Annual Financial Report

RNS Number : 3476U

Troy Income & Growth Trust Plc

29 November 2013

TROY INCOME & GROWTH TRUST PLC

ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED 30 SEPTEMBER 2013

1. CHAIRMAN'S STATEMENT

The objective of the Company is to provide an attractive income yield and the prospect of income and capital growth through investing in a portfolio of predominantly UK equities.

The performance for the year to 30 September 2013 shows a NAV total return per share of +12.4% and a share price total return of +11.2%. This compares with the total return from the FTSE All-Share Index of +18.9%. The total dividends declared for the year were 2.125p, an increase of 4.9% over the previous year. We expect, given the conservative and low volatility style of our portfolio, to lag somewhat in strongly rising markets but to fare relatively better in less bullish markets. Despite this and while we have continued to meet our investment objective there is some disappointment that we are further behind the FTSE All-Share Index than we might have hoped. The Manager's Review which follows gives a more detailed analysis of the performance.

The Board focuses also on longer term performance and it is useful to record that over the three year period to 30 September 2013 the NAV total return per share was +40.0% and the share price total return was +41.4% compared with the FTSE All-Share Index total return of +33.4%.

I am pleased also to relate that the Company continues to grow through the issue of new shares with 16,373,000 being issued in the year and none bought in. Our discount control policy continues to provide excellent liquidity and the increase in the size of the Company helps improve our cost ratio; the on-going charges represented 1.06% of shareholders' funds during the year, down from 1.27% in the previous year.

Economic Background

The difficult investment background has been well rehearsed. Despite stronger signs now of advanced economies emerging from recession, the likes of China and India are experiencing significant slowdown. The fuel provided to markets by asset purchases or quantitive easing is still in operation but the phasing out process and the implications of this are less clear. The spectre of inflation and the expected eventual increase in interest rates provide challenging scenarios for investment. After the strong run in share prices in recent years it is perhaps unsurprising that the market looks directionless at present. Our Manager points to the fact that much of the improvement in share prices has arisen from the expansion in earnings multiples as opposed to the underlying earnings growth. Our portfolio is chosen for long term growth and as such we believe that it is well invested to continue to meet our objectives.

Dividend

It is the Board's intention, barring unforeseen circumstances, at least to maintain a quarterly dividend rate of 0.55p per share for the full year to 30 September 2014.

Continuation Vote

Pursuant to the Company's Articles of Association an ordinary resolution proposing the continuation of the Company will be proposed at the AGM and the Board is recommending that shareholders vote in favour.

Board Changes

Jann Brown joined the Board in January and we have welcomed her input particularly in her role as Chairman of the Audit Committee.

I will be retiring at the AGM in January after 18 years on the Board. It has been a challenging and interesting period. I am delighted that the Company is in good shape for the future.

I am very pleased that David Warnock has accepted the Board's invitation to succeed me and I wish him and the Company continued success.

R G Hanna

Chairman

29 November 2013

2. MANAGER'S REVIEW

Background

When we reported to shareholders twelve months ago, equity markets had enjoyed a strong period of performance. We highlighted that these returns had been substantially driven by the continuing stimulus to the global economy which central bankers felt was needed to avoid a deflationary slump. The past twelve months have again seen UK equities rise with the FTSE All-Share Index producing a total return of +18.9% and the FTSE 350 Higher Yield Index a total return of +16.8%. Other asset classes fared less well - the return on cash remained a meagre +0.4% (therefore negative in real terms) while a sharp rise in gilt yields meant that the return from the FTSE UK Gilts All Stocks Index was -3.0%. The divergence of performance between bonds and equities is an indication that markets are beginning to price in the inflationary risk associated with the monetary base expansion as a consequence of Quantitative Easing.

The strength of equities has been driven by a number of factors. The demand for income has led to a shift away from cash and fixed income where yields are minimal, and thus far, investors have been prepared to accept the increased volatility of equities in return for additional income. Another factor has been clear signs of recovery in the US and, more recently, UK economies. However, the recovery remains weak by historic standards and vulnerable to setbacks such as the recent US government shutdown.

The divergence between corporate earnings and stock price performance in the UK market has been material over the past eighteen months. The trailing p/e of the FTSE All-Share Index non-financials is 15.7x and the dividend yield is 3.4%. This reflects either anticipation of a strong rise in earnings or high valuations which cannot be sustained indefinitely. There is also the possibility that prices continue to trade sideways for some time while earnings assume a slow but steady upward trend. In our view significant potential economic headwinds will make it hard for corporate earnings to make significant progress over the next twelve months. The slowdown in China and emerging economies, the rising cost of finance and the current strength of sterling are all examples of the factors which could act as a brake on earnings and profits growth.

Performance & Investment Strategy

Your Company delivered a Net Asset Value ("NAV") total return of +12.4% and a share price total return of +11.2% over the year. This compares with the FTSE All-Share Index return of +18.9%. The full year dividend of 2.125p represented a 4.9% increase on the previous year's dividend.

We have often emphasised to investors that our defensive strategy can lead us to underperform in ebullient markets and this is indeed true of our performance over the last twelve months. Many of the defensive stocks that performed so well in 2011-12 have lagged in 2013 as more cyclical and economically sensitive stocks and sectors have led the way. Despite the defensive bias this is a gap which requires further explanation.

Stocks in the consumer staples sector have underperformed as consumer spending remains under pressure despite a pickup in GDP growth. Those companies exposed to emerging markets, such as Unilever and Nestlé, have suffered more than most but the quality of these franchises is so great that we are happy to see what we believe to be temporary setbacks as buying opportunities. This divergence, however, does not alter our long-term view that consumer goods companies with strong brand names, broad geographic diversification and a prudent attitude towards capital allocation can continue to grow their earnings and return cash to shareholders year after year. Moreover, companies with robust brand portfolios have the ability to pass on price inflation to consumers. Whilst inflation has been benign in 2013, we are conscious that the continuation of easy monetary policy by governments around the world is increasing the supply of money much faster than economic output.

We will never purchase what we regard as overvalued cyclical shares purely to chase short-term investment performance. Our objective is to deliver high quality, consistent absolute returns to our investors throughout the investment cycle while avoiding the extremes of volatility that equity markets can inflict on investors. That can mean that there are periods when performance may look dull but we would emphasise that the pursuit of low absolute volatility will result in a wider range of relative performance at both peaks and troughs of the market.

Portfolio Changes

The Company's strategy and asset allocation have remained constant and the portfolio of investments has remained largely unchanged over the year.

Conscious that liquidity flows into equities have caused many of our equities to re-rate, we have kept an eye on those that are most fully valued. Close Brothers, after a period of strong performance, was one such stock. Whilst confident in the strength of the bank and securities operation, we had always been worried that the underperforming asset management arm would be difficult to turn around. We believed that the yield of 4.5% in December 2012 was pricing in a less than certain positive outcome for this part of the business and we therefore sold out of our holding.

