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
2017
PERFORMANCE RECORD
Financial Highlights
Attributable to ordinary shareholders |
31 May 2017
(unaudited) |
30 November 2016
(audited) |
Change
% |
Assets |
|
|
|
Net assets |
£381.53m |
£301.55m |
+26.5 |
Net asset value per share |
521.71p |
412.34p |
+26.5 |
– with income reinvested |
|
|
+28.3 |
Ordinary share price
(mid-market) |
436.00p |
325.00p |
+34.2 |
– with income reinvested |
|
|
+36.4 |
Numis Smaller Companies excluding
AIM (excluding Investment Companies) Index |
21,545.19 |
18,157.95 |
+18.7 |
|
For the six
months ended
31 May 2017
(unaudited) |
For the six
months ended
31 May 2016
(unaudited) |
Change
% |
Revenue |
|
|
|
Net revenue return after taxation
(£'000) |
3,977 |
2,743 |
+45.0 |
Revenue return per ordinary
share |
5.44p |
3.75p |
+45.1 |
|
------ |
------ |
------ |
Dividend per ordinary
share |
|
|
|
Interim |
2.00p |
1.25p |
+60.0 |
|
====== |
====== |
===== |
CHAIRMAN’S STATEMENT
PERFORMANCE
For the six months ended 31 May 2017
the Company’s net asset value per share (NAV) returned 28.3%
compared with a return of 18.7% for the Numis Smaller Companies
excluding AIM (excluding Investment Companies) Index. The FTSE
All-Share Index returned 13.6% over the same period (all figures in
sterling terms with income reinvested). It is encouraging to see
that the portfolio has performed strongly, outperforming the
benchmark index by 9.6% and generating a return of more than twice
that of the wider UK stock market (as measured by the FTSE
All-Share Index). 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
2017 (WITH INCOME REINVESTED)
|
Benchmark
(with income reinvested) |
Share price
(with income reinvested) |
NAV per share
(with income reinvested) – undiluted |
1 Year change % |
23.9% |
34.0% |
35.1% |
3 Year change % |
34.6% |
58.4% |
63.4% |
5 Year change % |
106.4% |
172.6% |
162.8% |
Since 1 July 2008 change
%1 |
140.8% |
288.1% |
312.7% |
1 Date of BlackRock's appointment as Manager.
Since the period end and up to the close of business on 20
July 2017, the NAV has fallen by 1.8%, and the benchmark index has
fallen by 1.2%. (All figures in sterling terms with income
reinvested.)
REVENUE RETURN AND DIVIDENDS
The revenue return per share for the period amounted to
5.44 pence compared to 3.75 pence earned during the comparative period
last year. This is an increase of 45.1% 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 2.00 pence per share
(2016: 1.25 pence per share) payable
on 23 August 2017 to shareholders on
the register on 4 August 2017
(ex-dividend date is 3 August
2017).
MARKET OVERVIEW
The period under review was characterised by stronger performance
with episodes of market volatility. Sentiment in the UK has been
dominated by political uncertainty with some highly publicised
political rhetoric from the initial negotiations on the terms of
the UK’s exit from the European Union (EU). The negative effect of
the uncertainty around Brexit was tempered somewhat by the outcome
of the Dutch and French elections, as victories by both moderate
candidates were well received by the market, helping to quell some
of the political risk present. It was somewhat pleasing, therefore,
that the International Monetary Fund twice revised its UK growth
forecast upwards in the period.
The Brexit process officially began on 29
March 2017 as Article 50 of the Lisbon Treaty was triggered.
The Prime Minister’s intention to do so had been well communicated
and the market’s reaction was somewhat muted. On 18 April the
Government called a snap general election to be held on 8 June and
Sterling rallied against both the US Dollar and the Euro. It
was anticipated that a Conservative victory with an increased
majority would strengthen the UK’s negotiating position with the
EU. However, the outcome of the general election was not as
expected, with no party commanding an outright majority and
resulting in a hung parliament. Sterling fell on this result but
has since stabilised. The Conservatives remain as the largest party
and have since formed a minority government with the support of the
Democratic Unionist Party (DUP) enacted through a confidence and
supply agreement. The agreement reached with the DUP is likely to
strengthen the UK Government’s ability to negotiate effectively
with the EU on the terms of the UK’s exit and which markets may
view as a positive development under the circumstances.
In the US, President Trump’s victory in the US Presidential
elections saw markets rally in anticipation of promised
protectionist policies, business friendly corporation tax cuts,
streamlined regulation and increased infrastructure investment. The
Federal Reserve increased interest rates in March and June of this
year following improving economic data. However, more recent data
has been mixed and the ability of the Trump administration to
implement their policies has come into question with certain
policies only partially delivered and others abandoned
entirely.
INVESTMENT MANAGEMENT ARRANGEMENTS
As I mentioned in the Company’s Annual Report for the year to
30 November 2016, although
performance has been strong in both relative and absolute terms –
as set out in the performance chart above – the Company’s shares
have persistently traded at a significant discount to NAV. Although
this discount has not been out of line with the overall sector, the
Board felt it important to consult with major shareholders and the
Company’s advisors on this issue.
As announced to the market on 24 July
2017, following shareholder consultation and negotiation
with the Manager, the Board has agreed a revised management fee
structure. I am pleased to report that with effect from
1 August 2017, the annual management
fee will be calculated at 0.35% of month end gross assets
(previously 0.70% of month end gross assets), representing a 50%
reduction. Effective 1 December 2017,
the performance fee will increase from 10% to 15% of any NAV total
return outperformance over the benchmark and will be calculated on
a 2 year rolling average basis which will be applied to average
gross assets over two years. With effect from 1 December 2017, the total management and
performance fees paid to BlackRock will be subject to a maximum
aggregate cap of 1.25% of average gross assets over a two year
period. The Board believes that the new fee structure is
appropriately aligned to the Company’s activities, investment
objective and shareholder interests. The low base fee minimises the
costs borne by shareholders whilst the performance fee is designed
to reward the Manager at a level acceptable to shareholders for the
generation of superior performance. The Board believes that these
changes will result in improved performance, further enhancing
shareholder return, increasing the Company’s attractiveness and
potentially narrowing the discount at which the Company’s shares
trade in the market, thereby increasing liquidity for shareholders.
Further information on management and performance fees during the
period can be found in note 4.
In addition, the Board has amended the investment parameters
within which the Manager must operate, increasing the existing
maximum permitted exposure to equities or collective investment
vehicles traded on the AIM market of the London Stock Exchange from
25% of gross assets (at the time of acquisition) to 35% of gross
assets (at the time of acquisition). The rationale for this change
is that we increasingly find that many more companies are choosing
to remain on the AIM Market rather than seeking a Main Market
listing. The change is being made to afford the investment managers
greater flexibility to continue to hold strongly performing AIM
stocks where it would otherwise be necessary to divest when the
aggregate portfolio exposure limit of 25% was reached.
The Board intends to continue its review of the Company’s
investment strategy and this may result in a further increase to
the AIM exposure limit. If deemed to be appropriate, this change
would be undertaken in tandem with a change to the Company’s
benchmark index, the Numis Smaller Companies ex AIM (excluding
Investment Companies) Index to the Numis Smaller Companies plus AIM
(excluding Investment Companies) Index to reflect the portfolio’s
greater potential AIM market exposure. The changes being considered
would, in aggregate, require shareholder approval in a general
meeting. Therefore, should the Board reach a decision on these
matters, suitable resolutions would be put to shareholders seeking
your approval at the Company’s Annual General Meeting (AGM) which
is expected to be held in March
2018.
