BlackRock Throgmorton Trust Plc - Half-year Report
PR Newswire
London, July 21
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 31 May 2021
Performance record
| 31 May 2021 (unaudited) | 30 November 2020 (audited) | |
| Net assets (£'000)1 | 826,371 | 596,215 |
| Net asset value per ordinary share | 883.45p | 681.24p |
| Ordinary share price (mid-market) | 891.00p | 682.00p |
| Benchmark Index2 | 19,451.94 | 15,232.31 |
| Premium to cum income net asset value3 | 0.9% | 0.1% |
| Average premium to cum income net asset value for the period/year3 | 1.2% | 0.2% |
| --------------- | --------------- | |
| Performance | ||
| Net asset value per share (with dividends reinvested)3 | +31.0% | +9.1% |
| Benchmark Index (with dividends reinvested)2 | +27.7% | +3.8% |
| Ordinary share price (with dividends reinvested)3 | +31.9% | +8.2% |
| ======== | ======== |
| For the six months ended 31 May 2021 (unaudited) | For the six months ended 31 May 2020 (unaudited) | Change % | |
| Revenue | |||
| Net profit after taxation (£'000) | 4,749 | 1,724 | +175.5 |
| Revenue earnings per ordinary share | 5.24p | 2.16p | +142.6 |
| Dividends per ordinary share | |||
| Interim | 2.50p | 2.50p | - |
| ======== | ======== | ======== |
Sources: BlackRock and Datastream.
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
Dear Shareholder
PERIOD HIGHLIGHTS
·NAV rose by 31.0%, outperforming the benchmark index by 3.3%
· Share price rose by 31.9%, outperforming the benchmark index by 4.2%
·6,020,108 new shares issued, raising £48.2m
· Interim dividend declared of 2.50p per share (2020: 2.50p)
OVERVIEW
As was the case this time last year, it has been another remarkable and challenging first half to the financial year, dominated by the continuing disruption caused by the COVID-19 pandemic. At the time of writing, there have been several new variants of the COVID-19 virus identified in the UK and this has contributed to uncertainty around the speed and extent of the reopening of our economy. However, on 19 July 2021 the UK Government implemented the final stage of its roadmap to reopening, removing the vast majority of the lockdown restrictions in place. This action has been well received by markets in anticipation of increased economic activity and productivity.
We have seen a surge in inflation, as prices of fuel, energy and commodities have all risen. This spike is believed to be largely due to a combination of supply chain bottlenecks, resulting from operational disruption caused by the effects of the lockdown, and the speed at which economic activity is restarted, and is currently considered to be temporary. Nonetheless, there are signs that certain supply chains may have been temporarily or even permanently altered as a result of COVID-19.
As COVID-19 restrictions have eased, we have seen increasing activity across many sectors and industries. The latest data on economic activity, productivity and employment is promising and consumer confidence is returning, demonstrated by a spike in retail spending which has risen sharply in recent months and which has provided a much-needed boost to the UK economy. Fiscal and monetary policy remain supportive and the Bank of England has forecast that growth will exceed 7% in 2021. This would represent the strongest expansion in over 70 years. It is based on lockdown restrictions being permanently removed. Nonetheless, as we move into a more stable environment and our successful vaccination programme takes effect, the near term outlook is bright.
Against this backdrop your portfolio manager remains optimistic and believes our portfolio is well positioned to benefit from the many opportunities available as the economy returns to growth. It is also clear that our portfolio manager's longstanding focus on financially strong companies, with innovative and disruptive business models, has served the Company well during this period and will hopefully stand the portfolio in good stead in the second half of the year and beyond.
PERFORMANCE RECORD TO 31 MAY 2021 (WITH DIVIDENDS REINVESTED)
1 Year change % | 3 Year change % | 5 Year change % | % change since BlackRock was appointed on 1 July 2008 | |
| NAV per share | 62.4 | 54.9 | 143.9 | 645.4 |
| Share price | 63.1 | 73.9 | 193.1 | 748.8 |
| Benchmark | 55.6 | 27.2 | 64.9 | 220.5 |
PERFORMANCE
Over the six months to 31 May 2021, the Company's Net Asset Value (NAV) return was +31.0% compared to a return of +27.7% from the Company's benchmark index, an outperformance of 3.3%. The Company's share price rose by 31.9%, an outperformance of 4.2% ending the period on a premium to NAV of 0.9% (30 November 2020: a premium of 0.1%). Since the period end and up to the close of business on 21 July 2021, the Company's NAV has risen by 3.6%, and the benchmark index has fallen by 2.8% (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.
REVENUE RETURN AND DIVIDENDS
The revenue return per share for the period amounted to 5.24 pence per share, compared to 2.16 pence per share earned during the same six-month period last year. This represents an increase of 142.6% and results from increases in both the ordinary and special dividends received during the period, predominantly as a result of the impact of the COVID-19 pandemic.
In the comparative period many companies suspended their dividend payments due to the uncertain outlook and this marks the resumption of normal dividend receipts.
The Board recognises that, although the Company's objective is capital growth, shareholders value consistency of dividends paid by the Company; an interim dividend of 2.50p per share (2020: 2.50p per share) payable on 27 August 2021 to shareholders on the register on 6 August 2021 (the ex-dividend date is 5 August 2021) has therefore been declared.
Consistent with this approach, the Board will continue to consider the use of brought forward distributable reserves to support the full year dividend if deemed appropriate to do so at the time.
CORPORATE GOVERNANCE
As I mentioned in the Company's Annual Report, the Board hopes to continue to grow your Company which may result in membership of the FTSE 250, which would bring with it some additional governance requirements. Having considered the provisions and application of the UK Code, in February 2021 the Board resolved to appoint an existing Director, Louise Nash, as the Company's Senior Independent Director and also established a new Remuneration Committee which is chaired by Angela Lane. The Remuneration Committee will make its first report to shareholders on its activities in this year's Annual Report.
As part of the Board's succession plans, we also welcomed two new Directors to the Board during the period; Nigel Burton and Merryn Somerset Webb who were appointed on 21 December 2020 and 24 March 2021 respectively.
ENVIRONMENTAL, SOCIAL AND GOVERNANCE (ESG)
The Board recognises that ESG issues can present both opportunities and risks to long term investment performance. An assessment of these issues forms an important part of the decision making process of the Investment Manager, which determines whether the Company will invest in, or divest of, the securities of a company. These considerations also guide BlackRock, the Investment Manager, in its reviews of portfolio companies and its assessment of the issues on which to engage with investee companies, how this is best done and whether or not to support proposals put to shareholders.
BlackRock therefore incorporates material ESG information and consideration of sustainability risks into investment decisions in order to seek to enhance risk-adjusted returns. ESG insights and data, including sustainability risks, are considered as part of the investment process, including company research and portfolio construction. These ESG insights are not the sole consideration when making investment decisions; ESG integration does not change the Company's investment objective and the extent to which ESG insights are considered during investment decision making will also be determined by other factors including, for example, the portfolio company's sector and operations.
OPERATIONAL RESILIENCE
As I reported in last year's Annual Report, throughout the COVID-19 outbreak the Board has been working closely with your Manager, BlackRock, and the Company's key suppliers to minimise the risk the virus poses to the health and wellbeing of all those engaged in the management and administration of the Company. I am pleased to report that there has been no adverse impact on the Company's operations which have continued to be unaffected.
As a Board, we have continued to meet regularly, via video conference, and I am hopeful that we can all return to some form of normality, meeting in person, in the near future.
SHARE PRICE PREMIUM/DISCOUNT
During the six months to 31 May 2021, the Company's share price premium/discount to NAV ranged between a discount of 1.5% and a premium of 2.8%, ending the period at a premium of 0.9%. As at 21 July 2021 the Company's shares were trading at a premium of 1.4%. The Company is once again one of very few investment companies in the UK smaller companies' sector that has been trading at a premium to NAV during the majority of the period.
The Board believes that the best way of addressing any 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 and other attractions.
The Board also 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.
During the period the Company issued a total of 6,020,108 new Ordinary shares for a total consideration of £48,189,000. Since 31 May 2021 and up to the latest practicable date of 21 July 2021, a further 2,122,504 shares have been issued for a total consideration of £19,606,961. All share issuance is conducted at a sufficient premium to the prevailing NAV such that it is accretive to NAV. The issue of new shares, where demand cannot be met in the market, is beneficial to existing shareholders as it often aids liquidity in the Company's shares and may help to avoid any excessive premium to NAV at which the existing shares trade arising. It also broadens the shareholder base over which the fixed operational costs of the Company are shared.
OUTLOOK
COVID-19 has clearly damaged the global economy in the short term and disrupted our way of life. There is little doubt that its impact will have far reaching consequences for many years to come and will change how companies operate and how people interact. In response to the pandemic, governments have deployed fiscal stimulus measures and monetary easing the like of which has not been seen in modern times.
More recently, central banks in the US, Europe and the UK have indicated that they will continue with this supportive policy, in the near term at least, and appear willing to allow the global economy and inflation to run a little hotter as the world recovers from COVID-19. This should provide a helpful economic backdrop for our portfolio manager and one within which the high-quality growth companies in our portfolio can continue to prosper.
