Throgmorton Trust Regulatory News (THRG)

BlackRock Throgmorton Trust Plc - Half-year Report

PR Newswire

London, July 22

BLACKROCK THROGMORTON TRUST PLC(Legal Entity Identifier: 5493003B7ETS1JEDPF59)Information disclosed in accordance with Article 5 Transparency Directive and DTR 4.2Half Yearly Financial Report for period ended 31 May 2020

PERFORMANCE RECORD

1 The change in net assets reflects market movements, dividends paid and share issues during the period.

2 The Company’s benchmark index is the Numis Smaller Companies plus AIM (excluding Investment Companies) Index.

3 Alternative Performance Measures, see Glossary contained within the Half Yearly Financial Report.

.

CHAIRMAN’S STATEMENT FOR THE SIX MONTHS TO 31 MAY 2020

PERIOD HIGHLIGHTS

· NAV outperformed the benchmark index by 2.8%

· Premium to NAV narrowed from 0.9% as at 30 November 2019 to 0.4%

· 9.4m shares issued - 6.4m from Treasury and 3.0m new shares

· Interim dividend declared of 2.50p per share (2019: 2.50p).

OVERVIEWIt has been a remarkable and challenging first half to the financial year, dominated by the extraordinary upheaval brought about by COVID-19. The spread of the pandemic has impacted almost every aspect of life in the global economy, and its long-term ramifications have yet to play out.

Against this background, the Board has been in regular contact with the portfolio manager, Dan Whitestone, and the rest of the BlackRock team and I would first like to pay tribute to how they have responded to the challenges of the transformed market and working environment with great adaptability and professionalism.

It is also clear that Dan’s longstanding focus on financially strong companies, many with innovative and disruptive business models, has served the Company well in this period and will hopefully stand the portfolio in good stead in the times ahead.

PerformanceFollowing the strong return delivered for shareholders in 2019, in both absolute and relative terms, it is of course disappointing to report a reduction in NAV per share over the period, although the Company has once again outperformed its benchmark during the first half of this financial year.

The six months to 31 May 2020 can be viewed as two separate periods given the significantly different economic backdrops. In the three months to 29 February 2020, total return on net assets was -3.8%. This compares with a total return for the same period from the Company’s benchmark index, the Numis Smaller Companies plus AIM (excluding Investment Companies) Index of -5.1%, an outperformance of 1.3%. With the acceleration in the spread of COVID-19 in March 2020 and the resulting stock market fall-out from the ‘lockdowns’, the total return on net assets for the three months to 31 May 2020 was -8.5% compared to -10.2% for the Company’s benchmark index, resulting in an outperformance of 1.7%. It is good to see outperformance in both of these very different investment environments and markets.

Over the six months to 31 May 2020, the Company’s Net Asset Value (NAV) return was -12.0% compared to a return of -14.8% from the Company’s benchmark index, an outperformance of 2.8%. The Company’s share price fell by -12.5% and the premium to NAV narrowed slightly to 0.4% at the period end (30 November 2019: 0.9%).

Since the period end and up to the close of business on 21 July 2020, the Company’s NAV has risen by 5.4%, and the benchmark index has risen by 3.9% (all figures in sterling terms with dividends reinvested).

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

PERFORMANCE RECORD TO 31 MAY 2020 (WITH DIVIDENDS REINVESTED)

REVENUE RETURN AND DIVIDENDSThe revenue return per share for the period amounted to 2.16 pence per share, compared to 4.57 pence per share earned during the same six month period last year. This represents a fall of 52.7% and results from decreases in both the aggregate ordinary and special dividends received during the period, predominantly as a result of the impact of the COVID-19 pandemic, where we have seen many companies suspend their dividend payments due to the uncertain outlook.

The Board recognises that, although the Company’s objective is capital growth, shareholders value consistency of dividends paid by the Company and therefore an interim dividend of 2.50p per share (2019: 2.50p per share) has been declared, payable on 28 August 2020 to shareholders on the register on 31 July 2020 (the ex-dividend date is 30 July 2020).

Consistent with this approach, the Board will consider the use of brought forward revenue reserves to support the full year dividend if deemed appropriate to do so at the time.

SHARE ISSUANCEDuring the six months to 31 May 2020, the Company’s share price premium/discount to NAV ranged between a discount of 12.0% and a premium of 4.2%, ending the period at a premium of 0.4%. As at 21 July 2020 the Company’s shares were trading at a discount of 1.3%. The Company is one of very few investment companies in the UK smaller companies sector that has been trading at a premium to NAV during the period.

The Board believes that the best way of addressing the discount over the longer-term is to continue to generate good performance and to create demand for the Company’s shares in the secondary market through broadening awareness of the Company’s unique structure. The Board believes that it is in shareholders’ interests that the share price does not trade at an excessive premium or discount to NAV. Therefore, where deemed to be in shareholders’ long-term interests, it may exercise its powers to issue shares or buy back shares with the objective of ensuring that an excessive premium or discount does not arise. As a result, the Board will seek to renew the authority from shareholders to buy back shares when it believes that it is in the interests of shareholders to do so, having taken into account all relevant factors including the size of the Company and the liquidity of its shares.

The Board is pleased that, following a period of strong investment performance and active marketing, the Company has sold all 6.4m Treasury Shares held at 30 November 2019, as well as issuing 3.0m new shares. As shareholders will already know, this demand necessitated calling a General Meeting in February to renew the Board’s authority to sell shares from Treasury and/or issue new shares, a resolution that was approved by some 91% of shareholders.

BOARD COMPOSITIONAs part of a process of ongoing Board refreshment and having carefully considered the composition of the Board, its committees, and the need to ensure that a suitable balance of skills, knowledge, experience, independence and diversity is maintained, it was agreed to commence a search and selection process to identify new directors to strengthen and enhance the existing Board. To assist them in their search for the right candidate, the Board engaged an independent third-party recruitment firm, Fletcher Jones.

