Annual Financial Report Annou

RNS Number : 4124I

Glasgow Income Trust PLC

18 November 2008

GLASGOW INCOME TRUST PLC

ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED 30 SEPTEMBER 2008

1. CHAIRMAN'S STATEMENT

Financial Highlights

Shareholders will be well aware of the continuing extremely difficult financial and economic environment. The twelve months to 30 September 2008 covered a period of extraordinary events in financial markets. Famous investment banks disappeared from Wall Street, banks were nationalised and, globally, governments and central banks had to rescue the banking system. Comparisons have been drawn to previous recessions in the early 80s and 90s or to the banking and oil price crisis of the mid 1970s.

The UK stock market fell by 25.1% in the year under review and 30% from the peak in October 2007. These numbers alone cannot convey the scale of the volatility and uncertainty which has assailed both equity and corporate bond investors during the year.

After the publication of the Company's interim results, news-flow and sentiment worsened and this has had a detrimental impact on the value of the Company's assets. As the Company has a geared structure, the impact of falling markets has been exacerbated in net asset value terms. However, the dividend generation of the portfolio held up during the period.

Performance

I am sorry to report a very disappointing year for performance. Asset allocation, including our exposure to smaller companies, and stock selection were the main contributors to the problem, but gearing exacerbated it. Steps were taken during the year to reduce the impact of gearing but this proved difficult in the prevailing conditions. The volatility has not been confined to equities, with corporate bonds and preference shares also producing negative returns. For the year to end September, the total return on net assets was -36.6% compared with the FTSE All Share index total return of -22.3%. Over the same period, the share price total return was -37.8%.

Portfolio Profile and Gearing

The distribution of assets shows that 104.6% of net assets were invested in equities at 30 September 2008, a small reduction from the position as at 30 September 2007. Falling asset values resulted in total gearing at the period end rising from 149% to 164.7%. The Company has maintained its zero coupon finance but has raised cash levels within the portfolio as it has been obliged to increase the proportion of the Company's assets pledged as collateral in support of this form of finance. The Company now has cash lodged, in addition to bonds and equities. Current assets had risen to 28% at the period end. We anticipate paying down the December 2008 ZCF tranche at its maturity cost of approximately £5.4 million.

AIC/JP Morgan Claverhouse VAT test Case

We are making progress in our discussions with the Manager and believe we will shortly be in a position to recognise an asset in respect of the VAT which has been charged since 2001.

Dividends

As we reported at the interim results, the revenue account remained healthy and this enabled the Board to increase the first three interim dividend payments by 3% from 3.315p to 3.414p in total. The fourth and final dividend, which was paid on 31 October 2008, was maintained at 1.8865p per share. Taken together, the total annual distribution was 5.3005p per share, an increase of 1.9% over last year. Based on the share price as at 30 September 2008, the dividend yield was 10%, significantly higher than the yield on the benchmark of 4.6% as at that date.

The Manager monitors the revenue account closely and adjusts forecasts to reflect the most up to date information on dividends from investee companies. Shareholders will be aware that there is considerable uncertainty in particular over dividend payments from UK Banks, an important source of revenue for many equity income trusts. Additionally, as the economy moves into recession, dividend cuts are likely to affect a greater number of sectors. The Board is aware of how important the yield is to shareholders and is closely monitoring the situation. However, it is also very important to be prudent about the level of payout given the deteriorating economic environment and the Company's geared structure.

At this early stage of the financial year, the Board anticipates being in a position to pay first and second interim dividends of at least 0.75p per share (1.138pps - 2008) for the year ending 30 September 2009, subject to market conditions and in the absence of unforeseen circumstances. The quantum of the third and fourth dividends for the current year will be dependent on the dividends of investee companies and, probably of more significance, the longer term strategy and gearing of the Company, to which we refer below.

Future of the Company

As noted above, recent market volatility and recession in the UK have significantly eroded the Company's net assets and reduced the prospects for corporate earnings in the Company's portfolio. In addition, market volatility has significantly increased the structural risk of the Company's zero coupon financing. There is therefore significant uncertainty as to the ability of the Company to maintain its current dividend or the Company's financing in its current form after the current financing obligations have expired. As noted within the Directors' Report and note 1 to the accounts, your Board is satisfied that the going concern basis of accounting continues to be appropriate.

The Company's articles of association oblige the Board to put to shareholders, at this year's AGM and each fifth AGM thereafter, an ordinary resolution to resolve that the Company should continue as an investment trust. In the event that such resolution is not passed, the Directors are obliged to convene an extraordinary general meeting to be held within four months after the AGM at which a special resolution is to be proposed to require the Company to be wound up voluntarily or to approve a unitisation of the Company.

However, the Board is of the view that liquidating the Company's portfolio and repaying the zero coupon finance early in the current market environment, would be detrimental to shareholders.

The Directors are of the view that it is in shareholders' best interests to reconsider the future of the Company once the wider economic situation becomes clearer and current market volatility has eased. They will continue to consult with advisors with the objective of developing a suitable and sustainable strategy for the longer term.

The Directors, who have been so advised by Dickson Minto W.S. consider Resolution 7 to be proposed at the Annual General Meeting is in the best interests of shareholders as a whole and are therefore unanimously recommending that shareholders vote in favour of the continuation vote at this year's AGM but with the important commitment that, if the continuation vote is passed at this year's AGM, the Directors undertake to put to shareholders, at or prior to the next AGM, an ordinary resolution to approve the continuation of the Company as an investment trust. If this continuation vote is not passed, the Directors will convene an extraordinary general meeting to be held within four months after the date of the continuation vote at which a special resolution will be proposed to require the Company to be wound up voluntarily or to approve proposals which will provide shareholders with an opportunity to realise their investment.

Outlook

Since the year end, stock market volatility has remained high and in October, the FTSE All Share index declined by a further 12%. However, the month featured important government and central bank initiatives including the part nationalisation of leading British banks and a cut in UK interest rates of 0.5% to 4.5%. The more encouraging sign for investors is that the LIBOR rate has started to decline as confidence slowly returns to the banking system.

The impact of the financial crisis is now hitting the real economy and is evident in slower consumer spending, higher unemployment and contracting activity in the manufacturing sector. Consensus UK forecasts for GDP in 2009 are around 0.5% but the reality is that the economy has already entered recession. As a result, we expect an increasing number of profits downgrades and dividend cuts from the corporate sector over the next few months. To an extent, the stock market has already corrected to a level that discounts a lot of the forthcoming troubles. On the positive side, November witnessed a deep cut in UK interest rates by another 1.5% to 3.0% and easing inflationary pressures will help hard pressed consumers and companies.

At times like these, it is vital to remain focused on the most important task of investing in companies which are well managed with sustainable businesses and strong balance sheets. Meanwhile, the Board and its advisors will continue to address the development of an appropriate longer term strategy for the Company.

R G Hanna

Chairman

18 November 2008

2. MANAGER'S REVIEW

Economic and Stock Market Background

The twelve months to 30 September 2008 was a period of unprecedented financial turmoil which started in the US sub prime mortgage market in 2007 and spread out causing a global banking crisis. The problems unfolded relatively slowly at the start, with asset write downs at major banks, but accelerated in 2008 with the loss of some of Wall Street's most famous investment firms and US$700bn of emergency funding for the US banking system.

In the UK, the first casualty to succumb to financial difficulties was Northern Rock. Since then Bradford & Bingley has been part- nationalised, HBOS is in merger negotiations with Lloyds TSB and Alliance & Leicester has been acquired by Santander. Since the Company's year end, various rescue packages are being implemented by governments and central banks to shore up the financial system and help markets to repair themselves.

In the year to 30 September 2008, after five years of positive returns, the FTSE All Share index fell by 22.3% on a total return basis with the conditions even harder for smaller companies. Over the same period, the FTSE Small Cap index (ex investment trusts) declined by 38.4% in total return terms. Even UK corporate bonds recorded a negative total return of -7.5%.The only asset classes which delivered positive returns were UK government bonds, up 6.8% and cash at 5.5%.

Portfolio Strategy

During the year, the Manager substantially reorganised the equity portfolio, selling the smaller, less liquid holdings and those companies with leveraged balance sheets. At the same time, the cash balance was increased to reduce overall gearing and meet higher collateral requirements. Part of the cash balance will be used in December to redeem £5.4m of the zero coupon finance which matures that month.

Equity Portfolio

During the period under review, the equity portfolio underperformed its benchmark with a total return of -29.4%. The underperformance versus the FTSE All Share index was caused by overweight positions in some consumer facing sectors and stocks. As a number of these investments were also in smaller companies, which fared worse than their FTSE100 peers, the impact on performance was greater.

During the year, investments in the Oil & Gas and Mining sectors were reduced following a period of buoyant energy and commodity price inflation. In addition, two of the holdings in Oil Services, Abbot Group and Expro International, were the subjects of cash bids during the year. In their place, a new holding of Amec, the oil engineering and services group, was introduced. Overall, these transactions reduced the exposure to Oil & Gas from 14.0% to 9.5% and in Basic Materials from 10.9% to 3.7%.

