Annual Financial Report

RNS Number : 6525L

Midas Income & Growth Trust PLC

08 July 2014

 



To:         RNS

Date:     8 July 2013

From:     Midas Income & Growth Trust plc

Results for the year ended 30 April 2014

Chairman's Statement

Highlights

• Net asset value total return of 7.2%

• Share price total return of 9.9%

• Dividend for the year increased by 3.2% to 5.42 pence

• Annualised volatility* 7.3% compared with 11.4% for the FTSE All-Share Index

• Share price discount to net asset value of 6.5% at the period end (8.6% at end 2013).

Introduction

This is my first annual Chairman's Statement to the shareholders of a Company with whom I was first involved as a corporate adviser in 2006, when it changed its name from The Taverners Trust to Midas Income & Growth Trust. I was appointed a Director of the Company just over a year ago in April 2013, and succeeded Hubert Reid as Chairman in September 2013. I am pleased to report that, since my appointment, your Company has continued to produce strong investment performance allied to low volatility, factors which have marked it since the introduction of the new investment policy in January 2012. This continuing good investment performance combined with low volatility and the acquisition of the Company's manager by Seneca Asset Managers, have been the highlights of the year. I comment in more detail below on both these matters and also the Board and the Manager's intention to explore and pursue the significant enlargement of your company.

New Investment Manager, Proposed Change of Name and New Investment Management Fee Arrangements

Seneca Investment Managers Limited (formerly Miton Capital Partners Limited) was acquired by Seneca Asset Managers Limited, a company with a strong Merseyside connection, in March 2014. The Board was pleased by this change which saw the Company's joint investment managers, Alan Borrows and Simon Callow, together with their Liverpool team, stay in place to continue the progress made since January 2012. This was especially so in the context of the new parent providing additional resource and commitment, particularly in the area of marketing.  To maximise the benefit of these additional resources and to emphasise the Company's global remit, it is proposed to change the name to Seneca Global Income & Growth Trust plc. In addition, your Manager, as evidence of its aim to enlarge your Company, has volunteered a change to the investment management fee under which the fee rate will reduce to 0.65% per annum of market capitalisation above £50 million and remain at 0.9% up to that level (previously it was at a flat rate of 0.9%).  This change took effect from 1 July 2014.

Investment Objective

The Company's Investment Objective is to outperform 3-month LIBOR plus 3.0% over the longer term, with low volatility and the prospect of income and capital growth, through investment in a multi-asset portfolio. 

Your Board keeps this objective under periodic review. The change in manager provides a suitable opportunity to carry out such a review and the Board has asked your Manager to discuss with major shareholders its ongoing appropriateness, or at least its usefulness as a benchmark to judge the investment policy. 

It is not proposed to review the Investment Policy, which is unchanged.

Investment and Share Price Performance

Your Company's net asset value total return for the year was 7.2%, ahead of the benchmark return of 3.6%. This reinforced the Company's recent success, and as at 30 April 2014 your Company's net asset value total return, since the introduction of the new investment policy in January 2012, was 32.8%. Over the same period the benchmark return was 8.6%. The Company has performed strongly and, in spite of the degree of outperformance of the benchmark, has done so in the context of a volatility level that was substantially lower than that of the market and other trusts in the Global Equity Income sector over both the year and since January 2012.

The discount at which the Company's shares trade to net asset value stood at 6.5% at the year end, down from 8.6% at the previous year end, a tightening which contributed to a share price total return of 9.9%. The average discount over the year was 8.3%, and it currently stands at 6.1% as I write.

Dividends and Income

The Company paid a fourth interim dividend of 1.40p per share, which represented an increase of 3.7% on the 1.35p per share paid in respect of the same period last year. This dividend, taken with the previous three interim dividends, gives a total dividend of 5.42p per share in respect of the year to 30 April 2014, an increase of 3.2% on the previous year's 5.25p. We have also been able to add to revenue reserves.

It is the Board's intention, barring unforeseen circumstances, that it will at least maintain the quarterly dividend rate of 1.40p per share for the full year to 30 April 2015.

Gearing

The Company has in place a short term rolling debt facility of £7 million. The facility runs until 31 October 2015 and can be cancelled at any time without cost to the Company. The Company

was 12% geared at the end of April.

Alternative Investment Fund Managers' Directive

The Company's application to be a Small Registered UK AIFM has been approved by the FCA, and the Company was entered in the register of small registered UK AIFMs with effect from 1 July 2014, under the Alternative Investment Fund Managers Regulations 2013.

