BLACKROCK INCOME AND GROWTH INVESTMENT TRUST PLC
BlackRock Income and Growth Investment Trust plc
Annual Results Announcement for the year ended 31 October 2015
PERFORMANCE RECORD
FINANCIAL SUMMARY
As at As at Change
31 October 2015 31 October 2014 %
Assets
Net asset value per ordinary share 187.69p 170.68p +10.0
-------- -------- --------
- with income reinvested +13.5
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Ordinary share price (mid-market) 184.25p 167.25p +10.2
-------- -------- --------
- with income reinvested +13.8
-------- -------- --------
FTSE All-Share Index (total return) 5,541.71 5,380.70 +3.0
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Net assets (1) (£'000) 49,231 45,194 +8.9
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Discount to net asset value 1.8% 2.0%
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1 The change in net assets includes the effect of market movements during
the year and the purchase of the Company's own shares.
Year ended Year ended Change
31 October 2015 31 October 2014 %
Revenue
Revenue return per ordinary share 6.68p 5.66p +18.0
-------- -------- --------
Net revenue return after taxation (£'000) 1,758 1,524 +15.4
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Dividends
-------- -------- --------
Interim 2.40p 2.20p +9.1
-------- -------- --------
Final 3.60p 3.50p +2.9
-------- -------- --------
Total dividends paid and payable 6.00p 5.70p +5.3
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OVERVIEW
CHAIRMAN'S STATEMENT
I am pleased to present the annual report to shareholders of BlackRock Income
and Growth Investment Trust plc for the year ended 31 October 2015.
PERFORMANCE
During the period the Company's net asset value per share (NAV) returned 13.5%
and the share price returned 13.8%. By comparison, the Company's benchmark, the
FTSE All-Share Index returned 3.0% (all percentages with income reinvested).
The NAV outperformance relative to the FTSE All-Share Index during the year was
due principally to stock selection. Further details of the factors which have
contributed to performance are set out in the Investment Manager's Report.
Since the year end the Company's NAV has fallen by 4.0% compared with a fall in
the benchmark of 5.1% over the same period to the close of business on 13
January 2016.
REVENUE RETURN AND DIVIDENDS
The Company's revenue return per share for the year amounted to 6.68 pence
compared with 5.66 pence for the previous year, representing an increase of
18.0%. 2.40 pence per share has already been distributed to shareholders during
the year by way of an interim dividend. This represented an increase of 9.1%
compared to the interim dividend of 2.20 pence per share paid in respect of the
year ended 31 October 2014.
The Directors are mindful of shareholders' desire for income in addition to
capital growth and are proposing a final dividend per share of 3.60 pence
(2014: 3.50 pence) giving a total for the year of 6.00 pence per share. This
represents a 5.3% increase over the prior year (2014: 5.70 pence per share) and
reflects the increased level of special dividends generated from the Company's
portfolio during the year. Subject to approval at the Annual General Meeting,
the final dividend will be paid on 4 March 2016 to shareholders on the
Company's register at the close of business on 12 February 2016 (ex dividend
date is 11 February 2016).
POLICY ON SHARE PRICE DISCOUNT
The Directors recognise the importance to investors that the Company's share
price should not trade at a significant discount to NAV, and therefore, in
normal market conditions, may use the Company's share buy back, sale of shares
from treasury and share issue powers to ensure that the share price is broadly
in line with the underlying NAV. They believe that an ongoing commitment to
that discount management policy will continue to enhance the attractiveness of
the Company to existing and potential new shareholders and thus its ability to
grow over time by increasing the liquidity of the shares and spreading fixed
costs over a larger asset base.
The discount management policy works through the use of share buy backs at a
narrow discount to NAV and the issue of new shares at or above the estimated
NAV per share. The existing authority to buy back up to 14.99% of the Company's
issued share capital (excluding treasury shares) will expire at the conclusion
of the 2016 Annual General Meeting and a resolution will be put to shareholders
to renew the authority at that meeting. Currently, ordinary shares representing
up to 35% of the Company's issued ordinary share capital can be allotted as new
ordinary shares or sold from treasury. It is proposed to renew this authority
at the forthcoming Annual General Meeting.
250,000 ordinary shares were purchased and placed in treasury during the year
for a total consideration of £448,000 (excluding costs). No shares were issued
or sold from treasury. At the date of this report, 20.4% of the Company's
issued share capital is held in treasury.
GEARING
The Company operates a flexible gearing policy which depends on prevailing
market conditions and is subject to a maximum level of 20% of net assets at the
time of investment. The maximum gearing used during the year was 2.9% and at
31 October 2015 net gearing was 2.4%.
The Company currently has a two year unsecured sterling revolving credit
facility of £4 million with Scotiabank (Ireland) Limited, with a maturity date
of 31 October 2016.
ANNUAL GENERAL MEETING
The Company's Annual General Meeting will be held on Wednesday, 24 February
2016 at 12 noon at the offices of BlackRock at 12 Throgmorton Avenue, London
EC2N 2DL. Details of the business of the meeting are set out in the Notice of
Annual General Meeting on pages 63 to 66 of the Annual Report and Financial
Statements. The Portfolio Managers will make a presentation to shareholders on
the Company's progress and the outlook for the year ahead.
OUTLOOK
After a sustained, if unremarkable, period of economic expansion following the
financial crisis the momentum behind economic growth appears to be faltering.
Whilst the recent, and long awaited, tightening in US interest rates provides
some evidence that the Federal Reserve believes that the US economy can sustain
modestly higher rates, elsewhere growth appears to be slowing. Further
quantitative easing has been signalled for the Eurozone area. The Chinese
economy is in a state of transition as it seeks to move to more domestic
consumption and away from government investment in order to stimulate growth. A
divergence in interest rates is likely to produce greater volatility in
currency markets, with the Eurozone area seeking to avoid another recession and
emerging market companies feeling the effect of a stronger US dollar on their
dollar denominated borrowings.
In the UK, employment levels and average earnings growth point to a continuing,
although potentially fragile, recovery. The prospect of a referendum on the
UK's membership of the European Union adds some uncertainty. Although some
sectors, including UK housebuilders, show signs of margin pressure, the UK
market continues to offer a broad spectrum of strong companies capable of
growing their dividends over time. Your fund manager continues to focus on
assembling a portfolio of individual companies which, taken as a whole, should
prove capable of growing the Company's revenue and supporting dividend growth
into the future.
Jonathan Cartwright
Chairman
15 January 2016
STRATEGIC REPORT
The Directors present the Strategic Report of the Company for the year ended 31
October 2015. The aim of the Strategic Report is to provide shareholders with
the information required to enable them to assess how the Directors have
performed in their duty to promote the success of the Company during the year
under review.
BUSINESS AND MANAGEMENT OF THE COMPANY
BlackRock Income and Growth Investment Trust plc is an investment trust company
that has a premium listing on the London Stock Exchange. Its principal activity
is portfolio investment. Investment trusts, like unit trusts and OEICs,
are pooled investment vehicles which allow exposure to a diversified range of
assets through a single investment, thus spreading, although not eliminating
investment risk.
Investment trusts, unlike unit trusts, have the ability to borrow for
investment purposes and to smooth dividend distributions through revenue
reserves. They also enjoy, unlike unit trusts, the benefit of continuous
dealing during market hours.
The Company is an Alternative Investment Fund in accordance with the
Alternative Investment Fund Managers Directive (AIFMD). BlackRock Fund Managers
Limited (the Manager) is the Company's Alternative Investment Fund Manager. The
management of the investment portfolio and the administration of the Company
have been contractually delegated to the Manager. The Manager, operating under
guidelines determined by the Board, has direct responsibility for decisions
relating to the running of the Company and is accountable to the Board for the
investment, financial and operating performance of the Company.
