Half-yearly Report

13 October 2010 BLACKROCK SMALLER COMPANIES TRUST plc Half yearly financial announcement of results in respect of the six months ended 31 August 2010 Financial Highlights Six months ended 31 August 2010 Performance Net asset value per share 433.59p Movement in net asset value per share +13.9% Movement in Hoare Govett Smaller Companies plus AIM (ex Investment Companies) Index +3.6% Share price per share 349.00p Movement in share price +18.8% Revenue Performance Return per share 5.22p Interim dividend per share 2.20p Change in interim dividend +10.0% Chairman's Statement Overview During the six months to 31 August 2010, markets experienced mixed fortunes. The recovery in stock markets from the lows seen in the Spring of 2009, which had been fuelled by significant fiscal stimulus packages, continued into March and then peaked in April. The subsequent sell-off which began in late April was triggered by a number of uncertainties which led many investors to fear the worst, including the possibility of a double-dip recession. The main concerns were the sovereign debt problems in some southern European countries, the sustainability of the high growth Chinese economy and the effects of spending cuts by the new UK coalition government. After falls during May and June, markets rallied in July. The rally followed positive company earnings releases for the second quarter, the conclusion of European banking stress test results and a significant pick up in the level of merger and acquisition activity, all of which helped to bolster market sentiment. Unfortunately, fears returned to markets in the final period and August was a notably poor month for equities. Performance Against this uncertain backdrop, I am delighted to report that during the six months ended 31 August 2010, the Company's net asset value per share ("NAV") has increased by 13.9% and the share price has risen by 18.8% on a capital only basis, and by 15.0% and 20.3% respectively on a total return basis. This compared favourably with the Company's benchmark index, the Hoare Govett Smaller Companies plus AIM (excluding Investment Companies) Index, which rose by 3.6% on a capital only basis and by 5.0% on a total return basis. Since the period end the Company's NAV has increased by a further 19.1% and the share price by 24.0%, compared with an increase in the benchmark of 11.4%. Earnings and dividends Revenue earnings per share for the period to 31 August 2010 were 5.22p compared to 4.00p for the corresponding period in the previous year. The Board has declared an interim dividend of 2.20p per share (2009: 2.00p per share) representing an increase of 10.0% over the previous interim dividend. The dividend will be paid on 26 November 2010 to shareholders on the Company's register on 22 October 2010. Gearing The Company has a Â£10 million overdraft facility and a Â£15 million debenture, which give the Investment Manager the ability to gear tactically. Gearing has been maintained at approximately the same level throughout the period under review. At the period end, the Company's net borrowing was Â£22.8 million, 11.0% of shareholders' funds and 9.8% of gross assets. Discount The UK Small Cap sector has tended to trade on a wider discount to the investment trust sector as a whole, possibly reflecting the illiquid nature of some of the underlying portfolio companies. As at 31 August 2010, the Company's discount stood at 19.5%, which is broadly in line with the sector, and since the period end has narrowed. Alternative Investment Fund Managers ("AIFM") Directive In my annual statement to shareholders, I reported on the European Commission's AIFM Directive which will create new regulatory obligations and costs for the investment trust sector. The Commission's original proposals for a Directive have been debated for some months and, although the legislation is still to be finalised, we are hopeful that the worst outcomes of the original proposals will be avoided for investment trusts. Again, we will keep shareholders advised of progress. Outlook Despite the well-publicised economic headwinds, we do expect the global economy to continue to grow, albeit at a slower pace, during the remainder of 2010. Smaller companies have outperformed larger companies in recent months and we believe that by continuing to invest in good quality growth companies, especially those with overseas earnings rather than companies exposed to the UK consumer and government, our portfolio should continue to perform well. Richard Brewster 13 October 2010 Interim Management Report and Responsibility Statement The Chairman's Statement