The pandemic has accelerated changes in industries to which we were already exposed. We expect that the financially strong businesses in which we invest will thrive and take greater market share as weaker competitors fall. Overall, our portfolio manager, Dan Whitestone, believes the outlook for the UK market looks very favourable and that our portfolio of fast growing, innovative and differentiated companies are well placed to prosper as the economy returns to growth.
SHAREHOLDER COMMUNICATION
We appreciate how important access to regular information is to our shareholders. To supplement our Company website, we now offer shareholders the ability to sign up to the Trust Matters newsletter which includes information on the Company as well as news, views and insights. Further information on how to sign up is set out at the foot of this announcement.
CHRISTOPHER SAMUEL
Chairman
23 July 2021
INVESTMENT MANAGER'S REPORT
MARKET REVIEW AND OVERALL INVESTMENT PERFORMANCE
The first six months of the Company's financial year have been characterised by the ongoing recovery in the UK stock market, as vaccination programmes and stimulus-boosted optimism around the recovery trumped concerns around virus variants. The steepening yield curve amidst much discussion of the recent pick-up in inflation drove some extreme style rotations, notably away from "growth" shares and into "value" areas of the market.
On Brexit, there were swings in trade negotiations during December, but finally an agreement was reached at the very end of the month. Having been out of favour since the referendum, clarity over Brexit removed the huge cloud that had been hanging over the UK market for the last four years, eliminating the Brexit 'no-deal' risk premium. As a result, interest in the UK equity market has risen, both in terms of institutional and retail demand, but also corporate interest with many M&A transactions occurring over the period. Small and mid-cap shares have performed strongly through the period.
PERFORMANCE REVIEW
The outperformance of the value factor has naturally created a headwind to our growth focused investment style but despite this backdrop the Company has delivered a positive result during the first half of our financial year, returning 31.0% and outperforming the benchmark by 3.3%. This we believe is very creditable performance and an indicator of just how much opportunity we are seeing even in an environment where the UK equity market is less favourable to differentiated growth companies. Underlying trading across the companies in our long book has for the most part been very strong. Many of our holdings have delivered very positive updates, a continuation of the trends that drove performance last year, beating estimates and raising guidance on both revenues and profits. This has reaffirmed our faith in the differentiation of these business models, and their ability to continue delivering on their strategies. Once again, our focus on the micro has triumphed over the macro challenges of the current environment and gives us confidence in the outlook for Company returns going forward.
Unsurprisingly the strong outperformance of the Company versus our benchmark during the first half of the year has been driven by the long book. This reflects firstly, the strong delivery across a number of our long positions and secondly, the fact that we have been operating with a lower than usual short exposure. This demonstrates our optimism in stock markets, the outlook for UK plc more broadly and the structural and industrial trends to which the Company is exposed.
During the year to date, it has been pleasing to see that the largest contributors to performance have come from a broad range of companies across different industries with the common feature being continuous delivery (and upgrades) against their clear business strategies, which, in most cases, are benefiting from strong secular growth drivers. The largest positive contributor during the period was the sustainable-focused fund manager, Impax Asset Management. The business has continued to show impressive growth in assets under management for a sustained period and this growth looks well set to continue given the strength of their franchise, market-leading investment performance and the structural growth/interest in sustainability which underpins the company's investment philosophy.
Watches of Switzerland (WOSG) once again contributed positively to performance. This is a retailer that has provided multiple strong updates with upgrades to forward guidance as its multi-channel approach has enabled the business to meet customer demand through successfully transitioning sales to online, while also benefiting as retail stores reopen post COVID-19 closures. The outlook for the group remains strong with demand for luxury watches far outweighing supply and the company's long-standing relationships with key brands such as Rolex provides WOSG with exclusive supply which is a key differentiating feature for any retailer. Treatt, the manufacturer of flavour and fragrance ingredients rose after delivering profits ahead of expectations. Positive organic revenue growth and an improving product mix has resulted in progress on margins and with this current momentum the group upgraded full year guidance.
One key feature in the UK market in recent months has been an increase in takeover activity, notably from private equity and overseas bidders. Strategic buyers have been willing to look through the period of current uncertainty and focus on what is perceived as the undervaluation of UK equities versus their global peers, particularly in smaller companies. One of our holdings which benefited from this dynamic was IMIMobile, a leading player in communications software, which soared after the company agreed to a takeover approach from US-listed IT giant Cisco Systems. We were very excited by the long-term secular growth prospects for this company so we were sorry to see it go, but we understand the strategic rationale. Similarly, industrial tape manufacturer Scapa added to performance after the company was acquired by US materials group Schweitzer-Mauduit International Inc.
Another feature of the period has been the increase in IPO activity in the UK market since the beginning of 2021. This has presented us with the opportunity to invest in several exciting new businesses which have contributed positively to performance. One example is Auction Technology Group, a market leader in digital auction marketplaces, which made a positive start to life as a public company and rose further after delivering very strong results in May. The shares have now doubled since we purchased at IPO earlier this year and the outlook for the business remains attractive for the foreseeable future.
On the negative side it was reassuring to see that detractors to performance were primarily driven by the market rotation away from growth and the outperformance of value, rather than disappointments at the stock level. A common theme across the detractors was that they were shares that performed very well during 2020, for example Masimo, Team17 and Trade Desk. We think they have only suffered in the very short term for no other reason than they have been such great performers so have succumbed to some profit taking. The fundamentals for all three remain very strong and we retain high conviction in the positions. Chegg, another of our US positions, reported a strong update, in our opinion, but fell back after some great share price performance in the last year. In our mind, the company is so much more than a "COVID-19 trade". It delivered growth that exceeded analyst forecasts for several years pre-dating COVID-19 due to the strength of its offering and the huge underlying changes occurring in the education market. While Chegg clearly saw an acceleration of these trends during COVID-19 we believe it has the potential for many more years of growth.
One stock specific detractor to highlight was Avon Rubber. The shares fell on the disappointing news that some US Army body armour contracts would not be signed as quickly as anticipated and as a result revenue would be delayed. While this is disappointing, we continue to believe in the long-term attractions of the business and the steps taken to increase its focus on the protection business.
ACTIVITY
Since the end of the financial year in November 2020 we have modestly added to our total number of holdings which is now 139. The number of short positions remains low at 8 and we have 131 long holdings. Consequently, the net gearing of the Company remains towards the upper end of our range at 120.3%, with the gross at 123.3%. This positioning reflects the opportunity that we believe is ahead for many differentiated emerging companies given the high level of industrial change that we are witnessing across our investable universe.
A number of companies have listed on the UK market during the first half of the year. This has presented some really interesting opportunities for the Company to take part in. We have taken a selective approach to these companies as they have not all been of the quality we seek but two purchases in Moonpig and AuctionTechnology Group (ATG) are worth highlighting. Moonpig is the UK's leading online greetings card retailer. During the pandemic they substantially strengthened their market position as more people shopped online for gift cards. Their very attractive unit economics mean customers are highly profitable once acquired. Since listing, they have released a positive trading update showing all the main drivers of customer lifetime value moving in the right direction. ATG provides auction houses with a scalable technology platform to take their auctions online. This is another industry that has seen digitalisation accelerate during the COVID-19 pandemic and where we believe the shift will be permanent and therefore there is a sizeable opportunity for ATG to capitalise on this trend.
We also used volatility caused by the rotation away from growth companies that had been deemed "COVID-19 winners" to add selectively to high conviction ideas at attractive valuations. In March, for example, we significantly added to our position in Gamma Communications, a leading cloud communications provider in both the UK and Europe, as the shares fell to their cheapest valuation in several years, despite a materially better outlook and positive accelerating structural changes in the markets they operate in. This proved to be an opportune time to add to our holding as shortly thereafter the shares rose to new highs on the back of another upgrade to forecasts accompanying their strong trading update.
PORTFOLIO POSITIONING
As a reminder, portfolio positioning is driven by stock and industry specific analysis and our focus on two types of company. First are what we define as quality differentials, essentially differentiated long-term growth investments. These we characterise as companies that have strong management teams, with a strong market position, a unique and compelling product offering and an attractive route to market, often benefiting from structural growth, and that are well-financed with clean accounting. The second type of company are those that are leading industry change, the 'disruptors' and alternatively on the short side it is the victims of industry change, the 'disrupted'. Given the conviction in our holdings and the long-term secular trends that the Company is exposed to, portfolio positioning does not change materially from period to period.
Digital Transformation is one secular area of spend where growth rates have meaningfully accelerated during COVID-19 as corporates continue to invest in their digital capabilities to drive demand and win market share, adapt to changes in consumer behaviour and remove costs and complexity from their operations. It remains a key focus for every board globally. We have deliberately sought exposure to these trends in recent years and have increased our exposure recently as we think the growth outlook has improved, notably in digital payments, software-as-a-service, online learning, and cloud enabled audio and visual communications.
COVID-19 has also driven an acceleration of profound seismic market share shifts intra-industry, which we think of as "Corporate Darwinism", as the well-capitalised leaders benefit from a confluence of changing consumer and corporate behaviours and structural withdrawal of capacity as weakened peers exit the market. Across a range of industries, we have witnessed many differentiated businesses solidify their market position through accelerated organic market share gains or through acquisition e.g. omni-channel retailers, veterinary services and component distribution.
