REG-BlackRock Throg Tst: Half-year Report
23/07/2020 15:30
BLACKROCK THROGMORTON TRUST PLC
(Legal Entity Identifier: 5493003B7ETS1JEDPF59)
Information disclosed in accordance with Article 5 Transparency Directive and
DTR 4.2
Half Yearly Financial Report for period ended 31 May 2020
PERFORMANCE RECORD
31 May 2020 (unaudited) 30 November 2019 (audited)
Net assets (£’000) (1) 461,301 470,057
Net asset value per ordinary share 551.87p 634.10p
Ordinary share price (mid-market) 554.00p 640.00p
Benchmark Index (2) 12,502.79 14,670.11
Premium to cum income net asset value (3) 0.4% 0.9%
Average premium/discount to cum income net asset valuefor the period/year (3) 0.2% -4.6%
Performance
Net asset value per share (total return) (3) -12.0% +24.4%
Benchmark Index (2) -14.8% +8.0%
Ordinary share price (total return) (3) -12.5% +42.8%
For the six months ended 31 May 2020 (unaudited) For the six months ended 31 May 2019 (unaudited) Change %
Revenue
Net revenue profit after taxation (£’000) 1,724 3,345 -48.5
Revenue return per ordinary share 2.16p 4.57p -52.7
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Dividend
Interim 2.50p 2.50p -
======== ======== ========
1 The change in net assets reflects market movements, dividends paid
and share issues during the period.
2 The Company’s benchmark index is the Numis Smaller Companies plus
AIM (excluding Investment Companies) Index.
3 Alternative Performance Measures, see Glossary contained within the
Half Yearly Financial Report.
.
CHAIRMAN’S STATEMENT FOR THE SIX MONTHS TO 31 MAY 2020
PERIOD HIGHLIGHTS
· NAV outperformed the benchmark index by 2.8%
· Premium to NAV narrowed from 0.9% as at 30 November 2019 to
0.4%
· 9.4m shares issued - 6.4m from Treasury and 3.0m new shares
· Interim dividend declared of 2.50p per share (2019: 2.50p).
OVERVIEW
It has been a remarkable and challenging first half to the financial year,
dominated by the extraordinary upheaval brought about by COVID-19. The spread
of the pandemic has impacted almost every aspect of life in the global
economy, and its long-term ramifications have yet to play out.
Against this background, the Board has been in regular contact with the
portfolio manager, Dan Whitestone, and the rest of the BlackRock team and I
would first like to pay tribute to how they have responded to the challenges
of the transformed market and working environment with great adaptability and
professionalism.
It is also clear that Dan’s longstanding focus on financially strong
companies, many with innovative and disruptive business models, has served the
Company well in this period and will hopefully stand the portfolio in good
stead in the times ahead.
Performance
Following the strong return delivered for shareholders in 2019, in both
absolute and relative terms, it is of course disappointing to report a
reduction in NAV per share over the period, although the Company has once
again outperformed its benchmark during the first half of this financial year.
The six months to 31 May 2020 can be viewed as two separate periods given the
significantly different economic backdrops. In the three months to 29 February
2020, total return on net assets was -3.8%. This compares with a total return
for the same period from the Company’s benchmark index, the Numis Smaller
Companies plus AIM (excluding Investment Companies) Index of -5.1%, an
outperformance of 1.3%. With the acceleration in the spread of COVID-19 in
March 2020 and the resulting stock market fall-out from the ‘lockdowns’,
the total return on net assets for the three months to 31 May 2020 was -8.5%
compared to -10.2% for the Company’s benchmark index, resulting in an
outperformance of 1.7%. It is good to see outperformance in both of these very
different investment environments and markets.
Over the six months to 31 May 2020, the Company’s Net Asset Value (NAV)
return was -12.0% compared to a return of -14.8% from the Company’s
benchmark index, an outperformance of 2.8%. The Company’s share price fell
by -12.5% and the premium to NAV narrowed slightly to 0.4% at the period end
(30 November 2019: 0.9%).
Since the period end and up to the close of business on 21 July 2020, the
Company’s NAV has risen by 5.4%, and the benchmark index has risen by 3.9%
(all figures in sterling terms with dividends reinvested).
Further information on portfolio activity, the factors that contributed to
performance during the period and the outlook for the second half of the
financial year are set out in the Investment Manager’s Report below.
PERFORMANCE RECORD TO 31 MAY 2020 (WITH DIVIDENDS REINVESTED)
1 Year change % 3 Year change % 5 Year change % % change since BlackRock was appointed on 1 July 2008
NAV per share -2.4 11.2 57.4 359.0
Share price 5.7 34.1 84.6 420.3
Benchmark -12.1 -14.5 4.3 106.0
REVENUE RETURN AND DIVIDENDS
The revenue return per share for the period amounted to 2.16 pence per share,
compared to 4.57 pence per share earned during the same six month period last
year. This represents a fall of 52.7% and results from decreases in both the
aggregate ordinary and special dividends received during the period,
predominantly as a result of the impact of the COVID-19 pandemic, where we
have seen many companies suspend their dividend payments due to the uncertain
outlook.
The Board recognises that, although the Company’s objective is capital
growth, shareholders value consistency of dividends paid by the Company and
therefore an interim dividend of 2.50p per share (2019: 2.50p per share) has
been declared, payable on 28 August 2020 to shareholders on the register on 31
July 2020 (the ex-dividend date is 30 July 2020).
Consistent with this approach, the Board will consider the use of brought
forward revenue reserves to support the full year dividend if deemed
appropriate to do so at the time.
SHARE ISSUANCE
During the six months to 31 May 2020, the Company’s share price
premium/discount to NAV ranged between a discount of 12.0% and a premium of
4.2%, ending the period at a premium of 0.4%. As at 21 July 2020 the
Company’s shares were trading at a discount of 1.3%. The Company is one of
very few investment companies in the UK smaller companies sector that has been
trading at a premium to NAV during the period.
The Board believes that the best way of addressing the discount over the
longer-term is to continue to generate good performance and to create demand
for the Company’s shares in the secondary market through broadening
awareness of the Company’s unique structure. The Board believes that it is
in shareholders’ interests that the share price does not trade at an
excessive premium or discount to NAV. Therefore, where deemed to be in
shareholders’ long-term interests, it may exercise its powers to issue
shares or buy back shares with the objective of ensuring that an excessive
premium or discount does not arise. As a result, the Board will seek to renew
the authority from shareholders to buy back shares when it believes that it is
in the interests of shareholders to do so, having taken into account all
relevant factors including the size of the Company and the liquidity of its
shares.
The Board is pleased that, following a period of strong investment performance
and active marketing, the Company has sold all 6.4m Treasury Shares held at 30
November 2019, as well as issuing 3.0m new shares. As shareholders will
already know, this demand necessitated calling a General Meeting in February
to renew the Board’s authority to sell shares from Treasury and/or issue new
shares, a resolution that was approved by some 91% of shareholders.
BOARD COMPOSITION
As part of a process of ongoing Board refreshment and having carefully
considered the composition of the Board, its committees, and the need to
ensure that a suitable balance of skills, knowledge, experience, independence
and diversity is maintained, it was agreed to commence a search and selection
process to identify new directors to strengthen and enhance the existing
Board. To assist them in their search for the right candidate, the Board
engaged an independent third-party recruitment firm, Fletcher Jones.
Following a thorough search process which identified a number of very suitable
candidates, I am delighted to welcome Angela Lane to the Board. Angela joined
the Board on 10 June 2020 and will also serve as a member of the Company’s
Audit, Nomination & Management Engagement Committees. Angela brings a wealth
of financial services expertise having spent 18 years working in private
equity at 3i. She is a Chartered Accountant and has held several non-executive
and advisory roles at small and medium sized companies across a range of
industries, including business services, healthcare, travel, media, consumer
goods and infrastructure.
The Board will continue to consider its composition as part of its ongoing
succession planning arrangements.
OUTLOOK
COVID-19 has clearly impacted global markets and disrupted supply chains and
economic activity in large swathes of the economy. Governments have responded
with fiscal stimulus measures and monetary easing the like of which has not
been seen in modern times. This, coupled with significant injections of
liquidity and direct support to businesses, appears to have been successful in
restoring calm and more recently we have seen signs of a recovery in equity
markets.
At the present time, it is not yet possible to quantify the full impact of the
economic scarring, nor to determine whether there will be any longer lasting
damage to supply chains and infrastructure. What is clear is that there will
be long-term lasting consequences in the way in which individuals interact and
companies do business in the future. We remain alert to these issues and our
investment process allows us to adapt to these changing circumstances.
Against this backdrop it is important to note that one of the key advantages
of the closed-end fund structure is that the portfolio manager is not obliged
to sell investments at potentially distressed valuations in order to create
liquidity for redemptions, and this has provided a degree of protection during
this period of extreme volatility and market stress. This ability to remain
invested for the long-term allows our portfolio manager to adhere to his
strategy, which is based on fundamental analysis, while also standing ready to
respond to the opportunities inevitably created by the current volatile
markets.
As you will see in his report which follows, the portfolio manager, Dan
Whitestone, remains cautious in the short-term given the severity of the
impact of COVID-19 to date and the lack of clarity around the shape and
duration of any recovery. However, he also believes that there will be a
greater dispersion of winners and losers as a result of the COVID-19 pandemic.
Some companies will demonstrate the financial resilience and ability to
respond, adapt and better weather the storm, potentially emerging stronger
than before, while others will find that their business model or competitive
advantage has been materially weakened.
This presents significant opportunities for active managers, particularly
those who have the ability, as Dan does, in managing your Company, to invest
on both a long and short basis. So despite the near-term hurdles and potential
headwinds, not least of which is the outcome of the ongoing Brexit trade
negotiations with the EU, the manager believes that the outlook for the
portfolio over the medium to longer-term is positive and that the universe of
UK listed small and medium sized companies will continue to provide a number
of differentiated, high-quality businesses which are well placed to prosper
notwithstanding the challenging economic backdrop and potential market
volatility.
