BlackRock Smaller Companies Trust Plc - Final Results (2022)

(Legal Entity Identifier: 549300MS535KC2WH4082)

Informationdisclosed in accordance with Article 5 Transparency Directive andDTR 4.1

Annual resultsannouncement for the year ended 28 February2022


Net asset value per ordinary share(debt at par value) (pence)11,878.111,784.35
Net asset value per ordinary share(debt at fair value) (pence)11,882.381,774.71
Ordinary share price (mid-market)(pence)11,684.001,698.00
Numis Smaller Companies plus AIM(excluding Investment Companies) Index217,421.9617,167.37
Performance (with dividendsreinvested)
Net asset value per ordinary share(debt at par value)2,37.0%16.1%
Net asset value per ordinary share(debt at fair value)2,37.8%16.7%
Ordinary share price(mid-market)2,30.9%17.2%
Numis Smaller Companies plus AIM(excluding Investment Companies) Index2,31.5%24.9%

28 February2022
28 February2021
Revenue and dividends
Revenue return per share35.29p13.36p+164.1
Interim dividend per share13.00p12.80p+1.6
Final dividend per share22.00p20.50p+7.3
Total dividends paid andpayable35.00p33.30p+5.1
Total assets less currentliabilities (£’000)986,537960,900+2.7
Equity shareholders’ funds(£’000)4917,078871,296+5.3
Ongoing chargesratio3,50.7%0.8%-12.5
Dividend yield32.1%2.0%

1 Without income reinvested.
2 Total return basis with income reinvested.
3 Alternative Performance Measure, see Glossarycontained within the Annual Report and Financial Statements.
4 The change in equity shareholders’ fundsrepresents the market movements during the year and dividendspaid.
5 Ongoing charges ratio calculated as apercentage of average daily net assets and using the management feeand all other operating expenses, excluding finance costs, directtransaction costs, custody transaction charges, VAT recovered,taxation and certain non-recurring items in accordance with AICguidelines.


Dear Shareholder

After two years of a global pandemic, shrinking economies anddwindling employment, we all looked forward to a return of morenormal times. A successful global roll-out of vaccines andgovernment efforts to control the COVID-19 infection across thepopulation did indeed bring us back toward normality and aresurgence of economic growth. UK markets performed well throughthe first half of the Company’s financial year into September 2021 as lockdown restrictions relaxedand consumer spending increased. Corporate spending rose, mainly inresponse to fundamental changes in global supply chains and a driveto localise sourcing. Investors grew more cautious in the latterpart of the year as the combined effects of supply chain disruptionand fiscal stimulus fuelled surging inflation. The era of cheapmoney, low interest rates and supportive fiscal policy looked setto come to an end. In these circumstances, it may not be surprisingthat the most significant contributors to performance in the yearcame from the portfolio’s exposure to oil and gas stocks, whereincreasing energy prices boosted returns. Performance alsobenefited from a resurgence in Merger & Acquisition (M&A)activity, as companies took advantage of increased liquidity andstill modest valuations.

Sadly, the return to normality did not last. Against an alreadychallenging market backdrop, the tragic and devastating events inUkraine, which began to unfold atthe end of the Company’s financial year, undermined investorconfidence and market direction. In addition to the hugely negativeimpact on investor psychology, the war in Europe caused constricted supplies of key hardand soft commodities while dramatically pushing prices up evenfurther. In a market environment only just beginning to recoverfrom past pandemic driven events, the situation created aturbocharged level of market uncertainty and volatility. Thisuncertainty is likely to persist for some time as the war inEurope unfolds and thepredictability of economic forces remains limited. However, yourCompany’s focus has always been on investing in companies with wellcapitalised balance sheets and strong, entrepreneurial managementteams that are able to rapidly adapt their businesses to shiftingmarket dynamics. As such we believe the portfolio iswell-positioned and prepared to navigate the challenges ahead andto take advantage of the investment opportunities that may arise inthese uncertain times.

In the year under review the Company’s Net Asset Value per sharerose by 7.0%1,2,3, outperforming our benchmark index,the Numis Smaller Companies plus AIM (excluding InvestmentCompanies), which returned 1.5%1,2. Over the same periodyour Company’s share price on a total return basis with incomereinvested rose by 0.9%1,2 compared with the FTSE AIMAll-Share Index which fell by 11.3%1, the FTSE 250 Indexwhich rose by 2.9%1 and the FTSE 100 Index which rose by19.2%1. The wide disparity between index returnsreflected changing investor sentiment about large versus smallercap companies during a period of great market uncertainty overfuture prospects.

More detail on the significant contributors to and detractorsfrom performance during the year are given in the InvestmentManager’s Report below.

The Company’s longer-term performance is set out in the tablebelow. More information is also given in the chart on page 7 of theAnnual Report and Financial Statements which illustrates howlong-term investors have had an opportunity to build up anattractive annual income from an investment in the Company. Even ifthe initial dividend yield at the point of purchase has beenunremarkable, the strong underlying growth in dividends over theyears has resulted in a competitive yield on cost when comparedwith equity income funds in general.

To illustrate this investment and income success, the chart onpage 7 of the Annual Report and Financial Statements shows that£1,000 invested in the Company on 28February 2006 would have increased in value by546%1 in NAV terms to 28 February2022, whereas £1,000 invested in the UK open-ended incomesector median would have increased by just 133%1. Thechart also demonstrates that while the yield on the Company’sshares was much lower at the beginning of the period, over time theCompany’s dividend has grown at a much faster rate than open-endedUK income fund competitors. As a result, the yield on the purchasecost of an investment in the Company would now be more than that onthe UK open-ended income sector median.

Your Company’s total revenues per year are a reflection of thedividends we receive from portfolio companies. This in turn drivesour ability to pay dividends to our shareholders. The period of thepandemic saw a dramatic drop in our revenues from portfoliodividends followed by a sharp improvement that reflected thestrength of our portfolio companies’ recovery. Total revenue returnfor the year was 35.29 pence pershare (2021: 13.36 pence per share).The increase of 164.1% was largely due to the exceptionally lowlevel of dividends received in the year to 28 February 2021 as the COVID-19 pandemic hitportfolio companies’ revenue streams. Notwithstanding this fact, itis pleasing to note that current year revenues are just 5.0% lowerthan the more comparable earnings per share of 37.13 pence for the year to 29 February 2020. This is despite the fact thatthe UK economy was still struggling against lockdown restrictionsand COVID-19 variants for a substantial part of the financial yearto 28 February 2022. The fact thatrevenue streams have recovered so significantly is a tribute to thestrength and resilience of many of our portfolio holdings.

The Board continues its policy to ensure the sustainability ofdividends and their future growth through investment in companieswith strong balance sheets, solid management and sustainablebusiness growth models. We remain mindful of the importance ofyield to shareholders. The Board is also cognisant of the benefitsof the Company’s investment trust structure which enables it toretain up to 15% of total revenue each year to build up reserveswhich may be carried forward and used to pay dividends duringleaner times. The Company has substantial distributable reserves(£851 million as at 28 February 2022,including revenue reserves of £16.4 million). Taking note of yourCompany’s current reserves, the Board has decided to declare afinal dividend of 22.00p per share, representing a 5.1% increaseover total dividends declared for the year to 28 February 2021. The dividend will be paid on17 June 2022 to shareholders on theCompany’s register as at 13 May 2022.The Board has also taken this decision recognising that manyportfolio companies are demonstrating a robust rebound in theirdividend paying ability, allowing us to take a more optimistic viewof future prospects.

Your Company has now increased its annual dividend every yearsince 2003. The annualised increase in dividends paid since thisdate equates to 12.2%.

Performance to 28 February 2022%%%%%
NAV per share (debt atpar)1,27.041.765.5262.4428.3
Share price1,20.934.875.7304.4465.3

1 Percentages in Sterling terms withincome reinvested.
2 Alternative Performance Measure, seeGlossary within the Annual Report and Financial Statements.
3 NAV with debt at par.
4 In Sterling terms with income reinvested.


The Company has traditionally maintained a range of borrowingsand facilities to provide balance between longer-term andshort-term maturities and between fixed and floating rates ofinterest. The Company currently has in place fixed rate fundingconsisting of the £15 million debenture maturing in July 2022, £25 million senior unsecured fixedrate private placement notes maturing in 2037, £20 million seniorunsecured notes maturing in 2044 and £25 million senior unsecurednotes maturing in 2046. We chose to increase long-term fixed ratefunding over the past year to capture what we considered veryattractive interest rates and more recent changes in interest rateprospects underscore the logic of that decision. By way ofillustration, the interest cost for the 7.75% £15 million debenturethat matures in July this year amounts to £1.2 million per annum;the equivalent cost for £15 million at the rate of the most recentLong Dated Note issued in September2021 of 2.47% (which may be used to repay the debenture)equates to just £0.4 million, a saving of £0.8 million (9 basispoints of NAV based on asset values at 28February 2022). Variable rate funding consists of a £35million three-year revolving loan facility with SMBC BankInternational plc and an uncommitted overdraft facility of £10million with The Bank of New York Mellon (International)Limited.

It is the Board’s intention that net gearing will not exceed 15%of the net assets of the Company at the time of the drawdown of therelevant borrowings. Under normal operating conditions it isenvisaged that gearing will be within a range of 0%-15% of netassets. At the year end, the Company’s net gearing was 4.3% of netassets (2021: 8.9%).

The Board monitors the Company’s share rating closely, andrecognises the importance to shareholders that the price of theCompany’s shares do not trade at either a significant premium ordiscount to the underlying NAV.

Market volatility persisted as the world grappled with theongoing COVID-19 pandemic through the year under review anddiscounts across the closed-end funds sector widened. YourCompany’s average discount narrowed, trading at an average discountof 5.0% to NAV (with debt at fair value) over the full year(compared to an average discount of 5.5% for the year to28 February 2021). To put this incontext, the average discount for companies in the AIC UK SmallerCompanies sector for the same period was 7.0%. The Company’sdiscount currently stands at 12.5%.

Since the date of my last report, the Board has made significantprogress in the implementation of its policy on tenure (that noDirector’s tenure should exceed nine years, or in the case of theChairman, twelve years).

As previously announced, Mr JamesBarnes joined the Board with effect from 31 July 2021 and Ms HelenSinclair joined with effect from 1March 2022. Mrs Burton is the only remaining Director whosetenure has exceeded nine years and she has advised the Board of herintention not to seek re-election at the Company’s Annual GeneralMeeting in 2022 and to retire with effect from the conclusion ofthis meeting. The Board wishes to thank Mrs Burton for her wisecounsel and invaluable contribution to the Company over her tenureas a Director.

The Company’s Annual General Meeting will be held at the offices ofBlackRock at 12 Throgmorton Avenue, London EC2N 2DL on Thursday, 9 June 2022 at 11.30a.m. Details of the business of the meeting are set out inthe Notice of Annual General Meeting contained within the AnnualReport and Financial Statements.

The Board is delighted to return to in person AGMs. At presentUK Government restrictions on public gatherings are no longer inforce in connection with COVID-19. We therefore intend to hold theAGM in the normal way with physical attendance by shareholders.However, shareholders should be aware that it is possible that suchrestrictions could be reimposed prior to the date of the AGM.

Shareholders who intend to attend the AGM should ensure thatthey have read and understood the venue requirements for entry tothe AGM. These requirements, along with further information on thearrangements for the AGM, can be found in Note 1 of the Notice ofAnnual General Meeting contained within the Annual Report andFinancial Statements.

In the absence of any reimposition of restrictions, the Boardvery much looks forward to meeting with shareholders at theAGM.

The war in Europe makes anyforecast of future results more than usually difficult. Since thefinancial year end the Company’s NAV (as at 27 April 2022) has decreased by 5.7%1,against a decrease in the benchmark of 1.9%1, and theshare price has fallen by 7.4%1. These results should beseen in the context of continued and significant marketvolatility.

As the COVID-19 pandemic has evolved, the resurgence of variantsand the unpredictable trajectory of a return to normal life hascontinued to create significant volatility in markets across theglobe. The monetary and fiscal hangover from the pandemic and thesharp resurgence in economic activity in the midst of ongoingsupply disruptions have set the stage for a high inflationenvironment. The situation has been exacerbated by the devastatingevents in Ukraine which haveconstricted the supply of key commodities dramatically and pushedprices up even further.

Against this turbulent backdrop, the Company’s portfolio isweighted towards companies with well capitalised balance sheets andentrepreneurial management teams that are able to rapidly adapttheir businesses to the shifting market dynamics. As such webelieve your Company is well-positioned and prepared to takeadvantage of the investment opportunities that lie ahead despitethe uncertain market conditions.

If shareholders would like to contact me, please write toBlackRock Smaller Companies Trust plc, Exchange Place One, 1 SempleStreet, Edinburgh EH3 8BL markedfor the attention of the Chairman.

29 April 2022

1Alternative Performance Measure. Percentages in Sterling terms withincome reinvested and based on NAV with debt at par value.


As with last year, I write this year’s Manager’s Report sittingat home. However, this year it’s not because of lockdown, butthrough choice as hybrid working has become more entrenched. I’m athome because I needed to get my family a pre-flight COVID-19 testfor entry to the US, a test I conducted on Zoom. The testunfortunately coincided with a Blackrock Smaller Companies Boardmeeting, but such clashes are no longer an issue, videoconferencing allowed me to participate, as it did with others whowere at home because they had been in contact with a confirmedCOVID-19 case. Two years ago these statements would have soundedunusual, yet now they are an everyday part of our lives, such hasbeen the change since COVID-19 first entered our lives. It isamazing how necessity can accelerate the pace of change, and howquickly we adapt to that horrid phrase, the “new normal”. TheCompany’s financial year has generally seen a recovery in marketsas COVID-19 risks began to recede. However, whilst we may havehoped this would be a reason for enthusiasm, the ripples of thepandemic continued to be felt through logistics, inflation andlabour disruption. Where once we were worried about lockdowns, wemoved onto the “pingdemic”. The shortage of pasta and toilet rollsbecame shortages in critical components and semi-conductors. Duringthe height of COVID-19 we worried about the strength of companybalance sheets, now pricing power dominates discussions. The debatemoved on from who were the “COVID-19 winners” to which companieswere most exposed to normalisation as old habits and practicesreturned. The era of easy money, low rates, and supportive fiscalpolicy gave way to rising rates and tax rises. All the whiletransient inflation has become less transitory, leading to asignificant shift in expectations for interest rate rises. Finally,the period under review ends with the shocking and dreadful eventsin Ukraine which led to volatilityin global markets, albeit the Company does not have a directexposure to any Russian or Ukrainian securities.

