Information  X 
Enter a valid email address

Invesco Inc Grth Tst (IVI)

  Print      Mail a friend       Annual reports

Friday 03 July, 2020

Invesco Inc Grth Tst

Annual Financial Report

Invesco Income Growth Trust plc

Annual Financial Report Announcement

For the year ended 31 March 2020

Financial Information and Performance Statistics

Total Return(1)(2)(3) (includes net dividends reinvested)

Year Ended Year Ended
31 March 2020 31 March 2019
Net asset value (NAV) per ordinary share –17.3% +5.7%
FTSE All-Share Index(4) –18.5% +6.4%
Share price –13.6% +1.2%


At 31 March At 31 March Change
2020 2019 %
Capital Return
NAV(1) per ordinary share 248.2p 311.2p –20.2
FTSE All-Share Index(2) 3,107.4 3,978.3 –21.9
Share price(2) 217.0p 262.0p –17.2
Discount(1)(3) per ordinary share (12.6)% (15.8)%
Gross gearing(1) – excluding the effect of cash 4.3% 3.9%
Net gearing(1) – including the effect of cash 4.3% 3.9%


Revenue and Dividends(3)
Year Ended Year Ended Change
31 March 2020 31 March 2019 %
Net revenue after tax (£000) 6,513 6,997 –6.9
Revenue return per ordinary share 11.12p 11.95p –6.9
– first interim 2.50p 2.40p
– second interim 2.50p 2.40p
– third interim 2.55p 2.45p
– fourth interim 4.20p 4.20p
11.75p 11.45p +2.6
Retail Price Index(2) – annual change 2.6% 2.4%
Ongoing charges(1)(3) 0.71% 0.73%


(1) Alternative Performance Measure (APM). See Glossary of Terms and Alternative Performance Measures on pages 74 to 76 of the financial report for details of the explanation and reconciliations of APMs.

(2) Source: Refinitiv.

(3) Key Performance Indicator.

(4) The benchmark index of the Company.


Chairman’s Statement


Harold Macmillan is reputed to have responded to a question as to what could knock governments off course, with “Events, dear boy, events”. His perception remains as valid today as then, as we have just discovered with the Covid-19 outbreak. This event threw stock markets completely off course in the last weeks of our financial year and so too our Company which, up to that point, had been following a very promising course with positive returns, outperformance over most periods and a narrowing discount. In the event our NAV total return was down 17.3% for the financial year and our Share Price total return was down 13.6% as it benefited from the narrowing of the discount, and both were better than our benchmark’s decline of 18.5%. Whilst disappointing, these figures should be put into the longer-term context where over 10 years the comparable figures are NAV +80.6% and Share Price +83.6%, so comfortably outperforming the +53.6% from our benchmark. The credit for this goes to Ciaran who has been our Manager throughout this period. This strong performance also underlines that investing in a company like ours should only really be for the longer-term, rather than for too short-term time horizons. However, having just lived a locked down life where a week seems a long time and three months an eternity, where we have become fixated on the latest Covid-19 figures and the shape of the curve and how the stock market has behaved as if nothing had happened, then the previous figures are now of historic interest. The UK stock market has strongly recovered from its lows and as at 30 June 2020 the 10 years performance figures are NAV +114.3%, Share Price +103.3% and Benchmark +91.8%, so further underlining the long-term performance success of this Company and the benefit of the long-term view which is further highlighted in the chart below of the Company’s outperformance over the last twenty years too. Ciaran in his report gives greater detail as to what has been happening in our portfolio and how he has positioned it for the future.

Revenue & Dividends

In the last weeks of our financial year, many companies announced the cancellation or suspensions of their dividends in response to the effects of the Covid-19 crisis. A number of these were dividends that had already been declared and we were expecting to receive, so as a result for the year to 31 March 2020, our revenue return per share at 11.12p per share (2019: 11.95p) was lower than we had anticipated. So using our revenue reserves, we have declared a fourth interim dividend, of 4.20p per share which together with previously declared interim dividends of 7.55p, gives a total dividend per share for the year of 11.75p (2019: 11.45p). This is in line with the annualised inflation rate for the year to 31 March 2020 of 2.6% (as measured by RPI) and is consistent with our longer-term objective of growing the dividend at above the rate of inflation. This is also the 23rd consecutive year of dividend increases and maintains the Company as an AIC ‘dividend hero’. The fourth interim dividend will be paid on 24 July 2020 to shareholders on the register on 3 July 2020. The shares will be quoted ex-dividend on 2 July 2020.

Since the year end the number of companies cancelling or suspending their dividends has increased substantially and, as a result, we are now forecasting a substantial reduction in our income for the year to 2021, although this can only be a tentative forecast as we are only three months into the year. However, we recognise the importance of the dividends which we pay to our shareholders. So it is at times like this that the revenue reserves which we have been building up for such occasions, and if necessary the capital reserves, can be further deployed in helping us to meet our investment objective of growing, over time, our dividend above the rate of inflation. Whilst this is absolutely our goal, we cannot know with certainty whether we can achieve it until we discover the actual income that we will receive and the speed with which companies restore their dividends. So, we will continuously monitor this as the year progresses and take one step at a time. Notwithstanding this, it is our current intention to at least maintain the level of the first interim dividend due to be paid in October.

The Board

As I indicated in my statement last year, it was my intention to step down in 2020. This is still my intention; however, it will now be later in the year than I had originally anticipated. This is at the request of the Board who asked if I would remain in post in order to see through the Continuation Vote being proposed at the AGM, before handing over to my successor who will be announced in due course.

As I also indicated last year, there is a plan in place to refresh the Board in a phased way over the next few years and the first part of that process – finding a replacement for Jonathan Silver as Audit Chair – is currently in hand and expected to be completed before the end of this year, at which point the start of the next phase of the refreshment in finding a replacement for Roger Walsom will commence.

Having had the privilege to serve on a number of different investment trust boards over the last 30 years, as well as having been on the other side as part of the management team, I know from that experience the value in so many different ways that a board can add to a company like ours. Shareholders need be in no doubt that they have and continue to benefit from a board that not only carries out its duties diligently, but also robustly when this is required, as I am sure our Manager Invesco will attest to.

Share buybacks

The Board seeks permission from shareholders at each AGM (as we will be doing at this AGM) to be able to repurchase shares in the market at a discount, to be either held as treasury shares or for cancellation. Whilst the Board has used this power in the past, it has not done so in recent years despite the wide discount at which the shares have often traded. This may appear surprising considering the desire to see the discount reduced and given that it would also enhance the NAV. However, although the Board has kept this under very active consideration and discussed the matter frequently with its advisors, it has so far concluded that to achieve a significant and sustainable reduction in the level of the discount would require such a significant capital commitment that it was not in the best financial interests of the Company and would also reduce the marketability of the shares to the disadvantage of shareholders. The Board will continue to keep this under regular review, particularly in light of the outcome of the Continuation Vote, and will not hesitate to utilise it if it concludes that it’s required, is likely to have the desired beneficial effects and will be in the best interests of the Company to use its valuable capital in this way.


