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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Blackrock Income And Growth Investment Trust Plc | LSE:BRIG | London | Ordinary Share | GB0030961691 | ORD 1P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 8.50 | 4.53% | 196.00 | 194.00 | 198.00 | 196.00 | 187.00 | 187.50 | 6,718 | 15:29:49 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| Mgmt Invt Offices, Open-end | 2.93M | 2.13M | 0.1039 | 18.86 | 40.2M |
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TIDMBRIG
BLACKROCK INCOME AND GROWTH INVESTMENT TRUST PLC
LEI: 5493003YBY59H9EJLJ16
Annual results announcement
for the year ended 31 October 2022
PERFORMANCE RECORD
As at As at
31 October 31 October Change
2022 2021 %
Net assets (£'000)1 40,572 43,468 -6.7
Net asset value per ordinary share (pence) 191.63 203.13 -5.7
Ordinary share price (mid-market) (pence) 171.00 191.00 -10.5
Discount to net asset value2 10.8% 6.0%
FTSE All-Share Index 7945.76 8173.30 -2.8
========== ========== ========
==
Performance (with dividends reinvested)
Net asset value per share2 -2.3% 30.4%
Ordinary share price2 -7.0% 22.2%
FTSE All-Share Index -2.8% 35.4%
========== ==========
Year ended Year ended
31 October 31 October Change
2022 2021 %
Revenue
Net profit after taxation (£'000) 1,438 1,557 -7.6
Revenue earnings per ordinary share (pence)3 6.77 7.10 -4.6
---------------- ---------------- ----------------
Dividends (pence)
Interim 2.60p 2.60p -
Final 4.70p 4.60p 2.2
Total dividends paid and payable 7.30p 7.20p 1.4
========== ========== ==========
1 The change in net assets reflects portfolio movements, the purchase of
the Company's own shares and dividends paid during the year.
2 Alternative Performance Measures, see Glossary in the Annual Report and
Financial Statements.
3 Further details are given in the Glossary in the Annual Report and
Financial Statements.
CHAIRMAN'S STATEMENT
Overview
When I reported to shareholders at this time last year, the UK market had been
buoyed by a successful vaccine roll-out and there was, to some extent, a degree
of optimism as the shadow of COVID-19 faded away and economic activity started
to return to more normal levels. However, although the risk of direct COVID-19
related disruption appeared to have dissipated, the longer-term damage to the
UK economy that many had feared was evident in strained supply chains, labour
shortages and the rising price of materials, freight and logistics.
As the UK economy struggled with the transition from a COVID-19 driven demand
for goods over services, to a more balanced goods and services-based economy,
the mismatch in demand over supply inevitably led to rising prices and in turn
rising inflation. This supply chain pressure was compounded by China's zero
COVID-19 policy, which created bottle necks and was at odds with the resumption
of economic activity seen around the industrialised world.
As we moved through early 2022, Russia's invasion of Ukraine triggered an
energy supply shock, resulting in soaring wholesale energy prices, as well as
price spikes in agricultural commodities, pushing up the cost of many food
staples and further exacerbating the supply constraint led inflationary forces
seen at the start of the period. These powerful inflationary drivers ensured
the rate of inflation continued to rise throughout the financial year and at
the time of writing UK inflation, as measured by the Consumer Prices Index, is
at 9.2%, having peaked at 11.1% in October 2022.
The Bank of England has taken action to combat rising inflation by reiterating
its commitment to the 2% inflation target and through monetary policy it has
implemented several interest rate hikes during the year. However, this action
has not come without cost, negatively impacting growth forecasts and raising
the likelihood of a more prolonged economic recession. The stock market
responded by adjusting valuations downward to reflect this more challenging
economic environment and the compounding effect on corporate profit margins of
a weakening pound, higher input costs and rising wages. This rise in operating
costs has, in many cases, been passed on to the consumer, whose spending power
has been steadily eroded as the rising cost of living bites.
Notwithstanding the headwinds faced by the UK economy, our portfolio managers
have approached this challenging backdrop with prudence and balance over the
12-month period, avoiding taking large sector or style bets and with limited
use of gearing in the portfolio. They also increased portfolio exposure to the
resources and power sectors, seeking to add to those holdings which they
believe will be beneficiaries of both rising energy costs and the UK
Government's focus on the security of energy supply following the invasion of
Ukraine. They have also used their ability to invest in non-UK companies,
providing a degree of diversification and additional sources of income.
Our portfolio managers' ongoing focus on high quality, cash generative
companies, with strong balance sheets and experienced management teams has
served the Company well during the year as the portfolio remained resilient,
marginally outperforming the benchmark; notwithstanding that the Company's NAV
fell in absolute terms during the period.
Performance
During the year the Company's Net Asset Value per share (NAV) returned -2.3%.
By comparison, the Company's benchmark, the FTSE All-Share Index, returned
-2.8%. At the share price level, the Company returned -7.0% over the period as
our discount widened from 6.0% at the start of the financial year to 10.8% as
at 31 October 2022.
As at 30 January 2023, since the year end the Company's NAV and share price
have increased by 11.7% and 13.7%, respectively (all percentages are in
Sterling with dividends reinvested).
As you will read in the Investment Manager's Report which follows, our
portfolio saw strong performance from our exposure to commodities and energy,
and our financial holdings also performed well as interest rates rose. 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 2022 of 6.77 pence compared with 7.10 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 of great value in the
current environment as inflation soars to a 40 year high and a challenging
global economic backdrop erodes the value of the pound. We are therefore
proposing a final dividend per share of 4.70 pence (2021: 4.60 pence) giving
total dividends for the year of 7.30 pence per share.
Subject to approval at the Annual General Meeting, the final dividend will be
paid on 15 March 2023 to shareholders on the Company's register at the close of
business on 10 February 2023 (ex-dividend date is 9 February 2023). This final
dividend, combined with an interim dividend of 2.60 pence per share (2021: 2.60
pence) paid to shareholders on 1 September 2022, gives a total dividend for the
year of 7.30 pence, resulting in a yield of 4.3% based on a share price of
171.00 pence as at 31 October 2022.
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 the date
of this report the Company held £2,294,000 in revenue reserves.
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 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.
During the year, a total of 226,928 ordinary shares were purchased at an
average price of 181.50 pence per share, for a total consideration (including
costs) of £416,000. All ordinary shares bought back were cancelled. No shares
were placed in treasury. The average discount for the year to 31 October 2022
was 7.8% and the discount at the year end was 10.8% which resulted in a share price return of -7.0% over the financial year. To put this in context, average discounts for investment trusts as a sector widened during the year to 13.3% as at 31 December 2022, compared with just 2.5% at the end of 2021. As at 30 January 2023, the sector discount was 9.2%. 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 the level. As at 31 October 2022 it stood at 2.4%. At the year end, the Company had in place a borrowing facility of up to £4 million, provided by ING Luxembourg S.A. This facility expired in December 2022 and the borrowings were repaid to the lender. Following consultation with the Manager, the Board sought a new borrowing facility that was aligned with the Company's gearing limit of 20% of net assets. On 23 December 2022, the Company arranged a replacement borrowing facility provided by The Bank of New York Mellon (International) Limited. This new facility has a higher borrowing limit of £8 million and as at the date of this report it is drawn down by £4 million. 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. The Board has a succession plan in place and will continue to appraise regularly 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. Further information on the Board's policy on director tenure and succession planning can be found in the Directors' Report in the Annual Report and Financial Statements. 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. The Association of Investment Companies (AIC) has also published updates to its Code of Corporate Governance (the 2019 AIC Code) which were endorsed by the Financial Reporting Council (FRC) as being appropriate for investment companies and fulfils the requirements of the UK Corporate Governance Code, as they are applicable to investment companies. The Board has fully adopted the recommendations of the 2019 AIC Code. Environmental, Social and Governance (ESG) considerations 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 a consideration of 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. 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. Therefore, an ordinary resolution will be put to shareholders at the forthcoming AGM to be held at 12.00 noon on Tuesday, 7 March 2023. The Board has considered the Company's performance, investment strategy and objective and the ongoing viability of the Company over the next five years. The Board believes that the Company's offering remains compelling, providing shareholders with growth in both capital and income over the longer term. The Board therefore unanimously recommends that shareholders vote in favour of the continuation of the Company in its current form. Annual general meeting It is the Board's intention that this year's AGM will be held on Tuesday, 7 March 2023 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 in the Annual Report and Financial Statements. At present, UK Government restrictions on public gatherings are no longer in force in connection with COVID-19 and therefore we intend to hold the AGM in the normal way with physical attendance by shareholders. However, although unlikely, shareholders should be aware that it is possible that such restrictions could be reimposed if required prior to the date of the AGM and therefore we recommend that as well as physical attendance, shareholders also cast their votes by proxy to ensure that their votes are counted. Shareholders who intend to attend the AGM should ensure that they have read the venue requirements for entry to the AGM. These requirements, along with further information on the business of this year's AGM, can be found in the Directors' Report in the Annual Report and Financial Statements. The Board very much looks forward to meeting shareholders and answering any questions you may have on the day. We hope you can attend this year's AGM. Communication with shareholders We appreciate how important access to regular information is to our shareholders. To supplement our Company website, we now 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 on the inside front cover of the Annual Report and Financial Statements. Outlook As you will read in their report which follows below, your investment managers' fundamental strategy has not changed, although they remain cautious, not least given the ongoing impact of the war in Ukraine. The UK market has been subject to sustained political and economic uncertainty this year, with rapid changes in last government's policy and the ill advised "mini-budget" negatively impacting confidence among both companies and investors. However, in a world currently dominated by macroeconomic and geopolitical factors, our portfolio managers remain focused on bottom-up stock selection, assembling a portfolio of individual companies which they believe are well placed to prosper over time. Your Board remains fully supportive of this approach and have every confidence in the ability of our Investment Managers to continue to deliver on the Company's investment objective as we move into 2023 and beyond. Graeme Proudfoot Chairman 1 February 2023 INVESTMENT MANAGER'S