Portfolio Update

The information contained in this release was correct as at 31 May 2023. Information on the Company’s up to date net asset values can be found on the London Stock Exchange website at:

https://www.londonstockexchange.com/exchange/news/market-news/market-news-home.html.

BLACKROCK INCOME & GROWTH INVESTMENT TRUST PLC (LEI:5493003YBY59H9EJLJ16)

All information is at 31 May 2023 and unaudited.

Performance at month end with net income reinvested

	One Month	Three Months	One Year	Three Years	Five Years	Since 1 April 2012
Sterling
Share price	-1.0%	-0.8%	9.7%	31.1%	11.7%	113.1%
Net asset value	-4.1%	-3.1%	2.7%	31.7%	14.3%	110.3%
FTSE All-Share Total Return	-4.6%	-4.2%	0.4%	33.9%	15.2%	102.4%
Source: BlackRock

BlackRock took over the investment management of the Company with effect from 1 April 2012.

At month end

Sterling:

Net asset value – capital only:	202.48p
Net asset value – cum income*:	206.34p
Share price:	189.00p
Total assets (including income):	£47.2m
Discount to cum-income NAV:	8.4%
Gearing:	5.4%
Net yield**:	3.9%
Ordinary shares in issue***:	20,921,646
Gearing range (as a % of net assets):	0-20%
Ongoing charges****:	1.2%
* Includes net revenue of 3.86 pence per share
** The Company’s yield based on dividends announced in the last 12 months as at the date of the release of this announcement is 3.9% and includes the 2022 interim dividend of 2.60p per share declared on 22 June 2022 with pay date 1 September 2022 and the 2022 final dividend of 4.70p per share declared on 1 February 2023 with pay date 15 March 2023.
*** excludes 10,081,532 shares held in treasury.
**** The Company’s ongoing charges are calculated as a percentage of average daily net assets and using management fee and all other operating expenses excluding finance costs, direct transaction costs, custody transaction charges, VAT recovered, taxation and certain non-recurring items for the year ended 31 October 2022.

Sector Analysis	Total assets (%)
Support Services	11.3
Pharmaceuticals & Biotechnology	10.5
Oil & Gas Producers	8.6
Household Goods & Home Construction	7.5
Banks	7.1
Media	7.0
Financial Services	6.8
Mining	6.0
Personal Goods	4.3
Nonlife Insurance	4.2
General Retailers	4.2
Electronic & Electrical Equipment	3.1
Health Care Equipment & Services	3.0
Life Insurance	2.9
Food Producers	2.9
Tobacco	1.8
Travel & Leisure	1.7
Gas, Water & Multiutilities	1.5
Real Estate Investment Trusts	1.1
Leisure Goods	1.0
Net Current Assets	3.5
	-----
Total	100.0
	=====
Country Analysis	Percentage
United Kingdom	90.0
Switzerland	2.7
United States	2.2
France	1.6
Net Current Assets	3.5
	-----
	100.0
	=====
Top 10 holdings	Fund %
AstraZeneca	7.5
Shell	6.8
Reckitt	4.9
3i Group	4.5
RELX	4.4
Rio Tinto	4.1
Unilever	3.3
Smith & Nephew	3.0
Phoenix Group	2.9
Tate & Lyle	2.9

Commenting on the markets, representing the Investment Manager noted:

Performance Overview:

The Company returned -4.1% during the month net of fees, outperforming the FTSE All-Share which returned -4.6%.

Market Summary:

The FTSE All Share fell -4.6% during May with Telecommunications, Oil & Gas and Consumer Goods as top underperforming sectors and Technology as the only sector delivering positive performance.

The UK gilt market  experienced significant volatility - alongside a twelfth consecutive rate hike by the Bank of England (BoE), Inflation again beating expectations, the gross domestic product (GDP) reading coming in well below estimates and a poor manufacturing purchasing managers' index (PMI) print.

The Bank of England (BoE) hiked rates by another 25bps¹ amid stubbornly high inflation and stagnating growth, highlighting central banks' acute trade-off. In Europe, the European Central Bank (ECB) raised interest rates by 25 bps² as inflation rose slightly in the region in April. Data in the month also showed that Germany had entered recession even with a smaller-than-feared energy shock.

In the US, debt ceiling negotiations dominated market sentiment. In addition, the first quarter gross domestic product (GDP) growth showed slowness and the April US Consumer Price Index (CPI) confirmed core inflation was staying stubbornly high. The Federal Reserve (Fed) raised interest rates by 25bps³ and signaled a potential pause to further rate hikes.

