July 26, 2018 - 2:00 AM EDT
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BlackRock Throgmorton Trust Plc - Half-year Report

BlackRock Throgmorton Trust plc
(Legal Entity Identifier: 5493003B7ETS1JEDPF59)

Information disclosed in accordance with Article 5 Transparency Directive and DTR 4.2

Half Yearly Financial Report for period ended 31 May 2018

REVISED INVESTMENT OBJECTIVE AND POLICY (with effect from 22 March 2018)
At a General Meeting of the Company held on 22 March 2018, an ordinary resolution was duly passed by the Company adopting a revised investment objective and policy. The Company’s new investment objective and policy is set out below.

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.

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 limits noted below.

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 to holding long positions in securities, 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 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%(1). 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.

(1) The AIC measures gearing at gross level, rather than net market exposure level (i.e. gearing is calculated as borrowings + long CFDs and/or comparable equity derivatives + short CFDs and/or comparable equity derivatives) and therefore the published gearing figures will be higher than the typical net market exposure of between 100% and 115%.

PERFORMANCE RECORD

FINANCIAL HIGHLIGHTS
 

Attributable to ordinary shareholders  31 May 2018 
(unaudited) 
30 November 2017 
(audited) 
Change 
%
 
Assets
Net assets (£’000)1  437,460   396,846  +10.2 
Net asset value per ordinary share 598.19p  542.66p  +10.2 
-with dividend reinvested +11.6 
Ordinary share price (mid-market) 538.00p  457.50p  +17.6 
-with dividend reinvested +19.3 
Numis Smaller Companies plus AIM (excluding Investment Companies) Index2  15,296.88  14,938.01  +2.4 

   

For the six 
months ended 
31 May 2018 
(unaudited)
 
For the six 
months ended 
31 May 2017 
(unaudited)
 


Change 
Revenue
Net revenue return after taxation (£’000)  5,214   3,977  +31.1 
Earnings per ordinary share 7.13p  5.44p  +31.1 
 --------   --------   -------- 
Dividend per ordinary share
Interim 2.50p  2.00p  +25.0 
 --------   --------   -------- 

1.    The change in net assets reflects market movements during the period.

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 have been blended to reflect these changes.

CHAIRMAN’S STATEMENT

PERIOD HIGHLIGHTS

  • Dan Whitestone appointed as sole Portfolio Manager

  • Outperformed the benchmark by 9.2%

  • Share price discount narrowed from 15.7% (as at 30 November 2017) to 10.1%

  • Revenue return up 31% year-on-year

  • Interim dividend declared of 2.50p per share, an increase of 25%

  • Revised investment objective and policy, including a new power to hold up to 15% in non-UK listed securities

  • Change of benchmark to the Numis Smaller Companies plus AIM (excluding Investment Companies) Index

PERFORMANCE
It is encouraging to report that during the six months to 31 May 2018, the Company has once again generated an exceptionally good investment performance for its shareholders, both in relative and absolute terms. The Company’s Net Asset Value (NAV) return for the period was 11.6%, compared with a return of 2.4% from the Company’s benchmark, the Numis Smaller Companies plus AIM (excluding Investment Companies) Index, an outperformance of 9.2% (all figures in sterling terms with dividend reinvested).

Further information on portfolio activity, the factors that contributed to performance during the period and the outlook for the second half of the financial year are set out in the Investment Manager’s Report.

PERFORMANCE RECORD TO 31 MAY 2018 (WITH DIVIDEND REINVESTED)
 

1 Year
change %
3 Year
change %
5 Year
change %
Since BlackRock
take-on change %
Benchmark
(with dividend reinvested)

4.7

27.6

66.2

152.1
Share price
(with dividend reinvested)

25.8

73.2

141.6

388.1
NAV per share
(with dividend reinvested)
– undiluted


16.6


64.9


124.5


381.1


Since the period end and up to the close of business on 24 July 2018, the NAV has risen by 3.4%, and the benchmark index has fallen by 0.2%. (All figures in sterling terms with dividend reinvested).

REVENUE RETURN AND DIVIDENDS
The revenue return per share for the period amounted to 7.13 pence per share, compared to 5.44 pence per share earned during the comparative period last year. This represents an increase of 31% and results from increases in the level of both the ordinary and special dividends received during the period. The Board is pleased to declare an interim dividend of 2.50 pence per share (2017: 2.00 pence per share) payable on 29 August 2018 to shareholders on the register on 3 August 2018 (ex-dividend date is 2 August 2018).

REVISED INVESTMENT ARRANGEMENTS
As set out in my Chairman’s Statement to the Annual Report for the year ended 30 November 2017, Dan Whitestone assumed sole responsibility for the portfolio management of the Company in February of this year.  The Company subsequently convened a General Meeting of its shareholders on 22 March 2018 to consider a revised investment objective and policy and an ordinary resolution adopting the new policy with effect from 22 March 2018 was duly passed. In summary, the changes included a removal of the previous 35% restriction on AIM market exposure, a change of the Company’s benchmark to one which includes AIM and a new power to permit the portfolio manager to hold up to 15% of the Company’s gross assets in non-UK listed securities.

The Company’s fundamental investment strategy has not changed and the Board believes that, taken together, these steps will empower the portfolio manager with the means to continue to deliver strong investment performance via a uniquely attractive vehicle for investors seeking exposure to UK smaller companies. Examples of how these new powers have been utilised are included in the Investment Manager’s report. The Company’s revised investment objective and policy is set out in full above. Although it is early days, it is encouraging that these changes have resulted in continuing strong investment performance.

SHARE PRICE DISCOUNT
During the six months to 31 May 2018, the Company’s share price discount to NAV ranged between 17.0% and 7.4%, ending the period at 10.1% (2017: 20.8%, 15.1% and 16.4% respectively). As at 24 July 2018 the discount stood at 9.4%. The constituents of the UK Smaller Companies sector have historically traded at a significant discount to NAV and the Company’s average discount to NAV since 1 July 2008 (the date BlackRock became Manager of the Company) has been 16.1%. It was pleasing to see that the Company’s discount has narrowed significantly during the period and currently trades below the sector average. The Board will continue to monitor closely the discount to NAV at which the Company’s shares trade.

MODIFICATION TO PERFORMANCE FEE CALCULATION
The current approach to calculating the performance fee, as set out in the Directors’ report in the Annual Report, is to measure NAV total return performance against the benchmark before base management and performance fees are deducted. Following discussions with the manager it has been agreed that this basis should be modified so that from 1 June 2018 net asset value performance against the benchmark will be measured after the deduction of the base fee. Although the outcome of the two different approaches is not material, the Board and the Manager believe that the latter basis is now more common, and also presents a slightly more demanding hurdle before a performance fee is earned.

