Investment trusts

About this investment trust

Capital at risk. The value of investments and the income from them can fall as well as rise and are not guaranteed. Investors may not get back the amount originally invested.

The Company aims to provide growth in capital and income over the long term through investment in a diversified portfolio of principally UK listed equities.

Why choose it?

With longer lifespans and greater demands on retirement funds, investors need a steady source of income and growth. This conviction-led portfolio delivers exposure to a balanced range of sectors and company shares, focused on the UK, which have the potential to deliver capital growth and a growing dividend income.

Suited to…

Investors targeting a steady income that grows over time, useful for retirement planning. The Trust also aims to grow investors’ capital in the longer term.

Kepler Rating: As at 1 January 2022.
Awards/Ratings have not been superseded to date.

Past performance is not a reliable indicator of future results and should not be the sole factor of consideration when selecting a product or strategy.

What are the risks?

• Capital at risk. The value of investments and the income from them can fall as well as rise and are not guaranteed. Investors may not get back the amount originally invested.
• Net Asset Value (NAV) performance is not the same as share price performance, and shareholders may realise returns that are lower or higher than NAV performance.
• The Trust’s investments may have low liquidity which often causes the value of these investments to be less predictable. In extreme cases, the Trust may not be able to realise the investment at the latest market price or at a price considered fair.
• Investment strategies, such as borrowing, used by the Trust can result in even larger losses suffered when the value of the underlying investments fall.

Useful information

Capital at risk. The value of investments and the income from them can fall as well as rise and are not guaranteed. Investors may not get back the amount originally invested.

Fees & Charges

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The Board’s approach to ESG

Capital at risk. The value of investments and the income from them can fall as well as rise and are not guaranteed. Investors may not get back the amount originally invested.

Environmental, social and governance (ESG) issues can present both opportunities and risks to long-term investment performance. These ethical and sustainability issues are a key focus of the Board, and your Board is committed to a diligent oversight of the activities of the Manager in these areas. The Board believes effective engagement with management is, in most cases, the most effective way of driving meaningful positive change in the behaviour of investee company management. The Board believes that BlackRock is well placed as Manager to fulfil these requirements due to the integration of ESG into its investment processes, the emphasis it places on sustainability, its collaborative approach in its investment stewardship activities and its position in the industry as one of the largest suppliers of sustainable investment products in the global market.

Sustainable investing: BlackRock’s approach

Sustainability is BlackRock’s standard for investing, based on the investment conviction that integrating sustainability can help investors build more resilient portfolios and achieve better long-term, risk-adjusted returns. BlackRock believes that climate change is a defining factor in companies’ long-term prospects and that it will have a significant and lasting impact on economic growth and prosperity. BlackRock believes that climate risk 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 is likely to drive a significant reallocation of capital away from traditional carbon intensive industries over the next decade.

Environmental, Social and Governance: integration into BlackRock’s investment management process

Environmental, Social and Governance (ESG) investing is often conflated or used interchangeably with the term “sustainable investing.” BlackRock has identified sustainable investing as being the overall framework and ESG as a data toolkit for identifying and informing our solutions. BlackRock has defined ESG Integration as the practice of incorporating material ESG information and consideration of sustainability risks into investment decisions in order to enhance risk-adjusted returns. BlackRock recognises the relevance of material ESG information across all asset classes and styles of portfolio management. ESG information and sustainability risks are included as a consideration in investment research, portfolio construction, portfolio review, and investment stewardship processes. The Investment Manager considers ESG insights and data, including sustainability risks, within the total set of information in its research process and makes a determination as to the materiality of such information in its investment process. ESG insights are not the sole consideration when making investment decisions and the extent to which ESG insights are considered during investment decision making will also be determined by the characteristics or objectives of the Company. The Investment Manager’s evaluation of ESG data may be subjective and could change over time in light of emerging sustainability risks or changing market conditions. This approach is consistent with the Investment Manager’s regulatory duty to manage the Company in accordance with its investment objective and policy and in the best interests of the Company’s investors. The Investment Manager’s Risk and Quantitative Analysis group will review portfolios to ensure that sustainability risks are considered regularly alongside traditional financial risks, that investment decisions are taken in light of relevant sustainability risks and that decisions exposing portfolios to sustainability risks are deliberate, and the risks diversified and scaled according to the investment objectives of the Company.

BlackRock’s approach to ESG integration is to broaden the total amount of information the Investment Manager considers with the aim of improving investment analysis and understanding the likely impact of sustainability risks on the Company’s investments. The Investment Manager assesses a variety of economic and financial indicators, which may include ESG data and insights, to make investment decisions appropriate for the Company objectives. This can include relevant third-party insights or data, internal research or engagement commentary and input from BlackRock Investment Stewardship.

ESG integration does not change the Company’s investment objective or constrain the Investment Manager’s investable universe and does not mean that an ESG investment strategy or exclusionary screens has been or will be adopted by the Company. Similarly, ESG integration does not determine the extent to which the Company may be impacted by sustainability risks.

