BlackRock Smaller Companies Trust (BRSC) targets long-term capital growth through investment in smaller UK-quoted companies. The maximum permitted exposure to Aim was recently increased from 40 to 50 per cent. Its report and accounts for the year to 28 February 2017 show shareholders’ funds of £597 million.
Mike Prentis has been manager since August 2002. He employs a combination of top-down and bottom-up analysis. He and his team look for significant upside from well-run, cash-generative, dividend-paying growth companies with strong balance sheets and good share price momentum. Only two holdings exceed 2 per cent of assets.
Prentis often favours firms that are smaller than the average for BRSC’s benchmark, the Numis Smaller Companies plus Aim index. At the end of February, close to half the portfolio was in companies capitalised at less than £400 million. Exposure to the UK economy was reduced in the second half of 2016 by cutting holdings in retailers, challenger banks, wealth managers and software firms. Gearing averaged 7.8 per cent over the year, contributing 2 per cent to relative outperformance. Ongoing charges were 1 per cent. There is no discount control target.
Last year’s NAV total returns of 27.9 per cent were well ahead of the 23.6 per cent total return for the trust’s benchmark. The dividend was raised 20 per cent to 21p, and the share price total return was 25.4 per cent. BRSC has outperformed its benchmark and raised its dividend every year for 14 years. Over that period its NAV has grown nearly tenfold.
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