and the Investment Manager's Report give details of the important events which have occurred during the period and their impact on the financial statements. Principal risks and uncertainties The principal risks faced by the Company can be divided into various areas as follows: - Performance; - Income/dividend; - Regulatory; - Operational; and - Financial. The Board reported on the principal risks and uncertainties faced by the Company in the Annual Report and Accounts for the year ended 28 February 2010. A detailed explanation can be found on pages 13 and 14 of the Annual Report and Accounts which is available on the website maintained by the Investment Manager, BlackRock Investment Management (UK) Limited, at www.blackrock.co.uk/ its. In the view of the Board, there have not been any changes to the fundamental nature of these risks since the previous report and these principal risks and uncertainties are equally applicable to the remaining six months of the financial year as they were to the six months under review. Related party transactions The Investment Manager is regarded as a related party and details of the management fees payable are set out in note 3 and note 9. Directors' responsibility statement The Disclosure and Transparency Rules ("DTR") of the UK Listing Authority require the Directors to confirm their responsibilities in relation to the preparation and publication of the Interim Management Report and Financial Statements. The Directors confirm to the best of their knowledge that: - the condensed set of financial statements contained within the half yearly financial report has been prepared in accordance with applicable UK Accounting Standards and the Accounting Standards Board's Statement `Half Yearly Financial Reports'; and - the interim management report, together with the Chairman's Statement and Investment Manager's Report, include a fair review of the information required by 4.2.7R and 4.2.8R of the FSA's Disclosure and Transparency Rules. The half yearly report has been reviewed by the Company's auditors. The half yearly financial report was approved by the Board on 13 October 2010 and the above responsibility statement was signed on its behalf by the Chairman. Richard Brewster By order of the Board 13 October 2010 Investment Manager's Report Market review and overall investment performance Markets have been volatile since late April, driven by concerns about the strength of economic recovery in various parts of the world and by worries about the excessive borrowing of some southern European countries. In the UK, the new coalition government has stated a clear intention to tackle our excessive budget deficit; the implications on UK public spending, the extent of public sector job cuts and their effect on consumer spending have yet to be seen. In the US, the initial pace of economic recovery seems to have slowed. Emerging market growth still looks strong, especially in most Asia Pacific markets and in Brazil. Within Europe, the German economy has recovered strongly from a deep downturn. This has been a difficult environment in which to manage the portfolio but we have fared well by retaining our investment in good quality stocks, many of which are exposed to the higher growth areas of the world. The Company's NAV per share rose by 13.9% on a capital only basis over the six month period, well ahead of the benchmark index which increased by 3.6%. By comparison with larger companies, the FTSE 100 Index fell by 2.4% over the same period. Portfolio performance From a stock point of view, our holdings in Encore Oil, Hutchison China Meditech, Abcam, Aveva Group, Blinkx and Domino Printing Sciences each contributed at least 0.5% to relative performance. Encore Oil drilled the Catcher well in the North Sea and discovered light oil. This find is increasingly looking like one of the largest in the North Sea in recent years. Encore also drilled an appraisal well on the Cladhan prospect; this too was successful and is very material. Hutchison China Meditech supplies traditional Chinese medicines into China. These vary from over the counter cold remedies to prescription cardiovascular drugs. A number of these are included on the Chinese government's Essential Medicines List, giving a high level of comfort about future sales levels. Sales are continuing to grow well. Abcam supplies antibodies to research scientists around the world. Its half year results showed continuing strong trading with earnings up by 54%. Aveva supplies software which enables large energy, chemical and shipbuilding companies to design new plant or vessels and subsequently manage