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Final Results

Released 17:56 06-Feb-2020

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 2019

PERFORMANCE RECORD

30 November 2019  30 November 2018 
Net assets (£’000)1 470,057  379,602 
Net asset value per ordinary share 634.10p  519.08p 
Ordinary share price (mid-market) 640.00p  457.00p 
Benchmark Index2 14,670.11  13,589.32 
Premium/(discount) to cum income net asset value3 0.9%  (12.0%)
Average discount to cum income net asset value3 for the year (4.6%) (10.7%)
Performance
Net asset value per share (total return)3 +24.4%  -2.7% 
Benchmark Index2 +8.0%  -9.0% 
Ordinary share price (total return)3 +42.8%  +1.8% 

   


 
Year ended 
30 November 2019 
Year ended 
30 November 2018 

Change 
Revenue
Net revenue profit after taxation (£’000) 6,265  8,056  -22.2% 
Revenue return per ordinary share 8.56p  11.02p  -22.3% 
Dividends
Interim 2.50p  2.50p  0.0% 
Final 7.70p  7.50p  +2.7% 
Total dividends paid and payable 10.20p  10.00p  +2.0% 

ANNUAL PERFORMANCE FOR THE FIVE YEARS TO 30 NOVEMBER 2019

NAV Benchmark Index2 Share Price
2015 23.2 11.9 27.7
2016 7.3 6.3 -2.1
2017 33.9 21.3 43.8
2018 -2.7 -9.0 1.8
2019 24.4 8.0 42.8

Performance figures 1 Year change %, calculated in sterling terms with dividends reinvested.

Sources: BlackRock and Datastream.

1      The change in net assets reflects market movements, dividends paid and share issues during the year.
2      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. From 1 December 2013 to 21 March 2018, the Company’s benchmark was the Numis Smaller Companies excluding AIM (excluding Investment Companies) Index. Prior to 1 December 2013 the Company’s benchmark was the Numis Smaller Companies plus AIM (excluding Investment Companies) Index. The performance of the benchmark indices during these periods have been blended to reflect these changes.
3      Alternative Performance Measures, see Glossary in the Annual Report and Financial Statements.

CHAIRMAN’S STATEMENT

Dear Shareholder

I am pleased to present the Annual Financial Report for the year to 30 November 2019.

PERFORMANCE
The Company has performed very strongly this year.  The Net Asset Value (NAV) per share outperformed the benchmark index by 16.4%, a notable achievement given the challenging economic and political backdrop during the year.

Over the twelve months to 30 November 2019, the Company’s NAV returned 24.4%, compared with a total return of 8.0% from the Company’s benchmark index, the Numis Smaller Companies plus AIM (excluding Investment Companies) Index. The share price returned an even more impressive 42.8% during the year. The Company also saw its discount narrow substantially from 12.0% at the start of the year, to a premium of 0.9% as at the financial year end.

Since the year end and up to the close of business on 3 February 2020, the NAV has increased by 7.6% compared to the benchmark index return which increased by 4.7% (all figures in sterling terms with dividends reinvested).

I am also very pleased to report that the Company won the Investment Week Investment Company of the Year Award 2019 (UK Smaller Companies category) and the Online Personal Wealth Award 2019 for best investment trust for growth. It was also awarded Citywire Investment Trust of the Year (UK Smaller Companies category) for the second year in a row.

We congratulate our Portfolio Manager, Dan Whitestone, on what has been a very impressive year. Further information on portfolio performance can be found in the Investment Manager’s report.

SHARE PRICE DISCOUNT/PREMIUM
During the year to 30 November 2019 the Company’s share price discount/premium to NAV ranged between a discount of 12.0% and a premium of 2.4% and ended the year at a premium of 0.9%. As at 3 February 2020 the Company’s shares were trading at a premium of 1.7%.

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 share issue or buy back powers with the objective of ensuring that an excessive premium or discount does not arise.

The Company is therefore once again seeking shareholder authority at the forthcoming Annual General Meeting to issue up to 10% and to buy back up to 14.99% of the Company’s issued share capital.

Further information in relation to the discount can be found in the Annual Report and Financial Statements.

REVENUE RETURN AND DIVIDENDS
The revenue return per share for the year amounted to 8.56 pence per share, compared with 11.02 pence per share for the previous year, a decrease of 22.3%. This decrease in revenue was primarily due to a decrease in ordinary and special dividends recognised during the year and increased costs relating to derivative positions, as outlined in note 11 to the financial statements in the Annual Report.  One of the features of the investment trust structure is the ability to distribute previous retained revenue to smooth out the dividends paid in years in which revenue has decreased.  The Company has paid £1,639,000 from revenue reserves this year, representing 20.7% of the total dividend paid.

The Directors are pleased to declare a proposed final dividend of 7.70 pence per share for the year ended 30 November 2019. This, together with the interim dividend of 2.50 pence per share paid on 28 August 2019, gives a total dividend for the year of 10.20 pence per share, an increase of 2.0% on the total dividend distributed to shareholders in the prior financial year. This dividend will be paid on 2 April 2020, subject to shareholder approval at the forthcoming AGM, to shareholders on the Company’s register on 21 February 2020. The ex-dividend date is 20 February 2020.

BOARD COMPOSITION
At the time of writing, the Board consists of four independent non-executive Directors, a lower number than it has historically had. The Board will continue to consider its composition on a regular basis to ensure that there is a suitable balance of skills, knowledge, experience, independence and diversity, which is aligned to the Company’s strategy.

In accordance with best practice and developing corporate governance, all Directors have agreed to submit themselves for election at the forthcoming AGM.

The Board’s policy on Director tenure and succession planning can be found in the Corporate Governance Statement in the Annual Report and Financial Statements. Further details of all the Directors can be found in their biographies in the Annual Report and Financial Statements.

ESG AND SOCIAL RESPONSIBILITY
As a Board, we are also conscious that Environmental, Social and Governance (ESG) matters are increasingly at the forefront of investors’ minds. We believe that it is important that this Company’s investee companies operate in a responsible and sustainable way having regard to the interests of all their stakeholders; whether these are shareholders, employees, customers, regulators or suppliers.

Our Investment Manager, BlackRock, has a rigorous approach to corporate governance, with the BlackRock Investment Stewardship team responsible for protecting and enhancing the value of clients’ assets through engagement with companies to encourage business and management practices that support sustainable financial performance over the long-term.

Further information on ESG and Socially Responsible Investment can be found in the Strategic Report and in the Corporate Governance Statement in the Annual Report and Financial Statements.

GENERAL MEETING
In the face of continuing demand for the Company’s shares and having regard to the benefits of enlarging the Company, the Directors have convened a General Meeting to be held at 11.00 a.m. on 27 February 2020 in order to seek shareholder authority to issue ordinary shares or to sell shares from treasury on a non-pre-emptive basis having determined that the existing authority granted by shareholders at last year’s AGM will likely be exhausted before the forthcoming AGM, at which time a renewal of these powers are usually sought. In so doing, the Directors have taken into account the desirability of limiting the premium to the Net Asset Value per ordinary share at which the ordinary shares trade in order to ensure that new or existing shareholders who regularly acquire ordinary shares are not disadvantaged.

The Resolution to be considered at the General Meeting will, if passed, give the Directors the authority to allot new ordinary shares or sell shares from treasury, on a non-pre-emptive basis up to 7,313,020 ordinary shares, being approximately 9.2% of the issued ordinary share capital as at 3 February 2020. The Directors intend to use this authority to satisfy continuing demand for the ordinary shares. As with the ordinary share issuance to date, any shares will be issued at a premium to the last published sterling Net Asset Value (cum-income) per ordinary share at the time the proposed allotment is agreed and will therefore benefit existing shareholders by being accretive to the Net Asset Value per ordinary share.

The authority conferred by the Resolution will lapse at the conclusion of the next Annual General Meeting of the Company to be held on 25 March 2020 when the Directors will seek a renewed authority as they do at this time each year. Further information can be found in the Director’s Report in the Annual Report and Financial Statements.

ANNUAL GENERAL MEETING
The Company’s AGM will be held on Wednesday, 25 March 2020 at 11.00 a.m. at the offices of BlackRock, 12 Throgmorton Avenue, London EC2N 2DL. Details of the business of the meeting are set out in the Notice of AGM in the Annual Report and Financial Statements. The portfolio manager will make a presentation to shareholders on the Company’s progress and the outlook for the year ahead. We welcome shareholders to the AGM and look forward to seeing you there.

OUTLOOK
The result of the UK General Election has aided UK equity markets. Sterling initially rallied against the US Dollar on the news and domestically-focused UK equities have benefited from greater political certainty, and the prospect of some fiscal stimulus.

The emergence of a comfortable working majority has ensured that the Withdrawal Agreement with the EU has been passed swiftly by Parliament. Nevertheless, it remains to be seen whether a comprehensive trade deal with the EU can be negotiated by the deadline of the end of 2020. At the same time, the UK will be free to negotiate trade deals with other countries.

Overall, this higher degree of political certainty should be positive for the UK economy. However, the heightened volatility seen in 2019 is likely to continue to be a feature throughout the forthcoming financial year as the Brexit process plays out, although this should present the Company’s active portfolio manager with opportunities.

The forthcoming year will no doubt present challenges, but your portfolio manager believes that UK small and mid-size companies provide a great number of exciting investment opportunities. The portfolio is focused on high quality companies which have robust business models, strong cash flows, favourable industry characteristics and which are led by experienced management teams, that can continue to generate attractive returns despite challenging macro-economic conditions and sustained market volatility.

