BlackRock Income and Growth Investment Trust Plc - Portfolio Update

The information contained in this release was correct as at 30 September 2024. Information on the Company's up to date net asset values can be found on the London Stock Exchange Website at:

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

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

All information is at 30 September 2024 and unaudited.

Performance at month end with net income reinvested

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

At month end

Sterling:

Commenting on the markets, representing the Investment Manager noted:

Market Summary:

Equity markets experienced significant volatility early in September, as concerns over the global economic slowdown and heightened tensions in the Middle East dampened investor sentiment. Weak payroll data and growing recessionary concerns in the US created broader market uncertainty1 as the S&P500 saw its worst start to September since 1953, falling more than 4% in the first week of the month2.

Market sentiment improved during the second half of the month, as optimism surrounding rate cuts and new economic stimulus in China helped to stabilize markets, with Global MSCI equities ending the month up 2.3%10. The European Central Bank delivered its second rate cut in September, taking interest rates to 3.5%3, and the Fed announced a 50bps cut halfway through the month in an attempt to stabilize the slowing labour market in the US4. The Bank of England also announced that it would hold interest rates at 5% as inflation nears its target in the UK, thanks to falling energy prices5.

In the UK, The FTSE All-Share returned -1.3% in the month, and the FTSE 100 -1.5%, with healthcare and commodities contributing to this underperformance. Shares in the Energy sector fell sharply as oil prices fell to their lowest price all year on September 10 over concerns of weak economic data in China and OPEC+ plans to increase production in December6. Healthcare also took a hit after AstraZeneca fell by 2.4% following a disappointing lung cancer trial result7.

The FTSE 250 was flat in September, up 0.06% for the month, with oil and gas and technology detracting, whilst consumer goods and pharmaceuticals were the best performing sectors.

There was increased optimism surrounding UK equities in September, despite the drop in the FTSE All-Share as M&A activity continued through September. Low equity valuations and more stable political and economic outlooks saw 6 bids take place8. The sectors in focus were technology and real estate, where notable examples include Rightmove, whose shares saw a 24% rally on the first day following the £6.2bn takeover attempt from REA9. Notably, corporates have been the main acquirors, reflecting the attractiveness of UK companies due to lower valuations to international peers8.

Stock comments

Rio Tinto benefitted from an iron ore price rise on the final day of the month, as iron ore rose by 10% on the back of increased Chinese demand. The China stimulus package also improved investor sentiment on the company, which relies heavily on Chinese demand for iron ore. The company also paid a substantial dividend during the month.  WH Smith shares rose after the company announced a £50 million share buyback following strong trading at the end of their financial year as the company benefitted from increased passenger volumes over the summer.

Ashmore reported full-year earnings, where revenue beat expectations, and announced a dividend that was well received by the market. They also benefitted from increasing improving sentiment towards Emerging Markets.

Many of the top detractors from performance included names that are not held by the portfolio including Glencore, Diageo and Rolls Royce.

Rentokil shares fell after the company delivered a profit warning early in the month, citing reduced demand in North America and poor integration of its new US branches. Oxford instruments shares were weak reflecting broader market concerns regarding their industrials and China exposure.

Changes

During the period, we purchased Hammerson. The company has recently completed the sale of its Retail Value portfolio, this simplifies the portfolio, removes debt concerns and provides the group with the ability to reinvest in what is now a more concentrated portfolio of 10 retail estates. Rents are stabilising while valuations look attractive and Hammerson can add value by buying out its joint-venture partners.  Shares trade on a c.25% discount to NAV.  We added to Rio Tinto reflecting the significant stimulus from Chinese authorities and following a period of very weak relative performance.

Outlook

Equity markets entered 2024 in a buoyant mood following a strong and broad rally in the latter part of 2023. The outlook, and optimism, is a far cry from 12 months ago, when supply chains were hugely disrupted, and inflation was double digit and well ahead of central banks' targets prompting rapid and substantial interest rates hikes, despite an uncertain demand environment. China was the surprise negative in 2023, with no noticeable COVID re-opening recovery and lacklustre growth despite government attempts to stimulate.

Markets have shifted to `goldilocks' territory whereby slowing inflation has signaled the peak for interest rates while broad macroeconomic indicators that have been weak are not expected to deteriorate further. This is also helpful for the cost and availability of credit which has recently improved having been deteriorating through most of 2023. Despite expectations for rate cuts moderating significantly, stock markets have continued to make progress in the developed world. Labour markets remain resilient for now with low levels of unemployment while real wage growth is supportive of consumer demand albeit presenting a challenge to corporate profit margins.

With the UK's election now over, the markets attention will turn its focus on the US election in November. The replacement of President Biden as the Democratic candidate will contribute further to the uncertainty, and we continue to expect that geopolitics will play a more significant role in asset markets. This year sees the biggest election year in history with more than 60 countries representing over half of the world's population going to the polls.  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 portfolios for any election 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 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 with a robust buyback yield of the UK market. Combining this with a dividend yield of 3.5% (FTSE All Share Index yield as at 31 August 2024 source: The Investment Association), the cash return of the UK market is attractive in absolute terms and comfortably higher than other developed markets. Although we anticipate further volatility ahead, we believe that in the course of time 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 turnarounds situations.

1. Source: FT, 6 September 2024 <US stocks turn in worst week in 18 months over slowdown fears (ft.com)>
2. Source: MarketWatch, 9 September 2024 <S&P 500 just saw its worst first week of September since 1953, this chart shows - MarketWatch>
3. Source: ECB, 12 September 2024 <Monetary policy decisions (europa.eu)>
4. Source: J.P. Morgan, 19 September 2024 <September 2024 Fed Meeting: Fed Cuts Rates by Half Point to Support Economy | J.P. Morgan (jpmorgan.com)>
5. Source: FT, 19 September 2024 <Bank of England holds interest rates at 5% (ft.com)>
6. Source: CNBC, 30 September 2024 <Crude oil prices today: WTI posts third monthly loss (cnbc.com)>
7. Source: Reuters, 10 September 2024 <FTSE 100 falls on healthcare, energy weakness; cooling wage growth fuels rate cut bets | Reuters>
8. Source: Peel Hunt Research as of 02 October 2024

9. Source: Investors' Chronicles, 2 September 2024 <Rightmove shares soar on buyout talks - Investors' Chronicle (investorschronicle.co.uk)>
10. Source: Rothschild and co, 9 September 2024 <Monthly Market Summary -September 2024 I Rothschild & Co (rothschildandco.com)

21 October 2024