Investment Co PLC Half-year Report

 
TIDMINV 
 
THE INVESTMENT COMPANY PLC 
 
HALF-YEARLY FINANCIAL REPORT FOR THE SIX MONTHSED 31 DECEMBER 2016 
 
The Investment Company plc presents its Half-Yearly Report for the six-month 
period ended 31 December 2016. It is referred to as TIC, the Company or the 
Group in the text of this report. 
 
CORPORATE SUMMARY 
 
Investment Objective 
 
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. 
 
Investment Policy 
 
The Company invests in equities and fixed income securities. It is expected the 
fixed income securities would include preference shares, loan stocks, 
debentures, notes, convertibles and related instruments and be issued by 
UK-quoted companies with a wide range of market capitalisations. The conversion 
rights or equity warrants would normally convert into the underlying equity of 
the quoted company. The equity portion of the portfolio would principally 
invest in UK-quoted companies, with a wide range of market capitalisations, 
which are anticipated to pay a growing stream of dividends. 
 
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 will not enter 
into uncovered short positions. 
 
Risk diversification 
 
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 around 75 or more different companies, most of which will 
represent individually no more than 5% of the value of the Company's total 
investment portfolio, as at the time of acquisition. 
 
The Company will not invest more than 10% of its gross assets, at the time of 
acquisition, in other listed closed-ended investment funds, whether managed by 
the Manager or not, except that this restriction shall not apply to investments 
in listed closed-ended investment funds which themselves have stated investment 
policies to invest no more than 15% of their gross assets in other listed 
closed-ended investment funds. 
 
Unquoted investments 
 
The Company does not intend to invest in unquoted equity securities. The 
Company may invest in unquoted fixed income securities from time to time 
subject to prior Board approval. 
 
Borrowing and gearing policy 
 
The Company may use gearing, including bank borrowings and the use of 
derivative instruments such as contracts for differences. The Company may 
borrow (through bank facilities and derivative instruments) up to 15% of net 
asset value ("NAV") (calculated at the time of borrowing). 
 
Investment strategy 
 
The Manager uses a bottom-up investment approach to selecting a diversified 
portfolio of equity and fixed income securities. 
 
The investment approach can be described as active and universal, as the 
Company will not seek to replicate any benchmark and will target a significant 
proportion of issues from smaller quoted companies within an overall 
diversified portfolio. Potential investments are assessed against the key 
criteria, including yield, along with an assessment of the prospects of 
underlying corporate growth prospects, market positions, calibre of management 
and risk and financial resilience. 
 
Dividend Policy 
 
The dividend policy has been adjusted to make it more sustainable, taking the 
dividend in the first year after reorganisation, being the year ended 30 June 
2014, which amounted to 20.7p and seeking to grow it gradually going forward. 
Any growth in the dividend beyond 20.7p will be reflected in the quantum of the 
fourth interim dividend. 
 
Capital Structure 
 
As at 31 December 2016, and the date of this report, the Company has in issue 
4,772,049 ordinary shares of 50p each. In addition, there are 1,717,565 fixed 
rate preference shares of 50p in issue, all of which are held by a wholly-owned 
subsidiary of the Company. 
 
At general meetings of the Company, holders of ordinary shares are entitled to 
one vote on a show of hands and on a poll, to one vote for every share held. 
Fixed rate preference shares are non-voting. 
 
Total Assets and Net Asset Value 
 
The Group had total net assets of GBP17.1 million and a NAV of 359.22p per 
ordinary share at 31 December 2016. 
 
SUMMARY OF RESULTS 
 
                                                 At               At 
                                   31 December 2016     30 June 2016 
                                        (unaudited)       (audited)   Change 
 
Equity shareholders' funds             17,142,015       16,991,639       +0.9% 
 
Number of ordinary shares in            4,772,049        4,772,049        - 
issue 
 
NAV per ordinary share                     359.22p          356.07p      +0.9% 
 
Ordinary share price (mid)                 345.00p          365.50p      -5.6% 
 
(Discount)/premium to NAV                   (3.96)%            2.65% 
 
                                       6 months to    12 months to 
                                  31 December 2016    30 June 2016 
                                        (unaudited)       (audited) 
 
Total return per ordinary share*             13.85p         (11.21)p 
 
Return after taxation per                     7.40p          (4.03)p 
ordinary share 
 
Dividends paid per ordinary                  10.70p          20.70p 
share 
 
 
* The total return per ordinary share is based on total comprehensive income as 
detailed in the Condensed Consolidated Statement of Comprehensive Income. 
 