CHRISTOPHER SAMUEL
Chairman
6 February 2020

INVESTMENT MANAGER’S REPORT

MARKET REVIEW AND OVERALL INVESTMENT PERFORMANCE
Strong equity markets during the period masked increasing levels of volatility and style rotations in market leadership away from growth and into value. Global trade uncertainties continued to create a major headwind, offset by renewed central bank monetary easing in both the US and Europe. The UK’s political environment remained turbulent; first with Theresa May’s decision to step down as Prime Minister after failing to secure a Brexit deal in Parliament (leading to the UK General Election), which saw Boris Johnson’s Conservative Party secure a convincing majority. This political chaos resulted in increased sterling volatility, with the currency touching lows in August, and then rallying in anticipation of the Conservative majority. For all the Brexit-related concerns, there was a notable resurgence in Mergers & Acquisitions activity in the UK market, with a diverse range of targets, particularly from overseas corporates prepared to take advantage of opportunities in the UK, despite the nervousness in the equity market.

PERFORMANCE REVIEW
2019 has been a successful year, with the Company’s NAV rising by 24.4% and outperforming our benchmark by 16.4%, with dividends reinvested. This level of outperformance has certainly exceeded our expectations, particularly given the volatile economic and political backdrop. However, we believe this result supports our belief that stock and industry specifics can triumph over macroeconomic factors, particularly during times of uncertainty. Encouragingly, the Company has delivered many positive stock specific results across both long and short positions. Whilst returns during the year have been predominantly driven by the long book, the short book has also delivered a significant and positive outcome, contributing close to 1% in absolute performance, which is very encouraging considering the backdrop of rising equity markets.

The largest positive contributor to performance came from our holding in JD Sports Fashion. We discussed the holding at length in the half-yearly report, however the shares have continued to rise during the second half of the year after the company delivered its third upgrade in earnings in the space of twelve months. Incredibly, this differentiated retailer continued to deliver high single digit like-for-like sales growth in-store in the UK. We highlight this because it goes to show that differentiated businesses can outperform peers, and company statements about ‘weather’ and ‘weak macroeconomics’ should not always be taken at face value. Shares in JD Sports Fashion are up more than 125% during the period and contributed 1.85% to relative performance.

Industrial software engineer Aveva was the second largest contributor to performance during the period. The company has been trading well on a consistent basis and has seen organic revenue growth accelerate more recently, driven in part by their customers’ desire to spend on the digital transformation and through multi-year contracts. We believe that digital transformation will continue to be a key secular growth driver of capital expenditure in the coming years as corporates invest in their digital journey and seek to drive market share or remove costs and complexity from their operations. With specific regard to Aveva, we believe this company is well placed as a market leader, with a compelling product offering to help enable their customers to embrace the “digital twin”. 4imprint Group, another long-term core holding, remained a top contributor for the full year as the business continued to deliver organic top-line growth. Shares in specialist media publisher Future rose in response to an underlying earnings upgrade, while also announcing a significant accretive acquisition of TI Media, the publisher of titles such as Marie Claire UK and Country Life.

Other notable contributors included Xero, Dechra Pharmaceuticals and Workspace Group which rose towards the end of the period as UK domestic assets performed strongly in response to polling data that leaned towards a Conservative majority in the election. The names mentioned above are merely a snapshot of some of the largest contributors to performance during the year. There were many other companies that contributed. The common theme amongst these holdings, in most cases, was the underlying businesses exceeding expectations and raising forward guidance.

We continue to believe that the ability to short stocks is a key differentiator of our Company compared to most other investment companies in our universe. It is therefore pleasing when the short book not only adds to relative performance, but also when short positions, which are typically smaller than longs, feature in the top ten contributors to performance, representing stock specific ‘alpha’, or outperformance. This year we have had two shorts which have been top ten contributors to performance, each falling more than 70% and each contributing more than 0.6% to relative returns. The largest was a UK contractor that we have mentioned in many of our monthly updates. Despite an emergency fund raise and a series of negative updates, the company issued a significant profit warning in June, resulting in the share price collapsing. Despite the share price weakness, we had been adding to this short position in the months ahead of the warnings, a decision that proved to be profitable. It is all too tempting to close short positions after material share price falls, particularly when they may appear “cheap” and with so many people who want to tell you they are “cheap”, but there are times when real conviction is required, and the resolve to maintain or add to the short. The other material short contributor was from a position in a listed Investment Trust which has fallen as the NAV has continued to be revised down as many of that Trust’s listed companies have delivered material profit warnings (some of which this Company has been short directly) whilst some of the private investments have seen their value written down as they have failed to deliver.

The largest detractor from performance was veterinary medicine producer, Eco Animal Health Group, which fell after the company issued a profit warning in November in response to a sharp slowdown in sales in China. Demand has fallen heavily in response to the African Swine Fever epidemic that has significantly reduced the pig herd and where the impact on revenues was far greater than we had anticipated. The company’s decision to maintain the cost base so they are well placed to benefit from the recovery in demand once the outbreak is contained, meant the reduction in revenues had a disproportionate impact on profitability. We have subsequently reduced the position, but maintain a holding as we see its long-term competitive position unchanged.

The next largest detractor was Craneware, a UK listed software company focused on the US healthcare market, which fell in response to a profit warning earlier in the year. The business has a very high percentage of recurring revenues, so the shortfall versus expectations was related to a reduction in new contract wins, which was attributed to poor sales execution rather than any change in the competitive landscape. We discussed this with management at the time. The issues appear to be transient and remedial actions are in place. Therefore, we believe this should have little impact on the long-term earnings power of the company. However, we reduced the holding as a result.

ACTIVITY
The total number of positions (long and short) in the portfolio has marginally reduced over the period to 133 as at 30 November 2019. Having reduced the gross and net exposure at the end of 2018, we have continued to operate with a lower than average gross and net exposure, at 109% and 95% respectively.

As stated in the half-yearly report, we purchased the holding in JD Sports Fashion in December 2018, taking advantage of the market volatility to buy into a company that we have owned historically and believe we know well at a valuation we had rarely seen. We own very few retailers, given the myriad of challenges facing bricks and mortar retailing, but what the company has achieved over the last 5-10 years is truly impressive and a credit to the management team. Its differentiated consumer proposition and multi-channel approach to retailing has enabled JD Sports Fashion to continue to deliver strong like-for-like sales growth, beating expectations and raising guidance, all without sacrificing gross margin. We continue to like the business, which has been a fantastic investment for the Company. However, as a result of strong share price performance, the shares were promoted into the FTSE 100, which, given our smaller companies mandate, required us to reduce the size of our holding. Similarly, Aveva has also been promoted into the large capitalisation index and while our conviction in the long-term prospects of the business remain unchanged, we have been locking in some profit from this holding.

The Initial Public Offering (IPO) market continues to present us with exciting opportunities. Watches of Switzerland, the luxury watch retailer, which floated in May 2019, is another good example of this process where we purchased a holding following an extensive due diligence process. We also took part in the IPO of Trainline in June. The company enjoys a strong market position in the UK and is set to grow its market share, particularly as the rail industry moves from paper to e-tickets, and more ticket barriers are now tap to pay. Its market position in Europe is more nascent, but the deregulation of the industry and the company’s technological advantages should allow it to gain share from the incumbent rail operators.

We have also been adding new holdings in some UK domestic shares in the second half of the year, including discount retailer B&M and UK bakery chain Greggs, whilst increasing our exposure to existing investments in companies like WH Smith and CVS Group. Each of these holdings were added to the portfolio for stock specific reasons and for their long-term secular growth drivers. Pessimism towards the UK during the year certainly provided attractive entry points in our opinion. We initiated a new position in serviced office provider IWG (formerly Regus) which recently embarked on a strategy to franchise some of its operations, which should help the group reduce its financial leverage and grow in a less capital intensive way.

Notable disposals during the period included Ascential, Howden Joinery and Fever-Tree Drinks. More recently, in the run-up to the UK General Election, we have been using strength in UK domestics to reduce exposure as we believed there was an asymmetrical risk/reward profile developing for many UK businesses if a majority Conservative Government failed to materialise. This was a risk management decision to help protect client capital should the UK public maintain its past form of surprising the market on polling days.

PORTFOLIO POSITIONING
As a reminder, stock positioning will be driven by our focus on only two types of company. First, what we define as quality differentials, which are essentially differentiated long-term growth investments. These we would characterise as companies that have strong management teams, with a protected market position, a unique and compelling product offering with an attractive route to market, maybe benefitting from structural growth, and that are well financed with clean accounting. The second type of company are those that are leading industry change, the ‘disruptors’, and alternatively on the short side, the victims of industry change, the ‘disrupted’.

Relative to our benchmark, our largest overweights are Media, Pharmaceuticals & Biotechnology and Industrials. Our largest holding in Media is 4imprint Group, a UK listed but US focused direct marketer of promotional goods. It is the market leader in the US by some distance, but has less than 4% market share despite compounding its revenues organically in the mid-teens for over 10 years, reflecting not only the size of the market but just how fragmented the competitive set is. Within Pharmaceuticals, our holdings include Dechra Pharmaceuticals, Masimo and Abcam. These are all global businesses, operating in specific niches where they are exposed to strong secular growth drivers. Our Industrials include Bodycote and Spirax-Sarco Engineering which are both high quality, cash generative industrials, that are well capitalised, and have strong and protected market positions.

Our exposure to Resources remains extremely limited because these companies generally fail to meet our investment criteria. Therefore we do not feel that these companies make compelling long-term compounding growth investments.

The long book remains exposed to specific investment cases, often where companies have harnessed the power and convenience of technology in a capital-light model that disrupts mature profit pools. We have also increased our long exposure to disruptive software companies benefitting from the structural trend in corporates investing in “digitisation” to either drive efficiency or yield improvements.

