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Invesco Inc Grth Tst (IVI)

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Thursday 16 June, 2016

Invesco Inc Grth Tst

Annual Financial Report

Invesco Income Growth Trust plc

Annual Financial Report Announcement

For the year ended 31 March 2016

Financial Information and Performance Statistics

Year Ended
31 March 2016
Year Ended
31 March 2015
Net asset value per ordinary share* –2.1% +10.3%
FTSE All-Share Index* –3.9% +6.6%
Share price* –7.8% +9.9%

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

At 31 March
At 31 March
Net asset value per ordinary share 293.9p 309.2p –4.9
FTSE All-Share Index* 3,395.2 3,663.6 –7.3
Share price* 260.0p 292.8p –11.2
Discount per ordinary share 11.5% 5.3%
Gross gearing – excluding the effect of cash 8.6% 8.3%
Net gearing – including the effect of cash 8.6% 8.3%
Revenue and Dividends
Year Ended
31 March 2016
Year Ended
31 March 2015
Net revenue after tax (£’000) 6,763 6,398 +5.7
Revenue return per ordinary share 11.5p 10.9p +5.5
– first interim 2.15p 2.10p
– second interim 2.15p 2.10p
– third interim 2.20p 2.15p
– final 3.80p 3.75p
10.30p 10.10p +2.0
Retail Price Index – annual change 1.6% 0.9%
Ongoing charges 0.81% 0.88%

*Source: Thomson Reuters Datastream.


Chairman’s Statement


In my interim statement I said that I saw no immediate prospect that Ciaran Mallon, our portfolio manager, was going to find his job any less challenging in the second half of the year than he had in the first, and this proved to be the case. The total return on our net asset value over the year to 31 March 2016 was -2.1%, which compares with our benchmark’s equivalent return of -3.9%. However, what was more disappointing was that our share price’s total return was -7.8% as a result of the discount to NAV widening to 11.5% at the end of the year from 5.3% last year. This significant widening which developed at the end of the period was, I understand, principally as a result of a decision by Aviva to liquidate a sizeable portfolio of investment trusts, which included a large holding in our Company, following its acquisition of Friends Life. This affected the market prices of most of the investment trusts in the AIC UK equity sectors, as well as our Company’s, and will, we believe, be a temporary feature.

Whilst any negative return is always unwelcome, it should be seen in the context of the positive returns that we have enjoyed in recent years and the excellent longer term performance record that Ciaran has established, as can be seen from the statistics on page 6. This has helped us to meet our longer term investment objective and has provided us, the shareholders, with superior capital and income growth to that of the UK stock market and real growth of our dividends. Ciaran will give more details on the past year in his own report, which follows.

Revenue and Dividends

In a year that has seen some high profile dividend cuts in the UK stock market, it is encouraging to be able to report that during the year, earnings increased to 11.5p per share from 10.9p, once again helped by some special dividends received. We are, therefore, pleased to be able to recommend a final dividend of 3.8p per share, which together with aggregate interim dividends paid of 6.5p, gives a total dividend per share for the year of 10.3p (2015: 10.1p), an increase of 2.0%. This exceeds the annualised inflation rate for the year to 31 March 2016 of 1.6% (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 29 July 2016 to shareholders on the register on 24 June 2016.

The Board

As I reported in my last annual statement, Chris Hills will retire from the Board at the conclusion of this year’s AGM. The Company has been very fortunate to have had Chris as a director since 1999 and to have been able to benefit from his considerable experience and wise counsel, particularly through the various testing times which we have seen in this period. I and, I know, the rest of the Board, will particularly miss him both as a respected colleague and for his insightful contributions to our deliberations. I would, therefore, like to take this opportunity, on behalf of all shareholders, to thank him for his long and distinguished service to the Company.

I am pleased to report that we have been fortunate to be able to appoint Mark Dampier, who joined the Board with effect from 1 March 2016, as Chris’s replacement. Mark has over 30 years’ experience in the investment management industry, is currently head of investment research for the largest private investor platform in the UK, Hargreaves Lansdown, and is a leading commentator on the sector. I strongly recommend his election by shareholders at the AGM in July.


