Half-yearly Report
BlackRock Income and Growth Investment Trust plc
Half yearly results announcement to 30 April 2014
Performance record
Financial Highlights
Attributable to ordinary shareholders As at As at
30 April 31 October
2014 2013 Change
(unaudited) (audited) %
Assets
Net assets (£'000)* 45,594 45,491 +0.2
Net asset value per ordinary share 169.25p 166.03p +1.9
- with income reinvested +4.1
Ordinary share price (mid-market) 165.25p 164.50p +0.5
- with income reinvested +2.6
FTSE All-Share Index (total return) 5,467.20 5,325.80 +2.7
Discount to net asset value 2.4% 0.9%
======== ======== ========
For the six For the six
months months
ended ended
30 April 30 April
2014 2013 Change
(unaudited) (unaudited) %
Revenue
Net revenue return after taxation (£'000) 773 797 -3.0
Revenue return per ordinary share** 2.84p 2.82p +0.7
Dividend per ordinary share
Interim 2.20p 2.00p +10.0
-------- -------- --------
* The change in net assets reflects the share repurchases made and market
movements during the period.
** Further details are given in note 4.
Chairman's statement
for the six months to 30 April 2014
Performance
I am pleased to report that for the six month period ended 30 April 2014, the
Company's net asset value per share ("NAV") increased by 4.1%. By comparison,
the FTSE All-Share Index rose by 2.7% and the share price returned 2.6% (all
percentages with income reinvested).
The NAV outperformance relative to the FTSE All-Share Index in the six month
period was due principally to stock selection, where a number of our portfolio
companies delivered improved earnings at a time when the trend was generally
one of downgrades to forecasts across the corporate sector.
Since the period end, the Company's NAV per share has risen by a further 1.2%
compared with a return of 0.7% from the FTSE All-Share Index.
Further information on the Company's performance is set out in the Investment
Manager's Report.
Revenue return and dividends
Revenue return for the period was 2.84 pence per share (six months to
30 April 2013: 2.82 pence per share) and the Board has declared an interim
dividend of 2.20 pence per share (2013: 2.00 pence per share).
The increase in the interim dividend is supported by earnings in the period and reflects
the Board’s recognition of shareholders’ desire for income in addition to capital
growth – particularly at a time of historically low interest rates. The dividend will
be paid on 5 September 2014 to shareholders on the Company's register at the
close of business on 4 July 2014 (ex-dividend date is 2 July 2014).
Management Arrangements
The Board is mindful of the impact of the Retail Distribution Review on fund
charges and the desire to make these charges as simple and transparent as
possible. The Board and the Manager have therefore agreed that the Company will
pay a management fee but no longer be charged a performance related fee. From 1
July 2014, this fee will be 0.60% per annum of the Company's market capitalisation
and the management fee payable in respect of a financial period will be capped at
no more than 0.60% of the NAV of the Company.
Zero discount policy
During the period 460,000 shares, representing 1.7% of the ordinary shares in
issue, excluding treasury shares, at the start of the period, were purchased
and placed in treasury for a total consideration of £748,000, excluding
transaction costs. Since 30 April 2014, a further 260,000 ordinary shares have
been purchased and placed in treasury for a total consideration of £435,000
excluding transaction costs. Shares held in treasury may be reissued to satisfy
market demand, but only at a premium to the estimated NAV per share at the time
of issue.
The average discount for the six month period was 1.7% (cum income).
Gearing
The Company operates a flexible gearing policy which depends on prevailing
conditions and the outlook for the market. Gearing is subject to a maximum
level of 20% of net assets at the time of investment. Under normal operating
conditions it is therefore envisaged that gearing will fall within a range of
0% and 20% of net assets, and in recent years has typically been about 5%. The
maximum gearing level during the period under review was 2.6% and at 30 April
2014 the Company had net cash of 0.2%. Gearing levels and sources of funding
are reviewed regularly.
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 2014 and an
uncommitted overdraft facility with The Bank of New York Mellon (International)
Limited of £5.5 million or 12.5% of the NAV, whichever is lower.
Alternative Investment Fund Managers' Directive
BlackRock Fund Managers Limited ("BFM") was authorised as an Alternative
Investment Fund Manager ("AIFM") by the Financial Conduct Authority ("FCA") on
1 May 2014 and it is expected that BFM will be appointed as the Company's AIFM
under a new Investment Management Agreement on or around 1 July 2014.
