BlackRock Smaller Companies Trust Plc – Final Results

BlackRock Smaller Companies Trust plc

(Legal Entity Identifier: 549300MS535KC2WH4082)

Information disclosed in accordance with Article 5 Transparency Directive and
DTR 4.1

Annual Report and Financial Statements 28 February 2026

Performance record

[][][][][][][][]
As at As at
28 February 28 February
2026 2025

Net asset value per ordinary share  1,516.70  1,403.45
(debt at par value) (pence)[1,4]
Net asset value per ordinary share  1,579.08  1,463.44
(debt at fair value) (pence)[1,4]
Ordinary share price (pence)[1]  1,402.00  1,270.00
Deutsche Numis Smaller Companies  19,578.62  16,108.27
plus AIM (excluding Investment
Companies) Index [2]
======== ========

Assets
Total assets less current  673,413  684,322
liabilities (£’000)
Equity shareholders’ funds  603,842  614,779
(£’000)[3]
Ongoing charges ratio[4,5] 0.8% 0.8%
Dividend yield[4] 3.2% 3.5%
Gearing[4] 5.7% 13.3%
======== ========

[][][][]
For the For the
year year ended
ended 28 February
28 2025
February
2026
Performance (with dividends
reinvested)
Net asset value per ordinary 11.5% -0.6%
share (debt at par value)[2,4]
Net asset value per ordinary 11.2% 0.0%
share (debt at fair
value)[2,4]
Ordinary share price[2,4] 14.2% -1.4%
Deutsche Numis Smaller 21.5% 6.2%
Companies plus AIM (excluding
Investment Companies)
Index[2,4]
======== ========

For the For the Change
year year ended %
ended 28 February
28 2025
February
2026
Revenue and dividends
Revenue return per ordinary  43.77p  42.53p +2.9
share
First interim dividend per  16.00p  15.50p +3.2
ordinary share
Second interim dividend per  28.50p 28.50p –
ordinary share
——– ————— —————
——-
Total dividends payable and  44.50p  44.00p +1.1
paid
======== ======== ========

[1]  Without dividends reinvested.
[2]  Total return basis with dividends reinvested.
[3]  The change in equity shareholders’ funds represents the portfolio
movements, shares repurchased into treasury and dividends paid during the year.
[4]  Alternative Performance Measure, see Glossary contained within the Annual
Report and Financial Statements. Full details setting out how calculations with
dividends reinvested are performed are set out in the Glossary contained within
the Annual Report and Financial Statements.
[5]  Ongoing charges ratio calculated as a percentage of average daily net
assets and using the management fee and all other operating expenses, excluding
finance costs, direct transaction costs, custody transaction charges, VAT
recovered, taxation, prior year expenses written back and certain non-recurring
items in accordance with AIC guidelines.

Chairman’s Statement

Every year is unique in various ways but this past year seems to have stretched
that art to new highs as we have confronted global and national geopolitical
disarray with its inevitable impact on stock markets and underlying investor
thinking. Economic cloudiness has added to this sense of confusion, enhanced by
a Government wedged into a set of policy options that grow narrower with each
day’s new crisis. As our portfolio manager says in his report, this is not a
very easy or comfortable place from which to make predictions for the future or
even present a cogent analysis of the recent past. What I do have however, is
the opportunity to usher in a new era of opportunity for investors and that is a
far more positive place to start.

I want to welcome both past investors and new ones who have so recently joined
us as a result of the combination of BlackRock Smaller Companies Trust plc
(BRSC) with BlackRock Throgmorton Trust plc (THRG). This may not have the same
impact as war in the Middle East but it does reflect the often dramatic changes
that have been taking place in the investment trust sector over the past two
years. Whilst not all of those changes are good, it is fair to say that this
combination will help us deliver better shareholder value as well as the
prospect of improving returns and lower management costs. We are delighted to
take up the challenge to deliver on these enhanced opportunities and look
forward to engaging with our enlarged shareholder group as we work our way
toward achieving the benefits that our new combination can bring. This report
will focus most on last year’s results but it’s important to take some time to
discuss our merger, its rationale and benefits so that everyone can share a
common starting point as we look ahead in these uncertain times.

Combination with BlackRock Throgmorton Trust plc

The combination with THRG effected by way of a scheme of reconstruction of THRG,
was completed on 16 April 2026, following shareholders of both companies voting
overwhelmingly in favour of the combination. This combination brings together
two investment trust companies with similar objectives that have both been in
existence for over sixty years. While each Trust has historically taken a
somewhat different approach toward achieving those investment objectives, the
Boards of both companies felt that a combination now would deliver better long
-term results for all our shareholders. Key among these positive changes has
been the chance to provide shareholders with the substantially increased
economies of scale from our enlarged asset base. These benefits also include
lower management charges from Blackrock along with an enhanced profile, greater
liquidity in the Company’s shares and operating cost efficiencies.

The transaction also brings together the best of BlackRock’s Emerging Companies
team, with Dan Whitestone joining Roland Arnold as co-manager on the portfolio,
along with the resources of the entire team to identify exciting new investment
ideas in the UK and abroad. This merger has been hard work, requiring a large
and extended commitment of time and effort by the Blackrock team, our advisors
and both Boards. On behalf of the BRSC Board, I would like to thank everyone
involved for their energy, support and diligence in completing the Company’s
combination with THRG. Further details about the combination can be found in
note 21 (contained within the Annual Report and Financial Statements), which
details all the post balance sheet date events.

The financial information in this annual report is for the year ending 28
February 2026 and therefore excludes any impact from the combination with THRG.
At the time of writing (at 12 May 2026), the net asset value of your enlarged
Company is £886 million.

Market overview

The global macroeconomic landscape continues to be marked by significant
volatility, strong inflationary pressures, shifting monetary policies, and
geopolitical tensions shaping economic outcomes. Navigating a clear pathway
through these evolving global conditions remains challenging for your Company as
it has for many others but it is worth noting that many of the UK smaller
companies in our portfolio have continued to produce good results despite the
challenging circumstances, underscoring their ability to manage through
complicated periods and produce good financial results for shareholders. More
information on individual stocks is given in the Investment Managers report
below but it’s important to underscore that our portfolio companies have shown
resilience and management effectiveness despite an uncertain environment.

While starting only at the end of our financial year, events in the Middle East
– especially disruptions at the Strait of Hormuz – have intensified and expanded
uncertainty over a range of issues, especially energy pricing. The supply
bottlenecks through the Strait of Hormuz have raised concerns around the world
but most of all in Europe. Dramatic price fluctuations have been a daily
challenge but availability of supply is an even more fundamental issue with
airlines already cutting marginal flights to reduce fuel use. All of this is
complicating the efforts of central banks to balance inflation and growth,
contributing to instability in financial markets across the board. The UK has
been no exception, with heightened risks of supply chain disruptions,
inflationary spikes and also challenges in international trade and investment.
This uncertainty has once again driven significant UK market outflows as
investors take risk off the table, depressing share prices indiscriminately,
regardless of stock fundamentals and leaving valuations at depressed levels.
That has impacted our investment results as well.

Performance

In the year under review, your Company’s net asset value (NAV) per share rose by
11.2% on a total return basis with dividends re-invested (debt at fair value),
lagging well behind our benchmark index return of 21.5%. Over the same period,
our share price rose by 10.4%. During the same period, the FTSE AIM All-Share
Index rose by 27.3%, the FTSE 250 Index rose by 21.0% and the FTSE 100 Index
rose by 28.1%. The disparity between different index returns, while not
altogether surprising, also shows some relevant changes in investor sentiment
toward large versus smaller cap companies during a period of ongoing market
uncertainty over future prospects. Those changes in investor attitude reflect
some important trends that we have explored extensively and which have
influenced some of the tactical and strategic shifts in our portfolio for the
future.

More detail on significant contributors to and detractors from performance
during the year are given in the Investment Manager’s Report below.

The Company’s longer-term performance is set out below. In addition, the chart
below illustrates how long-term investors have had an opportunity to build up an
attractive annual income from an investment in BRSC over time. Even if the
initial dividend yield at the point of purchase may have been unremarkable, the
strong underlying growth in dividends over the years has resulted in a
competitive yield on cost when compared with equity income funds in general. To
illustrate this investment and income success, the chart below shows that £1,000
invested in the Company on 28 February 2006 would have increased in value by
478% in NAV terms to 28 February 2026, whereas £1,000 invested in the UK open
-ended income sector median would have increased by just 254%. The chart also
demonstrates that while the yield on the Company’s shares was much lower at the
beginning of the period, over time the Company’s dividend has grown at a much
faster rate than open-ended UK income fund competitors.

[][][]
Performance to 28 February 2026 1 Year 3 Years 5 Years 10 Years 15 Years
change change change change change
% % % % %

NAV per share[1,2,3] 11.2 7.2 0.5 99.9 242.7
Benchmark[1,3,4] 21.5 21.5 14.0 86.9 150.3
Share price[1,3] 14.2 11.7 -5.2 107.1 257.8

[1]  Percentages in Sterling terms with dividends reinvested.
[2]  NAV with debt at fair value.
[3]  Alternative Performance Measure, see Glossary contained within the Annual
Report and Financial Statements.
[4]  Benchmark Index (the Deutsche Numis Smaller Companies plus AIM (excluding
Investment Companies) Index).

Returns and dividends

The Company’s revenue return per share for the year increased by 2.9% to 43.77p
per share (compared to 42.53p revenue return per share for the year to 28
February 2025). The increase was mainly attributable to an increase in special
dividends, which amounted to 3.99p per share (28 February 2025: 1.71p per
share). Regular dividend income from portfolio companies decreased by 18.0%
compared to 2025 levels, reflective of the continuing trend in the UK equity
market to prioritise share buybacks over dividends which is having an impact on
overall dividend growth. Changing Government policies have often influenced
these choices in the past and future trends are hard to predict. The fact that
the Government wants to encourage individual investors may well lead to stronger
dividend growth ahead and it is an area we monitor closely.

The Board is mindful of the importance of our dividend to shareholders. The
Board is also cognisant of the benefits of the Company’s investment trust
structure which enables it to retain up to 15% of total revenue each year to
build up reserves which may be carried forward and used to pay dividends during
leaner times. The Company has substantial distributable reserves (£537.4 million
as at 28 February 2026, including revenue reserves of £18.0 million). To put
this into context, the current level of annual dividend distribution based on
dividends declared in the last twelve months up to the date of this report
amounted to £17.8 million.

In the ordinary course of events, the Company would pay a final dividend in
respect of the financial year ending 28 February 2026, subject to approval by
Shareholders at the Company’s 2026 Annual General Meeting, to be paid in June
2026.

However, given that THRG paid a final dividend in respect of its financial year
ended 30 November 2025 as well as a pre-liquidation dividend ahead of
implementation of the Combination, it would have been inequitable if THRG
Shareholders rolling over into BRSC had received the Company’s final dividend in
addition to this. Accordingly, rather than declaring a final dividend as part of
these annual results, the Company has declared a second interim dividend on 31
March 2026 of 28.50p per share, representing the amount that would otherwise
have been declared as a final dividend paid to those Shareholders who were on
the Register as at 10 April 2026. Total dividends payable and paid for the year
ended 28 February 2026 of 44.50p per share reflects a 1.1% increase over the
total dividends paid for 2025 of 44.00p per share.

Dividend policy

In October 2025, the Company announced a revised dividend policy. This revised
policy provides that, with effect from 1 March 2026, the Company will make
quarterly dividend payments instead of our previous bi-annual dividend payments.
In all other respects the Company’s dividend policy will remain unchanged, and
the Board will continue to focus on ensuring the sustainability of dividends and
their future growth through investment in companies with strong balance sheets,
solid management and sustainable business growth models. Under the revised
policy, the Board’s intention is to make three dividend payments in September,
December and March each year, each equal to a quarter of the previous year’s
total dividend. We will then declare a final dividend for the full year (payable
in June) reflecting the final amount required to ensure an appropriate level of
full year dividend.

The first dividend to be paid to all shareholders following the Combination will
be the first interim dividend for the current financial year (ending 28 February
2027), to be paid in September 2026. It is intended that this first interim
dividend will be equal to 11.125p per share, equal to a quarter of the total
dividends paid by BRSC in respect of the financial year ending 28 February 2026.
While the Company’s investment objective is centered around capital growth, the
Board remains mindful of the importance of yield to shareholders and to
potential investors. As a point of reference, the yield on the shares as at the
end of the Company’s last full financial year ended 28 February 2026 (based upon
total dividends of 44.5 pence per share and a share price of 1,402 pence at the
end of the financial year) was 3.2%. The Company has increased its annual
dividend every year since 2003. The annualised increase in dividends paid across
those 23 years equates to 10.7% and your Company has received the accolade of
`AIC Dividend Hero’ for its consistent growth in dividends over that period.

Management of share rating

The Board monitors the BRSC share rating closely. We recognise the importance to
shareholders that the price of the Company’s shares do not trade at a
significant discount to the underlying NAV over sustained periods. Therefore,
where deemed to be in shareholders’ long-term interests, the Board will exercise
its powers to issue shares or buy back shares with the objective of ensuring
that an excessive premium or discount does not arise. During the past financial
year, we faced persistent market volatility with discounts across the closed end
funds sector becoming persistently wide. As a result of this sector-wide
pressure, BRSC shares traded at a discount to NAV ranging from 10% to 13.5% over
the year.

To address the challenge of persistent discounts the Board undertook an active
buyback programme during the year, with a total of 3,992,000 ordinary shares
repurchased at a total cost of £52.1 million to be held in treasury. All shares
were bought back at a significant discount to NAV, delivering an uplift to the
NAV per share of 1.2% for continuing shareholders for the year under review. The
Board believes that its actions helped to minimise discount volatility. The
Company’s shares traded at an average discount to NAV (with debt at fair value)
over the full year of 12.3%, compared to an average discount of 11.0% for the
year to 28 February 2025. To put this in context, the average discount for
companies in the AIC UK Smaller Companies sector for the same period was 11.4%.
Since our buyback programme began 3 years ago on 3 March 2023, we have acquired
a total of 9,062,000 ordinary shares repurchased at a cost of £119.9 million. We
are committed to an ongoing discount control process and as outlined below,
together with improving performance, we look for a narrowing discount ahead. For
context, companies in the UK closed-end fund sector bought back a record £10.2
billion of shares in 2025.

Tender and discount control mechanism

While the Board regards the Company’s share rating at any particular time as
primarily a reflection of sentiment towards the sector alongside portfolio
performance, both in absolute terms and relative to the peer group, it
recognises that there are a number of other factors which can have a material
impact on driving demand for the Company’s shares. Consequently as part of the
Combination with THRG, the Board offered BRSC shareholders a tender opportunity
for up to 28% of our issued share capital. The results of the tender were
announced on 13 April 2026, with the tender oversubscribed and a total of
18,893,897 shares tendered (47.46% of the Company’s issued share capital).
Accordingly, the tender was scaled back, and 11,147,581 shares will be
repurchased in due course representing 28% of the Company’s issued share
capital. It is currently envisaged that realisation of the assets held in the
Tender Pool which has been established for the purposes of the Tender Offer will
be completed in or around the week commencing 29 June 2026, with the final
Tender Price and payment date to be announced by the Company shortly thereafter.

In addition to the tender offer, and as part of the Combination proposals, the
Board has introduced a number of features which are designed to enhance the
attraction of our Company in a number of important ways.

·     We have refreshed our investment proposition with additional flexibility
to diversify risk and enhance returns;

·     Negotiated a new highly competitive management fee structure leading to a
reduced estimated OCR for the ongoing vehicle;

·     Created a formal discount control mechanism with the introduction of a
triennial 100% performance-related conditional tender offer to be made available
to all Shareholders. The Company will offer shareholders the ability to tender
up to 100% of their shares at a 4% discount to NAV (less costs) if the Company’s
NAV per share underperforms its Benchmark, the Deutsche Numis Smaller Companies
plus AIM (excluding Investment Companies) Index, over the relevant performance
period. It is expected that the first such tender offer, were it to be
triggered, would be in 2029.

The Board believes that the introduction of these initiatives, coupled with a
continuation of our proactive share buyback policy, will make a sustained single
-digit discount achievable for the Company in normal market conditions.

Investment policy changes

As part of the Combination with THRG, the Board proposed a number of amendments
to the Company’s investment policy which were approved by shareholders at the
General Meeting on 30 March 2026. Under the revised investment policy, the
Investment Manager will continue to seek to achieve the Company’s investment
objective through investing predominantly in listed UK smaller companies, but
will have additional latitude to invest in small cap stocks outside of the
Benchmark Index and will be able to invest up to 15% of the Company’s gross
assets, at the time of acquisition, in global small cap stocks which are listed
overseas and which do not have a primary or secondary UK listing.

