TIDMBRSA
BLACKROCK SUSTAINABLE AMERICAN INCOME TRUST PLC
LEI: 549300WWOCXSC241W468
Annual results announcement for the year ended 31 October 2022
PERFORMANCE RECORD
As at As at
31 October 31 October
2022 2021
Net assets (£'000)1 171,086 165,334
Net asset value per ordinary share (pence) 213.25 206.08
Ordinary share price (mid-market) (pence) 197.50 198.25
Discount to cum income net asset value2 7.4% 3.8%
Russell 1000 Value Index3 1824.64 1647.89
---------------- ----------------
Performance (with dividends reinvested)
Net asset value per share2 7.4% 36.0%
Ordinary share price2 3.6% 42.4%
Russell 1000 Value Index 10.7% 35.6%
========== ==========
Performance since inception (with dividends reinvested)
Net asset value per share2 216.3% 194.4%
Ordinary share price2 191.4% 181.4%
Russell 1000 Value Index 269.2% 233.4%
========== ==========
Year ended Year ended
31 October 31 October Change
2022 2021 %
Revenue
Net profit after taxation (£'000) 3,081 3,248 -5.1
Revenue earnings per ordinary share (pence)3 3.84 4.06 -5.4
---------------- ---------------- ----------------
Interim dividends (pence)
1st interim 2.00 2.00 -
2nd interim 2.00 2.00 -
3rd interim 2.00 2.00 -
4th interim 2.00 2.00 -
Total dividends paid/payable 8.00 8.00 -
========== ========== ==========
1 The change in net assets reflects portfolio movements and dividends paid
during the year.
2 Alternative Performance Measures, see Glossary in the Company's Annual
Report for the year ended 31 October 2022.
3 Further details are given in the Glossary in the Company's Annual
Report for the year ended 31 October 2022.
Sources: BlackRock and Datastream.
Performance figures have been calculated in Sterling terms with dividends
reinvested.
CHAIR'S STATEMENT
This is my first year as Chair of your Company and I am delighted to present
the Annual Report to shareholders for the year ended 31 October 2022.
Market overview
The period under review has proved highly volatile, with economic uncertainty
peaking in the first half of 2022 and remaining high. Equity markets initially
appeared to be driven by concerns around high inflation and the response by the
Federal Reserve (the Fed). However, they then sold off heavily following
Russia's invasion of Ukraine, as the market was quick to price in potential
commodity and food disruptions resulting from the conflict. China's continuing
zero tolerance approach to COVID-19 and subsequent lockdowns has also made it
harder to predict global economic trends, contributing to market volatility.
The U.S. economy and stock market struggled as it faced a multi-decade high in
inflation and aggressive monetary tightening by the Fed. Following the start of
the COVID-19 pandemic in March 2020, the U.S. economy greatly benefited from
the Fed's supportive fiscal and monetary policy which bolstered savings and
supercharged asset prices, but with that liquidity drying up and the hikes in
interest rates, the risk of recession is growing.
Compared to the wider US market, the Company has benefited from two particular
market developments during the year. First, the increase in interest rates (and
rise in the discount rate used to value future earnings growth) has meant that
value stocks have had a resurgence in performance compared to growth stocks
which has favoured our Investment Manager's style of investing. Secondly, the
strength of the US Dollar compared to Sterling and other currencies over the
period has meant that returns have been positive in absolute terms for
Sterling-based investors.
Performance
Against this backdrop and over the year to 31 October 2022, the Company's net
asset value per share (NAV) returned 7.4%1 and the share price returned 3.6%1.
This compares with a rise of 10.7%1 in the Russell 1000 Value Index, the
Company's reference index. September and October 2022 were two of the toughest
months for the Company since the change in strategy at the end of July 2021, as
the value style underperformed and the Company faced a combination of headwinds
including the outperformance of uninvestable sectors (such as aerospace,
defence and tobacco), portfolio gearing and poor sector allocation and stock
selection in medical technology, consumer discretionary and financials. It is
worth noting that the wider market as measured by the S&P 500 Index reached
bear market territory in mid-June (a drop of 20% or more from a previous peak)
and then finished the year to 31 October 2022 down by 1.7% in Sterling terms.
At the close of business on 23 January 2023, the Company's NAV had increased by
0.7% compared to a decrease of 1.4% in the reference index (both in Sterling
terms with dividends reinvested) since the year end.
Revenue earnings and dividends
The Company's revenue earnings per share (EPS), based on the weighted average
number of shares in issue for the year, amounted to 3.84p (2021: 4.06p), a
decrease of 5.4%. As the Company stopped writing option contracts since 31 July
2021, the Company's revenue EPS has increased on a like-to-like basis by 29.7%
after excluding the impact of option premium income earned in the year ended 31
October 2021. Four quarterly interim dividends of 2.00p per share were paid on
29 April 2022, 1 July 2022, 3 October 2022 and 3 January 2023. This is in line
with the payments made in the previous financial year. The dividend paid
represents a yield of 4.1% on the share price at the year end.
Your Board considers that it remains appropriate to continue with the current
dividend policy for the new financial year, which will be supported through
both revenue and other distributable reserves. The Company's distributable
reserves at 31 October 2022 were £168.6 million. The Board sought shareholder
authority at the previous Annual General Meeting to cancel the Company's share
premium account, effectively converting it into a distributable reserve, and
this became effective in August 2022. The Board continues to believe that this
dividend policy provides an attractive option for current and prospective
shareholders who wish to achieve exposure to the U.S. equity market, whilst at
the same time receiving a competitive dividend.
Discount/premium
The Directors recognise the importance to investors that the market price of
the Company's shares should not trade at a significant premium or discount to
the underlying NAV. Accordingly, in normal market conditions, the Board may use
the Company's share buy back and share issuance powers to ensure that the share
price does not go to an excessive discount or premium.
Over the year to 31 October 2022, the Company's shares have traded at an
average discount of 5.3%. The Board considered that the market volatility
caused by the geo-political issues referred to above and the associated
sell-off of equities has given rise to the discount and therefore it was not in
shareholders' interests to buy back shares at this point in the cycle.
Consequently, no shares were bought back during the year under review and up to
the date of this report. Neither were any shares reissued during the same
period. Resolutions to renew the authorities to issue and buy back shares will
be put to shareholders at the forthcoming Annual General Meeting.
Board composition
As previously announced in last year's Annual Report and Half Yearly Financial
Report, Simon Miller retired as Chairman at the end of the Company's financial
year on 31 October 2022. On behalf of the Board and shareholders, I would like
to thank Simon for his outstanding contribution as Chairman of the Company
since its inception.
Christopher Casey has also informed the Board of his intention to retire as a
Director of the Company following the Annual General Meeting in March 2023 and,
accordingly, will not be seeking re-election. The Board would like to express
its strong appreciation for Christopher's wise counsel and invaluable
contribution to the Company since its formation in 2012. The Board has
commenced a search and selection process to identify a new Director and a
further announcement will be made in due course.
The Board was pleased to appoint David Barron as a new non-executive Director
with effect from 22 March 2022 and it is the intention that David, a chartered
accountant, will replace Mr Casey as Audit and Management Engagement Chairman.
Upon Mr Miller's retirement and my appointment as Chair effective from 1
November 2022, I retired from the role as the Company's Senior Independent
Director and Mr Barron replaced me and also became Chairman of the Nomination
Committee.
Outlook
High inflation and tighter monetary policy are two important reasons why the
world economy is slowing down. Since recognising the urgent need for policy
tightening to combat inflationary pressures, the Fed has raised interest rates
at the fastest pace in more than three decades. Most other major developed
market central banks have followed suit and the scale and speed of subsequent
rate rises have surprised markets.
A resilient labour market in the U.S. and excess savings have so far protected
the economy from a more severe slowdown, but have given rise to more persistent
inflationary trends and sustained pressure on the Fed to continue to tighten
fiscal policy. In turn, higher financing costs and declining real disposable
income (driven by fiscal normalisation and high inflation) will be a headwind
for the economy. The odds have now shifted towards a recession in 2023, driven
by a Fed that is laser focused on bringing down inflation. While inflation has
peaked, it is coming down slowly and is still well above the Fed's 2% inflation
target.
It has been a difficult decade for the 'value' approach to investing but one of
the defining characteristics of financial markets in 2022, aside from the
volatility, has been the rotation from high growth stocks to 'value' areas of
the market. Historically, value has tended to do best in periods of higher and
rising rates and higher and rising inflation, so this is likely to continue to
be supportive of our Portfolio Managers' value investing approach in the near
term.
Annual General Meeting (AGM)
The AGM of the Company will be held at the offices of BlackRock at 12
Throgmorton Avenue, London EC2N 2DL on Tuesday, 21 March 2023 at 12 noon.
Details of the business of the meeting are set out in the Notice of Annual
General Meeting in the Company's Annual Report for the year ended 31 October
2022.
Shareholders who intend to attend the AGM should ensure that they have read and
understood the venue requirements for entry to the AGM. These requirements,
along with further information on the arrangements for the AGM, can be found in
the Directors' Report in the Company's Annual Report for the year ended 31
October 2022. In the absence of any reimposition of COVID-19 restrictions, the
Board very much looks forward to meeting with shareholders at the AGM.
Alice Ryder
Chair
26 January 2023
1 All percentages calculated in Sterling terms with dividends reinvested.
Alternative Performance Measures, see Glossary in the Company's Annual Report
for the year ended 31 October 2022.
Investment Manager's Report
Market Overview
Over the year to 31 October 2022, the Company's net asset value per share (NAV)
returned 7.4% and the share price returned 3.6%. This compares with a return of
10.7% in the Russell 1000 Value Index (all percentages calculated in Sterling
terms with dividends reinvested). For the same period, U.S. large cap stocks,
as represented by the S&P 500® Index, declined by 14.6% in US Dollar terms and
advanced by 1.7% in Sterling terms due to the strength of the dollar.
Following the adoption of the new investment strategy on 29 July 2021 to
incorporate explicit Environmental, Social and Governance objectives, and the
repositioning of the portfolio to reflect the changes, the Company's NAV
returned 15.0% and the share price returned 13.1%, compared with a return in
the Russell 1000 Value Index of 16.2%. All percentages are calculated in
Sterling terms with dividends reinvested. The following highlights some of the
key market events during the fiscal year.
U.S. equities rallied in the fourth quarter of 2021 as strong gains in October
were propelled by better-than-expected corporate earnings results. Investors
began to digest the Federal Reserve's (the Fed) plans to begin asset purchase
tapering and weighed Omicron variant uncertainty. By December 2021, Omicron
worries dissipated due in part to studies that suggested the variant was less
severe than past strains. Fed policy also continued to evolve in the closing
weeks of the year, as the U.S. central bank signalled it would slow its bond
purchases at a quicker pace and that it had pencilled in the potential for
multiple rate hikes in 2022.
A confluence of negative factors set U.S. stocks up for a difficult start to
the year, including rising interest rates, high inflation and unthinkable
violence and human tragedy in Europe. The S&P 500 recorded its worst January
since 2009 and officially hit correction territory (a 10%+ decline) in
February, before rallying higher in March. The Fed struck an increasingly
aggressive tone during the quarter, as inflation figures hit 40-year highs, and
Russian sanctions intensified supply-driven price pressures across oil & gas,
industrial metals and various agricultural commodities. The U.S. central bank
officially began its hiking cycle with a quarter-point increase in March 2022,
the first since 2018.
In the second quarter, U.S. equities remained under immense pressure as
investors priced in further interest rate rises and increased recession fears.
Unsurprisingly, annual inflation accelerated to 8.6% in May, the highest
reading since December 1981. To combat rising inflation, the Fed was forced to
take increasingly aggressive measures with rate hikes: a 0.50% increase in
early May followed by a 0.75% increase in mid-June. While the U.S. economy has
remained resilient in the face of these rate hikes, signs of an economic
slowdown have emerged. As a result, the focus on high inflation shifted towards
a potential economic recession as interest rates rose and stock markets
remained volatile.
In the second half of 2022, persistently high inflation spurred the Fed to
continue hiking interest rates aggressively, including 0.75% increases in July
and September, respectively. Fed Chair Jerome Powell also spoke harshly about
fighting inflation during his late August Jackson Hole speech, stating "we must
keep at it until the job is done". Despite central bank policy efforts,
weakening housing data and a general decline in commodities prices, inflation
remained firmly embedded in the U.S. economy amid a tightly supplied labour
market. This backdrop, combined with anticipation of further rate hikes, stoked
recessionary fears and weighed on market sentiment.
Portfolio overview
The largest contributor to relative performance was stock selection and
allocation decisions in communication services. Within the sector, an
underweight to the media industry and our decision not to invest in the
interactive media & services industry accounted for the majority of relative
outperformance. In energy, investment decisions in the oil, gas, & consumable
fuels industry boosted relative returns. Furthermore, stock selection in
utilities proved beneficial due to stock selection and an overweight allocation
to the multi-utilities industry.
The largest detractor from relative performance was stock selection and
allocation decisions in consumer discretionary. Stock selection within the
sector accounted for the majority of underperformance, although allocation
decisions in the household durables industry proved costly as well. In
financials, stock selection within the insurance industry proved detrimental,
as did our decision of not investing in diversified financial services
companies. Other modest detractors from relative results included stock
selection within health care, mainly in the health care equipment & supplies
and pharmaceuticals industries.
Below is a comprehensive overview of our allocations (in Sterling) at the end
of the period.
Information Technology (IT): 5.3% overweight (13.9% of the portfolio)
An increasing number of companies in the technology sector are what we refer to
as "industrial tech". These firms are competitively insulated from disruptors,
well-positioned to take advantage of long-term secular tailwinds and exhibit
growth in earnings and Free Cash Flow (FCF). Strong earnings growth and FCF
generation is also translating to an increasing number of companies paying
growing dividends to shareholders. This is in stark contrast to the dot-com era
where growth was often prioritised over shareholder return. We believe this
trend is poised to continue. Our preferred exposures in the sector include IT
services and communications equipment companies with sticky revenue streams
such as Cisco Systems (2.8% of the portfolio), Cognizant Technology Solutions
(2.6% of the portfolio), and Fidelity National Information Services (2.1% of
the portfolio). We also continue to invest in software companies with
capital-light business models such as Microsoft (1.9% of the portfolio). IT
broadly scores well on Environmental, Social and Governance (ESG) metrics given
the generally lower environmental impact than other sectors, with our selection
of companies including a mix of ESG leaders (Microsoft and Cisco Systems) and
ESG improvers (Fidelity National Information Services).
