Trinity Tradelink Ltd Auditors Report.

to the Members of

The Income & Growth VCT plc

Our opinion on the Financial Statements

In our opinion The Income & Growth VCT plc Financial Statements for the year ended 30 September 2015, which have been prepared by the Directors in accordance with applicable law and United Kingdom Accounting Standards:

• give a true and fair view of the state of the Companys affiairs as at 30 September 2015 and of its profit for the year then ended;

• have been properly prepared in accordance with United Kingdom Accounting Standards; and

• have been prepared in accordance with the requirements of the Companies Act 2006.

This report is made solely to the Companys members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the Companys members those matters we are required to state to them in an auditors report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Companys members as a body, for our audit work, for this report, or for the opinions we have formed.

What our opinion covers

Our audit opinion on the Financial Statements covers the:

• Income Statement;

• Balance Sheet;

• Reconciliation of Movements in Shareholders Funds;

• Cash Flow Statement; and

• related notes

Respective responsibilities of Directors and Auditor

As explained more fully in the Statement of Directors Responsibilities, the Directors are responsible for the preparation of the Financial Statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the Financial Statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the FRCs Ethical Standards for Auditors.

A description of the scope of an audit of financial statements is provided on the

Financial Reporting Councils (FRC) website at

An overview of the scope of the audit including our assessment of the risk of material misstatement

Our audit approach was developed by obtaining an understanding of the Companys activities, the key functions undertaken on behalf of the Board by the Investment Adviser and Administrator and the overall control environment. Based on this understanding we assessed those aspects of the Ccompanys transactions and balances which were most likely to give rise to a material misstatement. The outcome of our risk assessment was that the valuation of investments was considered to be the area that had the greatest effect the on overall audit strategy including the allocation of resources in the audit.

The valuation of investments is a key accounting estimate where there is an inherent risk of management override arising from the investment valuations being prepared by the Investment Adviser, who is remunerated based on the net asset value of the Company.

We performed initial analytical procedures to determine the extent of our work considering, inter alia, the value of individual investments, the nature of the investment and the extent of the fair value movement. A breakdown of the investment portfolio by nature of instrument is shown below.

In respect of equity investments quoted on AIM, we confirmed that bid price has been used as the basis for valuation and that there were no contra indicators, such as liquidity considerations, to suggest bid price was not the most appropriate indication of fair value.

Our sample for testing was stratified according to risk, having regard to the subjectivity of the inputs to the valuations. 43% of the portfolio is based on price of recent investment or cost (where the investment was recently acquired), quoted price, offer price or net asset value supported by a third party valuation. 57% of the unquoted investment portfolio is valued in accordance with more subjective techniques. The majority of such investments are valued on an earnings multiple basis. In respect of the sample selected for detailed testing (representing 91% by value of the investments valued using more subjective techniques) we:

• Reviewed and challenged the assumptions inherent in the valuation of unquoted investments and assessed the impact of the estimation uncertainty concerning these assumptions and the disclosure of these uncertainties in the Financial Statements;

• Reviewed the historical financial statements and recent management information available for unquoted investments used to support assumptions about maintainable earnings used in the valuations;

• Considered the earnings multiples applied by reference to observable listed company market data; and

• Challenged adjustments made to such market data in establishing the earnings multiple applied in arriving at the valuations adopted.

For the remaining investments cost, reviewed for impairment, is used as an approximation of fair value. For a sample of these investments we considered the appropriateness of this methodology by considering the proximity of the acquisition to the year-end, if appropriate, or the operational performance of the investee company. Where such investments were loans, we also considered wider economic and commercial factors that, in our judgement, could impact on the recoverability and valuation of those loans.

For all investments tested, we developed our own point estimate where alternative assumptions could reasonably be applied and considered the overall impact of such sensitisations on the portfolio of investments in determining whether the valuations as a whole are reasonable and unbiased.

The remainder of the portfolio was subject to analytical procedures.

We also consider revenue recognition to be a significant risk. Revenue consists of dividends receivable from the investee companies and interest earned on loans to investee companies and cash balances. Revenue recognition is considered to be a significant audit risk as it is a key driver of dividend returns to investors. In particular, as the company invests primariy in unquoted companies, dividends receivable can be difficut to predict.

