Half Yearly Report

RNS Number : 6920Q

Investment Company PLC

09 November 2012

The Investment Company plc

Unaudited Interim Report

For the six month period ended 30^th September 2012

Chairman's Statement

To the surprise of many commentators Stock Markets around the world have in general experienced rising trends in recent months. Anxiety about the problems of countries in the Eurozone has waned as a result of more forceful action from the European Central Bank and the knuckling under of debtor nation Governments to the austerity demanded by creditor countries. Fears of a slow-down in China recur from time to time and cause volatility in some commodity prices but in general fears, in the short-term at least, have proved exaggerated.

In America the re-elected President is faced with serious economic problems and how they are addressed will probably be influential in the short term direction of US Stock Markets.

Against this background your Company's assets have appreciated usefully with the net asset value per ordinary share rising from 315.6p at 31^st March (audited) to 357.5p at 30^th September (unaudited). After the exceptional income receipts of the previous year to 31^st March 2012, revenue in the six months to 30^th September 2012 is lower partly due to accounting treatment of accrued interest. A greater proportion of your Company's revenue arises now in the form of interest rather than dividends as the balance of our portfolio has swung away from preference shares, several large holdings being redeemed and replaced by interest-bearing loans and bonds.

Your Board has Resolved to declare a maintained interim ordinary dividend of 2p which will be paid on 21^st December 2012 to ordinary shareholders registered on 23^rd November 2012. The ordinary shares will be quoted ex dividend on 21^st November 2012. The half-year basic preference dividend of 3.5p will be paid on 1^st April 2013. The amount of the participation dividend, in addition to the half-year 3.5p basic payment, paid to the preference shareholders on 1^st October 2012 was 1p (0.75p in 2011) but the total amount payable on 1^st October 2013 will not be known until the total ordinary dividend for the current year is determined.

I have commented before on the diminishing number of preference issues available at attractive prices for purchase to include in the Company's portfolio. With the general recovery of confidence in the prosperity of the banking sector in the United Kingdom (just one year ago the Chairman and several directors of Lloyds Banking Group announced their personal purchases of ordinary shares at 22p which at the time of writing could now be sold at 44p!) our largest holdings are all standing at or above par. This is a circumstance with which we find ourselves less comfortable than when market prices are way below par values. We are therefore continuing to investigate possible developments which we believe will be attractive to shareholders.

Sir David Thomson Bt.

Chairman

9^th November 2012

Registered office:

3rd Floor, Salisbury House

London Wall

London EC2M 5QS

Consolidated Statement of Comprehensive Income

For six months ended 30 September 2012

	Notes	6 months to 30 September 2012 (unaudited)			6 months to 30 September 2011 (unaudited)			Year to 31 March 2012 (audited)
		Revenue	Capital	Total	Revenue	Capital	Total	Revenue	Capital	Total
		£	£	£	£	£	£	£	£	£

Total income		475,809	-	475,809	624,652	-	624,652	1,363,009	-	1,363,009
Administrative expenses		(211,987)	-	(211,987)	(180,391)	-	(180,391)	(433,590)	-	(433,590)
Loan note interest		(27,503)	-	(27,503)	(36,670)	-	(36,670)	(71,991)	-	(71,991)
Other finance costs		(174,818)	-	(174,818)	(174,818)	-	(174,818)	(349,636)	-	(349,636)
Other interest payable		(2,195)	-	(2,195)	(502)	-	(502)	(5,454)	-	(5,454)
Realised gains on investments		-	75,907	75,907	-	19,958	19,958	-	26,097	26,097
Movement in impairment provisions		-	201,606	201,606	-	(574,794)	(574,794)	-	(270,261)	(270,261)

Net return before taxation		59,306	277,513	336,819	232,271	(554,836)	(322,565)	502,338	(244,164)	258,174
Taxation		-	-	-	-	-	-	-	-	-

Net return after taxation		59,306	277,513	336,819	232,271	(554,836)	(322,565)	502,338	(244,164)	258,174
Other comprehensive income/expense
Movement in unrealised appreciation of investments:
Recognised in equity		-	513,561	513,561	-	(883,436)	(883,436)	-	7,801	7,801
Recognised in profit or loss		-	-	-	-	(1,297)	(1,297)	-	(146,627)	(146,627)

Total comprehensive income for the period attributable to equity shareholders		59,306	791,074	850,380	232,271	(1,439,569)	(1,207,298)	502,338	(382,990)	119,348

Return per 50p Ordinary Share
From net return after taxation		3.18p	14.86p	18.04p	12.44p	(29.71)p	(17.27)p	24.23p	(13.08)p	11.15p
From movement in unrealised appreciation of investments:		-	27.50p	27.50p	-	(47.38)p	(47.38)p	-	(7.43)p	(7.43)p

Total: Basic and diluted	5	3.18p	42.36p	45.54p	12.44p	(77.09)p	(64.65)p	24.23p	(20.51)p	3.72p


Net asset value per 50p Ordinary Share				357.50p			249.59p			315.96p

All the Company's operations are continuing.

