Investment Co. Regulatory News (INV)

The Investment Company Plc

Annual Results Announcement

for the year ended 30 June 2018

SUMMARY OF RESULTS

* The total return per ordinary share is based on total comprehensive income after taxation as detailed in the Consolidated Statement of Comprehensive

Income and in note 6 and is shown to enable comparison with other investment trust companies.

CHAIRMAN'S STATEMENT

This statement covers the year to 30 June 2018.

Introduction

Between 30 June 2017 and 30 June 2018 the FTSE All Share Index rose by 5.0%. The FTSE Actuaries UK Conventional Gilts All Stocks Index fell by 0.72% during the same period. The Company's NAV, which has a portfolio invested in both fixed income and equities, was 2.27 % lower within that period. Four dividends amounting to 20.7p per share were declared during the year.

Board Changes

Following earlier undertakings to refresh the Board, a number of changes were made on 6 July 2018. Sir David Thompson, Stephen Cockburn and Peter Allen, who had served on the Board for 13, 27 and 22 years respectively, retired and the Board, on behalf of all Shareholders, takes this opportunity to thank them for their long service. I was appointed, together with Tim Metcalfe, on 6 July 2018. We are both grateful for the continuity, support and expertise that Martin Perrin continues to bring to the Board.

Administrative and Portfolio Changes

As highlighted in the interim report, and following shareholder approval of the continuation vote at the last Annual General Meeting, the Board announced a change of Investment Manager to Fiske plc on 1 February 2018. The Board made a number of other administrative changes with the aim of significantly reducing the Company's ongoing annual expenses. However, the current regulatory environment and your Board's commitment to meet appropriate standards of governance mean that costs will always be subject to upward pressure.

Since the change of Investment Manager there have been a number of changes to the portfolio which are set out more fully in the Investment Manager's Report. You will also see there have been a number of changes to the Twenty Largest Investments.

Auditor

Saffery Champness have served the Company loyally for many years, for which we are grateful. We are now faced with their tenure becoming time-expired. We are pleased to report that we have asked PKF Littlejohn to become the Company's auditor and a resolution to that effect will be proposed at the Annual General Meeting.

Changes to Portfolio

Your new Board asked the Investment Manager to review the portfolio and the assess the Company's ability to meet the current mandate's yield expectations, whilst also carefully appraising the attendant risks in doing so. In order to put the Company on a more sustainable footing, and to give your new Investment Manager the opportunity to grow the assets of the Company, thereby giving your Board the opportunity to grow the size of the Company, we believe that some portfolio repositioning is necessary.

Dividend

In previous years, a relatively sizeable proportion of the dividend has been paid out of capital. Your new Board believes that this is not sustainable in the long term and that the Company must move towards ensuring that any dividend paid to shareholders is covered by the income produced by the assets, after allowing for the fixed costs, in order to give the Company a chance to grow in size. As a result of this change in approach, along with the change in the portfolio yield expectations, it is expected that a lower dividend totalling some 15p1 is likely to be declared throughout the forthcoming year. This will still require a proportion of the dividend to be paid out of capital; however, this will be much lower than in previous years.

The Investment Manager will now seek to invest in equities and loan stocks to achieve a portfolio yield of approximately

5% where this can be achieved without compromising total return.

Portfolio Valuation Changes

As a result of the Board and the Investment Manager's review of the portfolio, a number of changes have been made to the carrying value of those investments which have no market price. This has a resulted in a £234,000 (1.4%) decrease in their valuation, which represents a decrease of 4.9p to the NAV of the Company. The Investment Manager, together with the Company's auditors, believe that these changes to carrying valuations are appropriate as a result of its review of the existing investments.

The Investment Manager's review of the portfolio is set out fully in the Investment Manager's Report.

Continuation

The Company has put forward an ordinary resolution for the continuation of the Company, with the vote taking place at the Annual General Meeting to be held on 29 November 2018.