As I prepare to step down from fifty years of ‘front line’ investment activity during which time I have lived through more bear markets and crises than I care to remember, I have learnt four key things. First, whatever people may think at the time, it is never different this time. Bull markets always lead to a bear market which always leads to another bull market and so on. Their lengths and the causes of their tipping points may be different, but they come round time and time again. Second, events happen and they are usually unexpected and in the memorable words of Donald Rumsfeld are usually caused by the “known unknowns”. So do not try to be too clever, save regularly (the wonders of ‘pound cost averaging’) and invest with a long-term horizon, rather than discovering that you may not be clever enough to invest successfully with a short-term horizon. Thirdly, there is no better investment vehicle to invest through than the investment trust, with all the benefits of its closed-end structure, ability to gear and, importantly, to have revenue reserves. Benefits which sadly too many investors have discovered over the last year that their chosen investment vehicle did not have. If it trades at a discount occasionally then great, as so much more attractive to buy on a discount than a premium! Lastly, despite all my experience, the last thing which I have learnt is that my views on the outlook are really no better than yours, but what I have learnt is that not trying to be too clever, investing with a longer-term horizon and utilising investment trusts, like this Company, has served me very well as I prepare for my dotage. I remain confident that under Ciaran’s management this Company will continue to meet its investment objectives of growing the income and capital in real terms over the longer-term and will continue to serve me and all other shareholders well into whatever the future may hold.

Continuation Vote

Resolution 12 in the Notice of Meeting is to approve the Company’s continuation and I thought it would be helpful to explain the background to this resolution.

As shareholders will be aware, the Company had been trading on a stubbornly wide discount for some time, to the frustration of not only the Board but also many shareholders. There were several factors that lay behind this and whilst your Board has been very active in trying to overcome those where it had some leverage, such as increased pressure on Invesco to improve performance, improve marketing etc, a number of the factors were less easily surmountable. For instance, although the Company’s discount was much wider than the Income Growth sector’s average, the sector was out of fashion with investors during most of this period, although it is encouraging that since the Covid-19 crisis, this seems to be changing and investors are again recognising the sector’s attractions. At the same time, Ciaran, our portfolio manager, has recently been appointed co-manager of the flagship UK equity ICVC funds managed by Invesco and our Company will shortly be the only Invesco-managed investment trust in the UK Equity Income sector, so we will be able to benefit from a higher profile than we have previously and look forward to the benefits that this will hopefully bring.

However, before these more positive recent developments, your Board had concluded from their discussions with and feedback from shareholders, particularly the larger ones on our register, that although frustrated by the wide discount, they were supportive of the status quo and were more patient that the performance would improve, particularly as value investing recovered, and so the discount would reduce naturally. On the other hand, there was clearly also a number, particularly amongst some of the smaller shareholders, who did not share this patience for the discount to narrow naturally and wanted to see action, such as share buybacks, being taken to reduce it. As I set out earlier, the Board did not see share buybacks as likely to be effective or in the best interests of the Company. So, in light of these divergent views, the Board decided that it would be appropriate to put a Continuation Vote to shareholders at the AGM. This will allow all shareholders a say in the future of the Company and give them an opportunity to clearly indicate their view on the continuation of the Company.

Therefore, an Ordinary Resolution that the Company should continue in its present form is being proposed at the AGM. This requires a simple majority to be passed.

Whatever the actual result of the Continuation Vote will be, the Board will assess the votes cast so as to help them establish the best way forward. However, if the resolution is defeated then this would signal the end of the Company in its present form. In these circumstances the Board will immediately work with its advisors to bring forward proposals as soon as is practical, for the best way forward for the Company. These could include an option for shareholders either to remain invested broadly as at present, although not necessarily with the same Manager, fee basis, level of income or closed-ended structure, or to take cash near to NAV (net of costs and subject to possible liabilities to tax on capital gains).

The Board urges all shareholders to vote in favour of a continuation of the Company which has delivered on its investment objectives to shareholders over the longer-term (as clearly shown in the charts and tables in the previous pages), and there is every reason to believe that it will continue to do so in the future. The Board will be voting their combined holding of 113,129 shares in favour. However, the Board recognises that some shareholders may have misgivings that a wider discount could materialise again in the future or performance will not improve. Therefore, if the Continuation Vote is passed, the Board undertake that a similar Continuation Vote will be proposed every 2 years after the forthcoming AGM. Shareholders should be clear that to vote against this resolution could lead to the reconstruction of the Company which would result in substantial changes and costs as mentioned earlier. Shareholders should, therefore, seek their own independent advice if they are uncertain.


The Company’s AGM will be held at Invesco’s office, 43-45 Portman Square, London W1H 6LY on 10 September 2020 at 11am. However, although the Government has begun to ease the Stay at Home measures introduced in response to Covid-19, restrictions on gatherings are still in place and our meeting venue remains closed. Accordingly, we feel compelled to plan for the meeting to be held in a different format with attendance limited to the minimum quorum required by the Company’s Articles. For that reason, this year’s AGM will be restricted to the formal business, set out in the Notice of Meeting on pages 68 to 70, and there will be no presentation by the Portfolio Manager. Shareholders and their proxies are advised not to seek to attend the AGM, since we expect they will not be admitted to the venue. Rather, it is recommended that shareholders exercise their votes by means of registering them with the Company's Registrar ahead of the meeting, online or by completing paper proxy forms, and appoint the Chairman of the meeting as their proxy. A video presentation from Ciaran Mallon will be made available on the Company’s web page on the Invesco website in lieu of the usual Portfolio Manager presentation at the meeting. In the unlikely event of the situation changing, the Company will update shareholders through an announcement to the London Stock Exchange and on the Company’s web page on the Invesco website. In any event, we also still wish to engage with shareholders so if you have questions, on the business of the meeting or otherwise, please address them to the Company Secretary at [email protected] or, in hard copy, to 43-45 Portman Square, London W1H 6LY. The Company Secretary will ensure that questions received will be replied to by the appropriate person after the AGM and made available on the Company’s web page on the Invesco website.

The Directors have carefully considered all the resolutions proposed and believe them to be in the best interests of shareholders and the Company as a whole. Accordingly, the Directors recommend that shareholders vote in favour of each resolution, as will the Directors in respect of their own shareholdings.

Hugh Twiss MBE


2 July 2020


Manager’s Report

For the year ended 31 March 2020

Market review

The UK equity market provided a negative return of –18.5% in the twelve months to 31 March 2020, as measured by the Company’s benchmark, the FTSE All-Share Index. It was a volatile twelve month period dominated by concerns over the outlook for global economic growth, Brexit negotiations and the UK General Election. These concerns were overwhelmed however, in the final three months of the year by the impact of the Covid-19 pandemic. 2020 has delivered the market shock that no one could possibly have predicted. The UK equity market fell by over 25% in the quarter to 31 March 2020, posting its biggest quarterly drop for more than three decades as the global economic costs of the Covid-19 pandemic continued to mount. Between 23 January 2020, the date that the World Health Organisation (WHO) first met in Geneva to discuss the gathering crisis, and the low point on 23 March, the FTSE All-Share Index fell by 34.1%. Extreme levels of volatility were witnessed with large intraday swings in equity prices.

Prior to the pandemic, there had been clear grounds for greater optimism signalled by a marked shift in soft and hard economic data. The uncertainty that had lingered over the UK since the 2016 EU referendum looked to be lifting and there were encouraging signs about the direction of the UK economy. As the scale of the pandemic unfolded, however, governments around the world restricted the movement of people which brought immediate and severe disruption to economic activity. Governments quickly launched stimulus measures on an unprecedented scale, whilst central banks cut interest rates to support economic activity. The strength and depth of the measures announced in the UK by the Chancellor and the Bank of England should provide material support to employment, income and bank lending to the real economy, which will be of great benefit in enabling many businesses to navigate through what will be an extremely tough period. In the short-term there is considerable uncertainty, and this has been reflected in equity market movements.

Portfolio Review

The Company’s net asset value, including reinvested dividends, delivered a return of –17.3% during the period under review, marginally outperforming the benchmark, the FTSE All-Share Index which delivered a total return of –18.5% over the same period.