The changes being contemplated would be made with the intention
of optimising investment performance and would not represent a
significant shift in the Company’s investment approach, with the
focus remaining on providing shareholders with capital growth and
an attractive total return by investing in UK smaller and
mid-capitalisation companies.
BOARD COMPOSITION
As I mentioned in my Chairman’s Statement to the Annual Report, I
have been Chairman of the Company since March 2012, following my appointment to the Board
in March 2007. I believe it is now
the right time to step down both as Chairman of the Board and as a
Director. I will therefore retire from the Board with effect from
24 July 2017. As previously
announced, as part of the Board’s succession plans, Christopher
Samuel will succeed me as Chairman of the Board with effect
from the date of my retirement. Mr Samuel has extensive investment
company experience and financial sector expertise and I have no
doubt that he will provide strong and diligent leadership of this
Company, ensuring that it continues to achieve its objective of
providing shareholders with capital growth and an attractive total
return.
OUTLOOK
Overall, the outlook for the UK and global economy appears to be
generally positive, with improving economic data generated by the
UK, Europe and the US. However,
there are still a number of significant risks and headwinds
present, not least the effect of US President Trump’s protectionist
policies and the impact of sustained uncertainty around Brexit
negotiations. In the UK, economists have forecast rising inflation
and a fall in consumer spending as the effect of Sterling’s
depreciation and the rise in import costs are passed on to the UK
consumer through price increases. With UK inflation now above the
Bank of England’s 2% target, a rise in interest rates this year may
be seen, although any increase is expected to be gradual to avoid
unsettling markets.
Against this backdrop, our investment managers will continue to
seek to identify opportunities to add to existing holdings or to
introduce new stocks into the portfolio which appear well
positioned to benefit as the economy adjusts. The investment
strategy is unchanged, focusing on companies with robust business
models, strong cash flows and favourable industry characteristics,
led by management teams capable of ‘self-help’. The investment
process remains focused on bottom-up stock selection, assembling a
portfolio of individual companies which, taken as a whole, should
provide capital growth and an attractive total return, regardless
of short term economic fluctuations. Your Board is fully supportive
of this approach.
Crispin Latymer
Chairman
24 July 2017
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 2016.
A detailed explanation can be found in the Strategic Report on
pages 11 to 14 and in note 17 on pages 60 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 12 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 2016 were approximately 1.1% of net assets.
DIRECTORS’ RESPONSIBILITY STATEMENT
The Disclosure 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 and Transparency Rules.
The half yearly financial report has been reviewed by the
Company’s Auditor.
The half yearly financial report was approved by the Board on
24 July 2017 and the above
responsibility statement was signed on its behalf by the
Chairman.
Crispin Latymer
For and on behalf of the Board
24 July 2017
INVESTMENT MANAGER’S REPORT
for the six months ended 31 May
2017
MARKET REVIEW AND OVERALL INVESTMENT PERFORMANCE
The first half of our financial year corresponded to a period of
strong markets. Markets performed well despite numerous political
uncertainties including tensions involving North Korea, the French Presidential election
and at the end of the period, the calling of a surprise general
election in the UK. Global GDP growth has been firm with notable
signs of improvement in the EU, although UK GDP growth slowed in
the first quarter.
PERFORMANCE REVIEW
The Company’s NAV per share has performed well in the first six
months of the financial year, increasing by 28.3% to 521.71p on a
total return basis. This compares to an increase in the benchmark
of 18.7% and the FTSE 100 of 13.1%.
Both the long only equity and the long/short portfolios
contributed positively during the period. The long/short book
contributed 3.1% to NAV.
Starting with the long/short portfolio, it was encouraging to
see that despite the strong market return which acted as a headwind
for the short book, one of the top three positive contributors to
the performance of the total Company return was from one of our
short positions where a restructuring resulted in a significant
writedown of the company’s assets.
Other notable contributors in the long/short portfolio included
Melrose Industries and JD Sports. Melrose has demonstrated
strong progress in profit growth as the timing and magnitude of
improvements at Nortek, its recent acquisition, continue ahead of
the original plan. JD Sports delivered excellent full year results
with earnings per share up 55%, helped by strong like-for-like
sales growth in the UK. European development accelerated with 54
additional JD Fascia stores opened and the first stores opened in
Asia. JD Sports operates with net
cash and continues to look well placed.
Turning to the long-only equity portfolio, the largest positive
contributors to performance were our holdings in Warpaint,
Morgan Sindall, Fever-Tree and
Dechra Pharmaceuticals. Warpaint reported a 24% increase in 2016
earnings and announced a maiden final dividend of 1.5p and we
believe the outlook for the company remains good. The shares have
performed well since IPO and the outlook for the company remains
strong. Morgan Sindall’s recent AGM statement showed continued
strong trading across the group resulting in further broker
upgrades while Fever-Tree continues to grow strongly, reporting 73%
organic revenue growth in 2016. Dechra Pharmaceuticals’ interim
results for the 6 months to December came in ahead of
expectations, with the integration of recent acquisitions
supplementing strong revenue growth from existing operations.
Our holding in plastic packaging engineer RPC was the largest
detractor during the period. RPC fell as the market grew concerned
around the company’s acquisition strategy following the announced
acquisition of Letica for $490m
funded by a 1 for 4 rights issue. RPC’s management have an
excellent track record and remain ambitious.
ACTIVITY
Within the long only equity portfolio we have been increasing the
concentration of the portfolio by adding to our highest conviction
positions and reducing the total number of holdings.
We sold our holding in Hansteen after it announced the sale of
its Continental European operations and the holding in Topps Tiles
which has seen weakening like-for-like sales since the EU
referendum.
We have added positions in a number of best in class mid-cap
companies, which the Company has held in the past including
Berkeley Group, Derwent London,
Bellway and Rightmove.
We purchased a new holding in Countryside Properties.
Countryside builds houses both on land owned or controlled by
itself, and also on land owned by public bodies including local
authorities. The latter approach avoids the need to buy land in
these situations and helps Countryside generate good returns on
investment on such long term developments, and also provides
visibility of revenues. We believe the Company looks set for good
earnings growth.
We continue to find opportunities in initial public offerings,
and recently took part in the IPOs of Medica, UP Global Sourcing
and Xafinity. Medica is a leading independent UK provider of
radiology reporting delivering more than 1.3 million reports per
annum, mainly to the NHS. UP Global Sourcing is a leading product
development, sourcing and merchandising company owning brands such
as Salter, Russell Hobbs, Beldray
and Constellation. Xafinity is a UK specialist in pensions
actuarial, consulting and administration, providing a wide range of
advisory and compliance services to over 550 pension scheme
clients.
We have also used strong share price performance to take some
profits in a number of long term holdings which have performed well
and where valuations are now quite high. Our view on many of these
companies remains unchanged and we would add to many of these on
any setback.
Within the long/short portfolio, a few new holdings have been
added from promising IPOs, as outlined above. We’ve also been
increasing our short positions in certain UK domestics in recent
months, where we see scope for disappointment in valuation, rising
risks to earnings and cashflow from falling demand and rising costs
pressures. Recent political events leading to more uncertainty will
continue to exert further pressure on some of these business
models.