Following a thorough search process which identified a number of very suitable candidates, I am delighted to welcome Angela Lane to the Board. Angela joined the Board on 10 June 2020 and will also serve as a member of the Company’s Audit, Nomination & Management Engagement Committees. Angela brings a wealth of financial services expertise having spent 18 years working in private equity at 3i. She is a Chartered Accountant and has held several non-executive and advisory roles at small and medium sized companies across a range of industries, including business services, healthcare, travel, media, consumer goods and infrastructure.

The Board will continue to consider its composition as part of its ongoing succession planning arrangements.

OUTLOOKCOVID-19 has clearly impacted global markets and disrupted supply chains and economic activity in large swathes of the economy. Governments have responded with fiscal stimulus measures and monetary easing the like of which has not been seen in modern times. This, coupled with significant injections of liquidity and direct support to businesses, appears to have been successful in restoring calm and more recently we have seen signs of a recovery in equity markets.

At the present time, it is not yet possible to quantify the full impact of the economic scarring, nor to determine whether there will be any longer lasting damage to supply chains and infrastructure. What is clear is that there will be long-term lasting consequences in the way in which individuals interact and companies do business in the future. We remain alert to these issues and our investment process allows us to adapt to these changing circumstances.

Against this backdrop it is important to note that one of the key advantages of the closed-end fund structure is that the portfolio manager is not obliged to sell investments at potentially distressed valuations in order to create liquidity for redemptions, and this has provided a degree of protection during this period of extreme volatility and market stress. This ability to remain invested for the long-term allows our portfolio manager to adhere to his strategy, which is based on fundamental analysis, while also standing ready to respond to the opportunities inevitably created by the current volatile markets.

As you will see in his report which follows, the portfolio manager, Dan Whitestone, remains cautious in the short-term given the severity of the impact of COVID-19 to date and the lack of clarity around the shape and duration of any recovery. However, he also believes that there will be a greater dispersion of winners and losers as a result of the COVID-19 pandemic. Some companies will demonstrate the financial resilience and ability to respond, adapt and better weather the storm, potentially emerging stronger than before, while others will find that their business model or competitive advantage has been materially weakened.

This presents significant opportunities for active managers, particularly those who have the ability, as Dan does, in managing your Company, to invest on both a long and short basis. So despite the near-term hurdles and potential headwinds, not least of which is the outcome of the ongoing Brexit trade negotiations with the EU, the manager believes that the outlook for the portfolio over the medium to longer-term is positive and that the universe of UK listed small and medium sized companies will continue to provide a number of differentiated, high-quality businesses which are well placed to prosper notwithstanding the challenging economic backdrop and potential market volatility.

The Board is confident that in Dan Whitestone and BlackRock we have a manager who has the resources, investment insight and capability to continue to deliver on the Company’s objective and so remains fully supportive of the current approach and believes the Company can continue to meet its objectives of providing shareholders with long-term capital growth and an attractive total return.

CHRISTOPHER SAMUELChairman23 July 2020

INVESTMENT MANAGER’S REPORT FOR THE SIX MONTHS ENDED 31 MAY 2020

MARKET REVIEW AND OVERALL INVESTMENT PERFORMANCEThe first six months of our financial year (December to May) have been a tale of two very different halves, with extreme levels of market volatility. We started the period on a positive note after the Conservative party secured a convincing majority in the December General Election, resulting in a dramatic change in sentiment towards the UK economy, and providing a boost to UK equities. As we moved into 2020 signs of a thawing in the trade war between the US and China continued to provide a positive backdrop for markets. In March, this optimism was soon quashed by the outbreak of COVID-19 which sparked one of the most rapid falls in equity markets ever witnessed, as investors worried about the potential impact of the virus on the global economy. The required steps to control the spread of the virus have had extreme economic consequences, the full extent of which are yet to be fully understood.

The social lockdowns were soon followed by fiscal and monetary stimulus, the scale of which has been formidable. These include lower interest rates and monetary easing as well as direct interventions to cover labour costs and ease business outlays in the face of the social shutdown. Since the trough in late March, markets have rebounded despite the slowdown in global economic activity and a sharp rise in unemployment. Investor sentiment has recently been driven by signs that many countries have passed the peak of the virus, and are beginning to ease restrictions. However, the situation is of course changing rapidly and the threat of a second wave of infection remains.

PERFORMANCE REVIEW2020 has so far has been a challenging period to navigate and this was undoubtedly the most testing time we have yet experienced in managing this strategy. The impact of COVID-19 is unchartered territory for all whether individuals, businesses or governments. While performance was unfortunately negative in absolute terms (NAV -12.0% net of fees), we are pleased to report that the Company’s NAV has outperformed our benchmark by 2.8% net of fees during the period. This outperformance has been driven by a combination of strong absolute returns from the short book, which delivered +2.5%, and the long book which outperformed a falling market in relative terms. This result, we believe, highlights the Company’s unique structure and it is encouraging to report that we have been able to outperform our benchmark once again.

While shorts in aggregate were a key contributor to performance, eight of the top ten contributors were in fact long positions that rose in response to positive stock specific updates. The other two included not owning index constituent, Finablr, which collapsed, and a short position.

The largest positive contributor to performance was Games Workshop, which is best known as the creator of the Warhammer miniatures game. Since the new management team took steps to reinvigorate the business, making some key changes to broaden its market, the company has continued to report strong sales growth which has been significantly ahead of expectations. Despite the company having to cease operations for a short period, the business has continued to generate strong sales through its digital offering. Another top contributor to performance has been YouGov, the international research data and analytics group. It has proved resilient, despite operating in the consumer services space which has been so heavily affected by the pandemic, as it operates a business-to-business model providing valuable insights to marketing managers in understanding where their spend is best directed. IntegraFin, the operator of the Transact investment platform, also outperformed the falling market. The business has continued to generate strong net inflows, ahead of expectations, supporting our multi-year thesis that this best-in-class advisor platform remains well placed to win market share in a growing market.