Performance of the portfolio had been encouraging in the latter stages of 2019, particularly in the weeks immediately after the UK General Election. But as the disruption around Covid-19 became clear and the potential impact was digested the market started to fall. The portfolio had been carefully positioned with an element of caution factored in given the headwind of the UK exiting the EU. Whilst the portfolio showed some resilience versus the benchmark at the end of January as the crisis was unfolding, it was unfortunately short lived.

The strongest performing sector in the portfolio over the twelve month period has been utilities. Post the general election the threat of nationalisation by a far-left Labour government has been removed and these companies saw this relief materialise in an upward movement of their share prices. Since the post-election rally, these utility companies (Pennon, Severn Trent, National Grid, SSE and United Utilities) have continued to perform well. They have an attractive yield and provide defensive qualities in a challenging environment. Whilst there is some risk from regulators that might be disinclined to see dividends paid to shareholders, as customers struggle to pay their bills in a virus impacted world, I believe this risk to be low.

The exception to the strong performances in utilities was the holding of Drax which traded broadly sideways for the majority of the twelve month period before falling in March as a result of reduced power demand as the country locked down and amid concerns over increased bad debts from business customers in a virus impacted environment.

Elsewhere in the portfolio strong performances were seen from two of the largest holdings, Experian and RELX. The Experian share price has been resilient over the last twelve months but the share price was extremely volatile in March. Despite this the holding remained a strong performer for the portfolio over the period and the company has a resilient and cash generative model with a diverse base of drivers of growth within the business, which should stand it in good stead for the continued disruption in the coming months. In the last recession the business performed well and it is in an even stronger position now. RELX, which provides information and analytics to businesses, performed well for the majority of the period before the impact of the virus. The majority of the business should be resilient during this market volatility but the smaller exhibitions part of the business which accounted for 16% of revenues last year has been severely impacted by the lockdown.

Softcat released interim results mid March stating that trading has been in line with expectations, but given the uncertainty of the length of the impact of the virus the company thought it prudent to protect its cash position and to maintain flexibility around the timing of dividend payments in relation to the current financial year. As such they decided to cancel the interim dividend but will take the opportunity to review this decision later in the year as the impact of the virus becomes clearer. I believe that the company has been slightly over cautious in this decision and fully expect the dividend to be restored in due course. One should remember that if a dividend is not paid, this money does not disappear, rather it remains on the balance sheet available for distribution at a later date, or indeed it remains as cash in the business which should translate into the share price. Following a period of strength in the share price I reduced the holding in early February. Other strong performances in the portfolio were seen from Ferguson and Smith & Nephew.

In contrast, the portfolio’s holdings of Informa and Whitbread have detracted from performance as the virus poses serious challenges to their businesses. Informa which provides business intelligence and academic publishing services, for the most part had an uneventful year, but the virus has significantly impacted the group’s events-related businesses. Other parts of the business remain resilient but in order to ensure stability for the business the company has suspended the dividend, applied for the Bank of England’s Covid-19 Corporate Financing Facility (CCFF) and has raised capital from the equity market by placing new shares. I believe that the company is doing the right things by delivering meaningful cost savings, freezing recruitment and senior leadership are sacrificing part of their salaries. All things considered I am content to hold the position as the actions taken by the management team leave the company in a stronger position financially, and well placed for the spring back in economic activity as the lock downs ease.

Whitbread, which is probably best known for its Premier Inn brand, has effectively closed for business. As a result of the lockdown all its hotels in the UK and Germany have closed, together with its pubs and restaurants. The majority of staff have been furloughed on full pay. The business had enough liquidity to see it through twelve months of closure but subsequently announced a rights issue so that it may press ahead with its structural growth ambitions and win market share in the UK and Germany. The scale of their portfolio means that when they are able to reopen, they can do this in a staged way with not all hotels in each location opening to begin with. The company started the year with a strong balance sheet and access to significant liquidity. There is material headroom on their funding facilities, and they are able to access the CCFF should they require additional financing. In addition, the business is backed by a valuable freehold property estate. However, given the unprecedented situation they have taken swift action to reduce costs and the Board has decided not to declare a dividend for the company’s 2020 financial year. Whilst the business is closed for now, when it reopens, I am reassured that the very experienced management team will do so in a disciplined way to maximise opportunity.

Other detractors over the period have been Young & Co’s Brewery (Youngs) and Bunzl. Both companies saw their share prices trade within a relatively narrow price range over the twelve-month period leading up to the crisis but suffered falls as events unfolded. As the country went into lockdown, Youngs closed their pubs and furloughed the majority of their workers. The company has accessed the CCFF and has decided not to pay its final dividend. Youngs has a strong balance sheet supported by a predominantly freehold estate and has enough headroom to withstand a long period of closure. Bunzl has several divisions to its business with each experiencing varying degrees of impact from the crisis. The food service and retail sectors have been badly affected as offices, conferences and canteens have been closed and they expect cleaning, hygiene and safety areas to vary depending on the end markets served. The grocery and healthcare divisions of the business are expected to have a robust performance but due to uncertainty the company has cancelled the dividend.

Being underweight oil was a positive for the relative performance of the portfolio to the benchmark as oil prices plummeted and some of the major oil companies cut their dividends. Not holding Glencore, Lloyds Bank or Barclays was also helpful for relative performance, although the portfolio does hold Royal Bank of Scotland (RBS) which was a detractor over the period.

There were no new holdings introduced to the portfolio over the period. Notable additions to existing holdings included Drax, GlaxoSmithKline, HSBC, National Grid, RBS, Royal Dutch Shell and Vodafone. G4S has not performed well and the holding has been reduced in recent weeks alongside BT, Aviva, InterContinental Hotels, Legal & General and Softcat. Meanwhile Imperial Brands has been sold and the holding of Merlin Entertainments was bid for and exited the portfolio. Subsequent to the period end the remaining holdings of G4S and BT have been sold.

Outlook & portfolio strategy

It has become increasingly apparent that Covid-19 will have a significant and widespread impact on global as well as UK economic growth. The scale and duration of disruption remains subject to great uncertainties. The restrictions put in place since March to limit the spread of Covid-19 will naturally have a large impact on a wide range of economic indicators. As the effects of the virus start to fade, the measures implemented by the Government and the Bank of England will, in my view, encourage the stabilisation of economic activity in the second half of 2020 and the resumption of economic growth in 2021.

The FTSE All-Share seems to have shrugged off many of the concerns around the impact on future growth and earnings, the market deciding instead that the recovery will be more expeditious than previously thought, and the Index has rallied around 30% from its low point in March. There is no doubt that the stimulus measures put in place have had a significant impact and investors have pinned their hopes on a swift economic rebound. I think it sensible to pause and digest the fact that although the lockdown is easing and some activities normalising, the UK is still expected to face a severe recession.

In recent weeks I have had many conversations with the management teams of the companies that I hold and those that I am considering as potential new holdings. I am, on the whole, reassured by these conversations, finding that company behaviour is instructive; by that I mean that they are preparing for weaker trading, in some cases for many months. I am further comforted that they are conserving cash and, in a few cases, raising equity where appropriate. I believe that the next twelve to eighteen months will bring continued disruption to many businesses, but in the longer-term I do find myself more positive that markets will recover and they will take any encouraging news of a new treatment or vaccine positively.

