Final Results

RNS Number : 3623V

Investment Company PLC

08 July 2009

FOUNDED
1868

REGISTERED No. 4205

ENGLAND AND WALES

THE INVESTMENT COMPANY PLC

REPORT AND ACCOUNTS

31 MARCH 2009

Contents

Directors and Advisers 1

Chairman's Statement 2

Directors' report 4

Independent auditors' report to the members 13

Consolidated Income Statement 15

Consolidated Statement of Recognised Income and Expense 15

Consolidated Statement of Changes in Equity 16

Company Statement of Changes in Equity 16

Consolidated Balance Sheet 17

Company Balance Sheet 18

Consolidated Cash Flow Statement 19

Notes on the Consolidated Cash Flow Statement 20

Company Cash Flow Statement 21

Notes on the Company Cash Flow Statement 22

Notes to the Financial Statements 23

Notice of Annual General Meeting 39

Appendix: Explanatory Notes to the Notice of the Annual General Meeting 42

Directors and Advisers

Sir Frederick Douglas David Thomson Bt. (Chairman)

Stephen John Cockburn (Managing Director)

Miss Joan Beryl Webb

Peter Stanley Allen

Philip Albert Lovegrove OBE

Sir David Thomson Bt. (aged 69) was appointed to the Board and elected Chairman in 2005. He is Chairman of S.A. Meacock & Company Limited and a director of Through Transport Mutual Insurance Association Ltd.

S. J. Cockburn (aged 69) was appointed to the Board in 1991 and as Managing Director in September 1994. He is a non-executive director of Fiske plc and a director of Associated British Engineering plc and Dartmoor Investment Trust plc. He has managed portfolios specialising in preference shares for many years.

Miss Joan Webb (aged 80) was appointed to the Board in 1991 and is the Company's largest ordinary shareholder.

P. S. Allen (aged 60) was appointed to the Board in 1996. He trained as an investment analyst with Kleinwort Benson. He has managed portfolios specialising in preference shares for many years.

P.A. Lovegrove OBE (aged 71) was appointed to the Board in 2006. He has been involved in asset management, corporate finance and corporate recoveries in the City of London for more than 40 years.

Secretary and Registered Office

J. P. Q. Harrison

3rd Floor, Salisbury House

London Wall

London EC2M 5QS

Registered Auditors

Saffery Champness

Lion House

Red Lion Street

London WC1R 4GB

Legal Advisers

Macfarlanes LLP

10 Norwich Street

London EC4A 1BD

Bankers

Barclays Bank plc

Financial Services Team

Level 11

1 Churchill Place

London E14 5HP

Registrars

Capita Registrars Ltd.

Northern House

Woodsome Park

Fenay Bridge

Huddersfield HD8 0LA

Administrators

Fiske plc

3rd Floor, Salisbury House

London Wall

London EC2M 5QS

Chairman's Statement

Shareholders will be aware that The Investment Company is not immune from the events occurring in the global economy during the past two years and in particular the continuing uncertainties in the stock market in the last nine months.

In my interim statement of 24th November 2008 I confirmed that 'the turmoil in the market has intensified' and consequently the results for the first half of your Company's Financial Year were poor. The interim dividend on the ordinary shares was reduced from 4p to 2p and the net asset value of those shares had fallen from 217.49p to 150.57p at 30th September 2008.

In the second half of the year Preference Share prices continued the downward trend and the asset value had fallen such that at 31st March 2009 our Accounts show assets per ordinary share at 79.98p.

Since then the stock market has staged a recovery with the All Share Index of ordinary shares well up on the lowest levels seen in March. This performance has been based on the stabilisation principally of financial stocks and improving confidence. The turnaround in the market has been reflected to some extent in your Company's holdings of Preference Shares so much so that the net asset value at 30th June has improved to 103p per ordinary share.

We told you in November that we were focussing our interest on the preference shares of Royal Bank of Scotland's subsidiary, National Westminster Bank, and of Halifax Bank of Scotland which as we anticipated became a subsidiary of the renamed Lloyds Banking Group in January. Unfortunately we were not alone in being unaware of the frightening losses which Royal Bank (as enlarged by its ill-judged acquisition of ABN Amro) and Lloyds (through its new subsidiary HBOS) had become responsible for; indeed in the light of later developments it appears that the Directors of Lloyds Bank itself must have been ignorant of the full extent of the situation in HBOS when they recommended and so persuaded the shareholders of Lloyds to approve the acquisition.

Nevertheless, Press comment has consistently concentrated on the bad news and even on 7th June The Sunday Express referred to the 'Nationalised' Lloyds Banking Group and the Observer to the 'Nationalised' Royal Bank of Scotland. Neither company has been 'Nationalised' in the sense that Northern Rock and Bradford and Bingley were. In the national interest the government has lent money to Royal Bank and Lloyds, both in preference shares on which the tax payer is receiving a very high rate of coupon and in ordinary shares on which in due course Her Majesty's Treasury is reasonably confident of making a profit.

The tax payer has also had to accept a package of bad loans (for a significant fee paid as an insurance premium by the banks) because the Regulators of the banking industries in the United Kingdom as well as in Europe and above all in the United States of America had failed to appreciate the risks that were being run to achieve the colossal profits out of which were paid such ridiculous bonuses but from which Her Majesty's Treasury was receiving equally enormous flows of corporation tax and income tax!

On reflection the consequences of letting Lehman Brothers go under were probably not fully appreciated by the U.S. authorities. What was not perhaps understood was the incredible range of positions that involved Lehman as a counterparty or custodian: the liquidation is likely to last for years. The unfortunate result was that probably unnecessary fears of a systemic collapse were generated allowing bear sellers to enjoy a field day when the ban on short selling of financial shares was inopportunely lifted. Ordinary shares of Barclays Bank plunged to below 50p; we saw Lloyds Bank shares trade below 30p and Royal Bank at 10p. However as soon as confidence returned and the shorts were closed, over a matter of just weeks Barclays ordinary shares sextupled; Lloyds quadrupled and Royal Bank went up five fold. Meanwhile what of the preference shares in which we had reposed our somewhat premature confidence when yields reached double figures?

Frankly it has surprised us that National Westminster Bank 9% preference shares were obtainable at 29p; Barclays 6% preference shares at 21p and Lloyds Banking Group (i.e. ex HBOS) 6.0884% preference shares at 14p in the bearer form on Euroclear free of stamp duty. At those prices the income yields were as high as 31%, 28% and 43% respectively. Although the dividends on the shares are non-cumulative, and subject to the usual legal constraints on payment of dividends, which must have loomed large in the eyes of the sellers, the income available was more than surprising. Taking careful note as we did of what the Directors actually were saying rather than the journalists were writing we added to our holdings of these shares on falling prices. With the benefit of hindsight we would be the first to admit that we started by paying too high a price for some of these issues. Nevertheless we never lost our nerve and continued to buy when in our opinion prices became absurdly low. In consequence we have built up holdings at average prices on which we hope in due course to make good capital profits.

Since the year end we have invited our Bankers to re-instate the overdraft facility which we used to enjoy but gave up when the annual cost of keeping it in place became, in your Directors' opinion, an unnecessarily high expense for a facility of which we were unlikely to take advantage because the yields on the preference shares we would be buying were lower than the rate of interest we would be paying. Fortunately the pendulum has swung back and today's situation is totally different with significant opportunities arising for profitable investment in Preference Shares.

The present situation is that we are making arrangements to borrow up to £1.5m and will invest in the preference shares of Barclays, Lloyds and NatWest (and other banks and insurance companies) on yields well into double figures. We believe that in due course this will result in a significant boost to the revenue account of your company: furthermore as investors become more confident in the very survival of these banks (and institutional shareholders have recently purchased thousands of millions of pounds worth of ordinary shares in Barclays from a shrewd Middle Eastern investor and in Lloyds to enable redemption of £4 billion preference shares owned by Her Majesty's Treasury with a coupon of 12%) there will be capital appreciation in our Preference share holdings which rank for both capital and dividends ahead of the ordinary shares which have been so avidly snapped up.

Your Directors recommend a final dividend of 3p (5p last year) per ordinary share payable on 1 September 2009. The ordinary shares will be quoted ex-dividend on 22 July 2009 with a record date of 24 July 2009. This will result in a participating dividend of 0.75p (1.75p last year) payable to participating preference share holders on 1 October, in addition to their fixed dividend of 3.5p per share payable on that date.

The Annual General Meeting will be held on Thursday 27 August 2009 at 12.30 p.m. at the offices of Fiske plc, 3rd floor, Salisbury House, London Wall, London EC3M 5QS. The adoption of updated Articles of Association will be proposed at the AGM, primarily to take account of changes made by the Companies Act 2006.

Sir David Thomson Bt.

Chairman

8 July 2009

Directors' report

Principal activities and review of the business

The directors present to the Members the Company's financial statements for the year ended 31 March 2009, which incorporate the consolidated results of the Company and its subsidiary undertakings.

Review of the Business

The principal activity of the Company is investment in preference shares and prior charge securities with a view to achieving a high rate of income and capital growth over the medium term. A full review of the activities of the Company in the year under review is given in the Chairman's Statement.

The Company also owns an investment dealing company, Abport Limited.

Results and Dividends

A final dividend of 3p (2008 Final: 5p) per ordinary share will be paid, subject to shareholders' approval, on 1 September 2009, which together with the interim dividend of 2p (2008: 4p) makes a total of 5p (2008: 9p) for the year. Half-yearly dividends have been paid on the Participating Preference Shares of 5.25p on 1 October 2008 (2007: 5.25p) and of 3.5p on 1 April 2009 (2008: 3.5p).

The consolidated net asset value per ordinary share at 31 March 2009, before deducting the proposed final ordinary dividend, was 79.98p per share (2008: 217.49p).

The consolidated balance sheet shows net assets at 31 March 2009 of £4,016,965 and the Company's balance sheet shows net assets of £7,150,810. The difference relates to the cost of non-voting shares in the Company held by New Centurion Trust Limited, which are shown as a reduction in shareholders' funds in the consolidated balance sheet, the post acquisition results of the Company's subsidiaries and an historic charge for amortised goodwill. A reconciliation of the differences in the balance sheets is given in note 18 to the accounts.

Strategy and investment policy

The Company's objective is to achieve attractive and sustainable growth in Earnings per Share and Net Asset Value principally through investment in preference shares and prior charge securities. The board seeks to achieve this objective through investment in a diversified portfolio of holdings such that no investment, at the time it is made, results in more than 10% of the portfolio being in the securities of any one company or issuer. In addition, the board seeks to ensure that the portfolio is substantially invested into preference shares and prior charge securities, with no more than 10% of the portfolio invested in ordinary shares, with the portfolio being, subject to special circumstances, predominantly in sterling denominated instruments of United Kingdom-based issuers.

The Company's structure has given rise to a relatively high level of gearing, exacerbated by recent market and portfolio performance. It is the board's long-term objective to reduce the Company's gearing to at least a level such that the cost thereof is, together with any ordinary dividends, met out of current revenue.

Future Developments

In recent years the cost of borrowing on overdraft has exceeded the running yield on most quoted preference shares. That situation has now reversed with the very sharp reduction in bank rate reducing the cost of short term borrowing, although lending banks are generally charging significantly higher margins and arrangement fees, while high coupon preference shares which have in the main been issued by financial companies such as banks themselves and insurance companies have fallen below par in view of concerns about the economic strength of such issuers.

Your Board takes the view that such fears are overdone. Stricter regulation of Insurance Companies after the Equitable Life problems, the injection of taxpayers' money into Royal Bank of Scotland and Lloyds Banking Group; signs that the present recession will come to an end sooner rather than later, and thus the pessimistic expectations of a depression that were rife a few months ago are now unlikely to be experienced, lead the Directors to believe that borrowing now to invest in preference shares well below par values, the original policy of the company over many years, will once again prove profitable.

Principal risks and uncertainties

The management of the business and the execution of the company's strategy are subject to a number of risks. The key business risks affecting the Group are:

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

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

(iii) Macro-economic 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 widening the choice and scope of investment opportunities for the Company.

Further information is set out in note 23 to the accounts.

Environmental impact

The Directors consider that there is no material environmental impact arising from the Company's activities.

Key performance indicators

During the year the Earnings per Ordinary Share on the revenue account declined from a profit of 1.34p to a loss of 6.42p whilst the Net Asset Value per Ordinary share decreased from 217.49p to 79.98p.

Going Concern

The directors believe that it is appropriate to adopt the going concern basis in preparing the financial statements as the assets of the Company consist mainly of securities which are readily realisable. The directors are of the opinion that the Company has adequate resources to continue in operational existence for the foreseeable future and accordingly have continued to adopt the going concern basis in preparing the financial statements.

