## Schroder Income ## Growth Fund plc ### Annual Report and Accounts ### for the year ended 31 August 2023 1176811 Schroders Income Growth Cover NEW 1176811 Schroders Income Growth Cover NEW 1176811 Schroders Income Growth Cover NEW 1176811 Schroders Income Growth Cover NEW 1176811 Schroders Income Growth Cover NEW 1176811 Schroders Income Growth Cover NEW 1176811 Schroders Income Growth Cover NEW 1176811 Schroders Income Growth Cover NEW 1176811 Schroders Income Growth Cover NEW 1176811 Schroders Income Growth Cover NEW 1176811 Schroders Income Growth Cover NEW 1176811 Schroders Income Growth Cover NEW 1176811 Schroders Income Growth Cover NEW 1176811 Schroders Income Growth Cover NEW 1176811 Schroders Income Growth Cover NEW 1176811 Schroders Income Growth Cover NEW 1176811 Schroders Income Growth Cover NEW 1176811 Schroders Income Growth Cover NEW 1176811 Schroders Income Growth Cover NEW 1176811 Schroders Income Growth Cover NEW 1176811 Schroders Income Growth Cover NEW 1176811 Schroders Income Growth Cover NEW 1176811 Schroders Income Growth Cover NEW 1176811 Schroders Income Growth Cover NEW 1176811 Schroders Income Growth Cover NEW 1176811 Schroders Income Growth Cover NEW 1176811 Schroders Income Growth Cover NEW 1176811 Schroders Income Growth Cover NEW 1176811 Schroders Income Growth Cover NEW 1176811 Schroders Income Growth Cover NEW 1176811 Schroders Income Growth Cover NEW 1176811 Schroders Income Growth Cover NEW 1176811 Schroders Income Growth Cover NEW 1176811 Schroders Income Growth Cover NEW 1176811 Schroders Income Growth Cover NEW 1176811 Schroders Income Growth Cover NEW 1176811 Schroders Income Growth Cover NEW 1176811 Schroders Income Growth Cover NEW 1176811 Schroders Income Growth Cover NEW 1176811 Schroders Income Growth Cover NEW 1176811 Schroders Income Growth Cover NEW 1176811 Schroders Income Growth Cover NEW 1176811 Schroders Income Growth Cover NEW 1 006/09/2023 11:0906/09/2023 11:0906/09/2023 11:0906/09/2023 11:0906/09/2023 11:0906/09/2023 11:0906/09/2023 11:0906/09/2023 11:0906/09/2023 11:0906/09/2023 11:0906/09/2023 11:0906/09/2023 11:0906/09/2023 11:0906/09/2023 11:0906/09/2023 11:0906/09/2023 11:0906/09/2023 11:09 ## Investment objectives ## The Company’s principal objectives are to provide growth in income that ## exceeds the rate of inflation and capital growth as a consequence of rising ## income. ## Why Invest in the Company? Strategic Report Governance Financial Other Information | Benefit from consistent rising | Rely on decades of deep | Capture long-term capital | | --- | --- | --- | | income | expertise | growth | | SCF has delivered reliable dividend | Managed by Schroders Head of UK | Strong long-term performance | | growth for shareholders in each of | Equities, Sue Noffke, with support | through successful stock-picking, | | the last 28 years, allowing investors | from an investment team with | with the team adding value across | | to capture fully the significant | nearly a century of combined | the market cap spectrum. | | power of long-term compounding. | experience. | | Introduction Schroder Income Growth Fund plc 1 ## Overview ### Performance Summary | Net asset value (“NAV”) | Share price total return* | Dividends per share | Dividend growth for | | --- | --- | --- | --- | | per share total return* | | | the year | | 4.2% | -3.0% | 13.80p | +4.6% | | 2022: –2.7% | 2022: –4.7% | 2022: 13.2p | 2022: +3.1% | Some of the financial measures are classified as Alternative Performance Measures, as defined by the European Securities and Markets Authority and are indicated with an asterisk (*). Definitions of these performance measures, and other terms used in this report, are given on pages 79 and 80 together with supporting calculations where appropriate. ### Strategic Report Financial Page 5 Page 47 ### Governance Other ### Information Page 29 Page 71 2 Schroder Income Growth Fund plc Strategic Report Governance Financial Other Information Ongoing charges ratio* Share price discount to Revenue earnings per share NAV per share* ## 0.77% 8.9% 13.14p 2022: 0.74% 2022: 2.1% 2022: 13.96p Introduction Gearing* Share price Net revenues after taxation ## 13.7% 267.50p 9.130m 2022: 13.5% 2022: 289.00p 2022: 9.697m | Strategic Report | Remuneration Committee Report 41 | Other Information (unaudited) | | --- | --- | --- | | Chairman’s Statement 6 | Directors' Remuneration Report 42 | Annual General Meeting – | | | Statement of Directors’ | Recommendations 72 | Manager’s Review 8 Responsibilities 45 Notice of Annual General Meeting 75 ESG 12 Explanatory Notes to the Notice Investment Portfolio 14 Financial of Meeting 77 Ten Year Financial Record 15 Independent Auditor’s Report 48 Definitions of Terms and Alternative Business Review 16 Income Statement 53 Performance Measures 79 Statement of Changes in Equity 54 Shareholder Information 81 Governance Statement of Financial Position 55 Information about the Company 83 Board of Directors 30 Notes to the Accounts 56 Directors’ Report 32 Audit and Risk Committee Report 35 Management Engagement Committee Report 38 Nomination Committee Report 39 Scan this QR code on your smartphone camera to sign-up to receive regular updates on Schroder Income Growth Fund plc Schroder Income Growth Fund plc 3 4 Schroder Income Growth Fund plc ## Strategic Report Strategic Report Chairman’s Statement 6 Manager’s Review 8 ESG 12 Investment Portfolio 14 Ten Year Financial Record 15 Business Review 16 Schroder Income Growth Fund plc 5 # Chairman's Statement *Your Company was able to increase your dividend for the 28th year running. Dividends per share for the year of 13.80p represent a 4.6% increase on the previous year, in accordance with the Company's objective to increase the dividend in line with inflation over the longer term.* ![img-0.jpeg](img-0.jpeg) I am pleased to present the first set of annual results of Schroder Income Growth Fund plc since becoming Chairman in December 2022. Rising interest rates and sluggish global growth have made navigating equity markets a challenging task during the year. Your Manager has not allowed these distractions to alter their fundamental and well tested investment philosophy. ## Revenue and dividends Despite difficult conditions, your Company was able to increase your dividend for the 28th year running. Dividends per share for the year of 13.80p represent a 4.6% increase on the previous year, in accordance with the Company's objective to increase the dividend in line with inflation over the longer term. In this respect we define the medium term as five years and the longer term as ten. Earnings per share fell by 5.9% to 13.14p. The dividend of 13.80p was 95.2% covered by earnings. After payment of the fourth interim dividend on 3 November 2023, the revenue reserve will be £7.5 million, representing 10.80p per ordinary share or over nine months of the annual dividend. The ability to smooth income by judicious use of revenue reserves remains a particular advantage of investment trusts over open ended funds. Income earned by the Company came under pressure during the year for two main reasons. Firstly, lower commodity prices led to a notable reduction in earnings and dividends from mining shares. Secondly corporate managements pivoted from special dividends towards share buybacks thus reducing income for the market and your Company. The reduction in earnings per share masks very strong dividend growth across many stocks held in the portfolio. In tandem with much higher inflation the Company was consequently unable to increase the dividend in real terms this year without drawing heavily on reserves. Such outcomes have arisen from time to time in the last 28 years of our history. Despite this, we have continued to fulfil the primary objective of 'real growth of income' above the levels of inflation over the longer term. ## Performance During a volatile period for UK equity markets the Company returned 4.2% in net asset value total returns. Share price total returns over the period were -3.0% as compares to a return of 5.2% for the FTSE All-Share total return index. A bias towards medium and smaller sized companies, whose returns lagged those of the larger FTSE100, detracted from short term performance but have added significant value over the longer term. For more details of performance please refer to the Manager's Review. ## Share price performance and discount to NAV The Company's share price discount to NAV averaged 1.60% during the year but widened towards the latter part of the year to end at 8.9%. Whilst the Company did not buy back any shares during the year, your Board continues to monitor the discount closely and will take appropriate action as required. ## Gearing The Company has renewed its £30 million revolving credit facility with Sumitomo Mitsui Banking Corporation Europe Limited ('SMBC') for a further year effective from 22 September 2023. The average gearing level over the year was 12.01% and at the end of the Company's financial year the level of gearing was 13.7%. ## Annual General Meeting The AGM will be held at 12.30pm on Wednesday, 13 December 2023 at Schroders' offices at 1 London Wall Place, London EC2Y 5AU. Your Board strongly encourages shareholders to attend and participate in the meeting. Shareholders will also be able to hear a presentation from the Manager and light refreshments will be served. Please note that all voting will be by poll and we encourage all shareholders to 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 to appoint the Chairman of the meeting as their proxy. Information on voting can be found in the Notice of Meeting on pages 75 to 78. In the event that shareholders have a question for your Board, please email amcompanysecretary@schroders.com in advance of the AGM. ## Changes to the Articles of Association One of the resolutions that will be proposed at the AGM is an amendment to the Company's Articles of Association (the 'Articles') to 6 Schroder Income Growth Fund plc Introduction Strategic Report Governance Financial Other Information *We are confident in your Manager and their abilities to deploy their investment approach and exploit the market inefficiencies to drive returns over the long term.* *We base such confidence on the record since Sue Noffke and her team took over managing the portfolio in 2011. In that period the share price total return performance of 126.47% and the NAV total return of 128.46% are both well ahead of the FTSE All-Share Index total return of 103.50%.* allow for flexibility to hold shareholder meetings (wholly or partially) by electronic means. This will allow your Board to hold hybrid or virtual meetings when in the best interests of shareholder safety, for example, in the event of a future pandemic. The amendments will not prevent the Company from holding physical meetings and the Board's intention and strong preference is always to hold a physical general meeting when safe and practical to do so. Other amendments primarily relate to changes in law and regulation and developments in market practice since the Articles were last adopted. Further details can be found in the Director's Report and a summary of all the changes being introduced can be found in the Annual General Meeting – Recommendations section on pages 72 to 74. ## Results Webinar Please join the Manager for a webinar in which they will report on the year ended 31 August 2023 and outline their thoughts on the future direction of the portfolio. The presentation will be followed by a live Q&A session. The webinar will take place on 20 November 2023 at 2pm. Register for the event at https://registration.duuzra.com/form/SCF2023 or via the QR code below. ![img-1.jpeg](img-1.jpeg) ## Outlook Many of the challenges the Company has faced look set to continue into the year ahead. Concerns surrounding inflation and interest rate rises have been a feature of the last year. It seems likely that interest rates will stay higher for longer to help bring inflation into line with Bank of England's and other Central Banks' targets. Concerns over fiscal sustainability have broadened from the UK to the US and Europe leading to falls in government bond markets and consequent pressure on equities. The UK market continues to face negative investor sentiment, relative to Global and European markets, and investor outflows have been a drag on UK market returns. In addition, geopolitical risks understandably remain front of mind for investors. Such sentiment also creates significant opportunities for the Company over the longer term. The de-rating of UK smaller and medium sized companies is a prime example of this, and it is pleasing to see your Manager actively taking advantage of the valuation dislocations. Company managements seem to agree their shares are good value with a shift towards buybacks and away from dividends. We cannot ignore the reality that higher interest rates allow savers with an income target choice from a wider range of investments. The abiding feature of equities though is that their profits and dividends grow over the long term in nominal and real terms, a factor sometimes ignored when looking at shorter term cash rates. For investors real returns matter particularly in periods of rising inflation and interest rates. This is why the principal aim of the Company is to increase income above the rate of inflation over the medium and longer term. We remain committed to paying an increasing annual dividend and grow income adjusted for inflation over the long term, and I am pleased that we have been able to deliver such increases for 28 years. Whilst we utilised the Company's reserves on this occasion, they remain strong, having added to them in the previous financial year. We continue to monitor the income from the portfolio and remain committed to the sustainability of the Company's dividend. Whilst it is disappointing the Company's performance over the last year has lagged the broader UK market we are confident in your Manager and their abilities to deploy their investment approach and exploit the market inefficiencies to drive returns over the long term. We base such confidence on the record since Sue Noffke and her team took over managing the portfolio in 2011. In that period the share price total return performance of 126.47% and the NAV total return of 128.46% are both well ahead of the FTSE All-Share Index total return of 103.50%. Investment performance will fluctuate with market cycles but we, as your Board, are focused on ensuring the Company continues to meet its investment objectives over the long term. **Ewen Cameron Watt** Chairman 25 October 2023 Schroder Income Growth Fund plc 7 ## Manager’s Review At a market level we believe a total shareholder yield in excess of 6% represents an attractive level in absolute terms, relative to other equity markets and other assets – including bonds and cash. The net asset value total return in the 12months to 31 August 2023 in dividend dates impacted three of the holdings which last year paid was 4.2%. This compares to 5.2% from the FTSE All Share Total Return dividends in August and this year switched to September – asset Index. The share price return was -3.0%. The AIC UK Equity Income manager M&G, Asian life insurance business Prudential, and student median return was 4.4% over the period. It is disappointing to report property company, Empiric. that your Company’s return lagged these comparators over the 12 On the positive side a diverse range of holdings saw dividends grow month period. significantly, at more than 20%. Oil majors, Shell and BP, continued to Revenue after tax for your Company fell by 5.9% compared to the build back their dividend payments to shareholders after the cuts of same period last year. The decline was the result of a fall in income two years ago. Asian oriented banks, HSBC and Standard Chartered, received and a rise in the cost of gearing, as interest costs reflected saw particularly strong growth while domestic bank NatWest Group higher average interest rates in the latest 12 months compared to and financial services infrastructure business TP ICAP also grew those in the prior period. robustly. Several of your Company’s holdings in the consumer discretionary area rewarded shareholders with excellent dividend Total income for the Company fell 3.6% compared to the same period growth as their businesses flourished following the pandemic last year, due to three factors. The principal reason was a halving of disruptions - Whitbread and Hollywood Bowl saw dividends double total income from the mining sector. Lower commodity prices, and triple respectively, with strong growth from studios and compared to their peak levels of 2021/22, led to a marked reduction in broadcaster ITV and luxury goods company Burberry. Double digit earnings and dividends from the companies in this sector from the dividend increases were received from domestic bank Lloyds, extraordinarily high level of the prior two years. Ordinary dividends investment company 3i, financial services provider XPS Pensions, were lower whilst special dividends, which had been material in the power utilities companies SSE and Drax and infrastructure and prior period, were absent except for a small special dividend payment construction company Balfour Beatty. by Glencore. Your Company had less invested in the mining sector during the last 12 months compared to the prior period, on the belief Elsewhere more stable companies – information providers RELX and that we had passed the peak for the commodity cycle. Whilst the fall in Pearson, distribution services business Bunzl, retailer Pets at Home, mining sector income had been anticipated, the Company was not utility company National Grid, GP patient practice business Assura, able to offset the full reduction despite income from banks holdings defence services business QinetiQ, engineering group Spectris, and increasing by over 50% and from oils by over 30%. insurance company Legal & General all increased dividends by mid to high single digits. Companies in the portfolio with low or no dividend The second reason was the non-payment of a dividend by the growth are typically in a growth phase such as pharmaceuticals insurance company Direct Line Group due to disappointing operating company AstraZeneca, telecoms company BT and sustainable performance, detailed in the performance section. Your Company technologies company Johnson Matthey, or they have switched exited its position in the stock. preference to share buy backs over dividends as a way of rewarding Lastly some changes to dividend dates for a few holdings meant shareholders, an example of this is food retailer Tesco. being paid in September rather than August this year, resulting in A feature of the market, particularly evident in the mining, banks and some income being shifted from this period into the Company’s next oils sectors, has been a trend to favour share buy backs in capital financial year. Contributions to your Company’s income from special allocation decisions. With resulting dividend payments spread over dividends peaked in the 12-month period to August 2021 and has reduced share counts, this approach, all other things equal, improves fallen back, in each of the past two years, to levels that appear normal the sustainability , and growth, of income for these more cyclical in historical terms. sectors which are particularly sensitive to the economic cycle. Additional factors weighing on income in the year was the split of Companies and their boards must determine whether the price paid GlaxoSmithKline into two businesses, the biopharma company, for shares in conducting a share buyback offer attractive returns when rebasing its dividend to free up funds for investment in research and benchmarked against other uses of capital, such as investment in development. Dividends were around one quarter below their level of projects, research and development, staff, facilities or acquisitions. the prior period. Gambling company 888 did not pay a dividend in the Several other companies across a range of industries are conducting period as the company prioritised balance sheet leverage resulting share buybacks including food retailer Tesco, budget hotel operator from the purchase of William Hill’s UK assets. Additionally, movements 8 Schroder Income Growth Fund plc # Manager's Review Whitbread, luxury fashion house Burberry, consumer goods company Unilever, infrastructure and construction firm Balfour Beatty, TP ICAP and information companies RELX and Pearson. Some 17 of your Company's 43 holdings conducted share buy backs over the period. At a market level we believe a total shareholder yield in excess of 6% represents an attractive level in absolute terms, relative to other equity markets and other assets – including bonds and cash¹. ## Market background While global economic activity has generally surprised to the upside in 2023, inflation has been stronger and stickier than had been assumed. Central Banks around the world continued to raise interest rates during the period which has pushed up bond yields towards historic averages from the abnormally low levels seen in the post Global Financial Crisis era. In the second half of the period, bond and equity markets have been looking for signs that inflation is under sufficient control for central banks to signal the monetary tightening is done. At the start of the period in September 2022 UK gilts suffered an especially sharp decline, along with Sterling, leading to stresses in the pensions and fixed income market (LDI) which was driven by the Truss/Kwarteng 'mini budget'. This resulted in Bank of England intervention, criticism from outside authorities including the US government and the International Monetary Fund (IMF), and another change in the UK's Prime Minister and Chancellor. UK bond and stock markets did eventually calm down after many of the policies announced by Kwarteng were subsequently reversed by the new Chancellor, Jeremy Hunt, in his Autumn statement promising the country would tighten its belt in future. Further afield China loosened its pandemic restrictions, although the boost to economic activity was underwhelming and China has fallen short of original expectations with issues in the real estate sector weighing on activity and confidence. The collapse of Silicon Valley Bank (SVB) in the US in March raised concerns particularly over US regional banks that are subject to less regulation than their global peers. Subsequently in Europe, troubled lender Credit Suisse was subject to an emergency takeover from rival UBS in a deal brokered by the Swiss authorities. Enthusiasm for Artificial Intelligence (AI) drove huge gains in select areas of the US market as investors poured money into the technology sector. ## Portfolio performance Disappointingly the NAV total return underperformed the FTSE All-Share Index. Your Company generated a total return of 4.2% over the 12-month period against 5.2% for the FTSE All-Share Index. Portfolio performance was insufficient to offset the higher cost of gearing in the period. A bias towards medium and smaller sized companies, whose returns lagged behind those of the larger FTSE100, detracted from performance. At a sector level the main driver of negative relative returns was stock selection in industrials. Your Company did not own the strongly performing stocks in this sector. Aerospace and defence companies, Rolls Royce, Melrose and BAE Systems, rose as orderbooks strengthened with a strong post covid recovery in civil and defence aerospace end markets. CRH benefitted from a re-rating of the shares ¹ Total shareholder yield is the sum of a stock's dividend yield (paid over previous twelve months less any special dividends) and the percentage of net share buybacks over the previous twelve months. ## Five top/bottom relative performers | | Portfolio weight (%) | Weight relative to index (%) | Relative performance (%) | Impact (%) | | --- | --- | --- | --- | --- | | British American Tobacco | 0.0 | -2.9 | -23.3 | +0.8 | | Hollywood Bowl | 2.0 | 2.0 | 40.2 | +0.7 | | Diageo | 0.0 | -3.5 | -17.0 | +0.6 | | 3i Group | 1.9 | 1.2 | 64.2 | +0.6 | | Whitbread | 2.2 | 1.9 | 35.5 | +0.6 | | | Portfolio weight (%) | Weight relative to index (%) | Relative performance (%) | Impact (%) | | --- | --- | --- | --- | --- | | Assura | 1.7 | 1.6 | -30.6 | -0.7 | | BT Group | 2.6 | 2.2 | -23.3 | -0.6 | | Rolls Royce | 0.0 | -0.5 | 183.4 | -0.5 | | Direct Line | 0.9 | 0.8 | -26.5 | -0.5 | | Johnson Matthey | 2.1 | 1.9 | -21.0 | -0.5 | Source: Schroders, FactSet, for Schroder Income Growth investment portfolio, 12 months to end August 2023. ¹ Average weights over the period. ² Total return of the stock relative to the FTSE All-Share TR over the period. ³ Contribution to performance relative to the FTSE All-Share TR. The securities shown above are for illustrative purposes only and are not to be considered a recommendation to buy or sell. Schroder Income Growth Fund plc 9 Introduction Strategic Report Governance Financial Other Information ## Manager’s Review Bowl and Pets at Home, as well as financial investment group 3i (whose main asset is European value for money retailer Action) all had strong operating and share price performances. Many of your Company's holdings are resilient businesses offering consumers ### Portfolio activity good value for money and they have Your Manager has continued to review the portfolio for opportunities gained market share in recent years to add new investments for attractive medium term total returns, from weaker competitors exiting the augment existing holdings at compelling levels or exit those where market. share prices are fully valued or where the investment case and conviction has weakened. During the 12-month period, six new in advance of its move to relist on the US stock exchange, whilst holdings were added to your Company and seven were sold. Ashtead continued to experience robust demand for equipment At a sector level, the principal changes to your Company were a rental in the USA. reduction in exposure to property and additions to existing positions Additionally having more exposure in basic materials than in the in banks and utilities. Your Manager sold out of purpose-built student benchmark index detracted from performance with weakness in accommodation (PBSA) provider Unite Group in September, prior to commodity prices, particularly precious metals, impacting holdings in the significant rise in government bond (gilt) yields arising from the miner Anglo American and sustainability solutions company Johnson LDI fallout of the UK’s autumn statement, viewing the valuation of the Matthey. Anglo American suffered from a combination of weaker shares as close to fair value. Positions in fellow PBSA company, Empiric commodity prices and operational difficulties, now resolved. Your Student Property, and Assura, were reduced later in the period. Large Manager continues to find the diversified exposure to forward facing diversified international bank HSBC was considered attractive given metals and valuation of the business attractive. Lower precious metals the likelihood of higher for longer interest rates, the stock’s low prices weighed on Johnson Matthey whilst increased investment valuation, both relative to history and in absolute terms, the strong across areas of the group have hit profits. New management has capital position and attractive dividend yield together with additional begun to execute its strategy and your Manager is encouraged that capital returns, in the form of share buy backs. Your Company added Standard Industries, a US activist industrial investor, has increased its to its existing positions in regulated electricity network and stake in the business (announced in September 2023) to 10% from its renewables company SSE and to electricity and gas transmission and original 5% stake in April 2022. distribution business National Grid. Both businesses have attractive Property companies suffered the ructions of bond markets in the growth pathways investing for the energy transition in renewable autumn of 2022 as yields rose sharply. Assura was the largest electricity in the former and in the electricity grid in both the UK and individual detractor in the period. The shares suffered as bond yields USA in the latter. Additionally, their dividend yields, and future rose and the market fretted about the higher costs of refinancing dividend growth are attractive characteristics. debt. BT weighed on performance as the market worried about a Whilst maintaining your Company’s commodity sector exposures range of issues from the near-term cash flow impact of significant overall your Manager made changes to its preferences within the oil broadband investment, the impact of higher bond yields on the large and mining areas. The Company established a new holding in BP company pension scheme and a change in CEO. The incoming CEO through a part reduction in the Company’s large position in fellow oil has been an independent director on the board of BT for 2 years and major Shell. At its 2022 results, BP signalled its ambition to grow its is likely to hit the ground running. The group has potential levers to dividend, extend share buy backs whilst accelerating investments into demonstrate value and the valuation of the shares remains both low carbon energy and fossil fuels, and reduce debt. Your compelling. Your Company’s position in Direct Line, now sold, was a Manager believes there is scope for Shell to follow a similar strategy significant drag on performance over the period. The impact of but opted to introduce diversity by owning both companies. The adverse weather and significant claims inflation was detrimental to Company sold iron ore producer Rio Tinto and reduced its position in profits and capital leading to the company forgoing payment of a Anglo American, subsequently investing the proceeds into a new dividend until profits and capital have been restored. holding in diversified miner Glencore. Your Manager is attracted to Positioning in the two consumer sector positions contributed Glencore’s asset mix of forward-facing minerals which are well positively to performance by owning less than the market in positioned to benefit as the world moves to decarbonise energy and consumer staples and owning more than the market in consumer industry. Extensive research has been conducted on the company, discretionary sectors. Staples companies underperformed over the particularly around ethics, governance, climate and social risks. period as they experienced an unwind of the pandemic boost to Additionally, several engagements were conducted to understand volumes of cigarettes and alcohol as well as a headwind to profits better the business strategy and the firm’s commitment to cultural from currency moves over the period as the pound staged a part change associated with the settlement of bribery and corruption fines recovery from the lows of September 2022. Not owning British from the Department of Justice and Senior Fraud Office authorities. American Tobacco, Imperial Brands or international drinks company Your Manager believes that there is sufficient evidence of culture Diageo, all of which were weak, was positive for your Company. change and commitment to further improvements which, taken Consumer discretionary stocks performed strongly as they recovered together justifies a position in the portfolio. Rio Tinto was exited due from the sharp selloff in the summer and early autumn of 2022 on to a view of the greater risks and costs associated with the fears over domestic politics and economic prospects and in the face of development of a new iron ore facility in Simandou, Guinea. a mounting cost of living crisis and higher costs of servicing Your Company sold out of private assets investment manager mortgages. Many of your Company’s holdings are resilient businesses Petershill, reinvesting the proceeds into peer Intermediate Capital, offering consumers good value for money and they have gained which it believes is higher quality and more attractively valued. The market share in recent years from weaker competitors exiting the holding in National Express (now Mobico) was exited on concerns over market. Your Company’s material positions in Whitbread, Hollywood availability and cost inflation pressures of bus drivers, together with a 10 Schroder Income Growth Fund plc ## Manager’s Review Strategic Report Governance Financial Other InformationIntroduction Investing in the UK equity market is not the same as investing in the UK economy. Listed UK equities include a wide array of