Annual Financial Report

RNS Number : 7355I

Midas Income & Growth Trust PLC

05 July 2013

 



To:         RNS

Date:     5 July 2013

From:     Midas Income & Growth Trust plc

Results for the year ended 30 April 2013

Chairman's Statement

Highlights

Net asset value total return of 21.2%

Share price total return of 28.5%

Rebased dividend of 5.25 pence for the year

Share price discount to net asset value of 8.6% at the period end

Introduction

This Annual Report and Accounts covers the year from 1 May 2012 to 30 April 2013, which is the first full reporting period since shareholders approved changes to the Company's investment policy and other related matters on 18 January 2012.  These changes included rebasing the dividend, increasing the core allocation to overseas equities, reducing the core allocation to fixed income and widening asset allocation ranges.

Investment and Share Price Performance

I am pleased to report that your Company's net asset value total return for the year was 21.2%.  This was well ahead of the new investment objective to outperform 3-month LIBOR plus 3.0 per cent. over the longer term, which in the year was 3.7%.  Importantly, this outperformance was achieved in the context of a volatility level that was substantially lower than that of the market.  We will not always enjoy the fair market winds that have characterised recent months, and this low volatility emphasises the defensive qualities that stood us in good stead during the equity declines that marked the start of the year under review. The Manager discusses volatility further in his Review.

The Company's share price total return was better still at 28.5%, the discount at which the Company's shares trade narrowing from 12.9% to 8.6% at the year end.  This re-rating of the Company's shares is particularly welcome, signalling as it does the market's recognition of improved performance under the new investment policy.

Dividends and Income

Your Company paid three interim dividends of 1.30 pence per share for the year and, in accordance with its intention of pursuing a progressive dividend policy, declared a fourth interim dividend of 1.35 pence.  This represented a 3.8% increase on the 1.30 pence paid in respect of the fourth interim dividend last year. Earnings per share for the year were 5.40 pence per share.  This means that for the first time in four years the Company's dividend was covered, and that the rebuilding of the revenue reserve could commence.

The policy regarding dividends is that these be paid as three interim dividends of an equal amount, with a fourth interim dividend giving the total dividend payable for each financial year.  In deciding the level of the fourth interim dividend the Board will take into account current year performance and future year prospects.

Gearing

The Company renewed its short term rolling debt facility of £7 million in June 2013.  The new facility was renewed on better terms than its predecessor and runs until 31 October 2015.  It can be cancelled at any time without cost to the Company.  The Company was 8% geared at the end of April, somewhat less than the figure of 13% at 30 April 2012 and at the lower end of the gearing range during the year.

Board Changes

I have been a Director of the Company since 1996, and became Chairman in 2004 before the Company changed its name from The Taverners Trust to Midas Income & Growth Trust.  I spoke above of the significant changes to investment policy and related matters that have been implemented following shareholder approval in January last year.  I am pleased with the progress that the Company has made since these changes took effect, and feel that the time is now right for a new Chairman to take the Company forward.  Accordingly I am not offering myself for re-election at this year's Annual General Meeting and will stand down from the Board at the meeting's conclusion.

Against this backdrop I am particularly glad to welcome Richard Ramsay to the Board.  Richard joined us on 2 April 2013 and brings broad experience and a range of skills to the Board, as well as a fresh eye.  Richard will succeed me as Chairman, and we welcome him to the Board at what I believe is a particularly exciting time for the Company.

Annual General Meeting

This year's Annual General Meeting will be held at 12.30pm on Tuesday, 3 September 2013 at The Caledonian Club, 9 Halkin Street, London SW1X 7DR.  I would be delighted if shareholders were to take this opportunity to meet with Board members and the investment managers over a post AGM buffet lunch.

Resolution 6 at this year's AGM represents the first annual continuation vote by shareholders on the Company's future.  The Board believes this resolution to be in the best interests of the Company and its members as a whole, and strongly recommends that shareholders should vote in favour of Resolution 6 as it intends to do in respect of its own beneficial shareholdings of 261,751 shares.

