Annual Financial Report

BlackRock Income and Growth Investment Trust plc Annual Report 31 October 2012 Performance Record As at As at 31 October 31 October Change 2012 2011 % Assets Net assets 1 (£'000) 41,947 40,687 +3.1 Net asset value per ordinary share 147.81p 139.62p +5.9 - with income reinvested +9.8 Ordinary share price (mid-market) 137.00p 133.00p +3.0 - with income reinvested +7.0 FTSE All-Share Index (total return) 4,338.32 3,951.27 +9.8 Discount to net asset value 7.3% 4.7% Year ended Year ended 31 October 31 October Change 2012 2011 % Revenue Net revenue after taxation (£'000) 1,290 1,366 -5.6 Revenue return per ordinary share 4.52p 4.46p +1.3 Dividends Interim 1.80p 1.80p - Final 3.45p 3.30p +4.5 Total dividends paid and payable 5.25p 5.10p +2.9 1 The change in net assets reflects market movements during the year and the purchase of the Company's own shares. Chairman's Statement Performance I am pleased to report that during the year under review the Company's net asset value per share ("NAV") and share price rose by 9.8% and 7.0% respectively. This represents a significant improvement on the results for the previous year. By comparison, the FTSE All-Share Index rose by 9.8% (all percentages with income reinvested). Since the year end the Company's NAV has risen by a further 2.4% compared with the rise in the benchmark of 2.9% over the same period. Investment Manager BlackRock Investment Management (UK) Limited ("BlackRock") has been the Investment Manager of the Company since 1 April 2012 having been appointed following a detailed review by the Board. BlackRock has considerable expertise in, and commitment to, the closed end funds sector and a strong record in managing equity portfolios which the Board believes has the potential to deliver significant performance improvement over the medium term. The Company's portfolio is now jointly managed by Nick McLeod-Clarke and Adam Avigdori, both members of the UK Equity team in the Fundamental Equity division of BlackRock's Portfolio Management Group. Nick and Adam are also co-managers of the BlackRock UK Income Fund. Subsequent to the announcement of BlackRock's appointment the portfolio was significantly restructured. New positions in global mining company BHP Billiton and independent media group Aegis together with Shire and British Sky Broadcasting, contributed positively to overall performance in the period. The table below shows the Company's performance (with income reinvested) for the full year under review, during which RCM (UK) Limited ("RCM") was the Investment Manager for the first five months, to 31 March 2012 and also for the seven months to 31 October 2012, being the period since the appointment of BlackRock as Investment Manager on 1 April 2012. 12 months 7 months to to 31 October 31 October 2012 2012 Net asset value 9.8% 4.7% Share price 7.0% 6.0% Benchmark* 9.8% 3.0% * FTSE All-Share Index (total return) Further information on the Company's performance is set out in the Investment Manager's Report. Revenue return and dividends The Company's revenue return per share for the year amounted to 4.52 pence compared with 4.46 pence for the previous year, an increase of 1.3%. The Directors are proposing a final dividend of 3.45 pence per share (2011: 3.30 pence per share) which gives a total for the year of 5.25 pence per share, and represents a 2.9% increase over the prior year (2011: 5.10 pence per share). The final dividend is payable on 8 March 2013 to shareholders on the Company's register at the close of business on 15 February 2013 (ex-dividend date is 13 February 2013). The proposed increase in the final dividend is the first for three years. At a time of low interest rates the Directors believe that this modest increase will be welcomed by shareholders whilst leaving retained reserves in the Company of £1,116,000 - equivalent to 3.90 pence per share. Discount and share buy backs The Directors recognise the importance of discount levels to investors and seek to contain the volatility and absolute level of the discount to NAV at which the Company's shares trade in relation to its peers in the sector. Accordingly, the Directors monitor the share rating closely and will consider share repurchases in the market if the discount to NAV widens significantly. The Directors have the authority from shareholders to buy back up to 14.99% of the Company's issued share capital. This authority to buy back shares expires at the conclusion of the 2013 Annual General Meeting, and a resolution will be put to shareholders to renew it. The policy and parameters for purchasing shares in the market are set by the Board and are reviewed at regular intervals. 761,552 ordinary shares were purchased for cancellation during the year for a total consideration of £970,000 (excluding costs). 500,000 ordinary shares were also cancelled from treasury on 23 January 2012. Gearing The Company operates a flexible gearing policy which depends on prevailing conditions and is subject to a maximum level of 20% of net assets at the time of investment. The maximum gearing used during the year was 7.7% and at 31 October 2012 net gearing was 4.0%. The Company currently has an unsecured sterling revolving credit facility of £5 million with ING Bank N.V., with a maturity date of 31 October 2013. Company name The Company held a General Meeting on 17 April 2012, at which shareholders resolved to change the Company's name from British Portfolio Trust plc to BlackRock Income and Growth Investment Trust plc. The change of name was effected on 18 April 2012. BlackRock met the cost of changing the Company's name. AIC classification Prior to the change of Investment Manager on 1 April 2012, the Company moved from the AIC UK Growth Sector to the UK Growth & Income Sector classification to reflect the Company's continuing focus on both growth and income. Annual General Meeting The Company's Annual General Meeting will be held on Wednesday, 6 February 2013 at 12 noon at the offices of BlackRock at 12 Throgmorton Avenue, London EC2N 2DL. The Investment Manager will make a presentation to shareholders on the Company's progress and the outlook for the year ahead. The Retail Distribution Review and the Alternative Fund Managers Directive The current financial year will see the implementation of two important regulatory initiatives, both of which will have a significant impact on the Investment Trust sector. From 1 January 2013 the implementation of the Financial Services Authority's Retail Distribution Review ("RDR") means that advisers will in the future have to charge directly rather than receiving commissions from the funds in which their clients' invest. Investment trusts should then be on a level playing field with their open ended counterparts such as unit trusts. We hope that over time more investors will see the attraction of investing in investment trusts which are comparatively low cost, have the ability to gear to enhance overall returns and provide a quoted stock which is tradeable in the market. In addition, as part of the FSA's platform review, which will be implemented in 2014, open ended funds will be on the same footing as investment trusts as payments from funds to platforms will also be prohibited. We anticipate that strongly performing investment trusts will see increased demand from retail platforms and online brokers. The implementation of the Alternative Investment Fund Managers Directive will require all investment trusts to appoint an Alternative Investment Fund Manager ("AIFM") or become an AIFM themselves and, for most investment trusts, also to appoint an independent Depositary. The latter is likely to fulfill a broader role than that currently performed by the custodian, and will be obliged to ensure that funds comply with the relevant rules on portfolio composition and diversification. We expect the implementation of the AIFMD will be effective from 22 July 2013. Outlook It is now clear that the financial crisis of 2008/9 will continue to influence the global economy for some time to come. Although the effects are most evident in the recurring problems of the Eurozone, high levels of debt in much of the developed world continue to exert a strong drag on the speed at which the global economy is able to recover to its