PORTFOLIO POSITIONING
Relative to our benchmark index we remain overweight media
companies, housebuilders, construction companies, industrial
engineers and miners. Our media stocks include 4imprint and Next
Fifteen which are both heavily US and business to business focused.
Our housebuilders include Bellway and Berkeley Group. Within the
construction sector our holdings having a more infrastructure and
public housing focus, including Morgan
Sindall, Marshalls and Costain. Our engineering holdings
include Hill & Smith, Avon Rubber, Bodycote, Gooch &
Housego and Trifast. All these companies are very internationally
focused and generally supplying attractive end markets.
We remain underweight support services companies, food
producers, software companies and challenger banks.
We estimate that around half of the revenues of our portfolio
originate in the UK and these include defensive consumer companies
such as CVS Group and Cineworld. More cyclical consumer companies
include JD Sports and Headlam.
Within the long/short portfolio, there has been little 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, and the short book still targets the same areas that
we see as generating unsustainable returns 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
pressures (weakening consumer demand, rising costs).
OUTLOOK
Markets have remained firm based on generally good economic data
around the world, however the most recent UK GDP growth has been
weaker than expected, whilst wage growth remains lower than
inflation. Political developments have continued to be at the
forefront, with the unexpected call for a snap general election in
the UK and subsequent outcome of a hung parliament.
The unexpected result in the election has undoubtedly increased
the uncertainty around Brexit negotiations and may have an impact
on business investment decisions and could damage consumer
confidence.
Meanwhile, valuations are not cheap and although earnings growth
has been good for many of our holdings, and they remain well set,
an increasingly large number of companies trade on more than 20
times forecast earnings. Given this and the potential for further
political surprise or economic setback, the share prices of UK
small and mid-caps may find it difficult to make further progress
over the coming months.
Despite these concerns, we believe our portfolio is suitably
diversified and comprised of many market-leading businesses, run by
strong management teams and is therefore well placed for the
current environment, although it could suffer in any de-rating or
momentum correction. We also have the additional benefit through
the long/short portfolio to short companies with weaker
fundamentals and to vary our overall exposure to the market.
Mike Prentis and Dan Whitestone
BlackRock Investment Management (UK) Limited
24 July 2017
TWENTY LARGEST INVESTMENTS
as at 31 May 2017
Company |
|
Market value
£’000 |
% of net
assets |
Description |
CVS Group* |
Ordinary shares
Long CFD position |
10,141
2,768 |
3.4 |
Operation of veterinary
surgeries |
Dechra Pharmaceuticals |
Ordinary shares
Long CFD position |
9,070
1,604 |
2.8 |
Development and supply of
pharmaceutical and other products focused on the veterinary
market |
4imprint Group |
Ordinary shares
Long CFD position |
7,835
1,484 |
2.4 |
Supply of promotional merchandise in
the US |
JD Sports Fashion |
Ordinary shares
Long CFD position |
6,509
2,518 |
2.4 |
Retail supply of sports and leisure
footwear and clothing |
Cineworld Group |
Ordinary shares
Long CFD position |
6,332
2,336 |
2.3 |
Operation of cinemas |
Ascential |
Ordinary shares
Long CFD position |
4,963
2,454 |
1.9 |
Connection of businesses through
international exhibitions and festivals |
Hill & Smith |
Ordinary shares
Long CFD position |
6,683
719 |
1.9 |
Production of infrastructure
products and supply of galvanizing services |
Big Yellow |
Ordinary
shares |
7,355 |
1.9 |
Provision of self-storage
services |
Ibstock |
Ordinary shares
Long CFD position |
5,879
1,402 |
1.9 |
Manufacture of clay bricks and
concrete products |
Bellway |
Ordinary shares
Long CFD position |
6,373
756 |
1.9 |
UK housebuilding |
Berkeley Group Holdings |
Ordinary shares
Long CFD position |
5,713
1,393 |
1.9 |
Development of residential property
in London |
Derwent London |
Ordinary shares
Long CFD position |
5,947
952 |
1.8 |
Development and ownership of office
property in Central and North London |
Avon Rubber |
Ordinary
shares |
6,734 |
1.8 |
Production of safety masks and dairy
related products |
Accesso Technology* |
Ordinary shares
Long CFD position |
5,039
1,468 |
1.7 |
Development and supply of ticketing
and virtual queuing solutions |
Advanced Medical Solutions* |
Ordinary shares
Long CFD position |
5,542
888 |
1.7 |
Development and manufacture of wound
care and closure products |
Melrose Industries |
Ordinary shares
Long CFD position |
2,330
3,944 |
1.7 |
Purchase and improvement of
manufacturing businesses |
Workspace Group |
Ordinary shares
Long CFD position |
5,717
542 |
1.6 |
Supply of flexible workspace to
businesses in London |
Johnson Service Group* |
Ordinary shares
Long CFD position |
4,227
1,966 |
1.6 |
Provision of textile related
services |
Bodycote |
Ordinary shares
Long CFD position |
5,579
504 |
1.6 |
Provision of thermal processing
services |
Marshalls |
Ordinary shares
Long CFD position |
5,084
965 |
1.6 |
Manufacture and sale of concrete
stone paving and related products |
|
|
------- |
------ |
|
20 largest investments |
|
151,715 |
39.8 |
|
|
|
====== |
===== |
|
* Traded on the Alternative Investment Market (AIM) of the
London Stock Exchange.
At 31 May 2017, the Company did not
hold any equity interest representing more than 3% of each investee
company’s share capital.
A list of the Company’s long only equity portfolio and long CFD
portfolio is available on the Company’s website.
ANALYSIS OF INVESTMENTS
as at 31 May 2017
Portfolio |
Fair
value1
£’000 |
Gross market
exposure2
£’000 |
Gross market
exposure
as a % of net assets |
|
|
|
|
Equity investments |
374,659 |
374,659 |
98.2 |
|
-------- |
-------- |
-------- |
Total long CFD positions |
1,799 |
74,865 |
19.6 |
|
-------- |
-------- |
-------- |
Total short CFD positions |
(415) |
(23,250) |
(6.1) |
|
-------- |
-------- |
-------- |
Short index futures position |
(209) |
(3,663) |
(1.0) |
|
-------- |
-------- |
-------- |
Total Investments |
375,834 |
422,611 |
110.7 |
|
-------- |
-------- |
-------- |
Cash and cash
equivalents3 |
8,452 |
(38,325) |
(10.0) |
|
-------- |
-------- |
-------- |
Other net current liabilities |
(2,757) |
(2,757) |
(0.7) |
|
-------- |
-------- |
-------- |
Net assets |
381,529 |
381,529 |
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 column above includes CFD and
futures contracts at their fair value, 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 £73,066,000 at the time of purchase,
and subsequent market rises in prices have resulted in unrealised
gains on the CFD contracts of £1,799,000 resulting in the value of
the total market exposure to the underlying securities rising to
£74,865,000 as at 31 May 2017. The
notional price of selling the securities to which exposure was
gained via the short CFD and index futures positions would have
been £22,835,000 and £3,454,000 respectively at the time of
entering into the contract, and subsequent price increases have
resulted in unrealised losses on the short CFD and index futures
positions of £415,000 and £209,000 respectively and the value of
the market exposure of these investments increasing to £23,250,000
and £3,663,000 respectively at 31 May
2017. If the short positions had been closed on 31 May
2017 this would have resulted in a loss of £624,000 for the
Company.
