Half-yearly Report
15 June 2012
BLACKROCK INCOME AND GROWTH INVESTMENT TRUST PLC
Half yearly announcement of results in respect of
the six months ended 30 April 2012
Chairman's Statement
I am pleased to present my first report to shareholders since the appointment
of a new investment manager on 1 April 2012, further details of which are set
out below.
Performance
During the six month period to 30 April 2012, the Company's net asset value per
share ("NAV") returned 6.9% and its share price returned 1.4%. By comparison
the FTSE All-Share Index (total return)increased by 6.2% (all percentages with
income reinvested).
Further information on investment performance is included in the Investment
Manager's Report.
The investment environment has remained challenging during the first half of
the financial year, with continuing concerns about the level of government debt
both in the UK and several Eurozone countries. Compounded by disappointing poor
economic data emerging from the US, most observers are expecting the UK to struggle
to achieve economic growth over the next twelve months, and for it to be a long road
to recovery across the European Union.
Since the end of April, the Company's NAV fell by 4.0% and the share price
declined by 3.4%. The FTSE All-Share Index (total return) fell by 4.2%
Revenue return and dividends
Revenue return for the six month period was 1.81 pence per share (six months to
30 April 2011: 2.14 pence per share). The Board has declared an
interim dividend of 1.80 pence per share (2011: 1.80 pence per share). The
dividend will be paid on 7 September 2012 to shareholders on the Company's
register on 27 July 2012.
Appointment of a new Investment Manager
Following a review by your Board of the Company's management arrangements,
which entailed an extensive and formal assessment of a range of different
options, from a variety of fund managers, BlackRock Investment Management (UK)
Limited ("BlackRock") was appointed as Investment Manager and Company Secretary
on 1 April 2012. A summary of the terms of BlackRock's appointment is set out
in the Interim Management Report and Responsibility Statement. The Board
believes that BlackRock, with its considerable experience in managing UK equity
portfolios and strong commitment to the investment trust sector, is well placed
to achieve the Company's investment objective.
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. The Board would like to record their
appreciation of the support given to the Company by RCM (UK) Limited ("RCM")
since its inception, and also for RCM's help in ensuring an orderly handover to
BlackRock during this period.
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. I am pleased to report that BlackRock has borne all
of the costs associated with changing the Company's name.
Share Repurchases
The current authority to repurchase ordinary shares was granted to the
Directors on 6 February 2012 and will expire on 5 August 2013 unless renewed at
a prior general meeting. During the period under review 761,552 ordinary shares were
purchased at a cost of £977,000. All of the shares purchased were cancelled.
500,000 ordinary shares were also cancelled from treasury on 23 January 2012.
The policy and parameters for purchasing shares in the market are set by the
Board and are reviewed at regular intervals.
Gearing
The Company currently has an unsecured sterling revolving credit facility of up
to £5 million with ING Bank N.V., with a maturity date of 31 October 2012 which
provides the Company with the ability to gear. The Company operates a flexible
gearing policy which depends on prevailing market conditions. As at 30 April 2012,
£2 million of the facility had been drawn down representing net gearing of 4.9%.
Prospects
The global financial crisis which started in 2007 has now assumed an
unpredictable political dimension, as the electoral cycle in Europe is now
allowing the widespread hostility to austerity measures expression through the
ballot box. However, corporate balance sheets are now stronger than they have
been in recent memory, and the valuations of many equities are compelling,
particularly when compared with fixed interest securities. Although the outlook
for economic growth in the developed world is currently muted at best, we
believe that the investment approach followed by BlackRock, explained in
further detail in the Investment Manager's Report, is well suited to this
environment. It aims to blend higher yielding shares with others which are
chosen for their capital growth prospects. We also believe that against this
background an investment approach focused on delivering growth in income from
UK equities will remain popular for many years to come and ultimately prove a
successful long-term strategy, despite the current level of uncertainty and
volatility.
Jonathan Cartwright
Chairman
15 June 2012
Interim Management Report and Responsibility Statement
The Chairman's Statement and the Investment Manager's Report 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:
- Investment and Strategy;
- Market;
- Accounting, Legal and Regulatory;
- Corporate Governance and Shareholder Relations;
- Operational; and
- Financial.
The Board reported on the principal risks and uncertainties faced by the
Company in the Annual Report and Accounts for the year ended 31 October 2011. A
detailed explanation can be found in the Directors' Report on pages 23 and 24
and in note 17 on pages 53 to 56 of the Annual Report and Financial Statements
which is available on the website maintained by the Investment Manager,
BlackRock Investment Management (UK) Limited, at www.blackrock.co.uk/brig.
In the view of the Board, there have not been any changes to the fundamental
nature of these risks since the previous report and these principal risks and
uncertainties are equally applicable to the remaining six months of the
financial year as they were to the six months under review.