The ability to invest overseas has once again contributed to outperformance. Two of our top ten contributors were international investments, namely Masimo and Chegg. Masimo, a US listed medical device company, was the third largest contributor to performance with the shares rising 61% during the period and contributing 0.9% to outperformance. The shares have been particularly strong in recent months in response to strong demand for its respiratory monitoring products amid the COVID-19 pandemic, while FDA approval on three new respiration products provides further investor optimism.

Chegg, an online educational platform, delivered an emphatic “beat and raise” with revenue growth and subscriber additions both accelerating to in excess of 30%, comfortably ahead of forecasts, illustrating Chegg’s strong position in the virtual education operating environment, which we believe will only accelerate as a result of COVID-19.

As mentioned, while the companies in which we had short positions provided 2.5% of positive performance during the period, not all of this performance was due to the decline in the equity market alone. The largest contributor to the short book was a UK building materials supplier which issued its third profit warning in less than a year. The business has been suffering from the pressures of weakening demand, rising costs and an overindebted balance sheet: a challenging situation for any company.

Detractors to Company performance during the period were predominantly concentrated in our holdings in the Consumer Services sector, where several companies that we own or owned were forced to suspend operations for a period of time and therefore generated zero, or close to zero, revenues. However, four of our top ten detractors were from positions in the benchmark which we do not own that rose, and which we have no intention of owning as they do not align with our investment process.

To hold ourselves to account, and with the benefit of hindsight, we were too slow to reduce our exposure to Consumer Services in aggregate. The largest two detractors in this area were WH Smith and Dart Group, both of which were victims of airline travel disruption. The inability to predict the duration of route closures for Dart Group or concession/shop closures in transportation hubs for WH Smith, and what the longer-term impact will be on air passenger volumes, has created enormous uncertainty over the profit outlook and cash drain on both businesses. We believe both are well-managed companies with strong track records of value creation that have proved themselves as good operators and market share winners. Importantly, they also have stronger financials than their peers and have levers to pull to reduce costs and manage liquidity, but the situation remains fluid, hence the huge uncertainty and precipitous falls in both share prices in February and March. We remain owners of both and believe management will do the right things in the interests of their customers, staff and shareholders to ensure they get through this period and emerge with stronger market positions as competitors are materially weakened or leave the market altogether. Ultimately, there is demand for their products or services and therefore we do not think the medium-to-long-term opportunity is reflected in the valuation of either company today.

ACTIVITYThe total number of positions (long and short) in the portfolio has reduced modestly over the period to 130. It is important to highlight the changing composition of this number, which currently consists of 118 long positions and only 12 short positions. This reflects two deliberate actions on our part: first, we closed a number of our shorts that had fallen materially in February and March and locked in those gains ahead of a potential market recovery; and second, our decision to introduce a number of new long positions with exciting long-term growth prospects at what we believe to be attractive valuations. Where we have added new long positions, they have either been in response to us deliberately seeking to increase exposure to industry trends that we think are accelerating in response to COVID-19, such as digital payments (Adyen), or Video Gaming (Take-Two Interactive Software, Keywords Studios), or they reflect us taking advantage of extreme volatility to buy market leading companies at attractive valuations, for example, Wizz Air, London Metric Property, XP Power and Kainos Group.

It should be no surprise that we have sought to add to several existing positions that we believe will benefit from improving end market dynamics, especially in the digital space e.g. Chegg and Team17. Since the outbreak of COVID-19, we have reduced our exposure to Consumer Services in aggregate, reflecting the increased uncertainty over the quantum and trajectory of profits, but this still remains an attractive sector for us to find long-term growth companies. As a result of the actions above, we are currently operating with a gross exposure of around 120% and net market exposure of around 116%, which is at the higher end of our historic range.

PORTFOLIO POSITIONINGAs a reminder, portfolio positioning will be driven by our focus on two types of company. The first is what we define as ‘quality differentials’, which are essentially differentiated long-term growth investments. These we would characterise as companies that have strong management teams, with a protected market position, a unique and compelling product offering with an attractive route to market, maybe benefitting from structural growth, and that are well financed with clean accounting. The second type of company is those that are leading industry change, the ‘disruptors’ or alternatively on the short side it would be the victims of industry change, the ‘disrupted’.

This philosophy has not changed and will not change regardless of the wider market environment: however we do believe that many of the trends/industries that this Company is exposed to will see their aggregate growth rates accelerate on a five year view e.g. digital payments, cloud audio/visual communication, software-as-a-service and infrastructure-as-a-service. Meanwhile, other companies with market leading propositions have the potential to emerge with an even stronger market position as capacity exits, hence our focus on the strength of a company’s financial structure (i.e. debt and liquidity).

Digital transformation is an industry trend we have highlighted before and remains a key investment area for the Company. Looking forward, we expect corporate spending to accelerate as companies reduce costs and complexity, fight for market share, and stay front of mind with their customers as behaviours change. We believe that we own many exciting companies exposed to these trends spread across a range of different sectors. Our holdings here are numerous, but include YouGov, Chegg, Xero and Gamma Communications, which we expect to benefit from the trends identified, as demand for their services increases. We have also seen the benefits recently in traditional bricks and mortar retailers that have prioritised investment in their digital offerings to great effect, for example: Pets at Home and Games Workshop.

Given that governments have indicated a willingness to stimulate economic growth, we believe this will particularly benefit companies exposed to the typical channels for economic stimulus, such as infrastructure, construction and housebuilders. Our holdings in this area include Breedon, Serco, Bellway and Balfour Beatty.