Alternative Investment Fund Managers Directive ("AIFMD")

Shareholders may be aware of the forthcoming AIFMD, which is due to take effect on 22 July 2013, with provision for transitional arrangements until 22 July 2014.  The Board is currently assessing the most effective approach for the Company in complying  with the Directive.  It is prepared for July 2013 and expects to be fully compliant well in advance of the July 2014 deadline.

Investment Strategy and Outlook

I outlined above certain changes to your Company's investment policy, including an increase in the core allocation to overseas equities and a reduction in the core allocation to fixed income.  I said in my Interim Statement that it was particularly pleasing that it was this switch that had contributed most to your Company's strong performance during the period, and that remains the case during the second half of the year. The Manager speaks of this at greater length in his Review.

World markets allayed their concerns as to the United States' "fiscal cliff" in the New Year, and have shrugged off Eurozone stagnation, the Cyprus bail out and concerns as to the strength of the BRIC economies to move towards all time highs. The stutters that have accompanied any talk of the withdrawal of the stimulus of Quantitative Easing from the patient suggest, however, that all is not necessarily well.

Against this backdrop, a caution born of innate conservatism and a desire to protect capital leaves the Company well placed, while our commitment to income, preferably equity income, remains attractive during a time of low returns on cash. Your Company has made a strong start in its new incarnation and I believe that the portfolio is well positioned for the period ahead.

Hubert Reid

Chairman

5 July 2013

Investment Manager's Review

Market Background

The period began with equity market declines. The problems within the Eurozone, slowing economic activity in the United States and concerns over a 'hard landing' for the Chinese economy all weighed heavily on investor appetite for risk assets. However, reassuring comments from the President of the European Central Bank (ECB), Mario Draghi, who announced that the ECB would do 'whatever it takes' to support the European currency, encouraged a strong rally in the second half of 2012. The improved sentiment was further supported by better economic data in the United States, the re-election of president Obama and a degree of economic and political stabilisation in China. The UK economy has remained becalmed over the period, with economic growth running at well below levels needed to provide support to industry and with the coalition Government retaining its commitment to austerity measures.

Markets have continued to 'climb the wall of worry' and indeed equity markets posted their strongest start to a year for some twenty years in the early part of 2013. There have been some signs that investors have been forced into higher risk assets due to the very low yields available in bonds and cash. However, the risks to higher inflation resulting from the loose money conditions, including quantitative easing policies by the major Western Central Banks, has almost certainly encouraged investors to look again at equity markets. Equity market valuations have been pushed to historically high levels in several of the traditionally more defensive sectors such as Consumer Staples, Tobacco and Utilities. However, the slowdown in World economic growth has also led to the more volatile commodity sectors performing poorly.

The problems within the UK economy have led to a generally poor performance by Sterling, giving some succour to domestic exporters, as the currency devalued against many of its major trading partners. This trend was particularly evident against the US Dollar. The weakness in Sterling also contributed to returns achieved by UK investors in international markets. The main exception to this came in Japan, where the currency saw significant weakness as the new political leadership moved to promote growth and target higher inflation through massive monetary stimulus.

Strong performance was recorded in international equity markets over the period with the United States S&P 500 Index producing a total return to UK investors of 22.2%. The Japanese stock market performed extremely well, producing a 27.9% return (Topix Index), as investors took encouragement that a weaker currency and monetary stimulus would support the country's major exporters and finally lead to better economic growth. European equity markets also made up some lost ground producing a total return of 23.1% (FTSE Europe ex UK Index), despite further evidence that economic growth is muted and with severe structural problems still to be resolved.