previous levels of output and growth. Subdued economic growth in itself may not prevent equity markets achieving reasonable returns in the future compared to competing asset classes, as current dividend yields and valuations should provide an attractive entry point for long term investors. However, it does reinforce the merit of the investment approach followed by our Investment Manager which blends higher income producing shares with those which have the prospect of capital growth. In a low growth environment, the cyclical bias of a portfolio comprising solely of high yielding shares could well struggle to provide dividend growth in the long term. Your Board believes that growth in both income and capital value is an essential and necessary ingredient for the portfolio to achieve superior returns over the medium term. Jonathan Cartwright Chairman 18 December 2012 Principal risks The key risks faced by the Company are set out below. The Board regularly reviews and agrees policies for managing each risk, as summarised below. - Performance risk - The Board is responsible for deciding the investment strategy to fulfil the Company's objective and monitoring the performance of the Investment Manager. An inappropriate strategy may lead to underperformance against the reference index and the Company's peer group. To manage this risk the Investment Manager provides an explanation of significant stock selection decisions and the rationale for the composition of the investment portfolio. The Board monitors and maintains an adequate spread of investments in order to minimise the risks associated with particular countries (including the risk of government intervention and confiscation of assets) or factors specific to particular sectors, based on the diversification requirements inherent in the Company's investment policy. The Board also receives and reviews regular reports showing an analysis of the Company's performance against the FTSE All-Share Index (total return) and its peer group. - Income/dividend risk - The amount of dividends and future dividend growth will depend on the Company's underlying portfolio. Any change in the tax treatment of the dividends or interest received by the Company (including as a result of withholding taxes or exchange controls imposed by jurisdictions in which the Company invests) may reduce the level of dividends received by shareholders. The Board monitors this risk through the receipt of detailed income forecasts and considers the level of income at each meeting. - Regulatory risk - The Company operates as an investment trust in accordance with the requirements of Chapter 4 of Part 24 of the Corporation Tax Act 2010. As such, the Company is exempt from capital gains tax on the sale of its investments. The Investment Manager monitors investment movements, the level and type of forecast income and expenditure and the amount of quarterly dividends to ensure that the provisions of Chapter 4 of Part 24 of the Corporation Tax Act 2010 are not breached and the results are reported to the Board at each meeting. The Company must also comply with the provisions of the Companies Act 2006 and, as its shares are admitted to the Official List, the UKLA Listing Rules, the Disclosure and Transparency Rules and the Prospectus Rules. A breach of The Companies Act 2006 could result in the Company and/or the Directors being fined or the subject of criminal proceedings. Breach of the UKLA Listing Rules could result in the Company's shares being suspended from listing, which in turn would breach the requirements of Chapter 4 of Part 24 of the Corporation Tax Act 2010. The Board relies on the services of its professional advisers and its Company Secretary to ensure compliance with all relevant regulations. The Company Secretary has stringent compliance procedures in place and closely monitors regulatory developments and changes. - Operational risk - In common with most other investment trust companies, the Company has no employees. The Company therefore relies upon the services provided by third parties and is dependent on the control systems of the Investment Manager and the Company's other service providers. The security, for example, of the Company's assets, dealing procedures, accounting records and maintenance of regulatory and legal requirements, depend on the effective operation of these systems. These are regularly tested and monitored and an internal control report, which includes an assessment of risks together with procedures to mitigate such risks, is prepared by the Investment Manager and reviewed by the Audit Committee at least twice a year. The custodian and the Investment Manager also produce annual internal control reports, which are reviewed by their respective auditors and give assurance regarding the effective operation of controls and are also reviewed by the Audit Committee. - Market risk - Market risk arises from volatility in the prices of the Company's investments. It represents the potential loss the Company might suffer through holding investments in the face of negative market movements. The Board considers asset allocation, stock selection, unquoted investments and levels of gearing on a regular basis and has set investment restrictions and guidelines which are monitored and reported on by the Investment Manager. The Board monitors the implementation and results of the investment process with the Investment Manager. - Financial risk - The Company's investment activities expose it to a variety of financial risks that include market price risk, foreign currency risk, liquidity risk, credit risk and interest rate risk. - Gearing risk - The use of gearing creates special risks and may materially increase the Company's investment risk. Gearing provides an opportunity for greater returns but, at the same time, increases the Company's exposure to capital risk and interest costs. Any investment income and gains earned on investments made through the use of gearing that are in excess of the costs associated therewith may cause the Company's NAV to increase further and more rapidly than would otherwise be the case. Conversely, where investments depreciate, the Company's NAV may decrease further and more rapidly than would otherwise be the case. Gearing costs also decrease gains and income and increase losses and costs. The use of gearing in making investments increases the Company's exposure to market fluctuations and creates the possibility that where the investment depreciates the Company's overall loss may be greater than the sum invested. - Third party risk - The Company has no employees and the Directors have all been appointed on a non-executive basis. The Company must therefore rely upon the performance of third party service providers to perform its executive functions. In particular, the Investment Manager, the Administrator, the Registrar, the Custodian and their respective delegates, if any, will perform services that are integral to the Company's operations and financial performance. Failure by any service provider to carry out its obligations to the Company in accordance with the terms of its appointment, to exercise due care and skill, or to perform its obligations to the Company at all as a result of insolvency, bankruptcy or other causes could have a material adverse effect on the Company's performance and returns to holders of Ordinary Shares. The termination of the Company's relationship with any third party service provider or any delay in appointing a replacement for such service provider, could materially disrupt the business of the Company and could have a material adverse effect on the Company's performance and returns to holders of Ordinary Shares. Related party transactions BlackRock Investment Management (UK) Limited, the Investment Manager, is considered to be a related party of the Company. Transactions and relationship details are set out in the Director's Report and in note 4 of the Annual Report. The Board consists of four non-executive Directors, all of whom are considered to be independent by the Board. None of the Directors has a service contract with the Company. The Chairman receives an annual fee of £25,000, the Chairman of the Audit Committee receives an annual fee of £19,500 and each other Director