Final Results
14/05/2024 07:00
BLACKROCK SMALLER COMPANIES TRUST PLC
(Legal Entity Identifier: 549300MS535KC2WH4082)
Information disclosed in accordance with Article 5 Transparency Directive and
DTR 4.1
Annual Report and Financial Statements 29 February 2024
PERFORMANCE RECORD
As at As at
29 February 2024 28 February 2023
Net asset value per ordinary share (debt at par value) (pence) 1 1,450.15 1,553.41
Net asset value per ordinary share (debt at fair value) (pence) 1 1,502.25 1,601.42
Ordinary share price (mid-market) (pence) 1 1,326.00 1,380.00
Deutsche Numis Smaller Companies plus AIM (excluding Investment Companies) Index 2 15,173.40 16,108.12
--------------- ---------------
Assets
Total assets less current liabilities (£’000) 755,721 828,033
Equity shareholders’ funds (£’000) 3 686,206 758,529
Ongoing charges ratio 4,5 0.8% 0.7%
Dividend yield 4 3.2% 2.9%
Gearing 4 11.5% 6.3%
========= =========
For the For the
year ended year ended
29 February 2024 28 February 2023
Performance (with dividends reinvested)
Net asset value per ordinary share (debt at par value) 2,4 -4.0% -15.4%
Net asset value per ordinary share (debt at fair value) 2,4 -3.6% -13.0%
Ordinary share price (mid-market) 2,4 -0.8% -15.9%
Deutsche Numis Smaller Companies plus AIM (excluding Investment Companies) Index 2,4 -5.8% -7.5%
========= =========
For the For the Change
year ended year ended %
29 February 2024 28 February 2023
Revenue and dividends
Revenue return per ordinary share 40.70p 40.92p -0.5
Interim dividend per ordinary share 15.00p 14.50p +3.4
Final dividend per ordinary share 27.00p 25.50p +5.9
--------------- --------------- ---------------
Total dividends payable and paid 42.00p 40.00p +5.0
========= ========= =========
1 Without dividends reinvested.
2 Total return basis with dividends reinvested.
3 The change in equity shareholders’ funds represents the portfolio
movements, shares repurchased into treasury and dividends paid during the
year.
4 Alternative Performance Measure, see Glossary contained within the Annual
Report and Financial Statements. Full details setting out how calculations
with dividends reinvested are performed are set out in the Glossary contained
within the Annual Report and Financial Statements.
5 Ongoing charges ratio calculated as a percentage of average daily net
assets and using the management fee and all other operating expenses,
excluding finance costs, direct transaction costs, custody transaction
charges, VAT recovered, taxation, prior year expenses written back and certain
non-recurring items in accordance with AIC guidelines.
CHAIRMAN’S STATEMENT
MARKET OVERVIEW
In my Half-Yearly statement in October, I described how the first six months
of our financial year had been characterised by powerful geo-political and
macroeconomic drivers. As the year progressed, rising tensions in the Middle
East led to increasing concern around the inflationary impact of disruption to
major shipping routes in the Red Sea and an escalation into a wider conflict
in the region. Market concerns in the second half of the year continued to
focus on persistent inflation and high interest rates, with the Bank of
England (BoE) implementing a 25-basis point rise in the base interest rate in
August, raising interest rates to 5.25%, the highest level since 2008. The BoE
continued its policy of monetary tightening throughout most of the year with
the Monetary Policy Committee (MPC) voting to hold the base rate at 5.25% in
September 2023 (ending a run of fourteen consecutive rate increases since
December 2021). The high interest rate environment continues to weigh on the
valuations of the type of long-duration, higher growth shares favoured in our
portfolio. As a result, UK small and mid-caps have continued to underperform
large caps in what amounts to the longest cycle of underperformance in recent
history (including that seen in the Global Financial Crisis of 2008, COVID-19,
Brexit, the Tech sell-off or Black Monday). The fourth quarter of 2023 saw
markets reflect the expectation of rate cuts in 2024 in response to easing
inflation data, but as we entered 2024, a shift in market sentiment has seen a
volatile start to the year in equity markets.
Despite this challenging backdrop, it is comforting to note that many of our
portfolio holdings continue to deliver against their objectives. Your Board
also notes that the UK equity market continues to look cheap on a range of
valuation metrics. One should also be mindful that historically, periods of
heightened volatility have been followed by strong returns for the strategy
and presented excellent investment opportunities.
PERFORMANCE
In the year under review, the Company’s net asset value (NAV) per share
outperformed the benchmark index (the Deutsche Numis Smaller Companies plus
AIM (excluding Investment Companies) Index) by 2.2%, falling by 3.6%1,2,3, in
comparison to the decline in the benchmark of 5.8%1,3. Over the same period
your Company’s share price on a total return basis with dividends reinvested
was broadly flat, falling marginally by 0.8%1,3 compared with the FTSE AIM
All-Share Index which fell by -2.3%1, the FTSE 250 Index which fell by -1.3%1
and the FTSE 100 Index which rose by 0.8%1. The wide disparity between index
returns reflected changing investor sentiment about large versus smaller cap
companies during a period of great market uncertainty over future prospects.
More detail on the significant contributors to and detractors from performance
during the year are given in the Investment Manager’s Report below.
The Company’s longer-term performance is set out in the Annual Report and
Financial Statements. More information is also given in the chart contained
within the Annual Report and Financial Statements which illustrates how
long-term investors have had an opportunity to build up an attractive annual
income from an investment in the Company. Even if the initial dividend yield
at the point of purchase has been unremarkable, the strong underlying growth
in dividends over the years has resulted in a competitive yield on cost when
compared with equity income funds in general. To illustrate this investment
and income success, the chart contained within the Annual Report and Financial
Statements shows that £1,000 invested in the Company on 28 February 2006
would have increased in value by 421.5%1 in NAV terms to 29 February 2024,
whereas £1,000 invested in the UK open-ended income sector median would have
increased by just 150.7%1. The chart also demonstrates that while the yield on
the Company’s shares was much lower at the beginning of the period, over
time the Company’s dividend has grown at a much faster rate than open-ended
UK income fund competitors.
Performance to 29 February 2024 1 Year 3 Years 5 Years 10 Years 15 Years
change change change change change
% % % % %
NAV per share 1,2,3 -3.6 -9.6 19.7 97.1 763.1
Benchmark 1,3 -5.8 -11.6 11.9 33.7 327.8
Share price 1,3 -0.8 -15.8 12.5 6.1 912.7
1 Percentages in Sterling terms with dividends reinvested.
2 NAV with debt at fair value.
3 Alternative Performance Measure, see Glossary contained within the Annual
Report and Financial Statements.
RETURNS AND DIVIDENDS
Your Company’s total revenues per year are a reflection of the dividends we
receive from portfolio companies. Total revenue return for the year was 40.70
pence per share (2023: 40.92 pence per share). The Board continues its policy
to ensure the sustainability of dividends and their future growth through
investment in companies with strong balance sheets, solid management and
sustainable business growth models. We remain mindful of the importance of
yield to shareholders. The Board is also cognisant of the benefits of the
Company’s investment trust structure which enables it to retain up to 15% of
total revenue each year to build up reserves which may be carried forward and
used to pay dividends during leaner times. The Company has substantial
distributable reserves (£619.7 million as at 29 February 2024, including
revenue reserves of £18.6 million). Taking note of your Company’s current
reserves, the Board has decided to declare a final dividend of 27.00 pence per
share. Combined with the interim dividend of 15.00 pence per share, this
represents total dividends declared of 42.00 pence per share for the year to
29 February 2024, an increase of 5 % over total dividends declared for the
year to 28 February 2023. The dividend will be paid on 27 June 2024 to
shareholders on the Company’s register as at 24 May 2024. The Board has also
taken this decision recognising that many portfolio companies are
demonstrating strong earnings forecasts, allowing us to take a more optimistic
view of future prospects. Your Company has now increased its annual dividend
every year since 2003.
The annualised increase in dividends paid since this date equates to 10.9% and
your Company has received the AIC accolade of ‘Dividend Hero’ for its’
consistent growth in dividends for a period in excess of 20 years.
GEARING AND SOURCES OF FINANCES
The Company has traditionally maintained a range of borrowings and facilities
to provide balance between longer-term and short-term maturities and between
fixed and floating rates of interest. Over the past few years the Board has
taken steps to lock in borrowing at what we considered to be very attractive
interest rates, and the Company currently has in place a range of longer-term
fixed rate funding consisting of £25 million 2.74% senior unsecured fixed
rate private placement notes maturing in 2037, £20 million 2.41% senior
unsecured notes maturing in 2044 and £25 million 2.47% senior unsecured notes
maturing in 2046. The logic of the Board’s decision to capture these lower
interest rates for funding has been borne out by economic developments over
the past few years; by way of illustration, interest on an equivalent level of
£70 million of funding through a bank overdraft would attract interest at
SONIA plus 1% (currently c. 6.25%), amounting to interest of c. £4.4 million,
compared to the current cost of debt of just £1.9 million per annum. The
Company also has in place variable rate funding consisting of a £60 million
uncommitted overdraft facility with The Bank of New York Mellon
(International) Limited.
It is the Board’s intention that net gearing will not exceed 15% of the net
assets of the Company at the time of the drawdown of the relevant borrowings.
Under normal operating conditions it is envisaged that gearing will be within
a range of 0%-15% of net assets. At the year end, the Company’s net gearing
was 11.5%1 of net assets (2023: 6.3%).
MANAGEMENT OF SHARE RATING
The Board monitors the Company’s share rating closely, and recognises the
importance to shareholders that the price of the Company’s shares do not
trade at either a significant premium or discount to the underlying NAV.
Therefore, where deemed to be in shareholders’ long-term interests, it may
exercise its powers to issue shares or buy back shares with the objective of
ensuring that an excessive premium or discount does not arise. As market
volatility persisted through the year, discounts across the closed-end funds
sector remained wide and the Company’s shares traded at a discount to NAV
ranging from 7.8% to 15.1% over the period. As the discount widened, the Board
took action to address this, buying back 1.5 million shares during the year
under review for a total cost of £20.0 million. All shares were bought back
at a discount to NAV, delivering an uplift to the NAV per share of 0.3% for
continuing shareholders for the year under review. The Board believes that the
action it has taken has helped to minimise discount volatility, with the
Company’s shares trading at an average discount to NAV (with debt at fair
value) over the full year of 12.4%, compared to an average discount of 13.9%
for the year to 28 February 2023. To put this in context, the average discount
for companies in the AIC UK Smaller Companies sector for the same period was
11.9%.
Since the year end, and up to the date of this report, the Company has bought
back 220,000 shares for costs of £2,946,000 (at an average discount to NAV of
13.0%). The Company’s discount currently stands at 11.1% compared to a
sector average of 11.7%.
BOARD COMPOSITION, IMPLEMENTATION OF POLICY ON TENURE AND DIVERSITY
In previous Chairman’s Statements, I have noted that the Board has adopted a
policy of limiting directors’ tenure to nine years (or twelve years in the
case of the Chairman in certain circumstances). The Board remains focused on
high standards of governance and is cognisant that the Parker Review in
respect of board diversity and the recent changes to the FCA’s Listing Rules
set new diversity targets and associated disclosure requirements for UK
companies listed on the premium and standard segment of the London Stock
Exchange. Your Board recognises the benefits of diversity at Board level and
believes that Directors should have a mix of different skills, experience,
backgrounds, ethnicity, gender and other characteristics.
The Board appointed an external agency to undertake a search and selection
process in 2023 with the aim of further enhancing Board diversity. A broad
range of factors were taken into account in setting the appointment brief and
during the search and selection process. These were underpinned by our
conviction that all Board appointments must be made on merit, in the context
of the skills, experience, independence and knowledge which the Board as a
whole requires to be effective.
As a result of the search, the Board announced the appointment of Ms Dunke Afe
as a non-executive Director with effect from 1 January 2024. Ms Afe is an
accomplished global marketing executive with extensive experience in raising
brand and product awareness, as a marketing expert the Board expects this to
be helpful for the Company in the future. She has previously worked with top
blue chip multinationals including Unilever, Kimberly-Clark and Estee Lauder
companies. She is also a non-executive Director of CT UK Capital and Income
Investment Trust plc. We look forward to benefitting from her outstanding
marketing knowledge and insights as we navigate an increasingly competitive
environment for investor attention. Further information on Board composition
can be found in the Corporate Governance Statement contained within the Annual
Report and Financial Statements.
ANNUAL GENERAL MEETING
The Company’s Annual General Meeting (AGM) will be held in person at the
offices of BlackRock at 12 Throgmorton Avenue, London EC2N 2DL on Thursday 20
June 2024 at 11.30 a.m. Details of the business of the meeting are set out in
the Notice of Annual General Meeting contained within the Annual Report and
Financial Statements. Shareholders are also invited to join Directors for a
hot buffet lunch after the formal business of the meeting has concluded. Prior
to the formal business of the meeting, our Investment Manager will make a
presentation to shareholders. This will be followed by a question and answer
session. Shareholders who are unable to attend the meeting in person but who
wish to view the portfolio manager’s presentation can do so via a live
webinar this year. Details on how to register, together with access details,
will be available shortly on the Company’s website at:
www.blackrock.com/uk/brsc or by contacting the Company Secretary at
cosec@blackrock.com. It is not possible to speak or vote via this medium and
it is solely intended to provide shareholders with the ability to watch the
portfolio manager’s presentation. Additionally, if you are unable to attend
you can exercise your right to vote by proxy or appoint a proxy to attend in
your place. Details of how to do this are included on the AGM Proxy Card
provided to shareholders with the Annual Report. If you hold your shares
through a platform or a nominee company, you will need to contact them
directly and ask them to appoint you as a proxy in respect of your shares in
order to attend, speak and vote at the AGM. Further information on the
business of this year's AGM can be found in the Notice of the AGM contained
within the Annual Report and Financial Statements.
OUTLOOK
Since the financial year end, the Company’s NAV (as at 8 May 2024) has
increased by 8.0%1,2, against an increase in the benchmark of 7.8%1, and the
share price has risen by 8.7%1. These results should be seen in the context of
continued and significant market volatility, which persists in an ongoing high
interest rate environment, fuelled by heightened geo-political risk, with the
ongoing conflict in Ukraine and tensions escalating in the Middle East.
Looking forward, there are also several significant elections in 2024, notably
in the UK, US and Europe, with a range of outcomes, all of which could impact
market volatility and sentiment.
Against this turbulent backdrop, the Company’s portfolio is weighted towards
companies with well capitalised balance sheets and entrepreneurial management
teams that are able to rapidly adapt their businesses to the shifting market
dynamics. As such we believe your Company is well-positioned and prepared to
take advantage of the investment opportunities that lie ahead despite the
uncertain market conditions. If shareholders would like to contact me, please
write to BlackRock Smaller Companies Trust plc, Exchange Place One, 1 Semple
Street, Edinburgh EH3 8BL marked for the attention of the Chairman.
RONALD GOULD
Chairman
13 May 2024
1 Percentages in Sterling terms with dividends reinvested.
2 NAV with debt at fair value.
3 Alternative Performance Measure, see Glossary contained within the Annual
Report and Financial Statements.
