Invesco Inc Grth Tst

Annual Financial Report

Invesco Income Growth Trust plc
Annual Financial Report Announcement
For the year ended 31 March 2015



Performance Statistics

The Company’s benchmark is the FTSE All-Share Index.

Total Return
(includes net dividends reinvested)
Net asset value per ordinary share +10.3% +14.2%
FTSE All-Share Index +6.6% +8.8%
Share price +9.9% +16.7%

Source : Thomson Reuters Datastream




Net asset value per ordinary share 309.2p 289.5p +6.8
FTSE All-Share Index 3,664 3,556 +3.0
Share price 292.8p 276.0p +6.1
Discount per ordinary share 5.3% 4.7%


Gross gearing – excluding the effect of cash 8.3% 9.9%
Net gearing – including the effect of cash 8.3% 9.9%




Revenue and Dividends

Net revenue after tax (£’000) 6,398 5,786 +10.6
Revenue return per ordinary share 10.9p 9.9p +10.1
  – first interim 2.10p 2.05p
  – second interim 2.10p 2.05p
  – third interim 2.15p 2.10p
  – final 3.75p 3.65p
10.10p 9.85p +2.5


Retail Price Index – annual change 0.9% 2.5%


Ongoing charges ratio 0.88% 0.89%




I am delighted to be able to report that despite my fears at the half year that we would be facing more challenging market conditions, we have been able to achieve a very creditable performance with the total return on our net asset value over the year to 31 March 2015 being 10.3% which significantly outperformed our benchmark’s equivalent return of 6.6%. Our share price’s total return was 9.9% as a result of the discount to NAV widening a little to 5.3% at the end of the year from 4.7% last year. This outperformance is a great credit to Ciaran Mallon, our portfolio manager, who will give more details in his own report, and reflects the benefits of his careful and thoughtful stock selection. It also further establishes the excellent long term record that Ciaran has achieved over the last ten years of his management of our portfolio, as can be seen on page 6. This has helped us to meet our longer term investment objective and provide us, the shareholders, with superior capital and income growth to that of the UK stock market and real growth of our dividends.

Revenue and Dividends

During the year, earnings per share increased to 10.9p per share from 9.9p, once again helped along by special dividends received.  We are consequently again able to meet our long term dividend growth objective this year. We are pleased to recommend a final dividend of 3.75p per share, which together with aggregate interim dividends paid of 6.35p, gives a total dividend per share for the year of 10.10p (2014:9.85p), an increase of 2.5%. This exceeds the annualised inflation rate for the year to 31 March 2015 of 0.9% (as measured by RPI) and is consistent with our objective of growing the dividend at above the rate of inflation. If approved by shareholders, the final dividend will be paid on 27 July 2015 to shareholders on the register on 26 June 2015.

Management Fee

The Board, as is reported in this annual financial report on page 27, review each year the management arrangements for the Company and confirm the arrangements for the following year. This is no formality and the review covers a number of important aspects, including the terms of our agreement with Invesco Perpetual, and often results in a lively discussion between the Board and Invesco Perpetual. This year, as a result of the need to appoint an Alternative Investment Fund Manager, we agreed a new and up to date management agreement, which became effective on 22 July 2014. Fee arrangements were unchanged for the purposes of this agreement, but both parties agreed that it would be appropriate to also review them. Following subsequent constructive discussions with Invesco Perpetual, the Board announced on 20 March 2015 the agreement of a new fee arrangement, effective from 1 April 2015. The new fee structure, which is set out on page 26 of this report, has just two tiers of charging, rather than the previous three, and will be applied to market capitalisation rather than to gross assets as previously. For the first £150 million of market capitalisation the fee will be levied at the rate of 0.65% p.a. and a fee of 0.55% p.a. will apply above this level. The Board believes that this new arrangement will ensure that the Company continues to benefit from Invesco Perpetual’s proven successful management of the Company in a way that incentivises them and benefits shareholders.

Corporate Broker

In May this year, after a thorough review, the Board decided to appoint Westhouse Securities as our corporate broker in place of JPMorgan Cazenove. I would like to put on record our thanks and appreciation to JPMorgan Cazenove for their service, support and encouragement since the launch of the Company in 1996.


The Company’s auditor has been Grant Thornton UK LLP since their merger in 2007 with RSM Robson Rhodes LLP, who were appointed in 1996. Having regard to new regulations and evolving best practice on auditor rotation, the Audit Committee initiated a tender process during the year. As a result of this exercise the Board has invited, on the Audit Committee’s recommendation, Ernst & Young LLP to be the Company’s auditor in 2016. Accordingly, a resolution proposing the appointment of Ernst & Young LLP and authorising the Audit Committee to determine their remuneration has been included in the notice for the forthcoming AGM. I would like to take this opportunity to thank Grant Thornton for their service over the years and their sound advice when we have sought it.


Whilst the Board seeks to comply with the provisions of the AIC Code, it does not subscribe to the view that Directors are no longer independent after nine years of tenure and conversely considers that experience has great value on investment trust boards - a view that is recognised by the AIC Code. However, we are also cognisant of the need for periodic refreshment, and we consider this as part of our annual board appraisal process. Chris Hills has indicated his intention to retire from the Board at the conclusion of the AGM in 2016 and so his retirement will help with this, albeit at the cost of his considerable experience and expertise. We will start the replacement process this autumn.


If Ciaran found last year was challenging then I suspect this year may well turn out to be really challenging. As I write this we have a number of storm clouds appearing such as the consequences of the recent UK election and its impact on both the future of the United Kingdom and our membership of the European Union, Greece’s current flirtation with default and Grexit, the speculation over when the US will start raising interest rates and its impact on bond markets and that is without the antics of Mr Putin or Islamic extremists. Notwithstanding all these, there are some positives like continued very low interest rates and the economic benefits of a lower oil price and, of course, unpleasant as market disruptions are at the time, they do throw up attractive opportunities for long term investors like our Company. So there will be attractive opportunities and with little prospect that interest rates are going to rise substantially soon, I also remain confident in the abilities of Ciaran to find attractive opportunities for our portfolio in order to continue to meet our longer term investment objectives. Positive returns, such as we have enjoyed in recent years, may be harder to achieve, but there are no apparent reasons to believe that the all-important income part of the return will not be maintained.

Annual General Meeting (AGM)

This year’s AGM will be held at Invesco Perpetual’s city office, 6th Floor, 125 London Wall, London EC2Y 5AS at 11.30am on 22 July 2015. The Notice of the AGM of the Company is on pages 52 to 55 and a summary of the resolutions is set out in the Directors’ Report on page 29. Whilst I urge all shareholders to vote in favour of these resolutions by returning their completed voting papers or voting on-line, I do hope that as many shareholders as possible will attend the AGM in person and have the opportunity of hearing from Ciaran about the portfolio and his views on the outlook, as well as meeting myself and my fellow directors.

Hugh Twiss MBE
16 June 2015




Portfolio Strategy and Review

The 12 month period under review saw the UK equity market, as measured by the FTSE All-Share Index, deliver a total return of 6.6%. UK equities were range bound for much of 2014, as a result of concerns over future profit growth caused by the strength of sterling, the end to the Quantitative Easing (QE) programme in the US, rising geopolitical risk, and the prospect of UK domestic elections.

A renewed sense of optimism occurred at the start of 2015. This improved sentiment came despite uncertainty ahead of the general election in May, growing fears over China’s growth rate and a weakening European economy. Offsetting this, the fall in the price of oil led to increased optimism that consumer disposable income would rise as fuel and utility costs fell. The deflationary impact of this should also serve to reduce any short-term upward pressure on interest rates. Further positive factors were the news in January that the European Central Bank was to introduce a programme of QE and an increase in takeover speculation.

