Final Results
BlackRock Throgmorton Trust plc
(Legal Entity Identifier: 5493003B7ETS1JEDPF59)
Information disclosed in accordance with Article 5 Transparency Directive and DTR 4.1
Annual Results Announcement for the year ended 30 November 2021
PERFORMANCE RECORD
|
|
As at 30 November 2021 |
As at 30 November 2020 |
| Net assets (£000)1 | 935,148 | 596,215 |
| Net asset value per ordinary share (pence) | 921.91 | 681.24 |
| Ordinary share price (mid-market) (pence) | 935.00 | 682.00 |
| Benchmark Index2 | 18,968.77 | 15,232.31 |
| Premium to cum income net asset value3 | 1.4% | 0.1% |
| Average premium to cum income net asset value for the year3 | 1.2% | 0.2% |
| --------------- | --------------- | |
| Performance (with dividends reinvested) | ||
| Net asset value per share3 | +37.0% | +9.1% |
| Ordinary share price3 | +38.8% | +8.2% |
| Benchmark Index2 | +24.5% | +3.8% |
| ========= | ========= |
|
|
For the year ended 30 November 2021 |
For the year ended 30 November 2020 |
Change % |
| Revenue | |||
| Net revenue profit after taxation (£000) | 11,446 | 5,379 | +112.8% |
| Revenue return per ordinary share (pence)4 | 12.15 | 6.57 | +84.9% |
| --------------- | --------------- | --------------- | |
| Dividends per ordinary share (pence) | |||
| Interim | 2.50 | 2.50 | +0.0% |
| Final | 8.00 | 7.70 | +3.9% |
| --------------- | --------------- | --------------- | |
| Total dividends paid and payable | 10.5 | 10.20 | +2.9% |
| ========= | ========= | ========= |
1 The change in net assets reflects market movements, dividends paid and share issues during the year.
2 The Company’s Benchmark Index is the Numis Smaller Companies plus AIM (excluding Investment Companies) Index.
3 Alternative Performance Measures, see Glossary contained within the Annual Report and Accounts.
4 Further details are given in the Glossary contained within the Annual Report and Accounts.
CHAIRMAN’S STATEMENT
YEAR’S HIGHLIGHTS
• Strong investment performance maintained in the year to 30 November 2021:
- NAV outperformed the Benchmark Index over one year by 12.5% and the share price outperformed the same index over one year by 14.3%
- NAV has outperformed the Benchmark Index by 46.4% over three years, by 88.4% over five years and by 251.5% over ten years
- Share price has outperformed the Benchmark Index by 74.8% over three years, by 159.8% over five years and by 372.7% over ten years
- The Company is one of the strongest performers in its peer group over all time periods
• Share price has remained close to NAV through most of a challenging year. The 12-month average premium as at 30 November 2021 was 1.2% (average premium 2020: 0.2%)
• Promoted to the FTSE 250 during the financial year
• 13.9m new shares raising £125.0m have been issued
• Final dividend declared of 8.00p per share (2020: 7.70p)
OVERVIEW
After last year’s extremes of volatility, a more sedate year might have been anticipated; however, this was not to be. Although stock markets started the financial year flush with the optimism of several successful vaccine trials, few would have predicted that we would end it in the grip of another new variant with all the attendant uncertainty and disruptions to activity and supply chains this entails. January 2021 saw markets retract as the rates of COVID-19 infections rose sharply and lockdown measures were tightened and extended. However, the UK market then returned seven consecutive months of positive performance as the success of the vaccine roll-out in the UK started to take effect and market sentiment improved. More recently, a surge in inflation and the prospect of higher interest rates had added to the mood of uncertainty, something the Portfolio Manager says more about in his report below.
Despite the turmoil, it has been another extremely successful year for your Company, reinforcing the long-term strategy of the BlackRock Emerging Companies team to focus on high quality, differentiated growth companies capable of disrupting existing markets and driving industry change. The pandemic has reinforced the strength of this approach by accelerating trends already underway and polarising the prospects of companies with strong and weak franchises. Resolution to the Brexit discussions at the end of 2020 also helped by removing some of the Brexit related scepticism which has blighted UK equities in recent years.
It has also been encouraging that this outperformance has occurred in a period when cyclical ‘value’ shares have made much of the running. While in the short term the market remains vulnerable to sharp reversals and spikes in volatility, as we have seen in recent weeks, we remain convinced that our Manager’s strategy, of owning high quality, dynamic and advantaged growth companies for the long term, continues to be attractive.
Your Company was one of very few investment companies in the sector trading on a premium during the year and issued a total of 13.9m new ordinary shares, raising total gross proceeds of £125m in the twelve months to 30 November 2021.
I am also pleased to report that the issue of new shares in response to market demand, accompanied by strong investment performance, resulted in the Company becoming a constituent of the FTSE 250 Index in September 2021.
MARKET BACKGROUND
The financial year to 30 November 2021 has once again been overshadowed by the continuing disruption caused by the COVID-19 pandemic. The UK market nonetheless generated strong returns as the economy was supported by Government stimulus, a successful vaccine roll-out and, at the start of the year, the conclusion of a trade and co-operation agreement with the EU.
Although UK small and mid-cap companies generally performed well during the period, we witnessed a pronounced rotation from growth to cyclical value stocks in response to the economic reopening. Despite our emphasis on growth, it was pleasing to see the Company outperform its Benchmark Index in both the first and second half of the year, testament to the diversity and resilience of the portfolio and of the underlying portfolio companies’ ability to make headway despite the macroeconomic challenges.
Another key feature of the year under review was the surge in inflation as fuel, energy and commodity prices spiked, amid COVID-19 related supply chain bottlenecks, which threatened to derail the recovery. Although some market commentators believe this increase in UK inflation is transitory, annual inflation reached 5.1% in November, significantly above the Bank of England’s 2% target. In December 2021 the Bank’s monetary policy committee took the decision to raise interest rates marginally from 0.10% to 0.25%.
PERFORMANCE
Over the twelve months to 30 November 2021, the Company’s NAV returned 37.0%, compared with a total return of 24.5% from the Company’s Benchmark Index, the Numis Smaller Companies plus AIM (excluding Investment Companies) Index. This outperformance of the Benchmark Index by 12.5% is a considerable achievement given the challenging economic and political backdrop during the period. The share price returned +38.8% delivering an outperformance of 14.3% during the year as the Company’s premium to NAV rose slightly from a premium of 0.1% to a premium of 1.4%.
Since the year end, interest rate uncertainty and the tensions in Ukraine have weighed upon sentiment in recent months with the effect that the NAV has decreased by 8.4% to the close of business on 2 February 2022 compared to the Benchmark Index which has decreased by 2.8% (all figures in Sterling terms with dividends reinvested). The share price over the same period has decreased by 9.1%. Further information on post year end performance can be found in the Investment Manager’s report below.
As a result, the Company retains one of the strongest long-term track records in the UK smaller companies investment trusts sector with NAV outperforming the Benchmark Index by 46.4% over three years, by 88.4% over five years and by 251.5% over ten years. The share price outperformed the Benchmark Index by 74.8% over three years, 159.8% over five years and 372.7% over ten years.
A recent piece of research produced by Kepler Partners, who also write research commissioned by BlackRock on behalf of the Company, also highlights the Company’s consistency of returns. Commenting on what they term the ‘batting average’, essentially a measure of how often an investment manager beats the benchmark over certain rolling time periods, they note the Company’s consistent strong performance, as demonstrated by the chart below.
| WINDOW | PERIODS | WON | LOST | WIN RATE | AVG. EXCESS RETURN (%) |
| 1 month | 159 | 100 | 59 | 63% | 0.6 |
| 3 months | 157 | 125 | 32 | 80% | 1.9 |
| 1 year | 148 | 140 | 8 | 95% | 8.4 |
| 3 years | 124 | 124 | 0 | 100% | 30.0 |
| 5 years | 100 | 100 | 0 | 100% | 63.3 |
Data: 01/07/2008 to 30/09/2021. Source: Morningstar, Kepler Partners.
Past performance is not a reliable indicator of future results.
As I reported last year, the Company’s strong performance has once again been recognised through industry awards. I am very pleased to report that the Company won the AJ Bell Online Personal Wealth Award 2021 – Best Investment Trust for Growth, and the AJ Bell Investment Trust Award 2021 in the UK Smaller Companies Active category for the second year in a row. The Company was also awarded Kepler’s growth rating which is based on long-term, risk adjusted performance and is awarded to the investment trust Kepler view as ‘best in class’.
All of which means that our Portfolio Manager, Dan Whitestone, and his team, are to be congratulated once again on what has been another impressive year, particularly given the challenging circumstances.
Further information on portfolio performance, positioning and the outlook for the forthcoming year can be found in the Investment Manager’s report which follows below.
PERFORMANCE RECORD TO 30 NOVEMBER 2021 (WITH DIVIDENDS REINVESTED)
| 1 year change % |
3 year change % |
5 year change % |
|
| NAV per share | 37.0 | 86.0 | 142.4 |
| Share price | 38.8 | 114.4 | 213.8 |
| Benchmark Index | 24.5 | 39.6 | 54.0 |
SHARE PRICE DISCOUNT/PREMIUM
During the year to 30 November 2021 the Company’s share price discount/premium to NAV ranged between a discount of 3.2% and a premium of 2.9% and ended the year at a premium of 1.4% (30 November 2020: premium of 0.1%). The 12-month average premium as at 30 November 2021 was 1.2% (average premium 2020: 0.2%) versus the AIC UK Smaller Companies investment trust sector average discount of 8.4%.
As at 2 February 2022 the Company’s shares were trading at a premium of 0.6%.
Despite what has been a challenging and volatile year it is pleasing to note that the Company’s premium has been relatively stable and shares have traded within a tight range for most of the year.
Further information in relation to the discount can be found within the Annual Report and Accounts.
SHARE ISSUANCE
The Board believes that it is in shareholders’ interests that the share price does not trade at an excessive discount or premium to Net Asset Value. While the Company has not needed to buy back shares during the year to avoid an excessive discount from arising, it has, where deemed to be in shareholders’ long-term interests, exercised its powers to issue shares. This has not only avoided an excessive premium developing but also benefits shareholders because all such share issuance was carried out at a premium to Net Asset Value, the fixed costs of the Company are spread over a larger asset base and the increased size of the Company should improve the liquidity in the Company’s shares.
We believe that the Company’s ability to raise capital in the current challenging market conditions is further evidence of shareholders’ ongoing support of, and investors’ interest in, each of the Company’s investment proposition, the BlackRock Emerging Companies team and investment processes, and our Portfolio Manager.
This demand necessitated calling a General Meeting of the Company’s shareholders on 4 October 2021 to renew the Board’s authority to sell shares from treasury and/or to issue new shares, on a non-pre-emptive basis representing up to 10% of the Company’s issued share capital and also to seek an additional authority to allot up to a further 10% of the Company’s issued share capital. Resolutions renewing these powers were supported by the vast majority of shareholders with an excess of 94% of votes in favour of the resolutions.
Your Board, in conjunction with the Portfolio Manager, regularly reviews whether the Company is of a size, or growing at a pace, which could negatively impact the ability of the Manager to generate performance. The current view remains that there is capacity to grow the share capital of the Company to the level for which authority was approved in October 2021; allowing for issuance since October 2021, this represents an increase of approximately 15% of the Company’s current issued share capital.
In recent years issuance has exceeded the 10% authority requested at the AGM and we have therefore had to convene special General Meetings to request further authority. To minimise the cost to shareholders, the Company is, as in October 2021, seeking shareholder authority at the forthcoming Annual General meeting to issue and allot new shares for all the remaining capacity, in this case 15%. These issuance and allotment authorities are, as in October 2021, structured as four separate resolutions; two seek to renew the Board’s power to sell shares from Treasury and/or to issue new shares, and do so on a non-pre-emptive basis, up to 10% of the Company’s issued share capital, with two equivalent resolutions for a further 5%.
It should be noted that these powers, if approved, will be in substitution of, and not in addition to, the authority given to issue shares at the General Meeting in October 2021 meaning that, if approved, shareholders will be enabling the Company to grow to approximately the same size as was planned in October 2021. As always, any shares issued will be a premium to the NAV per share.
The Board believes these resolutions are in shareholders’ best interests and therefore, once again, encourages shareholders to support them.
The extent and speed of further issuance, especially given the recent volatility in markets, will be kept under review. There can therefore be no certainty that issuance will continue at the same level; this in turn means that, while the Board continues to believe it is in shareholders’ interests that the share price does not trade at an excessive discount, it accepts that shareholders may be best served in the future with less new issuance, something that could result in the Company’s shares trading at a higher premium to net asset value.
The Board however continues to believe that it is in shareholders’ interests that the share price does not trade at an excessive discount to net asset value. Therefore, where deemed to be in shareholders’ long-term interests, it may exercise its powers to buy back shares with the objective of ensuring that an excessive discount does not arise.
REVENUE RETURN AND DIVIDENDS
The revenue return per share for the year amounted to 12.15 pence per share, compared with 6.57 pence per share for the previous year. This represents an impressive increase of 84.9% versus the prior year and results from increases in both ordinary and special dividends received during the period compared to the depressed levels of a COVID-19 impacted 2020. In 2019, the last full year before portfolio companies were impacted by COVID-19, the revenue return per share amounted to 8.56p, an increase of 41.5%.
The Board recognises that, although the Company’s objective is capital growth, shareholders value consistency in the dividends paid by the Company; the Directors are therefore pleased to declare a proposed final dividend of 8.00 pence per share for the year ended 30 November 2021 (2020: 7.70p). This, together with the interim dividend of 2.50 pence per share paid on 27 August 2021, would give a total dividend for the year of 10.50 pence per share, increasing the total dividend distributed to shareholders in the prior financial year. This dividend will be paid on 31 March 2022, subject to shareholder approval at the forthcoming AGM, to shareholders on the Company’s register on 18 February 2022.
CORPORATE GOVERNANCE
The Board takes its governance responsibilities very seriously and follows best practice requirements as closely as possible. The revised UK Code of Corporate Governance (the UK Code), published in 2018, requires enhanced disclosure setting out how we, as Directors, have fulfilled our duties in considering the wider interests of stakeholders in promoting the success of the Company. Details of these are included below and within the Annual Report and Accounts.
The Board is pleased to see your Company continue to grow during the year and in September 2021 it became a constituent of the FTSE 250 Index as a result of the growth in its market capitalisation. This is a significant milestone for the Company and brings with it some additional corporate governance obligations. Having considered the provisions and application of the UK Code as it does each year, and as announced in the half yearly report, the Board resolved to appoint an existing Director, Louise Nash, as the Company’s Senior Independent Director and establish a new Remuneration Committee to be chaired by Angela Lane. The appointment of a Senior Independent Director and the establishment of the Remuneration Committee became effective from 1 February 2021.
Further information on the duties and responsibilities of the Remuneration Committee and the Senior Independent Director can be found in the Directors’ Report contained within the Annual Report and Accounts.
OUR APPROACH TO ESG INTEGRATION
Environmental, Social, and Governance (ESG) issues have remained at the forefront of industry debate this year and funds with an ESG focus have dominated fund flows. BlackRock remains at the centre of many these debates, stressing that portfolio companies should clearly articulate their strategies to achieve net zero carbon emissions by 2050, and through their regular engagement, to encourage strong corporate governance and social responsibility.
At BlackRock, consideration of ESG issues is built into the investment process and climate risk is considered to be a key part of investment risk, an approach your Board supports. The style of our Portfolio Manager naturally steers away from extractive industries, where innovative and disruptive business models are rare, although it should be noted that the Company does not have an explicit mandate for sustainable, ESG or impact-focused investment, nor has it adopted exclusionary screens. The Portfolio Manager’s integration of ESG factors in his analysis is though an important lens through which to identify long term winners, just as poor ESG outcomes provide a useful tool in establishing candidates for the short book.
BOARD COMPOSITION
The Board currently consists of six independent Non-Executive Directors. The Board’s policy on Director tenure and succession planning can be found in the Corporate Governance Statement contained within the Annual Report and Accounts.
Further details of all the Directors can be found in their biographies contained within the Annual Report and Accounts.
INVESTMENT POLICY
The Company’s exposure to private investments has in the past been made indirectly through holding a UK listed investment company. To date, the Board has agreed with the Investment Manager that any direct private investments may only be made if approved by the Board.
The Board recognises that a number of growth companies of the type favoured by the Portfolio Manager appear to be staying private for longer, a trend that could continue. In addition, the Board is aware that by participating in a pre-IPO (Initial Public Offering) round as opposed to say up to two years’ later in an IPO, the Portfolio Manager is often more likely to get both the size of holding sought and at a more reasonable valuation.
Your Board is also aware that BlackRock has significant investment capabilities to make private investments and that it is seeing an increasing number of attractive opportunities in this area and wants the Portfolio Manager, in the best interests of shareholders, to be able to include these in the portfolio if he chooses so to do. It should be noted that the timescales and confidentiality requirements of private fundraising often make it impractical for the Portfolio Manager to seek prior Board approval for such direct private investments.
The Board has accordingly given the authority, with effect from the date of publication of the Annual Report, for the Portfolio Manager to make direct private investments, based in any jurisdiction, of up to 2.5% of net assets at the time of investment without prior approval from the Board. The Board has also agreed that the Company may invest more than 2.5%, but no more than 3.75%, of its net assets (both measured at the time of investment), in direct unquoted securities in circumstances where such investment is in an existing investee company and, in the Portfolio Manager’s opinion, a failure of the Company to make such ‘follow on’ investment would have a material adverse effect on the value of the Company’s investment in such investee company.
This proposed change therefore will not alter the nature of the companies the Company can invest in but will ensure that the Portfolio Manager can, in the best interests of shareholders, respond to opportunities BlackRock finds to make investments where the company is private and the investment is best made directly.
Principally due to the percentage restrictions described above, the Board do not deem this to be a material change in investment policy; shareholder approval is therefore not required. Full details are set out in the Amended Investment policy section in the Strategic report below and contained within the Annual Report and Accounts.