INVESTMENT MANAGER’S REPORT
MARKET REVIEW
As ever when I sit and write these annual reviews, the first point of
reference is always my previous manager report; what did I write this time
last year, what was my outlook for the coming twelve months, how far off the
mark was I, and what unexpected events were thrown at us? Last year’s review
highlighted the almost schizophrenic behaviour of the markets, flitting
between rising and falling bond yields, inflation expectations, commodity and
asset prices, whilst the outlook suggested inflation expectations would
moderate, we would avoid a hard landing, and the low valuation of the UK
market would see an increase in corporate activity. I fear this year’s
review will not veer too much from this narrative. Many of the drivers of
uncertainty and volatility remain; will major economies avoid a hard landing,
what is the impact of geo-political conflict, will inflation fall enough to
gift central banks the freedom to reduce interest rates? Underlying these
macro factors is the one unescapable truth, the valuation of UK small and
medium sized companies remains incredibly attractive. Overlay valuations below
their historic range with corporate balance sheets as well capitalised as I
can remember in my career, and you could have a very attractive opportunity to
create long-term value.
PERFORMANCE REVIEW
For the second half of the financial year the Company’s NAV outperformed the
benchmark by 3.4%, producing a positive return of 4.6% against our benchmark
return of 1.2%. This takes the Company’s NAV return to -3.4% for the
financial year, and although it is disappointing to be reporting another year
of negative asset value, it outperformed our benchmark return of -5.8%.
In my interim report I asked “what’s the catalyst?” to seeing a change
in market sentiment, and an end to the persistent outflows we have seen in
small and mid cap equities. Sadly my conclusion was I don’t know, that
history tells us there will be one, but typically we only see the catalyst in
the rear view mirror. What is clear to me is the current valuation of the UK
market, and in particular UK small and mid-cap, is attractive. In addition,
the second half of the financial year has given significant cause for
optimism. Unemployment remains low, balance sheets remain strong, inflation is
falling, consumer confidence is improving, Purchasing Manager’s Index whilst
generally still negative are improving and for the much maligned UK have
tipped back into positive territory ahead of those of most other major
European economies. This backdrop gives confidence that the earnings outlook
for our businesses is broadly supportive for an earnings recovery.
The largest positive contributor to performance was 4imprint Group. This is
not the first time we have discussed the merits of the 4Imprint Group
investment case, it has been a significant contributor to performance over a
number of years, and acts as a case study to our investment philosophy; find a
well invested market leader in a growth market, that converts profits into
cash, continues to invest in both their product and people to maintain market
leadership and pricing power, whilst increasing the dividends paid to
shareholders.
The second largest contributor was recently listed Ashtead Technology, the
Aberdeen based equipment rental business focused on the Oil and Gas industry.
Management have done a commendable job of positioning the group towards growth
markets, whilst deploying the balance sheet towards accretive mergers and
acquisitions (“M&A”).
The third largest contribution has come from our holding in bowling operator
Ten Entertainment Group, which received a bid from private equity. This was
not the only bid we were on the receiving end of during the financial year, we
also saw Ergomed, City Pub Company, and Numis leave us. Whilst takeover
activity is obviously a positive to overall performance, it is often a
bittersweet moment as we lose businesses we believe could contribute to the
NAV growth of the Company over a number of years, and have to find suitable
replacements.
No year is perfect, there are always companies that weigh on performance.
These loosely split into two camps; the ones where there has been a change in
the earnings outlook, and those where shares have de-rated for other reasons
but the outlook for the investment case is unchanged. Watches of Switzerland
sadly sits in the first category, as the shares reacted negatively to the news
that Rolex has purchased luxury watch retailer Bucherer, raising concerns
Rolex will direct allocation to Bucherer over other retailers. We have to
acknowledge the potential impact this has on the Watches of Switzerland
investment case and have reduced the position to reflect what is now a wider
range of potential outcomes. CAB Payments listed on the London market in July
2023, the first significant initial public offering (“IPO”) on the London
market in some time. We recognised at the time the revenue model was
inherently unpredictable, and likely to be buffeted by the vagaries of
emerging market currencies. What we had not anticipated was the sudden change
in market conditions in a number of their currency markets, which facilitated
a significant decline in revenue and earnings expectations. Coming so soon
after the IPO this raised serious questions about the controls within the
group, and we exited the position. Finally, we need to address computer games
developer Team17, which revealed a profit warning in November. The gaming
industry had a tough year in 2023, with the demand for “triple A” games
disappointing generally, and a number of revenue related disappointments
across the industry. We spent a lot of time looking at Team17, analysing the
best seller lists to gain comfort that volumes would not disappoint. Sadly,
volumes were not the issue, and revenue forecasts were achieved, however
management appear to temporarily have lost control of the cost base leading to
a warning on profitability. We have reduced the position but have maintained a
small holding in the belief a cost problem can be fixed more easily when there
isn’t a revenue issue.
There is a third category of shares that can weigh on relative performance;
those that are a significant weight in the benchmark that we choose not to
own. 2023 saw an unusually large number of “fallen angels” enter the top
end of our benchmark. Accounting for 25% of the Numis Smaller Companies Index,
the 2023 cohort of fallen angels is the third largest on record. Two of these,
Burford and Carnival performed strongly in the year, rising 80% and 62%
respectively. Typically, the “fallen angels” fail to meet our investment
criteria. In the case of these two examples Burford’s revenue model is too
unpredictable, and Carnival’s market cap was simply too large for a
portfolio focused on small and medium sized companies.
THE HEALTH OF THE UK MARKET
Given the amount of press coverage it has received in the last year, it would
be amiss of us not to address the health of the UK stock market. The
overwhelming narrative has suggested the market is in a death spiral, deprived
of the vital lifeblood of new issues and fundraisings, haemorrhaging companies
to private equity, and seeing FTSE100 blue bloods seeking the Elysian Fields
of a US listing. We can’t sit here and pretend none of this is true, but
perhaps some context is also required. The number of UK listed companies has
been falling for decades, this is not some new phenomenon, what has changed in
the last two years is the dearth of new issues to replace those companies we
lose through M&A, re-listing or sadly insolvency. Capital markets activity has
been light, companies have not sought new funds in any volume, but perhaps we
should look at this from another angle. In 2009/2010 there were huge sums of
fresh equity raised, but often this was a direct result of weak balance sheets
going into a severe downturn. 2022/2023 was not the same, this has been strong
balance sheets going into a more shallow decline. London remains an attractive
market for new issues; the rule of law is unchanged, the breadth of capability
and experience is undiminished, what is required is confidence and indeed the
end of the significant outflows from the UK market. The entrepreneurial spirit
is still alive in the UK, owners will still want to see their businesses
listed to provide them with access to capital, and it remains my view that
London will remain an active market for UK small and medium sized businesses
once confidence returns.
POSITIONING AND OUTLOOK
Any discussion about the outlook for UK small and medium sized companies
essentially revolves around three broad sectors, as consumer, industrials and
financials form the vast bulk of the investment universe. If we once again
circle back to the outlook discussed this time last year, we felt the risks of
a significant recession were being overplayed, and there were opportunities in
both the consumer and industrial markets. We see little reason to change our
view at this point. As evidenced by the Asda Income Tracker, available
household cashflow is finally starting to grow after nearly two years of
pressure. At the same time food and fuel inflation is falling, increasing the
amount of household cash available to direct to more discretionary purposes.
With interest rates looking like they have peaked, and mortgage rates starting
to fall, support for the structurally undersupplied housing market should also
return. Our view on industrials also remains positive. 2023 has been a year of
inventory unwind, as firms run through the stock built up to manage the
post-COVID-19 supply chain disruptions. Much of this rightsizing has now
happened, suggesting end market demand should be much more closely correlated
to industrial company revenues. More importantly, going forward we still see
many of the positive structural drivers of near shoring and supply chain
duplication providing a multi-year tailwind for industrial companies. In
summary we retain a broadly pro-cyclical outlook, with a view that the coming
year could well see an earnings inflexion colliding with attractive
valuations, typically a mix that leads to share price appreciation.
ROLAND ARNOLD
BLACKROCK INVESTMENT MANAGEMENT (UK) LIMITED
13 May 2024
TEN LARGEST INVESTMENTS AS AT 29 FEBRUARY 2024
Together, the ten largest investments represent 21.3% of the Company’s
portfolio as at 29 February 2024 (2023: 20.5%).
1 Gamma Communications
Mobile Telecommunications
Portfolio value £20,662,000
Percentage of portfolio 2.7%
A leading provider of Unified Communications as a Service (UCaaS) into the UK
and European business markets, supplying communication solutions via their
extensive network of trusted channel partners and also directly.
2 4imprint Group
Media
Portfolio value £19,129,000
Percentage of portfolio 2.5%
A UK-listed but US-centric direct marketing business of promotional goods.
Despite a relatively small market share, they are the market leader in the US
by some distance which reflects just how fragmented the market is.
3 Bloomsbury Publishing
Media
Portfolio value £16,606,000
Percentage of portfolio 2.2%
The company is a leading independent publisher which aims to inform, educate,
entertain and inspire readers of all ages. The company is focused on investing
in high value intellectual property, with a focus on publishing quality
content. The company has been diversifying the portfolio across consumer and
non-consumer, and geographically has expanded it’s digital offering through
mergers and acquisitions, further increasing the quality of its revenues and
earnings.
4 Hill & Smith
Industrial Engineering
Portfolio value £16,476,000
Percentage of portfolio 2.2%
Hill & Smith is a leading UK-based infrastructure and construction products
company that specializes in the design, manufacture, and supply of vehicle
restraint systems, road safety barriers, and other infrastructure solutions
for the highways and construction sectors.
5 Chemring Group
Aerospace & Defence
Portfolio value £16,152,000
Percentage of portfolio 2.1%
Chemring Group PLC is a UK-based technology solutions company that operates in
the aerospace and defence industry. The company has two main business
segments: Sensors & Information, and Countermeasures.
6 Workspace Group
Real Estate Investment Trusts
Portfolio value £15,931,000
Percentage of portfolio 2.1%
Workspace Group is a leading UK-based REIT that owns and manages a portfolio
of flexible, sustainable commercial properties, primarily catering to SMEs in
the Greater London area through its comprehensive workspace solutions and
services.
7 Breedon
Construction & Materials
Portfolio value £15,293,000
Percentage of portfolio 2.0%
A leading construction materials group in Great Britain and Ireland producing
cement, aggregates, asphalt, ready-mixed concrete, specialist concrete and
clay products.
8 YouGov
Media
Portfolio value £14,568,000
Percentage of portfolio 1.9%
An international provider of specialist data analytics and marketing
information. The company was recently named one of the world’s top 25
research companies.
9 Tatton Asset Management
Financial Services
Portfolio value £14,114,000
Percentage of portfolio 1.8%
Tatton Asset Management is a leading UK financial services company that
provides a range of investment management, compliance, and support services to
independent financial advisers, with a focus on discretionary fund management
and portfolio solutions.
10 CVS Group
General Retailers
Portfolio value £13,786,000
Percentage of portfolio 1.8%
CVS Group is one of the largest integrated veterinary services providers in
the UK encompassing four main business areas; veterinary practices, diagnostic
laboratories, pet crematoria and e-commerce division.
FIFTY LARGEST INVESTMENTS AS AT 29 FEBRUARY 2024
Company Business activity Market % of
value total
£’000 portfolio
Gamma Communications Provider of communication services to UK businesses 20,662 2.7
4imprint Group Promotional merchandise in the US 19,129 2.5
Bloomsbury Publishing Publisher of fiction and non-fiction 16,606 2.2
Hill & Smith Production of infrastructure products and supply of galvanizing services 16,476 2.2
Chemring Group Advanced technology products and services for the aerospace, defence and security markets 16,152 2.1
Workspace Group Supply of flexible workspace to businesses in London 15,931 2.1
Breedon UK construction materials 15,293 2.0
YouGov International online research data and analysis group 14,568 1.9
Tatton Asset Management Provider of discretionary fund management services to financial advisors 14,114 1.8
CVS Group Operator of veterinary surgeries 13,786 1.8
IntegraFin Investment platform for financial advisers 13,191 1.7
SigmaRoc UK and European construction materials 12,195 1.6
XPS Pensions Leading independent pensions consultancy and administration firm 12,118 1.6
Baltic Classifieds Group Operator of online classified businesses in the Baltics 11,908 1.6
Oxford Instruments Designer and manufacturer of tools and systems for industry and scientific research 11,649 1.5
Boku Digital payments company 10,689 1.4
Renew Engineering services group supporting UK infrastructure 10,276 1.3
Robert Walters Recruitment services 10,177 1.3
Johnson Service Group Provider of textile services 9,967 1.3
Next Fifteen Communications Digital communication products and services 9,956 1.3
TT Electronics Global manufacturer of electronic components 9,837 1.3
GlobalData Data analytics and consulting company 9,820 1.3
Grafton Builders merchants in the UK, Ireland and Netherlands 9,567 1.3
Moneysupermarket.com Price comparison website specialising in financial services 9,547 1.3
MJ Gleeson UK-based low-cost house builder and strategic land promoter 9,479 1.2
Indivior Leading pharmaceutical company specializing in developing and commercializing treatments for opioid and substance use disorders 9,375 1.2
Vesuvius Provider of metal flow engineering services and solutions to the steel and foundry industries 9,373 1.2
Morgan Sindall Office fit-out, construction and urban regeneration services 9,208 1.2
Clarkson Provision of shipping services 8,900 1.2
Serica Energy Gas and oil exploration and production company 8,887 1.2
Atalaya Mining Copper miner 8,705 1.1
Sabre Insurance Insurance company that specializes in providing car insurance products 8,701 1.1
Wilmington Global provider of data, information, education and training services in the global Governance, Risk and Compliance (GRC) markets 8,613 1.1
Auction Technology Group Operator of marketplaces for curated online auctions 8,210 1.1
City Pub Group UK-based pub company that owns and operates a collection of pubs across southern England and Wales 8,120 1.1
Hunting Manufacturer of components, technology systems and precision parts for the energy industry 7,963 1.0
Central Asia Metals Mining operations in Kazakhstan and Macedonia 7,616 1.0
Sirius Real Estate Owner and operator of business parks, offices and industrial complexes in Germany 7,531 1.0
Lok’n Store Group Self-storage provider 7,505 1.0
Kitwave Group Wholesale distribution company that specializes in supplying a wide range of food, drink, and tobacco products 7,351 1.0
Fuller Smith & Turner – A Shares Ownership of and management of pubs in the London area and South East England 7,341 1.0
Porvair UK-based specialist filtration, laboratory, and environmental technology group 7,292 1.0
QinetiQ Group British multi-national defence technology company 7,243 0.9
MacFarlane Group Packaging company that designs, manufactures, and distributes protective packaging products and labels 7,231 0.9
Bodycote Provision of thermal processing services 7,211 0.9
Great Portland Estates British property development and investment company 7,132 0.9
Alfa Financial Software Provider of software for customers working in the asset finance industry 7,120 0.9
TP ICAP Inter-dealer broker and over the counter market data provider 7,026 0.9
Young & Co’s Brewery – A Shares UK-based pub and hotel operator 6,979 0.9
Luceco Designer, supplier, and manufacturer of high-quality and efficient LED lighting products, as well as electrical wiring accessories 6,922 0.9
--------------- ---------------
50 largest investments 520,648 68.0
--------------- ---------------
Remaining investments 244,530 32.0
--------------- ---------------
Total 765,178 100.0
========= =========
Details of the full portfolio are available on the Company’s website at
www.blackrock.com/uk/brsc.
