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 (Â£'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 (Â£'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 Boardâ€™s recognition of shareholdersâ€™ desire for income in addition to capital growth â€“ 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 Â£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 Â£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 ï¬‚exible 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 Â£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 Â£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 Companyâ€™s contribution is matched by BlackRock. The programme commenced on 1 November 2013 and for the period under review, the Companyâ€™s contribution amounted to Â£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 Â£1m 14 17.8 Â£1m to Â£2m 13 39.0 Â£2m to Â£3m 7 36.5 Â£3m to Â£4m 1 6.7 Source: BlackRock. Investments as at 30 April 2014 Market value % of Â£'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 Â£'000 Â£'000 Â£'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 Â£'000 Â£'000 Â£'000 Total Â£'000 Â£'000 Â£'000 Â£'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 Â£103,000 and Â£22,000 respectively for the six months ended 30 April 2014 (six months ended 30 April 2013: Â£156,000 and Â£32,000; year ended 31 October 2013: Â£266,000 and Â£61,000). Balance sheet as at 30 April 2014 Notes 30 April 30 April 31 October 2014 2013 2013 Â£'000 Â£'000 Â£'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 Â£'000 Â£'000 Â£'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 Â£'000 Â£'000 Â£'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 Â£'000 Â£'000 Â£'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 Â£'000 Â£'000 Â£'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: Â£nil and year ended 31 October 2013: Â£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 (Â£'000) 773 797 1,576 Net capital return attributable to ordinary shareholders (Â£'000) 1,038 2,913 5,057 -------- -------- -------- Total return (Â£'000) 1,811 3,710 6,633 -------- -------- -------- Equity shareholders' funds (Â£'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 exâ€“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 Â£587,000 (2013: Â£555,000). 6. Called up share capital Ordinary Treasury Total Nominal shares shares shares value number number number Â£'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 Â£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 Â£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 Â£'000 Â£'000 Â£'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 Â£25,000, the Chairman of the Audit Committee receives an annual fee of Â£19,500, and each of the other Directors, except Mr Luckraft, receives an annual fee of Â£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 Â£134,000 (six months ended 30 April 2013: Â£124,000 and year ended 31 October 2013: Â£256,000). At the period end, Â£66,000 was outstanding in respect of investment management and performance fees (six months ended 30 April 2013: Â£241,000 and year ended 31 October 2013: Â£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 Â£19,000 including VAT (six months ended 30 April 2013: Nil; year ended 31 October 2013: Nil), of which Â£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 Â£2,621,000 at the period end (30 April 2013: Â£475,000; 31 October 2013: Â£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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Blackrock Income And Growth Investment Trust (BRIG)

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