Annual Report • Aug 29, 2013
Annual Report
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RNS Number : 6895M
Investment Company PLC
29 August 2013
The Investment Company plc
For the period ended 30th June 2013
Chairman's Statement
All shareholders will have received the 98 page document issued by the Company at the beginning of June which set out the Directors' Proposals for the future of the Company. At the Class Meeting of Participating Preference shareholders and the General Meeting of Ordinary shareholders, held on 24 June 2013, Notice of which was given in that document, shareholders voted by overwhelming majorities in favour of the Resolutions putting into effect the Directors' Proposals.
On 24 June all the Participating Preference shares were converted into Ordinary shares on a factor of 309.855 Ordinary for every 1,000 Participating Preference shares held and a final dividend of 1.67p per Participating Preference share for the period from 1 April 2013 to 26 June 2013 was paid on 17 July 2013.
The new Ordinary shares issued under the terms of the Initial Placing at a price of 328.05p raised £4,345,000, for the newly appointed Managers, Miton Capital Partners Limited to invest in accordance in the newly approved Investment Policy which is described on Pages 1 and 2 of this Report and Accounts. Stephen Cockburn retired as Managing Director on 26 June but has been appointed as a Non-Executive Director of the company and has been retained as a Consultant to Miton in respect of the Legacy Portfolio, much of which has built up over the 19 years he has been running the Company. Martin Perrin, who is a Chartered Accountant and a Director of Fiske plc, the Administrator to the company where he has had close involvement in the services provided by that company during the last eight years, was appointed a non-executive Director of the Company on 26 June 2013 and in accordance with the Articles of Association of the Company will retire and offer himself for election as a Director at the forthcoming Annual General Meeting.
Miss Joan Webb, who since 1991 has been a Director of the Company, which her father ran as Chairman, Managing Director and controlling shareholder for many years until his death in 1994, has decided not to seek re-election to the Board at the Annual General Meeting. Philip Lovegrove, OBE, who has been a Director of the Company since 2006 and served as Chairman of the Audit Committee will also not be seeking re-election to the Board at the Annual General Meeting. I should like to express the thanks of the Board to these two Directors who have contributed significantly to the recent prosperity of the Company and put on record the admirable service they have done on shareholders behalf over their years in office.
Shareholders will appreciate that the Accounts presented in this document cover the fifteen month period to 30 June 2013 and the comparable figures are for the 12 months to 31 March 2012. Although distorted by the requirements of Accountancy to add capital return to dividend income careful examination of the Accounts will reveal the perhaps surprising figure which shows Gross Revenue for the 12-month period to exceed that of the 15-month period subsequently. I can explain this apparent anomaly by reminding shareholders of the exceptional receipts of arrears of dividends on our substantial holdings of the preference shares in Associated British Engineering last year (amounting to something in excess of £300,000).
Your Directors indicated in the Proposals Document dated 31 May 2013 that no further dividend would be declared in respect of the financial period to 30 June 2013. The anticipated income return of 6% on Net Asset Value after the Company's conversion into an Investment Trust (which will allow the Directors to distribute capital as well as revenue, all of which ranks as dividend in the hands of shareholders) will begin with a quarterly dividend to be declared in respect of the three months to 30 September 2013. It is the Directors' intention to declare and pay roughly equal dividends four times a year in order to improve the flow of income to shareholders.
If the 6% return is achieved (which while it is the Directors' intention should not be taken as a firm forecast) and the present net asset value of around 350p is maintained, the total annual dividend on the Ordinary shares will amount to no less than 21p per share.
Sir David Thomson Bt.
Chairman
28 August 2013
Directors' report
Principal activities and review of the business
The directors present to the Members the financial statements for the fifteen month period ended 30 June 2013, which incorporate the consolidated results of The Investment Company plc ("the Company") and its subsidiary undertakings ("the Group").
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. In June 2013, the Company in General Meeting, approved a number of proposals ("the Proposals") pursuant to which it amended its investment policy, appointed an external investment manager, reorganised the Company's share capital and raised additional capital through a placing. A full review of the activities of the Company and its subsidiaries in the period under review is given in the Chairman's Statement.
The Company owns Abport Limited, an investment dealing company, and New Centurion Trust Limited, an investment company.
It is the intention of the Directors to apply to HMRC for approval of the Company as an investment trust with effect from the financial period commencing 1 July 2013.
Change of Accounting Reference Date
Pursuant to the proposals, summarised in the Chairman's Statement, which were implemented in June 2013 the Company has changed its accounting reference date to June 30, extending the accounting period that was due to end on March 31, 2013 so as to end on 30 June 2013.
Results and Dividends
The consolidated net asset value per ordinary share at 30 June 2013 was 342.60p per share (2012: 315.96p).
The consolidated balance sheet shows net assets at 30 June 2013 of £16,237,484 and the Company's balance sheet shows net assets of £16,202,080. A reconciliation of the differences in the balance sheets is given in note 18 to the accounts.
Dividends were paid on the Participating Preference Shares of 3.5p on 1 October 2012 (2011: 4.5p), of 3.5p on 1 April 2013 (2012: 3.5p). A final dividend, pursuant to conversion into Ordinary Shares, on the Participating Preference Shares of 1.66p was paid on 17 July 2013.
On the Ordinary Shares, an interim dividend of 2p (2012: 2p) was paid in January 2013. Following the change in accounting reference date, from March 31 to June 30, it is expected that in respect of the six month period to 31 December 2013 a dividend will be paid in March 2014.
Strategy and investment policy
Investment objective and investment policy
The Company's investment objective is to provide Ordinary Shareholders with an attractive level of dividends coupled with capital growth over the long term, through the investment in a portfolio of equities, preference shares, loan stocks, debentures and convertibles.
The Company invests primarily in the equity securities of quoted UK companies with a wide range of market capitalisations many of which are, or are expected to be dividend paying, with anticipated dividend growth in the long term. The Company may also invest in large capitalisation companies, including FTSE 100 constituents, where this may increase the yield of the portfolio and where it is believed that this may increase shareholder value.
The Company also makes investments in preference shares, loan stocks, debentures, convertibles and related instruments of quoted UK companies.
The Manager adopts a stock specific approach in managing the Company's portfolio and, therefore, sector weightings will be of secondary consideration. As a result of this approach, the Company's portfolio does not track any benchmark index.
The Company may utilise derivative instruments including index-linked notes, contracts for differences, covered options and other equity-related derivative instruments for efficient portfolio management, gearing and investment purposes. Any use of derivatives for investment purposes will be made on the basis of the same principles of risk spreading and diversification that apply to the Company's direct investments, as described below. The Company does not enter into uncovered short positions.
Future Developments
With effect from 27 June 2013, Miton Capital Partners Limited were appointed external investment manager with the remit to manage the Company's funds, including the additional capital raised in June 2013, in accordance with the Company's new investment policy. In addition, the Company will seek to conduct its affairs so as to qualify as an investment trust.
Principal risks and uncertainties
The management of the business and the execution of the Group's strategy are subject to a number of risks. The key business risks affecting the Group are:
(i) Investment decisions: the performance of the Group's portfolio is dependent on a number of factors including, but not limited to the quality of initial investment decisions and the strategy and timing of sales;
(ii) Investment valuations: the valuation of the Group's portfolio and opportunities for realisations depend to some extent on stock market conditions and interest rates; and
(iii) 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 affecting the choice and scope of investment opportunities for the Group.
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 Group's activities.
Social and community issues
This review does not contain any information pertaining to social and community issues.
Key performance indicators
During the period the Earnings per Ordinary Share on the revenue account decreased from 24.23p to (6.35)p whilst the Net Asset Value per Ordinary share increased from 315.96p to 342.60p.
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 Group consist mainly of securities which are readily realisable. The directors are of the opinion that the Group has adequate resources to continue in operational existence for the foreseeable future and accordingly have continued to adopt the going concern basis in preparing the financial statements.
Share Capital
At the period end, the Company's issued share capital consisted of:
| Issued | |
| No. | |
| Ordinary shares of 50p | 4,772,049 |
| Fixed rate Preference shares of 50p | 1,717,565 |
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 that transaction, and the re-organisation of the Company's capital in June 2013, the Company holds indirectly 1,717,565 fixed rate preference shares of 50p each in itself.
The Company holds 32,500 ordinary shares in treasury. These were purchased during the year to 31 March 2010 and are designated as non-voting shares whilst so held.
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 | 11.38 | 539,344 |
| Mrs J. P. Brown | 4.48 | 212,343 |
| Mrs S. Williams | 4.48 | 212,343 |
| Investec Wealth & Investment Ltd. | 4.33 | 206,641 |
| S. J. Cockburn | 4.25 | 201,322 |
| Shirlstar Container Transport Limited Pension Fund | 4.11 | 194,650 |
Taxation Status
The directors are of the opinion that the Company is not a close company. As noted above, it is the intention of the Directors to apply to HMRC for approval of the Company as an investment trust with effect from the financial period commencing 1 July 2013.