Despite our reduction in consumer holdings, this remains a significant overweight reflecting our ongoing conviction in differentiated companies with strong digital offerings such as Games Workshop and Pets at Home, or video game developers, such as Sumo Group, Team17 and Frontier Developments. Our exposure to the video games industry has increased as we are positive on the long-term industry dynamics, but in the near-term the outlook has also improved as their global audience has increased with more people spending time at home with the propensity to spend more on gaming.

The short book continues to target the same areas that we see as ‘over-earning’ or under structural or cyclical pressure. Many of our short positions are within the Consumer Services sector, either facing structural headwinds (digital disruption, low cost or specialised formats) or cyclical pressures (weakening consumer demand, rising costs). Both categories can be overlaid with a financial framework centred on weak balance sheets and poor cash conversion. As discussed earlier we did reduce our overall short exposure in response to the market sell-off.

OUTLOOKWhile the first six months of the year have certainly been a challenging period for equity markets in absolute terms, our outperformance of the benchmark has been a positive outcome. The economic backdrop remains highly uncertain given the ongoing COVID-19 pandemic. In aggregate the news flow surrounding the economic impact of the pandemic has steadily improved with many countries past the peak and while some are in the process of lifting restrictions, other countries are seeing a rise in the rate of infection, although this varies significantly by region and the situation remains fluid. Meanwhile, monetary support continues to provide liquidity to financial markets and we believe most governments have already signalled an intention to use a wide variety of measures to stimulate economic activity. These actions have underpinned financial markets in general hence the rebound in most equity markets in recent months. We are continuing to engage with companies to understand the trends and impacts in the industries in which they operate, and how management teams expect to deal with this disruption.

Whilst there remains much uncertainty in the near-term, we are very positive about the long-term, and indeed our conviction and excitement for the outlook for specific companies and industry trends has, if anything, increased. We have read some truly remarkable company statements in recent weeks supporting some of these high conviction views about changing industry dynamics, notably our views on the acceleration in corporate spending on digital transformation to the benefit of digital ready businesses and/or businesses that enable the digital transformation. These suggest that the level of industry change is probably accelerating at this time, and so there are some important themes emerging that should deliver well for the Company over the coming years. Other companies with a strong financial footing and a differentiated product offering should be able to use this market disruption to their long-term advantage as and when competitors and capacity exit the market.

In summary, although it is always disappointing to report a negative return, we do believe that this has been a successful period for the Company as we delivered against our objective to outperform our benchmark in all market conditions. This outcome continues to support our belief that stock and industry specifics can triumph over macro factors, and most importantly, this Company has a superior toolkit to take advantage of the full opportunity set presented by our universe.

Overall, we feel enthused by the positive developments in some key industries where the virus crisis may actually have acted as a catalyst for change, which will benefit the Company in due course. We thank shareholders for their support during these challenging times.

DAN WHITESTONEBLACKROCK INVESTMENT MANAGEMENT (UK) LIMITED23 July 2020

PORTFOLIO OF INVESTMENTS AS AT 31 MAY 2020

1IntegraFinFinancial ServicesMarket value1  £13,579,000Share of net assets  2.9%UK savings platform for financial advisors

2YouGov*MediaMarket value  £13,530,000Share of net assets  2.9%Provision of survey data and specialist data analytics

3Games WorkshopLeisure GoodsMarket value  £12,479,000Share of net assets  2.7%Developer, publisher and manufacturer of miniature war games

4Breedon*Construction & MaterialsMarket value1  £12,263,000Share of net assets  2.7%British construction materials group

5SercoSupport ServicesMarket value  £12,215,000Share of net assets  2.6%Provision of public services across health, transport, immigration, defence, justice and citizen services

6Dechra PharmaceuticalsPharmaceuticals & BiotechnologyMarket value  £11,716,000Share of net assets  2.5%Development and supply of pharmaceutical and other products focused on the veterinary market

7Watches of SwitzerlandPersonal GoodsMarket value  £11,373,000Share of net assets  2.5%Retailer of luxury watches

8Gamma Communications*Mobile TelecommunicationsMarket value  £10,863,000Share of net assets  2.4%Provision of communication services to UK businesses

9Avon RubberAerospace & DefenceMarket value  £10,688,000Share of net assets  2.3%Production of safety masks and dairy related products

10FutureMediaMarket value  £9,938,000Share of net assets  2.2%Multi-platform media business covering technology, entertainment, creative arts, home interest and education services

1 Includes long derivative positions.* Traded on the Alternative Investment Market (AIM) of the London Stock Exchange.

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

Percentages shown are the share of net assets.At 31 May 2020, the Company did not hold any equity interest representing more than 3% of any company’s share capital.The above investments may comprise of exposures to long equity and long derivative positions.

FAIR VALUE AND GROSS MARKET EXPOSURE OF INVESTMENTS AS AT 31 MAY 2020

1 Fair value is determined as follows:– Listed and AIM quoted investments are valued at bid prices where available, otherwise at publisher price quotations.– The sum of the fair values of the long and short derivative positions above is determined based on the difference between the purchase or transaction price and value of the underlying shares in the contract (in effect the unrealised gains/(losses) on the exposed positions). The cost of purchasing the securities held through long derivative positions directly in the market would have amounted to £93,915,000 at the time of purchase, and subsequent market rises in prices have resulted in unrealised gains on the long derivative positions of £3,390,000, resulting in the value of the total market exposure to the underlying securities increasing to £97,305,000 as at 31 May 2020. The notional price of selling the securities to which exposure was gained via the short investment positions would have been £18,701,000 at the time of entering into the contract, and subsequent price rises have resulted in unrealised losses on the short investment positions of £1,772,000 and the value of the market exposure of these investments increasing to £20,473,000 at 31 May 2020. If the short investment positions had been closed on 31 May 2020, this would have resulted in a loss of £1,772,000 for the Company.2 Market exposure in the case of equity investments is the same as fair value. In the case of long and short derivative positions it is the market value of the underlying shares to which the portfolio is exposed via the contract.3 % based on the total market exposure of net assets.4 The gross market exposure column for cash and cash equivalents has been adjusted to assume the Company traded direct holdings rather than exposure being gained through long and short derivative positions.