them. They continue to trade very well. Blinkx is, like Abcam, heavily focused on the internet. Blinkx believe they are the world's largest and most advanced video search engine, with an index of over 35 million hours of searchable video. Revenues are running well ahead of previous market expectations and it has made a number of positive announcements about tie ups with Samsung, BBC World News and others. Domino Printing announced very strong interims, well ahead of expectations, with equipment sales recovering sharply from the low levels of the first half of the previous year. The main disappointment from a stock point of view was BATM. The stock cost us 0.5% in relative performance during the period. BATM's trading in their telecoms division has been well behind expectations, with one of their key customers losing market share mainly, we believe, to Chinese competitors. BATM still see considerable potential for their telecoms products especially in the US, but demand may not recover quickly. Their medical division is making better progress and the Company is financially very strong. We reduced our holding. Whilst most of our relative outperformance in the period came, as usual, from stock selection, sector allocation was also positive. The two sectors that contributed most were electronic & electrical equipment and industrial engineering. We were heavily overweight in both sectors and both outperformed our benchmark index. Activity We have seen a marked increase in bid activity during the period with holdings in Care UK, Rensburg Sheppards, Chloride and BSS Group all receiving takeover bids; outside our portfolio there were many other bids for companies in our investment universe. This is a great time for corporate buyers to make strategic acquisitions at prices that probably would not be achievable after a fuller economic recovery. We have generally seen better value at the smaller end of our investment universe and so we have sold some of our holdings with market capitalisations in excess of Â£1 billion where we have took the view that upside was more limited. Holdings sold included Charter, Premier Oil, Petropavlovsk and Derwent London. We have invested in a range of companies which we see as being well positioned and attractively valued. Examples include Yule Catto, a polymers company which derives 52% of its polymers revenues from the Asia Pacific region and other high growth developing markets, and Mecom, a publisher of local newspapers in Continental Europe with a rapidly growing online business which is starting to see better trends in advertising to complement its resilient subscription revenues. We are attracted to online business models given their inherent scalability and one new and highly successful business of this type is Blinkx. Revenue growth is expected to remain very strong. We also invested in a few IPOs, notably that of Supergroup, best known for its Superdry fashion clothing brand. Sales and profit growth have been very strong and the share price has doubled since its IPO. Portfolio positioning Our portfolio positioning has not changed materially. The portfolio is built around good quality growth companies, ones which we know well, run by management we regard highly, which are truly differentiated and have the ability to maintain organic growth and margins, generate cash and which have strong balance sheets; these are our core holdings. We particularly like companies with high levels of overseas earnings, especially from Asia Pacific; examples of holdings include Rotork and Hutchison China Meditech. We also like companies with good revenue visibility or predictability, for instance Abcam and ITE Group. A key part of our strategy is to invest in companies with high levels of intellectual property or strong brands, such as Fidessa and Aveva; these are protected by strong, sustainable barriers to entry and have real pricing power. We generally prefer companies which have their own products, rather than service companies, as these tend to be able to scale more quickly. We are always looking to find interesting new companies which have the potential to become core holdings in the future. Inevitably new holdings start off as small holdings in our portfolio until our confidence grows, or until they concern or disappoint us, in which case we usually sell. Gearing We have maintained gearing over the last six months and it has generally been 11% to 12% of NAV. We believe that macro economic conditions suggest slow, uneven recovery in the global economy but that there are attractive companies to invest in which can do well in this environment. We feel