Half-year Report
BlackRock Throgmorton Trust plc
Half Yearly Financial Report for period ending 31 May 2016
Financial Highlights
| Attributable to ordinary shareholders | 31 May 2016 (unaudited) |
30 November 2015 (audited) |
Change % |
| Assets | |||
| Net assets | £287.4m | £286.3m | +0.4 |
| Net asset value per share | 392.98p | 391.55p | +0.4 |
| – with income reinvested | +1.9 | ||
| Ordinary share price (mid-market) | 332.00p | 339.50p | -2.2 |
| – with income reinvested | -0.4 | ||
| Benchmark index* | 17,385.03 | 17,086.77 | +1.7 |
| For the six months ended 31 May 2016 (unaudited) |
For the six months ended 31 May 2015 (unaudited) |
Change % |
|
| Revenue | |||
| Net revenue return after taxation (£’000) | 2,743 | 3,340 | -17.9 |
| Revenue return per ordinary share | 3.75p | 4.57p | -17.9 |
| -------- | -------- | -------- | |
| Dividend per ordinary share | |||
| -------- | -------- | -------- | |
| Interim | 1.25p | 1.10p | +13.6 |
| -------- | -------- | -------- |
*Numis Smaller Companies excluding AIM (excluding Investment Companies) Index.
CHAIRMAN’S STATEMENT
PERFORMANCE
For the six months ended 31 May 2016 the Company’s net asset value per share (NAV) returned +1.9% compared with a return of +1.7% for the Numis Smaller Companies excluding AIM (excluding Investment Companies) Index. The FTSE All Share Index returned just 0.1% over the same period (all figures in sterling terms with income reinvested). Details of the factors which have contributed to performance are set out in the Investment Manager’s Report.
PERFORMANCE RECORD to 31 May 2016 (with income reinvested)
| 1 Year % | 3 Years % | 5 Years % | Since 1 July 2008 (1) | |
| Benchmark (with income reinvested) | -1.6 | 28.2 | 47.7 | 94.3 |
| Share price (with income reinvested) | 2.8 | 43.3 | 80.6 | 189.5 |
| NAV per share (with income reinvested) |
4.8 | 42.6 | 78.3 | 205.6 |
-
Date of BlackRock’s appointment
Since the period end and up to the close of business on 14 July 2016, the NAV has fallen by 8.4%, and the benchmark index has fallen by 3.2%. (All figures in sterling terms with income reinvested.)
MARKET OVERVIEW
Over the period under review, the Company has performed better than the benchmark index. This outperformance has taken place against a background of exceptional market volatility, initially due to concerns over slowing growth in China and the implications for the broader world economy.
In the latter part of the period under review, there were concerns over the strength and sustainability of US economic growth and the timing of further interest rate rises, whilst in the UK, the referendum to decide whether or not to leave the European Union weakened sterling and dampened investor confidence. In Europe, the European Central Bank has continued its policy of interest rate loosening to help stimulate growth.
REVENUE RETURN AND DIVIDENDS
The revenue return per share for the period amounted to 3.75 pence compared to 4.57 pence earned during the comparative period last year when the Company received a number of large special dividends, including dividends received in respect of the long CFD portfolio. This was partially offset by an increase in underlying dividend income from UK companies of 11.7%. The Board is pleased to declare an interim dividend of 1.25 pence per share (2015: 1.10 pence per share) payable on 19 August 2016 to shareholders on the register on 29 July 2016 (ex-dividend date is 28 July 2016).
BOARD CHANGES
I am delighted to welcome Mr Christopher Samuel to the Board. Mr Samuel is the former chief executive of Ignis Asset Management and is a non-executive director of the Alliance Trust plc, JPMorgan Japanese Investment Trust plc, UIL Limited and a number of unlisted companies.
After serving the Company for the past twelve years, Mr Stobart will be retiring as a non-executive Director of the Company at the close of the Annual General Meeting in 2017. We would like to thank Mr Stobart for his valuable service to the Company during his tenure and wish him well in the future. Mr Loudon Greenlees will succeed Mr Stobart as Chairman of the Audit Committee.
OUTLOOK
The results of the recent referendum in the UK to leave the EU continue to dominate the headlines. There has been significant volatility in markets as the implications of the exit are considered and this is expected to continue at least in the short term. Our managers have therefore positioned the portfolio in quality companies with diverse sources of revenue that should prove relatively defensive in these uncertain times. The CFD portfolio also provides scope to vary the Company’s overall exposure to the market.
Crispin Latymer
Chairman
18 July 2016
INTERIM MANAGEMENT REPORT AND RESPONSIBILITY STATEMENT
The Chairman’s Statement and the Investment Manager’s Report give details of the important events which have occurred during the period and their impact on the financial statements.
PRINCIPAL RISKS AND UNCERTAINTIES
The principal risks faced by the Company can be divided into various areas as follows:
- Performance;
- Market;
- Income/dividend;
- Financial;
- Operational; and
- Regulatory.
The Board reported on the principal risks and uncertainties faced by the Company in the Annual Report and Financial Statements for the year ended 30 November 2015. A detailed explanation can be found in the Strategic Report on pages 11 and 12 and in note 17 on pages 51 to 59 of the Annual Report and Financial Statements which are available on the website maintained by BlackRock at blackrock.co.uk/thrg.
In the Board’s opinion, an additional uncertainty to those outlined in the Annual Report now exists. In a referendum held on 23 June 2016, the United Kingdom electorate voted to leave the European Union. The referendum result may affect the Company’s risk profile through introducing new uncertainties and instability in financial markets. The process of a major country leaving the EU has no precedent, so we expect an ongoing period of market uncertainty as implications are digested.
In the view of the Board, there have been no other changes to the fundamental nature of the principal risks and uncertainties since the previous report and these are equally applicable to the remaining six months of the financial year as they were to the six months under review.
RELATED PARTY DISCLOSURE AND TRANSACTIONS WITH THE INVESTMENT MANAGER
BlackRock Fund Managers Limited (BFM) was appointed as the Company’s AIFM with effect from 2 July 2014. BFM has (with the Company’s consent) delegated certain portfolio and risk management services, and other ancillary services, to BlackRock Investment Management (UK) Limited (BIM (UK)). Both BFM and BIM (UK) are regarded as related parties under the Listing Rules. Details of the fees payable are set out in note 4 and note 10.
The related party transactions with the Directors are set out in note 11.
GOING CONCERN
The Directors are satisfied that the Company has adequate resources to continue in operational existence for the foreseeable future (being a period of at least 12 months from the date that this half yearly financial report is approved) and is financially sound. For this reason, they continue to adopt the going concern basis in preparing the financial statements. The Company has a portfolio of investments which is considered to be readily realisable and is able to meet all of its liabilities from its assets and the income generated from these assets. Ongoing charges (excluding performance fee and finance costs) for the year ended 30 November 2015 were approximately 1.1% of net assets.
DIRECTORS’ RESPONSIBILITY STATEMENT
The Disclosure and Transparency Rules (DTR) of the UK Listing Authority require the Directors to confirm their responsibilities in relation to the preparation and publication of the Interim Management Report and Financial Statements.
