BlackRock Throgmorton Trust Plc - Final Results

February 12, 2019 - 2:00 AM EST

BlackRock Throgmorton Trust Plc - Final Results

BlackRock Throgmorton Trust plc

(Legal Entity Identifier: 5493003B7ETS1JEDPF59)

Information disclosed in accordance with Article 5 Transparency Directive and DTR 4.1

Annual Results Announcement for the year ended 30 November 2018

PERFORMANCE RECORD

	30 November 2018	30 November 2017

Net assets (£’000)¹	379,602	396,846
Net asset value per ordinary share	519.08p	542.66p
Ordinary share price (mid-market)	457.00p	457.50p
Benchmark Index²	13,589.32	14,938.01
Discount to cum income net asset value³	12.0%	15.7%
Average discount to cum income net asset value³ for the year	10.7%	16.8%
Performance
Net asset value per share (total return)⁴	-2.7%	+33.9%
Benchmark Index²	-9.0%	+21.3%
Ordinary share price (total return)⁴	+1.8%	+43.8%

	Year ended 30 November 2018	Year ended 30 November 2017	Change
Revenue
Net revenue profit after taxation (£’000)	8,056	7,396	+8.9%
Revenue return per ordinary share	11.02p	10.11p	+9.0%
	--------	--------	--------
Dividends
Interim	2.50p	2.00p	+25.0%
Final	7.50p	7.00p	+7.1%
	--------	--------	--------
Total dividends paid and payable	10.00p	9.00p	+11.1%
	======	======	=====

Annual performance from 30 November 2013 to 30 November 2018

	NAV Total Return	Benchmark Index Return²	Share Price Total Return

2014	(1.1)	(0.6)	(5.7)
2015	23.2	11.9	27.7
2016	7.3	6.3	(2.1)
2017	33.9	21.3	43.8
2018	(2.7)	(9.0)	1.8

Total return performance record, rebased to 100 at 30 November 2013. Sources: BlackRock and Datastream.

1. The change in net assets reflects market movements.

2. With effect from 22 March 2018, the Numis Smaller Companies plus AIM (excluding Investment Companies) Index replaced the Numis Smaller Companies excluding AIM (excluding Investment Companies) Index as the Company’s benchmark. From 1 December 2013 to 21 March 2018, the Company’s benchmark was the Numis Smaller Companies excluding AIM (excluding Investment Companies) Index. Prior to 1 December 2013 the Company’s benchmark was the Numis Smaller Companies plus AIM (excluding Investment Companies) Index. The performance of the benchmark indices during these periods has been blended to reflect these changes.

3. This is the difference between the share price and the NAV per share.

4. This measures the Company’s NAV total return and share price, which assumes dividends paid by the Company have been reinvested.

Further information in relation to the calculations above can be found in the Glossary in the Annual Report.

TEN YEAR RECORD

Assets as at 30 November

	Equity shareholders’ funds (£m)

2008	77.0
2009	106.9
2010	127.3
2011	147.8
2012	174.1
2013	240.8
2014	235.5
2015	286.3
2016	301.5
2017	396.8
2018	379.6

...............

	NAV per share (p)

2008	93.5
2009	144.3
2010	212.8
2011	202.1
2012	238.0
2013	329.2
2014	322.0
2015	391.6
2016	412.3
2017	542.7
2018	519.1

Compound annual growth rate over the ten year period: 18.7%

...........

	Ordinary share price per share¹ (p)

2008	62.8
2009	115.8
2010	163.0
2011	170.0
2012	193.3
2013	290.0
2014	270.0
2015	339.5
2016	325.0
2017	457.5
2018	457.0

Compound annual growth rate over the ten year period: 22.0%

.............

	Discount (%)

2008	-32.9
2009	-19.8
2010	-18.8
2011	-15.9
2012	-18.8
2013	-11.9
2014	-16.1
2015	-13.3
2016	-21.2
2017	-15.7
2018	-12.0

...........

Revenue for the year ended 30 November

	Net revenue after taxation² (£m)

2008	4.8
2009	3.1
2010	1.9
2011	2.1
2012	2.7
2013	3.7
2014	3.8
2015	5.9
2016	5.7
2017	7.4
2018	8.1

...........

	Revenue return per share² (p)

2008	3.85
2009	3.86
2010	2.85
2011	3.29
2012	3.64
2013	4.99
2014	5.19
2015	8.08
2016	7.83
2017	10.11
2018	11.02

Compound annual growth rate over the ten year period: 11.1%

..........

	Dividends per share (p)

2008	2.40³
2009	2.75³
2010	3.00
2011	3.15
2012	3.32
2013	4.00
2014	4.40
2015	6.70
2016	7.50
2017	9.00
2018	10.00

Compound annual growth rate over the ten year period: 15.3%

..........

	NAV total return (%)

2008	-51.4⁴
2009	+63.7
2010	+51.7
2011	-3.9
2012	+19.4
2013	+40.1
2014	-1.1
2015	+23.2
2016	+7.3
2017	+33.9
2018	-2.7

1. Mid-market price.
2. Net revenue after taxation and revenue return per share for the years ended after 30 November 2012 relate to the parent company and for the years up to 30 November 2011, related to the Group including subsidiary companies.
3. Dividends per share do not include special dividends of 2.00 pence per share paid in 2009 and 3.00 pence per share paid in 2008.
4. Includes £5.5 million in respect of the write-back of prior years’ VAT.

CHAIRMAN’S STATEMENT

Dear Shareholder

PERFORMANCE
Although net assets have decreased in the period, the Company has achieved a return substantially ahead of the benchmark index. During the year to 30 November 2018, the Company’s Net Asset Value per share (NAV) returned -2.7% and the share price returned +1.8%, each on a total return basis, compared with a total return of -9.0% from the Company’s benchmark index, the Numis Smaller Companies plus AIM (excluding Investment Companies) Index. This is a notable achievement by your investment manager given that 2018 has been a challenging year for UK Smaller Companies. Since the year end and up to the close of business on 8 February 2019, the NAV has increased by 0.5%, compared to the benchmark index return which decreased by 0.9% (all figures in sterling terms with dividends reinvested).

It is also important to consider the Company’s NAV and share price performance over the longer term. During the ten year period to 30 November 2018, NAV and share price returns have been 579.0% and 831.7% respectively. This performance compares very favourably to the benchmark index return over the same period of 280.9%. Additionally, when we compare the Company’s NAV performance to the wider UK stock market, the Company’s ten year NAV return represents a 422.3% outperformance over the FTSE All-Share Index return of 156.7% over the same period, demonstrating the ability of smaller companies to outperform their larger counterparts over the medium to longer term.

I am also very pleased to be able to report to shareholders that the Company won the UK Smaller Companies category in the 2018 FT Adviser Investment 100 Club awards and the Citywire Investment Trust awards.

Further information on portfolio performance can be found in the Investment Manager’s report.

SHARE PRICE DISCOUNT
During the year to 30 November 2018 the Company’s share price discount to NAV ranged between 4.8% and 17.0%, and ended the year at 12.0%. As at 8 February 2019 the discount was 5.5%. The Board believes that it is in shareholders’ interests that the share price does not trade at an excessive discount or premium to NAV. The Board may therefore, where deemed to be in shareholders’ interests, buy back shares in the market with the objective of narrowing the discount and is once again seeking shareholder authority at the forthcoming Annual General Meeting to buy back up to 14.99% of the Company’s issued share capital. However, there is no guarantee that such action will be effective and undertaking share buy backs has the effect of reducing the size of the Company; therefore, the Board has not seen fit to exercise this power in recent years.

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

REVENUE RETURN AND DIVIDENDS
The revenue return per share for the year amounted to 11.02 pence per share, compared with 10.11 pence per share for the previous year, an increase of 9.0%.

The Directors are pleased to declare a proposed final dividend of 7.50 pence per share for the year ended 30 November 2018. This, together with the interim dividend of 2.50 pence per share paid on 29 August 2018, gives a total dividend for the year of 10.00 pence per share, an increase of 11.1% on the total dividend distributed to shareholders in the prior financial year. This dividend will be paid on 28 March 2019, subject to shareholder approval at the forthcoming AGM, to shareholders on the Company’s register on 22 February 2019. The ex-dividend date is 21 February 2019.

BOARD COMPOSITION
At the time of writing, the Board consists of five independent non-executive Directors. Simon Beart, having served on the Board for in excess of 9 years, informed the Board last year that it was his intention to step down as a Director of the Company at this year’s AGM. I would like to take this opportunity to express the Board’s gratitude to Simon for his invaluable contribution to the long-term success of the Company during his tenure and to wish him well for the future.

Having carefully considered the Board’s composition and the need to ensure that a suitable balance of skills, knowledge, experience, independence and diversity was maintained, it was agreed to commence a search and selection process to identify a new Director to replace Simon. To assist them in their search for the right candidate the Board engaged an independent third party recruitment firm, Cornforth Consulting. Following a thorough and detailed search, I am delighted to welcome Louise Nash to the Board.

Louise brings a wealth of financial services expertise and is a UK smaller company specialist with experience of developing corporate strategy, investor relations and promoting the highest levels of corporate governance. She spent 16 years as a UK Small and Mid-Cap fund manager, most recently as Director of UK smaller companies at M&G Investments and previously at Cazenove Capital. Having been appointed to the Board by the Directors with effect from 21 March 2019, Louise will stand for election by shareholders at the forthcoming AGM. Further details of Louise’s background and that of all the Directors can be found in the Annual Report.

In addition to the above changes, Andrew Pegge has more recently advised the Board that due to other commitments he has decided to step down from the Board and will not be seeking re-election at the forthcoming AGM. He will therefore cease to be a Director of the Company with effect from its conclusion. On behalf of the Board I would like to thank Andy for his valued service to the Company since he joined the Board and to wish him well for the future.

The Board will continue to regularly consider its composition. The Board’s policy on director tenure and succession planning can be found in the Directors’ Report contained within the Annual Report.

In accordance with best practice and developing corporate governance, all Directors, with the exception of Mr Beart and Mr Pegge who are standing down, have agreed to submit themselves for election at the forthcoming AGM.

ANNUAL GENERAL MEETING
The Company’s AGM will be held on Thursday, 21 March 2019 at 11.00 a.m. at the offices of BlackRock, 12 Throgmorton Avenue, London EC2N 2DL. Details of the business of the meeting are set out in the Notice contained within the Annual Report. The portfolio manager will make a presentation to shareholders on the Company’s progress and the outlook for the year ahead.

OUTLOOK
In the UK, the ongoing Brexit related uncertainty has weighed on the performance of the equity markets during the year. This, coupled with global macroeconomic and geopolitical headwinds such as US/China trade tensions, rising US interest rates, inflationary pressure and increasing volatility, has affected market sentiment both in the UK and more widely. As you will read in the Investment Manager’s report which follows, the portfolio manager does not believe that the recent market correction, which has negatively impacted UK Small Cap assets, is indicative of the beginning of a bear market. However the portfolio is now more defensively positioned with market exposure having been reduced in anticipation of a general slowdown in global growth and the continuing political headwinds faced by the domestic economy.

Your portfolio manager believes that the UK Small Cap universe provides a great number of differentiated, high quality companies, which are well placed to prosper against this challenging backdrop. Moreover, rising volatility may create opportunities for an active manager, particularly one who has the ability to short those companies which he believes are vulnerable to cyclical pressures such as rising operational costs or those which have high levels of debt which may struggle as interest rates rise towards more normalised levels.

Against this challenging backdrop, your portfolio manager believes that we are well positioned to continue to outperform. The portfolio is constructed of high quality companies which have robust business models, strong cash flows, favourable industry characteristics and which are led by strong management teams.

