Annual Financial Report

RNS Number : 7721X

Troy Income & Growth Trust Plc

10 December 2010

 



TROY INCOME & GROWTH TRUST PLC

ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED 30 SEPTEMBER 2010

1. CHAIRMAN'S STATEMENT

I am pleased to report on a year in which the restructuring of the Trust was satisfactorily completed. We began with the Company as Glasgow Income Trust and concluded, following the change of name approved at the Annual General Meeting in January 2010, as Troy Income & Growth Trust. In my last Chairman's Statement I explained the reasons for the changes including the Board's decision to appoint Troy Asset Management as Manager and I am glad to say that the material alterations made both to the structure of the Company and the investment portfolio since then have been executed successfully.

In completing the process Personal Assets Trust Administration Company Ltd has been appointed as Company Secretary.

The portfolio is now un-geared and biased towards equities which can provide real income growth in a world where yields across all asset classes have fallen sharply in recent years. With inflationary pressures rising, particularly in the UK, the need to preserve the real value of income is becoming more pressing. We regard a portfolio of high quality equities with international exposure as one of the best ways to achieve this.

Economic Background

Equities have made reasonable progress in the period under review but markets have continued to be volatile. Waves of concern about sovereign debt default in the Euro-zone in the spring and fears that the developed economies might slip back into recession were offset by the prospect of renewed global stimulus as the Federal Reserve encouraged speculation that a second leg of Quantitative Easing would be launched in the US. Currency markets have provided a clearer reflection of uncertainty as the sharp rise in the gold price against all currencies and the weakness of the US dollar betrayed the continuing instability in the global financial system.

Performance & Discount Control

The Net Asset Value ("NAV") total return for the year was +13.1% compared to the FTSE All-Share Index total return of +12.5%. That the NAV was ahead of the benchmark in a period of rising markets is encouraging as the portfolio is defensive in character. This is best illustrated by the fact that although the FTSE All-Share fell by as much as -16.9% during the period the Company's NAV declined by no more than -10.6%. This demonstrates that Troy's commitment to exposing shareholders to lower than average volatility is firmly in place.

I am pleased to say that the share price total return of +19.2% reflected the successful introduction of the discount control mechanism that I described in my Chairman's Statement in last year's annual report. The implementation has successfully narrowed the discount although the initial effect, as was anticipated, has resulted in the Company repurchasing more shares than it has issued thus far.

The Board remains conscious of the fact that the size of the Company needs to increase in order to lower the Total Expense Ratio. Our objective is to show we can deliver on the new structure and by producing a strong performance from a sound portfolio and an improving yield we can attract new money at a small premium to NAV.

Dividend

Dividends totalling 1.8p per share have been paid for the year ending 30 September 2010 as forecast in my statement last year. I am pleased to say that the dividend was covered by earnings despite the lack of overall dividend growth in the market as a whole. The failure of BP to pay a dividend since April 2010 had a significant impact on many equity income funds. The Company's exposure to BP was relatively small and so the income account was not materially damaged. Shareholders should also take comfort from the fact that the revenue reserve of just under £2m is roughly equivalent to one year's dividend. This underpins the current dividend and the ability to sustain distributions in the future.

Board Changes

I am sorry to say that Martin Griffiths has resigned from the Board. His advice and contribution to the setting of our new strategy and its implementation has been invaluable in what was a challenging period.

I am pleased to announce that David Warnock has agreed to join the Board as a non-executive Director. David is a much experienced fund manager and businessman and we look forward to gaining the benefit of his input.

Conclusion

The major changes to the Company's structure and portfolio are now complete. The Manager has a clear mandate to deliver income and capital growth from a portfolio predominantly composed of high quality equities. The economic and investment climate remains difficult with yields from many asset classes at unprecedentedly low levels. The Board believes we have a platform which the Company can continue to develop while providing an attractive situation for long term investors.

R G Hanna

Chairman

10 December 2010

2. MANAGER'S REVIEW

Background

The Company's financial year to 30 September 2010 was characterised by rising equity markets and lower volatility than in the previous twelve months. The FTSE All-Share delivered a total return of +12.5%.

Much of the rise in markets can be attributed to the effects of a sustained and unprecedented approach to monetary policy. By the middle of the year the US Federal Reserve had bought $1.2tr of financial assets and flooded the globe with cheap money, all of it seeking to earn a return. £200bn of Quantitative Easing by the Bank of England contributed further to the pool of liquidity and the subsequent compression of yields across both bond and equity markets.

The rally was not a totally smooth one, during the spring months of 2010 investors retreated from risk assets following the escalating sovereign debt crisis that was playing out on the peripheries of the Euro-zone. Bond spreads within the Euro-zone widened dramatically and in April Greek 10 year bond yields reached a premium of 9.6% over German Bunds when Standard & Poor's downgraded the nation's debt to BB+. This episode of the ongoing Euro-zone drama was brought to a tense conclusion when Germany finally agreed to support a €110bn- EU/-IMF bailout. During this period markets retreated 16% before recovering almost all of that loss by September.

In 2009 UK equity investors suffered a wave of dividend cuts and we had expected 2010 to begin to reverse this trend. Unfortunately the explosion of the BP's Macondo well in April caused the largest accidental oil spill in history and the board of BP was forced to renege on the previously announced payment of the Q1 dividend and suspend the remaining payments for 2010. This move instantly wiped more than £5bn from aggregate market dividend income. Although the Company's income account was affected, the exposure to BP was relatively modest and four 0.45p quarterly dividends were paid as planned. This was confirmation of the need to avoid excessive concentration of income in the portfolio and given that ten UK companies now generate over one half of aggregate UK equity income diversification of income remains prudent.

Performance

Your Company delivered a share price total return of +19.2% and a Net Asset Value total return of +13.1% over the year. This compares favourably with the FTSE All-Share return of +12.5%. This positive performance has been delivered with lower volatility than the market as a whole.

The discrepancy between the NAV return and the share price return shown above is a function of narrowing the discount. A discount control mechanism was approved at the AGM on the 14th January 2010 and since that date a 6.4% discount has been reduced to a discount at the year end of 0.7%.

The commitment to the discount control mechanism meant that the Company bought back just fewer than 10m shares and issued 450,000 shares from treasury during the course of the financial year. This process delivered a net NAV enhancement of £87,000 as buybacks were all at a narrow discount to NAV whereas shares are issued at a small premium.