international firms, many of which are global leaders in their fields and derive the Investing in a market that remains majority of their revenues from overseas. In fact, 77% of FTSE All Share significantly out of favour with investors revenues come from outside the UK. However, the negative narrative provides a plethora of opportunities surrounding the UK economy has heavily impacted investor sentiment across the market spectrum, which in the UK equity market, leading to an acceleration of outflows from should provide patient investors with the market into mainly global equities and other asset classes. highly attractive returns in the medium Since the Brexit vote in 2016, the UK has gained a reputation as a term. problematic economy among major economies, with political instability generating uncertainty about the nation's future and a lack stretched balance sheet. Direct Line Insurance was sold in two stages, of confidence from both domestic and overseas investors. However, the first following a disappointing trading update, the remainder the economic performance of the UK has been better than feared. following the full year results, and the subsequent announcement of While Brexit has weakened supply potential, the UK economy has forgoing a dividend. Part of the proceeds were invested in topping up broadly kept pace with the trends seen across advanced economies its position in global asset management company M&G. Your over the past seven years. Recent revisions to UK economic data Company exited its holding in the mid cap recruitment company challenge the prevailing view that the UK lags behind all other major SThree, which focuses on the permanent and flexible contract roles in industrial economies (the G7) in its economic performance since the STEM areas across Europe and the US, as in the near term it sees Covid pandemic. UK business investment has also been picking up more headwinds as the post Covid hiring has begun to normalise, more recently, having initially stalled after the UK’s vote to leave the EU especially in the company's core areas of technology and healthcare. and the aftermath of the pandemic. Recent data continues to exceed Your Company also sold its allocation to consumer healthcare expectations, and UK corporates have strong balance sheets and business Haleon following its split from GlaxoSmithKline as it was a liquidity to increase investment spending. small holding with a low dividend yield. Sentiment towards UK equities has remained very negative, with Your Manager saw upside potential from ITV’s strong cash generation persistent outflows weighing on market valuations. This has heavily and longer-term digital initiatives and added a new holding in the impacted the absolute and relative valuations of listed UK companies, media group. A new position was also established in Victrex, a world particularly those in the small and medium-sized (SMID) sectors. There leader in high performance polymer solutions for a range of industrial has been a significant de-rating of medium and smaller-sized and medical device applications. The company has strong pricing companies over the past two years, both in absolute terms and power, growth potential and balance sheet. Food producer Cranswick relative to the largest FTSE 100 companies, due to selling pressures has industry leading capabilities and continues to invest at pace into a from outflows. However, SMID companies have traditionally outgrown broad range of growth opportunities for attractive returns. The shares larger companies in the UK and have delivered attractive total returns have derated over the past three years whilst the business has grown, that have kept pace with the best returns from global equity markets expanded new facilities (pork and poultry), developed new capabilities over the long term. The convergence of valuations between SMID and (breaded chicken) and diversified into new areas (pet foods). A new large-cap areas presents a mispriced opportunity. holding was established in XPS Pensions, a leading pensions consulting and administration business with significant organic Negative sentiment has resulted in aggregate valuations of UK growth opportunities as it takes share in a large addressable market, equities at multi-year lows. Total shareholder yields are high in the shares offer an attractive and growing dividend yield. absolute terms, relative to other equity markets and other assets, including bonds and cash. Companies across the market, including Your Manager continues to add to existing holdings on share price those in your portfolio, are particularly active in buying back their own weakness when there is conviction in the investment case, in line with shares, as they see compelling returns from investing in their the investment process. Research into other potential investments is businesses at current prices. Small and medium-sized stocks are conducted continuously, along with risk/reward assessments versus subject to ongoing bid activity from overseas and private equity- existing portfolio holdings, in a healthy competition for capital. Your backed entities. These low valuations are unlikely to persist Manager is genuinely excited about the companies in the portfolio indefinitely, and there is currently a broad set of investment and see exceptional opportunities within the market to deliver growth opportunities within the UK equity market that may well be in capital and income. considered bargains in the future. ### Outlook Fading political uncertainty, combined with a reassessment of economic performance on growth and inflation, could support a Global economic activity in 2023 has surprised on the upside, leading revision of the negative narrative on UK risk assets and be one of the to higher and more stubborn inflation than anticipated by both global catalysts to address the market’s persistent undervaluation. Investing Central Banks and markets. However, inflation has moderated from its in a market that remains significantly out of favour with investors peak levels. Higher for longer interest rates are now seen as provides a plethora of opportunities across the market spectrum, necessary to bring inflation down towards the targets and forecasts of which should provide patient investors with highly attractive returns in Central Banks. Central Banks are currently at or close to peak rates as the medium term. the impact of significant rate rises over the past two years, which always work with a lag, appears to be taking effect, cooling both activity and inflation. In addition to economic risks, there are political Sue Noffke risks that include a US election and likely a UK election in 2024, Portfolio Manager ongoing geopolitical tensions between the USA and China, and Schroder Investment Management Limited unresolved conflict between Russia and Ukraine. While the risks of a recession may have diminished, they have not entirely disappeared. 25 October 2023 Schroder Income Growth Fund plc 11 ## ESG Integration of ESG into the investment process The table below shows the number of company meetings and resolutions the Company voted on in the last one and three years. ESG is integrated within your Manager’s investment approach. In your 1 Manager’s view, ESG and industry trends are intrinsically linked. Your 2023 2021-23 Number (%) Number (%) Manager identifies the key ESG issues of each company it invests in Meetings 43 145 and analyses and examines the management of these to determine the risks and opportunities of an investment. A range of inputs to help Resolutions 915 2646 identify these including proprietary analysis done by the team based Votes with management 902 98.6 2554 96.5 on information published by the companies themselves, output from Votes against management 13 1.4 52 2.0 proprietary internal tools, work done by internal analysts as well as input from external providers such as MSCI or Sustainalytics. To your Did not vote 0 0 0 0 Manager, effective ESG integration means conducting a rigorous 1 Calendar years. 2023 to 31 August. bottom-up examination of a company’s ESG performance and Where your Manager votes against on behalf of the Company, in most incorporating that analysis into investment decisions rather than cases this has been to oppose the re-election of a director or to outsourcing to third parties. oppose the remuneration report. Your Manager will oppose the re-election of a director for several reasons including ‘over-boarding’, Extensive engagement with portfolio companies where it believes a director holds too many board positions at once so Regular engagement with the board, executive management, investor are unable to dedicate sufficient time to each. In the case of relations and sustainability professionals of a portfolio company is a remuneration, your Manager pushes for management teams to have key feature of our approach. Your Manager meets with the firm alignment with shareholders. management of all portfolio companies at least once a year. In many cases your Manager meets more frequently. These engagements are ESG in practice led by the investment team in most cases as they have the knowledge Several topics come up consistently in your Manager’s engagements of and relationships with the companies. Your Manager also benefits with all companies. Governance structures, capital allocation and from engagements led by other Schroders’ teams. Your Manager is executive remuneration would be key examples. Your Manager not afraid to be robust with management teams where needed. To engages to ensure that companies have the right governance achieve the goals with engagements, your Manager works closely with structures in place to make effective capital allocation decisions that Schroders’ Sustainable Investment team, consisting of over 50 are in the interests of shareholders and that executive pay is of an dedicated specialists. Engagement is usually directly with appropriate quantum, is aligned with the interest of shareholders and management teams and, where necessary as a form of escalation, the incorporates ESG metrics in an appropriate way. Another particular team will use voting rights against management to encourage focus for engagement in FY23 has been Climate and Biodiversity. The change. Once your Manager engages with companies, its findings will investment team conducted several engagements with portfolio be documented in its proprietary tool called ActiveIQ, which helps companies over the course of the year to understand approaches to keep track of the progress made and monitor the success of previous these topics and encourage best practice. As part of these engagements with the company. Your Manager reviews engagement engagements, your Manager met with several more carbon intensive progress quarterly and where an engagement may be stalling, your companies to understand better their transition plans, benchmark Manager will discuss next steps and how to take this forward. their strategy against peers and provide feedback (and voting The chart below shows an illustration of the main engagement issues decisions) to reflect your Manager’s view as to whether the strategy is the investment team have had with UK companies over the past three sufficiently ambitious and achievable. years: Sustainability at Schroders Your Manager’s policies on sustainability are based on what it has learned from more than 20 years of integrating ESG analysis for its clients. The below chart shows several milestones hit over the last 20 years of ESG integration at Schroders. Source: Schroders. Most significant engagement topics over 3 years to 31December 2022. Engagement topics are grouped by Blueprint theme. For more information Became a Natural Capital Investment Alliance refer to https://mybrand.schroders.com/m/3222ea4ed44a1f2c/original/schroders- Founding member Sustainability at Schroders Signatory to Net Zero | | engagement-blueprint.pdf; our vision for active ownership at Schroders. For | | | | | Became a | 3 Asset | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | A continuously evolving approach | | | | | | UNGC | Managers | | | | Achieved A | | | | | | | | signatory | Initiative | CEO letter to | | | rating from | | | illustrative purposes only and should not be viewed as a recommendation to buy or | Launched first | | #1 in ShareAction | | | | FTSE350 | | | CDP | | | | sustainable | | European RI asset | | | | companies on | | | | | | | strategy | | management survey | | | Achieved | climate change | | Published | | | Published corporate | Became a CDP sell. | 1 | Developed responsible | | | | full ESG | | Natural Capital | Engagement | | | governance policy | signatory | | fixed income policy | | Linked ESG to | | integration | 5 | Research | Blueprint | | | | | | | | revolving credit | | | | partnership | | | facility | | | 1 | | 2 | | | --- | --- | --- | --- | --- | --- | | Source: Schroders, December 2022. | | Carbon Disclosure Project. | | UN Principles for | | | | 3 | | 4 | | 5 | | Responsible Investing. | UN Global Compact. | | Strategy and Governance module. | | For | 1998 2001 2006 2007 2008 2011 2016 2017 2019 2020 2021 2022 certain businesses acquired recently we have not yet integrated ESG factors into | | | | | | | | | + | | | | | investment decision-making. There are also a small number of strategies for which | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | | | | Top 5 in 2017 | Acquired majority | | | | | | | ESG integration is not practicable or possible, for example passive index tracking or | | First dedicated | | Became a UNPRI | 2 Developed | | AODP Global | | | 6 years of | | | | Joined | | | ESG resource | | signatory | | Launched | Climate 50 Asset | stake in | | A+ | Published | Science-based | | Finance for | | | | | | responsible real | | Manager Index | BlueOrchard | | UNPRI | Climate | targets | | Biodiversity | | | | Published first socially | | estate investment | CONTEXT | | | Business | rating 4 Became a | Transition | | | Pledge | legacy business or investments in the process of or soon to be liquidated, and certain | | | responsible policy | | policy | | | | | member of | Action Plan | validated by | | & published | | | | | | | | | | operating on a | the UN Race | | SBTi | | our Plan for | | | | | | | | Launched SustainEx & | | carbon-neutral | to Net Zero | | | | Nature | joint venture businesses are excluded. | | | | | | | Climate Progress | | basis | Initiative | | | Acquired 75% | | | | | | | | | | Dashboard | | | | | shareholding in | | | Greencoat Capital 'Issues such as climate change, resource scarcity, population growth and corporate failure have put responsible investment atthe forefront of investors’ minds. We believe that companies with a strong environmental, social and governance ethos tend to deliver better results for our | | 12 Schroder Income Growth Fund plc | | clients.' | | | | --- | --- | --- | --- | --- | --- | | Source: Schroders, December 2022. | | | | | Peter Harrison, Group Chief Executive, Schroders plc | | 1 Carbon Disclosure Project. | 2 UN Principles for Responsible Investing. | 3 UN Global Compact. | 4 Strategy and Governance module. | 5 For certain businesses acquired during the course of 2020 and 2021 we have not yet | | integrated ESG factors into investment decision-making. There are also a small number of strategies for which ESG integration is not practicable or now possible, for example passive index tracking or legacy businesses or investments in the process of or soon to be liquidated, and certain joint venture businesses are excluded. ## ESG Internal accreditation In 2019 Schroders introduced an internal ESG accreditation process. Each investment manager can apply to be ‘accredited’ by submitting a document articulating how they integrate ESG into their investment process. Schroders’ Sustainable Investment Team awards accreditation based on this submission fulfilling several criteria. The award is then annually reviewed against this consistent criteria. There are 3 sustainability categories to distinguish each product/fund approach: The managers of the investment Company achieved Schroders Integrated accreditation status in 2019, and had this renewed in 2020, 2021, 2022 and 2023. The award submission detailed the Manager’s use of Schroders proprietary tools and significant engagement with portfolio companies to deepen our ESG analysis. Climate related disclosures On 30 June 2023, the Company’s AIFM produced a product level disclosure consistent with the Task Force on Climate-Related Financial Disclosures (“TCFD”) for the period 1 January 2022 to 31December 2022. This can be found here: https://mybrand.schroders.com/m/6f7e91c1169baada/original/TCFD- Schroder-Income-Growth-Fund-20221231.pdf Schroder Income Growth Fund plc 13 ## Investment Portfolio ## as at 31 August 2023 Companies in bold represent the 20 largest investments, which by value account for 66.6% (2022: 68.3%) of total investments. All companies are headquartered in the UK unless otherwise stated. All investments are equities, listed on a recognised stock exchange. | £’000 % | £’000 % | | --- | --- | | Financials | Basic Materials | | HSBC 9,733 4.2 | Glencore 8,623 3.8 | | Legal & General 6,257 2.7 | Anglo American 4,822 2.1 | | Standard Chartered 6,245 2.7 | Johnson Matthey 4,665 2.0 | | Lloyds Bank 5,690 2.5 | Victrex 1,528 0.7 | | 3i Group 5,668 2.5 | Total Basic Materials 19,638 8.6 | | Prudential 5,655 2.5 | Oil and Gas | | M&G 4,680 2.0 | Shell 14,840 6.5 | | Intermediate Capital 4,423 1.9 | BP 4,596 2.0 | | Empiric Student Property 4,359 1.9 | Total Oil and Gas 19,436 8.5 | | Assura 3,203 1.4 | Industrials | | TP ICAP 3,022 1.3 | QinetiQ 5,546 2.4 | | Natwest 2,560 1.1 | Balfour Beatty 5,257 2.3 | | Total Financials 61,495 26.7 | Bunzl 4,409 1.9 | | Consumer Services | Paypoint 2,072 0.9 | | RELX 9,728 4.2 | Spectris 1,385 0.6 | | Pets At Home 6,504 2.8 | Total Industrials 18,669 8.1 | | Pearson 6,253 2.7 | Consumer Goods | | Whitbread 5,452 2.4 | Unilever 8,115 3.5 | | Hollywood Bowl 4,386 1.9 | Burberry 6,684 2.9 | | Tesco 3,816 1.7 | Cranswick 2,386 1.0 | | XPS 2,234 1.0 | Total Consumer Goods 17,185 7.4 | | 888 (Gibraltar) 1,760 0.8 | Utilities | | ITV 1,497 0.7 | SSE 6,262 2.7 | | Cazoo 7 0.0 | National Grid 5,920 2.6 | | Total Consumer Services 41,637 18.2 | Drax 4,722 2.1 | | Healthcare | Total Utilities 16,904 7.4 | | AstraZeneca 15,565 6.8 | Telecommunications | | GSK (GlaxoSmithKline) 9,014 3.9 | BT 5,312 2.3 | | ConvaTec 4,859 2.1 | Total Telecommunications 5,312 2.3 | | Total Healthcare 29,438 12.8 | Total Investments 229,714 100.0 | 14 Schroder Income Growth Fund plc ## Ten Year Financial Record Strategic Report Governance Financial Other InformationIntroduction At 31 August 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 Shareholders’ funds (£’000) 188,936 188,165 196,490 216,718 216,740 204,458 170,324 219,915 205,100 203,932 NAV per share (pence) 275.06 273.94 286.06 315.51 315.54 297.66 246.71 316.59 295.26 293.58 Share price (pence) 266.50 269.75 257.00 293.63 301.00 273.00 242.00 316.50 289.00 267.50 Share price discount to NAV per share* (%) (3.1) (1.5) (10.2) (6.9) (4.6) (8.3) (1.9) 0.0 (2.1) (8.9) 1 Gearing* (%) 9.6 9.5 8.4 5.8 8.3 15.5 9.5 7.9 13.5 13.7 For the year ended 31 August 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 Net revenue return after taxation (£’000) 7,428 7,761 8,299 9,107 8,767 9,744 8,042 8,370 9,697 9,130 Revenue return per share (pence) 10.82 11.30 12.08 13.26 12.76 14.19 11.69 12.08 13.96 13.14 Dividends per share (pence) 10.10 10.30 10.60 11.20 11.80 12.40 12.60 12.80 13.20 13.80 2 Ongoing charges* (%) 0.93 0.99 1.00 0.95 0.93 0.87 0.86 0.79 0.74 0.77 Performance 3 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 NAV total return* 100.0 143.1 147.8 160.3 183.1 190.5 186.9 162.2 217.9 211.7 220.6 Share price total return* 100.0 144.8 152.2 151.0 179.4 191.9 181.5 168.8 231.3 220.4 213.8 FTSE All-Share Index total return 100.0 131.2 128.1 143.1 163.7 171.3 172.1 150.3 190.8 192.7 170.6 1 Borrowings used for investment purposes, less cash, expressed as a percentage of net assets. If the amount so calculated is negative, this is shown as a “Net cash” position. 2 Ongoing Charges represents the management fee and all other operating expenses excluding finance costs and transaction costs, expressed as a percentage of the average daily net asset values during the year. 3 Source: Morningstar/Thomson Reuters. Rebased to 100 at 31 August 2013. *Alternative Performance Measures. | NAV/share price/FTSE All-Share Index | | | Dividends per share versus the rate of | | | --- | --- | --- | --- | --- | | total returns for the ten years ended | | | inflation for the ten years ended | | | 31 August 2023 | | | 31 August 2023 | | | | 300 | | 150 | | | | | NAV Total Return | | CPI/RPI | 280 Dividends per share Share Price Total Return 140 260 FTSE All-Share Total Return 240 130 220 200 120 180 160 110 140 120 100 100 | | 80 | | | | | | | | | | | | | | | | | | | | 90 | | | | | | | | | | | | | | | | | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | 3 | | 4 | | 5 | | 6 | 1 7 | | 8 | | 9 | | 0 | | 1 | | 2 | | 3 | 3 | | 4 | | 5 | | 6 | | 7 | | 8 | | 9 | | 0 | | 1 | | 2 | | 3 | | | 1 | | 0 1 | | 0 1 | | 0 1 | 0 | | 1 | | 0 1 | | 0 2 | | 2 | | 2 | | 2 | 1 | | 1 | | 1 | | 1 | | 1 | | 1 | | 1 | | 2 | | 2 | | 2 | | 2 | | | 0 | | | | | | | | | 0 | | | | | | 0 | | 0 | | 0 | 0 | | 0 | | 0 | | 0 | | 0 | | 0 | | 0 | | 0 | | 0 | | 0 | | 0 | | | -2 | -2 | | -2 | | -2 | | -2 | -2 | | -2 | | -2 | | -2 | | -2 | | -2 | | -2 | -2 | | -2 | | -2 | | -2 | | -2 | | -2 | | -2 | | -2 | | -2 | | -2 | | | | ug | ug | | ug | | ug | | ug | ug | | ug | | ug | | ug | | ug | | ug | | ug | ug | | ug | | ug | | ug | | ug | | ug | | ug | | ug | | ug | | ug | | | -A | | | | -A | | -A | 1 -A | | -A | | -A | | 1 -A | | -A | | -A | | -A | | -A | -A | | -A | | -A | | -A | | -A | | -A | | -A | | -A | | -A | | -A | | | 1 | | 3 1-A | 3 | 1 | 3 | 1 | 3 | | 1 | 3 | 1 | 3 | | | 1 | | 1 | | 1 | | 1 | 1 | | 1 | | 1 | | 1 | | 1 | | 1 | | 1 | | 1 | | 1 | | 1 | | | 3 | | | | | | | | 3 | | | | | | 3 | | 3 | | 3 | | | 3 | 3 | 3 | | 3 | | 3 | | 3 | | 3 | | 3 | | 3 | | 3 | | 3 | | | | Source: Morningstar/Thomson Reuters. Rebased to 100 at 31 August | | | | | | | | | | | | | | | | | | | | Source: Morningstar/Office for National Statistics. Rebased to 100 at | | | | | | | | | | | | | | | | | | | | | | | 2013 | | | | | | | | | | | | | | | | | | | | 31August 2013. The Retail Prices Index (“RPI”) was used as the | | | | | | | | | | | | | | | | | | | | | | measure of inflation up to 31 August 2014 and the Consumer Prices Index (“CPI”) thereafter. Schroder Income Growth Fund plc 15 ## Business Review ### Business model Investment – Manager implements the investment strategy by following an ### Board Strategy investment process – Set objectives, strategy – Supported by strong and KPIs research and ### Investor risk environment Competitiveness ### value – Regular reporting and Board is focused on ensuring: interaction with the Board – that the vehicle remains Oversight attractive to investors – Appoint Manager and – Oversee portfolio other service providers – that the fees and ongoing management to achieve objectives charges remain competitive – Monitor achievement – Responsible for Promotion of KPIs overall strategy and – Oversee the use of gearing – Marketing and sales oversight including capability of the Manager risk management – Oversee discount/premium management and the – Support from the corporate – Activities centred provision of liquidity broker with secondary on the creation of through share issuance market intervention to shareholder value and repurchase support discount/ premium management ### Purpose, values and culture financial instruments as appropriate. The terms of the appointment are described more completely in the Directors’ Report. The Manager The Company’s purpose is to create long-term shareholder value. also promotes the Company using its sales and marketing teams. The The Company’s culture is driven by its values: Transparency, Board and Manager work together to deliver the Company’s Engagement and Rigour, with collegial behaviour and constructive, investment objective, as demonstrated in the diagram above. The robust challenge. The values are all centred on achieving returns for investment and promotion processes set out in the diagram are shareholders in line with the Company’s investment objective. The described in more detail below. Board also promotes the effective management or mitigation of the risks faced by the Company and, to the extent it does not conflict with ### Investment objectives the investment objective, aims to structure the Company’s operations The Company’s principal objectives are to provide growth in income with regard to all its stakeholders and take account of the impact of that exceeds the rate of inflation and capital growth as a consequence the Company’s operations on the environment and community. of rising income. As the Company has no employees and acts through its service providers, its culture is represented by the values and behaviour of the ### Investment policy Board and third parties to which it delegates. The Board aims to fulfil The investment policy of the Company is to invest primarily in UK the Company’s investment objective by encouraging a culture of equities but up to 20% of the portfolio may be invested in equities constructive challenge with all key suppliers and openness with all listed on recognised stock exchanges outside the UK. If considered stakeholders. The Board is responsible for embedding the Company’s appropriate, the Company may use equity related instruments such as culture in the Company‘s operations. convertible securities and up to 10% of the portfolio may be invested The Board recognises the Company’s responsibilities with respect to in bonds. In addition, up to 20% of total income may be generated by corporate and social responsibility and engages with its outsourced short-dated call options written on holdings in the portfolio. Put service providers to safeguard the Company’s interests. As part of this options comprising short-term exchange-traded instruments on ongoing monitoring, the Board receives reporting from its service major stock market indices of an amount up to the value of the providers with respect to their anti-bribery and corruption policies; Company’s borrowings may also be utilised. Modern Slavery Act 2015 statements; diversity policies; and greenhouse gas and energy usage reporting. ### Investment restrictions and spread of ### investment risk ### Strategy and Business model Risk in relation to the Company’s investments is spread as a result of The Company is a listed investment trust, that has outsourced its the Manager investing the Company’s portfolio with a view to operations to third party service providers. The Board has appointed ensuring that the portfolio retains an appropriate balance to meet the the Manager, Schroder Unit Trusts Limited to implement the Company’s investment objectives. The key restrictions imposed on the investment strategy and to manage the Company’s assets in line with Manager include: the appropriate restrictions placed on it by the Board, including limits on the type and relative size of holdings which may be held in the (i) no more than 15% of the Company’s total net assets, at the date portfolio and on the use of gearing, cash, derivatives and other of acquisition, may be invested in any one single company; 16 Schroder Income Growth Fund plc Introduction Strategic Report Governance Financial Other Information - (ii) no more than 10% of the value of the Company's gross assets may be invested in other listed investment companies unless such companies have a stated investment policy not to invest more than 15% of their gross assets in other investment companies or investment trusts which are listed on the Official List of the London Stock Exchange; - (iii) no more than 15% of the Company's gross assets may be invested in other investment companies or investment trusts which are listed on the Official List of the London Stock Exchange; - (iv) no more than 15% of the Company's total net assets may be invested in open-ended funds; and - (v) no more than 25% of the Company's total net assets may be invested in the aggregate in unlisted investments and holdings representing 20% or more of the equity capital of any company. The investment portfolio on page 14 demonstrates that, as at 31 August 2023, the Manager invested in 43 UK equity investments spread across nine industry sectors. The Board believes that the diversity of the stocks, along with the above-mentioned restrictions imposed on the Manager, achieve the objective of spreading investment risk. ## Status The Company carries on business as an investment trust. Its shares are listed and admitted to trading on the premium segment of the main market of the London Stock Exchange. It has been approved by HM Revenue & Customs as an investment trust in accordance with section 1158 of the Corporation Tax Act 2010, by way of a one-off application and it is intended that the Company will continue to conduct its affairs in a manner which will enable it to retain this status. The Company is domiciled in the UK and is an investment company within the meaning of section 833 of the Companies Act 2006. The Company is not a 'close' company for taxation purposes. It is not intended that the Company should have a limited life but the Directors consider it desirable that the shareholders should have the opportunity to review the future of the Company at appropriate intervals. Accordingly, the Articles of Association contain provisions requiring the Directors to put a proposal for the continuation of the Company to shareholders at the Annual General Meeting ('AGM') in 2025 and thereafter at five yearly intervals. ## Key performance indicators ### The investment objective The Board measures the development and success of the Company's business through achievement of the Company's investment objective, to provide 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, which is considered to be the most significant key performance indicator for the Company. Commentary on performance against the investment objective can be found in the Chairman's Statement. At each meeting, the Board considers a number of performance indicators to assess the Company's success in achieving its investment objective. These are as follows: - NAV performance; - Share price performance; - Share price discount/premium; and - Ongoing charges ratio. These are classed as Alternative Performance Measures ('APMs') and their calculations are explained in more detail on page 79. The performance against these indicators is reported on page 15. ## Net asset value and share price total return At each meeting, the Board reviews the performance of the portfolio in detail and discusses the views of the portfolio managers with them. ### Share price discount/premium to net asset value per share The Board reviews the level of discount/premium to net asset value per share at every board meeting and is alert to the value shareholders place on maintaining as low a level of discount/premium volatility as possible. ### Ongoing charges The Board reviews the Company's ongoing charges to ensure that the total costs incurred by shareholders in the running of the Company remain competitive when measured against peer group funds. An analysis of the Company's costs, including management and performance fees, directors' fees and general expenses, is submitted to each board meeting. Management and any performance fees payable are reviewed at least annually. ### Revenue and dividend policy The net revenue return for the year, before finance costs and taxation, was £9,676,000 (2022: £9,912,000). After deducting finance costs and taxation the amount available for distribution to shareholders was £9,130,000 (2022: £9,697,000) equivalent to net revenue of 13.14p (2022: 13.96p) per ordinary share. The Directors of the Company intend to continue to pay dividends at the end of January, April, July and October in each year. Although it is intended to distribute substantially all net income after expenses and taxation, the Company may retain up to a maximum of 15% of the Company's gross income in each year as a revenue reserve to provide consistency in dividend policy. For the year ended 31 August 2023, the Directors have declared four interim dividends, totalling 13.80 (2022: 13.20) pence per ordinary share. ## Investment process Your Company's investment team look beyond today's highest dividend payers to provide attractive levels of yield and future income growth. By utilising a barbell approach to income generation, diversification is achieved by allocating towards mispriced opportunities in capital growth and income. Your Manager aims to balance the companies with a sustainably high yield with those that offer a lower dividend but with greater growth prospects. Your Manager seeks to identify and invest in mispriced situations through fundamental research. While macroeconomic outcomes are difficult to predict precisely, your Manager monitors the risk to the Company's holdings using their experience gained over multiple economic cycles. Your Manager maintains a focus on constructing a diversified portfolio consisting of their highest conviction stock picks for the long term, within the constraints of delivering the Company's required income objective. Your Company's investment approach is based on Schroders' belief that stock markets are inefficient, whilst your Manager believes it can exploit such inefficiencies by conducting primary research, through disciplined portfolio construction, and taking a long-term view. Your Company's lead Manager, Sue Noffke, is head of UK equities, head of the Prime UK equity team, has been a member of Schroders' UK Equity team for over 30 years and has been managing your Company's portfolio since 2011. Your Company's investment team employs a rigorous and disciplined investment process aiming to deliver consistent outperformance with low volatility against set objectives. The investment team's edge is built on several pillars: 1. **Experience and stability.