The developing credit crisis took its greatest toll on the Financials sectors. The portfolio started the year with an overweight position in Financials compared to the index but within that the portfolio was underweight to Banks. During the year, we reduced this exposure further with the sale of Alliance & Leicester and HBOS. However, we took up the rights in Royal Bank of Scotland. Investments in Life Insurance decreased following a cash bid from Pearl Assurance for our holding in Resolution. In Real Estate, the holding in AIM listed Puma Brandenburg was sold. The only area where investments were increased was General Financials, where in addition to taking up our rights in Intermediate Capital, a new holding was established in Close Brothers, a group that includes specialist lending, asset management and Winterflood Securities among its activities.

Outside of Financials, the credit crisis hit the house builders, housing related activities and the retailers. The weakness in these sectors created opportunities to make some changes and invest selectively on historically low valuations. We added a new holding in Wolseley, the builders' merchant with operations in the UK, US and Europe. In General Retailers, DSG, Pendragon and Topps Tiles were sold and new investments made in better quality retailers, Mothercare and Marks & Spencer. A holding was also initiated in Tesco, the UK's premier Food Retailer.

The Travel & Leisure sector was also impacted by the credit crisis and declined by 35% over the year under review. In particular, the demise of large private equity deals adversely affected companies with property assets and consequently, we sold Enterprise Inns and Intercontinental Hotels. In their place, two new holdings were started in Whitbread and Millennium & Copthorne Hotels.

In previous years, the Company had no exposure to pharmaceuticals but during the recent market setback, we were able to add a new holding in AstraZeneca. Telecoms investments were increased from very underweight, at only 0.9% of the portfolio to 4.6%, by reinstating holdings in Vodafone and BT on significantly better dividend yields and lower valuations. Some additions were also made to investments in the Utility sectors which offer more recession resistant earnings and dividends.

Preference Shares and Corporate Bonds

The preference share market tends to be dominated by issues from financial companies and as it is also quite a small market, the limited liquidity exacerbated negative sentiment. Over the twelve months to 30 September 2008, the Company's preference share holdings made a total return of -6.5%. There were no changes to the holdings during the year. Conditions in the preference market are beginning to improve and progress should follow the recovery in credit markets although it is likely to be a gradual process.

For the year under review, the total return on the corporate bond portfolio was -10% compared to the return on the iBoxx Sterling Corporates index of -7.5%. The negative return reflected the difficult conditions in UK credit markets, particularly for holdings exposed to the banking sector. During the year, we sold holdings in consumer facing businesses such as Next 5.25% 2013 and Carnival 7.125% 2012 and reinvested in better quality issues such as Deutsche Telecom 7.125% 2012. The holding in Ford Credit Canada was redeemed in December 2007. The corporate bond portfolio is an important source of revenue generation and is also used as part of the collateral to back the Company's zero coupon finance.

Aberdeen Asset Managers Limited

18 November 2008

3. RESULTS & DIVIDENDS

Financial Highlights
	2008	2007
Net asset value total return	- 36.6%	+ 7.4%
Share price total return	- 37.8%	- 1.0%
Benchmark total return	- 22.3%	+ 12.2%
Dividend per share	5.3005p	5.2015p
Dividend yield	10.0%	5.7%

Performance (total return)

	1 year ended	3 years ended	5 years ended
	30 September 2008	30 September 2008	30 September 2008
Share price	- 37.8%	- 23.7%	+ 16.0%
Net asset value per share	- 36.6%	- 16.8%	+ 34.8%
FTSE All-Share Index	- 22.3%	+ 0.0%	+ 44.5%

Cumulative Performance{A}


As at 30 September	1998	1999	2000	2001	2002	2003	2004 {A}	2005	2006	2007	2008
NAV	100.0	115.8	110.8	101.5	77.7	85.9	97.0	118.2	136.2	138.8	82.4
NAV total return{B}	100.0	120.2	119.8	116.0	94.7	114.8	142.5	186.1	227.5	244.2	154.8
Share price performance	100.0	124.3	116.3	118.8	95.8	106.7	110.5	138.9	162.8	153.1	88.7
Share price total return{B}	100.0	129.4	126.6	136.9	117.4	142.3	161.3	216.5	268.5	265.7	165.2
Benchmark performance	100.0	120.5	129.2	99.8	76.8	86.5	96.9	117.1	130.1	141.5	105.9
Benchmark total return{B}	100.0	123.6	135.3	107.2	84.9	99.1	114.7	143.2	164.3	184.3	143.3

{A} 2004 figures restated following the introduction if International Reporting Standards ('IFRS'). Figures for 2003 and earlier have not been restated. {B} Total return figures are based on reinvestment of net income.

	Rate per share	xd date	Record date	Payment date
First interim dividend	1.138p	9 January 2008	11 January 2008	31 January 2008
Second interim dividend	1.138p	9 April 2008	11 April 2008	30 April 2008
Third interim dividend	1.138p	9 July 2008	11 July 2008	31 July 2008
Fourth interim dividend	1.8865p	8 October 2008	10 October 2008	31 October 2008
2007/08	5.3005p

First interim dividend	0.6846p	22 November 2006	24 November 2006	31 January 2007
Second interim dividend	0.4204p	13 December 2006	15 December 2006	31 January 2007
Third interim dividend	1.1050p	11 April 2007	13 April 2007	30 April 2007
Fourth interim dividend	1.1050p	11 July 2007	13 July 2007	31 July 2007
Fifth interim dividend	1.8865p	10 October 2007	12 October 2007	31 October 2007
2006/07	5.2015p

Distribution of Assets

	Valuation at					Valuation at
	30 September				Appreciation/	30 September
	2007		Purchases	Sales	(depreciation)	2008
	£'000	%	£'000	£'000	£'000	£'000	%
Listed investments
Ordinary shares	122,306	106.3	37,503	(53,730)	(34,877)	71,202	104.6
Convertibles	2,194	1.9	-	-	(304)	1,890	2.8
Corporate bonds	35,339	30.7	6,771	(7,293)	(5,742)	29,075	42.7
Other fixed interest	11,576	10.1	-	-	(1,635)	9,941	14.6
	________	_____	________	________	________	_______	_____
	171,415	149.0	44,274	(61,023)	(42,558)	112,108	164.7
	________	_____	________	________	________	_______	_____
Other non current assets	31,862	27.7				21,715	31.9
Current assets	3,025	2.6				19,148	28.1
Current liabilities	(1,136)	(1.0)				(6,211)	(9.1)
Non current liabilities	(90,089)	(78.3)				(78,717)	(115.6)
	________	_____	________	________	________	_______	_____
Net assets	115,077	100.0				68,043	100.0
	________	_____	________	________	________	_______	_____
Net asset value per share	94.37p					56.04p
	________					________

4. BUSINESS REVIEW

Future of the Company

Recent market volatility and recession in the UK have significantly eroded the Company's net assets and reduced the prospects for corporate earnings in the Company's portfolio. In addition, market volatility has significantly increased the structural risk of the Company's zero coupon financing. There is therefore significant uncertainty as to the ability of the Company to maintain its current dividend or the Company's financing in its current form after the current financing obligations have expired. The Board has expressly reviewed the collateral required within the terms of the zero coupon financing arrangements, together with the potential impact of continued market volatility, and is satisfied that the Company's liabilities can be met as they fall due, for a period of at least one year from the date of this report.

However, the Board is of the view that liquidating the Company's portfolio and repaying the zero coupon finance early in the current market environment would be detrimental to shareholders. The Directors are of the view that it is in shareholders' best interests to reconsider the future of the Company once the wider economic situation is clearer and current market volatility has eased. They will continue to consult with advisors with the objective of developing a suitable and sustainable strategy for the longer term.

The Directors are therefore unanimously recommending that shareholders vote in favour of the continuation vote at this year's AGM but with the important commitment that, if the continuation vote is passed at this year's AGM, the Directors undertake to put to shareholders, at or prior to the next AGM, an ordinary resolution to approve the continuation of the Company as an investment trust. If this continuation vote is not passed, the Directors will convene an extraordinary general meeting to be held within four months after the date of the continuation vote at which a special resolution will be proposed to require the Company to be wound up voluntarily or to approve proposals which would result in the shareholders receiving, in lieu of their shares, units in a unit trust scheme.

Status of the Company

The Company, which was incorporated in 1988, has received approval as an investment trust by the Inland Revenue for all the periods up to and including 30 September 2007 and has since conducted its affairs so as to enable it to retain such approved status. It is a member of the Association of Investment Companies. The Company is an investment company within the meaning of Section 833 of the Companies Act 2006.

Activities

The Company is an investment trust. Its subsidiary undertaking, G.I.T. Securities Limited, operates as an investment dealing company. The objective of the Company is to provide shareholders with a high level of income and to obtain growth in both income and capital over the longer term.

Results and Dividends

Details of the Company's results are shown in the Financial Highlights. Dividends declared and paid in the year amounted to 5.3005p per share (2007 - 5.2015p). The fourth interim dividend of 1.8865p per share announced on 4 October 2008 was unchanged (from the fifth interim dividend for 2007) and will be accounted for in the financial year ending on 30 September 2009. As detailed in Note 8, under International Financial Reporting Standards (IFRS) the dividends accounted for in the 2008 results amount to 5.3005p per share (£6,457,000) compared to 5.125p per share (£5,513,000) accounted for in the year ended 30 September 2007.