Balance Sheet

Since Troy's appointment in August of 2009 the Company's balance sheet has remained un-geared. The Company continues to retain the ability to gear the balance sheet but this course of action will only be taken if equities are trading on fundamentally low valuations.

Troy Investment Approach

Troy Asset Management's mandate remains unaltered. We continue to strive towards our objective of generating consistent long term investment returns without exposing investors to high levels of volatility. It is our view that achieving above average returns whilst experiencing below average volatility is a highly desirable objective for investors in all of our funds. In order to achieve this goal we focus heavily on identifying the potential downside of individual investments as well as the possible gains. This will sometimes mean that we forego money-making opportunities but more importantly should result in us avoiding the damaging permanent capital losses that can blight the records of higher risk investment strategies.

Our natural caution leads us to concentrate on higher quality companies which tend to operate in less cyclical industries. By choosing companies which we believe can sustain consistent levels of profitability the Company will be able to generate a reliable stream of dividend growth that can underpin a progressive dividend policy and this will provide protection to investors from the impact of future inflation.

Portfolio Changes

As implied above the Company continues to strive to deliver a portfolio of quality businesses with the ability to deliver growing dividend yields. PayPoint, the cash payment service provider, was added to the portfolio whilst trading on a 7% yield and 8.5x earnings. Lancashire Holdings was bought for the Company after demonstrating excellent capital discipline and a formidable underwriting track record. The company has recently announced a 3rd special dividend in 3 years. A holding in Primary Health Properties has been progressively built over the period. As an owner of GP surgeries across the country PHP benefits from government backed rental income and can consequently deliver a very low risk 6% yield. Eight holdings were sold including Daily Mail & General Trust, Prudential, Whitbread and Reed Elsevier. There are now thirty nine holdings in the portfolio.

Investment Outlook

The Federal Reserve has recently announced a further gross total of $850bn of Quantitative Easing, dubbed "QE2," which initially provided strong support to global equities but markets are again becoming increasingly worried about the risk of a sovereign default within the Euro-zone. This time Ireland rather than Greece has seen its bond yields soar to levels not seen since the implementation of the Euro. There has also been little change to the set of risks faced by investors: In the medium term inflation remains a concern and economic growth remains weak.

But there are some brighter points. After another year of dividend disappointment the next twelve months look more positive and could be boosted further by the reinstatement of the BP dividend, albeit at a lower level. We believe that the portfolio is well placed to grow the dividend and sufficiently resilient to cope with further equity market volatility.

Troy Asset Management Limited

10 December 2010

Troy Asset Management is an independent fund management company aiming to generate absolute returns for investors over the long term. It manages approximately £1.8bn of assets including three open-ended investment funds: the Trojan Fund, the Trojan Income Fund and the Trojan Capital 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
	2010	2009
Net asset value total return	+13.1%	-12.2%
Share price total return	+19.2%	-11.6%
Benchmark total return	+12.5%	+10.8%
Dividend per share	1.80p	3.00p
Dividend yield*	3.8%	7.1%
FTSE All-share Index yield	+3.2%	+3.3%
* Dividend per share/share price at 30 September

Performance (total return)
	Year ended	3 years ended	5 years ended
	30 September	30 September	30 September
	2010	2010	2010
Share price	19.2%	-34.5%	-19.6%
Net asset value per share	13.1%	-37.1%	-17.4%
FTSE All-Share Index	12.5%	-3.1%	24.7%

Dividends
	Rate per share	xd date	Record date	Payment date
First interim dividend	0.45p	6 January 2010	8 January 2010	29 January 2010
Second interim dividend	0.45p	7 April 2010	9 April 2010	30 April 2010
Third interim dividend	0.45p	7 July 2010	9 July 2010	30 July 2010
Fourth interim dividend	0.45p	6 October 2010	8 October 2010	29 October 2010
2009/10	1.80p
First interim dividend	0.75p	7 January 2009	9 January 2009	30 January 2009
Second interim dividend	0.75p	8 April 2009	14 April 2009	30 April 2009
Third interim dividend	0.75p	8 July 2009	10 July 2009	31 July 2009
Fourth interim dividend	0.75p	7 October 2009	9 October 2009	30 October 2009
2008/09	3.00p

Distribution of Assets and Liabilities
	Valuation at					Valuation at
	30 September				Appreciation/	30 September
	2009		Purchases	Sales	(depreciation)	2010
	£'000	%	£'000	£'000	£'000	£'000	%
Listed investments
Ordinary shares	49,633	91.9	9,427	(14,136)	4,650	49,574	92.2
Convertibles	238	0.4	-	-	(14)	224	0.4
Other fixed interest	1,975	3.7	-	-	129	2,104	3.9
	_______	______	________	_______	________	______	_____
	51,846	96.0	9,427	(14,136)	4,765	51,902	96.5
	_______	______	________	_______	________	______	_____
Current assets	2,666	4.9				2,122	3.9
Current liabilities	(520)	(0.9)				(217)	(0.4)
	_______	______				______	_____
Net assets	53,992	100.0				53,807	100.0
	_______	______				______	_____
Net asset value per share	44.47p					48.06p
	_______					______

4.  BUSINESS REVIEW

Activities

The Company is an investment trust. Its subsidiary undertaking, G.I.T. Securities Limited, operates as an investment dealing company. There was no investment dealing activity in the year.

Investment Objective and Policy

Following shareholder approval at an extraordinary general meeting held on 17 September 2009, the Company's investment objective is to provide shareholders with an attractive income yield and the prospect of income and capital growth through investing in a portfolio of predominantly UK equities.

Results and Dividends

The financial statements for the year ended 30 September 2010 appear below. Dividends declared in respect of the year amounted to 1.8p per share (2009 - 3.0p). The fourth interim dividend of 0.45p per share announced on 30 September 2010 (2009 - 0.75p) will be accounted for in the financial year ending on 30 September 2011. As detailed in note 8, under International Financial Reporting Standards ("IFRS") the dividends accounted for in the 2010 results amount to 2.1p per share (£2,488,000) compared to 4.1365p per share (£5,022,000) accounted for in the year ended 30 September 2009.