One sector where we have increased exposure is the UK construction market. This may not initially seem the most high quality place to invest, but within a broad sector there are several differentiated businesses run by long-standing and trustworthy management teams e.g. Morgan Sindall, GraftonGroup or Breedon. We believe the sector is set to see an extended period of strong trading as, for the first time since the Global Financial Crisis, all three major areas of construction (new build housing, repairs & maintenance and, infrastructure) are growing at the same time. The industry structure has also changed for the better, with a great deal of capacity having left the market and those left standing able to negotiate more favourable contractual terms with their customers.
OUTLOOK
Our outlook remains broadly unchanged and if anything we feel that the opportunity for this Company is more exciting than ever before. We are always positive on the prospect for truly differentiated growth companies to deliver amazing results, regardless of the macro environment.
Clearly the biggest reservation that investors might have for a company like BlackRock Throgmorton Trust plc is the ongoing debate about 'value vs growth', and this is certainly a question that we have faced regularly in recent months. However, as mentioned in the past, and perhaps surprisingly, we really do not see the 'value vs growth' discussion as a critical issue in investment returns. Rather we see the high level of ongoing industrial change as creating many more opportunities for emerging companies to generate strong performance and this is far more important in delivering good returns to our investors.
In summary, the outperformance that we have delivered during the period and the strength of trading across many of our holdings continues to validate our positioning and provides us with confidence that our strategy of focusing on stock and industry analysis is the right one. We thank shareholders for their ongoing support.
DAN WHITESTONE
BLACKROCK INVESTMENT MANAGEMENT (UK) LIMITED
23 July 2021
PORTFOLIO OF INVESTMENTS
1GAMMA COMMUNICATIONS*
Mobile Telecommunications
Market value1: £26,622,000
Share of net assets: 3.2%
Provider of communication services to UK businesses.
2IMPAX ASSET MANAGEMENT*
Financial Services
Market value: £23,562,000
Share of net assets: 2.9%
Provider of asset management services.
3ELECTROCOMPONENTS
Support Services
Market value1: £22,504,000
Share of net assets: 2.7%
Distributor of industrial and electronics products.
4YOUGOV*
Media
Market value: £21,427,000
Share of net assets: 2.6%
Provider of survey data and specialist data analytics.
5WATCHES OF SWITZERLAND
Personal Goods
Market value: £21,424,000
Share of net assets:2.6%
Retailer of luxury watches.
6MOONPIG
General Retailers
Market value1: £20,209,000
Share of net assets: 2.4%
Internet based provider of personalised cards and gifts.
7OXFORD INSTRUMENTS
Electronic & Electrical Equipment
Market value: £17,932,000
Share of net assets: 2.2%
Designer and manufacturer of tools and systems for industry and research.
8PETS AT HOME
General Retailers
Market value1: £17,601,000
Share of net assets: 2.1%
Retailer of pet supplies.
9BREEDON*
Construction & Materials
Market value: £16,929,000
Share of net assets: 2.0%
British construction materials group.
10GAMES WORKSHOP
Leisure Goods
Market value: £16,770,000
Share of net assets: 2.0%
Developer, publisher and manufacturer of miniature war games.
1 Includes long derivative positions.
* Traded on the Alternative Investment Market (AIM) of the London Stock Exchange.
| # | Company | £'000 | % | Description |
| 11 | CVS Group* General Retailers | 15,992 | 1.9 | Operator of veterinary surgeries |
| 12 | Treatt Chemicals | 15,173 | 1.8 | Development and manufacture of ingredients for the flavour and fragrance industry |
| 13 | Qinetiq Group Aerospace & Defence | 15,0351 | 1.8 | Provider of scientific and technological services to the defence, security and aerospace markets |
| 14 | IntegraFin Financial Services | 14,781 | 1.8 | UK savings platform for financial advisors |
| 15 | Ergomed* Pharmaceuticals & Biotechnology | 14,6441 | 1.8 | Provider of pharmaceuticals services |
| 16 | Grafton Group Support Services | 14,471 | 1.8 | Builders merchants in the UK, Ireland and Netherlands |
| 17 | Dunelm Group General Retailers | 13,7281 | 1.7 | Retailer of homeware products |
| 18 | Learning Technologies* Software & Computer Services | 12,652 | 1.5 | Provider of e-learning services |
| 19 | Computacenter Software & Computer Services | 12,637 | 1.5 | Computer services |
| 20 | Dechra Pharmaceuticals Pharmaceuticals & Biotechnology | 12,563 | 1.5 | Developer and supplier of pharmaceutical and other products focused on the veterinary market |
| 21 | XP Power Electronic & Electrical Equipment | 12,472 | 1.5 | Leading provider of power solutions |
| 22 | Workspace Group Real Estate Investment Trusts | 12,4551 | 1.5 | Supply of flexible workspace to businesses in London |
| 23 | 4imprint Group Media | 12,361 | 1.5 | Supplier of promotional merchandise in the US |
| 24 | Sumo Group* Leisure Goods | 12,124 | 1.5 | Provider of creative and development services to the video games and entertainment industries |
| 25 | OSB Group Financial Services | 12,066 | 1.5 | Specialist lending business |
| 26 | Spectris Electronic & Electrical Equipment | 11,447 | 1.4 | Supplier of productivity enhancing instrumentation and controls |
| 27 | Howden Joinery Group General Retailers | 11,3891 | 1.4 | Kitchen and joinery product supplier |
| 28 | Liontrust Asset Management Financial Services | 10,794 | 1.3 | Provider of asset management services |
| 29 | Morgan Sindall Construction & Materials | 10,493 | 1.3 | Supplier of office fit out, construction and urban regeneration services |
| 30 | DiscoverIE Electronic & Electrical Equipment | 10,3511 | 1.3 | International designer, manufacturer and supplier of customised electronics |
| 31 | WH Smith General Retailers | 10,300 | 1.2 | British retailer of books, stationery, magazines and confectionary |
| 32 | Tyman Support Services | 10,061 | 1.2 | Supplier of engineered components and access solutions to the construction industry |
| 33 | Robert Walters Support Services | 9,954 | 1.2 | Provider of specialist recruitment services |
| 34 | Diploma Support Services | 9,787 | 1.2 | Supplier of specialised technical products and services |
| 35 | Next Fifteen Communications* Media | 9,654 | 1.2 | Provider of digital communication products and services |
| 36 | Jet2* Travel & Leisure | 9,288 | 1.1 | UK airline and tour operator |
| 37 | Sirius Real Estate Real Estate Investment & Services | 9,066 | 1.1 | Owner and operator of business parks, offices and industrial complexes in Germany |
| 38 | Safestore Holdings Real Estate Investment Trusts | 9,056 | 1.1 | Provider of self-storage units |
| 39 | Johnson Service Group* Support Services | 8,759 | 1.1 | Provider of textile services |
| 40 | Team 17* Leisure Goods | 8,7321 | 1.1 | Video game developer and publisher |
| 41 | Spirent Technology Hardware & Hardware Equipment | 8,695 | 1.1 | Multinational telecommunications testing |
| 42 | Greggs Food & Drug Retailers | 8,597 | 1.0 | Bakery chain |
| 43 | Clipper Logistics Support Services | 8,364 | 1.0 | Retail logistics business |
| 44 | Alliance Pharma* Pharmaceuticals & Biotechnology | 8,364 | 1.0 | Distributor of pharmaceutical and healthcare products |
| 45 | Vistry Group Household Goods & Home Construction | 8,164 | 1.0 | UK housebuilder |
| 46 | GB Group* Software & Computer Services | 8,001 | 1.0 | Developer and supplier of identity verification solutions |
| 47 | TT Electronics Electronic & Electrical Equipment | 7,939 | 1.0 | Global manufacturer of electronic components |
| 48 | Bytes Technology Software & Computer Services | 7,924 | 1.0 | Specialist in software, security and cloud services |
| 49 | Sanne Group Financial Services | 7,8861 | 1.0 | Provider of alternative asset and corporate services |
| 50 | Chegg General Retailers | 7,820 | 0.9 | Provider of education related services |
| 51 | Tatton Asset Management* Financial Services | 7,818 | 0.9 | Provider of discretionary fund management services to financial advisors |
| 52 | Polar Capital Holdings* Financial Services | 7,7521 | 0.9 | Provider of investment management services |
| 53 | Kainos Group Software & Computer Services | 7,7321 | 0.9 | Provider of digital technology solutions |
| 54 | Joules* General Retailers | 7,708 | 0.9 | Clothing retailer inspired by British country lifestyles |
| 55 | Balfour Beatty Construction & Materials | 7,7041 | 0.9 | Multinational infrastructure group |
| 56 | Luceco Electronic & Electrical Equipment | 7,662 | 0.9 | Supplier & manufacturer of high quality LED lighting products |
| 57 | Avon Rubber Aerospace & Defence | 7,662 | 0.9 | Producer of safety masks |
