BlackRock Income and Growth Investment Trust portfolio trading & earnings remain strong

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BlackRock Income and Growth Investment Trust plc (LON:BRIG) has announced its Annual Report and Financial Statements 31 October 2023.

Performance record

	As at 31 October 2023	As at 31 October 2022
Net assets (£’000)1	40,156	40,572
Net asset value per ordinary share (pence)	194.90	191.63
Ordinary share price (mid-market) (pence)	178.00	171.00
Discount to net asset value2	8.7%	10.8%
FTSE All-Share Index	8413.70	7945.76
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	For the year ended 31 October 2023	For the year ended 31 October 2022
Performance (with dividends reinvested)
Net asset value per share2	5.2%	-2.3%
Ordinary share price2	8.1%	-7.0%
FTSE All-Share Index	5.9%	-2.8%
	========	========

	For the year ended 31 October 2023	For the year ended 31 October 2022	Change %
Revenue
Net profit on ordinary activities after taxation (£’000)	1,367	1,438	-4.9
Revenue earnings per ordinary share (pence)3	6.54	6.77	-3.4
	————–	————–	————–
Dividends (pence)
Interim	2.60	2.60	–
Final	4.80	4.70	+2.1
	————–	————–	————–
Total dividends payable/paid	7.40	7.30	+1.4
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1 The change in net assets reflects portfolio movements, the purchase of the Company’s own shares and dividends paid during the year.

2 Alternative Performance Measures, see Glossary contained within the Annual Report and Financial Statements for the year ended 31 October 2023

3 Further details are given in the Glossary contained within the Annual Report and Financial Statements for the year ended 31 October 2023

Chairman’s statement

Market overview
In my statement in the Half-Yearly Financial Report, I noted that the picture had been dominated by powerful geopolitical and macroeconomic drivers, with markets focused on the path of inflation and interest rates. This pattern continued through the rest of our financial year to 31 October 2023. Developed market central banks continued to implement tight monetary policy in a bid to bring inflation under control. However, this action was not without consequences and the first signs of stress in the financial system were seen in March 2023, with several regional bank failures in the US and a subsequent Swiss government brokered take-over of Credit Suisse by UBS. The Bank of England (BOE) acted swiftly to ensure there was no contagion to the UK financial system, albeit credit conditions have tightened steadily throughout the year.

The rate of UK inflation, as measured by the Consumer Price Index (CPI), peaked at 11.1% in October 2022, since when it has steadily reduced during this financial year. By 31 October 2023, UK inflation had fallen to 4.60%, bringing some much-needed relief to UK consumers and corporates alike. Inflation had previously been driven by high energy and food prices and although they fell during the year, they remain far higher than in recent years. Robust demand and wage growth have been key factors in the path of inflation this year, and ongoing structural issues also in the UK labour market acted to keep wage settlements high. The BOE continued to implement its policy of monetary tightening throughout most of the year, although in September 2023 the Monetary Policy Committee voted to hold the base rate steady at 5.25%, still the highest level since February 2008. This ended a run of fourteen consecutive rate increases since December 2021, which news was well received by the UK equity market. In December, the US Federal Open Markets Committee voted to hold the base rate of interest steady at 5.25%. It also signalled that interest rate cuts were likely in 2024 which saw markets rise in response. However, the BOE was more hawkish, noting that UK wage demands remained elevated and that the MPC would continue to consider the economic data before a rate cut could be contemplated.

While the market continues to express a somewhat pessimistic view of the outlook for company valuations, our portfolio managers note that trading and, importantly, earnings remain strong for many of the companies within our portfolio. Despite the negative sentiment around the outlook, the UK economy has displayed notable resilience, with household balance sheets and corporate earnings in better shape than many anticipated. In fact, the UK managed to avoid a much feared recession in 2023 and although the economic data indicates our economy shrank in October 2023, it is forecast to return to modest growth in 2024. As a result, the likelihood of a ‘soft landing’ – a slowdown in economic growth that avoids a recession – may well have increased, although this remains to be seen. In any case, the current cycle of monetary policy tightening appears to have peaked, and markets are now focused on if and when interest rates will be cut; an event that may be the catalyst for a broader change in market sentiment towards UK equities.

