Final Results
21/12/2023 07:00
BlackRock Income and Growth Investment Trust plc
Annual Report and Financial Statements 31 October 2023
Performance record
As at As at
31 October 31 October
2023 2022
Net assets (£’000) 1 40,156 40,572
Net asset value per ordinary share (pence) 194.90 191.63
Ordinary share price (mid-market) (pence) 178.00 171.00
Discount to net asset value 2 8.7% 10.8%
FTSE All-Share Index 8413.70 7945.76
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For the year For the year
ended ended
31 October 31 October
2023 2022
Performance (with dividends reinvested)
Net asset value per share 2 5.2% -2.3%
Ordinary share price 2 8.1% -7.0%
FTSE All-Share Index 5.9% -2.8%
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For the year For the year Change
ended ended %
31 October 31 October
2023 2022
Revenue
Net profit on ordinary activities after taxation (£’000) 1,367 1,438 -4.9
Revenue earnings per ordinary share (pence) 3 6.54 6.77 -3.4
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Dividends (pence)
Interim 2.60 2.60 –
Final 4.80 4.70 +2.1
-------------- -------------- --------------
Total dividends payable/paid 7.40 7.30 +1.4
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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 Benchmark Index
by market value
1 Oil & Gas Producers 11.3 12.4
2 Pharmaceuticals & Biotechnology 9.2 11.0
3 Mining 8.9 0.3
4 Financial Services 8.8 4.4
5 Support Services 8.5 3.1
6 Household Goods & Home Construction 7.7 1.0
7 Media 7.1 3.9
8 Banks 6.6 9.0
9 General Retailers 4.5 3.3
10 Personal Goods 4.3 0.4
11 Non-Life Insurance 3.0 0.8
12 Real Estate Investment Trusts 2.9 2.3
13 Life Insurance 2.6 2.4
14 Food Producers 2.5 0.6
15 Electronic & Electrical Equipment 2.5 0.9
16 Health Care Equipment & Service 2.2 0.5
17 Tobacco 1.9 3.2
18 Travel & Leisure 1.8 3.1
19 Gas, Water & Multiutilities 1.7 3.7
20 Leisure Goods 1.1 0.2
21 Industrial Engineering 0.9 0.6
Sources: BlackRock and Datastream.
Investment size
Number of % of investments
investments by market value
< £1m 34 47.1
£1m to £2m 7 20.7
£2m to £3m 3 16.1
£3m to £4m 2 16.1
Source: BlackRock.
List of investments as at 31 October 2023
Market % of
value investments
£’000
Oil & Gas Producers
Shell 3,849 8.9
BP Group 722 1.7
Woodside Energy Group 293 0.7
--------------- ---------------
4,864 11.3
========= =========
Pharmaceuticals & Biotechnology
AstraZeneca 3,118 7.2
Roche Holding 1 847 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
Mastercard 1 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 Electric 1 555 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 Holdings 2 – –
--------------- ---------------
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 Year ended
31 October 31 October
2023 2022
NAV per share 1 194.90p 191.63p
Share price 2 178.00p 171.00p
Net asset value total return 3, 4 +5.2% -2.3%
Share price total return 3, 4 +8.1% -7.0%
Change in Benchmark Index 5 +5.9% -2.8%
Discount to net asset value 4 8.7% 10.8%
Revenue earnings per share 6.54p 6.77p
Dividends per share 7.40p 7.30p
Ongoing charges 4, 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 As at
31 October 2023 31 October 2022
Graeme Proudfoot (Chairman) 60,000 60,000
Nicholas Gold 43,175 20,000
Charles Worsley 1 987,539 987, 539
Win Robbins 12,106 12,106
1. Including a non-beneficial interest in 655,500 ordinary shares.
All of the holdings of the Directors are beneficial, other than where stated
in the footnote above. No changes to these holdings have been notified up to
the date of this report.
The information in the table above has been audited.
Statement of Directors’ responsibilities in respect of the Annual Report and
Financial Statements
The Directors are responsible for preparing the Annual Report and Financial
Statements in accordance with applicable law and regulations. Company law
requires the Directors to prepare financial statements for each financial
year. Under that law they have elected to prepare the financial statements in
accordance with applicable law and United Kingdom Generally Accepted
Accounting Practice, including FRS 102 The Financial Reporting Standard
applicable in the UK and Ireland.
Under company law, the Directors must not approve the financial statements
unless they are satisfied that they give a true and fair view of the state of
affairs of the Company as at the end of each financial year and of the profit
or loss of the Company for that year.
In preparing these financial statements, the Directors are required to:
·present fairly the financial position, financial performance and cash flows
of the Company;
·select suitable accounting policies in accordance with United Kingdom
Generally Accepted Accounting Practice and apply them consistently;
·present information, including accounting policies, in a manner that
provides relevant, reliable, comparable and understandable information;
·make judgements and estimates that are reasonable and prudent;
·state whether applicable UK Accounting Standards have been followed, subject
to any material departures disclosed and explained in the financial
statements; and
·prepare the financial statements on the going concern basis unless it is
inappropriate to presume that the Company will continue in business.
The Directors are responsible for keeping adequate accounting records that are
sufficient to show and explain the Company’s transactions and disclose with
reasonable accuracy at any time the financial position of the Company and
enable them to ensure that the financial statements comply with the Companies
Act 2006. They are also responsible for safeguarding the assets of the Company
and hence for taking reasonable steps for the prevention and detection of
fraud and other irregularities.