The UK equity market also saw strong returns, with the FTSE All Share Index producing a total return of 18.4%. However, the best returns from the UK market were found amid the small and mid-sized companies, where returns in both cases stretched to 26.4%. Larger companies, in general, fared less well although the FTSE 100 (largest 100 companies) still produced a healthy total return of 17.0%. Asian equity market returns were strong with an outturn of 18.2% (FT Asia Pacific ex Japan Index), whilst the laggards were Emerging market equities with an overall total return of 10% (as measured by the FT Emerging Markets Equity Index).

Government bond markets performed well, although they failed to match up to the equity market euphoria. 10 year bond yields in the United States, Germany and United Kingdom all fell to below 2%, a level which seems strangely at odds with the potential effects of inflation on such assets, but largely explained by the massive levels of buying being undertaken by the Central Banks. Towards the end of the period there were tentative signs that bond yields were beginning to rise as the prospect of reduced central bank support was anticipated.

Performance

The higher weighting towards equities put in place in early 2012 was a major contributor to returns over the period. However, the more general rally seen in risk assets also meant that returns were strong across most parts of the Company's investment portfolio. Strong relative performance by many of the overseas equity managers also added to the overall outturn, whilst UK equity selection was also positive, particularly in the mid cap holdings.

Over the period, the net asset value total return was a healthy 21.2%, whilst asset price volatility was contained to just over half of the FTSE 100 Index (as measured by Financial Express Analytics). The share price total return was even better at 28.5%, helped by a narrowing of the share price discount from 12.9% at the start of the period to 8.6% at the end. The benchmark return (LIBOR +3%) was 3.7% for the year.

Asset Allocation

The changes to the investment objectives approved by shareholders in January 2012 have provided more flexibility to improve capital returns and further diversify the Company's assets. In particular, the move to rebase the dividend has allowed investment to be made with more emphasis on a growing income stream, offering the prospect of better future revenue performance and also improved capital returns.

The Company's exposure to equities has been increased further over the course of the year, as the relative attractions of well financed companies with strong business franchises and growing dividends have been increasingly emphasised within the portfolio. We also feel that equities offer better potential to protect against future inflationary pressures. This increased exposure was achieved through further investment in overseas equities, whilst the allocation to UK equities actually fell slightly, as profits were taken towards the end of the period following strong performance by several portfolio stocks. The excellent performance of overseas equity holdings was another major contributor to the higher period end exposure, with Asian and Emerging Market managers being particularly successful in achieving market beating returns. However, manager selection and overall equity exposure has been carefully constructed to provide an element of downside protection, should the positive market environment deteriorate, supported by a strong emphasis on income orientated managers and direct UK equity investments.

Fixed interest positions have been broadly maintained over the period, although increased emphasis has been placed on shortening the duration of the portfolio to protect against potential future interest rates pressures and the detrimental effect of inflation. Cash balances have been maintained at between 4% to 7% over the period, which has given flexibility to take advantage of investment opportunities as they have been identified. At the period end cash stood at 4%.

Alternative asset holdings were again reduced this year, following a significant reduction in the previous year. Further profit was taken from the Company's private equity positions, whilst infrastructure and forestry positions were completely exited. Hedge fund holdings have been maintained and remain centred on managers positioned to profit from distressed debt markets.

Property exposure was reduced, mainly through relative underperformance, although absolute returns remained positive. Asian property exposure was reduced over the period in favour of European commercial property financing opportunities.

 The asset allocation across the portfolio at 30 April 2013 is shown in the table below.

Asset Class	Portfolio weight	Core allocation approved on 18/01/2012	Change to previous core allocation	New Allocation range
	%	%	%	%
UK Equities	33.3 (34.5)	35		15-60
Overseas Equities	30.3 (23.2)	25	+10	10-40
Total Equities	63.6 (57.7)	60	+10	25-85
Fixed Interest	19.3 (17.9)	25	-10	15-45
Alternative Assets	11.7 (18.4)	15		0-25
Property	5.4 (6.0)	10		0-25

All figures are expressed as a percentage of Gross assets.