Another feature of the challenging economic environment this year has been the compounding effect on corporate profit margins of higher input costs and rising wage demands. Our portfolio managers note that this rise in operating costs has, in many cases, been passed on to the consumer. However, as you will read in the Investment Manager’s report which follows, they believe companies may soon find this passthrough more difficult to achieve. Therefore, pricing power will be a key differentiator in 2024.

Notwithstanding the headwinds described, like all good active managers, our portfolio managers view equity market volatility as an opportunity and have been buying into high-quality domestic and mid-cap names at very attractive valuations following share price weakness. They believe there is a marked disconnect between the valuations ascribed to many UK companies and the underlying fundamentals of sales, revenue and future growth prospects. They have also been selectively adding to existing holdings which they believe are well placed to prosper as the economic landscape in the UK evolves.

Performance
During the year the Company’s Net Asset Value (NAV) per share returned +5.2%. By comparison, the Company’s Benchmark Index, the FTSE All-Share Index, returned +5.9%. At the share price level, the Company returned +8.1% over the period as our discount narrowed from 10.8% at the start of the year to 8.7% as at 31 October 2023 (all percentages in Pound Sterling terms with dividends reinvested).

While the performance of the portfolio was ahead of our Benchmark Index for much of 2023, it was disappointing to note that the market downturn in October 2023 reversed much of the relative outperformance, resulting in a marginal underperformance over the financial year to 31 October 2023. However, despite the challenging backdrop this year the Company was able to deliver a positive return in absolute terms. As at 18 December 2023, since the year end the Company’s NAV and share price have increased by 9.1% and 3.1%, respectively (all percentages are in Pound Sterling with dividends reinvested)

Further details of the key contributors and detractors from performance, and the portfolio managers’ views on the outlook for the forthcoming year, can be found in their report which follows below.

Revenue earnings and dividends
I am pleased to report that despite market volatility the Company’s earnings remained relatively stable, with revenue earnings per share for the year ended 31 October 2023 of 6.54 pence compared with 6.77 pence for the previous year. The Directors are mindful of shareholders’ desire for income in addition to capital growth and believe the Company’s dividend is greatly valued by shareholders. The Board is therefore proposing a final dividend per share of 4.80 pence (2022: 4.70 pence) giving total dividends for the year of 7.40 pence per share.

Subject to approval at the Annual General Meeting, the final dividend will be paid on 15 March 2024 to shareholders on the Company’s register at the close of business on 9 February 2024 (ex-dividend date is 8 February 2024). This final dividend, combined with an interim dividend of 2.60 pence per share (2022: 2.60 pence) paid to shareholders on 1 September 2023, gives a total dividend for the year of 7.40 pence, resulting in a yield of 4.2% based on a share price of 178.00 pence as at 31 October 2023.

One of the benefits of the Company’s investment trust structure is that it can retain up to 15% of total revenue each year to build up reserves which may be carried forward and used to pay dividends during leaner times. As at 31 October 2023 the Company held £2,131,000 or 10.34 pence per share in revenue reserves before the payment of final dividend of 4.80 pence for the year ended 31 October 2023.

Policy on share price discount
The Directors recognise the importance to investors that the Company’s share price should not trade at a significant discount to NAV, and therefore, in normal market conditions, may use the Company’s share buy back, sale of shares from treasury and share issuance powers to seek to ensure that the share price does not differ excessively from the underlying NAV.

The Board’s existing authority to buy back up to 14.99% of the Company’s issued share capital (excluding treasury shares) will expire at the conclusion of the 2023 Annual General Meeting and a resolution will be put to shareholders to renew the authority at that meeting. Currently, ordinary shares representing up to 33% of the Company’s issued ordinary share capital can be allotted as new ordinary shares or sold from treasury and the Board will also seek to renew this power.

During the year, a total of 568,428 ordinary shares were purchased at an average price of 182.26 pence per share, for a total consideration (including costs) of £1,036,000 and at an average discount of 11.7%. All ordinary shares bought back were cancelled. No shares were placed in treasury. The average discount for the year to 31 October 2023 was 9.6% and the discount at the year end was 8.7%. To put this in context, the average discount for the investment company sector as a whole has widened substantially this year and exceeded 16.0% as at 31 October 2023, a level not seen since the global financial crisis of 2008. As at 18 December 2023, the average UK Equity Income sector discount had narrowed to 4.1%.

