Interim / Quarterly Report • Dec 31, 2014
Interim / Quarterly Report
Open in ViewerOpens in native device viewer
FOUNDED 1868
REGISTERED No. 4205 ENGLAND AND WALES Half-Yearly Report
for the six month period ended 31 December 2014
The Company's investment objective is to provide shareholders with an attractive level of dividends coupled with capital growth over the long term, through investment in a portfolio of equities, preference shares, loan stocks, debentures and convertibles.
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 can also make investments in preference shares, loan stocks, debentures, convertibles and related instruments of quoted UK companies.
Portfolio risk is mitigated by investing in a diversified spread of investments. Investments in any one company shall not, at the time of acquisition, exceed 15% of the value of the Company's investment portfolio. In the long term, it is expected that the Company's investments will generally be a portfolio of between 40 and 60 securities, most of which will represent individually no more than 3% of the value of the Company's total investment portfolio, as at the time of acquisition.
The Company may invest in unquoted companies from time to time subject to prior Board approval.
Investments in unquoted companies in aggregate will not exceed 5% of the value of the Company's investment portfolio as at the time of investment.
The Company may use gearing, including bank borrowings and the use of derivative instruments such as contracts for differences. The Company may borrow up to 15% of net asset value ("NAV").
The Manager uses a bottom-up investment approach for the portfolio, with a diversified portfolio of securities of various market capitalisation sizes. There is a bias towards dividend paying smaller companies.
The investment approach can be described as active and universal, as the Company does not seek to replicate any benchmark. Potential investments are assessed against the key criteria including, inter alia, their yield, growth prospects, market positions, calibre of management and risk and cash resources.
A copy of the complete investment policy can be found in the Company's Annual Report and Accounts for the year ended 30 June 2014.
The Company has sought to maintain an annualised dividend yield of 6% of NAV (based on the opening NAV at the start of each financial year). It is intended that dividends of roughly equal size will be paid quarterly. This income will be paid out of revenue and/or capital, as available.
A modification to the dividend policy for future financial years is explained in the Chairman's Statement on page 5.
As at 31 December 2014 and the date of this report, the Company has in issue 4,772,049 ordinary shares of 50p each, of which 32,500 shares were held in Treasury.
continued
The Group had total assets of £18.4 million and a NAV of 388.1p per ordinary share at 31 December 2014.
Further detail is available from www.mitongroup.com/tic.
Miton believes that able fund managers are better placed to deliver for clients if they have wide ranging flexibility. Limiting the investment universe to a short list of benchmark stocks can be demotivating since the risk/reward ratio of the portfolio could be constrained unnecessarily. The best managers can take advantage of this wider flexibility better to moderate portfolio risk, as well as enhancing their clients' returns through selecting the best from a wider range of potential investments.
In addition, Miton also places great emphasis on its fund managers doing their own analysis since it believes this ensures that they have greater conviction in subsequent investment decisions, and are less vulnerable to becoming panicky sellers when a share price moves adversely.
Miton has a team of five fund managers researching the full universe of quoted UK stocks. These include George Godber and Georgina Hamilton, who principally seek stocks which are intrinsically cheap with regard to their tangible assets or where the scale of the underlying cashflow is underappreciated. Eric Moore principally concentrates on identifying mid and larger companies which have the best opportunities to grow their dividends over time.
The day-to-day management of the portfolio is carried out by Gervais Williams and Martin Turner, who research all quoted companies, but have a particular focus on many of the smaller quoted stocks.
Gervais joined Miton in March 2011 as Managing Director of the Miton Group. He has been an equity portfolio manager since 1985, including 17 years as Head of UK Smaller Companies and Irish Equities at Gartmore. He won the Grant Thornton Investor of the Year Award in 2009 and 2010, and was recently awarded Fund Manager of the Year 2014 by What Investment?
continued
Martin joined Miton in May 2011. Martin and Gervais have had a close working relationship since 2004, and their complementary expertise and skills led to a series of successful companies being backed. Martin qualified as a Chartered Accountant with Arthur Andersen, and also has extensive experience at Rothschild, Merrill Lynch and Collins Stewart, where as Head of Small/Mid Cap Equities his role covered their research, sales and trading activities.
