Interim Results

Investment Company PLC 01 December 2006 The Investment Company Plc Unaudited Interim Results For the Six Month Period ended 30 September 2006 Chairman's Statement Although the latest move in base rates was upwards, the impact on the price of the sort of preference shares which we hold has been muted. Revenues in the first half of the company's trading year were as expected. Your Directors have declared an interim dividend of 4p per ordinary share (2005: 4p) which will be paid to shareholders on the register on 15 December 2006. The shares will be quoted ex dividend on 13 December 2006 and the dividend will be paid on 15 January 2006. As explained in my statement of 20 December last year, new accounting standards have become applicable to Listed Companies in the U.K. Because such changes were incorporated in last year's interim figures as well as in the accounts at 31 March 2005, the figures this time required no adjustment and are comparable with those of which shareholders have previously been advised. Consequently your Board has decided (since it is not compulsory) to dispense with any report by the Auditors, Saffery Champness, on these figures. Under International Financial Reporting Standards the net asset value of the ordinary shares at 30 September 2006 (after deducting the Participating Preference Shares at Redemption Value, which shareholders should note is less than the quoted market value of such shares) was 276.74p. This compares with 283.36p per ordinary share at 31 March 2006 and 250.49p at 30 September 2005. A year ago your company had an overdraft of over £1 million. The takeover of P & O, a bid from Persimmon the parent company of a Charles Church group company in which we were a minority preference shareholder, and most recently the take over of Hardys and Hanson by Greene King has resulted in your company enjoying at the time of writing cash balances in excess of £450,000. Despite the rise in short term interest rates and the general feeling amongst your Directors that the conventional rate of inflation promulgated by HM Treasury is way below their own experience, your Board recognises the inherent value in the fixed coupon preference shares which form the major part of your company's portfolio of investments and looks forward to the immediate future with confidence. The market in your company's Ordinary shares is very illiquid with few shares changing hands although business in the participating preference shares is more frequent. Your Board would like to remind shareholders that it has their approval to make market purchases of both classes of share. On 9 November 2006 your Directors appointed Philip Lovegrove OBE to the Board. Philip was, until your Company acquired it in March 2005, a Director of our then parent company New Centurion Trust Limited. He has been appointed Chairman of our Audit Committee. Sir David Thompson Bt. Chairman 1 December 2006 CONSOLIDATED INCOME STATEMENT For the six months ended 30th September 2006 Half-year to Half-year to Year to 30th 30th 31st September September March 2006 2005 2006 (unaudited) (unaudited) (audited) Notes £ £ £ Total income 449,944 590,034 1,010,351 Expenses (184,539) (230,215) (439,912) Loan note interest (91,425) (103,323) (194,748) Bank interest (76) (11,724) (27,636) Net revenue before taxation 173,904 244,772 348,055 Taxation - (15,602) (5,200) Net revenue, after taxation 173,904 229,170 342,855 Dividends: Participating preference 4 (174,818) (218,218) (470,971) Ordinary 4 (96,370) (77,216) (154,191) Transfer from reserves (97,284) (66,264) (282,307) (Losses)/earnings per 50p Ordinary Share Basic 3 (0.03) p 0.30 p (3.51) p Adjusted 3 (0.05) p 0.57 p (6.64) p Net asset value per 50p Ordinary Share 276.74 p 250.49 p 283.36 p All of the Company's operations are continuing. CONSOLIDATED STATEMENT OF CHANGES IN EQUITY For the six months ended 30th September 2006 Capital Share Share Own Shares Redemption Revaluation Capital Revenue Capital Premium Held Reserve Reserve Reserve Account Total £ £ £ £ £ £ £ £ Balance at 30th September and 1st October 2004 4,566,695 - - 2,439,800 144,501 3,717,357 581,235 11,449,588 Ordinary shares issued 424,686 - - - - - - 424,686 Premium on new shares issued - 1,019,246 - - - - - 1,019,246 Own shares - - (2,919,861) - - - - (2,919,861) held Realised - - - - - 410,127 - 410,127 capital gains/ (losses) Movement in - - - - 446,120 - - 446,120 unrealised appreciation of investment Retained - - - - - - (432,166) (432,166) earnings for the period Balance at 4,991,381 1,019,246 (2,919,861) 2,439,800 590,621 4,127,484 149,069 10,397,740 31st March & 1st April 2005 Cancellation - - - (2,439,800) - - 2,439,800 - of capital redemption reserve Cancellation (50,000) - - 50,000 - - - - of deferred shares Buy in of (621,500) - - 621,500 - - (1,281,589) (1,281,589) own shares Realised - - - - - 502,744 - 502,744 capital gains/ (losses) Movement