I am having to write this statement just ahead of the EU referendum, the result of which, as I write, is still very unclear. However it finally plays out, it is causing increasing uncertainty, which is likely to continue if the result is to leave. This, together with its possible impact on an already fragile Europe and the prospect of uncertain political changes in the USA, all means that we are probably facing a period of increased uncertainty, the very thing that markets do not like. When combined with slower economic growth around the world, it would suggest that stock markets may not enjoy the experience. However, one consequence is likely to be continued very low interest rates for some time to come. So challenges are again what Ciaran faces, but he has risen to them before and I remain confident he will do so again. He may find positive returns hard to eek out for a while, but his concentration on investing in companies with strong fundamentals will, I am confident, ensure that the returns over the longer term will remain positive and that we can continue to meet our objective of growing the dividend in real terms.

Annual General Meeting (AGM)

This year’s AGM will be held at Invesco Perpetual’s West End office, 1st Floor, 43-45 Portman Square, London W1H 6LY at 3pm on 27 July 2016. The Notice of the AGM of the Company is on pages 60 to 62 and a summary of the resolutions is set out in the Directors’ Report on pages 33 and 34. Whilst I urge all shareholders to vote in favour of these resolutions by returning their completed voting papers or voting online, 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.

In the meantime, I would encourage shareholders to look at our section of our Manager’s website at which, in addition to hosting an electronic version of this annual financial report and a wealth of other useful information, features a video interview of our portfolio manager, Ciaran, that gives some insight into his investment style.

Hugh Twiss MBE
16 June 2016


Strategic Report

Portfolio Manager’s Report

For the year ended 31 March 2016

Portfolio Strategy and Review

The UK equity market was volatile over the 12 months under review, particularly towards the end of the period. The FTSE All-Share index reached an all-time high in April 2015, only to hit its lowest level since 2012 some 10 months later.

The introduction of quantitative easing in the eurozone and further stimulus from Japan drove a strong start to the period. However, equity market sentiment swung sharply negative as concerns grew over slowing economic growth in China and the impact of the strengthening US dollar on emerging market debt.

After a yuletide stock market rally, following the first increase in US interest rates for seven years, the start of 2016 saw the FTSE All-Share index fall back sharply to a multi-year low. Commodity prices hit 10 year lows and oil and mining companies cut profit guidance and, in some cases, dividends. Turbulence moderated as oil and metals prices showed some recovery and the ECB surprised financial markets by cutting interest rates in the eurozone to zero and stepping up the pace of quantitative easing. Nevertheless, worries persisted over the profitability of banks in a zero interest rate world. Towards period end, Janet Yellen, Chairman of the US Federal Reserve, provided a boost to equities by stating that the US central bank should proceed cautiously with interest rate rises.

The Company’s net asset value, including reinvested dividends, delivered a return of –2.1% during the 12 months to 31 March 2016, outperforming its benchmark FTSE All-Share Index, which delivered a total return of –3.9%.

Against a highly volatile market backdrop, it was pleasing to see positive performances from a range of the portfolio’s long term holdings. Notable amongst these was Imperial Brands (formerly Imperial Tobacco). As part of on-going consolidation in the industry, Imperial Brands acquired certain US brands, including Winston, and production facilities – a purchase which Imperial anticipates will be positively incremental to earnings. Dividend growth and profit margins remain healthy across the tobacco sector, driven by product innovation, tobacco quality improvements and cost rationalisation, in spite of the continuing volume decline.

The holding in Young & Co’s Brewery delivered impressive sales growth against a declining beer market, as the company continued to benefit from the sale of its London brewery and its focus on the acquisition and roll out of premium pubs. Croda saw its shares perform strongly, as the company’s niche position in speciality chemicals enables it to deliver organic revenue growth, rising margins and cash returns in the form of special dividends.

Other holdings which contributed positively to the portfolio’s performance included Bunzl, Informa, Nichols, National Grid, RELX (formerly Reed Elsevier) and Severn Trent. All of the companies named above have been held in the portfolio for at least the past five years, and in some cases very much longer.