Investment Outlook

The global economic outlook may have continued to improve, but western indebtedness and social and political tensions in Europe, Asia and the Middle East give pause for thought. Five years of monetary stimulus have left most assets looking fully valued, while both equities and bonds have rallied further in recent months, something that suggests a degree of market confusion as to the prospects for growth and inflation. We believe that longer term bonds continue to look unattractive in the face of potential rate increases and inflation and, on balance, equities with a defensive bias remain our asset of choice. The portfolio mix and weightings reflect this.

Board Changes

Adam Cooke has decided to step down from the Board with effect from the end of December this year; pending that he will stand for re-election at the forthcoming AGM. Adam joined the Board in

2005, just ahead of the Company's metamorphosis from The Taverners Trust to Midas Income & Growth Trust. He has been a loyal servant of shareholders' interests and a source of sound views for the Board and Manager. He will be missed. We wish him well and are looking for a successor.

The Board's Priorities

Your Company's investment strategy of growing income from a low volatility, multi asset portfolio is a distinctive one in the Global Equity Income Sector and one which your Board considers has broad potential appeal. Your Board is focussed on maintaining and building on the excellent investment performance record achieved since the changes to the Company's investment policy approved

by shareholders in January 2012, and on marketing the qualities of your Company more actively, with a view to building demand for your Company's shares. Your Manager has similar objectives and

it is your Board and Manager's intention actively to explore and pursue the significant enlargement of your Company. Contingent on the success of these efforts, we are both committed to the adoption of a Discount Control Mechanism (DCM) that would seek to regulate the share price at close to its net asset value. The objectives of such an enlargement are to reduce the Ongoing Charges (by spreading the fixed costs over a larger base) and to improve the liquidity of the Company's shares.

Whilst this initiative is being pursued, your Board sees the principal control over the discount as being the annual continuation vote. Adoption  of any DCM mechanism in advance of significant enlargement would risk disadvantaging continuing shareholders by virtue of the potential material increase in

Ongoing Charges should any significant shrinkage occur.

Annual General Meeting

This year's Annual General Meeting will be held at 12.30pm on Tuesday, 30 September 2014 at The Racquet Club, Hargreaves Buildings, Liverpool L3 9AG. We alternate Annual General Meetings between Liverpool and London, and it is particularly appropriate that it is Liverpool's turn this year given the change in investment management arrangements I mention above. I would be delighted if as many shareholders as possible were to take this opportunity to meet with Board members and the investment managers over a post AGM buffet lunch.

Resolution 7 at this year's AGM concerns the annual continuation vote by shareholders on the Company's future. The Board believes that it is in the best interests of the Company and its members as a whole, and strongly recommends that shareholders should vote in favour of resolution 7 as the Board intends to do in respect of its own beneficial shareholdings of 225,759 shares. In-house

managed funds of your Manager currently own 4,569,989 shares in the Company and they have indicated they will abstain from voting any such shares in relation to this resolution.

Richard Ramsay

Chairman

7 July 2014

* This measure describes the fluctuations of the share price over time. Whilst volatility is specific to a fund's particular mix of investments, higher volatility is generally considered to equate to higher risk.

Investment Manager's Review

Overview

Positive sentiment towards financial markets was challenged early in the period due to the announcement by Ben Bernanke, the Chairman of the Federal Reserve Board, that the central bank would begin to withdraw the stimulus being supplied into the US economy. Both equity and bond markets reacted badly to this news, despite clear indication that the asset purchase programme would only be withdrawn gradually, and then only in response to a further improvement in the US economy. In the event, the tapering of monetary support did not begin until December, by which time most developed markets had moved significantly higher, albeit with several bouts of short term volatility on the way. By contrast, developing markets continued to suffer from negative commentary and capital outflows, leading to underperformance of their developed market counterparts.

Economic data was mixed, but there has been steady improvement in the UK economy and early signs that the worst may be over for those parts of Europe most affected by the credit crisis. US economic growth stalled in the first quarter, although this was largely down to weather related problems and the economy is expected to show more positive growth over the rest of the year. The early part of 2014 has also seen pick up in corporate merger activity and a buoyant IPO market, a sign that confidence in the corporate sector has improved to such an extent that managements are keen to expand their business reach.

The early part of 2014 has been more difficult for major western equity markets, while bond markets have continued to perform well, with further falls in yields. Headwinds to sentiment have included the commencement of US tapering; concerns over slowing economic growth in China; and the annexation of the Crimea by Russia. Developing markets have seen some improvement in sentiment and were amongst the better performers as the period drew to a close.

It is difficult to argue, following five years of monetary stimulus, that many assets are cheap. However, we believe that equities, and to a lesser degree property, offer better value than bonds. We have maintained a preference for these 'real assets' over fixed interest counters throughout the period and indeed have further increased portfolio exposure to equities and other assets offering potential for both income and capital growth.

