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Invesco Inc Grth Tst (IVI)

  Print      Mail a friend       Annual reports

Thursday 27 May, 2004

Invesco Inc Grth Tst

Final Results

                        INVESCO Income Growth Trust plc                        

                   Preliminary Announcement of Final Results                   

                       For the Year Ended 31 March 2004                        

Chairman's Statement

Investment Performance

During the year under review the UK stockmarket rallied, resulting in positive
return for the first time in recent years. The recovery in equity markets was
driven by renewed investor confidence following the fall of the regime in Iraq.
This upward trend continued throughout the year, in response to increasing
evidence of a recovery in the world economy and an improvement in corporate
profits. Against this background your Company has outperformed its benchmark
index. The total returns (comprising the movement in the Net Asset Value plus
dividends reinvested) was +42.3% compared with that of +31.0% for the
FTSE-Actuaries All Share Index. The mid-market share price of the ordinary
shares increased from 108.5p to 144.0p during the year. The discount per
ordinary share widened from 8.9% to 11.4% during the year however, since the
year end, it has narrowed to 6.7%.

Market Background

Following the end of Saddam Hussain's regime in Iraq, equity investors
attention returned to the outlook for the world economy. The prospect of
subdued growth had resulted in central banks reducing interest rates to their
lowest level in over 40 years. As the year progressed, it became evident that
this monetary policy was having the desired effect. The US economy is now
growing at above trend whilst the global economy is being boosted by the
extraordinary growth in China. The UK has participated in this recovery with
renewed buoyancy in consumer spending and further rises in house prices. As a
result, the Bank of England's Monetary Policy Committee (MPC) has tightened
policy, taking the base rate to 4.25%, up from October's 48 year low of 3.5%.

In terms of the stockmarket, the improvement in the economy has renewed
investors' enthusiasm for `recovery' stocks and economically sensitive areas of
the market. As a result, non-cyclical sectors such as food producers, utilities
and pharmaceuticals have been amongst the worst performers. The year has also
been characterised by significant outperformance of small and mid cap stocks,
reflecting their more cyclical orientation.

Gearing and Further Issue of CULS

The Board continues to monitor the Company's level of gearing which, when
prudently used, should enhance the return to shareholders. During the year,
borrowings decreased from £10,430,000 to £5,575,000 at the year-end. This
resulted is an actual gearing figure at the end of the year of 109 compared to
119 at the beginning of the year.

On 2 April 2004, following the year-end, the company issued a further £
16,629,490 nominal of CULS at an issue price of 104p per 100p nominal unit of
stock (`new CULS'). The new CULS rank pari passu with and have been
consolidated and form a single series with the £2,365,823 CULS that were
previously outstanding. This issue of new CULS has a number of advantages for
the Company: the total assets of the Company have been increased, therefore,
spreading fixed costs over a larger asset base, liquidity in the CULS has
improved; the new loan stock carries an interest coupon of 4.75% per annum,
which represents an attractive long-term fixed rate cost of borrowing; at an
issue price of 104p, the new CULS have not diluted the net asset value of the
ordinary shares at the date they were issued, and the issue has enabled the
Company to reduce existing bank debt by, subsequent to the year end, repaying a
£5m bank loan.

As at 25 May 2004, the Company had actual gearing of 121. The residual proceeds
from the issue of new CULS have been invested in a triple AAA rated short dated
treasury bond issued by the European Investment Bank (EIB). It is anticipated
that the Manager will reduce this holding and re-invest the money into equities
as and when suitable investment opportunities arise.

Revenue and Dividends

An increased interim dividend of 2.0p per share (2003: 1.9p) was paid to
shareholders in December 2003. The Directors are now recommending a final
dividend of 2.8p per share (2003: 2.7p), representing an increase in the total
dividend of 4.3% (excluding the special dividend of 0.5p paid to shareholders
following the reconstruction of INVESCO Convertible Trust pIc).

The final dividend, which is subject to the approval of shareholders, will be
payable on 9 July 2004 to shareholders registered on 11 June 2004.

Market Outlook

The outlook for the world and UK economy has improved over the past year. As
yet, the improvement in economic activity has not resulted in an increase in
inflation, which has allowed monetary authorities throughout the world to
maintain interest rates at very low levels. Although further interest rate
increases are likely in the UK, at 4.25%, base rates are still very low by
historical standards. This favourable background suggests that corporate
profitability will continue to improve. However, following the rise in the
market over the past twelve months, much of this improvement is already
reflected in equity valuations. Therefore, although the outlook remains
favourable, returns are likely to be more modest going forward.