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 Fixed Rate Preference Shares have been satisfied in full.
The Fixed Rate Preference Shares, held by New Centurion Trust Limited, a wholly owned subsidiary of the Company, are non-voting, are entitled to receive a cumulative dividend of 0.01p per share per annum, and are entitled to receive their nominal value, 50p, on a distribution of assets or a winding up.
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 Group is committed to high standards of corporate governance and to the principles of good governance set out in the UK Corporate Governance Code (the "Code"). The Directors have reviewed the detailed principles and recommendations actioned in the Code and believe that, to the extent that they are relevant to the Group's business, they have complied with the provisions of the Code during the period ended 30 June 2013 and that the Group's current practice is, in all material aspects, consistent with the principles of the Code.
The Board confirms that, to the best of its knowledge and understanding, the Group has complied throughout the accounting period with all the relevant provisions as set out in section 1 of the Code.
The Board also confirms that, to the best of its knowledge and understanding, procedures were in place to meet the requirements of the Code relating to internal controls throughout the period under review. However, no formal policy or procedures have been documented as the directors do not consider that such practice is appropriate for the Group.
Board of Directors
Pursuant to the proposals implemented in June 2013, Stephen Cockburn retired as Managing Director, but continued as a non-executive director. The Board consists of independent non-executive directors. The Board is responsible for all matters of direction and control of the Group, including its investment policy, and no one individual has unfettered powers of decision. The directors review at regular meetings the Group's investments and all other important issues to ensure that control is maintained over the Group'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 period ended 30 June 2013 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. | 6 | (8) | 2 | (2) | ||
| S. J. Cockburn | 8 | (8) | n/a | |||
| Miss J. B. Webb | 8 | (8) | n/a | |||
| P. S. Allen | 8 | (8) | n/a | |||
| P. A. Lovegrove | 7 | (8) | 2 | (2) | ||
| M.H.W. Perrin | n/a | n/a | ||||
| Figures in brackets indicate the maximum number of meetings held in the period in respect of which the individual was a board/committee member |
Committees of the Board
The Group 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 during the fifteen month period to review and approve the Group'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 Group; 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 Group'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 Group; 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 Group'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 Group no policy or procedures exist for staff to raise concerns concerning any matters of financial reporting.
Remuneration Committee
The Remuneration Committee comprises all the independent non-executive directors. During the period, 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 Group's affairs, having regard to the industry generally.
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 Group'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 also Chairman of S.A. Meacock & Company Limited. He considers himself to have sufficient time to commit to the Group'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 Code (provision A.1.2).
Directors' independence
The Board has reviewed the independent status of its individual directors and the Board as a whole.
The Code (provision B.1.1) 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 because of his active participation in the preference share market independently of the Group. 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 Group. Given this combination of factors the Board recognises that she would not, technically, be regarded as independent under the terms of the 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, Stephen Cockburn, Martin Perrin and Philip Lovegrove are also considered to be independent in both character and judgement. Accordingly, five of the six 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 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 Stephen Cockburn and Martin Perrin is contained within the notice of the Annual General Meeting at the back of these Financial Statements. The other Board members recommend that shareholders vote for his re-election as they believe that their skills, knowledge and overall performances are of continued benefit to the Group. All directors have actively contributed in meetings throughout the period.
Shareholders are invited to consider the information set out herein on an individual basis, before voting on the re-election of the directors.
The information about the directors, which appears on page 3, demonstrates the range of skills and experience they bring to the Board.
Statement of Directors' responsibilities in respect of the financial statements
The directors are responsible for preparing this report and the financial statements in accordance with applicable United Kingdom law and regulations and those International Financial Reporting Standards (IFRS) adopted by the European Union. Company law requires the Directors to prepare financial statements for each financial period which present fairly the financial position of the Company and of the Group and the financial performance and cash flows of the Company and of the Group for that period.
In preparing those financial statements, the Directors are required to:
· select suitable accounting policies and then apply them consistently;
· make judgements and estimates that are reasonable and prudent;
· present information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable information;
· state whether applicable IFRSs have been followed, subject to any material departures disclosed and explained in the financial statements;
· prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group and Company will continue in business; 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.
The Directors confirm that they have complied with the above requirements when preparing the financial statements and that the Chairman's Statement and the Directors' Report include a fair review of the performance and the development of the Group together with a description of the principal risks and uncertainties faced.
The Directors are responsible for keeping adequate accounting records which disclose with reasonable accuracy at any time the financial position of the Company and of the Group and to enable them to ensure that the financial statements comply with the Companies Act 2006 and Article 4 of the IAS Regulations. The Directors are responsible for ensuring that the Directors' report and other information in the annual report is prepared in accordance with Company law in the United Kingdom. They are also responsible for ensuring that the annual report includes information required by the Listing Rules of the Financial Conduct Authority. They also have responsibility for safeguarding the assets of the Group and for taking such steps as are reasonably open to them to prevent and detect fraud and other irregularities.
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 Group.
Board responsibilities and relationship with service providers
The Board is responsible for the determination and implementation of the Group's investment policy and for monitoring compliance with the Group's objectives. Some of the Group'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 Group's strategic objectives. Specific responsibilities of the Board include: reviewing the Group'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). These documents are presented at the meetings to allow the Board as a whole to assess the Group'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 Group, 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 period.
The Administrator, being regulated by the Financial Conduct 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.
During the period to June 30, 2013, management of the Group's assets was conducted by the Managing Director who had discretion to manage the assets of the Group in accordance with the Group's objectives and policies. At each Board meeting, the Managing Director presented 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 2012, shareholders renewed the directors' authority to allot 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 July 2013 are set out in the Notice of Meeting at the back of these Financial Statements.
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.
Management Agreement
With effect from June 24 2013, the Company's investments are managed by Miton Capital Partners Limited ("the Manager") who are responsible for managing the assets of the Company and to advise the Company on a day to day basis in accordance with the Investment Policy and subject to the overall control and supervision of the Board. Under the terms of the Management Agreement, the Manager has discretion to buy, sell, retain, exchange or otherwise deal in investment assets for the account of the Company.
The Manager is entitled to receive from the Company or any member of its group in respect of its services provided under the Management Agreement, a management fee payable monthly in arrears calculated at the rate of one-twelfth of one per cent. per calendar month of the Net Asset Value per annum for its services under the Management Agreement, save that its management fee will be reduced by such amount (being not more than the fees payable to the Manager in respect of any year (exclusive of VAT)) so as to seek to ensure that the Ongoing Charges Ratio of the Company does not exceed 2.5 per cent. per annum.
The Management Agreement is terminable by either the Manager or the Company giving to the other not less than six months' written notice, such notice not to expire earlier than the second anniversary of commencement. The Management Agreement may be terminated earlier by the Company with immediate effect on the occurrence of certain events, including the liquidation of the Manager or appointment of a receiver or administrative receiver over the whole or any substantial part of the assets or undertaking of the Manager or a material breach by the Manager of the Management Agreement which is not remedied. The Company may also terminate the Management Agreement should Gervais Williams cease to be an employee of the Manager's group and within three months of his departure is not replaced by a person whom the Company considers, to be of equal or satisfactory standing. The Company may also terminate the Management Agreement if a continuation vote is not passed.
The Company has given certain market standard indemnities in favour of the Manager in respect of the Manager's potential losses in carrying on its responsibilities under the Management Agreement.
Creditor payment policy
The Group's policy is to pay suppliers promptly. As a result, there were no trade creditors payable at the period end (2012: £nil).
Internal Control Statement
This statement is made in accordance with the Disclosure and Transparency rules and section C of the Code.
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 controls 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 Group'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 Group'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 | Ordinary 50p | Participating Pref. 50p | ||
| Sir David Thomson Bt. (Chairman) * | 57,000 | 57,000 | - | |
| S. J. Cockburn (Managing Director) † | 201,322 | 188,647 | 28,000 | |
| Miss J. B. Webb* | 539,344 | 475,886 | 204,800 | |
| P. S. Allen* | 20,000 | 20,000 | - | |
| P. A. Lovegrove* | 21,500 | 11,000 | - | |
| M.H.W Perrin (appointed 27 June 2013) | 7,144 | - | - |
There have been other no changes in the above interests since 30 June 2013.
At the forthcoming Annual General Meeting (i) Philip Lovegrove and Joan Webb intend to retire, (ii) Stephen Cockburn retires and, being eligible, offers himself for re-election and (iii) Martin Perrin, having been appointed since the date of the last Annual General Meeting offers himself for election.