CHRISTOPHER SAMUEL
Chairman
11 February 2019

INVESTMENT MANAGER’S REPORT

MARKET REVIEW AND OVERALL INVESTMENT PERFORMANCE
The last 12 months have seen a return of volatility to equity markets. UK equities have lagged global markets with headwinds including ongoing Brexit negotiations, which have created a long period of political uncertainty in the UK. A withdrawal agreement was agreed between the UK and the European Union, however the Prime Minister has been unable to garner sufficient support to pass the proposed Withdrawal Agreement through the House of Commons despite surviving a vote of no confidence in December 2018. Equity markets globally experienced a sharp sell-off during October and November, with October being the UK market’s worst monthly return in over three years. This two-month period was characterised by a notable rotation away from highly rated shares, (i.e. those that look expensive at face value), and higher momentum shares, (i.e. those that have performed well), resulting in growth shares underperforming (a headwind to our growth-biased investment style). There were many factors at play which could have triggered the correction: rising bond yields, concerns around the pace of US interest rate rises, uncertainty over trade disputes and late-cycle concerns. The recent meeting between President Xi and President Trump at the G20 Summit showed some inclination to de-escalate trade tensions and this has kept the US Dollar from rising, but medium-term risks to markets remain.

PERFORMANCE REVIEW
Despite what can only be described as a challenging year, particularly due to the underperformance of small and mid-cap companies, the Company outperformed the benchmark by +6.3% during the financial year net of fees. The NAV per share of the Company returned -2.7% on a total return basis, ending the period at 519.08p, while the benchmark fell by -9.0%.

Ongoing shifts in geopolitical sentiment, both in the UK and broader global economy, have resulted in large swings in markets during the year. Despite the wider macroeconomic headwinds we have continued to focus on company fundamentals, which has enabled the Company to benefit from a number of stock specific successes during the year. Notwithstanding strong stock specific wins, a market that falls 9% is undoubtedly a challenge for a predominantly long-only vehicle. It is therefore pleasing to be able to highlight that during this challenging year the short book has delivered a positive return of 1.4%. This contribution, we feel, showcases the benefit to investors of the structure of our Company and the ability to hold both long and short positions, offering a differentiated source of alpha to many peers in the sector and enabling us to navigate challenging market environments.

The largest positive contributor to performance during the period was insurance company Hiscox, the Company’s largest holding as at 30 November 2018. The company has benefitted from continued strong growth in its US retail business and from an improving outlook for the London market business as prices have firmed. In recent market volatility Hiscox has outperformed on a relative basis due to its defensive characteristics and uncorrelated source of returns. We see Hiscox as a well-managed insurer, which has a successful long-term track record of positioning the business towards areas of growth with sustainably higher returns, which the market has persistently underestimated in our opinion.

Our holding in IntegraFin, a UK savings platform for financial advisers, delivered strong results despite stock market volatility. This was a share we purchased at IPO earlier in the year, attracted to its differentiated business model, owning its own technology and operating in an industry with many secular growth drivers. YouGov, a long-term core holding, continues to deliver strong organic growth and improving margins with profits significantly ahead of consensus and continued upgrades to guidance. The company has been successfully delivering on its strategy of expanding and developing data analytics products for specialised sectors beyond its traditional market research business, which we believe offers a large opportunity for growth.

Other notable contributors from the long book have been Fever-Tree, which continues to beat profit expectations, video games developer Sumo Group and marketer of promotional products, 4imprint Group, which has continued to trade well, beating forecasts and raising guidance, as investment in brand marketing has resulted in a strong increase in new customers.

As mentioned above, our short positions in aggregate have made a positive contribution to overall performance during the year, which has been thanks to some significant stock specific wins in the short book. The largest of which was from a position in a UK wholesaler of alcoholic beverages, which in the space of a couple of weeks issued negative profit revisions, announced an unexpected tax bill to HMRC, an increase in its net debt position, and a failed capital raise, before finally going into administration. We opened a short position in this company after we began to question the rationale of an extremely large acquisition. The deal was financed by a huge amount of debt and management claimed this would unlock significant synergies, which evidently failed to materialise. Our position contributed more than 40bps to the return of relative performance during the year.

Another significant short contributor came from a UK contracting firm, which fell heavily in November on the news it required an emergency rescue rights issue to strengthen its balance sheet. We have held a short position in this company for some time, concerned by its liabilities and weak cash generation. Interestingly, this company has publicly stated that “a number of lenders have indicated an intention to reduce their exposure to the construction and related sectors, which may affect the confidence of other credit providers and liquidity in the medium term” and also that “potential clients and customers are increasingly focusing on service providers’ balance sheets”. These developments with key stakeholders have significant implications for the wider sector. We feel well positioned to benefit from this, being short several other companies in the sector, to which we have added recently. We have also added to other over-leveraged companies with aggressive accounting policies that are now facing more scrutiny from the wider market.

We turn now to what has not worked so well during the year. Of the largest five detractors, two were shares that we do not own. One of these companies simply did not meet our investment criteria. The other was Fidessa, a UK software company we greatly admire (and should have owned), which received several bid approaches during the period. Shares in document management business, Restore, fell in response to the company highlighting some weakness within its shredding division, as well as being caught up in the general sell-off in domestic UK smaller companies. Short term project delays in the UK’s road programme and adverse weather in the first quarter impacted shares of Hill & Smith. We have subsequently sold the position.

It is also important to highlight that the Company did have a difficult period during the final two months of the financial year. The rotation away from highly rated and higher momentum shares and the subsequent underperformance of growth shares versus value, caused us to underperform the market given our growth orientated style bias. As the sell-off was most pronounced in growth assets like technology companies, or small and mid-caps, several of our longs fell more heavily than the benchmark without any specific negative newsflow e.g. Learning Technologies, Fever-Tree and Robert Walters. Thankfully strong stock specifics in both the long and the short book, as discussed above, ensured that the Company remained ahead of the benchmark and concluded a successful relative year for the Company.

ACTIVITY
As discussed in the interim report, following the change to a sole manager structure we have taken steps to increase the concentration of the portfolio by selling a number of smaller lower conviction holdings. As a result the portfolio has gone from holding 174 stocks at the end of November 2017 to holding 131 at the end of November 2018.

As we have already alluded to, the UK small and mid-cap universe continues to generate a rich source of exciting new and innovative businesses for us to invest into. Craneware is one such example of a new purchase that fits the bill. Craneware is a UK listed software company, where their core database is the market leader in US hospitals, helping them manage all their procedures and products with the correct authorisation code to ensure hospitals are correctly reimbursed for the work they carry out. They have since layered on further analytical tools to help hospitals reduce costs, which plays well into a sector where operational costs continue to rise in absolute terms and as a percentage of sales.

The rising market continues to present short opportunities in many consumer services businesses facing structural headwinds such as digital disruption or low cost/specialised formats, or cyclical pressures, particularly in UK domestics, from falling demand and rising cost pressures.

More recently, and reflecting the increased levels of market volatility which may potentially persist for some time, we have deliberately reduced the portfolio’s gross and net exposure, which are now 116% and 93% respectively, a noticeable reduction compared to the historical portfolio exposure.

PORTFOLIO POSITIONING
Relative to our benchmark we are overweight Media, Software and Computer Services and Healthcare. Within Media our largest holding is Ascential, an international business which owns focused media assets, including the Cannes Lions International Festival. Through its acquisitions it has been expanding its ecommerce analytics strategy to provide much needed insights to the global consumer brand companies that are confronted with the shifts in distribution of products via ecommerce platforms such as Amazon and Alibaba. Within Healthcare our largest position is Dechra Pharmaceuticals, the veterinary product manufacturer which is also very internationally exposed, has strong products and operates against a positive industry backdrop. Our Software and Computer Services holdings include Aveva, Craneware and Xero, an Australian listed accounting software business which is utilising cloud based technology to undermine the profit pools of legacy ‘software in a box’ accountancy software businesses, as well as disrupting a large global market of white space where their software can replace spreadsheets.

Changes in distribution is one area that we are particularly drawn to, which is currently often evident in these sectors. This is creating pressures for many legacy incumbent business models of which we are short, as well as revealing a wave of exciting dynamic emerging companies which we are exposed to on the long side.

In Mining and Oil and Gas we have very limited exposure to these sectors, because many of these companies fail to meet our investment criteria. We have deliberately reduced some of our growth cyclicals, notably Industrials, reflecting rising headwinds in certain industrial supply chains.

The short book continues to target the same areas that we see as over-earning or under structural or cyclical pressure. The long book remains exposed to specific investment cases, often where companies have harnessed the power and convenience of technology in a capital-light model that disrupts mature profit pools. Many of our short positions are within Consumer Services, either facing structural headwinds (digital disruption, low cost or specialised formats) or cyclical (weakening consumer demand, rising cost pressures). And as discussed above, we have short exposure to over-indebted cyclical companies facing slower growth.

OUTLOOK
In relative terms 2018 has been a strong year for the Company, delivering +6.3% outperformance. The final two months of the period were a difficult period for our style given the sell-off in quality and growth shares. Regardless of the initial catalyst of the rotation/reversal that began in October, it is now far more important for us to determine what the implications are for global economic growth and what, if any, impact there will be on the earnings power of our investments. Our view is that recent volatility is more of a correction than the start of a 'bear' market or period of sustained GDP weakness; however we recognise the global growth outlook faces some notable challenges. We still think there is sufficient growth for differentiated companies to prosper, but the recent volatility we have seen is likely to persist and this is reflected in a lowering of our gross and net exposures.

Despite the sell-off in a number of our long positions, in many cases we believe these will recover in time as the earnings outlook will not be compromised by macro factors.

We continue to believe the UK domestic economy is challenged. This has had a notable impact on the share prices of many domestic companies with several market participants highlighting the value on offer. However, many of these UK consumer shares we think are “bad value” and whilst many of these UK consumer shares may appear cheap on valuation metrics like “price to adjusted earnings”, this fails to take into account the levels of debt and poor cashflow some of these companies exhibit. In many cases these same investments are also exposed to cyclical pressures (weakening demand or rising cost pressures impacting corporate profit margins), and/or structural pressures (digital disruption or competition from low cost or specialised formats).

The rate of industry change is accelerating in our view, with many barriers to entry protecting the profit streams and returns of established businesses and industries coming under intense pressure. This is an exciting time to invest as we try to identify the new wave of emerging companies, as well as the requirement to be vigilant in detecting any flaws developing in existing business models. We believe that industry change, often in some form of disruption e.g. in distribution or manufacturing, or indeed changes in consumer behaviours, will be a key driver of stock market returns in the years ahead, both positive and negative.

Another theme we think will be prevalent in 2019 is that the market will finally reappraise the value of over-indebted companies, particularly those that are paying dividends they cannot afford, something we have highlighted for some time and which is now gaining greater market scrutiny. There have been several high profile examples of companies having to reduce dividends as part of a wider restructuring and recapitalisation exercise, and we think there will be more to come.

DAN WHITESTONE
BlackRock Investment Management (UK) Limited
11 February 2019

STRATEGIC REPORT

The Directors present the Strategic Report of the Company for the year ended 30 November 2018.

PRINCIPAL ACTIVITY
The Company carries on business as an investment trust and its principal activity is portfolio investment.

OBJECTIVE
The Company’s objective is to provide shareholders with long term capital growth and an attractive total return through investment primarily in UK smaller and mid-capitalisation companies traded on the London Stock Exchange.

STRATEGY, BUSINESS MODEL, INVESTMENT POLICY AND INVESTMENT PROCESS
The Company invests in accordance with the objective given above. The Board is collectively responsible to shareholders for the long term success of the Company and is its governing body. There is a clear division of responsibility between the Board and the Manager, BlackRock Fund Managers Limited (BFM). Matters for the Board include setting the Company’s strategy, including its investment objective and policy, setting limits on gearing (both bank borrowings and the effect of derivatives), capital structure, governance, and appointing and monitoring of performance of service providers, including the Manager.