Share Capital

At the annual general meeting held on 19 December 2007, shareholders approved the renewal of the authority permitting the Company to make market purchases of its own Ordinary shares. During the year ended 30 September 2008, 528,985 Ordinary shares of 25p each (0.43% of the issued share capital at 30 September 2007) were bought back at an average price of 64p per share to be held in treasury. The issued share capital at 30 September 2008 and as at the date of this report consisted of 121,413,532 Ordinary shares of 25p each and 528,985 Ordinary shares held in treasury.

Objective

The principal objective of the Company is to provide shareholders with a high level of income, and to obtain growth in both income and capital over the longer term

Principal Risks and Uncertainties

The principal risks facing the Company relate to the Company's investment activities and include market risk (comprising interest rate risk and other price risk), liquidity risk and credit risk. An explanation of these risks and how they are managed is contained below and in note 19.

Investment Policy

The Company invests in equities, bonds and preference shares. Investment in corporate bonds and preference shares is primarily to enhance the income generation of the Company. The investment risk within the portfolio is managed by investing in different categories of investments and by the Manager adhering to various guidelines set by the Board.

Gearing is used with the intention of enhancing long-term returns. The Company's gearing is in the form of zero coupon finance. This is a set of put and call options on the FTSE 100 which generate a premium that is invested mainly in corporate bonds. The risk of the zero coupon finance is managed by the structure of the put and call options. The structure is such that the Company knows at the outset of the arrangement exactly how much it will require to repay when the options mature irrespective of the level of the FTSE 100. The risk of this gearing is also managed by investing in corporate bonds, the vast majority of which are of an investment grade nature, and preference shares of large financial institutions.

The Company also writes covered put and call options and this traded options strategy is used by the Manager to assist in enacting equity portfolio changes, while taking account of ongoing volatility. The risk associated with the traded options strategy is managed by the Manager adhering to various guidelines set by the Board.

Investment Risk

The Directors are responsible for determining the investment policy and the investment objectives of the Company, while the day-to-day management of the Company's assets has been delegated to the Manager. The Manager invests in a portfolio of equities, corporate bonds and preference shares, following their investment processes. The equity investment process is active and bottom-up, based on a disciplined evaluation of companies through direct visits by fund managers. Stock selection is the major source of added value, concentrating on quality first, then value. Top-down investment factors are secondary in the equity portfolio construction, with diversification rather than formal controls guiding stock and sector weights. However the exposure to equities is limited by the investment guidelines drawn up by the Board in conjunction with the Manager.

These include:

- Maximum equity gearing of 115% of Net Asset Value;

- Maximum 5% of investee companies' ordinary shares;

- Maximum 7.5% of Glasgow Income Trust's net assets invested in the securities of one company;

- No unquoted investments.

The fixed income investment process is an active investment style which identifies value between individual securities. This is achieved by combining bottom-up security selection with a top-down investment approach. Again the exposure to fixed income is limited by the investment guidelines drawn up by the Board in conjunction with the Manager.

These include:

- No holding in single fixed income security to exceed 5% of the total bond issue of the investee company;

- No single bond holding to exceed 10% of the total bond portfolio.

The traded options strategy guidelines drawn up by the Board in conjunction with the Manager include:

- Options written to be covered by stock held or net current assets/borrowing facilities;

- Call options not to be written over more than 100% of a stock holding;

- Call options not to be written on more than 15% of net assets;

- Put options not to be written on more than 15% of net assets.

Analysis of Portfolio

A comprehensive analysis of the portfolio is given in the Manager's Review and the distribution of assets and liabilities.

Manager and Company Secretary

Investment management services are provided to the Company by Aberdeen Asset Managers Limited. Company secretarial, accounting and administrative services are provided by Aberdeen Asset Management PLC. The contract was novated to Aberdeen effective 31 January 2008 and the fee is at a rate of 0.75% of shareholders' funds. The contract may be terminated by either the Company or the Manager on the expiry of 12 months' written notice.

Investment Management Agreement

The key terms of the Investment Management Agreement and specifically the fee charged by Aberdeen in the financial year and how it is calculated are set out in note 3 to the financial statements. The Board believes the fee previously charged by GIM and now Aberdeen is competitive with reference to other investment trusts with a similar investment mandate and is priced appropriately given the level of service provided by Aberdeen.

The Board considers the continuing appointment of the Manager to be in the best interests of the shareholders at this time.

By Order of the Board

Aberdeen Asset Management PLC

Secretaries

18 November 2008

5. STATEMENT OF DIRECTORS' RESPONSIBILITIES

The Directors are responsible for preparing the Report & Accounts including the group and parent company financial statements, in accordance with applicable law and regulations. Company law requires the Directors to prepare group and parent company financial statements for each financial year. Under the law they are required to prepare the group financial statements in accordance with IFRSs as adopted by the EU and have elected to prepare the parent company financial statements on the same basis.

The group and parent company financial statements are required by law and IFRSs, as adopted by the EU, to present fairly the financial position of the group and the parent company and performance of the group; the Companies Act 1985 provides in relation to such financial statements that references in the relevant part of that Act to financial statements giving a true and fair view are references to their achieving a fair presentation.

In preparing each of the group and parent company 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 they have been prepared in accordance with IFRSs as adopted by the EU subject to
any material departures disclosed and explained in the Notes to the Financial Statements; and

- prepare the financial statements on the going concern basis unless it is inappropriate to presume that
the group and the parent company will continue in business.

The Directors confirm that the financial statements comply with these requirements.

The Directors are responsible for keeping proper accounting records that disclose with reasonable accuracy at any time the financial position of the parent company and enable them to ensure that its financial statements comply with the Companies Act 1985. They have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the group 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 Corporate Governance Statement that comply with that law and those regulations.

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.

Each of the Directors confirms that to the best of their knowledge:

- the group financial statements, prepared in accordance with IFRSs, give a true and fair view of
the assets, liabilities, financial position and profit or loss of the Group; and

- the Directors' Report includes a fair review of the development and performance of the business and the position
of the issuer, together with a description of the principal risks and uncertainties that the Company faces.

For and on behalf of Glasgow Income Trust plc

I .M. Boyd

Chairman of the Audit Committee

18 November 2008

GLASGOW INCOME TRUST PLC

GROUP INCOME STATEMENT

		Year ended			Year ended
		30 September 2008			30 September 2007
		Revenue	Capital	Total	Revenue	Capital	Total
	Note	£'000	£'000	£'000	£'000	£'000	£'000
(Losses)/gains on investments held at fair value	10		(42,684)	(42,684)	-	2,645	2,645

Revenue	2
Dividend income		4,540	-	4,540	4,818	-	4,818
Interest income from investments		2,502	-	2,502	2,169	-	2,169
Deposit interest		451	-	451	119	-	119
AAA money market funds interest		145	-	145	-	-	-
Traded options		673	-	673	690	-	690
Other income		58	25	83	1	-	1
(Losses)/gains of dealing subsidiary		(26)	-	(26)	(52)	-	(52)
		_______	_______	_______	_______	_______	_______
		8,343	(42,659)	(34,316)	7,745	2,645	10,390
Expenses		_______	_______	_______	_______	_______	_______
Investment management fees	3	(351)	(351)	(702)	(519)	(519)	(1,038)
Other administrative expenses	4	(287)	-	(287)	(227)	-	(227)
Finance costs of borrowing	5	(11)	(11)	(22)	(79)	(79)	(158)
Zero coupon finance costs	14	-	(4,108)	(4,108)	-	(2,455)	(2,455)
		_______	_______	_______	_______	_______	_______
Profit/(loss) before taxation		7,694	(47,129)	(39,435)	6,920	(408)	6,512
Taxation	6	(904)	105	(799)	(589)	179	(410)
		_______	_______	_______	_______	_______	_______
Profit/(loss) attributable to equity holders of the Company		6,791	(47,024)	(40,234)	6,331	(229)	6,102
		_______	_______	_______	_______	_______	_______
Earnings per Ordinary share (pence)	9	5.58	(38.62)	(33.04)	5.43	(0.20)	5.24
		_______	_______	_______	_______	_______	_______
The total column of this statement represents the Group's Income Statement, prepared in accordance with IFRS. The supplementary revenue return and capital columns are both prepared as explained in the accounting policies. All items in the above statement derive from continuing operations. All income and losses are attributable to the equity holders of the parent company. There are no minority interests. All items in the above statement derive from continuing operations. The accompanying notes are an integral part of these financial statements.