The short book continues to target the same areas that we see as over-earning, or under structural or cyclical pressure. Many of our short positions are within Consumer Services, either facing structural headwinds (digital disruption, low cost or specialised formats) or cyclical pressures (weakening consumer demand, rising costs). Both categories can be overlaid with a financial framework centred on weak balance sheets and poor cash conversion.

As discussed in previous reports we are of the view that the market needs to fundamentally reappraise the true value of over-indebted structurally challenged business models, particularly those that are paying dividends they can’t afford. We think there are many of these companies out there masquerading as “cheap shares” because their “price to adjusted earnings ratio” looks low, and for too long other market participants have championed some of these shares as “value” investments, which we think does a tremendous injustice to the many respected and wealth-creating value managers. There have been signs during the year that this view of ours is garnering support, no doubt catalysed by the implosion of several high-profile companies which fit the description(s) we’ve outlined above. Thankfully we have been short some of these companies and continue to target financially leveraged businesses that are over distributing (at the expense of investing in their business to generate real long-term wealth for their owners).

ENVIRONMENTAL, SOCIAL AND GOVERNANCE (ESG) MATTERS
We are conscious that ESG matters are increasingly at the forefront of shareholders’ minds. We have always incorporated an awareness of ESG into our fundamental research investment process in the belief that these additional insights, particularly with regard to the strength of management and high standards of corporate governance, can ultimately lead to more informed investment decisions. We continue to work closely with the BlackRock Investment Stewardship team to engage with those companies which may have governance issues we think need to be addressed.

OUTLOOK
Our ongoing and deliberate decision to reduce the gross and net exposures of the portfolio has been aimed to protect shareholders’ capital given the potential for sudden spikes in volatility and large swings in sentiment. Importantly, this leaves us in a position to add risk back to the portfolio when we feel the time is right. However, we must remember that trade negotiations may cause further volatility on a number of fronts, not only as the UK seeks to renegotiate relationships, but also as the US and China attempt to further build on the recent rapprochement.

The Conservative majority in Parliament does remove a tail risk in our view, and more clarity should lead to increased business confidence and corporate spending (something we will look for evidence of this in our interactions with company management teams). This has the potential to create a healthy backdrop of improving corporate profitability both for domestic and global-facing UK PLCs.

We continue to focus the portfolio on stock and industry specific investment cases, rather than just responding to short-term political developments. Our investment process remains centred around the factors that we think lead to long-term compounding growth for successful companies. We do not think the General Election outcome will reverse many of the structural issues facing some UK domestic industries. The progress (or lack thereof) of trade talks between the US and China is of far greater significance for the global economy and relevance to many of the portfolio’s holdings, so positive developments here combined with the improving business confidence and spending in the UK (if it materialises) could certainly create an attractive backdrop for our asset class in 2020.

In summary, 2019 has been a successful year for the Company, and the outperformance of the benchmark has far exceeded our expectations. This confirms our belief that stock and industry specifics can triumph over macro, particularly during times of uncertainty. We thank shareholders for their support during the year, and look forward to 2020, with confidence in the portfolio’s holdings. The prospects for growth will bring opportunities for further progress.

DAN WHITESTONE
BlackRock Investment Management (UK) Limited
6 February 2020

Portfolio of Investments as at 30 November 2019

1             + 2018 33rd
WH Smith
General Retailers

Market value £13,925,000
Share of net assets 3.0% (2018: 1.3%)

Widespread British retailer of books, stationery, magazines, newspapers, entertainment products and confectionery.

2             + 2018 7th
4imprint Group
Media

Market value £13,628,000
Share of net assets 2.9% (2018: 2.5%)

Supply of promotional merchandise in the US.

3             + 2018 9th
IntegraFin
Financial Services

Market value £13,261,0001

Share of net assets 2.8% (2018: 2.2%)

UK savings platform for financial advisors.

4             + 2018 8th
YouGov*
Media

Market value £13,076,0001
Share of net assets 2.8% (2018: 2.4%)

Provision of survey data and specialist data analytics.

5          + 2018 11th
Workspace Group
Real Estate Investment Trusts

Market value £12,018,000
Share of net assets 2.6% (2018: 2.1%)

Supply of flexible workspace to businesses in London.

6          = 2018 n/a
Serco Group
Support Services

Market value £11,836,000
Share of net assets 2.5% (2018: n/a)

Provision of public services across health, transport, immigration, defence, justice and citizen services.

7          - 2018 6th
Dechra Pharmaceuticals
Pharmaceuticals & Biotechnology

Market value £11,815,000
Share of net assets 2.5% (2018: 2.7%)

Development and supply of pharmaceutical and other products focused on the veterinary market.

8          - 2018 3rd
SSP
Travel & Leisure

Market value £11,446,000
Share of net assets 2.4% (2018: 2.8%)

Operator of food and beverage concessions in travel locations.

9          + 2018 10th
Bodycote
Industrial Engineering

Market value £11,078,0001
Share of net assets 2.4% (2018: 2.2%)

Provision of thermal processing services.

10           - 2018 5th
Aveva
Software & Computer Services

Market value £9,493,000
Share of net assets 2.0% (2018: 2.8%)

Engineering and industrial software business.

*      Traded on the Alternative Investment Market (AIM) of the London Stock Exchange.
1      Includes long derivative positions.