| 58 | Young & Co's Brewery* Travel & Leisure | 7,632 | 0.9 | Owner and operator of pubs mainly in the London area |
| 59 | Auction Technology Group General Retailers | 7,564 | 0.9 | Operator of marketplaces for curated online auctions |
| 60 | NCC Group Software & Computer Services | 7,363 | 0.9 | Cyber security business |
| 61 | Restaurant Group General Retailers | 7,2161 | 0.9 | Operator of restaurants and pubs |
| 62 | Euronext Financial Services | 6,9911 | 0.8 | European stock exchange |
| 63 | Xero Software & Computer Services | 6,980 | 0.8 | Software company specialising in accounting for small businesses |
| 64 | Cranswick Food Producers | 6,798 | 0.8 | Producer of premium, fresh and added-value food products |
| 65 | Chrysalis Investments Financial Services | 6,420 | 0.8 | Closed end investment company investing in later stage private companies with long-term growth potential |
| 66 | Dr. Martens Leisure Goods | 6,311 | 0.8 | Supplier and manufacturer of footwear |
| 67 | Vesuvius Industrial Engineering | 6,228 | 0.8 | British engineered ceramics company |
| 68 | Serco Group Support Services | 6,221 | 0.8 | Provider of public services across health, transport, immigration, defence, justice and citizen services |
| 69 | SThree Support Services | 6,215 | 0.8 | Provision of specialist professional recruitment services |
| 70 | DSV Industrial Transportation | 6,0071 | 0.7 | Danish transport and logistics company |
| 71 | Londonmetric Property Real Estate Investment Trusts | 5,9281 | 0.7 | Investor in, and developer of, property |
| 72 | Boku* Support Services | 5,846 | 0.7 | Digital payments platform |
| 73 | S4 Capital Media | 5,648 | 0.7 | Digital advertising and marketing services business |
| 74 | Draper Esprit* Financial Services | 5,491 | 0.7 | Technology-focused venture capital firm |
| 75 | Helios Towers Mobile Telecommunications | 5,321 | 0.6 | Provider of telecommunications infrastructure |
| 76 | Hollywood Bowl Group General Retailers | 5,1551 | 0.6 | Operator of ten-pin bowling services |
| 77 | Masimo Health Care Equipment & Services | 5,119 | 0.6 | Developer and manufacturer of non-invasive patient monitoring technologies |
| 78 | Close Brothers Group Banks | 5,0231 | 0.6 | Provider of lending, deposit taking, wealth management services and securities trading |
| 79 | 888 Travel & Leisure | 4,915 | 0.6 | Operator and platform for online gaming |
| 80 | Mattioli Woods* Financial Services | 4,859 | 0.6 | Provider of wealth management services |
| 81 | Marshalls Construction & Materials | 4,856 | 0.6 | British construction materials group |
| 82 | Redrow Household Goods & Home Construction | 4,765 | 0.6 | UK housebuilder |
| 83 | The Pebble Group* Media | 4,648 | 0.6 | Designer and manufacturer of promotional goods |
| 84 | Activeops* Software & Computer Services | 4,602 | 0.6 | Provider of management process automation solutions |
| 85 | Eckoh* Software & Computer Services | 4,4851 | 0.5 | Global provider of secure payments products |
| 86 | Zotefoams Chemicals | 4,4361 | 0.5 | Manufacturer of polyolefin foams used in sport, construction, marine, automation, medical equipment and aerospace |
| 87 | Judges Scientific* Electronic & Electrical Equipment | 4,382 | 0.5 | Designer and producer of scientific instruments |
| 88 | Ascential General Retailers | 4,297 | 0.5 | Specialist information, data and analytics company |
| 89 | GlobalData* Media | 4,2511 | 0.5 | Data analytics and consulting |
| 90 | AB Dynamics* Industrial Engineering | 4,209 | 0.5 | Developer and supplier of specialist automotive testing systems |
| 91 | Accesso Technology* Software & Computer Services | 4,1761 | 0.5 | Provider of ticketing and virtual queuing solutions |
| 92 | Future Media | 4,133 | 0.5 | Multi-platform media business covering technology, entertainment, creative arts, home interest and education |
| 93 | Synthomer Chemicals | 4,104 | 0.5 | Supplier and manufacturer of plastics and industrial specialities |
| 94 | Domo Software & Computer Services | 4,0931 | 0.5 | US based operator of mobile, cloud-based operating systems |
| 95 | Renishaw Electronic & Electrical Equipment | 4,090 | 0.5 | Engineering and scientific technology company |
| 96 | Anpario* Pharmaceuticals & Biotechnology | 4,009 | 0.5 | Manufacturer and distributor of natural animal feed additives for animal health, nutrition and biosecurity |
| 97 | Worldline Software & Computer Services | 3,9471 | 0.5 | Digital payments company |
| 98 | Aptitude Software Software & Computer Services | 3,946 | 0.5 | Provider of specialist finance software and technology |
| 99 | Porvair Industrial Engineering | 3,812 | 0.5 | Specialist filtration and environmental technology |
| 100 | Craneware* Software & Computer Services | 3,761 | 0.5 | Provider of financial business software for US hospitals |
| 101 | Adyen Support Services | 3,7171 | 0.4 | Digital payments company |
| 102 | Frontier Developments* Leisure Goods | 3,642 | 0.4 | British video game developer and publisher |
| 103 | Gooch & Housego* Electronic & Electrical Equipment | 3,641 | 0.4 | Designer and manufacturer of advanced photonic systems |
| 104 | Axon Enterprise Support Services | 3,6331 | 0.4 | US based provider of technology and weapons products |
| 105 | Shoals Technologies Support Services | 3,5051 | 0.4 | Provider of electrical balance of system solutions |
| 106 | MongoDB Software & Computer Services | 3,4861 | 0.4 | Global cloud-based database |
| 107 | Five9 Software & Computer Services | 3,475 | 0.4 | Provider of cloud-based contact centre software |
| 108 | Fevertree Drinks* Beverages | 3,362¹ | 0.4 | Developer and seller of soft drinks and mixers |
| 109 | Freshpet Food Producers | 3,3461 | 0.4 | Producer of fresh, refrigerated food and treats for dogs and cats |
| 110 | St. Modwen Properties Real Estate Investment & Services | 3,302 | 0.4 | Investor in, and developer of, property |
| 111 | Keywords Studios* Support Services | 3,2441 | 0.4 | Provider of video games technical services |
| 112 | Foresight Group Holdings Financial Services | 3,2291 | 0.4 | Infrastructure and private equity manager |
| 113 | AJ Bell Financial Services | 3,169 | 0.4 | UK savings platform for financial advisors & individual investors |
| 114 | Fuller Smith & Turner - A Shares Travel & Leisure | 3,149 | 0.4 | Owner and operator of pubs mainly in the London area |
| 115 | Bellway Household Goods & Home Construction | 3,1451 | 0.4 | UK housebuilder |
| 116 | MaxCyte* Pharmaceuticals & Biotechnology | 3,098 | 0.4 | Clinical-stage global cell-based therapies and life sciences company |
| 117 | Alfa Financial Software Software & Computer Services | 3,079 | 0.4 | Provider of software to the finance industry |
| 118 | ITM Power* Alternative Energy | 2,997 | 0.4 | British manufacturer of polymer electrolyte membrane electrolyzers for hydrogen production via electrochemical splitting of water into hydrogen and oxygen |
| 119 | Medpace Holdings Health Care Equipment & Services | 2,9601 | 0.4 | Clinical research organization (CRO) conducting global clinical research for the development of drugs and medical devices |
| 120 | Etsy General Retailers | 2,745 | 0.3 | Operator of online marketplaces |
| 121 | Trade Desk Media | 2,7131 | 0.3 | Digital advertising software |
| 122 | Coupa Software Software & Computer Services | 2,521 | 0.3 | Provider of cloud-based platform for business spend |
| 123 | 2U General Retailers | 2,5061 | 0.3 | Digital provider of educational offerings and infrastructure |
| 124 | Clarkson Industrial Transportation | 2,399 | 0.3 | Provider of shipping services |
| 125 | Okta Software & Computer Services | 2,3381 | 0.3 | Identity and access management company |
| 126 | Pegasystems Software & Computer Services | 2,2381 | 0.3 | Provider of innovative software and automation solutions |
| 127 | Chapel Down† Beverages | 2,197 | 0.3 | UK producer of sparkling and still wines, and Curious beers and ciders |
| 128 | Wix.com Software & Computer Services | 2,1721 | 0.3 | Cloud-based web development business |
| 129 | MarketAxess Financial Services | 2,0351 | 0.2 | International electronic trading platform for institutional credit markets |
| 130 | Kier Group Support Services | 179 | - | UK construction, services and property group |
| 131 | Kier Group Rights 14/06/2021 Support Services | 41 | - | UK construction, services and property group |
| ----------------- | -------------- | |||
| Long investment positions (excluding BlackRock's Institutional Cash Series plc - Sterling Liquid Environmentally Aware Fund) | 1,006,573 | 121.8 | ||
| ========== | ======== | |||
| Short investment positions | (12,071) | (1.5) | ||
| ========== | ======== |
1 Includes long derivative positions.
* 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 2021, the Company held equity interests in three companies comprising more than 3% of a company's share capital as follows: Tatton Asset Management (3.5%), Anpario (3.1%) and Activeops (3.1%).