The Directors confirm to the best of their knowledge that:
- the condensed set of financial statements contained within the half yearly financial report has been prepared in accordance with International Accounting Standard 34 ‘Interim Financial Reporting’; and
- the Interim Management Report, together with the Chairman’s Statement and Investment Manager’s Report, include a fair review of the information required by 4.2.7R and 4.2.8R of the FCA’s Disclosure and Transparency Rules.
The half yearly financial report has been reviewed by the Company’s Auditor.
The half yearly financial report was approved by the Board on 18 July 2016 and the above responsibility statement was signed on its behalf by the Chairman.
Crispin Latymer
For and on behalf of the Board
18 July 2016
INVESTMENT MANAGER’S REPORT for the six months ended 31 May 2016
MARKET REVIEW
Stock markets have been nervous and volatile in the first half of 2016, selling off aggressively in the early weeks of the year before staging a gradual recovery since mid-February. In the early part of the year the main worry was the slowdown in GDP growth in China and the implications for the world economy. The BREXIT vote in the UK has been a source of concern in recent months, and markets had incorrectly assumed the vote would be for Remain.
PERFORMANCE
The Company’s net asset value (NAV) per share increased by 1.9% to 392.98p on a total return basis (after deduction of costs). This compares to an increase in the benchmark of 1.7% and the FTSE100 of 0.1%.
The CFD portfolio contributed 1.1% to NAV and the long only portfolio performed in line with the benchmark index, both stated before costs.
The long CFD portfolio added 1.3% to NAV with the shorts detracting by 0.2% (all calculations stated before deduction of costs). The largest contributor to the long CFD portfolio was our position in JD Sports. JD Sports announced strong full year results with revenues up by 20% and earnings per share up by 57%. We also saw good contributions from other consumer stocks including Just Eat, Betfair and Fevertree Drinks.
On the short side, our largest loss was only 0.1% of NAV which was incurred in a heavily indebted mining company whose shares performed strongly, mainly, we believe, due to short closing. Our largest gain on a short position, just below 0.2% of NAV, related to another consumer stock faced with the challenge of supplying an increasingly competitive market.
In the long only portfolio the largest positive contributors to performance were our holdings in JD Sports, Skyepharma, Fevertree Drinks and Accesso Technology. Skyepharma announced a merger with Vectura. Fevertree Drinks released a trading update for the four months to the end of April 2016 which confirmed strong business momentum and indicated full year 2016 results are expected to be materially ahead of expectations. Accesso Technology also announced that 2016 had got off to a strong start and management were pleased with the level of new business wins.
Our holding in Avon Rubber performed poorly during the period, down by 16.3%, but recent interim results were better than expected and management were in confident mood when we met them.
The largest detractor from relative performance from a sector point of view was our underweight position in the mining sector. This sector performed strongly and our underweight position detracted just over 1.0% in aggregate from relative performance. Also, we did not own two benchmark stocks which were bid for, Home Retail and Darty, which in aggregate detracted by 0.6% from relative performance.
ACTIVITY
Within the long only portfolio, we added several holdings through IPOs, including Joules and Morses Club. Joules is a UK retailer focussed on supplying good value, colourful country wear. Morses Club is one of the largest home credit providers in the UK.
We added long only portfolio positions in McCarthy & Stone, Saga and Supergroup, all through placings. McCarthy & Stone is the UK market leader in the development of owner-occupied retirement accommodation. Saga is a leading provider of products and services tailored to customers over the age of 50 in the UK. Supergroup is a former holding, and we bought a small position following a good meeting with the new management team.
We also added holdings in Photo-Me Group and Park Group. The former company is well known for photo vending, operating in many countries. Photo-Me Group has shown significant ability to innovate, operate internationally in many markets, and achieve very attractive cash returns. Park Group is a leading multi-retailer voucher and prepaid gift card business. Operating profits have grown steadily in recent years, and we expect this to continue.
We reduced or sold our holdings in several companies in the long only portfolio where our conviction about trading has weakened.
In the CFD portfolio, a few new holdings were introduced, either through IPOs or some form of corporate activity, including Joules, MicroFocus and Saga. Elsewhere, we have tried to use the recent volatility to our advantage, buying more of our existing holdings we really believe in. The short book has required more effort, remaining disciplined with position sizing to minimise losses where shorts work against us during periods of sentiment change, whilst maintaining the structure and shape of the portfolio that we believe in, and of course, staying true to our investment philosophy.
PORTFOLIO POSITIONING
Within the long only portfolio our aim is to hold a portfolio largely comprised of high quality growth stocks capable of becoming much larger over the medium term. Companies such as 4imprint Group, GB Group, Fevertree Drinks, Advanced Medical Solutions and Accesso Technology fit this description well. All these companies are delivering strong organic growth, in some cases supplemented by sensible strategic acquisitions. They are all international in terms of sales; 4imprint Group for example derives all its sales in the US. They all have fairly predictable revenues, good operating margins and are strong cash generators. We continue to search for businesses like these to add to the portfolio.
Our portfolio also includes a number of businesses which are more UK focussed and we like companies which have very predictable revenues such as Restore, Fuller Smith & Turner and CVS Group, and others which have very strong market positions such as Topps Tiles, Cineworld Group and Marshalls.
Whilst our focus is very much on growth companies we recognise that certain markets have experienced strong headwinds in recent years and this has constrained earnings growth for many companies. Companies largely exposed to emerging markets are an example. We hold some companies which should benefit from an eventual improvement in these emerging markets, such as Ocean Wilsons and City of London Investment Group.
We tend to be underweight the resources sectors, but we have some holdings in these companies which we believe are well managed, have good cash flows and sound balance sheets, including Petra Diamonds, Faroe Petroleum and Central Asia Metals.
Within the CFD portfolio, there has been little change to the composition of the portfolio as we continue to see good long investment opportunities. The short book targets the areas where we also see structural or cyclical pressure and we believe that the flexibility afforded by this approach has proven consistently to add value over time, contributing an uplift of approximately 6% to the Company’s NAV (before deduction of costs) over the last 18 months.
OUTLOOK
The main news post the period end has been the referendum vote to leave the European Union. This shocked markets with significant falls in the value of both sterling and equities, especially UK midcaps, although there has since been a recovery in the share prices of the most internationally exposed companies. The stocks most negatively affected have been UK cyclicals including housebuilders, retailers and real estate companies. Whilst we had reduced our exposure to these areas we remain overweight.
We believe that the next few months will see a period of uncertainty and lower growth for the UK, potentially a modest recession.
Our portfolio is well diversified and comprises well managed leading companies with good growth prospects, many of which operate in international markets. We expect these to fare relatively well in an uncertain macro-economic and political environment.
The CFD portfolio gives us additional flexibility. Following the referendum result, we have modestly reduced our net portfolio exposure to the market. In the changed environment, we will take advantage of opportunities as and when they arise.