The terms of the Investment Management Agreement ("IMA") agreed with the AIFM
will enable the Board to continue to act independently of the AIFM. The new IMA
terms also strike the appropriate balance between the Board's control over the
Company, its investment policies and compliance with regulatory obligations. A
Depositary agreement has also been signed with BNY Mellon Trust & Depositary
(UK) Limited, which it is expected will take effect from 1 July 2014 and sets
out the terms of their work in monitoring the cash flows of the Company and acting
as custodian. BFM is also a party to the agreement. The Board has taken independent
advice on compliance matters relating to the AIFM Directive.
Facilitating retail investments
The Company currently conducts its affairs so that its securities can be
recommended by independent financial advisers to ordinary retail investors in
accordance with the FCA rules in relation to non-mainstream investment products
and intends to continue to do so for the foreseeable future. The securities are
excluded from the FCA's restrictions which apply to non-mainstream investment
products because they are shares in an investment trust.
The Company contributes to a focussed sales and marketing programme run by BlackRock
on behalf of a number of the investment trusts under its management. The Company’s
contribution is matched by BlackRock. The programme commenced on 1 November 2013
and for the period under review, the Company’s contribution amounted to £19,000
(including VAT). The purpose of the programme is to ensure effective communication
with shareholders and to attract new shareholders.
Outlook
Since the period end the main concerns for markets have been continuing
sluggish economic growth in Europe and uncertainties associated with the unrest
in Ukraine and the Middle East. In the UK, extracts from the Bank of England policy
minutes for May pondered whether `the more gradual the intended rise in Bank Rates,
the earlier it might be necessary to start tightening policy'. We are mindful therefore
that a return to more historically "normal" interest rates, however well flagged in
advance, could lead to further short term volatility in markets.
The Company's portfolio, which is predominantly invested in companies with
strong free cash flows and the capability to pay growing dividends, is well
positioned to benefit notwithstanding continuing market uncertainties.
Jonathan Cartwright
Chairman
25 June 2014
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 ï¬nancial statements.
Principal risks and uncertainties
The principal risks faced by the Company can be divided into various areas as
follows:
ïµ Performance;
ïµ Income/dividend;
ïµ Regulatory;
ïµ Operational;
ïµ Market;
ïµ Financial; and
ïµ Gearing.
The Board reported on the principal risks and uncertainties faced by the
Company in the Annual Report and Financial Statements for the year ended 31
October 2013. A detailed explanation can be found in the Strategic Report on
pages 14 and 15 and in note 18 on pages 50 to 53 of the Annual Report and
Financial Statements which are available on the website maintained by the
Investment Manager, BlackRock Investment Management (UK) Limited, at
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
ï¬nancial year as they were to the six months under review.
Related party disclosure and transactions with the Investment Manager
The Investment Manager is regarded under the Listing Rules as a related party
and details of the fees payable are set out in note 3 and note 10. The related
party transactions with the Directors are set out in note 9.
Going concern
The Directors are satisfied that the Company has adequate resources to continue
in operational existence for the foreseeable future and is financially sound.
For this reason, they continue to adopt the going concern basis in preparing
the financial statements. The Company has a portfolio of investments which are
considered to be readily realisable and is able to meet all of its liabilities
from its assets and income generated from these assets.
Directors' responsibility statement
The Disclosure and Transparency Rules (DTR) of the UK Listing Authority require
the Directors to conï¬rm their responsibilities in relation to the preparation
and publication of the Interim Management Report and Financial Statements.
The Directors conï¬rm to the best of their knowledge that:
ïµ the condensed set of ï¬nancial statements contained within the half yearly
financial report has been prepared in accordance with applicable UK Accounting
Standards and the Accounting Standards Board's Statement `Half Yearly Financial
Reports'; and
ïµ the Interim Management Report, together with the Chairman's Statement and
Investment Manager's Report, include a fair review of the information required
by 4.2.7R and 4.2.8R of the FCA's Disclosure and Transparency Rules.
The half yearly financial report has not been audited or reviewed by the
Company's Auditor.
The half yearly financial report was approved by the Board on 25 June 2014 and
the above responsibility statement was signed on its behalf by the Chairman.
Jonathan Cartwright
For and on behalf of the Board
25 June 2014
Investment manager's report
Performance
During the six month period ended 30 April 2014 the Company's NAV returned 4.1%
and the share price returned 2.6%. Over the same period, the FTSE All-Share
Index returned 2.7%. (All percentages are in sterling with income reinvested.)
Investment approach and process
In assembling the Company's portfolio we adopt a relatively concentrated
approach to investment to ensure that our best ideas contribute significantly
to returns. We believe that the portfolio as a whole should achieve a premium
level of yield rather than every individual company within it. This gives the
Company increased flexibility to invest where returns are most attractive. This
relatively concentrated approach results in a portfolio which differs substantially
from the FTSE All-Share Index (the "Index") and in any individual year, the returns
will vary, sometimes significantly from those of the Index. Over longer periods our
objective is to achieve returns greater than the Index, but with lower volatility.