Directors' remuneration report
The Board has prepared this report, in accordance with section 421 of the Companies Act 2006, 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 period to 30 June 2014. Directors' fees are determined within the limits set out in the Company's Articles of Association, and they are not normally 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 Stephen Cockburn 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, terminated on 27 June 2013 pursuant to the Proposals described above. It provided that his annual remuneration as Managing Director would be £50,000 in addition to his Directors' fee, currently £14,000.
Performance graph of Total Shareholder Return
The directors do not normally receive any performance-related remuneration and there are no comparable indices against which the Group feels able to measure itself. Consequently, it has not prepared a graph showing total shareholder return.
Directors' emoluments for the period ended 30 June 2013 (audited)
The directors who served during the period received the following emoluments in the form of fees and salaries:
| Period ended 30 June 2013 |
Year ended 31 March 2012 |
|
| £ | £ | |
| Sir David Thomson Bt. | 17,500 | 14,000 |
| S. J. Cockburn | 72,296 | 64,000 |
| Miss J. B. Webb | 13,750 | 11,000 |
| P. S. Allen | 13,750 | 11,000 |
| P.A. Lovegrove | 17,500 | 14,000 |
| M H W Perrin | - | - |
| 134,796 | 114,000 | |
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 Group and which was effected by the Group during the period. 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 Thursday, 3 October 2013 is set out at the back of these Financial Statements. In addition to routine business, resolutions will be proposed at the Annual General Meeting to grant the Directors authority to allot shares and provide a limited dis-application of pre-emption rights. The approval of these resolutions will allow the directors flexibility in managing the Company.
Saffery Champness are 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 28 August 2013 |
by Order of the Board James P. Q. Harrison Secretary |
Consolidated Income Statement
For the fifteen month period ended 30 June 2013
| Notes | Fifteen months to 30 June 2013 | Year to 31 March 2012 | |||||
| Revenue | Capital | Total | Revenue | Capital | Total | ||
| £ | £ | £ | £ | £ | £ | ||
| Total income | 2 | 1,134,994 | - | 1,134,994 | 1,363,009 | - | 1,363,009 |
| Administrative expenses | 3 | (707,351) | - | (707,351) | (433,590) | - | (433,590) |
| Loan note interest | 15 | (62,700) | - | (62,700) | (71,991) | - | (71,991) |
| Other finance costs | 6 | (432,550) | - | (432,550) | (349,636) | - | (349,636) |
| Other interest payable | (2,195) | - | (2,195) | (5,454) | - | (5,454) | |
| Realised gains on investments | - | 220,111 | 220,111 | - | 26,097 | 26,097 | |
| Movement in impairment provisions | - | 48,876 | 48,876 | - | (270,261) | (270,261) | |
| Net return before taxation | (69,802) | 268,987 | 199,185 | 502,338 | (244,164) | 258,174 | |
| Taxation | 4 | - | - | - | - | - | - |
| Net return after taxation | 5 | (69,802) | 268,987 | 199,185 | 502,338 | (244,164) | 258,174 |
| Return per 50p Ordinary Share | |||||||
| Basic and diluted | 8 | (6.35)p | 14.26p | 7.91p | 24.23p | (13.08)p | 11.15p |
Consolidated Statement of comprehensive Income
For the fifteen month period ended 30 June 2013
| 2013 | 2012 | ||
| £ | £ | ||
| Net return after taxation | 199,185 | 258,174 | |
| Movement in unrealised appreciation of investments: | |||
| Recognised in equity | 1,357,358 | 7,801 | |
| Recognised in profit or loss | (159,534) | (146,627) | |
| Total net recognised income for the financial period | 1,397,009 | 119,348 | |
The accompanying notes form part of these financial statements.
Consolidated Statement of Changes in Equity
For the fifteen month period ended 30 June 2013
| Issued Capital |
Share Premium |
Own Shares Held |
Capital Redemption Reserve |
Revaluation Reserve |
Capital Reserve |
Revenue Account |
Total | |
| £ | £ | £ | £ | £ | £ | £ | £ | |
| 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 - recognised in profit or loss |
- - |
- - |
- - |
- - |
7,801 (146,627) |
- - |
- - |
7,801 (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 |
| Movement in unrealised appreciation of investments | ||||||||
| - recognised in equity - recognised in profit or loss |
- - |
- - |
- - |
- - |
1,357,358 (159,534) |
- - |
- - |
1,357,358 (159,534) |
| Net increase in net assets from operations | - | - | - | - | - | 268,987 | (69,802) | 199,185 |
| Ordinary dividends paid | - | - | - | - | - | - | (112,044) | (112,044) |
| Participating element of preference dividends paid | - | - | - | - | - | - | (49,948) | (49,948) |
| Conversion of Non-voting Ordinary Shares into Fixed Rate Preference Shares | (858,782) | - | 2,919,861 | - | - | (2,061,079) | - | - |
| Conversion of Preference Shares into Ordinary Shares | 773,833 | - | - | 1,723,570 | - | - | - | 2,497,403 |
| Issue of new Ordinary Shares | 662,246 | 3,682,753 | - | - | - | - | - | 4,344,999 |
| Costs of Issue | - | (237,556) | - | - | - | - | - | (237,556) |
| Balance at 30 June 2013 | 2,386,025 | 4,464,443 | - | 2,408,820 | 3,511,569 | 3,013,972 | 452,655 | 16,237,484 |
The accompanying notes form part of these financial statements.
Company Statement of Changes in Equity
For the fifteen month period ended 30 June 2013
| Issued Capital |
Share Premium |
Own Shares Held |
Capital Redemption Reserve |
Revaluation Reserve |
Capital Reserve |
Revenue Account |
Total | |
| £ | £ | £ | £ | £ | £ | £ | £ | |
| Balance at 1 April 2011 | 1,808,728 | 1,019,246 | - | 685,250 | 2,466,071 | 4,980,161 | 381,795 | 11,341,251 |
| Movement in unrealised appreciation of investments | ||||||||
| - recognised in equity - recognised in profit or loss |
- - |
- - |
- - |
- - |
23,802 (146,626) |
- - |
- - |
23,802 (146,626) |
| Net increase in net assets from operations | - | - | - | - | - | (262,201) | 571,202 | 309,001 |
| 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 | - | 685,250 | 2,343,247 | 4,717,960 | 791,006 | 11,365,437 |
| Movement in unrealised appreciation of investments | ||||||||
| - recognised in equity - recognised in profit or loss |
- - |
- - |
- - |
- - |
1,352,660 (159,534) |
- - |
- - |
1,352,660 (159,534) |
| Provision for diminution in value of investment in subsidiary undertaking | - | - | - | - | - | (4,547,896) | - | (4,547,896) |
| Net increase in net assets from operations | - | - | - | - | - | 273,686 | 2,333,655 | 2,607,341 |
| Ordinary dividends paid | - | - | - | - | - | - | (112,044) | (112,044) |
| Participating element of preference dividends paid | - | - | - | - | - | - | (49,948) | (49,948) |
| Conversion of Non-voting Ordinary Shares into Fixed Rate Preference Shares | (858,782) | - | - | - | - | - | - | (858,782) |
| Conversion of Preference Shares into Ordinary Shares | 773,833 | - | - | 1,723,570 | - | - | - | 2,497,403 |
| Issue of New Ordinary Shares | 662,246 | 3,682,753 | - | - | - | - | - | 4,344,999 |
| Costs of Issue | - | (237,556) | - | - | - | - | - | (237,556) |
| Balance at 30 June 2013 | 2,386,025 | 4,464,443 | - | 2,408,820 | 3,536,373 | 443,750 | 2,962,669 | 16,202,080 |
The accompanying notes form part of these financial statements.