The Board stresses that there are no immediate plans to make such investments but wants to ensure that the Portfolio Manager is able to take such opportunities if and when they present themselves.
DIRECTORS’ REMUNERATION
As I mentioned in my statement in the half yearly report, having now entered the FTSE 250 and in light of the increasing governance and regulatory responsibilities of a Company of our size and complexity, the Board appointed two additional non-executive Directors during the year.
Having reviewed the Directors’ fees the Board is therefore seeking shareholder approval to increase the maximum limit on aggregate Directors’ fees payable in any one year. This will ensure that there is sufficient headroom to accommodate the additional Directors. The change proposed is set out in more detail in the Directors’ Report contained within the Annual Report and Accounts.
ANNUAL GENERAL MEETING
The Board is pleased to announce that it is its intention that the Company’s Annual General Meeting will be held in person on Thursday, 24 March 2022 at 11.00 a.m. at the offices of BlackRock at 12 Throgmorton Avenue, London, EC2N 2DL. Details of the business of the meeting are set out in the Notice of Annual General Meeting contained within the Annual Report and Accounts.
At present UK Government restrictions on public gatherings are no longer in force in connection with COVID-19 and the AGM can be held in the normal way with physical attendance by shareholders. However, shareholders should be aware that it is possible that such restrictions could be reimposed prior to the date of the AGM.
Shareholders who intend to attend the AGM should ensure that they have read and understood the requirements for entry to the AGM. These requirements, along with further information on the arrangements for the AGM, can be found in the Directors' Report, contained within the Annual Report and Accounts.
In the absence of any reimposition of restrictions, the Board very much looks forward to meeting with shareholders at the AGM.
OUTLOOK
The COVID-19 pandemic has continued to have a negative impact on the global economy and stock markets in which we invest. Despite a successful vaccine roll-out in the UK, market sentiment has continued to be heavily influenced by fluctuating infection levels, driven by the emergence of new variants and the ever-present threat of a reimposition of more stringent government restrictions. Supply constraints have also pushed inflation to levels not seen in recent years, with considerable uncertainty as to how long this will persist. The duration of the pandemic is of course difficult to predict, although what is clear is that the longer-term impact on how we live our lives, how businesses and public services operate and how governments will seek to regain equilibrium in their finances will affect us all for many years to come.
However, as the world seeks to establish some form of normality, and as we learn to live with and adapt to the ongoing COVID-19 related disruption, your Portfolio Manager believes that UK small and mid-sized companies will continue to provide a great number of exciting investment opportunities. In fact, in many cases the innovative and flexible companies within our portfolio have benefitted from the accelerated rate of change during the pandemic.
As you will read in Dan Whitestone’s report which follows, he is optimistic about the outlook for the portfolio and believes strongly that a focus on stock and industry specifics can triumph over the current challenging macroeconomic conditions, COVID-19 related or otherwise, over the long term, as proved to be the case this year.
Your Portfolio Manager therefore continues to seek out exciting, high quality, companies with strong management teams, differentiated products and services, and those with strong and dominant market positions. He is also focused on identifying companies leading industry change, the “disruptors”.
In a time when COVID-19 is accelerating corporate digitalisation and changes to consumption, we continue to believe that our Portfolio Manager’s investment approach offers significant opportunity for the medium to long-term investor. The Board is confident that, in Dan Whitestone and BlackRock, we have a team which has the resources, investment processes, insights and capability to continue to deliver on the Company’s investment objective as we move into 2022 and beyond.
CHRISTOPHER SAMUEL
Chairman
4 February 2022
INVESTMENT MANAGER’S REPORT
MARKET REVIEW AND OVERALL INVESTMENT PERFORMANCE
Global stock markets have made strong progress over the past 12 months as the announcement of effective vaccines at the end of 2020 fuelled optimism around an economic recovery. During the year countries around the world began lifting the restrictions that had impacted so many businesses across a raft of industries throughout 2020 and the world started to return to a new level of normality. In truth, the equity market rise over the full year masks the path the market has taken during 2021. The recovery has not been linear, and there have been bouts of extreme market volatility. Investor sentiment has jumped continuously between optimism about the recovery, to fears of new variants of COVID-19 and the potential impact on the global economy. This occurred first with the emergence of the Delta variant and more recently the highly contagious Omicron variant where transmission accelerated over the Christmas period, a time of year that is so crucial to many businesses including pubs, restaurants and retailers that rely on a seasonal boost from Christmas shoppers.
To add to the COVID-19 debate logistics issues, supply chain disruption, labour shortages, and rising inflation have all contributed to higher intra-month volatility during the year, with investors constantly grappling with the duration and impact of these factors on economic growth and corporate profitability. These factors are important inputs that determine therefore the likely path for monetary policy in the near future and this has led to some sharp factor/style rotations within equity markets. Fortunately, within the small and mid-cap space, which we believe is home to some excellent and differentiated companies, these rotations have presented us with some fantastic opportunities throughout the year.
PERFORMANCE REVIEW
The Company has had another strong year and successfully navigated the challenging environment returning a total return of 37.0%. This is a significant outperformance of its Benchmark Index of +12.5% net of fees. While performance has predominantly been driven by the long book, it has been pleasing to see a positive contribution from the short book which is especially hard to achieve in a strongly positive market. We believe this result once again reflects the power of stock specifics in generating outperformance for our clients and ultimately stems from a rigorous investment approach based on core beliefs, and an approach which remains consistent over time despite swings in newsflow and short-term sentiment.
Once again the largest contributors to performance came from a broad range of companies across different industries, many of which have delivered for this Company for several years but still outperform against their financial objectives and in many cases upgrade their future year guidance for profits.
Watches of Switzerland was the top contributor during the year. This is a retailer that has provided multiple strong updates with upgrades to forward guidance as it continues to benefit from the secular demand for luxury watches in a supply-constrained industry. They have been able to achieve record sales and profits despite most of their stores being closed through their financial year. This was achieved in part due to the strength of the category, but also due to this management team who have successfully navigated a difficult retailing environment by enhancing its business model through digital “clientelling” – using software to enhance long-term relationships with their clients. We firmly believe Watches of Switzerland has emerged from COVID-19 with a significantly enhanced market position and strengthened its relationship with the luxury brands, which leaves the company well placed to pursue its international expansion ambitions.
Impax Asset Management continued to deliver impressive growth in assets under management and this growth looks well set to continue given the strength of its franchise, market leading investment performance and the structural growth/interest in sustainability which underpins the company’s investment philosophy. Electrocomponents has delivered strong results through the year, achieving double digit organic revenue growth from a combination of market share gains and end market recovery. Importantly, we believe Electrocomponents is another company that has strengthened its market position during COVID-19 and is well placed to accelerate market share gains in the coming years. Other notable contributors during the period included Tatton Asset Management, YouGov, Auction Technology Group, and IMIMobile, a leading player in communications software, which soared after the company agreed to a takeover approach from US listed IT giant Cisco Systems.
It is worth noting that despite running with far fewer shorts than we would under more normal market conditions, the short book continued to deliver stock specific alpha, particularly towards the end of the year. This is demonstrated by our short position in a UK listed CFD trading business which contributed positively when the shares fell after the company issued a profit warning driven by lower activity levels as customer trading behaviour normalises post the pandemic.
Detractors during the year have thankfully been limited and in many cases just reflect some mean reversion in share price performance after a particularly strong 2020, for instance Games Workshop. It is worth noting that we experienced two stock-specific disappointments during the year, namely US listed Chegg and the UK listed engineering business Avon Protection (formerly Avon Rubber). Chegg fell sharply after announcing that the current year sign-ups to its educational service had deteriorated and therefore profits would be considerably lower due to the operational gearing of the company. Many reasons for this sudden deterioration in trading have been provided, from lower than anticipated US college enrolments to changes in mix. This negative development certainly caught us (and management) off guard, and the position is currently under review as we assess whether this problem is transitory in nature. We discussed Avon Protection at length in the half-year report. The shares initially fell on the news that one of their products needed to be re-certified and then disappointed further when the company warned that a short-term slowdown in defence spending would impact sales. While disappointing, we initially continued to believe in the long-term attractions of the business, as there was no change in Avon’s competitive position and pricing power. We maintained the position; even though as an operationally geared business the impact on the shares was particularly negative. We changed our view in the final month of the year when the company announced that it was initiating a strategic review of its body armour business after the US Army contract was delayed again, following a failure in the testing process. At this point we became concerned that the long-term thesis for owning the shares had changed and as a result the position has been exited completely.
PORTFOLIO POSITIONING AND OUTLOOK
Whilst market volatility has increased recently due to rising COVID-19 infections and specific supply chain and cost challenges that have affected some companies, our overall view remains positive for the outlook of the portfolio. It is our belief that many of our investments can thrive despite these issues, as the last two years have proved. Ultimately, this relates to the strong underlying demand for the products and services that our portfolio companies produce and the pricing power they command. It also reflects strong financial structures and years of investment in their products, plants, and people, which have strengthened their core proposition and enhanced their market position.
We have long argued that stock and industry specific outcomes are the most important driver of returns for our investment philosophy and this Company, and we can think of no better evidence to support this than the achieved outperformance in 2020 and 2021. In summary, the current market dynamics are not something to be fearful of and should be viewed as an opportunity for this Company and its stated investment strategy in seeking out the differentiated from the average in the pack.
The net market exposure of the portfolio at around 118% remains comfortably above the long-term average but has come down a few percentage points in recent weeks as the Company enters more short positions. Despite our small positive gain in the short book in 2021, it has generally been an unrewarding experience for much of the last year as markets recovered and investors were more willing to look through disappointments. However, the rising tide of the stock market has lifted the valuations of many companies with unattractive business models that continue to face long-term structural pressures, and where more recently the twin headwinds of cost inflation and supply challenges create additional difficulties for such low margin ‘undifferentiated’ companies with limited pricing power. There is also a small, but growing, list of companies that “over-traded” through 2020 and we are now seeing a sharp reversal in trading patterns not currently reflected in analysts’ forecasts. This is another area exercising our attention and where we have focused some of our short exposure.
Ultimately, we believe this will herald a period for more dispersion in our investment universe between winners and losers driven by increased bifurcation in financial outcomes and in turn share price performance. To clarify, the Company’s overall net exposure of 118% should not be interpreted as a call on the stock market but, instead, a reflection of the conviction we have in our long book and the returns we consider our investments can generate. We simply believe that the opportunities ahead for well financed differentiated growth companies which continue to deliver on their long-term strategies and are exposed to attractive long-term secular trends are extremely attractive regardless of the wider stock market environment.
As mentioned in the half yearly report, we believe firmly that COVID-19 has driven an acceleration of profound seismic market share shifts intra-industry, which we think of as “Corporate Darwinism”. Well capitalised leaders benefit from a confluence of changing consumer and corporate behaviours as well as a structural withdrawal of capacity as weakened peers exit the market. We referred to notable beneficiaries of this earlier, such as Watches of Switzerland and Electrocomponents and there are many other examples encompassing a broad variety of industries including omni-channel retailers, and veterinary services.
We have also commented on our ongoing belief that COVID-19 has accelerated many long-term structural trends, most notably Digital Transformation as corporates continue to invest in their digital capabilities to drive demand and win market share, adapt to changes in customer behaviour, and remove costs and complexity from their operations. We have deliberately sought exposure to these trends in recent years and have increased our exposure recently, as in our view the growth outlook has improved, notably in digital payments, software-as-a-service, and cloud enabled audio and visual communications.
2022 has got off to a difficult start for equity markets. There have been some large moves in share prices in the ‘growth’ and ‘value’ categories and this has disproportionately impacted many of our growth-oriented UK listed mid-cap companies, some of which have fallen between 15 and 30%. Moves such as this, whilst painful, are alas not uncommon, and the severity of moves can be significantly exacerbated at times of lower liquidity (such as during the holiday season) or when there is a backdrop of limited corporate news flow. Indeed, where there has been corporate news we have generally found it to be very reassuring and for the most part it has confirmed our investment views; the companies themselves are often trading well with ongoing positive momentum in forecasts.
The reason for these large moves is due to market concerns of rising inflation and interest rates, which in some cases have the potential to erode corporate profitability. We believe this risk is centred firmly on low margin businesses with limited pricing power and volume growth and where we have already seen evidence of pressure on profit forecasts. As discussed many times, these are businesses or industries we seek to avoid or short. Inflation can be accommodated more easily in businesses with high margins, volume growth and pricing power. These are exactly the companies we look to invest in, and while investors will inevitably worry about all companies for a while, we do expect our holdings to fare better in due course.
As to the impact of inflation on the interest rate curve, we acknowledge the relationship between interest rates and the discount rate, but this we believe is a much bigger problem for loss making, “jam-tomorrow” speculative companies. This has never been our area of focus but has indeed been the source of profitable shorts. The last few weeks have reaffirmed how indiscriminate the market can be at times, as there has been little distinction in the share price falls of ’jam-tomorrow’ loss making speculative investments and the fast growing, highly cash generative companies priced at what we believe to be attractive valuations. Fortunately, this is the opportunity of equity markets.
Whilst we acknowledge the market’s immediate focus on inflation and its potential impact on interest rates, we think January is nothing more than a painful but temporary mark-to-market exercise in response to a more hawkish Fed rather than a permanent loss of capital for our clients. We are firm believers in our holdings and, whilst we acknowledge that in any given year we will make mistakes in individual holdings, and that not all our investments will deliver as planned, we also believe the majority will prosper. The valuations of many of our investments have fallen back in the last few weeks to levels we believe offer significant value, at a time when in many cases their market position and outlook has improved. Corporate results continue to reassure us and we think this bodes well for the months to come.
In summary, 2021 has been a successful year for the Company and our shareholders; the performance of the Company against the backdrop of multiple macro and political headwinds, most notably the market’s preference for “value” over “growth”, continues to demonstrate evidence for our belief that, over the long term, stock and industry specifics can triumph over macro factors. We thank shareholders for their ongoing support and enter 2022 with real optimism and conviction in the outlook for the Company.
DAN WHITESTONE
BLACKROCK INVESTMENT MANAGEMENT (UK) LIMITED
4 February 2022
PORTFOLIO OF INVESTMENTS
1 + Electrocomponents (2020: 29th)
Support Services
Market value: £32,274,0001
Share of net assets: 3.5% (2020: 1.4%)
Distributor of industrial and electronic products.
2 + Watches of Switzerland (2020: 3rd)
Personal Goods
Market value: £30,419,000
Share of net assets: 3.3% (2020: 2.8%)
Retailer of luxury watches.
3 + Gamma Communications* (2020: 4th)
Mobile Telecommunications
Market value: £29,356,0001
Share of net assets: 3.1% (2020: 2.5%)
Provider of communication services to UK businesses.
4 + Impax Asset Management* (2020: 9th)
Financial Services
Market value: £26,843,000
Share of net assets: 2.9% (2020: 2.1%)
Provider of asset management services.
5 + IntegraFin (2020: 10th)
Financial Services
Market value: £25,305,0001
Share of net assets: 2.7% (2020: 2.0%)
UK savings platform for financial advisors.
6
+ Oxford Instruments (2020: 14th)
Electronic & Electrical Equipment
Market value: £25,013,0001
Share of net assets: 2.7% (2020: 1.8%)
Designer and manufacturer of tools and systems for industry and research.
7
+ Auction Technology Group (2020: n/a)
General Retailers
Market value: £24,759,0001
Share of net assets: 2.7% (2020: n/a)
Operator of marketplaces for curated online auctions.
8
= Dechra Pharmaceuticals (2020: 8th)
Pharmaceuticals & Biotechnology
Market value: £23,486,000
Share of net assets: 2.5% (2020: 2.2%)
Developer and supplier of pharmaceuticals and other products focused on the veterinary market.
9
- Games Workshop (2020: 1st)
Leisure Goods
Market value: £22,710,0001
Share of net assets: 2.4% (2020: 3.4%)
Developer, publisher and manufacturer of miniature war games.
10 -
YouGov* (2020: 2nd)
Media
Market value: £21,458,000
Share of net assets: 2.3% (2020: 2.9%)
Provider of survey data and specialist data analytics.
* Traded on the Alternative Investment Market (AIM) of the London Stock Exchange.
