REG-BlackRock Smaller Companies Trust Plc: Final Results
15/05/2026 15:30
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 28 February 2026
Performance record
As at As at
28 February 28 February
2026 2025
Net asset value per ordinary share (debt at par value) (pence)(1,4) 1,516.70 1,403.45
Net asset value per ordinary share (debt at fair value) (pence)(1,4) 1,579.08 1,463.44
Ordinary share price (pence)(1) 1,402.00 1,270.00
Deutsche Numis Smaller Companies plus AIM (excluding Investment 19,578.62 16,108.27
Companies) Index (2)
======== ========
Assets
Total assets less current liabilities (£’000) 673,413 684,322
Equity shareholders’ funds (£’000)(3) 603,842 614,779
Ongoing charges ratio(4,5) 0.8% 0.8%
Dividend yield(4) 3.2% 3.5%
Gearing(4) 5.7% 13.3%
======== ========
For the For the
year ended year ended
28 February 28 February
2026 2025
Performance (with dividends reinvested)
Net asset value per ordinary share (debt at par value)(2,4) 11.5% -0.6%
Net asset value per ordinary share (debt at fair value)(2,4) 11.2% 0.0%
Ordinary share price(2,4) 14.2% -1.4%
Deutsche Numis Smaller Companies plus AIM (excluding 21.5% 6.2%
Investment Companies) Index(2,4)
======== ========
For the For the Change
year ended year ended %
28 February 28 February
2026 2025
Revenue and dividends
Revenue return per ordinary share 43.77p 42.53p +2.9
First interim dividend per ordinary share 16.00p 15.50p +3.2
Second interim dividend per ordinary share 28.50p 28.50p –
--------------- --------------- ---------------
Total dividends payable and paid 44.50p 44.00p +1.1
======== ======== ========
(
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
Every year is unique in various ways but this past year seems to have
stretched that art to new highs as we have confronted global and national
geopolitical disarray with its inevitable impact on stock markets and
underlying investor thinking. Economic cloudiness has added to this sense of
confusion, enhanced by a Government wedged into a set of policy options that
grow narrower with each day’s new crisis. As our portfolio manager says in
his report, this is not a very easy or comfortable place from which to make
predictions for the future or even present a cogent analysis of the recent
past. What I do have however, is the opportunity to usher in a new era of
opportunity for investors and that is a far more positive place to start.
I want to welcome both past investors and new ones who have so recently joined
us as a result of the combination of BlackRock Smaller Companies Trust plc
(BRSC) with BlackRock Throgmorton Trust plc (THRG). This may not have the same
impact as war in the Middle East but it does reflect the often dramatic
changes that have been taking place in the investment trust sector over the
past two years. Whilst not all of those changes are good, it is fair to say
that this combination will help us deliver better shareholder value as well as
the prospect of improving returns and lower management costs. We are delighted
to take up the challenge to deliver on these enhanced opportunities and look
forward to engaging with our enlarged shareholder group as we work our way
toward achieving the benefits that our new combination can bring. This report
will focus most on last year’s results but it’s important to take some
time to discuss our merger, its rationale and benefits so that everyone can
share a common starting point as we look ahead in these uncertain times.
Combination with BlackRock Throgmorton Trust plc
The combination with THRG effected by way of a scheme of reconstruction of
THRG, was completed on 16 April 2026, following shareholders of both companies
voting overwhelmingly in favour of the combination. This combination brings
together two investment trust companies with similar objectives that have both
been in existence for over sixty years. While each Trust has historically
taken a somewhat different approach toward achieving those investment
objectives, the Boards of both companies felt that a combination now would
deliver better long-term results for all our shareholders. Key among these
positive changes has been the chance to provide shareholders with the
substantially increased economies of scale from our enlarged asset base. These
benefits also include lower management charges from Blackrock along with an
enhanced profile, greater liquidity in the Company’s shares and operating
cost efficiencies.
The transaction also brings together the best of BlackRock’s Emerging
Companies team, with Dan Whitestone joining Roland Arnold as co-manager on the
portfolio, along with the resources of the entire team to identify exciting
new investment ideas in the UK and abroad. This merger has been hard work,
requiring a large and extended commitment of time and effort by the Blackrock
team, our advisors and both Boards. On behalf of the BRSC Board, I would like
to thank everyone involved for their energy, support and diligence in
completing the Company’s combination with THRG. Further details about the
combination can be found in note 21 (contained within the Annual Report and
Financial Statements), which details all the post balance sheet date events.
The financial information in this annual report is for the year ending 28
February 2026 and therefore excludes any impact from the combination with
THRG. At the time of writing (at 12 May 2026), the net asset value of your
enlarged Company is £886 million.
Market overview
The global macroeconomic landscape continues to be marked by significant
volatility, strong inflationary pressures, shifting monetary policies, and
geopolitical tensions shaping economic outcomes. Navigating a clear pathway
through these evolving global conditions remains challenging for your Company
as it has for many others but it is worth noting that many of the UK smaller
companies in our portfolio have continued to produce good results despite the
challenging circumstances, underscoring their ability to manage through
complicated periods and produce good financial results for shareholders. More
information on individual stocks is given in the Investment Managers report
below but it’s important to underscore that our portfolio companies have
shown resilience and management effectiveness despite an uncertain
environment.
While starting only at the end of our financial year, events in the Middle
East – especially disruptions at the Strait of Hormuz – have intensified
and expanded uncertainty over a range of issues, especially energy pricing.
The supply bottlenecks through the Strait of Hormuz have raised concerns
around the world but most of all in Europe. Dramatic price fluctuations have
been a daily challenge but availability of supply is an even more fundamental
issue with airlines already cutting marginal flights to reduce fuel use. All
of this is complicating the efforts of central banks to balance inflation and
growth, contributing to instability in financial markets across the board. The
UK has been no exception, with heightened risks of supply chain disruptions,
inflationary spikes and also challenges in international trade and investment.
This uncertainty has once again driven significant UK market outflows as
investors take risk off the table, depressing share prices indiscriminately,
regardless of stock fundamentals and leaving valuations at depressed levels.
That has impacted our investment results as well.
Performance
In the year under review, your Company’s net asset value (NAV) per share
rose by 11.2% on a total return basis with dividends re-invested (debt at fair
value), lagging well behind our benchmark index return of 21.5%. Over the same
period, our share price rose by 10.4%. During the same period, the FTSE AIM
All-Share Index rose by 27.3%, the FTSE 250 Index rose by 21.0% and the FTSE
100 Index rose by 28.1%. The disparity between different index returns, while
not altogether surprising, also shows some relevant changes in investor
sentiment toward large versus smaller cap companies during a period of ongoing
market uncertainty over future prospects. Those changes in investor attitude
reflect some important trends that we have explored extensively and which have
influenced some of the tactical and strategic shifts in our portfolio for the
future.
More detail on 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 below. In addition, the
chart below illustrates how long-term investors have had an opportunity to
build up an attractive annual income from an investment in BRSC over time.
Even if the initial dividend yield at the point of purchase may have 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 below
shows that £1,000 invested in the Company on 28 February 2006 would have
increased in value by 478% in NAV terms to 28 February 2026, whereas £1,000
invested in the UK open-ended income sector median would have increased by
just 254%. 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 28 February 2026 1 Year 3 Years 5 Years 10 Years 15 Years
change change change change change
% % % % %
NAV per share(1,2,3) 11.2 7.2 0.5 99.9 242.7
Benchmark(1,3,4) 21.5 21.5 14.0 86.9 150.3
Share price(1,3) 14.2 11.7 -5.2 107.1 257.8
(
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.
(4) Benchmark Index (the Deutsche Numis Smaller Companies plus AIM
(excluding Investment Companies) Index).
Returns and dividends
The Company’s revenue return per share for the year increased by 2.9% to
43.77p per share (compared to 42.53p revenue return per share for the year to
28 February 2025). The increase was mainly attributable to an increase in
special dividends, which amounted to 3.99p per share (28 February 2025: 1.71p
per share). Regular dividend income from portfolio companies decreased by
18.0% compared to 2025 levels, reflective of the continuing trend in the UK
equity market to prioritise share buybacks over dividends which is having an
impact on overall dividend growth. Changing Government policies have often
influenced these choices in the past and future trends are hard to predict.
The fact that the Government wants to encourage individual investors may well
lead to stronger dividend growth ahead and it is an area we monitor closely.
The Board is mindful of the importance of our dividend 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
(£537.4 million as at 28 February 2026, including revenue reserves of £18.0
million). To put this into context, the current level of annual dividend
distribution based on dividends declared in the last twelve months up to the
date of this report amounted to £17.8 million.
In the ordinary course of events, the Company would pay a final dividend in
respect of the financial year ending 28 February 2026, subject to approval by
Shareholders at the Company’s 2026 Annual General Meeting, to be paid in
June 2026.
However, given that THRG paid a final dividend in respect of its financial
year ended 30 November 2025 as well as a pre-liquidation dividend ahead of
implementation of the Combination, it would have been inequitable if THRG
Shareholders rolling over into BRSC had received the Company’s final
dividend in addition to this. Accordingly, rather than declaring a final
dividend as part of these annual results, the Company has declared a second
interim dividend on 31 March 2026 of 28.50p per share, representing the amount
that would otherwise have been declared as a final dividend paid to those
Shareholders who were on the Register as at 10 April 2026. Total dividends
payable and paid for the year ended 28 February 2026 of 44.50p per share
reflects a 1.1% increase over the total dividends paid for 2025 of 44.00p per
share.
Dividend policy
In October 2025, the Company announced a revised dividend policy. This revised
policy provides that, with effect from 1 March 2026, the Company will make
quarterly dividend payments instead of our previous bi-annual dividend
payments. In all other respects the Company’s dividend policy will remain
unchanged, and the Board will continue to focus on ensuring the sustainability
of dividends and their future growth through investment in companies with
strong balance sheets, solid management and sustainable business growth
models. Under the revised policy, the Board’s intention is to make three
dividend payments in September, December and March each year, each equal to a
quarter of the previous year’s total dividend. We will then declare a final
dividend for the full year (payable in June) reflecting the final amount
required to ensure an appropriate level of full year dividend.