in - - - - 270,015 - - 270,015 unrealised appreciation of investment Retained - - - - - - (66,264) (66,264) earnings for the period Balance at 4,319,881 1,019,246 (2,919,861) 671,500 860,636 4,630,228 1,241,016 9,822,646 30th September and 1st October 2005 Realised - - - - - 943,331 - 943,331 capital gains/ (losses) Movement in - - - - (93,598) - - (93,598) unrealised appreciation of investment Retained - - - - - - (216,043) (216,043) earnings for the period Balance at 4,319,881 1,019,246 (2,919,861) 671,500 767,038 5,573,559 1,024,973 10,456,336 31st March & 1st April 2006 Realised - - - - - 46,715 - 46,715 capital gains/ (losses) Movement in - - - - (77,075) - - (77,075) unrealised appreciation of investment Retained - - - - - - (97,284) (97,284) earnings for the period Balance at 4,319,881 1,019,246 (2,919,861) 671,500 689,963 5,620,274 927,689 10,328,692 30th September 2006 CONSOLIDATED BALANCE SHEET At 30th September 2006 30th September 30th September 31st March 2006 2005 2006 (unaudited) (unaudited) (audited) £ £ £ Non-current assets Portfolio investments at cost 12,575,979 13,654,654 12,391,868 Unrealised appreciation 718,727 889,401 795,802 Portfolio investments at market value 13,294,706 14,544,055 13,187,670 Current assets Trade and other receivables 41,524 11,645 121,000 Current asset investments 43,723 321,575 81,224 Cash at bank 927,200 98,448 1,048,962 1,012,447 431,668 1,251,186 Current liabilities Bank overdraft - 1,029,589 - Dividends 174,818 218,218 174,818 Trade and other payables 146,639 248,266 150,698 321,457 1,496,073 325,516 Net current assets/(liabilities) 690,990 (1,064,405) 925,670 Non-current liabilities Loan notes (3,657,004) (3,657,004) (3,657,004) Net assets 10,328,692 9,822,646 10,456,336 Capital and reserves Called up share capital 4,319,881 4,319,881 4,319,881 Share premium 1,019,246 1,019,246 1,019,246 Own shares held (2,919,861) (2,919,861) (2,919,861) Capital redemption reserve 671,500 671,500 671,500 Revaluation reserve 689,963 860,636 767,038 Capital reserve 5,620,274 4,630,228 5,573,559 Revenue reserves 927,689 1,241,016 1,024,973 Shareholders' funds 10,328,692 9,822,646 10,456,336 CONSOLIDATED CASH FLOW STATEMENT For the six months ended 30th September 2006 Half-year Half-year Year to to to 30th 30th 31st March September September 2006 2005 2006 (unaudited) (unaudited) (audited) Notes £ £ £ Operating activities Cash received from 348,687 521,954 927,335 investments Interest received 98,937 58,678 108,325 Sundry income - 26,400 26,400 Cash paid to and on behalf (86,129) (97,014) (184,403) of employees Other cash payments (113,825) (177,374) (282,126) UK corporation tax paid - - (5,200) Net cash inflow from operating activities 247,670 332,644 590,331 Financing activities Interest paid (76) (8,924) (30,636) Loan note interest paid (91,425) (82,658) (194,748) Non-equity dividends paid (174,818) (218,218) (514,371) Net cash outflow from returns on investments and servicing of finance (266,319) (309,800) (739,755) Investing activities Purchase of investments (1,202,698) (932,967) (1,227,754) Further payment in respect of purchase - (34,655) (34,655) of subsidiaries Cash acquired with - - - subsidiary Buy in of own shares 5 - (1,281,589) (1,281,589) Sale of investments 1,193,653 1,555,627 4,142,985 Net cash (outflow)/inflow from capital expenditure and financial investment (9,045) (693,584) 1,598,987 Equity dividends paid (94,068) (14,055) (154,255) (Decrease)/increase in cash 6 (121,762) (684,795) 1,295,308 NOTES TO THE INTERIM REPORT 1 Financial information The financial information above does not constitute statutory accounts within the meaning of Section 240 of the Companies Act 1985. Statutory accounts for the year ended 31st March 2006 have been delivered to the Registrar of Companies and contain an audit report in accordance with Section 285 which was unqualified. The interim financial information has not been audited or reviewed by the Company's auditors. 2 Accounting policies These financial statements have been prepared in accordance with International Financial Reporting Standards (IFRSs). The prior period comparatives reflect the advantage taken by the Group of the exemption under IFRS 1 First-time Adoption of IFRS not to apply IFRS 3 Business Combinations retrospectively to past business combinations (business combinations that occurred before the date of transition to IFRS). The Group has complied with IAS 34 and IFRS 1 in the preparation of these interim statements. The following are the key accounting policies extracts relating to the financial information presented and the effects of the transition to IFRS: (a) Taxation Current tax is provided at amounts expected to be paid (or recovered) using the tax rates and laws that have been enacted or substantially enacted by the balance sheet date. Deferred tax is recognised in respect of all timing differences that have originated but not