Other service providers include the Depositary, BNY Mellon Trust & Depositary
(UK) Limited, the fund accountant, Bank of New York Mellon (International)
Limited, and the Registrar, Computershare Investor Services PLC
(Computershare). Details of the contractual terms with these service providers
are set out in the Directors' Report contained within the Annual Report and
Financial Statements.
BUSINESS MODEL
The Company invests in accordance with the investment objective. The Board is
collectively responsible to shareholders for the long term success of the
Company and is its governing body. There is a clear division of responsibility
between the Board and the Manager. Matters for the Board include setting the
Company's strategy, including its investment objective and policy, setting
limits on gearing, capital structure, governance, and appointing and monitoring
of the performance of service providers, including the Manager.
The Company's business model follows that of an externally managed investment
trust, therefore the Company does not have any employees and outsources its
activities to third party service providers including the Manager which is the
principal service provider.
INVESTMENT OBJECTIVE
The Company's objective is to provide growth in capital and income over the
long term through investment in a diversified portfolio of principally UK
listed equities.
INVESTMENT STRATEGY AND POLICY
The Company's policy is that the portfolio will usually consist of
approximately 30-60 securities and will only invest in UK securities which
include the shares of companies listed, domiciled or carrying out the majority
of their business in the UK.
The Company may hold a maximum of 10% of the issued ordinary share capital of
any company. No more than 15% of the gross asset value of the Company may be
invested in the securities of any one issuer, calculated at the time of any
relevant investment. Cash or non-benchmark stocks may not exceed 10% of the net
asset value of the Company. Each stock held is subject to a lower limit of 0%
and an upper limit of plus 4 percentage points against its weighting in the
FTSE All-Share Index (total return) on an ongoing basis, subject to an absolute
sector weighting upper limit of 20% of the Company's net assets at any time.
The Company may deal in derivatives, including options, futures and contracts
for difference and derivatives not traded on or under the rules of a recognised
or designated investment exchange for the purpose of efficient portfolio
management. Derivatives and exchange traded funds may be dealt in only with the
prior consent of the Board.
The performance of the Company is measured by reference to the FTSE All-Share
Index (the Index) on a total return basis.
The Company achieves an appropriate spread of risk by investing in a
diversified portfolio of securities.
No material change will be made to the investment policy without the approval
of shareholders by ordinary resolution.
INVESTMENT APPROACH AND PROCESS
In assembling the Company's portfolio a relatively concentrated approach to
investment is adopted to ensure that the fund manager's best ideas contribute
significantly to returns. We believe that it is the role of the portfolio
overall to achieve a premium level of yield rather than every individual
company within it. This gives increased flexibility to invest where returns are
most attractive. This relatively concentrated approach results in a portfolio
which differs substantially from the Index and in any individual year, the
returns will vary, sometimes significantly from those of the Index. Over longer
periods the objective is to achieve returns greater than the Index.
The foundation of the portfolio, approximately 70% by value, 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, the fund
manager seeks to identify and invest 20% by value of the portfolio in 'growth'
companies that have significant barriers to entry and scalable business models
that enable them to grow consistently. Turnaround companies are also sought, at
around 10% by value, which represent those companies that are out of favour by
the market, facing temporary challenges with high yields/very low valuations,
but with recovery potential. The expected return from this segment, is expected
to contribute meaningfully to returns over time.
GEARING AND BORROWINGS
The appropriate use of gearing can add value and the Company may, from time to
time, use borrowings to gear its investment policy. The Board is responsible
for the level of gearing in the Company and reviews the position at every
meeting. Gearing, including borrowings and gearing through the use of
derivatives, (which requires prior Board approval) when aggregated with
underwriting participations, will not exceed 20% of the net asset value at the
time of investment, drawdown or participation. Any borrowing, except for short
term liquidity purposes, is used for investment purposes or to fund the
purchase of the Company's own shares.
The Company has a two year unsecured revolving facility with Scotiabank
(Ireland) Limited which will expire on 31 October 2016. At the year end net
gearing was 2.4% (2014: net cash 1.6%).
PERFORMANCE
Details of the Company's performance for the year are given in the Chairman's
Statement. The Investment Manager's report includes a review of the main
developments during the year, together with information on investment activity
within the Company's portfolio.
RESULTS AND DIVIDENDS
The Company's revenue earnings for the year amounted to 6.68p per share (2014:
5.66p per share).
Details of dividends paid and declared in respect of the year together with the
Company's dividend policy, are set out on in the Chairman's Statement.
KEY PERFORMANCE INDICATORS
A number of performance indicators (KPIs) are used to monitor and assess the
Company's success in achieving its objectives and to measure its progress and
performance.
The principal KPIs are described below:
PERFORMANCE AGAINST THE BENCHMARK
The performance of the portfolio together with the performance of the
Company's net asset value and share price are reviewed at each Board meeting
and compared to the return on the Company's benchmark.
Information on the Company's performance is given in the performance record and
the Chairman's Statement and Investment Managers' Report.
PREMIUM/DISCOUNT TO NAV
At each meeting the Board monitors the level of the Company's premium or
discount to NAV and considers strategies for managing any premium or discount.
Further details of the discount policy are provided on page 20 of the Annual
Report and Financial Statements.
In the year to 31 October 2015, the Company's share price to NAV traded in the
range of a premium of 2.0% to a discount of 3.5% on a cum income basis.
The Company bought back a total of 250,000 shares during the year and further
details are given on page 20 of the Annual Report and Financial Statements. No
shares were issued or sold from treasury.
ONGOING CHARGES
The ongoing charges represent the Company's management fee and all other
recurring operating and investment management expenses, excluding finance
costs, expressed as a percentage of average net assets.
The Board reviews the ongoing charges and monitors the expenses incurred by the
Company at each meeting. The Board also compares the level of ongoing charges
against those of its peers.
PERFORMANCE AGAINST THE COMPANY'S PEERS
Whilst the principal objective is to achieve growth in capital and income
relative to the benchmark, the Board also monitors performance relative to a
range of competitor funds, particularly those also within the AIC UK Equity
Income sector.
Year ended Year ended
31 October 2015 31 October 2014
NAV per share (1) 187.69p 170.68p
Share price (2) 184.25p 167.25p
Change in benchmark index (3) 3.0% 1.0%
Discount to net asset value 1.8% 2.0%
Revenue return per share 6.68p 5.66p
Ongoing charges (4) 1.0% 1.2%
1 Calculated in accordance with AIC guidelines.
2 Calculated on a mid to mid basis.
3 FTSE All-Share Index (total return).
4 Ongoing charges represent the Company's management fee and all other
recurring operating and investment management expenses, excluding finance
costs, expressed as a percentage of average net assets.
The Board also regularly reviews the Company's performance attribution analysis
to understand how performance was achieved. This provides an understanding of
how components, such as sector exposure, stock selection and asset allocation,
impact performance. Further details are provided in the Investment Manager's
Report.
PRINCIPAL RISKS
The Company is exposed to a variety of risks and uncertainties. The Board has
in place a robust process to identify, understand and monitor the principal
risks of the Company. A core element of this process is the Company's risk
register which identifies the risks facing the Company, the likelihood and
potential impact of each risk and the controls established for mitigation. A
residual risk rating is calculated for each risk.
The risk register, its method of preparation and the operation of key controls
in the Manager's and third party service providers systems of internal control
are reviewed on a regular basis by the Audit Committee. In order to gain a more
comprehensive understanding of the Manager's and other third party service
providers' risk management processes and how these apply to the Company's
business, the Audit Committee periodically receives presentations from
BlackRock's Internal Audit and Risk & Quantitative Analysis teams. Where
produced, the Audit Committee also reviews Service Organisation Control (SOC 1)
reports from the Company's service providers.