The Company’s business model follows that of an externally managed investment trust, therefore the Company does not have any employees and outsources its activities to third party service providers, including the Manager who is the principal service provider.

The management of the investment portfolio and the administration of the Company have been contractually delegated to the Manager. The Manager, operating under guidelines determined by the Board, has direct responsibility for the decisions relating to the day-to-day running of the Company and is accountable to the Board for the investment, financial and operating performance of the Company.

Other service providers include the Depositary and the Fund Accountant, The Bank of New York Mellon (International) Limited, and the Registrar, Computershare Investor Services PLC. Details of the contractual terms with third party service providers are set out in the Directors’ Report contained within the Annual Report.

INVESTMENT POLICY
The Company’s performance is measured against the Numis Smaller Companies plus AIM (excluding Investment Companies) Index (the Index). The Investment Manager, BlackRock Investment Management (UK) Limited (BIM (UK)), may invest in companies outside the Index without restriction, subject to the following limits.

The Company may hold up to 15% of its gross assets, at the time of acquisition, in securities of companies which are listed or traded on a stock exchange outside the UK. In addition, the Company is permitted to employ leverage up to 30% of net assets, which it does primarily through the use of contracts for difference (CFDs) and/or comparable equity derivatives, rather than bank borrowings.

This leverage can be deployed into either long or short CFDs and/or comparable equity derivatives, therefore enabling the Company to have a maximum net market exposure of 130%.

In normal circumstances the Company will likely hold a mixture of long and short CFDs and/or comparable equity derivatives that would result in a typical net market exposure of between 100% and 115%. In extremis, the Company could deploy the full 30% of permissible leverage into short CFDs and/or comparable equity derivatives, thereby reducing its overall net market exposure to 70%. Portfolio risk will be mitigated by investment in a diversified portfolio of holdings.

No more than 5% of the Company’s gross assets, at the time of acquisition, may be invested in any one single holding, excluding holdings in cash or money market funds, where up to 10% of the Company’s gross assets may be held. The Company may also invest in collective investment vehicles. However, the Company will not invest more than 10% of its gross assets, at the time of the acquisition, in other listed closed-ended investment funds, unless such companies have a stated investment policy not to invest more than 15% of their gross assets in other listed closed-ended investment funds, in which case the limit is 15% of gross assets.

The Board’s policy is that net gearing, borrowings less cash, should not exceed 20% of gross assets. The Company expects to employ any leverage primarily through its use of CFDs and/or comparable equity derivatives.

No material change will be made to the investment objective and policy without shareholder approval.

INVESTMENT PROCESS
A unique feature of the Company is that it has the ability to go both long and short up to approximately 30% of the Company’s net assets.

Notwithstanding recent positive returns from UK small and mid-cap companies, the sector has demonstrated considerable volatility over the past 20 years. Such an environment provides an attractive opportunity to add value via derivatives: instruments which can exploit share price moves whether up or down.

As the maximum short portfolio exposure through derivatives is 30% of net assets, the Company will at all times retain a significant exposure to the market.

In the course of their research the portfolio manager comes across companies which they judge are likely to underperform; the ability to take short positions therefore significantly enhances the opportunity to make money for shareholders. This is not possible in a conventional or long only portfolio.

When markets are expected to rise in the medium term, the long/short strategy is used to generate additional market exposure through ensuring that the long exposure exceeds the short exposure in a range between 0% to 15% of the net assets of the Company. Rising or ‘bull’ markets have historically (in the UK) persisted for longer than falling or ‘bear’ markets. A typical net market exposure might therefore be between 100% and 115%. This is lower than the ‘gross exposure’, which is the combination of the long equity positions plus the net of long and short derivative positions expressed as a percentage of net assets. In a recessionary environment the portfolio manager has the flexibility to reduce market exposure to – at the maximum of its ‘least exposed’ level – around 70%. If successfully implemented this strategy would provide some cushioning of the Company’s performance in falling markets.

Typical market positioning – % of NAV (115% net exposure)

Long positions	120
Short positions	5
Net market exposure	115

Net market exposure is the net of long equity positions plus the net of long and short derivative positions.

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

RESULTS AND DIVIDENDS
The results for the Company are set out in the Statement of Comprehensive Income. The total loss for the year, after taxation, was £10,297,000 (2017: a profit of £101,332,000) of which the revenue return amounted to £8,056,000 (2017: £7,396,000), and a capital loss of £18,353,000 (2017: profit of £93,936,000).

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

KEY PERFORMANCE INDICATORS
At each Board meeting, the Directors consider a number of performance measures to assess the Company’s success in achieving its objectives. The key performance indicators (KPIs) used to measure the progress and performance of the Company over time, which are comparable to those reported by other investment trusts, are set out in the table below. These KPIs fall within the definition of ‘Alternative Performance Measures’ (APMs) under guidance issued by the European Securities and Markets Authority (ESMA), and additional information explaining how these are calculated is set out in the Glossary contained within the Annual Report.

The Board monitors the KPIs at each meeting. Additionally, it regularly reviews a number of indices and ratios to understand the impact on the Company’s relative performance of the various components such as asset allocation and stock selection. This includes an assessment of the Company’s performance and ongoing charges against its peer group of investment trusts with similar investment objectives.

	Year ended 30 November 2018	Year ended 30 November 2017

Net asset value total return¹	-2.7%	33.9%
Share price total return¹	1.8%	43.8%
Benchmark total return²	-9.0%	21.3%
Discount to cum income net asset value³	12.0%	15.7%
Revenue return per share	11.02p	10.11p
Total dividend per share	10.00p	9.00p
Ongoing charges⁴	0.57%	0.87%
Ongoing charges (including performance fees)⁵	1.29%	2.16%

1.    This measures the Company’s share price and NAV total return, which assumes dividends paid by the Company have been reinvested.
2.    With effect from 22 March 2018, the Numis Smaller Companies plus AIM (excluding Investment Companies) Index replaced the Numis Smaller Companies excluding AIM (excluding Investment Companies) Index as the Company’s benchmark. From 1 December 2013 to 21 March 2018, the Company’s benchmark was the Numis Smaller Companies excluding AIM (excluding Investment Companies) Index. Prior to 1 December 2013 the Company’s benchmark was the Numis Smaller Companies plus AIM (excluding Investment Companies) Index. The performance of the benchmark indices during these periods has been blended to reflect these changes.
3.    This is the difference between the share price and the NAV per share with debt at par.
4.    Ongoing charges represent the management fee and all other operating expenses, excluding the performance fee, finance costs, transaction costs and taxation, as a % of average shareholders’ funds.
5.    Ongoing charges represent the management fee, performance fee and all other operating expenses, excluding finance costs, transaction costs and taxation, as a % of average shareholders’ funds.

DISCOUNT
The Directors recognise that it is in the long term interests of shareholders that the Company’s shares do not trade at a significant discount to their prevailing NAV for any material length of time. In the year under review the discount to NAV of the ordinary shares on a cum income basis has ranged between 4.8% and 17.0%, with the average being 10.7%. The shares ended the year at a discount of 12.0% on a cum income basis. As at 8 February 2019 the discount was 5.5%.

Your Board believes that the best way of addressing the discount over the longer term is to continue to generate good performance and to create demand for the Company’s shares in the secondary market through effective communication of the Company’s unique structure to existing and potential shareholders. The Board will also be seeking to renew the authority from shareholders to buy back shares.

PRINCIPAL RISKS
The Company is exposed to a variety of risks and uncertainties and the Board has in place a robust process to identify, assess and monitor the principal risks faced by the Company. A core element of this process is the Company’s risk register, which identifies the risks facing the Company and the likelihood and potential impact of each risk, together with the controls established for mitigation. A residual risk rating is calculated for each risk, which allows the effect of any mitigating procedures to be reflected in the register. The principal risks and uncertainties faced by the Company during the financial year, together with the potential effects, controls and mitigating factors, are set out as follows.

The risk register, its method of preparation and the operation of key controls in the Manager’s and third party service providers’ systems of internal control are reviewed on a regular basis by the Audit Committee. In order to gain a more comprehensive understanding of the Manager’s and other third party service providers’ risk management processes and how these apply to the Company’s business, the Audit Committee periodically receives presentations from BlackRock’s Internal Audit and Risk & Quantitative Analysis teams. Where produced, the Audit Committee also reviews summaries of the Service Organisation Control (SOC1) reports from the Company’s service providers.

As required by the UK Corporate Governance Code, the Board has undertaken a robust assessment of the principal risks facing the Company, including those that would threaten its business model, future performance, solvency or liquidity. The principal risks have been described below, together with an explanation of how they are managed and mitigated. The Board will continue to assess these risks on an ongoing basis.