Consumer Discretionary: 3.9% overweight (10.0% of the portfolio)
Within the sector, our preferred areas of investment include household
durables, textiles and apparel, and firms with auto-related exposure.
Disruption risks persist in the sector, and we believe these risks are best
mitigated through identifying stock-specific investment opportunities that
either trade at discounted valuations or have business models that are somewhat
insulated from disruptive pressures. For example, we believe companies such as
General Motors (autos; 2.3% of the portfolio) and Ralph Lauren (apparel; 2.2%
of the portfolio) offer investors exposure to underappreciated franchises at
discounted valuations. Furthermore, retailers such as Dollar Tree (dollar
store; 1.8% of the portfolio) provide us with access to businesses that can
potentially compound earnings and are more immune to disruptive forces. From a
sustainability standpoint, our selection of companies includes a mix of ESG
leaders such as Panasonic (1.7% of the portfolio), as well as ESG improvers
with clear roadmaps for better ESG adherence and disclosures (i.e. General
Motors' commitment to electric vehicles and Ralph Lauren's Global Citizen
initiative).
Financials: 1.6% overweight (21.9% of the portfolio)
Financials represent our portfolio's largest absolute sector allocation and we
remain particularly bullish on companies in the banks, insurance, and wealth
management industries. The U.S. banks offer investors a combination of strong
balance sheets (their capital levels are meaningfully higher post financial
crisis), attractive valuations, and the potential for relative upside versus
the broader market from inflation and higher interest rates. We believe the
current credit cycle is in its early stages as loan growth is starting to pick
up and consumer balance sheets remain quite healthy. In our view this setup
could result in upside surprise versus consensus expectations on both growth
and credit expectations over the next several years. Secondly, we continue to
like insurers and insurance brokers as these companies operate relatively
stable businesses and trade at attractive valuations. We categorise most of our
holdings in this sector as ESG improvers, with opportunities for company
managements to enact stronger corporate governance and human capital
development policies. Lastly, we have also identified stock specific
investments in wealth management as companies such as Morgan Stanley (1.4% of
the portfolio) and Charles Schwab (1.2% of the portfolio) stand out from peers
due to their differentiated investment platforms, proximity to end customers
and runways for long-term growth.
Materials: 0.2% overweight (4.3% of the portfolio)
Our exposure to the materials sector is stock specific. In the metals & mining
industry we have a single position in Newmont (1.3% of the portfolio), an
advantaged gold miner that operates on the lower end of the cost curve and we
view as an ESG leader. We sold our position in Steel Dynamics, the fifth
largest U.S. steel producer, in August 2022 based on valuation. Meanwhile,
Newmont stands above its gold mining peers due to its strong governance, safety
record and environmental management commitments. Within the containers &
packaging industry, we have a position in Sealed Air (1.6% of the portfolio), a
manufacturer of film packaging for perishable food and industrials/e-commerce.
Sealed Air operates a high return business, has good pricing power and in our
view offers a relatively stable growth outlook. From a sustainability
standpoint, plastic packagers generally score poorly on waste and water stress.
The key issue for plastic is how to improve circularity and management has
pledged to have 100% recyclable/reusable solutions and 50% average recycled/
renewable content by 2025, which is well ahead of peers.
Health Care: 3.4% overweight (20.4% of the portfolio)
Secular growth opportunities in health care are a byproduct of demographic
trends. Older populations spend more on health care than younger populations.
In the United States, a combination of greater demand for health care services
and rising costs facilitates a need for increased efficiency within the health
care ecosystem. We believe innovation and strong cost control can work together
to address this need and companies that can contribute to this outcome may be
poised to benefit. On the innovation front, we are finding opportunities in
pharmaceuticals and among companies in the health care equipment & supplies
industry. We prefer to invest in pharma companies with a proven ability to
generate high research & development productivity versus those that focus on
one or two key drugs and rely upon raising their prices to drive growth.
Outside of pharma, our search for attractively priced innovators is more stock
specific; we recently initiated a position in Baxter International (1.9% of the
portfolio) a health care company focused on products to treat kidney disease
and other chronic medical conditions. We believe the company is poised to do
well as margin pressures from temporary inflation (logistics and shipping)
suppress and the economy continues to reopen. From a cost perspective, health
maintenance organisations (HMOs) have an economic incentive to drive down costs
as they provide health insurance coverage to constituents. These efforts
ultimately help to make health care insurance affordable to more people and the
HMOs also play a substantial role in improving the access to and quality of
health care its members receive. Fundamentally, we believe our holdings in the
sector can benefit from downward pressure on cost-trend, new membership growth
and further industry consolidation over time. Furthermore, they trade at
meaningfully discounted valuations versus peers, offering us an attractive risk
versus reward opportunity.
Energy: 0.1% underweight (8.7% of the portfolio)
The portfolio currently invests in five energy stocks and we have a neutral
weight in the sector relative to the reference index. Our focus on
sustainability places a high hurdle for energy companies to be included in the
portfolio, but we believe the sector remains investable, as more traditional
oil & gas operators are critical in the energy transition towards less carbon
intensive sources. For example, natural gas is 40-60% less carbon-intensive to
produce and combust versus coal and oil. We view natural gas as a key "bridge
fuel" and like companies such as Woodside Energy Group (2.0% of the portfolio)
and EQT (1.3% of the portfolio). Fundamentally, we generally seek to invest in
attractively priced operators with good resource assets that have the
opportunity to improve upon environmental issues or demonstrate clear
leadership in sustainability (i.e. through their exposure to renewables or
commitments to net zero/carbon neutral outcomes). We also prefer to target
companies with experienced management teams, low financial leverage and
disciplined capital expenditure spending plans, as these elements can
contribute to positive free cash flow generation over time.
Utilities: 1.4% underweight (4.2% of the portfolio)
The portfolio currently invests in only two utility stocks and we have a slight
underweight in the sector relative to the reference index. Portfolio exposures
are stock specific as we are finding pockets of investment opportunity among
U.S. regulated utilities, which add a level of stability and defensiveness to
the portfolio through their durable earnings and dividend profiles. Our
investments in the sector primarily focus on ESG leaders that have specific
targets for reduction in carbon emissions and maintain significant exposure to
renewables or generate power through cleaner means such as natural gas.
Communication Services: 2.9% underweight (4.4% of the portfolio)
The portfolio has an underweight to communication services. Our underweight is
driven by expensive valuations and a lack of dividend payers in the
entertainment and interactive media & services industries. Meanwhile, the
portfolio is overweight to the diversified telecom services and wireless
telecom services industries. Notable portfolio holdings include Verizon
Communications (diversified telecom; 2.8% of the portfolio) and Rogers
Communications (wireless telecom; 1.6% of the portfolio). Verizon
Communications and Rogers Communications trade at reasonable valuations, boast
strong competitive positions and rank well on ESG metrics versus peers. We also
like that their core businesses, operating telecom networks, can be a key
enabler of smart cities of the future, with potential to reduce energy
consumption and provide other social benefits.
Consumer Staples: 1.9% underweight (5.4% of the portfolio)
The consumer staples sector is a common destination for the conservative equity
income investor. Historically, many of these companies have offered investors
recognisable brands, diverse revenue streams, exposure to growing end markets
and the ability to garner pricing power. These characteristics, in turn, have
translated into strong and often stable free cash flow and growing dividends
for shareholders. In recent years, some of these secular advantages have become
challenged, in our view, due to changing consumer preferences, greater end
market competition from local brands and disruption from the rapid adoption of
online shopping. These challenges, combined with higher than historical
valuations, have facilitated our underweight positioning in the sector. Notable
portfolio holdings include PepsiCo (2.6% of the portfolio). We held Lamb Weston
Holdings during the year and exited the position before the year end. We view
each of these businesses as ESG leaders: PepsiCo stands out for reducing its
water usage and product carbon footprint and Lamb Weston is at the forefront of
implementing strong corporate governance practices.
Real Estate: 3.2% underweight (1.3% of the portfolio)
The portfolio has an underweight allocation to real estate, as we are finding
few companies in the sector with both attractive valuations and strong or
improving fundamentals. For example, retail REITs are facing challenges due to
e-commerce and its negative impact on traditional brick and mortar retailers.
Meanwhile, data center and logistics companies have strong fundamentals, but we
view their valuations as unattractive. Our only portfolio holding is CBRE Group
(1.3% of the portfolio), the world's largest commercial real estate services
firm. The company is trading at a wide discount relative to peers and ranks
well on ESG metrics versus peers. CBRE Group signed the Climate Pledge in 2021
to reach net zero by 2040.
Industrials: 4.9% underweight (5.5% of the portfolio)
The portfolio is meaningfully underweight to the industrials sector. Our
selectivity is driven by relative valuations, which we view as expensive, in
many cases, versus other cyclical value segments of the U.S. equity market.
Notable positions include Komatsu (1.9% of the portfolio), a Japanese
manufacturer of construction and mining equipment, and Norfolk Southern (1.7%
of the portfolio), a major U.S. east coast railroad operator. We view both
companies as ESG leaders in their respective domains. Komatsu has set
meaningful targets for reduced CO2 emissions from its products by 2030 and to
achieve carbon neutrality by 2050. Furthermore, Norfolk Southern provides us
with exposure to a consolidated industry with pricing power that emits roughly
one-third as much CO2 as trucks (the main shipping alternative), in moving an
equivalent amount of cargo.
Market outlook
Investors and policymakers alike are finding themselves in quite an unusual and
uncertain market environment. Over the past twelve months we have seen
geopolitical tensions rise, rapid inflation, increased market volatility and
the fastest pace of central bank tightening in decades. We believe elevated
core inflation will linger for a while longer and a recession is to be expected
across developed markets. In this vein, central banks are in a difficult
position as they must address inflation but remain cognisant of growth at risk.
While inflation seems to have finally stopped rising, it remains stubbornly
elevated, but we believe inflation will inevitably drop in 2023 as commodity
prices decline and energy and food inflation falls. Core goods inflation will
decline as supply shortages decrease and shipping costs continue to fall.
However, risks remain around price pressures in the service sector and central
banks must stay ahead to curb long-term, high inflation.
Now, more than ever, is a time to be very cautious and strategic in portfolios.
As a shallow recession is more likely than not, we can expect U.S. GDP to
contract and unemployment to rise slightly. Further rate hikes are to be
expected as the year progresses and as policymakers struggle with inflation
running well above central bank targets. All told, we see potential downside
risk for equity markets as companies will have to navigate a tumultuous market
environment with slowing demand and cost pressures, ultimately leading to
margin reduction. While we are conscious of the risks, we continue to favour
high quality companies with strong balance sheets at reasonable valuations.
Tony DeSpirito, David Zhao and Lisa Yang
BlackRock Investment Management LLC
26 January 2023
TEN LARGEST INVESTMENTS
1 + Sanofi (2021: 12th)
Health Care
Market value: £5,175,000
Share of investments: 2.9% (2021: 2.3%)
ESG Leader
Sanofi is a French multinational pharmaceutical and health care company, and it
operates in three segments including pharmaceuticals, vaccines and consumer
health. Sanofi is a leader in diabetes, immunology and cardiovascular
management and also maintains strong consumer brands such as Allegra, IcyHot,
GoldBond and Rolaids. The company also has a wide portfolio of vaccines
including a leading influenza vaccine business. While Sanofi has been subject
to various inquiries around insulin pricing, this represents a diminishing part
of the overall business as many of these drugs have seen rapidly declining
prices due to generic competition. We believe Sanofi trades at a discount
relative to peers with low exposure to US regulatory reform. With the newly
appointed CEO who we know well from Novartis, we believe the company's research
& development and innovation track record can be turned around.
2 + Wells Fargo (2021: 4th)
Financials
Market value: £5,138,000
Share of investments: 2.9% (2021: 3.3%)
ESG Improver
Wells Fargo (WFC) is one of the largest U.S. banks and it operates in three
segments including community banking, wholesale banking and wealth & investment
management. WFC has a strong deposit franchise and we like its history of
strong investment returns and prudent credit risk management. While WFC has a
chequered history, we believe its current management team, led by CEO Charlie
Scharf (hired in October 2019), can restore the firm's reputation as a premiere
community bank. Operational improvements require patience, but we believe that
risk and control remediation as well as time-passed can ultimately improve
WFC's low social and governance scores. In summary, we view shares of the
company as underappreciated today in an environment characterised by low credit
losses and ample access to liquidity.
3 + Willis Towers Watson (2021: 29th)
Financials
Market value: £5,117,000
Share of investments: 2.9% (2021: 1.7%)
ESG Improver
Willis Towers Watson (WLTW) is a British-American multinational insurance
advisor company. WLTW's revenue breakdown is approximately 55% consulting
related and 45% insurance brokerage related. Historically, WLTW has lagged its
peers on margins and has had higher restructuring costs. We believe there is a
margin improvement opportunity on the horizon, specifically in their insurance
brokering related businesses. Additionally, WLTW's valuation relative to peers
is at historically wide levels. The board has seen many positive changes since
late 2021 and we believe this will improve WLTW's sustainability rating over
time.
4 + Verizon Communications (2021: 14th)
Communication Services
Market value: £4,967,000
Share of investments: 2.8% (2021: 2.3%)
ESG Leader
Verizon Communications is the leading wireless company in the United States. We
believe the company trades at a reasonable price relative to the quality and
stability of the business due to competitive dynamics that have somewhat
abated, as T-Mobile has pivoted to a margin growth strategy (from a share gain
strategy). The company also has some optionality on new types of revenue
enabled by 5th generation networks. Telecommunication networks can be key
enablers for smart cities, with the potential to reduce energy consumption,
increase safety and provide other social benefits.