DISTRIBUTION OF INVESTMENTS AS AT 31 MAY 2020

The above percentages are calculated on the net portfolio as at 31 May 2020. The net portfolio is calculated as long equity and derivative positions, less short derivative positions as at 31 May 2020.

ANALYSIS OF THE PORTFOLIO 

Source: BlackRock.

1 Long exposure plus short exposure as a percentage of the portfolio in aggregate excluding investment in BlackRock’s Institutional Cash Series plc - Sterling Liquid Environmentally Aware Fund.

2 Long exposure less short exposure as a percentage of the portfolio excluding investment in BlackRock’s Institutional Cash Series plc - Sterling Liquid Environmentally Aware Fund.

MARKET CAPITALISATION AS AT 31 MAY 2020

* The above investments may comprise of exposures to long equity and long derivative positions.

Source: BlackRock.

POSITION SIZE AS AT 31 MAY 2020

* The above investments may comprise of exposures to long equity and long derivative positions.

Source: BlackRock.

INTERIM MANAGEMENT REPORT AND RESPONSIBILITY STATEMENT

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

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

· Performance;· Market;· Income/dividend;· Financial;· Operational; and· Regulatory.

The Board reported on the principal risks and uncertainties faced by the Company in the Annual Report and Financial Statements for the year ended 30 November 2019. A detailed explanation can be found in the Strategic Report on pages 34 to 36 and in note 16 on pages 84 to 96 of the Annual Report and Financial Statements which are available on the website maintained by BlackRock at www.blackrock.com/uk/thrg.

An outbreak of an infectious respiratory illness caused by a novel coronavirus known as COVID-19 was first detected in China in December 2019 and has developed into a global pandemic. This coronavirus has resulted in travel restrictions, closed international borders, enhanced health screenings at ports of entry and elsewhere, disruption of and delays in healthcare service preparation and delivery, prolonged quarantines, cancellations, supply chain disruptions, and lower consumer demand, as well as general concern and uncertainty. The response to the COVID-19 pandemic has adversely affected the economies of many nations across the entire global economy, individual issuers and capital markets, and could continue with extents that cannot necessarily be foreseen. The duration of the COVID-19 outbreak and its effects cannot be determined with certainty.

In the view of the Board, there have been no changes to the fundamental nature of the principal risks and uncertainties, other than the outbreak of the COVID-19 pandemic as discussed above, since the previous report and these are equally applicable to the remaining six months of the financial year as they were to the six months under review.

RELATED PARTY DISCLOSURE AND TRANSACTIONS WITH THE INVESTMENT MANAGERBlackRock Fund Managers Limited (BFM) was appointed as the Company’s Alternative Investment Fund Manager (AIFM) with effect from 2 July 2014. BFM has (with the Company’s consent) delegated certain portfolio and risk management services, and other ancillary services, to BlackRock Investment Management (UK) Limited (BIM (UK)). Both BFM and BIM (UK) are regarded as related parties under the Listing Rules. Details of the fees payable are set out in note 4 and note 11 of the financial statements.

The related party transactions with the Directors are set out in note 12 of the financial statements.

GOING CONCERNThe Board is mindful of the uncertainty surrounding the potential duration of the COVID-19 pandemic and its impact on the global economy, the Company’s assets and the potential for the level of revenue derived from the portfolio to reduce versus the prior year. The Board believes that the Company and its key third party service providers have in place appropriate business continuity plans and will be able to maintain service levels through the COVID-19 pandemic.

The Directors, having considered the nature and liquidity of the portfolio, the Company’s investment objective and the Company’s projected income and expenditure, are satisfied that the Company has adequate resources to continue in operational existence for the foreseeable future (being a period of at least twelve months from the date that this half-yearly financial report is approved) and is financially sound. For this reason, they continue to adopt the going concern basis in preparing the financial statements. The Company has a portfolio of investments which is considered to be readily realisable and is able to meet all of its liabilities from its assets and the income generated from these assets. Ongoing charges (excluding finance costs, performance fees, direct transaction costs, custody transaction charges, taxation and certain non-recurring items) for the year ended 30 November 2019 were approximately 0.59%1 of net assets.

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

The Directors confirm to the best of their knowledge that:

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

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

The half yearly financial report has not been audited or reviewed by the Company’s Auditor.

The half yearly financial report was approved by the Board on 23 July 2020 and the above responsibility statement was signed on its behalf by the Chairman.

CHRISTOPHER SAMUELFOR AND ON BEHALF OF THE BOARD23 July 2020

STATEMENT OF COMPREHENSIVE INCOME FOR THE SIX MONTHS ENDED 31 MAY 2020

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

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

STATEMENT OF CHANGES IN EQUITY FOR THE SIX MONTHS ENDED 31 MAY 2020

(1) Final dividend of 7.70p per share for the year ended 30 November 2019, declared on 6 February 2020 and paid on 2 April 2020.

(2) Final dividend of 7.50p per share for the year ended 30 November 2018, declared on 12 February 2019 and paid on 28 March 2019.

(3) Final dividend of 7.50p per share for the year ended 30 November 2018, declared on 12 February 2019 and paid on 28 March 2019 and interim dividend of 2.50p per share for the year ended 30 November 2019, declared on 23 July 2019 and paid on 28 August 2019.