Related party transactions
RCM (UK) Limited ("RCM") acted as the Company's Investment Manager until 31
March 2012. Details of RCM's services and fee arrangements are provided in the
Annual Report on page 26. Under the previous management agreement with RCM a
base management fee of 0.5% and an administrative and secretarial fee was
payable. These fees will be payable until 4 July 2012 (inclusive), being the
date of the expiry of the protective notice served on RCM on 4 January 2012.
RCM was also 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 its benchmark index, the FTSE All-Share Index, during the relevant
Performance Period. RCM were entitled to charge this fee up until 31 March
2012. No performance fee was earned by RCM for the period from 1 November 2011
to 31 March 2012. Further details of this fee arrangement are available in the
Annual Report on pages 45 and 46.
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 is entitled to a base
fee at 0.6% p.a. of the Company's market capitalisation, although a base fee
will not be charged for the first three months of the management contract.
There is no additional fee for the Company secretarial and administration
services. BlackRock is also entitled to a performance fee for a financial
period based on the Company's net asset value outperformance of the benchmark.
The performance fee is calculated by applying 15% of the excess return over the
performance fee net asset value.
The benchmark index, which the Company will use for the calculation of the
performance fee, remains the FTSE All-Share Index measured on a total return
basis.
The performance fee is calculated on a geometric basis, that is the Company's
return is divided by the performance of the benchmark to derive an excess
return from which the 15% performance fee is calculated. The performance fee is
measured over a rolling three year period, although any excess return that
exceeds the return used in calculating a particular performance fee as a result
of the application of the cap may be carried forward and included in future
performance fee calculations. Transitional arrangements are in place in respect
of the initial periods building up to the first rolling three year period which
will comprise the first three complete financial years following commencement
of the Investment Management Agreement.
There are high watermark arrangements such that a performance fee is only
payable in respect of a given rolling three year period for which
outperformance has been achieved if the Company has also achieved cumulative
outperformance since the end date of the last period in respect of which a
performance fee was payable.
The base fee and performance fee payable in respect of a financial period are
capped at no more than 5% of the net asset value of the Company.
The management contract has an initial period of 12 months from 1 April 2012
followed by a rolling six month notice period.
Directors' responsibility statement
The Disclosure 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 the Accounting Standards
Board's Statement `Half Yearly Financial Reports'; 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 FSA's Disclosure and Transparency Rules.
The half yearly financial report was approved by the Board on 15 June 2012 and
the above responsibility statement was signed on its behalf by the Chairman.
Jonathan Cartwright
For and on behalf of the Board
15 June 2012
Investment Manager's Report
Market Review
Equity markets increased over the period as initial concerns over the
peripheral European sovereign debt crisis temporarily abated, and hopes rose
that a more comprehensive solution might be forthcoming. The European Central
Bank's Long-Term Refinancing Operation was an obvious catalyst for the gains
seen in the first months of 2012 as it provided much needed liquidity to the
European banking system, but markets were also temporarily boosted by stronger
economic data, particularly from the US. Not all markets participated: in a reminder
that sovereign risks remain, Spanish and Portuguese equities continued to fall.
Towards the end of the period `risk assets' gave back some gains as policy
uncertainty dominated discussions on the Chinese economy, the case for US
growth became less conclusive and doubt over the security of peripheral
sovereigns returned in Europe.
The rise in the market over the six months was driven by Industrial, Beverage,
Tobacco and Oil Equipment & Services companies, whilst Mining companies,
Food Retailers, Pharmaceuticals and Mobile Telecommunications companies lagged.
Performance and Portfolio Activity up to 1 April 2012
In the period up to 1 April 2012, the portfolio was managed by RCM. 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 defensives that had
performed particularly well in the final months of 2011 such as 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 and so the portfolio presented in this report represents our chosen
holdings. No further re-organisation activity arising from the change in
Investment Manager will be required.
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 we believe 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.
Gearing
In agreement with the Board, £2 million of the £5 million facility
provided by ING was drawn down on 30 April 2012. In part this reflects our
conviction that current market valuations represent good value: over the long
term we believe that valuation at purchase is a major determinant of future real
returns. Another benefit of gearing is that it allows us to remove the inherent bias
that is typically a feature of most high yielding portfolios, ie., a relatively low beta.
This measure illustrates the sensitivity of the portfolio to underlying market
movements, and higher yielding portfolios typically demonstrate a low
sensitivity or beta. Through adding 5% gearing to the portfolio, this tilt
within the portfolio is largely removed and we can achieve a beta broadly
similar to that of the market. As a consequence, stock selection becomes the
primary driver of performance relative to our benchmark, the FTSE All-Share
Index, which is how we believe we can add most value to the portfolio.