Likewise, in January, we believed that Diageo, trading on a forward PE multiple of over 20x, was excessively valued. With analysts forecasting double-digit earnings growth, despite a slowdown evident in Diageo's principal emerging markets, we became cautious of such optimism. We therefore trimmed this holding from 3.4% of the portfolio to 1.4%.

In January we also began to reduce the holding in PayPoint, after the share price had nearly trebled since purchase, and reinvested the proceeds into W H Smith. The senior management team at W H Smith continues to exhibit relentless capital allocation discipline and focus on costs. This has driven higher returns in a difficult retail environment. Margin improvement, buybacks and a shift in the store portfolio towards the less cyclical travel business have enabled earnings to grow at 13% per annum over the past five years. The shares have generated a total return of 37% since purchase.

In May we initiated a holding in BSkyB, after BT's announcement of its intention to compete against Sky Sports' franchise, and to allow its customers free access to selected premiership football, caused a pullback in Sky's shares to below 800p. We believed that this bad news had distracted the market from the strength of the Sky franchise and provided an attractive entry point. Sky delivers its services to nearly 40% of UK households which gives the company unparalleled purchasing power when bidding for high quality, high value content, whether it be Premier League football or the rights to show recently released blockbuster films. This dominant market position and a track record of adapting to new competitive threats should enable the company to survive this latest challenge. Moreover, its modest 14x PE and 3.7% yield provided an attractive entry point.

Discount Control Mechanism

During the course of its reporting year the Company's shares traded at a small premium over NAV for the vast majority of days, demonstrating the price stability generated by the discount control mechanism ("DCM"). This allowed the Company to issue just over 16 million new shares without shareholders suffering any value dilution. In fact, the overall enhancement to your Company's NAV by repurchasing shares at a discount and issuing at a premium has been well over £500,000 net of costs since January 2010, which equates to over 1% of the NAV when Troy became Manager of the Company.

The number of shares has almost exactly doubled to 242 million since the discount control mechanism was activated in January 2010 and as a result the Company is now considerably more liquid. Most importantly costs have been significantly reduced and on-going charges have fallen from over 1.4% of shareholders funds in September 2009 to 1.06% at the end of September 2013.

Investment Outlook

We are faced with the likelihood that either equities will de-rate or earnings will recover, closing the gap between current stock market prices and their fundamental values. As investors in equities, we remain ever wary of the possibility that prices will fall to meet earnings. We have therefore been reducing our exposure to those companies with the most extended valuations.

The possibility of an earnings recovery seems more plausible now than it did a year ago. We are seeing signs of life in the real economy, namely stronger housing data from both the US and UK along with indications of a consumer-led recovery. July saw the biggest real increase in UK retail sales for two years and unemployment fell from 7.8% to 7.7% in August. Despite the growth in overall employment numbers, average earnings continue to lag inflation and this, combined with rising energy bills, will hold back the consumer recovery in the UK.

We remain sensitive to the fragility of these positive economic signals and the real possibility of market disruption as a result of external shocks. In the meantime, we continue to hold companies which have proved able to increase their income distribution to shareholders in spite of stalling earnings. Indeed, the income stream from dividend paying UK companies has grown circa 20% over the last 24 months. This is at least partially because many of the sectors that pay higher dividends enjoy a stability and predictability of underlying earnings growth not replicated across the wider economy, and in many cases are further supported by historically strong balance sheets. The companies we continue to invest in are those which offer such long-term visibility in the face of short-term uncertainty.

Troy Asset Management Limited

29 November 2013

Troy Asset Management is an independent fund management company aiming to generate absolute returns for investors over the long term. It manages approximately £5.1bn of assets including four open-ended investment funds: the Trojan Fund, the Trojan Income Fund, the Trojan Capital Fund and the Spectrum Fund; and two investment trusts: Troy Income & Growth Trust plc and Personal Assets Trust plc. Our investors include private individuals, charities, pension funds, trusts and endowments.

3. RESULTS & DIVIDENDS

Financial Highlights
	2013	2012
Net asset value total return	+12.4%	+15.5%
Share price total return	+11.2%	+18.0%
FTSE All-Share Index total return	+18.9%	+17.2%
Dividends per share	+4.9%	+5.6%
Dividend yield*	3.5%	3.6%
FTSE All-Share Index yield	3.4%	3.6%
Dividends per share+	2.125p	2.025p
Ongoing Charges++	1.06%	1.27%
* Dividends per share as a percentage of share price at 30 September +Dividends per share reflect the years in which they were earned ++ Excludes non-recurring credit of £42,000 (2012 - £0)

	Performance (total return)
	Year ended	3 years ended	From change of Manager 50 months ended
	30 September	30 September	30 September
	2013	2013	2013
Share price	+11.2%	+41.4%	+95.3%
Net asset value per share	+12.4%	+40.0%	+78.8%
FTSE All-Share Index	+18.9%	+33.4%	+69.2%

Distribution of Assets and Liabilities

	Valuation at					Valuation at
	30 September				Appreciation/	30 September
	2012		Purchases	Sales	(depreciation)	2013
	£'000	%	£'000	£'000	£'000	£'000	%

Listed investments
Ordinary shares	116,267	93.4	21,615	(9,263)	12,242	140,861	96.6
Other fixed interest	2,173	1.7	-	(710)	(1,085)	378	0.3
	______	_____	________	_______	________	______	_____
	118,440	95.1	21,615	(9,973)	11,157	141,239	96.9
	______	_____	________	_______	________	______	_____
Current assets	7,245	5.8				4,927	3.4
Current liabilities	(1,160)	(0.9)				(388)	(0.3)
	______	_____				______	_____
Net assets	124,525	100.0				145,778	100.0
	______	_____				______	_____
Net asset value per share	55.18p					60.22p
	______					______

4. STRATEGIC & DIRECTORS' REPORT EXTRACTS

Performance and Future Development

A review of the business performance, market background, investment activity and portfolio during the year under review, together with the investment outlook, are provided in the Chairman's Statement and the Manager's Review.

Risk Management

The Directors are responsible for supervising the overall management of the Company, whilst the day-to-day management of the Company's assets has been delegated to the Manager. Portfolio exposure has been limited by the guidelines which are detailed within the Investment Strategy section of the annual report.

The principal risks facing the Company relate to the Company's investment activities and these risks include the following:

• performance and market risk

• resource risk

• operational risk.

An explanation of these principal risks and how they are managed are set out below, with disclosures of financial risk set out in note 15 to the financial statements.

• Performance and market risk - The Board is responsible for deciding the investment strategy to fulfil the Company's objective and monitoring the performance of the Manager. An inappropriate strategy may lead to underperformance against the appropriate benchmark. To manage this risk the Manager provides an explanation of significant stock selection decisions and the rationale for the composition of the investment portfolio. The Board monitors and maintains an adequate spread of investments in order to minimise the risks or factors specific to particular sectors, based on the diversification requirements inherent in the Company's investment policy. The Board also receives and reviews regular reports showing an analysis of the Company's performance against the FTSE All-Share Index (total return) and its peer group.