5 - Cisco Systems (2021: 1st)
Information Technology
Market value: £4,935,000
Share of investments: 2.8% (2021: 4.0%)
ESG Leader
Cisco Systems is the world's largest networking equipment vendor, with leading
positions in most of its core end markets. As one of the largest suppliers of
network security solutions, Cisco System's products help customers to enhance
data security and privacy. Despite market concerns regarding competition and
Cloud migration, we believe they can still deliver sustainable revenue and
earnings growth due to better than feared market positions, a diversified
portfolio and a large existing installed base.
6 + Laboratory Corporation of America (2021: N/A)
Health Care
Market value: £4,909,000
Share of investments: 2.8% (2021: N/A)
ESG Leader
Laboratory Corporation of America, commonly known as LabCorp, operates in two
segments including a low-cost, high quality national provider of laboratory
services and a contract research organisation, which supports clinical research
through administering trials and lab testing. LabCorp is able to offer high
quality service at a materially lower cost due to scale. We believe LabCorp's
drug development business is underearning peers, which allows management to
drive cost savings. Lastly, diagnostic testing is vital to generating positive
health outcomes and LabCorp supports low-cost testing services, helping drive
testing accessibility nationally.
7 + PepsiCo (2021: 18th)
Consumer Staples
Market value: £4,595,000
Share of investments: 2.6% (2021: 2.1%)
ESG Leader
PepsiCo is a multinational food, snack and beverage corporation with the
majority of the profits stemming from their snacks business (75%). PepsiCo's
key brands include Lays, Doritos, Pepsi, Gatorade and Mountain Dew. Frito-Lay,
a subsidiary of PepsiCo that manufactures corn chips, potato chips and other
snack foods is one of the best assets in the packaged food industry. We believe
Frito-Lay has the ability to sustainably grow 5% in North America and 8% in
international markets where it remains underpenetrated. Lastly, PepsiCo is a
leader within the consumer staples industry in managing its water and product
carbon footprint, targeting a reduction in its carbon footprint across its
value chain by 20% by 2030 and water use by 15% by 2025.
8 + Cigna (2021: 16th)
Health Care
Market value: £4,563,000
Share of investments: 2.6% (2021: 2.2%)
ESG Leader
Cigna is a multinational company that operates in two main segments including a
traditional managed care business which operates a primarily fee-based
commercial insurance business and a pharmacy benefit managers/health care
services segment that provides pharmacy benefits and broader health care
services to a wide variety of customers. We believe managed care companies play
a substantial role in improving access and quality in health care to its
members and in driving down costs to make health insurance affordable to more
people. In 2015, Cigna became the first health services company to sign on to
and commit to the UN Global Compact principles, which is a pact to encourage
businesses and firms worldwide to adopt sustainable and socially responsible
policies and to report on their implementation. Currently, Cigna is trading at
a meaningful discount to peers and offers an attractive entry point to gain
exposure to a high quality, double digits earnings compounder at a reasonable
valuation.
9 - Cognizant Technology Solutions (2021: 5th)
Information Technology
Market value: £4,525,000
Share of investments: 2.6% (2021: 3.2%)
ESG Leader
Cognizant Technology Solutions is an IT Services company with a diversified
revenue base across industry verticals and geographies. As a service provider,
they help enterprise and small and medium business clients to transition to
cloud infrastructure, which is more efficient versus sub-scale in-house data
centers. The company also exhibits strong governance as evidenced by an
independent chairman, an independent majority and a gender diverse board. After
a period of market share loss and earnings guide-downs, we do not believe
Cognizant Technology Solutions is structurally impaired. Rather, we see an
attractive turnaround opportunity under CEO Brian Humphries who joined the firm
in April 2019.
10 - American International (2021: 8th)
Financials
Market value: £4,474,000
Share of investments: 2.5% (2021: 2.9%)
ESG Leader
American International (AIG) is a diversified insurance company with exposure
to both property & casualty and life insurance. AIG's business model entails
pooling and diversifying risk and this includes insuring against adverse events
related to climate change such as floods, hurricanes, etc. New management at
AIG has spent the past several years fixing a variety of operational issues at
the firm. Notably, AIG has expanded margins, increased reserves, lowered
expenses and better managed catastrophe losses via improved use of reinsurance.
Despite these developments, the stock still trades at an underappreciated
valuation.
All percentages reflect the value of the holding as a percentage of total
investments.
Percentages in brackets represent the value of the holding as of 31 October
2021.
Together, the ten largest investments represent 27.4% of the Company's
portfolio (31 October 2021: 31.7%).
Investments as at 31 October 2022
Market
value % of total
Company Country Sector Securities £'000 portfolio
Sanofi France Health Care Ordinary 5,175 2.9
shares
Wells Fargo United Financials Ordinary 5,138 2.9
States shares
Willis Towers Watson United Financials Ordinary 5,117 2.9
States shares
Verizon Communications United Communication Ordinary 4,967 2.8
States Services shares
Cisco Systems United Information Ordinary 4,935 2.8
States Technology shares
Laboratory Corporation of America United Health Care Ordinary 4,909 2.8
States shares
PepsiCo United Consumer Ordinary 4,595 2.6
States Staples shares
Cigna United Health Care Ordinary 4,563 2.6
States shares
Cognizant Technology Solutions United Information Ordinary 4,525 2.6
States Technology shares
American International United Financials Ordinary 4,474 2.5
States shares
Shell United Energy Ordinary 4,466 2.5
Kingdom shares
AstraZeneca United Health Care Ordinary 4,412 2.5
Kingdom shares
Citigroup United Financials Ordinary 4,137 2.4
States shares
General Motors United Consumer Ordinary 3,956 2.3
States Discretionary shares
Ralph Lauren United Consumer Ordinary 3,793 2.2
States Discretionary shares
Sempra United Utilities Ordinary 3,685 2.1
States shares
Fidelity National Information United Information Ordinary 3,659 2.1
Services States Technology shares
Cardinal Health United Health Care Ordinary 3,623 2.1
States shares
Public Service Enterprise Group United Utilities Ordinary 3,617 2.1
States shares
Humana United Health Care Ordinary 3,565 2.0
States shares
Anthem United Health Care Ordinary 3,556 2.0
States shares
Woodside Energy Group Australia Energy Ordinary 3,461 2.0
shares
Baxter International United Health Care Ordinary 3,341 1.9
States shares
Cheniere Energy United Energy Ordinary 3,306 1.9
States shares
Komatsu Japan Industrials Ordinary 3,293 1.9
shares
Microsoft United Information Ordinary 3,251 1.9
States Technology shares
Dollar Tree United Consumer Ordinary 3,244 1.8
States Discretionary shares
Comerica United Financials Ordinary 3,145 1.8
States shares
Norfolk Southern United Industrials Ordinary 3,050 1.7
States shares
JPMorgan Chase United Financials Ordinary 3,026 1.7
States shares
Panasonic Japan Consumer Ordinary 2,926 1.7
Discretionary shares
Western Digital United Information Ordinary 2,923 1.7
States Technology shares
Reckitt Benckiser Group United Consumer Ordinary 2,893 1.6
Kingdom Staples shares
Rogers Communications Canada Communication Ordinary 2,893 1.6
Services shares
Sealed Air United Materials Ordinary 2,817 1.6
States shares
Morgan Stanley United Financials Ordinary 2,546 1.4
States shares
Citizens Financial Group United Financials Ordinary 2,478 1.4
States shares
PPG Industries United Materials Ordinary 2,476 1.4
States shares
CBRE Group United Real Estate Ordinary 2,258 1.3
States shares
EQT United Energy Ordinary 2,257 1.3
States shares
Newmont United Materials Ordinary 2,224 1.3
States shares
Zebra Technologies United Information Ordinary 2,049 1.2
States Technology shares
Charles Schwab United Financials Ordinary 2,047 1.2
States shares
Kraft Heinz United Consumer Ordinary 2,036 1.2
States Staples shares
Prudential United Financials Ordinary 1,978 1.1
Kingdom shares
Newell Brands United Consumer Ordinary 1,909 1.1
States Discretionary shares
L3Harris Technologies United Industrials Ordinary 1,830 1.0
States shares
Visa United Information Ordinary 1,751 1.0
States Technology shares
Invesco United Financials Ordinary 1,710 1.0
States shares
Hess United Energy Ordinary 1,699 1.0
States shares
Novo Nordisk Denmark Health Care Ordinary 1,698 1.0
shares
Lear United Consumer Ordinary 1,641 0.9
States Discretionary shares
Robert Half United Industrials Ordinary 1,639 0.9
States shares
First American United Financials Ordinary 1,448 0.8
States shares
Fidelity National United Financials Ordinary 1,351 0.8
States shares
Ciena United Information Ordinary 989 0.6
States Technology shares
Eli Lilly United Health Care Ordinary 975 0.6
States shares
---------------- ----------------
Portfolio 175,425 100.0
========== ==========
All investments are in ordinary shares unless otherwise stated. The number of
holdings as at 31 October 2022 was 57 (31 October 2021: 54).
At 31 October 2022, the Company did not hold any equity interests comprising
more than 3% of any company's share capital.
DISTRIBUTION OF INVESTMENTS AS AT 31 OCTOBER 2022
Total % Reference Index %
Communication Services 4.4 7.3
Consumer Discretionary 10.0 6.1
Consumer Staples 5.4 7.3
Energy 8.7 8.8
Financials 21.9 20.3
Health Care 20.4 17.0
Industrials 5.5 10.4
Information Technology 13.9 8.6
Materials 4.3 4.1
Real Estate 1.3 4.5
Utilities 4.2 5.6
Sources: BlackRock and Datastream.
Environmental, Social and Governance issues and approach
The Board's approach to ESG
The Board believes that responsible investment and sustainability are integral
to the longer-term delivery of the Company's success. The Board works closely
with the Investment Manager regularly to review the Company's performance,
investment strategy and underlying policies to ensure that the Company's
investment objective continues to be met in an effective, responsible and
sustainable way in the interests of shareholders and future investors.
The Board has been mindful of the increase in demand for investment products
that place a sustainable investment philosophy at their core, a trend that has
accelerated in recent years. Accordingly, the Company's investment objective
and investment policy incorporates a sustainable investment approach into the
investment policy so that the Company is managed in a way which is compatible
with the principles of sustainable investment adopted by the Company. In
addition, one of the Company's non-executive Directors has responsibility for
sustainability, working alongside the rest of the Board and the Investment
Manager.
The Company promotes environmental or social characteristics under the EU
Sustainable Finance Disclosure Regulation (SFDR) and is classified as an
Article 8 product. Further detail around how the Company has achieved these
characteristics and objectives, is included in the sustainability-related
disclosures supplementary section to the Annual Report.
BlackRock Sustainable American Income Trust plc - BlackRock Investment
Stewardship Engagement with portfolio companies for the year ended 31 October
2022
The Company's portfolio is managed by the Fundamental Equities division of
BlackRock's Portfolio Management Group which consists of 28 investment
professionals. The team engages with company management teams and undertakes
company meetings to identify the best management teams in the region with the
ability to create value for shareholders over the long term. In addition,
BlackRock also has a separate BlackRock Investment Stewardship (BIS) team.
Consistent with BlackRock's fiduciary duty as an asset manager, BIS seeks to
support investee companies in their efforts to deliver long-term durable
financial performance on behalf of BlackRock's clients. BIS engages with
investee companies to build its understanding of these companies' approach to
addressing material business risks and opportunities. For the year to 31
October 2022, BIS held 86 company engagements on a range of governance issues
with the management teams of 43 companies in the BlackRock Sustainable American
Income Trust plc portfolio, representing 74% of the portfolio by value at 31
October 2022. Additional information is set out in the table and charts below,
as well as the key engagement themes for the meetings held in respect of the
Company's portfolio holdings.
Year ended 31
October 2022
Number of engagements held1 86
Number of companies met1 43
% of equity investments covered2 74.0
Shareholder meetings voted at1 50
Number of proposals voted on1 715
Number of votes against management1 64
% of total items voted represented by votes against management 1.7
1 Source: Institutional Shareholder Services as at 31 October 2022.
2 Source: BlackRock. Company valuation as included in the portfolio at 31
October 2022 as a percentage of the total portfolio value.
ENGAGEMENT THEMES1
Governance 41%
Social 24%
Environmental 35%
ENVIRONMENTAL ENGAGEMENT THEMES
Climate Risk Management 49%
Environmental Impact Management 20%
Operational Sustainability 24%
Other 7%
SOCIAL ENGAGMENT THEMES
Human Capital Management 50%
Social Risks and Opportunities 39%
Other 11%
GOVERNANCE ENGAGEMENT THEMES
Board Composition and Effectiveness 21%
Board Gender Diversity 1%
Business Oversight/Risk Management 11%
Corporate Strategy 25%
Executive Management 6%
Governance Structure 6%
Remuneration 24%
Sustainability Reporting 5%
1 Engagements are with investee companies. Sources: ISS Proxy Exchange and
BlackRock Investment Stewardship.
Engagements with investee companies
Case study: Integration of sustainability- related criteria in compensation
policies
General Motors
Following the 2021 AGM of General Motors, a U.S. automobile manufacturer, at
which the BlackRock Investment Stewardship team (BIS) supported management on
pay, we discussed with management how they might enhance their compensation
disclosures. In BIS's view, there was an opportunity for the company to
articulate better their strategic pivot to electric vehicles (EV) and how it
was being factored into future compensation decisions. Per the company's 2022
proxy statement, General Motors responded to shareholder feedback and provided
additional detail on the goal setting process for the short-term incentive
plan. The company also made changes to the design of the long- term plan,
adding "Electric Vehicle financial performance measures that reward
performance" among other adjustments. BIS subsequently supported the company's
Say on Pay proposal at the June 2022 AGM, which received 92.3% shareholder
support.