FAIR VALUE AND GROSS MARKET EXPOSURE OF INVESTMENTS AS AT 31 MAY 2021
Fair value1 | Gross market exposure2 | Gross market exposure as a % of net assets2 | |||
| £'000 | £'000 | 31 May 2021 | 31 May 2020 | 30 November 2020 | |
| Long investment positions (excluding BlackRock's Institutional Cash Series plc - Sterling Liquid Environmentally Aware Fund) | 812,979 | 1,006,573 | 121.8 | 118.6 | 120.7 |
| Short investment positions | 136 | (12,071) | (1.5) | (4.4) | (1.9) |
| Cash and cash equivalents1,3 | 850 | (180,537) | (21.8) | (16.3) | (19.1) |
| BlackRock's Institutional Cash Series plc - Sterling Liquid Environmentally Aware Fund | 25,697 | 25,697 | 3.1 | 4.1 | 1.9 |
| Other net current liabilities | (13,291) | (13,291) | (1.6) | (2.0) | (1.6) |
| ----------------- | ----------------- | ----------------- | ----------------- | ----------------- | |
| Net assets | 826,371 | 826,371 | 100.0 | 100.0 | 100.0 |
| ========== | ========== | ========== | ========== | ========== | |
The Company uses gearing through the use of long and short CFD positions. Gross and Net Gearing as at 31 May 2021 were 123.3% and 120.3% respectively (31 May 2020: 123.1% and 114.2%; 30 November 2020: 122.6% and 118.8%). Gross and Net Gearing are Alternative Performance Measures, see Glossary contained within the Half Yearly Financial Report for further details.
1 Fair value is determined as follows:
- Listed and AIM quoted investments are valued at bid prices where available, otherwise at published price quotations.
- The sum of the fair values of the long and short investment 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 £193,594,000 at the time of purchase and subsequent market rises in prices have resulted in unrealised gains on the long derivative positions of £3,343,000, resulting in the value of the total market exposure to the underlying securities increasing to £196,937,000 as at 31 May 2021.
- The notional price of selling the securities to which exposure was gained via the short derivative positions would have been £12,207,000 at the time of entering into the contract, and subsequent price rises have resulted in unrealised gains on the short derivative positions of £136,000 and the value of the market exposure of these investments decreasing to £12,071,000 at 31 May 2021. If the short derivative positions had been closed on 31 May 2021 this would have resulted in a gain of £136,000 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 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 INVESTMENTSAS AT 31 MAY 2021
Sector | % of long portfolio | % of short portfolio | % of net portfolio |
| Chemicals | 2.4 | (0.2) | 2.2 |
| ----------------- | ----------------- | ----------------- | |
| Basic Materials | 2.4 | (0.2) | 2.2 |
| ========== | ========== | ========== | |
| Aerospace & Defence | 2.3 | 0.0 | 2.3 |
| Alternative Energy | 0.3 | 0.0 | 0.3 |
| Construction & Materials | 4.0 | 0.0 | 4.0 |
| Electronic & Electrical Equipment | 8.1 | 0.0 | 8.1 |
| Industrial Engineering | 1.4 | 0.0 | 1.4 |
| Industrial Transportation | 0.8 | 0.0 | 0.8 |
| Support Services | 11.7 | 0.0 | 11.7 |
| ----------------- | ----------------- | ----------------- | |
| Industrials | 28.6 | 0.0 | 28.6 |
| ========== | ========== | ========== | |
| Beverages | 0.6 | 0.0 | 0.6 |
| Food Producers | 1.0 | 0.0 | 1.0 |
| Household Goods & Home Construction | 1.7 | 0.0 | 1.7 |
| Leisure Goods | 4.8 | 0.0 | 4.8 |
| Personal Goods | 2.2 | 0.0 | 2.2 |
| ----------------- | ----------------- | ----------------- | |
| Consumer Staples | 10.3 | 0.0 | 10.3 |
| ========== | ========== | ========== | |
| Health Care Equipment & Services | 0.8 | 0.0 | 0.8 |
| Pharmaceuticals & Biotechnology | 4.3 | (0.2) | 4.1 |
| ----------------- | ----------------- | ----------------- | |
| Health Care | 5.1 | (0.2) | 4.9 |
| ========== | ========== | ========== | |
| Food & Drug Retailers | 0.9 | 0.0 | 0.9 |
| General Retailers | 13.5 | (0.3) | 13.2 |
| Media | 6.5 | 0.0 | 6.5 |
| Travel & Leisure | 2.5 | 0.0 | 2.5 |
| ----------------- | ----------------- | ----------------- | |
| Consumer Discretionary | 23.4 | (0.3) | 23.1 |
| ========== | ========== | ========== | |
| Banks | 0.5 | 0.0 | 0.5 |
| Financial Services | 11.7 | 0.0 | 11.7 |
| Real Estate Investment & Services | 1.2 | 0.0 | 1.2 |
| Real Estate Investment Trusts | 2.8 | (0.2) | 2.6 |
| ----------------- | ----------------- | ----------------- | |
| Financials | 16.2 | (0.2) | 16.0 |
| ========== | ========== | ========== | |
| Software & Computer Services | 11.2 | (0.4) | 10.8 |
| Technology Hardware & Hardware Equipment | 0.9 | 0.0 | 0.9 |
| ----------------- | ----------------- | ----------------- | |
| Technology | 12.1 | (0.4) | 11.7 |
| ========== | ========== | ========== | |
| Mobile Telecommunications | 3.2 | 0.0 | 3.2 |
| ----------------- | ----------------- | ----------------- | |
| Telecommunications | 3.2 | 0.0 | 3.2 |
| ========== | ========== | ========== | |
| Total Investments | 101.3 | (1.3) | 100.0 |
| ========== | ========== | ========== |
The above percentages are calculated on the net portfolio as at 31 May 2021. The net portfolio is calculated as long equity and derivative positions less short derivative positions as at 31 May 2021.
ANALYSIS OF THE PORTFOLIO
Market capitalisation as at 31 May 2021
| Long Positions1 | Short Positions | |
| £2bn+ | 35.0% | -0.8% |
| £1bn - £2bn | 35.0% | -0.2% |
| £400m - £1bn | 24.1% | 0.0% |
| £0m - £400m | 7.2% | -0.3% |
1 The above investments may comprise exposures to long equity and long derivative positions.
Source: BlackRock.
Position size as at 31 May 2021
| Long Positions1 | Short Positions | |
| £10m+ | 32 | 0 |
| £5m - £10m | 46 | 0 |
| £2.5m - £5m | 45 | 0 |
| £0m - £2.5m | 8 | -8 |
1 The above investments may comprise exposures to long equity and long derivative positions.
Source: BlackRock.
Gross Basis1
| FTSE 250 | 41.9% |
| FTSE AIM | 27.4% |
| FTSE Small Cap | 14.8% |
| International | 10.7% |
| Other | 4.2% |
| FTSE 100 | 1.0% |
Net Basis2
| FTSE 250 | 41.7% |
| FTSE AIM | 27.7% |
| FTSE Small Cap | 14.9% |
| International | 11.0% |
| Other | 3.7% |
| FTSE 100 | 1.0% |
The above tables include holdings that are included within the Benchmark Index of 59.1% on a Gross Basis and 58.2% on a Net Basis.
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.
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 2020. A detailed explanation can be found in the Strategic Report on pages 41 to 44 and in note 16 on pages 103 to 114 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 has developed into a global pandemic and has resulted in travel restrictions, closed international borders, enhanced health screenings at ports of entry and elsewhere, disruption of and delays in health care 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 an extent that cannot necessarily be foreseen. In addition, the impact of infectious illnesses in emerging market countries may be greater due to generally less established health care 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.
While the impact of the COVID-19 pandemic has been substantially reduced by the efficiency of the vaccination programmes in many of the world's developed economies, there remains some uncertainty as to the number and diversity of new strains of the disease and the speed at which these new strains are spreadable. However, in the view of the Board, there have been no substantial changes to the fundamental nature of the principal risks and uncertainties 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, VAT recovered, taxation and certain non-recurring items) for the year ended 30 November 2020 were approximately 0.60%1 of average daily 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 2021 and the above responsibility statement was signed on its behalf by the Chairman.