Gearing
One of the advantages of the investment trust structure is that the Company can use gearing with the objective of increasing portfolio returns. The Company operates a flexible gearing policy which depends on prevailing market conditions and is subject to a maximum level of 20% of net assets at the time of investment. Net gearing during the financial year did not exceed such level. As at 31 October 2023, net gearing stood at 7.7%.

At the year end, the Company had a borrowing facility in place of up to £8 million, provided by The Bank of New York Mellon, London Branch. As at the date of this report it is drawn down by £4 million. Subsequent to the year end, the facility was renewed for a further period of 1 year to 20 December 2024.

Board composition
At the date of this report the Board consists of four independent Non-executive Directors, with two of the current Directors having been appointed since 2019. In accordance with best practice and good corporate governance, the Directors continue to submit themselves for annual re-election. Win Robbins advised the Board that she has decided that she will step down from the Board at the conclusion of the next Annual General Meeting. I would like to take this opportunity to thank Win for the benefit of her expertise and experience and her contribution to the Board during her tenure. We wish her well for the future.

The Board has a succession plan in place and will continue to regularly appraise its composition to ensure that a suitable balance of skills, knowledge, experience, independence and diversity is achieved to enable the Board to discharge its duties effectively. As part of these plans, the Board has initiated a search and selection process earlier in the year to identify a suitable candidate to replace Win. Through this process we have identified several high-calibre individuals who possess the necessary skills, experience and expertise to act as a Director of the Company. The Board will announce details of the chosen candidate in due course.

Further information on the Board’s policy on board diversity, director tenure and succession planning can be found in the Directors’ Report contained within the Annual Report and Financial Statements for the year ended 31 October 2023

Corporate governance
The UK Code of Corporate Governance (the UK Code) requires enhanced disclosure setting out how we, as Directors, have fulfilled our duties in taking into account the wider interests of stakeholders in promoting the success of the Company. The Board takes its governance responsibilities very seriously and follows the provisions of the UK Code as closely as possible.

As an investment company, the Company reports against the Association of Investment Companies Code of Corporate Governance (the 2019 AIC Code) which has been endorsed by the Financial Reporting Council as being appropriate for investment companies and fulfils the requirements of the UK Corporate Governance Code, as they are applicable to investment companies.

As it does each year, and as required by the Corporate Governance Code, the Company undertook a comprehensive Board evaluation this year. The overall conclusion was positive in terms of the effectiveness of the Board, and the skills, expertise and commitment of the Directors.

Environmental, Social and Governance (ESG) consideration
Material ESG issues can present both opportunities and risks to long-term investment performance. While the Company does not have a sustainable investment objective or exclude investments based only on ESG criteria, these ethical and sustainability issues are considerations for the Company, and your Board is committed to a diligent oversight of the activities of our Investment Manager in these areas.

We believe that the companies in which the portfolio is invested should operate within a healthy ecosystem of all their stakeholders whether these are shareholders, employees, customers, regulators or suppliers and that this can aid the sustainability of long-term returns. We have also provided information on our Manager’s approach to investment stewardship and voting. Further information can be found in the Annual Report and Financial Statements for the year ended 31 October 2023.

Continuation vote
The Company has an arrangement in place whereby at the Annual General Meeting (AGM) held in 2018 and at every fifth AGM of the Company convened thereafter, shareholders shall be asked to approve the continuation of the Company as an investment trust. An ordinary resolution was put to shareholders at the last AGM in March 2023. The resolution was passed with 99.8% of the votes cast in favour. We thank shareholders for their loyalty and support.

Annual general Meeting
This year’s AGM will be held on Thursday, 7 March 2024 at 12.00 noon at the offices of BlackRock at 12 Throgmorton Avenue, London, EC2N 2DL. Details of the business of the meeting are set out in the Notice of Annual General Meeting contained within the Annual Report and Financial Statements for the year ended 31 October 2023

We hope you can attend this year’s AGM. The Board very much looks forward to meeting shareholders and answering any questions you may have on the day.