Mike Prentis and Dan Whitestone
BlackRock Investment Management (UK) Limited
18 July 2016
TWENTY LARGEST INVESTMENTS as at 31 May 2016
Company |
Market value £’000 |
% of net assets |
Description |
|
| JD Sports | Ordinary shares Long CFD position |
5,673 2,926 |
3.0 | Retail of sports and leisure footwear and clothing |
| 4imprint Group | Ordinary shares Long CFD position |
6,900 1,270 |
2.8 | Supply of promotional merchandise in the US |
| CVS Group* | Ordinary shares Long CFD position |
6,413 1,621 |
2.8 | Operation of veterinary surgeries |
| Dechra Pharmaceuticals | Ordinary shares Long CFD position |
5,309 1,175 |
2.3 | Development and supply of pharmaceutical and other products focused on the veterinary market |
| Workspace Group | Ordinary shares Long CFD position |
5,478 741 |
2.2 | Supply of flexible workspace to businesses in London |
| Topps Tiles | Ordinary shares Long CFD position |
4,693 711 |
1.9 | Sourcing and retail of ceramic tiles |
| Restore* | Ordinary shares Long CFD position |
4,071 1,264 |
1.9 | Management of business information in both paper and digital form |
| Fevertree Drinks* | Ordinary shares Long CFD position |
4,082 1,079 |
1.8 | Development and sale of soft drinks and mixers |
| Avon Rubber | Ordinary shares | 5,030 | 1.8 | Design and manufacture of protection and safety masks and dairy related products |
| Cineworld Group | Ordinary shares Long CFD position |
3,392 1,457 |
1.7 | Operation of cinemas |
| Savills | Ordinary shares | 4,811 | 1.7 | Provision of property services |
| Fuller Smith & Turner | Ordinary shares Long CFD position |
3,286 1,363 |
1.6 | Ownership and management of pubs in the London area |
| Headlam Group | Ordinary shares | 4,466 | 1.6 | Distribution of carpets and other floor coverings |
| Hill & Smith | Ordinary shares | 4,442 | 1.5 | Production of infrastructure products and supply of galvanizing services |
| Advanced Medical Solutions* | Ordinary shares Long CFD position |
3,483 890 |
1.5 | Development and provision of products for global wound care and wound closure markets |
| Accesso Technology* | Ordinary shares Long CFD position |
3,451 853 |
1.5 | Development and supply of ticketing and virtual queuing solutions |
| GB Group* | Ordinary shares | 4,211 | 1.5 | Development and supply of identity verification solutions |
| Safestore | Ordinary shares Long CFD position |
2,835 1,363 |
1.5 | Ownership and operation of self storage facilities |
| Rathbone Brothers | Ordinary shares | 4,105 | 1.4 | Private client fund management |
| Marshalls | Ordinary shares | 3,975 | 1.4 | Manufacture and sale of concrete and stone paving and related products |
| -------- | ----- | |||
| 20 largest investments | 106,819 | 37.4 | ||
| ====== | ==== |
In addition, the Company had long only equity investments in 130 companies and 101 long and short positions at 31 May 2016. The long CFD positions in the table above state the market value of the securities underlying the long CFD positions as at 31 May 2016.
* Traded on the Alternative Investment Market (AIM) of the London Stock Exchange.
Net portfolio is calculated as long CFD portfolio less short CFD portfolio plus long only equity portfolio. All investments are in equity shares unless otherwise stated.
A list of the Company’s long only portfolio holdings and long CFD positions is available on the Company’s website.
ANALYSIS OF INVESTMENTS as at 31 May 2016
| Fair value (1) £’000 |
Gross market exposure (2) £’000 |
Gross market exposure as a % of net assets (3) |
|
| Portfolio | |||
| Equity investments (excluding BlackRock’s Institutional Cash Series plc - Sterling Liquidity Fund) and CFDs | 285,676 | 285,676 | 99.4 |
| -------- | -------- | -------- | |
| BlackRock’s Institutional Cash Series plc – Sterling Liquidity Fund | 2,076 | 2,076 | 0.7 |
| -------- | -------- | -------- | |
| Total long CFD positions | 2,152 | 44,988 | 15.7 |
| -------- | -------- | -------- | |
| Total short CFD positions | (741) | (24,038) | (8.4) |
| -------- | -------- | -------- | |
| Total Investments | 289,163 | 308,702 | 107.4 |
| -------- | -------- | -------- | |
| Cash and cash equivalents (4) | 255 | (19,284) | (6.7) |
| -------- | -------- | -------- | |
| Other net current liabilities | (2,032) | (2,032) | (0.7) |
| -------- | -------- | -------- | |
| Net assets | 287,386 | 287,386 | 100.0 |
| ====== | ======= | ==== |
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 value column above includes CFD contracts at their fair value, which is determined based on the difference between the purchase 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 CFD positions directly in the market would have amounted to £42,836,000 at the time of purchase, and subsequent market rises in prices have resulted in unrealised gains on the CFD contracts of £2,152,000, resulting in the value of the total market exposure to the underlying securities rising to £44,988,000 as at 31 May 2016. The notional price of selling the securities to which exposure was gained via the short CFD positions would have been £23,297,000 at the time of entering into the contract, and subsequent price rises have resulted in unrealised losses on the short CFD positions of £741,000 and the value of the market exposure of these investments increasing to £24,038,000 at 31 May 2016.
2 Market exposure in the case of equity investments is the same as fair value. In the case of CFDs it is the market value of the underlying shares to which the portfolio is exposed via the contract.
3 % based on the total market exposure.
4 The gross market exposure column for Cash and Cash Fund investments has been adjusted to assume the Company purchased direct holdings rather than exposure being gained through CFDs.