30 April 2012 figures are shown in brackets.

UK Equities (33.3%)

The strong rise in equity markets has left many companies trading at valuations which leave little room for disappointments we feel. Against this background exposure to the UK Equity market was reduced slightly over the period, with the prices of several holdings in the consumer staples sectors being driven to valuations which appear very forward looking. The Company's holdings in Diageo, Reckitt Benckiser and Unilever were all sold, as strong advances pushed valuations to less attractive levels. Meanwhile the portfolio also benefited from strong performance from several other larger cap holdings such as Centrica, GlaxoSmithKline, SSE, Tesco and Vodafone - all of which produced returns in excess of 20%. Of particular note was the performance of Legal & General, which achieved a return of 51.2%.

Nonetheless, it was amid the mid cap holdings that some of the best gains were recorded. Amongst companies to add significant value were; D S Smith (+43.6%), GKN (+38.9%), W S Atkins (+28.8%) and of particular note was Intermediate Capital, which returned 77.3%. A degree of profit taking was carried out on these holdings towards the end of the period, but they remain core positions within the portfolio. Another equity holding that performed extremely well, namely William Hill, was top sliced during the course of the year and eventually exited having reached our price target.

Pharmaceutical company AstraZeneca was sold at a profit due to our concerns over the strategy now being followed by the new management team, whilst Kingfisher was also exited profitably, as senior management changes and a period of dull trading performance undermined our confidence. New holdings introduced to the portfolio included construction group Kier; bus and rail operator National Express; Standard Chartered Bank (funded by the sale of HSBC); property company Segro; and 'closed book' life assurance group Phoenix. We consider that whilst all these companies offer good current dividends, they should also be capable of providing decent growth over the medium term. Indeed, the new holdings offer yields higher than the companies sold, which will further enhance the revenue generated within the portfolio. 

There were few disappointments within the UK portfolio with BHP Billiton being a name that performed less well, as investors became unconvinced that metal prices were sustainable at current levels. Meanwhile RSA Insurance, a relatively new holding, fell sharply as management rather surprisingly cut the dividend. We continue to hold both investments and believe that they still offer value over the medium term. Exposure to smaller UK companies was effectively increased over the period, with the acquisition of a holding in the Diverse Income Trust, which subsequently has performed well and traded consistently at a premium to net asset value.

Overseas Equities (30.3%)

Overseas fund selection remains biased towards managers who emphasise the identification of dividend growing companies within their investment process. We are also attracted to managers who have proven defensive in less buoyant market conditions and who can deliver returns with lower volatility than their benchmark indices.

Exposure to overseas equity markets was further increased as additional allocations were made to the United States, Europe, Asia and Emerging Markets. These increased allocations were largely made through investment in new managers brought in to complement existing holdings, although strong performance also contributed to an increase in weightings.

In the United States the holding in Cullen North American High Value Dividend Fund produced a sterling return of 21.1% (within 1% of the S&P 500 index but with much lower volatility). This open ended vehicle forms the core holding to US equities. Exposure to the region was increased through an investment in the BlackRock North American Income Trust, in which the managers selectively enhance dividend income through a covered call writing strategy. The trust had produced a return of 13.6% by period end having been purchased in October.  US equity exposure stood at 4.4% at the period end.

In Europe the positions in Argonaut European Equity Income Fund and Argonaut European Enhanced Income Fund produced returns of 27.8% and 22.5% respectively, with the latter suffering due to being fully hedged against the Euro and implementing a covered call overlay which tends to limit returns in very strong market conditions. We believe that part of the portfolio's exposure to the Euro should remain hedged to mitigate the risk posed should the Eurozone come under renewed pressure. European equity exposure was increased as markets sold off in early summer. A new holding in shape of the Henderson European Focus Trust was purchased at a 14% discount to net asset value. Since acquisition the discount has closed and has been improved due to strong underlying asset performance. Given the strong performance achieved, some profit was taken on this position later in the period, having recorded a very encouraging 33% uplift. Overall European Equity exposure was 4.4% at the end of April.

