TIDMBRIG
BlackRock Income and Growth Investment Trust plc
Annual Report and Financial Statements 31 October 2023
Performance record
As at As at
31 October 31 October
2023 2022
Net assets (£'000)1 40,156 40,572
Net asset value per ordinary share (pence) 194.90 191.63
Ordinary share price (mid-market) (pence) 178.00 171.00
Discount to net asset value2 8.7% 10.8%
FTSE All-Share Index 8413.70 7945.76
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For the year For the year
ended ended
31 October 31 October
2023 2022
Performance (with dividends reinvested)
Net asset value per share2 5.2% -2.3%
Ordinary share price2 8.1% -7.0%
FTSE All-Share Index 5.9% -2.8%
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For the year For the year Change
ended ended %
31 October 31 October
2023 2022
Revenue
Net profit on ordinary 1,367 1,438 -4.9
activities after taxation
(£'000)
Revenue earnings per 6.54 6.77 -3.4
ordinary share (pence)3
-------------- -------------- --------------
Dividends (pence)
Interim 2.60 2.60 -
Final 4.80 4.70 +2.1
-------------- -------------- --------------
Total dividends payable/paid 7.40 7.30 +1.4
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1The change in net assets reflects portfolio movements, the purchase of the
Company's own shares and dividends paid during the year.
2Alternative Performance Measures, see Glossary contained within the Annual
Report and Financial Statements for the year ended 31 October 2023
3Further details are given in the Glossary contained within the Annual Report
and Financial Statements for the year ended 31 October 2023
Chairman's statement
Market overview
In my statement in the Half-Yearly Financial Report, I noted that the picture
had been dominated by powerful geopolitical and macroeconomic drivers, with
markets focused on the path of inflation and interest rates. This pattern
continued through the rest of our financial year to 31October 2023. Developed
market central banks continued to implement tight monetary policy in a bid to
bring inflation under control. However, this action was not without consequences
and the first signs of stress in the financial system were seen in March 2023,
with several regional bank failures in the US and a subsequent Swiss government
brokered take-over of Credit Suisse by UBS. The Bank of England (BOE) acted
swiftly to ensure there was no contagion to the UK financial system, albeit
credit conditions have tightened steadily throughout the year.
The rate of UK inflation, as measured by the Consumer Price Index (CPI), peaked
at 11.1% in October 2022, since when it has steadily reduced during this
financial year. By 31 October 2023, UK inflation had fallen to 4.60%, bringing
some much-needed relief to UK consumers and corporates alike. Inflation had
previously been driven by high energy and food prices and although they fell
during the year, they remain far higher than in recent years. Robust demand and
wage growth have been key factors in the path of inflation this year, and
ongoing structural issues also in the UK labour market acted to keep wage
settlements high. The BOE continued to implement its policy of monetary
tightening throughout most of the year, although in September 2023 the Monetary
Policy Committee voted to hold the base rate steady at 5.25%, still the highest
level since February 2008. This ended a run of fourteen consecutive rate
increases since December 2021, which news was well received by the UK equity
market. In December, the US Federal Open Markets Committee voted to hold the
base rate of interest steady at 5.25%. It also signalled that interest rate
cuts were likely in 2024 which saw markets rise in response. However, the BOE
was more hawkish, noting that UK wage demands remained elevated and that the MPC
would continue to consider the economic data before a rate cut could be
contemplated.
While the market continues to express a somewhat pessimistic view of the outlook
for company valuations, our portfolio managers note that trading and,
importantly, earnings remain strong for many of the companies within our
portfolio. Despite the negative sentiment around the outlook, the UK economy has
displayed notable resilience, with household balance sheets and corporate
earnings in better shape than many anticipated. In fact, the UK managed to avoid
a much feared recession in 2023 and although the economic data indicates our
economy shrank in October 2023, it is forecast to return to modest growth in
2024. As a result, the likelihood of a `soft landing' - a slowdown in economic
growth that avoids a recession - may well have increased, although this remains
to be seen. In any case, the current cycle of monetary policy tightening appears
to have peaked, and markets are now focused on if and when interest rates will
be cut; an event that may be the catalyst for a broader change in market
sentiment towards UK equities.
Another feature of the challenging economic environment this year has been the
compounding effect on corporate profit margins of higher input costs and rising
wage demands. Our portfolio managers note that this rise in operating costs has,
in many cases, been passed on to the consumer. However, as you will read in the
Investment Manager's report which follows, they believe companies may soon find
this passthrough more difficult to achieve. Therefore, pricing power will be a
key differentiator in 2024.
Notwithstanding the headwinds described, like all good active managers, our
portfolio managers view equity market volatility as an opportunity and have been
buying into high-quality domestic and mid-cap names at very attractive
valuations following share price weakness. They believe there is a marked
disconnect between the valuations ascribed to many UK companies and the
underlying fundamentals of sales, revenue and future growth prospects. They have
also been selectively adding to existing holdings which they believe are well
placed to prosper as the economic landscape in the UK evolves.
Performance
During the year the Company's Net Asset Value (NAV) per share returned +5.2%. By
comparison, the Company's Benchmark Index, the FTSE All-Share Index, returned
+5.9%. At the share price level, the Company returned +8.1% over the period as
our discount narrowed from 10.8% at the start of the year to 8.7% as at 31
October 2023 (all percentages in Pound Sterling terms with dividends
reinvested).
While the performance of the portfolio was ahead of our Benchmark Index for much
of 2023, it was disappointing to note that the market downturn in October 2023
reversed much of the relative outperformance, resulting in a marginal
underperformance over the financial year to 31 October 2023. However, despite
the challenging backdrop this year the Company was able to deliver a positive
return in absolute terms. As at 18 December 2023, since the year end the
Company's NAV and share price have increased by 9.1% and 3.1%, respectively (all
percentages are in Pound Sterling with dividends reinvested)
Further details of the key contributors and detractors from performance, and the
portfolio managers' views on the outlook for the forthcoming year, can be found
in their report which follows below.
Revenue earnings and dividends
I am pleased to report that despite market volatility the Company's earnings
remained relatively stable, with revenue earnings per share for the year ended
31 October 2023 of 6.54 pence compared with 6.77 pence for the previous year.
The Directors are mindful of shareholders' desire for income in addition to
capital growth and believe the Company's dividend is greatly valued by
shareholders. The Board is therefore proposing a final dividend per share of
4.80 pence (2022: 4.70 pence) giving total dividends for the year of 7.40 pence
per share.
Subject to approval at the Annual General Meeting, the final dividend will be
paid on 15 March 2024 to shareholders on the Company's register at the close of
business on 9 February 2024 (ex-dividend date is 8 February 2024). This final
dividend, combined with an interim dividend of 2.60 pence per share (2022: 2.60
pence) paid to shareholders on 1 September 2023, gives a total dividend for the
year of 7.40 pence, resulting in a yield of 4.2% based on a share price of
178.00 pence as at 31 October 2023.
One of the benefits of the Company's investment trust structure is that it can
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. As at 31 October
2023 the Company held £2,131,000 or 10.34 pence per share in revenue reserves
before the payment of final dividend of 4.80 pence for the year ended 31 October
2023.
Policy on share price discount
The Directors recognise the importance to investors that the Company's share
price should not trade at a significant discount to NAV, and therefore, in
normal market conditions, may use the Company's share buy back, sale of shares
from treasury and share issuance powers to seek to ensure that the share price
does not differ excessively from the underlying NAV.
The Board's existing authority to buy back up to 14.99% of the Company's issued
share capital (excluding treasury shares) will expire at the conclusion of the
2023 Annual General Meeting and a resolution will be put to shareholders to
renew the authority at that meeting. Currently, ordinary shares representing up
to 33% of the Company's issued ordinary share capital can be allotted as new
ordinary shares or sold from treasury and the Board will also seek to renew this
power.
During the year, a total of 568,428 ordinary shares were purchased at an average
price of 182.26 pence per share, for a total consideration (including costs) of
£1,036,000 and at an average discount of 11.7%. All ordinary shares bought back
were cancelled. No shares were placed in treasury. The average discount for the
year to 31 October 2023 was 9.6% and the discount at the year end was 8.7%. To
put this in context, the average discount for the investment company sector as a
whole has widened substantially this year and exceeded 16.0% as at 31October
2023, a level not seen since the global financial crisis of 2008. As at 18
December 2023, the average UK Equity Income sector discount had narrowed to
4.1%.
Gearing
One of the advantages of the investment trust structure is that the Company can
use gearing with the objective of increasing portfolio returns. The Company
operates a flexible gearing policy which depends on prevailing market conditions
and is subject to a maximum level of 20% of net assets at the time of
investment. Net gearing during the financial year did not exceed such level. As
at 31 October 2023, net gearing stood at 7.7%.
At the year end, the Company had a borrowing facility in place of up to £8
million, provided by The Bank of New York Mellon, London Branch. As at the date
of this report it is drawn down by £4 million. Subsequent to the year end, the
facility was renewed for a further period of 1 year to 20 December 2024.
Board composition
At the date of this report the Board consists of four independent Non-executive
Directors, with two of the current Directors having been appointed since 2019.
In accordance with best practice and good corporate governance, the Directors
continue to submit themselves for annual re-election. Win Robbins advised the
Board that she has decided that she will step down from the Board at the
conclusion of the next Annual General Meeting. I would like to take this
opportunity to thank Win for the benefit of her expertise and experience and her
contribution to the Board during her tenure. We wish her well for the future.
The Board has a succession plan in place and will continue to regularly appraise
its composition to ensure that a suitable balance of skills, knowledge,
experience, independence and diversity is achieved to enable the Board to
discharge its duties effectively. As part of these plans, the Board has
initiated a search and selection process earlier in the year to identify a
suitable candidate to replace Win. Through this process we have identified
several high-calibre individuals who possess the necessary skills, experience
and expertise to act as a Director of the Company. The Board will announce
details of the chosen candidate in due course.
Further information on the Board's policy on board diversity, director tenure
and succession planning can be found in the Directors' Report contained within
the Annual Report and Financial Statements for the year ended 31 October 2023
Corporate governance
The UK Code of Corporate Governance (the UK Code) requires enhanced disclosure
setting out how we, as Directors, have fulfilled our duties in taking into
account the wider interests of stakeholders in promoting the success of the
Company. The Board takes its governance responsibilities very seriously and
follows the provisions of the UK Code as closely as possible.
As an investment company, the Company reports against the Association of
Investment Companies Code of Corporate Governance (the 2019 AIC Code) which has
been endorsed by the Financial Reporting Council as being appropriate for
investment companies and fulfils the requirements of the UK Corporate Governance
Code, as they are applicable to investment companies.
As it does each year, and as required by the Corporate Governance Code, the
Company undertook a comprehensive Board evaluation this year. The overall
conclusion was positive in terms of the effectiveness of the Board, and the
skills, expertise and commitment of the Directors.
Environmental, Social and Governance (ESG) consideration
Material ESG issues can present both opportunities and risks to long-term
investment performance. While the Company does not have a sustainable investment
objective or exclude investments based only on ESG criteria, these ethical and
sustainability issues are considerations for the Company, and your Board is
committed to a diligent oversight of the activities of our Investment Manager in
these areas.