Your Board is aware that the Company is too small relative to its fixed cost base, and its viability is dependent not just upon performance but also its ability to grow by attracting further capital. Your new Board is wholly committed to exploring all appropriate opportunities that are likely to enhance Shareholder returns and firmly believes that continuation would be in the best interests of all Shareholders as it will enable your new Board to continue with the implementation of the existing changes and to explore new options for the growth of the Company.

1 This is a target and should not be interpreted as a profit or dividend forecast.

Outlook and Recommendation

Your Board believes that Shareholders benefit from the diversification provided by the combination of fixed income and equity investments, as well as from the quarterly dividends paid by the Company. When combined with the measures adopted during the last six months and the Board's commitment to growing the size of the Company meaningfully, the Board believes that the Company has the potential to be an attractive investment proposition.

Accordingly, your Directors recommend that members vote in favour of continuation. Yours faithfully,

I. R. Dighé

Chairman

30 October 2018

INVESTMENT MANAGER'S REPORT

Performance

During the 12 month period to 30 June 2018, the NAV of the Company fell by 2.27% whilst the share price rose by 1.85%. During the year Fiske was appointed investment manager on 1 February 2018 and took responsibility for the portfolio on 1 April 2018. Between 1 April and 30 June 2018 the NAV rose by 0.83% and the discount narrowed from 13.61% to 8.88%.

Investment Commentary

The UK is experiencing moderate GDP growth. The inflationary impact of sterling's depreciation following the EU referendum is unwinding but the anticipated boost to disposable incomes is being partially offset by a rise in energy costs. While business investment remains subdued, exports are strong, job vacancies are high and unemployment is low. Wage growth is not accelerating as anticipated by the Bank of England but that did not prevent the Monetary Policy Committee

- by unanimous vote - from raising rates to 0.75% in early August 2018.

Equity markets dislike uncertainty and the combination of Brexit and global trade wars are a growing investment risk. However, once there is clarity over the post-Brexit regulatory and political environment the UK could start to look even more attractive especially to those investors who are not currently allocating to the UK.

Portfolio

After taking over the responsibility for the portfolio on 1 April 2018, a number of existing holdings were either sold or reduced whilst new holdings were introduced.

In the fixed income part of the portfolio, holdings were reduced or sold in order to protect the capital value of the portfolio in the light of generally rising market interest rates. One of the securities sold was Phoenix Life 7.25% perpetual notes. This bond has a call date in March 2021 which we believe the issuer is likely to use in order to re-finance this debt on better terms.

In the equity segment of the portfolio, we have sold a number of holdings where liquidity was constrained and either the companies had performed well and this was reflected in the current market valuation or we perceived the current value was vulnerable to weakening sales growth, softening margins or to an overly leveraged balance sheet.

Future Prospects

The majority of the portfolio has historically been invested in fixed income securities including corporate bonds, preference shares and convertibles. As at 31 March 2018 the weighting of fixed interest securities was approximately 60%. During the three-month period to 30 June 2018 a number of fixed interest securities were sold, bringing the weighting down to approximately 50%.

Fundamentally, growth in capital value is driven by sustained growth in revenues and stable margins resulting in free cashflows available to re-invest in the business and provide for growth in dividends over time. We believe that share prices ultimately track long-term earnings and cashflows. As a result, our investment approach is to invest for the long term with a "buy and manage" approach.

Over time we will re-focus the portfolio in order to deliver long-term total returns from a blend of capital and income growth from a high conviction/low turnover portfolio. We will be investing with a multi-cap approach focusing on companies listed in the UK and seeking to preserve capital over the business cycle.

This is likely to lead to further reductions in the fixed interest exposure of the portfolio and an increase in the equity component. The process will take time, as a number of the holdings are relatively illiquid and will need to be sold carefully to preserve capital value.

M. Foster, J. P. Q. Harrison and J. Dieppe

Fiske plc

30 October 2018

TWENTY LARGEST INVESTMENTS

At 30 June 2018

^ Issues with unrestricted voting rights.