The rationale for this change, as well as responding to shareholder feedback,
was to provide additional flexibility for the Investment Manager to diversify
risk and deliver alpha at times when the UK small cap market was under stress,
while retaining a core UK small cap mandate. The additional exposure to global
small cap also mirrored the limit previously adopted by the THRG. More
information on the revised policy is set out in the Strategic Report below (and
contained within the Annual Report and Financial Statements).

Management fees

As part of the above Combination, the Board agreed revised management fee
arrangements with BlackRock, moving to charge a fee on net assets instead of
total assets less current liabilities and introducing a new tiered rate as
follows:

·     0.5% per annum on the first £500 million of the Company’s NAV;

·     0.475% per annum NAV between £500 million and £750 million; and

·     0.45% per annum on NAV in excess of £750 million.

The revised fee structure was implemented with effect from 16 April 2026. In
addition to the revised fee, BlackRock has agreed to waive the management fee
for six months with effect from 16 April 2026 as a contribution to the costs of
the transaction.

The new fee arrangements combined with the larger asset base post Combination
should result in a significant reduction in the Company’s operating charges
ratio, which is estimated to fall to 0.63% on an annualised basis (versus 0.8%
last year). The fee also represents the lowest fee in the AIC UK Smaller
Companies sector for trusts without a performance fee in place.

Board composition

Having just completed a long and complicated merger process it is important to
retain and integrate the corporate memory available to us in merging with THRG.
With that in mind I am delighted to welcome two new directors to the Board as
part of the combination with THRG. Angela Lane and Louise Nash were appointed as
non-executive Directors of the Company with effect from 16 April 2026, and will
stand for election at the Company’s Annual General Meeting on 17 June 2026. Both
Angela and Louise bring with them considerable corporate knowledge and financial
services expertise. Further details of their biographies can be found within the
Annual Report and Financial Statements.

Agreement with Saba

On 22 January 2025, the Company announced that it had entered into an agreement
with Saba Capital Management L.P. (Saba), pursuant to which Saba has given a
number of undertakings to the Company regarding its shareholding in the Company.
The full announcement can be viewed at the following link:
https://www.londonstockexchange.com/news-article/%20BRSC/agreement-with
-Saba/16863463. The agreement was to last until the earlier of the day following
the completion of the Company’s 2027 AGM or 31 August 2027 and does not limit
Saba’s ability to acquire or dispose of shares in the Company. As announced on
20 February 2026, the Board has subsequently agreed an extension of the period
of this standstill agreement to June 2030. No other terms have been amended.

Your Board believes that the extension of this agreement is in the long-term
interest of shareholders as we continue to invest for their future benefit.

Gearing and sources of finance

Gearing can play an important role in portfolio performance over time although
your Company continues to maintain a very conservative capital structure. The
Company has current borrowing facilities of long-term fixed rate funding in the
form of a £25 million senior unsecured fixed rate private placement notes issued
in May 2017 at a coupon of 2.74% with a 20 year maturity, £20 million senior
unsecured fixed rate private placement notes issued in December 2019 at a coupon
of 2.41% with a 25 year maturity and £25 million senior unsecured fixed rate
private placement notes issued in September 2021 at a coupon of 2.47% with a 25
year maturity. Shorter-term variable rate funding consists of an uncommitted
overdraft facility of £60 million with The Bank of New York Mellon
(International) Limited with interest charged at SONIA plus 100 basis points (of
which £262,000 was utilised at year end – additional information is set out in
note 13 contained within the Annual Report and Financial Statements).

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 the relevant borrowings.
Under normal operating conditions it is envisaged that gearing will be within a
range of 0%-15% of net assets. At the year end, the Company’s net gearing was
5.7% of net assets (2025: 13.3%), well within our target range.

Share sub-division

Since BlackRock was appointed as manager in December 2004, the market price of
the Company’s shares has increased from 204 pence to 1,402 pence (as at 28
February 2026). In order to assist the Company’s growing base of individual
investors, monthly savers and those who reinvest their dividends or are looking
to invest smaller amounts, the Board will implement a sub-division of the
Company’s shares on a 5 for 1 basis, effective once the tender has completed
(expected to be no later than July 2026). Following this sub-division, each
shareholder will hold five sub-divided shares for each existing share. Whilst
the sub-division will increase the number of ordinary shares the Company has in
issue, the Net Asset Value per share and market price immediately after the sub
-division will become one-fifth of their respective values immediately preceding
the sub-division and hence there will be no impact on the overall value of a
shareholder’s holding in the Company. The subdivided shares will carry the same
rights as the existing shares, including the same rights to participate in
dividends paid by the Company. The Board anticipates that this share sub
-division will also improve the liquidity in and marketability of the Company’s
ordinary shares, to the benefit of all shareholders.

Annual General Meeting

The Company’s AGM will be held in person at the offices of BlackRock at 12
Throgmorton Avenue, London EC2N 2DL on 17 June 2026 at 11.30 a.m. Details of the
business of the meeting are set out in the Notice of Annual General Meeting
contained within the Annual Report and Financial Statements. Shareholders are
also invited to join Directors for a hot buffet lunch after the formal business
of the meeting has concluded. Prior to the formal business of the meeting, our
Investment Manager will make a presentation to shareholders. This will be
followed by a question and answer session.

Shareholders who are unable to attend the meeting in person but who wish to view
the portfolio manager’s presentation can do so via a live webinar this year.
Details on how to register, together with access details, will be available
shortly on the Company’s website at: www.blackrock.com/uk/brsc or by contacting
the Company Secretary at [email protected]. It is not possible to speak or
vote via this medium and it is solely intended to provide shareholders with the
ability to watch the portfolio manager’s presentation. Additionally, if you are
unable to attend you can exercise your right to vote by proxy or appoint a proxy
to attend in your place. Details of how to do this are included on the AGM Proxy
Card provided to shareholders with the Annual Report. If you hold your shares
through a platform or a nominee company, you will need to contact them directly
and ask them to appoint you as a proxy in respect of your shares in order to
attend, speak and vote at the AGM. Further information on the business of this
year’s AGM can be found in the Notice of the AGM contained within the Annual
Report and Financial Statements.

Outlook

Since the financial year end, market volatility has increased as investors
grapple with the implications of a messy war in the Middle East and its
unpredictable side effects. During this period, the Company’s NAV (as at 12 May
2026) has decreased by 7.5%, against a decrease in the benchmark of 5.6%, and
the share price has fallen by 8.7%.

Against this turbulent backdrop, your Board believes that through the
combination with THRG it has positioned your Company well to weather the
challenges across equity markets, with a larger asset base, lower fees and
operating charges, an enhanced portfolio management team and with additional
flexibility under a refreshed investment policy. The Company’s portfolio remains
weighted towards companies with well capitalised balance sheets and
entrepreneurial management teams that are able to rapidly adapt their businesses
to the shifting market dynamics and have been successfully demonstrating these
skills through the challenging environment we have faced. UK assets are
inexpensive by global standards and we have companies with real growth and
exciting long-term prospects. As such we believe that the enlarged BRSC is well
-positioned and prepared to take advantage of the investment opportunities that
lie ahead despite the uncertain market conditions. If shareholders would like to
contact me, please write to BlackRock Smaller Companies Trust plc, Dundas House,
20 Brandon Street, Edinburgh, EH3 5PP marked for the attention of the Chairman.

Ronald Gould
Chairman
15 May 2026

Investment Manager’s Report

Market review

There has been a pattern over the last few years, a recurring theme, not related
to one specific event or notion. I’m not referring to inflation or politics
although these are contributing factors and recognisable symptoms. What I’m
referring to is the unnerving cycle of destabilising events that happen almost
every year just as I’m sitting down to write this report. Since the start of
this decade, we have had COVID-19 (lockdown March 2020), Ukraine invasion
(February 2022), the failure of Silicon Valley Bank (March 2023), Tariff
“Liberation Day” (April 2025), and now the US strikes on Iran (February 2026).
These events are inflationary, disruptive to supply chains, drive consumer and
corporate behaviour, upset geopolitical relationships, and are often binary in
nature with the potential conclusions requiring very different portfolios. They
also make it very difficult to write an annual letter.

Outside of these specific events the last twelve months have proven
frustratingly challenging. Underlying company fundamentals have remained
resilient, and whilst the portfolio has seen some disappointments, for the most
part management teams have delivered against expectations. Unfortunately,
valuations and therefore share prices have struggled to reflect this progress.
This disconnect has been driven by the on-going structural and cyclical
headwinds; inflation, tight government finances, poor governmental signalling,
the uncertain and to some extent unknowable impact of artificial intelligence
(AI), all of which ultimately lead to the main culprit of outflows. The result
is a market where returns have been driven by a narrow set of companies, and
active management has struggled to keep pace with the market.

Performance review

The second half of the financial year saw the portfolio return 8.1% vs a
benchmark of 10.6%. From a market perspective, the period has been characterised
by a number of powerful and, at times, competing forces. Global equity markets
have remained heavily influenced by the dominance of AI-related narratives, with
capital concentrated in a relatively small group of perceived “winners”, whilst
any stock that finds itself in the AI “loser” crosshairs has seen significant
weakness. The “shoot first, ask questions later” mentality has been
indiscriminate and painful, upending the narrative on business models that until
recently were perceived as having significant structural economic moats.
Meanwhile, the negative narrative has spread into other markets, most recently
private credit where fears of large-scale defaults from exposed companies have
catalysed investor redemption requests.

When I look at the list of stocks that have detracted from performance in the
second half, there is a common thread that runs across the bulk of them. These
are businesses that have not disappointed, in fact in many cases they have not
only delivered on expectations but beaten them. The single biggest detractor in
the period was payments business Boku, where the market reaction to a company
that has delivered on targets, won significant new customers, and continues to
demonstrate the validity of the business model has been a near 20% fall in the
share price. Similarly, Tatton Asset Management was rewarded with a 12% share
price fall in the period despite seeing some analysts upgrade earnings by high
single digits. The list goes on; XPS Pensions has de-rated despite continued
upgrades, IntegraFin has been rewarded for unblemished delivery in 2025 with the
lowest rating since the 2018 IPO, as has insolvency firm FRP Advisory. I cannot
remember a period where the underperformers felt so undeserving. That is not to
say all has gone to plan. Paypoint revealed a period of soft trading that saw
the shares fall by a third. Hilton Food Group’s organisational difficulties and
poor handling of food inflation ultimately cost the Chief Executive his job.

In the spirit of fairness, I should acknowledge some of the positive performers
where share prices have been driven by thematics rather than operational
excellence, in particular amongst the resources sector. Pan African Resources,
Atalaya Mining, Sylvania Platinum and Hochschild Mining have all seen outsized
returns because of the extraordinary performance of the relevant commodity
prices. Outside of the resources sector there have been several positive
contributions this year.

Luceco shares have responded to a well-timed move into the EV charger market, as
well as a return to growth in the core electrical products market. Serco Group
has seen both earnings momentum in the core business and a re-rating as
investors seek security in their multi-year contracted revenues. Relatively new
holding Helios Towers responded positively to a capital markets day that laid
out new medium-term targets and a capital return policy. Aerospace component
supplier Senior disposed of their Aerostructures division and latterly have
announced several parties are interested in acquiring the ongoing operations.
Finally, building materials producer Sigmaroc have rallied through a combination
of sustained delivery on earnings coupled with an exposure into the potential
German infrastructure spend.

Activity

The last year has seen higher portfolio turnover than in recent years as a
result of adapting the portfolio to better reflect underlying trends in the
investment universe. As the number of listed companies continues to fall, the
average and upper market capitalisation of the universe continues to increase.
As an illustration of the changes, the market cap of the largest company in the
benchmark rose from £1.9 billion to £2.5 billion when the benchmark went through
the annual rebalance. Adding larger holdings brings additional benefits.
Typically, the greater the market capitalisation the greater the underlying
liquidity of the shares, which allows us to be more tactical with positioning.

A new position has been added in housebuilder Bellway. To say the UK housing
backdrop has been challenging doesn’t quite do justice to the current market.
New build volumes in the UK have fallen to levels not seen since the Global
Financial Crisis, yet the Government has not yet walked away from the target of
one and a half million new homes through this parliament. This frankly
unreachable target requires volumes not seen in sixty years, but the valuation
of the UK housebuilding sector is in our view suggesting several years of
depressed volumes that flies in the face of demographic pressures. In times of
economic uncertainty and volatility, companies that demonstrate lower revenue
volatility backed by secure long-term order books become more attractive. We
added positions in Mitie Group and Mears Group, both companies where we felt the
negative press commentary centered around their UK asylum contracts had impacted
on the valuation of the valuable non-asylum contracts. Sometimes the best
opportunities come from companies where investors have failed to recognise a
fundamental shift in an investment case. We believe Helios Towers is one such
opportunity. Having listed in 2019 with a relatively levered balance sheet,
investors shied away and the shares languished. Helios own and operate telecom
towers in Africa and the Middle East, providing exposure to long-term inflation
adjusted revenue streams derived from critical infrastructure. Over the last few
years, the debt has been significantly reduced allowing management to announce a
capital return strategy.

Given the amount of mergers and acquisitions (“M&A”) in recent years it has been
notable how little the Company has benefited. Whilst there is no identifiable
reason for this, it is encouraging to see some activity in the last twelve
months with bids for Alpha Group, JTC and Empiric Student Property. We sold our
position in Gamma Communications following their move into Germany, a market
where we feel management have a lot to prove, as well as concerns UK small and
medium sized businesses (“SME”) are struggling in the current economic and
fiscal backdrop. These SME concerns were also the motivation for selling our
position in Workspace, where deteriorating confidence has been translating into
reduced occupancy and higher churn.

The impact of artificial intelligence

The world does not need another missive on the impact of AI. There are plenty of
volumes out there better informed and written than I can produce here. Indeed
some of those articles have led to significant market corrections. In January
Dario Amodei, CEO of Anthropic, published his thoughts which were widely shared.
Amodei’s piece was followed by Matt Shumers post on X “Something Big is Coming”
and Citrini Research’s vision of the world in 2028. Every new release of Claude,
or developmental anecdote has driven the next phase of the “SaaSpocalypse”, as
the market looked beyond the AI winners and focused on the tangential losers.
There is no doubt that AI has the potential to upend business models, bring down
competitive barriers, and drive significant disruption. But we shouldn’t
underestimate the potential for the disrupted to fight back, after all the same
AI tools are available to everyone. Product development and research cycles are
likely to fall dramatically, incumbent firms can respond to competitive threats
by rapidly bringing out their own products and selling them into their existing
customer base. Those of us with grey hair will remember how the internet was
initially seen as a threat to existing business models, how legacy and lazy
incumbents would struggle to compete and adapt to the new world. Yet often what
happened was the upstarts failed to persuade consumers to switch, and the
incumbents developed their own internet strategies. AI is different, of course
it is, but human nature is the same. Management incentive structures prioritise
growth, and whilst there will inevitably be cost savings in some areas, I
fundamentally believe most management teams will re-invest those savings in
growth rather than just pocket the enhanced margin. Cost savings are a form of
profit investors ascribe with a low multiple, whereas investment that leads to
sustainable profit growth draws higher multiples. All else being equal
productivity should increase and inflation should fall, whilst product
development timelines could vastly accelerate.

Outlook

The near term is impossible to call. Even as I write this piece I’m painfully
aware that from the moment I press send to the time the words appear in print my
conclusions may well be out of date. So rather than the inevitable embarrassment
of making predictions, it is likely more instructive to illustrate how we are
framing our current discussions. I have commented before on the growing
disconnect between how the UK is portrayed and the reality of the situation. On
the one hand there is no getting away from the tight fiscal position the country
is in, with the recent surge in UK bond yields having a significant impact on
Chancellor Rachel Reeves’ headroom, raising the spectre of yet another tax grab
budget. But the UK debt position isn’t out of line to other major Western
economies. In fact we can say the same for most economic indicators; inflation,
growth, debt to gross domestic product (GDP), all are in the same ballpark. Yet
the valuation of UK stocks relative to other developed markets is suggestive of
a greater gulf, of something rotten at the heart of the UK.

Against this backdrop, the structural challenges facing UK smaller and medium
sized equities remain largely unchanged. Despite several years of
underperformance and increasingly compelling relative valuations, the asset
class continues to experience sustained outflows. While the pace has moderated
from peak levels, the ongoing withdrawal of capital remains significant for a
relatively illiquid segment of the market and continues to exert downward
pressure on valuations.

This raises the same fundamental question, one that I have pondered in previous
reports: what is required to re-engage investors? As discussed in last year’s
review, a combination of attractive valuations, economic and political
stability, a healthy pipeline of opportunities and, ultimately, a willing
investor base are all important components. There is little doubt that
valuations remain attractive, but the other items on my tick list are proving
elusive. Depressingly the Labour Party are continuing the pattern of policy
followed by U-turn, and questions remain about a potential change in leadership
that were it to come would most likely herald a shift to the left. The pipeline
of new opportunities is still blocked, with little appetite for companies to
test the market, despite the continued presence of both strategic and private
buyers of listed assets. On the face of it the outlook is challenging.