The first dividend to be paid to all shareholders following the Combination
will be the first interim dividend for the current financial year (ending 28
February 2027), to be paid in September 2026. It is intended that this first
interim dividend will be equal to 11.125p per share, equal to a quarter of the
total dividends paid by BRSC in respect of the financial year ending 28
February 2026. While the Company’s investment objective is centered around
capital growth, the Board remains mindful of the importance of yield to
shareholders and to potential investors. As a point of reference, the yield on
the shares as at the end of the Company’s last full financial year ended 28
February 2026 (based upon total dividends of 44.5 pence per share and a share
price of 1,402 pence at the end of the financial year) was 3.2%. The Company
has increased its annual dividend every year since 2003. The annualised
increase in dividends paid across those 23 years equates to 10.7% and your
Company has received the accolade of ‘AIC Dividend Hero’ for its
consistent growth in dividends over that period.
Management of share rating
The Board monitors the BRSC share rating closely. We recognise the importance
to shareholders that the price of the Company’s shares do not trade at a
significant discount to the underlying NAV over sustained periods. Therefore,
where deemed to be in shareholders’ long-term interests, the Board will
exercise its powers to issue shares or buy back shares with the objective of
ensuring that an excessive premium or discount does not arise. During the past
financial year, we faced persistent market volatility with discounts across
the closed end funds sector becoming persistently wide. As a result of this
sector-wide pressure, BRSC shares traded at a discount to NAV ranging from 10%
to 13.5% over the year.
To address the challenge of persistent discounts the Board undertook an active
buyback programme during the year, with a total of 3,992,000 ordinary shares
repurchased at a total cost of £52.1 million to be held in treasury. All
shares were bought back at a significant discount to NAV, delivering an uplift
to the NAV per share of 1.2% for continuing shareholders for the year under
review. The Board believes that its actions helped to minimise discount
volatility. The Company’s shares traded at an average discount to NAV (with
debt at fair value) over the full year of 12.3%, compared to an average
discount of 11.0% for the year to 28 February 2025. To put this in context,
the average discount for companies in the AIC UK Smaller Companies sector for
the same period was 11.4%. Since our buyback programme began 3 years ago on 3
March 2023, we have acquired a total of 9,062,000 ordinary shares repurchased
at a cost of £119.9 million.
We are committed to an ongoing discount
control process and as outlined below, together with improving performance, we
look for a narrowing discount ahead. For context, companies in the UK
closed-end fund sector bought back a record £10.2 billion of shares in 2025.
Tender and discount control mechanism
While the Board regards the Company’s share rating at any particular time as
primarily a reflection of sentiment towards the sector alongside portfolio
performance, both in absolute terms and relative to the peer group, it
recognises that there are a number of other factors which can have a material
impact on driving demand for the Company’s shares. Consequently as part of
the Combination with THRG, the Board offered BRSC shareholders a tender
opportunity for up to 28% of our issued share capital. The results of the
tender were announced on 13 April 2026, with the tender oversubscribed and a
total of 18,893,897 shares tendered (47.46% of the Company's issued share
capital). Accordingly, the tender was scaled back, and 11,147,581 shares will
be repurchased in due course representing 28% of the Company's issued share
capital. It is currently envisaged that realisation of the assets held in the
Tender Pool which has been established for the purposes of the Tender Offer
will be completed in or around the week commencing 29 June 2026, with the
final Tender Price and payment date to be announced by the Company shortly
thereafter.
In addition to the tender offer, and as part of the Combination proposals, the
Board has introduced a number of features which are designed to enhance the
attraction of our Company in a number of important ways.
• We have refreshed our investment proposition with additional
flexibility to diversify risk and enhance returns;
• Negotiated a new highly competitive management fee structure
leading to a reduced estimated OCR for the ongoing vehicle;
• Created a formal discount control mechanism with the introduction
of a triennial 100% performance-related conditional tender offer to be made
available to all Shareholders. The Company will offer shareholders the ability
to tender up to 100% of their shares at a 4% discount to NAV (less costs) if
the Company’s NAV per share underperforms its Benchmark, the Deutsche Numis
Smaller Companies plus AIM (excluding Investment Companies) Index, over the
relevant performance period. It is expected that the first such tender offer,
were it to be triggered, would be in 2029.
The Board believes that the introduction of these initiatives, coupled with a
continuation of our proactive share buyback policy, will make a sustained
single-digit discount achievable for the Company in normal market conditions.
Investment policy changes
As part of the Combination with THRG, the Board proposed a number of
amendments to the Company’s investment policy which were approved by
shareholders at the General Meeting on 30 March 2026. Under the revised
investment policy, the Investment Manager will continue to seek to achieve the
Company’s investment objective through investing predominantly in listed UK
smaller companies, but will have additional latitude to invest in small cap
stocks outside of the Benchmark Index and will be able to invest up to 15% of
the Company’s gross assets, at the time of acquisition, in global small cap
stocks which are listed overseas and which do not have a primary or secondary
UK listing.
The rationale for this change, as well as responding to shareholder feedback,
was to provide additional flexibility for the Investment Manager to diversify
risk and deliver alpha at times when the UK small cap market was under stress,
while retaining a core UK small cap mandate. The additional exposure to global
small cap also mirrored the limit previously adopted by the THRG. More
information on the revised policy is set out in the Strategic Report below
(and contained within the Annual Report and Financial Statements).
Management fees
As part of the above Combination, the Board agreed revised management fee
arrangements with BlackRock, moving to charge a fee on net assets instead of
total assets less current liabilities and introducing a new tiered rate as
follows:
• 0.5% per annum on the first £500 million of the Company’s
NAV;
• 0.475% per annum NAV between £500 million and £750 million; and
• 0.45% per annum on NAV in excess of £750 million.
The revised fee structure was implemented with effect from 16 April 2026. In
addition to the revised fee, BlackRock has agreed to waive the management fee
for six months with effect from 16 April 2026 as a contribution to the costs
of the transaction.
The new fee arrangements combined with the larger asset base post Combination
should result in a significant reduction in the Company’s operating charges
ratio, which is estimated to fall to 0.63% on an annualised basis (versus 0.8%
last year). The fee also represents the lowest fee in the AIC UK Smaller
Companies sector for trusts without a performance fee in place.
Board composition
Having just completed a long and complicated merger process it is important to
retain and integrate the corporate memory available to us in merging with
THRG. With that in mind I am delighted to welcome two new directors to the
Board as part of the combination with THRG. Angela Lane and Louise Nash were
appointed as non-executive Directors of the Company with effect from 16 April
2026, and will stand for election at the Company’s Annual General Meeting on
17 June 2026. Both Angela and Louise bring with them considerable corporate
knowledge and financial services expertise. Further details of their
biographies can be found within the Annual Report and Financial Statements.
Agreement with Saba
On 22 January 2025, the Company announced that it had entered into an
agreement with Saba Capital Management L.P. (Saba), pursuant to which Saba has
given a number of undertakings to the Company regarding its shareholding in
the Company. The full announcement can be viewed at the following link:
https://www.londonstockexchange.com/news-article/%20BRSC/agreement-with-Saba/16863463.
The agreement was to last until the earlier of the day following the
completion of the Company’s 2027 AGM or 31 August 2027 and does not limit
Saba’s ability to acquire or dispose of shares in the Company. As announced
on 20 February 2026, the Board has subsequently agreed an extension of the
period of this standstill agreement to June 2030. No other terms have been
amended.
Your Board believes that the extension of this agreement is in the long-term
interest of shareholders as we continue to invest for their future benefit.
Gearing and sources of finance
Gearing can play an important role in portfolio performance over time although
your Company continues to maintain a very conservative capital structure. The
Company has current borrowing facilities of 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 consists of
an uncommitted overdraft facility of £60 million with The Bank of New York
Mellon (International) Limited with interest charged at SONIA plus 100 basis
points (of which £262,000 was utilised at year end – additional information
is set out in note 13 contained within the Annual Report and Financial
Statements).
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 5.7% of net assets (2025: 13.3%), well within our target range.
Share sub-division
Since BlackRock was appointed as manager in December 2004, the market price of
the Company’s shares has increased from 204 pence to 1,402 pence (as at 28
February 2026). In order to assist the Company’s growing base of individual
investors, monthly savers and those who reinvest their dividends or are
looking to invest smaller amounts, the Board will implement a sub-division of
the Company’s shares on a 5 for 1 basis, effective once the tender has
completed (expected to be no later than July 2026). Following this
sub-division, each shareholder will hold five sub-divided shares for each
existing share. Whilst the sub-division will increase the number of ordinary
shares the Company has in issue, the Net Asset Value per share and market
price immediately after the sub-division will become one-fifth of their
respective values immediately preceding the sub-division and hence there will
be no impact on the overall value of a shareholder’s holding in the Company.
The subdivided shares will carry the same rights as the existing shares,
including the same rights to participate in dividends paid by the Company. The
Board anticipates that this share sub-division will also improve the liquidity
in and marketability of the Company’s ordinary shares, to the benefit of all
shareholders.
Annual General Meeting
The Company’s AGM will be held in person at the offices of BlackRock at 12
Throgmorton Avenue, London EC2N 2DL on 17 June 2026 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, market volatility has increased as investors
grapple with the implications of a messy war in the Middle East and its
unpredictable side effects. During this period, the Company’s NAV (as at 12
May 2026) has decreased by 7.5%, against a decrease in the benchmark of 5.6%,
and the share price has fallen by 8.7%.
Against this turbulent backdrop, your Board believes that through the
combination with THRG it has positioned your Company well to weather the
challenges across equity markets, with a larger asset base, lower fees and
operating charges, an enhanced portfolio management team and with additional
flexibility under a refreshed investment policy. The Company’s portfolio
remains 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 and have been successfully
demonstrating these skills through the challenging environment we have faced.