OUTLOOK
Despite recent softening, global economic activity is expected to remain robust during the second half of 2018. Corporate earnings remain strong, particularly in the US. In the UK, equities are trading at near record highs and inflation appears to be trending down towards the Bank of England’s 2% target, which may bode well for the outlook for UK Small Cap companies. There has also been an acceleration in UK wage growth in recent months and the labour market has strengthened, with levels of employment hitting a record high in May 2018.

These factors have offset some of the negative impact of the heightened global and domestic political risk, concerns around the potential impact of rising interest rates, and a general wind-down of the easy monetary policy seen in recent years which will result in a tightening of liquidity. In addition, the uncertainty around the ongoing Brexit negotiations with the European Union remains a significant risk and there are indications that the UK economy is starting to feel the effects of Brexit. Overall, the outlook for the UK market, which even in the smaller companies sector, derives a significant proportion of its revenue from overseas, appears reasonable and the combination of low inflation, low unemployment and increasing earnings should be supportive of UK economic growth.

Against this backdrop your Investment Manager will continue to seek to identify opportunities, focusing on two types of investments that meet our investment philosophy: first, differentiated long-term growth investments and second, those companies that are leading industry change.

Christopher Samuel
Chairman
25 July 2018
 

INTERIM MANAGEMENT REPORT AND RESPONSIBILITY STATEMENT

The Chairman’s Statement and the Investment Manager’s report give details of the important events which have occurred during the period and their impact on the financial statements.

PRINCIPAL RISKS AND UNCERTAINTIES
The principal risks faced by the Company can be divided into various areas as follows:

  • Performance;

  • Market;

  • Income/dividend;

  • Financial;

  • Operational; and

  • Regulatory.

The Board reported on the principal risks and uncertainties faced by the Company in the Annual Report and Financial Statements for the year ended 30 November 2017. A detailed explanation can be found in the Strategic Report on pages 11 and 12 and in note 16 on pages 59 to 69 of the Annual Report and Financial Statements which are available on the website maintained by BlackRock at blackrock.co.uk/thrg.

In the view of the Board, there have been no changes to the fundamental nature of the principal risks and uncertainties since the previous report and these are equally applicable to the remaining six months of the financial year as they were to the six months under review.

RELATED PARTY DISCLOSURE AND TRANSACTIONS WITH THE INVESTMENT MANAGER
BlackRock Fund Managers Limited (BFM) was appointed as the Company’s AIFM with effect from 2 July 2014. BFM has (with the Company’s consent) delegated certain portfolio and risk management services, and other ancillary services, to BlackRock Investment Management (UK) Limited (BIM (UK)). Both BFM and BIM (UK) are regarded as related parties under the Listing Rules. Details of the fees payable are set out in note 4 and note 10.

The related party transactions with the Directors are set out in note 11.

GOING CONCERN
The Directors are satisfied that the Company has adequate resources to continue in operational existence for the foreseeable future (being a period of at least twelve months from the date that this half-yearly financial report is approved) and is financially sound. For this reason, they continue to adopt the going concern basis in preparing the financial statements. The Company has a portfolio of investments which is considered to be readily realisable and is able to meet all of its liabilities from its assets and the income generated from these assets. Ongoing charges (excluding performance fee and finance costs) for the year ended 30 November 2017 were approximately 0.9% of net assets.

DIRECTORS’ RESPONSIBILITY STATEMENT
The Disclosure Guidance and Transparency Rules (DTR) of the UK Listing Authority require the Directors to confirm their responsibilities in relation to the preparation and publication of the Interim Management Report and Financial Statements.

The Directors confirm to the best of their knowledge that:

  • the condensed set of financial statements contained within the half yearly financial report has been prepared in accordance with International Accounting Standard 34 ‘Interim Financial Reporting’; and

  • the Interim Management Report, together with the Chairman’s Statement and Investment Manager’s report, include a fair review of the information required by 4.2.7R and 4.2.8R of the FCA’s Disclosure Guidance and Transparency Rules.

The half yearly financial report has been reviewed by the Company’s Auditors and their report can be found at the end of this announcement.

The half yearly financial report was approved by the Board on 25 July 2018 and the above responsibility statement was signed on its behalf by the Chairman.

Christopher Samuel
For and on behalf of the Board
25 July 2018

INVESTMENT MANAGER’S REPORT FOR THE SIX MONTHS ENDED 31 MAY 2018
 

MARKET REVIEW AND OVERALL INVESTMENT PERFORMANCE
Overall, the last six months have seen an increase in equity market volatility from the extremely low levels witnessed in 2017. The first three months in 2018 saw significant declines in markets globally, followed by a sharp rebound at the beginning of the second quarter. Economic data confirmed a moderate pace of economic growth in the US, and the Federal Reserve reiterated the likely path of monetary tightening for the remainder of the year. First quarter earnings from the US came in strongly, with c.80% of companies beating analysts’ expectations, and earnings remain on track to grow at the highest rate in seven years, aided by tax reform. Eurozone data continues to signal growth, however geopolitical events continued to dominate headlines, most notably in Italy. Trade tensions continue to rise as the US announced tariffs on trading partners around the world, with the emerging market complex being most notably impacted. Evidence is building that the UK economy is now starting to feel the effects of Brexit with the UK headline growth rate of +0.1% quarter-on-quarter, the weakest since Q4 2012, with the year-on-year figure now sitting at +1.2%.

PERFORMANCE REVIEW
The Company has made a strong start to the financial year, with the NAV per share rising by 11.6% to 598.19p on a total return basis, significantly outperforming the benchmark return of 2.4% and the FTSE 100 return of 7.0% over the same period.

Despite the Company’s strong outperformance during the period, this has been a difficult market environment to navigate. We have witnessed large swings in geopolitical sentiment driving markets both higher and lower, however our continued focus on company fundamentals has enabled the Company to benefit from a number of stock specific successes in the long and short books. During the six month period, the long book has been the predominant driver of performance and the short book has been broadly flat, which we feel is a strong result against a market rise of more than 2%, and reflects a number of stock specific successes from our short positions.

