Share Name Share Symbol Market Type Share ISIN Share Description
Schroder Income Growth Fund Plc LSE:SCF London Ordinary Share GB0007915860 ORD 10P
  Price Change % Change Share Price Bid Price Offer Price High Price Low Price Open Price Shares Traded Last Trade
  0.00 0.0% 274.00 274.00 277.00 274.00 274.00 274.00 2,158 08:17:53
Industry Sector Turnover (m) Profit (m) EPS - Basic PE Ratio Market Cap (m)
Equity Investment Instruments 9.2 8.1 11.7 23.4 188

Schroder Income Growth Fund PLC Annual Financial Report

20/11/2020 7:00am

UK Regulatory (RNS & others)

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RNS Number : 9472F

Schroder Income Growth Fund PLC

20 November 2020

20 November 2020


Schroder Income Growth Fund plc (the "Company") hereby submits its annual report for the year ended 31 August 2020 as required by the Financial Conduct Authority's Disclosure Guidance and Transparency Rule 4.1.

The Company's annual report and accounts for the year ended 31 August 2020 are also being published in hard copy format and an electronic copy will shortly be available to download from the Company's webpages . Please click on the following link to view the document:

The Company has submitted its annual report and accounts to the National Storage Mechanism and it will shortly be available for inspection at


Matthew Riley

Schroder Investment Management Limited

Tel: 020 7658 6596

Chairman's Statement


It is particularly encouraging in such uncertain times to report that your Company has maintained its record of increasing its dividend each year. The distribution of 12.6p per share was 1.6% up over the previous year, the 25th year of increases, and higher than the 0.2% rise in the Consumer Price Index, enabling us to continue to meet our objective of providing real growth of income.

The income earned by the Company did fall by 16.3%, because of COVID-19's impact on investee companies' ability to pay dividends, so a small transfer was made from the reserves that your Company has built up from income in earlier years. These revenue reserves are now equivalent to 11 months of dividends, and remain available to help us support growth of income going forward.

The Company's second objective of capital growth was much more affected by the pandemic, with the NAV total return being -13.2%. This was worse than the FTSE All Share Index of -12.6%, for the reasons discussed in the Manager's Review, which includes commentary on the portfolio and the changes that have been made during this difficult year. Your board is very alert to this underperformance and the challenges facing UK equities, and will continue to work with the Manager to maximise capital returns, although not at the cost of income in a world where it is increasingly hard to find.

Share price discount and issuance

We know that the share price return is an important measure of performance for shareholders. During the year, the share price's discount to NAV narrowed from 8.3% to 1.9%. The share price total return therefore fell by 7.0% which, while a disappointing decline, was better than the FTSE All Share Index return of -12.6% mentioned above.

We were pleased that in June 2020 the Company issued 350,000 shares at a premium of 2.3%(1) to NAV. The discount today is 1.0%(1) .

At the date of this report, the Share Price performance of the Company has outperformed both its average peer group company and the FTSE All-Share Index over one, three and five years.


During the year, gearing decreased from 15.5% to 9.5%, in reaction to the uncertainties from the impact of COVID-19. Average gearing during the year was 12.3%. The GBP35 million facility with Sumitomo Mitsui Banking Corporation Europe plc expired on 22 August 2020 and was replaced by a GBP20 million facility with the same lender, which will mature on 23 August 2021. The gearing today is 10.3%(1) .

Board composition

As mentioned in last year's Report and Accounts, the board has been prioritising succession planning, with the addition of two new independent non-executive directors, Victoria Muir and Fraser McIntyre, in 2019. David Causer, who has served the Company for a number of years as Chair of the Audit and Risk Committee, intends to retire as a director of the Company at the Annual General Meeting. We would like to thank David warmly for his service to the Company. Fraser McIntyre, who has extensive experience as both a chief operating officer and as a chief financial officer in the investment management sector and is a qualified accountant, will succeed him as Chair of the Audit and Risk Committee. Following the AGM the board will comprise four independent non-executive directors.

Continuation vote

The Notice of the Annual General Meeting contains an ordinary resolution proposing that the Company should continue for a further five year period. The board has reviewed the Company's investment objectives and policy, as well as the Manager and its investment process and resources. The board believes that the Company's objectives of providing real growth of income, being growth of income in excess of the rate of inflation, and capital growth as a consequence of the rising income, remain relevant to investors. The investment strategy and process employed by the Manager, which are well known to investors, have been laid out in the Strategic Report.

The board recommends that the Company should continue as an investment trust for a further five year period. The directors intend to vote their shares accordingly and wish to encourage all other shareholders likewise to vote in favour of continuation.

Annual general meeting

The AGM will be held at 12.00 pm on Thursday, 17 December 2020. Due to the continuing restrictions relating to meetings due to the COVID-19 pandemic, shareholders are asked to cast their votes by proxy. To ensure the safety and security of our shareholders, service providers, officers and guests, shareholders will not be able to attend the meeting in person.

The Manager will be presenting at a webinar on 17 December 2020 at 12.15 pm, and all shareholders are encouraged to sign up, to hear the fund manager's view, and to ask questions of the fund manager or the board. To sign up please visit the Company's webpages ( ).

In addition, the board would like to invite shareholders to get in touch via the Company Secretary with any questions or comments, so that the board can answer them in advance of the AGM. The board will be providing answers to commonly asked questions on the Company's webpages, as well as the answers to questions from shareholders which have been submitted before the AGM. To email, please use: or write to us at the Company's registered office address (Company Secretary, Schroder Income Growth Fund plc, 1 London Wall Place, London EC2Y 5AU).