2. Market exposure in the case of equity investments is the same as
fair value. In the case of CFDs and futures it is the market value
of the underlying shares to which the portfolio is exposed via the
contract.
3. Cash and cash equivalents include investment in BlackRock’s
Institutional Cash Series plc – Sterling Liquidity Fund of
£8,370,000. The gross market exposure column for Cash and cash
equivalents has been adjusted to assume the Company purchased
direct holdings rather than exposure being gained through CFDs or
futures.
DISTRIBUTION OF INVESTMENTS
as at 31 May 2017
Sector |
equity
portfolio
% |
long CFD
portfolio
% |
short CFD
& future
portfolio
% |
net
portfolio
% |
Oil & Gas |
|
|
|
|
Oil & Gas Producers |
2.3 |
– |
(0.1) |
2.2 |
Oil Equipment, Services &
Distribution |
– |
0.1 |
– |
0.1 |
|
------ |
------ |
------ |
----- |
|
2.3 |
0.1 |
(0.1) |
2.3 |
|
------ |
------ |
------ |
----- |
Basic Materials |
|
|
|
|
Chemicals |
2.2 |
0.4 |
(0.3) |
2.3 |
Industrial Metals & Mining |
0.6 |
– |
– |
0.6 |
Mining |
3.8 |
– |
– |
3.8 |
|
------ |
------ |
------ |
----- |
|
6.6 |
0.4 |
(0.3) |
6.7 |
|
------ |
------ |
------ |
----- |
Industrials |
|
|
|
|
Construction & Materials |
8.1 |
2.1 |
– |
10.2 |
Aerospace & Defence |
2.6 |
– |
– |
2.6 |
General Industrials |
2.5 |
0.8 |
– |
3.3 |
Electronic & Electrical
Equipment |
1.3 |
0.6 |
(0.4) |
1.5 |
Industrial Engineering |
4.4 |
0.7 |
(0.3) |
4.8 |
Industrial Transportation |
2.0 |
0.2 |
(0.1) |
2.1 |
Support Services |
5.7 |
1.5 |
(1.0) |
6.2 |
|
------ |
------ |
------ |
----- |
|
26.6 |
5.9 |
(1.8) |
30.7 |
|
------ |
------ |
------ |
----- |
Consumer Goods |
|
|
|
|
Beverages |
0.9 |
0.2 |
(0.1) |
1.0 |
Food Producers |
– |
– |
(0.1) |
(0.1) |
Household Goods & Home
Construction |
8.7 |
1.5 |
– |
10.2 |
Leisure Goods |
1.0 |
0.2 |
– |
1.2 |
Personal Goods |
1.1 |
0.1 |
(0.1) |
1.1 |
|
------ |
------ |
------ |
----- |
|
11.7 |
2.0 |
(0.3) |
13.4 |
|
------ |
------ |
------ |
----- |
Health Care |
|
|
|
|
Health Care Equipment &
Services |
2.0 |
0.2 |
– |
2.2 |
Pharmaceuticals &
Biotechnology |
2.5 |
0.4 |
– |
2.9 |
|
------ |
------ |
------ |
----- |
|
4.5 |
0.6 |
– |
5.1 |
|
------ |
------ |
------ |
----- |
Consumer Services |
|
|
|
|
Food & Drug Retailers |
– |
0.4 |
(0.5) |
(0.1) |
General Retailers |
6.1 |
2.2 |
(0.6) |
7.7 |
Media |
8.9 |
2.1 |
(0.2) |
10.8 |
Travel & Leisure |
5.1 |
2.1 |
(0.9) |
6.3 |
|
------ |
------ |
------ |
----- |
|
20.1 |
6.8 |
(2.2) |
24.7 |
|
------ |
------ |
------ |
----- |
Financials |
|
|
|
|
Banks |
– |
0.2 |
– |
0.2 |
Financial Services |
5.0 |
0.4 |
(0.9) |
4.5 |
Non-life Insurance |
0.9 |
0.5 |
(0.1) |
1.3 |
Real Estate Investment &
Services |
2.0 |
0.2 |
– |
2.2 |
Real Estate Investment Trusts |
4.9 |
0.5 |
– |
5.4 |
|
------ |
------ |
------ |
----- |
|
12.8 |
1.8 |
(1.0) |
13.6 |
|
------ |
------ |
------ |
----- |
Technology |
|
|
|
|
Software & Computer
Services |
3.6 |
0.5 |
(0.4) |
3.7 |
Technology Hardware &
Equipment |
– |
– |
(0.2) |
(0.2) |
|
------ |
------ |
------ |
----- |
|
3.6 |
0.5 |
(0.6) |
3.5 |
|
------ |
------ |
------ |
----- |
Total Investments |
88.2 |
18.1 |
(6.3) |
100.0 |
|
===== |
===== |
===== |
===== |
The above percentages are calculated based on the portfolio at
31 May 2017. The net portfolio is
calculated as long only equity portfolio plus long CFD portfolio
less short CFD portfolio.
ANALYSIS OF THE PORTFOLIO
|
Gross
Basis1 |
Net
Basis2 |
FTSE 250 |
44.1% |
44.5% |
FTSE AIM |
27.6% |
29.8% |
FTSE Small Cap |
21.2% |
21.8% |
Other |
7.1% |
3.9% |
Source: BlackRock.
1. Long and short CFD portfolio in aggregate plus futures and
long only equity portfolio excluding investments in BlackRock's
Institutional Cash Series plc – Sterling Liquidity Fund.
2. Long CFD portfolio less short CFD portfolio and futures
portfolio plus long only equity portfolio excluding investments in
BlackRock's Institutional Cash Series plc – Sterling Liquidity
Fund.
MARKET CAPITALISATION AS AT
31 MAY 2017
|
Long positions
(including the long equity portfolio and long CFD portfolio) |
Short positions |
£1bn+ |
45.1% |
-2.1% |
£400m-£1bn |
29.9% |
-2.5% |
£100m-£400m |
31.4% |
-0.9% |
£0m-£100m |
0.0% |
-0.9% |
Source: BlackRock.
Weighted average market capitalisation as at 31 May 2017: £1,091.3 million (Benchmark Index:
£919.7 million).
POSITION SIZE AS AT 31 MAY 2017
|
Long positions
(including the long equity portfolio and long CFD portfolio) |
Short positions |
£2m+ |
85 |
-1 |
£1m-2m |
51 |
-2 |
£0m-£1m |
50 |
-42 |
Source: BlackRock.