# Company £’000 % Description
11 Gamma Communications* 9,492 2.0 Provider of communication services to UK businesses
Mobile Telecommunications
12 Games Workshop 9,215 2.0 Developer, publisher and manufacturer of miniature war games
Leisure Goods
13 Watches of Switzerland 9,055 1.9 Retailer of luxury watches
Personal Goods
14 Qinetiq Group 8,377 1.8 Provider of scientific and technological services to the defence, security and aerospace markets
Aerospace & Defence
15 Wetherspoon (J.D) 8,367 1.8 Owner and manager of pubs in the UK
Travel & Leisure
16 Breedon* 8,181 1.8 British construction materials group
Construction & Materials
17 Oxford Instruments 7,988 1.7 Designer and manufacturers of tools and systems for industry and research
Electronic & Electrical Equipment
18 RWS Holdings* 7,706 1.6 Provider of language support services
Support Services
19 IWG 7,642 1.6 Multinational provider of serviced offices
Support Services
20 Avon Rubber 7,620 1.6 Provider of safety masks and dairy related products
Aerospace & Defence
21 Trainline 6,787 1.4 Independent rail and coach digital ticketing platform
General Retailers
22 Sirius Real Estate 6,686 1.4 Owner and operator of business parks, offices and industrial complexes in Germany
Real Estate Investment & Services
23 Beazley 6,641 1.4 Specialist insurance businesses
Non-Life Insurance
24 Liontrust Asset Management 6,495 1.4 Provider of asset management services
Financial Services
25 Bovis Homes Group 6,269 1.3 UK housebuilder
Household Goods & Home Construction
26 Learning Technologies* 6,076 1.3 Provider of e-learning services
Support Services
27 Future 6,006 1.3 Multi-platform media business covering technology, entertainment, creative arts, home interest and education
Media
28 CVS Group* 5,966 1.3 Operator of veterinary surgeries
General Retailers
29 Masimo 5,962 1.3 Developer and manufacturer of non-invasive patient monitoring technologies
Health Care Equipment & Services
30 Alliance Pharma* 5,942 1.3 Distributor of pharmaceutical and healthcare products
Pharmaceuticals & Biotechnology
31 Polar Capital Holdings* 5,669 1.2 Provider of investment management services
Financial Services
32 Fuller Smith & Turner - A Shares 5,659 1.2 Owner and operator of pubs, mainly in the London area
Travel & Leisure
33 Impax Asset Management* 5,501 1.2 Provider of asset management services
Financial Services
34 B&M 5,324 1.1 UK discount retailer
General Retailers
35 Xero 5,130 1.1 Australian listed, but New Zealand based, software company specialising in accounting for small businesses
Software & Computer Services
36 Greggs 5,091 1.1 Bakery chain
Food & Drug Retailers
37 Hiscox 5,085 1.1 Provider of insurance services
Non-Life Insurance
38 Young & Co’s Brewery* 5,055 1.1 Owner and operator of pubs, mainly in the London area
Travel & Leisure
39 Spectris 4,949 1.1 Supplier of productivity enhancing instrumentation and controls
Electronic & Electrical Equipment
40 GB Group* 4,908 1.0 Developer and supplier of identity verification solutions
Software & Computer Services
41 Derwent London 4,772 1.0 British property investment company
Real Estate Investment Trusts
42 Robert Walters 4,655 1.0 Provider of specialist recruitment services
Support Services
43 Diploma 4,518 1.0 Supplier of specialised technical products and services
Support Services
44 Sumo Group* 4,456 0.9 Provider of creative and development services to the video games and entertainment industries
Leisure Goods
45 Mattioli Woods* 4,387 0.9 Provider of asset management
Financial Services
46 Abcam* 4,302 0.9 Abcam is a producer, distributor and seller of protein research tools
Pharmaceuticals & Biotechnology
47 James Fisher and Sons 4,246 0.9 Provider of innovative marine solutions and specialised engineering services
Industrial Transportation
48 Grafton 4,227 0.9 Distribution of building materials
Support Services
49 Computacenter 4,218 0.9 Provider of computer services to private and public sector clients
Software & Computer Services
50 Aptitude Software 4,201 0.9 Provider of specialist finance software and technology
Software & Computer Services
51 Clarkson 4,200 0.9 Provider of shipping services
Industrial Transportation
52 Next Fifteen Communications* 4,122 0.9 Provider of digital communication products and services
Media
53 Tatton Asset Management* 3,937 0.8 Transportation Services
Financial Services
54 JD Sports Fashion 3,868 0.8 Leading trainer and sports fashion retailer in the UK
General Retailers
55 Ryanair 3,541 0.8 Irish low cost airline
Travel & Leisure
56 Signature Aviation 3,455 0.7 Service provider to the business & general aviation industry
Industrial Transportation
57 Big Yellow 3,441 0.7 Provider of self-storage services
Real Estate Investment Trusts
58 Advanced Medical Solutions* 3,409 0.7 Development and manufacture of wound care and closure products
Health Care Equipment & Services
59 Softcat 3,331 0.7 Software distributor
Software & Computer Services
60 Premier Asset Management Group* 3,311 0.7 Retail asset management services provider
Financial Services
61 Pets at Home 3,296 0.7 Pet supplies retailer
General Retailers
62 IMImobile* 3,160 0.7 Cloud communications software provider
Software & Computer Services
63 Chapel Down† 3,080 0.7 UK producer of sparkling and still wines, and Curious beers and ciders
Beverages
64 AB Dynamics* 3,001 0.6 Developer and supplier of specialist automotive testing systems
Industrial Engineering
65 Team 17* 2,957 0.6 British video game developer and publisher
Leisure Goods
66 Gooch & Housego* 2,935 0.6 Designer and manufacturer of advanced photonic systems
Electronic & Electrical Equipment
67 888 2,931 0.6 Operator of online gaming platform 
Travel & Leisure
68 Spirax-Sarco Engineering 2,904 0.6 Manufacturer of steam management systems and peristaltic pumps and associated fluid path technologies
Industrial Engineering
69 SThree 2,681 0.6 Provider of specialist professional recruitment services
Support Services
70 Cineworld Group 2,679 0.6 Global cinema chain
Travel & Leisure
71 Renishaw 2,607 0.6 Engineering and scientific technology company, with expertise in precision measurement and healthcare
Electronic & Electrical Equipment
72 Eckoh* 2,494 0.5 Global provider of secure payments products
Software & Computer Services
73 Frontier Developments* 2,420 0.5 British video game developer and publisher
Leisure Goods
74 Chegg 2,397 0.5 Provider of education related services
General Retailers
75 DSV Panalpina 2,375 0.5 Danish transport and logistics company
Industrial Transportation
76 Coupa Software 2,330 0.5 Provider of cloud-based platform for business spend
Software & Computer Services
77 St. Modwen Properties 2,308 0.5 Investment in, and development of property
Real Estate Investment & Services
78 Craneware* 2,211 0.5 Provider of financial business software for US hospitals
Software & Computer Services
79 Equals Group* 2,190 0.5 Provider of payment services
Financial Services
80 Treatt 2,184 0.5 Development and manufacture of ingredients for the flavour and fragrance industry
Chemicals
81 Bellway 2,165 0.5 UK housebuilder
Household Goods & Home Construction
82 Ergomed* 2,155 0.5 Pharmaceuticals services provider
Pharmaceuticals & Biotechnology
83 Euromoney Institutional Investor 2,113 0.4 Financial information specialist
Media
84 Genus 2,100 0.4 Animal genetics company
Pharmaceuticals & Biotechnology
85 Five9 1,984 0.4 Provider of cloud-based contact centre software
Software & Computer Services
86 Premier Oil 1,960 0.4 Oil & gas exploration and production business
Oil & Gas Producers
87 Sika 1,953 0.4 Development and production of systems and products for bonding, sealing, damping, reinforcing and protecting in the building sector and motor vehicle industry
Construction & Materials
88 Central Asia Metals* 1,927 0.4 Production of base metals with operations in Kazakhstan and North Macedonia
Mining
89 Huntsworth 1,924 0.4 Provider of marketing and research services principally to the pharmaceuticals sector
Media
90 ECO Animal Health Group* 1,889 0.4 Development, registration and marketing of pharmaceutical products for global animal health markets
Pharmaceuticals & Biotechnology
91 Trifast 1,806 0.4 Manufacturer and distributor of industrial fastenings
Industrial Engineering
92 Rathbone Brothers 1,728 0.4 Provider of wealth management services
Financial Services
93 Stock Spirits Group 1,550 0.3 Developer and manufacturer of branded spirits mainly in Eastern Europe
Beverages
94 Zotefoams 1,464 0.3 Manufacturer of polyolefin foams used in sport, construction, marine, automation, medical equipment and aerospace
Chemicals
95 Savills 1,214 0.3 Provider of specialist real estate services
Real Estate Investment & Services
96 8X8 1,069 0.2 Provider of cloud-based communications platform
Mobile Telecommunications
97 Luceco 1,063 0.2 LED lighting manufacturer
Electronic & Electrical Equipment
98 XPS Pensions Group 804 0.2 Pension consulting and administration business
Financial Services
99 Appreciate Group (formerly Park Group)* 166 Provider of multi-retailer gift cards and vouchers and digital rewards services
Financial Services
Long investment positions (excluding BlackRock’s Institutional 485,191 103.2
Cash Series plc - Sterling Liquid Environmentally Aware Fund)
Short investment positions (34,685) (7.4)

2018 comparative for ten largest investments

# Company £’000 % Description
1 Hiscox 11,247 3.0 Provider of insurance services
Non-life insurance
2 Ascential 10,837 2.9 Global business-to-business media company
Media
3 SSP 10,723 2.8 Operator of food and beverage concessions in travel locations
Travel & Leisure
4 Craneware* 10,654 2.8 Provider of financial software business for US hospitals
Software & Computer Services
5 Aveva 10,513 2.8 Engineering and industrial software business
Software & Computer Services
6 Dechra Pharmaceuticals 10,233 2.7 Developer and supplier of pharmaceutical and other products focused on the veterinary market
Pharmaceuitcals & Biotechnology
7 4imprint Group 9,474 2.5 Supplier of promotional merchandise in the US
Media
8 YouGov* 9,101 2.4 Provider of survey data and specialist data analytics
Media
9 IntegraFin 8,461 2.2 UK savings platform for financial advisors
Financial Services
10 Bodycote 8,420 2.2 Provider of thermal processing services
Industrial Engineering

*      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 2019, the Company did not hold any equity interest representing more than 3% of any company’s share capital.

The above investments may comprise exposures to long equity and long derivative positions.

FAIR VALUE AND GROSS MARKET EXPOSURE OF INVESTMENTS AS AT 30 NOVEMBER 2019



Fair value1 
£’000 

Gross market 
exposure2 
£’000 
Gross market 
exposure as a % 
of net assets3 
2019 
Gross market 
exposure as a % 
of net assets3 
2018 
Long investment positions (excluding BlackRock’s Institutional Cash Series plc – Sterling Liquid Environmentally Aware Fund) 447,670  485,191  103.2  103.8 
--------------------  --------------------  --------------------  -------------------- 
Short investment positions (508) (34,685) (7.4) (10.5)
--------------------  --------------------  --------------------  -------------------- 
Cash and cash equivalents4 1,421  (1,923) (0.4) (2.1)
--------------------  --------------------  --------------------  -------------------- 
BlackRock’s Institutional Cash Series plc - Sterling Liquid Environmentally Aware Fund4 28,977  28,977  6.2  8.9 
--------------------  --------------------  --------------------  -------------------- 
Other net current liabilities (7,503) (7,503) (1.6) (0.1)
--------------------  --------------------  --------------------  -------------------- 
Net assets 470,057  470,057  100.0  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 values of the long and short derivative 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 £37,521,000 at the time of purchase, and subsequent market rises in prices have resulted in unrealised gains on the long derivative positions of £3,066,000, resulting in the value of the total market exposure to the underlying securities increasing to £40,587,000 as at 30 November 2019. The notional price of selling the securities to which exposure was gained via the short investment positions would have been £34,177,000 at the time of entering into the contract, and subsequent price rises have resulted in unrealised losses on the short investment positions of £508,000 and the value of the market exposure of these investments increasing to £34,685,000 at 30 November 2019. If the short investment positions had been closed on 30 November 2019 this would have resulted in a loss of £508,000 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      % based on the total market exposure of Net Assets.
4      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 derivative positions.

DISTRIBUTION OF INVESTMENTS AS AT 30 NOVEMBER 2019

% of long portfolio  % of short portfolio  % of net portfolio 
Oil & Gas Producers 0.4  0.0  0.4 
Oil Equipment, Services & Distribution 0.0  (0.4) (0.4)
---------------  ---------------  --------------- 
Oil & Gas 0.4  (0.4) 0.0 
---------------  ---------------  --------------- 
Chemicals 0.8  (0.9) (0.1)
Mining 0.4  0.0  0.4 
---------------  ---------------  --------------- 
Basic Materials 1.2  (0.9) 0.3 
---------------  ---------------  --------------- 
Aerospace & Defence 3.6  0.0  3.6 
Construction & Materials 2.2  (0.4) 1.8 
Electronic & Electrical Equipment 4.3  0.0  4.3 
General Industrials 0.0  0.0  0.0 
Industrial Engineering 4.2  0.0  4.2 
Industrial Transportation 3.2  0.0  3.2 
Support Services 10.7  (1.6) 9.1 
---------------  ---------------  --------------- 
Industrials 28.2  (2.0) 26.2 
---------------  ---------------  --------------- 
Automobiles 0.0  (0.1) (0.1)
Beverages 1.0  0.0  1.0 
Food Producers 0.0  (0.5) (0.5)
Household Goods & Home Construction 1.9  0.0  1.9 
Leisure Goods 4.2  0.0  4.2 
Personal Goods 2.0  0.0  2.0 
---------------  ---------------  --------------- 
Consumer Goods 9.1  (0.6) 8.5 
---------------  ---------------  --------------- 
Health Care Equipment & Services 2.1  (0.4) 1.7 
Pharmaceuticals & Biotechnology 6.5  (0.5) 6.0 
---------------  ---------------  --------------- 
Health Care 8.6  (0.9) 7.7 
---------------  ---------------  --------------- 
Food & Drug Retailers 1.1  0.0  1.1 
General Retailers 9.2  (0.3) 8.9 
Media 9.1  0.0  9.1 
Travel & Leisure 8.8  (0.5) 8.3 
---------------  ---------------  --------------- 
Consumer Services 28.2  (0.8) 27.4 
---------------  ---------------  --------------- 
Financial Services 10.5  (0.4) 10.1 
Non-life Insurance 2.6  0.0  2.6 
Real Estate Investment & Services 2.3  0.0  2.3 
Real Estate Investment Trusts 4.5  (0.7) 3.8 
---------------  ---------------  --------------- 
Financials 19.9  (1.1) 18.8 
---------------  ---------------  --------------- 
Software & Computer Services 9.7  (1.0) 8.7 
---------------  ---------------  --------------- 
Technology 9.7  (1.0) 8.7 
---------------  ---------------  --------------- 
Mobile Telecommunications 2.4  0.0  2.4 
---------------  ---------------  --------------- 
Telecommunications 2.4  0.0  2.4 
---------------  ---------------  --------------- 
Total Investments 107.7  (7.7) 100.0 
=========  =========  ========= 

The above percentages are calculated on the net portfolio as at 30 November 2019. The net portfolio is calculated as long equity and derivative positions, less short derivative positions as at 30 November 2019.