The current risk register is categorised under the following headings:
- performance;
- income/dividend;
- gearing;
- regulatory;
- operational;
- market; and
- financial.
The principal risks and uncertainties faced by the Company during the financial
year, together with the potential effects, controls and mitigating factors, are
set out in the following table.
Principal Risk Mitigation/Control
Performance
The Board is responsible for: To manage this risk the Board:
- deciding the investment strategy to - regularly reviews the Company's
fulfil the investment mandate
Company's objective; and and long term strategy;
- for monitoring the performance of the - is required to provide prior consent
Investment to the use of
Manager and the implementation of the derivatives and exchange traded
investment funds;
strategy. - has set investment restrictions and
An inappropriate investment strategy may guidelines which
lead to: the Investment Manager monitors and
- poor performance compared to the regularly reports
Benchmark Index on;
and the Company's peer group; - receives from the Investment Manager
- a loss of capital; and a regular
- dissatisfied shareholders. explanation of stock
selection decisions, portfolio
exposure, gearing and any changes in
gearing and
the rationale for the composition of
the investment
portfolio;
- monitors the maintenance of an
adequate spread of
investments in order to minimise the
risks associated
with factors specific to particular
sectors, based on the
diversification requirements inherent
in the investment
policy.
Income/dividend
The amount of dividends and future dividend The Board monitors this risk through the
growth will depend on the Company's receipt of detailed income forecasts and
underlying portfolio. considers the level of income at each
meeting.
Changes in the composition of the
portfolio, any change in the tax treatment
of the dividends or interest received by
the Company may alter the level of
dividends received by shareholders.
Gearing
The Company's investment strategy may To manage this risk the Board has limited
involve the use of gearing to enhance gearing, including borrowings and gearing
investment returns. through the use of derivatives, to 20% of
NAV at the time of investment, drawdown or
Gearing may be generated through borrowing participation.
money or increasing levels of market
exposure through the use of derivatives. The Investment Manager will only use
The Company currently has an unsecured gearing when confident that market
revolving facility with Scotiabank conditions and opportunities exist to
(Ireland) Limited and has drawn down £2 enhance investment returns.
million.
The use of gearing exposes the Company to
the risk associated with borrowing.
Gearing provides an opportunity for greater
returns where the return on the Company's
underlying assets exceeds the cost of
borrowing. It is likely to have the
opposite effect where the return on the
underlying assets is below the cost of
borrowings. Consequently, the use of
borrowings by the Company may increase the
volatility of the NAV.
Regulatory
The Company has been accepted by HM Revenue The Investment Manager monitors investment
& Customs as an investment trust, subject movements, the level and type of forecast
to meeting the relevant eligibility income and expenditure and the amount of
conditions and operating as an investment proposed dividends, if any, to ensure that
trust in accordance with sections 1158 and the provisions of Chapter 4 of Part 24 of
1159 of the Corporation Tax Act 2010. As the Corporation Tax Act 2010 are not
such, the Company is exempt from capital breached. The results are reported to the
gains tax on the profits realised from the Board at each meeting.
sale of its investments.
Compliance with the accounting rules
The Company is required to comply with the affecting investment trusts are also
provisions of the Companies Act 2006, the carefully and regularly monitored.
Alternative Investment Fund Managers The Company Secretary and the Company's
Directive and the UK Listing Rules and professional advisers provide regular
Disclosure Rules. reports to the Board in respect of
compliance with all applicable rules and
Any breach of the relevant eligibility regulation.
conditions could lead to the Company losing
investment trust status and being subject
to corporation tax on capital gains
realised within the Company's portfolio.
Any serious breach could result in the
Company and/or the Directors being fined or
the subject of criminal proceedings or the
suspension of the Company's shares which
would in turn lead to a breach of the
Corporation Tax Act 2010.
Operational
The Company relies on the services provided Due diligence is undertaken before
by third parties. Accordingly, it is contracts are entered into with third party
dependent on the control systems of the service providers. Thereafter, the
Manager, BNY Mellon Trust & Depositary (UK) performance of the provider is subject to
Limited (the Depositary) and the Bank of regular review and reported to the Board.
New York Mellon (International) Limited
(the fund accountant), who maintain the Most third party service providers produce
Company's assets, dealing procedures and Service Organisation Control (SOC 1)
accounting records. The security of the reports to provide assurance regarding the
Company's assets, dealing procedures, effective operation of internal controls as
accounting records and adherence to reported on by their reporting accountants.
regulatory and legal requirements depend on These reports are provided to the Audit
the effective operation of the systems Committee.
of these third party service providers.
The Company's assets are subject to a
Disruption to the accounting, payment strict liability regime and in the event of
systems or custody records could prevent a loss of assets, the Depositary must
the accurate reporting and monitoring of return assets of an identical type or the
the Company's financial position. corresponding amount, unless able to
demonstrate the loss was a result of an
event beyond its reasonable control.
The Board reviews the overall performance
of the Manager, Investment Manager and all
other third party service providers on a
regular basis and compliance with the
Investment Management Agreement annually.
The Board also considers the business
continuity arrangements of the Company's
key service providers.
Market
Market risk arises from volatility in the The Board considers the diversification of
prices of the Company's investments. the portfolio, asset allocation, stock
selection, and levels of gearing on a
There is the potential for the Company to regular basis and has set investment
suffer loss through holding investments in restrictions and guidelines which are
the face of negative market movements. monitored and reported on by the Investment
Manager.
The Board monitors the implementation and
results of the investment process with the
Investment Manager.
Financial
The Company's investment activities expose Details of these risks are disclosed in
it to a variety of financial risks that note 17 of the Annual Report and Financial
include interest rate risk. Statements, together with a summary of the
policies for managing these risks.
As required by the UK Corporate Governance Code (2014 Code), the Board has
undertaken a robust assessment of the principal risks facing the Company,
including those that would threaten its business model, future performance,
solvency or liquidity. Those principal risks have been described in the above
table together with an explanation of how they are managed and mitigated. The
Board will continue to assess these risks on an ongoing basis.
VIABILITY STATEMENT
The Directors have assessed the prospects of the Company over a longer period
than the 12 months required by the "Going Concern" provision.
The Board conducted this review for the period up to the AGM in 2021, being a
five year period from the date that this annual report will be approved by
Shareholders. In making this assessment the Board has considered the following
factors:
- the Company's principal risks as set out above;
- the ongoing relevance of the Company's investment objective in the current
environment; and
- the level of demand for the Company's shares.
The Company is required to undertake a continuation vote in 2018 and has also
reviewed the potential impact that this may have on the Company's viability.
Particular consideration has been given to the following:
- good communication with major shareholders; at the present time there has
been no indication that the continuation vote would not be successful; and
- at the close of business on 13 January 2016, the Company's shares were
trading at a discount to NAV of 0.1%.
Having considered the above factors, the Board believes that the scheduled
continuation vote does not have a detrimental impact on the Company's
viability.
The Board has also considered a number of financial metrics in its
assessment, including:
- the level of ongoing charges, both current and historic;
- the level at which the shares trade relative to NAV;
- the level of income generated;
- future income forecasts; and
- the liquidity of the portfolio.
The Board has concluded that the Company would be able to meet its ongoing
operating costs as they fall due as a consequence of:
- a liquid portfolio; and
- overheads which comprise a small percentage of net assets.
Based on the results of their analysis, the Directors have a reasonable
expectation that the Company will be able to continue in operation and meet its
liabilities as they fall due over the period of their assessment.