Case study: Voting on climate-related shareholder proposals
Woodside
Woodside Petroleum Ltd. (Woodside) is an Australian oil and natural gas
company. At the company's May 2022 AGM, BIS supported two management proposals,
among others, seeking shareholder approval of a merger with BHP Petroleum and
of the company's 2021 Climate Report which outlines the company's view of
climate risk and their energy transition strategy. The merger with BHP's oil
and gas business would increase the likelihood of further development of
natural gas projects in Australia, which have been scrutinized by activist
groups. BIS discussed these issues with Woodside and sought to understand their
long-term views on climate risk management, particularly as it relates to these
projects. BIS had concerns in 2021 about the comprehensiveness of the company's
climate risk management and target setting. This year's engagement reassured
BIS that the company is focused on meeting its energy transition commitments
even with this gas project expansion. At the 2022 AGM, BIS did not support
several shareholder proposals that it felt were overly prescriptive and risked
unduly restricting management's ability to make business decisions. BIS will
continue to engage with Woodside and will discuss management's views on the
role that the company plays in the transition to a decarbonized economy, among
other issues that we believe contribute to Woodside's ability to deliver
durable, long-term shareholder returns.
Case study: Supporting management proposals to approve the company's climate
action plans
Shell
At Shell Plc's (Shell) May 2022 AGM, management proposed an advisory,
non-binding shareholder vote on the progress made to date against the company's
Energy Transition Strategy. BIS supported this proposal in recognition of the
company's disclosed energy transition plan to manage climate-related risks and
opportunities and the company's progress against this strategy. BIS did not
support a shareholder proposal requesting that the company set and publish
targets that are consistent with the goal of the Paris Climate Agreement to
limit global warming to well below 2°C above pre-industrial levels and to
pursue efforts to limit the temperature increase to 1.5°C. BIS believed that it
was not additive to Shell's Energy Transition Strategy and that the company's
ability to set absolute short-and medium-term scope 3 emissions reduction
targets was impeded by the current uncertainty around the pace of declines in
oil and gas demand as well as energy security considerations.
Sustainable investing: BlackRock's approach
BlackRock believes that sustainability risk - and climate risk in particular -
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
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 at BlackRock 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 analysts' 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 and Transition Solutions (STS) function.
STS looks to advance ESG research and integration, active engagement and the
development of sustainable investment solutions across the firm.
Investment stewardship
Consistent with BlackRock's fiduciary duty as an asset manager, BIS seeks 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 authorised 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 a 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 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 - such as the 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
publishes both annual and quarterly reports detailing its stewardship
activities, as well as vote bulletins that describe its rationale for certain
votes at high profile shareholder meetings. More detail in respect of BIS
reporting can be found at www.blackrock.com/corporate/about-us/
investment-stewardship.
BlackRock's reporting and disclosures
In terms of its own reporting, BlackRock believes that the Sustainability
Accounting Standards Board 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 Task Force on Climate-related Financial
Disclosures (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
www.blackrock. com/corporate/literature/continuous-disclosure-and-
importantinformation/tcfd-report-2021-blkinc.pdf.
Strategic Report
The Directors present the Strategic Report of the Company for the year ended 31
October 2022. The aim of the Strategic Report is to provide shareholders with
the information to assess how the Directors have performed their duty to
promote the success of the Company for the collective benefit of shareholders.
The Chair's Statement together with the Investment Manager's Report form part
of this Strategic Report. The Strategic Report was approved by the Board at its
meeting on 26 January 2023.
Principal activity
The Company carries on business as an investment trust and has a premium
listing on the London Stock Exchange. Its principal activity is portfolio
investment. Investment trusts are pooled investment vehicles which allow
exposure to a diversified range of assets through a single investment, thus
spreading investment risk.
Investment objective
The Company's objective is to provide an attractive level of income return
together with capital appreciation over the long term in a manner consistent
with the principles of sustainable investing adopted by the Company.
Strategy, business model and investment policy
Strategy
The Company invests in accordance with the objective given above. 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 BlackRock Fund Managers Limited (the Manager). Matters
reserved for the Board include setting the Company's strategy, including its
investment objective and policy, setting limits on gearing, capital structure,
governance, and appointing and monitoring performance of service providers,
including the Manager.
Business model
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 who is the
principal service provider. In accordance with the Alternative Investment Fund
Managers' Directive (AIFMD) the Company is an Alternative Investment Fund
(AIF). BlackRock Fund Managers Limited 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 who in turn (with the
permission of the Company) has delegated certain investment management and
other ancillary services to BlackRock Investment Management (UK) Limited (the
Investment Manager or BIM (UK)). The Manager, operating under guidelines
determined by the Board, has direct responsibility for the decisions relating
to the day-to-day 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 the Manager, which in turn
sub-delegates these services to The Bank of New York Mellon (International)
Limited (BNYM). Other service providers include the Depositary (also BNYM) and
the Registrar, Computershare Investor Services PLC. Details of the contractual
terms with the Manager and the Depositary and more details of arrangements in
place governing custody services are set out in the Directors' Report in the
Company's Annual Report for the year ended 31 October 2022.
Investment policy
The Company invests primarily in a diversified portfolio of North American*
equity securities, with a focus on large-cap and medium-cap companies that pay
and grow their dividends. 'North America', in accordance with the United
Nations publication 'Standard Country or Area Codes for Statistical Use', means
Bermuda, Canada, Greenland, Saint Pierre and Miquelon and United States of
America and 'North American' shall be construed accordingly. The Company may
also invest in the equity securities of companies outside North America,
subject to the restrictions set out below, and may invest in securities
denominated in currencies other than the official currencies of the relevant
countries or areas within North America. The Company may also hold other
securities from time-to-time including, inter alia, options, futures contracts,
convertible securities, fixed interest securities, preference shares,
non-convertible preferred stock and depositary receipts (such securities other
than equity securities, together 'Other Securities'). The Company may also
write covered call options in respect of its portfolio.
To achieve the Company's investment objective, the Investment Manager adopts a
stock specific approach in managing the Company's portfolio, selecting
investments that it believes will both increase in value over the long term and
provide income. The Company does not invest in companies which are not listed,
quoted or traded on an exchange at the time of investment, although it may have
exposure to such companies where, following investment, the relevant securities
cease to be listed, quoted or traded on an exchange. Typically, it is expected
that the investment portfolio will comprise between 30 and 60 equity
securities. As at 31 October 2022, there were 57 holdings in the Company's
portfolio.
The Company may invest in derivatives for efficient portfolio management and in
options for investment purposes and may, for investment purposes, write covered
call options in respect of its portfolio. Any use of derivatives for efficient
portfolio management and/or options for investment purposes is made based on
the same principles of risk spreading and diversification that apply to the
Company's direct investments. For the avoidance of doubt, the Company does not
enter into physical or synthetic short positions or write any uncovered
options.
Portfolio risk is mitigated by investing in a diversified spread of
investments. In particular, the Company observes the following investment
restrictions: no single investment (including for the avoidance of doubt, any
single derivative instrument) at the time of investment, shall account for more
than 10% of the gross asset value of the Company; no more than 25% of the gross
asset value of the Company, at the time of investment, shall be invested in
securities which are not deemed to be North American* securities; no more than
35% of the gross asset value of the Company, at the time of investment, shall
be exposed to any one sector; no more than 20% of the gross asset value of the
Company, at the time of investment, shall be invested in Other Securities; and
no more than 20% of the Company's portfolio will be under option at any given
time. (*Securities may be deemed to be North American securities if: (i) the
company's principal operations are conducted from North America; or (ii) the
company's equity securities are listed, quoted or traded on a North American
stock exchange; or (iii) the company does a substantial amount of business in
North America; or (iv) the issuer of securities is included in the Company's
reference index.)
In managing the Company's portfolio, the Investment Manager, in addition to
other investment criteria, takes into account the environmental, social and
governance (ESG) characteristics of the relevant issuers of securities and
seeks to deliver a superior ESG outcome versus the reference index by aiming
for the Company's portfolio to achieve: (i) a better ESG score than the
reference index; and (ii) a lower carbon emissions intensity score than the
reference index. The reference index is the Russell 1000 Value Index, or such
other index as may be agreed by the Company and the Investment Manager to be
appropriate from time to time. However, there can be no guarantee that these
aims will be achieved and the ESG rating of the Company's portfolio and its
carbon emission intensity score may vary.
The Investment Manager also applies a screening policy (currently the BlackRock
EMEA Baseline Screens policy) at the time of investment through which it seeks
to limit and/or exclude direct investment (as applicable) in companies which,
in the opinion of the Investment Manager, have exposure to, or ties with,
certain sectors (in some cases subject to specific revenue thresholds)
including but not limited to: (i) the production of certain types of
controversial weapons; (ii) the distribution or production of firearms or small
arms ammunition intended for retail civilians; (iii) the extraction of certain
types of fossil fuel and/or the generation of power from them; (iv) the
production of tobacco products or certain activities in relation to
tobacco-related products; and (v) issuers which have been deemed to have failed
to comply with United Nations Global Compact Principles.
Following application of the screening policy outlined above, those companies
which have not yet been excluded from investment are then evaluated by the
Investment Manager based on their ability to manage the risks and opportunities
associated with ESG-consistent business practices and their ESG risk and
opportunity credentials, such as their leadership and governance framework,
which is considered essential for sustainable growth, their ability to
strategically manage longer-term issues surrounding ESG and the potential
impact this may have on a company's financials. To undertake the required
analyses, the Investment Manager may use data provided by external ESG data
providers, proprietary models and local intelligence and may undertake site
visits.
Should holdings which are compliant with the screening policy applied by the
Investment Manager outlined above at the time of investment subsequently become
ineligible, they will be divested within a reasonable period of time. The
Company may gain limited exposure (including, but not limited to, through
investment in other listed closed-ended investment funds and derivatives) to
issuers with exposures that do not meet the sustainable investment principles
described above. Circumstances in which such exposure may arise include, but
are not limited to, where a counterparty to a derivative in which the Company
invests posts collateral which is inconsistent with the Company's sustainable
investment principles or where a fund in which the Company invests does not
apply any or the same sustainable investment principles as the Company and so
provides exposure to securities which are inconsistent with the Company's
sustainable investment principles. The Investment Manager may take corrective
action in such circumstances.
The Company may borrow up to 20 per cent of its net asset value (calculated at
the time of draw down), although typically borrowings are not expected to
exceed 10 per cent of its net asset value at the time of draw down. Borrowings
may be used for investment purposes. The Company has entered into an overdraft
facility for this purpose. The Company may enter into interest rate hedging
arrangements.
The Company's foreign currency investments are not hedged to Sterling as a
matter of general policy. However, the investment team may employ currency
hedging, either back to Sterling or between currencies (i.e. cross-hedging of
portfolio investments).
In order to comply with the current Listing Rules, the Company also complies
with the following investment restrictions (which do not form part of the
Company's investment policy): the Company will not conduct any trading activity
which is significant in the context of its group as a whole; and the Company
will not invest more than 10% of its gross asset value in other listed
closed-ended investment funds, whether managed by the Investment Manager or
not, except that this restriction shall not apply to investments in listed
closed-ended investment funds which themselves have stated investment policies
to invest no more than 15% of their gross assets in other listed closed-ended
investment funds.
Information regarding the Company's investment exposures is contained within
the schedule of investments in the Company's Annual Report for the year ended
31 October 2022. Further information regarding investment risk and activity
throughout the year can be found in the Investment Manager's Report.
No material change will be made to the investment policy without the approval
of shareholders by ordinary resolution.
Environmental impact
The direct impact of the Company's activities is minimal as it has no
employees, premises, physical assets or operations either as a producer or a
provider of goods or services. Neither does it have customers. Its indirect
impact occurs through the investments that it makes and this is mitigated
through BlackRock's environmental, social and governance policies.
Performance
Over the year ended 31 October 2022, the Company's net asset value returned
+7.4% compared with a return of +10.7% in the Russell 1000 Value Index. The
ordinary share price returned +3.6% (all percentages are calculated in Sterling
terms with dividends reinvested). The Investment Manager's Report 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 results for the Company are set out in the Statement of Comprehensive
Income. The total return for the year, after taxation, was a profit of £
12,170,000 (2021: profit of £44,734,000) of which the revenue return amounted
to a profit of £3,081,000 (2021: £3,248,000) and the capital return amounted to
a profit of £9,089,000 (2021: profit of £41,486,000).
The Company pays dividends quarterly. Four quarterly interim dividends of 2.00p
per share were paid on 29 April 2022, 1 July 2022, 3 October 2022 and 3 January
2023. Total dividends of 8.00p per share were paid or declared in the year
ended 31 October 2022 (2021: 8.00p).
Future prospects
The Board's main focus is to provide an attractive level of income together
with capital appreciation over the long term in a manner consistent with the
principles of sustainable investing. The future of the Company is dependent
upon the success of the investment strategy. The outlook for the Company in the
next twelve months is discussed in both the Chair's Statement and in the
Investment Manager's Report.
Social, community and human rights issues
As an investment trust, the Company has no direct social or community
responsibilities or impact on the environment. However, the Directors believe
that it is important and in shareholders' interests to consider human rights
issues and environmental, social and governance factors when selecting and
retaining investments. Details of the Company's approach on socially
responsible investment are set out in the Company's Annual Report for the year
ended 31 October 2022.
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. The Investment Manager
considers modern slavery as part of supply chains and labour management within
the investment process. 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
chains, 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 are set out in the Directors'
Biographies in the Company's Annual Report for the year ended 31 October 2022.
The Board consists of two male Directors and two female Directors. The Company
does not have any executive employees.
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 Company's Annual Report for the year ended 31 October 2022.
Additionally, the Board regularly reviews the performance of the portfolio, as
well as the net asset value and share price of the Company and compares this
against various companies and indices. The Board also reviews the performance
of the portfolio against a reference index, the Russell 1000 Value Index.
Information on the Company's performance is given in the Chair's Statement.