Communication with shareholders
We appreciate how important access to regular information is to our shareholders. To supplement our Company website, we offer shareholders the ability to sign up to the Trust Matters newsletter which includes information on the Company and other news, views and insights. Further information on how to sign up is included within.

Outlook
As you will read in the Investment Manager’s Report which follows, in a world currently dominated by macroeconomic and geopolitical factors, our portfolio managers remain cautiously positioned. They are focused on bottom-up stock selection, assembling a portfolio of high-quality companies, with robust balance sheets, differentiated franchises, and, importantly, pricing power. They also believe their long held focus on well capitalised and cash generative companies will serve the Company well against a backdrop of higher interest rates and a deterioration in the availability and increase in the cost of credit. In addition, they believe that the UK market offers a wealth of opportunity, with valuations at historical lows versus their own history and that of other developed markets.

Your Board remains fully supportive of our Investment Manager’s investment philosophy and approach and have every confidence that they will continue to deliver on the Company’s investment objective as we move into 2024 and beyond.

GRAEME PROUDFOOT
Chairman
20 December 2023

For more information on the BlackRock Income and Growth Investment Trust, please visit: www.blackrock.com/uk/brig

Investment Manager’s report

Performance
For the year ended 31 October 2023, the Company’s NAV returned 5.2%, underperforming its benchmark, the FTSE All-Share Index (the Benchmark Index), which returned 5.9% over the same period (all percentages are in Pound Sterling terms with dividends reinvested).

You might also enjoy reading BlackRock Income and Growth Investment Trust NAV returns +2.2% during November

Investment approach
In assembling the Company’s portfolio, we adopt a concentrated investment approach to ensure that our best ideas contribute significantly to returns. We believe that it is the role of the portfolio overall to generate an attractive and growing yield alongside capital growth rather than every individual company within the portfolio. This gives the Company increased flexibility to invest where returns are most attractive. This approach results in a portfolio which differs substantially from the Benchmark Index and in any individual year the returns will vary, sometimes significantly from those of the Benchmark Index. Our objective is to achieve returns greater than the Benchmark Index over time. The foundation of the portfolio, approximately 70%, is in ’income generators’ that we believe will sustain strong cash generation and pay an attractive and growing dividend yield whilst aiming to deliver a double-digit total return. Additionally, we look to identify and invest 20% of the portfolio in ‘growth’ companies that have significant barriers to entry and scalable business models that enable them to grow consistently. We also look for turnaround companies, accounting for up to 10% of portfolio, which represent those companies that are out of favour in the market, facing temporary challenges yet offering significant recovery potential.

Market review
Whilst global equity markets made progress during the 12 months to 31 October 2023, the UK market meaningfully lagged global markets during the period. This partially reversed the relative outperformance that the UK enjoyed during 2022 as global equity valuations compressed. The Benchmark Index rose by 5.9% during the year with Consumer Services, Utilities, and Technology being the top performing sectors while Telecommunications and Consumer Goods sectors underperformed. Interest rate policy and inflation stayed on top of the agenda as central banks deliberated on how to respond to a mixed picture from the UK inflation data. As the year progressed, goods inflation eased, however, services sector inflation remained sticky, driven by tight labour markets. The challenge remained pronounced in the UK where inflation reached a 40-year high and the Bank of England delivered fourteen consecutive rate hikes, the most significant monetary tightening carried out since the late 1980s, before holding interest rates flat at 5.25% at the end of the period.

The majority of 2023 was characterised by relatively narrow markets with notable outperformance of large capitalisation companies versus mid and small capitalisation companies. This has been most notable in the United States of America (US) market where the emergence of Artificial Intelligence (AI) has contributed to the remarkable outperformance of seven mega-capitalisation companies. In the UK, this size dynamic was particularly evident as domestically focussed, mid and small capitalisation companies struggled during much of the period as earnings headwinds persisted due to higher inflation in costs but weaker revenues. As we have highlighted before, the UK market continues to trade at notable valuation discount to other developed markets.