The Board is confident that in Dan Whitestone and BlackRock we have a manager
who has the resources, investment insight and capability to continue to
deliver on the Company’s objective and so remains fully supportive of the
current approach and believes the Company can continue to meet its objectives
of providing shareholders with long-term capital growth and an attractive
total return.
CHRISTOPHER SAMUEL
Chairman
23 July 2020
INVESTMENT MANAGER’S REPORT FOR THE SIX MONTHS ENDED 31 MAY 2020
MARKET REVIEW AND OVERALL INVESTMENT PERFORMANCE
The first six months of our financial year (December to May) have been a tale
of two very different halves, with extreme levels of market volatility. We
started the period on a positive note after the Conservative party secured a
convincing majority in the December General Election, resulting in a dramatic
change in sentiment towards the UK economy, and providing a boost to UK
equities. As we moved into 2020 signs of a thawing in the trade war between
the US and China continued to provide a positive backdrop for markets. In
March, this optimism was soon quashed by the outbreak of COVID-19 which
sparked one of the most rapid falls in equity markets ever witnessed, as
investors worried about the potential impact of the virus on the global
economy. The required steps to control the spread of the virus have had
extreme economic consequences, the full extent of which are yet to be fully
understood.
The social lockdowns were soon followed by fiscal and monetary stimulus, the
scale of which has been formidable. These include lower interest rates and
monetary easing as well as direct interventions to cover labour costs and ease
business outlays in the face of the social shutdown. Since the trough in late
March, markets have rebounded despite the slowdown in global economic activity
and a sharp rise in unemployment. Investor sentiment has recently been driven
by signs that many countries have passed the peak of the virus, and are
beginning to ease restrictions. However, the situation is of course changing
rapidly and the threat of a second wave of infection remains.
PERFORMANCE REVIEW
2020 has so far has been a challenging period to navigate and this was
undoubtedly the most testing time we have yet experienced in managing this
strategy. The impact of COVID-19 is unchartered territory for all whether
individuals, businesses or governments. While performance was unfortunately
negative in absolute terms (NAV -12.0% net of fees), we are pleased to report
that the Company’s NAV has outperformed our benchmark by 2.8% net of fees
during the period. This outperformance has been driven by a combination of
strong absolute returns from the short book, which delivered +2.5%, and the
long book which outperformed a falling market in relative terms. This result,
we believe, highlights the Company’s unique structure and it is encouraging
to report that we have been able to outperform our benchmark once again.
While shorts in aggregate were a key contributor to performance, eight of the
top ten contributors were in fact long positions that rose in response to
positive stock specific updates. The other two included not owning index
constituent, Finablr, which collapsed, and a short position.
The largest positive contributor to performance was Games Workshop, which is
best known as the creator of the Warhammer miniatures game. Since the new
management team took steps to reinvigorate the business, making some key
changes to broaden its market, the company has continued to report strong
sales growth which has been significantly ahead of expectations. Despite the
company having to cease operations for a short period, the business has
continued to generate strong sales through its digital offering. Another top
contributor to performance has been YouGov, the international research data
and analytics group. It has proved resilient, despite operating in the
consumer services space which has been so heavily affected by the
pandemic, as it operates a business-to-business model providing valuable
insights to marketing managers in understanding where their spend is best
directed. IntegraFin, the operator of the Transact investment platform, also
outperformed the falling market. The business has continued to generate strong
net inflows, ahead of expectations, supporting our multi-year thesis that this
best-in-class advisor platform remains well placed to win market share in a
growing market.
The ability to invest overseas has once again contributed to outperformance.
Two of our top ten contributors were international investments, namely Masimo
and Chegg. Masimo, a US listed medical device company, was the third largest
contributor to performance with the shares rising 61% during the period and
contributing 0.9% to outperformance. The shares have been particularly strong
in recent months in response to strong demand for its respiratory monitoring
products amid the COVID-19 pandemic, while FDA approval on three new
respiration products provides further investor optimism.
Chegg, an online educational platform, delivered an emphatic “beat and
raise” with revenue growth and subscriber additions both accelerating to in
excess of 30%, comfortably ahead of forecasts, illustrating Chegg’s strong
position in the virtual education operating environment, which we believe will
only accelerate as a result of COVID-19.
As mentioned, while the companies in which we had short positions provided
2.5% of positive performance during the period, not all of this performance
was due to the decline in the equity market alone. The largest contributor to
the short book was a UK building materials supplier which issued its third
profit warning in less than a year. The business has been suffering from the
pressures of weakening demand, rising costs and an overindebted balance sheet:
a challenging situation for any company.
Detractors to Company performance during the period were predominantly
concentrated in our holdings in the Consumer Services sector, where several
companies that we own or owned were forced to suspend operations for a period
of time and therefore generated zero, or close to zero, revenues. However,
four of our top ten detractors were from positions in the benchmark which we
do not own that rose, and which we have no intention of owning as they do not
align with our investment process.
To hold ourselves to account, and with the benefit of hindsight, we were too
slow to reduce our exposure to Consumer Services in aggregate. The largest two
detractors in this area were WH Smith and Dart Group, both of which were
victims of airline travel disruption. The inability to predict the duration of
route closures for Dart Group or concession/shop closures in transportation
hubs for WH Smith, and what the longer-term impact will be on air passenger
volumes, has created enormous uncertainty over the profit outlook and cash
drain on both businesses. We believe both are well-managed companies with
strong track records of value creation that have proved themselves as good
operators and market share winners. Importantly, they also have stronger
financials than their peers and have levers to pull to reduce costs and manage
liquidity, but the situation remains fluid, hence the huge uncertainty and
precipitous falls in both share prices in February and March. We remain owners
of both and believe management will do the right things in the interests of
their customers, staff and shareholders to ensure they get through this period
and emerge with stronger market positions as competitors are materially
weakened or leave the market altogether. Ultimately, there is demand for their
products or services and therefore we do not think the medium-to-long-term
opportunity is reflected in the valuation of either company today.
ACTIVITY
The total number of positions (long and short) in the portfolio has reduced
modestly over the period to 130. It is important to highlight the changing
composition of this number, which currently consists of 118 long positions and
only 12 short positions. This reflects two deliberate actions on our part:
first, we closed a number of our shorts that had fallen materially in February
and March and locked in those gains ahead of a potential market recovery; and
second, our decision to introduce a number of new long positions with exciting
long-term growth prospects at what we believe to be attractive valuations.
Where we have added new long positions, they have either been in response to
us deliberately seeking to increase exposure to industry trends that we think
are accelerating in response to COVID-19, such as digital payments (Adyen), or
Video Gaming (Take-Two Interactive Software, Keywords Studios), or they
reflect us taking advantage of extreme volatility to buy market leading
companies at attractive valuations, for example, Wizz Air, London Metric
Property, XP Power and Kainos Group.
It should be no surprise that we have sought to add to several existing
positions that we believe will benefit from improving end market dynamics,
especially in the digital space e.g. Chegg and Team17. Since the outbreak of
COVID-19, we have reduced our exposure to Consumer Services in aggregate,
reflecting the increased uncertainty over the quantum and trajectory of
profits, but this still remains an attractive sector for us to find long-term
growth companies. As a result of the actions above, we are currently operating
with a gross exposure of around 120% and net market exposure of around 116%,
which is at the higher end of our historic range.
PORTFOLIO POSITIONING
As a reminder, portfolio positioning will be driven by our focus on two types
of company. The first is what we define as ‘quality differentials’, which
are essentially differentiated long-term growth investments. These we would
characterise as companies that have strong management teams, with a protected
market position, a unique and compelling product offering with an attractive
route to market, maybe benefitting from structural growth, and that are well
financed with clean accounting. The second type of company is those that are
leading industry change, the ‘disruptors’ or alternatively on the short
side it would be the victims of industry change, the ‘disrupted’.
This philosophy has not changed and will not change regardless of the wider
market environment: however we do believe that many of the trends/industries
that this Company is exposed to will see their aggregate growth rates
accelerate on a five year view e.g. digital payments, cloud audio/visual
communication, software-as-a-service and infrastructure-as-a-service.
Meanwhile, other companies with market leading propositions have the potential
to emerge with an even stronger market position as capacity exits, hence our
focus on the strength of a company’s financial structure (i.e. debt and
liquidity).
Digital transformation is an industry trend we have highlighted before and
remains a key investment area for the Company. Looking forward, we expect
corporate spending to accelerate as companies reduce costs and complexity,
fight for market share, and stay front of mind with their customers as
behaviours change. We believe that we own many exciting companies exposed to
these trends spread across a range of different sectors. Our holdings here are
numerous, but include YouGov, Chegg, Xero and Gamma Communications, which we
expect to benefit from the trends identified, as demand for their services
increases. We have also seen the benefits recently in traditional bricks and
mortar retailers that have prioritised investment in their digital offerings
to great effect, for example: Pets at Home and Games Workshop.
Given that governments have indicated a willingness to stimulate economic
growth, we believe this will particularly benefit companies exposed to the
typical channels for economic stimulus, such as infrastructure, construction
and housebuilders. Our holdings in this area include Breedon, Serco, Bellway
and Balfour Beatty.
Despite our reduction in consumer holdings, this remains a significant
overweight reflecting our ongoing conviction in differentiated companies with
strong digital offerings such as Games Workshop and Pets at Home, or video
game developers, such as Sumo Group, Team17 and Frontier Developments. Our
exposure to the video games industry has increased as we are positive on the
long-term industry dynamics, but in the near-term the outlook has also
improved as their global audience has increased with more people spending time
at home with the propensity to spend more on gaming.
The short book continues to target the same areas that we see as
‘over-earning’ or under structural or cyclical pressure. Many of our short
positions are within the Consumer Services sector, either facing structural
headwinds (digital disruption, low cost or specialised formats) or cyclical
pressures (weakening consumer demand, rising costs). Both categories can be
overlaid with a financial framework centred on weak balance sheets and poor
cash conversion. As discussed earlier we did reduce our overall short exposure
in response to the market sell-off.
OUTLOOK
While the first six months of the year have certainly been a challenging
period for equity markets in absolute terms, our outperformance of the
benchmark has been a positive outcome. The economic backdrop remains highly
uncertain given the ongoing COVID-19 pandemic. In aggregate the news flow
surrounding the economic impact of the pandemic has steadily improved with
many countries past the peak and while some are in the process of lifting
restrictions, other countries are seeing a rise in the rate of infection,
although this varies significantly by region and the situation remains fluid.