Asian Equityholdings represent the largest element of the overseas equity portfolio, with the Company's position being increased due to a combination of good relative performance and new investment. The long term attractions of the region being emphasised with a 9.5% weighting at the period end. Existing open ended positions performed well over the period with Prusik Asian Equity Income Fund (+36.2%), Newton Asian Equity Income Fund (+30.7%) and Schroder Asian Income Maximiser Fund (+23.7%) all providing returns that were not only well in excess of their benchmark, but also achieved with lower volatility. In addition the closed end holding in Schroder Oriental Income Fund produced a very satisfactory total return of 33.8%. A new position was added when we participated in the 'C' share issue by the Aberdeen Asian Income Fund, although this holding was subsequently top sliced as the shares quickly moved to a 10% premium to net asset value.

Emerging Market equityexposure was added to over the period with the developing markets lagging the overall advances seen across developed equity markets. The position in Magna Emerging Markets Dividend Fund was added to, with the fund proceeding to produce a very satisfactory return of 26.6%, well ahead of its benchmark. Somerset Emerging Markets Equity Dividend Growth Fund was also successful in beating the index return, with a 15.6% outturn. The performance of the UBS Emerging Markets Equity Income Fund was slightly disappointing at 6.7%, although it has continued to deliver a strong income stream. This holding was increased further as a defensive exposure to Emerging Market equities. Another holding to be increased was the Aberdeen Latin American Income Fund, however, after a strong rally in the shares profit was taken on this purchase. At the end of the period Emerging Market equities represented 7.3% of the portfolio.

Japanese equity exposureincreased over the period although no new money was committed. The Lindsell Train Japanese Equity Fund proved to be one of the best performing assets in the portfolio, giving a total return of 54.3% as it benefited from a strong market rally and also from being fully hedged against the weakening Yen. Portfolio exposure amounted to 2.8% at the end of April.

Other Overseas exposureheld within the portfolio at the period end was largely represented by a holding in the BlackRock World Mining Trust, which was bought as a value switch out of the BlackRock Commodities Income Trust, with the latter trading at a premium to nav and the former on a significant discount.  Portfolio exposure amounted to 1.9% at the end of April.

Fixed Interest (19.3% - including 4% cash)

Investment in fixed interest markets was increased slightly over the course of the year with positioning targeted towards the short end of the yield curve in short duration assets. The Company's position in Lloyds Banking Group 7.975% preference share was sold following a strong price rally, realising a significant gain. Other holdings reduced included Invesco Leveraged High Yield Fund, which returned 27.5% in the year and Thames River High Income Fund, where performance had proven disappointing, which was sold in its entirety. Of particular note was the performance of the Royal London Sterling Extra Yield Bond Fund, which returned 23.3% over the period. This is by some distance the largest holding within the fixed interest portfolio. Preference share holdings in Ecclesiastical Insurance and Royal Insurance also performed well as yields were driven lower over the course of the year.

A new position was commenced in the Royal London Short Duration Global High Yield Bond Fund, which can invest in high yield corporate debt on a global basis, which we anticipate should deliver a yield in excess of 5%, coupled with low levels of volatility. In addition, an investment in a new closed end vehicle, TwentyFour Income Fund, was made to give exposure to European asset backed securities, which have lagged the broad advances in fixed interest markets. Other transactions included the repurchase of a position in City Merchants High Yield Trust, which had been sold at higher levels in the previous year. A top up investment was also made in the Harbourvest Senior Loan Europe Fund with the shares trading at a discount to net asset value. The Company's holding in the AXA US Short Duration High Yield Fund was increased with the Fund offering a 5.5% yield and very low volatility. Cash balances stood at 4% at the period end, with the flexibility afforded by the reduced dividend allowing active cash management to better time investment opportunities.