REPORT Performance For the 12 months since 31 October 2021, the Company's NAV returned -2.3%, outperforming its benchmark, whereas the FTSE All-Share Index (the Benchmark Index) returned -2.8% over the same period (all percentages are in Sterling with dividends reinvested). Market review The year ended 31 October 2022 marked a tumultuous time in markets with building inflationary pressures that were exacerbated by the war in Ukraine, leading to rising interest rates and heightened recessionary concerns. Strong demand combined with supply chain constraints continued to drive inflation higher at the start of the period. Interest rate expectations rose to reflect this increasingly inflationary backdrop causing the discount rate used by financial markets to rise and the valuation of financial assets to fall. This also impacted the shape of the market as the valuation of long duration assets was hit hardest, as evidenced by the underperformance of growth shares within equity markets. Global stock markets weakened further on the announcement of Russia's invasion of Ukraine in February 2022. The war exacerbated inflationary concerns as supply chains were disrupted once more, with the price of key commodities across energy and agriculture markets rising sharply while energy supply and security became a key focus. Geopolitical tensions have remained at the fore throughout the period, as highlighted by the interruptions to Europe's energy supply due to the suspension of the Nord Stream gas pipeline. Recessionary fears have been stoked by persistent high inflation pressuring consumers, while the rhetoric from central banks remains hawkish driving interest rate expectations higher. Whilst COVID-19 faded in relative importance, it continued to have impacts, notably with China's ongoing zero-COVID-19 policy, compounding the global inventory problems and causing continued supply chain constraints. The period ended with the UK Government's "mini-budget" announcement leading to market turmoil. The scale of the announced tax cuts and the lack of independent oversight from the Office of Budget Responsibility triggered a sell-off in gilts which quickly spiralled as Liability Driven Investment pension schemes became forced sellers and only stabilised once the Bank of England intervened. The outlook for the UK economy remains challenged, although it has stabilised following the latest change in leadership. Although the FTSE All-Share Index fell in absolute terms, the UK market
provided some relative respite compared to other global markets, benefitting in part from its low starting valuation. Market performance was dominated by the strength in commodities prices; Mining and Oil & Gas markedly outperformed as the oil price surged and defensive sectors, such as Tobacco and Pharmaceuticals, also benefitted from the increase in economic uncertainty. In contrast, cyclical sectors, notably Industrials, and domestically exposed sectors, such as Construction and Retailers, fell sharply contributing to weakness in mid and small-cap indices. Contributors to and detractors from performance During the period, the Company's performance fell in absolute terms as rising interest rates and the implications of the "mini-budget" announcement weighed on performance, however, the portfolio outperformed in relative terms. International shares performed relatively better and contributed to relative performance of the portfolio while domestic holdings including BT Group, Taylor Wimpey and Moonpig Group performed poorly and detracted. Mining holdings Rio Tinto and BHP were top positive contributors to the returns of the Company reflecting the strength in commodity markets. Pearson was a top positive contributor during the period despite rejecting a bid from private equity. The company has consistently posted strong results and was the strongest performing company in the index over the period. The education company is shifting emphasis away from the legacy textbook business to the stable growth, highly cash generative core, where we see material value. Whilst the underweight positioning in the Oil & Gas sector detracted from performance given strength in the oil price, other holdings exposed to the energy sector including Drax and Chart Industries, a US-listed supplier of equipment to the clean energy sector performed well and contributed to relative performance. Whilst these had been relatively recent purchases for the Company, both have been subsequently sold following significant outperformance having risen c. 40% in absolute terms during the year. US-listed Mastercard reported solid results with strong payment volumes and an encouraging acceleration in cross-border volume linked to increased travel as COVID-19 restrictions fade. EuroAPI, a pharmaceutical ingredients producer, was another top positive contributor to relative performance during the period. This was added to the portfolio after its spin-off from French pharmaceutical company, Sanofi. The company announced very strong numbers in September for its first statement as a public company where revenue beat expectations by 5% and EBITDA by 10%. Heightened recession concerns impacted the portfolio with the potential for consumer weakness, housing price falls and rising unemployment leading to weakness in several holdings, such as Moonpig Group, Hays, Taylor Wimpey and Grafton Group. Whilst cyclical exposure in the Company was moderated, we continue to own positions in these areas given the attractive valuations on offer. We are also reassured by strong balance sheets and cash generation and where we see the opportunity for companies to improve market positions through the downturn. Elsewhere the holding in Integrafin negatively impacted performance. Although the technology platform for independent financial advisers reported strong results, we were disappointed to see a meaningful cost increase causing us to question the operational strength of the company. We have sold the position. Transactions We approached portfolio construction with caution and balance over the 12-month period, avoiding large sector or style bets and with limited use of gearing, given the difficult circumstances and many moving parts that investors faced. Having added to holdings in the resources and energy sectors prior to the period, we continued to add to holdings that are beneficiaries of both rising energy costs and of the focus on the security of energy supply; purchasing Centrica and Woodside Energy Group and adding to BP Group and Shell. We also reduced Financials exposure in the portfolio, including the sale of Legal & General, given challenges in the financial system in the UK. Ferguson's strong logistics enabled the company to thrive during the period of robust demand and disrupted supply chains, while high commodity prices boosted revenues and margins. The strong share price combined with our concern over the sustainability of this performance prompted us to sell the holding. We used some of the proceeds of the Ferguson sale to purchase a new holding in Ashtead Group, the US-focused equipment rental company offering attractive structural growth from continued outsourcing trends in this fragmented industry. We purchased a new holding in BT Group which is building out the UK's national fibre network, targeting more than 25 million homes, providing customers and businesses with access to high-speed internet. We purchased Sanofi in the first half of 2021, encouraged by the progress of the operational turnaround at the company which was focused on improving efficiency while benefitting from the growing and underappreciated success of its blockbuster, Dupixent, while its consumer health division offered optionality. More recently, we grew concerned on litigation around the recalled drug Zantac and we subsequently sold the holding in August 2022. Towards the end of the period, we purchased a small position in Kone, the Finnish elevator engineering company. The company trades at a significant discount to peers, primarily due to concerns over its exposure to China yet has a strong service division, is highly cash generative supporting a compelling dividend. Gearing Historically, we have managed the Company's portfolio with a modest and consistent level of gearing, typically between 5-8% to enhance income generation and capital growth. However, as market volatility has picked up, we have been more active over the last 2 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 2022, the Company had employed net gearing of 2.4%. Outlook As we look ahead into 2023, the headwinds facing global equity markets are evident. Inflation has consistently surprised in its depth and breadth, driven by the resilient demand, COVID-19 supply chain constraints, and most importantly by rising wages in more recent data. Central banks across the developed world continue to unwind ten years of excess liquidity by tightening monetary policy desperate to prevent the entrenchment of higher inflation expectations. Meanwhile, the risk of policy error from central banks or politicians remains high as evidenced by the turmoil created by the "mini-budget" in the UK that sent gilts spiralling. The cost and availability of credit has changed and strengthens our belief in investing in companies with robust balance sheets capable of funding their own growth. The rise in the risk-free or discount rate also challenges valuation frameworks especially for long duration, high growth or highly valued businesses. We are mindful of this and feel it is incredibly important to focus on companies with strong, competitive positions, at attractive valuations that can deliver in this environment. The political and economic impact of the war in Ukraine has been significant in uniting Europe and its allies, whilst exacerbating the demand/supply imbalance in the oil and soft commodity markets. We are conscious of the impact this has on the cost of energy, and we continue to expect divergent regional monetary approaches with the US being somewhat more insulated from the impact of the conflict, than for example, Europe. Complicating this further is the impact COVID-19 has had on certain parts of the world, notably China, which has used lockdowns to control the spread of the virus impacting economic activity. More recently, China's reopening in January 2023 has been well received by markets, with the return of the world's second largest economy bolstering the global outlook. However, the rapid reversal of the lockdown policy has seen infections rates surge to levels not seen since the height of the pandemic. We also see the potential for longer-term inflationary pressure from decarbonisation and deglobalisation, the latter as geopolitical tensions rise more broadly across the world. We would expect broader demand weakness as we enter 2023 although the 'scars' of supply chain disruption are likely to support parts of industrial capex demand as companies seek to enhance the resilience of their supply chains. A notable feature of our conversations with a wide range of corporates has been the ease with which they have been able to pass on cost increases and protect or even expand margins during 2022 as evidenced by US corporate margins reaching 70-year highs. We believe that as demand weakens and as the transitory inflationary pressures start to fade during 2023 (e.g. commodity prices, supply chain disruption) then pricing conversations will become more challenging, despite pressure from wage inflation which may prove more persistent. While this does not bode well for margins in aggregate, we believe that 2023 will see greater differentiation as corporates' pricing power will come under intense scrutiny. The UK's policy has somewhat diverged from the other G7 countries in fiscal policy terms as the present government attempts to create stability after the severe reaction from the "mini-budget". The early signs of stability are welcome as financial market liquidity has increased and the outlook, whilst challenged, has improved. Although the UK stock market retains a majority of internationally weighted revenues, the domestic facing companies have continued to be impacted by this backdrop, notably financials, housebuilders and property companies. The valuation of the UK market remains highly supportive as currency
weakness supports international earnings, whilst domestic earners are in many
cases at COVID-19 or Brexit lows in share price or valuation terms. Although we
anticipate further volatility ahead as earnings estimates moderate, we know
that in the course of time, risk appetites will return, and opportunities are
emerging.