The Company’s net asset value per share, including reinvested dividends, returned 10.3%, outperforming the 6.6% total return of the benchmark FTSE All-Share index.

Positive contributions to the performance of the portfolio came from a range of companies. Amongst these were the holdings in the tobacco sector, notably Imperial Tobacco. As part of consolidation within the sector, Imperial Tobacco is to purchase certain of US company Lorillard’s brands, including Winston and leading e-cigarette brand Blu, and strengthen its US position. The deal is expected to provide a near term boost to Imperial Tobacco’s earnings. Another year of strong results from the major tobacco companies also served to remind the stock market of the companies’ ability to deliver profit and dividend increases against a backdrop of declining cigarette volumes.

The holdings in life insurance groups Friends Life and Legal & General delivered strong performances over the period. Friends Life benefited from news of an agreed purchase of the company by fellow insurance group Aviva, a deal which provides the combined entity with significant scope for cost savings and synergies, along with a strengthened balance sheet, which should underpin dividend growth. Since completion of the deal in April the investment in Aviva has been retained in the portfolio. Legal & General, meanwhile, reminded the stock market of the strength of its global business and of its cash flow, delivering a 21% increase in its annual dividend on the back of 10% increase in operating profits.

Notable contributions to performance came from some mid cap companies including soft drinks business Nichols, whose key brand is Vimto, and Essentra, an international supplier of speciality plastic and fibre products. Both companies pleased the stock market with profits ahead of stock market expectations along with upbeat trading statements.

I noted in my half year report that speciality chemical business Croda International had been through a difficult period in 2014, but that I remained confident that this would be a rewarding long term investment. It is pleasing to note that the company delivered a positive performance over the 12 months as a whole, as the company confirmed in November that it was seeing improved organic sales growth as it benefited from global organisational changes implemented in the first half of the year.

Detractors to the portfolio’s performance in the year included power suppliers Drax and Centrica, both of which were adversely affected by falling energy prices and political uncertainty ahead of the general election. The share price of Drax was additionally hit by the UK government’s decision to remove a future biomass subsidy and by possible EU intervention.

The holding in Tesco also delivered negative returns. Having initially seen the widely publicised market share gains by the discount chains Lidl and Aldi as headwinds that could be surmounted, it became apparent that the turnaround will take much longer than expected and will involve a much greater fall in profitability. Consequently, as I reported in my half year report, I decided to sell the shares.

Niche clothing retailer N. Brown endured a challenging year, as the company seeks to move towards an internet offering and to diversify away from its traditional mail order base.

In terms of portfolio activity, in addition to the disposal of Tesco outlined above, the holdings in Domino Printing, Wm. Morrison Supermarkets, Smiths Group and Vodafone were sold in the first half of the year as their long term earnings prospects were considered to have deteriorated. More recently, the holding in Synergy Healthcare was disposed of following news of a proposed merger with Steris Corporation and a sharp rise in Synergy’s share price.

As a result of these sales, the portfolio has become more concentrated as reliable value becomes harder to find. One company that did meet the portfolio selection criteria, and in which I have invested, is CVS, a chain of veterinary practices and an online seller of pet products and animal medicines.


The FTSE All-Share Index has risen strongly over the last six years and now stands at an all-time peak level. Although political uncertainty in the UK has been resolved for now, there are other headwinds to withstand in the short term, including weakening demand in the Chinese economy and the political backdrop internationally, but valuations suggest that the long term outlook for returns from investing in the stock market are still attractive. My investment strategy remains intact - I am seeking companies with strong fundamentals, with sensible management whose interests are aligned with shareholders and with a low risk balance sheet. I remain confident in the long term return potential of the holdings in the Company’s portfolio.

Ciaran Mallon
Portfolio Manager
16 June 2015


Invesco Income Growth Trust plc is a UK investment company and its investment objective is set out below. The strategy the Board follows to achieve that objective is to set investment policy and risk guidelines, together with investment limits, and to monitor how they are applied. These are also set out below and have been approved by shareholders.

The business model the Company has adopted to achieve its objective has been to contract the services of Invesco Fund Managers Limited (IFML or the ‘Manager’) to manage the portfolio in accordance with the Board’s strategy and under its oversight. Prior to 22 July 2014 the contracted Manager was Invesco Asset Management Limited (IAML), a company related to IFML. The Manager is also responsible for providing company secretarial, marketing, accounting and general administration services. The change in the Manager entity was made necessary by the implementation of the Alternative Investment Fund Managers Directive. IAML continues to provide management, administration and secretarial services to the Company under delegated authority from IFML. Invesco Perpetual is a business name of both IFML and IAML. The portfolio manager responsible for the day to day management of the portfolio continues to be Ciaran Mallon.

All administrative support is provided by third parties under the oversight of the Board. In addition to the management and administrative functions of the Manager, the Company has contractual arrangements with Capita Asset Services to act as registrar and, since 22 July 2014, with BNY Mellon Trust & Depositary (UK) Limited as depositary. The depositary has delegated safekeeping of the Company’s investments to The Bank of New York Mellon (London Branch) which was previously the Company’s custodian and retains that function under delegated authority.

Investment Policy

The Company’s investment objective, principal investment aims, investment policy and risk and investment limits combine to form the ‘Investment Policy’ of the Company.

Investment Objective

The Company’s investment objective is to produce income and capital growth superior to that of the UK stock market and dividends paid quarterly that, over time, grow above the rate of inflation.

Principal Investment Aims

The Company aims to:

•      have a portfolio yielding more than the FTSE All-Share Index in order to generate sufficient income;

•      provide shareholders with dividend growth in excess of inflation over the longer term;

•      achieve capital growth in excess of the FTSE All-Share Index over the longer term;

•      reduce risk by diversifying investments across a wide range of companies and sectors; and

•      enhance returns by utilising borrowings, when appropriate.

Investment Policy and Risk

The Company invests principally in quoted UK equities and equity-related securities of UK companies selected from any market sector.

At certain times some exposure to fixed interest securities may be considered desirable by the Manager whereby the main criteria for inclusion will be income, liquidity and credit quality.

The Company utilises borrowings when appropriate in order to seek to enhance its returns but the associated risks will be mitigated by limiting the maximum amount of borrowings that can be utilised and by investing predominantly in liquid investments so that any gearing can be managed in a timely way.

One of the Company’s principal characteristics is that it diversifies its investments across a wide range of companies and sectors, so minimising the risks associated with having too much invested in one stock or sector. The Manager’s aim is to have a broad cross-section of the best-performing stocks that he can find consistent with this characteristic.

Investment Limits

The Board has prescribed limits on the Investment Policy, among which are the following:

•      no more than 10% of gross assets will be held in a single investment;

•      no more than 15% of gross assets will be held in other listed investment companies;

•      no more than 5% of gross assets will be held in unquoted investments; and

•      borrowings may be used to raise market exposure up to a maximum of 25% of net assets.

Except for borrowings, all of the above limits are measured at the time of investment.

The Company does not currently use derivative instruments, but could potentially do so for efficient portfolio management purposes, subject to specific sanction of the Board.


Key Performance Indicators

The Board and Manager work closely together to achieve the Company’s investment objective. To help shareholders understand how this is achieved and monitored, the following key performance indicators are used:

•      the income available to be paid as dividends compared to Retail Price Inflation (RPI);

•      the net asset value performance;

•      the Company’s total return performance compared to inflation, its benchmark & its peer group;

•      the premium or discount to net asset value at which the Company’s shares trade; and

•      ongoing charges (the total cost to shareholders incurred by the Company).