Apportionment of Investment Management Fees and Interest Payable

Following the new issue of CULS on 2 April 2004, your Directors reviewed the
basis on which investment management fees and interest payable on long-term
borrowings are apportioned between capital and revenue accounts. In accordance
with the Board's long-term split of returns in the form of capital gains and
income respectively from the investment portfolio of the Company, your
Directors have concluded that, with effect from 1 April 2004, such expenses
should be allocated 50% to the capital reserve - realised and 50% to the
revenue account.

In these accounts, as in previous years, investment managements fees and
interest payable on long-term borrowings have been allocated 67% to the capital
reserve - realised and 33% to the revenue account.

Corporate Governance

The Board remains committed to maintaining the highest standards of Corporate
Governance and is accountable to you as shareholders for the governance of the
Company's affairs.

There have been a number of recent developments in Corporate Governance,
including the publication of the new Combined Code on Corporate Governance
(`Combined Code') and The Association of Investment Trust Companies - Code on
Corporate Governance (`AITC Code'). Details of your Company's compliance with
the respective codes has been incorporated into the Annual Report and Accounts
for the year ended 31 March 2004.


At the AGM there are four items of Special Business to be proposed:-

Share Issuance

First your Directors are asking for the usual authority to issue new ordinary
shares. This will allow Directors to issue shares within the prescribed limits
in a shorter period than would otherwise be the case. The powers authorised
will not be exercised at a price below Net Asset Value so that the interests of
existing shareholders are not diluted.

Secondly, your Directors are also asking for the usual authority to issue new
ordinary shares disapplying pre-emption rights. This will allow shares to be
issued to new shareholders without having to be offered to existing
shareholders first, thus broadening the Shareholder base of the Company.

Share Buybacks

Thirdly your Directors are seeking to renew the authority to buyback up to
14.99% (8,384,765 ordinary shares) of the Company's issued share capital
subject to the restrictions referred to in the notice of the Annual General

Directors' Fees

Finally your Directors are also seeking to amend Article 76 of the Company's
Articles of Association in order that the maximum aggregate amount of
Directors' fees permitted for payment be increased from its current level of £
60,000 to £100,000 per year.

In light of the increasing demands and accountability of the new corporate
governance environment, your Board recognises the additional workload that each
member has and will continue to experience. For this reason your Board has
resolved to increase Directors' fees from 1 April 2004.

As of 1 April 2004, following the aforementioned increase, the aggregate amount
of fees being paid to the Directors is £54,000 per annum, which is £6,000 per
annum short of the present aggregate limit laid down by the Articles of
Association. Your Board regularly review levels of Directors' fees and, whilst
they do not currently plan further increases in Directors' fees, they do
recognise that there may be a requirement for the appointment of an additional
Director, in order to expand the skills and knowledge of your Board. For this
reason, your Directors are seeking to increase the current aggregate level of
Directors' fees to £100,000.

The Annual General Meeting of the Company will be held at the offices of
INVESCO Asset Management on 30 June 2004 at 12.00 noon. I do hope that as many
shareholders as are able will attend. This will be an opportunity not only to
meet the Directors, but also to hear the views of Graham Kitchen, who is the
investment manager at INVESCO with the day-to-day responsibility for managing
the Company's share portfolio.

John J. McLachlan


27 May 2004

Statement of Total Return (incorporating the revenue account)

for the year ended 31 March

                                2004                     2003         
                     Revenue Capital   Total Revenue  Capital    Total
                       £'000   £'000   £'000   £'000    £'000    £'000
Gains/(losses) on                                                     
investments                -  25,347  25,347       - (37,531) (37,531)
Income                 3,779       -   3,779   3,785        -    3,785
Investment             (245)   (497)   (742)   (241)    (489)    (730)
management fee                                                        
Other expenses         (298)       -   (298)   (262)     (10)    (272)
Net return before                                                     
costs and taxation     3,236  24,850  28,086   3,282 (38,030) (34,748)
Interest payable       (153)   (307)   (460)   (190)    (375)    (565)
Return on ordinary                                                    
activities before      3,083  24,543  27,626   3,092 (38,405) (35,313)
Tax on ordinary            -       -       -       -        -        -
Return on ordinary                                                    
activities after tax   3,083  24,543  27,626   3,092 (38,405) (35,313)
Dividends in respect (2,685)       - (2,685) (2,798)        -  (2,798)
 equity shares                                                        
Transfer to reserves     398  24,543  24,941     294 (38,405) (38,111)
Return per ordinary    5.51p  43.87p  49.38p   5.63p (69.96)p (64.33)p

The revenue column of this statement is the profit and loss account of the
Company. All revenue and capital items in the above statement derive from
continuing operations. No further operations were acquired or discontinued in
the year.