** The team has over 93 years' experience investing in the UK equity market. Schroder Income Growth Fund plc 17 ## Business Review 2. A rigorously implemented, repeatable process. The 4. Behavioural foundations of the investment process have been stable since Your investment team have a behavioural edge that has been 2006, though significant incremental enhancements have been repeatedly exploited over many years. It strikes your Manager as odd made. that the increasing number of portfolio managers proclaiming to be 3. A pragmatic rather than ideological investment style. A ‘long term’ investors coincides with a sustained shortening of holding focus on building style neutral portfolios allows the team to hunt periods. Your Company’s 10 year average portfolio turnover is below for opportunities in all corners of the market. 20%, implying an average holding period of over 5years. Many of your 4. Behavioural. The team’s time horizon allows them to embrace Company’s peers are unable or unwilling to invest where the next short term uncertainty when they are confident in the long-term three to six months looks uncertain but the five-year outlook is destination. positive. These are opportunities your Company steps into when confident in the destination, believing that underfollowed and 5. The depth of Schroders resources available. The team are analysed mid-caps represent some of the best opportunities. In the members of the UK Equity community and regularly collaborate ten years to the end of 2022, an outsized portion of the alpha with global colleagues. generated by the underlying portfolio of Schroder Income Growth PLC 6. Active Ownership. The team’s longer holding periods allow 2 has come from mid-cap companies. As a result, your Company has them to affect change where appropriate, prevent bad outcomes increased its mid cap analyst resource in the past 12 months. and ensure alignment of incentives. Furthermore, its two dedicated team analysts have roving roles, freeing them to find the best opportunities rather than be constrained 1. Experience and Stability by sector. Your Manager believes that just as investment returns compound, knowledge also does. The investment team has over 93 years of 5. Schroders resources investment experience that gives them an important edge. The Being part of Schroders is a significant benefit to your investment Portfolio Managers (PMs), led by Sue Noffke, have worked together team, enhancing its edge. They are members of the UK Equity since 2015. They have built a deep understanding of UK businesses, Community, a group of 16 investors focused on UK equities. industries, management teams and competitive dynamics. This Colleagues share their research, disseminate information that matters knowledge is shared across the team continually, in a collaborative and provide alternative viewpoints to challenge existing views. Beyond way of working. Consequently, the entire team benefits from the the UK Equity Community, the team engage with more than 100 experience of investing through various cycles, interest rate regimes, equity analysts and 70 Portfolio Managers across the world. As your inflation and valuation environments. The team use this knowledge to teams portfolios’ are style neutral, they regularly collaborate across build its investment edge. For example, deciding when trends are the spectrum of investment teams. This provides valuable insight into structural rather than cyclical, spot changes in competitive dynamics UK businesses’ global competitors. They engage daily with Schroder’s and back proven management teams. team of over 50 sustainability experts. 2. Rigorously implemented, repeatable process 6. Active Ownership The investment process is built on the belief that a collaborative, Active Ownership at Schroders means engaging with companies to team-based approach is key to avoiding rash decisions. All buy and encourage responsible behaviour and enhance our investment edge. sell decisions must be unanimous across the portfolio managers. Your Company’s 5 to 7year holding period means it can build Unanimity creates a high hurdle for buy decisions and a shared meaningful relationships with management and the board of responsibility for all holdings. Performance is therefore worn directors. Your Company’s proposals and opinions are given serious collectively, creating psychological safety. Every week, the investment consideration due to Schroders’ reputation in ESG and because they team hold two portfolio construction meetings where existing are in it for the long-term. Moreover, engagements are investor-led. positions and new ideas are debated. The team review portfolios, They do not outsource matters of sustainability and proxy voting to its reflect on company meetings and examine mistakes for learning sustainability team. They prefer to engage directly. Active Ownership is opportunities. A key aspect of the team's edge is both recognising and focused on aligning the interests of management teams and avoiding the situations and environments we struggle to perform in. stakeholders with shareholders. This can prevent bad outcomes and gives an alternative insight into company culture. Your Company is 3. Pragmatic rather than ideological investment style prepared to invest in “progress not perfection”. Your Manager believes that the industry terms ‘value’ and ‘growth’ 1 Source: Schroders performance analysis. create inefficiencies to take advantage of, and to deliver the best risk 2 FTSE 250 Mid Cap companies. Source: Schroders. adjusted returns. Style neutrality allows the team to focus on where the opportunities are and act independently of whichever ‘factor’ is in Promotion and shareholder relations favour. Mispricing can occur in a high growth company on high The Company promotes its shares to a broad range of investors who headline multiples of earnings and cash flows, or a mature business have the potential to be long-term supporters of the investment priced below market multiples. There are examples of both types of strategy. The Company seeks to achieve this through its Manager and company in your Company’s portfolio. Over the years the team have corporate broker, which promote the shares of the Company through had success identifying mispricings where fundamentally sound regular contact with both current and potential shareholders. companies encounter a serious but temporary problem. They are unafraid to take a contrarian view when backed by research. Over 80% Promotion is focused via two channels: 1 of your Company’s active return comes from stock selection. It – Discretionary fund managers. The Manager promotes the believes that style neutrality helps deliver consistent alpha generation Company via both London and regional sales teams. which gives our clients a smoother experience, reducing the chances of selling prematurely. 18 Schroder Income Growth Fund plc ## Business Review Strategic Report Governance Financial Other InformationIntroduction – Execution-only investors. The Company promotes its shares via and personal strengths. The Board recognises that its debates and engaging with platforms, via the press, and through its decision-making are greatly enriched by a wider range of perspectives webpages. Platforms have experienced strong growth in recent and thinking. The Board will encourage any recruitment agencies it times and are an important focus for the Manager. engages to find a range of candidates that meet the objective criteria agreed for each appointment. Appointments will always be based on These activities consist of investor meetings, one-on-one meetings, merit. Candidates for board vacancies are selected based on their regional road shows and attendance at conferences for professional skills and experience, which are matched against the balance of skills investors. Inaddition, the Company’s shares are supported by the and experience of the overall board taking into account the criteria for Manager’s wider marketing of investment companies targeted at all the role being offered. The Board also considers the diversity and types of investors; this includes maintaining close relationships with inclusion policies of its service providers. advisers and execution-only platforms, advertising in the trade press, maintaining relationships with financial journalists and the provision of Implementation of diversity policy digital information on Schroders’ website. The Board also seeks active The Board has adopted the FCA’s Listing Rules (LR 9.8.6R(9)(a) in engagement with investors, and meetings with the Chairman are relation to diversity which requires that: offered to professional investors where appropriate. (i) at least 40% of individuals on the board are women; Further disclosures (ii) at least one of the senior board positions is held by a woman; and Shareholder relations are given high priority by both the Board and the Manager and are detailed further in “Promotion” on page 16. (iii) at least one individual on the board is from a minority ethnic background. In addition to the engagement and meetings held during the year described on pages 12 and 13, the chairs of the Board and The FCA defines senior board positions as Chairman, Chief Executive committees and the other Directors, usually attend the AGM and are Officer (CEO), Chief Financial Officer (CFO) or Senior Independent available to respond to queries and concerns from shareholders. The Director (SID). As an investment trust with no executive officers, the Board is keen to hear from shareholders and can do so by writing to Company has no CEO or CFO. The Board has reflected the senior the Company Secretary (Company Secretary, Schroder Income Growth positions of the Chairman and the SID in its diversity tables below. Fund plc, 1London Wall Place, London EC2Y5AU), or emailing The Board has chosen to align its diversity reporting reference date amcompanysecretary@schroders.com. with the Company’s financial year end and proposes to maintain this Shareholders are also encouraged to sign up to the Manager’s alignment for future reporting periods. The Company has met all Investment Trusts update, to receive information on the Company three targets on board diversity as at its chosen reference date, directly https://www.schroders.com/en/uk/private-investor/fund- 31August 2023, and there have been no changes since then to the centre/funds-in-focus/investment-trusts/ date of publication of the annual report and accounts. The data is set schroders-investment-trusts/never-miss-an-update/ out in the tables below. Details of the Board’s approach to discount management and share Financial crime policy issuance may be found in the Annual General Meeting The Company continues to be committed to carrying out its business Recommendations on page72 to 74. fairly and operates a financial crime policy, covering bribery and Diversity policy corruption, tax evasion, money laundering, terrorist financing and The Board has adopted a diversity and inclusion policy which seeks to sanctions, as well as seeking confirmations that the Company’s service promote diversity of gender, social and ethnic backgrounds, cognitive providers’ policies are operating soundly. Number of Percentage Number of senior Listing Sex Board Members of the Board positions on the Board Rules Target Men 2 50% 1 Women should make up at least 40% of the Board and hold at least one of the senior positions Women 2 50% 1 Prefer not to say – – – Number of Percentage Number of senior Listing Ethnic background Board Members of the Board positions on the Board Rules Target White British or other White (including minority-white groups) 3 75% 2 At least one member of the board should be from an ethnic minority background excluding white Mixed/Multiple Ethnic Groups – – – ethnic groups (as set out in categories used by the Office for Asian/Asian British 1 17% – National Asian/Asian British 1 25% – Statistics) Black/African/Caribbean/Black British – – – Other ethnic group, including Arab – – – Not specified/prefer not to say – – – Schroder Income Growth Fund plc 19 ## Business Review Greenhouse gas emissions and energy usage As the Company outsources its operations to third parties, it has no significant greenhouse gas emissions and energy usage to report. Responsible investment The Company delegates to its Manager the responsibility for taking environmental, social and governance (“ESG”) issues into account when assessing the selection, retention and realisation of investments. The Board expects the Manager to engage with investee companies on social, environmental and business ethics issues and to promote best practice. The Board expects the Manager to exercise the Company’s voting rights in consideration of these issues. In addition to the description of the Manager’s integration ofESG into the investment process and the details in theStrategic Report on pages 12 to 13, a description of theManager’s policy, and its engagement withinvesteecompanies on these matters, can be found on the Schroders’ website at https://www.schroders.com/en/sustainability/active-ownership/. The Board notes that Schroders believes that companies with good ESG management often perform better and deliver superior returns over time. Engaging with companies to understand how they approach ESG management is an integral part of the investment process. Schroders is compliant with the UK Stewardship Code and its compliance with the principles therein is reported on its website. The Board has received reporting from the Manager on the application of its policy. 20 Schroder Income Growth Fund plc ## Business Review Strategic Report Governance Financial Other InformationIntroduction ### Stakeholder Engagement: Section 172 of the Companies Act2006 During the year under review to 31 August 2023, the Board discharged its duty under section 172 of the Companies Act 2006 to promote the success of the Company for the benefit of its members as a whole, having regard to the interests of all stakeholders. As an externally managed investment trust, the Company has no employees, operations or premises. The Board has identified its key stakeholders as the Company’s shareholders, the Manager, other service providers, the Investee companies and the Company’s Lender. The table below explains how the Directors have engaged with all stakeholders and outlines key activities undertaken and decisions made by the Board during the reporting period. ### Stakeholder Why they are Engagement 2022/23 Highlights ### important | Shareholders Continued shareholder | | Annual General Meeting (AGM): The | The AGM was held in person in 2022 | | --- | --- | --- | --- | | | support and engagement | Company welcomes attendance and | and questions and feedback from | | | are critical to the continuing | participation from shareholders at the | shareholders were welcomed. The | | | existence of the business | AGM. Shareholders have the | Board, along with the Manager, look | | | and the delivery of the long- | opportunity to meet the Directors and | forward to meeting and interacting with | | | term strategy of its business | the Manager and ask questions at the | more shareholders at the forthcoming | | | | AGM. The Board values the feedback it | AGM in December 2023. | receives from shareholders which is The Company’s webpages have been incorporated into Board discussions. refreshed and enhanced during the Publications: The annual and interim year to optimise the user experience for results presentations, as well as shareholders and investors. The quarterly reports and factsheets, are newsletter has also been refreshed for available on the Company’s webpage professional and retail subscribers. with their availability announced via the The Manager engaged with several stock exchange. Feedback and/or major shareholders and investors questions received from shareholders during the year. enable the Company to evolve its reporting which, in turn, helps to deliver transparent and understandable updates. Shareholder communication: The Manager communicates with The Board continues to work with shareholders periodically. All investors Kepler on promoting the Company are offered the opportunity to meet the through its research notes which are Chair, Senior Independent Director, or published twice a year. other Board members without using the Manager or Company Secretary as a conduit, by writing to the Company's registered office. The Board also corresponds with shareholders by letter and email. The Board receives regular feedback from its broker on investor engagement and sentiment. Investor Relations updates: At every Board meeting, the Directors receive updates on the share trading activity, share price performance and any shareholders’ feedback, as well as any publications or comments in the press. To gain a deeper understanding of the views of its shareholders and potential investors, the Manager also undertake Investor Roadshows following publications of results. Schroder Income Growth Fund plc 21 ## Business Review ### Stakeholder Why they are Engagement 2022/23 Highlights ### important Working with external partners: The The Board has made disclosures in Board also engages some external respect of its diversity policy and providers, such as investor implementation of this in the year communications advisors to obtain a under review. more detailed view on specific aspects of shareholder communications, such as developing more effective ways to communicate with investors. Board Succession Planning: The composition of the Board and the succession planning is led by the Nomination Committee with changes managed in order to provide regular refreshment, good diversity and a high level of relevant skills as set out in its report on pages 39-40. This ensures the Board has the expertise to effectively manage the Company to contribute to its long-term success and to safeguard shareholders’ interests. ### The Manager Holding the Company’s Maintaining a close and constructive The Board reviews the portfolio at each shares offers investors a working relationship with the Manager quarterly meeting and maintains liquid investment vehicle is crucial as the Board and the Manager constructive dialogue with the Manager. through which they can both aim to continue to achieve The Board has not repurchased any obtain exposure to the consistent, long-term returns in line shares during the year but it continues Company’s diversified with the investment objective. The to monitor the discount closely and will portfolio of investment Board invites the Manager to attend all take appropriate action as required. opportunities. The Board and certain Committee meetings Manager’s performance is in order to update the Directors on the The Company could not, without a critical for the Company to performance of the investments and significant draw down on reserves, to deliver its investment the implementation of the investment increase the dividend in real terms this strategy successfully and strategy and objective. year, as has happened several times in meet its objective to provide the past due to the recent surge in Important components in the real growth of income, being inflation. However, the ability to smooth collaboration with the Manager are: growth of income in excess income by judicious use of revenue of the rate of inflation, and – Encouraging open discussion with reserves remains a particular advantage capital growth as a the Manager. of investment trusts. Despite difficult consequence of the rising conditions, the Board was able to – Recognising that the interests of income. increase its dividend for the 28th shareholders and the Manager (as consecutive year. The dividend of 13.80p well as of its other clients) are, for the was 95.2% covered by earnings. After most part, well aligned, adopting a payment of the fourth interim dividend, tone of constructive challenge, the revenue reserve will be £7.5million, balanced when those interests are representing 10.80p per ordinary share not fully congruent by robust or over nine months of the annual negotiation of the Manager’s terms dividend. of engagement. – Drawing on Directors’ individual experience to support the Manager in its monitoring and change management of portfolio companies, for the benefit of all stakeholders of the Company. 22 Schroder Income Growth Fund plc ## Business Review Strategic Report Governance Financial Other InformationIntroduction ### Stakeholder Why they are Engagement 2022/23 Highlights ### important ### Investee The Board is committed to In order to achieve this, the Manager In respect of the year under review, the responsible investing and has discretionary powers to exercise Manager engaged with many of its ### companies | actively monitors the | voting rights on behalf of the Company | investee companies and voted at all of | | --- | --- | --- | | activities of investee | on all resolutions proposed by the | its shareholder meetings (further details | | companies through its | investee companies, when the | can be found on page 12). | | delegation to the Manager. | Company's rights permit voting. The | | Board monitors investments made and divested and questions the Manager’s rationale for exposures taken and voting decisions made. ### Service In order to function as an The Board maintains regular contact During the year, the Management ### Providers investment trust with a with its key external providers, both Engagement Committee reviewed its premium listing on the through the Board and Committee third party service providers including London Stock Exchange, the meetings, as well as outside of the the Manager. The Board considered the Company relies on a diverse regular meeting cycle. Their advice, as ongoing appointments to be in the best range of advisers to support well as their needs and views, are interests of the Company and its meeting all relevant routinely taken into account. shareholders as a whole. obligations. | Lenders Availability of funding and | | Considering how important the | During the year, gearing was regularly | | --- | --- | --- | --- | | | liquidity are crucial to the | availability of funding is, the Company | considered. The revolving loan facility | | | Company’s ability to take | aims to demonstrate to lenders that it is | for £30million with Sumitomo Mitsui | | | advantage of investment | a well-managed business and, in | Banking Corporation (“SMBC”) has been | | | opportunities as they arise. | particular, that the Board focuses | renewed for a further year from | | | | regularly and carefully on the | 22September 2023. | management of risk. The Manager manages the relationship with the Company's lender and reports to the Board at each meeting and as and when required for renewals of terms or negotiation of loan covenants. The Manager provides a monthly statement of compliance of the loan covenants to the lender. Schroder Income Growth Fund plc 23 ## Business Review ### Principal risks and uncertainties The Board, through its delegation to the Audit and Risk Committee, 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 October 2023. During the year, the Board discussed and monitored a number of risks which could potentially impact the Company’s ability to meet its strategic objectives. The Board received updates from the Manager, Company Secretary and other service providers on emerging risks that could affect the Company. The Board was mindful of the following emerging risks during the year; the ongoing conflict in Ukraine, rising inflation and interest rates, the threat of a UK recession and increasing energy prices. These risks were not seen as new principal or emerging risks but those that exacerbate existing risks and have been incorporated in the market risks section in the table below. Political risk includes the impact of geopolitical risk, regional tensions, trade wars and sanctions against companies. The Board continued to monitor the Russian invasion of Ukraine and its impact on political tensions, supply chains, interest rates and in particular higher inflation in the UK and globally. The Board is also mindful that changes to financial and public policy 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 that the Manager has integrated ESG considerations, including climate change, into the investment process. The Board will continue to monitor this. The Board considers that both political risks and climate risks referred to above are covered in the table below under economic and market risks and ESG and climate change risks respectively. 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. 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, decreased or unchanged. ### Risk Mitigation and management Change ### Strategic ## ➔ The Company’s investment objectives The Board holds a separate annual strategy meeting to may become out of line with the consider the Company’s strategy and performance, the requirements of investors, resulting in a appropriateness of the Company’s investment remit together wide discount of the share price to with opportunities and threats to its business. Share price underlying NAV per share. relative to NAV per share is monitored at quarterly board meetings and the use of buy back authorities is considered on a regular basis. The marketing and distribution activity is actively reviewed and there is proactive engagement with shareholders. The Company holds a continuation vote every five years on whether the Company should continue in its current form. Shareholders will have the opportunity to vote on the continuation of the Company at its AGM in 2025. The Company’s cost base could become The ongoing competitiveness of all service provider fees is ## ➔ uncompetitive, particularly in light of subject to periodic benchmarking against its competitors. open- ended alternatives. Annual consideration of management fee levels. 24 Schroder Income Growth Fund plc ## Business Review Strategic Report Governance Financial Other InformationIntroduction ### Risk Mitigation and management Change ### Investment management ## ➔ The Manager’s investment strategy, if Review of the Manager’s compliance with the agreed inappropriate, may result in the investment restrictions, investment performance and risk Company underperforming the market against investment objectives and strategy; relative and/or peer group companies, leading performance; the portfolio’s risk profile; and appropriate to the Company and its objectives strategies employed to mitigate any negative impact of becoming unattractive to investors. substantial changes in markets. Annual review of the ongoing suitability of the Manager, including resources and key personnel risk. ### Economic and market ## ➔ The Company is exposed to the effect of The risk profile of the portfolio is considered and appropriate market fluctuations due to the nature of strategies to mitigate any negative impact of substantial The increased risk reflects the its business. A significant fall in equity changes in markets are discussed with the Manager. continuing geopolitical markets could have an adverse impact concerns globally as well as on the market value of the Company’s higher inflation, interest rate underlying investments. rises and the ongoing The portfolio will normally be fairly fully There are inherent risks involved in stock selection. The economic impact of these. The invested and as such will therefore Manager is experienced and has a long track record in Board continues to monitor inevitably be exposed to economic and successfully investing in public equity holdings. these macro events on a market risk. Changes in general regular basis. The Manager monitors the impact of foreign currency economic and market conditions, such movements on the portfolio and is able to rebalance the as currency exchange rates, interest portfolio towards stocks which are less impacted by changes rates, inflation rates, industry conditions, in foreign currency exchange rates if required. tax laws, political events and trends can substantially and adversely affect the value of investments. Market risk includes the potential impact of events which are outside the Company’s control, such as pandemics, civil unrest and wars. ### Custody ## ➔ Safe custody of the Company’s assets The depositary reports on the safe custody of the Company’s may be compromised through control assets, including cash and portfolio holdings, which are failures by the depositary. independently reconciled with 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 reviewed. ### Gearing | The Company utilises a credit facility. | Gearing is monitored and strict restrictions on borrowings are | | ➔ | | --- | --- | --- | --- | | This arrangement increases the funds | imposed: gearing continues to operate within pre-agreed | | | | | limits so as not to exceed 25% of shareholders’ funds. | The loan was renewed in | | available for investment through September 2023 for a further borrowing. While this has the potential year. Borrowing remains to enhance investment returns in rising expensive in the current falling markets, in falling markets the impact market environment However, could be detrimental to performance. the Manager optimises the use of gearing to maximise the return to its equity shareholders through appropriate borrowing levels. Schroder Income Growth Fund plc 25 ## Business Review ### Risk Mitigation and management Change ### Accounting, legal and ## ➔ ### regulatory In order to continue to qualify as an The confirmation of compliance with relevant laws and investment trust, the Company must regulations by key service providers. comply with the requirements of section Shareholder documents and announcements, including the 1158 of the Corporation Tax Act 2010. Company’s published annual report are subject to stringent review processes. Breaches of the UK Listing Rules, the Companies Act or other regulations with Procedures have been established to safeguard against which the Company is required to disclosure of inside information. comply, could lead to a number of detrimental outcomes. ### Service provider ## ➔ The Company has no employees and Service providers are appointed subject to due diligence has delegated certain functions to a processes and with clearly-documented contractual number of service providers, principally arrangements detailing service expectations. the Manager, depositary and registrar. Regular reports are provided by key service providers and the Failure of controls and poor quality of services provided are monitored. performance of any service provider could lead to disruption, reputational Audited internal controls reports from key service providers, damage or loss. including confirmation of business continuity arrangements, are reviewed annually. ### Cyber ## The Company’s service providers are all Service providers report on cyber risk mitigation and ➔ exposed to the risk of cyber attacks. management at least annually, which includes confirmation of business continuity capability in the event of a cyber attack. The evolving nature of cyber Cyber attacks could lead to loss of attacks remains prevalent personal or confidential information or In addition, the Board received presentations from the across the industry. While the disrupt operations. Manager, the registrar and the safekeeping agent and risk of financial loss is probably custodian on cyber risk. small, the risk of reputational damage and loss of sensitive information continues to be significant. ### ESG and climate change ## ➔ The failure of the Manager to identify The Manager’s ESG policies, including those relating to ESG issues, including the impact of climate change, which have been adopted by the Company, climate change, could impact are fully integrated into the investment process, as set out in shareholder returns due to valuation the Strategic Report. Investments are valued at fair value and issues in investee companies and the reflect market participants’ views of ESG and climate change Company’s shares becoming less risk on the Company’s portfolio investments. The Manager attractive to investors. regularly reports to the Board on ESG and climate change matters, including engagement with investee companies. Any investor feedback is also taken into consideration by the Board. ### 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 65 to 69. 