The Board aims to pay a sustainable level of base dividend that grows at least in line with the Company’s investment objective to provide shareholders with real long-term growth in dividends. Additional dividend payments above the sustainable level may be paid on a case by case basis as special dividends.

For the year ended 31 March 2015, three interim dividends have been paid and shareholder approval is being sought at this year’s AGM to pay a final dividend of 3.75p (2014: 3.65p) per share. The first two interim dividends were of 2.1p (2014: 2.05p) each per share and were paid on 31 October 2014 and 31 December 2014. The third interim dividend was 2.15p (2014: 2.1p) and was paid on 16 March 2015. If approved by shareholders, the final dividend will be paid to shareholders on 27 July 2015. In total, the Directors have declared dividends of 10.10p, an increase of 2.5% over the previous year. Further details on the dividend payment history can be found on page 5.

The Board keeps under review the income generated by the portfolio. The average yield of the portfolio during the year was approximately 3.9%, a premium of 0.6% over the average yield of the FTSE All-Share Index over the same period, which was 3.3%. Whilst the portfolio’s yield has been, and is anticipated to continue to be, at a premium to the index the premium has narrowed in recent years. This is mostly because of the strong capital return from the portfolio, leading to a concomitant fall in dividend yield. Many of the large, higher yielding companies in the benchmark index have dividends which are not well covered by earnings. Inclusion in the portfolio takes account not only of current dividend yield, but also dividend safety and growth prospects.

Asset Performance

On 31 March 2015, the share price and the net asset value (NAV) per share were 292.75p and 309.2p respectively. The comparable figures for 31 March 2014 were 276p and 289.5p.

The Board monitors the Company’s NAV and compares its performance with relevant indices, principally the FTSE All-Share Index, which is the Company’s benchmark. The NAV total return of the Company for the year was 10.3% compared with a total return of 6.6% for the FTSE All-Share Index, 6.9% for the FTSE All-Share 5% Capped Index, 6.3% for the FTSE 100 Share Index and 6.6% for the FTSE 350 High Yield Index.

Peer Group Performance

The Board monitors the performance of the Company in relation to both the AIC UK Equity Income sector as a whole and, as this sector is quite diverse in its objectives and structures, to those companies within it which the Board consider to be the peer group that most closely matches it.

As at 31 March 2015, out of the 21 investment trusts ranked within the AIC UK Equity Income sector, the Company was ranked 8th over one year, 11th over three years and 5th over five years by NAV performance (source: JPMorgan Cazenove).


The Board monitors the discount at which the Company’s shares trade in relation to its assets and how this compares to other investment trusts in the AIC UK Equity Income sector. During the year the Company’s shares traded at a discount between 1.6% and 8.6%. At the year end the discount was 5.3% (2014: 4.7%) and the average discount of the sector was 2.5% (2014: 0.5%) (source: JPMorgan Cazenove).

The Board and Manager closely monitor movements in the Company’s share price and dealings in the Company’s shares. In order to avoid significant overhang or shortage of shares in the market, the Board asks shareholders to approve resolutions every year authorising the repurchase of shares (for cancellation or to be held as treasury shares) and also their issuance. This may assist in the management of the discount. These authorities were not utilised in the year.

The Company does not currently hold shares in treasury. However, should the Board consider it to be in shareholders’ interests to do so, then it is the Board’s policy to sell shares held as treasury shares on terms that are in the best interests of shareholders.

Ongoing Charges Ratio

The expenses of managing the Company are reviewed by the Board at every meeting. The Board aims to minimise the ongoing charges ratio, which provides a guide to the effect on performance of all annual operating costs of the Company. The ongoing charges ratio is calculated by dividing the annualised ongoing charges, including those charged to capital, by average undiluted net asset value during the year.

Ongoing charges for the year totalled £1,528,000 (2014: £1,470,000) and at the year end the ongoing charges ratio was 0.88% (2014: 0.89%)

Financial Position

At 31 March 2015, the Company’s net assets were valued at £181 million (2014: £170 million). The portfolio consisted of equity investments, fixed rate securities and cash.

Due to the readily realisable nature of the Company’s assets, cash flow does not have the same significance as for an industrial or commercial company. The Company’s principal cash flows arise from the purchase and sales of investments and the income from investments, against which must be set the costs of borrowing and management expenses. The Company’s use of financial instruments is disclosed in note 1(c) and note 16 to the financial statements.

The Company has an overdraft facility, which is limited to the lesser of 25% of net asset value and £25 million. At the balance sheet date, drawings were £14.9 million (2014: £16.9 million). Note 11 gives details of the facility.

Future Trends

Details of the main trends and factors likely to affect the future development, performance and position of the Company’s business can be found in the Portfolio Manager’s Report section of this Strategic Report on pages 9 and 10. Further details as to the risks affecting the Company are set out below under ‘Principal Risks and Uncertainties’.

Principal Risks and Uncertainties

The following are considered to be the most significant risks to shareholders in relation to their investment in the Company. Further details of risks and risk management policies as they relate to the financial assets and liabilities of the Company are detailed in note 16 to the financial statements.

Investment Objective

There can be no guarantee that the Company will meet its investment objective.

The Board monitors the performance of the Company and has established guidelines to ensure that the investment policy is followed.

Market Risk

All of the investments held in the year traded on the London Stock Exchange. The prices of securities and the income derived from them are influenced by many factors such as general economic conditions, interest rates, inflation, political events and government policies, as well as by supply and demand reflecting investor sentiment. Such factors are outside the control of the Board and Manager and may give rise to high levels of volatility in the prices of investments held by the Company, although the risk can be mitigated to an extent by adjusting the level of borrowing or holding cash balances.

Investment Risk

There is a risk that the performance of stocks selected for the portfolio might disappoint. Any poor performance of individual investments is mitigated by the diversification of the portfolio and the continual analysis of all holdings by the portfolio manager. The portfolio of investments held at 31 March 2015 is set out on pages 16 and 17.


Shareholders are exposed to certain risks in addition to risks applying to the Company itself. The market value of the shares in the Company may not reflect their underlying net asset value (NAV) and they may trade at a discount to it. The Board and the Manager monitor the market rating of the Company’s shares and both share repurchase and issuance powers that can be used to help in its management are in place and are intended to be renewed at the AGM.

The value of an investment in the Company and the income derived from that investment may go down as well as up and an investor may not get back the amount invested. Past performance of the Company is not necessarily indicative of future performance.

While it is the intention of the Directors to pay dividends to shareholders quarterly from revenue earned, the ability to do so will depend upon the level of income received from securities and the timing of receipt of such income by the Company. Accordingly, the amount of quarterly dividends paid to shareholders may fluctuate.

Gearing Arising from Borrowings

Whilst the use of borrowings by the Company should enhance the total return on the shares where the return on the Company’s underlying securities is rising and exceeds the cost of borrowing, it will have the opposite effect where the underlying return is falling, further reducing the total return on the shares. The Board and the Manager keep the level of borrowing under review.


The Company is subject to various laws and regulations by virtue of its status as a public limited company registered under section 833 of the Companies Act 2006, its status as an investment trust, and its listing on the Official List of the UK Listing Authority.