GLASGOW INCOME TRUST PLC

Balance Sheets

		Group		Company
		As at	As at	As at	As at
		30 September	30 September	30 September	30 September
		2008	2007	2008	2007
	Note	£'000	£'000	£'000	£'000
Non-current assets
Ordinary shares		71,202	122,306	71,202	122,306
Convertibles		1,890	2,194	1,890	2,194
Corporate bonds		29,075	35,339	29,075	35,339
Other fixed interest		9,941	11,576	9,941	11,576
		_________	_________	_________	_________
Investments held at fair value through profit or loss	10	112,108	171,415	112,108	171,415
Zero coupon finance derivatives at fair value	14	21,715	31,862	21,715	31,862
Subsidiary	11	-	-	5	5
		_________	_________	_________	_________
		133,823	203,277	133,828	203,282
		_________	_________	_________	_________
Current assets
Trade and other receivables		298	12	298	478
Accrued income and prepayments		1,755	2,202	1,755	2,202
Investments of dealing subsidiary		-	673	-	-
AAA money market funds		6,338		6,338	-
Cash and short term deposits		10,730	138	10,730	138
Zero coupon finance derivatives at fair value	14	27	-	27	-
		_________	_________	_________	_________
Total current assets	12	19,148	3,025	19,148	2,818
		_________	_________	_________	_________
Total assets		152,971	206,302	152,976	206,100

Current liabilities
Trade and other payables		(851)	(714)	(1,075)	(756)
Short-term borrowings		-	(422)	-	(422)
Zero coupon finance derivatives at fair value	14	(5,360)	-	(5,360)	-
		_________	_________	_________	_________
Total current liabilities	13	(6,211)	(1,136)	(6,435)	(1,178)
		_________	_________	_________	_________
Non-current liabilities
Zero coupon finance derivatives at fair value	14	(78,717)	(90,089)	(78,717)	(90,089)
		_________	_________	_________	_________
Total liabilities		(84,928)	(91,225)	(85,152)	(91,267)
		_________	_________	_________	_________
Net assets		68,043	115,077	67,824	114,833
		_________	_________	_________	_________
Issued capital and reserves attributable to equity holders of the parent
Called-up share capital	15	30,486	30,486	30,486	30,486
Share premium account	16	53,204	53,205	53,204	53,205
Special reserve	17	4,658	5,000	4,658	5,000
Capital reserve	18	(24,257)	22,767	(24,257)	22,767
Revenue reserve	18	3,952	3,619	3,733	3,375
		_________	_________	_________	_________
Equity shareholders' funds		68,043	115,077	67,824	114,833
		_________	_________	_________	_________
Net asset value per Ordinary share (pence)	9	56.04	94.37
		_________	_________	_________	_________

GLASGOW INCOME TRUST PLC

Consolidated Statement of Changes in Equity

For year ended 30 September 2008
		Share
	Share	premium	Special	Capital	Revenue
	capital	account	reserve	reserve	reserve	Total
	£'000	£'000	£'000	£'000	£'000	£'000
Balance at 30 September 2007	30,486	53,205	5,000	22,767	3,619	115,077
(Loss) / profit after tax	-	-	-	(47,024)	6,791	(40,233)
Equity dividends	-	-	-	-	(6,457)	(6,457)
Share issue expense	-	(1)	-	-	-	(1)
Shares bought back	-	-	(342)	-	-	(342)
	______	_______	_______	________	______	_______
Balance at 30 September 2008	30,486	53,204	4,658	(24,257)	3,952	68,043
	______	_______	_______	________	______	_______
For year ended 30 September 2007

Balance at 30 September 2006	23,496	32,715	5,000	22,996	2,801	87,008
Profit after tax	-	-	-	(229)	6,331	6,102
Equity dividends	-	-	-	-	(5,513)	(5,513)
Issue of share capital	6,990	20,490	-	-	-	27,480
	______	_______	_______	________	______	_______
Balance at 30 September 2007	30,486	53,205	5,000	22,767	3,619	115,077
	______	_______	_______	________	______	_______
Company Statement of Changes in Equity

Year ended 30 September 2008
		Share
	Share	premium	Special	Capital	Revenue
	capital	account	reserve	reserve	reserve	Total
	£'000	£'000	£'000	£'000	£'000	£'000
Balance at 30 September 2007	30,486	53,205	5,000	22,767	3,375	114,833
(Loss) / profit after tax	-	-	-	(47,024)	6,816	(40,208)
Equity dividends	-	-	-	-	(6,457)	(6,457)
Share issue expense	-	(1)	-	-	-	(1)
Shares bought back	-	-	(342)	-	-	(342)
	______	_______	_______	________	______	_______
Balance at 30 September 2008	30,486	53,204	4,658	(24,257)	3,733	67,824
	______	_______	_______	________	______	_______
For year ended 30 September 2007

Balance at 30 September 2006	23,496	32,715	5,000	22,996	2,548	86,755
Profit after tax	-	-	-	(229)	6,340	6,111
Equity dividends	-	-	-	-	(5,513)	(5,513)
Issue of share capital	6,990	20,490	-	-	-	27,480
	______	_______	_______	________	______	_______
Balance at 30 September 2007	30,486	53,205	5,000	22,767	3,375	114,833
	______	_______	_______	________	______	_______

GLASGOW INCOME TRUST PLC

Group and Company Cash Flow Statement

	Year ended		Year ended
	30 September 2008		30 September 2007
	£'000	£'000	£'000	£'000
Cash flows from operating activities
Investment income received	7,552		6,776
Deposit interest received	547		120
Dealing subsidiary receipts	673		-
Other cash receipts	591		834
Administrative expenses paid	(1,111)		(1,213)
	_________		_________
Cash generated from operations		8,252		6,517
Interest paid		(22)		(151)
Taxation		(625)		(426)
		_________		_________
Net cash inflows from operating activities		7,605		5,940

Cash flows from investing activities
Purchases of investments	(44,163)		(160,450)
Sales of investments	60,710		117,443
Zero coupon finance	-		15,126
	_________		_________
Net cash inflow/(outflow) from investing activities		16,547		(27,881)
		_________		_________
Net cash inflow/(outflow) before financing		24,152		(21,941)

Financing activities
Proceeds of issue of shares	(1)		27,468
Cost of share buy backs	(342)		-
Dividends paid	(6,457)		(5,513)
	_________		_________
Net cash (outflow)/inflow from financing activities		(6,800)		21,955
		_________		_________
Net cash inflow before management of liquid resources		17,352		14

Management of liquid resources
Purchase of AAA money market funds	(18,843)		-
Sale of AAA money market funds	12,505		-
	_________		_________
Net cash outflow from management of liquid resources		(6,338)		-
		_________		_________
Net increase/(decrease) in cash and short term deposits		11,014		14
Cash and cash equivalents at the start of the year		(284)		(298)
		_________		_________
Cash and short term deposits at the end of the year		10,730		(284)
		_________		_________
Cash and short term deposits comprise:
Cash and short term deposits		10,730		138
Short term borrowings		-		(422)
		_________		_________
		10,730		(284)
		_________		_________

GLASGOW INCOME TRUST PLC

YEAR ENDED 30 SEPTEMBER 2008

Accounting policies

(a) Basis of accounting

The financial statements of the Group have been prepared in accordance with International Financial Reporting Standards (IFRS) which comprise standards and interpretations approved by the International Accounting Standards Board ("IASB"), and International Accounting Standards and Standing Interpretations Committee interpretations approved by the International Accounting Standards Committee ("IASC") that remain in effect, and to the extent that they have been adopted by the European Union. The principal accounting policies adopted are set out below. These policies have been applied consistently throughout the year. Where presentational guidance set out in the Statement of Recommended Practice ("SORP") for investment trusts issued by the Association of Investment Companies in December 2005 is consistent with the requirements of IFRS, the Directors have sought to prepare the financial statements on a basis compliant with the recommendations of the SORP.

In order to better reflect the activities of an investment trust company and in accordance with guidance issued by the AIC, supplementary information which analyses the income statement between items of a revenue and capital nature has been presented alongside the income statement. In accordance with the Company's status as a UK investment company under section 833-834 of the Companies Act 2006, net capital returns may not be distributed by way of dividend. Additionally, the net revenue of the Company is the measure the directors believe appropriate in assessing the Group's compliance with certain requirements set out in section 842 of the Income and Corporation Taxes Act 1988.

The financial statements have been prepared on a going concern basis, which assumes that the Company will continue in operational existence for the foreseeable future and be able to meet its liabilities as they fall due. There are uncertainties that the Directors have had to consider in deciding to prepare the financial statements on this basis, which are set out below.

The Company's Articles of Association provide that the Company must, at this year's AGM and each fifth AGM thereafter, put to shareholders an ordinary resolution to resolve that the Company should continue as an investment trust for a further five years. In the event that such a resolution is not passed, the Directors are obliged to convene an extraordinary general meeting to be held within four months after the AGM at which a special resolution is to be proposed to require the Company to be wound up voluntarily or to approve proposals which would result in the shareholders receiving, in lieu of their shares, units in a unit trust scheme.

If the continuation vote is passed at this year's AGM, the Directors have undertaken to put to shareholders, at the next AGM, another continuation vote. This continuation vote will be proposed as an ordinary resolution and, if it is not passed, the Directors will convene an extraordinary general meeting to be held within four months after the date of the continuation vote at which a special resolution will be proposed to require the Company to be wound up voluntarily or to approve proposals which will provide shareholders with an opportunity to realise their investment.