Analysis of the Portfolio

GROSS BASIS1

%
FTSE 250 54.0
FTSE AIM 26.8
FTSE Small Cap 9.0
Overseas 4.7
FTSE 100 4.1
Other 1.4

NET BASIS2

%
FTSE 250 52.6
FTSE AIM 28.1
FTSE Small Cap 8.4
Overseas 4.9
FTSE 100 4.7
Other 1.3

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.

Market capitalisation as at 30 November 2019

% of net portfolio
Long positions
% of net portfolio
Short positions
£1bn+ 64.6 -4.3
£400m - £1bn 28.3 -2.1
£100m - £400m 14.8 -1.3
£0m - £10m 0.0 0.0

Source: BlackRock.

Position size as at 30 November 2019


Market value
Number of positions
Long positions
Number of positions
Short positions
£2m+ 84 0
£1m - £2m 13 -20
£0m - £1m 2 -14

Source: BlackRock.

STRATEGIC REPORT

The Directors present the Strategic Report of the Company for the year ended 30 November 2019.

PRINCIPAL ACTIVITY
The Company is a public company limited by shares and 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 the 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.

WHAT MAKES BLACKROCK THROGMORTON TRUST PLC DIFFERENT?

·      A greater toolkit for outperformance

·      Enhanced outperformance generation through expressing both long and short positions

·      Ability to smooth out volatility of returns whilst maintaining exposure to the attractive, but sometimes volatile, asset class of UK smaller and mid-capitalisation companies

·      Ability to flex overall market exposure to potentially reduce correlation to the market

INVESTMENT POLICY
The Company’s performance is measured against the Numis Smaller Companies plus AIM (excluding Investment Companies) Index (the Index). The Investment Manager, BlackRock Investment Management (UK) Limited (BIM (UK)), may invest in companies outside the 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, the Company is permitted to employ leverage up to 30% of net assets, which it does primarily through the use of contracts for difference (CFDs) and/or comparable equity derivatives, rather than bank borrowings.

This can be deployed into either long or short CFDs and/or comparable equity derivatives, 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.

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 managers come 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 AND SOCIALLY RESPONSIBLE INVESTING
The Manager defines Environmental, Social and Governance (ESG) integration as the practice of incorporating material ESG information into investment decisions in order to enhance risk-adjusted returns. The Manager believes that this is part of any robust investment process and means adapting its research and core investment processes to account for additional sources of risk and return that are identified by ESG information. In alpha-seeking strategies, the Manager can use ESG information when conducting research and due diligence on new investments, and again when monitoring investments in a portfolio. Of course, ESG information is not the sole consideration for investment decisions; instead, the Manager assesses a variety of economic and financial indicators, which can include ESG issues, to make investment decisions appropriate to their clients’ objectives.

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. This results in the expectation that there will be an outperformance bias towards better governed companies in the long-run. The portfolio manager works closely with BlackRock’s Investment Stewardship team (BIS) to assess the governance quality of companies and investigate any potential issues, risks or opportunities.

Specific to corporate governance, the portfolio manager leverages expertise (BIS and investors) in its proprietary, risk-based approach. Financial statement integrity is central to the analysis, where BIS applies a range of systematic measures to highlight companies’ accounting ratios in its assessment of balance sheet and earnings quality risks. For other categories under the corporate governance umbrella (e.g. audit quality, board accountability, executive pay and ownership and control), BIS flags risks based on internal research, including regulatory filings announcements and public news feeds. Governance (G) data may also be employed for supporting consideration. Environmental (E) and Social (S) factors are primarily assessed using MSCI data, examining whether specific E&S exposure exists, and if so, to determine how well such exposure is being managed.

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 Manager’s Risk & Quantitative Analysis Team (RQA) are an integral part of the investment process. RQA 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.

Further information on the Manager’s approach to ESG can be found in the ESG investment statement at the following link (https://www.blackrock.com/corporate/literature/publication/blk-esg-investment-statement-web.pdf) and in the Corporate Governance report in the Annual Report and Financial Statements.

PERFORMANCE
The Investment Manager’s report includes a review of the main developments during the year, together with information on investment activity within the Company’s portfolio.

RESULTS AND DIVIDENDS
The results for the Company are set out in the Statement of Comprehensive Income. The total profit for the year, after taxation, was £91,395,000 (2018: a loss of £10,297,000) of which the revenue return amounted to £6,265,000 (2018: £8,056,000), and a capital profit of £85,130,000 (2018: loss of £18,353,000).

Details of the dividends declared in respect of the year are set out in the Chairman’s Statement.

KEY PERFORMANCE INDICATORS
At each Board meeting, the Directors consider a number of performance measures to assess the Company’s success in achieving its objectives. The key performance indicators (KPIs) used to measure the progress and performance of the Company over time, which are comparable to those reported by other investment trusts, are set out 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 in the Annual Report and Financial Statements.

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.

Year ended 
30 November 2019 
Year ended 
30 November 2018 
Net asset value total return1,2 24.4%  -2.7% 
----------------------  ---------------------- 
Share price total return1,2 42.8%  1.8% 
----------------------  ---------------------- 
Benchmark total return3 8.0%  -9.0% 
----------------------  ---------------------- 
Premium/(discount) to cum income net asset value2 0.9%  (12.0%)
----------------------  ---------------------- 
Revenue return per share 8.56p  11.02p 
----------------------  ---------------------- 
Total dividend per share 10.20p  10.00p 
----------------------  ---------------------- 
Ongoing charges2,4 0.59%  0.57% 
----------------------  ---------------------- 
Ongoing charges2,5 1.75%  1.29% 
=============  ============= 

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 in the Annual Report and Financial Statements.
3      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. From 1 December 2013 to 21 March 2018, the Company’s benchmark was the Numis Smaller Companies excluding AIM (excluding Investment Companies) Index. Prior to 1 December 2013 the Company’s benchmark was the Numis Smaller Companies plus AIM (excluding Investment Companies) Index. The performance of the benchmark indices during these periods has been blended to reflect these changes.
4      Ongoing charges represent the management fee and all other recurring operating expenses, excluding the performance fee, finance costs, direct transaction costs, custody transaction charges and taxation, as a % of average shareholders’ funds.
5      Ongoing charges represent the management fee, performance fee and all other recurring operating expenses, excluding finance costs, direct transaction costs, custody transaction charges and taxation, as a % of average shareholders’ funds.

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 12.0% and a premium of 2.4%, with the average being a discount of 4.6%. The shares ended the year at a premium of 0.9% on a cum income basis. As at 3 February 2020 the premium was 1.7%.

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 to buy back shares.

PRINCIPAL RISKS
The Company is exposed to a variety of risks and uncertainties and the Board has in place a robust process to identify, assess and monitor the principal risks faced by the Company. 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 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 following tables.

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.

As required by the UK Corporate Governance Code, the Board has undertaken a robust assessment of the principal risks facing the Company, including those that would threaten its business model, future performance, solvency or liquidity. The Board will continue to assess these risks on an ongoing basis.

Principal Risk Mitigation/Control
Investment Performance
The Board is responsible for:
·      setting the investment policy to fulfil the Company’s objectives; and
·      monitoring the performance of the Company’s Investment Manager and the strategy adopted.
An inappropriate policy or strategy may lead to:
·      poor performance compared to the Company’s benchmark, peer group or shareholder expectations;
·      a widening discount to NAV;
·      a reduction or permanent loss of capital; and
·      dissatisfied shareholders and reputational damage.

To manage these risks the Board:
·      regularly reviews the Company’s investment mandate and long-term strategy;
·      has set, and regularly reviews, the investment guidelines and has put in place appropriate limits on levels of gearing and the use of derivatives;
·      receives from the Investment Manager a regular explanation of stock selection decisions, portfolio gearing and any changes in gearing and the rationale for the composition of the investment portfolio;
·      receives from the Investment Manager regular reporting on the portfolio’s exposure through derivatives, including the extent to which the portfolio is geared in this manner and the value of any short positions;
·      monitors the maintenance of an adequate spread of investments in order to minimise the risks associated with particular sectors, based on the diversification requirements inherent in the Company’s investment policy; and
·      monitors the share price discount or premium to NAV.
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.

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.
Income/dividend risk
The amount of dividends and future dividend growth will depend on the performance of the Company’s underlying portfolio. 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.
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 2019, the Company had approximately 26.6% of its gross asset value invested in AIM traded equity securities, and, by the very nature of its investment objective, largely invests in smaller companies. Liquidity in these securities can from time-to-time become constrained, making these investments difficult to realise at or near published prices.