Costs related to the acquisition and disposal of investments amounted to £823,000 and £83,000 respectively for the six months ended 31 May 2020 (six months ended 31 May 2019: £495,000 and £72,000; year ended 30 November 2019: £801,000 and £139,000). All transaction costs have been included within capital reserves.

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

STATEMENT OF FINANCIAL POSITION AS AT 31 MAY 2020

CASH FLOW STATEMENT FOR THE SIX MONTHS ENDED 31 MAY 2020

1 Cash Funds represent funds held on deposit with the BlackRock Institutional Cash Series plc – Sterling Liquid Environmentally Aware Fund (31 May 2019: BlackRock Institutional Cash Series plc

– Sterling Liquidity Fund; 30 November 2019: BlackRock Institutional Cash Series plc – Sterling Liquid Environmentally Aware Fund).

NOTES TO THE CONDENSED FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED 31 MAY 2020

1. PRINCIPAL ACTIVITYThe 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 PREPARATIONThe half yearly financial statements for the period ended 31 May 2020 have been prepared in accordance with the Disclosure Guidance and Transparency Rules sourcebook of the Financial Conduct Authority and with International Accounting Standard 34 (IAS 34), ‘Interim Financial Reporting’, as adopted by the European Union (EU). The half yearly financial statements should be read in conjunction with the Company’s Annual Report and Financial Statements for the year ended 30 November 2019, which have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the EU and as applied in accordance with the provisions of the Companies Act 2006 and in accordance with IAS 34 Interim Financial Reporting.

Insofar as the Statement of Recommended Practice (SORP) for investment trust companies and venture capital trusts, issued by the Association of Investment Companies (AIC) in October 2019, is compatible with IFRS, the financial statements have been prepared in accordance with guidance set out in the SORP.

The revised SORP issued in October 2019 is applicable for accounting periods beginning on or after 1 January 2019, therefore the Company has adopted the new SORP for the accounting year beginning 1 December 2019. As a result, there will be an amended presentation of movements in investments held at fair value through profit or loss in the notes to the financial statements which will be included as part of the 2020 Annual Report and Financial Statements. As this note is not included as part of the Interim Report and Financial Statements, there is no impact on the Interim Report and Financial Statements as a result of the adoption of the revised SORP.

Adoption of new and amended standards and interpretationsIFRS 16 LeasesThe Company adopted IFRS 16 as of the date of initial application of 1 December 2019. IFRS 16 specifies accounting for leases and removes the distinction between operating and finance leases. This standard is not applicable to the Company as it has no leases.

IFRIC 23 Uncertainty over Income Tax TreatmentsThe Company adopted IFRIC 23 as of the date of initial application of 1 December 2019. IFRIC 23 seeks to provide clarity on how to account for uncertainty over income tax treatments and specifies that an entity must consider whether it is probable that the relevant tax authority will accept each tax treatment, or group of tax treatments, that it plans to use in its income tax filing. The interpretation also requires companies to reassess the judgements and estimates applied if facts and circumstances change. The interpretation would require the Company to recognise uncertain tax positions which are more than probable within its financial statements and it could potentially require the Company to recognise tax reclaims filed with HMRC if their recoverability becomes more than probable. The adoption of this interpretation has had no impact on the financial statements of the Company.

IFRS standards that have yet to be adoptedAmendments to IFRS 3 – Definition of a business (effective 1 January 2020). This amendment revises the definition of a business. According to feedback received by the International Accounting Standards Board, application of the current guidance is commonly thought to be too complex and it results in too many transactions qualifying as business combinations. The standard has been endorsed by the EU. This standard is unlikely to have any impact on the Company.

Amendments to IAS 1 and IAS 8 – Definition of material (effective 1 January 2020). The amendments to IAS 1, ‘Presentation of Financial Statements’, and IAS 8, ‘Accounting Policies, Changes in Accounting Estimates and Errors’, and consequential amendments to other IFRSs require companies to:

(i) use a consistent definition of materiality throughout IFRSs and the Conceptual Framework for Financial Reporting;

(ii) clarify the explanation of the definition of material; and

(iii) incorporate some of the guidance of IAS 1 about immaterial information.

This standard has been endorsed by the EU. This standard is unlikely to have any significant impact on the Company.

Amendments to IFRS 9, IAS 39 and IFRS 7 – Interest rate benchmark reform (effective 1 January 2020). These amendments provide certain reliefs in connection with the interest rate benchmark reform. The reliefs relate to hedge accounting and have the effect that the Inter Bank Offer Rate (IBOR) reform should not generally cause hedge accounting to terminate. However, any hedge ineffectiveness should continue to be recorded in the income statement. Given the pervasive nature of hedges involving IBOR based contracts, the reliefs will affect companies in all industries.

This standard has been endorsed by the EU. This standard is unlikely to have any significant impact on the Company.

IFRS 17 – Insurance contracts (effective 1 January 2021). This standard replaces IFRS 4, which currently permits a wide variety of practices in accounting for insurance contracts. IFRS 17 will fundamentally change the accounting by all entities that issue insurance contracts and investment contracts with discretionary participation features. The standard has not been endorsed by the EU. This standard is unlikely to have any impact on the Company as it has no insurance contracts.

3. INCOME

Dividends and interest received in cash in the six months ended 31 May 2020 amounted to £3,507,000 and £45,000 (six months ended 31 May 2019: £3,780,000 and £99,000; year ended 30 November 2019: £8,538,000 and £172,000) respectively.

Special dividends of £83,000 have been recognised in capital in the six months ended 31 May 2020 (six months ended 31 May 2019: £nil; year ended 30 November 2019: £1,109,000).