Performance since 1 April 2012
Looking at the Company's performance in April 2012 in more detail following our
appointment as Investment Manager, the FTSE All-Share Index finished the month
modestly lower as financials, particularly banks and life insurers, were unable
to escape the negative impact from renewed European sovereign debt concerns.
Positive contributors to performance included software provider Playtech, which
continued to see improving demand for its gaming technologies. Both oil majors
benefited the portfolio, albeit very differently: owning an overweight position
in Royal Dutch Shell was beneficial as it reported good first quarter results,
and not owning BP, whose operational performance continued to disappoint, was
also a positive.
Being underweight the mining sector was modestly detrimental as the sector rose
on expectations of higher Chinese demand for commodities, although owning
copper miner Antofagasta was beneficial for returns. Shares of electronic
controls manufacturer Spectris performed well after reporting good first
quarter results.
Amongst the detractors, Carphone Warehouse shares fell as the market worried
about prospects for its retail activities in Europe, whilst United Business
Media fell as macro uncertainty increased, despite the group announcing strong
profit growth led by its core events business.
Activity
Activity over the month saw us opening a new position in global mining company
BHP Billiton and independent media group Aegis. We also added to Shire and
British Sky Broadcasting. We reduced our holdings in Next, Royal Dutch Shell and Unilever.
Outlook
The economic outlook has begun to diverge. Data from the US and the developing
world on balance still suggests that modest economic growth is likely, but the
outlook for Europe has deteriorated. In a world where the global economy is volatile
and changing rapidly it is more important than ever to ensure that portfolios can deliver
performance in a range of economic environments. So what are the key issues?
Although the Company invests primarily in companies listed in the UK, the major
investment issues are global in nature because UK listed companies generate
about two-thirds of their profits outside of the UK, including a growing
proportion in high growth emerging markets. Emerging market economic growth
remains fundamentally important to short-and long-term global growth,
particularly given the challenging environment in Europe. China and India are
especially important given their size and growth rates. While growth in both
countries is expected to be slower this year than it was last year, it is
likely that these two countries will still account for more than half of total
global growth in 2012.
It is impossible to ignore the Eurozone debt crisis, which continues to
influence economic growth and is a major trading partner for UK companies. The
European Central Bank's Long-Term Refinancing Operations further reduced the
risk of liquidity driven banking defaults in continental European banks as more
than 800 banks took advantage of almost one trillion euros in cheap funding.
However, the core longer-term threat to European stability remains in
persuading Eurozone nations to accept a fiscal stability pact, improve
productivity and deliver a sustainable solution to the structural deficit
issues. Recession remains a concern, as the Eurozone was confirmed to be in
recession after two consecutive periods of negative growth, although recovery
is expected to begin later this year. As the Chancellor of the Exchequer noted
in his budget speech, Eurozone recession is dragging down UK growth prospects
with it.
The valuation of UK equities remains attractive, especially in the context of
low interest rates and monetary easing policies. We believe that the major
short-term risk to these valuations would be a corporate profits recession, but
the current strength of corporate balance sheets and the willingness of
governments to engage in monetary easing makes this outcome less likely than
the current level of the UK market suggests.
In summary, the UK equity market has considerable exposure to overseas earnings
and provides many good investment opportunities. UK equity valuations currently
look attractive compared to those of most other asset classes, with the
prospect of high quality earnings and dividend growth. Fundamentally, on both a
relative and absolute basis, the UK equity market remains attractively valued,
with the largest corporate cash level in UK history at over £200 billion. We
continue to position the portfolio towards companies where the fundamentals are
good and the business can take advantage of regions that are growing strongly.
Nick McLeode-Clark and Adam Avigdori
BlackRock Investment Management (UK) Limited
15 June 2012
Ten Largest Investments
Vodafone Group - 8.4% (2011: 6.0%, www.vodafone.com)
Vodafone 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.
Royal Dutch Shell `B' - 8.3% (2011: 5.0%, www.shell.com)
Royal Dutch Shell 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 Holdings - 6.0% (2011: 5.0%, www.hsbc.com)
HSBC Holdings 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.
GlaxoSmithKline - 4.9% (2011: 7.5%, www.gsk.com)
GlaxoSmithKline 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.
Tullow Oil - 4.9% (2011: nil, www.tullowoil.com)
Tullow Oil 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.
Centrica - 4.1% (2011: 3.3%, www.centrica.com)
Centrica's businesses include British Gas, the UK energy supplier, and upstream
operations of Centrica Energy which undertake sourcing, generating, processing,
trading and storing of energy.
Antofagasta - 4.0% (2011: nil, www.antofagasta.co.uk)
Antofagasta is a copper mining company with its activities mainly concentrated
in Chile. Mines include Los Pelambres, El Tesoro and Esperanza.
UBM - 3.4% (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.
