Annual Financial Report

THE INVESTMENT COMPANY PLC

ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2017

The full Annual Report and Accounts for the year ended 30 June 2017 can be found on the Companyâ€™s website: http://www.mitongroup.com/tic.

DIRECTORS (all non-executive)

Sir David Thomson Bt. (Chairman)
S. J. Cockburn
P. S. Allen
M. H. W. Perrin (Audit Committee Chairman and Senior Independent Director)

STRATEGIC REPORT

SUMMARY OF RESULTS

		At 30 June 2017	At 30 June 2016	Change
Equity shareholdersâ€™ funds		17,736,777	16,991,639	+4.4%
Number of ordinary shares in issue		4,772,049	4,772,049	-%
Net asset value (â€œNAVâ€) per ordinary share		371.68p	356.07p	+4.4%
Ordinary share price (mid)		325.00p	365.50p	-11.1%
Premium/(discount) to NAV		(12.56)%	2.65%

		At 30 June 2017	At 30 June 2016
Total return per ordinary share*		36.31p	(11.21)p
Return after taxation per ordinary share		24.64p	(4.03)p
Dividends paid/declared per ordinary share		20.70p	20.70p

*	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.

FINANCIAL CALENDAR

November	Payment of first interim dividend for the year ending 30 June 2018.
December	Annual General Meeting.
February	Payment of second interim dividend for the year ending 30 June 2018.
February/March	Announcement of Half-Yearly Financial Report.
May	Payment of third interim dividend for the year ending 30 June 2018.
August	Payment of fourth interim dividend for the year ending 30 June 2018.
September/October	Announcement of Annual Results.

CHAIRMANâ€™S STATEMENT

This statement covers the year ending 30 June 2017.

Following the initial market setback on the UKâ€™s decision to leave the EU, the subsequent period was marked with a strong equity recovery. The FTSE All Share Index rose 13.9% over the year. In contrast, the FTSE Actuaries UK Conventional Gilts All Stocks Index fell 3.6% over the year, as the decades of bond yield reductions came to an end. The net asset value (â€œNAVâ€) of the Company, which has a portfolio invested in both fixed income and equities, rose 4.4% over the twelve-month period. In addition, three interim dividends of 5p and a fourth interim of 5.7p were declared over the year. Dividends for the year 2017 totalled 20.7p (2015/16: 20.7p). Following the Companyâ€™s reorganisation in June 2013, its aim was to pay a premium, and in time grow the dividend to shareholders. It had sought to do this through investing in high-yielding loan stocks issued by quoted companies, which frequently carry a degree of participation in the issuerâ€™s share price growth if they perform strongly. A second aspect of this strategy was that the Companyâ€™s return was not expected to be closely correlated with the movements of mainstream markets.

The Company has continued to hold a number of fixed interest stocks, which the Company has held for many years and the Board is well satisfied with the total return on these holdings. However, since June 2013, there have been few convertible loan notes issued that offer attractive risk/reward ratios, therefore the market opportunity for the strategy has not developed as had been expected. Those funds have been invested in smaller company equities where the returns have proved somewhat disappointing.

Overall, the increase in our NAV in the year was only 4.4% compared with gains of 24.8% and 36.5% respectively in the FTSE Smaller Companies and FTSE AIM Indices.

The Board is exploring initiatives to improve the total return to shareholders. The Board is also reviewing the administrative arrangements and has identified changes that can lower the cost of overheads, which includes the change of Secretary, Administrator and Registrar. Further details are included in the Directorâ€™s Report. In addition, pursuant to discussion with significant shareholders, the Board will review its composition.

Whilst markets may continue to appreciate from here for some time, the absence of global productivity growth could become a constraint. It may therefore become all the more important to invest across a wider range of opportunities in the coming period. In the meantime, our fixed interest portfolio is expected to generate a steady flow of relatively high income.

At the forthcoming Annual General Meeting there shall be, as with last year, a continuation resolution put to shareholders. The Directors believe the Company is well placed to deliver on its objectives in relation to returns to shareholders. Certain significant shareholders have expressed a strong preference to continue. Accordingly, your Directors recommend that members vote in favour of the continuation resolution.

Sir David Thomson
Chairman

27 October 2017

MANAGERâ€™S REPORT

Market returns in the year to June 2017
Market returns have been good over the last three decades. In our view, this has been driven by the extra growth derived from the globalisation of trade, combined with the fall of bond yields as the growth in imported low cost goods has moderated inflationary pressures. Going forward there are indications that globalisation may have peaked, which may lead to a series of changes in market trends. If this is the case, then it will become more important than ever for investment strategies to be less correlated with equity markets in future, along with a greater attention to downside resilience.

Performance
Following the equity market setback post the UKâ€™s decision to leave the EU, the year between June 2016 and June 2017 was marked with a strong rise in the FTSE All Share Index; this index rose 13.9% over the year.

However, if anything the near absence of world growth has led to an escalation in the valuations of many of the largest growth stocks.

In NASDAQ, the US exchange, the rise in the share prices of Facebook, Apple, Amazon, Netflix and Google (collectively known as the FANGs) has attracted plenty of media comment. Interestingly, there has been a similar trend in the UK, with the best returns coming from many of the largest growth stocks listed on the AIM exchange. These could be linked together in the acronym FHAB â€“ comprising Fevertree, Hutchinson China, ASOS and Boohoo. These four stocks alone added some 9% of the return on the FTSE AIM All Share Index that appreciated 36.5% over the year. Smaller companies generally appreciated, with the FTSE Smaller Companies (excluding Investment Companies) Index up 24.8% over the year.

In contrast, the FTSE Actuaries UK Conventional Gilts All Stocks Index fell 3.6% over the year. UK bond yields have been falling over recent decades as the surge in low cost imports have led to progressively lower interest rates.

The NAV of the Company, with a portfolio invested in both fixed income securities and equities, rose 4.4% over the twelve-month period. This reflected a period in which several of the equity holdings performed strongly, along with some others that disappointed.

For example, Bilby, a business that helps install gas fittings for social housing, lost a major contract and then went on to restate its past profitability. The share price of this company fell back 41.8% over the period. Alongside this Coral Products, a manufacturer of injected moulded products, fell back 21.6% over the year because it took some time to pass on the extra costs of its raw materials after the devaluation of Sterling. Subsequent to the end of June both of these companies have announced much improved trading, and therefore we look forward to the recovery of their share prices. The worst performing individual stock was Fairpoint, a business that acquired two legal practices that were automating to improve their efficiency. The share price fell back 91.0% to 9.5 pence before suspension of trading on AIM on 28 June 2017, as the business suffered a sharp rise in their working capital. Subsequent to June 2017, the company has announced that it has appointed administrators. Consequently, it has been decided to write down the carrying market value to Â£nil for this year end. In contrast, the portfolio also held holdings in Stobart Group, Randall & Quilter, Anglo Pacific and Aviva, all of which performed very strongly in the period.

Despite a reduction in the prices of UK government debt over the year, some of the fixed income holdings have nevertheless appreciated. The Phoenix 7.25% Perpetual Notes rose by 7.5% and the RBS 9% Perpetual Notes rose by 16.1% over the year. Alongside this, a few of the convertible loan stocks issued by quoted companies have shown some early performance.

Portfolio
Approximately half of the portfolio remains invested in a range of preference shares, loan stocks, debentures and notes. Although the largest corporate exposure in the portfolio is to Phoenix Life through a 7.25% perpetual note along with some ordinary shares as well, there are over 40 issuers from different corporates in the portfolio.

Despite a slight pick-up in the issuance of convertible loan notes during the year under review, there have still been too few with sufficiently attractive risk/reward ratios, so the second portion of the portfolio has largely remained invested in ordinary equities â€“ including many smaller quoted companies â€“ that often pay premium dividend yields. Generally smaller quoted companies tend to have greater growth potential, which will be more important if world growth remains tepid.

A number of holdings that were suffering adverse trading conditions were sold over the year. In the case of the Royal Mail and Safestyle, these were sold ahead of their downturn. However, in the case of DX Group and Entu, these were sold after adverse trading statements since the prospect of recovery seemed too distant. In the case of Serpura, a holding purchased through underwriting by a lowly priced fundraising, the CEO was unfortunately involved in an accident, which affected its prospects, therefore we accepted a takeover towards the end of the period. Alongside these, significant profits were taken on Esure given the valuation had moved up to an elevated level.

New holdings were established in Yu, a young and vibrant energy supplier to businesses, Eddie Stobart Logistics, which was relisted after finding operational improvements that helped them increase market share, and K3 Capital, an efficient corporate finance business that helps the very smallest businesses find a new owner. All three are well placed to pay good and growing dividend yields in our view. In addition, a new holding in the Sirius Minerals convertible loan stock was purchased at issue, but was subsequently sold when it moved to a significant premium some months after purchase.

Finally, the Company continues to hold a FTSE100 Put option that was purchased for the portfolio following the market appreciation ahead of the US election. This covers around one third of the portfolio, with an exercise price of 6000 and the cover extends to March 2018. As with all insurance, the value of this holding has diminished as its term has reduced.