We believe that the companies in which the portfolio is invested should operate
within a healthy ecosystem of all their stakeholders whether these are
shareholders, employees, customers, regulators or suppliers and that this can
aid the sustainability of long-term returns. We have also provided information
on our Manager's approach to investment stewardship and voting. Further
information can be found in the Annual Report and Financial Statements for the
year ended 31 October 2023.
Continuation vote
The Company has an arrangement in place whereby at the Annual General Meeting
(AGM) held in 2018 and at every fifth AGM of the Company convened thereafter,
shareholders shall be asked to approve the continuation of the Company as an
investment trust. An ordinary resolution was put to shareholders at the last AGM
in March 2023. The resolution was passed with 99.8% of the votes cast in favour.
We thank shareholders for their loyalty and support.
Annual general Meeting
This year's AGM will be held on Thursday, 7 March 2024 at 12.00 noon at the
offices of BlackRock at 12 Throgmorton Avenue, London, EC2N 2DL. 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 for the year ended
31 October 2023
We hope you can attend this year's AGM. The Board very much looks forward to
meeting shareholders and answering any questions you may have on the day.
Communication with shareholders
We appreciate how important access to regular information is to our
shareholders. To supplement our Company website, we offer shareholders the
ability to sign up to the Trust Matters newsletter which includes information on
the Company and other news, views and insights. Further information on how to
sign up is included within.
Outlook
As you will read in the Investment Manager's Report which follows, in a world
currently dominated by macroeconomic and geopolitical factors, our portfolio
managers remain cautiously positioned. They are focused on bottom-up stock
selection, assembling a portfolio of high-quality companies, with robust balance
sheets, differentiated franchises, and, importantly, pricing power. They also
believe their long held focus on well capitalised and cash generative companies
will serve the Company well against a backdrop of higher interest rates and a
deterioration in the availability and increase in the cost of credit. In
addition, they believe that the UK market offers a wealth of opportunity, with
valuations at historical lows versus their own history and that of other
developed markets.
Your Board remains fully supportive of our Investment Manager's investment
philosophy and approach and have every confidence that they will continue to
deliver on the Company's investment objective as we move into 2024 and beyond.
GRAEME PROUDFOOT
Chairman
20 December 2023
Investment Manager's report
Performance
For the year ended 31 October 2023, the Company's NAV returned 5.2%,
underperforming its benchmark, the FTSE All-Share Index (the Benchmark Index),
which returned 5.9% over the same period (all percentages are in Pound Sterling
terms with dividends reinvested).
Investment approach
In assembling the Company's portfolio, we adopt a concentrated investment
approach to ensure that our best ideas contribute significantly to returns. We
believe that it is the role of the portfolio overall to generate an attractive
and growing yield alongside capital growth rather than every individual company
within the portfolio. This gives the Company increased flexibility to invest
where returns are most attractive. This approach results in a portfolio which
differs substantially from the Benchmark Index and in any individual year the
returns will vary, sometimes significantly from those of the Benchmark Index.
Our objective is to achieve returns greater than the Benchmark Index over time.
The foundation of the portfolio, approximately 70%, is in 'income generators'
that we believe will sustain strong cash generation and pay an attractive and
growing dividend yield whilst aiming to deliver a double-digit total return.
Additionally, we look to identify and invest 20% of the portfolio in `growth'
companies that have significant barriers to entry and scalable business models
that enable them to grow consistently. We also look for turnaround companies,
accounting for up to 10% of portfolio, which represent those companies that are
out of favour in the market, facing temporary challenges yet offering
significant recovery potential.
Market review
Whilst global equity markets made progress during the 12 months to 31 October
2023, the UK market meaningfully lagged global markets during the period. This
partially reversed the relative outperformance that the UK enjoyed during 2022
as global equity valuations compressed. The Benchmark Index rose by 5.9% during
the year with Consumer Services, Utilities, and Technology being the top
performing sectors while Telecommunications and Consumer Goods sectors
underperformed. Interest rate policy and inflation stayed on top of the agenda
as central banks deliberated on how to respond to a mixed picture from the UK
inflation data. As the year progressed, goods inflation eased, however, services
sector inflation remained sticky, driven by tight labour markets. The challenge
remained pronounced in the UK where inflation reached a 40-year high and the
Bank of England delivered fourteen consecutive rate hikes, the most significant
monetary tightening carried out since the late 1980s, before holding interest
rates flat at 5.25% at the end of the period.
The majority of 2023 was characterised by relatively narrow markets with notable
outperformance of large capitalisation companies versus mid and small
capitalisation companies. This has been most notable in the United States of
America (US) market where the emergence of Artificial Intelligence (AI) has
contributed to the remarkable outperformance of seven mega-capitalisation
companies. In the UK, this size dynamic was particularly evident as domestically
focussed, mid and small capitalisation companies struggled during much of the
period as earnings headwinds persisted due to higher inflation in costs but
weaker revenues. As we have highlighted before, the UK market continues to trade
at notable valuation discount to other developed markets.
The first quarter of 2023 also saw the signs of financial stress as a result of
the tightening monetary cycle with a number of bank failures. These were the
first `bank-runs' of the digital age and were indeed personified by a
breathtakingly fast run on deposits. This led to the collapse of Silicon Valley
Bank and First Republic Bank in the US and the eventual rescue of Credit Suisse
by UBS. These events have been well contained with little contagion to the
broader financial system albeit credit conditions have tightened steadily over
the year. Elsewhere, expectations for a strong rebound in China as its economy
emerged from COVID-19 related restrictions failed to materialise. Weak consumer
spending and a property sector downturn have weighed on the economic backdrop in
China. Geopolitics remains topical with the ongoing war in Ukraine, the upcoming
elections in Taiwan, US and UK and more recently the conflict between Israel and
Hamas.
Contributors to and detractors from performance
While the performance of the portfolio was ahead of the Benchmark Index for much
of 2023, the market downturn in October 2023 reversed many of the gains. The
portfolio subsequently slightly underperformed its Benchmark Index. We are
however, pleased with the positive absolute return of the Company driven by the
strong performance from holdings such as 3i Group, Standard Chartered and RELX.
As the top positive contributor during the period, 3i Group has continued to
report strong results with meaningful net asset value (NAV) growth. 3i Group's
largest portfolio company, the European discount retailer Action, was again the
highlight, with impressive growth and cash generation. The shares rose 72% in
absolute terms.
Standard Chartered also delivered strong results, beating market expectations as
the bank benefited from higher non-interest income and a higher than expected
net interest margin (NIM). Credit quality remains strong and provisions for
losses were lower than predicted.
The share price of RELX rose strongly during the period reflecting the steady
acceleration of its revenue growth across major divisions and for the group as a
whole. The company continues to invest in its products and services, with the
launch of new AI powered tools being a highlight this year. RELX has been a
consistent holding in the Company over the last decade.
Rio Tinto experienced share price volatility given lacklustre economic data out
of China earlier in the year and concerns around the health of the property
sector. However, the company ended the year higher after posting a steady
trading update at the end of the year with production across its mining
operations in-line with expectations. Shares in Centrica more than doubled
during the year on the back of significant cash generation that led to
substantial capital returns. The company was another top positive contributor to
performance.
During the year, we saw meaningful impact on the share prices of companies that
did not deliver on earnings expectations; Rentokil Initial is an example of
this. The company reported a weak trading statement at the end of the year with
disappointing organic growth from their US pest control division. This also
impacted the margin outlook for the division. The company is making good
progress with the integration of its recently acquired Terminix business and the
rest of the group is performing strongly. However, the US pest control division
is key to the group's long-term success.
Watches of Switzerland experienced share price weakness after the announcement
of the stepping down of its Chief Financial Officer, softer trading in the
jewellery business and the announcement by Rolex, one of the world's largest
watch making companies and a key supplier to Watches of Switzerland, of its
acquisition of Bucherer, a notable watch retailer. As a result our position was
reduced. EuroAPI cut profit expectations due to an issue with documentation at
their Budapest site and delivered a weak trading statement later in the year and
we have sold the holding. Finally, NatWest detracted from the portfolio after
delivering weak results as deposit pricing weighed on the bank's Net Interest
Margin and following the resignation of its CEO, Alison Rose.
Transactions
At the beginning of the year, we identified opportunities in the dislocation in
2022, notably, in the consumer space. In November 2022, we added mid-cap names
to the portfolio including Games Workshop and Howden Joinery following
significant share price underperformance. We believe that these are advantaged
franchises capable of resilient and growing cash generation with robust balance
sheets.
During the year, opportunities arose through share price weakness, notably in UK
domestic and mid-cap names. We added new positions in Admiral Group, Segro,
Spirax-Sarco Engineering and Intermediate Capital Group. Segro, an industrial
real estate investment trust, has a high-quality portfolio which we believe has
significant rental growth potential and the ability to add value through
development. Spirax-Sarco Engineering is a high-quality engineering business
with strong structural drivers around energy efficiency where the malaise in the
bio-processing and semi-conductor industries has impacted the group's near-term
prospects and valuation. Intermediate Capital Group was owned by the Company in
the past, initially bought in the dislocation in March 2020. Having subsequently
sold the position in 2021 following the near doubling of the share price, recent
weakness had seen its valuation return to attractive levels.
We sold Equifax, Kone and Whitbread following strong performance. Whilst Kone
and Equifax were purchased in the second half of 2022, we were pleasantly
surprised by their strong performance in a short space of time. Both share
prices reached levels where we felt their prospects were well understood and we
consequently saw better value elsewhere.
We also sold the holding in BT Group. Whilst we saw progress in the attractive
nature of the long-term fibre roll-out, inflationary challenges and higher
capital expenditure are undermining the group's ability to generate cash. With
the elevated risk, the returns may come under pressure given the cost of living
backdrop.
Gearing
Historically, we have managed the Company with a modest and consistent level of
gearing, typically between 5-8% to enhance income generation and capital growth.
However, as market volatility picked up, we have been more active over the last
two years, varying both the level of gearing and using a broader range (0 - 10%)
depending on the opportunities or risks presenting themselves at the time. At 31
October 2023, the Company had employed net gearing of 7.7%.
Outlook
During the course of 2023, central banks continued to unwind ten years of excess
liquidity by tightening monetary policy desperate to prevent the entrenchment of
higher inflation expectation. Inflation has persisted, driven by resilient
demand, supply chain constraints and rising wages. Developed market central
banks have responded with aggressive interest rate increases with 11 rate hikes
in the US and 14 in the UK so far. Despite these steep rate rises, the impact of
high interest rates and the associated transmission of lower liquidity into the
global economy has been slow. March 2023 saw the first signs of financial stress
with the bankruptcy of Silicon Valley Bank and Signature Bank in the US
contributing to a steady deterioration in the availability and cost of credit.
This has had a notable impact in specific industries, e.g. biotech, yet, so far,
the broad economic impact has been limited. As monetary tightening appears to be
slowing, the key question facing markets is whether we will see a soft or a hard
landing as the effects of the interest rate fluctuations feed into the economy.