• Resource risk - Like most other investment trusts, the Company has no employees. The Company therefore relies on services provided by third parties, including, in particular, the Manager, to whom responsibility for the management of the Company has been delegated under an investment management agreement (the "Agreement") (further details of which are set out below). The terms of the Agreement cover the necessary duties and conditions expected of the Manager. The Board reviews the performance of the Manager on a regular basis and their compliance with the Agreement on an annual basis.

• Operational risk - As the Company relies upon the services provided by third parties it is dependent upon the control systems of the Manager and the Company's other service providers. The security, for example, of the Company's assets, dealing procedures, accounting records and maintenance of regulatory and legal requirements, depend on the effective operation of these systems. These are regularly tested and monitored.

Other risks faced by the Company include the following:

• breach of regulatory rules which could lead to the suspension of the Company's London Stock Exchange listing, financial penalties or a qualified audit report.

• breach of Section 1159 of the Corporation Tax Act 2010 which could lead to the Company being subject to tax on capital gains.

Results and Dividends

The financial statements for the year ended 30 September 2013 appear below. Dividends in respect of the year amounted to 2.125p per share (2012 - 2.025p). The fourth interim dividend of 0.55p per share announced on 23 September 2013 (2012 - fifth interim 0.125p) will be accounted for in the financial year ending on 30 September 2014.

Share Capital

At the Annual General Meeting held on 18 January 2013, shareholders approved the renewal of the authority permitting the Company to make market purchases of its own Ordinary shares. This authority (which, unless renewed, will expire at the conclusion of the Company's forthcoming AGM) is limited to Ordinary shares with a maximum aggregate nominal value of £8,704,859 (being equal to approximately 14.99% of the Ordinary shares in issue as at 18 January 2013). It is proposed that this authority will be renewed at the Company's forthcoming AGM. During the year ended 30 September 2013 no Ordinary shares were purchased and no Ordinary shares were re-issued. The issued share capital at 30 September 2013 consisted of 242,057,445 Ordinary shares of 25p each and there were no Ordinary shares held in treasury. As at the date of this report the issued share capital consisted of 238,007,445 Ordinary shares of 25p each and there were 4,050,000 Ordinary shares held in treasury. Each holder of Ordinary shares, excluding treasury shares, is entitled to one vote on a show of hands and, on a poll, to one vote for every Ordinary share held.

Manager

With effect from 1 August 2009, investment management services are provided to the Company by Troy Asset Management Limited. From 1 October 2012 the fee is at an annual rate of 0.75% of the Company's net assets up to £175 million and at an annual rate of 0.65% of the Company's net assets at or above £175 million.

Company Secretary

On 1 July 2010 Personal Assets Trust Administration Company Ltd ('PATAC') was appointed to provide Company Secretarial, accounting and administrative services, for an annual fee of £95,000 payable quarterly in advance. The appointment is terminable on three months notice. This fee is adjusted annually by the higher of the increase in the Retail Price Index or the Consumer Price index and is currently £105,927 per annum.

The Alternative Investment Fund Managers Directive (AIFMD)

The AIFMD is European legislation which will create a European-wide framework for regulating managers of "alternative investment funds", which includes investment trusts. It was written into UK legislation with effect from 22 July 2013. There is a one year transition period for the Company to comply with the provisions of this directive, which include appointing an alternative investment fund manager ("AIFM") and may require the appointment of an independent depositary, who would provide an independent monitoring role to ensure the Company complies with the regulations. The Board anticipates no problem in being in a position to comply with the implications of this legislation for the Company and will keep shareholders informed of developments.

Going Concern

The Company's articles of association require that at every fifth AGM of the Company an ordinary resolution be put to shareholders asking them to approve the continuation of the Company. Although such a resolution was passed at the AGM on 14 January 2010, the next resolution will require to be proposed at the AGM on 23 January 2014.

The Directors are committed to the continuation of the Company in its current form, and through a series of conversations with key investors, led by the Company's broker, they have a reasonable expectation that the continuation resolution will be approved.

The assets of the Company consist mainly of securities which are readily realisable and accordingly the Company has adequate financial resources to continue in operational existence for the foreseeable future. In reaching this view, the Directors reviewed the level of expenditure of the Company against the cash and asset liquidity within the portfolio.

For these reasons the Directors believe that it is appropriate to continue to adopt the going concern basis in preparing the financial statements.

The ongoing validity of the going concern basis depends on the outcome of the continuation vote, on which the Board is recommending that shareholders vote in favour. In particular, no provision has been made for the costs of winding-up the Company or liquidating its investments in the event that the resolution is not passed.

Discount Policy

The Company's discount policy is to ensure that the Ordinary shares trade at close to net asset value through a combination of share buy-backs and the issue of new Ordinary shares at a premium to net asset value where demand exceeds supply.

This discount control mechanism is operated by Troy for a fee (additional to its investment management fee) of £30,000 per annum (excluding VAT) and this has been charged to the share premium account.

The Directors will continue to seek the renewal of the Company's authority to buy back Ordinary shares annually and at other times should this prove necessary. Any buy-back of Ordinary shares will be made subject to the Companies Act 2006 and within guidelines established from time to time by the Board and the making and timing of any buy-backs will be at the absolute discretion of the Board. The Directors will be authorised to cancel any Ordinary shares purchased under such authority or to hold them in treasury. Purchases of Ordinary shares will only be made through the market for cash at prices below the prevailing net asset value of the Ordinary shares (as last published). Such purchases will also only be made in accordance with the rules of the UK Listing Authority which provide that the price to be paid must not be less than the nominal value of an Ordinary share nor more than the higher of (a) 5% above the average of the middle market quotations for the Ordinary shares for the five business days before the purchase is made and (b) the higher of the price of the last independent trade and the highest current independent bid relating to an Ordinary share on the trading venue where the purchase is carried out.

It is the intention of the Directors that the share buy-back authority is used to purchase Ordinary shares if the middle market price for a Share is below the net asset value per Ordinary share most recently published by the Company (taking into account any rights to which the Ordinary shares are trading "ex"). However, nothing in this discount policy will require the Directors to take any steps that would require the Company to make a tender offer for its shares or to publish a prospectus. Notwithstanding this discount policy, there is no guarantee that the Ordinary shares will trade at close to the net asset value per Ordinary share. Shareholders should note that this discount policy could lead to a reduction in the size of the Company over time.

Annual General Meeting

Capital Reserves and Share Premium Account

Certain statutory rules governing investment trusts and companies were amended in 2012. In particular, the rule which prohibited an investment trust from distributing any surplus arising from the realisation of its investments was repealed. In compliance with the previous statutory regime, the Company has a provision in its Articles of Association ("Articles") which expressly prohibits the distribution of any surplus arising from the realisation of any investment. In light of the amended statutory rules, the Board no longer considers it appropriate to have such a prohibition in the Articles and therefore proposes that it is removed. A resolution will be proposed at the AGM which, if passed, would remove this prohibition.