However, while sentiment towards UK small and mid-cap equities remains subdued,
we continue to see clear evidence of value, both in absolute terms and relative
to other markets. The ongoing level of corporate activity reinforces this view,
with strategic buyers taking advantage of depressed valuations. The “shoot first
ask questions later” mentality with regards to AI disruption is presenting
significant opportunity, and analogous to the dotcom disruption a quarter of a
century ago, there are now a myriad of companies trading at record low
valuations where we believe the AI threat has been fundamentally overplayed or
misanalysed.

In summary, the UK smaller companies market continues to experience a period of
weak sentiment and structural outflows that have weighed on both absolute and
relative performance. Regardless, the underlying fundamentals of many portfolio
companies remain intact, and the valuation opportunity across the asset class is
increasingly compelling. While the timing of a shift in investor sentiment
remains uncertain, we believe the conditions for improved outcomes are gradually
building, and we remain confident in the long-term opportunity set.

Roland Arnold
BlackRock Investment Management (UK) Limited
15 May 2026

Ten largest investments

as at 28 February 2026

Together, the Company’s ten largest investments represented 25.6% of the
Company’s portfolio as at 28 February 2026 (2025: 22.8%).

1 Greencore Group (2025: 48th)
Food Producers
Portfolio £18,015,000
Percentage of portfolio 2.8% (2025: 0.8%)
Leading manufacturer of convenience food in the UK. It supplies major
supermarkets and other retailers with products like sandwiches, salads, sushi,
chilled ready meals and sauces.

2 Great Portland Estates (2025: 15th)
Real Estate Investment Trusts
Portfolio value £17,924,000
Percentage of portfolio 2.8% (2025: 1.7%)
London-focused real estate company that develops and manages high-quality
commercial property, primarily offices and mixed-use assets.
3 Serco Group (2025: 55th)
Industrial Support Services
Portfolio value £17,017,000
Percentage of portfolio 2.7% (2025: 0.8%)
A services company that delivers outsourced public services across health,
transport, immigration, defence, justice and citizen services. It partners with
governments to manage complex, mission-critical operations under long-term
contracts.
4 IntegraFin (2025: 2nd)
Financial Services
Portfolio value £16,906,000
Percentage of portfolio 2.6% (2025: 2.6%)
Leading investment platform used by financial advisers to manage client
portfolios efficiently. It generates revenues primarily from administration and
custody services across tax-efficient wrappers.

5 XPS Pensions (2025: 3rd)
Financial Services
Portfolio value £16,826,000
Percentage of portfolio 2.6% (2025: 2.6%)
A UK-focused pensions consultancy providing actuarial, administration,
investment advisory and covenant services, supporting both private and public
sector pension schemes.
6 Morgan Sindall (2025: 18th)
Construction & Materials
Portfolio value £16,696,000
Percentage of portfolio 2.6% (2025: 1.5%)
A UK construction and regeneration group operating across construction,
infrastructure, fit-out, urban regeneration and housing partnerships. The group
focuses on capital-light, partnership-based models with strong public-sector
exposure.

7 Boku (2025: 9th)
Industrial Support Services
Portfolio value £16,341,000
Percentage of portfolio 2.6% (2025: 1.9%)
Global payments company, specialising in local payment methods, including direct
carrier billing and digital wallets.
8 Tatton Asset Management (2025: 7th)
Financial Services
Portfolio value £15,127,000
Percentage of portfolio 2.4% (2025: 2.2%)
Leading UK financial services company that provides a range of investment
management, compliance, and support services to independent financial advisers,
with a focus on discretionary fund management and portfolio solutions.
9 Helios Towers (2025: n/a)
Mobile Telecommunications
Portfolio value £14,725,000
Percentage of portfolio 2.3% (2025: n/a)
Leading telecommunications tower company operating across Africa and the Middle
East. It owns and manages passive mobile infrastructure.
10 Sigmaroc (2025: 80th)
Construction & Materials
Portfolio value £13,964,000
Percentage of portfolio 2.2% (2025: 0.5%)
A buy-and-build construction materials company focused on cementitious and lime
products in the UK and Europe.

Fifty largest investments

as at 28 February 2026

Company Business activity Market % of
value total
£’000 portfolio

Greencore Group A leading manufacturer of  18,015  2.8
convenience food in the UK. It
supplies major supermarkets and
other retailers with products
like sandwiches, salads, sushi,
chilled ready meals and sauces

Great Portland London-focused real estate  17,924  2.8
Estates company that develops and
manages high-quality commercial
property, primarily offices and
mixed-use assets

Serco Group A services company that  17,017  2.7
delivers outsourced public
services across health,
transport, immigration,
defence, justice and citizen
services. It partners with
governments to manage complex,
mission-critical operations
under long-term contracts

IntegraFin Leading investment platform  16,906  2.6
used by financial advisers to
manage client portfolios
efficiently. It generates
revenues primarily from
administration and custody
services across tax-efficient
wrappers

XPS Pensions A UK-focused pensions  16,826  2.6
consultancy providing
actuarial, administration,
investment advisory and
covenant services, supporting
both private and public sector
pension schemes

Morgan Sindall A UK construction and  16,696  2.6
regeneration group operating
across construction,
infrastructure, fit-out, urban
regeneration and housing
partnerships. The group focuses
on capital-light,
partnership-based models with
strong public-sector exposure

Boku Global payments company,  16,341  2.6
specialising in local payment
methods, including direct
carrier billing and digital
wallets

Tatton Asset Leading UK financial services  15,127  2.4
Management company that provides a range
of investment management,
compliance, and support
services to independent
financial advisers, with a
focus on discretionary fund
management and portfolio
solutions

Helios Towers Leading telecommunications  14,725  2.3
tower company operating across
Africa and the Middle East. It
owns and manages passive mobile
infrastructure

Sigmaroc A buy-and-build construction  13,964  2.2
materials company focused on
cementitious and lime products
in the UK and Europe

Young & Co’s UK-based pub and hotel operator  13,467  2.1
Brewery – A
Shares
Sirius Real Owner and operator of business  12,536  2.0
Estate parks, offices and industrial
complexes in Germany

Rosebank Investment business that buys,  11,428  1.8
Industries improves and sells industrial
and manufacturing businesses

Ithaca Energy A UK-based oil and gas company  11,422  1.8
operating in the North Sea

Genuit Manufacturer of plastic piping  11,351  1.8
systems

Grafton Builders merchants in the UK,  11,028  1.7
Ireland and Netherlands

DiscoverIE Specialist components for  10,970  1.7
electronics applications

Pollen Street Alternatives asset manager with  10,914  1.7
Group strategies across private
equity and private credit

FRP Advisory A business advisory firm  10,285  1.6
providing services in corporate
restructuring, insolvency, debt
advisory and financial
solutions to businesses

Alfa Financial Provider of software for  10,129  1.6
Software customers working in the asset
finance industry

CVS Group Operator of veterinary  10,070  1.6
surgeries

Atalaya Mining Copper miner  9,976  1.6

Polar Capital Specialist asset management  9,758  1.5
Holdings
Breedon UK construction materials  9,506  1.5

Luceco Designer, supplier and  9,292  1.5
manufacturer of high-quality
and efficient LED lighting
products, as well as electrical
wiring accessories

Safestore Provider of self-storage units  9,201  1.4
Holdings
Chemring Group Advanced technology products  9,006  1.4
and services for the aerospace,
defence and security markets

Genus Animal genetics company  8,972  1.4
specializing in the production
and sale of animal breeding
products

Elementis Speciality chemicals company  8,735  1.4

Pan African UK-listed African-focused gold  8,487  1.3
Resources mining business

Bellway Residential property developer  8,333  1.3
and housebuilder

Bodycote Provision of thermal processing  8,239  1.3
services

Hill & Smith Production of infrastructure  8,045  1.3
products and supply of
galvanizing services

Mitie Group Leading facilities management  8,018  1.3
and professional services
provider

Senior A designer and manufacturer of  7,983  1.3
high-technology components and
systems for the OEMs

OSB Group Specialist lending business  7,942  1.2

Premier Foods UK food manufacturer  7,895  1.2

Central Asia Mining operations in Kazakhstan  7,383  1.2
Metals and Macedonia

Watches of Retailer of luxury watches  7,210  1.1
Switzerland
Shaftesbury A REIT investing focusing on  6,922  1.1
Capital sites in London’s West End

Mortgage Advice Leading mortgage intermediary  6,882  1.1
Bureau providing mortgage advice and
protection insurance

MONY Group Leading technology-led savings  6,854  1.1
platform

Porvair UK-based specialist filtration,  6,767  1.1
laboratory and environmental
technology group

Vesuvius Provider of metal flow  6,639  1.0
engineering services and
solutions to the steel and
foundry industries

Cranswick Food producer and supplier of  6,635  1.0
premium, fresh and added-value
products

Oxford Designer and manufacturer of  6,615  1.0
Instruments tools and systems for industry
and scientific research

Rotork Manufacturer of industrial flow  6,533  1.0
control equipment

Volution Group Ventilation products for the  6,515  1.0
residential and commercial
construction markets

Ashmore Group Emerging market focused  6,474  1.0
investment manager

Essentra Supplier of plastic and fibre  6,295  1.0
products such as plastic caps,
clamps, fasteners, etc.
————- ————-
50 largest  514,253  80.6
investments
======== ========
Remaining  123,831  19.4
investments
————- ————-
Total  638,084  100.0
======== ========

Details of the full portfolio are available on the Company’s website at
www.blackrock.com/uk/brsc.

Portfolio holdings in excess of 3% of issued share capital

At 28 February 2026, the Company did not hold any equity investments comprising
more than 3% of any company’s share capital other than as disclosed in the table
below:

Company % of issued share capital held

Tatton Asset Management 4.0
FRP Advisory 3.3
Luceco 3.3
Boku 3.0

Distribution of investments

as at 28 February 2026

Sector % of portfolio

Oil Equipment, Services & Distribution  1.8
—————
Energy  1.8
=========
Chemicals  1.4
Construction & Materials 10.0
Mining  3.7
Precious Metals & Mining 1.3
—————
Basic Materials  16.4
=========
Aerospace & Defence  3.9
Electronic & Electrical Equipment  5.4
General Industrials  1.0
Industrial Engineering  3.6
Industrial Support Services  11.5
—————
Industrials  25.4
=========
General Retailers  4.1
Leisure Goods  0.6
Media  1.8
Personal Goods  1.1
Travel & Leisure  3.5
—————
Consumer Discretionary  11.1
=========
Health Care Equipment & Services  1.0
Health Care Providers  0.5
Pharmaceuticals & Biotechnology  2.0
—————
Health Care  3.5
=========
Food Producers  6.0
Household Goods & Home Construction  2.1
Personal Care Drug & Grocery Stores  1.0
—————
Consumer Staples  9.1
=========
Mobile Telecommunications 2.3
Telecommunications Equipment 0.6
—————
Telecommunications  2.9
=========
Banks  0.7
Financial Services  18.4
—————
Financials  19.1
=========
Real Estate Investment & Services  2.0
Real Estate Investment Trusts  5.3
—————
Real Estate  7.3
=========
Software & Computer Services  3.4
—————
Technology  3.4
=========
Total 100.0
=========

Portfolio analysis

as at 28 February 2026

Analysis of portfolio value by sector

Company Benchmark (Deutsche Numis
Smaller Companies, plus
AIM
(ex Investment Companies)
Index)
Energy 1.8 3.9
Basic Materials 16.4 8.3
Industrials 25.4 23.5
Consumer 11.1 15.6
Discretionary
Health Care 3.5 4.8
Consumer Staples 9.1 7.4
Telecommunications 2.9 1.6
Financials 19.1 17.7
Real Estate 7.3 8.9
Technology 3.4 5.3
Utilities 0.0 2.0
Other 0.0 1.0

Sources: BlackRock and LSEG Datastream.

Investment size

Number of Market value of investments
investments as % of portfolio
£0m-£1m 1.0 0.2
£2m-£3m 3.0 1.2
£3m-£4m 11.0 5.8
£4m-£5m 7.0 5.1
£5m-£6m 6.0 5.2
£6m-£7m 13.0 13.4
£7m-£8m 5.0 6.0
£8m-£9m 7.0 9.2
£9m-£10m 6.0 8.9
£10m-£11m 5.0 8.2
£11m-£12m 4.0 7.1
£12m-£13m 1.0 2.0
£13m-£14m 2.0 4.3
£14m-£15m 1.0 2.3
£15m-£16m 1.0 2.4
£16m-£17m 4.0 10.5
£17m-£18m 2.0 5.4
£18m-£19m 1.0 2.8

Source: BlackRock.

Market capitalisation of our portfolio companies

% of portfolio

£0m to £200m 0.5
£200m to £600m 27.8
£600m to £1.5bn 34.2
£1.5bn+ 37.5

Source: BlackRock.

Strategic Report

The Directors present the Strategic Report of the Company for the year ended 28
February 2026. The aim of the Strategic Report is to provide shareholders with
the information to assess how the Directors have performed their duty to promote
the success of the Company for the collective benefit of shareholders.

The Chairman’s Statement together with the Investment Manager’s Report and the
Directors’ Statement setting out how they promote the success of the Company
contained within the Annual Report and Financial Statements form part of the
Strategic Report. The Strategic Report was approved by the Board at its meeting
on 15 May 2026.

Principal activities

The Company is a public company limited by shares and carries on business as an
investment trust and its principal activity is portfolio investment. Investment
trusts, like unit trusts and OEICs, are pooled investment vehicles which allow
exposure to a diversified range of assets through a single investment, thus
spreading, although not eliminating investment risk. The closed-ended capital
structure of an investment trust permits the company to invest in stocks with
less liquidity and to gear its investments within a risk framework governed by
the Board.

Investment objective

The Company’s prime objective is to seek to achieve long-term capital growth for
shareholders through investment mainly in smaller UK quoted companies.

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

To achieve its investment objective the Company invests predominantly in UK
smaller companies with securities admitted to trading on the Main Market of the
London Stock Exchange or on AIM (including securities which are listed overseas
but which have a secondary UK quotation). Although investments are primarily in
companies with securities admitted to trading on recognised stock exchanges or
on AIM, the Investment Manager may also invest in less liquid unquoted
securities with the prior approval of the Board. The Manager may also invest in
global listed small-cap companies, provided that no more than 15% of the
portfolio by value at the time of investment may be held in companies which are
listed overseas and do not have a primary and secondary UK listing. The Manager
has adopted a consistent investment process, focusing on good quality growth
companies; stock selection is the primary focus, but consideration is also given
to sector weightings and underlying themes.

Whilst there are no set limits on individual sector exposures against the
Company’s benchmark, a schedule of sector weightings is presented at each Board
meeting for review. In applying the investment objective, the Investment Manager
expects the Company to be substantially fully invested and to borrow as and when
appropriate.

The Company seeks to achieve an appropriate spread of investment risk by
investing in a number of holdings across a range of sectors. The Company may not
hold more than 10% of the share capital of any company in which it has an
investment. No single portfolio holding (excluding holdings in cash fund
investments held for cash management purposes) will, on the date such holding is
acquired by the Company, exceed 5% of the Company’s net asset value. The Company
may hold shares in other listed investment companies (including investment
trusts), however the Board has agreed that the Company will not invest more than
15% of its total assets in other UK listed investment companies. The Investment
Manager will not deal in derivatives without prior approval of the Board.

Benchmark

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

Gearing policy

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

Business model

The Company’s business model follows that of an externally managed investment
trust. Therefore, the Company does not have any employees and outsources its
activities to third-party service providers including the Manager, who is the
principal service provider. The management of the investment portfolio and the
administration of the Company have been contractually delegated to the Manager
who in turn (with the permission of the Company) has delegated certain
investment management and other ancillary services to the Investment Manager.
The Manager, operating under guidelines determined by the Board, has direct
responsibility for the decisions relating to the day-to-day running of the
Company and is accountable to the Board for the investment, financial and
operating performance of the Company. The Company delegates fund accounting
services to BlackRock Investment Management (UK) Limited (BIM (UK)), which in
turn sub-delegates these services to The Bank of New York Mellon (International)
Limited (BNY).

Other service providers include the Depositary (also BNY) and the Registrar,
Computershare Investor Services PLC. The Depositary has sub-delegated the
provision of custody services to the Asset Servicing division of BNY. Details of
the contractual terms with the Manager and the Depositary and more details of
the sub-delegation arrangements in place governing custody services are set out
in the Directors’ Report.