Share Capital

At the Annual General Meeting held on 14 January 2010, 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 £4,537,044 (being equal to approximately 14.99% of the Ordinary shares in issue as at 14 January 2010. It is proposed that this authority will be renewed at the Company's forthcoming AGM (see Annual General Meeting below). During the year ended 30 September 2010 9,915,350 Ordinary shares with an aggregate nominal value of £2,478,838 were purchased and 450,000 Ordinary shares were re-issued. The issued share capital at 30 September 2010 consisted of 111,948,182 Ordinary shares of 25p each and 9,994,335 Ordinary shares held in treasury. As at the date of this report the issued share capital consisted of 111,865,432 Ordinary shares of 25p each and 10,077,085 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.

Principal Risks and Uncertainties and Risk Management

The principal risks facing the Company relate to the Company's investment activities and include market price risk (comprising interest rate risk, foreign currency risk and other price risk), liquidity risk and credit risk. Other risks faced by the Company include breach of regulatory rules which could lead to suspension of the Company's stock exchange listing, financial penalties, or a qualified audit report. Breach of Section 1159 of the Corporation Tax Act 2010 could lead to the Company being subject to tax on capital gains. An explanation of the principal risks and how they are managed is contained below and in note 17 to the financial statements.

Risk Management

The Directors are responsible for supervising the management of the Company, while the day-to-day management of the Company's assets has been delegated to the Manager. Troy is an independent fund management company aiming to generate absolute returns for investors over the longer term. Troy seeks to preserve and build investors' wealth by constructing conservative portfolios for the long term which demonstrate lower than average volatility.

Portfolio exposure is limited by the investment guidelines drawn up by the Board in conjunction with the Manager.

These include:

-    Overseas investments not to exceed 15% of gross assets;

-    UK equity portfolio to comprise between 30 and 50 individual holdings;

-    No more than 6% of gross assets in any one FTSE 100 stock;

-    No more than 3% of gross assets in any one Mid 250 stock;

-    No more than 2% of gross assets in any one small cap stock;

-    No more than 20% of gross assets in any one FTSE Industry Sector.

Analysis of Portfolio

A comprehensive analysis of the portfolio is given in the Manager's Review and the Distribution of Assets and Liabilities.

Manager

With effect from 1 August 2009, investment management services are provided to the Company by Troy Asset Management Limited and the fee is at an annual rate of 0.75% of the Company's net assets. The key terms of the investment management agreement (including details of the arrangements relating to the termination of the Manager's appointment) are set out in the section entitled "Investment Management Agreement" below.

Investment Management Agreement

Details of the fee charged by Troy in the financial year and how it is calculated are set out in note 3 to the financial statements. The Board believes the fee charged by Troy is competitive by comparison with other investment trusts with a similar investment mandate and is priced appropriately given the level of service provided by the Manager.

The contract between the Company and Troy may be terminated by either party on 6 months' notice, subject to an initial minimum term of 12 months following the passing of the continuation resolution at the annual general meeting of the Company on 14 January 2010. No compensation is payable to the Manager in the event of termination of the contract over and above payment in respect of the required minimum notice.

The contract is also terminable summarily by either party in the event of material breach by the other party; the occurrence of certain events suggesting the insolvency of the other party or relating to the winding up of the other party; the serious misconduct, negligence, wilful default, or fraud of the other party; or the Company being the subject of any reconstruction or amalgamation following a continuation vote having failed to be passed by the Company in general meeting and/or the Company being wound up, liquidated or dissolved. In addition, the Company is entitled to terminate the contract summarily (a) if Francis Brooke ceases to be a full-time executive of Troy, (b) if Troy ceases to have the appropriate FSA authorisation to manage the Company's assets, (c) if Troy or any of its employees or associates is involved in any conduct which is materially prejudicial to the interests of the Company, (d) if Troy undergoes a change of control (other than through a change of control whereby the existing management team of Sebastian Lyon, Francis Brooke and Simon de Zoete increases its aggregate holding in Troy to more than 50 per cent of the voting rights or through a change of control which does not involve a change of control of the Manager's ultimate holding company, (e) if the Company ceases to satisfy the conditions for approval as an investment trust by reason of the Manager's negligence or wilful default or (f) if an FSA audit or investigation gives rise to an adverse finding in relation to any significant aspect of the Manager's business which might be expected to have a materially adverse effect on the Company's business or reputation.

The Board considers the continuing appointment of the Manager to be in the best interests of the shareholders at this time. The Board believes Troy has the skills and experience appropriate to achieving the Company's investment objective.

Company Secretary

Company Secretarial, accounting and administrative services were provided by Aberdeen Asset Management PLC for an annual fee of £100,000, plus VAT, chargeable monthly in advance from 1 August 2009 to 30 June 2010. On 1 July 2010 Personal Assets Trust Administration Company Ltd ('PATAC') were appointed to provide these services for an annual fee of £95,000 plus VAT payable quarterly in advance. The appointment is terminable on three months notice following the initial period to 30 June 2011.

Going Concern

The Directors believe that it is appropriate to continue to adopt the going concern basis in preparing the financial statements as 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.

Discount Policy

The Company's discount policy was introduced with effect from the conclusion of the 2010 AGM. This policy is to ensure that the Ordinary shares trade at close to net asset value through a combination of share buy-backs coupled with 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).

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.

Share Premium Account and Special Capital Reserve

At an Extraordinary General Meeting of the Company held on 5 August 2010, the shareholders approved, subject to the consent of the Court of Session, the cancellation of the share premium account and the creation of a special capital reserve. As the Court of Session in Scotland consent was received on 1 October 2010, subsequent to the Company's financial year end, the cancellation of the share premium account and the creation of the special capital reserve are not reflected in these financial statements. The special capital reserve may only be used for certain restricted purposes including the purchase of the Company's own shares.