In order to comply with the Alternative Investment Fund Managers' Directive ("AIFMD"), the Company's previous investment management agreement with Miton Asset Management Limited was terminated, and the Company appointed PSigma Unit Trust Managers Limited as its Alternative Investment Fund Manager ("AIFM") with effect from 22 July 2014. Miton Asset Management Limited has been appointed by the AIFM as investment manager to the Company pursuant to a delegation agreement. Subsequent to this appointment, PSigma Unit Trust Managers has changed its name to Miton Trust Managers Limited. There has been no change to the fee structure or the portfolio management arrangements as a result of these changes.
| At | At | ||
|---|---|---|---|
| 31 December 2014 | 30 June 2014 | ||
| (unaudited) | (audited) | Change | |
| Equity shareholders' funds | 18,393,924 | 18,693,293 | (1.6)% |
| Number of ordinary shares in issue* | 4,739,549 | 4,739,549 | |
| Net asset value per ordinary share | 388.09p | 394.41p | (1.6)% |
| Ordinary share price (mid) | 395.00p | 406.00p | (2.7)% |
| Premium to net asset value | 1.78% | 2.94% |
* Excluding shares held in treasury.
| 6 months to | 12 months to | ||
|---|---|---|---|
| 31 December 2014 | 30 June 2014 | ||
| (unaudited) | (audited) | ||
| Total return per ordinary share** | 4.66p | 67.03p | |
| Return after taxation per ordinary share | 4.66p | 91.02p | |
| Dividends paid per ordinary share | 11.00p | 20.72p |
* Excluding 32,500 ordinary shares held in treasury.
** The total return per ordinary share is based on total comprehensive income as detailed in the Consolidated Statement of Comprehensive Income.
| February | Payment of second interim dividend for the year ending 30 June 2015. |
|---|---|
| Announcement of Half-Yearly Financial Report. | |
| May | Payment of third interim dividend for the year ending 30 June 2015. |
| August | Payment of fourth interim dividend for the year ending 30 June 2015. |
| September/October | Announcement of Annual Results. |
| November | Payment of first interim dividend for the year ending 30 June 2016. |
| December | Annual General Meeting. |
This report covers the six month period ended 31 December 2014.
Although markets have been volatile, the characteristics of the portfolio mean that the Company has remained relatively steady.
Bond market prices rose as deflationary pressures came through. The FTSE Actuaries Government UK Gilts All Stocks Securities Index rose 8.4% in the half year. The portfolio has many fixed income investments issued by small and larger corporates, and it is anticipated that (after a time lag) their prices will also reflect a good part of this rise too. Equity markets were unsettled, with the FTSE All-Share Index gyrating and finishing the period down 1.9%. Generally, trading conditions for our investee companies remained good and therefore, it is expected that their premium dividends will be increased in many cases, or at least otherwise maintained.
Two interim dividends of 5.5p each have been declared for the half year period, an increase of 0.5p each on the previous half year. However, the NAV of the Company has fallen 1.6% in the six month period.
I recently indicated that the Board was actively considering modifying the dividend policy of the Company so that the dividend payable might grow more sustainably over the longer term.
Following the capital reconstruction at the end of June 2013, your Board commenced paying dividends through the year amounting to 6% of the NAV. In accordance with that policy, in respect of the year to 30 June 2015, it is the Directors' intention to pay dividends totalling 23.6p based on a NAV at 30 June 2014 of 394.4p.
For future financial years the Board believes that the dividend policy should be modified to increase the likelihood that the Company can pay a sustainable and growing dividend. The Board notes that interest rates remain low, and are likely to remain lower for longer than was foreseen at the time of the reorganisation. This has implications for the level of risk that might have to be taken to maintain the current level of dividend.
The current policy explicitly links the dividend payment to the capital value of the portfolio at the beginning of a financial period. There is concern that this may lead to the dividends paid conflicting with the Company's longer-term success.
For the year to 30 June 2016 therefore, it is the Directors' present intention to pay a reduced total dividend of 20.72p, equal to that paid in the year to 30 June 2014. Thereafter, the Directors will seek to grow the dividend from this level at a rate that is sustainable. This dividend may be paid out of revenue and/or capital. As with the current policy, it remains the Board's intention that the modified dividend policy will lead to our dividend yield remaining ahead of many competitor funds.
continued
At our AGM, shareholders approved a resolution for the Company to issue further equity at NAV (or at a higher price) so it can grow over time. As yet, the Board has not approved the issue of any additional shares, as extra capital will only be taken when sufficient investments with attractive prospects are available. The Managers inform us that there has been an increase in the issuance of attractive convertible loan stocks by smaller quoted companies since the half year, so the Board may approve the issue of new shares in the second half of the year. Increasing the scale of the Company defrays the fixed costs of running the Company over a wider number of shares, which reduces cost on a per share basis. In addition, it is expected the extra shares will increase liquidity in the Company's shares traded on the Stock Exchange.
Worldwide growth expectations moderated significantly over the period, as underlined by the major reduction in various commodity prices. The Board believes the Company's strategy is well placed to prosper as smaller and microcap stocks have extra growth potential, which is particularly important at times of economic stagnation. Prior to the credit boom, smaller UK quoted companies outperformed for decades.
Sir David Thomson Chairman
27 February 2015
World growth prospects have declined over the six month period, and the change in expectations has led to a pronounced decline in many commodity prices. The consequent reduction in inflationary pressures has caused the fixed yields on bonds to become more attractive to investors, and most mainstream bond markets have enjoyed some good appreciation. The FTSE Actuaries Government UK Gilts All Stocks Securities Index rose 8.4% in the half year.