Investment philosophy

The Investment Manager seeks to identify companies which it believes have
superior long-term growth prospects and the management in place to take
advantage of these prospects. This is done through internal investment research,
company visits and the careful monitoring of market newsflow and external broker
analysis. Initially, if the Investment Manager is sufficiently impressed with a
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 new holding. These holdings will be
closely monitored, and members of the portfolio management team will meet with
management on a regular basis. If these companies continue to prosper and make
the most of opportunities, the Investment Manager will gradually add to the
portfolio holding. Where initial expectations are disappointing, the holding
will be sold. The anticipation is that each holding will develop into a core
holding over time; one that meets the Investment Manager’s criteria for high
quality growth companies.

Valuation is a key consideration; it is important not to overpay for new
holdings. However, investment fundamentals are also important, and the
Investment Manager may be prepared to pay what seems like a high price if it
believes that long-term growth prospects are very strong. Generally, a company
will be held within the portfolio if it meets the criteria for core holdings; in
respect of recent investments, the Investment Manager will consider whether they
have the potential to meet these criteria. Holdings will be sold if there are
concerns that the investment case has changed in a negative way. Holdings will
be reduced where the position size becomes too large and raises concerns about
risk and diversification. The general aim is for portfolio holdings not to
exceed 3% of the Company’s net assets (excluding cash fund investments held for
cash management purposes). As the investments within the portfolio become larger
over time, the Portfolio Manager will continue to assess growth prospects in
comparison to smaller businesses operating within similar markets. In accordance
with the guidelines, the Portfolio Manager will sell any stock that enters the
FTSE 100 Index within 180 days of entry.

The Investment Manager believes that consistent outperformance can be achieved
by employing a combination of bottom-up and top-down analysis, based upon strong
fundamental research as outlined above.

In building a robust portfolio the Investment Manager will also consider the
macro-economic background, working with strategists, economists and other teams
internally and externally to understand the broad environment. It also works
closely with BlackRock’s risk team to assess the risks in the structure of the
portfolio. Any necessary adjustments will be made to the portfolio to ensure
that it is structured in an appropriate way from a macro and risk point of view.

Portfolio analysis

A detailed analysis of the portfolio has been provided above (and contained
within the Annual Report and Financial Statements).

Performance

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

Results and dividends

The results for the Company are set out in the Income Statement in the Financial
Statements. The total net profit for the year, after taxation, was £60,205,000
(2025: loss of £4,268,000) of which the revenue return amounted to a profit of
£18,172,000 (2025: £19,918,000) and the capital profit amounted to £42,033,000
(2025: loss of £24,186,000).

The Company’s revenue return amounted to 43.77p per share (2025: 42.53p). The
Directors have declared a second interim dividend of 28.50p per share as set out
in the Chairman’s Statement.

Future prospects

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

Social, community and human rights issues

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

Modern Slavery Act

As an investment vehicle the Company does not provide goods or services in the
normal course of business and does not have customers. Accordingly, the
Directors consider that the Company is not required to make any slavery or human
trafficking statement under the Modern Slavery Act 2015. In any event, the Board
considers the Company’s supply chain, dealing predominantly with professional
advisers and service providers in the financial services industry, to be low
risk in relation to this matter.

Directors, gender representation and employees

The Directors of the Company on 28 February 2026 are set out in the Directors’
biographies contained within the Annual Report and Financial Statements. With
effect from 16 April 2026, with the completion of the combination with BlackRock
Throgmorton Trust plc, the Board consists of 3 male Directors and 4 female
Directors. The Company does not have any executive employees.

Key performance indicators

At each Board meeting, the Directors consider a number of performance measures
to assess the Company’s success in achieving its objectives. The key performance
indicators (KPIs) used to measure the progress and performance of the Company
over time, and which are comparable to those reported by other investment trusts
are set out below. As indicated in footnote 2 to the table, some of these KPIs
fall within the definition of `Alternative Performance Measures’ (APMs) under
guidance issued by the European Securities and Markets Authority (ESMA) and
additional information explaining how these are calculated is set out in the
Glossary contained within the Annual Report and Financial Statements.

[][][][][][]
Key Performance Indicators Year ended Year ended
28 February 28 February
2026 2025

% change NAV per share (debt at par value)[1,2] 11.5% -0.6%
% change NAV per share (debt at fair value)[1,2] 11.2% 0.0%
% change share price total return[1,2] 14.2% -1.4%
% change Benchmark return[1] 21.5% 6.2%
Average discount to NAV with debt at fair value[2] 12.3% 11.0%
Revenue return per share 43.77p 42.53p
Ongoing charges ratio[2,3] 0.8% 0.8%
Retail ownership 61.7% 69.8%

[1]  Total return basis with dividends reinvested.
[2]   Alternative Performance Measure, see Glossary contained within the Annual
Report and Financial Statements.
[3]   Calculated as a percentage of average daily net assets and using the
management fee and all other operating expenses, excluding finance costs, direct
transaction costs, custody transaction charges, VAT recovered, taxation, prior
year expenses written back and certain non-recurring items in accordance with
AIC guidelines.
Sources: BlackRock and LSEG Datastream.

Additionally, the Board regularly reviews many indices and ratios to understand
the impact on the Company’s relative performance of the various components such
as asset allocation and stock selection. The Board also reviews the performance
and ongoing charges of the Company against a peer group of UK smaller companies
trusts and open-ended funds.

Principal risks

The Company is exposed to a variety of risks and uncertainties. As required by
the UK Code, the Board has in place a robust ongoing process to identify, assess
and monitor the principal risks and emerging risks facing the Company, including
those that would threaten its business model, future performance, solvency or
liquidity. A core element of this process is the Company’s risk register which
identifies the risks facing the Company and assesses the likelihood and
potential impact of each risk and the quality of the controls operating to
mitigate it. A residual risk rating is then calculated for each risk based on
the outcome of the assessment.

The risk register, its method of preparation and the operation of key controls
in BlackRock’s and third-party service providers’ systems of internal control
are reviewed on a regular basis by the Audit Committee. In order to gain a more
comprehensive understanding of BlackRock’s and other third-party service
providers’ risk management processes and how these apply to the Company’s
business, BlackRock’s internal audit department provides an annual presentation
to the Audit Committee Chairman setting out the results of testing performed in
relation to BlackRock’s internal control processes. The Audit Committee also
periodically receives presentations from BlackRock’s Risk and Quantitative
Analysis team and reviews Service Organisation Control (SOC 1) reports from the
Company’s service providers. The current risk register categorises the Company’s
main areas of risk as follows:

· 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 the principal and emerging
risks facing the Company, including those that would threaten its business
model, future performance, solvency or liquidity. The risk that unforeseen or
unprecedented events including (but not limited to) heightened geo-political
tensions such as the war in Ukraine, high inflation and the current cost of
living crisis has had a significant impact on global markets. The risks
identified by the Board have been described in the table that follows, together
with an explanation of how they are managed and mitigated. Emerging risks are
considered by the Board as they come into view and are incorporated into the
existing review of the Company’s risk register. They were also considered as
part of the annual evaluation process.

Additionally, the Manager considers emerging risks in numerous forums and the
Risk and Quantitative Analysis team produces an annual risk survey. Any material
risks of relevance to the Company identified through the annual risk survey will
be communicated to the Board.

Emerging risks that have been considered by the Board over the year include the
impact of climate change, escalating geo-political conflict and technological
advances.

The key emerging risks identified are as follows:

Geo-political risk: Escalating geo-political tensions (including, but not
limited to the potential for a prolonged global trade war over tariffs, tensions
in the Middle East and the ongoing war in Ukraine, or deteriorating relations
between China and the US/other countries) have a significant negative impact on
global markets, with an increasing use of tariffs and domestic regulations
making global trade more complex and driving economic fragmentation.

Artificial Intelligence (`AI’): Advances in computing power means that AI has
become a powerful tool that will impact a huge range of areas and with a wide
range of applications that have the potential to dislocate established business
models and disrupt labour markets, creating uncertainty in corporate valuations.
The significant energy required to power this technological revolution will
create further pressure on environmental resources and carbon emissions.

The Board will continue to assess all identified risks on an ongoing basis. In
relation to the UK Code, the Board is confident that the procedures that the
Company has put in place are sufficient to ensure that the necessary monitoring
of risks and controls has been carried out throughout the reporting period.

The principal risks and uncertainties faced by the Company during the financial
year, together with the potential effects, controls and mitigating factors are
set out in the following table.

Investment performance

Principal risk

The returns achieved are reliant primarily upon the performance of the
portfolio.

The Board is responsible for:

· deciding the investment strategy to fulfil the Company’s objective; and
· monitoring the performance of the Investment Manager and the implementation
of the investment strategy.

An inappropriate investment strategy may lead to:

· poor performance compared to the Benchmark Index and the Company’s peer
group;
· a loss of capital; and
· dissatisfied shareholders.

The Board is also cognisant of the long-term risk to performance from inadequate
attention to ESG issues, and in particular the impact of climate change. More
detail in respect of these risks can be found in the AIFMD Fund Disclosures
document available on the Company’s website at
www.blackrock.com/uk/individual/literature/policies/itc-disclosure-blackrock
-smaller-companies-trust-plc.pdf.

Mitigation/Control

To manage this risk the Board:

· regularly reviews the Company’s investment mandate and long-term strategy;
· has set investment restrictions and guidelines which the Investment Manager
monitors and regularly reports on;
· receives from the Investment Manager a regular explanation of stock
selection decisions, portfolio exposure, gearing and any changes in gearing and
the rationale for the composition of the investment portfolio;
· monitors the maintenance of an adequate spread of investments in order to
minimise the risks associated with factors specific to particular sectors, based
on the diversification requirements inherent in the investment policy; and
· receives reports showing the Company’s performance against the benchmark.

ESG analysis is integrated into the Manager’s investment process, as set out
within the Annual Report and Financial Statements. This is monitored by the
Board.

Market risk

Principal risk

Market risk arises from volatility in the prices of the Company’s investments
influenced by currency, interest rate or other price movements. It represents
the potential loss the Company might suffer through holding market positions in
financial instruments in the face of market movements.

Market risk includes the potential impact of events which are outside the
Company’s control, including (but not limited to) heightened geo-political
tensions and military conflict, increased tariffs, a global pandemic and high
inflation or stagflation (in particular through increased commodity price
volatility driving inflation and impacting trade).

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

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

Mitigation/Control

The Board considers asset allocation, stock selection and levels of gearing on a
regular basis and has set investment restrictions and guidelines which are
monitored and reported on by the Investment Manager.

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

The Board also recognises the benefits of a closed-end fund structure in
extremely volatile markets such as those experienced during the Russia-Ukraine
and Middle East conflicts as well as recent trade and tariff related
disruptions. Unlike open-ended counterparts, closed-end funds are not obliged to
sell down portfolio holdings at low valuations to meet liquidity requirements
for redemptions. During times of elevated volatility and market stress, the
ability of a closed-end fund structure to remain invested for the long term
enables the portfolio manager to adhere to disciplined fundamental analysis from
a bottom-up perspective and be ready to respond to dislocations in the market as
opportunities present themselves.

The Manager takes into account climate risk within the investment process along
with other ESG considerations as set out within the Annual Report and Financial
Statements.

Income/dividend risk

Principal risk

The amount of dividends and future dividend growth will depend on the
performance of the Company’s underlying portfolio and may be impacted by events
which are outside the Company’s control, such as the Russia-Ukraine and Middle
East conflicts. In addition, any change in the tax treatment of the dividends or
interest received by the Company may reduce the level of dividends received by
shareholders.

Mitigation/Control

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

The Company has substantial revenue reserves which can be utilised and also has
the ability to make distributions by way of dividends from capital reserves if
required.

Legal & Compliance risk

Principal risk

The Company has been approved by HM Revenue & Customs as an investment trust,
subject to continuing to meet the relevant eligibility conditions and operates
as an investment trust in accordance with Chapter 4 of Part 24 of the
Corporation Tax Act 2010. As such, the Company is exempt from capital gains tax
on the profits realised from the sale of its investments.

Any breach of the relevant eligibility conditions could lead to the Company
losing investment trust status and being subject to corporation tax on capital
gains realised within the Company’s portfolio. In such event the investment
returns of the Company may be adversely affected.

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

Amongst other relevant laws and regulations, the Company is required to comply
with the provisions of the Companies Act 2006, the Alternative Investment Fund
Managers’ Directive, the UK Listing Rules and Disclosure Guidance and
Transparency Rules, the Sanctions and Anti-Money Laundering Act 2018 and the
Market Abuse Regulation.

Mitigation/Control

The Investment Manager monitors investment movements and the amount of proposed
dividends to ensure that the provisions of Chapter 4 of Part 24 of the
Corporation Tax Act 2010 are not breached. The results are reported to the Board
at each meeting.

Compliance with the accounting rules affecting investment trusts is also
carefully and regularly monitored.

The Company Secretary and the Company’s professional advisers provide regular
reports to the Board in respect of compliance with all applicable rules and
regulations.

The Company’s Investment Manager, BlackRock, at all times complies with
sanctions administered by the UK Office of Financial Sanctions Implementation,
the United States Treasury’s Office of Foreign Assets Control, the United
Nations, European Union member states and any other applicable regimes. The
Company does not invest in companies domiciled in Russia.

Operational risk

Principal risk

In common with most other investment trust companies, the Company has no
employees. The Company therefore relies on the services provided by third
parties. Accordingly, it is dependent on the control systems of the Manager, the
Depositary and the Fund Accountant who maintain the Company’s assets, dealing
procedures and accounting records.

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

Failure by any service provider to carry out its obligations to the Company
could have a material adverse effect on the Company’s performance. Disruption to
the accounting, payment systems or custody records could prevent the accurate
reporting and monitoring of the Company’s financial position.

Inadequate succession planning arrangements, particularly of the Manager, could
disrupt the level of service provided.

Mitigation/Control

Due diligence is undertaken before contracts are entered into with third-party
service providers. Thereafter, the performance of the provider is subject to
regular review and reported to the Board.

The Board reviews on a regular basis an assessment of the fraud risks that the
Company could potentially be exposed to, and also a summary of the controls put
in place by the Manager, the Depositary, the Custodian, the Fund Accountant and
the Registrar designed specifically to mitigate these risks.

Most third-party service providers produce Service Organisation Control (SOC 1)
reports to provide assurance regarding the effective operation of internal
controls as reported on by their reporting accountants. These reports are
provided to the Audit Committee.

The Company’s financial instruments held in custody are subject to a strict
liability regime and in the event of a loss of such financial instruments held
in custody, the Depositary must return assets of an identical type or the
corresponding amount, unless able to demonstrate the loss was a result of an
event beyond its reasonable control.

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

The Board also considers the business continuity arrangements of the Company’s
key service providers on an ongoing basis and reviews these as part of their
review of the Company’s risk register. The Board considers the Manager’s
succession plans in so far as they affect the services provided to the Company.

Financial risk

Principal risk

The Company’s investment activities expose it to a variety of financial risks
that include interest rate, credit and liquidity risk.

Mitigation/Control

Details of these risks are disclosed in note 17 to the financial statements,
together with a summary of the policies for managing these risks.

Marketing risk

Principal risk

Marketing efforts are inadequate, do not comply with relevant regulatory
requirements, and fail to communicate adequately with shareholders or reach out
to potential new shareholders resulting in reduced demand for the Company’s
shares and a widening discount.

Mitigation/Control

The Board focuses significant time on communications with shareholders and
reviewing marketing strategy and initiatives. All investment trust marketing
documents are subject to appropriate review and authorisation.

Viability statement

In accordance with the UK Corporate Governance Code, the Directors have assessed
the prospects of the Company over a longer period than the 12 months referred to
by the `Going Concern’ guidelines.

The Board is cognisant of the uncertainty surrounding the potential duration of
the conflicts in Russia-Ukraine and the Middle East, their impact on the global
economy and the prospects for some of the Company’s portfolio holdings. The
Board is also cognisant of the disruptive impact on world trade as a result of
US tariff initiatives and the effect these might have on the Company’s
portfolio. Notwithstanding these crises, and given the factors stated below, the
Board expects the Company to continue for the foreseeable future and has
therefore conducted this review for the period up to the AGM in 2031 being a
five-year period from the date that this Annual Report will be approved by
shareholders. This assessment term has been chosen as it represents a medium
-term performance period over which investors in the smaller companies’ sector
generally refer to when making investment decisions.

In making this assessment the Board has considered the following factors:

· The Company’s principal risks as set out above;
· The risk that the challenging geo-political backdrop, rising inflation and a
sustained high interest rate environment will impact on the ability of portfolio
companies to pay dividends, and consequently impact the Company’s portfolio
yield and ability to pay dividends;
· The ongoing relevance of the Company’s investment objective in the current
environment; and
· The level of demand for the Company’s ordinary shares.