Whilst difficult to predict, and the sectors may vary, we would expect some
broader demand weakness into 2024 as the impact of interest rate rises are felt
by the economy. The third quarter of 2023 reporting season saw a broadening of
demand weakness as consumers began to tighten their spending habits post summer
and as excess savings built up during COVID-19 were depleted. Meanwhile
industrial companies continued to build backlogs at a slower pace than revenues
as supply chains normalised leading companies to destock as their need for
excess inventory receded. To guard against lower credit availability and the
potential for higher rates for longer, our approach continues to focus on
companies with robust balance sheets capable of funding their own growth. We
also continue to believe that identifying companies with real pricing power will
be a differentiator. As demand weakens and the transitory inflationary pressures
continue to fade (e.g. commodity prices, supply chain disruption) then pricing
conversations will become more challenging even though wage pressure may prove
more persistent. While this does not bode well for margins in aggregate, we
believe that 2024 will see greater differentiation as pricing power of companies
will become critical.
The UK's policy during the early part of 2023 diverged from the Group of Seven
industrialised countries (G7) in fiscal policy terms as the UK government
attempted to create stability after the severe reaction from the "mini-budget"
in October 2022. Thereafter, the UK rate policy mirrored others although towards
the end of the period the fall in the oil price and the annualisation of
previous year's rate rises combined meaningfully to lower inflation to below 5%
bringing the UK back in line with the G7. As we have commented several times
before, the UK stock market continues to remain depressed in valuation terms
relative to other developed markets offering double-digit discounts across a
range of valuation metrics. This valuation `anomaly' saw further reactions from
UK corporates with the buyback yield of the UK, at the end of the period,
standing at a respectable c.2.5%. Combining this with a dividend yield of c.4%,
the cash return of the UK market is attractive in absolute terms and comfortably
higher than other developed markets. Although we anticipate further volatility
ahead as earnings estimates moderate, we know that in the course of time, risk
appetite will return, and opportunities will emerge. As we have stated above, we
have identified a number of opportunities with new positions initiated
throughout the year in both UK domestic and mid-cap companies.
In summary, we expect geopolitics to continue to be a source of volatility with
potentially significant elections in Taiwan, the US and the UK as well as the
impact of resolution or escalation of geopolitical conflicts globally.
We continue to focus the portfolio on cash generative businesses with durable,
competitive advantages as we believe these companies are best placed to drive
returns over the long term. Whilst we anticipate economic and market volatility
will persist throughout the year, we are excited by the opportunities this will
likely create, by identifying the companies that strengthen their long term
prospects as well as attractive turnaround situations.
ADAM AVIGDORI AND DAVID GOLDMAN
BLACKROCK INVESTMENT MANAGEMENT (UK) LIMITED
20 December 2023
Ten largest investments
Together, the ten largest investments represent 48.0% of the Company's portfolio
as at 31 October 2023 (2022: 48.4%).
1 ? Shell (2022: 2nd)
Sector: Oil & Gas Producers
Market value: £3,849,000
Share of investments: 8.9% (2022: 8.4%)
Shell is a global oil and gas company. The company operates in both upstream and
downstream industries. The upstream division is engaged in searching for and
recovering crude oil and natural gas, the liquefaction and transportation of
gas. The downstream division is engaged in manufacturing, distribution and
marketing activities for oil products and chemicals.
2 ? AstraZeneca (2022: 1st)
Sector: Pharmaceuticals & Biotechnology
Market value: £3,118,000
Share of investments: 7.2% (2022: 8.4%)
AstraZeneca is an Anglo-Swedish multinational pharmaceutical group with its
headquarters in the UK. It is a science-led biopharmaceutical business with a
portfolio of products for major disease areas including cancer, cardiovascular
infection, neuroscience and respiration.
3 ? Rio Tinto (2022: 6th)
Sector: Mining
Market value: £2,569,000
Share of investments: 5.9% (2022: 4.0%)
Rio Tinto is a metals and mining group operating in approximately 36 countries
around the world, producing iron ore, copper, diamonds, gold and uranium.
4 ? RELX (2022: 3rd)
Sector: Media
Market value: £2,403,000
Share of investments: 5.5% (2022: 5.8%)
RELX is a global provider of professional information solutions including the
publication of scientific, medical, technical and legal journals. It also has
the world's leading exhibitions, conference and events business.
5 ? Reckitt (2022: 4th)
Sector: Household Goods & Home Construction
Market value: £2,036,000
Share of investments: 4.7% (2022: 4.7%)
Reckitt is a global leader in consumer health, hygiene and household products.
Its products are sold in 200 countries and its 19 most profitable brands are
responsible for 70% of net revenues.
6 ? 3i Group (2022: 8th)
Sector: Financial Services
Market value: £1,834,000
Share of investments: 4.2% (2022: 3.2%)
3i Group is a leading international investor focused on mid-market private
equity and infrastructure. The group invests in mid-market buyouts, growth
capital and infrastructure. Sectors invested in are business and financial
services, consumer, industrials, energy and health care.
7 ? Unilever (2022: 7th)
Sector: Personal Goods
Market value: £1,499,000
Share of investments: 3.5% (2022: 3.3%)
Unilever is a consumer staples business operating in food, home and personal
care and has strong positions in emerging markets, where long-term growth trends
in various countries that currently generate the majority of revenues.
8 ? BHP (2022: 23rd)
Sector: Mining
Market value: £1,284,000
Share of investments: 3.0% (2022: 1.7%)
The world's largest diversified mining group by market capitalisation. The group
is an important global player in a number of commodities including iron ore,
copper, thermal and metallurgical coal, manganese, nickel, silver and diamonds.
9 ? Phoenix Group (2022: 13th)
Sector: Life Insurance
Market value: £1,108,000
Share of investments: 2.6% (2022: 2.8%)
Phoenix Group is one of the largest providers of insurance services in the
United Kingdom. The company offers a broad range of pensions and savings
products to support people across all stages of the savings life cycle.
10 ? Mastercard (2022: 15th)
Sector: Support Services
Market value: £1,085,000
Share of investments: 2.5% (2022: 2.4%)
Mastercard is the second-largest payment-processing corporation worldwide and
its principal business is to process payments between the banks of merchants and
the card-issuing banks or credit unions of the purchasers who use the Mastercard
-brand debit, credit and prepaid cards to make purchases.
All percentages reflect the value of the holding as a percentage of total
investments.
Percentages in brackets represent the value of the holding as at 31 October
2022.
Distribution of investments as at 31 October 2023
Analysis of portfolio by sector
+--+-----------------------------------+----------------+---------------+
| | |% of investments|Benchmark Index|
| | |by market value | |
+--+-----------------------------------+----------------+---------------+
|1 |Oil & Gas Producers |11.3 |12.4 |
+--+-----------------------------------+----------------+---------------+
|2 |Pharmaceuticals & Biotechnology |9.2 |11.0 |
+--+-----------------------------------+----------------+---------------+
|3 |Mining |8.9 |0.3 |
+--+-----------------------------------+----------------+---------------+
|4 |Financial Services |8.8 |4.4 |
+--+-----------------------------------+----------------+---------------+
|5 |Support Services |8.5 |3.1 |
+--+-----------------------------------+----------------+---------------+
|6 |Household Goods & Home Construction|7.7 |1.0 |
+--+-----------------------------------+----------------+---------------+
|7 |Media |7.1 |3.9 |
+--+-----------------------------------+----------------+---------------+
|8 |Banks |6.6 |9.0 |
+--+-----------------------------------+----------------+---------------+
|9 |General Retailers |4.5 |3.3 |
+--+-----------------------------------+----------------+---------------+
|10|Personal Goods |4.3 |0.4 |
+--+-----------------------------------+----------------+---------------+
|11|Non-Life Insurance |3.0 |0.8 |
+--+-----------------------------------+----------------+---------------+
|12|Real Estate Investment Trusts |2.9 |2.3 |
+--+-----------------------------------+----------------+---------------+
|13|Life Insurance |2.6 |2.4 |
+--+-----------------------------------+----------------+---------------+
|14|Food Producers |2.5 |0.6 |
+--+-----------------------------------+----------------+---------------+
|15|Electronic & Electrical Equipment |2.5 |0.9 |
+--+-----------------------------------+----------------+---------------+
|16|Health Care Equipment & Service |2.2 |0.5 |
+--+-----------------------------------+----------------+---------------+
|17|Tobacco |1.9 |3.2 |
+--+-----------------------------------+----------------+---------------+
|18|Travel & Leisure |1.8 |3.1 |
+--+-----------------------------------+----------------+---------------+
|19|Gas, Water & Multiutilities |1.7 |3.7 |
+--+-----------------------------------+----------------+---------------+
|20|Leisure Goods |1.1 |0.2 |
+--+-----------------------------------+----------------+---------------+
|21|Industrial Engineering |0.9 |0.6 |
+--+-----------------------------------+----------------+---------------+
Sources: BlackRock and Datastream.
Investment size
+----------+-----------+----------------+
| |Number of |% of investments|
| |investments|by market value |
+----------+-----------+----------------+
|< £1m |34 |47.1 |
+----------+-----------+----------------+
|£1m to £2m|7 |20.7 |
+----------+-----------+----------------+
|£2m to £3m|3 |16.1 |
+----------+-----------+----------------+
|£3m to £4m|2 |16.1 |
+----------+-----------+----------------+
Source: BlackRock.
List of investments as at 31 October 2023
Market % of
value investments
£'000
Oil & Gas Producers
Shell 3,849 8.9
BP Group 722 1.7
Woodside Energy Group 293 0.7
--------------- ---------------
4,864 11.3
========= =========
Pharmaceuticals & Biotechnology
AstraZeneca 3,118 7.2
Roche Holding1 847 2.0
--------------- ---------------
3,965 9.2
========= =========
Mining
Rio Tinto 2,569 5.9
BHP 1,284 3.0
--------------- ---------------
3,853 8.9
========= =========
Financial Services
3i Group 1,834 4.2
London Stock Exchange Group 704 1.6
Intermediate Capital Group 510 1.2
Ashmore Group 498 1.2
Premier Asset Management Group 275 0.6
--------------- ---------------
3,821 8.8
========= =========
Support Services
Mastercard1 1,085 2.5
Hays 972 2.2
Rentokil Initial 864 2.0
Ashtead Group 797 1.8
--------------- ---------------
3,718 8.5
========= =========
Household Goods & Home Construction
Reckitt 2,036 4.7
Berkeley Group 758 1.8
Taylor Wimpey 543 1.2
--------------- ---------------
3,337 7.7
========= =========
Media
RELX 2,403 5.5
Pearson 702 1.6
--------------- ---------------
3,105 7.1
========= =========
Banks
Standard Chartered 1,048 2.4
HSBC Holdings 946 2.2
Lloyds Banking Group 498 1.2
NatWest 351 0.8
--------------- ---------------
2,843 6.6
========= =========
General Retailers
Next 936 2.2
WH Smith 506 1.2
Howden Joinery 499 1.1
--------------- ---------------
1,941 4.5
========= =========
Personal Goods
Unilever 1,499 3.5
Watches of Switzerland 337 0.8
--------------- ---------------
1,836 4.3
========= =========
Non-Life Insurance
Admiral Group 738 1.7
Hiscox 583 1.3
--------------- ---------------
1,321 3.0
========= =========
Real Estate Investment Trusts
Segro 766 1.8
Big Yellow Group 471 1.1
--------------- ---------------
1,237 2.9
========= =========
Life Insurance
Phoenix Group 1,108 2.6
--------------- ---------------
1,108 2.6
========= =========
Food Producers
Tate & Lyle 1,082 2.5
--------------- ---------------
1,082 2.5
========= =========
Electronic & Electrical Equipment
Schneider Electric1 555 1.3
Oxford Instruments 502 1.2
--------------- ---------------
1,057 2.5
========= =========
Health Care Equipment & Services
Smith & Nephew 959 2.2
--------------- ---------------
959 2.2
========= =========
Tobacco
British American Tobacco 812 1.9
--------------- ---------------
812 1.9
========= =========
Travel & Leisure
Compass Group 458 1.0
Fuller Smith & Turner - A Shares 339 0.8
Patisserie Holdings2 - -
--------------- ---------------
797 1.8
========= =========
Gas, Water & Multiutilities
Centrica 724 1.7
--------------- ---------------
724 1.7
========= =========
Leisure Goods
Games Workshop 494 1.1
--------------- ---------------
494 1.1
========= =========
Industrial Engineering
Spirax-Sarco Engineering 393 0.9
--------------- ---------------
393 0.9
========= =========
Total investments 43,267 100.0
========= =========
1Non-UK listed investments.