Equity markets were rather more unsettled, with the FTSE All-Share Index gyrating over recent months and finishing the period down 1.9%. After some substantial outperformance in previous periods, the FTSE Smaller Companies Index (excluding investment companies) fell 4.1% and the FTSE AIM All-Share Index fell 10.6% in the six months to December 2014.
The portfolio remains heavily invested in a range of preference shares, loan stocks, debentures and notes. Although the largest corporate exposure in the portfolio is to Phoenix Life through a 7.25% perpetual note, there are over 40 issuers from different corporates in the portfolio. It is difficult to purchase more of these issues because there are almost no significant sellers in the market given their obvious yield attractions. On occasion, we find that our issues are redeemed, normally at a premium to their market prices, as happened in the case of the Braime preference shares during the period.
The portfolio also holds a number of equities that are mainly smaller quoted companies that are paying high dividend yields. Small companies tend to have greater growth potential, which we believe will become rather more important to investors now that world growth has stalled. As yet, most institutions have little capital invested in smaller companies which are, by their nature, naturally diminutive in scale and under-researched. Yet, prior to the credit boom, institutional portfolios were fully weighted in smaller companies, given that their key advantage is that as a group they can grow even at a time of economic austerity. We believe that institutional weightings in the smallest stocks will therefore be gradually rebuilt over the coming years.
We anticipate that there will be growing interest in funding smaller companies, often via the issue of new convertible loan stocks and convertible preference shares. These instruments offer the new investor a regular income at a premium yield, along with the right to convert into the quoted shares if the relevant share price appreciates significantly. Whilst such issues have been relatively rare over recent years, they were more popular prior to the credit boom, and we are now regularly reviewing an increasing number of such issues again. In the period, we did not find any that we believed had sufficiently attractive risk/reward ratios, but there are indications that there might be some that do meet our criteria issued in the second half of this year.
There are five criteria that the managers use to determine the scope for the business to deliver good and growing dividends in the longer term.
The prospect of turnover growth – If a business is to sustain and grow its dividend, then the portfolio needs to invest in companies that will generate more cash in the coming years. Without decent turnover growth, this is near-impossible to achieve over time.
continued
Sustained or improving margins – A business needs to deliver significant value to its customer base if it is to sustain decent margins. Unexpected cost increases cannot be charged on to customers if they are anything less than delighted with their suppliers. Turnover growth will not lead to improved cash generation if declining margins offset it.
A forward-looking management team – Businesses often need to make commercial decisions on incomplete information. A thoughtful and forward-looking team has a better chance of making better decisions.
Robust balance sheet – There are disproportionate advantages to having the independence of a strong balance sheet in a period of elevated economic and political risks. Conversely, corporates with imprudent borrowings can risk the total loss of shareholders' capital.
Low expectation valuation – Many of the most exciting stocks enjoy higher stock market valuations but almost none can consistently beat the high expectations baked into their share prices. Those with low expectations tend to be less vulnerable to disappointment, but conversely can enjoy excellent share price rises if they surprise on the upside.
Companies that meet these criteria on a prospective basis are believed to be best positioned to deliver attractive returns to shareholders, as well as offering moderated risk.
These criteria, used in reverse, can also be useful in determining the timing of portfolio holdings that should be considered for divestment. So for example, a business in danger of suffering turnover declines, would naturally be expected to generate less cash flow in future years and thereby struggle to sustain a good dividend payment over time, let alone grow it. Clearly, these decisions need to be taken in conjunction with consideration of their market prices at the time.
Over the half year, the portfolio of fixed income stocks slightly improved, though the fact that the Lloyds Banking Group Enhanced Capital Notes were being bought in at the start of the period meant these prices were already at relatively demanding levels. The share prices of Gable Holdings, an insurance underwriter, and Esure, a motor insurance company, both fell back in the six month period. In addition, Bagir Group, a company that produces suits and jackets, and DX Group, a distribution business, also underperformed. In contrast, there was strong performance from Seeing Machines, as it announced several new partners for their technology, and the holding was sold at these elevated levels. Shoe Zone also performed well, and Friends Life agreed to be acquired by Aviva at a significant premium. The NAV of the Company fell 1.6% in the six month period, with the appreciation of some holdings being more than offset by the falls of some others.
None of the holdings in the portfolio are directly involved in the oil or mining sectors, where trading conditions are expected to be the most adverse. In addition, the Company purchased a Put option on the FTSE 100 Index towards the end of the period, which covers approximately one-third of the value of the Company's assets. This Put option extends for the period through to March 2016. With an exercise level of 5,800, this would rise in value if the mainstream equity markets were to suffer a significant setback.
continued
Although we are in a low growth environment, we believe there are still encouraging prospects for further income growth from many of the equities in the portfolio. In addition, the very low yields offered by most Government Bonds should lead to the prices of both high yielding fixed income securities and higher yielding equities stepping up in market price over time.