In China, April data which includes industrial production, fixed investment, and retail sales, fell short of consensus expectations. In addition, credit growth and import data was also lacklustre, and put pressure on authorities to loosen policy. In Japan, manufacturing activity expanded for the first time since October 2022, and service-sector growth hit a record in May.

Contributors to Performance:

The largest stock contributor was 3i Group. The company’s full year results were excellent with meaningful net asset value (NAV) growth. The largest portfolio company, discount retailer Action, was the highlight, growing significantly and generating robust cash flow in excess of growth investment.

The portfolio holding in Admiral was another top positive contributor to performance. There are signs that the motor pricing cycle was turning more positive with some early data to suggest pricing was moving up following 18 months of pressured profitability. The share price of Roche rose after the company reported solid earnings.

The largest detractor from performance during the month was the portfolio underweight positioning in HSBC despite limited news-flow.

Watches of Switzerland was another top detractor from performance during the period after the announcement of the CFO step down. In addition, softer trading with weakness in the jewellery business as well as a slowdown in the rate of growth in the watch industry has contributed to downgrades in their H2 ratings.

The profit warning from education company Chegg in response to being disrupted by generative AI caused the share price of fellow education company, Pearson to fall despite a soon released re-iteration of current trading.

Changes:

During the period, we sold the holding in BT. Whilst the attractive nature of the long-term fibre roll-out continues, the Inflation challenges and higher capex continue to pressure free cash flow. With the elevated risk that the allowed returns may come under pressure in the cost-of-living backdrop, we exited following the strong year-to-date share price performance.

Outlook:

Inflation has consistently surprised in its depth and breadth, driven by resilient demand, supply chain constraints, and most importantly by rising wages in more recent data. Central banks across the developed world continue to unwind ten years of excess liquidity by tightening monetary policy desperate to prevent the entrenchment of higher inflation expectations. Meanwhile, March saw the first signs of financial stress with the bankruptcy of Silicon Valley Bank and Signature bank in the US serving to highlight the potential issues of the aggressive retrenchment of liquidity.  Whilst the ramifications of this crisis remain unclear, it is likely that credit conditions and the availability of credit will continue to recede. This strengthens our belief that companies with robust balance sheets capable of funding their own growth will outperform. We are mindful of this and feel it is incredibly important to focus on companies with strong, competitive positions, at attractive valuations that can deliver in this environment.

We would expect broader demand weakness into the second half of 2023 although the ‘scars’ of supply chain disruption are likely to support parts of industrial capex demand as companies seek to enhance the resilience of their supply chains. A notable feature of our conversations with a wide range of corporates has been the ease with which they have been able to pass on cost increases and protect or even expand margins during 2022 as evidenced by US corporate margins reaching 70-year highs. We believe that as demand weakens and as the transitory inflationary pressures start to fade during 2023 (e.g. commodity prices, supply chain disruption) then pricing conversations will become more challenging despite pressure from wage inflation which may prove more persistent. While this does not bode well for margins in aggregate, we believe that 2023 will see greater differentiation as corporates’ pricing power will come under intense scrutiny.

The UK’s fiscal policy has somewhat diverged from the G7 as the present government attempts to create stability after the severe reaction from the “mini-budget”. The early signs of stability are welcome as financial market liquidity has increased and the outlook, whilst challenged, has improved. Although the UK stock market retains a majority of internationally weighted revenues, the domestic facing companies have continued to be impacted by this backdrop, notably financials, housebuilders and property companies. The valuation of the UK market remains highly supportive as currency weakness supports international earnings, whilst domestic earners are in many cases at COVID or Brexit lows in share price or valuation terms. Although we anticipate further volatility ahead as earnings estimates moderate, we know that in the course of time, risk appetites will return and opportunities are emerging.

In China, the re-opening of the economy post the lockdowns has been slower than expected. There are early signs that the Chinese government is looking to stimulate the economy further which may become more apparent as we enter 2024. We continue to focus the portfolio on cash generative businesses with durable, competitive advantages boasting strong leadership as we believe these companies are best-placed to drive returns over the long-term.  We anticipate economic and market volatility will persist throughout the year and we are excited by the opportunities this will likely create by identifying those companies using this cycle to strengthen their long-term prospects as well as attractive turnarounds situations.

1 Source: Reuters, 11 May 2023 Reuters - BoE weighs in with another rate hike as big central banks near peak

2 Source: Financial Times, 4 May 2023  Financial Times - ECB raises rates as Christine Lagarde warns of ‘more ground to cover’

3 Source: Financial Times, 3 May 2023 Financial Times - Federal Reserve implements quarter-point rate rise and signals potential pause

21 June 2023