The largest positive contributor during the period was Integrafin, a UK savings platform for financial advisors, which delivered strong results despite recent market volatility. This is a share we purchased at IPO earlier in the year and where we subsequently increased our position, so it was reassuring to see this conviction rewarded. We believe Integrafin has a differentiated business model, owning its own technology and operating in an industry with many secular growth drivers. Veterinary pharma manufacturer Dechra Pharmaceuticals performed strongly over the period helped by the acquisition of two inter-linked Dutch companies that specialise in enhanced formulation companion animal products. Shares in FeverTree performed strongly as the company continues to beat profit expectations.

As mentioned above, the Company has delivered a number of positive short successes during the first half. The largest short contributor 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. This ended up being the fifth largest contributor to performance over the six month period. Another short in a UK roadside assistance company contributed positively as the shares have been under pressure on growing fears about its balance sheet, whilst profit expectations have been revised lower. As discussed in previous reports, we remain structurally bearish on many consumer-facing UK domestic industries and we believe many of these “value” areas offer poor value. This positioning in aggregate has paid off, with a number of our UK consumer-related short positions delivering some significant profit warnings, which also provides us with confidence that the thesis behind this positioning remains intact.

Turning our attention to what has not worked so well for the Company over the period, the first positive to note is that the detractors during the period have been limited. Of the largest 10 detractors to performance, half came from shares that we do not own which did not meet our investment criteria or are in sectors we are structurally underweight (e.g. Resources), as opposed to shares where our analysis proved flawed. One share we did get wrong is Superdry, one of the few UK consumer-facing shares we own. The company issued a disappointing trading update showing that in-store sales had suffered from the bad weather earlier in the year, while a shift in sales mix to lower margin wholesale and clearance activity was impacting gross margins. The position is currently under review and we have not added to it on this weakness. LED lighting manufacturer Luceco fell in response to a trading update warning that gross margin weakness, due to an incorrect assessment of stock, would hit 2017 earnings. We spoke with management to gain a better understanding of the issue and have subsequently sold our holding. We also suffered from not owning Fidessa, a UK software company we greatly admire (and should have owned), which received several bid approaches during the period.

ACTIVITY
Since moving to the sole manager structure in February, we have continued to increase the portfolio’s concentration by selling a number of smaller lower-conviction holdings, including Headlam, Polypipe and Eurocell. We have also reduced the portfolio’s exposure to resources whilst adding to a number of the portfolio’s core ideas including Renishaw, Ascential, SSP, Sophos Group and Restore.

As discussed in previous reports, we have become progressively more cautious around the outlook for the UK economy and in particular those companies exposed to UK consumer spending as not only do many investments here face structural challenges, but will also face cyclical pressures from falling consumer confidence and rising costs. Recent data continues to support this thesis, therefore we have continued to reduce our exposure to this area of the market.

Industry change remains a key focus of our investment philosophy, and an area that we look to monetise on both the long and the short side. Any industry in flux can create some very exciting opportunities, particularly within the UK small and mid-cap universe where a number of disruptive winners emerge. However, as we have alluded to in the past, industry disruption is not limited by geography and therefore the ability for the Company to now invest up to 15% in companies not listed in the UK provides further opportunity to identify exciting growth companies that are driving change and disrupting their end markets. One form of industry disruption we pay particular attention to is distribution. As consumers, we can all observe (and benefit from) the changes in distribution across many industries, from e-commerce to food delivery to ordering a taxi. Two new international purchases we have made are companies where distribution within their respective industries has been driven by the advent of cloud computing. One is Xero, a dynamic and fast growing Australian listed software company that specialises in accounting for small businesses. The other is Ubisoft, a French listed video-game developer, benefitting not only from strong content releases but from how that content is distributed, i.e. a shift to direct distribution to the consumer via the cloud, as opposed to a CD in a box sold through the retail channel.

The decision to remove the restriction on AIM listed shares earlier in the year was made in order to further broaden the Company’s investment universe and more importantly to ensure that we are no longer forced sellers of some of our top performing AIM shares due to an arbitrary limit on the amount that the Company is able to hold. During the period we have utilised this increased flexibility, and our AIM weighting has increased to 40% (of the net portfolio), through a combination of maintaining holdings in a number of strongly performing AIM shares, and new purchases, such as Draper Esprit and ASOS.

Within the short book we remain focused on identifying over-leveraged and capital intensive businesses. The rising market also 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 costs pressures.

PORTFOLIO POSITIONING
Relative to our benchmark we are overweight Industrials, Healthcare and Financials (excluding Banks). Within industrials our largest holdings include Bodycote and Renishaw, both global businesses with strong and dominant market positions exposed to positive trends. Within Healthcare our largest position is Dechra Pharmaceuticals, the veterinary product manufacturer which is also very internationally exposed, has a strong product suite and is exposed to positive industry drivers. Our Financials exposure is to niche asset managers like Polar Capital and Premier Asset Management, savings platform Integrafin, and specialist non-life insurer, Hiscox.

We are broadly neutral Consumer Goods and Consumer Services, which is an output of the opportunities that we are able to gain exposure to on both the long and the short side. Disruption within distribution is one theme that we are particularly drawn to, often evident within Consumer Services and Consumer Goods. This presents a wave of exciting emerging companies which we are exposed to on the long side, as well as creating pressures for many legacy incumbent business models which we are short. We are underweight Mining and Oil & Gas because many of these companies fail to meet our investment criteria.

Our long book comprises many global companies. Where we have UK exposure it is very targeted, either exposed to positive structural drivers for example veterinary spend and affordable housing, or companies that are consolidating fragmented end markets for example CVS Group and Restore.

Since the move to a sole manager there has been little radical change to the overall shape of the portfolio, because we believe the key shares and sectors where we see good long investment opportunities are the same. The key differences are: 1) a reduction in our exposure to resources; 2) further concentration behind core investment ideas; 3) a stronger focus on industry change; 4) increasing international holdings; and 5) an increase in allocation to AIM.

The short book still targets the same areas that we see as over-earning or under structural or cyclical pressure. Many of our short positions are within Consumer Services, either facing structural headwinds (digital disruption, low cost or specialised formats) or cyclical pressures (weakening consumer demand and rising cost pressures). 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.

OUTLOOK
Following the strong performance of the UK stock market in 2017 with low levels of volatility, 2018 has been much more volatile with markets reacting “more normally” to company newsflow, both positive and negative, as opposed to continually grinding higher as we saw in the previous year.

The outlook for the UK domestic economy remains challenged and the recent evidence would suggest it is deteriorating. This has had a notable impact on the share prices of many domestic companies with several market participants highlighting the value on offer. However, we think many of these UK consumer shares are “bad value” and whilst many of them 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).