26 Schroder Income Growth Fund plc ## Business Review Strategic Report Governance Financial Other InformationIntroduction ### Viability statement Going concern The Directors have assessed the viability of the Company over a five The Directors have assessed the principal risks, the impact of the year period, taking into account the Company’s position at 31August emerging risks and uncertainties and the matters referred to in the 2023 and the potential impacts of the principal risks and uncertainties viability statement. The Board have considered climate risk, political it faces for the review period. The Directors have assessed the risk and external market factors in their assessment. Based on the Company’s operational resilience and they are satisfied that the work the Directors have performed, they have not identified any Company’s outsourced service providers will continue to operate material uncertainties relating to events or conditions that, individually effectively. or collectively, may cast significant doubt on the Company’s ability to continue as a going concern for the period assessed by the Directors, A period of five years has been chosen as the Board believes that this being the period to 30 November 2024 which is at least 12months reflects a suitable time horizon for strategic planning, taking into from the date the financial statements were authorised for issue. account the investment policy, liquidity of investments, potential impact of economic cycles, nature of operating costs, dividends and availability of funding. By order of the Board 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 24 to 26 and in particular the impact of a significant Schroder Investment Management Limited fall in UK equity markets on the value of the Company’s investment Company Secretary portfolio. The Directors have considered the Company’s income and 25 October 2023 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. The Directors also considered the beneficial tax treatment the Company is eligible for as an investment trust. If changes to these taxation arrangements were to be made it would affect the viability of the Company to act as an effective investment vehicle. Whilst the Company’s Articles of Association require that a proposal for the continuation of the Company be put forward at the AGM in 2025, the Directors have no present reason to believe such a resolution will not be passed by shareholders. The Directors also considered a stress test in which the Company’s NAV dropped by 50% and noted that, based on the assumptions in the test, the Company would continue to be viable over a five year period. 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. Schroder Income Growth Fund plc 27 28 Schroder Income Growth Fund plc ## Go v ernance Governance Board of Directors 30 Directors’ Report 32 Audit and Risk Committee Report 35 Management Engagement Committee Report 38 Nomination Committee Report 39 Remuneration Committee Report 41 Directors’ Remuneration Report 42 Statement of Directors’ Responsibilities 45 Schroder Income Growth Fund plc 29 ## Board of ## Directors ### Ewen Cameron Watt 1990 to 1995. Ewen is also an independent adviser to a number of endowments and Status: independent non-executive pension funds. He began his career as an Chairman analyst at EB Savory Miln in 1978. Length of service: 6 years – appointed a Contribution: Ewen brings his extensive Director on 18 December 2017 financial services and investment experience. Experience: Ewen Cameron Watt was a Committee membership: Audit and Risk, managing director at Blackrock, where he Management Engagement, Nomination and spent the majority of his career (including Remuneration Committees (Chairman of the predecessor companies). From 2011 to 2016, Management Engagement Committee) he was chief investment strategist at the Current remuneration: £38,000 per Blackrock Investment Institute. Prior to annum* joining Blackrock, he held senior investment roles in the UK and Hong Kong, including as Shares held: 13,000** portfolio manager from 1995 to 2010 and head of Asian research for SG Warburg from ### June Aitken She has previously held roles with Berkshire Capital ICAV, Asian Masters Fund, Emerging Status: independent non–executive Markets Masters Fund and Aquarius Fund. Director June is currently a non-executive Director of | Length of service: 9 months – appointed a | JP Morgan Asia Growth and Income plc, CC | | --- | --- | | Director on 1 January 2023 | Japan Income & Growth Trust plc and BBGI | | Experience: June Aitken has over 30 years' | Global Infrastructure S.A. | | experience with a successful equities | Contribution: June brings broad based | | distribution platform background. She | experience in investment trusts and financial | | worked in partnership with institutional | services including distribution, responsible | | investors and subsequently co-founded an | investment and governance. | investment manager focused on Committee membership: Audit and Risk, environmental and responsible equity Management Engagement, Nomination and mandates for pension funds and Remuneration Committees (Chairman of the endowments globally. She brings her Nomination Committee) knowledge of the investment trust market, Current remuneration: £28,000 per including intermediary and retail investor annum* distribution, and experience of risk and governance frameworks. Shares held: 10,163** 30 Schroder Income Growth Fund plc ## Board of Strategic Report Governance Financial Other InformationIntroduction ## Directors ### Fraser McIntyre investments covered a wide range of asset classes across traditional and alternative Status: independent non-executive strategies. Director Fraser is a Chartered Accountant. He has Length of service: 4 years – appointed a held a variety of executive positions within Director on 17 December 2019 the financial services sector, most recently as Experience: Fraser McIntyre has over 30 Chief Operating Officer of Cantab Capital LLP years of experience in financial services, which became part of GAM. including asset management, investment Contribution: Fraser brings his experience banking and audit. He started his career in financial services, including asset auditing financial services companies before management, investment banking and audit. working in the prime brokerage/equity Committee membership: Audit and Risk, divisions of two banks, Goldman Sachs and Management Engagement, Nomination and UBS. He has been COO at several multi- Remuneration Committees (Chairman of the billion dollar hedge funds where he was Audit and Risk Committee) responsible for overseeing all operational areas of the business, including finance and Current remuneration: £33,000 per accounting, operations, risk, legal and annum* compliance. He has sat on a number of fund Shares held: 15,415*** and management company boards whose ### Victoria Muir dealer broking. Her experience covers a broad range of products and services Status: senior independent non- including investment trusts, segregated executive Director accounts, pension funds, insurance products, | Length of service: 4 years – appointed a | VCTs and hedge funds and a wide breadth of | | --- | --- | | Director on 23 July 2019 | asset classes across both traditional and | | Experience: Victoria Muir is a Chartered | alternative investments. | | Director and a Fellow of the Institute of | Contribution: Victoria brings her experience | | Directors. She has held a variety of executive | in financial services, particularly asset | | positions within the financial services sector, | management with a focus on distribution, | | most notably as an executive director of | strategy and governance. | Royal London Asset Management Ltd and Committee membership: Audit and Risk, some of its sister companies, before Management Engagement, Nomination and pursuing a career as a non-executive Remuneration Committees (Chairman of the director. She is chair of Invesco Select Trust Remuneration Committee) plc, and a director of Premier Miton Global Current remuneration: £28,000 per Renewables Trust plc and its subsidiary annum* PMGR Securities 2025 plc. Victoria has over 25 years of experience in financial services, Shares held: 3,500** including asset management and inter- * Current remuneration effective 1 September 2023. ** Shareholdings are as at 25 October 2023. Full details of Directors’ shareholdings and fees paid to Directors are set out in the Directors’ Remuneration Report on pages 42 to 44. *** Mr McIntyre's shareholding as at 25 October 2023 includes the holdings of a connected person. Schroder Income Growth Fund plc 31 ## Directors’ ## Report ### Directors and officers considers reports regularly from the Manager and other key advisers and ad hoc reports and information are supplied to the Board as Chairman required. The Chairman is an independent non-executive Director who is The Board is satisfied that it is of sufficient size with an appropriate responsible for leadership of the Board and ensuring its effectiveness balance of diverse skills and experience, independence and in all aspects of its role. The Chairman’s other significant knowledge of the Company, its sector and the wider investment trust commitments are detailed on page 30. He has no conflicting industry, to enable it to discharge its duties and responsibilities relationships. effectively and that no individual or group of individuals dominates decision making. Senior Independent Director The Board has approved a policy on Directors’ conflicts of interest. Victoria Muir is the Board‘s Senior Independent Director (“SID”) and Under this policy, Directors are required to disclose all actual and has held this position since 15 December 2022. She acts as a potential conflicts of interest to the Board as they arise for sounding board for the Chairman, meets with major shareholders as consideration and approval. The Board may impose restrictions or appropriate, provides a channel for any shareholder concerns refuse to authorise such conflicts if deemed appropriate. No Directors regarding the Chairman and takes the lead in the annual evaluation have any connections with the Manager, shared directorships with of the Chairman by the independent Directors. other Directors or material interests in any contract which is Company Secretary significant to the Company’s business. Schroder Investment Management Limited provides company ### Key service providers secretarial support to the Board and is responsible for assisting the Chairman with Board meetings and advising the Board with respect The Board has adopted an outsourced business model and has to governance. The Company Secretary also manages the appointed the following key service providers: relationship with the Company’s service providers, except for the Manager Manager. Shareholders wishing to lodge questions in advance of the AGM are invited to do so by writing to the Company Secretary at the The Company is an alternative investment fund as defined by the address given on the outside back cover or by email to AIFM Directive and has appointed Schroder Unit Trusts Limited amcompanysecretary@schroders.com. (“SUTL”) as the Manager in accordance with the terms of an alternative investment fund manager (“AIFM”) agreement. The AIFM ### Role and operation of the Board agreement, which is governed by the laws of England and Wales, can be terminated by either party on 12months’ notice or on immediate Four board meetings are usually scheduled each year to deal with notice in the event of certain breaches or the insolvency of either matters including: the setting and monitoring of investment strategy; party. As at the date of this report no such notice had been given by approval of borrowings and/or cash positions; review of investment either party. performance; the level of discount of the Company’s shares to underlying NAV; promotion of the Company; and services provided by SUTL is authorised and regulated by the FCA and provides portfolio third parties. Additional meetings of the Board are arranged as management, risk management, accounting and company secretarial required. services to the Company under the AIFM agreement. The Manager also provides general marketing support for the Company and The Board is the Company’s governing body; it sets the Company’s manages relationships with key investors, in conjunction with the strategy and is collectively responsible to shareholders for its long- Chairman, other Board members or the corporate broker as term success. The Board is responsible for appointing and appropriate. The Manager has delegated investment management, subsequently monitoring the activities of the Manager and other accounting and company secretarial services to another wholly service providers to ensure that the investment objective of the owned subsidiary of Schroders plc, Schroder Investment Company continues to be met. The Board also ensures that the Management Limited. The Manager has appropriate professional Manager adheres to the investment restrictions set by the Board and indemnity insurance cover in place. acts within the parameters set by it in respect of any gearing. The Strategic Report on pages 6 to 27 sets out further detail of how the The Schroders Group manages £726.1 billion (as at 30 June 2023) on Board reviews the Company’s strategy, risk management and internal behalf of institutional and retail investors, financial institutions and controls and also includes other information required for the highnet-worth clients from around the world, invested in a broad Directors’ Report, and is incorporated by reference. range of asset classes across equities, fixed income, multi-asset and alternatives. A formal schedule of matters specifically reserved for decision by the Board has been defined and a procedure adopted for Directors, in Under the terms of the AIFM Agreement, a management fee is the furtherance of their duties, to take independent professional payable at a rate of 0.45% per annum of chargeable assets. A further advice at the expense of the Company. fee of £150,000 plus VAT per annum is payable to cover administration and company secretarial fees. The Chairman ensures that all Directors receive relevant management, regulatory and financial information in a timely manner The management fee payable in respect of the year ended 31 August and that they are provided, on a regular basis, with key information 2023 amounted to £1,055,000 (2022: £1,054,000). on the Company’s policies, regulatory requirements and internal Details of all amounts payable to the Manager are set out in note 4 controls. The Board meets at least quarterly and receives and on page59. 32 Schroder Income Growth Fund plc ## Directors’ Strategic Report Governance Financial Other InformationIntroduction ## Report The Board has reviewed the performance of the Manager during the parties, it has no executive directors, employees or internal year under review and continues to consider that it has the operations and therefore has not reported in respect of the following appropriate depth and quality of resource to deliver the Company’s UK Code Provisions: investment objectives over the longer term. Thus, the Board • the role of the executive directors and senior management; considers that the Manager’s appointment under the terms of the • the need for an internal audit function; and AIFM agreement, details of which are set out above, is in the best interests of shareholders as a whole. • executive directors’ remuneration. ### Depositary Committees HSBC Bank plc, which is authorised by the Prudential Regulation In order to assist the Board in fulfilling its governance responsibilities, Authority and regulated by the Financial Conduct Authority and the it has delegated certain functions to committees. The roles and Prudential Regulation Authority, carries out certain duties of a responsibilities of these committees, together with details of work depositary specified in the AIFM Directive including, in relation to the undertaken during the year under review, are outlined over the next Company, as follows: few pages. – safekeeping of the assets of the Company which are entrusted to The reports of the Audit and Risk Committee, Nomination Committee, it; Remuneration Committee and Management Engagement Committee – cash monitoring and verifying the Company’s cash flows; and are incorporated and form part of the Directors’ Report. – oversight of the Company and the Manager. Share capital and substantial share interests The Company, the Manager and the depositary may terminate the As at 25 October 2023, the Company had 69,463,343 ordinary shares depositary agreement at any time by giving 90days’ notice in writing. of 10 pence each in issue. No shares are held in treasury. Accordingly, HSBC Bank plc may only be removed from office when a new the total number of voting rights in the Company at the date of this depositary is appointed by the Company. report is 69,463,343. Details of changes to the Company’s share capital during the year under review are given in note 13 to the Registrar accounts on page 63. Equiniti Limited has been appointed as the Company’s registrar. The Company has received notifications in accordance with the Equiniti’s services to the Company include share register maintenance Financial Conduct Authority’s (“FCA”) Disclosure Guidance and (including the issuance, transfer and cancellation of shares as Transparency Rule 5.1.2R of the following interests in 3% or more of necessary), acting as agent for the payment of any dividends, the voting rights attached to the Company’s issued share capital. management of company meetings (including the registering of proxy votes and scrutineer services as necessary), handling As at shareholder queries and correspondence and processing corporate 31 August % of total 2023 voting rights actions. Charles Stanley & Co. Limited 3,446,355 4.98 ### Corporate Governance Statement There have been no notified changes to the above holdings since the The Financial Conduct Authority requires all UK listed companies to year end. disclose how they have applied the principles and complied with the provisions of the UK Corporate Governance Code 2018 (the “UK Provision of information to the auditor Code”) issued by the Financial Reporting Council (“FRC”). The Directors at the date of approval of this report confirm that, so The Board of the Company has considered the principles and far as each of them is aware, there is no relevant audit information of provisions of the AIC Code of Corporate Governance (the “AIC Code”). which the Company’s auditor is unaware; and each Director has taken The Code addresses the Principles and Provisions set out in the UK all the steps that he or she ought to have taken as a Director in order Corporate Governance Code (the “UK Code”), as well as setting out to make himself or herself aware of any relevant audit information additional Provisions on issues that are of specific relevance to the and to establish that the Company’s auditor is aware of that Company. information. The Board considers that reporting against the Principles and Provisions of the AIC Code, which has been endorsed by the Financial Reporting Council, provides more relevant information to shareholders. The AIC Code is available on the AIC website (www.theaic.co.uk). It includes an explanation of how the AIC Code adopts the principles and provisions set out in the UK Code to make them relevant for investment companies. The Board confirms that the Company has complied with the AIC Code, in so far as they apply to the Company’s business, throughout the year under review. As all of the Company's day-to-day management and administrative functions are outsourced to third Schroder Income Growth Fund plc 33 ## Directors’ ## Report Directors’ attendance at meetings The number of scheduled and ad hoc meetings of the Board and its Committees held during the financial year, and the attendance of individual Directors, is shown below. Whenever possible all Directors attend the AGM. Audit Management and Risk Engagement Nomination Remuneration Board Committee Committee Committee Committee Ewen Cameron Watt 4/4 2/2 2/2 2/2 2/2 1 June Aitken 2/4 1/2 1/2 1/2 1/2 2 Bridget Guerin 2/4 1/2 1/2 1/2 1/2 Fraser McIntyre 4/4 2/2 2/2 2/2 2/2 Victoria Muir 4/4 2/2 2/2 2/2 2/2 1 Ms Aitken was appointed to the Board on 1 January 2023. 2 Ms Guerin retired from the Board on 15 December 2022. In addition to the scheduled quarterly Board meetings, the Board met once during the year to review and focus on the Company’s strategy. The Board is satisfied that the Chairman and each of the other non-executive Directors commit sufficient time to the affairs of the Company to fulfil their duties. Directors’ and officers’ liability insurance and indemnities Directors’ and officers’ liability insurance cover was in place for the Directors throughout the year. The Company’s Articles of Association provide, subject to the provisions of UK legislation, an indemnity for Directors in respect of costs which they may incur relating to the defence of any proceedings brought against them arising out of their positions as Directors, in which they are acquitted or judgment is given in their favour by the court. This is a qualifying third party indemnity provision and was in place throughout the year under review and to the date of this report. By order of the Board Schroder Investment Management Limited Company Secretary 25 October 2023 34 Schroder Income Growth Fund plc ## Audit and Risk Committee Report Strategic Report Governance Financial Other InformationIntroduction The responsibilities and work carried out by the Audit and Risk Committee during the year under review are set out in the following report. The duties and responsibilities of the Committee, which include monitoring the integrity of the Company’s financial reporting and internal controls, are set out in further detail below, and may be found in the terms of reference which are set out on the Company’s webpages, www.schroders.co.uk/incomegrowth. All Directors are members of the Committee. Fraser McIntyre is the Chairman of the Committee. The Board has satisfied itself that at least one of the Committee’s members has recent and relevant financial experience and that the Committee as a whole has competence relevant to the sector in which the company operates. The Chairman of the Board is a member of the Committee, and was independent on appointment. Provision 24 of the UK Code states that the chairman of the board should not be a member of the audit committee. However, the AIC Code permits the Chairman to be a member of, but not chair, the Committee if they were independent on appointment. In view of the size of the Board, the Directors feel it is appropriate for him to continue as a member, so that the Committee can continue to benefit from his experience and knowledge. The activities of the Committee were considered as part of the internally facilitated board appraisal process completed in accordance with standard governance arrangements. The evaluation found that the Committee functioned well, with the right balance of membership, skills and experience. ### Ongoing risk review ### Half year Audit Annual Post-audit ### Audit ### report planning report review ### Approach The Committee’s key roles and responsibilities are set out below. Risks and Internal Controls Financial Reports and Valuation Audit Principal and Emerging risks and Financial statements Audit results uncertainties To monitor the integrity of the financial To discuss any matters arising from the To establish a process for identifying, statements of the Company and any audit and recommendations made by the assessing, managing and monitoring formal announcements relating to the auditor. emerging and principal risks of the Company’s financial performance and Company, and an explanation of how valuation. To review the half year report. these are being managed or mitigated. The Committee is responsible for reviewing the adequacy and effectiveness Going concern and viability Auditor appointment, independence of the Company’s internal controls and To review the position and make and performance the whistleblowing procedures operated recommendations to the Board in relation To make recommendations to the Board, by the AIFM and other services providers. to whether it considers it appropriate to in relation to the appointment, adopt the going concern basis of re-appointment, effectiveness, any accounting in preparing its annual and non-audit services by the auditor, half-yearly financial statements. removal of the external auditor, to review their independence, and to approve their The Committee is also responsible for remuneration and terms of engagement. reviewing the disclosures made by the To review the audit plan and engagement Company in the viability statement. letter. Schroder Income Growth Fund plc 35 ## Audit and Risk Committee Report The below table sets out how the Committee discharged its duties during the year. The Committee met twice during the year. Further details on attendance can be found on page 34. An evaluation of the Committee’s effectiveness and review of its terms of reference was completed during the year. ### Application during the year Risks and Internal Controls Financial Reports and Valuation Audit Principal and Emerging risks Recognition of investment income Effectiveness of the independent Reviewed the principal and emerging Considered dividends received against audit process and auditor risks faced by the Company together with forecast and the allocation of special performance the systems, processes and oversight in dividends to income or capital. Evaluated the effectiveness of the place to manage and mitigate them. independent audit firm and process prior to making a recommendation that it Service provider controls should be re-appointed at the Consideration of the operational controls forthcoming AGM. Evaluated the auditor’s maintained by the Manager, Depositary performance against agreed criteria and Registrar. including: qualification; knowledge, expertise and resources; independence policies; effectiveness of audit planning; adherence to auditing standards; and overall competence was considered, alongside feedback from the Manager on the audit process. Professional scepticism of the auditor was questioned and the Committee was satisfied with the auditor’s replies. | Internal controls and risk | Calculation of the investment | Auditor independence | | --- | --- | --- | | management | management fee | Ernst & Young LLP has provided audit | | Consideration of several key aspects of | Consideration of methodology used to | services to the Company since it was | | internal control and risk management | calculate the fees, matched against the | appointed on 17May 2019. | | operating within the Manager, Depositary | criteria set out in the AIFM agreement. | The auditor is required to rotate the | | and Registrar, including assurance reports | | senior statutory auditor every five years. | and presentations on these controls. There are no contractual obligations restricting the choice of external auditor. This is the fourth year that the senior statutory auditor, Matthew Price, has conducted the audit of the Company’s financial statements. | Compliance with the investment trust | Overall accuracy of the annual report | Audit results | | --- | --- | --- | | qualifying rules in S1158 of the | and accounts | Met with and reviewed a comprehensive | | Corporation Tax Act 2010 | Consideration of the draft annual report | report from the auditor which detailed | | Consideration of the Manager’s report | and accounts and the letter from the | the results of the audit, compliance with | | confirming compliance. | Manager in support of the letter of | regulatory requirements, safeguards that | | | representation to the auditor. | have been established, and on their own | internal quality control procedures. Valuation and existence of holdings Meetings with the auditor Quarterly review of portfolio holdings and Met the auditor without representatives assurance reports. of the Manager present. Representatives of the auditor attended the Committee meeting at which the draft annual report and accounts was considered. 36 Schroder Income Growth Fund plc ## Audit and Risk Committee Report Strategic Report Governance Financial Other InformationIntroduction ### Application during the year Risks and Internal Controls Financial Reports and Valuation Audit Fair, balanced and understandable Provision of non-audit services by the Reviewed the annual report and accounts auditor to ensure that it was fair, balanced and The Committee has reviewed the FRC’s understandable. Guidance on Audit Committees and has formulated a policy on the provision of non-audit services by the Company’s auditor. The Committee has determined that the Company’s appointed auditor will not be considered for the provision of certain non-audit services, such as accounting and preparation of the financial statements, internal audit and custody. The auditor may, if required, provide other non-audit services which will be judged on a case-by-case basis. The auditor did not provide any non-audit services to the Company during the year. Going concern and viability Consent to continue as auditor To review the position and make Ernst & Young LLP indicated to the recommendations to the Board in relation Committee their willingness to continue to whether it considers it appropriate to to act as auditor. adopt the going concern basis of accounting in preparing its annual and half-yearly report and accounts. The Committee is also responsible for reviewing the disclosures made by the Company in the viability statement. Recommendations made to, and approved by, the Board: • The Committee recommended that the Board approve the report and accounts. • The Committee recommended that the going concern assumption be adopted in the report and accounts and the explanations set out in the viability statement. • As a result of the work performed, the Committee has concluded that the report for the period ended 31 August 2023, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the Company’s position, performance, business model and strategy, and has reported on these findings to the Board. The Board’s conclusions in this respect are set out in the Statement of Directors’ Responsibilities on page45. • Having reviewed the performance of the auditor as described above, the Committee considered it appropriate to recommend the firm’s re-appointment. Resolutions to re-appoint Ernst & Young LLP as auditor to the Company, and to authorise the Directors to determine their remuneration will be proposed at the AGM. Fraser McIntyre Chairman of the Audit and Risk Committee 25 October 2023 Schroder Income Growth Fund plc 37 ## Management Engagement Committee Report The Management Engagement Committee is responsible for (1) the monitoring and oversight of the Manager’s performance and fees, and confirming the Manager’s ongoing suitability, and (2) reviewing and assessing the Company’s other service providers, including reviewing their fees. All Directors are members of the Committee. Ewen Cameron Watt is the Chairman of the Committee. Its terms of reference are available on the Company’s webpages, www.schroders.co.uk/incomegrowth. The activities of the Committee were considered as part of the internally facilitated board appraisal process completed in accordance with standard governance arrangements. The evaluation found that the Committee functioned well, with the right balance of membership, skills and experience. ### Approach ### Oversight of the Manager Oversight of other service providers The Committee: The Committee reviews the performance and competitiveness of the following service providers on at least an annual basis: • reviews the Manager’s performance, over the short- and long-term, against the reference index, peer group and the • Depositary market. • Corporate broker • considers the reporting it has received from the Manager • Registrar throughout the year, and the reporting from the Manager • Lender to the shareholders. The Committee also receives a report from the Company • assesses management fees on an absolute and relative Secretary on ancillary service providers, and considers any basis, receiving input from the Company’s broker, including recommendations. peer group and industry figures, as well as the structure of the fees. The Committee notes the Audit and Risk Committee’s review of the auditor. • reviews the appropriateness of the Manager’s contract, including terms such as notice period. • assesses whether the Company receives appropriate administrative, accounting, company secretarial and marketing support from the Manager. ### Application during the year The Committee undertook a detailed review of the Manager’s The annual review of each of the service providers was performance and agreed that it has the appropriate depth satisfactory. and quality of resource to deliver superior returns over the The Committee noted that the Audit and Risk Committee had longer term. undertaken a detailed evaluation of the Manager, registrar, The Committee also reviewed the terms of the AIFM and depositary and custodian’s internal controls. agreement and agreed they remained fit for purpose. The Committee reviewed the other services provided by the Manager and agreed they were satisfactory. Recommendations made to, and approved by, the Board: • That the ongoing appointment of the Manager on the terms of the AIFM agreement, including the fee, was in the best interests of shareholders as a whole. • That the Company’s service providers’ performance remained satisfactory. 