Meanwhile, monetary support continues to provide liquidity to financial
markets and we believe most governments have already signalled an intention to
use a wide variety of measures to stimulate economic activity. These actions
have underpinned financial markets in general hence the rebound in most equity
markets in recent months. We are continuing to engage with companies to
understand the trends and impacts in the industries in which they operate, and
how management teams expect to deal with this disruption.
Whilst there remains much uncertainty in the near-term, we are very positive
about the long-term, and indeed our conviction and excitement for the outlook
for specific companies and industry trends has, if anything, increased. We
have read some truly remarkable company statements in recent weeks supporting
some of these high conviction views about changing industry dynamics, notably
our views on the acceleration in corporate spending on digital transformation
to the benefit of digital ready businesses and/or businesses that enable the
digital transformation. These suggest that the level of industry change is
probably accelerating at this time, and so there are some important themes
emerging that should deliver well for the Company over the coming years. Other
companies with a strong financial footing and a differentiated product
offering should be able to use this market disruption to their long-term
advantage as and when competitors and capacity exit the market.
In summary, although it is always disappointing to report a negative return,
we do believe that this has been a successful period for the Company as we
delivered against our objective to outperform our benchmark in all market
conditions. This outcome continues to support our belief that stock and
industry specifics can triumph over macro factors, and most importantly, this
Company has a superior toolkit to take advantage of the full opportunity set
presented by our universe.
Overall, we feel enthused by the positive developments in some key industries
where the virus crisis may actually have acted as a catalyst for change, which
will benefit the Company in due course. We thank shareholders for their
support during these challenging times.
DAN WHITESTONE
BLACKROCK INVESTMENT MANAGEMENT (UK) LIMITED
23 July 2020
PORTFOLIO OF INVESTMENTS AS AT 31 MAY 2020
1
IntegraFin
Financial Services
Market value(1 ) £13,579,000
Share of net assets 2.9%
UK savings platform for financial advisors
2
YouGov*
Media
Market value £13,530,000
Share of net assets 2.9%
Provision of survey data and specialist data analytics
3
Games Workshop
Leisure Goods
Market value £12,479,000
Share of net assets 2.7%
Developer, publisher and manufacturer of miniature war games
4
Breedon*
Construction & Materials
Market value(1 ) £12,263,000
Share of net assets 2.7%
British construction materials group
5
Serco
Support Services
Market value £12,215,000
Share of net assets 2.6%
Provision of public services across health, transport, immigration, defence,
justice and citizen services
6
Dechra Pharmaceuticals
Pharmaceuticals & Biotechnology
Market value £11,716,000
Share of net assets 2.5%
Development and supply of pharmaceutical and other products focused on the
veterinary market
7
Watches of Switzerland
Personal Goods
Market value £11,373,000
Share of net assets 2.5%
Retailer of luxury watches
8
Gamma Communications*
Mobile Telecommunications
Market value £10,863,000
Share of net assets 2.4%
Provision of communication services to UK businesses
9
Avon Rubber
Aerospace & Defence
Market value £10,688,000
Share of net assets 2.3%
Production of safety masks and dairy related products
10
Future
Media
Market value £9,938,000
Share of net assets 2.2%
Multi-platform media business covering technology, entertainment, creative
arts, home interest and education services
1 Includes long derivative positions.
* Traded on the Alternative Investment Market (AIM) of the London
Stock Exchange.
# Company £’000 % of net assets Description
11 Learning Technologies* Support Services 9,840 2.1 Provision of e-learning services
12 RWS Holdings* Support Services 9,800 2.1 Provision of language support services
13 Bodycote Industrial Engineering 9,221 2.0 Provision of thermal processing services
14 Qinetiq Group Aerospace & Defence 9,019 2.0 Provision of scientific and technological services to the defence, security and aerospace markets
15 Liontrust Asset Management Financial Services 8,666 1.9 Provision of asset management services
16 Impax Asset Management* Financial Services 7,497 1.6 Provision of asset management services
17 4imprint Group Media 7,432 1.6 Supply of promotional merchandise in the US
18 Sirius Real Estate Real Estate Investment & Services 7,368 1.6 Owner and operator of business parks, offices and industrial complexes in Germany
19 HomeServe Support Services 7,267 1.6 Multinational home emergency repairs and improvements
20 Team17* Leisure Goods 7,177 1.6 British video game developer and publisher
21 Safestore Holdings Real Estate Investment Trusts 7,141 1.5 Provision of self-storage units
22 Computacenter Software & Computer Services 6,905 1.5 Computer services
23 Spirent Technology Hardware & Equipment 6,778 1.5 Multinational telecommunications testing
24 IWG Support Services 6,584 1.4 Provision of serviced offices, co-working spaces, business lounges, virtual offices, meeting rooms, and video teleconference services
25 Pets at Home General Retailers 6,582 1.4 Retailer of pet supplies
26 Masimo Health Care Equipment & Services 6,566 1.4 Developer and manufacturer of non-invasive patient monitoring technologies
27 Sumo Group* Leisure Goods 6,505 1.4 Provision of creative and development services to the video games and entertainment industries
28 Xero Software & Computer Services 6,498 1.4 Software company specialising in accounting for small businesses
29 Treatt Chemicals 6,467 1.4 Development and manufacture of ingredients for the flavour and fragrance industry
30 Oxford Instruments Electronic & Electrical Equipment 6,463 1.4 Designer and manufacturer of tools and systems for industry and research
31 Alliance Pharma* Pharmaceuticals & Biotechnology 6,283 1.4 Distributor of pharmaceutical and healthcare products
32 Chegg General Retailers 6,068 1.3 Provision of education related services
33 GB Group* Software & Computer Services 6,033 1.3 Development and supply of identity verification solutions
34 Workspace Group Real Estate Investment Trusts 5,934 1.3 Supply of flexible workspace to businesses in London
35 CVS Group* General Retailers 5,520 1.2 Operation of veterinary surgeries
36 Spectris Electronic & Electrical Equipment 5,428 1.2 Supplier of productivity enhancing instrumentation and controls
37 IMImobile* Software & Computer Services 5,359 1.2 Provision of cloud communication software
38 Trainline General Retailers 5,123 1.1 Independent rail and coach digital ticketing platform
39 Morgan Sindall Construction & Materials 5,089 1.1 Office fit out, construction and urban regeneration services
40 Bellway Household Goods & Home Construction 5,082 1.1 UK housebuilder
41 AJ Bell Financial Services 4,974 1.1 UK savings platform for financial advisors & individual investors
42 Abcam* Pharmaceuticals & Biotechnology 4,831 1.1 Producer, distributor and seller of protein research tools
43 Vistry Group Household Goods & Home Construction 4,829 1.0 UK housebuilder
44 LondonMetric Property Real Estate Investment Trusts 4,795 1.0 UK property company
45 Balfour Beatty Construction & Materials 4,777 1.0 Multinational infrastructure group
46 Diploma Support Services 4,649 1.0 Supplier of specialised technical products and services
47 Keywords Studios* Support Services 4,595 1.0 Provision of video games technical services
48 Polar Capital Holdings* Financial Services 4,546 1.0 Provision of investment management services
49 Adyen Software & Computer Services 4,452 1.0 Digital payments company
50 Beazley Non-Life Insurance 4,350 0.9 Specialist insurance businesses
51 Mattioli Woods* Financial Services 4,315 0.9 Provision of asset management services
52 Fuller Smith & Turner - A Shares Travel & Leisure 4,150 0.9 Ownership and operation of pubs mainly in the London area
53 Tatton Asset Management* Financial Services 4,084 0.9 Provision of discretionary fund management services to financial advisors
54 AB Dynamics* Industrial Engineering 3,933 0.9 Development and supply of specialist automotive testing systems
55 Countryside Properties Household Goods & Home Construction 3,825 0.8 UK housebuilder
56 Wetherspoon (J.D) Travel & Leisure 3,822 0.8 Ownership and management of pubs in the UK
57 Young & Co's Brewery* Travel & Leisure 3,811 0.8 Ownership and operation of pubs mainly in the London area
58 Frontier Developments* Leisure Goods 3,801 0.8 British developer and publisher of video games
59 Ergomed* Pharmaceuticals & Biotechnology 3,729 0.8 Provision of pharmaceutical services
60 XP Power Electronic & Electrical Equipment 3,581 0.8 Leading provider of power solutions
61 Euronext Financial Services 3,564 0.8 European stock exchange
62 GlobalData* Media 3,541 0.8 Data analytics and consulting
63 St. Modwen Properties Real Estate Investment & Services 3,476 0.8 Investment in, and development of, property
64 Wizz Air Travel & Leisure 3,421 0.7 Low cost airline
65 Kainos Group Software & Computer Services 3,400 0.7 Provision of digital technology solutions
66 OneSavings Bank Financial Services 3,323 0.7 Provision of financial services
67 Next Fifteen Communications* Media 3,293 0.7 Provision of digital communication products and services
68 Robert Walters Support Services 3,229 0.7 Provision of specialist recruitment services
69 TT Electronics Electronic & Electrical Equipment 3,129 0.7 Global manufacturer of electronic components
70 Redrow Household Goods & Home Construction 3,125 0.7 UK housebuilder
71 The Pebble Group* Media 3,037 0.7 Design and manufacturing of promotional goods
72 Grafton Group Support Services 2,917 0.6 Builders merchants in the UK, Ireland and Netherlands
73 James Fisher and Sons Industrial Transportation 2,907 0.6 Provision of innovative marine solutions and specialised engineering services
74 B&M European Value General Retailers 2,864 0.6 European value retailer