2Company under liquidation.
All investments are in ordinary shares unless otherwise stated. The total number
of investments held at 31 October 2023 was 46 (31 October 2022: 45).
As at 31 October 2023, the Company did not hold any equity interests comprising
more than 3% of any company's share capital.
Strategic report
The Directors present the Strategic Report of the Company for the year ended 31
October 2023.
Investment objective
The Company's objective is to provide growth in capital and income over the long
term through investment in a diversified portfolio of principally UK listed
equities.
Business and management of the company
BlackRock Income and Growth Investment Trust plc is an investment trust company
that has a premium listing on the London Stock Exchange. Its principal activity
is portfolio investment. Investment trusts, like unit trusts and open-ended
investment companies (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.
Investment trusts, unlike unit trusts and OEICs, have the ability to borrow for
investment purposes and to manage dividend distributions through revenue
reserves. They also enjoy, unlike unit trusts and OEICs, the benefit of
continuous dealing during market hours.
The Company is an Alternative Investment Fund in accordance with the Alternative
Investment Fund Managers Directive (AIFMD). BlackRock Fund Managers Limited (the
Manager) is the Company's Alternative Investment Fund Manager. The management of
the investment portfolio and the administration of the Company have been
contractually delegated to the Manager. The Manager, operating under guidelines
determined by the Board, has direct responsibility for decisions relating to the
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) or the Investment Manager), which in turn sub
-delegates these services to the Fund Accountant, The Bank of New York Mellon
(International) Limited, and also sub-delegates registration services to the
Registrar, Computershare Investor Services PLC. Other service providers include
the Depositary, also performed by The Bank of New York Mellon (International)
Limited. Details of the contractual terms with these service providers are set
out in the Directors' Report contained within the Annual Report and Financial
Statements for the year ended 31 October 2023.
Business model
The Company invests in accordance with the investment objective. The Board is
collectively responsible to shareholders for the long term success of the
Company and is its governing body. There is a clear division of responsibility
between the Board and the Manager. Matters reserved for the Board include
setting the Company's strategy, including its investment objective and policy,
setting limits on gearing, setting the dividend, capital structure, governance,
and appointing and monitoring the performance of service providers, including
the Manager.
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 which is the
principal service provider.
Investment strategy and policy
The Company's policy is that the portfolio will usually consist of approximately
30-60 securities and the Company will invest primarily in the securities of
companies listed or admitted to trading in the UK. The Company may invest up to
20% of the gross asset value of the Company in the securities of companies that
are not listed or admitted to trading in the UK.
The Company may hold a maximum of 10% of the issued ordinary share capital of
any company. No more than 15% of the gross asset value of the Company may be
invested in the securities of any one issuer, calculated at the time of any
relevant investment. Cash may not exceed 10% of the net asset value of the
Company. The performance of the Company is measured by reference to the FTSE All
-Share Index (the Benchmark Index) on a total return basis. Non-benchmark
securities (including securities that are not listed or admitted to trading in
the UK) may not exceed 20% of the gross asset value of the Company. Any non
-benchmark securities which are listed or admitted to trading in the UK shall be
limited to 10% of the gross asset value of the Company. Each investee company
that is a constituent of the Benchmark Index is subject to a lower limit of 0%
and an upper limit of plus 4 percentage points of the Company's gross asset
value against such investee company's weighting in the Index on an ongoing
basis, subject to an absolute sector weighting upper limit of 20% of the
Company's net asset value at any time.
The Company may deal in derivatives, including options, futures, contracts for
difference and derivatives not traded on or under the rules of a recognised or
designated investment exchange for the purpose of efficient portfolio
management. Derivatives and exchange traded funds may be dealt in only with the
prior consent of the Board.
The Company achieves an appropriate spread of risk by investing in a diversified
portfolio of securities.
No material change can be made to the investment policy without the approval of
shareholders by ordinary resolution.
Investment approach and process
In assembling the Company's portfolio, a relatively concentrated approach to
investment is adopted to ensure that the fund manager's best ideas contribute
significantly to returns. We believe that it is the role of the portfolio
overall to achieve a premium level of yield rather than every individual company
within it. This gives increased flexibility to invest where returns are most
attractive. This relatively concentrated approach results in a portfolio which
differs substantially from the Benchmark Index and in any individual year, the
returns will vary, sometimes significantly, from those of the Benchmark Index.
Over longer periods the objective is to achieve total returns greater than the
Benchmark Index.
Investment approach
The foundation of the portfolio, approximately 70% by value, is in high free
cash flow companies that can sustain cash generation and pay a growing yield
whilst aiming to deliver a double-digit total return. Additionally, the
Investment Manager seeks to identify and invest 20% by value of the portfolio in
`growth' companies that have significant barriers to entry and scalable business
models that enable them to grow consistently. Turnaround companies are also
sought, at around 10% by value, which represent those companies that are out of
favour by the market, facing temporary challenges with high yields/very low
valuations, but with recovery potential. The return from this segment is
expected to contribute meaningfully to returns over time.
Our approach to Environmental, Social and Governance (ESG)
BlackRock believes that sustainability risk - and climate risk in particular -
now equates to investment risk, and this will drive a profound reassessment of
risk and asset values as investors seek to react to the impact of climate policy
changes. This in turn (in BlackRock's view) is likely to drive a significant
reallocation of capital away from traditional carbon intensive industries over
the next decade. BlackRock believes that carbon-intensive companies will play an
integral role in unlocking the full potential of the energy transition, and to
do this, they must be prepared to adapt, innovate and pivot their strategies
towards a low carbon economy.
As part of BlackRock's structured investment process, ESG risks and
opportunities (including sustainability/climate risk) are considered within the
portfolio management team's fundamental analysis of companies and industries.
ESG factors have been a key consideration of the BlackRock UK Equity Team's
investment process since inception and the Company's portfolio managers work
closely with BlackRock Investment Stewardship (BIS) to assess the governance
quality of companies and understand any potential issues, risks or
opportunities.
As part of their approach to ESG integration, the portfolio managers use ESG
information when conducting research and due diligence on new investments and
again when monitoring investments in the portfolio. In particular, portfolio
managers now have access to 1,200 key ESG performance indicators in Aladdin
(BlackRock's proprietary trading system) from third-party data providers.
BlackRock's internal sustainability research framework scoring is also available
alongside third-party ESG scores in core portfolio management tools. BlackRock's
analyst's sector expertise and local market knowledge allows it to engage with
companies through direct interaction with management teams and conducting site
visits. In conjunction with the portfolio management team, BIS meets with boards
of companies frequently to evaluate how they are strategically managing their
longer-term issues, including those surrounding ESG and the potential impact
these may have on company financials. BIS's and the portfolio management team's
understanding of ESG issues is further supported by BlackRock's Sustainable
Investment Team (BSI). BSI look to advance ESG research and integration, active
engagement and the development of sustainable investment solutions across the
firm.
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.
Further information on the Manager's approach to ESG and Socially Responsible
Investing can be found in the Strategic Report below.
Gearing and borrowings
The appropriate use of gearing can add value and the Company may, from time to
time, use borrowings to achieve this. The Board is responsible for the level of
gearing in the Company and reviews the position at every meeting. Gearing,
including borrowings and gearing through the use of derivatives (which requires
prior Board approval), when aggregated with underwriting participations, will
not exceed 20% of the net asset value at the time of investment, drawdown or
participation. There are no derivative positions at 31 October 2023. Any
borrowing, except for short-term liquidity purposes, is used for investment
purposes or to fund the purchase of the Company's own shares.
At the prior year end, the Company had in place a two-year unsecured Pound
Sterling revolving credit facility of £4 million, provided by ING Luxembourg
S.A. The facility matured on 31 December 2022 and was repaid. The Company has
put in place a replacement borrowing facility with a limit of £8 million,
extended to the Company by The Bank of New York Mellon, London Branch. At the
date of this report the facility was drawn down in the sum of £4 million.
Performance
The Board also reviews regularly the Company's performance attribution analysis
to understand how performance was achieved. This provides an understanding of
how components such as sector exposure, stock selection and asset allocation
impact performance. The table below provides performance information for the
current and prior year.
Details of the Company's performance for the year are also given in the
Chairman's Statement above. The Investment Manager's Report above 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 Company's revenue earnings for the year amounted to 6.54p per share (2022:
6.77p per share). The total net profit for the year, after taxation, was
£2,150,000 (2022: loss of £949,000) of which the net revenue profit amounted to
£1,367,000 (2022: £1,438,000) and the net capital profit amounted to £783,000
(2022: loss of £2,387,000). Details of dividends paid and declared in respect of
the year are set out in the Chairman's Statement above.
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 other investment trusts, are set out in
the following table. As indicated in the footnote to the table, some of these
KPIs fall within the definition of `Alternative Performance Measures' 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 for the
year ended 31 October 2023.
Additionally, the Board regularly reviews the performance of the portfolio, the
net asset value, share price, discount to NAV and ongoing charges of the Company
and compares this against various companies and indices. The Board also reviews
the performance of the portfolio against a benchmark index, the FTSE All-Share
Index. Information on the Company's performance is given in the Chairman's
Statement.
The principal KPIs are described below.
Performance against the benchmark
The performance of the portfolio together with the performance of the Company's
net asset value and share price are reviewed at each Board meeting and compared
to the return of the Company's benchmark, the FTSE All-Share Index.
Premium/discount to NAV
At each meeting the Board monitors the level of the Company's premium or
discount to NAV and considers strategies for managing any premium or discount.
Further details of the discount policy are provided in the Chairman's statement
above. In the year to 31 October 2023, the Company's share price to NAV traded
in the range of a discount of 3.2% to 14.0%, both on a cum income basis. The
Company bought back a total of 568,428 ordinary shares during the year at an
average discount of 11.7% and at an average price of 182.26p per share. The
total consideration (including costs) was £1,036,000. No ordinary shares were
reissued from treasury during the year.