As such we remain cautious on UK domestics in general, but remain positive on the outlook for UK listed companies. We think the UK is home to many compelling investment opportunities where the revenues and profits are generated outside the UK and the companies have a leading differentiated competitive offering. Notably, the outlook for these investments is tied to the global economy which we believe remains robust. Our universe is well diversified by sector and geography and there are ample opportunities to find well managed, dynamic, differentiated companies that are market leaders competing on a global basis.

Dan Whitestone
BlackRock Investment Management (UK) Limited

25 July 2018

TWENTY LARGEST INVESTMENTS AS AT 31 MAY 2018
 


Company 
Market value 
£’000 
% of net 
assets 

Description 
Ascential  12,465   2.8  Global business-to-business media company 
Dechra Pharmaceuticals  11,906   2.7  Development and supply of pharmaceutical and other products focused on the veterinary market 
Integrafin  9,861   2.3  UK savings platform for financial advisors 
Robert Walters  9,555   2.2  Provision of specialist recruitment services 
FeverTree Drinks*  9,478   2.2  Development and sale of soft drinks and mixers 
Restore*  9,246   2.1  Management of business information in both paper and digital form 
YouGov*  9,241   2.1  Provision of research and consultancy services 
SSP  8,833   2.0  Operator of food and beverage concessions in travel locations 
Bodycote  8,718   2.0  Provision of thermal processing services 
4imprint Group  8,688   2.0  Supply of promotional merchandise in the US 
Renishaw  8,667   2.0  Engineering and scientific technology company, with expertise in precision measurement and healthcare 
CVS Group*  8,556   2.0  Operation of veterinary surgeries 
Accesso Technology*  8,543   1.9  Development and supply of ticketing and virtual queuing solutions 
Hill & Smith  7,865   1.8  Production of infrastructure products and supply of galvanising services 
Advanced Medical Solutions*  7,668   1.8  Development and manufacture of wound care and closure products 
Sophos Group  7,535   1.7  Provider of cloud-enabled end-user and network security solutions 
Hiscox  7,487   1.7  Provision of insurance services 
Premier Asset Management Group*  7,229   1.6  Retail asset management 
Big Yellow  6,978   1.6  Provision of self-storage services 
First Derivatives*  6,886   1.6  Provider of software and consulting services to finance, technology and energy organisations 
 --------   -------- 
20 largest investments  175,405   40.1 
 --------   -------- 

*Traded on the Alternative Investment Market (AIM) of the London Stock Exchange.
At 31 May 2018, the Company did not hold any equity interest representing more than 3% of any company’s share capital.
The above investments may comprise long equity and long CFD positions.
A list of the Company’s investment positions is available on the Company’s website.

ANALYSIS OF INVESTMENTS AS AT 31 MAY 2018
 





Portfolio 



Fair value1 
£’000 

Gross 
market 
exposure2 
£’000 
Gross 
market 
exposure as 
a % of net 
assets3 

 
Long investment (excluding BlackRock’s Institutional Cash Fund) positions  434,372   510,329   116.6 
Short investment positions  1,828   (43,851)  (10.0)
Cash and cash equivalents4  1,290   (28,988)  (6.6)
BlackRock’s Institutional Cash Fund4  9,210   9,210   2.1 
Other net current liabilities  (9,240)  (9,240)  (2.1)
 --------   --------   -------- 
Net assets  437,460   437,460   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 value for the CFD contracts included in long and short investment positions above represents the fair valuation of all the CFD contracts, which 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 CFD positions directly in the market would have amounted to £75,957,000 at the time of purchase, and subsequent market rises in prices have resulted in unrealised gains on the CFD contracts of £2,688,000 resulting in the value of the total market exposure to the underlying securities rising to £78,645,000 as at 31 May 2018. The notional price of selling the securities to which exposure was gained via the short CFD positions would have been £45,679,000 at the time of entering into the contract, and subsequent price falls have resulted in unrealised gains on the short CFD positions of £1,828,000 and the value of the market exposure of these investments decreasing to £43,851,000 at 31 May 2018. If the short positions had been closed on 31 May 2018 this would have resulted in a gain of £1,828,000 for the Company.
2.    Market exposure in the case of equity investments is the same as fair value. In the case of CFDs 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 CFDs.
A list of the Company’s investment positions is available on the Company’s website.


DISTRIBUTION OF INVESTMENTS AS AT 31 MAY 2018
 

 
Sector 
% of long 
portfolio 
% of short 
portfolio 
% of net 
portfolio 
Oil & Gas Producers  1.8   (0.2)  1.6 
 --------   --------   -------- 
Oil & Gas  1.8   (0.2)  1.6 
 --------   --------   -------- 
Chemicals  2.5   (0.3)  2.2 
Mining  1.0   –   1.0 
 --------   --------   -------- 
Basic Materials  3.5   (0.3)  3.2 
 --------   --------   -------- 
Construction & Materials  7.6   (0.7)  6.9 
Aerospace & Defence  1.6   (0.2)  1.4 
General Industrials  1.8   (0.3)  1.5 
Electronic & Electrical Equipment  3.4   (0.4)  3.0 
Industrial Engineering  6.9   (0.3)  6.6 
Industrial Transportation  2.3   –   2.3 
Support Services  12.7   (0.9)  11.8 
 --------   --------   -------- 
Industrials  36.3   (2.8)  33.5 
 --------   --------   -------- 
Beverages  2.5   –   2.5 
Food Producers  0.8   (0.6)  0.2 
Household Goods & Home Construction  2.7   (0.2)  2.5 
Leisure Goods  4.1   –   4.1 
Personal Goods  1.1   (0.5)  0.6 
 --------   --------   -------- 
Consumer Goods  11.2   (1.3)  9.9 
 --------   --------   -------- 
Health Care Equipment & Services  3.0   (0.6)  2.4 
Pharmaceuticals & Biotechnology  5.3   –   5.3 
 --------   --------   -------- 
Health Care  8.3   (0.6)  7.7 
 --------   --------   -------- 
General Retailers  3.8   (1.9)  1.9 
Media  9.1   (0.3)  8.8 
Travel & Leisure  4.5   (1.2)  3.3 
 --------   --------   -------- 
Consumer Services  17.4   (3.4)  14.0 
 --------   --------   -------- 
Financial Services  11.5   (0.2)  11.3 
Non-life Insurance  1.6   –   1.6 
Real Estate Investment & Services  2.4   –   2.4 
Real Estate Investment Trusts  5.4   (0.3)  5.1 
 --------   --------   -------- 
Financials  20.9   (0.5)  20.4 
 --------   --------   -------- 
Software & Computer Services  10.0   (0.3)  9.7 
 --------   --------   -------- 
Technology  10.0   (0.3)  9.7 
 --------   --------   -------- 
Total Investments  109.4   (9.4)  100.0 
 ====   ====   ==== 

The above percentages are calculated based on the portfolio at 31 May 2018. The net portfolio is calculated as long investment portfolio, less short CFD portfolio.