The first quarter of 2023 also saw the signs of financial stress as a result of the tightening monetary cycle with a number of bank failures. These were the first ‘bank-runs’ of the digital age and were indeed personified by a breathtakingly fast run on deposits. This led to the collapse of Silicon Valley Bank and First Republic Bank in the US and the eventual rescue of Credit Suisse by UBS. These events have been well contained with little contagion to the broader financial system albeit credit conditions have tightened steadily over the year. Elsewhere, expectations for a strong rebound in China as its economy emerged from COVID-19 related restrictions failed to materialise. Weak consumer spending and a property sector downturn have weighed on the economic backdrop in China. Geopolitics remains topical with the ongoing war in Ukraine, the upcoming elections in Taiwan, US and UK and more recently the conflict between Israel and Hamas.

Contributors to and detractors from performance
While the performance of the portfolio was ahead of the Benchmark Index for much of 2023, the market downturn in October 2023 reversed many of the gains. The portfolio subsequently slightly underperformed its Benchmark Index. We are however, pleased with the positive absolute return of the Company driven by the strong performance from holdings such as 3i Group, Standard Chartered and RELX. As the top positive contributor during the period, 3i Group has continued to report strongresults with meaningful net asset value (NAV) growth. 3i Group’s largest portfolio company, the European discount retailer Action, was again the highlight, with impressive growth and cash generation. The shares rose 72% in absolute terms.

Standard Chartered also delivered strong results, beating market expectations as the bank benefited from higher non-interest income and a higher than expected net interest margin (NIM). Credit quality remains strong and provisions for losses were lower than predicted.

The share price of RELX rose strongly during the period reflecting the steady acceleration of its revenue growth across major divisions and for the group as a whole. The company continues to invest in its products and services, with the launch of new AI powered tools being a highlight this year. RELX has been a consistent holding in the Company over the last decade.

Rio Tinto experienced share price volatility given lacklustre economic data out of China earlier in the year and concerns around the health of the property sector. However, the company ended theyear higher after posting a steady trading update at the end of the year with production across its mining operations in-line with expectations. Shares in Centrica more than doubled during the year on the back of significant cash generation that led to substantial capital returns. The company was another top positive contributor to performance.

During the year, we saw meaningful impact on the share prices of companies that did not deliver on earnings expectations; Rentokil Initial is an example of this. The company reported a weak trading statement at the end of the year withdisappointing organic growth from their US pest control division. This also impacted the margin outlook for the division. The company is making good progress with the integration of its recently acquired Terminix business and the rest of the group is performing strongly. However, the US pest control division is key to the group’s long-term success.

Watches of Switzerland experienced share price weakness after the announcement of the stepping down of its Chief FinancialOfficer, softer trading in the jewellery business and the announcement by Rolex, one of the world’s largest watch making companies and a key supplier to Watches of Switzerland, of its acquisition of Bucherer, a notable watch retailer. As a result our position was reduced. EuroAPI cut profit expectations due to an issue with documentation at their Budapest site and delivered a weak trading statement later in the year and we have sold the holding. Finally, NatWest detracted from the portfolio after delivering weak results as deposit pricing weighed on the bank’s Net Interest Margin and following the resignation of its CEO, Alison Rose.

Transactions
At the beginning of the year, we identified opportunities in the dislocation in 2022, notably, in the consumer space. In November 2022, we added mid-cap names to the portfolio including Games Workshop and Howden Joinery following significant share price underperformance. We believe that these are advantaged franchises capable of resilient and growing cash generation with robust balance sheets.

During the year, opportunities arose through share price weakness, notably in UK domestic and mid-cap names. We added new positions in Admiral Group, Segro, Spirax-Sarco Engineering and Intermediate Capital Group. Segro, an industrial real estate investment trust, has a high-quality portfolio which we believe has significant rental growth potential and the ability to add value through development. Spirax-Sarco Engineering is a high-quality engineering business with strong structural drivers around energy efficiency where the malaise in the bio-processing and semi-conductor industries has impacted the group’s near-term prospects and valuation. Intermediate Capital Group was owned by the Company in the past, initially bought in the dislocation in March 2020. Having subsequently sold the position in 2021 following the near doubling of the share price, recent weakness had seen its valuation return to attractive levels.

We sold Equifax, Kone and Whitbread following strong performance. Whilst Kone and Equifax were purchased in the second half of 2022, we were pleasantly surprised by their strong performance in a short space of time. Both share prices reached levels where we felt their prospects were well understood and we consequently saw better value elsewhere.