Share Capital

At the year end, the Company's authorised and issued share capital consisted of:

	Authorised	Issued
	No.	No.
Ordinary shares of 50p	4,000,000
of which:
- voting shares		1,899,891
- non voting ordinary shares		1,717,565
Preference shares of 50p	12,640,000	4,994,805

Interest in own shares

On 7 March 2005 the Company acquired the entire issued share capital of its then parent company, New Centurion Trust Limited. As a result of the transaction the Company holds indirectly 1,717,565 ordinary shares of 50p each in itself. These shares have been re-designated as non-voting shares. The dividends payable on these shares have been waived.

During the year the Company purchased 32,500 ordinary shares in the Company for £52,689. These shares are held in treasury.

Substantial interests

At the date of approval of the financial statements the following interests of three percent or more of the issued Ordinary share capital had been notified to the Company:

	%	Number of Ordinary shares
Miss J. B. Webb	25.05	475,886
Mrs J. P. Brown	11.18	212,343
Mrs S. Williams	11.18	212,343
Shirlstar Container Transport Limited Pension Fund	10.25	194,650
S. J. Cockburn	9.93	188,647
Sir David Thomson Bt.	3.00	57,000

Taxation Status

The directors are of the opinion that the Company is not a close company.

Rights and obligations attaching to each class of share

The Ordinary Shares entitle the holders to receive all ordinary dividends and all remaining assets on a winding up, after the Participating Preference Shares have been satisfied in full.

The non-voting ordinary shares, all of which are held by New Centurion Trust Limited, a wholly owned subsidiary of the Company, rank pari passu with the existing ordinary shares except that they do not have a right to vote at General Meetings of the Company.

The participating preference shares entitle the holders, in priority to the payment of any dividend to the holders of all or any other shares in the capital of the company, to a fixed net cash cumulative dividend at the rate of 7p per share per annum. In addition, holders are entitled to a participating dividend at the rate of 25% of any dividends paid on the Ordinary Shares in excess of 2p per share for any year, subject to a maximum participating dividend in respect of any year of 3p net per share. On any return of capital holders are entitled to the payment of a premium of 50p per share. The shares also confer voting rights in certain circumstances.

Restrictions on the transfer of shares

The Directors may, in their absolute discretion and without assigning any ground or reason therefor, decline to register any transfer of any share (not being a fully paid share) to a person of whom they shall not approve. They may also decline to register any transfer of any share (including a fully paid share) on which the Company has a lien or in respect of which the shareholder is in default in complying with a notice under Section 793 of the Companies Act 2006.

The Directors are not aware of any agreements between shareholders that may result in restrictions on the transfer of securities or voting rights. The Directors are not aware of any other restrictions on the transfer of shares in the Company other than certain restrictions that may from time to time be imposed by laws and regulations (for example, insider trading laws).

Amendments to Articles of Association

The amendment of the Company's Articles of Association is governed by relevant statutes. The Articles may be amended by special resolution of the shareholders in general meeting.

Corporate Governance

The Company is committed to high standards of corporate governance and to the principles of good governance set out in the Combined Code on Corporate Governance (the Combined Code). The Directors have reviewed the detailed principles and recommendations actioned in the Combined Code and believe that, to the extent that they are relevant to the Company's business, they have complied with the provisions of the Combined Code during the year ended 31 March 2009 and that the Company's current practice is, in all material aspects, consistent with the principles of the Combined Code.

The Board confirms that, to the best of its knowledge and understanding, the Company has complied throughout the accounting period with all the relevant provisions as set out in section 1 of the Combined Code.

The Board also confirms that, to the best of its knowledge and understanding, procedures were in place to meet the requirements of the Combined Code relating to internal controls throughout the year under review. However, no formal policy or procedures have been documented as the directors do not consider that such practice is appropriate for the Company.

Board of Directors

With the exception of Mr Stephen Cockburn who is Managing Director and is responsible for the investment management, the Board consists of independent non-executive directors. In particular the balance of executive and non-executive directors has been designed to ensure the independence of the Board. The Board is responsible for all matters of direction and control of the Company, including its investment policy, and no one individual has unfettered powers of decision. The directors review at regular meetings the Company's investments and all other important issues to ensure that control is maintained over the Company's affairs.

The directors meet at regular Board meetings held at least once a quarter. Additional meetings and telephone meetings are arranged as necessary. During the year ended 31 March 2009 the number of full and scheduled Board meetings and Committee meetings attended by each director was as follows:

	Board Meetings		Audit Committee Meetings
Sir David Thomson Bt.	4	(4)	4	(4)
S. J. Cockburn	4	(4)	-	(-)
Miss J. B. Webb	4	(4)	-	(-)
P. S. Allen	4	(4)	-	(-)
P. A. Lovegrove	4	(4)	4	(4)
Figures in brackets indicate the maximum number of meetings held in the year in respect of which the individual was a board/committee member

Committees of the Board

The Company has appointed a number of committees to monitor specific operations. However given its size, the Board does not believe that there is a requirement to establish a Nominations Committee.

Audit Committee

The Audit Committee comprises Philip Lovegrove and Sir David Thomson, both of whom are non-executive directors of the Company. The Committee is chaired by Philip Lovegrove and met on two occasions last year to review and approve the Company's Annual Report and Accounts and the Interim Financial Statement.

The primary responsibilities of the Audit Committee are to review the effectiveness of the internal control environment of the Company; to monitor adherence to best practice in corporate governance; to make recommendations to the Board in relation to the re-appointment of the Auditors and to approve their remuneration and terms of engagement; to review and monitor the Auditors' independence and objectivity and the effectiveness of the audit process and provide a forum through which the Company's Auditors report to the Board. The Audit Committee also has responsibility for monitoring the integrity of the financial statements and accounting policies of the Company; and receiving reports from the compliance officer of the Administrator. Committee members consider that individually and collectively they are appropriately experienced to fulfil the role required. The Audit Committee has formal written terms of reference.

Saffery Champness, the Company's Auditors, attend the meeting of the Audit Committee to approve the Annual Report and have direct access to Committee members. A member of the Audit Committee will be present at the Annual General Meeting to deal with any questions relating to the accounts.

Due to the management structure of the Company no policy or procedures exist for staff to raise concerns concerning possible improprieties in matters of financial reporting.

Remuneration Committee

The Remuneration Committee comprises all the independent non-executive directors. During the year, Sir David Thomson chaired the committee which has been formally constituted to determine and approve directors' fees. Directors' fees are determined following proper consideration of the role that individual directors fulfil in respect of Board and Committee responsibilities and the time committed to the Company's affairs, having regard to the industry generally. During the year, the Managing Director proposed to the Committee that the fees of all the non-executive directors remain unchanged and the board accepted Mr Cockburn's offer to reduce his managing director's salary by 50% for an indefinite period from 1 September 2008.

Detailed information on the remuneration arrangements for the directors of the Company can be found in the Directors' Remuneration Report set out below and in note 3 to the financial statements.

Performance evaluation

The Chairman has confirmed that all Directors have been subject to performance evaluation and as part of this evaluation the Chairman confirms that they continue to demonstrate commitment to their role and in his view to responsibly fulfil their functions.

Independent professional advice

The Board has formalised arrangements under which the directors, in the furtherance of their duties, may seek independent professional advice at the Company's expense.

Chairman and Senior Independent Director

The Chairman, Sir David Thomson, is deemed by his fellow independent Board members to be independent and to have no conflicting relationships. Sir David Thomson is Chairman of S.A. Meacock & Company Limited and a director of Through Transport Mutual Insurance Association Ltd. He considers himself to have sufficient time to commit to the Company's affairs.

Given the size and nature of the Board it is not considered appropriate to appoint a senior independent director and this is non-compliant with Combined Code Provision A.1.2.1. Stephen Cockburn is the Company's Managing Director, and therefore the roles of the Chairman and Managing Director are separated.

Directors' independence

The Board has reviewed the independent status of its individual directors and the Board as a whole.

Stephen Cockburn is the Managing Director of the Company, and is therefore considered not to be independent under the terms of the Combined Code.

The Combined Code requires that this report should identify each non-executive director the Board considers to be independent in character and judgement and whether there are relationships or circumstances which are likely to affect, or could appear to affect, the director's judgement.

The Board has considered the fact that Peter Allen has served on the Board since 1996. The AIC's Code of Corporate Governance recognises that, in the context of an investment company, long service need not compromise independence and the Directors are satisfied that it has not done so in the case of Mr Allen. In the case of Miss Webb, the Board has considered not only her length of service on the Board, but also her substantial holdings of shares and loan notes of the Company. Given this combination of factors the Board recognises that she would not, technically, be regarded as independent under the terms of the Combined Code. Nevertheless the other directors believe that she continues to bring to the Board the benefit of her independent judgement.

In the Board's opinion Sir David Thomson and Philip Lovegrove are also considered to be independent in both character and judgement. Accordingly, four of the five Board members are independent, thus the majority of the Board is comprised of independent non-executive directors.

Under the Articles of Association, all directors with the exception of the Managing Director are subject to periodic retirement and re-election by shareholders. In order to comply with the Combined Code, and the Articles of Association, the directors have adopted a policy providing for all non-executive directors to submit themselves for re-election at least every three years. A resolution to re-elect Sir David Thomson is contained within the notice of the Annual General Meeting on page 39. The other Board members recommend that shareholders vote for his re-election as they believe that his skills, knowledge and overall performance is of continued benefit to the Company. All directors have actively contributed in meetings throughout the year.

Shareholders are invited to consider the following information on an individual basis, before voting on the re-election of the directors.

The information about the directors, which appears on page 1, demonstrates the wide range of skills and experience they bring to the Board.

Statement of Directors' responsibilities

The directors are responsible for keeping proper accounting records which disclose with reasonable accuracy at any time the financial position of the group and the company, for safeguarding the assets of the company, for taking reasonable steps for the prevention and detection of fraud and other irregularities and for the preparation of a Directors' Report which complies with the requirements of the Companies Act 1985.

The directors are responsible for preparing the Annual Report and the financial statements in accordance with those International Financial Reporting Standards (IFRSs) adopted for use in the European Union and with the Companies Acts. For the most part, the Report and Accounts for the year to 31 March 2009 are still governed by the 1985 Act, but next year the 2006 Act will apply in entirety.

International Accounting Standard 1 requires that financial statements present fairly for each financial year the company's financial position, financial performance and cash flows. This requires the faithful representation of the effects of transactions, other events and conditions in accordance with the definitions and recognition criteria for assets, liabilities, income and expenses set out in the International Accounting Standards Board's 'Framework for the preparation and presentation of financial statements'. In virtually all circumstances, a fair presentation will be achieved by compliance with all applicable IFRSs. A fair presentation also requires the directors to:

consistently select and apply appropriate accounting policies;
present information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable information; and
provide additional disclosures when compliance with the specific requirements in IFRSs is insufficient to enable users to understand the impact of particular transactions, other events and conditions on the entity's financial position and financial performance.

In accordance with the FSA's Disclosure and Transparency Rules, the Directors confirm to the best of their knowledge that:

the financial statements, prepared in accordance with applicable accounting standards, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company and the undertakings included in the consolidation taken as a whole; and
the Directors' report includes a fair review of the development and performance of the business and the position of the Company and the undertakings included in the consolidation taken as a whole together with a description of the principal risks and uncertainties that they face.

Relations with shareholders

Communication with shareholders is given a high priority by the Board and the directors are available to enter into dialogue with shareholders. All shareholders are encouraged to attend and vote at the Annual General Meeting during which the Board is available to discuss issues affecting the Company.

Board responsibilities and relationship with service providers

The Board is responsible for the determination and implementation of the Company's investment policy and for monitoring compliance with the Company's objectives. Some of the Company's main functions have been subcontracted to service providers, engaged under separate legal agreements. At each Board meeting the directors follow a formal agenda, which is circulated in advance by the Company Secretary. The Board's main roles are to create value for shareholders and to approve the Company's strategic objectives. Specific responsibilities of the Board include: reviewing the Company's investments, asset allocation, gearing policy, cash management, investment outlook and revenue forecasts.

The Board has contractually delegated to Fiske plc (the 'Administrator') all day to day accounting and company secretarial duties as well as the administration and safe custody of its investments. The Administrator prepares management accounts, valuations of investments, statements of transactions and forecasts of cash surpluses or requirements which are provided in advance of all regular meetings of the Board (which are held at least four times a year). Mr Cockburn, as Managing Director, presents these documents at the meetings to allow the Board as a whole to assess the Company's activities and review its performance.

The Board considers, at each meeting, future strategy with regard to the investment criteria to be followed by the Company, including criteria concerning risk. The Board may seek independent advice regarding any proposed investments of an unusual nature, such as investments in unquoted securities. No formal review of the Group's system of internal control has been undertaken during the year.

The Administrator, being regulated by the Financial Services Authority under the Financial Services and Markets Act 2000, continually reviews its own compliance procedures in accordance with the financial, safe custody, conduct of business and other rules to which it is subject.