FINANCIAL CALAR 
 
February           Payment of second interim dividend for the year ending 30 
                   June 2017. 
 
February/March     Announcement of Half-Yearly Financial Report. 
 
May                Payment of third interim dividend for the year ending 30 
                   June 2017. 
 
August             Payment of fourth interim dividend for the year ending 30 
                   June 2017. 
 
September/October  Announcement of Annual Results. 
 
November           Payment of first interim dividend for the year ending 30 
                   June 2018. 
 
December           Annual General Meeting. 
 
CHAIRMAN'S STATEMENT 
 
Half Year to 31 December 2016 
 
This statement covers the half year ended 31 December 2016. 
 
After the UK's decision to leave the European Union, the stock market recovery 
was led by a limited number of companies with large index weightings that rose 
strongly. The share prices of those out of the limelight have generally not 
enjoyed such good returns. Therefore, over the half year to 31 December 2016, 
the NAV of the Company rose only slightly from 356.07p to 359.22p, which is an 
increase of 0.9%. The total return including the two interim dividends of 10.7p 
paid in the current year, was 3.9%. 
 
In comparison, the FTSE All-Share Index enjoyed a total return of 12.0% over 
the six months to 31 December 2016. Smaller quoted indices, which were also 
dominated by the moves of a few of their largest weightings, recorded a total 
return of 18.0% on the FTSE Small Capitalisation Index (excluding Investment 
Companies) and 20.3% on the FTSE AIM All-Share Index. In contrast, the FTSE 
Actuaries UK Conventional Gilts All Stocks Index declined 1.2% over the same 
period. 
 
The strategy of the Company is distinctive from many others in its potential 
participation in high-yield fixed income loan stocks and preference shares that 
sometimes carry scope for capital appreciation through equity conversion 
rights. Overall the aim is to deliver an attractive yield to investors, with a 
net asset value that is not too correlated with the movements of mainstream 
indices. 
 
The capital structure of the Company was simplified in June 2013 and it was 
intended that an increasing portion of the additional capital raised at the 
time would be invested in these types of instruments. However, in the last 
three years the risk/reward ratio on most of these issues has not been 
compelling; therefore just under half of the portfolio has been held in 
ordinary shares that generally offer reasonable yields. 
 
Recently, the issuance trend appears to have changed with a series of 
attractive convertible loan stocks being issued. If this trend persists, then 
the weighting of the portfolio in higher yielding convertibles will increase, 
enhancing the Company's underlying revenue, yet still leaving the Company with 
scope to generate longer-term capital gains as well. 
 
Sir David Thomson 
Chairman 
20 February 2017 
 
MANAGER'S REPORT 
 
There are indications that the long period of globalisation may be coming to an 
end. If this is the case then it will become more important than ever for 
investment strategies to be less correlated with equity markets generally, 
along with greater attention to their resilience. We believe that the Company's 
strategy has these advantages. 
 
Markets 
 
Equity indices rose considerably during the half year to 31 December 2016. 
However, index gains were often driven by a relatively limited number of stocks 
with large index weightings. By way of example HSBC, which had an average 
weighting of 6% of the FTSE 100 Index, rose 41.0% in the six month period. This 
stock alone contributed 2.2% to the overall return of the FTSE 100. There were 
similar examples in the FTSE Small Capitalisation Index (excluding Investment 
Companies) with Melrose Industries adding 1.4% to the overall return of that 
index. Within the FTSE AIM All-Share Index ASOS, Boohoo.com, GW Pharmaceuticals 
and Fevertree collectively added 4.3% to the index's return in the period. 
 
In spite of the announcement of renewed Quantitative Easing by the Bank of 
England, UK Government bond prices generally fell back over the half year 

period in line with those of other developed markets, as investors became 
concerned about the risk of rising inflationary pressures. Over the half year, 
the FTSE Actuaries UK Conventional Gilts All Stocks Index fell 1.2%. 
 