reversed at the balance sheet date where transactions or events that result in an obligation to pay more tax in the future or a right to pay less tax in the future have accrued at the balance sheet date. Timing differences are differences between the Group's taxable profits and its results as stated in the financial statements that arise from the inclusion of gains and losses in tax assessments in periods different from those in which they are recognised in the financial statements. The company has material tax losses available for relief against future profits and gains, resulting from accumulated unrealised losses on certain investments and excess management expenses. No deferred tax asset has been provided for on the basis that future profits or gains are uncertain. (b) Preference shares The participating preference shares entitle the holders, in priority to the payment of any dividend to the holders of all or any other shares in the capital of the company, to a fixed net cash cumulative dividend at the rate of 7p per share per annum. In addition, holders are entitled to a participating dividend at the rate of 25% of any dividends paid on the Ordinary Shares in excess of 2p per share for any year, subject to a maximum participating dividend in respect of any year of 3p net per share. On any return of capital holders are entitled to a premium of 50p per share in addition to the nominal value of 50p on any surplus assets. The shares also confer voting rights in certain circumstances. The participating preference share capital has been treated as an equity financial instrument in accordance with IAS 32. (c) Dividends Ordinary dividends are accounted for in the period in which they are declared in accordance with IAS 10. Preference dividends have two dividend elements, the fixed net cash cumulative dividend and the participating dividend. The 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 fixed net cash cumulative element accrues evenly on a daily basis throughout the period. The dividend payable on 1 October 2006 has therefore been treated as a charge against revenue for the six months to 30th September 2006. This basis overrides IAS 10 as, in the opinion of the directors, the dividend has accrued on a daily basis during the six months ended 30th September 2006. (d) Investments IAS 39 requires investment funds to measure assets listed on a recognised Stock Exchange at current bid prices whereas under UK GAAP these assets have 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 adjustment has been reflected in the investment valuation for the period ended 30th September 2006. All investments held as non-current assets are shown in the balance sheet at valuation and all purchase and sale of investments are accounted for at trade date. The difference between book cost and valuation is taken to the revaluation reserve. Profits and losses on the realisation of investments held as non-current assets are taken to capital reserve. 3 Earnings per Share Half-year to Half-year to Year to 30th 30th 31st September September March The calculation of basic 2006 2005 2006 earnings per share is based on the following: (unaudited) (unaudited) (audited) £ £ £ Revenue after taxation 173,904 229,170 342,855 Participating preference (174,818) (218,218) (470,971) dividend (914) 10,952 (128,116) Weighted average number of 3,644,956 3,646,956 3,645,959 Ordinary Shares of 50p each The calculation of the adjusted earnings per share is based on the following: Weighted average number of shares being all ordinary voting shares but excluding non-voting shares: Weighted average number of 3,644,956 3,646,956 3,645,959 Ordinary Shares of 50p each Shares reclassified as (1,717,565) (1,717,565) (1,717,565) non-voting shares 1,927,391 1,929,391 1,928,394 4 Dividends Half-year to Half-year to Year to 30th 30th 31st September September March 2006 2005 2006 (unaudited) (unaudited) (audited) £ £ £ Interim Dividends declared or accrued Participating preference shares - - 296,153 - - 296,153 Final dividends declared or accrued Participating preference shares 174,818 218,218 174,818 Ordinary shares 96,370 77,216 154,191 271,188 295,434 329,009 Total dividends 271,188 295,434 625,162 5 Buy in of own shares Half-year to Half-year to Year to 30th 30th 31st March September September 2006 2005 2006 (unaudited) (unaudited) (audited) £ £ £ Buy in of 1,240,000 preference - 1,275,509 1,275,509 shares of 50p each Buy in of 3,000 ordinary shares - 6,080 6,080 of 50p each - 1,281,589 1,281,589 6 Analysis of net debt At At 30th 1st September April 2006 2006 (unaudited) Cash flow £ £ £ Bank overdraft - - - Cash at bank 927,200 (121,762) 1,048,962 927,200 (121,762) 1,048,962 Long term debt (3,657,004) - (3,657,004) (2,729,804) (121,762) (2,608,042) This information is provided by RNS The company news service from the London Stock Exchange

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