Consolidated Balance Sheet
At 30 June 2013
| Notes | 2013 | 2012 | |||
| £ | £ | £ | £ | ||
| Investments | 9 | 12,798,594 | 12,216,646 | ||
| Current assets | |||||
| Trade and other receivables | 12 | 1,393,916 | 214,896 | ||
| Investments | 13 | 122,860 | 182,857 | ||
| Cash and bank balances | 3,138,062 | 284,517 | |||
| 4,654,838 | 682,270 | ||||
| Current liabilities | |||||
| Bank overdraft | 15 | - | 500,000 | ||
| Preference dividends payable | 6 | 82,914 | 174,818 | ||
| Trade and other payables | 14 | 401,634 | 231,974 | ||
| 5% loan notes maturing 2010/2015 | 15 | 365,700 | 365,700 | ||
| 850,248 | 1,272,492 | ||||
| Net current assets/(liabilities) | 3,804,590 | (590,222) | |||
| Non-current liabilities | |||||
| 5% loan notes maturing 2010/2015 | 15 | (365,700) | (731,400) | ||
| Participating preference shares | 15 | - | (2,497,403) | ||
| Net assets | 16,237,484 | 8,397,621 | |||
| Capital and reserves | |||||
| Issued capital | 16 | 2,386,025 | 1,808,728 | ||
| Share premium | 17 | 4,464,443 | 1,019,246 | ||
| Own shares held | 17 | - | (2,919,861) | ||
| Capital redemption reserve | 17 | 2,408,820 | 685,250 | ||
| Revaluation reserve | 17 | 3,511,569 | 2,313,745 | ||
| Capital reserve | 17 | 3,013,972 | 4,806,064 | ||
| Revenue reserves | 17 | 452,655 | 684,449 | ||
| Shareholders' funds | 18 | 16,237,484 | 8,397,621 | ||
| Net asset value per Ordinary Share of 50p | 19 | 342.60p | 315.96p | ||
| The accompanying notes form part of these financial statements. |
| Sir David Thomson Bt. Stephen J. Cockburn Directors |
Approved by the Board 28 August 2013 |
Company Number: 4205
Company Balance Sheet
At 30 June 2013
| Notes | 2013 | 2012 | |||
| £ | £ | £ | £ | ||
| Investments | 9 | 12,798,594 | 12,216,646 | ||
| Investment in subsidiaries | 10 | 862,656 | 5,410,552 | ||
| 13,661,250 | 17,627,198 | ||||
| Current assets | |||||
| Trade and other receivables | 12 | 1,476,220 | 369,117 | ||
| Cash and bank balances | 3,135,055 | 281,479 | |||
| 4,611,275 | 650,596 | ||||
| Current liabilities | |||||
| Bank overdraft | 15 | - | 500,000 | ||
| Preference dividends payable | 6 | 82,914 | 174,818 | ||
| Amounts owed to group undertakings | - | 2,415,048 | |||
| Trade and other payables | 14 | 397,348 | 227,988 | ||
| 5% loan notes maturing 2010/2015 | 15 | 365,700 | 365,700 | ||
| 845,962 | 3,683,554 | ||||
| Net current assets/(liabilities) | 3,765,313 | (3,032,958) | |||
| Non-current liabilities | |||||
| 5% loan notes maturing 2010/2015 | 15 | (365,700) | (731,400) | ||
| Participating preference shares | 15 | - | (2,497,403) | ||
| Fixed Rate Preference Shares | (858,783) | ||||
| Net assets | 16,202,080 | 11,365,437 | |||
| Capital and reserves | |||||
| Issued capital | 16 | 2,386,025 | 1,808,728 | ||
| Share premium | 17 | 4,464,443 | 1,019,246 | ||
| Capital redemption reserve | 17 | 2,408,820 | 685,250 | ||
| Revaluation reserve | 17 | 3,536,373 | 2,343,247 | ||
| Capital reserve | 17 | 443,750 | 4,717,960 | ||
| Revenue reserves | 17 | 2,962,669 | 791,006 | ||
| Shareholders' funds | 18 | 16,202,080 | 11,365,437 | ||
| The accompanying notes form part of these financial statements. |
| Sir David Thomson Bt. Stephen J. Cockburn Directors |
Approved by the Board 28 August 2013 |
Company Number: 4205
Consolidated Cash Flow Statement
For the fifteen month period ended 30 June 2013
| Notes | Fifteen months to 30 June 2013 |
Year to 31 March 2012 |
|||
| £ | £ | £ | £ | ||
| Cash flows from operating activities | |||||
| Cash received from investments | 406,454 | 417,926 | |||
| Interest received | 722,332 | 558,386 | |||
| Sundry income | 468 | - | |||
| Cash paid to and on behalf of employees | (250,687) | (150,175) | |||
| Other cash payments | (377,647) | (251,852) | |||
| Net cash inflow from operating activities | A | 500,920 | 574,285 | ||
| Cash flows from financing activities | |||||
| Bank interest | (2,195) | (5,454) | |||
| Loan note interest paid | (53,583) | (71,991) | |||
| Loan notes redeemed | (365,700) | (365,702) | |||
| Fixed element of dividends paid on preference shares | (524,455) | (349,636) | |||
| Participating element of dividends paid on preference shares | (49,948) | (49,948) | |||
| Dividends paid on ordinary shares | (104,195) | (109,962) | |||
| Share capital subscriptions received | 2,998,176 | - | |||
| Net cash inflow/(outflow) from financing activities | 1,898,100 | (952,693) | |||
| Cash flows from investing activities | |||||
| Purchase of investments | (274,005) | (1,278,605) | |||
| Sale of investments | 1,228,530 | 1,243,114 | |||
| Net cash inflow/(outflow) from investing activities | 954,525 | (35,491) | |||
| Net increase/(decrease) in cash and cash equivalents | B | 3,353,545 | (413,899) | ||
| The notes on the following page form part of this cash flow statement. |
Notes on the Consolidated Cash Flow Statement
For the fifteen month period ended 30 June 2013
| Fifteen months to 30 June 2013 |
Year to 31 March 2012 |
||||
| £ | £ | ||||
| A. | Reconciliation of net revenue before taxation to net cash inflow from operations: | ||||
| Net revenue before taxation | (69,802) | 502,338 | |||
| Non-cash dividends received | - | (258,925) | |||
| Interest paid | 2,195 | 5,454 | |||
| Loan note interest paid | 53,583 | 71,991 | |||
| Fixed element of preference dividends paid | 432,550 | 349,636 | |||
| Investment (gains)/losses of trading subsidiary | (10,391) | 64,304 | |||
| Decrease/(increase) in trade and other receivables | 17,055 | (206,455) | |||
| Increase in trade and other payables | 75,730 | 45,942 | |||
| 500,920 | 574,285 | ||||
| B. | Reconciliation of cash flow to movement in net cash | ||||
| Increase/(decrease) in cash and cash equivalents in the period | 3,353,545 | (413,899) | |||
| Loan notes redeemed | 365,700 | 365,702 | |||
| Decrease/(increase) in net cash/(debt) | 3,719,245 | (48,197) | |||
| Net debt at 1 April 2012 | (1,312,583) | (1,264,386) | |||
| Net cash/(debt) at 30 June 2013 | 2,406,662 | (1,312,583) | |||
| C. | Analysis of net cash | At 30 June 2013 | Movement | At 1 April 2012 | |
| £ | £ | £ | |||
| Cash at bank | 3,138,062 | 2,853,545 | 284,517 | ||
| Bank overdraft | - | 500,000 | (500,000) | ||
| Loan notes | (731,400) | 365,700 | (1,097,100) | ||
| 2,406,662 | 3,719,245 | (1,312,583) | |||
Company Cash Flow Statement
For the fifteen month period ended 30 June 2013
| Notes | Fifteen months to 30 June 2013 |
Year to 31 March 2012 |
|||
| £ | £ | £ | £ | ||
| Cash flows from operating activities | |||||
| Cash received from investments | 402,933 | 416,926 | |||
| Interest received | 722,332 | 558,386 | |||
| Sundry income | 468 | - | |||
| Cash paid to and on behalf of employees | (250,687) | (150,175) | |||
| Other cash payments | (373,640) | (248,134) | |||
| Net cash inflow from operating activities | A | 501,406 | 577,003 | ||
| Cash flows from financing activities | |||||
| Bank interest | (2,195) | (5,454) | |||
| Loan note interest paid | (53,583) | (71,991) | |||
| Loan notes redeemed | (365,700) | (365,702) | |||
| Fixed element of dividends paid on preference shares | (524,455) | (349,636) | |||
| Participating element of dividends paid on preference shares | (49,948) | (49,948) | |||
| Dividends paid on ordinary shares | (104,195) | (109,963) | |||
| Share capital subscriptions received | 2,998,176 | - | |||
| Net cash inflow/(outflow) from financing activities | 1,898,100 | (952,694) | |||
| Cash flows from investing activities | |||||
| Purchase of investments | (211,189) | (1,226,061) | |||
| Amounts advanced to subsidiaries | (9,315) | (55,030) | |||
| Sale of investments | 1,174,574 | 1,240,879 | |||
| Net cash inflow/(outflow) from investing activities | 954,070 | (40,212) | |||
| Net increase/(decrease) in cash and cash equivalents | B | 3,353,576 | (415,903) | ||
| The notes on the following page form part of this cash flow statement. |
Notes on the Company Cash Flow Statement
For the fifteen month period ended 30 June 2013
| Fifteen months to 30 June 2013 |
Year to 31 March 2012 |
||||
| £ | £ | ||||
| A. | Reconciliation of net revenue before taxation to net cash inflow from operations: | ||||
| Net revenue before taxation | 2,333,655 | 571,203 | |||
| Non-cash dividends received | - | (258,925) | |||
| Interest paid | 2,195 | 5,454 | |||
| Loan note interest paid | 53,583 | 71,991 | |||
| Fixed element of preference dividends paid | 432,550 | 349,636 | |||
| Decrease/(increase) in trade and other receivables | 17,057 | (206,456) | |||
| Increase in trade and other payables | 75,434 | 44,100 | |||
| Intercompany debt forgiven | (2,413,068) | - | |||
| 501,406 | 577,003 | ||||
| B. | Reconciliation of cash flow to movement in net cash | ||||
| Increase/(decrease) in cash and cash equivalents in the period | 3,353,576 | (415,903) | |||
| Loan notes redeemed | 365,700 | 365,702 | |||
| Decrease/(increase) in net cash/(debt) | 3,719,276 | (50,201) | |||
| Net debt at 1 April 2012 | (1,315,621) | (1,265,420) | |||
| Net cash at 30 June 2013 | 2,403,655 | (1,315,621) | |||
| C. | Analysis of net debt | At 30 June 2013 | Movement | At 1 April 2012 | |
| £ | £ | £ | |||
| Cash at bank | 3,135,055 | 2,853,576 | 281,479 | ||
| Bank overdraft | - | 500,000 | (500,000) | ||
| Loan notes | (731,400) | 365,700 | (1,097,100) | ||
| 2,403,655 | 3,719,276 | (1,315,621) | |||
Notes to the Financial Statements
For the fifteen month period ended 30 June 2013
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.