STATEMENT OF COMPREHENSIVE INCOME
for the six months ended 31 May
2017
|
Notes |
Revenue
£’000 |
Capital
£’000 |
Total
£’000 |
Six
months
ended
31.05.17
(unaudited) |
Six
months
ended
31.05.16
(unaudited) |
Year
ended
30.11.16
(audited) |
Six
months
ended
31.05.17
(unaudited) |
Six
months
ended
31.05.16
(unaudited) |
Year
ended
30.11.16
(audited) |
Six
months
ended
31.05.17
(unaudited) |
Six
months
ended
31.05.16
(unaudited) |
Year
ended
30.11.16
(audited) |
|
|
|
|
|
|
|
|
|
|
|
Income from investments held at fair
value through profit or loss |
3 |
4,335 |
3,313 |
6,794 |
– |
– |
– |
4,335 |
3,313 |
6,794 |
Net income from contracts for
difference |
3 |
254 |
(20) |
76 |
– |
– |
– |
254 |
(20) |
76 |
Other income |
3 |
13 |
– |
1 |
– |
– |
– |
13 |
– |
1 |
|
|
-------- |
-------- |
-------- |
-------- |
-------- |
-------- |
-------- |
-------- |
-------- |
Total revenue |
|
4,602 |
3,293 |
6,871 |
– |
– |
– |
4,602 |
3,293 |
6,871 |
|
|
-------- |
-------- |
-------- |
-------- |
-------- |
-------- |
-------- |
-------- |
-------- |
Profit on investments held at fair
value through profit or loss |
|
– |
– |
– |
76,456 |
517 |
10,419 |
76,456 |
517 |
10,419 |
Loss on foreign exchange |
|
– |
– |
– |
(40) |
– |
(24) |
(40) |
– |
(24) |
Net profit from contracts for
difference |
|
– |
– |
– |
9,887 |
3,040 |
6,746 |
9,887 |
3,040 |
6,746 |
|
|
-------- |
-------- |
-------- |
-------- |
-------- |
-------- |
-------- |
-------- |
-------- |
Total |
|
4,602 |
3,293 |
6,871 |
86,303 |
3,557 |
17,141 |
90,905 |
6,850 |
24,012 |
|
|
-------- |
-------- |
-------- |
-------- |
-------- |
-------- |
-------- |
-------- |
-------- |
Expenses |
|
|
|
|
|
|
|
|
|
|
Investment management and performance
fees |
4 |
(377) |
(306) |
(621) |
(5,718) |
(1,152) |
(2,630) |
(6,095) |
(1,458) |
(3,251) |
Operating expenses |
5 |
(236) |
(238) |
(519) |
(8) |
(8) |
(18) |
(244) |
(246) |
(537) |
|
|
-------- |
-------- |
-------- |
-------- |
-------- |
-------- |
-------- |
-------- |
-------- |
Total operating expenses |
|
(613) |
(544) |
(1,140) |
(5,726) |
(1,160) |
(2,648) |
(6,339) |
(1,704) |
(3,788) |
|
|
-------- |
-------- |
-------- |
-------- |
-------- |
-------- |
-------- |
-------- |
-------- |
Net profit on ordinary activities
before finance costs and taxation |
|
3,989 |
2,749 |
5,731 |
80,577 |
2,397 |
14,493 |
84,566 |
5,146 |
20,224 |
Finance costs |
|
– |
– |
(1) |
(1) |
(2) |
(3) |
(1) |
(2) |
(4) |
|
|
-------- |
-------- |
-------- |
-------- |
-------- |
-------- |
-------- |
-------- |
-------- |
Net profit on ordinary activities
before taxation |
|
3,989 |
2,749 |
5,730 |
80,576 |
2,395 |
14,490 |
84,565 |
5,144 |
20,220 |
Taxation |
|
(12) |
(6) |
(7) |
– |
– |
– |
(12) |
(6) |
(7) |
|
|
-------- |
-------- |
-------- |
-------- |
-------- |
-------- |
-------- |
-------- |
-------- |
Profit for the period |
7 |
3,977 |
2,743 |
5,723 |
80,576 |
2,395 |
14,490 |
84,553 |
5,138 |
20,213 |
|
|
-------- |
-------- |
-------- |
-------- |
-------- |
-------- |
-------- |
-------- |
-------- |
Earnings per ordinary
share |
7 |
5.44p |
3.75p |
7.83p |
110.18p |
3.28p |
19.81p |
115.62p |
7.03p |
27.64p |
|
|
======== |
======== |
======== |
======== |
======== |
======== |
======== |
======== |
======== |
The total column of this statement represents the 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 disposed of
during the period.
The Company does not have any other comprehensive income. The
net profit disclosed above represents the Company’s total
comprehensive income.
STATEMENT OF CHANGES IN EQUITY
for the six months ended 31 May
2017
|
|
Called up
share
capital
£’000 |
Share
premium
account
£’000 |
Special
reserve
£’000 |
Capital
redemption
reserve
£’000 |
Capital
reserves
£’000 |
Revenue
reserve
£’000 |
Total
£’000 |
For the six months ended
31 May 2017 (unaudited) |
|
|
|
|
|
|
|
|
At 30 November 2016 |
|
4,026 |
21,049 |
35,272 |
11,905 |
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* |
|
– |
– |
– |
– |
– |
(4,571) |
(4,571) |
|
|
-------- |
-------- |
-------- |
-------- |
-------- |
-------- |
-------- |
At 31 May 2017 |
|
4,026 |
21,049 |
35,272 |
11,905 |
299,587 |
9,690 |
381,529 |
|
|
-------- |
-------- |
-------- |
-------- |
-------- |
-------- |
-------- |
For the six months ended
31 May 2016 (unaudited) |
|
|
|
|
|
|
|
|
At 30 November 2015 |
|
4,026 |
21,049 |
35,272 |
11,905 |
204,521 |
9,570 |
286,343 |
Total comprehensive income: |
|
|
|
|
|
|
|
|
Net profit for the period |
|
– |
– |
– |
– |
2,395 |
2,743 |
5,138 |
Transactions with owners, recorded
directly to equity: |
|
|
|
|
|
|
|
|
Dividends paid** |
|
– |
– |
– |
– |
– |
(4,095) |
(4,095) |
|
|
-------- |
-------- |
-------- |
-------- |
-------- |
-------- |
-------- |
At 31 May 2016 |
|
4,026 |
21,049 |
35,272 |
11,905 |
206,916 |
8,218 |
287,386 |
|
|
-------- |
-------- |
-------- |
-------- |
-------- |
-------- |
-------- |
For the year ended
30 November 2016 (audited) |
|
|
|
|
|
|
|
|
At 30 November 2015 |
|
4,026 |
21,049 |
35,272 |
11,905 |
204,521 |
9,570 |
286,343 |
Total comprehensive income: |
|
|
|
|
|
|
|
|
Net profit for the year |
|
– |
– |
– |
– |
14,490 |
5,723 |
20,213 |
Transactions with owners, recorded
directly to equity: |
|
|
|
|
|
|
|
|
Dividends paid*** |
|
– |
– |
– |
– |
– |
(5,009) |
(5,009) |
|
|
-------- |
-------- |
-------- |
-------- |
-------- |
-------- |
-------- |
At 30 November 2016 |
|
4,026 |
21,049 |
35,272 |
11,905 |
219,011 |
10,284 |
301,547 |
|
|
-------- |
-------- |
-------- |
-------- |
-------- |
-------- |
-------- |
* Final dividend of 6.25p per share for the
year ended 30 November 2016, declared
on 17 February 2017 and paid on
29 March 2017.
** Final dividend of 5.60p per share for the year ended
30 November 2015, declared on
12 February 2016 and paid on
5 April 2016.
*** Final dividend of 5.60p per share for the year ended
30 November 2015, declared on
12 February 2016 and paid on
5 April 2016 and interim dividend of
1.25p per share for the year ended 30
November 2016, declared on 18 July
2016 and paid on 19 August
2016.