The Company’s NAV (debt at par value) rose by 7.0%1during the financial year, outperforming our Benchmark which roseby 1.5% (all percentages stated with income reinvested). It ispleasing to see the Company return to outperformance this year, andfor that performance to come from a wide set of investments,highlighting the strength of our process and stock picking.

As investors, we aim to identify opportunities that can deliverin the medium to long-term, so it is always pleasing when sharesappear as top performers over a number of years. Watches ofSwitzerland delivered furtherupgrades as demand for higher end jewellery and watches continuedpost the re-opening of their retail outlets. Their success as adistributor has been recognised by the major brands, resulting infurther opportunities in the UnitedStates (US) and Europe. Therecovery in corporate spending has been felt in several areas, fromNext Fifteen Communications benefiting from the increaseddemand for digital content, to YouGov and their suite ofdata products. In an ever-changing world it is of paramountimportance for businesses to know not just who their customers are,but also how best to access them, and whilst large technologycompanies do more to protect their customer data, the value ofbusinesses that can provide other mechanisms to identify and targetaudiences will increase. MorganSindall delivered several upgrades through the course ofthe year as domestic infrastructure and regeneration marketsrecovered. The management of MorganSindall take great pride in the relationship theymaintain with the supply chain, with prompt payment a keycomponent. In an industry that has historically been characterisedby confrontational relationships between clients and suppliers,this is a definite source of competitive advantage, and will likelyhelp Morgan Sindall managetheir business more effectively than others in today’s environmentof component shortages.

Even before the recent dislocation in energy markets caused byevents in Ukraine, oil and gasprices were rallying as the additional demand required by a postCOVID-19 world met the supply side realities of an industry thathasn’t invested for growth for a number of years. Whilst highcommodity prices will inevitably cause pressure for corporates andconsumers, they are of course positive for the resources sector,with both Serica Energy and Gulf KeystonePetroleum appearing in the top performers this year.

No year is ever perfect, there are always companies that fail todeliver on expectations. When this happens, our role is tounderstand if changes are temporary, and ultimately have no impacton longer term fundamentals and value, or if they represent a morepermanent shift in opportunity. Joules is an example of the twinpressures of a weakening consumer backdrop and the supply chainstresses that are impacting on the retail sector, with the sharesweakening on the back of two downgrades. Sadly, we expect thesedifficult conditions for Joules to continue, and have sold theposition. In contrast, Moonpig shares have also fallensubstantially since their 2021 peak despite delivering on theearnings expectations set at the time of their Initial PublicOffering (IPO). The supply chain for greetings cards is far lesscomplicated than for fashion, less exposed to the logistics andinflationary pressures we are seeing elsewhere, whilst there is astructural shift to online cards and gifting that will continue todrive the top line. With this view in mind, we continue to hold aposition.

In an environment of rising costs, it is paramount thatbusinesses have pricing power. Unfortunately, InternationalGreetings has shown what happens when customers are unwillingto accept price increases, no matter how justified they may be byraw material inflation, and the company finds itself in the vicelike grip of the closing jaws of cost and price. With the outlookshowing no signs of improvement, and no suggestion they willsuddenly develop more pricing power, we have exited theposition.

A combination of significant available liquidity and favourablevaluations catalysed a resurgence in Mergers & Acquisitions(M&A) activity. The Company has been fortunate to benefit on anumber of occasions this year, with bids for Sumo,Sanne, Stock Spirits and Vectura. It is worthnoting how many of these deals have corporate buyers rather thanprivate equity, highlighting the increased confidence frommanagement teams, and value they see in the UK market. Thatconfidence extends to our own investments too, as AuctionTechnology Group, Team17, and LearningTechnologies took advantage of equity markets to raise capitalfor transactions, whilst a myriad of others utilised their own cashflow to carry out bolt on deals. However, the health of the M&Amarkets stood in stark contrast to the IPO markets, where theofferings this year were generally of lower quality or atunattractive valuations. As such, our participation in offeringsthis year has been minimal, with only Kitwave Group, InThe Style Group, Big Technologies and DevolverDigital added to our holdings.

Whilst we have a fundamental bottom-up investment process, bydefault that stock selection aggregates up to produce sectorexposures. This year we have reduced our overweight in consumerrelated stocks, moderating the position as the outlook for consumerspending becomes more opaque. Employment is still high, wageincreases are coming through, but it is still unclear whether theseincreases will be enough to cover the rapid changes to the cost ofliving. Overlaying the macro dynamics are unknown shifts inconsumer spending patterns. After two years of lockdowns, homeshopping and house repairs, it is unclear where consumers will lookto spend their tightening budgets in the coming twelve months.However, whilst consumer spending may be more challenged, it isclear that corporates have their cheque books out. Whilst some ofthis may be post COVID-19 catch up, most is a response tofundamental changes in global supply chains. Traditional patternsof trade are shifting, “just in time” is being replaced with “justin case”, and global supply chains are being localised ornearshored. As a result, our exposure to corporate expenditure,whether that be through Capital Goods or Media has been increasing.Finally, our exposure to the resources sector has increased.Typically, this is an area where we struggle to identify valuationsthat suitably compensate for the risk, but with resources priceshitting new highs all through the year, some of these businessesare now producing significant cash flow.

With the shocking events in Ukraine, there is an enormous range ofoutcomes for the coming year. The immediate impact of the invasionhas been seen in markets and commodities, further fuelling theinflation fire. But, like COVID-19 before, it will take time forthe wider implications to manifest themselves. COVID-19 has shownus the magnified impact on end markets that small disruptions insupply chains can have, history shows us the profound socialconsequences of high inflation in food and fuel, and thesubstantial and unprecedented sanctions that have been announcedwill amplify these distortions. I often worry that I sound like abroken record when discussing positioning, repeating the samemantra year after year, but in these markets the companies bestplaced to perform are those with well capitalised balance sheets,market leading positions, pricing power and entrepreneurialmanagement teams able to rapidly adapt their businesses to theshifting market dynamics. This was true in the tech crisis, theglobal financial crisis, through Brexit and COVID-19. The companieswe invest in have proved themselves through numerous cycles, and weconsider that there is no reason to suggest they will be incapableof doing so in 2022.

29 April 2022

1Alternative Performance Measure. Percentages calculated in Sterlingterms with income reinvested.


1 Oxford Instruments
Electronic & Electrical Equipment
Percentage ofportfolio

A manufacturer of scientific instruments serving both academicand commercial markets. Oxford Instruments sells highly technicaland complex instruments which play into some of the most highlyfunded and exciting areas of global research and development(R&D) today.

2 Watches of Switzerland
Personal Goods
Percentage ofportfolio

The UK’s leading luxury watch specialist with a growing USpresence. The group is comprised of four prestigious retail brands;Watches of Switzerland, Mappin& Webb, Goldsmiths and Mayors and has been transformed over thelast 5 years into a modern, technologically advanced, multi-channelretailer. The group has a showroom network which includes flagshipsin London, two flagship showroomsin New York, and increasingpresence of mono-brand boutiques along with an industry leadinge-commerce platform.

3 Gamma Communications
Mobile Telecommunications
Percentage ofportfolio

A leading provider of Unified Communications as a Service(UCaaS) into the UK and European business markets, supplyingcommunication solutions via their extensive network of trustedchannel partners and also directly.

4 Treatt
Percentage ofportfolio

An ingredients manufacturer and solutions provider to the globalflavour, fragrance and consumer goods markets with operations basedin the UK, the US and China.

5 Next Fifteen Communications
Percentage ofportfolio

A global provider of digital communication products andservices. The company offers digital content, public relations andaffairs, technology, marketing software, market research and policycommunications.

6 4imprint Group
Percentage ofportfolio2.0%

A UK-listed but US-centric direct marketing business ofpromotional goods. Despite a relatively small market share, theyare the market leader in the US by some distance which reflectsjust how fragmented the competitive set is.

7 Impax Asset Management
Financial Services
Percentage ofportfolio

A sustainable focused fund manager with a growing franchise,market leading investment performance and structuralgrowth/interest in sustainability which underpins the company’sinvestment philosophy.

8 YouGov
Percentage ofportfolio

An international provider of specialist data analytics andmarketing information. The company was recently named one of theworld’s top 25 research companies.

9 CVS Group
General Retailers
Percentage ofportfolio

CVS Group plc is one of the largest integrated veterinaryservices providers in the UK encompassing four main business areas;veterinary practices, diagnostic laboratories, pet crematoria ande-commerce division.

10 Breedon
Construction & Materials
Percentage ofportfolio

Video: Investing in uncertain times seminar - BlackRock Smaller Companies Trust

A leading construction materials group in Great Britain and Ireland producing cement, aggregates, asphalt,ready-mixed concrete, specialist concrete and clay products.



Business activity


% of
Oxford InstrumentsDesigner and manufacturer of toolsand systems for industry and scientific research24,2302.5
Watches of SwitzerlandRetailer of luxury watches22,8692.4
Gamma CommunicationsProvider of communication servicesto UK businesses21,8892.3
TreattDevelopment and manufacture ofingredients for the flavour and fragrance industry20,3632.1
Next Fifteen CommunicationsDigital communication products andservices19,3902.0
4imprint GroupPromotional merchandise in theUS19,0782.0
Impax Asset ManagementAsset management18,6822.0
YouGovInternational online research dataand analysis group18,4151.9
CVS GroupOperator of veterinarysurgeries17,8871.9
BreedonUK construction materials17,3451.8
Robert WaltersRecruitment services17,1081.8
Learning TechnologiesE-learning services16,3681.7
IntegraFinInvestment platform for financialadvisers16,3061.7
Workspace GroupSupply of flexible workspace tobusinesses in London16,0401.7
Auction Technology GroupOperator of marketplaces for curatedonline auctions16,0301.7
ErgomedProvider of pharmaceuticalsservices15,5441.6
Team17British video game developer andpublisher15,5101.6
DiscoverIESpecialist components forelectronics applications14,9361.6
Bloomsbury PublishingPublisher of fiction andnon-fiction14,8371.6
Sirius Real EstateOwner and operator of businessparks, offices and industrial complexes in Germany and the UK14,6561.5
XP PowerLeading provider of powersolutions14,0891.5
OSB GroupSpecialist lending business14,0001.5
Morgan SindallOffice fit-out, construction andurban regeneration services12,6781.3
Tatton Asset ManagementProvider of discretionary fundmanagement services to financial advisors11,9701.2
Baltic Classifieds GroupOperator of online classifiedbusinesses in the Baltics11,9341.2
Spirent CommunicationsMultinational telecommunicationstesting11,5581.2
Pets at HomePet supplies retailer11,2841.2
Serica EnergyGas and oil exploration andproduction company11,2191.2
Hilton Food GroupFood packaging business11,1491.2
QinetiQ GroupBritish multi-national defencetechnology company11,1041.2
Central Asia MetalsMining operations in Kazakhstan andMacedonia11,1011.2
Alliance PharmaPharmaceutical and healthcareproducts11,0001.1
Johnson Service GroupProvider of textile services10,8031.1
Fuller Smith & Turner – ASharesOwner and operator of pubs in theLondon area and South East England10,5141.1
Genuit GroupBuilding products9,8621.0
SigmarocUK and European constructionmaterials9,6251.0
Gulf Keystone PetroleumOperation of oil producing assets inthe Kurdistan region of Iraq9,4141.0
Vitec GroupProvider of hardware products andsoftware solutions to the content creation market9,0440.9
Molten VenturesTechnology focused venture capitalfirm8,9180.9
RestoreRecords management business8,9100.9
Lok’n Store GroupSelf-storage provider8,8360.9
Jadestone EnergyOil and gas development andproduction company8,8320.9
TymanInternational building products8,6780.9
RenewConstruction company8,5050.9
Liontrust Asset ManagementAsset management8,4780.9
Restaurant GroupOperator of restaurants andpubs8,3300.9
Ten Entertainment GroupOperator of entertainment centresacross the UK8,3300.9
Inspecs GroupManufacturer of eye wear8,2800.9
Accesso TechnologyProvider of ticketing and virtualqueuing solutions8,2400.9
Atalaya MiningCopper miner8,1900.9
50 largest investments662,35869.3
Remaining investments294,07130.7

Details of the full portfolio are available on the Company’swebsite at


At 28 February 2022, the Companydid not hold any equity investments comprising more than 3% of anycompany’s share capital other than as disclosed in the tablebelow:

Security% of issued sharecapital held
Longboat Energy5.2
Kitwave Group5.1
City Pub Group5.1
Ten Entertainment Group5.0
Bloomsbury Publishing4.5
Tatton Asset Management4.5
The Pebble Group4.3
Everyman Media GP4.3
Distribution Finance CapitalHoldings4.2
Fuller Smith & Turner - AShares3.8
Robert Walters3.5
Mercia Asset Management3.4
MacFarlane Group3.2
Animalcare Group3.2
Lok’n Store Group3.1
Central Asia Metals3.1

Distribution of investments as at28 February 2022

Sector% ofportfolio
Oil & Gas Producers4.0
Oil Equipment, Services &Distribution0.8
Basic Materials4.8
Aerospace & Defence1.9
Construction & Materials6.9
Electronic & ElectricalEquipment7.6
General Industrials0.7
Industrial Engineering2.0
Industrial Support Services6.3
Industrial Transportation0.8
Automobiles & Parts0.9
General Retailers5.3
Leisure Goods2.7
Personal Goods4.3
Specialty Retailers1.1
Travel & Leisure5.4
Consumer Discretionary28.2
Pharmaceuticals &Biotechnology3.4
Health Care3.4
Food Producers1.2
Household Goods & HomeConstruction0.9
Consumer Staples2.1
Mobile Telecommunications2.3
Financial Services10.1
Real Estate Investment &Services3.6
Real Estate Investment Trusts3.0
Real Estate6.6
Software & ComputerServices10.0
Technology Hardware &Equipment1.2
Technology Support Services0.3



Benchmark (NumisSmaller Companies, plus AIM
(ex Investment Companies) Index)
Basic Materials4.87.0
Health Care3.46.0
Consumer Staples2.16.9
Real Estate6.65.4

Sources: BlackRock and Datastream.