receives an annual fee of £17,000. Three members of the Board hold shares in the Company, both Jonathan Cartwright and Nicholas Gold hold 20,000 ordinary shares and Charles Worsley holds 332,039 ordinary shares, excluding a non-beneficial interest in 155,500 ordinary shares. George Luckraft does not hold any shares in the Company at this time. Statement of Directors' responsibilities In accordance with Disclosure and Transparency Rule 4.1.12, each of the Directors confirm to the best of their knowledge that: - the financial statements, prepared in accordance with applicable accounting standards, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company; and - the annual report includes a fair review of the development and performance of the business and the position of the Company, together with a description of the principal risks and uncertainties that it faces. For and on behalf of the Board of Directors Jonathan Cartwright 18 December 2012 Investment Manager's Report Performance For the year ended 31 October 2012, the NAV returned 9.8% and the share price 7.0% whilst the FTSE All-Share Index returned 9.8%. (All percentages are in sterling with income reinvested). For the seven months ended 31 October 2012, the period during which BlackRock has been responsible for managing the Company, the NAV returned 4.7%, outperforming the FTSE All-Share Index which returned 3.0%. The share price rose by 6.0% over the same period. Portfolio performance for the year ended 31 October 2012 Performance of portfolio benchmark (total return)* 9.8% Performance of the investment portfolio against benchmark: - from 1 November 2011 to 31 March 2012 - due to stock selection -0.4% - due to asset allocation -0.4% - effect of gearing 0.2% -0.6% ----- - from 1 April 2012 to 31 October 2012 - due to stock selection 1.6% - due to asset allocation 0.4% - effect of gearing 0.4% 2.4% ----- 11.6% Other factors Fees and expenses -1.9% Impact of repurchasing ordinary shares 0.1% -1.8% ----- ----- Net asset value total return (with dividends 9.8% re-invested) ----- * The movement in the benchmark index over the year is calculated on a total return basis. Performance and Portfolio Activity up to 1 April 2012 In the period up to 1 April 2012, the portfolio was managed by RCM. As previously reported in the Half Yearly Report, two new stocks were added to the portfolio in November: AZ Electronic Materials, a niche provider of speciality chemicals to the semiconductor industry, and Xstrata, the diversified mining company. In December, Britvic the soft drinks company was bought on the basis that margins appeared to have stabilised and new product initiatives offered scope to improve sales. This investment was funded from reductions in Barclays and Inmarsat. In early 2012, RCM added two financials, HSBC and Tullett Prebon which in their view offered attractive absolute valuations at a time when liquidity from the European Central Bank, in the form of its long term refinancing operations, had improved the trading environment for financials and reduced downside risk in the sector. These purchases were funded by profit taking in some defensive sectors that had performed particularly well in the final months of 2011 including Bunzl, Sage and Unilever. Following the review by the Board of the Company's management arrangements which led to the appointment of BlackRock as the Investment Manager, the portfolio was substantially re-organised at the end of March to reflect BlackRock's preferred portfolio. This re-organisation was executed by RCM through a `program trade' which ensured that the portfolio was rapidly and efficiently re-organised in a cost effective way. This process was completed by the end of March. BlackRock's UK Equity Income Investment Philosophy Our team's investment approach can be characterised as a "barbell" strategy, driven by the belief that a carefully selected portfolio can achieve an income yield at an appropriate premium to the market with the prospect of both capital and income growth. By blending higher yielding securities with others that have greater potential for capital growth we believe that the long term investment prospects are enhanced. First, the income end of the barbell is designed to capture the majority of the portfolio's income requirement. Secondly, at the opposite end of the barbell, the portfolio can invest in equities that the team believes will deliver above average profit growth in future but that often have lower than average yields. This approach gives us the flexibility to include all of our strongest investment ideas within the portfolio. It also gives us the flexibility to vary the portfolio's overall investment characteristics as the investment cycle develops - a feature not often associated with income funds. We use fundamental research to identify undervalued shares, focusing on management quality, corporate strategy and competitive factors. Our aim is to outperform the benchmark through stock selection rather than through market timing or permanently choosing a particular style of equity. Market comment Equity markets were initially weak in the second quarter of 2012 as global growth faltered. The European debt crisis became sovereign in nature, and this uncertainty caused continued falls in individual share prices and wider equity markets most exposed to slowing European economies. Resource stocks led the list of fallers due to fears that slowing growth will cause a fall in commodity prices at a time when most companies have committed to large capital spending plans that may stretch their balance sheets. Bank shares were also weak as the sovereign debt crisis in Europe has negative consequences for bank funding costs and for the wider revenue environment. Equity markets subsequently rose in the third quarter in response to stimulus measures provided by the Federal Reserve, the European Central Bank and the Bank of Japan. The rally was strongest in European peripheral markets as policy-makers, notably Mario Draghi, President of the European Central Bank, signalled an intention to do whatever is necessary to underpin the Eurozone. Markets also benefited from an earnings season that was relatively benign with few notable disappointments. The market's rally left behind the more defensive shares: tobacco, mobile telecommunications and oil producers were the biggest negative contributors to relative performance in the period. Financials, led by banks and life assurance, rallied strongly towards the end of the quarter as Eurozone risks were perceived to have diminished. October was the fifth consecutive month of positive performance for UK equities, helped by better macroeconomic data from the US and elsewhere, with a mix of cyclicals and financials the strongest contributors to performance. However, the month was not so good for companies with more defensive earnings, which were amongst the most negative contributors to market performance - especially companies in the oil & gas, telecommunications, pharmaceuticals and tobacco sectors. Performance of the portfolio On the positive side, one of the strongest contributors to performance was technology company CSR, a global provider of multi-function semiconductor platforms. The company performed well following the announcement of the proposed transfer of its handset connectivity and location development operations and technology to Samsung. Shares of business information and exhibitions group UBM also performed well. UBM reported an encouraging set of interim figures, with the exhibitions and conferences business, which is mainly focused on emerging markets and China in particular, delivering growth ahead of market expectations. The bid by Japanese marketing agency Dentsu for UK media group Aegis, an independent media planner and buyer, also helped performance. Aegis's status as the last, significant, independent media-buying agency made it an attractive target, particularly since it has been delivering strong organic growth. Owning copper miner Antofagasta was helpful as its shares held up as the copper price strengthened in September. Positive contributors also included software provider Playtech, which continued to see improving demand for its gaming technologies, and plumbing goods supplier Wolseley, which