Half-year Report
BLACKROCK SUSTAINABLE AMERICAN INCOME TRUST PLC
LEI: 549300WWOCXSC241W468 - Article 5 Transparency Directive, DTR 4.2
Half Yearly Financial Report 30 April 2022
Performance record
|
|
As at 30 April 2022 |
As at 31 October 2021 |
| Net assets (£000)1 | 172,021 | 165,334 |
| Net asset value per ordinary share (pence) | 214.41 | 206.08 |
| Ordinary share price (mid-market) (pence) | 210.00 | 198.25 |
| Discount to cum income net asset value2 | 2.1% | 3.8% |
| Russell 1000 Value Index | 1728.34 | 1647.89 |
| --------------- | --------------- | |
| Performance (with dividends reinvested) | ||
| Net asset value per share2 | 6.0% | 36.0% |
| Ordinary share price2 | 8.0% | 42.4% |
| Russell 1000 Value Index | 4.9% | 35.6% |
| ========= | ========= |
|
|
For the six months ended 30 April 2022 |
For the six months ended 30 April 2021 |
Change % |
| Revenue | |||
| Net profit on ordinary activities after taxation (£000) | 1,463 | 2,042 | -28.4 |
| Revenue earnings per ordinary share (pence)3 | 1.82 | 2.56 | -28.9 |
| --------------- | --------------- | --------------- | |
| Dividends per ordinary share (pence) | |||
| 1st interim | 2.00 | 2.00 | – |
| 2nd interim | 2.00 | 2.00 | – |
| --------------- | --------------- | --------------- | |
| Total dividends paid/payable | 4.00 | 4.00 | – |
| ========= | ========= | ========= |
1 The change in net assets reflects market movements and dividends paid during the period.
2 Alternative Performance Measures, see Glossary in the half yearly report and financial statements.
3 Further details are given in the Glossary in the half yearly report and financial statements.
Chairman’s Statement
A new investment approach and performance
These are the first set of half yearly results that fully reflect the Company’s new sustainable approach, first adopted on 29 July 2021. While we are only just under a year in, we are encouraged by the performance of the Company since the change. We have been able to adhere the fundamental tenets of the Company - to provide an attractive level of income together with capital appreciation over the long term - but in a manner consistent with the principles of sustainable investing.
The Company has also benefited from a shift in the market, away from growth stocks and in favour of value stocks. These combined have helped deliver strong relative performance over the six months to 30 April 2022. Amid some turbulent market conditions, the Company’s net asset value per share (NAV) returned 6.0% compared with a return of 4.9% in the Russell 1000 Value Index. The Company’s share price returned 8.0% over the same period (all figures are in British Pound Sterling terms with dividends reinvested). Further information on investment performance is given in the Investment Manager’s Report.
Since the period end and up to close of business on 27 June 2022, the Company’s NAV has decreased by 3.1% and the share price has fallen by 6.9% (both percentages in British Pound Sterling with dividends reinvested).
Market overview
Overall, 2021 was a positive year for the U.S. stock market with a solid recovery from the broader economy. Steady upward earnings revisions from the corporate sector supported market gains, while the Federal Reserve kept interest rates near zero and continued its asset purchase plan, thereby adding liquidity into markets.
However, the skies darkened at the start of 2022. Although the year started with great promise, ultimately, rising interest rates, higher inflation and a slowing economy have led to increased uncertainty. The Russian-Ukraine war combined with renewed lockdowns in China (to combat COVID-19 outbreaks) dented global growth expectations. This has been a source of significant volatility in financial markets. Both bond and equity markets have struggled in the early months of the year.
Earnings and dividends
The Company’s earnings per share for the six months ended 30 April 2022 were 1.82p compared with 2.56p for the corresponding period in 2021. The changes to the investment mandate and our decision to stop writing covered call options have impacted the Company’s underlying income level. On 22 March 2022, the Board declared the first quarterly dividend of 2.00p per share which was paid on 29 April 2022. A second quarterly dividend of 2.00p per share has been declared and will be paid on 1 July 2022 to shareholders on the register on 20 May 2022. These are in line with payments made in prior years.
BlackRock, our Manager, pays particular attention to the prospective earnings and dividends from our portfolio companies. The Company continues to retain a bias to high yielding stocks. It has been a more fertile period for income seekers with many companies resuming or increasing dividend payouts with the uncertainty of the pandemic behind them.
Ongoing charges
Following the change in investment mandate, management fees were lowered from 0.75% to 0.70% of the Company’s net assets, effective from 30 July 2021. The ongoing charges for the year ended 31 October 2021 were 1.06% of net assets and these are expected to fall below 1.0% for the current year.
Shares and shareholders
There is a gradual but noticeable change in our shareholder base in favour of retail investors, often via share-dealing platforms and away from wealth managers, which nevertheless still represent the largest body of shareholders. This trend is common throughout the investment trust world and, unsurprisingly, it presents both opportunities and challenges. We are exploring new ways to engage with investors and looking at how to best communicate with them. Approximately 61% of our share register is owned by wealth managers and 25% by retail investors.
Share issues and buybacks
During the six months to 30 April 2022, the Company’s share price to NAV ranged between a discount of 0.5% and 8.9%. During the period and up to the date of this report, no ordinary shares have been reissued or bought back. The Board will continue to use its authorities to issue and buy back shares when it considers it in shareholders’ interests to do so.
Board changes
Following the retirement of Andrew Irvine, we are delighted to welcome David Barron to the Board. David was appointed on 22 March 2022 and brings a wealth of experience, having spent 25 years working in the investment management sector and was until November 2019 chief executive of Miton Group PLC. Prior to this he was head of investment trusts at J.P. Morgan Asset Management and, until 2014, a director of The Association of Investment Companies. He is currently chairman of Dunedin Income Growth Investment Trust PLC, a non-executive director of Fidelity Japan Trust PLC and a non-executive Director of Premier Miton Group PLC.
As mentioned in the Annual Report, I will be retiring at the end of the Company’s financial year on 31 October and I am delighted that Alice Ryder will succeed me as Chairman. It has been an honour and privilege to be Chairman of your Company. I would like to thank my Board and management colleagues who have provided unstinting support throughout my tenure and I wish them well for the future.
Outlook
The global economy had been in the middle of an uneven recovery from the COVID-19 pandemic, but the Russia-Ukraine war has cast a shadow over the longer-term outlook. There are many variables today and this is creating volatility in financial markets. The immediate threat comes from higher energy prices, rising food prices and disrupted supply chains, which has left households and businesses under strain, but there are also longer-term pressures.
The conflict has changed the outlook for inflation, which remains the key risk to the market cycle in 2022. The Federal Reserve is currently on a path to increase interest rates to levels that could clearly slow the economy and create a worsening environment for the rest of the year and into 2023. However, the U.S. should be among the more resilient economies globally, given its energy independence.
This new environment of elevated volatility has crucial implications for stock selection. The Company’s portfolio is weighted towards higher-quality companies, which should be in a better position to weather higher inflation and tighter monetary conditions. We believe this environment is likely to favour value and dividend stocks, as investors increasingly prioritise predictable, stable cash flows. The Company is well positioned to take advantage of the investment opportunities ahead, despite the market disruption.
Simon Miller
29 June 2022
Investment Manager’s Report
Market overview
For the six-month period ended 30 April 2022, the Company returned 6.0% and 8.0% on a net asset value and share price basis, respectively. This compares to a 4.9% return for the reference index, the Russell 1000 Value Index. In the same period, U.S. large cap stocks, as represented by the S&P 500 Index, declined by 9.6% in US Dollar terms. In British Pound Sterling terms, U.S. stocks depreciated by 1.4% for the performance period (unless otherwise stated, all percentages in British Pound Sterling terms with dividends reinvested). We highlight below some of the key market events during the semi-annual period.
U.S. large-cap stocks rallied during the rest of the third quarter of 2021 driven primarily by better-than-expected corporate earnings results. This trend continued into the fourth quarter, even as the Federal Reserve’s (the Fed) plan to begin tapering was announced and the Omicron variant began to spread. By late December, concerns regarding the COVID-19 variant 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 will slow its bond purchases at a quicker pace and that it has “pencilled in the potential for three rate hikes next year.”