The Board believes that the removal of this restriction will give the Company greater flexibility in the long term as it will enable the Company to make distributions from any surplus arising from the realisation of any investment. However, the Board has no intention of exercising this authority at the current time and, as explained below, the deficit on the realised capital reserve currently prevents any distribution of surpluses arising from the realisation of investments.

As at 30 September 2013 the realised capital reserve of the Company stood at a deficit of £36,200,000, mainly as a result of the losses incurred in the year to 30 September 2009. To eliminate this deficit the Directors are therefore seeking shareholder approval to cancel the share premium account to create a distributable capital reserve and authorise the use of the special reserve for buy backs and capital distributions. At 30 September 2013 the Company's Share Premium Account was £36,432,000 and the Special Reserve was £58,163,000. These changes will be subject to approval of the Court of Session in Scotland and are also dependent upon the passing of the necessary resolutions at the AGM.

AIFMD

The Board is also proposing to make amendments to the Articles in response to the AIFMD Regulations coming into force.

The principal changes proposed to be introduced in the Articles, and their effect, are set out below.

(i) The Articles will now provide that the NAV of the Company shall be calculated at least annually and be disclosed to Shareholders from time to time in such manner as may be determined by the Board. The amendment will have no bearing on current practice and simply articulates the minimum requirements of the AIFMD Regulations.

(ii) The Articles will now provide that the Company's annual report and accounts may be prepared either in accordance with generally acceptable accounting principles of the UK or such other international accounting standards as may be permitted under the law of the UK. The amendment will have no bearing on current practice and simply articulates the minimum requirements of the AIFMD Regulations.

(iii) The AIFMD Regulations require that prior to any new or existing investor making an investment in the Company certain prescribed information is to be made available to them. Therefore, the Articles will include language with the effect that such information shall be made available to prospective and existing Shareholders from time to time in such manner as may be determined by the Board (including, in certain cases, on the Company's website or by electronic notice).

(iv) The AIFMD Regulations require that the Company has a depositary other than in certain limited circumstances. Under the AIFMD Regulations, the depositary has strict liability for the loss of the Company's financial assets in respect of which it has safe-keeping duties. This rule applies even where the depositary has delegated the actual custody of an asset to another entity. The Company may wish to hold assets in a country where the depositary is required by local law to use a local sub-custodian to hold the relevant asset. The depositary may not wish the Company to acquire or retain such an asset, unless it can discharge its strict liability to the local sub-custodian. A discharge of strict liability in these circumstances will only be possible if the Company's 'rules or instruments of incorporation' (for example, the Articles) permit such a discharge. The Board is cognisant that situations may arise where allowing the depositary to discharge its strict liability will be commercially necessary. An amendment to the Articles is therefore proposed with the effect of enabling the Board, should the need arise and subject to applicable laws, to allow a depositary to discharge its strict liability for loss of certain of the Company's assets. This proposed amendment provides the Company with commercial flexibility and the Board will exercise its discretion in the usual way in determining whether or not to provide such a discharge.

(v) In line with early guidance from the Financial Conduct Authority, the Articles will now provide that valuation of the Company's assets shall be performed in accordance with prevailing accounting standards.

By Order of the Board

Steven Cowie C.A.
Secretary

29 November 2013

5. STATEMENT OF DIRECTORS' RESPONSIBILITIES

The Directors are responsible for preparing this Annual Financial Report and the Annual Report & Accounts, in accordance with applicable law and regulations. Company law requires the Directors to prepare financial statements for each financial year and these have been prepared in accordance with IFRSs as adopted by the EU.

Under Company law, the Directors must not approve the financial statements unless they are satisfied they present fairly the financial position, financial performance and cash flows for that period.

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

- select suitable accounting policies in accordance with IAS 8: Accounting Policies, Changes in Accounting Estimates and Errors and then apply them consistently;

- present information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable information;

- provide additional disclosures when compliance with the specific requirements in IFRSs is insufficient to enable users to understand the impact of particular transactions, other events and conditions on the company's financial position and performance;

- make judgements and estimates that are reasonable and prudent; and

- 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.

The Directors consider that the Annual Report and Accounts, taken as a whole, is fair, balanced and understandable, and provides the information necessary for shareholders to assess the Company's performance, business model and strategy. In reaching this conclusion the Directors have assumed that the reader of the Annual Report and Accounts would have a reasonable level of knowledge of the investment industry and of investment trusts in particular.

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that its financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

Under applicable law and regulations, the Directors are also responsible for preparing a Strategic Report, a Directors' Report, a Corporate Governance Statement and a Directors' Remuneration Report 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.

Statement under Disclosure and Transparency Rules

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

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

- the Strategic Report and the Directors' Report (incorporating the other sections which are referred to in them) includes a fair review of the development and performance of the business and the position of the Company, together with a description of the principal risks and uncertainties that it faces.

For and on behalf of Troy Income & Growth Trust plc

J Brown

Chairman of the Audit Committee

29 November 2013

TROY INCOME & GROWTH TRUST PLC

STATEMENT OF COMPREHENSIVE INCOME

		Year ended 30 September 2013			Year ended 30 September 2012
		Revenue	Capital		Revenue	Capital
	Note	return	return	Total	return	return	Total
		£'000	£'000	£'000	£'000	£'000	£'000
Profits on investments held at fair value	9	-	11,157	11,157	-	7,765	7,765
Currency gains/(losses)		-	1	1	-	(8)	(8)
Revenue	2
Income from listed investments		5,999	-	5,999	3,885	-	3,885
Other income		2	-	2	1	-	1
		______	_______	______	______	_______	______
		6,001	11,158	17,159	3,886	7,757	11,643
		______	_______	______	______	_______	______
Expenses
Investment management fees	3	(364)	(677)	(1,041)	(217)	(403)	(620)
Other administrative expenses	4	(343)	-	(343)	(364)	-	(364)
Finance costs of borrowing	5	(5)	(10)	(15)	(5)	(10)	(15)
		______	_______	______	______	_______	______
Profit before taxation		5,289	10,471	15,760	3,300	7,344	10,644
Taxation	6	(95)	-	(95)	(55)	-	(55)
		______	_______	______	______	_______	______
Profit for the year		5,194	10,471	15,665	3,245	7,344	10,589
		______	_______	______	______	_______	______
Earnings per Ordinary share (pence)	8	2.21	4.45	6.66	2.16	4.88	7.04
		______	_______	______	______	_______	______

The "Profit for the Year" is also the Total Comprehensive Income for the year as defined in IAS1 (revised).

The total column of this statement represents the Statement of Comprehensive Income, prepared in accordance with IFRS, as adopted by the European Union. The supplementary revenue return and capital return columns are both prepared as explained in the accounting policies. All items in the above statement derive from continuing operations.