Principal Risk	Mitigation/Control
Investment Performance The Board is responsible for: · setting the investment policy to fulfil the Company’s objectives; and · monitoring the performance of the Company’s Investment Manager and the strategy adopted. An inappropriate policy or strategy may lead to: · poor performance compared to the Company’s benchmark, peer group or shareholder expectations; · a widening discount to NAV; · a reduction or permanent loss of capital; and · dissatisfied shareholders and reputational damage.	To manage these risks the Board: · regularly reviews the Company’s investment mandate and long term strategy; · has set, and regularly reviews, the investment guidelines and has put in place appropriate limits on levels of gearing and the use of derivatives; · receives from the Investment Manager a regular explanation of stock selection decisions, portfolio gearing and any changes in gearing and the rationale for the composition of the investment portfolio; · receives from the Investment Manager regular reporting on the portfolio’s exposure through derivatives, including the extent to which the portfolio is geared in this manner and the value of any short positions; and · monitors the maintenance of an adequate spread of investments in order to minimise the risks associated with particular sectors, based on the diversification requirements inherent in the Company’s investment policy.
Market Risk Market risk arises from changes to the prices of the Company’s investments. It represents the potential loss the Company might suffer through holding investments and derivatives. Market risk includes the potential impact of events which are outside the scope of the Company’s control, such as the UK’s decision to leave the European Union.	The Board carefully considers diversification of the portfolio, asset allocation, stock selection, unquoted investments and levels of gearing on a regular basis and has set investment restrictions and guidelines which are monitored and reported on by the Investment Manager. The Board monitors the implementation and results of the investment process with the Investment Manager.
Income/dividend risk The amount of dividends and future dividend growth will depend on the performance of the Company’s underlying portfolio. Any change in the tax treatment of the dividends or interest received by the Company may reduce the level of dividends received by shareholders.	The Board monitors this risk through the receipt of detailed income forecasts and considers the level of income at each meeting. The Company also has a revenue reserve and powers to pay dividends from capital which could potentially be used to support the Company’s dividend if required.
Financial risk The Company’s investment activities expose it to a variety of financial risks that include market risk, foreign currency risk and interest rate risk. At 30 November 2018, the Company had approximately 32.6% of its gross asset value invested in AIM traded equity securities, and, by the very nature of its investment objective, largely invests in smaller companies. Liquidity in these securities can from time-to-time become constrained, making these investments difficult to realise at or near published prices.	The Company is not materially exposed to foreign currency and interest rate risk. For mitigation of market risk, see above. There are also risks linked to the Company’s use of derivative transactions including long and short investment positions. Details are disclosed in note 11 of the Annual Report, together with a summary of the policies for managing and controlling these risks in note 16 of the Annual Report.
Operational risk In common with most other investment trust companies, the Company has no employees. The Company therefore relies upon the services provided by BlackRock (the Manager) and The Bank of New York Mellon (International) Limited (the Depositary and Fund Accountant) who maintain the Company’s accounting records. Failure by any service provider to carry out its obligations to the Company could have a material adverse effect on the Company’s performance. Disruption to the accounting, payment systems or custody records, as a result of a cyber-attack or otherwise, could impact the monitoring and reporting of the Company’s financial position. The security of the Company’s assets, dealing procedures, accounting records and maintenance of regulatory and legal requirements, depend on the effective operation of these systems.	The Board reviews the overall performance of the Manager, Investment Manager and all other third party service providers and compliance with the investment management agreement on a regular basis. The Fund Accountant’s and the Manager’s internal control processes are regularly tested and monitored throughout the year and are evidenced through their Service Organisation Control (SOC 1) reports, which are subject to review by an Independent Service Assurance Auditor. The SOC 1 reports provide assurance in respect of the effective operation of internal controls. The Company’s assets are subject to a strict liability regime and in the event of a loss of financial assets held in custody, the Depositary must return assets of an identical type or the corresponding amount, unless able to demonstrate that the loss was a result of an event beyond its reasonable control. The Board considers succession arrangements for key employees of the Manager and the Investment Manager and receives reports on the business continuity arrangements for the Company’s key service providers. The Board also receives regular reports from BlackRock’s internal audit function.
Legal and regulatory risk The Company has been approved by HM Revenue & Customs as an investment trust, subject to continuing to meet the relevant eligibility conditions, and operates as an investment trust in accordance with Chapter 4 of Part 24 of the Corporation Tax Act 2010. As such, the Company is exempt from capital gains tax on the profits realised from the sale of its investments. Any breach of the relevant eligibility conditions could lead to the Company losing its investment trust status and being subject to corporation tax on capital gains realised within the Company’s portfolio. In such event the investment returns of the Company may be adversely affected. Any serious breach could result in the Company and/or the Directors being fined or the subject of criminal proceedings or the suspension of the Company’s shares which would in turn lead to a breach of the Corporation Tax Act 2010. Amongst other relevant laws and regulations, the Company is required to comply with the provisions of the Companies Act 2006, the Alternative Investment Fund Managers’ Directive, the Market Abuse Regulation, the UK Listing Rules and the Disclosure Guidance and Transparency Rules.	The Investment Manager monitors investment movements, the level of forecast income and expenditure and the amount of proposed dividends, if any, to ensure that the provisions of Chapter 4 of Part 24 of the Corporation Tax Act 2010 are not breached and the results are reported to the Board at each meeting. Following authorisation under the Alternative Investment Fund Managers’ Directive (AIFMD), the Company and its appointed Alternative Investment Fund Manager (AIFM) are subject to the risks that the requirements of this Directive are not correctly complied with. The Board and the AIFM also monitor changes in government policy and legislation which may have an impact on the Company. Compliance with the accounting standards applicable to quoted companies and those applicable to investment trusts are also regularly monitored to ensure compliance. The Company Secretary and the Company’s professional advisers monitor developments in relevant laws and regulations and provide regular reports to the Board in respect of the Company’s compliance.
Counterparty risk The potential loss that the Company could incur if a counterparty is unable (or unwilling) to perform on its commitments. The Company’s investment policy also permits the use of both exchange-traded and over-the-counter derivatives (including contracts for difference).	Due diligence is undertaken before contracts are entered into and exposures are diversified across a number of counterparties. The Board reviews the controls put in place by the Investment Manager to monitor and to minimise counterparty exposure, which include intra-day monitoring of exposures to ensure that these are within set limits. The Depositary is liable for restitution for the loss of financial instruments held in custody, unless it is able to demonstrate that the loss was due to an event beyond its reasonable control.

VIABILITY STATEMENT
The Directors have assessed the prospects of the Company over a longer period than the 12 months referred to by the “Going Concern” guidelines.

The Board conducted this review for the period up to the AGM in 2024, being a five year period from the date that this Annual Report will be approved by shareholders. This is generally the investment holding period investors consider while investing in the smaller companies sector. In making this assessment the Board has considered the following factors:

· the Company’s principal risks as set out above;

· the impact of a significant fall in UK equity markets on the value of the Company’s investment portfolio;

· the ongoing relevance of the Company’s investment objective; and

· the level of demand for the Company’s shares.

The Directors have also considered the Company’s revenue and expense forecasts and the fact that expenses and liabilities are relatively stable. The Company also has a portfolio of investments which provides a level of cash receipts in the form of dividends and which are considered to be relatively realisable if required.

The Directors reviewed the assumptions and considerations underpinning the Company’s existing going concern assertion which are based on:

· processes for monitoring costs;

· key financial ratios;

· evaluation of risk management and controls;

· compliance with the investment objective;

· the Company’s ability to meet its liabilities as they fall due;

· portfolio risk profile;

· share price discount to NAV;

· gearing; and

· counterparty exposure and liquidity risk.

The Company has a relatively liquid portfolio and largely fixed overheads (excluding any applicable performance fees) which comprise a very small percentage of net assets (0.57%). In addition, with effect from 1 December 2017, the effective performance fee cap in the event that the NAV return exceeds the benchmark return over the performance period was reduced to 0.9% of the average gross assets over the two years and the applicable percentage to be applied to the outperformance of the NAV total return over the benchmark return was changed from 10% to 15%. In addition, the maximum cap on total management and performance fees was reduced from 1.70% (measured over a one year period) to 1.25% of average gross assets (measured over a rolling two year period). Therefore, the Board has concluded that the Company would be able to meet its ongoing operating costs as they fall due.

The Board has also considered the current and potential future impact on the Company of the UK’s decision to leave the European Union following the referendum held in June 2016. It has concluded that the Company’s business model and strategy are not materially threatened by this event.

In reaching this conclusion the Board considered whether this event has, or would be likely to have, a significant impact on the Company’s activities and whether or not the Investment Manager would be materially impeded in achieving its investment objectives as a result of the impact of the Leave vote. The Board also considered the impact of potential changes in law, regulation, foreign exchange and taxation. However, due to the complexity and general lack of information available at present, it is challenging to assess accurately the future impact of the UK’s exit from the European Union. Therefore, the Board intends to closely monitor the situation as it develops and will regularly reappraise its position.

Based on the results of their analysis, the Directors have a reasonable expectation that the Company will be able to continue in operation and meet its liabilities as they fall due over the period of their assessment.

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

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

MODERN SLAVERY ACT
As an investment vehicle the Company does not provide goods or services in the normal course of business, and does not have customers. Accordingly, the Directors consider that the Company is not required to make any slavery or human trafficking statement under the Modern Slavery Act 2015. The Board considers the Company’s supply chain, dealing predominantly with professional advisers and service providers in the financial services industry, to be low risk in relation to this matter.

GLOBAL GREENHOUSE GAS EMISSIONS FOR THE PERIOD 1 DECEMBER 2017 TO 30 NOVEMBER 2018
The Company has no greenhouse gas emissions to report from its operations, nor does it have responsibility for any other emissions producing sources under the Companies Act 2006 (Strategic Report and Directors’ Reports) Regulations 2013.

DIRECTORS’ GENDER REPRESENTATION
The Directors of the Company on 30 November 2018, all of whom held office throughout the year, are set out in the Annual Report. The Board recognises the importance of having a range of experienced Directors who, both individually and collectively, possess a suitable balance of skills, knowledge, independence and diversity to enable it to fulfil its obligations. As at 30 November 2018, the Board consisted of four men and one woman. Following the retirement of Mr Beart and Mr Pegge at the forthcoming AGM and the appointment of Mrs Nash to the Board, with effect from 21 March 2019, the Board will be composed of two women and two men.

The Company has no employees and all of its Directors are non-executive. Therefore, there are no disclosures to be made in respect of employees.

The Chairman’s Statement and the Investment Manager’s Report forms part of this Strategic Report.

The Strategic Report was approved by the Board at its meeting on 11 February 2019.

By order of the Board

Kevin Mayger, for and on behalf of
BlackRock Investment Management (UK) Limited
Company Secretary
11 February 2019

RELATED PARTY TRANSACTIONS

BlackRock Fund Managers Limited (BFM) provides management and administration services to the Company under a contract which is terminable on six months’ notice. BFM has (with the Company’s consent) delegated certain portfolio and risk management services, and other ancillary services to BlackRock Investment Management (UK) Limited (BIM (UK)). Further details of the investment management contract are disclosed in the Directors’ Report contained within the Annual Report.

The investment management fee due for the year ended 30 November 2018 amounted to £1,866,000 (2017: £2,643,000). In addition, a performance fee is payable of £3,018,000 (2017: £4,659,000). At the year end, £441,000 was outstanding in respect of management fees (2017: £1,942,000) and £3,018,000 (2017: £4,659,000) was outstanding in respect of performance fees.

In addition to the above services, BlackRock has provided marketing services. The total fees paid or payable for these services for the year ended 30 November 2018 amounted to £79,000 excluding VAT (2017: £54,000). Marketing fees of £82,000 (2017: £92,000) were outstanding at the year end.

The Company has an investment in BlackRock’s Institutional Cash Series plc – Sterling Liquidity Fund (a fund managed by the BlackRock Group) of £33,949,000 (2017: £13,004,000) which for the year ended 30 November 2018 and 30 November 2017 has been presented in the financial statements as a cash equivalent.

Disclosures of the Directors’ interests in the ordinary shares of the Company and fees and expenses payable to the Directors are set out in the Directors’ Remuneration Report contained within the Annual Report. At 30 November 2018 £11,000 (2017: £11,000) was outstanding in respect of Directors’ fees.

The Board consists of five non-executive Directors, all of whom are considered to be independent by the Board. None of the Directors has a service contract with the Company. For the year ended 30 November 2018, the Chairman received an annual fee of £36,000, the Chairman of the Audit and Management Engagement Committee received an annual fee of £28,000 and each other Director received an annual fee of £24,000.

As at 30 November 2018, all members of the Board held shares in the Company. Christopher Samuel held 11,000 ordinary shares, Loudon Greenlees held 15,000 ordinary shares, Simon Beart held 54,178 ordinary shares (including 16,917 ordinary shares held by Mrs Beart), Jean Matterson held 46,000 ordinary shares and Andrew Pegge held 2,000 ordinary shares.

All of the holdings of the Directors are beneficial. Since the year end there have been a number of changes to the Directors’ share interests. As at the date of this report Mr Samuel holds 13,500 ordinary shares and Mr Beart holds 54,832 ordinary shares (including 17,244 ordinary shares held by Mrs Beart). All other shareholdings remain unchanged.

STATEMENT OF DIRECTORS’ RESPONSIBILITIES IN RESPECT OF THE ANNUAL REPORT AND FINANCIAL STATEMENTS

The Directors are responsible for preparing the Annual Report and Financial Statements, the Directors’ Remuneration Report and the financial statements in accordance with applicable United Kingdom law and regulations.

Company law requires the Directors to prepare financial statements for each financial year. Under that law, the Directors are required to prepare the financial statements in accordance with IFRS as adopted by the European Union. Under Company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Company and of the profit or loss of the Company for that period.

In preparing these financial statements, the Directors are required to:

· present fairly the financial position, financial performance and cash flows of the Company;

· select suitable accounting policies in accordance with IAS8: Accounting Policies, Changes in Accounting Estimates and Errors and then apply them consistently;

· present information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable information;

· make judgements and estimates that are reasonable and prudent;

· state whether the financial statements have been prepared in accordance with IFRS as adopted by the European Union, subject to any material departures disclosed and explained in the financial statements;

· provide additional disclosures when compliance with the specific requirements in IFRS as adopted by the European Union is insufficient to enable users to understand the impact of particular transactions, other events and conditions on the Company’s financial position and financial performance; and

· prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business.