A relative newcomer to the portfolio is veterinary services company CVS, which was added in 2014. The company continues to expand rapidly and profitably through acquiring businesses in the highly fragmented and growing veterinary market. The increased prevalence of pet insurance, which drives demand for higher cost services, as well as the company’s online animal pharmacy, labs and crematoria businesses, is underpinning levels of growth in the medium term. The shares rose by over 50% in the year.

The performance of the portfolio relative to its FTSE All-Share Index benchmark benefited from the portfolio’s underweighting of the banks sector but, within the oil & gas sector, the absence of a holding in BG Group detracted from performance. The zero weighting in the mining sector, where share prices demonstrated exceptional swings, was a positive over the period as a whole, although a negative over the final quarter.

However, there were also some negative contributors amongst companies held. The holding in Amec Foster Wheeler, a company which provides project management services to the energy industry, weighed on performance. While I had expected that this business would be able to weather the industry downturn, it became increasingly clear that the scale of the downturn would make business for oil services companies difficult through 2016. Consequently, the holding in Amec, and also that in another energy services company, John Wood, were sold.

The holding in G4S fell over the period, despite good results and a management delivering on their turnaround plans. I believe the valuation looks attractive and have added to the portfolio’s holding.

Next and Whitbread are two holdings which had recently delivered consistent positive performance. However, the past 12 months saw both disappoint, in a challenging retail environment. Next warned that it was facing the “toughest year since the 2008 financial crisis” and Whitbread blamed weak high street footfall on lower sales at Costa Coffee. Both companies have business models that can withstand near term pressures and should create significant shareholder value in years to come.

Pearson has endured a bumpy ride over the past few years, as it migrates its educational business model to a digital proposition. Despite the sale of the company’s Financial Times business for an attractive price, the shares again underperformed over the year. We continue to believe that the company’s unrivalled positioning in the global educational market should stand it in good long term stead.

In terms of other portfolio activity, Friends Life was taken over by Aviva in an all share offer and the consequent holding in Aviva has been retained. New investments were made in Micro Focus International and Softcat, while Spectris and Ultra Electronics were sold.


Notwithstanding its recent volatility, the UK stock market has risen strongly over the last six years. Market valuations, in terms of historic dividend yields and price earnings ratios, are near long term average levels, suggesting that that the long term outlook for returns from investing in the stock market are still attractive. However, there remains the possibility of further dividend cuts, while earnings growth for many companies and sectors remains elusive, or even negative, against a back drop of subdued economic growth and other uncertainties.

I believe it is sensible to remain conservative in my investment approach and seek to invest in companies whose prospects are not dependent on an improving economic outlook. I remain confident in the long term return potential of the holdings in my portfolio.

Ciaran Mallon
Portfolio Manager
16 June 2016


Business Review

Strategy and Business Model

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 also follow 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. The Manager is also responsible for providing company secretarial, marketing, accounting and general administration services. In practice, many of these services are performed under delegated authority by Invesco Asset Management Limited (IAML), a company related to IFML. References to the Manager in this annual financial report should consequently be considered to include both entities. Invesco Perpetual is a business name of both IFML and IAML. The portfolio manager responsible for the day to day management of the portfolio is 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 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).

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 preceding 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 and 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 2016, three interim dividends have been paid and shareholder approval is being sought at this year’s AGM to pay a final dividend of 3.80p (2015: 3.75p) per share. The first two interim dividends were of 2.15p (2015: 2.10p) each per share and were paid on 30 October 2015 and 31 December 2015. The third interim dividend was 2.20p (2015: 2.15p) and was paid on 15 March 2016. If approved by shareholders, the final dividend will be paid to shareholders on 29 July 2016. In total, the Directors have declared and recommended dividends of 10.30p, an increase of 2% 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 4.0%, a premium of 0.4% over the average yield of the FTSE All-Share Index over the same period, which was 3.6%. 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 partly because of the strong capital return from the portfolio, leading to a concomitant fall in dividend yield. Also, 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 2016, the share price and the net asset value (NAV) per share were 260.0p and 293.9p respectively. The comparable figures for 31 March 2015 were 292.8p and 309.2p.

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 –2.1% compared with a total return of –3.9% for the FTSE All-Share Index, –7.2% for the FTSE All-Share 5% Capped Index, –8.8% for the FTSE 100 Share Index and –7.5% 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 considers to be the peer group that most closely matches it.