Management of the Company's assets is conducted by the Managing Director who has discretion to manage the assets of the Company in accordance with the Company's objectives and policies. At each Board meeting, the Managing Director presents verbal and written reports covering the activity, portfolio and investment performance over the preceding period. Ongoing communication with the other members of the Board is maintained between formal meetings.

The directors are responsible to the shareholders for the overall management of the Group and may exercise all the powers of the Company subject to the provisions of relevant statutes, the Company's Memorandum and Articles of Association and any directions given by special resolution of the shareholders. In particular the Articles of Association empower the directors to issue and buy back ordinary and preference shares, which powers are exercisable in accordance with authorities approved from time to time by shareholders in general meeting. At the Annual General Meeting in August 2008, shareholders renewed the director's authority to allot Ordinary Shares of 50p each and Participating Preference Shares of 50p each and to make market purchases of Ordinary Shares of 50p each and Participating Preference Shares of 50p each on behalf of the Company subject to the limits set out in those resolutions. Details of the authorities which the directors will be seeking at the Annual General Meeting to be held in September 2009 are set out in the Notice of Meeting on page 39 and in the explanatory notes set out in the Appendix to the Notice.

The Articles of Association also specifically empower the directors to exercise the Company's powers to borrow money and to mortgage or charge the Company's assets and any uncalled capital and to issue debentures and other securities, subject to the limits set out in the Articles.

Creditor payment policy

The Company's policy is to pay suppliers by return of post. As a result, there were no trade creditors payable at the year end (2008: £nil).

Internal Control

The Combined Code requires that the Board should maintain a sound system of internal control to safeguard shareholders' investments and the Company's assets.

Given the size of the Group, an internal audit department is considered unnecessary, although this need is reviewed annually.

The key procedures that have been established with a view to providing effective internal financial control are as follows:

Investment management is provided by the Managing Director. The Board is responsible for setting the overall investment policy and monitors the action of the Managing Director at regular Board meetings.
The provision of administration, accounting, custody of assets and company secretarial duties is the responsibility of the Administrator.
The non-executive directors of the Company clearly define the duties and responsibilities of their agents and advisers in the terms of their contracts. The appointment of agents and advisers is conducted by the Board after consideration of the quality of the parties involved; the Board monitors their ongoing performance and contractual arrangements.
Mandates for authorisation of investment transactions and expense payments are set by the Board.

Statement of disclosure to auditors

So far as each of the directors is aware, there is no relevant audit information of which the company's auditors are unaware and each of the directors believes that all steps have been taken that ought to have been taken to make them aware of any relevant audit information and to establish that the Company's auditors have been made aware of that information.

Auditors

The directors review the terms of reference for the auditors and obtain written confirmation that the firm has complied with its relevant ethical guidance on ensuring independence. Saffery Champness provide audit services to the Company and Group as well as corporation tax compliance services. The Board reviews the level of their fees to ensure they remain competitive and to ensure no conflicts of interest arise.

Directors and their Share Interests

The Directors who held office in the period up to the date of approval of these accounts and their beneficial interests in the Company's issued share capital at the period end were:

	Interest at end of period		Interest at start of period or date of appointment
	Ordinary 50p	Participating Pref. 50p	Ordinary 50p	Participating Pref. 50p
Sir David Thomson Bt. (Chairman) *	57,000	-	57,000	-
S. J. Cockburn (Managing Director) †	188,647	28,000	188,647	28,000
Miss J. B. Webb*	475,886	204,800	475,886	204,800
P. S. Allen*	20,000	-	20,000	-
P. A. Lovegrove*	11,000	-	11,000	-
* Non-executive
† In addition, Mr S. J. Cockburn has a non-beneficial interest in 41,000 ordinary shares and 4,000 participating preference shares (at 31 March 2008: 41,000 ordinary shares and 4,000 participating preference shares). In addition, Miss Joan Webb holds £1,828,502 Unsecured 5% Loan Notes 2010/2015 issued by the Company.

There have been no changes in the above interests since 31 March 2009.

Sir David Thomson Bt. retires and, being eligible, offers himself for re-election at the forthcoming Annual General Meeting.

Directors' remuneration report

The Board has prepared this report, in accordance with Schedule 7A to the Companies Act 1985, which applies to companies quoted on the Official List of the London Stock Exchange. The law requires your Company's auditors to audit certain disclosures provided. Where disclosures have been audited, they are indicated as such.

Remuneration Committee

The Remuneration Committee is chaired by Sir David Thomson and consists of the non-executive directors.

Policy on Directors' fees

The Board's policy is that the remuneration of the directors should reflect the experience of the Board as a whole, and is determined with reference to comparable financial organisations and appointments. It is intended that this policy will continue for the current year to 31 March 2010. Directors' fees are determined within the limits set out in the Company's Articles of Association, and they are not eligible for bonuses, pension benefits, share options, long-term incentive schemes or other benefits.

Director's service contract

The terms of appointment provide that each of the non-executive directors shall retire and be subject to election at the first Annual General Meeting after their appointment, and not less than every three years thereafter. The service contract of the Managing Director and the agreement for the provision of administration and accommodation services by Fiske plc, in which Mr Cockburn is deemed to be interested as a non-executive director and shareholder of Fiske plc, are available for inspection by shareholders at the place of the AGM of the Company during the meeting and for 15 minutes beforehand.

The service contract of the Managing Director, entered into in January 2005, may be terminated by the Company by not less than 12 months written notice, and provides that in the event of such termination, compensation shall be limited to Mr Cockburn's entitlement to receive his salary until the expiry of such notice period. The service contract provides that his annual remuneration as Managing Director shall be £50,000 in addition to his Directors' fee of £13,000. As noted above, Mr Cockburn volunteered a 50% reduction in his managing director's salary from 1 September 2008. The Managing Director is not, under the Articles, required to submit himself for re-election as a Director of the Company at any time.

Performance graph of Total Shareholder Return

The directors do not receive any performance-related remuneration and there are no comparable indices against which the Company feels able to measure itself. Consequently, it has not prepared a graph showing total shareholder return.

Directors' emoluments for the year ended 31 March 2009 (audited)

The directors who served during the year received the following emoluments in the form of fees and salaries:

	Year ended 31 March 2009	Year ended 31 March 2008
	£	£
Sir David Thomson Bt.	13,000	13,000
S. J. Cockburn	50,500	63,000
Miss J. B. Webb	10,000	10,000
P. S. Allen	10,000	10,000
C. W. G. Marsh	-	6,413
P.A. Lovegrove	13,000	13,000

	96,500	115,413

None of the directors has any other entitlement to remuneration for their services to the Company save as mentioned above.

Directors' interests in contracts

Details of directors' interests in contracts are shown in Note 21 to the financial statements. Other than those transactions, none of the directors has or has had any interest in any transaction which is or was unusual in nature or conditions or significant to the business of the Company and which was effected by the Company during the year. At the date of this report, there are no outstanding loans by the Company or its subsidiaries to any director.

Annual General Meeting

Notice of the Annual General Meeting, which is to be held at the offices of Fiske plc, 3rd Floor, Salisbury House, London Wall, London, EC2M 5QS at 12.30pm on 27 August 2009 is set out on pages 39 and 40. In addition to routine business, resolutions will be proposed at the Annual General Meeting to: grant the Directors authority to allot shares, provide a limited dis-application of pre-emption rights, enable shareholders meetings (other than annual general meetings) to be held on not less than 14 clear days' notice and adopt updated Articles of Association in response to the legislative changes introduced by the Companies Act 2006. Further details of these resolutions and the reasons for them, and details of the proposed changes to the Articles of Association are set out in the Notice of the Meeting and in the explanatory notes set out in the Appendix which follows the Notice on pages 42 and 43.

The approval of these resolutions will allow the directors flexibility in managing the Company.

Saffery Champness is willing to remain in office and a resolution for their reappointment will be proposed at the Annual General Meeting.

3rd Floor

Salisbury House

London Wall

London EC2M 5QS

8 July 2009

by Order of the Board
James P. Q. Harrison
Secretary

THE INVESTMENT COMPANY PLC

Independent auditors' report to the members

We have audited the financial statements of The Investment Company plc for the year ended 31 March 2009 which comprise the Consolidated Income Statement, the Consolidated Statement of Recognised Income and Expense, the Consolidated and Company Balance Sheets, the Consolidated and Company Cash Flow Statements, the Consolidated and Company Statements of Change in Equity and the related notes. These financial statements have been prepared under the accounting policies set out therein. We have also audited the information in the Directors' Remuneration Report that is described as having been audited.

Respective responsibilities of directors and auditors

The directors' responsibilities for preparing the Annual Report, the Directors' Remuneration Report and the Financial Statements in accordance with applicable law and International Financial Reporting Standards (IFRS) as adopted for use in the European Union are set out in the Statement of Directors' Responsibilities.

Our responsibility is to audit the financial statements and the part of the Directors' Remuneration Report to be audited in accordance with relevant legal and regulatory requirements, and International Standards on Auditing (UK and Ireland).

This report is made solely to the Company's members, as a body, in accordance with Section 235 of the Companies Act 1985. Our audit work has been undertaken so that we might state to the Company's members those matters we are required to state to them in an auditors' report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company's members as a body, for our audit work, for this report, or for the opinions we have formed.

We report to you our opinion as to whether the financial statements give a true and fair view and whether the financial statements and the part of the Directors' Remuneration Report to be audited have been properly prepared in accordance with the Companies Act 1985 and Article 4 of the IAS Regulation and whether in our opinion the information given in the directors' report is consistent with the financial statements. We also report to you if, in our opinion, the Company has not kept proper accounting records, if we have not received all the information and explanations we require for our audit, or if information specified by law regarding directors' remuneration and other transactions is not disclosed.

We review whether the Corporate Governance Statement reflects the Company's compliance with the provisions of the 2006 Combined Code specified for our review by the Listing Rules of the Financial Services Authority, and we report if it does not. We are not required to consider whether the board's statements on internal control cover all risks and controls, or form an opinion on the effectiveness of the Group's corporate governance procedures or its risk and control procedures.

We read other information contained in the Annual Report and consider whether it is consistent with the audited financial statements. The other information comprises only the unaudited part of the Directors' Report and the Chairman's Statement. We consider the implications for our report if we become aware of any apparent misstatements or material inconsistencies with the financial statements. Our responsibilities do not extend to any other information.

Basis of audit opinion

We conducted our audit in accordance with International Standards on Auditing (UK and Ireland) issued by the Auditing Practices Board. An audit includes examination, on a test basis, of evidence relevant to the amounts and disclosures in the financial statements and the part of the Directors' Remuneration Report to be audited. It also includes an assessment of the significant estimates and judgements made by the directors in the preparation of the financial statements, and of whether the accounting policies are appropriate in the Group's and Company's circumstances, consistently applied and adequately disclosed.

We planned and performed our audit so as to obtain all the information and explanations which we considered necessary in order to provide us with sufficient evidence to give reasonable assurance that the financial statements and the part of the Directors' Remuneration Report to be audited are free from material misstatement, whether caused by fraud or other irregularity or error. In forming our opinion we also evaluated the overall adequacy of the presentation of information in the financial statements and the part of the Directors' Remuneration Report to be audited.

Opinion

In our opinion:

the Group financial statements give a true and fair view, in accordance with IFRS as adopted for use in the European Union, of the state of the Group's affairs as at 31 March 2009 and of its return for the year then ended;
the parent Company financial statements give a true and fair view, in accordance with IFRS as adopted for use in the European Union as applied in accordance with the provisions of the Companies Act 1985, of the state of the Company's affairs as at 31 March 2009;
the financial statements and the part of the Directors' Remuneration Report to be audited have been properly prepared in accordance with the Companies Act 1985 and, as regards the consolidated financial statements, Article 4 of the IAS Regulation; and
the information given in the Directors' report is consistent with the financial statements.

Saffery Champness

Chartered Accountants and

Registered Auditors

8 July 2009

Lion House

Red Lion Street

London WC1R 4GB

Consolidated Income Statement

For the year ended 31 March 2009

	Notes			2009			2008
		Revenue	Capital	Total	Revenue	Capital	Total
		£	£	£	£	£	£

Total income	2	762,202	-	762,202	1,043,605	-	1,043,605
Administrative expenses	3	(374,567)	-	(374,567)	(375,008)	-	(375,008)
Loan note interest	15	(182,850)	-	(182,850)	(182,850)	-	(182,850)
Other finance costs	6	(349,636)	-	(349,636)	(349,636)	-	(349,636)
Other interest payable		-	-	-	-	-	-
Realised gains on investments		-	27,175	27,175	-	728,554	728,554
Impairment provisions		-	(1,648,261)	(1,648,261)	-	(401,624)	(401,624)

Net (loss)/return before taxation		(144,851)	(1,621,086)	(1,765,937)	136,111	326,930	463,041
Taxation	4	-	-	-	-	-	-

Net (loss)/return after taxation	5	(144,851)	(1,621,086)	(1,765,937)	136,111	326,930	463,041


(Loss)/return per 50p Ordinary Share
Basic and diluted	8	(6.42)p	(44.81)p	(51.23)p	1.34p	9.03p	10.37p

Consolidated Statement of Recognised Income and Expense

For the year ended 31 March 2009

	2009	2008
	£	£

Net (loss)/return after taxation	(1,765,937)	463,041
Movement in unrealised appreciation of investments:
Recognised in equity	(544,318)	(608,948)
Recognised in profit or loss	(31,395)	(674,400)

Total net recognised losses for the financial year	(2,341,650)	(820,307)

The notes on pages 23 to 36 form part of these financial statements.