FUTURE PROSPECTS
The Board's main focus is the achievement of income and capital growth. The
future performance of the Company is dependent upon the success of the
investment strategy. The outlook for the Company is discussed in the Chairman's
Statement and in the Investment Manager's Report.
EMPLOYEES, SOCIAL, COMMUNITY AND HUMAN RIGHTS ISSUES
The Company has no employees and all of its Directors are non-executive,
therefore, there are no disclosures to be made in respect of employees.
The Company believes that it is in shareholders' interests to consider human
rights issues, environmental, social and governance factors when selecting and
retaining investments. Details of the Company's policy on socially responsible
investment are set out on page 29 of the Annual Report and Financial
Statements.
GLOBAL GREENHOUSE GAS EMISSIONS FOR THE PERIOD 1 NOVEMBER 2014 TO 31 OCTOBER
2015
The Company has no greenhouse gas emissions to report from its operations, nor
does it have responsibility for any other emissions producing sources under the
Companies Act 2006 (Strategic Report and Directors' Reports) Regulations 2013.
DIRECTORS, GENDER REPRESENTATION AND EMPLOYEES
The Directors of the Company on 31 October 2015, all of whom held office
throughout the year, are set out in the Governance Structure and Directors'
biographies on page 17 of the Annual Report and Financial Statements.
The Board recognises the importance of having a range of experienced Directors
with the right skills and knowledge to enable it to fulfil its obligations. As
at 31 October 2015, the Board consisted of four male Directors.
The Company does not have any employees as stated above.
By order of the Board
BlackRock Investment Management (UK) Limited
Company Secretary
15 January 2016
RELATED PARTY TRANSACTIONS
BlackRock Fund Managers Limited (BFM) provided management and administration
services to the Company during the period under review. BIM (UK) acts as the
Company's Investment Manager under a delegation agreement with BFM. Further
details of the investment management contract are disclosed in the Directors'
Report on page 18 of the Annual Report and Financial Statements.
The investment management fee for the year was £288,000 (2014: £268,000), as
disclosed in note 4. At the year end, an amount of £146,000 was outstanding in
respect of these fees (2014: £200,000).
The Company held an investment in BlackRock's Institutional Sterling Liquidity
Fund of £869,000 at 31 October 2015 (2014: £2,953,000).
In addition to the above services, BlackRock has provided the Company with
marketing services. The total fees paid or payable for these services for the
year ended 31 October 2015 amounted to £3,000 including VAT (2014: £38,000).
Marketing fees of £49,000 including VAT were outstanding at 31 October 2015
(2014: £38,000).
The Board consists of four non-executive Directors, all of whom are considered
to be independent of the Investment Manager by the Board. None of the Directors
has a service contract with the Company. For the year ended 31 October 2015,
the Chairman received an annual fee of £28,000, the Chairman of the Audit
Committee received an annual fee of £22,500 and each of the other Directors
received an annual fee of £19,000. No changes will be made for the year ending
31 October 2016.
At 31 October 2015 and 2014, the Directors' interests in the Company's Ordinary
Shares were as follows:
2015 2014
J H Cartwright (Chairman) 20,000 20,000
N R Gold 20,000 20,000
G M Luckraft - -
C R Worsley 487,539* 487,539*
* Including a non-beneficial interest in 155,500 shares.
STATEMENT OF DIRECTORS' RESPONSIBILITIES IN RESPECT OF THE ANNUAL REPORT AND
FINANCIAL STATEMENTS
The Directors are responsible for preparing the Annual Report and Financial
Statements in accordance with applicable law and regulations. Company law
requires the Directors to prepare financial statements for each financial year.
Under that law they have elected to prepare the financial statements in
accordance with applicable law and United Kingdom Accounting Standards.
Under company law the Directors must not approve the financial statements
unless they are satisfied that they give a true and fair view of the state of
affairs of the Company as at the end of each financial year and of the profit
or loss of the Company for that period.
In preparing these financial statements, the Directors are required to:
- present fairly the financial position, financial performance and cash flows
of the Company;
- select suitable accounting policies and apply them consistently;
- present information, including accounting policies, in a manner that
provides relevant, reliable, comparable and understandable information;
- make judgements and estimates that are reasonable and prudent;
- state whether applicable UK Accounting Standards have been followed, subject
to any material departures disclosed and explained in the financial statements;
and
- prepare the financial statements on the going concern basis unless it is
inappropriate to presume that the Company will continue in business.
The Directors are responsible for keeping adequate accounting records that are
sufficient to show and explain the Company's transactions and disclose with
reasonable accuracy at any time the financial position of the Company and
enable them to ensure that the financial statements comply with the Companies
Act 2006. They are also responsible for safeguarding the assets of the Company
and hence for taking reasonable steps for the prevention and detection of fraud
and other irregularities.
The Directors are also responsible for preparing the Strategic Report, the
Directors' Report, the Directors' Remuneration Report, the Corporate Governance
Statement and the Report of the Audit Committee in accordance with the
Companies Act 2006 and applicable regulations, including the requirements of
the Listing Rules and the Disclosure and Transparency Rules. The Directors have
delegated responsibility to the Manager for the maintenance and integrity of
the Company's corporate and financial information included on the BlackRock
website. Legislation in the United Kingdom governing the preparation and
dissemination of financial statements may differ from legislation in other
jurisdictions.
Each of the Directors, whose names are listed on page 17 of the Annual Report
and Financial Statements, confirm to the best of their knowledge that:
- the financial statements, prepared in accordance with applicable accounting
standards, give a true and fair view of the assets, liabilities, financial
position and profit or loss of the Company; and
- the Strategic Report contained in the Annual Report and Financial Statements
includes a fair review of the development and performance of the business and
the position of the Company, together with a description of the principal risks
and uncertainties that it faces.
The 2014 UK Corporate Governance Code requires Directors to ensure that the
Annual Report and Financial Statements are fair, balanced and understandable.
In order to reach a conclusion on this matter, the Board has requested that the
Audit Committee advise on whether it considers that the Annual Report and
Financial Statements fulfils these requirements. The process by which the Audit
Committee has reached these conclusions is set out in the Audit Committee's
report on pages 30 to 32 of the Annual Report and Financial Statements. As a
result, the Board has concluded that the Annual Report and Financial Statements
for the year ended 31 October 2015, taken as a whole, is fair, balanced and
understandable and provides the information necessary for shareholders to
assess the Company's position and performance, business model and strategy.
For and on behalf of the Board
Jonathan Cartwright
Chairman
15 January 2016
INVESTMENT MANAGER'S REPORT
PERFORMANCE
The Investment Manager reports that for the year ended 31 October 2015, the
Company's NAV per share returned 13.5% and the share price 13.8%. Over the same
period, the FTSE All-Share Index (total return) (the Index) returned 3.0% and
the peer group, as measured by the Investment Association UK Income Sector
returned 8.1%. (All percentages are in sterling with income reinvested.)
MARKET REVIEW
The Index returned 3.0% over the year to 31 October 2015, this was the result
of initially strong returns giving way to market weakness over the summer
period. The beginning of a quantitative easing bond purchase programme by the
European Central Bank had a positive impact on share prices early in the period
and the conclusive General Election result provided a boost to UK domestic
stocks in May. However, a deterioration in the outlook for economic growth in
China and other Emerging Markets, and fears that this would lead to a wider
slowdown in global economic growth, precipitated sharp stock market falls. For
oil and other commodities, these global demand concerns are occurring against a
backdrop of an expansion in supply which further contributed to weaker oil and
commodity prices.
Market highlights included strong returns from the consumer services sector,
including domestically focussed areas of the market such as housebuilders, real
estate, general retailers and non-bank financials. The oil and mining sectors
were weak on lower oil and commodity prices, whilst further provisions for past
conduct issues impacted the banks sector.