Performance

The strong returns achieved last year have been built upon in this period. The net asset value total return of 7.2% was ahead of the benchmark (3 month Libor +3%) return of 3.6%. The share price

total return was higher at 9.9%, helped by a narrowing of the discount from 8.6% at the start of the period to 6.5% at the end. These returns were achieved with a level of volatility (as measured

by Financial Express Analytics) which was around half that of the FTSE 100 Share Index.

Equity returns within the Company's portfolio have been mixed. The UK equity portfolio, which is largely held through direct holdings, made by far the largest contribution to returns. This was helped by an emphasis on mid cap stocks, which generally outperformed their larger brethren over the period. Other assets making meaningful positive contributions during the year were property, corporate bonds and venture capital.

Overseas equity holdings, which are held though third party managed closed and open ended funds, produced little by way of contribution. The relatively high weighting towards Asian and emerging market equities, which produced negative returns, more than cancelled out gains in the United States and Europe. The wide range of equity managers used to invest in overseas equities generally struggled to add value over the period. The strength in sterling had a detrimental impact on assets held overseas. However, this factor was mitigated over the period, as the Company's yen exposure has been fully hedged, whilst dollar and euro denominated equity positions were protected in part.

The largest individual contributions to returns were mainly found within the UK equity portfolio, with seven from the top ten coming from this source. The emphasis on mid-sized companies is also

apparent, as the only FTSE 100 stock making the top ten contributors list was Legal & General.

It is also pleasing to note that several of the main contributors had only been added to the portfolio in the previous year (highlighted in bold in the table below). An element of profit taking was undertaken on several of these holdings with both DS Smith and WS Atkins exiting the portfolio completely.

Attribution analysis by individual holdings in the 12 month period to 30 April 2014

Top 10 Contributors	Asset Class	Contribution
National Express Group plc	UK Equities (mid cap)	0.85%
Kier Group plc	UK Equities (mid cap)	0.81%
Segro Group plc	UK Equities (mid cap)	0.56%
Legal & General Group plc	UK Equities (large cap)	0.50%
DS Smith plc	UK Equities (mid cap)	0.43%
Macau Property Fund Property 0.42%	Property	0.42%
Atkins (WS) plc	UK Equities (mid cap)	0.37%
Henderson European Focus Trust	European Equities	0.36%
Partners Group Opportunities Fund	Venture Capital	0.31%
Phoenix Group Holdings plc	UK Equities (mid cap)	0.31%
Bottom 10 Contributors	Asset Class	Return
Standard Chartered	UK Equities	-0.33%
Aberdeen Latin American Income Fund	Emerging Markets	-0.32%
Tesco	UK Equities	-0.23%
Magna Emerging Markets Dividend Fund	Emerging Markets	-0.19%
Schroder Oriental Income Fund	Far East (ex Japan)	-0.18%
Somerset Emerging Markets Dividend Growth Fund	Emerging Markets	-0.17%
Schroder Asian Maximiser Fund	Income Far East (ex Japan)	-0.17%
Aberdeen Asian Income Fund	Far East (ex Japan)	-0.15%
UBS Emerging Markets Equity Income Fund	Emerging Markets	-0.14%
Newton Asian Income Fund	Far East (ex Japan)	-0.14%

Source: Seneca Investment Managers

The table of worst detractors from returns bears witness to the poor sentiment towards the Asian and emerging markets over the period. In several cases this weakness has been used to add to positions (highlighted in bold) as we look to take a long term view on the attractions of these markets.

The income generated by the portfolio increased by in excess of 6.5% during the period, driven in part by higher UK equity dividends and also by switching from stocks which had performed well into new positions with higher yields (and more potential we feel to provide future capital returns).

Overseas dividend income came under pressure due to the strength in sterling and several managers in Asia and the emerging markets choosing to run higher cash balances to preserve capital.

The increase in income has enabled a further improvement in your Company's dividends this year, whilst also adding to revenue reserves.

Asset Allocation

The changes to the investment objectives, approved by shareholders in January 2012, have provided more flexibility to improve capital returns and further diversify the Company's

assets.

The main changes to asset allocation over the period were:

• UK Equities - an increase in exposure, although this was partly due to strong relative performance

• Alternative assets - increased with further allocations to private equity and renewable energy

• Fixed Interest - Reduced as the fall in yields made the asset class ever less attractive.

Alternative assets increased allocations have been driven largely by investments into four newly launched renewable energy funds over the course of the year. These funds will provide initial yields

of 6% to 7% once fully invested and the potential for dividends to grow in line with inflation.