1 Includes long derivative positions.
| # | Company | £000 | % | Description |
| 11 |
SigmaRoc*
Construction & Materials |
18,313 | 2.0 | Buy-and-build group targeting construction materials assets in the UK and Northern Europe |
| 12 |
CVS Group*
General Retailers |
18,232 | 1.9 | Operator of veterinary surgeries |
| 13 |
Pets at Home
General Retailers |
18,1061 | 1.9 | Retailer of pet supplies |
| 14 |
Treatt
Chemicals |
17,195 | 1.8 | Developer and manufacturer of ingredients for the flavour and fragrance industry |
| 15 |
Breedon*
Construction & Materials |
17,1561 | 1.8 | Supplier of construction materials |
| 16 |
Dunelm Group
General Retailers |
17,1181 | 1.8 | Retailer of homeware products |
| 17 |
Baltic Classifieds Group
Software & Computer Services |
16,3591 | 1.8 | Operator of online classified businesses in the Baltics |
| 18 |
Computacenter
Software & Computer Services |
16,2031 | 1.7 | Computer services |
| 19 |
Sirius Real Estate
Real Estate Investment & Services |
16,117 | 1.7 | Owner and operator of business parks, offices and industrial complexes in Germany |
| 20 |
Ergomed*
Pharmaceuticals & Biotechnology |
15,8261 | 1.7 | Provider of pharmaceuticals services |
| 21 |
Workspace Group
Real Estate Investment Trusts |
14,7711 | 1.6 | Supplier of flexible workspace to businesses in London |
| 22 |
Tatton Asset Management*
Financial Services |
14,703 | 1.6 | Provider of discretionary fund management services to the IFA market |
| 23 |
Grafton Group
Support Services |
14,634 | 1.6 | Builders merchants in the UK, Ireland and Netherlands |
| 24 |
WH Smith
General Retailers |
14,057 | 1.5 | British retailer of books, stationery, magazines, newspapers and confectionery |
| 25 |
4imprint Group
Media |
13,973 | 1.5 | Supplier of promotional merchandise in the US |
| 26 |
DiscoverIE
Electronic & Electrical Equipment |
13,8601 | 1.5 | International designer, manufacturer and supplier of customised electronics |
| 27 |
OSB Group
Financial Services |
13,696 | 1.5 | Specialist lending business |
| 28 |
Spectris
Electronic & Electrical Equipment |
13,651 | 1.5 | Supplier of productivity enhancing instrumentation and controls |
| 29 |
Mattioli Woods*
Financial Services |
13,3881 | 1.4 | Provider of wealth management services |
| 30 |
XP Power
Electronic & Electrical Equipment |
12,912 | 1.4 | Leading provider of power solutions |
| 31 |
Next Fifteen Communications*
Media |
12,868 | 1.4 | Provider of digital communication products and services |
| 32 |
Learning Technologies*
Software & Computer Services |
12,585 | 1.3 | Provider of e-learning services |
| 33 |
Spirent
Technology Hardware & Equipment |
12,243 | 1.3 | Multinational telecommunications testing |
| 34 |
Safestore
Real Estate Investment Trusts |
12,213 | 1.3 | Provider of self-storage units |
| 35 |
Liontrust Asset Management
Financial Services |
12,029 | 1.3 | Provider of asset management services |
| 36 |
Euronext
Financial Services |
11,6971 | 1.3 | European stock exchange |
| 37 |
Bytes Technology
Software & Computer Services |
11,438 | 1.2 | Specialist in software, security and cloud services |
| 38 |
Robert Walters
Support Services |
10,829 | 1.2 | Provider of specialist recruitment services |
| 39 |
Diploma
Support Services |
10,8081 | 1.2 | Supplier of specialised technical products and services |
| 40 |
Morgan Sindall
Construction & Materials |
10,2981 | 1.1 | Supplier of office fit out, construction and urban regeneration services |
| 41 |
Howden Joinery Group
General Retailers |
9,7001 | 1.0 | Kitchen and joinery product supplier |
| 42 |
Genuit Group
Construction & Materials |
9,575 | 1.0 | Manufacturer of plastic piping systems |
| 43 |
Greggs
Food & Drug Retailers |
9,239 | 1.0 | Bakery chain |
| 44 |
Draper Esprit
Financial Services |
8,879 | 1.0 | Technology focused venture capital firm |
| 45 |
Luceco
Electronic & Electrical Equipment |
8,646 | 0.9 | Supplier & manufacturer of high quality LED lighting products |
| 46 |
Boku*
Support Services |
8,615 | 0.9 | Digital payments platform |
| 47 |
Team17*
Leisure Goods |
8,3051 | 0.9 | Video game developer and publisher |
| 48 |
Cranswick
Food Producers |
7,886 | 0.8 | Producer of premium, fresh and added-value food products |
| 49 |
SThree
Support Services |
7,7321 | 0.8 | Provider of specialist professional recruitment services |
| 50 |
Axon Enterprise
Support Services |
7,7281 | 0.8 | US based provider of technology and weapons products |
| 51 |
Alliance Pharma*
Pharmaceuticals & Biotechnology |
7,717 | 0.8 | Distributor of pharmaceutical and healthcare products |
| 52 |
Xero
Software & Computer Services |
7,6451 | 0.8 | Software company specialising in accounting for small businesses |
| 53 |
Chrysalis Investments
Financial Services |
7,556 | 0.8 | Closed end investment company investing in later stage private companies with long-term growth potential |
| 54 |
GB Group*
Software & Computer Services |
7,550 | 0.8 | Developer and supplier of identity verification solutions |
| 55 |
Future
Media |
7,485 | 0.8 | Multi-platform media business covering technology, entertainment, creative arts, home interest and education |
| 56 |
Londonmetric Property
Real Estate Investment Trusts |
7,3581 | 0.8 | Investor in, and developer of property |
| 57 |
Young & Co’s Brewery*
Travel & Leisure |
7,217 | 0.8 | Owner and operator of pubs mainly in the London area |
| 58 |
Medpace Holdings
Healthcare Equipment & Services |
7,1311 | 0.8 | Clinical research organization (CRO) conducting global clinical research for the development of drugs and medical devices |
| 59 |
Masimo
Healthcare Equipment & Services |
7,0771 | 0.8 | Developer and manufacturer of noninvasive patient monitoring technologies |
| 60 |
Clarkson
Industrial Transportation |
6,864 | 0.7 | Provider of shipping services |
| 61 |
Polar Capital Holdings*
Financial Services |
6,839 | 0.7 | Provider of investment management services |
| 62 |
S4 Capital
Media |
6,787 | 0.7 | Digital advertising and marketing services business |
| 63 |
Qinetiq Group
Aerospace & Defence |
6,740 | 0.7 | Provider of scientific and technological services to the defence, security and aerospace markets |
| 64 |
The Pebble Group*
Media |
6,671 | 0.7 | Designer and manufacturer of promotional goods |
| 65 |
Johnson Service Group*
Support Services |
6,655 | 0.7 | Provider of textile services |
| 66 |
Vistry Group
Household Goods & Home Construction |
6,649 | 0.7 | UK housebuilder |
| 67 |
Craneware* Software & Computer Services |
6,589 | 0.7 | Provider of financial business software for US hospitals |
| 68 |
Alfa Financial Software
Software & Computer Services |
6,564 | 0.7 | Provider of software to the finance industry |
| 69 |
Tyman
Construction & Materials |
6,552 | 0.7 | Supplier of engineered components and access solutions to the construction industry |
| 70 |
MongoDB
Software & Computer Services |
6,379¹ | 0.7 | Global cloud-based database |
| 71 |
Dart Group*
Travel & Leisure |
6,313 | 0.7 | Low cost tour operator and airline |
| 72 |
Kainos Group
Software & Computer Services |
6,0991 | 0.7 | Provider of digital technology solutions |
| 73 |
Serco Group
Support Services |
6,064 | 0.7 | Provider of public services across health, transport, immigration, defence, justice and citizen services |
| 74 |
Marshalls
Construction & Materials |
6,003 | 0.6 | British construction materials group |
| 75 |
Fevertree Drinks*
Beverages |
5,9691 | 0.6 | Developer and seller of soft drinks and mixers |
| 76 |
Domo
Software & Computer Services |
5,8981 | 0.6 | US based operator of mobile, cloud-based operating systems |
| 77 |
Accesso Technology*
Software & Computer Services |
5,8111 | 0.6 | Provider of ticketing and virtual queuing solutions |
| 78 |
NCC Group
Software & Computer Services |
5,801 | 0.6 | Cyber security business |
| 79 |
TT Electronics
Electronic & Electrical Equipment |
5,719 | 0.6 | Global manufacturer of electronic components |
| 80 |
Restore*
Support Services |
5,707 | 0.6 | Records management business |
| 81 |
Judges Scientific*
Electronic & Electrical Equipment |
5,384 | 0.6 | Designer and producer of scientific instruments |
| 82 |
Advanced Medical Solutions Group
Healthcare Equipment & Services |
5,3811 | 0.6 | Developer and manufacturer of advanced wound care solutions |
| 83 |
Moonpig
General Retailers |
5,1321 | 0.6 | Internet based provider of personalised cards and gifts |
| 84 |
888
Travel & Leisure |
5,060 | 0.6 | Operator and platform for online gaming |
| 85 |
Hemnet
Real Estate Investment & Services |
4,9531 | 0.5 | Online property portal operating in Sweden |
| 86 |
Genus
Pharmaceuticals & Biotechnology |
4,947 | 0.5 | Animal genetics company |
| 87 |
Joules*
General Retailers |
4,935 | 0.5 | Clothing retailer inspired by British country lifestyles |
| 88 |
Zotefoams
Chemicals |
4,8351 | 0.5 | Manufacturer of polyolefin foams used in sport, construction, marine, automation, medical equipment and aerospace |
| 89 |
Balfour Beatty
Construction & Materials |
4,8001 | 0.5 | Multinational infrastructure group |
| 90 |
Moneysupermarket.com
Software & Computer Services |
4,7871 | 0.5 | Price comparison website specialising in financial services |
| 91 |
Eckoh*
Software & Computer Services |
4,753 | 0.5 | Global provider of secure payments products |
| 92 |
GlobalData*
Media |
4,6681 | 0.5 | Data analytics and consulting |
| 93 |
Anpario*
Pharmaceuticals & Biotechnology |
4,667 | 0.5 | Manufacturer and distributor of natural animal feed additives for animal health, nutrition and biosecurity |
| 94 |
Porvair
Industrial Engineering |
4,582 | 0.5 | Specialist filtration and environmental technology |
| 95 |
Hill & Smith Holdings
Industrial Metals & Mining |
4,576 | 0.5 | Supplier of infrastructure products and galvanizing services |
| 96 |
RVRC Holding
General Retailers |
4,5631 | 0.5 | Active clothing retailer under the RevolutionRace brand |
| 97 |
Redrow
Household Goods & Home Construction |
4,543 | 0.5 | UK housebuilder |
| 98 |
Hollywood Bowl Group
Travel & Leisure |
4,4861 | 0.5 | Operator of ten-pin bowling services |
| 99 |
Clipper Logistics
Support Services |
4,4371 | 0.5 | Retail logistics business |
| 100 |
Kier Group
Support Services |
4,361 | 0.5 | UK construction, services and property group |
| 101 |
Animalcare Group*
Pharmaceuticals & Biotechnology |
4,300 | 0.5 | Veterinary pharmaceuticals business |
| 102 |
Helios Towers
Mobile Telecommunications |
4,267 | 0.5 | Provider of telecommunications infrastructure |
| 103 |
Aptitude Software
Software & Computer Services |
4,106 | 0.4 | Provider of specialist finance software and technology |
| 104 |
AJ Bell
Financial Services |
4,056 | 0.4 | UK savings platform for financial advisors & individual investors |
| 105 |
Activeops*
Software & Computer Services |
4,028 | 0.4 | Provider of management process automation solutions |
| 106 |
Five9
Software & Computer Services |
4,0261 | 0.4 | Provider of cloud-based contact centre software |
| 107 |
AB Dynamics*
Industrial Engineering |
3,577 | 0.4 | Developer and supplier of specialist automotive testing systems |
| 108 |
MaxCyte*
Pharmaceuticals & Biotechnology |
3,494 | 0.4 | Clinical-stage global cell-based therapies and life sciences company |
| 109 |
Shoals Technologies
Support Services |
3,4431 | 0.4 | Provider of electrical balance of system solutions |
| 110 |
Renishaw
Electronic & Electrical Equipment |
3,226 | 0.3 | Engineering and scientific technology company |
| 111 |
Gooch & Housego*
Electronic & Electrical Equipment |
3,212 | 0.3 | Designer and manufacturer of advanced photonic systems |
| 112 |
ASOS*
General Retailers |
3,154 | 0.3 | British online fashion and cosmetic retailer |
| 113 |
Essensys*
Software & Computer Services |
3,089 | 0.3 | Provider of software to flexible workspace landlords |
| 114 |
Chegg
General Retailers |
2,8741 | 0.3 | Provider of education related services |
| 115 |
AbCellera Biologics
Pharmaceuticals & Biotechnology |
2,8451 | 0.3 | Pharmaceutical research and development business |
| 116 |
TI Fluid Systems
Automobiles & Parts |
2,8131 | 0.3 | Manufacturer of fluid storage systems |
| 117 |
MarketAxess
Financial Services |
2,2991 | 0.3 | International electronic trading platform for institutional credit markets |
| 118 |
Restaurant Group
Travel & Leisure |
2,236 | 0.2 | Operator of restaurants and pubs |
| 119 |
Avon Protection
Aerospace & Defence |
1,661 | 0.2 | Producer of safety masks |
| 120 |
Chapel Down
†
Beverages |
1,601 | 0.2 | UK producer of sparkling and still wines, and Curious beers and ciders |
| --------------- | --------------- | |||
| Long investment positions (excluding BlackRock’s Institutional Cash Series plc – Sterling Liquid Environmentally Aware Fund) | 1,134,772 | 121.4 | ||
| --------------- | --------------- | |||
| Short investment positions | (24,925) | (2.7) | ||
| ========= | ========= |
1 Includes long derivative positions.
* Traded on the Alternative Investment Market (AIM) of the London Stock Exchange.
† Traded on NEX exchange.
Percentages shown are the share of net assets.
At 30 November 2021, the Company held equity interests in five companies comprising more than 3% of a company’s share capital as follows: Tatton Asset Management (4.2%), SigmaRoc (3.4%), Anpario (3.2%), Eckoh (3.1%) and Activeops (3.1%).
FAIR VALUE AND GROSS MARKET EXPOSURE OF INVESTMENTS AS AT 30 NOVEMBER 2021
|
|
Fair value1 £000 |
Gross market exposure2 £000 |
Gross market exposure as a % of net assets2 | |
|
2021 |
2020 |
|||
| Long investment positions (excluding BlackRock’s Institutional Cash Series plc – Sterling Liquid Environmentally Aware Fund) | 911,628 | 1,134,772 | 121.4 | 120.7 |
| Short investment positions1 | 860 | (24,925) | (2.7) | (1.9) |
| Cash and cash equivalents1,3 | 144 | (197,215) | (21.1) | (19.1) |
| BlackRock’s Institutional Cash Series plc – Sterling Liquid Environmentally Aware Fund | 25,080 | 25,080 | 2.7 | 1.9 |
| Other net current liabilities | (2,564) | (2,564) | (0.3) | (1.6) |
| --------------- | --------------- | --------------- | --------------- | |
| Net assets | 935,148 | 935,148 | 100.0 | 100.0 |
| ========= | ========= | ========= | ========= | |
The Company uses gearing through the use of long and short CFD positions. Gross and Net Gearing as at 30 November 2021 were 124.1% and 118.7% respectively (2020: 122.6% and 118.8% respectively). Gross and Net Gearing are Alternative Performance Measures, see Glossary contained within the Annual Report and Accounts.
1 Fair value is determined as follows:
- Listed and AIM quoted investments are valued at bid prices where available, otherwise at published price quotations.
- The sum of the fair values of the long and short investment positions above is determined based on the difference between the purchase or transaction price and value of the underlying shares in the contract (in effect the unrealised gains/(losses) on the exposed positions). The cost of purchasing the securities held through long derivative positions directly in the market would have amounted to £223,144,000 at the time of purchase, and subsequent market falls in prices have resulted in unrealised losses on the long derivative positions of £9,576,000, resulting in the value of the total market exposure to the underlying securities decreasing to £213,568,000 as at 30 November 2021.
- The notional price of selling the securities to which exposure was gained via the short derivative positions would have been £25,785,000 at the time of entering into the contract, and subsequent price rises have resulted in unrealised gains on the short derivative positions of £860,000 and the value of the market exposure of these investments decreasing to £24,925,000 at 30 November 2021. If the short derivative positions had been closed on 30 November 2021, this would have resulted in a gain of £860,000 for the Company.
2 Market exposure in the case of equity investments is the same as fair value. In the case of long and short derivative positions it is the market value of the underlying shares to which the portfolio is exposed via the contract.
3 The gross market exposure column for cash and cash equivalents has been adjusted to assume the Company traded direct holdings rather than exposure being gained through long and short investment positions.
DISTRIBUTION OF INVESTMENTS AS AT 30 NOVEMBER 2021
|
Sector |
% of long portfolio |
% of short portfolio |
% of net portfolio |
| Chemicals | 2.0 | (0.1) | 1.9 |
| Industrial Metals & Mining | 0.4 | 0.0 | 0.4 |
| Basic Materials | 2.4 | (0.1) | 2.3 |
| -------- | -------- | -------- | |
| Aerospace & Defence | 0.8 | 0.0 | 0.8 |
| Construction & Materials | 6.6 | 0.0 | 6.6 |
| Electronic & Electrical Equipment | 8.3 | 0.0 | 8.3 |
| Industrial Engineering | 0.7 | 0.0 | 0.7 |
| Industrial Transportation | 0.6 | 0.0 | 0.6 |
| Support Services | 11.1 | 0.0 | 11.1 |
| Industrials | 28.1 | 0.0 | 28.1 |
| -------- | -------- | -------- | |
| Beverages | 0.7 | 0.0 | 0.7 |
| Food Producers | 0.7 | 0.0 | 0.7 |
| Household Goods & Home Construction | 1.0 | 0.0 | 1.0 |
| Personal Goods | 2.7 | 0.0 | 2.7 |
| Consumer Staples | 5.1 | 0.0 | 5.1 |
| -------- | -------- | -------- | |
| Healthcare Equipment & Services | 1.7 | (0.3) | 1.4 |
| Pharmaceuticals & Biotechnology | 6.1 | 0.0 | 6.1 |
| Health Care | 7.8 | (0.3) | 7.5 |
| -------- | -------- | -------- | |
| Automobiles & Parts | 0.3 | 0.0 | 0.3 |
| Consumer Services | 0.0 | (0.1) | (0.1) |
| Food & Drug Retailers | 0.8 | 0.0 | 0.8 |
| General Retailers | 11.0 | (0.3) | 10.7 |
| Leisure Goods | 2.8 | 0.0 | 2.8 |
| Media | 6.7 | 0.0 | 6.7 |
| Travel & Leisure | 2.3 | 0.0 | 2.3 |
| Consumer Discretionary | 23.9 | (0.4) | 23.5 |
| -------- | -------- | -------- | |
| Banks | 0.0 | (0.2) | (0.2) |
| Closed End Investments | 0.0 | (0.3) | (0.3) |
| Financial Services | 13.3 | (0.2) | 13.1 |
| Non-life Insurance | 0.0 | (0.1) | (0.1) |
| Financials | 13.3 | (0.8) | 12.5 |
| -------- | -------- | -------- | |
| Real Estate Investment & Services | 1.9 | 0.0 | 1.9 |
| Real Estate Investment Trusts | 3.1 | (0.1) | 3.0 |
| Real Estate | 5.0 | (0.1) | 4.9 |
| -------- | -------- | -------- | |
| Software & Computer Services | 12.6 | (0.4) | 12.2 |
| Technology Hardware & Equipment | 1.1 | (0.2) | 0.9 |
| Technology | 13.7 | (0.6) | 13.1 |
| -------- | -------- | -------- | |
| Mobile Telecommunications | 3.0 | 0.0 | 3.0 |
| Telecommunications | 3.0 | 0.0 | 3.0 |
| -------- | -------- | -------- | |
| Total Investments | 102.3 | (2.3) | 100.0 |
| ===== | ===== | ===== |
The above percentages are calculated on the net portfolio as at 30 November 2021. The net portfolio is calculated as long equity and derivative positions, less short derivative positions as at 30 November 2021.