38 Schroder Income Growth Fund plc ## Nomination Committee Report Strategic Report Governance Financial Other InformationIntroduction The Nomination Committee is responsible for (1) the recruitment, selection and induction of Directors, (2) their assessment during their tenure, and (3) the Board’s succession. All Directors are members of the Committee. June Aitken is the Chairman of the Committee. Its terms of reference are available on the Company’s webpages, www.schroders.co.uk/incomegrowth. The activities of the Committee were considered as part of the internally facilitated board appraisal process completed in accordance with standard governance arrangements. The evaluation found that the Committee functioned well, with the right balance of membership, skills and experience. ### Oversight of Directors ### Approach ### Selection and induction Board evaluation Succession • The Committee prepares a job • The Committee assesses each Director • Having considered diversity, the specification for each role, which is annually and considers whether an external need for regular refreshment and shared with an independent evaluation should take place. orderly succession, the Board’s recruitment firm. For the Chairman policy is that Directors’ tenure will • Evaluation focuses on whether each Director and the chairs of committees, the be for no longer than nine years, continues to demonstrate commitment to their Committee also considers current with the exception of the role and provides a valuable contribution to the Board members. Chairman, who should not serve Board during the year, taking into account time longer than 9years, in ordinary • Job specification outlines the commitment, independence, conflicts and circumstances and that each knowledge, professional skills, training needs. Director will be subject to annual personal qualities and experience • Following the evaluation, the Committee re-election at the AGM. requirements. provides a recommendation to shareholders • The Committee reviews the Board’s • Potential candidates are assessed with respect to the annual re-election of current and future needs at least against the Company’s diversity Directors at the AGM. annually. Should any need be policy. • All Directors retire at the AGM and their identified the Committee will • The Committee discusses the long re-election is subject to shareholder approval. initiate the selection process. list, invites a number of candidates • The Committee oversees the for interview and makes a handover process for retiring recommendation to the Board. Directors. • The Committee reviews the induction and training of new Directors. Annual review Application Annual | Selection | | Induction | | of succession | of succession | | --- | --- | --- | --- | --- | --- | | | Schroder Income Growth Fund plc 39 | | evaluation | | | | | | | | policy | policy | ## Nomination Committee Report ### Application during the year | Selection and induction | Board evaluation | Succession | | --- | --- | --- | | • Following a rigorous selection | • The Board evaluation was undertaken in July | • The Committee believes it is | | process using an independent | 2023 and concluded that the Board and its | important for the Board to have | | external recruitment agency, | Committees functioned well, with the right | the appropriate skills and diversity | | Cornforth Consulting Limited, June | balance of membership, skills and experience. | and has reviewed composition and | | Aitken was appointed to the Board | | succession plans with these in | • The Committee also reviewed each Director’s on 1January 2023. An induction mind. time commitment and independence to ensure session was held with the Manager that each Director remained free from conflict • The Board has complied with the and its various operating functions. and had sufficient time available to discharge FCA Listing Rule in relation to each of their duties effectively. diversity and provided necessary disclosures on page 19. The Committee considered each Director’s contributions, and noted that in addition to extensive experience as professionals and non- executive Directors, each Director had valuable skills and experience, as detailed in their biographies on pages 30 and 31. All Directors were considered to be independent in character and judgement. • Based on its assessment, the Committee provided individual recommendations for each Director’s election or re-election. Recommendations made to, and approved by, the Board: • That all Directors continue to demonstrate commitment to their roles, provide a valuable contribution to the deliberations of the Board, contribute towards the Company's long-term success, and remain free from conflicts with the Company and its Directors, so should all be recommended for election or re-election by shareholders at the AGM. 40 Schroder Income Growth Fund plc ## Remuneration Committee Report Strategic Report Governance Financial Other InformationIntroduction The Remuneration Committee is responsible for the making recommendations to the Board about the remuneration of the Directors. All Directors are members of the Committee. Victoria Muir is the Chairman of the Committee. Its terms of reference are available on the Company’s webpages, www.schroders.co.uk/incomegrowth. ### Approach Application during the year The Committee determines and agrees with the Board the The remuneration framework, as set out in the Directors’ framework or broad policy for the remuneration of the Directors. Remuneration Report, was unchanged during the year. The objective of the policy shall be to ensure that members of the Board are, in a fair and responsible manner, rewarded for their individual contributions to the success of the Company. No Director shall be involved in any decisions as to their own remuneration outcome. The Committee reviews the ongoing appropriateness and relevance The Committee concluded that the remuneration policy remained of the remuneration policy. appropriate and relevant. The Committee reviews Director remuneration annually and makes The Committee reviewed Directors’ fees, using external recommendations on the fees paid to non-executive Directors in benchmarking, and determined they remained appropriate. light of Directors’ workloads, levels of responsibility and industry norms. The Committee ensures that each year the Remuneration Report is The Remuneration Report and Remuneration Policy will be put to put to shareholders for approval as an advisory vote at the AGM, shareholders for approval at the forthcoming AGM. and the Remuneration Policy is put to shareholders for approval every three years at the AGM. Recommendations made to, and approved by, the Board: • That the remuneration framework and Remuneration Policy remained appropriate. • That the Remuneration Report should be put to shareholders for approval as an advisory vote at the forthcoming AGM. • That the Remuneration Policy should be put to shareholders for approval at the forthcoming AGM. Schroder Income Growth Fund plc 41 ## Directors’ Remuneration Report ### Introduction responsibilities, and time committed to the Company’s affairs, taking into account the aggregate limit of fees set out in the Company’s The following Remuneration Policy is currently in force and is subject Articles of Association. This aggregate level of Directors’ fees is to a binding vote every three years. The shareholders approved the currently set at £150,000 per annum and any increase in this level Directors’ Remuneration Policy at the 2020 AGM and the current requires approval by the Board and the Company’s shareholders. The policy provisions will apply until the policy is next considered by Chairman of the Board and the Chairman of the Audit and Risk shareholders at the forthcoming AGM. Additionally, an ordinary Committee each receive fees at a higher rate than the other Directors resolution to approve this report will be put to shareholders at the to reflect their additional responsibilities. Directors’ fees are set at a forthcoming AGM. level to recruit and retain individuals of sufficient calibre, with the level At the AGM held on 17 December 2020, 98.33% of the votes cast (including of knowledge, experience and expertise necessary to promote the votes cast at the Chairman’s discretion) in respect of approval of the success of the Company in reaching its short and long-term strategic Directors’ Remuneration Policy were in favour while 1.67% were against. objectives. 80,492 votes were withheld. Any Director who performs services which in the opinion of the At the AGM held on 15 December 2022, 97.50% of the votes cast Directors are outside the scope of the ordinary duties of a director, (including votes cast at the Chairman’s discretion) in respect of approval may be paid additional remuneration to be determined by the of the Directors’ Remuneration Report for the year ended 31 August Directors, subject to the previously mentioned fee cap. 2022 were in favour, while 2.50% were against. 35,896votes were The Board and its committees exclusively comprise non-executive withheld. Directors. No Director past or present has an entitlement to a pension from the Company and the Company has not, and does not intend to, ### Directors’ Remuneration Policy operate a share scheme for Directors or to award any share options or The determination of the Directors’ fees is the responsibility of the long-term performance incentives to any Director. No Director has a Remuneration Committee, which makes recommendations to the service contract with the Company, although Directors have a letter of Board. appointment. Directors do not receive exit payments and are not It is the Remuneration Committee’s policy to determine the level of provided with any compensation for loss of office. No other payments Directors’ remuneration having regard to amountspayable to are made to Directors other than the reimbursement of reasonable non-executive directors in the industrygenerally,the role that out-of-pocket expenses incurred in attending to the Company’s individual Directors fulfil in respect of Board and Committee business. ### Fees paid to Directors The following amounts were paid by the Company to Directors for their services in respect of the year ended 31 August 2023 and the preceding financial year. Directors’ remuneration is all fixed; they do not receive any variable remuneration. The performance of the Company over the financial year is presented on page 15. Change in annual fee Taxable over years ended 1 6 Fees benefits Total 31 August 2023 2022 2023 2022 2023 2022 2023 2022 2021 Director £ £ £ £ £ £ % % % 2 Ewen Cameron Watt (Chairman) 34,176 26,000 440 157 34,616 26,157 32.3 9.0 (1.1) 3 June Aitken 18,000 – 103 – 18,103 – 0.0 n/a n/a 4 Bridget Guerin 10,771 36,000 568 253 11,339 36,253 (68.7) 5.5 8.4 5 Fraser McIntyre 32,000 31,000 1,749 116 33,749 31,116 8.5 12.6 71.3 Victoria Muir 27,000 26,000 1,696 – 28,696 26,000 10.3 8.3 (1.2) Total 121,946 119,000 4,556 526 126,503 119,526 | 1 Comprise amounts reimbursed for expenses incurred in carrying out business for the Company, and which have been grossed up to include PAYE and NI contributions. | | --- | | 2 Appointed Chairman on 15 December 2022. | | 3 Appointed to the Board on 1 January 2023. | | 4 Retired from the Board and as Chairman on 15 December 2022. | 5 Appointed as Director on 17 December 2019 and Audit Chairman on 17 December 2020. 6 The percentage increase is attributable to the taxable benefits resulting from a two year delay caused by the Covid pandemic and a return to face to face meetings. The information in the above table has been audited. 42 Schroder Income Growth Fund plc Introduction Strategic Report Governance Financial Other Information # Directors' Remuneration Report ## Implementation of policy The terms of Directors' letters of appointment are available for inspection at the Company's registered office address during normal business hours and during the AGM at the location of such meeting. The Board did not consult with any individual shareholders before setting this remuneration policy, although feedback from the Company's Manager and corporate broker on shareholder views was considered. Any specific comments on the policy received from shareholders would be considered on a case-by-case basis. As the Company does not have any employees, no employee pay and employment conditions were taken into account when setting this remuneration policy and no employees were consulted in its construction. Directors' fees are reviewed annually and take into account research from third parties on the fee levels of directors of peer group companies, as well as industry norms and factors affecting the time commitment expected of the Directors. New directors are subject to the provisions set out in this remuneration policy. ## Directors' annual report on remuneration This report sets out how the remuneration policy was implemented during the year ended 31 August 2023. ## Consideration of matters relating to Directors' remuneration Directors' fees to 31 August 2023 were as follows: Chairman £37,000; Audit Committee Chairman £32,000; Director £27,000. Directors' remuneration was last reviewed by the Remuneration Committee in July 2023. The members of the Committee and Board at the time that remuneration levels were considered were as set out on pages 30 and 31. Although no external advice was sought in considering the levels of Directors' fees, information on fees paid to directors of other investment trusts managed by Schroders and peer group companies provided by the Manager and corporate broker was taken into consideration. Following this review, it was agreed that with effect from 1 September 2023, annual fees would be increased to £38,000 for the Chairman, £33,000 for the Audit Committee Chairman and £28,000 for Directors. The Remuneration Committee believes that the level of increase and resulting fees appropriately reflects prevailing market rates for an investment trust of the Company's size, the increasing complexity of regulation and resultant time spent by the Directors on Company matters, and will also enable the Company to attract appropriately experienced additional Directors in the future. The maximum level of fees payable, in aggregate, to the Directors of the Company is currently £150,000 per annum. ## Expenditure by the Company on remuneration and distributions to shareholders The table below compares the remuneration payable to Directors to distributions paid to shareholders during the year under review and the prior financial year. In considering these figures, shareholders should take into account the Company's investment objectives. | | Year ended 31 August 2023 £'000 | Year ended 31 August 2022 £'000 | % change | | --- | --- | --- | --- | | Remuneration payable to Directors | 127 | 120 | 5.8^{1} | | Distribution paid to shareholders – dividends | 9,586 | 9,170 | 4.5 | $^{1}$The percentage fee increase is attributable to the taxable benefits resulting from a two year delay caused by the Covid pandemic and a return to face to face meetings. Schroder Income Growth Fund plc 43 ## Directors’ Remuneration Report ### Performance graph A graph showing the Company’s share price total return compared with the FTSE All-Share Index total return, over the last ten years, is set out below. The FTSE All-Share Index has been selected as an appropriate comparison based on the composition of the Company’s investment portfolio. 275 250 Share Price Total Return 225 FTSE All-Share Total Return 200 175 150 125 100 75 | | -14 | | -15 | | -16 | | -17 | | -18 | | -19 | | -20 | | -21 | | -22 | | -23 | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | g | | g | | g | | g | | g | | g | | g | | g | | g | | g | | 31-Au | | 31-Au | | 31-Au | | 31-Au | | 31-Au | | 31-Au | | 31-Au | | 31-Au | | 31-Au | | 31-Au | | Source: Morningstar/Thomson Reuters. Rebased to 100 at 31 August 2013. ### Directors’ share interests The Company’s Articles of Association do not require Directors to own shares in the Company. The interests of Directors, including those of connected persons, at the beginning and end of the financial year under review are set out below. At At 31 August 1 September 2023 2022 Ewen Cameron Watt 13,000 10,000 June Aitken 10,163 – Fraser McIntyre 7,984 7,704 Victoria Muir 3,500 3,500 The information in the above table has been audited. On 8 and 11 September 2023, a connected person to Mr McIntyre purchased 3,748 and 3,683 shares respectively. Following this purchase, Mr McIntyre's interests increased to 15,415 ordinary shares in the Company. There have been no purchases of shares by any of the other Directors since the year end. Victoria Muir Chairman of the Remuneration Committee 25 October 2023 44 Schroder Income Growth Fund plc ## Statement of Directors’ Responsibilities in respect of the Strategic Report Governance Financial Other InformationIntroduction ## Annual Report and Accounts The Directors are responsible for preparing the annual report, and The Manager is responsible for the maintenance and integrity of the the financial statements in accordance with applicable law and Company’s webpages. Legislation in the United Kingdom governing regulation. the preparation and dissemination of financial statements may differ from legislation in other jurisdictions. Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors have prepared The Directors consider that the annual report and accounts, taken as the financial statements in accordance with United Kingdom a whole, are fair, balanced and understandable and provide the Generally Accepted Accounting Practice (United Kingdom Accounting information necessary for shareholders to assess the Company’s Standards and applicable law). Under company law the Directors position and performance, business model and strategy. 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 Directors’ Statement Company and of the return or loss of the Company for that period. In Each of the Directors, whose names and functions are listed on preparing these financial statements, the Directors are required to: pages30 and 31, confirm that to the best of their knowledge: – select suitable accounting policies and then apply them – the Company’s financial statements, which have been prepared in consistently; accordance with United Kingdom Generally Accepted Accounting – state whether applicable UK Accounting Standards have been Practice (United Kingdom Accounting Standards, comprising followed, subject to any material departures disclosed and FRS102 “The Financial Reporting Standard applicable in the UK explained in the financial statements; and Republic of Ireland” and applicable law), give a true and fair view of the assets, liabilities, financial position and loss of the – make judgements and accounting estimates that are reasonable Company; and and prudent; and – the Strategic Report includes a fair review of the development – prepare the financial statements on the going concern basis and performance of the business and the position of the unless it is inappropriate to presume that the Company will Company, together with a description of the principal risks and continue in business. uncertainties that it faces. The Directors are responsible for keeping adequate accounting By order of the Board 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 Ewen Cameron Watt with the Companies Act 2006. Chairman The Directors are also responsible for safeguarding the assets of the 25 October 2023 Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. Schroder Income Growth Fund plc 45 46 Schroder Income Growth Fund plc ## Financial Financial Independent Auditor’s Report 48 Income Statement 53 Statement of Changes in Equity 54 Statement of Financial Position 55 Notes to the Accounts 56 Schroder Income Growth Fund plc 47 ## Independent Auditor’s Report to the Members of ## Schroder Income Growth Fund plc ### Opinion – Inspection of the Directors’ assessment of going concern, including the revenue forecast, for the period to 30 November We have audited the financial statements of Schroder Income Growth 2024 which is at least 12 months from the date the financial Fund plc (“The Company”) for the year ended 31 August 2023 which statements will be authorised for issue. In preparing the revenue comprise the Income Statement, Statement of Changes in Equity, forecast, the Company has concluded that it is able to continue Statement of Financial Position, and the related notes 1 to 20 to meet its ongoing costs as they fall due. including a summary of significant accounting policies. The financial reporting framework that has been applied in their preparation is – Review of the factors and assumptions, including the impact of applicable law and United Kingdom Accounting Standards including the current economic environment, as applied to the revenue FRS 102 “The Financial Reporting Standard applicable in the UK and forecast and the liquidity assessment of the investments. We Republic of Ireland” (United Kingdom Generally Accepted Accounting considered the appropriateness of the methods used to Practice). calculate the revenue forecast and the liquidity assessment and determined, through testing of the methodology and In our opinion, the financial statements: calculations, that the methods, inputs and assumptions utilised – give a true and fair view of the Company’s affairs as at 31 August are appropriate to be able to make an assessment for the 2023 and of its profit for the year then ended; Company. – have been properly prepared in accordance with United – Consideration of the mitigating factors included in the revenue Kingdom Generally Accepted Accounting Practice; and forecasts that are within the control of the Company. We – have been prepared in accordance with the requirements of the reviewed the Company’s assessment of the liquidity of Companies Act 2006. investments held and evaluated the Company’s ability to sell those investments in order to cover working capital ### Basis for opinion requirements should revenue decline significantly. We conducted our audit in accordance with International Standards – Review of Assessment of the risk of breaching the debt on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities covenants as a result of a reduction in the value of the under those standards are further described in the Auditor’s Company’s portfolio. We recalculated the Company’s compliance responsibilities for the audit of the financial statements section of our with debt covenants in the scenarios assessed by the Directors report. We believe that the audit evidence we have obtained is and performed reverse stress testing in order to identify what sufficient and appropriate to provide a basis for our opinion. factors would lead to the Company breaching the financial covenants. ### Independence – Review of the Company’s going concern disclosures included in We are independent of the Company in accordance with the ethical the annual report in order to assess that the disclosures were requirements that are relevant to our audit of the financial appropriate and in conformity with the reporting standards. statements in the UK, including the FRC’s Ethical Standard as applied Based on the work we have performed, we have not identified any to public interest entities, and we have fulfilled our other ethical material uncertainties relating to events or conditions that, responsibilities in accordance with these requirements. individually or collectively, may cast significant doubt on the The non-audit services prohibited by the FRC’s Ethical Standard were Company’s ability to continue as a going concern for a period covered not provided to the Company and we remain independent of by the directors to 30 November 2024 which is at least 12 months Company in conducting the audit. from when the financial statements are authorised for issue. In relation to the Company’s reporting on how they have applied the ### Conclusions relating to going concern UK Corporate Governance Code, we have nothing material to add or In auditing the financial statements, we have concluded that the draw attention to in relation to the Directors’ statement in the Directors’ use of the going concern basis of accounting in the financial statements about whether the directors considered it preparation of the financial statements is appropriate. Our evaluation appropriate to adopt the going concern basis of accounting. of the Directors’ assessment of the Company’s ability to continue to Our responsibilities and the responsibilities of the directors with adopt the going concern basis of accounting included the following respect to going concern are described in the relevant sections of this procedures; report. However, because not all future events or conditions can be – Confirmation of our understanding of the Company’s going predicted, this statement is not a guarantee as to the Company’s concern assessment process and engagement with the ability to continue as a going concern. Directors and the Company Secretary to determine if all key factors were considered in their assessment. 48 Schroder Income Growth Fund plc Strategic Report Governance Financial Other InformationIntroduction ### Overview of our audit approach Key audit matters – Risk of incomplete or inaccurate revenue recognition, including the classification of special dividends as revenue or capital items in the Income Statement – Risk of incorrect valuation or ownership of the investment portfolio Materiality – Overall materiality of £2.04m which represents 1% of shareholders’ funds. ### An overview of the scope of our audit Our audit effort in considering climate change was focused on the adequacy of the Company’s disclosures in the financial statements as Tailoring the scope set out in note 1(a) and conclusion that there was no material impact Our assessment of audit risk, our evaluation of materiality and our of climate change on the valuation of the investments. We also allocation of performance materiality determine our audit scope for challenged the Directors’ considerations of climate change in their the Company. This enables us to form an opinion on the financial assessment of going concern and viability and associated disclosures statements. We take into account size, risk profile, the organisation of Key audit matters the Company and effectiveness of controls, the potential impact of climate change and changes in the business environment when Key audit matters are those matters that, in our professional assessing the level of work to be performed. All audit work was judgment, were of most significance in our audit of the financial performed directly by the audit engagement team. statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) Climate change that we identified. These matters included those which had the Stakeholders have been increasingly interested as to how climate greatest effect on: the overall audit strategy, the allocation of change will impact companies. The Company has determined that resources in the audit; and directing the efforts of the engagement the impact of climate change could affect the Company’s investments team. These matters were addressed in the context of our audit of and the overall investment process. This is explained in the principal the financial statements as a whole, and in our opinion thereon, and risks section on page 26 and which forms part of the “Other we do not provide a separate opinion on these matters. information,” rather than the audited financial statements. Our procedures on these disclosures therefore consisted solely of considering whether they are materially inconsistent with the financial statements, or our knowledge obtained in the course of the audit or otherwise appear to be materially misstated. Risk Our response to the risk Key observations communicated to the Audit and Risk Committee Incomplete or inaccurate revenue We performed the following procedures: The results of our procedures recognition, including the classification of identified no material misstatements We obtained an understanding of the Manager’s special dividends as revenue or capital in relation to the risk of incomplete or and Administrator’s processes and controls items in the Income Statement inaccurate revenue recognition, surrounding revenue recognition and including classification of special As Described in the Audit and Risk Committee classification of special dividends by performing dividends as revenue or capital items Report (page 24); Accounting policies (note 1 to the walkthrough procedures. in the Income Statement. financial statement pages 42 to 43); For all dividends received and accrued The total revenue for the year to 31 August 2023 dividends, we recalculated the dividend income | was £10.56m (2022: £10.96m), consisting | by multiplying the investment holdings at the ex- | | --- | --- | | primarily of dividend income from listed equity | dividend date, traced from the accounting | | investments. | records, by the dividend per share, which was | agreed to an independent data vendor. We also agreed all exchange rates to an external source where applicable and, for a sample of dividends received and all accrued dividends, we agreed the amounts to bank statements. Schroder Income Growth Fund plc 49 ## Independent Auditor’s Report to the Members of ## Schroder Income Growth Fund plc Risk Our response to the risk Key observations communicated to the Audit and Risk Committee | The Company received special dividends | To test completeness of recorded income, we | | --- | --- | | amounting to £0.20m (2022: £2.20m). Of which | verified that dividends had been recorded for | | £0.20m was classed as revenue (2022: £0.50m), | each investee Company held during the year | | and £0m (2022: £1.71m) was classed as capital. | with reference to investee Company | announcements obtained from an independent The investment income receivable by the data vendor. Company during the year directly affects the | Company’s revenue return. There is a