Markets encountered bouts of volatility in the beginning stages of 2022 as rising interest rates, high inflation and human tragedy in Europe were of the utmost concern. U.S. equities, as represented by the S&P 500 Index, declined 4.6% in the first quarter of 2022. 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 to close out the 3-month period. 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, the first since 2018, and the Fed’s projections indicate that the federal funds rate could reach 3.8% by the end of 2023. Equities lagged in April as tighter monetary policy, geopolitical tensions in Europe and lockdowns in China unfolded. The S&P 500 Index dropped 8.7% during the month of April – the largest monthly decline since March 2020. In terms of style, value stocks outperformed growth stocks as the Russell 1000 Value Index declined 3.9% and the Russell 1000 Growth Index declined 17.8% during the semi-annual period.
Portfolio overview
The largest contributor to relative performance was stock selection and allocation decisions in communication services. Within the sector, stock selection and an overweight to the wireless telecom services industry accounted for the majority of relative outperformance. In information technology (IT), stock selection in the software and IT services industries boosted relative returns. Furthermore, stock selection in energy proved beneficial mainly due to our investment decisions in the oil, gas and consumable fuels industry.
The largest detractor from relative performance was in the consumer discretionary sector. Within the sector, our overweight allocation and stock selection in the automobiles industry accounted for the majority of underperformance. Allocation decisions in the household durables industry also proved costly within the sector. In financials, our stock selection in the insurance industry proved detrimental, as did our decision not to invest in the diversified financial services industry. Lastly, performance in the consumer staples sector detracted from relative results, mainly due to investment decisions in the household products industry.
Below is a comprehensive overview of our allocations (in British Pounds Sterling) at the end of the period.
Information Technology: 5.7% overweight (14.9% of the portfolio)
The portfolio’s largest overweight allocation is to the information technology sector and we are finding ample investment opportunities due to the strong need for tech. 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. Our preferred exposures in the sector include communications equipment and IT services companies with sticky revenue streams such as Cisco Systems (3.1% 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 (2.1% of the portfolio) and SS&C Technologies Holdings (2.0% 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 and SS&C Technologies).
Consumer Discretionary: 4.5% overweight (9.6% of the portfolio)
While there are concerns around higher inflation, higher wages and higher shipping costs, the current market environment is unique as U.S. household balance sheets are strong. Within the sector, our preferred areas of investment include apparel, retail 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 Ralph Lauren (2.3% of the portfolio) and General Motors (1.7% of the portfolio) offer investors exposure to underappreciated franchises at discounted valuations. Furthermore, retailers such as Dollar General (1.4% 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 (2.0% of the portfolio), as well as ESG improvers with clear roadmaps for better ESG adherence and disclosures (i.e. Ralph Lauren’s Global Citizen initiative and General Motors’ commitment to electric vehicles).
Financials: 0.5% overweight (20.3% 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. Secondly, we continue to like insurers and insurance brokers, including American International Group, Willis Towers Watson, First American and Fidelity National, as these companies operate relatively stable businesses and trade at attractive valuations. We categorise most of our holdings in this space as ESG improvers, with opportunities for company management teams 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 (1.3% of the portfolio) and Charles Schwab (1.3% of the portfolio) stand out from peers due to their differentiated investment platforms, proximity to end customers and runways for long-term growth.
Materials: 2.7% overweight (6.8% of the portfolio)
Our exposure to the materials sector is stock specific. In the metals & mining industry we have positions in Newmont (1.8% of the portfolio), an advantaged gold miner that operates on the lower end of the cost curve, and in Steel Dynamics (1.6% of the portfolio), the fifth largest U.S. steel producer. Both are ESG leaders in their respective disciplines. Steel Dynamics is an EAF (electric arc furnace) “clean” steel producer and EAF mills use a lower-cost, less carbon-intensive process for manufacturing steel than conventional blast furnaces. Meanwhile, Newmont stands above its gold mining peers due to its strong governance, safety record and environmental management commitments. We also recently initiated a position in Sealed Air (1.7% 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 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: 0.9% overweight (19.4% 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 as we like Alcon (1.4% of the portfolio), a leading eye care company that serves more than 140 countries, and Dentsply Sirona (2.1% of the portfolio), a dental manufacturer focused on both equipment and consumables. 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 their members receive. Fundamentally, we believe our holdings in the space 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.
Utilities: 0.5% underweight (5.0% of the portfolio)
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 dioxide emissions (CO2) and maintain significant exposure to renewables or generate power through cleaner means such as natural gas.
Energy: 0.2% overweight (7.6% of the portfolio)
The Company currently invests in four 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% to 60% less carbon-intensive to produce and combust versus coal and oil. We have a bullish outlook on U.S. natural gas due to the imposed Russian sanctions. We view natural gas as a key “bridge fuel” and like companies such as Woodside Petroleum (2.0% of the portfolio) and EQT (2.0% 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 capex spending plans, as these elements can contribute to positive free cash flow generation over time.
Communication Services: 0.6% underweight (6.1% 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 telecommunication services and wireless telecom services industries. Notable portfolio holdings include Verizon Communications (diversified telecom; 3.1% of the portfolio) and Rogers Communications (wireless telecom; 2.2% 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: 3.0% underweight (5.1% 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 (2.4% of the portfolio) and Lamb Weston Holdings (0.8% of the portfolio). We view each of these businesses as ESG leaders: PepsiCo stands out for reducing its water usage and product carbon footprint; and Lamb Weston Holdings is at the forefront of implementing strong corporate governance practices.
Real Estate: 4.2% underweight (0.9% 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 one portfolio holding is SL Green Realty (0.9% of the portfolio), an office REIT with a knowledgeable management team that has successfully navigated the New York City real estate cycle and, in our view, made astute capital allocation decisions over time. SL Green Realty is the largest New York City (NYC) landlord and over 90% of its office footprint is Leadership in Energy and Environmental Design (LEED) Gold or Silver certified, well above the NYC and U.S. averages. LEED is a leading rating system for sustainable and “green” buildings and the certification is administered by the U.S. Green Building Council, a private non-profit organisation.
Industrials: 6.2% underweight (4.3% 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 (2.6% 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
A fast-paced economic cycle, one born in the depths of the pandemic and shaped by coordinated monetary and fiscal policy stimulus, continued its forward charge in the first quarter. A grievous war has applied new pressures to a global financial system that is looking to normalise interest rates and process the effects of the highest inflation seen in decades. The investing backdrop is mired in uncertainty, but one matter we feel relatively confident about is that U.S. markets are going through a regime change. The post-global financial crisis (post-GFC) era marked by low to moderate economic growth, low inflation and lower interest rates, is over. In its place is an environment still taking form, but one that will undoubtedly entail higher inflation and rates than we experienced from 2008 to 2020. Although we do not see inflation sustaining at the current decades-high level over the long term, we do expect it to settle into a range higher than the sub-2% seen in the post-GFC period. The culprits, among others, are a tight U.S. labour market and a shortage of entry-level homes, which could apply persistent upward pressure on the costs for services and shelter. This form of “sticky” inflation can be more enduring than other inflation pressures where a rebalance of supply and demand can more quickly restore price stability. From an investment standpoint, higher inflation will challenge companies’ cost structures, and investors must discern which businesses are most impacted by rising costs and which have the pricing power to maintain their profit margins.
Volatile markets can test investors’ fortitude and we believe these are the moments when active, bottom-up stock selection and thoughtful portfolio construction can provide a steady hand in pursuit of long-term financial goals. In the Company, we continue to use a barbell approach in pursuit of portfolio resilience. We are identifying companies in health care and technology with good stability characteristics and companies in financials and energy with cheaper valuations that are well-positioned for a Fed hiking cycle. Another overarching theme in the portfolio is a focus on quality – particularly stocks of companies with strong balance sheets and healthy free cash flow characteristics. This posture has served us well in recent years and we continue to view it as prudent in navigating today’s unique market backdrop.