Number ofinvestmentsMarket value ofinvestments as % of portfolio
£0m to £1m10.1
£1m to £2m40.6
£2m to £3m30.9
£3m to £4m31.2
£4m to £5m146.9
£5m to £6m126.8
£6m to £7m85.5
£7m to £8m107.9
£8m to £9m1311.6
£9m to £10m43.9
£10m to £11m22.2
£11m to £12m910.7
£12m to £13m11.3
£14m to £15m57.7
£15m to £16m23.2
£16m to £17m46.8
£17m to £18m35.5
£18m to £19m23.9
£19m to £20m24.0
£20m to £21m12.1
£21m to £22m12.3
£22m to £23m12.4
£24m to 25m12.5

Source: BlackRock.


Market capitalisation% of portfolio
£0m to £200m8.6
£200m to £600m28.6
£600m to £1.5bn51.7

Source: BlackRock.


The Directors present the Strategic Report of the Company forthe year ended 28 February 2022. Theaim of the Strategic Report is to provide shareholders with theinformation to assess how the Directors have performed their dutyto promote the success of the Company for the collective benefit ofshareholders.

The Chairman’s Statement together with the Investment Manager’sReport and the Directors’ Statement setting out how they promotethe success of the Company contained within the Annual Report andFinancial Statements form part of the Strategic Report. TheStrategic Report was approved by the Board at its meeting on29 April 2022.

The Company is a public company limited by shares and carries onbusiness as an investment trust and its principal activity isportfolio investment. Investment trusts, like unit trusts andOEICs, are pooled investment vehicles which allow exposure to adiversified range of assets through a single investment, thusspreading, although not eliminating investment risk.

The Company’s prime objective is to seek to achieve long-termcapital growth for shareholders through investment mainly insmaller UK quoted companies.

No material change will be made to the Company’s investmentobjective without shareholder approval.

To achieve its investment objective the Company investspredominantly in UK smaller companies with securities admitted totrading on the Main Market of the London Stock Exchange or on AIM.The Company may also invest in securities which are listed overseasbut have a secondary UK quotation. Although investments areprimarily in companies with securities admitted to trading onrecognised stock exchanges or AIM, the Investment Manager may alsoinvest in less liquid unquoted securities with the prior approvalof the Board. The Manager has adopted a consistent investmentprocess, focusing on good quality growth companies; stock selectionis the primary focus, but consideration is also given to sectorweightings and underlying themes. Whilst there are no set limits onindividual sector exposures against the Company’s benchmark, aschedule of sector weightings is presented at each Board meetingfor review. In applying the investment objective, the InvestmentManager expects the Company to be substantially fully invested andto borrow as and when appropriate. The Company seeks to achieve anappropriate spread of investment risk by investing in a number ofholdings across a range of sectors. The Company may not hold morethan 6% of the share capital of any company in which it has aninvestment. No single portfolio holding (excluding holdings in cashfund investments held for cash management purposes) will, on thedate such holding is acquired by the Company, exceed 5% of theCompany’s net asset value. Notwithstanding the foregoing, thegeneral aim is that no single portfolio holding (excluding cashfund investments held for cash management purposes) will, on thedate such holding is acquired by the Company, exceed 3% of theCompany’s net asset value. In addition, while the Company may holdshares in other listed investment companies (including investmenttrusts), the Board has agreed that the Company will not invest morethan 15% of its total assets in other UK listed investmentcompanies. The Investment Manager will not deal in derivativeswithout prior approval of the Board.

As previously advised, the Board announced on 15 March 2021 that it was undertaking a review ofthe AIM threshold of 50%. After consultation with the Company’slargest shareholders, the Board decided to seek approval fromshareholders to remove the AIM limit of 50% of the portfolio byvalue. The Investment Manager’s approach in determining the optimalexposure to AIM investments is to focus on the merits of theunderlying company and to seek value rather than to focus on theexchange on which the holding is listed or traded.

The amended investment policy that shareholders were asked toapprove included the removal of the AIM limit and other,non-material amendments to the wording of the investment policy forthe purposes of clarification. In particular, the investment policyhas been expanded to clarify that (as previously stated in theinvestment philosophy section of the Strategic Report) the generalaim is for portfolio holdings not to exceed 3% of the Company’s netassets (excluding cash fund investments held for cash managementpurposes) at the time of purchase and that no single portfolioholding (excluding holdings in cash fund investments held for cashmanagement purposes) will, on the date such holding is acquired bythe Company, exceed 5% of the Company’s net asset value.

Following shareholder approval, the amended investment policytook effect from the date of the Company’s AGM on 11 June 2021.

Performance is measured against an appropriate benchmark, the NumisSmaller Companies plus AIM (excluding Investment Companies)Index.

It is intended that net gearing will not exceed 15% of the netassets of the Company at the time of the drawdown of the relevantborrowings. Under normal operating conditions it is envisaged thatgearing will be within a range of 0%-15% of net assets.

The Company’s business model follows that of an externally managedinvestment trust. Therefore, the Company does not have anyemployees and outsources its activities to third-party serviceproviders including the Manager, who is the principal serviceprovider. The management of the investment portfolio and theadministration of the Company have been contractually delegated tothe Manager who in turn (with the permission of the Company) hasdelegated certain investment management and other ancillaryservices to the Investment Manager. The Manager, operating underguidelines determined by the Board, has direct responsibility forthe decisions relating to the day-to-day running of the Company andis accountable to the Board for the investment, financial andoperating performance of the Company. The Company delegates fundaccounting services to BlackRock Investment Management (UK) Limited(BIM (UK)), which in turnsub-delegates these services to The Bank of New York Mellon(International) Limited (BNYM).

Other service providers include the Depositary (also BNYM) andthe Registrar, Computershare Investor Services PLC. The Depositaryhas sub-delegated the provision of custody services to the AssetServicing division of BNYM. Details of the contractual terms withthe Manager and the Depositary and more details of thesub-delegation arrangements in place governing custody services areset out in the Directors’ Report contained within the Annual Reportand Financial Statements.

The Investment Manager seeks to identify companies which itbelieves have superior long-term growth prospects and themanagement in place to take advantage of these prospects. This isdone through internal investment research, company visits and thecareful monitoring of market newsflow and external broker analysis.Initially, if the Investment Manager is sufficiently impressed witha company’s prospects, it will look to take a small position,usually 0.25% to 0.50% of the Company’s net assets, in a newholding. These holdings will be closely monitored, and members ofthe portfolio management team will meet with management on aregular basis. If these companies continue to prosper and make themost of opportunities, the Investment Manager will gradually add tothe portfolio holding. Where initial expectations are disappointed,the holding will be sold. The anticipation is that each holdingwill develop into a core holding over time; one that meets theInvestment Manager’s criteria for high quality growthcompanies.

Valuation is a key consideration; it is important not to overpayfor new holdings. However, investment fundamentals are alsoimportant, and the Investment Manager may be prepared to pay whatseems like a high price if it believes that long-term growthprospects are very strong. Generally, a company will be held withinthe portfolio if it meets the criteria for core holdings; inrespect of recent investments, the Investment Manager will considerwhether they have the potential to meet these criteria. Holdingswill be sold if there are concerns that the investment case haschanged in a negative way. Holdings will be reduced where theposition size becomes too large and raises concerns about risk anddiversification. The general aim is for portfolio holdings not toexceed 3% of the Company’s net assets (excluding cash fundinvestments held for cash management purposes). As the investmentswithin the portfolio become larger over time, the Portfolio Managerwill continue to assess growth prospects in comparison to smallerbusinesses operating within similar markets. New holdings must havea market cap beneath £2 billion, however holdings that move abovethat level will be maintained providing the investment adheres tothe original thesis and remains the most attractive opportunitythat can be found amongst a comparable peer group. In accordancewith the guidelines, the Portfolio Manager will sell any stock thatenters the FTSE 100 Index within thirty days of entry.

The Investment Manager believes that consistent outperformancecan be achieved by employing a combination of bottom-up andtop-down analysis, based upon strong fundamental research.

In building a robust portfolio the Investment Manager will alsoconsider the macro-economic background, working with strategists,economists and other teams internally and externally to understandthe broad environment. It also works closely with BlackRock’s riskteam to assess the risks in the structure of the portfolio. Anynecessary adjustments will be made to the portfolio to ensure thatit is structured in an appropriate way from a macro and risk pointof view.

A detailed analysis of the portfolio has been provided within theAnnual Report and Financial Statements.

Details of the Company’s performance including the dividend are setout in the Chairman’s Statement above. The Chairman’s Statement andthe Investment Manager’s Report form part of this Strategic Reportand include a review of the main developments during the year,together with information on investment activity within theCompany’s portfolio.

The results for the Company are set out in the Income Statement inthe Financial Statements. The total net profit for the year, aftertaxation, was £62,140,000 (2021: £119,293,000) of which the revenuereturn amounted to £17,234,000 (2021: £6,526,000), and the capitalprofit amounted to £44,906,000 (2021: £112,767,000).

The Company’s revenue return amounted to 35.29p per share (2021:13.36p). The Directors have declared a final dividend of 22.00p pershare as set out in the Chairman’s Statement.

The Board’s main focus is to achieve long-term capital growth. Thefuture performance of the Company is dependent upon the success ofthe investment strategy and, to a large extent, on the performanceof financial markets. The outlook for the Company in the nexttwelve months is discussed in the Chairman’s Statement and theInvestment Manager’s Report above.

As an investment trust, the Company has no direct social orcommunity responsibilities or impact on the environment, and theCompany has not adopted an ESG investment strategy or exclusionaryscreens. However, the Directors believe that it is in shareholders’interests to consider human rights issues, environmental, socialand governance matters when selecting and retaining investments.Details of the Board’s approach to ESG and socially responsibleinvestment is set out below. Details of the Manager’s approach toESG integration are set out within the Annual Report and FinancialStatements.

As an investment vehicle the Company does not provide goods orservices in the normal course of business and does not havecustomers. Accordingly, the Directors consider that the Company isnot required to make any slavery or human trafficking statementunder the Modern Slavery Act 2015. In any event, the Boardconsiders the Company’s supply chain, dealing predominantly withprofessional advisers and service providers in the financialservices industry, to be low risk in relation to this matter.

The Directors of the Company on 28 February2022 are set out in the Directors’ biographies containedwithin the Annual Report and Financial Statements. With effect from1 March 2022, the Board consists ofthree male Directors and three female Directors. The Company’spolicy on diversity is set out within the Annual Report andFinancial Statements. The Company does not have any executiveemployees.

At each Board meeting, the Directors consider a number ofperformance measures to assess the Company’s success in achievingits objectives. The key performance indicators (KPIs) used tomeasure the progress and performance of the Company over time, andwhich are comparable to those reported by other investment trustsare set out below. As indicated in footnote 2 to the table, some ofthese KPIs fall within the definition of ‘Alternative PerformanceMeasures’ (APMs) under guidance issued by the European Securitiesand Markets Authority (ESMA) and additional information explaininghow these are calculated is set out in the Glossary containedwithin the Annual Report and Financial Statements.

Key Performance Indicators

Year ended
28 February2022
Year ended
28 February2021
NAV per share (debt at parvalue)1,27.0%16.1%
NAV per share (debt at fairvalue)1,27.8%16.7%
Share price totalreturn1,20.9%17.2%
Benchmark return11.5%24.9%
Average discount to NAV with debt atfair value25.0%5.5%
Revenue return per share35.29p13.36p
Ongoing chargesratio2,30.7%0.8%
Retail ownership68.6%65.3%

1 Total return basis with incomereinvested.
2 Alternative Performance Measure, seeGlossary contained within the Annual Report and FinancialStatements.
3 Calculated as a percentage of averagedaily net assets and using the management fee and all otheroperating expenses, excluding finance costs, direct transactioncosts, custody transaction charges, VAT recovered, taxation andcertain non-recurring items in accordance with AIC guidelines.

Sources: BlackRock and Datastream.

Additionally, the Board regularly reviews many indices andratios to understand the impact on the Company’s relativeperformance of the various components such as asset allocation andstock selection. The Board also reviews the performance and ongoingcharges of the Company against a peer group of UK smaller companiestrusts and open-ended funds.

The Company is exposed to a variety of risks and uncertainties. Asrequired by the UK Code, the Board has in place a robust ongoingprocess to identify, assess and monitor the principal risks andemerging risks facing the Company, including those that wouldthreaten its business model, future performance, solvency orliquidity. A core element of this process is the Company’s riskregister which identifies the risks facing the Company and assessesthe likelihood and potential impact of each risk and the quality ofthe controls operating to mitigate it. A residual risk rating isthen calculated for each risk based on the outcome of theassessment.

The risk register, its method of preparation and the operationof key controls in BlackRock’s and third-party service providers’systems of internal control are reviewed on a regular basis by theAudit Committee. In order to gain a more comprehensiveunderstanding of BlackRock’s and other third-party serviceproviders’ risk management processes and how these apply to theCompany’s business, BlackRock’s internal audit department providesan annual presentation to the Audit Committee Chairman setting outthe results of testing performed in relation to BlackRock’sinternal control processes. The Audit Committee also periodicallyreceives presentations from BlackRock’s Risk and QuantitativeAnalysis team and reviews Service Organisation Control (SOC 1)reports from the Company’s service providers. The current riskregister categorises the Company’s main areas of risk asfollows:

  • Investment performance risk;
  • Market risk;
  • Income/dividend risk;
  • Legal & compliance risk;
  • Operational risk;
  • Financial risk; and
  • Marketing risk.

The Board has undertaken a robust assessment of both theprincipal and emerging risks facing the Company, including thosethat would threaten its business model, future performance,solvency or liquidity. Over the course of 2020 and through to thepresent time, the COVID-19 pandemic has given rise to unprecedentedchallenges for businesses across the globe and the Board has takeninto consideration the risks posed to the Company by the crisis andincorporated these into the Company’s risk register. The risksidentified by the Board have been described in the table thatfollows, together with an explanation of how they are managed andmitigated. Emerging risks are considered by the Board as they comeinto view and are incorporated into the existing review of theCompany’s risk register. They were also considered as part of theannual evaluation process.

Additionally, the Manager considers emerging risks in numerousforums and the Risk and Quantitative Analysis team produces anannual risk survey. Any material risks of relevance to the Companyidentified through the annual risk survey will be communicated tothe Board.

The Board will continue to assess these risks on an ongoingbasis. In relation to the UK Code, the Board is confident that theprocedures that the Company has put in place are sufficient toensure that the necessary monitoring of risks and controls has beencarried out throughout the reporting period.

Principal riskMitigation/Control
Returns achieved are reliant primarily upon the performance of theportfolio.

