Half Yearly Report

RNS Number : 2977W

Investment Company PLC

17 November 2010

FOUNDED
1868

REGISTERED No. 4205

ENGLAND AND WALES

THE INVESTMENT COMPANY PLC

UNAUDITED INTERIM REPORT

For the six month period ended 30 September 2010

Chairman's Statement

The six month period on which I am reporting has continued the recovery in asset value which began towards the end of March 2009. The unaudited net asset value at 30 September 2010 of 298.81p. per ordinary share compares with the value per the audited accounts at 31 March 2009 for each ordinary share of almost exactly 80p. Shareholders will find a table similar to that set out in my Statement with the Annual Reports and Accounts explaining the accounting treatment which gives rise to this increase in Note 8.

Geared up by the preference capital, the 5% loan notes and the overdraft/loan facility we were able to negotiate with Barclays Bank, the investments which we held, and those in the prior charges of Lloyds Banking Group and Royal Bank of Scotland Group which we purchased, appreciated rapidly with the recovery of confidence which saw the FTSE Index of 100 shares of the largest companies rise sharply from its nadir of 3460.71. Today, at the time of writing, the FTSE 100 Index has just hit a two year "high" of 5880.99.

While our portfolio is almost entirely invested in fixed interest securities which have little similarity with the ordinary shares which make up that Index, nevertheless it is a barometer of investor confidence which influences in particular the price of the prior charges of some of the 100 companies therein. It is almost unbelievable today to look back at some of the bargains available in the Spring of 2009 when fear was rampant and common sense had flown out of the window. Investors often forget that if any ordinary share is worth anything, preference shares in that company must still be worth their full value.

With the current absurd notion being perpetrated by some commentators and corporate finance advisors in Investment Banks that "the pain should be shared" or "bondholders should take a haircut" while leaving ordinary shareholders with undeserved value, we hold fast to the obvious truth that bond holders and preference shareholders rank for their entirety ahead of equity investors and we are never inclined to give away our shareholders' money to enable others not to lose theirs. Essentially, to adapt an apparently fashionable phrase, "we are not all in this together". We rank ahead and there we will stay.

On the very morning of our Annual General Meeting in July it had been announced that one of our largest holdings, that of Delta Group 4.5% preference shares, was in receipt of a redemption proposal at par, 100p, plus accrued dividend to the date of repayment. More recently it has been announced that Dunlop Plantations are to repay its 6% preference shares at 100p plus accrued dividend to the date of repayment, which was our 8th largest holding at the 31 March. The receipt of these sums in cash puts us in a strong position since we repaid half of the 5% loan notes last March and used our bank facilities so as not to have to sell securities to meet the cost of £1,828,502. Although our bank borrowings are presently only about half the £1.4 million we shall receive in December from Delta, the facility remains in place if we wish to continue to use it, and if not we can repay the loans without having to sell securities.

Revenue for the period was boosted by the receipt of arrears of dividend on our holding of Liberty plc (formerly Retail Stores plc) although no bid was made for the preference issue when the ordinary shares were taken over in the recent agreed offer. We remain preference shareholders in both the parent company Liberty Limited and its subsidiary Liberty Retail Limited, (both companies having recently renounced public limited company status) and are concerned at the attitude of the former directors of Liberty plc and that of the Private Equity fund, BlueGem whose subsidiary BlueGem Gamma Ltd, now controls the group.

Your directors recommend a maintained ordinary dividend of 2p which will be paid on 7 January 2011 to ordinary shareholders registered on 3 December 2010. The ordinary shares will be quoted ex-dividend on 1 December 2010. The half year basic preference dividend of 3.5p will be paid on 1 April 2011 but the participating dividend payable on 1 October 2011 will not be known until the final dividend for the year to 31 March 2011 is declared.

Sir David Thomson Bt.

Chairman

17 November 2010

Registered office:

3rd Floor, Salisbury House

London Wall

London EC2M 5QS

Consolidated Statement of Comprehensive Income

For six months ended 30 September 2010

	Notes	6 months to 30 September 2010 (unaudited)			6 months to 30 September 2009 (unaudited)			Year to 31 March 2010 (audited)
		Revenue	Capital	Total	Revenue	Capital	Total	Revenue	Capital	Total
		£	£	£	£	£	£	£	£	£

