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BlackRock Smaller Cos geared for the long-term

FUND PROFILE: BlackRock Smaller Companies Trust has used gearing cleverly
July 6, 2010

BlackRock Smaller Companies Trust has a strong performance record, beating both its index, the Hoare Govett Smaller Company Index plus AIM and its Association of Investment Companies (AIC) sector, UK Smaller Companies, over one, three and five years. A big part of this outperformance has been its use of gearing.

320.5pp

The flip side of gearing up is that it has resulted in some periods of underperformance, such as May this year, which the trust's manager Mike Prentis says was a poor month for stock markets around the world. With the trust geared between 10 and 12 per cent for some time, a benchmark fall of 7.3 per cent in May meant gearing accounted for 0.8 per cent of underperformance.

However, Mr Prentis says he is encouraged by data which shows that global gross domestic product (GDP) growth is above three per cent, led by Asia Pacific, emerging markets and North America, which the trust's portfolio should benefit from. The trust is well diversified in terms of sector exposure, though it has considerable positions in industrial metals, mining and software & computer services. Top 10 holdings including Canada's Western Coal, and FTSE 250 companies Aveva Group and Fidessa Group.

The trust has performed fairly well since it moved from 3i to BlackRock at the end of 2004, according to Winterflood, whose smaller companies team also manages Throgmorton Trust. Currently, the trust's discount is wider than its historical and sector average, at more than 18 per cent.

BLACKROCK SMALLER COMPANIES TRUST (BRSC)

PRICE320.5pPRICE DISCOUNT TO NAV18.6%*
SIZE OF FUND£153m**1 YEAR NAV PERFORMANCE42.8%*
No OF HOLDINGS:493 YR NAV PERFORMANCE-18.5%*
SET UP DATEMay 1906*5 YR NAV PERFORMANCE51.1%*
MANAGER START DATESep 2002**TOTAL EXPENSE RATIO1.20%
3 YR BETA0.9YIELD1.43%
3-YR SHARPE RATIO-0.09GEARING11.5%*
NAV397.03p*MORE DETAILSwww.blackrock.co.uk/its

Source: Morningstar, *BlackRock, **Winterflood

Performance figures as at 5 July 2010

Top 10 holdings as at 31 May 2010

Holding
Abcam Group
Aveva Group
Brewin Dolphin Holdings
Domino Printing Sciences
Fidessa Group
ITE Group
Rotork
Spirax-Sarco Engineering
Victrex
Western Coal

Sector Breakdown

SectorPercentage
Industrial Metals & Mining11
Software & Computer Services10.5
Financial Services8.6
Oil & Gas Producers8.6
Electronic & Electrical Equipment7.3
Support Services6.8
Industrial Engineering6.6
Pharmaceuticals & Biotechnology5.5
Technology Hardware & Equipment5
Media4.7
Other25.4