Prospects
The principal aim of the Company has been to pay a premium yield, and ultimately grow the dividend for shareholders. The Intention was to generate a larger stream of revenue through investing in Loan Stocks issued by quoted companies since they typically pay yields in excess of 6%. In addition, these instruments can also generate an additional return through participating in a degree of the share price rise thereafter. Overall the returns on the Company have not been closely correlated with the movements of mainstream markets.

The absence of world growth remains a headwind going forward. If anything, the fact that productivity has not fully recovered since the Global Financial Crisis, is maybe even more troubling. Both of these factors imply that the market trends that have been with us over recent decades may be at the point of change. However, there will be individual stocks that continue to thrive and prosper in spite of the challenges. As an example, the Trust holds a number of convertible loan notes paying very attractive yields, where the underlying quoted companies continue to have promising prospects.

G. Williams and M. Turner
Miton Asset Management Limited

27 October 2017

TWENTY LARGEST INVESTMENTS
At 30 June 2017

	Stock	Number	Issue	Book cost	Market or Directorsâ€™ valuation	% of total portfolio


			%	Â£	Â£
1	Lloyds Banking Group
	7.625% Perpetual notes (LBG Capital)	478,000	0.03	204,360	528,182	3.24
	7.281% Perpetual notes (Bank of Scotland)	400,000	0.27	315,331	499,440	3.07
	7.875% Perpetual notes (LBG Capital)	362,000	0.05	245,997	423,195	2.60

				765,688	1,450,817	8.91

2	Phoenix Group Holdings
	7.25% perpetual notes	1,060,000	0.53	811,923	1,130,170	6.94
	Ordinary â‚¬0.0001Â§	35,758	0.01	266,195	276,767	1.70

				1,078,118	1,406,937	8.64


3	Royal Bank of Scotland Group
	9% series â€˜Aâ€™ non-cum pref (NatWest)	500,000	0.36	362,920	740,000	4.54
	Sponsored ADR each rep pref C (NatWest)	20,000	0.20	55,473	404,019	2.48

				418,393	1,144,019	7.02

4	Stobart Group
	Ordinary 1pÂ§	315,146	0.09	499,491	933,462	5.73

5	Aggregated Micro Power
	8% conv loan notes 30/03/21	500,000	2.50	500,000	714,286	4.39

6	Randall & Quilter Investment Holdings
	Ordinary 2pÂ§	387,000	0.44	417,591	561,150	3.44

7	Newcastle Building Society
	Subordinated 6.625% step-up note 23/12/19 (variable)	600,000	2.40	405,438	528,000	3.24

8	The Fishguard & Rosslare Railways and Harbours Company
	3.5% guaranteed preference stock	790,999	63.91	441,810	522,059	3.20

9	600 Group
	8% conv loan notes 14/02/20	500,000	5.88	500,000	500,000	3.07

10	Charles Taylor
	Ordinary 1pÂ§	192,198	0.28	334,592	461,275	2.83

11	Intercede Group
	8% conv loan notes 29/12/21	450,000	10.01	450,000	450,000	2.76

12	Investec Investment Trust
	3.5% cum pref Â£1	461,508	35.50	271,938	304,595	1.87
	5% cum pref Â£1	104,043	30.12	92,858	95,720	0.59

				364,796	400,315	2.46

13	Aviva
	Ordinary 25pÂ§	75,774	-	334,545	398,571	2.45

14	Amalgamated Metal Corporation
	5.4% cum pref Â£1	256,065	18.21	144,049	204,852	1.26
	6% cum pref Â£1	213,510	23.72	103,844	185,754	1.14

				247,893	390,606	2.40

15	Direct Line Insurance Group
	Ordinary 10.909pÂ§	105,621	0.01	354,049	375,377	2.30

16	KCOM Group
	Ordinary 10pÂ§	413,519	0.08	407,699	368,032	2.26

17	Coral Products
	Ordinary 1pÂ§	2,500,000	3.03	500,000	362,500	2.23

18	Liberty
	9.5% cum pref Â£1	199,708	34.58	146,996	205,699	1.26
	6% cum non redeemable pref Â£1	250,225	64.99	118,071	122,610	0.75

				265,067	328,309	2.01

19	Renold Group
	6% cum pref Â£1	422,109	72.72	330,490	316,582	1.94

20	Manx Telecom
	Ordinary 0.2pÂ§	158,562	0.14	236,585	299,682	1.84

				8,852,245	11,911,979	73.12

Â§ Issues with unrestricted voting rights.

The Group has a total of 73 portfolio investment holdings in 58 companies.

CORPORATE SUMMARY

Investment Objective
The Companyâ€™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. It is expected the fixed income securities would include preference shares, loan stocks, debentures, notes, 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. 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.

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 Companyâ€™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 Companyâ€™s investment portfolio. In the long term, it is expected that the Companyâ€™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 Companyâ€™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 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 Company may invest in unquoted fixed income securities from time to time subject to prior Board approval.

Investment strategy
The Manager 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 target a significant proportion of issues from smaller quoted companies 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
The dividend policy has been adjusted to make it more sustainable, taking the dividend in the first year after reorganisation, being the year ended 30 June 2014, which amounted to 20.7p and seeking to gradually grow it going forward. Any growth in the dividend beyond 20.7p will be reflected in the quantum of the fourth interim dividend.

Capital Structure
As at 30 June 2017 and the date of this Annual Report, the Companyâ€™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 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 Group had total net assets of Â£17,736,777 and a NAV of 371.68p per ordinary share at 30 June 2017.

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 (â€œHMRCâ€) as an investment trust under s1158/1159 of the Corporation Tax Act 2010 (â€œs1158/1159â€) and will continue to be treated as an investment trust company, subject to there being no serious breaches of the conditions for approval.

The principal conditions that must be met for approval by HMRC as an investment trust for any given accounting period are that the Companyâ€™s business should consist of â€œinvesting in shares, land or other assets with the aim of spreading investment risk and giving members of the company the benefit of the resultsâ€ and the Company must distribute a minimum of 85% of all its income as dividend payments. The Company must also not be a close company. The Directors are of the opinion that the Company has conducted its affairs for the year ended 30 June 2017 so as to be able to continue to qualify as an investment trust.

The Companyâ€™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 â€œsubsidiariesâ€). The Company and its wholly owned Subsidiaries together compromise a group (the â€œGroupâ€).

Principal Risks and Uncertainties
The management of the business and the execution of the Groupâ€™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 in the full Annual Report. The key business risks affecting the Group are:

Investment decisions: the performance of the Groupâ€™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;
Investment valuations: the valuation of the Groupâ€™s portfolio and opportunities for realisations depend to some extent on stock market conditions and interest rates; and
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 period:

1. Market price risk
The Manager monitors the prices of financial instruments held by the Group on a regular basis. In addition, it is the Boardâ€™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 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 Group 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 Manager monitors the applicable interest rates and yields associated with the securities.

3. Liquidity risk
The Groupâ€™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 Manager mean that this is not a significant risk.

Discount volatility: The Companyâ€™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 s1158/1159 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 Managersâ€™ 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 Manager and the Administrator.

Protection of assets: The Companyâ€™s assets are protected by the use of an independent custodian, BNY Mellon. In addition, the Company operates clear internal controls to safeguard all assets.

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

Key Performance Indicators (â€œKPIsâ€)
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 Company as a whole. The Board and Manager monitor the following KPIs:

NAV performance relative to the FTSE All-Share Index (total return)
The NAV per ordinary share at 30 June 2017 was 371.68p per share (2016: 356.07p). The total return of the NAV after adding back dividends paid was 10.2%. This compares with a total return on the FTSE All-Share Index of 18.1%.
(Discount)/premium of share price in relation to NAV
Over the year to 30 June 2017, the Companyâ€™s share price moved from trading at a premium of 2.65% to a discount of 12.56%.
Ongoing Charges Ratio
The Ongoing Charges Ratio for the year to 30 June 2017 amounted to 2.5%. The management fee for the year was reduced by Â£11,128 in order to achieve the maximum Ongoing Charges Ratio permitted under the Management Agreement, as explained below.

Management
During the year, the Companyâ€™s investments were managed by Miton.

Miton is an independent fund management company quoted on AIM with an extensive shareholder base of major institutions and a particularly robust balance sheet.

Miton is distinctive from most other fund managers in that many of its funds do not use traditional benchmarks since they can bring unintentional risks that can impede the day-to-day managersâ€™ ability to maximise absolute return in unsettled markets.

Through anticipating post credit boom trends, Miton proposes investment strategies that are set up with forthcoming trends in mind, rather than slavishly following the consensus.

Many of Mitonâ€™s funds have greater scope to manage volatility more closely than others, with an aim better to sustain its clientsâ€™ assets through market cycles.

Details of the Manager
Miton has a team of fund managers researching the full universe of quoted UK stocks. The day-to-day management of the portfolio is carried out by Gervais Williams and Martin Turner, who research all quoted companies, and are particularly known for successfully investing in many of the smaller quoted stocks.

Gervais Williams
Gervais joined Miton in March 2011 and is a Senior Executive director of the Miton Group. He has been an equity portfolio manager since 1985, including 17 years as Head of UK Smaller Companies and Irish Equities at Gartmore. He won the Grant Thornton Investor of the Year Award in 2009 and 2010, and was awarded Fund Manager of the Year 2014 by What Investment? He is also non-executive chairman of the Quoted Companies Alliance.