Total income		625,798	-	625,798	470,232	-	470,232	1,151,082	-	1,151,082
Administrative expenses		(185,426)	-	(185,426)	(200,435)	-	(200,435)	(391,007)	-	(391,007)
Loan note interest		(45,713)	-	(45,713)	(91,425)	-	(91,425)	(176,275)	-	(176,275)
Other finance costs		(174,818)	-	(174,818)	(174,818)	-	(174,818)	(349,636)	-	(349,636)
Other interest payable		(16,655)	-	(16,655)	(763)	-	(763)	(22,932)	-	(22,932)
Realised gains/(losses) on investments		-	421,648	421,648	-	(14,542)	(14,542)	-	371,369	371,369
Movement in impairment provisions		-	(257,771)	(257,771)	-	707,837	707,837	-	900,635	900,635

Net return before taxation		203,186	163,877	367,063	2,791	693,295	696,086	211,232	1,272,004	1,483,236
Taxation		-	-	-	-	-	-	-	-	-

Net return after taxation		203,186	163,877	367,063	2,791	693,295	696,086	211,232	1,272,004	1,483,236
Other comprehensive income/expense
Movement in unrealised appreciation of investments:
Recognised in equity		-	712,573	712,573	-	1,026,843	1,026,843	-	2,118,734	2,118,734
Recognised in profit or loss		-	(400,613)	(400,613)	-	(35,761)	(35,761)	-	(33,792)	(33,792)

Total comprehensive income for the period attributable to ordinary equity shareholders		203,186	475,837	679,023	2,791	1,684,377	1,687,168	211,232	3,356,946	3,568,178

Return per 50p Ordinary Share
From net return after taxation		10.88p	8.78p	19.66p	0.15p	37.13p	37.28p	9.31p	68.11p	77.42p
From movement in unrealised appreciation of investments:		-	16.71p	16.71p	-	53.07p	53.07p	-	111.66p	111.66p

Total: Basic and diluted	5	10.88p	25.49p	36.37p	0.15p	90.20p	90.35p	9.31p	179.77p	189.08p


Net asset value per 50p Ordinary Share				298.81p			165.84p			265.45p

All the Company's operations are continuing.

Consolidated Statement of Changes in Equity

For six months ended 30 September 2010

	Issued Capital	Share Premium	Own Shares Held	Capital Redemption Reserve	Revaluation Reserve	Capital Reserve	Revenue Account	Total
	£	£	£	£	£	£	£	£
Balance at 1 April 2010	1,808,728	1,019,246	(2,919,861)	685,250	2,649,706	3,967,162	244,081	7,454,312
Buy in of own shares	-	-	-	-	-	-	-	-
Movement in unrealised appreciation of investments
- recognised in equity	-	-	-	-	712,573	-	-	712,573
- recognised in profit or loss	-	-	-	-	(400,613)	-	-	(400,613)
Net increase in net assets from operations	-	-	-	-	-	163,877	203,186	367,063
Ordinary dividends paid	-	-	-	-	-	-	(56,022)	(56,022)
Participating element of preference dividends paid	-	-	-	-	-	-	-	-

Balance at 30 September 2010	1,808,728	1,019,246	(2,919,861)	685,250	2,961,666	4,131,039	391,245	8,077,313


Balance at 1 April 2009	1,808,728	1,019,246	(2,919,861)	685,250	564,764	2,695,158	163,680	4,016,965
Buy in of own shares	-	-	-	-	-	-	-	-
Movement in unrealised appreciation of investments
- recognised in equity	-	-	-	-	1,026,843	-	-	1,026,843
- recognised in profit or loss	-	-	-	-	(35,761)	-	-	(35,761)
Net increase in net assets from operations	-	-	-	-	-	693,295	2,791	696,086
Ordinary dividends paid	-	-	-	-	-	-	(56,022)	(56,022)
Participating element of preference dividends paid	-	-	-	-	-	-	-	-

Balance at 30 September 2009	1,808,728	1,019,246	(2,919,861)	685,250	1,555,846	3,388,453	110,449	5,648,111


Balance at 1 April 2009	1,808,728	1,019,246	(2,919,861)	685,250	564,764	2,695,158	163,680	4,016,965
Movement in unrealised appreciation of investments
- recognised in equity	-	-	-	-	2,118,734	-	-	2,118,734
- recognised in profit or loss	-	-	-	-	(33,792)	-	-	(33,792)
Net increase in net assets from operations	-	-	-	-	-	1,272,004	211,232	1,483,236
Ordinary dividends paid	-	-	-	-	-	-	(93,370)	(93,370)
Participating element of preference dividends paid	-	-	-	-	-	-	(37,461)	(37,461)