We also sold the holding in BT Group. Whilst we saw progress in the attractive nature of the long-term fibre roll-out, inflationary challenges and higher capital expenditure are undermining the group’s ability to generate cash. With the elevated risk, the returns may come under pressure given the cost of living backdrop.

Gearing
Historically, we have managed the Company with a modest and consistent level of gearing, typically between 5-8% to enhance income generation and capital growth. However, as market volatility picked up, we have been more active over the last two years, varying both the level of gearing and using a broader range (0 – 10%) depending on the opportunities or risks presenting themselves at the time. At 31 October 2023, the Company had employed net gearing of 7.7%.

Outlook
During the course of 2023, central banks continued to unwind ten years of excess liquidity by tightening monetary policy desperate to prevent the entrenchment of higher inflation expectation. Inflation has persisted, driven by resilient demand, supply chain constraints and rising wages. Developed market central banks have responded with aggressive interest rate increases with 11 rate hikes in the US and 14 in the UK so far. Despite these steep rate rises, the impact of high interest rates and the associated transmission of lower liquidity into the global economy has been slow. March 2023 saw the first signs of financial stress with the bankruptcy of Silicon Valley Bank and Signature Bank in the US contributing to a steady deterioration in the availability and cost of credit. This has had a notable impact in specific industries, e.g. biotech, yet, so far, the broad economic impact has been limited. As monetary tightening appears to be slowing, the key question facing markets is whether we will see a soft or a hard landing as the effects of the interest rate fluctuations feed into the economy.

Whilst difficult to predict, and the sectors may vary, we would expect some broader demand weakness into 2024 as the impact of interest rate rises are felt by the economy. The third quarter of 2023 reporting season saw a broadening of demand weakness as consumers began to tighten their spending habits post summer and as excess savings built up during COVID-19 were depleted. Meanwhile industrial companies continued to build backlogs at a slower pace than revenues as supply chains normalised leading companies to destock as their need for excess inventory receded. To guard against lower credit availability and the potential for higher rates for longer, our approach continues to focus on companies with robust balance sheets capable of funding their own growth. We also continue to believe that identifying companies with real pricing power will be a differentiator. As demand weakens and the transitory inflationary pressures continue to fade (e.g. commodity prices, supply chain disruption) then pricing conversations will become more challenging even though wage pressure may prove more persistent. While this does not bode well for margins in aggregate, we believe that 2024 will see greater differentiation as pricing power of companies will become critical.

The UK’s policy during the early part of 2023 diverged from the Group of Seven industrialised countries (G7) in fiscal policy terms as the UK government attempted to create stability after the severe reaction from the “mini-budget” in October 2022. Thereafter, the UK rate policy mirrored others although towards the end of the period the fall in the oil price and the annualisation of previous year’s rate rises combined meaningfully to lower inflation to below 5% bringing the UK back in line with the G7. As we have commented several times before, the UK stock market continues to remain depressed in valuation terms relative to other developed markets offering double-digit discounts across a range of valuation metrics. This valuation ‘anomaly’ saw further reactions from UK corporates with the buyback yield of the UK, at the end of the period, standing at a respectable c.2.5%. Combining this with a dividend yield of c.4%, the cash return of the UK market is attractive in absolute terms and comfortably higher than other developed markets. Although we anticipate further volatility ahead as earnings estimates moderate, we know that in the course of time, risk appetite will return, and opportunities will emerge. As we have stated above, we have identified a number of opportunities with new positions initiated throughout the year in both UK domestic and mid-cap companies.

In summary, we expect geopolitics to continue to be a source of volatility with potentially significant elections in Taiwan, the US and the UK as well as the impact of resolution or escalation of geopolitical conflicts globally.

We continue to focus the portfolio on cash generative businesses with durable, competitive advantages as we believe these companies are best placed to drive returns over the long term. Whilst we anticipate economic and market volatility will persist throughout the year, we are excited by the opportunities this will likely create, by identifying the companies that strengthen their long term prospects as well as attractive turnaround situations.

ADAM AVIGDORI AND DAVID GOLDMAN
BLACKROCK INVESTMENT MANAGEMENT (UK) LIMITED
20 December 2023

Ten largest investments

Together, the ten largest investments represent 48.0% of the Company’s portfolio as at 31 October 2023 (2022: 48.4%).