ANALYSIS OF THE PORTFOLIO

Gross Basis1 Net Basis2
FTSE 250 39.8% 35.4%
FTSE AIM 34.0% 39.8%
FTSE Small Cap 17.7% 16.4%
International 3.8% 3.1%
Other 3.6% 4.0%
FTSE 100 1.1% 1.3%

Source: BlackRock

  1. Long portfolio exposure plus short portfolio exposure aggregate excluding investment in BlackRock’s Institutional Cash Fund.

  2. Long portfolio exposure less short portfolio exposure excluding investment in BlackRock’s Institutional Cash Fund.


MARKET CAPITALISATION AS AT 31 MAY 2018

Long positions Short positions
£1bn+ 51.8% -5.5%
£400m – £1bn 36.2% -2.2%
£100m – £400m 21.4% -1.7%
£0m – £100m 0.0% 0.0%

Net portfolio is calculated as long investment portfolio less short investment portfolio.

All investments are in equity shares unless otherwise stated.


POSITION SIZE AS AT 31 MAY 2018

Long positions Short positions
£2m+ 91 -4
£1m – £2m 27 -20

£0m – £1m
6 -14

Source: BlackRock.

STATEMENT OF COMPREHENSIVE INCOME FOR THE SIX MONTHS ENDED 31 MAY 2018
 

Revenue £’000 Capital £’000 Total £’000



Notes 
Six months ended
31.05.18 
(unaudited)
 
Six months ended
31.05.17 
(unaudited) 
Year 
ended 
30.11.17 
(audited) 
Six months ended
31.05.18 
(unaudited)
 
Six months ended
31.05.17 
(unaudited)
 
Year 
ended 
30.11.17 
(audited)
 
Six months ended
31.05.18 
(unaudited) 
Six months ended
31.05.17 
(unaudited)
 
Year 
ended 
30.11.17 
(audited)
 
Income from investments held at fair value through profit or loss 5,485  4,335  8,216   –   –   –  5,485  4,335  8,216 
Net income from contracts for difference 228  254  370   –   –   –  228  254  370 
Other income  1   13  15   –   –   –   1   13  15 
    --------   --------   --------   --------   --------   --------   --------   --------   -------- 
Total revenue 5,714  4,602  8,601   –   –   –  5,714  4,602  8,601 
    --------   --------   --------   --------   --------   --------   --------   --------   -------- 
Net profit on investments held at fair value through profit or loss  –   –   –  38,542  76,456  88,130  38,542  76,456  88,130 
Net profit/(loss) on foreign exchange  –   –   –  42  (40) (70) 42  (40) (70)
Net profit from contracts for difference and futures  –   –   –   6,756  9,887  12,535  6,756   9,887  12,535 
    --------   --------   --------   --------   --------   --------   --------   --------   -------- 
Total 5,714  4,602  8,601  45,340  86,303  100,595  51,054  90,905  109,196 
    --------   --------   --------   --------   --------   --------   --------   --------   -------- 
Expenses
Investment management and performance fees (229) (377) (661) (4,812) (5,718) (6,641) (5,041) (6,095) (7,302)
Other operating expenses (261) (236) (525) (8) (8) (16) (269) (244) (541)
    --------   --------   --------   --------   --------   --------   --------   --------   -------- 
Total operating expenses (490) (613) (1,186) (4,820) (5,726) (6,657) (5,310) (6,339) (7,843)
    --------   --------   --------   --------   --------   --------   --------   --------   -------- 
Net profit on ordinary activities before finance costs and taxation 5,224  3,989  7,415  40,520  80,577  93,938  45,744  84,566  101,353 
Finance costs  –   –  (1) (1) (1) (2) (1) (1) (3)
    --------   --------   --------   --------   --------   --------   --------   --------   -------- 
Net profit on ordinary activities before taxation 5,224  3,989  7,414  40,519  80,576  93,936  45,743  84,565  101,350 
Taxation (10) (12) (18)  –   –   –  (10) (12) (18)
    --------   --------   --------   --------   --------   --------   --------   --------   -------- 
Profit for the period 5,214  3,977  7,396  40,519  80,576  93,936  45,733  84,553  101,332 
    --------   --------   --------   --------   --------   --------   --------   --------   -------- 
Earnings per ordinary share (pence) 7.13  5.44  10.11  55.41  110.18  128.45  62.54  115.62  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 period. All income is attributable to the equity holders of the Company.

The Company does not have any other comprehensive income. The net profit for the period disclosed above represents the Company’s total comprehensive income.


STATEMENT OF CHANGES IN EQUITY FOR THE SIX MONTHS ENDED 31 MAY 2018
 

Called 
up 
share 
capital 
£’000 

Share 
premium 
account 
£’000 

Capital 
redemption 
reserve 
£’000 


Special 
reserve 
£’000 


Capital 
reserves 
£’000 


Revenue 
reserve 
£’000 



Total 
£’000 
For the six months ended 31 May 2018 (unaudited)
At 30 November 2017 4,026  21,049  11,905  35,272  312,947  11,647  396,846 
Total comprehensive income:
Net profit for the period  –   –   –   –  40,519  5,214  45,733 
Transactions with owners, recorded directly to equity:
Dividends paid(a)  –   –   –   –   –  (5,119) (5,119)
 --------   --------   --------   --------   --------   --------   -------- 
At 31 May 2018 4,026  21,049  11,905  35,272  353,466  11,742  437,460 
 --------   --------   --------   --------   --------   --------   -------- 
For the six months ended 31 May 2017 (unaudited)
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 period  –   –   –   –  80,576  3,977  84,553 
Transactions with owners, recorded directly to equity:
Dividends paid(b)  –   –   –   –   –  (4,571) (4,571)
 --------   --------   --------   --------   --------   --------   -------- 
At 31 May 2017 4,026  21,049  11,905  35,272  299,587  9,690  381,529 
 --------   --------   --------   --------   --------   --------   -------- 
For the year ended 30 November 2017 (audited)
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(c)  –   –   –   –   –  (6,033) (6,033)
 --------   --------   --------   --------   --------   --------   -------- 
At 30 November 2017 4,026  21,049  11,905  35,272  312,947  11,647  396,846 
 =====   =====   =====   =====   ======   =====   ====== 

(a)   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.
(b)   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.
(c)   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.