CHRISTOPHER SAMUEL
FOR AND ON BEHALF OF THE BOARD
23 July 2021
1 Alternative Performance Measures, see Glossary contained within the Half Yearly Financial Report.
FINANCIAL STATEMENTS
STATEMENT OF COMPREHENSIVE INCOME FOR THE SIX MONTHS ENDED 31 MAY 2021
| Six months ended 31 May 2021 (unaudited) | Six months ended 31 May 2020 (unaudited) | Year ended 30 November 2020 (audited) | ||||||||
Notes | Revenue £'000 | Capital £'000 | Total £'000 | Revenue £'000 | Capital £'000 | Total £'000 | Revenue £'000 | Capital £'000 | Total £'000 | |
| Income from investments held at fair value through profit or loss | 3 | 5,017 | - | 5,017 | 2,394 | - | 2,394 | 6,387 | - | 6,387 |
| Net income/(expense) from derivatives | 3 | 644 | - | 644 | (135) | - | (135) | 323 | - | 323 |
| Other income | 3 | 3 | - | 3 | 49 | - | 49 | 60 | - | 60 |
| -------------- | -------------- | -------------- | -------------- | -------------- | -------------- | -------------- | -------------- | -------------- | ||
| Total revenue | 5,664 | - | 5,664 | 2,308 | - | 2,308 | 6,770 | - | 6,770 | |
| ======== | ======== | ======== | ======== | ======== | ======== | ======== | ======== | ======== | ||
| Net profit/(loss) on investments and options held at fair value through profit or loss | - | 173,076 | 173,076 | - | (63,284) | (63,284) | - | 25,656 | 25,656 | |
| Net loss on foreign exchange | - | (43) | (43) | - | (151) | (151) | - | (234) | (234) | |
| Net profit from derivatives | - | 18,289 | 18,289 | - | 7,381 | 7,381 | - | 26,495 | 26,495 | |
| -------------- | -------------- | -------------- | -------------- | -------------- | -------------- | -------------- | -------------- | -------------- | ||
| Total | 5,664 | 191,322 | 196,986 | 2,308 | (56,054) | (53,746) | 6,770 | 51,917 | 58,687 | |
| ======== | ======== | ======== | ======== | ======== | ======== | ======== | ======== | ======== | ||
| Expenses | ||||||||||
| Investment management fee and performance fees | 4 | (399) | (7,115) | (7,514) | (244) | (5,536) | (5,780) | (524) | (6,463) | (6,987) |
| Other operating expenses | 5 | (492) | (14) | (506) | (336) | (17) | (353) | (822) | (33) | (855) |
| -------------- | -------------- | -------------- | -------------- | -------------- | -------------- | -------------- | -------------- | -------------- | ||
| Total operating expenses | (891) | (7,129) | (8,020) | (580) | (5,553) | (6,133) | (1,346) | (6,496) | (7,842) | |
| ======== | ======== | ======== | ======== | ======== | ======== | ======== | ======== | ======== | ||
| Net profit/(loss) on ordinary activities before finance costs and taxation | 4,773 | 184,193 | 188,966 | 1,728 | (61,607) | (59,879) | 5,424 | 45,421 | 50,845 | |
| Finance costs | (1) | (3) | (4) | (2) | (4) | (6) | (2) | (5) | (7) | |
| -------------- | -------------- | -------------- | -------------- | -------------- | -------------- | -------------- | -------------- | -------------- | ||
| Net profit/(loss) on ordinary activities before taxation | 4,772 | 184,190 | 188,962 | 1,726 | (61,611) | (59,885) | 5,422 | 45,416 | 50,838 | |
| Taxation | (23) | - | (23) | (2) | - | (2) | (43) | - | (43) | |
| -------------- | -------------- | -------------- | -------------- | -------------- | -------------- | -------------- | -------------- | -------------- | ||
| Profit/(loss) for the period | 4,749 | 184,190 | 188,939 | 1,724 | (61,611) | (59,887) | 5,379 | 45,416 | 50,795 | |
| ======== | ======== | ======== | ======== | ======== | ======== | ======== | ======== | ======== | ||
| Earnings/(loss) per ordinary share (pence) | 7 | 5.24 | 203.20 | 208.44 | 2.16 | (77.28) | (75.12) | 6.57 | 55.45 | 62.02 |
| ======== | ======== | ======== | ======== | ======== | ======== | ======== | ======== | ======== | ||
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/(loss). 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 2021
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 2021 (unaudited) | ||||||||
| At 30 November 2020 | 4,376 | 101,368 | 11,905 | 44,580 | 425,140 | 8,846 | 596,215 | |
| Total comprehensive income: | ||||||||
| Net profit for the period | - | - | - | - | 184,190 | 4,749 | 188,939 | |
| Transactions with owners, recorded directly to equity: | ||||||||
| Ordinary shares issued | 301 | 47,936 | - | - | - | - | 48,237 | |
| Share issue costs | - | (48) | - | - | - | - | (48) | |
| Dividends paid1 | 6 | - | - | - | - | - | (6,972) | (6,972) |
| -------------- | -------------- | -------------- | -------------- | -------------- | -------------- | -------------- | ||
| At 31 May 2021 | 4,677 | 149,256 | 11,905 | 44,580 | 609,330 | 6,623 | 826,371 | |
| ======== | ======== | ======== | ======== | ======== | ======== | ======== | ||
| 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 from treasury | - | 34,741 | - | 8,099 | - | - | 42,840 | |
| Ordinary shares issued | 153 | 14,346 | - | - | - | - | 14,499 | |
| Share issue costs - treasury | - | - | - | (44) | - | - | (44) | |
| Share issue costs | - | (14) | - | - | - | - | (14) | |
| Dividends paid2 | 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 year ended 30 November 2020 (audited) | ||||||||
| At 30 November 2019 | 4,026 | 26,169 | 11,905 | 36,525 | 379,724 | 11,708 | 470,057 | |
| Total comprehensive income: | ||||||||
| Net profit for the year | - | - | - | - | 45,416 | 5,379 | 50,795 | |
| Transactions with owners, recorded directly to equity: | ||||||||
| Ordinary shares issued from treasury | - | 34,741 | - | 8,099 | - | - | 42,840 | |
| Ordinary shares issued | 350 | 40,683 | - | - | - | - | 41,033 | |
| Share issue costs - treasury | - | - | - | (44) | - | - | (44) | |
| Share issue costs | - | (225) | - | - | - | - | (225) | |
| Dividends paid3 | - | - | - | - | - | (8,241) | (8,241) | |
| -------------- | -------------- | -------------- | -------------- | -------------- | -------------- | -------------- | ||
| At 30 November 2020 | 4,376 | 101,368 | 11,905 | 44,580 | 425,140 | 8,846 | 596,215 | |
| ======== | ======== | ======== | ======== | ======== | ======== | ======== |
1 Final dividend of 7.70p per share for the year ended 30 November 2020, declared on 10 February 2021 and paid on 1 April 2021.
2 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.
3 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 and interim dividend of 2.50p per share for the year ended 30 November 2020, declared on 23 July 2020 and paid on 28 August 2020.
For information on the Company's distributable reserves, please refer to note 9.
STATEMENT OF FINANCIAL POSITION AS AT 31 MAY 2021
Notes | 31 May 2021 (unaudited) £'000 | 31 May 2020 (unaudited) (restated)1 £'000 | 30 November 2020 (audited) (restated)1 £'000 | |
| Non current assets | ||||
| Investments held at fair value through profit or loss | 10 | 809,636 | 449,989 | 590,225 |
| Current assets | ||||
| Other receivables | 4,437 | 4,456 | 5,767 | |
| Current tax asset | 16 | 53 | 27 | |
| Derivative financial assets held at fair value through profit or loss | 3,632 | 4,890 | 4,108 | |
| Cash collateral held with brokers | - | 3,177 | 1,050 | |
| Cash and cash equivalents | 26,547 | 18,810 | 11,642 | |
| -------------- | -------------- | -------------- | ||
| Total current assets | 34,632 | 31,386 | 22,594 | |
| ======== | ======== | ======== | ||
| Total assets | 844,268 | 481,375 | 612,819 | |
| ======== | ======== | ======== | ||
| Current liabilities | ||||
| Other payables | (13,714) | (14,812) | (14,289) | |
| Derivative financial liabilities held at fair value through profit or loss | (153) | (3,272) | (105) | |