ANALYSIS OF THE PORTFOLIO
Market capitalisation as at 30 November 2021
| Long Positions1 % |
Short Positions % |
|
| £2.5bn+ | 28.1 | -0.5 |
| £2bn - £2.5bn | 5.3 | -0.6 |
| £1.5bn - £2bn | 23.5 | -0.3 |
| £1bn - £1.5bn | 17.1 | -0.2 |
| £500m - £1bn | 18.4 | -0.3 |
| £0m - £500m | -0.4 | 9.9 |
1 The above investments may comprise exposures to long equity and long derivative positions.
Source: BlackRock.
Position size as at 30 November 2021
|
Market value |
Long Positions* |
Short Positions |
| £25m+ | 6 | 0 |
| £20m - £25m | 4 | 0 |
| £15m - £20m | 10 | 0 |
| £10m - £15m | 20 | 0 |
| £5m - £10m | 44 | 0 |
| £0m - £5m | 36 | -15 |
* The above investments may comprise exposures to long equity and long derivative positions.
Source: BlackRock.
GROSS BASIS1 WITHIN THE NUMIS SMALLER COMPANIES PLUS AIM (EXCLUDING INVESTMENT COMPANIES) INDEX3
| % | |
| Held in Benchmark | 63.9 |
| Other | 36.1 |
NET BASIS2 WITHIN THE NUMIS SMALLER COMPANIES PLUS AIM (EXCLUDING INVESTMENT COMPANIES) INDEX3
| % | |
| Held in Benchmark | 62.9 |
| Other | 37.1 |
Source: BlackRock.
1 Long exposure plus short exposure as a percentage of the portfolio in aggregate excluding investment in BlackRock’s Institutional Cash Series plc – Sterling Liquid Environmentally Aware Fund.
2 Long exposure less short exposure as a percentage of the portfolio excluding investment in BlackRock’s Institutional Cash Series plc – Sterling Liquid Environmentally Aware Fund.
3 Holdings included within the Benchmark Index as at 30 November 2020 were 60.6% on a Gross Basis and 61.0% on a Net Basis.
STRATEGIC REPORT
The Directors present the Strategic Report of the Company for the year ended 30 November 2021.
PRINCIPAL ACTIVITY
The Company is a public company limited by shares which carries on business as an investment trust and its principal activity is portfolio investment.
OBJECTIVE
The Company’s objective is to provide shareholders with long term capital growth and an attractive total return through investment primarily in UK smaller and mid-capitalisation companies traded on the London Stock Exchange.
STRATEGY, BUSINESS MODEL, INVESTMENT POLICY AND INVESTMENT PROCESS
The Company invests in accordance with the objective given above. The Board is collectively responsible to shareholders for the long-term success of the Company and is its governing body. There is a clear division of responsibility between the Board and the Manager, BlackRock Fund Managers Limited (BFM). Matters for the Board include setting the Company’s strategy, including its investment objective and policy, setting limits on gearing (both bank borrowings and the effect of derivatives), capital structure, governance, and appointing and monitoring of performance of service providers, including the Manager.
The Company’s business model follows that of an externally managed investment trust; therefore the Company does not have any employees and outsources its activities to third party service providers, including the Manager who is the principal service provider.
The management of the investment portfolio and the administration of the Company have been contractually delegated to BFM. The Manager, operating under guidelines determined by the Board, has direct responsibility for the decisions relating to the day-to-day running of the Company and is accountable to the Board for the investment, financial and operating performance of the Company.
Other service providers include the Depositary and the Fund Accountant, The Bank of New York Mellon (International) Limited, and the Registrar, Computershare Investor Services PLC. Details of the contractual terms with third party service providers are set out in the Directors’ Report contained within the Annual Report and Accounts.
AMENDED INVESTMENT POLICY
The Company’s performance is measured against the Numis Smaller Companies plus AIM (excluding Investment Companies) Index (the Benchmark Index). The Investment Manager, BlackRock Investment Management (UK) Limited (BIM (UK)), may invest in companies outside the Benchmark Index without restriction, subject to the following limits.
The Company may hold up to 15% of its gross assets, at the time of acquisition, in securities of companies which are listed or traded on a stock exchange outside the UK.
In addition to the normal long only portfolio, the Company will likely hold a mixture of long and short contracts for difference (CFDs) and/or comparable equity derivatives that would result in a typical net market exposure of between 100% and 115%. In extremis, the Company could deploy the full 30% of permissible leverage into short CFDs and/or comparable equity derivatives, thereby reducing its overall net market exposure to 70%.
With effect from the publication of this report, the following amendment will be incorporated into the Company’s investment policy. Please see the Chairman’s Statement above for further details.
The Company may also invest up to 2.5% of its net assets (measured at the time of investment) in unquoted securities, including securities issued by companies incorporated outside the United Kingdom. However, the Company may invest more than 2.5%, but no more than 3.75%, of its net assets (both measured at the time of investment), in unquoted securities in circumstances where such investment is in an existing investee company and, in the Investment Manager’s opinion, a failure of the Company to make such investment would have a material adverse effect on the value of the Company’s investment in such investee company.
In addition, the Company is permitted to employ leverage up to 30% of net assets, which it does primarily through the use of CFDs and/or comparable equity derivatives, rather than bank borrowings, therefore enabling the Company to have a maximum net market exposure of 130%.
In normal circumstances the Company will likely hold a mixture of long and short CFDs and/or comparable equity derivatives that would result in a typical net market exposure of between 100% and 115%*. In extremis, the Company could deploy the full 30% of permissible leverage into short CFDs and/or comparable equity derivatives, thereby reducing its overall net market exposure to 70%.
Portfolio risk will be mitigated by investment in a diversified portfolio of holdings. No more than 5% of the Company’s gross assets, at the time of acquisition, may be invested in any one single holding, excluding holdings in cash or money market funds, where up to 10% of the Company’s gross assets may be held. The Company may also invest in collective investment vehicles. However, 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, borrowings less cash, should not exceed 20% of gross assets. The Company expects to employ any leverage primarily through its use of CFDs and/or comparable equity derivatives.
No material change will be made to the investment objective and policy without shareholder approval.
* The AIC measures gearing at gross level, rather than net market exposure level (i.e. gearing is calculated as borrowings + long CFDs and/or comparable equity derivatives + short CFDs and/or comparable equity derivatives) and therefore the published gearing figures will be higher than the typical net market exposure of between 100% and 115%.
INVESTMENT PROCESS
A unique feature of the Company is that it has the ability to go both long and short up to approximately 30% of the Company’s net assets.
Notwithstanding recent positive returns from UK small and mid-capitalisation companies, the sector has demonstrated considerable volatility over the past 20 years. Such an environment provides an attractive opportunity to add value via derivatives: instruments which can exploit share price moves whether up or down. As the maximum short portfolio exposure through derivatives is 30% of net assets, the Company will at all times retain a significant exposure to the market. In the course of their research the Portfolio Manager comes across companies which they judge are likely to underperform; the ability to take short positions therefore significantly enhances 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 long/short strategy is used to generate additional market exposure through ensuring that the long exposure exceeds the short exposure in a range between 0% to 15% 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 net market exposure might therefore be between 100% and 115%. This is lower than the ‘gross exposure’, which is the combination of the long equity positions, plus the net of long and short derivative positions expressed as a percentage of net assets. In a recessionary environment the Portfolio Manager has the flexibility to reduce market exposure to – at the maximum of its ‘least exposed’ level – around 70%. If successfully implemented this strategy would provide some cushioning of the Company’s performance in falling markets.
ESG INTEGRATION
The Manager defines Environmental, Social and Governance (ESG) integration as the practice of incorporating material ESG information and consideration of sustainability risks into investment decisions in order to enhance risk-adjusted returns Inclusion of this statement does not imply that the Company has an ESG-aligned investment objective, but rather describes how ESG information is considered as part of the overall investment process.
Of course, ESG information is not the sole consideration for investment decisions; instead, the Manager assesses a variety of economic and financial indicators which include ESG considerations in combination with other information in the research phase of the investment process to make investment decisions appropriate to their client’s objectives. This may also include relevant third party insight, as well as internal engagement commentary and input from BlackRock Investment Stewardship (BIS) on governance issues. The Portfolio Manager conducts regular portfolio reviews with the BlackRock Risk and Quantitative Analysis (RQA) team. These reviews include discussion of the portfolio's exposure to material ESG risks, as well as exposure to sustainability-related business involvements, climate-related metrics, traditional financial risks and other factors.
The Manager’s approach to ESG integration is to broaden the total amount of information its investment professionals consider in order to improve investment analysis, seeking to meet or exceed economic return and financial risk targets. ESG factors can be useful and relevant indicators for investment purposes and can help portfolio managers with their decision-making through identifying potentially negative events or corporate behaviour. The Portfolio Manager works closely with BIS to assess the governance quality of companies and investigate any potential issues, risks or opportunities. The Manager’s evaluation of ESG data may be subjective and could change over time in light of emerging sustainability risks or changing market conditions.
The Manager’s research team monitors differing levels of risk throughout the process and believes that avoiding major downside events can generate significant outperformance over the long term. Inputs from the RQA team are an integral part of the investment process. The RQA team analyse market and portfolio risk factors including stress tests, correlations, factor returns, cross-sectional volatility and attributions. The Manager’s evaluation procedures and financial analysis of the companies within the portfolio also take into account environmental, social and governance matters and other business issues.
The Company does not meet the criteria for Article 8 or 9 products under the EU Sustainable Finance Disclosure Regulation (“SFDR”) and the investments underlying this financial product do not take into account the EU criteria for environmentally sustainable economic activities.
Further information on the Manager’s approach to ESG and sustainability can be found in the report on Responsible Investing contained within the Annual Report and Accounts.
PERFORMANCE
The Investment Manager’s report above 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 below. The total profit for the year, after taxation, was £223,334,000 (2020: a profit of £50,795,000) of which the revenue return amounted to £11,446,000 (2020: £5,379,000) and a capital profit of £211,888,000 (2020: profit of £45,416,000).
Details of the dividends declared in respect of the year are set out in the Chairman’s Statement above.
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, and which are comparable to those reported by other investment trusts, are set out in the table below. These KPIs fall within the definition of ‘Alternative Performance Measures’ (APMs) under guidance issued by the European Securities and Markets Authority (ESMA), and additional information explaining how these are calculated is set out in the Glossary contained within the Annual Report and Accounts.
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.
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Year ended 30 November 2021 |
Year ended 30 November 2020 |
| Net asset value total return1,2 | 37.0% | 9.1% |
| Share price total return1,2 | 38.8% | 8.2% |
| Benchmark Index total return3 | 24.5% | 3.8% |
| Premium to cum income net asset value2 | 1.4% | 0.1% |
| Revenue return per share | 12.15p | 6.57p |
| Total dividend per share | 10.50p | 10.20p |
| Ongoing charges2,4 | 0.57% | 0.60% |
| Ongoing charges including performance fees2,5 | 1.38% | 1.60% |
1 This measures the Company’s share price and NAV total return, which assumes dividends paid by the Company have been reinvested.
2 Alternative Performance Measures, see Glossary contained within the Annual Report and Accounts.
3 The Company's Benchmark Index is the Numis Smaller Companies plus AIM (excluding Investment Companies) Index.
4 Ongoing charges represent the management fee and all other operating expenses, excluding the performance fee, finance costs, direct transaction costs, custody transaction charges, VAT recovered, taxation and certain non-recurring items as a % of average daily net assets.
5 Ongoing charges represent the management fee, performance fee and all other operating expenses, excluding finance costs, direct transaction costs, custody transaction charges, VAT recovered, taxation and certain non-recurring items as a % of average daily net assets.
SHARE PRICE DISCOUNT/PREMIUM
The Directors recognise that it is in the long-term interests of shareholders that the Company’s shares do not trade at an excessive discount or premium to their prevailing NAV for any material length of time. In the year under review the discount/premium to NAV of the ordinary shares on a cum income basis has ranged between a discount of 3.2% and a premium of 2.9%, with the average being a premium of 1.2%. The shares ended the year at a premium of 1.4% on a cum income basis. As at 2 February 2022 the premium was •%.
Your Board believes that the best way of ensuring that the Company’s shares trade at as close to NAV as possible 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 effective communication of the Company’s unique structure to existing and potential shareholders. The Board will also be seeking to renew the authority from shareholders at the AGM to buy back shares.
PRINCIPAL RISKS
As required by the 2018 UK Code of Corporate Governance, the Board has in place a robust, ongoing process to identify, assess and monitor the principal and emerging risks of the Company, including those that they consider would threaten its business model, future performance, solvency or liquidity. The COVID-19 pandemic has given rise to unprecedented challenges for businesses across the globe and the Board has taken into consideration the risks posed to the Company by the crisis.
A core element of this process is the Company’s risk register, which identifies the risks facing the Company and the likelihood and potential impact of each risk, together with the controls established for mitigation. A residual risk rating is calculated for each risk, which allows the effect of any mitigating procedures to be reflected in the register. The current risk register includes a range of risks spread between investment performance risk, income/dividend risk, legal & regulatory risk, counterparty risk, operational risk, market risk, political risk and financial risk.
The risk register, its method of preparation and the operation of key controls in the Manager’s and third party service providers’ systems of internal control are reviewed on a regular basis by the Audit Committee. In order to gain a more comprehensive understanding of the Manager’s and other third party service providers’ risk management processes and how these apply to the Company’s business, the Audit Committee periodically receives presentations from BlackRock’s Internal Audit and Risk & Quantitative Analysis teams. Where produced, the Audit Committee also reviews summaries of the Service Organisation Control (SOC1) reports from the Company’s service providers.
The principal risks and uncertainties faced by the Company during the financial year, together with the potential effects, controls and mitigating factors, are set out in the table below.
| Principal Risk | Mitigation/Control |
| An inappropriate policy or strategy may lead to: |
To manage these risks the Board:
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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 and derivatives. Market risk includes the potential impact of events which are outside the scope of the Company’s control, such as the UK’s decision to leave the European Union and the impacts of climate change. |
The Board carefully considers the 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, and key market risk factors are discussed. The Board also recognises the benefits of a closed-end fund structure in extremely volatile markets such as those experienced with the COVID-19 pandemic. Unlike open-ended counterparts, closed-end funds are not obliged to sell-down portfolio holdings at low valuations to meet liquidity requirements for redemptions. During times of elevated volatility and market stress, the ability of a closed-end fund structure to remain invested for the long-term enables the Portfolio Manager to adhere to disciplined fundamental analysis from a bottom-up perspective and be ready to respond to dislocations in the market as opportunities present themselves. |
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Income/dividend risk
The amount of dividends and future dividend growth will depend on the performance of the Company’s underlying portfolio holdings. Changes in the composition of the portfolio and 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. The Company also has a revenue reserve and powers to pay dividends from capital which could potentially be used to support the Company’s dividend if required. |
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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 2021, the Company had approximately 29.3% of its gross asset value invested in AIM traded equity securities and 12.4% of its gross assets in international markets, 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. |
The Company is not materially exposed to foreign currency and interest rate risk. For mitigation of market risk, see above. There are also risks linked to the Company’s use of derivative transactions including long and short investment positions. Details are disclosed in note 11 of the Annual Report and Accounts, together with a summary of the policies for managing and controlling these risks in note 16 contained within the Annual Report and Accounts. |
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Operational risk
In common with most other investment trust companies, the Company has no employees. The Company therefore relies upon the services provided by BlackRock (the Manager and AIFM) and The Bank of New York Mellon (International) Limited (the Depositary and Fund Accountant) who maintain the Company’s accounting records. Failure by any service provider to carry out its obligations to the Company could have a material adverse effect on the Company’s performance. Disruption to the accounting, payment systems or custody records, as a result of a cyber-attack or otherwise, could impact the monitoring and reporting of the Company’s financial position. 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. |
The Board reviews the overall performance of the Manager, Investment Manager and all other third party service providers and compliance with the investment management agreement on a regular basis. The Fund Accountant’s and the Manager’s internal control processes are regularly tested and monitored throughout the year and are evidenced through their Service Organisation Control (SOC 1) reports, which are subject to review by an Independent Service Assurance Auditor. The SOC 1 reports provide assurance in respect of the effective operation of internal controls. The Company’s financial instruments held in custody are subject to a strict liability regime and in the event of a loss of such financial instruments held in custody, the Depositary must return assets of an identical type or the corresponding amount, unless able to demonstrate that the loss was a result of an event beyond its reasonable control. The Board considers succession arrangements for key employees of the Manager and the Board also considers the business continuity arrangements of the Company’s key service providers on an ongoing basis and reviews these as part of its review of the Company’s risk register. In respect of the unprecedented and emerging risks posed by the COVID-19 pandemic in terms of the ability of service providers to function effectively, the Board has received reports from key service providers setting out the measures that they have put in place to address the crisis, in addition to their existing business continuity framework. Having considered these arrangements and reviewed service levels since the crisis has evolved, the Board are confident that a good level of service has and will be maintained. The Board also receives regular reports from BlackRock’s internal audit function. |
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Legal and regulatory risk
The Company has been approved by HM Revenue & Customs as an investment trust, subject to continuing to meet the relevant eligibility conditions, and 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. Any breach of the relevant eligibility conditions could lead to the Company losing its investment trust status and being subject to corporation tax on capital gains realised within the Company’s portfolio. In such event the investment returns of the Company may be adversely affected. Any serious breach could result in the Company and/or the Directors being fined or the subject of criminal proceedings or the suspension of the Company’s shares which would in turn lead to a breach of the Corporation Tax Act 2010. Risk of regulatory change Amongst other relevant laws and regulations, the Company is required to comply with the provisions of the Companies Act 2006, the Alternative Investment Fund Managers’ Directive (as retained and onshored in the UK), the Market Abuse Regulation (also as retained and onshored in the UK), the UK Listing Rules and the Disclosure Guidance and Transparency Rules. |
The Investment Manager monitors investment movements, the level of forecast income and expenditure and the amount of proposed dividends, if any, 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 as retained and onshored in the UK (AIFMD), the Company and its appointed Alternative Investment Fund Manager (AIFM) are subject to the risks that the requirements of the AIFMD are not correctly complied with. The Board and the AIFM also monitor changes in government policy and legislation which may have an impact on the Company. Compliance with the accounting standards applicable to quoted companies and those applicable to investment trusts are also regularly monitored to ensure compliance. The Company Secretary and the Company’s professional advisers monitor developments in relevant laws and regulations and provide regular reports to the Board in respect of the Company’s compliance. The Market Abuse Regulation came into force across the EU on 3 July 2016 and this has been retained and onshored in the UK following Brexit. The Board has taken steps to ensure that individual Directors (and their Persons Closely Associated) are aware of their obligations under the regulation and has updated internal processes, where necessary, to ensure the risk of non-compliance is effectively mitigated. |
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Counterparty risk
The potential loss that the Company could incur if a counterparty is unable (or unwilling) to perform on its commitments. The Company’s investment policy also permits the use of both exchange-traded and over-the-counter derivatives (including contracts for difference). |
Due diligence is undertaken before contracts are entered into and exposures are diversified across a number of counterparties. The Board reviews the controls put in place by the Investment Manager to monitor and to minimise counterparty exposure, which include intra-day monitoring of exposures to ensure that these are within set limits. The Depositary is liable for restitution for the loss of financial instruments held in custody, unless it is able to demonstrate that the loss was due to an event beyond its reasonable control. |
VIABILITY STATEMENT
The Directors have assessed the prospects of the Company over a longer period than the 12 months referred to by the “Going Concern” guidelines.