The transaction costs incurred on the acquisition and disposal of
investments are included within the capital reserves. Purchase and
sale costs amounted to £337,000 and £91,000 respectively for the
period ended 31 May 2017 (six months
ended 31 May 2016: £250,000 and
£64,000; year ended 30 November 2016:
£492,000 and £129,000).
STATEMENT OF FINANCIAL POSITION
as at 31 May 2017
|
Notes |
31 May 2017
£’000
(unaudited) |
31 May 2016
£’000
(unaudited) |
30 November 2016
£’000
(audited) |
Non current assets |
|
|
|
|
Investments held at fair value
through profit or loss |
9 |
374,659 |
285,676 |
297,072 |
|
|
-------- |
-------- |
-------- |
Current assets |
|
|
|
|
Other receivables |
|
7,158 |
1,961 |
1,346 |
Cash and cash equivalents |
|
8,452 |
2,331 |
5,509 |
Cash held on margin deposit with
brokers |
|
414 |
– |
152 |
Derivative financial assets held at
fair value through profit or loss |
|
3,213 |
1,411 |
1,934 |
|
|
-------- |
-------- |
-------- |
|
|
19,237 |
5,703 |
8,941 |
|
|
-------- |
-------- |
-------- |
Total assets |
|
393,896 |
291,379 |
306,013 |
|
|
-------- |
-------- |
-------- |
Current liabilities |
|
|
|
|
Other payables |
|
(7,887) |
(2,633) |
(3,024) |
Collateral held in respect of
contracts for difference |
|
(2,442) |
(1,360) |
(1,423) |
Derivative financial liabilities
held at fair value through profit or loss |
|
(2,038) |
– |
(19) |
|
|
-------- |
-------- |
-------- |
|
|
(12,367) |
(3,993) |
(4,466) |
|
|
-------- |
-------- |
-------- |
Net current assets |
|
6,870 |
1,710 |
4,475 |
|
|
-------- |
-------- |
-------- |
Net assets |
|
381,529 |
287,386 |
301,547 |
|
|
====== |
====== |
====== |
Equity attributable to equity
holders |
|
|
|
|
Called up share capital |
8 |
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 |
|
299,587 |
206,916 |
219,011 |
Revenue reserve |
|
9,690 |
8,218 |
10,284 |
|
|
====== |
====== |
====== |
Total equity |
7 |
381,529 |
287,386 |
301,547 |
|
|
====== |
====== |
====== |
Net asset value per ordinary
share |
7 |
521.71p |
392.98p |
412.34p |
|
|
====== |
====== |
====== |
CASH FLOW STATEMENT
for the six months ended 31 May
2017
|
Six months ended
31 May 2017
£’000
(unaudited) |
Six months ended
31 May 2016
£’000
(unaudited) |
Year ended
30 November 2016
£’000
(audited) |
|
|
|
|
Net cash inflow from operating
activities |
7,781 |
4,312 |
8,663 |
|
----- |
----- |
----- |
Financing activities |
|
|
|
Interest paid on CFDs |
(226) |
(227) |
(462) |
Interest paid |
(1) |
(3) |
(3) |
Dividends paid |
(4,571) |
(4,095) |
(5,009) |
|
----- |
----- |
----- |
Net cash outflow from financing
activities |
(4,798) |
(4,325) |
(5,474) |
|
----- |
----- |
----- |
Increase/(decrease) in cash and
cash equivalents |
2,983 |
(13) |
3,189 |
Effect of foreign exchange rate
changes |
(40) |
– |
(24) |
|
----- |
----- |
----- |
Change in cash and cash
equivalents |
2,943 |
(13) |
3,165 |
Cash and cash equivalents at the
start of period |
5,509 |
2,344 |
2,344 |
|
----- |
----- |
----- |
Cash and cash equivalents at the
end of the period |
8,452 |
2,331 |
5,509 |
|
===== |
===== |
===== |
Comprised of: |
|
|
|
Cash at bank |
82 |
255 |
119 |
BlackRock's Institutional Cash
Series plc – Sterling Liquidity Fund |
8,370 |
2,076 |
5,390 |
|
----- |
----- |
----- |
|
8,452 |
2,331 |
5,509 |
|
===== |
===== |
===== |
RECONCILIATION OF NET PROFIT BEFORE TAXATION TO NET CASH FLOW
FROM OPERATING ACTIVITIES
for the six months ended 31 May
2017
|
Six months ended
31 May 2017
£’000
(unaudited) |
Six months ended
31 May 2016
£’000
(unaudited) |
Year ended
30 November 2016
£’000
(audited) |
Operating activities |
|
|
|
Net profit before taxation |
84,565 |
5,144 |
20,220 |
Add back interest paid on CFDs |
226 |
227 |
462 |
Add back finance cost |
1 |
3 |
4 |
Profits on investments and CFDs held
at fair value through profit or loss (including transaction
costs) |
(86,514) |
(3,759) |
(17,512) |
Net losses on foreign exchange |
40 |
– |
24 |
Sales of investments held at fair
value through profit or loss |
91,950 |
56,366 |
110,936 |
Purchases of investments held at
fair value through profit or loss |
(93,081) |
(54,307) |
(110,369) |
Realised losses on closure of
CFDs |
(11,393) |
(13,719) |
(28,282) |
Realised gains on closure of
CFDs |
22,396 |
16,670 |
35,038 |
Net realised losses on closure of
futures |
(205) |
– |
(461) |
Collateral received in respect of
CFDs |
1,019 |
126 |
189 |
Net movement in cash held on margin
deposit with brokers |
(262) |
– |
(152) |
(Increase)/decrease in other
receivables |
(1,376) |
(495) |
65 |
(Increase)/decrease in amounts due
from brokers |
(4,436) |
1,602 |
1,655 |
Increase in amounts due to
brokers |
364 |
172 |
106 |
Increase/(decrease) in other
payables |
4,499 |
(3,712) |
(3,253) |
Taxation paid |
(12) |
(6) |
(7) |
|
------ |
------ |
------ |
Net cash inflow from operating
activities |
7,781 |
4,312 |
8,663 |
|
====== |
====== |
====== |
NOTES TO THE FINANCIAL STATEMENTS
for the six months ended 31 May
2017
1. PRINCIPAL ACTIVITY
The principal activity of the Company is that of an investment
trust company within the meaning of section 1158 of the Corporation
Tax Act 2010.
2. BASIS OF PREPARATION
The half yearly financial statements 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 2016 which were prepared in
accordance with International Financial Reporting Standards (IFRS)
as adopted by the European Union and applied 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), revised in November 2014 is compatible with IFRS, the
Financial Statements have been prepared in accordance with the
guidance set out in the SORP.
The Company’s investment in BlackRock’s Institutional Cash
Series plc – Sterling Liquidity Fund of £8,370,000 (31 May 2016: £2,076,000; 30 November 2016: £5,390,000) is managed as part
of the Company’s cash management policy and, accordingly, at
30 November 2016 this investment along with purchases and
sales of this investment has been classified in the Statement of
Financial Position and Cash Flow Statement as cash and cash
equivalents. The comparative figures as at 31 May 2016 in the Statement of Financial
Position and for the six months period ended 31 May 2016 in the Cash Flow Statement have been
amended to reflect this change.