Year Year
ended ended
31 31
October October
2022 2021
Net asset value per ordinary share 213.25p 206.08p
Ordinary share price (mid-market) 197.50p 198.25p
Net asset value total return1 +7.4% +36.0%
Reference index2 +10.7% +35.6%
Share price total return1 +3.6% +42.4%
Dividends per share 8.00p 8.00p
Discount to cum income net asset value3 7.4% 3.8%
Revenue return per share 3.84p 4.06p
Ongoing charges4 1.01% 1.06%
======== ========
== ==
1 This measures the Company's share price and NAV total return, which
assumes dividends paid by the Company have been reinvested.
2 Russell 1000 Value Index, total return basis.
3 This is the difference between the share price and the NAV per share with
debt at par. It is an indicator of the need for shares to be bought back or, in
the event of a premium to NAV per share, issued.
4 Ongoing charges represent the management fee and all other operating
expenses excluding finance costs, direct transaction costs, custody transaction
charges, VAT recovered, taxation, prior year expenses written back and certain
non-recurring items as a % of average daily net assets.
Principal risks
The Company is exposed to a variety of risks and uncertainties. As required by
the 2018 UK Corporate Governance Code (the UK Code), the Board has put in place
a robust ongoing process to identify, assess and monitor the principal and
emerging risks facing the Company, including those that would threaten its
business model. 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 quality of controls operating to mitigate
it. A residual risk rating is then calculated for each risk based on the
outcome of the assessment.
The risk register, its method of preparation and the operation of key controls
in BlackRock's and third-party service providers' systems of internal control,
are reviewed on a regular basis by the Audit and Management Engagement
Committee. In order to gain a more comprehensive understanding of BlackRock's
and other third-party service providers' risk management processes and how
these apply to the Company's business, BlackRock's internal audit department
provides an annual presentation to the Audit Committee chairs of the BlackRock
investment trusts setting out the results of testing performed in relation to
BlackRock's internal control processes. The Audit and Management Engagement
Committee also periodically receives and reviews internal control reports from
BlackRock and the Company's service providers.
The Board has undertaken a robust assessment of both the principal and emerging
risks facing the Company, including those that would threaten its business
model, future performance, solvency or liquidity. The COVID-19 pandemic has
given rise to unprecedented challenges for businesses across the globe.
Additionally, the risk that unforeseen or unprecedented events including (but
not limited to) heightened geo-political tensions such as the war in Ukraine,
high inflation and the current cost of living crisis has had a significant
impact on global markets. The Board has taken into consideration the risks
posed to the Company by these events and incorporated these into the Company's
risk register. The threat of climate change has also reinforced the importance
of more sustainable practices and environmental responsibility.
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.
Additionally, the 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.
The Board will continue to assess these risks on an ongoing basis. In relation
to the UK Code, the Board is confident that the procedures that the Company has
put in place are sufficient to ensure that the necessary monitoring of risks
and controls has been carried out throughout the reporting period.
The principal risks and uncertainties faced by the Company during the financial
year, together with the potential effects, controls and mitigating factors are
set out in the following table.
Principal Risk Mitigation/Control
Counterparty
The potential loss that the Company could Due diligence is undertaken before
incur if a counterparty is unable (or contracts are entered into and exposures
unwilling) to perform on its commitments. are diversified across a number of
counterparties.
The Depositary is liable for restitution
for the loss of financial instruments held
in custody unless able to demonstrate the
loss was a result of an event beyond its
reasonable control.
Investment performance
Returns achieved are reliant primarily upon To manage this risk the Board:
the performance of the portfolio. · regularly reviews the Company's
The Board is responsible for: investment mandate and long-term strategy;
· deciding the investment strategy to · has set investment restrictions and
fulfil the Company's objective; and guidelines which the Investment Manager
· monitoring the performance of the monitors and regularly reports on;
Investment Manager and the implementation · receives from the Investment Manager
of the investment strategy. a regular explanation of stock selection
An inappropriate investment policy may lead decisions, portfolio exposure, gearing and
to: any changes in gearing and the rationale
· underperformance compared to the for the composition of the investment
reference index; portfolio;
· a reduction or permanent loss of · monitors and maintains an adequate
capital; and spread of investments in order to minimise
· dissatisfied shareholders and the risks associated with particular
reputational damage. countries or factors specific to particular
sectors, based on the diversification
requirements inherent in the investment
policy; and
· receives and reviews regular reports
showing an analysis of the Company's
performance against the Russell 1000 Value
Index and other similar indices.
Legal & Regulatory Compliance
The Company has been approved by HM Revenue The Investment Manager monitors investment
& Customs as an investment trust, subject movements, the level of forecast income and
to continuing to meet the relevant expenditure and the amount of proposed
eligibility conditions, and operates as an dividends to ensure that the provisions of
investment trust in accordance with Chapter Chapter 4 of Part 24 of the Corporation Tax
4 of Part 24 of the Corporation Tax Act Act 2010 are not breached. The results are
2010. As such, the Company is exempt from reported to the Board at each meeting.
corporation tax on capital gains on the Compliance with the accounting rules
profits realised from the sale of its affecting investment trusts is also
investments. carefully and regularly monitored.
Any breach of the relevant eligibility The Company Secretary, Manager and the
conditions could lead to the Company losing Company's professional advisers provide
investment trust status and being subject regular reports to the Board in respect of
to corporation tax on capital gains compliance with all applicable rules and
realised within the Company's portfolio. In regulations. The Board and Manager also
such event, the investment returns of the monitor changes in government policy and
Company may be adversely affected. legislation which may have an impact on the
A serious regulatory breach could result in Company.
the Company and/or the Directors being
fined or the subject of criminal
proceedings, or the suspension of the
Company's shares which would in turn lead
to a breach of the Corporation Tax Act
2010.
Amongst other relevant laws, the Company is
required to comply with the provisions of
the Companies Act 2006, the Alternative
Investment Fund Managers' Directive, the UK
Listing Rules, Disclosure Guidance and
Transparency Rules, the Sanctions and
Anti-Money Laundering Act 2018 and the
Market Abuse Regulation.
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
in the face of negative market movements. restrictions and guidelines which are
Changes in general economic and market monitored and reported on by the Investment
conditions, such as currency exchange Manager.
rates, interest rates, rates of inflation, The Board monitors the implementation and
industry conditions, tax laws, political results of the investment process with the
events and trends can also substantially Investment Manager.
and adversely affect the securities and, as The Board also recognises the benefits of a
a consequence, the Company's prospects and closed-end fund structure in extremely
share price. volatile markets such as those experienced
Market risk includes the potential impact as a consequence of the COVID-19 pandemic,
of events which are outside the Company's and more recently the conflict in Ukraine.
control, including (but not limited to) Unlike open-ended counterparts, closed-end
heightened geo-political tensions and funds are not obliged to sell-down
military conflict, a global pandemic and portfolio holdings at low valuations to
high inflation. meet liquidity requirements for
Companies operating in sectors in which the redemptions. During times of elevated
Company invests may be impacted by new volatility and market stress, the ability
legislation governing climate change and of a closed-end fund structure to remain
environmental issues, which may have a invested for the long term enables the
negative impact on their valuation and Portfolio Managers to adhere to disciplined
share price. fundamental analysis from a bottom-up
perspective and be ready to respond to
dislocations in the market as opportunities
present themselves.
The Portfolio Managers spend a considerable
amount of time understanding the ESG risks
and opportunities facing investee companies
and conduct research and due diligence on
new investments and when monitoring
investments in the portfolio.
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 on 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 the regular review and reported to the Board.
Manager, the Depositary and Fund The Board reviews on a regular basis an
Accountant, which maintain the Company's assessment of the fraud risks that the
assets, dealing procedures and accounting Company could potentially be exposed to and
records. also a summary of the controls put in place
The security of the Company's assets, by the Manager, Depositary, Custodian, Fund
dealing procedures, accounting records and Accountant and Registrar specifically to
adherence to regulatory and legal mitigate these risks.
requirements depend on the effective Most third-party service providers produce
operation of the systems of these other Service Organisation Control (SOC 1)
third-party service providers. There is a reports to provide assurance regarding the
risk that a major disaster, such as floods, effective operation of internal controls as
fire, a global pandemic, or terrorist reported on by their reporting accountants.
activity, renders the Company's service These reports are provided to the Audit and
providers unable to conduct business at Management Engagement Committee for review.
normal operating effectiveness. The Committee would seek further
Failure by any service provider to carry representations from service providers if
out its obligations could have a material not satisfied with the effectiveness of
adverse effect on the Company's their control environment.
performance. Disruption to the accounting, The Company's financial instruments held in
payment systems or custody records custody are subject to a strict liability
(including cyber security risk) could regime and, in the event of a loss of such
prevent the accurate reporting and financial instruments held in custody, the
monitoring of the Company's financial Depositary must return financial
position. instruments of an identical type or the
corresponding amount, unless able to
demonstrate the loss was a result of an
event beyond its reasonable control.
The Board reviews the overall performance
of the Manager, Investment Manager and all
other third-party service providers on a
regular basis and compliance with the
Investment Management Agreement annually.
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.
Financial
The Company's investment activities expose Details of these risks are disclosed in
it to a variety of financial risks which note 15 to the Financial Statements in the
include market risk, counterparty credit Company's Annual Report for the year ended
risk, liquidity risk and the valuation of 31 October 2022, together with a summary of
financial instruments. the policies for managing these risks.
Marketing
Marketing efforts are inadequate or do not The Board reviews marketing strategy and
comply with relevant regulatory initiatives and the Manager is required to
requirements. There is a failure to provide regular updates on progress.
communicate adequately with shareholders or BlackRock has a dedicated investment trust
reach out to potential new shareholders sales team visiting both existing and
resulting in reduced demand for the potential clients on a regular basis. The
Company's shares and a widening of the Manager also devotes considerable resources
discount. marketing to self-directed private
investors. Data on client meetings and
issues raised are provided to the Board on
a regular basis.
All investment trust marketing documents
are subject to appropriate review and
authorisation.
Section 172 statement: Promoting the success of the Company
The Companies (Miscellaneous Reporting) Regulations 2018 require directors to
explain in greater detail 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 includes the likely consequences of
their decisions in the longer term and how they have taken wider stakeholders'
needs into account.
The disclosure that follows 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. The Board considers the main stakeholders in the
Company to be the Manager, Investment Manager and the shareholders. In addition
to this, the Board considers investee companies and key service providers of
the Company to be stakeholders; the latter comprise the Company's Custodian,
Depositary, Registrar and Broker.
Stakeholders
Shareholders Manager and Other key service Investee companies
Investment Manager providers
Continued shareholder The Board's main In order for the Portfolio holdings
support and working relationship Company to function are ultimately
engagement are is with the Manager, as an investment shareholders' assets
critical to the who is responsible trust with a listing and the Board
continued existence for the Company's on the premium recognises the
of the Company and portfolio management segment of the importance of good
the successful (including asset official list of the stewardship and
delivery of its allocation, stock and Financial Conduct communication with
long-term strategy. sector selection) and Authority and trade investee companies in
The Board is focused risk management, as on the London Stock meeting the Company's
on fostering good well as ancillary Exchange's (LSE) main investment objective
working relationships functions such as market for listed and strategy. The
with shareholders and administration, securities, the Board Board monitors the
on understanding the secretarial, relies on a diverse Manager's stewardship
views of shareholders accounting and range of advisors for arrangements and
in order to marketing services. support in meeting receives regular
incorporate them into The Manager has relevant obligations feedback from the
the Board's strategy sub-delegated and safeguarding the Manager in respect of
and objectives in portfolio management Company's assets. For meetings with the
delivering an to the Investment this reason, the management.
attractive level of Manager. Successful Board considers the
income return management of Company's Custodian,
together with capital shareholders' assets Depositary, Registrar
appreciation over the by the Investment and Broker to be
long term in a manner Manager is critical stakeholders. The
consistent with the for the Company to Board maintains
principles of successfully deliver regular contact with
sustainable investing its investment its key external
adopted by the strategy and meet its service providers and
Company. 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.
Areas of Engagement Issue Engagement Impact
Investment mandate The Board has The Board worked The Company's
and objective responsibility to closely with the investment objective
shareholders to Investment Manager is to provide an
ensure that the throughout the year attractive level of
Company's portfolio in further developing income together with
of assets is invested investment strategy capital appreciation
in line with the and underlying over the long term in
stated investment policies in the a manner consistent
objective and in a interests of with the principles
way that ensures an shareholders and of sustainable
appropriate balance future investors. investing adopted by
between spread of The Manager's the Company.
risk and portfolio approach to the The Board believes
returns. consideration of ESG that it offers an
factors in respect of attractive investment
the Company's strategy with the
portfolio, as well as additional alpha
its engagement with potential the ESG
investee companies, integration provides.
is to encourage the
adoption of
sustainable business
practices which
support long-term
value creation.
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 Feedback and
Meetings. questions will also
Shareholders will help the Company
have the opportunity evolve its reporting,
to meet the Directors aiming to make
and Investment reports more
Manager and to transparent and
address questions to understandable.
them directly. The Feedback from all
Investment Manager substantive meetings
will also provide a between the
presentation on the Investment Manager
Company's performance and shareholders will
and outlook. be shared with the
The Annual Report and Board. The Directors
Half Yearly Financial will also receive
Report are available updates from the
on the BlackRock Company's Broker on
website and are also any feedback from
circulated to shareholders, as well
shareholders. In as share trading
addition, regular activity, share price
updates on performance and an
performance, monthly update from the
factsheets, the daily Investment Manager.
NAV and other Portfolio holdings
information are also are ultimately
published on the shareholders' assets
Manager's website at and the Board
www.blackrock.com/uk/ recognises the
brsa. importance of good
The Board also works stewardship and
closely with the communication with
Manager to develop investee companies in
the Company's meeting the Company's
marketing strategy. investment objective
Unlike trading and strategy. The
companies, one-to-one Board monitors the
shareholder meetings Manager's stewardship
normally take the arrangements and
form of a meeting receives regular
with the Investment feedback from the
Manager as opposed to Investment Manager in
members of the Board. respect of meetings
The Company's with the management
willingness to enter of portfolio
into discussions with companies.
institutional
shareholders is also
demonstrated by the
programmes of
institutional
presentations by the
Portfolio Managers.