The Board conducted this review for the period up to the AGM in 2027, being a five-year period from the date that this Annual Report will be approved by shareholders. This is generally the investment holding period investors consider while investing in the smaller companies’ sector. In making this assessment the Board has considered the following factors:
• the Company’s principal risks as set out above;
• the impact of a significant fall in UK equity markets on the value of the Company’s investment portfolio in the light of the heightened volatility resulting from the impact of the ongoing COVID-19 pandemic;
• the ongoing relevance of the Company’s investment objective; and
• the level of demand for the Company’s shares.
The Directors have also considered the Company’s revenue and expense forecasts and the fact that expenses and liabilities are relatively stable. The Company also has a portfolio of investments which provides a level of cash receipts in the form of dividends and which are considered to be relatively realisable if required.
The Directors reviewed the assumptions and considerations underpinning the Company’s existing going concern assertion (please see the disclosure in the Directors’ Report contained within the Annual Report and Accounts), which are based on:
• processes for monitoring costs;
• key financial ratios;
• evaluation of risk management and controls;
• compliance with the investment objective;
• the Company’s ability to meet its liabilities as they fall due;
• portfolio risk profile;
• share price discount to NAV;
• gearing;
• counterparty exposure and liquidity risk in the light of the ongoing COVID-19 pandemic;
• the operational resilience of the Company and its key service providers and their ability to continue to provide a good level of service for the foreseeable future; and
• the effectiveness of business continuity plans in place for the Company and key service providers.
The Company has a relatively liquid portfolio and largely fixed overheads (excluding any applicable performance fees) which comprise a very small percentage of net assets (0.57% excluding performance fees, 1.38% including performance fees). The effective performance fee cap in the event that the NAV return exceeds the Benchmark Index return over the performance period is 0.90% of the average gross assets over the two years and the applicable percentage to be applied to the outperformance of the NAV total return over the Benchmark Index return is 15%. In addition, the maximum cap on total management and performance fees is 1.25% of average gross assets (measured over a rolling two-year period). Therefore, the Board has concluded that the Company would be able to meet its ongoing operating costs as they fall due.
On 30 December 2020, the UK and the EU signed the UK/EU Trade and Cooperation Agreement (“UK/EU Trade Agreement”), applied from 1 January 2021 and sets out the foundation of the economic and legal framework for trade between the UK and the EU. The UK’s exit from the EU is expected to result in additional trade costs and disruptions in this trading relationship. While the UK/EU Trade Agreement provides for the free trade of goods, it provides only general commitments on market access in services together with a “most favoured nation” provision which is subject to many exceptions. Furthermore, there is the possibility that either party may impose tariffs on trade in the future in the event that regulatory standards between the EU and the UK diverge. The terms of the future relationship may cause continued uncertainty in the global financial downgrading markets, and adversely affect the performance of the Company. Volatility resulting from this uncertainty may mean that the returns of the Company’s investments are affected by market movements, the potential decline in the value of Sterling or Euro, and the potential downgrading of UK sovereign credit rating.
The Directors have also considered the impact of potential changes in law, regulation and taxation and the matter of foreign exchange risk. They have determined that although there are a number of new potential risks associated with the legal, fiscal and regulatory landscape they do not believe that this represents a material threat to the Company’s strategy and business model, nor do they believe that the Investment Manager will be materially impeded in achieving the Company’s investment objective. The longer-term process of implementing the political, economic and legal framework that is to be agreed between the UK and the EU is likely to lead to ongoing uncertainty and periods of exacerbated volatility in both the UK and in wider European markets.
Based on the results of their analysis, the Directors have a reasonable expectation that the Company will be able to continue in operation and meet its liabilities as they fall due over the period of their assessment.
SECTION 172 STATEMENT: PROMOTING THE SUCCESS OF BLACKROCK THROGMORTON TRUST PLC
The Companies (Miscellaneous Reporting) Regulations 2018 require directors to explain more fully how they have discharged their duties under Section 172(1) of the Companies Act 2006 in promoting the success of their companies for the benefit of members as a whole. This enhanced disclosure covers how the Board has engaged with and understands the views of stakeholders and how stakeholders’ needs have been taken into account, the outcome of this engagement and the impact that it has had on the Board’s decisions.
As the Company is an externally managed investment company and does not have any employees or customers, the Board considers the main stakeholders in the Company to be the shareholders and the key service providers (being the Manager and Investment Manager, the Custodian, Depositary, Registrar and Broker). The reasons for this determination, and the Board’s overarching approach to engagement, are set out in the table below:
Stakeholders
| Shareholders | Manager and Investment Manager | Other key service providers |
| Continued shareholder support and engagement are critical to the continued existence of the Company and the successful delivery of its long-term strategy. The Board is focused on fostering good working relationships with shareholders and on understanding the views of shareholders in order to incorporate them into the Board’s strategy and objectives in delivering long-term growth and income. In turn, portfolio holdings are ultimately shareholders’ assets, and the Board recognises the importance of good stewardship and communication with investee companies in meeting the Company’s investment objective and strategy. |
The Board’s main working relationship is with the Manager, who is responsible for the Company’s portfolio management (including asset allocation, stock and sector selection) and risk management, as well as ancillary functions such as administration, secretarial, accounting and marketing services. The Manager has sub-delegated portfolio management to the Investment Manager. Successful management of shareholders’ assets by the Investment Manager is critical for the Company to successfully deliver its investment strategy and meet its objective. The Company is also reliant on the Manager as AIFM to provide support in meeting relevant regulatory obligations under the AIFMD and other relevant legislation. | In order for the Company to function as an investment trust with a listing on the premium segment of the official list of the FCA and trade on the London Stock Exchange’s (LSE) main market for listed securities, the Board relies on a diverse range of advisors for support in meeting relevant obligations and safeguarding the Company’s assets. For this reason, the Board considers the Company’s Custodian, Depositary, Registrar and Broker to be stakeholders. The Board, either directly or through the Manager, maintains regular contact with its key external providers and receives regular reporting from them through the Board and Committee meetings, as well as outside of the regular meeting cycle. |
A summary of the key areas of engagement undertaken by the Board with its key stakeholders in the year under review and how Directors have acted upon this to promote the long-term success of the Company are set out in the table below:
| Area of Engagement | Issue | Engagement | Impact |
| Investment mandate and objective | The Board is committed to promoting the role and success of the Company in delivering on its investment mandate to shareholders over the long term. The Board also has responsibility to shareholders to ensure that the Company’s portfolio of assets is invested in line with the stated investment objective and in a way that ensures an appropriate balance between spread of risk and portfolio returns. | The Board works closely with the Investment Manager throughout the year in further developing our investment strategy and underlying policies, not simply for the purpose of achieving the Company’s investment objective but in the interests of shareholders and future investors. The Manager’s approach to the consideration of ESG factors in respect of the Company’s portfolio, as well as its engagement with investee companies, is to encourage the adoption of sustainable business practices which support long-term value creation. The Board is kept advised in respect of the Manager’s consideration of ESG factors as part of the investment process; a summary of BlackRock’s approach to ESG matters is set out within the Annual Report and Accounts. |
Details regarding the Company’s NAV and share price performance can be found in the Chairman’s Statement and in the Strategic Report above. The portfolio activities undertaken by the Manager can be found in the Investment Manager’s Report above. |
| Management of the share rating | The 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 believes that it is in shareholders’ interests that the share price does not trade at an excessive premium or discount to NAV. Therefore, where deemed to be in shareholders’ long-term interests, it may exercise its powers to issue shares or buy back shares with the objective of ensuring that an excessive premium or discount does not arise. | The Manager reports total return performance statistics to the Board on a regular basis, along with the portfolio yield and the impact of dividends paid on brought forward distributable reserves. The Board reviews the Company’s discount/premium to NAV on a regular basis and holds regular discussions with the Manager and the Company’s broker regarding the discount/premium level. The Board believes that the best way of maintaining the share rating at an optimal level over the long term is to create demand for the shares in the secondary market. To this end the Investment Manager is devoting considerable effort to broadening the awareness of the Company, particularly to wealth managers and to the wider retail shareholder market. The Manager provides the Board with feedback and key performance statistics regarding the success of the Company’s marketing initiatives. Notwithstanding the issues posed by the ongoing COVID-19 pandemic, in normal operating conditions shareholders may attend the Company’s Annual General Meeting where formal questions may be put to the Board around the management of any premium/discount. |
The average premium for the year to 30 November 2021 was 1.2%. During the year the Company’s share price has traded at a maximum discount of 3.2% and a maximum premium of 2.9%. Market demand for the Company’s shares has been strong and between 1 December 2020 and the date of this report the Company has issued 13,917,035 shares for proceeds of £125 million, improving the Company’s liquidity and resulting in a lower operating charges ratio. |
| Service levels of third party providers | The Board acknowledges the importance of ensuring that the Company’s principal suppliers are providing a suitable level of service including: the Manager in respect of investment performance and delivering on the Company’s investment mandate; the Depositary in respect of its duties towards safeguarding the Company’s assets; the Registrar in its maintenance of the Company’s share register and dealing with investor queries and the Company’s Brokers in respect of the provision of advice and acting as a market maker for the Company’s shares. | The Manager reports to the Board on the Company’s performance on a regular basis. The Board carries out a robust annual evaluation of the Manager’s performance, their commitment and available resources. The Board performs an annual review of the service levels of all third party service providers and concludes on their suitability to continue in their role. The Board has received updates in respect of business continuity planning from the Company’s Manager, Depositary, Fund Administrator, Brokers, Registrar and Printers, and is confident that arrangements are in place to ensure that a good level of service will continue to be provided despite the impact of the COVID-19 pandemic. In light of the challenges presented by the ongoing COVID-19 pandemic to the operation of business across the globe, the Board has continued to work closely with the Manager to gain comfort that relevant business continuity plans are operating effectively for all of the Company’s service providers. |
Performance evaluations were performed on a timely basis and the Board concluded that all third party service providers, including the Manager, Depositary and Fund Administrator were operating effectively and providing a good level of service. |
| Board composition | The Board is committed to ensuring that its own composition brings an appropriate balance of knowledge, experience and skills, and that it is compliant with best corporate governance practice under the UK Corporate Governance Code, including guidance on tenure and the composition of the Board’s committees. | Over recent years the Board undertook a review of succession planning arrangements and identified the need for action to ensure that the composition of the Board was appropriate and that there was an ongoing process of refreshment, bringing in new ideas and different perspectives. The Board, through its Nomination Committee, agreed the selection criteria and the method of selection, recruitment and appointment. Board diversity, including gender, was taken into account when establishing the criteria. All Directors are subject to a formal evaluation process on an annual basis (more details and the conclusions in respect of the 2021 evaluation process are given within the Annual Report and Accounts). All Directors stand for re- election by shareholders annually. Shareholders may attend the AGM and raise any queries in respect of Board composition or individual Directors in person or may contact the Company Secretary or the Chairman using the details provided within the Annual Report and Accounts if they wish to raise any issues. |
On 21 December 2020 the Board announced the appointment of a new non-executive Director, Nigel Burton. Jean Matterson retired as a Director at the conclusion of the AGM on 24 March 2021. Merryn Somerset Webb was appointed as a new non-executive Director on 24 March 2021, further strengthening the Board. The Directors are not aware of any issues that have been raised directly by shareholders in respect of Board composition in 2021. Details for the proxy voting results in favour and against individual Directors’ re-election at the 2021 AGM are given on the Company’s website at www.blackrock.com/ uk/thrg. |
| Shareholders | Continued shareholder support and engagement are critical to the continued existence of the Company and the successful delivery of its long-term strategy. The dividend is funded out of current year revenue and, where deemed appropriate, may be supported from revenue reserves if current year revenue is insufficient. The Company does not have a policy of seeking income, however, the portfolio has, to date, continued to deliver a level of income such that the Board is able to pay an attractive dividend. |
The Board is committed to maintaining open channels of communication and to engaging with shareholders. Notwithstanding the challenges posed by the COVID-19 pandemic, in normal operating circumstances the Company welcomes and encourages attendance and participation from shareholders at its Annual General Meetings. Shareholders therefore have the opportunity to meet the Directors and Investment Manager and to address questions to them directly. The Annual Report and half yearly financial report are available on the BlackRock website and are also circulated to shareholders either in printed copy or via electronic communications. In addition, regular updates on performance, monthly factsheets, the daily NAV and other information are also published on the website at www.blackrock. com/uk/thrg. The Board also works closely with the Manager to develop the Company’s marketing strategy, with the aim of ensuring effective communication with shareholders in respect of the investment mandate and objective. Unlike trading companies, shareholder meetings usually take the form of a meeting with the Portfolio Manager as opposed to members of the Board. As well as attending regular investor meetings the Portfolio Manager holds regular discussions with wealth management desks and offices to build on the case for, and understanding of, long-term investment opportunities in the UK smaller companies’ sector. However, the Board is ultimately responsible for communication with shareholders and all substantive matters arising from such communication are referred to the Board. The Manager also coordinates public relations activity, including meetings between the Portfolio Manager and relevant industry publications to set out their vision for the portfolio strategy and outlook for the UK equity market. The Manager releases the daily NAV and monthly portfolio updates to the market to ensure that investors are kept up to date in respect of performance and other portfolio developments and maintains a website on behalf of the Company that contains relevant information in respect of the Company’s investment mandate and objective. If shareholders wish to raise issues or concerns with the Board, they are welcome to do so at any time. The Chairman is available to meet directly with shareholders periodically to understand their views on governance and the Company’s performance where they wish to do so. He may be contacted via the Company Secretary whose details are provided within the Annual Report and Accounts. |
The Board values any feedback and questions from shareholders ahead of and during Annual General Meetings in order to gain an understanding of their views and will take action when and as appropriate. Feedback and questions will also help the Company evolve its reporting, aiming to make reports more transparent and understandable. Feedback from all substantive meetings between the Investment Manager and shareholders will be shared with the Board. The Directors will also receive updates from the Company’s broker on any feedback from shareholders, as well as share trading activity, share price performance and an update from the Investment Manager. The Portfolio Manager attended professional investor meetings and held discussions with a range of different wealth management desks and offices in respect of the Company during the year under review. Investors were also impressed with the wide pool of resource available through BlackRock’s Emerging Companies team, and the rigorous ‘bottom-up’ investment approach. |
| Responsible Investing | More than ever, consideration of material Environmental, Social and Governance (ESG) information and sustainability risk is a key factor in making investment decisions. Climate change is becoming a defining factor in companies’ long-term prospects across the investment spectrum, with significant and lasting implications for economic growth and prosperity. | The Board believes that responsible investment and sustainability are integral to the longer-term delivery of the Company’s success. The Board works closely with the Investment Manager to regularly review the Company’s performance, investment strategy and underlying policies to ensure that the Company’s investment objective continues to be met in an effective, responsible and sustainable way in the interests of shareholders and future investors. The Investment Manager’s approach to the consideration of ESG factors in respect of the Company’s portfolio, as well as the Investment Manager’s engagement with investee companies to encourage the adoption of sustainable business practices which support long-term value creation, are kept under review by the Board. The Investment Manager reports to the Board in respect of its ESG policies and how these are integrated into the investment process; a summary of BlackRock’s approach to ESG integration is set out within the Annual Report and Accounts. The Investment Manager’s engagement and voting policy are detailed within the Annual Report and Accounts. |
The Investment Manager believes there is a positive correlation between good ESG practices on the part of portfolio companies and investment performance. Details of the Company’s performance in the year are given in the Chairman’s Statement above and the Performance Record contained within the Annual Report and Accounts. |
THE BOARD’S APPROACH TO ESG
Environmental, Social and Governance (ESG) issues can present both opportunities and threats to long-term investment performance. The Company does not have an ESG mandate (and accordingly does not have an ESG or impact focused investment strategy and has not adopted any exclusionary screens) but our Portfolio Manager does take ESG factors into account as part of the investment process as these elements can significantly influence a company’s valuation. These ESG issues are a key focus of the Board, and the Board is committed to a diligent oversight of the activities of the Manager in these areas. The Board is aware of the Company’s long term underweight position in extractive industries, where innovative and disruptive business models are rare and the non-participation in some capital raises where ESG factors have been a concern.