The Board is responsible for:

  • deciding the investment strategy to fulfil the Company’sobjective; and
  • monitoring the performance of the Investment Manager and theimplementation of the investment strategy.
An inappropriate investment strategy may lead to:
  • poor performance compared to the Benchmark Index and theCompany’s peer group;
  • a loss of capital; and
  • dissatisfied shareholders.
The Board is also cognisant of the long-term risk to performancefrom inadequate attention to ESG issues, and in particular theimpact of Climate Change. More detail in respect of these risks canbe found in the AIFMD Fund Disclosures document available on theCompany’s website at

To manage this risk the Board:
  • regularly reviews the Company’s investment mandate andlong-term strategy;
  • has set investment restrictions and guidelines which theInvestment Manager monitors and regularly reports on;
  • receives from the Investment Manager a regular explanation ofstock selection decisions, portfolio exposure, gearing and anychanges in gearing and the rationale for the composition of theinvestment portfolio;
  • monitors the maintenance of an adequate spread of investmentsin order to minimise the risks associated with factors specific toparticular sectors, based on the diversification requirementsinherent in the investment policy; and
  • receives reports showing the Company’s performance against thebenchmark.
ESG analysis is integrated into the Manager’s investment process,as set out in the Annual Report and Financial Statements. This ismonitored by the Board.
Market risk
Market risk arises from volatility in the prices of the Company’sinvestments influenced by currency, interest rate or other pricemovements. It represents the potential loss the Company mightsuffer through holding market positions in financial instruments inthe face of market movements.

Market risk includes the potential impact of events which areoutside the Company’s control, including (but not limited to)heightened geo-political tensions and military conflict, a globalpandemic and high inflation or stagflation (in particular throughincreased commodity price volatility driving inflation andimpacting trade).

The impact of climate change and new legislation governing climatechange and environmental issues have the potential to adverselyimpact markets and the valuation of companies within theportfolio.

There is the potential for the Company to suffer loss throughholding investments in the face of negative market movements.

The Board considers asset allocation, stock selection and levels ofgearing on a regular basis and has set investment restrictions andguidelines which are monitored and reported on by the InvestmentManager.

The Board monitors the implementation and results of the investmentprocess with the Investment Manager.

The Board also recognises the benefits of a closed-end fundstructure in extremely volatile markets such as those experiencedas a consequence of the COVID-19 pandemic. Unlike open-endedcounterparts, closed-end funds are not obliged to sell downportfolio holdings at low valuations to meet liquidity requirementsfor redemptions. During times of elevated volatility and marketstress, the ability of a closed-end fund structure to remaininvested for the long-term enables the portfolio manager to adhereto disciplined fundamental analysis from a bottom-up perspectiveand be ready to respond to dislocations in the market asopportunities present themselves.

The Manager takes into account climate risk within the investmentprocess along with other ESG considerations as set out in theAnnual Report and Financial Statements.

Income/dividend risk
The amount of dividends and future dividend growth will depend onthe performance of the Company’s underlying portfolio and may beimpacted by events which are outside the Company’s control, such asthe COVID-19 pandemic. In addition, any change in the tax treatmentof the dividends or interest received by the Company may reduce thelevel of dividends received by shareholders.

The Board monitors this risk through the receipt of detailed incomeforecasts and considers the level of income at each Boardmeeting.

The Company has substantial revenue reserves which can be utilisedand also has the ability to make distributions by way of dividendsfrom capital reserves if required.

Legal &Compliance risk
The Company has been approved by HM Revenue & Customs as aninvestment trust, subject to continuing to meet the relevanteligibility conditions and operates as an investment trust inaccordance with Chapter 4 of Part 24 of the Corporation Tax Act2010. As such, the Company is exempt from capital gains tax on theprofits realised from the sale of its investments.

Any breach of the relevant eligibility conditions could lead to theCompany losing investment trust status and being subject tocorporation tax on capital gains realised within the Company’sportfolio. In such event the investment returns of the Company maybe adversely affected.

Any serious breach could result in the Company and/or the Directorsbeing fined or the subject of criminal proceedings or thesuspension of the Company’s shares which would in turn lead to abreach of the Corporation Tax Act 2010.

Amongst other relevant laws and regulations, the Company isrequired to comply with the provisions of the Companies Act 2006,the Alternative Investment Fund Managers’ Directive, the UK ListingRules and Disclosure Guidance and Transparency Rules, the Sanctionsand Anti-Money Laundering Act 2018 and the Market AbuseRegulation.

The Investment Manager monitors investment movements and the amountof proposed dividends to ensure that the provisions of Chapter 4 ofPart 24 of the Corporation Tax Act 2010 are not breached. Theresults are reported to the Board at each meeting.
Compliance with the accounting rules affecting investment trusts isalso carefully and regularly monitored.

The Company Secretary and the Company’s professional advisersprovide regular reports to the Board in respect of compliance withall applicable rules and regulations.

The Company’s Investment Manager, BlackRock, at all times complieswith sanctions administered by the UK Office of Financial SanctionsImplementation, the United States Treasury’s Office of ForeignAssets Control, the United Nations, European Union member statesand any other applicable regimes. The Company does not invest incompanies domiciled in Russia.

In common with most other investment trust companies, the Companyhas no employees. The Company therefore relies on the servicesprovided by third parties. Accordingly, it is dependent on thecontrol systems of the Manager, the Depositary and the FundAccountant who maintain the Company’s assets, dealing proceduresand accounting records.

The security of the Company’s assets, dealing procedures,accounting records and adherence to regulatory and legalrequirements and the prevention of fraud depend on the effectiveoperation of the systems of these other third-party serviceproviders. There is a risk that a major disaster, such as floods,fire, a global pandemic, or terrorist activity, renders theCompany’s service providers unable to conduct business at normaloperating capacity and effectiveness.

Failure by any service provider to carry out its obligations to theCompany could have a material adverse effect on the Company’sperformance. Disruption to the accounting, payment systems orcustody records could prevent the accurate reporting and monitoringof the Company’s financial position.


Due diligence is undertaken before contracts are entered into withthird-party service providers. Thereafter, the performance of theprovider is subject to regular review and reported to theBoard.

The Board reviews on a regular basis an assessment of the fraudrisks that the Company could potentially be exposed to, and also asummary of the controls put in place by the Manager, theDepositary, the Custodian, the Fund Accountant and the Registrardesigned specifically to mitigate these risks.

Most third-party service providers produce Service OrganisationControl (SOC 1) reports to provide assurance regarding theeffective operation of internal controls as reported on by theirreporting accountants. These reports are provided to the AuditCommittee.

The Company’s financial instruments held in custody are subject toa strict liability regime and in the event of a loss of suchfinancial instruments held in custody, the Depositary must returnassets of an identical type or the corresponding amount, unlessable to demonstrate the loss was a result of an event beyond itsreasonable control.

The Board reviews the overall performance of the Manager,Investment Manager and all other third-party service providers andcompliance with the Investment Management Agreement on a regularbasis.

The Board also considers the business continuity arrangements ofthe Company’s key service providers on an ongoing basis and reviewsthese as part of their review of the Company’s risk register. Inrespect of the unprecedented risks posed by the COVID-19 pandemicin terms of the ability of service providers to functioneffectively, the Board has received reports from key serviceproviders (the Manager, the Depositary, the Custodian, the FundAdministrator, the Broker, the Registrar and the printers) settingout the measures that they have put in place to address the crisisin addition to their existing business continuity framework. Havingconsidered these arrangements and reviewed service levels since thecrisis has evolved, the Board is confident that a good level ofservice will continue to be maintained.

Financial risk
The Company’s investment activities expose it to a variety offinancial risks that include interest rate, credit and liquidityrisk.

Details of these risks are disclosed in note 17 to the financialstatements contained within the Annual Report and FinancialStatements, together with a summary of the policies for managingthese risks.
Marketing risk
Marketing efforts are inadequate, do not comply with relevantregulatory requirements, and fail to communicate adequately withshareholders or reach out to potential new shareholders resultingin reduced demand for the Company’s shares and a wideningdiscount.

The Board focuses significant time on communications withshareholders and reviewing marketing strategy and initiatives. Allinvestment trust marketing documents are subject to appropriatereview and authorisation.

In accordance with provision 31 of the 2018 UK Corporate GovernanceCode, the Directors have assessed the prospects of the Company overa longer period than the 12 months referred to by the ‘GoingConcern’ guidelines.

The Board is cognisant of the uncertainty surrounding thepotential duration of the COVID-19 pandemic, and the additionalchallenges posed to international supply chains and commodityprices arising from recent events in Ukraine and the escalation of geopoliticalconflict. The Board notes that these events will have an impact onthe global economy and the prospects for some of the Company’sportfolio holdings. However, notwithstanding these issues,and given the factors stated below, the Board expects theCompany to continue for the foreseeable future and has thereforeconducted this review for the period up to the AGM in 2027 being afive-year period from the date that this Annual Report will beapproved by shareholders. This assessment term has been chosen asit represents a medium-term performance period over which investorsin the smaller companies' sector generally refer to when makinginvestment decisions.

In making this assessment the Board has considered the followingfactors:

  • The Company’s principal risks as set out above;
  • The impact of a significant fall in UK equity markets on thevalue of the Company’s investment portfolio, factoring in theimpact of recent market volatility related to the COVID-19pandemic;
  • The potential impact of the COVID-19 pandemic on the ability ofportfolio companies to pay dividends, and the consequent impact onthe Company’s portfolio yield and ability to pay dividends;
  • The ongoing relevance of the Company’s investment objective inthe current environment; and
  • The level of demand for the Company’s ordinary shares.

The Board has also considered a number of financial metrics andother factors, including:

  • The Board has reviewed portfolio liquidity as at 28 February 2022 in light of the impact of theCOVID-19 pandemic on global market liquidity;
  • The Board has reviewed the Company’s revenue and expenseforecasts in light of the COVID-19 pandemic and its anticipatedimpact on dividend income and market valuations. The Board isconfident that the Company’s business model remains viable and thatthe Company has sufficient resources to meet all liabilities asthey fall due for the period under review;
  • The Board has reviewed the Company’s borrowing and debtfacilities and considers that the Company continues to meet itsfinancial covenants in respect of these facilities and has a widemargin before any relevant thresholds are reached;
  • The Board keeps the Company’s principal risks and uncertaintiesas set out above under review, and is confident that the Companyhas appropriate controls and processes in place to manage these andto maintain its operating model, even given the global economicchallenges posed by COVID-19, the impact of climate change onportfolio companies and the current climate of heightenedgeo-political risk (notably the war in Ukraine);
  • The operational resilience of the Company and its key serviceproviders (the Manager, Depositary, Custodian, Fund Administrator,Registrar and Broker) and their ability to continue to provide agood level of service for the foreseeable future;
  • The effectiveness of business continuity plans in place for theCompany and key service providers in particular in respect toCOVID-19;
  • The level of current and historic ongoing charges incurred bythe Company;
  • The discount to NAV;
  • The level of income generated by the Company; and
  • Future income forecasts.

The Company is an investment company with a relatively liquidportfolio. As at 28 February 2022,the Company held no illiquid unquoted investments and 56.9% of theCompany’s portfolio investments were readily realisable and listedon the London Stock Exchange. The remaining 43.1% that were listedon the Alternative Investment Market are also considered to bereadily realisable. The Company has largely fixed overheads whichcomprise a very small percentage of net assets. Therefore, theBoard has concluded that, even in exceptionally stressed operatingconditions, including the challenges presented by the COVID-19pandemic, the Company would comfortably be able to meet its ongoingoperating costs as they fall due.

Based on the results of their analysis, the Directors have areasonable expectation that the Company will be able to continue inoperation and meet its liabilities as they fall due over the periodof their assessment.


The Companies (Miscellaneous Reporting) Regulations 2018 requiredirectors to explain in greater detail how they have dischargedtheir duties under Section 172(1) of the Companies Act 2006 inpromoting the success of their companies for the benefit of membersas a whole. This enhanced disclosure is required under theCompanies Act 2006 and the AIC Code of Corporate Governance andcovers how the Board has engaged with and understands the views ofstakeholders and how stakeholders’ needs have been taken intoaccount, the outcome of this engagement and the impact that it hashad on the Board’s decisions.

As the Company is an externally managed investment company anddoes not have any employees or customers, the Board considers themain stakeholders in the Company to be the shareholders, keyservice providers (being the Manager and Investment Manager, theCustodian, Depositary, Registrar and Broker) and investeecompanies. The reasons for this determination, and the Board’soverarching approach to engagement, are set out in the tablebelow.

ShareholdersManager and InvestmentManagerOther key serviceprovidersInvestee companies
Continued shareholder support andengagement are critical to the continued existence of the Companyand the successful delivery of its long-term strategy. The Board isfocused on fostering good working relationships with shareholdersand on understanding the views of shareholders in order toincorporate them into the Board’s strategy and objectives indelivering long-term growth and income.The Board’s main workingrelationship is with the Manager, who is responsible for theCompany’s portfolio management (including asset allocation, stockand sector selection) and risk management, as well as ancillaryfunctions such as administration, secretarial, accounting andmarketing services. The Manager has sub-delegated portfoliomanagement to the Investment Manager. Successful management ofshareholders’ assets by the Investment Manager is critical for theCompany to successfully deliver its investment strategy and meetits objective. The Company is also reliant on the Manager as AIFMto provide support in meeting relevant regulatory obligations underthe AIFMD and other relevant legislation.
In order for the Company to functionas an investment trust with a listing on the premium segment of theofficial list of the FCA and trade on the London Stock Exchange’s(LSE) main market for listed securities, the Board relies on adiverse range of advisors for support in meeting relevantobligations and safeguarding the Company’s assets. For this reason,the Board considers the Company’s Custodian, Depositary, Registrarand Broker to be stakeholders. The Board maintains regular contactwith its key external service providers and receives regularreporting from them through the Board and committee meetings, aswell as outside of the regular meeting cycle.Portfolio holdings are ultimatelyshareholders’ assets, and the Board recognises the importance ofgood stewardship and communication with investee companies inmeeting the Company’s investment objective and strategy. The Boardmonitors the Manager’s stewardship arrangements and receivesregular feedback from the Manager in respect of meetings with themanagement of portfolio companies.

A summary of the key areas of engagement undertaken by the Boardwith its key stakeholders in the year under review and howDirectors have acted upon this to promote the long-term success ofthe Company are set out in the table below.

Area of EngagementIssueEngagementImpact
Management of shareratingThe Board recognises that it is inthe long-term interests of shareholders that shares do not trade ata significant discount or premium to their prevailing net assetvalue.The Board monitors theCompany’s share rating on an ongoing basis and receives regularupdates from the Company’s Broker and Manager regarding the levelof discount and the drivers behind this. The Manager providesregular performance updates and detailed performanceattribution.