No operations were acquired or discontinued during the year.

The Directors are of the opinion that the Company is engaged in a single segment of business, being investment in predominantly UK equities.

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

TROY INCOME & GROWTH TRUST PLC

BALANCE SHEET


		As at	As at
		30 September	30 September
		2013	2012
	Notes	£'000	£'000
Non-current assets
Ordinary shares		140,861	116,267
Other fixed interest		378	2,173
		______	______
Investments held at fair value through profit or loss	9	141,239	118,440
		______	______
Current assets
Accrued income and prepayments		684	608
Other debtors		-	41
Cash and cash equivalents		4,243	6,596
		______	______
Total current assets		4,927	7,245
		______	______
Total assets		146,166	125,685
Current liabilities
Trade and other payables		(388)	(428)
Dividends payable		-	(732)
		______	______
Total current liabilities		(388)	(1,160)
		______	______
Net assets		145,778	124,525
		______	______
Issued capital and reserves attributable to equity holders
Called-up share capital	10	60,514	56,421
Share premium account	11	36,432	30,941
Special reserve	12	58,163	58,163
Capital reserve	13	(12,900)	(23,371)
Revenue reserve	14	3,569	2,371
		______	______
Equity shareholders' funds		145,778	124,525
		______	______
Net asset value per Ordinary share (pence)	8	60.22	55.18
		______	______

TROY INCOME & GROWTH TRUST PLC

STATEMENT OF CHANGES IN EQUITY


For year ended 30 September 2013
		Share
	Share	premium	Special	Capital	Revenue
	capital	account	reserve	reserve	reserve	Total
	£'000	£'000	£'000	£'000	£'000	£'000
Balance at 30 September 2012	56,421	30,941	58,163	(23,371)	2,371	124,525
Total comprehensive income for the year	-	-	-	10,471	5,194	15,665
Equity dividends	-	-	-	-	(3,996)	(3,996)
Costs incurred on issue of new shares	-	1	-	-	-	1
Contribution to costs incurred on issue of new shares	-	(3)	-	-	-	(3)
Discount control costs	-	(36)	-	-	-	(36)
New shares issued	4,093	5,529	-	-	-	9,622
	______	______	______	______	______	______
Balance at 30 September 2013	60,514	36,432	58,163	(12,900)	3,569	145,778
	______	______	______	______	______	______
For year ended 30 September 2012
Balance at 30 September 2011	31,610	1,547	58,163	(30,715)	2,622	63,227
Total comprehensive income for the year	-	-	-	7,344	3,245	10,589
Equity dividends	-	-	-	-	(3,496)	(3,496)
Costs incurred on the issue of new shares	-	(558)	-	-	-	(558)
Contribution to costs incurred on issue of new shares	-	254	-	-	-	254
Discount control costs	-	(36)	-	-	-	(36)
New shares issued	24,811	29,734	-	-	-	54,545
	______	______	______	______	______	______
Balance at 30 September 2012	56,421	30,941	58,163	(23,371)	2,371	124,525
	______	______	______	______	______	______

TROY INCOME & GROWTH TRUST PLC

CASH FLOW STATEMENT

	Year ended		Year ended
	30 September 2013		30 September 2012
	£'000	£'000	£'000	£'000
Cash flows from operating activities
Investment income received	5,929		3,621
Deposit interest received	2		1
Administrative expenses paid	(1,401)		(856)
	________		________
Cash generated from operations (note 19 (a))		4,530		2,766
Finance costs paid		(15)		(15)
Taxation		(97)		(55)
		________		________
Net cash inflows from operating activities		4,418		2,696

Cash flows from investing activities
Purchases of investments	(21,615)		(34,517)
Sales of investments	9,973		3,021
	________		________
Net cash outflow from investing activities		(11,642)		(31,496)
		________		________
Net cash outflow before financing		(7,224)		(28,800)
Financing activities
Proceeds of issue of shares	9,622		32,576
Dividends paid	(4,728)		(2,764)
Costs incurred on issue of new shares	(25)		(317)
	________		________
Net cash inflow from financing activities		4,869		29,495
		________		________
Net (decrease)/increase in cash and short term deposits (note 19(b))		(2,355)		695
Cash and cash equivalents at the start of the year		6,596		5,910
Effect of foreign exchange rate changes		2		(9)
		________		________
Cash and cash equivalents at the end of the year		4,243		6,596
		________		________

TROY INCOME & GROWTH TRUST PLC

YEAR ENDED 30 SEPTEMBER 2013

1.	Accounting Policies
	(a)	Basis of accounting
		The financial statements of the Company 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 financial statements are presented in Sterling which is regarded as the functional currency and all values are rounded to the nearest thousand pounds (£'000) except where otherwise indicated.
		The principal accounting policies adopted are set out below. These policies have been applied consistently throughout the current and prior year. Where presentational guidance set out in the Statement of Recommended Practice ("SORP") 'Financial Statements of Investment Trust Companies and Venture Capital Trusts' (issued in January 2009) 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 better to 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. Additionally, the net revenue of the Company is the measure the Directors believe appropriate in assessing the Company's compliance with certain requirements set out in Section 1159 of the Corporation Tax Act 2010.
		At the date of authorisation of these financial statements, the following Standards and Interpretations were in issue but not yet effective:
		-	Amendment to IAS 1 - Presentation of Financial Statements - additional comparative information (effective for annual periods beginning on or after 1 January 2013).
		-	Amendment to IAS 27- Reissued as IAS 27 - Separate Financial Statements (2011) (effective for annual periods beginning on or after 1 January 2014).
		-	Amendment to IAS 27 - Separate Financial Statements - investment entity consolidation exemption (effective for annual periods beginning on or after 1 January 2014).
		-	Amendment to IFRS 7 - Financial Instruments: Disclosures - amendments related to the offsetting of assets and liabilities (effective for annual periods beginning on or after 1 January 2013).
		-	IFRS 9 - Financial Instruments - Classification and Measurement (effective for annual periods beginning on or after 1 January 2015).
		-	IFRS 12 - Disclosures of Interests in Other Entities (effective for annual periods beginning on or after 1 January 2014).
		-	Amendments to IFRS 12 - Disclosures of Interests in Other Entities - investment entity consolidation exemption (effective for annual periods beginning on or after 1 January 2014).
		-	IFRS 13 - Fair Value Measurement (effective for annual periods beginning on or after 1 January 2013).
		The Directors do not anticipate that the adoption of these Standards and Interpretations in future periods will materially impact the financial results in the period of initial application. The Company intends to adopt the standards in the reporting period when they become effective.
	(b)	Investments - Securities held at Fair Value
		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.
		As the Company's business is investing in financial assets with a view to profiting from their total return in the form of interest, dividends or increases in fair value, listed equities and fixed interest securities are designated as fair value through profit or loss on initial recognition. All investments designated upon initial recognition as held at fair value through profit or loss 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.
	(c)	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.
	(d)	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 35% to revenue and 65% to capital.
	(e)	Bank borrowings
		Interest-bearing bank loans and overdrafts are initially recognised at cost, being the fair value of the consideration received, net of any issue expenses. Finance charges, including premiums payable on settlement or redemption and direct issue costs, are accounted for in the Income Statement using the effective interest rate method.
	(f)	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 Company'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 temporary 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. Temporary 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.
	(g)	Foreign currency
		Transactions denominated in foreign currencies are recorded at the actual exchange rate as at the date of the transaction. Assets and liabilities denominated in foreign currencies at the year end are reported at fair value by using the rate of exchange prevailing at the year end. The currencies to which the Company was exposed were Swiss Francs and US Dollars.
		Any gain or loss arising from a movement in exchange rates subsequent to the date of the transaction is included as an exchange gain or loss in the income statement as a revenue or capital item depending on the nature of the gain or loss.
	(h)	Cash and cash equivalents
		Cash comprises cash in hand and demand deposits. Cash equivalents are short-term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value.
	(i)	Use of estimates
		The preparation of financial statements require the Company to make estimates and assumptions that affect items reported in the Balance Sheet and Statement of Comprehensive Income and the disclosure of contingent assets and liabilities at the date of the financial instruments. Although these estimates are based on the Directors' best knowledge of current facts, circumstances and, to some extent, future events and actions, the Company's actual results may ultimately differ from those estimates. There were no material accounting estimates in the current period.