The foundation of the portfolio, approximately 70%, is in high free cash flow
companies that can sustain cash generation and pay a growing yield whilst
aiming to deliver a double digit total return. Additionally, we look to
identify and invest up to 20% of the portfolio in `growth' companies that have
significant barriers to entry and scalable business models that enable them to
grow consistently. We also look for `turnaround companies', at around 10% of
portfolio value, which represent those companies that are out of favour with
the market, facing temporary challenges with high yields/very low valuations,
but with recovery potential. The expected return from these stocks, although
they represent a relatively small proportion of the portfolio, is expected to
contribute meaningfully to returns over time.
Market review
The Index paused for breath in 2014 after the strong re-rating seen through
much of 2013. In December, the US Federal Reserve announced that it would begin
to `taper' its quantitative easing, reducing its monthly asset purchases of
US$85 billion per month, which contributed to market volatility. Tensions then
rose sharply around Ukraine, centred on the Crimea, prompting an increase in
the risk premium after a period of relatively subdued geopolitical tensions.
Chinese economic data remained relatively weak and continued to provide a
headwind to Emerging Markets and related stocks.
In April 2014 market leadership rotated significantly: the most obvious feature
was the marked outperformance of the FTSE 100 Index which rose by 3.1% during
the month versus the FTSE Mid 250 Index, which fell by 2.5%. This
outperformance of 5.4% is the fourth largest on a record stretching back to
1986. UK interest rate cyclicals such as housebuilders led the decline but the
broader trend can be described as a reversal of the momentum that has been
prevalent over the last year. April was also notable for a marked pick-up in
the pace of corporate activity with the health care sector to the fore:
GlaxoSmithKline's tripartite deal with Novartis and Pfizer's approach to acquire
AstraZeneca. As a result of these moves, the oil & gas and pharmaceutical
sectors performed well whilst the financials and consumer services sectors
fell.
Contributors to performance
The portfolio performed well over the period, benefiting from positions in a
variety of companies which delivered on earnings expectations at a time when
the prevailing trend has been for downgrades to forecasts. Plant hire company
Ashtead, has delivered strong earnings growth from its exposure to US
construction as capital constraints handicap many of the smaller players, and,
as the cycle for bigger construction projects begins to accelerate. Shire
reported strong revenue growth and earnings driven by a broadening
pharmaceutical portfolio.
Having added Ryanair to the portfolio in November, it was pleasing to see
trading rebounding which led to a strong share price performance. Air traffic
numbers have increased and the company reported an easing of pricing pressures.
Insurers esure and Admiral both benefited from indications that the car
insurance rate cycle was stabilising and Admiral raised its dividend by 10%.
Carphone Warehouse exceeded earnings expectations and had benefited from the
announcement of talks that might lead to a merger with Dixons. Whilst the
outcome is uncertain at this stage, we believe the synergies that could be
generated from a merger to be significant. AstraZeneca was also the subject of
corporate activity and the company's share price rose by 37% over the period
following a bid approach from US pharmaceutical company Pfizer. We purchased
the position in AstraZeneca in November, at a time when the market was
attributing little value to management action over the past year to improve the
success of the company's long drug pipeline.
On the negative side, the strong market rotation during April led to
underperformance from holdings in our `Growth' portion of the portfolio despite
these having delivered strong operational performances. These included Berkeley
Group, Essentra, Hargreaves Lansdown, Betfair and Howden Joinery Group.
Tate & Lyle fell over the period following weaker sucralose pricing as price
competition intensified and volumes for its high fructose corn syrup product
were lower than that forecasted. The speciality ingredients part of the
business continues to grow as expected. Barclays, held in the turnaround
portion of the portfolio, has struggled with transforming itself into a more
balanced bank and underperformed during the period. There remains significant
execution risk and we have sold the position.
During the period we purchased AstraZeneca, Next and Berkeley Group in the free
cash flow portion of the portfolio and added to Reckitt Benckiser Group,
Compass and Unilever. We sold BT Group, Verizon and BSkyB. In the `growth'
portion of the portfolio we purchased Prudential, Howden Joinery Group and
Essentra and sold Ashtead Group and Merlin Entertainment, whilst we reduced
Hargreaves Lansdown and Betfair Group. In the `turnaround' portion we purchased
Rentokil Initial and Aviva and sold Barclays and Ladbrokes.
Outlook
While the ending of quantitative easing in the US is likely to induce some
volatility in equities and bond yields, we expect that inflation expectations
and medium term GDP growth will remain modest, thereby limiting the risks of a
substantial correction. Over the longer-term, recovering global growth and
confidence about monetary policy, which will remain loose to allow economies to
pay down fiscal deficits, is a positive backdrop for corporate earnings
expectations and equity valuations.