Tony DeSpirito, David Zhao and Lisa Yang
BlackRock Investment Management LLC
29 June 2022
Ten largest investments
1 + AstraZeneca (2021: 2nd)
Sector: Health Care
Market value: £6,613,000
Share of investments: 3.7% (2021: 3.5%)
ESG Leader
AstraZeneca is a diversified pharmaceutical group that conducts research & development (R&D) in high growth areas including oncology, cardiovascular diseases and immunology. It is also a leader in increasing access to health care in the developing world and we are encouraged by the aggressive stance it has taken on addressing its carbon footprint. AstraZeneca has improved its R&D productivity and cost control in recent years and we believe the group now has a long runway for top-line and bottom-line growth.
2 + Sanofi (2021: 12th)
Sector: Health Care
Market value: £5,868,000
Share of investments: 3.3% (2021: 2.3%)
ESG Leader
Sanofi is a multinational health care group that operates in pharmaceuticals, vaccines and consumer health. The group is a leader in diabetes, immunology and branded generics. Additionally, the group has a wide portfolio of vaccines and maintains strong consumer brands such as Allegra, Gold Bond and Icy Hot. The group is a leader in various initiatives aimed at addressing global health inequality issues. The group is strongly committed to eradicating various diseases including polio and sleeping sickness by 2030 and aims to develop innovative therapies to address childhood cancers.
3 - Cisco Systems (2021: 1st)
Sector: Information Technology
Market value: £5,567,000
Share of investments: 3.1% (2021: 4.0%)
ESG Leader
Cisco Systems (Cisco) 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’s products help customers to enhance data security and privacy. Despite market concerns regarding competition and cloud migration, we believe it can still deliver sustainable revenue and earnings growth due to better than feared market positions, a diversified portfolio and a large existing installed base.
4 + Verizon Communications (2021: 14th)
Sector: Communication Services
Market value: £5,541,000
Share of investments: 3.1% (2021: 2.3%)
ESG Leader
Verizon Communications (Verizon) is the leading wireless group in the United States. Verizon trades at a reasonable price relative to the quality and stability of its business. The group’s leadership has also continuously shown interest in key social issues. For example, Verizon took pro-active measures to survey and help improve employee mental health during the pandemic. The group also incorporates metrics such as diversity and carbon intensity into compensation.
5 + Anthem (2021: 11th)
Sector: Health Care
Market value: £5,156,000
Share of investments: 2.9% (2021: 2.5%)
ESG Leader
Anthem operates as the second largest managed care organisation under the recognisable Blue Cross & Blue Shield brand. The group services members across commercial, Medicare and Medicaid markets, while also operating a health care services business. Under the leadership of Anthem’s new CEO, we believe the group is well-positioned to accelerate growth through various initiatives. Managed care companies play a substantial role in improving access and quality of health care to its members and in driving down costs to make health insurance affordable to more people. Anthem provides exposure to the favourable HMO growth trends at an attractive valuation.
6 + Sempra (2021: 37th)
Sector: Utilities
Market value: £5,129,000
Share of investments: 2.9% (2021: 1.4%)
ESG Leader
Sempra is a North American energy infrastructure group where 75% of the business is a regulated utility with exposure to Southern California and Texas. The remaining 25% is Sempra’s Infrastructure Partners business, which includes various assets including gas, pipelines, renewable generation and small regulated gas utility. Sempra’s gas investments are driven by safety and emissions. The group also has a strong focus on electric transmissions and distribution assets which reduces Sempra’s risk exposure associated with greenhouse gas emissions.
7 - Cognizant Technology Solutions (2021: 5th)
Sector: Information Technology
Market value: £4,635,000
Share of investments: 2.6% (2021: 3.2%)
ESG Leader
Cognizant Technology Solutions (Cognizant) is an IT Services group with a diversified revenue base across industry verticals and geographies. As a service provider, they help enterprise small and medium business clients to transition to cloud infrastructure, which is more efficient versus sub-scale in-house data centers. The group 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 is structurally impaired. Rather, we see an attractive turnaround opportunity under CEO Brian Humphries (who joined the firm in April 2019).
8 -
Comerica (2021: 3rd)
Sector: Financials
Market value: £4,581,000
Share of investments: 2.6% (2021: 3.4%)
ESG Leader
Comerica is one of the 20 largest U.S. banks and most of their business is in commercial loans. It has a strong independent risk management committee that focuses on detecting unethical behaviour and has established processes to attract and retain talent, including a focus on diversity. We see Comerica as offering us access to higher growth geographies in the US and believe its significant excess capital above regulatory minimums can help them execute on their long-term goals.
9 -
Komatsu (2020: 6th)
Sector: Industrials
Market value: £4,579,000
Share of investments: 2.6% (2021: 3.0%)
ESG Leader
Komatsu is a Japanese manufacturer of construction and mining equipment and a provider of aftermarket parts and services. Lax management has left Komatsu underperforming its potential, but we believe sales are at a cyclical trough and that forward estimates are too low (i.e. the sales recovery following the pandemic is underappreciated). From a sustainability standpoint, the group is a leader in incorporating a broad range of power sources (i.e. hybrids, hydrogen, trolley, battery-electric) in its product portfolio. Furthermore, the group’s management has set targets to reduce CO2 emissions from its products by 50% by 2030 and to achieve carbon neutrality by 2050.
10 - Wells Fargo (2021: 4th)
Financials
Market value: £4,560,000
Share of investments: 2.6% (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. The group 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 premier 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 group as underappreciated today in an environment characterised by low credit losses and ample access to liquidity.
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 2021.
Together, the ten largest investments represent 29.4% of the Company’s portfolio (31 October 2021: 31.7%).
ESG Leaders: best-in-class companies that effectively manage ESG factors to benefit all stakeholders.
ESG Improvers: companies showing demonstrable progress in their ESG journey.