Loss of investment trust status could lead to the Company being subject to tax on the realised capital profits on the sale of its investments. A serious breach of other regulatory rules could lead to suspension from the Official List, a fine or a qualified audit report. Other control failures, either by the Manager or any other of the Company’s service providers, could result in operational or reputational problems, erroneous disclosures or loss of assets through fraud, as well as breaches of regulations.

The Manager reviews compliance with tax and other financial regulatory requirements on a daily basis. All transactions, income and expenditure are reported to the Board. The Board regularly considers all perceived risks and the measures in place to control them. The Board ensures that satisfactory assurances are received from service providers. The Manager’s Compliance and Internal Audit Officers produce reports regularly for review by the Company’s Audit Committee.

The most significant regulatory change in the year has been the implementation of the Alternative Investment Fund Managers Directive. This has required the appointment of a depositary and a change in the contractual arrangements with the Manager, who bears the main compliance obligations.

Reliance on Third Party Service Providers

The Company has no employees and the Directors are all appointed on a non-executive basis. The Company is reliant upon the performance of third party service providers for its executive functions. In particular, the Manager performs services which are integral to the operation of the Company. Failure by any service provider to carry out its obligations to the Company in accordance with the terms of its appointment could have a materially detrimental impact on the operation of the Company and could affect the ability of the Company to successfully pursue its Investment Policy.

The Manager may be exposed to reputational risks, in particular, the risk that litigation, misconduct, operational failures, negative publicity and press speculation, whether or not it is valid, will harm its reputation. Any damage to the reputation of the Manager could result in potential counterparties and third parties being unwilling to deal with the Manager and by extension the Company.

The Board regularly reviews the quality of services provided. The Company’s main service providers are listed on page 57.

Board Diversity

The Company’s policy on diversity is set out on page 25. The Board comprises five non-executive directors of whom one is a woman, thereby constituting 20% female representation. Summary biographical details of the Directors are set out on page 18. The Company has no employees.

Social and Environmental Matters

As an investment company with no employees, property or activities outside investment, environmental policy has limited application. The Manager considers various factors when evaluating potential investments. While a company’s policy towards the environment and social responsibility, including with regard to human rights, is considered as part of the overall assessment of risk and suitability for the portfolio, the Manager does not decide to, or not to, make an investment on environmental and social grounds alone. The Company does not have a human rights policy, although the Manager applies the United Nations Principles for Responsible Investment.

This Strategic Report was approved by the Board on 16 June 2015

Invesco Asset Management Limited
Company Secretary


AT 31 MARCH 2015

UK listed ordinary shares unless otherwise stated

% OF
285,808 Imperial Tobacco Tobacco 8,468 4.3
164,954 AstraZeneca Pharmaceuticals & Biotechnology 7,630 3.9
208,341 British American Tobacco Tobacco 7,268 3.7
460,851 GlaxoSmithKline Pharmaceuticals & Biotechnology 7,122 3.7
2,042,158 Legal & General Life Insurance 5,687 2.9
1,284,917 BP Oil & Gas Producers 5,611 2.9
79,366 Next General Retailers 5,575 2.9
1,345,864 Friends Life Life Insurance 5,566 2.9
956,462 HSBC Banks 5,489 2.8
592,153 National Grid Gas, Water & Multiutilities 5,120 2.6
Top ten holdings 63,536 32.6
616,364 Pennon Gas, Water & Multiutilities 5,091 2.6
167,023 Croda International Chemicals 4,575 2.4
626,800 Young & Co.’s Brewery – Non voting Travel & Leisure 4,513 2.3
85,993 Whitbread Travel & Leisure 4,510 2.3
386,858 Reed Elsevier Media 4,484 2.3
306,874 Pearson Media 4,450 2.3
436,502 Essentra Support Services 4,337 2.2
107,192 Wolseley Support Services 4,279 2.2
232,000 Bunzl Support Services 4,248 2.2
1,014,328 Jupiter Fund Management Financial Services 4,148 2.2
Top twenty holdings 108,171 55.6
934,688 BT Fixed Line Telecommunications 4,094 2.1
709,518 Informa Media 4,005 2.1
357,190 Experian Support Services 3,990 2.0
1,347,424 G4S Support Services 3,986 2.0
192,206 Severn Trent Gas, Water & Multiutilities 3,958 2.0
185,141 Royal Dutch Shell B Shares Oil & Gas Producers 3,886 2.0
324,043 Compass Travel & Leisure 3,795 1.9
247,350 SSE Electricity 3,705 1.9
327,693 Euromoney Institutional Investor Media 3,651 1.9
315,675 Nichols Beverages 3,630 1.9
Top thirty holdings 146,871 75.4
316,645 Smith & Nephew Health Care Equipment & Services 3,622  1.9
396,059 Amec Foster Wheeler Oil Equipment, Services & Distribution 3,582 1.9
316,234 Capita Support Services 3,529  1.8
370,873 United Utilities Gas, Water & Multiutilities 3,458  1.8
1,224,252 MITIE Support Services 3,367  1.7
127,488 InterContinental Hotels Travel & Leisure 3,358  1.7
926,478 GKN Automobiles & Parts 3,322  1.7
584,369 CVS General Retailers 2,975  1.5
1,172,730 Centrica Gas, Water & Multiutilities 2,967  1.5
220,200 Land Securities Real Estate Investment Trusts 2,757  1.4
Top forty holdings 179,808  92.3
384,258 Wood Oil Equipment, Services & Distribution 2,440 1.2
708,726 Senior Aerospace & Defence 2,305  1.2
711,700 N Brown General Retailers 2,265  1.2
86,039 Spectris Electronic & Electrical Equipment 1,858  1.0
409,260 Drax Electricity 1,489  0.8
76,900 Ultra Electronic Aerospace & Defence 1,311  0.7
Total ordinary shares (46) 191,476  98.4
1,300,000 Barclays Bank
14% Perpetual (BBB-)*
Banks 1,748  0.9
1,027,000 Friends Life
12% 21 May 2021 (BBB+)*
Life Insurance 1,459  0.7
Total fixed income investments (2) 3,207  1.6
Total value of investments (48) 194,683 100.0

*Standard & Poor’s Long term Credit Rating; investment grade range is from BBB to AAA, non-investment (speculative) grade is BB and below.


in respect of the preparation of the Annual Financial Report

The Directors are responsible for ensuring that the annual financial report is prepared in accordance with applicable law and regulations.

Company law requires the Directors to prepare financial statements for each financial year. The Directors have elected to prepare financial statements in accordance with United Kingdom Generally Accepted Accounting Practice.

Under company law, the Directors must not approve the accounts unless they are satisfied that they give a true and fair view of the state of affairs of the Company and of the net return of the Company for that period.

In preparing these financial statements, the Directors are required to:

•      select suitable accounting policies and then apply them consistently;

•      make judgements and estimates that are reasonable and prudent;

•      state whether applicable 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 which enable them to ensure that the financial statements comply with the Companies Act 2006. They have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Company and to prevent and detect fraud and other irregularities.

Under applicable law and regulations, the Directors are also responsible for preparing a Strategic Report, Directors’ Report, which includes a Corporate Governance Statement, and a Directors’ Remuneration Report that comply with that law and those regulations.

In so far as each of the Directors is aware:

•      there is no relevant audit information of which the Company’s Auditor is unaware; and

•      the Directors have taken all steps that they ought to have taken to make themselves aware of any relevant audit information and to establish that the Auditor is aware of that information.

The Directors of the Company each confirm to the best of their knowledge that:

•        the financial statements, prepared in accordance with the applicable set of accounting standards, give a true and fair view of the assets, liabilities, financial position and profit of the Company; and

•        this annual financial report 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 Directors consider that this annual financial report, 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.