We assessed the design and the implementation of the controls relating to revenue recognition and we developed expectations for interest income receivable based on loan instruments and investigated any variations in amounts recognised to ensure they were valid.

We considered whether the accounting policy had been applied correctly by management in determining provisions against income where recovery is considered doubtful, considering management information relevant to the ability of the investee company to service the loan and the reasons for any arrears of loan interest.

In respect of dividends receivable, we compared actual income to expectations set based on independent published data on dividends declared by the investee companies held. We tested the categorisation of dividends received from the investee companies between the revenue and capital.

The Audit Committees consideration of its key issues is set out on pages 42 - 43.

Materiality in context

We apply the concept of materiality both in planning and performing our audit, and in evaluating the effect of misstatements. For planning, we consider materiality to be the magnitude by which misstatements, including omissions, could influence the economic decisions of reasonable users that are taken on the basis of the Financial Statements.

Importantly, misstatements below this level will not necessarily be evaluated as immaterial as we also take account of the nature of identified misstatements, and the particular circumstances of their occurrence, when evaluating their effect on the Financial Statements. The application of these key considerations gives rise to two levels of materiality, the quantum and purpose of which are tabulated below.

Materiality measure Purpose Key considerations and benchmarks Quantum ()
Financial statement materiality Assessing whether the Financial Statements as a whole present a true and fair view • The value of net assets 1,200,000
• The level of judgement inherent in the valuation
• The range of reasonable alternative valuations
Specific materiality – classes of transactions and balances which impact on revenue profits Assessing those classes of transactions, balances or disclosures for which misstatements of lesser amounts than materiality for the Financial Statements as a whole could reasonably be expected to influence the economic decisions of users taken on the basis of the Financial Statements. • The level of net income return 250,000

We agreed with the Audit Committee that we would report to the Committee all audit differences in excess of 24,000, as well as differences below that threshold that, in our view, warranted reporting on qualitative grounds.

Opinion on other matters prescribed by the Companies Act 2006

In our opinion:

• the part of the Directors Remuneration Report to be audited has been properly prepared in accordance with the Companies Act 2006;

• the information given in the Strategic Report and the Directors Report for the financial year for which the Financial Statements are prepared is consistent with the Financial Statements; and

• the information given in the Corporate Governance Statement set out on pages 38 - 44 of the Annual Report with respect to internal control and risk management systems in relation to financial reporting processes and about share capital structures is consistent with the Financial Statements.

Matters on which we are required to report by exception

Under the ISAs (UK and Ireland), we are required to report to you if, in our opinion, information in the Annual Report is:

• materially inconsistent with the information in the audited Financial Statements; or

• apparently materially incorrect based on, or materially inconsistent with, our knowledge of the Company acquired in the course of performing our audit; or

• is otherwise misleading.

In particular, we are required to consider whether we have identified any inconsistencies between our knowledge acquired during the audit and the Directors statement that they consider the Annual Report is fair, balanced and understandable and whether the Annual Report appropriately discloses those matters that we communicated to the Audit Committee which we consider should have been disclosed.

Under the Companies Act 2006 we are required to report to you if, in our opinion:

• adequate accounting records have not been kept, or returns adequate for our audit have not been received from branches not visited by us; or

• the Financial Statements and the part of the Directors Remuneration Report to be audited are not in agreement with the accounting records and returns; or

• certain disclosures of Directors remuneration specified by law are not made; or

• we have not received all the information and explanations we require for our audit; or

• a Corporate Governance Statement has not been prepared by the Company. Under the Listing Rules we are required to review:

• the Directors statement, set out on page 29, in relation to going concern and longer-term viability; and

• the part of the Corporate Governance Statement relating to the Companys compliance with the provisions of the UK Corporate Governance Code specified for our review.

We have nothing to report in respect of these matters.

Jason Homewood

(senior statutory auditor)

For and on behalf of BDO LLP,

statutory auditor


United Kingdom

17 December 2015

BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127).