		2013	2012
2.	Income	£'000	£'000
	Income from listed investments
	UK dividend income	5,365	3,516
	Interest income from investments and overseas interest	634	369
		________	________
		5,999	3,885
		________	________
	Other income from investment activity
	Deposit interest	2	1
		________	________
	Total income	6,001	3,886
		________	________

Investment management fees

On 31 July 2009, Troy Asset Management Limited ("Troy") became the Investment Manager. Until 30 September 2012 the investment management fee paid was at an annual rate of 0.75% of the Company's net assets, calculated monthly and paid quarterly. From 1 October 2012 the investment management fee has been paid at an annual rate of 0.75% of the Company's net assets up to £175 million and at an annual rate of 0.65% of the Company's net assets at or above £175 million. The fee is calculated monthly and paid quarterly. The fee is allocated 35% to revenue and 65% to capital.

	2013			2012
	Revenue	Capital		Revenue	Capital
	return	return	Total	return	return	Total
	£'000	£'000	£'000	£'000	£'000	£'000
Investment management fee	364	677	1,041	217	403	620
	_______	______	______	_______	______	______


		2013	2012
4.	Other administrative expenses	£'000	£'000
	Directors' remuneration - fees as Directors	76	68
	Secretarial fees	103	100
	Fees payable to auditor
	- fees payable to the Company's auditor for the audit of the annual accounts {a}	22	22
	- fees payable to the Company's auditor for taxation services	8	9
	Other management expenses {b}	134	165
		_______	_______
		343	364
		_______	_______
	{a} Includes irrecoverable VAT of £3,700 (2012 - £3,700).
	{b} Includes non-recurring credit of £42,000 (2012 - nil).
	In addition to the fees payable to the auditors and charged to administrative expenses in 2012, further fees of £43,200 were paid and were included in the costs incurred on the issue of new shares. These fees related to certain agreed procedures in relation to the acquisition of assets from Grampian Investment Trust plc and Albany Investment Trust plc.
	The Company had no employees during the year (2012 - nil). No pension contributions were paid for Directors (2012 - £nil).


		2013			2012
		Revenue	Capital		Revenue	Capital
		return	return	Total	return	return	Total
5.	Finance costs of borrowings	£'000	£'000	£'000	£'000	£'000	£'000
	Bank loans and overdrafts repayable within one year	5	10	15	5	10	15
		______	_____	_____	_____	_____	_____
	Interest on bank overdrafts is at floating rates related to the lenders' UK base rates.

	.
		2013			2012
		Revenue	Capital		Revenue	Capital
		return	return	Total	return	return	Total
6.	Taxation	£'000	£'000	£'000	£'000	£'000	£'000
	Irrecoverable overseas tax	95	-	95	55	-	55
		_______	______	______	_______	______	______
	The following table is a reconciliation of the current taxation charge to the charges or credits which would arise if all ordinary activities were taxed at the standard UK effective corporation tax rate of 23.5% (2012 - 25%):
		2013			2012
		Revenue	Capital		Revenue	Capital
		return	return	Total	return	return	Total
		£'000	£'000	£'000	£'000	£'000	£'000
	Profit on ordinary activities before taxation	5,289	10,471	15,760	3,300	7,344	10,644
		_______	______	______	_______	______	______
	Taxation of return on ordinary activities at the standard rate of corporation tax	1,243	2,461	3,704	825	1,836	2,661
	Effects of:
	UK dividend income not liable to further tax	(1,195)	-	(1,195)	(879)	-	(879)
	Overseas dividend income not liable to further tax	(149)	-	(149)	(92)	-	(92)
	Capital profits not taxable	-	(2,622)	(2,622)	-	(1,939)	(1,939)
	Movement in unutilised management expenses	101	161	262	146	103	249
	Overseas withholding tax suffered	95	-	95	55	-	55
		_______	______	______	_______	______	______
	Current taxation charge for the year	95	-	95	55	-	55
		_______	______	______	_______	______	______
	At 30 September 2013, the Company had surplus management expenses of £3,366,000 (2012 - £2,420,000) with a tax value of £673,000 (2012 - £556,000) to carry forward. No deferred tax asset has been recognised in the current or prior period because it is considered too uncertain that there will be suitable taxable profits from which the future reversal of the deferred tax asset could be deducted.


		2013	2012
7.	Dividends on equity shares	£'000	£'000
	Amounts recognised as distributions to equity shareholders in the year:
	Fourth interim dividend for the year ended 30 September 2011 of 0.5p per share	-	633
	Fifth interim dividend for the year ended 30 September 2012 of 0.125p per share	282	-
	Three interim dividends for the year ended 30 September 2013 totalling 1.575p (2012 - four interims totalling 1.9p) per share	3,714	2,863
		________	________
		3,996	3,496
		________	________
	The fourth interim dividend of 0.55p per share, declared on 23 September 2013 and paid on 25 October 2013, 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 1159 of the Corporation Tax Act 2010 are considered.
		2013	2012
		£'000	£'000
	Three interim dividends for the year ended 30 September 2013 totalling 1.575p (2012 - four interim dividends totaling1.9p) per share	3,714	2,863
	Fourth interim dividend for the year ended 30 September 2013 of 0.55p (2012 - fifth interim dividend 0.125p) per share	1,331	282
		________	________
		5,045	3,145
		________	________


		2013	2012
8.	Return and net asset value per share	£'000	£'000
	The returns per share are based on the following figures:
	Revenue return	5,194	3,245
	Capital return	10,471	7,344
		________	________
	Total	15,665	10,589
		________	________
	Weighted average number of Ordinary shares	235,342,418	150,380,633
		__________	__________
	The net asset value per share is based on net assets attributable to shareholders of £145,778,000 (2012 - £124,525,000) and on 242,057,445 (2012 - 225,684,445) Ordinary shares in issue at the year end.