Portfolio 
 
Approximately half of the portfolio is invested in a range of preference 
shares, loan stocks, debentures and notes. Although the largest corporate 
exposure in the portfolio is to Lloyds Banking Group through a series of 
perpetual notes, 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 that, at current market 
prices, many of these continue to offer premium yields. 
 
The other half of the portfolio is invested in ordinary equities - mainly 
smaller quoted companies - that are often paying premium dividend yields. Small 
companies tend to have greater growth potential, and, as world growth has 
moderated, we believe this factor will become more important to investors. 
 
Early in the period, the Company underwrote what we believed to be a low priced 
fundraising by Sepura, a phone supplier for use by the emergency services in 
Europe and the US. However, the CEO was subsequently injured in a motorbike 
accident, and the company reported a disappointing period of trading. The 
setback attracted speculative interest and the company received a takeover 
approach towards the end of the period. 
 
A new holding was also purchased in Yu, a young and vibrant energy supplier to 
businesses. A new FTSE 100 Put option was purchased for the portfolio following 
the index rise ahead of the US election. This covers around one-third of the 
portfolio, with an exercise price of 6,000, and the cover extends to March 
2018. 
 
Towards the end of the period, a larger number of companies started considering 
issuing new, high-yielding convertible loan stocks. This is an encouraging 
trend, as it has the potential to expand the investment universe of the Company 
if it continues. Only one of these transactions was completed in the half-year 
period. Sirius Minerals raised additional finance to build a new Polyhalite 
mine in the UK, and in part funded this via a new convertible loan stock with 
an annual yield of 8.5%, and an option to convert into their equity if their 
share price rises over 25p. 
 
During the half year, Esure, Hostelworld and Royal Mail were sold to fund these 
new purchases. 
 
Criteria for selecting new investments for the portfolio 
 
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. 
 
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 best 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. 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. 
 
Performance 
 
As noted above, many of the market indices recorded strong returns over the 
period, as some of their largest holdings performed strongly. The FTSE 
All-Share Index rose 12.0% in the half year, with the FTSE Small Capitalisation 
Index (excluding Investment Companies) up 18.0% and the FTSE AIM All-Share 
Index up 20.3%. All these figures represent a total return including dividend 
payments. 
 
In comparison, the total return of the Company at 3.9% looks very pedestrian. 
Unfortunately, a number of our holdings were caught out with unexpected 
setbacks in trading. The most notable was Fairpoint, a legal services company 
that offers low cost legal services at competitive prices. The company suffered 
a combination of slightly lower conveyancing volumes after Brexit, and then was 
impacted by a Government decision to move the remit of the Small Claims Court 
up from actions from GBP1,000 or less to GBP5,000 or less.  We have retained our 
holding given the potential for its share price to recover. 
 
Bilby, an installation and servicer of gas appliances for social housing around 
London, also suffered a setback. Generally, Bilby works to a high standard of 
care, but it announced one of its largest customers had decided to take their 
work in-house. Its share price was further affected by a statement where the 
loss of the contract had raised concerns over how well it matched corporate 
costs with its revenues. Bilby finished the period announcing a number of new 
contracts and, again, has been retained for its recovery potential. 
 
A third detractor to performance was the FTSE 100 Put option, as the general 
market rose towards the end of December 2016. The value of the Put has fallen 
since purchase, but has been retained to mitigate the impact on the net assets 
of the Company if markets were to fall. 
 
The best performer in the portfolio was Anglo Pacific as energy prices 
recovered. It also pays a generous dividend. The share price of Randall & 
Quilter, an insurance service business which acquired some run-off assets 
cheaply, also increased strongly. Finally, in spite of the general reduction in 
bond yields in the UK, some of the fixed income securities also rose in price 
given their substantial yields.  For example, the Lloyds Bank 7.625% and 7.875% 
perpetual notes rose 11.0% and 12.1% respectively. 
 
However, we were disappointed with the overall performance of the portfolio in 
the half year. 
 
Prospects 
 
Over recent years, one of the principal drivers of equity market return has 
been the rise in valuations as Government bond yields have moved to ultra-low 
levels. Overall, this reflects the slowdown in world growth and interest rates 
being sustained for years at remarkably low levels. Productivity improvement, 
which is the long-term driver of wealth generation, has actually declined in 
the four years to the end of 2015. The figures are not yet known for 2016. 
 