Looking back over the last year, it could all have been worse for the Company's portfolio. After a period of strong performance for both the Company and UK equities to 29 February 2020, things changed dramatically with the onset of COVID-19 and a nationwide lockdown. There were genuine concerns as to whether a large number of companies would pay any dividends at all. As it turned out, the Company's investment income at the year end was more than 80% of the 2019 level. Adding a small amount from income saved from previous years has allowed us to increase the dividend again.

Saying it could have been worse is not to deny the disappointments - not least that the NAV is slightly less than 10% lower than a year ago. Lockdown measures are increasing again in many countries, and there is still little clarity on what the UK's post-Brexit trading environment with the EU will be like. We note, however, the comments in the Manager's review on how resilient many of the portfolio holdings have been, and that the Company's shares are yielding nearly 5% today.

At a time when interest rates and bond yields are so low, this is a good test of the Company's raison d'etre. We want the Manager and the portfolio to keep us in a position where we can maintain the record of increasing the dividend every year. With our revenue reserves equivalent to 11 months of dividends the board retains the ability to smooth out dividends should there be a future fall in investment income.

Bridget Guerin


19 November 2020

(1) As at 18 November 2020

Manager's Review

The net asset value total return in the 12 months to 31 August 2020 was -13.2%. This compares to

-12.6% from both the FTSE All-Share Index and the median of the AIC UK Equity Income Sector (excluding funds that joined the sector this year). The share price total return was -7.0% (source: Morningstar/Schroders).

Investment income for the Company fell 16.3% from the unprecedented disruption to UK dividends from COVID-19. This was a smaller decline than that from the total market (which Link estimates at 37% in the period to end September). To put this in a historical context, UK dividend income fell 20% during the Global Financial Crisis in 2009 and 2010.

Your Company has a focused portfolio which has been actively managed for both income and capital preservation. Fourteen holdings increased dividends over the 12 months. Tesco, BHP Billiton, Rio Tinto, Portuguese oil producer GALP and alternative asset manager Intermediate Capital all made substantial increases. A range of more stable businesses such as Unilever, RELX, British American Tobacco, Pearson, Legal & General and healthcare property company Assura continued to increase their dividends by modest percentages.

More than offsetting these increases were two negatives. Firstly, there were substantial cuts from holdings seeking to preserve balance sheet strength and liquidity, such as Burberry, security services provider G4S, leisure businesses Hollywood Bowl, William Hill and Whitbread. The student accommodation providers, Unite and Empiric, deferred making interim dividends until the situation became clearer. We maintained or increased the holdings in these businesses as we expect them to return to paying attractive dividends in due course.

Secondly, we sold holdings in companies where we considered there to be a risk of dividends being cut or permanently rebased lower. These included Aviva, BT, HSBC, Lloyds, Nat West (formerly RBS), software company Micro Focus, house builder Crest Nicholson, speciality chemicals company Johnson Matthey, and the holdings in oil companies.

Market background

The pandemic caused the fastest decline in global markets on record. Though equity markets have recovered well from their March lows following government monetary and fiscal responses, many, including the UK, are still down for the year to 31 August 2020. Prior to these events, domestic politics had dominated the narrative around UK assets. The general election in December brought a surprisingly strong victory for the Conservative Party.

Portfolio performance

The NAV total return underperformed the FTSE All-Share Index, as the portfolio's gearing proved a disadvantage during the falling market.

---------------------  ------ 
FTSE All-Share Index   -12.6% 
---------------------  ------ 
Stock selection          +0.8 
---------------------  ------ 
Sector allocation        +1.5 
---------------------  ------ 
Gearing                  -2.0 
---------------------  ------ 
Costs                    -0.9 
---------------------  ------ 
NAV total return       -13.2% 
---------------------  ------ 

Source: Schroders, 31 August 2020

Stock selection and sector allocation were positive. The portfolio entered 2020 more focused on domestic cyclical companies, which we believed were set to benefit as political risk around Brexit dissipated following the General Election and a rally in sterling. When the impact of the COVID-19 situation became apparent, we took decisive action early in the crisis regarding companies where we had particular concerns or where our original investment theses were jeopardised, as well as reducing the level of borrowings.

The portfolio benefited from moving underweight in the oil and gas sector, whilst reinvesting part of the proceeds in mining companies. Oil prices have fallen significantly in response to oversupply. However our decision was based on a view that companies were unlikely to be able to satisfy all stakeholders needs given their stretched balance sheets together with the transition to clean energy involving significant capital expenditure and likely acquisitions. Ultimately this transpired in the decision by Royal Dutch Shell and BP to rebase down their dividends. In addition the portfolio benefited from boosting its weightings in mining companies by buying Anglo American to add to Rio Tinto and BHP Billiton. The mining sector's performance has been robust due to demand for commodities from Asia remaining strong as these economies have been first in and first out of the COVID-19 pandemic.

The portfolio benefited from selling out of all banks (including HSBC), while GP practice property business Assura and Legal & General have been strong performers. Pets at Home, which was classified as an essential retailer by the UK Government, benefited from spending on pets remaining resilient.