Reconciliation of Movement in Shareholders' Funds

for the year ended 31 March

                                                            2004     2003
                                                           £'000    £'000
Revenue transfer to Reserves                                 398      294
Capital return for the year                               24,543 (38,405)
Proceeds from issue of shares                                  -    3,381
Net movement in Shareholders' funds                       24,941 (34,730)
Opening Shareholders' funds                               65,971  100,701
Closing Shareholders' funds                               90,912   65,971

Balance Sheet

as at 31 March

                                                  2004         2003
                                                  £'000       £'000
Fixed assets                                                       
  Investments                                      100,464   79,777
Current assets                                                     
  Debtors                                            1,176    1,553
  Cash at bank                                          11      102
                                                     1,187    1,655
Creditors: amounts falling due within one year       8,373    8,095
Net current liabilities                            (7,186)  (6,440)
Total assets less current liabilities               93,278   73,337
Creditors: amounts falling due after more than       2,366    7,366
one year                                                           
Total net assets                                    90,912   65,971
Capital and reserves                                               
Called-up share capital                             13,984   13,984
Share premium account                               23,200   23,200
Other reserves                                                     
  Capital redemption reserve                            50       50
  Special reserve                                   19,728   19,728
  Capital reserve - realised                        22,311   24,649
  Capital reserve - unrealised                       8,555 (18,326)
Revenue reserve                                      3,084    2,686
Equity Shareholders' funds                          90,912   65,971
Net asset value per ordinary share                                 
  Basic                                             162.5p   117.9p
  Fully diluted                                     162.5p   119.1p

Cash Flow Statement

for the year ended 31 March

                                                     2004      2003
                                                     £'000    £'000
Cash flow from operating activities                  2,809    2,805
Servicing of finance                                 (524)    (504)
Taxation                                                 -        -
Net financial investment                             5,108  (4,869)
Equity dividends paid                              (2,629)  (2,736)
Cash inflow/(outflow) before management of liquid    4,764  (5,304)
resources and financing                                            
Management of liquid resources                           -    2,700
Financing                                          (4,855)    1,560
Decrease in cash                                      (91)  (1,044)
Reconciliation of cash flow to movement in net                     
Decrease in cash                                      (91)  (1,044)
Cash outflow/(inflow) from decrease/(increase) in    4,855    (620)
bank loan                                                          
Cash inflow from issue of loan stock                     -  (2,366)
Change in net funds/(debt) resulting from cash       4,764  (4,030)
Net debt at beginning of year                     (12,694)  (8,664)
Net debt at end of year                            (7,930) (12,694)

The accompanying notes are an integral part of this statement.

The financial information set out above does not constitute the Company's
statutory accounts for the year ended 31 March 2004 or 2003. The financial
information for 2003 is derived from the statutory accounts for 2003, which
have been delivered to the Registrar of Companies. The Auditors have reported
on the 2003 statutory accounts and their report was unqualified and did not
contain a statement under s237(2) or (3) of the Companies Act 1985. The
statutory accounts for 2004 will be finalised on the basis of the information
presented by the Directors in this preliminary announcement and will be
delivered to the Registrar of Companies following the Company's Annual General


1. Income

                                                           2004      2003
                                                          £'000     £'000
Income from listed investments                                           
UK dividends                                              3,776     3,781
                                                          3,776     3,781
Other income                                                             
Deposit interest                                              3         4
                                                              3         4
Total income                                              3,779     3,785
Total income comprises:                                                  
Dividends                                                 3,776     3,781
Interest                                                      3         4
                                                          3,779     3,785

2. Investment management fee

                                     2004                    2003        
                          Revenue Capital   Total Revenue Capital   Total
                        £'000       £'000   £'000   £'000   £'000   £'000
Investment management         209     423     632     205     416     621
Irrecoverable VAT              36      74     110      36      73     109
                              245     497     742     241     489     730

(i) The Company's investment manager is INVESCO Asset Management Limited. The
contract between the Company and INVESCO may be terminated on one year's notice
and immediately in certain other circumstances. INVESCO receives an annual fee,
calculated and payable monthly based on the value of the funds under management
before deducting borrowings, of 0.7 per cent. up to £50 million, 0.65 per cent.
on the next £50 million and 0.6 per cent. thereafter. This fee is allocated 67
per cent. to capital and 33 per cent. to revenue in accordance with the Board's
expected long-term split of returns, in the form of capital gains and income
respectively, from the investment portfolio of the Company. At 31 March 2004 £
65,000 (2003: £53,000) was owed in respect of management fees.