Ongoing charges
The Board reviews the ongoing charges and monitors the expenses incurred by the
Company at each meeting. The Board also compares the level of ongoing charges
against those of its peers.
Year ended Year ended
31 October 31 October
2023 2022
NAV per share1 194.90p 191.63p
Share price2 178.00p 171.00p
Net asset value total return3, 4 +5.2% -2.3%
Share price total return3, 4 +8.1% -7.0%
Change in Benchmark Index5 +5.9% -2.8%
Discount to net asset value4 8.7% 10.8%
Revenue earnings per share 6.54p 6.77p
Dividends per share 7.40p 7.30p
Ongoing charges4, 6 1.28% 1.18%
========= =========
1Calculated in accordance with accounting policies adopted by the Company and
AIC guidelines.
2Mid-market share price.
3This measures the Company's share price and NAV total return, which assumes
dividends paid by the Company have been reinvested.
4Alternative Performance Measures, see Glossary contained within the Annual
Report and Financial Statements for the year ended 31 October 2023.
5FTSE All-Share Index (total return).
6Ongoing charges represent 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 as a % of average daily net assets.
Performance against the Company's peers
Whilst the principal objective is to achieve growth in capital and income
relative to the benchmark, the Board also monitors performance relative to a
range of competitor funds, particularly those also within the AIC UK Equity
Income sector.
Principal risks
The Company is exposed to a variety of risks and uncertainties. As required by
the UK Corporate Governance Code, the Board has undertaken a robust assessment
of the principal and emerging risks facing the Company, including those that
would threaten its business model, future performance, solvency or liquidity.
In making this assessment, the Board has considered, amongst other factors, the
impact of the conflicts in Ukraine and the Middle East and their impact on the
global economy. 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. There has been no material change in the risks faced by the Company as
identified and assessed during the year.
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 controls established for mitigation. A residual risk rating is
then calculated for each risk. The risk register is regularly reviewed and the
risks reassessed. The risk environment in which the Company operates is also
monitored and regularly appraised. New risks are also added to the register as
they are identified which ensures that the document continues to be an effective
risk management tool. The risk register, its method of preparation and the
operation of key controls in the Investment Manager's and third-party service
providers, systems of internal control are reviewed on a regular basis by the
Audit Committee.
Additionally, the Investment 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.
In order to gain a more comprehensive understanding of the Investment Manager's
and other third-party service providers' risk management processes and how these
apply to the Company's business, the Audit Committee periodically receives
presentations from BlackRock's Internal Audit and Risk & Quantitative Analysis
functions. The Audit Committee also reviews Service Organisation Control (SOC 1)
reports from the Company's service providers.
The current risk register includes a range of risks which are categorised under
the following headings:
·investment performance;
·income/dividend;
·gearing;
·legal, regulatory and tax compliance;
·operational;
·market; and
·financial.
The principal risks identified are described in detail within the table below,
together with an explanation of how they are managed and mitigated. The Board
will continue to assess these risks on an ongoing basis.
Investment performance
Principal risk
The Board is responsible for:
·setting 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 widening discount to NAV;
·a reduction or permanent loss of capital; and
·dissatisfied shareholders and reputational damage.
The Board is also aware of the long-term risk to performance from inadequate
attention to ESG issues and in particular the impact of climate change.
Mitigation/Control
To manage this risk the Board:
·regularly reviews investment performance;
·regularly reviews the Company's investment mandate and long term strategy;
·is required to provide prior consent to the use of derivatives and exchange
traded funds;
·has set investment restrictions and guidelines which the Investment Manager
monitors and regularly reports on;
·reviews 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
·monitors the discount to NAV and use of the granted buy back powers.
ESG analysis is integrated into the Manager's investment process. This is
monitored by the Board.
Income/dividend
Principal risk
The amount of dividends and future dividend growth will depend on the Company's
underlying portfolio and the dividends paid by the underlying investee
companies.
Changes in the composition of the portfolio and any change in the tax treatment
of the dividends or interest received by the Company may alter 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 meeting. The Company also has a
revenue reserve and powers to pay dividends from capital which could potentially
be used to support the Company's dividend if required.
Gearing
Principal risk
The Company's investment strategy may involve the use of gearing to enhance
investment returns.
Gearing may be generated through borrowing money or increasing levels of market
exposure through the use of derivatives. The Company currently has an unsecured
revolving credit facility provided by The Bank of New York Mellon, London
Branch. The use of gearing exposes the Company to the risks associated with
borrowing.
Mitigation/Control
To manage this risk the Board has limited gearing, including borrowings and
gearing through the use of derivatives, to 20% of NAV at the time of investment,
drawdown or participation.
The Investment Manager will only use gearing when confident that market
conditions and opportunities exist to enhance investment returns.
Legal, regulatory and tax compliance
Principal risk
The Company has been approved by HM Revenue & Customs as an investment trust,
subject to meeting the relevant eligibility conditions and operating as an
investment trust in accordance with Sections 1158 and 1159 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.
The Company is required to comply with the provisions of the Companies Act 2006,
the Alternative Investment Fund Managers Directive (the `AIMFD'), the Market
Abuse Regulation, the UK Listing Rules and the FCA's Disclosure Guidance &
Transparency Rules.
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.
Mitigation/Control
Compliance with the accounting rules affecting investment trusts are regularly
monitored.
The Investment Manager monitors investment movements, the level and type of
forecast income and expenditure and the amount of proposed dividends, if any, 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.
The Board is aware of the risk of potential changes in law and taxation post
Brexit and will continue to monitor this closely.
The Company Secretary and the Company's professional advisers provide regular
reports to the Board in respect of compliance with all applicable rules and
regulation.
The Company and its appointed Alternative Investment Fund Manager (AIFM and/or
Manager) are subject to the risks that the requirements of AIFMD are not
correctly complied with. The Board and the Manager also monitor changes in
government policy and legislation which may have an impact on the Company.
The Market Abuse Regulation came into force on 3 July 2016. The Board has taken
steps to ensure that individual Directors (and their Persons Closely Associated)
are aware of their obligations under the regulation and has updated internal
processes, where necessary, to ensure the risk of non-compliance is effectively
mitigated.
Operational
Principal risk
In common with most other investment trust companies, the Company has no
employees. The Company therefore relies upon the services provided by third
parties and is dependent on the control systems of BlackRock (the Investment
Manager and AIFM), and of The Bank of New York Mellon (International) Limited
(the Depositary and Fund Accountant), which ensures safe custody of the
Company's assets and maintains the Company's accounting records. The Company's
share register is maintained by the Registrar, Computershare Investor Services
PLC.
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, as a result of a cyber
-attack or otherwise, could impact the monitoring and reporting of the Company's
financial position.
The security of the Company's assets, dealing procedures, accounting records and
maintenance of regulatory and legal requirements, depend on the effective
operation of these systems.
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 reports to the Board.
The Bank of New York Mellon's and BlackRock's internal control processes are
regularly tested and monitored throughout the year and are evidenced through
their Service Organisation Control (SOC 1) reports, which are subject to review
by an Independent Service Assurance Auditor. The SOC 1 reports provide assurance
in respect of the effective operation of internal controls. These reports are
regularly reviewed by the Audit Committee.
The Company's assets are subject to a strict liability regime and in the event
of a loss of assets, 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 on a regular basis and compliance with
the Investment Management Agreement regularly. The Board also considers the
business continuity arrangements of the Company's key service providers.
The Board considers succession arrangements for key employees of the Investment
Manager and 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
its review of the Company's risk register. Having considered these arrangements
and reviewed service levels since the crisis has evolved, the Board is confident
that a good level of service has and will be maintained.
Market
Principal risk
Market risk arises from volatility in the prices of the Company's investments.
It represents the potential loss the Company might suffer through realising
investments at a time of negative market movements.
There is also the potential for the Company to suffer loss through holding
investments in a period of negative market movements.
Mitigation/Control
The Board considers the diversification of the portfolio, 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 with the conflict in
Ukraine and, more recently, the hostilities in the Middle East and their impact
on markets. 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 Investment Manager to adhere to disciplined fundamental analysis
from a bottom-up perspective.
Financial
Principal risk
The Company's investment activities expose it to a variety of financial risks
that include market risk.
Mitigation/Control
Details of these risks are disclosed in note 16 to the financial statements,
together with a summary of the policies for managing these risks.
Viability statement
In accordance with provision 31 of the UK Corporate Governance Code, the
Directors have assessed the prospects of the Company over a longer period than
the twelve months referred to by the `Going Concern' guidelines. The Company is
an investment trust with the objective of achieving capital growth and income.
The Directors believe that five years is an appropriate investment horizon to
assess the viability of the Company. This is based on the Company's long-term
mandate, the low turnover in the portfolio and the investment holding period
investors generally consider while investing in the UK market. This period has
also been selected as it is aligned to the Company's objective of achieving long
-term growth in capital and income. The Board is aware of the ongoing
uncertainty surrounding the potential duration of the conflicts in Ukraine and
the Middle East, their impact on the global economy, and the prospects for many
of the Company's portfolio holdings. Notwithstanding the impact of these events,
and given the factors stated below, the Board expects the Company to continue to
meet its liabilities as they fall due for the foreseeable future.
The Board conducted its review for the period up to the AGM in 2028, being a
five-year period from the date that this annual report will be laid before
shareholders for approval. In making this assessment the Board has considered
the following factors:
·the Company's principal risks as set out above;
·the ongoing relevance of the Company's investment objective in the current
environment;
·the level of demand for the Company's shares;
·the performance of the Company versus its benchmark index;
·good communication with major shareholders. At the present time there has been
no indication that the continuation vote will not be successful; and
·at the close of business on 18 December 2023 the Company's shares were trading
at a discount to NAV of 13.7%.
As part of its assessment the Board has also considered:
·the level of ongoing charges, both current and historical;
·the level at which the shares trade relative to NAV;
·the level of income generated; and
·future income forecasts.
The Board has concluded that the Company would be able to meet its ongoing
operating costs and net current liabilities as they fall due as a consequence
of:
·a liquid portfolio; and
·overheads which comprise a small percentage of net assets.
Therefore, the Board has concluded that even in exceptionally stressed operating
conditions, the Company would comfortably be able to meet its ongoing operating
costs as they fall due.
However, investment companies may face other challenges. These include
regulatory changes, changes to the tax treatment of investment trusts, a
significant decrease in size due to poor investment performance or substantial
share buy back activity, which may result in the Company no longer being of
sufficient market capitalisation to represent a viable investment proposition or
no longer being able to continue in operation.
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.
Future prospects
The Board's main focus is the achievement of income and capital growth. The
future performance of the Company is dependent upon the success of the
investment strategy.
The outlook for the Company is discussed in the Chairman's Statement and in 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.