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 in the Annual Report and Financial Statements, together with a summary of the policies for managing and controlling these risks in note 16 of the Annual Report and Financial Statements.
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 assets are subject to a strict liability regime and in the event of a loss of financial assets 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 receives assurance on the business continuity arrangements for the Company’s key service providers. The Board also receives regular reports from BlackRock’s internal audit function.
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.

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, the Market Abuse Regulation, 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 (AIFMD), the Company and its appointed Alternative Investment Fund Manager (AIFM) are subject to the risks that the requirements of this Directive 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. 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.
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 2025, 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;
·      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 in the Annual Report and Financial Statements), 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; and
·      counterparty exposure and liquidity risk.

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 (0.59% excluding performance fees, 1.75% including performance fees). The effective performance fee cap in the event that the NAV return exceeds the benchmark return over the performance period is 0.9% 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 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.

The Board has considered the potential impact on the Company of the UK’s decision to leave the European Union (the ‘EU’) following a referendum held on 23 June 2016 (‘Brexit’). The result has led to political and economic instability and volatility in the financial markets of the United Kingdom and more broadly across Europe. This has also led to weakening in consumer, corporate and financial confidence in such markets as the UK finalises the terms of its exit from the EU.

More recently, the emergence of a comfortable working majority Government in the UK elections has brought greater political certainty. At the date of this report the UK has officially exited the EU. However, the extent of any potential impact will depend in part on the nature of the trade deals and other arrangements that the UK will seek to agree with the EU and other countries following its withdrawal from the EU.

The Board has 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 potential risks associated with the Brexit process and the legal, fiscal and regulatory landscape thereafter, 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 would 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.

FUTURE PROSPECTS
The Board’s main focus is on the achievement of capital growth and the future of the Company is dependent upon the success of the investment strategy. The outlook for the Company is discussed in the Chairman’s Statement and in the Investment Manager’s Report.

SOCIAL, COMMUNITY AND HUMAN RIGHTS ISSUES
As an investment trust, the Company has no direct social or community responsibilities. However, the Company believes that it is in shareholders’ interests to consider human rights issues, environmental, social and governance factors when selecting and retaining investments. Details of the Company’s policy on socially responsible investment are set out in the Annual Report and Financial Statements.

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.

GLOBAL GREENHOUSE GAS EMISSIONS FOR THE PERIOD 1 DECEMBER 2018 TO 30 NOVEMBER 2019
The Company has no greenhouse gas emissions to report from its operations, nor does it have responsibility for any other emissions producing sources under the Companies Act 2006 (Strategic Report and Directors’ Reports) Regulations 2013.

DIRECTORS’ GENDER REPRESENTATION
The Directors of the Company on 30 November 2019, three of whom, with the exception of Mrs Nash who joined the Board on 21 March 2019, held office throughout the year, are set out in the Annual Report and Financial Statements. 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 2019, the Board consisted of two men and two 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 form part of this Strategic Report.

The Strategic Report was approved by the Board at its meeting on 6 February 2020.

BY ORDER OF THE BOARD
KEVIN MAYGER, FOR AND ON BEHALF OF
BLACKROCK INVESTMENT MANAGEMENT (UK) LIMITED
Company Secretary

6 February 2020

RELATED PARTY TRANSACTIONS

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 in the Annual Report and Financial Statements.

The investment management fee due for the year ended 30 November 2019 amounted to £1,784,000 (2018: £1,866,000). In addition, a performance fee is payable of £4,756,000 (2018: £3,018,000). At the year end, £932,000 was outstanding in respect of management fees (2018: £441,000) and £4,756,000 (2018: £3,018,000) 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 2019 amounted to £202,000 excluding VAT (2018: £79,000). Marketing fees of £122,000 (2018: £82,000) were outstanding at the year end.

The Company has an investment in BlackRock Institutional Cash Series plc – Sterling Liquid Environmentally Aware Fund of £28,977,000 (2018: £33,949,000 in BlackRock Institutional Cash Series plc – Sterling Liquidity Fund) which for the year ended 30 November 2019 and 30 November 2018 has been presented in the financial statements as a cash equivalent.

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 in the Annual Report and Financial Statements. At 30 November 2019, £10,000 (2018: £11,000) was outstanding in respect of Directors’ fees.

The Board consists of four 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 2019, the Chairman received an annual fee of £38,500, the Chairman of the Audit and Management Engagement Committee received an annual fee of £30,000 and each other Director received an annual fee of £26,000.  With effect from 1 December 2019 the Chairman will receive an annual fee of £39,500, the Chairman of the Audit and Management Engagement Committee will receive an annual fee of £31,000 and each other Director will receive an annual fee of £27,000.

As at 30 November 2019, all members of the Board held shares in the Company. Christopher Samuel held 24,999 ordinary shares, Loudon Greenlees held 15,000 ordinary shares, Jean Matterson held 46,000 ordinary shares and Louise Nash held 1,000 ordinary shares.

All of the holdings of the Directors are beneficial. Since the year end there have been no 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 IFRS as adopted by the European Union. 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 IAS8: 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 IFRS as adopted by the European Union, subject to any material departures disclosed and explained in the Financial Statements;
·      provide additional disclosures when compliance with the specific requirements in IFRS as adopted by the European Union 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 in the Annual Report and Financial Statements, confirms to the best of his or her knowledge that:

·      the Financial Statements, which have been prepared in accordance with IFRS as adopted by the European Union, give a true and fair view of the assets, liabilities, 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 2016 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 in the Annual Report and Financial Statements. As a result, the Board has concluded that the Annual Report and Financial Statements for the year ended 30 November 2019, 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

6 February 2020

FINANCIAL STATEMENTS

STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 30 NOVEMBER 2019



Notes 
Revenue 
2019 
£’000 
Revenue 
2018 
£’000 
Capital 
2019 
£’000 
Capital 
2018 
£’000 
Total 
2019 
£’000 
Total 
2018 
£’000 
Income from investments held at fair value through profit or loss 8,531  9,281  –  –  8,531  9,281 
Net loss from derivatives (1,352) (247) –  –  (1,352) (247)
Other income 191  40  –  –  191  40 
-------------------  -------------------  -------------------  -------------------  -------------------  ------------------- 
Total revenue 7,370  9,074  –  –  7,370  9,074 
-------------------  -------------------  -------------------  -------------------  -------------------  ------------------- 
Net profit/(loss) on investments held at fair value through profit or loss –  –  78,040  (18,705) 78,040  (18,705)
Net loss on foreign exchange –  –  (4) (67) (4) (67)
Net profit from derivatives –  –  13,212  4,863  13,212  4,863 
-------------------  -------------------  -------------------  -------------------  -------------------  ------------------- 
Total 7,370  9,074  91,248  (13,909) 98,618  (4,835)
-------------------  -------------------  -------------------  -------------------  -------------------  ------------------- 
Expenses
Investment management and performance fees (446) (467) (6,094) (4,417) (6,540) (4,884)
Other operating expenses (635) (537) (17) (21) (652) (558)
-------------------  -------------------  -------------------  -------------------  -------------------  ------------------- 
Total operating expenses (1,081) (1,004) (6,111) (4,438) (7,192) (5,442)
-------------------  -------------------  -------------------  -------------------  -------------------  ------------------- 
Net profit/(loss) on ordinary activities before finance costs and taxation 6,289  8,070  85,137  (18,347) 91,426  (10,277)
Finance costs (2) (2) (7) (6) (9) (8)
-------------------  -------------------  -------------------  -------------------  -------------------  ------------------- 
Net profit/(loss) on ordinary activities before taxation 6,287  8,068  85,130  (18,353) 91,417  (10,285)
Taxation (22) (12) –  –  (22) (12)
-------------------  -------------------  -------------------  -------------------  -------------------  ------------------- 
Profit/(loss) for the year 6,265  8,056  85,130  (18,353) 91,395  (10,297)
===========  ===========  ===========  ===========  ===========  =========== 
Earnings/(loss) per ordinary share (pence) 8.56  11.02  116.39  (25.10) 124.95  (14.08)
===========  ===========  ===========  ===========  ===========  =========== 

The total column of this statement represents the Company’s Statement of Comprehensive Income, prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union (EU). 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/(loss) for the year disclosed above represents the Company’s total comprehensive income/(loss).


STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 NOVEMBER 2019




Notes 
Called 
up share 
capital 
£’000 
Share 
premium 
account 
£’000 
Capital 
redemption 
reserve 
£’000 

Special
reserve
£’000

Capital 
reserve 
£’000 

Revenue 
reserve 
£’000 


Total 
£’000 
For the year ended 30 November 2019
At 30 November 2018 4,026  21,049  11,905  35,272 294,594  12,756  379,602 
Total comprehensive income:
Net profit for the year –  –  –  85,130  6,265  91,395 
Transactions with owners, recorded directly to equity:
Ordinary shares issued from treasury 8, 9  –  5,120  –  1,266 –  –  6,386 
Share issue costs –  –  –  (13) –  –  (13)
Dividends paid1 –  –  –  –  (7,313) (7,313)
-------------------  -------------------  -------------------  -------------------  -------------------  -------------------  ------------------- 
At 30 November 2019 4,026  26,169  11,905  36,525 379,724  11,708  470,057 
===========  ===========  ===========  ===========  ===========  ===========  =========== 
For the year ended 30 November 2018
At 30 November 2017 4,026  21,049  11,905  35,272 312,947  11,647  396,846 
Total comprehensive loss:
Net (loss)/profit for the year –  –  –  (18,353) 8,056  (10,297)
Transactions with owners, recorded directly to equity:
Dividends paid2 –  –  –  –  (6,947) (6,947)
-------------------  -------------------  -------------------  -------------------  -------------------  -------------------  ------------------- 
At 30 November 2018 4,026  21,049  11,905  35,272 294,594  12,756  379,602 
===========  ===========  ===========  ===========  ===========  ===========  =========== 

1        Final dividend of 7.50p per share for the year ended 30 November 2018, declared on 12 February 2019 and paid on 28 March 2019 and interim dividend of 2.50p per share for the year ended 30 November 2019, declared on 23 July 2019 and paid on 28 August 2019.
2        Final dividend of 7.00p per share for the year ended 30 November 2017, declared on 9 February 2018 and paid on 29 March 2018 and interim dividend of 2.50p per share for the year ended 30 November 2018, declared on 26 July 2018 and paid on 29 August 2018.