PORTFOLIO HOLDINGS IN EXCESS OF 3% OF ISSUED SHARE CAPITAL
At 29 February 2024, the Company did not hold any equity investments
comprising more than 3% of any company’s share capital other than as
disclosed in the table below:
Company % of issued share capital held
City Pub Group 5.6
The Pebble Group 5.0
Tatton Asset Management 4.3
Distribution Finance Capital Holdings 4.2
TT Electronics 4.1
Oxford Metrics 3.7
Bloomsbury Publishing 3.7
MacFarlane Group 3.7
Mercia Asset Management 3.4
Kitwave Group 3.4
Fuller Smith and Turner - A Shares 3.4
Robert Walters 3.3
Luceco 3.1
MJ Gleeson 3.1
Sylvania Platinum 3.1
DISTRIBUTION OF INVESTMENTS AS AT 29 FEBRUARY 2024
Sector % of portfolio
Oil & Gas Producers 1.2
Oil Equipment, Services & Distribution 0.9
Oil-Field Services 1.0
---------------
Energy 3.1
---------------
Chemicals 0.9
Mining 3.1
---------------
Basic Materials 4.0
---------------
Aerospace & Defence 3.6
Construction & Materials 7.9
Electronic & Electrical Equipment 5.4
General Industrials 2.9
Industrial Engineering 4.5
Industrial Support Services 9.9
Industrial Transportation 1.2
---------------
Industrials 35.4
---------------
Automobiles & Parts 0.7
General Retailers 2.9
Leisure Goods 0.7
Media 11.5
Personal Care, Drug & Grocery Stores 0.2
Personal Goods 1.6
Specialty Retailers 1.1
Travel & Leisure 2.9
---------------
Consumer Discretionary 21.6
---------------
Pharmaceuticals & Biotechnology 2.0
---------------
Health Care 2.0
---------------
Beverages 1.2
Food & Drug Retailers 0.9
Household Goods & Home Construction 2.1
---------------
Consumer Staples 4.2
---------------
Mobile Telecommunications 2.7
Telecommunications Service Providers 0.5
---------------
Telecommunications 3.2
---------------
Banks 1.0
Finance & Credit Services 0.4
Financial Services 9.4
Investment Banking & Brokerage Services 0.2
Non-life Insurance 1.1
---------------
Financials 12.1
---------------
Real Estate Investment & Services 2.0
Real Estate Investment Trusts 4.2
---------------
Real Estate 6.2
---------------
Software & Computer Services 7.8
Technology Hardware & Equipment 0.4
---------------
Technology 8.2
---------------
Total 100.0
=========
PORTFOLIO ANALYSIS AS AT 29 FEBRUARY 2024
Analysis of portfolio value by sector
Company Benchmark (Deutsche Numis Smaller Companies plus AIM (ex investment Companies) Index)
Energy 3.1 5.1
Basic Materials 4.0 7.5
Industrials 35.4 22.8
Consumer Discretionary 21.6 18.4
Health Care 2.0 5.4
Consumer Staples 4.2 4.9
Telecommunications 3.2 2.8
Financials 12.1 16.0
Real Estate 6.2 5.7
Technology 8.2 9.7
Utilities 0.0 0.8
Other 0.0 0.9
Sources: BlackRock and Datastream.
Investment size as at 29 February 2024
Number of investments Market value of investments as % of portfolio
£1m to £2m 5 1.0
£2m to £3m 3 1.0
£3m to £4m 12 5.5
£4m to £5m 14 7.9
£5m to £6m 15 10.6
£6m to £7m 9 7.7
£7m to £8m 13 12.5
£8m to £9m 7 7.9
£9m to £10m 10 12.6
£10m to £11m 3 4.1
£11m to £12m 2 3.1
£12m to £13m 2 3.2
£13m to £14m 2 3.5
£14m to £15m 2 3.7
£15m to £16m 2 4.1
£16m to £17m 3 6.4
£17m to £18m 1 2.5
£18m to £19m 1 2.7
Source: BlackRock.
Market capitalisation of our portfolio companies as at 29 February 2024
Market capitalisation % of portfolio
£0m to £200m 6.4
£200m to £600m 37.5
£600m to £1.5bn 48.3
£1.5bn+ 7.8
Source: BlackRock.
STRATEGIC REPORT
The Directors present the Strategic Report of the Company for the year ended
29 February 2024. The aim of the Strategic Report is to provide shareholders
with the information to assess how the Directors have performed their duty to
promote the success of the Company for the collective benefit of shareholders.
The Chairman’s Statement together with the Investment Manager’s Report and
the Directors’ Statement setting out how they promote the success of the
Company contained within the Annual Report and Financial Statements form part
of the Strategic Report. The Strategic Report was approved by the Board at its
meeting on 13 May 2024.
PRINCIPAL ACTIVITIES
The Company is a public company limited by shares and carries on business as
an investment trust and its principal activity is portfolio investment.
Investment trusts, like unit trusts and OEICs, are pooled investment vehicles
which allow exposure to a diversified range of assets through a single
investment, thus spreading, although not eliminating investment risk.
INVESTMENT OBJECTIVE
The Company’s prime objective is to seek to achieve long-term capital growth
for shareholders through investment mainly in smaller UK quoted companies.
No material change will be made to the Company’s investment objective
without shareholder approval.
To achieve its investment objective the Company invests predominantly in UK
smaller companies with securities admitted to trading on the Main Market of
the London Stock Exchange or on the AIM. The Company may also invest in
securities which are listed overseas but have a secondary UK quotation.
Although investments are primarily in companies with securities admitted to
trading on recognised stock exchanges or on the AIM, the Investment Manager
may also invest in less liquid unquoted securities with the prior approval of
the Board. The Manager has adopted a consistent investment process, focusing
on good quality growth companies; stock selection is the primary focus, but
consideration is also given to sector weightings and underlying themes. Whilst
there are no set limits on individual sector exposures against the Company’s
benchmark, a schedule of sector weightings is presented at each Board meeting
for review. In applying the investment objective, the Investment Manager
expects the Company to be substantially fully invested and to borrow as and
when appropriate. The Company seeks to achieve an appropriate spread of
investment risk by investing in a number of holdings across a range of
sectors. The Company may not hold more than 7% of the share capital of any
company in which it has an investment. No single portfolio holding (excluding
holdings in cash fund investments held for cash management purposes) will, on
the date such holding is acquired by the Company, exceed 5% of the Company’s
net asset value. Notwithstanding the foregoing, the general aim is that no
single portfolio holding (excluding cash fund investments held for cash
management purposes) will, on the date such holding is acquired by the
Company, exceed 3% of the Company’s net asset value. In addition, while the
Company may hold shares in other listed investment companies (including
investment trusts), the Board has agreed that the Company will not invest more
than 15% of its total assets in other UK listed investment companies. The
Investment Manager will not deal in derivatives without prior approval of the
Board.
BENCHMARK
Performance is measured against an appropriate benchmark, the Deutsche Numis
Smaller Companies plus AIM (excluding Investment Companies) Index.
GEARING POLICY
It is intended that net gearing will not exceed 15% of the net assets of the
Company at the time of the drawdown of the relevant borrowings. Under normal
operating conditions it is envisaged that gearing will be within a range of
0%-15% of net assets.
BUSINESS MODEL
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 Manager who in turn (with the permission of the
Company) has delegated certain investment management and other ancillary
services to the Investment Manager. 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. The
Company delegates fund accounting services to BlackRock Investment Management
(UK) Limited (BIM (UK)), which in turn sub-delegates these services to The
Bank of New York Mellon (International) Limited (BNYM).
Other service providers include the Depositary (also BNYM) and the Registrar,
Computershare Investor Services PLC. The Depositary has sub-delegated the
provision of custody services to the Asset Servicing division of BNYM. Details
of the contractual terms with the Manager and the Depositary and more details
of the sub-delegation arrangements in place governing custody services are set
out in the Directors’ Report.
INVESTMENT PHILOSOPHY
The Investment Manager seeks to identify companies which it believes have
superior long-term growth prospects and the management in place to take
advantage of these prospects. This is done through internal investment
research, company visits and the careful monitoring of market newsflow and
external broker analysis. Initially, if the Investment Manager is sufficiently
impressed with a company’s prospects, it will look to take a small position,
usually 0.25% to 0.50% of the Company’s net assets, in a new holding. These
holdings will be closely monitored, and members of the portfolio management
team will meet with management on a regular basis. If these companies continue
to prosper and make the most of opportunities, the Investment Manager will
gradually add to the portfolio holding. Where initial expectations are
disappointing, the holding will be sold. The anticipation is that each holding
will develop into a core holding over time; one that meets the Investment
Manager’s criteria for high quality growth companies.
Valuation is a key consideration; it is important not to overpay for new
holdings. However, investment fundamentals are also important, and the
Investment Manager may be prepared to pay what seems like a high price if it
believes that long-term growth prospects are very strong. Generally, a company
will be held within the portfolio if it meets the criteria for core holdings;
in respect of recent investments, the Investment Manager will consider whether
they have the potential to meet these criteria. Holdings will be sold if there
are concerns that the investment case has changed in a negative way. Holdings
will be reduced where the position size becomes too large and raises concerns
about risk and diversification. The general aim is for portfolio holdings not
to exceed 3% of the Company’s net assets (excluding cash fund investments
held for cash management purposes). As the investments within the portfolio
become larger over time, the Portfolio Manager will continue to assess growth
prospects in comparison to smaller businesses operating within similar
markets. New holdings must have a market cap beneath £2 billion, however
holdings that move above that level will be maintained providing the
investment adheres to the original thesis and remains the most attractive
opportunity that can be found amongst a comparable peer group. In accordance
with the guidelines, the Portfolio Manager will sell any stock that enters the
FTSE 100 Index within thirty days of entry.
The Investment Manager believes that consistent outperformance can be achieved
by employing a combination of bottom-up and top-down analysis, based upon
strong fundamental research.
In building a robust portfolio the Investment Manager will also consider the
macro-economic background, working with strategists, economists and other
teams internally and externally to understand the broad environment. It also
works closely with BlackRock’s risk team to assess the risks in the
structure of the portfolio. Any necessary adjustments will be made to the
portfolio to ensure that it is structured in an appropriate way from a macro
and risk point of view.
PORTFOLIO ANALYSIS
A detailed analysis of the portfolio has been provided within the Annual
Report and Financial Statements.
PERFORMANCE
Details of the Company’s performance including the dividend are set out in
the Chairman’s Statement above. The Chairman’s Statement and the
Investment Manager’s Report above form part of this Strategic Report and
include 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 Income Statement in the
Financial Statements. The total net loss for the year, after taxation, was
£32,701,000 (2023: loss of £140,726,000) of which the revenue return
amounted to a profit of £19,691,000 (2023: profit of £19,980,000) and the
capital loss amounted to £52,392,000 (2023: loss of £160,706,000).
The Company’s revenue return amounted to 40.70p per share (2023: 40.92p).
The Directors have declared a final dividend of 27.00p per share as set out in
the Chairman’s Statement.
FUTURE PROSPECTS
The Board’s main focus is to achieve long-term capital growth. The future
performance of the Company is dependent upon the success of the investment
strategy and, to a large extent, on the performance of financial markets. The
outlook for the Company in the next twelve months is discussed in the
Chairman’s Statement and the Investment Manager’s Report above.
SOCIAL, COMMUNITY AND HUMAN RIGHTS ISSUES
As an investment trust, the Company has no direct social or community
responsibilities or impact on the environment, and the Company has not adopted
an ESG investment strategy or exclusionary screens. However, the Directors
believe that it is in shareholders’ interests to consider human rights
issues, environmental, social and governance matters when selecting and
retaining investments. Details of the Board’s approach to ESG and socially
responsible investment is set out within the Annual Report and Financial
Statements. Details of the Manager’s approach to ESG integration are set out
within 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. In any event,
the Board considers the Company’s supply chain, dealing predominantly with
professional advisers and service providers in the financial services
industry, to be low risk in relation to this matter.
DIRECTORS, GENDER REPRESENTATION AND EMPLOYEES
The Directors of the Company on 29 February 2024 are set out in the
Directors’ biographies contained within the Annual Report and Financial
Statements. With effect from 1 March 2024, the Board consists of three male
Directors and three female Directors. The Company does not have any executive
employees.
KEY PERFORMANCE INDICATORS
At each Board meeting, the Directors consider a number of performance measures
to assess the Company’s success in achieving its objectives. The key
performance indicators (KPIs) used to measure the progress and performance of
the Company over time, and which are comparable to those reported by other
investment trusts are set out below. As indicated in footnote 2 to the table,
some of these KPIs fall within the definition of ‘Alternative Performance
Measures’ (APMs) under guidance issued by the European Securities and
Markets Authority (ESMA) and additional information explaining how these are
calculated is set out in the Glossary contained within the Annual Report and
Financial Statements.
Key Performance Indicators Year ended Year ended
29 February 2024 28 February 2023
NAV per share (debt at par value) 1,2 -4.0% -15.4%
NAV per share (debt at fair value) 1,2 -3.6% -13.0%
Share price total return 1,2 -0.8% -15.9%
Benchmark return 1 -5.8% -7.5%
Average discount to NAV with debt at fair value 2 12.4% 13.9%
Revenue return per share 40.70p 40.92p
Ongoing charges ratio 2,3 0.8% 0.7%
Retail ownership 66.5% 66.9%
1 Total return basis with dividends reinvested.
2 Alternative Performance Measure, see Glossary contained within the Annual
Report and Financial Statements.
3 Calculated as a percentage of average daily net assets and using the
management fee and all other operating expenses, excluding finance costs,
direct transaction costs, custody transaction charges, VAT recovered,
taxation, prior year expenses written back and certain non-recurring items in
accordance with AIC guidelines.
Sources: BlackRock and Datastream.
Additionally, the Board regularly reviews many indices and ratios to
understand the impact on the Company’s relative performance of the various
components such as asset allocation and stock selection. The Board also
reviews the performance and ongoing charges of the Company against a peer
group of UK smaller companies trusts and open-ended funds.
PRINCIPALS RISKS
The Company is exposed to a variety of risks and uncertainties. As required by
the UK Code, the Board has in place a robust ongoing process to identify,
assess and monitor the principal risks and emerging risks facing the Company,
including those that would threaten its business model, future performance,
solvency or liquidity. A core element of this process is the Company’s risk
register which identifies the risks facing the Company and assesses the
likelihood and potential impact of each risk and the quality of the controls
operating to mitigate it. A residual risk rating is then calculated for each
risk based on the outcome of the assessment.