So whilst it is anticipated that the economic headwinds could inhibit the appreciation of markets generally, we are hopeful that a portfolio of mainly smaller businesses with premium income instruments or premium growth equities will buck the wider trend, especially with a part of the downside risk moderated via the Put option. We believe the outlook for the Company is favourable.
On 5 September 2014, the Company invested around 1.2% of the portfolio, at that date, to purchase some downside protection, covering approximately one-third of the portfolio. Our view is that an option like this should only be purchased when its cost appears modest by historical standards. This tends to occur after markets have appreciated for some years, and at times when confidence in further appreciation is at a cyclical high.
The key advantage for shareholders of holding a Put option is that, should markets suffer a significant setback, then the market value of the Put option tends to rise. In part this is proportional to the scale of the market setback, and in part it is related to the duration of the remaining term of the option. It is possible that the market value of the option might be a multiple of its initial cost at such a time. The advantage for shareholders is that the option could then be sold to bring in additional capital in the Company at a time when share prices were depressed. This could be used to buy additional income stocks, at a time when their prices were abnormally low, on hopefully more attractive dividend yields. The effect would be to boost the dividend income generated by the Company, as well as increasing the portfolio's ability to participate in any subsequent market recovery.
The advantage of a FTSE 100 Put option is that it is regularly traded, so the weekly NAV fully reflects the market value of the option. In addition, being a popular instrument, the cost of a FTSE 100 Put option is much lower than a specialist instrument covering other indices such as the FTSE All-Share or the FTSE SmallCap Indices. Furthermore, at times of market distress when the option might want to be sold, market volume in the FTSE 100 Put option tends to be better than other more obscure instruments.
However, despite the unsettled market conditions, we need to appreciate that it is unusual for the FTSE 100 Index to fall back precipitously. That explains why Put options should only be purchased when the cost is relatively modest. In our case, the running cost is only 0.07% or so each month over the period to March 2016, should markets remain resilient.
Miton Asset Management Limited
27 February 2015
At 31 December 2014
| Stock | Number | Issue | Book cost |
Market or Directors' valuation |
% of total portfolio |
|---|---|---|---|---|---|
| 1. Lloyds Banking Group | % | £ | £ | ||
| 7.625% Perpetual (LBG Capital) | 478,000 | 0.16 | 204,360 | 476,757 | |
| 7.875% Perpetual (LBG Capital) | 362,000 | 0.05 | 245,997 | 366,561 | |
| 7.5884% ECN 12/05/20 (LBG Capital) | 300,000 | 0.04 | 136,323 | 302,250 | |
| 7.281% Perpetual (Bank of Scotland) | 400,000 | 0.27 | 315,330 | 449,360 | |
| 902,010 | 1,595,928 | 9.43 | |||
| 2. Phoenix Life | |||||
| 7.25% perpetual notes | 1,060,000 | 0.53 | 811,923 | 1,119,466 | 6.62 |
| 3. Royal Bank of Scotland Group | |||||
| 9% series 'A' non-cum pref (NatWest) | 500,000 | 0.36 | 362,920 | 670,000 | |
| Sponsored ADR each rep pref C (NatWest) | 20,000 | 0.20 | 55,473 | 334,905 | |
| 418,393 | 1,004,905 | 5.94 | |||
| 4. Friends Life Group | |||||
| Ordinary NPV* | 173,069 | 0.01 | 565,438 | 633,779 | 3.75 |
| 5. Safestyle UK | |||||
| Ordinary 1p* | 369,000 | 0.47 | 369,000 | 633,296 | 3.74 |
| 6. Conygar Investment Company | |||||
| Ordinary 5p* | 320,478 | 0.37 | 406,493 | 599,294 | 3.54 |
| 7. Brit | |||||
| Ordinary 1p* | 219,167 | 0.01 | 526,001 | 592,847 | 3.50 |
| 8. Manx Telecom | |||||
| Ordinary 0.2p* | 340,321 | 0.30 | 507,782 | 588,755 | 3.48 |
| 9. Charles Taylor | |||||
| Ordinary 1p* | 230,000 | 0.54 | 419,215 | 575,000 | 3.40 |
| 10. Newcastle Building Society | |||||
| 6.625% sub notes 23/12/19 | 600,000 | 2.40 | 405,438 | 540,000 | 3.19 |
| 11. Juridica Investments | |||||
| Ordinary NPV* | 410,000 | 0.39 | 544,190 | 524,800 | 3.10 |
| 12. Fishguard & Rosslare | |||||
| 3.5% GTD Preference Stock | 790,999 | 63.91 | 441,810 | 506,239 | 2.99 |
| 13. William Sinclair Holdings | |||||
| 8% convertible loan notes† | 550,000 | 6.67 | 563,750 | 495,000 | 2.93 |
At 31 December 2014
| Number | Issue % |
Book cost £ |
Directors' valuation £ |
% of total portfolio |
|---|---|---|---|---|
| 2.77 | ||||
| 387,000 | 0.54 | 502,731 | 448,920 | 2.65 |
| 201,217 | 0.05 | 545,776 | 410,885 | 2.43 |
| 300,000 | 2.00 | 298,254 | 313,500 | |
| 150,000 | 0.44 | 76,740 | 96,200 | |
| 374,994 | 409,700 | 2.42 | ||
| 420,000 | 0.21 | 484,204 | 367,500 | 2.17 |
| 166,662 | 0.33 | 266,659 | 348,324 | 2.06 |
| 461,508 | 35.50 | 271,938 | 258,444 | |
| 104,043 | 30.12 | 92,858 | 86,356 | |
| 364,796 | 344,800 | 2.04 | ||
| 9,862,864 | 12,207,438 | 72.15 | ||
| 400,000 | 0.91 | 442,261 | Market or 468,000 |
* Issues with unrestricted voting rights.