Consolidated Statement of Changes in Equity

For the year ended 31 March 2009

	Issued Capital	Share Premium	Own Shares Held	Capital Redemption Reserve	Revaluation Reserve	Capital Reserve	Revenue Account	Total
	£	£	£	£	£	£	£	£

Balance at 1 April 2007	1,818,728	1,019,246	(2,919,861)	675,250	2,423,825	3,989,314	746,995	7,753,497
Buy in of own shares	(10,000)	-	-	10,000	-	-	(45,361)	(45,361)
Movement in unrealised appreciation of investments
- recognised in equity - recognised in profit or loss	- -	- -	- -	- -	(608,948) (674,400)	- -	- -	(608,948) (674,400)
Net increase in net assets from operations	-	-	-	-	-	326,930	136,111	463,041
Ordinary dividends paid	-	-	-	-	-	-	(170,990)	(170,990)
Participating element of preference dividends paid	-	-	-	-	-	-	(87,409)	(87,409)

Balance at 31 March 2008	1,808,728	1,019,246	(2,919,861)	685,250	1,140,477	4,316,244	579,346	6,629,430
Buy in of own shares	-	-	-	-	-	-	(52,689)	(52,689)
Movement in unrealised appreciation of investments
- recognised in equity - recognised in profit or loss	- -	- -	- -	- -	(544,318) (31,395)	- -	- -	(544,318) (31,395)
Net decrease in net assets from operations	-	-	-	-	-	(1,621,086)	(144,851)	(1,765,937)
Ordinary dividends paid	-	-	-	-	-	-	(130,717)	(130,717)
Participating element of preference dividends paid	-	-	-	-	-	-	(87,409)	(87,409)

Balance at 31 March 2009	1,808,728	1,019,246	(2,919,861)	685,250	564,764	2,695,158	163,680	4,016,965

Company Statement of Changes in Equity

For the year ended 31 March 2009

	Issued Capital	Share Premium	Own Shares Held	Capital Redemption Reserve	Revaluation Reserve	Capital Reserve	Revenue Account	Total
	£	£	£	£	£	£	£	£

Balance at 1 April 2007	1,818,728	1,019,246	-	675,250	2,634,815	3,808,667	896,225	10,852,931
Buy in of own shares	(10,000)	-	-	10,000	-	-	(45,361)	(45,361)
Movement in unrealised appreciation of investments
- recognised in equity - recognised in profit or loss	- -	- -	- -	- -	(733,540) (699,953)	- -	- -	(733,540) (699,953)
Net increase in net assets from operations	-	-	-	-	-	390,166	169,141	559,307
Ordinary dividends paid	-	-	-	-	-	-	(170,990)	(170,990)
Participating element of preference dividends paid	-	-	-	-	-	-	(87,409)	(87,409)

Balance at 31 March 2008	1,808,728	1,019,246	-	685,250	1,201,322	4,198,833	761,606	9,674,985
Buy in of own shares	-	-	-	-	-	-	(52,689)	(52,689)
Movement in unrealised appreciation of investments
- recognised in equity - recognised in profit or loss	- -	- -	- -	- -	(551,882) (42,469)	- -	- -	(551,882) (42,469)
Net decrease in net assets from operations	-	-	-	-	-	(1,602,449)	(56,560)	(1,659,009)
Ordinary dividends paid	-	-	-	-	-	-	(130,717)	(130,717)
Participating element of preference dividends paid	-	-	-	-	-	-	(87,409)	(87,409)

Balance at 31 March 2009	1,808,728	1,019,246	-	685,250	606,971	2,596,384	434,231	7,150,810

The notes on pages 23 to 36 form part of these financial statements.

Consolidated Balance Sheet

At 31 March 2009

	Notes	2009		2008
		£	£	£	£

Investments	9		9,906,006		10,849,840

Current assets
Trade and other receivables	12	47,443		49,859
Investments	13	84,082		195,026
Cash and bank balances		487,425		2,095,866

		618,950		2,340,751

Current liabilities
Preference dividends payable	6	174,818		174,818
Trade and other payables	14	178,766		231,936

		353,584		406,754

Net current assets			265,366		1,933,997
Non-current liabilities
5% loan notes maturing 2010/2015	15		(3,657,004)		(3,657,004)
Participating preference shares	15		(2,497,403)		(2,497,403)

Net assets			4,016,965		6,629,430

Capital and reserves
Issued capital	16		1,808,728		1,808,728
Share premium	17		1,019,246		1,019,246
Own shares held	17		(2,919,861)		(2,919,861)
Capital redemption reserve	17		685,250		685,250
Revaluation reserve	17		564,764		1,140,477
Capital reserve	17		2,695,158		4,316,244
Revenue reserves	17		163,680		579,346

Shareholders' funds	18		4,016,965		6,629,430


Net asset value per Ordinary Share of 50p	19		79.98p		217.49p
The notes on pages 23 to 36 form part of these financial statements.

Sir David Thomson Bt.

Stephen J. Cockburn

Directors

Approved by the Board

8 July 2009

Company Balance Sheet

At 31 March 2009

	Notes	2009		2008
		£	£	£	£

Investments	9		9,906,006		10,849,840
Investment in subsidiaries at cost	10		5,410,552		5,410,552

			15,316,558		16,260,392
Current assets
Trade and other receivables	12	276,579		303,364
Cash and bank balances		486,348		2,094,836

		762,927		2,398,200

Current liabilities
Preference dividends payable	6	174,818		174,818
Amounts owed to group undertakings		2,420,684		2,422,446
Trade and other payables	14	178,766		231,936

		2,774,268		2,829,200

Net current liabilities			(2,011,341)		(431,000)

Non-current liabilities
5% loan notes maturing 2010/2015	15		(3,657,004)		(3,657,004)
Participating preference shares	15		(2,497,403)		(2,497,403)

Net assets			7,150,810		9,674,985

Capital and reserves
Issued capital	16		1,808,728		1,808,728
Share premium	17		1,019,246		1,019,246
Capital redemption reserve	17		685,250		685,250
Revaluation reserve	17		606,971		1,201,332
Capital reserve	17		2,596,384		4,198,833
Revenue reserves	17		434,231		761,606

Shareholders' funds	18		7,150,810		9,674,985



The notes on pages 23 to 36 form part of these financial statements.

Sir David Thomson Bt.

Stephen J. Cockburn

Directors

Approved by the Board

8 July 2009

Consolidated Cash Flow Statement

For the year ended 31 March 2009

	Notes	2009		2008
		£	£	£	£
Cash flows from operating activities
Cash received from investments		683,652		890,432
Interest received		163,780		179,829
Sundry income		1,431		-
Cash paid to and on behalf of employees		(155,834)		(175,671)
Other cash payments		(275,057)		(124,148)

Net cash inflow from operating activities	A		417,972		770,442
Cash flows from financing activities
Bank interest		-		-
Loan note interest paid		(182,850)		(182,850)
Purchase of own shares		(52,689)		(45,361)
Fixed element of dividends paid on preference shares		(349,636)		(349,636)
Participating element of dividends paid on preference shares		(87,409)		(87,409)
Dividends paid on ordinary shares		(127,405)		(165,122)

Net cash outflow from financing activities			(799,989)		(830,378)

Cash flows from investing activities
Purchase of investments		(1,716,882)		(1,047,201)
Sale of investments		490,458		2,737,445

Net cash (outflow)/inflow from investing activities			(1,226,424)		1,690,244

Net (decrease)/increase in cash and cash equivalents	B		(1,608,441)		1,630,308


The notes on page 20 form part of this cash flow statement.

Notes on the Consolidated Cash Flow Statement

For the year ended 31 March 2009

		2009		2008
			£		£
A.	Reconciliation of net revenue before taxation to net cash inflow from operations:
	Net (loss)/revenue before taxation		(144,851)		136,111

	Interest paid		-		-
	Loan note interest paid		182,850		182,850
	Fixed element of preference dividends paid		349,636		349,636
	Investment losses of trading subsidiary		84,402		33,374
	Decrease/(increase) in trade and other receivables		2,416		(5,414)
	(Decrease)/increase in trade and other payables		(56,481)		73,885

			417,972		770,442

B.	Reconciliation of cash flow to movement in net debt
	(Decrease)/increase in cash and cash equivalents in the year		(1,608,441)		1,630,308

	Change in net debt resulting from cash flows		(1,608,441)		1,630,308

	(Increase)/decrease in net debt		(1,608,441)		1,630,308
	Net debt at 1 April 2008		(1,561,138)		(3,191,446)

	Net debt at 31 March 2009		(3,169,579)		(1,561,138)


C.	Analysis of net debt	At 31 March 2009	Cash Flow	At 1 April 2008
		£	£	£
	Cash at bank	487,425	(1,608,441)	2,095,866
	Long term debt	(3,657,004)	-	(3,657,004)

		(3,169,579)	(1,608,441)	(1,561,138)

Company Cash Flow Statement

For the year ended 31 March 2009

	Notes	2009		2008
		£	£	£	£
Cash flows from operating activities
Cash received from investments		683,652		888,532
Interest received		163,780		179,829
Sundry income		1,431		-
Cash paid to and on behalf of employees		(155,834)		(175,671)
Other cash payments		(271,169)		(122,593)

Net cash inflow from operating activities	A		421,860		770,097
Cash flows from financing activities
Bank interest		-		-
Loan note interest paid		(182,850)		(182,850)
Purchase of own shares		(52,689)		(45,361)
Fixed element of dividends paid on preference shares		(349,636)		(349,636)
Participating element of dividends paid on preference shares		(87,409)		(87,409)
Dividends paid on ordinary shares		(127,405)		(165,122)

Net cash outflow from financing activities			(799,989)		(830,378)

Cash flows from investing activities
Purchase of investments		(1,672,476)		(888,548)
Amounts advanced to subsidiaries		(22,607)		(137,898)
Sale of investments		419,510		2,722,436

Net cash (outflow)/inflow from investing activities			(1,230,359)		1,695,990

Net (decrease)/increase in cash and cash equivalents	B		(1,608,488)		1,635,709


The notes on page 22 form part of this cash flow statement.

Notes on the Company Cash Flow Statement

For the year ended 31 March 2009

		2009		2008
			£		£
A.	Reconciliation of net revenue before taxation to net cash inflow from operations:
	Net (loss)/revenue before taxation		(56,561)		169,141

	Interest paid		-		-
	Loan note interest paid		182,850		182,850
	Fixed element of preference dividends paid		349,636		349,636
	Decrease/(increase) in trade and other receivables		2,416		(5,414)
	(Decrease)/increase in trade and other payables		(56,481)		73,884

			421,860		770,097

B.	Reconciliation of cash flow to movement in net debt
	(Decrease)/increase in cash and cash equivalents in the year		(1,608,488)		1,635,709

	Change in net debt resulting from cash flows		(1,608,488)		1,635,709

	(Increase)/decrease in net debt		(1,608,488)		1,635,709
	Net debt at 1 April 2008		(1,562,168)		(3,197,877)

	Net debt at 31 March 2009		(3,170,656)		(1,562,168)


C.	Analysis of net debt	At 31 March 2009	Cash Flow	At 1 April 2008
		£	£	£
	Cash at bank	486,348	(1,608,488)	2,094,836
	Long term debt	(3,657,004)	-	(3,657,004)

		(3,170,656)	(1,608,488)	(1,562,168)

Notes to the Financial Statements

For the year ended 31 March 2009

1 Accounting policies

(a) Basis of preparation

(i) The consolidated financial statements of The Investment Company Plc, a company with domicile in the United Kingdom and whose principal activities are investing in preference shares and prior charge securities, have been prepared in accordance with International Accounting Standards (IAS) issued by the International Accounting Standards Board (IASB) as adopted by the EU and in accordance with the Interpretations of International Accounting Standards issued by the Standing Interpretations Committee of the IASB.

(ii) Standards effective in 2009

IFRS 7 'Financial Instruments: Disclosures' introduces new disclosures relating to financial instruments and does not have any impact on the classification and valuation of the group's financial instruments, or the disclosures relating to taxation and trade and other payables.

(iii) The consolidated financial statements for the year ended 31 March 2009 have been prepared under the historical cost convention, except for Investments which are stated at market value.