Signed on behalf of the Board of Directors

Hugh Twiss MBE
16 June 2015




2015 2014

Profits on investments at fair value through profit or loss 9 11,352 11,352 15,388 15,388
Income 2 7,411 291 7,702 6,783 764 7,547
Investment management fee 3 (607) (607) (1,214) (584) (584) (1,168)
Other expenses 4 (314) (314) (302) (302)
Net return before finance costs and taxation 6,490 11,036 17,526 5,897 15,568 21,465
Finance costs 5 (92) (92) (184) (111) (111) (222)
Return on ordinary activities before and after tax 6,398 10,944 17,342 5,786 15,457 21,243
Return per ordinary share Basic 7 10.9p 18.7p 29.6p 9.9p 26.4p 36.3p

The total column of this statement represents the Company’s profit and loss account. The supplementary revenue and capital columns are presented for information purposes in accordance with the Statement of Recommended Practice issued by the Association of Investment Companies. All items in the above statement derive from continuing operations and the Company has no other gains or losses and therefore no statement of total recognised gains or losses is presented. No operations were acquired or discontinued in the year.









At 31 March 2013  14,638  40,021  2,310  92,341  4,661 153,971
Net return on ordinary activities 15,457 5,786 21,243
Net dividends paid 8 (5,684) (5,684)
At 31 March 2014 14,638 40,021 2,310 107,798 4,763 169,530
Net return on ordinary activities 10,944 6,398 17,342
Net dividends paid 8 (5,839) (5,839)
At 31 March 2015 14,638 40,021 2,310 118,742 5,322 181,033




Fixed assets
  Investments at fair value 9 194,683 185,989
Current assets
  Debtors 10 1,480 892
Creditors: amounts falling due within one year 11 (15,130) (17,351)
Net current liabilities (13,650) (16,459)
Net assets 181,033 169,530


Capital and reserves
  Share capital 12 14,638 14,638
  Share premium 13 40,021 40,021
  Capital redemption reserve 13 2,310 2,310
  Capital reserve 13 118,742 107,798
  Revenue reserve 13 5,322 4,763
Shareholders’ funds 181,033 169,530


Net asset value per ordinary share
  Basic 14 309.2p 289.5p

These financial statements were approved and authorised for issue by the Board of Directors on 16 June 2015.

Signed on behalf of the Board of Directors

Hugh Twiss MBE




Cash flow from operating activities 15(a) 5,985 6,188
Servicing of finance 15(b) (184) (222)
Net financial investment 15(b) 1,967 (3,875)
Net equity dividends paid 8 (5,839) (5,684)
Increase/(decrease) in cash 1,929 (3,593)




Increase/(decrease) in cash 1,929 (3,593)
Change in net debt in the year 1,929 (3,593)
Net debt at the beginning of the year (16,867) (13,274)
Net debt at the end of the year 15(c) (14,938) (16,867)



1.     Principal Accounting Policies

Accounting policies describe the Company’s approach to recognising and measuring transactions during the year and the position of the Company at the year end.

The principal accounting policies adopted in the preparation of these financial statements are set out below. These policies have been consistently applied during the year and the preceding year, unless otherwise stated.

(a)    Basis of Preparation

Accounting Standards applied

The financial statements have been prepared in accordance with applicable United Kingdom Accounting Standards and with the Statement of Recommended Practice (SORP) ‘Financial Statements of Investment Trust Companies and Venture Capital Trusts’, issued by the Association of Investment Companies in January 2009.

(b)    Foreign Currency

(i)     Functional and presentation currency

The financial statements are presented in sterling, which is the Company’s functional and presentation currency and the currency in which the Company’s share capital and expenses, as well as its assets and liabilities, are denominated.

(ii)    Transactions and balances

Transactions in foreign currencies, whether of a revenue or capital nature, are translated to sterling at the rates of exchange ruling on the dates of such transactions. Foreign currency assets and liabilities are translated to sterling at the rates of exchange ruling at the balance sheet date. Any gains or losses, whether realised or unrealised, are taken to the capital reserve or to the revenue account, depending on whether the gain or loss is of a capital or revenue nature. All gains and losses are recognised in the income statement.

(c)    Financial Instruments

(i)     Recognition of financial assets and financial liabilities

The Company recognises financial assets and financial liabilities when the Company becomes a party to the contractual provisions of the instrument. The Company will offset financial assets and financial liabilities if the Company has a legally enforceable right to set off the recognised amounts and interests and intends to settle on a net basis.

(ii)    Derecognition of financial assets

The Company derecognises a financial asset when the contractual rights to the cash flows from the asset expire or it transfers the right to receive the contractual cash flows on the financial asset in a transaction in which substantially all the risks and rewards of ownership of the financial asset are transferred. Any interest in the transferred financial asset that is created or retained by the Company is recognised as an asset.

(iii)   Derecognition of financial liabilities

The Company derecognises financial liabilities when its obligations are discharged, cancelled or expired.

(iv)   Trade date accounting

Purchases and sales of financial assets are recognised on trade date, being the date on which the Company commits to purchase or sell the assets.

(v)    Classification and measurement of financial assets and financial liabilities

Financial assets

The Company’s investments are designated as held at fair value through profit or loss. Financial assets held at fair value through profit or loss are initially recognised at fair value, which is taken to be their cost, with transaction costs expensed in the income statement, and are subsequently valued at fair value.

Fair value for investments that are actively traded in organised financial markets, is determined by reference to stock exchange quoted bid prices at the balance sheet date. For investments that are not actively traded or where active stock exchange quoted bid prices are not available, fair value is determined by reference to a variety of valuation techniques including broker quotes and price modelling.

Financial liabilities

Financial liabilities, including borrowings, are initially measured at fair value, net of transaction costs and are subsequently measured at amortised cost using the effective interest method.

(d)    Income

Interest income arising from fixed income securities and cash is recognised in the income statement using the effective interest method. Dividend income arises from equity investments held and is recognised on the date investments are marked ‘ex-dividend’. Deposit interest and underwriting commission receivable are taken into account on an accruals basis.

(e)    Expenses and Finance Costs

Expenses are recognised on an accruals basis and finance costs are recognised using the effective interest method in the income statement.

The investment management fee and finance costs are allocated 50% to capital and 50% to revenue. This is in accordance with the Board’s expected long-term split of returns, in the form of capital gains and income respectively, from the portfolio.

All other expenses, except for custodian transaction charges, are allocated to revenue in the income statement.

(f)    Taxation

The liability to corporation tax is based on net revenue for the year excluding UK dividends. The tax charge is allocated between the revenue and capital account on the marginal basis whereby revenue expenses are matched first against taxable income in the revenue account.

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. Deferred taxation assets are recognised where, in the opinion of the directors, it is more likely than not that these amounts will be realised in future periods.

A deferred tax asset has not been recognised in respect of surplus management expenses, losses on loan relationships and eligible unrelieved foreign tax, as the Company is unlikely to have sufficient future taxable revenue to offset against these.

(g)    Dividends

Dividends are not recognised in the accounts unless there is an obligation to pay at the balance sheet date. Proposed dividends are recognised in the year in which they are paid to shareholders.

2.     Income

This note shows the income generated from the portfolio (investment assets) of the Company and income received from any other source.

Income from listed investments
UK dividends 6,543 6,148
UK special dividends 374 193
UK unfranked investment income 422 427
7,339 6,768
Other income
Underwriting commission 72 15
Total income 7,411 6,783

Special dividends of £291,000 (2014: £764,000) have been recognised in capital.