The transaction costs relating to the acquisition and disposal of investments amounted to £453,000 and £98,000 respectively for the six months ended 31 May 2018 (six months ended 31 May 2017: £337,000 and £91,000; year ended 30 November 2017: £732,000 and £164,000) and are included within the capital reserves.


STATEMENT OF FINANCIAL POSITION AS AT 31 MAY 2018
 



Notes 
31 May 2018 
£’000 
(unaudited)
 
31 May 2017 
£’000 
(unaudited)
 
30 November 2017 
£’000 
(audited)
 
Non current assets
Investments held at fair value through profit or loss 431,684  374,659  390,326 
    --------   --------   -------- 
Current assets
Other receivables 3,149  7,158  1,703 
Derivative financial assets held at fair value through profit or loss 4,554  3,213  189 
Cash collateral held with brokers 450  414  1,117 
Cash and cash equivalents 10,500  8,452  13,048 
    --------   --------   -------- 
18,653  19,237  16,057 
    --------   --------   -------- 
Total assets 450,337  393,896  406,383 
    --------   --------   -------- 
Current liabilities
Other payables (9,919) (7,887) (7,375)
Derivative financial liabilities held at fair value through profit or loss (38) (2,038) (882)
Cash collateral received in respect of contracts for difference (2,920) (2,442) (1,280)
    --------   --------   -------- 
(12,877) (12,367) (9,537)
    --------   --------   -------- 
Net assets 437,460  381,529  396,846 
    ======   ======   ====== 
Equity attributable to equity holders
Called up share capital  4,026  4,026  4,026 
Share premium account  21,049  21,049  21,049 
Capital redemption reserve  11,905  11,905  11,905 
Special reserve  35,272  35,272  35,272 
Capital reserves  353,466  299,587  312,947 
Revenue reserve  11,742  9,690  11,647 
    --------   --------   -------- 
Total equity 437,460  381,529  396,846 
    ======   ======   ====== 
Net asset value per ordinary share (pence) 598.19  521.71  542.66 
    ======   ======   ====== 


CASH FLOW STATEMENT FOR THE SIX MONTHS ENDED 31 MAY 2018

Six months 
ended 
31 May 2018 
£’000 
(unaudited) 
Six months 
ended 
31 May 2017 
£’000 
(unaudited)
 
Year 
ended 
30 November 2017 
£’000 
(audited) 
Operating activities
Net profit on ordinary activities before taxation 45,743  84,565  101,350 
Add back finance costs  3 
Net profit on investments and CFDs held at fair value through profit or loss (including transaction costs) (45,536) (86,514) (101,032)
Net (gain)/loss on foreign exchange (42) 40  70 
Sales of investments held at fair value through profit or loss 122,762  91,950  171,534 
Purchases of investments held at fair value through profit or loss (125,579) (93,081) (176,658)
Realised gains on closure of CFDs 26,160  22,396  43,446 
Realised losses on closure of CFDs (24,359) (11,393) (27,449)
Realised losses on closure of futures contracts (15) (205) (487)
Net movement in cash collateral received/(pledged) in respect of CFDs 2,307  757  (1,108)
Increase in other receivables (2,388) (1,376) (242)
(Decrease)/increase in other payables (14) 4,499  5,058 
Decrease/(increase) in amounts due from brokers 942  (4,436) (115)
Increase/(decrease) in amounts due to brokers 2,558  364  (707)
 --------   --------   -------- 
Net cash inflow from operating activities before interest and taxation 2,540  7,567  13,663 
 --------   --------   -------- 
Taxation on investment income included within gross income (10) (12) (18)
 --------   --------   -------- 
Net cash inflow from operating activities 2,530  7,555  13,645 
 --------   --------   -------- 
Financing activities
Interest paid (1) (1) (3)
Dividends paid (5,119) (4,571) (6,033)
 --------   --------   -------- 
Net cash outflow from financing activities (5,120) (4,572) (6,036)
 --------   --------   -------- 
(Decrease)/increase in cash and cash equivalents (2,590) 2,983  7,609 
Effect of foreign exchange rate changes 42  (40) (70)
 --------   --------   -------- 
Change in cash and cash equivalents (2,548) 2,943  7,539 
Cash and cash equivalents at start of period 13,048  5,509  5,509 
 --------   --------   -------- 
Cash and cash equivalents at end of the period 10,500  8,452  13,048 
 --------   --------   -------- 
Comprised of:
Cash at bank 1,290   82  44 
BlackRock’s Institutional Cash Series plc – Sterling Liquidity Fund 9,210  8,370  13,004 
 --------   --------   -------- 
10,500  8,452  13,048 
 =====   =====   ===== 


NOTES TO THE CONDENSED FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED 31 MAY 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. BASIS OF PREPARATION
The half yearly condensed financial statements have been prepared using the same accounting policies as set out in the Company’s Annual Report and Financial Statements for the year ended 30 November 2017 (which were prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union (EU) and as applied in accordance with the provisions of the Companies Act 2016) and in accordance with International Accounting Standard 34, ‘Interim Financial Reporting’.

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

3. INCOME

Six months 
ended 
31 May 2018 
£’000 
(unaudited)
 
Six months 
ended 
31 May 2017 
£’000 
(unaudited)
 
Year 
ended 
30 November 2017 
£’000 
(audited) 
Investment income:
UK listed dividends 3,471  2,984  5,866 
UK listed special dividends 1,068  326  441 
UK listed stock dividends 40  17  58 
UK listed REIT dividends 249  –  482 
Overseas listed dividends 553  831  1,192 
Overseas listed special dividends 62  177  177 
Overseas listed stock dividends 42  –  – 
Income from contracts for difference 228  254  370 
 --------   --------   -------- 
5,713  4,589  8,586 
 --------   --------   -------- 
Other income:
Deposit interest – 
Underwriting commission –  13  13 
 --------   --------   -------- 
13  15 
 --------   --------   -------- 
Total income 5,714  4,602  8,601 
 =====   =====   ===== 

Dividends and interest received in cash in the six months ended 31 May 2018 amounted to £4,289,000 and £1,000 (six months ended 31 May 2017: £3,233,000 and £nil; year ended 30 November 2017: £8,344,000 and £2,000) respectively.