(ii) The Company also obtains secretarial services from INVESCO Asset
Management Limited, the fees for which are adjusted annually in line with the
UK Retail Price Index and are payable monthly in arrears (see note 3). At
31 March 2004 £6,000 (2003: £6,000) was owed in respect of secretarial fees.

3. Other expenses

                                         2004                  2003      
                             Revenue  Capital Total Revenue Capital Total
                                £'000   £'000 £'000   £'000   £'000 £'000
General expenses                  171       -   171     138      10   148
Secretarial services               70       -    70      68       -    68
Directors' fees (see below)        41       -    41      41       -    41
Auditors' remuneration                                                   
- for audit services               16       -    16      15       -    15
                                  298       -   298     262      10   272

The Directors' emoluments authorised by the Articles of Association are £60,000
(2003: £60,000) per annum.

4. Interest payable and similar charges

                                           2004                  2003      
                                Revenue Capital Total Revenue Capital Total
                                  £'000   £'000 £'000   £'000   £'000 £'000
Interest on bank loans and                                                 
Repayable within 1 year, not by     116     231   347     170     335   505
Repayable between 2 and 5            37      76   113      20      40    60
not by instalments                                                         
                                    153     307   460     190     375   565

5. Return per ordinary share

                                  2004                     2003         
                       Revenue Capital   Total Revenue  Capital    Total
Return per ordinary      5.51p  43.87p  49.38p   5.63p (69.96)p (64.33)p

Revenue return per ordinary share is based on the net revenue on ordinary
activities after taxation of £3,083,000 (2003: £3,092,000) and on 55,935,724
(2003: 54,897,476) ordinary shares, being the weighted average number of
ordinary shares in issue in the year.

Capital return per ordinary share is based on a net capital profit of £
24,543,000 (2003: net loss of £38,405,000) for the financial year and on
55,935,724 (2003: 54,897,476) ordinary shares, being the weighted average
number of ordinary shares in issue in the year.

6. Investments

                                                           2004      2003
                                                          £'000     £'000
Investments listed on the London Stock Exchange         100,464    79,777
Valuation at 1 April                                     79,777   110,213
Unrealised depreciation/(appreciation) at 1 April        18,326  (10,595)
Cost at 1 April                                          98,103    99,618
Investments received from INVESCO Convertible Trust           -     2,107
Purchases at cost                                        28,785    32,891
Sales - proceeds                                       (33,445)  (27,903)
     - realised loss on sales                           (1,534)   (8,610)
Cost at 31 March                                         91,909    98,103
Unrealised appreciation/(depreciation) at 31 March        8,555  (18,326)
Valuation at 31 March                                   100,464    79,777

7. Net asset value

The net asset value per ordinary share and the net asset values attributable at
the year-end calculated in accordance with the Articles of Association were as

                    Net asset value   Net assets      Net asset   Net assets
                          per share attributable                attributable
                                                      per share             
                               2004         2004                        2003
                                  p        £'000                       £'000
Ordinary shares                                                             
- Basic                       162.5       90,912          117.9       65,971
- Fully diluted               162.5       93,278          119.1       68,337

Net asset value per ordinary share is based on net assets at the year-end and
on 55,935,724 (2003: 55,935,725) ordinary shares, being the number of ordinary
shares in issue at the year-end.

Fully-diluted net asset value per ordinary shares is based on net assets at the
year-end and on the assumption that 2,365,823 (2003: 2,365,823) being the
outstanding CULS are converted into ordinary shares based on 25p nominal of
ordinary shares for every £x of CULS. For conversion purposes `x' is equal to
118% of the mid-market closing price of the previous day's ordinary shares on
the date the scheme commenced. The scheme commenced on 13 September 2002 and
118% of the mid-market closing price at 12 September 2002 was 163p. Conversion
rights may be exercisable during the month of July commencing 2006 and ending
2009, 31 July 2009 being the final conversion date. CULS not redeemed,
purchased or converted by final conversion date will be redeemed by the Company
on 1 October 2009 and then cancelled.

Where the fully diluted net asset value per ordinary shares is greater than the
basic net asset value per ordinary share, there is no dilutive effect.

The Annual General Meeting will be held at the Company's Registered Office on
Wednesday, 30 June 2004 at 12.00noon.

By order of the Board

INVESCO Asset Management Limited - Secretary

27 May 2004



a d v e r t i s e m e n t