BlackRock Income and Growth Investment Trust
plc
Annual Report and Financial Statements 31
October 2023
Performance record
|
As at
31 October
2023
|
As at
31 October
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
|
|
|
========
|
========
|
|
|
For the year
ended
31 October
2023
|
For the year
ended
31 October
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%
|
|
|
========
|
========
|
|
|
For the year
ended
31 October
2023
|
For the year
ended
31 October
2022
|
Change
%
|
Revenue
|
|
|
|
Net profit on ordinary activities after taxation (£’000)
|
1,367
|
1,438
|
-4.9
|
Revenue earnings per ordinary share (pence)3
|
6.54
|
6.77
|
-3.4
|
|
--------------
|
--------------
|
--------------
|
Dividends (pence)
|
|
|
|
Interim
|
2.60
|
2.60
|
–
|
Final
|
4.80
|
4.70
|
+2.1
|
|
--------------
|
--------------
|
--------------
|
Total dividends payable/paid
|
7.40
|
7.30
|
+1.4
|
|
========
|
========
|
========
|
1 The
change in net assets reflects portfolio movements, the purchase of
the Company’s own shares and dividends paid during the
year.
2 Alternative
Performance Measures, see Glossary contained within the Annual
Report and Financial Statements for the year ended 31 October 2023
3 Further
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 31 October
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 31 October
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
by market value
|
Benchmark Index
|
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
investments
|
% of 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
value
£’000
|
% of
investments
|
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
|
|
=========
|
=========
|
1 Non-UK
listed investments.
2 Company
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
31 October
2023
|
Year ended
31 October
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%
|
|
=========
|
=========
|
1 Calculated
in accordance with accounting policies adopted by the Company and
AIC guidelines.
2 Mid-market
share price.
3 This
measures the Company’s share price and NAV total return, which
assumes dividends paid by the Company have been
reinvested.
4 Alternative
Performance Measures, see Glossary contained within the Annual
Report and Financial Statements for the year ended 31 October 2023.
5 FTSE
All-Share Index (total return).
6 Ongoing
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
31 October 2023
|
As at
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
£’000
|
Capital
£’000
|
Total
£’000
|
Revenue
£’000
|
Capital
£’000
|
Total
£’000
|
Gains/(losses) on investments held at fair value through profit or
loss
|
|
–
|
1,119
|
1,119
|
–
|
(2,328)
|
(2,328)
|
Gains on foreign exchange
|
|
–
|
2
|
2
|
–
|
5
|
5
|
Income from investments held at fair value through profit or
loss
|
3
|
1,723
|
7
|
1,730
|
1,742
|
169
|
1,911
|
Other income
|
3
|
81
|
–
|
81
|
28
|
–
|
28
|
|
|
---------------
|
---------------
|
---------------
|
---------------
|
---------------
|
---------------
|
Total income/(loss)
|
|
1,804
|
1,128
|
2,932
|
1,770
|
(2,154)
|
(384)
|
|
|
=========
|
=========
|
=========
|
=========
|
=========
|
=========
|
Expenses
|
|
|
|
|
|
|
|
Investment management fee
|
4
|
(59)
|
(176)
|
(235)
|
(59)
|
(178)