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company’s transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. The Directors are also responsible for preparing the Strategic Report, the Directors’ Report, the Directors’ Remuneration Report and the Corporate Governance Statement in accordance with the Companies Act 2006 and applicable regulations, including the requirements of the Listing Rules and the Disclosure Guidance and Transparency Rules. The Directors have delegated responsibility to the Investment Manager and the AIFM for the maintenance and integrity of the Company’s corporate and financial information included on BlackRock’s website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

Each of the Directors, whose names are listed on pages 36 and 37 of the Annual Report and Financial Statements, confirms to the best of his or her knowledge that:

· the financial statements, which have been prepared in accordance with IFRS as adopted by the European Union, give a true and fair view of the assets, liabilities, financial position and net return of the Company; and

· the Annual Report and Financial Statements include a fair review of the development and performance of the business and the position of the Company, together with a description of the principal risks and uncertainties that it faces.

The 2016 UK Corporate Governance Code also requires Directors to ensure that the Annual Report and Financial Statements are fair, balanced and understandable. In order to reach a conclusion on this matter, the Board has requested that the Audit Committee advise on whether it considers that the Annual Report and Financial Statements fulfil these requirements. The process by which the Committee has reached these conclusions is set out in the Audit Committee’s report contained within the Annual Report. As a result, the Board has concluded that the Annual Report and Financial Statements for the year ended 30 November 2018, taken as a whole, are fair, balanced and understandable and provided the information necessary for shareholders to assess the Company’s position, performance, business model and strategy.

For and on behalf of the Board

Christopher Samuel
Chairman
11 February 2019

TEN LARGEST INVESTMENTS

1
Hiscox
Non-life Insurance

Market value	£	11,247,000
Share of net assets	%	3.0

Provision of insurance services

2
Ascential
Media

Market value	£	10,837,000
Share of net assets	%	2.9

Global business-to business media company

3
SSP
Travel & Leisure

Market value	£	10,723,000
Share of net assets	%	2.8

Operator of food and beverage concessions in travel locations

4
Craneware*
Software & Computer Services

Market value	£	10,654,000
Share of net assets	%	2.8

Financial software business for US hospitals

5
Aveva
Software & Computer Services

Market value	£	10,513,000
Share of net assets	%	2.8

Engineering and industrial software business

6
Dechra Pharmaceuticals
Pharmaceuticals & Biotechnology

Market value	£	10,233,000
Share of net assets	%	2.7

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

7
4imprint Group
Media

Market value	£	9,474,000
Share of net assets	%	2.5

Supply of promotional merchandise in the US

8
YouGov*
Media

Market value	£	9,101,000
Share of net assets	%	2.4

Provision of survey data and specialist data analytics

9
IntegraFin
Financial Services

Market value	£	8,461,000
Share of net assets	%	2.2

UK savings platform for financial advisors

10
Bodycote
Industrial Engineering

Market value	£	8,420,000
Share of net assets	%	2.2

Provision of thermal processing services

* Traded on the Alternative Investment Market (AIM) of the London Stock Exchange.

FIFTY LARGEST INVESTMENTS AS AT 30 NOVEMBER 2018

#	Company	£	%	Description

11	Workspace Group	8,012,000	2.1	Supply of flexible workspace to businesses in London
	Real Estate Investment Trusts
12	Big Yellow	7,421,000	2.0	Provision of self-storage services
	Real Estate Investment Trusts
13	Robert Walters	7,384,000	1.9	Provision of specialist recruitment services
	Support Services
14	Xero	7,323,000	1.9	Australian listed software company specialising in accounting for small businesses
	Software & Computer Services
15	Advanced Medical Solutions*	6,846,000	1.8	Development and manufacture of wound care and closure products
	Health Care Equipment & Services
16	Howden Joinery Group	6,681,000	1.8	Supplier of kitchens and joinery products
	Support Services
17	Ubisoft Entertainment	6,563,000	1.7	French video game company
	Leisure Goods
18	Zotefoams	6,046,000	1.6	Manufactures polyolefin foams used in sport, construction, marine, automation, medical equipment and aerospace
	Chemicals
19	Lonza Group	5,768,000	1.5	Swiss multinational, chemicals and biotechnology company
	Pharmaceuticals & Biotechnology
20	Draper Esprit*	5,487,000	1.4	Technology focused venture capital firm
	Financial Services
21	Breedon*	5,480,000	1.4	British construction materials group
	Construction & Materials
22	Restore*	5,399,000	1.4	Management of business information in both paper and digital form
	Support Services
23	Polar Capital Holdings*	5,378,000	1.4	Provision of investment management services
	Financial Services
24	ECO Animal Health*	5,318,000	1.4	Development, registration and marketing of pharmaceutical products for global animal health markets
	Pharmaceuticals & Biotechnology
25	Sumo Group*	5,307,000	1.4	Provision of creative and development services to the video games and entertainment industries
	Leisure Goods
26	Johnson Service Group*	5,157,000	1.4	Provision of textile related services
	Support Services
27	Liontrust Asset Management	5,152,000	1.4	Investment management company
	Financial Services
28	Next Fifteen Communications*	5,132,000	1.4	Provision of digital communication products and services
	Media
29	Straumann Holding	4,958,000	1.3	Swiss listed provider of products and services for the dental industry
	Health Care Equipment & Services
30	Avon Rubber	4,949,000	1.3	Production of safety masks and dairy related products
	Aerospace & Defence
31	GB Group*	4,906,000	1.3	Development and supply of identity verification solutions
	Software & Computer Services
32	Spirax-Sarco Engineering	4,812,000	1.3	Manufacturer of steam management systems and peristaltic pumps and associated fluid path technologies
	Industrial Engineering
33	WH Smith	4,773,000	1.3	Widespread British retailer of books, stationery, magazines, newspapers, entertainment products and confectionery
	General Retailers
34	Learning Technologies*	4,447,000	1.2	Provision of e-learning services
	Support Services
35	Beazley	4,215,000	1.1	Specialist insurance businesses
	Non-life Insurance
36	Tatton Asset Management*	3,871,000	1.0	Provision of discretionary fund management services to IFA market
	Financial Services
37	Future	3,854,000	1.0	Multi-platform media business covering technology, entertainment, creative arts, home interest and education
	Media
38	Renishaw	3,835,000	1.0	Engineering and scientific technology company, with expertise in precision measurement and healthcare
	Electronic & Electrical Equipment
39	Premier Asset Management Group*	3,718,000	1.0	Retail asset management
	Financial Services
40	XPS Pensions	3,718,000	1.0	Pension consulting and administration business
	Financial Services
41	Fuller Smith & Turner	3,706,000	1.0	Ownership and operation of pubs mainly in the London area
	Travel & Leisure
42	Alliance Pharma*	3,664,000	1.0	Distributor of pharmaceutical and healthcare products
	Pharmaceuticals & Biotechnology
43	Interxion	3,581,000	0.9	Provision of carrier and cloud-neutral colocation data centre services
	Software & Computer Services
44	Faroe Petroleum*	3,534,000	0.9	Oil & gas exploration
	Oil & Gas Producers
45	Accesso Technology*	3,439,000	0.9	Development and supply of ticketing and virtual queuing solutions
	Software & Computer Services
46	Chapel Down	3,280,000	0.9	UK producer of sparkling and still wines, and Curious beers and ciders
	Beverages
47	RWS*	3,272,000	0.9	Specialist in language support services
	Support Services
48	Clarkson	3,259,000	0.9	Provision of shipping services
	Industrial Transportation
49	Oxford Instruments	3,210,000	0.8	Designs and manufactures tools and systems for industry and research
	Electronic & Electrical Equipment
50	NCC Group	3,175,000	0.8	Information assurance firm providing cyber security and risk mitigation services
	Software & Computer Services
		----------------	-----
	50 largest investments	295,693,000	78.0
		==========	====

* Traded on the Alternative Investment Market (AIM) of the London Stock Exchange.
Percentages shown are the share of net assets.
A list of the Company’s investment positions is available on the Company’s website.

2017 comparative for ten largest investments

#	Company	£	%	Description

1	Dechra Pharmaceuticals	12,107,000	3.1	Development and supply of pharmaceutical and other products focused on the veterinary market
	Pharmaceuticals & Biotechnology
2	4imprint Group	10,434,000	2.6	Supply of promotional merchandise in the US
	Media
3	Ibstock	8,959,000	2.3	Manufacture of clay bricks and concrete products
	Construction & Materials
4	Hill & Smith	8,683,000	2.2	Production of infrastructure products and supply of galvanising services
	Industrial Engineering
5	Big Yellow	8,603,000	2.2	Provision of self-storage services
	Real Estate Investment Trusts
6	Accesso Technology*	8,293,000	2.1	Development and supply of ticketing and virtual queuing solutions
	Software & Computer Services
7	Robert Walters	8,287,000	2.1	Provision of specialist recruitment services
	Support Services
8	CVS Group*	8,188,000	2.1	Operation of veterinary surgeries
	General Retailers
9	Ascential	7,914,000	2.0	Global business-to-business media company
	Media
10	Avon Rubber	7,778,000	2.0	Production of safety masks and dairy related products
	Aerospace & Defence

* Traded on the Alternative Investment Market (AIM) of the London Stock Exchange.
Percentages shown are the share of net assets.
At 30 November 2018, the Company did not hold any equity interest representing more than 3% of any company’s share capital.
The above investments may comprise exposures to long equity and long derivative positions.

FAIR VALUE AND GROSS MARKET EXPOSURE OF INVESTMENTS

	Fair value¹ £’000	Gross market exposure² £’000	Gross market exposure as a % of net assets³ 2018	Gross market exposure as a % of net assets³ 2017
Long investment positions (excluding BlackRock’s Institutional Cash Series plc - Sterling Liquidity Fund)	343,146	393,942	103.8	117.1
Short investment positions	2,934	(39,884)	(10.5)	(8.7)
Cash and cash equivalents⁴	132	(7,846)	(2.1)	(10.2)
BlackRock’s Institutional Cash Series plc - Sterling Liquidity Fund⁴	33,949	33,949	8.9	3.3
Other net current liabilities	(559)	(559)	(0.1)	(1.5)
	--------------	--------------	--------------	--------------
Net assets	379,602	379,602	100.0	100.0
	========	========	========	========

1.    Fair value is determined as follows:
–        Listed and AIM quoted investments are valued at bid prices where available, otherwise at published price quotations.
–        The sum of the fair values of the long and short investment positions above is determined based on the difference between the purchase 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 investment positions directly in the market would have amounted to £50,796,000 at the time of purchase, and subsequent market falls in prices have resulted in unrealised losses on the long investment positions of £1,332,000, resulting in the value of the total market exposure to the underlying securities decreasing to £49,464,000 as at 30 November 2018. The notional price of selling the securities to which exposure was gained via the short investment positions would have been £42,818,000 at the time of entering into the contract, and subsequent price falls have resulted in unrealised gains on the short investment positions of £2,934,000 and the value of the market exposure of these investments decreasing to £39,884,000 at 30 November 2018. If the short investment positions had been closed on 30 November 2018 this would have resulted in a gain of £2,934,000 for the Company.
2.    Market exposure in the case of equity investments is the same as fair value. In the case of long and short derivative positions it is the market value of the underlying shares to which the portfolio is exposed via the contract.
3.    % based on the total market exposure.
4.    The gross market exposure column for cash and cash equivalents has been adjusted to assume the Company traded direct holdings rather than exposure being gained through long and short investment positions.

A list of the Company’s investment positions is available on the Company’s website.