3i Infrastructure - 3.1% (2011: nil, www.3i-infrastructure.com)
3i Infrastructure is a listed infrastructure investment company investing
mainly in Europe and Asia, with a focus on the Utilities, Transportation and
Social Infrastructure sectors.
British American Tobacco - 3.0% (2011: nil, www.bat.com)
BAT is one of the world 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.
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 30 April 2012
Analysis of portfolio by sector
Portfolio % Benchmark %
Oil & Gas Producers 14.7 16.9
Banks 10.3 10.2
Pharmaceuticals & Biotechnology 10.2 6.9
Mobile Telecommunications 8.4 4.9
Media 6.9 2.8
Tobacco 5.9 4.9
Mining 5.3 10.5
Gas, Water & Multiutilities 4.1 3.2
Non-life Insurance 3.7 0.8
Software & Computer Services 3.5 1.0
Equity Investment Instruments 3.1 3.0
Food Producers 2.9 2.1
Life Insurance 2.5 2.8
General Retailers 2.5 1.5
Support Services 2.3 3.8
Industrial Engineering 2.3 0.8
Aerospace & Defence 2.2 2.0
Electronic & Electrical
Equipment 2.1 0.5
Real Estate Investment &
Services 1.6 0.4
Oil Equipment, Services &
Distribution 1.5 0.8
General Financial 1.5 0.1
Chemicals 1.1 0.6
Technology Hardware & Equipment 1.0 0.7
Sources: BlackRock and Datastream.
Investment Size
% of
Number of Investments Portfolio
< £1 m 18 28.3
£1m to £2m 13 39.1
£2m to £3m 3 15.9
£3m to £4m 2 16.7
Investments
as at 30 April 2012
Market
value % of
£'000 Investments
Oil & Gas Producers
Royal Dutch Shell `B' 3,571 8.3
Tullow Oil 2,126 4.9
Soco International 633 1.5
------ -----
6,330 14.7
------ -----
Banks
HSBC 2,586 6.0
Standard Chartered 1,027 2.4
Barclays 808 1.9
------ -----
4,421 10.3
------ -----
Pharmaceuticals & Biotechnology
Glaxosmithkline 2,140 4.9
AstraZeneca 1,239 2.9
Shire 1,023 2.4
------ -----
4,402 10.2
------ -----
Mobile Telecommunications
Vodafone Group 3,624 8.4
------ -----
3,624 8.4
------ -----
Media
UBM 1,448 3.4
British Sky Broadcasting 1,219 2.8
Aegis 303 0.7
------ -----
2,970 6.9
------ -----
Tobacco
British American Tobacco 1,277 3.0
Imperial Tobacco 1,267 2.9
------ -----
2,544 5.9
------ -----
Mining
Antofagasta 1,724 4.0
BHP Billiton 556 1.3
------ -----
2,280 5.3
------ -----
Gas, Water & Multi-utilities
Centrica 1,779 4.1
------ -----
1,779 4.1
------ -----
Non-life Insurance
Lancashire Holdings 939 2.2
Admiral 664 1.5
------ -----
1,603 3.7
------ -----
Software & Computer Services
Sage 846 2.0
Playtech 677 1.5
------ -----
1,523 3.5
------ -----
Equity Investment Instruments
3i Infrastructure 1,334 3.1
------ -----
1,334 3.1
------ -----
Food Producers
Unilever 1,270 2.9
------ -----
1,270 2.9
------ -----
Life Insurance
Aviva 1,252 2.9
------ -----
1,252 2.9
------ -----
General Retailers
Carphone Warehouse 534 1.3
Next 527 1.2
------ -----
1,061 2.5
------ -----
Support Services
Wolseley 1,012 2.3
------ -----
1,012 2.3
------ -----
Industrial Engineering
IMI 970 2.3
------ -----
970 2.3
------ -----
Aerospace & Defence
Rolls Royce* 964 2.2
------ -----
964 2.2
------ -----
Electronic & Electrical Equipment
Spectris 899 2.1
------ -----
899 2.1
------ -----
Real Estate Investment & Services
Capital & Counties 682 1.6
------ -----
682 1.6
------ -----
Oil Equipment, Services & Distribution
AMEC 662 1.5
------ -----
662 1.5
------ -----
General Financial
Jupiter Fund Managers 641 1.5
------ -----
641 1.5
------ -----
Chemicals
Victrex 468 1.1
------ -----
468 1.1
------ -----
Technology Hardware & Equipment
CSR 413 1.0
------ -----
413 1.0
------ -----
Total Investments 43,104 100.0
------ -----
* includes preference shares
All investments are in ordinary shares unless otherwise stated.
The total number of holdings as at 30 April was 36 (31 October 2011: 48).