The validity of the going concern basis depends on the continuation vote at the AGM being passed by shareholders. The primary purpose of the continuation vote is to determine whether shareholders are satisfied to continue the operations of the Company, or whether shareholder interests would be better served by another means. There is no guarantee that shareholders will pass the continuation vote at the AGM. Other than this consideration, the Directors, having considered market volatility together with the Company's future cash flows and collateral requirements, are satisfied that the Company continues to be a going concern. Accordingly, the Directors believe that it is appropriate to prepare the financial statements on a going concern basis.

If the continuation vote is not passed at the AGM in 2008 or again at the next AGM, adjustments would be required to reduce the Balance Sheet values to their recoverable amounts, reclassify non-current assets as current, and provide for further liabilities that might arise including liquidation costs estimated at £250,000.

The Company has adopted the following standards and interpretations during the year 2007/08:

- IFRS 7 Financial Instruments: Disclosures

- IAS 1 Amendment - Presentation of Financial Statements

These standards primarily concern the disclosure of Capital, Financial Instruments and risks. These disclosures can be found primarily in note 19.

At the date of authorisation of these financial statements, the following Standards and Interpretations were in issue but not yet effective:

- IAS 1 Presentation of Financial Statements - Comprehensive revision including requiring a statement of comprehensive income (effective for annual periods beginning on or after 1 January 2008)

- IAS 23 Borrowing Costs - Amendment requiring that all borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying assets form part of the cost of the asset (effective for annual periods beginning on or after 1 January 2009)

- IAS 27 Consolidated and Separate Financial Statements - Consequential amendments arising to IFRS 3 (effective for annual periods beginning on or after 1 July 2010)

The Directors do not anticipate that the adoption of these Standards and Interpretations in future periods will materially impact the Group's financial results in the period of initial application although there will be revised presentations to the Primary Financial Statements and additional disclosures. Any future business combinations will be affected. The Group intends to adopt the standards in the reporting period when they become effective.

(b) Consolidation

The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company (its subsidiaries) made up to 30 September each year. Control is achieved where the Company has the power to govern the financial and operating policies of an investee entity so as to obtain benefits from its activities. All intra-group transactions, balances, income and expenses are eliminated on consolidation. The Company has availed itself of the relief from showing a revenue account for the parent company, granted under section 408 of the Companies Act 2006.

Investments are recognised or derecognised on the trade date where a purchase or sale is under a contract whose terms require delivery within the timeframe established by the market concerned, and are initially measured at fair value.

The Group's investments are defined by IFRS as investments designated as fair value through profit or loss. All investments are designated upon initial recognition as held at fair value and are measured at subsequent reporting dates at their fair value, which is the bid price as at close of business on the balance sheet date.

Gains and losses arising from the changes in fair value are included in net profit or loss for the period as a capital item. Expenses which are incidental to the acquisition and disposal of investments are treated as capital costs.

(d) Investments held in dealing subsidiary

Investments held are shown as current assets at fair value. Realised and unrealised gains and losses arising on these investments are dealt with in the revenue column of the Consolidated Income Statement. In respect of the Company the subsidiary is held at cost with any amounts owed to or from the subsidiary included in the relevant balance sheet heading.

(e) Zero coupon finance

The Company has in place medium-term funding in the form of zero coupon finance through a series of option transactions on the FTSE 100 Index. The option contracts are accounted for as separate derivative contracts and therefore are shown on the balance sheet at their fair value. Changes in the fair value of the option contracts are charged or credited to capital and presented as a capital item in the income statement.

(f) Money Market Interest

The AAA Money Market funds are used by the Company to provide addditional short term liquidity. As they are not listed on a recognised exchange and due to their short term nature, they are recognised in the financial statements at cost and as a current asset.

(g) Income

Dividend income from equity investments including preference shares which have a discretionary dividend is recognised when the shareholders' rights to receive payment has been established, normally the ex-dividend date.

Interest from debt securities is accounted for on an effective yield basis. Any write off of the premium or discount on acquisition as a result of using this basis is allocated as a revenue item in the Income Statement. Interest from deposits is dealt with on an accrual basis.

Traded option contracts are restricted to writing out of the money options with a view to generating income. Premiums received on traded option contracts are recognised as income evenly over the period from the date they are written to the date when they expire or are exercised or assigned. Gains and losses on the underlying shares acquired or disposed as a result of options exercised are included in the capital account.

Underwriting commission is taken to revenue, unless any shares underwritten are required to be taken up, in which case the proportionate commission received is deducted from the cost of the investment.

(h) Expenses

All expenses are accounted for on an accruals basis. In respect of the analysis between revenue and capital items presented within the income statement, all expenses have been presented as revenue items except those where a connection with the maintenance or enhancement of the value of the investments held can be demonstrated. Accordingly the investment management fee and finance costs have been allocated 50% to revenue and 50% to capital, in order to reflect the directors' expected long-term view of the nature of the investment returns of the Company.

(i) Bank borrowings

Interest-bearing bank loans and overdrafts are recorded at the proceeds received. Finance charges, including premiums payable on settlement or redemption and direct issue costs, are accounted for on an accruals basis in the income statement using the effective interest rate method.

(j) Taxation

The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Group's liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the balance sheet date.

The allocation method used to calculate tax relief on expenses presented against capital returns is the 'marginal basis'. Under this basis if taxable income is not capable of being offset entirely by expenses presented in revenue then unutilised expenses arising in capital will be set against income with an amount based on current tax rates charged against income and credited to capital.

Deferred tax is provided in full on timing differences which result in an obligation at the balance sheet date to pay more tax, or a right to pay less tax, at a future date at rates expected to apply when they crystallise, based on current tax rates and law. Timing differences arise from the inclusion of items of income and expenditure in taxation computations in periods different from those in which they are included in financial statements. Deferred tax assets are recognised to the extent that it is regarded as more likely than not that they will be recovered.

		2008		2007
2.	Income	£'000	£'000	£'000	£'000
	Income from listed investments:
	Dividend income		4,540		4,818
	Interest income from investments and overseas interest		2,502		2,169
	Stock dividend		41		-
	Underwriting income		17		-
	Unclaimed dividends		-		1
			_______		_______
			7,100		6,988

	Other income from investment activity
	Deposit interest		451		119
	AAA money market funds interest		145		-
	Traded option premiums		673		690
	Sales of investments in dealing subsidiary	647		-
	Cost of sales in dealing subsidiary	(673)		-
	Increase/(decrease) in fair value of investments in dealing subsidiary	-		(52)
		_______		_______
			(26)		(52)
			_______		_______
			1,243		757
			_______		_______
	Total income		8,343		7,745
			_______		_______
	In addition to the above which has been reported as revenue, there is £25,000 (2007 - £nil) of income reported as capital. This was received by the fund in the form of an incentive payment for early instruction on a proposed amendment to the terms of a preference share holding.

3.	Secretarial and Management Fee For the year ended 30 September 2008 management and secretarial services were provided by Aberdeen Asset Managers Limited. The fee is at an annual rate, calculated monthly and paid quarterly. The fee is allocated 50% to capital and 50% to revenue. The fee for the year ended 30 September 2008 was £702,000 exclusive of VAT (2007 - £1,038,000 inclusive of VAT). Note 21 provides further information on the current status of VAT charged on management fees and its implications for the Company

		2008			2007
		Revenue	Capital	Total	Revenue	Capital	Total
		£'000	£'000	£'000	£'000	£'000	£'000
	Investment management fee	351	351	702	519	519	1,038
		_______	_______	_______	_______	_______	_______

			2008	2007
4.	Administrative expenses		£'000	£'000
	Directors' remuneration - fees as Directors		61	46
	Fees payable to auditors and associates:
	- fees payable to the Company's auditors for the audit of the annual accounts		17	14
	- fees payable to the Company's auditors and its associates for other services:
		- taxation services	-	5
		- other services pursuant to legislation	-	7
	Marketing contribution		75	-
	Other management expenses		134	155
			_______	_______
			287	227
			_______	_______
	The Company had no employees during the year (2007 - nil). No pension contributions were paid for Directors (2007 - £nil).