benefited from signs that the US housing market is reviving, despite reporting a challenging period for its European business. Positions across the oil & gas sector had a mixed impact on performance. Tullow Oil weakened, in part due to worries over increasing costs in Uganda, although the company noted that the discoveries there were likely to contain a higher proportion of oil to gas than had originally been thought. This was partially offset by not owning BG Group, which underperformed on continuing concerns regarding the delivery of demanding production targets. These fears were confirmed late in October when BG announced that it expects no production growth for 2013 compared to market expectations of circa 7% growth. These production delays have led to earnings being downgraded for next year, impacting the share price. The holding of specialty pharmaceuticals company Shire produced negative returns. The company focuses on Attention Deficit and Hyperactivity Disorders (ADHD) and Human Genetic Therapies. These therapeutic areas offer, respectively, rapid growth due to expansion into the adult market and excellent barriers to entry given the rarity of the diseases being addressed. We believe that Shire's leading market positions in these fast growing areas should enable the company to generate sustained earnings growth over the medium term. However, in this period the shares performed poorly after a series of late-stage product development set-backs for new drugs and legal challenges to the ADHD franchise. Finally, not owning Barclays in the third quarter of 2012, produced negative returns as its share price bounced on decent results and on improving market sentiment, aided by the perception that eurozone risks appeared to have diminished. Outlook/Strategy The recent downward trend in macroeconomic data has arrested and the environment appears to have stabilised, suggesting that a period of consolidation is underway. European equities have been rising since June, and the clearest indication of the change in sentiment is evidenced by the strong rebound in Greek equities. Interventions by the ECB, the Federal Reserve and the Japanese Central Bank provided a great deal of liquidity which may have reduced downside risk in the short term but to be effective, this needs to translate into economic growth. The macro environment remains stable but depressed, and a wide range of outcomes are still possible. Overall, UK equity valuations still look attractive compared to those of most other asset classes, with the prospect of high quality earnings and dividend growth. We expect domestic consumption to remain under pressure and hence we prefer to hold positions in companies with exposure to growth markets. The UK equity market has considerable exposure to overseas earnings and provides many good investment opportunities. We expect market volatility to continue, driven by policy uncertainty, and consequently we continue to focus on stock selection. We retain our preference for companies with high quality franchises that can still prosper in a difficult environment and continue to position the portfolio towards companies that offer strong market positions, robust cash generation, a track record of consistent growth or a clear catalyst for change, and a solid balance sheet. Nick McLeod-Clarke and Adam Avigdori BlackRock Investment Management (UK) Limited 18 December 2012 Ten Largest Investments 31 October 2012 Royal Dutch Shell `B' - 7.8% (2011: 5.0%, www.shell.com) is one of the world's largest independent oil and gas companies. It operates in three segments: upstream, downstream and corporate. Upstream is engaged in searching for and recovering crude oil and natural gas; the liquefaction and transportation of gas; the extraction of bitumen from oil sands. Downstream is engaged in manufacturing; distribution and marketing activities for oil products and chemicals, in alternative energy (excluding wind), and carbon dioxide management. Corporate represents the key support functions. HSBC - 7.4% (2011: 5.0%, www.hsbc.com) is one of the world's largest banking and financial services organisations. Its main businesses include, personal financial services, commercial banking and two global businesses, global banking and markets, and global private banking. Its international network covers 87 countries and territories in six geographical regions; Europe, Hong Kong, rest of Asia-Pacific, the Middle East, North America and Latin America. Vodafone Group - 5.6% (2011: 6.0%, www.vodafone.com) is a global mobile communications company providing a range of communications services including voice, messaging, data and fixed-line solutions. It operates in Europe, Africa, Asia Pacific and the Middle East, and has an investment in Verizon Wireless in the United States. British American Tobacco - 5.0% (2011: nil, www.bat.com) is one of the world's largest tobacco companies selling in approximately 180 countries worldwide. Their four principal brands include Dunhill, Kent, Lucky Strike and Pall Mall. Its other international brands include Vogue, Viceroy, Rothmans, Kool, Peter Stuyvesant, Benson & Hedges, State Express 555 and John Player Gold Leaf. Tullow Oil - 4.2% (2011: nil, www.tullowoil.com) is an independent oil and gas company with licences in 15 countries. The Company is principally engaged in oil and gas exploration, development and production and has operations in the North Sea, Uganda, Ghana, South America and Kenya. Antofagasta - 3.9% (2011: nil, www.antofagasta.co.uk) is a copper mining company with its activities mainly concentrated in Chile. Mines include Los Pelambres, El Tesoro and Esperanza. UBM - 3.6% (2011: 1.4%, www.ubm.com) United Business Media's businesses include events, data services, online, print-magazines, targeting, distribution and monitoring. In recent years the events business has grown strongly, particularly in emerging economies. GlaxoSmithKline - 3.5% (2011: 7.5%, www.gsk.com) is a global healthcare group, operating in three main areas: pharmaceuticals, vaccines and consumer healthcare. It is engaged in the creation and discovery, development, manufacture and marketing of pharmaceutical products, including vaccines, over-the-counter medicines and health-related consumer products. Tate & Lyle - 3.1% (2011: nil, www.tateandlyle.com) is the holding company for an international group of companies that produce and market ingredients and solutions for the food, beverage, industrials and agriculture industries around the world. The company's range of products includes nutritive sweeteners, industrial starches, ethanol, acidulants and animal feed. AstraZeneca - 3.0% (2011: nil, www.astrazeneca.co.uk) is a holding company whose subsidiaries research, manufacture, and sell pharmaceutical and medical products. AstraZeneca focuses its operations on eight therapeutic areas: Gastrointestinal, Oncology, Cardiovascular, Respiratory, Central Nervous System, Pain Control, Anaesthesia, and Infection. All percentages reflect the value of the holding as a percentage of total investments. The percentages in brackets represent the value of the holding as at 31 October 2011. Distribution of Investments As at 31 October 2012 Analysis of portfolio by sector % of % of portfolio benchmark Oil & Gas Producers 13.6 16.3 Banks 10.0 11 Pharmaceuticals & Biotechnology 9.0 6.9 Mining 7.7 9.2 Tobacco 7.7 4.8 Media 6.5 2.8 Mobile Telecommunications 5.6 4.9 General Retailers 4.6 1.7 Non-life Insurance 3.7 0.9 Life Insurance 3.6 3.4 Food Producers 3.1 2.2 Support Services 2.9 4.1 Gas, Water & Multiutilities 2.6 3.1 Aerospace & Defence 2.4 2 Equity Investment Instruments 2.3 3 Electronic & Electrical Equipment 2.1 0.5 Electricity 2.0 0.9 Real Estate Investment & Services 1.8 0.4 General Financial 1.6 0.1 Technology Hardware & Equipment 1.4 0.7 Software & Computer Services 1.3 0.7 Oil Equipment, Services & Distribution 1.0 0.7 Industrial Engineering 0.9 0.9 Financial Services 0.6 1.7 Cash and Cash Equivalents 2.0 0 Source: BlackRock and Datastream Investment Size Investment Number of % of Size Investments portfolio <£1m 19 27.47 £1m to £2m 16 46.69 £2m to £3m 4 25.84 Source: BlackRock Investments as at 31 October 2012 Market value % of £'000 Investments Oil & Gas Producers Royal Dutch Shell `B' 