The Board believes engagement and dialogue with management is, in most cases, the most effective way of driving meaningful change in the behaviour of investee company management. This is particularly true for our Manager given the extent of BlackRock’s shareholder engagement. The Board also believes that voting and engagement are important tools to generate change. During the year to 30 November 2021, the Investment Manager, through its investment stewardship team, engaged 44 times with 32 individual portfolio companies (representing 31.4% of the portfolio by value) on ESG matters. It also voted on 1,742 proposals at 126 general meetings on behalf of the Company. In addition, our Portfolio Manager held a total of 384 meetings with investee companies during the financial year as part of his investment and research activity. Further detail of how our Manager has voted and engaged with the companies in our portfolio can be found within the Annual Report and Accounts.
As well as the influence afforded by its sheer scale, the Board believes that BlackRock is well placed as Manager to fulfil these requirements due to its approach to ESG integration and its application of this to the Company’s investment processes, the emphasis it places on sustainability, its collaborative approach in its investment stewardship activities and its position in the industry as one of the largest suppliers of sustainable investment products in the global market. More information on BlackRock’s approach to sustainability and investment stewardship is set out within the Annual Report and Accounts.
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 above.
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, and environmental, social and governance factors when selecting and retaining investments. Details of the Company’s approach to socially responsible investment is set out above and within the Annual Report and Accounts.
Modern Slavery Act
As an investment vehicle the Company does not provide goods or services in the normal course of business and does not have customers. Accordingly, the Directors consider that the Company is not required to make any slavery or human trafficking statement under the Modern Slavery Act 2015. The Board considers the Company’s supply chain, dealing predominantly with professional advisers and service providers in the financial services industry, to be low risk in relation to this matter.
Directors, gender representation and employees
The Directors of the Company on 30 November 2021, all of whom, with the exception of Nigel Burton and Merryn Somerset Webb, who were appointed on 21 December 2020 and 24 March 2021 respectively, held office throughout the year, are set out within the Annual Report and Accounts. The Board recognises the importance of having a range of experienced Directors who, both individually and collectively, possess a suitable balance of skills, knowledge, independence and diversity to enable it to fulfil its obligations. As at 30 November 2021, the Board consisted of three men and three women, resulting in 50% female representation. The Company has no employees, and all of its Directors are non-executive. Therefore, there are no disclosures to be made in respect of employees.
The Chairman’s Statement and the Investment Manager’s Report above form part of this Strategic Report.
The Strategic Report was approved by the Board at its meeting on 4 February 2022.
BY ORDER OF THE BOARD
KEVIN MAYGER
FOR AND ON BEHALF OF BLACKROCK INVESTMENT MANAGEMENT (UK) LIMITED
Company Secretary
4 February 2022
The following report has been prepared by the Company’s Manager and sets out its approach to responsible investing.
RESPONSIBLE OWNERSHIP: BLACKROCK’S APPROACH TO SUSTAINABLE INVESTING
RESPONSIBLE OWNERSHIP – BLACKROCK’S APPROACH
As a fiduciary to its clients, BlackRock has built its business to protect and grow the value of clients’ assets. From BlackRock’s perspective, business-relevant sustainability issues can contribute to a company’s long-term financial performance, and by further incorporating these considerations into the investment research, portfolio construction, and investment stewardship process can help support long-term risk adjusted returns. By expanding access to data, insights and learning on material ESG risks and opportunities in investment processes across BlackRock’s diverse platform, BlackRock believes that the investment process is greatly enhanced. The Company’s Investment Manager works closely with the BIS team to assess the governance quality of companies and assess any potential ESG risks or opportunities. The Investment Manager uses ESG information when conducting research and due diligence on new investments and again when monitoring investments in the portfolio.
BLACKROCK’S APPROACH TO SUSTAINABLE INVESTING
In January 2020, Larry Fink wrote a letter to CEOs saying that climate change will fundamentally reshape modern finance. In addition, BlackRock announced it would make sustainability its new standard for investing, by doubling down on product innovation while also achieving full ESG integration across our active platform. Our sustainability strategy is focused on long-term value creation. As a fiduciary asset manager we believe that our clients should consider how climate change, policy and economic shifts will affect returns in their portfolios. We believe that climate risk is investment risk. Further, BlackRock believes that the net zero transition will reshape the real economy and financial portfolios, presenting risks and opportunities for investors.
Our strategy is built on the investment conviction that sustainability risk and climate risk are investment risks, and that integrating sustainability can help investors build more resilient portfolios and achieve better long-term, risk adjusted returns. This investment conviction is built on a two-part thesis: first, asset prices and portfolio risks do not yet fully reflect a broad set of sustainability-related considerations; second, the market is at the front end of a significant reallocation of capital towards sustainable investing, which we believe will result in a flow of capital towards issuers and assets with positive sustainability characteristics (and away from those with negative ones). This in turn will also impact the relative pricing of risk and assets in portfolios.
BlackRock also announced in January 2021 that it was committed to supporting the goal of ‘net zero’ (building an economy that emits no more carbon dioxide than it removes from the atmosphere) by 2050 (the scientifically-established threshold necessary to keep global warming below 2ºC). BlackRock is taking a number of steps to help investors prepare their portfolios for a net zero world, including capturing opportunities created by the net zero transition.
Our firmwide ESG integration statement outlines how we are integrating ESG investment insights and data across our entire platform. Fund-level ESG integration statements can be found on our product pages, or available upon request. https://www.blackrock.com/corporate/literature/publication/blk-esg-investment-statement-web.pdf.
INVESTMENT STEWARDSHIP
BlackRock also places a strong emphasis on sustainability in its stewardship activities. As a fiduciary, BlackRock has a responsibility to its clients to make sure investee companies are adequately managing and disclosing ESG risks and opportunities that can impact their ability to generate long-term financial performance, and to signal concerns if they are not.
The BIS team engages with portfolio companies, and proxy votes on clients’ behalf, to promote corporate governance standards and sustainable business models that BlackRock believes contribute to the durable, long-term profitability BlackRock’s clients depend on to meet their financial goals. Each year, the BIS team prioritizes its work around several engagement themes that enables it to provide feedback to companies and build mutual understanding about corporate governance and sustainable business models. In 2021, the BIS engagement priorities reflected a continued emphasis on board effectiveness alongside the impact of sustainability-related factors on a company’s ability to generate long-term financial returns. BIS mapped its priorities to specific United Nations Sustainable Development Goals, such as Gender Equality and Clean and Affordable Energy, and provided high level, globally relevant Key Performance Indicators (KPIs) for each priority so companies are aware of BlackRock’s expectations. Further information on our engagement priorities for 2022 can be found at the following link: https://www.blackrock.com/corporate/about-us/investment-stewardship#engagement-priorities.
BlackRock is committed to transparency in terms of disclosure on its engagement with companies and voting rationales. During the twelve months to 30 June 2021, BlackRock held over 3,600 engagements with companies based in 55 markets and voted on clients’ behalf on more than 165,000 management and shareholder proposals across 71 voting markets. Voting is how BIS signals support for or raises concerns over a company’s corporate governance or business model. Where BIS has concerns, the team may vote against directors or other management proposals, or in support of a shareholder proposal. BIS employs votes against directors more frequently since that is a globally available signal of concern. During the 2020-21 proxy year (1 July 2020 through 30 June 2021), BIS voted on more than 64,000 director elections, voting against 10% for falling short of the team’s expectations. BIS voted against one or more directors at over 3,400 companies globally. Corporate governance concerns — including lack of board independence, insufficient diversity, and executive compensation — prompted most of the votes against directors’ elections, and other director-related proposals, globally. BIS’s engagement and voting disclosure can be found at: https://www.blackrock.com/corporate/about-us/investment-stewardship#engagement-and-voting-history.
In line with BlackRock’s investment conviction that climate risk is investment risk, in 2020 the BIS team identified 244 companies that, on its assessment, were not adequately addressing their exposure to or management of climate risk.1 In 2021, BIS expanded the climate focus universe to over 1,000 carbon intensive public companies that represent 90% of the global scope 1 and 2 greenhouse gas (GHG) emissions of our clients’ public equity holdings with BlackRock.2 Further information on climate risk can be found at: https://www. blackrock.com/corporate/literature/publication/blk-climate-focus-universe.pdf
The increasing demand from investors for more complete and comparable sustainability reporting, and from companies for clarity on what to report, led BlackRock to ask, in January 2020, that companies publish reports aligned with the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD), supplemented by industry specific metrics such as those identified by the Sustainability Accounting Standards Board (SASB). BIS communicated its position throughout the past two years that BlackRock expects companies to demonstrate how climate and sustainability-related risks are considered and integrated into their strategy. If a company does not provide adequate public disclosures for BlackRock to assess how material risks are addressed, we may conclude that those issues are not appropriately managed and mitigated. In the 2020-21 proxy year, BIS voted against 255 directors and against 319 companies for climate-related concerns that could negatively affect long-term shareholder value.3
More details about BlackRock’s investment stewardship process can be found on BlackRock’s website at www.blackrock.com/corporate/about-us/investment-stewardship.
In terms of its own reporting, BlackRock believes that the SASB provides a clear set of standards for reporting sustainability information across a wide range of issues, from labour practices to data privacy to business ethics. For evaluating and reporting climate-related risks, as well as the related governance issues that are essential to managing them, the TCFD provides a valuable framework. BlackRock recognise that reporting to these standards requires significant time, analysis, and effort. BlackRock’s own SASB-aligned disclosure is available on its website at: www. blackrock.com/corporate/literature/continuous-disclosure-and-important-information/blackrock-2020-sasb-disclosure.pdf and BlackRock is committed to publishing a detailed TCFD-aligned report in 2022 on its 2021 activities.
The above forms part of the Strategic Report.
1 See the BIS special report, “Our approach to sustainability”, that outlines BIS’ engagement approach and voting on climate risk and other sustainability topics.
2 Based on MSCI data. This list includes companies that were on the 2020 BIS Climate Watchlist and those that are constituents of the Climate Action 100+ focus universe, in addition to other companies that BlackRock held an equity position in on behalf of our clients as of the end of 2020.
3 Votes against unique companies on climate include: 1) votes against or abstain on director elections and director-related proposals, and 2) votes in support or abstain on climate-related shareholder proposals.
RELATED PARTY AND TRANSACTIONS WITH THE INVESTMENT MANAGER AND AIFM
BlackRock Fund Managers Limited (BFM) provides management and administration services to the Company under a contract which is terminable on six months’ notice. BFM has (with the Company’s consent) delegated certain portfolio and risk management services, and other ancillary services to BlackRock Investment Management (UK) Limited (BIM (UK)). Further details of the investment management contract are disclosed in the Directors’ Report contained within the Annual Report and Accounts.
The investment management fee due for the year ended 30 November 2021 amounted to £3,652,000 (2020: £2,097,000). In addition, a performance fee of £6,655,000 (2020: £4,890,000) is payable for the year. At the year end, £2,923,000 was outstanding in respect of management fees (2020: £1,113,000) and £6,655,000 (2020: £4,890,000) was outstanding in respect of performance fees.
In addition to the above services, BlackRock has provided marketing services. The total fees paid or payable for these services for the year ended 30 November 2021 amounted to £157,000 excluding VAT (2020: £174,000). Marketing fees of £120,000 (2020: £132,000) were outstanding at the year end.
The Company has an investment in the BlackRock Institutional Cash Series plc – Sterling Liquid Environmentally Aware Fund of £25,080,000 (2020: £11,541,000) which for the year ended 30 November 2021 and 30 November 2020 has been presented in the Financial Statements as a cash equivalent.
The ultimate holding company of the Manager and the Investment Manager is BlackRock, Inc., a company incorporated in Delaware, USA.
The Board consists of six 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 2021, the Chairman received an annual fee of £41,000, the Chairman of the Audit and Management Engagement Committee received an annual fee of £32,500 and each other Director received an annual fee of £28,000. With effect from 1 December 2021 the Chairman will receive an annual fee of £44,000, the Chairman of the Audit and Management Engagement Committee will receive an annual fee of £35,000 and each other Director will receive an annual fee of £30,000.
As at 30 November 2021, all members of the Board held shares in the Company. Christopher Samuel held 63,352 ordinary shares, Loudon Greenlees held 15,000 ordinary shares, Louise Nash held 2,100 ordinary shares, Angela Lane held 11,496 ordinary shares, Nigel Burton held 16,000 ordinary shares and Merryn Somerset Webb held 3,727 ordinary shares.
All of the holdings of the Directors are beneficial. Since the year end there have been no further changes to the Directors’ share interests.
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, (including the Directors’ Remuneration Report) in accordance with applicable United Kingdom law and regulations.
Company law requires the Directors to prepare financial statements for each financial year. Under that law, the Directors are required to prepare the financial statements in accordance with international accounting standards in conformity with the requirements of the Companies Act 2006. Under company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Company and of the profit or loss of the Company for that period.
In preparing these Financial Statements, the Directors are required to:
- present fairly the financial position, financial 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 Financial Statements have been prepared in accordance with international accounting standards in conformity with the requirements of the Companies Act 2006, subject to any material departures disclosed and explained in the Financial Statements;
- provide additional disclosures when compliance with the specific requirements in international accounting standards in conformity with the requirements of the Companies Act 2006, is insufficient to enable users to understand the impact of particular transactions, other events and conditions on the Company’s financial position and financial performance; and
- prepare the Financial 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 sufficient to show and explain the Company’s transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the Financial Statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and hence 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 and the Corporate Governance Statement in accordance with the Companies Act 2006 and applicable regulations, including the requirements of the Listing Rules and the Disclosure Guidance and Transparency Rules. The Directors have delegated responsibility to the Investment Manager and the AIFM for the maintenance and integrity of the Company’s corporate and financial information included on BlackRock’s website. Legislation in the United Kingdom governing the preparation and dissemination of Financial Statements may differ from legislation in other jurisdictions.
Each of the Directors, whose names are listed within the Annual Report and Accounts, confirms to the best of his or her knowledge that:
- the Financial Statements, which have been prepared in accordance with international accounting standards in conformity with the requirements of the Companies Act 2006, give a true and fair view of the assets, liabilities, financial position and net profit of the Company; and
- the Annual Report and Financial Statements include 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 2018 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 fulfil these requirements. The process by which the Committee has reached these conclusions is set out in the Audit Committee’s report contained within the Annual Report and Accounts. As a result, the Board has concluded that the Annual Report and Financial Statements for the year ended 30 November 2021, taken as a whole, are fair, balanced and understandable and provided the information necessary for shareholders to assess the Company’s position, performance, business model and strategy.
FOR AND ON BEHALF OF THE BOARD
CHRISTOPHER SAMUEL
Chairman
4 February 2022
STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 30 NOVEMBER 2021
|
|
Notes |
Revenue | Capital | Total | |||
| 2021 £000 |
2020 £000 |
2021 £000 |
2020 £000 |
2021 £000 |
2020 £000 |
||
| Income from investments held at fair value through profit or loss | 3 | 12,188 | 6,387 | – | – | 12,188 | 6,387 |
| Net income from derivatives | 3 | 1,272 | 323 | – | – | 1,272 | 323 |
| Other income | 3 | 7 | 60 | – | – | 7 | 60 |
| -------------- | -------------- | -------------- | -------------- | -------------- | -------------- | ||
| Total revenue | 13,467 | 6,770 | – | – | 13,467 | 6,770 | |
| ======== | ======== | ======== | ======== | ======== | ======== | ||
| Net profit on investments held at fair value through profit or loss | – | – | 192,102 | 25,656 | 192,102 | 25,656 | |
| Net profit/(loss) on foreign exchange | – | – | 141 | (234) | 141 | (234) | |
| Net profit from derivatives | – | – | 29,070 | 26,495 | 29,070 | 26,495 | |
| -------------- | -------------- | -------------- | -------------- | -------------- | -------------- | ||
| Total | 13,467 | 6,770 | 221,313 | 51,917 | 234,780 | 58,687 | |
| ======== | ======== | ======== | ======== | ======== | ======== | ||
| Expenses | |||||||
| Investment management and performance fees | 4 | (913) | (524) | (9,394) | (6,463) | (10,307) | (6,987) |
| Other operating expenses | 5 | (1,078) | (822) | (27) | (33) | (1,105) | (855) |
| -------------- | -------------- | -------------- | -------------- | -------------- | -------------- | ||
| Total operating expenses | (1,991) | (1,346) | (9,421) | (6,496) | (11,412) | (7,842) | |
| ======== | ======== | ======== | ======== | ======== | ======== | ||
| Net profit on ordinary activities before finance costs and taxation | 11,476 | 5,424 | 211,892 | 45,421 | 223,368 | 50,845 | |
| Finance costs | (1) | (2) | (4) | (5) | (5) | (7) | |
| -------------- | -------------- | -------------- | -------------- | -------------- | -------------- | ||
| Net profit on ordinary activities before taxation | 11,475 | 5,422 | 211,888 | 45,416 | 223,363 | 50,838 | |
| ======== | ======== | ======== | ======== | ======== | ======== | ||
| Taxation | (29) | (43) | – | – | (29) | (43) | |
| -------------- | -------------- | -------------- | -------------- | -------------- | -------------- | ||
| Net profit on ordinary activities after taxation | 11,446 | 5,379 | 211,888 | 45,416 | 223,334 | 50,795 | |
| ======== | ======== | ======== | ======== | ======== | ======== | ||
| Earnings per ordinary share (pence) | 7 | 12.15 | 6.57 | 224.96 | 55.45 | 237.11 | 62.02 |
| ======== | ======== | ======== | ======== | ======== | ======== | ||
The total column of this statement represents the Company’s Statement of Comprehensive Income, prepared in accordance with International Accounting Standards in conformity with the requirements of the Companies Act 2006. The supplementary revenue and capital columns are both prepared under guidance published by the Association of Investment Companies (AIC). All items in the above statement derive from continuing operations. No operations were acquired or discontinued during the year. All income is attributable to the equity holders of the Company.