75 Clarkson Industrial Transportation 2,852 0.6 Provision of shipping services
76 Chapel Down † Beverages 2,836 0.6 UK producer of sparkling and still wines, and Curious beers and ciders
77 Eckoh* Software & Computer Services 2,811 0.6 Global provider of secure payments products
78 RHI Magnesita Industrial Engineering 2,758 0.6 Global supplier of refractory products, systems and services
79 Gooch & Housego* Electronic & Electrical Equipment 2,752 0.6 Designer and manufacturer of advanced photonic systems
80 TP ICAP Financial Services 2,649 0.6 Inter-dealer broker
81 Accesso Technology* Software & Computer Services 2,620 0.6 Provision of ticketing and virtual queuing solutions
82 Johnson Service Group* Support Services 2,589 0.6 Textile rental and related services
83 Okta Software & Computer Services 2,580 0.6 Identity and access management company
84 Judges Scientific* Electronic & Electrical Equipment 2,565 0.6 Designer and producer of scientific instruments
85 Scapa* Chemicals 2,557 0.6 Healthcare and industrial group
86 Dart Group* Travel & Leisure 2,538 0.6 UK airline & tour operator
87 Greggs Food & Drug Retailers 2,528 0.6 Bakery chain
88 Ryanair Travel & Leisure 2,485 0.5 European low cost airline
89 Renishaw Electronic & Electrical Equipment 2,475 0.5 Engineering and scientific technology company
90 MongoDB Software & Computer Services 2,462 0.5 Global cloud-based database
91 WH Smith General Retailers 2,404 0.5 Widespread British retailer of books, stationery, magazines and confectionery
92 Craneware* Software & Computer Services 2,390 0.5 Provision of financial business software for US hospitals
93 MarketAxess Holdings Financial Services 2,386 0.5 Electronic trading platform
94 Marshalls Construction & Materials 2,344 0.5 British construction materials group
95 Luceco Electronic & Electrical Equipment 2,332 0.5 Supplier & manufacturer of high quality LED lighting products
96 888 Travel & Leisure 2,326 0.5 Operator of online gaming platform
97 Advanced Medical Solutions* Health Care Equipment & Services 2,287 0.5 Developer and manufacturer of wound care and closure products
98 Trade Desk Inc Media 2,267 0.5 Digital advertising software
99 Grainger Real Estate Investment & Services 2,151 0.5 UK property company
100 Aptitude Software Software & Computer Services 2,095 0.5 Provision of specialist finance software and technology
101 Howden Joinery Group Support Services 2,057 0.4 Kitchen and joinery product supplier
102 Stock Spirits Group Beverages 2,002 0.4 Branded spirits mainly in Eastern Europe
103 Freshpet Food Producers 1,958 0.4 Pet food manufacturer
104 Take-Two Interactive Software Leisure Goods 1,936 0.4 Developer and publisher of video games
105 Worldline Software & Computer Services 1,909 0.4 Digital payments company
106 Five9 Software & Computer Services 1,893 0.4 Provision of cloud-based contact centre software
107 SThree Support Services 1,874 0.4 Provision of specialist professional recruitment services
108 City Pub Group* Travel & Leisure 1,817 0.4 Pub operator across southern England and Wales
109 Coupa Software Software & Computer Services 1,723 0.4 Provision of cloud-based platform for business spend
110 ECO Animal Health Group* Pharmaceuticals & Biotechnology 1,675 0.4 Developer of pharmaceuticals products for the animal health market
111 Softcat Software & Computer Services 1,638 0.4 IT infrastructure and services provider
112 Central Asia Metals* Mining 1,483 0.3 Production of base metals with operations in Kazakhstan and North Macedonia
113 Premier Asset Management Group* Financial Services 1,412 0.3 Provision of retail asset management services
114 Rathbone Brothers Financial Services 1,067 0.2 Provision of wealth management services
115 Porvair Alternative Energy 953 0.2 Specialist filtration and environmental technology
116 Zotefoams Chemicals 674 0.1 Manufacturer of polyolefin foams used in sport, construction, marine, automation, medical equipment and aerospace
117 Hotel Chocolat* Food Producers 412 0.1 British chocolatier and cocoa grower
118 Alfa Financial Software Software & Computer Services 358 0.1 Provision of software to the finance industry
-------------- --------------
Long investment positions (excluding BlackRock’s Institutional Cash Series plc – Sterling Liquid Environmentally Aware Fund) 547,294 118.6
-------------- --------------
Short investment positions (20,473) (4.4)
======== ========
* Traded on the Alternative Investment Market (AIM) of the London
Stock Exchange.
† Traded on NEX exchange.
Percentages shown are the share of net assets.
At 31 May 2020, the Company did not hold any equity interest representing more
than 3% of any company’s share capital.
The above investments may comprise of exposures to long equity and long
derivative positions.
FAIR VALUE AND GROSS MARKET EXPOSURE OF INVESTMENTS AS AT 31 MAY 2020
Fair value (1) £’000 Market exposure (2) £’000 Market exposure as a % of net assets (3)
Long investment positions (excluding BlackRock’s Institutional Cash Series plc – Sterling Liquid Environmentally Aware Fund) 453,379 547,294 118.6
Short investment positions (1,772) (20,473) (4.4)
Cash and cash equivalents (4) 129 (75,085) (16.3)
BlackRock’s Institutional Cash Series plc – Sterling Liquid Environmentally Aware Fund (4) 18,681 18,681 4.1
Other net current liabilities (9,116) (9,116) (2.0)
-------------- -------------- --------------
Net assets 461,301 461,301 100.0
======== ======== ========
1 Fair value is determined as follows:
– Listed and AIM quoted investments are valued at bid prices where
available, otherwise at publisher price quotations.
– The sum of the fair values of the long and short derivative
positions above is determined based on the difference between the purchase or
transaction price and value of the underlying shares in the contract (in
effect the unrealised gains/(losses) on the exposed positions). The cost of
purchasing the securities held through long derivative positions directly in
the market would have amounted to £93,915,000 at the time of purchase, and
subsequent market rises in prices have resulted in unrealised gains on the
long derivative positions of £3,390,000, resulting in the value of the total
market exposure to the underlying securities increasing to £97,305,000 as at
31 May 2020. The notional price of selling the securities to which exposure
was gained via the short investment positions would have been £18,701,000 at
the time of entering into the contract, and subsequent price rises have
resulted in unrealised losses on the short investment positions of £1,772,000
and the value of the market exposure of these investments increasing to
£20,473,000 at 31 May 2020. If the short investment positions had been closed
on 31 May 2020, this would have resulted in a loss of £1,772,000 for the
Company.
2 Market exposure in the case of equity investments is the same as
fair value. In the case of long and short derivative positions it is the
market value of the underlying shares to which the portfolio is exposed via
the contract.
3 % based on the total market exposure of net assets.
4 The gross market exposure column for cash and cash equivalents has
been adjusted to assume the Company traded direct holdings rather than
exposure being gained through long and short derivative positions.
DISTRIBUTION OF INVESTMENTS AS AT 31 MAY 2020
Sector % of long portfolio % of short portfolio % of net portfolio
Oil Equipment, Services & Distribution 0.0 (0.1) (0.1)
-------------- -------------- --------------
Oil & Gas 0.0 (0.1) (0.1)
-------------- -------------- --------------
Chemicals 1.8 (0.2) 1.6
Mining 0.3 0.0 0.3
-------------- -------------- --------------
Basic Materials 2.1 (0.2) 1.9
-------------- -------------- --------------
Aerospace & Defence 3.7 0.0 3.7
Alternative Energy 0.2 0.0 0.2
Construction & Materials 4.6 0.0 4.6
Electronic & Electrical Equipment 5.5 0.0 5.5
Industrial Engineering 3.0 0.0 3.0
Industrial Transportation 1.1 0.0 1.1
Support Services 12.8 (0.2) 12.6
-------------- -------------- --------------
Industrials 30.9 (0.2) 30.7
-------------- -------------- --------------
Beverages 0.9 0.0 0.9
Food Producers 0.4 (0.1) 0.3
Household Goods & Home Construction 3.2 0.0 3.2
Leisure Goods 6.1 0.0 6.1
Personal Goods 2.2 0.0 2.2
-------------- -------------- --------------
Consumer Goods 12.8 (0.1) 12.7
-------------- -------------- --------------
Health Care Equipment & Services 1.7 0.0 1.7
Pharmaceuticals & Biotechnology 5.4 (0.1) 5.3
-------------- -------------- --------------
Health Care 7.1 (0.1) 7.0
-------------- -------------- --------------
Food & Drug Retailers 0.5 0.0 0.5
General Retailers 5.4 (0.2) 5.2
Media 8.2 0.0 8.2
Travel & Leisure 4.6 0.0 4.6
-------------- -------------- --------------
Consumer Services 18.7 (0.2) 18.5
-------------- -------------- --------------
Financial Services 11.8 (2.1) 9.7
Non-Life Insurance 0.8 0.0 0.8
Real Estate Investment & Services 2.5 0.0 2.5
Real Estate Investment Trusts 3.4 (0.3) 3.1
-------------- -------------- --------------
Financials 18.5 (2.4) 16.1
-------------- -------------- --------------
Software & Computer Services 10.4 (0.6) 9.8
Technology Hardware & Equipment 1.3 0.0 1.3
-------------- -------------- --------------
Technology 11.7 (0.6) 11.1
-------------- -------------- --------------
Mobile Telecommunications 2.1 0.0 2.1
-------------- -------------- --------------
Telecommunications 2.1 0.0 2.1
-------------- -------------- --------------
Total Investments 103.9 (3.9) 100.0
======== ======== ========
The above percentages are calculated on the net portfolio as at 31 May 2020.
The net portfolio is calculated as long equity and derivative positions, less
short derivative positions as at 31 May 2020.
ANALYSIS OF THE PORTFOLIO
Gross basis (1) Net basis (2)
FTSE 250 52.2% 49.8%
FTSE AIM 31.5% 33.6%
Overseas 8.6% 8.6%
FTSE Small Cap 6.9% 7.1%
Other 0.8% 0.9%
Source: BlackRock.
1 Long exposure plus short exposure as a percentage of the portfolio
in aggregate excluding investment in BlackRock’s Institutional Cash Series
plc - Sterling Liquid Environmentally Aware Fund.
2 Long exposure less short exposure as a percentage of the portfolio
excluding investment in BlackRock’s Institutional Cash Series plc - Sterling
Liquid Environmentally Aware Fund.