If shareholders wish
to raise issues or
concerns with the
Board, they are
welcome to do so at
any time. The Chair
is available to meet
directly with
shareholders
periodically to
understand their
views on governance
and the Company's
performance where
they wish to do so.
She may be contacted
via the Company
Secretary.
Responsible investing More than ever, the The Board believes The Board and
importance of good that responsible Investment Manager
governance and investment and believe there is
consideration of sustainability are likely to be a
sustainable important to the positive correlation
investment are key longer-term delivery between strong ESG
factors in making of the Company's practices and
investment decisions. success. The Board investment
Climate change is works closely with performance over
becoming a defining the Investment time.
factor in companies' Manager to regularly
long-term prospects review the Company's
across the investment performance,
spectrum, with investment strategy
significant and and underlying
lasting implications policies to ensure
for economic growth that the Company's
and prosperity. investment objective
continues to be met
in an effective and
responsible way in
the interests of
shareholders and
future investors.
The Investment
Manager's approach to
the consideration of
ESG factors in
respect of the
Company's portfolio,
as well as the
Investment Manager's
engagement with
investee companies to
encourage the
adoption of
sustainable business
practices which
support long-term
value creation, are
kept under review by
the Board. The Board
also expects to be
informed by the
Manager of any
sensitive voting
issues involving the
Company's
investments.
The Investment
Manager reports to
the Board in respect
of its ESG policies
and how these are
integrated into the
investment process; a
summary of
BlackRock's approach
to ESG and
sustainability is set
out in the Company's
Annual Report for the
year ended 31 October
2022. The Investment
Manager's engagement
and voting policy is
detailed in the
Company's Annual
Report for the year
ended 31 October 2022
and on the BlackRock
website.
Management of share The Board recognises The Board monitors The Board continues
rating that it is in the the Company's share to monitor the
long-term interests rating on an ongoing Company's premium/
of shareholders that basis and receives discount to NAV and
shares do not trade regular updates from will look to buy back
at a significant the Manager and the or issue shares if it
discount (or premium) Company's Broker is deemed to be in
to their prevailing regarding the level the interests of
NAV. The Board of discount/premium. shareholders as a
believes this may be The Board believes whole. During the
achieved by the use that the best way of financial year the
of share buy back maintaining the share Company did not buy
powers and the issue rating at an optimal back or reissue any
of shares. level over the long shares.
term is to create The Company's average
demand for the shares discount for the year
in the secondary to 31 October 2022
market. To this end, was 5.3% and the
the Investment discount at 23
Manager is devoting January 2023 stood at
considerable effort 5.8%.
to broadening the
awareness of the
Company, particularly
to wealth managers
and to the wider
retail market.
In addition, the
Board has worked
closely with the
Manager to develop
the Company's
marketing strategy,
with the aim of
ensuring effective
communication with
existing shareholders
and to attract new
shareholders to the
Company in order to
improve liquidity in
the Company's shares
and to sustain the
share rating of the
Company.
Service levels of The Board The Manager reports All 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 key third-party
providing a suitable evaluation of the service providers,
level of service, Manager's including the
including the Manager performance, their Manager, were
in respect of commitment and operating effectively
investment available resources. and providing a good
performance and The Board performs an level of service.
delivering on the annual review of the The Board has
Company's investment service levels of all received updates in
mandate; the third-party service respect of business
Custodian and providers and continuity planning
Depositary in respect concludes on their from the Company's
of their duties suitability to Manager, Custodian,
towards safeguarding continue in their Depositary, Fund
the Company's assets; role. The Board Accountant, Registrar
the Registrar in its receives regular and Printer and is
maintenance of the updates from the confident that
Company's share AIFM, Depositary, arrangements are in
register and dealing Registrar and Broker place to ensure a
with investor on an ongoing basis. good level of service
queries; and the The ongoing COVID-19 will continue to be
Company's Broker in pandemic continued to provided.
respect of the pose challenges to
provision of advice the operation of
and acting as a businesses across the
market maker for the globe. The Board has
Company's shares. continued to work
closely with the
Manager to gain
comfort that relevant
business continuity
plans are operating
effectively for all
of the Company's key
service providers.
Board composition The Board is During the year, the As a result of the
committed to ensuring Board appointed a new recruitment process,
that its own Director. The Mr Barron was
composition brings an Nomination Committee appointed as a
appropriate balance agreed the selection Director of the
of knowledge, criteria and the Company with effect
experience and skills method of selection, from 22 March 2022.
and that it is recruitment and As at the date of
compliant with best appointment. The this report, the
corporate governance services of an Board was comprised
practice under the UK external search of two men and two
Code, including consultant, Cornforth women. Two Directors
guidance on tenure Consulting Ltd, were have a tenure in
and the composition used to identify excess of nine years.
of the Board's potential candidates. Details of each
committees. All Directors are Director's
subject to a formal contribution to the
evaluation process on success and promotion
an annual basis. All of the Company are
Directors stand for set out in the
re-election by Directors' Report in
shareholders the Company's Annual
annually. Report for the year
Shareholders may ended 31 October 2022
attend the Annual and details of
General Meeting and Directors'
raise any queries in biographies can be
respect of Board found in the
composition or Company's Annual
individual Directors Report for the year
in person or may ended 31 October
contact the Company 2022.
Secretary or the The Directors are not
Chair using the aware of any issues
details provided in that have been raised
the Company's Annual directly by
Report for the year shareholders in
ended 31 October respect of Board
2022. composition in the
The Board is year under review.
currently undertaking Details of the proxy
another review of voting results in
succession planning favour and against
arrangements having individual Directors'
identified the need re-election at the
for a new Director 2022 Annual General
following the Meeting are given on
retirement of the the Manager's website
Chairman, Mr Miller, at www.blackrock.com/
and the forthcoming uk/brsa.
retirement of Mr
Casey. The services
of Cornforth
Consulting Ltd, are
being used again to
identify potential
candidates.
Viability statement
In accordance with provision 31 of the 2018 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 providing an attractive level of
income return together with capital appreciation over the long term.
The Directors expect the Company to continue for the foreseeable future and
have therefore conducted this review for a period up to the Annual General
Meeting in 2026. The Directors assess viability over a rolling three-year
period as they believe it best balances the Company's long-term objective, its
financial flexibility and scope with the difficulty in forecasting economic
conditions which could affect both the Company and its shareholders. The
Company also undertakes a continuation vote every three years with the next one
taking place at the Annual General Meeting in 2025.
In making an assessment on the viability of the Company, the Board has
considered the following:
· the impact of a significant fall in U.S. equity markets on the value
of the Company's investment portfolio;
· the ongoing relevance of the Company's investment objective, business
model and investment policy in the prevailing market;
· the principal and emerging risks and uncertainties, as set out above,
and their potential impact;
· the level of ongoing demand for the Company's shares;
· the Company's share price discount/premium to NAV;
· the liquidity of the Company's portfolio; and
· the level of income generated by the Company and future income and
expenditure forecasts.
The Directors have concluded that there is a reasonable expectation that the
Company will continue in operation and meet its liabilities as they fall due
over the period of their assessment based on the following considerations:
· the Investment Manager's compliance with the investment objective and
policy, its investment strategy and asset allocation;
· the portfolio mainly comprises readily realisable assets which
continue to offer a broad range of investment opportunities for shareholders as
part of a balanced investment portfolio;
· the operational resilience of the Company and its key service
providers and their ability to continue to provide a good level of service for
the foreseeable future;
· the effectiveness of business continuity plans in place for the
Company and its key service providers;
· the ongoing processes for monitoring operating costs and income which
are considered to be reasonable in comparison to the Company's total assets;
· the Board's discount management policy; and
· the Company is a closed-end investment company and therefore does not
suffer from the liquidity issues arising from unexpected redemptions.
In addition, the Board's assessment of the Company's ability to operate in the
foreseeable future is included in the Going Concern Statement which can be
found in the Directors' Report in the Company's Annual Report for the year
ended 31 October 2022.
By order of the Board
CAROLINE DRISCOLL
For and on behalf of
BlackRock Investment Management (UK) Limited
Company Secretary
26 January 2023
Statement of Directors' Responsibilities in respect of the Annual Report and
Financial Statements
The Directors are responsible for preparing the Annual Report and the financial
statements in accordance with applicable United Kingdom law and regulations.
Company law requires the Directors to prepare financial statements for each
financial year. Under that law, the Directors have elected to prepare the
financial statements under UK-adopted International Accounting Standards (IASs)
in conformity with the requirements of the Companies Act 2006. 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 period.
In preparing those 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 IAS 8,
'Accounting Policies, Changes in Accounting Estimates and Errors,' and then
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 the financial statements have been prepared in
accordance with IASs in conformity with the requirements of the Companies Act
2006, subject to any material departures disclosed and explained in the
financial statements;
· provide additional disclosures when compliance with the specific
requirements in IASs in conformity with the requirements of the Companies Act
2006 is insufficient to enable users to understand the impact of particular
transactions, other events and conditions on the Company's financial position
and financial performance; 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,
Directors' Report, the Directors' Remuneration Report, the Corporate Governance
Statement and the Report of the Audit and Management Engagement 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 confirm to the best of their knowledge that:
· the financial statements, which have been prepared in accordance with
IASs in conformity with the requirements of the Companies Act 2006, give a true
and fair view of the assets, liabilities, financial position and net profit 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 also 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 and Management Engagement Committee advise on whether
it considers that the Annual Report and Financial Statements fulfil these
requirements. The process by which the Committee has reached these conclusions
is set out in the Audit and Management Engagement Committee's report in the
Company's Annual Report for the year ended 31 October 2022. 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, performance, business model and strategy.
For and on behalf of the Board
ALICE RYDER
Chair
26 January 2023
STATEMENT OF COMPREHENSIVE INCOME FOR THE YEARED 31 OCTOBER 2022
2022 2021
Revenue Capital Total Revenue Capital Total
Notes £'000 £'000 £'000 £'000 £'000 £'000
Income from investments 3 4,255 55 4,310 3,617 2 3,619
held at fair value
through profit or loss
Other income 3 3 - 3 897 - 897
--------------- --------------- --------------- --------------- --------------- ---------------
Total income 4,258 55 4,313 4,514 2 4,516
========= ========= ========= ========= ========= =========
Net profit on - 10,423 10,423 - 42,989 42,989
investments and options
held at fair value
through profit or loss
Net loss on foreign - (433) (433) - (653) (653)
exchange
--------------- --------------- --------------- --------------- --------------- ---------------
Total 4,258 10,045 14,303 4,514 42,338 46,852
========= ========= ========= ========= ========= =========
Expenses
Investment management 4 (299) (898) (1,197) (284) (853) (1,137)
fee
Other operating expenses 5 (412) 2 (410) (547) (13) (560)
--------------- --------------- --------------- --------------- --------------- ---------------
Total operating expenses (711) (896) (1,607) (831) (866) (1,697)
========= ========= ========= ========= ========= =========
Net profit on ordinary 3,547 9,149 12,696 3,683 41,472 45,155
activities before
finance costs and
taxation
Finance costs (17) (52) (69) - - -
--------------- --------------- --------------- --------------- --------------- ---------------
Net profit on ordinary 3,530 9,097 12,627 3,683 41,472 45,155
activities before
taxation
Taxation (charge)/credit (449) (8) (457) (435) 14 (421)
--------------- --------------- --------------- --------------- --------------- ---------------
Profit for the year 3,081 9,089 12,170 3,248 41,486 44,734
========= ========= ========= ========= ========= =========
Earnings per ordinary 7 3.84 11.33 15.17 4.06 51.84 55.90
share (pence)
========= ========= ========= ========= ========= =========
The total column of this statement represents the Company's Statement of
Comprehensive Income, prepared in accordance with UK-adopted International
Accounting Standards (IASs). 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 Company does not have any other comprehensive income (31 October 2021: £
nil). The net profit for the year disclosed above represents the Company's
total comprehensive income.
STATEMENT OF CHANGES IN EQUITY FOR THE YEARED 31 OCTOBER 2022
Called Share Capital
up share premium redemption Special Capital Revenue
capital account reserve reserve reserves reserve Total
Notes £'000 £'000 £'000 £'000 £'000 £'000 £'000
For the year ended 31
October 2022
At 31 October 2021 1,004 44,873 1,460 38,090 79,369 538 165,334
Total comprehensive
income:
Net profit for the year - - - - 9,089 3,081 12,170
Transactions with
owners, recorded
directly to equity:
Transfer of share 9 - (44,873) - 44,873 - - -
premium to special
reserve1
Dividends paid2 6 - - - - (3,518) (2,900) (6,418)
--------------- --------------- --------------- --------------- --------------- --------------- ---------------
At 31 October 2022 1,004 - 1,460 82,963 84,940 719 171,086
========= ========= ========= ========= ========= ========= =========
For the year ended 31
October 2021
At 31 October 2020 1,004 44,533 1,460 37,839 38,222 3,352 126,410
Total comprehensive
income:
Net profit for the year - - - - 41,486 3,248 44,734
Transactions with
owners, recorded
directly to equity:
Ordinary shares reissued - 340 - 548 - - 888
from treasury
Share issue costs - - - (2) - - (2)
Ordinary shares bought - - - (294) - - (294)
back into treasury
Share purchase costs - - - (1) - - (1)
Dividends paid3 6 - - - - (339) (6,062) (6,401)
--------------- --------------- --------------- --------------- --------------- --------------- ---------------
At 31 October 2021 1,004 44,873 1,460 38,090 79,369 538 165,334
========= ========= ========= ========= ========= ========= =========
1 The Company's share premium account was cancelled pursuant to
shareholders' approval of a special resolution at the Company's Annual General
Meeting on 22 March 2022 and Court approval on 19 July 2022. The share premium
account which totalled £44,873,000 was transferred to a special reserve. This
action was taken, in part, to ensure that the Company had sufficient
distributable reserves.