However, the Company believes that it is in shareholders' interests to consider
environmental, social and governance factors and human rights issues when
selecting and retaining investments. Details of the Company's approach to
socially responsible investment are set out in the Annual Report and Financial
Statements for the year ended 31 October 2023
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 31 October 2023, all of whom held office
throughout the year, are set out in the Governance Structure and Directors'
biographies contained within the Annual Report and Financial Statements for the
year ended 31 October 2023
The Board recognises the importance of having a range of experienced Directors
with the right skills and knowledge to enable it to fulfil its obligations. As
at 31 October 2023, the Board consisted of three male Directors and one female
Director, resulting in 25% female board representation. The Company does not
have any employees.
Promoting the success of BlackRock Income and Growth Investment Trust plc
The Companies (Miscellaneous Reporting) Regulations 2018 require directors to
explain more fully 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 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 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.
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 deliver successfully 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 service providers and 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
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
Investment Manager's stewardship activities and receives regular feedback from
the Investment Manager in respect of meetings with the management of portfolio
companies.
A summary of the key areas of engagement undertaken by the Board with its key
stakeholders in the year under review and how Directors have acted upon this to
promote the long-term success of the Company are set out in the table below.
Area of Engagement
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.
Consideration of sustainable investment is a key part of the investment process
and must be factored in when making investment decisions. 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 believes that responsible investment and sustainability are important
to the longer-term delivery of growth in capital and income and has worked very
closely with the Manager throughout the year to review regularly the Company's
performance, investment strategy and underlying policies and to understand how
sustainability considerations are integrated into the investment process.
The Manager's approach to the consideration of ESG factors in respect of the
Company's portfolio, as well as its engagement with investee companies to
encourage the adoption of sustainable business practices which support long-term
value creation, are kept under review by the Board. The Manager reports to the
Board in respect of its consideration of ESG factors and how these are
integrated into the investment process.
Impact
The portfolio activities undertaken by the Investment Manager and the
performance delivered for shareholders during the year can be found in the
Investment Manager's Report above.
The Board believes the buy back activity undertaken during the year has been
effective in reducing the discount, both on a cum income basis.
Discount strategy
Issue
The Board believes that strong performance and an attractive dividend yield
enhances demand for the Company's shares, which will help to narrow the
Company's discount of share price to NAV over time.
Engagement
The Manager reports total return performance statistics to the Board on a
regular basis, along with the portfolio yield and the impact of dividends paid
on brought forward distributable reserves.
The Board reviews the Company's discount/premium to NAV on a regular basis and
holds regular discussions with the Manager and the Company's broker regarding
the discount/premium level.
The Board has authority to buy back up to 14.99% of the Company's issued share
capital (excluding treasury shares) and has an active buy back programme in
place. The Company bought back a total of 568,428 ordinary shares during the
year at an average discount of 11.7% and at an average price of 182.26p per
share. As at the financial year end, the Company's shares were trading at a
discount to NAV of 8.7%.
The Manager provides the Board with feedback and key performance statistics
regarding the success of the Company's marketing initiatives which include
messaging to highlight the dividends.
The Board also reviews feedback from shareholders in respect of the level of
dividend.
Impact
The average discount for the year to 31 October 2023 was 9.6%. During the year
the Company's share price has traded at a minimum discount of 3.2% to a maximum
discount of 14.0%.
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: 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
Brokers 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
Brokers.
The Board has worked closely with the Manager to gain comfort that relevant
business continuity plans are operating effectively for all of the Company's
service providers.
Impact
Performance evaluations were performed on a timely basis and the Board concluded
that all third party service providers, including the Manager, Custodian,
Depositary and Fund Administrator were operating effectively and providing a
good level of service.
The Board has received updates in respect of business continuity planning from
the Manager, Custodian, Depositary, Fund Administrator, Brokers and Registrar,
and is confident that arrangements are in place to ensure that a good level of
service will continue to be provided in the event of disruption, for example the
COVID-19 pandemic.
Board composition
Issue
The Board is committed to ensuring that its own composition brings an
appropriate balance of knowledge, experience, diversity and skills, and that it
is compliant with best corporate governance practice under the UK Code of
Corporate Governance, including guidance on tenure and the composition of the
Board's committees.
Engagement
Over recent years the Board undertook a review of succession planning
arrangements and identified the need for action given that, if no action were
taken, a majority of Board Directors would have had tenure in excess of nine
years. The Board, discharging the duties of a Nomination Committee, agreed the
selection criteria and the method of selection, recruitment and appointment.
Board diversity, including gender, was taken into account when establishing the
criteria. 50% of the Board was appointed after 2019.
All Directors are subject to a formal evaluation process on an annual basis
(more details and the conclusions in respect of the 2023 evaluation process are
given in the Annual Report and Financial Statements for the year ended 31
October 2023. All Directors stand for re-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 in the Annual Report and
Financial Statements for the year ended 31 October 2023 if they wish to raise
any issues.
Impact
The Board recognises the benefits of diversity and a structured process of
ongoing refreshment and will continue to consider regularly its composition.
The Directors are not aware of any issues that have been raised directly by
shareholders in respect of Board composition in 2023. Through its Manager and
Corporate Broker, there is regular contact with major shareholders. Shareholders
are able to raise any concerns in this regard at the AGM or alternatively they
may write to the Chairman of the Board. Details of the proxy voting results in
favour and against individual Directors' re-election at the 2023 AGM are given
on the Company's website at www.blackrock.com/uk/brig. Historical proxy voting
results can be found under the `Further Literature' tab.
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
The Board is committed to maintaining open channels of communication and to
engage with shareholders. The Company welcomes and encourages attendance and
participation from shareholders at its Annual General Meetings. Shareholders
therefore have the opportunity to meet the Directors and Investment Manager and
to address questions to them directly.
The Annual Report and Half-Yearly Financial Report are available on the
BlackRock 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/brig.
The Company also has an arrangement in place whereby at every fifth Annual
General Meeting of the Company, shareholders shall be asked to approve the
continuation of the Company as an investment trust by ordinary resolution. This
mechanism provides shareholders with a regular opportunity at which they can
realise the value of there shares. The Board, through its Manager and corporate
advisers, engaged with major shareholders on the continuation vote held in March
this year and it was confirmed that there was no dissatisfaction and that they
would support continuation. The vote was subsequently passed with 99.8% in
favour of continuation.
The Board also works closely with the Investment Manager to develop the
Company's marketing strategy, 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 Investment Manager as opposed to members of the Board. As well
as attending regular investor meetings the Investment Manager holds regular
discussions with wealth management desks and offices to build on the case for,
and understanding of, long-term investment opportunities in the UK market.
The Investment Manager also coordinates public relations activity, including
meetings with relevant industry publications to set out their vision for the
portfolio strategy and outlook for the UK equity market. The Investment 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. If shareholders
wish to raise issues or concerns with the Board, 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. He may be
contacted via the Company Secretary whose details are given in the Annual Report
and Financial Statements for the year ended 31 October 2023.
Impact
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 Board's approach to Sustainability and ESG
Material environmental, social and governance (ESG) issues can present both
opportunities and threats to long-term investment performance. These ethical and
sustainability issues are a key focus of the Board and your Board is committed
to a diligent oversight of the activities of the Manager in these areas. The
Board believes effective engagement with management is, in most cases, the most
effective way of driving meaningful change in the behaviour of investee company
management. This is particularly true for the Company's Manager given the extent
of BlackRock's shareholder engagement. The Board believes that BlackRock is well
placed as Manager to fulfil these requirements due to the integration of ESG
into its investment processes, the emphasis it places on sustainability, its
approach in its investment stewardship activities and its position in the
industry as one of the largest suppliers of sustainable investment products in
the global market. More information on BlackRock's approach to responsible
investing is set out in the Annual Report and Financial Statements for the year
ended 31 October 2023
BY ORDER OF THE BOARD
KEVIN MAYGER
FOR AND ON BEHALF OF
BLACKROCK INVESTMENT MANAGEMENT (UK) LIMITED
Company Secretary
20 December 2023
Related Party Transactions
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 on page 47 of the Annual
Financial Report.
The investment management fee is levied quarterly, based on 0.60% per annum of
the Company's market capitalisation. The investment management fee due for the
year ended 31 October 2023 amounted to £235,000 (2022: £237,000). At the year
end, £175,000 was outstanding in respect of the management fee (2022: £118,000).
In addition to the above services, BIM (UK) has provided the Company with
marketing services. The total fees paid or payable for these services for the
year ended 31 October 2023 amounted to £14,000 including VAT (2022: £13,000). At
the year end, £24,000 including VAT was outstanding in respect of marketing fees
(2022: £11,000).
The Company holds an investment in the BlackRock Institutional Cash Series plc -
Sterling Liquid Environmentally Aware Fund of £1,066,000 (2022: £2,604,000)
which for the year ended 31 October 2023 and 31 October 2022 has been presented
in the financial statements as a cash equivalent. This is a fund managed by a
company within the BlackRock Group.
The ultimate holding company of the Manager and the Investment Manager is
BlackRock, Inc., a company incorporated in Delaware, USA.
The Board currently consists of four non-executive Directors, all of whom are
independent of the Company's Manager. None of the Directors has a service
contract with the Company. For the year ended 31 October 2023, the Chairman
received an annual fee of £31,750, the Chairman of the Audit Committee received
an annual fee of £26,000 and each of the other Directors received an annual fee
of £22,500. Directors' fees were last increased with effect from 1 November
2022.
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 in the Annual Report and Financial Statements. At 31 October
2023, £9,000 (2022: £8,000) was outstanding in respect of Directors' fees.
As at 31 October 2023 and 2022, the Directors' interests in the Company's
ordinary shares were as follows:
As at As at
31 October 2023 31 October 2022
Graeme Proudfoot (Chairman) 60,000 60,000
Nicholas Gold 43,175 20,000
Charles Worsley1 987,539 987, 539
Win Robbins 12,106 12,106
1.Including a non-beneficial interest in 655,500 ordinary shares.
All of the holdings of the Directors are beneficial, other than where stated in
the footnote above. No changes to these holdings have been notified up to the
date of this report.
The information in the table above has been audited.
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 Generally Accepted Accounting
Practice, including FRS 102 The Financial Reporting Standard applicable in the
UK and Ireland.
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 these financial statements, the Directors are required to:
·present fairly the financial position, financial performance and cash flows of
the Company;
·select suitable accounting policies in accordance with United Kingdom Generally
Accepted Accounting Practice and 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 enable
them to ensure that the financial statements 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, the
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
the BlackRock 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 n the Annual Report and Financial
Statements for the year ended 31 October 2023 confirm to the best of their
knowledge that:
·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 2018 UK Corporate Governance Code 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 fulfils these requirements. The process by which the Audit
Committee has reached these conclusions is set out in the Audit Committee's
report contained within the Annual Report and Financial Statements for the year
ended 31 October 2023. As a result, the Board has concluded that the Annual
Report and Financial Statements for the year ended 31 October 2023, taken as a
whole, are fair, balanced and understandable and provide the information
necessary for shareholders to assess the Company's position and performance,
business model and strategy.