Five top/bottom relative performers

                               Portfolio   Perfor-    Impact 
                                  weight     mance        on 
                                relative  relative  relative 
                    Portfolio     to the    to the   perfor- 
                       weight      index     index     mance 
Security               (%)(1)     (%)(1)    (%)(2)    (%)(3) 
------------------  ---------  ---------  --------  -------- 
HSBC                      0.9       -3.8     -30.9       1.8 
------------------  ---------  ---------  --------  -------- 
Royal Dutch Shell         3.4       -3.1     -37.0       1.5 
------------------  ---------  ---------  --------  -------- 
Pets At Home              3.2        3.2      43.9       1.3 
------------------  ---------  ---------  --------  -------- 
Assura                    2.6        2.5      33.9       0.7 
------------------  ---------  ---------  --------  -------- 
Legal & General           3.9        3.2      20.3       0.6 
------------------  ---------  ---------  --------  -------- 
                                    Portfolio   Perfor-    Impact 
                                       weight     mance        on 
                                     relative  relative  relative 
                         Portfolio     to the    to the   perfor- 
                            weight      index     index     mance 
Security                    (%)(1)     (%)(1)    (%)(2)    (%)(3) 
-----------------------  ---------  ---------  --------  -------- 
Royal Bank of Scotland         0.6       -0.7     -26.7      -0.7 
-----------------------  ---------  ---------  --------  -------- 
Reckitt Benckiser                -       -2.0      32.9      -0.7 
-----------------------  ---------  ---------  --------  -------- 
Whitbread                      2.1        1.9     -19.7      -0.6 
-----------------------  ---------  ---------  --------  -------- 
Crest Nicholson                1.3        1.3     -28.7      -0.5 
-----------------------  ---------  ---------  --------  -------- 
Pearson                        2.5        2.3     -17.8      -0.5 
-----------------------  ---------  ---------  --------  -------- 

Source: Factset.

(1) Weights are averages over the period.

(2) Performance relative to the FTSE All-Share Index.

(3) Impact is the contribution to performance relative to the FTSE All-Share Index.

Certain cyclical domestic holdings weighed on performance, including Whitbread, and house-builder Crest Nicholson (sold from the portfolio after the year end), and we reduced these holdings, amongst others, as the scale of the pandemic became clear. Pearson detracted from performance after a profit warning last autumn driven by poor trading in its US university textbook business. Pearson have had a challenging few years of operational performance recently as earnings have been under pressure due to the decline of print textbook sales in the US higher education market. While we acknowledge the pressure from this, we believe there is a big opportunity for the company to create value from their digital education business.

Portfolio activity

Turnover has been higher than in the past, as we took action in holdings where we had concerns or where the investment thesis was negated by COVID-19, and sought to reposition the portfolio as the outlook changed materially from what had been a benign economic background with reduced domestic political risk.

Last autumn we extended the positions in domestic UK stocks where we believed there to be an opportunity for valuations of these stocks to correct upwards on a resolution to Brexit. Purchases in Next and Royal Bank of Scotland (now Nat West) accompanied additions to Legal & General and Lloyds Bank, and were financed by reductions in HSBC and Royal Dutch Shell.

Between the general election and the pandemic we sold BT, where we felt the risks to the dividend and opportunities from accelerating the rollout of fibre broadband were fairly balanced. We established a new holding in National Grid. Political clarity in the UK sets the scene for the Company to deliver defensive earnings growth while opportunities should accrue from the decarbonisation of the economy. We also added to a number of defensive companies on attractive valuations, such as Unilever, RELX and BAT.

As the pandemic unrolled, we reassessed the investment theses of many of the holdings, selling the bank and oil holdings and several cyclical domestic companies such as ITV, Next, Taylor Wimpey, Crest Nicholson, and Whitbread. Proceeds were deployed to take advantage of capital and income opportunities, to support fund raisings and to invest in companies we considered better placed to recover more strongly, such as Anglo American, Direct Line Insurance, M&G and Prudential. We engaged constructively and frequently with many holdings to get reassurance on short term liquidity and understand the operational levers companies had at their disposal.

By the summer activity reverted to more normal levels. We sold out of speciality chemical company Johnson Matthey and established a new holding in business services supplier Bunzl.


COVID-19 is the quintessential exogenous shock. The range of potential outcomes appears very wide. This holds true for companies at both an operational level of profitability and their ability and desire to reward shareholders with dividends. On the positive side there is the potential for vaccination. Areas which would do best in such a scenario would be those that have been hardest hit - for example, banks and consumer discretionary sectors such as travel and leisure. On the negative side, it may take a long time. In such an outcome markets could fall as some expectation of a vaccine has been priced into markets. Areas which would hold up relatively well would be defensive growth companies with resilient balance sheets and franchises. In this instance COVID-19 may prove such a shock that some industries are permanently changed through overcapacity, technological changes or changes in consumer behaviour - e.g. airlines, cruises, and traditional retail/office companies (none of which are in your portfolio).

We remain bottom-up stock pickers looking for idiosyncratic investment opportunities. Macro events often throw up stock-specific opportunities and this has been the case during the height of the crisis. Our process incorporates scenario analysis to test both the upside potential and the downside risks. As we survey the opportunity set today, we feel that there are many attractive opportunities. We also believe that there is good reason to be optimistic about UK equities, not least because sentiment remains so poor. The uncertainties are well known but the positive long-term prospects of many businesses have been obscured by gloomy headlines on COVID-19 and Brexit alongside high-profile dividend cuts.

Notwithstanding the high levels of uncertainty, there has been a resumption of bid interest from overseas buyers as companies seek to take advantage of cheap prices, low financing costs and an attractive exchange rate. We also note the appearance of activist investors. Two holdings - G4S and William Hill - have been subject to takeover approaches since the end of August, with both shares rising sharply.

We believe that income in the current financial year will be somewhat lower than 2020 as we have yet to pass the anniversary of COVID-19, which coincides with the declaration of many companies' final dividends. It remains important to balance the sources of income as well as to look at a time horizon beyond the immediate. The portfolio includes many companies that continued to pay dividends and companies where the pandemic disrupted payments but where we see the ability for payments to resume. It includes low but secure yielding stocks, typically from defensive and growth areas such as essential retailers, specialty property stocks with secure tenants, and business-to-business services companies with secure revenues.