We continue to focus the portfolio on cash generative businesses with durable,
competitive advantages with strong leadership as we believe these companies are
best-placed to drive returns over the long-term. We anticipate economic and
market volatility will persist in 2023 and we are excited by the opportunities
this will likely create by identifying those companies using this cycle to
strengthen their long-term prospects as well as attractive turnaround
situations.
ADAM AVIGDORI AND DAVID GOLDMAN
BlackRock Investment Management (UK) Limited
1 February 2023
TEN LARGEST INVESTMENTS
1 = AstraZeneca (2021: 1st)
Sector: Pharmaceuticals & Biotechnology
Market value: £3,510,000
Percentage of portfolio: 8.4% (2021: 7.2%)
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.
2 + Shell (2021: 3rd)
Sector: Oil & Gas Producers
Market value: £3,497,000
Percentage of portfolio: 8.4% (2021: 4.7%)
Shell is a global oil and gas group. The group operates in both Upstream and
Downstream industries. Upstream is engaged in searching for and recovering
crude oil and natural gas and the liquefaction and transportation of gas.
Downstream is engaged in manufacturing, distribution and marketing activities
for oil products and chemicals.
3 - RELX (2021: 2nd)
Sector: Media
Market value: £2,422,000
Percentage of portfolio: 5.8% (2021: 5.2%)
RELX is a global provider of professional information solutions that includes
publication of scientific, medical, technical and legal journals. It also has
the world's leading exhibitions, conference and events business.
4 = Reckitt Benckiser (2021: 4th)
Sector: Household Goods & Home Construction
Market value: £1,942,000
Percentage of portfolio: 4.7% (2021: 4.5%)
Reckitt Benckiser is a global leader in consumer health, hygiene and home
products. Its products are sold in many countries. The company's strategy is to
have a highly focused portfolio concentrating on its most profitable brands,
which are responsible for 70% of its revenues.
5 + British American Tobacco (2021: 8th)
Sector: Tobacco
Market value: £1,854,000
Percentage of portfolio: 4.5% (2021: 3.7%)
British American Tobacco is one of the world's leading tobacco groups, with
more than 200 brands in the portfolio selling in approximately 180 markets
worldwide.
6 + Rio Tinto (2021: 7th)
Sector: Mining
Market value: £1,651,000
Percentage of portfolio: 4.0% (2021: 3.7%)
Rio Tinto is a metals and mining group operating in approximately 36 countries
around the world, producing iron ore, copper, diamonds, gold and uranium.
7 - Unilever (2021: 5th)
Sector: Personal Goods
Market value: £1,365,000
Percentage of portfolio: 3.3% (2021: 3.9%)
Unilever is a global supplier of food, home, and personal care products with
more than 400 brands focused on health and well-being.
8 - 3i Group (2021: 6th)
Sector: Financial Services
Market value: £1,329,000
Percentage of portfolio: 3.2% (2021: 3.8%)
3i Group is a private equity and venture capital group based in London. 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.
9 + Pearson (2021: 32nd)
Sector: Media
Market value: £1,321,000
Percentage of portfolio: 3.2% (2021: 1.3%)
Pearson is a British multinational and provides educational materials and
learning technologies. The company provides a range of education services,
including educational software, and system-wide solutions. The company serves
customers in the education and consumer publishing markets across North
America, Europe, Asia Pacific, and other regions.
10 + Smith & Nephew (2021: 13th)
Sector: Health Care Equipment & Services
Market value: £1,187,000
Percentage of portfolio: 2.9% (2021: 2.8%)
Smith & Nephew is a multinational medical equipment manufacturing company and
an international producer of advanced wound management products, arthroscopy
products, trauma and clinical therapy products, and orthopaedic reconstruction
products.
All percentages reflect the value of the holding as a percentage of total
investments as at 31 October 2022.
Percentages in brackets represent the value of the holding as at 31 October
2021.
Together, the ten largest investments represent 48.4% of total investments (ten
largest investments as at 31 October 2021: 43.5%).
DISTRIBUTION OF INVESTMENTS AS AT 31 OCTOBER 2022
Analysis of portfolio by sector
% of investments
by market value Benchmark
1 Support Services 12.6 3.5
2 Oil & Gas Producers 10.5 12.4
3 Pharmaceuticals & 9.6 10.5
Biotechnology
4 Media 9.0 3.3
5 Household Goods & Home 7.4 1.0
Construction
6 Banks 6.1 7.9
7 Financial Services 6.0 3.8
8 Mining 5.7 0.3
9 Tobacco 4.5 4.4
10 Non-Life Insurance 3.7 0.9
11 Personal Goods 3.3 0.5
12 Electronic & Electrical 3.1 0.9
Equipment
13 Travel & Leisure 2.9 2.9
14 General Retailers 2.9 2.8
15 Health Care Equipment & 2.9 0.7
Services
16 Food Producers 2.8 0.5
17 Life Insurance 2.8 2.4
18 Fixed Line Telecommunications 1.3 1.8
19 Gas, Water & Multiutilities 1.1 3.3
20 Industrial Engineering 1.0 0.6
21 Real Estate Investment Trusts 0.8 2.6
Sources: BlackRock and Datastream.
Investment size
Number of % of investments
investments by market value
< £1m 31 40.4
£1m to £2m 11 37.0
£2m to £3m 1 5.8
£3m to £4m 2 16.8
Source: BlackRock
List of investments as at 31 October 2022
Market
value % of
£'000 investments
Support Services
Rentokil Initial 1,128 2.7
Mastercard1 997 2.4
Hays 933 2.2
RS Group 733 1.8
Ashtead Group 712 1.7
Equifax1 442 1.1
Grafton Group 289 0.7
--------------- ---------------
5,234 12.6
========= =========
Oil & Gas Producers
Shell 3,497 8.4
BP Group 540 1.3
Woodside Energy Group 330 0.8
--------------- ---------------
4,367 10.5
========= =========
Pharmaceuticals & Biotechnology
AstraZeneca 3,510 8.4
EuroAPI1 497 1.2
--------------- ---------------
4,007 9.6
========= =========
Media
RELX 2,422 5.8
Pearson 1,321 3.2
--------------- ---------------
3,743 9.0
========= =========
Household Goods & Home Construction
Reckitt Benckiser 1,942 4.7
Berkeley Group 760 1.8
Taylor Wimpey 368 0.9
--------------- ---------------
3,070 7.4
========= =========
Banks
Standard Chartered 1,187 2.9
HSBC Holdings 682 1.6
Lloyds Banking Group 680 1.6
--------------- ---------------
2,549 6.1
========= =========
Financial Services
3i Group 1,329 3.2
Ashmore Group 438 1.1
London Stock Exchange Group 394 0.9
Premier Asset Management Group 319 0.8
--------------- ---------------
2,480 6.0
========= =========
Mining
Rio Tinto 1,651 4.0
BHP 700 1.7
--------------- ---------------
2,351 5.7
========= =========
Tobacco
British American Tobacco 1,854 4.5
--------------- ---------------
1,854 4.5
========= =========
Non-Life Insurance
Direct Line Group 944 2.3
Hiscox 588 1.4
--------------- ---------------
1,532 3.7
========= =========
Personal Goods
Unilever 1,365 3.3
--------------- ---------------
1,365 3.3
========= =========
Electronic & Electrical Equipment
Schneider Electric1 705 1.7
Oxford Instruments 578 1.4
--------------- ---------------
1,283 3.1
========= =========
Travel & Leisure
Whitbread 946 2.3
Fuller Smith & Turner - A Shares 270 0.6
Patisserie Holdings2 - -
--------------- ---------------
1,216 2.9
========= =========
General Retailers
Moonpig Group 438 1.1
Next 434 1.0
WH Smith 326 0.8
--------------- ---------------
1,198 2.9
========= =========
Health Care Equipment & Services
Smith & Nephew 1,187 2.9
--------------- ---------------
1,187 2.9
========= =========
Food Producers
Tate & Lyle 1,182 2.8
--------------- ---------------
1,182 2.8
========= =========
Life Insurance
Phoenix Group 1,143 2.8
--------------- ---------------
1,143 2.8
========= =========
Fixed Line Telecommunications
BT Group 557 1.3
--------------- ---------------
557 1.3
========= =========
Gas, Water & Multiutilities
Centrica 477 1.1
--------------- ---------------
477 1.1
========= =========
Industrial Engineering
Kone1 441 1.0
--------------- ---------------
441 1.0
========= =========
Real Estate Investment Trusts
Big Yellow Group 321 0.8
--------------- ---------------
321 0.8
========= =========
Total investments 41,557 100.0
========= =========
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 2022 was 45 (31 October 2021: 48).