Portfolio analysis as at 30 April 2022
|
Sectors |
% Canada |
% France |
% Switzerland |
% United Kingdom |
% United States |
% Japan |
% Australia |
% Denmark |
% Norway |
30.04.22 Total % |
31.10.21 Total % |
| Financials | – | – | – | – | 20.3 | – | – | – | – | 20.3 | 25.4 |
| Health Care | – | 3.3 | 1.4 | 3.7 | 10.5 | – | – | 0.5 | – | 19.4 | 18.6 |
| Information Technology | – | – | – | – | 14.9 | – | – | – | – | 14.9 | 14.9 |
| Consumer Discretionary | – | – | – | – | 7.6 | 2.0 | – | – | – | 9.6 | 11.3 |
| Energy | – | – | – | – | 5.6 | – | 2.0 | – | – | 7.6 | 5.3 |
| Materials | – | – | – | – | 6.8 | – | – | – | – | 6.8 | 3.8 |
| Communication Services | 2.2 | – | – | – | 3.9 | – | – | – | – | 6.1 | 5.8 |
| Consumer Staples | – | – | – | 1.9 | 3.2 | – | – | – | – | 5.1 | 3.9 |
| Utilities | – | – | – | – | 5.0 | – | – | – | – | 5.0 | 5.2 |
| Industrials | – | – | – | – | 1.7 | 2.6 | – | – | – | 4.3 | 4.9 |
| Real Estate | – | – | – | – | 0.9 | – | – | – | – | 0.9 | 0.9 |
| --------------- | --------------- | --------------- | --------------- | --------------- | --------------- | --------------- | --------------- | --------------- | --------------- | --------------- | |
| % Portfolio 30.04.22 | 2.2 | 3.3 | 1.4 | 5.6 | 80.4 | 4.6 | 2.0 | 0.5 | – | 100.0 | |
| --------------- | --------------- | --------------- | --------------- | --------------- | --------------- | --------------- | --------------- | --------------- | --------------- | --------------- | |
| % Portfolio 31.10.21 | 2.7 | 3.2 | 1.9 | 3.5 | 79.5 | 4.8 | 1.3 | 1.3 | 1.8 | 100.0 | |
| ========= | ========= | ========= | ========= | ========= | ========= | ========= | ========= | ========= | ========= | ========= |
Investments as at 30 April 2022
|
Company |
Country |
Sector |
Market value £000 |
% of total portfolio |
| AstraZeneca | United Kingdom | Health Care | 6,613 | 3.7 |
| Sanofi | France | Health Care | 5,868 | 3.3 |
| Cisco Systems | United States | Information Technology | 5,567 | 3.1 |
| Verizon Communications | United States | Communication Services | 5,541 | 3.1 |
| Anthem | United States | Health Care | 5,156 | 2.9 |
| Sempra | United States | Utilities | 5,129 | 2.9 |
| Cognizant Technology Solutions | United States | Information Technology | 4,635 | 2.6 |
| Comerica | United States | Financials | 4,581 | 2.6 |
| Komatsu | Japan | Industrials | 4,579 | 2.6 |
| Wells Fargo | United States | Financials | 4,560 | 2.6 |
| Cigna | United States | Health Care | 4,513 | 2.6 |
| Willis Towers Watson | United States | Financials | 4,509 | 2.6 |
| American International Group | United States | Financials | 4,427 | 2.5 |
| PepsiCo | United States | Consumer Staples | 4,286 | 2.4 |
| Laboratory Corporation of America | United States | Health Care | 4,162 | 2.4 |
| Ralph Lauren | United States | Consumer Discretionary | 4,070 | 2.3 |
| Citigroup | United States | Financials | 4,046 | 2.3 |
| Rogers Communications | Canada | Communication Services | 3,910 | 2.2 |
| Fidelity National Information Services | United States | Information Technology | 3,781 | 2.1 |
| Public Service Enterprise Group | United States | Utilities | 3,762 | 2.1 |
| Hess | United States | Energy | 3,713 | 2.1 |
| Microsoft | United States | Information Technology | 3,691 | 2.1 |
| Dentsply Sirona | United States | Health Care | 3,624 | 2.1 |
| EQT | United States | Energy | 3,598 | 2.0 |
| CDK Global | United States | Information Technology | 3,582 | 2.0 |
| Panasonic | Japan | Consumer Discretionary | 3,494 | 2.0 |
| SS&C Technologies Holdings | United States | Information Technology | 3,473 | 2.0 |
| Woodside Petroleum | Australia | Energy | 3,458 | 2.0 |
| Reckitt Benckiser Group | United Kingdom | Consumer Staples | 3,284 | 1.9 |
| Newmont | United States | Materials | 3,249 | 1.8 |
| General Motors | United States | Consumer Discretionary | 3,035 | 1.7 |
| Sealed Air | United States | Materials | 2,983 | 1.7 |
| PPG Industries | United States | Materials | 2,933 | 1.7 |
| Norfolk Southern | United States | Industrials | 2,930 | 1.7 |
| Steel Dynamics | United States | Materials | 2,886 | 1.6 |
| Bank of America | United States | Financials | 2,765 | 1.6 |
| ConocoPhillips | United States | Energy | 2,625 | 1.5 |
| Alcon | Switzerland | Health Care | 2,543 | 1.4 |
| Dollar General | United States | Consumer Discretionary | 2,461 | 1.4 |
| Newell Brands | United States | Consumer Discretionary | 2,458 | 1.4 |
| Morgan Stanley | United States | Financials | 2,334 | 1.3 |
| Charles Schwab | United States | Financials | 2,282 | 1.3 |
| Invesco | United States | Financials | 2,270 | 1.3 |
| Visa | United States | Information Technology | 1,700 | 1.0 |
| SL Green Realty | United States | Real Estate | 1,616 | 0.9 |
| First American | United States | Financials | 1,609 | 0.9 |
| Warner Bros. Discovery | United States | Communication Services | 1,481 | 0.8 |
| Lear | United States | Consumer Discretionary | 1,435 | 0.8 |
| Lamb Weston Holdings | United States | Consumer Staples | 1,399 | 0.8 |
| Fidelity National | United States | Financials | 1,314 | 0.7 |
| JPMorgan Chase | United States | Financials | 993 | 0.6 |
| Novo Nordisk | Denmark | Health Care | 897 | 0.5 |
| AmerisourceBergen | United States | Health Care | 855 | 0.5 |
| --------------- | --------------- | |||
| Portfolio | 176,665 | 100.0 | ||
| ========= | ========= |
All investments are in ordinary shares. The number of holdings as at 30 April 2022 was 53 (31 October 2021: 54).
At 30 April 2022, the Company did not hold any equity interests comprising more than 3% of any company’s share capital.
Interim Management Report and Responsibility Statement
The Chairman’s Statement and Investment Manager's Report above give details of the important events which have occurred during the period and their impact on the financial statements.
Principal risks and uncertainties
The principal risks faced by the Company can be divided into various areas as follows:
· Counterparty;
· Investment performance;
· Legal & Regulatory Compliance;
· Market;
· Operational;
· Political;
· Financial; and
· Marketing.
The Board reported on the principal risks and uncertainties faced by the Company in the Annual Report and Financial Statements for the year ended 31 October 2021. A detailed explanation can be found in the Strategic Report on pages 35 to 38 and in note 14 on pages 91 to 100 of the Annual Report and Financial Statements which are available on the website maintained by BlackRock at www.blackrock.com/uk/brsa.
The ongoing COVID-19 pandemic has had a profound impact on all aspects of society in recent years. The impact of this significant event on the Company’s financial risk exposure is disclosed in note 10.
The Directors have assessed the impact of market conditions arising from the COVID-19 outbreak on the Company’s ability to meet its investment objective. Based on the latest available information, the Company continues to be managed in line with its investment objective, with no disruption to its operations.
Certain financial markets have fallen towards the end of the financial period due primarily to geo-political tensions arising from Russia’s invasion of Ukraine and the impact of the subsequent range of sanctions, regulations and other measures which impaired normal trading in Russian securities. The Board and the Investment Manager continue to monitor investment performance in line with the Company’s investment objectives, and the operations of the Company and the publication of net asset values are continuing.
In the view of the Board, there have not been any changes to the fundamental nature of the principal risks and uncertainties since the previous report and these are equally applicable to the remaining six months of the financial year as they were to the six months under review.
Going concern
The Board remains mindful of the ongoing uncertainty surrounding the potential duration of the COVID-19 pandemic and its longer-term effects on the global economy and the current heightened geo-political risk. Nevertheless, the Directors, having considered the nature and liquidity of the portfolio, the Company’s investment objective and the Company’s projected income and expenditure, are satisfied that the Company has adequate resources to continue in operational existence for the foreseeable future and is financially sound. The Board is still mindful of the continuing uncertainty surrounding the potential duration of the COVID-19 pandemic and its longer-term effects on the global economy and recovery of economies. The Board believes that the Company and its key third-party service providers have in place appropriate business continuity plans and these services have continued to be supplied without interruption throughout the COVID-19 pandemic.
The Company has a portfolio of investments which are predominantly readily realisable and is able to meet all its liabilities from its assets and income generated from these assets. Accounting revenue and expense forecasts are maintained and reported to the Board regularly and it is expected that the Company will be able to meet all its obligations. Borrowings under the overdraft facility shall at no time exceed 20% of the Company’s net assets (calculated at the time of draw down), although the Board intends only to utilise borrowings representing 10% of net assets at the time of draw down, and this covenant was complied with during the period. Ongoing charges for the year ended 31 October 2021 were 1.06% of net assets and are expected to fall modestly going forward.
Based on the above, the Board is satisfied that it is appropriate to continue to adopt the going concern basis in preparing the financial statements.
Related party disclosure and transactions with the Manager
BlackRock Fund Managers Limited (BFM) was appointed as the Company’s AIternative Investment Fund Manager (AIFM) with effect from 2 July 2014. 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)). Both BFM and BIM (UK) are regarded as related parties under the Listing Rules. Details of the fees payable are set out in note 4 and note 11 below.
The related party transactions with the Directors are set out in note 12 below.
Directors’ responsibility statement
The Disclosure Guidance and Transparency Rules (DTR) of the UK Listing Authority require the Directors to confirm their responsibilities in relation to the preparation and publication of the Interim Management Report and Financial Statements.