As at 31 March 2016, out of the 22 investment trusts ranked within the AIC UK Equity Income sector, the Company was ranked 13th over one year, 11th over three years and 7th over five years by NAV performance (source: JPMorgan Cazenove).


The Board monitors the discount at which the Company’s shares trade in relation to the value of the underlying 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 2.1% and 11.6%. At the year end the discount was 11.5% (2015: 5.3%) and the average discount of the sector was 4.5% (2015: 2.5%) (source: JPMorgan Cazenove). The wide discount at the year end is thought to be a temporary feature caused by market indigestion after a large holder of this and other investment companies changed its investment policy.

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

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

Ongoing charges for the year totalled £1,437,000 (2015: £1,528,000) and the ongoing charges figure was 0.81% (2015: 0.88%).

Financial Position

At 31 March 2016, the Company’s net assets were valued at £172 million (2015: £181 million). The portfolio consisted of equity investments, fixed rate securities and cash.

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 (2015: £14.9 million). Note 11 to the financial statements gives details of the facility.

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 1C and note 15 to the financial statements.

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 audit committee regularly undertakes a robust assessment of the risks the Company faces, on behalf of the Board (see Audit Committee Report on page 24).

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 15 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 to the Company’s performance 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 2016 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 are in place that can be used to help in its management 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 depositary and the Manager’s compliance and internal audit officers report regularly to the Company’s Audit Committee.

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 64.

Viability Statement

The Company is an investment company operating as an investment trust, as defined by sections 1158 and 1159 of the Corporation Tax Act 2010. As such, the Company is a collective investment vehicle rather than a commercial business venture and is designed and managed for long term investment. Long term for this purpose is considered to be at least five years and so the Directors have assessed the Company’s viability over that period. However, the life of the Company is not intended to be limited to that or any other period.

In assessing the viability of the Company the Board considered the principal risks to which it is exposed, as set out on pages 13 and 14, together with mitigating factors. The risks of failure to meet the Company’s investment objective, and contributory market and investment risks were considered to be of particular importance. The Board also took into account the capabilities of the Manager and the varying market conditions already experienced by the Company since it commenced operations in 1996.

In terms of financial risks to viability, the investments comprising the portfolio are all listed on the London Stock Exchange and readily realisable. The Company has no long term liabilities and the portfolio’s total value is many times the value of its short term liabilities and annual operating costs. Consequently, there appears little to no prospect of the Company being unable to meet its financial obligations as they fall due in the next five years.

Based on the above, the Directors have a reasonable expectation that the Company will be able to continue in operation and meet its liabilities as they fall due over the five-year period of their assessment.

Board Diversity

The Company’s policy on diversity is set out on page 28. The Board currently comprises six non-executive directors of whom one is a woman, thereby constituting 17% female representation. The number of male directors will revert to four following the annual general meeting. Summary biographical details of the Directors are set out on page 20. 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.

The Company is an investment vehicle and does not provide goods or services in the normal course of its business, or have customers. Accordingly, the Directors consider that the Company is not required to make any slavery or human trafficking statement under the Modern Slavery Act 2015.