The portfolio is primarily invested in high free cash flow companies that can
sustain cash generation and pay a growing dividend yield. It also has exposure
to companies with sustainable growth franchises and turnaround situations.
Adam Avigdori and Mark Wharrier
BlackRock Investment Management (UK) Limited
25 June 2014
Ten largest investments
30 April 2014
Royal Dutch Shell `B': 6.7% (2013: 5.1%) is one of the world's largest
independent oil and gas companies. Its upstream operations are engaged in
searching for and recovering crude oil and natural gas, the liquefaction and
transportation of gas, and the extraction of bitumen from oil sands. The
downstream businesses are engaged in manufacturing; distribution and marketing
activities for oil products and chemicals, in alternative energy and carbon
dioxide management.
GlaxoSmithKline: 6.0% (2013: 5.7%) is a global health care group, operating in
the research, development, manufacture and marketing of pharmaceutical
products, including vaccines, over-the-counter medicines and health-related
consumer products.
AstraZeneca: 5.8% (2013: nil) is a global pharmaceutical company, operating in
the research, development, manufacture and marketing of pharmaceutical
products, that include the areas of cardiovascular and metabolic disease,
oncology, respiratory, inflammation and autoimmunity.
British American Tobacco: 5.6% (2013: 5.2%) is one of the world's leading
tobacco groups, with more than 200 brands in the portfolio selling in
approximately 180 markets worldwide. It also has a significant interest in
tobacco leaf growing, working with thousands of farmers internationally.
Unilever: 4.8% (2013: 3.2%) is a global consumer goods company with leading
brands across home care (Comfort, Cif), personal care (Sure, Dove, Simple),
foods (Knorr, Flora) and refreshment (Magnum and Ben & Jerry's ice cream). The
group's products are sold in over 190 countries with approximately 55% of sales
coming from emerging markets.
HSBC Holdings: 4.7% (2013: 6.0%) is one of the world's largest banking and
financial services organisations. Its principal businesses are commercial
banking, global banking and markets, private banking and personal financial
services. Its international network covers 81 countries and territories
worldwide, across Europe, Asia-Pacific, North America, Latin America and the
Middle East and North Africa.
Reckitt Benckiser: 4.2% (2013: 2.6%) is a global consumer goods leader in
health (Nurofen, Strepsils), hygiene (Dettol, Clearasil) and home (Air Wick,
Cillit Bang, Finish). The company is conducting a strategic review of its
pharmaceutical business that specialises in the treatment of opioid dependence.
Vodafone Group: 3.9% (2013: 6.1%) 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. The company completed the sale of its Verizon Wireless stake to US
telecommunications group Verizon in Q1 2014, with shareholders receiving cash
and Verizon shares as a result of the sale.
Wolseley: 3.8% (2013: 3.3%) is the world's largest trade distributor of
plumbing and heating products and a leading supplier of building materials. It
has businesses in the US, Nordics, UK and Europe.
Reed Elsevier: 3.8% (2013: 3.3%) is a global provider of professional
information solutions that includes publication of scientific, medical,
technical and legal journals. Reed is also the leading exhibitions and events
business globally.
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 2013. Together, the ten largest investments represents 49.3% of
total investments (ten largest investments as at 31 October 2013: 44.4%).
Distribution of Investments
as at 30 April 2014
ANALYSIS OF PORTFOLIO BY SECTOR
Portfolio Benchmark
% %
Pharmaceuticals & Biotechnology 14.9 7.9
Support Services 8.5 4.6
Life Insurance 7.9 4.4
Tobacco 7.9 4.3
Oil & Gas Producers 7.8 14.7
Food Producers 6.5 2.4
Travel & Leisure 6.0 3.6
Household Goods & Home Construction 6.0 2.4
Cash and Cash Equivalents 5.4 0.0
Banks 4.8 10.9
General Retailers 4.6 2.1
Mobile Telecommunications 3.9 3.0
Media 3.8 3.0
Mining 3.5 7.1
Financial Services 3.3 2.2
Non-life Insurance 3.0 1.1
Electronic & Electrical Equipment 2.2 0.5
Sources: BlackRock and Datastream.
INVESTMENT SIZE
Number %
of of
Investments portfolio
Less than £1m 14 17.8
£1m to £2m 13 39.0
£2m to £3m 7 36.5
£3m to £4m 1 6.7
Source: BlackRock.