The Board believes that the best way of maintaining the sharerating at an optimal level over the long-term is to create demandfor the shares in the secondary market. To this end the InvestmentManager is devoting considerable effort to broadening the awarenessof the Company, particularly to wealth managers and to the widerretail shareholder market.

The Company contributes to a focused investment trust sales andmarketing initiative operated by BlackRock on behalf of theinvestment trusts under its management. The Company’s contributionto the consortium element of the initiative, which enables thetrusts to achieve efficiencies by combining certain sales andmarketing activities was a fixed amount of £64,000 and thiscontribution is matched by the Investment Manager for the yearended
31 December 2021. In addition, a budget of £51,000 was allocatedfor Company specific sales and marketing activity also for the yearto 31 December 2021. The purpose of the programme overall is toensure effective communication with existing shareholders and toattract new shareholders to the Company to improve liquidity in theCompany’s shares and to sustain the stock market rating of theCompany.

Over the last fouryears, the Company’s discount has narrowed steadily, from anaverage discount of 13.0% for the year to 28 February 2018 to 5.0%for the year ended 28 February 2022. As at 27 April 2022 theCompany’s shares were trading at a discount of 12.5% to the cumincome NAV (with debt at fair value).

Over the last ten years, the number of shares held by retailshareholders has increased from 34.1% (as at 29 February 2012) to68.6% at 28 February 2022.

Investment mandate andobjectiveThe Board has the responsibility toshareholders to ensure that the Company’s portfolio of assets isinvested in line with the stated investment objective and in a waythat ensures an appropriate balance between spread of risk andportfolio returns.The Board works closelywith the Investment Manager throughout the year in furtherdeveloping our investment strategy and underlying policies, notsimply for the purpose of achieving the Company’s investmentobjective but in the interests of shareholders and futureinvestors.

The Board worked with the Manager to review the Company’s limits oninvesting in AIM-traded securities. This review was driven by thefact that, in recent years, some of the Company’s AIM holdings hadperformed well and this resulted in an increase in the portfolio’saggregate exposure to AIM to just under 50% of the portfolio byvalue. Had no action been taken, the Company would be required todispose of these AIM stocks solely as a result of circumstanceswhere the performance of these stocks has brought the Company’stotal AIM holdings close to the 50% limit. This limit could alsorestrict the Company’s ability to subscribe to IPOs or placings ofAIM companies that are regarded as attractive investmentpropositions by the Investment Manager.

The portfolioactivities undertaken by the Investment Manager can be found in theInvestment Manager’s Report above.

Details regarding the Company’s NAV and share price performance canbe found in the Chairman’s Statement and in the Strategic Reportabove.

A shareholder consultation was undertaken in March 2021, in respectof the removal of the AIM limit, and as a result of feedbackreceived, a resolution put forward to the Company’s AGM on 11 June2021 seeking shareholder approval to remove the AIM limit wasapproved.

Responsible investingMore than ever, good governance andconsideration of sustainable investment is a key factor in makinginvestment decisions. Climate change is becoming a defining factorin companies’ long-term prospects across the investment spectrum,with significant and lasting implications for economic growth andprosperity.The Board believes thatresponsible investment and sustainability are important to thelonger-term delivery of the Company’s success. The Board worksclosely with the Investment Manager to regularly review theCompany’s performance, investment strategy and underlying policiesto ensure that the Company’s investment objective continues to bemet in an effective and responsible way in the interests ofshareholders and future investors.

The Investment Manager’s approach to the consideration ofEnvironmental, Social and Governance (ESG) factors in respect ofthe Company’s portfolio, as well as the Investment Manager’sengagement with investee companies are kept under review by theBoard. The Investment Manager reports to the Board in respect ofits ESG policies and how these are integrated into the investmentprocess; a summary of BlackRock’s approach to ESG andsustainability is set out within the Annual Report and FinancialStatements. The Investment Manager’s engagement and voting policyis detailed within the Annual Report and Financial Statements andon the BlackRock website.

The Board and theInvestment Manager believe there is a positive correlation betweenESG practices and investment performance. Details of the Company’sperformance in the year are given in the Chairman’s Statement aboveand the Performance Record contained within the Annual Report andFinancial Statements.

The Company does not meet the criteria for Article 8 or 9 productsunder the EU Sustainable Finance Disclosure Regulation (SFDR) andthe investments underlying this financial product do not take intoaccount the EU criteria for environmentally sustainable economicactivities.

Gearing and sources offinanceThe Board believes that it isimportant for the Company to have an appropriate range ofborrowings and facilities in place to provide a balance betweenlonger-term and short-term maturities and between fixed andfloating rates of interest.Gearing levels andsources of funding are reviewed regularly by the Board with a viewto ensuring that the Company has a suitable mix of financing atcompetitive market rates.

As at 28 February 2022, the Company had the following borrowingfacilities in place: long-term fixed rate funding in the form of a£15 million debenture with a coupon of 7.75% maturing on 31 July2022, £25 million senior unsecured fixed rate private placementnotes issued in May 2017 at a coupon of 2.74% with a 20 yearmaturity, £20 million senior unsecured fixed rate private placementnotes issued in December 2019 at a coupon of 2.41% with a 25 yearmaturity and £25 million senior unsecured fixed rate privateplacement notes issued in September 2021 at a coupon of 2.47% witha 25 year maturity. Shorter-term variable rate funding consisted ofa £35 million three-year revolving loan facility with SMBC BankInternational plc with interest charged at SONIA plus a creditadjustment spread for the relevant draw down period (0.0326% perannum for one month and 0.1193% for three months). The Company alsohas an uncommitted overdraft facility of £10 million with The Bankof New York Mellon (International) Limited with interest charged atSONIA plus 100 basis points.

It is the Board’s intention that gearing will not exceed 15% of thenet assets of the Company at the time of the drawdown of therelevant borrowings. Under normal operating conditions it isenvisaged that gearing will be within a range of 0%-15% of netassets.

The Board has beenproactive over the last few years in putting in place structuralfixed gearing with the issue of an additional £25 million ofprivate placement notes in September 2021 to lock in fixed rate,long dated, sterling denominated financing at a highly competitivepricing level.

For the year to 28 February 2022, it is estimated that gearingcontributed 0.43% to the NAV per share performance.

At the year end, the Company’s gearing was 4.3% of net assets.

Service levels ofthird-party providersThe Board acknowledges theimportance of ensuring that the Company’s principal suppliers areproviding a suitable level of service: including the Manager inrespect of investment performance and delivering on the Company’sinvestment mandate; the Custodian and Depositary in respect oftheir duties towards safeguarding the Company’s assets; theRegistrar in its maintenance of the Company’s share register anddealing with investor queries and the Company’s Broker in respectof the provision of advice and acting as a market maker for theCompany’s shares.
The Manager reports tothe Board on the Company’s performance on a regular basis. TheBoard carries out a robust annual evaluation of the Manager’sperformance, their commitment and available resources.

The Board performs an annual review of the service levels of allthird-party service providers and concludes on their suitability tocontinue in their role.

The Board receives regular updates from the AIFM, Depositary,Registrar and Broker on an ongoing basis.

The ongoing COVID-19 pandemic continues to pose significantchallenges to the operation of businesses across the globe. TheBoard has continued to work closely with the Manager to gaincomfort that relevant business continuity plans are in place andare operating effectively for all of the Company’s serviceproviders.

All performanceevaluations were performed on a timely basis and the Boardconcluded that all third-party service providers, including theManager were operating effectively and providing a good level ofservice.

The Board has received updates in respect of business continuityplanning from the Company’s Manager, Custodian, Depositary, FundAdministrator, Broker, Registrar and printers, and is confidentthat arrangements are in place to ensure that a good level ofservice has continued to be provided despite the impact of theCOVID-19 pandemic.

Board compositionThe Board is committed to ensuringthat its own composition brings an appropriate balance ofknowledge, experience and skills, and that it is compliant withbest corporate governance practice under the UK Code, includingguidance on tenure and the composition of the Board’scommittees.During the 2021financial year, Mr Peacock advised of his desire to retire at the2021 AGM, creating the need to appoint a new director and AuditCommittee Chairman.

The Nomination Committee agreed the selection criteria and themethod of selection, recruitment and appointment. Board diversity,including gender, was taken into account when establishing thecriteria. The services of an external search consultant were usedto identify potential candidates.

All Directors are subject to a formal evaluation process on anannual basis (more details and the conclusions in respect of the2022 evaluation process are given within the Annual Report andFinancial Statements). All Directors stand for re-election byshareholders annually.

Notwithstanding the issues posed by the COVID-19 pandemic, innormal operating conditions, shareholders may attend the AGM andraise any queries in respect of Board composition or individualDirectors in person or may contact the Company Secretary or theChairman using the details provided within the Annual Report andFinancial Statements with any issues.

In line with provision 21 of the UK Code of Corporate Governance(the Code) which recommends that companies should consider having aregular externally facilitated board evaluation, the Directors haveengaged the services of Stogdale St James to carry out an externalevaluation of the Board over the forthcoming year. The results willbe reported in the 2023 annual report.

As a result of therecruitment process, Mr Barnes was appointed as a Director of theCompany with effect from
31 July 2021. Mr Little took over the role of Audit CommitteeChairman with effect from 11June 2021. MsSinclair wasappointed as a Director of the Company on 1 March 2022.

One Board Director has tenure close to or in excess of nine yearsat the date of this report. Mrs Burton has served for ten years andten months. Mrs Burton has given notice of her intention to retireat the Company’s AGM on 9 June 2022 and she will not be seekingre-election.

The Board announced in June 2020 that it would implement, overtime, a policy of limiting directors’ tenure to nine years. Subjectto the constraints of effective succession planning, it is theBoard’s aim that no Director will serve on the Board for more thannine years (or twelve years in the case of the Chairman).

In setting this policy, the Board was mindful that several Boardmembers had exceeded or were close to exceeding the proposednine-year limit, and therefore to ensure an orderly Boardrefreshment process, the implementation of the new policy on tenureis being phased in over a period of time. For this reason, MrsBurton agreed to remain on the Board for a further year to providecontinuity of leadership while a replacement was found. Mrs Burtonwill not be seeking re-election as a Director at the Annual GeneralMeeting on
9 June 2022.

Details of each Director’s contribution to the success andpromotion of the Company are set out in the Directors’ Report anddetails of Directors’ biographies which can be found within theAnnual Report and Financial Statements.

The Directors are not aware of any issues that have been raiseddirectly by shareholders in respect of Board composition in theyear under review. Details for the proxy voting results in favourand against individual Directors’ re-election at the 2021 AGM aregiven on the Company’s website at

ShareholdersContinued shareholder support andengagement are critical to the continued existence of the Companyand the successful delivery of its long-term strategy.The Board is committedto maintaining open channels of communication and to engage withshareholders and (COVID-19 health and safety restrictionspermitting) welcomes and encourages attendance and participationfrom shareholders at its Annual General Meetings. If shareholderswish to raise issues or concerns with the Board outside of the AGM,they are welcome to do so at any time. The Chairman is available tomeet directly with shareholders periodically to understand theirviews on governance and the Company’s performance where they wishto do so. He may be contacted via the Company Secretary whosedetails are given within the Annual Report and FinancialStatements.
The Annual Report and Half Yearly Financial Report are available onthe Company’s website and are also circulated to shareholderseither in printed copy or via electronic communications. Inaddition, regular updates on performance, monthly factsheets, thedaily NAV and other information are also published on the websiteat

The Board also works closely with the Manager to develop theCompany’s marketing strategy, with the aim of ensuring effectivecommunication with shareholders in respect of the investmentmandate and objective. Unlike trading companies, one-to-oneshareholder meetings usually take the form of a meeting with theportfolio manager as opposed to members of the Board. As well asattending regular investor meetings the portfolio managers holdregular discussions with wealth management desks and offices tobuild on the case for, and understanding of, long-term investmentopportunities in the UK smaller companies’ sector.

The Manager also coordinates public relations activity, includingmeetings between the portfolio managers and shareholders andpotential investors to set out their vision for the portfoliostrategy and outlook for the region. As social distancingrestrictions were implemented during the COVID-19 pandemic, theCompany held a number of webcasts and virtual conferences as wellas meeting with investors by videoconference.

The Manager releases monthly portfolio updates to the market toensure that investors are kept up to date in respect of performanceand other portfolio developments and maintains a website on behalfof the Company that contains relevant information in respect of theCompany’s investment mandate and objective.

The Board values anyfeedback and questions from shareholders ahead of and during AnnualGeneral Meetings in order to gain an understanding of their viewsand will take action when and as appropriate. Feedback andquestions will also help the Company evolve its reporting, aimingto make reports more transparent and understandable.
Feedback from all substantive meetings between the InvestmentManager and shareholders will be shared with the Board. TheDirectors will also receive updates from the Company’s broker onany feedback from shareholders, as well as share trading activity,share price performance and an update from the InvestmentManager.

The portfolio management team attended a number of professionalinvestor meetings (mainly by videoconference) and held discussionswith many different wealth management desks and offices in respectof the Company during the year under review.
The portfolio manager also presented at virtual events hosted byAsset TV and MoneyWeek. In addition, the portfolio manager met witha number of investors throughout the year by videoconference.
Investors gave positive feedback in respect of the portfoliomanager, the good long-term track record, clear investment strategyand low fee. Some investors commented that they liked the fact thata significant proportion of the portfolio companies’ revenues weregenerated overseas, and the potential that this gave to benefitfrom a weak sterling currency especially in light of Brexit.

Investors expressed concerns over the impact of Brexit on the UKSmaller Companies sector.

Environmental, social and governance (ESG) issues can present bothopportunities and threats to long-term investment performance.Whilst the Company does not exclude investment in stocks purely onESG criteria, ESG analytics are fully integrated into theinvestment process when weighing up the risk and reward benefits ofinvestment decisions and the Board believes that communication andengagement with portfolio companies is important and can lead tobetter outcomes for shareholders and the environment than merelyexcluding investment in certain areas.