As at 31 October 2022, 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 2022.
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 in the Annual Report and
Financial Statements.
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 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 in the Annual Report and
Financial Statements.
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 2022. 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 year end, the Company had in place a two-year unsecured 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 (International) Limited. 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 6.77p per share (2021:
7.10p per share). The total net loss for the year, after taxation, was £949,000
(2021: profit of £10,621,000) of which the net revenue profit amounted to £
1,438,000 (2021: £1,557,000) and the net capital loss amounted to £2,387,000
(2021: profit of £9,064,000). 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 in the Annual Report and Financial Statements.
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 above.
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 Annual Report and
Financial Statements. In the year to 31 October 2022, the Company's share price
to NAV traded in the range of a discount of 15.7% to a premium of 0.9%, both on
a cum income basis. The Company bought back a total of 226,928 ordinary shares
during the year at an average discount of 10.8% and at an average price of
181.50p per share. The total consideration (including costs) was £416,000. No
ordinary shares were reissued from treasury during the year.
Ongoing charges
Ongoing charges represent the Company's management fee and all other operating
expenses, excluding finance costs, direct transaction costs, custody
transaction charges, VAT recovered, taxation, write back of prior year expenses
and certain non-recurring items, expressed as a percentage of average daily net
assets.
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 Year
ended ended
31 31
October October
2022 2021
NAV per share1 191.63p 203.13p
Share price2 171.00p 191.00p
Net asset value total return3, 4 -2.3% +30.4%
Share price total return3, 4 -7.0% +22.2%
Change in Benchmark Index5 -2.8% +35.4%
Discount to net asset value4 10.8% 6.0%
Revenue earnings per share 6.77p 7.10p
Dividends per share 7.30p 7.20p
Ongoing charges4, 6 1.18% 1.21%
======== ========
= =
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 in the Annual Report and
Financial Statements.
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, write back of prior year expenses
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
ongoing COVID-19 pandemic which has given rise to unprecedented challenges for
businesses across the globe and the Board has taken into consideration the
risks posed to the Company by the crisis and incorporated these into the
Company's risk register. It has also considered the impact of the conflict in
Ukraine and its 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.
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.
Principal Risk Mitigation/Control
Investment performance
The Board is responsible for: To manage this risk the Board:
· setting the investment strategy to · regularly reviews investment
fulfil the Company's objective; and performance;
· monitoring the performance of the · regularly reviews the Company's
Investment Manager and the implementation investment mandate and long-term strategy;
of the investment strategy. · is required to provide prior
consent to the use of derivatives and
An inappropriate investment strategy may exchange traded funds;
lead to: · has set investment restrictions
and guidelines which the Investment Manager
· poor performance compared to the monitors and regularly reports on;
Benchmark Index and the Company's peer · reviews changes in gearing and the
group; rationale for the composition of the
· a widening discount to NAV; investment portfolio;
· a reduction or permanent loss of · monitors the maintenance of an
capital; and adequate spread of investments in order to
· dissatisfied shareholders and minimise the risks associated with factors
reputational damage. 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.
The Board is also aware of the long-term
risk to performance from inadequate ESG analysis is integrated into the
attention to ESG issues and in particular Manager's investment process. This is
the impact of climate change. monitored by the Board.
Income/dividend
The amount of dividends and future dividend The Board monitors this risk through the
growth will depend on the Company's receipt of detailed income forecasts and
underlying portfolio and the dividends paid considers the level of income at each
by the underlying investee companies. meeting. The Company also has a revenue
reserve and powers to pay dividends from
Changes in the composition of the portfolio capital which could potentially be used to
and any change in the tax treatment of the support the Company's dividend if required.
dividends or interest received by the
Company may alter the level of dividends
received by shareholders.
Gearing
The Company's investment strategy may To manage this risk the Board has limited
involve the use of gearing to enhance gearing, including borrowings and gearing
investment returns. through the use of derivatives, to 20% of
NAV at the time of investment, drawdown or
Gearing may be generated through borrowing participation.
money or increasing levels of market
exposure through the use of derivatives. The Investment Manager will only use
The Company currently has an unsecured gearing when confident that market
revolving credit facility provided by The conditions and opportunities exist to
Bank of New York Mellon (International) enhance investment returns.
Limited. The use of gearing exposes the
Company to the risks associated with
borrowing.
Legal, regulatory and tax compliance
The Company has been approved by HM Revenue Compliance with the accounting rules
& Customs as an investment trust, subject affecting investment trusts are regularly
to meeting the relevant eligibility monitored.
conditions and operating as an investment
trust in accordance with Sections 1158 and The Investment Manager monitors investment
1159 of the Corporation Tax Act 2010. As movements, the level and type of forecast
such, the Company is exempt from capital income and expenditure and the amount of
gains tax on the profits realised from the proposed dividends, if any, to ensure that
sale of its investments. Any breach of the the provisions of Chapter 4 of Part 24 of
relevant eligibility conditions could lead the Corporation Tax Act 2010 are not
to the Company losing investment trust breached. The results are reported to the
status and being subject to corporation tax Board at each meeting. The Board is aware
on capital gains realised within the of the risk of potential changes in law and
Company's portfolio. taxation post Brexit and will continue to
monitor this closely.
The Company is required to comply with the
provisions of the Companies Act 2006, the The Company Secretary and the Company's
Alternative Investment Fund Managers professional advisers provide regular
Directive (the 'AIMFD'), the Market Abuse reports to the Board in respect of
Regulation, the UK Listing Rules and the compliance with all applicable rules and
FCA's Disclosure Guidance & Transparency regulation.
Rules.
The Company and its appointed Alternative
Any serious breach could result in the Investment Fund Manager (AIFM and/or
Company and/or the Directors being fined or Manager) are subject to the risks that the
the subject of criminal proceedings or the requirements of AIFMD are not correctly
suspension of the Company's shares which complied with. The Board and the Manager
would in turn lead to a breach of the also monitor changes in government policy
Corporation Tax Act 2010. and legislation which may have an impact on
the Company.
The Market Abuse Regulation came into force
across the EU 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
In common with most other investment trust Due diligence is undertaken before
companies, the Company has no employees. contracts are entered into with third party
The Company therefore relies upon the service providers. Thereafter, the
services provided by third parties and is performance of the provider is subject to
dependent on the control systems of regular review and reports to the Board.
BlackRock (the Investment Manager and
AIFM), and of The Bank of New York Mellon The Bank of New York Mellon's and
(International) Limited (the Depositary and BlackRock's internal control processes are
Fund Accountant), which ensures safe regularly tested and monitored throughout
custody of the Company's assets and the year and are evidenced through their
maintains the Company's accounting records. Service Organisation Control (SOC 1)
The Company's share register is maintained reports, which are subject to review by an
by the Registrar, Computershare Investor Independent Service Assurance Auditor. The
Services PLC. SOC 1 reports provide assurance in respect
of the effective operation of internal
Failure by any service provider to carry controls. These reports are regularly
out its obligations to the Company could reviewed by the Audit Committee.
have a material adverse effect on the
Company's performance. Disruption to the The Company's assets are subject to a
accounting, payment systems or custody strict liability regime and in the event of
records, as a result of a cyber-attack or a loss of assets, the Depositary must
otherwise, could impact the monitoring and return assets of an identical type or the
reporting of the Company's financial corresponding amount, unless able to
position. demonstrate the loss was a result of an
event beyond its reasonable control.