By Order of the Board

Steven Cowie
Secretary

10 December 2010

5. STATEMENT OF DIRECTORS' RESPONSIBILITIES

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

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

In preparing each of the group and parent company 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 group'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 are responsible for keeping adequate accounting records that are sufficient to show and explain the group's transactions and disclose with reasonable accuracy at any time the financial position of the group and enable them to ensure that its financial statements comply with the Companies Act 2006 and Article 4 of IAS Regulation. They are also responsible for safeguarding the assets of the group 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 Directors' Report (including a business review), 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 group 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 of the group; and

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

For and on behalf of Troy Income & Growth Trust plc

I M Boyd

Chairman of the Audit Committee

10 December 2010

TROY INCOME & GROWTH TRUST PLC

CONSOLIDATED INCOME STATEMENT

		Year ended 30 September 2010			Year ended 30 September 2009
		Revenue	Capital		Revenue	Capital
	Note	return	return	Total	return	return	Total
Profits/(losses) on investments held at fair value	10	-	4,765	4,765	-	(7,952)	(7,952)
Currency gains/(losses)		-	2	2	-	(18)	(18)
Revenue	2
Income from listed investments		2,650	-	2,650	4,007	-	4,007
Other income		-	-	-	863	14	877
		______	_______	______	_______	_______	_______
		2,650	4,767	7,417	4,870	(7,956)	(3,086)
		______	_______	______	_______	_______	_______
Expenses
Investment management fees	3	(151)	(151)	(302)	(172)	(172)	(344)
VAT recoverable on investment management fees	19	-	-	-	250	216	466
Other administrative expenses	4	(357)	-	(357)	(411)	-	(411)
Finance costs of borrowing	5	(8)	(8)	(16)	(1)	(1)	(2)
Zero coupon finance costs		-	-	-	-	(5,061)	(5,061)
		______	_______	______	_______	_______	_______
Profit/(loss) before taxation		2,134	4,608	6,742	4,536	(12,974)	(8,438)
Taxation	6	(30)	-	(30)	(579)	(12)	(591)
		______	_______	______	_______	_______	_______
Profit/(loss) for the year		2,104	4,608	6,712	3,957	(12,986)	(9,029)
		______	_______	______	_______	_______	_______
Earnings per Ordinary share (pence)	9	1.80	3.94	5.74	3.26	(10.70)	(7.44)
		______	_______	______	_______	_______	_______

The "Profit for the Year" is also the Total Comprehensive Income for the year as defined in IAS1 (revised) and no separate Statement of Comprehensive Income has been presented.

The total column of this statement represents the Group's Income Statement, prepared in accordance with IFRS. 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.

All income and losses are attributable to the equity holders of the parent company. There are no minority interests.

No operations were acquired or discontinued during the year.

The Directors are of the opinion that the Group is engaged in a single segment business, being investment business.

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

TROY INCOME & GROWTH TRUST PLC

BALANCE SHEETS

		Group		Company
		As at	As at	As at	As at
		30 September	30 September	30 September	30 September
		2010	2009	2010	2009
	Notes	£'000	£'000	£'000	£'000
Non-current assets
Ordinary shares		49,574	49,633	49,574	49,633
Convertibles		224	238	224	238
Other fixed interest		2,104	1,975	2,104	1,975
		______	_______	______	_______
Investments held at fair value through profit or loss	10	51,902	51,846	51,902	51,846
Subsidiary	11	-	-	5	5
		______	_______	______	_______
		51,902	51,846	51,907	51,851
		______	_______	______	_______
Current assets
Accrued income and prepayments		344	232	344	232
VAT recoverable on investment management fees		-	466	-	466
Interest due on recoverable VAT on investment management fees		-	72	-	72
Cash and cash equivalents		1,778	1,896	1,778	1,896
		______	_______	______	_______
Total current assets		2,122	2,666	2,122	2,666
		______	_______	______	_______
Total assets		54,024	54,512	54,029	54,517
Current liabilities
Corporation tax payable		-	(223)	-	(223)
Trade and other payables		(217)	(297)	(404)	(484)
		______	_______	______	_______
Total current liabilities		(217)	(520)	(404)	(707)
		______	_______	______	_______
Net assets		53,807	53,992	53,625	53,810
		______	_______	______	_______
Issued capital and reserves attributable to equity holders of the parent
Called-up share capital	12	30,486	30,486	30,486	30,486
Share premium account	13	53,204	53,204	53,204	53,204
Special reserve	14	249	4,658	249	4,658
Capital reserve	15	(32,635)	(37,243)	(32,635)	(37,243)
Revenue reserve	16	2,503	2,887	2,321	2,705
		______	_______	______	_______
Equity shareholders'   funds		53,807	53,992	53,625	53,810
		______	_______	______	_______
Net asset value per Ordinary share (pence)	9	48.06	44.47
		______	_______	______	_______

TROYINCOME & GROWTH TRUST PLC

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For year ended 30 September 2010
		Share
	Share	premium	Special	Capital	Revenue
	capital	account	reserve	reserve	reserve	Total
	£'000	£'000	£'000	£'000	£'000	£'000
Balance at 30 September 2009	30,486	53,204	4,658	(37,243)	2,887	53,992
Total comprehensive income for the year	-	-	-	4,608	2,104	6,712
Equity dividends	-	-	-	-	(2,488)	(2,488)
Costs of cancellation of share premium account	-	-	(40)	-	-	(40)
Shares issued from treasury	-	-	213	-	-	213
Shares bought back into treasury	-	-	(4,582)	-	-	(4,582)
	______	______	______	______	______	______
Balance at 30 September 2010	30,486	53,204	249	(32,635)	2,503	53,807
	______	______	______	______	______	______
For year ended 30 September 2009
Balance at 30 September 2008	30,486	53,204	4,658	(24,257)	3,952	68,043
Total comprehensive income for the year	-	-	-	(12,986)	3,957	(9,029)
Equity dividends	-	-	-	-	(5,022)	(5,022)
	______	______	______	______	______	______
Balance at 30 September 2009	30,486	53,204	4,658	(37,243)	2,887	53,992
	______	______	______	______	______	______
Company Statement of Changes in Equity
For  year ended 30 September 2010
	Share
	Share	premium	Special	Capital	Revenue
	capital	account	reserve	reserve	reserve	Total
	£'000	£'000	£'000	£'000	£'000	£'000
Balance at 30 September 2009	30,486	53,204	4,658	(37,243)	2,705	53,810
Total comprehensive income for the year	-	-	-	4,608	2,104	6,712
Equity dividends	-	-	-	-	(2,488)	(2,488)
Costs of cancellation of share premium account	-	-	(40)	-	-	(40)
Shares issued from treasury	-	-	213	-	-	213
Shares bought back into treasury	-	-	(4,582)	-	-	(4,582)
	______	______	______	______	______	______
Balance at 30 September 2010	30,486	53,204	249	(32,635)	2,321	53,625
	______	______	______	______	______	______
For  year ended 30 September 2009
Balance at 30 September 2008	30,486	53,204	4,658	(24,257)	3,733	67,824
Total comprehensive income for the year	-	-	-	(12,986)	3,994	(8,992)
Equity dividends	-	-	-	-	(5,022)	(5,022)
	______	______	______	______	______	______
Balance at 30 September 2009	30,486	53,204	4,658	(37,243)	2,705	53,810
	______	______	______	______	______	______