this warrants the continued use of gearing. Outlook We are encouraged by the performance of our portfolio over the period. Management of most of these portfolio companies are positive but cautious. Many run businesses which are exposed to higher growth parts of the world such as the Asia Pacific region and Brazil. Developed markets are more difficult to assess, with recent data out of the US rather mixed and generally less positive than we had hoped for. Europe looks set for an extended period of low growth, but we are encouraged that the coalition government in the UK is starting to tackle the large budget deficit. We believe that a carefully chosen portfolio of smaller companies has the potential to continue to outperform larger companies. Mike Prentis BlackRock Investment Management (UK) Limited 13 October 2010 Investment exposure as at 31 August 2010 Number of % of investments Portfolio <Â£1m 84 21.2 Â£1m to Â£2m 51 30.4 Â£2m to Â£3m 25 26.3 Â£3m to Â£4m 5 7.1 Â£4m to Â£5m 4 7.7 Â£5m to Â£6m 2 4.6 Â£6m to Â£7m 1 2.7 Market capitalisation as at 31 August 2010 % of Portfolio < Â£100m 18.0 Â£100m to Â£400m 46.0 Â£400m to Â£1bn 27.0 >Â£1bn 9.0 Twenty Largest Holdings (in alphabetical order)as at 31 August 2010 Company Business activity Abcam Production and distribution of research grade antibodies and associated products Alterian Development and sale of software to improve customer communication and marketing Aveva Group Development and marketing of engineering computer software Brewin Dolphin Fund management and stockbroking Holdings City of London Management of investment funds primarily Investment Group invested in emerging markets Domino Printing Manufacture of inkjet and laser commercial Sciences printers Eastern Platinum Exploration, development and production of platinum group metals Encore Oil Exploration and production of oil and gas primarily in the UK Continental Shelf Fidessa group Development and marketing of financial trading and connectivity software Gulfsands Petroleum Exploration and production of oil in Syria and Iraq Hargreaves Services Mining, importing, processing and supply of coal and related products Hutchison China Development and supply of traditional Chinese Meditech medicines to the Chinese market ITE Group Organisation of trade exhibitions in Russia and other FSU countries Pace Design and sale of digital set top boxes Rathbone Brothers Private client fund management Renishaw Design and manufacture of instruments used for calibration purposes Rotork Engineering, manufacturing and design of valve actuators Spirax-Sarco Design and manufacture of steam management Engineering systems Victrex Manufacture and supply of PEEK thermoplastic products Western Coal Production of coking and thermal coal in North America and the United Kingdom Distribution of investments as at 31 August 2010 Analysis of portfolio % Oil & Gas Producers 10.0 Oil Equipment, Services & Distribution 0.5 Chemicals 2.5 Industrial Metals 1.5 Mining 8.7 Construction & Materials 1.4 Aerospace & Defence 1.2 General Industrials 0.5 Electronic & Electrical Equipment 7.4 Industrial Engineering 8.0 Industrial Transportation 0.4 Support Services 6.5 Beverages 2.2 Household Goods & Home Construction 1.2 Health Care Equipment & Services 2.5 Pharmaceuticals & Biotechnology 3.2 Food & Drug Retailers 0.6 General Retailers 3.7 Media 5.6 Travel & Leisure 1.3 Fixed-Line Telecommunications 1.1 Electricity 0.7 Non life Insurance 1.2 Real Estate Investment & Services 2.8 Real Estate Investment Trusts 1.9 Financial Services 7.9 Other Financials 0.2 Software & Computer Services 10.9 Technology Hardware & Equipment 4.4 INCOME STATEMENT for the six months ended 31 August 2010 Revenue Â£'000 Capital Â£'000 Total Â£'000 Six months Six months Year Six months Six months Year Six months Six months Year ended ended ended ended ended ended ended ended ended 31.08.10 31.08.09 28.02.10 31.08.10 31.08.09 28.02.10 31.08.10 31.08.09 28.02.10 (unaudited) (unaudited) (audited) (unaudited) (unaudited) (audited) (unaudited) (unaudited) (audited) Gains on investments held at fair value through profit or loss - - - 26,255 52,809 74,267 26,255 52,809 74,267 Income from investments held at fair value through profit or loss (note 2) 2,748 2,346 4,208 - - - 2,748 2,346 4,208 Other income (note 2) 233 20 66 - - - 233 20 66 Investment management and performance fees (note 3) (144) (111) (239) (958) (333) (1,121) (1,102) (444) (1,360) Write back of prior years' VAT (note 3) - (12) 176 - - 526 - (12) 702 Other operating expenses (159) (145) (316) - - - (159) (145) (316) ----- ----- ----- ------ ------ ------ ------ ------ ------ Net return before finance costs and taxation 2,678 2,098 3,895 25,297 52,476 73,672 27,975 54,574 77,567 Finance costs (166) (152) (308) (497) (454) (920) (663) (606) (1,228) ----- ----- ----- ------ ------ ------ ------ ------ ------ Return on ordinary activities before taxation 2,512 1,946 3,587 24,800 52,022 72,752 27,312 53,968 76,339 Taxation on ordinary activities (14) (15) (15) - - - (14) (15) (15) ----- ----- ----- ------ ------ ------ ------ ------ ------ Return on ordinary activities after taxation 2,498 1,931 3,572 24,800 52,022 72,752 27,298 53,953 76,324 ===== ===== ===== ====== ======= ======= ======= ======= ======= Return per ordinary share (note 4) 5.22p 4.00p 7.41p 51.79p 107.80p 150.92p 57.01p 111.80p 158.33p ===== ===== ===== ====== ======= ======= ======= ======= ======= The total column of this statement represents the Income Statement of the Company. The supplementary revenue and capital columns are both prepared under guidance published by the Association of Investment Companies. The Company has no recognised gains or losses other than those disclosed in the Income Statement and the Reconciliation of Movements in Shareholders' Funds. All items in the above statement derive from continuing operations. No operations were acquired or discontinued during the period. RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS for the six months ended 31 August 2010 Share Capital Share premium redemption Capital Revenue capital account reserve reserves reserve Total Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 For the six months ended 31 August 2010 (unaudited) At 28 February 2010 12,498 38,952 1,982 121,791 7,044 182,267 Return for the period - - - 24,800 2,498 27,298 Dividends paid (a) - - - - (1,963) (1,963) ------ ------ ----- ------- ----- ------- At 31 August 2010 12,498 38,952 1,982 146,591 7,579 207,602 ------ ------ ----- ------- ----- ------- For the six months ended 31 August 2009 (unaudited) At 28 February 2009 12,498 38,952 1,982 50,566 6,267 110,265 Return for the period - - - 52,022 1,931 53,953 Shares purchased and held in treasury - - - (607) - (607) Dividends paid (b) - - - - (1,831) (1,831) ------ ------ ----- ------- ----- ------- At 31 August 2009 12,498 38,952 1,982 101,981 6,367 161,780 ------ ------ ----- ------- ----- ------- For the year ended 28 February 2010 (audited) At 28 February 2009 12,498 38,952 1,982 50,566 6,267 110,265 Return for the year - - - 72,752 3,572 76,324 Shares purchased and held in treasury - - - (1,527) - (1,527) Dividends paid (c) - - - - (2,795) (2,795) ------ ------ ----- ------- ----- ------- At 28 February 2010 12,498 38,952 1,982 121,791 7,044 182,267 ------ ------ ----- ------- ----- ------- (a) Final dividend of 3.60p per share and special dividend of 0.50p per share for the year ended 28 February 2010, declared on 22 April 2010 and paid on 22 June 2010. (b) Final dividend of 3.10p per share and special dividend of 0.70p per share for the year ended 28 February 2009, declared on 22 April 2009 and paid on 24 June 2009. (c) Final dividend of 3.10p per share and special dividend of 0.70p per share for the year ended 28 February 2009, declared on 22 April 2009 and paid on 24 June 2009 and interim dividend of 2.00p per share for the six months ended 31 August 2009, declared on 7 October 2009 and paid on 2 November 2009. BALANCE SHEET as at 31 August 2010 31 August 31 August 28 February 2010 2009 2010 Â£'000 Â£'000 Â£'000 Notes (unaudited) (unaudited) (audited) Fixed assets Investments held at fair value through profit or loss 230,519 177,108 203,355 ------- ------- ------- Current assets Debtors 2,943 3,657 1,064 ------- ------- ------- 2,943 3,657 1,064 Creditors - amounts falling due within one year Bank overdraft (8,020) (1,695) (6,116) Other creditors (3,013) (2,478) (1,216) ------- ------- ------- Net current liabilities (8,090) (516) (6,268) ------- ------- ------- Total assets less current liabilities 222,429 176,592 197,087 Creditors - amounts falling due after more than one year (14,827) (14,812) (14,820) ------- ------- ------- Net assets 207,602 161,780 182,267 ======= ======= ======= Capital and reserves Share capital 6 12,498 12,498 12,498 Share premium 38,952 38,952 38,952 account Capital redemption 1,982 1,982 1,982 reserve Capital reserves 146,591 101,981 121,791 Revenue reserve 7,579 6,367 7,044 ------- ------- ------- Total equity shareholders' funds 4 207,602 161,780 182,267 ======= ======= ======= Net asset value per ordinary share 4 433.59p 335.68p 380.68p ======= ======= ======= CASH FLOW STATEMENT for the six months ended 31 August 2010 Six months Six months