I strongly believe that whilst I am quite cautious about the immediate outlook, the portfolio has both highly defensive companies for a Covid-19 world, and a number of companies which, while very sound normally, are under pressure currently. These companies should recover well and become strong performers in the future. I have removed companies that I believe to have been more susceptible to the weaker environment, those that have a weaker business model, balance sheet or management team and have focused on stronger and more resilient businesses. At the same time, I am alert to new opportunities that may present themselves and having kept gearing low going into this crisis I have an additional tool at my disposal.

The cancellation or reduction of dividends is an inevitable result of this crisis as companies seek to sustain liquidity within their businesses. Whilst one would prefer this not to be the case, in most instances it is prudent given the unknown length and depth of this disruption. As I have mentioned briefly earlier, the money set aside for dividends does not disappear when the dividend is reduced or cancelled. It stays within the business enhancing the balance sheet, ready for distribution at a later date should the crisis be shorter and less disruptive than imagined or should the management have turned out to be more conservative than was warranted. I believe that once the environment normalises businesses that have not been casualties of the crisis will quickly return to pre-crisis activity levels and thus will be able to restart their dividend payments.

For the time being I think it sensible to remain conservative in my investment approach and having kept gearing at a low level for some months, notwithstanding some brief elevation as a result of extreme market volatility, I see no reason to adjust this currently. Having made some changes to the portfolio in recent months I remain confident in the long-term potential of the current holdings. Whilst it is difficult to be optimistic during such a challenging environment, I can see through this disruption to a time when these businesses are back to a new normal.

Ciaran Mallon

Portfolio Manager

2 July 2020


Business Review

Purpose, Strategy and Business Model

Invesco Income Growth Trust plc is a UK investment trust company and its investment objective is set out below. The Company’s purpose is to invest its shareholders’ capital professionally and cost effectively in a diversified portfolio, in order to provide shareholders with sustainable long-term returns.

The strategy the Board follows to achieve the investment objective is to set investment policy and risk guidelines, together with investment limits, and to monitor how they are applied. These have been approved by shareholders and are set out below.

The business model the Company has adopted to achieve its investment objective has been to contract investment management and administration to appropriate external service providers. The Board has oversight of the Company’s service providers and monitors them on a formal and regular basis. The Board has a collegiate culture and pursues its fiduciary responsibilities with independence, integrity and diligence, taking advice and outside views as appropriate and constructively challenging and interacting with service providers, including the Manager.

The principal service provider at present is Invesco Fund Managers Limited (IFML or the Manager). Invesco Asset Management Limited (IAML), an associate company of IFML, currently manages the Company’s investments and acts as company secretary under delegated authority from IFML. References to the Manager in this annual financial report should consequently be considered to include both entities. The Manager provides company secretarial, marketing and general administration services including accounting and manages the portfolio in accordance with the Board’s strategy. The portfolio manager responsible for the day to day management of the portfolio is Ciaran Mallon.

In addition to the management and administrative functions of the Manager, the Company has contractual arrangements with Link Asset Services to act as registrar and The Bank of New York Mellon (International) Limited (BNYMIL) as depositary and custodian.

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. The Company is also permitted to invest up to 20% of its gross assets in overseas-listed equities and securities although the Manager has not utilised this permission to date. 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. 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 Portfolio 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, subject to approval by the Board; 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).

Dividends and Dividend Payment Policy

The Board aims to pay a sustainable level of base dividend that grows above the rate of inflation and so provides 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.

The Board’s Dividend Payment Policy is for the Directors to declare four dividends in respect of each accounting year, with one payment in respect of each calendar quarter. Currently, payments are made in October, December, March and July. Additional special dividends may be declared, at the discretion of the Directors.

For the year ended 31 March 2020, three interim dividends have been paid and the Directors have declared a fourth interim dividend, in lieu of a final dividend, of 4.20p (2019: 4.20p) per share. The first two interim dividends were of 2.50p (2019: 2.40p) each per share and were paid on 11 October 2019 and 27 December 2019. The third interim dividend was 2.55p (2019: 2.45p) and was paid on 13 March 2020. The fourth interim dividend will be paid to shareholders on 24 July 2020. In total, the Directors have declared dividends of 11.75p, an increase of 2.6% 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 4.9%, a premium of 0.5% over the average yield of the FTSE All-Share Index over the same period, which was 4.4%. 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. 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 2020, the share price and the net asset value (NAV) per share were 217.0p and 248.2p respectively. The comparable figures for 31 March 2019 were 262.0p and 311.2p.

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 –17.3% compared with a total return of –18.5% for the FTSE All-Share Index, –17.4% for the FTSE All-Share 5% Capped Index, –18.4% for the FTSE 100 Share Index and –18.4% 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 2020, out of the 24 investment trusts ranked within the AIC UK Equity Income sector, the Company was ranked 7th over one year, 11th over three years and 12th over five years by NAV performance (source: J.P. Morgan 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 5.1% and 17.9%. At the year end the discount was 12.6% (2019: 15.8%) and the average discount of the sector was 3.0% (2019: 3.5%) (source: J.P. Morgan Cazenove).

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

The Company does not currently hold shares in treasury. However, if the Company held shares in treasury and 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 net asset value during the year, expressed as a percentage. The ongoing charges figure for the year was 0.71% (2019: 0.73%).

Financial Position

At 31 March 2020, the Company’s net assets were valued at £145 million (2019: £182 million). The portfolio consisted wholly of equity investments at the year end.

The Company has an overdraft facility, which is limited to the lesser of 25% of net asset value and £25 million and total assets will not fall below £75 million. At the balance sheet date, drawings were £6.3 million (2019: £7.1 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 Manager’s Report section of this Strategic Report on pages 10 to 12. 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 principal and emerging risks the Company faces, on behalf of the Board (see Audit Committee Report on pages 30 and 31). Attention is also drawn to what is said under the Viability Statement on page 17.

The following are considered to be the most significant risks to shareholders in relation to their investment in the Company and how they are being managed or mitigated. 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. The extreme volatility experienced in March 2020 from the market reaction to the Covid-19 virus exemplifies this risk, which has had a marked effect on both the valuation of the Company’s portfolio of investments and the discount to net asset value at which the Company’s shares trade.

Pandemic (Covid-19) Risk

As the impact from Covid-19 continues, the Directors are monitoring the situation closely, together with the Manager and other service providers. A range of actions has been implemented to ensure that the Company and its service providers are in a good position to continue to run their business even if there is prolonged disruption. The Manager’s business continuity plans are reviewed on an ongoing basis and the Directors are satisfied that the Manager has in place robust plans and infrastructure to minimise the impact on its operations so that the Company can continue to trade, meet regulatory obligations, report and meet shareholder requirements.

The Manager has mandated work from home arrangements and implemented split team working for those whose work is deemed necessary to be carried out on business premises. Any meetings are being held virtually or via conference calls.

The Company’s other service providers have similar working arrangements in place.

Investment Risk

There is a risk that the performance of stocks selected for the portfolio might disappoint. This could significantly increase risks to the liquidity and price of certain stocks under certain scenarios and market conditions. 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 2020 is set out on pages 21 and 22.


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 will enhance the total return on the shares where the return on the Company’s underlying securities is positive and exceeds the cost of borrowing, it will have the opposite effect where the underlying return is negative. 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 73.

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 designed and managed for long-term investment. 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. The Directors take a long-term view in their stewardship of the Company, as does the portfolio manager in his management of the portfolio. The Company has delivered on its objective over the longer-term. This assessment of the Company’s viability is based on the assumption that the resolution for the continuation of the Company which the Directors have decided to propose at the forthcoming AGM will be passed, and therefore takes a long term view which the Directors consider for these purposes to be at least five years. The actual outcome of the vote on continuation will depend on the views of shareholders at the time, which will be influenced by the Company’s performance, sympathy with the investment strategy being followed and external factors. The life of the Company is not intended to be limited to five years 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 15 to 17, together with mitigating factors. 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. The risks of failure to meet the Company’s investment objective, and contributory market and investment risks were considered to be of particular importance. These risks have been a particular focus during the Covid-19 disruption this year and the outlook for economic growth and its effect on UK companies’ earnings gives rise to greater than usual uncertainty for performance.