This Strategic Report was approved by the Board on 16June 2016

Invesco Asset Management Limited
Company Secretary


Investments in Order of Valuation

At 31 March 2016

UK listed ordinary shares unless otherwise stated



Activity By Sector
% of
232,817 Imperial Brands (formerly Imperial Tobacco) Tobacco 8,994 4.9
208,341 British American Tobacco Tobacco 8,521 4.6
787,943 Pennon Gas, Water & Multiutilities 6,382 3.4
625,844 National Grid Gas, Water & Multiutilities 6,176 3.3
425,960 GlaxoSmithKline Pharmaceuticals & Biotechnology 6,010 3.2
262,206 Severn Trent Gas, Water & Multiutilities 5,695 3.1
407,568 RELX Media 5,270 2.8
626,800 Young & Co’s Brewery – Non voting Travel & Leisure 5,171 2.8
167,023 Croda International Chemicals 5,066 2.7
129,626 AstraZeneca Pharmaceuticals & Biotechnology 5,059 2.7
Top ten holdings 62,344 33.5
2,143,494 Legal & General Life Insurance 5,039 2.7
126,790 Wolseley Support Services 4,994 2.7
709,518 Informa Media 4,921 2.7
510,873 United Utilities Gas, Water & Multiutilities 4,713 2.5
232,000 Bunzl Support Services 4,693 2.5
1,114,328 Jupiter Fund Management Financial Services 4,557 2.5
995,939 Aviva Life Insurance 4,542 2.5
113,993 Whitbread Travel & Leisure 4,514 2.4
584,369 CVS General Retailers 4,494 2.4
357,190 Experian Support Services 4,443 2.4
Top twenty holdings 109,254 58.8
297,350 SSE Electricity 4,433 2.4
358,693 Compass Travel & Leisure 4,405 2.4
78,369 Next General Retailers 4,228 2.3
953,404 BT Group Fixed Line Telecommunications 4,200 2.3
956,462 HSBC Banks 4,150 2.2
1,609,665 MITIE Support Services 4,137 2.2
316,651 Nichols Beverages 4,009 2.1
478,843 Essentra Support Services 3,962 2.1
366,234 Capita Support Services 3,812 2.0
127,488 InterContinental Hotels Travel & Leisure 3,658 2.0
Top thirty holdings 150,248 80.8


316,645 Smith & Nephew Health Care Equipment & Services 3,632 2.0
1,587,425 Centrica Gas, Water & Multiutilities 3,613 1.9
963,243 BP Oil & Gas Producers 3,373 1.8
185,141 Royal Dutch Shell B Shares Oil & Gas Producers 3,147 1.7
353,058 Pearson Media 3,089 1.7
327,693 Euromoney Institutional Investor Media 3,087 1.7
875,837 N Brown General Retailers 2,859 1.5
1,489,362 G4S Support Services 2,839 1.5
614,493 Softcat Software & Computer Services 1,914 1.0
569,483 GKN Automobiles & Parts 1,645 0.9
Top forty holdings 179,446 96.5
131,843 Land Securities Real Estate Investment Trusts 1,450 0.8
91,959 Micro Focus Software & Computer Services 1,443 0.8
409,260 Drax Electricity 1,114 0.6
333,396 Senior Aerospace & Defence 760 0.4
Total ordinary shares (44) 184,213 99.1
1,300,000 Barclays Bank 14% Perpetual (BB)* Banks 1,638 0.9
Total fixed income investments (1) 1,638 0.9
Total value of investments (45) 185,851 100.0

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


Directors’ Responsibilities Statement

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. Under that law the Directors have elected to prepare financial statements in accordance with UK Accounting Standards, including FRS 102 ‘The Financial Reporting Standard applicable in the UK and Republic of Ireland’.

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 and loss 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 2016



For the year ended 31 March

Income Statement

2016 2015

(Losses)/gains on investments at fair value through profit or loss 9 (9,188) (9,188) 11,352 11,352
Income 2 7,778 85 7,863 7,411 291 7,702
Investment management fee 3 (526) (526) (1,052) (607) (607) (1,214)
Other expenses 4 (385) (385) (314) (314)
Net return before finance costs and taxation 6,867 (9,629) (2,762) 6,490 11,036 17,526
Finance costs 5 (104) (104) (208) (92) (92) (184)
Return on ordinary activities before and after taxation 6,763 (9,733) (2,970) 6,398 10,944 17,342
Return per ordinary share:
Basic 7 11.5p (16.6)p (5.1)p 10.9p 18.7p 29.6p

The total column of this statement represents the Company’s profit and loss account prepared in accordance with UK Accounting Standards. The return on ordinary activities after taxation is the total comprehensive income and therefore no statement of comprehensive income is presented. 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. No operations were acquired or discontinued in the year.


Reconciliation of Movements in Shareholders’ Funds






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
Net return on ordinary activities (9,733) 6,763 (2,970)
Net dividends paid 8 (6,002) (6,002)
At 31 March 2016 14,638 40,021 2,310 109,009 6,083 172,061

The accompanying notes are an integral part of these financial statements.