|
(237)
|
Other operating expenses
|
5
|
(317)
|
(6)
|
(323)
|
(265)
|
(6)
|
(271)
|
|
|
---------------
|
---------------
|
---------------
|
---------------
|
---------------
|
---------------
|
Total operating expenses
|
|
(376)
|
(182)
|
(558)
|
(324)
|
(184)
|
(508)
|
|
|
=========
|
=========
|
=========
|
=========
|
=========
|
=========
|
Net profit/(loss) on ordinary activities before finance
costs and taxation
|
|
1,428
|
946
|
2,374
|
1,446
|
(2,338)
|
(892)
|
Finance costs
|
6
|
(54)
|
(163)
|
(217)
|
(16)
|
(49)
|
(65)
|
|
|
---------------
|
---------------
|
---------------
|
---------------
|
---------------
|
---------------
|
Net profit/(loss) on ordinary activities before
taxation
|
|
1,374
|
783
|
2,157
|
1,430
|
(2,387)
|
(957)
|
Taxation (charge)/credit
|
|
(7)
|
–
|
(7)
|
8
|
–
|
8
|
|
|
---------------
|
---------------
|
---------------
|
---------------
|
---------------
|
---------------
|
Net profit/(loss) on ordinary activities after
taxation
|
8
|
1,367
|
783
|
2,150
|
1,438
|
(2,387)
|
(949)
|
|
|
=========
|
=========
|
=========
|
=========
|
=========
|
=========
|
Earnings/(loss) per ordinary share
(pence)
|
8
|
6.54
|
3.75
|
10.29
|
6.77
|
(11.24)
|
(4.47)
|
|
|
=========
|
=========
|
=========
|
=========
|
=========
|
=========
|
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
up share
capital
£’000
|
Share
premium
account
£’000
|
Capital
redemption
reserve
£’000
|
Capital
reserve
£’000
|
Special
reserve
£’000
|
Revenue
reserve
£’000
|
Total
£’000
|
For the year ended 31 October 2023
|
|
|
|
|
|
|
|
|
At 31 October 2022
|
|
313
|
14,819
|
236
|
9,483
|
13,427
|
2,294
|
40,572
|
Total comprehensive income:
|
|
|
|
|
|
|
|
|
Net profit for the year
|
|
–
|
–
|
–
|
783
|
–
|
1,367
|
2,150
|
Transactions with owners, recorded directly to equity:
|
|
|
|
|
|
|
|
|
Ordinary shares purchased for cancellation
|
9,10
|
(6)
|
–
|
6
|
–
|
(1,029)
|
–
|
(1,029)
|
Share purchase costs
|
10
|
–
|
–
|
–
|
–
|
(7)
|
–
|
(7)
|
Dividends paid1
|
7
|
–
|
–
|
–
|
–
|
–
|
(1,530)
|
(1,530)
|
|
|
---------------
|
---------------
|
---------------
|
---------------
|
---------------
|
---------------
|
---------------
|
At 31 October 2023
|
|
307
|
14,819
|
242
|
10,266
|
12,391
|
2,131
|
40,156
|
|
|
=========
|
=========
|
=========
|
=========
|
=========
|
=========
|
=========
|
For the year ended 31 October 2022
|
|
|
|
|
|
|
|
|
At 31 October 2021
|
|
315
|
14,819
|
234
|
11,870
|
13,843
|
2,387
|
43,468
|
Total comprehensive (loss)/income:
|
|
|
|
|
|
|
|
|
Net (loss)/profit for the year
|
|
–
|
–
|
–
|
(2,387)
|
–
|
1,438
|
(949)
|
Transactions with owners, recorded directly to equity:
|
|
|
|
|
|
|
|
|
Ordinary shares purchased for cancellation
|
|
(2)
|
–
|
2
|
–
|
(414)
|
–
|
(414)
|
Share purchase costs
|
|
–
|
–
|
–
|
–
|
(2)
|
–
|
(2)
|
Dividends paid2
|
7
|
–
|
–
|
–
|
–
|
–
|
(1,531)
|
(1,531)
|
|
|
---------------
|
---------------
|
---------------
|
---------------
|
---------------
|
---------------
|
---------------
|
At 31 October 2022
|
|
313
|
14,819
|
236
|
9,483
|
13,427
|
2,294
|
40,572
|
|
|
=========
|
=========
|
=========
|
=========
|
=========
|
=========
|
=========
|
1 Interim
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.