DISTRIBUTION OF INVESTMENTS as at 31 May 2016
| Sector |
long only portfolio % |
long CFD portfolio % |
short CFD portfolio % |
net portfolio % |
| Oil & Gas | ||||
| Oil & Gas Producers | 1.8 | 0.1 | (0.2) | 1.7 |
| -------- | -------- | -------- | -------- | |
| 1.8 | 0.1 | (0.2) | 1.7 | |
| -------- | -------- | -------- | -------- | |
| Basic Materials | ||||
| Chemicals | 2.0 | 0.3 | – | 2.3 |
| Industrial Metals & Mining | – | – | (0.1) | (0.1) |
| Mining | 2.2 | – | – | 2.2 |
| -------- | -------- | -------- | -------- | |
| 4.2 | 0.3 | (0.1) | 4.4 | |
| -------- | -------- | -------- | -------- | |
| Industrials | ||||
| Construction & Materials | 5.6 | 0.5 | – | 6.1 |
| Aerospace & Defence | 3.0 | – | – | 3.0 |
| General Industrials | 0.5 | 0.4 | (0.1) | 0.8 |
| Electronic & Electrical Equipment | 1.6 | – | (0.3) | 1.3 |
| Industrial Engineering | 3.7 | – | (0.6) | 3.1 |
| Industrial Transportation | 2.5 | 0.1 | (0.3) | 2.3 |
| Support Services | 8.8 | 1.8 | (1.2) | 9.4 |
| -------- | -------- | -------- | -------- | |
| 25.7 | 2.8 | (2.5) | 26.0 | |
| -------- | -------- | -------- | -------- | |
| Consumer Goods | ||||
| Beverages | 1.3 | 0.4 | (0.1) | 1.6 |
| Food Producers | 0.2 | – | – | 0.2 |
| Household Goods & Home Construction | 5.1 | 1.1 | – | 6.2 |
| Leisure Goods | 0.6 | 0.3 | – | 0.9 |
| Personal Goods | 1.6 | 0.2 | (0.3) | 1.5 |
| -------- | -------- | -------- | -------- | |
| 8.8 | 2.0 | (0.4) | 10.4 | |
| -------- | -------- | -------- | -------- | |
| Health Care | ||||
| Health Care Equipment & Services | 2.3 | 0.3 | – | 2.6 |
| Pharmaceuticals & Biotechnology | 4.8 | 0.4 | (0.3) | 4.9 |
| -------- | -------- | -------- | -------- | |
| 7.1 | 0.7 | (0.3) | 7.5 | |
| -------- | -------- | -------- | -------- | |
| Consumer Services | ||||
| Food & Drug Retailers | – | – | (0.5) | (0.5) |
| General Retailers | 9.2 | 2.7 | (1.1) | 10.8 |
| Media | 6.2 | 0.8 | (0.3) | 6.7 |
| Travel & Leisure | 5.2 | 2.0 | (0.2) | 7.0 |
| -------- | -------- | -------- | -------- | |
| 20.6 | 5.5 | (2.1) | 24.0 | |
| -------- | -------- | -------- | -------- | |
| Telecommunications | ||||
| Fixed Line Telecommunications | – | – | (0.3) | (0.3) |
| -------- | -------- | -------- | -------- | |
| – | – | (0.3) | (0.3) | |
| -------- | -------- | -------- | -------- | |
| Financials | ||||
| Banks | 1.3 | – | (0.1) | 1.2 |
| Equity Investment Instruments | – | – | (0.1) | (0.1) |
| Financial Services | 5.5 | 0.3 | (0.5) | 5.3 |
| Life Insurance | – | – | (0.2) | (0.2) |
| Non-life Insurance | 0.6 | 0.5 | (0.3) | 0.8 |
| Real Estate Investment & Services | 4.1 | 0.3 | – | 4.4 |
| Real Estate Investment Trusts | 4.6 | 1.2 | (0.2) | 5.6 |
| -------- | -------- | -------- | -------- | |
| 16.1 | 2.3 | (1.4) | 17.0 | |
| -------- | -------- | -------- | -------- | |
| Technology | ||||
| Software & Computer Services | 8.3 | 1.1 | (0.2) | 9.2 |
| Technology Hardware & Equipment | 0.4 | – | (0.3) | 0.1 |
| -------- | -------- | -------- | -------- | |
| 8.7 | 1.1 | (0.5) | 9.3 | |
| -------- | -------- | -------- | -------- | |
| Total Investments | 93.0 | 14.8 | (7.8) | 100.0 |
| ===== | ===== | ===== | ===== |
The above percentages are calculated based on the portfolio at 31 May 2016. The net portfolio is calculated as long equity portfolio plus long CFD portfolio less short CFD portfolio.
Analysis of Portfolio
| Gross Basis (1) | |
| FTSE 250 | 36.6% |
| FTSE AIM | 26.8% |
| FTSE Fledgling | 0.2% |
| FTSE Small Cap | 28.5% |
| Other | 7.9% |
Source: BlackRock.
1. Long and short CFD portfolio in aggregate plus long only equity portfolio excluding investment in BlackRock’s Institutional Cash Series plc – Sterling Liquidity Fund.
2. Long CFD portfolio less short CFD portfolio plus long only equity portfolio excluding investment in BlackRock’s Institutional Cash Series plc – Sterling Liquidity Fund.
Analysis of Portfolio
| Net Basis (2) | |
| FTSE 250 | 32.2% |
| FTSE AIM | 29.9% |
| FTSE Fledgling | 0.2% |
| FTSE Small Cap | 30.1% |
| Other | 7.6% |
Source: BlackRock.
1. Long and short CFD portfolio in aggregate plus long only equity portfolio excluding investment in BlackRock’s Institutional Cash Series plc – Sterling Liquidity Fund.
2. Long CFD portfolio less short CFD portfolio plus long only equity portfolio excluding investment in BlackRock’s Institutional Cash Series plc – Sterling Liquidity Fund.
Market Capitalisation as at 31 May 2016 (% of net portfolio)
| Long positions (1) | Short positions | |
| £1bn | 24.1% | 3.6% |
| £400m-£1bn | 36.8% | 3.0% |
| £100m-£400m | 44.3% | 1.2% |
| £0m-£100m | 2.6% | 0.0% |
Weighted average market cap as at 31 May 2016: £788 million (Benchmark Index: £426 million).
Position size as at 31 May 2016 (number of positions)
| Long positions (1) | Short positions | |
| £2m+ | 56 | - |
| £1m-2m | 73 | 1 |
| £0m-£1m | 71 | 66 |
Source: BlackRock
1. Long positions include the long only equity portfolio and the long CFD portfolio.
STATEMENT OF COMPREHENSIVE INCOME for the six months ended 31 May 2016
Notes |
Revenue £’000 Six months ended 31.05.16 (unaudited) |
Revenue £’000 Six months ended 31.05.15 (unaudited) |
Revenue £’000 Year ended 30.11.15 (audited) |
Capital £’000 Six months ended 31.05.16 (unaudited) |
Capital £’000 Six months ended 31.05.16 (unaudited) |
Capital £’000 Year ended 30.11.15 (audited) |
Total £’000 Six months ended 31.05.16 (unaudited) |
Total £’000 Six months ended 31.05.15 (unaudited) |
Total £’000 Year ended 30.11.15 (audited) |
|
| Income from investments held at fair value through profit or loss | 3 | 3,313 | 3,445 | 6,363 | – | – | – | 3,313 | 3,445 | 6,363 |
| Net income from contracts for difference | 3 | (20) | 451 | 582 | – | – | – | (20) | 451 | 582 |
| Other income | 3 | – | 3 | 15 | – | – | – | – | 3 | 15 |
| -------- | -------- | -------- | -------- | -------- | -------- | -------- | -------- | -------- | ||
| 3,293 | 3,899 | 6,960 | – | – | – | 3,293 | 3,899 | 6,960 | ||
| -------- | -------- | -------- | -------- | -------- | -------- | -------- | -------- | -------- | ||
| Gains on investments held at fair value through profit or loss | – | – | – | 517 | 40,830 | 42,983 | 517 | 40,830 | 42,983 | |
| Gain/(loss) on foreign exchange | – | – | – | – | 1 | (1) | – | 1 | (1) | |
| Net gains from contracts for difference | – | – | – | 3,040 | 5,563 | 10,645 | 3,040 | 5,563 | 10,645 | |
| -------- | -------- | -------- | -------- | -------- | -------- | -------- | -------- | -------- | ||
| Total revenue | 3,293 | 3,899 | 6,960 | 3,557 | 46,394 | 53,627 | 6,850 | 50,293 | 60,587 | |
| -------- | -------- | -------- | -------- | -------- | -------- | -------- | -------- | -------- | ||
| Expenses | ||||||||||
| Investment management and performance fees | 4 | (306) | (287) | (595) | (1,152) | (3,252) | (5,187) | (1,458) | (3,539) | (5,782) |
| Operating expenses | 5 | (238) | (268) | (442) | (8) | (12) | (22) | (246) | (280) | (464) |
| -------- | -------- | -------- | -------- | -------- | -------- | -------- | -------- | -------- | ||
| Total operating expenses | (544) | (555) | (1,037) | (1,160) | (3,264) | (5,209) | (1,704) | (3,819) | (6,246) | |
| -------- | -------- | -------- | -------- | -------- | -------- | -------- | -------- | -------- | ||
| Net profit on ordinary activities before finance costs and taxation | 2,749 | 3,344 | 5,923 | 2,397 | 43,130 | 48,418 | 5,146 | 46,474 | 54,341 | |
| Finance costs | – | (1) | (1) | (2) | (3) | (4) | (2) | (4) | (5) | |
| -------- | -------- | -------- | -------- | -------- | -------- | -------- | -------- | -------- | ||
| Net profit on ordinary activities before taxation | 2,749 | 3,343 | 5,922 | 2,395 | 43,127 | 48,414 | 5,144 | 46,470 | 54,336 | |
| Taxation | (6) | (3) | (11) | – | – | – | (6) | (3) | (11) | |
| -------- | -------- | -------- | -------- | -------- | -------- | -------- | -------- | -------- | ||
| Net profit for the period | 7 | 2,743 | 3,340 | 5,911 | 2,395 | 43,127 | 48,414 | 5,138 | 46,467 | 54,325 |
| -------- | -------- | -------- | -------- | -------- | -------- | -------- | -------- | -------- | ||
| Earnings per ordinary share | 7 | 3.75p | 4.57p | 8.08p | 3.28p | 58.97p | 66.21p | 7.03p | 63.54p | 74.29p |
| ====== | ====== | ====== | ====== | ====== | ====== | ====== | ====== | ====== |
The total column of this statement represents the Statement of Comprehensive Income, prepared in accordance with International Financial Reporting Standards (IFRS), as adopted by the European Union. The supplementary revenue and capital columns are both prepared under guidance published by the Association of Investment Companies (AIC). All items in the above statement derive from continuing operations. All income is attributable to the equity holders of the Company.