STATEMENT OF FINANCIAL POSITION AS AT 30 NOVEMBER 2019



Notes 
30 November 2019 
£’000 
30 November 2018 
£’000 
Non-current assets
Investments held at fair value through profit or loss 444,604  344,478 
-------------------  ------------------- 
Current assets
Other receivables 3,682  3,183 
Derivative financial assets held at fair value through profit or loss 2,923  1,719 
Cash collateral held with brokers in respect of derivatives 310  1,410 
Cash and cash equivalents 30,398  34,081 
-------------------  ------------------- 
37,313  40,393 
-------------------  ------------------- 
Total assets 481,917  384,871 
-------------------  ------------------- 
Current liabilities
Other payables (8,875) (5,152)
Derivative financial liabilities held at fair value through profit or loss (365) (117)
Cash collateral received in respect of derivatives (2,620) – 
-------------------  ------------------- 
(11,860) (5,269)
-------------------  ------------------- 
Net assets 470,057  379,602 
===========  =========== 
Equity attributable to equity holders
Called up share capital 8 4,026  4,026 
Share premium account 9 26,169  21,049 
Capital redemption reserve 9 11,905  11,905 
Special reserve 9 36,525  35,272 
Capital reserve 9 379,724  294,594 
Revenue reserve 9 11,708  12,756 
-------------------  ------------------- 
Total equity 470,057  379,602 
-------------------  ------------------- 
Net asset value per ordinary share (pence) 634.10  519.08 
===========  =========== 

CASH FLOW STATEMENT FOR THE YEAR ENDED 30 NOVEMBER 2019

30 November 2019 
£’000 
30 November 2018 
£’000 
Operating activities
Net profit/(loss) on ordinary activities before taxation 91,417  (10,285)
Add back finance costs
(Profit)/loss on investments and contracts for difference held at fair value through profit or loss (including transaction costs) (91,876) 13,343 
Net loss on foreign exchange 67 
Special dividends allocated to capital 1,109  – 
Sales of investments held at fair value through profit or loss 210,451  298,720 
Purchases of investments held at fair value through profit or loss (233,646) (271,577)
Net receipts on closure of derivatives 12,880  3,066 
Increase in other receivables (807) (32)
Increase/(decrease) in other payables 2,135  (2,944)
Decrease/(increase) in amounts due from brokers 1,543  (1,437)
Increase in amounts due to brokers 1,588  721 
Net movement in cash collateral received from/held with brokers in respect of derivatives 3,720  (1,573)
-------------------  ------------------- 
Net cash (outflow)/inflow from operating activities before taxation (1,473) 28,077 
-------------------  ------------------- 
Taxation (32) (22)
-------------------  ------------------- 
Net cash (outflow)/inflow from operating activities (1,505) 28,055 
-------------------  ------------------- 
Financing activities
Interest paid (9) (8)
Cash proceeds from ordinary shares issued from treasury 5,148  – 
Dividends paid (7,313) (6,947)
-------------------  ------------------- 
Net cash outflow from financing activities (2,174) (6,955)
-------------------  ------------------- 
(Decrease)/increase in cash and cash equivalents (3,679) 21,100 
Effect of foreign exchange rate changes (4) (67)
-------------------  ------------------- 
Change in cash and cash equivalents (3,683) 21,033 
Cash and cash equivalents at start of year 34,081  13,048 
-------------------  ------------------- 
Cash and cash equivalents at end of year 30,398  34,081 
===========  =========== 
Comprised of:
Cash at bank 1,421  132 
Cash Funds* 28,977  33,949 
-------------------  ------------------- 
30,398  34,081 
===========  =========== 

*        Cash Funds represent funds held on deposit with the BlackRock Institutional Cash Series plc – Sterling Liquid Environmentally Aware Fund (2018: BlackRock Institutional Cash Series plc – Sterling Liquidity Fund).

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 NOVEMBER 2019

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 Financial Reporting Standards (IFRS) as adopted by the European Union and as applied in accordance with the provisions of the Companies Act 2006. 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), revised in November 2014 and updated in February 2018 is compatible with IFRS, 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 foreseeable future. Consequently, the Directors have determined that it is appropriate for the financial statements to be prepared on a going concern basis.

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.

A number of new standards, amendments to standards and interpretations are effective for the annual periods beginning on or after 1 January 2019 and have not been applied in preparing these financial statements (major changes and new standards issued are detailed below) as these are not expected to have any effect on the measurement of the amounts recognised in the financial statements of the Company.

IFRS standards that have yet to be adopted:
IFRS 16 – Leases (effective 1 January 2019) specifies accounting for leases and removes the distinction between operating and finance leases. This standard is not applicable to the Company as it has no leases.

IFRIC 23 – Uncertainty over Income Tax Treatments seeks to provide clarity on how to account for uncertainty over income tax treatments and specifies that an entity must consider whether it is probable that the relevant tax authority will accept each tax treatment, or group of tax treatments, that it plans to use in its income tax filing. The interpretation also requires companies to reassess the judgements and estimates applied if facts and circumstances change. The interpretation is effective for annual reporting periods beginning on or after 1 January 2019. The interpretation would require the Company to recognise uncertain tax positions which are more than probable within its financial statements. The interpretation is unlikely to have any impact on the financial statements of the Company.

Adoption of new and amended standards and interpretations:
IFRS 9 Financial Instruments
The classification and measurement requirements of IFRS 9 have been adopted retrospectively as of the date of initial application on 1 December 2018; however, the Company has chosen to take advantage of the option not to restate comparatives. Therefore, the 2018 comparative figures are presented and measured under IAS 39. All financial assets previously held at fair value continue to be measured at fair value and accordingly there has been no impact as a result of the adoption of IFRS 9. All financial assets that were classified as loans and receivables and measured at amortised cost continue to be so and there was no material impact of expected credit losses on financial assets and financial liabilities measured at amortised cost.

IFRS 15 Revenue from contracts with customers
The Company adopted IFRS 15 as of the date of initial application of 1 December 2018. IFRS 15 replaces IAS 18 Revenue and establishes a five-step model to account for revenue arising from contracts with customers. In addition, guidance on interest and dividend income has been moved from IAS 18 to IFRS 9 without significant changes to the requirements. Therefore, there was no impact of adopting IFRS 15 for 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.

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 in the Annual Report and Financial Statements;

·      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 expectations of the 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 tax in the future or right to pay less tax 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 or 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 as 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.

Profits 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 profits 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 IFRS, final dividends should not be accrued in the financial statements unless they have been approved by shareholders before the financial reporting date. Interim dividends should not be 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 profit/(loss) 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 Company has an investment in BlackRock Institutional Cash Series plc – Sterling Liquid Environmentally Aware Fund (Cash Fund) of £28,977,000 (2018: investment in BlackRock Institutional Cash Series plc – Sterling Liquidity Fund of £33,949,000). 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 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 and re-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 reissued:

·      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.

(o) Critical accounting estimates and judgements
The Board 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.

(p) Comparatives
Certain prior year figures have been reclassified to correspond to current year presentation.

3. INCOME

2019 
£’000 
2018 
£’000 
Investment income:
UK dividends 6,251  6,421 
UK special dividends 934  1,232 
UK stock dividends –  40 
UK REIT dividends 655  570 
Overseas dividends 666  914 
Overseas special dividends 25  62 
Overseas stock dividends –  42 
-------------------  ------------------- 
8,531  9,281 
-------------------  ------------------- 
Net loss from derivatives (1,352) (247)
-------------------  ------------------- 
7,179  9,034 
-------------------  ------------------- 
Other income:
Deposit interest
Interest from Cash Funds 184  36 
-------------------  ------------------- 
191  40 
-------------------  ------------------- 
Total income 7,370  9,074 
===========  =========== 

Dividends and interest received in cash during the year amounted to £8,538,000 and £172,000 (2018: £9,161,000 and £45,000).

Special dividends of £1,109,000 have been recognised in capital (2018: £nil) and deducted from investment costs.

4. INVESTMENT MANAGEMENT AND PERFORMANCE FEES

2019 2018
Revenue 
£’000 
Capital 
£’000 
Total 
£’000 
Revenue 
£’000 
Capital 
£’000 
Total 
£’000 
Investment management fee 446  1,338  1,784  467  1,399  1,866 
Performance fee –  4,756  4,756  –  3,018  3,018 
-------------------  -------------------  -------------------  -------------------  -------------------  ------------------- 
446  6,094  6,540  467  4,417  4,884 
===========  ===========  ===========  ===========  ===========  =========== 

The performance fee is 15% of Net Asset Value total return outperformance of the benchmark 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 gross asset value of the long only portfolio plus the gross value of the underlying equities, long and short, to which the Company is exposed through CFDs. There is a cap on total management and performance fees of 1.25% of average gross assets over a two year period which has the effect of capping performance fees at circa 0.9% of average gross assets over two years.

