Investment trusts

About this investment trust

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

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

Why choose it?

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

Suited to…

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

What are the risks?

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

Useful information

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

Fees & Charges

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Fund manager commentary

30 April 2024

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

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

Performance Overview:

The Company returned 1.9% during the month net of fees, underperforming the FTSE All-Share which returned 2.5%.

Market Summary:

Global equity markets fell in April, however, UK markets showed resilience as signs of easing inflation, expectations of interest rate cuts, and M&A activity helped improve investor sentiment.

The FTSE 100 rose steadily over the month, before reaching a record high of 8,147 points,¹ benefitting from the strength in oil, copper, and precious metals prices.

The healthcare and consumer staples sectors, which are significant dollar earners, also contributed to the UK market's strong relative performance, aided by sterling's weakness against the US currency².The strong performance also trickled down to UK small and mid-cap stocks, although not to the same extent, with the FTSE 250 ending 0.6% higher³.

US equities fell over the month of April as sticky inflation dampened hopes of near-term interest rate cuts from the Federal Reserve (Fed). Strong jobs market combined with elevated inflation has led Fed rate cuts to be pushed further out, with a June cut now appearing unlikely.

The European Central Bank, however, was more dovish as Eurozone inflation remained steady at 2.4% in April and economic data points to rate cuts in June⁴.

The FTSE All Share had rose by 2.5% during April with Basic Materials, Oil & Gas and Health Care as the top performing sectors (Blackrock, 30 April 2024).

Stock comments:

WH Smith was the top detractor during the period as progress in their US division disappointed though we believe that this is temporary and that there is still significant growth on offer in the region. Phoenix was another top detractor, having performed well post results in March, the shares reacted negatively to a sell-side broker downgrade. Segro fell during the month despite a reassuring trading update that demonstrated continued rental growth.

Rio Tinto rose reflecting the rebound in iron ore prices. NatWest rose following a robust trading update that highlighted the resilience of its Net Interest Income as headwinds from higher deposit costs fade. Tate & Lyle performed strongly during the month, although there was limited company specific newsflow during the month.

Changes:

During the month, we started a new position in Anglo American. We view BHP's bid for Anglo American as the beginning of a process which will result in a materially higher price when the deal is ultimately done. The approach from BHP highlights the importance and value of copper assets, a theme we also have exposure to through Weir, whose products and services support the mining industry.

Outlook

Equity markets entered 2024 in a buoyant mood following a strong and broad rally in the latter part of 2023. The outlook, and optimism, is a far cry from 12 months ago, when supply chains were hugely disrupted, and inflation was double digit and well ahead of central banks’ targets prompting rapid and substantial interest rates hikes despite an uncertain demand environment.. The FTSE All Share had returned by 7.9% in 2023 (BlackRock, 30 April 2024). China was the surprise negative in 2023, with no noticeable COVID re-opening recovery and lacklustre growth despite government attempts to stimulate.

As we pass the first quarter of 2024, markets have shifted to ‘goldilocks’ territory whereby slowing inflation has signalled the peak for interest rates while broad macroeconomic indicators that have been weak are not expected to deteriorate further. This is also helpful for the cost and availability of credit which has recently improved having been deteriorating through most of 2023. We believed that this quantum of cuts will prove to be overly aggressive without a significant deterioration in the economy which we don’t expect. That said despite these expectations moderating significantly during Q1, stock markets have continued to make progress in the developed world. Labour markets remain resilient for now with low levels of unemployment while real wage growth is supportive of consumer demand albeit presenting a challenge to corporate profit margins.

Notably in 2024, geopolitics will play a more significant role in asset markets. This year will see the biggest election year in history with more than 60 countries representing over half of the world’s population, While most, such as the UK’s are unlikely to have globally significant economic or geopolitical ramifications, others, such as the US elections in November, could have a material impact. We believe political certainty may be helpful for the UK and address the UK’s elevated risk premium that has persisted since the damaging Autumn budget of 2022. Whilst we do not position the portfolios for any particular election outcome, we are mindful of the potential volatility and the opportunities that may result.

As we have commented several times before, the UK stock market continues to remain depressed in, for example, price-to-equity-ratio 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 2023, standing at a respectable c.2.5%. Combining this with a dividend yield of with a dividend yield of 3.7% (FTSE All Share Index yield as at 30 April 2024 source: The Investment Association) 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 are emerging. As we have stated in previous commentaries, we have identified a number of potential opportunities with new positions initiated throughout the year in both UK domestic and midcap companies.

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 seeking to identify the companies that strengthen their long-term prospects as well as attractive turnarounds situations.

¹https://www.proactiveinvestors.com/companies/news/1046293/ftse-100-live-blue-chips-close-near-record-high-us-stocks-mixed-1046293.html (Proactive, 29 April)
²https://www.fxstreet.com/news/pound-sterling-falls-due-to-us-dollars-recovery-uncertainty-ahead-of-boes-policy-decision-202405080812
³https://www.reuters.com/markets/europe/anglo-american-boosts-londons-ftse-100-near-record-high-2024-05-03/
⁴https://www.reuters.com/markets/rates-bonds/ecb-rate-cut-case-getting-stronger-says-chief-economist-lane-2024-05-06/#:~:text=The%20ECB%20has%20all%20but,jobs%20data%20late%20last%20week.

Unless otherwise stated all data is sourced from BlackRock as of 30 April 2024

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

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

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

Portfolio manager biographies

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

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

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

Board of directors

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

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

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