Portfolio Update

BLACKROCK THROGMORTON TRUST PLC (LEI: 5493003B7ETS1JEDPF59)
 

All information is at 31 December 2019 and unaudited.
Performance at month end is calculated on a cum income basis

	One Month	Three months	One year	Three years	Five years
Net asset value	5.6	13.9	38.4	64.2	120.5
Share price	7.5	20.7	60.5	108.9	173.8
Benchmark*	7.3	12.6	22.2	21.6	49.4

Sources: BlackRock and Datastream

*With effect from 22 March 2018 the Numis Smaller Companies plus AIM (excluding Investment Companies) Index replaced the Numis Smaller Companies excluding AIM (excluding Investment Companies) Index as the Company’s benchmark. The performance of the indices have been blended to reflect this.

At month end
Net asset value capital only:	663.20p
Net asset value incl. income:	669.89p
Share price	688.00p
Discount to cum income NAV	2.7%
Net yield1:	1.5%
Total Gross assets2:	£512.6m
Net market exposure as a % of net asset value3:	101.4%
Ordinary shares in issue4:	76,520,240
2019 ongoing charges (excluding performance fees)5,6:	0.6%
2019 ongoing charges ratio (including performance fees)5,6,7:	1.8%

1. Calculated using the 2019 interim dividend declared on 23 July 2019 and paid on 28 August 2019, together with the 2018 final dividend declared on 12 February 2019 and paid on 28 March 2019.

2. Includes current year revenue and excludes gross exposure through contracts for difference.

3. Long exposure less short exposure as a percentage of net asset value.

4. Excluding 4,010,086 shares held in treasury.

5. Calculated as a percentage of average net assets and using expenses, excluding performance fees and interest costs for the year ended 30 November 2018.

6. With effect from 1 August 2017 the base management fee was reduced from 0.70% to 0.35% of gross assets per annum.

7. Effective 1st December 2017 the annual performance fee is calculated using performance data on an annualised rolling two year basis (previously, one year) and the maximum annual performance fee payable is effectively reduced to 0.90% of two year rolling average month end gross assets (from 1% of average annual gross assets over one year). Additionally, the Company now accrues this fee at a rate of 15% of outperformance (previously 10%). The maximum annual total fees (comprising the base management fee of 0.35% and a potential performance fee of 0.90%) are therefore 1.25% of average month end gross assets on a two year rolling basis (from 1.70% of average annual gross assets).

Sector Weightings	% of Total Assets
Consumer Services	28.1
Industrials	26.4
Financials	19.0
Consumer Goods	9.1
Health Care	6.6
Technology	6.5
Telecommunications	2.1
Basic Materials	1.1
Oil & Gas	0.3
Net current assets	0.8
	-----
Total	100.0
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Market Exposure (Quarterly)
	28.02.19	31.05.19	31.08.19	30.11.19
Long	108.7	113.7	109.1	103.2
Short	14.9	13.2	11.2	7.4
Gross exposure	123.6	126.9	120.3	110.6
Net exposure	93.8	100.5	97.9	95.8

Ten Largest Investments
Company	% of Total Gross Assets
4imprint Group	3.0
WH Smith	3.0
IntegraFin	2.9
YouGov	2.8
Serco Group	2.7
Bodycote	2.4
Games Workshop	2.3
Dechra Pharmaceuticals	2.3
Gamma Communications	2.1
SSP	2.1

Commenting on the markets, Dan Whitestone, representing the Investment Manager noted:

Whilst the Company delivered a positive net return of 5.6%¹ in December 2019, this did trail our benchmark, the Numis Smaller Companies plus AIM (excluding Investment Companies) Index, which rose by 7.3%¹. There are two explanations for December’s relative underperformance. The first is that the portfolio modestly underperformed a rising market and specifically the rally in domestic shares around the UK General Election.  The second reason is due to the accounting treatment of performance fees. The performance fee model operates a 2-year rolling cycle, with a 90 basis point cap on gross assets, meaning that on the 1st day of the new financial year (2nd December 2019) the outperformance from 2019 was carried forward and accrued immediately equating to a circa 0.99% reduction in the Company’s NAV. This reflects the fact that the Company had a very strong 2019, outperforming its benchmark by 16.2% net of fees during the year to the 31st December 2019.

Performance during the month was driven by the long book, while the short book modestly detracted as a result of several our UK listed shorts rising as a result of the market bias towards UK domestics.

The largest positive contributor to performance during the month was Impax Asset Management, a specialist in sustainable investing, which rose in response to strong results which were comfortably ahead of expectations. The second largest contributor was Pebble Group, an IPO (Initial Public Offering) that we participated in during the month, which is a global facing designer and manufacturer of bespoke branded promotional goods. Watches of Switzerland reported strong interim results with upgrades, whilst also announcing the acquisition of four new showrooms, while British construction business, Breedon, benefitted from the post-election bounce in UK domestic shares.

Detractors as a result of stock specific updates during the month were limited. Most of the largest detractors were a result of broader market moves, notably UK domestic facing shorts which rose during the month and also some international facing shares giving back a bit of their recent strong performance, for example Oxford Instruments. Shares in SSP weakened in line with many other businesses that are cautioning on a deteriorating macro environment in Europe. RWS reported solid full year results, however the shares weakened.  We would attribute this move to nothing other than “travel and arrive” (i.e. the market had already factored in these positive results).

As mentioned in our November monthly announcement, we had made the decision to reduce our gross and net exposures in the run up to the General Election given the strong share price rises seen in many UK domestic businesses. We were concerned that if a Conservative majority did not materialise this would be followed by a sharp fall in small and mid-cap shares and reduced liquidity, making trading conditions more unfavourable. I think it is fair to say that performance could have been stronger if we hadn’t reduced these exposures, however we hope our shareholders will agree that reducing risk, heading into a binary event like an election, where we have no informational advantage, is a prudent move.

Once the result of the General Election was known we were quick to act, implementing a plan we prepared in advance to good effect. As a reminder, we do not intend to allocate capital back to all areas of the market, as we do not believe there will be a reversal in many of the structural issues facing many UK industries. We continue to build the portfolio based on stock and industry specific investment cases, and our investment process remains centred around the factors that we think lead to long term compounding growth for successful companies. Specifically, we have increased exposure to some domestic industries (savings platforms, housebuilders, differentiated retailers).

We enter 2020 with confidence in our holdings and the shape of the portfolio and look forward to updating you in due course.

¹Source: BlackRock as at 31 December 2019

27 January 2020

ENDS

Latest information is available by typing www.blackrock.co.uk/thrg on the internet, "BLRKINDEX" on Reuters, "BLRK" on Bloomberg or "8800" on Topic 3 (ICV terminal).  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.