With effect from 22 March 2018, the Company’s benchmark index was changed from the Numis Smaller Companies excluding AIM (excluding Investment Companies) Index to the Numis Smaller Companies plus AIM (excluding Investment Companies) Index. For the purposes of calculation of performance fee for each period, the outperformance of the Net Asset Value total return has been measured against the performance of the benchmark indices on a blended basis during each period.

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 2019, a performance fee of £4,756,000 has been accrued (2018: £3,018,000).

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 revenue and 75% to capital.

5. OTHER OPERATING EXPENSES

2019 
£’000 
2018 
£’000 
Allocated to revenue:
Custody fee 11 
Auditor’s remuneration:
– audit services 35  37 
– non-audit services1 – 
Registrar’s fee 37  39 
Directors’ emoluments 133  139 
Broker fees 33  36 
Depositary fees 47  58 
Marketing fees2 202  79 
FCA fees 13  12 
Printing and postage fees 33  23 
AIC fees 27  20 
Other administrative costs 67  76 
-------------------  ------------------- 
635  537 
-------------------  ------------------- 
Allocated to capital:
Custody transaction charges 17  21 
-------------------  ------------------- 
652  558 
-------------------  ------------------- 
The Company’s ongoing charges3, calculated as a percentage of average net assets and using recurring expenses, excluding performance fees, direct transaction costs, finance costs, custody transaction charges and taxation were: 0.59%  0.57% 
-------------------  ------------------- 
The Company’s ongoing charges3, calculated as a percentage of average net assets and using recurring expenses, including performance fees but excluding direct transaction costs, finance costs, custody transaction charges and taxation were: 1.75%  1.29% 
===========  =========== 

1        The Audit fee excluding VAT for 2019 is £29,750. There was no half yearly review performed during the year, therefore Auditor’s remuneration for other assurance services was £nil (2018: £6,500 relating to the half yearly review).
2        Marketing fees for the year reflect an under accrual of £69,000 for these fees in 2018.
3        Alternative Performance Measures, see Glossary in the Annual Report and Financial Statements.

For the year ended 30 November 2019, expenses of £17,000 (2018: £21,000) 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.

Details of the Directors’ emoluments are given in the Directors’ Remuneration Report in the Annual Report and Financial Statements.

6. DIVIDENDS
Dividends paid on equity shares:


Record date 

Payment date 
2019 
£’000 
2018 
£’000 
Final dividend of 7.50p per share for the year ended 30 November 2018 (2017: 7.00p) 22 February 2019  28 March 2019  5,485  5,119 
Interim dividend of 2.50p per share for the year ended 30 November 2019 (2018: 2.50p) 2 August 2019  28 August 2019  1,828  1,828 
-------------------  ------------------- 
7,313  6,947 
===========  =========== 

The total dividends payable in respect of the year ended 30 November 2019 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:
2019 
£’000 
2018 
£’000 
Interim dividend of 2.50p per share for the year ended 30 November 2019 (2018: 2.50p) 1,828  1,828 
Final dividend of 7.70p per share for the year ended 30 November 2019* (2018: 7.50p) 6,076  5,485 
-------------------  ------------------- 
7,904  7,313 
===========  =========== 

*        Based on 78,908,941 (2018: 73,130,326) ordinary shares in issue on 3 February 2020.

7. EARNINGS AND NET ASSET VALUE PER ORDINARY SHARE
Total revenue and capital returns per share and net asset value per share are shown below and have been calculated using the following:

2019  2018 
Net revenue profit attributable to ordinary shareholders (£’000) 6,265  8,056 
Net capital profit/(loss) attributable to ordinary shareholders (£’000) 85,130  (18,353)
-------------------  ------------------- 
Total profit/(loss) attributable to ordinary shareholders (£’000) 91,395  (10,297)
-------------------  ------------------- 
Equity shareholders’ funds (£’000) 470,057  379,602 
-------------------  ------------------- 
The weighted average number of ordinary shares in issue during the year, on which the earnings/(loss) per ordinary share was calculated was: 73,146,571  73,130,326 
-------------------  ------------------- 
The actual number of ordinary shares in issue at the year end, on which the net asset value per ordinary share was calculated was: 74,130,326  73,130,326 
-------------------  ------------------- 
Earnings per share
Revenue earnings per share (pence) 8.56  11.02 
Capital earnings/(loss) per share (pence) 116.39  (25.10)
-------------------  ------------------- 
Total earnings/(loss) per share (pence) 124.95  (14.08)
===========  =========== 

   

As at 
30 November 2019 
As at 
30 November 2018 
Net asset value per ordinary share (pence) 634.10  519.08 
-------------------  ------------------- 
Ordinary share price (pence) 640.00  457.00 
===========  =========== 
There were no dilutive securities at the year end.

8. CALLED UP SHARE CAPITAL

Number 
of shares 
in issue 

Treasury 
shares 

Total 
shares 
Nominal 
value 
£’000 
Allotted, called up and fully paid share capital comprised:
Ordinary shares of 5 pence each
At 30 November 2018 73,130,326  7,400,000  80,530,326  4,026 
Ordinary shares issued from treasury 1,000,000  (1,000,000) –  – 
-----------------------  -----------------------  -----------------------  ----------------------- 
At 30 November 2019 74,130,326  6,400,000  80,530,326  4,026 
=============  =============  =============  ============= 

During the year ended 30 November 2019, the Company issued 1,000,000 (2018: nil) shares from treasury for a total gross consideration of £6,373,000 (2018: £nil) including costs.

Since 30 November 2019, and up to the latest practicable date of 4 February 2020, 4,778,615 shares have been reissued from treasury for a total gross consideration of £32,487,000.

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

Distributable reserves




Share 
premium 
account 
£’000 




Capital 
redemption 
reserve 
£’000 





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 2018 21,049  11,905  35,272  244,457  50,137  12,756 
Movement during the year:
Total Comprehensive Income:
Net capital profit for the year –  –  –  36,718  48,412  – 
Net revenue profit for the year –  –  –  –  –  6,265 
Transactions with owners recorded directly to equity:
Ordinary shares issued from treasury 5,120  –  1,266  –  –  – 
Share issue costs –  –  (13) –  –  – 
Dividends paid –  –  –  –  –  (7,313)
-------------------  -------------------  -------------------  -------------------  -------------------  ------------------- 
At 30 November 2019 26,169  11,905  36,525  281,175  98,549  11,708 
===========  ===========  ===========  ===========  ===========  =========== 

The share premium account and capital redemption reserve are not 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, net capital returns may be distributed by way of dividend.

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 in the Annual Report and Financial Statements.

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 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. 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.

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 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. 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’ inputs requires significant judgement by the Investment Manager.

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.

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 2019
Level 1 
£’000 
Level 2 
£’000 
Level 3 
£’000 
Total 
£’000 
Assets:
Equity investments 444,604  –  –  444,604 
Contracts for difference (fair value) –  2,923  –  2,923 
Liabilities:
Contracts for difference (fair value) –  (365) –  (365)
-------------------  -------------------  -------------------  ------------------- 
444,604  2,558  –  447,162 
===========  ===========  ===========  =========== 

   


Financial assets/(liabilities) at fair value through profit or loss at 30 November 2018
Level 1 
£’000 
Level 2 
£’000 
Level 3 
£’000 
Total 
£’000 
Assets:
Equity investments 344,478  –  –  344,478 
Contracts for difference (fair value) –  1,719  –  1,719 
Liabilities:
Contracts for difference (fair value) –  (117) –  (117)
-------------------  -------------------  -------------------  ------------------- 
344,478  1,602  –  346,080 
===========  ===========  ===========  =========== 

There were no transfers between levels for financial assets and financial liabilities during the year recorded at fair value as at 30 November 2019 and 30 November 2018. The Company did not hold any Level 3 securities throughout the financial year or as at 30 November 2019 (2018: nil).

The values of derivative positions classified as Level 2 as at 30 November 2018 have been restated to fair value to align with the values presented on the statement of financial position. The amounts presented in the prior year financial statements were presented on a gross exposure basis as follows: total gross exposure on long derivative positions was presented as an asset of £49,464,000 and total gross exposure on short derivative positions was presented as a liability of (£39,884,000).

11. RELATED PARTY DISCLOSURE: DIRECTORS’ EMOLUMENTS
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 in the Annual Report and Financial Statements. At 30 November 2019, £10,000 (2018: £11,000) was outstanding in respect of Directors’ fees.

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 in the Annual Report and Financial Statements.

The investment management fee due for the year ended 30 November 2019 amounted to £1,784,000 (2018: £1,866,000). In addition, a performance fee is payable of £4,756,000 (2018: £3,018,000). At the year end, £932,000 was outstanding in respect of management fees (2018: £441,000) and £4,756,000 (2018: £3,018,000) 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 2019 amounted to £202,000 excluding VAT (2018: £79,000). Marketing fees of £122,000 (2018: £82,000) were outstanding at the year end.

The Company has an investment in BlackRock Institutional Cash Series plc – Sterling Liquid Environmentally Aware Fund of £28,977,000 (2018: £33,949,000 in BlackRock Institutional Cash Series plc – Sterling Liquidity Fund) which for the year ended 30 November 2019 and 30 November 2018 has been presented in the financial statements as a cash equivalent.

13. CONTINGENT LIABILITIES
There were no contingent liabilities at 30 November 2019 (2018: £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 2019 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 2019 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 2018, 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 Wednesday, 25 March 2020 at 11.00 a.m.

ENDS

The Annual Report will also be available on the BlackRock website at blackrock.co.uk/thrg.  Neither the contents of the Manager’s website nor the contents of any website accessible from hyperlinks on the Manager’s website (or any other website) is incorporated into, or forms part of, this announcement.

FOR FURTHER INFORMATION, PLEASE CONTACT:

Simon White, Managing Director, 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  

6 February 2020

12 Throgmorton Avenue
London EC2N 2DL


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Final Results - RNS