TROY INCOME & GROWTH TRUST PLC

CONSOLIDATED AND COMPANY CASH FLOW STATEMENT

	Year ended		Year ended
	30 September 2010		30 September 2009
	£'000	£'000	£'000	£'000
Cash flows from operating activities
Investment income received	2,548		5,389
Deposit interest received	-		334
Other cash receipts	538		605
Administrative expenses paid	(741)		(806)
	________		________
Cash generated from operations		2,345		5,522
Finance costs paid		(16)		(2)
Taxation		(261)		(753)
		________		________
Net cash inflows from operating activities		2,068		4,767
Cash flows from investing activities
Purchases of investments	(9,427)		(31,937)
Sales of investments	14,136		84,434
Zero coupon finance repaid	-		(67,396)
	________		________
Net cash inflow/(outflow) from investing activities		4,709		(14,899)
		________		________
Net cash inflow/(outflow) before financing		6,777		(10,132)
Financing activities
Proceeds of issue of shares	213		-
Cost of share buy backs	(4,582)		-
Dividends paid	(2,488)		(5,022)
Costs of cancellation of share premium account	(40)		-
	________		________
Net cash outflow from financing activities		(6,897)		(5,022)
		________		________
Net decrease in cash and short term deposits		(120)		(15,154)
Cash and cash equivalents at the start of the year		1,896		17,068
Effect of foreign exchange rate changes		2		(18)
		________		________
Cash and cash equivalents at the end of the year		1,778		1,896
		________		________

TROY INCOME & GROWTH TRUST PLC

YEAR ENDED 30 SEPTEMBER 2010

1.	Accounting Policies
	(a)	Basis of accounting
		The financial statements of the Group have been prepared in accordance with International Financial Reporting Standards ("IFRS") which comprise standards and interpretations approved by the International Accounting Standards Board ("IASB"), and International Accounting Standards and Standing Interpretations Committee interpretations approved by the International Accounting Standards Committee ("IASC") that remain in effect, and to the extent that they have been adopted by the European Union.
		The 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 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 to better reflect the activities of an investment trust company and in accordance with guidance issued by the AIC, supplementary information which analyses the Income Statement between items of a revenue and capital nature has been presented alongside the Income Statement. In accordance with the Company's status as a UK investment company under Section 833 of the Companies Act 2006, net capital returns may not be distributed by way of dividend. Additionally, the net revenue of the Company is the measure the Directors believe appropriate in assessing the Group's compliance with certain requirements set out in Section 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 - amendments resulting from the April 2009 annual improvements to IFRSs (effective for annual periods beginning on or after 1 January 2010).
		-	Amendment to IAS 1 - Presentation of Financial Statements - amendments resulting from the May 2010 annual improvements to IFRSs (effective for annual periods beginning on or after 1 January 2011).
		-	Amendment to IAS 7 - Statement of Cash Flows - amendments resulting from April 2009 annual improvements to IFRSs (effective for annual periods beginning on or after 1  January 2010).
		-	Amendment to IAS 24 - Related Party Disclosures - revised definition of related parties (effective for annual periods beginning on or after 1 January 2011).
		-	Amendment to IAS 27 - Consolidated and Separate Financial Statements - amendments resulting from the May 2010 annual improvements to IFRSs (effective for annual periods beginning on or after 1 July 2010).
		-	Amendment to IAS 32 - Financial Instruments: Presentation - amendments relating to the classification of rights issues (effective for annual periods beginning on or after 1 February 2010).
		-	Amendment to IAS 36 - Impairment of Assets - amendments resulting from the April 2009 annual improvements to IFRSs (effective for annual periods beginning on or after 1 January 2010).
		-	Amendment to IAS 39 - Financial Instruments: Recognition & Measurement - amendments resulting from April 2009 annual improvements to IFRSs (effective for annual periods beginning on or after 1 January 2010).
		-	Amendment to IFRS 7 - Financial Instruments: Disclosures - amendments resulting from the May 2010 annual improvements to IFRSs (effective for annual periods beginning on or after 1 January 2011).
		-	Amendment to IFRS 7 - Financial Instruments: Disclosures - amendments enhancing disclosures about transfers of financial assets (effective for annual periods beginning on or after July 2011).
		-	Revised IFRS 8 - Operating Segments - amendments resulting from April 2009 annual improvements to IFRSs (effective for annual periods beginning on or after 1 January 2010).
		-	IFRS 9 - Financial Instruments - Classification and 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 Group's financial results in the period of initial application. The Group intends to adopt the standards in the reporting period when they become effective.
	(b)	Consolidation
		The consolidated financial statements incorporate the financial statements of the Company and the entity controlled by the Company (its subsidiary) made up to 30 September each year. Control is achieved where the Company has the power to govern the financial and operating policies of an investee entity so as to obtain benefits from its activities. All intra-group transactions, balances, income and expenses are eliminated on consolidation. The Company has availed itself of the relief from showing an Income Statement for the parent company, granted under Section 408 of the Companies Act 2006.
	(c)	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.
		The Group's investments are designated upon initial recognition as fair value through profit or loss. All investments are designated upon initial recognition as held at fair value and are measured at subsequent reporting dates at their fair value, which is the bid price as at close of business on the Balance Sheet date.
		Gains and losses arising from the changes in fair value are included in net profit or loss for the period as a capital item. Expenses which are incidental to the acquisition and disposal of investments are treated as capital costs.
		In respect of the Company, the subsidiary is valued at cost with any amounts owed to or from the subsidiary included in the relevant Balance Sheet heading.
	(d)	Zero coupon finance
		The Company had in place medium-term funding in the form of zero coupon finance through a series of option transactions on the FTSE 100 Index. All of these were fully repaid during the year ended 30 September 2009. The option contracts were accounted for as separate derivative contracts and therefore were shown on the Balance Sheet at their fair value. Changes in the fair value of the option contracts were charged or credited to capital and presented as a capital item in the Income Statement.
	(e)	Income
		Dividend income from equity investments including preference shares which have a discretionary dividend is recognised when the shareholders' rights to receive payment has been established, normally the ex-dividend date.
		Interest from debt securities is accounted for using the effective interest rate method. Any write off of the premium or discount on acquisition as a result of using this basis is allocated as a revenue item in the Income Statement. Interest from deposits is dealt with on an accrual basis.
		Underwriting commission is taken to revenue, unless any shares underwritten are required to be taken up, in which case the proportionate commission received is deducted from the cost of the investment.
	(f)	Expenses
		All expenses are accounted for on an accruals basis. In respect of the analysis between revenue and capital items presented within the Income Statement, all expenses have been presented as revenue items except those where a connection with the maintenance or enhancement of the value of the investments held can be demonstrated. Accordingly the investment management fee and finance costs have been allocated 50% to revenue and 50% to capital, in order to reflect the Directors' expected long-term view of the nature of the investment returns of the Company.
	(g)	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 on an accruals basis in the Income Statement using the effective interest rate method.
	(h)	Taxation
		The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Group's liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the Balance Sheet date.
		The allocation method used to calculate tax relief on expenses presented against capital returns is the 'marginal basis'. Under this basis if taxable income is not capable of being offset entirely by expenses presented in revenue then unutilised expenses arising in capital will be set against income with an amount based on current tax rates charged against income and credited to capital.
		Deferred tax is provided in full on 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.
	(i)	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 capital reserve.
	(j)	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.
	(k)	Use of estimates
		The preparation of financial statements require the Group to make estimates and assumptions that affect items reported in the Balance Sheet and Consolidated Income Statement 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 Group's actual results may ultimately differ from those estimates.