(iv) In accordance with the concession granted under Section 230(2) of the Companies Act 1985 the company's income statement has not been presented separately in these financial statements.

(b) Basis of consolidation

The group financial statements comprise the financial statements of The Investment Company Plc and its subsidiaries made up to 31 March 2009.

The results of operations of subsidiary undertakings are included in the consolidated financial statements as from the date of acquisition, which is the date on which control of the acquired subsidiary is effectively transferred to the buyer. The results of operations of subsidiary undertakings disposed of are included in the consolidated income statement until the date of disposal, which is the date on which the parent ceases to have control of the subsidiary undertaking. Intragroup balances and intragroup transactions and resulting unrealised profits are eliminated in full.

(c) Taxation

Income tax expense represents the sum of the tax currently payable and deferred tax.

Current tax

The tax currently payable is based on taxable profit for the year. Taxable profit differs from profit as reported in the income statement because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Group's liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the balance sheet date.

Deferred tax

Deferred tax is recognised on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences, and deferred tax assets are generally recognised for all deductible temporary differences to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.

Deferred tax liabilities are recognised for taxable temporary differences associated with investments in subsidiaries and associates, and interests in joint ventures, except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax assets arising from deductible temporary differences associated with such investments and interests are only recognised to the extent that it is probable that there will be sufficient taxable profits against which to utilise the benefits of the temporary differences and they are expected to reverse in the foreseeable future.

The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset realised, based on tax rates (and tax laws) that have been enacted or substantively enacted by the balance sheet date. The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Group expects, at the reporting date, to recover or settle the carrying amount of its assets and liabilities.

Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Group intends to settle its current tax assets and liabilities on a net basis.

Current and deferred tax for the period

Current and deferred tax are recognised as an expense or income in profit or loss, except when they relate to items credited or debited directly to equity, in which case the tax is also recognised directly in equity, or where they arise from the initial accounting for a business combination. In the case of a business combination, the tax effect is taken into account in calculating goodwill or determining the excess of the acquirer's interest in the net fair value of the acquiree's identifiable assets, liabilities and contingent liabilities over cost.

(d) Preference shares

On any return of capital holders are entitled to the payment of a premium of 50p per share. The shares also confer voting rights in certain circumstances.

The participating preference shares are disclosed as non-current liabilities in accordance with IAS 32 (Financial Instruments: Disclosure and Presentation).

(e) Dividends

Ordinary dividends are accounted for in the period in which they are declared in accordance with IAS 10. Preference dividends have two dividend elements, the fixed net cash cumulative dividend and the participating dividend. The fixed net cash cumulative element accrues evenly on a daily basis throughout the period. The dividend payable on 1 April 2009 has therefore been treated as a charge against revenue for the year to 31 March 2009. The participating dividend element is accounted for in the period in which the dividend is declared and is treated in the same way as the Ordinary dividend upon which its calculation is based.

(f) Revenue and expenditure

Revenue includes dividends and interest from investments receivable on or before the balance sheet date. Deposit interest receivable, expenses and interest payable are accounted for on an accruals basis.

(g) Earnings per ordinary share

The Group calculates both basic and diluted earnings per ordinary share in accordance with IAS 33 'Earnings Per Share'. Under IAS 33, basic earnings per share is computed using the weighted average number of shares outstanding during the period. Earnings are adjusted for the participating element of preference share dividends.

(h) Significant estimates and assumptions

The Group makes estimates and assumptions regarding the future. Estimates and judgements are continually evaluated based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstance. In the future, actual experience may deviate from these estimates and assumptions. The estimates and assumptions that have a significant risk of causing material adjustment to carrying amounts of assets and liabilities within the next financial year lie primarily in investments, their fair value and any impairment review.

(i) Investments

IAS 39 requires investment funds to measure assets listed on a recognised Stock Exchange at current bid prices whereas under UK GAAP these assets had been previously measured at current middle market prices. The directors are of the opinion that the bid valuation is 1% lower than the mid valuation due to the nature of the assets concerned and this treatment is reflected in the investment valuation at the year end.

All investments held as non-current assets are shown in the balance sheet at valuation and all purchase and sale of investments are accounted for at trade date. Impairments of available for sale assets are taken to the income statement as required by paragraphs 55(b) and 67 of IAS 39 'Financial Instruments: Recognition and measurement. Such loss is transferred from the profit and loss reserve to the capital reserve in accordance with the Company's articles of association. Other differences between book cost and valuation are taken to the revaluation reserve. Profits and losses on the realisation of investments held as non-current assets are taken to profit and loss.

The Group determines the fair value of financial instruments that are not quoted, based on estimates using present values or other valuation techniques. Those techniques are significantly affected by the assumptions used, including discount rates and estimates of future cash flows. Where market prices are not readily available, fair value is either based on estimates obtained from independent experts or quoted market prices of comparable instruments. In that regard, the derived fair value estimates cannot be substantiated by comparison with independent markets and, in many cases, could not be realised immediately.

(j) Impairment review

At each balance sheet date, a review is carried out to assess whether there is any objective evidence that the Group's available for sale financial assets have become impaired. Where such evidence exists, the amount of any impairment loss is recognised immediately in the Consolidated Income Statement. Any excess of the impairment loss over the amount previously recognised in equity is recognised in the Consolidated Income Statement.

If, in a subsequent period, the fair value of available for sale financial assets increase and the increase can be objectively related to an event occurring after the impairment loss was recognised in profit or loss, the impairment loss is reversed and the amount of the reversal is recognised in profit or loss.

(k) IFRS standards

The following interpretations to published standards are mandatory for accounting periods beginning on or after 1January 2008 but are not relevant to the Group's operations:

• IFRIC 12 'Service concession arrangements'; and

• IFRIC 13 'Customer loyalty programmes'.

The following standards and amendments to existing standards have been published and are mandatory for the Group's accounting periods beginning on or after 1April 2009 or later periods but the Group has not adopted them early:

• IAS 32 (amendment) 'Financial instruments presentation' and IAS 1 (amendment) 'Presentation of financial statements' - 'Puttable financial instruments and obligations arising on liquidation' (effective from 1 January 2009). This amendment to the standard is still subject to endorsement by the EU. It requires entities to classify puttable financial instruments and instruments or components of instruments that impose on the entity an obligation to deliver to another party a pro rata share of the net assets of the entity only on liquidation as entity, provided the financial instruments have particular features and meet specific conditions. The Group will apply IAS 32 and IAS 1 (amendment) from 1 April 2009, subject to endorsement by the EU.

• IFRS 1 (amendment) 'First time adoption of IFRS' and IAS 27 'Consolidated and separate financial statements' (effective from 1 January 2009). The revised standard is still subject to endorsement by the EU. The amended standard allows first time adopters to use a deemed cost of either fair value or the carrying amount under previous accounting practice to measure the initial cost of investments in subsidiaries, jointly controlled entities and associates in the separate financial statements. The amendment also removes the definition of the cost method from IAS 27 and replaces it with a requirement to present dividends as income in the separate financial statements of the investor. The Group will apply IFRS 1 (amendment) from 1 April 2009, subject to endorsement by the EU. The amendment will not have any impact on the Group's financial statements. The IFRS 1 amendment will not have any impact on the Company's financial statements which are already prepared under IFRS.

• IAS 39 (amendment) 'Financial instruments: Recognition and measurement' (effective from 1 January 2009). The amendment is part of the IASB's annual improvement project published in May 2008. The amendment to the standard is still subject to endorsement by the EU. The Group will apply IAS 39 (amendment) from 1 April 2009, subject to endorsement by the EU.

The directors anticipate that the adoption of these Standards and Interpretations in future periods will have no material financial impact on the financial statements of the Group or the Company.

2 Total income

	2009	2008
	£	£
Dividends	683,277	766,793
Interest on portfolio investments	119,877	162,919
Deemed income distributions	-	103,795
Loss on disposal of investments held for trading	(84,402)	(33,374)
Bank deposit interest	43,450	43,472

	762,202	1,043,605

3 Administrative expenses

	2009	2008
	£	£
Staff costs (see note a)	155,833	175,673
Management expenses:
Administration fee (see note c)	114,000	111,000
Others	76,634	62,335
Fees payable to the Company's auditors:
- for the audit of the annual accounts of the Group	23,100	21,000
- other services relating to taxation	5,000	5,000

	374,567	375,008

(a) Staff costs during the year:
Salaries and fees (see note b)	126,500	145,413
Social Security costs	11,490	12,937
Pension costs	17,843	17,323

	155,833	175,673

The average number of persons employed by the Company during the year was:	Number	Number
Directors	5	5
Staff	1	1

Pension commitments

At 31 March 2009 the company had accrued £100,000 (2008:£100,000) towards the purchase of an annuity for a former employee of the Company.

(b) Directors' remuneration

Directors' remuneration of £96,500 (2008: £115,413) comprised as follows; to Sir David Thomson Bt. £13,000 (2008:£13,000), to Mr. S.J. Cockburn £50,500 (2008:£63,000), to Miss. J.B. Webb £10,000 (2008:£10,000), to Mr. P.S. Allen £10,000 (2008:£10,000), to Mr. P.A. Lovegrove £13,000 (2008:£13,000) and to Mr. C.W.G. Marsh £nil (2008:£ 6,413).

Mr S.J. Cockburn is contracted under a service contract with a remuneration which was reduced during the year from £50,000 to £25,000 which is in addition to his director's fee of £13,000 per annum. All Directors' remuneration was in respect of short-term benefits. There were no post employment benefits, other long term benefits or termination benefits.

(c) An administration charge of £27,750 (2008:£27,750) plus VAT per quarter was charged by Ionian Investment Management, a division of Fiske plc. Mr Cockburn is interested in Fiske plc as a director and substantial shareholder. During the year £3,000 (2008:£nil) was charged for additional work.

4 Taxation

	2009	2008
	£	£
Arising on revenue items	-	-
Arising on capital items	-	-

	-	-

Factors affecting the tax charge for the year
The tax assessed for the year is lower than the standard rate of corporation tax in the United Kingdom (28%)
The differences are explained below:
(Loss)/profit on ordinary activities before taxation	(1,765,937)	463,041

Tax on profit on ordinary activities at 28%	(494,462)	138,912
Effects of:
Expenses not deductible for tax purposes	2,573	343
Impairment provision not deductible for tax purposes	457,278	120,487
Preference dividends not deductible for tax purposes	97,898	104,890
Income not taxable	(191,318)	(479,742)
Realised gains per accounts	(7,609)
Chargeable gains on disposal of investments	4,959	-
Utilisation of tax losses	(5,360)	-
Unutilised tax losses carried forward	136,041	115,110

	-	-

Deferred taxation
No provision has been made for deferred taxation. The potential deferred tax asset at 31 March 2009 not recognised was as follows:
Short term timing differences	6,000	6,000
Credit on revaluation of investments	(929,921)	(666,861)

	(923,921)	(660,861)

5 Net revenue after taxation

As permitted by section 230 of the Companies Act 1985 the parent undertaking has not presented its own Income Statement in these financial statements. The consolidated return for the year of £1,765,937 (2008: £463,041) includes a loss of £1,659,009 (2008: profit of £559,307) which is dealt with in the accounts of the parent undertaking.