The group financial statements comprise the financial statements of The Investment Company Plc and its subsidiaries made up to 30 June 2013.
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.
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.
Revenue includes dividends and interest from investments which, on or before the balance sheet date, become receivable. Deposit interest receivable, expenses and interest payable are accounted for on an accruals basis. Where, before recognition of dividend income is due, there is any reasonable doubt that a return will actually be received, for example as a consequence of the investee company lacking distributable reserves, the recognition of the return is deferred until the doubt is removed.
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.
Ordinary dividends are accounted for in the period in which they are declared in accordance with IAS 10. Dividends on the Participating Preference shares had two dividend elements, the fixed net cash cumulative dividend and the participating dividend. The fixed net cash cumulative element accrued evenly on a daily basis throughout the period. The dividend payable on 17 July 2013 has therefore been treated as a charge against revenue for the period to 30 June 2013. 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.
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.
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 consolidated 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.
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.
Participating preference shares
The participating preference shares entitled 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 were 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 were entitled to the payment of a premium of 50p per share. The shares also conferred voting rights in certain circumstances.
Fixed rate preference shares
The Fixed Rate Preference Shares are non-voting, are entitled to receive a cumulative dividend of 0.01p per share per annum, and are entitled to receive their nominal value, 50p, on a distribution of assets or a winding up.
Preference shares are disclosed as non-current liabilities in accordance with IAS 32 (Financial Instruments: Disclosure and Presentation).
The following standards, amendments to existing standards and interpretations relevant to the Group's activities have been published and are mandatory for the Group's accounting periods beginning on or after 1 January 2013 or later periods but the Group has not adopted them early:
New or revised standards
| IFRS 9 | Financial Instruments (effective beginning on or after 1 January 2015) |
| IFRS 10 | Consolidated Financial Statements (effective beginning on or after 1 January 2013) |
| IFRS 11 | Joint Arrangements (effective beginning on or after 1 January 2013) |
| IFRS 12 | Disclosure of Interests in Other Entities (effective beginning on or after 1 January 2013) |
| IFRS 13 | Fair Value Measurement (effective beginning on or after 1 January 2013) |
| IAS 19 | Employee Benefits (effective beginning on or after 1 January 2013) |
| IAS 28 | Investments in Associates and Joint Ventures (effective beginning on or after 1 January 2013) |
Amendments
| IAS 32 | Financial Instruments: Presentation (effective beginning on or after 1 January 2014) |
| IAS 36 | Impairment of Assets (effective beginning on or after 1 January 2014) |
| IAS 39 | Financial Instruments: Recognition and Measurement (effective beginning on or after 1 January 2014) |
New and revised interpretations
| IFRIC21 | Levies (effective beginning on or after 1 January 2014) |
The directors anticipate that the adoption of these standards, amendments to existing standards and interpretations in future periods will have no material financial impact on the financial statements of the Group or the Company.
| 2013 | 2012 | |
| £ | £ | |
| Dividends | 378,479 | 708,981 |
| Interest on portfolio investments | 745,656 | 704,222 |
| Deemed income distributions | - | 13,962 |
| Profit on investments held for trading | 10,391 | (64,304) |
| Other income | 468 | 148 |
| 1,134,994 | 1,363,009 | |
| 2013 | 2012 | |
| £ | £ | |
| Staff costs (see note a) | 212,236 | 188,625 |
| Management expenses: | ||
| Administration fee (see note c) | 138,750 | 111,000 |
| Restructuring costs charged to profit and loss | 191,466 | - |
| Others | 103,574 | 104,265 |
| Fees payable to the Company's auditors: | ||
| - for the audit of the annual accounts of the Group | 23,650 | 24,700 |
| - other services relating to taxation | 5,000 | 5,000 |
| - other assurance services | 32,675 | - |
| 707,351 | 433,590 | |
| (a) Staff costs during the period: | ||
| Salaries and fees (see note b) | 174,796 | 155,200 |
| Social Security costs | 12,251 | 13,928 |
| Pension costs | 25,189 | 19,497 |
| 212,236 | 188,625 | |
| The average number of persons employed by the Company during the period was: | Number | Number |
| Directors | 5 | 5 |
| Staff | 1 | 1 |
Pension commitments
At 30 June 2013 the company had accrued £100,000 (2012:£100,000) towards the purchase of an annuity for a former employee of the Company.
(b) Directors' remuneration
| Directors' remuneration comprised as follows; | 2013 | 2012 |
| £ | £ | |
| Sir David Thomson Bt. | 17,500 | 14,000 |
| Mr. S.J. Cockburn | 72,296 | 64,000 |
| Miss. J.B. Webb | 13,750 | 11,000 |
| Mr. P.S. Allen | 13,750 | 11,000 |
| Mr. P.A. Lovegrove | 17,500 | 14,000 |
| Mr. M H W Perrin | - | - |
| 134,796 | 114,000 | |
During the period, Mr S.J. Cockburn was contracted under a service contract with a remuneration which is in addition to his director's fee of £14,000 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 (2012: £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 shareholder.
| 2013 | 2012 | |
| £ | £ | |
| Arising on revenue items | - | - |
| Arising on capital items | - | - |
| - | - | |
| Factors affecting the tax charge for the period | ||
| The tax assessed for the period is lower than the standard rate of corporation tax in the United Kingdom (24%) | ||
| The differences are explained below: | ||
| Profit on ordinary activities before taxation | 199,185 | 258,174 |
| Tax on profit on ordinary activities at 24% (2012: 26%) | 47,804 | 67,125 |
| Effects of: | ||
| Expenses not deductible for tax purposes | 2,742 | 2,849 |
| Movement in impairment provision not deductible for tax purposes | (11,730) | 70,268 |
| Preference dividends not deductible for tax purposes | 103,812 | 90,904 |
| Dividend income not taxable | (90,835) | (187,964) |
| Realised gains per accounts | (52,827) | (6,785) |
| Utilisation of tax losses | 1,034 | - |
| Unutilised tax losses carried forward | - | (36,397) |
| - | - | |
| Deferred taxation | ||
| No provision has been made for deferred taxation. The potential deferred tax asset at 30 June 2013 not recognised was as follows: | ||
| Short term timing differences | 5,538 | 6,000 |
| Credit on revaluation of investments | (376,783) | (608,783) |
| (371,245) | (602,783) | |
As permitted by section 408 of the Companies Act 2006 the parent undertaking has not presented its own Income Statement in these financial statements. The consolidated return for the period of £199,185 (2012: £258,174) includes a return of £2,607,341 (2012: £309,001) which is dealt with in the accounts of the parent undertaking.