1 ▲ Shell (2022: 2nd)
Sector: Oil & Gas Producers
Market value: £3,849,000
Share of investments: 8.9% (2022: 8.4%)

Shell is a global oil and gas company. The company operates in both upstream and downstream industries. The upstream division is engaged in searching for and recovering crude oil and natural gas, the liquefaction and transportation of gas. The downstream division is engaged in manufacturing, distribution and marketing activities for oil products and chemicals.

2 ▼ AstraZeneca (2022: 1st)
Sector: Pharmaceuticals & Biotechnology
Market value: £3,118,000
Share of investments: 7.2% (2022: 8.4%)

AstraZeneca is an Anglo-Swedish multinational pharmaceutical group with its headquarters in the UK. It is a science-led biopharmaceutical business with a portfolio of products for major disease areas including cancer, cardiovascular infection, neuroscience and respiration.

3 ▲ Rio Tinto (2022: 6th)
Sector: Mining
Market value: £2,569,000
Share of investments: 5.9% (2022: 4.0%)

Rio Tinto is a metals and mining group operating in approximately 36 countries around the world, producing iron ore, copper, diamonds, gold and uranium.

4 ▼ RELX (2022: 3rd)
Sector: Media
Market value: £2,403,000
Share of investments: 5.5% (2022: 5.8%)

RELX is a global provider of professional information solutions including the publication of scientific, medical, technical and legal journals. It also has the world’s leading exhibitions, conference and events business.

5 ▼ Reckitt (2022: 4th)
Sector: Household Goods & Home Construction
Market value: £2,036,000
Share of investments: 4.7% (2022: 4.7%)

Reckitt is a global leader in consumer health, hygiene and household products. Its products are sold in 200 countries and its 19 most profitable brands are responsible for 70% of net revenues.

6 ▲ 3i Group (2022: 8th)
Sector: Financial Services
Market value: £1,834,000
Share of investments: 4.2% (2022: 3.2%)

3i Group is a leading international investor focused on mid-market private equity and infrastructure. The group invests in mid-market buyouts, growth capital and infrastructure. Sectors invested in are business and financial services, consumer, industrials, energy and health care.

7 ► Unilever (2022: 7th)
Sector: Personal Goods
Market value: £1,499,000
Share of investments: 3.5% (2022: 3.3%)

Unilever is a consumer staples business operating in food, home and personal care and has strong positions in emerging markets, where long-term growth trends in various countries that currently generate the majority of revenues.

8 ▲ BHP (2022: 23rd)
Sector: Mining
Market value: £1,284,000
Share of investments: 3.0% (2022: 1.7%)

The world’s largest diversified mining group by market capitalisation. The group is an important global player in a number of commodities including iron ore, copper, thermal and metallurgical coal, manganese, nickel, silver and diamonds.

9 ▲ Phoenix Group (2022: 13th)
Sector: Life Insurance
Market value: £1,108,000
Share of investments: 2.6% (2022: 2.8%)

Phoenix Group is one of the largest providers of insurance services in the United Kingdom. The company offers a broad range of pensions and savings products to support people across all stages of the savings life cycle.

10 ▲ Mastercard (2022: 15th)
Sector: Support Services
Market value: £1,085,000
Share of investments: 2.5% (2022: 2.4%)

Mastercard is the second-largest payment-processing corporation worldwide and its principal business is to process payments between the banks of merchants and the card-issuing banks or credit unions of the purchasers who use the Mastercard-brand debit, credit and prepaid cards to make purchases.

All percentages reflect the value of the holding as a percentage of total investments.
Percentages in brackets represent the value of the holding as at 31 October 2022.