The risk register, its method of preparation and the operation of key controls
in BlackRock’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 BlackRock’s and other third-party
service providers’ risk management processes and how these apply to the
Company’s business, BlackRock’s internal audit department provides an
annual presentation to the Audit Committee Chairman setting out the results of
testing performed in relation to BlackRock’s internal control processes. The
Audit Committee also periodically receives presentations from BlackRock’s
Risk and Quantitative Analysis team and reviews Service Organisation Control
(SOC 1) reports from the Company’s service providers. The current risk
register categorises the Company’s main areas of risk as follows:
* Investment performance risk;
* Market risk;
* Income/dividend risk;
* Legal & compliance risk;
* Operational risk;
* Financial risk; and
* Marketing risk.
The Board has undertaken a robust assessment of both the principal and
emerging risks facing the Company, including those that would threaten its
business model, future performance, solvency or liquidity. The risk that
unforeseen or unprecedented events including (but not limited to) heightened
geo-political tensions such as the war in Ukraine, high inflation and the
current cost of living crisis has had a significant impact on global markets.
The risks identified by the Board have been described in the table that
follows, together with an explanation of how they are managed and mitigated.
Emerging risks are considered by the Board as they come into view and are
incorporated into the existing review of the Company’s risk register. They
were also considered as part of the annual evaluation process.
Additionally, the Manager considers emerging risks in numerous forums and the
Risk and Quantitative Analysis team produces an annual risk survey. Any
material risks of relevance to the Company identified through the annual risk
survey will be communicated to the Board.
The Board will continue to assess these risks on an ongoing basis. In relation
to the UK Code, the Board is confident that the procedures that the Company
has put in place are sufficient to ensure that the necessary monitoring of
risks and controls has been carried out throughout the reporting period.
INVESTMENT PERFORMANCE
Principal risk
The returns achieved are reliant primarily upon the performance of the
portfolio.
The Board is responsible for:
* deciding the investment strategy to fulfil the Company’s objective; and
* monitoring the performance of the Investment Manager and the implementation
of the investment strategy.
An inappropriate investment strategy may lead to:
* poor performance compared to the Benchmark Index and the Company’s peer
group;
* a loss of capital; and
* dissatisfied shareholders.
The Board is also cognisant of the long-term risk to performance from
inadequate attention to ESG issues, and in particular the impact of climate
change. More detail in respect of these risks can be found in the AIFMD Fund
Disclosures document available on the Company’s website at
www.blackrock.com/uk/individual/literature/policies/itc-disclosure-blackrock-smaller-companies-trust-plc.pd
(http://www.blackrock.com/uk/individual/literature/policies/itc-disclosure-blackrock-smaller-companies-trust-plc.pdf)f.
Mitigation/Control
To manage this risk the Board:
* regularly reviews the Company’s investment mandate and long-term strategy;
* has set investment restrictions and guidelines which the Investment Manager
monitors and regularly reports on;
* receives from the Investment Manager a regular explanation of stock
selection decisions, portfolio exposure, gearing and any changes in gearing
and the rationale for the composition of the investment portfolio;
* monitors the maintenance of an adequate spread of investments in order to
minimise the risks associated with factors specific to particular sectors,
based on the diversification requirements inherent in the investment policy;
and
* receives reports showing the Company’s performance against the benchmark.
ESG analysis is integrated into the Manager’s investment process, as set out
within the Annual Report and Financial Statements. This is monitored by the
Board.
MARKET RISK
Principal risk
Market risk arises from volatility in the prices of the Company’s
investments influenced by currency, interest rate or other price movements. It
represents the potential loss the Company might suffer through holding market
positions in financial instruments in the face of market movements.
Market risk includes the potential impact of events which are outside the
Company’s control, including (but not limited to) heightened geo-political
tensions and military conflict, a global pandemic and high inflation or
stagflation (in particular through increased commodity price volatility
driving inflation and impacting trade).
The impact of climate change and new legislation governing climate change and
environmental issues have the potential to adversely impact markets and the
valuation of companies within the portfolio.
There is the potential for the Company to suffer loss through holding
investments in the face of negative market movements.
Mitigation/Control
The Board considers asset allocation, stock selection 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.
The Board also recognises the benefits of a closed-end fund structure in
extremely volatile markets such as those experienced during the Russia-Ukraine
and Middle East conflicts. Unlike open-ended counterparts, closed-end funds
are not obliged to sell down portfolio holdings at low valuations to meet
liquidity requirements for redemptions. During times of elevated volatility
and market stress, the ability of a closed-end fund structure to remain
invested for the long term enables the portfolio manager to adhere to
disciplined fundamental analysis from a bottom-up perspective and be ready to
respond to dislocations in the market as opportunities present themselves.
The Manager takes into account climate risk within the investment process
along with other ESG considerations as set out within the Annual Report and
Financial Statements.
INCOME/DIVIDEND RISK
Principal risk
The amount of dividends and future dividend growth will depend on the
performance of the Company’s underlying portfolio and may be impacted by
events which are outside the Company’s control, such as the Russia-Ukraine
and Middle East conflicts. In addition, any change in the tax treatment of the
dividends or interest received by the Company may reduce the level of
dividends received by shareholders.
Mitigation/Control
The Board monitors this risk through the receipt of detailed income forecasts
and considers the level of income at each Board meeting.
The Company has substantial revenue reserves which can be utilised and also
has the ability to make distributions by way of dividends from capital
reserves if required.
LEGAL & COMPLIANCE RISK
Principal 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 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 UK Listing Rules and Disclosure Guidance and
Transparency Rules, the Sanctions and Anti-Money Laundering Act 2018 and the
Market Abuse Regulation.
Mitigation/Control
The Investment Manager monitors investment movements and the amount of
proposed dividends to ensure that the provisions of Chapter 4 of Part 24 of
the Corporation Tax Act 2010 are not breached. The results are reported to the
Board at each meeting.
Compliance with the accounting rules affecting investment trusts is also
carefully and regularly monitored.
The Company Secretary and the Company’s professional advisers provide
regular reports to the Board in respect of compliance with all applicable
rules and regulations.
The Company’s Investment Manager, BlackRock, at all times complies with
sanctions administered by the UK Office of Financial Sanctions Implementation,
the United States Treasury’s Office of Foreign Assets Control, the United
Nations, European Union member states and any other applicable regimes. The
Company does not invest in companies domiciled in Russia.
OPERATIONAL RISK
Principal risk
In common with most other investment trust companies, the Company has no
employees. The Company therefore relies on the services provided by third
parties. Accordingly, it is dependent on the control systems of the Manager,
the Depositary and the Fund Accountant who maintain the Company’s assets,
dealing procedures and accounting records.
The security of the Company’s assets, dealing procedures, accounting records
and adherence to regulatory and legal requirements and the prevention of fraud
depend on the effective operation of the systems of these other third-party
service providers. There is a risk that a major disaster, such as floods,
fire, a global pandemic, or terrorist activity, renders the Company’s
service providers unable to conduct business at normal operating capacity and
effectiveness.
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 could prevent
the accurate reporting and monitoring of the Company’s financial position.
Inadequate succession planning arrangements, particularly of the Manager,
could disrupt the level of service provided.
Mitigation/Control
Due diligence is undertaken before contracts are entered into with third-party
service providers. Thereafter, the performance of the provider is subject to
regular review and reported to the Board.
The Board reviews on a regular basis an assessment of the fraud risks that the
Company could potentially be exposed to, and also a summary of the controls
put in place by the Manager, the Depositary, the Custodian, the Fund
Accountant and the Registrar designed specifically to mitigate these risks.
Most third-party service providers produce Service Organisation Control (SOC
1) reports to provide assurance regarding the effective operation of internal
controls as reported on by their reporting accountants. These reports are
provided to the Audit Committee.
The Company’s financial instruments held in custody are subject to a strict
liability regime and in the event of a loss of such financial instruments held
in custody, the Depositary must return assets of an identical type or the
corresponding amount, unless able to demonstrate the loss was a result of an
event beyond its reasonable control.
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 Board also considers the business continuity arrangements of the
Company’s key service providers on an ongoing basis and reviews these as
part of their review of the Company’s risk register. The Board considers the
Manager’s succession plans in so far as they affect the services provided to
the Company.
FINANCIAL RISK
Principal risk
The Company’s investment activities expose it to a variety of financial
risks that include interest rate, credit and liquidity risk.
Mitigation/Control
Details of these risks are disclosed in note 17 to the financial statements,
together with a summary of the policies for managing these risks.
MARKETING RISK
Principal risk
Marketing efforts are inadequate, do not comply with relevant regulatory
requirements, and fail to communicate adequately with shareholders or reach
out to potential new shareholders resulting in reduced demand for the
Company’s shares and a widening discount.
Mitigation/Control
The Board focuses significant time on communications with shareholders and
reviewing marketing strategy and initiatives. All investment trust marketing
documents are subject to appropriate review and authorisation.
VIABILITY STATEMENT
In accordance with provision 31 of the 2018 UK Corporate Governance Code, 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 is cognisant of the uncertainty surrounding the potential duration
of the conflicts in Russia-Ukraine and the Middle East, its impact on the
global economy and the prospects for some of the Company’s portfolio
holdings. Notwithstanding these crises, and given the factors stated below,
the Board expects the Company to continue for the foreseeable future and has
therefore conducted this review for the period up to the AGM in 2029 being a
five-year period from the date that this Annual Report will be approved by
shareholders. This assessment term has been chosen as it represents a
medium-term performance period over which investors in the smaller
companies’ sector generally refer to when making investment decisions.
In making this assessment the Board has considered the following factors:
* The Company’s principal risks as set out within the Annual Report and
Financial Statements;
* The risk that the challenging geo-political backdrop, rising inflation and a
sustained high interest rate environment will impact on the ability of
portfolio companies to pay dividends, and consequently impact the Company’s
portfolio yield and ability to pay dividends;
* The ongoing relevance of the Company’s investment objective in the current
environment; and
* The level of demand for the Company’s ordinary shares.
The Board has also considered a number of financial metrics and other factors,
including:
* The Board has reviewed portfolio liquidity as at 29 February 2024;
* The Board has reviewed the Company’s revenue and expense forecasts in
light of the current economic back drop both in the UK and globally and the
anticipated impact on dividend income and market valuations. The Board is
confident that the Company’s business model remains viable and that the
Company has sufficient resources to meet all liabilities as they fall due for
the period under review;
* The Board has reviewed the Company’s borrowing and debt facilities and
considers that the Company continues to meet its financial covenants in
respect of these facilities and has a wide margin before any relevant
thresholds are reached;
* The Board keeps the Company’s principal risks and uncertainties as set out
above under review, and is confident that the Company has appropriate controls
and processes in place to manage these and to maintain its operating model,
even given the global economic challenges posed by the impact of climate
change on portfolio companies and the current climate of heightened
geo-political risk (notably the invasion of Ukraine and the conflict in the
Middle East);
* The operational resilience of the Company and its key service providers (the
Manager, Depositary, Custodian, Fund Administrator, Registrar and Broker) and
their ability to continue to provide a good level of service for the
foreseeable future;
* The level of current and historic ongoing charges incurred by the Company;
* The discount to NAV;
* The level of income generated by the Company; and
* Future income forecasts.
The Company is an investment company with a relatively liquid portfolio. As at
29 February 2024, the Company held no illiquid unquoted investments and 63.3%
of the Company’s portfolio investments were readily realisable and listed on
the London Stock Exchange. The remaining 36.7% that were listed on the
Alternative Investment Market are also considered to be readily realisable.
The Company has largely fixed overheads which comprise a very small percentage
of net assets. Therefore, the Board has concluded that the Company would
comfortably be able to meet its ongoing operating costs as they fall due.
Based on the results of their analysis, the Directors have a reasonable
expectation that the Company will be able to continue in operation and meet
its liabilities as they fall due over the period of their assessment.
SECTION 172 STATEMENT: PROMOTING THE SUCCESS OF THE COMPANY
The Companies (Miscellaneous Reporting) Regulations 2018 require directors to
explain in greater detail how they have discharged their duties under Section
172(1) of the Companies Act 2006 in promoting the success of their companies
for the benefit of members as a whole. This enhanced disclosure is required
under the Companies Act 2006 and the AIC Code of Corporate Governance and
covers how the Board has engaged with and understands the views of
stakeholders and how stakeholders’ needs have been taken into account, the
outcome of this engagement and the impact that it has had on the Board’s
decisions.
As the Company is an externally managed investment company and does not have
any employees or customers, the Board considers the main stakeholders in the
Company to be the shareholders, key service providers (being the Manager and
Investment Manager, the Custodian, Depositary, Registrar and Broker) and
investee companies. The reasons for this determination, and the Board’s
overarching approach to engagement, are set out in the table below.
STAKEHOLDERS
Shareholders
Continued shareholder support and engagement are critical to the continued
existence of the Company and the successful delivery of its long-term
strategy. The Board is focused on fostering good working relationships with
shareholders and on understanding the views of shareholders in order to
incorporate them into the Board’s strategy and objectives in delivering
long-term growth and income.
Manager and Investment Manager
The Board’s main working relationship is with the Manager, who is
responsible for the Company’s portfolio management (including asset
allocation, stock and sector selection) and risk management, as well as
ancillary functions such as administration, secretarial, accounting and
marketing services. The Manager has sub-delegated portfolio management to
the Investment Manager. Successful management of shareholders’ assets by the
Investment Manager is critical for the Company to successfully deliver its
investment strategy and meet its objective. The Company is also reliant on the
Manager as AIFM to provide support in meeting relevant regulatory obligations
under the AIFMD and other relevant legislation.
Other key service providers
In order for the Company to function as an investment trust with a listing on
the premium segment of the official list of the FCA and trade on the London
Stock Exchange’s (LSE) main market for listed securities, the Board relies
on a diverse range of advisors for support in meeting relevant obligations and
safeguarding the Company’s assets. For this reason, the Board considers the
Company’s Custodian, Depositary, Registrar and Broker to be stakeholders.
The Board maintains regular contact with its key external service providers
and receives regular reporting from them through the Board and committee
meetings, as well as outside of the regular meeting cycle.
Investee companies
Portfolio holdings are ultimately shareholders’ assets, and the Board
recognises the importance of good stewardship and communication with investee
companies in meeting the Company’s investment objective and strategy. The
Board monitors the Manager’s stewardship activities and receives regular
feedback from the Manager in respect of meetings with the management of
portfolio companies.
MANAGEMENT OF SHARE RATING
Issue
The Board recognises that it is in the long-term interests of shareholders
that shares do not trade at a significant discount or premium to their
prevailing net asset value. Therefore, where deemed to be in shareholders’
long-term interests, it may exercise its powers to issue shares or buy back
shares with the objective of ensuring that an excessive premium or discount
does not arise.
Engagement
The Board monitors the Company’s share rating on an ongoing basis and
receives regular updates from the Company’s Broker and Manager regarding the
level of discount and the drivers behind this. The Manager provides regular
performance updates and detailed performance attribution.
The Board believes that the best way of maintaining the share rating at an
optimal level over the long term is to create demand for the shares in the
secondary market. To this end the Investment Manager is devoting considerable
effort to broadening the awareness of the Company, particularly to wealth
managers and to the wider retail shareholder market.