2 Interim
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
£’000
|
2022
£’000
|
Fixed assets
|
|
|
|
Investments held at fair value through profit or loss
|
|
43,267
|
41,557
|
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 ordinary share
(pence)
|
8
|
194.90
|
191.63
|
|
|
=========
|
=========
|
Statement of cash flows for the year ended 31 October 2023
|
2023
£’000
|
2022
£’000
|
Operating activities
|
|
|
Net profit/(loss) on ordinary activities before taxation
|
2,157
|
(957)
|
Add back finance costs
|
217
|
65
|
(Gains)/losses on investments held at fair value through profit or
loss
|
(1,119)
|
2,328
|
Gains on foreign exchange
|
(2)
|
(5)
|
Special dividends allocated to capital
|
(7)
|
(169)
|
Sales of investments held at fair value through profit or
loss
|
11,482
|
17,494
|
Purchases of investments held at fair value through profit or
loss
|
(11,632)
|
(15,424)
|
Decrease in other debtors
|
22
|
29
|
Increase/(decrease) in other creditors
|
134
|
(62)
|
Taxation on investment income
|
(18)
|
3
|
|
---------------
|
---------------
|
Net cash generated from operating
activities
|
1,234
|
3,302
|
|
=========
|
=========
|
Financing activities
|
|
|
Ordinary shares purchased for cancellation
|
(1,029)
|
(414)
|
Share purchase costs paid
|
(7)
|
(2)
|
Interest paid
|
(217)
|
(65)
|
Dividends paid
|
(1,530)
|
(1,531)
|
|
---------------
|
---------------
|
Net cash used in financing activities
|
(2,783)
|
(2,012)
|
|
=========
|
=========
|
(Decrease)/increase in cash and cash
equivalents
|
(1,549)
|
1,290
|
Cash and cash equivalents at the beginning of the year
|
2,657
|
1,362
|
Effect of foreign exchange rate changes
|
2
|
5
|
|
---------------
|
---------------
|
Cash and cash equivalents at end of the
year
|
1,110
|
2,657
|
|
=========
|
=========
|
Comprised of:
|
|
|
Cash at bank
|
44
|
53
|
Cash Fund1
|
1,066
|
2,604
|
|
---------------
|
---------------
|
|
1,110
|
2,657
|
|
=========
|
=========
|
1 Cash
Fund represents funds held on deposit with the BlackRock
Institutional Cash Series plc – Sterling Liquid Environmentally
Aware Fund.
Notes to the financial statements for the year ended
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
£’000
|
2022
£’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
£’000
|
Capital
£’000
|
Total
£’000
|
Revenue
£’000
|
Capital
£’000
|
Total
£’000
|
Investment management fee
|
59
|
176
|
235
|
59
|
178
|
237
|
|
---------------
|
---------------
|
---------------
|
---------------
|
---------------
|
---------------
|
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
£’000
|
2022
£’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 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:
|
1.28%
|
1.18%
|
|
=========
|
=========
|
1 No
non-audit services were provided by the Company’s auditors (2022:
none).
2 Further
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.
3 Relates
to audit fees and other administration costs written back in the
year ended 31 October 2023 (2022: other administration
costs).
4 For
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.
5 Alternative
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
£’000
|
Capital
£’000
|
Total
£’000
|
Revenue
£’000
|
Capital
£’000
|
Total
£’000
|
Interest on Sterling bank loan
|
53
|
161
|
214
|
16
|
49
|
65
|
Loan facility fees
|
1
|
2
|
3
|
–
|
–
|
–
|
|
---------------
|
---------------
|
---------------
|
---------------
|
---------------
|
---------------
|
|
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 on equity shares
|
Record date
|
Payment date
|
2023
£’000
|
2022
£’000
|
2021 Final dividend of 4.60p
|
4 February 2022
|
17 March 2022
|
–
|
981
|
2022 Interim dividend of 2.60p
|
22 July 2022
|
1 September 2022
|
–
|
550
|
2022 Final dividend of 4.70p
|
10 February 2023
|
15 March 2023
|
986
|
–
|
2023 Interim dividend of 2.60p
|
21 July 2023
|
1 September 2023
|
544
|
–
|
|
|
|
---------------
|
---------------
|
|
|
|
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
£’000
|
2022
£’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
|
|
=========
|
=========
|
1 Based
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 shareholders
(£’000)
|
1,367
|
1,438
|
Net capital profit/(loss) attributable to ordinary shareholders
(£’000)
|
783
|
(2,387)
|
|
---------------