FOR AND ON BEHALF OF THE BOARD
GRAEME PROUDFOOT
Chairman
20 December 2023
Income statement for the year ended 31 October 2023
2023 2022
Notes Revenue Capital Total Revenue Capital
Total
£'000 £'000 £'000 £'000 £'000
£'000
Gains/(losse - 1,119 1,119 - (2,328)
(2,328)
s) on
investments
held
at
fair value
through
profit or
loss
Gains on - 2 2 - 5 5
foreign
exchange
Income from 3 1,723 7 1,730 1,742 169
1,911
investments
held
at fair
value
through
profit or
loss
Other 3 81 - 81 28 - 28
income
--------- --------- --------- --------- --------- ----
-----
------ ------ ------ ------ ------ ----
--
Total 1,804 1,128 2,932 1,770 (2,154)
(384)
income/(loss
)
========= ========= ========= ========= =========
=========
Expenses
Investment 4 (59) (176) (235) (59) (178)
(237)
management
fee
Other 5 (317) (6) (323) (265) (6)
(271)
operating
expenses
--------- --------- --------- --------- --------- ----
-----
------ ------ ------ ------ ------ ----
--
Total (376) (182) (558) (324) (184)
(508)
operating
expenses
========= ========= ========= ========= =========
=========
Net 1,428 946 2,374 1,446 (2,338)
(892)
profit/(loss
)
on ordinary
activities
before
finance
costs and
taxation
Finance 6 (54) (163) (217) (16) (49) (65)
costs
--------- --------- --------- --------- --------- ----
-----
------ ------ ------ ------ ------ ----
--
Net 1,374 783 2,157 1,430 (2,387)
(957)
profit/(loss
)
on ordinary
activities
before
taxation
Taxation (7) - (7) 8 - 8
(charge)/cre
dit
--------- --------- --------- --------- --------- ----
-----
------ ------ ------ ------ ------ ----
--
Net 8 1,367 783 2,150 1,438 (2,387)
(949)
profit/(loss
)
on ordinary
activities
after
taxation
========= ========= ========= ========= =========
=========
Earnings/(lo 8 6.54 3.75 10.29 6.77 (11.24)
(4.47)
ss)
per
ordinary
share
(pence)
========= ========= ========= ========= =========
=========
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) on ordinary activities for the year disclosed above
represents the Company's total comprehensive income/(loss).
Statement of changes in equity for the year ended 31 October 2023
Notes Called Share Capital Capital Special
Revenue Total
up share premium redemption reserve reserve
reserve £'000
capital account reserve £'000 £'000
£'000
£'000 £'000 £'000
For the year
ended 31
October 2023
At 31 October 313 14,819 236 9,483 13,427
2,294 40,572
2022
Total
comprehensive
income:
Net profit - - - 783 -
1,367 2,150
for the year
Transactions
with owners,
recorded
directly to
equity:
Ordinary 9,10 (6) - 6 - (1,029) -
(1,029)
shares
purchased
for
cancellation
Share 10 - - - - (7) -
(7)
purchase
costs
Dividends 7 - - - - -
(1,530) (1,530)
paid1
--------- --------- ---------- --------- --------- -
-------- ---------
------ ------ ----- ------ ------ -
----- ------
At 31 October 307 14,819 242 10,266 12,391
2,131 40,156
2023
========= ========= ========= ========= =========
========= =========
For the year
ended 31
October 2022
At 31 October 315 14,819 234 11,870 13,843
2,387 43,468
2021
Total
comprehensive
(loss)/income:
Net - - - (2,387) -
1,438 (949)
(loss)/profit
for the
year
Transactions
with owners,
recorded
directly to
equity:
Ordinary (2) - 2 - (414) -
(414)
shares
purchased
for
cancellation
Share - - - - (2) -
(2)
purchase
costs
Dividends 7 - - - - -
(1,531) (1,531)
paid2
--------- --------- ---------- --------- --------- -
-------- ---------
------ ------ ----- ------ ------ -
----- ------
At 31 October 313 14,819 236 9,483 13,427
2,294 40,572
2022
========= ========= ========= ========= =========
========= =========
1Interim dividend paid in respect of the six months ended 30 April 2023 of 2.60p
per share was declared on 21 June 2023 and paid on 1 September 2023. Final
dividend paid in respect of the year ended 31 October 2022 of 4.70p per share
was declared on 2 February 2023 and paid on 15 March 2023.
2Interim dividend paid in respect of the six months ended 30 April 2022 of 2.60p
per share was declared on 22 June 2022 and paid on 1 September 2022. Final
dividend paid in respect of the year ended 31 October 2021 of 4.60p per share
was declared on 13 January 2022 and paid on 17 March 2022.
For information on the Company's distributable reserves please refer to note 10
below
Balance sheet as at 31 October 2023
Notes 2023 2022
£'000 £'000
Fixed assets
Investments held at fair 43,267 41,557
value through profit or
loss
Current assets
Current tax asset 27 16
Debtors 133 589
Cash and cash equivalents 1,110 2,657
--------------- ---------------
Total current assets 1,270 3,262
========= =========
Creditors - amounts
falling due within one
year
Bank loan (4,000) (4,000)
Other creditors (381) (247)
--------------- ---------------
Total current liabilities (4,381) (4,247)
========= =========
Net current liabilities (3,111) (985)
========= =========
Net assets 40,156 40,572
========= =========
Capital and reserves
Called up share capital 9 307 313
Share premium account 10 14,819 14,819
Capital redemption reserve 10 242 236
Capital reserve 10 10,266 9,483
Special reserve 10 12,391 13,427
Revenue reserve 10 2,131 2,294
--------------- ---------------
Total shareholders' funds 8 40,156 40,572
========= =========
Net asset value per 8 194.90 191.63
ordinary share (pence)
========= =========
Statement of cash flows for the year ended 31 October 2023
2023 2022
£'000 £'000
Operating activities
Net profit/(loss) on ordinary 2,157 (957)
activities before taxation
Add back finance costs 217 65
(Gains)/losses on investments held (1,119) 2,328
at fair value through profit or
loss
Gains on foreign exchange (2) (5)
Special dividends allocated to (7) (169)
capital
Sales of investments held at fair 11,482 17,494
value through profit or loss
Purchases of investments held at (11,632) (15,424)
fair value through profit or loss
Decrease in other debtors 22 29
Increase/(decrease) in other 134 (62)
creditors
Taxation on investment income (18) 3
--------------- ---------------
Net cash generated from operating 1,234 3,302
activities
========= =========
Financing activities
Ordinary shares purchased for (1,029) (414)
cancellation
Share purchase costs paid (7) (2)
Interest paid (217) (65)
Dividends paid (1,530) (1,531)
--------------- ---------------
Net cash used in financing (2,783) (2,012)
activities
========= =========
(Decrease)/increase in cash and (1,549) 1,290
cash equivalents
Cash and cash equivalents at the 2,657 1,362
beginning of the year
Effect of foreign exchange rate 2 5
changes
--------------- ---------------
Cash and cash equivalents at end of 1,110 2,657
the year
========= =========
Comprised of:
Cash at bank 44 53
Cash Fund1 1,066 2,604
--------------- ---------------
1,110 2,657
========= =========
1Cash 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 31 October 2023
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 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 bank loan
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; and
-the risk is adequately captured in the assumptions and inputs used in
measurement of Level 3 assets, if any, as noted in note 16 of the Financial
Statements in the Company's Annual Report and Financial Statements for the year
ended 31 October 2023.
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 Pound 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 indicated.
(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.
Special dividends are recognised on an ex-dividend basis and 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 on an accruals basis. Interest
income from the Cash Fund is accounted for on an accruals basis. Underwriting
commission is recognised when the issue underwritten closes.
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 is recognised as
revenue. Any excess in the value of the shares received over the amount of the
cash dividend is recognised in capital.
(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 disclosed in note 10 contained within the Annual Report and
Financial Statements for the year ended 31 October 2023.
·expenses are treated as capital where a connection with the maintenance or
enhancement of the value of the investments can be demonstrated; and
·the investment management fee and finance costs have been allocated 25% to the
revenue account and 75% to the capital 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 taxation 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 Section 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 are recognised at the trade date of the disposal and the proceeds
are measured at fair value, which is 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) 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.
(i) Creditors
Creditors include purchases for future settlement, interest payable, share
buyback costs and accruals in the ordinary course of business. Creditors 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 business if longer). If
not, they are presented as creditors - amounts due after more than one year.
(j) 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 only
recognised in the financial statements in the period in which they are paid.
(k) Cash and cash equivalents
Cash comprises cash in hand and on demand deposits. Cash equivalents include
bank overdrafts repayable on demand and 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.
(l) 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 Pound Sterling, reflecting
the primary economic environment in which the Company operates. Transactions in
foreign currencies are translated into Pound Sterling at the rates of exchange
ruling on the date of the transaction. Foreign currency monetary assets and
liabilities and non-monetary assets held at fair value are translated into Pound
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.
(m) Share repurchases, share reissues 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 special reserve.
Shares repurchased and held in treasury - the full cost of the repurchase is
charged to the special reserve.
Where treasury shares are subsequently reissued:
?amounts received to the extent of the repurchase price are credited to the
special reserve and capital reserve based on a weighted average basis of amounts
utilised from these reserves on repurchases; 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.
Costs on issuance of new shares are charged to the share premium account. Costs
on share reissues are charged to the special reserve and capital reserve.
(n) Bank borrowings
Bank loans are recorded as the proceeds received. Finance charges are accounted
for on an accruals basis in the Income Statement.
(o) Critical accounting judgement and key sources of estimation uncertainty
The Board 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 that are believed to be reasonable under the circumstances. There
are no critical accounting judgements or estimates and the Directors do not
believe that any accounting judgements or estimates have a significant risk of
causing a material adjustment to the carrying amount of assets and liabilities
within the next financial year.
3. Income
2023 2022
£'000 £'000
Investment income:
UK dividends 1,494 1,447
UK special dividends 27 96
UK property income distributions 19 11
Overseas dividends 183 188
--------------- ---------------
Total investment income 1,723 1,742
========= =========
Other income:
Interest from Cash Fund 80 28
Deposit interest 1 -
--------------- ---------------
Total income 1,804 1,770
========= =========
Dividends and interest received in cash during the year amounted to £1,789,000
and £83,000 respectively (2022: £1,838,000 and £23,000).
Special dividends of £7,000 have been recognised in capital during the year
(2022: £169,000).
4. Investment management fee
2023 2022
Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
Investment 59 176 235 59 178 237
management
fee
--------- --------- --------- --------- --------- ---------
------ ------ ------ ------ ------ ------
Total 59 176 235 59 178 237
========= ========= ========= ========= ========= =========
Under the terms of the investment management agreement, BFM is entitled to a fee
of 0.6% per annum of the Company's quarter end market capitalisation. The
investment management fee is allocated 25% to the revenue account and 75% to the
capital account. There is no additional fee for company secretarial and
administration services.
5. Other operating expenses
2023 2022
£'000 £'000
Allocated to revenue:
Custody fees 1 1
Depositary fees 5 5
Audit fees1 29 29
Registrars' fee 26 27
Directors' emoluments2 103 99
Marketing fees 14 13
Printing and postage fees 32 35
Legal and professional fees 56 12
London Stock Exchange fee 12 10
FCA fee 7 7
Prior year expenses written back3 (3) (2)
Other administration costs 35 29
--------------- ---------------
317 265
========= =========
Allocated to capital:
Custody transaction costs4 6 6
--------------- ---------------
323 271
========= =========
The Company's ongoing charges5, calculated 1.28% 1.18%
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 were:
========= =========
1No non-audit services were provided by the Company's auditors (2022: none).