Alternative Assets (11.7%)

Private equity positionshave been reduced across the board over the period. The unquoted holding in A J Bell Holdings, the fast growing SIPP provider, was reduced early in the period at 500p per share through a sale to Invesco Perpetual. The carried value of the remaining position was subsequently increased to 575p from 500p following the release of the company's final results in December 2012. These results showed pre-tax profits in the financial year to 30 September 2012 had grown by 39%, revenue by 25% and dividends had increased by 18%.  At 575p the holding is valued at a price earnings ratio of 11.7x historic earnings and a yield of 4.3%, which we feel is prudent and compares very favourably with the main quoted competitor, Hargreaves Lansdown.

The on-going quarterly redemptions offered by Partners Group Global Opportunities (PGGO) have been used to reduce the position, with well over £1 million being realised over the course of the year. PGGO continues to generate cash-flows from realisations although returns over the year were somewhat muted and we intend to reduce this holding further to improve liquidity within the portfolio. This holding is carried at a 20% discount to nav and redemptions are therefore accretive to our own net asset value. The holding in Princess Private Equity was top sliced during the period following a significant rally in the shares and consequent narrowing of the discount - the period return was 27.6%.

The holding in Phaunos Timber was sold in September, following something of a 'dead cat bounce' in the shares. GCP Infrastructure was sold towards the end of the period at a large premium to NAV with investors pushing the shares ever higher due to the good yield offered.

Hedge Fundholdings remain concentrated on distressed credit strategies and weightings have been maintained over the period, although some profit was taken on Acencia Debt Strategies, which saw its discount to NAV narrow, producing an overall return of 19.3% in the year.

Property (5.4%)

Exposure to propertywas reduced with the outright sale of Dolphin Capital and a partial reduction in Asian property holdings. The position in Celsius Asian Real Estate Income Fund (12% return) was reduced and profit was taken on Macau Property Opportunities having performed well rising 30.7% on the back of strong net asset value performance and asset sales. A new position was introduced to the portfolio in the shape of Starwood European Real Estate, which will invest in loans and mezzanine finance in commercial property. This market looks attractive and should benefit from the withdrawal of banks finance, a theme we are keen to access within the portfolio. The existing position in Duet Real Estate Finance was a little dull (1.9%) as the investment period stretched beyond that envisaged on IPO. The position was increased with the shares trading at a discount to net asset value. The company is now fully invested and we expect a re-rating with the shares yielding over 8%.

Outlook

Global stocks overcame concerns related to the US fiscal cliff, the trajectory of the Chinese economy, the Cyprus bail out and an inconclusive election in Italy to post further robust gains towards the end of the period. Whilst investor sentiment towards equities appears to be improving, this is driven by the paucity of returns from other assets, especially government bonds. Fund flows into equity mutual funds turned positive in early 2013 for the first time in years, but investors do not appear to have confidence in a true recovery in global economies, a reservation we share. With investors being driven into higher risk assets, the immediate focus has been very much on large, dependable companies which offer a degree of security. This has led to many such companies being driven to valuations which appear expensive and out of kilter with short to medium term trading prospects.

Income generation across the portfolio remains robust and has benefitted from sales of equity holdings where yields had fallen to less attractive levels following good price performance. A return to a more progressive dividend policy has been established, with the increase in the fourth interim dividend, and our thinking is firmly focused on producing a balance between capital growth and further dividend progress.

We remain of the view that equities are more attractive than bonds, but it is becoming increasingly difficult to argue that they are cheap unless economic activity picks up significantly as we move through the year. The Company has achieved a very competitive return over the year, whilst also offering some comfort that the conservative approach being adopted should prove defensive if market sentiment turns less positive. In an environment full of uncertainties, we feel a cautious approach remains warranted.

Miton Capital Partners Limited

5 July 2013

Income Statement

For the year ended 30 April 2013

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

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

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

No operations were acquired or discontinued in the year.