3,482 7.8 Tullow Oil 1,845 4.2 Soco International 711 1.6 6,038 13.6 Banks HSBC 3,314 7.4 Standard Chartered 1,166 2.6 4,480 10.0 Pharmaceuticals & Biotechnology GlaxoSmithKline 1,547 3.5 AstraZeneca 1,321 3.0 Shire 1,114 2.5 3,982 9.0 Mining Antofagasta 1,749 3.9 Rio Tinto 928 2.1 BHP Billiton 765 1.7 3,442 7.7 Tobacco British American Tobacco 2,227 5.0 Imperial Tobacco 1,202 2.7 3,429 7.7 Media UBM 1,601 3.6 British Sky Broadcasting 1,275 2.9 2,876 6.5 Mobile Telecommunications Vodafone Group 2,473 5.6 2,473 5.6 General Retailers Kingfisher 891 2.0 Carphone Warehouse 692 1.5 Halfords 475 1.1 2,058 4.6 Non-life Insurance Lancashire Holdings 1,008 2.3 Admiral 609 1.4 1,617 3.7 Life Insurance Prudential 1,041 2.3 Aviva 562 1.3 1,603 3.6 Food Producers Tate & Lyle 1,384 3.1 1,384 3.1 Support Services Wolseley 1,284 2.9 1,284 2.9 Gas, Water & Multiutilities Severn Trent 1,151 2.6 1,151 2.6 Aerospace & Defence Rolls Royce* 1,046 2.4 1,046 2.4 Equity Investment Instruments 3i Infrastructure 1,040 2.3 1,040 2.3 Electronic & Electrical Equipment Spectris 919 2.1 919 2.1 Electricity SSE 899 2.0 899 2.0 Real Estate Investment & Services Capital & Counties 805 1.8 805 1.8 General Financial Jupiter Fund Managers 734 1.6 734 1.6 Technology Hardware & Equipment CSR 613 1.4 613 1.4 Software & Computer Services Playtech 597 1.3 597 1.3 Oil Equipment, Services & Distribution Wood Group 440 1.0 440 1.0 Industrial Engineering Melrose 420 0.9 420 0.9 Financial Services 3i 216 0.5 Paragon 65 0.1 281 0.6 43,611 98.0 Cash and Cash Equivalents BlackRock Institutional Cash Fund 884 2.0 884 2.0 TOTAL VALUE OF SECURITIES 44,495 100.0 * Includes preference shares All investments are in ordinary shares unless otherwise stated. The total number of holdings as at 31 October 2012 was 39 (31 October 2011: 48) Income Statement for the year ended 31 October 2012 Revenue Revenue Capital Capital Total Total 2012 2011 2012 2011 2012 2011 Notes £'000 £'000 £'000 £'000 £'000 £'000 Gains/(losses) on investments at fair value through profit or loss 11 - - 2,788 (2,086) 2,788 (2,086) Investment income 3 1,658 1,668 - - 1,658 1,668 Other income 3 - 5 - - - 5 Investment management and performance fees 4 (89) (107) (203) (172) (292) (279) Other operating expenses 5 (265) (192) (145) (5) (410) (197) ------- ------- ------- ------- ------- ------- Net return/(loss) before finance costs and taxation 1,304 1,374 2,440 (2,263) 3,744 (889) Finance costs 7 (14) (8) (41) (22) (55) (30) ------- ------- ------- ------- ------- ------- Return/(loss) on ordinary activities before taxation 1,290 1,366 2,399 (2,285) 3,689 (919) Taxation 8 - - - - - - ------- ------- ------- ------- ------- ------- Return/(loss) on ordinary activities after taxation 10 1,290 1,366 2,399 (2,285) 3,689 (919) ======= ======= ======= ======= ======= ======= Return/(loss) per ordinary share 10 4.52p 4.46p 8.41p (7.46p) 12.93p (3.00p) (basic and diluted) ======= ======= ======= ======= ======= ======= The total column of this statement represents the Income Statement of the Company. The supplementary revenue and capital columns are both prepared under guidance published by the Association of Investment Companies ("AIC"). The Company had no recognised gains or losses other than those disclosed in the Income Statement and the Reconciliation of Movements in Shareholders' Funds. All items in the above statement derive from continuing operations. No operations were acquired or discontinued during the year. Reconciliation of Movement in Shareholders' Funds for the year ended 31 October 2012 Called-up Share Capital share premium redemption Special Capital Revenue capital account reserve reserve reserves reserve Total Notes £'000 £'000 £'000 £'000 £'000 £'000 £'000 For the year ended 31 October 2012 At 31 October 2011 342 14,819 207 27,379 (4,316) 2,256 40,687 Return for the year - - - - 2,399 1,290 3,689 Shares purchased (8) - 8 (978) - - (978) Cancellation of shares held in treasury (5) - 5 - - - - Dividends paid* 9 - - - - - (1,451) (1,451) ------- ------- ------- ------- ------- ------- ------- At 31 October 2012 329 14,819 220 26,401 (1,917) 2,095 41,947 ------- ------- ------- ------- ------- ------- ------- For the year ended 31 October 2011 At 31 October 2010 368 14,819 181 30,224 (2,031) 2,462 46,023 (Loss)/return for the year - - - - (2,285) 1,366 (919) Shares purchased (21) - 21 (2,845) - - (2,845) Cancellation of shares held in treasury (5) - 5 - - - - Dividends paid** 9 - - - - - (1,572) (1,572) ------- ------- ------- ------- ------- ------- ------- At 31 October 2011 342 14,819 207 27,379 (4,316) 2,256 40,687 ------- ------- ------- ------- ------- ------- ------- * Final dividend of 3.30p per share for the year ended 31 October 2011, declared on 21 December 2011 and paid on 1 March 2012, and the interim dividend of 1.80p per share for the six months ended 30 April 2012, declared on 15 June 2012 and paid on 7 September 2012. ** Final dividend of 3.30p per share for the year ended 31 October 2010, declared on 23 December 2010 and paid on 3 March 2011, and the interim dividend of 1.80p per share for the six months ended 30 April 2011, declared on 16 June 2011 and paid on 1 September 2011. Balance Sheet as at 31 October 2012 2012 2011 Notes £'000 £'000 Fixed assets Investments held at fair value through profit or loss 11 44,495 40,210 Current assets Debtors 12 108 491 Cash at bank 101 2,159 ------- ------- 209 2,650 Current liabilities Bank loan 14 (2,000) (2,000) Other creditors 14 (757) (173) ------- ------- (2,757) (2,173) ------- ------- Net current (liabilities)/assets (2,548) 477 ------- ------- Net assets 41,947 40,687 ======= ======= Capital and reserves Called-up share capital 15 329 342 Share premium account 16 14,819 14,819 Capital redemption reserve 16 220 207 Special reserve 17 26,401 27,379 Capital reserves 16 (1,917) (4,316) Revenue reserve 17 2,095 2,256 ------- ------- Total equity shareholders' funds 10 41,947 40,687 ======= ======= Net asset value per ordinary share - basic and diluted 10 147.81p 139.62p ======= ======= The financial statements were approved and authorised for issue by the Board of Directors on 18 December 2012 and signed on its behalf by Mr J H Cartwright, Chairman. BlackRock Income and Growth Investment Trust plc Registered in England. No. 4223927 Cash Flow Statement for the year ended 31 October 2012 2012 2011 Notes £'000 £'000 Net cash inflow from operating activities 5(b) 1,158 1,066 Returns on investment and servicing of finance Interest paid (43) (30) Capital expenditure and financial investment Purchases of investments (52,113) (14,708) Proceeds from sales of investments 51,369 18,224 ------- ------- Net cash (outflow)/inflow from capital expenditure (744) 3,516 and financial investment ------- ------- Equity dividends paid 9 (1,451) (1,572) ------- ------- Net cash (outflow)/inflow before financing (1,080) 2,980 Financing Repurchase of ordinary shares (978) (2,844) Repayment of bank loan (2,000) (2,000) Drawdown of bank loan 2,000 3,000 ------- ------- Net cash outflow from financing (978) (1,844) ------- ------- (Decrease)/increase in cash in the year 13 (2,058) 1,135 ======= ======= Notes to the Financial Statements for the year ended 31 October 2012 1. Principal activity The Company conducts its business so as to qualify as an investment trust company within the meaning of sub-section 1158 of the Corporation Tax Act 2010. 