Martin Turner
Martin joined Miton in May 2011. Martin and Gervais have had a close working relationship since 2004 and their complementary expertise and skills led to a series of successful companies being backed. Martin qualified as a Chartered Accountant with Arthur Andersen, and also has extensive experience at Rothschild, Merrill Lynch and Collins Stewart, where as Head of Small/Mid Cap Equities his role covered their research, sales and trading activities.

Management Arrangements
The Company appointed Miton Trust Managers Limited (â€œMTMâ€ or â€œManagerâ€) as its Alternative Investment Fund Manager (â€œAIFMâ€) under an agreement dated 22 July 2014 (the â€œManagement Agreementâ€). MTM has been approved as an AIFM by the UKâ€™s Financial Conduct Authority. Miton Asset Management Limited has been appointed by MTM as Investment Manager to the Company pursuant to a delegation agreement.

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

The Manager is entitled to receive from the Company or any member of its subsidiaries in respect of its services provided under the Management Agreement, a management fee payable monthly in arrears calculated at the rate of one-twelfth of 1% per calendar month of the NAV for its services under the Management Agreement, save that its management fee will be reduced by such amount (being not more than the fees payable to the Manager in respect of any year (exclusive of VAT)) so as to seek to ensure that the Ongoing Charges Ratio of the Company does not exceed 2.5% per annum.

The Management Agreement is terminable by either the Manager or the Company giving to the other not less than six monthsâ€™ written notice, such notice not to expire earlier than the second anniversary of commencement. The Management Agreement may be terminated earlier by the Company with immediate effect on the occurrence of certain events, including the liquidation of the Manager or appointment of a receiver or administrative receiver over the whole or any substantial part of the assets or undertaking of the Manager or a material breach by the Manager of the Management Agreement which is not remedied. The Company may also terminate the Management Agreement should Gervais Williams cease to be an employee of the Managerâ€™s group and, within three months of his departure, is not replaced by a person whom the Company considers to be of equal or satisfactory standing. The Company may also terminate the Management Agreement if a continuation vote is not passed.

Environmental, Human Rights, Employee, Social and Community Issues
The Board consists entirely of non-executive Directors and no one individual has unfettered powers of decision. Day-to-day management of the business is delegated to the Manager. As an investment trust, 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 misjudgements on these matters can incur additional costs to the portfolio holdings, as well as undermining their equity return through reputational damage. The Manager questions the corporate management on a variety of topics to ensure that company are adhering to best practice. These questions can be wide ranging.

The Board comprises four male Directors. In relation to gender diversity considerations, whilst there are currently no female Directors of the Company, members of the Board are appointed on merit, against an objective criteria set by the Board acting as the Nomination Committee.

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

On behalf of the Board

Sir David Thomson
Chairman

27 October 2017

EXTRACTS FROM THE DIRECTORSâ€™ REPORT

Going Concern
At the forthcoming Annual General Meeting, shareholders will be asked to vote on the continuation of the Company as a closed-ended investment company. Should shareholders agree that the Company should continue to operate as an investment company, a similar ordinary resolution will be proposed at every Annual General Meeting thereafter.

The Directors believe that it is appropriate to adopt the going concern basis in preparing the financial statements as the assets of the Group consist mainly of securities which are readily realisable. The Directors are of the opinion that the Group has adequate resources to continue in operational existence for the foreseeable future. In arriving at this conclusion, the Directors have considered the liquidity of the portfolio and the Companyâ€™s ability to meet obligations as they fall due for a period of at least 12 months from the date that these financial statements were approved.

Viability Statement
The Directors have assessed the viability of the Company over a two year period, taking account of the Companyâ€™s position and the risks as set out in the Strategic Report.

The period assessed balances the long-term aims of the Company, the Boardâ€™s view that the success of the Company is best assessed over longer time period and the inherent uncertainty of looking too far ahead. During this period, the Company will 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 7 December 2017, and every year thereafter.

As part of its assessment of the viability of the Company, the Board has considered the principal risks and uncertainties and the impact on the Company of a significant fall in the value of its portfolio.

To provide this assessment, the Board has considered the Companyâ€™s financial position and its ability to liquidate its portfolio to meet its expenses or other liabilities as they fall due.

The Company invests largely in debt, preference shares and equity instruments issued by companies listed and traded on regulated stock exchanges. These are traded, and whilst some may be less liquid than larger quoted companies, the portfolio is well diversified by both number of holdings and industry sector.

The expenses of the Company are predictable and modest in comparison with the assets in the portfolio. There are no commitments that would change that position.

The Ongoing Charges Ratio of the Company is presently capped at 2.5%.

In addition to considering the principal risks above and the financial position of the Company as described above, the Board has also considered the following further factors:

the Board will ensure that the investment manager continues to adopt a long-term view when making investments;

regulation will not increase to a level that makes the running of the Company uneconomical; and

the performance of the Company will be satisfactory and should performance be less than the Board deem acceptable it has powers to take appropriate action.

Accordingly, the Directors have formed the reasonable expectation that the Company will be able to continue in operation and meet its liabilities as they fall due over the next two years.

STATEMENT OF DIRECTORSâ€™ 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 (â€œIFRSâ€) 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 IFRSâ€™s are insufficient to enable users to understand the impact of particular transactions, other events and conditions on the entityâ€™s financial position and financial performance.

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Companyâ€™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, Directorsâ€™ Report, Directorsâ€™ 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 published on the Companyâ€™s website, www.mitongroup.com/tic, which is maintained on behalf of the Company by the Manager. Under the Management Agreement, the Manager has agreed to maintain, host, manage and operate the Companyâ€™s website and to ensure that it is accurate and up-to-date and operate in accordance with applicable law. 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 loss 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 Companyâ€™s position and performance, business model and strategy.

On behalf of the Board

Sir David Thomson
Chairman

27 October 2017

NON-STATUTORY ACCOUNTS
The financial information set out below does not constitute the Companyâ€™s statutory accounts for the years ended 30 June 2017 or 30 June 2016 but is derived from those accounts. Statutory accounts for the year ended 30 June 2016 have been delivered to the Registrar of Companies and statutory accounts for the year ended 30 June 2017 will be delivered to the Registrar of Companies in due course. The Auditor has reported on those accounts; their report was (i) unqualified, (ii) did not include a reference to any matters to which the Auditor drew attention by way of emphasis without qualifying their report and (iii) did not contain a statement under Section 498 (2) or (3) of the Companies Act 2006. The text of the Auditorâ€™s report can be found in the Companyâ€™s full Annual Report and Accounts atwww.mitongroup.com/tic.

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the year ended 30 June 2017

		Year to 30 June 2017			Year to 30 June 2016
		Revenue	Capital	Total	Revenue	Capital	Total
	Notes	Â£	Â£	Â£	Â£	Â£	Â£

Realised (losses)/gains on investments	11	-	(659,326)	(659,326)	-	528,892	528,892
Unrealised gains/(losses) on investments held at fair value through profit or loss	11	-	1,018,729	1,018,729	-	(1,278,227)	(1,278,227)
Movement in impairment provision on investments held as available for sale		-	339,395	339,395	-	(72,680)	(72,680)
Exchange gains on capital items		-	(8,892)	(8,892)	-	1,845	1,845
Losses on derivative contracts	12	-	(276,213)	(276,213)	-	-	-
Investment income	2	1,199,285	-	1,199,285	1,085,970	-	1,085,970
Investment management fee		(160,723)	-	(160,723)	(113,705)	-	(113,705)
Other expenses	4	(279,629)	-	(279,629)	(342,277)	-	(342,277)
Return before finance costs and taxation		758,933	413,693	1,172,626	629,988	(820,170)	(190,182)

Finance costs
Bank debit interest		(9)	-	(9)	-	-	-
Return before taxation		758,924	413,693	1,172,617	629,988	(820,170)	(190,182)
Taxation	5	3,241	-	3,241	(995)	-	(995)
Return after taxation		762,165	413,693	1,175,858	628,993	(820,170)	(191,177)

Other comprehensive income
Movement in unrealised appreciation on investments held as available for sale
Recognised in equity		-	575,730	575,730	-	(151,492)	(151,492)
Recognised in return after taxation		-	(18,637)	(18,637)	-	(188,607)	(188,607)

Other comprehensive income after taxation		-	557,093	557,093	-	(340,099)	(340,099)
Total comprehensive income after taxation		762,165	970,786	1,732,951	628,993	(1,160,269)	(531,276)

Return after taxation per 50p ordinary share
Basic and diluted	6	15.97p	8.67p	24.64p	13.27p	(17.30)p	(4.03)p

Return on total comprehensive income after taxation per 50p ordinary share
Basic and diluted	6	15.97p	20.34p	36.31p	13.27p	(24.48)p	(11.21)p

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 below form part of these financial statements.