^ Issues with unrestricted voting rights.

The Company has a total of 69 portfolio investment holdings in 57 companies.

CORPORATE SUMMARY

Investment Objective

The Company's investment objective is to provide shareholders with an attractive level of dividends coupled with capital growth over the long term, through investment in a portfolio of equities, preference shares, loan stocks, debentures and convertibles.

Investment Policy

The Company invests in equity and fixed income securities. The equity portion of the portfolio would principally invest in UK quoted companies, with a wide range of market capitalisations, which are anticipated to pay a growing stream of dividends. It is expected that the fixed income securities would include preference shares, loan stocks, convertibles and related instruments and be issued by UK quoted companies with a wide range of market capitalisations. The conversion rights or equity warrants would normally convert into the underlying equity of the quoted company.

Any use of derivatives for investment purposes will be made on the basis of the same principles of risk spreading and diversification that apply to the Company's direct investments, as described below. The Company will not enter into uncovered short positions.

Risk diversification

Portfolio risk is mitigated by investing in a diversified spread of investments. Investments in any one company shall not, at the time of acquisition, exceed 15% of the value of the Company's investment portfolio. In the long term, it is expected that the Company's investments will generally be a portfolio of around 75 or more different securities, most of which will represent individually no more than 5% of the value of the Company's total investment portfolio, as at the time of acquisition.

The Company will not invest more than 10% of its gross assets, at the time of acquisition, in other listed closed-ended investment funds, whether managed by the Investment Manager or not, except that this restriction shall not apply to investments in listed closed-ended investment funds which themselves have stated investment policies to invest no more than 15% of their gross assets in other listed closed-ended investment funds.

Unquoted investments

The Investment Manager may invest in unquoted fixed income securities from time to time subject to prior Board approval.

Investment strategy

The Company uses a bottom-up investment approach to selecting a diversified portfolio of equity and fixed income securities.

The investment approach can be described as active and universal, as the Company will not seek to replicate any benchmark and will adopt a multicap investment approach within an overall diversified portfolio. Potential investments are assessed against the key criteria, including, yield along with an assessment of the prospects of underlying corporate growth prospects, market positions, calibre of management and risk and financial resilience.

Dividend Policy

Pursuant to the changes, your Board intends to pay a total dividend of 15p1 per share during the year ending 30 July 2019. Any growth in net income in future years will be taken into account in assessing dividend levels with a view to gradually growing it going forward.

1 This is a target and should not be interpreted as a profit or dividend forecast.

Capital Structure

As at 30 June 2018 and the date of this Annual Report, the Company's share capital consists of 4,772,049 ordinary shares of 50p each. The Company holds no shares in treasury. At general meetings of the Company, holders of ordinary shares are entitled to one vote on a show of hands and on a poll, to one vote for every share held.

In addition, there are 1,717,565 fixed rate preference shares of 50p in issue, all of which are held by New Centurian Trust Limited a wholly owned subsidiary of the Company. The fixed rate preference shares are non-voting, are entitled to receive a cumulative dividend of 0.01p per share per annum, and are entitled to receive their nominal value, 50p, on a distribution of assets or winding up. Preference shares are disclosed as equity in accordance with IAS 32.

Total Assets and Net Asset Value

The Company and its wholly owned subsidiaries, Abport Limited and New Centurion Trust Limited, had total net assets of £17,334,093 and a NAV of 363.24p per ordinary share at 30 June 2018 (2017: £17,736,777 and 371.68p).

Business Model

The principal activity of the Company is investment in equity securities of quoted UK companies with a wide range of market capitalisations, preference shares and prior charge securities with a view to achieving a high rate of income and capital growth over the medium term. The Company has been granted approval from HM Revenue & Customs ("HMRC") as an investment trust under sections 1158 and 1159 of the Corporation Tax Act 2010 ("ss1158/1159") and will continue to be treated as an investment trust company, subject to continuing to meet the conditions for approval.