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

· The Board has reviewed portfolio liquidity as at 28 February 2026;
· The Board has reviewed the Company’s revenue and expense forecasts in light
of the current economic back drop both in the UK and globally and the
anticipated impact on dividend income and market valuations. The Board is
confident that the Company’s business model remains viable and that the Company
has sufficient resources to meet all liabilities as they fall due for the period
under review;
· The Board has reviewed the Company’s borrowing and debt facilities and
considers that the Company continues to meet its financial covenants in respect
of these facilities and has a wide margin before any relevant thresholds are
reached;
· The Board keeps the Company’s principal risks and uncertainties as set out
above under review, and is confident that the Company has appropriate controls
and processes in place to manage these and to maintain its operating model, even
given the global economic challenges posed by the impact of climate change on
portfolio companies and the current climate of heightened geo-political risk
(notably the invasion of Ukraine and the conflict in the Middle East);
· The operational resilience of the Company and its key service providers (the
Manager, Depositary, Custodian, Fund Administrator, Registrar and Broker) and
their ability to continue to provide a good level of service for the foreseeable
future;
· The level of current and historic ongoing charges incurred by the 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 liquid portfolio. As at
28 February 2026, the Company held one illiquid unquoted investment and 79.9% of
the Company’s portfolio investments were readily realisable and listed on the
London Stock Exchange. The remaining 20.1% that were listed on the Alternative
Investment Market are also considered to be readily realisable. The Company has
largely fixed overheads which comprise a very small percentage of net assets.
Therefore, the Board has concluded that the Company would comfortably be able to
meet its ongoing operating costs as they fall due.

Based on the results of their analysis, the Directors have a reasonable
expectation that the Company will be able to continue in operation and meet its
liabilities as they fall due over the period of their assessment.

Section 172 Statement: promoting the success of the Company

The Companies (Miscellaneous Reporting) Regulations 2018 require directors to
explain in greater detail how they have discharged their duties under Section
172(1) of the Companies Act 2006 in promoting the success of their companies for
the benefit of members as a whole. This enhanced disclosure is required under
the Companies Act 2006 and the AIC Code of Corporate Governance and covers how
the Board has engaged with and understands the views of stakeholders and how
stakeholders’ needs have been taken into account, the outcome of this engagement
and the impact that it has had on the Board’s decisions.

As the Company is an externally managed investment company and does not have any
employees or customers, the Board considers the main stakeholders in the Company
to be the shareholders, key service providers (being the Manager and Investment
Manager, the Custodian, Depositary, Registrar and Broker) and investee
companies. The reasons for this determination, and the Board’s overarching
approach to engagement, are set out in the table below.

Stakeholders

Shareholders

Continued shareholder support and engagement are critical to the continued
existence of the Company and the successful delivery of its long-term
strategy. The Board is focused on fostering good working relationships with
shareholders and on understanding the views of shareholders in order to
incorporate them into the Board’s strategy and objectives in delivering long
-term growth and income. The Board makes a regular effort to discuss ongoing
Company developments with shareholders.

Manager and Investment Manager

The Board’s main working relationship is with the Manager, who is responsible
for the Company’s portfolio management (including asset allocation, stock and
sector selection) and risk management, as well as ancillary functions such as
administration, secretarial, accounting and marketing services. The Manager has
sub-delegated portfolio management to the Investment Manager. Successful
management of shareholders’ assets by the Investment Manager is critical for the
Company to successfully deliver its investment strategy and meet its objective.
The Company is also reliant on the Manager as AIFM to provide support in meeting
relevant regulatory obligations under the AIFMD and other relevant legislation.

Other key service providers

In order for the Company to function as an investment trust with a listing on
the premium segment of the official list of the FCA and trade on the London
Stock Exchange’s (LSE) main market for listed securities, the Board relies on a
diverse range of advisors for support in meeting relevant obligations and
safeguarding the Company’s assets. For this reason, the Board considers the
Company’s Custodian, Depositary, Registrar and Broker to be stakeholders. The
Board maintains regular contact with its key external service providers and
receives regular reporting from them through the Board and committee meetings,
as well as outside of the regular meeting cycle.

Investee companies

Portfolio holdings are ultimately shareholders’ assets, and the Board recognises
the importance of good stewardship and communication with investee companies in
meeting the Company’s investment objective and strategy. The Board monitors the
Manager’s stewardship activities and receives regular feedback from the Manager
in respect of meetings with the management of portfolio companies.

Management of share rating

Issue

The Board recognises that it is in the long-term interests of shareholders that
shares do not trade at a significant discount or premium to their prevailing net
asset value. Therefore, where deemed to be in shareholders’ long-term interests,
it may exercise its powers to issue shares or buy back shares with the objective
of ensuring that an excessive premium or discount does not arise.

Engagement

The Board monitors the Company’s share rating on an ongoing basis and receives
regular updates from the Company’s Broker and Manager regarding the level of
discount and the drivers behind this. The Manager provides regular performance
updates and detailed performance attribution.

The Board believes that the best way of maintaining the share rating at an
optimal level over the long term is to create demand for the shares in the
secondary market. To this end the Investment Manager is devoting considerable
effort to broadening the awareness of the Company, particularly to wealth
managers and to the wider retail shareholder market. The Company contributes to
a focused investment trust sales and marketing initiative operated by BlackRock
on behalf of the investment trusts under its management.

In addition to this, during the year, the Board engaged regularly with the
Investment Manager and welcomed the increased level of marketing support
provided to promote BlackRock Investment Trusts in the UK market. The Board was
pleased to see additional marketing resources committed to the development of a
new advertising campaign designed to raise awareness of the BlackRock Investment
Trust range.

Alongside this, the Board initiated a broader review which included examining
the retail consumer landscape, expanding retail investor target audience and
widening the marketing channels options – including PR – to reach them more
effectively. Building on this foundation, the Board engaged an independent
marketing agency to sharpen the Company’s positioning, messaging, tone and
communication plan. This work is being incorporated into the ongoing marketing
activity for the Company, and the Board believes it will help strengthen
engagement and resonate more effectively with existing and prospective
investors.

The purpose of the programme overall is to ensure effective communication with
existing shareholders and to attract new shareholders to the Company to improve
liquidity in the Company’s shares and to sustain the stock market rating of the
Company.

The Board is also cognisant of the need to ensure that the Company’s mandate and
structure remains relevant in the current market environment to attract demand.
In the year under review it spent a significant amount of time reviewing
strategic options for the Company, agreeing heads of terms for a Scheme of
Combination with THRG (`the Scheme’) and drafting the requisite documentation to
give shareholders the option to vote on the creation of a larger combined
vehicle that would offer a number of important benefit for investors, including
increased scale, lower operating charges, lower management fees, and offered a
substantial cash exit to allow investors to realise up to 28% of the Company’s
issued share capital for cash. In addition, the transaction offered a co-manager
structure that brought together Roland Arnold and Dan Whitestone, two well
regarded managers in BlackRock’s emerging companies team with a strong long-term
track record.

The Board recognises the importance of income to its shareholders and, following
discussions with its advisers, concluded that an increased frequency of dividend
payments would be welcomed by shareholders. The Board also notes the importance
of the Company’s dividend approach being attractive to new investors, which will
help to support demand for its shares and to narrow the discount. With effect
from 1 March 2026, the Company moved to making quarterly dividend payments in
place of the previous bi-annual dividend payments. These will be made as three
dividend payments in September, December and March each year equal to a quarter
of the previous year’s total dividend, with the Board declaring a final dividend
for the full year (payable in June) reflecting the final amount required to
ensure an appropriate level of full year dividend.

In addition to focusing on driving increased demand through the initiatives
above, the Board was also active in buying back the Company’s shares over the
period under review. For the year ended 28 February 2026, the Company has
repurchased 3,992,000 ordinary shares into treasury at a total cost of
£52,107,000 and at an average discount of 12.4%.

Since the year end and as at the date of this report, the Company has
repurchased 45,000 shares for costs of £585,000 at an average discount of 13.3%.

Impact

Shareholders approved the Combination proposals by an overwhelming majority at
the General Meeting held on 30 March 2026.

The tender offer for 28% of issued share capital was oversubscribed, with
holders of 47.5% of the Company’s share capital electing to take cash.

The combination of the Company with THRG took effect on the 16 April 2026,
pursuant to which the Company acquired net assets of approximately £303.2
million from THRG in consideration for the issue of 20,892,579 new ordinary
shares to THRG shareholders in accordance with the Scheme. These new ordinary
shares were admitted to trading on the main market for listed securities of the
London Stock Exchange with effect from 17 April 2026.

Over the last five years, the Company’s discount has widened steadily, from an
average discount of 5.5% for the year to 28 February 2021 to 12.3% for the year
ended 28 February 2026.

As at 12 May 2026 the Company’s shares were trading at a discount of 12.4% to
the cum income NAV (with debt at fair value). This compares to an average
discount for the Company’s sector of 11.6% (based on the Association of
Investment Companies sector average for the UK Smaller Companies peer group).

Over the last twelve years, the number of shares held by retail shareholders has
increased from 46.2% (as at 28 February 2014) to 61.7% at 28 February 2026.

Investment mandate and objective

Issue

The Board is committed to promoting the role and success of the Company in
delivering on its investment mandate to shareholders over the long term. The
Board also has responsibility to shareholders to ensure that the Company’s
portfolio of assets is invested in line with the stated investment objective and
in a way that ensures an appropriate balance between spread of risk and
portfolio returns.

Engagement

The Board works closely with the Investment Manager throughout the year in
further developing our investment strategy and underlying policies, not simply
for the purpose of achieving the Company’s investment objective but in the
interests of shareholders and future investors.

A significant amount of time was expended this year reviewing strategic options
for the Company, agreeing heads of terms for a Scheme of Combination with THRG
(`the Scheme’) and drafting the requisite documentation. As part of this
process, the Board proposed changes to the Company’s investment policy which
were set out in a Circular to shareholders dated 20 February 2026. Conditional
on shareholder approval for the Scheme, the Board proposed to give the
investment manager additional latitude to invest in small cap stocks outside of
the Benchmark index and to invest up to 15% of the Company’s gross assets, at
the time of acquisition, in global small cap stocks which are listed overseas
and which do not have a primary or secondary UK listing. The Board believes that
this provides the Manager with additional flexibility to diversify risk and
generate alpha from a wider investment universe in times when the UK small cap
market is particularly challenged and under stress.

Impact

Shareholders approved the changes to the Company’s investment policy at the
General Meeting held on 30 March 2026, and these were implemented on completion
of the Scheme on 16 April 2026.

Additional information on the portfolio activities undertaken by the Investment
Manager can be found in the Investment Manager’s Report above.

Details regarding the Company’s NAV and share price performance can be found in
the Chairman’s Statement above and in the Strategic Report above (and contained
within the Annual Report and Financial Statements).

Responsible investing

Issue

More than ever, good governance and consideration of sustainable investment is a
key factor in making investment decisions. Climate change is becoming a defining
factor in companies’ long-term prospects across the investment spectrum, with
significant and lasting implications for economic growth and prosperity.

Engagement

The Board believes that responsible investment and sustainability are important
to the longer-term delivery of the Company’s success. The Board works closely
with the Investment Manager to regularly review the Company’s performance,
investment strategy and underlying policies to ensure that the Company’s
investment objective continues to be met in an effective and responsible way in
the interests of shareholders and future investors.

The Investment Manager’s approach to the consideration of Environmental, Social
and Governance (ESG) factors in respect of the Company’s portfolio, as well as
the Investment Manager’s engagement with investee companies, are kept under
review by the Board. The Investment Manager reports to the Board in respect of
how consideration of material ESG risks and opportunities is integrated into the
investment process; a summary of BlackRock’s approach to ESG integration is set
out within the Annual Report and Financial Statements. The Investment Manager’s
engagement and voting policy is detailed within the Annual Report and Financial
Statements and on the BlackRock website.

Impact

The Board and the Investment Manager believe there is a positive correlation
between ESG practices and investment performance. Details of the Company’s
performance in the year are given in the Chairman’s Statement and the
Performance Record above.

The Company does not meet the criteria for Article 8 or 9 products under the EU
Sustainable Finance Disclosure Regulation (SFDR) and the investments underlying
this financial product do not take into account the EU criteria for
environmentally sustainable economic activities. The Investment Manager has
access to a range of data sources, including principal adverse indicator (PAI)
data, when making decisions on the selection of investments. However, whilst
BlackRock considers ESG risks for all portfolios and these risks may coincide
with environmental or social themes associated with the PAIs, unless stated
otherwise in the AIFMD Disclosure Document, the Company does not commit to
considering PAIs in driving the selection of its investments.

Gearing and sources of finance

Issue

The Board believes that it is important for the Company to have an appropriate
range of borrowings and facilities in place to provide a balance between longer
-term and short-term maturities and between fixed and floating rates of
interest.

Engagement

Gearing levels and sources of funding are reviewed regularly by the Board with a
view to ensuring that the Company has a suitable mix of financing at competitive
market rates.

As at 28 February 2026, the Company had the following borrowing facilities in
place: long-term fixed rate funding in the form of a £25 million senior
unsecured fixed rate private placement note issued in May 2017 at a coupon of
2.74% with a 20 year maturity, a £20 million senior unsecured fixed rate private
placement note issued in December 2019 at a coupon of 2.41% with a 25 year
maturity and a £25 million senior unsecured fixed rate private placement note
issued in September 2021 at a coupon of 2.47% with a 25 year maturity. Shorter
-term variable rate funding consisted of an uncommitted overdraft facility of
£60 million with The Bank of New York Mellon (International) Limited (BNY) with
interest charged at SONIA plus 100 basis points (bps).

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

Impact

The Board has been proactive over the last few years in putting in place
structural fixed gearing with the issue of £70 million of private placement
notes issued between May 2017 and September 2021 to lock in fixed rate, long
dated, Sterling denominated financing at a highly competitive pricing level. The
Board also has in place a bank overdraft with BNY at a competitive interest rate
(SONIA plus 100 bps) and a lower non-utilisation fee (4 bps).

For the year to 28 February 2026, it is estimated that gearing contributed 0.3%
to the NAV per share performance.

At the year end, the Company’s gearing was 5.7% of net assets.

Service levels of third-party providers

Issue

The Board acknowledges the importance of ensuring that the Company’s principal
suppliers are providing a suitable level of service at a competitive price:
including the Manager in respect of investment performance and delivering on the
Company’s investment mandate; the Custodian and Depositary in respect of their
duties towards safeguarding the Company’s assets; the Registrar in its
maintenance of the Company’s share register and dealing with investor queries
and the Company’s Broker in respect of the provision of advice and acting as a
market maker for the Company’s shares.

Engagement

The Manager reports to the Board on the Company’s performance on a regular
basis. The Board carries out a robust annual evaluation of the Manager’s
performance, their commitment and available resources. The Board performs an
annual review of the service levels of all third-party service providers and
concludes on their suitability to continue in their role. The Board receives
regular updates from the AIFM, Depositary, Registrar and Broker on an ongoing
basis. The Board works closely with the Manager to gain comfort that relevant
business continuity plans are in place and are operating effectively for all of
the Company’s service providers.

As part of the ongoing review and oversight of service provider costs, and
subject to the approval of the Scheme of Combination with THRG, the Board
negotiated a revised management fee equal to: (i) 0.5% per annum on the first
£500 million of the Company’s NAV; (ii) 0.475% per annum on the Company’s NAV
between £500 million and £750 million; and (iii) 0.45% per annum on the
Company’s NAV in excess of £750 million. As well as a lower rate, the new fee is
applied to net assets (previously the fee was applied to total assets less
current liabilities). As the Company has £70 million of fixed debt, the change
in the basis of the fee represented a significant reduction.

Impact

All performance evaluations were performed on a timely basis and the Board
concluded that all third-party service providers, including the Manager were
operating effectively and providing a good level of service. The Board has
received updates in respect of business continuity planning from the Company’s
Manager, Custodian, Depositary, Fund Administrator, Broker, Registrar and
printers, and is confident that the arrangements in place are appropriate.

The revised management fee was implemented with effect from 16 April 2026, and
has resulted in a significantly reduced projected operating charges ratio of
c.0.63%, the lowest in the AIC UK Small Cap sector for a trust without a
performance fee, which the Board believes represents excellent value for
investors.

In addition to the revised fee, the Board negotiated a six month fee waiver as a
contribution from BlackRock to the costs of the Scheme transaction.

Board composition

Issue

The Board is committed to ensuring that its own composition brings an
appropriate balance of knowledge, experience and skills, and that it is
compliant with best corporate governance practice under the UK Code, including
guidance on tenure and the composition of the Board’s committees.

Engagement

The Board engaged an external firm (Linstock) to carry out an independent
external evaluation of the Board in 2025.

All Directors are subject to a formal evaluation process on an annual basis and
it was concluded that the Board, its Committees and the Chairman were all
performing in an effective manner. More details are given within the Annual
Report and Financial Statements.

All Directors stand for re-election/election by shareholders annually.