Balance Sheet

Fixed assets
Investments at fair value 9 185,851 194,683
Current assets
Debtors 10 1,269 1,480
Creditors: amounts falling due within one year 11 (15,059) (15,130
Net current liabilities (13,790) (13,650)
Net assets 172,061 181,033
(15,059) (15,130)
Capital and reserves (13,790) (13,650)
Share capital 12 14,638 14,638
Share premium 13 40,021 40,021
Capital redemption reserve 13 2,310 2,310
Capital reserve 13 109,009 118,742
Revenue reserve 13 6,083 5,322
Shareholders’ funds 172,061 181,033
Net asset value per ordinary share
Basic 14 293.9p 309.2p

These financial statements were approved and authorised for issue by the Board of Directors on 16 June 2016.

Hugh Twiss MBE


Signed on behalf of the Board of Directors

The accompanying notes are an integral part of these financial statements.


Notes to the Financial Statements

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

The financial statements have been prepared in accordance with applicable United Kingdom Accounting Standards and applicable law (UK Generally Accepted Accounting Practice) and with the Statement of Recommended Practice Financial Statements of Investment Trust Companies and Venture Capital Trusts, issued by the Association of Investment Companies in November 2014. Accordingly, FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland applies for these financial statements for the year ended 31 March 2016 and has been applied for the first time. The financial statements are issued on a going concern basis.

As a result of the first time adoption of FRS 102 and the revised SORP, comparative figures and presentation have been revised where required. The net return attributable to ordinary shareholders and shareholders’ funds remain unchanged. The Company is classed as an investment fund and as such has the option, which it has taken, not to present a cash flow statement. A cash flow statement is not required when an investment fund meets all the following conditions: substantially all investments are highly liquid and are carried at market value, and where a statement of changes in equity (in these financial statements it is called the Reconciliation of Movements in Shareholders’ Funds) is provided. The accounting policies applied to these financial statements are consistent with those applied for the year ended 31 March 2015, apart from a revision to cash which is now defined as cash and cash equivalents. Note 1(D) sets out the accounting policy for cash and cash equivalents. No other accounting policies have changed as a result of the application of FRS 102, amendments to FRS 102 (see below) and the revised SORP.

Amendments to FRS 102 – Fair value hierarchy disclosures (March 16) amends paragraphs 34.22 and 34.42 of FRS 102, revising the disclosure requirements for financial instruments held at fair value to align these with the disclosure requirements of EU-adopted IFRS. These amendments become effective for accounting periods beginning on or after 1 January 2017. The Company has chosen to early adopt these paragraphs. There are no accounting policy or disclosure changes as a result of this adoption.

B.         Foreign Currency

(i)         Functional and presentational 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

The Company has chosen to apply the provisions of sections 11 and 12 of FRS102 in full in respect of the financial statements.

(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 expire.

(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.         Cash and cash equivalents

Cash and cash equivalents may comprise cash (including short term deposits which are readily convertible to a known amount of cash and are subject to an insignificant risk of change in value) as well as cash equivalents, including money market funds. Investments are regarded as cash equivalents if they meet all of the following criteria: highly liquid investments held in the Company’s base currency that are readily convertible to a known amount of cash, are subject to an insignificant risk of change in value and provide a return no greater than the rate of a three-month high quality government bond.

E.         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.

F.         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.

G.         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 and losses on loan relationships, as the Company is unlikely to have sufficient future taxable revenue to offset against these.

H.         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 investments
UK dividends 7,237 6,543
UK special dividends 312 374
UK unfranked investment income 229 422
7,778 7,339
Other income
Underwriting commission 72
Total income 7,778 7,411

Special dividends of £85,000 (2015: £291,000) have been recognised in capital.

3. Investment Management Fee

This note shows the fees paid to the Manager, which were calculated monthly.

2016 2015
Investment management fee 526 526 1,052 607 607 1,214

Details of the management agreement are disclosed in the Directors' Report. At 31 March 2016, £83,000 (2015: £104,000) 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.

2016 2015
Directors’ emoluments 129 129 118 118
Auditor’s remuneration
- for audit of the annual financial statements 23 23 24 24
- other services relating to taxation compliance 6 6
Other expenses 233 233 166 166
385 385 314 314

The Director’s Remuneration Report provides further information on Directors’ emoluments.