2. Accounting policies The principal accounting policies adopted by the Company are set out below. (a) Basis of preparation The Company's financial statements have been prepared under the historical cost convention, modified to include the revaluation of investments, and in accordance with the United Kingdom law and United Kingdom Generally Accepted Accounting Practice (UK GAAP) and the Statement of Recommended Practice - `Financial Statements of Investment Trust Companies and Venture Capital Trusts' (SORP) issued in January 2009 by the Association of Investment Companies (AIC). All of the Company's operations are of a continuing nature. The Company's financial statements are presented in sterling, which is the currency of the primary economic environment in which the Company operates. All values are rounded to the nearest thousand pounds (£'000) except where otherwise indicated. (b) Presentation of Income Statement In order to better reflect the activities of an investment trust company and in accordance with guidance issued by the AIC, supplementary information which analyses the Income Statement between items of a revenue and capital nature has been presented alongside the Income Statement. In accordance with the Company's status as a UK investment trust under the old provisions of section 1158 of the Corporation Tax Act 2010, net capital returns may not be distributed by way of dividend. The accounting policies adopted in preparing the current year's financial statements are consistent with those of previous years. (c) Going concern The Directors believe that it is appropriate to continue to adopt the going concern basis in preparing the financial statements as the assets of the Company consist mainly of securities which are readily realisable and, accordingly, that the Company has adequate financial resources to continue in operational existence for the foreseeable future. The Company's business, the principal risks and uncertainties it faces, together with the factors likely to affect its future development, performance and position are set out in the Directors' Report, Business Review section on pages 15 and 16 of the Annual Report. As a consequence, the Directors believe that the Company is well placed to manage its business risks successfully despite the current uncertain economic outlook. Thus they continue to adopt the going concern basis of accounting in preparing the annual financial statements. (d) Segmental reporting The Directors are of the opinion that the Company is engaged in a single segment of business, being investment business. The Company invests principally in UK listed equities and its investment income comprises dividends from these UK listed equities. (e) Income Dividends receivable on equity shares are accounted for on an ex-dividend basis. Where no ex-dividend date is available, dividends receivable on or before the year end are treated as revenue for the year. UK dividends are shown net of tax credits. Income from convertible securities having an element of equity is recognised on an accruals basis. Provisions are made for dividends not expected to be received. Fixed returns on non-equity shares and debt securities are recognised on a time apportionment basis so as to reflect the effective yield on the investment. Special dividends are recognised on an ex-dividend basis and treated as a capital or revenue item depending on the facts and circumstances of each dividend. Where the Company has elected to receive its dividends in the form of additional shares rather than in cash, the cash equivalent of the dividend is recognised as income. Any excess in the value of the shares received over the amount of the cash dividend is recognised in capital reserves. Deposit interest receivable is accounted for on an accruals basis. Underwriting commission is recognised when the issue underwritten closes. (f) Expenses All expenses are accounted for on an accruals basis. Expenses have been treated as revenue except as follows: - expenses including finance costs which are incidental to the acquisition or disposal of investments are included within the cost of the investments. Details of transaction costs on the purchases and sales of investments are disclosed in note 11; - the investment management fee has been allocated 75% to the capital column and 25% to the revenue column of the Income Statement in line with the Board's expected long term split of returns, in the form of capital gains and income respectively, from the investment portfolio. - legal and professional fees incurred in connection with the change of Investment Manager have been allocated 75% to capital and 25% to revenue. - performance fees have been allocated 100% to the capital column of the Income Statement, as performance has been predominantly generated through capital returns of the investment portfolio. (g) Finance costs Finance costs are accounted for on an accruals basis. Finance costs are allocated, insofar as they relate to the financing of the Company's investments, 75% to the capital column and 25% to the revenue column of the Income Statement, in line with the Board's expected long term split of returns, in the form of capital gains and income respectively, from the investment portfolio. (h) Investments held at fair value through profit or loss As the Company's business is investing in financial assets with a view to profiting from their total return in the form of increases in fair value, financial assets are designated as held at fair value through profit or loss in accordance with FRS 26 `Financial Instruments: Recognition and Measurement'. The Company manages and evaluates the performance of these investments on a fair value basis in accordance with its investment strategy, and information about the investments is provided on this basis to the Board of Directors. Investments held at fair value through profit or loss are initially recognised at fair value. After initial recognition, these continue to be measured at fair value, which for quoted investments is either the bid price or the last traded price depending on the convention of the exchange on which the investment is listed. Purchases and sales of financial assets are recognised on the trade date, being the date which the Company commits to purchase or sell the assets. Investment holding gains or losses reflect differences between book value and book cost. Net gains or losses arising on realisation of investments are taken to capital reserves. (i) Taxation Where expenses are allocated between capital and revenue, any tax relief obtained in respect of those expenses is allocated between capital and revenue on the marginal basis using the Company's effective rate of corporation tax for the accounting period. Deferred taxation is recognised in respect of all timing differences that have originated but not reversed at the balance sheet date, where transactions or events that result in an obligation to pay more tax or a right to pay less tax in the future have occurred. Timing differences are differences between the Company's taxable profits and its results as stated in the financial statements. A deferred tax asset is recognised when it is more likely than not that the asset will be recoverable. Deferred tax is measured on a non-discounted basis at the rate of corporation tax that is expected to apply when the timing differences are expected to reverse. (j) Foreign currency translation Foreign currency - in accordance with FRS 23 `The Effect of changes in Foreign Currency Exchange Rates', the Company is required to nominate a functional currency, being the currency in which the Company predominately operates. The functional and reporting currency is sterling, reflecting the primary economic environment in which the Company operates. Transactions in foreign currencies are translated into sterling at the rates of exchange ruling on the date of the transaction. Foreign currency monetary assets and liabilities are translated into sterling at the rates of exchange ruling at the Balance Sheet date. Profits and losses thereon are recognised in the capital column of the Income Statement and taken to the capital reserves. (k) Dividends payable In accordance with FRS 21 `Events After Balance Sheet Date', the final dividend proposed on ordinary shares is recognised as a liability when approved by shareholders. Interim dividends are recognised only when paid. (l) Share repurchases Shares repurchased and subsequently cancelled - share capital is reduced by the nominal value of the shares repurchased, and the capital redemption reserve is correspondingly increased in accordance with section 733 Companies Act 2006. The full cost of the repurchase is charged to the special reserve. Shares repurchased and held in treasury - the full cost of the repurchase is charged to the special reserve. Where treasury shares are subsequently reissued, any surplus is taken to the share premium account. 