DISTRIBUTION OF INVESTMENTS AS AT 30 NOVEMBER 2018

	% of long positions	% of short positions	% of net portfolio

Oil & Gas Producers	1.0	(0.2)	0.8
	-------------	-------------	-------------
Oil & Gas	1.0	(0.2)	0.8
	-------------	-------------	-------------
Chemicals	2.3	(1.0)	1.3
Mining	0.5	–	0.5
	-------------	-------------	-------------
Basic Materials	2.8	(1.0)	1.8
	-------------	-------------	-------------
Aerospace & Defence	2.0	–	2.0
Construction & Materials	2.1	(0.3)	1.8
Electronic & Electrical Equipment	2.6	–	2.6
General Industrials	1.4	(0.4)	1.0
Industrial Engineering	5.0	–	5.0
Industrial Transportation	1.4	–	1.4
Support Services	10.2	(0.9)	9.3
	-------------	-------------	-------------
Industrials	24.7	(1.6)	23.1
	-------------	-------------	-------------
Automobiles	–	(0.3)	(0.3)
Beverages	2.2	–	2.2
Food Producers	–	(0.7)	(0.7)
Household Goods & Home Construction	0.9	–	0.9
Leisure Goods	4.8	–	4.8
Personal Goods	–	(1.1)	(1.1)
	-------------	-------------	-------------
Consumer Goods	7.9	(2.1)	5.8
	-------------	-------------	-------------
Health Care Equipment & Services	3.9	(0.2)	3.7
Pharmaceuticals & Biotechnology	8.6	(0.9)	7.7
	-------------	-------------	-------------
Health Care	12.5	(1.1)	11.4
	-------------	-------------	-------------
General Retailers	3.1	(1.4)	1.7
Media	11.7	(0.6)	11.1
Travel & Leisure	7.5	(1.2)	6.3
	-------------	-------------	-------------
Consumer Services	22.3	(3.2)	19.1
	-------------	-------------	-------------
Mobile Telecommunications	–	(0.3)	(0.3)
	-------------	-------------	-------------
Telecommunications	–	(0.3)	(0.3)
	-------------	-------------	-------------
Financial Services	14.2	(0.3)	13.9
Non-life Insurance	4.4	–	4.4
Real Estate Investment & Services	1.1	–	1.1
Real Estate Investment Trusts	6.0	(0.4)	5.6
	-------------	-------------	-------------
Financials	25.7	(0.7)	25.0
	-------------	-------------	-------------
Software & Computer Services	13.9	(1.0)	12.9
Technology Hardware & Equipment	0.4	–	0.4
	-------------	-------------	-------------
Technology	14.3	(1.0)	13.3
	-------------	-------------	-------------
Total Investments	111.2	(11.2)	100.0
	========	========	========

The above percentages are calculated based on the net portfolio at 30 November 2018. The net portfolio is calculated as long equity and derivative positions, less short derivative positions as at 30 November 2018.

Portfolio by main index membership

	Gross basis¹	Net basis²
FTSE 250	36.8%	37.5%
FTSE AIM	32.6%	38.6%
FTSE Small Cap	17.6%	17.0%
Other	10.1%	3.3%
International	2.9%	3.6%

Source: BlackRock.

1. Long exposure plus short exposure in aggregate excluding investment in BlackRock’s Institutional Cash Series plc - Sterling Liquidity Fund.
2. Long exposure less short exposure excluding investment in BlackRock’s Institutional Cash Series plc - Sterling Liquidity Fund.

Market capitalisation

% of net portfolio	Long positions	Short positions
£1bn+	53.1%	-5.5%
£400m-£1bn	33.7%	-3.4%
£100m-£400m	24.3%	-2.4%
£0m-£100m	0.2%	0.0%

Source: BlackRock.

Position size

Number of positions	Long positions	Short positions
£2m+	73	-1
£1m-£2m	22	-23
£0m-£1m	3	-10

Source: BlackRock.

STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 30 NOVEMBER 2018

	Notes	Revenue 2018 £’000	Revenue 2017 £’000	Capital 2018 £’000	Capital 2017 £’000	Total 2018 £’000	Total 2017 £’000

Income from investments held at fair value through profit or loss	3	9,281	8,190	–	–	9,281	8,190
Net (expense)/income from derivatives	3	(247)	370	–	–	(247)	370
Other income	3	40	41	–	–	40	41
		--------------	--------------	--------------	--------------	--------------	--------------
Total revenue		9,074	8,601	–	–	9,074	8,601
		--------------	--------------	--------------	--------------	--------------	--------------
Net (loss)/profit on investments held at fair value through profit or loss		–	–	(18,705)	88,130	(18,705)	88,130
Net loss on foreign exchange		–	–	(67)	(70)	(67)	(70)
Net profit from derivatives		–	–	4,863	12,535	4,863	12,535
		--------------	--------------	--------------	--------------	--------------	--------------
Total		9,074	8,601	(13,909)	100,595	(4,835)	109,196
		--------------	--------------	--------------	--------------	--------------	--------------
Expenses
Investment management and performance fees	4	(467)	(661)	(4,417)	(6,641)	(4,884)	(7,302)
Other operating expenses	5	(537)	(525)	(21)	(16)	(558)	(541)
		--------------	--------------	--------------	--------------	--------------	--------------
Total operating expenses		(1,004)	(1,186)	(4,438)	(6,657)	(5,442)	(7,843)
		--------------	--------------	--------------	--------------	--------------	--------------
Net profit/(loss) on ordinary activities before finance costs and taxation		8,070	7,415	(18,347)	93,938	(10,277)	101,353
Finance costs		(2)	(1)	(6)	(2)	(8)	(3)
		--------------	--------------	--------------	--------------	--------------	--------------
Net profit/(loss) on ordinary activities before taxation		8,068	7,414	(18,353)	93,936	(10,285)	101,350
Taxation		(12)	(18)	–	–	(12)	(18)
		--------------	--------------	--------------	--------------	--------------	--------------
Profit/(loss) for the year		8,056	7,396	(18,353)	93,936	(10,297)	101,332
		========	========	========	========	========	========
Earnings/(loss) per ordinary share (pence)	7	11.02	10.11	(25.10)	128.45	(14.08)	138.56
		========	========	========	========	========	========

The total column of this statement represents the Company’s Statement of Comprehensive Income, prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union (EU). The supplementary revenue and capital columns are both prepared under guidance published by the Association of Investment Companies (AIC). All items in the above statement derive from continuing operations. No operations were acquired or discontinued during the year. All income is attributable to the equity holders of the Company.

The Company does not have any other comprehensive income. The net profit/(loss) for the year disclosed above represents the Company’s total comprehensive income/(loss).

STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 NOVEMBER 2018

	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 year ended 30 November 2018
At 30 November 2017		4,026	21,049	11,905	35,272	312,947	11,647	396,846
Total comprehensive income:
Net (loss)/profit for the year		–	–	–	–	(18,353)	8,056	(10,297)
Transactions with owners, recorded directly to equity:
Dividends paid^*	6	–	–	–	–	–	(6,947)	(6,947)
		--------	---------	---------	----------	-----------	---------	-----------
At 30 November 2018		4,026	21,049	11,905	35,272	294,594	12,756	379,602
		=====	=====	=====	=====	======	=====	======
For the year ended 30 November 2017
At 30 November 2016		4,026	21,049	11,905	35,272	219,011	10,284	301,547
Total comprehensive income:
Net profit for the year		–	–	–	–	93,936	7,396	101,332
Transactions with owners, recorded directly to equity:
Dividends paid^**	6	–	–	–	–	–	(6,033)	(6,033)
		--------	---------	---------	----------	-----------	---------	-----------
At 30 November 2017		4,026	21,049	11,905	35,272	312,947	11,647	396,846
		=====	=====	=====	=====	======	=====	======

* Final dividend of 7.00p per share for the year ended 30 November 2017, declared on 9 February 2018 and paid on 29 March 2018 and interim dividend of 2.50p per share for the year ended 30 November 2018, declared on 25 July 2018 and paid on 29 August 2018.
** Final dividend of 6.25p per share for the year ended 30 November 2016, declared on 6 February 2017 and paid on 29 March 2017 and interim dividend of 2.00p per share for the year ended 30 November 2017, declared on 24 July 2017 and paid on 23 August 2017.

STATEMENT OF FINANCIAL POSITION AS AT 30 NOVEMBER 2018

	Notes	30 November 2018 £’000	30 November 2017 £’000

Non current assets
Investments held at fair value through profit or loss		344,478	390,326
		-----------	-----------
Current assets
Other receivables		3,183	1,703
Derivative financial assets held at fair value through profit or loss	10	1,719	189
Cash collateral held with brokers in respect of derivatives		1,410	1,117
Cash and cash equivalents		34,081	13,048
		-----------	-----------
		40,393	16,057
		-----------	-----------
Total assets		384,871	406,383
		-----------	-----------
Current liabilities
Other payables		(5,152)	(7,375)
Derivative financial liabilities held at fair value through profit or loss	10	(117)	(882)
Cash collateral received in respect of derivatives		–	(1,280)
		-----------	-----------
		(5,269)	(9,537)
		-----------	-----------
Net assets		379,602	396,846
		=======	=======
Equity attributable to equity holders
Called up share capital	8	4,026	4,026
Share premium account	9	21,049	21,049
Capital redemption reserve	9	11,905	11,905
Special reserve	9	35,272	35,272
Capital reserves	9	294,594	312,947
Revenue reserve	9	12,756	11,647
		-----------	-----------
Total equity		379,602	396,846
		=======	=======
Net asset value per ordinary share (pence)	7	519.08	542.66
		=======	=======

The financial statements on pages 68 to 94 of the Annual Report were approved and authorised for issue by the Board of Directors on 11 February 2019 and signed on its behalf by Mr Christopher Samuel, Chairman.
BlackRock Throgmorton Trust plc
Registered in England, No. 00594634

CASH FLOW STATEMENT FOR THE YEAR ENDED 30 NOVEMBER 2018

	30 November 2018 £’000	30 November 2017 £’000
Operating activities
Net (loss)/profit on ordinary activities before taxation	(10,285)	101,350
Add back finance costs	8	3
Loss/(profit) on investments and derivatives held at fair value through profit or loss (including transaction costs)	13,343	(101,032)
Net loss on foreign exchange	67	70
Sales of investments held at fair value through profit or loss	298,720	171,534
Purchases of investments held at fair value through profit or loss	(271,577)	(176,658)
Realised gains on closure of derivatives	54,652	43,446
Realised losses on closure of derivatives	(51,571)	(27,449)
Realised losses on closure of futures contracts	(15)	(487)
Increase in other receivables	(32)	(242)
(Decrease)/increase in other payables	(2,944)	5,058
Increase in amounts due from brokers	(1,437)	(115)
Increase/(decrease) in amounts due to brokers	721	(707)
Net movement in cash collateral held with brokers in respect of derivatives	(1,573)	(1,108)
	------------	------------
Net cash inflow from operating activities before taxation	28,077	13,663
	------------	------------
Taxation on investment income included within gross income	(22)	(18)
	------------	------------
Net cash inflow from operating activities	28,055	13,645
	------------	------------
Financing activities
Interest paid	(8)	(3)
Dividends paid	(6,947)	(6,033)
	------------	------------
Net cash outflow from financing activities	(6,955)	(6,036)
	------------	------------
Increase in cash and cash equivalents	21,100	7,609
Effect of foreign exchange rate changes	(67)	(70)
	------------	------------
Change in cash and cash equivalents	21,033	7,539
Cash and cash equivalents at start of year	13,048	5,509
	------------	------------
Cash and cash equivalents at end of year	34,081	13,048
	=======	=======
Comprised of:
Cash at bank	132	44
BlackRock’s Institutional Cash Series plc – Sterling Liquidity Fund (Cash Fund)	33,949	13,004
	------------	------------
	34,081	13,048
	=======	=======

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 NOVEMBER 2018

1. PRINCIPAL ACTIVITY
The principal activity of the Company is that of an investment trust company within the meaning of section 1158 of the Corporation Tax Act 2010.

2. ACCOUNTING POLICIES
The principal accounting policies adopted by the Company are set out below.

(a) Basis of preparation
The financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union and as applied in accordance with the provisions of the Companies Act 2006. All of the Company’s operations are of a continuing nature.