The Directors are of the opinion that the Company has conducted its affairs for the year ended 30 June 2018 so as to be able to continue to qualify as an investment trust.

The Company's status as an investment trust allows it to obtain an exemption from paying taxes on the profits made from the sale of its investments and all other net capital gains. Investment trusts offer a number of advantages for investors, including access to investment opportunities that might not be open to private investors and to professional stock selection skills at lower cost.

The Company owns Abport Limited, an investment dealing company, and New Centurion Trust Limited, an inactive investment company (the "Subsidiaries"). The Company and its wholly owned Subsidiaries together compromise a group (the "Group").

Principal Risks and Uncertainties

The management of the business and the execution of the Group's strategy are subject to a number of risks. A robust assessment of the principal risks to the Company has been carried out, including those that would threaten its business model, future performance, solvency and liquidity. A summary of the risk management and internal control processes can be found in the Corporate Governance Statement . The key business risks affecting the Group are:

(i) Investment decisions: the performance of the Group's portfolio is dependent on a number of factors including, but not limited to the quality of initial investment decisions and the strategy and timing of sales;

(ii) Investment valuations: the valuation of the Group's portfolio and opportunities for realisations depend to some extent on stock market conditions and interest rates; and

(iii)  Macroeconomic environment for preference shares and prior charge securities: the environment for issuing of new preference shares and prior charge securities determines whether new issues become available, thus affecting the choice and scope of investment opportunities for the Group.

Risk Management

Specific policies for managing risks are summarised below and have been applied throughout the year:

1. Market price risk

The Investment Manager monitors the prices of financial instruments held by the Group on a regular basis. In addition, it is the Board's policy to hold an appropriate spread of investments in the portfolio in order to reduce risks arising from investment decisions and investment valuations. The Investment Manager actively monitors market prices throughout the year and reports to the Board, which meets regularly in order to review investment strategy. Most of the equity investments held by the Company are listed on the London Stock Exchange.

2. Interest rate risk

In addition to the impact of the general investment climate, interest rate movements may specifically affect the fair value of investments in fixed interest securities. The Investment Manager monitors the applicable interest rates and yields associated with the securities.

3. Liquidity risk

The Group's assets mainly comprise readily realisable quoted securities that can be sold to meet funding commitments if necessary. Short-term flexibility is achieved through the use of overdraft facilities.

Additional risks and uncertainties include:

Credit risk: the failure of a counterparty to a transaction to discharge its obligations under that transaction that could result in the Company suffering a loss. Normal delivery versus payment practice and review of counterparties and custodians by the Investment Manager mean that this is not a significant risk.

Discount volatility: The Company's shares may trade at a price which represents a discount to its underlying NAV.

Regulatory risk: The Company operates in an evolving regulatory environment and faces a number of regulatory risks. A breach of section 1158/1159 would result in the Company being subject to capital gains tax on portfolio investments. Breaches of other regulations, including the Companies Act 2006, the UKLA Listing Rules, the UKLA Disclosure Guidance and Transparency Rules, or the Alternative Investment Fund Managers' Directive, could lead to a detrimental outcome. Breaches of controls by service providers to the Company could also lead to reputational damage or loss. The Board monitors compliance with regulations, with reports from the Investment Manager and the Administrator.

Protection of assets: The Company's assets are protected by the using its custodian, Fiske plc. In addition, the Company operates clear internal controls to safeguard all assets.

These and other risks facing the Company are reviewed regularly by the Audit Committee.

Key Performance Indicators ("KPIs")

The Board reviews performance by reference to a number of KPIs and considers that the most relevant KPIs are those that communicate the financial performance and strength of the Group as a whole. The Board and Investment Manager monitor the following KPIs:

-  NAV performance relative to the FTSE All-Share Index (total return)

The NAV per ordinary share at 30 June 2018 was 363.24p per share (2017: 371.68p). The total return of the NAV

after adding back dividends paid was 3.3%. This compares with a total return on the FTSE All-Share Index of 8.98%.