Investments
as at 30 April 2014
Market
value % of
£'000 Investments
Pharmaceuticals & Biotechnology
GlaxoSmithKline 2,867 6.0
AstraZeneca 2,802 5.8
Shire 1,481 3.1
-------- --------
7,150 14.9
-------- --------
Support Services
Wolseley 1,853 3.8
Essentra 803 1.7
Howden Joinery Group 735 1.5
Rentokil Initial 733 1.5
-------- --------
4,124 8.5
-------- --------
Life Insurance
Aviva 1,460 3.0
Legal & General 1,376 2.9
Prudential 947 2.0
-------- --------
3,783 7.9
-------- --------
Tobacco
British American Tobacco 2,673 5.6
Imperial Tobacco Group 1,100 2.3
-------- --------
3,773 7.9
-------- --------
Oil & Gas Producers
Royal Dutch Shell `B' 3,219 6.7
BG Group 513 1.1
-------- --------
3,732 7.8
-------- --------
Food Producers
Unilever 2,316 4.8
Tate & Lyle 829 1.7
-------- --------
3,145 6.5
-------- --------
Travel & Leisure
Compass Group 1,808 3.7
Betfair Group 638 1.3
Stagecoach Group 311 0.6
Cineworld Group 189 0.4
-------- --------
2,946 6.0
-------- --------
Household Goods & Home Construction
Reckitt Benckiser Group 2,029 4.2
Berkeley Group Holdings 869 1.8
-------- --------
2,898 6.0
-------- --------
Banks
HSBC Holdings 2,245 4.7
Lloyds Banking Group 65 0.1
-------- --------
2,310 4.8
-------- --------
General Retailers
Carphone Warehouse 1,148 2.4
Next 1,042 2.2
-------- --------
2,190 4.6
-------- --------
Mobile Telecommunications
Vodafone Group 1,879 3.9
-------- --------
1,879 3.9
-------- --------
Media
Reed Elsevier 1,850 3.8
-------- --------
1,850 3.8
-------- --------
Mining
Rio Tinto 1,680 3.5
-------- --------
1,680 3.5
-------- --------
Financial Services
3i Group 1,048 2.2
Hargreaves Lansdown 512 1.1
-------- --------
1,560 3.3
-------- --------
Non-life Insurance
esure 761 1.6
Admiral Group 668 1.4
-------- --------
1,429 3.0
-------- --------
Electronic & Electrical Equipment
Spectris 1,060 2.2
-------- --------
1,060 2.2
-------- --------
45,509 94.6
-------- --------
Cash and Cash Equivalents
BlackRock's Institutional Cash Series plc - Sterling
Liquidity Fund 2,621 5.4
-------- --------
2,621 5.4
-------- --------
Total value of securities 48,130 100.0
-------- --------
All investments are in ordinary shares unless otherwise stated.
The total number of holdings as at 30 April 2014 was 35 (31 October 2013: 39).
Income statement
for the six months ended 30 April 2014
Revenue Capital Total
£'000 £'000 £'000
Six months Year Six months Year Six months Year
ended ended ended ended ended ended
Notes 30.04.14 30.04.13 31.10.13 30.04.14 30.04.13 31.10.13 30.04.14 30.04.13 31.10.13
(unaudited)(unaudited) (audited)(unaudited) (unaudited)(audited)(unaudited)(unaudited) (audited)
Net gains on
investments at
fair value
through profit
or loss - - - 1,152 3,032 5,297 1,152 3,032 5,297
Income from
investments
held at fair
value
through
profit or loss 2 928 953 1,880 - - - 928 953 1,880
Investment
management fee 3 (34) (31) (64) (100) (93) (192) (134) (124) (256)
Other operating
expenses (117) (120) (229) (4) (10) (16) (121) (130) (245)
-------- -------- -------- -------- -------- -------- -------- -------- --------
Net return
before finance
costs and taxation 777 802 1,587 1,048 2,929 5,089 1,825 3,731 6,676
Finance costs (4) (5) (11) (10) (16) (32) (14) (21) (43)
-------- -------- -------- -------- -------- -------- -------- -------- --------
Return on
ordinary activities
before taxation 773 797 1,576 1,038 2,913 5,057 1,811 3,710 6,633
Taxation on
activities - - - - - - - - -
-------- -------- -------- -------- -------- -------- -------- -------- --------
Return on
ordinary activities
after taxation 773 797 1,576 1,038 2,913 5,057 1,811 3,710 6,633
-------- -------- -------- -------- -------- -------- -------- -------- --------
Return per
ordinary share
(basic
and diluted) 4 2.84p 2.82p 5.63p 3.81p 10.30p 18.09p 6.65p 13.12p 23.72p
======== ======== ======== ======== ======== ======== ======== ======== ========
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. All items in the above statement derive from continuing
operations.