|
---------------
|
Total profit/(loss) attributable to ordinary shareholders
(£’000)
|
2,150
|
(949)
|
|
=========
|
=========
|
Total shareholders’ funds (£’000)
|
40,156
|
40,572
|
|
=========
|
=========
|
Earnings per share
|
|
|
The weighted average number of ordinary shares in issue during the
year on which the earnings per ordinary share was calculated
was:
|
20,913,124
|
21,244,153
|
The actual number of ordinary shares in issue at the year end on
which the net asset value per ordinary share was calculated
was:
|
20,603,486
|
21,171,914
|
|
---------------
|
---------------
|
Calculated on weighted average number of ordinary
shares:
|
|
|
Revenue earnings per share (pence) – basic and diluted
|
6.54
|
6.77
|
Capital earnings/(loss) per share (pence) – basic and
diluted
|
3.75
|
(11.24)
|
|
---------------
|
---------------
|
Total earnings/(loss) per share (pence) – basic and
diluted
|
10.29
|
(4.47)
|
|
=========
|
=========
|
|
As at
31 October
2023
|
As at
31 October
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
shares
number
|
Treasury
shares
number
|
Total
shares
number
|
Nominal
value
£’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 cancellation
|
(568,428)
|
–
|
(568,428)
|
(6)
|
|
---------------
|
---------------
|
---------------
|
---------------
|
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
premium
account
£’000
|
Capital
redemption
reserve
£’000
|
Capital
reserve
(arising on
investments
sold)
£’000
|
Capital
reserve
(arising on
revaluation of
investments
held)
£’000
|
Special
reserve
£’000
|
Revenue
reserve
£’000
|
At 31 October 2022
|
14,819
|
236
|
7,997
|
1,486
|
13,427
|
2,294
|
Movement during the year:
|
|
|
|
|
|
|
Total comprehensive (loss)/income:
|
|
|
|
|
|
|
Net (loss)/profit for the year
|
–
|
–
|
(524)
|
1,307
|
–
|
1,367
|
Transactions with owners, recorded directly to equity:
|
|
|
|
|
|
|
Ordinary shares purchased for cancellation
|
–
|
6
|
–
|
–
|
(1,029)
|
–
|
Share purchase costs
|
–
|
–
|
–
|
–
|
(7)
|
–
|
Dividends paid during the year
|
–
|
–
|
–
|
–
|
–
|
(1,530)
|
|
---------------
|
---------------
|
---------------
|
---------------
|
---------------
|
---------------
|
At 31 October 2023
|
14,819
|
242
|
7,473
|
2,793
|
12,391
|
2,131
|
|
=========
|
=========
|
=========
|
=========
|
=========
|
=========
|
|
|
|
Distributable reserves
|
|
Share
premium
account
£’000
|
Capital
redemption
reserve
£’000
|
Capital
reserve
(arising on
investments
sold)
£’000
|
Capital
reserve
(arising on
revaluation of
investments
held)
£’000
|
Special
reserve
£’000
|
Revenue
reserve
£’000
|
At 31 October 2021
|
14,819
|
234
|
7,108
|
4,762
|
13,843
|
2,387
|
Movement during the year:
|
|
|
|
|
|
|
Total comprehensive income/(loss):
|
|
|
|
|
|
|
Net profit/(loss) for the year
|
–
|
–
|
889
|
(3,276)
|
–
|
1,438
|
Transactions with owners, recorded directly to equity:
|
|
|
|
|
|
|
Ordinary shares purchased for cancellation
|
–
|
2
|
–
|
–
|
(414)
|
–
|
Share purchase costs
|
–
|
–
|
–
|
–
|
(2)
|
–
|
Dividends paid during the year
|
–
|
–
|
–
|
–
|
–
|
(1,531)
|
|
---------------
|
---------------
|
---------------
|
---------------
|
---------------
|
---------------
|
At 31 October 2022
|
14,819
|
236
|
7,997
|
1,486
|
13,427
|
2,294
|
|
=========
|
=========
|
=========
|
=========
|
=========
|
=========
|
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 through profit or loss at 31 October
2023
|
Level 1
£’000
|
Level 2
£’000
|
Level 3
£’000
|
Total
£’000
|
Equity investments
|
43,267
|
–
|
–
|
43,267
|
|
=========
|
=========
|
=========
|
=========
|
Financial assets at fair value through profit or loss at 31 October
2022
|
Level 1
£’000
|
Level 2
£’000
|
Level 3
£’000
|
Total
£’000
|
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 shares held by Related
BlackRock Funds
|
Total % of shares held by Significant
Investors who are not affiliates of
BlackRock Group or BlackRock, Inc.
|
Number of Significant Investors who
are not affiliates of BlackRock Group or
BlackRock, Inc.
|
nil
|
n/a
|
n/a
|
As at 31 October 2022
Total % of shares held by Related
BlackRock Funds
|
Total % of shares held by Significant
Investors who are not affiliates of
BlackRock Group or BlackRock, Inc.
|
Number of Significant 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.