| 2013 | 2012 | |||||
| £ | £ | |||||
| Participating Preference Shares | ||||||
| Fixed entitlement accrued in first half year 3.5p (2012: 3.5p) | Paid 1 Oct 12 | 174,818 | Paid 1 Oct 11 | 174,818 | ||
| Fixed entitlement accrued in second half year 3.5p (2012: 3.5p) | Paid 1 Apr 13 | 174,818 | Payable 1 Apr 12 | 174,818 | ||
| Fixed entitlement accrued up to conversion on 27 June 2013 1.66p | Paid 17 July 2013 | 82,914 | - | |||
| Participating preference dividends accounted as finance costs | 432,550 | 349,636 | ||||
| 2013 | 2012 | |||||
| £ | £ | £ | £ | |||
| Participating Preference Shares | ||||||
| Participating element | Paid 1 Oct 12 | 49,948 | Paid 1 Oct 11 | 49,948 | ||
| Ordinary shares | ||||||
| Prior year final paid 4p (2012: 4p) |
Paid 1 Sept 12 | 74,696 | Paid 1 Sept 11 | 74,696 | ||
| Current period interim paid 2p (2012: 2p) |
Paid 7 Jan 13 | 37,348 | Paid 7 Jan 12 | 37,347 | ||
| Ordinary dividends paid | 112,044 | 112,043 | ||||
| 161,992 | 161,991 | |||||
| The calculation of basic earnings per share is based on the weighted average number of ordinary shares in issue throughout the period, excluding own shares held by the group. As the Company has no options or warrants in issue, basic and diluted return per share are the same. |
|||||||||
| Return per share: | Net Return £ |
2013 Ordinary Shares |
Per Share Pence |
Net Return £ |
2012 Ordinary Shares |
Per Share Pence |
|||
| Revenue | |||||||||
| Return attributable to ordinary shareholders | (119,750) | 1,886,328 | (6.35)p | 452,390 | 1,867,391 | 24.23p | |||
| Capital | |||||||||
| Net investment gains/(losses) after tax | 268,987 | 1,886,328 | 14.26p | (244,164) | 1,867,391 | (13.08)p | |||
| Total | 149,237 | 1,886,328 | 7.91p | 208,226 | 1,867,391 | 11.15p | |||
| 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 | 3,625,069 | 3,617,456 | |||||||
| Weighted average number of Non-voting ordinary shares held by subsidiary | (1,706,241) | (1,717,565) | |||||||
| Non voting ordinary shares held in treasury | (32,500) | (32,500) | |||||||
| 1,886,328 | 1,867,391 | ||||||||
| Group | Company | |||
| 2013 | 2012 | 2013 | 2012 | |
| £ | £ | £ | £ | |
| Valuation at 1 April 2012 | 12,216,646 | 11,721,142 | 12,216,646 | 11,721,142 |
| Unrealised diminution at 1 April 2012 | 856,618 | 447,531 | 953,292 | 544,205 |
| Cost at 1 April 2012 | 13,073,264 | 12,168,673 | 13,169,938 | 12,265,347 |
| Additions | 290,439 | 1,413,611 | 290,439 | 1,413,611 |
| Cost of disposals | (955,193) | (509,020) | (955,192) | (509,020) |
| Cost at 30 June 2013 | 12,408,510 | 13,073,264 | 12,505,185 | 13,169,938 |
| Unrealised appreciation/(diminution) at 30 June 2013 | 390,084 | (856,618) | 293,409 | (953,292) |
| Valuation at 30 June 2013 | 12,798,594 | 12,216,646 | 12,798,594 | 12,216,646 |
| Aggregate value of investments listed on a recognised Stock Exchange | 11,773,385 | 10,845,936 | 11,773,384 | 10,845,936 |
| Other investments at Directors' valuation | 1,025,209 | 1,370,710 | 1,025,210 | 1,370,710 |
| 12,798,594 | 12,216,646 | 12,798,594 | 12,216,646 | |
Fair value estimation: IFRS 7 requires disclosure of fair value measurements by level of the following fair value measurement hierarchy:
Level 1- Quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2 - Inputs other than quoted prices included within level 1 that are observable for the asset either directly (that is, as prices) or indirectly (that is, derived from prices).
Level 3 - Inputs for assets that are not based on observable market data (that is, unobservable inputs)
The table below presents the Group's assets that are measured at fair value:
| at 30 June 2013 | Level 1 | Level 2 | Level 3 | Total |
| £ | £ | £ | £ | |
| Fixed asset investments held by the Company | - | 6,008,774 | 6,789,820 | 12,798,594 |
| Current asset investments held by a trading subsidiary | 122,860 | - | - | 122,860 |
| 122,860 | 6,008,774 | 6,789,820 | 12,921,454 | |
| at 31 March 2012 | Level 1 | Level 2 | Level 3 | Total |
| £ | £ | £ | £ | |
| Fixed asset investments held by the Company | - | 5,588,867 | 6,627,779 | 12,216,646 |
| Current asset investments held by a trading subsidiary | 182,857 | - | - | 182,857 |
| 182,857 | 5,588,867 | 6,627,779 | 12,399,503 | |
Instruments included in Level 2 are reported at the mid bid/offer price less 1%.
...note 9 continued
Where significant inputs are not based on observable market data, the instrument is included in Level 3. There were no transfers between levels during the period (2012: none).
Specific valuation techniques used to value the financial instruments include:
i) Quoted market prices
ii) Other techniques, taking account of independent market opinion, are used to determine the fair value for the remaining financial instruments.
These assets comprise primarily London Stock Exchange equity investments and fixed income securities classified as fixed asset and current asset investments as appropriate.
| Company | ||
| 2013 | 2012 | |
| £ | £ | |
| At cost | 5,410,552 | 5,410,552 |
| Provision for diminution in value | (4,547,896) | - |
| At cost | 862,656 | 5,410,552 |
Subsidiaries
At 30 June 2013 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 30 June 2013 | Profit/(Loss) in period to 30 June 2013 | |
| Abport Limited | England | 100% | 100% | Investment dealing company | (529,706) | 11,768 |
| New Centurion Trust Limited | England | 100% | 100% | Investment company | 859,811 | (2,415,228) |
During the period to 30 June 2013, the 1,717,565 Ordinary Shares in the Company held by New Centurion Trust Limited were converted into Fixed Rate Preference shares of 50p each in the Company. Pursuant to this New Centurion Trust Limited made a provision for a diminution in value of its holding its Parent Company, previously valued at the pro-rata Net Asset Value of the Investment Company, so as to value the Fixed Rate Preference shares at their 50p capital entitlement each. This provision amounted to £4,568,036.
In addition, during the period to 30 June 2013, New Centurion Trust Limited forgave the intercompany debt due to it by The Investment Company plc, amounting to £2,413,067.
Following these two adjustments, the net assets of New Centurion Trust were materially reduced and accordingly a provision for diminution in value was made in the capital reserve of the parent company.
The forgiveness of intercompany debt by the subsidiary gave rise to a matching gain in the income statement of the parent company.
| Group assets per balance sheet as at 30 June 2013 |
Loans and receivables | Assets at fair value through profit and loss | Available for sale | Total |
| £ | £ | £ | £ | |
| Available for sale | - | - | 12,798,594 | 12,798,594 |
| Trade and other receivables | 1,393,916 | - | - | 1,393,916 |
| Other financial assets at fair value through profit and loss | - | 122,860 | - | 122,860 |
| Cash and cash equivalents | 3,138,062 | - | - | 3,138,062 |
| Total | 4,531,978 | 122,860 | 12,798,594 | 17,453,432 |
...note 11 continued
| Group liabilities per balance sheet as at 30 June 2013 |
Liabilities at fair value through profit and loss | Other financial liabilities | Total | |
| £ | £ | £ | ||
| Trade and other payables | - | 401,634 | 401,634 | |
| Dividends payable | - | 82,914 | 82,914 | |
| Borrowings | - | 731,400 | 731,400 | |
| Total | - | 1,215,948 | 1,215,948 | |
| Group assets as per balance sheet as at 31 March 2012 |
Loans and receivables | Assets at fair value through profit and loss | Available for sale | Total |
| £ | £ | £ | £ | |
| Available for sale | - | - | 12,216,646 | 12,216,646 |
| Trade and other receivables | 214,896 | - | - | 214,896 |
| Other financial assets at fair value through the profit and loss | - | 182,857 | - | 182,857 |
| Cash and cash equivalents | 284,517 | - | - | 284,517 |
| Total | 499,413 | 182,857 | 12,216,646 | 12,898,916 |
| Group liabilities as per balance sheet as at 31 March 2012 |
Liabilities at fair value through profit and loss |
Other financial liabilities | Total | |
| £ | £ | £ | ||
| Trade and other payables | - | 231,974 | 231,974 | |
| Dividends payable | - | 174,818 | 174,818 | |
| Borrowings | - | 4,094,503 | 4,094,503 | |
| Total | - | 4,501,295 | 4,501,295 | |
| Group | Company | |||
| 2013 | 2012 | 2013 | 2012 | |
| £ | £ | £ | £ | |
| Amount due from Abport Limited | - | - | 82,306 | 154,221 |
| Share capital subscriptions received after period end | 1,195,345 | - | 1,195,345 | - |
| Trade and other receivables | 198,571 | 214,896 | 198,569 | 214,896 |
| 1,393,916 | 214,896 | 1,476,220 | 369,117 | |
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.