The security of the Company's assets,
dealing procedures, accounting records and The Board reviews the overall performance
maintenance of regulatory and legal of the Manager, Investment Manager and all
requirements, depend on the effective other third party service providers on a
operation of these systems. 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. In respect of
the unprecedented risks posed by the
COVID-19 pandemic in terms of the ability
of service providers to function
effectively, the Board has received reports
from key service providers setting out the
measures that they have put in place to
address the crisis, in addition to their
existing business continuity framework.
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
Market risk arises from volatility in the The Board considers the diversification of
prices of the Company's investments. It the portfolio, asset allocation, stock
represents the potential loss the Company selection, and levels of gearing on a
might suffer through realising investments regular basis and has set investment
at a time of negative market movements. restrictions and guidelines which are
monitored and reported on by the Investment
There is also the potential for the Company Manager.
to suffer loss through holding investments
in a period of negative market movements. 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 COVID-19 pandemic and, more
recently, the conflict in Ukraine and its
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
The Company's investment activities expose Details of these risks are disclosed in
it to a variety of financial risks that note 16 to the financial statements within
include market risk. the Annual Report 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 COVID-19 pandemic and the
conflict in Ukraine, 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; and
· the level of demand for the Company's shares.
The Company is required to undertake a continuation vote at this year's AGM and
has also reviewed the potential impact that this may have on the Company's
viability. Particular consideration has been given to the following:
· 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 index;
and
· at the close of business on 30 January 2023 the Company's shares were
trading at a discount to NAV of 9.2%.
Having considered the above factors, the Board believes that the scheduled
continuation vote does not have a detrimental impact on the Company's
viability.
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.
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 2022, all of whom held office
throughout the year, are set out in the Governance Structure and Directors'
biographies in the Annual Report and Financial Statements.
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 2022, 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 in the table below.
Stakeholders
Shareholders Manager and Other key service Investee companies
Continued shareholder Investment Manager providers Portfolio holdings
support and The Board's main In order for the are ultimately
engagement are working relationship Company to function shareholders' assets,
critical to the is with the Manager, as an investment and the Board
continued existence who is responsible trust with a listing recognises the
of the Company and for the Company's on the premium importance of good
the successful portfolio management segment of the stewardship and
delivery of its (including asset official list of the communication with
long-term strategy. allocation, stock and FCA and trade on the investee companies in
The Board is focused sector selection) and London Stock meeting the Company's
on fostering good risk management, as Exchange's (LSE) main investment objective
working relationships well as ancillary market for listed and strategy. The
with shareholders and functions such as securities, the Board Board monitors the
on understanding the administration, relies on a diverse Investment Manager's
views of shareholders secretarial, range of service stewardship
in order to accounting and providers and arrangements and
incorporate them into marketing services. advisors for support receives regular
the Board's strategy in meeting relevant feedback from the
and objectives in The Manager has obligations and Investment Manager in
delivering long-term sub-delegated safeguarding the respect of meetings
growth and income. portfolio management Company's assets. For with the management
to the Investment this reason the Board of portfolio
Manager. Successful considers the companies.
management of Company's Custodian,
shareholders' assets Depositary, Registrar
by the Investment and Broker to be
Manager is critical stakeholders. The
for the Company to Board maintains
deliver successfully regular contact with
its investment its key external
strategy and meet its providers and
objective. The receives regular
Company is also reporting from them
reliant on the through the Board and
Manager as AIFM to committee meetings,
provide support in as well as outside of
meeting relevant the regular meeting
regulatory cycle.
obligations under the
AIFMD and other
relevant legislation.
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 Issue Engagement Impact
Investment mandate The Board is The Board believes The portfolio
and objective committed to that responsible activities undertaken
promoting the role investment and by the Investment
and success of the sustainability are Manager and the
Company in delivering important to the performance delivered
on its investment longer-term delivery for shareholders
mandate to of growth in capital during the year can
shareholders over the and income and has be found in the
long-term. worked very closely Investment Manager's
Consideration of with the Manager Report above.
sustainable throughout the year
investment is a key to review regularly
part of the the Company's
investment process performance,
and must be factored investment strategy
in when making and underlying
investment decisions. policies and to
The Board also has understand how
responsibility to sustainability
shareholders to considerations are
ensure that the integrated into the
Company's portfolio investment process.
of assets is invested
in line with the The Manager's
stated investment approach to the
objective and in a consideration of ESG
way that ensures an factors in respect of
appropriate balance the Company's
between spread of portfolio, as well as
risk and portfolio its engagement with
returns. 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.
Discount strategy The Board believes The Manager reports The average discount
that strong total return for the year to 31
performance and an performance October 2022 was
attractive dividend statistics to the 7.8%. During the year
yield enhances demand Board on a regular the Company's share
for the Company's basis, along with the price has traded at a
shares, which will portfolio yield and maximum discount of
help to narrow the the impact of 15.7% and a maximum
Company's discount of dividends paid on premium of 0.9%.
share price to NAV brought forward
over time. 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 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.
Service levels of The Board The Manager reports Performance
third party providers acknowledges the to the Board on the evaluations were
importance of Company's performance performed on a timely
ensuring that the on a regular basis. basis and the Board
Company's principal The Board carries out concluded that all
suppliers are a robust annual third party service
providing a suitable evaluation of the providers, including
level of service: Manager's the Manager,
including the Manager performance, their Custodian, Depositary
in respect of commitment and and Fund
investment available resources. Administrator were
performance and operating effectively
delivering on the The Board performs an and providing a good
Company's investment annual review of the level of service.
mandate; the service levels of all
Custodian and third party service The Board has
Depositary in respect providers and received updates in
of their duties concludes on their respect of business
towards safeguarding suitability to continuity planning
the Company's assets; continue in their from the Manager,
the Registrar in its role. Custodian,
maintenance of the Depositary, Fund
Company's share The Board receives Administrator,
register and dealing regular updates from Brokers and
with investor queries the AIFM, Depositary, Registrar, and is
and the Company's Registrar and confident that
Brokers in respect of Brokers. arrangements are in
the provision of place to ensure that
advice and acting as In light of the a good level of
a market maker for challenges presented service will continue
the Company's shares. by the ongoing to be provided
COVID-19 pandemic to despite the ongoing
the operation of impact of the
business across the COVID-19 pandemic.
globe, 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.
Board composition The Board is Over recent years the The Board recognises
committed to ensuring Board undertook a the benefits of
that its own review of succession diversity and a
composition brings an planning arrangements structured process of
appropriate balance and identified the ongoing refreshment
of knowledge, need for action given and will continue to
experience, diversity that, if no action consider regularly
and skills, and that were taken, a its composition.
it is compliant with majority of Board
best corporate Directors would have The Directors are not
governance practice had tenure in excess aware of any issues
under the UK Code of of nine years. The that have been raised
Corporate Governance, Board, discharging directly by
including guidance on the duties of a shareholders in
tenure and the Nomination Committee, respect of Board
composition of the agreed the selection composition in 2022.
Board's committees. criteria and the Through its Manager
method of selection, and Corporate Broker,
recruitment and there is regular
appointment. Board contact with major
diversity, including shareholders.
gender, was taken Shareholders are able
into account when to raise any concerns
establishing the in this regard at the
criteria. 50% of the AGM or alternatively
Board was appointed they may write to the
after 2019. Chairman of the
Board. Details of the
All Directors are proxy voting results
subject to a formal in favour and against
evaluation process on individual Directors'
an annual basis (more re-election at the
details and the 2022 AGM are given on
conclusions in the Company's website
respect of the 2022 at www.blackrock.com/
evaluation process uk/brig. Historical
are given in the proxy voting results
Annual Report and can be found under
Financial the 'Further
Statements). All Literature' tab.
Directors stand for
re-election by
shareholders
annually.
Shareholders may,
subject to any
COVID-19
restrictions, 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
if they wish to raise
any issues.
Shareholders Continued shareholder The Board is The Board values any
support and committed to feedback and
engagement are maintaining open questions from
critical to the channels of shareholders ahead of
continued existence communication and to and during Annual
of the Company and engage with General Meetings in
the successful shareholders. The order to gain an
delivery of its Company welcomes and understanding of
long-term strategy. encourages attendance their views and will
and participation take action when and
from shareholders at as appropriate.
its Annual General
Meetings. Feedback and
Shareholders questions will also
therefore have the help the Company
opportunity to meet evolve its reporting,
the Directors and aiming to make
Investment Manager reports more
and to address transparent and
questions to them understandable.
directly. Feedback from all
substantive meetings
The Annual Report and between the
Half-Yearly Financial Investment Manager
Report are available and shareholders will
on the BlackRock be shared with the
website and are also Board. The Directors
circulated to will also receive
shareholders either updates from the
in printed copy or Company's broker on
via electronic any feedback from
communications. In shareholders, as well
addition, regular as share trading
updates on activity, share price
performance, monthly performance and an
factsheets, the daily update from the
NAV and other Investment Manager.
information are also
published on the
website at
www.blackrock.com/uk/
brig.