| Cash collateral received | (4,030) | (1,990) | (2,210) | |
| -------------- | -------------- | -------------- | ||
| Total current liabilities | (17,897) | (20,074) | (16,604) | |
| ======== | ======== | ======== | ||
| Net assets | 826,371 | 461,301 | 596,215 | |
| ======== | ======== | ======== | ||
| Equity attributable to equity holders | ||||
| Called up share capital | 8 | 4,677 | 4,179 | 4,376 |
| Share premium account | 149,256 | 75,242 | 101,368 | |
| Capital redemption reserve | 11,905 | 11,905 | 11,905 | |
| Special reserve | 44,580 | 44,580 | 44,580 | |
| Capital reserves | 609,330 | 318,113 | 425,140 | |
| Revenue reserve | 6,623 | 7,282 | 8,846 | |
| -------------- | -------------- | -------------- | ||
| Total equity | 7 | 826,371 | 461,301 | 596,215 |
| ======== | ======== | ======== | ||
| Net asset value per ordinary share (pence) | 7 | 883.45 | 551.87 | 681.24 |
| ======== | ======== | ======== |
1 See note 2 "Restatement of 2020 comparatives" below for further details.
CASH FLOW STATEMENT FOR THE SIX MONTHS ENDED 31 MAY 2021
| Six months ended 31 May 2021 (unaudited) £'000 | Six months ended 31 May 2020 (unaudited) £'000 | Year ended 30 November 2020 (audited) £'000 | |
| Operating activities | |||
| Net profit/(loss) on ordinary activities before taxation | 188,962 | (59,885) | 50,838 |
| Add back finance costs | 4 | 6 | 7 |
| (Profit)/loss on investments and derivatives held at fair value through profit or loss (including transaction costs) | (191,593) | 55,820 | (52,573) |
| Net loss on foreign exchange | 43 | 151 | 234 |
| Special dividends allocated to capital | - | 83 | 83 |
| Sales of investments held at fair value through profit or loss | 190,761 | 141,170 | 274,350 |
| Purchases of investments held at fair value through profit or loss | (237,096) | (208,893) | (394,398) |
| Net receipts on closure of derivatives | 19,041 | 8,599 | 25,472 |
| (Increase)/decrease in other receivables | (732) | (431) | 604 |
| Increase in other payables | 2,340 | 738 | 362 |
| Decrease/(increase) in amounts due from brokers | 2,062 | (2,845) | (3,966) |
| (Decrease)/increase in amounts due to brokers | (2,915) | 5,199 | 5,052 |
| Net movement in cash collateral held with brokers in respect of derivatives | 2,870 | (3,497) | (1,150) |
| -------------- | -------------- | -------------- | |
| Net cash outflow from operating activities before taxation | (26,253) | (63,785) | (95,085) |
| Taxation | (12) | (2) | (18) |
| -------------- | -------------- | -------------- | |
| Net cash outflow from operating activities | (26,265) | (63,787) | (95,103) |
| ======== | ======== | ======== | |
| Financing activities | |||
| Interest paid | (4) | (6) | (7) |
| Cash proceeds from ordinary shares issued from treasury | - | - | 44,021 |
| Cash proceeds from ordinary shares issued | 48,189 | 58,506 | 40,808 |
| Dividends paid | (6,972) | (6,150) | (8,241) |
| -------------- | -------------- | -------------- | |
| Net cash inflow from financing activities | 41,213 | 52,350 | 76,581 |
| ======== | ======== | ======== | |
| Increase/(decrease) in cash and cash equivalents | 14,948 | (11,437) | (18,522) |
| Effect of foreign exchange rate changes | (43) | (151) | (234) |
| ======== | ======== | ======== | |
| Change in cash and cash equivalents | 14,905 | (11,588) | (18,756) |
| Cash and cash equivalents at start of period | 11,642 | 30,398 | 30,398 |
| -------------- | -------------- | -------------- | |
| Cash and cash equivalents at end of the period | 26,547 | 18,810 | 11,642 |
| ======== | ======== | ======== | |
| Comprised of: | |||
| Cash at bank | 850 | 129 | 101 |
| Cash Fund1 | 25,697 | 18,681 | 11,541 |
| -------------- | -------------- | -------------- | |
| 26,547 | 18,810 | 11,642 | |
| ======== | ======== | ======== |
1 Cash Fund represents funds held on deposit with the BlackRock Institutional Cash Series plc - Sterling Liquid Environmentally Aware Fund.
NOTES TO THE FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED 31 MAY 2021
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 PRESENTATION
The Half Yearly Financial Statements for the period ended 31 May 2021 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 2020, which have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the EU.
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.
Adoption of new and amended standards and interpretations:
Amendments to IFRS 3 - Definition of a business (effective 1 January 2020). This amendment revised the definition of a business.
This standard did not 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 did not have any 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 cause hedge accounting to terminate.
This standard did not have any significant impact on the Company.
IFRS standards that have yet to be adopted:
IFRS 17 - Insurance contracts (effective 1 January 2021). This standard replaces IFRS 4, which currently permits a wide range of accounting 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.
This standard is unlikely to have any impact on the Company as it has no insurance contracts.
Restatement of 2020 comparatives
The Company has restated presentation of the current tax asset on the face of the Statement of Financial Position separately from Other Receivables. The current tax asset was previously included within Other Receivables in the Statement of Financial Position.
3. INCOME
| Six months ended 31 May 2021 (unaudited) £'000 | Six months ended 31 May 2020 (unaudited) £'000 | Year ended 30 November 2020 (audited) £'000 | |
| Investment income: | |||
| UK dividends | 3,736 | 1,950 | 4,535 |
| UK special dividends | 251 | - | 427 |
| UK stock dividends | 21 | - | 207 |
| UK REIT dividends | 135 | 256 | 491 |
| Overseas dividends | 704 | 188 | 491 |
| Overseas special dividends | 170 | - | 236 |
| -------------- | -------------- | -------------- | |
| Total investment income | 5,017 | 2,394 | 6,387 |
| ======== | ======== | ======== | |
| Net income/(expense) from derivatives | 644 | (135) | 323 |
| Other income: | |||
| Deposit interest | - | 2 | 4 |
| Interest from Cash Fund | 3 | 47 | 56 |
| -------------- | -------------- | -------------- | |
| 3 | 49 | 60 | |
| ======== | ======== | ======== | |
| Total income | 5,664 | 2,308 | 6,770 |
| ======== | ======== | ======== |
Dividends and interest received in cash in the six months ended 31 May 2021 amounted to £4,435,000 and £2,000 (six months ended 31 May 2020: £3,507,000 and £45,000; year ended 30 November 2020: £6,985,000 and £60,000) respectively.
No special dividends have been recognised in capital in the six months ended 31 May 2021 (six months ended 31 May 2020: £83,000; year ended 30 November 2020: £83,000).
4. INVESTMENT MANAGEMENT AND PERFORMANCE FEES
| Six months ended 31 May 2021 (unaudited) | Six months ended 31 May 2020 (unaudited) | Year ended 30 November 2020 (audited) | |||||||
| Revenue £'000 | Capital £'000 | Total £'000 | Revenue £'000 | Capital £'000 | Total £'000 | Revenue £'000 | Capital £'000 | Total £'000 | |
| Investment management fee | 399 | 1,198 | 1,597 | 244 | 731 | 975 | 524 | 1,573 | 2,097 |
| Performance fee | - | 5,917 | 5,917 | - | 4,805 | 4,805 | - | 4,890 | 4,890 |
| -------------- | -------------- | -------------- | -------------- | -------------- | -------------- | -------------- | -------------- | -------------- | |
| Total | 399 | 7,115 | 7,514 | 244 | 5,536 | 5,780 | 524 | 6,463 | 6,987 |
| ======== | ======== | ======== | ======== | ======== | ======== | ======== | ======== | ======== | |
The performance fee is 15% of Net Asset Value total return outperformance of the Benchmark Index measured on 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 on that day.
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 2021, a performance fee of £5,917,000 has been accrued (six months ended 31 May 2020: £4,805,000; year ended 30 November 2020: £4,890,000).
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. There is no additional fee for company secretarial and administration services.
5. OTHER OPERATING EXPENSES
| Six months ended 31 May 2021 (unaudited) £'000 | Six months ended 31 May 2020 (unaudited) £'000 | Year ended 30 November 2020 (audited) £'000 | |
| Allocated to revenue: | |||
| Custody fee | 8 | 9 | 15 |
| Auditor's remuneration1 | 26 | 18 | 44 |
| Registrar's fee | 22 | 22 | 43 |
| Directors' emoluments | 90 | 56 | 137 |
| Broker fees | 26 | 21 | 54 |
| Depositary fees | 39 | 26 | 55 |
| Marketing fees | 72 | 70 | 174 |
| FCA fees | 8 | 7 | 16 |
| Printing and postage fees | 51 | 12 | 25 |
| AIC fees | 8 | 8 | 22 |
| Stock exchange listing fees | 87 | 52 | 134 |
| Other administrative costs | 55 | 35 | 103 |
| -------------- | -------------- | -------------- | |
| 492 | 336 | 822 | |
| ======== | ======== | ======== | |
| Allocated to capital: | |||
| Custody transaction charges2 | 14 | 17 | 33 |
| -------------- | -------------- | -------------- | |
| 506 | 353 | 855 | |
| ======== | ======== | ======== |
1 No non-audit services were provided by the auditors.
2 For the six month period ended 31 May 2021, expenses of £14,000 (six months ended 31 May 2020: £17,000; year ended 30 November 2020: £33,000) were charged to the capital column of the Statement of Comprehensive Income. These relate to transaction costs charged by the custodian on sale and purchase trades.
The transaction costs incurred on the acquisition of investments amounted to £880,000 for the six months ended 31 May 2021 (six months ended 31 May 2020: £823,000; year ended 30 November 2020: £1,501,000). Costs relating to the disposal of investments amounts to £134,000 for the six months ended 31 May 2021 (six months ended 31 May 2020: £83,000; year ended 30 November 2020: £180,000). All transaction costs have been included within capital reserves.
6. DIVIDENDS
The Board has declared an interim dividend of 2.50p per share payable on 27 August 2021 to shareholders on the register at 6 August 2021 (six months ended 31 May 2020: interim dividend of 2.50p per share paid on 28 August 2020 to shareholders on the register at 31 July 2020). This dividend has not been accrued in the financial statements for the six months ended 31 May 2021 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, capital return and net asset value per ordinary share are shown below and have been calculated using the following:
| Six months ended 31 May 2021 (unaudited) | Six months ended 31 May 2020 (unaudited) | Year ended 30 November 2020 (audited) | |
| Net revenue profit attributable to ordinary shareholders (£'000) | 4,749 | 1,724 | 5,379 |
| Net capital profit/(loss) attributable to ordinary shareholders (£'000) | 184,190 | (61,611) | 45,416 |
| ---------------- | ---------------- | ---------------- | |
| Total profit/(loss) attributable to ordinary shareholders (£'000) | 188,939 | (59,887) | 50,795 |
| ========= | ========= | ========= | |
| Equity shareholders' funds (£'000) | 826,371 | 461,301 | 596,215 |
| ========= | ========= | ========= | |
| The weighted average number of ordinary shares in issue during the period on which the earnings per ordinary share was calculated was: | 90,644,426 | 79,721,039 | 81,902,632 |
| 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: | 93,539,037 | 83,588,462 | 87,518,929 |
| Earnings per share | |||
| Revenue earnings per share (pence) | 5.24 | 2.16 | 6.57 |
| Capital earnings/(loss) per share (pence) | 203.20 | (77.28) | 55.45 |
| ---------------- | ---------------- | ---------------- | |
| Total earnings/(loss) per share (pence) | 208.44 | (75.12) | 62.02 |
| ========= | ========= | ========= |
| As at 31 May 2021 (unaudited) | As at 31 May 2020 (unaudited) | As at 30 November 2020 (audited) | |
| Net asset value per ordinary share (pence) | 883.45 | 551.87 | 681.24 |
| Ordinary share price (pence) | 891.00 | 554.00 | 682.00 |
| ======== | ======== | ======== |
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 5 pence each: | ||||
| At 30 November 2020 | 87,518,929 | - | 87,518,929 | 4,376 |
| New ordinary shares issued | 6,020,108 | - | 6,020,108 | 301 |
| ---------------- | ---------------- | ---------------- | ---------------- | |
| At 31 May 2021 | 93,539,037 | - | 93,539,037 | 4,677 |
| ========= | ========= | ========= | ========= |
During the six months ended 31 May 2021, the Company issued no shares from treasury (six months ended 31 May 2020: 6,400,000; year ended 30 November 2020: 6,400,000) for a total consideration of £nil (six months ended 31 May 2020: £42,796,000; year ended 30 November 2020: £42,796,000) including costs.