MARKET CAPITALISATION AS AT 31 MAY 2020
Long positions* Short positions
£1bn+ 62.9% -3.4%
£400m-£1bn 24.3% -0.3%
£100m-£400m 16.4% -0.2%
£0m-£100m 0.3% 0.0%
* The above investments may comprise of exposures to long equity and
long derivative positions.
Source: BlackRock.
POSITION SIZE AS AT 31 MAY 2020
Market Value Long positions* Short positions
£2m+ 102 -1
£1m-2m 12 -5
£0m-1m 4 -6
* The above investments may comprise of exposures to long equity and
long derivative positions.
Source: BlackRock.
INTERIM MANAGEMENT REPORT AND RESPONSIBILITY STATEMENT
The Chairman’s Statement and the Investment Manager’s report give details
of the important events which have occurred during the period and their impact
on the financial statements.
PRINCIPAL RISKS AND UNCERTAINTIES
The principal risks faced by the Company can be divided into various areas as
follows:
· Performance;
· Market;
· Income/dividend;
· Financial;
· Operational; and
· Regulatory.
The Board reported on the principal risks and uncertainties faced by the
Company in the Annual Report and Financial Statements for the year ended 30
November 2019. A detailed explanation can be found in the Strategic Report on
pages 34 to 36 and in note 16 on pages 84 to 96 of the Annual Report and
Financial Statements which are available on the website maintained by
BlackRock at www.blackrock.com/uk/thrg.
An outbreak of an infectious respiratory illness caused by a novel coronavirus
known as COVID-19 was first detected in China in December 2019 and has
developed into a global pandemic. This coronavirus has resulted in travel
restrictions, closed international borders, enhanced health screenings at
ports of entry and elsewhere, disruption of and delays in healthcare service
preparation and delivery, prolonged quarantines, cancellations, supply chain
disruptions, and lower consumer demand, as well as general concern and
uncertainty. The response to the COVID-19 pandemic has adversely affected the
economies of many nations across the entire global economy, individual issuers
and capital markets, and could continue with extents that cannot necessarily
be foreseen. The duration of the COVID-19 outbreak and its effects cannot be
determined with certainty.
In the view of the Board, there have been no changes to the fundamental nature
of the principal risks and uncertainties, other than the outbreak of the
COVID-19 pandemic as discussed above, since the previous report and these are
equally applicable to the remaining six months of the financial year as they
were to the six months under review.
RELATED PARTY DISCLOSURE AND TRANSACTIONS WITH THE INVESTMENT MANAGER
BlackRock Fund Managers Limited (BFM) was appointed as the Company’s
Alternative Investment Fund Manager (AIFM) with effect from 2 July 2014. BFM
has (with the Company’s consent) delegated certain portfolio and risk
management services, and other ancillary services, to BlackRock Investment
Management (UK) Limited (BIM (UK)). Both BFM and BIM (UK) are regarded as
related parties under the Listing Rules. Details of the fees payable are set
out in note 4 and note 11 of the financial statements.
The related party transactions with the Directors are set out in note 12 of
the financial statements.
GOING CONCERN
The Board is mindful of the uncertainty surrounding the potential duration of
the COVID-19 pandemic and its impact on the global economy, the Company’s
assets and the potential for the level of revenue derived from the portfolio
to reduce versus the prior year. The Board believes that the Company and its
key third party service providers have in place appropriate business
continuity plans and will be able to maintain service levels through the
COVID-19 pandemic.
The Directors, having considered the nature and liquidity of the portfolio,
the Company’s investment objective and the Company’s projected income and
expenditure, are satisfied that the Company has adequate resources to continue
in operational existence for the foreseeable future (being a period of at
least twelve months from the date that this half-yearly financial report is
approved) and is financially sound. For this reason, they continue to adopt
the going concern basis in preparing the financial statements. The Company has
a portfolio of investments which is considered to be readily realisable and is
able to meet all of its liabilities from its assets and the income generated
from these assets. Ongoing charges (excluding finance costs, performance fees,
direct transaction costs, custody transaction charges, taxation and certain
non-recurring items) for the year ended 30 November 2019 were approximately
0.59%(1) of net assets.
DIRECTORS’ RESPONSIBILITY STATEMENT
The Disclosure Guidance and Transparency Rules (DTR) of the UK Listing
Authority require the Directors to confirm their responsibilities in relation
to the preparation and publication of the Interim Management Report and
Financial Statements.
The Directors confirm to the best of their knowledge that:
· the condensed set of financial statements contained within
the half yearly financial report has been prepared in accordance with
International Accounting Standard 34 ‘Interim Financial Reporting’; and
· the Interim Management Report, together with the Chairman’s
Statement and Investment Manager’s report, include a fair review of the
information required by 4.2.7R and 4.2.8R of the FCA’s Disclosure Guidance
and Transparency Rules.
The half yearly financial report has not been audited or reviewed by the
Company’s Auditor.
The half yearly financial report was approved by the Board on 23 July 2020 and
the above responsibility statement was signed on its behalf by the Chairman.
CHRISTOPHER SAMUEL
FOR AND ON BEHALF OF THE BOARD
23 July 2020
STATEMENT OF COMPREHENSIVE INCOME FOR THE SIX MONTHS ENDED 31 MAY 2020
Revenue £’000 Capital £’000 Total £’000
Notes Six months ended 31.05.20 (unaudited) Six months ended 31.05.19 (unaudited) Year ended 30.11.19 (audited) Six months ended 31.05.20 (unaudited) Six months ended 31.05.19 (unaudited) Year ended 30.11.19 (audited) Six months ended 31.05.20 (unaudited) Six months ended 31.05.19 (unaudited) Year ended 30.11.19 (audited)
Income from investments held at fair value through profit or loss 3 2,394 4,496 8,531 – – – 2,394 4,496 8,531
Net expense from derivatives 3 (135) (738) (1,352) – – – (135) (738) (1,352)
Other income 3 49 111 191 – – – 49 111 191
-------------- -------------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
Total income 2,308 3,869 7,370 – – – 2,308 3,869 7,370
-------------- -------------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
Net (loss)/profit on investments held at fair value through profit or loss – – – (63,284) 44,065 78,040 (63,284) 44,065 78,040
Net loss on foreign exchange – – – (151) (44) (4) (151) (44) (4)
Net profit from derivatives – – – 7,381 3,939 13,212 7,381 3,939 13,212
-------------- -------------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
Total 2,308 3,869 7,370 (56,054) 47,960 91,248 (53,746) 51,829 98,618
-------------- -------------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
Expenses
Investment management and performance fees 4 (244) (214) (446) (5,536) (5,394) (6,094) (5,780) (5,608) (6,540)
Other operating expenses 5 (336) (295) (635) (17) (14) (17) (353) (309) (652)
-------------- -------------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
Total operating expenses (580) (509) (1,081) (5,553) (5,408) (6,111) (6,133) (5,917) (7,192)
-------------- -------------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
Net profit/(loss) on ordinary activities before finance costs and taxation 1,728 3,360 6,289 (61,607) 42,552 85,137 (59,879) 45,912 91,426
Finance costs (2) (1) (2) (4) (2) (7) (6) (3) (9)
-------------- -------------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
Net profit/(loss) on ordinary activities before taxation 1,726 3,359 6,287 (61,611) 42,550 85,130 (59,885) 45,909 91,417
Taxation (2) (14) (22) – – – (2) (14) (22)
-------------- -------------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
Profit/(loss) for the period 7 1,724 3,345 6,265 (61,611) 42,550 85,130 (59,887) 45,895 91,395
-------------- -------------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
Earnings/(loss) per ordinary share (pence) 7 2.16 4.57 8.56 (77.28) 58.19 116.39 (75.12) 62.76 124.95
======== ======== ======== ======== ======== ======== ======== ======== ========
The total column of this statement represents the Company’s Statement of
Comprehensive Income, prepared in accordance with International Financial
Reporting Standards (IFRS) as adopted by the European Union (EU). The
supplementary revenue and capital columns are both prepared under guidance
published by the Association of Investment Companies (AIC). All items in the
above statement derive from continuing operations. No operations were acquired
or discontinued during the period. All income is attributable to the equity
holders of the Company.
The Company does not have any other comprehensive income. The net
profit/(loss) for the period disclosed above represents the Company’s total
comprehensive income/(loss).
STATEMENT OF CHANGES IN EQUITY FOR THE SIX MONTHS ENDED 31 MAY 2020
Note Called up share capital £’000 Share premium account £’000 Capital redemption reserve £’000 Special reserve £’000 Capital reserves £’000 Revenue reserve £’000 Total £’000
For the six months ended 31 May 2020 (unaudited)
At 30 November 2019 4,026 26,169 11,905 36,525 379,724 11,708 470,057
Total comprehensive income:
Net (loss)/profit for the period – – – – (61,611) 1,724 (59,887)
Transactions with owners, recorded directly to equity:
Ordinary shares issued 153 14,346 – – – – 14,499
Ordinary shares issued from treasury – 34,741 – 8,099 – – 42,840
Share issue costs – (14) – – – – (14)
Share issue costs – treasury – – – (44) – – (44)
Dividends paid ((1)) 6 – – – – – (6,150) (6,150)
-------------- -------------- -------------- -------------- -------------- -------------- --------------
At 31 May 2020 4,179 75,242 11,905 44,580 318,113 7,282 461,301
-------------- -------------- -------------- -------------- -------------- -------------- --------------
For the six months ended 31 May 2019 (unaudited)
At 30 November 2018 4,026 21,049 11,905 35,272 294,594 12,756 379,602
Total comprehensive income:
Net profit for the period – – – – 42,550 3,345 45,895
Transactions with owners, recorded directly to equity:
Dividends paid ((2)) 6 – – – – – (5,485) (5,485)
-------------- -------------- -------------- -------------- -------------- -------------- --------------
At 31 May 2019 4,026 21,049 11,905 35,272 337,144 10,616 420,012
-------------- -------------- -------------- -------------- -------------- -------------- --------------
For the year ended
30 November 2019 (audited)
At 30 November 2018 4,026 21,049 11,905 35,272 294,594 12,756 379,602
Total comprehensive income:
Net profit for the year – – – – 85,130 6,265 91,395
Transactions with owners, recorded directly to equity:
Ordinary shares issued from treasury – 5,120 – 1,266 – – 6,386
Share issue costs – – – (13) – – (13)
Dividends paid ((3)) – – – – – (7,313) (7,313)
-------------- -------------- -------------- -------------- -------------- -------------- --------------
At 30 November 2019 4,026 26,169 11,905 36,525 379,724 11,708 470,057
======== ======== ======== ======== ======== ======== ========
(1) Final dividend of 7.70p per share for the year ended 30 November 2019,
declared on 6 February 2020 and paid on 2 April 2020.