3. INCOME
|
Six months ended
31 May 2017
£’000
(unaudited) |
Six months ended
31 May 2016
£’000
(unaudited) |
Year
ended
30 November 2016
£’000
(audited) |
Investment income: |
|
|
|
UK listed dividends |
2,984 |
2,662 |
5,835 |
UK listed dividends – special |
326 |
294 |
403 |
UK scrip dividends |
17 |
11 |
36 |
Overseas listed dividends |
831 |
346 |
474 |
Overseas listed dividends –
special |
177 |
– |
46 |
|
------ |
------ |
------ |
|
4,335 |
3,313 |
6,794 |
|
------ |
------ |
------ |
Income from contracts for
difference |
254 |
(20) |
76 |
|
------ |
------ |
------ |
|
254 |
(20) |
76 |
|
------ |
------ |
------ |
Interest receivable and other
income: |
|
|
|
Deposit interest |
– |
– |
1 |
Underwriting commission |
13 |
– |
– |
|
------ |
------ |
------ |
|
13 |
– |
1 |
|
------ |
------ |
------ |
Total income |
4,602 |
3,293 |
6,871 |
|
===== |
===== |
===== |
Dividends and interest received in the period amounted to
£3,233,000 and £nil (six months ended 31 May
2016: £2,975,000 and £nil; year ended 30 November 2016: £6,364,000 and £1,000)
respectively.
4. INVESTMENT MANAGEMENT AND PERFORMANCE FEES
|
Six
months ended
31 May 2017
(unaudited) |
Six
months ended
31 May 2016
(unaudited) |
Year
ended
30 November 2016
(audited) |
Revenue
£’000 |
Capital
£’000 |
Total
£’000 |
Revenue
£’000 |
Capital
£’000 |
Total
£’000 |
Revenue
£’000 |
Capital
£’000 |
Total
£’000 |
Investment management fee |
377 |
1,131 |
1,508 |
306 |
917 |
1,223 |
621 |
1,862 |
2,483 |
Performance fee |
- |
4,587 |
4,587 |
- |
235 |
235 |
– |
768 |
768 |
|
----- |
----- |
----- |
----- |
----- |
----- |
----- |
----- |
----- |
Total |
377 |
5,718 |
6,095 |
306 |
1,152 |
1,458 |
621 |
2,630 |
3,251 |
|
===== |
===== |
===== |
===== |
===== |
===== |
===== |
===== |
===== |
BlackRock Fund Managers Limited (BFM) provides management and
administration services to the Company under a contract which is
terminable on six months’ notice.
Up to 31 July 2017, the terms of
the existing investment management agreement with BFM provide for a
basic management fee, payable quarterly in arrears, of 0.7% per
annum on the gross asset value of the Company’s long only portfolio
plus the gross value of the underlying equities, long and short
(Performance Fee Market Value), to which the Company is exposed
through the CFD portfolio. In addition, BFM is entitled to a
performance fee of 10% of the net asset value (total return)
outperformance against the Numis Companies excluding AIM (excluding
Investment Companies) Index (the benchmark index) subject to a cap
of 1% of Performance Fee Market Value.
The investment management fee is allocated 75% to the capital
column and 25% to the revenue column of the Statement of
Comprehensive Income in line with the Board’s expected long term
split of returns, in the form of capital gains and income,
respectively, from the investment portfolio. A performance fee of
£4,587,000 was accrued for the six months ended 31 May 2017 (six months ended 31 May 2016: £235,000; year ended
30 November 2016: £768,000). The performance fee has been
wholly allocated to the capital column of the Statement of
Comprehensive Income, as performance has been predominantly
generated through the capital returns on the investment
portfolio.
As announced on 24 July 2017, the
Company has agreed revised management and performance fee
arrangements with BFM which are effective from 1 August 2017 for management fees and from
1 December 2017 for performance fees
and the aggregate cap on total fees. For further details, refer to
the Chairman’s Statement.
5. OTHER OPERATING EXPENSES
|
Six months ended
31 May 2017
£’000
(unaudited) |
Six months ended
31 May 2016
£’000
(unaudited) |
Year ended
30 November 2016
£’000
(audited) |
Allocated to revenue: |
|
|
|
Custody fee |
3 |
4 |
7 |
Auditor’s remuneration: |
|
|
|
– audit services |
18 |
18 |
36 |
– other assurance services |
6 |
6 |
6 |
Registrar’s fee |
14 |
16 |
33 |
Broker fees |
19 |
19 |
37 |
Depositary fees |
23 |
19 |
39 |
Marketing fees |
50 |
64 |
126 |
Marketing fee accrual written
back |
(41) |
(34) |
(34) |
Directors’ emoluments |
87 |
68 |
150 |
Other administrative costs |
57 |
58 |
119 |
|
-------- |
-------- |
-------- |
|
236 |
238 |
519 |
|
-------- |
-------- |
-------- |
Allocated to capital: |
|
|
|
Transaction charges |
8 |
8 |
18 |
|
-------- |
-------- |
-------- |
|
244 |
246 |
537 |
|
======== |
======== |
======== |
6. DIVIDENDS
The Board has declared an interim dividend of 2.00p per share
payable on 23 August 2017 to
shareholders on the register at 4 August
2017 (six months ended 31 May 2016, interim dividend of
1.25p per share paid on 19 August 2016 to shareholders on the
register at 29 July 2016.) This dividend has not been accrued
in the financial statements for the six months ended 31 May
2017 as, under IFRS, interim dividends are not recognised until
paid. Dividends are debited directly to reserves.
7. EARNINGS AND NET ASSET VALUE PER ORDINARY SHARE
Total revenue and capital returns and per share are shown below and
have been calculated using the following:
|
Six months ended
31 May 2017
£’000
(unaudited) |
Six months ended
31 May 2016
£’000
(unaudited) |
Year ended
30 November 2016
£’000
(audited) |
Net revenue profit attributable to
ordinary shareholders (£’000) |
3,977 |
2,743 |
5,723 |
Net capital profit attributable to
ordinary shareholders (£’000) |
80,576 |
2,395 |
14,490 |
|
-------- |
-------- |
-------- |
Total profit attributable to
ordinary shareholders (£’000) |
84,553 |
5,138 |
20,213 |
|
-------- |
-------- |
-------- |
Equity shareholders’ funds
(£’000) |
381,529 |
287,386 |
301,547 |
|
-------- |
-------- |
-------- |
The weighted average number of
ordinary shares in issue during each 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 ordinary
share |
5.44p |
3.75p |
7.83p |
Capital profit per ordinary
share |
110.18p |
3.28p |
19.81p |
|
-------- |
-------- |
-------- |
Total earnings per ordinary
share |
115.62p |
7.03p |
27.64p |
|
======== |
======== |
======== |
|
As at
31 May 2017
(unaudited) |
As at
31 May 2016
(unaudited) |
As at
30 November 2016
(audited) |
Net asset value per ordinary share –
basic and diluted |
521.71p |
392.98p |
412.34p |
|
-------- |
-------- |
-------- |
Ordinary share price |
436.00p |
332.00p |
325.00p |
|
======== |
======== |
======== |
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 2016 and 31 May
2017 |
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 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(c) and 2(d) as set out in the Company’s
Annual Report and Financial Statements for the year ended
30 November 2016.
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 in an active market for an
identical instrument. 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.
Level 2 – Valuation techniques used to price securities based on
observable inputs. 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.