Shareholders may attend the AGM and raise any queries in respect of Board
composition or individual Directors in person or may contact the Company
Secretary or the Chairman using the details provided within the Annual Report
and Financial Statements with any issues.

The Board has implemented a policy of limiting directors’ tenure to nine years.
Subject to the constraints of effective succession planning, it is the Board’s
aim that no Director will serve on the Board for more than nine years (or twelve
years in the case of the Chairman). The longer time limit for the Chairman’s
tenure is to allow for continuity of leadership in circumstances where a
Chairman is appointed from the ranks of existing Board members after having
already served on the Board for a period of time.

Impact

As at 15 May 2026, the Board had a 43:57 male to female gender ratio, in
accordance with relevant regulation and best practice, and will continue to
consider other diversity characteristics, such as age, ethnicity, gender,
disability, educational or professional background when appraising Board
composition.

The Parker Review in respect of board diversity and the recent changes to the
FCA’s Listing Rules set diversity targets and associated disclosure requirements
for UK companies listed on the premium and standard segment of the London Stock
Exchange. Listing Rule 9.8.6R (9) requires listed companies to include a
statement in their annual reports and accounts in respect of certain targets on
board diversity, or if those new targets have not been met to disclose the
reasons for this. This new requirement applies to accounting periods commencing
on or after 1 April 2022 and therefore the Company has reported against these
diversity targets for the current year ending 28 February 2026.

Further information on the composition and diversity of the Board can be found
in the Corporate Governance Statement contained within the Annual Report and
Financial Statements.

At the start of the year under review, no Board Director had tenure in excess of
nine years.

Details of each Director’s contribution to the success and promotion of the
Company are set out in the Directors’ Report contained within the Annual Report
and Financial Statements and details of Directors’ biographies can be found
within the Annual Report and Financial Statements.

The Directors are not aware of any issues that have been raised directly by
shareholders in respect of Board composition in the year under review. Details
for the proxy voting results in favour and against individual Directors’ re
-election at the 2025 AGM are given on the Company’s website at
www.blackrock.com/uk/brsc.

On 5 May 2023, the Directors established a combined Nomination and Remuneration
Committee to perform these duties on an ongoing basis. This combined Committee
meets annually in February/March each year, or more frequently as required on an
ad hoc basis.

Shareholders

Issue

Continued shareholder support and engagement are critical to the continued
existence of the Company and the successful delivery of its long-term strategy.

Engagement

For the year under review, and as described above, the Board has been active in
pursuing strategic opportunities to enhance the attractiveness of the Company to
investors and deliver value to shareholders, resulting in the publication of the
circular on 20 February 2026 proposing the Scheme of Combination with THRG. This
process was driven in part by feedback from shareholders indicating a preference
for increased scale and liquidity. As part of this process the Board engaged
with shareholders representing a significant proportion of the Company’s share
register and obtained feedback which was incorporated into the proposals.

The Board is committed to maintaining open channels of communication and to
engage with shareholders and welcomes and encourages attendance and
participation from shareholders at its Annual General Meetings. If shareholders
wish 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 to meet directly with
shareholders periodically to understand their views on governance and the
Company’s performance where they wish to do so. He may be contacted via the
Company Secretary whose details are given within the Annual Report and Financial
Statements.

The Annual Report and Half Yearly Financial Report are available on the
Company’s website and are also circulated to shareholders either in printed copy
or via electronic communications. In addition, regular updates on performance,
monthly factsheets, the daily NAV and other information are also published on
the website at www.blackrock.com/uk/brsc.

The Board also works closely with the Manager to develop the Company’s marketing
strategy, with Ms Afe being actively involved in all aspects including utilising
external marketing consultants where appropriate, with the aim of ensuring
effective communication with shareholders in respect of the investment mandate
and objective. Unlike trading companies, one-to-one shareholder meetings usually
take the form of a meeting with the Portfolio Manager as opposed to members of
the Board. As well as attending regular investor meetings, the portfolio
managers hold regular discussions with wealth management desks and offices to
build on the case for, and understanding of, long-term investment opportunities
in the UK smaller companies’ sector.

The Manager also coordinates public relations activity, including meetings
between the portfolio managers and shareholders and potential investors to set
out their vision for the portfolio strategy and outlook for the region and in
the year under review, the Company held a number of webcasts and virtual
conferences as well as meeting with investors by videoconference.

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

Impact

Shareholders approved the Scheme of Combination with THRG by an overwhelming
majority at the General Meeting on 30 March 2026.

The Board signed an extension to its existing standstill agreement with Saba
Capital to June 2030. Other than the change in date, the terms of this agreement
remain unchanged. More detail can be found at the following link:
https://www.londonstockexchange.com/news-article/BRSC/agreement-with
-saba/16863463.

The Board values any feedback and questions from shareholders ahead of and
during Annual General Meetings in order to gain an understanding of their views
and will take action when and as appropriate. Feedback and questions will also
help the Company evolve its reporting, aiming to make reports more transparent
and understandable. Feedback from all substantive meetings between the
Investment Manager and shareholders will be shared with the Board. The Directors
will also receive updates from the Company’s broker on any feedback from
shareholders, as well as share trading activity, share price performance and an
update from the Investment Manager.

The portfolio management team attended a number of professional investor
meetings (mainly by videoconference) and held discussions with many different
wealth management desks and offices in respect of the Company during the year
under review. The portfolio manager also participated in a panel discussion at
the Association of Investment Companies annual conference, focused on UK
equities being undervalued by historical standards. In addition, the portfolio
manager met with a number of investors throughout the year. Investors gave
positive feedback in respect of the portfolio manager, the good long-term track
record, clear investment strategy and low fee.

Some investors commented that they liked the fact that (in common with many
closed-ended funds across the sector) the Company’s discount had widened, making
the shares excellent value. Investors expressed concerns over the outlook for UK
consumers and the potential for economic data to deteriorate.

For and on behalf of the Board
RONALD GOULD
Chairman
15 May 2026

RELATED PARTY TRANSACTIONS: TRANSACTIONS WITH THE MANAGER AND AIFM

BlackRock Fund Managers Limited (BFM) provides management and administration
services to the Company under a contract which is terminable on six months’
notice. BFM has (with the Company’s consent) delegated certain portfolio and
risk management services, and other ancillary services to BlackRock Investment
Management (UK) Limited (BIM (UK)). Further details of the investment management
contract are disclosed in the Directors’ Report contained within the Annual
Report and Financial Statements.

The investment management fee for the year ended 28 February 2026 amounted to
£3,908,000 (2025: £4,611,000) as disclosed in note 4 to the Financial
Statements. At the year end, £1,915,000 was outstanding in respect of the
management fee (2025: £4,488,000).

In addition to the above services, BIM (UK) provided the Company with marketing
services. The total fees paid or payable for these services for the year ended
28 February 2026 amounted to £269,000 including VAT (2025: £195,000). Marketing
fees of £240,000 (2025: £137,000) were outstanding at the year end.

During the year, the Manager pays the amounts due to the Directors. These fees
are then reimbursed by the Company for the amounts paid on its behalf. As at 28
February 2026, an amount of £240,000 (2025: £129,000) was payable to the Manager
in respect of Directors’ fees.

The Company holds an investment in the BlackRock Institutional Cash Series plc –
Sterling Liquid Environmentally Aware Fund of £36,146,000 (2025: £nil) which has
been presented in the financial statements as a cash equivalent. This is a fund
managed by a company within the BlackRock Group. The Company’s investment in the
Cash Fund is held in a share class on which no management fees are paid to
BlackRock to avoid double dipping.

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

RELATED PARTY DISCLOSURE: DIRECTORS’ EMOLUMENTS

At the date of this report, the Board consists of non-executive Directors, all
of whom are considered to be independent of the Manager by the Board.
Disclosures of the Directors’ interests in the ordinary shares of the Company
and fees and expenses payable to the Directors are set out in the Directors’
Remuneration Report, contained within the Annual Report and Financial
Statements. At 28 February 2026, an amount of £17,000 (2025: £19,000) was
outstanding in respect of Directors’ fees.

None of the Directors has a service contract with the Company. For the year
ended 28 February 2026, the Chairman received an annual fee of £52,000, the
Audit Committee Chairman received an annual fee of £41,000, and the other
Directors received £35,000 per annum as a base fee.  The Senior Independent
Director received an additional fee of £2,000 on a pro-rata basis and the Chair
of the Nomination and Remuneration Committee received an additional fee of
£1,000 on a pro-rata basis. Following a review on 16 April 2026, and with effect
from 1 March 2026, Directors’ fees will be increased in line with inflation
(broadly based on CPI at 28 February 2026 of 3.2%). From this date the Chairman
will receive an annual fee of £53,664, the Audit Committee Chairman will receive
£42,312 and the Senior Independent Director (SID) and the Chair of the
Nomination and Remuneration Committee will receive £38,184. Other Directors will
receive £36,120.

Statement of Directors’ Responsibilities in respect of the Annual Report and
Financial Statements

The Directors are responsible for preparing the Annual Report and Financial
Statements in accordance with applicable law and regulations. Company law
requires the Directors to prepare financial statements for each financial year.
Under that law they have elected to prepare the financial statements in
accordance with applicable law and United Kingdom Accounting Standards (United
Kingdom Generally Accepted Accounting Practice).

Under company law, the Directors must not approve the financial statements
unless they are satisfied that they give a true and fair view of the state of
affairs of the Company as at the end of each financial year and of the profit or
loss of the Company for that year.

In preparing those financial statements, the Directors are required to:

· present fairly the financial position, financial performance and cash flows
of the Company;
· select suitable accounting policies and then apply them consistently;
· present information, including accounting policies, in a manner that
provides relevant, reliable, comparable and understandable information;
· make judgements and estimates that are reasonable and prudent;
· state whether applicable UK Accounting Standards have been followed, subject
to any material departures disclosed and explained in the financial statements;
and
· prepare the financial statements on the going concern basis unless it is
inappropriate to presume that the Company will continue in business.

The Directors are responsible for keeping adequate accounting records that are
sufficient to show and explain the Company’s transactions and disclose with
reasonable accuracy at any time the financial position of the Company and that
enable them to ensure that the Financial Statements and the Directors’
Remuneration Report comply with the Companies Act 2006. They are also
responsible for safeguarding the assets of the Company and hence for taking
reasonable steps for the prevention and detection of fraud and other
irregularities.

The Directors are also responsible for preparing the Strategic Report,
Directors’ Report, the Directors’ Remuneration Report, the Corporate Governance
Statement and the Report of the Audit Committee in accordance with the Companies
Act 2006 and applicable regulations, including the requirements of the Listing
Rules and the Disclosure Guidance and Transparency Rules. The Directors have
delegated responsibility to the Manager for the maintenance and integrity of the
Company’s corporate and financial information included on BlackRock’s website.
Legislation in the United Kingdom governing the preparation and dissemination of
financial statements may differ from legislation in other jurisdictions.

Each of the Directors, whose names are listed within the Annual Report and
Financial Statements, confirms that, to the best of their knowledge:

· the Financial Statements, prepared in accordance with applicable accounting
standards, give a true and fair view of the assets, liabilities, financial
position and profit or loss of the Company; and
· the Strategic Report contained in the Annual Report and Financial Statements
includes a fair review of the development and performance of the business and
the position of the Company, together with a description of the principal risks
and uncertainties that it faces.

The UK Code also requires Directors to ensure that the Annual Report and
Financial Statements are fair, balanced and understandable. In order to reach a
conclusion on this matter, the Board has requested that the Audit Committee
advise on whether it considers that the Annual Report and Financial Statements
fulfil these requirements. The process by which the Committee has reached these
conclusions is set out in the Audit Committee’s report contained within the
Annual Report and Financial Statements. As a result, the Board has concluded
that the Annual Report and Financial Statements for the year ended 28 February
2026, taken as a whole, are fair, balanced and understandable and provide the
information necessary for shareholders to assess the Company’s position,
performance, business model and strategy.

For and on behalf of the Board
RONALD GOULD
Chairman
15 May 2026

Income Statement

for the year ended 28 February 2026

2026 2025
Notes Revenue Capital Total Revenue Capital Total
£’000 £’000 £’000 £’000 £’000 £’000

Gains/(losses) on – 45,554 45,554 – (19,794) (19,794)
investments held
at fair value
through profit or
loss
Gains/(losses) on – 39 39 – (3) (3)
foreign exchange
Income from 3 19,609 797 20,406 22,684 875 23,559
investments held
at
fair value
through profit or
loss
Other income 3 1,194 – 1,194 1 – 1
——- ——- ——- ——- ——– ——–
— — — — — —
Total 20,803 46,390 67,193 22,685 (18,922) 3,763
income/(loss)
====== ====== ====== ====== ====== ======
Expenses
Investment 4 (977) (2,931) (3,908) (1,153) (3,458) (4,611)
management fee
Other operating 5 (1,127) (27) (1,154) (940) (25) (965)
expenses
——- ——- ——- ——- ——– ——–
— — — — — —
Total operating (2,104) (2,958) (5,062) (2,093) (3,483) (5,576)
expenses
====== ====== ====== ====== ====== ======
Net profit/(loss) 18,699 43,432 62,131 20,592 (22,405) (1,813)
before finance
costs and
taxation
Finance costs (468) (1,399) (1,867) (627) (1,781) (2,408)
Net profit/(loss) 18,231 42,033 60,264 19,965 (24,186) (4,221)
before taxation
——- ——- ——- ——- ——– ——–
— — — — — —
Taxation (59) – (59) (47) – (47)
Net profit/(loss) 18,172 42,033 60,205 19,918 (24,186) (4,268)
after taxation
——- ——- ——- ——- ——– ——–
— — — — — —
Earnings/(loss) 7 43.77 101.24 145.01 42.53 (51.64) (9.11)
per ordinary
share
(pence) – basic
and diluted
====== ====== ====== ====== ====== ======

The total columns of this statement represent the Company’s profit and loss
account. The supplementary revenue and capital accounts are both prepared under
guidance published by the Association of Investment Companies (AIC). All items
in the above statement derive from continuing operations. No operations were
acquired or discontinued during the year. All income is attributable to the
equity holders of the Company.

The net profit/(loss) for the year disclosed above represents the Company’s
total comprehensive income/(loss).

Statement of Changes in Equity

for the year ended 28 February 2026

[][]
Notes Called Share Capital Capital Revenue
Total
up premium redemption reserves reserve
share account reserve
capital
£’000 £’000 £’000 £’000 £’000
£’000
For the year
ended 28
February 2026
At 28  12,498  51,980  1,982  529,771  18,548
 614,779
February 2025
Total
comprehensive
income:
 Net profit  –  –  – 42,033 18,172
 60,205
for the year
Transactions
with owners,
recorded
directly to
equity:
 Ordinary 11,  –  –  – (51,753)  –
(51,753)
shares 12
repurchased
into treasury
 Share 11,  –  –  – (354)  –
(354)
repurchase 12
costs
 Tender offer  –  –  – (300)  –
(300)
costs
 Dividends 6  –  –  –  – (18,735)
(18,735)
paid[1]
——- ——- ———- ——– ——– ——-
–
—- — – — — —
–
–
At 28  12,498  51,980  1,982 519,397 17,985
 603,842
February 2026
====== ====== ====== ====== ======
======

For the year
ended 28
February 2025
At 29  12,498  51,980  1,982  601,098  18,648
 686,206
February 2024
Total
comprehensive
(loss)/income:

 Net  –  –  – (24,186)  19,918
(4,268)
(loss)/profit
for the
year
Transactions
with owners,
recorded
directly to
equity:
 Ordinary 11,  –  –  – (46,838)  –
(46,838)
shares 12
repurchased
into treasury
 Share 11,  –  –  – (303)  –
(303)
repurchase 12
costs
 Dividends 6  –  –  –  – (20,018)
(20,018)
paid[2]
——- ——- ———- ——– ——– ——-
–
—- — – — — —
–
–
At 28  12,498  51,980  1,982  529,771  18,548
 614,779
February 2025
====== ====== ====== ====== ======
======

[1]  Interim dividend paid in respect of the year ended 28 February 2026 of
16.00p was declared on 24 October 2025 and paid on 10 December 2025. Final
dividend paid in respect of the year ended 28 February 2025 of 28.50p was
declared on 7 May 2025 and paid on 26 June 2025.

[2]  Interim dividend paid in respect of the year ended 28 February 2025 of
15.50p was declared on 24 October 2024 and paid on 4 December 2024. Final
dividend paid in respect of the year ended 29 February 2024 of 27.00p was
declared on 14 May 2024 and paid on 27 June 2024.

For information on the Company’s distributable reserves, please refer to the
Annual Report and Financial Statements.