Income Statement
Revenue £'000 Capital £'000 Total £'000
Six months Year Six months Year Six months Year
ended ended ended ended ended ended
30.04.12 30.04.11 31.10.11 30.04.12 30.04.11 31.10.11 30.04.12 30.04.11 31.10.11
Notes(unaudited)(unaudited) (audited) (unaudited)(unaudited) (audited)(unaudited)(unaudited) (audited)
Net gains/
(losses) on
investments
at fair
value
through
profit or
loss - - - 1,503 2,483 (2,086) 1,503 2,483 (2,086)
Income from
investments
held at
fair value
through
profit or
loss 2 722 821 1,668 - - - 722 821 1,668
Other
income 2 - 5 5 - - - - 5 5
Investment
management
fee 3 (52) (55) (107) (79) (89) (172) (131) (144) (279)
Performance
fee 3 - - - (4) - - (4) - -
Other
operating
expenses (145) (103) (192) (143) (3) (5) (288) (106) (197)
----- ----- ----- ----- ----- ---- ----- ----- -----
Net return
before
finance
costs and
taxation 525 668 1,374 1,277 2,391 (2,263) 1,802 3,059 (889)
Finance
costs (7) (3) (8) (21) (8) (22) (28) (11) (30)
----- ----- ----- ----- ----- ----- ----- ----- -----
Return on
ordinary
activities
before
taxation 518 665 1,366 1,256 2,383 (2,285) 1,774 3,048 (919)
Taxation on
ordinary
activities - - - - - - - - -
---- ---- ----- ----- ----- ----- ----- ----- ----
Return on
ordinary
activities
after
taxation 518 665 1,366 1,256 2,383 (2,285) 1,774 3,048 (919)
===== ===== ===== ===== ===== ====== ===== ===== =====
Return per
ordinary 4 1.81p 2.14p 4.46p 4.38p 7.66p (7.46p) 6.19p 9.80p (3.00p)
===== ===== ===== ===== ===== ====== ===== ===== =====
Reconciliation of Movements in Shareholders' Funds
for the six months ended 30 April 2012 and comparative periods
Called up Share Capital
Share Premium Redemption Special Captial Revenue
Capital Account Reserve Reserve Reserve Reserve Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000
Six months ended
30 April 2012 (unaudited)
Net assets at
31 October 2011 342 14,819 207 27,379 (4,316) 2,256 40,687
Revenue return - - - - - 518 518
Shares repurchased
during the period (8) - 8 (977) - - (977)
Cancellation of
ordinary shares held
in treasury (5) - 5 - - - -
Dividends on ordinary
shares - - - - - (941) (941)
Capital return - - - - 1,256 - 1,256
--- ------ --- ------ ----- ----- ------
Net assets at 30 April
2012 329 14,819 220 26,402 (3,060) 1,833 40,543
--- ------ --- ------ ----- ----- ------
Six months ended
30 April 2011 (unaudited)
Net assets at
31 October 2010 368 14,819 181 30,224 (2,031) 2,462 46,023
Revenue return - - - - - 665 665
Shares repurchased
during the period (7) - 7 (663) - - (663)
Dividends on ordinary
shares - - - - - (1,028) (1,028)
Capital return - - - - 2,383 - 2,383
--- ------ --- ------ ----- ----- ------
Net assets at 30 April
2010 361 14,819 188 29,561 352 2,099 47,380
--- ------ --- ------ ----- ----- ------
Year ended 31 October
2011 (audited)
Net assets at
31 October 2010 368 14,819 181 30,224 (2,031) 2,462 46,023
Revenue return - - - - - 1,366 1,366
Shares repurchased
during the year (21) - 21 (2,845) - - (2,845)
Cancellation of
ordinary shares held
in treasury (5) - 5 - - - -
Dividends on ordinary
shares - - - - - (1,572) (1,572)
Capital return - - - - (2,285) - (2,285)
--- ------ --- ------ ----- ----- ------
Net assets at
31 October 2011 342 14,819 207 27,379 (4,316) 2,256 40,687
--- ------ --- ------ ----- ----- ------
The transaction costs incurred on the acquisition and disposal of investments
are included within the capital reserve. Purchase and sale costs amounted to
£154,869 and £10,888 respectively for the six months ended 30 April 2012 (six
months ended 30 April 2011: £52,271 and £15,534; year ended 31 October 2011:
£84,392 and £25,971).
Transaction costs during the period under review reflect a realignment of the portfoilio following
BlackRock's appointment as Investment Manager.