† Unquoted investments at Directors' valuation.
The Group has a total of 73 portfolio investment holdings in 59 companies.
For the six months ended 31 December 2014
| Notes Revenue Capital Total Revenue Capital Total Revenue Capital £ £ £ £ £ £ £ £ £ Realised (losses)/gains on investments – (1,922,345) (1,922,345) – 532,229 532,229 – 2,456,691 Unrealised (losses)/gains on investments held at fair value through profit or loss – (419,172) (419,172) – 1,788,376 1,788,376 – 522,123 Movement in impairment provision on investments held as available for sale – 1,780,314 1,780,314 – (105,798) (105,798) – 791,998 Exchange gains/(losses) on capital items – 5,748 5,748 – – – – (221) Investment income 647,801 – 647,801 517,101 – 517,101 1,045,888 – Investment management fee 3 (71,559) – (71,559) (100,703) – (100,703) (116,251) – (116,251) Other administrative expenses (164,531) – (164,531) (194,512) – (194,512) (348,198) – (348,198) Return before finance costs and taxation 411,711 (555,455) (143,744) 221,886 2,214,807 2,436,693 581,439 3,770,591 Finance costs Loan note interest (9,218) – (9,218) (18,436) – (18,436) (30,759) – Return before taxation 402,493 (555,455) (152,962) 203,450 2,214,807 2,418,257 550,680 3,770,591 Taxation (486) – (486) – – – (7,299) – Return after taxation 402,007 (555,455) (153,448) 203,450 2,214,807 2,418,257 543,381 3,770,591 Other comprehensive income Movement in unrealised appreciation on investments held as available for sale Recognised in equity – 385,779 385,779 – 576,952 576,952 – 798,908 798,908 Recognised in return after – (11,429) (11,429) – (218,248) (218,248) – (1,935,599) taxation Other comprehensive – 374,350 374,350 – 358,704 358,704 – (1,136,691) income after taxation Total comprehensive income after taxation 402,007 (181,105) 220,902 203,450 2,573,511 2,776,961 543,381 2,633,900 Return after taxation per 50p ordinary share Basic and diluted 5 8.48p (3.82)p 4.66p 4.29p 54.30p 58.59p 11.46p 79.56p Return on total comprehensive income per 50p ordinary share Basic and diluted 5 8.48p (3.82)p 4.66p 4.29p 54.30p 58.59p 11.46p 55.57p |
6 months to 31 December 2014 (unaudited) |
6 months to 31 December 2013 (unaudited) |
Year ended 30 June 2014 (audited) |
||||
|---|---|---|---|---|---|---|---|
| Total | |||||||
| 2,456,691 | |||||||
| 522,123 | |||||||
| 791,998 | |||||||
| (221) | |||||||
| 1,045,888 | |||||||
| 4,352,030 | |||||||
| (30,759) | |||||||
| 4,321,271 (7,299) |
|||||||
| 4,313,972 | |||||||
| (1,935,599) | |||||||
| (1,136,691) | |||||||
| 3,177,281 | |||||||
| 91.02p | |||||||
| 67.03p |
The total column of this statement is the Consolidated Statement of Total Comprehensive Income of the Group prepared in accordance with International Financial Reporting Standards ("IFRS"). The supplementary revenue return and capital return columns are prepared in accordance with the Statement of Recommended Practice issued by the Association of Investment Companies ("AIC SORP").
All revenue and capital items in the above statement derive from continuing operations. No operations were acquired or discontinued during the period.
The notes on pages 16 to 19 form part of these financial statements.