UK assets are inexpensive by global standards and we have companies with real
growth and exciting long-term prospects. As such we believe that the enlarged
BRSC 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, Dundas House, 20 Brandon Street, Edinburgh, EH3 5PP
marked for the attention of the Chairman.
Ronald Gould
Chairman
15 May 2026
Investment Manager’s
Report
Market review
There has been a pattern over the last few years, a recurring theme, not
related to one specific event or notion. I’m not referring to inflation or
politics although these are contributing factors and recognisable symptoms.
What I’m referring to is the unnerving cycle of destabilising events that
happen almost every year just as I’m sitting down to write this report.
Since the start of this decade, we have had COVID-19 (lockdown March 2020),
Ukraine invasion (February 2022), the failure of Silicon Valley Bank (March
2023), Tariff “Liberation Day” (April 2025), and now the US strikes on
Iran (February 2026). These events are inflationary, disruptive to supply
chains, drive consumer and corporate behaviour, upset geopolitical
relationships, and are often binary in nature with the potential conclusions
requiring very different portfolios. They also make it very difficult to write
an annual letter.
Outside of these specific events the last twelve months have proven
frustratingly challenging. Underlying company fundamentals have remained
resilient, and whilst the portfolio has seen some disappointments, for the
most part management teams have delivered against expectations. Unfortunately,
valuations and therefore share prices have struggled to reflect this progress.
This disconnect has been driven by the on-going structural and cyclical
headwinds; inflation, tight government finances, poor governmental signalling,
the uncertain and to some extent unknowable impact of artificial intelligence
(AI), all of which ultimately lead to the main culprit of outflows. The result
is a market where returns have been driven by a narrow set of companies, and
active management has struggled to keep pace with the market.
Performance review
The second half of the financial year saw the portfolio return 8.1% vs a
benchmark of 10.6%. From a market perspective, the period has been
characterised by a number of powerful and, at times, competing forces. Global
equity markets have remained heavily influenced by the dominance of AI-related
narratives, with capital concentrated in a relatively small group of perceived
“winners”, whilst any stock that finds itself in the AI “loser”
crosshairs has seen significant weakness. The “shoot first, ask questions
later” mentality has been indiscriminate and painful, upending the narrative
on business models that until recently were perceived as having significant
structural economic moats. Meanwhile, the negative narrative has spread into
other markets, most recently private credit where fears of large-scale
defaults from exposed companies have catalysed investor redemption requests.
When I look at the list of stocks that have detracted from performance in the
second half, there is a common thread that runs across the bulk of them. These
are businesses that have not disappointed, in fact in many cases they have not
only delivered on expectations but beaten them. The single biggest detractor
in the period was payments business Boku, where the market reaction to a
company that has delivered on targets, won significant new customers, and
continues to demonstrate the validity of the business model has been a near
20% fall in the share price. Similarly, Tatton Asset Management was rewarded
with a 12% share price fall in the period despite seeing some analysts upgrade
earnings by high single digits. The list goes on; XPS Pensions has de-rated
despite continued upgrades, IntegraFin has been rewarded for unblemished
delivery in 2025 with the lowest rating since the 2018 IPO, as has insolvency
firm FRP Advisory. I cannot remember a period where the underperformers felt
so undeserving. That is not to say all has gone to plan. Paypoint revealed a
period of soft trading that saw the shares fall by a third. Hilton Food
Group’s organisational difficulties and poor handling of food inflation
ultimately cost the Chief Executive his job.
In the spirit of fairness, I should acknowledge some of the positive
performers where share prices have been driven by thematics rather than
operational excellence, in particular amongst the resources sector. Pan
African Resources, Atalaya Mining, Sylvania Platinum and Hochschild Mining
have all seen outsized returns because of the extraordinary performance of the
relevant commodity prices. Outside of the resources sector there have been
several positive contributions this year.
Luceco
shares have responded to a well-timed move into the EV charger market, as well
as a return to growth in the core electrical products market. Serco Group has
seen both earnings momentum in the core business and a re-rating as investors
seek security in their multi-year contracted revenues. Relatively new holding
Helios Towers responded positively to a capital markets day that laid out new
medium-term targets and a capital return policy. Aerospace component supplier
Senior disposed of their Aerostructures division and latterly have announced
several parties are interested in acquiring the ongoing operations. Finally,
building materials producer Sigmaroc have rallied through a combination of
sustained delivery on earnings coupled with an exposure into the potential
German infrastructure spend.
Activity
The last year has seen higher portfolio turnover than in recent years as a
result of adapting the portfolio to better reflect underlying trends in the
investment universe. As the number of listed companies continues to fall, the
average and upper market capitalisation of the universe continues to increase.
As an illustration of the changes, the market cap of the largest company in
the benchmark rose from £1.9 billion to £2.5 billion when the benchmark went
through the annual rebalance. Adding larger holdings brings additional
benefits. Typically, the greater the market capitalisation the greater the
underlying liquidity of the shares, which allows us to be more tactical with
positioning.
A new position has been added in housebuilder Bellway. To say the UK housing
backdrop has been challenging doesn’t quite do justice to the current
market. New build volumes in the UK have fallen to levels not seen since the
Global Financial Crisis, yet the Government has not yet walked away from the
target of one and a half million new homes through this parliament. This
frankly unreachable target requires volumes not seen in sixty years, but the
valuation of the UK housebuilding sector is in our view suggesting several
years of depressed volumes that flies in the face of demographic pressures. In
times of economic uncertainty and volatility, companies that demonstrate lower
revenue volatility backed by secure long-term order books become more
attractive. We added positions in Mitie Group and Mears Group, both companies
where we felt the negative press commentary centered around their UK asylum
contracts had impacted on the valuation of the valuable non-asylum contracts.
Sometimes the best opportunities come from companies where investors have
failed to recognise a fundamental shift in an investment case. We believe
Helios Towers is one such opportunity. Having listed in 2019 with a relatively
levered balance sheet, investors shied away and the shares languished. Helios
own and operate telecom towers in Africa and the Middle East, providing
exposure to long-term inflation adjusted revenue streams derived from critical
infrastructure. Over the last few years, the debt has been significantly
reduced allowing management to announce a capital return strategy.
Given the amount of mergers and acquisitions (“M&A”) in recent years it
has been notable how little the Company has benefited. Whilst there is no
identifiable reason for this, it is encouraging to see some activity in the
last twelve months with bids for Alpha Group, JTC and Empiric Student
Property. We sold our position in Gamma Communications following their move
into Germany, a market where we feel management have a lot to prove, as well
as concerns UK small and medium sized businesses (“SME”) are struggling in
the current economic and fiscal backdrop. These SME concerns were also the
motivation for selling our position in Workspace, where deteriorating
confidence has been translating into reduced occupancy and higher churn.
The impact of artificial intelligence
The world does not need another missive on the impact of AI. There are plenty
of volumes out there better informed and written than I can produce here.
Indeed some of those articles have led to significant market corrections. In
January Dario Amodei, CEO of Anthropic, published his thoughts which were
widely shared. Amodei’s piece was followed by Matt Shumers post on X
“Something Big is Coming” and Citrini Research’s vision of the world in
2028. Every new release of Claude, or developmental anecdote has driven the
next phase of the “SaaSpocalypse”, as the market looked beyond the AI
winners and focused on the tangential losers. There is no doubt that AI has
the potential to upend business models, bring down competitive barriers, and
drive significant disruption. But we shouldn’t underestimate the potential
for the disrupted to fight back, after all the same AI tools are available to
everyone. Product development and research cycles are likely to fall
dramatically, incumbent firms can respond to competitive threats by rapidly
bringing out their own products and selling them into their existing customer
base. Those of us with grey hair will remember how the internet was initially
seen as a threat to existing business models, how legacy and lazy incumbents
would struggle to compete and adapt to the new world. Yet often what happened
was the upstarts failed to persuade consumers to switch, and the incumbents
developed their own internet strategies. AI is different, of course it is, but
human nature is the same. Management incentive structures prioritise growth,
and whilst there will inevitably be cost savings in some areas, I
fundamentally believe most management teams will re-invest those savings in
growth rather than just pocket the enhanced margin. Cost savings are a form of
profit investors ascribe with a low multiple, whereas investment that leads to
sustainable profit growth draws higher multiples. All else being equal
productivity should increase and inflation should fall, whilst product
development timelines could vastly accelerate.
Outlook
The near term is impossible to call. Even as I write this piece I’m
painfully aware that from the moment I press send to the time the words appear
in print my conclusions may well be out of date. So rather than the inevitable
embarrassment of making predictions, it is likely more instructive to
illustrate how we are framing our current discussions. I have commented before
on the growing disconnect between how the UK is portrayed and the reality of
the situation. On the one hand there is no getting away from the tight fiscal
position the country is in, with the recent surge in UK bond yields having a
significant impact on Chancellor Rachel Reeves’ headroom, raising the
spectre of yet another tax grab budget. But the UK debt position isn’t out
of line to other major Western economies. In fact we can say the same for most
economic indicators; inflation, growth, debt to gross domestic product (GDP),
all are in the same ballpark. Yet the valuation of UK stocks relative to other
developed markets is suggestive of a greater gulf, of something rotten at the
heart of the UK.
Against this backdrop, the structural challenges facing UK smaller and medium
sized equities remain largely unchanged. Despite several years of
underperformance and increasingly compelling relative valuations, the asset
class continues to experience sustained outflows. While the pace has moderated
from peak levels, the ongoing withdrawal of capital remains significant for a
relatively illiquid segment of the market and continues to exert downward
pressure on valuations.
This raises the same fundamental question, one that I have pondered in
previous reports: what is required to re-engage investors? As discussed in
last year’s review, a combination of attractive valuations, economic and
political stability, a healthy pipeline of opportunities and, ultimately, a
willing investor base are all important components. There is little doubt that
valuations remain attractive, but the other items on my tick list are proving
elusive. Depressingly the Labour Party are continuing the pattern of policy
followed by U-turn, and questions remain about a potential change in
leadership that were it to come would most likely herald a shift to the left.