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.
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. As well as the
influence afforded by its sheer scale, 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 collaborative 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.
BY ORDER OF THE BOARD
KEVIN MAYGER
FOR AND ON BEHALF OF
BLACKROCK INVESTMENT MANAGEMENT (UK) LIMITED
Company Secretary
1 February 2023
RESPONSIBLE OWNERSHIP: BLACKROCK'S APPROACH TO SUSTAINABLE INVESTING
Responsible ownership - BlackRock's approach
Consistent with BlackRock's fiduciary duty as an asset manager, BlackRock
Investment Stewardship's (BIS) purpose is to support investee companies in
their efforts to deliver long-term durable financial performance on behalf of
our clients. These clients include public and private pension plans,
governments, insurance companies, endowments, universities, charities and,
ultimately, individual investors, among others. BIS serves as an important link
between BlackRock's clients and the companies they invest in. Clients depend on
BlackRock to help them meet their investment goals; the business and governance
decisions that companies make will have a direct impact on BlackRock's clients'
long-term investment outcomes and financial well-being.
Global Principles
BlackRock's approach to corporate governance and stewardship is comprised in
BIS' Global Principles and market-specific voting guidelines. BIS' policies set
out the core elements of corporate governance that guide its investment
stewardship activities globally and within each regional market, including when
voting at shareholder meetings for those clients who have authorized BIS to
vote on their behalf. Each year, BIS reviews its policies and updates them as
necessary to reflect changes in market standards and regulations, insights
gained over the year through third-party and its own research, and feedback
from clients and companies. BIS' Global Principles are available on its website
at https://www.blackrock.com/corporate/literature/fact-sheet/
blk-responsible-investment-engprinciples-global.pdf.
Market-specific proxy voting guidelines
BIS' voting guidelines are intended to help clients and companies understand
its thinking on key governance matters. They are the benchmark against which it
assesses a company's approach to corporate governance and the items on the
agenda to be voted on at the shareholder meeting. BIS applies its guidelines
pragmatically, taking into account a company's unique circumstances where
relevant. BlackRock informs voting decisions through research and engages as
necessary. BIS reviews its voting guidelines annually and updates them as
necessary to reflect changes in market standards, evolving governance practice
and insights gained from engagement over the prior year.
BIS' market-specific voting guidelines are available on its website at https://
www.blackrock.com/corporate/about-us/investment-stewardship#
stewardship-policies.
BlackRock is committed to transparency in terms of disclosure on its
stewardship activities on behalf of clients. BIS publishes its stewardship
policies on its approach to responsible investment and its global principles,
engagement priorities and voting guidelines to help BlackRock's clients
understand its work to advance their interests as long-term investors in public
companies. Additionally, BIS published both annual and quarterly vote bulletins
that describe its rationale for certain votes at high profile shareholder
meetings.
BlackRock's reporting and disclosures
In terms of its own reporting, BlackRock believes that the SASB provides a
clear set of standards for reporting sustainability information across a wide
range of issues, from labour practices to data privacy to business ethics. For
evaluating and reporting climate-related risks, as well as the related
governance issues that are essential to managing them, the TCFD provides a
valuable framework. BlackRock recognises that reporting to these standards
requires significant time, analysis and effort. BlackRock's 2021 TCFD report
can be found at https://www.blackrock.com/corporate/literature/
continuous-disclosure-and-important-information/tcfd-report-2021-blkinc.pdf
The Company does not meet the criteria for Article 8 or 9 products under the EU
Sustainable Finance Disclosure Regulation ("SFDR") and the investments
underlying this financial product do not take into account the EU criteria for
environmentally sustainable economic activities. The Investment Manager has
access to a range of data sources, including principal adverse indicator
("PAI") data, when making decisions on the selection of investments. However,
whilst BlackRock considers ESG risks for all portfolios and these risks may
coincide with environmental or social themes associated with the PAIs, unless
stated otherwise in the AIFMD Disclosure Document, the Company does not commit
to considering PAIs in driving the selection of its investments.
The above forms part of the Strategic Report.
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 in 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 2022 amounted to £237,000 (2021: £240,000). At the year
end, £118,000 was outstanding in respect of the management fee (2021: £
180,000).
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 2022 amounted to £13,000 including VAT (2021: £11,000).
Marketing fees of £11,000 including VAT were outstanding at 31 October 2022
(2021: £11,000).
The Company holds an investment in the BlackRock Institutional Cash Series plc
- Sterling Liquid Environmentally Aware Fund of £2,604,000 (2021: £1,299,000)
which for the year ended 31 October 2022 and 31 October 2021 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 2022, the Chairman
received an annual fee of £30,750, the Chairman of the Audit Committee received
an annual fee of £25,000 and each of the other Directors received an annual fee
of £21,500. Directors' fees were last increased with effect from 1 November
2021.
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 2022, £8,000 (2021: £8,000) was outstanding in respect of Directors'
fees.
As at 31 October 2022 and 2021, the Directors' interests in the Company's
ordinary shares were as follows:
As at As at
31 October 31 October
2022 2021
Graeme Proudfoot (Chairman) 60,000 60,000
Nicholas Gold1 20,0001 20,000
Charles Worsley2 987,5392 987,5392
Win Robbins 12,106 12,106
1. Mr Gold purchased a further 23,175 ordinary shares on 2
November 2022 and as of the date of this report he holds a total of 43,175
ordinary shares.
2. 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' RESPONSIBILITES 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 in the Annual Report and
Financial Statements, 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 in the Annual Report and Financial Statements. As a result, the Board
has concluded that the Annual Report and Financial Statements for the year
ended 31 October 2022, 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
1 February 2023
INCOME STATEMENT FOR THE YEARED 31 OCTOBER 2022
2022 2021
Revenue Capital Total Revenue Capital Total
Notes £'000 £'000 £'000 £'000 £'000 £'000
(Losses)/gains on - (2,328) (2,328) - 8,980 8,980
investments held at fair
value through profit or
loss
Gains/(losses) on foreign - 5 5 - (3) (3)
exchange
Income from investments 3 1,742 169 1,911 1,919 303 2,222
held at fair value through
profit or loss
Other income 3 28 - 28 8 - 8
--------------- --------------- --------------- --------------- --------------- ---------------
Total income/(loss) 1,770 (2,154) (384) 1,927 9,280 11,207
========= ========= ========= ========= ========= =========
Expenses
Investment management fee 4 (59) (178) (237) (60) (180) (240)
Other operating expenses 5 (265) (6) (271) (284) (6) (290)
--------------- --------------- --------------- --------------- --------------- ---------------
Total operating expenses (324) (184) (508) (344) (186) (530)
========= ========= ========= ========= ========= =========
Net profit/(loss) on 1,446 (2,338) (892) 1,583 9,094 10,677
ordinary activities before
finance costs and taxation
Finance costs 6 (16) (49) (65) (10) (30) (40)
--------------- --------------- --------------- --------------- --------------- ---------------
Net profit/(loss) on 1,430 (2,387) (957) 1,573 9,064 10,637
ordinary activities before
taxation
Taxation 8 - 8 (16) - (16)
--------------- --------------- --------------- --------------- --------------- ---------------
Net profit/(loss) on 1,438 (2,387) (949) 1,557 9,064 10,621
ordinary activities after
taxation
========= ========= ========= ========= ========= =========
Earnings/(loss) per 8 6.77 (11.24) (4.47) 7.10 41.35 48.45
ordinary share (pence)
========= ========= ========= ========= ========= =========
The total column of this statement represents 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 YEARED 31 OCTOBER 2022
Called Share Capital
up share premium redemption Capital Special Revenue
capital account reserve reserve reserve reserve Total
Notes £'000 £'000 £'000 £'000 £'000 £'000 £'000
For the year
ended 31 October
2022
At 31 October 315 14,819 234 11,870 13,843 2,387 43,468
2021
Total
comprehensive
(loss)/income:
Net (loss)/profit - - - (2,387) - 1,438 (949)
for the year
Transactions with
owners, recorded
directly to
equity:
Ordinary shares 9,10 (2) - 2 - (414) - (414)
purchased for
cancellation
Share purchase 10 - - - - (2) - (2)
costs
Dividends paid1 7 - - - - - (1,531) (1,531)
--------------- --------------- --------------- --------------- --------------- --------------- ---------------
At 31 October 313 14,819 236 9,483 13,427 2,294 40,572
2022
========= ========= ========= ========= ========= ========= =========
For the year
ended 31 October
2021
At 31 October 326 14,819 223 2,806 15,816 2,411 36,401
2020
Total
comprehensive
income:
Net profit for - - - 9,064 - 1,557 10,621
the year
Transactions with
owners, recorded
directly to
equity:
Ordinary shares (11) - 11 - (1,961) - (1,961)
purchased for
cancellation
Share purchase - - - - (12) - (12)
costs
Dividends paid2 7 - - - - - (1,581) (1,581)
--------------- --------------- --------------- --------------- --------------- --------------- ---------------
At 31 October 315 14,819 234 11,870 13,843 2,387 43,468
2021
========= ========= ========= ========= ========= ========= =========
1 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.