The Company contributes to a focused investment trust sales and marketing
initiative operated by BlackRock on behalf of the investment trusts under its
management. The Company’s contribution to the consortium element of the
initiative, which enables the trusts to achieve efficiencies by combining
certain sales and marketing activities was a fixed amount of £67,000 and this
contribution is matched by the Investment Manager for the year ended 31
December 2023. The purpose of the programme overall is to ensure effective
communication with existing shareholders and to attract new shareholders to
the Company to improve liquidity in the Company’s shares and to sustain the
stock market rating of the Company.
During the year ended 29 February 2024, the Company has repurchased 1,510,000
ordinary shares into treasury at a total cost of £19,989,000 and at an
average discount of 12.6%.
Since the year end and as at the date of this report, the Company has
repurchased 220,000 shares for costs of £2,946,000 at an average discount of
13.0%.
Impact
Over the last five years, the Company’s discount has widened steadily, from
an average discount of 7.9% for the year to 28 February 2019 to 12.4% for the
year ended 29 February 2024. As at 8 May 2024 the Company’s shares were
trading at a discount of 11.1% to the cum income NAV (with debt at fair
value). This compares to an average discount for the Company’s sector of
11.7% (based on the Association of Investment Companies sector average for the
UK Smaller Companies peer group).
Over the last twelve years, the number of shares held by retail shareholders
has increased from 34.1% (as at 29 February 2012) to 66.5% at 29 February
2024.
INVESTMENT MANDATE AND OBJECTIVE
Issue
The Board has the responsibility to shareholders to ensure that the
Company’s portfolio of assets is invested in line with the stated investment
objective and in a way that ensures an appropriate balance between spread of
risk and portfolio returns.
Engagement
The Board works closely with the Investment Manager throughout the year in
further developing our investment strategy and underlying policies, not simply
for the purpose of achieving the Company’s investment objective but in the
interests of shareholders and future investors.
Impact
The portfolio activities undertaken by the Investment Manager can be found in
the Investment Manager’s Report above.
Details regarding the Company’s NAV and share price performance can be found
in the Chairman’s Statement and in the Strategic Report above.
RESPONSIBLE INVESTING
Issue
More than ever, good governance and consideration of sustainable investment is
a key factor in making investment decisions. Climate change is becoming a
defining factor in companies’ long-term prospects across the investment
spectrum, with significant and lasting implications for economic growth and
prosperity.
Engagement
The Board believes that responsible investment and sustainability are
important to the longer-term delivery of the Company’s success. The Board
works closely with the Investment Manager to regularly review the Company’s
performance, investment strategy and underlying policies to ensure that the
Company’s investment objective continues to be met in an effective and
responsible way in the interests of shareholders and future investors.
The Investment Manager’s approach to the consideration of Environmental,
Social and Governance (ESG) factors in respect of the Company’s portfolio,
as well as the Investment Manager’s engagement with investee companies, are
kept under review by the Board. The Investment Manager reports to the Board in
respect of how consideration of material ESG risks and opportunities is
integrated into the investment process; a summary of BlackRock’s approach to
ESG integration is set out within the Annual Report and Financial Statements.
The Investment Manager’s engagement and voting policy is detailed in the
Annual Report and Financial Statements and on the BlackRock website.
Impact
The Board and the Investment Manager believe there is a positive correlation
between ESG practices and investment performance. Details of the Company’s
performance in the year are given in the Chairman’s Statement above and the
Performance Record contained within the Annual Report and Financial
Statements.
The Company does not meet the criteria for Article 8 or 9 products under the
EU Sustainable Finance Disclosure Regulation (SFDR) and the investments
underlying this financial product do not take into account the EU criteria for
environmentally sustainable economic activities. The Investment Manager has
access to a range of data sources, including principal adverse indicator
(“PAI”) data, when making decisions on the selection of investments.
However, whilst BlackRock considers ESG risks for all portfolios and these
risks may coincide with environmental or social themes associated with the
PAIs, unless stated otherwise in the AIFMD Disclosure Document, the Company
does not commit to considering PAIs in driving the selection of its
investments.
GEARING AND SOURCES OF FINANCE
Issue
The Board believes that it is important for the Company to have an appropriate
range of borrowings and facilities in place to provide a balance between
longer-term and short-term maturities and between fixed and floating rates of
interest.
Engagement
Gearing levels and sources of funding are reviewed regularly by the Board with
a view to ensuring that the Company has a suitable mix of financing at
competitive market rates.
As at 29 February 2024, the Company had the following borrowing facilities in
place: long-term fixed rate funding in the form of a £25 million senior
unsecured fixed rate private placement notes issued in May 2017 at a coupon of
2.74% with a 20 year maturity, £20 million senior unsecured fixed rate
private placement notes issued in December 2019 at a coupon of 2.41% with a 25
year maturity and £25 million senior unsecured fixed rate private placement
notes issued in September 2021 at a coupon of 2.47% with a 25 year maturity.
Shorter-term variable rate funding consisted of an uncommitted overdraft
facility of £60 million with The Bank of New York Mellon (International)
Limited (BNYM) with interest charged at SONIA plus 100 basis points (bps).
It is the Board’s intention that gearing will not exceed 15% of the net
assets of the Company at the time of the drawdown of the relevant borrowings.
Under normal operating conditions it is envisaged that gearing will be within
a range of 0%-15% of net assets.
Impact
The Board has been proactive over the last few years in putting in place
structural fixed gearing with the issue of £70 million of private placement
notes issued between May 2017 and September 2021 to lock in fixed rate, long
dated, Sterling denominated financing at a highly competitive pricing level.
The Board also has in place a bank overdraft with BNYM at a competitive
interest rate (SONIA plus 100 bps) and a lower non-utilisation fee (4 bps).
For the year to 29 February 2024, it is estimated that gearing contributed
0.3% to the NAV per share performance.
At the year end, the Company’s gearing was 11.5% of net assets.
SERVICE LEVELS OF THIRD-PARTY PROVIDERS
Issue
The Board acknowledges the importance of ensuring that the Company’s
principal suppliers are providing a suitable level of service: including the
Manager in respect of investment performance and delivering on the Company’s
investment mandate; the Custodian and Depositary in respect of their duties
towards safeguarding the Company’s assets; the Registrar in its maintenance
of the Company’s share register and dealing with investor queries and the
Company’s Broker in respect of the provision of advice and acting as a
market maker for the Company’s shares.
Engagement
The Manager reports to the Board on the Company’s performance on a regular
basis. The Board carries out a robust annual evaluation of the Manager’s
performance, their commitment and available resources.
The Board performs an annual review of the service levels of all third-party
service providers and concludes on their suitability to continue in their
role.
The Board receives regular updates from the AIFM, Depositary, Registrar and
Broker on an ongoing basis.
The Board works closely with the Manager to gain comfort that relevant
business continuity plans are in place and are operating effectively for all
of the Company’s service providers.
Impact
All performance evaluations were performed on a timely basis and the Board
concluded that all third-party service providers, including the Manager were
operating effectively and providing a good level of service.
The Board has received updates in respect of business continuity planning from
the Company’s Manager, Custodian, Depositary, Fund Administrator, Broker,
Registrar and printers, and is confident that the arrangements in place are
appropriate.
BOARD COMPOSITION
Issue
The Board is committed to ensuring that its own composition brings an
appropriate balance of knowledge, experience and skills, and that it is
compliant with best corporate governance practice under the UK Code, including
guidance on tenure and the composition of the Board’s committees.
Engagement
The Board engaged an external firm (Stogdale St James) to carry out an
independent external evaluation of the Board for the prior year. As part of
this process the Board also asked Stogdale St James to compile a skills matrix
to enable the Board to identify areas of focus in future succession planning
to ensure a diverse Board. The Board used this skills matrix as the
cornerstone for undertaking the search and selection process in 2023 with the
aim of further enhancing Board diversity. Sapphire Partners, an external
recruitment agency, was engaged to conduct this exercise and a broad range of
factors were taken into account in setting the appointment brief and during
the search and selection process. This was underpinned by the underlying
premise that all Board appointments must be made on merit, in the context of
the skills, experience, independence and knowledge which the Board as a whole
requires to be effective.
The results of the external evaluation were satisfactory and it was concluded
that the Board, its Committees and the Chairman were all performing in an
effective manner. More details are given within the Annual Report and
Financial Statements.
All Directors stand for re-election/election by shareholders annually.
Shareholders may attend the AGM and raise any queries in respect of Board
composition or individual Directors in person or may contact the Company
Secretary or the Chairman using the details provided within the Annual Report
and Financial Statements with any issues.
The Board has implemented a policy of limiting directors’ tenure to nine
years. Subject to the constraints of effective succession planning, it is the
Board’s aim that no Director will serve on the Board for more than nine
years (or twelve years in the case of the Chairman). The longer time limit for
the Chairman’s tenure is to allow for continuity of leadership in
circumstances where a Chairman is appointed from the ranks of existing Board
members after having already served on the Board for a period of time.
Impact
As at 13 May 2024, the Board had a 50:50 male to female gender ratio, in
accordance with relevant regulation and best practice, and will continue to
consider other diversity characteristics, such as age, ethnicity, gender,
disability, educational or professional background when appraising Board
composition.
The Parker Review in respect of board diversity and the recent changes to the
FCA’s Listing Rules set new diversity targets and associated disclosure
requirements for UK companies listed on the premium and standard segment of
the London Stock Exchange. Listing Rule 9.8.6R (9) requires listed companies
to include a statement in their annual reports and accounts in respect of
certain targets on board diversity, or if those new targets have not been met
to disclose the reasons for this. This new requirement applies to accounting
periods commencing on or after 1 April 2022 and therefore the Company has
reported against these diversity targets for the current year ending 29
February 2024.
Further information on the composition and diversity of the Board can be found
in the Corporate Governance Statement contained within the Annual Report and
Financial Statements.
At the start of the year under review, no Board Director had tenure in excess
of nine years.
Details of each Director’s contribution to the success and promotion of the
Company are set out in the Directors’ Report within the Annual Report and
Financial Statements and details of Directors’ biographies can be found
within the Annual Report and Financial Statements.
The Directors are not aware of any issues that have been raised directly by
shareholders in respect of Board composition in the year under review. Details
for the proxy voting results in favour and against individual Directors’
re-election at the 2023 AGM are given on the Company’s website at
www.blackrock.com/uk/brsc.
On 5 May 2023, the Directors established a combined Nomination and
Remuneration Committee to perform these duties on an ongoing basis. This
combined Committee will meet annually in February/March each year, or more
frequently as required on an ad hoc basis.
SHAREHOLDERS
Issue
Continued shareholder support and engagement are critical to the continued
existence of the Company and the successful delivery of its long-term
strategy.
Engagement
The Board is committed to maintaining open channels of communication and to
engage with shareholders and welcomes and encourages attendance and
participation from shareholders at its Annual General Meetings. If
shareholders wish to raise issues or concerns with the Board outside of the
AGM, they are welcome to do so at any time. The Chairman is available to meet
directly with shareholders periodically to understand their views on
governance and the Company’s performance where they wish to do so. He may be
contacted via the Company Secretary whose details are given within the Annual
Report and Financial Statements.
The Annual Report and Half Yearly Financial Report are available on the
Company’s website and are also circulated to shareholders either in printed
copy or via electronic communications. In addition, regular updates on
performance, monthly factsheets, the daily NAV and other information are also
published on the website at www.blackrock.com/uk/brsc.
The Board also works closely with the Manager to develop the Company’s
marketing strategy, with the aim of ensuring effective communication with
shareholders in respect of the investment mandate and objective. Unlike
trading companies, one-to-one shareholder meetings usually take the form of a
meeting with the portfolio manager as opposed to members of the Board. As well
as attending regular investor meetings the portfolio managers hold regular
discussions with wealth management desks and offices to build on the case for,
and understanding of, long-term investment opportunities in the UK smaller
companies’ sector.
The Manager also coordinates public relations activity, including meetings
between the portfolio managers and shareholders and potential investors to set
out their vision for the portfolio strategy and outlook for the region and in
the year under review, the Company held a number of webcasts and virtual
conferences as well as meeting with investors by videoconference.
The Manager releases monthly portfolio updates to the market to ensure that
investors are kept up to date in respect of performance and other portfolio
developments and maintains a website on behalf of the Company that contains
relevant information in respect of the Company’s investment mandate and
objective.
Impact
The Board values any feedback and questions from shareholders ahead of and
during Annual General Meetings in order to gain an understanding of their
views and will take action when and as appropriate. Feedback and questions
will also help the Company evolve its reporting, aiming to make reports more
transparent and understandable.
Feedback from all substantive meetings between the Investment Manager and
shareholders will be shared with the Board. The Directors will also receive
updates from the Company’s broker on any feedback from shareholders, as well
as share trading activity, share price performance and an update from the
Investment Manager.
The portfolio management team attended a number of professional investor
meetings (mainly by videoconference) and held discussions with many different
wealth management desks and offices in respect of the Company during the year
under review.
The portfolio manager also presented at virtual events hosted by Boring Money,
Investor Meet, Kepler and Citywire. In addition, the portfolio manager met
with a number of investors throughout the year.
Investors gave positive feedback in respect of the portfolio manager, the good
long-term track record, clear investment strategy and low fee. Some investors
commented that they liked the fact that (in common with many closed-ended
funds across the sector) the Company’s discount had widened, making the
shares excellent value.
Investors expressed concerns over the outlook for UK consumers and the
potential for economic data to deteriorate.
ENVIRONMENTAL, SOCIAL AND GOVERANCE ISSUES AND APPROACH
The Board’s approach
Environmental, social and governance (ESG) issues can present both
opportunities and risks to long-term investment performance. Whilst the
Company does not exclude investment in stocks purely on ESG criteria, material
ESG analytics are integrated into the investment process when weighing up the
risk and reward benefits of investment decisions and the Board believes that
communication and engagement with portfolio companies is important and can
lead to better outcomes for shareholders and the environment than merely
excluding investment in certain areas.
More information on BlackRock’s global approach to ESG integration, as well
as activity specific to the BlackRock Smaller Companies Trust plc portfolio,
is set out below. BlackRock has defined ESG integration as the practice of
incorporating financially material E, S and/or G data and information and
consideration of sustainability risks into investment decisions with the
objective of enhancing risk-adjusted returns. ESG integration does not change
the Company’s investment objective. More information on sustainability risks
may be found in the AIFMD Fund Disclosures document of the Company available
on the Company’s website at
www.blackrock.com/uk/individual/literature/policies/itc-disclosure-blackrock-smaller-companies-trust-plc.pdf.
BlackRock’s approach to ESG integration
BlackRock incorporates into its firmwide processes relevant, financially
material information, including financially material data and information
related to ESG. BlackRock’s investment view is that doing so can provide
better risk-adjusted returns for its clients over the long term.
BlackRock’s clients have a wide range of perspectives on a variety of issues
and investment themes, including sustainable and low-carbon transition
investing. Given the wide range of unique and varied investment objectives
sought by our clients, BlackRock’s investment teams have a range of
approaches to considering financially material E, S, and/or G factors. As with
other investment risks and opportunities, the financial materiality of E, S
and/or G considerations may vary by issuer, sector, product, mandate, and time
horizon. Depending on the investment approach, this financially material E, S
and/or G data or information may help inform due diligence, portfolio or index
construction, and/or monitoring processes of our portfolios, as well as our
approach to risk management.