Investment stewardship

BlackRock undertakes investment stewardship engagements and proxy voting with the goal of protecting and enhancing the long-term value of clients’ investments for relevant asset classes. In our experience, sustainable financial performance and value creation are enhanced by sound governance practices, including risk management oversight, board accountability, and compliance with regulations. We focus on board composition, effectiveness and accountability as a top priority. In our experience, high standards of corporate governance are the foundations of board leadership and oversight. We engage to better understand how boards assess their effectiveness and performance, as well as their position on director responsibilities and commitments, turnover and succession planning, crisis management and diversity. For further detail regarding BlackRock’s work on investment stewardship please refer to the website here.

Engagement with portfolio companies in 2020

The Board receive periodic updates from the Manager in respect of activity undertaken for the year under review. Over the year to 31 October 2020, 94 total company engagements were held with the management teams of 36 portfolio companies, representing 75% of the portfolio at 31 October 2020. To put this into context, there were 48 companies in BlackRock Income and Growth Investment Trust plc’s portfolio at 31 October 2020 (31 October 2019: 48). In total 1,018 proposals were voted on at 59 shareholder meetings.

Fund manager commentary

31 October 2023

Please note that the commentary below includes historic information in respect of index performance data and the Company’s NAV performance.

The figures shown relate to past performance. Past performance is not a reliable indicator of current or future results.

Performance Overview:

The Company returned -5.9% during the month net of fees, underperforming the FTSE All-Share which returned -4.1%.

Market Summary:

Global equity markets fell in October as geopolitical uncertainty due to the Israel-Hamas conflict and the prospect of higher-for-longer interest rates weighed on market sentiment.

In the UK, inflation proved persistent as the September figure showed the annual rate stuck at 6.7%¹ as lower prices in food and drink were offset by higher oil prices. The FTSE All Share fell -4.1% during October with Financials, Health Care and Industrial as top underperforming sectors; Utilities was the only sector that outperformed.

In the US, the 10-year Treasury yields reached 16-year highs above 5%² and stocks hit five-month lows. Technology stocks underperformed on some disappointing earnings, while regional bank shares broadly hit new lows for the year. US Core Personal Consumption Expenditure (PCE) data, the Federal Reserve’s preferred inflation gauge, softened in September on falling goods prices. In addition, strong consumer spending drove a stronger-than-expected rise in Q3 GDP.

In the Eurozone, the outlook continued to be pessimistic as the Eurozone composite Purchasing Managers’ Index (PMI) fell to a 35-month low of 46.52 in October³. In addition, the European Central Bank’s survey of banks showed a continued contraction in the supply of credit to households and businesses from European banks.

In China, the economy’s gross domestic product grew in the third quarter, beating market expectations but was still short of the country’s full year target. China continued to see weakness in the real estate sector and the US further tightened export controls for artificial intelligence chips to China.

Contributors to Performance:

Rentokil was the top detractor from performance during the period after reporting a weak trading statement. US organic growth of 2.3% (2.7% ex-products) disappointed and represents a slowdown from 4.1% last quarter. The company pointed to the weak macro/consumer environment making it hard to acquire new customers. This weaker revenue led to lower margin expectations for the US - down to 18.5-19% from c.19.5% previously. In contrast, the rest of the group has performed better than expected which limited any downgrades to 1-2%.

Standard Chartered also released a weaker trading statement due largely to three reasons; lower net interest margin (NIM) and weaker than expected balance sheet growth, increased provisions against their Chinese real estate exposure, and a write-down of the Bohai stake. The positive was a modest beat on capital but there was no incremental buy-back announced. NatWest also delivered weak results with lower guidance on NIM due to the pricing of deposits.

The share price of RELX rose during the month and the company was the top positive contributor to performance. The company released a steady earnings statement with Q3 growth rates for the three, major divisions matching those from the first half; Risk sustained at 8%; STM at 4%; Legal at 6%; Exhibitions at +32% which drove group growth to 8%. Pearson was another top positive contributor to performance. The company also delivered strong results with 3-4% underlying upgrades.

Rio Tinto also posted a steady trading update with output across its mining operations in line with expectations; the company was another top positive contributor.

Changes:

During the period, we added to the holdings in Segro and Big Yellow and reduced the holdings in NatWest and 3i.

Outlook:

Inflation has consistently surprised in its depth and breadth, driven by resilient demand, supply chain constraints, and most importantly by rising wages in more recent data. Central banks across the developed world continue to unwind ten years of excess liquidity by tightening monetary policy desperate to prevent the entrenchment of higher inflation expectations. Meanwhile, March saw the first signs of financial stress with the bankruptcy of Silicon Valley Bank and Signature bank in the US serving to highlight the potential issues of the aggressive retrenchment of liquidity. Whilst the ramifications of this crisis appear modest, it is likely that credit conditions and the availability of credit will continue to deteriorate. This strengthens our belief that companies with robust balance sheets capable of funding their own growth will outperform. We are mindful of this and feel it is incredibly important to focus on companies with strong, competitive positions, at attractive valuations that can deliver in this environment.