The Company does not have any other comprehensive income. The net profit disclosed above represents the Company’s total comprehensive income.
STATEMENT OF CHANGES IN EQUITY for the six months ended 31 May 2016
Notes |
Called up share capital £’000 |
Share premium account £’000 |
Special reserve £’000 |
Capital redemption reserve £’000 |
Capital reserves £’000 |
Revenue reserve £’000 |
Total £’000 |
|
| For the six months ended 31 May 2016 (unaudited) | ||||||||
| At 30 November 2015 | 4,026 | 21,049 | 35,272 | 11,905 | 204,521 | 9,570 | 286,343 | |
| Total comprehensive income: | ||||||||
| Net profit for the period | – | – | – | – | 2,395 | 2,743 | 5,138 | |
| Transactions with owners, recorded directly to equity: | ||||||||
| Dividend paid* | 6 | – | – | – | – | – | (4,095) | (4,095) |
| -------- | -------- | -------- | -------- | -------- | -------- | -------- | ||
| At 31 May 2016 | 4,026 | 21,049 | 35,272 | 11,905 | 206,916 | 8,218 | 287,386 | |
| -------- | -------- | -------- | -------- | -------- | -------- | -------- | ||
| For the six months ended 31 May 2015 (unaudited) | ||||||||
| At 30 November 2014 | 4,026 | 21,049 | 35,272 | 11,905 | 156,107 | 7,096 | 235,455 | |
| Total comprehensive income: | ||||||||
| Net profit for the period | – | – | – | – | 43,127 | 3,340 | 46,467 | |
| Transactions with owners, recorded directly to equity: | ||||||||
| Dividend paid** | 6 | – | – | – | – | – | (2,633) | (2,633) |
| -------- | -------- | -------- | -------- | -------- | -------- | -------- | ||
| At 31 May 2015 | 4,026 | 21,049 | 35,272 | 11,905 | 199,234 | 7,803 | 279,289 | |
| -------- | -------- | -------- | -------- | -------- | -------- | -------- | ||
| For the year ended 30 November 2015 (audited) | ||||||||
| At 30 November 2014 | 4,026 | 21,049 | 35,272 | 11,905 | 156,107 | 7,096 | 235,455 | |
| Total Comprehensive Income: | ||||||||
| Net profit for the year | – | – | – | – | 48,414 | 5,911 | 54,325 | |
| Transactions with owners, recorded directly to equity: | ||||||||
| Dividends paid*** | 6 | – | – | – | – | – | (3,437) | (3,437) |
| -------- | -------- | -------- | -------- | -------- | -------- | -------- | ||
| At 30 November 2015 | 4,026 | 21,049 | 35,272 | 11,905 | 204,521 | 9,570 | 286,343 | |
| ===== | ====== | ====== | ====== | ======= | ===== | ======= |
* Final dividend of 5.60p per share for the year ended 30 November 2015, declared on 12 February 2016 and paid on 5 April 2016.
** Final dividend of 3.60p per share for the year ended 30 November 2014, declared on 13 February 2015 and paid on 7 April 2015.
*** Final dividend of 3.60p per share for the year ended 30 November 2014, declared on 13 February 2015 and paid on 7 April 2015 and interim dividend of 1.10p per share for the year ended 30 November 2015, declared on 24 July 2015 and paid on 21 August 2015.