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended 30 June 2017

	Issued ordinary share capital Â£	Share premium Â£	Capital redemption reserve Â£	Revaluation reserve Â£	Capital reserve Â£	Revenue account Â£	Total Â£

Balance at 1 July 2016	2,386,025	4,453,903	2,408,820	2,000,848	6,155,368	(413,325)	16,991,639
Total comprehensive income
Net return for the period	-	-	-	-	413,693	762,165	1,175,858
Movement in unrealised appreciation on investments held as available for sale:
- Recognised in equity	-	-	-	575,730	-	-	575,730
- Recognised in return after taxation	-	-	-	(18,637)	-	-	(18,637)
Transactions with shareholders recorded directly to equity
Ordinary dividends paid	-	-	-	-	-	(987,813)	(987,813)

Balance at 30 June 2017	2,386,025	4,453,903	2,408,820	2,557,941	6,569,061	(638,973)	17,736,777

Balance at 1 July 2015	2,386,025	4,453,903	2,408,820	2,340,947	6,858,154	5,121	18,452,970
Total comprehensive income
Net return for the period				-	(820,170)	628,993	(191,177)
Movement in unrealised appreciation on investments held as available for sale:
- Recognised in equity				(151,492)	-	-	(151,492)
- Recognised in return after taxation				(188,607)	-	-	(188,607)
Transactions with shareholders recorded directly to equity
Sale of Treasury shares				-	117,384	-	117,384
Ordinary dividends paid				-	-	(1,047,439)	(1,047,439)
Balance at 30 June 2016	2,386,025	4,453,903	2,408,820	2,000,848	6,155,368	(413,325)	16,991,639

The notes below form part of these financial statements.

COMPANY STATEMENT OF CHANGES IN EQUITY
For the year ended 30 June 2017

	Issued ordinary share capital Â£	Issued preference share capital Â£	Share premium Â£	Capital redemption reserve Â£	Revaluation reserve Â£	Capital reserve Â£	Revenue account Â£	Total Â£

Balance at 1 July 2016	2,386,025	858,783	4,453,903	2,408,820	1,989,576	3,621,223	2,064,612	17,782,942
Total comprehensive income
Net return for the period	-	-	-	-	-	404,039	751,113	1,155,152
Movement in unrealised appreciation on investments held as available for sale:
- Recognised in equity	-	-	-	-	585,384	-	-	585,384
- Recognised in return after taxation	-	-	-	-	(18,637)	-	-	(18,637)
Transactions with shareholders recorded directly to equity

Ordinary dividends paid	-	-	-	-	-	-	(987,813)	(987,813)
Preference share dividends paid	-	-	-	-	-	-	(172)	(172)
Balance at 30 June 2017	2,386,025	858,783	4,453,903	2,408,820	2,556,323	4,025,262	1,827,740	1 8,516,856

Balance at 1 July 2015	2,386,025	858,783	4,453,903	2,408,820	2,337,024	4,316,659	2,525,031	19,286,245
Total comprehensive income
Net return for the period					-	(812,820)	587,194	(225,626)
Movement in unrealised appreciation on investments held as available for sale:
- Recognised in equity					(159,771)	-	-	(159,771)
- Recognised in return after taxation					(187,677)	-	-	(187,677)
Transactions with shareholders recorded directly to equity
Sale of Treasury shares					-	117,384	-	117,384
Ordinary dividends paid					-	-	(1,047,439)	(1,047,439)
Preference share dividends paid					-	-	(174)	(174)
Balance at 30 June 2016	2,386,025	858,783	4,453,903	2,408,820	1,989,576	3,621,223	2,064,612	17,782,942

The notes below form part of these financial statements.

CONSOLIDATED BALANCE SHEET
As at 30 June 2017

	Note	Group 2017 Â£	Group 2016 Â£

Non-current assets
Investments	11	16,289,129	16,410,045

Current assets
Derivative financial statements	12	63,640	-
Trade and other receivables	15	211,300	425,351
Investments available for sale		2,265	1,952
Cash and bank balances		1,267,244	664,859
		1,544,449	1,092,162

Current liabilities
Trade and other payables	16	96,801	510,568
		96,801	510,568

Net current assets		1,447,648	581,594

Net assets		17,736,777	16,991,639

Capital and reserves
Issued ordinary share capital	8	2,386,025	2,386,025
Share premium		4,453,903	4,453,903
Capital redemption reserve		2,408,820	2,408,820
Revaluation reserve		2,557,941	2,000,848
Capital reserve		6,569,061	6,155,368
Revenue reserve		(638,973)	(413,325)

Shareholdersâ€™ funds	10	17,736,777	16,991,639

NAV per 50p ordinary share		371.68p	356.07p

These financial statements were approved by the Board on 27 October 2017 and were signed on its behalf by:

Sir David Thomson
Chairman

Company Number: 4205

The notes below form part of these financial statements

COMPANY BALANCE SHEET
As at 30 June 2017

	Note	Company 2017 Â£	Company 2016 Â£

Non-current assets
Investments	11	16,289,129	16,410,045
Investments in subsidiaries	13	862,656	862,656
		17,151,785	17,272,701

Current assets
Derivative financial instruments	12	63,640	-
Trade and other receivables	15	227,059	494,662
Cash and bank balances		1,265,397	521,960
		1,556,096	1,016,622

Current liabilities
Trade and other payables	16	191,025	506,381
		191,025	506,381

Net current assets		1,365,071	510,241

Net assets		18,516,856	17,782,942

Capital and reserves
Issued ordinary share capital	8	2,386,025	2,386,025
Issued preference share capital	9	858,783	858,783
Share premium		4,453,903	4,453,903
Capital redemption reserve		2,408,820	2,408,820
Revaluation reserve		2,556,323	1,989,576
Capital reserve		4,025,262	3,621,223
Revenue reserve		1,827,740	2,064,612

Shareholdersâ€™ funds		18,516,856	17,782,942

As permitted by Section 408 of the Companies Act 2006, the Company has not presented its own Income Statement. The amount of the Company's return for the financial year dealt with in the financial statements of the Group is a profit after tax of Â£1,1555,152 (2016: loss after tax of Â£225,626).

These financial statements were approved by the Board of on 27 October 2017 and were signed on its behalf by:

Sir David Thomson
Chairman

Company Number: 4205

The notes below form part of these financial statements

CONSOLIDATED AND COMPANY CASH FLOW STATEMENTS
For the year ended 30 June 2017

	Group		Company
	Year to 30 June 2017 Â£	Year to 30 June 2016 Â£	Year to 30 June 2017 Â£	Year to 30 June 2016 Â£

Cash flows from operating activities
Cash received from investments	1,179,839	1,087,015	1,158,373	1,034,428
Interest received	312	-	312	-
Sundry income	2,520	627	2,520	627
Investment management fees paid	(160,694)	(121,053)	(160,694)	(121,053)
Cash paid to and on behalf of employees	(26,939)	(36,111)	(26,939)	(36,111)
Other cash payments	(328,439)	(319,804)	(317,701)	(309,433)
Withholding tax paid	-	(995)	-	(995)
Net cash inflow from operating activities	666,599	609,679	655,871	567,463

Cash flows from financing activities
Sale of Treasury shares	117,384	-	117,384	-
Dividends paid on ordinary shares	(987,813)	(1,047,439)	(987,813)	(1,047,439)
Net cash outflow from financing activities	(870,429)	(1,047,439)	(870,429)	(1,047,439)

Cash flows from investing activities
Purchase of investments	(2,216,355)	(2,252,996)	(2,216,355)	(2,252,996)
Sale of investments	3,361,689	2,840,914	3,361,689	2,840,914
Purchase of derivative contracts	(339,853)	-	(339,853)	-
Loans from subsidiaries	-	-	151,780	-
Loans to subsidiaries	-	-	-	(95,200)
Net cash inflow from investing activities	805,481	587,918	957,261	492,718
Net increase in cash and cash equivalents	601,651	150,158	742,703	12,742

Reconciliation of net cash flow to movement in net cash
Increase in cash	601,651	150,158	742,703	12,742
Exchange rate movements	734	1,845	734	1,845
Increase in net cash	602,385	152,003	743,437	14,587
Net cash at start of period	664,859	512,856	521,960	507,373
Net cash at end of period	1,267,244	664,859	1,265,397	521,960

Analysis of net cash
Cash and bank balances	1,267,244	664,859	1,265,397	521,960
	1,267,244	664,859	1,265,397	521,960

The notes below form part of these financial statements.

NOTES TO THE FINANCIAL STATEMENTS
At 30 June 2017

1. Accounting Policies

Basis of Preparation

The Company is a public limited company incorporated and registered in England and Wales. The Company has been approved as an investment trust within the meaning of sections 1158/1159 of the Corporation Tax Act 2010.

The Groupâ€™s consolidated financial statements for the year ended 30 June 2017, which comprise the audited results of the Company and its wholly owned subsidiaries, Abport Limited and New Centurion Trust Limited (together referred to as the â€˜â€˜Groupâ€™â€™), have been prepared in conformity with IFRS as adopted by the European Union, which comprise standards and interpretations approved by the International Accounting Standards Board ("IASB"), and as applied in accordance with the provision of the Companies Act 2006. The annual financial statements have also been prepared in accordance with the AIC Statement of Recommended Practice 2016 (â€œAIC SORPâ€), except to any extent where it is not consistent with the requirements of IFRS.

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 have been prepared alongside the Income Statement.

The financial statements are presented in Sterling, which is the Groupâ€™s functional currency as the UK is the primary environment in which it operates.