The Directors confirm to the best of their knowledge that:
· the condensed set of financial statements contained within the Half Yearly Financial Report has been prepared in accordance with applicable International Accounting Standard 34 – ‘Interim Financial Reporting’; and
· the Interim Management Report, together with the Chairman’s Statement and Investment Manager’s Report, include a fair review of the information required by 4.2.7R and 4.2.8R of the FCA’s Disclosure Guidance and Transparency Rules.
This Half Yearly Financial Report has not been audited or reviewed by the Company’s auditors.
The Half Yearly Financial Report was approved by the Board on 29 June 2022 and the above responsibility statement was signed on its behalf by the Chairman.
Simon Miller
FOR AND ON BEHALF OF THE BOARD
29 June 2022
Statement of Comprehensive Income for the six months ended 30 April 2022
|
|
|
Six months ended 30 April 2022 (unaudited) |
Six months ended 30 April 2021 (unaudited) |
Year ended 31 October 2021 (audited) |
||||||
|
|
Notes |
Revenue £000 |
Capital £000 |
Total £000 |
Revenue £000 |
Capital £000 |
Total £000 |
Revenue £000 |
Capital £000 |
Total £000 |
| Income from investments held at fair value through profit or loss | 3 | 1,961 | 47 | 2,008 | 1,777 | 2 | 1,779 | 3,617 | 2 | 3,619 |
| Other income | 3 | – | – | – | 939 | – | 939 | 897 | – | 897 |
| --------------- | --------------- | --------------- | --------------- | --------------- | --------------- | --------------- | --------------- | --------------- | ||
| Total revenue | 1,961 | 47 | 2,008 | 2,716 | 2 | 2,718 | 4,514 | 2 | 4,516 | |
| ========= | ========= | ========= | ========= | ========= | ========= | ========= | ========= | ========= | ||
| Net profit on investments and options held at fair value through profit or loss | – | 9,038 | 9,038 | – | 33,953 | 33,953 | – | 42,989 | 42,989 | |
| Net loss on foreign exchange | – | (199) | (199) | – | (596) | (596) | – | (653) | (653) | |
| --------------- | --------------- | --------------- | --------------- | --------------- | --------------- | --------------- | --------------- | --------------- | ||
| Total | 1,961 | 8,886 | 10,847 | 2,716 | 33,359 | 36,075 | 4,514 | 42,338 | 46,852 | |
| ========= | ========= | ========= | ========= | ========= | ========= | ========= | ========= | ========= | ||
| Expenses | ||||||||||
| Investment management fee | 4 | (148) | (444) | (592) | (138) | (414) | (552) | (284) | (853) | (1,137) |
| Other operating expenses | 5 | (153) | 2 | (151) | (242) | (5) | (247) | (547) | (13) | (560) |
| --------------- | --------------- | --------------- | --------------- | --------------- | --------------- | --------------- | --------------- | --------------- | ||
| Total operating expenses | (301) | (442) | (743) | (380) | (419) | (799) | (831) | (866) | (1,697) | |
| ========= | ========= | ========= | ========= | ========= | ========= | ========= | ========= | ========= | ||
| Net profit on ordinary activities before finance costs and taxation | 1,660 | 8,444 | 10,104 | 2,336 | 32,940 | 35,276 | 3,683 | 41,472 | 45,155 | |
| Finance costs | (4) | (11) | (15) | – | – | – | – | – | – | |
| --------------- | --------------- | --------------- | --------------- | --------------- | --------------- | --------------- | --------------- | --------------- | ||
| Net profit on ordinary activities before taxation | 1,656 | 8,433 | 10,089 | 2,336 | 32,940 | 35,276 | 3,683 | 41,472 | 45,155 | |
| Taxation (charge)/credit | (193) | – | (193) | (294) | 79 | (215) | (435) | 14 | (421) | |
| --------------- | --------------- | --------------- | --------------- | --------------- | --------------- | --------------- | --------------- | --------------- | ||
| Net profit on ordinary activities after taxation | 1,463 | 8,433 | 9,896 | 2,042 | 33,019 | 35,061 | 3,248 | 41,486 | 44,734 | |
| ========= | ========= | ========= | ========= | ========= | ========= | ========= | ========= | ========= | ||
| Earnings per ordinary share (pence) | 7 | 1.82 | 10.51 | 12.33 | 2.56 | 41.36 | 43.92 | 4.06 | 51.84 | 55.90 |
| ========= | ========= | ========= | ========= | ========= | ========= | ========= | ========= | ========= | ||
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 period. All income is attributable to the equity holders of the Company.
The Company does not have any other comprehensive income. The net profit for the period disclosed above represents the Company’s total comprehensive income.
Statement of Changes in Equity for the six months ended 30 April 2022
|
|
Note |
Called up share capital £000 |
Share premium account £000 |
Capital redemption reserve £000 |
Special reserve £000 |
Capital reserves £000 |
Revenue reserve £000 |
Total £000 |
| For the six months ended 30 April 2022 (unaudited) | ||||||||
| At 31 October 2021 | 1,004 | 44,873 | 1,460 | 38,090 | 79,369 | 538 | 165,334 | |
| Total comprehensive income: | ||||||||
| Net profit for the period | – | – | – | – | 8,433 | 1,463 | 9,896 | |
| Transactions with owners, recorded directly to equity: | ||||||||
| Dividends paid1 | 6 | – | – | – | – | (1,394) | (1,815) | (3,209) |
| --------------- | --------------- | --------------- | --------------- | --------------- | --------------- | --------------- | ||
| At 30 April 2022 | 1,004 | 44,873 | 1,460 | 38,090 | 86,408 | 186 | 172,021 | |
| ========= | ========= | ========= | ========= | ========= | ========= | ========= | ||
| For the six months ended 30 April 2021 (unaudited) | ||||||||
| 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 period | – | – | – | – | 33,019 | 2,042 | 35,061 | |
| Transactions with owners, recorded directly to equity: | ||||||||
| Ordinary shares reissued from treasury | – | 340 | – | 548 | – | – | 888 | |
| Share issue costs | – | – | – | (2) | – | – | (2) | |
| Ordinary shares bought back into treasury | – | – | – | (294) | – | – | (294) | |
| Share purchase costs | – | – | – | (1) | – | – | (1) | |
| Dividends paid2 | – | – | – | – | – | (3,192) | (3,192) | |
| --------------- | --------------- | --------------- | --------------- | --------------- | --------------- | --------------- | ||
| At 30 April 2021 | 1,004 | 44,873 | 1,460 | 38,090 | 71,241 | 2,202 | 158,870 | |
| ========= | ========= | ========= | ========= | ========= | ========= | ========= | ||
| For the year ended 31 October 2021 (audited) | ||||||||
| 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 from treasury | – | 340 | – | 548 | – | – | 888 | |
| Share issue costs | – | – | – | (2) | – | – | (2) | |
| Ordinary shares bought back into treasury | – | – | – | (294) | – | – | (294) | |
| Share purchase costs | – | – | – | (1) | – | – | (1) | |
| Dividends paid3 | – | – | – | – | (339) | (6,062) | (6,401) | |
| --------------- | --------------- | --------------- | --------------- | --------------- | --------------- | --------------- | ||
| At 31 October 2021 | 1,004 | 44,873 | 1,460 | 38,090 | 79,369 | 538 | 165,334 | |
| ========= | ========= | ========= | ========= | ========= | ========= | ========= |
1 4th interim dividend of 2.00p per share for the year ended 31 October 2021, declared on 3 November 2021 and paid on 4 January 2022 and 1st interim dividend of 2.00p per share for the year ending 31 October 2022, declared on 22 March 2022 and paid on 29 April 2022.
2 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 and 1st interim dividend of 2.00p per share for the year ending 31 October 2021, declared on 23 March 2021 and paid on 29 April 2021.
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.
For information on the Company’s distributable reserves, please refer to note 9 below.