The Company does not have any other comprehensive income. The net profit for the year disclosed above represents the Company’s total comprehensive income.
STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 NOVEMBER 2021
|
|
Notes |
Called up share capital £000 |
Share premium account £000 |
Capital redemption reserve £000 |
Special reserve £000 |
Capital reserves £000 |
Revenue reserve £000 |
Total £000 |
| For the year ended 30 November 2021 | ||||||||
| At 30 November 2020 | 4,376 | 101,368 | 11,905 | 44,580 | 425,140 | 8,846 | 596,215 | |
| Total comprehensive income: | ||||||||
| Net profit for the year | – | – | – | – | 211,888 | 11,446 | 223,334 | |
| Transactions with owners, recorded directly to equity: | ||||||||
| Ordinary shares issued | 8, 9 | 696 | 124,418 | – | – | – | – | 125,114 |
| Share issue costs | 9 | – | (126) | – | – | – | – | (126) |
| Tender costs written back | 9 | – | – | – | 2 | – | – | 2 |
| Dividends paid1 | 6 | – | – | – | – | – | (9,391) | (9,391) |
| -------------- | -------------- | -------------- | -------------- | -------------- | -------------- | -------------- | ||
| At 30 November 2021 | 5,072 | 225,660 | 11,905 | 44,582 | 637,028 | 10,901 | 935,148 | |
| ======== | ======== | ======== | ======== | ======== | ======== | ======== | ||
| For the year ended 30 November 2020 | ||||||||
| At 30 November 2019 | 4,026 | 26,169 | 11,905 | 36,525 | 379,724 | 11,708 | 470,057 | |
| Total comprehensive income: | ||||||||
| Net profit for the year | – | – | – | – | 45,416 | 5,379 | 50,795 | |
| Transactions with owners, recorded directly to equity: | ||||||||
| Ordinary shares issued from treasury | – | 34,741 | – | 8,099 | – | – | 42,840 | |
| Ordinary shares issued | 350 | 40,683 | – | – | – | – | 41,033 | |
| Share issue costs – treasury | – | – | – | (44) | – | – | (44) | |
| Share issue costs | – | (225) | – | – | – | – | (225) | |
| Dividends paid2 | 6 | – | – | – | – | – | (8,241) | (8,241) |
| -------------- | -------------- | -------------- | -------------- | -------------- | -------------- | -------------- | ||
| At 30 November 2020 | 4,376 | 101,368 | 11,905 | 44,580 | 425,140 | 8,846 | 596,215 | |
| ======== | ======== | ======== | ======== | ======== | ======== | ======== |
1 Final dividend of 7.70p per share for the year ended 30 November 2020, declared on 10 February 2021 and paid on 1 April 2021 and interim dividend of 2.50p per share for the year ended 30 November 2021, declared on 23 July 2021 and paid on 27 August 2021.
2 Final dividend of 7.70p per share for the year ended 30 November 2019, declared on 6 February 2020 and paid on 2 April 2020 and interim dividend of 2.50p per share for the year ended 30 November 2020, declared on 23 July 2020 and paid on 28 August 2020.
For information on the Company’s distributable reserves please refer to note 9 below.
STATEMENT OF FINANCIAL POSITION AS AT 30 NOVEMBER 2021
|
Notes |
2021 £000 |
2020 £000 |
|
| Non current assets | |||
| Investments held at fair value through profit or loss | 10 | 921,204 | 590,225 |
| Current assets | |||
| Current tax asset | 81 | 27 | |
| Other receivables | 2,984 | 5,767 | |
| Derivative financial assets held at fair value through profit or loss | 10 | – | 4,108 |
| Cash collateral pledged with brokers | 7,380 | 1,050 | |
| Cash and cash equivalents | 25,223 | 11,642 | |
| -------------- | -------------- | ||
| Total current assets | 35,668 | 22,594 | |
| ======== | ======== | ||
| Total assets | 956,872 | 612,819 | |
| ======== | ======== | ||
| Current liabilities | |||
| Other payables | (13,008) | (14,289) | |
| Derivative financial liabilities held at fair value through profit or loss | 10 | (8,716) | (105) |
| Liability for cash collateral received | – | (2,210) | |
| -------------- | -------------- | ||
| Total current liabilities | (21,724) | (16,604) | |
| ======== | ======== | ||
| Net assets | 935,148 | 596,215 | |
| ======== | ======== | ||
| Equity attributable to equity holders | |||
| Called up share capital | 8 | 5,072 | 4,376 |
| Share premium account | 9 | 225,660 | 101,368 |
| Capital redemption reserve | 9 | 11,905 | 11,905 |
| Special reserve | 9 | 44,582 | 44,580 |
| Capital reserves | 9 | 637,028 | 425,140 |
| Revenue reserve | 9 | 10,901 | 8,846 |
| -------------- | -------------- | ||
| Total equity | 935,148 | 596,215 | |
| ======== | ======== | ||
| Net asset value per ordinary share (pence) | 7 | 921.91 | 681.24 |
| ======== | ======== |
CASH FLOW STATEMENT FOR THE YEAR ENDED 30 NOVEMBER 2021
| 2021 £000 |
2020 £000 |
|
| Operating activities | ||
| Net profit on ordinary activities before taxation | 223,363 | 50,838 |
| Add back finance costs | 5 | 7 |
| Profit on investments and contracts for difference held at fair value through profit or loss (including transaction costs) | (221,688) | (52,573) |
| Net (profit)/loss on foreign exchange | (141) | 234 |
| Special dividends allocated to capital | – | 83 |
| Sales of investments held at fair value through profit or loss | 322,822 | 274,350 |
| Purchases of investments held at fair value through profit or loss | (461,699) | (394,398) |
| Net receipts on closure of derivatives | 42,306 | 25,472 |
| (Increase)/decrease in other receivables | (64) | 604 |
| Increase in other payables | 3,517 | 362 |
| Decrease/(increase) in amounts due from brokers | 3,977 | (3,966) |
| (Decrease)/increase in amounts due to brokers | (4,798) | 5,052 |
| Net cash collateral pledged | (8,540) | (1,150) |
| -------------- | -------------- | |
| Net cash outflow from operating activities before taxation | (100,940) | (95,085) |
| ======== | ======== | |
| Taxation paid | (83) | (18) |
| -------------- | -------------- | |
| Net cash outflow from operating activities | (101,023) | (95,103) |
| ======== | ======== | |
| Financing activities | ||
| Interest paid | (5) | (7) |
| Cash proceeds from ordinary shares issued from treasury | – | 44,021 |
| Cash proceeds from ordinary shares issued | 123,859 | 40,808 |
| Dividends paid | (9,391) | (8,241) |
| -------------- | -------------- | |
| Net cash inflow from financing activities | 114,463 | 76,581 |
| ======== | ======== | |
| Increase/(decrease) in cash and cash equivalents | 13,440 | (18,522) |
| ======== | ======== | |
| Effect of foreign exchange rate changes | 141 | (234) |
| -------------- | -------------- | |
| Change in cash and cash equivalents | 13,581 | (18,756) |
| ======== | ======== | |
| Cash and cash equivalents at start of year | 11,642 | 30,398 |
| -------------- | -------------- | |
| Cash and cash equivalents at end of year | 25,223 | 11,642 |
| ======== | ======== | |
| Comprised of: | ||
| Cash at bank | 143 | 101 |
| Cash Fund1 | 25,080 | 11,541 |
| -------------- | -------------- | |
| 25,223 | 11,642 | |
| ======== | ======== |
1 Cash Fund represents funds held on deposit with the BlackRock Institutional Cash Series plc – Sterling Liquid Environmentally Aware Fund.
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 NOVEMBER 2021
1. PRINCIPAL ACTIVITY
The principal activity of the Company is that of an investment trust company within the meaning of Section 1158 of the Corporation Tax Act 2010.
2. ACCOUNTING POLICIES
The principal accounting policies adopted by the Company have been applied consistently, other than where new policies have been adopted and are set out below.
(a) Basis of preparation
The Financial Statements have been prepared under the historic cost convention modified by the revaluation of financial assets and financial liabilities held at fair value through profit or loss and in accordance with international accounting standards in conformity with the requirements of the Companies Act 2006 (IASs). All of the Company’s operations are of a continuing nature.
Insofar as the Statement of Recommended Practice (SORP) for investment trust companies and venture capital trusts issued by the Association of Investment Companies (AIC) in October 2019 is compatible with international accounting standards in conformity with the requirements of the Companies Act 2006, the Financial Statements have been prepared in accordance with the guidance set out in the SORP.
Substantially all of the assets of the Company consist of securities that are readily realisable and, accordingly, the Directors believe that the Company has adequate resources to continue in operational existence for the period for the forseeable future, being a period of at least one year from the date of approval of the Financial Statements and therefore consider the going concern assumption to be appropriate. The Directors have considered any potential impact of the COVID-19 pandemic, its potential longer-term effects on the global economy and the mitigation measures which key service providers, including the Manager, have in place to maintain operational resilience on the going concern of the Company. The Directors have reviewed the income and expense projections and the liquidity of the investment portfolio in making their assessment.
The Company’s Financial Statements are presented in Sterling, which is the functional currency of the Company and 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 indicated.
Adoption of new and amended standards and interpretations:
Amendments to IFRS 3 – Definition of a business (effective 1 January 2020). This amendment revised the definition of a business. According to feedback received by the International Accounting Standards Board (IASB), application of the current guidance is commonly thought to be too complex and it results in too many transactions qualifying as business combinations. The adoption of this standard has had no impact on the Financial Statements of the Company.
Amendments to IAS 1 and IAS 8 – Definition of material (effective 1 January 2020). The amendments to IAS 1, ‘Presentation of Financial Statements’ and IAS 8, ‘Accounting Policies, Changes in Accounting Estimates and Errors’, and consequential amendments to other IASs, require companies to:
(i) use a consistent definition of materiality throughout IASs and the Conceptual Framework for Financial Reporting;
(ii) clarify the explanation of the definition of material; and
(iii) incorporate some of the guidance of IAS 1 about immaterial information.
The adoption of this standard has had no impact on the Financial Statements of the Company.
Amendments to IFRS 9, IAS 39 and IFRS 7 – Interest rate benchmark reform (effective 1 January 2020). These amendments provide certain reliefs in connection with the interest rate benchmark reform (excluding phase 2 reforms). These reliefs relate to hedge accounting and have the effect that the Inter Bank Offer Rate (IBOR) reform should not generally cause hedge accounting to terminate. However, any hedge ineffectiveness should continue to be recorded in the Statement of Comprehensive Income. Given the pervasive nature of hedges involving IBOR based contracts, the reliefs will affect companies in all industries.
The adoption of this standard has had no impact on the Financial Statements of the Company.
Relevant IAS standards that have yet to be adopted:
IAS 12 – Deferred tax related to assets and liabilities arising from a single transaction (effective 1 January 2023). The IASB has amended IAS 12, ‘Income taxes’, to require companies to recognise deferred tax on particular transactions that, on initial recognition, give rise to equal amounts of taxable and deductible temporary differences. According to the amended guidance, a temporary difference that arises on initial recognition of an asset or liability is not subject to the initial recognition exemption if that transaction gave rise to equal amounts of taxable and deductible temporary differences. These amendments might have a significant impact on the preparation of Financial Statements by companies that have substantial balances of right-of-use assets, lease liabilities, decommissioning, restoration and similar liabilities. The impact for those affected would be the recognition of additional deferred tax assets and liabilities.
The adoption of this standard is unlikely to have any significant impact on the Company.
(b) Presentation of the Statement of Comprehensive Income
In order to better reflect 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) Segmental reporting
The Directors are of the opinion that the Company is engaged in a single segment of business being investment business.
(d) Income
Dividends receivable on equity shares are recognised as revenue for the year 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. Provision is made for any dividends not expected to be received. Special dividends, if any, are treated as a capital or a revenue receipt depending on the facts or circumstances of each dividend. The return on a debt security is recognised on a time apportionment basis so as to reflect the effective yield on the debt security.
Deposit interest receivable is accounted for on an accruals basis. Interest income from the Cash Fund is accounted for on an accruals basis.
Where the Company has elected to receive its dividends in the form of additional shares rather than in cash, the cash equivalent of the dividend is recognised as revenue. Any excess in the value of the shares received over the amount of the cash dividend is recognised in capital.
(e) 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 which are incidental to the acquisition or sale of an investment 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 within note 10 to the Financial Statements contained within the Annual Report and Accounts;
- expenses are treated as capital where a connection with the maintenance or enhancement of the value of the investments can be demonstrated;
- the investment management fee and finance costs have 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 of capital gains and income, respectively, from the investment portfolio; and
- performance fees are allocated 100% to the capital column of the Statement of Comprehensive Income as fees are generated in connection with enhancing the value of the investment portfolio.
(f) 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 year. 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.
Where expenses are allocated between capital and revenue, any tax relief in respect of expenses is allocated between capital and revenue returns on the marginal basis using the Company’s effective rate of corporation tax for the accounting period.
Deferred taxation is recognised in respect of all temporary differences that have originated but not reversed at the financial reporting date, where transactions or events that result in an obligation to pay more taxation in the future or right to pay less taxation in the future have occurred at the financial reporting date. This is subject to deferred tax 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. Deferred tax assets and liabilities are measured at the rates applicable to the legal jurisdictions in which they arise.
(g) Investments held at fair value through profit or loss
In accordance with IFRS 9, the Company classifies its investments at initial recognition as held at fair value through profit or loss and are managed and evaluated on a fair value basis in accordance with its investment strategy and business model.
All investments are measured initially and subsequently at fair value through profit or loss. Purchases of investments are recognised on a trade date basis. Sales of investments are recognised at the trade date of the disposal.
The fair value of the financial investments is based on their quoted bid price at the financial reporting date, without deduction for the estimated selling costs. This policy applies to all current and non-current asset investments held by 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 “Net profits/losses on investments held at fair value through profit or loss”. Also included within the heading are transaction costs in relation to the purchase or sale of investments.
For all financial instruments not traded in an active market, the fair value is determined by using various valuation techniques. Valuation techniques include market approach (i.e., using recent arm’s length market transactions adjusted as necessary and reference to the current market value of another instrument that is substantially the same) and the income approach (e.g., discounted cash flow analysis and option pricing models making use of available and supportable market data where possible).
(h) Derivatives
The Company can hold long and short positions in contracts for difference (CFDs) and index futures which are held at fair value based on the bid prices of the underlying securities in respect of long positions and the offer prices of the underlying securities in respect of short positions.
Gains and losses on derivative transactions are recognised in the Statement of Comprehensive Income. They are shown in the capital column of the Statement of Comprehensive Income if they are of a capital nature and are 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. Derivative assets and derivative liabilities that are subject to netting arrangements are offset in the Statement of Financial Position.
(i) Other receivables and other payables
Other receivables and other payables do not carry any interest and are short-term in nature and are accordingly stated on an amortised cost basis.
(j) Dividends payable
Under IASs, 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 accrued in the Financial Statements unless they have been paid.
Dividends payable to equity shareholders are recognised in the Statement of Changes in Equity.
(k) Foreign currency translation
Transactions involving foreign currencies are converted at the rate ruling at the date of the transaction. Foreign currency monetary assets and liabilities and non-monetary assets held at fair value are translated into Sterling at the rate ruling on the financial reporting date. Foreign exchange differences arising on translation are recognised in the Statement of Comprehensive Income as a revenue or capital item depending on the income or expense to which they relate. For investment transactions and investments held at the year end, denominated in a foreign currency, the resulting gains or losses are included in the gain on investments held at fair value through profit or loss in the Statement of Comprehensive Income.
(l) Cash and cash equivalents
Cash comprises cash in hand and on 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.
The Cash Fund is managed by BlackRock Asset Management Ireland Limited and is subject to fees and expenses which are capped at 0.03% of the NAV. The investment is managed as part of the Company’s cash and cash equivalents as defined under IAS 7 and is presented as a cash equivalent in the Financial Statements.
(m) Bank borrowings
Bank overdrafts are recorded as the proceeds received. Finance charges, including any premium payable on settlement or redemption and direct issue costs, are accounted for on an accruals basis in the Statement of Comprehensive Income using the effective interest rate method and are added to the carrying amount of the instruments to the extent that they are not settled in the period in which they arise.
(n) Share repurchases, share reissues and new share issues
Shares repurchased and subsequently cancelled – share capital is reduced by the nominal value of the shares repurchased, and the capital redemption reserve is correspondingly increased in accordance with Section 733 of the Companies Act 2006. The full cost of the repurchase is charged to the special reserve.
Shares repurchased and held in treasury – the full cost of the repurchase is charged to the special reserve.
Where treasury shares are subsequently re-issued:
- amounts received to the extent of the repurchase price are credited to the special reserve; and
- any surplus received in excess of the repurchase price is taken to the share premium account.
Where new shares are issued, the par value is taken to called up share capital and amounts received to the extent of any surplus received in excess of the par value are taken to the share premium account.
Share issue costs are charged to the share premium account.
(o) Critical accounting estimates and judgements
The Company makes estimates and assumptions concerning the future. The resulting accounting estimates and assumptions will, by definition, seldom equal the related actual results. Estimates and judgements are regularly evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. The Directors do not believe that any accounting judgements or estimates have a significant risk of causing a material adjustment to the carrying amount of assets and liabilities within the next financial year. There are no critical accounting estimates or judgements.
3. INCOME
|
|
2021 £000 |
2020 £000 |
| Investment income: | ||
| UK dividends | 8,940 | 4,535 |
| UK special dividends | 1,320 | 427 |
| UK stock dividends | 108 | 207 |
| UK REIT dividends | 464 | 491 |
| Overseas dividends | 1,186 | 491 |
| Overseas special dividends | 170 | 236 |
| --------------- | --------------- | |
| Total investment income | 12,188 | 6,387 |
| ========= | ========= | |
| Net income from derivatives | 1,272 | 323 |
| Other income: | ||
| Deposit interest | – | 4 |
| Interest from Cash Fund | 7 | 56 |
| 7 | 60 | |
| --------------- | --------------- | |
| Total income | 13,467 | 6,770 |
| ========= | ========= |
Dividends and interest received in cash during the year amounted to £11,919,000 and £6,000 (2020: £6,985,000 and £60,000).