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

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

Income Statement

For the year ended 30 April 2012

	Year ended 30 April 2012
		£ '000	£'000	£'000
	Notes	Revenue	Capital	Total
Losses on investments		-	(2,745)	(2,745)
Income		3,075	4	3,079
Investment management fee		(225)	(225)	(450)
Administrative expenses		(418)	-	(418)
Exchange losses		-	(8)	(8)
Net return on ordinary activities before interest payable and taxation		2,432	(2,974)	(542)
Finance costs		(118)	(118)	(236)
Net return on ordinary activities before taxation		2,314	(3,092)	(778)
Taxation		-	-	-
Return on ordinary activities after taxation		2,314	(3,092)	(778)
Return per share (pence)	2	5.80	(7.75)	(1.95)

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

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

No operations were acquired or discontinued in the year.

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

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

Balance Sheet

		As at	As at
		30 April 2013	30 April 2012
	Notes	£'000	£'000
Non-current assets
Investments held at fair value through profit and loss		59,894	52,811
Current assets
Debtors and prepayments		520	347
Cash and short term deposits		2,355	1,828
		2,875	2,175
Creditors: amounts falling due within one year
Bank loan		(7,000)	(7,000)
Other creditors		(136)	(97)
		(7,136)	(7,097)
Net current liabilities		(4,261)	(4,922)
Net assets		55,633	47,889
Capital and reserves
Called up share capital		9,974	9,974
Share premium account		1,445	1,445
Special reserve		41,783	41,783
Capital redemption reserve		2,099	2,099
Capital reserve		(382)	(8,047)
Revenue reserve		714	635
Equity shareholders' funds		55,633	47,889
Net asset value per share (pence)	3	139.44	120.03

Reconciliation of Movements in Shareholders' Funds

For the year ended 30 April 2013

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

Reconciliation of Movements in Shareholders' Funds

For the year ended 30 April 2012

		Share		Capital
	Share	premium	Special	Redemption	Capital	Revenue
	capital	Account	reserve	reserve	reserve	reserve	Total
	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Balance at 30 April 2011	10,012	1,445	41,954	2,061	(4,955)	790	51,307
Purchase of own shares for cancellation	(38)	-	(171)	38	-	-	(171)
Return on ordinary activities after taxation	-	-	-	-	(3,092)	2,314	(778)
Dividends paid	-	-	-	-	-	(2,469)	(2,469)
Balance at 30 April 2012	9,974	1,445	41,783	2,099	(8,047)	635	47,889

Cash Flow Statement

	Year	Year
	Ended	Ended
	30 April 2013	30 April 2012
	£'000	£'000
Net cash inflow from operating activities	1,875	2,286
Servicing of finance
Bank and loan interest paid	(126)	(250)
Taxation
Tax payable on non UK income	-	-
Financial investment
Purchases of investments	(24,589)	(16,814)
Sales of investments	25,447	18,782
Net cash inflow from financial investment	858	1,968
Equity dividends paid	(2,076)	(2,469)
Net cash inflow before financing	531	1,535
Financing
Buyback of shares	-	(171)
Net cash outflow from financing	-	(171)
Increase in cash	531	1,364
Reconciliation of net cash flow to movements in net debt
Increase in cash as above	531	1,364
Exchange movements	(4)	(8)
Movement in net debt in the year Net debt at 1 May	527 (5,172)	1,356 (6,528)
Net debt at 30 April	(4,645)	(5,172)

Principal Risks and Uncertainties

The principal risks faced by the Company are: investment and market risks; shares; investment and strategic risk; borrowings; currency; dividends; discount; key individuals and taxation. These risks, which have not changed materially since the annual report for the year ended 30 April 2012, and the way in which they are managed, are described in more detail in the annual report for the year ended 30 April 2013.  The report will be made available on the manager's website www.mitongroup.com during July 2013.

       Risk management, financial assets and liabilities

The Company's financial instruments comprise:

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

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

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

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

Liquidity risk

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

meet funding commitments if necessary.