These are balanced with higher-yielding shares where the work we have done gives us comfort that dividends are sustainable, such as mining, insurance and investment companies. The stocks with takeover bids, G4S and William Hill, are examples of those retained despite not paying dividends. Where appropriate, a number of companies have also resumed the payment of dividends deferred in the spring, such as defence company BAE, Direct Line Insurance and Bunzl. We believe that this barbell approach will provide a good level of income and investment style diversification in order to meet income and capital growth objectives over time.

Our work on portfolio companies reassures us about the attractive absolute and relative value in the portfolio. We remain positive on the prospects and believe that retaining gearing at the current low level of markets is appropriate for two reasons. Firstly, given the low costs of borrowing, the extra dividends benefit portfolio income. Secondly, investors will be rewarded over the longer term by the boost to capital returns of market rises from the current low levels.

Investment policy

We are sticking to our disciplined investment process that has served us well for over 20 years, and look to take advantage of opportunities in market-leading, cash generative, well-managed businesses which trade at attractive levels. We continue to work closely with our in-house analysts to help identify attractive potential investment candidates and to monitor the validity of the case for existing holdings.

Five largest overweight stocks

                  Portfolio   Index 
                     weight  weight  Difference 
Security                (%)     (%)         (%) 
----------------  ---------  ------  ---------- 
Pets At Home            4.1     0.1         4.0 
----------------  ---------  ------  ---------- 
BAE Systems             4.7     0.9         3.8 
----------------  ---------  ------  ---------- 
G4S                     3.7     0.9         2.8 
----------------  ---------  ------  ---------- 
Legal & General         4.1     0.7         3.4 
----------------  ---------  ------  ---------- 
GlaxoSmithKline         7.2     3.8         3.4 
----------------  ---------  ------  ---------- 

Source: Schroders, as at 31 August 2020.

We continue to believe that an actively managed portfolio with a bottom-up, stock-specific focus can deliver on the Fund's capital and income objectives. The uncertainties are well known but the long-term prospects of many businesses have been obscured by the headlines on COVID-19 and Brexit alongside high-profile dividend cuts. By taking a measured, long-term investment view, we believe that the portfolio will be able to exploit the many mispriced bottom-up stock opportunities in the market.

Schroder Investment Management Limited

19 November 2020

Past performance is not a guide to future performance and may not be repeated. The value of investments and the income from

them may go down as well as up and investors may not get back the amounts originally invested.

The securities shown above are for illustrative purposes only and are not to be considered a recommendation to buy or sell.

Strategic Review

Principal risks and uncertainties

The board is responsible for the Company's system of risk management and internal control and for reviewing its effectiveness. The board has adopted a detailed matrix of principal risks affecting the Company's business as an investment trust and has established associated policies and processes designed to manage and, where possible, mitigate those risks, which are monitored by the audit and risk committee on an ongoing basis. This system assists the board in determining the nature and extent of the risks it is willing to take in achieving the Company's strategic objectives. Both the principal risks and the monitoring system are also subject to robust assessment at least annually. The last assessment took place in November 2020.

Although the board believes that it has a robust framework of internal control in place this can provide only reasonable, and not absolute, assurance against material financial misstatement or loss and is designed to manage, not eliminate, risk.

Actions taken by the board and, where appropriate, its committees, to manage and mitigate the Company's principal risks and uncertainties are set out in the table below.

Emerging risks and uncertainties

During the year, the board also discussed and monitored a number of risks that could potentially impact the Company's ability to meet its strategic objectives. These were political risk, climate change risk and the impact of COVID-19 pandemic. The board has determined that these risks are worthy of close monitoring, although they do not meet the threshold for inclusion as principal risks at this time. The board receives updates from the Manager, Company Secretary and other service providers on other potential risks that could affect the Company.

Political risk includes Brexit, trade wars and regional tensions. The board continues to monitor developments for the UK's departure from the European Union and to assess the potential consequences for the Company's future activities. The board is also mindful that changes to public policy in the UK could impact the Company in the future.

Climate change risk includes how climate change could affect the Company's investments, and potentially shareholder returns. The board notes the Manager has integrated ESG considerations, including climate change, into the investment process. The board will continue to monitor this.

The board also reviewed the risks arising from the COVID-19 pandemic and how it impacted the Company's principal risks and uncertainties. The board considers that the pandemic will likely continue to affect the Company with respect to investment management and service provider risks, due to the uncertainty caused by the pandemic, affecting the value of the Company's investments due to the disruption of supply chains and demand for products and services, increased costs and cash flow problems, and changed legal and regulatory requirements for companies. The board notes the Manager's investment process is unaffected by the pandemic and it continues to focus on long-term company fundamentals and detailed analysis of current and future investments. COVID-19 also affected the Company's service providers, who implemented business continuity plans in line with government guidelines. All service providers continue to operate on a business as usual basis.

*The "Change" column on the right highlights at a glance the board's assessment of any increases or decreases in risk during the year after mitigation and management. The arrows show the risks as increased or decreased, and dashes show risks as stable.