		2010	2009
2.	Income	£'000	£'000
	Income from listed investments
	UK dividend income	2,239	2,548
	Interest income from investments and overseas interest	409	1,371
	Stock dividend	-	47
	Underwriting income	2	41
		________	________
		2,650	4,007
		________	________
	Other income from investment activity
	Deposit interest	-	242
	AAA money market funds interest	-	43
	Interest on recoverable VAT on management fees	-	72
	Traded option premiums	-	506
		________	________
		-	863
		________	________
	Total income	2,650	4,870
		________	________
	In addition to the above which has been reported as revenue, there is £nil (2009 - £14,000) of income reported as capital. The amount received in 2009 was surplus rehypothication fees

3.

Investment management fees

For the year ended 30 September 2009 investment management services were provided by Aberdeen Asset Managers Limited ("AAM") until 31 July 2009, at which point Troy Asset Management Limited ("Troy") took over as the Investment Manager. The investment management fee paid to both Troy and AAM was at an annual rate of 0.75% of the Company's net assets, calculated monthly and paid quarterly. The fee is allocated 50% to revenue and 50% to capital.

		2010			2009
		Revenue	Capital		Revenue	Capital
		return	return	Total	return	return	Total
		£'000	£'000	£'000	£'000	£'000	£'000
	Investment management fee - AAM	-	-	-	139	139	278
	Investment management fee - Troy	151	151	302	33	33	66
		_______	______	______	______	______	______
		151	151	302	172	172	344
		_______	______	______	______	______	______

		2010	2009
4.	Administrative expenses	£'000	£'000
	Directors' remuneration - fees as Directors	61	62
	Secretarial fees - AAM	89	19
	Secretarial fees - PATAC	24	-
	Fees payable to auditors
	- fees payable to the Company's auditors for the audit of the annual accounts	21	19
	- fees payable to the Company's auditors for taxation services	5	-
	Marketing contribution	-	35
	Discount management fee	24	-
	Other management expenses {a}	133	276
		_______	______
		357	411
		_______	______
	{a} Includes non-recurring expenses of £nil (2009 - £112,500).
	Following the appointment of Troy, the Company received secretarial services from Aberdeen Asset Managers Limited ("AAM"), which was charged at a rate of £100,000 per annum exclusive of VAT. On 1 July 2010 Personal Assets Trust Administration Company Ltd ('PATAC') were appointed to provide these services at £95,000 per annum exclusive of VAT.
	The Company had no employees during the year (2009 - nil). No pension contributions were paid for Directors (2009 - £nil).

		2010			2009
		Revenue	Capital		Revenue	Capital
		return	return	Total	return	return	Total
5.	Finance costs and borrowings	£'000	£'000	£'000	£'000	£'000	£'000
	Bank loans and overdrafts repayable within one year	8	8	16	1	1	2
		______	_____	_____	_____	_____	_____
	Interest on bank overdrafts is at floating rates related to the lenders UK base rates.

	.
		2010			2009
		Revenue	Capital		Revenue	Capital
		return	return	Total	return	return	Total
6.	Taxation	£'000	£'000	£'000	£'000	£'000	£'000
	Current corporation tax	-	-	-	533	12	545
	Prior year adjustment	-	-	-	40	-	40
	Irrecoverable overseas tax	30	-	30	6	-	6
		_______	______	______	______	______	______
		30	-	30	579	12	591
		_______	______	______	______	______	______
	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 corporation tax rate of 28% (2009 - 28%):
		2010			2009
		Revenue	Capital		Revenue	Capital
		return	return	Total	return	return	Total
		£'000	£'000	£'000	£'000	£'000	£'000
	Profit on ordinary activities before taxation	2,134	4,608	6,742	4,536	(12,974)	(8,438)
		_______	______	______	______	______	______
	Taxation of return on ordinary activities at the standard rate of corporation tax	598	1,290	1,888	1,270	(3,633)	(2,363)
	Effects of:
	UK dividend income not liable to further tax	(627)	-	(627)	(713)	-	(713)
	Overseas dividend income not liable to further tax	(115)	-	(115)	(11)	-	(11)
	Disallowed expenses	3	-	3	-	-	-
	Stock dividend not taxable	-	-	-	(13)	-	(13)
	Capital (profits)/losses not taxable	-	(1,335)	(1,335)	-	3,645	3,645
	Movement in unutilised management expenses	141	45	186	-	-	-
	Overseas withholding tax suffered	30	-	30	6	-	6
	Prior year adjustment	-	-	-	40	-	40
		_______	______	______	______	______	______
	Current taxation charge for the year	30	-	30	579	12	591
		_______	______	______	______	______	______
	At 30 September 2010, the Group had surplus management expenses of £662,000 (2009 - £nil) with a tax value of £185,000 (2009 - £nil) to carry forward. No deferred tax has been recognised in the current or prior periods.

7.	Profit attributable to Ordinary shareholders of the Company
	The revenue profit attributable to equity holders of the Group for the financial year includes £2,104,000 (2009 - £3,994,000) which has been dealt with in the Company's financial statements.