Going Concern

The financial statements have been prepared on a going concern basis, being a period of at least 12 months from the date that these financial statements were approved, and on the basis that approval as an investment trust company will continue to be met.

The Directors have made an assessment of the Groupâ€™s ability to continue as a going concern and are satisfied that the Group has the resources to continue in business for the foreseeable future. Furthermore the Directors are not aware of any material uncertainties that may cast significant doubt upon the Groupâ€™s ability to continue as a going concern, having taken into account the liquidity of the Groupâ€™s investment portfolio and the Groupâ€™s financial position in respect of its cash flows, borrowing facilities and investment commitments (of which there are none of significance). Therefore, the financial statements have been prepared on the going concern basis.

Basis of Consolidation

The subsidiaries are consolidated from the date of their acquisition, being the date on which control is obtained, and will continue to be consolidated until the date that such control ceases. Control comprises being exposed, or having rights, to variable returns through its power over the investee. The financial statements of the subsidiaries are prepared for the same reporting year as the parent Company, using consistent accounting policies. All inter-company balances and transactions, including unrealised profits arising from them are eliminated.

Segmental Reporting

The Directors are of the opinion that the Group is engaged in a single segment of business, being investment business. The Group primarily invests in companies listed in the UK.

Accounting Developments

The accounting policies adopted are consistent with those of the previous financial year. The following accounting standards and their amendments were in issue at the period end but will not be in effect until after this financial year.

International Financial Reporting Standards	Effective date*
IFRS 7 Financial Instruments (IFRS Disclosures)	1 January 2018
IFRS 9 Financial Instruments	1 January 2018
IFRS 15 Revenue from Contracts with Customers	1 January 2018
IFRS 16 Leases	1 January 2018

*Years beginning on or after

The Directors are considering the impact of the standards upon the financial statements. The impact of IRFS 9 in future periods will change the presentation of investments and the related allocation of income within the financial statements of the Group. This should not impact the returns of the Group.

The Directors do not expect that the adoption of other standards listed above will have a material impact on the financial statements of the Group in future periods.

Critical Accounting Judgements and Key Sources of Estimation Uncertainty

The preparation of financial statements in conformity with IFRS requires management to make judgements, estimates and assumptions that affect the application of policies and the reported amounts in the Balance Sheet, the Income Statement and the disclosure of contingent assets and liabilities at the date of the financial statements. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making judgements about carrying values of assets and liabilities that are not readily apparent from other sources.

The estimates and underlying assumptions are based on historical experience and other factors that are considered to be relevant. These are reviewed on an ongoing basis. Actual results may differ from these estimates. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future period if the revision affects both current and future periods.

Investments

The Groupâ€™s business is investing in financial assets with a view to profiting from their total return in the form of income and capital growth. The portfolio of financial assets is managed and its performance evaluated on a fair value basis, in accordance with a documented investment strategy, and information about the portfolio is provided internally on that basis to the Groupâ€™s Board of Directors.

Investments are measured initially, and at subsequent reporting dates, at fair value, and derecognised at trade date where a purchase or sale is under a contract whose terms require delivery within the time-frame of the relevant market. For listed investments this is deemed to be bid market prices or closing prices for Stock Exchange Electronic Trading Service â€“ quotes and crosses (â€˜SETSqxâ€™).

Changes in fair value of investments, realised gains and losses on disposal are also recognised in the Income Statement as capital items.

All investments held that have been purchased by the Group since obtaining approval as an investment trust from 1 July 2013 are classified as at â€œfair value through profit or lossâ€. Changes in fair value of investments are recognised in the Consolidated Income Statement as a capital item. On disposal, realised gains and losses are also recognised in the Consolidated Income Statement as capital items.
Investments held at 30 June 2017 which were purchased prior to 1 July 2013 are classified as â€˜â€˜assets available for saleâ€. These investments have not been reclassified as at â€œfair value through profit or lossâ€ in accordance with IAS 39 Financial Instruments: Recognition and Measurement. Realised gains and losses and movement in impairment provision on investments classified as â€œassets available for saleâ€ are recognised in the Consolidated Income Statement and allocated to the Capital reserve. Movement in unrealised appreciation on investments classified as â€œassets available for saleâ€ is recognised in the Revaluation reserve.
Investments held as current assets by the subsidiary undertaking are classified as â€˜held for tradingâ€™, and are at fair value. rofits or losses on investments held for trading are taken to revenue in the Income Statement.
The holdings of the investment in subsidiaries are stated at cost less diminution in value.

All investments for which fair value is measured or disclosed in the financial statements are categorised within the fair value hierarchy in note 11.

Derivative Financial Instruments

Derivatives, including Index Put options, which are listed investments are classified as financial instruments being assets or liabilities held for trading. They are initially recorded at cost (being the premium paid to purchase the option) and are subsequently valued at fair value at the close of business at the year-end and included in fixed assets or current assets/liabilities depending on their maturity date.

Changes in the fair value of derivative instruments are recognised as they arise in the capital column of the Income Statement.

Foreign Currency

Transactions denominated in foreign currencies are converted to Sterling at the actual exchange rate as at the date of the transaction. Items that are denominated in foreign currencies at the year-end are reported at the rate of exchange at the Balance Sheet date. Any gain or loss arising from a change in exchange rate subsequent to the date of the transaction is included as an exchange gain or loss in the capital reserve or the revenue account depending on whether the gain or loss is of a capital or revenue nature.

Cash and Cash Equivalents

Cash comprises cash in hand, overdrafts 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 insignificant risk of changes in value.

For the purpose of the Statement of Cash Flows, cash and cash equivalents consist of cash and cash equivalents as defined above, net of outstanding bank overdrafts when applicable.

Trade Receivables, Trade Payables and Short-term Borrowings

Trade receivables, trade payables and short-term borrowings are measured at amortised cost.

Income

Dividends receivable on quoted equity shares are taken to revenue on an ex-dividend basis. Dividends receivable on equity shares where no ex-dividend date is quoted are brought into account when the Companyâ€™s right to receive payment is established. Fixed returns on non-equity shares are recognised on a time-apportioned basis.

Dividends from overseas companies are shown gross of any non-recoverable withholding taxes which are described separately in the Income Statement.

Special dividends are taken to revenue or capital account depending on their nature. In deciding whether a dividend should be regarded as a capital or revenue receipt, the Board reviews all relevant information as to the reasons for the sources of the dividend on a case-by-case basis.

When the Company has elected to receive scrip dividends in the form of additional shares rather than in cash, the amount of the cash dividend forgone is recognised as income. Any excess in the value of the cash dividend is recognised in the capital column.

Where, before recognition of dividend income is due, there is any reasonable doubt that a return will actually be received, for example as a consequence of the investee company lacking distributable reserves, the recognition of the return is deferred until the doubt is removed.

All other income is accounted for on a time-apportioned accruals basis using the effective interest rate method and is recognised in the Income Statement

Expenses and Finance Costs

All expenses and finance costs are accounted for on an accruals basis.

Taxation

Deferred tax is provided using the liability method on temporary differences between the tax bases of assets and liabilities and their carrying amount for financial reporting purposes at the reporting date. Deferred tax assets are only recognised if it is considered more likely than not that there will be suitable profits from which the future reversal of timing differences can be deducted. In line with the recommendations of the AIC SORP, the allocation method used to calculate the tax relief on expenses charged to capital is the â€œmarginalâ€ basis. Under this basis, if taxable income is capable of being offset entirely by expenses charged through the revenue account, then no tax relief is transferred to the capital account.

No taxation liability arises on gains from sales of fixed asset investments by the Group by virtue of its investment trust status. However, the net revenue (excluding UK dividend income) accruing to the Group is liable to corporation tax at the prevailing rates.

Dividends Payable to Shareholders

Dividends to shareholders are recognised as a liability in the period in which they are paid or approved in general meetings and are taken to the Statement of Changes in Equity. Dividends declared and approved by the Company after the Balance Sheet date have not been recognised as a liability of the Company at the Balance Sheet date.

Share Capital

Issued share capital consists of Ordinary shares with voting rights and Issued preference shares which are non-voting. The Issued preference shares 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 a winding up.

Share Premium

The share premium account represents the accumulated premium paid for shares issued in previous periods above their normal value less issue expenses. This is a reserve forming part of non-distributable reserves. The following items are taken to this reserve:
Costs associated with the issue of equity
Premium on the issue of shares

Capital Redemption Reserve

The reserve represents the shares bought back and cancelled. This reserve is not distributable.

Revaluation Reserve

Movement in unrealised appreciation on investments classified as â€œassets available for saleâ€ is recognised in the Revaluation reserve and is not distributable.

Capital Reserve

The following are taken to this reserve:
Gains and losses on derivatives;
Gains and losses on the disposal of investments;
Net movement arising from changes in the fair value of investments held and classified as at â€œfair value through profit or lossâ€;
Exchange difference of a capital nature; and
Expenses together with the related taxation effect, allocated to this reserve in accordance with the above policies.

Realised gains on investments less expenses, provisions and unrealised gains may be considered by the Board for distribution. This reserve is not distributable.

Revenue Reserves

The revenue reserve represents the surplus accumulated profits and is distributable.