We believe the Company's portfolio will be able to generate attractive returns 
in spite of these challenges. Specifically, the holdings in the portfolio have 
been selected as they are investing to generate an attractive cash payback for 
their shareholders. The new loan stocks tend to be issued with generous yields, 
but can still work out as inexpensive equity if their share prices rise as 
their businesses grow. 
 
Whilst it is anticipated that any material increase in government bond yields 
away from their ultra-low yields could inhibit the appreciation of markets 
generally, we are confident that the Company is in a good position to generate 
an attractive return for shareholders in the future. 
 
The rationale for holding the FTSE 100 Put option 
 
During September 2016, the Company invested around 1.8% of the portfolio to 
purchase a FTSE 100 Put option. This offers our investors some downside 
protection on markets, 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 before the exercise date, which in this 
case is March 2018, 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. The capital released could then 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 Small Capitalisation 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 
not usual 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 monthly running cost is only 0.07% over the period to March 2018 
should the markets remain resilient and the Put option expired worthless. 
 
Gervais Williams and Martin Turner 
Miton Asset Management Limited 
20 February 2017 
 
TWENTY LARGEST INVESTMENTS 
At 31 December 2016 
 
     Stock                                 Number  Issue Book cost  Market or % of total 
                                                                   Directors'  portfolio 
                                                                    valuation 
 
                                                       %         GBP          GBP 
 
1    Lloyds Banking Group 
 
     7.625% perpetual notes (LBG          478,000   0.03   204,360    499,046       3.06 
     Capital) 
 
     7.281% perpetual notes (Bank of      400,000   0.27   315,331    473,200       2.90 
     Scotland) 
 
     7.875% perpetual notes (LBG          362,000   0.05   245,997    382,459       2.35 
     Capital) 
 
                                                           765,688  1,354,705       8.31 
 
2    Phoenix Group Holdings 
 
     7.25% perpetual notes              1,060,000   0.53   811,923  1,072,056       6.58 
 
     Ordinary EUR0.0001§                     35,758   0.01   266,195    262,821       1.61 
 
                                                         1,078,118  1,334,877       8.19 
 
3    Royal Bank of Scotland Group 
 
     9% series 'A' non-cum pref           500,000   0.36   362,920    667,500       4.10 
     (NatWest) 
 
     Sponsored ADR each rep pref C         20,000   0.20    55,473    415,004       2.55 
     (NatWest) 
 
                                                           418,393  1,082,504       6.65 
 
4    Stobart Group 
 
     Ordinary 10p§                        315,146   0.09   499,491    561,748       3.45 
 
5    Anglo Pacific Group 
 
     Ordinary 2p§                         432,903   0.25   346,322    560,609       3.44 
 
6    The Fishguard & Rosslare Railways 
     and Harbours Company 
 
     3.5% guaranteed preferred stock      790,999  63.91   441,810    522,059       3.20 
 
7    Newcastle Building Society 
 
     6.625% sub notes 23/12/19            600,000   2.40   405,438    510,000       3.13 
 
8    Aggregated Micro Power 
 
     8% conv loan notes 30/03/21          500,000   2.50   500,000    500,000       3.07 
 
9    Randall & Quilter Investment 
     Holdings 
 
     Ordinary 2p§                         387,000   0.54   437,715    495,360       3.04 
 
10   Coral Products 
 
     Ordinary 1p§                       2,500,000   3.03   500,000    475,000       2.92 
 
11   600 Group 
 
     8% conv loan notes 14/02/20          500,000   5.88   500,000    470,000       2.89 
 
12   Charles Taylor 
 
     Ordinary 1p§                         192,198   0.29   334,592    466,320       2.86 
 
13   REA Holdings 
 
     9.5% loan notes 31/12/17             300,000   2.00   298,254    297,000       1.82 
 
     7.5% US Dollar loan notes 30/06/17   150,000   0.44    76,740    112,896       0.69 
 
                                                           374,994    409,896       2.51 
 
 
14   KCOM Group 
 
     Ordinary 10p§                        413,519   0.08   407,699    391,809       2.41 
 
15   Direct Line Insurance Group 
 
     Ordinary 10.909p§                    105,261   0.01   354,049    390,164       2.39 
 