Insofar as the Statement of Recommended Practice (SORP) for investment trust companies and venture capital trusts issued by the Association of Investment Companies (AIC), revised in November 2014 and updated in January 2017, is compatible with IFRS, the financial statements have been prepared in accordance with the guidance set out in the SORP.

Substantially all of the assets of the Company consist of securities that are readily realisable and, accordingly, the Directors believe that the Company has adequate resources to continue in operational existence for the foreseeable future. Consequently, the Directors have determined that it is appropriate for the financial statements to be prepared on a going concern basis.

The Company’s financial statements are presented in sterling, which is the functional currency of the Company and the currency of the primary economic environment in which the Company operates. All values are rounded to the nearest thousand pounds (£’000) except where otherwise indicated.

A number of new standards, amendments to standards and interpretations are effective for the annual periods beginning on or after 1 December 2018 and have not been applied in preparing these financial statements (major changes and new standards issued are detailed below) as these are not expected to have any effect on the measurement of the amounts recognised in the financial statements of the Company.

IFRS standards that have been recently adopted:
Amendments to IAS 7 – Statement of Cash Flows (effective 1 January 2017). The amendments did not have a significant effect on the presentation of the Cash Flow Statement within the financial statements of the Company as the Company does not have any debt.

Amendments to IAS 12 – Recognition of deferred tax assets for unrealised losses (effective 1 January 2017). The amendment did not have a significant effect on the measurement of amounts recognised in the financial statements of the Company.

IFRS standards that have yet to be adopted:
IFRS 9 (2014) – Financial Instruments replaces IAS 39 and deals with a package of improvements including principally a revised model for classification and measurement of financial instruments, a forward looking expected loss impairment model and a revised framework for hedge accounting. In terms of classification and measurement, the revised standard is principles-based depending on the business model and nature of cash flows. Under this approach, instruments are measured at either amortised cost or fair value. Under IFRS 9 equity and derivative investments will be held at fair value because they fail the ‘solely payments of principal and interest’ test and debt investments will be held at fair value because the business model is to manage them on a fair value basis. The standard is effective for periods beginning on or after 1 January 2018 with earlier application permitted. The standard is not expected to have any impact on the Company as all of its investments are held at fair value through profit or loss.

IFRS 15 – Revenue from Contracts with Customers (effective for periods beginning on or after 1 January 2018) specifies how and when an entity should recognise revenue and enhances the nature of revenue disclosures. Given the nature of the Company’s revenue streams from financial instruments, the provisions of this standard are not expected to have any impact.

(b) Presentation of the Statement of Comprehensive Income
In order to reflect the activities of an investment trust company and in accordance with guidance issued by the AIC, supplementary information which analyses the Statement of Comprehensive Income between items of a revenue and a capital nature has been presented alongside the Statement of Comprehensive Income.

(c) Segmental reporting
The Directors are of the opinion that the Company is engaged in a single segment of business being investment business.

(d) Income
Dividends receivable on equity shares are recognised as revenue for the year on an ex-dividend basis. Where no ex-dividend date is available, dividends receivable on or before the year end are treated as revenue for the year. Provision is made for any dividends not expected to be received. Special dividends, if any, are treated as a capital or a revenue receipt depending on the facts or circumstances of each dividend. The return on a debt security is recognised on a time apportionment basis so as to reflect the effective yield on the debt security.

Deposit interest receivable is accounted for on an accruals basis.

Where the Company has elected to receive its dividends in the form of additional shares rather than in cash, the cash equivalent of the dividend is recognised as revenue. Any excess in the value of the shares received over the amount of the cash dividend is recognised in capital.

(e) Expenses
All expenses, including finance costs, are accounted for on an accruals basis. Expenses have been charged wholly to the revenue column of the Statement of Comprehensive Income, except as follows:

expenses which are incidental to the acquisition or sale of an investment are charged to the capital column of the Statement of Comprehensive Income. Details of transaction costs on the purchases and sales of investments are disclosed within note 10 of the Annual Report;
expenses are treated as capital where a connection with the maintenance or enhancement of the value of the investments can be demonstrated;
the investment management fee and finance costs have been allocated 75% to the capital column and 25% to the revenue column of the Statement of Comprehensive Income in line with the Board’s expectations of the long term split of returns, in the form of capital gains and income, respectively, from the investment portfolio;
performance fees are allocated 100% to the capital column of the Statement of Comprehensive Income as fees are generated in connection with enhancing the value of the investment portfolio.

(f) Taxation
The tax expense represents the sum of the tax currently payable and deferred tax. The tax currently payable is based on the taxable profit for the year. Taxable profit differs from net profit as reported in the Statement of Comprehensive Income because it excludes items of income or expenses that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Company’s liability for current tax is calculated using tax rates that were applicable at the balance sheet date.

Where expenses are allocated between capital and revenue, any tax relief in respect of expenses is allocated between capital and revenue returns on the marginal basis using the Company’s effective rate of corporation tax for the accounting period.

Deferred taxation is recognised in respect of all temporary differences that have originated but not reversed at the financial reporting date, where transactions or events that result in an obligation to pay more tax in the future or right to pay less tax in the future have occurred at the financial reporting date. This is subject to deferred tax assets only being recognised if it is considered more likely than not that there will be suitable profits from which the future reversal of the temporary differences can be deducted. Deferred tax assets and liabilities are measured at the rates applicable to the legal jurisdictions in which they arise.

(g) Investments held at fair value through profit or loss
The Company’s investments are designated upon initial recognition as held at fair value through profit or loss in accordance with IAS 39 – ‘Financial Instruments: Recognition and Measurement’ and are managed and evaluated on a fair value basis in accordance with its investment strategy.

All investments are measured initially and subsequently at fair value through profit or loss. Purchases of investments are recognised on a trade date basis. Sales of investments are recognised at the trade date of the disposal.

The fair value of the equity investments is based on their quoted bid price at the financial reporting date, without deduction for the estimated selling costs.

Changes in the value of investments held at fair value through profit or loss and gains and losses on disposal are recognised in the Statement of Comprehensive Income as ‘Net profit or loss on investments held at fair value through profit or loss’. Also included within the heading are transaction costs in relation to the purchase or sale of investments.

(h) Derivatives
The Company can hold long and short investment positions through contracts for difference (CFD) and index futures which are held at fair value based on the bid prices of the underlying securities in respect of long positions, and the offer prices of the underlying securities in respect of short positions.

Profits and losses on derivative transactions are recognised in the Statement of Comprehensive Income. They are shown in the capital column of the Statement of Comprehensive Income if they are of a capital nature and are shown in the revenue column of the Statement of Comprehensive Income if they are of a revenue nature. To the extent that any profits or losses are of a mixed revenue and capital nature, they are apportioned between revenue and capital accordingly.

(i) Other receivables and other payables
Other receivables and other payables do not carry any interest and are short term in nature and are accordingly stated at their nominal value.

(j) Dividends payable
Under IFRS, final dividends should not be accrued in the financial statements unless they have been approved by shareholders before the financial reporting date. Interim dividends should not be accrued in the financial statements unless they have been paid.

Dividends payable to equity shareholders are recognised in the Statement of Changes in Equity.

(k) Foreign currency translation
Transactions involving foreign currencies are converted at the rate ruling at the date of the transaction. Foreign currency monetary assets and liabilities and non monetary assets held at fair value are translated into sterling at the rate ruling on the financial reporting date. Foreign exchange differences arising on translation are recognised in the Statement of Comprehensive Income as a revenue or capital item depending on the income or expense to which they relate. For investment transactions and investments held at the year end, denominated in a foreign currency, the resulting gains or losses are included in the profit/(loss) on investments held at fair value through profit or loss in the Statement of Comprehensive Income.

(l) Cash and cash equivalents
Cash comprises cash in hand and on demand deposits. Cash equivalents are short term, highly liquid investments that are readily convertible to known amounts of cash and that are subject to an insignificant risk of changes in value.

The Company’s investment in BlackRock’s Institutional Cash Series plc – Sterling Liquidity Fund (Cash Fund) of £33,949,000 (2017: £13,004,000) is managed as part of the Company’s cash and cash equivalents as defined under IAS 7.

(m) Bank borrowings
Bank overdrafts are recorded as the proceeds received. Finance charges are accounted for on an accruals basis in the Statement of Comprehensive Income using the effective interest rate method and are added to the carrying amount of the instruments to the extent that they are not settled in the period in which they arise.

(n) Critical accounting estimates and judgements
The Company makes estimates and assumptions concerning the future. The resulting accounting estimates and assumptions will, by definition, seldom equal the related actual results. Estimates and judgements are regularly evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. The Directors do not believe that any accounting judgements or estimates have a significant risk of causing a material adjustment to the carrying amount of assets and liabilities within the next financial year.

3. INCOME

	2018 £’000	2017 £’000
Income from investments held at fair value through profit or loss:
UK listed dividends	6,421	5,840
UK listed special dividends	1,232	441
UK listed stock dividends	40	58
UK listed REIT dividends	570	482
Overseas listed dividends	914	1,192
Overseas listed special dividends	62	177
Overseas listed stock dividends	42	–
	--------	--------
	9,281	8,190
	--------	--------
Net (expense)/income from derivatives	(247)	370
	--------	--------
	9,034	8,560
	--------	--------
Other income:
Deposit interest	4	2
Interest from Cash Fund	36	26
Underwriting commission	–	13
	--------	--------
	40	41
	--------	--------
Total income	9,074	8,601
	=====	=====

Dividends and interest received in cash during the year amounted to £9,161,000 and £45,000 (2017: £8,344,000 and £25,000). No special dividends have been recognised in capital during the year (2017: £8,000).

Comparative figures
Interest of £36,000 (2017: £26,000) from the BlackRock Institutional Cash Series plc – Sterling Liquidity Fund (Cash Fund) has been reclassified from “Income from investments held at fair value through profit or loss” to “Other Income” in the Statement of Comprehensive Income. This reclassification had no impact on the revenue return for the respective periods or the net assets as at 30 November 2018.

4. INVESTMENT MANAGEMENT AND PERFORMANCE FEES

	2018			2017
	Revenue £’000	Capital £’000	Total £’000	Revenue £’000	Capital £’000	Total £’000

Investment management fees	467	1,399	1,866	661	1,982	2,643
Performance fee	–	3,018	3,018	–	4,659	4,659
	--------	--------	--------	--------	--------	--------
	467	4,417	4,884	661	6,641	7,302
	=====	=====	=====	=====	=====	=====

With effect from 1 December 2017 the performance fee changed from 10% to 15% of Net Asset Value total return outperformance of the benchmark measured over a two year rolling basis and will be applied on the average gross assets over two years. The previous cap on the performance fee of 1% of average gross assets over a one year period has been replaced with a cap on total management and performance fees of 1.25% of average gross assets over a two year period which has the effect of capping performance fees at circa 0.9% of average gross assets over two years.

With effect from 22 March 2018, the Company’s benchmark index was changed from the Numis Smaller Companies excluding AIM (excluding Investment Companies) Index to the Numis Smaller Companies plus AIM (excluding Investment Companies) Index. For the purposes of calculation of performance fee for the year ended 30 November 2018, the outperformance of the Net Asset Value total return has been measured against the performance of the benchmark indices on a blended basis during this period.

Performance fees have been wholly allocated to the capital column of the Statement of Comprehensive Income as the performance has been predominantly generated through capital returns from the investment portfolio. For the year ended 30 November 2018, a performance fee of £3,018,000 has been accrued (2017: £4,659,000).

The rate charged for investment management fees changed with effect from 1 August 2017 from 0.70% per annum to 0.35% per annum on month end gross assets. The management fee is charged 25% to revenue and 75% to capital.