-  (Discount)/premium of share price in relation to NAV

Over the year to 30 June 2018, the Company's share price moved from trading at a discount of 12.56% to a discount of 8.88%.

-  Ongoing Charges Ratio

The Ongoing Charges Ratio for the year to 30 June 2018 amounted to 2.6%.

Management

During the year the Company's investments were managed by Miton Asset Management Limited ("Miton") until 31 March

2018. On 1 April 2018 Fiske plc ("Fiske") took over responsibility as the Investment Manager. Further detail on Fiske is set out below:

• Fiske is an independent investment management company whose principal activities are the provision of private client investment management, asset management and private client and institutional stockbroking.

• Fiske is distinctive from a number of investment managers in that many of its portfolios do not use traditional benchmarks as they can bring unintentional risks that can impede the day-to-day investment manager's ability to maximise absolute returns for clients.

•  Fiske is focused on delivering positive investment outcomes combined with a high level of service for its clients.

•  Fiske is authorised and regulated by the Financial Conduct Authority, is a member of the London Stock Exchange and is quoted on AIM.

•  Fiske is capitalised with equity capital, it has no debt and does not use financial instruments except its intra-day

Crest cap facility.

Details of the Investment Manager

Fiske has a team of investment managers researching a broad range of quoted UK stocks. The day-to-day management of the portfolio is carried out by Michael Foster, James Harrison and Julian Dieppe.

Michael Foster

Michael joined Fiske in June 2017 to work on the launch of a UCITS fund for Fiske. In May 2018 the Ocean UK Equity Fund was launched with Michael as Lead Portfolio Manager. He holds the Investment Management Certificate and has managed extensive private investments since 2011.

James Harrison

James joined Fiske in 1996 and has over 20 years of industry experience. He is a Chartered Fellow of the Securities Institute and is Chief Executive Officer of Fiske plc. He manages a number of multi-asset private client portfolios and is also a co-manager of the Ocean UK Equity Fund.

Julian Dieppe

Julian joined Fiske in 2010 and has more than eight years of industry experience. He is a Member of the Securities Institute and manages a significant number of multi-asset private client portfolios at Fiske. He is also a co-manager of the Ocean UK Equity Fund.

Management Arrangements

Miton ceased to be the Company's Investment Manager on 31 March 2018. Up to that point, Miton had received £65,759 in management fees in respect of the year ended 30 June 2018.

On 1 February 2018, the Company announced that it was changing Investment Manager, and was appointing Fiske with effect from 1 April 2018. Fiske has been appointed as the Investment Manager under an agreement dated 1 February 2018.

Under the terms of the Investment Management Agreement, the Investment Manager has discretion to buy, sell, retain, exchange or otherwise deal in investment assets for the account of the Company.

The Investment Manager is entitled to receive from the Company, or any member of its subsidiaries in respect of its services provided under the Investment Management Agreement, a management fee payable monthly in arrears calculated at the rate of one-twelfth of 0.75% per calendar month of the NAV for its services under the Investment Management Agreement. This fee has been capped in respect of the first 12 months of Fiske's appointment, at £90,000.

The Investment Management Agreement is terminable by either the Investment Manager or the Company giving to the other not less than six months' written notice. The Investment Management Agreement may be terminated earlier by the Company with immediate effect on the occurrence of certain events, including the liquidation of the Investment Manager or appointment of a receiver or administrative receiver over the whole or any substantial part of the assets or undertaking

of the Investment Manager, or a material breach by the Investment Manager of the Investment Management Agreement which is not remedied. The Company may also terminate the Investment Management Agreement if a continuation vote is not passed.

Having considered the terms of the Investment Management Agreement the Board considers that the current fee structure is appropriate.

It is the opinion of the Board that the continuing appointment of Fiske as Investment Manager on the terms disclosed is in the interests of shareholders as a whole.