Risk                                 Mitigation and management                          Change (post 
                                                                                         and management)* 
Strategic                                                                                      - 
 The Company's investment              The appropriateness of the Company's 
 objectives may become                 investment remit is periodically reviewed 
 out of line with the                  and success of the Company in meeting 
 requirements of investors,            its stated objectives is monitored. 
 resulting in a wide 
 discount of the share                 Share price relative to NAV per share 
 price to underlying                   is monitored and the use of buy back 
 NAV per share.                        authorities is considered on a regular 
                                       The marketing and distribution activity 
                                       is actively reviewed. 
                                       Proactive engagement with shareholders. 
The Company's cost                   The ongoing competitiveness of all                        - 
 base could become uncompetitive,     service provider fees is subject to 
 particularly in light                periodic benchmarking against its 
 of open-ended alternatives.          competitors. 
                                      Annual consideration of management 
                                      fee levels. 
Investment management                                                                          - 
 The Manager's investment              Review of the Manager's compliance 
 strategy, if inappropriate,           with the agreed investment restrictions, 
 may result in the Company             investment performance and risk against 
 underperforming the                   investment objectives and strategy; 
 market and/or peer                    relative performance; the portfolio's 
 group companies, leading              risk profile; and appropriate strategies 
 to the Company and                    employed to mitigate any negative 
 its objectives becoming               impact of substantial changes in markets. 
 unattractive to investors.            The Manager also reported on the impact 
                                       of COVID-19 on the Company's portfolio, 
                                       and the market generally. 
                                       Annual review of the ongoing suitability 
                                       of the Manager, including resources 
                                       and key personnel risk. 
Market                                                                                         - 
 The Company is exposed                The risk profile of the portfolio 
 to the effect of market               is considered and appropriate strategies 
 fluctuations due to                   to mitigate any negative impact of 
 the nature of its business.           substantial changes in markets are 
 A significant fall                    discussed with the Manager. 
 in equity markets could 
 have an adverse impact 
 on the market value 
 of the Company's underlying 
Currency                                                                                       - 
 Currency risk is the                  The Manager monitors the impact of 
 risk that changes in                  foreign currency movements on the 
 foreign currency exchange             portfolio and is able to rebalance 
 rates impact negatively               the portfolio towards stocks which 
 the value or level                    are less impacted by changes in foreign 
 of dividend of the                    currency exchange rates if required. 
 Company's investments. 
Custody                                                                                        - 
 Safe custody of the                   The depositary reports on the safe 
 Company's assets may                  custody of the Company's assets, including 
 be compromised through                cash and portfolio holdings, which 
 control failures by                   are independently reconciled with 
 the depositary.                       the Manager's records. 
                                       The review of audited internal controls 
                                       reports covering custodial arrangements 
                                       is undertaken. 
                                       An annual report from the depositary 
                                       on its activities, including matters 
                                       arising from custody operations is 
Gearing and leverage                                                                           - 
 The Company utilises                  Gearing is monitored and strict restrictions 
 a credit facility.                    on borrowings are imposed: gearing 
 This arrangement increases            continues to operate within pre-agreed 
 the funds available                   limits so as not to exceed 25% of 
 for investment through                shareholders' funds. 
 borrowing. While this 
 has the potential to 
 enhance investment 
 returns in rising markets, 
 in falling markets 
 the impact could be 
 detrimental to performance. 
Accounting, legal and                                                                          - 
 In order to continue                  The confirmation of compliance with 
 to qualify as an investment           relevant laws and regulations by key 
 trust, the Company                    service providers. 
 must comply with the 
 requirements of section               Shareholder documents and announcements, 
 1158 of the Corporation               including the Company's published 
 Tax Act 2010.                         annual report are subject to stringent 
                                       review processes. 
 Breaches of the UK 
 Listing Rules, the                    Procedures have been established to 
 Companies Act or other                safeguard against disclosure of inside 
 regulations with which                information. 
 the Company is required 
 to comply, could lead 
 to a number of detrimental 
Service provider                                                                               - 
 The Company has no                    Service providers are appointed subject 
 employees and has delegated           to due diligence processes and with 
 certain functions to                  clearly-documented contractual arrangements 
 a number of service                   detailing service expectations. 
 providers, principally 
 the Manager, depositary               Regular reports are provided by key 
 and registrar. Failure                service providers and the quality 
 of controls and poor                  of services provided are monitored. 
 performance of any 
 service provider could                Review of annual audited internal 
 lead to disruption,                   controls reports from key service 
 reputational damage                   providers, including confirmation 
 or loss.                              of business continuity arrangements. 
Cyber                                                                                          - 
 The Company's service                 Service providers report on cyber 
 providers are all exposed             risk mitigation and management at 
 to the risk of cyber                  least annually, which includes confirmation 
 attacks. Cyber attacks                of business continuity capability 
 could lead to loss                    in the event of a cyber attack. 
 of personal or confidential 
 information or disrupt                In addition, the board received presentations 
 operations.                           from the Manager and the safekeeping 
                                       agent and custodian on cyber risk, 
                                       and the additional steps those companies 
                                       were taking during the COVID-19 pandemic 
                                       and the need for employees to work 
                                       from home. 

Risk assessment and internal controls review by the board

Risk assessment includes consideration of the scope and quality of the systems of internal control operating within key service providers, and ensures regular communication of the results of monitoring by such providers to the audit and risk committee, including the incidence of significant control failings or weaknesses that have been identified at any time and the extent to which they have resulted in unforeseen outcomes or contingencies that may have a material impact on the Company's performance or condition.

No significant control failings or weaknesses were identified from the audit and risk committee's ongoing risk assessment which has been in place throughout the financial year and up to the date of this report. The board is satisfied that it has undertaken a detailed review of the risks facing the Company.

A full analysis of the financial risks facing the Company is set out in note 19 to the accounts on pages 50 to 53 of the 2020 annual report.

Viability statement

The directors have assessed the viability of the Company over a five year period, taking into account the Company's position at 31 August 2020 and the potential impacts of the principal risks and uncertainties it faces for the review period. They have also reviewed the impact of the COVID-19 pandemic on the Company as further detailed in the Portfolio Managers' Review, Emerging Risks sections of this report, as well as the Audit and Risk Committee Report. The directors have assessed the Company's operational resilience and they are satisfied that the Company's outsourced service providers will continue to operate effectively, following the implementation of their business continuity plans.

A period of five years has been chosen as the board believes that this reflects a suitable time horizon for strategic planning, taking into account the investment policy, liquidity of investments, potential impact of economic cycles, nature of operating costs, dividends and availability of funding.