2 4th interim dividend of 2.00p per share for the year ended 31 October
2021, declared on 3 November 2021 and paid 4 January 2022; 1st interim dividend
of 2.00p per share for the year ended 31 October 2022, declared on 22 March
2022 and paid on 29 April 2022; 2nd interim dividend of 2.00p per share for the
year ended 31 October 2022, declared on 11 May 2022 and paid on 1 July 2022;
and 3rd interim dividend of 2.00p per share for the year ended 31 October 2022,
declared on 4 August 2022 and paid on 3 October 2022.
3 4th interim dividend of 2.00p per share for the year ended 31 October
2020, declared on 4 November 2020 and paid on 4 January 2021; 1st interim
dividend of 2.00p per share for the year ended 31 October 2021, declared on 23
March 2021 and paid on 29 April 2021; 2nd interim dividend of 2.00p per share
for the year ended 31 October 2021, declared on 5 May 2021 and paid on 2 July
2021; and 3rd interim dividend of 2.00p per share for the year ended 31 October
2021, declared on 5 August 2021 and paid on 1 October 2021.
STATEMENT OF FINANCIAL POSITION AS AT 31 OCTOBER 2022
2022 2021
Notes £'000 £'000
Non current assets
Investments held at fair value through profit or loss 175,425 164,971
Current assets
Current tax asset 145 96
Other receivables 3,287 2,243
Cash and cash equivalents 58 1,240
--------------- ---------------
Total current assets 3,490 3,579
========= =========
Total assets 178,915 168,550
========= =========
Current liabilities
Current tax liability (6) -
Other payables (3,969) (3,216)
Bank overdraft (3,854) -
--------------- ---------------
Total current liabilities (7,829) (3,216)
========= =========
Net assets 171,086 165,334
========= =========
Equity attributable to equity holders
Called up share capital 8 1,004 1,004
Share premium account 9 - 44,873
Capital redemption reserve 9 1,460 1,460
Special reserve 9 82,963 38,090
Capital reserves 9 84,940 79,369
Revenue reserve 9 719 538
--------------- ---------------
Total equity 171,086 165,334
========= =========
Net asset value per ordinary share (pence) 7 213.25 206.08
========= =========
CASH FLOW STATEMENT FOR THE YEARED 31 OCTOBER 2022
2022 2021
£'000 £'000
Operating activities
Net profit on ordinary activities before taxation 12,619 45,155
Add back finance costs 69 -
Net profit on investments and options held at fair value through (10,423) (42,989)
profit or loss (including transaction costs)
Net loss on foreign exchange 433 653
Sales of investments held at fair value through profit or loss 107,169 199,237
Purchases of investments held at fair value through profit or loss (107,200) (202,133)
(Increase)/decrease in other receivables (23) 35
(Decrease)/increase in other payables (76) 143
Increase in amounts due from brokers (1,021) (1,514)
Increase in amounts due to brokers 829 1,656
--------------- ---------------
Net cash inflow from operating activities before taxation 2,376 243
========= =========
Taxation paid (492) (609)
--------------- ---------------
Net cash inflow/(outflow) from operating activities 1,884 (366)
========= =========
Financing activities
Interest paid (69) -
Net cash proceeds from ordinary shares reissued from treasury - 886
Net cash outflow from ordinary shares bought back into treasury - (295)
Dividends paid (6,418) (6,401)
--------------- ---------------
Net cash outflow from financing activities (6,487) (5,810)
========= =========
Decrease in cash and cash equivalents (4,603) (6,176)
Effect of foreign exchange rate changes (433) (653)
--------------- ---------------
Change in cash and cash equivalents (5,036) (6,829)
Cash and cash equivalents at start of year 1,240 8,069
--------------- ---------------
Cash and cash equivalents at end of year (3,796) 1,240
========= =========
Comprised of:
Cash at bank 58 666
Bank overdraft (3,854) -
Cash Fund1 - 574
--------------- ---------------
(3,796) 1,240
========= =========
1 Cash Fund represents funds held on deposit with the BlackRock
Institutional Cash Series plc - US Dollar 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. The Company
was incorporated in England and Wales on 30 August 2012, and this is the tenth
Annual Report.
2. ACCOUNTING POLICIES
The principal accounting policies adopted by the Company have been applied
consistently, other than where new policies have been adopted and are set out
below.
(a) Basis of preparation
On 31 December 2020, International Financial Reporting Standards (IFRS) as
adopted by the European Union at that date was brought into UK law and became
UK-adopted International Accounting Standards, with future changes being
subject to endorsement by the UK Endorsement Board and with the requirements of
the Companies Act 2006 as applicable to companies reporting under those
standards. The Company transitioned to UK-adopted International Accounting
Standards in its financial statements with effect from 1 November 2021. There
was no impact or changes in accounting policies from the transition.
The financial statements have been prepared under the historic cost convention
modified by the revaluation of certain financial assets and financial
liabilities held at fair value through profit or loss and in accordance with
UK- adopted International Accounting Standards (IASs). All of the Company's
operations are of a continuing nature.
Insofar as the Statement of Recommended Practice (SORP) for investment trust
companies and venture capital trusts, issued by the Association of Investment
Companies (AIC) in October 2019 and updated in July 2022, is compatible with
UK-adopted International Accounting Standards, the financial statements have
been prepared in accordance with the guidance set out in the SORP.
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
foreseeable future for the period to 31 January 2024, being a period of at
least twelve months from the date of approval of the financial statements and
therefore consider the going concern assumption to be appropriate. The
Directors have reviewed the income and expense projections and the liquidity of
the investment portfolio in making their assessment.
The Directors have considered the impact of climate change on the value of the
investments included in the Financial Statements and have concluded that:
· there was no further impact of climate change to be considered as the
investments are valued based on market pricing as required by IFRS 13; and
· the risk is adequately captured in the assumptions and inputs used in
measurement of Level 3 assets, as noted in Note 15 of the Financial Statements
in the Company's Annual Report for the year ended 31 October 2022.
None of the Company's other assets and liabilities were considered to be
potentially impacted by climate change.
The Company's financial statements are presented in Sterling, which is the
functional currency of the Company and the currency of the primary economic
environment in which the Company operates. All values are rounded to the
nearest thousand pounds (£'000) except where otherwise indicated.
Relevant International Accounting Standards that have yet to be adopted:
IFRS 17 - Insurance contracts (effective 1 January 2023). This standard
replaces IFRS 4, which currently permits a wide range of accounting practices
in accounting for insurance contracts. IFRS 17 will fundamentally change the
accounting by all entities that issue insurance contracts and investment
contracts with discretionary participation features.
This standard is unlikely to have any impact on the Company as it has no
insurance contracts.
IAS 12 - Deferred tax related to assets and liabilities arising from a single
transaction (effective 1 January 2023). The International Accounting Standards
Board (IASB) has amended IAS 12 Income Taxes to require companies to recognise
deferred tax on particular transactions that, on initial recognition, give rise
to equal amounts of taxable and deductible temporary differences. According to
the amended guidance, a temporary difference that arises on initial recognition
of an asset or liability is not subject to the initial recognition exemption if
that transaction gave rise to equal amounts of taxable and deductible temporary
differences. These amendments might have a significant impact on the
preparation of financial statements by companies that have substantial balances
of right-of-use assets, lease liabilities, decommissioning, restoration and
similar liabilities. The impact for those affected would be the recognition of
additional deferred tax assets and liabilities.
The amendment of this standard is unlikely to have any significant impact on
the Company.
None of the standards that have been issued, but are not yet effective, are
expected to have a material impact on the Company.
(b) Presentation of the Statement of Comprehensive Income
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 Statement of Comprehensive Income between items of a revenue and a
capital nature has been presented alongside the Statement of Comprehensive
Income.
(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 recognised 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.
Provision is made for any dividends not expected to be received. Special
dividends, if any, are treated as a capital or a revenue receipt depending on
the facts or circumstances of each particular case. The return on a debt
security is recognised on a time apportionment basis so as to reflect the
effective yield on the debt security.
Options may be purchased or written over securities held in the portfolio for
generating or protecting capital returns, or for generating or maintaining
revenue returns. Where the purpose of the option is the generation of income,
the premium is treated as a revenue item. Where the purpose of the option is
the maintenance of capital, the premium is treated as a capital item.
Option premium income is recognised as revenue evenly over the life of the
option contract and included in the revenue account of the Statement of
Comprehensive Income unless the option has been written for the maintenance and
enhancement of the Company's investment portfolio and represents an incidental
part of a larger capital transaction, in which case any premia arising are
allocated to the capital account of the Statement of Comprehensive Income.
Deposit interest receivable is accounted for on an accruals basis. Interest
income from the Cash Fund is accounted for on an accruals basis.
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 income. 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 Statement of
Comprehensive Income, except as follows:
· expenses which are incidental to the acquisition or sale of an
investment are charged to the capital account of the Statement of Comprehensive
Income. Details of transaction costs on the purchases and sales of investments
are disclosed within note 10 to the financial statements in the Company's
Annual Report for the year ended 31 October 2022;
· expenses are treated as capital where a connection with the
maintenance or enhancement of the value of the investments can be demonstrated;
· the investment management fee and finance costs have been allocated
75% to the capital account and 25% to the revenue account of the Statement of
Comprehensive Income 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 Statement of
Comprehensive Income 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.
Where expenses are allocated between capital and revenue accounts, any tax
relief in respect of expenses is allocated between capital and revenue returns
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 temporary differences that
have originated but not reversed at the financial reporting date, where
transactions or events that result in an obligation to pay more taxation in the
future or right to pay less taxation in the future have occurred at the
financial reporting 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 temporary differences
can be deducted. Deferred taxation assets and liabilities are measured at the
rates applicable to the legal jurisdictions in which they arise.
(g) Investments held at fair value through profit or loss
In accordance with IFRS 9, the Company classifies its investments at initial
recognition as held at fair value through profit or loss and are managed and
evaluated on a fair value basis in accordance with its investment strategy and
business model.
All investments are measured initially and subsequently at fair value through
profit or loss. Purchases of investments are recognised on a trade date basis.
Sales of investments are recognised at the trade date of the disposal.
The fair value of the financial investments is based on their quoted bid price
at the financial reporting date, without deduction for the estimated selling
costs. This policy applies to all current and non-current asset investments
held by 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 Statement of
Comprehensive Income as "Net profit/(loss) on investments and options held at
fair value through profit or loss". Also included within the heading are
transaction costs in relation to the purchase or sale of investments.
For all financial instruments not traded in an active market, the fair value is
determined by using various valuation techniques. Valuation techniques include
market approach (i.e., using recent arm's length market transactions adjusted
as necessary and reference to the current market value of another instrument
that is substantially the same) and the income approach (i.e., discounted cash
flow analysis and option pricing models making as much use of available and
supportable market data where possible). See note 2(o) below.
(h) Options
Options are held at fair value through profit or loss based on the bid/offer
prices of the options written to which the Company is exposed. The value of the
option is subsequently marked-to-market to reflect the fair value through
profit or loss of the option based on traded prices. Where the premium is taken
to revenue, an appropriate amount is shown as capital return such that the
total return reflects the overall change in the fair value of the option. When
an option is exercised, the gain or loss is accounted for as a capital gain or
loss. Any cost on closing out an option is transferred to revenue along with
any remaining unamortised premium.
(i) Other receivables and other payables
Other receivables and other payables do not carry any interest and are
short-term in nature and are accordingly stated on an amortised cost basis.
(j) Dividends payable
Under IASs, final dividends should not be accrued in the financial statements
unless they have been approved by shareholders before the financial reporting
date. Interim dividends should not be recognised in the financial statements
unless they have been paid.
Dividends payable to equity shareholders are recognised in the Statement of
Changes in Equity.
(k) Foreign currency translation
Transactions involving foreign currencies are converted at the rate ruling at
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
rate ruling on the financial reporting date. Foreign exchange differences
arising on translation are recognised in the Statement of Comprehensive Income
as a revenue or capital item depending on the income or expense to which they
relate. For investment transactions and investments held at the year end,
denominated in a foreign currency, the resulting gains or losses are included
in the profit/(loss) on investments and options held at fair value through
profit or loss in the Statement of Comprehensive Income.
(l) Cash and cash equivalents
Cash comprises cash in hand, bank overdrafts and on demand deposits. Cash
equivalents are 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.
The Company can invest in a Cash Fund which is managed as part of the Company's
investment policy and, accordingly, the investment is managed as part of the
Company's cash and cash equivalents as defined under IAS 7 and is presented as
a cash equivalent in the Financial Statements.
(m) Bank borrowings
Bank overdrafts and loans are recorded as the proceeds received. Finance
charges, including any premium payable on settlement or redemption and direct
issue costs, are accounted for on an accruals basis in the Statement of
Comprehensive Income using the effective interest rate method and are added to
the carrying amount of the instrument to the extent that they are not settled
in the period in which they arise.
(n) Share repurchases and 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 re-issued:
· amounts received to the extent of the repurchase price are credited to
the special reserve and capital reserves 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.
Share issue costs are charged to the share premium account. Costs on share
reissues are charged to the special reserve and capital reserves.
(o) Critical accounting estimates and judgements
The Company 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 234 297
Overseas dividends 3,926 3,228
Overseas special dividends 27 73
Overseas REIT dividends 68 19
--------------- ---------------
Total investment income 4,255 3,617
========= =========
Deposit interest 3 -
Option premium income - 897
--------------- ---------------
Total income 4,258 4,514
========= =========
During the year, the Company received no option premium income in cash (31
October 2021: £585,000) for writing covered call options for the purposes of
revenue generation.
Option premium income is amortised evenly over the life of the option contract
and, accordingly, during the year no option premium (31 October 2021: £897,000)
was amortised to revenue.
At 31 October 2022, there were no open positions or associated liability (31
October 2021: no open positions or associated liability).
There were no derivative transactions in 2022. All derivative transactions in
2021 were based on constituent stocks in the Russell 1000 Value Index.
Dividends and interest received in cash during the year amounted to £3,662,000
and £3,000 (31 October 2021: £3,127,000 and £nil).
Special dividends of £55,000 have been recognised in capital (31 October 2021:
£2,000).