Year ended ended ended 31 August 31 August 28 February 2010 2009 2010 Â£'000 Â£'000 Â£'000 Note (unaudited) (unaudited) (audited) Net cash inflow from operating activities 2,220 2,300 3,927 Servicing of finance (648) (591) (1,214) Tax paid (23) - (39) Capital expenditure and financial investment Purchases of investments (41,936) (48,414) (104,882) Proceeds from sales of investments 40,446 46,178 99,144 ------- ------- ------- Net cash outflow from capital expenditure and financial investment (1,490) (2,236) (5,738) ------- ------- ------- Equity dividends paid (1,963) (1,831) (2,795) ------- ------- ------- Net cash outflow before financing (1,904) (2,358) (5,859) ------- ------- ------- Financing Purchase of ordinary shares - (607) (1,527) ------- ------- ------- Net cash outflow from financing - (607) (1,527) ------- ------- ------- Decrease in cash in the period 7 (1,904) (2,965) (7,386) ======= ======= ======= RECONCILIATION OF NET RETURN BEFORE FINANCE COSTS AND TAXATION TO NET CASH FLOW FROM OPERATING ACTIVITIES Six months Six months Year ended ended ended 31 August 31 August 28 February 2010 2009 2010 Â£'000 Â£'000 Â£'000 (unaudited) (unaudited) (audited) Net gain before finance costs and taxation 27,975 54,574 77,567 Gains on investments held at fair value through profit or loss (26,255) (52,809) (74,267) (Increase)/decrease in accrued income (74) (9) 65 Decrease in debtors - 629 629 Increase/(decrease) in creditors 574 (58) (67) Income tax suffered - (8) - Overseas withholding tax suffered - (19) - ----- ------- ------- Net cash inflow from operating activities 2,220 2,300 3,927 ----- ------- ------- Notes to the Financial Statements 1. Principal activity and basis of preparation The Company conducts its business so as to qualify as an investment trust company within the meaning of section 1158 of the Corporation Tax Act 2010. The half yearly financial statements have been prepared using the same accounting policies set out in the Company's financial statements for the year ended 28 February 2010. Under FRS 26 "Financial Instruments: Recognition and Measurement" the Company has designated its assets and liabilities as being measured at "fair value through profit or loss". The fair value of fixed asset investments is deemed to be the bid market value at the close of business on the balance sheet date. The taxation charge has been calculated by applying an estimate of the annual effective tax rate to any profit for the period. The financial statements have been prepared in accordance with applicable Accounting Standards, pronouncements on half yearly reporting issued by the Accounting Standards Board and the Statement of Recommended Practice "Financial Statements of Investment Trust Companies" ("SORP") revised in January 2009. 2. Income Six months Six months Year ended ended ended 31 August 31 August 28 February 2010 2009 2010 Â£'000 Â£'000 Â£'000 (unaudited) (unaudited) (audited) Investment income: UK listed dividends 2,461 2,086 3,817 Overseas listed dividends 287 260 391 ----- ----- ----- 2,748 2,346 4,208 ----- ----- ----- Other income: Deposit interest - 1 1 Interest on VAT refunds 227 - 34 Underwriting commission 6 19 31 ----- ----- ----- 233 20 66 ----- ----- ----- Total 2,981 2,366 4,274 ----- ----- ----- 3. Investment management and performance fees Six months ended Six months ended Year ended 31 August 2010 31 August 2009 28 February 2010 (unaudited) (unaudited) (audited) Revenue Capital Total Revenue Capital Total Revenue Capital Total Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Investment management fee 144 432 576 111 333 444 239 717 956 Performance fee - 526 526 - - - - 404 404 --- --- ----- --- --- --- --- ----- ----- 144 958 1,102 111 333 444 239 1,121 1,360 Write back of prior years' VAT - - - 12 - 12 (176) (526) (702) --- --- ----- --- --- --- --- ----- ----- 144 958 1,102 123 333 456 63 595 658 --- --- ----- --- --- --- --- ----- ----- The investment management fee is calculated based on 0.65% in respect of the first Â£50 million of the Company's total assets less current liabilities, reducing to 0.5% thereafter. A performance fee is payable at the rate of 10% of the annualised excess performance in the two previous financial years, applied to the average of the total assets less current liabilities of the Company. The fee is payable annually in April and is capped at 0.25% of the average of the total assets less current liabilities. Performance fees have been wholly allocated to capital reserves as the performance has been predominantly generated through capital returns of the investment portfolio. A performance fee of Â£526,000 has been accrued for the six month period to 31 August 2010 (six months ended 31 August 2009: nil and the year ended 28 February 2010: Â£404,000). 