The pipeline of new opportunities is still blocked, with little appetite for
companies to test the market, despite the continued presence of both strategic
and private buyers of listed assets. On the face of it the outlook is
challenging.
However, while sentiment towards UK small and mid-cap equities remains
subdued, we continue to see clear evidence of value, both in absolute terms
and relative to other markets. The ongoing level of corporate activity
reinforces this view, with strategic buyers taking advantage of depressed
valuations. The "shoot first ask questions later" mentality with regards to AI
disruption is presenting significant opportunity, and analogous to the dotcom
disruption a quarter of a century ago, there are now a myriad of companies
trading at record low valuations where we believe the AI threat has been
fundamentally overplayed or misanalysed.
In summary, the UK smaller companies market continues to experience a period
of weak sentiment and structural outflows that have weighed on both absolute
and relative performance. Regardless, the underlying fundamentals of many
portfolio companies remain intact, and the valuation opportunity across the
asset class is increasingly compelling. While the timing of a shift in
investor sentiment remains uncertain, we believe the conditions for improved
outcomes are gradually building, and we remain confident in the long-term
opportunity set.
Roland Arnold
BlackRock Investment Management (UK) Limited
15 May 2026
Ten largest investments
as at 28 February 2026
Together, the Company’s ten largest investments represented 25.6% of the
Company’s portfolio as at 28 February 2026 (2025: 22.8%).
1
Greencore Group
(2025: 48th)
Food
Producers
Portfolio £18,015,000
Percentage of portfolio 2.8% (2025: 0.8%)
Leading manufacturer of convenience food in the UK. It supplies major
supermarkets and other retailers with products like sandwiches, salads, sushi,
chilled ready meals and sauces.
2
Great Portland Estates
(2025: 15th)
Real
Estate Investment Trusts
Portfolio value £17,924,000
Percentage of portfolio 2.8% (2025: 1.7%)
London-focused real estate company that develops and manages high-quality
commercial property, primarily offices and mixed-use assets.
3
Serco Group
(2025: 55th)
Industrial Support Services
Portfolio value £17,017,000
Percentage of portfolio 2.7% (2025: 0.8%)
A services company that delivers outsourced public services across health,
transport, immigration, defence, justice and citizen services. It partners
with governments to manage complex, mission-critical operations under
long-term contracts.
4
IntegraFin
(2025: 2nd)
Financial Services
Portfolio value £16,906,000
Percentage of portfolio 2.6% (2025: 2.6%)
Leading investment platform used by financial advisers to manage client
portfolios efficiently. It generates revenues primarily from administration
and custody services across tax
-
efficient wrappers.
5
XPS Pensions
(2025: 3rd)
Financial Services
Portfolio value £16,826,000
Percentage of portfolio 2.6% (2025: 2.6%)
A UK
-
focused pensions consultancy providing actuarial, administration,
investment advisory and covenant services, supporting both private and public
sector pension schemes.
6
Morgan Sindall
(2025: 18th)
Construction & Materials
Portfolio value £16,696,000
Percentage of portfolio 2.6% (2025: 1.5%)
A UK construction and regeneration group operating across construction,
infrastructure, fit
-
out, urban regeneration and housing partnerships. The
group focuses on capital
-
light, partnership
-
based models with strong
public
-
sector exposure.
7
Boku
(2025:
9th)
Industrial Support Services
Portfolio value £16,341,000
Percentage of portfolio 2.6% (2025: 1.9%)
Global payments company, specialising in local payment methods, including
direct carrier billing and digital wallets.
8
Tatton Asset Management
(2025: 7th)
Financial Services
Portfolio value £15,127,000
Percentage of portfolio 2.4% (2025: 2.2%)
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.
9
Helios Towers
(2025: n/a)
Mobile
Telecommunications
Portfolio value £14,725,000
Percentage of portfolio 2.3% (2025: n/a)
Leading telecommunications tower company operating across Africa and the
Middle East. It owns and manages passive mobile infrastructure.
10
Sigmaroc
(2025: 80th)
Construction & Materials
Portfolio value £13,964,000
Percentage of portfolio 2.2% (2025: 0.5%)
A buy-and-build construction materials company focused on cementitious and
lime products in the UK and Europe.
Fifty largest investments
as at 28 February 2026
Company Business activity Market % of
value total
£’000 portfolio
Greencore Group A leading manufacturer of convenience food in the UK. It supplies major supermarkets and other retailers with products like 18,015 2.8
sandwiches, salads, sushi, chilled ready meals and sauces
Great Portland Estates London-focused real estate company that develops and manages high-quality commercial property, primarily offices and mixed-use 17,924 2.8
assets
Serco Group A services company that delivers outsourced public services across health, transport, immigration, defence, justice and citizen 17,017 2.7
services. It partners with governments to manage complex, mission-critical operations under long-term contracts
IntegraFin Leading investment platform used by financial advisers to manage client portfolios efficiently. It generates revenues primarily 16,906 2.6
from administration and custody services across tax -
efficient wrappers
XPS Pensions A UK - 16,826 2.6
focused pensions consultancy providing actuarial, administration, investment advisory and covenant
services, supporting both private and public sector pension schemes
Morgan Sindall A UK construction and regeneration group operating across construction, infrastructure, fit 16,696 2.6
- out, urban
regeneration and housing partnerships. The group focuses on capital
- light, partnership
-
based models with strong public -
sector exposure
Boku Global payments company, specialising in local payment methods, including direct carrier billing and digital wallets 16,341 2.6
Tatton Asset Management Leading UK financial services company that provides a range of investment management, compliance, and support services to 15,127 2.4
independent financial advisers, with a focus on discretionary fund management and portfolio solutions
Helios Towers Leading telecommunications tower company operating across Africa and the Middle East. It owns and manages passive mobile 14,725 2.3
infrastructure
Sigmaroc A buy-and-build construction materials company focused on cementitious and lime products in the UK and Europe 13,964 2.2
Young & Co’s Brewery - A Shares UK-based pub and hotel operator 13,467 2.1
Sirius Real Estate Owner and operator of business parks, offices and industrial complexes in Germany 12,536 2.0
Rosebank Industries Investment business that buys, improves and sells industrial and manufacturing businesses 11,428 1.8
Ithaca Energy A UK-based oil and gas company operating in the North Sea 11,422 1.8
Genuit Manufacturer of plastic piping systems 11,351 1.8
Grafton Builders merchants in the UK, Ireland and Netherlands 11,028 1.7
DiscoverIE Specialist components for electronics applications 10,970 1.7
Pollen Street Group Alternatives asset manager with strategies across private equity and private credit 10,914 1.7
FRP Advisory A business advisory firm providing services in corporate restructuring, insolvency, debt advisory and financial solutions to 10,285 1.6
businesses
Alfa Financial Software Provider of software for customers working in the asset finance industry 10,129 1.6
CVS Group Operator of veterinary surgeries 10,070 1.6
Atalaya Mining Copper miner 9,976 1.6
Polar Capital Holdings Specialist asset management 9,758 1.5
Breedon UK construction materials 9,506 1.5
Luceco Designer, supplier and manufacturer of high-quality and efficient LED lighting products, as well as electrical wiring 9,292 1.5
accessories
Safestore Holdings Provider of self-storage units 9,201 1.4
Chemring Group Advanced technology products and services for the aerospace, defence and security markets 9,006 1.4
Genus Animal genetics company specializing in the production and sale of animal breeding products 8,972 1.4
Elementis Speciality chemicals company 8,735 1.4
Pan African Resources UK-listed African-focused gold mining business 8,487 1.3
Bellway Residential property developer and housebuilder 8,333 1.3
Bodycote Provision of thermal processing services 8,239 1.3
Hill & Smith Production of infrastructure products and supply of galvanizing services 8,045 1.3
Mitie Group Leading facilities management and professional services provider 8,018 1.3
Senior A designer and manufacturer of high-technology components and systems for the OEMs 7,983 1.3
OSB Group Specialist lending business 7,942 1.2
Premier Foods UK food manufacturer 7,895 1.2
Central Asia Metals Mining operations in Kazakhstan and Macedonia 7,383 1.2
Watches of Switzerland Retailer of luxury watches 7,210 1.1
Shaftesbury Capital A REIT investing focusing on sites in London’s West End 6,922 1.1
Mortgage Advice Bureau Leading mortgage intermediary providing mortgage advice and protection insurance 6,882 1.1
MONY Group Leading technology-led savings platform 6,854 1.1
Porvair UK-based specialist filtration, laboratory and environmental technology group 6,767 1.1
Vesuvius Provider of metal flow engineering services and solutions to the steel and foundry industries 6,639 1.0
Cranswick Food producer and supplier of premium, fresh and added-value products 6,635 1.0
Oxford Instruments Designer and manufacturer of tools and systems for industry and scientific research 6,615 1.0
Rotork Manufacturer of industrial flow control equipment 6,533 1.0
Volution Group Ventilation products for the residential and commercial construction markets 6,515 1.0
Ashmore Group Emerging market focused investment manager 6,474 1.0
Essentra Supplier of plastic and fibre products such as plastic caps, clamps, fasteners, etc. 6,295 1.0
------------- -------------
50 largest investments 514,253 80.6
======== ========
Remaining investments 123,831 19.4
------------- -------------
Total 638,084 100.0
======== ========
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 28 February 2026, 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
Tatton Asset Management 4.0
FRP Advisory 3.3
Luceco 3.3
Boku 3.0
Distribution of investments
as at 28 February 2026
Sector % of portfolio
Oil Equipment, Services & Distribution 1.8
---------------
Energy 1.8
=========
Chemicals 1.4
Construction & Materials 10.0
Mining 3.7
Precious Metals & Mining 1.3
---------------
Basic Materials 16.4
=========
Aerospace & Defence 3.9
Electronic & Electrical Equipment 5.4
General Industrials 1.0
Industrial Engineering 3.6
Industrial Support Services 11.5
---------------
Industrials 25.4
=========
General Retailers 4.1
Leisure Goods 0.6
Media 1.8
Personal Goods 1.1
Travel & Leisure 3.5
---------------
Consumer Discretionary 11.1
=========
Health Care Equipment & Services 1.0
Health Care Providers 0.5
Pharmaceuticals & Biotechnology 2.0
---------------
Health Care 3.5
=========
Food Producers 6.0
Household Goods & Home Construction 2.1
Personal Care Drug & Grocery Stores 1.0
---------------
Consumer Staples 9.1
=========
Mobile Telecommunications 2.3
Telecommunications Equipment 0.6
---------------
Telecommunications 2.9
=========
Banks 0.7
Financial Services 18.4
---------------
Financials 19.1
=========
Real Estate Investment & Services 2.0
Real Estate Investment Trusts 5.3
---------------
Real Estate 7.3
=========
Software & Computer Services 3.4
---------------
Technology 3.4
=========
Total 100.0
=========
Portfolio analysis
as at 28 February 2026
Analysis of portfolio value by sector
Company Benchmark (Deutsche Numis Smaller Companies, plus AIM
(ex Investment Companies) Index)
Energy 1.8 3.9
Basic Materials 16.4 8.3
Industrials 25.4 23.5
Consumer Discretionary 11.1 15.6
Health Care 3.5 4.8
Consumer Staples 9.1 7.4
Telecommunications 2.9 1.6
Financials 19.1 17.7
Real Estate 7.3 8.9
Technology 3.4 5.3
Utilities 0.0 2.0
Other 0.0 1.0
Sources: BlackRock and LSEG Datastream.