risk of | For all accrued dividends, we reviewed the | | --- | --- | | incomplete or inaccurate recognition of revenue | investee Company announcements to assess | | through the failure to recognise proper income | whether the entitlement arose prior to | | entitlements or to apply an appropriate | 31August 2023. | accounting treatment. We performed a review of the income and In addition, the Directors may be required to acquisition and disposal reports produced by exercise judgment in determining whether the Administrator to identify all special dividends income receivable in the form of special received and accrued. The Company received dividends should be classified as ‘revenue’ or two special dividends in the period. For these ‘capital’ in the Income Statement. dividends, we assessed the appropriateness of the Administrator’s classification as revenue for these dividends by reviewing the underlying rationale for the distribution. Risk of incorrect valuation or ownership of We obtained an understanding of the The results of our procedures the investment portfolio Administrator’s processes and controls identified no material misstatements surrounding investment valuation and legal title in relation to the risk of incorrect As described in the Audit and Risk Committee’s by performing walkthrough procedures. valuation or ownership of the Report (page 24); Accounting policies (note 1 to the investment portfolio. financial statement pages 42 to 43). For all listed investments in the portfolio we compared the market prices and exchange rates The valuation of the investment portfolio at applied to an independent pricing vendor and 31 August 2023 was £229.8 million (2022: recalculated the investment valuations as at the £230.5 million) consisting entirely of listed year end. equities. We reviewed the prices for all investments in the The valuation of investments held in the portfolio to identify prices that have not changed investment portfolio is the key driver of the within five business days from year end to verify Company’s net asset value and total return. whether the listed price is a valid fair value. Our Incorrect investment pricing, or failure to testing identified no prices which had not maintain proper legal title of the investments changed, and no stale prices were identified. held by the Company, could have a significant impact on the portfolio valuation and the return We compared the Company’s investment generated for shareholders. holdings at 31 August 2023 to independent confirmations received directly from the The fair value of listed investments is Company’s Custodian. determined using quoted market bid prices at close of business on the reporting date. There have been no changes to the areas of audit focus raised in the We determined materiality for the Company to be £2.04m (2022: above risk table from the prior year. £2.05m), which is 1% (2022: 1%) of shareholders’ funds. We believe that shareholders’ funds provides us with materiality aligned to the ### Our application of materiality key measure of the Company’s performance. We apply the concept of materiality in planning and performing the Performance materiality audit, in evaluating the effect of identified misstatements on the audit The application of materiality at the individual account or balance level. and in forming our audit opinion. It is set at an amount to reduce to an appropriately low level the Materiality probability that the aggregate of uncorrected and undetected misstatements exceeds materiality. The magnitude of an omission or misstatement that, individually or in the aggregate, could reasonably be expected to influence the economic On the basis of our risk assessments, together with our assessment decisions of the users of the financial statements. Materiality provides a of the Company’s overall control environment, our judgement was basis for determining the nature and extent of our audit procedures. that performance materiality was 75% (2022: 75%) of our planning 50 Schroder Income Growth Fund plc Introduction Strategic Report Governance Financial Other Information materiality, namely £1.53m (2022: £1.54m). We have set performance materiality at this percentage due to our past experience of working with the key service providers which therefore indicates a lower risk of misstatements, both corrected and uncorrected. Given the importance of the distinction between revenue and capital for investment trusts, we have also applied a separate testing threshold for the revenue column of the Income Statement which is calculated as 5% of net revenue before tax. We determined this to be £0.46m (2022: £0.49m). ### Reporting threshold An amount below which identified misstatements are considered as being clearly trivial. We agreed with the Audit Committee that we would report to them all uncorrected audit differences in excess of £0.10m (2022: £0.10m), which is set at 5% of planning materiality, as well as differences below that threshold that, in our view, warranted reporting on qualitative grounds. We evaluate any uncorrected misstatements against both the quantitative measures of materiality discussed above and in light of other relevant qualitative considerations in forming our opinion. ### Other information The other information comprises the information included in the annual report other than the financial statements and our auditor's report thereon. The directors are responsible for the other information contained within the annual report. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in this report, we do not express any form of assurance conclusion thereon. Our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the course of the audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to a material misstatement in the financial statements themselves. If, based on the work we have performed, we conclude that there is a material misstatement of the other information, we are required to report that fact. We have nothing to report in this regard. ### Opinions on other matters prescribed by the Companies Act 2006 In our opinion the part of the Directors' remuneration report to be audited has been properly prepared in accordance with the Companies Act 2006. In our opinion, based on the work undertaken in the course of the audit: - the information given in the strategic report and the Directors' report for the financial year for which the financial statements are prepared is consistent with the financial statements; and - the strategic report and Directors' reports have been prepared in accordance with applicable legal requirements; ### Matters on which we are required to report by exception In the light of the knowledge and understanding of the Company and its environment obtained in the course of the audit, we have not identified material misstatements in the strategic report or Directors' report. We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to you if, in our opinion: - adequate accounting records have not been kept, or returns adequate for our audit have not been received from branches not visited by us; or - the financial statements and the part of the Directors' Remuneration Report to be audited are not in agreement with the accounting records and returns; or - certain disclosures of Directors' remuneration specified by law are not made; or - we have not received all the information and explanations we require for our audit. ### Corporate Governance Statement We have reviewed the Directors' statement in relation to going concern, longer-term viability and that part of the Corporate Governance Statement relating to the Company's compliance with the provisions of the UK Corporate Governance Code specified for our review by the Listing Rules. Based on the work undertaken as part of our audit, we have concluded that each of the following elements of the Corporate Governance Statement is materially consistent with the financial statements or our knowledge obtained during the audit: - Directors' statement with regards to the appropriateness of adopting the going concern basis of accounting and any material uncertainties identified set out on page 27; - Directors' explanation as to its assessment of the Company's prospects, the period this assessment covers and why the period is appropriate set out on page 27; - Directors' statement on whether it has a reasonable expectation that the group will be able to continue in operation and meets its liabilities set out on page 27; - Directors' statement on fair, balanced and understandable set out on page 37; - Board's confirmation that it has carried out a robust assessment of the emerging and principal risks set out on page 26; - The section of the annual report that describes the review of effectiveness of risk management and internal control systems set out on pages 35 to 37; and; - The section describing the work of the audit committee set out on pages 35 to 37. ### Responsibilities of directors As explained more fully in the Directors' responsibilities statement set out on page 45, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, the directors are responsible for assessing the Company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Company or to cease operations, or have no realistic alternative but to do so. Schroder Income Growth Fund plc 51 ## Independent Auditor’s Report to the Members of ## Schroder Income Growth Fund plc ### Auditor’s responsibilities for the audit of the Other matters we are required to address ### financial statements – Following the recommendation from the Audit and Risk Committee, we were appointed by the Company on 5 July 2019 Our objectives are to obtain reasonable assurance about whether the to audit the financial statements for the year ending 31 August financial statements as a whole are free from material misstatement, 2023 and subsequent financial periods. whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of The period of total uninterrupted engagement including assurance, but is not a guarantee that an audit conducted in previous renewals and reappointments is five years, covering the accordance with ISAs (UK) will always detect a material misstatement years ending 31 August 2019 to 31 August 2023. when it exists. Misstatements can arise from fraud or error and are – The audit opinion is consistent with the additional report to the considered material if, individually or in the aggregate, they could Audit and Risk Committee. reasonably be expected to influence the economic decisions of users ### taken on the basis of these financial statements. Use of our report This report is made solely to the Company’s members, as a body, in ### Explanation as to what extent the audit was accordance with Chapter 3 of Part 16 of the Companies Act 2006. ### considered capable of detecting Our audit work has been undertaken so that we might state to the Company’s members those matters we are required to state to them ### irregularities, including fraud in an auditor’s report and for no other purpose. To the fullest extent Irregularities, including fraud, are instances of non-compliance with permitted by law, we do not accept or assume responsibility to laws and regulations. We design procedures in line with our anyone other than the Company and the Company’s members as a responsibilities, outlined above, to detect irregularities, including body, for our audit work, for this report, or for the opinions we have fraud. The risk of not detecting a material misstatement due to fraud formed. is higher than the risk of not detecting one resulting from error, as fraud may involve deliberate concealment by, for example, forgery or intentional misrepresentations, or through collusion. The extent to which our procedures are capable of detecting irregularities, Matthew Price (Senior statutory auditor) including fraud is detailed below. for and on behalf of Ernst & Young LLP, Statutory Auditor However, the primary responsibility for the prevention and detection London of fraud rests with both those charged with governance of the 25 October 2023 Company and management. – We obtained an understanding of the legal and regulatory frameworks that are applicable to the Company and determined that the most significant United Kingdom Generally Accepted Accounting Practice, the Companies Act 2006, the Listing Rules, UK Corporate Governance Code, the Association of Investment Companies’ Code and Statement of Recommended Practice, Section 1158 of the Corporation Tax Act 2010 and The Companies (Miscellaneous Reporting) Regulations 2018. – We understood how the Company is complying with those frameworks through discussions with the Audit and Risk Committee and Company Secretary, review of board minutes and the Company’s documented policies and procedures. – We assessed the susceptibility of the Company’s financial statements to material misstatement, including how fraud might occur by considering the key risks impacting the financial statements. We identified a fraud risk with respect to incomplete or inaccurate revenue recognition through incorrect classification of special dividends as revenue or capital in the Income Statement. Further discussion of our approach is set out in the key audit matter above. – Based on this understanding we designed our audit procedures to identify non-compliance with such laws and regulations. Our procedures involved review of the Company Secretary’s reporting to the directors with respect to the application of the documented policies and procedures and review of the financial statements to ensure compliance with the reporting requirements of the Company. A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council’s website at https://www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report. 52 Schroder Income Growth Fund plc # Income Statement for the year ended 31 August 2023 | | Note | Revenue £'000 | 2023 Capital £'000 | Total £'000 | Revenue £'000 | 2022 Capital £'000 | Total £'000 | | --- | --- | --- | --- | --- | --- | --- | --- | | Gains/(losses) on investments held at fair value through profit or loss | 2 | - | 326 | 326 | - | (16,596) | (16,596) | | Net foreign currency losses | | - | - | - | - | (1) | (1) | | Income from investments | 3 | 10,560 | - | 10,560 | 10,954 | 1,707 | 12,661 | | Other interest receivable and similar income | 3 | 90 | - | 90 | 8 | - | 8 | | Gross return/(loss) | | 10,650 | 326 | 10,976 | 10,962 | (14,890) | (3,928) | | Investment management fee | 4 | (422) | (633) | (1,055) | (527) | (527) | (1,054) | | Administrative expenses | 5 | (552) | - | (552) | (523) | - | (523) | | Net return/(loss) before finance costs and taxation | | 9,676 | (307) | 9,369 | 9,912 | (15,417) | (5,505) | | Finance costs | 6 | (546) | (821) | (1,367) | (202) | (202) | (404) | | Net return/(loss) before taxation | | 9,130 | (1,128) | 8,002 | 9,710 | (15,619) | (5,909) | | Taxation | 7 | - | - | - | (13) | - | (13) | | Net return/(loss) after taxation | | 9,130 | (1,128) | 8,002 | 9,697 | (15,619) | (5,922) | | Return/(loss) per share (pence) | 9 | 13.14 | (1.62) | 11.52 | 13.96 | (22.49) | (8.53) | 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 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. The notes on pages 56 to 70 form an integral part of these accounts. Schroder Income Growth Fund plc 53 Introduction Strategic Report Governance Financial Other Information ## Statement of Changes in Equity for the year ended 31 August 2023 | | Note | Called-up share capital £'000 | Share premium £'000 | Capital redemption reserve £'000 | Warrant exercise reserve £'000 | Share purchase reserve £'000 | Capital reserves £'000 | Revenue reserve £'000 | Total £'000 | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | At 31 August 2021 | | 6,946 | 9,449 | 2,011 | 1,596 | 34,936 | 153,859 | 11,118 | 219,915 | | Issue of new shares | | – | – | – | – | – | – | – | – | | Net (loss)/return on ordinary activities | | – | – | – | – | – | (15,619) | 9,697 | (5,922) | | Dividends paid in the year | 8 | – | – | – | – | – | – | (8,893) | (8,893) | | At 31 August 2022 | | 6,946 | 9,449 | 2,011 | 1,596 | 34,936 | 138,240 | 11,922 | 205,100 | | Net (loss)/return on ordinary activities | | – | – | – | – | – | (1,128) | 9,130 | 8,002 | | Dividends paid in the year | 8 | – | – | – | – | – | – | (9,170) | (9,170) | | At 31 August 2023 | | 6,946 | 9,449 | 2,011 | 1,596 | 34,936 | 137,112 | 11,882 | 203,932 | The notes on pages 56 to 70 form an integral part of these accounts. 54 Schroder Income Growth Fund plc # Statement of Financial Position at 31 August 2023 | | Note | 2023 £'000 | 2022 £'000 | | --- | --- | --- | --- | | **Fixed assets** | | | | | Investments held at fair value through profit or loss | 10 | 229,714 | 230,497 | | **Current assets** | | | | | Debtors | 11 | 2,557 | 2,737 | | Cash at bank and in hand | | 1,560 | 2,305 | | | | 4,117 | 5,042 | | **Current liabilities** | | | | | Creditors: amounts falling due within one year | 12 | (29,899) | (30,439) | | Net current liabilities | | (25,782) | (25,397) | | Total assets less current liabilities | | 203,932 | 205,100 | | Net assets | | 203,932 | 205,100 | | **Capital and reserves** | | | | | Called-up share capital | 13 | 6,946 | 6,946 | | Share premium | 14 | 9,449 | 9,449 | | Capital redemption reserve | 14 | 2,011 | 2,011 | | Warrant exercise reserve | 14 | 1,596 | 1,596 | | Share purchase reserve | 14 | 34,936 | 34,936 | | Capital reserves | 14 | 137,112 | 138,240 | | Revenue reserve | 14 | 11,882 | 11,922 | | Total equity shareholders' funds | | 203,932 | 205,100 | | Net asset value per share (pence) | 15 | 293.58 | 295.26 | These accounts were approved and authorised for issue by the Board of Directors on 25 October 2023 and signed on its behalf by: **Ewen Cameron Watt** Chairman The notes on pages 56 to 70 form an integral part of these accounts. Registered in England and Wales as a public company limited by shares **Company registration number: 03008494** Schroder Income Growth Fund plc 55 Introduction Strategic Report Governance Financial Other Information ## Notes to the accounts ## for the year ended 31 August 2023 ### 1. Accounting Policies (a) Basis of accounting 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 July 2022. 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 until 30 November 2024, which is 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; and that the Company’s assets comprise cash and readily realisable securities quoted in active markets. The directors have considered the impact of climate change risk and emerging risk and have concluded that there was no further impact of climate change to be taken into account as the investments are valued based on market pricing. Further details of directors’ considerations regarding this are given in the Chairman’s Statement, Portfolio Managers’ Review, Going Concern Statement, Viability Statement and under the Principal Risks and uncertainties in the Strategic Report. The Company has not presented a statement of cash flows, as it is not required for an investment trust which meets certain conditions; in particular that substantially all of the Company’s investments are highly liquid and carried at market value. 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 2022. Other than the Director’s assessment of going concern, no significant judgements, estimates or assumptions have been required in the preparation of the accounts for the current or preceding financial year. (b) Valuation of investments The Company’s investments are classified as fair value through profit and loss in accordance with FRS 102. Upon initial recognition the investments are measured at the transaction price, excluding expenses incidental to purchase which are written off to capital at the time of acquisition. Subsequently the investments are valued at fair value, which are quoted bid prices for investments traded in active markets. Fair value gains or losses are recognised in the capital column of the Income Statement. All purchases and sales are accounted for on a trade date basis. (c) Accounting for reserves Gains and losses on sales of investments, and the management fee or finance costs allocated to capital, are included in the Income Statement and dealt with in capital reserves within “Gains and losses on sales of investments”. Increases and decreases in the valuation of investments held at the year end, are included in the Income Statement and dealt with in capital reserves within “Investment holding gains and losses”. Foreign exchange gains and losses on cash and deposit balances are included in the Income Statement and in capital reserves within “Gains and losses on sales of investments”. (d) Income Dividends receivable from equity shares are included in revenue on an ex-dividend basis except where, in the opinion of the Board, the dividend is capital in nature, in which case it is included in capital. Dividends from overseas companies are included gross of any withholding tax. Where the Company has elected to receive scrip dividends in the form of additional shares rather than in cash, the amount of the cash dividend foregone is recognised in revenue. Any excess in the value of the shares received over the amount of the cash dividend is recognised in capital. Deposit interest outstanding at the year end is calculated and accrued on a time apportionment basis using market rates of interest. (e) Expenses All expenses are accounted for on an accruals basis. Expenses are allocated wholly to revenue with the following exceptions: – The management fee is allocated 40% to revenue and 60% to capital in line with the Board’s expected long-term split of revenue and capital return from the Company’s investment portfolio. 56 Schroder Income Growth Fund plc ## Notes to the accounts Strategic Report Governance Financial Other InformationIntroduction ## for the year ended 31 August 2023 – Expenses incidental to the purchase and sale of an investment are written off to capital at the time of acquisition or disposal. These expenses are commonly referred to as transaction costs and comprise brokerage commission and stamp duty. Details of transaction costs are given in note 10 on page 61. (f) Finance costs Finance costs, including any premiums payable on settlement or redemption and direct issue costs, are accounted for on an accruals basis using the effective interest method in accordance with FRS 102. Finance costs are allocated 40% to revenue and 60% to capital in line with the Board’s expected long-term split of revenue and capital return from the Company’s investment portfolio. (g) Financial instruments Cash at bank and in hand may comprise cash and demand deposits which are readily convertible to a known amount of cash and are subject to insignificant risk of changes in value. Other debtors and creditors do not carry any interest, are short-term in nature and are accordingly stated at nominal value, with debtors reduced by appropriate allowances for estimated irrecoverable amounts. Bank loans and overdrafts are initially measured at transaction price and, subsequently at amortised cost. They are recorded at the proceeds received net of direct issue costs. (h) Taxation The tax charge for the year is based on amounts expected to be received or paid. Deferred tax is accounted for in accordance with FRS 102. Deferred tax is provided on all timing differences that have originated but not reversed by the accounting date. Deferred tax liabilities are recognised for all taxable timing differences but deferred tax assets are only recognised to the extent that it is probable that taxable profits will be available against which those timing differences can be utilised. Deferred tax is measured at the tax rate which is expected to apply in the periods in which the timing differences are expected to reverse, based on tax rates that have been enacted or substantively enacted at the accounting date and is measured on an undiscounted basis. (i) Value added tax (“VAT”) Expenses are disclosed inclusive of the related irrecoverable VAT. (j) Foreign currency In accordance with FRS 102, the Company is required to determine a functional currency, being the currency in which the Company predominantly operates. The Board has determined that sterling is the Company’s functional currency and the presentational currency of the accounts. Transactions denominated in foreign currencies are converted at actual exchange rates as at the date of the transaction. Monetary assets, liabilities and investments held at fair value, denominated in foreign currencies at the year end are translated at the rates of exchange prevailing at the year end. (k) Dividends payable Dividends on equity shares are recognised as a deduction of equity when the liability to pay the dividends arises. Consequently, interim dividends are recognised when paid and final dividends when approved in the general meeting. Schroder Income Growth Fund plc 57 # Notes to the accounts for the year ended 31 August 2023 ## 2. Gains/(losses) on investments held at fair value through profit or loss | | 2023 £'000 | 2022 £'000 | | --- | --- | --- | | Gains on sales of investments based on historic cost | 1,242 | 6,923 | | Amounts recognised in investment holding gains and losses in the previous year in respect of investments sold in the year | (2,196) | (10,239) | | (Losses) on sales of investments based on the carrying value at the previous balance sheet date | (954) | (3,316) | | Net movement in investment holding gains and losses | 1,280 | (13,280) | | Gains/(losses) on investments held at fair value through profit or loss | 326 | (16,596) | ## 3. Income | | 2023 £'000 | 2022 £'000 | | --- | --- | --- | | Income from investments: | | | | UK dividends | 8,763 | 9,406 | | UK special dividends | 196 | 496 | | Overseas dividends | 1,538 | 909 | | Scrip dividends | 63 | 143 | | | 10,560 | 10,954 | | Other interest receivable and similar income: | | | | Deposit interest | 90 | 8 | | | 90 | 8 | | Total income | 10,650 | 10,962 | | Capital: | | | | Special dividends allocated to capital | - | 1,707 | 58 Schroder Income Growth Fund plc Introduction Strategic Report Governance Financial Other Information # Notes to the accounts for the year ended 31 August 2023 ## 4. Investment management fee | | Revenue £'000 | 2023 Capital £'000 | Total £'000 | Revenue £'000 | 2022 Capital £'000 | Total £'000 | | --- | --- | --- | --- | --- | --- | --- | | Management fee | 422 | 633 | 1,055 | 527 | 527 | 1,054 | The basis for calculating the management fee is set out in the Directors' Report on page 32. ## 5. Administrative expenses | | 2023 £'000 | 2022 £'000 | | --- | --- | --- | | Administration expenses | 374 | 350 | | Directors' fees | 122 | 119 | | Auditor's remuneration for the audit of the Company's financial statements^{1} | 56 | 54 | | | 552 | 523 | $^{1}$Includes £9,000 (2022: £9,000) irrecoverable VAT. ## 6. Finance costs | | Revenue £'000 | 2023 Capital £'000 | Total £'000 | Revenue £'000 | 2022 Capital £'000 | Total £'000 | | --- | --- | --- | --- | --- | --- | --- | | Interest on bank loans and overdrafts | 546 | 821 | 1,367 | 202 | 202 | 404 | ## 7. Taxation | | 2023 £'000 | 2022 £'000 | | --- | --- | --- | | **(a) Analysis of charge in the year:** | | | | Irrecoverable overseas tax | - | 13 | | Tax charge for the year | - | 13 | ### (b) Factors affecting tax charge for the year The tax assessed for the year is lower (2022: higher) than the Company's applicable rate of corporation tax for the year of 21.5% (2022: 19.0%). Schroder Income Growth Fund plc 59 # Notes to the accounts for the year ended 31 August 2023 The factors affecting the current tax charge for the year are as follows: | | Revenue £'000 | 2023 Capital £'000 | Total £'000 | Revenue £'000 | 2022 Capital £'000 | Total £'000 | | --- | --- | --- | --- | --- | --- | --- | | Net gain/return on ordinary activities before taxation | 9,130 | (1,128) | 8,002 | 9,710 | (15,619) | (5,909) | | Net gain/return on ordinary activities before taxation multiplied by the Company's applicable rate of corporation tax for the year of 21.5% (2022: 19.0%) | 1,962 | (243) | 1,719 | 1,845 | (2,968) | (1,123) | | Effects of: | | | | | | | | Capital return/loss on investments | – | (70) | (70) | – | 3,153 | 3,153 | | Income not chargeable to corporation tax | (2,181) | – | (2,181) | (1,978) | (324) | (2,302) | | Unrelieved expenses | 219 | 313 | 532 | 133 | 139 | 272 | | Irrecoverable overseas tax | – | – | – | 13 | – | 13 | | Tax charge for the year | – | – | – | 13 | – | 13 | ## (c) Deferred taxation The Company has an unrecognised deferred tax asset of £9,207,000 (2022: £8,589,000) based on a main rate of corporation tax of 25% (2022: 25%). In its 2021 budget, the UK government announced that the main rate of corporation tax (for all profits except ring fence profits) for the fiscal year beginning on 1 April 2023 would increase to 25%. 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. ## 8. Dividends | | 2023 £'000 | 2022 £'000 | | --- | --- | --- | | **(a) Dividends paid and declared** | | | | 2022 fourth interim dividend of 5.7p (2021: 5.3p) | 3,959 | 3,682 | | First interim dividend of 2.5p (2022: 2.5p) | 1,737 | 1,737 | | Second interim dividend of 2.5p (2022: 2.5p) | 1,737 | 1,737 | | Third interim dividend of 2.5p (2022: 2.5p) | 1,737 | 1,737 | | Total dividends paid in the year | 9,170 | 8,893 | | | 2023 £'000 | 2022 £'000 | | Fourth interim dividend declared of 6.3p (2022: 5.7p) | 4,376 | 3,959 | 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 £9,130,000 (2022: £9,697,000). 60 Schroder Income Growth Fund plc Introduction Strategic Report Governance Financial Other Information ## Notes to the accounts for the year ended 31 August 2023 | | 2023 £'000 | 2022 £'000 | | --- | --- | --- | | First interim dividend of 2.5p (2022: 2.5p) | 1,737 | 1,737 | | Second interim dividend of 2.5p (2022: 2.5p) | 1,737 | 1,737 | | Third interim dividend of 2.5p (2022: 2.5p) | 1,737 | 1,737 | | Fourth interim dividend of 6.3p (2022: 5.3p) | 4,376 | 3,959 | | Total dividends of 13.80p (2022: 13.20p) per share | 9,587 | 9,170 | ### 9. Return/(loss) per share | | 2023 £'000 | 2022 £'000 | | --- | --- | --- | | Revenue return | 9,130 | 9,697 | | Capital loss | (1,128) | (15,619) | | Total return/(loss) | 8,002 | (5,922) | | Weighted average number of ordinary shares in issue during the year | 69,463,343 | 69,463,343 | | Revenue return per share | 13.14p | 13.96p | | Capital loss per share | (1.62)p | (22.49)p | | Total return/gain per share | 11.52p | (8.53)p | ### 10. Investments held at fair value through profit or loss | | 2023 £'000 | 2022 £'000 | | --- | --- | --- | | Opening book cost | 207,135 | 187,930 | | Opening investment holding gains | 23,362 | 46,881 | | Opening fair value | 230,497 | 234,811 | | Analysis of transactions made during the year | | | | Purchases at cost | 57,193 | 69,738 | | Sales proceeds | (58,302) | (57,456) | | Gains/(losses) on investments held at fair value | 326 | (16,596) | | Closing fair value | 229,714 | 230,497 | | Closing book cost | 207,268 | 207,135 | | Closing investment holding gains | 22,446 | 23,362 | | Closing fair value | 229,714 | 230,497 | All investments are listed on a recognised stock exchange. Sales proceeds amounting to £58,302,000 (2022: £57,456,000) were receivable from disposal of investments in the year. The book cost of these investments when they were purchased was £57,059,000 (2022: £50,533,000). These investments have been revalued over time and until they were sold any unrealised gains/losses were included in the fair value of the investments. Schroder Income Growth Fund plc 61 # Notes to the accounts for the year ended 31 August 2023 The following transaction costs, comprising stamp duty and brokerage commission were incurred during the year: | | 2023 £'000 | 2022 £'000 | | --- | --- | --- | | On acquisitions | 236 | 352 | | On disposals | 30 | 24 | | | 266 | 376 | ## 11. Debtors | | 2023 £'000 | 2022 £'000 | | --- | --- | --- | | Dividends and interest receivable | 2,537 | 2,718 | | Taxation recoverable | 5 | 5 | | Other debtors | 15 | 14 | | | 2,557 | 2,737 | The directors consider that the carrying amount of debtors approximates to their fair value. ## 12. Creditors: amounts falling due within one year | | 2023 £'000 | 2022 £'000 | | --- | --- | --- | | Bank loan | 29,500 | 30,000 | | Other creditors and accruals | 399 | 439 | | | 29,899 | 30,439 | The bank loan comprises £29.5 million (2022: £30 million) drawn down on the Company's revolving credit facility with SMBC Bank International plc. The facility was extended for a further year, effective 22 September 2023. The facility is unsecured but is subject to covenants and restrictions which are customary for a facility of this nature, all of which have been complied with during the year. Further details of this facility are given in note 19(a)(i). The Directors consider that the carrying amount of creditors falling due within one year approximates to their fair value. 