However, the Company’s own financial position is robust: operating expenses (including finance costs) were covered more than five times by income in the year under review; there are no long term liabilities and outstanding debt was covered more than twenty times at the year end; the investments comprising the portfolio are currently all listed on the London Stock Exchange and readily realisable and their value greatly exceeds the value of all the Company's liabilities and annual operating costs. While there appears little or no prospect of the Company being unable to meet its financial obligations as they fall due, as at the date of this report there is material uncertainty over whether the continuation vote will be passed. This may cast significant doubt on the likelihood of the Company continuing as a going concern. Despite this material uncertainty the financial statements have been prepared on a going concern basis and, subject to that uncertainty, the Directors confirm that they have a reasonable expectation that, if the vote is passed, the Company will be able to continue in operation and meet its liabilities as they fall due over the five year period of assessment.

Board’s Duty to Promote the Success of Company

The Directors have a fiduciary duty to act, in good faith, for the benefit of shareholders taken as a whole. Section 172 of the Companies Act 2006 codifies this duty and also widens the responsibility to incorporate the consideration of wider relationships that are necessary for the Company’s sustainability. Using the terminology of the Act, the Directors have a duty to promote the success of the Company, whilst also having regard to certain broader matters, including the need to engage with employees, suppliers, customers and others, and to have regard to their interests. This is reflected in the summary of the Board’s responsibilities on pages 32 and 33.

In fulfilling these duties, and in accordance with the Company’s nature as an investment company with no employees and no customers in the traditional sense, the Board’s principal concern has been, and continues to be, the interests of the Company’s shareholders taken as a whole. Notwithstanding this, the Board has a responsible governance culture and also has due regard for broader matters so far as they apply. In particular, the Board engages with the Manager at every Board meeting and reviews the Company’s relationships with the other service providers, such as the registrar, depositary and custodian, at least annually. The Board continues to be content with the services provided by the Manager and other service providers.

Some of the key considerations for the Board during the year were:

• to challenge the Manager on performance and discount matters, which led to putting a vote to shareholders on the continuation of the Company. Discussions with major shareholders highlighted their continued support;

• to continue to grow the dividend in accordance with its policy to provide shareholders with dividend growth in excess of inflation over the longer-term;

• to consider a successor for the Chairman and the Board’s overall succession plan.

Shareholder relations are given a high priority by the Board. The prime medium by which the Company communicates with shareholders is through the annual and half-yearly financial reports, which aim to provide shareholders with a full understanding of the Company’s activities and its results. This information is supplemented by the publication of monthly factsheets and the NAV of the Company’s ordinary shares, which is published daily via the London Stock Exchange and on the Company’s section of the current Manager’s website at

Shareholders normally have the opportunity to communicate directly with the Directors at the AGM.

It is the intention of the Board that the annual financial report and the notice of the AGM be issued to shareholders so as to provide twenty working days’ notice of the AGM. Shareholders wishing to lodge questions in advance of the AGM are invited to do so, either on the reverse of the proxy card, via the current Manager’s website ( or in writing to the Company Secretary at the address given on page 73. At other times the Company responds to queries from shareholders on a range of issues.

There is a clear channel of communication between the Board and the Company’s shareholders via the Company Secretary. The Company Secretary has no express authority to respond to enquiries addressed to the Board and all such communication, other than junk mail, is redirected to the Chairman or Senior Independent Director as appropriate.

There is a regular dialogue with individual major shareholders to discuss aspects of investment performance, governance and strategy and to listen to shareholder views in order to develop a balanced understanding of their issues and concerns. The Manager also engages in a series of regional meetings throughout the year to promote the Company to institutional shareholders, analysts and potential investors. Ahead of the upcoming continuation vote at the AGM in September 2020, the Chairman has held meetings with a number of the largest shareholders to ascertain their support for voting in favour of the resolution. In normal circumstances, shareholders are invited to attend the AGM but this year, as explained in the Chairman's Statement, shareholders should lodge their questions to the Company Secretary at [email protected] or, in hard copy, to 43-45 Portman Square, London W1H 6LY. The Company Secretary will ensure that questions received will be replied to by the appropriate person after the AGM and made available on the Company’s web page on the Invesco website.

Shareholders can visit the Company’s section of the current Manager’s website ( in order to access copies of annual and half-yearly financial reports, pre-investment information, key information document (KID), factsheets, Stock Exchange announcements, schedule of matters reserved for the Board, terms of reference of Board Committees, Directors’ letters of appointment and proxy voting results.

Board Diversity

The Company’s policy on diversity is set out, under the Nomination Committee section, on page 35. The Board currently comprises six non-executive Directors of whom one is a woman, thereby constituting 17% female representation. Summary biographical details of the Directors are set out on page 26. The Company has no employees.

Environmental, Social and Governance (ESG) Matters

As an investment company with no employees, property or activities outside investment, environmental policy has limited application. A greenhouse gas emissions statement is included in the Directors’ Report on page 38. In relation to the portfolio, the Company has, for the time being, delegated the management of the Company’s investments to the current Manager, who has an ESG Guiding Framework which sets out a number of principles that are intended to be considered in the context of its responsibility to manage investments in the financial interests of shareholders.

The Manager is committed to being a responsible investor and applies, and is a signatory to, the United Nations Principles for Responsible Investment, which demonstrates its extensive efforts in terms of ESG integration, active ownership, investor collaboration and transparency. The Manager is also a signatory to the FRC Stewardship Code 2012, which seeks to improve the quality of engagement between institutional investors and companies to help improve long-term returns to shareholders and the efficient exercise of governance responsibilities.

The Henley investment team incorporates ESG considerations in its investment process as part of the evaluation of new opportunities, with identified ESG concerns feeding into the final investment decision and assessment of relative value. The portfolio managers make their own subjective conclusions about the ESG characteristics of each investment held and about the overall ESG characteristics of the portfolio, although third party ESG ratings may inform their view. Additionally, the Manager’s ESG team provides formalised ESG portfolio monitoring. This is a rigorous semi-annual process where the portfolio is reviewed from an ESG perspective.

Regarding stewardship, the Board considers that the Company has a responsibility as a shareholder towards ensuring that high standards of corporate governance are maintained in the companies in which it invests. To achieve this, the Board does not seek to intervene in daily management decisions, but aims to support high standards of governance and, where necessary, will take the initiative to ensure those standards are met. The principal means of putting shareholder responsibility into practice is through the exercise of voting rights. The Company’s voting rights are exercised on an informed and independent basis.