Investment size
Number of Market value of investments
investments as % of portfolio
£0m-£1m 1.0 0.2
£2m-£3m 3.0 1.2
£3m-£4m 11.0 5.8
£4m-£5m 7.0 5.1
£5m-£6m 6.0 5.2
£6m-£7m 13.0 13.4
£7m-£8m 5.0 6.0
£8m-£9m 7.0 9.2
£9m-£10m 6.0 8.9
£10m-£11m 5.0 8.2
£11m-£12m 4.0 7.1
£12m-£13m 1.0 2.0
£13m-£14m 2.0 4.3
£14m-£15m 1.0 2.3
£15m-£16m 1.0 2.4
£16m-£17m 4.0 10.5
£17m-£18m 2.0 5.4
£18m-£19m 1.0 2.8
Source: BlackRock.
Market capitalisation of our portfolio companies
% of portfolio
£0m to £200m 0.5
£200m to £600m 27.8
£600m to £1.5bn 34.2
£1.5bn+ 37.5
Source: BlackRock.
Strategic Report
The Directors present the Strategic Report of the Company for the year ended
28 February 2026. 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 15 May 2026.
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. The
closed-ended capital structure of an investment trust permits the company to
invest in stocks with less liquidity and to gear its investments within a risk
framework governed by the Board.
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 AIM (including securities which are listed
overseas but which have a secondary UK quotation). Although investments are
primarily in companies with securities admitted to trading on recognised stock
exchanges or on AIM, the Investment Manager may also invest in less liquid
unquoted securities with the prior approval of the Board. The Manager may also
invest in global listed small-cap companies, provided that no more than 15% of
the portfolio by value at the time of investment may be held in companies
which are listed overseas and do not have a primary and secondary UK listing.
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 10% 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. The
Company may hold shares in other listed investment companies (including
investment trusts), however 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 (BNY).
Other service providers include the Depositary (also BNY) and the Registrar,
Computershare Investor Services PLC. The Depositary has sub-delegated the
provision of custody services to the Asset Servicing division of BNY. 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. In accordance with the guidelines, the Portfolio Manager will sell
any stock that enters the FTSE 100 Index within 180 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 as outlined above.
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 above (and contained
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 form part of this Strategic Report and includes
a review of the main developments during the year, together with information
on investment activity within the Company’s portfolio.
Results and dividends
The results for the Company are set out in the Income Statement in the
Financial Statements. The total net profit for the year, after taxation, was
£60,205,000 (2025: loss of £4,268,000) of which the revenue return amounted
to a profit of £18,172,000 (2025: £19,918,000) and the capital profit
amounted to £42,033,000 (2025: loss of £24,186,000).
The Company’s revenue return amounted to 43.77p per share (2025: 42.53p).
The Directors have declared a second interim dividend of 28.50p 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 28 February 2026 are set out in the
Directors’ biographies contained within the Annual Report and Financial
Statements. With effect from 16 April 2026, with the completion of the
combination with BlackRock Throgmorton Trust plc, the Board consists of 3 male
Directors and 4 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
28 February 28 February
2026 2025
% change NAV per share (debt at par value)(1,2) 11.5% -0.6%
% change NAV per share (debt at fair value)(1,2) 11.2% 0.0%
% change share price total return(1,2) 14.2% -1.4%
% change Benchmark return(1) 21.5% 6.2%
Average discount to NAV with debt at fair value(2) 12.3% 11.0%
Revenue return per share 43.77p 42.53p
Ongoing charges ratio(2,3) 0.8% 0.8%
Retail ownership 61.7% 69.8%
(
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 LSEG 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.
Principal 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.
Emerging risks that have been considered by the Board over the year include
the impact of climate change, escalating geo
-
political conflict and technological advances.
The key emerging risks identified are as follows:
Geo-political risk: Escalating geo-political tensions (including, but not
limited to the potential for a prolonged global trade war over tariffs,
tensions in the Middle East and the ongoing war in Ukraine, or deteriorating
relations between China and the US/other countries) have a significant
negative impact on global markets, with an increasing use of tariffs and
domestic regulations making global trade more complex and driving economic
fragmentation.
Artificial Intelligence (‘AI’): Advances in computing power means that AI
has become a powerful tool that will impact a huge range of areas and with a
wide range of applications that have the potential to dislocate established
business models and disrupt labour markets, creating uncertainty in corporate
valuations. The significant energy required to power this technological
revolution will create further pressure on environmental resources and carbon
emissions.
The Board will continue to assess all identified 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.
The principal risks and uncertainties faced by the Company during the
financial year, together with the potential effects, controls and mitigating
factors are set out in the following table.
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.pdf.
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, increased tariffs, 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 as well as recent trade and tariff related
disruptions. 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 the 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, their impact on the
global economy and the prospects for some of the Company’s portfolio
holdings. The Board is also cognisant of the disruptive impact on world trade
as a result of US tariff initiatives and the effect these might have on the
Company’s portfolio. 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
2031 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 above;
*
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 28 February 2026;
*
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
28 February 2026, the Company held one illiquid unquoted investment and 79.9%
of the Company’s portfolio investments were readily realisable and listed on
the London Stock Exchange. The remaining 20.1% 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. The Board makes a regular effort to discuss
ongoing Company developments with shareholders.
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.
In addition to this, during the year, the Board engaged regularly with the
Investment Manager and welcomed the increased level of marketing support
provided to promote BlackRock Investment Trusts in the UK market. The Board
was pleased to see additional marketing resources committed to the development
of a new advertising campaign designed to raise awareness of the BlackRock
Investment Trust range.
Alongside this, the Board initiated a broader review which included examining
the retail consumer landscape, expanding retail investor target audience and
widening the marketing channels options – including PR – to reach them
more effectively. Building on this foundation, the Board engaged an
independent marketing agency to sharpen the Company’s positioning,
messaging, tone and communication plan. This work is being incorporated into
the ongoing marketing activity for the Company, and the Board believes it will
help strengthen engagement and resonate more effectively with existing and
prospective investors.
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.
The Board is also cognisant of the need to ensure that the Company’s mandate
and structure remains relevant in the current market environment to attract
demand. In the year under review it spent a significant amount of time
reviewing strategic options for the Company, agreeing heads of terms for a
Scheme of Combination with THRG (‘the Scheme’) and drafting the requisite
documentation to give shareholders the option to vote on the creation of a
larger combined vehicle that would offer a number of important benefit for
investors, including increased scale, lower operating charges, lower
management fees, and offered a substantial cash exit to allow investors to
realise up to 28% of the Company’s issued share capital for cash. In
addition, the transaction offered a co-manager structure that brought together
Roland Arnold and Dan Whitestone, two well regarded managers in BlackRock’s
emerging companies team with a strong long-term track record.
The Board recognises the importance of income to its shareholders and,
following discussions with its advisers, concluded that an increased frequency
of dividend payments would be welcomed by shareholders. The Board also notes
the importance of the Company’s dividend approach being attractive to new
investors, which will help to support demand for its shares and to narrow the
discount. With effect from 1 March 2026, the Company moved to making quarterly
dividend payments in place of the previous bi-annual dividend payments. These
will be made as three dividend payments in September, December and March each
year equal to a quarter of the previous year’s total dividend, with the
Board declaring a final dividend for the full year (payable in June)
reflecting the final amount required to ensure an appropriate level of full
year dividend.
In addition to focusing on driving increased demand through the initiatives
above, the Board was also active in buying back the Company’s shares over
the period under review. For the year ended 28 February 2026, the Company has
repurchased 3,992,000 ordinary shares into treasury at a total cost of
£52,107,000 and at an average discount of 12.4%.
Since the year end and as at the date of this report, the Company has
repurchased 45,000 shares for costs of £585,000 at an average discount of
13.3%.
Impact
Shareholders approved the Combination proposals by an overwhelming majority at
the General Meeting held on 30 March 2026.
The tender offer for 28% of issued share capital was oversubscribed, with
holders of 47.5% of the Company’s share capital electing to take cash.
The combination of the Company with THRG took effect on the 16 April 2026,
pursuant to which the Company acquired net assets of approximately £303.2
million from THRG in consideration for the issue of 20,892,579 new ordinary
shares to THRG shareholders in accordance with the Scheme. These new ordinary
shares were admitted to trading on the main market for listed securities of
the London Stock Exchange with effect from 17 April 2026.
Over the last five years, the Company’s discount has widened steadily, from
an average discount of 5.5% for the year to 28 February 2021 to 12.3% for the
year ended 28 February 2026.