No special dividends have been recognised in capital during the year (2020: £83,000).
4. INVESTMENT MANAGEMENT AND PERFORMANCE FEES
|
|
2021 | 2020 | ||||
| Revenue £000 |
Capital £000 |
Total £000 |
Revenue £000 |
Capital £000 |
Total £000 |
|
| Investment management fee | 913 | 2,739 | 3,652 | 524 | 1,573 | 2,097 |
| Performance fee | – | 6,655 | 6,655 | – | 4,890 | 4,890 |
| --------------- | --------------- | --------------- | --------------- | --------------- | --------------- | |
| Total | 913 | 9,394 | 10,307 | 524 | 6,463 | 6,987 |
| ========= | ========= | ========= | ========= | ========= | ========= | |
The performance fee is 15% of Net Asset Value total return outperformance of the Benchmark Index measured over a two year rolling basis and is applied on the average Gross Assets over two years. The performance fee is calculated and accrued on a daily basis and payable on 30 November each year. Gross Assets are defined as the economic exposure to the total long and short positions and all derivatives positions less current liabilities. There is a cap on the annual total management and performance fees of 1.25% of average Gross Assets over a two year period which has the effect of capping annual performance fees at circa 0.9% of average Gross Assets over two years.
On the first day of the financial year, outperformance from the previous financial year (if any) is carried forward and accrued in the daily NAV released to the London Stock Exchange on that day.
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. For the year ended 30 November 2021, a performance fee of £6,655,000 has been accrued (2020: £4,890,000).
The investment management fee is calculated at the rate of 0.35% per annum on month end Gross Assets. The management fee is charged 25% to the revenue column and 75% to the capital column of the Statement of Comprehensive Income. There is no additional fee for company secretarial and administration services.
5. OTHER OPERATING EXPENSES
|
|
2021 £000 |
2020 £000 |
| Allocated to revenue: | ||
| Custody fee | 12 | 15 |
| Auditor’s remuneration1 | 52 | 44 |
| Registrar’s fee | 47 | 43 |
| Directors’ emoluments2 | 184 | 137 |
| Broker fees | 45 | 54 |
| Depositary fees | 92 | 55 |
| Marketing fees | 157 | 174 |
| FCA Fees | 19 | 16 |
| Printing and postage fees | 76 | 25 |
| AIC fees | 16 | 22 |
| Stock exchange listing fees | 268 | 134 |
| Other administrative costs | 110 | 103 |
| --------------- | --------------- | |
| 1,078 | 822 | |
| Allocated to capital: | ||
| Custody transaction charges3 | 27 | 33 |
| 1,105 | 855 | |
| --------------- | --------------- | |
| The Company’s ongoing charges4, calculated as a percentage of average daily net assets and using the management fee and all other operating expenses, excluding performance fees, finance costs, direct transaction costs, custody transaction charges, VAT recovered, taxation and certain non–recurring items, were: | 0.57% | 0.60% |
| --------------- | --------------- | |
| The Company’s ongoing charges4, calculated as a percentage of average daily net assets and using the management fee and all other operating expenses and including performance fees but excluding finance costs, direct transaction costs, custody transaction charges, VAT recovered, taxation and certain non–recurring items, were: | 1.38% | 1.60% |
| ========= | ========= |
1 No non-audit services were provided by the Company’s auditors.
2 Further information on Directors’ emoluments can be found in the Report of the Remuneration Committee contained within the Annual Report and Accounts. The Company has no employees.
3 For the year ended 30 November 2021, expenses of £27,000 (2020: £33,000) were charged to the capital column of the Statement of Comprehensive Income. These relate to transaction costs charged by the Custodian on sale and purchase trades.
4 Alternative Performance Measures, see Glossary contained within the Annual Report and Accounts.
6. DIVIDENDS
|
Dividends paid on equity shares: |
Record date |
Payment date |
2021 £000 |
2020 £000 |
| Final dividend of 7.70p per share for the year ended 30 November 2020 (2019: 7.70p) |
19 February 2021 | 1 April 2021 | 6,972 | 6,150 |
| Interim dividend of 2.50p per share for the year ended 30 November 2021 (2020: 2.50p) |
6 August 2021 | 27 August 2021 | 2,419 | 2,091 |
| --------------- | --------------- | |||
| 9,391 | 8,241 | |||
| ========= | ========= |
The total dividends payable in respect of the year ended 30 November 2021 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.
| Dividends paid or declared on equity shares: | 2021 £000 |
2020 £000 |
| Interim dividend of 2.50p per share for the year ended 30 November 2021 (2020: 2.50p) | 2,419 | 2,091 |
| Final dividend of 8.00p per share for the year ended 30 November 2021 (2020: 7.70p) | 8,255 | 6,972 |
| --------------- | --------------- | |
| 10,674 | 9,063 | |
| ========= | ========= |
1 Based on103,184,864 ordinary shares in issue on 2 February 2022.
7. EARNINGS AND NET ASSET VALUE PER ORDINARY SHARE
Total revenue, capital return and net asset value per ordinary share are shown below and have been calculated using the following:
|
|
Year ended 30 November 2021 |
Year ended 30 November 2020 |
| Net revenue profit attributable to ordinary shareholders (£000) | 11,446 | 5,379 |
| Net capital profit attributable to ordinary shareholders (£000) | 211,888 | 45,416 |
| --------------- | --------------- | |
| Total profit attributable to ordinary shareholders (£000) | 223,334 | 50,795 |
| ========= | ========= | |
| Equity shareholders’ funds (£000) | 935,148 | 596,215 |
| ========= | ========= | |
| The weighted average number of ordinary shares in issue during the year, on which the earnings per ordinary share was calculated was: |
94,190,181 | 81,902,632 |
| The actual number of ordinary shares in issue at the year end, on which the net asset value per ordinary share was calculated was: | 101,435,964 | 87,518,929 |
| Earnings per share | ||
| Revenue earnings per share (pence) – basic and diluted | 12.15 | 6.57 |
| Capital earnings per share (pence) – basic and diluted | 224.96 | 55.45 |
| --------------- | --------------- | |
| Total earnings per share (pence) – basic and diluted | 237.11 | 62.02 |
| ========= | ========= |
|
|
As at 30 November 2021 |
As at 30 November 2020 |
| Net asset value per ordinary share (pence) | 921.91 | 681.24 |
| Ordinary share price (pence) | 935.00 | 682.00 |
| ========= | ========= |
There were no dilutive securities at the year end.
8. CALLED UP SHARE CAPITAL
|
|
Ordinary shares in issue number |
Treasury shares number |
Total shares number |
Nominal value £000 |
| Allotted, called up and fully paid share capital comprised: | ||||
| Ordinary shares of 5 pence each: | ||||
| At 30 November 2020 | 87,518,929 | – | 87,518,929 | 4,376 |
| Ordinary shares issued | 13,917,035 | – | 13,917,035 | 696 |
| -------------------- | -------------------- | -------------------- | -------------------- | |
| At 30 November 2021 | 101,435,964 | – | 101,435,964 | 5,072 |
| =========== | =========== | =========== | =========== |
During the year ended 30 November 2021, the Company issued no shares from treasury (2020: 6,400,000) for a total consideration of £nil (2020: £42,796,000) including costs.
During the year ended 30 November 2021, the Company issued 13,917,035 new shares (2020: 6,988,603) for a total consideration of £124,988,000 (2020: £40,808,000) including costs.
Since 30 November 2021 and up to the latest practicable date of 2 February 2022, a further 1,748,900 shares have been issued for a total gross consideration of £16,382,000.
The ordinary shares give shareholders voting rights, the entitlement to all of the capital growth in the Company’s assets and to all income from the Company that is resolved to be distributed.
9. RESERVES
|
Share premium account £000 |
Capital redemption reserve £000 |
Distributable reserves | ||||
|
Special reserve £000 |
Capital reserve arising on investments sold £000 |
Capital reserve arising on revaluation of investments held £000 |
Revenue reserve £000 |
|||
| At 30 November 2020 | 101,368 | 11,905 | 44,580 | 277,106 | 148,034 | 8,846 |
| Movement during the year: | ||||||
| Total comprehensive income: | ||||||
| Net profit for the year | – | – | – | 121,759 | 90,129 | – |
| Revenue return for the year | – | – | – | – | – | 11,446 |
| Transactions with owners recorded directly to equity: | ||||||
| Ordinary shares issued | 124,418 | – | – | – | – | – |
| Share issue costs | (126) | – | – | – | – | – |
| Tender costs written back | – | – | 2 | – | – | – |
| Dividends paid | – | – | – | – | – | (9,391) |
| --------------- | --------------- | --------------- | --------------- | --------------- | --------------- | |
| At 30 November 2021 | 225,660 | 11,905 | 44,582 | 398,865 | 238,163 | 10,901 |
| ========= | ========= | ========= | ========= | ========= | ========= | |
The share premium account and capital redemption reserve are not distributable profits under the Companies Act 2006. In accordance with ICAEW Technical Release 02/17BL on Guidance on Realised and Distributable Profits under the Companies Act 2006, the special reserve and capital reserve may be used as distributable profits for all purposes and, in particular, for the repurchase by the Company of its ordinary shares and for payment as dividends. In accordance with the Company’s Articles of Association, the special reserve, capital reserves and revenue reserve may be distributed by way of dividend. The capital reserve arising on the revaluation of investments of £238,163,000 (2020: gain of £148,034,000) is subject to fair value movements and may not be readily realisable at short notice, as such it may not be entirely distributable. The investments are subject to financial risks; as such capital reserves (arising on investments sold) and the revenue reserve may not be entirely distributable if a loss occurred during the realisation of these investments.
10. VALUATION OF FINANCIAL INSTRUMENTS
Financial assets and financial liabilities are either carried in the Statement of Financial Position at their fair value (investment and derivatives) or at an amount which is a reasonable approximation of fair value (due from brokers, dividends and interest receivable, due to brokers, accruals, cash at bank and bank overdrafts). IFRS 13 requires the Company to classify fair value measurements using a fair value hierarchy that reflects the significance of inputs used in making the measurements. The valuation techniques used by the Company are explained in the accounting policies note 2(g) to the Financial Statements above.
Categorisation within the hierarchy has been determined on the basis of the lowest level input that is significant to the fair value measurement of the relevant asset or liability.
The fair value hierarchy has the following levels:
Level 1 – Quoted market price for identical instruments in active markets
A financial instrument is regarded as quoted in an active market if quoted prices are readily available from an exchange, dealer, broker, industry group, pricing service or regulatory agency and those prices represent actual and regularly occurring market transactions on an arm’s length basis. The Company does not adjust the quoted price for these instruments.
Level 2 – Valuation techniques using observable inputs
This category includes instruments valued using quoted prices for similar instruments in markets that are considered less than active, or other valuation techniques where all significant inputs are directly or indirectly observable from market data.
Valuation techniques used for non-standardised financial instruments such as options, currency swaps and other over-the-counter derivatives include the use of comparable recent arm’s length transactions, reference to other instruments that are substantially the same, discounted cash flow analysis, option pricing models and other valuation techniques commonly used by market participants making the maximum use of market inputs and relying as little as possible on entity specific inputs.
As at the year end the long and short derivative positions were valued using the underlying equity bid price (offer price in respect of short positions) and the contract price at the inception of the trade or at the trade reset date. There have been no changes to the valuation technique since the previous year or as at the date of this report.
Contracts for difference have been classified as Level 2 investments as their valuation has been based on market observable inputs represented by the market prices of the underlying quoted securities to which these contracts expose the Company.
Level 3 – Valuation techniques using significant unobservable inputs
This category includes all instruments where the valuation technique includes inputs not based on market data and these inputs could have a significant impact on the instrument’s valuation.
This category also includes instruments that are valued based on quoted prices for similar instruments where significant entity determined adjustments or assumptions are required to reflect differences between the instruments and instruments for which there is no active market. The Investment Manager considers observable data to be that market data that is readily available, regularly distributed or updated, reliable and verifiable, not proprietary, and provided by independent sources that are actively involved in the relevant market.
The level in the fair value hierarchy within which the fair value measurement is categorised in its entirety is determined on the basis of the lowest level input that is significant to the fair value measurement.
Assessing the significance of a particular input to the fair value measurement in its entirety requires judgement, considering factors specific to the asset or liability. The determination of what constitutes ‘observable’ inputs requires significant judgement by the Investment Manager.
Fair values of financial assets and financial liabilities
The table below sets out fair value measurements using the IFRS 13 fair value hierarchy.
|
Financial assets/(liabilities) at fair value through profit or loss at 30 November 2021 |
Level 1 £000 |
Level 2 £000 |
Level 3 £000 |
Total £000 |
| Assets: | ||||
| Equity investments | 921,204 | – | – | 921,204 |
| Contracts for difference (fair value) | – | – | – | – |
| Liabilities: | ||||
| Contracts for difference (fair value) | – | (8,716) | – | (8,716) |
| --------------- | --------------- | --------------- | --------------- | |
| 921,204 | (8,716) | – | 912,488 | |
| ========= | ========= | ========= | ========= |
|
Financial assets/(liabilities) at fair value through profit or loss at 30 November 2020 |
Level 1 £000 |
Level 2 £000 |
Level 3 £000 |
Total £000 |
| Assets: | ||||
| Equity investments | 590,225 | – | – | 590,225 |
| Contracts for difference (fair value) | – | 4,108 | – | 4,108 |
| Liabilities: | ||||
| Contracts for difference (fair value) | – | (105) | – | (105) |
| --------------- | --------------- | --------------- | --------------- | |
| 590,225 | 4,003 | – | 594,228 | |
| ========= | ========= | ========= | ========= |
There were no transfers between levels for financial assets and financial liabilities during the year recorded at fair value as at 30 November 2021 and 30 November 2020. The Company did not hold any Level 3 securities throughout the financial year or as at 30 November 2021 (2020: nil).
11. RELATED PARTY DISCLOSURE
Directors’ emoluments
At the date of this report, the Board consists of six non-executive Directors, all of whom are considered to be independent of the Manager by the Board.
Disclosures of the Directors’ interests in the ordinary shares of the Company and fees and expenses payable to the Directors are set out in the Directors’ Remuneration Report contained within the Annual Report and Accounts. At 30 November 2021: £15,000 (2020: £13,000) was outstanding in respect of Directors’ fees.
Significant Holdings
The following investors are:
a. funds managed by the BlackRock Group or are affiliates of BlackRock, Inc. (“Related BlackRock Funds”) or
b. investors (other than those listed in (a) above) who held more than 20% of the voting shares in issue in the Company and are as a result, considered to be related parties to the Company (“Significant Investors”).
As at 30 November 2021
| Total % of shares held by Related BlackRock Funds |
Total % of shares held by Significant Investors who are not affiliates of BlackRock Group or BlackRock, Inc. |
Number of Significant Investors who are not affiliates of BlackRock Group or BlackRock, Inc. |
| 1.78 | n/a | n/a |
As at 30 November 2020
| Total % of shares held by Related BlackRock Funds |
Total % of shares held by Significant Investors who are not affiliates of BlackRock Group or BlackRock, Inc. |
Number of Significant Investors who are not affiliates of BlackRock Group or BlackRock, Inc. |
| 1.88 | n/a | n/a |
12. TRANSACTIONS WITH THE INVESTMENT MANAGER AND AIFM
BlackRock Fund Managers Limited (BFM) provides management and administration services to the Company under a contract which is terminable on six months’ notice. BFM has (with the Company’s consent) delegated certain portfolio and risk management services, and other ancillary services to BlackRock Investment Management (UK) Limited (BIM (UK)). Further details of the investment management contract are disclosed in the Directors’ Report contained within the Annual Report and Accounts.
The investment management fee due for the year ended 30 November 2021 amounted to £3,652,000 (2020: £2,097,000). In addition, a performance fee of £6,655,000 (2020: £4,890,000) is payable for the year. At the year end, £2,923,000 was outstanding in respect of management fees (2020: £1,113,000) and £6,655,000 (2020: £4,890,000) was outstanding in respect of performance fees.
In addition to the above services, BlackRock has provided marketing services. The total fees paid or payable for these services for the year ended 30 November 2021 amounted to £157,000 excluding VAT (2020: £174,000). Marketing fees of £120,000 (2020: £132,000) were outstanding at the year end.
The Company has an investment in the BlackRock Institutional Cash Series plc – Sterling Liquid Environmentally Aware Fund of £25,080,000 (2020: £11,541,000) which for the year ended 30 November 2021 and 30 November 2020 has been presented in the Financial Statements as a cash equivalent.
The ultimate holding company of the Manager and the Investment Manager is BlackRock, Inc., a company incorporated in Delaware, USA.
13. CONTINGENT LIABILITIES
There were no contingent liabilities at 30 November 2021 (2020: nil).
14. 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 Annual Report and Financial Statements for the year ended 30 November 2021 will be filed with the Registrar of Companies after the Annual General Meeting.
The figures set out above have been reported upon by the auditor, whose report for the year ended 30 November 2021 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 2020, which have been filed with the Registrar of Companies. The report of the auditor on those financial statements contained no qualification or statement under Section 498 of the Companies Act.
15. ANNUAL REPORT
Copies of the Annual Report and Financial Statements 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.
16. ANNUAL GENERAL MEETING
The Annual General Meeting of the Company will be held at 12 Throgmorton Avenue, London EC2N 2DL on Thursday, 24 March 2022 at 11.00 a.m.
ENDS
The Annual Report will also be available on the BlackRock website at blackrock.com/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, Closed End Funds, BlackRock Investment Management (UK) Limited
Tel: 020 7743 3000
Press Enquiries:
Ed Hooper, Lansons Communications – Tel: 0207 294 3620
E-mail: edh@lansons.com; BlackRockInvestmentTrusts@lansons.com
7 February 2022
12 Throgmorton Avenue
London EC2N 2DL
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