STATEMENT OF FINANCIAL POSITION as at 31 May 2016
Notes |
31 May 2016 £’000 (unaudited) |
31 May 2015 £’000 (unaudited) |
30 November 2015 £’000 (audited) |
|
| Non current assets | ||||
| Investments held at fair value through profit or loss | 9 | 287,752 | 282,229 | 289,436 |
| -------- | -------- | -------- | ||
| Current assets | ||||
| Other receivables | 1,961 | 3,157 | 3,066 | |
| Amounts due in respect of contracts for difference | 9 | 1,411 | 918 | 1,118 |
| Cash and cash equivalents | 255 | 228 | 128 | |
| -------- | -------- | -------- | ||
| 3,627 | 4,303 | 4,312 | ||
| -------- | -------- | -------- | ||
| Total assets | 291,379 | 286,532 | 293,748 | |
| -------- | -------- | -------- | ||
| Current liabilities | ||||
| Other payables | (2,633) | (6,135) | (6,171) | |
| Collateral held in respect of contracts for difference | (1,360) | (1,108) | (1,234) | |
| -------- | -------- | -------- | ||
| (3,993) | (7,243) | (7,405) | ||
| -------- | -------- | -------- | ||
| Net current liabilities | (366) | (2,940) | (3,093) | |
| -------- | -------- | -------- | ||
| Net assets | 287,386 | 279,289 | 286,343 | |
| ======== | ======== | ======== | ||
| Equity attributable to equity holders | ||||
| Called up share capital | 8 | 4,026 | 4,026 | 4,026 |
| Share premium account | 21,049 | 21,049 | 21,049 | |
| Special reserve | 35,272 | 35,272 | 35,272 | |
| Capital redemption reserve | 11,905 | 11,905 | 11,905 | |
| Capital reserves | 206,916 | 199,234 | 204,521 | |
| Revenue reserve | 8,218 | 7,803 | 9,570 | |
| -------- | -------- | -------- | ||
| Total equity shareholders’ funds | 7 | 287,386 | 279,289 | 286,343 |
| ======== | ======== | ======== | ||
| Net asset value per ordinary share | 7 | 392.98p | 381.91p | 391.55p |
| ======== | ======== | ======== |
CASH FLOW STATEMENT for the six months ended 31 May 2016
| Six months ended 31 May 2016 £’000 (unaudited) |
Six months ended 31 May 2015 £’000 (unaudited) |
Year ended 30 November 2015 £’000 (audited) |
|
| Net cash inflow from operating activities | 4,452 | 2,738 | 3,779 |
| -------- | -------- | -------- | |
| Financing activities | |||
| Interest paid on contracts for difference | (227) | (202) | (536) |
| Finance costs paid | (3) | (4) | (5) |
| Dividends paid | (4,095) | (2,633) | (3,437) |
| -------- | -------- | -------- | |
| Net cash outflow from financing activities | (4,325) | (2,839) | (3,978) |
| -------- | -------- | -------- | |
| Increase/(decrease) in cash and cash equivalents | 127 | (101) | (199) |
| Effect of foreign exchange rate changes | – | 1 | (1) |
| -------- | -------- | -------- | |
| Change in cash and cash equivalents | 127 | (100) | (200) |
| Cash and cash equivalents at the start of period | 128 | 328 | 328 |
| -------- | -------- | -------- | |
| Cash and cash equivalents at the end of the period | 255 | 228 | 128 |
| -------- | -------- | -------- | |
| Comprised of: | |||
| Cash at bank | 255 | 228 | 128 |
| -------- | -------- | -------- | |
| Total | 255 | 228 | 128 |
| ======== | ======== | ======== |
RECONCILIATION OF NET PROFIT BEFORE TAXATION TO NET CASH FLOW FROM OPERATING ACTIVITIES for the six months ended 31 May 2016
| Six months ended 31 May 2016 £’000 (unaudited) |
Six months ended 31 May 2015 £’000 (unaudited) |
Year ended 30 November 2015 £’000 (audited) |
|
| Operating activities | |||
| Net profit before taxation* | 5,144 | 46,470 | 54,336 |
| Add back interest paid on contracts for difference | 227 | 202 | 536 |
| Add back finance cost | 3 | 4 | 5 |
| Profits on investments and contracts for difference held at fair value through profit or loss (including transaction costs) | (3,759) | (46,599) | (54,030) |
| Net movement on foreign exchange | – | (1) | 1 |
| Sales of investments held at fair value through profit or loss | 100,204 | 72,244 | 167,087 |
| Purchases of investments held at fair value through profit or loss | (98,005) | (76,280) | (176,178) |
| Net realised gains on contracts for difference | 2,951 | 5,747 | 10,827 |
| Net movement in collateral received/(pledged) with counterparties | 126 | (637) | (511) |
| Increase in other receivables | (495) | (477) | (23) |
| Decrease in amounts due from brokers | 1,602 | 1,719 | 1,355 |
| Increase/(decrease) in amounts due to brokers | 172 | (1,747) | (2,753) |
| (Decrease)/increase in other payables | (3,712) | 2,096 | 3,138 |
| Taxation paid | (6) | (3) | (11) |
| -------- | -------- | -------- | |
| Net cash inflow from operating activities | 4,452 | 2,738 | 3,779 |
| ====== | ====== | ====== | |
| * Includes dividends and interest received in the period of £2,975,000 and £nil (six months ended 31 May 2015: £3,787,000 and £3,000; year ended 30 November 2015: £6,304,000 and £nil). | |||
NOTES TO THE FINANCIAL STATEMENTS for the six months ended 31 May 2016
1. PRINCIPAL ACITIVITY
The principal activity of the Company is that of an investment trust company within the meaning of section 1158–1165 of the Corporation Tax Act 2010.
2. BASIS OF PREPARATION
The half yearly financial statements have been prepared using the same accounting policies as set out in the Company’s Annual Report and Financial Statements for the year ended 30 November 2015 which were prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union and applied in accordance with International Accounting Standard 34, ‘Interim Financial Reporting’. These comprise standards and interpretations of the International Accounting Standards and Standard Interpretations Committee as approved by the International Accounting Standards Committee that remain in effect, to the extent that IFRS have been adopted by the European Union.
Insofar as the Statement of Recommended Practice (SORP) for investment trust companies and venture capital trusts issued by the Association of Investment Companies (AIC), revised in November 2014 is compatible with IFRS, the financial statements have been prepared in accordance with the guidance set out in the SORP.
The functional currency of the Company is UK pounds sterling as this is the currency of the primary economic environment in which the Company operates. Accordingly, the financial statements are presented in UK pounds sterling.
3. INCOME
| Six months ended 31 May 2016 £’000 (unaudited) |
Six months ended 31 May 2015 £’000 (unaudited) |
Year ended 30 November 2015 £’000 (audited) |
|
| Investment income: | |||
| UK listed dividends | 2,662 | 2,405 | 5,139 |
| UK listed dividends – special | 294 | 855 | 878 |
| UK scrip dividends | 11 | – | 14 |
| Overseas listed dividends | 346 | 185 | 332 |
| -------- | -------- | -------- | |
| 3,313 | 3,445 | 6,363 | |
| -------- | -------- | -------- | |
| Net income from contracts for difference | (20) | 451 | 582 |
| -------- | -------- | -------- | |
| (20) | 451 | 582 | |
| -------- | -------- | -------- | |
| Other income: | |||
| Deposit interest | – | 3 | – |
| Underwriting commission | – | – | 15 |
| -------- | -------- | -------- | |
| – | 3 | 15 | |
| -------- | -------- | -------- | |
| Total | 3,293 | 3,899 | 6,960 |
| ====== | ====== | ====== |
4. INVESTMENT MANAGEMENT AND PERFORMANCE FEES
| Six months ended 31 May 2016 (unaudited) |
Six months ended 31 May 2016 (unaudited) |
Six months ended 31 May 2016 (unaudited) |
Six months ended 31 May 2015 (unaudited) |
Six months ended 31 May 2015 (unaudited) |
Six months ended 31 May 2015 (unaudited) |
Year ended 30 November 2015 (audited) |
Year ended 30 November 2015 (audited) |
Year ended 30 November 2015 (audited) |
|
| Revenue £’000 |
Capital £’000 |
Total £’000 |
Revenue £’000 |
Capital £’000 |
Total £’000 |
Revenue £’000 |
Capital £’000 |
Total £’000 |
|
| Investment management fee | 306 | 917 | 1,223 | 287 | 861 | 1,148 | 595 | 1,786 | 2,381 |
| Performance fee | – | 235 | 235 | – | 2,391 | 2,391 | – | 3,401 | 3,401 |
| -------- | -------- | -------- | -------- | -------- | -------- | -------- | -------- | -------- | |
| Total | 306 | 1,152 | 1,458 | 287 | 3,252 | 3,539 | 595 | 5,187 | 5,782 |
| ======== | ======== | ======== | ======== | ======== | ======== | ===== | ===== | ===== |
BlackRock Fund Managers Limited (BlackRock) provides management and administration services to the Company under a contract which is terminable on six months’ notice.