Reconciliation of movements in shareholders' funds
for the six months ended 30 April 2014 and comparative periods
Called up Share Capital Special Capital Revenue
share premium redemption reserve reserves reserve
capital account reserve £'000 £'000 £'000 Total
£'000 £'000 £'000 £'000
Six months ended 30
April 2014 (unaudited)
At 31 October 2013 329 14,819 220 24,846 3,140 2,137 45,491
Return for the period - - - - 1,038 773 1,811
Shares repurchased
during the period - - - (756) - - (756)
Dividends paid - - - - - (952) (952)
-------- -------- -------- -------- -------- -------- --------
At 30 April 2014 329 14,819 220 24,090 4,178 1,958 45,594
-------- -------- -------- -------- -------- -------- --------
Six months ended 30
April 2013 (unaudited)
At 31 October 2012 329 14,819 220 26,401 (1,917) 2,095 41,947
Return for the period - - - - 2,913 797 3,710
Shares repurchased
during the period - - - (579) - - (579)
Dividends paid - - - - - (979) (979)
-------- -------- -------- -------- -------- -------- --------
At 30 April 2013 329 14,819 220 25,822 996 1,913 44,099
-------- -------- -------- -------- -------- -------- --------
Year ended 31 October 2013(audited)
At 31 October 2012 329 14,819 220 26,401 (1,917) 2,095 41,947
Return for the year - - - - 5,057 1,576 6,633
Shares repurchased
during the year - - - (1,555) - - (1,555)
Dividends paid - - - - - (1,534) (1,534)
-------- -------- -------- -------- -------- -------- --------
At 31 October 2013 329 14,819 220 24,846 3,140 2,137 45,491
======== ======== ======== ======== ======== ======== ========
The transaction costs incurred on the acquisition and disposal of investments
are included within the capital reserve. Purchase and sale costs amounted to
£103,000 and £22,000 respectively for the six months ended 30 April 2014 (six
months ended 30 April 2013: £156,000 and £32,000; year ended 31 October 2013:
£266,000 and £61,000).
Balance sheet
as at 30 April 2014
Notes 30 April 30 April 31 October
2014 2013 2013
£'000 £'000 £'000
(unaudited) (unaudited) (audited)
Fixed assets
Investments held at fair value
through profit or loss 48,130 46,704 46,396
======== ======== ========
Current assets
Debtors 794 744 2,322
Cash at bank 110 100 278
-------- -------- --------
904 844 2,600
-------- -------- --------
Creditors - amounts falling due within one year
Bank loan (2,000) (2,000) (2,000)
Other creditors (1,440) (1,449) (1,505)
-------- -------- --------
(3,440) (3,449) (3,505)
-------- -------- --------
Net current liabilities (2,536) (2,605) (905)
-------- -------- --------
Net assets 45,594 44,099 45,491
======== ======== ========
Capital and reserves
Called up share capital 6 329 329 329
Share premium account 14,819 14,819 14,819
Capital redemption reserve 220 220 220
Special reserve 24,090 25,822 24,846
Capital reserves 4,178 996 3,140
Revenue reserve 1,958 1,913 2,137
-------- -------- --------
Total equity shareholders' funds 4 45,594 44,099 45,491
======== ======== ========
Net asset value per ordinary
share - basic and diluted 4 169.25p 157.44p 166.03p
======== ======== ========
Cash flow statement
for the six months ended 30 April 2014
Six months Six months Year ended
ended ended 31 October
30 April 30 April 2013
2014 2013 £'000
£'000 £'000 (audited)
(unaudited) (unaudited)
Net cash inflow from operating activities
Returns on investment and servicing of
finance 387 708 1,683
Interest paid (14) (34) (56)
-------- -------- --------
Capital expenditure and financial
investment
Purchases of investments (28,661) (33,194) (61,831)
Sales of investments 29,828 34,077 63,470
-------- -------- --------
Net cash inflow from capital expenditure
and financial investment 1,167 883 1,639
-------- -------- --------
Equity dividends paid (952) (979) (1,534)
-------- -------- --------
Net cash inflow before financing 588 578 1,732
-------- -------- --------
Financing
Purchase of ordinary shares held in
treasury (756) (579) (1,555)
Repayment of loan - - (2,000)
Drawdown of loan - - 2,000
-------- -------- --------
Net cash outflow from financing (756) (579) (1,555)
-------- -------- --------
(Decrease)/increase in cash (168) (1) 177
======== ======== ========
Reconciliation of net return on ordinary activities before finance costs and
taxation to net cash flow from operating activities
for the six months ended 30 April 2014
Six months Six months Year ended
ended ended 31 October
30 April 30 April 2013
2014 2013 £'000
£'000 £'000 (audited)
(unaudited) (unaudited)
Net return before finance costs and
taxation 1,825 3,731 6,676
Capital return before finance costs and
taxation (1,048) (2,929) (5,089)
-------- -------- --------
Net revenue return before finance costs
and taxation 777 802 1,587
Expenses charged to capital (104) (103) (208)
Special dividends credited to capital - 38 38
(Increase)/decrease in debtors (267) (209) 52
(Decrease)/increase in creditors (19) 180 214
-------- -------- --------
Net cash inflow from operating activities 387 708 1,683
======== ======== ========
Notes to the financial statements
for the six months ended 30 April 2014
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 sections 1158 - 1165 of the Corporation Tax
Act 2010. The half yearly financial report has been prepared using the same
accounting policies set out in the Company's financial statements for the year
ended 31 October 2013.