CONTRIBUTORS TO PERFORMANCE
Portfolio performance over the year has been strong in relative and absolute
terms, significantly outperforming both the benchmark and the Investment
Association UK Income sector. Performance was driven by good stock picking
across a wide range of sectors and industries with no single theme dominating.
The Company also benefited in relative terms by not holding some of the larger
companies that fell such as Glencore, Anglo American and Standard Chartered.
The biggest contributor to performance came from the holding in Carnival, which
performed strongly, driven by rising demand and higher on-board spend feeding
through to revenue and profit growth, adding to the benefits gained from the
lower oil price. Cineworld Group reported full year pre-tax profits which more
than doubled, boosted by the purchase of Cinema City International in 2014, and
another strong performer was our holding in Domino Printing Sciences which rose
significantly as the company received a bid from Japan's Brother Industries.
Howden Joinery Group continued to trade strongly benefiting from a buoyant
domestic economy and a leading market position, resulting in further upgrades.
Wolseley continued to deliver strong revenue growth, particularly in the USA,
and our holding in Friends Life rallied after Aviva agreed to buy the company.
Other positive contributors to performance included Imperial Tobacco, RELX
(Reed Elsevier), Rentokil Initial, Next, DS Smith and Direct Line Insurance.
Over the year, Rio Tinto underperformed due to commodity price weakness.
Ashmore Group's share price was weak following net outflows in the second
quarter of 2015 as emerging market funds continued to be out of favour given
currency weakness. The holding in Bodycote fell due to fears over the
industrial slowdown.
PORTFOLIO ACTIVITY
During the reporting period we purchased new positions in Lloyds Banking Group,
Barclays, Hays, Stagecoach, ARM Holdings, Auto Trader Group and DS Smith whilst
adding to our holdings in Next, Friends Life (subsequently taken over), Dixons
Carphone and Carnival. We reduced our holdings in Imperial Tobacco Group, HSBC
Holdings and Wolseley whilst selling our holdings in Prudential, Reckitt
Benckiser, Essentra, Compass Group, Burberry Group, Howden Joinery Group and
Marks & Spencer Group.
OUTLOOK
Eurozone economic activity is showing signs of improvement as the European
Central Bank starts quantitative easing, whilst in the US the ending of
quantitative easing is contributing to uncertainty. We continue to focus on the
specific drivers of individual companies and the ability to determine their
future rather than relying on a specific macro outcome. Given the outlook for
both economic growth and interest rates remains uncertain, we seek those
companies that can drive returns through self-help and have a clear strategy to
deploy the cashflow they generate. The portfolio is primarily invested in high
free cash flow companies that can sustain cash generation and pay a growing
dividend yield, but also has exposure to companies with sustainable growth
franchises and turnaround situations.
Mark Wharrier and Adam Avigdori
BlackRock Investment Management (UK) Limited
15 January 2016
TEN LARGEST EQUITY INVESTMENTS AS AT 31 OCTOBER 2015
British American Tobacco: 5.6% (2014: 6.3%) is one of the world's leading
tobacco groups, with more than 200 brands in the portfolio selling in
approximately 180 markets worldwide.
AstraZeneca: 4.9% (2014: 5.3%) is a global pharmaceutical company, operating in
the research, development, manufacture and marketing of pharmaceutical
products, including the areas of cardiovascular and metabolic disease,
oncology, respiratory, inflammation and autoimmunity.
Lloyds Banking Group: 4.7% (2014: nil) is a UK-based financial services group,
providing a wide range of banking and financial services, focused on personal
and commercial customers. Its main business activities are retail, commercial
and corporate banking, general insurance, and life, pensions and investment
provision.
HSBC Holdings: 4.6% (2014: 6.3%) is one of the world's largest banking and
financial services organisations. Its principal businesses are commercial
banking, global banking and markets, retail banking and wealth management. Its
international network covers 73 countries and territories worldwide, across
Europe, Asia, the Middle East, North Africa, North America and Latin America.
RELX (previously Reed Elsevier): 4.2% (2014: 4.3%) is a global provider of
professional information solutions that includes publication of scientific,
medical, technical and legal journals.It is also the world's leading
exhibitions, conference and events business.
BT Group: 4.1% (2014: nil) is a communications services company, involved in
the provisions of fixed line services, broadband, mobile and television
products and services in the United Kingdom and globally. The Company operates
in five segments: BT Global Services, BT Business, BT Consumer, BT Wholesale
and Openreach.
Wolseley: 4.0% (2014: 4.1%) is a specialist trade distributor of plumbing and
heating products and building materials in North America, the United Kingdom
and Continental Europe. The company has a network of distribution centres which
serve branches for its plumbing and heating businesses.
Royal Dutch Shell 'B': 3.5% (2014: 6.8%) is an oil and gas company based in the
United Kingdom. The company operates in both, Upstream and Downstream. Upstream
is engaged in searching for and recovering crude oil and natural gas, the
liquefaction and transportation of gas. Downstream is engaged in manufacturing,
distribution and marketing activities for oil products and chemicals.
Legal & General Group: 3.5% (2014: 3.0%) is one of the worlds largest insurance
and investment management companies. The company manages over £700 billion in
assets for its clients, operating through Insurance, Savings and Investment
Management departments.
Aviva: 3.4% (2014: nil) is a provider of long term insurance and savings and
fund management products and services. The Company operates across four main
areas: long-term insurance and savings business; general insurance; health
insurance and fund management.
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
2014.
Together, the ten largest investments represent 42.5% of total investments (ten
largest investments as at 31 October 2014: 48.6%).
DISTRIBUTION OF INVESTMENTS AS AT 31 OCTOBER 2015
ANALYSIS OF PORTFOLIO BY SECTOR
% of Benchmark
Investments
1 Banks 11.9 10.3
2 Support Services 10.3 4.8
3 Travel & Leisure 8.5 4.6
4 Tobacco 7.8 5.2
5 Pharmaceuticals & Biotechnology 7.4 7.8
6 Life Insurance 6.9 4.9
7 Media 6.9 3.8
8 Oil & Gas Producers 6.6 10.6
9 General Retailers 5.7 2.9
10 Financial Services 5.7 2.8
11 Mining 4.9 4.0
12 Fixed Line Telecommunications 4.1 2.1
13 Non-life Insurance 3.9 1.2
14 Food Producers 2.9 0.9
15 Technology Hardware & Equipment 1.7 0.9
16 Cash and Cash Equivalents 1.7 -
17 Industrial Engineering 1.3 0.7
18 General Industrials 1.1 0.7
19 Real Estate Investment Trusts 0.7 2.4
Sources: BlackRock and Datastream.
INVESTMENT SIZE
Number of Investments % value of Investments
< £1m 20 27.8
£1m to £2m 14 40.1
£2m to £3m 7 32.1
Source: BlackRock.