Balance at 31 March 2010	1,808,728	1,019,246	(2,919,861)	685,250	2,649,706	3,967,162	244,081	7,454,312

Consolidated Balance Sheet

At 30 September 2010

	30 September 2010 (Unaudited) £	30 September 2009 (Unaudited) £	31 March 2010 (Audited) £
Investments Investments at cost	13,155,330	13,728,843	13,249,016
Unrealised (depreciation)/appreciation	(76,608)	(1,417,455)	(130,798)

Portfolio investments at market value	13,078,722	12,311,388	13,118,218
Current assets
Trade and other receivables	152,848	16,916	14,462
Investments	138,221	168,355	96,595
Cash and bank balances	519,281	77,749	254,283

	810,350	263,020	365,340

Current liabilities
Bank overdraft	1,150,000	383,434	1,350,000
Preference dividends payable	174,818	174,818	174,818
Trade and other payables	161,036	213,638	178,523
5% loan notes maturing 2010	365,700	1,828,502	365,700

	1,851,554	2,600,392	2,069,041

Net current assets/(liabilities)	(1,041,204)	(2,337,372)	(1,703,701)
Non-current liabilities
5% loan notes maturing 2010 / 2015	(1,462,802)	(1,828,502)	(1,462,802)
Participating preference shares	(2,497,403)	(2,497,403)	(2,497,403)

Net assets	8,077,313	5,648,111	7,454,312

Capital and reserves
Issued capital	1,808,728	1,808,728	1,808,728
Share premium	1,019,246	1,019,246	1,019,246
Own shares held	(2,919,861)	(2,919,861)	(2,919,861)
Capital redemption reserve	685,250	685,250	685,250
Revaluation reserve	2,961,666	1,555,846	2,649,706
Capital reserve	4,131,039	3,388,453	3,967,162
Revenue reserves	391,245	110,449	244,081

Shareholders' funds	8,077,313	5,648,111	7,454,312

Net Asset Value per 50p Ordinary share	298.81p	165.84p	265.45p

Company Number: 4205

Consolidated Cash Flow Statement

For the six months ended 30 September 2010

	Notes	6 months to 30 September 2010 (unaudited)	6 months to 30 September 2009 (unaudited)	Year to 31 March 2010 (audited)
		£	£	£
Cash flows from operating activities
Cash received from investments		541,769	282,212	668,054
Interest received		70,761	188,565	281,503
Sundry income		-	-	2,677
Cash paid to and on behalf of employees		(71,647)	(71,366)	(142,583)
Other cash payments		(140,000)	(148,839)	(254,674)

Net cash inflow from operating activities		400,883	250,572	554,977
Cash flows from financing activities
Bank interest paid		(16,655)	(763)	(22,932)
Loan note interest paid		(45,713)	(91,425)	(176,275)
Loan notes redeemed		-	-	(1,828,502)
Fixed element of dividends paid on preference shares		(174,818)	(174,818)	(349,636)
Participating element of dividends paid on preference shares		-	-	(37,461)
Dividends paid on ordinary shares		(55,379)	(11,197)	(89,252)

Net cash outflow from financing activities		(292,565)	(278,203)	(2,504,058)

Cash flows from investing activities
Purchase of investments		(837,200)	(1,869,793)	(2,390,740)
Sale of investments		1,193,880	1,104,314	2,756,679

Net cash inflow/(outflow) from investing activities		356,680	(765,479)	365,939

Net increase/(decrease) in cash and cash equivalents	7	464,998	(793,110)	(1,583,142)

Notes to the Interim Report

1 Financial information

The Investment Company plc is a limited company incorporated in Great Britain and registered in England and Wales, company number 4205. The address of its registered office and principal place of business is 3rd Floor, Salisbury House, London Wall, London EC2M 5QS.

The financial information contained in this half year financial report does not constitute statutory accounts as defined in section 434 of the Companies Act 2006. The financial information for the half years ended 30 September 2010 and 30 September 2009 has been neither audited nor reviewed by the auditors.

The figures and financial information for the year ended 31 March 2010 are extracted from the latest published audited financial statements of the Company and do not constitute the statutory accounts for that year. The audited financial statements for the year ended 31 March 2010 have been filed with the Registrar of Companies. The report of the independent auditors on those accounts contained no qualification or statement under section 498(2) or section 498(3) of the Companies Act 2006.

Except as described below, the Group has applied consistent accounting policies in preparing the interim financial statements for the six months ended 30 September 2010, the comparative information for the six months ended 30 September 2009, and the financial statements for the period ended 31 March 2010.