The Company’s stewardship functions have been delegated to the Manager, who has adopted a clear and considered policy towards its responsibility as a shareholder on behalf of the Company. As part of this policy, the Manager takes steps to satisfy itself about the extent to which the companies in which it invests look after shareholders’ value and comply with local recommendations and practices, such as the UK Corporate Governance Code. The Manager reports back regularly to the Board on its activities. A copy of the current Manager’s Stewardship Policy, which is updated annually, can be found at

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 2 July 2020

Invesco Asset Management Limited

Company Secretary


Investments in Order of Valuation

At 31 March 2020

UK listed ordinary shares unless otherwise stated

Value % of
Holdings Company Industry Sector £000 Portfolio
589,454 GlaxoSmithKline Health Care Pharmaceuticals & Biotechnology 8,926 5.9
792,794 Pennon Utilities Gas, Water & Multiutilities 8,606 5.7
365,864 Experian Industrials Support Services 8,236 5.4
427,643 RELX Consumer Services Media 7,405 4.9
138,310 Ferguson Industrials Support Services 6,990 4.6
240,367 British American Tobacco Consumer Goods Tobacco 6,627 4.4
657,215 National Grid Utilities Gas, Water & Multiutilities 6,218 4.1
126,964 Croda International Basic Materials Chemicals 5,420 3.6
233,819 Severn Trent Utilities Gas, Water & Multiutilities 5,329 3.5
1,143,574 HSBC Financials Banks 5,195 3.4
Top ten holdings 68,952 45.5
626,800 Young & Co’s Brewery– Non-VotingAIM Consumer Services Travel & Leisure 4,701 3.1
322,708 Royal Dutch Shell – B shares Oil & Gas Oil & Gas Producers 4,387 2.9
246,761 Bunzl Industrials Support Services 4,020 2.7
851,151 Informa Consumer Services Media 3,757 2.5
293,941 Compass Consumer Services Travel & Leisure 3,712 2.5
121,445 Whitbread Consumer Services Travel & Leisure 3,680 2.4
86,914 Next Consumer Services General Retailers 3,539 2.3
?626,800 Young & Co's Brewery– Non-VotingAIM Consumer Services Travel & Leisure 4,701 3.1
322,708 Royal Dutch Shell – B shares Oil & Gas Oil & Gas Producers 4,387 2.9
246,761 Bunzl Industrials Support Services 4,020 2.7
851,151 Informa Consumer Services Media 3,757 2.5
Top twenty holdings 111,380 73.6
436,960 Euromoney Institutional Investor Consumer Services Media 3,535 2.3
284,653 NicholsAIM Consumer Goods Beverages 3,416 2.2
2,569,847 Vodafone Telecommunications Mobile Telecommunications 2,903 1.9
1,253,862 Legal & General Financials Life Insurance 2,430 1.7
568,966 JTC Financials Financial Services 2,418 1.7
239,087 United Utilities Utilities Gas, Water & Multiutilities 2,159 1.4
207,361 Softcat Technology Software & Computer Services 2,150 1.4
318,103 Phoenix Financials Life Insurance 1,993 1.3
54,647 InterContinental Hotels Consumer Services Travel & Leisure 1,919 1.3
899,087 Jupiter Fund Management Financials Financial Services 1,798 1.2
Top thirty holdings 136,101 90.0
1,586,164 Royal Bank of Scotland Financials Banks 1,791 1.1
1,562,957 XPS Pensions Financials Financial Services 1,704 1.1
206,283 CVSAIM Consumer Services General Retailers 1,701 1.1
595,795 Aviva Financials Life Insurance 1,599 1.1
393,940 Treatt Basic Materials Chemicals 1,536 1.0
549,773 Essentra Industrials Support Services 1,445 1.0
1,083,538 BT Telecommunications Fixed Line Telecommunications 1,277 0.8
765,777 Drax Utilities Electricity 1,177 0.8
281,745 Ricardo Industrials Support Services 1,152 0.8
1,186,687 G4S Industrials Support Services 1,095 0.7
Top forty holdings 150,578 99.5
241,002 Chesnara Financials Life Insurance  702 0.5
Total Value Of Investments (41) 151,280 100.0

AIM Investments quoted on AIM.


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


2 July 2020


Financial Statements

For the year ended 31 March

Income Statement

2020 2019
Revenue Capital Total Revenue Capital Total
Notes £000 £000 £000 £000 £000 £000
(Losses)/gains on investments held at fair value 9 (36,091) (36,091) 3,182 3,182
Income 2 7,394 75 7,469 7,885 428 8,313
Investment management fee 3 (471) (471) (942) (490) (490) (980)
Other expenses 4 (375) (375) (378) (378)
Net return before finance costs and taxation 6,548 (36,487) (29,939) 7,017 3,120 10,137
Finance costs 5 (35) (35) (70) (20) (20) (40)
Return on ordinary activities before and after taxation for the financial year 6,513 (36,522) (30,009) 6,997 3,100 10,097
Return per ordinary share:
Basic 7 11.12p (62.37)p (51.25)p 11.95p 5.29p 17.24p

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 additional statement of other 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 of the Company. No operations were acquired or discontinued in the year.

Statement of Changes in Equity

Share Share Redemption Capital Revenue
Capital Premium Reserve Reserve Reserve Total
Notes £000 £000  000 £000 £000 £000
At 31 March 2018  14,638  40,021  2,310  114,721  7,016  178,706
Return on ordinary activities  3,100  6,997 10,097
Dividends paid 8 (6,575) (6,575)
At 31 March 2019 14,638 40,021  2,310  117,821  7,438  182,228
Return on ordinary activities (36,522) 6,513 (30,009)
Dividends paid 8 (6,880) (6,880)
At 31 March 2020 14,638 40,021  2,310 81,299 7,071 145,339

Balance Sheet

2020  2019
Notes £000 £000
Fixed assets
Investments held at fair value through profit or loss 9  151,280  188,308
Current assets
Debtors 10 493 1,166
Creditors: amounts falling due within one year
Other payables 11 (158) (179)
Bank overdraft 11 (6,276) (7,067)
(6,434) (7,246)
Net current liabilities (5,941) (6,080)
Net assets 145,339  182,228
Capital and reserves
Share capital 12 14,638 14,638
Share premium 13 40,021 40,021
Capital redemption reserve 13 2,310 2,310
Capital reserve 13 81,299  117,821
Revenue reserve 13 7,071 7,438
Shareholders’ funds 145,339  182,228
Net asset value per ordinary share
Basic 14 248.2p 311.2p

These financial statements were approved and authorised for issue by the Board of Directors on 2 July 2020.

Hugh Twiss MBE


Signed on behalf of the Board of Directors


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.

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 October 2019 (SORP).

The financial statements have been prepared on a going concern basis.

The Directors confirm that they have a reasonable expectation that the Company will be able to continue in operation and meet its liabilities as they fall due on the basis that the Company's investment portfolio (including cash) is sufficiently liquid and significantly exceeds all balance sheet liabilities and there are no unrecorded commitments or contingencies and the Company has significant headroom on its loan covenants. As such, the Directors believe the Company has sufficient liquidity to meet its liabilities for the next 12 months and that the preparation of the financial statements on a going concern basis remains appropriate.

However, as disclosed in the Notice of the AGM on pages 68 to 70, the Directors propose to bring forward a resolution at the next general meeting seeking confirmation from shareholders that they wish the Company to continue to operate as currently constituted. As at the date of this report, it is not possible to predict whether shareholders will vote for continuation of the Company at the AGM in September 2020. There is therefore a material uncertainty over the outcome of the continuation vote. The Directors recognise that this circumstance gives rise to an uncertainty which may cast significant doubt on the Company’s ability to continue as a going concern. The financial statements do not reflect any adjustments that would be required to be made, if they were prepared on a basis other than the going concern basis.

Further information is given in the Viability Statement on pages 17 and 18 and the Going Concern Statement on page 36.

The revised SORP issued in October 2019 is applicable for accounting periods beginning on or after 1 January 2019. As a result, the presentation of gains and losses arising from disposals of investments and gains and losses on revaluation of investments have now been combined, as shown in note 9 with no impact to the net asset value or profit/(loss) reported for both the current or prior year. No other accounting policies or disclosures have changed as a result of the revised SORP.