INVESTMENTS AS AT 31 OCTOBER 2015
Market % of
value £ investments
'000
Banks
Lloyds Banking Group 2,408 4.7
HSBC Holdings 2,342 4.6
Barclays 1,349 2.6
-------- --------
6,099 11.9
-------- --------
Support Services
Wolseley 2,022 4.0
Rentokil Initial 1,141 2.2
Hays 939 1.8
Worldpay Group 609 1.2
Intertek 551 1.1
-------- --------
5,262 10.3
-------- --------
Travel & Leisure
Carnival 1,457 2.8
Stagecoach Group 833 1.6
Cineworld Group 802 1.6
Intercontinental Hotels Group 676 1.3
Patisserie Holdings 589 1.2
-------- --------
4,357 8.5
-------- --------
Tobacco
British American Tobacco 2,881 5.6
Imperial Tobacco Group 1,108 2.2
-------- --------
3,989 7.8
-------- --------
Pharmaceuticals & Biotechnology
AstraZeneca 2,518 4.9
GlaxoSmithKline 1,262 2.5
-------- --------
3,780 7.4
-------- --------
Life Insurance
Legal & General Group 1,807 3.5
Aviva 1,752 3.4
-------- --------
3,559 6.9
-------- --------
Media
RELX 2,148 4.2
Sky 1,383 2.7
-------- --------
3,531 6.9
-------- --------
Oil & Gas Producers
Royal Dutch Shell 'B' 1,811 3.5
BP Group 1,597 3.1
-------- --------
3,408 6.6
-------- --------
General Retailers
Next 1,740 3.4
Dixons Carphone 671 1.3
Auto Trader Group 538 1.0
-------- --------
2,949 5.7
-------- --------
Financial Services
Hargreaves Lansdown 951 1.9
John Laing Group 785 1.5
Ashmore Group 723 1.4
Provident Financial 486 0.9
-------- --------
2,945 5.7
-------- --------
Mining
Rio Tinto 1,625 3.2
BHP Billiton 864 1.7
-------- --------
2,489 4.9
-------- --------
Fixed Line Telecommunications
BT Group 2,094 4.1
-------- --------
2,094 4.1
-------- --------
Non-life Insurance
Direct Line Insurance 1,102 2.1
Admiral Group 900 1.8
-------- --------
2,002 3.9
-------- --------
Food Producers
Unilever 1,478 2.9
-------- --------
1,478 2.9
-------- --------
Technology Hardware & Equipment
ARM Holdings 890 1.7
-------- --------
890 1.7
-------- --------
Industrial Engineering
Bodycote 646 1.3
-------- --------
646 1.3
-------- --------
General Industrials
DS Smith 549 1.1
-------- --------
549 1.1
-------- --------
Real Estate Investment Trusts
Hansteen Holdings 361 0.7
-------- --------
361 0.7
-------- --------
50,388 98.3
-------- --------
Cash and Cash Equivalents
BlackRock's Institutional Sterling Liquidity Fund 869 1.7
-------- --------
869 1.7
-------- --------
Total Value of Securities 51,257 100.0
====== =====
All investments are in ordinary shares unless otherwise stated.
The total number of holdings as at 31 October 2015 was 41 (31 October 2014:
36).
As at 31 October 2015, the Company did not hold any equity interests
representing more than 3% of any company's share capital.
INCOME STATEMENT FOR THE YEAR ENDED 31 OCTOBER 2015
Revenue Revenue Capital Capital Total Total
2015 2014 2015 2014 2015 2014
Notes £'000 £'000 £'000 £'000 £'000 £'000
Gains on investments at fair - - 4,534 1,485 4,534 1,485
value through profit or loss
Income from investments at 3 2,047 1,881 - - 2,047 1,881
fair value through profit or
loss
Investment management fee 4 (72) (67) (216) (201) (288) (268)
Other operating expenses 5 (207) (283) (4) (4) (211) (287)
Net return before finance 1,768 1,531 4,314 1,280 6,082 2,811
costs and taxation
-------- -------- -------- -------- -------- --------
Finance costs 6 (10) (7) (30) (22) (40) (29)
Return on ordinary activities 1,758 1,524 4,284 1,258 6,042 2,782
before taxation
-------- -------- -------- -------- -------- --------
Taxation - - - - - -
===== ===== ===== ===== ===== =====
Return on ordinary activities 8 1,758 1,524 4,284 1,258 6,042 2,782
after taxation
===== ===== ===== ===== ===== =====
Return per ordinary share 8 6.68p 5.66p 16.29p 4.67p 22.97p 10.33p
===== ===== ===== ===== ===== =====
The total column of this statement represents the Income Statement of the
Company. The supplementary revenue and capital columns are both prepared under
guidance published by the Association of Investment Companies (AIC). The
Company had no recognised gains or losses other than those disclosed in the
Income Statement and accordingly no statement of recognised gains and losses
has been presented. All items in the above statement derive from continuing
operations. No operations were acquired or discontinued during the year.
RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS FOR THE YEAR ENDED 31
OCTOBER 2015
Called-up Share Capital
share premium redemption Special Capital Revenue
capital account reserve reserve reserves reserve Total
Notes £'000 £'000 £'000 £'000 £'000 £'000 £'000
For the year ended 31
October 2015
At 31 October 2014 329 14,819 220 23,306 4,398 2,122 45,194
Return for the year - - - - 4,284 1,758 6,042
Shares purchased to - - - (449) - - (449)
be held in treasury
Dividends paid* 7 - - - - - (1,556) (1,556)
-------- -------- -------- -------- -------- -------- --------
At 31 October 2015 329 14,819 220 22,857 8,682 2,324 49,231
-------- -------- -------- -------- -------- -------- --------
For the year ended 31
October 2014
At 31 October 2013 329 14,819 220 24,846 3,140 2,137 45,491
Return for the year - - - - 1,258 1,524 2,782
Shares purchased to - - - (1,540) - - (1,540)
be held in treasury
Dividends paid** 7 - - - - - (1,539) (1,539)
------- -------- -------- -------- -------- -------- --------
At 31 October 2014 329 14,819 220 23,306 4,398 2,122 45,194
==== ===== ==== ===== ==== ==== =====
* Final dividend of 3.50p per share for the year ended 31 October 2014,
declared on 8 January 2015 and paid on 6 March 2015, and the interim dividend
of 2.40p per share for the six months ended 30 April 2015, declared on 23 June
2015 and paid on 4 September 2015.
** Final dividend of 3.50p per share for the year ended 31 October 2013,
declared on 20 December 2013 and paid on 7 March 2014, and the interim dividend
of 2.20p per share for the six months ended 30 April 2014, declared on 25 June
2014 and paid on 5 September 2014.
BALANCE SHEET AS AT 31 OCTOBER 2015
2015 2014
Notes £'000 £'000
Fixed assets
Investments held at fair value through profit or loss 51,257 47,419
-------- --------
Current assets
Debtors 195 103
Cash at bank 122 110
-------- --------
317 213
-------- --------
Creditors - amounts falling due within one year
Bank loan (2,000) (2,000)
Other creditors (343) (438)
-------- --------
(2,343) (2,438)
-------- --------
Net current liabilities (2,026) (2,225)
-------- --------
Net assets 49,231 45,194
===== =====
Capital and reserves
Called-up share capital 9 329 329
Share premium account 10 14,819 14,819
Capital redemption reserve 10 220 220
Special reserve 10 22,857 23,306
Capital reserves 10 8,682 4,398
Revenue reserve 10 2,324 2,122
-------- --------
Total equity shareholders' funds 8 49,231 45,194
====== ======
Net asset value per ordinary share 8 187.69p 170.68p
====== ======
CASH FLOW STATEMENT FOR THE YEAR ENDED 31 OCTOBER 2015
2015 2014
Notes £'000 £'000
Net cash inflow from operating activities 5(b) 1,474 1,220
Returns on investment and servicing of finance
Interest paid (40) (29)
Capital expenditure and financial investment
Purchases of investments (46,219) (50,125)
Proceeds from sales of investments 46,802 51,845
-------- --------
Net cash inflow from capital expenditure and financial 583 1,720
investment
Equity dividends paid 7 (1,556) (1,539)
-------- --------
Net cash inflow before financing 461 1,372
Financing
Repurchase of ordinary shares (449) (1,540)
-------- --------
Net cash outflow from financing (449) (1,540)
===== =====
Increase/(decrease) in cash in the year 12 (168)
===== =====
NOTES TO THE FINANCIAL STATEMENTS
1. PRINCIPAL ACTIVITY
The Company conducts its business so as to qualify as an investment trust
company within the meaning of sub-section 1158 of the Corporation Tax Act 2010.