The Group applies revised IAS 1 Presentation of Financial Statements, as a result of which the Company presents in the statement of changes in equity all owner changes in equity, whereas all non-owner changes in equity are presented in the statement of comprehensive income. This standard is concerned with presentation only and does not have any impact on the results or net assets of the Company.

2 Accounting policies

These financial statements 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.

These financial statements have been prepared under the historical cost convention, except for Portfolio Investments which are stated at market value.

3 Directors' Responsibility Statement

The Directors confirm that, to the best of their knowledge:

(a) these condensed financial statements have been prepared in accordance with IAS 34;

(b) the interim management report includes a fair review of the information required by Disclosure and Transparency Rule 4.2.7R (an indication of important events that have occurred during the first six months of the financial year and a description of the principal risks and uncertainties for the remaining six months of the financial year); and

(c) the interim management report includes a fair review of the information required by Disclosure and Transparency Rule 4.2.8R (disclosure of related party transactions and changes therein).

4 Dividends payable

	6 months to 30 September 2010 (unaudited)	6 months to 30 September 2009 (unaudited)	Year to 31 March 2010 (audited)
	£	£	£
Participating preference shares
Participating preference element	-	-	37,461
Ordinary shares
Prior year final	56,022	56,022	56,022
Current year interim	-	-	37,348

Total dividends	56,022	56,022	130,831

5 Return per ordinary share

	6 months to 30 September 2010 (unaudited)		6 months to 30 September 2009 (unaudited)		Year to 31 March 2010 (audited)
Ordinary shares	1,867,391		1,867,391		1,867,391

	£	Per Share Pence	£	Per Share Pence	£	Per Share Pence
Revenue
Net return/(deficit) after taxation	203,186	10.88	2,791	0.15	211,232	11.32
Participating dividend	-	-	-	-	(37,461)	(2.01)
Capital
Net investment gains/(losses) after taxation	163,877	8.78	693,295	37.13	1,272,004	68.11

Net return/(deficit) after taxation	367,063	19.66	696,086	37.28	1,445,775	77.42
Movement in unrealised appreciation of investments	311,960	16.71	991,082	53.07	2,084,942	111.66

Total	679,023	36.37	1,687,168	90.35	3,530,717	189.08

As the Company has no options or warrants in issue, basic and diluted loss per share are the same.

Of the ordinary shares in issue, 1,717,565 shares are held by the company, are non-voting, and are excluded when calculating the adjusted return per share:

6 Preference shares

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.

7 Analysis of net debt

	At 30 September 2010 (unaudited)	Cash flow (unaudited)	At 1 April 2010 (audited)
	£	£	£
Cash and bank balances	519,281	264,998	254,283
Bank overdraft	(1,150,000)	200,000	(1,350,000)
5% loan notes maturing March 2011	(365,700)	-	(365,700)
5% loan notes maturing March 2012-15	(1,462,802)	-	(1,462,802)

	(2,459,221)	464,998	(2,924,219)
Participating preference shares	(2,497,403)	-	(2,497,403)

	(4,956,624)	464,998	(5,421,622)

8 Movement in Net Asset Value

	£	p	p
Opening NAV			265.45
Revenue in period	203,186	10.87

Realised gains on investments	421,648	22.58
Movement in impairment provisions	(257,771)	(13.80)
	163,877	8.78
			19.65
Revaluation reserve at year-end	2,961,666
Revaluation reserve at start of year	2,649,706
Increase in the year in unrealised appreciation of investments above cost	311,960		16.71
Dividends paid to ordinary shareholders	(56,022)		(3.00)
Closing NAV			298.81

IFRS requires diminution in value from the cost of an investment to be reflected through the Consolidated Income Statement. This does not reflect similarly any rise in value above the cost. However once provision for any diminution in value or unrealised loss (known as an Impairment Provision) has been put through the Income Statement, any subsequent recovery up to original cost does go through the Income Statement; but if the value of those investments continues to rise above cost, until that gain is realised it is confined to the Statement of Changes in Equity where it is shown in the Revaluation Reserve on the Balance Sheet.

9 Principal Risks and Uncertainties

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. Its principal risks are market price risk, interest rate risk and liquidity risk. These risks, and the way in which they are managed, are described in more detail within the Company's Annual Report and Accounts for the year ended 31 March 2010. The nature of the Company's principal risks and uncertainties has not changed materially since the date of that report.