The terms of the investment management agreement with BlackRock provide for a basic management fee, payable quarterly in arrears, of 0.7% per annum on the gross asset value of the Company’s long only portfolio plus the gross value of the underlying equities, long and short (Performance Fee Market Value), to which the Company is exposed through the CFD portfolio. In addition, BlackRock is entitled to a performance fee of 10% (until 1 December 2015: 12.5%), of the net asset value (total return) outperformance against the Numis Smaller Companies excluding AIM (excluding Investment Companies) Index (the benchmark index) subject to a cap of 1% of the Performance Fee Market Value.
Until 1 June 2015, the performance fee cap in the event the NAV total return over the annual performance period was zero or positive was 2% of the Performance Fee Market Value and in the event the NAV total return was negative, the performance fee cap was 1% of Performance Fee Market Value.
The investment management fee is 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. A performance fee of £235,000 was accrued for the six months ended 31 May 2016 (six months ended 31 May 2015: £2,391,000; year ended 30 November 2015: £3,401,000). The performance fee has been wholly allocated to the capital column of the Statement of Comprehensive Income, as performance has been predominantly generated through the capital returns on the investment portfolio.
5. OPERATING EXPENSES
| Six months ended 31 May 2016 £’000 (unaudited) |
Six months ended 31 May 2015 £’000 (unaudited) |
Year ended 30 November 2015 £’000 (audited) |
|
| Allocated to revenue: | |||
| Custody fee | 4 | 3 | 7 |
| Auditor’s remuneration: | |||
| – audit services | 14 | 14 | 34 |
| – other assurance services | 6 | 6 | 6 |
| Registrar’s fee | 16 | 17 | 31 |
| Broker fees | 19 | 13 | 39 |
| Depositary fees | 19 | 17 | 37 |
| Marketing fees | 30 | 78 | 41 |
| Directors’ emoluments | 68 | 68 | 139 |
| Other administrative costs | 62 | 52 | 108 |
| -------- | -------- | -------- | |
| 238 | 268 | 442 | |
| -------- | -------- | -------- | |
| Allocated to capital: | |||
| Transaction charges – capital | 8 | 12 | 22 |
| -------- | -------- | -------- | |
| 246 | 280 | 464 | |
| ======== | ======== | ======== |
6. DIVIDENDS
The Board has declared an interim dividend of 1.25p per share payable on 19 August 2016 to shareholders on the register at 29 July 2016. This dividend has not been accrued in the financial statements for the six months ended 31 May 2016, as under IFRS, interim dividends are not recognised until paid. Dividends are debited directly to reserves.
7. EARNINGS AND NET ASSET VALUE PER ORDINARY SHARE
Total revenue and capital returns and net asset value per share are shown below and have been calculated using the following:
| Six months ended 31 May 2016 (unaudited) |
Six months ended 31 May 2015 (unaudited) |
Year ended 30 November 2015 (audited) |
|
| Net revenue profit attributable to ordinary shareholders (£'000) | 2,743 | 3,340 | 5,911 |
| Net capital profit attributable to ordinary shareholders (£'000) | 2,395 | 43,127 | 48,414 |
| -------- | -------- | -------- | |
| Total profit attributable to ordinary shareholders (£’000) | 5,138 | 46,467 | 54,325 |
| -------- | -------- | -------- | |
| Equity shareholders’ funds (£’000) | 287,386 | 279,289 | 286,343 |
| -------- | -------- | -------- | |
| The weighted average number of ordinary shares in issue during each period on which the return per ordinary share was calculated was: | 73,130,326 | 73,130,326 | 73,130,326 |
| -------- | -------- | -------- | |
| The actual number of ordinary shares in issue at the end of each period on which the net asset value per ordinary share was calculated was: | 73,130,326 | 73,130,326 | 73,130,326 |
| -------- | -------- | -------- | |
| Returns per share – basic and diluted | |||
| Revenue earnings per share | 3.75p | 4.57p | 8.08p |
| Capital earnings per share | 3.28p | 58.97p | 66.21p |
| -------- | -------- | -------- | |
| Total earnings per share | 7.03p | 63.54p | 74.29p |
| ======== | ======== | ======== | |
| ======== | ======== | ======== | |
| As at 31 May 2016 |
As at 31 May 2016 |
As at 30 November 2015 |
|
| ======== | ======== | ======== | |
| (unaudited) | (unaudited) | (audited) | |
| ======== | ======== | ======== | |
| Net asset value per share – basic and diluted | 392.98p | 381.91p | 391.55p |
| ======== | ======== | ======== | |
| Ordinary share price | 332.00p | 330.00p | 339.50p |
| ======== | ======== | ======== |
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 5p each: | ||||
| At 1 December 2015 | 73,130,326 | 7,400,000 | 80,530,326 | 4,026 |
| ========= | ======== | ========= | ====== | |
| At 31 May 2016 | 73,130,326 | 7,400,000 | 80,530,326 | 4,026 |
| ========= | ======== | ========= | ====== |
There has been no change in the Company’s share capital during the period or as at the date of this report.
9. VALUATION OF FINANCIAL INSTRUMENTS
Financial assets and financial liabilities are either carried in the Statement of Financial Position at their fair value (investments and derivatives) or at an amount which is a reasonable approximation of fair value (other receivables and payables, cash at bank, collateral held and margin deposits). 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(c) and 2(d), as set out in the Company’s Annual Report and Financial Statements for the year ended 30 November 2015.
Categorisation within the hierarchy has been determined on the basis of the lowest level input that is significant to the fair value measurement of the relevant asset.
The fair value hierarchy has the following levels:
Level 1 – Quoted market price in an active market for an identical instrument. A financial instrument is regarded as quoted in an active market if quoted prices are readily and regularly available from an exchange, dealer, broker, industry group, pricing service, or regulatory agency, and those prices represent actual and regularly occurring market transactions on an arm’s length basis.
Level 2 - Valuation techniques used to price securities based on 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 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 low 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 period end, the contracts for difference were valued by reference to the underlying equity bid or ask prices and the contract price at the inception of the CFD trade or at the trade reset date.
Level 3 – Valuation techniques using significant unobservable inputs. This category includes all instruments where the valuation technique includes inputs not based on observable market data and the unobservable inputs could have a significant impact on the instrument’s valuation. This category includes instruments that are valued based on quoted prices for similar instruments where significant unobservable adjustments or assumptions are required to reflect differences between the instruments and instruments for which there is no active market.
The level in the fair value hierarchy within which the fair value measurement is categorised in its entirety is determined on the basis of the lowest level input that is significant to the fair value measurement.
For this purpose, the significance of an input is assessed against the fair value measurement in its entirety. If a fair value measurement uses observable inputs that require significant adjustment based on unobservable inputs, that measurement is a level 3 measurement. Assessing the significance of a particular input to the fair value measurement in its entirety requires judgement, considering factors specific to the asset or liability.
The determination of what constitutes “observable†requires significant judgement by the Investment Manager. 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.
There has been no change to the valuation techniques during the period under review or as at the date of this report.