We would expect broader demand weakness into the second half of 2023 although the ‘scars’ of supply chain disruption are likely to support parts of industrial capex demand as companies seek to enhance the resilience of their supply chains. A notable feature of our conversations with a wide range of corporates was the ease with which they were able to pass on cost increases and protect or even expand margins during 2022. We believe that as demand weakens and as the transitory inflationary pressures start to fade during 2023 (e.g. commodity prices, supply chain disruption) then pricing conversations will become more challenging even though pressure from wage inflation may prove more persistent. While this does not bode well for margins in aggregate, we believe that 2023 and 2024 will see greater differentiation as corporates’ pricing power will come under intense scrutiny.

The UK’s policy has somewhat diverged from the G7 in fiscal policy terms as the present government attempts to create stability after the severe reaction from the “mini-budget”. The challenging divergence in inflation between the UK and other developed markets has seen sterling recover some strength, notably against the dollar as markets infer higher rates for longer. Although the UK stock market retains a majority of internationally weighted revenues, the domestic facing companies have continued to be impacted by this backdrop, notably financials, housebuilders and property companies. The valuation of the UK market continues to be extremely low in absolute terms but particularly versus other developed market indices with many companies, notably the domestic earners trading at COVID or Brexit lows in share price or valuation terms. Although we anticipate further volatility ahead as earnings estimates moderate, we know that in the course of time, risk appetites will return and opportunities are emerging.

In China, the re-opening of the economy post the lockdowns has been slower than expected. There are early signs that the Chinese government is looking to stimulate the economy further which may become more apparent as we enter 2024. We continue to focus the portfolio on cash generative businesses with durable, competitive advantages boasting strong leadership as we believe these companies are best-placed to drive returns over the long-term. We anticipate economic and market volatility will persist throughout the year and we are excited by the opportunities this will likely create by identifying those companies using this cycle to strengthen their long-term prospects as well as attractive turnarounds situations.

¹ Source: Financial Times, 18 October 2023
https://www.ft.com/content/5818da50-e1d4-4dfd-8bf8-2ba3c79e46f0
² Source: Financial Times, 27 October 2023
https://www.ft.com/content/57388c11-884e-46c5-b0d8-606b39c64888
³ Source: Office of National Statistics 24 October 2023
https://www.ft.com/content/7d6015f9-3282-42a6-a3a9-192ec68458a0

Unless otherwise stated all data is sourced from BlackRock as at 31 October 2023.

Any opinions or forecasts represent an assessment of the market environment at a specific time and is not intended to be a forecast of future events or a guarantee of future results.

This information should not be relied upon by the reader as research, investment advice or a recommendation.

Risk: Reference to the names of each company in this communication is merely for explaining the investment strategy, and should not be construed as investment advice or investment recommendation of those companies.

Portfolio manager biographies

Capital at risk. The value of investments and the income from them can fall as well as rise and are not guaranteed. Investors may not get back the amount originally invested.

Adam Avigdori, Director, is co-manager of the BlackRock Income and Growth Investment Trust plc, and is a member of the UK Equity Team. Adam joined BlackRock in 2001 and is responsible for managing UK equity portfolios covering the real estate and construction sectors. Adam has a degree in management sciences.

David Goldman, CFA, Director, is co-manager of the BlackRock Income and Growth Investment Trust plc, and is a member of the UK Equity Team. David joined BlackRock in 2004 and is responsible for managing UK equity portfolios covering the support services sectors. David has a degree with first class honours in economics.

Board of directors

Graeme Proudfoot (Chairman) (appointed 1 November 2019) spent his executive career at Invesco, latterly as Managing Director, EMEA and CEO of Invesco Pensions. Mr Proudfoot joined Invesco in 1992 as a legal advisor and held various roles within the Invesco Group, before moving to take responsibility for a number of businesses in the UK, including Invesco’s investment trust business which he led from 1999 until his retirement from Invesco in 2019. Mr Proudfoot began his career at Wilde Sapte, Solicitors, practising as a corporate finance lawyer in London and New York.

Nicholas Gold (appointed 17 December 2008) is an experienced investment banker with over 36 years’ advisory experience across a wide range of industries and jurisdictions. He retired as the Managing Director responsible for closed-end fund corporate finance at ING Bank N.V. in 2008. Mr Gold is a chartered accountant and a solicitor. He was formerly a member of the Royal Academy of Dramatic Art Council and chairman of its commercial arm, RADA Enterprises. He is a Special Adviser to Pottinger Co Pty Limited.

Charles Worsley (appointed 19 April 2010) has over 25 years’ experience in property management and has been a shareholder of the Company since its launch. Mr Worsley has formerly been a director of retail and media companies.

Win Robbins (appointed 15 December 2020) has extensive investment management experience having held various senior positions including eight years as Managing Director of Credit Suisse Asset Management Limited from 1996 until 2004 and Managing Director and Head of Non-US Fixed Income at Citigroup Asset Management from 2004 to 2006. Win holds the Diploma in Investment Management from the London Business School.