As an investment fund the Company 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 is provided.

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 the majority of 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 Section 11 and 12 of FRS 102 in full in respect of the financial instruments, which are explained below.

(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 have expired.

(iv) Trade date accounting

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

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

– Financial assets

The Company’s investments are classified as basic financial instruments and are measured at fair value through profit or loss as the investments are managed and their performance evaluated on a fair value basis in accordance with a documented investment strategy, and this is also the basis on which investment information is provided internally to the Board.

Financial assets measured at fair value through profit or loss are initially recognised at fair value, which is taken to be their cost, with transaction costs expensed as part of gains and losses on investments 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

Dividend income arises from equity investments held and is recognised on the date investments are marked ‘ex-dividend’. Where the Company elects to receive dividends in the form of additional shares rather than cash, the equivalent to the cash dividend is recognised as income in the revenue account and any excess in the value of the shares received over the amount of the cash dividend is recognised in capital reserve.

Special dividends are looked at individually to ascertain the reason behind the payment. This will determine whether they are treated as income or capital in the income statement.

Interest income arising from fixed income securities is recognised in the income statement based on the coupon payable adjusted to spread any premium or discount on purchase or redemption over the remaining life of the security.

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.

Investment management fees and finance costs are recognised on an accruals basis and are charged 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 investment portfolio of the Company.

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

G. Amounts recognised in Capital Reserves

The following are included in the income statement and recognised in capital: realised gains and losses on sales of investments; realised gains and losses on foreign currency and any forward currency contracts; management fees and finance costs allocated to capital; and other capital charges; and unrealised increases and decreases in the valuation of investments at the year end (including the related foreign exchange gains and losses).

H. 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 accounts 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.

I.  Dividends

Dividends are not recognised in the financial statements unless there is an obligation to pay at the balance sheet date. Dividends are recognised in the year in which they are paid to shareholders and shown in the Statement of Changes in Equity.

2.  Income

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

2020 2019
£000 £000
Income from investments:
UK dividends 7,097  7,281
UK special dividends 259  433
UK unfranked investment income 36  169
Overseas dividends 1
7,392  7,884
Other income:
Deposit interest  2 1
Total income 7,394  7,885

Special dividends of £75,000 were recognised in capital during the year (2019: £428,000).

3.  Investment Management Fee

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

2020 2019
Revenue Capital Total Revenue Capital Total
£000 £000 £000 £000 £000 £000
Investment management fee  471  471 942 490 490  980

Details of the investment management agreement are given on page 37 in the Directors’ Report.

At 31 March 2020, £63,000 (2019: £76,000) was accrued in respect of the investment management fee.

4.  Other Expenses

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

2020 2019
Revenue Capital Total Revenue Capital Total
£000 £000 £000 £000 £000 £000
Directors' remuneration (i)  164 164  161  161
Auditors' fees (ii):
– for audit of the Company's annual financial statements 32  32 25 25
Other expenses (iii)  179 179  192  192
 375 375  378  378

(i)  The Director's Remuneration Report provides further information on Directors’ fees.

(ii) Auditor’s fees include expenses but excludes VAT. The VAT is included in other expenses.

(iii) Other expenses include:

• £15,000 (2019: £15,000) of employer’s National Insurance payable on Directors’ remuneration. As at 31 March 2020, the amounts outstanding on Directors’ remuneration and employer’s National Insurance was £17,000 (2019: £25,000).

5.  Finance costs

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

2020 2019
Revenue Capital Total Revenue Capital Total
£000 £000 £000 £000 £000 £000
Overdraft facility fee 6 6  12 3  3 6
Interest on overdraft 29 29  58 17 17 34
35 35  70 20 20 40

The rate of interest applicable to drawings is at a margin over the Bank of England’s Base Rate, with a flat rate overdraft facility fee at a rate of 0.05% per annum on the full £25 million facility. Further details of the facility are given in note 11.

6. Taxation

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 was offset by expenses. This note also shows the basis of the Company having no deferred tax assets or liability.

The tax charge for the year is nil (2019: nil) as allowable expenses exceed taxable income.

2020 2019
£000 £000
Return on ordinary activities before taxation (30,009) 10,097
Theoretical tax at the current UK Corporation Tax rate of 19% (2019: 19%) (5,702)  1,918
Effects of:
– non-taxable UK dividends (1,349) (1,383)
– non-taxable UK special dividends (63) (164)
– Non-taxable losses/(gains) on investments  6,857 (605)
– Excess of allowable expenses over taxable income 257  234
Actual tax amount

Factors that may affect future tax charges

The Company has cumulative excess management expenses of £28,142,000 (2019: £26,792,000) that are available to offset future taxable revenue.

A deferred tax asset of £5,347,000 (2019: £4,555,000) at 19% (2019: 17%) has not been recognised in respect of these expenses since tax is recoverable only to the extent that the Company has sufficient future taxable revenue. On 11 March 2020 it was announced (and substantively enacted on 17 March 2020) that the UK corporation tax rate would remain at 19% and not reduce to 17% (the previously enacted rate) from 1 April 2020.

7. Return per Ordinary Share

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

The basic revenue, capital and total return per ordinary share is based on each of the returns on ordinary activities after taxation and on 58,551,530 (2019: 58,551,530) ordinary shares, being the weighted average number of ordinary shares in issue throughout the year.

8.  Dividends on Ordinary Shares

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

2020 2019
Dividends paid and recognised in the year: pence £000 pence £000
Fourth interim (in lieu of final) 4.20  2,460 4.10  2,401
First interim paid 2.50  1,464 2.40  1,405
Second interim paid 2.50  1,464 2.40  1,405
Third interim paid 2.55  1,492 2.45  1,434
Return of unclaimed dividends from previous years (70)
 11.75  6,880  11.35  6,575


2020 2019
Dividends payable in respect of the year: pence £000 pence £000
First interim paid 2.50  1,464 2.40  1,405
Second interim paid 2.50  1,464 2.40  1,405
Third interim paid 2.55  1,492 2.45  1,434
Fourth interim (in lieu of final) 4.20 2,460 4.20  2,460
11.75 6,880  11.45  6,704

The fourth interim dividend for 2020 will be paid on 24 July 2020 to shareholders on the register as at 3 July 2020. Shares will be quoted ex-dividend on 2 July 2020.

9. Investments Held at Fair Value Through Profit and Loss

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.  

2020 2019
£000 £000
Investments listed on a recognised Stock Exchange 151,280 188,308
Opening valuation 188,308 179,558
Movements in year:
Purchases at cost  13,682 11,485
Sales – proceeds (14,619) (5,917)
(Losses)/gains on investments in the year (36,091) 3,182*
Closing valuation 151,280 188,308
Closing book cost 123,385 122,866
Closing investment holding gains  27,895 65,442
Closing valuation 151,280 188,308

The Company received £14,619,000 (2019: £5,917,000) from investments sold in the year. The book cost of these investments when they were purchased was £13,163,000 (2019: £5,182,000) realising a profit of £1,456,000 (2019: £735,000). These investments have been revalued over time and until they were sold any unrealised profits/losses were included in the fair value of the investments.

* Due to adoption of the revised SORP issued in October 2019 (see Note 1A). The gain on investments figure of £3,182,000 for the year ended 31 March 2019 is as follows:

Net realised gain on sales 735
Investment holding gain in the year 2,447
Gains on investments 3,182

The transaction costs included in gains on investments amount to £74,000 (2019: £63,000) on purchases and £4,000 (2019: £3,000) for sales.