For the six months ended 31 December 2014
| Capital | |||||||
|---|---|---|---|---|---|---|---|
| Issued | Share | redemption | Revaluation | Capital | Revenue | ||
| capital | premium | reserve | reserve | reserve | account | Total | |
| £ | £ | £ | £ | £ | £ | £ | |
| Balance at 1 July 2014 | 2,386,025 | 4,453,903 | 2,408,820 | 2,374,878 | 6,784,563 | 285,104 | 18,693,293 |
| Total comprehensive income | |||||||
| Net return for the period | – | – | – | – | (555,455) | 402,007 | (153,448) |
| Movement in unrealised appreciation on investments | |||||||
| held as available for sale: | |||||||
| – Recognised in equity | – | – | – | 385,779 | – | – | 385,779 |
| – Recognised in return after taxation | – | – | – | (11,429) | – | – | (11,429) |
| Transactions with shareholders recorded directly | |||||||
| to equity | |||||||
| Ordinary dividends paid | – | – | – | – | – | (531,777) | (531,777) |
| Unclaimed ordinary dividends written back | – | – | – | – | – | 11,506 | 11,506 |
| Balance at 31 December 2014 | 2,386,025 | 4,453,903 | 2,408,820 | 2,749,228 | 6,229,108 | 166,840 | 18,393,924 |
| Balance at 1 July 2013 | 2,386,025 | 4,464,443 | 2,408,820 | 3,511,569 | 3,013,972 | 452,655 | 16,237,484 |
| Total comprehensive income | |||||||
| Net return for the period | – | – | – | – | 2,214,807 | 203,450 | 2,418,257 |
| Movement in unrealised appreciation on investments | |||||||
| held as available for sale: | |||||||
| – Recognised in equity | – | – | – | 576,952 | – | – | 576,952 |
| – Recognised in return after taxation | – | – | – | (218,248) | – | – | (218,248) |
| Transactions with shareholders recorded directly to equity |
|||||||
| Ordinary dividends paid | – | – | – | – | – | (236,977) | (236,977) |
| Costs of issue | – | (23,456) | – | – | – | – | (23,456) |
| Balance at 31 December 2013 | 2,386,025 | 4,440,987 | 2,408,820 | 3,870,273 | 5,228,779 | 419,128 | 18,754,012 |
| Balance at 1 July 2013 | 2,386,025 | 4,464,443 | 2,408,820 | 3,511,569 | 3,013,972 | 452,655 | 16,237,484 |
| Total comprehensive income | |||||||
| Net return for the period | – | – | – | – | 3,770,591 | 543,381 | 4,313,972 |
| Movement in unrealised appreciation on investments | |||||||
| held as available for sale: | |||||||
| – Recognised in equity | – | – | – | 798,908 | – | – | 798,908 |
| – Recognised in return after taxation | – | – | – | (1,935,599) | – | – | (1,935,599) |
| Transactions with shareholders recorded directly to equity |
|||||||
| Ordinary dividends paid | – | – | – | – | – | (710,932) | (710,932) |
| Costs of issue | – | (10,540) | – | – | – | – | (10,540) |
| Balance at 30 June 2014 | 2,386,025 | 4,453,903 | 2,408,820 | 2,374,878 | 6,784,563 | 285,104 | 18,693,293 |
As at 31 December 2014
| Note | 31 December 2014 (unaudited) £ |
31 December 2013 (unaudited) £ |
30 June 2014 (audited) £ |
|
|---|---|---|---|---|
| Non-current assets | ||||
| Investments | 16,916,824 | 18,893,881 | 17,486,703 | |
| Current assets | ||||
| Trade and other receivables | 280,143 | 262,720 | 161,071 | |
| Investments held for trading | 1,569 | 35,897 | 1,564 | |
| Cash and bank balances | 1,770,227 | 648,928 | 1,754,315 | |
| 2,051,939 | 947,545 | 1,916,950 | ||
| Current liabilities | ||||
| Trade and other payables | 209,139 | 356,014 | 344,660 | |
| 5% loan notes maturing 2015 | 365,700 | 365,700 | 365,700 | |
| 574,839 | 721,714 | 710,360 | ||
| Net current assets | 1,477,100 | 225,831 | 1,206,590 | |
| Non-current liabilities | ||||
| 5% loan notes maturing 2015 | – | (365,700) | – | |
| Net assets | 18,393,924 | 18,754,012 | 18,693,293 | |
| Capital and reserves | ||||
| Issued capital | 2,386,025 | 2,386,025 | 2,386,025 | |
| Share premium | 4,453,903 | 4,440,987 | 4,453,903 | |
| Capital redemption reserve | 2,408,820 | 2,408,820 | 2,408,820 | |
| Revaluation reserve | 2,749,228 | 3,870,273 | 2,374,878 | |
| Capital reserve | 6,229,108 | 5,228,779 | 6,784,563 | |
| Revenue reserve | 166,840 | 419,128 | 285,104 | |
| Shareholders' funds | 18,393,924 | 18,754,012 | 18,693,293 | |
| Net Asset Value per 50p ordinary share | 6 | 388.09p | 395.69p | 394.41p |
The notes on pages 16 to 19 form part of these financial statements.