6 Finance Costs

	2009		2008
		£		£
Participating Preference Shares
Fixed entitlement accrued in first half year 3.5p (2008: 3.5p)	Paid 1 Oct 08	174,818	Paid 1 Oct 07	174,818
Fixed entitlement accrued in second half year 3.5p (2008: 3.5p)	Payable 1 Apr 09	174,818	Payable 1 Apr 08	174,818

Participating preference dividends accounted as finance costs		349,636		349,636

7 Dividends payable

	2009			2008
		£	£		£	£
Participating Preference Shares
Participating element	Paid 1 Oct 08		87,409	Paid 1 Oct 07		87,409
Ordinary shares
Prior year final paid 5p (2008: 5p)	Paid 12 Sept 08	93,370		Paid 28 Aug 07	94,995
Current year interim paid 2p (2008: 4p)	Paid 9 Jan 09	37,347		Paid 14 Jan 08	75,995

Ordinary dividends paid			130,717			170,990

			218,126			258,399

8 Return per ordinary share

			2009				2008
	Net return		Ordinary shares	Per share	Net return		Ordinary shares	Per share
	£			Pence	£			Pence
Revenue
Net (loss)/revenue after taxation and participating preference dividend	(232,260)		3,617,456	(6.42)p	48,702		3,621,018	1.34p
Capital
Net investment (losses)/gains after taxation	(1,621,086)		3,617,456	(44.81)p	326,930		3,621,018	9.03p

Total	(1,853,346)		3,617,456	(51.23)p	375,632		3,621,018	10.37p

The calculation of basic earnings per share is based on the weighted average number of ordinary shares in issue throughout the year. As the Company has no options or warrants in issue, basic and diluted loss per share are the same.
Adjusted return per share:
Revenue
Net revenue after taxation	(232,260)		1,899,891	(12.22)p 2.56p	48,702 48,702		1,903,453 1,903,453	2.56p 2.56p
Capital
Net investment (losses)/gains after taxation	(1,621,086)		1,899,891	(85.33)p	326,930		1,903,453	17.18p

Total	(1,853,346)		1,899,891	(97.55)p	375,632		1,903,453	19.73p


The number of ordinary shares used in the calculation of Adjusted return per share is calculated as follows:-
Weighted average number of Ordinary Shares of 50p each		3,617,456				3,621,018
Non voting ordinary shares		(1,717,565)				(1,717,565)

		1,899,891				1,903,453

9 Investments

	Group		Company
	2009	2008	2009	2008
	£	£	£	£
Valuation at 1 April 2008	10,849,840	13,603,406	10,849,840	13,690,315
Unrealised diminution at 1 April 2008	(892,400)	(775,390)	(935,135)	(862,299)

Cost at 1 April 2008	11,742,240	12,828,016	11,784,975	12,828,016
Additions	1,672,476	888,548	1,672,476	888,548
Cost of disposals	(392,335)	(1,974,324)	(381,261)	(1,931,589)

Cost at 31 March 2009	13,022,381	11,742,240	13,076,190	11,784,975
Unrealised diminution at 31 March 2009	(3,116,375)	(892,400)	(3,170,184)	(935,135)

Valuation at 31 March 2009	9,906,006	10,849,840	9,906,006	10,849,840

Aggregate value of investments listed on a recognised Stock Exchange	7,919,914	8,757,886	7,919,914	8,757,886
Other investments at Directors' valuation	1,986,092	2,091,954	1,986,092	2,091,954

	9,906,006	10,849,840	9,906,006	10,849,840

10 Investment in subsidiaries

	Company
	2009	2008
	£	£
At cost	5,410,552	5,410,552

Subsidiaries

At 31 March 2009 the company held interests in the following subsidiary companies:

	Country of Incorporation	% share of capital held	% Share of voting rights	Nature of Business	Share Capital and Reserves at 31 March 2009	Profit/(Loss) in year to 31 March 2009
Abport Limited	England	100%	100%	Investment dealing company	(713,010)	(86,577)
New Centurion Trust Limited	England	100%	100%	Investment company	3,843,046	(1,714)

11 Financial Instruments by Category

Group assets per balance sheet as at 31 March 2009	Loans and receivables	Assets at fair value through profit and loss	Available for sale	Total
	£	£	£	£
Available for sale	-	-	9,906,006	9,906,006
Trade and other receivables	47,443	-	-	47,443
Other financial assets at fair value through the profit and loss	-	84,082	-	84,082
Cash and cash equivalents	487,425	-	-	487,425

Total	534,868	84,082	9,906,006	10,524,956

Group liabilities per balance sheet as at 31 March 2009	Liabilities at fair value through profit and loss	Other financial liabilities	Total
	£	£	£
Trade and other payables	-	178,766	178,766
Dividends payable	-	174,818	174,818
Borrowings	-	6,154,407	6,154,407

Total	-	6,507,991	6,507,991

Group assets as per balance sheet as at 31 March 2008	Loans and receivables	Assets at fair value through profit and loss	Available for sale	Total
	£	£	£	£
Available for sale	-	-	10,849,840	10,849,840
Trade and other receivables	49,859	-	-	49,859
Other financial assets at fair value through the profit and loss	-	195,026	-	195,026
Cash and cash equivalents	2,095,866	-	-	2,095,866

Total	2,145,725	195,026	10,849,840	13,190,591

Group liabilities as per balance sheet as at 31 March 2008	Liabilities at fair value through profit and loss	Other financial liabilities	Total
	£	£	£
Trade and other payables	-	231,936	231,936
Dividends payable	-	174,818	174,818
Borrowings	-	6,154,407	6,154,407

Total	-	6,561,161	6,561,161

12 Trade and other receivables

	Group		Company
	2009	2008	2009	2008
	£	£	£	£
Amount due from Abport Limited	-	-	229,136	253,505
Trade and other receivables	47,443	49,859	47,443	49,859

	47,443	49,859	276,579	303,364

Other receivables principally comprise amounts outstanding for trade sales and dividends receivable. These amounts are unsecured, non-interest bearing and have no fixed repayment period.

13 Investments

Investments held as current assets are shown at fair value through profit or loss of £84,082 (2008: £195,206). If they had been shown at cost they would have been carried at £259,683 (2008: £282,546).

14 Trade and other payables

	Group		Company
	2009	2008	2009	2008
	£	£	£	£
Other trade payables	178,766	231,936	178,766	231,936

	178,766	231,936	178,766	231,936

Other trade payables principally comprise amounts outstanding for operating expenses. These amounts are unsecured and non-interest bearing. Of the other trade payables, £100,000 (2008: £100,000) is an accrual for a pension contribution for which there is no determined payment date; the remaining other trade payables are due for payment within 30 days.

15 Interest bearing liabilities

	Group		Company
	2009	2008	2009	2008
	£	£	£	£
5% loan notes maturing 2010/2015	3,657,004	3,657,004	3,657,004	3,657,004
Participating preference shares	2,497,403	2,497,403	2,497,403	2,497,403

The loan notes were issued at par on 7 March 2005 as part of the consideration for the acquisition of New Centurion Trust Limited. The loan notes are unsecured and unsubordinated and will be redeemed by the Company at par as to 50% of their aggregate original principal amount on the fifth anniversary of the completion date, being 7 March 2010, and as to a further 10% on each anniversary thereafter up to and including the tenth anniversary.

Loan notes maturity analysis	Group		Company
	2009	2008	2009	2008
	£	£	£	£
In not more than one year	1,828,502	-	1,828,502	-
In more than one year but not more than two years	365,700	1,828,502	365,700	1,828,502
In more than two years but not more than five years	1,097,101	1,097,101	1,097,101	1,097,101
In more than five years	365,701	731,401	365,701	731,401

	3,657,004	3,657,004	3,657,004	3,657,004

The participating preference shares are analysed as to:

	Group and Company
	2009		2008
	No.	£	No.	£
Authorised
Participating Preference Shares of 50p each	12,640,000	6,320,000	12,640,000	6,320,000
Allotted, issued and fully paid
Participating Preference Shares of 50p each
At 1 April 2008 and 31 March 2009	4,994,805	2,497,403	4,994,805	2,497,403

The directors do not consider the fair values of the group's financial instruments to be significantly different from the carrying values.

16 Issued capital

	Group and Company
	2009		2008
	No.	£	No.	£
Authorised
Ordinary shares of 50p each	4,000,000	2,000,000	4,000,000	2,000,000

In 2005 the Deferred shares in the Company were cancelled by court order and as such no longer form part of the authorised capital of the Company.
Allotted, issued and fully paid
Ordinary shares of 50p each
At 1 April 2008	1,899,891	949,946	1,919,891	959,946
Bought in for cancellation during year	-	-	(20,000)	(10,000)

At 31 March 2009	1,899,891	949,946	1,899,891	949,946

Non-voting shares of 50p each
Non-voting shares held by the Group	1,717,565	858,782	1,717,565	858,782

		1,808,728		1,808,728

During the year the Company purchased 32,500 Ordinary shares in the Company for a consideration of £52,689. These shares are held in treasury.

The Ordinary Shares entitle the holders to receive all ordinary dividends and all remaining assets on a winding up, after the Participating Preference Shares have been satisfied in full.

17 Reserves

	Group		Company
	2009	2008	2009	2008
	£	£	£	£
Share premium
Balance at 1 April 2008 and 31 March 2009	1,019,246	1,019,246	1,019,246	1,019,246

Capital redemption reserve
Balance at 1 April 2008	685,250	675,250	685,250	675,250
Buy in of own shares	-	10,000	-	10,000

Balance at 31 March 2009	685,250	685,250	685,250	685,250

Revaluation reserve
Balance at 1 April 2008	1,140,477	2,423,825	1,201,322	2,634,815
Unrealised revaluation of investments	(575,713)	(1,283,348)	(594,351)	(1,433,493)

Balance at 31 March 2009	564,764	1,140,477	606,971	1,201,322

Capital reserve
Balance at 1 April 2008	4,316,244	3,989,314	4,198,833	3,808,667
Realised gains	27,175	728,554	38,249	754,107
Impairment provisions	(1,648,261)	(401,624)	(1,640,698)	(363,941)

Balance at 31 March 2009	2,695,158	4,316,244	2,596,384	4,198,833

Revenue account
Balance at 1 April 2008	579,346	746,995	761,606	896,225
Buy in of own shares	(52,689)	(45,361)	(52,689)	(45,361)
Retained loss for the year	(362,977)	(122,288)	(274,686)	(89,258)

Balance at 31 March 2009	163,680	579,346	434,231	761,606

A full reconciliation of the movement in reserves is shown in the Consolidated Statement of Changes in Equity.

The following is a description of the nature and purpose of the key reserves:

Own shares held are shares in the Company that are owned by New Centurion Trust Limited which, following its acquisition in March 2005, became a wholly owned subsidiary of the Company.
The capital redemption reserve reflects the nominal value of deferred shares which have been cancelled and the nominal value of ordinary and preference shares which have been bought in by the Company.
The revaluation reserve reflects the difference between the cost of portfolio investments and the market value at which they are held on the balance sheet, where market value is greater than cost.
The capital reserve is the total of accumulated realised gains and losses on disposal of portfolio investments, less unrealised losses.
Revenue account consists of revenue earnings after taxation, dividends and any transfers to capital redemption reserve arising on the buy-in of own shares.

The Own Shares Held reserve, the capital redemption reserve, the revaluation reserve and the capital reserve are non-distributable reserves.

18 Reconciliation of movements in shareholders' funds

	Group		Company
	2009	2008	2009	2008
	£	£	£	£
Return for the financial year	(1,765,937)	463,041	(1,659,009)	559,307
Dividends	(218,126)	(258,399)	(218,126)	(258,399)

	(1,984,063)	204,642	(1,877,135)	300,908
Purchase of own shares	(52,689)	(45,361)	(52,689)	(45,361)
Other recognised gains and losses relating to the year	(575,713)	(1,283,348)	(594,351)	(1,433,493)

Net reduction to shareholders' funds	(2,612,465)	(1,124,067)	(2,524,175)	(1,177,946)
Opening shareholders' funds	6,629,430	7,753,497	9,674,985	10,852,931

Closing shareholders' funds	4,016,965	6,629,430	7,150,810	9,674,985

Attributable on a winding up to:
Premium payable to Participating Preference shareholders	2,497,403	2,497,403	2,497,403	2,497,403
Ordinary shareholders	1,519,563	4,132,027	4,653,408	7,177,582

	4,019,965	6,629,430	7,150,810	9,674,985

The Participating Preference Shares entitle the holders, in priority to the payment of any dividend to the holders of all or any other shares in the capital of the Company, to a fixed net cash cumulative dividend at the rate per annum of 7p per share. In addition, holders are entitled to a participating dividend at the rate of 25% of any dividends paid on the Ordinary Shares in excess of 2p net per share for any year, subject to a maximum participating dividend in respect of any year of 3p net per share.

On any return of capital holders are entitled to the payment of a premium of 50p per share. The shares also confer voting rights in certain circumstances. This 50p premium, amounting to £2,497,403, falls to be treated as a contingent call on Shareholders' funds as shown in the above table.

A reconciliation of the Consolidated balance sheet and the Company's balance sheet is as follows:

	2009	2008
	£	£
Consolidated balance sheet net assets	4,016,965	6,629,430
Add:
Cost of non-voting ordinary shares of the Company held by New Centurion Trust Limited	2,919,861	2,919,861
Goodwill on acquisition of New Centurion Trust Limited and Abport Limited being primarily costs of acquisition which have been amortised in the consolidated accounts	354,879	354,879
Less:
Adjustments for post acquisition trading of subsidiaries	(140,895)	(229,185)

Company balance sheet net assets	7,150,810	9,674,985

19 Net asset value per ordinary share

The net asset value per ordinary share is calculated as follows:	2009	2008
	£	£
Net assets at 31 March 2009	4,016,965	6,629,430
Less premium attributable to Participating Preference Shareholders	(2,497,403)	(2,497,403)

Net assets attributable to ordinary shareholders	1,519,563	4,132,027

Ordinary shares in issue	1,899,891	1,899,891

Net asset value per ordinary share	79.98p	217.49p

The net asset value of the Group as shown on the consolidated balance sheet reflects the market value of the underlying investments of New Centurion Trust Limited and Abport Limited as at 31 March 2009.

20 Ultimate controlling party

The Company has no ultimate controlling party.

21 Related party transactions

During the year the Company was charged administration fees of £114,000 (2008: £111,000) by Ionian Investment Management which is a division of Fiske plc. At 31 March 2009 there were no balances outstanding (2008: £nil). Mr S.J. Cockburn is interested as a director and substantial shareholder in Fiske plc.