As at 12 May 2026 the Company’s shares were trading at a discount of 12.4%
to the cum income NAV (with debt at fair value). This compares to an average
discount for the Company’s sector of 11.6% (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 46.2% (as at 28 February 2014) to 61.7% at 28 February
2026.
Investment mandate and objective
Issue
The Board is committed to promoting the role and success of the Company in
delivering on its investment mandate to shareholders over the long term. The
Board also has responsibility to shareholders to ensure that the Company’s
portfolio of assets is invested in line with the stated investment objective
and in a way that ensures an appropriate balance between spread of risk and
portfolio returns.
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.
A significant amount of time was expended this year reviewing strategic
options for the Company, agreeing heads of terms for a Scheme of Combination
with THRG (‘the Scheme’) and drafting the requisite documentation. As part
of this process, the Board proposed changes to the Company’s investment
policy which were set out in a Circular to shareholders dated 20 February
2026. Conditional on shareholder approval for the Scheme, the Board proposed
to give the investment manager additional latitude to invest in small cap
stocks outside of the Benchmark index and to invest up to 15% of the
Company’s gross assets, at the time of acquisition, in global small cap
stocks which are listed overseas and which do not have a primary or secondary
UK listing. The Board believes that this provides the Manager with additional
flexibility to diversify risk and generate alpha from a wider investment
universe in times when the UK small cap market is particularly challenged and
under stress.
Impact
Shareholders approved the changes to the Company’s investment policy at the
General Meeting held on 30 March 2026, and these were implemented on
completion of the Scheme on 16 April 2026.
Additional information on 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 above and in the Strategic Report above (and
contained within the Annual Report and Financial Statements).
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 within 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 and the
Performance Record above.
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 28 February 2026, 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 note issued in May 2017 at a coupon of
2.74% with a 20 year maturity, a £20 million senior unsecured fixed rate
private placement note issued in December 2019 at a coupon of 2.41% with a 25
year maturity and a £25 million senior unsecured fixed rate private placement
note 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 (BNY) 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 BNY at a competitive
interest rate (SONIA plus 100 bps) and a lower non
-
utilisation fee (4 bps).
For the year to 28 February 2026, it is estimated that gearing contributed
0.3% to the NAV per share performance.
At the year end, the Company’s gearing was 5.7% 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 at a competitive
price: 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.
As part of the ongoing review and oversight of service provider costs, and
subject to the approval of the Scheme of Combination with THRG, the Board
negotiated a revised management fee equal to: (i) 0.5% per annum on the first
£500 million of the Company’s NAV; (ii) 0.475% per annum on the Company’s
NAV between £500 million and £750 million; and (iii) 0.45% per annum on the
Company’s NAV in excess of £750 million. As well as a lower rate, the new
fee is applied to net assets (previously the fee was applied to total assets
less current liabilities). As the Company has £70 million of fixed debt, the
change in the basis of the fee represented a significant reduction.
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.
The revised management fee was implemented with effect from 16 April 2026, and
has resulted in a significantly reduced projected operating charges ratio of
c.0.63%, the lowest in the AIC UK Small Cap sector for a trust without a
performance fee, which the Board believes represents excellent value for
investors.
In addition to the revised fee, the Board negotiated a six month fee waiver as
a contribution from BlackRock to the costs of the Scheme transaction.
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 (Linstock) to carry out an independent
external evaluation of the Board in 2025.
All Directors are subject to a formal evaluation process on an annual basis
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 15 May 2026, the Board had a 43:57 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 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 28
February 2026.
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 contained 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 2025 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 meets 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
For the year under review, and as described above, the Board has been active
in pursuing strategic opportunities to enhance the attractiveness of the
Company to investors and deliver value to shareholders, resulting in the
publication of the circular on 20 February 2026 proposing the Scheme of
Combination with THRG. This process was driven in part by feedback from
shareholders indicating a preference for increased scale and liquidity. As
part of this process the Board engaged with shareholders representing a
significant proportion of the Company’s share register and obtained feedback
which was incorporated into the proposals.
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 Ms Afe being actively involved in all aspects
including utilising external marketing consultants where appropriate, 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
Shareholders approved the Scheme of Combination with THRG by an overwhelming
majority at the General Meeting on 30 March 2026.
The Board signed an extension to its existing standstill agreement with Saba
Capital to June 2030. Other than the change in date, the terms of this
agreement remain unchanged. More detail can be found at the following link:
https://www.londonstockexchange.com/news-article/BRSC/agreement-with-saba/16863463.
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 participated in a panel discussion at
the Association of Investment Companies annual conference, focused on UK
equities being undervalued by historical standards. 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.
For and on behalf of the Board
RONALD GOULD
Chairman
15 May 2026
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 28 February 2026 amounted to
£3,908,000 (2025: £4,611,000) as disclosed in note 4 to the Financial
Statements. At the year end, £1,915,000 was outstanding in respect of the
management fee (2025: £4,488,000).
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 28 February 2026 amounted to £269,000 including VAT (2025:
£195,000). Marketing fees of £240,000 (2025: £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
28 February 2026, an amount of £240,000 (2025: £129,000) was payable to the
Manager in respect of Directors’ fees.
The Company holds an investment in the BlackRock Institutional Cash Series plc
- Sterling Liquid Environmentally Aware Fund of £36,146,000 (2025: £nil)
which has been presented in the financial statements as a cash equivalent.
This is a fund managed by a company within the BlackRock Group. The
Company’s investment in the Cash Fund is held in a share class on which no
management fees are paid to BlackRock to avoid double dipping.
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 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 28 February 2026, an amount of £17,000 (2025:
£19,000) was outstanding in respect of Directors’ fees.
None of the Directors has a service contract with the Company. For the year
ended 28 February 2026, the Chairman received an annual fee of £52,000, the
Audit Committee Chairman received an annual fee of £41,000, and the other
Directors received £35,000 per annum as a base fee. The Senior Independent
Director received an additional fee of £2,000
on a pro-rata basis and the
Chair of the Nomination and Remuneration Committee received an additional fee
of £1,000 on a pro-rata basis. Following a review on 16 April 2026, and with
effect from 1 March 2026, Directors’ fees will be increased in line with
inflation (broadly based on CPI at 28 February 2026 of 3.2%). From this date
the Chairman will receive an annual fee of £53,664, the Audit Committee
Chairman will receive £42,312 and the Senior Independent Director (SID) and
the Chair of the Nomination and Remuneration Committee will receive £38,184.
Other Directors will receive £36,120.
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
28 February 2026, 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
15 May 2026
Income Statement
for the year ended 28 February 2026
2026 2025
Notes Revenue Capital Total Revenue Capital Total
£’000 £’000 £’000 £’000 £’000 £’000
Gains/(losses) on investments held at fair value through profit or loss – 45,554 45,554 – (19,794) (19,794)
Gains/(losses) on foreign exchange – 39 39 – (3) (3)
Income from investments held at fair value through profit or loss 3 19,609 797 20,406 22,684 875 23,559
Other income 3 1,194 – 1,194 1 – 1
---------- ---------- ---------- ---------- ---------- ----------
Total income/(loss) 20,803 46,390 67,193 22,685 (18,922) 3,763
====== ====== ====== ====== ====== ======
Expenses
Investment management fee 4 (977) (2,931) (3,908) (1,153) (3,458) (4,611)
Other operating expenses 5 (1,127) (27) (1,154) (940) (25) (965)
---------- ---------- ---------- ---------- ---------- ----------
Total operating expenses (2,104) (2,958) (5,062) (2,093) (3,483) (5,576)
====== ====== ====== ====== ====== ======
Net profit/(loss) before finance costs and taxation 18,699 43,432 62,131 20,592 (22,405) (1,813)
Finance costs (468) (1,399) (1,867) (627) (1,781) (2,408)
Net profit/(loss) before taxation 18,231 42,033 60,264 19,965 (24,186) (4,221)
---------- ---------- ---------- ---------- ---------- ----------
Taxation (59) – (59) (47) – (47)
Net profit/(loss) after taxation 18,172 42,033 60,205 19,918 (24,186) (4,268)
---------- ---------- ---------- ---------- ---------- ----------
Earnings/(loss) per ordinary share (pence) – basic and diluted 7 43.77 101.24 145.01 42.53 (51.64) (9.11)
====== ====== ====== ====== ====== ======
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 28 February 2026
Notes Called up share capital Share premium account Capital redemption reserve Capital reserves Revenue reserve Total
£’000 £’000 £’000 £’000 £’000 £’000
For the year ended 28 February 2026
At 28 February 2025 12,498 51,980 1,982 529,771 18,548 614,779
Total comprehensive income:
Net profit for the year – – – 42,033 18,172 60,205
Transactions with owners, recorded directly to equity:
Ordinary shares repurchased into treasury 11, 12 – – – (51,753) – (51,753)
Share repurchase costs 11, 12 – – – (354) – (354)
Tender offer costs – – – (300) – (300)
Dividends paid(1) 6 – – – – (18,735) (18,735)
----------- ----------- ----------- ----------- ----------- -----------
At 28 February 2026 12,498 51,980 1,982 519,397 17,985 603,842
====== ====== ====== ====== ====== ======
For the year ended 28 February 2025
At 29 February 2024 12,498 51,980 1,982 601,098 18,648 686,206
Total comprehensive (loss)/income:
Net (loss)/profit for the year – – – (24,186) 19,918 (4,268)
Transactions with owners, recorded directly to equity:
Ordinary shares repurchased into treasury 11, 12 – – – (46,838) – (46,838)
Share repurchase costs 11, 12 – – – (303) – (303)
Dividends paid(2) 6 – – – – (20,018) (20,018)
----------- ----------- ----------- ----------- ----------- -----------
At 28 February 2025 12,498 51,980 1,982 529,771 18,548 614,779
====== ====== ====== ====== ====== ======
(
1
)
Interim dividend paid in respect of the year ended 28 February
2026 of 16.00p was declared on 24 October 2025 and paid on 10 December 2025.
Final dividend paid in respect of the year ended 28 February 2025 of 28.50p
was declared on 7 May 2025 and paid on 26 June 2025.