Under FRS 26 "Financial Instruments: Recognition and Measurement" the Company
has designated its fixed asset investments 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 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 31 October
30 April 30 April 2013
2014 2013 £'000
£'000 £'000 (audited)
(unaudited) (unaudited)
Investment income:
Franked UK listed dividends 872 934 1,778
Unfranked equity income from UK
investments - - 66
Overseas listed dividends 4 19 36
Underwriting commission 15 - -
Scrip dividends from UK investments 37 - -
-------- -------- --------
Total 928 953 1,880
======== ======== ========
3. Investment management and performance fees
Revenue Capital Total
£'000 £'000 £'000
Six months Year Six months Year Six months Year
ended ended ended ended ended ended
30.04.14 30.04.13 31.10.13 30.04.14 30.04.13 31.10.13 30.04.14 30.04.13 31.10.13
(unaudited) (unaudited) (audited) (unaudited)(unaudited) (audited) (unaudited)(unaudited) (audited)
Investment
management fee 34 31 64 100 93 192 134 124 256
-------- -------- -------- -------- -------- -------- -------- -------- --------
34 31 64 100 93 192 134 124 256
======== ======== ======== ======== ======== ======== ======== ======== ========
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, BlackRock is entitled to a base fee of 0.6%
per annum of the Company's market capitalisation. There is no additional fee
for company secretarial and administration services.
Under the investment management agreement, BlackRock is also entitled to a
performance fee which is based on the Company's net asset 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 will use for the
calculation of the performance fee is the FTSE All-Share Index measured on a
total return basis. Further information about this fee arrangement is detailed
on page 16 of the 2013 annual report.
Performance fees, if any, are wholly allocated to the capital column of the
Income Statement. No performance fee has been accrued for the six month period
to 30 April 2014 (six months ended 30 April 2013: £nil and year ended 31
October 2013: £nil).
With effect from 1 July 2014 the Company will no longer be charged a
performance related fee. The Company will pay a management fee of 0.60% per
annum of the Company's market capitalisation and the management fee payable in
respect of a financial period will be capped at no more than 0.60% of the NAV
of the Company.
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 31 October
30 April 30 April 2013
2014 2013 (audited)
(unaudited) (unaudited)
Net revenue return attributable to
ordinary shareholders (£'000) 773 797 1,576
Net capital return attributable to
ordinary shareholders (£'000) 1,038 2,913 5,057
-------- -------- --------
Total return (£'000) 1,811 3,710 6,633
-------- -------- --------
Equity shareholders' funds (£'000) 45,594 44,099 45,491
-------- -------- --------
The weighted average number of ordinary
shares in issue at the end of each
period, on which the return per ordinary
share was calculated was: 27,217,362 28,280,262 27,958,747
-------- -------- --------
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: 26,939,268 28,009,268 27,399,268
-------- -------- --------
Revenue return per ordinary share 2.84p 2.82p 5.63p
Capital return per ordinary share 3.81p 10.30p 18.09p
-------- -------- --------
Total return per ordinary share 6.65p 13.12p 23.72p
-------- -------- --------
Net asset value per ordinary share (debt
at par value) 169.25p* 157.44p** 166.03p***
-------- -------- --------
Ordinary share price 165.25p 154.25p 164.50p
-------- -------- --------
* The net asset value is based on 26,939,268 Ordinary Shares in issue. An
additional 5,994,664 Ordinary Shares were held in treasury.
** The net asset value is based on 28,009,268 Ordinary Shares in issue. An
additional 4,924,664 Ordinary Shares were held in treasury.
*** The net asset value is based on 27,399,268 Ordinary Shares in issue. An
additional 5,534,664 Ordinary Shares were held in treasury.