During the six months ended 31 May 2021, the Company issued 6,020,108 new shares (six months ended 31 May 2020: 3,058,136; year ended 30 November 2020: 6,988,603) for a total consideration of £48,189,000 (six months ended 31 May 2020: £14,485,000; year ended 30 November 2020: £40,808,000) including costs.
Since 31 May 2021 and up to the latest practicable date of 21 July 2021, a further 2,122,504 shares have been issued for a total consideration of £19,606,961.
The ordinary shares give shareholders voting rights, the entitlement to all of the capital growth in the Company's assets and to all income from the Company that is resolved to be distributed.
9. RESERVES
The share premium and capital redemption reserve are not distributable profits under the Companies Act 2006. In accordance with ICAEW Technical Release 02/17BL on Guidance on Realised and Distributable Profits under the Companies Act 2006, the special reserve and capital reserve may be used as distributable profits for all purposes and, in particular, the repurchase by the Company of its ordinary shares and for payments as dividends. In accordance with the Company's Articles of Association, net capital returns may be distributed by way of dividend. The £609,330,000 of capital reserve is made up of a gain on capital reserve arising on investments sold of £339,924,000 and a gain on capital reserve arising on revaluation of investments held of £269,406,000. The £269,406,000 of capital reserve arising on the revaluation of investments is subject to fair value movements and may not be readily realisable at short notice, as such it may not be entirely distributable.
10. VALUATION OF FINANCIAL INSTRUMENTS
Market risk arising from price risk
While the impact of the COVID-19 pandemic has been substantially reduced by the efficiency of the vaccination programmes in many of the world's developed economies, there remains some uncertainty over the effect of new strains and the continuing movement of people across international borders. As a result, although economies are beginning to recover from the various lockdowns, there are occasions when markets react, sometimes erratically, to news that might be interpreted as having adverse or favourable effects on share prices of individual companies or market segments. This may often result in higher than normal levels of price volatility.
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 at bank and bank overdrafts). IFRS 13 requires the Company to classify fair value measurements using a fair value hierarchy that reflects the significance of inputs used in making the measurements. The valuation techniques used by the Company are explained in the accounting policies note 2(g) as set out on pages 93 and 94 in the Company's Annual Report and Financial Statements for the year ended 30 November 2020.
Categorisation within the hierarchy has been determined on the basis of the lowest level input that is significant to the fair value measurement of the relevant asset.
The fair value hierarchy has the following levels:
Level 1 - Quoted market price for identical instruments in active markets
A financial instrument is regarded as quoted in an active market if quoted prices are readily available from an exchange, dealer, broker, industry group, pricing service or regulatory agency and those prices represent actual and regularly occurring market transactions on an arm's length basis. The Company does not adjust the quoted price for these instruments.
Level 2 - Valuation techniques using observable inputs
This category includes instruments valued using quoted prices for similar instruments in markets that are considered less 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.
Assessing the significance of a particular input to the fair value measurement in its entirety requires judgement, considering factors specific to the asset or liability. The determination of what constitutes 'observable' inputs requires significant judgement by the Investment Manager.
Contracts for difference have been classified as Level 2 investments as their valuation has been based on market observable inputs represented by the market prices of the underlying quoted securities to which these contracts expose the Company.
Fair values of financial assets and financial liabilities
The table below sets out fair value measurements using the IFRS 13 fair value hierarchy.
Financial assets/(liabilities) at fair value through profit or loss at 31 May 2021 (unaudited) | Level 1 £'000 | Level 2 £'000 | Level 3 £'000 | Total £'000 |
| Assets: | ||||
| Equity investments | 809,636 | - | - | 809,636 |
| Contracts for difference (fair value) | - | 3,632 | - | 3,632 |
| Liabilities: | ||||
| Contracts for difference (fair value) | - | (153) | - | (153) |
| -------------- | -------------- | -------------- | -------------- | |
| 809,636 | 3,479 | - | 813,115 | |
| ======== | ======== | ======== | ======== |
Financial assets/(liabilities) at fair value through profit or loss at 31 May 2020 (unaudited) | Level 1 £'000 | Level 2 £'000 | Level 3 £'000 | Total £'000 |
| 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 at 30 November 2020 (audited) | Level 1 £'000 | Level 2 £'000 | Level 3 £'000 | Total £'000 |
| Assets: | ||||
| Equity investments | 590,225 | - | - | 590,225 |
| Contracts for difference (fair value) | - | 4,108 | - | 4,108 |
| Liabilities: | ||||
| Contracts for difference (fair value) | - | (105) | - | (105) |
| -------------- | -------------- | -------------- | -------------- | |
| 590,225 | 4,003 | - | 594,228 | |
| ======== | ======== | ======== | ======== |
There were no transfers between levels for financial assets and financial liabilities during the period recorded at fair value as at 31 May 2021 and 31 May 2020 or the year ended 30 November 2020. The Company did not hold any Level 3 securities during the period ended 31 May 2021.
11. Transactions with the Investment Manager and AIFM
BlackRock Fund Managers Limited (BFM) provides management and administration services to the Company under a contract which is terminable on six months' notice. BFM has (with the Company's consent) delegated certain portfolio and risk management services, and other ancillary services, to BlackRock Investment Management (UK) Limited (BIM (UK)). Further details of the investment management contract are disclosed on pages 55 and 56 of the Directors' Report in the Company's Annual Report and Financial Statements for the year ended 30 November 2020.
The investment management fee due for the six months ended 31 May 2021 amounted to £1,597,000 (six months ended 31 May 2020: £975,000; year ended 30 November 2020: £2,097,000). In addition, a performance fee of £5,917,000 (six months ended 31 May 2020: £4,805,000; year ended 30 November 2020: £4,890,000) was accrued for the six months ended 31 May 2021.
At the period end, £2,183,000 was outstanding in respect of management fees (31 May 2020: £1,437,000; 30 November 2020: £1,113,000). Any final performance fee for the full year ending 30 November 2021 will not crystallise and fall due until the calculation date of 30 November 2021.
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 2021 amounted to £72,000 excluding VAT (six months ended 31 May 2020: £70,000; year ended 30 November 2020: £174,000). Marketing fees of £203,000 excluding VAT (31 May 2020: £192,000; 30 November 2020: £132,000) were outstanding at 31 May 2021.
The Company has an investment in BlackRock Institutional Cash Series plc - Sterling Liquid Environmentally Aware Fund of £25,697,000 as at 31 May 2021 (31 May 2020: £18,681,000; 30 November 2020: £11,541,000).
As at 31 May 2021, an amount of £155,000 (31 May 2020: £110,000; 30 November 2020: £127,000) 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.
12. RELATED PARTY DISCLOSURE
Directors' emoluments
The Board consists of six non-executive Directors, all of whom are considered to be independent of the Manager by the Board. None of the Directors has a service contract with the Company. With effect from 1 December 2020, the Chairman receives an annual fee of £41,000, the Chairman of the Audit Committee receives an annual fee of £32,500 and each of the other Directors receives an annual fee of £28,000.
As at 31 May 2021, an amount of £15,000 (31 May 2020: £10,000; 30 November 2020: £13,000) was outstanding in respect of Directors' fees.
At the period end, members of the Board, including any connected persons, held ordinary shares in the Company as set out below:
| Ordinary shares 31 May 2021 | Ordinary shares 30 November 2020 | |
| Christopher Samuel (Chairman) | 63,206 | 62,647 |
| Nigel Burton | 16,000 | n/a |
| Loudon Greenlees | 15,000 | 15,000 |
| Angela Lane | 9,427 | 5,253 |
| Jean Matterson1 | n/a | 46,000 |
| Louise Nash | 2,100 | 1,000 |
| Merryn Somerset Webb2 | 3,727 | n/a |
1 Retired as a non-executive Director on 24 March 2021.
2 Appointed as a non-executive Director on 24 March 2021.
13. CONTINGENT LIABILITIES
There were no contingent liabilities as at 31 May 2021 (31 May 2020 and 30 November 2020: 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 2021 and 31 May 2020 has not been audited.
The information for the year ended 30 November 2020 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 2021 in February 2022. 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 2022, with the Annual General Meeting expected to be held in March 2022.
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 2021
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.
Should you wish to receive investment trust related news and insights you can subscribe to BlackRock's Investment Trust Matters newsletter at: https://go.blackrock.com/LP=2142.