(
2
)
Interim dividend paid in respect of the year ended 28 February
2025 of 15.50p was declared on 24 October 2024 and paid on 4 December 2024.
Final dividend paid in respect of the year ended 29 February 2024 of 27.00p
was declared on 14 May 2024 and paid on 27 June 2024.
For information on the Company’s distributable reserves, please refer to the
Annual Report and Financial Statements.
Balance Sheet
as at 28 February 2026
Notes 2026 2025
£’000 £’000
Non current assets
Investments held at fair value through profit or loss 638,084 696,573
Current assets
Current taxation asset 76 84
Debtors 8 7,014 9,738
Cash and cash equivalents – Cash Fund 36,146 –
Total current assets 43,236 9,822
======== ========
Current liabilities
Cash and cash equivalents – bank overdraft (262) (9,230)
Creditors – amounts falling due within one year 9 (7,645) (12,843)
Net current assets/(liabilities) 35,329 (12,251)
-------------- --------------
Total assets less current liabilities 673,413 684,322
======== ========
Creditors – amounts falling due after more than one year 10 (69,571) (69,543)
Net assets 603,842 614,779
======== ========
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 12 519,397 529,771
Revenue reserve 12 17,985 18,548
Total shareholders’ funds 7 603,842 614,779
-------------- --------------
Net asset value per ordinary share (debt at par value) (pence) 1,516.70 1,403.45
-------------- --------------
Net asset value per ordinary share (debt at fair value) (pence) 1,579.08 1,463.44
======== ========
Statement of Cash Flows
for the year ended 28 February 2026
2026 2025
£’000 £’000
Operating activities
Net profit/(loss) before taxation(1) 60,264 (4,221)
Changes in working capital items:
Decrease in debtors 407 348
(Decrease)/increase in other creditors (2,033) 1,065
Decrease/(increase) in amounts due from brokers 2,317 (5,293)
(Decrease)/increase in amounts due to brokers (926) 3,143
Other adjustments:
Finance costs 1,867 2,408
(Gains)/losses on investments held at fair value through profit or loss (45,554) 19,794
Net (gains)/losses on foreign exchange (39) 3
Special dividends allocated to capital (797) (875)
Sale of investments held at fair value through profit or loss 545,696 546,719
Purchase of investments held at fair value through profit or loss (440,856) (497,033)
Net cash inflow from operating activities before taxation 120,346 66,058
-------------- --------------
Taxation paid (51) (47)
Net cash inflow from operating activities 120,295 66,011
-------------- --------------
Financing activities
Ordinary shares repurchased into treasury (53,994) (44,663)
Share repurchase costs (354) (303)
Tender offer costs (300) –
Interest paid (1,837) (2,383)
Dividends paid (18,735) (20,018)
Net cash outflow from financing activities (75,220) (67,367)
-------------- --------------
Increase/(decrease) in cash and cash equivalents 45,075 (1,356)
Effect of foreign exchange rate changes 39 (3)
Cash and cash equivalents at beginning of year (9,230) (7,871)
Cash and cash equivalents at end of year 35,884 (9,230)
-------------- --------------
Comprised of:
Cash Fund(2) 36,146 –
Bank overdraft (262) (9,230)
-------------- --------------
35,884 (9,230)
======== ========
(
1
)
Dividends and interest received in cash during the year
amounted to £19,988,000 and £1,071,000 (2025: £22,774,000 and £1,000).
(
2
) 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 28 February 2026
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 2028, 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 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 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, share re-issues and new share issues
Shares repurchased and subsequently cancelled – share capital is reduced by
the nominal value of the shares repurchased, and the capital redemption
reserve is correspondingly increased in accordance with Section 733 of the
Companies Act 2006. The full cost of the repurchase is charged to the 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
re-issues 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. Debentures are held at par less
amortised cost, whilst all other creditors are held at fair value.
(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.
The investment in the BlackRock Institutional Cash Series plc - Sterling
Liquid Environmentally Aware Fund has been presented in the financial
statements as a cash equivalent as it is held for short-term cash management
purposes.
(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
2026 2025
£’000 £’000
Investment income(1):
UK dividends 14,966 18,567
UK special dividends 691 801
UK property income distributions 649 1,007
Dividends from UK REITs(2) 514 493
Overseas dividends 1,424 1,514
Overseas special dividends 966 –
Dividends from overseas REITs(2) 399 302
-------------- --------------
Total investment income 19,609 22,684
======== ========
Other income:
Bank interest 18 1
Interest from Cash Fund 1,176 –
Total other income 1,194 1
-------------- --------------
Total 20,803 22,685
======== ========
(
1
)
UK and overseas dividends are disclosed based on the country of
domicile of the underlying portfolio company.
(
2
)
REITs - real estate investment trusts.
Special dividends of £797,000 have been recognised in capital during the year
(2025: £875,000).
Dividends and interest received in cash during the year amounted to
£19,988,000 and £1,071,000 (2025: £22,774,000 and £1,000).
4. Investment management fee
2026 2025
Revenue Capital Total Revenue Capital Total
£’000 £’000 £’000 £’000 £’000 £’000
Investment management fee 977 2,931 3,908 1,153 3,458 4,611
------------ ------------ ------------ ------------ ------------ ------------
Total 977 2,931 3,908 1,153 3,458 4,611
====== ====== ====== ====== ====== ======
Up to 16 April 2026, the investment management fee was 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 was 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. With effect from 16 April 2026, the AIFM receives a
revised management fee equal to: (i) 0.5% per annum on the first £500 million
of the Company’s Net Asset Value (NAV); (ii) 0.475% per annum on the
Company’s NAV between £500 million and £750 million; and (iii) 0.45% per
annum on the Company’s NAV in excess of £750 million.
In addition to the revised fee, BlackRock has agreed to waive the management
fee for six months with effect from 16 April 2026 as a contribution to the
costs of the combination with THRG. 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
2026 2025
£’000 £’000
Allocated to revenue:
Custody fees 6 9
Depositary fees 68 83
Auditors’ remuneration(1) 61 52
Registrar’s fee 55 46
Directors’ emoluments(2) 205 240
Marketing fees 269 195
AIC fees 26 22
Bank charges 24 24
Broker fees 35 23
Stock exchange listings 45 41
Printing and postage fees 60 39
Legal fees 44 43
Prior year expenses written back(3) – (11)
Other administrative costs 229 134
----------- -----------
Total revenue expenses 1,127 940
======= =======
Allocated to capital:
Custody transaction charges(4) 27 25
Total capital expenses 27 25
----------- -----------
Total 1,154 965
======= =======
2026 2025
Ongoing charges(5) 0.8% 0.8%
======= =======
(
1
)
No non-audit services were provided by the Company’s auditors
(2025: none).
(
2
)
Further information on Directors’ emoluments can be found in
the Directors’ Remuneration Report contained within the Annual Report and
Financial Statements.
(
3
)
No prior year expenses were written back during the year ended
28 February 2026 (2025: bank charges, printing and postage fees and
miscellaneous fees).
(
4
)
For the year ended 28 February 2026, expenses of £27,000
(2025: £25,000) were charged to the capital account of the Income Statement.
These relate to transaction costs charged by the Custodian on sale and
purchase trades.
(
5
)
The Company’s ongoing charges are 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. Alternative Performance Measure, see Glossary
contained within the Annual Report and Financial Statements.
6. Dividends
2026 2025
Dividends paid on equity shares: Record date Payment date £’000 £’000
2024 Final of 27.00p 24 May 2024 27 June 2024 – 12,717
2025 Interim of 15.50p 1 November 2024 4 December 2024 – 7,301
2025 Final of 28.50p 16 May 2025 26 June 2025 12,285 –
2026 First Interim of 16.00p 7 November 2025 10 December 2025 6,450 –
--------- ---------
Accounted for in the financial statements 18,735 20,018
======= =======
The Directors have proposed a second and final interim dividend of
28.50
p per share in respect of the year ended 28 February 2026. The
second and final interim dividend will be paid, subject to shareholders’
approval, on 8 May 2026 to shareholders on the Company’s register on 10
April 2026. The proposed second and final interim dividend has not been
included as a liability in these financial statements, as 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 2026 meet the relevant
requirements as set out in this legislation.
2026 2025
Dividends paid or proposed on equity shares: £’000 £’000
First interim dividend paid of 16.00p (2025: 15.50p) 6,450 7,301
Second and final interim dividend proposed of 28.50p per share(1) (2025: 28.50p) 11,347 12,285
------------ ------------
Total 17,797 19,586
======= =======
(
1
)
Based upon 39,812,792 ordinary shares (excluding treasury
shares) in issue on 10 April 2026.
All dividends paid or payable are distributed from the Company’s
distributable reserves.