The build-up in cash early in the period proved well timed and enabled advantage to be taken of the sharp market declines in late May and June following the Ben Bernanke ' tapering' announcement.

UK Equities (36.3%)

The stock market's strong rise over the past 12 months has also been accompanied with periods of volatility, particularly when sentiment was impacted by the anticipated change in the US Federal Reserve's policy towards quantitative easing. However, the overall trend has been towards rising prices and leadership from the mid-capitalisation and small company indices. This trend has been beneficial to returns, as the UK portfolio is well represented in the mid-cap area.

The weighting to UK equities has increased over the period through a combination of good relative performance and a modest amount of new investment. There has been somewhat more trading activity within the portfolio than would normally be the case, as strong share price performance for several holdings left them sitting at valuation levels we felt fully reflected their medium term prospects. Positions sold encompassed Unilever, Reckitt Benckiser, SSE, DS Smith, GKN and WS Atkins. New positions were started in companies that generally offered higher yields than those leaving the portfolio. Purchases included Lloyds market insurer Amlin; general insurer Esure; asset manager

Aberdeen Asset Management; UK specialist property company Assura; and corporate event organiser UBM. New positions were also started in Barratt Developments, which carries a lower yield

but offers the prospect of strong growth in dividends; and pub retailer Marston's - giving more exposure within the portfolio to the improvements in employment and consumer confidence.

Whilst UK market valuations do not look cheap we feel that the better prospects for the UK economy will feed through to profits and justify current slightly stretched metrics. By concentrating on well financed companies with strong balance sheets and growing dividends, we feel the revenue performance of the Company can be further improved and capital returns enhanced.

Overseas Equities (31.1%)

Overseas fund selection remains biased towards managers who emphasise the identification of dividend growing companies within their investment process. We are also attracted to managers who

have proven defensive in less buoyant market conditions and who can deliver returns with lower volatility than their benchmark indices.

Exposure to overseas equity markets was increased with investment mainly directed into Asian equity markets following a protracted period of weakness. The existing holdings in Schroder Oriental Income Fund and Aberdeen Asian Income Fund were added to, as both moved to trade uncustomary discounts to net asset value. A further increase was made via a new holding in Liontrust Asian Equity Income Fund, which is managed by a very experienced manager focussed on equity income growth.

This investment was financed by a reduction in emerging market exposure, although this was driven primarily by a decision to sell the UBS Emerging Markets Equity Income Fund, following a period of both absolute and relative poor performance. Part of this sale was reinvested into the Aberdeen Latin American Income Fund to obtain exposure to bot  out of favour equities and bonds in the region.

There has been little activity within the US equity portfolio, although a small reduction was made following strong market performance, which raised concerns that valuations were 'up with events'.

The US economy appears to be showing good underlying growth, notwithstanding the weather related slowdown seen in the first quarter on 2014. Employment data in particular has now (finally) turned more positive. However, the adjustment period, as quantitative easing measures are reduced, may prove protracted. Thoughts have already begun to turn to the effects of higher interest rates and the impact this would have on the sustainability of the economic recovery.

European equity exposure increased through a combination of strong relative performance from existing managers and also through a new investment in European Assets Trust, which offers

exposure to smaller companies together with a very healthy yield of 6% (which is in part paid from capital). This holding compliments existing positions, which tend to be more large/midcap orientated.

Japanese equity investment was also added to through an exchange traded fund, following the market's weak performance in the early part of 2014. This investment was made pending commitment to another actively managed fund, which was completed just after the period end.

Alternative Assets (17.5%)

Private equity exposure has been added to as the buoyant IPO market is providing venture capital managers with the opportunity to achieve realisations. A new holding in NB Private Equity Partners Limited, a quoted private equity company, was acquired at a 24% discount to net asset value, whilst also offering a yield ofover 4%. In addition, a top-up investment was made into Princess Private Equity Holding Limited, which was effectively funded through quarterly redemptions of the holding in Partners Group Global Opportunities. This fund is currently carried at a 20% discount to net asset value due to its limited liquidity. Any realisations are effectively made at a 5% discount, thus accruing

value and providing funding for other asset purchases.

The unquoted investment in A J Bell Holdings (AJB), the fast growing SIPP provider, has remained valued at 575p per share throughout the period. AJB released its full year results (to 30 September 2013) in December and these results demonstrated significant growth in both client numbers (up 23%) and assets under administration (up 17%). However, profits fell by 10% due to lower interest margins on cash balances. Interest rate margin pressure is also likely to be a significant drag on current year profits. At 575p the holding is valued at a historic price earnings ratio of 12.8x and a yield of 4.3%. This valuation is, we feel, prudent and still compares favourably with the main quoted

competitor Hargreaves Lansdown.