Balance Sheet

as at 28 February 2026

Notes 2026 2025
£’000 £’000
Non current assets
Investments held at fair value  638,084  696,573
through profit or loss
Current assets
Current taxation asset  76  84
Debtors 8  7,014  9,738
Cash and cash equivalents –  36,146 –
Cash Fund
Total current assets  43,236  9,822
======== ========
Current liabilities
Cash and cash equivalents – (262) (9,230)
bank overdraft
Creditors – amounts falling due 9 (7,645) (12,843)
within one year
Net current  35,329 (12,251)
assets/(liabilities)
————– ————–
Total assets less current  673,413  684,322
liabilities
======== ========
Creditors – amounts falling due 10 (69,571) (69,543)
after more than one year
Net assets  603,842  614,779
======== ========
Total equity
Called up share capital 11  12,498  12,498
Share premium account 12  51,980  51,980
Capital redemption reserve 12  1,982  1,982
Capital reserves 12 519,397  529,771
Revenue reserve 12 17,985  18,548
Total shareholders’ funds 7  603,842  614,779
————– ————–
Net asset value per ordinary  1,516.70  1,403.45
share (debt at par value)
(pence)
————– ————–
Net asset value per ordinary  1,579.08  1,463.44
share (debt at fair value)
(pence)
======== ========

Statement of Cash Flows

for the year ended 28 February 2026

[][]
2026 2025
£’000 £’000
Operating activities
Net profit/(loss) before taxation[1] 60,264 (4,221)
Changes in working capital items:
 Decrease in debtors 407 348
 (Decrease)/increase in other (2,033) 1,065
creditors
 Decrease/(increase) in amounts due 2,317 (5,293)
from brokers
 (Decrease)/increase in amounts due (926) 3,143
to brokers
Other adjustments:
 Finance costs 1,867 2,408
 (Gains)/losses on investments held (45,554) 19,794
at fair value through profit or loss
 Net (gains)/losses on foreign (39) 3
exchange
 Special dividends allocated to (797) (875)
capital
 Sale of investments held at fair 545,696 546,719
value through profit or loss
 Purchase of investments held at (440,856) (497,033)
fair value through profit or loss
Net cash inflow from operating 120,346 66,058
activities before taxation
————– ————–
Taxation paid (51) (47)
Net cash inflow from operating 120,295 66,011
activities
————– ————–
Financing activities
Ordinary shares repurchased into (53,994) (44,663)
treasury
Share repurchase costs (354) (303)
Tender offer costs (300) –
Interest paid (1,837) (2,383)
Dividends paid (18,735) (20,018)
Net cash outflow from financing (75,220) (67,367)
activities
————– ————–
Increase/(decrease) in cash and cash 45,075 (1,356)
equivalents
Effect of foreign exchange rate 39 (3)
changes
Cash and cash equivalents at (9,230) (7,871)
beginning of year
Cash and cash equivalents at end of 35,884 (9,230)
year
————– ————–
Comprised of:
Cash Fund[2] 36,146 –
Bank overdraft (262) (9,230)
————– ————–
35,884 (9,230)
======== ========

[1]  Dividends and interest received in cash during the year amounted to
£19,988,000 and £1,071,000 (2025: £22,774,000 and £1,000).

[2    ]Cash Fund represents funds held on deposit with the BlackRock
Institutional Cash Series plc – Sterling Liquid Environmentally Aware Fund.

Notes to the Financial Statements

for the year ended 28 February 2026

1. Principal activity

The principal activity of the Company is that of an investment trust company
within the meaning of Section 1158 of the Corporation Tax Act 2010.

2. Accounting policies

The principal accounting policies adopted by the Company are set out below.

(a) Basis of preparation

The financial statements have been prepared on a going concern basis in
accordance with The Financial Reporting Standard applicable in the UK and
Republic of Ireland (FRS 102) and the revised Statement of Recommended Practice
– Financial Statements of Investment Trust Companies and Venture Capital Trusts
(SORP), issued by the Association of Investment Companies (AIC) in October 2019
and updated in July 2022, and the provisions of the Companies Act 2006.

Substantially, all of the assets of the Company consist of securities that are
readily realisable and, accordingly, the Directors are satisfied that the
Company has adequate resources to continue in operational existence for the
period to 28 February 2028, being  a period of at least 12 months from the date
of approval of the financial statements, and therefore consider the going
concern assumption to be appropriate. The Directors have reviewed compliance
with the covenants associated with the loan notes and revolving credit facility,
income and expense projections and the liquidity of the investment portfolio in
making their assessment.

The Directors have considered the impact of climate change on the value of the
investments included in the Financial Statements and have concluded that there
was no further impact of climate change to be considered as the investments are
valued based on market pricing as required by FRS 102.

None of the Company’s other assets and liabilities were considered to be
potentially impacted by climate change.

The principal accounting policies adopted by the Company are set out below.
Unless specified otherwise, the policies have been applied consistently
throughout the year and are consistent with those applied in the preceding year.
All of the Company’s operations are of a continuing nature.

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

(b) Presentation of Income Statement

In order to better reflect the activities of an investment trust company and in
accordance with guidance issued by the AIC, supplementary information which
analyses the Income Statement between items of a revenue and a capital nature
has been presented alongside the Income Statement.

(c) Segmental reporting

The Directors are of the opinion that the Company is engaged in a single segment
of business being investment business.

(d) Income

Dividends receivable on equity shares are treated as revenue for the year on an
ex-dividend basis. Where no ex-dividend date is available, dividends receivable
on or before the year end are treated as revenue for the year. Provisions are
made for dividends not expected to be received. The return on a debt security is
recognised on a time apportionment basis.

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

Dividends are accounted for in accordance with Section 29 of FRS 102 on the
basis of income actually receivable, without adjustment for tax credits
attaching to the dividend. Dividends from overseas companies continue to be
shown gross of withholding tax.

Deposit interest receivable is accounted for using the effective interest rate
method in accordance with Section 11 of FRS 102.

Where the Company has elected to receive its dividends in the form of additional
shares rather than in cash, the cash equivalent of the dividend foregone is
recognised in the revenue account of the Income Statement. Any excess in the
value of the shares over the amount of the cash dividend is recognised in
capital reserves.

(e) Expenses

All expenses, including finance costs, are accounted for on an accruals basis.
Expenses have been charged wholly to the revenue account of the Income
Statement, except as follows:

· expenses which are incidental to the acquisition or disposal of an
investment are treated as capital. Details of transaction costs on the purchases
and sales of investments are shown within the Annual Report and Financial
Statements;
· expenses are treated as capital where a connection with the maintenance of
enhancement of the value of the investments can be demonstrated; and
· the investment management fee and finance costs have been allocated 75% to
the capital account and 25% to the revenue account of the Income Statement in
line with the Board’s expected long-term split of returns, in the form of
capital gains and income respectively, from the investment portfolio.

(f) Taxation

The tax expense represents the sum of the tax currently payable and deferred
tax. The tax currently payable is based on the taxable profit for the year.
Taxable profit differs from net profit as reported in the Income Statement
because it excludes items of income or expenses that are taxable or deductible
in other years and it further excludes items that are never taxable or
deductible. The Company’s liability for current tax is calculated using tax
rates that were applicable at the balance sheet date.

The current tax effect of different items of expenditure is allocated between
capital and revenue on the marginal basis using the Company’s effective rate of
corporation tax for the accounting period.

Deferred taxation is recognised in respect of all timing differences at the
financial reporting date, where transactions or events that result in an
obligation to pay more taxation in the future or right to less taxation in the
future have occurred at the balance sheet date. Deferred tax is measured on a
non-discounted basis, at the average tax rates that are expected to apply in the
periods in which the timing differences are expected to reverse based on tax
rates and laws that have been enacted or substantively enacted by the balance
sheet date. This is subject to deferred taxation assets only being recognised if
it is considered more likely than not that there will be suitable profits from
which the future reversal of the timing differences can be deducted.

(g) Investments held at fair value through profit or loss

The Company’s investments are classified as held at fair value through profit or
loss in accordance with Sections 11 and 12 of FRS 102 and are managed and
evaluated on a fair value basis in accordance with its investment strategy.

All investments are classified upon initial recognition as held at fair value
through profit or loss. Purchases of investments are recognised on a trade date
basis. Sales of assets are recognised at the trade date of the disposal and the
proceeds will be measured at fair value, which will be regarded as the proceeds
of the sale less any transaction costs.

The fair value of the financial investments is based on their quoted bid price
at the balance sheet date on the exchange on which the investment is quoted,
without deduction for the estimated future selling costs.

Unquoted investments are valued by the Directors at fair value using
International Private Equity and Venture Capital Valuation Guidelines. This
policy applies to all current and non-current asset investments of the Company.

Changes in the value of investments held at fair value through profit or loss
and gains and losses on disposal are recognised in the Income Statement as
`Gains or losses on investments held at fair value through profit or loss’. Also
included within this heading are transaction costs in relation to the purchase
or sale of investments.

The fair value hierarchy consists of the following three levels:

Level 1 – Quoted market price for identical instruments in active markets.

Level 2 – Valuation techniques using observable inputs.

Level 3 – Valuation techniques using significant unobservable inputs.

(h) Dividends payable

Under Section 32 of FRS 102, final dividends should not be accrued in the
financial statements unless they have been approved by shareholders before the
balance sheet date. Dividends payable to equity shareholders are recognised in
the Statement of Changes in Equity when they have been approved by shareholders
and have become a liability of the Company. Interim dividends are recognised in
the financial statements in the period in which they are paid.

(i) Foreign currency translation

In accordance with Section 30 of FRS 102, the Company is required to nominate a
functional currency, being the currency in which the Company predominately
operates. The functional and reporting currency is Sterling, reflecting the
primary economic environment in which the Company operates. Transactions in
foreign currencies are translated into Sterling at the rates of exchange ruling
on the date of the transaction. Foreign currency monetary assets and liabilities
are translated into Sterling at the rates of exchange ruling at the balance
sheet date. Profits and losses thereon are recognised in the capital account of
the Income Statement and taken to the capital reserve.

(j) Share repurchases, share re-issues and new share issues

Shares repurchased and subsequently cancelled – share capital is reduced by the
nominal value of the shares repurchased, and the capital redemption reserve is
correspondingly increased in accordance with Section 733 of the Companies Act
2006. The full cost of the repurchase is charged to the capital reserves.

Shares repurchased and held in treasury – the full cost of the repurchase is
charged to the capital reserves.

Where treasury shares are subsequently re-issued:

· amounts received to the extent of the repurchase price are credited to the
capital reserves; and
· any surplus received in excess of the repurchase price is taken to the share
premium account.

Where new shares are issued, the par value is taken to called up share capital
and amounts received to the extent of any surplus received in excess of the par
value are taken to the share premium account.

Share issue costs are charged to the share premium account. Costs on share re
-issues are charged to the capital reserves.

(k) Debtors

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

(l) Creditors

Creditors include purchases for future settlement, interest payable, share
buyback costs and accruals in the ordinary course of business. Creditors, loans
and debentures are classified as creditors – amounts due within one year if
payment is due within one year or less (or in the normal operating cycle of the
business if longer). If not, they are presented as creditors – amounts falling
due after more than one year. Debentures are held at par less amortised cost,
whilst all other creditors are held at fair value.

(m) Cash and cash equivalents

Cash comprises cash in hand and on demand deposits and bank overdrafts repayable
on demand. Cash equivalents include short-term, highly liquid investments, that
are readily convertible to known amounts of cash and that are subject to an
insignificant risk of changes in value.

The investment in the BlackRock Institutional Cash Series plc – Sterling Liquid
Environmentally Aware Fund has been presented in the financial statements as a
cash equivalent as it is held for short-term cash management purposes.

(n) Critical accounting estimates and judgements

The Company makes estimates and assumptions concerning the future. The resulting
accounting estimates and assumptions will, by definition, seldom equal the
related actual results. Estimates and judgements are regularly evaluated and are
based on historical experience and other factors, including expectations of
future events and that are believed to be reasonable under the circumstances.
The Directors do not believe that any accounting judgements or estimates have a
significant risk of causing material adjustment to the carrying amount of assets
and liabilities within the next financial year.

3. Income

[][][]
2026 2025
£’000 £’000
Investment income[1]:
UK dividends  14,966  18,567
UK special dividends  691  801
UK property income distributions  649  1,007
Dividends from UK REITs[2]  514  493
Overseas dividends  1,424  1,514
Overseas special dividends  966 –
Dividends from overseas REITs[2]  399  302
————– ————–
Total investment income  19,609  22,684
======== ========
Other income:
Bank interest  18  1
Interest from Cash Fund  1,176 –
Total other income  1,194  1
————– ————–
Total  20,803  22,685
======== ========

[1    ]UK and overseas dividends are disclosed based on the country of domicile
of the underlying portfolio company.

[2    ]REITs – real estate investment trusts.

Special dividends of £797,000 have been recognised in capital during the year
(2025: £875,000).

Dividends and interest received in cash during the year amounted to £19,988,000
and £1,071,000 (2025: £22,774,000 and £1,000).

4. Investment management fee

2026 2025
Revenue Capital Total Revenue Capital Total
£’000 £’000 £’000 £’000 £’000 £’000

Investment  977  2,931  3,908  1,153  3,458  4,611
management
fee
——- ——- —— ——- ———— ————
—– —– —— —–
Total  977  2,931  3,908  1,153  3,458  4,611
====== ====== ====== ====== ====== ======

Up to 16 April 2026, the investment management fee was based on a rate of 0.6%
of the first £750 million of total assets (excluding current year income) less
the current liabilities of the Company (the “Fee Asset Amount”), reducing to
0.5% above this level. The fee was calculated at the rate of one quarter of 0.6%
of the Fee Asset Amount up to the initial threshold of £750 million, and one
quarter of 0.5% of the Fee Asset Amount in excess thereof, at the end of each
quarter. With effect from 16 April 2026, the AIFM receives a revised management
fee equal to: (i) 0.5% per annum on the first £500 million of the Company’s Net
Asset Value (NAV);  (ii) 0.475% per annum on the Company’s NAV between £500
million and £750 million; and (iii) 0.45% per annum on the Company’s NAV in
excess of £750 million.

In addition to the revised fee, BlackRock has agreed to waive the management fee
for six months with effect from 16 April 2026 as a contribution to the costs of
the combination with THRG. The investment management fee is allocated 25% to the
revenue account and 75% to the capital account of the Income Statement.

5. Other operating expenses

[][][][]
2026 2025
£’000 £’000
Allocated to revenue:
Custody fees  6  9
Depositary fees  68  83
Auditors’ remuneration[1]  61  52
Registrar’s fee  55  46
Directors’ emoluments[2]  205 240
Marketing fees  269  195
AIC fees  26  22
Bank charges  24  24
Broker fees  35  23
Stock exchange listings  45  41
Printing and postage fees  60  39
Legal fees  44  43
Prior year expenses written back[3] – (11)
Other administrative costs  229 134
———– ———–
Total revenue expenses  1,127  940
======= =======
Allocated to capital:
Custody transaction charges[4]  27  25
Total capital expenses  27 25
———– ———–
Total  1,154  965
======= =======
[]
2026 2025
Ongoing charges[5] 0.8% 0.8%
======= =======

[1    ]No non-audit services were provided by the Company’s auditors (2025:
none).

[2]  Further information on Directors’ emoluments can be found in the Directors’
Remuneration Report contained within the Annual Report and Financial Statements.

[3]  No prior year expenses were written back during the year ended 28 February
2026 (2025: bank charges, printing and postage fees and miscellaneous fees).

[4]  For the year ended 28 February 2026, expenses of £27,000 (2025: £25,000)
were charged to the capital account of the Income Statement. These relate to
transaction costs charged by the Custodian on sale and purchase trades.

[5    ]The Company’s ongoing charges are calculated as a percentage of average
daily net assets and using the management fee and all other operating expenses,
excluding finance costs, direct transaction costs, custody transaction charges,
VAT recovered, taxation, prior year expenses written back and certain non
-recurring items. Alternative Performance Measure, see Glossary contained within
the Annual Report and Financial Statements.

6. Dividends

2026 2025
Dividends paid on Record date Payment date £’000 £’000
equity shares:

2024 Final of 27.00p 24 May 2024 27 June 2024  – 12,717
2025 Interim of 1 November 2024 4 December 2024  – 7,301
15.50p
2025 Final of 28.50p 16 May 2025 26 June 2025  12,285 –
2026 First Interim 7 November 2025 10 December 2025  6,450 –
of 16.00p
——— ———
Accounted for in the  18,735 20,018
financial statements
======= =======

The Directors have proposed a second and final interim dividend of 28.50p per
share in respect of the year ended 28 February 2026. The second and final
interim dividend will be paid, subject to shareholders’ approval, on 8 May 2026
to shareholders on the Company’s register on 10 April 2026. The proposed second
and final interim dividend has not been included as a liability in these
financial statements, as dividends are only recognised in the financial
statements when they have been approved by shareholders.