There are no special dividends recognised in capital in the six months ended 31 May 2018 (six months ended 31 May 2017: £nil; year ended 30 November 2017: £8,000).

4. INVESTMENT MANAGEMENT AND PERFORMANCE FEES

Six  months ended
31 May 2018
(unaudited)
Six  months ended
31 May 2017
(unaudited)
Year ended
30 November 2017
(audited)
Revenue 
£’000 
Capital 
£’000 
Total 
£’000 
Revenue 
£’000 
Capital 
£’000 
Total 
£’000 
Revenue 
£’000 
Capital 
£’000 
Total 
£’000 
Investment management fee 229  686  915  377  1,131  1,508  661  1,982  2,643 
Performance fee –  4,126  4,126  –  4,587  4,587  –  4,659  4,659 
 --------   --------   --------   --------   --------   --------   --------   --------   -------- 
Total 229  4,812  5,041  377  5,718  6,095  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 six months period ended 31 May 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 six months ended 31 May 2018, a performance fee of £4,126,000 has been accrued (six months ended 31 May 2017: £4,587,000; year ended 30 November 2017: £4,659,000).

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

Six months 
ended 
31 May 2018 
£’000 
(unaudited)
 
Six months 
ended 
31 May 2017 
£’000 
(unaudited)
 
Year 
ended 
30 November 2017 
£’000 
(audited)
 
Allocated to revenue:
Custody fee
Auditor’s remuneration:
– audit services 16  18  37 
– other assurance services
Registrar’s fee 19  14  33 
Directors’ emoluments 68  87  167 
Broker fees 18  19  37 
Depositary fees 28  23  49 
Marketing fees 35  54 
Other administrative costs 66  57  134 
 --------   --------   -------- 
261  236  525 
 --------   --------   -------- 
Allocated to capital:
Custody transaction charges 16 
 --------   --------   -------- 
269  244  541 
 =====   =====   ===== 

6. DIVIDENDS
The Board has declared an interim dividend of 2.50p per share payable on 29 August 2018 to shareholders on the register at 3 August 2018 (six months ended 31 May 2017, interim dividend of 2.00p per share paid on 23 August 2017 to shareholders on the register at 4 August 2017). This dividend has not been accrued in the financial statements for the six months ended 31 May 2018 as, under IFRS, interim dividends are not recognised until paid. Dividends are debited directly to revenue reserve.

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

Six months 
ended 
31 May 2018 
(unaudited)
 
Six months 
ended 
31 May 2017 
(unaudited)
 
Year 
ended 
30 November 2017 
(audited)
 
Net revenue profit attributable to ordinary shareholders (£’000) 5,214  3,977  7,396 
Net capital profit attributable to ordinary shareholders (£’000) 40,519  80,576  93,936 
 --------   --------   -------- 
Total profit attributable to ordinary shareholders (£’000) 45,733  84,553  101,332 
 --------   --------   -------- 
Equity shareholders’ funds (£’000) 437,460  381,529  396,846 
 ---------------   --------------   -------------- 
The weighted average number of ordinary shares in issue during the period on which the return per ordinary share was calculated was: 73,130,326  73,130,326  73,130,326 
 ---------------   --------------   -------------- 
The actual number of ordinary shares in issue at the end of each period on which the net asset value per ordinary share was calculated was: 73,130,326  73,130,326  73,130,326 
 ---------------   --------------   -------------- 
Returns per share:
Revenue earnings per share (pence) 7.13  5.44  10.11 
Capital earnings per share (pence) 55.41  110.18  128.45 
 --------   --------   -------- 
Total earnings per share (pence) 62.54  115.62  138.56 
 ======   =====   ===== 

   

As at 
31 May 2018 
(unaudited)
 
As at 
31 May 2017 
(unaudited)
 
As at 
30 November 2017 
(audited)
 
Net asset value per ordinary share (pence) 598.19  521.71  542.66 
 --------   --------   -------- 
Ordinary share price (pence) 538.00  436.00  457.50 
 ======   ======   ====== 

The Company does not have any dilutive securities.

8. CALLED UP SHARE CAPITAL

Ordinary 
shares in issue 
(number) 
Treasury 
shares 
(number) 
Total 
shares 
(number)
 
Nominal 
value 
£’000 
Allotted, called up and fully paid share capital comprised:
Ordinary shares of 5p each:
 --------------   -------------   --------------   -------- 
At 1 December 2017 and 31 May 2018 73,130,326  7,400,000  80,530,326  4,026 
 ========   ========   ========   ===== 

There has been no change in the Company’s share capital during the period or as at the date of this report.

9. VALUATION OF FINANCIAL INSTRUMENTS
Financial assets and financial liabilities are either carried in the Statement of Financial Position at their fair value (investments and derivatives) or at an amount which is a reasonable approximation of fair value (due from brokers, dividends and interest receivable, due to brokers, accruals, cash and cash equivalents and bank overdrafts). IFRS 13 requires the Company to classify fair value measurements using a fair value hierarchy that reflects the significance of inputs used in making the measurements. The valuation techniques used by the Company are explained in the accounting policies note 2(g) as set out on pages 51 and 52 in the Company’s Annual Report and Financial Statements for the year ended 30 November 2017.

Categorisation within the hierarchy has been determined on the basis of the lowest level input that is significant to the fair value measurement of the relevant asset.

The fair value hierarchy has the following levels:

Level 1 – Quoted market price for an identical instrument in an active market
A financial instrument is regarded as quoted in an active market if quoted prices are readily 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 period end the CFDs were valued using the underlying equity bid/ask price and the contract price at the inception of the CFD 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 observable market data and these inputs could have a significant impact on the instrument’s valuation.

This category includes instruments that are valued based on quoted prices for similar instruments where significant entity determined adjustments or assumptions are required to reflect differences between the instruments and instruments for which there is no active market. The Investment Manager considers observable data to be that market data that is readily available, regularly distributed or updated, reliable and verifiable, not proprietary, and provided by independent sources that are actively involved in the relevant market.

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

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

There has been no change to the valuation techniques during the period under review or as at the date of this report.

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.

The table below sets out fair value measurements using IFRS 13 fair value hierarchy.