2. Income

	Year ended 30 June 2017 Â£	Year ended 30 June 2016 Â£
Income from investments:
UK dividends	536,956	547,381
Un-franked dividend income	230,447	171,642
UK fixed interest	407,272	313,733
	1,174,675	1,032,756
Other income:
Bank deposit interest	312	-
Underwriting commission	2,520	627
Net dealing gains of subsidiaries	21,778	52,587
Total income	1,199,285	1,085,970

3. Investment Management Fee

	Year ended 30 June 2017 Â£	Year ended 30 June 2016 Â£
Investment Management Fee	160,723	113,705

The management fee payable monthly in arrears by the Company to the Alternative Investment Fund Manager (â€œAIFMâ€) Miton Trust Managers Limited is calculated at the rate of one-twelfth of 1% per calendar month of the NAV of the Company. For these purposes, the NAV shall be calculated as at the last business day of each month and is subject to the ongoing charges ratio of the Company not exceeding 2.5% per annum in respect of any completed financial year.

At 30 June 2017 an amount of Â£7,284 (2016: Â£7,255) was outstanding and due to the AIFM.

4. Other Expenses

	Year ended 30 June 2017 Â£	Year ended 30 June 2016 Â£

Administration and secretarial services	126,849	112,041
Auditorsâ€™ remuneration for:
- audit of the Group's financial statements	28,450	26,750
Directorsâ€™ remuneration (see the Directorsâ€™ Remuneration Report in the full Annual Report)	60,000	58,000
Staff costs	14,000	14,000
Pension costs	(57,546)	12,107
Other expenses	107,876	119,379
	279,629	342,277

The audit of the Groupâ€™s financial statements includes the cost of the audit of Abport Limited of Â£1,950 (2016: Â£1,950) and New Centurion Trust Limited Â£1,950 (2016: Â£1,950), which are charged to the subsidiaries.

The Directors Remuneration is set out in the Directors Report.

The average number of employees as at 30 June 2017 was one (2016: one) with the aggregate remuneration consisting of:

	2017 Â£	2016 Â£
Staff costs
Wages and salaries	14,000	14,000
Social security costs	-	-
Total	14,000	14,000

Pension costs
Pension payments	11,274	22,107
Pension provision release	(70,000)	(10,000)
Workplace pension costs	1,180	-
Total	(57,546)	12,107

The Company does not have a provision (2016: Â£70,485) in respect of future pension payments. There are no pension liabilities due to past employees.

5. Taxation

	Year ended 30 June 2017			Year ended 30 June 2016
	Revenue Â£	Capital Â£	Total Â£	Revenue Â£	Capital Â£	Total Â£
Overseas taxation suffered	-	-	-	995	-	995
Overseas taxation â€“ reversal of prior yearâ€™s tax	(3,241)	-	(3,241)	-	-	-
	(3,241)	-	(3,241)	995	-	995

	Year ended 30 June 2017			Year ended 30 June 2016
	Revenue Â£	Capital Â£	Total Â£	Revenue Â£	Capital Â£	Total Â£
Return on ordinary activities	758,924	413,693	1,172,617	629,988	(820,170)	(190,182)

Theoretical tax at UK corporation tax rate of 19.75% (2015: 20.75%)	149,887	81,704	231,591	125,998	(164,034)	(38,036)

Effects of:
UK dividends that are not taxable	(106,049)	-	(106,049)	(109,033)	-	(109,033)
Overseas dividends that are not taxable	(45,513)	-	(45,513)	(34,772)	-	(34,772)
Non-taxable investment gains	-	(81,704)	(81,704)	-	164,034	164,034
Overseas taxation suffered	-	-	-	995	-	995
Reversal prior yearâ€™s tax	(3,241)	-	(3,241)		-	-
Unrelieved expenses	1,675	-	1,675	17,807	-	17,807
	(3,241)	-	(3,241)	995	-	995

Factors that may affect future tax charges

The Company has excess management expenses of Â£1,484,651 (2016: Â£1,423,322). It is unlikely that the Company will generate sufficient taxable income in the future to use these expenses to reduce future tax charges and therefore no deferred tax asset has been recognised.

Deferred tax is not provided on capital gains and losses arising on the revaluation or disposal of investments because the Company meets (and intends to continue for the foreseeable future to meet) the conditions for approval as an investment trust company under HMRC rules.

6. Return per Ordinary Share

	Year ended 30 June 2017			Year ended 30 June 2016
	Revenue	Capital	Total	Revenue	Capital	Total
Return after taxation
Return attributable to ordinary shareholders (Â£)	762,165	413,693	1,175,858	628,993	(820,170)	(191,177)
Weighted average number of ordinary shares in issue (excluding shares held in Treasury)			4,772,049			4,739,727*
Return per ordinary share (pence)	15.97p	8.67p	24.64p	13.27p	(17.30)p	(4.03)p

The return on total comprehensive income per ordinary share has been calculated to enable comparison of the returns per share shown in the annual reports of other investment trust companies. A reconciliation is shown below:

	Year ended 30 June 2017			Year ended 30 June 2016
	Revenue	Capital	Total	Revenue	Capital	Total
Return on total comprehensive income
Return attributable to ordinary shareholders (Â£)	762,165	413,693	1,175,858	628,993	(820,170)	(191,177)
Add other comprehensive income recognised in equity (Â£)	-	575,730	575,730	-	(151,492)	(151,492)
Add other comprehensive income recognised in profit and loss (Â£)	-	(18,637)	(18,637)	-	(188,607)	(188,607)
Return attributable to ordinary shareholders (Â£)	762,165	970,786	1,732,951	628,993	(1,160,269)	(531,276)
Weighted average number of ordinary shares in issue			4,772,049			4,739,727*
Return per ordinary share (pence)	15.97p	20.34p	36.31p	13.27p	(24.48)p	(11.21)p

*excluding shares held in Treasury

7. Dividends per Ordinary Share

	Year ended 30 June 2017 Â£	Year ended 30 June 2016 Â£
In respect of the prior period:
Fourth interim dividend 5.70p (2016: 7.10p)	272,007	336,508
In respect of the year under review:
First interim 5.00p (2016 5.00p)	238,602	236,977
Second interim dividend 5.00p (2016: 5.00p)	238,602	236,977
Third interim dividend 5.00p (2016: 5.00p)	238,602	236,977
	987,813	1,047,439
Dividend declared in respect of the year under review:
Fourth interim dividend 5.70p (2016: 5.70p)	272,007	272,007

The Directors have declared a first interim dividend in respect of the year ending 30 June 2018 of 5.00p per ordinary share payable on 17 November 2017 to all shareholders on the register at close of business on 27 October 2017. The ex-dividend date was 26 October 2017.

8. Issued Ordinary Share Capital

	Group and Company 2017		Group and Company 2016
	Number	Â£	Number	Â£

Ordinary shares of 50p each	4,772,049	2,386,025	4,772,049	2,386,025

The ordinary shares entitle the holders to receive all ordinary dividends and all remaining assets on a winding up, after the fixed rate preference shares have been satisfied in full.

The Company does not hold any ordinary shares in Treasury (2016: none).

9. Issued Preference Share Capital

	Group		Company
	2017 Â£	2016 Â£	2017 Â£	2016 Â£

Issued preference share capital	-	-	858,783	858,783
	-	-	858,783	858,783

The 1,717,565 fixed rate preference shares of 50p each are non-voting, 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 a winding up. The whole of the issue is held by New Centurion Trust Limited, a wholly owned subsidiary of the Company.

The Directors do not consider the fair values of the issued preference share capital to be significantly different from the carrying values.

10. Net Asset Value per Ordinary Share

The NAV per ordinary share is calculated as follows:

	2017 Â£	2016 Â£

Net assets	17,736,777	16,991,639

Ordinary shares in issue, excluding own shares held in Treasury	4,772,049	4,772,049
NAV per ordinary share	371.68p	356.07p

The underlying investments of the wholly owned subsidiary New Centurion Trust Limited comprise issued preference share capital, as discussed in note 9, in the Company and, being effectively eliminated on consolidation, the valuation thereof does not impact the NAV attributable to ordinary shareholders.