(2) Final dividend of 7.50p per share for the year ended 30 November 2018,
declared on 12 February 2019 and paid on 28 March 2019.
(3) Final dividend of 7.50p per share for the year ended 30 November 2018,
declared on 12 February 2019 and paid on 28 March 2019 and interim dividend of
2.50p per share for the year ended 30 November 2019, declared on 23 July 2019
and paid on 28 August 2019.
Costs related to the acquisition and disposal of investments amounted to
£823,000 and £83,000 respectively for the six months ended 31 May 2020 (six
months ended 31 May 2019: £495,000 and £72,000; year ended 30 November 2019:
£801,000 and £139,000). All transaction costs have been included within
capital reserves.
The share premium account and capital redemption reserve are not distributable
profits under the Companies Act 2006. The special reserve may be used as
distributable profits for all purposes and, in particular, for the repurchase
by the Company of its ordinary shares and for payment as dividends. In
accordance with the Company’s Articles of Association, net capital reserves
may be distributed by way of the repurchase by the Company of its ordinary
shares and for payment as dividends.
STATEMENT OF FINANCIAL POSITION AS AT 31 MAY 2020
Notes 31 May 2020 £’000 (unaudited) 31 May 2019 £’000 (unaudited) 30 November 2019 £’000 (audited)
Non current assets
Investments held at fair value through profit or loss 9 449,989 419,408 444,604
-------------- -------------- --------------
Current assets
Other receivables 4,509 3,781 3,682
Derivative financial assets held at fair value through profit or loss 4,890 2,100 2,923
Cash collateral held with brokers in respect of derivatives 3,177 350 310
Cash and cash equivalents 18,810 14,471 30,398
-------------- -------------- --------------
31,386 20,702 37,313
-------------- -------------- --------------
Total assets 481,375 440,110 481,917
-------------- -------------- --------------
Current liabilities
Other payables (14,812) (19,678) (8,875)
Derivative financial liabilities held at fair value through profit or loss (3,272) (60) (365)
Cash collateral received in respect of derivatives (1,990) (360) (2,620)
-------------- -------------- --------------
(20,074) (20,098) (11,860)
-------------- -------------- --------------
Net assets 461,301 420,012 470,057
======== ======== ========
Equity attributable to equity holders
Called up share capital 8 4,179 4,026 4,026
Share premium account 75,242 21,049 26,169
Capital redemption reserve 11,905 11,905 11,905
Special reserve 44,580 35,272 36,525
Capital reserves 318,113 337,144 379,724
Revenue reserve 7,282 10,616 11,708
-------------- -------------- --------------
Total equity 7 461,301 420,012 470,057
-------------- -------------- --------------
Net asset value per ordinary share (pence) 7 551.87 574.33 634.10
======== ======== ========
CASH FLOW STATEMENT FOR THE SIX MONTHS ENDED 31 MAY 2020
Six months ended 31 May 2020 £’000 (unaudited) Six months ended 31 May 2019 £’000 (unaudited) Year ended 30 November 2019 £’000 (audited)
Operating activities
Net (loss)/profit on ordinary activities before taxation (59,885) 45,909 91,417
Add back finance costs 6 3 9
Loss/(profit) on investments and derivatives held at fair value through profit or loss (including transaction costs) 55,820 (48,261) (91,876)
Net loss on foreign exchange 151 44 4
Special dividends allocated to capital 83 – 1,109
Sales of investments held at fair value through profit or loss 141,170 104,144 210,451
Purchases of investments held at fair value through profit or loss (208,893) (135,008) (233,646)
Net receipts on closure of derivatives 8,599 3,758 12,880
Net movement in cash collateral held with brokers in respect of derivatives (3,497) 1,420 3,720
(Increase) in other receivables (431) (582) (807)
Increase in other payables 738 2,800 2,135
(Increase)/decrease in amounts due from brokers (2,845) (5) 1,543
Increase in amounts due to brokers 5,199 11,725 1,588
-------------- -------------- --------------
Net cash outflow from operating activities before interest and taxation (63,785) (14,053) (1,473)
-------------- -------------- --------------
Taxation (2) (25) (32)
-------------- -------------- --------------
Net cash outflow from operating activities (63,787) (14,078) (1,505)
-------------- -------------- --------------
Financing activities
Interest paid (6) (3) (9)
Cash proceeds from ordinary shares issued 58,506 – 5,148
Dividends paid (6,150) (5,485) (7,313)
-------------- -------------- --------------
Net cash inflow/(outflow) from financing activities 52,350 (5,488) (2,174)
-------------- -------------- --------------
Decrease in cash and cash equivalents (11,437) (19,566) (3,679)
Effect of foreign exchange rate changes (151) (44) (4)
-------------- -------------- --------------
Change in cash and cash equivalents (11,588) (19,610) (3,683)
Cash and cash equivalents at start of period 30,398 34,081 34,081
-------------- -------------- --------------
Cash and cash equivalents at end of the period 18,810 14,471 30,398
======== ======== ========
Comprised of:
Cash at bank 129 224 1,421
Cash Funds (1) 18,681 14,247 28,977
-------------- -------------- --------------
18,810 14,471 30,398
======== ======== ========
1 Cash Funds represent funds held on deposit with the BlackRock
Institutional Cash Series plc – Sterling Liquid Environmentally Aware Fund
(31 May 2019: BlackRock Institutional Cash Series plc
– Sterling Liquidity Fund; 30 November 2019: BlackRock Institutional
Cash Series plc – Sterling Liquid Environmentally Aware Fund).
NOTES TO THE CONDENSED FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED 31 MAY
2020
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. BASIS OF PREPARATION
The half yearly financial statements for the period ended 31 May 2020 have
been prepared in accordance with the Disclosure Guidance and Transparency
Rules sourcebook of the Financial Conduct Authority and with International
Accounting Standard 34 (IAS 34), ‘Interim Financial Reporting’, as adopted
by the European Union (EU). The half yearly financial statements should be
read in conjunction with the Company’s Annual Report and Financial
Statements for the year ended 30 November 2019, which have been prepared in
accordance with International Financial Reporting Standards (IFRS) as adopted
by the EU and as applied in accordance with the provisions of the Companies
Act 2006 and in accordance with IAS 34 Interim Financial Reporting.
Insofar as the Statement of Recommended Practice (SORP) for investment trust
companies and venture capital trusts, issued by the Association of Investment
Companies (AIC) in October 2019, is compatible with IFRS, the financial
statements have been prepared in accordance with guidance set out in the SORP.
The revised SORP issued in October 2019 is applicable for accounting periods
beginning on or after 1 January 2019, therefore the Company has adopted the
new SORP for the accounting year beginning 1 December 2019. As a result, there
will be an amended presentation of movements in investments held at fair value
through profit or loss in the notes to the financial statements which will be
included as part of the 2020 Annual Report and Financial Statements. As this
note is not included as part of the Interim Report and Financial Statements,
there is no impact on the Interim Report and Financial Statements as a result
of the adoption of the revised SORP.
Adoption of new and amended standards and interpretations
IFRS 16 Leases
The Company adopted IFRS 16 as of the date of initial application of 1
December 2019. IFRS 16 specifies accounting for leases and removes the
distinction between operating and finance leases. This standard is not
applicable to the Company as it has no leases.
IFRIC 23 Uncertainty over Income Tax Treatments
The Company adopted IFRIC 23 as of the date of initial application of 1
December 2019. IFRIC 23 seeks to provide clarity on how to account for
uncertainty over income tax treatments and specifies that an entity must
consider whether it is probable that the relevant tax authority will accept
each tax treatment, or group of tax treatments, that it plans to use in its
income tax filing. The interpretation also requires companies to reassess the
judgements and estimates applied if facts and circumstances change. The
interpretation would require the Company to recognise uncertain tax positions
which are more than probable within its financial statements and it could
potentially require the Company to recognise tax reclaims filed with HMRC if
their recoverability becomes more than probable. The adoption of this
interpretation has had no impact on the financial statements of the Company.
IFRS standards that have yet to be adopted
Amendments to IFRS 3 – Definition of a business (effective 1 January 2020).
This amendment revises the definition of a business. According to feedback
received by the International Accounting Standards Board, application of the
current guidance is commonly thought to be too complex and it results in too
many transactions qualifying as business combinations. The standard has been
endorsed by the EU. This standard is unlikely to have any impact on the
Company.
Amendments to IAS 1 and IAS 8 – Definition of material (effective 1 January
2020). The amendments to IAS 1, ‘Presentation of Financial Statements’,
and IAS 8, ‘Accounting Policies, Changes in Accounting Estimates and
Errors’, and consequential amendments to other IFRSs require companies to:
(i) use a consistent definition of materiality throughout IFRSs and
the Conceptual Framework for Financial Reporting;
(ii) clarify the explanation of the definition of material; and
(iii) incorporate some of the guidance of IAS 1 about immaterial
information.
This standard has been endorsed by the EU. This standard is unlikely to have
any significant impact on the Company.
Amendments to IFRS 9, IAS 39 and IFRS 7 – Interest rate benchmark reform
(effective 1 January 2020). These amendments provide certain reliefs in
connection with the interest rate benchmark reform. The reliefs relate to
hedge accounting and have the effect that the Inter Bank Offer Rate (IBOR)
reform should not generally cause hedge accounting to terminate. However, any
hedge ineffectiveness should continue to be recorded in the income statement.
Given the pervasive nature of hedges involving IBOR based contracts, the
reliefs will affect companies in all industries.