4. INVESTMENT MANAGEMENT AND PERFORMANCE FEES

The performance fee is 15% of Net Asset Value total return outperformance of the benchmark measured over a two year rolling basis and is applied on the average Gross Assets over two years. The performance fee is calculated and accrued on a daily basis and payable on 30 November each year. Gross Assets are defined as the gross asset value of the long only portfolio plus the gross value of the underlying equities, long and short, to which the Company is exposed through CFDs. There is a cap on total management and performance fees of 1.25% of average gross assets over a two year period which has the effect of capping performance fees at circa 0.9% of average gross assets over two years.

On the first day of the financial year, outperformance from the previous financial year (if any) is carried forward and accrued in the daily NAV released to the London Stock Exchange.

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

Performance fees have been wholly allocated to the capital column of the Statement of Comprehensive Income as the performance has been predominantly generated through capital returns from the investment portfolio. For the six months ended 31 May 2020, a performance fee of £4,805,000 has been accrued (six months ended 31 May 2019: £4,754,000; year ended 30 November 2019: £4,756,000).

The investment management fee is calculated at the rate of 0.35% per annum on month end Gross Assets. The management fee is charged 25% to revenue and 75% to capital.

5. OTHER OPERATING EXPENSES

6. DIVIDENDSThe Board has declared an interim dividend of 2.50p per share payable on 28 August 2020 to shareholders on the register at 31 July 2020 (six months ended 31 May 2019, interim dividend of 2.50p per share paid on 28 August 2019 to shareholders on the register at 2 August 2019). This dividend has not been accrued in the financial statements for the six months ended 31 May 2020 as, under IFRS, interim dividends are not recognised until paid. Dividends are debited directly to reserves.

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

8. CALLED UP SHARE CAPITAL

During the six months ended 31 May 2020, the Company issued 6,400,000 shares (six months ended 31 May 2019: nil; year ended 30 November 2019: 1,000,000) from treasury for a total consideration of £42,796,000 (six months ended 31 May 2019: £nil; year ended 30 November 2019: £6,373,000) including costs.

During the six months ended 31 May 2020, the Company issued 3,058,136 new shares (six months ended 31 May 2019: £nil; year ended 30 November 2019: nil) for a total consideration of £14,485,000 (31 May 2019: nil; 30 November 2019: £nil) including costs.

Since 31 May 2020 and up to the latest practicable date of 21 July 2020, the Company has issued 55,000 Ordinary shares for a total consideration of £320,000.

The Ordinary shares give shareholders voting rights, the entitlement to all of the capital growth in the Company’s assets and to all income from the Company that is resolved to be distributed.

9. VALUATION OF FINANCIAL INSTRUMENTSFinancial assets and financial liabilities are either carried in the Statement of Financial Position at their fair value (investments and derivatives) or at an amount which is a reasonable approximation of fair value (due from brokers, dividends and interest receivable, due to brokers, accruals, cash and cash equivalents and bank overdrafts). IFRS 13 requires the Company to classify fair value measurements using a fair value hierarchy that reflects the significance of inputs used in making the measurements. The valuation techniques used by the Company are explained in the accounting policies note 2(g) as set out on page 75 in the Company’s Annual Report and Financial Statements for the year ended 30 November 2019.

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

The fair value hierarchy has the following levels:

Level 1 – Quoted market price for an identical instrument in an active marketA financial instrument is regarded as quoted in an active market if quoted prices are readily available from an exchange, dealer, broker, industry group, pricing service, or regulatory agency and those prices represent actual and regularly occurring market transactions on an arm’s length basis. The Company does not adjust the quoted price for these instruments.

Level 2 – Valuation techniques using observable inputsThis category includes instruments valued using quoted prices for similar instruments in markets that are considered less than active, or other valuation techniques where all significant inputs are directly or indirectly observable from market data.

Valuation techniques used for non-standardised financial instruments such as options, currency swaps and other over-the-counter derivatives include the use of comparable recent arm’s length transactions, reference to other instruments that are substantially the same, discounted cash flow analysis, option pricing models and other valuation techniques commonly used by market participants making the maximum use of market inputs and relying as little as possible on entity specific inputs.

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

Level 3 – Valuation techniques using significant unobservable inputsThis category includes all instruments where the valuation technique includes inputs not based on market data and these inputs could have a significant impact on the instrument’s valuation.

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

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

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

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

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

There were no transfers between levels for financial assets and financial liabilities during the period recorded at fair value as at 31 May 2020, 31 May 2019 and 30 November 2019. The Company did not hold any Level 3 securities throughout the financial period under review or as at 31 May 2020, 31 May 2019 or 30 November 2019.

The values of derivative positions classified as Level 2 as at 31 May 2019 have been restated to fair value to align with the values presented on the Statement of Financial Position. The amounts presented in the prior interim financial statements were presented on a gross exposure basis as follows: total gross exposure on long derivative positions was presented as an asset of £59,193,000 and total gross exposure on short derivative positions was presented as a liability of £(55,526,000).

10. FINANCIAL RISKSThe Company’s investment activities expose it to the various types of risk which are associated with the financial instruments and markets in which it invests. The risks are substantially consistent with those disclosed in the previous annual financial statements with the exception of those outlined below.

Market risk arising from price riskPrice risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market prices (other than those arising from interest rate risk or currency risk), whether those changes are caused by factors specific to the individual financial instrument or its issuer, or factors affecting similar financial instruments traded in the market. Local, regional or global events such as war, acts of terrorism, the spread of infectious illness or other public health issues, recessions, or other events could have a significant impact on the Company and the market price of its investments and could result in increased premiums or discounts to the Company’s net asset value.