Auditor’s remuneration amounts exclude VAT. The VAT is included in other expenses. Tax compliance services are provided by Grant Thornton UK LLP who were the Company’s auditor in 2015.

Included within other expenses is £12,000 (2015: £11,000) of employer’s National Insurance payable on Directors’ emoluments. As at 31 March 2016, the amounts outstanding on Directors’ emoluments and employer’s National Insurance was £13,000 (2015: £13,000).

5. Finance costs

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

2016 2015
Interest on overdraft 104 104 208 92 92 184

6. Tax on Ordinary Activities

As an investment trust the Company pays no tax on capital gains. The Company also pays no tax on income as most of its income is non-taxable UK dividend income and any taxable income is 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 (2015: nil) as allowable expenses exceed taxable income.

2016 2015
£’000 £’000
Total return on ordinary activities before taxation (2,970) 17,342
Theoretical tax at the current UK Corporation Tax rate of 20% (2015: 21%) (594) 3,642
Effects of:
– non-taxable (losses)/gains on investments 1,838 (2,384)
– non-taxable UK dividends (1,527) (1,514)
– expenses in excess of taxable income 283 256
Actual tax amount

Factors that may affect future tax charges

The Company has cumulative surplus management expenses and losses on loan relationships of £22,919,000 (2015: £21,502,000) that are available to offset future taxable revenue. A deferred tax asset of £4,125,000 (2015: £4,300,000) measured at the standard prospective rate of corporation tax of 18% (2015: 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 on 58,551,530 (2015: 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 distribution of income less expenses to shareholders. The Company pays four dividends a year.

2016 2015
Dividends paid and recognised in the year: pence £’000 pence £’000
Final paid in respect of previous year 3.75 2,196 3.65 2,137
First interim paid 2.15 1,259 2.10 1,229
Second interim paid 2.15 1,259 2.10 1,229
Third interim paid 2.20 1,288 2.15 1,260
10.25 6,002 10.00 5,855
Return of unclaimed dividends from previous years (16)
10.25 6,002 10.00 5,839
2016 2015
Dividends payable in respect of the year: pence £’000 pence £’000
First interim paid 2.15 1,259 2.10 1,229
Second interim paid 2.15 1,259 2.10 1,229
Third interim paid 2.20 1,288 2.15 1,259
Proposed final 3.80 2,225 3.75 2,196
10.30 6,031 10.10 5,913

The proposed 2016 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 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 185,851 194,683
Opening valuation 194,683 185,989
Movements in year:
Purchases at cost 20,388 18,065
Sales – proceeds (20,032) (20,723)
Sales – net realised gains 2,248 4,949
Movement in investment holding gains (11,436) 6,403
Closing valuation 185,851 194,683
Closing book cost (122,603) (119,999)
Closing investment holding gains 63,248 74,684
Net realised gains in year 2,248 4,949
Movement in investment holding gains (11,436) 6,403
Total (losses)/gains in year (9,188) 11,352

The transaction costs included in gains on investments amount to £115,000 (2015: £85,000) on purchases and £37,000 (2015: £24,000) 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 1,269 1,085
1,269 1,480

11. Creditors: amounts falling due within one year

Creditors are amounts the Company owes, and includes any overdraft and any amounts due to brokers for the purchase of investments or amounts owed to suppliers, such as the Manager and auditor.

Bank overdraft 14,877 14,938
Accruals 182 192
15,059 15,130

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 17 September 2016. 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.

2016 2015
number £’000 number £’000
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.

The Directors’ Report on page 32 sets out the rights and restrictions attaching to the shares.

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 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. The revenue reserve shows the net revenue retained after payment of dividends. Reducing the balance sheet revenue reserve by the proposed final dividend of £2,225,000 (see note 8) results in a revenue reserve available for future distributions of £3,858,000.

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 to shareholders at the year end were as follows:

2016 2015
Net asset value
per share
Net assets
Net asset value
per share
Net assets
Ordinary shares
– Basic 293.9 172,061 309.2 181,033

Net asset value per ordinary share is based on net assets at the year end and on 58,551,530 (2015: 58,551,530) ordinary shares, being the number of ordinary shares in issue at the year end.