Financial assets/(liabilities) at fair value through profit or loss as at
31 May 2018 (unaudited)
Level 1 
£’000 
Level 2 
£’000 
Level 3 
£’000 
Total 
£’000 
Assets:
Equity investments 431,684  –  –  431,684 
Contracts for difference (gross exposure on long positions) –  78,645  –  78,645 
Liabilities:
Contracts for difference (gross exposure on short positions) –  (43,851) –  (43,851)
 --------   --------   --------   -------- 
431,684  34,794  –  466,478 
 ======   ======   ======   ====== 

   

Financial assets/(liabilities) at fair value through profit or loss as at
31 May 2017 (unaudited)
Level 1 
£’000 
Level 2 
£’000 
Level 3 
£’000 
Total 
£’000 
Assets:
Equity investments 374,659  –  –  374,659 
Contracts for difference (gross exposure on long positions) –  74,865  –  74,865 
Liabilities:
Contracts for difference (gross exposure on short positions) –  (23,250) –  (23,250)
Index futures (gross exposure on short positions) –  (3,663) –  (3,663)
 --------   --------   --------   -------- 
374,659  47,952  –  422,611 
 ======   ======   ======   ====== 

   

Financial assets/(liabilities) at fair value through profit or loss as at
30 November 2017 (audited)
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 period recorded at fair value as at 31 May 2018, 31 May 2017 and 30 November 2017. The Company did not hold any Level 3 securities throughout the financial period under review or as at 31 May 2018, 31 May 2017 or 30 November 2017.

10. TRANSACTIONS WITH THE AIFM AND INVESTMENT MANAGER
BlackRock Fund Managers Limited (BFM) provides management and administration services to the Company under a contract which is terminable on six month’s 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)).

The investment management fee due for the six months ended 31 May 2018 amounted to £915,000 (six months ended 31 May 2017: £1,508,000; year ended 30 November 2017: £2,643,000). In addition the performance fee of £4,126,000 (six months ended 31 May 2017: £4,587,000, year ended 30 November 2017: £4,659,000) was accrued for the six months ended 31 May 2018.

At the period end £915,000 was outstanding in respect of management fees (31 May 2017: £1,508,000; 30 November 2017: £1,942,000) and £4,126,000 was accrued in respect of performance fees (31 May 2017: £4,587,000; 30 November 2017: £4,659,000). Any final performance fee for the full year ending 30 November 2018 will not crystallise and fall due until the calculation date of 30 November 2018.

In addition to the above services, BlackRock provides the Company with marketing services. The total fees paid or payable for these services to 31 May 2018 amounted to £35,000 excluding VAT (six months ended 31 May 2017: £9,000; year ended 30 November 2017: £54,000). Marketing fees of £117,000 excluding VAT (31 May 2017: £37,000; 30 November 2017: £92,000) were outstanding at 31 May 2018.

The Company has an investment in BlackRock’s Institutional Cash Series plc – Sterling Liquidity Fund of £9,210,000 as at 31 May 2018 (31 May 2017: £8,370,000; 30 November 2017: £13,004,000).

11. RELATED PARTY DISCLOSURE: DIRECTORS’ EMOLUMENTS
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. The Chairman receives an annual fee of £36,000, the Chairman of the Audit Committee receives an annual fee of £28,000 and each other Director receives an annual fee of £24,000.

As at 31 May 2018 an amount of £11,000 (31 May 2017: £13,000; 30 November 2017: £11,000) was outstanding in respect of Directors’ fees.

At the period end and at 25 July 2018, the interests of the Directors in the ordinary shares of the Company were as follows:

Ordinary shares 
31 May 2018 
Ordinary shares 
25 July 2018 
Christopher Samuel (Chairman) 11,000  11,000 
Loudon Greenlees 15,000  15,000 
Simon Beart 47,677(1)  48,199(2)
Jean Matterson 46,000  46,000 
Andrew Pegge 2,000  2,000 

1.    Including 16,129 shares held by Mrs Beart.
2.    Including 16,390 shares held by Mrs Beart.


12. CONTINGENT LIABILITIES
There were no contingent liabilities as at 31 May 2018 (31 May 2017 and 30 November 2017: nil).

13. PUBLICATION OF NON STATUTORY ACCOUNTS
The financial information contained in this half yearly financial report does not constitute statutory accounts as defined in section 435 of the Companies Act 2006. The financial information for the six months ended 31 May 2018 and 31 May 2017 has not been audited.

The information for the year ended 30 November 2017 has been extracted from the latest published audited financial statements, which have been filed with the Registrar of Companies. The report of the Auditor on those financial statements contained no qualification or statement under sections 498(2) or 498(3) of the Companies Act 2006.

14. ANNUAL RESULTS
The Board expects to announce the annual results for the year ending 30 November 2018 in February 2019. Copies of the results announcement can be obtained from the Secretary on 020 7743 3000 or by email at [email protected]. The Annual Report and Financial Statements should be available in February 2019, with the Annual General Meeting expected to be held in March 2019.

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INDEPENDENT REVIEW REPORT TO BLACKROCK THROGMORTON TRUST PLC

 

INTRODUCTION
We have been engaged by the Company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 31 May 2018 which comprises the Statement of Comprehensive Income, Statement of Changes in Equity, Statement of Financial Position, Cash Flow Statement and the related notes 1 to 14. We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

This report is made solely to the Company in accordance with guidance contained in International Standard on Review Engagements (UK and Ireland) 2410 “Review of Interim Financial Information Performed by the Independent Auditor of the Entity” issued by the Auditing Practices Board. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company, for our work, for this report, or for the conclusions we have formed.

DIRECTORS’ RESPONSIBILITIES
The half-yearly financial report is the responsibility of, and has been approved by, the Directors. The Directors are responsible for preparing the half-yearly financial report in accordance with the Disclosure Guidance and Transparency Rules of the United Kingdom’s Financial Conduct Authority.

As disclosed in note 2, the annual financial statements of the Company are prepared in accordance with IFRSs as adopted by the European Union. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34, “Interim Financial Reporting”, as adopted by the European Union.

OUR RESPONSIBILITY
Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.

SCOPE OF REVIEW
We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, “Review of Interim Financial Information Performed by the Independent Auditor of the Entity” issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

CONCLUSION
Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 31 May 2018 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure Guidance and Transparency Rules of the United Kingdom’s Financial Conduct Authority.

Ernst & Young LLP
London
25 July 2018

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For further information, please contact:

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

Press enquiries:

Lucy Horne, Lansons Communications – Tel:  020 7294 3689
E-mail:  [email protected]

26 July 2018

12 Throgmorton Avenue
London EC2N 2DL

END

The Half Yearly Financial Report will also be available on the BlackRock website at http://www.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.


Source: PR Newswire (July 26, 2018 - 2:00 AM EDT)

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