		2013	2012
9.	Investments held at fair value through profit or loss	£'000	£'000
	Listed on recognised stock exchanges:
	United Kingdom	126,396	104,269
	Overseas	14,843	14,171
		________	________
		141,239	118,440
		________	________
		2013	2012
		£'000	£'000
	Opening book cost	104,084	50,931
	Opening fair value gains on investments held	14,356	6,315
		________	________
	Opening fair value	118,440	57,246
	Purchases for cash	21,615	34,517
	Purchases financed by the issue of shares (note 10)	-	21,933
	Sales - proceeds	(9,973)	(3,021)
	Sales - net gains/(losses) on sales	2,214	(276)
	Movement in fair value during the year	8,943	8,041
		________	________
	Closing fair value	141,239	118,440
		________	________
	Closing book cost	117,940	104,084
	Closing fair value gains on investments held	23,299	14,356
		________	________
	Closing fair value	141,239	118,440
		________	________
	All investments are categorised as held at fair value through profit or loss, and were designated as such upon initial recognition.
	The total transaction costs on purchases was £120,000 (2012 - £181,000) and on sales £16,000 (2012 - £3,000).

		2013	2012
	Gains/(losses) on investments held at fair value	£'000	£'000
	Net gains/(losses) on sales	2,214	(276)
	Gains in investment holdings	8,943	8,041
		________	________
		11,157	7,765
		________	________

		Ordinary shares of 25p each
10.	Called-up share capital	Number	£'000
	Allotted, called up and fully paid
	At 30 September 2013	242,057,445	60,514
	Held in treasury	-	-
		__________	________
		242,057,445	60,514
		__________	________
	Allotted, called up and fully paid
	At 30 September 2012	225,684,445	56,421
	Held in treasury	-	-
		__________	________
		225,684,445	56,421
		__________	________
	There were no shares repurchased by the Company nor were any shares re-issued from treasury during the years ended 30 September 2012 and 30 September 2013.
	During the year to 30 September 2013 there were 16,373,000 new Ordinary shares of 25p each issued by the Company for cash proceeds totalling £9,621,817. During the year to 30 September 2012 there were 99,243,013 new Ordinary shares of 25p each issued by the Company for proceeds totalling £54,545,159. Of the 99,243,013 shares issued, 39,543,885 shares were allotted for non cash consideration of £21,932,912. All other shares issued during the year to 30 September 2012 were issued for cash.
	No shares were purchased for cancellation during the year (2012 - nil) and at the year end no shares were held in treasury (2012- nil). The costs of the operation of the discount control mechanism of £36,000 (including VAT) have been charged against the premium on shares issued.


		2013	2012
11.	Share premium account	£'000	£'000
	At 1 October	30,941	1,547
	Premium on issue of new shares	5,529	29,734
	Costs incurred on issue of new shares	1	(558)
	Contributions to costs incurred on issue of new shares	(3)	254
	Discount control costs (note 10)	(36)	(36)
		________	________
	At 30 September	36,432	30,941
		________	________

		2013	2012
12.	Special reserve	£'000	£'000
	At 30 September	58,163	58,163
		________	________
	The purpose of this reserve is to fund market purchases by the Company of its own Ordinary shares.


		2013	2012
13.	Capital reserve	£'000	£'000
	At 1 October	(37,727)	(37,033)
	Net gains/(losses) on sales of investments during the year	2,214	(276)
	Finance costs of borrowings	(10)	(10)
	Investment management fee	(677)	(403)
	Currency losses	-	(5)
		________	________
	At 30 September	(36,200)	(37,727)
		________	________

	Investment holdings gains
	At 30 September	14,356	6,318
	Investment gains	8,943	8,041
	Unrealised currency gains/(losses)	1	(3)
		________	________
		23,300	14,356
		________	________
	Total capital reserve	(12,900)	(23,371)
		________	________


		2013	2012
14.	Revenue reserve	£'000	£'000
	At 1 October	2,371	2,622
	Transfer to revenue account net of dividends	1,198	(251)
		______	______
	At 30 September	3,569	2,371
		______	______

15.

Risk management, financial assets and liabilities

Risk management

With effect from 17 September 2009, the Company's objective changed to that of providing shareholders with an attractive income yield and the prospect of income and capital growth through investing in a portfolio of predominately UK equities.

In pursuit of the Company's objective, the Company's investment policy is to invest in a portfolio of predominately UK equities. Equities are selected for their inclusion within the portfolio solely on the basis of the strength of the investment case with the focus being on long term income growth along with capital preservation.

Asset classes other than equities will be purchased from time to time and will vary as opportunities are identified and will include convertibles, preference shares, fixed income securities and corporate bonds. Such investments will be made when prospective returns appear to be superior to those from equity markets or are considered likely to exceed the Company's borrowing costs. However, non-equity securities will not constitute the majority of the portfolio. The Company may also use derivatives for the purpose of efficient portfolio management (including reducing, transferring or eliminating investment risk in its investments and protection against currency risk), to exploit an investment opportunity and to achieve capital growth.

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.

Financial assets and liabilities

The Company's financial assets include investments, cash at bank and short-term debtors. Financial liabilities consist of short-term creditors and bank overdraft.

The main risks the Company faces from its financial instruments are (i) market risk (comprising interest rate risk, foreign currency risk and other price risk), (ii) liquidity risk and (iii) credit risk.

(i)

Market risk

The fair value or future cash flows of a financial instrument held by the Company may fluctuate because of changes in market prices. This market risk comprises three elements - interest rate risk, foreign currency risk and other price risk.

Interest rate risk

The Company is subject to interest rate risk because the value of fixed interest rate securities is 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 at the Balance Sheet date was as follows (there were no interest bearing financial liabilities at the Balance Sheet dates):

Weighted

average

interest

Fixed

Floating

rate

As at 30 September 2013

£'000

Assets

UK preference shares

378

Cash

4,243

________

______

________

Total assets

378

4,243

________

______

________

Weighted

average

interest

Fixed

Floating

rate

As at 30 September 2012

£'000

Assets

UK preference shares

7.78

2,173

Cash

6,596

________

______

________

Total assets

2,173

6,596

________

______

________

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 have been excluded from the above tables.