11. Investments

	Group		Company
	2017 Â£	2016 Â£	2017 Â£	2016 Â£
Available for sale	8,588,507	8,056,096	8,588,507	8,056,096
At fair value through profit and loss	7,700,622	8,353,949	7,700,622	8,353,949
Total investments designated at fair value	16,289,129	16,410,045	16,289,129	16,410,045

Investments available for sale	Group		Company
	2017 Â£	2016 Â£	2017 Â£	2016 Â£
Opening book cost	6,926,993	7,117,829	6,982,611	7,175,542
Opening net investment holding gains	1,129,103	1,541,882	1,073,485	1,484,169
Total investments designated as available for sale	8,056,096	8,659,711	8,056,096	8,659,711
Movements in the period:
Purchases at cost	-	-	-	-
Sales - proceeds	(136,055)	(374,663)	(136,055)	(374,663)
- (losses)/gains on sales	(228,022)	183,827	(228,022)	181,732
Increase/(decrease) in investment holding gains	896,488	(412,779)	896,488	(410,684)
Closing valuation	8,588,507	8,056,096	8,588,507	8,056,096

Closing book cost	6,562,916	6,926,993	6,618,534	6,982,611
Closing net investment holding gains	2,025,591	1,129,103	1,969,973	1,073,485
	8,588,507	8,056,096	8,588,507	8,056,096

Analysis of changes in investment holding gains
Movement in impairment provision	339,395	(72,680)	329,741	(72,680)
Recognised in equity	575,730	(151,492)	585,384	(151,492)
Recognised in return after taxation	(18,637)	(188,607)	(18,637)	(188,607)
Movement in sales to parent company	-	-	-	2,095
Closing valuation	896,488	(412,779)	896,488	(410,684)

Investments held at fair value through profit or loss
	Group		Company
	2017 Â£	2016 Â£	2017 Â£	2016 Â£
Opening book cost	9,973,717	9,502,059	9,973,717	9,502,059
Opening net investment holding losses	(1,619,768)	(341,541)	(1,619,768)	(341,541)
Total investments designated at fair value	8,353,949	9,160,518	8,353,949	9,160,518
Movements in the period:
Purchases at cost	1,877,185	2,592,167	1,877,185	2,592,167
Sales - proceeds	(3,117,937)	(2,465,574)	(3,117,937)	(2,465,574)
- (losses)/gains on sales	(431,304)	345,065	(431,304)	345,065
Decrease/(Increase) in net investment holding losses	1,018,729	(1,278,227)	1,018,729	(1,278,227)
Closing valuation	7,700,622	8,353,949	7,700,622	8,353,949

Closing book cost	8,301,661	9,973,717	8,301,661	9,973,717
Closing net investment holding losses	(601,039)	(1,619,768)	(601,039)	(1,619,768)
	7,700,622	8,353,949	7,700,622	8,353,949

	Group Year ended		Company Year ended
	30 June 2017 Â£	30 June 2016 Â£	30 June 2017 Â£	30 June 2016 Â£

Transaction costs
Costs on acquisitions	1,880	1,336	1,880	1,336
Costs on disposals	4,543	4,231	4,543	3,694
	6,423	5,567	6,423	5,030

	Group Year ended		Company Year ended
	30 June 2017 Â£	30 June 2016 Â£	30 June 2017 Â£	30 June 2016 Â£

Analysis of capital gains
(Losses)/gains on sale of investments	(659,326)	528,892	(659,326)	526,797
Movement in investment holding gains/(losses)	1,915,217	(1,691,006)	1,915,217	(1,688,911)
	1,255,891	(1,162,114)	1,255,891	(1,162,114)

Fair Value Hierarchy

The Group is required to classify fair value measurements using a fair value hierarchy that reflects the subjectivity of the inputs used in measuring the fair value of each asset. The fair value as the amount at which the asset could be sold or the liability transferred in an orderly transaction between market participants, at the measurement date, other than a forced or liquidation sale.

Categorisation within the hierarchy has been determined on the basis of the lowest level input that is significant to the fair value measurement of the relevant asset as follows:

Level 1 â€“ valued using quoted prices, unadjusted in active markets for identical assets or liabilities.

Level 2 â€“ valued by reference to valuation techniques using observable inputs for the asset or liability other than quoted prices included in level 1.

Level 3 â€“ valued by reference to valuation techniques using inputs that are not based on observable market data or the asset or liability.

The table below sets out fair value measurements of financial instruments as at 30 June 2017, by the level in the fair value hierarchy into which the fair value measurement is categorised.

At 30 June 2017	Level 1 Â£	Level 2 Â£	Level 3 Â£	Total Â£
Fixed asset investments held by the Company	10,392,613	415,248	5,481,268	16,289,129
Current asset investments held by a trading subsidiary	2,176	89	-	2,265
Derivative financial instruments	63,640	-	-	63,640
	10,458,429	415,337	5,481,268	16,355,034

At 30 June 2016	Level 1 Â£	Level 2 Â£	Level 3 Â£	Total Â£
Fixed asset investments held by the Company	11,309,018	395,902	4,705,125	16,410,045
Current asset investments held by a trading subsidiary	1,868	84		1,952
	11,310,886	395,986	4,705,125	16,411,997

The valuation techniques used by the Group are set out in the Accounting Policies in Note 1.

Valuation process for Level 2 investments

The valuations are provided by an independent third party broker. The values are determined using observable inputs including prevailing interest rates, the maturity and redemption dates of the investment. The equity securities of the issuing company of the investments held are or have been publicly listed. The information includes reported results, commentary on current trading and third party research.

Valuation process for Level 3 investments

Investments classified within level 3 have significant unobservable inputs. Level 3 investments can typically include unlisted equity and corporate debt securities. As observable prices are not available for these securities, the Group has used valuation techniques to derive the fair value using recognised valuation methodologies, in accordance with International Private Equity and Venture Capital (â€œIPEVCâ€) valuation Guidelines including discounted cash flow modelling where relevant.

The level 3 investments held by the Company currently consist of fixed interest bearing securities and certain equity securities. These are valued by the Manager with valuation confirmations provided to the Board on a regular basis. The equity securities of the issuing company of the Level 3 investments held have been publicly listed and, therefore, detailed public information is available to substantiate the future prospects of the issuing company. The fixed interest bearing securities anticipated future cash returns and cash-flows. This information includes reported results, commentary on current trading, and third party research.

The Group uses a variety of methods and makes assumptions that are based on market conditions existing at each reporting date. Valuation techniques used include the use of comparable recent armâ€™s length transactions, reference to other instruments that are substantially the same, discounted cash flow analysis, option pricing models and other valuation techniques commonly used by market participants making the maximum use of market inputs and relying as little as possible on entity specific inputs.

The table below presents the movement in Level 3 investments that were accounted for at fair value for the year ending 30 June 2017.

	Year ended 30 June 2017
	Group Â£	Company Â£
Opening balance	4,705,125	4,705,125
Movement in impairment provision on investments available for sale	379,611	365,057
Movement in unrealised appreciation on investments available for sale recognised in equity	140,645	155,199
Movement in unrealised appreciation on investments available for sale recognised in return after taxation	-	-
Purchases at cost	450,000	450,000
Movement in unrealised gains/(losses) on investments at fair value through profit or loss	402,989	402,989
Realised loss	(266,693)	(266,693)
Sales proceeds	(330,409)	(330,409)
Closing balance	5,481,268	5,481,268

12. Derivative Contracts

The derivative contracts serve as components of the Companyâ€™s investment strategy and are utilised primarily to structure and hedge investments, to enhance performance and reduce risk to the Group (the Company does not designate any derivative as a hedging instrument for hedge accounting purposes). The derivative contracts that the Company may hold from time to time or issue include: index-linked notes, contracts for differences, covered options and other equity-related derivative instruments.

These instruments can involve a high degree of leverage and are very volatile. A relatively small movement in the underlying value of a derivative contract may have a significant impact on the profit and loss and net assets of the Group. The Companyâ€™s investment objective sets limits on investments in derivatives with a high risk profile. The Manager is instructed to closely monitor the Companyâ€™s exposure under derivative contracts and any use of the derivatives for investment purposes will be made on the basis of the same principles of risk spreading and diversification that apply to the Companyâ€™s direct investments. The Company will not enter into uncovered short positions.

As at 30 June 2017, the Group has positions in the following type of derivative:

Options

Options are contractual agreements that convey the right, but not the obligation, for the purchaser either to buy or sell a specific amount of a financial instrument at a fixed price, either at a fixed future date or at any time within a specified period.

The Company purchases either Put or Call options through regulated exchanges and OTC markets. Options purchased by the Company provide the Company with the opportunity to purchase (Call options) or sell (Put options) the underlying asset at an agreed-upon value either on or before the expiration of the option. The Company is exposed to credit risk on purchased options only to the extent of their carrying value, which is their fair value.

During the year, the Company purchased a FTSE 100 March 2018 6,000 Put option. At the Balance Sheet date, the Put option had a fair value of Â£63,640 and a notional portfolio exposure of Â£6,289,000. Unrealised holding losses of Â£276,213 are detailed in the table below.

	Group		Company
	2017 Â£	2016 Â£	2017 Â£	2016 Â£
Movements in the period:
Purchase at cost	339,853	-	339,853	-
Movement in unrealised loss	(276,213)	-	(276,213)	-
Closing valuation	63,640	-	63,640	-

Closing book cost	339,853	-	339,853	-
Closing unrealised loss	(276,213)	-	(276,213)	-
	63,640	-	63,640	-

	Group		Company
	2017 Â£	2016 Â£	2017 Â£	2016 Â£

Analysis of capital gains
Gains on sale of investments	-	-	-	-
Movement in investment holding losses	(276,213)	-	(276,213)	-

	(276,213)	-	(276,213)	-

13. Investment in Subsidiaries

	Company
	2017 Â£	2016 Â£
At cost	5,410,552	5,410,552
Provision for diminution in value	(4,547,896)	(4,547,896)
At cost	862,656	862,656

At 30 June 2017, the Company held interests in the following subsidiary companies:

	Country of Incorporation	% share of capital held	% share of voting rights	Nature of business
Abport Limited	England	100%	100%	Investment dealing company
New Centurion Trust Limited	England	100%	100%	Investment holding company

The registered office for both companies above is:

Beaufort House, 51 New North Road, Exeter, Devon, EX4 4EP

14. Substantial Share Interests

The Company has notified interests in 3% or more of the voting rights of the following companies:

Company	% share of voting rights
Associated British Engineering	4.88
Coral Products	3.03

15. Trade and Other Receivables

	Group		Company
	2017 Â£	2016 Â£	2017 Â£	2016 Â£
Amount due from subsidiaries	-	-	15,759	69,311
Accrued income	79,158	71,707	79,158	71,707
Due from brokers	-	234,707	-	234,707
Dividends receivable	118,329	109,479	118,329	109,479
Taxation recoverable	6,284	2,371	6,284	2,371
Other receivables	7,529	7,087	7,529	7,087
	211,300	425,351	227,059	494,662

The carrying amount of trade receivables approximates to their fair value. Trade and other receivables are not past due at 30 June 2017.