7. Returns and net asset value per share
Revenue earnings, capital earnings/(loss) and net asset value per ordinary
share are shown below and have been calculated using the following:
2026 2025
Revenue return attributable to ordinary shareholders (£’000) 18,172 19,918
Capital profit/(loss) attributable to ordinary shareholders (£’000) 42,033 (24,186)
------------ ------------
Total profit/(loss) attributable to ordinary shareholders (£’000) 60,205 (4,268)
======= =======
Total shareholders’ funds (£’000) 603,842 614,779
======= =======
The weighted average number of ordinary shares in issue during the year on which the earnings per ordinary share was calculated was: 41,517,247 46,833,380
The actual number of ordinary shares in issue at the end of each year on which the undiluted net asset value was calculated was: 39,812,792 43,804,792
Earnings per share
Revenue earnings per share (pence) – basic and diluted 43.77 42.53
Capital earnings/(loss) per share (pence) – basic and diluted 101.24 (51.64)
------------ ------------
Total earnings/(loss) per share (pence) – basic and diluted 145.01 (9.11)
======= =======
As at As at
28 February 28 February
2026 2025
Net asset value per ordinary share (debt at par value) (pence) 1,516.70 1,403.45
Net asset value per ordinary share (debt at fair value) (pence) 1,579.08 1,463.44
Ordinary share price (pence) 1,402.00 1,270.00
======= =======
8. Debtors
2026 2025
£’000 £’000
Sales for future settlement 6,553 8,870
Prepayments and accrued income 461 868
------------ ------------
Total 7,014 9,738
======= =======
9. Creditors – amounts falling due within one year
2026 2025
£’000 £’000
Purchases for future settlement 4,140 5,066
Interest payable 583 581
Share buybacks awaiting settlement – 2,241
Accruals 2,922 4,955
------------ ------------
Total 7,645 12,843
======= =======
10. Creditors – amounts falling due after more than one year
2026 2025
£’000 £’000
2.74% loan note 2037 25,000 25,000
Unamortised loan note issue expenses (154) (168)
24,846 24,832
------------ ------------
2.41% loan note 2044 20,000 20,000
Unamortised loan note issue expenses (120) (127)
19,880 19,873
------------ ------------
2.47% loan note 2046 25,000 25,000
Unamortised loan note issue expenses (155) (162)
24,845 24,838
------------ ------------
Total 69,571 69,543
======= =======
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 28 February 2026 equated to a valuation of 76.33p per note (2025:
73.47p), a total of £19,083,000 (2025: £18,368,000). 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 28 February 2026 equated
to a valuation of 59.41p per note (2025: 57.61p), a total of £11,882,000
(2025: £11,522,000). 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 28 February 2026 equated to a valuation of
55.09p per note (2025: 53.50p), a total of £13,772,000 (2025: £13,375,000).
The first £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
£262,000 had been utilised at 28 February 2026 (2025: £9,230,000).
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 29 February 2024 47,319,792 2,673,731 49,993,523 12,498
Ordinary shares repurchased into treasury (3,515,000) 3,515,000 – –
At 28 February 2025 43,804,792 6,188,731 49,993,523 12,498
Ordinary shares repurchased into treasury (3,992,000) 3,992,000 – –
---------------- ---------------- ---------------- ----------------
At 28 February 2026 39,812,792 10,180,731 49,993,523 12,498
========= ========= ========= =========
During the year ended 28 February 2026, the Company repurchased 3,992,000
shares (2025: 3,515,000) into treasury for a total consideration of
£52,107,000 (2025: £47,141,000).
Since 28 February 2026 and up to the latest practicable date of 12 May 2026,
45,000 ordinary shares have been repurchased into treasury for a total
consideration of £585,000.
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 investments sold) (arising on revaluation
of
investments held)
£’000 £’000 £’000 £’000 £’000
At 29 February 2024 51,980 1,982 565,497 35,601 18,648
Movement during the year:
Losses on realisation of investments – – (2,573) – –
Change in investment holding gains – – – (16,346) –
Losses on foreign currency transactions – – (3) – –
Finance costs and expenses charged to capital – – (5,264) – –
Net profit for the year – – – – 19,918
Ordinary shares repurchased into treasury – – (46,838) – –
Share buyback costs – – (303) – –
Dividends paid during the year – – – – (20,018)
---------------- ---------------- ---------------- ---------------- ----------------
At 28 February 2025 51,980 1,982 510,516 19,255 18,548
========= ========= ========= ========= =========
Movement during the year:
Losses on realisation of investments – – (31,988) – –
Change in investment holding gains – – – 78,339 –
Gains on foreign currency transactions – – 39 – –
Finance costs and expenses charged to capital – – (4,357) – –
Net profit for the year – – – – 18,172
Ordinary shares repurchased into treasury – – (51,753) – –
Share repurchase costs – – (354) – –
Tender offer cost – – (300) – –
Dividends paid during the year – – – – (18,735)
---------------- ---------------- ---------------- ---------------- ----------------
At 28 February 2026 51,980 1,982 421,803 97,594 17,985
========= ========= ========= ========= =========
The share premium account and capital redemption reserve of £51,980,000 and
£1,982,000 (2025: £51,980,000 and £1,982,000) 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 of £519,397,000
(2025: £529,771,000) and the revenue reserve of £17,985,000 (2025:
£18,548,000) may be distributed by way of dividend. The gain on the capital
reserve arising on the revaluation of investments of £97,594,000 (2025: gain
of £19,255,000) 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.
As at 28 February 2026, the Company’s distributable reserves (excluding
capital reserves on the revaluation of investments) amounted to £439,788,000
(2025: £529,064,000).
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.
Level 1 Level 2 Level 3 Total
Financial assets at fair value through profit or loss £’000 £’000 £’000 £’000
Equity investments at 28 February 2026 626,656 – 11,428 638,084
Equity investments at 28 February 2025 694,356 – 2,217 696,573
======= ======= ======= =======
The Company held one Level 3 security as at 28 February 2026 (2025: one).
A reconciliation of fair value measurement of Level 3 is set out below.
2026 2025
Level 3 financial assets at fair value through profit or loss £’000 £’000
Opening fair value 2,217 –
Additions at cost 11,303 770
Sale of investments (2,009) –
Total profit or loss included in net profit/(loss) on investments in the Income Statement
– realised gain on investments sold 280 –
– unrealised (losses)/gains on assets held at the end of the year (363) 1,447
------------- -------------
Closing balance 11,428 2,217
======= =======
As at 28 February 2026, the investment in Rosebank Industries was a Level 3
investment due to there being a temporary suspension of trading in the
ordinary shares of the company and the price used to value the investment is
the last available market price. Due to the temporary suspension and use of
last available market price, a table of unobservable inputs is not applicable.
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 Investment Manager and AIFM
BlackRock Fund Managers Limited (BFM) provides management and administration
services to the Company under a contract which is terminable on six months’
notice. BFM has (with the Company’s consent) delegated certain portfolio and
risk management services, and other ancillary services to BlackRock Investment
Management (UK) Limited (BIM (UK)). Further details of the investment
management contract are disclosed in the Directors’ Report contained within
the Annual Report and Financial Statements.
The investment management fee for the year ended 28 February 2026 amounted to
£3,908,000 (2025: £4,611,000) as disclosed in note 4 to the Financial
Statements. At the year end, £1,915,000 was outstanding in respect of the
management fee (2025: £4,488,000).
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 28 February 2026 amounted to £269,000 including VAT (2025:
£195,000). Marketing fees of £240,000 (2025: £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
28 February 2026, an amount of £240,000 (2025: £129,000) was payable to the
Manager in respect of Directors’ fees.
The Company holds an investment in the BlackRock Institutional Cash Series plc
- Sterling Liquid Environmentally Aware Fund of £36,146,000 (2025: £nil)
which has been presented in the financial statements as a cash equivalent.
This is a fund managed by a company within the BlackRock Group. The
Company’s investment in the Cash Fund is held in a share class on which no
management fees are paid to BlackRock to avoid double dipping.
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 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 28 February 2026, an amount of £17,000
(2025: £19,000) 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).
Total % of shares held by Total % of shares held by Number of Significant Investors
Related BlackRock Funds Significant Investors who are not who are not affiliates of
affiliates of BlackRock Group or BlackRock, Inc. BlackRock Group or
BlackRock, Inc.
As at 28 February 2026 4.7 n/a n/a
As at 28 February 2025 6.1 n/a n/a
========= ========= =========
16. Contingent liabilities
There were no contingent liabilities at 28 February 2026 (2025: none).
17. Subsequent events
On 20 February 2026, the Board announced a proposed Scheme of Combination with
THRG (‘the Combination’), which was approved by the Company’s
shareholders at a General Meeting held on 30 March 2026. The Combination was
effected by way of a scheme of reconstruction and members’ voluntary winding
up of THRG under Section 110 of the Insolvency Act, and the issue of new
ordinary shares in the Company to THRG’s shareholders who are deemed to have
elected to roll over their investment into the enlarged Company.
The Combination of the Company with THRG took effect on 16 April 2026,
pursuant to which the Company acquired net assets of approximately £303.2
million from THRG in consideration for the issue of 20,892,579 new ordinary
shares which were admitted to trading on the main market for listed securities
of the London Stock Exchange with effect from 17 April 2026. Following this
issue of new shares, the Company’s share capital consisted of 60,705,371
ordinary shares (excluding treasury shares), and the existing 10,180,731
ordinary shares held in treasury.
In connection with the Combination, eligible shareholders were given the
option to elect for a cash exit in respect of a proportion of their
shareholding in the Company at a discount of 1.0% to NAV. The Company’s cash
exit was implemented by way of a tender offer and was limited up to 28% of the
Company’s issued share capital (excluding Shares held in treasury). The
tender offer for 28% of issued share capital was oversubscribed, and
accordingly, 11,147,581 shares will be repurchased in due course representing
28% of the Company’s issued share capital. It is currently envisaged that
realisation of the assets held in the Tender Pool which has been established
for the purposes of the Tender Offer will be completed in or around the week
commencing 29 June 2026, with the final Tender Price and payment date to be
announced by the Company shortly thereafter.
As part of the Combination process, the Board proposed changes to the
Company’s investment policy giving the Investment Manager additional
latitude to invest in small cap stocks outside of the Benchmark Index and to
invest up to 15% of the Company’s gross assets, at the time of acquisition,
in global small cap stocks which are listed overseas and which do not have a
primary or secondary UK listing. Shareholders approved the changes to the
Company’s investment policy at the General Meeting held on 30 March 2026,
and this new policy was implemented on completion of the Combination on 16
April 2026.
Louise Nash and Angela Lane were appointed as non-executive Directors to the
Company on 17 April 2026.
18. 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 2025,
which have been filed with the Registrar of Companies. The reports of the
auditors for the years ended 28 February 2025 and 28 February 2026 contain no
qualification or statement under Section 498(2) or (3) of the Companies Act
2006. The 2026 Annual Report and Financial Statements will be filed with the
Registrar of Companies after the Annual General Meeting.
19. 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.
20. Annual General Meeting
The Annual General Meeting of the Company will be held at 12 Throgmorton
Avenue, London EC2N 2DL on 17 June 2026 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
15 May 2026
Release (https://mb.cision.com/Main/22402/4343412/4094548.pdf)
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