BlackRock Income and Growth Investment Trust plc

About this investment trust

Capital at risk. The value of investments and the income from them can fall as well as rise and are not guaranteed. Investors may not get back the amount originally invested.

The Company aims to provide growth in capital and income over the long term through investment in a diversified portfolio of principally UK listed equities.

Why choose it?

With longer lifespans and greater demands on retirement funds, investors need a steady source of income and growth. This conviction-led portfolio delivers exposure to a balanced range of sectors and company shares, focused on the UK, which have the potential to deliver capital growth and a growing dividend income.

Suited to…

Investors targeting a steady income that grows over time, useful for retirement planning. The Trust also aims to grow investors’ capital in the longer term.

What are the risks?

• Capital at risk. The value of investments and the income from them can fall as well as rise and are not guaranteed. Investors may not get back the amount originally invested.
• Net Asset Value (NAV) performance is not the same as share price performance, and shareholders may realise returns that are lower or higher than NAV performance.
• The Trust’s investments may have low liquidity which often causes the value of these investments to be less predictable. In extreme cases, the Trust may not be able to realise the investment at the latest market price or at a price considered fair.
• Investment strategies, such as borrowing, used by the Trust can result in even larger losses suffered when the value of the underlying investments fall.

Useful information

Capital at risk. The value of investments and the income from them can fall as well as rise and are not guaranteed. Investors may not get back the amount originally invested.

Fees & Charges

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ESG Integration

The fund noted above does not commit to sustainable criteria nor does it have a sustainable investment objective.

BlackRock considers many investment risks in our processes. In order to seek the best risk-adjusted returns for our clients, we manage material risks and opportunities that could impact portfolios, including financially material Environmental, Social and/or Governance (ESG) data or information, where available. See our Firm Wide ESG Integration Statement for more information on this approach and fund documentation for how these material risks are considered within this product, where applicable.

Fund manager commentary

28 February 2025

Please note that the commentary below includes historic information in respect of index performance data and the Company’s NAV performance.

The figures shown relate to past performance. Past performance is not a reliable indicator of current or future results.

Market Summary

February started with the announcement that President Trump was imposing 25% tariffs on all imports from Canada and Mexico, along with additional 10% tariffs on all imports from China. Following the announcement, there was a broad-based move lower in risk assets across Europe, with eurozone large caps down 1.6% and UK large caps, a market where the tariff rhetoric has been softer, down 1.2%. The imposition on Canada and Mexico was later delayed, which allowed some stability to return after a volatile start to the month.

In the US, equity indices closed lower in February. Headline CPI rose 0.5% month-on-month for January, which has reinforced the Federal Reserve's cautious stance on cutting rates through the year. Doubts about the strength of the US consumer also led to a risk-off move in markets towards the end of February, leading to a drop in the S&P 500. The index closed the month - 1.3% as the risk-off sentiment dominated the market and softer economic readings worried investors. Technology and Consumer Discretionary were the hardest hit as the Nasdaq dropped, led by falls in some of the world’s largest technology companies.

In the UK, large caps have benefited from being relatively shielded from tariff discussions and the market's low-technology exposure, as the FTSE 100 ended +2%, and the FTSE All-Share +1.3% versus broad selloffs in U.S. equities. The Bank of England struck a dovish tone with a 25bps rate cut halfway through February, as the Governor Andrew Bailey pointed to the UK economy's stagnation, despite a slightly stronger fourth quarter of 2024 for Gross Domestic Product. The move was highly anticipated by markets, but the 7-2 vote split did provide a mild surprise, with two members voting for a larger 50bps cut. Inflation data surprised to the upside for January, rising 3% against expectations of 2.8% year-on-year, its highest in 10 months. The increase was driven largely by a smaller-than-usual drop in air fares in December, and the implementation of VAT on private school fees. The economy also grew in Q4 2024, up 0.1%, defying expectations of a contraction.

Stock comment

Tate & Lyle detracted as its 2024 results highlighted the subdued market backdrop for the food manufacturers leading to modest earnings downgrades. WH Smith and Spirax Group struggled during the month despite limited newsflow. The underweight to Aerospace & Defence detracted from performance following significant upgrades at Rolls Royce and growing excitement in the defence names given pressure on Europe to materially increase its defence spending.

The banks exposure in the Company contributed positively to performance following strong updates from Standard Chartered and Lloyds which highlighted the strong fundamentals while valuations remain undemanding. Standard Charterer’s results for 2024 showed strong revenue growth combined with good cost control. Although there is still an overhang at Lloyds from motor commission litigation, the 2024 results impressed with strong capital generation supported by the tailwind stemming from rate increases of the last few years. Admiral performed well during the month ahead of its 2024 results announcement while not owning Diageo contributed to relative performance, in part due to rising tariff-related concerns.

Changes

Trading activity during the month was focused on increasing the BP holding to reflect the strategy shift and acceleration that is underway and that has the potential to address the company’s leverage position and capital allocation. This was funded out of Shell. We also increased the Lloyds holding to reflect the combination of an attractive returns profile over the next 24 months with a subdued valuation given the overhang from ongoing motor commission litigation. This was funded out of NatWest.