More information on BlackRock’s global approach to ESGintegration, as well as activity specific to the BlackRock SmallerCompanies Trust plc portfolio, is set out below. BlackRock hasdefined ESG integration as the practice of incorporating materialESG information and consideration of sustainability risks intoinvestment decisions in order to enhance risk-adjusted returns. ESGintegration does not change the Company’s investment objective orconstrain the Investment Manager’s investable universe, and doesnot mean that an ESG or impact focused investment strategy or anyexclusionary screens have been or will be adopted by the Company.Similarly, ESG integration does not determine the extent to whichthe Company may be impacted by sustainability risks. Moreinformation on sustainability risks may be found in the AIFMD FundDisclosures document of the Company available on the Company’swebsite at

The BlackRock portfolio management team has excellent access tocompany management teams and undertakes about 700 company meetingseach year to identify high quality, cash generative businesses withstrong management teams that are able to generate growth in a morechallenging economic environment. In addition, BlackRock also has aseparate Business Investment Stewardship (BIS) team that iscommitted to promoting sound corporate governance throughengagement with investee companies, development of proxy votingpolicies that support best governance practices and widerengagement on public policy issues. For the year to 28 February 2022, BIS held 32 company engagementson a range of governance issues with the management teams of 25companies in the BlackRock Smaller Companies Trust portfolio,representing 23.3% of the portfolio by value at 28 February 2022. Additional information is setout in the table below and the charts on page 45 (of the AnnualReport and Financial Statements) as well as the key engagementthemes for the meetings held in respect of the Company’s portfolioholdings.

Year ended
28 February2022
Number of engagementsheld132
Number of companiesmet125
% of equity investmentscovered223.3
Shareholder meetings votedat1133
Number of proposals votedon11,690
Number of votes againstmanagement198
% of total votes represented byvotes against management5.8

1 Source: Institutional ShareholderServices as at 28 February 2022.
2 Source: BlackRock. Company valuation asincluded in the portfolio at 28 February2022 as a percentage of the total portfolio value.

BlackRock believes that sustainability risk – and climate risk inparticular - now equates to investment risk, and this will drive aprofound reassessment of risk and asset values as investors seek toreact to the impact of climate policy changes. This in turn, inBlackRock’s view, is likely to drive a significant reallocation ofcapital away from traditional carbon intensive industries over thenext decade. BlackRock believes that carbon-intensive companieswill play an integral role in unlocking the full potential of theenergy transition, and to do this, they must be prepared to adapt,innovate and pivot their strategies towards a low carboneconomy.

As part of BlackRock’s structured investment process, ESG risksand opportunities (including sustainability/climate risk) areconsidered within the portfolio management team’s fundamentalanalysis of companies and industries and the Company’s portfoliomanagers work closely with BlackRock’s Investment Stewardship team(BIS) to assess the governance quality of companies and investigateany potential issues, risks or opportunities.

As part of their approach to ESG integration, the portfoliomanagers use ESG information when conducting research and duediligence on new investments and again when monitoring investmentsin the portfolio. In particular, portfolio managers at BlackRocknow have access to 1,200 key ESG performance indicators in Aladdin(BlackRock’s proprietary trading system) from third-party dataproviders. BlackRock’s internal sustainability research frameworkscoring is also available alongside third-party ESG scores in coreportfolio management tools. BlackRock’s access to companymanagement allows it to engage on issues that are identifiedthrough questioning management teams and conducting site visits. Inconjunction with the portfolio management team, BIS meets withboards of companies frequently to evaluate how they arestrategically managing their longer-term issues, including thosesurrounding ESG and the potential impact these may have on companyfinancials. BIS’s and the portfolio management team’s understandingof ESG issues is further supported by BlackRock’s SustainableInvestment Team (BSI). BSI looks to advance ESG research andintegration, active engagement and the development of sustainableinvestment solutions across the firm.

As a fiduciary to its clients, BlackRock has built its business toprotect and grow the value of clients’ assets. As part of thisfiduciary duty to its clients, BIS is committed to promoting soundcorporate governance through engagement with investee companies,development of proxy voting policies that support best governancepractices and also through wider engagement on public policyissues.

BlackRock’s approach to corporate governance and stewardship isexplained in its Global Principles. These high-level Principles arethe framework for BlackRock’s more detailed, market-specific votingguidelines, all of which are published on the BlackRock website.The Principles describe BlackRock’s philosophy on stewardship(including how it monitors and engages with companies), its policyon voting, its integrated approach to stewardship matters and howit deals with conflicts of interest. These apply across relevantasset classes and products as permitted by investment strategies.BlackRock reviews its Global Principles annually and updates themas necessary to reflect changes in market standards, evolvinggovernance practice and insights gained from engagement over theprior year. BlackRock’s Global Principles are available on itswebsite at

BlackRock’s voting guidelines are intended to help clients andcompanies understand its thinking on key governance matters. Theyare the benchmark against which it assesses a company’s approach tocorporate governance and the items on the agenda to be voted on atthe shareholder meeting. BlackRock applies its guidelinespragmatically, taking into account a company’s unique circumstanceswhere relevant. BlackRock informs voting decisions through researchand engages as necessary. BlackRock reviews its voting guidelinesannually and updates them as necessary to reflect changes in marketstandards, evolving governance practice and insights gained fromengagement over the prior year.

BlackRock’s market-specific voting guidelines are available onits website at

In 2021, BIS explicitly asked that all companies disclose abusiness plan aligned with the goal of limiting global warming towell below 2ºC, consistent with achieving net zero globalgreenhouse gas (GHG) emissions by 2050. BlackRock viewed thesedisclosures as essential to helping investors assess a company’sability to transition its business to a low carbon world and tocapture value-creation opportunities created by the climatetransition. BlackRock also asked that companies align theirdisclosures to the Task Force on Climate-related FinancialDisclosures (TCFD) framework and the SASB standards. For 2022, BISis evolving its perspective on sustainability reporting torecognize that companies may use standards other than that of theSASB (Sustainability Accounting Standards Board), and reiteratesits ask for metrics that are industry-specific or company-specific.BIS is also encouraging companies to demonstrate that their plansare resilient under likely decarbonization pathways, and the globalaspiration to limit warming to 1.5°C. BIS is also asking companiesto disclose how considerations related to having a reliable energysupply and just transition affect their plans. More information inrespect of BlackRock’s investment stewardship approach tosustainable investing can be found at

BlackRock has been a member of Climate Action 100+ since 2020and has aligned its engagement and stewardship priorities to UNSustainable Development Goals (including Gender Equality andAffordable and Clean Energy). A map of how BIS’s engagementpriorities align to the UN Sustainable Development Goals (SDGs) canbe found at

BlackRock is committed to transparency in terms of disclosure onits engagement with companies and voting rationales and iscommitted to voting against management to the extent that they havenot demonstrated sufficient progress on ESG issues. This year,BlackRock voted against or withheld votes from 6,560 directorsglobally at 3,400 different companies driven by concerns regardingdirector independence, executive compensation, insufficientprogress on board diversity, and overcommitted directors,reflecting our intensified focus on sustainability risks. In the2020-21 proxy year, BlackRock voted against 255 directors andagainst 319 companies for climate-related concerns that couldnegatively affect long-term shareholder value. More detail inrespect of BIS’s engagement and voting history can be found at

BIS also publishes voting bulletins explaining its votedecision, and the engagement and analysis underpinning it, oncertain high-profile proposals at company shareholder meetings.Vote bulletins for 2021 can be found at

In terms of its own reporting, BlackRock believes that the SASBprovides a clear set of standards for reporting sustainabilityinformation across a wide range of issues, from labour practices todata privacy to business ethics. For evaluating and reportingclimate-related risks, as well as the related governance issuesthat are essential to managing them, the TCFD provides a valuableframework. BlackRock recognises that reporting to these standardsrequires significant time, analysis and effort. BlackRock’s 2021TCFD report can be found at


29 April 2022


BlackRock Fund Managers Limited (BFM) provides management andadministration services to the Company under a contract which isterminable on six months’ notice. BFM has (with the Company’sconsent) delegated certain portfolio and risk management services,and other ancillary services to BlackRock Investment Management(UK) Limited (BIM (UK)). Furtherdetails of the investment management contract are disclosed in theDirectors’ Report contained within the Annual Report and FinancialStatements.

Video: BlackRock Sustainable American Income Trust plc (BRSA) - 28 October 2021

The investment management fee payable for the year ended28 February 2022 amounted to£6,285,000 (2021: £4,781,000) as disclosed in note 4 below. At theyear end, £4,714,000 was outstanding in respect of the managementfee (2021: £2,594,000).

In addition to the above services, BlackRock provided theCompany with marketing services. The total fees paid or payable forthese services for the year ended 28February 2022 amounted to £125,000, including VAT (2021:£166,000). Marketing fees of £132,000 (2021: £166,000) wereoutstanding at the year end.

As of 28 February 2022, an amountof £102,000 (2021: £108,000) was payable to the Manager in respectof Directors’ fees.

The ultimate holding company of the Manager and the InvestmentManager is BlackRock, Inc., a company incorporated in Delaware, USA.


Disclosures of the Directors’ interests in the ordinary sharesof the Company and fees and expenses payable to the Directors areset out in the Directors’ Remuneration Report. At 28 February 2022, an amount of £13,000 (2021:£13,000) was outstanding in respect of Directors’ fees. The Boardconsists of six non-executive Directors, all of whom are consideredto be independent by the Board. None of the Directors has a servicecontract with the Company. For the year ended 28 February 2022, the Chairman received an annualfee of £42,750, the Audit Committee Chairman received an annual feeof £32,750, the Senior Independent Director received an annual feeof £29,750 and each other Director received an annual fee of£28,750. With effect from 1 March2022 the Chairman will receive an annual fee of £44,500, theAudit Committee Chairman will receive an annual fee of £34,000, theSenior Independent Director will receive an annual fee of £31,000and each other Directors will receive an annual fee of£30,000.

As at 29 April 2022 all members ofthe Board held shares in the Company. Ronald Gould held 1,000 ordinary shares,Mark Little 491 ordinary shares,Caroline Burton held 5,500 ordinaryshares, Susan Platts-Martin held2,800 ordinary shares, James Barnesheld 1,000 ordinary shares and HelenSinclair held 988 ordinary shares.

Statement of Directors’Responsibilities in respect of the Annual Report and FinancialStatements

The Directors are responsible for preparing the Annual Reportand Financial Statements in accordance with applicable law andregulations. Company law requires the Directors to preparefinancial statements for each financial year. Under that law theyhave elected to prepare the financial statements in accordance withapplicable law and United Kingdom Accounting Standards (UnitedKingdom Generally Accepted Accounting Practice).

Under company law, the Directors must not approve the financialstatements unless they are satisfied that they give a true and fairview of the state of affairs of the Company as at the end of eachfinancial year and of the profit or loss of the Company for thatyear.

In preparing those financial statements, the Directors arerequired to:

  • present fairly the financial position, financial performanceand cash flows of the Company;
  • select suitable accounting policies and then apply themconsistently;
  • present information, including accounting policies, in a mannerthat provides relevant, reliable, comparable and understandableinformation;
  • make judgements and estimates that are reasonable andprudent;
  • state whether applicable UK Accounting Standards have beenfollowed, subject to any material departures disclosed andexplained in the financial statements; and
  • prepare the financial statements on the going concern basisunless it is inappropriate to presume that the Company willcontinue in business.

The Directors are responsible for keeping adequate accountingrecords that are sufficient to show and explain the Company’stransactions and disclose with reasonable accuracy at any time thefinancial position of the Company and that enable them to ensurethat the Financial Statements and the Directors’ RemunerationReport comply with the Companies Act 2006. They are alsoresponsible for safeguarding the assets of the Company and hencefor taking reasonable steps for the prevention and detection offraud and other irregularities.

The Directors are also responsible for preparing the StrategicReport, Directors’ Report, the Directors’ Remuneration Report, theCorporate Governance Statement and the Report of the AuditCommittee in accordance with the Companies Act 2006 and applicableregulations, including the requirements of the Listing Rules andthe Disclosure Guidance and Transparency Rules. The Directors havedelegated responsibility to the Manager for the maintenance andintegrity of the Company’s corporate and financial informationincluded on BlackRock’s website. Legislation in the United Kingdom governing the preparation anddissemination of financial statements may differ from legislationin other jurisdictions.

Each of the Directors, whose names are listed within the AnnualReport and Financial Statements, confirms that, to the best oftheir knowledge:

  • the Financial Statements, prepared in accordance withapplicable accounting standards, give a true and fair view of theassets, liabilities, financial position and profit or loss of theCompany; and
  • the Strategic Report contained in the Annual Report andFinancial Statements includes a fair review of the development andperformance of the business and the position of the Company,together with a description of the principal risks anduncertainties that it faces.

The UK Code also requires Directors to ensure that the AnnualReport and Financial Statements are fair, balanced andunderstandable. In order to reach a conclusion on this matter, theBoard has requested that the Audit Committee advise on whether itconsiders that the Annual Report and Financial Statements fulfilthese requirements. The process by which the Committee has reachedthese conclusions is set out in the Audit Committee’s reportcontained within the Annual Report and Financial Statements. As aresult, the Board has concluded that the Annual Report andFinancial Statements for the year ended 28February 2022, taken as a whole, are fair, balanced andunderstandable and provide the information necessary forshareholders to assess the Company’s position, performance,business model and strategy.

29 April 2022



Gains on investments held at fairvalue through profit or loss51,82451,824118,375118,375
Losses on foreign exchange(3)(3)(7)(7)
Income from investments held at fairvalue through profit or loss320,35120,3519,3019,301
Other income334345858
Total income20,38551,82172,2069,359118,368127,727
Investment management fee4(1,571)(4,714)(6,285)(1,133)(3,648)(4,781)
Operating expenses5(746)(17)(763)(916)(93)(1,009)
Total operating expenses(2,317)(4,731)(7,048)(2,049)(3,741)(5,790)
Net profit on ordinary activitiesbefore finance costs and taxation18,06847,09065,1587,310114,627121,937
Finance costs(729)(2,184)(2,913)(620)(1,860)(2,480)
Net profit on ordinary activitiesbefore taxation17,33944,90662,2456,690112,767119,457
Net profit on ordinary activitiesafter taxation17,23444,90662,1406,526112,767119,293
Earnings per ordinary share(pence)735.2991.97127.2613.36230.94244.30

The total column of this statement represents the Company’sprofit and loss account. The supplementary revenue and capitalaccounts are both prepared under guidance published by theAssociation of Investment Companies (AIC). All items in the abovestatement derive from continuing operations. No operations wereacquired or discontinued during the year. All income isattributable to the equity holders of the Company.