62 Schroder Income Growth Fund plc # Notes to the accounts for the year ended 31 August 2023 ## 13. Called-up share capital | | 2023 £'000 | 2022 £'000 | | --- | --- | --- | | Ordinary shares allotted, called-up and fully paid: | | | | Ordinary shares of 10p each | | | | Opening balance of 69,463,343 (2022: 69,463,343) shares | 6,946 | 6,946 | | Total of 69,463,343 (2022: 69,463,343) shares | 6,946 | 6,946 | ## 14. Reserves ### Year ended 31 August 2023 | | Share premium^{1} £'000 | Capital redemption reserve^{1} £'000 | Warrant exercise reserve^{1} £'000 | Share purchase reserve^{1} £'000 | Capital reserves Gains and losses on sales of investments^{2} £'000 | Investment holding gains and losses^{2} £'000 | Revenue reserve^{3} £'000 | | --- | --- | --- | --- | --- | --- | --- | --- | | Opening balance | 9,449 | 2,011 | 1,596 | 34,936 | 114,878 | 23,362 | 11,922 | | Gains on sales of investments based on the carrying value at the previous balance sheet date | – | – | – | – | (954) | – | – | | Net movement in investment holding gains and losses | – | – | – | – | – | 1,280 | – | | Transfer on disposal of investments | – | – | – | – | 2,196 | (2,196) | – | | Management fee and finance costs allocated to capital | – | – | – | – | (1,454) | – | – | | Dividends paid | – | – | – | – | – | – | (9,170) | | Retained revenue for the year | – | – | – | – | – | – | 9,130 | | Closing balance | 9,449 | 2,011 | 1,596 | 34,936 | 114,666 | 22,446 | 11,882 | Schroder Income Growth Fund plc 63 Introduction Strategic Report Governance Financial Other Information # Notes to the accounts for the year ended 31 August 2023 Year ended 31 August 2022 | | Share premium^{1} £'000 | Capital redemption reserve^{1} £'000 | Warrant exercise reserve^{1} £'000 | Share purchase reserve^{1} £'000 | Capital reserves Gains and losses on sales of investments^{1} £'000 | Investment holding gains and losses^{1} £'000 | Revenue reserve^{1} £'000 | | --- | --- | --- | --- | --- | --- | --- | --- | | Opening balance | 9,449 | 2,011 | 1,596 | 34,936 | 106,978 | 46,881 | 11,118 | | Losses on sales of investments based on the carrying value at the previous balance sheet date | – | – | – | – | (3,316) | – | – | | Net movement in investment holding gains and losses | – | – | – | – | – | (13,280) | – | | Transfer on disposal of investments | – | – | – | – | 10,239 | (10,239) | – | | Realised exchange gains on currency balances | – | – | – | – | (1) | – | – | | Management fee and finance costs allocated to capital | – | – | – | – | (729) | – | – | | Special dividends allocated to capital | – | – | – | – | 1,707 | – | – | | Dividends paid | – | – | – | – | – | – | (8,893) | | Retained revenue for the year | – | – | – | – | – | – | 9,697 | | **Closing balance** | **9,449** | **2,011** | **1,596** | **34,936** | **114,878** | **23,362** | **11,922** | The Company's Articles of Association permit dividend distributions out of realised capital profits. $^{1}$These reserves are not distributable. $^{2}$These are realised (distributable) capital reserves which may be used to repurchase the Company's own shares or distributed as dividends. $^{3}$This reserve comprises holding gains on liquid investments (which may be deemed to be realised) and other amounts which are unrealised. An analysis has not been made between those amounts that are realised (and may be distributed as dividends or used to repurchase the Company's own shares) and those that are unrealised. $^{4}$The revenue reserve may be distributed as dividends or used to repurchase the Company's own shares. ## 15. Net asset value per share | | 2023 | 2022 | | --- | --- | --- | | Net assets attributable to shareholders (£'000) | 203,932 | 205,100 | | Shares in issue at the year end | 69,463,343 | 69,463,343 | | Net asset value per share | 293.58p | 295.26p | ## 16. Transactions with the Manager Under the terms of the AIFM Agreement, the Manager is entitled to receive a management fee. Details of the basis of the calculation are given in the Directors' Report on page 32. Any investments in funds managed or advised by the Manager or any of its associated companies are excluded from the assets used for the purpose of the calculation and therefore incur no fee. The management fee payable in respect of the year ended 31 August 2023 amounted to £1,055,000 (2022: £1,054,000) of which £259,000 (2022: £259,000) was outstanding at the year end. Effective from 1 March 2021, the Manager is entitled to receive a further fee to cover administration and company secretarial costs. The secretarial fee payable for the year amounted to £180,000 (2022: £180,000) including VAT, of which £45,000 (2022: £45,000) was outstanding at the year end. No Director of the Company served as a director of any member of the Schroder Group at any time during the year. 64 Schroder Income Growth Fund plc ## Notes to the accounts Strategic Report Governance Financial Other InformationIntroduction ## for the year ended 31 August 2023 ### 17. Related party transactions Details of the remuneration payable to Directors are given in the Directors’ Remuneration Report on pages 42 to 44 and details of directors’ shareholdings are given in the Directors’ Remuneration Report on page 44. Details of transactions with the Manager are given in note 16 above. There have been no other transactions with related parties during the year (2022: nil). ### 18. Disclosures regarding financial instruments measured at fair value The Company’s financial instruments within the scope of FRS 102 that are held at fair value comprise its investment portfolio. FRS 102 requires financial instruments to be categorised into a hierarchy consisting of the three levels below. Level 1 – valued using unadjusted quoted prices in active markets for identical assets. Level 2 – valued using observable inputs other than quoted prices included within Level 1. Level 3 – valued using inputs that are unobservable. Details of the valuation techniques used by the Company are given in note 1(b). At 31 August 2023, all investments in the Company’s portfolio are categorised as Level 1 (2022: same). ### 19. Financial instruments’ exposure to risk and risk management policies The Company’s objectives are set out on the inside front cover of this report. In pursuing these objectives, the Company is exposed to a variety of financial risks that could result in a reduction in the Company’s net assets or a reduction in the profits available for dividends. These financial risks include market risk (comprising interest rate risk and other price risk), liquidity risk and credit risk. The directors’ policy for managing these risks is set out below. The Board coordinates the Company’s risk management policy. The Company has no significant direct exposure to foreign exchange risk on monetary items. The objectives, policies and processes for managing the risks and the methods used to measure the risks that are set out below, have not changed from those applying in the comparative year. The Company’s classes of financial instruments may comprise the following: – investments in equity shares which are held in accordance with the Company’s investment objectives; – short-term debtors, creditors and cash arising directly from its operations; and – loans drawn on a facility, the purpose of which are to assist with financing the Company’s operations. (a) Market risk The fair value or future cash flows of a financial instrument held by the Company may fluctuate because of changes in market prices. This market risk comprises two elements: interest rate risk and other price risk. Information to enable an evaluation of the nature and extent of these two elements of market risk is given in parts (i) and (ii) of this note, together with sensitivity analyses where appropriate. The Board reviews and agrees policies for managing these risks and these policies have remained unchanged from those applying in the comparative year. The Manager assesses the exposure to market risk when making each investment decision and monitors the overall level of market risk on the whole of the investment portfolio on an ongoing basis. (i) Interest rate risk Interest rate movements may affect the level of income receivable on cash deposits and the interest payable on variable rate borrowings when interest rates are re-set. ### Management of interest rate risk Liquidity and borrowings are managed with the aim of increasing returns to shareholders. The board’s policy is to permit gearing up to 25% where gearing is defined as borrowings used for investment purposes, less cash, expressed as a percentage of net assets. Any amount drawn on the facility would normally be for a one month period, at the end of which the drawdown may be rolled over, adjusted or repaid, and the interest rate is re-set. These amounts have been included in the analysis below, although the exposure to interest rate changes is not significant as any drawings can be repaid at the end of the one month period under the terms of this flexible arrangement. The Company has arranged a £5m overdraft facility with HSBC Bank plc, this was not utilised during the current or comparative year. Schroder Income Growth Fund plc 65 # Notes to the accounts for the year ended 31 August 2023 ## *Interest rate exposure* The exposure of financial assets and financial liabilities to floating interest rates, giving cash flow interest rate risk when rates are re-set, is shown below: | | 2023 £'000 | 2022 £'000 | | --- | --- | --- | | Exposure to floating interest rates: | | | | Cash at bank and in hand | 1,560 | 2,305 | | Creditors falling due within one year: bank loan | (29,500) | (30,000) | | Total exposure | (27,940) | (27,695) | Cash balances earn interest at a floating rate based on the Sterling Overnight Index Average (2022: Sterling Overnight Index Average). The Company extended its £30 million credit facility with SMBC Bank International plc for a further year, effective from 22 September 2023. Interest payable is calculated at the aggregate of the compounded daily Risk Free Rate ("RFR"), plus a margin. Amounts are normally drawn down on the facility for a one month period, at the end of which it may be rolled over or adjusted. At 31 August 2023, the Company had drawn down £29.5 million (2022: £30 million), for a one month period at an interest rate of 5.91% (2022: 2.52%) per annum. The above year end amounts are not representative of the exposure to interest rates during the current or comparative year as the level cash balances and drawings on the facility have fluctuated. The maximum and minimum exposure during the year was as follows: | | 2023 £'000 | 2022 £'000 | | --- | --- | --- | | Minimum debit interest rate exposure during the year – net debt | (21,727) | (17,972) | | Maximum debit interest rate exposure during the year – net debt | (27,940) | (27,695) | 66 Schroder Income Growth Fund plc Introduction Strategic Report Governance Financial Other Information # Notes to the accounts for the year ended 31 August 2023 ## Interest rate sensitivity The following table illustrates the sensitivity of the return after taxation for the year and net assets to a 1.5% (2022: 1.5%) increase or decrease in interest rates in regards to the Company's monetary financial assets and financial liabilities. This level of change is considered to be a reasonable illustration based on observation of current market conditions. The sensitivity analysis is based on the Company's monetary financial instruments held at the balance sheet date which are exposed to interest rate movements, with all other variables held constant. | | 2023 1.5% increase in rate £'000 | 2023 1.5% decrease in rate £'000 | 2022 1.5% increase in rate £'000 | 2022 1.5% decrease in rate £'000 | | --- | --- | --- | --- | --- | | Income statement – return after taxation | | | | | | Revenue return | (154) | 154 | (145) | 145 | | Capital return | (266) | 266 | (270) | 270 | | Total return after taxation | (420) | 420 | (415) | 415 | | Net assets | (420) | 420 | (415) | 415 | Given the increase in the UK interest rates, the interest rate sensitivity has been updated to 1.5%. The prior year disclosure has been updated to 1.5% to show a direct comparison in the sensitivity. In the prior year report, the sensitivity was calculated using 1.0%, which was representative of the market at 31 August 2022. As disclosed in the prior year annual report, an increase of 1.0% reduced total return after taxation by £277,000 (a decrease of 1.0% had an equal and opposite effect). In the opinion of the directors, this sensitivity analysis may not be representative of the Company's future exposure to interest rate changes as the level of cash balances and drawings on the facility will fluctuate. ### (ii) Other price risk Market price risk includes changes in market prices, other than those arising from interest rate risk, which may affect the value of investments. ## Management of market price risk The Board meets on at least four occasions each year to consider the asset allocation of the portfolio and the risk associated with particular industry sectors. The investment management team has responsibility for monitoring the portfolio, which is selected in accordance with the Company's investment objective and seeks to ensure that individual stocks meet an acceptable risk/reward profile. ## Market price risk exposure The Company's total exposure to changes in market prices at 31 August comprised the following: | | 2023 £'000 | 2022 £'000 | | --- | --- | --- | | Investments held at fair value through profit or loss | 229,714 | 230,497 | The above data is broadly representative of the exposure to market price risk during the year. ## Concentration of exposure to market price risk An analysis of the Company's investments is given on page 14. The portfolio principally comprises securities of companies listed on the London Stock Exchange and accordingly there is a concentration of exposure to economic conditions in the UK. However it should be noted that many of these companies conduct much of their business overseas. Furthermore, up to 20% of the portfolio may be listed on overseas stock exchanges. ## Market price risk sensitivity The following table illustrates the sensitivity of the return after taxation for the year and net assets to an increase or decrease of 20% (2022: 20%) in the fair values of the Company's investments. This level of change is considered to be a reasonable illustration based on observation of current market conditions. The sensitivity analysis is based on the Company's exposure through equity investments and includes the impact on the management fee but assumes that all other variables are held constant. Schroder Income Growth Fund plc 67 # Notes to the accounts for the year ended 31 August 2023 | | 2023 20% increase in fair value £'000 | 2023 20% decrease in fair value £'000 | 2022 20% increase in fair value £'000 | 2022 20% decrease in fair value £'000 | | --- | --- | --- | --- | --- | | Income statement – return after taxation | | | | | | Revenue return | (83) | 83 | (104) | 104 | | Capital return | 45,819 | (45,819) | 45,996 | (45,996) | | Total return after taxation and net assets | 45,736 | (45,736) | 45,892 | (45,892) | | Change in net asset value | 22.4% | (22.4%) | 22.4% | (22.4%) | ## (b) Liquidity risk This is the risk that the Company will encounter difficulty in meeting its obligations associated with financial liabilities that are settled by delivering cash or another financial asset. ### Management of liquidity risk Liquidity risk is not significant as the Company's assets comprise mainly readily realisable securities, which can be sold to meet funding requirements if necessary. The facility is also available to provide liquidity at short notice. The Board's policy is for the Company to remain fully invested in normal market conditions. The facility may be used to manage working capital requirements and to gear the Company as appropriate. ### Liquidity risk exposure Contractual maturities of financial liabilities, based on the earliest date on which payment can be required are as follows: | | 2023 Three months or less £'000 | 2023 Total £'000 | 2022 Three months or less £'000 | 2022 Total £'000 | | --- | --- | --- | --- | --- | | Creditors: amounts falling due within one year | | | | | | Securities purchased awaiting settlement | – | – | – | – | | Other creditors and accruals | 399 | 399 | 424 | 424 | | Bank loan – including interest | 29,645 | 29,645 | 30,063 | 30,063 | | | 30,044 | 30,044 | 30,487 | 30,487 | ## (c) Credit risk Credit risk is the risk that the failure of the counterparty to a transaction to discharge its obligations under that transaction could result in loss to the Company. ### Management of credit risk This risk is not significant and is managed as follows: #### Portfolio dealing The Company invests in markets that operate a "Delivery Versus Payment" settlement process which mitigates the risk of losing the principal of a trade during settlement. The Manager continuously monitors dealing activity to ensure best execution, which involves measuring various indicators including the quality of trade settlement and incidence of failed trades. Counterparties must be pre-approved by the Manager's credit committee. #### Exposure to the Custodian The custodian of the Company's assets is HSBC Bank plc which has long-term Credit Ratings of AA- with Fitch and Aa3 with Moody's. The Company's investments are held in accounts which are segregated from the custodian's own trading assets. If the custodian were to become insolvent, the Company's right of ownership of its investments is clear and they are therefore protected. However the Company's cash balances are all deposited with the custodian as banker and held on the custodian's balance sheet. Accordingly, in accordance with usual banking practice, the Company will rank as a general creditor to the custodian in respect of cash balances. 68 Schroder Income Growth Fund plc Introduction Strategic Report Governance Financial Other Information # Notes to the accounts for the year ended 31 August 2023 ## Credit risk exposure The following amounts shown in the Statement of Financial Position, represent the maximum exposure to credit risk at the current and comparative year end. | | 2023 Balance sheet £'000 | Maximum exposure £'000 | 2022 Balance sheet £'000 | Maximum exposure £'000 | | --- | --- | --- | --- | --- | | Fixed assets | | | | | | Investments held at fair value through profit or loss | 229,714 | – | 230,497 | – | | Current assets | | | | | | Debtors – dividends and interest receivable and other debtors | 2,557 | 2,557 | 2,737 | 2,737 | | Cash at bank and in hand | 1,560 | 1,560 | 2,305 | 2,305 | | | 233,831 | 4,117 | 235,539 | 5,042 | No debtors are past their due date and none have been written down or deemed to be impaired. ### (d) Fair values of financial assets and financial liabilities All financial assets and liabilities are either carried at fair value or the amount in the Statement of Financial Position is a reasonable approximation of fair value. ## 20. Capital management policies and procedures The Company's objectives, policies and processes for managing capital are unchanged from the preceding year. The Company's debt and capital structure comprises the following: | | 2023 £'000 | 2022 £'000 | | --- | --- | --- | | Debt | | | | Bank loan | 29,500 | 30,000 | | Equity | | | | Called-up share capital | 6,946 | 6,946 | | Reserves | 196,986 | 198,154 | | | 203,932 | 205,100 | | Total debt and equity | 233,432 | 235,100 | The Company's capital management objectives are to ensure that it will continue as a going concern and to maximise the return to its equity shareholders through an appropriate level of gearing. The Board's policy is to permit gearing up to 25% where gearing is defined as borrowings used for investment purposes, less cash, expressed as a percentage of net assets. | | 2023 £'000 | 2022 £'000 | | --- | --- | --- | | Borrowings used for investment purposes, less cash | 27,940 | 27,695 | | Net assets | 203,932 | 205,100 | | Gearing | 13.7% | 13.5% | Schroder Income Growth Fund plc 69 ## Notes to the accounts ## for the year ended 31 August 2023 The Board, with the assistance of the Manager, monitors and reviews the broad structure of the Company’s capital on an ongoing basis. This review includes: – the planned level of gearing, which takes into account the Manager’s views on the market; – the need to buy back the Company’s own shares for cancellation or to hold in treasury, which takes into account the share price discount; – the opportunities for issues of new shares; and – the amount of dividend to be paid, in excess of that which is required to be distributed. 70 Schroder Income Growth Fund plc ## Other ## Information Other Information (unaudited) Annual General Meeting – Recommendations 72 Notice of Annual General Meeting 75 Explanatory Notes to the Notice of Meeting 77 Definitions of Terms and Alternative Performance Measures 79 Shareholder Information 81 Information about the Company 83 Schroder Income Growth Fund plc 71 # Recommendations The Annual General Meeting ("AGM") of the Company will be held on Wednesday, 13 December 2023 at 12.30 p.m. The formal Notice of Meeting is set out on pages 75 to 78. The following information is important and requires your immediate attention. If you are in any doubt about the action you should take, you should consult an independent financial adviser, authorised under the Financial Services and Markets Act 2000. If you have sold or transferred all of your ordinary shares in the Company, please forward this document with its accompanying form of proxy at once to the purchaser or transferee, or to the stockbroker, bank or other agent through whom the sale or transfer was effected, for onward transmission to the purchaser or transferee. ## Ordinary business ### Resolutions 1 to 11 are all ordinary resolutions Resolutions 1 to 10 are ordinary resolutions. Resolutions 2 and 3 concerns the Directors' Remuneration Policy and Remuneration Report, on pages 42 to 44. Resolutions 4 to 7 invite shareholders to re-elect each of the Directors for another year, apart from June Aitken who is standing for election as a Director. The re-elections and election have been recommended by the Nomination Committee on pages 39 and 40 (their biographies are set out on pages 30 and 31). Resolutions 8 and 9 concern the re-appointment and remuneration of the Company's auditor, discussed in the Audit and Risk Committee Report on pages 35 and 37. Resolution 10 relates to an advisory vote in respect of the Company's dividend policy. ## Special business ### Resolution 11: Directors' authority to allot shares (ordinary resolution) and Resolution 12: power to disapply pre-emption rights (special resolution) The Directors are seeking authority to allot a limited number of unissued ordinary shares for cash without first offering them to existing shareholders in accordance with statutory pre-emption procedures. Appropriate resolutions will be proposed at the forthcoming AGM and are set out in full in the Notice of AGM. An ordinary resolution will be proposed to authorise the directors to allot shares up to a maximum aggregate nominal amount of £1,389,266 (being 20% of the issued share capital as at the date of the Notice of the AGM). A special resolution will also be proposed to give the directors authority to allot securities for cash on a non pre-emptive basis up to a maximum aggregate nominal amount of £1,389,266 (being 20% of the Company's issued share capital as at the date of the Notice of the AGM). The Directors do not intend to allot shares pursuant to these authorities other than to take advantage of opportunities in the market as they arise and only if they believe it to be advantageous to the Company's existing shareholders to do so. Shares issued under this authority will only be issued at a premium to the NAV (cum income) per share after taking into account the costs of issue, and will not result in any dilution of NAV per share. If approved, both of these authorities will expire at the conclusion of the AGM in 2024 unless renewed, varied or revoked earlier. ### Resolution 13: authority to make market purchases of the Company's own shares (special resolution) At the AGM held on 15 December 2022, the Company was granted authority to make market purchases of up to 10,412,555 ordinary shares of 10p each for cancellation. No shares have been bought back under this authority and the Company therefore has remaining authority to purchase up to 10,412,555 ordinary shares. This authority will expire at the forthcoming AGM. The Directors believe it is in the best interests of the Company and its shareholders to have a general authority for the Company to buy back its ordinary shares in the market as they keep under review the share price discount to NAV and the purchase of ordinary shares. A special resolution will be proposed at the forthcoming AGM to give the Company authority to make market purchases of up to 14.99% of the ordinary shares in issue as at the date of the Notice of the AGM. The Directors will exercise this authority only if the directors consider 72 Schroder Income Growth Fund plc Strategic Report Governance Financial Other InformationIntroduction that any purchase would be for the benefit of the Company and its for any reason to hold the meeting on the date or at the time or at shareholders, taking into account relevant factors and circumstances any place specified in the notice calling the general meeting. at the time. Any shares so purchased would be cancelled or held in (iv) Documents available for inspection at a meeting treasury. If renewed, the authority to be given at the 2023 AGM will lapse at the conclusion of the AGM in 2024 unless renewed, varied or If, in the case of a general meeting which is held wholly or partly by revoked earlier. means of an electronic facility, any document is required to be on display or available for inspection at that meeting (whether prior to Resolution 14: amendments of the Articles of Association: and/or for the duration of the meeting), the Company shall ensure As a result of the circumstances that occurred during the COVID-19 that it is electronically available to persons entitled to inspect it for at pandemic, the Board is proposing to make amendments to the least the required period of time. Articles of Association to give the Company the flexibility to hold (v) Accommodation of members and security general meetings (wholly or partially) by electronic means and to arrangements enable members to attend and participate in general meetings at one or more satellite meeting places. In addition, the Board is The Board’s existing powers to put in place security arrangements at proposing to amend the Articles of Association to give it certain meetings will be expanded to give the Board the ability to make such additional powers in respect of postponing or adjourning meetings in arrangements as the Board shall in its absolute discretion consider to appropriate circumstances and the security arrangements at be appropriate to ensure the security and orderly conduct of the meetings. The amendments are being proposed in response to meeting and to control the level of attendance at any meeting restrictions on social interactions during the COVID-19 pandemic that, (including at any principal meeting place, satellite meeting place or on occasion, made it impossible or impractical for shareholders to electronic facility). Similarly, if a general meeting is held wholly or attend physical general meetings. partly by means of an electronic facility, the Board may make any arrangement and impose any requirement or restriction that is The Board’s objective is to make it easier for shareholders to necessary to ensure the identification of those taking part by way of participate in general meetings through introducing electronic access such electronic facility and the security of electronic communication. for those not able to travel and to ensure appropriate security measures are in place for the protection and wellbeing of (vi) Method of voting at meetings conducted wholly or shareholders should circumstances similar to those that occurred partly electronically during the COVID-19 pandemic occur again. The Board makes it clear that these powers would only be used if the specific circumstances or A resolution put to the vote at a general meeting held wholly or partly applicable law and regulation require it and the Board’s intention is to by means of an electronic facility or facilities shall be decided on a always hold a physical AGM provided it is both safe and practical to poll, with poll votes to be cast by such electronic means as the Board, do so. The safety of all of the Company’s stakeholders must of course in its sole discretion, deems appropriate for the purposes of the remain paramount. meeting. The Board is also proposing to update the Articles of Association to (vii) Restrictions on transfer comply with FCA rules regarding restrictions on transfer, to add Article 50 of the Articles of Association (“Prohibition on Shareholdings certain provisions to facilitate compliance with the UK’s by Non-Qualified Person”) allows the Board to require the transfer of implementation of the EU Alternative Investment Fund Managers any shares that are held by a “non-qualified person”. At present, a directive (No. 2011/61/EU) and to correct certain typographical errors. “non-qualified person” is broadly defined to include any US Person The principal changes proposed to be introduced in the Articles of and any person to whom a transfer of shares might result in the Association, and their effect, are set out below. Company incurring any liability to taxation or suffering any other pecuniary disadvantage which the Company might not otherwise (i) Electronic participation in general meetings have incurred or suffered. Having received advice, the Board does not The Board will have the ability to determine the means of attendance consider that this provision complies with the requirements of Listing and participation used in relation to general meetings of the Rule 2.2.4R and the related FCA technical guidance, which require the Company, including whether the meeting shall be held physically (at Company’s shares to be freely transferable, save in certain limited one or more locations), through an electronic facility, or partly in one circumstances where restrictions are necessary to avoid falling within way and partly in another. onerous overseas legislative requirements. The Board is therefore seeking to amend Article 50 to comply with the FCA rules by ensuring (ii) Adjournment of general meetings that all such restrictions are carefully drafted so that they identify the The chairman of the meeting will have the ability to interrupt or specific legislative provisions in question. The Company will continue adjourn general meetings to such time and with such means of to retain the right to require the transfer of shares that are held by a attendance and participation as the chairman may determine without person who may subject the Company to certain onerous legislative the consent of the meeting if it appears to the chairman that the requirements. In connection with these amendments, the Board is facilities at any general meeting (including those conducted wholly or also seeking to supplement Article 50 to allow the Company to partly electronically) have become inadequate. require additional information from shareholders in order to comply with certain legislative requirements, including the US Foreign (iii) Postponement of general meeting Account Tax Compliance Act 2010, and to give the Board certain The Board will be granted new powers to postpone and/or move the additional powers in relation to non-qualified persons. location of a general meeting will be expanded to allow the Board to change a physical meeting to an electronic meeting and vice versa. The Board may exercise its ability to postpone a meeting if, in its absolute discretion, it considers that it is impractical or unreasonable Schroder Income Growth Fund plc 73 ## Recommendations ### (viii) UK’s implementation of the EU Alternative Recommendations Investment Fund Managers directive The Board considers that the resolutions relating to the above items (No.2011/61/EU) (the “UK AIFMD”) of business are in the best interests of shareholders as a whole. Accordingly, the Board unanimously recommends to shareholders The Board is seeking to add certain provisions to facilitate compliance that they vote in favour of the above resolutions to be proposed at with the UK AIFMD, including provisions relating to valuation, investor the forthcoming AGM, as they intend to do in respect of their own disclosures and the ability of a depositary to discharge itself of liability beneficial holdings. in certain circumstances. The proposed new Articles of Association (marked to show the proposed changes) will be available for inspection on the Company’s website at www.schroders.co.uk/incomegrowth from the date of this Report and Accounts until the conclusion of the Annual General Meeting or may be obtained from the Company Secretary by requesting a copy using the address and details provided on page 83. The proposed new Articles of Association (marked to show the proposed changes) will also be available for inspection at the place of the forthcoming Annual General Meeting for at least 15minutes before and during that Annual General Meeting. Resolution 15: notice period for general meetings (special resolution) Resolution 15 set out in the Notice of AGM is a special resolution and will, if passed, allow the Company to hold general meetings (other than annual general meetings) on a minimum notice period of 14 clear days, rather than 21 clear days as required by the Companies Act 2006. The approval will be effective until the Company’s next AGM to be held in 2024. The Directors will only call general meetings on 14clear days’ notice when they consider it to be in the best interests of the Company’s shareholders and will only do so if the Company offers facilities for all shareholders to vote by electronic means and when the matter needs to be dealt with expediently. 