3.     Investment Management Fee

This note shows the fees paid to the Manager, which were calculated monthly on the basis of the value of the assets being managed.

2015 2014
Investment management fee 607 607 1,214 584 584 1,168

Details of the management agreement are disclosed in the Directors' Report. At 31 March 2015, £104,000 (2014: £102,000) was owed in respect of management fees.

4.     Other Expenses

The other expenses of the Company are presented below; those paid to the Directors and the auditor are separately identified.

2015 2014
Directors’ fees 118 118 116 116
Auditor’s remuneration
– for audit of the annual financial statements 26 26 24 24
– other services relating to taxation compliance 6 6 6 6
Other expenses 164 164 156 156
314 314 302 302

The Director’s Remuneration Report provides information on Directors’ fees. Included within other expenses is £11,000 (2014: £11,000) of employers national insurance payable in respect of Directors’ fees. As at 31 March 2015, the amounts outstanding for Directors’ fees and employers national insurance was £13,000 (2014: £14,000).

Fees payable to the Company's auditor are shown excluding VAT, which is included in other expenses.

5.     Finance Costs

Finance costs arise on any borrowing facilities the Company has used in the year

2015 2014
Interest on overdraft 92 92 184 111 111 222

6.     Tax on Ordinary Activities

As an investment trust the Company pays no tax on capital gains. The Company pays no tax as most of its income is non-taxable UK dividend income and any taxable income was offset by expenses. This note also shows the basis of the Company having no deferred tax assets or liability.

The tax charge for the year is nil (2014: nil) as allowable expenses exceed taxable income.

Total return on ordinary activities before taxation 17,342 21,243
UK Corporation Tax rate of 21% (2014: 23%) 3,642 4,886
Effects of:
– non-taxable gains on investments (2,384) (3,539)
– non-taxable UK dividends (1,514) (1,634)
– expenses in excess of taxable income 256 287
Actual current tax amount

Factors that may affect future tax charges

The Company has cumulative surplus management expenses and losses on loan relationships of £21,502,000 (2014: £20,285,000) that are available to offset future taxable revenue. A deferred tax asset of £4,300,000 (2014: £4,057,000) measured at the standard corporation tax rate of 20% (2014: 20%) has not been recognised in respect of the expenses since the Directors believe that there will be no taxable profits in the future against which the deferred tax assets can be offset.

7.     Return per Ordinary Share

Return per share is the amount of gain generated for the financial year divided by the weighted average number of ordinary shares in issue.

The basic revenue, capital and total returns per ordinary share are based on each return on ordinary shares after tax and on 58,551,530 (2014: 58,551,530) ordinary shares, being the weighted average number of shares in issue during the year.

8.     Dividends on Ordinary Shares

Dividends represent the return of income less expenses to shareholders. The Company pays four dividends a year.

Dividends paid and recognised in the year:


Final paid in respect of previous year 3.65 2,137 3.55 2,079
First interim paid 2.10 1,229 2.05 1,200
Second interim paid 2.10 1,229 2.05 1,200
Third interim paid 2.15 1,260 2.10 1,230
10.00 5,855 9.75 5,709
Return of unclaimed dividends from previous years (16) (25)
10.00 5,839 9.75 5,684

Dividends payable in respect of the year:


First interim paid 2.10 1,229 2.05 1,200
Second interim paid 2.10 1,229 2.05 1,200
Third interim paid 2.15 1,259 2.10 1,230
Proposed final 3.75 2,196 3.65 2,137
10.10 5,913 9.85 5,767

The proposed 2015 final dividend is subject to approval by shareholders at the AGM.

9.     Investments

The portfolio is made up of investments which are listed, i.e. traded on a regulated stock exchange. Gains and losses in the year are either:

•      realised, usually arising when investments are sold; or

•      unrealised, being the difference from cost of those investments still held at the year end.

Investments listed on a recognised Stock Exchange 194,683 185,989
Opening valuation  185,989 166,430
Movements in year:
  Purchases at cost 18,065 16,937
  Sales – proceeds (20,723) (12,766)
        – net realised gains 4,949 2,901
Movement in investment holding gains 6,403 12,487
Closing valuation 194,683 185,989
Closing book cost (119,999) (117,708)
Closing investment holding gains 74,684 68,281
Net realised gains in year 4,949 2,901
Movement in investment holding gains 6,403 12,487
Total gains in year 11,352 15,388

The transaction costs included in gains on investments amount to £85,000 (2014: £83,000) on purchases and £24,000 (2014: £26,000) for sales.

Significant Interests

The Company owns 3.3% of the issued non-voting ordinary 50p share capital of Young & Co. Brewery.

10.   Debtors

Debtors are amounts due to the Company, such as income which has been earned (accrued) but not yet received and any monies due from brokers for investments sold.

Amounts due from brokers 395
Prepayments and accrued income 1,085 892
1,480 892

11.   Creditors: amounts falling due within one year

Creditors are amounts which must be paid by the Company, and includes any amounts due to brokers for the purchase of investments or amounts owed to suppliers, such as the Manager and auditor.

Amounts due to brokers 296
Bank overdraft 14,938 16,867
Accruals 192 188
15,130 17,351

The Company has a one-year uncommitted overdraft facility with The Bank of New York Mellon of up to the lesser of £25 million and 25% of the adjusted net asset value of the Company. The facility is due for renewal on 18 September 2015. The rate of interest applicable to drawings is 0.85% per annum over the Bank of England’s Base Rate.

12.   Share Capital

Share capital represents the total number of shares in issue, on which dividends are paid.



Allotted, called-up and fully paid:
Ordinary shares of 25p each 58,551,530 14,638 58,551,530 14,638

No shares were bought back and cancelled in the year and no shares were held in treasury at the year end.

13.   Reserves

This note explains the different reserves attributable to shareholders. The aggregate of the reserves and share capital (see previous note) make up total shareholders’ funds.

The share premium arose on the issue of new shares. The capital redemption reserve maintains the equity share capital of the Company and arose from the nominal value of shares bought back and cancelled. The share premium and capital redemption reserve are non-distributable.

The revenue and capital reserves are distributable by way of dividend. Reducing the balance sheet revenue reserve by the proposed final dividend of £2,196,000 (see note 8) results in a revenue reserve available for future distributions of £3,126,000.

The capital reserve includes investment holding gains, being the difference between cost and market value which are shown in note 9.

14.   Net Asset Value per Ordinary Share

The Company’s net assets (total assets less total liabilities) are often termed shareholders’ funds and are converted into net asset value per ordinary share by dividing by the number of shares in issue.

The net asset value per ordinary share and the net asset values attributable at the year end were as follows:

2015 2014
Ordinary shares
– Basic 309.2 181,033 289.5 169,530

Net asset value per ordinary share is based on net assets at the year end and on 58,551,530 (2014: 58,551,530) ordinary shares, being the number of ordinary shares in issue at the year end.

15.   Notes to the Cash Flow Statement

The cash flow statement shows the cash flows of the Company from its operating, investing and financing activities. The main cash flows arise from the purchase and sale of investments.