Investments held as current assets are shown at fair value through profit or loss of £122,860 (2012: £182,857). If they had been shown at cost they would have been carried at £291,898 (2012: £342,945).
| Group | Company | |||
| 2013 | 2012 | 2013 | 2012 | |
| £ | £ | £ | £ | |
| Reconstruction costs accrued | 186,656 | - | 186,656 | - |
| Other trade payables | 214,978 | 231,974 | 210,692 | 227,988 |
| 401,634 | 231,974 | 397,348 | 227,988 | |
These payables are unsecured and non-interest bearing. Other trade payables principally comprise amounts outstanding for operating expenses. Of the other trade payables, £100,000 (2012: £100,000) is an accrual for a pension contribution; the remaining other trade payables are due for payment within 30 days.
| Group | Company | |||
| 2013 | 2012 | 2013 | 2012 | |
| £ | £ | £ | £ | |
| Bank overdraft | - | 500,000 | - | 500,000 |
| 5% loan notes maturing 2013/2015 | 731,400 | 1,097,100 | 731,400 | 1,097,100 |
| Participating preference shares | - | 2,497,403 | - | 2,497,403 |
| Fixed rate preference shares | - | - | 858,783 | - |
| 731,400 | 4,094,503 | 1,590,183 | 4,094,503 | |
An overdraft facility is available to the company of up to £500,000, to be secured by an omnibus charge over a portfolio of shares with a valuation of £1,250,000. At 30 June 2013 no overdraft was outstanding.
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 are being redeemed by the Company at par as to 50% of their aggregate original principal amount on the fifth anniversary of the completion date, which was 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 | ||
| 2013 | 2012 | 2013 | 2012 | |
| £ | £ | £ | £ | |
| In not more than one year | 365,700 | 365,700 | 365,700 | 365,700 |
| In more than one year but not more than two years | 365,700 | 365,700 | 365,700 | 365,700 |
| In more than two years but not more than five years | - | 365,700 | - | 365,700 |
| 731,400 | 1,097,100 | 731,400 | 1,097,100 | |
The Participating Preference Shares of 50p each are analysed as to:
| Group and Company | ||||
| 2013 | 2012 | |||
| Allotted, issued and fully paid | No. | £ | No. | £ |
| At 1 April 2012 | 4,994,805 | 2,497,403 | 4,994,805 | 2,497,403 |
| Conversion into Ordinary shares | (4,994,805) | (2,497,403) | - | - |
| At 30 June 2013 | - | - | 4,994,805 | 2,497,403 |
...note 15 continued
The Fixed Rate Preference Shares of 50p each are analysed as to:
| Group and Company | ||||
| 2013 | 2012 | |||
| Allotted, issued and fully paid | No. | £ | No. | £ |
| At 1 April 2012 | - | - | - | - |
| Conversion of Non-voting Ordinary shares | 1,717,565 | 858,783 | - | - |
| At 30 June 2013 | 1,717,565 | 858,783 | - | - |
The Fixed rate preference shares, all of which are held by New Centurion Trust Limited, a wholly owned subsidiary of the Company, are non-voting, are entitled to receive a cumulative dividend of 0.01p per share per annum, and are entitled to receive their nominal value, 50p, on a distribution of assets or a winding up.
The directors do not consider the fair values of the group's financial instruments to be significantly different from the carrying values.
| Group and Company | ||||
| 2013 | 2012 | |||
| Allotted, issued and fully paid | No. | £ | No. | £ |
| Ordinary shares of 50p each | ||||
| At 1 April 2012 | 1,899,891 | 949,946 | 1,899,891 | 949,946 |
| Issued pursuant to conversion of Participating Preference Shares | 1,547,665 | 773,833 | - | - |
| Issued pursuant to a placing | 1,324,493 | 662,246 | - | - |
| At 30 June 2013 | 4,772,049 | 2,386,025 | 1,899,891 | 949,946 |
| Non-voting shares of 50p each | ||||
| Non-voting shares held by New Centurion Trust at 1 April 2012 |
1,717,565 | 858,782 | 1,717,565 | 858,782 |
| Converted into Fixed rate preference shares | (1,717,565) | (858,782) | - | - |
| At 30 June 2013 | - | - | 1,717,565 | 858,782 |
| 2,386,025 | 1,808,728 | |||
In addition to the above Ordinary shares, the issued capital of the Company includes 1,717,565 Fixed Rate Preference shares of 50p each. Details of these preference shares in the Company are set out in note 15.
The Ordinary Shares entitle the holders to receive all ordinary dividends and all remaining assets on a winding up, after the Fixed rate Preference Shares have been satisfied in full.
The Company holds 32,500 Ordinary shares in the Company. These shares are held in treasury and have been re-designated non-voting.
| Group | Company | |||
| 2013 | 2012 | 2013 | 2012 | |
| £ | £ | £ | £ | |
| Share premium | ||||
| Balance at 1 April 2012 | 1,019,246 | 1,019,246 | 1,019,246 | 1,019,246 |
| Issue of new Ordinary Shares | 3,682,753 | - | 3,682,753 | - |
| Costs of transaction | (237,556) | - | (237,556) | - |
| Balance at 30 June 2013 | 4,464,443 | 1,019,246 | 4,464,443 | 1,019,246 |
| Own Shares Held | ||||
| Balance at 1 April 2012 | (2,919,861) | (2,919,861) | - | - |
| Conversion of Non-voting Ordinary Shares into Fixed Rate Preference Shares | 2,919,861 | - | - | - |
| Balance at 30 June 2013 | - | (2,919,861) | - | - |
| Capital redemption reserve | ||||
| Balance at 1 April 2012 | 685,250 | 685,250 | 685,250 | 685,250 |
| Cancellation of deferred shares arising from conversion of Preference shares into Ordinary shares | 1,723,570 | - | 1,723,570 | - |
| Balance at 30 June 2013 | 2,408,820 | 685,250 | 2,408,820 | 685,250 |
| Revaluation reserve | ||||
| Balance at 1 April 2012 | 2,313,745 | 2,452,571 | 2,343,247 | 2,466,071 |
| Unrealised revaluation of investments | 1,197,824 | (138,826) | 1,193,126 | (122,824) |
| Balance at 30 June 2013 | 3,511,569 | 2,313,745 | 3,536,373 | 2,343,247 |
| Capital reserve | ||||
| Balance at 1 April 2012 | 4,806,064 | 5,050,228 | 4,717,960 | 4,980,161 |
| Realised gains | 220,111 | 26,097 | 220,111 | 24,062 |
| Impairment provisions | 48,876 | (270,261) | 53,575 | (286,263) |
| Conversion of Non-voting Ordinary Shares into Fixed Rate Preference Shares | (2,061,079) | - | - | - |
| Provision for diminution in value of investment in subsidiary undertaking | - | - | (4,547,896) | - |
| Balance at 30 June 2013 | 3,013,972 | 4,806,064 | 443,750 | 4,717,960 |
| Revenue account | ||||
| Balance at 1 April 2012 | 684,449 | 344,102 | 791,006 | 381,795 |
| Retained return for the period | (231,794) | 340,347 | 2,171,663 | 409,211 |
| Balance at 30 June 2013 | 452,655 | 684,449 | 2,962,669 | 791,006 |
...note 17 continued
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 were 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.
| Group | Company | |||
| 2013 | 2012 | 2013 | 2012 | |
| £ | £ | £ | £ | |
| Return for the financial period | 199,185 | 258,174 | 2,607,341 | 309,001 |
| Dividends | (161,992) | (161,991) | (161,992) | (161,991) |
| 37,193 | 96,183 | 2,445,349 | 147,010 | |
| Other recognised gains and losses relating to the period | 1,197,824 | (138,826) | 1,193,126 | (122,824) |
| Conversion of Preference Shares into Ordinary Shares | 2,497,403 | - | 2,497,403 | - |
| Issue of new Ordinary Shares | 4,107,443 | - | 4,107,443 | - |
| Non-voting shares converted into fixed rate preference shares | - | - | (858,782) | - |
| Provision for diminution in value of investment in subsidiary undertaking | - | - | (4,547,896) | - |
| Net increase in shareholders' funds | 7,839,863 | (42,643) | 4,836,643 | 24,186 |
| Opening shareholders' funds | 8,397,621 | 8,440,264 | 11,365,437 | 11,341,251 |
| Closing shareholders' funds | 16,237,484 | 8,397,621 | 16,202,080 | 11,365,437 |
| Attributable on a winding up to: | ||||
| Premium payable to Participating Preference shareholders | - | 2,497,403 | - | 2,497,403 |
| Ordinary shareholders | 16,237,484 | 5,900,218 | 16,202,080 | 8,868,034 |
| 16,237,484 | 8,397,621 | 16,202,080 | 11,365,437 | |
...note 18 continued
A reconciliation of the Consolidated balance sheet and the Company's balance sheet is as follows:
| 2013 | 2012 | |
| £ | £ | |
| Consolidated balance sheet net assets | 16,237,484 | 8,397,621 |
| Cost of non-voting ordinary shares of the Company held by New Centurion Trust Limited | 2,919,861 | 2,919,861 |
| Less: impact of conversion of non-voting ordinary shares into Fixed Rate Preference Shares | (858,783) | - |
| 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 |
| Provision for diminution in value of investment in subsidiary undertaking | (4,547,896) | - |
| Adjustments for post acquisition trading of subsidiaries | 2,096,535 | (306,924) |
| Company balance sheet net assets | 16,202,080 | 11,365,437 |
| The net asset value per ordinary share is calculated as follows: | 2013 | 2012 |
| £ | £ | |
| Net assets at 30 June 2013 | 16,237,484 | 8,397,621 |
| Less premium attributable to Participating Preference Shareholders | - | (2,497,403) |
| Net assets attributable to ordinary shareholders | 16,237,484 | 5,900,218 |
| Ordinary shares in issue, excluding own shares held | 4,379,549 | 1,867,391 |
| Net asset value per ordinary share | 342.60p | 315.96p |
The underlying investments of New Centurion Trust Limited comprise Fixed Rate Preference Shares in The Investment Company plc and, being effectively eliminated on consolidation, the valuation thereof does not impact the net asset value attributable to ordinary shareholders.