15. 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 and 14. 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 24. 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 follow.

15.1     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, as disclosed in the Board Responsibilities on page 25. No derivative or hedging instruments are utilised to manage market risk. Gearing is used to enhance returns, but this also increases the Company‘s exposure to market risk and volatility.

15.1.1     Currency risk is not significant for the two years under review as the Company invests principally in UK equities traded on the London Stock Exchange. The Company received non-sterling dividends that represented 14.0% of total investment income in the year (2015: 12.4%).

15.1.2     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 £14,877,000 (2015: £14,938,000). 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 annual return of £250,000 (2015: £250,000).

The Company can invest in fixed income securities and at the year end the level of exposure was £1.6 million (2015: £3.2 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 £39,000 (2015: £117,000). The Company had no cash flow exposure to floating interest rate assets.

15.1.3     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 companies’ 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 £18.6 million (2015: £19.5 million) respectively.

15.2   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.

          Liquidity risk exposure: 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.

15.3   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 bonds that are investment grade, or not significantly below. 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.

16. Fair Value

Fair Values of Financial Assets and Financial Liabilities

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 102 as amended for fair value hierarchy disclosures (March 16) sets out three fair value levels. These are:

Level 1 – The unadjusted quoted price in an active market for identical assets or liabilities that the entity can access at the measurement date.

Level 2 – Inputs other than quoted prices included within Level 1 that are observable (ie developed using market data) for the asset or liability, either directly or indirectly.

Level 3 – Inputs are unobservable (ie for which market data is unavailable) for the asset or liability.

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.

The valuation techniques used by the Company are explained in the accounting policies note. All of the equity investments are deemed to be Level 1. Due to less visibility on prices for the fixed income investments, these are reported as Level 2; these represented 0.9% (2015: 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.

17. Capital Management

The Company’s total capital employed at 31 March 2016 was £186,938,000 (2015: £195,971,000) comprising borrowings of £14,877,000 (2015: £14,938,000) and equity share capital and other reserves of £172,061,000 (2015: £181,033,000).

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 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 8.6% (2015: 8.3%) 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 and 14. 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 lender. The Board regularly monitors, and the Company has complied with, the externally imposed capital requirements. This is unchanged from the prior year.

18. 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.

19. 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’ emoluments and interests have been disclosed on pages 36 and 37 with additional disclosure in note 4. No other related parties have been identified.

Details of the Manager’s services and fees are disclosed in the Directors’ Report on page 30, and in note 3.

20. 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 Of Annual General Meeting

NOTICE IS GIVEN that the Annual General Meeting (AGM) of Invesco Income Growth Trust plc will be held at 1st Floor, 43-45 Portman Square, London W1H 6LY, on 27 July 2016 at 3.00 pm for the following purposes:

Ordinary Business

1.         To receive the Annual Financial Report for the year ended 31 March 2016.

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

3.         To declare a final dividend as recommended.

4.         To elect Mark Dampier a Director of the Company.

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

6.         To re-elect Jonathan Silver a Director of the Company.

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

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

Biographies of Directors seeking re-election are shown on page 20 of the annual financial report.

Special Business

To consider and, if thought fit, to pass the following resolutions of which resolution 9 will be proposed as an ordinary resolution and resolutions 10, 11 and 12 will be proposed as special resolutions:

9.         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.

10. 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 the preceding resolution 9 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.

11. 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’).

Provided always that:

(i)      the maximum number of Shares hereby authorised to be purchased shall be 14.99% of the Company’s issued ordinary shares on 27 July 2016, being the date of the AGM (equivalent to 8,776,874 shares at 15 June 2016);

(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.

12. 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.

By order of the Board

Invesco Asset Management Limited

Company Secretary

Dated this 16 June 2016


This annual financial report announcement is not the Company's statutory accounts. The statutory accounts for the year ended 31 March 2015 have been delivered to the Registrar of Companies. The statutory accounts for the financial year ended 31 March 2016 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 2015 and for the year ended 31 March 2016 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 2016


Andrew Watkins            Tel – 020 3753 1000
Paul Griggs                                  “

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