Distribution of investments as at 31 October 2023

Analysis of portfolio by sector

		% of investments by market value	Benchmark Index
1	Oil & Gas Producers	11.3	12.4
2	Pharmaceuticals & Biotechnology	9.2	11.0
3	Mining	8.9	0.3
4	Financial Services	8.8	4.4
5	Support Services	8.5	3.1
6	Household Goods & Home Construction	7.7	1.0
7	Media	7.1	3.9
8	Banks	6.6	9.0
9	General Retailers	4.5	3.3
10	Personal Goods	4.3	0.4
11	Non-Life Insurance	3.0	0.8
12	Real Estate Investment Trusts	2.9	2.3
13	Life Insurance	2.6	2.4
14	Food Producers	2.5	0.6
15	Electronic & Electrical Equipment	2.5	0.9
16	Health Care Equipment & Service	2.2	0.5
17	Tobacco	1.9	3.2
18	Travel & Leisure	1.8	3.1
19	Gas, Water & Multiutilities	1.7	3.7
20	Leisure Goods	1.1	0.2
21	Industrial Engineering	0.9	0.6

Sources: BlackRock and Datastream.

Investment size

	Number of investments	% of investments by market value
< £1m	34	47.1
£1m to £2m	7	20.7
£2m to £3m	3	16.1
£3m to £4m	2	16.1

Source: BlackRock.

List of investments as at 31 October 2023

	Market value £’000	% of investments
Oil & Gas Producers
Shell	3,849	8.9
BP Group	722	1.7
Woodside Energy Group	293	0.7
	—————	—————
	4,864	11.3
	=========	=========
Pharmaceuticals & Biotechnology
AstraZeneca	3,118	7.2
Roche Holding1	847	2.0
	—————	—————
	3,965	9.2
	=========	=========
Mining
Rio Tinto	2,569	5.9
BHP	1,284	3.0
	—————	—————
	3,853	8.9
	=========	=========
Financial Services
3i Group	1,834	4.2
London Stock Exchange Group	704	1.6
Intermediate Capital Group	510	1.2
Ashmore Group	498	1.2
Premier Asset Management Group	275	0.6
	—————	—————
	3,821	8.8
	=========	=========
Support Services
Mastercard1	1,085	2.5
Hays	972	2.2
Rentokil Initial	864	2.0
Ashtead Group	797	1.8
	—————	—————
	3,718	8.5
	=========	=========
Household Goods & Home Construction
Reckitt	2,036	4.7
Berkeley Group	758	1.8
Taylor Wimpey	543	1.2
	—————	—————
	3,337	7.7
	=========	=========
Media
RELX	2,403	5.5
Pearson	702	1.6
	—————	—————
	3,105	7.1
	=========	=========
Banks
Standard Chartered	1,048	2.4
HSBC Holdings	946	2.2
Lloyds Banking Group	498	1.2
NatWest	351	0.8
	—————	—————
	2,843	6.6
	=========	=========
General Retailers
Next	936	2.2
WH Smith	506	1.2
Howden Joinery	499	1.1
	—————	—————
	1,941	4.5
	=========	=========
Personal Goods
Unilever	1,499	3.5
Watches of Switzerland	337	0.8
	—————	—————
	1,836	4.3
	=========	=========
Non-Life Insurance
Admiral Group	738	1.7
Hiscox	583	1.3
	—————	—————
	1,321	3.0
	=========	=========
Real Estate Investment Trusts
Segro	766	1.8
Big Yellow Group	471	1.1
	—————	—————
	1,237	2.9
	=========	=========
Life Insurance
Phoenix Group	1,108	2.6
	—————	—————
	1,108	2.6
	=========	=========
Food Producers
Tate & Lyle	1,082	2.5
	—————	—————
	1,082	2.5
	=========	=========
Electronic & Electrical Equipment
Schneider Electric1	555	1.3
Oxford Instruments	502	1.2
	—————	—————
	1,057	2.5
	=========	=========
Health Care Equipment & Services
Smith & Nephew	959	2.2
	—————	—————
	959	2.2
	=========	=========
Tobacco
British American Tobacco	812	1.9
	—————	—————
	812	1.9
	=========	=========
Travel & Leisure
Compass Group	458	1.0
Fuller Smith & Turner – A Shares	339	0.8
Patisserie Holdings2	–	–
	—————	—————
	797	1.8
	=========	=========
Gas, Water & Multiutilities
Centrica	724	1.7
	—————	—————
	724	1.7
	=========	=========
Leisure Goods
Games Workshop	494	1.1
	—————	—————
	494	1.1
	=========	=========
Industrial Engineering
Spirax-Sarco Engineering	393	0.9
	—————	—————
	393	0.9
	=========	=========
Total investments	43,267	100.0
	=========	=========