4. Returns and net asset value per ordinary share Revenue and capital returns per share are shown below and have been calculated using the following: Six months Six months Year ended ended ended 31 August 31 August 28 February 2010 2009 2010 Â£'000 Â£'000 Â£'000 (unaudited) (unaudited) (audited) Revenue return (Â£'000) 2,498 1,931 3,572 Capital return (Â£'000) 24,800 52,022 72,752 ------- ------- ------- Total return (Â£'000) 27,298 53,953 76,324 ------- ------- ------- Equity shareholders' funds (Â£'000) 207,602 161,780 182,267 ------- ------- ------- The weighted average number of ordinary shares in issue on which the return per ordinary share was calculated, was: 47,879,792 48,258,379 48,207,135 The actual number of ordinary shares in issue at the end of each period on which the net asset value per ordinary share was calculated, was: 47,879,792 48,194,792 47,879,792 Revenue return per ordinary share 5.22p 4.00p 7.41p Capital return per ordinary share 51.79p 107.80p 150.92p ---------- ---------- ---------- Total return per ordinary share 57.01p 111.80p 158.33p ---------- ---------- ---------- Net asset value per ordinary share (debt at par value) 433.59p 335.68p 380.68p ---------- ---------- ---------- Net asset value per ordinary share (debt at fair value) 429.34p 331.43p 376.42p ---------- ---------- ---------- 5. Dividend The Board has declared an interim dividend of 2.20p per share (2009: 2.00p per share) payable on 26 November 2010 to shareholders on the register as at 22 October 2010. The total cost of this dividend, based on 47,879,792 shares in issue at 13 October 2010, is Â£1,053,000 (2009: Â£964,000). 6. Share capital and shares held in treasury Ordinary Treasury Nominal shares shares Total value number number shares Â£'000 Allotted, issued and fully paid share capital comprised: Ordinary shares of 25p each ---------- --------- ---------- ------ At 1 March 2010 and 31 August 2010 47,879,792 2,113,731 49,993,523 12,498 ---------- --------- ---------- ------ 7. Movement in net debt Six months Six months Year ended ended ended 31 August 31 August 28 February 2010 2009 2010 Â£'000 Â£'000 Â£'000 (unaudited) (unaudited) (audited) Reconciliation of net cash flow to movement in net debt Decrease in cash in the period (1,904) (2,965) (7,386) Foreign exchange movements - (1) (1) Amortised debenture stock issue expenses (7) (6) (14) ------- ------- ------ Movement in net debt in the period (1,911) (2,972) (7,401) Opening net debt (20,936) (13,535) (13,535) ------- ------- ------ Closing net debt (22,847) (16,507) (20,936) ------- ------- ------ 8. Publication of non statutory accounts The financial information contained in this half yearly financial report does not constitute statutory accounts as defined in the Companies Act 2006. The financial information for the six months ended 31 August 2010 and 31 August 2009 has not been audited. The information for the year ended 28 February 2010 has been extracted from the latest published audited financial statements which have been filed with the Registrar of Companies. The report of the auditors on those accounts contained no qualification or statement under sections 498(2) or 498(3) of the Companies Act 2006. A copy of the half yearly financial report will be available on the BlackRock Investment Management (UK) Limited website at www.blackrock.com/its. 9. Related party disclosure The fee due to the Investment Manager for the six months ended 31 August 2010 amounted to Â£1,102,000 (six months ended 31 August 2009: Â£444,000 and year ended 28 February 2010: Â£1,360,000). At the period end, Â£1,225,000 was outstanding in respect of investment management and performance fees (six months ended 31 August 2009: Â£666,000 and year ended 28 February 2010: Â£662,000). 10. Annual results The Board expects to announce the annual results for the year ended 28 February 2011, in late April 2011. Copies of the annual results announcement can be obtained from the Secretary on 020 7743 3000. The annual report should be available by the beginning of May 2011, with the Annual General Meeting being held in June 2011. For further information please contact: Jonathan Ruck Keene, Managing Director Investment Companies - 0207 743 2178 Mike Prentis, Fund Manager - 0207 743 2312 Emma Phillips, Media & Communications - 0207 743 2922 BlackRock Investment Management (UK) Limited or William Clutterbuck - 0207 379 5151 The Maitland Consultancy END

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