3. Income 2012 2011 £'000 £'000 Investment income: Franked UK listed dividends 1,550 1,544 Scrip dividends from UK investments 19 - Overseas listed dividends 89 124 ------- ------- 1,658 1,668 Other income: Underwriting commission - 5 ------- ------- - 5 ------- ------- Total 1,658 1,673 ======= ======= 4. Investment management and performance fees 2012 2012 2012 2011 2011 2011 £'000 £'000 £'000 £'000 £'000 £'000 Revenue Capital Total Revenue Capital Total Investment management fee 89 165 254 107 172 279 Performance fee - 38 38 - - - ------- ------- ------- ------- ------- ------- 89 203 292 107 172 279 ======= ======= ======= ======= ======= ======= RCM (UK) Limited ("RCM") acted as Investment Manager until 31 March 2012. Details of RCM's services and the fee arrangement are provided in the Directors' Report. In accordance with the RCM investment management agreement, a base management fee of 0.5% was payable to RCM, together with the pro rata administration and secretarial fee, until 4 July 2012 inclusive. BlackRock Investment Management (UK) Limited ("BlackRock") was appointed as Investment Manager and Company Secretary on 1 April 2012. Under the terms of the investment management agreement with BlackRock, BlackRock are entitled to a base fee of 0.6% per annum of the Company's market capitalisation, although a base fee was not charged for the first three months of the management contract. There was no additional fee for company secretarial and administration services. Under the previous investment management, RCM was entitled to a performance fee of up to 0.75% of the net assets under management based on the level of outperformance of the Company's net assets over the benchmark index, the FTSE All-Share Index, during the relevant performance period. RCM were entitled to charge this fee until 31 March 2012. There was no performance fee payable to RCM for the period ended 31 March 2012. Further details of this fee arrangement are available in the Directors' Report on page 17 of the Annual Report. Under the existing investment management agreement with BlackRock, a performance fee is payable for the financial period based on the Company's net assets value outperformance of the benchmark. The performance fee is calculated by applying 15% of the annualised excess return for a performance period to the performance fee net asset value. The benchmark index, which the Company use for the calculation of the performance fee is the FTSE All-Share Index measured on a total return basis. Further information on this fee arrangement is described in the Directors' Report on page 17 of the Annual Report. Performance fees have been wholly allocated to the capital column of the Income Statement. A performance fee of £38,000 has been accrued for the year ended 31 October 2012 (year ended 31 October 2011: nil). 5. Operating activities 2012 2011 £'000 £'000 (a) Operating expenses Custody fee 2 3 Auditor's remuneration: - statutory audit 17 17 - other audit services* 2 - - VAT on auditor's remuneration 4 3 Directors' emoluments 79 78 Other operating expenses 161 91 ------- ------- 265 192 ======= ======= In addition to the above, custodian handling charges of £4,000 (2011: £5,000) were charged to capital. Legal and professional fees of £188,000 incurred in connection with the change of Investment Manager during the year were allocated 75% to capital and 25% to the revenue account. The Company's ongoing charge ratios, calculated as a percentage of average net assets and using expenses, excluding performance fees and interest costs, after relief for any taxation was: 1.2% 1.0% ======= ======= * Other audit services relate to the review of the half yearly financial statements. 2012 2011 £'000 £'000 (b) Reconciliation of net return before finance costs and taxation to net cash flow from operating activities Net return/(loss) before finance costs and taxation 3,744 (889) Capital (return)/loss before finance cost and taxation (2,440) 2,263 ------- ------- Net revenue return before finance costs and taxation 1,304 1,374 Expenses charged to capital (348) (177) Special dividends taken to capital 10 50 Decrease in debtors 29 57 Increase/(decrease) in creditors 163 (238) -------- -------- Net cash inflow from operating activities 1,158 1,066 ======= ======= 6. Directors' emoluments The aggregate emoluments of the Directors, excluding VAT, where applicable, for the year ended 31 October 2012 were £78,500 (2011: £77,737). The emoluments of the Chairman, who was also the highest paid Director were £25,000 (2011: £ 19,731). The Company does not have a share option scheme or any incentive scheme. No pension contributions were made in respect of the Directors. The Company has no employees. 7. Finance costs 2012 2011 Revenue Capital Total Revenue Capital Total £'000 £'000 £'000 £'000 £'000 £'000 Interest payable - bank overdraft - - - 1 - 1 Interest payable - 14 41 55 7 22 29 sterling bank loan ------- ------- ------- ------- ------- ------- 14 41 55 8 22 30 ======= ======= ======= ======= ======= ======= 8. Taxation 2012 2011 Revenue Capital Total Revenue Capital Total £'000 £'000 £'000 £'000 £'000 £'000 Current tax charge - - - - - - Reconciliation of tax charge Return/(loss) on ordinary activities before taxation 1,290 2,399 3,689 1,366 (2,285) (919) ------- ------- ------- ------- ------- ------- Corporation tax at 24.83% (2011: 26.83%) 320 596 916 366 (613) (247) Reconciling factors: Non taxable income (412) - (412) (447) - (447) Non taxable capital (gains)/losses - (693) (693) - 560 560 Disallowable expenses 12 36 48 - 1 1 Excess of allowable expenses over taxable income 80 61 141 81 52 133 ------- ------- ------- ------- ------- ------- Current tax charge - - - - - - ======= ======= ======= ======= ======= ======= The Company's taxable income is exceeded by its tax allowable expenses, which include both the revenue and capital elements of the management fee and finance costs. As at 31 October 2012, the Company had accumulated surplus expenses of £ 10.4 million (2011: £9.8 million). As 31 October 2012, the Company has not recognised a deferred tax asset of £2.4 million (2011: £2.5 million) in respect of the accumulated expenses. Provided the Company continues to maintain its current investment profile, it is unlikely that the expenses will be utilised and that the Company will obtain any benefit from this asset. Due to the Company's intention to meet the conditions required to obtain approval under Section 1158 of the Corporation Tax Act 2010, it has not provided deferred tax on any capital gains or losses arising on the disposal of investments. Investment trusts are exempt from corporation tax on capital gains provided the Company obtains agreement from HM Revenue & Customs that tests under Section 1158 of the Corporation Tax Act 2010 have been met. 9. Dividends on ordinary shares 2012 2011 £'000 £'000 Dividends paid on equity shares: Final dividend of 3.30p per ordinary share paid 1 March 2012 (2011: 3.30p - 1 March 2011) 940 1,027 Interim dividend of 1.80p per ordinary share paid 7 September 2012(2011: 1.80p - 1 September 2011) 511 545 ------- ------- 1,451 1,572 ======= ======= The Directors have proposed a final dividend of 3.45p per share in respect of the year ended 31 October 2012. The proposed final dividend will be paid, subject to shareholders' approval, on 8 March 2013 to shareholders on the Company's register on 15 February 2013. The final dividend has not been included as a liability in these financial statements as final dividends are only recognised in the financial statements when they have been approved by shareholders, or in the case of interim dividends, recognised when paid to shareholders. The total dividends payable in respect of the year which form the basis of determining retained income for the purposes of Section 1158 of the Corporation Tax Act 2010 and Section 833 of the Companies Act 2006, and the amounts proposed, meet the relevant requirements as set out in the legislation. 