In its assessment of the viability of the Company, the directors have considered each of the Company's principal risks and uncertainties detailed on pages 18 and 19 of the 2020 annual report and in particular the impact of a significant fall in UK equity markets on the value of the Company's investment portfolio. The directors have considered the Company's income and expenditure projections and the fact that the Company's investments comprise readily realisable securities which can be sold to meet funding requirements if necessary and on that basis consider that five years is an appropriate time period. While the articles of association require that a proposal for the continuation of the Company be put forward at the Company's next AGM, the directors have no reason to believe that such a resolution will not be passed by shareholders.

Based on the Company's processes for monitoring operating costs, the board's view that the Manager has the appropriate depth and quality of resource to achieve superior returns in the longer term, the portfolio risk profile, limits imposed on gearing, counterparty exposure, liquidity risk and financial controls, the directors have concluded that there is a reasonable expectation that the Company will be able to continue in operation and meet its liabilities as they fall due over the five year period of their assessment.

Going concern

Having assessed the principal risks, the impact of the COVID-19 pandemic, the impact of the continuation vote and the other matters discussed in connection with the viability statement set out above, and the "Guidance on Risk Management, Internal Control and Related Financial and Business Reporting" published by the FRC in 2014, the directors consider it appropriate to adopt the going concern basis in preparing the accounts.

Statement of Directors' Responsibilities in respect of the Annual Report and Accounts

The directors are responsible for preparing the annual report, and the financial statements in accordance with applicable law and regulation.

Company law requires the directors to prepare financial statements for each financial year. Under that law the directors have prepared the financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law). Under company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Company and of the return or loss 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; 

- state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements;

   -              make judgements and accounting estimates that are reasonable and prudent; 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 enable them to ensure that the financial statements and the Directors' Remuneration Report comply with the Companies Act 2006.

The directors are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

The Manager is responsible for the maintenance and integrity of the Company's webpages. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

The directors consider that the annual report and accounts, taken as a whole, are fair, balanced and understandable and provide the information necessary for shareholders to assess the Company's position and performance, business model and strategy.

Each of the directors, whose names and functions are listed on pages 21 and 22 of the 2020 annual report, confirm that to the best of their knowledge:

- the Company's financial statements, which have been prepared in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards, comprising FRS 102 "The Financial Reporting Standard applicable in the UK and Republic of Ireland" and applicable law), give a true and fair view of the assets, liabilities, financial position and loss of the Company; and

- the Strategic 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.

Income Statement for the year ended 31 August 2020

                                       2020                         2019 
                            Revenue   Capital     Total  Revenue   Capital     Total 
                            GBP'000   GBP'000   GBP'000  GBP'000   GBP'000   GBP'000 
--------------------------  -------  --------  --------  -------  --------  -------- 
Losses on investments 
 held at fair value 
 through profit or 
 loss                             -  (33,534)  (33,534)        -  (13,721)  (13,721) 
Net foreign currency 
 gains                            -         6         6        -        23        23 
Income from investments       9,225         -     9,225   11,023       673    11,696 
Other interest receivable 
 and similar income              10         -        10        6         -         6 
--------------------------  -------  --------  --------  -------  --------  -------- 
Gross return/(loss)           9,235  (33,528)  (24,293)   11,029  (13,025)   (1,996) 
Investment management 
 fee                          (660)     (660)   (1,320)    (713)     (713)   (1,426) 
Administrative expenses       (321)         -     (321)    (350)         -     (350) 
--------------------------  -------  --------  --------  -------  --------  -------- 
Net return/(loss) 
 before finance costs 
 and taxation                 8,254  (34,188)  (25,934)    9,966  (13,738)   (3,772) 
Finance costs                 (157)     (157)     (314)    (181)     (181)     (362) 
--------------------------  -------  --------  --------  -------  --------  -------- 
Net return/(loss) 
 on ordinary activities 
 before taxation              8,097  (34,345)  (26,248)    9,785  (13,919)   (4,134) 
Taxation on ordinary 
 activities                    (55)         -      (55)     (41)         -      (41) 
--------------------------  -------  --------  --------  -------  --------  -------- 
Net return/(loss) 
 on ordinary activities 
 after taxation               8,042  (34,345)  (26,303)    9,744  (13,919)   (4,175) 
--------------------------  -------  --------  --------  -------  --------  -------- 
Return/(loss) per 
 share                       11.69p  (49.94)p  (38.25)p   14.19p  (20.26)p   (6.07)p 

The "Total" column of this statement is the profit and loss account of the Company. The "Revenue" and "Capital" columns represent supplementary information prepared under guidance issued by The Association of Investment Companies. The Company has no other items of other comprehensive income, and therefore the net return on ordinary activities after taxation is also the total comprehensive income for the year.

All revenue and capital items in the above statement derive from continuing operations. No operations were acquired or discontinued in the year.

Statement of Changes in Equity for the year ended 31 August 2020

                          Called-up                Capital    Warrant      Share 
                              share     Share   redemption   exercise   purchase    Capital   Revenue 
                            capital   premium      reserve    reserve    reserve   reserves   reserve     Total 
                            GBP'000   GBP'000      GBP'000    GBP'000    GBP'000    GBP'000   GBP'000   GBP'000 
------------------------  ---------  --------  -----------  ---------  ---------  ---------  --------  -------- 
At 31 August 2018             6,869     7,404        2,011      1,596     34,936    153,401    10,523   216,740 
Net (loss)/return 
 on ordinary activities           -         -            -          -          -   (13,919)     9,744   (4,175) 
Dividends paid in 
 the year                         -         -            -          -          -          -   (8,107)   (8,107) 
------------------------  ---------  --------  -----------  ---------  ---------  ---------  --------  -------- 
At 31 August 2019             6,869     7,404        2,011      1,596     34,936    139,482    12,160   204,458 
Issue of new shares              35       866            -          -          -          -         -       901 
Net (loss)/return 
 on ordinary 
 activities                       -         -            -          -          -   (34,345)     8,042  (26,303) 
Dividends paid in 
 the year                         -         -            -          -          -          -   (8,732)   (8,732) 
------------------------  ---------  --------  -----------  ---------  ---------  ---------  --------  -------- 
At 31 August 2020             6,904     8,270        2,011      1,596     34,936    105,137    11,470   170,324 
------------------------  ---------  --------  -----------  ---------  ---------  ---------  --------  -------- 