This standard has been endorsed by the EU. This standard is unlikely to have
any significant impact on the Company.
IFRS 17 – Insurance contracts (effective 1 January 2021). This standard
replaces IFRS 4, which currently permits a wide variety of practices in
accounting for insurance contracts. IFRS 17 will fundamentally change the
accounting by all entities that issue insurance contracts and investment
contracts with discretionary participation features. The standard has not been
endorsed by the EU. This standard is unlikely to have any impact on the
Company as it has no insurance contracts.
3. INCOME
Six months ended 31 May 2020 £’000 (unaudited) Six months ended 31 May 2019 £’000 (unaudited) Year ended 30 November 2019 £’000 (audited)
Investment income:
UK dividends 1,950 2,892 6,251
UK special dividends – 870 934
UK REIT dividends 256 319 655
Overseas dividends 188 390 666
Overseas special dividends – 25 25
-------------- -------------- --------------
2,394 4,496 8,531
-------------- -------------- --------------
Net loss from derivatives (135) (738) (1,352)
-------------- -------------- --------------
2,259 3,758 7,179
-------------- -------------- --------------
Other income:
Deposit interest 2 4 7
Interest from Cash Funds 47 107 184
-------------- -------------- --------------
49 111 191
-------------- -------------- --------------
Total income 2,308 3,869 7,370
======== ======== ========
Dividends and interest received in cash in the six months ended 31 May 2020
amounted to £3,507,000 and £45,000 (six months ended 31 May 2019:
£3,780,000 and £99,000; year ended 30 November 2019: £8,538,000 and
£172,000) respectively.
Special dividends of £83,000 have been recognised in capital in the six
months ended 31 May 2020 (six months ended 31 May 2019: £nil; year ended 30
November 2019: £1,109,000).
4. INVESTMENT MANAGEMENT AND PERFORMANCE FEES
Six months ended Six months ended Year ended
31 May 2020 31 May 2019 30
Nov
emb
er
201
9
(unaudited) (unaudited) (au
dit
ed)
Revenue £’000 Capital £’000 Total £’000 Revenue £’000 Capital £’000 Total £’000 Revenue £’000 Capital £’000 Total £’000
Investment management fee 244 731 975 214 640 854 446 1,338 1,784
Performance fee – 4,805 4,805 – 4,754 4,754 – 4,756 4,756
-------------- -------------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
Total 244 5,536 5,780 214 5,394 5,608 446 6,094 6,540
======== ======== ======== ======== ======== ======== ======== ======== ========
The performance fee is 15% of Net Asset Value total return outperformance of
the benchmark measured over a two year rolling basis and is applied on the
average Gross Assets over two years. The performance fee is calculated and
accrued on a daily basis and payable on 30 November each year. Gross Assets
are defined as the gross asset value of the long only portfolio plus the gross
value of the underlying equities, long and short, to which the Company is
exposed through CFDs. There is a cap on total management and performance fees
of 1.25% of average gross assets over a two year period which has the effect
of capping performance fees at circa 0.9% of average gross assets over two
years.
On the first day of the financial year, outperformance from the previous
financial year (if any) is carried forward and accrued in the daily NAV
released to the London Stock Exchange.
With effect from 22 March 2018, the Company’s benchmark index was changed
from the Numis Smaller Companies excluding AIM (excluding Investment
Companies) Index to the Numis Smaller Companies plus AIM (excluding Investment
Companies) Index. For the purposes of calculation of performance fee for each
period, the outperformance of the Net Asset Value total return has been
measured against the performance of the benchmark indices on a blended basis
during each period.
Performance fees have been wholly allocated to the capital column of the
Statement of Comprehensive Income as the performance has been predominantly
generated through capital returns from the investment portfolio. For the six
months ended 31 May 2020, a performance fee of £4,805,000 has been accrued
(six months ended 31 May 2019: £4,754,000; year ended 30 November 2019:
£4,756,000).
The investment management fee is calculated at the rate of 0.35% per annum on
month end Gross Assets. The management fee is charged 25% to revenue and 75%
to capital.
5. OTHER OPERATING EXPENSES
Six months ended 31 May 2020 £’000 (unaudited) Six months ended 31 May 2019 £’000 (unaudited) Year ended 30 November 2019 £’000 (audited)
Allocated to revenue:
Custody fee 9 5 8
Auditor’s remuneration 18 18 35
Registrar’s fee 22 17 37
Directors’ emoluments 56 68 133
Broker fees 21 18 33
Depositary fees 26 23 47
Marketing fees 70 63 202
FCA Fees 7 6 13
Printing and postage fees 12 21 33
AIC fees 8 14 27
Stock exchange listing fees 52 6 13
Other administrative costs 35 36 54
-------------- -------------- --------------
336 295 635
======== ======== ========
Allocated to capital:
Custody transaction charges 17 14 17
-------------- -------------- --------------
353 309 652
======== ======== ========
6. DIVIDENDS
The Board has declared an interim dividend of 2.50p per share payable on 28
August 2020 to shareholders on the register at 31 July 2020 (six months ended
31 May 2019, interim dividend of 2.50p per share paid on 28 August 2019 to
shareholders on the register at 2 August 2019). This dividend has not been
accrued in the financial statements for the six months ended 31 May 2020 as,
under IFRS, interim dividends are not recognised until paid. Dividends are
debited directly to reserves.
7. EARNINGS AND NET ASSET VALUE PER ORDINARY SHARE
Total revenue and capital returns per share and net asset value per share are
shown below and have been calculated using the following:
Six months ended 31 May 2020 (unaudited) Six months ended 31 May 2019 (unaudited) Year ended 30 November 2019 (audited)
Net revenue profit attributable to ordinary shareholders (£’000) 1,724 3,345 6,265
Net capital (loss)/profit attributable to ordinary shareholders (£’000) (61,611) 42,550 85,130
-------------- -------------- --------------
Total (loss)/profit attributable to ordinary shareholders (£’000) (59,887) 45,895 91,395
======== ======== ========
Equity shareholders’ funds (£’000) 461,301 420,012 470,057
-------------- -------------- --------------
The weighted average number of ordinary shares in issue during the period on which the earnings per ordinary share was calculated was: 79,721,039 73,130,326 73,146,571
-------------- -------------- --------------
The actual number of ordinary shares in issue at the end of each period on which the net asset value per ordinary share was calculated was: 83,588,462 73,130,326 74,130,326
-------------- -------------- --------------
Returns per share
Revenue earnings per share (pence) 2.16 4.57 8.56
Capital (loss)/earnings per share (pence) (77.28) 58.19 116.39
-------------- -------------- --------------
Total (loss)/earnings per share (pence) (75.12) 62.76 124.95
======== ======== ========
As at 31 May 2020 £’000 (unaudited) As at 31 May 2019 £’000 (unaudited) As at 30 November 2019 £’000 (audited)
Net asset value per ordinary share (pence) 551.87 574.33 634.10
-------------- -------------- --------------
Ordinary share price (pence) 554.00 532.00 640.00
======== ======== ========
8. CALLED UP SHARE CAPITAL
Ordinary shares in issue (number) Treasury shares (number) Total shares (number) Nominal value £’000
Allotted, called up and fully paid share capital comprised:
Ordinary shares of 5p each:
At 30 November 2019 74,130,326 6,400,000 80,530,326 4,026
Ordinary shares issued from treasury 6,400,000 (6,400,000) – –
New Ordinary shares issued 3,058,136 – 3,058,136 153
---------------- ---------------- ---------------- ----------------
At 31 May 2020 83,588,462 – 83,588,462 4,179
========= ========= ========= =========
During the six months ended 31 May 2020, the Company issued 6,400,000 shares
(six months ended 31 May 2019: nil; year ended 30 November 2019: 1,000,000)
from treasury for a total consideration of £42,796,000 (six months ended 31
May 2019: £nil; year ended 30 November 2019: £6,373,000) including costs.
During the six months ended 31 May 2020, the Company issued 3,058,136 new
shares (six months ended 31 May 2019: £nil; year ended 30 November 2019: nil)
for a total consideration of £14,485,000 (31 May 2019: nil; 30 November 2019:
£nil) including costs.
Since 31 May 2020 and up to the latest practicable date of 21 July 2020, the
Company has issued 55,000 Ordinary shares for a total consideration of
£320,000.
The Ordinary shares give shareholders voting rights, the entitlement to all of
the capital growth in the Company’s assets and to all income from the
Company that is resolved to be distributed.
9. VALUATION OF FINANCIAL INSTRUMENTS
Financial assets and financial liabilities are either carried in the Statement
of Financial Position at their fair value (investments and derivatives) or at
an amount which is a reasonable approximation of fair value (due from brokers,
dividends and interest receivable, due to brokers, accruals, cash and cash
equivalents and bank overdrafts). IFRS 13 requires the Company to classify
fair value measurements using a fair value hierarchy that reflects the
significance of inputs used in making the measurements. The valuation
techniques used by the Company are explained in the accounting policies note
2(g) as set out on page 75 in the Company’s Annual Report and Financial
Statements for the year ended 30 November 2019.
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 an identical instrument in an active
market
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 than active, or other
valuation techniques where all significant inputs are directly or indirectly
observable from market data.
Valuation techniques used for non-standardised financial instruments such as
options, currency swaps and other over-the-counter derivatives include the use
of comparable recent arm’s length transactions, reference to other
instruments that are substantially the same, discounted cash flow analysis,
option pricing models and other valuation techniques commonly used by market
participants making the maximum use of market inputs and relying as little as
possible on entity specific inputs.
As at the period end the long and short derivative positions were valued using
the underlying equity bid price (offer price in respect of short positions)
and the contract price at the inception of the trade or at the trade reset
date. There have been no changes to the valuation technique since the previous
year or as at the date of this report.
Level 3 – Valuation techniques using significant unobservable inputs
This category includes all instruments where the valuation technique includes
inputs not based on market data and these inputs could have a significant
impact on the instrument’s valuation.
This category also includes instruments that are valued based on quoted prices
for similar instruments where significant entity determined adjustments or
assumptions are required to reflect differences between the instruments and
instruments for which there is no active market. The Investment Manager
considers observable data to be that market data that is readily available,
regularly distributed or updated, reliable and verifiable, not proprietary and
provided by independent sources that are actively involved in the relevant
market.