				2010		2009
8.		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 2008 of 1.8865p per share		-		2,290
		Fourth interim dividend for the year ended 30 September 2009 of 0.75p per share		911		-
		Three interim dividends for the year ended 30 September 2010 totalling 1.35p (2009 - three interims totalling 2.25p) per share		1,577		2,732
				________		________
				2,488		5,022
				________		________
		The fourth interim dividend of 0.45p per share, declared on 30 September 2010 and paid on 29 October 2010 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.
				2010		2009
				£'000		£'000
		Three interim dividends for the year ended 30 September 2010 totalling 1.35p (2009 - 2.25p) per share		1,577		2,732
		Fourth interim dividend for the year ended 30 September 2010 of 0.45p (2009 - 0.75p) per share		504		911
				________		________
				2,081		3,643
				________		________
			2010		2009
9.	Return and net asset value per share		£'000		£'000
	The returns per share are based on the following figures:
	Revenue return		2,104		3,957
	Capital return		4,608		(12,986)
			________		________
	Total		6,712		(9,029)
			________		________
	Weighted average number of Ordinary shares		116,936,176		121,413,532
			__________		__________
	The net asset value per share is based on net assets attributable to shareholders of £53,807,000 (2009 - £53,992,000) and on 111,948,182 (2009 - 121,413,532) Ordinary shares in issue at the year end.

		Group & Company
		2010	2009
10.	Investments held at fair value through profit or loss	£'000	£'000
	Listed on recognised stock exchanges:
	United Kingdom	46,770	48,281
	Overseas	5,132	3,565
		________	________
		51,902	51,846
		________	________
		Group & Company
		2010	2009
		£'000	£'000
	Opening book cost	51,419	135,042
	Opening fair value gains/(losses) on investments held	427	(22,934)
		________	________
	Opening fair value	51,846	112,108
	Purchases	9,427	31,826
	Effective yield adjustment	-	(3)
	Sales - proceeds	(14,136)	(84,136)
	Sales - net losses on sales	(31)	(31,310)
	Movement in fair value during the year	4,796	23,361
		________	________
	Closing fair value	51,902	51,846
		________	________
	Closing book cost	46,679	51,419
	Closing fair value gains on investments held	5,223	427
		________	________
	Closing fair value	51,902	51,846
		________	________
	All investments are categorised as held at fair value through profit or loss, with the exception of the subsidiary, and were designated as such upon initial recognition. The subsidiary is held at cost.
	The total transaction costs on purchases was £51,000 (2009 - £128,000) and on sales £21,000 (2009 - £57,000).
		Group & Company
		2010	2009
	Gains/(losses) on investments held at fair value	£'000	£'000
	Net losses on sales	(31)	(31,310)
	Gains in investment holdings	4,796	23,361
	Movement in fair value of traded option contracts	-	(3)
		________	________
		4,765	(7,952)
		________	________
	The above table includes the following effects of traded option activity:
		Group & Company
		2010	2009
		£'000	£'000
	Call options exercised	-	(38)
	Put options assigned	-	(550)
		________	________
		-	(588)
		________	________

		2010	2009
11.	Subsidiary	£'000	£'000
	Shares at cost	5	5
		________	________
	The Company owns 100% of the Ordinary share capital of its sole subsidiary, G.I.T. Securities Limited, an investment dealing company registered in Scotland.

		Ordinary shares of 25p each
12.	Called-up share capital	Number	£'000
	Authorised
	At 30 September 2010 & 30 September 2009	200,000,000	50,000
		__________	________
	Allotted, called up and fully paid
	At 30 September 2010	111,948,182	27,987
	Held in treasury	9,994,335	2,499
		__________	________
		121,942,517	30,486
		__________	________
	Allotted, called up and fully paid
	At 30 September 2009	121,413,532	30,354
	Held in treasury	528,985	132
		__________	________
		121,942,517	30,486
		__________	________
	During the year to 30 September 2010 there were 9,915,350 Ordinary shares of 25p each repurchased by the Company at a total cost, including transaction costs of £4,582,436 and placed in treasury. During the year to 30 September 2009 there were no repurchases of Ordinary shares of 25p each by the Company. During the year to 30 September 2010 the Company re-issued 450,000 Ordinary shares of 25p each from treasury for proceeds totalling £213,500. There were no re-- issues of Ordinary shares of 25p each during the year to 30 September 2009.
	No shares were purchased for cancellation during the year (2009 - nil). At the year end 9,994,335 (2009 - 528,985) shares were held in treasury, which represents 8.20% (2009 - 0.43%) of the Company's total issued share capital at 30 September 2010.

		2010	2009
13.	Share premium account	£'000	£'000
	At 30 September	53,204	53,204
		________	________
	On 1 October 2010, following the special resolution passed at the Extraordinary General Meeting held on 5 August 2010, the Courts of Session in Scotland approved the cancellation of the Share Premium Account and the creation of a Special Capital Reserve from the balance of the Share Premium Account.
	This Special Capital Reserve, together with the balance of the Special Reserve (note 14) will be used to fund market purchases by the Company of its own shares.

		2010	2009
14.	Special reserve	£'000	£'000
	At 1 October	4,658	4,658
	Shares bought back during the year into treasury	(4,582)	-
	Shares issued during the year from treasury	213	-
	Costs of cancellation of the Share Premium Account (note 13)	(40)	-
		________	________
	At 30 September	249	4,658
		________	________
	The purpose of this reserve is to fund market purchases by the Company of its own Ordinary shares.

.

		Group & Company
		2010	2009
15.	Capital reserve	£'000	£'000
	At 1 October	(37,670)	8,550
	Net losses on sales of investments during the year	(31)	(31,310)
	Finance costs of borrowings (note 5)	(8)	(1)
	Tax charges allocated to capital	-	(12)
	Zero coupon finance costs	-	(14,937)
	Surplus rehypothication fees (see note 2)	-	14
	Investment management fee	(151)	(172)
	VAT recoverable on investment management fees	-	216
	Currency gains/(losses)	2	(18)
		________	________
	At 30 September	(37,858)	(37,670)
		________	________
	Investment holdings gains/(losses)
	At 30 September	427	(32,807)
	Investment gains	4,796	23,361
	Zero coupon finance costs	-	9,876
	Movement in fair value of traded option contracts	-	(3)
		________	________
		5,223	427
		________	________
	Total capital reserve	(32,635)	(37,243)
		________	________
	The zero coupon finance costs attributed to the capital reserve in the year to 30  September 2009 (£14,937,000) represents the movement from the original cost of the instruments when the positions were taken out compared to their value on the dates when they were repaid or redeemed. The credit of £9,876,000 reflected in investment holdings gains in 2009 represents the reversal of the holding loss shown at the 2008 year end.