5. OTHER OPERATING EXPENSES

	2018 £’000	2015 £’000
Allocated to revenue:
Custody fee	11	8
Auditor's remuneration:
– audit services	37	37
– non-audit services	7	6
Registrar’s fee	39	33
Directors’ emoluments	139	167
Broker fees	36	37
Depositary fees	58	49
Marketing fees	79	54
FCA fees	12	11
Printing and postage fees	24	24
AIC fees	20	21
Other administrative costs	76	78
	--------	--------
	537	525
	--------	--------
Allocated to capital:
Custody transaction charges	21	16
	--------	--------
	21	16
	--------	--------
	558	541
	====	====
The Company’s ongoing charges, calculated as a percentage of average net assets and using expenses, excluding performance fees, transaction costs, finance costs and taxation were:	0.57%	0.87%
	--------	--------
The Company’s ongoing charges, calculated as a percentage of average net assets and using expenses, including performance fees but excluding transaction costs, finance costs and taxation were:	1.29%	2.16%
	=====	=====

Details of the calculation methodology for ongoing charges can be found in the Glossary contained within the Annual Report.
Auditor’s remuneration for non-audit services comprised £6,500 relating to the interim review (2017: £6,000).
For the year ended 30 November 2018, expenses of £21,000 (2017: £16,000) were charged to the capital column of the Statement of Comprehensive Income. These relate to transaction costs charged by the custodian on sale and purchase trades.
Details of the Directors’ emoluments are given in the Directors’ Remuneration Report contained within the Annual Report.

6. DIVIDENDS
Dividends paid on equity shares:

	Record date	Payment date	2018 £’000	2017 £’000

Final dividend of 7.00p per share for the year ended 30 November 2017 (2016: 6.25p)	23 February 2018	29 March 2018	5,119	4,571
Interim dividend of 2.50p per share for the year ended 30 November 2018 (2017: 2.00p)	3 August 2018	29 August 2018	1,828	1,462
			--------	--------
			6,947	6,033
			=====	=====

The total dividends payable in respect of the year ended 30 November 2018 which form the basis of section 1158 of the Corporation Tax Act 2010 and section 833 of the Companies Act 2006, and the amounts proposed, meet the relevant requirements as set out in this legislation.

Dividends paid or declared on equity shares:	2018 £’000	2017 £’000

Interim dividend of 2.50p per share for the year ended 30 November 2018 (2017: 2.00p)	1,828	1,462
Final dividend of 7.50p per share for the year ended 30 November 2018* (2017: 7.00p)	5,485	5,119
	--------	--------
	7,313	6,581
	=====	=====

*Based on 73,130,326 (2017: 73,130,326) ordinary shares in issue on 11 February 2019.

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

	2018	2017

Net revenue profit attributable to ordinary shareholders (£’000)	8,056	7,396
Net capital (loss)/profit attributable to ordinary shareholders (£’000)	(18,353)	93,936
	---------------	---------------
Total (loss)/profit attributable to ordinary shareholders (£’000)	(10,297)	101,332
	---------------	---------------
Equity shareholders’ funds (£’000)	379,602	396,846
	---------------	---------------
The weighted average number of ordinary shares in issue during the year, on which the earnings per ordinary share was calculated was:	73,130,326	73,130,326
	---------------	---------------
The actual number of ordinary shares in issue at the year end, on which the net asset value per ordinary share was calculated was:	73,130,326	73,130,326
	---------------	---------------
Earnings/(loss) per share
Revenue earnings per share (pence)	11.02	10.11
Capital (loss)/earnings per share (pence)	(25.10)	128.45
	---------------	---------------
Total (loss)/earnings per share (pence)	(14.08)	138.56
	=========	=========

	As at 30 November 2018	As at 30 November 2017

Net asset value per ordinary share (pence)	519.08	542.66
	---------	---------
Ordinary share price (pence)	457.00	457.50
	=====	=====

8. CALLED UP SHARE CAPITAL

	Number of shares in issue	Treasury shares	Total shares	Nominal value £’000
Allotted, called up and fully paid share capital comprised:
Ordinary shares of 5 pence each
At 30 November 2017	73,130,326	7,400,000	80,530,326	4,026
	---------------	---------------	---------------	---------------
At 30 November 2018	73,130,326	7,400,000	80,530,326	4,026
	=========	=========	=========	=========

No ordinary shares were issued, purchased or cancelled in the year (2017: nil).

9. RESERVES

			Distributable reserves
	Share premium account £’000	Capital redemption reserve £’000	Special reserve £’000	Capital reserve arising on investments sold £’000	Capital reserve arising on revaluation of investments £’000	Revenue reserve £’000

At 30 November 2017	21,049	11,905	35,272	193,267	119,680	11,647
Movement during the year:
Total Comprehensive Income:
Net capital profit/(loss) for the year	–	–	–	51,190	(69,543)	–
Net revenue profit for the year	–	–	–	–	–	8,056
Transactions with owners recorded directly to equity:
Dividends paid	–	–	–	–	–	(6,947)
	--------------	--------------	--------------	--------------	--------------	--------------
At 30 November 2018	21,049	11,905	35,272	244,457	50,137	12,756
	========	========	========	========	========	========

The share premium account and capital redemption reserve are not distributable profits under the Companies Act 2006. The special reserve may be used as distributable profits for all purposes and, in particular, for the repurchase by the Company of its ordinary shares and for payment as dividends. In accordance with the Company’s Articles, net capital returns may be distributed by way of dividend.

10. VALUATION OF FINANCIAL INSTRUMENTS
Financial assets and financial liabilities are either carried in the Statement of Financial Position at their fair value (investment and derivatives) or at an amount which is a reasonable approximation of fair value (due from brokers, dividends and interest receivable, due to brokers, accruals, cash at bank and bank overdrafts). IFRS 13 requires the Company to classify fair value measurements using a fair value hierarchy that reflects the significance of inputs used in making the measurements. The valuation techniques used by the Company are explained in the accounting policies note 2(g) of the Annual Report.

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 and regularly available from an exchange, dealer, broker, industry group, pricing service or regulatory agency and those prices represent actual and regularly occurring market transactions on an arm’s length basis. The Company does not adjust the quoted price for these instruments.

Level 2 – Valuation techniques using observable inputs
This category includes instruments valued using quoted prices for similar instruments in markets that are considered less than active, or other valuation techniques where all significant inputs are directly or indirectly observable from market data. Valuation techniques used for non-standardised financial instruments such as options, currency swaps and other over-the-counter derivatives include the use of comparable recent arm’s length transactions, reference to other instruments that are substantially the same, discounted cash flow analysis, option pricing models and other valuation techniques commonly used by market participants making the maximum use of market inputs and relying as little as possible on entity specific inputs.

As at the year end the long and short derivative positions were valued using the underlying equity bid price (offer price in respect of short positions) and the contract price at the inception of the trade or at the trade reset date. There have been no changes to the valuation technique since the previous year or as at the date of this report.

Level 3 – Valuation techniques using significant unobservable inputs
This category includes all instruments where the valuation technique includes inputs not based on 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 determination of what constitutes ‘observable’ inputs requires significant judgement by the Investment Manager. The Investment Manager considers observable data to be that market data that is readily available, regularly distributed or updated, reliable and verifiable, not proprietary, and provided by independent sources that are actively involved in the relevant market.

The level in the fair value hierarchy within which the fair value measurement is categorised in its entirety is determined on the basis of the lowest level input that is significant to the fair value measurement. If a fair value measurement uses observable inputs that require significant adjustment based on unobservable inputs, that measurement is a Level 3 measurement.

Assessing the significance of a particular input to the fair value measurement in its entirety requires judgement, considering factors specific to the asset or liability. The determination of what constitutes ‘observable’ inputs requires significant judgement by the Investment Manager.

Contracts for difference have been classified as Level 2 investments as their valuation has been based on market observable inputs represented by the market prices of the underlying quoted securities to which these contracts expose the Company. Index futures have also been classified as Level 2 investments.

Fair values of financial assets and financial liabilities
The table below sets out fair value measurements using the IFRS 13 fair value hierarchy.

Financial assets/(liabilities) at fair value through profit or loss at 30 November 2018	Level 1 £’000	Level 2 £’000	Level 3 £’000	Total £’000
Assets:
Equity investments	344,478	–	–	344,478
Contracts for difference (gross exposure on long positions)	–	49,464	–	49,464
Liabilities:
Contracts for difference (gross exposure on short positions)	–	(39,884)	–	(39,884)
	-----------	-----------	-----------	-----------
	344,478	9,580	–	354,058
	=======	=======	=======	=======

Financial assets/(liabilities) at fair value through profit or loss at 30 November 2017	Level 1 £’000	Level 2 £’000	Level 3 £’000	Total £’000
Assets:
Equity investments	390,326	–	–	390,326
Contracts for difference (gross exposure on long positions)	–	74,071	–	74,071
Liabilities:
Contracts for difference (gross exposure on short positions)	–	(25,020)	–	(25,020)
Index futures (gross exposure on short positions)	–	(9,622)	–	(9,622)
	-----------	-----------	-----------	-----------
	390,326	39,429	–	429,755
	=======	=======	=======	=======

There were no transfers between levels for financial assets and financial liabilities during the year recorded at fair value as at 30 November 2018 and 30 November 2017. The Company did not hold any Level 3 securities throughout the financial year or as at 30 November 2018 (2017: nil).

11. RELATED PARTY DISCLOSURE: DIRECTORS’ EMOLUMENTS
Disclosures of the Directors’ interests in the ordinary shares of the Company and fees and expenses payable to the Directors are set out in the Directors’ Remuneration Report on pages 48 and 49 of the Annual Report and Financial Statements. At 30 November 2018 £11,000 (2017: £11,000) was outstanding in respect of Directors’ fees.

12. TRANSACTIONS WITH THE MANAGER AND INVESTMENT MANAGER
BlackRock Fund Managers Limited (BFM) provides management and administration services to the Company under a contract which is terminable on six months’ notice. BFM has (with the Company’s consent) delegated certain portfolio and risk management services, and other ancillary services to BlackRock Investment Management (UK) Limited (BIM (UK)). Further details of the investment management contract are disclosed in the Directors’ Report on pages 38 and 39 of the Annual Report and Financial Statements.

13. CONTINGENT LIABILITIES
There were no contingent liabilities at 30 November 2018 (2017: £nil).

14. PUBLICATION OF NON-STATUTORY ACCOUNTS

The financial information contained in this announcement does not constitute statutory accounts as defined in the Companies Act 2006. The Annual Report and Financial Statements for the year ended 30 November 2018 will be filed with the Registrar of Companies after the Annual General Meeting.

The figures set out above have been reported upon by the auditor, whose report for the year ended 30 November 2018 contains no qualification or statement under section 498(2) or (3) of the Companies Act 2006.

The comparative figures are extracts from the audited financial statements of BlackRock Throgmorton Trust plc for the year ended 30 November 2017, which have been filed with the Registrar of Companies. The report of the auditor on those financial statements contained no qualification or statement under section 498 of the Companies Act.

15. ANNUAL REPORT

Copies of the Annual Report and Financial Statements will be sent to members shortly and will be available from the registered office, c/o The Company Secretary, BlackRock Throgmorton Trust plc, 12 Throgmorton Avenue, London EC2N 2DL.

16. ANNUAL GENERAL MEETING

The Annual General Meeting of the Company will be held at 12 Throgmorton Avenue, London EC2N 2DL on Thursday, 21 March 2019 at 11.00 a.m.

ENDS

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

FOR FURTHER INFORMATION, PLEASE CONTACT:

Simon White, Managing Director, Closed End Funds, BlackRock Investment Management (UK) Limited
Tel: 020 7743 3000

Press Enquiries:

Lucy Horne, Lansons Communications – Tel: 020 7294 3689
E-mail: lucyh@lansons.com

12 February 2019

12 Throgmorton Avenue
London EC2N 2DL

Source: PR Newswire (February 12, 2019 - 2:00 AM EST)

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