(a)    Reconciliation of operating profit to operating cash flows

Total return before finance costs and taxation 17,526 21,465
Adjustment for gains on investments (11,352) (15,388)
(Increase)/decrease in debtors (193) 99
Increase in creditors 4 12
Net cash inflow from operating activities 5,985 6,188

(b)    Analysis of cash flow for headings netted in the cash flow statement

Servicing of finance
Interest paid on bank loans (184) (222)


Net financial investment
Purchase of investments (18,361) (16,641)
Sale of investments 20,328 12,766
1,967 (3,875)

(c)    Analysis of changes in net debt

1 APRIL 2014
31 MARCH 2015
Net debt – bank overdraft (16,867) 1,929 (14,938)

16.   Financial Instruments

Financial instruments comprise the Company’s investment portfolio as well as its cash, borrowings, debtors and creditors. This note sets out the risks arising from the Company’s financial instruments in terms of the Company’s exposure and sensitivity, and any mitigation that the Manager or Board can take.

The Company’s principal risks and uncertainties are outlined in the Strategic Report on pages 13 to 15. This note expands on risk areas in relation to the Company’s financial instruments. The Company’s portfolio is managed in accordance with its investment policy, which is set out on page 11. The internal control and risk management process is described on page 22. The overall disposition of the Company’s assets is reviewed by the Board on a regular basis.

The accounting policies in note 1 include criteria for the recognition and the basis of measurement applied for financial instruments. Note 1 also includes the basis on which income and expenses arising from financial assets and liabilities are recognised and measured.

Risks that an investment company faces in its portfolio management activities include:

Market risk – arising from fluctuations in the fair value or future cash flows of a financial instrument because of changes in market prices. Market risk comprises three types of risk: currency risk, interest rate risk and other price risk:

  Currency risk – arising from fluctuations in the fair value or future cash flows of a financial instrument because of changes in foreign exchange rates;

  Interest rate risk – arising from fluctuations in the fair value or future cash flows of a financial instrument because of changes in market interest rates; and

  Other price risk – arising from fluctuations in the fair value or future cash flows of a financial instrument for reasons other than changes in foreign exchange rates or market interest rates.

Liquidity risk – arising from any difficulty in meeting obligations associated with financial liabilities.

Credit risk – arising from financial loss for a company where the other party to a financial instrument fails to discharge an obligation.

Risk Management Policies and Procedures

The Directors have delegated to the Manager the responsibility for day-to-day investment activities and the management of borrowings of the Company as more fully described in the Directors’ Report.

As an investment trust the Company invests in equities and other investments for the long-term according to its Investment Policy so as to fulfil its investment objective. In pursuing its investment objective, the Company is exposed to a variety of risks that could result in either a reduction in the Company’s net assets or a reduction of the profits available for dividends.

The risks applicable to the Company and the policies the Company used to manage these risks for the two years under review follow.

Market Risk

The Manager assesses the Company‘s exposure when making each investment decision, and monitors the overall level of market risk on the whole of the investment portfolio on an ongoing basis. The Board meets at least quarterly to assess risk and review investment performance, in accordance with the Board Responsibilities on page 23. No derivative or hedging instruments have been utilised to manage market risk during the year. Gearing is used to enhance returns, but this also increases the Company‘s exposure to market risk and volatility.

  Currency risk is not significant for the two years under review as the Company invests in UK equities traded on the London Stock Exchange. During the year, the Company also received non-sterling dividends, which represented 12.4% (2014: 6.9%) of total investment income.

  Interest rate risk

Interest rate movements may affect the level of interest payable on variable rate borrowings and the income receivable on cash deposits. When the Company has cash balances, they are held in variable rate bank accounts yielding rates of interest dependent on the base rate of the Custodian. The Company has an overdraft facility limited to a maximum of £25 million. Note 11 gives full details. The Company uses the facility when required at levels approved and monitored by the Board.

At the year end drawings on the Company’s overdraft were £14,938,000 (2014: £16,867,000). At the maximum of £25 million, the effect of a movement of +/- 1% in the interest rate would result in a decrease/increase to the Company’s income statement of £250,000 (2014: £250,000).

The Company can invest in fixed income securities and at the year end the level of exposure was £3.2 million (2014: £3.1 million). The Directors estimate that a 1% change in interest rates applied to this balance would have no impact on reported revenue profit before tax but would increase or decrease reported capital profit before tax by £117,000 (2014: £128,000). The Company had no cash flow exposure to floating interest rate assets.

  Other price risk

Other price risk (i.e. changes in market prices other than those arising directly from interest rate risk or currency risk) may affect the value of the equity investments, but it is the business of the Manager to manage the portfolio to achieve the best return possible.

The Directors manage the market price risks inherent in the investment portfolio by meeting regularly to monitor on a formal basis the Manager’s compliance with the Company’s stated Investment Policy and to review investment performance.

The Company’s portfolio is the result of the Manager’s investment process and as a result is not wholly correlated with the Company’s benchmark or the market in which the Company invests. Therefore, the value of the portfolio will not move in line with the market but in accordance with the performance of the particular company shares held within the portfolio.

If the value of the portfolio rose or fell by 10% at the balance sheet date, the profit after tax for the year would increase or decrease by £19.5 million (2014: £18.6 million) respectively.

Liquidity risk is minimised as the majority of the Company‘s investments constitute a diversified portfolio of readily realisable securities which can be sold to meet funding commitments as necessary. In addition, an overdraft provides short-term funding flexibility. The Board monitors the portfolio’s liquidity.

The financial liabilities are detailed in note 11. The contractual maturities of these are all three months or less, based on the earliest date on which payment can be required.

Credit risk encompasses the failure by counterparties to deliver securities which the Company has paid for, to pay for securities which the Company has delivered, or to repay debt instruments on the due date. This risk is minimised by using only approved counterparties and investing in investment grade bonds. Investments may be adversely affected if the Company’s custodian suffers insolvency or other financial difficulties. The Board reviews the custodian’s annual controls report and the Manager’s management of the relationship with the custodian. Cash balances are limited to a maximum of £5 million with any one deposit taker, with only approved deposit takers being used.

17.   Fair Value

Fair Values of Financial Assets and Financial Liabilities

The fair values of the financial assets and financial liabilities are either carried in the balance sheet at their fair value (investments), or the balance sheet amount is a reasonable approximation of fair value (due from brokers, dividends receivable, accrued income, due to brokers, accruals, cash at bank and overdraft).

Fair Value – Hierarchy Disclosures

FRS 29 “Financial Instruments: Disclosures” sets out three fair value levels. These are:

Level 1 – fair value based on quoted prices in active markets for identical assets.

Level 2 – fair values based on valuation techniques using observable inputs other than quoted prices within Level 1.

Level 3 – fair values based on valuation techniques using inputs that are not based on observable market data.

Categorisation within the hierarchy is determined on the basis of the lowest level input that is significant to the fair value measurement of each relevant asset/liability and the valuation techniques used by the Company are explained in the accounting policies note.

The investments held by the Company are shown on pages 16 and 17. All except two holdings are equity investments which are deemed to be Level 1. Due to less visibility on prices for the fixed income investments these two investments are reported as Level 2 and these represented 1.6% (2014: 1.6%) of the portfolio at the balance sheet date. There were no transfers between any levels during the year and no investments were held in Level 3.

18.   Capital Management

The Company’s total capital employed at 31 March 2015 was £195,971,000 (2014: £186,397,000) comprising borrowings of £14,938,000 (2014: £16,867,000) and equity share capital and other reserves of £181,033,000 (2014: £169,530,000).

The Company’s total capital employed is managed to achieve the Company’s investment objective as set out on page 11, including that borrowings may be used to provide gearing of the equity portfolio up to a maximum of £25 million or 25% of net asset value. Borrowings comprise of a bank overdraft. Details are given in note 11 and net gearing was 8.3% (2014: 9.9%) at the balance sheet date. The Company’s policies and processes for managing capital were unchanged throughout the year and the preceding year.