Statement of Financial Position at 31 August 2020

                                                       2020      2019 
                                                    GBP'000   GBP'000 
-------------------------------------------------  --------  -------- 
Fixed assets 
Investments held at fair value through profit or 
 loss                                               185,331   234,862 
Current assets 
Debtors                                               1,594     2,009 
Cash at bank and in hand                              3,877       347 
-------------------------------------------------  --------  -------- 
                                                      5,471     2,356 
-------------------------------------------------  --------  -------- 
Current liabilities 
Creditors: amounts falling due within one year     (20,478)  (32,760) 
-------------------------------------------------  --------  -------- 
Net current liabilities                            (15,007)  (30,404) 
-------------------------------------------------  --------  -------- 
Total assets less current liabilities               170,324   204,458 
-------------------------------------------------  --------  -------- 
Net assets                                          170,324   204,458 
-------------------------------------------------  --------  -------- 
Capital and reserves 
Called-up share capital                               6,904     6,869 
Share premium                                         8,270     7,404 
Capital redemption reserve                            2,011     2,011 
Warrant exercise reserve                              1,596     1,596 
Share purchase reserve                               34,936    34,936 
Capital reserves                                    105,137   139,482 
Revenue reserve                                      11,470    12,160 
-------------------------------------------------  --------  -------- 
Total equity shareholders' funds                    170,324   204,458 
-------------------------------------------------  --------  -------- 
Net asset value per share                           246.71p   297.66p 

Notes to the accounts for the year ended 31 August 2020

   1.             Accounting Policies 

Schroder Income Growth Fund plc ("the Company") is registered in England and Wales as a public company limited by shares. The Company's registered office is 1 London Wall Place, London EC2Y 5AU.

The accounts are prepared in accordance with the Companies Act 2006, United Kingdom Generally Accepted Accounting Practice ("UK GAAP"), in particular in accordance with Financial Reporting Standard (FRS) 102 "The Financial Reporting Standard applicable in the UK and Republic of Ireland", and with the Statement of Recommended Practice "Financial Statements of Investment Trust Companies and Venture Capital Trusts" (the "SORP") issued by the Association of Investment Companies in October 2019. All of the Company's operations are of a continuing nature.

The accounts have been prepared on a going concern basis under the historical cost convention, as modified by the revaluation of investments and derivative financial instruments held at fair value through profit or loss. The directors believe that the Company has adequate resources to continue operating for at least 12 months from the date of approval of these accounts. In forming this opinion, the directors have taken into consideration: the controls and monitoring processes in place; the Company's low level of debt and other payables; the low level of operating expenses, comprising largely variable costs which would reduce pro rata in the event of a market downturn; the board's view that the forthcoming continuation vote is likely to pass, and that the Company's assets comprise cash and readily realisable securities quoted in active markets.

The Company has not presented a statement of cash flows, as it is not required for an investment trust which meets certain conditions.

The accounts are presented in sterling and amounts have been rounded to the nearest thousand.

The accounting policies applied to these accounts are consistent with those applied in the accounts for the year ended 31 August 2019.

No significant judgements, estimates or assumptions have been required in the preparation of the accounts for the current or preceding financial year.

   2.             Taxation on ordinary activities 
                                         2020     2019 
                                      GBP'000  GBP'000 
------------------------------------  -------  ------- 
(a) Analysis of charge in the year: 
Irrecoverable overseas tax                 55       41 
------------------------------------  -------  ------- 
Tax charge for the year                    55       41 
------------------------------------  -------  ------- 
   (b)           Factors affecting tax charge for the year 

The tax assessed for the year is higher (2019: higher) than the Company's applicable rate of corporation tax for the year of 19.0% (2019: 19.0%).

The factors affecting the current tax charge for the year are as follows:

                                       2020                         2019 
                          Revenue   Capital     Total  Revenue   Capital    Total 
                          GBP'000   GBP'000   GBP'000  GBP'000   GBP'000  GBP'000 
------------------------  -------  --------  --------  -------  --------  ------- 
Net return/(loss) 
 on ordinary activities 
 before taxation            8,097  (34,345)  (26,248)    9,785  (13,919)  (4,134) 
------------------------  -------  --------  --------  -------  --------  ------- 
Net return/(loss) 
 on ordinary activities 
 before taxation 
 multiplied by the 
 Company's applicable 
 rate of corporation 
 tax for the year of 
 19.0% (2019: 19.0%)        1,539   (6,526)   (4,987)    1,859   (2,645)    (786) 
Effects of: 
Capital return on 
 investments                    -     6,371     6,371        -     2,603    2,603 
Tax relief on overseas 
 tax suffered                 (6)         -       (6)      (4)         -      (4) 
Income not chargeable 
 to corporation tax       (1,674)         -   (1,674)  (2,041)     (128)  (2,169) 
Unrelieved expenses           141       155       296      186       170      356 
Irrecoverable overseas 
 tax                           55         -        55       41         -       41 
------------------------  -------  --------  --------  -------  --------  ------- 
Tax charge for the 
 year                          55         -        55       41         -       41 
------------------------  -------  --------  --------  -------  --------  ------- 
   (c)           Deferred taxation 

The Company has an unrecognised deferred tax asset of GBP5,985,000 (2019: GBP5,090,000) based on a main rate of corporation tax of 19% (2019: 17%). At Budget 2020, the government announced that the main rate of corporation tax (for all profits except ring fence profits) for fiscal years beginning 1 April 2020 and 2021 would remain at 19%.