Level 3 – Valuation techniques using significant unobservable
inputs other than quoted prices within Level 1. This category
includes all instruments where the valuation technique includes
inputs not based on observable market data and unobservable 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 unobservable
adjustments or assumptions are required to reflect differences
between the instruments and instruments for which there is no
active market. The level in the hierarchy within 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 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.
There has been no change to the valuation techniques during the
period under review or as at the date of this report.
CFDs have all 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 and relevant foreign currency
exchange rates.
The table below sets out fair value measurements using IFRS 13
fair value hierarchy.
Financial
assets/(liabilities) at fair value through profit or loss at 31 May
2017 |
Level 1
£’000 |
Level 2
£’000 |
Level 3
£’000 |
Total
£’000 |
Assets: |
|
|
|
|
Equity investments |
374,659 |
– |
– |
374,659 |
Contracts for difference – long
(gross exposure) |
– |
74,865 |
– |
74,865 |
Liabilities: |
|
|
|
|
Index futures – short (gross
exposure) |
– |
(3,663) |
– |
(3,663) |
Contracts for difference – short
(gross exposure) |
– |
(23,250) |
– |
(23,250) |
|
-------- |
-------- |
-------- |
-------- |
|
374,659 |
47,952 |
– |
422,611 |
|
======== |
======== |
======== |
======== |
Financial assets at
fair value through profit or loss at 31 May 2016 |
Level 1
£’000 |
Level 2
£’000 |
Level 3
£’000 |
Total
£’000 |
Assets: |
|
|
|
|
Equity investments |
285,676 |
– |
– |
285,676 |
Contracts for difference – long
(gross exposure) |
– |
44,988 |
– |
44,988 |
Liabilities: |
|
|
|
|
Index futures – short (gross
exposure) |
– |
– |
– |
– |
Contracts for difference – short
(gross exposure) |
– |
(24,038) |
– |
(24,038) |
|
-------- |
-------- |
-------- |
-------- |
|
285,676 |
20,950 |
– |
306,626 |
|
======== |
======== |
======== |
======== |
Financial
assets/(liabilities) at fair value through profit or loss at 30
November 2016 |
Level 1
£’000 |
Level 2
£’000 |
Level 3
£’000 |
Total
£’000 |
Assets: |
|
|
|
|
Equity investments |
297,072 |
– |
– |
297,072 |
Contracts for difference – long
(gross exposure) |
– |
56,467 |
– |
56,467 |
Liabilities: |
|
|
|
|
Index futures – short (gross
exposure) |
– |
(2,452) |
– |
(2,452) |
Contracts for difference – short
(gross exposure) |
– |
(23,260) |
– |
(23,260) |
|
-------- |
-------- |
-------- |
-------- |
|
297,072 |
30,755 |
– |
327,827 |
|
======== |
======== |
======== |
======== |
There were no transfers between levels for financial assets and
financial liabilities during the period recorded at fair value as
at 31 May 2017, 31 May 2016 and 30
November 2016. The Company did not hold any level 3
securities throughout the financial period under review or as at
31 May 2017, 31 May 2016 or 30 November
2016.
10. TRANSACTIONS WITH THE AIFM AND INVESTMENT MANAGER
BlackRock Fund Managers Limited (BFM) was appointed as the
Company’s Alternative Investment Fund Manager (AIFM) with effect
from 2 July 2014. BFM has (with the
Company’s consent) delegated certain portfolio and risk management
services, and other ancillary services, to Blackrock Investment
Management (UK) Limited (BIM
(UK)).
The investment management fee due to BFM for the six months
ended 31 May 2017 amounted to
£1,508,000 (six months ended 31 May
2016: £1,223,000; year ended 30 November 2016:
£2,483,000). In addition the performance fee accrued for the six
months ended 31 May 2017 amounted to
£4,587,000 (six months ended 31 May
2016: £235,000; year ended 30
November 2016: £768,000).
At the period end £1,508,000 was outstanding in respect of the
investment management fee (31 May
2016: £607,000; 30 November
2016: £656,000) and £4,587,000 was accrued in respect of
performance fees (31 May 2016:
£235,000; 30 November 2016:
£768,000). Any final performance fee for the full year ending
30 November 2017 will not crystallise
and fall due until the calculation date of 30 November 2017.
In addition to the above services, the Manager provides the
Company with marketing services. The total fees paid or payable for
these services for the six months to 31 May
2017 amounted to £9,000 including VAT (six months ended
31 May 2016: £30,000; year ended
30 November 2016: £92,000). Marketing
fees of £37,000 including VAT (31 May
2016: £165,000; 30 November
2016: £113,000) were outstanding at 31 May 2017.
The Company has an investment in BlackRock’s Institutional Cash
Series plc - Sterling Liquidity Fund of £8,370,000 at 31 May 2017 (31 May
2016: £2,076,000; 30 November
2016: £5,390,000).
11. RELATED PARTY DISCLOSURE
The Board consisted of six non-executive Directors at 31 May 2017, all of whom are considered to be
independent by the Board. Mr Stobart retired with effect from
22 March 2017 and Mr Greenlees succeeded him as Chairman of
the Audit Committee on this date. 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 2017 an amount of
£13,000 (31 May 2016: £11,000;
30 November 2016: £12,000) was
outstanding in respect of Directors’ fees.
At the period end and at 20 July
2017, the interests of the Directors in the ordinary shares
of the Company were as follows:
|
Ordinary shares
31 May 2017 |
Ordinary shares
20 July 2017 |
|
|
|
Crispin Latymer |
31,369 |
31,404 |
Simon Beart |
43,522
1 |
43,869
2 |
Loudon Greenlees |
10,000 |
10,000 |
Jean Matterson |
46,000 |
46,000 |
Christopher Samuel |
6,500 |
6,500 |
Andrew Pegge |
Nil |
Nil |
1. Including 13,964 shares held by Mrs Beart.
2. Including 14,137 shares held by Mrs Beart.
12. CONTINGENT LIABILITIES
There were no contingent liabilities at 31
May 2017, 31 May 2016 or
30 November 2016.
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 2017 and
31 May 2016 has not been audited.
The information for the year ended 30
November 2016 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 2017 in
February 2018. Copies of the results
announcement can be obtained from the Secretary on 020 7743 3000 or
by email at: cosec@blackrock.com. The Annual Report and Financial
Statements should be available by the beginning of February 2018, with the Annual General Meeting
expected to be held in March
2018.
---------------------------------------------------------------------------------------------------------------------------------------------------------------------------
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 2017 which
comprises the Statement of comprehensive income, Statement of
changes in equity, Statement of financial position, Cash flow
statement, Reconciliation of net profit before taxation to net cash
flow from operating activities 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
2410 (UK and Ireland) “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 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 Ireland) 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 2017 is not prepared, in all material
respects, in accordance with International Accounting Standard 34
as adopted by the European Union and the Disclosure and
Transparency Rules of the United Kingdom’s Financial Conduct
Authority.
Ernst & Young LLP
London
24 July 2017
---------------------------------------------------------------------------------------------------------------------------------------------------------------------------
For further information, please
contact:
Simon White, Managing Director,
Investment Companies, BlackRock Investment Management (UK)
Limited
Tel: 020 7743 5284
Mike Prentis, Fund Manager,
BlackRock Investment Management (UK) Limited
Tel: 020 7743 2312
Press enquiries:
Lucy Horne, Lansons
Communications – Tel: 020 7294 3689
E-mail: lucyh@lansons.com
24 July 2017
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.