Schroder Income Growth change to investment policy

SCF : Schroder Income Growth change to investment policy

Schroder Income Growth’s annual report for the year that ended on 31 August 2014 is out. they upped the dividend by 3.1% (well ahead of the 1.5% increase in the CPI – inflation beating dividend increases are part of Schroder Income Growth’s objective). The total return on net assets was 14.1%, beating the 10.3% return generated by the FTSE All-Share Index.

With effect from 1 September 2014, the management fee structure (which was based on a percentage of net revenue return, a percentage of assets and a performance fee) has been replaced with a single management fee of 0.75% of assets. The fee continues to be charged on the value of the Company’s assets under management, net of current liabilities (other than short term borrowings, less any cash up to the level of borrowings), and is calculated and paid quarterly in arrears.

In another change, the Board plan to change the company’s investment policy to allow the manager to use put options to generate revenue for the company – shareholders will be asked to approve this change at the AGM.

The manager’s report says outperformance of the FTSE All-Share Index was driven in part from M&A candidates such as AstraZeneca and ITV, while the single largest negative contributor was not holding another company that was bid for, Shire (a bid that collapsed after the year end). Other positive contributions were in the insurance sector (Direct Line, Legal & General, and Prudential) and Halfords, while the portfolio benefited relative to the FTSE All-Share Index from reducing its holdings in the supermarket sector (eg by selling the holdings in Tesco and Morrisons) which is facing challenges from discount stores. One disappointment was stock selection in utilities, with the holding in Centrica performing less well than National Grid which was not held.