The Directors are also responsible for preparing the Strategic Report, the
Directors’ Report, the Directors’ Remuneration Report, the Corporate
Governance Statement and the Report of the Audit Committee in accordance with
the Companies Act 2006 and applicable regulations, including the requirements
of the Listing Rules and the Disclosure Guidance and Transparency Rules.
The Directors have delegated responsibility to the Manager for the maintenance
and integrity of the Company’s corporate and financial information included
on the BlackRock website.
Legislation in the United Kingdom governing the preparation and dissemination
of financial statements may differ from legislation in other jurisdictions.
Each of the Directors, whose names are listed n the Annual Report and
Financial Statements for the year ended 31 October 2023 confirm to the best of
their knowledge that:
·the financial statements, prepared in accordance with applicable accounting
standards, give a true and fair view of the assets, liabilities, financial
position and profit or loss of the Company; and
·the Strategic Report contained in the Annual Report and Financial Statements
includes a fair review of the development and performance of the business and
the position of the Company, together with a description of the principal
risks and uncertainties that it faces.
The 2018 UK Corporate Governance Code requires Directors to ensure that the
Annual Report and Financial Statements are fair, balanced and understandable.
In order to reach a conclusion on this matter, the Board has requested that
the Audit Committee advise on whether it considers that the Annual Report and
Financial Statements fulfils these requirements. The process by which the
Audit Committee has reached these conclusions is set out in the Audit
Committee’s report contained within the Annual Report and Financial
Statements for the year ended 31 October 2023. As a result, the Board has
concluded that the Annual Report and Financial Statements for the year ended
31 October 2023, taken as a whole, are fair, balanced and understandable and
provide the information necessary for shareholders to assess the Company’s
position and performance, business model and strategy.
FOR AND ON BEHALF OF THE BOARD
GRAEME PROUDFOOT
Chairman
20 December 2023
Income statement for the year ended 31 October 2023
2023 2022
Notes Revenue Capital Total Revenue Capital Total
£’000 £’000 £’000 £’000 £’000 £’000
Gains/(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 Share Capital Capital Special Revenue Total
up share premium redemption reserve reserve reserve £’000
capital account reserve £’000 £’000 £’000
£’000 £’000 £’000
For the year ended 31 October 2023
At 31 October 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 paid 1 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 paid 2 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 2022
£’000 £’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 2022
£’000 £’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 Fund 1 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 2022
£’000 £’000
Investment income:
UK dividends 1,494 1,447
UK special dividends 27 96
UK property income distributions 19 11
Overseas dividends 183 188
--------------- ---------------
Total investment income 1,723 1,742
========= =========
Other income:
Interest from Cash Fund 80 28
Deposit interest 1 –
--------------- ---------------
Total income 1,804 1,770
========= =========
Dividends and interest received in cash during the year amounted to
£1,789,000 and £83,000 respectively (2022: £1,838,000 and £23,000).
Special dividends of £7,000 have been recognised in capital during the year
(2022: £169,000).
4. Investment management fee
2023 2022
Revenue Capital Total Revenue Capital Total
£’000 £’000 £’000 £’000 £’000 £’000
Investment 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 2022
£’000 £’000
Allocated to revenue:
Custody fees 1 1
Depositary fees 5 5
Audit fees 1 29 29
Registrars’ fee 26 27
Directors’ emoluments 2 103 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 back 3 (3) (2)
Other administration costs 35 29
--------------- ---------------
317 265
========= =========
Allocated to capital:
Custody transaction costs 4 6 6
--------------- ---------------
323 271
========= =========
The Company’s ongoing charges 5 , 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 Capital Total Revenue Capital Total
£’000 £’000 £’000 £’000 £’000 £’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 2022
£’000 £’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 2022
£’000 £’000
Interim paid of 2.60p (2022: 2.60p) 544 550
Final proposed of 4.80p 1 (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 As at
31 October 31 October
2023 2022
Net asset value per ordinary share (pence) 194.90 191.63
Ordinary share price (mid-market) (pence) 178.00 171.00
========= =========
There were no dilutive securities at the year end (2022: nil).
--------------- ---------------
133 589
========= =========
========= =========
9. Called up share capital
Ordinary Treasury Total Nominal
shares shares shares value
number number number £’000
Allotted, called up and fully paid share capital comprised:
Ordinary shares of 1 pence each:
At 31 October 2022 21,171,914 10,081,532 31,253,446 313
Shares purchased for 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 Capital Capital Capital Special Revenue
premium redemption reserve reserve reserve reserve
account reserve (arising on (arising on £’000 £’000
£’000 £’000 investments revaluation of
sold) investments
£’000 held)
£’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 Capital Capital Capital Special Revenue
premium redemption reserve reserve reserve reserve
account reserve (arising on (arising on £’000 £’000
£’000 £’000 investments revaluation of
sold) investments
£’000 held)
£’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 Level 2 Level 3 Total
£’000 £’000 £’000 £’000
Equity investments 43,267 – – 43,267
========= ========= ========= =========
Financial assets at fair value through profit or loss at 31 October 2022 Level 1 Level 2 Level 3 Total
£’000 £’000 £’000 £’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 Total % of shares held by Significant Number of Significant Investors who
BlackRock Funds Investors who are not affiliates of are not affiliates of BlackRock Group or
BlackRock Group or BlackRock, Inc. BlackRock, Inc.
nil n/a n/a
As at 31 October 2022
Total % of shares held by Related Total % of shares held by Significant Number of Significant Investors who
BlackRock Funds Investors who are not affiliates of are not affiliates of BlackRock Group or
BlackRock Group or BlackRock, Inc. 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.
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