The deferred tax asset has arisen due to the cumulative excess of deductible expenses over taxable income. Given the composition of the Company's portfolio, it is not likely that this asset will be utilised in the foreseeable future and therefore no asset has been recognised in the accounts.

Given the Company's status as an Investment Trust Company, no provision has been made for deferred tax on any capital gains or losses arising on the revaluation or disposal of investments.

   3.             Dividends 
   (a)           Dividends paid and declared 
                                                           2020     2019 
                                                        GBP'000  GBP'000 
------------------------------------------------------  -------  ------- 
2019 fourth interim dividend of 5.2p (2018: 4.6p)         3,572    3,160 
First interim dividend of 2.5p (2019: 2.4p)               1,717    1,649 
Second interim dividend of 2.5p (2019: 2.4p)              1,717    1,649 
Third interim dividend of 2.5p (2019: 2.4p)               1,726    1,649 
------------------------------------------------------  -------  ------- 
Total dividends paid in the year                          8,732    8,107 
------------------------------------------------------  -------  ------- 
                                                           2020     2019 
                                                        GBP'000  GBP'000 
------------------------------------------------------  -------  ------- 
Fourth interim dividend declared of 5.1p (2019: 5.2p)     3,521    3,572 
------------------------------------------------------  -------  ------- 

All dividends paid and declared to date have been paid, or will be paid, out of revenue profits.

(b) Dividends for the purposes of Section 1158 of the Corporation Tax Act 2010 ("Section 1158")

The requirements of Section 1158 are considered on the basis of dividends declared in respect of the financial year as shown below. The revenue available for distribution by way of dividend for the year is GBP8,042,000 (2019: GBP9,744,000).

                                                      2020     2019 
                                                   GBP'000  GBP'000 
-------------------------------------------------  -------  ------- 
First interim dividend of 2.5p (2019: 2.4p)          1,717    1,649 
Second interim dividend of 2.5p (2019: 2.4p)         1,717    1,649 
Third interim dividend of 2.5p (2019: 2.4p)          1,726    1,649 
Fourth interim dividend of 5.1p (2019: 5.2p)         3,521    3,572 
-------------------------------------------------  -------  ------- 
Total dividends of 12.6p (2019: 12.4p) per share     8,681    8,519 
-------------------------------------------------  -------  ------- 
   4.             Return/(loss) per share 
                                                            2020        2019 
                                                         GBP'000     GBP'000 
----------------------------------------------------  ----------  ---------- 
Revenue return                                             8,042       9,744 
Capital loss                                            (34,345)    (13,919) 
----------------------------------------------------  ----------  ---------- 
Total loss                                              (26,303)     (4,175) 
----------------------------------------------------  ----------  ---------- 
Weighted average number of ordinary shares in issue 
 during the year                                      68,771,540  68,688,343 
Revenue return per share                                  11.69p      14.19p 
Capital loss per share                                  (49.94)p    (20.26)p 
----------------------------------------------------  ----------  ---------- 
Total loss per share                                    (38.25)p     (6.07)p 
----------------------------------------------------  ----------  ---------- 
   5.             Called-up share capital 
                                                         2020     2019 
                                                      GBP'000  GBP'000 
----------------------------------------------------  -------  ------- 
Ordinary shares allotted, called-up and fully paid: 
Ordinary shares of 10p each 
Opening balance of 68,688,343 (2019: 68,688,343) 
 shares                                                 6,869    6,869 
Issue of 350,000 (2019: nil) new shares                    35        - 
----------------------------------------------------  -------  ------- 
Total of 69,038,343 (2019: 68,688,343) shares           6,904    6,869 
----------------------------------------------------  -------  ------- 

During the year, 350,000 new shares, nominal value GBP35,000, were issued to the market at a premium to NAV per share to satisfy demand. These shares were issued at a price of 261.7p per share, for a net consideration of GBP901,000.

   6.             Net asset value per share 
                                                          2020        2019 
--------------------------------------------------  ----------  ---------- 
Net assets attributable to shareholders (GBP'000)      170,324     204,458 
Shares in issue at the year end                     69,038,343  68,688,343 
--------------------------------------------------  ----------  ---------- 
Net asset value per share                              246.71p     297.66p 
--------------------------------------------------  ----------  ---------- 
   7.             Status of announcement 

2019 Financial Information

The figures and financial information for 2019 are extracted from the published annual report and accounts for the year ended 31 August 2019 and do not constitute the statutory accounts for that year. The 2019 annual report and accounts have been delivered to the Registrar of Companies and included the Report of the Independent Auditors which was unqualified and did not contain a statement under either section 498(2) or section 498(3) of the Companies Act 2006.

2020 Financial Information

The figures and financial information for 2020 are extracted from the annual report and accounts for the year ended 31 August 2020 and do not constitute the statutory accounts for the year. The 2020 annual report and accounts include the Report of the Independent Auditors which is unqualified and does not contain a statement under either section 498(2) or section 498(3) of the Companies Act 2006. The 2020 annual report and accounts will be delivered to the Registrar of Companies in due course.

Neither the contents of the Company's webpages nor the contents of any website accessible from hyperlinks on the Company's webpages (or any other website) is incorporated into, or forms part of, this announcement.

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact or visit

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November 20, 2020 02:00 ET (07:00 GMT)

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