For the six months ended 31 December 2014
| 6 months to 31 December 2014 (unaudited) £ |
6 months to 31 December 2013 (unaudited) £ |
Year ended 30 June 2014 (audited) £ |
|
|---|---|---|---|
| Cash flows from operating activities | |||
| Cash received from investments | 469,662 | 290,573 | 1,204,193 |
| Interest received Sundry income |
17 70,748 |
252,388 – |
1,684 – |
| Cash paid to and on behalf of employees | (17,616) | (17,307) | (34,337) |
| Other cash payments | (379,498) | (433,521) | (483,705) |
| Withholding tax paid | (486) | – | (7,299) |
| Net cash inflow from operating activities | 142,827 | 92,133 | 680,536 |
| Cash flows from financing activities | |||
| Loan note interest paid | (9,168) | (17,859) | (35,317) |
| Loan notes redeemed | – | – | (365,700) |
| Fixed element of dividends paid on preference shares | – | – | (82,914) |
| Dividends paid on ordinary shares | (531,777) 11,506 |
(236,977) – |
(710,932) – |
| Unclaimed dividends written back Share capital subscriptions received |
– | ||
| Net cash (outflow)/inflow from financing activities | (529,439) | 1,195,345 940,509 |
1,184,789 (10,074) |
| Cash flows from investing activities | |||
| Purchase of investments Sale of investments |
(527,933) 924,709 |
(6,126,454) 2,604,678 |
(9,076,089) 7,022,181 |
| Net cash inflow/(outflow) from investing activities | 396,776 | (3,521,776) | (2,053,908) |
| Net increase/(decrease) in cash and cash equivalents | 10,164 | (2,489,134) | (1,383,446) |
| Reconciliation of net cash flow to movement in net debt | |||
| Increase/(decrease) in cash | 10,164 | (2,489,134) | (1,383,446) |
| Exchange rate movements | 5,748 | – | (301) |
| Loan notes redeemed | – | – | 365,700 |
| Increase/(decrease) in net cash | 15,912 | (2,489,134) | (1,018,047) |
| Net cash at start of period | 1,388,615 | 2,406,662 | 2,406,662 |
| Net cash/(debt) at end of period | 1,404,527 | (82,472) | 1,388,615 |
| Analysis of net cash/(net debt) | |||
| Cash and bank balances | 1,770,227 | 648,928 | 1,754,315 |
| 5% loan notes due within one year | (365,700) | (365,700) | (365,700) |
| 5% loan notes due in more than one year | – | (365,700) | – |
| 1,404,527 | (82,472) | 1,388,615 |
The Investment Company plc is a public limited company incorporated and registered in England and Wales. The address of its registered office is Beaufort House, 51 New North Road, Exeter EX4 4EP.
The consolidated financial statements, which comprise the unaudited results of the Company and its wholly owned subsidiaries, Abport Limited and New Centurion Trust Limited, together referred to as the "Group", for the half year to 31 December 2014, have been prepared under the historical cost basis, except for the measurement at fair value of investments, and in accordance with International Financial Reporting Standards, as adopted by the European Union.
Where guidance set out in the AIC SORP is consistent with the requirements of IFRS, the Directors have sought to prepare the financial statements on a basis compliant with the recommendations of the SORP.
In order better to reflect the activities of an investment trust company and in accordance with guidance issued by the AIC, supplementary information which analyses the Consolidated Statement of Comprehensive Income between items of a revenue and capital nature has been presented alongside the Consolidated Statement of Comprehensive Income.
The financial information contained in this half-yearly financial report does not constitute statutory accounts as defined in section 434 of the Companies Act 2006. The financial information for the half years ended 31 December 2014 and 31 December 2013 has been neither audited nor reviewed by the auditors.
The figures and financial information for the year ended 30 June 2014 are extracted from the latest published audited financial statements of the Company and do not constitute the statutory accounts for that year. The audited financial statements for the year ended 30 June 2014 have been filed with the Registrar of Companies. The report of the independent auditors on those accounts contained no qualification or statement under section 498(2) or section 498(3) of the Companies Act 2006.
Except as described below, the Group has applied consistent accounting policies in preparing the half-yearly financial statements for the six months ended 31 December 2014, the comparative information for the six months ended 31 December 2013, and the financial statements for the year ended 30 June 2014.
continued
The Company seeks to conduct its affairs in a manner consistent with continuing to receive approval from HM Revenue & Customs as an investment trust under s1158/1159 of the Corporation Tax Act 2010. The Company's policies set out in note 1 of the Annual Report and Financial Statements for the year ended 30 June 2014 have remained substantially unchanged except for the following:
Investments are recognised and derecognised on the trade date where a purchase or sale is under a contract whose terms require delivery within the timeframe established by the market concerned, and are initially measured at fair value.