The net profit for the year disclosed above represents theCompany’s total comprehensive income.



up share




For the year ended
28 February 2022
At 28 February 202112,49851,9801,982789,27915,557871,296
Total comprehensive income:
Net profit for the year44,90617,23462,140
Transactions with owners, recordeddirectly to equity:
Dividends paid16(16,358)(16,358)
At 28 February 202212,49851,9801,982834,18516,433917,078
For the year ended
28 February 2021
At 29 February 202012,49851,9801,982676,51224,901767,873
Total comprehensive income:
Net profit for the year112,7676,526119,293
Transactions with owners, recordeddirectly to equity:
Dividends paid26(15,870)(15,870)
At 28 February 202112,49851,9801,982789,27915,557871,296

1 Interim dividend paid in respect ofthe year ended 28 February 2022 of13.00p was declared on 2 November2021 and paid on 2 December2021. Final dividend paid in respect of the year ended28 February 2021 of 20.50p wasdeclared on 7 May 2021 and paid on18 June 2021.
2 Interim dividend paid in respect of theyear ended 28 February 2021 of 12.80pwas declared on 5 November 2020 andpaid on 2 December 2020. Secondinterim dividend paid in respect of the year ended 29 February 2020 of 19.70p was declared on3 June 2020 and paid on 29 June 2020.


Fixed assets
Investments held at fair valuethrough profit or loss956,429948,448
Current assets
Current tax assets9123
Cash and cash equivalents72,47912,149
Total current assets79,23519,880
Creditors – amounts falling duewithin one year
Other creditors9(49,127)(7,428)
Net current assets30,10812,452
Total assets less currentliabilities986,537960,900
Creditors – amounts falling dueafter more than one year10(69,459)(89,604)
Net assets917,078871,296
Capital and reserves
Called up share capital1112,49812,498
Share premium account1251,98051,980
Capital redemption reserve121,9821,982
Capital reserves12834,185789,279
Revenue reserve1216,43315,557
Total shareholders’funds7917,078871,296
Net asset value per ordinaryshare (debt at par value) (pence)71,878.111,784.35
Net asset value per ordinaryshare (debt at fair value) (pence)71,882.381,774.71


Operating activities
Net profit on ordinary activitiesbefore taxation62,245119,457
Add back finance costs2,9132,480
Gains on investments held at fairvalue through profit or loss(51,824)(118,375)
Net movement in foreignexchange37
Sales of investments held at fairvalue through profit or loss475,565510,452
Purchases of investments held atfair value through profit or loss(431,313)(533,433)
(Increase)/decrease in debtors(100)603
Increase in creditors2,070189
Taxation on investment income(105)(164)
Net cash generated from/(used in)operating activities59,454(18,784)
Financing activities
Proceeds from 2.47% loan noteissue25,000
Issue costs of loan note(188)
(Repayment)/drawdown of SMBC BankInternational plc revolving credit facility(5,000)10,000
Interest paid(2,575)(2,440)
Dividends paid(16,358)(15,870)
Net cash generated from/(used in)financing activities879(8,310)
Increase/(decrease) in cash andcash equivalents60,333(27,094)
Cash and cash equivalents atbeginning of the year12,14939,250
Effect of foreign exchange ratechanges(3)(7)
Cash and cash equivalents at endof year72,47912,149
Comprised of:
Cash at bank3,1232,285
Cash Fund*69,3569,864

* Cash Fund represents funds held ondeposit with the BlackRock Institutional Cash Series plc - SterlingLiquid Environmentally Aware Fund.


The principal activity of the Company is that of an investmenttrust company within the meaning of Section 1158 of the CorporationTax Act 2010.

The principal accounting policies adopted by the Company are setout below.

(a) Basis of preparation
The financial statements have been prepared on a going concernbasis in accordance with ‘The Financial Reporting Standardapplicable in the UK and Republic of Ireland’ (FRS 102) and therevised Statement of Recommended Practice – ‘Financial Statementsof Investment Trust Companies and Venture Capital Trusts’ (SORP)issued by the Association of Investment Companies (AIC) inOctober 2019 and updated inApril 2021, and the provisions of theCompanies Act 2006.

Substantially, all of the assets of the Company consist ofsecurities that are readily realisable and, accordingly, theDirectors are satisfied that the Company has adequate resources tocontinue in operational existence for the foreseeable future, beinga period of at least 12 months from the date of approval of thefinancial statements, and therefore consider the going concernassumption to be appropriate. The Directors have reviewedcompliance with the covenants associated with the debenture, loannotes and revolving credit facility, income and expense projectionsand the liquidity of the investment portfolio in making theirassessment.

The principal accounting policies adopted by the Company are setout below. Unless specified otherwise, the policies have beenapplied consistently throughout the year and are consistent withthose applied in the preceding year. All of the Company’soperations are of a continuing nature.

The Company’s financial statements are presented in Sterling,which is the functional currency of the Company and the primaryeconomic environment in which the Company operates. All values arerounded to the nearest thousand pounds (£’000) except whereotherwise stated.

(b) Presentation of Income Statement
In order to better reflect the activities of an investment trustcompany and in accordance with guidance issued by the AIC,supplementary information which analyses the Income Statementbetween items of a revenue and a capital nature has been presentedon the face of the Income Statement.

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

(d) Income
Dividends receivable on equity shares are treated as revenue forthe year on an ex-dividend basis. Where no ex-dividend date isavailable, dividends receivable on or before the year end aretreated as revenue for the year. Provisions are made for dividendsnot expected to be received. The return on a debt security isrecognised on a time apportionment basis.

Special dividends are recognised on an ex-dividend basis and aretreated as capital or revenue depending on the facts orcircumstances of each dividend.

Dividends are accounted for in accordance with Section 29 of FRS102 on the basis of income actually receivable, without adjustmentfor tax credits attaching to the dividend. Dividends from overseascompanies continue to be shown gross of withholding tax.

Deposit interest receivable is accounted for on an accrualsbasis.

Where the Company has elected to receive its dividends in theform of additional shares rather than in cash, the cash equivalentof the dividend foregone is recognised in the revenue account ofthe Income Statement. Any excess in the value of the shares overthe amount of the cash dividend is recognised in capitalreserves.

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

  • expenses which are incidental to the acquisition or disposal ofan investment are treated as capital. Details of transaction costson the purchases and sales of investments are shown in note 10contained within the Annual Report and Financial Statements;
  • expenses are treated as capital where a connection with themaintenance of enhancement of the value of the investments can bedemonstrated; and
  • the investment management fee and finance costs have beenallocated 75% to the capital account and 25% to the revenue accountof the Income Statement in line with the Board’s expected long-termsplit of returns, in the form of capital gains and incomerespectively, from the investment portfolio.

(f) Taxation
The tax expense represents the sum of the tax currently payable anddeferred tax. The tax currently payable is based on the taxableprofit for the year. Taxable profit differs from net profit asreported in the Income Statement because it excludes items ofincome or expenses that are taxable or deductible in other yearsand it further excludes items that are never taxable or deductible.The Company’s liability for current tax is calculated using taxrates that were applicable at the balance sheet date.

Deferred taxation is recognised in respect of all timingdifferences at the financial reporting date, where transactions orevents that result in an obligation to pay more taxation in thefuture or right to less taxation in the future have occurred at thebalance sheet date. Deferred tax is measured on a non-discountedbasis, at the average tax rates that are expected to apply in theperiods in which the timing differences are expected to reversebased on tax rates and laws that have been enacted or substantivelyenacted by the balance sheet date. This is subject to deferredtaxation assets only being recognised if it is considered morelikely than not that there will be suitable profits from which thefuture reversal of the timing differences can be deducted.

(g) Investments held at fair value through profit orloss
The Company’s investments are classified as held at fair valuethrough profit or loss in accordance with Sections 11 and 12 of FRS102 and are managed and evaluated on a fair value basis inaccordance with its investment strategy.

All investments are classified upon initial recognition as heldat fair value through profit or loss. Purchases of investments arerecognised on a trade date basis. Sales of assets are recognised atthe trade date of the disposal. Proceeds will be measured at fairvalue, which will be regarded as the proceeds of the sale less anytransaction costs.

The fair value of the financial investments is based on theirquoted bid price at the balance sheet date on the exchange on whichthe investment is quoted, without deduction for the estimatedfuture selling costs.

Unquoted investments are valued by the Directors at fair valueusing International Private Equity and Venture Capital ValuationGuidelines. This policy applies to all current and non-currentasset investments of the Company.

Changes in the value of investments held at fair value throughprofit or loss and gains and losses on disposal are recognised inthe Income Statement as ‘Gains or losses on investments held atfair value through profit or loss’. Also included within thisheading are transaction costs in relation to the purchase or saleof investments.

The fair value hierarchy consists of the following threelevels:

Level 1 – Quoted market price for identical instruments inactive markets.
Level 2 – Valuation techniques using observable inputs.
Level 3 – Valuation techniques using significant unobservableinputs.

(h) Dividends payable
Under Section 32 of FRS 102, final dividends should not be accruedin the financial statements unless they have been approved byshareholders before the balance sheet date. Dividends payable toequity shareholders are recognised in the Statement of Changes inEquity when they have been approved by shareholders and have becomea liability of the Company. Interim dividends are recognised in thefinancial statements in the period in which they are paid.

(i) Foreign currency translation
In accordance with Section 30 of FRS 102, the Company is requiredto nominate a functional currency, being the currency in which theCompany predominately operates. The functional and reportingcurrency is Sterling, reflecting the primary economic environmentin which the Company operates. Transactions in foreign currenciesare translated into Sterling at the rates of exchange ruling on thedate of the transaction. Foreign currency monetary assets andliabilities are translated into Sterling at the rates of exchangeruling at the balance sheet date. Profits and losses thereon arerecognised in the capital account of the Income Statement and takento the capital reserve.

(j) Share repurchases and re-issues
Shares repurchased and subsequently cancelled – share capital isreduced by the nominal value of the shares repurchased, and thecapital redemption reserve is correspondingly increased inaccordance with Section 733 of the Companies Act 2006. The fullcost of the repurchase is charged to an appropriate reserve.

Shares repurchased and held in treasury – the full cost of therepurchase is charged to an appropriate reserve.

Where treasury shares are subsequently re-issued;

  • amounts received to the extent of the repurchase price arecredited to an appropriate reserve; and
  • any surplus received in excess of the repurchase price is takento the share premium account.

(k) Debtors
Debtors include sales for future settlement, other debtors andprepayments and accrued income in the ordinary course of business.If collection is expected in one year or less, they are classifiedas current assets. If not, they are presented as non-currentassets.

(l) Creditors
Creditors include purchases for future settlement, interestpayable, share buyback costs and accruals in the ordinary course ofbusiness. Creditors, loans and debentures are classified ascreditors – amounts due within one year if payment is due withinone year or less (or in the normal operating cycle of the businessif longer). If not, they are presented as creditors – amountsfalling due after more than one year.

(m) Cash and cash equivalents
Cash comprises cash in hand and on demand deposits and bankoverdrafts repayable on demand. Cash equivalents includeshort-term, highly liquid investments, that are readily convertibleto known amounts of cash and that are subject to an insignificantrisk of changes in value.

(n) Critical accounting estimates and judgements
The Company makes estimates and assumptions concerning the future.The resulting accounting estimates and assumptions will, bydefinition, seldom equal the related actual results. Estimates andjudgements are regularly evaluated and are based on historicalexperience and other factors, including expectations of futureevents and that are believed to be reasonable under thecircumstances. The Directors do not believe that any accountingjudgements or estimates have a significant risk of causing materialadjustment to the carrying amount of assets and liabilities withinthe next financial year.


Investment income:
UK listed dividends13,3766,394
UK listed scrip dividends598
UK listed special dividends881856
Property income dividends624473
Overseas listed dividends4,928951
Overseas listed specialdividends54229
Total investment income20,3519,301
Other income:
Bank interest1
Interest from Cash Fund3457
Total income20,3859,359

No special dividends have been recognised in capital during theyear (2021: £707,000).

Dividends and interest received in cash during the year amountedto £20,116,000 and £18,000 (2021: £9,098,000 and £71,000).



Investment management fee1,5714,7146,2851,1333,6484,781

The investment management fee is based on a rate of 0.6% of thefirst £750 million of total assets (excluding current year income)less the current liabilities of the Company (the “Fee AssetAmount”), reducing to 0.5% above this level. The fee is calculatedat the rate of one quarter of 0.6% of the Fee Asset Amount up tothe initial threshold of £750 million, and one quarter of 0.5% ofthe Fee Asset Amount in excess thereof, at the end of each quarter.The investment management fee is allocated 75% to the capitalaccount and 25% to the revenue account of the Income Statement.

For the year ended 28 February2021, BlackRock agreed to waive management fees payable bythe Company up to the value of £83,254 to cover additional auditand legal costs incurred as a result of the work required tocorrect the Company’s Articles and restate brought forward reservesfollowing an administrative error. Please see note 5 below for afurther breakdown of the expenses incurred.



Allocated to revenue:
Custody fees137
Depositary fees11581
Auditors’ remuneration:
– audit services4533
– audit services – additionalnon-recurring fees113
– non-auditservices243
Registrar’s fee4742
Director search fees1730
Marketing fees125166
AIC fees1125
Bank charges1064
Broker fees4036
Stock exchange listings2628
Printing and postage fees3445
Legal fees:
– legal fees – ongoing services2212
– legal fees – non-recurring feesfor ad hoc legal advice170
Other administrative costs7897
Allocated to capital:
Custody transactioncharges41793
The Company’s ongoingcharges5, calculated as a percentage of average dailynet assets and using the management fee and all other operatingexpenses, excluding finance costs, direct transaction costs,custody transaction charges, VAT recovered, taxation and certainnon-recurring items were:0.7%0.8%

1 Additional audit fees of £13,200including VAT and additional legal fees totalling £70,054 includingVAT were incurred in the year ended 28February 2021 as a result of the work required to correctthe Company’s Articles and restate the brought forward reservesfollowing an administrative error. These costs were absorbed byBlackRock by way of a management fee waiver. Please see note 4above for further details.
2 Additional fees of £3,500 (2021: £3,075)excluding VAT were incurred for non-audit services relating to thedebenture compliance work carried out by the Auditors.
3 Further information on Directors’emoluments can be found in the Directors’ Remuneration Reportcontained within the Annual Report and Financial Statements.
4 For the year ended 28 February 2022, expenses of £17,000 (2021:£93,000) were charged to the capital account of the IncomeStatement. These relate to transaction costs charged by theCustodian on sale and purchase trades.
5 Alternative Performance Measure, seeGlossary contained within the Annual Report and FinancialStatements.