As an investment company, managed and marketed in the UK, the Company is an Alternative Investment Fund ("AIF")

under the provisions of the Alternative Investment Fund Manager's Directive ("AIFM").

The Company does not currently use gearing, makes sufficient risk disclosure within the report, and there have been no material changes to the investment policy or objectives. Therefore, it is considered that separate disclosures are not required.

Environmental, Human Rights, Employee, Social and Community Issues

The Board consists entirely of non-executive Directors and during the year the Company had one employee. Day-to-day management of the business is delegated to the Investment Manager. The Company has no direct impact on the community or the environment, and as such has no environmental, human rights, social or community policies. In carrying out its investment activities and in relationships with suppliers, the Company aims to conduct itself responsibly, ethically and fairly.

Environmental, Social and Governance factors are considered as part of the investment process as misjudgments on these matters can incur additional costs to the portfolio holdings, as well as undermining their equity return through reputational damage. The Investment Manager questions the corporate management on a variety of topics to ensure that investee companies are adhering to best practice. These questions can be wide ranging.

The Board's policy on diversity is to take this into account during the recruitment and appointment process. However, members of the Board are appointed on merit, against an objective criteria set by the Board acting as the Nomination Committee therefore there are no set targets against which to report.

The Strategic Report has been approved by the Board of Directors. On behalf of the Board

I. R. Dighé

Chairman

30 October 2018

STATEMENT OF DIRECTORS' RESPONSIBILITIES

The Directors are responsible for preparing this Annual Report and the financial statements in accordance with applicable United Kingdom law and regulations and those International Financial Reporting Standards ("IFRS") adopted by the European Union and Article 4 of the International Accounting Standards. Company law requires the Directors to prepare financial statements for each financial period which present fairly the financial position of the Group and the financial performance and cash flows of the Group for that period.

In preparing those 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;

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

•  state whether applicable IFRS 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 that the Group will continue in business; and

•  provide additional disclosures when compliance with the specific requirements in IFRSs are insufficient to enable users to understand the impact of particular transactions, other events and conditions on the entity's financial position and financial performance.

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Group and enable them to ensure that the Group financial statements comply with the Companies Act 2006 and Article 4 of the 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 Strategic Report, Directors' Report, Directors' Remuneration Report and Corporate Governance Statement that comply with that law and those regulations, and for ensuring that the Annual Report includes information required by the Listing Rules of the Financial Conduct Authority.

The financial statements are available on the Administrator's website, www.maitlandgroup.com. The work carried out by the Auditor does not involve consideration of the maintenance and integrity of this website and, accordingly, the Auditor accepts no responsibility for any changes that have occurred to the financial statements since they were initially presented on the website. Visitors to the website need to be aware that legislation in the United Kingdom covering the preparation and dissemination of the financial statements may differ from legislation in their jurisdiction.

We confirm that to the best of our knowledge:

•  the Group and Company financial statements, prepared in accordance with IFRS as adopted by the European Union, give a true and fair view of the assets, liabilities, financial position and profit of the Group;

•  this Annual Report 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 it faces; and

•  the Annual Report and financial statements, taken as a whole, are fair, balanced and understandable and provide the information necessary for shareholders to assess the Company's position and performance, business model and strategy.

On behalf of the Board

I. R. Dighé

Chairman

30 October 2018

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the year ended 30 June 2018

The total column of this statement is the Consolidated Statement of Comprehensive Income of the Group prepared in accordance with IFRS. The supplementary revenue and capital columns are prepared in accordance with the Statement of Recommended Practice issued by the Association of Investment Companies.

All revenue and capital items in the above statement derive from continuing operations. No operations were acquired or discontinued during the period.

The notes form part of these financial statements.

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the year ended 30 June 2018

The notes form part of these financial statements

COMPANY STATEMENT OF CHANGES IN EQUITY

For the year ended 30 June 2018