The Directors consider there to be no key management personnel other than the Directors.

22 Contingent liabilities

There were no contingent liabilities at 31 March 2009 (2008 Nil).

23 Analysis of financial assets and liabilities

Background

The investment objective of the group is to generate income and capital growth over the medium term. The group's financial instruments comprise investments in fixed interest securities and prior charge investments, borrowings for investment purposes, cash balances and debtors and creditors that arise directly from its operations.

Risks

The principal risks the group faces in its portfolio management activities are:

Market price risk - arising from uncertainty about future prices of financial instruments used by the group;
Interest rate risk - arising because the group may borrow funds in order to increase the amount of capital available for investment; and
Liquidity risk - because the group may invest in small companies with more limited marketability and in investments not traded on recognised or designated investment exchanges.

Policy

The investment philosophy of the Directors is to identify areas of value and potential capital growth in the medium term.

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

1. Market price risk

The Managing Director monitors the prices of financial instruments held by the group on a regular basis.

2. Interest rate risk

The Company finances its operations through existing reserves and loan notes with a fixed coupon of 5%.

3. Liquidity risk

The group'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 use of overdraft facilities.

Financial instruments

Non-current assets	2009	2008
	£	£
Listed Investments	7,919,914	8,757,886
Unlisted Investments	1,986,092	2,091,954

	9,906,006	10,849,840

Current asset investments

The group holds current asset investments with a market value of £136,771 (2008: £195,026) at the year end. Investments are subject to fluctuation in value due to market forces including interest rates.

Current assets and current liabilities

The group's current assets and liabilities are denominated in sterling.

Long term loan

The loan notes bear interest at a fixed rate of 5% per annum and are repayable in instalments.

The value of current assets, current liabilities and long term loans are not subject to interest rate risk.

Sensitivity

The direct impact of a 5% movement in the value of the portfolio investments and current asset investments amounts to £495,000 (2008: £520,000), being 26p (2008: 29p) per ordinary share.

The Directors are of the opinion that the direct impact of a movement in short term interest rates on the value of the investments is relatively small due to the illiquid and specialised nature of the investments in the portfolio.

Capital structure and management

The capital structure of the Group consists of net debt, including cash held on deposit, preference shares and ordinary shares.

	2009	2008
	£	£
Cash and bank balances	487,425	2,095,866
Interest bearing liabilities	(3,657,004)	(3,657,004)
Participating preference shares	(2,497,403)	(2,497,403)

Net debt	(5,666,982)	(4,058,541)

Ordinary Shareholders' funds	4,016,965	6,629,430
Gearing (net debt/ordinary shareholders' funds)	141.1%	61.2%

The type and maturity of the Group's borrowings are analysed in notes 15 and 18 and the Group's equity is analysed in note 16. Capital is managed so as to maximise the return to shareholders while maintaining a capital base to allow The Investment Company plc to operate effectively. Where appropriate shareholder returns can be enhanced through buying-in preference shares in the market. Capital is managed on a consolidated basis. The Group is not a member of any body that imposes minimum levels of regulatory capital. No significant external constraints in the management of capital have been identified in the past.

Stock

Number

Issue

Book

Cost

Market or

Directors'

Valuation

% of total

portfolio

REA Holdings

9% cum pref £1

9.5% Gtd Notes 31/12/15/17

7.75% Dollar Notes 20/12/14

785,009

300,000

150,000

9.23%

2.00%

5.00%

709,420

300,306

77,162

1,086,888

742,187

283,635

77,591

1,103,413

11.14%

Delta Group

4½% 2nd cum pref £1

1,380,099

71.14%

932,441

894,925

9.03%

Fiske

ordinary §

1,071,000

12.83%

762,783

599,064

6.05%

Coats International

6% red pref £1 †

624,347

4.75%

482,588

530,695

5.36%

Fishguard & Rosslare

3½% gtd preference stock

775,999

62.70%

433,040

441,737

4.46%

Satcom Group Holdings

8% conv bonds 30/06/09

8% conv bonds 31/12/10

280,000

100,000

9.33%

22.22%

280,280

100,000

380,280

277,200

99,000

376,200

3.80%

Dunlop Plantations

6% cum pref £1

538,493

21.54%

369,745

375,841

3.79%

Amalgamated Metal

5.4% cum pref £1 †

6% cum pref £1 †

256,065

213,510

18.22%

23.72%

144,049

103,844

247,893

192,049

179,348

371,397

3.75%

Lloyds Banking Group

6.475% non-cum pref

6.0884% non Cum pref (Bearer)

6.0884% non Cum pref (Registered)

ordinary 25p

570,000

380,000

300,000

30,000

0.29%

0.05%

0.04%

0.00%

308,926

84,885

241,561

91,628

727,000

194,684

82,764

69,794

20,998

368,240

3.72%

10.

Liberty

9½% cum pref £1

6% cum pref £1 (fmly Retail Stores)

199,708

250,225

34.58

64.99

146,996

107,446

254,442

199,708

105,282

304,990

3.08%

11.

S&U

31½% pref 12.5p

6% cum pref £1

489,192

67,850

13.59%

33.93%

266,283

56,198

322,482

256,679

41,982

298,661

3.01%

12.

National Westminster

9% series 'A' non-cum pref

SPON ADR each rep Prf 'C'

350,000

20,000

0.25%

1.67%

237,485

55,473

292,959

158,524

94,446

252,970

2.55%

13.

Mano River Resources

9% Conv Loan Notes

250,000

83.33%

250,625

250,000

2.52%

14.

Turbo Power Systems Inc

6.5% conv notes 2010

Common shares NPV §

Warrants 2010

250,000

3,437,500

218,750

12.50%

1.08%

200,400

275,000

475,400

212,500

33,180

245,680

2.48%

15.

Investec Investment Trust

3½% cum pref

5% cum pref

320,073

104,043

24.62%

30.12%

219,250

79,593

298,843

166,358

78,797

245,155

2.48%

16.

Right Management Consultants

8p cnv pref £1 † (fmly Coutts)

245,000

6.53%

245,840

245,000

2.47%

17.

Manganese Bronze Holdings

8.25% cum pref £1

282,000

41.22%

234,085

230,324

2.33%

18.

Royal Bank of Scotland

5.25% Perpetual Notes €

1,000,000

0.08%

147,909

227,700

2.30%

19.

Associated British Engineering

7% cum pref £1

8% cum red pref £1

291,251

56,474

52.48%

35.88%

153,809

51,674

205,483

180,212

34,943

215,155

2.17%

20.

Renold

6% cum pref £1

422,109

72.72%

330,490

198,497

2.00%

8,481,214

7,775,645

78.49%

§ Issues with unrestricted voting rights

† Unquoted investments at Directors' valuation

The Group has a total of 90 portfolio investment holdings in 71 companies.

Notice of Annual General Meeting

Notice is hereby given that the 143rd Annual General Meeting of The Investment Company plc ('the Company') will be held at the offices of Fiske plc, 3rd Floor, Salisbury House, London Wall, London, EC2M 5QS at 12.30 p.m. on 27 August 2009 for the following purposes:

Routine Business

To consider and if thought fit resolve as ordinary resolutions:

1. To receive and adopt the accounts and reports of the Directors and the Auditors for the financial year ended 31 March 2009.

2. To approve the Directors’ remuneration report for the financial year ended 31 March 2009 (as set out in the annual report and accounts of the Company for such year).

3. To declare a final dividend of 3p per Ordinary Share of 50p in the capital of the Company (each an “Ordinary Share”) for the financial year ended 31 March 2009, payable on 1 September 2009 to holders of Ordinary Shares on the register as at the close of business on 24 July 2009.

4. To re-elect Sir David Thomson Bt. as a Director.

5. To re-appoint Saffery Champness as the Company’s Auditors and to authorise the Directors to determine their remuneration.

Special Business

To consider and if thought fit resolve as follows:

Authority to Allot Shares

To resolve as an Ordinary Resolution:

6. That, in place of all existing such authorities, the Directors be generally and unconditionally authorised pursuant to section 80 of the Companies Act 1985 (“the Act”) to exercise all the powers of the Company to allot relevant securities (within the meaning of such section 80) up to an aggregate nominal amount of £191,272, in the form of Ordinary Shares or rights to subscribe for or convert into Ordinary Shares for a period expiring (unless previously revoked, varied or renewed) on 27 November 2010 or, if sooner, the end of the next annual general meeting of the Company held after the passing of this resolution, but in each case the Company may make an offer or agreement which would or might require relevant securities to be allotted after this authority expires and the Directors may allot relevant securities in pursuance of such offer or agreement as if this authority had not expired. For the avoidance of doubt Article 7(A) of the Company’s Articles of Association shall not apply to an allotment made pursuant to this resolution.

Dis-application of statutory pre-emption rights

To resolve as a special resolution:

That subject to the passing of Resolution 6 above and in place of all existing such powers, the Directors be generally empowered pursuant to section 95 of the Act to allot equity securities (within the meaning of section 94(2) to 94(3A) of the Act) for cash, pursuant to the authority conferred by Resolution 6 as if section 89(1) of the Act did not apply to such allotment, provided that this power shall expire on 27 November 2010 or, if sooner, the end of the next annual general meeting of the Company. This power shall be limited to the allotment of equity securities:

in connection with an offer of equity securities (including, without limitation, under a rights issue, open offer or similar arrangement, in favour of (i) holders of Ordinary Shares (for the avoidance of doubt, other than a holder of Non-voting Ordinary Shares which is a subsidiary of the Company) in proportion (as nearly as may be practicable) to their existing holdings of Ordinary Shares; and (ii) holders of other equity securities (if any) as required by the rights of those securities, but subject to such exclusions or other arrangements as the Directors deem necessary or expedient in relation to fractional entitlements or any legal, regulatory or practical problems under the laws of any territory, or the requirements of any regulatory body or stock exchange; and
otherwise than pursuant to the preceding paragraph up to an aggregate nominal amount of £47,497;

but the Company may make an offer or agreement which would or might require equity securities to be allotted after this power expires and the Directors may allot equity securities in pursuance of such offer or agreement as if this power had not expired. This power applies in relation to a sale of shares which is an allotment of equity securities by virtue of section 94(3A) of the Act as if in the first paragraph of this resolution the words 'pursuant to the authority conferred by Resolution 6' were omitted. For the avoidance of doubt Article 7(A) of the Company's Articles of Association shall not apply to an allotment made pursuant to this resolution.

Requisite Notice of General Meetings

To resolve as a special resolution:

1. That, subject always to applicable law, general meetings (other than any annual general meeting) of the Company may be called on not less than 14 clear days notice.

Adoption of Amended and Restated Articles of Association

To resolve as a special resolution:

2. That with effect from 00.01 a.m. on 1 October 2009:

the Articles of Association of the Company be amended by deleting all the provisions of the Company's Memorandum of Association which, by virtue of section 28 Companies Act 2006, are to be treated as part of the Company's Articles of Association; and
the amended and restated Articles of Association produced to the meeting and initialled by the Chairman of the meeting for the purpose of identification be adopted as the Articles of Association of the Company in substitution for, and to the exclusion of, the existing Articles of Association.

3rd Floor

Salisbury House

London Wall

London EC2M 5QS

8 July 2009

by Order of the Board
James P. Q. Harrison
Secretary

Notes:

Right to appoint a proxy

1 Members of the Company are entitled to appoint a proxy to exercise all or any of their rights to attend and to speak and vote at a meeting of the Company. A proxy does not need to be a member of the Company. A member may appoint more than one proxy in relation to a meeting provided that each proxy is appointed to exercise the rights attached to a different share or shares held by that member.

2 A proxy form which may be used to make such appointment and give proxy directions accompanies this notice. If you do not receive a proxy form and believe that you should have one, or if you require additional proxy forms in order to appoint more than one proxy, please contact Capita Registrars Ltd on 0871 664 0300.

Procedure for appointing a proxy

3 To be valid, the proxy form must be received by post or (during normal business hours only) by hand at Capita Registrars Ltd, Northern House, Woodsome Park, Fenay Bridge, Huddersfield HD8 0LA no later than 48 hours before the meeting time. It should be accompanied by the power of attorney or other authority (if any) under which it is signed or a notarially certified copy of such power or authority.

4 The return of a completed proxy form will not preclude a member from attending the annual general meeting and voting in person if he or she wishes to do so.

Nominated persons

5 Any person to whom this notice is sent who is a person nominated under section 146 of the Companies Act 2006 to enjoy information rights (a “Nominated Person”) may, under an agreement between him or her and the member by whom he or she was nominated, have a right to be appointed (or to have someone else appointed) as a proxy for the annual general meeting. If a Nominated Person has no such proxy appointment right or does not wish to exercise it, he or she may, under any such agreement, have a right to give instructions to the member as to the exercise of voting rights.