Consolidated Statement of Changes in Equity

For six months ended 30 September 2012

	Issued Capital	Share Premium	Own Shares Held	Capital Redemption Reserve	Revaluation Reserve	Capital Reserve	Revenue Account	Total
	£	£	£	£	£	£	£	£
Balance at 1 April 2012	1,808,728	1,019,246	(2,919,861)	685,250	2,313,745	4,806,064	684,449	8,397,621
Buy in of own shares	-	-	-	-	-	-	-	-
Movement in unrealised appreciation of investments
- recognised in equity	-	-	-	-	513,561	-	-	513,561
- recognised in profit or loss	-	-	-	-	-	-	-
Net increase in net assets from operations	-	-	-	-	-	277,513	59,304	336,817
Ordinary dividends paid	-	-	-	-	-	-	(74,693)	(74,693)
Participating element of preference dividends paid	-	-	-	-	-	-	-	-

Balance at 30 September 2012	1,808,728	1,019,246	(2,919,861)	685,250	2,827,306	5,083,577	669,060	9,173,306


Balance at 1 April 2011	1,808,728	1,019,246	(2,919,861)	685,250	2,452,571	5,050,228	344,102	8,440,264
Buy in of own shares	-	-	-	-	-	-	-	-
Movement in unrealised appreciation of investments
- recognised in equity	-	-	-	-	(883,436)	-	-	(883,436)
- recognised in profit or loss	-	-	-	-	(1,297)	-	-	(1,297)
Net increase in net assets from operations	-	-	-	-	-	(554,836)	232,271	(322,565)
Ordinary dividends paid	-	-	-	-	-	-	(74,696)	(74,696)
Participating element of preference dividends paid	-	-	-	-	-	-	-	-

Balance at 30 September 2011	1,808,728	1,019,246	(2,919,861)	685,250	1,567,838	4,495,392	501,677	7,158,270


Balance at 1 April 2011	1,808,728	1,019,246	(2,919,861)	685,250	2,452,571	5,050,228	344,102	8,440,264
Movement in unrealised appreciation of investments
- recognised in equity	-	-	-	-	7,801	-	-	7,801
- recognised in profit or loss	-	-	-	-	(146,627)	-	-	(146,627)
Net increase in net assets from operations	-	-	-	-	-	(244,164)	502,338	258,174
Ordinary dividends paid	-	-	-	-	-	-	(112,043)	(112,043)
Participating element of preference dividends paid	-	-	-	-	-	-	(49,948)	(49,948)

Balance at 31 March 2012	1,808,728	1,019,246	(2,919,861)	685,250	2,313,745	4,806,064	684,449	8,397,621

Consolidated Balance Sheet

At 30 September 2012

	30 September 2012 (Unaudited) £	30 September 2011 (Unaudited) £	31 March 2012 (Audited) £
Investments Investments at cost	12,465,789	12,873,237	13,073,264
Unrealised depreciation	(141,451)	(1,907,058)	(856,618)

Portfolio investments at market value	12,324,338	10,966,179	12,216,646
Current assets
Trade and other receivables	275,835	416,957	214,896
Investments	249,770	178,236	182,857
Cash and bank balances	280,068	297,927	284,517

	805,673	893,120	682,270

Current liabilities
Bank overdraft	-	400,000	500,000
Preference dividends payable	174,818	174,818	174,818
Trade and other payables	187,384	166,006	231,974
5% loan notes maturing 2013	365,700	365,700	365,700

	727,902	1,106,524	1,272,492

Net current (liabilities)/assets	77,771	(213,404)	(590,222)
Non-current liabilities
5% loan notes maturing 2014 / 2015	(731,400)	(1,097,102)	(731,400)
Participating preference shares	(2,497,403)	(2,497,403)	(2,497,403)