An outbreak of an infectious respiratory illness caused by a novel coronavirus known as COVID-19 was first detected in China in December 2019 and has now developed into a global pandemic. This coronavirus has resulted in travel restrictions, closed international borders, enhanced health screenings at ports of entry and elsewhere, disruption of and delays in healthcare service preparation and delivery, prolonged quarantines, cancellations, supply chain disruptions, and lower consumer demand, as well as general concern and uncertainty. The impact of COVID-19 has adversely affected the economies of many nations across the entire global economy, individual issuers and capital markets, and could continue to extents that cannot necessarily be foreseen. In addition, the impact of infectious illnesses in emerging market countries may be greater due to generally less established healthcare systems. Public health crises caused by the COVID-19 outbreak may exacerbate other pre-existing political, social and economic risks in certain countries or globally. The duration of the COVID-19 outbreak and its effects cannot be determined with certainty.

A key metric used by the BlackRock Risk and Quantitative Analysis Group to measure market risk is Value-at-Risk (“VaR”) which encompasses currency, interest rate and price risk. VaR is a statistical risk measure that estimates the potential portfolio loss from adverse market movements in an ordinary market environment. VaR analysis reflects the interdependencies between risk variables, unlike a traditional sensitivity analysis.

The one-day VaR as of 31 May 2020 and 30 November 2019 based on a 99% confidence level was 12.57% and 1.91%. The higher VaR number is representative of higher market volatility during the period as a result of the COVID-19 pandemic described above.

11. TRANSACTIONS WITH THE AIFM AND INVESTMENT MANAGERBlackRock Fund Managers Limited (BFM) provides management and administration services to the Company under a contract which is terminable on six months’ notice. BFM has (with the Company’s consent) delegated certain portfolio and risk management services, and other ancillary services, to BlackRock Investment Management (UK) Limited (BIM (UK)). Further details of the investment management contract are disclosed on pages 39 and 40 of the Directors’ Report in the Company’s Annual Report and Financial Statements for the year ended 30 November 2019.

The investment management fee due for the six months ended 31 May 2020 amounted to £975,000 (six months ended 31 May 2019: £854,000; year ended 30 November 2019: £1,784,000). In addition, a performance fee of £4,805,000 (six months ended 31 May 2019: £4,754,000; year ended 30 November 2019: £4,756,000) was accrued for the six months ended 31 May 2020.

At the period end, £1,437,000 was outstanding in respect of management fees (31 May 2019: £854,000; 30 November 2019: £932,000). Any final performance fee for the full year ending 30 November 2020 will not crystallise and fall due until the calculation date of 30 November 2020.

In addition to the above services, BlackRock has provided the Company with marketing services. The total fees paid or payable for these services to 31 May 2020 amounted to £70,000 excluding VAT (six months ended 31 May 2019: £63,000; year ended 30 November 2019: £202,000). Marketing fees of £192,000 excluding VAT (31 May 2019: £145,000; 30 November 2019: £122,000) were outstanding at 31 May 2020.

The Company has an investment in BlackRock Institutional Cash Series plc - Sterling Liquid Environmentally Aware Fund of £18,681,000 as at 31 May 2020 (31 May 2019: £14,247,000 in BlackRock Institutional Cash Series plc - Sterling Liquidity Fund; 30 November 2019: £28,977,000 in BlackRock Institutional Cash Series plc - Sterling Liquid Environmentally Aware Fund).

As at 31 May 2020, an amount of £110,000 (31 May 2019: £92,000; 30 November 2019: £116,000) was payable to the Manager in respect of Directors’ fees.

The ultimate holding company of the Manager and the Investment Manager is BlackRock, Inc. a company incorporated in Delaware USA. During the period, PNC Financial Services Group, Inc. (“PNC”) was a substantial shareholder in BlackRock, Inc. PNC did not provide any services to the Company during the financial year ended 30 November 2019 and the period up to the 11 May 2020. On 11 May 2020, PNC announced its intent to sell its investment in BlackRock, Inc. through a registered offering and related buyback by BlackRock, Inc.

12. RELATED PARTY DISCLOSUREThe Board consists of five non-executive Directors, all of whom are considered to be independent by the Board. None of the Directors has a service contract with the Company. With effect from 1 December 2019, the Chairman receives an annual fee of £39,500, the Chairman of the Audit Committee receives an annual fee of £31,000 and each of the other Directors receives an annual fee of £27,000.

As at 31 May 2020, an amount of £10,000 (31 May 2019: £10,000; 30 November 2019: £10,000) was outstanding in respect of Directors' fees.

At the period end and at 23 July 2020, the interests of the Directors in the ordinary shares of the Company were as follows:

1 Appointed 10 June 2020

13. CONTINGENT LIABILITIESThere were no contingent liabilities as at 31 May 2020 (31 May 2019 and 30 November 2019: nil).

14. PUBLICATION OF NON STATUTORY ACCOUNTSThe financial information contained in this half yearly financial report does not constitute statutory accounts as defined in Section 435 of the Companies Act 2006. The financial information for the six months ended 31 May 2020 and 31 May 2019 has not been audited.

The information for the year ended 30 November 2019 has been extracted from the latest published audited financial statements, which have been filed with the Registrar of Companies. The report of the Auditor on those financial statements contained no qualification or statement under Sections 498(2) or 498(3) of the Companies Act 2006.

15. ANNUAL RESULTSThe Board expects to announce the annual results for the year ending 30 November 2020 in February 2021. Copies of the results announcement can be obtained from the Secretary on 020 7743 3000 or by email at cosec@blackrock.com. The Annual Report and Financial Statements should be available by the beginning of February 2021, with the Annual General Meeting expected to be held in March 2021.

For further information, please contact:

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

Press Enquiries:Ed Hooper, Lansons Communications – Tel: 0207 294 3620E-mail: edh@lansons.com; BlackRockInvestmentTrusts@lansons.com

23 July 2020

12 Throgmorton AvenueLondon EC2N 2DL

END

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