The most significant increase in alternative asset exposure came from the commitment of just over 5% of gross assets into four quoted renewable energy companies. These vehicles yield between 6% and 7%, with dividends targeted to grow in line with inflation. The investment spans solar power, onshore wind, waste and waste water assets. We feel there is a window of opportunity to invest in this sector, as government subsidies on future renewable energy assets are likely to be reduced. The

combination of such a high level of relatively secure income with inflation linking appears attractive, particularly when compared to current bond yields. The high and growing income generated on

these renewable energy investments will be extremely helpful in providing further support to your Company's progressive dividend policy.

A further commitment was made to aircraft leasing through an investment at IPO of Doric Nimrod Air Three, a quoted vehicle launched to acquire and then lease four A380 aircraft to the Emirates airline. The running yield at acquisition is 8.25% and overall projected returns could be in the low to mid-teens range - dependent on residual values of the aircraft at the end of their 12 year leases.

Hedge Fund exposure is minimal following the sale of Acencia Debt Strategies, which had been re-rated by the market and we felt offered only limited further upside.

Fixed Interest (10.2% including cash)

Investment in fixed interest markets was reduced over the period, as further strength in bond markets left yields looking ever less attractive. The Company's position in preference shares was sold in its entirety, as were the holdings in City Merchants High Yield Trust and Invesco Perpetual Enhanced Income (previously Invesco Leveraged High Yield). The position in the AXA US Short Duration High Yield Fund was also sold to reduce exposure to subinvestment grade bonds. A disposal of the M&G European Loans Fund was made to finance investment into a new, quoted loans fund, namely CVC Credit Partners Limited, which we felt had better scope to invest across less liquid parts of the European loans market. A new position was introduced in the form of the TwentyFour Select Monthly Income Fund, which will seek to invest in less liquid issues within the European corporate bond markets, where pricing is favourable when compared to more liquid bonds.

Fixed interest positions held are now largely invested in relatively short duration bonds and loans. This should mean that they are protected against any pick-up in inflation. Indeed they should be early beneficiaries of higher interest rates, as and when the interest rate cycle finally turns.

Property (4.9%)

Property exposure has been broadly maintained with Asian property holdings being reduced in favour of UK based assets. The holding in Asian Real Estate Income Fund was sold and Macau

Property Opportunities, which was one of the portfolio's best performing assets over the period, top sliced. New investment was committed to GCP Student Living, which invests in student accommodation in London. A further new investment was made in Tritax Big Box REIT, a company launched to invest in large distribution facilities in the UK. Both companies are targeting yields in excess of 5%, with the potential to grow at least in line with inflation. The holding in Starwood European Real Estate was sold following a disappointing delay in the investment programme, which has jeopardised future returns.

We are encouraged by the better performance of the UK economy but are also conscious that property yields have, in many areas, already discounted this improvement. However, we have added

exposure on a selective basis to sectors we still feel offer potential for further yield compression.

Outlook

Financial markets have clearly been beneficiaries of the extremely loose monetary conditions over the past 5 years. Whilst the overall macroeconomic outlook has improved, there remain significant

uncertainties surrounding the indebtedness of many western nations and the political tensions and social unrest in Europe, Asia and the Middle East. The full implicateons of the reflationary economic experiment is still to play out, with Japan and now seemingly Europe joining the party.

Market sentiment has certainly improved and the corporate sector is now showing signs of moving into a more expansive phase, with takeover activity on the rise and the IPO market buoyant.

However, valuations across most asset classes appear full by historic standards and need to be justified by a lengthy period of economic progress. Whilst there are certainly signs that better

times may lie ahead, the permanency of recent improvements will be challenged as the 'crutches' of support are gradually removed.

Against this background we have judged that equities and other assets capable of providing income and capital growth are more attractive than monetary assets, such as bonds, which have been at the centre of 'quantitative' support. We continue to feel that caution is warranted and that the stability provided by a diverse income stream will help smooth returns and prove defensive should market volatility return. It seems likely that the post credit crisis 'easy money' has now been made. However, we remain convinced that through a combination of active asset allocation across a wide range of assets, the use of quality managers and direct focussed UK equity investment, we can continue to achieve competitive returns, with a low level of volatility.