Statement of Financial Position as at 30 April 2022
|
|
Notes |
30 April 2022 (unaudited) £000 |
30 April 2021 (unaudited) £000 |
31 October 2021 (audited) £000 |
| Non current assets | ||||
| Investments held at fair value through profit or loss | 10 | 176,665 | 148,432 | 164,971 |
| Current assets | ||||
| Current tax asset | 99 | 83 | 96 | |
| Other receivables | 332 | 2,185 | 2,243 | |
| Cash and cash equivalents | 60 | 10,681 | 1,240 | |
| --------------- | --------------- | --------------- | ||
| Total current assets | 491 | 12,949 | 3,579 | |
| ========= | ========= | ========= | ||
| Total assets | 177,156 | 161,381 | 168,550 | |
| ========= | ========= | ========= | ||
| Current liabilities | ||||
| Current tax liability | – | (35) | – | |
| Other payables | (1,389) | (1,591) | (3,216) | |
| Derivative financial liabilities held at fair value through profit or loss | – | (885) | – | |
| Bank overdraft | (3,746) | – | – | |
| --------------- | --------------- | --------------- | ||
| Total current liabilities | (5,135) | (2,511) | (3,216) | |
| ========= | ========= | ========= | ||
| Net assets | 172,021 | 158,870 | 165,334 | |
| ========= | ========= | ========= | ||
| Equity attributable to equity holders | ||||
| Called up share capital | 8 | 1,004 | 1,004 | 1,004 |
| Share premium account | 44,873 | 44,873 | 44,873 | |
| Capital redemption reserve | 1,460 | 1,460 | 1,460 | |
| Special reserve | 38,090 | 38,090 | 38,090 | |
| Capital reserves | 86,408 | 71,241 | 79,369 | |
| Revenue reserve | 186 | 2,202 | 538 | |
| --------------- | --------------- | --------------- | ||
| Total equity | 172,021 | 158,870 | 165,334 | |
| ========= | ========= | ========= | ||
| Net asset value per ordinary share (pence) | 7 | 214.41 | 198.02 | 206.08 |
| ========= | ========= | ========= |
Cash Flow Statement for the six months ended 30 April 2022
|
|
Six months ended 30 April 2022 (unaudited) £000 |
Six months ended 30 April 2021 (unaudited) £000 |
Year ended 31 October 2021 (audited) £000 |
| Operating activities | |||
| Net profit on ordinary activities before taxation | 10,089 | 35,276 | 45,155 |
| Add back finance costs | 15 | – | – |
| Net profit on investments and options held at fair value through profit or loss (including transaction costs) | (9,038) | (33,955) | (42,989) |
| Net loss on foreign exchange | 199 | 596 | 653 |
| Sales of investments held at fair value through profit or loss | 50,798 | 66,354 | 199,237 |
| Purchases of investments held at fair value through profit or loss | (53,454) | (60,860) | (202,133) |
| (Increase)/decrease in other receivables | (116) | (365) | 35 |
| Increase in other payables | 173 | 269 | 143 |
| Decrease/(increase) in amounts due from brokers | 2,021 | (1,056) | (1,514) |
| (Decrease)/increase in amounts due to brokers | (2,000) | (95) | 1,656 |
| --------------- | --------------- | --------------- | |
| Net cash (outflow)/inflow from operating activities before taxation | (1,313) | 6,164 | 243 |
| Taxation paid | (190) | (355) | (609) |
| --------------- | --------------- | --------------- | |
| Net cash (outflow)/inflow from operating activities | (1,503) | 5,809 | (366) |
| ========= | ========= | ========= | |
| Financing activities | |||
| Interest paid | (15) | – | – |
| Net cash proceeds from ordinary shares reissued from treasury | – | 886 | 886 |
| Net cash outflow from ordinary shares bought back into treasury | – | (295) | (295) |
| Dividends paid | (3,209) | (3,192) | (6,401) |
| --------------- | --------------- | --------------- | |
| Net cash outflow from financing activities | (3,224) | (2,601) | (5,810) |
| ========= | ========= | ========= | |
| (Decrease)/increase in cash and cash equivalents | (4,727) | 3,208 | (6,176) |
| Effect of foreign exchange rate changes | (199) | (596) | (653) |
| --------------- | --------------- | --------------- | |
| Change in cash and cash equivalents | (4,926) | 2,612 | (6,829) |
| Cash and cash equivalents at start of period/year | 1,240 | 8,069 | 8,069 |
| --------------- | --------------- | --------------- | |
| Cash and cash equivalents at end of period/year | (3,686) | 10,681 | 1,240 |
| ========= | ========= | ========= | |
| Comprised of: | |||
| Cash at bank | 60 | 10,681 | 666 |
| Bank overdraft | (3,746) | – | – |
| Cash Fund1 | – | – | 574 |
| --------------- | --------------- | --------------- | |
| (3,686) | 10,681 | 1,240 | |
| ========= | ========= | ========= |
1 Cash Fund represents funds invested in the BlackRock Institutional Cash Series plc – US Dollar Liquid Environmentally Aware Fund.
Notes to the financial statements for the six months ended 30 April 2022
1. PRINCIPAL ACTIVITY
The principal activity of the Company is that of an investment trust company within the meaning of Section 1158 of the Corporation Tax Act 2010.
2. BASIS OF PRESENTATION
The half yearly financial statements for the period ended 30 April 2022 have been prepared in accordance with the Disclosure Guidance and Transparency Rules sourcebook of the Financial Conduct Authority and with the UK-adopted International Accounting Standard 34 (IAS 34), ‘Interim Financial Reporting’. The half yearly financial statements should be read in conjunction with the Company’s Annual Report and Financial Statements for the year ended 31 October 2021, which have been prepared in accordance with International Accounting Standards (IASs) in conformity with the requirements of the Companies Act 2006.
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 April 2021, is compatible with UK-adopted IASs, the financial statements have been prepared in accordance with guidance set out in the SORP.
Amendments to IFRS 9, IAS 39 and IFRS 7 - Interest rate benchmark reform Phase 2 (effective 1 January 2021). The Phase 2 amendments address issues that might affect financial reporting during the reform of an interest rate benchmark, including the effects of changes to contractual cash flows or hedging relationships arising from the replacement of an interest rate benchmark with an alternative benchmark rate (replacement issues).
The objectives of the Phase 2 amendments are to assist companies in:
- applying IFRS Standards when changes are made to contractual cash flows or hedging relationships because of the interest rate benchmark reform; and
- providing useful information to users of financial statements.
In Phase 2 of its project, the Board amended requirements in IFRS 9 Financial Instruments, IAS 39 Financial Instruments: Recognition and Measurement, IFRS 7 Financial Instruments: Disclosures, IFRS 4 Insurance Contracts and IFRS 16 Leases relating to:
- changes in the basis for determining contractual cash flows of financial assets, financial liabilities and lease liabilities;
- hedge accounting; and
- disclosures.
The Phase 2 amendments apply only to changes required by the interest rate benchmark reform to financial instruments and hedging relationships.
These amendments have been adopted by the UK. The adoption of these amendments did not have any significant impact on the Company.
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 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.
3. INCOME
|
|
Six months ended 30 April 2022 (unaudited) £000 |
Six months ended 30 April 2021 (unaudited) £000 |
Year ended 31 October 2021 (audited) £000 |
| Investment income: | |||
| UK dividends | 148 | 168 | 297 |
| Overseas dividends | 1,764 | 1,536 | 3,228 |
| Overseas special dividends | 8 | 73 | 73 |
| Overseas REIT dividends | 41 | – | 19 |
| --------------- | --------------- | --------------- | |
| Total investment income | 1,961 | 1,777 | 3,617 |
| ========= | ========= | ========= | |
| Other income: | |||
| Option premium income | – | 939 | 897 |
| --------------- | --------------- | --------------- | |
| – | 939 | 897 | |
| ========= | ========= | ========= | |
| Total income | 1,961 | 2,716 | 4,514 |
| ========= | ========= | ========= |
During the period, the Company received no option premium income in cash (six months ended 30 April 2021: £1,017,000; year ended 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. During the period, no option premiums (six months ended 30 April 2021: £939,000; year ended 31 October 2021: £897,000) were amortised to revenue.
At 30 April 2022, there were no open positions or associated liability (six months ended 30 April 2021: 174 open positions with an associated liability of £885,000; year ended 31 October 2021: no open positions or associated liability).