		2008			2007
		Revenue	Capital	Total	Revenue	Capital	Total
5.	Finance costs and borrowings	£'000	£'000	£'000	£'000	£'000	£'000
	Bank loans and overdrafts repayable within one year	11	11	22	79	79	158
		_______	_______	_______	_______	_______	_______

		2008				2007
		Revenue		Capital	Total	Revenue	Capital	Total
6.	Taxation	£'000		£'000	£'000	£'000	£'000	£'000
	Notional corporation tax at 29% (2007 - 30%)	105		(105)	-	179	(179)	-
	Corporation tax at 29% (2007 - 30%)	799		-	799	410	-	410
		_______		_______	_______	_______	_______	_______
		904		(105)	799	589	(179)	410
		_______		_______	_______	_______	_______	_______
	All management expenses arising on Revenue items this year were relieved against taxable revenue. By relieving £362,000 (2007 - £598,000) of surplus management expenses arising on capital items against the remaining taxable revenue, the Group reduced its corporation tax charge. However, an amount equal to 29% of £362,000, i.e. £105,000 (2007 - 30% of £598,000, i.e. £179,400) has been credited to capital and charged to revenue as a notional corporation tax item to prevent the distribution of capital equal to this amount. At 30 September 2008, the Group had no surplus management expenses or non-trade debits (2007 - £nil) to carry forward. No deferred tax has been recognised in the current or prior periods. The following table is a reconciliation of the current taxation charge/(credit) to the charges or credits which would arise if all ordinary activities were taxed at the standard UK corporation tax rate of 29% (2007 - 30%):

		2008				2007
		Revenue	Capital		Total	Revenue	Capital	Total
		£'000	£'000		£'000	£'000	£'000	£'000
	Profit on ordinary activities before taxation	7,694	(47,129)		39,435	6,920	(408)	6,512

	Taxation of return on ordinary activities at the standard rate of corporation tax	2,231	(13,667)		(11,436)	2,076	(122)	1,954
	Effects of:
	UK dividend income not liable to further tax	(1,316)	-		(1,316)	(1,445)	-	(1,445)
	Stock dividend not taxable	(11)	-		(11)	-	-	-
	Capital gains not taxable	-	13,562		13,562	-	(57)	(57)
	Prior year adjustment	-	-		-	(42)	-	(42)
		_______	_______		_______	_______	_______	_______
	Current taxation charge/(credit) for the year	904	(105)		799	589	(179)	410
		_______	_______		_______	_______	_______	_______

7.	Profit attributable to Ordinary Shareholders of the Company
	The revenue profit attributable to equity holders of the Group for the financial year includes £6,815,000 (2007 - £6,340,000) which has been dealt with in the Company's financial statements.

		2008	2007
8.	Dividends on equity shares	£'000	£'000
	Amounts recognised as distributions to equity holders in the year:
	Fifth interim dividend for the year ended 30 September 2007 of 1.8865p per share	2,300	-
	Fourth interim dividend for the year ended 30 September 2006 of 1.81p	-	1,701
	Three interim dividends for the year ended 30 September 2008 totalling 3.414p (2007 - Four interims totalling 3.315p) per share	4,157	3,812
		_______	_______
		6,457	5,513
		_______	_______
	The fourth interim dividend of 1.8865p per share, declared on 2 October 2008 and paid on 31 October 2008 has not been included as a liability in these financial statements. We also set out below the total dividend payable in respect of the financial year, which is the basis on which the requirements of Section 842 Income and Corporation Taxes Act 1988 are considered.

		2008	2007
		£'000	£'000
	Three interim dividends for the year ended 30 September 2008 totalling 3.414p (2007 - four interim dividends totalling 3.315p) per share	4,157	3,812
	Fourth interim dividend for the year ended 30 September 2008 of 1.8865p per share (2007-fifth interim dividend of 1.8865p)	2,290	2,300
		_______	_______
		6,447	6,112
		_______	_______

		2008	2007
9.	Return and net asset value per share	£'000	£'000
	The returns per share are based on the following figures:
	Revenue return	6,791	6,331
	Capital return	(47,024)	(229)
		_________	_________
	Total	(40,234)	6,102
		_________	_________
	Weighted average number of shares	121,767,858	116,519,827
		__________	__________
	Net asset value per share is based on net assets attributable to shareholders of £68,043,000 (2007 - £115,077,000) and on 121,413,532 (2007 - 121,942,517) shares in issue at 30 September 2008.

			Group & Company
			2008	2007
10.	Non-current assets - Securities at fair value		£'000	£'000
	Listed on recognised stock exchanges:
	United Kingdom		105,000	165,499
	Overseas		7,108	5,916
			_________	_________
			112,108	171,415
			_________	_________
			Group & Company
			2008	2007
			£'000	£'000
	Cost at 30 September 2007		160,041	108,649
	Unrealised appreciation at 30 September 2007		11,374	17,254
			_________	_________
	Fair value at 30 September 2007		171,415	125,903
	Purchases		44,274	159,550
	Capital event		41	-
	Effective yield adjustment		24	(180)
	Sales	- proceeds	(61,023)	(115,308)
		- net realised (losses)/gains on sales	(8,315)	7,330
	Movement in fair value during the year		(34,308)	(5,880)
			_________	_________
	Valuation at 30 September 2008		112,108	171,415
			_________	_________

	Cost at 30 September 2008		135,042	160,041
	Unrealised (depreciation) /appreciation at 30 September 2008		(22,934)	11,374
			_________	_________
	Valuation at 30 September 2008		112,108	171,415
			_________	_________
	The total transaction costs on purchases was £192,000 (2007 - £739,000) and on sales £72,000 (2007 - £196,000).

			Group & Company
			2008	2007
			£'000	£'000
	Net realised (losses)/gains on sales		(8,315)	7,330
	Movement in fair value of investments		(34,308)	(5,880)
	Movement in fair value of traded option contracts		(61)	89
	Special dividend allocated to capital		-	1,106
			_________	_________
			(42,684)	2,645
			_________	_________
	The above table includes the following effects of traded option activity:
	Call options exercised		(134)	(693)
	Put options assigned		(132)	(284)
			_________	_________
			(266)	(977)
			_________	_________

			Company
			2008	2007
11.	Subsidiary		£'000	£'000
			_________	_________
	Shares at cost		5	5
			_________	_________

	The Company owns 100% of the ordinary share capital of its sole subsidiary, G.I.T. Securities Limited, an investment dealing company registered in Scotland.

		Group		Company
		2008	2007	2008	2007
12.	Current assets	£'000	£'000	£'000	£'000
	Amounts falling due within one year:
	Investment sales	298	12	298	12
	Accrued income & prepayments	1,755	2,202	1,755	2,202
	Due by subsidiary	-	-	-	466
	Investments of dealing subsidiary at fair value	-	673	-	-
	Cash & cash equivalents	17,068	138	17,068	138
	Zero coupon finance derivatives at fair value	27	-	27	-
		________	________	________	________
		19,148	3,025	19,148	2,818
		________	________	________	________

		Group		Company
		2008	2007	2008	2007
13.	Current liabilities	£'000	£'000	£'000	£'000
	Bank loans and overdrafts	-	422	-	422
	Investment purchases	111	-	111	-
	Corporation tax	392	209	435	251
	Other creditors	348	505	529	505
	Zero coupon finance derivatives at fair value	5,360	-	5,360	-
		________	________	________	________
		6,211	1,136	6,435	1,178
		________	________	________	________

	Interest on short-term bank loans and overdrafts is at floating rates related to LIBOR and UK base rates respectively.

14.	Zero Coupon Finance The zero coupon finance arrangement comprises a set of separately traded financial instruments (FTSE 100 Index options) each with its own market value. The options run until 2008, 2010 and 2011. Set out below is a breakdown of the different options split between put and call options and assets and liabilities as disclosed in the balance sheet. The change in the net total market value of the options in each accounting period is treated as an unrealised loss and charged to the capital column of the Consolidated Income Statement. In total the Company has nine tranches of zero coupon finance. The amount so charged to capital will fluctuate from year to year due to stock market volatility but ranges from 5.5% to 6.6% over the life of all the tranches. When the options reach their expiry date, the aggregate unrealised depreciation will be transferred to realised capital reserve. As at 30 September 2008, the Company had pledged collateral of 148% of the value of this finance, being £5.6 million cash and £87.2 million of securities.
		2008	2007
	Fair value at 30 September 2008	£'000	£'000
	Non-current assets
	Call option expiring in December 2008	-	1,622
	Call options expiring in January 2010	559	9,487
	Call options expiring in April 2011	2,318	12,723
	Put option expiring in December 2008	-	5
	Put options expiring in January 2010	8,988	3,321
	Put options expiring in April 2011	9,850	4,704
		________	________
		21,715	31,862
		________	________
	Current assets
	Call option expiring in December 2008	24	-
	Put option expiring in December 2008	3	-
		________	________
		27	-
		________	________
	Non-current liabilities
	Call option expiring in December 2008	-	(6,119)
	Call options expiring in January 2010	(8,891)	(28,533)
	Call options expiring in April 2011	(12,036)	(29,123)
	Put option expiring in December 2008	-	(542)
	Put options expiring in January 2010	(30,699)	(12,385)
	Put options expiring in April 2011	(27,091)	(13,387)
		________	________
		(78,717)	(90,089)
		________	________
	Current liabilities
	Call option expiring in December 2008	(3,479)	-
	Put option expiring in December 2008	(1,881)	-
		________	________
		(5,360)	-
		________	________
	Net zero coupon finance liability - fair value	(62,335)	(58,227)
		________	________
	The movements in the fair value of this finance were as follows:
		Group and Company
		2008	2007
		£'000	£'000
	At 30 September 2007	58,227	40,646
	Proceeds from new zero coupon finance arrangements	-	15,126
		________	________
		58,227	55,772
	Movement in fair value of zero coupon finance	4,108	2,455
		________	________
	At 30 September 2008	62,335	58,227
		________	________

		Ordinary shares
		of 25p each
15.	Called-up share capital	Number	£'000
	Authorised
	At 30 September 2008 & 30 September 2007	200,000,000	50,000
		___________	________
	Allotted, called up and fully paid
	At 30 September 2008	121,413,532	30,354
	Held in treasury	528,985	132
		___________	________
		121,942,517	30,486
		___________	________

	During the year to 2008 528,985 Ordinary shares of 25p each were repurchased by the Company at a total cost, including transaction costs of £342,000. In the year all of these shares were placed in treasury. No shares were purchased for cancellation during the year. At the year end 528,985 (2007 - nil) shares were held in treasury, which represents 0.43% of the Company's total issued share capital at 30 September 2008.