6 The statement of the rights of members in relation to the appointment of proxies in notes 1, 2 and 3 above does not apply to Nominated Persons. The rights described in those notes can only be exercised by members of the Company.

Record date and entitlement to vote

7 To be entitled to attend and vote at the annual general meeting (and for the purpose of the determination by the Company of the votes they may cast), members must be registered in the register of members of the Company 48 hours before AGM time (or, in the event of any adjournment, 48 hours before the time of the adjourned meeting). Changes to the register of members after the relevant deadline will be disregarded in determining the right of any person to attend and vote at the meeting. Only holders of Ordinary Shares (other than Non-voting Ordinary Shares) are entitled to attend and vote at the Annual General Meeting.

Documents available for inspection

8 There will be available for inspection at the registered office of the Company, Fiske plc, 3^rd Floor, Salisbury House, London Wall, London EC2M 5QS (which is also the place at which the Annual General Meeting will be held), during normal business hours on any weekday (excluding Saturdays and public holidays) and for at least 15 minutes prior to and during the Annual General Meeting, copies of (i) the service contract of the Managing Director; (ii) the letter of appointment of each other Director; and (iii) copies of the current Articles of Association and proposed amended and restated Articles of Association of the Company.

Appendix: Explanatory Notes to the Notice of the Annual General Meeting

(Ordinary) Resolution 1 - to receive and adopt accounts and reports

The Directors are required to present the accounts for the financial year ended 31 March 2009 to the meeting.

(Ordinary) Resolution 2 - to approve the Directors' remuneration report

The Companies Act 1985 requires listed companies to put a resolution to shareholders at each annual general meeting to approve the Directors' remuneration report, which forms part of the annual report. The vote is advisory in nature. Resolution 2 in the notice of Annual General Meeting, which will be proposed as an ordinary resolution, asks shareholders to approve the remuneration report, which can be found on pages 10 and 11 of this document.

(Ordinary) Resolution 3 - to declare a final dividend

The Directors recommend a final dividend of 3 pence per share on the ordinary shares of 50p each ('Ordinary Shares'). Subject to approval by shareholders, the final dividend will be paid on 1 September 2009 to holders of Ordinary Shares on the register on 24 July 2009.

(Ordinary) Resolution 4 - to re-elect Sir David Thomson Bt. as a Director

The Company's Articles of Association state that one third of the Directors (or the nearest number to but not exceeding that number), other than the Managing Director, shall retire from office at each Annual General Meeting. Information on the Chairman, Sir David Thomson Bt, who is retiring by rotation but who is offering himself for re-election, may be found on page 1 of this document.

(Ordinary) Resolution 5 - to re-appoint Saffery Champness as Auditors

The Company is required to appoint Auditors at each Annual General Meeting to hold office until the next such meeting at which accounts are presented. This resolution proposes that Saffery Champness, the Company's existing Auditors, should be re-appointed as the Company's Auditors and authorises the Directors to determine their remuneration.

(Ordinary) Resolution 6 - authority to allot shares

The Companies Act 1985 prevents directors from allotting unissued shares of any class without the authority of shareholders in general meeting. In certain circumstances this could be unduly restrictive. Resolution 6 in the notice of Annual General Meeting will be proposed, as an ordinary resolution, to authorise the Directors to allot Ordinary Shares (or rights to subscribe for or convert into Ordinary Shares) up to an aggregate nominal amount equal to the current authorised but unissued ordinary share capital of £191,272, representing approximately 20% of the nominal value of the Ordinary Shares in issue on 8 July 2009 (other than 32,500 Ordinary Shares currently held in treasury and the 1,717,565 non-voting Ordinary Shares held by a subsidiary of the Company). The authority conferred by the resolution will expire on 27 November 2010 or, if sooner, at the end of next year's annual general meeting.

The Directors have no present plans to allot unissued shares. However, the Directors believe it to be in the best interests of the Company that they should continue to have this authority to enable the Board to take advantage of appropriate opportunities which may arise in the future.

(Special) Resolution 7 - to disapply pre-emption rights

Unless they are given an appropriate authority by shareholders, if the Directors wish to allot any unissued equity shares for cash or grant rights over such shares they must first offer them to existing Ordinary Shareholders in proportion to their existing holdings in accordance with statutory pre-emption rights and the Company's existing Articles of Association. Resolution 7 in the notice of Annual General Meeting will be proposed, as a special resolution, to give the Directors power to allot equity shares without the application of these pre-emption rights: first, in relation to offers of equity securities by way of rights issue, open offer or similar arrangements, pro rata to existing holdings (but with more flexible procedures than those provided by statute); and second, in relation to the allotment of equity securities for cash up to a maximum aggregate nominal amount of £47,497, representing approximately 5% of the nominal value of the Ordinary Shares in issue on 8 July 2009 (other than the non-voting Ordinary Shares held by a subsidiary of the Company). The power conferred by this Resolution will expire on 27 November 2010 or, if sooner, at the end of next year's Annual General Meeting

The authority sought and limits set by this resolution will also apply to any sale by the Company of treasury shares.

(Special) Resolution 8 - period of notice for general meetings (other than AGMs)

This resolution is required to reflect the proposed implementation in August 2009 of the Shareholder Rights Directive. Although the 2006 Act allows a company to call any general meeting, other than an AGM, on 14 clear days' notice, even if a special resolution will be proposed. However, under the regulation implementing this Directive, a listed company may only call a general meeting on less than 21 days' notice if shareholders have resolved to allow this and certain other requirements are met. Resolution 8 seeks such approval, effective until the Company's next Annual General Meeting. However, the Company would also need to meet the requirements for electronic voting under the Directive before it could call a general meeting on less than 21 days' notice.

(Special) Resolution 9 - adoption of amended and restated Articles of Association

It is proposed to adopt amended and restated Articles of Association (the 'New Articles') in order to update the Company's current Articles of Association (the 'Current Articles') primarily to reflect the provisions of the Companies Act 2006 (the '2006 Act') and certain other developments in company law and practice in recent years. The New Articles will only become effective on 1 October 2009, when the remaining provisions of the 2006 Act come into force.

The Current Articles have not been thoroughly reviewed and updated since 1996 and are now out of date in a number of technical respects. The principal changes introduced in the New Articles are summarised below. Other changes, which are of a minor, technical or clarifying nature and also some more minor changes which merely reflect changes made by the 2006 Act, have not been noted in the summary below. There have also been formatting changes to make the document more 'user-friendly', including the introduction of headings and a table of contents, as well as more straightforward numbering. The New Articles and the Current Articles are available for inspection, as noted on page 41 of this document. The New Articles will not make any changes to the relative rights of the Company's existing classes of shares.

1 Articles which duplicate statutory provisions

Provisions in the Current Articles which replicate provisions contained in the 2006 Act are in the main amended to bring them into line with the 2006 Act, but have in some cases been deleted to avoid unnecessary repetition. The main changes made to reflect the 2006 Act are detailed below.

2 Deletion of references to deferred shares

The Current Articles still contain certain provisions relating to the class rights of the Deferred Shares, all of which were cancelled in 2005. These provisions have now been removed in the New Articles.

3 Convening general meetings

The provisions in the Current Articles dealing with the convening of general meetings and the length of notice required to convene general meetings are being amended to conform to new provisions in the 2006 Act. Further details are provided above in relation to Resolution 8.

4 Votes of members

Under the 2006 Act, proxies are entitled to vote on a show of hands whereas under the Current Articles, proxies are only entitled to vote on a poll. Multiple proxies may be appointed, provided that each proxy is appointed to exercise the rights attached to a different share held by the shareholder. The New Articles reflect these new provisions.

5 Conflicts of interest

The 2006 Act sets out directors' general duties, which largely codify the existing law but with some changes. Under the 2006 Act, a director must avoid a situation where he has, or can have, a direct or indirect interest that conflicts, or possibly may conflict with his company's interests. The requirement is very broad and could apply, for example, if a director becomes a director of another company or a trustee of another organisation. The 2006 Act allows directors of public companies to authorise conflicts and potential conflicts, where appropriate, where the articles of association contain a provision to this effect and to contain other provisions for dealing with directors' conflicts of interest to avoid a breach of duty. Consistently with the provisions adopted by many listed companies recently in this regard, the New Articles give the disinterested Directors authority to approve such conflict situations and to include other provisions to allow conflicts of interest to be dealt with in a similar way to the current position, updated to reflect current common practice.

There are safeguards which will apply when Directors decide whether to authorise a conflict or potential conflict. First, only Directors who have no interest in the matter being considered will be able to take the relevant decision, and secondly, in taking the decision the Directors must act in a way they consider, in good faith, will be most likely to promote the company's success. The Directors will be able to impose limits or conditions when giving authorisation if they think this is appropriate.

6 Electronic and web communications

Provisions of the 2006 Act which came into force in January 2007 enable companies to communicate with members by electronic and/or website communications. The New Articles continue to allow communications to members in electronic form and, in addition, they also permit the Company to take advantage of the new provisions relating to website communications. Before the Company can communicate with a member by means of website communication, the relevant member must be asked individually by the Company to agree that the Company may send or supply documents or information to him by means of a website, and the Company must either have received a positive response or have received no response within the period of 28 days beginning with the date on which the request was sent. The Company will notify the member (either in writing, or by other permitted means) when a relevant document or information is placed on the website and a member can always request a hard copy version of the document or information. The Directors have no immediate plans to utilise these provisions but believe it appropriate to include them for future flexibility.

7 Directors' remuneration

The Current Articles allow the Board to set the remuneration for Directors for special services and/or service on committees and also specifically for the Managing Director. The New Articles preserve these powers but set them out in a more up-to-date manner, including specific provisions for the Board to set fees for Directors' basic services, including normal committee services, in such amounts as the Board may determine (not exceeding an aggregate amount equivalent to £15,000 per Director per annum or such higher amount as may from time to time be approved by shareholders by ordinary resolution). The specific financial limit is introduced in recognition of institutional shareholder corporate governance guidelines. It is intended to allow flexibility for the future, but the Directors do not intend these changes to result in any changes to the current levels of the Directors' remuneration.

8 Directors' indemnities and related matters

The 2006 Act has in some areas extended the scope of the powers of a company to indemnify directors and to fund expenditure incurred in connection with certain actions against directors. In particular, the existing exemption allowing a company to provide money for the purpose of funding a director's defence in court proceedings now expressly covers regulatory proceedings and applies to associated companies. In the New Articles the relevant provisions have been updated to reflect the legislative changes.

9 The Company's objects

The provisions regulating the operations of the Company are currently set out in the Company's memorandum and articles of association. The Company's memorandum contains, among other things, the objects clause which sets out the scope of the activities the Company is authorised to undertake. This is drafted to give a wide scope. The 2006 Act significantly reduces the constitutional significance of a company's memorandum. Under the 2006 Act the objects clause and all other provisions which are contained in the memorandum of a company already in existence at 1 October 2009 will instead be deemed to be contained in a company's articles of association but the company can remove these provisions by special resolution.

Further the 2006 Act states that unless a company's articles provide otherwise, a company's objects are unrestricted, thus eliminating the need for objects clauses. For this reason the Company is proposing to remove its objects clause together with all other provisions of its memorandum which, by virtue of the 2006 Act, are to be treated as forming part of the Company's Articles of Association as of 1 October 2009. These changes are technical in nature and are not expected to result in any material change to the nature or scope of the Company's business. The New Articles also contain an express statement confirming the limited liability of the shareholders.

10 Authorised share capital and issue of new shares

The 2006 Act abolishes the requirement for a company to have an authorised share capital and the New Articles reflect this. Directors will still be limited as to the number of shares they can at any time allot because allotment authority continues to be required under the 2006 Act.

The Current Articles provide for pre-emption rights of Ordinary Shareholders on new issues of shares, but that such rights are disapplied to the extent general allotment authority has been given by shareholders. They provide a framework, now outdated in some respects, intended to allow periodic resolutions to grant allotment authority and disapply pre-emption rights to be passed in shorter form. To provide greater clarity and flexibility for changes in law and practice, these 'framework' provisions have been deleted and it is proposed that these matters will be dealt with entirely by periodic resolutions in general meeting instead.

11 Authority to purchase own shares

The Current Articles provide a 'framework' provision to which short-form resolutions to authorise market purchases of the Company's own shares may be referenced. Again, the New Articles drop these provisions and in future all details of any such authority will be dealt with in the relevant resolution.

12 Disclosure of interests in shares

In line with the articles of association of many other listed companies, the New Articles contain provisions which entitle the Company to impose restrictions on any holder of shares of the Company if he or any other person appearing to be interested in those shares fails to comply with a statutory notice issued by the Company requiring the disclosure of interests in the shares specified in the notice. In these circumstances, the Company may disenfranchise the shareholder and, subject to the 2006 Act and if the shareholder holds 0.25% or more in nominal value of the shares of the relevant class, impose restrictions on the transfer of the shares in question.

This information is provided by RNS

The company news service from the London Stock Exchange

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