2 Interim dividend paid in respect of the six months ended 30 April 2021 of
2.60p per share was declared on 23 June 2021 and paid on 1 September 2021.
Final dividend paid in respect of the year ended 31 October 2020 of 4.60p per
share was declared on 1 February 2021 and paid on 17 March 2021.
For information on the Company's distributable reserves please refer to note 15
in the Annual Report and Financial Statements.
BALANCE SHEET AS AT 31 OCTOBER 2022
2022 2021
Notes £'000 £'000
Fixed assets
Investments held at fair value through profit or loss 41,557 46,080
--------------- ---------------
Current assets
Current tax asset 16 11
Debtors 589 324
Cash and cash equivalents 2,657 1,362
--------------- ---------------
Total current assets 3,262 1,697
========= =========
Creditors - amounts falling due within one year
Bank loan (4,000) (4,000)
Other creditors (247) (309)
--------------- ---------------
Total current liabilities (4,247) (4,309)
========= =========
Net current liabilities (985) (2,612)
========= =========
Net assets 40,572 43,468
========= =========
Capital and reserves
Called up share capital 9 313 315
Share premium account 10 14,819 14,819
Capital redemption reserve 10 236 234
Capital reserve 10 9,483 11,870
Special reserve 10 13,427 13,843
Revenue reserve 10 2,294 2,387
--------------- ---------------
Total shareholders' funds 8 40,572 43,468
========= =========
Net asset value per ordinary share (pence) 8 191.63 203.13
========= =========
STATEMENT OF CASH FLOWS FOR THE YEARED 31 OCTOBER 2022
2022 2021
£'000 £'000
Operating activities
Net (loss)/profit on ordinary activities before taxation (957) 10,637
Add back finance costs 65 40
Loss/(gains) on investments held at fair value through profit or loss 2,328 (8,980)
(Gains)/losses on foreign exchange (5) 3
Sales of investments held at fair value through profit or loss 17,325 22,755
Purchases of investments held at fair value through profit or loss (15,424) (21,084)
Decrease/(increase) in other debtors 29 (89)
(Decrease)/increase in other creditors (62) 60
Taxation on investment income 3 (27)
--------------- ---------------
Net cash generated from operating activities 3,302 3,315
========= =========
Financing activities
Ordinary shares purchased for cancellation (414) (1,961)
Share purchase costs paid (2) (12)
Interest paid (65) (40)
Dividends paid (1,531) (1,581)
--------------- ---------------
Net cash used in financing activities (2,012) (3,594)
========= =========
Increase/(decrease) in cash and cash equivalents 1,290 (279)
Cash and cash equivalents at the beginning of the year 1,362 1,644
Effect of foreign exchange rate changes 5 (3)
--------------- ---------------
Cash and cash equivalents at the end of the year 2,657 1,362
========= =========
Comprised of:
Cash at bank 53 63
Cash Fund1 2,604 1,299
--------------- ---------------
2,657 1,362
========= =========
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 YEARED 31 OCTOBER 2022
1. PRINCIPAL ACTIVITY
The principal activity of the Company is that of an investment trust company
within the meaning of Section 1158 of the Corporation Tax Act 2010.
2. ACCOUNTING POLICIES
The principal accounting policies adopted by the Company are set out below.
(a) Basis of preparation
The financial statements have been prepared on a going concern basis in
accordance with 'The Financial Reporting Standard applicable in the UK and
Republic of Ireland' (FRS 102) and the revised Statement of Recommended
Practice - 'Financial Statements of Investment Trust Companies and Venture
Capital Trusts' (SORP) issued by the Association of Investment Companies (AIC)
in October 2019, and updated in July 2022, and the provisions of the Companies
Act 2006.
Substantially, all of the assets of the Company consist of securities that are
readily realisable and, accordingly, the Directors are satisfied that the
Company has adequate resources to continue in operational existence for the
period to 1 February 2024, being a period of at least 12 months from the date
of approval of the financial statements, and therefore consider the going
concern assumption to be appropriate. The Directors have reviewed compliance
with the covenants associated with the bank loan facility, income and expense
projections, the liquidity of the investment portfolio and the risks associated
with the current environment of heightened geo-political risk given the war in
Ukraine in making their assessment.
We also acknowledge the continuation vote in March 2023, however, given the
Company's relative performance to peers, our discussions with shareholders to
date and the alternatives available to shareholders to realise their
investment, we believe the continuation vote will be passed and therefore the
vote does not represent a material uncertainty to the going concern of the
Company.
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 within the Annual Report and Financial Statements.
None of the Company's other assets and liabilities were considered to be
potentially impacted by climate change.
The principal accounting policies adopted by the Company are set out below.
Unless specified otherwise, the policies have been applied consistently
throughout the year and are consistent with those applied in the preceding
year. All of the Company's operations are of a continuing nature.
The Company's financial statements are presented in Sterling, which is the
functional currency of the Company and the primary economic environment in
which the Company operates. All values are rounded to the nearest thousand
pounds (£'000) except where otherwise 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 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, in the Annual
Report and Financial Statements;
· 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
75% to the capital account and 25% to the revenue account of the Income
Statement in line with the Board's expected long-term split of returns, in the
form of capital gains and income respectively, from the investment portfolio.
(f) Taxation
The tax expense represents the sum of the tax currently payable and deferred
tax. The tax currently payable is based on the taxable profit for the year.
Taxable profit differs from net profit as reported in the Income Statement
because it excludes items of income or expenses that are taxable or deductible
in other years and it further excludes items that are never taxable or
deductible. The Company's liability for current tax is calculated using tax
rates that were applicable at the balance sheet date.
The current tax effect of different items of expenditure is allocated between
capital and revenue on the marginal basis using the Company's effective rate of
corporation tax for the accounting period.
Deferred taxation is recognised in respect of all timing differences at the
financial reporting date, where transactions or events that result in an
obligation to pay more taxation in the future or right to less taxation in the
future have occurred at the balance sheet date. Deferred 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 Sterling, reflecting the
primary economic environment in which the Company operates. Transactions in
foreign currencies are translated into Sterling at the rates of exchange ruling
on the date of the transaction. Foreign currency monetary assets and
liabilities and non-monetary assets held at fair value are translated into
Sterling at the rates of exchange ruling at the balance sheet date. Profits and
losses thereon are recognised in the capital account of the Income Statement
and taken to the capital reserve.
(m) Share repurchases and share reissues
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, 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. 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
2022 2021
£'000 £'000
Investment income:
UK dividends 1,447 1,503
UK scrip dividends - 19
UK special dividends 96 226
UK REIT dividends 11 9
Overseas dividends 188 162
--------------- ---------------
Total investment income 1,742 1,919
========= =========
Other income:
Interest from Cash Fund 28 1
Underwriting commission - 7
--------------- ---------------
Total income 1,770 1,927
========= =========
Dividends and interest received in cash during the year amounted to £1,838,000
and £23,000 respectively (2021: £1,771,000 and £1,000).
Special dividends of £169,000 have been recognised in capital during the year
(2021: £303,000).
4. INVESTMENT MANAGEMENT FEE
2022 2021
Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
Investment management fee 59 178 237 60 180 240
--------------- --------------- --------------- --------------- --------------- ---------------
Total 59 178 237 60 180 240
========= ========= ========= ========= ========= =========
Under the terms of the investment management agreement, BFM is entitled to a
fee of 0.6% per annum of the Company's market capitalisation. The investment
management fee is allocated 75% to the capital account and 25% to the revenue
account. There is no additional fee for company secretarial and administration
services.
5. OTHER OPERATING EXPENSES
2022 2021
£'000 £'000
Allocated to revenue:
Custody fees 1 1
Depositary fees 5 5
Audit fees1 29 29
Registrars' fee 27 24
Directors' emoluments2 99 100
Marketing fees 13 11
Printing and postage fees 35 32
Legal and professional fees 12 32
London Stock Exchange fee 10 10
FCA fee 7 7
Prior year expenses written back3 (2) -
Other administration costs 29 33
--------------- ---------------
265 284
========= =========
Allocated to capital:
Custody transaction costs4 6 6
--------------- ---------------
271 290
========= =========
The Company's ongoing charges5, calculated as a percentage of average 1.18% 1.21%
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, write back of prior year
expenses and certain non-recurring items were:
========= =========
1 No non-audit services were provided by the Company's auditors.
2 Further information on Directors' emoluments can be found in the
Directors' Remuneration Report in the Annual Report and Financial Statements.
The Company has no employees.
3 Relates to other administration costs written back in the year ended 31
October 2022 (31 October 2021: none).
4 For the year ended 31 October 2022, expenses of £6,000 (2021: £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 in the Annual Report and
Financial Statements.