Outlook

Global developed equity markets continued their broad rallies throughout 2024 following a trend that started in late 2023. Having passed peak interest rates with stable labour markets and broadly stable macroeconomic conditions, equity markets have performed strongly. The promise of greater fiscal spending in the US, China and parts of Europe have served to buoy equity markets further despite contributing to rising government bond yields as the spectre of uncontrolled fiscal deficits and inflationary pressures loom large for bond investors.

Following a period of extended economic weakness, the Chinese Government has begun a more concerted campaign aimed at accelerating economic growth and arresting deflationary pressures. Recent policy moves have sought to improve and encourage lending into the real economy with a sizable fiscal easing programme announced. Whilst the scale of the easing is large, western markets and commentators have remained sceptical of its impact and effectiveness whilst awaiting evidence to the contrary. In the UK, the recent budget promised and delivered a large-scale borrowing and spending plan. Whilst sizable increases in minimum wage and public sector wage agreements likely support a brighter picture for the UK consumer, business confidence remains low impacting the growth outlook. UK labour markets remain resilient for now with low levels of unemployment while real wage growth is supportive of consumer demand albeit presents a challenge to corporate profit margins.

With the UK’s election and budget now over, the market’s attention will focus on the subsequent policy actions of the new US administration under Donald Trump. The global economy has benefited from the significant growth and deflation ‘dividend’ it has received from globalisation over the past decades. The impact of a more protectionist US approach and the potential implementation of tariffs may challenge this ‘dividend’. Indeed, we anticipate more uncertainty given the announcements of significant federal budget cuts and a stricter immigration policy. We would anticipate asset markets to be wary of these policies until there is more clarity as we move through 2025. Conversely, we believe political certainty, now evident in the UK, will be helpful for the UK and address the UK’s elevated risk premium that has persisted since the damaging Autumn budget of 2022. Whilst we do not position the portfolio for any election or geopolitical outcome, we are mindful of the potential volatility and the opportunities that may result, some of which have started to emerge.

The UK stock market continues to remain very depressed in valuation terms relative to other developed markets offering double-digit discounts across a range of valuation metrics. This valuation anomaly saw further reactions from UK corporates who continue to use their excess cashflows to fund buybacks contributing to a robust buyback yield of the UK market. Combining this with a dividend yield of 3.6% (FTSE All Share Index yield as at 28 February 2025; source: Bloomberg), the cash return of the UK market is attractive in absolute terms and higher than other developed markets. Although we anticipate further volatility ahead, we believe that risk appetite will return and opportunities are emerging. We have identified several potential opportunities with new positions initiated throughout the year in both UK domestic and midcap companies.

We continue to focus the portfolio on cash generative businesses that we believe offer durable, competitive advantages as we believe these companies are best placed to drive returns over the long term. Whilst we anticipate economic and market volatility will persist throughout the year, we are excited by the opportunities this will likely create; by seeking to identify the companies that strengthen their long-term prospects as well as attractive turnaround situations.

Any opinions or forecasts represent an assessment of the market environment at a specific time and is not intended to be a forecast of future events or a guarantee of future results.

This information should not be relied upon by the reader as research, investment advice or a recommendation.

Risk: Reference to the names of each company in this communication is merely for explaining the investment strategy, and should not be construed as investment advice or investment recommendation of those companies.

Portfolio manager biographies

Capital at risk. The value of investments and the income from them can fall as well as rise and are not guaranteed. Investors may not get back the amount originally invested.

Adam Avigdori, Director, is co-manager of the BlackRock Income and Growth Investment Trust plc, and is a member of the UK Equity Team. Adam joined BlackRock in 2001 and is responsible for managing UK equity portfolios covering the real estate and construction sectors. Adam has a degree in management sciences.

David Goldman, CFA, Director, is co-manager of the BlackRock Income and Growth Investment Trust plc, and is a member of the UK Equity Team. David joined BlackRock in 2004 and is responsible for managing UK equity portfolios covering the support services sectors. David has a degree with first class honours in economics.

Board of directors

Graeme Proudfoot (Chairman) (appointed 1 November 2019) has considerable asset management experience and expertise having spent the bulk of his executive career at Invesco, latterly as Managing Director, EMEA and CEO of Invesco Pensions. Prior to joining Invesco, Mr Proudfoot began his career at Wilde Sapte Solicitors, practising as a corporate finance lawyer in London and New York. He is also non-executive Chairman of VPC Specialty Lending Investments plc.

Charles Worsley (appointed 19 April 2010) has over 30 years’ experience in commercial and residential property management and has been a shareholder of the Company since its launch. Mr Worsley has formerly been a director of retail and media companies. He is currently a director of a commercial property company, a renewable energy development company and a trustee director of a private family office.

Chrysoula Zervoudakis (appointed 19 December 2024) has worked for 28 years in asset management in the UK and France, investing in UK and Continental European Equities for retail and institutional clients. Most recently she was a director at AXA IM until 2015 and co-Head of Research. She has managed Growth and Income funds and analysed both industrial and consumer sectors with a focus on corporate governance and sustainability. She has been involved in promoting funds in the UK and internationally. She currently serves as non-executive director of OFI Invest AM in France where she chairs the Engagement and Ethics Committee and as Governor of West Thames College. She was previously a non exec director of Quadpack Industries SA and chair of the audit and risk committee.