The total dividends payable in respect of the year which form the basis of
determining retained income for the purposes of Section 1158 of the Corporation
Tax Act 2010 and Section 833 of the Companies Act 2006, and the amount proposed
for the year ended 28 February 2026 meet the relevant requirements as set out in
this legislation.

[]
2026 2025
Dividends paid or proposed on equity £’000 £’000
shares:

First interim dividend paid of 16.00p  6,450 7,301
(2025: 15.50p)
Second and final interim dividend 11,347 12,285
proposed of 28.50p per share[1] (2025:
28.50p)
———— ————
Total 17,797 19,586
======= =======

[1]  Based upon 39,812,792 ordinary shares (excluding treasury shares) in issue
on 10 April 2026.

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

7. Returns and net asset value per share

Revenue earnings, capital earnings/(loss) and net asset value per ordinary share
are shown below and have been calculated using the following:

2026 2025

Revenue return attributable to ordinary 18,172 19,918
shareholders (£’000)
Capital profit/(loss) attributable to ordinary 42,033 (24,186)
shareholders (£’000)
———— ————
Total profit/(loss) attributable to ordinary 60,205 (4,268)
shareholders (£’000)
======= =======
Total shareholders’ funds (£’000) 603,842 614,779
======= =======
The weighted average number of ordinary shares in 41,517,247 46,833,380
issue during the year on which the earnings per
ordinary share was calculated was:
The actual number of ordinary shares in issue at 39,812,792 43,804,792
the end of each year on which the undiluted net
asset value was calculated was:
Earnings per share
Revenue earnings per share (pence) – basic and 43.77 42.53
diluted
Capital earnings/(loss) per share (pence) – basic 101.24 (51.64)
and diluted
———— ————
Total earnings/(loss) per share (pence) – basic 145.01 (9.11)
and diluted
======= =======

As at As at
28 February 28 February
2026 2025

Net asset value per ordinary 1,516.70  1,403.45
share (debt at par value)
(pence)
Net asset value per ordinary 1,579.08 1,463.44
share (debt at fair value)
(pence)
Ordinary share price (pence) 1,402.00 1,270.00
======= =======

8. Debtors

2026 2025
£’000 £’000
Sales for future settlement  6,553  8,870
Prepayments and accrued income  461  868
———— ————
Total  7,014  9,738
======= =======

9. Creditors – amounts falling due within one year

2026 2025
£’000 £’000
Purchases for future settlement  4,140  5,066
Interest payable  583  581
Share buybacks awaiting settlement  –  2,241
Accruals  2,922  4,955
———— ————
Total  7,645  12,843
======= =======

10. Creditors – amounts falling due after more than one year

2026 2025
£’000 £’000
2.74% loan note 2037 25,000 25,000
Unamortised loan note issue expenses (154) (168)
24,846 24,832
———— ————
2.41% loan note 2044 20,000 20,000
Unamortised loan note issue expenses (120) (127)
19,880 19,873
———— ————
2.47% loan note 2046 25,000 25,000
Unamortised loan note issue expenses (155) (162)
24,845 24,838
———— ————
Total 69,571 69,543
======= =======

The fair value of the 2.74% loan note has been determined based on a comparative
yield for UK Gilts for similar duration maturity and spreads, and as at 28
February 2026 equated to a valuation of 76.33p per note (2025: 73.47p), a total
of £19,083,000 (2025: £18,368,000). The fair value of the 2.41% loan note has
been determined based on a comparative yield for UK Gilts for similar duration
maturity and spreads, and as at 28 February 2026 equated to a valuation of
59.41p per note (2025: 57.61p), a total of £11,882,000 (2025: £11,522,000). The
fair value of the 2.47% loan note has been determined based on a comparative
yield for UK Gilts for similar duration maturity and spreads, and as at 28
February 2026 equated to a valuation of 55.09p per note (2025: 53.50p), a total
of £13,772,000 (2025: £13,375,000).

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

The £20 million loan note was issued on 3 December 2019. Interest on the note is
payable in equal half yearly instalments on 3 December and 3 June in each year.
The loan note 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 is payable in equal half yearly instalments on 24 May and 16 September
each year. The loan note is unsecured and is redeemable at par on 16 September
2046.

The Company also has available an uncommitted overdraft facility of £60 million
with The Bank of New York Mellon (International) Limited, of which £262,000 had
been utilised at 28 February 2026 (2025: £9,230,000).

11. Called up share capital

Ordinary Treasury Total Nominal
shares shares shares value
number number number £’000
Allotted, called up and fully
paid share capital comprised:
Ordinary shares of 25 pence
each
At 29 February 2024 47,319,792 2,673,731 49,993,523 12,498
Ordinary shares repurchased (3,515,000) 3,515,000 – –
into treasury
At 28 February 2025 43,804,792 6,188,731 49,993,523 12,498
Ordinary shares repurchased (3,992,000) 3,992,000 – –
into treasury
———– ———- ———- ———
—– —— —— ——-
At 28 February 2026 39,812,792 10,180,731 49,993,523 12,498
========= ========= ========= =========

During the year ended 28 February 2026, the Company repurchased 3,992,000 shares
(2025: 3,515,000) into treasury for a total consideration of £52,107,000 (2025:
£47,141,000).

Since 28 February 2026 and up to the latest practicable date of 12 May 2026,
45,000 ordinary shares have been repurchased into treasury for a total
consideration of £585,000.

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

12. Reserves

Distributable
reserves
Share Capital Capital Capital Revenue
premium redemption reserve reserve reserve
account reserve (arising on (arising on
investments revaluation
sold) of
investments
held)
£’000 £’000 £’000 £’000 £’000

At 29 51,980 1,982 565,497 35,601 18,648
February
2024
Movement
during the
year:
Losses on – – (2,573) – –
realisation
of
investments
Change in – – – (16,346) –
investment
holding
gains
Losses on – – (3) – –
foreign
currency
transactions
Finance – – (5,264) – –
costs and
expenses
charged to
capital
Net profit – – – – 19,918
for the
year
Ordinary – – (46,838) – –
shares
repurchased
into
treasury
Share – – (303) – –
buyback
costs
Dividends – – – – (20,018)
paid during
the year
——— ———- ————– ———– ———
——- —— — —– ——-
At 28 51,980 1,982 510,516 19,255 18,548
February
2025
========= ========= ========= ========= =========
Movement
during the
year:
Losses on – – (31,988) – –
realisation
of
investments
Change in – – – 78,339 –
investment
holding
gains
Gains on – – 39 – –
foreign
currency
transactions
Finance – – (4,357) – –
costs and
expenses
charged to
capital
Net profit – – – – 18,172
for the
year
Ordinary – – (51,753) – –
shares
repurchased
into
treasury
Share – – (354) – –
repurchase
costs
Tender offer – – (300) – –
cost
Dividends – – – – (18,735)
paid during
the year
——— ———- ————– ———– ———
——- —— — —– ——-
At 28 51,980 1,982 421,803 97,594 17,985
February
2026
========= ========= ========= ========= =========

The share premium account and capital redemption reserve of £51,980,000 and
£1,982,000 (2025: £51,980,000 and £1,982,000) are not distributable reserves
under the Companies Act 2006. In accordance with ICAEW Technical Release 02/17BL
on Guidance on Realised and Distributable Profits under the Companies Act 2006,
the capital reserve may be used as distributable reserves for all purposes and,
in particular, the repurchase by the Company of its ordinary shares and for
payments such as dividends. In accordance with the Company’s Articles of
Association, the capital reserve of £519,397,000 (2025: £529,771,000) and the
revenue reserve of £17,985,000 (2025: £18,548,000) may be distributed by way of
dividend. The gain on the capital reserve arising on the revaluation of
investments of £97,594,000 (2025: gain of £19,255,000) is subject to fair value
movements and may not be readily realisable at short notice, as such it may not
be entirely distributable. The investments are subject to financial risks, as
such capital reserves (arising on investments sold) and the revenue reserve may
not be entirely distributable if a loss occurred during the realisation of these
investments.

As at 28 February 2026, the Company’s distributable reserves (excluding capital
reserves on the revaluation of investments) amounted to £439,788,000 (2025:
£529,064,000).

13. Valuation of financial instruments

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

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

The fair value hierarchy has the following levels:

Level 1 – Quoted market price for identical instruments in active markets

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

Level 2 – Valuation techniques using observable inputs

This category includes instruments valued using quoted prices for similar
instruments in markets that are considered less active; or other valuation
techniques where significant inputs are directly or indirectly observable from
market data.

Level 3 – Valuation techniques using significant unobservable inputs

This category includes all instruments where the valuation technique includes
inputs not based on market data and these inputs could have a significant impact
on the instrument’s valuation.

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

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

Assessing the significance of a particular input to the fair value measurement
in its entirety requires judgement, considering factors specific to the asset or
liability including an assessment of the relevant risks including but not
limited to credit risk, market risk, liquidity risk, business risk and
sustainability risk. The determination of what constitutes `observable’ inputs
requires significant judgement by the Investment Manager, and these risks are
adequately captured in the assumptions and inputs used in measurement of Level 3
assets or liabilities.

Fair values of financial assets and financial liabilities

The table below is an analysis of the Company’s financial instruments measured
at fair value at the balance sheet date.

Level 1 Level 2 Level 3 Total
Financial assets at fair £’000 £’000 £’000 £’000
value through profit or
loss
Equity investments at 28  626,656 –  11,428  638,084
February 2026
Equity investments at 28  694,356 – 2,217 696,573
February 2025
======= ======= ======= =======

The Company held one Level 3 security as at 28 February 2026 (2025: one).

A reconciliation of fair value measurement of Level 3 is set out below.

2026 2025
Level 3 financial assets at fair value £’000 £’000
through profit or loss
Opening fair value  2,217  –
Additions at cost  11,303  770
Sale of investments (2,009)  –
Total profit or loss included in net
profit/(loss) on investments in the Income
Statement
– realised gain on investments sold 280  –
– unrealised (losses)/gains on assets held (363)  1,447
at the end of the year
————- ————-
Closing balance  11,428  2,217
======= =======

As at 28 February 2026, the investment in Rosebank Industries was a Level 3
investment due to there being a temporary suspension of trading in the ordinary
shares of the company and the price used to value the investment is the last
available market price. Due to the temporary suspension and use of last
available market price, a table of unobservable inputs is not applicable.

For exchange listed equity investments, the quoted price is the bid price.
Substantially all investments are valued based on unadjusted quoted market
prices. Where such quoted prices are readily available in an active market, such
prices are not required to be assessed or adjusted for any price related risks,
including climate risk, in accordance with the fair value related requirements
of the Company’s Financial Reporting Framework.

14. Transactions with the Investment Manager and AIFM

BlackRock Fund Managers Limited (BFM) provides management and administration
services to the Company under a contract which is terminable on six months’
notice. BFM has (with the Company’s consent) delegated certain portfolio and
risk management services, and other ancillary services to BlackRock Investment
Management (UK) Limited (BIM (UK)). Further details of the investment management
contract are disclosed in the Directors’ Report contained within the Annual
Report and Financial Statements.

The investment management fee for the year ended 28 February 2026 amounted to
£3,908,000 (2025: £4,611,000) as disclosed in note 4 to the Financial
Statements. At the year end, £1,915,000 was outstanding in respect of the
management fee (2025: £4,488,000).

In addition to the above services, BIM (UK) provided the Company with marketing
services. The total fees paid or payable for these services for the year ended
28 February 2026 amounted to £269,000 including VAT (2025: £195,000). Marketing
fees of £240,000 (2025: £137,000) were outstanding at the year end.

During the year, the Manager pays the amounts due to the Directors. These fees
are then reimbursed by the Company for the amounts paid on its behalf. As at 28
February 2026, an amount of £240,000 (2025: £129,000) was payable to the Manager
in respect of Directors’ fees.

The Company holds an investment in the BlackRock Institutional Cash Series plc –
Sterling Liquid Environmentally Aware Fund of £36,146,000 (2025: £nil) which has
been presented in the financial statements as a cash equivalent. This is a fund
managed by a company within the BlackRock Group. The Company’s investment in the
Cash Fund is held in a share class on which no management fees are paid to
BlackRock to avoid double dipping.

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

15. Related parties disclosures

Directors’ emoluments

At the date of this report, the Board consists of non-executive Directors, all
of whom are considered to be independent of the Manager by the Board.
Disclosures of the Directors’ interests in the ordinary shares of the Company
and fees and expenses payable to the Directors are set out in the Directors’
Remuneration Report. At 28 February 2026, an amount of £17,000 (2025: £19,000)
was outstanding in respect of Directors’ fees.

Significant holdings

The following investors are:

a.   funds managed by the BlackRock Group or are affiliates of BlackRock, Inc.
(Related BlackRock Funds) or

b.   investors (other than those listed in (a) above) who held more than 20% of
the voting shares in issue in the Company and are as a result, considered to be
related parties to the Company (Significant Investors).

Total % of Total % of shares held Number of
shares held by Significant
by Significant Investors Investors
Related who are not who are not
BlackRock affiliates of BlackRock affiliates of
Funds Group or BlackRock, Inc. BlackRock Group
or
BlackRock, Inc.
As at 28 4.7 n/a n/a
February
2026
As at 28 6.1 n/a n/a
February
2025
========= ========= =========

16. Contingent liabilities

There were no contingent liabilities at 28 February 2026 (2025: none).

17. Subsequent events

On 20 February 2026, the Board announced a proposed Scheme of Combination with
THRG (`the Combination’), which was approved by the Company’s shareholders at a
General Meeting held on 30 March 2026. The Combination was effected by way of a
scheme of reconstruction and members’ voluntary winding up of THRG under Section
110 of the Insolvency Act, and the issue of new ordinary shares in the Company
to THRG’s shareholders who are deemed to have elected to roll over their
investment into the enlarged Company.

The Combination of the Company with THRG took effect on 16 April 2026, pursuant
to which the Company acquired net assets of approximately £303.2 million from
THRG in consideration for the issue of 20,892,579 new ordinary shares which were
admitted to trading on the main market for listed securities of the London Stock
Exchange with effect from 17 April 2026. Following this issue of new shares, the
Company’s share capital consisted of 60,705,371 ordinary shares (excluding
treasury shares), and the existing 10,180,731 ordinary shares held in treasury.

In connection with the Combination, eligible shareholders were given the option
to elect for a cash exit in respect of a proportion of their shareholding in the
Company at a discount of 1.0% to NAV. The Company’s cash exit was implemented by
way of a tender offer and was limited up to 28% of the Company’s issued share
capital (excluding Shares held in treasury). The tender offer for 28% of issued
share capital was oversubscribed, and accordingly, 11,147,581 shares will be
repurchased in due course representing 28% of the Company’s issued share
capital. It is currently envisaged that realisation of the assets held in the
Tender Pool which has been established for the purposes of the Tender Offer will
be completed in or around the week commencing 29 June 2026, with the final
Tender Price and payment date to be announced by the Company shortly thereafter.

As part of the Combination process, the Board proposed changes to the Company’s
investment policy giving the Investment Manager additional latitude to invest in
small cap stocks outside of the Benchmark Index and to invest up to 15% of the
Company’s gross assets, at the time of acquisition, in global small cap stocks
which are listed overseas and which do not have a primary or secondary UK
listing. Shareholders approved the changes to the Company’s investment policy at
the General Meeting held on 30 March 2026, and this new policy was implemented
on completion of the Combination on 16 April 2026.

Louise Nash and Angela Lane were appointed as non-executive Directors to the
Company on 17 April 2026.

18. Publication of non-statutory accounts

The financial information contained in this announcement does not constitute
statutory accounts as defined in Section 435 of the Companies Act 2006.

The figures set out above have been reported upon by the auditors. The
comparative figures are extracts from the audited financial statements of
BlackRock Smaller Companies Trust plc for the year ended 28 February 2025, which
have been filed with the Registrar of Companies. The reports of the auditors for
the years ended 28 February 2025 and 28 February 2026 contain no qualification
or statement under Section 498(2) or (3) of the Companies Act 2006. The 2026
Annual Report and Financial Statements will be filed with the Registrar of
Companies after the Annual General Meeting.

19. Annual report and financial statements

Copies of the Annual Report and Financial Statements will be sent to members
shortly and will be available from The Company Secretary, BlackRock Smaller
Companies Trust plc, 12 Throgmorton Avenue, London EC2N 2DL.

20. Annual General Meeting

The Annual General Meeting of the Company will be held at 12 Throgmorton Avenue,
London EC2N 2DL on 17 June 2026 at 11:30 a.m.

ENDS

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

For further information, please contact:

Sarah Beynsberger, Director, Closed End Funds, BlackRock Investment Management
(UK) Limited
Tel: 020 7743 3000

Press Enquiries:

Ed Hooper, Lansons Communications – Tel: 020 7294 3620
E-mail: [email protected] or [email protected]

15 May 2026

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