The level in the fair value hierarchy within which the fair value measurement
is categorised in its entirety is determined on the basis of the lowest level
input that is significant to the fair value measurement. If a fair value
measurement uses observable inputs that require significant adjustment based
on unobservable inputs, that measurement is a Level 3 measurement.
Assessing the significance of a particular input to the fair value measurement
in its entirety requires judgement, considering factors specific to the asset
or liability. The determination of what constitutes ‘observable’ inputs
requires significant judgement by the Investment Manager.
CFDs have been classified as Level 2 investments as their valuation has been
based on market observable inputs represented by the market prices of the
underlying quoted securities to which these contracts expose the Company.
The table below sets out fair value measurements using IFRS 13 fair value
hierarchy.
Financial assets/(liabilities) at fair value through profit or loss Level 1 £’000 Level 2 £’000 Level 3 £’000 Total £’000
as at 31 May 2020 (unaudited)
Assets:
Equity investments 449,989 – – 449,989
Contracts for difference (fair value) – 4,890 – 4,890
Liabilities:
Contracts for difference (fair value) – (2,114) – (2,114)
Futures contracts (fair value) (1,158) – – (1,158)
-------------- -------------- -------------- --------------
448,831 2,776 – 451,607
======== ======== ======== ========
Financial assets/(liabilities) at fair value through profit or loss Level 1 £’000 Level 2 £’000 Level 3 £’000 Total £’000
as at 31 May 2019 (unaudited)
Assets:
Equity investments 419,408 – – 419,408
Contracts for difference (fair value) – 2,100 – 2,100
Liabilities:
Contracts for difference (fair value) – (60) – (60)
-------------- -------------- -------------- --------------
419,408 2,040 – 421,448
======== ======== ======== ========
Financial assets/(liabilities) at fair value through profit or loss Level 1 £’000 Level 2 £’000 Level 3 £’000 Total £’000
as at 30 November 2019 (audited)
Assets:
Equity investments 444,604 – – 444,604
Contracts for difference (fair value) – 2,923 – 2,923
Liabilities:
Contracts for difference (fair value) – (365) – (365)
-------------- -------------- -------------- --------------
444,604 2,558 – 447,162
======== ======== ======== ========
There were no transfers between levels for financial assets and financial
liabilities during the period recorded at fair value as at 31 May 2020, 31 May
2019 and 30 November 2019. The Company did not hold any Level 3 securities
throughout the financial period under review or as at 31 May 2020, 31 May 2019
or 30 November 2019.
The values of derivative positions classified as Level 2 as at 31 May 2019
have been restated to fair value to align with the values presented on the
Statement of Financial Position. The amounts presented in the prior interim
financial statements were presented on a gross exposure basis as follows:
total gross exposure on long derivative positions was presented as an asset of
£59,193,000 and total gross exposure on short derivative positions was
presented as a liability of £(55,526,000).
10. FINANCIAL RISKS
The Company’s investment activities expose it to the various types of risk
which are associated with the financial instruments and markets in which it
invests. The risks are substantially consistent with those disclosed in the
previous annual financial statements with the exception of those outlined
below.
Market risk arising from price risk
Price risk is the risk that the fair value of future cash flows of a financial
instrument will fluctuate because of changes in market prices (other than
those arising from interest rate risk or currency risk), whether those changes
are caused by factors specific to the individual financial instrument or its
issuer, or factors affecting similar financial instruments traded in the
market. Local, regional or global events such as war, acts of terrorism, the
spread of infectious illness or other public health issues, recessions, or
other events could have a significant impact on the Company and the market
price of its investments and could result in increased premiums or discounts
to the Company’s net asset value.
An outbreak of an infectious respiratory illness caused by a novel coronavirus
known as COVID-19 was first detected in China in December 2019 and has now
developed into a global pandemic. This coronavirus has resulted in travel
restrictions, closed international borders, enhanced health screenings at
ports of entry and elsewhere, disruption of and delays in healthcare service
preparation and delivery, prolonged quarantines, cancellations, supply chain
disruptions, and lower consumer demand, as well as general concern and
uncertainty. The impact of COVID-19 has adversely affected the economies of
many nations across the entire global economy, individual issuers and capital
markets, and could continue to extents that cannot necessarily be foreseen. In
addition, the impact of infectious illnesses in emerging market countries may
be greater due to generally less established healthcare systems. Public health
crises caused by the COVID-19 outbreak may exacerbate other pre-existing
political, social and economic risks in certain countries or globally. The
duration of the COVID-19 outbreak and its effects cannot be determined with
certainty.
A key metric used by the BlackRock Risk and Quantitative Analysis Group to
measure market risk is Value-at-Risk (“VaR”) which encompasses currency,
interest rate and price risk. VaR is a statistical risk measure that estimates
the potential portfolio loss from adverse market movements in an ordinary
market environment. VaR analysis reflects the interdependencies between risk
variables, unlike a traditional sensitivity analysis.
The one-day VaR as of 31 May 2020 and 30 November 2019 based on a 99%
confidence level was 12.57% and 1.91%. The higher VaR number is representative
of higher market volatility during the period as a result of the COVID-19
pandemic described above.
11. TRANSACTIONS WITH THE AIFM AND INVESTMENT MANAGER
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 on pages 39 and 40 of the
Directors’ Report in the Company’s Annual Report and Financial Statements
for the year ended 30 November 2019.
The investment management fee due for the six months ended 31 May 2020
amounted to £975,000 (six months ended 31 May 2019: £854,000; year ended 30
November 2019: £1,784,000). In addition, a performance fee of £4,805,000
(six months ended 31 May 2019: £4,754,000; year ended 30 November 2019:
£4,756,000) was accrued for the six months ended 31 May 2020.
At the period end, £1,437,000 was outstanding in respect of management fees
(31 May 2019: £854,000; 30 November 2019: £932,000). Any final performance
fee for the full year ending 30 November 2020 will not crystallise and fall
due until the calculation date of 30 November 2020.
In addition to the above services, BlackRock has provided the Company with
marketing services. The total fees paid or payable for these services to 31
May 2020 amounted to £70,000 excluding VAT (six months ended 31 May 2019:
£63,000; year ended 30 November 2019: £202,000). Marketing fees of £192,000
excluding VAT (31 May 2019: £145,000; 30 November 2019: £122,000) were
outstanding at 31 May 2020.
The Company has an investment in BlackRock Institutional Cash Series plc -
Sterling Liquid Environmentally Aware Fund of £18,681,000 as at 31 May 2020
(31 May 2019: £14,247,000 in BlackRock Institutional Cash Series plc -
Sterling Liquidity Fund; 30 November 2019: £28,977,000 in BlackRock
Institutional Cash Series plc - Sterling Liquid Environmentally Aware Fund).
As at 31 May 2020, an amount of £110,000 (31 May 2019: £92,000; 30 November
2019: £116,000) was payable to the Manager in respect of Directors’ fees.
The ultimate holding company of the Manager and the Investment Manager is
BlackRock, Inc. a company incorporated in Delaware USA. During the period, PNC
Financial Services Group, Inc. (“PNC”) was a substantial shareholder in
BlackRock, Inc. PNC did not provide any services to the Company during the
financial year ended 30 November 2019 and the period up to the 11 May 2020. On
11 May 2020, PNC announced its intent to sell its investment in BlackRock,
Inc. through a registered offering and related buyback by BlackRock, Inc.
12. RELATED PARTY DISCLOSURE
The Board consists of five non-executive Directors, all of whom are considered
to be independent by the Board. None of the Directors has a service contract
with the Company. With effect from 1 December 2019, the Chairman receives an
annual fee of £39,500, the Chairman of the Audit Committee receives an annual
fee of £31,000 and each of the other Directors receives an annual fee of
£27,000.
As at 31 May 2020, an amount of £10,000 (31 May 2019: £10,000; 30 November
2019: £10,000) was outstanding in respect of Directors' fees.
At the period end and at 23 July 2020, the interests of the Directors in the
ordinary shares of the Company were as follows:
Ordinary shares 31 May 2020 Ordinary shares 23 July 2020
Christopher Samuel (Chairman) 62,405 62,405
Loudon Greenlees 15,000 15,000
Angela Lane (1) n/a nil
Jean Matterson 46,000 46,000
Louise Nash 1,000 1,000
1 Appointed 10 June 2020
13. CONTINGENT LIABILITIES
There were no contingent liabilities as at 31 May 2020 (31 May 2019 and 30
November 2019: nil).
14. PUBLICATION OF NON STATUTORY ACCOUNTS
The financial information contained in this half yearly financial report does
not constitute statutory accounts as defined in Section 435 of the Companies
Act 2006. The financial information for the six months ended 31 May 2020 and
31 May 2019 has not been audited.
The information for the year ended 30 November 2019 has been extracted from
the latest published audited financial statements, which have been filed with
the Registrar of Companies. The report of the Auditor on those financial
statements contained no qualification or statement under Sections 498(2) or
498(3) of the Companies Act 2006.
15. ANNUAL RESULTS
The Board expects to announce the annual results for the year ending 30
November 2020 in February 2021. Copies of the results announcement can be
obtained from the Secretary on 020 7743 3000 or by email at
cosec@blackrock.com. The Annual Report and Financial Statements should be
available by the beginning of February 2021, with the Annual General Meeting
expected to be held in March 2021.
For further information, please contact:
Simon White, Managing Director, Closed End Funds, BlackRock Investment
Management (UK) Limited
Tel: 020 7743 3000
Press Enquiries:
Ed Hooper, Lansons Communications – Tel: 0207 294 3620
E-mail: edh@lansons.com; BlackRockInvestmentTrusts@lansons.com
23 July 2020
12 Throgmorton Avenue
London EC2N 2DL
END
The Half Yearly Financial Report will also be available on the BlackRock
website at http://www.blackrock.com/uk/thrg. Neither the contents of the
Manager’s website nor the contents of any website accessible from hyperlinks
on the Manager’s website (or any other website) is incorporated into, or
forms part of, this announcement.
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