Seneca Investment Managers Limited

7 July 2014

Income Statement

For the year ended 30 April 2014

	Year ended 30 April 2014
		£ '000	£'000	£'000
	Notes	Revenue	Capital	Total
Gains on investments		-	1,902	1,902
Income		2,969	-	2,969
Investment management fee		(232)	(232)	(464)
Administrative expenses		(402)	-	(402)
Exchange losses		-	-	-
Net return on ordinary activities before interest payable and taxation		2,335	1,670	4,005
Finance costs		(58)	(58)	(116)
Net return on ordinary activities before taxation		2,277	1,612	3,889
Taxation		-	-	-
Return on ordinary activities after taxation		2,277	1,612	3,889
Return per share (pence)	2	5.71	4.04	9.75

The total column of this statement represents the profit and loss account of the Company.

All revenue and capital items in the above statement derive from continuing operations.

No operations were acquired or discontinued in the year.

A Statement of Total Recognised Gains and Losses has not been prepared as all gains and losses are recognised in the Income Statement.

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

Income Statement

For the year ended 30 April 2013

	Year ended 30 April 2013
		£ '000	£'000	£'000
	Notes	Revenue	Capital	Total
Gains on investments		-	7,941	7,941
Income		2,780	-	2,780
Investment management fee		(198)	(198)	(396)
Administrative expenses		(353)	-	(353)
Exchange losses		-	(4)	(4)
Net return on ordinary activities before interest payable and taxation		2,229	7,739	9,968
Finance costs		(74)	(74)	(148)
Net return on ordinary activities before taxation		2,155	7,665	9,820
Taxation		-	-	-
Return on ordinary activities after taxation		2,155	7,665	9,820
Return per share (pence)	2	5.40	19.21	24.61

The total column of this statement represents the profit and loss account of the Company.

All revenue and capital items in the above statement derive from continuing operations.

No operations were acquired or discontinued in the year.

A Statement of Total Recognised Gains and Losses has not been prepared as all gains and losses are recognised in the Income Statement.

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

Balance Sheet

		As at	As at
		30 April 2014	30 April 2013
	Notes	£'000	£'000
Non-current assets
Investments held at fair value through profit and loss		63,624	59,894
Current assets
Debtors and prepayments		677	520
Cash and short term deposits		179	2,355
		856	2,875
Creditors: amounts falling due within one year
Bank loan		(7,000)	(7,000)
Other creditors		(102)	(136)
		(7,102)	(7,136)
Net current liabilities		(6,245)	(4,261)
Net assets		57,378	55,633
Capital and reserves
Called up share capital		9,974	9,974
Share premium account		1,445	1,445
Special reserve		41,783	41,783
Capital redemption reserve		2,099	2,099
Capital reserve		1,230	(382)
Revenue reserve		847	714
Equity shareholders' funds		57,378	55,633
Net asset value per share (pence)	3	143.82	139.44

Reconciliation of Movements in Shareholders' Funds

For the year ended 30 April 2014

		Share		Capital
	Share	premium	Special	Redemption	Capital	Revenue
	capital	Account	reserve	reserve	reserve	reserve	Total
	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Balance at 30 April 2013	9,974	1,445	41,783	2,099	(382)	714	55,633
Return on ordinary activities after taxation	-	-	-	-	1,612	2,277	3,889
Dividends paid	-	-	-	-	-	(2,144)	(2,144)
Balance at 30 April 2014	9,974	1,445	41,783	2,099	1,230	847	57,378

Reconciliation of Movements in Shareholders' Funds

For the year ended 30 April 2013

		Share		Capital
	Share	premium	Special	Redemption	Capital	Revenue
	capital	Account	reserve	reserve	reserve	reserve	Total
	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Balance at 30 April 2012	9,974	1,445	41,783	2,099	(8,047)	635	47,889
Return on ordinary activities after taxation	-	-	-	-	7,665	2,155	9,820
Dividends paid	-	-	-	-	-	(2,076)	(2,076)
Balance at 30 April 2013	9,974	1,445	41,783	2,099	(382)	714	55,633

Cash Flow Statement

		Year		Year
		Ended		Ended
		30 April 2014		30 April 2013
		£'000		£'000
Net cash inflow from operating activities		1,932		1,875
Servicing of finance
Bank and loan interest paid		(136)		(126)
Taxation
Tax payable on non UK income		-		-
Financial investment
Purchases of investments	(28,306)		(24,589)
Sales of investments	26,478		25,447
Net cash (outflow)/inflow from financial investment		(1,828)		858
Equity dividends paid		(2,144)		(2,076)
Net cash (outflow)/inflow before financing		(2,176)		531
Financing
Buyback of shares		-		-
Net cash outflow from financing		-		-
(Decrease)/Increase in cash		(2,176)		531
Reconciliation of net cash flow to movements in net debt
(Decrease)/Increase in cash as above		(2,176)		531
Exchange movements		-		(4)
Movement in net debt in the year Net debt at 1 May		(2,176) (4,645)		527 (5,172)
Net debt at 30 April		(6,821)		(4,645)

Principal Risks and Uncertainties

The principal risks faced by the Company are: investment and strategy risk; market risk; financial risk; earnings and dividend risk; operational risk; regulatory risk and key man risk. These risks, which have not changed materially since the annual report for the year ended 30 April 2013, and the way in which they are managed, are described in more detail in the annual report for the year ended 30 April 2014.  The report will be made available on the manager's website www.senecaim.com during July 2014.