2012 2011 £'000 £'000 Dividends paid or proposed on equity shares: Interim dividend of 1.80p per ordinary share paid 7 September 2012 (2011: 1.80p -1 September 2011) 511 545 Final proposed 3.45p* payable 8 March 2013 (2011: 3.30p) 979 962 ------- ------- 1,490 1,507 ======= ======= * Based upon 28,379,268 ordinary shares (excluding treasury shares) in issue on 17 December 2012. The proposed final dividend is based on the number of shares in issue at 17 December 2012. However, the dividend payable will be based on the number of shares in issue on the record date and will reflect any purchases and cancellations of shares by the Company settled subsequent to 17 December 2012. Ordinary dividends paid by the Company carry a tax credit at a rate of 10%. The credit discharges the tax liability of shareholders subject to income tax at less than the higher rate. Shareholders liable to pay tax at the higher rate will have further tax to pay. 10. Return/(loss) per ordinary share Revenue and capital returns/(loss) per share are shown below and have been calculated using the following: 2012 2011 Net revenue return attributable to ordinary shareholders (£'000) 1,290 1,366 Net capital return/(loss) attributable to ordinary shareholders (£'000) 2,399 (2,285) ------- ------- Total return/(loss) (£'000) 3,689 (919) ======= ======= Equity shareholders' funds (£'000) 41,947 40,687 ======= ======= The weighted average number of ordinary shares in issue during each year, on which the return per ordinary share was calculated, was: 28,525,965 30,637,282 The actual number of ordinary shares in issue at the end of each year, on which the net asset value was calculated, was: 28,379,268 29,140,820 ========== ========== 2012 2011 Revenue Capital Total Revenue Capital Total p p p p p p Return/(loss) per share Calculated on weighted average number of shares 4.52 8.41 12.93 4.46 (7.46) (3.00) ------- ------- ------- ------- ------- ------- Net asset value per share (debt at par value) 147.81* 139.62† ======= ======= ======= ======= ======= ======= Ordinary share price 137.00 133.00 ======= ======= ======= ======= ======= ======= * The net asset value is based on 28,379,268 ordinary shares in issue. An additional 4,554,664 shares were held in treasury. † The net asset value is based on 29,140,820 ordinary shares in issue. An additional 5,054,664 shares were held in treasury. 11. Investments held at fair value through profit or loss 2012 2011 £'000 £'000 UK equity listed investments held at fair value 44,495 40,210 ------- ------- Valuation brought forward 40,210 46,164 Investment holding losses/(gains) 2,414 (2,144) ------- ------- Opening cost of equity investments 42,624 44,020 Additions at cost 52,522 14,759 Disposals (51,484) (16,155) ------- ------- Cost carried forward 43,662 42,624 Closing investment holding gains/(losses) 833 (2,414) ------- ------- Closing valuation of equity investments 44,495 40,210 ======= ======= During the year, the Company incurred purchase transaction costs of £232,000 (2011: £84,000) and sale transaction costs of £30,000 (2011: £26,000). Gains/(losses) on investments held at fair value through profit or loss 2012 2011 £'000 £'000 Realised (losses)/gains on sales (469) 693 Movement in investment holding gains/(losses) 3,247 (2,829) Special dividends credited to capital 10 50 ------- ------- Net gains / (losses) on investments 2,788 (2,086) ======= ======= 12. Debtors 2012 2011 £'000 £'000 Sales for future settlement - 353 Prepayments and accrued income 105 126 Other debtors 3 12 ------- ------- 108 491 ======= ======= 13. Movement in net (debt)/funds 2012 2011 £'000 £'000 (a) Reconciliation of net cash flow to movement in net funds (Decrease)/increase in cash in the year (2,058) 1,135 Repayment of loan 2,000 2,000 Drawdown of loan (2,000) (3,000) Net funds at beginning of the year 159 24 ------- ------- Net (debt)/funds at 31 October (1,899) 159 ======= ======= (b) Analysis of change in net (debt)/funds Cash at bank 101 2,159 Bank loan (2,000) (2,000) ------- ------- Net (debt)/funds at 31 October (1,899) 159 ======= ======= 14. Creditors - amounts falling due within one year 2012 2011 £'000 £'000 Purchases for future settlement 460 51 Other creditors 297 122 Bank loan 2,000 2,000 ------- ------- 2,757 2,173 ======= ======= On 31 October 2012 a new facility was arranged between ING Bank N.V., London Branch and the Company under which ING Bank N.V., London Branch has agreed to make available to the Company a variable interest rate unsecured sterling revolving credit facility of up to £5 million with a maturity date of 31 October 2013. The drawn down amount of £2.0 million was rolled over to this new facility. This replaced the previous variable interest rate unsecured sterling revolving credit facility of up to £5 million with ING Bank N.V., London Branch, which matured on 31 October 2012. The rate of interest on the new facility is the aggregate of the margin of 1.60% per annum and LIBOR. 15. Called-up share capital Ordinary Treasury Nominal shares shares Total value number number shares £'000 Allotted, called-up and fully paid share capital comprised: Ordinary shares of 1p each At 31 October 2011 29,140,820 5,054,664 34,195,484 342 Shares purchased and cancelled (761,552) - (761,552) (8) Sale of shares out of treasury - (500,000) (500,000) (5) ---------- --------- ---------- ------- At 31 October 2012 28,379,268 4,554,664 32,933,932 329 ========== ========= ========== ======= During the year 761,552 ordinary shares were purchased and cancelled (2011: 2,081,000 shares purchased and cancelled. A further 100,000 shares were repurchased and held in treasury) for a total consideration, including expenses, of £978,000 (2011: £2,845,000). 500,000 ordinary shares (2011: 550,000) were also cancelled from treasury. 16. Share premium and reserves Capital Capital reserves reserves arising on Share Capital arising on revaluation of premium redemption investments investments account reserve sold held £'000 £'000 £'000 £'000 At 1 November 2011 14,819 207 (1,951) (2,365) Movement during the year: Losses on realisation of investments - - (469) - Change in investment holding gains - - - 3,247 Repurchase of ordinary shares for cancellaion - 8 - - Cancellation of treasury shares - 5 - - Special dividends taken to capital - - 10 - Finance costs, investment management and performance fees charged to capital after taxation - - (389) - ------- ------- ------- ------- At 31 October 2012 14,819 220 (2,799) 882 ======= ======= ======= ======= 17. Distributable reserves Special reserve £'000 At 1 November 2011 27,379 Purchase and cancellation of ordinary shares (978) ------- At 31 October 2012 26,401 ======= Revenue reserve £'000 At 1 November 2011 2,256 Return for the year 1,290 Dividends paid (1,451) ------- At 31 October 2012 2,095 ======= Publication of non-statutory accounts The financial information contained in this announcement does not constitute statutory accounts as defined in the Companies Act 2006. The 2012 annual report and financial statements will be filed with the Registrar of Companies shortly. The comparative figures are extracts from the audited financial statements of BlackRock Income and Growth Investment Trust plc for the year ended 31 October 2011, which have been filed with the Registrar of Companies. The report of the Auditor on those accounts contained no qualification or statement under section 498 of the Companies Act. This announcement was approved by the Board of Directors on 18 December 2012. Annual Report Members will be notified that the annual report is available shortly or if a hard copy has been requested this will be sent shortly. It will also be available from the registered office, c/o The Company Secretary, BlackRock Income and Growth Investment Trust plc, 12 Throgmorton Avenue, London EC2N 2DL. Annual General Meeting The Annual General Meeting of the Company will be held at 12 Throgmorton Avenue, London EC2N 2DL on Wednesday, 6 February 2013 at 12 noon. The Annual Report will also be available on the BlackRock Investment Management website at http://www.blackrock.co.uk/literature/annual-report/ blackrock-income-and-growth-investment-trust-plc-annual-report.pdf Neither the contents of the Manager's website nor the contents of any website accessible from hyperlinks on the Manager's website (or any other website) is incorporated into, or forms part of, this announcement. For further information, please contact: Jonathan Ruck Keene, Managing Director, Investment Companies, BlackRock Investment Management (UK) Limited Tel: 020 7743 2178 Emma Phillips, Media & Communication, BlackRock Investment Management (UK) Limited Tel: 020 7743 2922 18 December 2012 12 Throgmorton Avenue London EC2N 2DL

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