16. Trade and Other Payables

	Group		Company
	2017 Â£	2016 Â£	2017 Â£	2016 Â£
Preference dividends payable to the Companyâ€™s wholly owned subsidiary	-	-	689	518
Amount due to subsidiaries	-	-	98,228	-
Due to brokers	-	339,170	-	339,170
Investment management fees	7,284	7,255	7,284	7,255
Other trade payables and accruals	89,517	164,143	84,824	159,438
	96,801	510,568	191,025	506,381

17. Analysis of Financial Assets and Liabilities

Investment Objective and Policy

The Groupâ€™s investment objective is to provide shareholders with an attractive level of dividends coupled with capital growth over the long-term. The investing activities in pursuit of its investment objective involve certain inherent risks. The Groupâ€™s financial instruments can comprise the following held in accordance with the Companyâ€™s investment objectives and policies:

Shares and debt securities;
Derivative instruments for efficient portfolio management, gearing and investment purposes;
Current asset investments held by its subsidiary;
Cash, liquid resources and short-term debtors and creditors that arise from its operations; and
Conversion rights or equity warrants:

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 Companyâ€™s direct investments, as described below.

Risks

The risks identified arising from the Groupâ€™s financial instruments are market risk (which comprises market price risk and interest rate risk, liquidity risk and credit and counterparty risk). The Group may enter into derivative contracts to manage risk. The Group has held, sold and taken out listed Put options against the FTSE 100 index during the year. The Board reviews and agrees policies for managing each of these risks, which are summarised below.

Market Risk

Market risk arises mainly from uncertainty about future prices of financial instruments used in the Groupâ€™s business. It represents the potential loss the Group might suffer through holding market positions by way of price movements, interest rate movements and exchange rate movements. The Group assesses the exposure to market risk when making each investment decision and these risks are monitored by the Investment Manager on a regular basis and the Board at quarterly meetings with the Manager.

Market price risk

Market price risk (i.e. changes in market prices other than those arising from currency risk or interest rate risk) may affect the value of investments.

The Board manages the risks inherent in the investment portfolio by ensuring full and timely reporting of relevant information from the Manager. Investment performance and exposure are reviewed at each Board meeting.

Analysis of Financial Assets and Liabilities

The Groupâ€™s exposure to changes in market values was Â£16,355,034 (2016: Â£16,411,997).The direct impact of a 5% movement in the value of the portfolio investments and current asset investments amounts to Â£817,752 (2016: Â£820,599). An equal change in the opposite direction would have decreased the net assets and net profit available to shareholders by an equal and opposite amount. The analysis is based on closing balances only and is not representative of the year as a whole. The market value of the option may move in a different direction to Securities.

	2017 Â£	2016 Â£
Securities available for sale	8,590,772	8,058,048
Securities at fair value through profit and loss	7,700,622	8,353,949
Derivative financial instruments	63,640	-
Total investment	16,355,034	16,411,997

	2017 Â£	2016 Â£
Securities available for sale	429,539	402,902
Securities at fair value through profit and loss	385,031	417,697
Derivative financial instruments	3,182	-
Effect on post-tax profit for the year and on equity	817,752	820,599

Interest Rate Risk

Interest rate movements may affect the level of income receivable on cash deposits. The Groupâ€™s financial assets and liabilities, excluding short-term debtors and creditors, may include investment in fixed interest securities, such as UK corporate debt stock, whose fair value may be affected by movements in interest rates. The majority of the Groupâ€™ financial assets and liabilities, however, are non-interest bearing. As a result, the Groupâ€™s financial assets and liabilities are not subject to significant amounts of risk due to fluctuations in the prevailing levels of market interest rates.

The possible effects on the fair value and cash flows that could arise as a result of changes in interest rates are taken into account when making investment decisions. The Board imposes borrowing limits to ensure gearing levels are appropriate to market conditions.

Liquidity Risk

The Groupâ€™s assets mainly comprise readily realisable quoted and unquoted securities that can be sold to meet funding commitments if necessary. Short-term flexibility is achieved through the ability to liquidate listed securities.

The Groupâ€™s liquidity risk is managed by the Investment Manager in accordance with established policies and procedures in place. Cash flow forecasting is performed in the operating entities of the Group and aggregated by the Manager. The Manager monitors the rolling forecasts of the groupâ€™s liquidity requirements to ensure it has sufficient cash to meet obligations as they fall due.

The maturity profile pf the Groupâ€™s financial liabilities Â£96,801 (2016: Â£510,568) are all due in one year or less.

Credit and Counterparty Risk

Credit risk is the risk of financial loss to the Group if the contractual party to a financial instrument fails to meet its contractual obligations.

The maximum exposure to credit risk as at 30 June 2017 was Â£1,544,449 (2016: Â£1,092,162). The calculation is based on the Groupâ€™s credit risk exposure as at 30 June 2017 and this may not be representative for the whole year.

The Groupâ€™s quoted investments are held on its behalf by Bank of New York Mellon acting as the Groupâ€™s custodian. Bankruptcy or insolvency of the custodian may cause the Groupâ€™s rights with respect to securities held by the custodian to be delayed.

Where the Manager makes an investment in a bond, corporate or otherwise, the credit rating of the issuer is taken into account so as to minimise the risk to the Group of default.

Investment transactions are carried out with a number of brokers where creditworthiness is reviewed by the Investment Manager.

Cash is only held at banks that have been identified by the Board as reputable and of high credit quality.

Foreign Currency Risk

Although the Companyâ€™s performance is measured in sterling, a proportion of the Companyâ€™s assets may be either denominated in other currencies, investments with currency exposure or the trading activities of its investee companies.

Derivatives

The Manager may use derivative instruments in order to â€˜hedgeâ€™ the market risk of part of the portfolio. The Manager reviews the risks associated with individual investments and, where they believe it appropriate, may use derivatives to mitigate the risk of adverse market (or currency) movements. The Manager discusses regularly the hedging strategy with the Board.

At the year end, there was one derivative contract open (2016: none).

Capital Management Policies

Capital is managed so as to maximise the return to shareholders while maintaining a capital base to allow the Group to operate effectively. Capital is managed on a consolidated basis and to ensure that it will be able to continue as a going concern.

In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell securities to reduce debt.

The Board, with the assistance of the Manager, monitors and reviews the capital on the basis of the gearing ratio. This ratio is calculated as net debt divided by total capital. Net debt is calculated as total borrowings (including current and non-current borrowingsâ€™ as shown in the consolidated balance sheet) less cash and cash equivalents. Total capital is calculated as â€˜equityâ€™ as shown in the consolidated balance sheet plus net debt. The gearing ratios at 30 June 2017 and 2016 were as follows:

	2017 Â£	2016 Â£
Cash and bank balances	1,267,244	664,859
Net cash	1,267,244	664,859

Ordinary shareholdersâ€™ funds	17,736,777	16,991,639
Gearing (net debt/ordinary shareholdersâ€™ funds)	nil	nil

18. Transactions with the Manager and Related Parties

The amounts paid to the Manager, together with details of the Management Agreement, are disclosed in note 3. Management fees for the year amounted to Â£160,723 (2016: Â£113,705).

As at the year-end, the following amounts were outstanding in respect of management fees: Â£7,284 (2016: Â£7,255).

Fees payable to the Groupâ€™s Directors are disclosed in the Directorsâ€™ Remuneration Report. At the year-end, there were no outstanding fees payable to Directors (2016: Â£4,000).

There were no other identifiable related parties at the year end.

Expenses outstanding to Directors at the year-end consists of Â£1,957 (2016: nil). No interest is charged on the balance and consists of reimbursement of expenses incurred.

NOTICE OF ANNUAL GENERAL MEETING

Notice is hereby given that the 151st Annual General Meeting of the Company will be held at the offices of Fiske plc, Salisbury House, London Wall, London EC2M 5QS on Thursday, 7 December 2017 at 12.30pm.

NATIONAL STORAGE MECHANISM

A copy of the Annual Report and Accounts will be submitted shortly to the National Storage Mechanism ("NSM") and will be available for inspection at the NSM, which is situated at: www.morningstar.co.uk/uk/nsm

ENDS

Neither the contents of the Company's website nor the contents of any website accessible from hyperlinks on this announcement (or any other website) is incorporated into, or forms part of, this announcement.

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