2Further information on Directors' emoluments can be found in the Directors'
Remuneration Report contained within the Annual Report and Financial Statements
for the year ended 31 October 2023. The Company has no employees.
3Relates to audit fees and other administration costs written back in the year
ended 31 October 2023 (2022: other administration costs).
4For the year ended 31 October 2023, expenses of £6,000 (2022: £6,000) were
charged to the capital account of the Income Statement. These relate to
transaction costs charged by the custodian on sale and purchase trades.
5Alternative Performance Measure, see Glossary contained within the Annual
Report and Financial Statements for the year ended 31 October 2023
6. Finance costs
2023 2022
Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
Interest on 53 161 214 16 49 65
Sterling bank
loan
Loan facility 1 2 3 - - -
fees
--------- --------- --------- --------- --------- ---------
------ ------ ------ ------ ------ ------
54 163 217 16 49 65
========= ========= ========= ========= ========= =========
Finance costs have been allocated 25% to the revenue account and 75% to the
capital account of the Income Statement.
7. Dividends
Dividends paid Record Payment date 2023 2022
on equity date £'000 £'000
shares
2021 Final 4 Februar 17 March 2022 - 981
dividend of y 2022
4.60p
2022 Interim 22 July 1 September 2022 - 550
dividend of 2022
2.60p
2022 Final 10 15 March 2023 986 -
dividend of February
4.70p 2023
2023 Interim 21 July 1 September 2023 544 -
dividend of 2023
2.60p
--------------- ---------------
1,530 1,531
========= =========
The Directors have proposed a final dividend of 4.80p per share in respect of
the year ended 31 October 2023. The final dividend will be paid, subject to
shareholders' approval, on 15 March 2024 to shareholders on the Company's
register on 9 February 2024. The proposed final dividend has not been included
as a liability in these financial statements as final 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 purpose 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 31 October 2023, meet the relevant requirements as set out in
this legislation.
Dividends paid or declared on equity shares: 2023 2022
£'000 £'000
Interim paid of 2.60p (2022: 2.60p) 544 550
Final proposed of 4.80p1 (2022: 4.70p) 986 986
--------------- ---------------
1,530 1,536
========= =========
1Based on 20,541,536 ordinary shares (excluding treasury shares) in issue on 18
December 2024.
All dividends paid or payable are distributed from the Company's current year
revenue profits and, if required, from brought forward revenue reserves.
8. Earnings/(loss) and net asset value per ordinary share
Revenue, capital earnings/(loss) and net asset value per ordinary share are
shown below and have been calculated using the following:
2023 2022
Net revenue profit attributable to ordinary 1,367 1,438
shareholders (£'000)
Net capital profit/(loss) attributable to 783 (2,387)
ordinary shareholders (£'000)
--------------- ---------------
Total profit/(loss) attributable to ordinary 2,150 (949)
shareholders (£'000)
========= =========
Total shareholders' funds (£'000) 40,156 40,572
========= =========
Earnings per share
The weighted average number of ordinary 20,913,124 21,244,153
shares in issue during the year on which the
earnings per ordinary share was calculated
was:
The actual number of ordinary shares in 20,603,486 21,171,914
issue at the year end on which the net asset
value per ordinary share was calculated was:
--------------- ---------------
Calculated on weighted average number of
ordinary shares:
Revenue earnings per share (pence) - basic 6.54 6.77
and diluted
Capital earnings/(loss) per share (pence) - 3.75 (11.24)
basic and diluted
--------------- ---------------
Total earnings/(loss) per share (pence) - 10.29 (4.47)
basic and diluted
========= =========
As at As at
31 October 31 October
2023 2022
Net asset value per ordinary share (pence) 194.90 191.63
Ordinary share price (mid-market) (pence) 178.00 171.00
========= =========
There were no dilutive securities at the year end (2022: nil).
--------------- ---------------
133 589
========= =========
========= =========
9. 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 1 pence
each:
At 31 October 2022 21,171,914 10,081,532 31,253,446 313
Shares purchased for (568,428) - (568,428) (6)
cancellation
---------- ---------- ---------- ---------
----- ----- ----- ------
At 31 October 2023 20,603,486 10,081,532 30,685,018 307
========= ========= ========= =========
During the year 568,428 ordinary shares (2022: 226,928) were purchased and
subsequently cancelled for a total consideration including expenses of
£1,036,000 (2022: £416,000).
The number of ordinary shares in issue at the year end was 30,685,018 (2022:
31,253,446) of which 10,081,532 (2022: 10,081,532) were held in treasury.
10. Reserves
Distributable
reserves
Share Capital Capital Capital Special
Revenue
premium redemption reserve reserve reserve
reserve
account reserve (arising on (arising on £'000
£'000
£'000 £'000 investments revaluation
sold) of
£'000 investments
held)
£'000
At 31 October 14,819 236 7,997 1,486 13,427
2,294
2022
Movement
during the
year:
Total
comprehensive
(loss)/income:
Net - - (524) 1,307 -
1,367
(loss)/profit
for the
year
Transactions
with owners,
recorded
directly to
equity:
Ordinary - 6 - - (1,029) -
shares
purchased
for
cancellation
Share - - - - (7) -
purchase
costs
Dividends - - - - -
(1,530)
paid during
the
year
--------- ---------- ------------- ----------- --------- --
-------
------ ----- -- ---- ------ --
----
At 31 October 14,819 242 7,473 2,793 12,391
2,131
2023
========= ========= ========= ========= =========
=========
Distributable
reserves
Share Capital Capital Capital Special
Revenue
premium redemption reserve reserve reserve
reserve
account reserve (arising on (arising on £'000
£'000
£'000 £'000 investments revaluation
sold) of
£'000 investments
held)
£'000
At 31 October 14,819 234 7,108 4,762 13,843
2,387
2021
Movement
during the
year:
Total
comprehensive
income/(loss):
Net - - 889 (3,276) -
1,438
profit/(loss)
for the
year
Transactions
with owners,
recorded
directly to
equity:
Ordinary - 2 - - (414) -
shares
purchased
for
cancellation
Share - - - - (2) -
purchase
costs
Dividends - - - - -
(1,531)
paid during
the
year
--------- ---------- ------------- ----------- --------- --
-------
------ ----- -- ---- ------ --
----
At 31 October 14,819 236 7,997 1,486 13,427
2,294
2022
========= ========= ========= ========= =========
=========
The Company's share premium account was cancelled pursuant to shareholders'
approval of a special resolution at the Company's Annual General Meeting in 2002
and Court approval on 24 January 2002. The share premium account which totalled
£61,852,000 was transferred to a special reserve. This action was taken, in
part, to ensure that the Company had sufficient distributable reserves.
The share premium account and capital redemption reserve 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 special reserve and capital reserves 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 special reserve,
capital reserves and the revenue reserve may be distributed by way of dividend.
The gain on the capital reserve arising on the revaluation of investments of
£2,793,000 (2022: gain of £1,486,000) 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.
11. 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, bank overdrafts and bank
loans). 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 to the Financial
Statements are in the Financial Statements above.
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 the 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.
Financial assets at fair value Level 1 Level 2 Level 3 Total
through profit or loss at 31 October £'000 £'000 £'000 £'000
2023
Equity investments 43,267 - - 43,267
========= ========= ========= =========
Financial assets at fair value Level 1 Level 2 Level 3 Total
through profit or loss at 31 October £'000 £'000 £'000 £'000
2022
Equity investments 41,557 - - 41,557
========= ========= ========= =========
The Company held one Level 3 security as at 31 October 2023 (2022: one).
The investment in Patisserie Holdings has been valued at £nil as the company is
under liquidation.
There were no transfers between levels of financial assets and financial
liabilities recorded at fair value during the year ended 31 October 2023 (2022:
none).
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.
12. Transactions with the Manager and Investment Manager
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 is levied quarterly, based on 0.60% per annum of
the Company's market capitalisation. The investment management fee due for the
year ended 31 October 2023 amounted to £235,000 (2022: £237,000). At the year
end, £175,000 was outstanding in respect of the management fee (2022: £118,000).
In addition to the above services, BIM (UK) has provided the Company with
marketing services. The total fees paid or payable for these services for the
year ended 31 October 2023 amounted to £14,000 including VAT (2022: £13,000). At
the year end, £24,000 including VAT was outstanding in respect of marketing fees
(2022: £11,000).
The Company holds an investment in the BlackRock Institutional Cash Series plc -
Sterling Liquid Environmentally Aware Fund of £1,066,000 (2022: £2,604,000)
which for the year ended 31 October 2023 and 31 October 2022 has been presented
in the financial statements as a cash equivalent. This is a fund managed by a
company within the BlackRock Group.
The ultimate holding company of the Manager and the Investment Manager is
BlackRock, Inc., a company incorporated in Delaware, USA.
13. Related party disclosure
At the date of this report, the Board consists of four 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 in the Annual Report and Financial Statements for
the year ended 31 October 2023. At 31 October 2023, £9,000 (2022: £8,000) 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).
As at 31 October 2023
Total % of Total % of shares Number of Significant Investors who
shares held by held by are not affiliates of BlackRock Group or
Related Significant BlackRock, Inc.
BlackRock Funds Investors who are
not affiliates of
BlackRock Group or
BlackRock, Inc.
nil n/a n/a
As at 31 October 2022
Total % of Total % of shares Number of Significant Investors who
shares held by held by are not affiliates of BlackRock Group or
Related Significant BlackRock, Inc.
BlackRock Funds Investors who are
not affiliates of
BlackRock Group or
BlackRock, Inc.
nil n/a n/a
14. Contingent liabilities
There were no contingent liabilities at 31 October 2023 (2022: nil).
15. Publication of Non- Statutory Accounts
The financial information contained in this announcement does not constitute
statutory accounts as defined in the Companies Act 2006. The Annual Report and
Financial Statements for the year ended 31 October 2023 will be filed with the
Registrar of Companies after the Annual General Meeting. The figures set out
above have been reported upon by the auditor, whose report for the year ended 31
October 2023 contains no qualification or statement under Section 498(2) or (3)
of the Companies Act 2006.
The comparative figures are extracts from the audited financial statements of
BlackRock Income and Growth Investment Trust plc for the year ended 31 October
2022, which have been filed with the Registrar of Companies, unless otherwise
stated. The report of the auditor on those financial statements contained no
qualification or statement under Section 498 of the Companies Act.
16. Annual Reports
Copies of the Annual Report will be sent to members shortly and will be
available from the registered office c/o The Company Secretary, BlackRock Income
and Growth Investment Trust plc, 12 Throgmorton Avenue, London EC2N 2DL.
17. Annual General Meeting
The Annual General Meeting of the Company will be held at 12 Throgmorton Avenue,
London EC2N 2DL on Thursday, 7 March 2024 at 12.00 noon.
This information was brought to you by Cision http://news.cision.com
END
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