Net assets	9,173,306	7,158,270	8,397,621

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	2,827,306	1,567,838	2,313,745
Capital reserve	5,083,577	4,495,392	4,806,064
Revenue reserves	669,060	501,677	684,449

Shareholders' funds	9,173,306	7,158,270	8,397,621

Net Asset Value per 50p Ordinary share	357.50p	249.59p	315.96p

Company Number: 4205

Consolidated Cash Flow Statement

For the six months ended 30 September 2012

	Notes	6 months to 30 September 2012 (unaudited)	6 months to 30 September 2011 (unaudited)	Year to 31 March 2012 (audited)
		£	£	£
Cash flows from operating activities
Cash received from investments		146,137	173,222	417,926
Interest received		254,742	230,395	558,386
Sundry income		-	-	-
Cash paid to and on behalf of employees		(125,069)	(76,072)	(150,175)
Other cash payments		(128,153)	(132,136)	(251,852)

Net cash inflow from operating activities		147,657	195,409	574,285
Cash flows from financing activities
Bank interest paid		(2,195)	(502)	(5,454)
Loan note interest paid		(27,503)	(36,670)	(71,991)
Loan notes redeemed		-	-	(365,702)
Fixed element of dividends paid on preference shares		(174,818)	(174,818)	(349,636)
Participating element of dividends paid on preference shares		-	-	(49,948)
Dividends paid on ordinary shares		(70,954)	(73,080)	(109,962)

Net cash outflow from financing activities		(275,470)	(285,070)	(952,693)

Cash flows from investing activities
Purchase of investments		(241,186)	(1,118,038)	(1,278,605)
Sale of investments		864,550	907,210	1,243,114

Net cash (outflow)/inflow from investing activities		623,364	(210,828)	(35,491)

Net (decrease)/increase in cash and cash equivalents	7	495,551	(300,489)	(413,899)

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 2012 and 30 September 2011 has been neither audited nor reviewed by the auditors.

The figures and financial information for the year ended 31 March 2012 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 2012 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 2012, the comparative information for the six months ended 30 September 2011, and the financial statements for the period ended 31 March 2012.

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 2012 (unaudited)	6 months to 30 September 2011 (unaudited)	Year to 31 March 2012 (audited)
	£	£	£
Participating preference shares
Participating preference element	-	-	49,948
Ordinary shares
Prior year final	74,693	74,696	74,696
Current year interim	-	-	37,347

Total dividends	74,693	74,696	161,991

5 Return per ordinary share

	6 months to 30 September 2012 (unaudited)		6 months to 30 September 2011 (unaudited)		Year to 31 March 2012 (audited)
Ordinary shares	1,867,391		1,867,391		1,867,391

	£	Per Share Pence	£	Per Share Pence	£	Per Share Pence
Revenue
Net return after taxation	59,304	3.18	232,271	12.44	502,338	26.90
Participating dividend	-	-	-	-	(49,948)	(2.67)
Capital
Net investment (losses)/gains after taxation	277,513	14.86	(554,836)	(29.71)	(244,164)	(13.08)

Net (deficit)/return after taxation	336,817	18.04	(322,565)	(17.27)	208,226	11.15
Movement in unrealised appreciation of investments	513,561	27.50	(884,733)	(47.38)	(138,826)	(7.43)

Total	850,378	45.54	(1,207,298)	(64.65)	69,400	3.72

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

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 2012 (unaudited)	Cash flow (unaudited)	At 1 April 2012 (audited)
	£	£	£
Cash and bank balances	280,068	(4,449)	284,517
Bank overdraft	-	500,000	(500,000)
5% loan notes maturing March 2012	(365,700)	-	(365,700)
5% loan notes maturing March 2012-15	(731,400)	-	(731,400)

	(817,032)	495,551	(1,312,583)
Participating preference shares	(2,497,403)	-	(2,497,403)

	(3,314,435)	495,551	(3,809,986)

8 Movement in Net Asset Value

	£	p	p
NAV at 1 April 2012			315.96
Revenue in period	59,306	3.18

Realised gains on investments	75,907	4.06
Movement in impairment provisions	201,606	10.80
	277,513	14.86
			18.04
Revaluation reserve at period end	2,827,306
Revaluation reserve at start of year	2,313,745
Increase in the year in unrealised appreciation of investments above cost	513,561		27.50
Dividends paid to ordinary shareholders	(74,693)		(4.00)
NAV at 30 September 2012			357.50

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 2012. The nature of the Company's principal risks and uncertainties has not changed materially since the date of that report.