Market risk

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

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

Interest rate risk

Financial assets

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

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

Financial liabilities

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

Foreign currency risk

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

Other price risk

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

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

Credit risk

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

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

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

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

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

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

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

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

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

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

Statement of Directors' Responsibilities

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

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

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

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

• select suitable accounting policies and then apply them consistently;

• make judgements and estimates that are reasonable and prudent;

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

• prepare the financial statements on the going concern basis unless it is inappropriate to presume the Company will continue in business.

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

Under applicable law and regulations, the Directors are also responsible for preparing a Directors' Report, Directors' Remuneration Report and Statement of Corporate Governance that comply with that law and those regulations. The financial statements are published on www. mitongroup.com/index.php/private/fund-pages/investment-trusts/midas-income-andgrowth-trust-plc/ which is a website maintained by the Company's Manager. The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company's website. Legislation in the UK governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

The Directors confirm that to the best of our knowledge:

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

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

For Midas Income & Growth Trust PLC

Hubert Reid

Chairman

5 July 2013

Notes

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

2.    Return per ordinary share

       The revenue return per Ordinary share is calculated on net revenue on ordinary activities after taxation for the year of £2,155,000 (2012 - £2,314,000) and on 39,896,361 (2012 - 39,903,738) Ordinary shares, being the weighted average number of Ordinary shares in issue during the year.

       The capital return per Ordinary share is calculated on net capital return for the year of £7,665,000 (2012 - losses of £3,092,000) and on 39,896,361 (2012 - 39,903,738) Ordinary shares, being the weighted average number of Ordinary shares in issue during the year.

       The total return per Ordinary share is calculated on total return for the year of £9,820,000 (2012 - losses of £778,000) and on 39,896,361 (2012 - 39,903,738) Ordinary shares, being the weighted average number of Ordinary shares in issue during the year.

3.    Net asset value per ordinary share

       The net asset value per Ordinary share is based on net assets of £55,633,000 (2012: £47,889,000) and on 39,896,361 (2012: 39,896,361) Ordinary shares, being the number of Ordinary shares in issue at the year end.

4.    Dividends

       A fourth interim dividend in respect of the year ended 30 April 2013 of 1.35p (2012 - 1.30p) per Ordinary share was paid on 14 June 2013 to shareholders on the register on 24 May 2013.  In accordance with UK Accounting Standards this dividend has not been included as a liability in these accounts and will be recognised in the period in which it is paid.

5.    Related parties

The following are considered related parties: the Board of Directors ("the Board") and Miton Capital Partners ("the Investment Manager") and are the only related parties with whom the Company has transacted during the year.

All transactions with related parties are carried out at an arms length basis.

There are no other transactions with the Board other than aggregated remuneration for services as Directors and there are no outstanding balances to the Board at the year end.

6.    Bank loan facility

The Company has a £7 million revolving loan facility in place with Royal Bank of Scotland plc, of which at 30 April 2013 the full amount had been drawn down at an all-in rate of 2.247%.  The Company renewed its short term rolling loan facility of £7 million in June 2013.  The new facility runs until October 2015 and can be cancelled at any time without cost to the Company.

7.     Financial information

These are not full statutory accounts for the year ended 30 April 2013.  The full audited annual report and accounts for the year ended 30 April 2013 will be sent to shareholders in July 2013 and will be delivered to the Registrar of Companies following the Company's Annual General Meeting. The full audited accounts for the year ended 30 April 2012, which were unqualified, have been lodged with the Registrar of Companies.

8.    The report and accounts for the year ended 30 April 2013 will be made available on the website www.mitongroup.com.  Copies may also be obtained from the Company's registered office, Eighth Floor, 6 New Street Square, New Fetter Lane, London EC4A 3AQ

Enquiries:

Alan Borrows, Miton Capital Partners                               0151 906 2461    

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

 

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