Contracts for difference have all 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.
The table below sets out fair value measurements using IFRS 13 fair value hierarchy.
| Financial assets/(liabilities) at fair value through profit or loss at 31 May 2016 | Level 1 £’000 |
Level 2 £’000 |
Level 3 £’000 |
Total £’000 |
| Assets: | ||||
| Equity investments | 285,676 | – | – | 285,676 |
| BlackRock’s Institutional Cash Series plc – Sterling Liquidity Fund | 2,076 | – | – | 2,076 |
| Contracts for difference – fair value gains | – | 2,504 | – | 2,504 |
| Liabilities: | ||||
| Contracts for difference – fair value losses | – | (1,093) | – | (1,093) |
| -------- | -------- | -------- | -------- | |
| 287,752 | 1,411 | – | 289,163 | |
| ======== | ======== | ======== | ======== |
| Financial assets at fair value through profit or loss at 31 May 2015 | Level 1 £’000 | Level 2 £’000 | Level 3 £’000 | Total £’000 |
| Assets: | ||||
| Equity investments | 280,718 | – | – | 280,718 |
| BlackRock’s Institutional Cash Series plc – Sterling Liquidity Fund | 1,511 | – | – | 1,511 |
| Contracts for difference – fair value gains | – | 918 | – | 918 |
| Liabilities: | ||||
| Contracts for difference – fair value losses | – | – | – | – |
| -------- | -------- | -------- | -------- | |
| 282,229 | 918 | – | 283,147 | |
| ====== | ===== | ===== | ====== |
| Financial assets/(liabilities) at fair value through profit or loss at 30 November 2015 | Level 1 £’000 | Level 2 £’000 | Level 3 £’000 | Total £’000 |
| Assets: | ||||
| Equity investments | 287,220 | – | – | 287,220 |
| BlackRock’s Institutional Cash Series plc – Sterling Liquidity Fund | 2,216 | – | – | 2,216 |
| Contracts for difference – fair value gains | – | 2,113 | – | 2,113 |
| Liabilities: | ||||
| Contracts for difference – fair value losses | – | (995) | – | (995) |
| -------- | -------- | -------- | -------- | |
| 289,436 | 1,118 | – | 290,554 | |
| ====== | ===== | ===== | ====== |
There were no transfers between levels for financial assets and financial liabilities during the period recorded at fair value as at 31 May 2016, 31 May 2015 and 30 November 2015. The Company did not hold any level 3 securities throughout the financial period under review or as at 31 May 2016, 31 May 2015 or 30 November 2015.
10. TRANSACTIONS WITH THE AIFM AND THE INVESTMENT MANAGER
BlackRock Fund Managers Limited (BFM) was appointed as the Company’s Alternative Investment Fund Manager (AIFM) with effect from 2 July 2014. BFM has (with the Company’s consent) delegated certain portfolio and risk management services, and other ancillary services, to BlackRock Investment Management (UK) Limited (BIM (UK)).
The investment management fee due to BFM for the six months ended 31 May 2016 amounted to £1,223,000 (six months ended 31 May 2015: £1,148,000; year ended 30 November 2015: £2,381,000). In addition the performance fee accrued for the six months ended 31 May 2016 amounted to £235,000 (six months ended 31 May 2015: £2,391,000, year ended 30 November 2015: £3,401,000).
At the period end £607,000 was outstanding in respect of the investment management fee (31 May 2015: £598,000; 30 November 2015: £1,233,000) and £235,000 was accrued in respect of performance fees (31 May 2015: £2,615,000; 30 November 2015: £3,401,000). Any final performance fee for the full year ending 30 November 2016 will not crystallise and fall due until the calculation date of 30 November 2016.
In addition to the above services, BlackRock provides the Company with marketing services. The total fees paid or payable for these services for the six months to 31 May 2016 amounted to £30,000 excluding VAT (six months ended 31 May 2015: £78,000; year ended 30 November 2015: £41,000). Marketing fees of £165,000 including VAT (31 May 2015: £291,000; 30 November 2015: £135,000) were outstanding at 31 May 2016.
The Company has an investment in BlackRock’s Institutional Cash Series plc –Sterling Liquidity Fund of £2,076,000 at the period end (31 May 2015: £1,511,000; 30 November 2015: £2,216,000).
11. RELATED PARTY DISCLOSURE
The Board consisted of five non-executive Directors at 31 May 2016, all of whom are considered to be independent by the Board. Mr Christopher Samuel was appointed as a Director of the Company with effect from 1 June 2016. None of the Directors has a service contract with the Company. The Chairman receives an annual fee of £36,000, the Chairman of the Audit Committee receives an annual fee of £27,000 and each other Director receives an annual fee of £24,000.
As at 31 May 2016 an amount of £11,250 (31 May 2015: £11,250; 30 November 2015: £nil) was outstanding in respect of Directors’ fees.
At the period end and at 18 July 2016, the interests of the Directors in the ordinary shares of the Company were as follows:
| 31 May 2016 | 18 July 2016 | |
| Crispin Latymer | 32,889 | 32,940 |
| Simon Beart | 39,456(1) | 39,793(3) |
| Loudon Greenlees | 10,000 | 10,000 |
| Jean Matterson | 46,000 | 46,000 |
| Christopher Samuel | N/A | nil |
| Eric Stobart | 24,893(2) | 24,893(2) |
| 1. Including 11,912 shares held by Mrs Beart. 2. Including 12,506 shares held by Mrs Stobart. 3. Including 12,088 shares held by Mrs Beart. |
12. CONTINGENT LIABILITIES
There were no contingent liabilities at 31 May 2016, 31 May 2015 or 30 November 2015.
13. PUBLICTION OF NON STATUTORY ACCOUNTS
The financial information contained in this half yearly financial report does not constitute statutory accounts as defined in section 435 of the Companies Act 2006. The financial information for the six months ended 31 May 2016 and 31 May 2015 has not been audited.
The information for the year ended 30 November 2015 has been extracted from the latest published audited financial statements, which have been filed with the Registrar of Companies. The report of the Auditor on those financial statements contained no qualification or statement under sections 498(2) or (3) of the Companies Act 2006.
14. ANNUAL RESULTS
The Board expects to announce the annual results for the year ending 30 November 2016 in February 2017. Copies of the results announcement can be obtained from the Secretary on 020 7743 3000. The Annual Report and Financial Statements should be available in February 2017, with the Annual General Meeting being held in March 2017.
For further information, please contact:
Simon White, Managing Director, Investment Companies, BlackRock Investment Management (UK) Limited
Tel: 020 7743 5284
Mike Prentis, Fund Manager, BlackRock Investment Management (UK) Limited
Tel: 020 7743 2312
Press enquiries:
Lucy Horne, Lansons Communications – Tel: 020 7294 3689
E-mail: lucyh@lansons.com
18 July 2016
12 Throgmorton Avenue
London EC2N 2DL
END
The Half Yearly Financial Report will also be available on the BlackRock website at http://www.blackrock.co.uk/thrg. Neither the contents of the Manager’s website nor the contents of any website accessible from hyperlinks on the Manager’s website (or any other website) is incorporated into, or forms part of, this announcement.
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