2. ACCOUNTING POLICIES
(a) Basis of preparation
The Company's financial statements have been prepared under the historical cost
convention, modified to include the revaluation of investments, and in
accordance with the United Kingdom law and United Kingdom Generally Accepted
Accounting Practice (UK GAAP) and the Statement of Recommended Practice -
'Financial Statements of Investment Trust Companies and Venture Capital Trusts'
( SORP ) issued in January 2009 by the Association of Investment Companies (
AIC ).
The principal accounting policies adopted by the Company are set out below. The
policies have been applied consistently throughout the year and are consistent
with those applied in the preceding year. All of the Company's operations are
of a continuing nature. A statement regarding the Company as a going concern is
noted in the DIrectors' Report on page 19 of the Annual Report and Financial
Statements.
The Company's financial statements are presented in Sterling, which is the
currency of the primary economic environment in which the Company operates. All
values are rounded to the nearest thousand pounds (£'000) except where
otherwise indicated.
(b) Presentation of Income Statement
In order to reflect better the activities of an investment trust company and in
accordance with guidance issued by the AIC, supplementary information which
analyses the Income Statement between items of a revenue and capital nature has
been presented alongside the Income Statement.
(c) Segmental reporting
The Directors are of the opinion that the Company is engaged in a single
segment of business being investment business.
(d) Income
Dividends receivable on equity shares are accounted for on an ex-dividend
basis. Where no ex-dividend date is available, dividends receivable on or
before the year end are treated as revenue for the year. UK dividends are shown
net of tax credits. Provisions are made for dividends not expected to be
received.
Special dividends are recognised on an ex-dividend basis and treated as a
capital or revenue item depending on the facts and circumstances of each
dividend.
Where the Company has elected to receive its dividends in the form of
additional shares rather than in cash, the cash equivalent of the dividend is
recognised as income. Any excess in the value of the shares received over the
amount of the cash dividend is recognised in capital reserves.
Deposit interest receivable is accounted for on an accruals basis. Underwriting
commission is recognised when the issue underwritten closes.
(e) Expenses
All expenses are accounted for on an accruals basis. Expenses have been treated
as revenue except as follows:
- expenses including finance costs which are incidental to the acquisition or
disposal of investments are included within the book cost of the investments.
Details of transaction costs on the purchases and sales of investments are
disclosed in note 11 on page 47 of the Annual Report and Financial Statements;
and
- the investment management fee has been allocated 75% to the capital column
and 25% to the revenue column of the Income Statement in line with the Board's
expected long-term split of returns, in the form of capital gains and income
respectively, from the investment portfolio.
(f) Finance costs
Finance costs are accounted for on an accruals basis. Finance costs are
allocated, insofar as they relate to the financing of the Company's
investments, 75% to the capital column and 25% to the revenue column of the
Income Statement, in line with the Board's expected long term split of returns,
in the form of capital gains and income respectively, from the investment
portfolio.
(g) Taxation
Where expenses are allocated between capital and revenue, any tax relief
obtained in respect of those expenses is allocated between capital and revenue
on the marginal basis using the Company's effective rate of corporation tax for
the accounting period.
Deferred taxation is recognised in respect of all timing differences that have
originated but not reversed at the balance sheet date, where transactions or
events that result in an obligation to pay more tax or a right to pay less tax
in the future have occurred. Timing differences are differences between the
Company's taxable profits and its results as stated in the
financial statements.
A deferred tax asset is recognised when it is more likely than not that the
asset will be recoverable. Deferred tax is measured on a non-discounted basis
at the rate of corporation tax that is expected to apply when the timing
differences are expected to reverse.
(h) Investments held at fair value through profit or loss
As the Company's business is investing in financial assets with a view to
profiting from their total return in the form of increases in fair value,
financial assets are designated as held at fair value through profit or loss in
accordance with FRS 26 'Financial Instruments: Recognition and Measurement'.
The Company manages and evaluates the performance of these investments on a
fair value basis in accordance with its investment strategy, and information
about the investments is provided on this basis to the Board of Directors.
Investments held at fair value through profit or loss are initially recognised
at fair value. After initial recognition, these continue to be measured at fair
value, which for quoted investments is either the bid price or the last traded
price depending on the convention of the exchange on which the investment is
listed. Purchases and sales of financial assets are recognised on the trade
date, being the date which the Company commits to purchase or sell the assets.
Investment holding gains or losses reflect differences between fair value and
book cost and therefore include transaction costs in relation to the purchases
or sale of investments. Net gains or losses arising on realisation of
investments are taken to capital reserve.
(i) Foreign currency translation
Foreign currency - in accordance with FRS 23 'The Effect of Changes in Foreign
Currency Exchange Rates', the Company is required to determine its functional
currency, being the currency in which the Company predominately operates. The
functional and reporting currency is Sterling, reflecting the primary economic
environment in which the Company operates. Transactions in foreign currencies
are translated into Sterling at the rates of exchange ruling on the date of the
transaction. Foreign currency monetary assets and liabilities are translated
into Sterling at the rates of exchange ruling at the Balance Sheet date.
Profits and losses thereon are recognised in the capital column of the Income
Statement and taken to the capital reserve.
(j) Dividends payable
In accordance with FRS 21 'Events After Balance Sheet Date', the final dividend
proposed on ordinary shares is recognised as a liability when approved by
shareholders. Interim dividends are recognised only when paid.
(k) Share repurchases
Shares repurchased and subsequently cancelled - share capital is reduced by the
nominal value of the shares repurchased, and the capital redemption reserve is
correspondingly increased in accordance with section 733 Companies Act 2006.
The full cost of the repurchase is charged to the special reserve.
Shares repurchased and held in treasury - the full cost of the repurchase is
charged to the special reserve. Where treasury shares are subsequently
reissued, any surplus is taken to the share premium account.
3. INCOME
2015 2014
£'000 £'000
Investment income:
Franked UK listed dividends 2,031 1,841
Unfranked income from UK investments 4 -
Overseas listed dividends 12 18
-------- --------
Underwriting commission - 22
-------- --------
Total income 2,047 1,881
===== =====
Special dividends of £113,000 have been recognised in capital (2014: £nil).
4. INVESTMENT MANAGEMENT FEE
2015 2014
Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
Investment management fee 72 216 288 67 201 268
-------- -------- ------ ------- ------ ------
72 216 288 67 201 268
==== ==== === ==== === ===
Under the terms of the investment management agreement with BFM, BFM is
entitled to a fee of 0.6% per annum of the Company's market capitalisation.
There is no additional fee for company secretarial and administration services.
Up to 1 July 2014 the Company was subject to a performance related fee. The
performance fee was payable for the financial period based on the Company's net
asset value outperformance of the benchmark. The performance fee was 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 used
for the calculation of the performance fee was the FTSE All-Share Index
measured on a total return basis.
At the year end, £146,000 was outstanding in respect of the management fee
(2014: £200,000).
5. OTHER OPERATING EXPENSES
2015 2014
£'000 £'000
(a) Operating expenses
Custody fee 1 1
Auditor's remuneration:
- statutory audit 22 21
Depositary fee 7 2
Directors' emoluments 95 79
Marketing fees 3 38
Other operating expenses 79 142
------- -------
207 283
==== ====
Transaction charges - capital 4 4
------ -------
211 287
==== ====
The ongoing charges represent the Company's management fee and all 1.0% 1.2%
other recurring operating and investment management expenses,
excluding finance costs, expressed as a percentage of average net
assets. These figures are unaudited.