Significant holdings

The Company's only holding in investee companies in excess of 3% is its 3.3% holding of the issued non-voting ordinary 12.5p 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.

2020 2019
£000 £000
Prepayments and accrued income 493  1,166
493  1,166

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.

2020 2019
£000 £000
Bank overdraft  6,276  7,067
Accruals 158  179
 6,434  7,246

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 12 September 2020 (2019: 14 September 2019). The rate of interest applicable to drawings is at a margin over the Bank of England’s Base Rate. In addition, an overdraft facility fee of 0.05% per annum is also payable. The covenants on the overdraft facility are that total overdraft will not exceed £25 million, total assets will not fall below £75 million and total financial indebtedness will not exceed 25% of net assets.

12. Share Capital

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

2020 2019
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 issued, bought back or cancelled in the year.

The Directors’ Report on page 38 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 fourth interim (in lieu of final) dividend of £2,460,000 (see note 8) results in a revenue reserve available for future distributions of £4,611,000.

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 share and the net asset values attributable at the year end were as follows:

Net Asset Value
Per Ordinary Share
Net Assets
2020 2019 2020 2019
Pence Pence £000 £000
Ordinary shares 248.2  311.2 145,339 182,228

Net asset value per ordinary share is based on net assets at the year end and on 58,551,530 (2019: 58,551,530) ordinary shares, being the number of ordinary shares in issue (excluding treasury) 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 15 to 17. 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 13. The internal control and risk management process is described on page 30. 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 pages 32 and 33. 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

The Company invests in UK equities that are traded on the London Stock Exchange. A number of the UK equities in the portfolio have elected to pay dividends in Euros and US dollars. During the year, the non-sterling dividends received were 14.8% (2019: 10.2%) of the total income received.

If sterling had strengthened by 10% against the Euro and the US dollar, the aggregated impact on revenue return would have been a loss of £111,000 (2019: £84,000). The aggregated impact on net assets would be a reduction of 0.1% (2019: reduction of 0.1%). If sterling had weakened by the same amounts, the effect would have been the converse.

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 £6,276,000 (2019: £7,067,000). At the maximum of £25 million, the effect of a movement of +/– 1% in the interest rate would result in a decrease/increase to the Company’s income statement of £250,000 (2019: £250,000).

The Company can invest in fixed income securities and at the year end the level of exposure was £nil (2019: £1.3 million). The Directors estimate that a 1% change in interest rates applied to this balance would have no impact on reported revenue return and would increase or decrease reported capital return by £nil (2019: £2,000). 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 company's 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 £15.1 million (2019: £18.8 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 comprises the potential failure by counterparties to deliver securities which the Company has paid for, or to pay for securities which the Company has delivered; it includes, but is not limited to: lost principal and interest, disruptions to cash flows or failure to pay interest.

Credit risk is minimised by using: (a) only approved counterparties, covering both brokers and deposit takers; and (b) a custodian that operates under BASEL III guidelines. The Board reviews the custodian’s annual independent control assurance report and the Manager's management of the relationship with the custodian. Following the appointment of a depositary, assets and cash held at the custodian are covered by the depositary’s restitution obligation, accordingly the risk of loss is remote. Cash balances are limited to a maximum of 2.5% of net assets with any one deposit taker. This limit is at the discretion of the Board and is reviewed on a regular basis.

The maximum exposure to credit risk arises from amounts due from brokers and cash held by the custodian. As at 31 March 2020, no amounts were due from brokers (2019: £nil) and no cash was held with the custodian (2019: £nil).

There are no financial assets that are past due or impaired during the year (2019: none).

16. Fair Value

Fair Values of Financial Assets and Financial Liabilities

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

Fair Value – Hierarchy Disclosures

Nearly all of the Company’s portfolio of investments are in the Level 1 category as defined in FRS 102 as amended for fair value hierarchy disclosures (March 2016). The three levels set out in this follow:

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 (i.e. developed using market data) for the asset or liability, either directly or indirectly.

Level 3 – Inputs are unobservable (i.e. 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. The portfolio consists wholly of equity investments which are deemed to be Level 1 (2019: all equity investments Level 1 and one fixed income investment reported as Level 2 (0.7%), due to less visibility of prices for such investments). 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 2020 was £151,615,000 (2019: £189,295,000) comprising borrowings of £6,276,000 (2019: £7,067,000) and equity share capital and other reserves of £145,339,000 (2019: £182,228,000).

The Company’s total capital employed is managed to achieve the Company’s investment objective as set out on page 13, including that borrowings may be used to provide gearing of the equity portfolio up to a maximum of £25 million or 25% of net asset value. Borrowings comprise of a bank overdraft. Details are given in note 11 and net gearing was 4.3% (2019: 3.9%) at the balance sheet date. The Company’s policies and processes for managing capital were unchanged throughout the year and the preceding year.

The main risks to the Company’s investments are shown in the Strategic Report under the ‘Principal Risks and Uncertainties’ section on pages 15 to 17. 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 and key management personnel (i.e. the Directors). Under accounting standards, the Manager is not a related party.

Under UK GAAP, the Company has identified the Directors as related parties. The Directors’ remuneration and interests have been disclosed on pages 42 and 43 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 37, and in note 3.

20. Post Balance Sheet Events

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

The economic outlook following from Covid-19 and its impact on the Company’s investment portfolio continues to be uncertain. As at close of business on 30 June 2020, the Company’s NAV, share price and discount were 270.9p, 232.0p and 14.4% respectively. There are no other 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 43-45 Portman Square, London W1H 6LY, on 10th September 2020 at 11am for the following purposes:

Please note access to this meeting will be restricted. Please refer to Note 1 to this Notice of Annual General Meeting.

Ordinary Business

To consider and, if thought fit, to pass the following resolutions all of which will be proposed as ordinary resolutions:

1.  To receive the Annual Financial Report for the year ended 31 March 2020.

2.  To approve the Directors’ Remuneration Policy.

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

4.  To approve the Company’s Dividend Payment Policy to declare four dividends in respect of each accounting year, with one payment in respect of each calendar quarter.

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 re-elect Davina Curling a Director of the Company.

9.  To re-elect Mark Dampier a Director of the Company.

10. To re-elect Tim Woodhead a Director of the Company.

11. To re-appoint 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 26 of the annual financial report.

Special Business

To consider and, if thought fit, to pass the following resolutions of which resolutions 12 and 13 will be proposed as ordinary resolutions and resolutions 14, 15 and 16 will be proposed as special resolutions:

12. That:

the Company continue as a closed-ended investment company.

13. 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 15 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.

14. 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 13 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, regulatory 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, unless the authority is renewed or revoked at any other general meeting prior to such time, 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.

15. 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 8,776,874 shares;

(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 must not be more than the higher of: (a) 5%. above the average of the mid-market values of the Shares for the five business days before the purchase is made; and (b) the higher of the price of the last independent trade in the Shares and the highest then current independent bid for the Shares on the London Stock Exchange;

(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.

16. 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.

The resolutions are explained further in the Directors’ Report on pages 39 and 40.

This annual financial report announcement is not the Company's statutory accounts. The statutory accounts for the year ended 31 March 2019 have been delivered to the Registrar of Companies. The statutory accounts for the financial year ended 31 March 2020 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 2019 and for the year ended 31 March 2020 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 and will be delivered to the Registrar of Companies as soon as practicable.  Copies can be requested from the Company Secretary, by email to [email protected] or by letter to 43-45 Portman Square, London W1H 6LY, and will shortly be available to download from the Company’s web page: .

By order of the Board

Invesco Asset Management Limited

Company Secretary

Dated this 2 July 2020

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