		Group	Company	Group	Company
		2010	2010	2009	2009
16.	Revenue reserve	£'000	£'000	£'000	£'000
	At 1 October	2,887	2,705	3,952	3,733
	Transfer to revenue account net of dividends	(384)	(384)	(1,065)	(1,028)
		______	______	______	______
	At 30 September	2,503	2,321	2,887	2,705
		______	______	______	______

17.

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. 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.

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

Financial assets and liabilities

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

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

Interest rate movements may affect:

-

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

-

the level of income receivable on cash deposits;

-

interest payable on the Company's variable rate borrowings.

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

Interest rate profile

The interest rate risk profile of the portfolio of financial assets 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

rate

rate

As at 30 September 2010

%

£'000

£'000

Assets

UK preference shares

8.04

2,104

-

Cash

-

-

1,778

________

______

________

Total assets

-

2,104

1,778

________

______

________

Weighted

average

interest

Fixed

Floating

rate

rate

rate

As at 30 September 2009

%

£'000

£'000

Assets

UK preference shares

8.57

1,975

-

Cash

-

-

1,896

________

______

________

Total assets

-

1,975

1,896

________

______

________

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

Within

Within

Within

Within

More than

1 year

1-2 years

2-3 years

3-4 years

4-5 years

5 years

At 30 September 2010

£'000

£'000

£'000

£'000

£'000

£'000

Fixed rate

UK preference shares

-

-

-

-

-

2,104

________

_____

______

________

______

________

Floating rate

Cash

1,778

-

-

-

-

-

________

_____

______

________

______

________

Total

1,778

-

-

-

-

2,104

________

_____

______

________

______

________

Within

Within

Within

Within

Within

More than

1 year

1-2 years

2-3 years

3-4 years

4-5 years

5 years

At 30 September 2009

£'000

£'000

£'000

£'000

£'000

£'000

Fixed rate

UK preference shares

-

-

-

-

-

1,975

________

_____

______

________

______

________

Floating rate

Cash

1,896

-

-

-

-

-

________

_____

______

________

______

________

Total

1,896

-

-

-

-

1,975

________

_____

______

________

______

________

Interest rate sensitivity

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

If interest rates had been 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 2010 would increase/decrease by £9,000 (2009 - £9,000) 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 2010 would decrease by £136,000 (2009 - decrease by £121,000), increase by £156,000 (2009 - increase by £137,000) given the Company's exposure to interest rates on its fixed interest securities.

-

net assets at 30 September 2010 would decrease by £127,000 (2009 - decrease by £112,000), increase by £147,000 (2009 - increase by £128,000) 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 Group's currency exposure is detailed below:

30 September 2010

30 September 2009

Net

Net

Overseas

monetary

Overseas

monetary

investments

assets

investments

assets

£'000

£'000

£'000

£'000

US Dollar

3,001

63

2,368

-

Swiss Franc

1,020

-

1,197

-

_______

_______

_______

_______

Total

4,021

63

3,565

-

_______

_______

_______

_______

Foreign currency sensitivity

There is no sensitivity analysis included, as the Group'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 while all other variables remained constant, the return attributable to Ordinary shareholders and equity reserves for the year ended 30 September 2010 would have increased/decreased by £4,957,000 (2009 - increase/decrease of £4,963,000). 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.

(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 investment manager, and limits are set on the amount that may be due from any one broker;

-

the risk of counterparty exposure due to failed trades causing a loss to the Company is mitigated by the review of failed trade reports on a monthly basis. In addition, the 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 enhancements.

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

Credit risk exposure

In summary, compared to the amounts in the Balance Sheet, the maximum exposure to credit risk at 30  September 2010 was as follows:

2010

2009

Balance

Maximum

Balance

Maximum

Sheet

exposure

Sheet

exposure

£'000

£'000

£'000

£'000

Non-current assets

Securities at fair value through profit or loss

224

224

238

238

Current assets

Accrued income

344

344

232

232

Recoverable VAT on management fees and

interest thereon

-

-

538

538

Cash and short term deposits

1,778

1,778

1,896

1,896

________

________

________

________

2,346

2,346

2,904

2,904

________

________

________

________

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 £5 million or 15% 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 Group 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 Group's portfolio of investments.

18.	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:
				2010	2009
				£'000	£'000
	Equity share capital			30,486	30,486
	Retained earnings and other reserves			23,321	23,506
				________	________
				53,807	53,992
				________	________
	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 (2009 - nil).

19.	Commitments, contingencies and post Balance Sheet events
	At 30 September 2010 there were no contingent liabilities in respect of outstanding underwriting commitments or uncalled capital (2009 - £nil).
	In the year ended 30 September 2009 the Company recognised a refund of £466,000 plus interest of £72,000, representing the proportion of VAT charged on investment management fees for the period 1 January 1990 to 31 December 2007 that was recoverable; and this has been allocated to revenue and capital in accordance with the accounting policy of the Company for the periods in which the VAT was charged. Interest on the refund was allocated to revenue.

20.	Financial instruments measured at Fair Value
					2010				2009
		Level 1	Level 2	Level 3	Total	Level 1	Level 2	Level 3	Total
		£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
	Investments	51,902	-	-	51,902	51,846	-	-	51,846
	Cash and cash equivalents	1,778	-	-	1,778	1,896	-	-	1,896
		______	_____	______	______	______	______	______	______
		53,680	-	-	53,680	53,742	-	-	53,742
		______	_____	______	______	______	______	______	______
	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.

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 2010. The statutory accounts for the year ended 30 September 2010 received an audit report which was unqualified. The statutory accounts for the financial year ended 30 September 2010 were approved by the Directors on 10 December 2010 but will not be filed with the Registrar of Companies until after the company's Annual General Meeting which is to be held at 10.00am on 21 January 2011 at 16 Charlotte Square, Edinburgh, EH2 4DF. The Annual Report will be posted to shareholders in December 2010 and available in due course by download for the Company's webpage (http://tigt.co.uk/secure/documents/annual/TIGTAnnual2010.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, Secretary 10 December 2010 Enquiries: 0131 538 6610

 

END

 

 

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