Dividends paid on equity shares:

Record date

Payment date
2020 Second interim of 19.70p12 June202029 June20209,619
2021 Interim of 12.80p13 November20202 December20206,251
2021 Final of 20.50p21 May 202118 June202110,010
2022 Interim of 13.00p12 November20212 December20216,348

The Directors have proposed a final dividend of 22.00p per sharein respect of the year ended 28 February2022. The final dividend will be paid, subject toshareholders’ approval, on 17 June2022 to shareholders on the Company’s register on13 May 2022. The proposed finaldividend has not been included as a liability in these financialstatements, as final dividends are only recognised in the financialstatements when they have been approved by shareholders.

The total dividends payable in respect of the year which formthe basis of determining retained income for the purposes ofSection 1158 of the Corporation Tax Act 2010 and Section 833 of theCompanies Act 2006, and the amount proposed for the year ended28 February 2022 meet the relevantrequirements as set out in this legislation.

Dividends paid or proposed on equity shares:
Interim dividend paid 13.00p (2021:12.80p)6,3486,251
Final dividend payable of 22.00p pershare* (2021 final dividend: 20.50p)10,74310,010

* Based upon 48,829,792 ordinary shares(excluding treasury shares) in issue on 29April 2022.

All dividends paid or payable are distributed from the Company’sdistributable reserves.

Revenue and capital earnings per share are shown below and havebeen calculated using the following:

28 February2022
28 February2021
Revenue return attributable toordinary shareholders (£’000)17,2346,526
Capital return attributable toordinary shareholders (£’000)44,906112,767
Total profit attributable toordinary shareholders (£’000)62,140119,293
Equity shareholders’ funds(£’000)917,078871,296
The weighted average number ofordinary shares in issue during the year on which the return perordinary share was calculated was:48,829,79248,829,792
The actual number of ordinary sharesin issue at the end of each year on which the undiluted net assetvalue was calculated was:48,829,79248,829,792
Earnings per share
Revenue return per share(pence)35.2913.36
Capital return per share(pence)91.97230.94
Total return per share(pence)127.26244.30
28 February2022
28 February2021
Net asset value per ordinary share(debt at par value) (pence)1,878.111,784.35
Net asset value per ordinary share(debt at fair value) (pence)1,882.381,774.71
Ordinary share price (pence)1,684.001,698.00


Sales for future settlement6,0367,111
Prepayments and accrued income629597


Purchases for future settlement3,3113,977
Interest payable682382
7.75% debenture stock 202215,000
Unamortised debenture stock issueexpenses(5)
Revolving loan facility – SMBC BankInternational plc25,000


7.75% debenture stock 202215,000
Unamortised debenture stock issueexpenses(20)
2.74% loan note 203725,00025,000
Unamortised loan note issueexpenses(210)(224)
2.41% loan note 204420,00020,000
Unamortised loan note issueexpenses(146)(152)
2.47% loan note 204625,000
Unamortised loan note issueexpenses(185)
Revolving loan facility - SMBC BankInternational plc30,000
Total borrowings69,45989,604

The fair value of the 7.75% debenture stock 2022 using the lastavailable quoted offer price from the London Stock Exchange as at28 February 2022 was 113p perdebenture (2021: 121p), a total of £16,950,000 (2021: £18,150,000).The fair value of the 2.74% loan note has been determined based ona comparative yield for UK Gilts for similar duration maturity andspreads, and as at 28 February 2022equated to a valuation of 99.14p per note (2021: 105.61p), a totalof £24,785,000 (2021: £26,403,000). The fair value of the 2.41%loan note has been determined based on a comparative yield for UKGilts for similar duration maturity and spreads, and as at28 February 2022 equated to avaluation of 92.99p per note (2021: 98.79p), a total of £18,598,000(2021: £19,758,000). The fair value of the 2.47% loan note has beendetermined based on a comparative yield for UK Gilts for similarduration maturity and spreads, and as at 28February 2022 equated to a valuation of 88.15p per note(2021: n/a), a total of £22,038,000 (2021: n/a).

The £15 million debenture stock was issued on 8 July 1997. Interest on the stock is payable inequal half yearly instalments on 31 July and 31 January in eachyear. The stock is secured by a first floating charge over thewhole of the assets of the Company and is redeemable at par on31 July 2022.

The £25 million loan note was issued on 24 May 2017. Interest on the note is payable inequal half yearly instalments on 24 May and 24 November in eachyear. The loan note is unsecured and is redeemable at par on24 May 2037.

The £20 million loan note was issued on 3December 2019. Interest on the note is payable in equal halfyearly instalments on 3 December and 3 June in each year. The loannote is unsecured and is redeemable at par on 3 December 2044.

The second £25 million loan note was issued on 16 September 2021. Interest on the note ispayable in equal half yearly instalments on 24 May and 16 Septembereach year. The loan note is unsecured and is redeemable at par on16 September 2046.

The Company has in place a £35 million three year multi-currencyrevolving loan facility with SMBC Bank International plc. As at28 February 2022, £25 million of thefacility had been utilised. Under the agreement the terminationdate of this facility is the third anniversary of the effectivedate being 30 November 2022. Intereston this facility is reset every three months and is currentlycharged at the rate of 1.23%.

The Company also has available an uncommitted overdraft facilityof £10 million with The Bank of New York Mellon (International)Limited (BNYM), of which £nil had been utilised at 28 February 2022 (2021: £nil).


in issue



Allotted, called up and fullypaid share capital comprised:
Ordinary shares of 25peach
At 28 February 202148,829,7921,163,73149,993,52312,498
At 28 February 202248,829,7921,163,73149,993,52312,498

During the year ended 28 February2022, the Company has not bought back or issued any sharesto or from treasury (2021: nil).

Since 28 February 2022 and up tothe latest practicable date of 27 April2022, no shares have been reissued.

The ordinary shares (excluding any shares held in treasury)carry the right to receive any dividends and have one voting rightper ordinary share. There are no restrictions on the voting rightsof the ordinary shares or on the transfer of ordinary shares.


Distributable reserves



(arising on

(arising on


At 28 February 202151,9801,982528,028261,25115,557
Movement during the year:
Gains on realisation ofinvestments120,538
Change in investment holdinggains(68,714)
Gains/(losses) on foreign currencytransactions7(10)
Finance costs and expenses chargedto capital(6,915)
Net profit for the year17,234
Dividends paid during the year(16,358)
At 28 February 202251,9801,982641,658192,52716,433
Distributable reserves



(arising on

(arising on


At 29 February 202051,9801,982499,094177,41824,901
Movement during the year:
Gains on realisation ofinvestments33,824
Change in investment holdinggains83,843
Gains/(losses) on foreign currencytransactions3(10)
Finance costs and expenses chargedto capital(4,893)
Net profit for the year6,526
Dividends paid during the year(15,870)
At 28 February 202151,9801,982528,028261,25115,557

The share premium account and capital redemption reserve are notdistributable reserves under the Companies Act 2006. In accordancewith ICAEW Technical Release 02/17BL on Guidance on Realised andDistributable Profits under the Companies Act 2006, the capitalreserves may be used as distributable profits for all purposes and,in particular, for the repurchase by the Company of its ordinaryshares and for payment as dividends. In accordance with theCompany’s Articles of Association, capital reserves and the revenuereserve may be distributed by way of dividend. The capital reserveof £192,527,000 (2021: £261,251,000) arising on the revaluation ofinvestments is subject to fair value movements and may not bereadily realisable at short notice, as such it may not be entirelydistributable. The investments are subject to financial risk;included in note 17 contained within the Annual Report andFinancial Statements, as such capital reserves and the revenuereserve may not be entirely distributable if a loss occurred duringthe realisation of these investments.

Financial assets and financial liabilities are either carried inthe Balance Sheet at their fair value (investments) or at an amountwhich is a reasonable approximation of fair value (due frombrokers, dividends and interest receivable, due to brokers,accruals, cash at bank and bank overdrafts). Section 34 of FRS 102requires the Company to classify fair value measurements using afair value hierarchy that reflects the significance of inputs usedin making the measurements. The valuation techniques used by theCompany are explained in the accounting policies note 2 of theFinancial Statements.

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

The fair value hierarchy has the following levels:

Level 1 – Quoted market price for identical instruments inactive markets
A financial instrument is regarded as quoted in an active market ifquoted prices are readily and regularly available from an exchange,dealer, broker, industry group, pricing service or regulatoryagency and those prices represent actual and regularly occurringmarket transactions on an arm’s length basis. The Company does notadjust the quoted price for these instruments.

Level 2 – Valuation techniques using observableinputs
This category includes instruments valued using quoted prices forsimilar instruments in markets that are considered less active; orother valuation techniques where significant inputs are directly orindirectly observable from market data.

Level 3 – Valuation techniques using significant unobservableinputs
This category includes all instruments where the valuationtechnique includes inputs not based on market data and these inputscould have a significant impact on the instrument’s valuation.

This category also includes instruments that are valued based onquoted prices for similar instruments where significant entitydetermined adjustments or assumptions are required to reflectdifferences between the instruments and instruments for which thereis no active market. The Investment Manager considers observabledata to be that market data that is readily available, regularlydistributed or updated, reliable and verifiable, not proprietary,and provided by independent sources that are actively involved inthe relevant market.

The level in the fair value hierarchy within which the fairvalue measurement is categorised in its entirety is determined onthe basis of the lowest level input that is significant to the fairvalue measurement. For this purpose, the significance of an inputis assessed against the fair value measurement in its entirety. Ifa fair value measurement uses observable inputs that requiresignificant adjustment based on unobservable inputs, thatmeasurement is a Level 3 measurement.

Assessing the significance of a particular input to the fairvalue measurement in its entirety requires judgement, consideringfactors specific to the asset or liability. The determination ofwhat constitutes ‘observable’ inputs requires significant judgementby the Investment Manager.

Fair values of financial assets and financialliabilities
The table below is an analysis of the Company’s financialinstruments measured at fair value at the balance sheet date.

Financial assets at fair value through profit or loss at 28February 2022
Level 1
Level 2
Level 3
Equity investments956,429956,429

Financial assets at fair value through profit or loss at 28February 2021
Level 1
Level 2
Level 3
Equity investments948,448948,448

There were no transfers between levels for financial assetsduring the year recorded at fair value as at 28 February 2022 and 28February 2021. The Company did not hold any Level 3securities throughout the financial year or as at 28 February 2022 (2021: nil).

For exchange listed equity investments the quoted price is thebid price. Substantially all investments are valued based onunadjusted quoted market prices. Where such quoted prices arereadily available in an active market, such prices are not requiredto be assessed or adjusted for any price related risks, includingclimate risk, in accordance with the fair value relatedrequirements of the Company’s Financial Reporting Framework.

BlackRock Fund Managers Limited (BFM) provides management andadministration services to the Company under a contract which isterminable on six months’ notice. BFM has (with the Company’sconsent) delegated certain portfolio and risk management services,and other ancillary services to BlackRock Investment Management(UK) Limited (BIM (UK)). Furtherdetails of the investment management contract are disclosed in theDirectors’ Report contained within the Annual Report and FinancialStatements.

The investment management fee payable for the year ended28 February 2022 amounted to£6,285,000 (2021: £4,781,000) as disclosed in note 4 to theFinancial Statements. At the year end, £4,714,000 was outstandingin respect of the management fee (2021: £2,594,000).

In addition to the above services, BlackRock provided theCompany with marketing services. The total fees paid or payable forthese services for the year ended 28February 2022 amounted to £125,000, including VAT (2021:£166,000). Marketing fees of £132,000 (2021: £166,000) wereoutstanding at the year end.

As of 28 February 2022, an amountof £102,000 (2021: £108,000) was payable to the Manager in respectof Directors’ fees.

The ultimate holding company of the Manager and the InvestmentManager is BlackRock, Inc., a company incorporated in Delaware, USA.

Directors’ emoluments

Disclosures of the Directors’ interests in the ordinary shares ofthe Company and fees and expenses payable to the Directors are setout in the Directors’ Remuneration Report contained within theAnnual Report and Financial Statements. At 28 February 2022, an amount of £13,000 (2021:£13,000) was outstanding in respect of Directors’ fees.

Significant holdings
The following investors are:

a. funds managed by the BlackRockGroup or are affiliates of BlackRock, Inc. (“Related BlackRockFunds”) or

b. investors (other than thoselisted in (a) above) who held more than 20% of the voting shares inissue in the Company and are as a result, considered to be relatedparties to the Company (“Significant Investors”).

As at 28February 2022

Total % of shares held by Related
BlackRock Funds
Total % of shares held bySignificant
Investors who are not affiliates of
BlackRock Group or BlackRock, Inc.
Number of Significant Investorswho
are not affiliates of BlackRock Group or
BlackRock, Inc.

As at 28February 2021

Total % of shares held by Related
BlackRock Funds
Total % of shares heldby Significant
Investors who are not affiliates of
BlackRock Group or BlackRock, Inc.
Number of SignificantInvestors who
are not affiliates of BlackRock Group or
BlackRock, Inc.

There were no contingent liabilities at 28February 2022 (2021: nil).

The financial information contained in this announcement does notconstitute statutory accounts as defined in Section 435 of theCompanies Act 2006.

The figures set out above have been reported upon by theauditors. The comparative figures are extracts from the auditedfinancial statements of BlackRock Smaller Companies Trust plc forthe year ended 28 February 2021,which have been filed with the Registrar of Companies. The reportsof the auditors for the years ended 28February 2021 and 28 February2022 contain no qualification or statement under Section498(2) or (3) of the Companies Act 2006. The 2022 Annual Report andFinancial Statements will be filed with the Registrar of Companiesafter the Annual General Meeting.

Copies of the Annual Report and Financial Statements will be sentto members shortly and will be available from The CompanySecretary, BlackRock Smaller Companies Trust plc, 12 ThrogmortonAvenue, London EC2N 2DL.

The Annual General Meeting of the Company will be held at 12Throgmorton Avenue, London EC2N2DL on 9 June 2022 at 11:30 a.m.


The Annual Report and Financial Statements will also beavailable on the BlackRock Investment Management website at Neither the contents of theManager's website nor the contents of any website accessible fromhyperlinks on the Manager's website (or any other website) isincorporated into, or forms part of, this announcement.


Melissa Gallagher, ManagingDirector, Closed End Funds, BlackRock Investment Management (UK)Limited
Tel: 020 7743 3893

Roland Arnold, BlackRockInvestment Management (UK) Limited
Tel: 020 7743 5113

Press Enquiries:

Video: Invesco Perpetual UK Smaller Companies Investment Trust plc - How are UK smaller companies faring?

Ed Hooper, Lansons Communications– Tel: 020 7294 3620

29 April 2022


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