BlackRock Smaller Companies outperforms for 14th year on the spin - annual report summary

Our annual report summary series delivers a condensed analysis of a selected investment trust's annual report, including details of the trust's aim, investment style, portfolio focuses, gearing policy, charges and performance.

BlackRock Smaller Companies Trust

BlackRock Smaller Companies Trust (BRSC) targets long-term capital growth through investment in smaller UK-quoted companies. The maximum permitted exposure to the Alternative Investment Market 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 companies that are smaller than the average for BRSC’s benchmark, the Numis Smaller Companies plus Aim (ex Investment Companies) index. At end-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 companies.

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 10-fold .

You can read the full report on the BlackRock website.

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