BlackRock’s ESG integration framework is built upon our history as a firm
founded on the principle of thorough and thoughtful risk management. Aladdin,
our core risk management and investment technology platform, allows investors
to leverage financially material E, S and/or G data or information as well as
the combined experience of our investment teams to effectively identify
investment opportunities and investment risks. Our heritage in risk management
combined with the strength of the Aladdin platform enables BlackRock’s
approach to ESG integration.
We structure our approach around three main pillars: investment processes,
material insights and transparency and we support them by equipping our
employees with investment relevant E, S and/or G data, tools, and education.
More information in respect of BlackRock’s approach to ESG integration can
be found at
https://www.blackrock.com/corporate/literature/publication/blk-esg-investment-statement-web.pdf.
BlackRock Smaller Companies Trust plc – BlackRock Investment Stewardship
engagement with portfolio companies for the year ended 29 February 2024
The BlackRock portfolio management team has excellent access to company
management teams and undertakes about 700 company meetings each year to
identify high quality, cash generative businesses with strong management teams
that are able to generate growth in a more challenging economic environment.
In addition, BlackRock also has a separate Investment Stewardship (BIS) team
that is committed to promoting sound corporate governance through engagement
with investee companies, development of proxy voting policies that support
best governance practices and wider engagement with the stewardship ecosystem
. For the year to 29 February 2024, BIS held 48 company engagements on a range
of governance issues with the management teams of 36 companies in the
BlackRock Smaller Companies Trust portfolio, representing 34% of the portfolio
holdings at 29 February 2024. Additional information is set out in the table
below and the charts on page 46 as well as the key engagement themes for the
meetings held in respect of the Company’s portfolio holdings.
Year ended
29 February 2024
Number of engagements held 1 48
Number of companies met 1 36
% of equity investments covered 2 34
Shareholder meetings voted at 3 128
Number of proposals voted on 3 1,771
Number of votes against management 3 49
% of total votes represented by votes against management 3 2.8
1 Source: BlackRock as at 29 February 2024.
2 Source: BlackRock. As a percentage of total portfolio holdings at 29
February 2024.
3 Source: BlackRock, Institutional Shareholder Services as at 29 February
2024.
Engagement Topics1
Climate Risk Management 2
Biodiversity 1
Remuneration 26
Board Composition and Effectiveness 20
Board Gender Diversity 9
Corporate Strategy 7
Governance Structure 6
Business Oversight/Risk Management 2
Executive Management 1
Sustainability Reporting 1
Human Capital Management 3
Diversity and Inclusion 2
Business Ethics and Integrity 1
Other company impacts on people/human rights 1
Engagement Themes1
Environmental 3
Governance 47
Social 4
1 The number of meetings held in respect of the Company’s portfolio
holdings; at which a particular topic is discussed. Most engagement
conversations cover multiple topics. More detail about BIS’ engagement
priorities can be found here:
www.blackrock.com/corporate/literature/publication/blk-stewardship-priorities-final.pdf.
Investment Stewardship
Consistent with BlackRock’s fiduciary duty as an asset manager, BIS seeks to
support investee companies in their efforts to deliver long-term financial
value on behalf of our clients. These clients include public and private
pension plans, governments, insurance companies, endowments, universities,
charities and, ultimately, individual investors, among others. BIS serves as a
link between BlackRock’s clients and the companies they invest in. Clients
depend on BlackRock to help them meet their investment goals; the business and
governance decisions that companies make may have a direct impact on
BlackRock’s clients’ long-term investment outcomes and financial
wellbeing.
Global principles
The BIS Global Principles, regional voting guidelines and engagement
priorities (collectively, the ‘BIS policies’) set out the core elements of
corporate governance that guide BIS’ efforts globally and within each
regional market, including when engaging with companies and voting at
shareholder meetings when authorised to do so on behalf of clients. Each year,
BIS reviews its policies and updates them as necessary to reflect changes in
market standards and regulations, insights gained over the year through
third-party and its own research, and feedback from clients and companies.
BIS’ Global Principles are available on its website at
www.blackrock.com/corporate/literature/fact-sheet/blk-responsible-investment-engprinciples-global.pdf.
Regional voting guidelines
BIS’ voting guidelines are intended to help clients and companies understand
its thinking on key governance matters. They are the benchmark against which
it assesses a company’s approach to corporate governance and the items on
the agenda to be voted on at a shareholder meeting. BIS applies its guidelines
pragmatically, taking into account a company’s unique circumstances where
relevant. BlackRock informs voting decisions through research and engages as
necessary. BIS reviews its voting guidelines annually and updates them as
necessary to reflect changes in market standards, evolving governance practice
and insights gained from engagement over the prior year. BIS’ regional
voting guidelines are available on its website at
www.blackrock.com/corporate/about-us/investment-stewardship#stewardship-policies.
BlackRock is committed to transparency in terms of disclosure of its
stewardship activities on behalf of clients. BIS publishes its stewardship
policies – such as the BIS Global Principles, regional voting guidelines and
engagement priorities – to help BlackRock’s clients understand its work to
advance their interests as long-term investors in public companies.
Additionally, BIS publishes both annual and quarterly reports detailing its
stewardship activities, as well as vote bulletins that describe its rationale
for certain votes at high-profile shareholder meetings. More detail in respect
of BIS reporting can be found at
www.blackrock.com/corporate/insights/investment-stewardship.
BlackRock’s reporting and disclosures
In terms of its own reporting, BlackRock believes that the Sustainability
Accounting Standards Board provides a clear set of standards for reporting
sustainability information across a wide range of issues, from labour
practices to data privacy to business ethics. For evaluating and reporting
climate-related risks, as well as the related governance issues that are
essential to managing them, the Task Force on Climate-related Financial
Disclosures (TCFD) provides a valuable framework. BlackRock recognises that
reporting to these standards requires significant time, analysis, and effort.
BlackRock’s 2023 TCFD report can be found at
www.blackrock.com/corporate/literature/continuous-disclosure-and-important-information/tcfd-report-2023-blkinc.pdf.
FOR AND ON BEHALF OF THE BOARD
RONALD GOULD
Chairman
13 May 2024
RELATED PARTY TRANSACTIONS: TRANSACTIONS WITH THE MANAGER AND AIFM
BlackRock Fund Managers Limited (BFM) provides management and administration
services to the Company under a contract which is terminable on six months’
notice. BFM has (with the Company’s consent) delegated certain portfolio and
risk management services, and other ancillary services to BlackRock Investment
Management (UK) Limited (BIM (UK)). Further details of the investment
management contract are disclosed in the Directors’ Report contained within
the Annual Report and Financial Statements.
The investment management fee for the year ended 29 February 2024 amounted to
£4,437,000 (2023: £4,784,000) as disclosed in note 4 to the Financial
Statements above. At the year end, £3,319,000 was outstanding in respect of
the management fee (2023: £4,784,000).
In addition to the above services, BIM (UK) provided the Company with
marketing services. The total fees paid or payable for these services for the
year ended 29 February 2024 amounted to £174,000 including VAT (2023:
£170,000). Marketing fees of £137,000 (2023: £137,000) were outstanding at
the year end.
During the year, the Manager pays the amounts due to the Directors. These fees
are then reimbursed by the Company for the amounts paid on its behalf. As at
29 February 2024, an amount of £210,000 (2023: £105,000) was payable to the
Manager in respect of Directors’ fees.
The ultimate holding company of the Manager and the Investment Manager is
BlackRock, Inc., a company incorporated in Delaware, USA.
RELATED PARTY DISCLOSURE: DIRECTORS’ EMOLUMENTS
At the date of this report, the Board consists of six Non-executive Directors,
all of whom are considered to be independent of the Manager by the Board.
Disclosures of the Directors’ interests in the ordinary shares of the
Company and fees and expenses payable to the Directors are set out in the
Directors’ Remuneration Report, contained within the Annual Report and
Financial Statements. At 29 February 2024, an amount of £17,000 (2023:
£14,000) was outstanding in respect of Directors’ fees.
None of the Directors has a service contract with the Company. For the year
ended 29 February 2024, the Chairman received an annual fee of £46,735, the
Audit Committee Chairman received an annual fee of £35,700, the Senior
Independent Director received an annual fee of £32,550 and each other
Director received an annual fee of £31,500. With effect from 1 March 2024,
the Chairman will receive an annual fee of £50,000, the Audit Committee
Chairman will receive an annual fee of £38,000, the Senior Independent
Director will receive an annual fee of £35,000 and each other Directors will
receive an annual fee of £33,000.
As at 13 May 2024 all members of the Board held shares in the Company. Ronald
Gould held 3,544 ordinary shares, Mark Little 491 ordinary shares, Susan
Platts-Martin held 2,800 ordinary shares, James Barnes held 2,500 ordinary
shares and Helen Sinclair held 988 ordinary shares. Dunke Afe does not
currently hold any shares in the Company.
STATEMENT OF DIRECTORS’ RESPONSIBILITIES IN RESPECT OF THE ANNUAL REPORT AND
FINANCIAL STATEMENTS
The Directors are responsible for preparing the Annual Report and Financial
Statements in accordance with applicable law and regulations. Company law
requires the Directors to prepare financial statements for each financial
year. Under that law they have elected to prepare the financial statements in
accordance with applicable law and United Kingdom Accounting Standards (United
Kingdom Generally Accepted Accounting Practice).
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 as at the end of each financial year and of the profit
or loss of the Company for that year.
In preparing those financial statements, the Directors are required to:
* present fairly the financial position, financial performance and cash flows
of the Company;
* select suitable accounting policies 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 applicable UK Accounting Standards have been followed, subject
to any material departures disclosed and explained in the financial
statements; 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 that
enable them to ensure that the Financial Statements and the Directors’
Remuneration Report 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,
Directors’ Report, the Directors’ Remuneration Report, the Corporate
Governance Statement and the Report of the Audit Committee in accordance with
the Companies Act 2006 and applicable regulations, including the requirements
of the Listing Rules and the Disclosure Guidance and Transparency Rules. The
Directors have delegated responsibility to the Manager for the maintenance and
integrity of the Company’s corporate and financial information included on
BlackRock’s website. Legislation in the United Kingdom governing the
preparation and dissemination of financial statements may differ from
legislation in other jurisdictions.
Each of the Directors, whose names are listed within the Annual Report and
Financial Statements, confirms that, to the best of their knowledge:
* the Financial Statements, prepared in accordance with applicable accounting
standards, give a true and fair view of the assets, liabilities, financial
position and profit or loss of the Company; and
* the Strategic Report contained in the Annual Report and Financial Statements
includes a fair review of the development and performance of the business and
the position of the Company, together with a description of the principal
risks and uncertainties that it faces.
The UK Code also requires Directors to ensure that the Annual Report and
Financial Statements are fair, balanced and understandable. In order to reach
a conclusion on this matter, the Board has requested that the Audit Committee
advise on whether it considers that the Annual Report and Financial Statements
fulfil these requirements. The process by which the Committee has reached
these conclusions is set out in the Audit Committee’s report contained
within the Annual Report and Financial Statements. As a result, the Board has
concluded that the Annual Report and Financial Statements for the year ended
29 February 2024, taken as a whole, are fair, balanced and understandable and
provide the information necessary for shareholders to assess the Company’s
position, performance, business model and strategy.
FOR AND ON BEHALF OF THE BOARD
RONALD GOULD
Chairman
13 May 2024
INCOME STATEMENT FOR THE YEAR ENDED 29 FEBRUARY 2024
2024 2023
Notes Revenue Capital Total Revenue Capital Total
£’000 £’000 £’000 £’000 £’000 £’000
Losses on investments held at fair value through profit or loss – (48,408) (48,408) – (155,358) (155,358)
Losses on foreign exchange – (9) (9) – (5) (5)
Income from investments held at fair value through profit or loss 3 21,884 782 22,666 21,468 – 21,468
Other income 3 379 – 379 1,237 – 1,237
--------------- --------------- --------------- --------------- --------------- ---------------
Total income/(loss) 22,263 (47,635) (25,372) 22,705 (155,363) (132,658)
========= ========= ========= ========= ========= =========
Expenses
Investment management fee 4 (1,109) (3,328) (4,437) (1,196) (3,588) (4,784)
Operating expenses 5 (869) (21) (890) (832) (22) (854)
--------------- --------------- --------------- --------------- --------------- ---------------
Total operating expenses (1,978) (3,349) (5,327) (2,028) (3,610) (5,638)
========= ========= ========= ========= ========= =========
Net profit/(loss) on ordinary activities before finance costs and taxation 20,285 (50,984) (30,699) 20,677 (158,973) (138,296)
Finance costs (471) (1,408) (1,879) (577) (1,733) (2,310)
--------------- --------------- --------------- --------------- --------------- ---------------
Net profit/(loss) on ordinary activities before taxation 19,814 (52,392) (32,578) 20,100 (160,706) (140,606)
Taxation (123) – (123) (120) – (120)
--------------- --------------- --------------- --------------- --------------- ---------------
Net profit/(loss) on ordinary activities after taxation 19,691 (52,392) (32,701) 19,980 (160,706) (140,726)
========= ========= ========= ========= ========= =========
Earnings/(loss) per ordinary share (pence) – basic and diluted 7 40.70 (108.29) (67.59) 40.92 (329.12) (288.20)
========= ========= ========= ========= ========= =========
The total columns of this statement represent the Company’s profit and loss
account. The supplementary revenue and capital accounts 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 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 29 FEBRUARY 2024
Notes Called Share Capital Capital Revenue Total
up share premium redemption reserves reserve £’000
capital account reserve £’000 £’000
£’000 £’000 £’000
For the year ended 29 February 2024
At 28 February 2023 12,498 51,980 1,982 673,479 18,590 758,529
Total comprehensive (loss)/income:
Net (loss)/profit for the year – – – (52,392) 19,691 (32,701)
Transactions with owners, recorded directly to equity:
Ordinary shares repurchased into treasury 11, 12 – – – (19,859) – (19,859)
Share buyback costs 11, 12 – – – (130) – (130)
Dividends paid 1 6 – – – – (19,633) (19,633)
--------------- --------------- --------------- --------------- --------------- ---------------
At 29 February 2024 12,498 51,980 1,982 601,098 18,648 686,206
========= ========= ========= ========= ========= =========
For the year ended 28 February 2023
At 28 February 2022 12,498 51,980 1,982 834,185 16,433 917,078
Total comprehensive (loss)/income:
Net (loss)/profit for the year – – – (160,706) 19,980 (140,726)
Transactions with owners, recorded directly to equity:
Dividends paid 2 6 – – – – (17,823) (17,823)
--------------- --------------- --------------- --------------- --------------- ---------------
At 28 February 2023 12,498 51,980 1,982 673,479 18,590 758,529
========= ========= ========= ========= ========= =========
1 Interim dividend paid in respect of the year ended 29 February 2024 of
15.00p was declared on 26 October 2023 and paid on 4 December 2023. Final
dividend paid in respect of the year ended 28 February 2023 of 25.50p was
declared on 9 May 2023 and paid on 27 June 2023.
2 Interim dividend paid in respect of the year ended 28 February 2023 of
14.50p was declared on 3 November 2022 and paid on 9 December 2022. Final
dividend paid in respect of the year ended 28 February 2022 of 22.00p was
declared on 29 April 2022 and paid on 17 June 2022.