Balance Sheet
30 April 30 April 31 October
2012 2011 2011
£'000 £'000 £'000
Notes (unaudited) (unaudited) (audited)
Fixed assets
Investments held at fair value
through profit or loss 43,104 46,126 40,210
Current assets
Debtors 514 1,073 491
Cash at bank 20 384 2,159
Creditors - amounts falling
due within one year
Short term bank loan (2,000) - (2,000)
Other creditors (1,095) (203) (173)
------ ------ ------
Net current (liabilities)/
assets (2,561) 1,254 477
------ ------ ------
Net assets 40,543 47,380 40,687
====== ====== ======
Capital and reserves
Share capital 6 329 361 342
Share premium account 14,819 14,819 14,819
Capital redemption reserve 220 188 207
Special reserve 26,402 29,561 27,379
Capital reserves (3,060) 352 (4,316)
Revenue reserve 1,833 2,099 2,256
------ ------ ------
Total equity shareholders'
funds 4 40,543 47,380 40,687
======= ======= =======
Net asset value per ordinary
share 4 142.86p 153.53p 139.62p
======= ======= =======
Cash Flow Statement
Six months Six months Year
ended ended ended
30 April 30 April 31 October
2012 2011 2011
£'000 £'000 £'000
(unaudited) (unaudited) (audited)
Net cash inflow from operating
activities 418 271 1,066
Returns on investment and servicing
of finance
Interest paid (14) (11) (30)
Capital expenditure and financial
investment
Purchases of fixed asset investments (33,534) (8,686) (14,708)
Sales of fixed asset investments 32,909 10,478 18,224
Net cash (outflow)/inflow from
capital expenditure and financial
investment (625) 1,792 3,516
Equity dividends paid (941) (1,028) (1,572)
------ ------ ------
Net cash (outflow)/inflow before
financing (1,162) 1,024 2,980
Financing
Purchase of ordinary shares for
cancellation and held in treasury (978) (663) (2,844)
Repayment of loan - (1,000) (2,000)
Drawdown of loan - - 3,000
Net cash outflow from financing (978) (1,663) (1,844)
------ ------ ------
(Decrease)/Increase in cash (2,140) (639) 1,135
====== ====== ======
Reconciliation of Return on Ordinary Activities before Finance Costs and
Taxation to Net Cash Flow from Operating Activities
Six months Six months Year
ended ended ended
30 April 30 April 31 October
2012 2011 2011
£'000 £'000 £'000
(unaudited) (unaudited) (audited)
Total return/(loss) before finance
costs and taxation 1,802 3,059 (889)
(Less)/add: capital return before
finance costs and taxation (1,503) (2,483) 2,136
----- ----- -----
299 576 1247
(Increase)/decrease in debtors (77) (147) 57
Increase/(decrease) in creditors 196 (158) (238)
----- ----- -----
Net cash inflow from operating
activities 418 271 1,066
----- ----- -----
Reconciliation of net cash flow to
movement in net debt
Net cash (outflow)/inflow (2,140) (639) 1,135
Repayment of loan - 1,000 2,000
Drawdown of loan - - (3,000)
----- ----- -----
Movement in net (debt)/funds (2,140) 361 135
Net funds brought forward 158 23 23
----- ----- -----
Net (debt)/funds carried forward (1,982) 384 158
===== ===== =====
Notes to the financial statements
1. Principal activity and basis of preparation
The Company conducts its business so as to qualify as an investment trust
company within the meaning of sub-sections 1158 - 1165 of the Corporation Tax
Act 2010. The half yearly financial statements have been prepared using the
same accounting policies set out in the Company's financial statements for the
year ended 31 October 2011.
Under FRS 26 "Financial Instruments: Recognition and Measurement" the Company
has designated its assets and liabilities as being measured at "fair value
through profit or loss". The fair value of fixed asset investments is deemed to
be the bid market value at the close of business on the balance sheet date. The
taxation charge, if any, has been calculated by applying an estimate of the
annual effective tax rate to any profit for the period.
The financial statements have been prepared in accordance with applicable
Accounting Standards, pronouncements on half yearly reporting issued by the
Accounting Standards Board and the Statement of Recommended Practice "Financial
Statements of Investment Trust Companies" ("SORP") revised in January 2009.
2. Income
Six months Six months Year
ended ended ended
30 April 30 April 31 October
2012 2011 2011
£'000 £'000 £'000
(unaudited) (unaudited) (audited)
Investment income:
UK listed dividends 681 717 1,544
Overseas listed dividends 41 104 124
--- --- -----
722 821 1,668
--- --- -----
Other income:
Underwriting commission - 5 5
--- --- -----
- 5 5
--- --- -----
Total 722 826 1,673
=== === =====
3. Investment management and performance fees
Revenue £'000 Capital £'000 Total £'000
Six months Year Six months Year Six months Year
ended ended ended ended ended ended
30.04.12 30.04.11 31.10.11 30.04.12 30.04.11 31.10.11 30.04.12 30.04.11 31.10.11
(unaudited)(unaudited)(audited)(unaudited)(unaudited)(audited)(unaudited)(unaudited)(audited)
Investment management
fee 52 55 107 79 89 172 131 144 279
Performance fee - - - 4 - - 4 - -
-- -- --- -- -- --- --- --- ---
52 55 107 83 89 172 135 144 279
== == === == == === === === ===
RCM (UK) Limited ("RCM") acted as Investment Manager until 31 March 2012.