4. INVESTMENT MANAGEMENT FEE
2022 2021
Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
Investment management fee 299 898 1,197 284 853 1,137
--------------- --------------- --------------- --------------- --------------- ---------------
Total 299 898 1,197 284 853 1,137
========= ========= ========= ========= ========= =========
With effect from 30 July 2021, the investment management fee is payable in
quarterly arrears, calculated at the rate of 0.70% of the Company's net assets.
Up to 29 July 2021, the investment management fee was payable quarterly in
arrears, calculated at the rate of 0.75% of the Company's net assets. 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 fee 3 3
Auditors' remuneration - audit services1 38 38
Registrar's fee 32 32
Directors' emoluments2 165 164
Broker fees3 40 75
Depositary fees 16 14
Printing fees 32 44
Legal and professional fees 35 63
Marketing fees 49 37
AIC fees 11 9
FCA fees 9 8
Write back of prior year expenses4 (101) -
Other administrative costs 83 60
--------------- ---------------
412 547
========= =========
Allocated to capital:
Custody transaction charges5 5 13
Write back of prior year expenses5,6 (7) -
--------------- ---------------
410 560
========= =========
The Company's ongoing charges7, calculated as a percentage of average 1.01% 1.06%
daily net assets and using the management fee and all other operating
expenses excluding finance costs, direct transaction costs, custody
transaction charges, VAT recovered, taxation, prior year expenses
written back and certain non-recurring items were:
========= =========
1 No non-audit services were provided by the Company's auditors (31 October
2021: none).
2 Further information on Directors' emoluments can be found in the
Directors' Remuneration Report in the Company's Annual Report for the year
ended 31 October 2022. The Company has no employees.
3 Relates to prior year printing fees, legal fees, Directors' emoluments,
Employers' NI and Directors' expenses written back during the year (31 October
2021: no expenses were written back).
4 Broker fees for 2021 include a one off fee of £35,000 for advice on the
change in the investment policy.
5 For the year ended 31 October 2022, an expense of £5,000 and write back
of prior year accruals of £7,000 (31 October 2021: expense of £13,000) were
charged to the capital account of the Statement of Comprehensive Income. These
relate to transaction costs charged by the custodian on sale and purchase
trades.
6 Relates to prior year accruals for custody transaction charges written
back during the year.
7 Alternative Performance Measure, see Glossary in the Company's Annual
Report for the year ended 31 October 2022.
6. DIVIDS
2022 2021
Dividends paid on equity shares Record Payment £'000 £'000
date date
4th interim dividend of 2.00p per share paid for the 26 4 1,605 1,596
year ended 31 October 2021 (2020: 2.00p) November January
2021 2022
1st interim dividend of 2.00p per share paid for the 1 April 29 April 1,605 1,596
year ended 31 October 2022 (2021: 2.00p) 2022 2022
2nd interim dividend of 2.00p per share paid for the 20 May 1 July 1,604 1,605
year ended 31 October 2022 (2021: 2.00p) 2022 2022
3rd interim dividend of 2.00p per share paid for the 19 3 1,604 1,604
year ended 31 October 2022 (2021: 2.00p) August October
2022 2022
--------------- ---------------
Accounted for in the financial statements 6,418 6,401
========= =========
The total dividends payable in respect of the year ended 31 October 2022 which
form the basis of Section 1158 of the Corporation Tax Act 2010 and Section 833
of the Companies Act 2006, and the amounts declared, meet the relevant
requirements as set out in this legislation.
2022 2021
Dividends paid or declared on equity shares: £'000 £'000
1st interim dividend of 2.00p per share paid for the year ended 31 1,605 1,596
October 2022 (2021: 2.00p)
2nd interim dividend of 2.00p per share paid for the year ended 31 1,604 1,605
October 2022 (2021: 2.00p)
3rd interim dividend of 2.00p per share paid for the year ended 31 1,604 1,604
October 2022 (2021: 2.00p)
4th interim dividend of 2.00p per share payable on 3rd January 2023 1,604 1,605
for the year ended 31 October 20221 (2021: 2.00p)
--------------- ---------------
6,417 6,410
========= =========
1 Based on 80,229,044 ordinary shares in issue on 24 November 2022 (the
ex-dividend date).
7. EARNINGS AND NET ASSET VALUE PER ORDINARY SHARE
Total revenue, capital earnings and net asset value per ordinary share are
shown below and have been calculated using the following:
Year ended Year ended
31 October 31 October
2022 2021
Net revenue profit attributable to ordinary shareholders (£'000) 3,081 3,248
Net capital profit attributable to ordinary shareholders (£'000) 9,089 41,486
--------------- ---------------
Total profit attributable to ordinary shareholders (£'000) 12,170 44,734
--------------- ---------------
Equity shareholders' funds (£'000) 171,086 165,334
========= =========
The weighted average number of ordinary shares in issue during the 80,229,044 80,031,140
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 80,229,044 80,229,044
the net asset value per ordinary share was calculated was:
Earnings per ordinary share
Revenue earnings per share (pence) - basic and diluted 3.84 4.06
Capital earnings per share (pence) - basic and diluted 11.33 51.84
--------------- ---------------
Total earnings per share (pence) - basic and diluted 15.17 55.90
========= =========
As at As at
31 31
October October
2022 2021
Net asset value per ordinary share (pence) 213.25 206.08
Ordinary share price (pence) 197.50 198.25
======== ========
= =
There were no dilutive securities at the year end.
8. CALLED UP SHARE CAPITAL
Ordinary
shares Treasury Total Nominal
in issue 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 80,229,044 20,132,261 100,361,305 1,004
--------------- --------------- --------------- ---------------
At 31 October 2022 80,229,044 20,132,261 100,361,305 1,004
========= ========= ========= =========
During the year ended 31 October 2022, the Company reissued no (31 October
2021: 445,000) shares from treasury for a total consideration including costs
of £nil (31 October 2021: £886,000).
The Company bought back and transferred no (31 October 2021: 190,000) shares
into treasury for a total consideration including costs of £nil (31 October
2021: £295,000).
Since 31 October 2022 and up to the date of this report, no shares have been
reissued from treasury and no shares have been bought back into treasury.
9. RESERVES
Distributable reserves
Capital
Capital reserve
reserve arising on
Share Capital arising on revaluation of
premium redemption Special investments investments Revenue
account reserve reserve sold held reserve
£'000 £'000 £'000 £'000 £'000 £'000
At 31 October 2021 44,873 1,460 38,090 62,624 16,745 538
Movement during the year:
Total comprehensive income/(loss):
Net profit/(loss) for the year - - - 14,154 (5,065) 3,081
Transactions with owners, recorded
directly to equity:
Transfer of share premium to (44,873) - 44,873 - - -
special reserve1
Dividends paid - - - (3,518) - (2,900)
--------------- --------------- --------------- --------------- --------------- ---------------
At 31 October 2022 - 1,460 82,963 73,260 11,680 719
========= ========= ========= ========= ========= =========
1 The Company's share premium account was cancelled pursuant to
shareholders' approval of a special resolution at the Company's Annual General
Meeting on 22 March 2022 and Court approval on 19 July 2022. The share premium
account which totalled £44,873,000 was transferred to a special reserve. This
action was taken, in part, to ensure that the Company had sufficient
distributable reserves.
Distributable reserves
Capital
Capital reserve
reserve arising on
Share Capital arising on revaluation of
premium redemption Special investments investments Revenue
account reserve reserve sold held reserve
£'000 £'000 £'000 £'000 £'000 £'000
At 31 October 2020 44,533 1,460 37,839 47,280 (9,058) 3,352
Movement during the year:
Total comprehensive income:
Net profit for the year - - - 15,683 25,803 3,248
Transactions with owners, recorded
directly to equity:
Ordinary shares reissued from 340 - 548 - - -
treasury
Share issue costs - - (2) - - -
Ordinary shares bought back into - - (294) - - -
treasury
Share purchase costs - - (1) - - -
Dividends paid - - - (339) - (6,062)
--------------- --------------- --------------- --------------- --------------- ---------------
At 31 October 2021 44,873 1,460 38,090 62,624 16,745 538
========= ========= ========= ========= ========= =========
The share premium account and capital redemption reserve are not distributable
reserves under the Companies Act 2006. In accordance with ICAEW Technical
Release 02/17BL on Guidance on Realised and Distributable profits under the
Companies Act 2006, the special reserve and capital reserves may be used as
distributable reserves for all purposes and, in particular, the repurchase by
the Company of its ordinary shares and for payments 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 capital reserve arising on the revaluation of investments of £
11,680,000 (31 October 2021: gain of £16,745,000) is subject to fair value
movements and may not be readily realisable at short notice; as such any gains
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.
10. VALUATION OF FINANCIAL INSTRUMENTS
Financial assets and financial liabilities are either carried in the Statement
of Financial Position 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 and bank
overdrafts). IFRS 13 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 2(g) to the Financial Statements in
the Company's Annual Report for the year ended 31 October 2022.
Categorisation within the hierarchy has been determined on the basis of the
lowest level of 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 all significant inputs are directly or indirectly observable
from market data.
Valuation techniques used for non-standardised financial instruments such as
options, currency swaps and other over-the- counter derivatives include the use
of comparable recent arm's length transactions, reference to other instruments
that are substantially the same, discounted cash flow analysis, option pricing
models and other valuation techniques commonly used by market participants
making the maximum use of market inputs and relying as little as possible on
entity specific inputs.
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 includes instruments that are valued based on quoted prices for
similar instruments where significant entity determined adjustments or
assumptions are required to reflect differences between the instruments and
instruments for which there is no active market. The Investment Manager
considers observable data to be that market data that is readily available,
regularly distributed or updated, reliable and verifiable, not proprietary, and
provided by independent sources that are actively involved in the relevant
market.
The level in the fair value hierarchy within which the fair value measurement
is categorised in its entirety is determined on the basis of the lowest level
input that is significant to the fair value measurement. If a fair value
measurement uses observable inputs that require significant adjustment based on
unobservable inputs, that measurement is a Level 3 measurement.
Assessing the significance of a particular input to the fair value measurement
in its entirety requires judgement, considering factors specific to the asset
or liability. The determination of what constitutes 'observable' inputs
requires significant judgement by the Investment Manager.
Fair values of financial assets and financial liabilities
The table below sets out fair value measurements using the IFRS 13 fair value
hierarchy.
Level 1 Level 2 Level 3 Total
Financial assets at fair value through profit or £'000 £'000 £'000 £'000
loss at 31 October 2022
Assets:
Equity investments 175,425 - - 175,425
--------------- --------------- --------------- ---------------
175,425 - - 175,425
========= ========= ========= =========
Level 1 Level 2 Level 3 Total
Financial assets at fair value through profit or £'000 £'000 £'000 £'000
loss at 31 October 2021
Assets:
Equity investments 164,971 - - 164,971
--------------- --------------- --------------- ---------------
164,971 - - 164,971
========= ========= ========= =========
There were no transfers between levels of financial assets and financial
liabilities during the year recorded at fair value as at 31 October 2022 and 31
October 2021. The Company did not hold any Level 3 securities throughout the
financial year or as at 31 October 2022 (31 October 2021: nil).
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.
11. RELATED PARTY DISCLOSURE
Directors' Emoluments
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 Company's Annual Report for the year ended 31
October 2022. At 31 October 2022, £14,000 (31 October 2021: £14,000) 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 Number of Significant
Total % of shares held by Significant Investors who
Related Investors who are not are not affiliates of
BlackRock Funds affiliates of BlackRock Group or
BlackRock Group or BlackRock, Inc.
BlackRock, Inc.
1.8 n/a n/a
As at 31 October 2021
Total % of shares held by Number of Significant
Total % of shares held by Significant Investors who
Related Investors who are not are not affiliates of
BlackRock Funds affiliates of BlackRock Group or
BlackRock Group or BlackRock, Inc.
BlackRock, Inc.
1.6 n/a n/a
12. TRANSACTIONS WITH THE INVESTMENT MANAGER AND AIFM
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 Company's
Annual Report for the year ended 31 October 2022.
The investment management fee due for the year ended 31 October 2022 amounted
to £1,197,000 (31 October 2021: £1,137,000). At the year end, £899,000 was
outstanding in respect of the management fee (31 October 2021: £876,000).
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 £49,000 excluding VAT (31 October 2021:
£37,000). Marketing fees of £29,000 excluding VAT (31 October 2021: £29,000)
were outstanding as at the year end.
The Company has no investment in the BlackRock Institutional Cash Series plc -
US Dollar Liquid Environmentally Aware Fund (31 October 2021: £574,000) at the
year end, which 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. CONTINGENT LIABILITIES
There were no contingent liabilities at 31 October 2022 (31 October 2021: nil).
14. 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 auditors, 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 Sustainable American Income Trust plc for the year ended 31 October
2021, which have been filed with the Registrar of Companies. The report of the
auditor on those financial statements contained no qualification or statement
under section 498 of the Companies Act.
15. ANNUAL REPORT
Copies of the Annual Report and Financial Statements will be published shortly
and will be available from the registered office, c/o The Company Secretary,
BlackRock Sustainable American Income Trust plc, 12 Throgmorton Avenue, London
EC2N 2DL.
16. ANNUAL GENERAL MEETING
The Annual General Meeting of the Company will be held at the offices of
BlackRock, 12 Throgmorton Avenue, London EC2N 2DL on Tuesday, 21 March 2023 at
12.00 noon.
ENDS
The Annual Report will also be available on the BlackRock website at
blackrock.com/uk/brsa. 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, Managing Director, Investment Trusts, BlackRock Investment
Management (UK) Limited
Tel: 020 7743 3000
Press enquiries:
Ed Hooper, Lansons Communications
Tel: 020 7294 3620
E-mail: BlackRockInvestmentTrusts@lansons.com or EdH@lansons.com
12 Throgmorton Avenue
London
EC2N 2DL
26 January 2023
END
(END) Dow Jones Newswires
January 27, 2023 02:00 ET (07:00 GMT)
Blackrock North American... (LSE:BRNA)
Historical Stock Chart
From Oct 2024 to Nov 2024
Blackrock North American... (LSE:BRNA)
Historical Stock Chart
From Nov 2023 to Nov 2024