BALANCE SHEET AS AT 29 FEBRUARY 2024
Notes 2024 2023
£’000 £’000
Non current assets
Investments held at fair value through profit or loss 765,178 806,088
Current assets
Current tax assets 210 97
Debtors 8 4,667 6,858
Cash and cash equivalents 28 23,536
--------------- ---------------
Total current assets 4,905 30,491
========= =========
Current liabilities
Bank overdraft (7,899) –
Other creditors 9 (6,463) (8,546)
--------------- ---------------
Net current (liabilities)/assets (9,457) 21,945
========= =========
Total assets less current liabilities 755,721 828,033
========= =========
Non current liabilities 10 (69,515) (69,504)
--------------- ---------------
Net assets 686,206 758,529
========= =========
Total equity
Called up share capital 11 12,498 12,498
Share premium account 12 51,980 51,980
Capital redemption reserve 12 1,982 1,982
Capital reserves 12 601,098 673,479
Revenue reserve 12 18,648 18,590
--------------- ---------------
Total shareholders’ funds 7 686,206 758,529
========= =========
Net asset value per ordinary share (debt at par value) (pence) 7 1,450.15 1,553.41
========= =========
Net asset value per ordinary share (debt at fair value) (pence) 7 1,502.25 1,601.42
========= =========
STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 29 FEBRUARY 2024
2024 2023
£’000 £’000
Operating activities
Net loss on ordinary activities before taxation (32,578) (140,606)
Add back finance costs 1,879 2,310
Losses on investments held at fair value through profit or loss 48,408 155,358
Net movement in foreign exchange 9 5
Sale of investments held at fair value through profit or loss 322,366 304,837
Purchase of investments held at fair value through profit or loss (327,895) (309,973)
Net amount for capital special dividends received (782) –
Decrease/(increase) in debtors 7 (591)
(Decrease)/increase in other creditors (1,280) 36
Taxation on investment income (123) (120)
--------------- ---------------
Net cash generated from operating activities 10,011 11,256
========= =========
Financing activities
Ordinary shares repurchased into treasury (19,792) –
Share buyback costs (130) –
Repayment of SMBC Bank International plc revolving credit facility – (25,000)
Redemption of 7.75% debenture stock – (15,000)
Interest paid (1,854) (2,371)
Dividends paid (19,633) (17,823)
--------------- ---------------
Net cash used in financing activities (41,409) (60,194)
========= =========
Decrease in cash and cash equivalents (31,398) (48,938)
Cash and cash equivalents at beginning of year 23,536 72,479
Effect of foreign exchange rate changes (9) (5)
--------------- ---------------
Cash and cash equivalents at end of year (7,871) 23,536
========= =========
Comprised of:
Cash Fund 1 28 22,742
Cash at bank – 794
Bank overdraft (7,899) –
--------------- ---------------
(7,871) 23,536
========= =========
1 Cash Fund represents funds held on deposit with the BlackRock Institutional
Cash Series plc - Sterling Liquid Environmentally Aware Fund.
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 29 FEBRUARY 2024
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 are set out below.
(a) Basis of preparation
The financial statements have been prepared on a going concern basis in
accordance with The Financial Reporting Standard applicable in the UK and
Republic of Ireland (FRS 102) and the revised Statement of Recommended
Practice – Financial Statements of Investment Trust Companies and Venture
Capital Trusts (SORP) issued by the Association of Investment Companies (AIC)
in October 2019 and updated in July 2022, and the provisions of the Companies
Act 2006.
Substantially, all of the assets of the Company consist of securities that are
readily realisable and, accordingly, the Directors are satisfied that the
Company has adequate resources to continue in operational existence for the
period to 28 February 2026, being a period of at least 12 months from the date
of approval of the financial statements, and therefore consider the going
concern assumption to be appropriate. The Directors have reviewed compliance
with the covenants associated with the debenture, loan notes and revolving
credit facility, income and expense projections and the liquidity of the
investment portfolio in making their assessment.
The Directors have considered the impact of climate change on the value of the
investments included in the Financial Statements and have concluded that there
was no further impact of climate change to be considered as the investments
are valued based on market pricing as required by FRS 102.
None of the Company’s other assets and liabilities were considered to be
potentially impacted by climate change.
The principal accounting policies adopted by the Company are set out below.
Unless specified otherwise, the policies have been applied consistently
throughout the year and are consistent with those applied in the preceding
year. All of the Company’s operations are of a continuing nature.
The Company’s financial statements are presented in Sterling, which is the
functional currency of the Company and the primary economic environment in
which the Company operates. All values are rounded to the nearest thousand
pounds (£’000) except where otherwise stated.
(b) Presentation of Income Statement
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 Income Statement between items of a revenue and a capital nature
has been presented alongside the Income Statement.
(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 treated 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.
Provisions are made for dividends not expected to be received. The return on a
debt security is recognised on a time apportionment basis.
Special dividends are recognised on an ex-dividend basis and are treated as
capital or revenue depending on the facts or circumstances of each particular
dividend.
Dividends are accounted for in accordance with Section 29 of FRS 102 on the
basis of income actually receivable, without adjustment for tax credits
attaching to the dividend. Dividends from overseas companies continue to be
shown gross of withholding tax.
Deposit interest receivable is accounted for using the effective interest rate
method in accordance with Section 11 of FRS 102.
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
foregone is recognised in the revenue account of the Income Statement. Any
excess in the value of the shares over the amount of the cash dividend is
recognised in capital reserves.
(e) Expenses
All expenses, including finance costs, are accounted for on an accruals basis.
Expenses have been charged wholly to the revenue account of the Income
Statement, except as follows:
* expenses which are incidental to the acquisition or disposal of an
investment are treated as capital. Details of transaction costs on the
purchases and sales of investments are shown in note 10 contained within the
Annual Report and Financial Statements;
* expenses are treated as capital where a connection with the maintenance of
enhancement of the value of the investments can be demonstrated; and
* the investment management fee and finance costs have been allocated 75% to
the capital account and 25% to the revenue account of the Income Statement in
line with the Board’s expected long-term split of returns, in the form of
capital gains and income respectively, from the investment portfolio.
(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 Income Statement
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.
The current tax effect of different items of expenditure is allocated between
capital and revenue 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 timing differences at the
financial reporting date, where transactions or events that result in an
obligation to pay more taxation in the future or right to less taxation in the
future have occurred at the balance sheet date. Deferred tax is measured on a
non-discounted basis, at the average tax rates that are expected to apply in
the periods in which the timing differences are expected to reverse based on
tax rates and laws that have been enacted or substantively enacted by the
balance sheet date. This is subject to deferred taxation assets only being
recognised if it is considered more likely than not that there will be
suitable profits from which the future reversal of the timing differences can
be deducted.
(g) Investments held at fair value through profit or loss
The Company’s investments are classified as held at fair value through
profit or loss in accordance with Sections 11 and 12 of FRS 102 and are
managed and evaluated on a fair value basis in accordance with its investment
strategy.
All investments are classified upon initial recognition as held at fair value
through profit or loss. Purchases of investments are recognised on a trade
date basis. Sales of assets are recognised at the trade date of the disposal
and the proceeds will be measured at fair value, which will be regarded as the
proceeds of the sale less any transaction costs.
The fair value of the financial investments is based on their quoted bid price
at the balance sheet date on the exchange on which the investment is quoted,
without deduction for the estimated future selling costs.
Unquoted investments are valued by the Directors at fair value using
International Private Equity and Venture Capital Valuation Guidelines. This
policy applies to all current and non-current asset investments of the
Company.
Changes in the value of investments held at fair value through profit or loss
and gains and losses on disposal are recognised in the Income Statement as
‘Gains or losses on investments held at fair value through profit or
loss’. Also included within this heading are transaction costs in relation
to the purchase or sale of investments.
The fair value hierarchy consists of the following three levels:
Level 1 – Quoted market price for identical instruments in active markets.
Level 2 – Valuation techniques using observable inputs.
Level 3 – Valuation techniques using significant unobservable inputs.
(h) Dividends payable
Under Section 32 of FRS 102, final dividends should not be accrued in the
financial statements unless they have been approved by shareholders before the
balance sheet date. Dividends payable to equity shareholders are recognised in
the Statement of Changes in Equity when they have been approved by
shareholders and have become a liability of the Company. Interim dividends are
recognised in the financial statements in the period in which they are paid.
(i) Foreign currency translation
In accordance with Section 30 of FRS 102, the Company is required to nominate
a functional currency, being the currency in which the Company predominately
operates. The functional and reporting currency is Sterling, reflecting the
primary economic environment in which the Company operates. Transactions in
foreign currencies are translated into Sterling at the rates of exchange
ruling on the date of the transaction. Foreign currency monetary assets and
liabilities are translated into Sterling at the rates of exchange ruling at
the balance sheet date. Profits and losses thereon are recognised in the
capital account of the Income Statement and taken to the capital reserve.
(j) 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 capital
reserves.
Shares repurchased and held in treasury – the full cost of the repurchase is
charged to the capital reserves.
Where treasury shares are subsequently re-issued:
* amounts received to the extent of the repurchase price are credited to the
capital reserves; and
* any surplus received in excess of the repurchase price is taken to the share
premium account.
Where new shares are issued, the par value is taken to called up share capital
and amounts received to the extent of any surplus received in excess of the
par value are taken to the share premium account.
Share issue costs are charged to the share premium account. Costs on share
reissues are charged to the capital reserves.
(k) Debtors
Debtors include sales for future settlement, other debtors and prepayments and
accrued income in the ordinary course of business. If collection is expected
in one year or less, they are classified as current assets. If not, they are
presented as non-current assets.
(l) Creditors
Creditors include purchases for future settlement, interest payable, share
buyback costs and accruals in the ordinary course of business. Creditors,
loans and debentures are classified as creditors – amounts due within one
year if payment is due within one year or less (or in the normal operating
cycle of the business if longer). If not, they are presented as creditors –
amounts falling due after more than one year.
(m) Cash and cash equivalents
Cash comprises cash in hand and on demand deposits and bank overdrafts
repayable on demand. Cash equivalents include 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.
(n) Critical accounting estimates and judgements
The Company makes estimates and assumptions concerning the future. The
resulting accounting estimates and assumptions will, by definition, seldom
equal the related actual results. Estimates and judgements are regularly
evaluated and are based on historical experience and other factors, including
expectations of future events and 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 material adjustment to the
carrying amount of assets and liabilities within the next financial year.
3. INCOME
2024 2023
£’000 £’000
Investment income 1 :
UK dividends 16,538 15,162
UK special dividends 1,230 389
Property income dividends 1,058 851
Overseas dividends 3,058 4,348
Overseas special dividends – 718
--------------- ---------------
Total investment income 21,884 21,468
========= =========
Other income:
Bank interest 8 76
Interest from Cash Fund 371 1,161
--------------- ---------------
379 1,237
--------------- ---------------
Total income 22,263 22,705
========= =========
1 UK and overseas dividends are disclosed based on the country of domicile of
the underlying portfolio company.
Special dividends of £782,000 have been recognised in capital during the year
(2023: £nil).
Dividends and interest received in cash during the year amounted to
£21,699,000 and £447,000 (2023: £20,835,000 and £1,174,000).
4. INVESTMENT MANAGEMENT FEE
2024 2023
Revenue Capital Total Revenue Capital Total
£’000 £’000 £’000 £’000 £’000 £’000
Investment management fee 1,109 3,328 4,437 1,196 3,588 4,784
--------------- --------------- --------------- --------------- --------------- ---------------
Total 1,109 3,328 4,437 1,196 3,588 4,784
========= ========= ========= ========= ========= =========
The investment management fee is based on a rate of 0.6% of the first £750
million of total assets (excluding current year income) less the current
liabilities of the Company (the “Fee Asset Amount”), reducing to 0.5%
above this level. The fee is calculated at the rate of one quarter of 0.6% of
the Fee Asset Amount up to the initial threshold of £750 million, and one
quarter of 0.5% of the Fee Asset Amount in excess thereof, at the end of each
quarter. The investment management fee is allocated 25% to the revenue account
and 75% to the capital account of the Income Statement.
5. OTHER OPERATING EXPENSES
2024 2023
£’000 £’000
Allocated to revenue:
Custody fees 10 9
Depositary fees 78 98
Auditor’s remuneration 50 48
Registrar’s fee 42 45
Directors’ emoluments 1 201 188
Director search fees 35 4
Marketing fees 174 170
AIC fees 22 21
Bank charges 28 51
Broker fees 35 40
Stock exchange listings 34 48
Printing and postage fees 37 37
Legal fees 21 –
Prior year expenses written back 2 (1) (7)
Other administrative costs 103 80
--------------- ---------------
869 832
========= =========
Allocated to capital:
Custody transaction charges 3 21 22
--------------- ---------------
890 854
========= =========
2024 2023
The Company’s ongoing charges 4 , calculated as a percentage of average daily net assets and using the management fee and all other operating expenses, excluding finance costs, direct transaction costs, custody transaction charges, VAT recovered, taxation, prior year expenses written back and certain non-recurring items were: 0.8% 0.7%
========= =========
1 Further information on Directors’ emoluments can be found in the
Directors’ Remuneration Report contained within the Annual Report and
Financial Statements.
2 Relates to miscellaneous fees written back during the year ended 29
February 2024 (2023: legal fees).
3 For the year ended 29 February 2024, expenses of £21,000 (2023: £22,000)
were charged to the capital account of the Income Statement. These relate to
transaction costs charged by the Custodian on sale and purchase trades.
4 Alternative Performance Measure, see Glossary contained within the Annual
Report and Financial Statements.
6. DIVIDENDS
Dividends paid on equity shares: Record date Payment date 2024 2023
£’000 £’000
2022 Final of 22.00p 13 May 2022 17 June 2022 – 10,743
2023 Interim of 14.50p 11 November 2022 9 December 2022 – 7,080
2023 Final of 25.50p 19 May 2023 27 June 2023 12,395 –
2024 Interim of 15.00p 3 November 2023 4 December 2023 7,238 –
--------------- ---------------
19,633 17,823
========= =========
The Directors have proposed a final dividend of 27.00p per share in respect of
the year ended 29 February 2024. The final dividend will be paid, subject to
shareholders’ approval, on 20 June 2024 to shareholders on the Company’s
register on 24 May 2024. The proposed final dividend has not been included as
a liability in these financial statements, as final dividends are only
recognised in the financial statements when they have been approved by
shareholders.
The total dividends payable in respect of the year which form the basis of
determining retained income for the purposes of Section 1158 of the
Corporation Tax Act 2010 and Section 833 of the Companies Act 2006, and the
amount proposed for the year ended 28 February 2023 meet the relevant
requirements as set out in this legislation.
Dividends paid or proposed on equity shares: 2024 2023
£’000 £’000
Interim dividend paid 15.00p (2023: 14.50p) 7,238 7,080
Final dividend payable of 27.00p per share* (2023: 25.50p) 12,717 12,395
--------------- ---------------
19,955 19,475
========= =========
* Based upon 47,099,792 ordinary shares (excluding treasury shares) in issue
on 8 May 2024.