All derivative transactions were based on constituent stocks in the Russell 1000 Value Index.
Dividends and interest received in cash during the period amounted to £1,659,000 and £nil (six months ended 30 April 2021: £1,526,000 and £nil; year ended 31 October 2021: £3,127,000 and £nil).
Special dividends of £47,000 have been recognised in capital during the period (six months ended 30 April 2021: £2,000; year ended 31 October 2021: £2,000).
4. INVESTMENT MANAGEMENT FEE
|
|
Six months ended 30 April 2022 (unaudited) |
Six months ended 30 April 2021 (unaudited) |
Year ended 31 October 2021 (audited) |
||||||
|
|
Revenue £000 |
Capital £000 |
Total £000 |
Revenue £000 |
Capital £000 |
Total £000 |
Revenue £000 |
Capital £000 |
Total £000 |
| Investment management fee | 148 | 444 | 592 | 138 | 414 | 552 | 284 | 853 | 1,137 |
| --------------- | --------------- | --------------- | --------------- | --------------- | --------------- | --------------- | --------------- | --------------- | |
| Total | 148 | 444 | 592 | 138 | 414 | 552 | 284 | 853 | 1,137 |
| ========= | ========= | ========= | ========= | ========= | ========= | ========= | ========= | ========= | |
Up to 29 July 2021, the investment management fee was payable in quarterly arrears, calculated at the rate of 0.75% of the Company’s net assets. 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. 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
|
|
Six months ended 30 April 2022 (unaudited) £000 |
Six months ended 30 April 2021 (unaudited) £000 |
Year ended 31 October 2021 (audited) £000 |
| Allocated to revenue: | |||
| Custody fee | 1 | 3 | 3 |
| Auditors’ remuneration – audit services1 | 19 | 19 | 38 |
| Registrar’s fee | 15 | 15 | 32 |
| Directors’ emoluments | 82 | 83 | 164 |
| Broker fees | 20 | 20 | 75 |
| Depositary fees | 8 | 7 | 14 |
| Printing fees | 16 | 18 | 44 |
| Legal and professional fees | 17 | 19 | 63 |
| Marketing fees | 17 | 18 | 37 |
| AIC fees | 5 | 4 | 9 |
| FCA fees | 4 | 4 | 8 |
| Write back of prior year expenses2 | (87) | – | – |
| Other administration costs | 36 | 32 | 60 |
| --------------- | --------------- | --------------- | |
| 153 | 242 | 547 | |
| ========= | ========= | ========= | |
| Allocated to capital: | |||
| Custody transaction charges3 | 5 | 5 | 13 |
| Write back of prior year expenses3,4 | (7) | – | – |
| --------------- | --------------- | --------------- | |
| 151 | 247 | 560 | |
| ========= | ========= | ========= |
1 No non-audit services were provided by the Company’s auditors.
2 Relates to prior year accruals for Directors’ fees, directors’ expenses and legal fees written back during the period.
3 For the six month period ended 30 April 2022, an expense of £5,000 and a write back of prior year accruals of £7,000 (six months ended 30 April 2021: expense of £5,000; year ended 31 October 2021: expense of £13,000) was credited to the capital account of the Statement of Comprehensive Income. This relates to transaction costs charged by the custodian on sale and purchase trades.
4 Relates to prior year accruals for custody transaction charges written back during the period.
The transaction costs incurred on the acquisition of investments amounted to £26,000 for the six months ended 30 April 2022 (six months ended 30 April 2021: £40,000; year ended 31 October 2021: £103,000). Costs relating to the disposal of investments amounted to £8,000 for the six months ended 30 April 2022 (six months ended 30 April 2021: £18,000; year ended 31 October 2021: £39,000). All transaction costs have been included within capital reserves.
6. DIVIDENDS
On 11 May 2022, the Directors declared a second quarterly interim dividend of 2.00p per share. The dividend will be paid on 1 July 2022 to shareholders on the Company’s register on 20 May 2022. This dividend has not been accrued in the financial statements for the six months ended 30 April 2022 as, under IAS, interim dividends are not recognised until paid. Dividends are debited directly to reserves.
Dividends paid on equity shares during the period were:
|
|
Six months ended 30 April 2022 (unaudited) £000 |
| Fourth interim dividend for the year ended 31 October 2021 of 2.00p per ordinary share paid on 4 January 2022 | 1,605 |
| First interim dividend for the year ended 31 October 2022 of 2.00p per ordinary share paid on 29 April 2022 | 1,605 |
| --------------- | |
| 3,210 | |
| ========= | |
| Second interim dividend for the year ended 31 October 2022 of 2.00p per ordinary share payable on 1 July 20221 | 1,605 |
| --------------- | |
| 4,815 | |
| ========= |
1 Based on 80,229,044 ordinary shares in issue on 19 May 2022 (the ex-dividend date).
7. EARNINGS AND NET ASSET VALUE PER ORDINARY SHARE
Total revenue return, capital return and net asset value per share are shown below and have been calculated using the following:
|
|
Six months ended 30 April 2022 (unaudited) |
Six months ended 30 April 2021 (unaudited) |
Year ended 31 October 2021 (audited) |
| Net revenue profit attributable to ordinary shareholders (£000) | 1,463 | 2,042 | 3,248 |
| Net capital profit attributable to ordinary shareholders (£000) | 8,433 | 33,019 | 41,486 |
| --------------- | --------------- | --------------- | |
| Total profit attributable to ordinary shareholders (£000) | 9,896 | 35,061 | 44,734 |
| --------------- | --------------- | --------------- | |
| Equity shareholders’ funds (£000) | 172,021 | 158,870 | 165,334 |
| ========= | ========= | ========= | |
| The weighted average number of ordinary shares in issue during the period on which the earnings per ordinary share was calculated was: | 80,229,044 | 79,829,958 | 80,031,140 |
| The actual number of ordinary shares in issue at the period end on which the net asset value per ordinary share was calculated was: | 80,229,044 | 80,229,044 | 80,229,044 |
| Earnings per ordinary share | |||
| Revenue earnings per share (pence) - basic and diluted | 1.82 | 2.56 | 4.06 |
| Capital earnings per share (pence) - basic and diluted | 10.51 | 41.36 | 51.84 |
| --------------- | --------------- | --------------- | |
| Total earnings per share (pence) - basic and diluted | 12.33 | 43.92 | 55.90 |
| ========= | ========= | ========= |
There were no dilutive securities at the period end (six months ended 30 April 2021: nil; year ended 31 October 2021: nil).
|
|
As at 30 April 2022 (unaudited) |
As at 30 April 2021 (unaudited) |
As at 31 October 2021 (audited) |
| Net asset value per ordinary share (pence) | 214.41 | 198.02 | 206.08 |
| Ordinary share price (pence) | 210.00 | 198.00 | 198.25 |
| ========= | ========= | ========= |
8. CALLED UP SHARE CAPITAL
|
(unaudited) |
Ordinary shares in issue number |
Treasury shares number |
Total shares number |
Nominal value £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 30 April 2022 | 80,229,044 | 20,132,261 | 100,361,305 | 1,004 |
| ========= | ========= | ========= | ========= |
During the six months ended 30 April 2022, no ordinary shares were reissued from treasury (six months ended 30 April 2021 and year ended 31 October 2021: 445,000 shares were reissued for a total consideration including costs of £886,000).
During the six months ended 30 April 2022, no shares were bought back and transferred into treasury (six months ended 30 April 2021 and year ended 31 October 2021: 190,000 shares were bought back and transferred into treasury for a total consideration including costs of £295,000).
Since 30 April 2022 and up to the date of this report, no ordinary shares have been reissued from treasury and no ordinary shares have been bought back and transferred into treasury.
9. RESERVES
The share premium and capital redemption reserve are not distributable profits 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 reserve may be used as distributable profits 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 capital reserve arising on the revaluation of investments of £19,243,000 (30 April 2021: gain of £18,671,000; year ended 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 it may not be entirely distributable. The investments are subject to financial risks, as such capital reserves (arising on investments sold) and the revenue reserve may not be entirely distributable if a loss occurred during the realisation of these investments.