Details of RCM's services and fee arrangements are provided in the 2011 Annual
Report on page 26.
In accordance with the RCM investment management agreement, a base management
fee of 0.5% will be payable to RCM, together with the pro rata administration
and secretarial fee, up 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 will be entitled
to a base fee of 0.6% p.a. of the Company's market capitalisation, although a
base fee will not be charged for the first three months of the management
contract. There is no additional fee for company secretarial and administration
services.
Under the previous investment management agreement, 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 its benchmark index,
the FTSE All-Share Index, during the relevant performance period. RCM were
entitled to charge this fee up 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 2011 Annual Report on pages 45 and 46.
Under the new investment management agreement with BlackRock, a performance fee
is payable for the financial period based on the Company's net asset value
outperformance of the benchmark. The performance fee will be 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
will use for the calculation of the performance fee, will be the FTSE All-Share
Index measured on a total return basis. Further information on this fee
arrangement is detailed in the Interim Management Report and Responsibility
Statement.
Performance fees have been wholly allocated to the capital column of the Income
Statement. A performance fee of £4,000 has been accrued for the six month
period to 30 April 2012 (six months ended 30 April 2011: nil and year ended
31 October 2011: nil).
4. Returns and net asset value per ordinary share
Revenue and capital returns per share are shown below and have been calculated
using the following:
Six months Six months Year
ended ended ended
30 April 30 April 31 October
2012 2011 2011
(unaudited) (unaudited) (audited)
Net revenue return attributable to
ordinary shareholders (£'000) 518 665 1,366
Net capital return attributable to
ordinary shareholders (£'000) 1,256 2,383 (2,285)
------ ------ ------
Total return (£'000) 1,774 3,048 (919)
------ ------ ------
Equity shareholders' funds (£'000) 40,543 47,380 40,687
------ ------ ------
The actual number of ordinary
shares in issue at the end of each
period on which the net asset value
per ordinary share was calculated
was: 28,379,268 30,859,820 29,140,820
---------- ---------- ----------
The weighted number of ordinary
shares in issue at the end of each
period on which the return per
ordinary share was calculated was: 28,674,278 31,097,019 30,637,282
---------- ---------- ----------
Revenue return per ordinary share 1.81p 2.14p 4.46p
Capital return per ordinary share 4.38p 7.66p (7.46p)
------- ------- -------
Total return per ordinary share 6.19p 9.80p (3.00p)
------- ------- -------
Net asset value per ordinary share
(debt at par value) 142.86p* 153.53p** 139.62p***
======= ======= =======
* The net asset value is based on 28,379,268 Ordinary Shares in issue. An additional 4,554,664
Ordinary Shares were held in Treasury.
** The net asset value is based on 30,859,820 Ordinary Shares in issue. An additional 5,304,664
Ordinary Shares were held in Treasury.
*** The net asset value is based on 29,140,820 Ordinary Shares in issue. An additional 5,054,664
Ordinary Shares were held in Treasury.
5. Dividend
The Board has declared an interim dividend of 1.80p per share (2011: 1.80p per
share), payable on 7 September 2012 to shareholders on the register as at
27 July 2012; the ex dividend date is 25 July 2012. The total cost of this
dividend, based on 28,379,268 ordinary shares in issue at 15 June 2012, is
£511,000 (2011: £545,000).
6. Share capital
Ordinary Treasury Nominal
shares shares Total value
(nominal) (nominal) shares £
Allotted, issued and
fully paid share
capital comprised:
Ordinary shares of 1p
each
---------- --------- ---------- -------
At 1 November 2011 29,140,820 5,054,664 34,195,484 341,955
---------- --------- ---------- -------
At 30 April 2012 28,379,268 4,554,664 32,933,932 329,339
========== ========= ========== =======
During the period to 30 April 2012, the Company purchased 761,552 ordinary
shares at a cost of £977,000. All of the shares purchased were cancelled.
500,000 ordinary shares were also cancelled from treasury.
7. Movement in net debt
Six months Six months Year
ended ended ended
30 April 30 April 31 October
2012 2011 2011
£'000 £'000 £'000
(unaudited) (unaudited) (audited)
Reconciliation of net cash flow to
movement in net debt
----- --- ---
Movement in net (debt)/funds in the
period (2,140) 361 135
Opening net funds 158 23 23
----- --- ---
Closing net (debt)/funds (1,982) 384 158
===== === ===
8. Going concern
The Directors believe 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.