All dividends paid or payable are distributed from the Company’s
distributable reserves.
7. RETURNS AND NET ASSET VALUE PER SHARE
Revenue earnings, capital loss and net asset value per share are shown below
and have been calculated using the following:
Year ended Year ended
29 February 28 February
2024 2023
Revenue return attributable to ordinary shareholders (£'000) 19,691 19,980
Capital loss attributable to ordinary shareholders (£'000) (52,392) (160,706)
--------------- ---------------
Total loss attributable to ordinary shareholders (£'000) (32,701) (140,726)
========= =========
Total shareholders’ funds (£’000) 686,206 758,529
========= =========
The weighted average number of ordinary shares in issue during the year on which the earnings per ordinary share was calculated was: 48,381,588 48,829,792
The actual number of ordinary shares in issue at the end of each year on which the undiluted net asset value was calculated was: 47,319,792 48,829,792
Earnings per share
Revenue earnings per share (pence) – basic and diluted 40.70 40.92
Capital loss per share (pence) – basic and diluted (108.29) (329.12)
--------------- ---------------
Total loss per share (pence) - basic and diluted (67.59) (288.20)
========= =========
As at As at
29 February 28 February
2024 2023
Net asset value per ordinary share (debt at par value) (pence) 1,450.15 1,553.41
Net asset value per ordinary share (debt at fair value) (pence) 1,502.25 1,601.42
Ordinary share price (pence) 1,326.00 1,380.00
========= =========
8. DEBTORS
2024 2023
£’000 £’000
Sales for future settlement 3,577 5,648
Prepayments and accrued income 1,090 1,210
--------------- ---------------
4,667 6,858
========= =========
9. CREDITORS – AMOUNTS FALLING DUE WITHIN ONE YEAR
2024 2023
£’000 £’000
Purchases for future settlement 1,923 2,805
Interest payable 584 571
Share buybacks awaiting settlement 66 –
Accruals 3,890 5,170
--------------- ---------------
6,463 8,546
========= =========
10. CREDITORS – AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR
2024 2023
£’000 £’000
2.74% loan note 2037 25,000 25,000
Unamortised loan note issue expenses (182) (196)
--------------- ---------------
24,818 24,804
========= =========
2.41% loan note 2044 20,000 20,000
Unamortised loan note issue expenses (133) (140)
--------------- ---------------
19,867 19,860
========= =========
2.47% loan note 2046 25,000 25,000
Unamortised loan note issue expenses (170) (160)
--------------- ---------------
24,830 24,840
========= =========
Total borrowings 69,515 69,504
========= =========
The fair value of the 2.74% loan note has been determined based on a
comparative yield for UK Gilts for similar duration maturity and spreads, and
as at 29 February 2024 equated to a valuation of 74.55p per note (2023:
75.22p), a total of £18,638,000 (2023: £18,805,000). The fair value of the
2.41% loan note has been determined based on a comparative yield for UK Gilts
for similar duration maturity and spreads, and as at 29 February 2024 equated
to a valuation of 60.55p per note (2023: 62.80p), a total of £12,110,000
(2023: £12,560,000). The fair value of the 2.47% loan note has been
determined based on a comparative yield for UK Gilts for similar duration
maturity and spreads, and as at 29 February 2024 equated to a valuation of
56.44p per note (2023: 58.79p), a total of £14,110,000 (2023: £14,698,000).
The £15 million debenture stock was issued on 8 July 1997. Interest on the
stock was payable in equal half yearly instalments on 31 July and 31 January
in each year. The stock was secured by a first floating charge over the whole
of the assets of the Company and was redeemed at par on 31 July 2022.
The £25 million loan note was issued on 24 May 2017. Interest on the note is
payable in equal half yearly instalments on 24 May and 24 November in each
year. The loan note is unsecured and is redeemable at par on 24 May 2037.
The £20 million loan note was issued on 3 December 2019. Interest on the note
is payable in equal half yearly instalments on 3 December and 3 June in each
year. The loan note is unsecured and is redeemable at par on 3 December 2044.
The second £25 million loan note was issued on 16 September 2021. Interest on
the note is payable in equal half yearly instalments on 24 May and 16
September each year. The loan note is unsecured and is redeemable at par on 16
September 2046.
The Company also has available an uncommitted overdraft facility of £60
million with The Bank of New York Mellon (International) Limited, of which
£7,871,000 had been utilised at 29 February 2024 (2023: £nil).
11. CALLED UP SHARE CAPITAL
Ordinary Treasury Total Nominal
shares shares shares value
number number number £’000
Allotted, called up and fully paid share capital comprised:
Ordinary shares of 25 pence each
At 28 February 2023 48,829,792 1,163,731 49,993,523 12,498
Ordinary shares repurchased into treasury (1,510,000) 1,510,000 – –
--------------- --------------- --------------- ---------------
At 29 February 2024 47,319,792 2,673,731 49,993,523 12,498
========= ========= ========= =========
During the year ended 29 February 2024, the Company repurchased 1,510,000
shares into treasury for a total consideration of £19,989,000 (2023: no
shares repurchased).
Since 29 February 2024 and up to the latest practicable date of 8 May 2024,
220,000 ordinary shares have been repurchased into treasury for a total
consideration of £2,946,000.
The ordinary shares (excluding any shares held in treasury) carry the right to
receive any dividends and have one voting right per ordinary share. There are
no restrictions on the voting rights of the ordinary shares or on the transfer
of ordinary shares.
12. RESERVES
Distributable reserves
Share Capital Capital Capital Revenue
premium redemption reserve reserve reserve
account reserve (arising on (arising on £’000
£’000 £’000 investments revaluation
sold) of
£’000 investments
held)
£’000
At 28 February 2023 51,980 1,982 620,667 52,812 18,590
Movement during the year:
Losses on realisation of investments – – (30,417) – –
Change in investment holding gains – – – (17,209) –
Losses on foreign currency transactions – – (7) (2) –
Finance costs and expenses charged to capital – – (4,757) – –
Net profit for the year – – – – 19,691
Ordinary shares repurchased into treasury – – (19,859) – –
Share buyback costs – – (130) – –
Dividends paid during the year – – – – (19,633)
--------------- --------------- --------------- --------------- ---------------
At 29 February 2024 51,980 1,982 565,497 35,601 18,648
========= ========= ========= ========= =========
Share Capital Distributable reserves
premium redemption
account reserve
£’000 £’000
Capital Capital Revenue
reserve reserve reserve
(arising on (arising on £’000
investments revaluation
sold) of
£’000 investments
held)
£’000
At 28 February 2022 51,980 1,982 641,658 192,527 16,433
Movement during the year:
Losses on realisation of investments – – (15,627) – –
Change in investment holding gains – – – (139,731) –
(Losses)/gains on foreign currency transactions – – (21) 16 –
Finance costs and expenses charged to capital – – (5,343) – –
Net profit for the year – – – – 19,980
Dividends paid during the year – – – – (17,823)
--------------- --------------- --------------- --------------- ---------------
At 28 February 2023 51,980 1,982 620,667 52,812 18,590
========= ========= ========= ========= =========
The share premium account and capital redemption reserve are not distributable
reserves under the Companies Act 2006. In accordance with ICAEW Technical
Release 02/17BL on Guidance on Realised and Distributable Profits under the
Companies Act 2006, the capital reserve may be used as distributable reserves
for all purposes and, in particular, the repurchase by the Company of its
ordinary shares and for payments such as dividends. In accordance with the
Company’s Articles of Association, the capital reserve and the revenue
reserve may be distributed by way of dividend. The gain on the capital reserve
arising on the revaluation of investments of £35,601,000 (2023: gain of
£52,812,000) is subject to fair value movements and may not be readily
realisable at short notice, as such it may not be entirely distributable. The
investments are subject to financial risks; as such capital reserves (arising
on investments sold) and the revenue reserve may not be entirely distributable
if a loss occurred during the realisation of these investments.
13. VALUATION OF FINANCIAL INSTRUMENTS
Financial assets and financial liabilities are either carried in the Balance
Sheet at their fair value (investments) 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).
Section 34 of FRS 102 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 of the 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.
The fair value hierarchy has the following levels:
Level 1 – Quoted market price for identical instruments in active markets
A financial instrument is regarded as quoted in an active market if quoted
prices are readily available from an exchange, dealer, broker, industry group,
pricing service or regulatory agency and those prices represent actual and
regularly occurring market transactions on an arm’s length basis. The
Company does not adjust the quoted price for these instruments.
Level 2 – Valuation techniques using observable inputs
This category includes instruments valued using quoted prices for similar
instruments in markets that are considered less active; or other valuation
techniques where significant inputs are directly or indirectly observable from
market data.
Level 3 – Valuation techniques using significant unobservable inputs
This category includes all instruments where the valuation technique includes
inputs not based on market data and these inputs could have a significant
impact on the instrument’s valuation.
This category also includes instruments that are valued based on quoted prices
for similar instruments where significant entity determined adjustments or
assumptions are required to reflect differences between the instruments and
instruments for which there is no active market. The Investment Manager
considers observable data to be that market data that is readily available,
regularly distributed or updated, reliable and verifiable, not proprietary,
and provided by independent sources that are actively involved in the relevant
market.
The level in the fair value hierarchy within which the fair value measurement
is categorised in its entirety is determined on the basis of the lowest level
input that is significant to the fair value measurement. 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 including an assessment of the relevant risks including but not
limited to credit risk, market risk, liquidity risk, business risk and
sustainability risk. The determination of what constitutes ‘observable’
inputs requires significant judgement by the Investment Manager, and these
risks are adequately captured in the assumptions and inputs used in
measurement of Level 3 assets or liabilities.
Fair values of financial assets and financial liabilities
The table below is an analysis of the Company’s financial instruments
measured at fair value at the balance sheet date.
Financial assets at fair value through profit or loss Level 1 Level 2 Level 3 Total
at 29 February 2024 £’000 £’000 £’000 £’000
Equity investments 765,178 – – 765,178
--------------- --------------- --------------- ---------------
Total 765,178 – – 765,178
========= ========= ========= =========
Financial assets at fair value through profit or loss Level 1 Level 2 Level 3 Total
at 28 February 2023 £’000 £’000 £’000 £’000
Equity investments 806,088 – – 806,088
--------------- --------------- --------------- ---------------
Total 806,088 – – 806,088
========= ========= ========= =========
There were no transfers between levels for financial assets during the year
recorded at fair value as at 29 February 2024 and 28 February 2023. The
Company did not hold any Level 3 securities throughout the financial year or
as at 29 February 2024 (2023: nil).
For exchange listed equity investments, the quoted price is the bid price.
Substantially all investments are valued based on unadjusted quoted market
prices. Where such quoted prices are readily available in an active market,
such prices are not required to be assessed or adjusted for any price related
risks, including climate risk, in accordance with the fair value related
requirements of the Company’s Financial Reporting Framework.
14. TRANSACTIONS WITH THE MANAGER AND AIFM
BlackRock Fund Managers Limited (BFM) provides management and administration
services to the Company under a contract which is terminable on six months’
notice. BFM has (with the Company’s consent) delegated certain portfolio and
risk management services, and other ancillary services to BlackRock Investment
Management (UK) Limited (BIM (UK)). Further details of the investment
management contract are disclosed in the Directors’ Report contained within
the Annual Report and Financial Statements.
The investment management fee for the year ended 29 February 2024 amounted to
£4,437,000 (2023: £4,784,000) as disclosed in note 4 to the Financial
Statements above. At the year end, £3,319,000 was outstanding in respect of
the management fee (2023: £4,784,000).
In addition to the above services, BIM (UK) provided the Company with
marketing services. The total fees paid or payable for these services for the
year ended 29 February 2024 amounted to £174,000 including VAT (2023:
£170,000). Marketing fees of £137,000 (2023: £137,000) were outstanding at
the year end.
During the year, the Manager pays the amounts due to the Directors. These fees
are then reimbursed by the Company for the amounts paid on its behalf. As at
29 February 2024, an amount of £210,000 (2023: £105,000) was payable to the
Manager in respect of Directors’ fees.
The ultimate holding company of the Manager and the Investment Manager is
BlackRock, Inc., a company incorporated in Delaware, USA.
15. RELATED PARTIES DISCLOSURES
Directors’ emoluments
At the date of this report, the Board consists of six Non-executive Directors,
all of whom are considered to be independent of the Manager by the Board.
Disclosures of the Directors’ interests in the ordinary shares of the
Company and fees and expenses payable to the Directors are set out in the
Directors’ Remuneration Report. At 29 February 2024, an amount of £17,000
(2023: £14,000) was outstanding in respect of Directors’ fees.
Significant holdings
The following investors are:
a. funds managed by the BlackRock Group or are affiliates of BlackRock, Inc.
(Related BlackRock Funds) or
b. investors (other than those listed in (a) above) who held more than 20% of
the voting shares in issue in the Company and are as a result, considered to
be related parties to the Company (Significant Investors).
As at 29 February 2024
Total % of shares held by Related Total % of shares held by Significant Number of Significant Investors who
BlackRock Funds Investors who are not affiliates of are not affiliates of BlackRock Group or
BlackRock Group or BlackRock, Inc. BlackRock, Inc.
9.7 n/a n/a
As at 28 February 2023
Total % of shares held by Related Total % of shares held by Significant Number of Significant Investors who
BlackRock Funds Investors who are not affiliates of are not affiliates of BlackRock Group or
BlackRock Group or BlackRock, Inc. BlackRock, Inc.
10.6 n/a n/a
16. CONTINGENT LIABILITIES
There were no contingent liabilities at 29 February 2024 (2023: none).
17. PUBLICATION OF NON-STATUTORY ACCOUNTS
The financial information contained in this announcement does not constitute
statutory accounts as defined in Section 435 of the Companies Act 2006.
The figures set out above have been reported upon by the auditors. The
comparative figures are extracts from the audited financial statements of
BlackRock Smaller Companies Trust plc for the year ended 28 February 2022,
which have been filed with the Registrar of Companies. The reports of the
auditors for the years ended 28 February 2023 and 29 February 2024 contain no
qualification or statement under Section 498(2) or (3) of the Companies Act
2006. The 2024 Annual Report and Financial Statements will be filed with the
Registrar of Companies after the Annual General Meeting.
18. ANNUAL REPORT AND FINANCIAL STATEMENTS
Copies of the Annual Report and Financial Statements will be sent to members
shortly and will be available from The Company Secretary, BlackRock Smaller
Companies Trust plc, 12 Throgmorton Avenue, London EC2N 2DL.
19. ANNUAL GENERAL MEETING
The Annual General Meeting of the Company will be held at 12 Throgmorton
Avenue, London EC2N 2DL on 20 June 2024 at 11:30 a.m.
ENDS
The Annual Report and Financial Statements will also be available on the
BlackRock Investment Management website at http://www.blackrock.com/uk/brsc.
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:
Sarah Beynsberger, Director, Closed End Funds, BlackRock Investment Management
(UK) Limited
Tel: 020 7743 3000
Press Enquiries:
Ed Hooper, Lansons Communications – Tel: 020 7294 3620
E-mail: BlackRockInvestmentTrusts@lansons.com or EdH@lansons.com
13 May 2024
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