5. Dividend
The Board has declared an interim dividend of 2.20p per share (2013: 2.00p per
share), payable on 5 September 2014 to shareholders on the register as at 4
July 2014; the ex–dividend date is 2 July 2014. The total cost of this
dividend, based on 26,679,268 shares (excluding treasury shares) in issue on
25 June 2014, is £587,000 (2013: £555,000).
6. Called up share capital
Ordinary Treasury Total Nominal
shares shares shares value
number number number £'000
Allotted, called up and fully
paid share capital comprised:
Ordinary shares of 1p each
At 31 October 2013 27,399,268 5,534,664 32,933,932 329
-------- -------- -------- --------
Shares purchased and held in
treasury (460,000) 460,000 - -
-------- -------- -------- --------
At 30 April 2014 26,939,268 5,994,664 32,933,932 329
======== ======== ======== ========
During the period to 30 April 2014, the Company purchased 460,000 ordinary
shares and placed these in treasury for re-issue into the market or for
cancellation at a future date at a cost of £748,000 (excluding costs). No
ordinary shares were cancelled from treasury. Since the end of April, a further
260,000 ordinary shares have been purchased and placed in treasury for a total
consideration of £435,000 (excluding costs).
7. Movement in net debt
Six months Six months Year ended
ended ended 31 October
30 April 30 April 2013
2014 2013 £'000
£'000 £'000 (audited)
(unaudited) (unaudited)
(a) Reconciliation of net cash flow to
movements in net debt
(Decrease)/increase in cash (168) (1) 177
Repayment of bank loan - - 2,000
Drawdown of bank loan - - (2,000)
-------- -------- --------
Movement in net (debt)/funds in the
period (168) (1) 177
Opening net debt (1,722) (1,899) (1,899)
-------- -------- --------
Closing net debt (1,890) (1,900) (1,722)
-------- -------- --------
(b) Analysis of change in net (debt)/
funds
Cash at bank 110 100 278
Bank loan (2,000) (2,000) (2,000)
-------- -------- --------
Closing net debt (1,890) (1,900) (1,722)
======== ======== ========
8. 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 2014 and 30 April 2013
has not been audited or reviewed by the Company's Auditor.
The information for the year ended 31 October 2013 has been extracted from the
latest published audited financial statements which have been filed with the
Registrar of Companies. The report of the Auditor on those accounts contained
no qualification or statement under sections 498(2) or 498(3) of the Companies
Act 2006.
9. Related party disclosure
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, except Mr Luckraft, receives an annual fee of £17,000. Mr Luckraft's
fee is paid to AXA Investment Management (UK) Limited for the provision of his
services as a non-executive Director of the Company. 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, including a non-beneficial
interest in 155,500 shares. A further 3,000,000 shares are held by Mr Worsley's
connected persons.
Since the period end up to the date of this report, there have been no changes
in Directors' holdings.
10. Transactions with investment manager
The transaction with BlackRock is set out in note 3.
The investment management fee due for the six months ended 30 April 2014
amounted to £134,000 (six months ended 30 April 2013: £124,000 and year ended
31 October 2013: £256,000).
At the period end, £66,000 was outstanding in respect of investment management
and performance fees (six months ended 30 April 2013: £241,000 and year ended
31 October 2013: £171,000).
In addition to the above services, with effect from 1 November 2013, BlackRock
has provided the Company with marketing services. The total fees paid or
payable for these services for the period ended 30 April 2014 amounted to
£19,000 including VAT (six months ended 30 April 2013: Nil; year ended 31
October 2013: Nil), of which £19,000 (30 April 2013: Nil; 31 October 2013: Nil)
was outstanding at 30 April 2014.
The Company has an investment in BlackRock's Institutional Cash Series plc
-Sterling Liquidity Fund of £2,621,000 at the period end (30 April 2013:
£475,000; 31 October 2013: £1,282,000).
11. Contingent liabilities
There were no contingent liabilities at 30 April 2014 (30 April 2013 and 31
October 2013: nil).
12. Annual results
The Board expects to announce the annual results for the year ended 31 October
2014, in December 2014. Copies of the annual results announcement can be
obtained from the Secretary on 020 7743 3000. The annual report should be
available by early January 2015 with the Annual General Meeting being held in
February 2015.
25 June 2014
12 Throgmorton Avenue
London
EC2N 2DL
The Half Yearly Financial Report will also be available on the BlackRock
Investment Management website at www.blackrock.co.uk/brig. 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:
Simon White, Managing Director, BlackRock Investment Management (UK) Limited -
Tel: 020 7743 2178
Adam Avigdori Fund Manager, BlackRock Investment Management (UK) Limited -
Tel: 020 7743 5406
Mark Wharrier Fund Manager, BlackRock Investment Management (UK) Limited -
Tel: 020 7743 4216
Emma Philips, Media & Communications, BlackRock Investment Management (UK)
Limited -
Tel: 020 7743 2922
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