10. VALUATION OF FINANCIAL INSTRUMENTS
Market risk arising from price risk
Price risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices (other than those arising from interest rate risk or currency risk), whether those changes are caused by factors specific to the individual financial instrument or its issuer, or factors affecting similar financial instruments traded in the market. Local, regional or global events such as war, acts of terrorism, the spread of infectious illness or other public health issue, recessions, climate change or other events could have a significant impact on the Company and its investments.
The infectious respiratory illness caused by a novel coronavirus known as COVID-19 has had a profound impact on all aspects of society over the last two years. While there is a growing consensus in developed economies that the worst of the impact is now over, there is an expectation that travel restrictions, enhanced health screenings at ports of entry and elsewhere, disruption of and delays in healthcare service preparation and delivery, cancellations, supply chain disruptions, and lower consumer demand will create ongoing challenges. While widescale vaccination programmes are now in place in many countries and are having a positive effect, the impact of COVID-19 continues to adversely affect the economies of many nations across the globe and this impact may be greater where vaccination rates are lower, such as in certain emerging markets. Although it is difficult to make timing predictions, it is expected that the economic effects of COVID-19 will continue to be felt for a period after the virus itself has moved from being pandemic to endemic in nature, and this in turn may continue to impact investments held by the Company.
Valuation of financial instruments
Financial assets and financial liabilities are either carried in the Statement of Financial Position at their fair value (investments and derivatives) 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) as set out on pages 83 and 84 of the Company’s Annual Report and Financial Statements for the year ended 31 October 2021.
Categorisation within the hierarchy has been determined on the basis of the lowest level input that is significant to the fair value measurement of the relevant asset.
The fair value hierarchy has the following levels:
Level 1 – Quoted market price for identical instruments in active markets
A financial instrument is regarded as quoted in an active market if quoted prices are readily available from an exchange, dealer, broker, industry group, pricing service or regulatory agency and those prices represent actual and regularly occurring market transactions on an arm’s length basis. The Company does not adjust the quoted price for these instruments.
Level 2 – Valuation techniques using observable inputs
This category includes instruments valued using quoted prices for similar instruments in markets that are considered less active, or other valuation techniques where 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.
Over-the-counter derivative option contracts have been classified as Level 2 investments as their valuation has been based on market observable inputs represented by the underlying quoted securities to which these contracts expose the Company.
Level 3 – Valuation techniques using significant unobservable inputs
This category includes all instruments where the valuation technique includes inputs not based on market data and these inputs could have a significant impact on the instrument’s valuation.
This category also includes all 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
For exchange listed equity investments the quoted price is the bid price. Substantially all investments are valued based on unadjusted quoted market prices. Where such quoted prices are readily available in an active market, such prices are not required to be assessed or adjusted for any price related risks, including climate risk, in accordance with the fair value related requirements of the Company’s financial reporting framework.
The table below sets out fair value measurements using the IFRS 13 fair value hierarchy.
|
Financial assets at fair value through profit or loss at 30 April 2022 (unaudited) |
Level 1 £000 |
Level 2 £000 |
Level 3 £000 |
Total £000 |
| Assets: | ||||
| Equity investments | 176,665 | – | – | 176,665 |
| --------------- | --------------- | --------------- | --------------- | |
| 176,665 | – | – | 176,665 | |
| ========= | ========= | ========= | ========= |
|
Financial assets/(liabilities) at fair value through profit or loss at 30 April 2021 (unaudited) |
Level 1 £000 |
Level 2 £000 |
Level 3 £000 |
Total £000 |
| Assets: | ||||
| Equity investments | 148,432 | – | – | 148,432 |
| Liabilities: | ||||
| Derivative financial instruments – written options | – | (885) | – | (885) |
| --------------- | --------------- | --------------- | --------------- | |
| 148,432 | (885) | – | 147,547 | |
| ========= | ========= | ========= | ========= |
|
Financial assets at fair value through profit or loss at 31 October 2021 (audited) |
Level 1 £000 |
Level 2 £000 |
Level 3 £000 |
Total £000 |
| Assets: | ||||
| Equity investments | 164,971 | – | – | 164,971 |
| --------------- | --------------- | --------------- | --------------- | |
| 164,971 | – | – | 164,971 | |
| ========= | ========= | ========= | ========= |
There were no transfers between levels for financial assets and financial liabilities during the period/year recorded at fair value as at 30 April 2022, 30 April 2021 and 31 October 2021. The Company did not hold any Level 3 securities throughout the financial period under review or as at 30 April 2022, 30 April 2021 and 31 October 2021.
11. RELATED PARTY DISCLOSURE
Directors’ emoluments
The Board consists of five non-executive Directors, all of whom are considered to be independent of the Manager by the Board. None of the Directors has a service contract with the Company. The Chairman receives an annual fee of £42,000, the Audit and Management Committee Chairman receives an annual fee of £35,000 and each of the Directors receives an annual fee of £29,000. At 30 April 2022, an amount of £14,000 (six months ended 30 April 2021: £14,000; year ended 31 October 2021: £14,000) was outstanding in respect of Directors’ fees.
At 30 April 2022, interests of the Directors in the ordinary shares of the Company are as set out below:
|
|
Six months ended 30 April 2022 (unaudited) |
Six months ended 30 April 2021 (unaudited) |
Year ended 31 October 2021 (audited) |
| Simon Miller (Chairman) | 38,094 | 38,094 | 38,094 |
| Christopher Casey | 19,047 | 19,047 | 19,047 |
| Andrew Irvine1 | n/a | 38,094 | 38,094 |
| Alice Ryder | 9,047 | 9,047 | 9,047 |
| Melanie Roberts | – | – | – |
| David Barron2 | – | n/a | n/a |
| ========= | ========= | ========= |
1 Retired on 22 March 2022.
2 Appointed on 22 March 2022.
Since the period end and up to the date of this report there have been no changes in Directors’ holdings.
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 on pages 46 and 47 of the Directors’ Report in the Company’s Annual Report and Financial Statements for the year ended 31 October 2021.
The investment management fee due for the six months ended 30 April 2022 amounted to £592,000 (six months ended 30 April 2021: £552,000; year ended 31 October 2021: £1,137,000). At the period end £1,177,000 was outstanding in respect of the investment management fee (six months ended 30 April 2021: £528,000; year ended 31 October 2021: £876,000).
In addition to the above services, BlackRock has provided the Company with marketing services. The total fees paid or payable for these services to 30 April 2022 amounted to £17,000 excluding VAT (six months ended 30 April 2021: £18,000; year ended 31 October 2021: £37,000). Marketing fees of £46,000 excluding VAT (30 April 2021: £50,000; 31 October 2021: £29,000) were outstanding as at 30 April 2022.
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 30 April 2022 (six months ended 30 April 2021: nil; year ended 31 October 2021: nil).
14. PUBLICATION OF NON STATUTORY ACCOUNTS
The financial information contained in this half yearly financial report does not constitute statutory accounts as defined in Section 435 of the Companies Act 2006. The financial information for the six months ended 30 April 2022 and 30 April 2021 has not been audited.
The information for the year ended 31 October 2021 has been extracted from the latest published audited financial statements which have been filed with the Registrar of Companies. The report of the auditors on those financial statements contained no qualifications or statement under Sections 498(2) or 498(3) of the Companies Act 2006.
15. ANNUAL RESULTS
The Board expects to announce the annual results for the year ending 31 October 2022 in early February 2023.
Copies of the annual results announcement can be obtained from the Secretary on 0207 743 3000 or cosec@blackrock.com. The Annual Report and Financial Statements should be available by the beginning of February 2023 with the Annual General Meeting being held in March 2023.
FOR FURTHER INFORMATION, PLEASE CONTACT:
Melissa Gallagher, Managing Director, Investment Trusts, BlackRock Investment Management (UK) Limited - Tel: 020 7743 3000
Press enquiries:
Lansons Communications – Tel: 020 7294 3689
E-mail: BlackRockInvestmentTrusts@lansons.com
29 June 2022
12 Throgmorton Avenue
London EC2N 2DL
END
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