6. FINANCE COSTS
2022 2021
Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
Interest on Sterling bank loan 16 49 65 10 30 40
--------------- --------------- --------------- --------------- --------------- ---------------
16 49 65 10 30 40
========= ========= ========= ========= ========= =========
Finance costs have been allocated 75% to the capital account and 25% to the
revenue account of the Income Statement.
7. DIVIDS
2022 2021
Dividends paid on equity shares Record date Payment date £'000 £'000
2020 Final dividend of 4.60p 12 February 17 March - 1,015
2021 2021
2021 Interim dividend of 2.60p 23 July 2021 1 September - 566
2021
2021 Final dividend of 4.60p 4 February 17 March 981 -
2022 2022
2022 Interim dividend of 2.60p 22 July 2022 1 September 550 -
2022
--------------- ---------------
1,531 1,581
========= =========
The Directors have proposed a final dividend of 4.70p per share in respect of
the year ended 31 October 2022. The final dividend will be paid, subject to
shareholders' approval, on 15 March 2023 to shareholders on the Company's
register on 10 February 2023. 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 2022, meet the relevant requirements as set out
in this legislation.
2022 2021
Dividends paid or declared on equity shares: £'000 £'000
Interim paid of 2.60p (2021: 2.60p) 550 566
Final proposed of 4.70p1 (2021: 4.60p) 986 981
--------------- ---------------
1,536 1,547
========= =========
1 Based on 20,968,251 ordinary shares (excluding treasury shares) in issue
on 30 January 2023.
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:
2022 2021
Net revenue profit attributable to ordinary shareholders (£'000) 1,438 1,557
Net capital (loss)/profit attributable to ordinary shareholders (£ (2,387) 9,064
'000)
--------------- ---------------
Total (loss)/profit attributable to ordinary shareholders (£'000) (949) 10,621
--------------- ---------------
Total shareholders' funds (£'000) 40,572 43,468
========= =========
Earnings per share
The weighted average number of ordinary shares in issue during the 21,244,153 21,920,081
year on which the earnings per ordinary share was calculated was:
The actual number of ordinary shares in issue at the year end on which 21,171,914 21,398,842
the net asset value was calculated was:
The number of ordinary shares in issue, including treasury shares at 31,253,446 31,480,374
the year end was:
Calculated on weighted average number of ordinary shares:
Revenue earnings per share (pence) - basic and diluted 6.77 7.10
Capital (loss)/earnings per share (pence) - basic and diluted (11.24) 41.35
--------------- ---------------
Total (loss)/earnings per share (pence) - basic and diluted (4.47) 48.45
========= =========
As at As at
31 31
October October
2022 2021
Net asset value per ordinary share (pence) 191.63 203.13
Ordinary share price (mid-market) (pence) 171.00 191.00
======== ========
= =
There were no dilutive securities at the year end (31 October 2021: nil).
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 2021 21,398,842 10,081,532 31,480,374 315
Shares purchased for cancellation (226,928) - (226,928) (2)
--------------- --------------- --------------- ---------------
At 31 October 2022 21,171,914 10,081,532 31,253,446 313
========= ========= ========= =========
During the year 226,928 ordinary shares (2021: 1,112,783) were purchased and
subsequently cancelled for a total consideration including expenses of £416,000
(2021: £1,973,000).
The number of ordinary shares in issue at the year end was 31,253,446 (2021:
31,480,374) of which 10,081,532 (2021: 10,081,532) were held in treasury.
10. RESERVES
Distributable reserves
Share Capital
premium redemption
account reserve
£'000 £'000
Capital
Capital reserve
reserve (arising on
(arising on revaluation of
investments investments Special Revenue
sold) held) reserve reserve
£'000 £'000 £'000 £'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 - 2 - - (414) -
cancellation
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
========= ========= ========= ========= ========= =========
Distributable reserves
Share Capital
premium redemption
account reserve
£'000 £'000
Capital
Capital reserve
reserve (arising on
(arising on revaluation of
investments investments Special Revenue
sold) held) reserve reserve
£'000 £'000 £'000 £'000
At 31 October 2020 14,819 223 4,661 (1,855) 15,816 2,411
Movement during the year:
Total comprehensive income:
Net profit for the year - - 2,447 6,617 - 1,557
Transactions with owners, recorded
directly to equity:
Ordinary shares purchased for - 11 - - (1,961) -
cancellation
Share purchase costs - - - - (12) -
Dividends paid during the year - - - - - (1,581)
--------------- --------------- --------------- --------------- --------------- ---------------
At 31 October 2021 14,819 234 7,108 4,762 13,843 2,387
========= ========= ========= ========= ========= =========
The share premium account and capital redemption reserve are not distributable
reserves under the Companies Act 2006. 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. 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 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 £1,486,000 (2021:
gain of £4,762,000) 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 in the Annual Report and Financial Statements.
Categorisation within the hierarchy has been determined on the basis of the
lowest level input that is significant to the fair value measurement of the
relevant asset.
The fair value hierarchy has the following levels:
Level 1 - Quoted market price for identical instruments in active markets
A financial instrument is regarded as quoted in an active market if quoted
prices are readily and regularly 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 than 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 Level 3
asset or liability including an assessment of the relevant risks including but
not limited to credit risk, market risk, liquidity risk, business risk and
sustainability risk. The determination of what constitutes 'observable' inputs
requires significant judgement by the Investment Manager, and these risks are
adequately captured in the assumptions and inputs used in measurement of Level
3 asset or liability.
Fair values of financial assets and financial liabilities
The table below is an analysis of the Company's financial instruments measured
at fair value at the balance sheet date.
Level 1 Level 2 Level 3 Total
Financial assets at fair value through profit or £'000 £'000 £'000 £'000
loss at 31 October 2022
Equity investments 41,557 - - 41,557
======== ======== ======== ========
= = = =
Level 1 Level 2 Level 3 Total
Financial assets at fair value through profit or £'000 £'000 £'000 £'000
loss at 31 October 2021
Equity investments 46,080 - - 46,080
======== ======== ======== ========
= = = =
There were no transfers between levels for financial assets and financial
liabilities during the year recorded at fair value as at 31 October 2022 (2021:
none). The Company held no Level 3 securities during the financial year or as
at 31 October 2022 (2021: 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 business risks,
including climate change 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 in 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 2022 amounted to £237,000 (2021: £240,000). At the year
end, £118,000 was outstanding in respect of the management fee (2021: £
180,000).
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 2022 amounted to £13,000 including VAT (2021: £11,000).
Marketing fees of £11,000 including VAT were outstanding at 31 October 2022
(2021: £11,000).
The Company holds an investment in the BlackRock Institutional Cash Series plc
- Sterling Liquid Environmentally Aware Fund of £2,604,000 (2021: £1,299,000)
which for the year ended 31 October 2022 and 31 October 2021 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 in the Annual Report and Financial Statements. At 31
October 2022, £8,000 (2021: £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 2022
Total % of shares held by Significant Number of Significant Investors who
Total % of shares held by Related Investors who are not affiliates of are not affiliates of BlackRock Group or
BlackRock Funds BlackRock Group or BlackRock, Inc. BlackRock, Inc.
nil n/a n/a
As at 31 October 2021
Total % of shares held by Significant Number of Significant Investors who
Total % of shares held by Related Investors who are not affiliates of are not affiliates of BlackRock Group or
BlackRock Funds BlackRock Group or BlackRock, Inc. BlackRock, Inc.
nil n/a n/a
14. CONTINGENT LIABILITIES
There were no contingent liabilities at 31 October 2022 (2021: nil).
15. SUBSEQUENT EVENTS
The Company's £4 million overdraft facility with ING Luxembourg S.A. matured on 31 December 2022. On 31 December 2022, a new facility was arranged between The Bank of New York Mellon (International) Limited (BNYM) and the Company under which BNYM agreed to make available to the Company a variable interest rate unsecured Sterling revolving credit facility of up to £8 million. 16. 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 2022 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 2022 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 2021, 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. 17. ANNUAL REPORT 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. 18. ANNUAL GENERAL MEETING The Annual General Meeting of the Company will be held at 12 Throgmorton Avenue, London EC2N 2DL on Tuesday, 7 March 2023 at 12.00 noon. ENDS The Annual Report will also be available on the BlackRock website at blackrock.co.uk/brig. Neither the contents of the Manager's website nor the contents of any website accessible from hyperlinks on the Manager's website (or any other website) is incorporated into, or forms part of, this announcement. For further information, please contact: Melissa Gallagher, Head, Closed End Funds, BlackRock Investment Management (UK) Limited Tel: 020 7743 3893 Press enquires: Ed Hooper, Lansons Communications Tel: 020 7294 3620 E-mail: BlackRockInvestmentTrusts@lansons.com or EdH@lansons.com 2 February 2023 12 Throgmorton Avenue London EC2N 2DL END
(END) Dow Jones Newswires
February 02, 2023 02:00 ET (07:00 GMT)
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