2015 2014
£'000 £'000
(b) Reconciliation of net return before finance costs and taxation
to net cash flow from operating activities
Net return before finance costs and taxation 6,082 2,811
-------- --------
Less: Capital return before finance costs and taxation (4,314) (1,280)
Net revenue return before finance costs and taxation 1,768 1,531
Expenses charged to capital (220) (205)
Special dividends credited to capital 113 -
Increase in debtors (92) (47)
Decrease in creditors (95) (59)
-------- --------
Net cash inflow from operating activities 1,474 1,220
-------- --------
6. FINANCE COSTS
2015 2014
Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
Interest payable - Sterling 7 21 28 7 22 29
bank loan
Bank charges - Sterling bank 3 9 12 - - -
loan
------- ------- ------- ----- ----- ----
10 30 40 7 22 29
==== ==== ==== === === ===
7. DIVIDENDS
2015 2014
£'000 £'000
Dividends paid on equity shares:
Final dividend of 3.50p per share paid 6 March 2015 (2014: 3.50p - 7 927 952
March 2014)
Interim dividend of 2.40p per share paid 4 September 2015 (2014: 2.20p - 629 587
5 September 2014)
-------- --------
1,556 1,539
===== ====
The Directors have proposed a final dividend of 3.60p per share in respect of
the year ended 31 October 2015. The proposed final dividend will be paid,
subject to shareholders' approval, on 4 March 2016 to shareholders on the
Company's register on 12 February 2016. The final dividend has not been
included as a liability in these financial statements as final dividends are
only recognised in the financial statements when they have been approved by
shareholders, or in the case of interim dividends, recognised when paid to
shareholders.
The total dividends payable in respect of the year which form the basis of
determining retained income for the purposes of section 1158 of the Corporation
Tax Act 2010 and section 833 of the Companies Act 2006, and the amounts
proposed, meet the relevant requirements as set out in the legislation.
2015 2014
£'000 £'000
Dividends paid or proposed on equity shares:
Interim paid 2.40p per share paid 4 September 2015 (2014: 2.20p) 629 587
Final proposed 3.60p* per share payable 4 March 2016 (2015: 3.50p) 944 927
-------- --------
1,573 1,514
===== ====
* Based upon 26,229,268 ordinary shares (excluding treasury shares)
in issue.
The proposed final dividend is based on the number of shares in issue at the
year end. However, the dividend payable will be based on the number of shares
in issue on the record date and will reflect any purchases and cancellations of
shares by the Company settled subsequent to the year end.
8. RETURN AND NET ASSET VALUE PER ORDINARY SHARE
Revenue and capital returns per share are shown below and have been calculated
using the following:
2015 2014
Net revenue return attributable to ordinary shareholders (£'000) 1,758 1,524
Net capital return attributable to ordinary shareholders (£'000) 4,284 1,258
-------- --------
Total return (£'000) 6,042 2,782
-------- --------
Equity shareholders' funds (£'000) 49,231 45,194
-------- --------
The weighted average number of shares in issue during each year, on 26,300,501 26,924,569
which the return per share was calculated was:
======== ========
The actual number of shares in issue at the end of each year, on 26,229,268 26,479,268
which the net asset value per share was calculated was:
======== ========
2015 2014
Revenue Capital Total Revenue Capital Total
p p p p p p
Return per share
Calculated on weighted average 6.68 16.29 22.97 5.66 4.67 10.33
number of shares
Net asset value per share 187.69* 170.68**
-------- ----------
Share price 184.25 167.25
===== ======
* The net asset value is based on 26,229,268 ordinary shares in issue. An
additional 6,704,664 shares were held in treasury.
** The net asset value is based on 26,479,268 ordinary shares in issue. An
additional 6,454,664 shares were held in treasury.
9. CALLED-UP SHARE CAPITAL
Ordinary Treasury Nominal
shares shares Total value
number number shares £'000
Allotted, called-up and fully paid share capital
comprised:
Ordinary shares of 1p each
-------------- ------------- --------------- ------
At 31 October 2014 26,479,268 6,454,664 32,933,932 329
--------------- ------------- --------------- ------
Shares purchased and held in treasury (250,000) 250,000 - -
--------------- ------------- --------------- ------
At 31 October 2015 26,229,268 6,704,664 32,933,932 329
========= ======== ======== ====
During the year 250,000 ordinary shares were purchased and held in treasury
(2014: 920,000 were purchased and placed in treasury) for a total consideration
of £449,000. No shares were cancelled from treasury during the year (2014:
nil).
10. SHARE PREMIUM ACCOUNT AND RESERVES
*Captial *Capital reserves
Share Capital reserves arising on
premium redemption *Special arising on revaluation of *Revenue
account reserve reserve investments sold investments held reserve
£'000 £'000 £'000 £'000 £'000 £'000
At 1 November 2014 14,819 220 23,306 1,753 2,645 2,122
-------- -------- -------- -------- -------- --------
Transfer in respect of prior - - - 50 (50) -
period
-------- -------- -------- -------- -------- --------
Movement during the year:
-------- -------- -------- -------- -------- --------
Gains on realisation of - - - 3,990 - -
investments
-------- -------- -------- -------- -------- --------
Change in investment holding - - - - 431 -
gains
-------- -------- -------- -------- -------- --------
Purchase of ordinary shares - - (449) - - -
in treasury
-------- -------- -------- -------- -------- --------
Special dividends charged to - - - 113 - -
capital
-------- -------- -------- -------- -------- --------
Finance costs, investment - - - (250) - -
management and
other fees charged to
capital
-------- -------- -------- -------- -------- --------
Return for the year - - - - - 1,758
-------- -------- -------- -------- -------- --------
Dividends paid - - - - - (1,556)
-------- -------- -------- -------- -------- --------
At 31 October 2015 14,819 220 22,857 5,656 3,026 2,324
===== ==== ===== ===== ===== =====
* Distributable reserves.
11. RELATED PARTY DISCLOSURE
Disclosures of the Directors' interests in the ordinary shares of the Company
and fees and expenses payable to the Directors are given in the Directors'
Remuneration Report on pages 23 to 25 of the Annual Report and Financial
Statements.
12. CONTINGENT LIABILITIES
There were no contingent liabilities at 31 October 2015 (2014: £nil).
13. PUBLICATION OF NON-STATUTORY ACCOUNTS
The financial information contained in this announcement does not constitute
statutory accounts as defined in the Companies Act 2006. The 2015 Annual Report
and Financial Statements will be filed with the Registrar of Companies shortly.
The report of the auditor for the year ended 31 October 2015 contains no
qualification or statement under Section 498(2) or (3) of the Companies Act
2006.
This announcement was approved by the Board of Directors on 15 January 2016.
14. ANNUAL REPORT
Copies of the Annual Report will be sent to members shortly and will be
available from the registered office c/o The Company Secretary, BlackRock
Income & Growth Investment Trust plc, 12 Throgmorton Avenue, London EC2N 2DL.
15. ANNUAL GENERAL MEETING
The Annual General Meeting of the Company will be held at 12 Throgmorton
Avenue, London EC2N 2DL on Wednesday, 24 February 2016 at 12.00 noon.
ENDS
The Annual Report will also be available on the BlackRock website at
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, Closed End Funds, BlackRock Investment
Management (UK) Limited
Tel: 020 7743 5284
Julia Wennstrom, Media Relations, BlackRock Investment Management (UK) Limited
Tel: 020 7743 4142
15 January 2016
12 Throgmorton Avenue
London
EC2N 2DL
Blackrock Income & Growth Invt : AND GROWTH INVESTMENT TRUST PLC - Final Results
January 15, 2016 at 05:10 am EST
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