       Risk management, financial assets and liabilities

The Company's financial instruments comprise:

·      Equities and debt security investments that are held in accordance with the Company's investment objectives;

·      Term loans and bank overdrafts, the main purpose of which are to raise finance for the Company's operations; and

·      Cash and liquid resources that arise directly from the Company's operations.

The main risks arising from the Company's financial instruments are market risk, interest rate risk and foreign currency risk. There may also be exposure to interest rate risk from time to time. The Board regularly reviews and agrees policies for managing each of these risks and they are summarised below. These policies have remained unchanged since the inception of the Company.

Liquidity risk

Liquidity risk is the risk that the Company will encounter difficulty in meeting obligations associated with financial liabilities. Liquidity risk is not considered to be significant as the Company's assets comprise of mainly readily realisable securities, which can be sold to

meet funding commitments if necessary.

Market risk

Market risk arises mainly from uncertainty about future prices of financial instruments held. It represents the potential loss the Company might suffer through holding market positions in the face of price movements.

To mitigate the risk the Board's investment strategy is to select investments for their fundamental value. Stock selection is therefore based on disciplined accounting, market and sector analysis, with the emphasis on long term investments. The Investment Manager actively monitors market prices throughout the year and reports to the Board, which meets regularly in order to consider investment strategy.

Interest rate risk

Financial assets

Prices of bonds, open ended investment companies (on a look-through basis) and floating rate notes together with preference share yields, are determined by market perception as to the appropriate level of yields given the economic background. Key determinants include economic growth prospects, inflation, the Government's fiscal position, short-term interest rates and international market comparisons. The Investment Manager takes all these factors into account when making any investment decisions as well as considering the financial standing of the potential investee company.

Returns from bonds, floating rate notes and preference shares are fixed at the time of purchase, as the fixed coupon payments are known, as are the final redemption proceeds. This means that if a bond is held until its redemption date, the total return achieved is unaltered from its purchase date. However, over the life of a bond the market price at any given time will depend on the market environment at that time. Therefore, a bond sold before its redemption date is likely to have a different price to its purchase level and a profit or loss may be incurred.

Financial liabilities

The Company finances its operations through the use of a loan facility. The Board sets borrowing limits to ensure gearing levels are appropriate to market conditions and reviews these on a regular basis.

Foreign currency risk

The income and capital value of the Company's investments are mainly denominated in Sterling; therefore, the Company is not subject to any material risk of currency movements.

Other price risk

Other price risks (ie changes in market prices other than those arising from interest rate or currency risk) may affect the value of the quoted investments.

It is the Board's policy to hold an appropriate spread of investments in the portfolio in order to reduce the risk arising from factors specific to a particular country or sector. The allocation of assets to international markets and the stock selection process both act to reduce market risk. The Manager actively monitors market prices throughout the year and reports to the Board, which meets regularly in order to review investment strategy.  The investments held by the Company are listed on various stock exchanges worldwide.

Credit risk

Credit risk represents the failure of the counterparty to a transaction to discharge its obligations under that transaction that could result in the Company suffering a loss.

The risk is not considered significant, and is managed as follows:

·      where the Investment Manager makes an investment in a bond, corporate or otherwise, the credit rating of the issuer is taken into account so as to minimise the risk to the Company of default;

·      investments in quoted bonds are made across a variety of industry sectors and geographic markets so as to avoid concentrations of credit risk;

·      transactions involving derivatives are entered into only with investment banks, the credit rating of which is taken into account so as to minimise the risk to the Company of default;

·      investment transactions are carried out with a large number of brokers, the credit rating of which is taken into account prior to undertaking the transaction so as to minimise the risk to the Company of default;

·      investment transactions are carried out with a large number of brokers, whose credit-standing is reviewed periodically by the Investment Manager, and limits are set on the amount that may be due from any one broker;

·      the risk of counterparty exposure due to failed trades causing a loss to the Company is mitigated by the review of failed trade reports by the Administrator on a daily basis. In addition, the Administrator carries out a stock reconciliation to the Custodian's records on a weekly basis to ensure discrepancies are picked up on a timely basis. The Manager's Compliance department carries out periodic reviews of the Custodian's operations and reports its findings to the Manager's Risk Management Committee.