The Company has no ultimate controlling party.
During the fifteen month period the Company was charged administration fees of £138,750 (year to 31 March 2012: £111,000) by Ionian Investment Management which is a division of Fiske plc. At 30 June 2013 there were no balances outstanding (2012: £nil). Mr S.J. Cockburn is interested as a director and substantial shareholder in Fiske plc.
Available for sale investments include a holding of nil Ordinary 25p shares in Fiske plc (2012: 1,106,000 shares valued at £640,540).
Directors' fees and salaries are set out note 3.
During the period, the Directors each received dividends attributable to their respective shareholdings, as disclosed in the Directors' Report, amounting to 6p (2012: 6p) per ordinary share and 8p (2012: 8p) per Preference share. The Directors consider there to be no key management personnel other than the Directors.
There were no contingent liabilities at 30 June 2013.
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 | 2013 | 2012 |
| £ | £ | |
| Listed Investments | 11,773,385 | 10,845,936 |
| Unlisted Investments | 1,025,209 | 1,370,710 |
| 12,798,594 | 12,216,646 | |
Current asset investments
The group holds current asset investments with a market value of £210,208 (2012: £266,251) at the period 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 £646,073 (2012: £619,975), being 14p (2012: 33p) 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.
...note 23 continued
Capital structure and management
The capital structure of the Group consists of cash held on deposit, loan notes and Ordinary Shares.
| 2013 | 2012 | |
| £ | £ | |
| Cash and bank balances | 3,138,062 | 284,517 |
| Bank overdraft | - | (500,000) |
| Interest bearing liabilities | (731,400) | (1,097,100) |
| Net cash/(debt) | 2,406,662 | (1,312,583) |
| Participating preference shares | - | (2,497,403) |
| Net cash/(debt and preference shares) | 2,406,662 | (3,809,986) |
| Ordinary Shareholders' funds | 16,230,484 | 8,397,621 |
| Gearing (net debt/ordinary shareholders' funds) | nil | 45.4% |
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.
Twenty Largest Investments
At 30 June 2013
| Stock | Number | % Issue |
Book Cost £ |
Market or Directors' Valuation £ |
% of total portfolio |
|
| 1. | Lloyds Banking Group | |||||
| 7.8673% ECN 17/12/19 (LBG Capital) | 500,000 | 0.15% | 167,613 | 503,415 | ||
| 7.5884% ECN 12/05/20 (LBG Capital) | 1,750,000 | 0.24% | 795,219 | 1,736,745 | ||
| 9.125% ECN 15/07/20 (LBG Capital) | 100,000 | 0.03% | 89,224 | 106,920 | ||
| 14.5% ECN 30/01/22 (LBG Capital) | 300,000 | 0.38% | 246,247 | 400,950 | ||
| 7.975% ECN 15/09/24 (LBG Capital) | 920,000 | 0.90% | 548,906 | 926,739 | ||
| 7.281% Perpetual (Bank of Scotland) | 400,000 | 0.27% | 315,331 | 390,555 | ||
| 2,162,540 | 4,065,324 | 31.76% | ||||
| 2. | Phoenix Life Ltd | |||||
| 7.25% perp notes | 1,060,000 | 0.53% | 811,923 | 947,084 | 7.40% | |
| 3. | Royal Bank of Scotland | |||||
| 9% series 'A' non-cum pref (NatWest) | 500,000 | 0.36% | 362,920 | 556,875 | ||
| SPON ADR each rep Pref C (NatWest) | 20,000 | 1.67% | 55,473 | 327,096 | ||
| 418,393 | 883,971 | 6.91% | ||||
| 4. | Skipton Building Society | |||||
| 1.544% FRNs 18/01/18 | 500,000 | 1.00% | 394,948 | 366,300 | ||
| 10% Notes 12/12/18 | 400,000 | 0.53% | 368,569 | 407,880 | ||
| 763,517 | 774,180 | 6.05% | ||||
| 5. | Anpario | |||||
| ordinary 23p § | 300,000 | 1.64% | 422,146 | 521,235 | 4.07% | |
| 6. | Fishguard & Rosslare | |||||
| 3½% gtd preference stock | £790,999 | 63.91% | 441,810 | 512,923 | 4.01% | |
| 7. | Newcastle Building Society | |||||
| 6.25% sub notes 23/12/19 | £600,000 | 2.40% | 405,438 | 470,448 | 3.68% | |
| 8. | REA Holdings | |||||
| 9.5% Gtd Notes 31/12/17 | 300,000 | 2.00% | 298,254 | 311,850 | ||
| 7.5% Dollar Notes 30/06/17 | 150,000 | 0.44% | 76,740 | 98,753 | ||
| 374,994 | 410,603 | 3.21% | ||||
| 9. | Amalgamated Metal | |||||
| 5.4% cum pref £1 † | 256,065 | 18.22% | 144,049 | 192,049 | ||
| 6% cum pref £1 † | 213,510 | 23.72% | 103,844 | 179,348 | ||
| 247,893 | 371,397 | 2.90% | ||||
| 10. | Investec Investment Trust | |||||
| 3.5% cum pref £1 | 461,508 | 35.50% | 297,672 | 276,420 | ||
| 5% cum pref £1 | 104,043 | 30.12% | 79,593 | 78,797 | ||
| 377,265 | 355,217 | 2.78% | ||||
| 11. | The Liberty Group | |||||
| Liberty Ltd: 6% cum pref £1 | 250,225 | 64.99% | 107,446 | 107,759 | ||
| Liberty Retail Ltd: 9.5% cum pref £1 † | 199,708 | 78.59% | 146,996 | 199,708 | ||
| 254,442 | 307,467 | 2.40% | ||||
| 12. | S&U | |||||
| 31.5% preference shares 12.5p | 489,192 | 13.59% | 266,283 | 256,679 | ||
| 6% cum pref £1 | 67,850 | 33.93% | 56,198 | 50,043 | ||
| 322,481 | 306,722 | 2.40% | ||||
| 13. | Chesnara | |||||
| ordinary 5p § | 110,000 | 0.11% | 112,801 | 272,250 | 2.13% | |
| 14. | Bristol Water | |||||
| 4% cons deb irrd stock £1 | 360,118 | 25.63% | 209,705 | 240,649 | 1.88% | |
| 15. | Arbuthnot Banking Group | |||||
| ordinary 1p § | 25,000 | 0.17% | 102,688 | 224,606 | 1.75% | |
| 16. | Northgate | |||||
| 5% cum pref 50p | 532,763 | 53.28% | 188,350 | 208,337 | 1.63% | |
| 17. | Morgan Crucible | |||||
| 5% 2nd cum pref £1 | 169,500 | 54.33% | 130,428 | 130,049 | ||
| 5.5% 1st cum pref £1 | 94,000 | 75.00% | 77,822 | 76,775 | ||
| 208,250 | 206,824 | 1.62% | ||||
| 18. | Renold | |||||
| 6% cum pref £1 | 422,109 | 72.72% | 330,490 | 173,423 | 1.36% | |
| 19. | Whitnash | |||||
| 5% cum pref £1† | 329,603 | 65.92% | 81,843 | 148,321 | 1.16% | |
| 20. | Associated British Engineering | |||||
| ordinary 2.5p § | 100,000 | 4.88% | 120,000 | 118,800 | 0.93% | |
| 8,356,969 | 11,519,781 | 90.01% |
§ Issues with unrestricted voting rights
† Unquoted investments at Directors' valuation
The Group has a total of 84 portfolio investment holdings in 71 companies.
This information is provided by RNS
The company news service from the London Stock Exchange
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