		2008	2007
16.	Share premium account	£'000	£'000
	At 30 September 2007 and 2006 respectively	53,205	32,715
	Issues of new ordinary shares within the year	-	20,960
	Expenses of Issue during year	(1)	(470)
		________	________
	At 30 September 2008 and 2007 respectively	53,204	53,205
		________	________

		2008	2007
17.	Special Reserve	£'000	£'000
	At 30 September 2007 and 2006 respectively	5,000	5,000
	Shares bought back during the year into Treasury	(342)	-
		________	________
	At 30 September 2008 and 2007 respectively	4,658	5,000
		________	________
	The purpose of this reserve is to fund market purchases by the Company of its own ordinary shares.

				Group & Company
				2008	2007
18.	Analysis of capital reserves			£'000	£'000
	Realised capital reserve
	At 30 September 2007/2006 respectively			17,097	9,080
	Net (losses)/gains on sales of investments during the year			(8,315)	7,330
	Finance costs of borrowings (note 5)			(11)	(79)
	Tax credit allocated to capital			105	179
	Special dividend allocated to capital			-	1,106
	Incentive Payment			25	-
	Investment management fee			(351)	(519)
				________	________
	At 30 September 2008/2007 respectively			8,550	17,097
				________	________
	Investment holdings gains/(losses)
	At 30 September 2007/2006 respectively			5,670	13,916
	Fixed asset investment losses			(34,308)	(5,880)
	Zero coupon finance costs (note 14)			(4,108)	(2,455)
	Movement in fair value of traded option contracts			(61)	89
				________	________
	At 30 September 2008/2007 respectively			(32,807)	5,670
				________	________
	Total capital reserve			(24,257)	22,767
				________	________

		Group	Company	Group	Company
		2008	2008	2007	2007
	Revenue reserve	£'000	£'000	£'000	£'000
	At 30 September 2007 / 2006 respectively	3,619	3,375	2,801	2,548
	Transfer to Revenue Account net of dividends	334	359	818	827
		________	________	________	________
	At 30 September 2008 / 2007 respectively	3,953	3,734	3,619	3,375
		________	________	________	________

19.

Risk management, financial assets and liabilities

Risk management

The Company's objective of providing a high and growing dividend with capital growth is addressed by investing primarily in UK equities to provide growth in capital and income and in fixed income securities to provide a high level of income. Additional revenue is generated from premiums earned by writing out of the money traded options against assets held in the portfolio and writing put options.

The impact of security price volatility is reduced by diversification. Diversification is by type of security - ordinary shares, preference shares, convertibles and corporate fixed interest and by investment in the stocks and shares of companies in a range of industrial, commercial and financial sectors. The management of the portfolio is conducted according to investment guidelines, established by the Board after discussion with the Manager, which specify the limits within which the Manager is authorised to act.

The Manager has dedicated investment management processes, as disclosed in the Directors' Report, which ensures that the investment objective is achieved. Stock selection procedures are in place based on the active portfolio management and identification of stocks. The portfolio is reviewed on a periodic basis by a Senior Investment Manager and also by the Manager's Investment Committee.

The Company's Manager has an independent Investment Risk department for reviewing the investment risk parameters of all core equity, balanced, fixed income and alternative asset classes on a regular basis. The department reports to the Manager's Performance Review Committee which is chaired by the Manager's Chief Investment Officer. The department's responsibility is to review and monitor ex-ante (predicted) portfolio risk and style characteristics using best practice, industry standard multi-factor models.

Additionally, the Manager's Compliance department continually monitors the Company's investment and borrowing powers and reports to the Manager's Risk Management Committee.

The Manager has created a Business Risk department to consolidate risk management functions. The department is responsible for supporting management in the efficient identification of risk and resolution of control issues. The department incorporates Operational Risk, Breaches and Errors Risk Control Management, Counterparty Risk, the Procedures and Business Control teams. The Head of Front Office Risk reports directly to the Manager's Group Head of Risk.

Financial assets and liabilities

The Group's financial assets include investments, cash at bank, AAA money market funds and short-term debtors. Financial liabilities consist of bank loans and overdrafts, other short-term creditors and long-term creditors arising from option contracts.

The main risks the Company faces from its financial instruments are (i) market price risk (comprising interest rate risk and other price risk), (ii) liquidity risk and (iii) credit risk. The Company has no exposure to foreign currency risk as it does not hold any foreign currency assets and has no exposure to any foreign currency liabilities.

(i) Market price 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.

Interest rate risk

The Company is subject to interest rate risk because bond yields are linked to underlying bank rates or equivalents, and its short-term borrowings and cash resources carry interest at floating rates. The interest rate profile is managed as part of the overall investment strategy of the Company.

Interest rate movements may affect:

- the fair value of the investments in fixed interest rate securities;

- the level of income receivable on cash deposits;

- interest payable on the Company's variable rate borrowings.

The possible effects on fair value and cash flows that could arise as a result of changes in interest rates are taken into account when making investment and borrowing decisions.

Interest rate profile The interest rate risk profile of the portfolio of financial assets and liabilities at the Balance Sheet date was as follows:

	Weighted
	average	Weighted
	period for which	average interest	Fixed	Floating	Non- interest
	rate is fixed	rate	rate	rate	bearing
As at 30 September 2008	Years	%	£'000	£'000	£'000
Assets
Corporate Bonds	8.99	6.48	29,075	-	-
UK preference shares	-	8.65	9,941	-	-
Zero Coupon Finance	-	-	-	-	21,715
Cash	-	-	-	10,730	-
AAA money market funds	-	-	-	6,338	-
	________	________	________	________	________
Total assets	-	-	39,016	17,068	21,715
	________	________	________	________	________
Liabilities
Zero Coupon Finance	-	-	-	-	(78,717)
	________	________	________	________	________
Total liabilities	-	-	-	-	(78,717)
	________	________	________	________	________

	Weighted
	average	Weighted
	period for which	average interest	Fixed	Floating	Non- interest
	rate is fixed	rate	rate	rate	bearing
As at 30 September 2007	Years	%	£'000	£'000	£'000
Assets
Corporate Bonds	9.46	6.59	35,339	-	-
UK preference shares	-	8.67	11,576	-	-
Zero Coupon Finance	-	-	-	-	31,862
Cash	-	-	-	138	-
	________	________	________	________	________
Total assets	-	-	46,915	138	31,862
	________	________	________	________	________
Liabilities
Short-term bank loan	0.01	6.45	(422)	-	-
Zero Coupon Finance	-	-	-	-	(90,089)
	________	________	________	________	________
Total liabilities	-	-	(422)	-	(90,089)
	________	________	________	________	________

The weighted average interest rate is based on the current yield of each asset, weighted by its market value. The cash assets consist of cash deposits on call earning interest at prevailing market rates. Short-term debtors and creditors (with the exception of loans) have been excluded from the above tables. Zero Coupon Finance is measured at fair value and other financial liabilities at amortised cost. The weighted average interest rate on bank loans is the interest payable.

Maturity profile The maturity profile of the Company's financial assets and liabilities at the Balance Sheet date was as follows:

	Within	Within	Within	Within	Within	More than
	1 year	1-2 years	2-3 years	3-4 years	4-5 years	5 years
At 30 September 2008	£'000	£'000	£'000	£'000	£'000	£'000
Fixed rate
Corporate Bonds	2,501	3,715	1,383	3,439	1,820	16,217
UK preference shares	-	-	-	-	-	9,941
Short-term bank loan	-	-	-	-	-	-
	_______	_______	_______	_______	_______	_______
	2,501	3,715	1,383	3,439	1,820	26,158
	_______	_______	_______	_______	_______	_______

	Within	Within	Within	Within	Within	More than
	1 year	1-2 years	2-3 years	3-4 years	4-5 years	5 years
At 30 September 2008	£'000	£'000	£'000	£'000	£'000	£'000
Floating rate
Zero Coupon Finance	(5,333)	(30,043)	(26,959)	-	-	-
Cash	10,730	-	-	-	-	-
AAA money market funds	6,338	-	-	-	-	-
	_______	_______	_______	_______	_______	_______
	11,735	(30,043)	(26,959)	-	-	-
	_______	_______	_______	_______	_______	_______
Total	14,236	(26,328)	(25,576)	3,439	1,820	26,158
	_______	_______	_______	_______	_______	_______

	Within	Within	Within	Within	Within	More than
	1 year	1-2 years	2-3 years	3-4 years	4-5 years	5 years
At 30 September 2007	£'000	£'000	£'000	£'000	£'000	£'000
Fixed rate
Corporate Bonds	1,000	2,517	2,940	-	5,096	23,786
UK preference shares	-	-	-	-	-	11,576
Short-term bank loan	(422)	-	-	-	-	-
	_______	_______	_______	_______	_______	_______
	578	2,517	2,940	-	5,096	35,362
	_______	_______	_______	_______	_______	_______

	Within	Within	Within	Within	Within	More than
	1 year	1-2 years	2-3 years	3-4 years	4-5 years	5 years
Floating rate	£'000	£'000	£'000	£'000	£'000	£'000
Zero Coupon Finance	-	(5,034)	(28,110)	(25,083)	-	-
Cash	138	-	-	-	-	-
	_______	_______	_______	_______	_______	_______
Total	716	(2,517)	(25,170)	(25,083)	5,096	35,362
	_______	_______	_______	_______	_______	_______

Interest rate sensitivity

The sensitivity analysis below have been determined based on the exposure to interest rates for both derivative and non-derivative instruments at the Balance Sheet date and the stipulated change taking place at the beginning of the financial year and held constant throughout the reporting period in the case of instruments that have floating rates.