74 Schroder Income Growth Fund plc # Notice of Annual General Meeting Notice is hereby given that the Annual General Meeting of Schroder Income Growth Fund plc will be held on Wednesday, 13 December 2023 at 12.30 p.m. at 1 London Wall Place, London EC2Y 5AU to consider the following resolutions of which resolutions 1 to 11 will be proposed as ordinary resolutions and resolutions 12 to 15 will be proposed as special resolutions: 1. To receive the Report of the Directors and the audited Accounts for the year ended 31 August 2023. 2. To approve the Directors' Remuneration Policy. 3. To approve the Directors' Remuneration Report for the year ended 31 August 2023. 4. To approve the re-election of Ewen Cameron Watt as a Director of the Company. 5. To approve the election of June Aitken as a Director of the Company. 6. To approve the re-election of Fraser McIntyre as a Director of the Company. 7. To approve the re-election of Victoria Muir as a Director of the Company. 8. To re-appoint Ernst & Young LLP as auditor to the Company. 9. To authorise the Directors to determine the remuneration of Ernst & Young LLP as auditor to the Company. 10. To approve the Company's dividend policy, as set out on page 17 of the Annual Report and Accounts for the year ended 31 August 2023. 11. To consider, and if thought fit, pass the following resolution as an ordinary resolution: "THAT in substitution for all existing authorities the directors be generally and unconditionally authorised pursuant to section 551 of the Companies Act 2006 (the 'Act') to exercise all the powers of the Company to allot relevant securities (within the meaning of section 551 of the Act) up to an aggregate nominal amount of £6,946,334 (being 10% of the issued ordinary share capital, excluding shares held in treasury, at the date of this Notice) for a period expiring (unless previously renewed, varied or revoked by the Company in general meeting) at the conclusion of the next Annual General Meeting of the Company, but that the Company may make an offer or agreement which would or might require relevant securities to be allotted after expiry of this authority and the Board may allot relevant securities in pursuance of that offer or agreement." 12. To consider and, if thought fit, to pass the following resolution as a special resolution: "That, subject to the passing of Resolution 11 set out above, the directors be and are hereby empowered, pursuant to Section 571 of the Act, to allot equity securities (including any shares held in treasury) (as defined in section 560(1) of the Act) pursuant to the authority given in accordance with section 551 of the Act by the said Resolution 11 and/or where such allotment constitutes an allotment of equity securities by virtue of section 560(2) of the Act as if Section 561(1) of the Act did not apply to any such allotment, provided that this power shall be limited to the allotment of equity securities up to an aggregate nominal amount of £6,946,334 (representing 10% of the aggregate nominal amount of the share capital in issue at the date of this Notice); and provided that this power shall expire at the conclusion of the next Annual General Meeting of the Company but so that this power shall enable the Company to make offers or agreements before such expiry which would or might require equity securities to be allotted after such expiry." 13. To consider and, if thought fit, to pass the following resolution as a special resolution: "THAT the Company be and is hereby generally and unconditionally authorised in accordance with Section 701 of the Companies Act 2006 (the 'Act') to make market purchases (within the meaning of Section 693 of the Act) of ordinary shares of 10p each in the capital of the Company ('Share') at whatever discount the prevailing market price represents to the prevailing net asset value per Share provided that: (a) the maximum number of Shares which may be purchased is 10,412,555, representing 14.99% of the Company's issued ordinary share capital as at the date of this Notice; (b) the maximum price (exclusive of expenses) which may be paid for a Share shall not exceed the higher of: i) 105% of the average of the middle market quotations for the Shares as taken from the London Stock Exchange Daily Official List for the five business days preceding the date of purchase; and ii) the higher of the last independent bid and the highest current independent bid on the London Stock Exchange; (c) the minimum price (exclusive of expenses) which may be paid for a Share shall be 10p, being the nominal value per Share; (d) this authority hereby conferred shall expire at the conclusion of the next Annual General Meeting of the Company in 2024 (unless previously renewed, varied or revoked by the Company prior to such date); (e) the Company may make a contract to purchase Shares under the authority hereby conferred which will or may be executed wholly or partly after the expiration of such authority and may make a purchase of Shares pursuant to any such contract; and (f) any Shares so purchased will be cancelled or held in treasury." Introduction Strategic Report Governance Financial Other Information Schroder Income Growth Fund plc 75 ## Notice of Annual ## General Meeting 14. To consider and, if thought fit, to pass the following resolution as a special resolution: “That the amended Articles of Association as set out in the printed document produced to the meeting (and initialled by the Chairman of the meeting for the purposes of identification) be and are hereby approved and adopted as the Articles of Association of the Company in substitution for, and to the exclusion of, all existing Articles of Association.” 15. To consider and, if thought fit, to pass the following resolution as a special resolution: “That a general meeting, other than an Annual General Meeting, may be called on not less than 14 clear days’ notice.” By order of the Board for and on behalf of Schroder Investment Management Limited Company Secretary 25 October 2023 Registered Number: 03008494 Registered office: 1 London Wall Place London EC2Y 5AU 76 Schroder Income Growth Fund plc # Explanatory Notes to the Notice of Annual General Meeting 1. Ordinary shareholders are entitled to attend and vote at the meeting and to appoint one or more proxies, who need not be a shareholder, as their proxy to exercise all or any of their rights to attend, speak and vote on their behalf at the meeting. A proxy form is attached. Shareholders are encouraged to appoint the Chairman as proxy. If you wish to appoint a person other than the Chairman as your proxy, please insert the name of your chosen proxy holder in the space provided at the top of the form. If the proxy is being appointed in relation to less than your full voting entitlement, please enter in the box next to the proxy holder's name the number of shares in relation to which they are authorised to act as your proxy. If left blank your proxy will be deemed to be authorised in respect of your full voting entitlement (or if this proxy form has been issued in respect of a designated account for a shareholder, the full voting entitlement for that designated account). Additional proxy forms can be obtained by contacting the Company's Registrars, Equiniti Limited, on +44 (0) 800 032 0641, or you may photocopy the attached proxy form. Please indicate in the box next to the proxy holder's name the number of shares in relation to which they are authorised to act as your proxy. Please also indicate by ticking the box provided if the proxy instruction is one of multiple instructions being given. Completion and return of a form of proxy will not preclude a member from attending the Annual General Meeting and voting in person. On a vote by show of hands, every ordinary shareholder who is present in person has one vote and every duly appointed proxy who is present has one vote. On a poll vote, every ordinary shareholder who is present in person or by way of a proxy has one vote for every share of which he/she is a holder. The 'Vote Withheld' option on the proxy form is provided to enable you to abstain on any particular resolution. However it should be noted that a 'Vote Withheld' is not a vote in law and will not be counted in the calculation of the proportion of the votes 'For' and 'Against' a resolution. A proxy form must be signed and dated by the shareholder or his or her attorney duly authorised in writing. In the case of joint holdings, any one holder may sign this form. The vote of the senior joint holder who tenders a vote, whether in person or by proxy, will be accepted to the exclusion of the votes of the other joint holder and for this purpose seniority will be determined by the order in which the names appear on the Register of Members in respect of the joint holding. To be valid, proxy form(s) must be completed and returned to the Company's Registrars, Equiniti Limited, Aspect House, Spencer Road, Lancing, West Sussex BN99 6DA, or in the enclosed envelope, together with any power of attorney or other authority under which it is signed or a copy of such authority certified notarially, to arrive no later than 48 hours before the time fixed for the meeting, or an adjourned meeting. Shareholders may also appoint a proxy to vote on the resolutions being put to the meeting electronically at www.sharevote.co.uk. Shareholders who are not registered to vote electronically, will need to enter the Voting ID, Task ID and Shareholder Reference Number set out in their personalised proxy form. Alternatively, shareholders who have already registered with Equiniti's Shareview service can appoint a proxy by logging onto their portfolio at www.shareview.co.uk using their user ID and password. Once logged in, click 'view' on the 'My Investments' page, click on the link to vote, then follow the on-screen instructions. The on-screen instructions give details on how to complete the appointment process. Please note that to be valid, your proxy instructions must be received by Equiniti no later than 12.30pm on 11 December 2023. If you have any difficulties with online voting, you should contact the shareholder helpline on +44 (0) 800 032 0641. If an ordinary shareholder submits more than one valid proxy appointment, the appointment received last before the latest time for receipt of proxies will take precedence. Shareholders may not use any electronic address provided either in this Notice of Annual General Meeting or any related documents to communicate with the Company for any purposes other than expressly stated. Representatives of shareholders that are corporations will have to produce evidence of their proper appointment when attending the Annual General Meeting. 2. Any person to whom this notice is sent who is a person nominated under section 146 of the Companies Act 2006 to enjoy information rights (a 'Nominated Person') may, under an agreement between him or her and the shareholder by whom he or she was nominated, have a right to be appointed (or to have someone else appointed) as a proxy for the Annual General Meeting. If a Nominated Person has no such proxy appointment right or does not wish to exercise it, he or she may, under any such agreement, have a right to give instructions to the shareholder as to the exercise of voting rights. The statement of the rights of ordinary shareholders in relation to the appointment of proxies in note 1 above does not apply to Nominated Persons. The rights described in that note can only be exercised by ordinary shareholders of the Company. 3. Pursuant to Regulation 41 of the Uncertificated Securities Regulations 2001, the Company has specified that only those shareholders registered in the Register of Members of the Company at 6.30 p.m. on 11 December 2023, or 6.30 p.m. two days prior to the date of an adjourned meeting, shall be entitled to attend and vote at the meeting in respect of the number of shares registered in their name at that time. Changes to the Register of Members after 6.30 p.m. on 11 December 2023 shall be disregarded in determining the right of any person to attend and vote at the meeting. 4. CREST members who wish to appoint a proxy or proxies through the CREST electronic proxy appointment service may do so by using the procedures described in the CREST manual. The CREST manual can be viewed at www.euroclear.com. A CREST message appointing a proxy (a 'CREST proxy instruction') regardless of whether it constitutes the appointment of a proxy or an amendment to the instruction previously given to a previously appointed proxy must, in order to be valid, be transmitted so as to be received by the issuer's agent (ID RA19) by the latest time for receipt of proxy appointments. 5. Copies of the terms of appointment of the non-executive Directors and a statement of all transactions of each Director and of his/her family interests in the shares of the Company, will be available for inspection by any member of the Company at the registered office of the Company during normal business hours on any weekday (English public holidays excepted) and at the Annual General Meeting by any attendee, for at least 15 minutes prior to, and during, the Annual General Meeting. None of the directors has a contract of service with the Company. Introduction Strategic Report Governance Financial ➤ Other Information Schroder Income Growth Fund plc 77 # Explanatory Notes to the Notice of Annual General Meeting In addition, copies of the marked up Articles of Association of the Company will be available for inspection. 6. The biographies of the Directors offering themselves for election and re-election are set out on pages 30 and 31 of the Company's annual report and accounts for the year ended 31 August 2023. 7. As at 25 October 2023, 69,463,343 ordinary shares of 10 pence each were in issue (no shares were held in treasury). Therefore the total number of voting rights of the Company as at 25 October 2023 was 69,463,343. 8. A copy of this notice of meeting, which includes details of shareholder voting rights, together with any other information as required under Section 311A of the Companies Act 2006, is available from the Company's webpages, www.schroders.co.uk/incomegrowth. 9. Pursuant to Section 319A of the Companies Act 2006, the Company must cause to be answered at the Annual General Meeting any question relating to the business being dealt with at the Annual General Meeting which is put by a member attending the meeting, except in certain circumstances, including if it is undesirable in the interests of the Company or the good order of the meeting that the question be answered or if to do so would involve the disclosure of confidential information. 10. Members satisfying the thresholds in section 527 of the Companies Act 2006 can require the Company to publish a statement on its website setting out any matter relating to: (a) the audit of the Company's Accounts (including the auditor's report and the conduct of the audit) that are to be laid before the Meeting; or (b) any circumstance connected with an auditor of the Company ceasing to hold office since the last AGM, that the members propose to raise at the Meeting. The Company cannot require the members requesting the publication to pay its expenses. Any statement placed on the website must also be sent to the Company's auditor no later than the time it makes its statement available on the website. The business which may be dealt with at the meeting includes any statement that the Company has been required to publish on its website. 11. The Company's privacy policy is available on its webpages http://www.schroders.co.uk/incomegrowth. Shareholders can contact Equiniti for details of how Equiniti processes their personal information as part of the AGM. 78 Schroder Income Growth Fund plc Introduction Strategic Report Governance Financial Other Information # Definitions of Terms and Alternative Performance Measures The terms and performance measures below are those commonly used by investment companies to assess values, investment performance and operating costs. Some of the financial measures below are classified Alternative Performance Measures as defined by the European Securities and Markets Authority, and some numerical calculations are given for those. ## Consumer Prices Index (“CPI”) The Consumer Price Index is a measure that examines the weighted average of prices of a basket of consumer goods and services, such as transportation, food and medical care. It is calculated by taking price changes for each item in the predetermined basket of goods and averaging them. Changes in the CPI are used to assess price changes associated with the cost of living. The CPI is one of the most frequently used statistics for identifying periods of inflation or deflation. ## Reference index The index against which it is deemed most appropriate to measure the Company’s performance. The reference index is the FTSE All-Share Index. ## Net asset value (“NAV”) per share The NAV per share of 293.58p (2022: 295.26p) represents the net assets attributable to equity shareholders of £203,932,000 (2022: £205,100,000) divided by the number of shares in issue of 69,463,343 (2022: 69,463,343). The change in the NAV amounted to -0.6% (2022: -6.7%) over the year. However this performance measure excludes the positive impact of dividends paid out by the Company during the year. When these dividends are factored into the calculation, the resulting performance measure is termed the “total return”. Total return definitions and calculations are given below. ## Total return* The combined effect of any dividends paid, together with the rise or fall in the NAV per share or share price. Total return statistics enable the investor to make performance comparisons between investment companies with different dividend policies. Any dividends received by a shareholder are assumed to have been reinvested in either the assets of the Company at its NAV per share at the time the shares were quoted ex-dividend (to calculate the NAV per share total return) or in additional shares of the Company (to calculate the share price total return). The NAV total return for the year ended 31 August 2023 is calculated as follows: | NAV at 31/8/22 | 295.26p | | --- | --- | | NAV at 31/8/23 | 293.58p | | Dividend | XD date | NAV on XD date | Factor | Cumulative factor | | --- | --- | --- | --- | --- | | 5.7p | 03/10/2022 | 265.18 | 1.0215 | 1.0215 | | 2.5p | 29/12/2022 | 298.48 | 1.0084 | 1.0301 | | 2.5p | 06/04/2023 | 305.88 | 1.0082 | 1.0385 | | 2.5p | 06/07/2023 | 284.73 | 1.0088 | 1.0476 | NAV total return, being the closing NAV, multiplied by the cumulative factor, expressed as a percentage change in the opening NAV 4.2% The NAV total return for the year ended 31 August 2022 is calculated as follows: | NAV at 31/8/21 | 316.59p | | --- | --- | | NAV at 31/8/22 | 295.26p | | Dividend | XD date | NAV on XD date | Factor | Cumulative factor | | --- | --- | --- | --- | --- | | 5.3p | 07/10/2021 | 299.36 | 1.0177 | 1.0177 | | 2.5p | 30/12/2021 | 303.36 | 1.0082 | 1.0261 | | 2.5p | 07/04/2022 | 317.39 | 1.0079 | 1.0342 | | 2.5p | 07/07/2022 | 295.28 | 1.0085 | 1.0429 | NAV total return, being the closing NAV, multiplied by the cumulative factor, expressed as a percentage change in the opening NAV -2.7% *Alternative Performance measure Schroder Income Growth Fund plc 79 # Definitions of Terms and Alternative Performance Measures The share price total return for the year ended 31 August 2023 is calculated as follows: | Share price at 31/8/22 | 289.00p | | --- | --- | | Share price at 31/8/23 | 267.50p | | Dividend | XD date | Share price on XD date | Factor | Cumulative factor | | --- | --- | --- | --- | --- | | 5.7p | 13/10/2022 | 257.00p | 1.0222 | 1.0222 | | 2.5p | 29/12/2022 | 305.00p | 1.0082 | 1.0306 | | 2.5p | 06/04/2023 | 301.00p | 1.0083 | 1.0391 | | 2.5p | 06/07/2023 | 281.00p | 1.0089 | 1.0484 | Share price total return, being the closing share price, multiplied by the cumulative factor, expressed as a percentage change in the opening share price -3.0% The share price total return for the year ended 31 August 2022 is calculated as follows: | Share price at 31/8/21 | 316.50p | | --- | --- | | Share price at 31/8/22 | 289.00p | | Dividend | XD date | Share price on XD date | Factor | Cumulative factor | | --- | --- | --- | --- | --- | | 5.3p | 07/10/2021 | 300.00p | 1.0177 | 1.0177 | | 2.5p | 30/12/2021 | 300.00p | 1.0083 | 1.0261 | | 2.5p | 07/04/2022 | 305.00p | 1.0082 | 1.0346 | | 2.5p | 07/07/2022 | 286.50p | 1.0088 | 1.0436 | Share price total return, being the closing share price, multiplied by the cumulative factor, expressed as a percentage change in the opening share price -4.7% ## Discount/premium The amount by which the share price of an investment trust is lower (discount) or higher (premium) than the NAV per share. The discount or premium is expressed as a percentage of the NAV per share. The discount at the year end was 8.9% (2022: 2.1%), as the closing share price at 267.50p (2022: 289.00p) was 8.9% (2022: 2.1%) lower than the closing NAV of 293.58p (2022: 295.26p). ## Gearing The gearing percentage reflects the amount of borrowings (i.e. bank loans or overdrafts) which the Company has drawn down and invested in the market. This figure is indicative of the extra amount by which shareholders' funds would move if the Company's investments were to rise or fall. This represents borrowings used for investment purposes, less cash, expressed as a percentage of net assets. The gearing figure at the year end is calculated as follows: | | 2023 £'000 | 2022 £'000 | | --- | --- | --- | | Borrowings used for investment purposes, less cash | 27,941 | 27,695 | | Net assets | 203,932 | 205,100 | | Gearing | 13.7% | 13.5% | ## Leverage For the purpose of the Alternative Investment Fund Managers (AIFM) Directive, leverage is any method which increases the Company's exposure, including the borrowing of cash and the use of derivatives. It is expressed as the ratio of the Company's exposure to its net asset value and is required to be calculated both on a "Gross" and a "Commitment" method. Under the Gross method, exposure represents the sum of the absolute values of all positions, so as to give an indication of overall exposure. Under the Commitment method, exposure is calculated in a similar way, but after netting off hedges which satisfy certain strict criteria. ## Ongoing Charges Ongoing Charges is calculated in accordance with the AIC's recommended methodology and represents the management fee and all other operating expenses excluding finance costs and transaction costs, amounting to £1,607,000 (2022: £1,577,000), expressed as a percentage of the average daily net asset values during the year of £207,871,000 (2022: £212,256,000). 80 Schroder Income Growth Fund plc ## Shareholder Strategic Report Governance Financial Other InformationIntroduction ## Information ### Webpage and share price information Alternative Investment Fund Managers ### The Company has dedicated webpages, which may be found at Directive (“AIFMD”) disclosures www.schroders.co.uk/incomegrowth. The webpages have been Certain pre-sale, regular and periodic disclosures required by the designed to be utilised as the Company’s primary method of AIFM Directive may be found either in this annual report or on the electronic communication with shareholders. It contains details of Company’s webpages. the Company’s ordinary share price and copies of annual reports and accounts and other documents published by the Company as well as The Company’s leverage policy and details of limits on leverage information on the directors, terms of reference of committees and required under the AIFM Directive are published on the Company’s other governance arrangements. In addition, the webpages contain webpages. links to announcements made by the Company to the market, Leverage Equiniti’s Shareview service and Schroders’ website. There is also a section entitled “How to Invest”. The Company’s leverage policy and details of its leverage ratio calculation and exposure limits as required by the AIFMD are The Company releases its NAV per share on both a cum and ex- published on the Company’s webpages and within this report. The income basis to the market on a daily basis. Company is also required to periodically publish its actual leverage Share price information may also be found in the FinancialTimes and exposures. As at 31 August 2023 these were: on the company’s webpages. Leverage Maximum Actual | Association of Investment Companies | exposure exposure exposure | | --- | --- | | The Company is a member of the Association of Investment | Gross method 200.0% 128.9% | | Companies. Further information on the Association can be found on | Commitment | | its website, www.theaic.co.uk. | method 200.0% 112.8% | Illiquid assets ### Individual Savings Account (“ISA”) status As at the date of this report, none of the Company’s assets are The Company’s shares are eligible for stocks and shares ISAs. subject to special arrangements arising from their illiquid nature. ### Non-Mainstream Pooled Investments status Remuneration disclosures The Company currently conducts its affairs so that its shares can be Quantitative remuneration disclosures to be made in this annual recommended by IFAs to ordinary retail investors in accordance with report in accordance with FCA Handbook rule FUND3.3.5 may also the FCA’s rules in relation to non-mainstream investment products be found in the Company’s AIFMD information disclosure document and intends to continue to do so for the foreseeable future. The published on the Investor Relations section of Schroders’ website Company’s shares are excluded from the FCA’s restrictions which www.schroders.com. apply to non-mainstream investment products because they are shares in an investment trust. Publication of key information document (“KID”) by the AIFM ### Financial calendar Pursuant to the Packaged Retail and Insurance Based Investment First interim dividend paid 31 January Products (“PRIIPs”) Regulation, the Manager, as the Company’s AIFM, is required to publish a short KID on the Company. KIDs are Second interim dividend paid 30 April designed to provide certain prescribed information to retail investors, Half year results announced April/May including details of potential returns under different performance scenarios and a risk/reward indicator. The Company’s KID is available Third interim dividend paid 31 July on its webpages. Financial year end 31 August Fourth interim dividend paid 31 October Annual results October/ announced November Annual General Meeting December Schroder Income Growth Fund plc 81 ## Investor Warning ### Companies are aware that their shareholders have received Dividends unsolicited telephone calls or correspondence concerning Paying dividends into a bank or building society account helps investment matters. These are typically from overseas-based ‘brokers’ reduce the risk of fraud and will provide you with quicker access to who target UK shareholders, offering to sell them what often turn your funds than payment by cheque. out to be worthless or high risk shares or investments. Applications for an electronic mandate can be made by contacting These operations are commonly known as ‘boiler rooms’. These the Registrar, Equiniti. ‘brokers’ can be very persistent and extremely persuasive. This is the most secure and efficient method of payment and ensures Shareholders are advised to be wary of any unsolicited advice, offers that you receive any dividends promptly. to buy shares at a discount or offers of free company reports. If you If you do not have a UK bank or building society account, please receive any unsolicited investment advice: contact Equiniti for details of their overseas payment service. • Make sure you get the correct name of the person and Further information can be found at www.shareview.co.uk, including organisation how to register with Shareview Portfolio and manage your • Check that they are properly authorised by the FCA before shareholding online. getting involved by visiting https://register.fca.org.uk • Report the matter to the FCA by calling 0800 111 6768 or visiting https://fca.org.uk/consumers/report-scam-unauthorised-firm • Do not deal with any firm that you are unsure about If you deal with an unauthorised firm, you will not be eligible to receive payment under the Financial Services Compensation Scheme. The FCA provides a list of unauthorised firms of which it is aware, which can be accessed at https://www.fca.org.uk/consumers/warning-list-unauthorised- firms#list. More detailed information on this or similar activity can be found on the FCA website at https://fca.org.uk/consumers/protect- yourself-scams. 82 Schroder Income Growth Fund plc ## Information about the Company ### www.schroders.co.uk/incomegrowth | Directors | Independent auditor | | --- | --- | | Ewen Cameron Watt | Ernst & Young LLP | | June Aitken | Atria One | | Fraser McIntyre | 144 Morrison Street | | Victoria Muir | Edinburgh EH3 8EX | Registrar ### Advisers Equiniti Limited Alternative investment fund manager Aspect House (the “Manager”) Spencer Road | Schroder Unit Trusts Limited | Lancing | | --- | --- | | 1 London Wall Place | West Sussex BN99 6DA | | London EC2Y 5AU | Shareholder Helpline: 0800 032 0641* | Website: www.shareview.co.uk Investment Manager and Company Secretary *Calls to this number are free of charge from UK landlines. Schroder Investment Management Limited Communications with shareholders are mailed to the address held on 1 London Wall Place the register. Any notifications and enquiries relating to shareholdings, London EC2Y 5AU including a change of address or other amendment should be Telephone: 020 7658 6501 directed to Equiniti Limited at the above address. Email: amcompanysecretary@schroders.com Shareholder enquiries Registered office General enquiries about the Company should be addressed to the 1 London Wall Place Company Secretary at the Company’s registered office. London EC2Y 5AU Dealing codes Depositary ISIN: GB0007915860 HSBC Bank plc SEDOL: 0791586 8 Canada Square Ticker: SCF London E14 5HQ Global intermediary identification number (GIIN) Lending bank T34UKV.99999.SL.826 Sumitomo Mitsui Banking Corporation 99 Queen Victoria Street Legal entity identifier (LEI) London EC4V 4EH 549300X1RTYYP7S3YE39 Corporate broker Privacy notice Peel Hunt LLP The Company's privacy notice is available on its webpages 100 Liverpool Street London EC2M 2AT The Company’s privacy notice is available on its webpages. ### Schroder Income Growth Fund plc