9. Publication of non statutory accounts
The financial information contained in this half yearly financial report does
not constitute statutory accounts as defined in the Companies Act 2006. The
financial information for the six months ended 30 April 2012 and 30 April 2011
has not been audited.
The information for the year ended 31 October 2011 does not constitute
statutory accounts as defined in section 434 of the Companies Act 2006. A copy
of the statutory accounts for that year has been delivered to the Registrar of
Companies. The auditor's report on those accounts was not qualified, did not
include a reference to any matters to which the auditor drew attention by way
of emphasis without qualifying the report and did not contain statements under
section 498(2) or (3) of the Companies Act 2006.
Copies of the half yearly financial report will be posted to shareholders by
20 June 2012. Copies will also be available to the public from the Company's
registered office at 12 Throgmorton Avenue, London EC2N 2DL, and on BlackRock
Investment Management's website at www.blackrock.co.uk/brig.
10. Related party disclosure
The related party transaction with BlackRock is set out in note 3. The fee due
to RCM for the six months ended 30 April 2012 amounted to £131,000 (six months
ended 30 April 2011: £144,000 and year ended 31 October 2011: £279,000).
At the period end, £58,000 was outstanding in respect of investment management
and performance fees (six months ended 30 April 2011: £119,000 and year ended
31 October 2011: £53,000).
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 of the other
Directors receives an annual fee of £17,000. The following members of the Board
hold shares in the Company. Mr Cartwright holds 20,000 shares, Mr Gold 20,000
shares and Mr Worsley 487,539 shares. Mr Luckraft does not currently own any
shares.
11. Contingent liabilities
There were no contingent liabilities at 30 April 2012 (30 April 2011 and 31
October 2011: nil).
12. Annual results
The Board expects to announce the annual results for the year ended 31 October
2012 in December 2012. Copies of the annual results announcement can be obtained
fromn the Secretary on 020 7743 3000. The annual report should be available by early
January 2013 with the Annual General Meeting being held in February 2013.
Independent Review Report
to BlackRock Income and Growth Investment Trust Plc
We have been engaged by the Company to review the condensed set of financial
statements in the half yearly financial report for the six months ended
30 April 2012 which comprises the income statement, the reconciliation of movement
in shareholders' funds, the balance sheet, the cash flow statement, the
reconciliation of return on ordinary activities before finance costs and
taxation to net cash flow from operating activities and related notes 1 to 12.
We have read the other information contained in the half yearly financial
report and considered whether it contains any apparent misstatements or
material inconsistencies with the information in the condensed set of financial
statements.
This report is made solely to the Company in accordance with International
Standard on Review Engagements (UK and Ireland) 2410 "Review of Interim
Financial Information Performed by the Independent Auditor of the Entity"
issued by the Auditing Practices Board. Our work has been undertaken so that we
might state to the Company those matters we are required to state to it in an
independent review report and for no other purpose. To the fullest extent
permitted by law, we do not accept or assume responsibility to anyone other
than the Company, for our review work, for this report, or for the conclusions
we have formed.
Directors' responsibilities
The half yearly financial report is the responsibility of, and has been
approved by, the Directors. The Directors are responsible for preparing the
half yearly financial report in accordance with the Disclosure and Transparency
Rules of the United Kingdom's Financial Services Authority.
As disclosed in note 1, the annual financial statements of the Company are
prepared in accordance with United Kingdom Generally Accepted Accounting
Practice. The condensed set of financial statements included in this half
yearly financial report have been prepared in accordance with the accounting
policies the group intends to use in preparing its next annual financial
statements.
Our responsibility
Our responsibility is to express to the Company a conclusion on the condensed
set of financial statements in the half yearly financial report based on our
review.
Scope of review
We conducted our review in accordance with International Standard on Review
Engagements (UK and Ireland) 2410 "Review of Interim Financial Information
Performed by the Independent Auditor of the Entity" issued by the Auditing
Practices Board for use in the United Kingdom. A review of interim financial
information consists of making inquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other review
procedures. A review is substantially less in scope than an audit conducted in
accordance with International Standards on Auditing (UK and Ireland) and
consequently does not enable us to obtain assurance that we would become aware
of all significant matters that might be identified in an audit. Accordingly,
we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to
believe that the condensed set of financial statements in the half yearly
financial report for the six months ended 30 April 2012 is not prepared, in all
material respects, in accordance with the Disclosure and Transparency Rules of
the United Kingdom's Financial Services Authority.
Deloitte LLP
Chartered Accountants and Statutory Auditor
London, United Kingdom
15 June 2012
For further information please contact:
Simon White, Managing Director Investment Trusts - 020 7743 3000
Nick McLeod-Clarke / Adam Avidgori, Fund Managers - 020 7743 3000
Emma Phillips, Media & Communications - 020 7743 3000
BlackRock Investment Management (UK) Limited
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