If interest rates had been 100 basis points higher or lower and all other variables were held constant, the Company's:

- profit before tax for the year ended 30 September 2008 would increase / decrease by £171,000 (2007 - £1,000) given the Company's exposure to interest rates on its floating rate cash balances. These figures have been calculated based on cash positions at each year end.

- profit before tax for the year ended 30 September 2008 would decrease /increase by £525,000 (2007 - decrease /increase by £510,000) given the Company's exposure to interest rates on its fixed interest securities. This is based on a Value at Risk ('VaR') calculated at a 99% confidence level.

In the opinion of the Directors, the above sensitivity analyses are not representative of the year as a whole, since the level of exposure changes frequently as part of the interest rate risk management process used to meet the Company's objectives. The risk parameters used will also fluctuate depending on the current market perception.

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 sector. The allocation of assets to specific sectors 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 the London Stock Exchange.

Other price sensitivity

If market prices at the Balance Sheet date had been 10% higher or lower while all other variables remained constant, the return attributable to Ordinary Shareholders and equity reserves for the year ended 30 September 2008 would have increased/decreased by £7,120,000 (2007 - increase/decrease of £12,231,000). This is based on the Company's equity portfolio held at each year end.

(ii)	Liquidity risk This 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 mainly readily realisable securities, which can be sold to meet funding commitments if necessary. Short-term flexibility is achieved through the use of loan and overdraft facilities (note 13).
(iii)	Credit risk This is failure of the counter party to a transaction to discharge its obligations under that transaction that could result in the Company suffering a loss. The risk is not 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 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, 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 on a monthly basis. In addition, the Custodian carries out a stock reconciliation to third party administrators' records on a monthly 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 finding to the Manager's Risk Management Committee.
	-	transactions involving derivatives, structured notes and other arrangements wherein the creditworthiness of the entity acting as broker or counterparty to the transaction is likely to be of sustained interest are subject to rigorous assessment by the Investment Manager of the credit worthiness of that counterparty. The Company's aggregate exposure to each such counterparty is monitored regularly by the Board.
	-	The main component of the Company's gearing relates to the zero coupon finance raised in the derivatives market. The final liability of the zero coupon finance is pre-determined at the outset of each tranche of zero coupon finance. The zero coupon finance is subject to counterparty risk. The Company places trades through a broker and pledges collateral in support of the net market value of this finance in accordance with commercial practice. Collateral requirements can vary at the option of the broker and the broker's Euronext.LIFFE market clearer. The overall intended effect of the related put and call options which constitute each tranche of zero coupon finance is dependent upon any liability to the Company under each constituent option contract being honoured. The option contracts are traded on Euronext.LIFFE. On-exchange trades go through LCH.Clearnet SA such that the Company is not exposed to the credit risk of the exchange member. The Company manages its collateral obligations on a daily basis; and
	-	cash and AAA money market funds are held only with reputable banks and financial institutions with high quality external credit enhancements.

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

	Credit risk exposure
	In summary, compared to the amounts in the Balance Sheet, the maximum exposure to credit risk at 30 September 2008 was as follows:

			2008		2007
			Balance	Maximum	Balance	Maximum
			Sheet	exposure	Sheet	exposure
			£'000	£'000	£'000	£'000
	Non-current assets
	Securities at fair value through profit or loss		30,965	30,965	37,533	37,533
	Zero Coupon finance derivatives at fair value		21,715	21,715	31,862	31,862
	Current assets
	Zero Coupon finance derivatives at fair value		27	27	-	-
	Trade and other receivables		298	298	12	12
	Accrued income		1,755	1,755	2,202	2,202
	Cash and cash equivalents		10,730	10,730	138	138
			_______	_______	_______	_______
			65,490	65,490	71,747	71,747
			_______	_______	_______	_______

	None of the Company's financial assets is past due or impaired.

	Fair value of financial assets and liabilities
	The book value of cash at bank and bank loans and overdrafts included in these financial statements approximate to fair value because of their short-term maturity. Investments held as dealing investments are valued at fair value. The carrying values of fixed asset investments are stated at their fair values, which have been determined with reference to quoted market prices. Traded options contracts are valued at fair value which have been determined with reference to quoted market values of the contracts. The contracts are tradeable on a recognised exchange. For all other short-term debtors and creditors, their book values approximate to fair values because of their short-term maturity. The fair value of the zero coupon finance are shown in note 14.

	Gearing
	The Group's gearing comprises both longer and short-term borrowings. Short-term bank borrowing is used from time to time and bears interest at floating rates. The profile of financing costs is managed as part of overall investment strategy. The employment of gearing magnifies the impact on net assets of both positive and negative changes in the value of the Group's portfolio of investments.

	The main component of the Company's gearing relates to the zero coupon finance raised in the derivatives market. The final liability of the zero coupon finance is pre-determined at the outset of each tranche of zero coupon finance. However the amount charged to capital fluctuates from year to year due to interest rate movements giving rise to interest rate risk. This is managed by investing the proceeds of the zero coupon finance in predominantly investment grade corporate bonds the value of which are also affected by interest rates but in an inverse manner to the zero coupon finance.

	The Company augments the zero coupon finance from time to time with short-term borrowings. These borrowings are provided by a major bank. The only covenant in relation to this borrowing facility is that the Company's net assets must exceed £20million. As at 30 September 2008 the net asset value was £68 million.

20.

Capital management policies and procedures

The Company's capital management objectives are:

- to ensure that the Company will be able to continue as a going concern, and

- to maximise the income and capital return to its equity shareholders through an appropriate balance of equity capital and debt.

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 account of the Manager's views on the market;

- the need to buy back equity shares for cancellation, which takes account of the difference between the net asset value per share and the share price (ie the level of share price discount or premium);

- the need for new issues of equity shares; and

- the extent to which revenue in excess of that which is required to be distributed should be retained.

21.	Commitments, contingencies and post Balance Sheet events
	At 30 September 2008 there were no contingent liabilities in respect of outstanding underwriting commitments or uncalled capital (2007 - £nil).

	On 5 November 2007, the European Court of Justice ruled that management fees should be exempt from VAT. HMRC has announced its intention not to appeal against this case to the UK VAT Tribunal and therefore protective claims which have been made in relation to the Company will be processed in due course. The Board is currently in the process of quantifying the potential repayment that should be due. However, the amount the Company will receive, the period to which it will refer, and the timescale for receipt are all uncertain and hence the Company has made no provision in these financial statements for any such repayment.

Additional Notes to the Annual Financial Report

This Annual Financial Report announcement is not the Company's statutory accounts for the year ended 30 September 2008. The statutory accounts for the year ended 30 September 2008 received an audit report which was unqualified but included a matter to which the auditors drew attention by way of emphasis without qualifying the report and did not include a statement under either section 237(2) or 237(3) of the Companies Act 1985.

Emphasis of Matter - Going Concern

In forming their opinion on the financial statements, which is not qualified, Ernst & Young LLP have considered the adequacy of the disclosure made in Note 1 to the financial statements concerning the basis of preparation. The Company's ability to continue as a going concern is dependent on the continuation vote being approved by shareholders at the Annual General Meeting. These conditions, along with the other matters explained in Note 1 to the financial statements, indicate a material uncertainty which may cast significant doubt on the Company's ability to continue as a going concern. The financial statements do not include the adjustments that would result in the event that the continuation vote was not passed by shareholders.

The statutory accounts for the financial year ended 30 September 2008 were approved by the Directors on 18 November 2008 but will not be filed with the Registrar of Companies until after the company's Annual General Meeting which is to be held at 10.00am on 19 December 2008 at 40 Princes Street, Edinburgh, EH2 2BY.

The Annual Report will be posted to shareholders in November 2008 and additional copies will be available from the Manager (Investor Helpline - Tel. 0845 60 24 247) or by download for the Company's webpage (www.glasgowincometrust.co.uk)

Please note that past performance is not necessarily a guide to the future and that the value of investments and the income from them may fall as well as rise. Investors may not get back the amount they originally invested.

For Glasgow Income Trust plc

Aberdeen Asset Management PLC, Secretaries

Enquiries:

Aberdeen Asset Managers Limited

William Hemmings, Head of Investment Companies Tel: 020 7463 6000

Kenny Harper, Manager Investment Trust Investor Relations Tel: 07825 011075

G&N Collective Funds Services

Nigel Russell, Graeme Caton, Graham Reeves Tel: 0131 226 4411

This information is provided by RNS

The company news service from the London Stock Exchange

END

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