The main risks to the Company’s investments are shown in the Strategic Report under the ‘Principal Risks and Uncertainties’ section on pages 13 to 15. These also explain that the Company is able to gear and that gearing will amplify the effect on equity of changes in the value of the portfolio.

The Board can also manage the capital structure directly since it has taken the powers, which it is seeking to renew, to issue and buy back shares and it also determines dividend payments.

The Company is subject to externally imposed capital requirements with respect to the obligation and ability to pay dividends under the Corporation Tax Act 2010 and under the Companies Act 2006, respectively, and with respect to the availability of the overdraft facility, by the terms imposed by the custodian. The Board regularly monitors, and the Company has complied with, the externally imposed capital requirements. This is unchanged from the prior year.­

19.   Contingencies, Guarantees and Financial Commitments

Any liabilities the Company is committed to honour but which are dependent on a future circumstance or event occurring would be disclosed in this note if any existed.

There are no contingencies, guarantees or financial commitments of the Company at the year end.

20.   Related Party Transactions and Transactions with the Manager

A related party is a company or individual who has direct or indirect control or who has significant influence over the Company. Under accounting standards, the Manager is not a related party.

Under UK GAAP, the Company has identified the Directors as related parties. The Directors’ remuneration and interests have been disclosed on pages 31 to 33 with additional disclosure in note 4. No other related parties have been identified.

Until 22 July 2014, the Manager was Invesco Asset Management Limited at which date Invesco Fund Managers Limited was appointed. Details of this change and the Manager’s services are disclosed in the Directors’ Report on page 26, and the the Manager’s fees are shown in note 3.

21    Post Balance Sheet Event

Any significant events that occurred after the balance sheet date but before the signing of the balance sheet will be shown here.

There were no significant post balance sheet events requiring disclosure.



NOTICE IS GIVEN that the Annual General Meeting (AGM) of Invesco Income Growth Trust plc will be held at 6th Floor, 125 London Wall, London EC2Y 5AS, on 22 July 2015 at 11.30 am for the following purposes:

Ordinary Business

1.     To receive the Annual Financial Report for the year ended 31 March 2015.

2.     To approve the Annual Statement and Report on Remuneration.

3.     To declare a final dividend as recommended.

4.     To re-elect Hugh Twiss a Director of the Company.

5.     To re-elect Chris Hills a Director of the Company.

6.     To re-elect Roger Walsom a Director of the Company.

7.     To appoint Ernst & Young LLP as the Company’s auditor and to authorise the Audit Committee to determine the auditor’s remuneration.

Special Business

To consider and, if thought fit, to pass the following resolutions of which resolution 8 will be proposed as an ordinary resolution and resolutions 9, 10 and 11 will be proposed as special resolutions:

8.     THAT:-

the Directors be generally and unconditionally authorised in accordance with section 551 of the Companies Act 2006 as amended from time to time prior to the date of the passing of this resolution (‘the Act’) to exercise all powers of the Company to allot relevant securities (as defined in that section) up to an aggregate nominal amount (within the meaning of sections 551(3) and (6) of the Act) of £4,879,294, such authority to expire at the conclusion of the next AGM of the Company or the date fifteen months after the passing of this resolution, whichever is the earlier, but so that this authority shall allow the Company to make offers or agreements before the expiry of this authority which would or might require relevant securities to be allotted after such expiry as if the authority conferred by this resolution had not expired.

9.     THAT:-

the Directors be and they are hereby empowered, in accordance with sections 570 and 573 of the Companies Act 2006 as amended from time to time prior to the date of the passing of this resolution (‘the Act’) to allot equity securities for cash, either pursuant to the authority given by resolution 8 set out above or (if such allotment constitutes the sale of relevant shares which, immediately before the sale, were held by the Company as treasury shares) otherwise, as if section 561 of the Act did not apply to any such allotment, provided that this power shall be limited:

(a)    to the allotment of equity securities in connection with a rights issue in favour of all holders of a class of equity securities where the equity securities attributable respectively to the interests of all holders of securities of such class are either proportionate (as nearly as may be) to the respective numbers of relevant equity securities held by them or are otherwise allotted in accordance with the rights attaching to such equity securities (subject in either case to such exclusions or other arrangements as the Directors may deem necessary or expedient in relation to fractional entitlements or legal or practical problems under the laws of, or the requirements of, any regulatory body or any stock exchange in any territory or otherwise); and

(b)    to the allotment (otherwise than pursuant to a rights issue) of equity securities up to an aggregate nominal amount of £1,463,788

and this power shall expire at the conclusion of the next AGM of the Company or the date fifteen months after the passing of this resolution, whichever is the earlier, but so that this power shall allow the Company to make offers or agreements before the expiry of this power which would or might require equity securities to be allotted after such expiry as if the power conferred by this resolution had not expired; and so that words and expressions defined in or for the purposes of Part 17 of the Act shall bear the same meanings in this resolution.

10.   THAT:-

the Company be generally and subject as hereinafter appears unconditionally authorised in accordance with section 701 of the Companies Act 2006 (the ‘Act’) to make market purchases (within the meaning of section 693(4) of the Act) of its issued ordinary shares of 25p each in the capital of the Company (‘Shares’)


(i)     the maximum number of Shares hereby authorised to be purchased shall be 14.99% of the Company’s issued ordinary shares on 22 July 2015, being the date of the AGM (equivalent to 8,776,874 shares at 15 June 2015);

(ii)    the minimum price which may be paid for a Share shall be 25p;

(iii)   the maximum price which may be paid for a Share shall be an amount equal to 105% of the average of the middle market quotations for a Share taken from and calculated by reference to the London Stock Exchange Daily Official List for five business days immediately preceding the day on which the Share is purchased;

(iv)   any purchase of Shares will be made in the market for cash at prices below the prevailing net asset value per Share (as determined by the Directors);

(v)    the authority hereby conferred shall expire at the conclusion of the next AGM of the Company or, if earlier, on the expiry of 15 months from the passing of this resolution unless the authority is renewed at any other general meeting prior to such time;

(vi)   the Company may make a contract to purchase Shares under the authority hereby conferred prior to the expiry of such authority which will be executed wholly or partly after the expiration of such authority and may make a purchase of Shares pursuant to any such contract; and

(vii)  any shares so purchased shall be cancelled or, if the Directors so determine and subject to the provisions of Sections 724 to 731 of the Act and any applicable regulations of the United Kingdom Listing Authority, be held (or otherwise dealt with in accordance with Section 727 or 729 of the Act) as Treasury Shares.

11.   THAT:-

the period of notice required for general meetings of the Company (other than Annual General Meetings) shall be not less than 14 clear days’ notice.

The resolutions are explained further in the Directors’ Report on page 29.

Dated this 16th June 2015
By order of the Board
Invesco Asset Management Limited
Company Secretary


This annual financial report announcement is not the Company's statutory accounts. The statutory accounts for the year ended 31 March 2014 have been delivered to the Registrar of Companies. The statutory accounts for the financial year ended 31 March 2015 have been approved and audited but have not yet been delivered to the Registrar of Companies. The statutory accounts both for the year ended 31 March 2014 and for the year ended 31 March 2015 received an audit report which was unqualified and did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying the report.

The audited Annual Financial Report will be available to shareholders shortly. Copies may be obtained during normal business hours from the Company’s correspondence address, 6th Floor, 125 London Wall, London EC2Y 5AS or the Company’s website at .

By order of the Board
Invesco Asset Management Limited
16 June 2015


Andrew Watkins            Tel – 020 3753 1000
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