·      cash is held only with reputable banks with high quality external credit enhancements.

None of the Company's financial assets are secured by collateral or other credit enhancements.

Statement of Directors' Responsibilities

The Directors are responsible for preparing the Annual Report and financial statements, in accordance with applicable law and regulations.

Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors have elected to prepare the financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law).

Under company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Company and of the profit or loss of the Company for that period.

In preparing these financial statements, the Directors are required to:

• select suitable accounting policies and then apply them consistently;

• make judgements and estimates that are reasonable and prudent;

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

The Directors are responsible for keeping proper accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that its financial statements comply with the Companies Act 2006, where applicable. They are responsible for taking such steps as are reasonably open to them to safeguard the assets of the Company and to prevent and detect fraud and other irregularities.

Under applicable law and regulations, the Directors are also responsible for preparing a Directors' Report, Directors' Remuneration Report and Statement of Corporate Governance that comply with that law and those regulations. The financial statements are published on www.senecaim/migt/ which is a website maintained by the Company's Manager. The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company's website. Legislation in the UK governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

The Directors confirm that to the best of our knowledge:

• the financial statements, prepared in accordance with the applicable UK Accounting Standards, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company;

• that in the opinion of the Directors, the Annual Report and Accounts taken as a whole, is fair, balanced and understandable and it provides the information necessary to assess the Company's performance, business model and strategy; and

• the Strategic Report includes a fair review of the development and performance of the business and the position of the Company, together with a description of the principal risks and uncertainties that the Company faces.

For Midas Income & Growth Trust PLC

Richard Ramsay

Chairman

7 July 2014

Notes

1.   The financial statements have been prepared in accordance with the applicable UK Accounting Standards and with the Statement of Recommended Practice 'Financial Statements of Investment Trust Companies and Venture Capital Trusts'.  They have also been prepared on the assumption that approval as an investment trust will continue to be granted.  The financial statements have been prepared on a going concern basis.

2.    Return per ordinary share

       The revenue return per Ordinary share is calculated on net revenue on ordinary activities after taxation for the year of £2,277,000 (2013 - £2,155,000) and on 39,896,361 (2013 - 39,896,361) Ordinary shares, being the weighted average number of Ordinary shares in issue during the year.

       The capital return per Ordinary share is calculated on net capital return for the year of £1,612,000 (2013 - £7,665,000) and on 39,896,361 (2013 - 39,896,361) Ordinary shares, being the weighted average number of Ordinary shares in issue during the year.

       The total return per Ordinary share is calculated on total return for the year of £3,889,000 (2013 - £9,820,000) and on 39,896,361 (2012 - 39,896,361) Ordinary shares, being the weighted average number of Ordinary shares in issue during the year.

3.    Net asset value per ordinary share

       The net asset value per Ordinary share is based on net assets of £57,378,000 (2013: £55,633,000) and on 39,896,361 (2013: 39,896,361) Ordinary shares, being the number of Ordinary shares in issue at the year end.

4.    Dividends

       A fourth interim dividend in respect of the year ended 30 April 2014 of 1.40p (2013 - 1.35p) per Ordinary share was paid on 13 June 2014 to shareholders on the register on 23 May 2014.  In accordance with UK Accounting Standards this dividend has not been included as a liability in these accounts and will be recognised in the period in which it is paid.

5.    Related parties

The Directors of the Company receive fees for their services.

6.    Bank loan facility

The Company has a £7 million revolving loan facility in place with Royal Bank of Scotland plc, of which at 30 April 2014 the full amount had been drawn down at an all-in rate of 1.6531%.  The facility runs until October 2015 and can be cancelled at any time without cost to the Company.

7.     Financial information

These are not full statutory accounts for the year ended 30 April 2014.  The full audited annual report and accounts for the year ended 30 April 2014 will be sent to shareholders in July 2014 and will be delivered to the Registrar of Companies following the Company's Annual General Meeting. The full audited accounts for the year ended 30 April 2013, which were unqualified, have been lodged with the Registrar of Companies.

8.    The report and accounts for the year ended 30 April 2014 will be made available on the website www.senecaim.com.  Copies may also be obtained from the Company's registered office, Eighth Floor, 6 New Street Square, New Fetter Lane, London EC4A 3AQ

Enquiries:

Alan Borrows, Seneca Investment Managers Limited         0151 906 2461    

Philip Rorke, R&H Fund Services Limited             0131 524 6139

 

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