All investments held by the Company are classified as at "fair value through profit or loss". Investments are initially recognised at cost, being the fair value of the consideration given. After initial recognition, investments are measured at fair value, with unrealised gains and losses on investments and impairment of investments recognised in the Consolidated Statement of Comprehensive Income and allocated to capital.
For investments actively traded in organised financial markets, fair value is generally determined by reference to quoted market bid prices or closing prices for SETS (London Stock Exchange's electronic trading service) stocks sourced from the London Stock Exchange on the Balance Sheet date, without adjustment for transaction costs necessary to realise the asset.
After initial recognition, unlisted stocks are reviewed and valued by the Board on a regular basis.
The following are accounted for in this reserve:
The revaluation reserve represents the accumulated unrealised gains on the Company's availablefor-sale investments. Following investment trust status being granted to the Company, and in order better to reflect the requirements of investment companies in accordance with the AIC SORP, all such movements in unrealised gains and losses will be accounted for in the capital reserve as described above.
continued
Under the terms of the Management Agreement, the Manager is entitled to receive from the Company or any member of the Group in respect of its services provided under this Agreement, a management fee payable monthly in arrears equal to one-twelfth of 1% per calendar month of the NAV of the Company. For these purposes, the NAV shall be calculated as at the last Business Day of each month and is subject to the ongoing charges ratio of the Company not exceeding 2.5% per annum in respect of any completed financial year.
| 6 months to | 6 months to | Year end | |
|---|---|---|---|
| 31 December | 31 December | 30 June | |
| 2014 | 2013 | 2014 | |
| (unaudited) | (unaudited) | (audited) | |
| £ | £ | £ | |
| Ordinary shares | |||
| Prior year interim dividend of 5p paid on 22 November 2013 | – | 236,977 | 236,978 |
| Prior year interim dividend of 5p paid on 21 February 2014 | – | – | 236,977 |
| Prior year interim dividend of 5p paid on 23 May 2014 | – | – | 236,977 |
| Prior year interim dividend of 5.72p paid on 22 August 2014 | 271,102 | – | – |
| Current year first interim dividend of 5.5p paid on | |||
| 21 November 2014 | 260,675 | – | – |
| Total dividends | 531,777 | 236,977 | 710,932 |
The Board declared a second interim dividend of 5.5p per ordinary share, which was paid on 20 February 2015 to shareholders registered at the close of business on 30 January 2015. This dividend has not been included as a liability in these financial statements.
| 6 months to 31 December 2014 (unaudited) |
6 months to 31 December 2013 (unaudited) |
Year end 30 June 2014 (audited) |
||||
|---|---|---|---|---|---|---|
| Weighted average ordinary shares in issue (excluding shares held in treasury) |
4,739,549 | 4,739,549 | 4,739,549 | |||
| £ | Per share pence |
£ | Per share pence |
£ | Per share pence |
|
| Revenue return Net return after taxation attributable to ordinary shareholders |
402,007 | 8.48 | 203,450 | 4.29 | 543,381 | 11.46 |
| Capital return Net investment (losses)/gains after tax |
(181,105) | (3.82) | 2,573,511 | 54.30 | 2,633,900 | 55.57 |
| Total return | 220,902 | 4.66 | 2,776,961 | 58.59 | 3,177,281 | 67.03 |
continued
Net asset value per ordinary share is based on net assets at the period end and 4,739,549 (31 December 2013: 4,739,549 and 30 June 2014: 4,739,549) ordinary shares, being in each case the number of ordinary shares in issue at the period end less 32,500 shares held in Treasury.
The principal risks facing the Group are substantially unchanged since the date of the Annual Report for the year ended 30 June 2014 and continue to be as set out in that report. Risks faced by the Group include, but are not limited to, investment decisions, investment valuations, the macro-economic environment for preference shares and prior charge securities, market price risk, interest rate risk and liquidity risk.
The Directors confirm that to the best of their knowledge:
This Half-Yearly Financial Report was approved by the Board of Directors on 27 February 2015 and the above responsibility statement was signed on its behalf by Sir David Thomson, Chairman.
Sir David Thomson Bt. (Chairman) S. J. Cockburn P. S. Allen M. H. W. Perrin (Audit Committee Chairman)
Capita Company Secretarial Services Limited Beaufort House 51 New North Road Exeter EX4 4EP
Telephone: 01392 412122
Miton Asset Management Limited 51 Moorgate London EC2R 6BH
Telephone: 020 3714 1525 Website: www.mitongroup.com
Miton Trust Managers Limited 51 Moorgate London EC2R 6BH
Capita Sinclair Henderson Limited Beaufort House 51 New North Road Exeter EX4 4EP
Saffery Champness Lion House Red Lion Street London WC1R 4GB
Capita Asset Services The Registry 34 Beckenham Road Beckenham Kent BR3 4TU
An investment company as defined under Section 833 of the Companies Act 2006.
Building tools?
Free accounts include 100 API calls/year for testing.
Have a question? We'll get back to you promptly.