Maturity profile

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

Within

More than

1 year

1-2 years

2-3 years

3-4 years

4-5 years

5 years

At 30 September 2013

£'000

Fixed rate

UK preference shares

378

________

_____

______

________

______

________

Floating rate

Cash

4,243

________

_____

______

________

______

________

Total

4,243

378

________

_____

______

________

______

________

Within

More than

1 year

1-2 years

2-3 years

3-4 years

4-5 years

5 years

At 30 September 2012

£'000

Fixed rate

UK preference shares

2,173

________

_____

______

________

______

________

Floating rate

Cash

6,596

________

_____

______

________

______

________

Total

6,596

2,173

________

_____

______

________

______

________

Interest rate sensitivity

The sensitivity analysis below has been determined based on the exposure to interest rates 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 50 basis points higher or lower and all other variables were held constant, the Company's:

profit before tax for the year ended 30 September 2013 would increase/decrease by £21,000 (2012 - increase/decrease by £33,000) 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 2013 would decrease by £8,000 (2012 - decrease by £145,000), increase by £9,000 (2012 - increase by £167,000) given the Company's exposure to interest rates on its fixed interest securities.

net assets at 30 September 2013 would increase by £13,000 (2012 - decrease by £112,000), decrease by £12,000 (2012 - increase by £134,000) as a result of the combined effect on its floating rate cash balances and its fixed interest securities.

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.

Foreign currency risk

A proportion of the Company's investment portfolio is invested in overseas securities and the income and capital value can be affected by movements in exchange rates. Exchange gains or losses may arise as a result of the movement in the exchange rate between the date of the transaction denominated in a currency other than sterling and its settlement.

An analysis of the Company's currency exposure is detailed below:

30 September 2013

30 September 2012

Net

Overseas

monetary

Overseas

monetary

investments

assets

investments

assets

£'000

US Dollar

12,469

147

12,492

119

Swiss Franc

2,374

1,679

_______

Total

14,843

147

14,171

119

_______

Foreign currency sensitivity

There is no sensitivity analysis included, as the Company's significant foreign currency financial instruments are in the form of equity investments, which have been included within the other price risk sensitivity analysis so as to show the overall level of exposure.

Other price risk

Other price risks (i.e. changes in market prices other than those arising from interest rate 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 all listed on recognised investment exchanges.

Other price sensitivity

If market prices at the Balance Sheet date had been 10% higher or lower on a sterling basis while all other variables remained constant, the return attributable to Ordinary shareholders and equity reserves for the year ended 30 September 2013 would have increased/decreased by £14,086,000 (2012 - increase/decrease of £11,627,000). 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 overdraft facilities.

Liabilities at the balance sheet date are payable within three months.

(iii)

Credit risk

This is 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 significant, and is managed as follows:

investment transactions are carried out with a large number of brokers, whose credit-standing is reviewed periodically by the 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 administrator carries out a stock reconciliation to the custodian's records on a monthly basis to ensure discrepancies are picked up on a timely basis.

cash is held only with reputable banks and financial institutions with high quality external credit ratings.

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 was as follows:

2013

2012

Balance

Maximum

Balance

Maximum

Sheet

exposure

Sheet

exposure

£'000

Non-current assets

Securities at fair value through profit or loss

Current assets

Accrued income

684

608

Other debtors

Cash and short term deposits

4,243

6,596

________

4,927

7,245

________

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 included in these financial statements approximates to fair value because of the short-term maturity. The carrying value of fixed asset investments are stated at their fair values, which have been determined with reference to quoted market prices. For all other short-term debtors and creditors, their book values approximate to fair value because of their short-term maturity.

Gearing

The Company has in place a multi-currency overdraft facility with HSBC for the lesser of £12 million or 25% of the market value of assets they hold as custodians. This gives the Company the ability to augment finance from time to time with short-term borrowings. The facility is secured against the cash accounts and assets held by the custodian.

The Company had no outstanding gearing at the year end. 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 Company's portfolio of investments.

16.	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 Company's capital at 30 September comprised:
				2013	2012
				£'000	£'000
	Equity share capital			60,514	56,421
	Retained earnings and other reserves			85,264	68,104
				________	________
				145,778	124,525
				________	________
	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 or to hold in treasury, which takes account of the difference between the net asset value per share and the share price (i.e. 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.
	The Company's objectives, policies and processes for managing capital are unchanged from the preceding accounting period.
	The Company had no gearing at the year end (2012 - nil).

17.	Commitments and contingencies
	At 30 September 2013 there were no contingent liabilities in respect of outstanding underwriting commitments or uncalled capital (2012 - £nil).

18.	Financial instruments measured at Fair Value
					2013				2012
		Level 1	Level 2	Level 3	Total	Level 1	Level 2	Level 3	Total
		£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
	Investments	141,239	-	-	141,239	118,440	-	-	118,440
	Cash and cash equivalents	4,243	-	-	4,243	6,596	-	-	6,596
		______	_____	______	______	______	_____	______	______
		145,482	-	-	145,482	125,036	-	-	125,036
		______	_____	______	______	______	_____	______	______
	Level 1 reflects financial instruments quoted in an active market.
	Level 2 reflects financial instruments the fair value of which is evidenced by comparison with other observable current market transactions in the same instrument or based on a valuation technique whose variables includes only data from observable markets.
	Level 3 reflects financial instruments the fair value of which is determined in whole or in part using a valuation technique based on assumptions that are not supported by prices from observable market transactions in the same instrument and not based on available observable market data.

19.	Notes to the Cash Flow Statement
	(a) Reconciliation of operating profit to operating cash flows
				2013	2012
				£'000	£'000
	Profit before taxation			15,760	10,644
	Add interest payable			15	15
	Adjustments for:
	Gains on investments			(11,157)	(7,765)
	Currency (gains)/losses			(1)	8
	(Increase) in accrued income and prepayments			(35)	(312)
	(Decrease)/increase in trade and other payables			(52)	176
				________	________
				4,530	2,766
				________	________

	(b) Analysis of changes in net funds
		30 September	Cash	Exchange	30 September
		2012	Flow	Movements	2013
		£'000	£'000	£'000	£'000
	Cash at bank	6,596	(2,355)	2	4,243
		________	________	________	________

20.	Related party transactions
	The following are considered to be related parties:
	- The Directors of the Company
	All material related party transactions, as set out in International Accounting Standard 24, Related Party, have been disclosed in the Strategic and Directors Report extracts and in 4 above.

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 2013. The statutory accounts for the year ended 30 September 2013 received an audit report which was unqualified.

The statutory accounts for the financial year ended 30 September 2013 were approved by the Directors on 29 November 2013 but will not be filed with the Registrar of Companies until after the company's Annual General Meeting which is to be held at 11.00am on 23 January 2014 at 16 Charlotte Square, Edinburgh, EH2 4DF.

The Annual Report will be posted to shareholders in December 2013 and available in due course by download from the Company's webpage (http://tigt.co.uk/secure/documents/annual/TIGTAnnual2013.pdf)

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 Troy Income & Growth Trust plc

Steven Cowie, C.A., Secretary

29 November 2013

Enquiries: 0131 538 6610

This information is provided by RNS

The company news service from the London Stock Exchange

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