16   Investec Investment Trust 
 
     3.5% cum pref GBP1                     461,508  35.50   271,938    286,135       1.76 
 
     5% cum pref GBP1                       104,043  30.12    92,858     91,558       0.56 
 
                                                           364,796    377,693       2.32 
 
17   Amalgamated Metal Corporation 
 
     5.4% cum pref GBP1                     256,065  18.21   144,049    194,609       1.19 
 
     6% cum pref GBP1                       213,510  23.72   103,844    177,213       1.09 
 
                                                           247,893    371,822       2.28 
 
18   Aviva 
 
     Ordinary 25p§                         75,774   0.00   334,545    368,565       2.26 
 
19   Sirius Minerals Finance 
 
     8.5% USD conv loan notes 28/11/23    400,000   0.10   321,156    330,191       2.03 
 
20   Liberty 
 
     9.5% cum pref                        199,708  34.58   146,996    201,705       1.24 
 
     6% cum non redeemable pref GBP1        250,225  64.99   118,071    115,104       0.71 
 
                                                           265,067    316,809       1.95 
 
                                                         8,897,766 11,290,131      69.30 
 
§ Issues with unrestricted voting 
rights. 
 
The Group has a total of 78 portfolio investment holdings in 62 companies. 
 
Interim Management Report and Directors' Responsibility Statement 
 
Interim Management Report 
 
The important events that have occurred during the period under review, the key 
factors influencing the financial statements and the principal risks and 
uncertainties for the remaining six months of the financial year are set out 
above. 
 
The principal risks facing the Group are substantially unchanged since the date 
of the Report and Accounts for the year ended 30 June 2016 and continue to be 
as set out in that report. 
 
Risks faced by the Group include, but are not limited to, market risk (which 
comprises market price risk, interest rate risk, liquidity risk and credit and 
counterparty risk). Details of the Company's management of these risks and 
exposure to them is set out in the Company's Report and Accounts for the year 
ended 30 June 2016. 
 
There have been no significant changes to the related party disclosures set out 
in the Annual Report. 
 
Responsibility Statement 
 
The Directors confirm that to the best of their knowledge: 
 
  * the condensed set of financial statements has been prepared in accordance 
    with International Accounting Standard 34, Interim Financial Reporting, as 
    adopted by the European Union; and gives a true and fair view of the 
    assets, liabilities, financial position and profit or loss of the Group; 
    and 
 
  * this Half-Yearly Financial Report includes a fair review of the information 
    required by: 
 
 a. DTR 4.2.7R of the Disclosure Guidance  and Transparency Rules, being an 
    indication of important events that have occurred during the first six 
    months of the financial year and their impact on the condensed set of 
    financial statements; and a description of the principal risks and 
    uncertainties for the remaining six months of the year; and 
 b. DTR 4.2.8R of the Disclosure Guidance and Transparency Rules, being related 
    party transactions that have taken place in the first six months of the 
    current financial year and that have materially affected the financial 
    position or performance of the Group during that period; and any changes in 
    the related party transactions that could do so. 
 
This Half-Yearly Financial Report was approved by the Board of Directors on 20 
February 2017 and the above responsibility statement was signed on its behalf 
by Sir David Thomson, Chairman. 
 
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME 
For the six months ended 31 December 2016 
 
                                      6 months to 31 December 2016  6 months to 31 December 2015       Year ended 30 June 2016 
                                               (unaudited)                   (unaudited)                      (audited) 
 
                                Notes  Revenue   Capital     Total   Revenue   Capital     Total    Revenue     Capital       Total 
                                             GBP         GBP         GBP         GBP         GBP         GBP          GBP           GBP           GBP 
 
Realised (losses)/gains on                   -  (390,907) (390,907)        -   129,097   129,097          -     528,892     528,892 
investments 
 
Unrealised gains/(losses) on                 -    38,010    38,010         -  (362,029) (362,029)         -  (1,278,227) (1,278,227) 
investments held at fair 
value through profit or loss 
 
Movement in impairment                       -   286,177   286,177         -   (45,585)  (45,585)         -     (72,680)    (72,680) 
provision on investments held 
as available for sale 
 
Exchange (losses)/gains on                   -    (1,387)   (1,387)        -       388       388          -       1,845       1,845 
capital items 
 
Investment income                   2  621,024         -   621,024   473,739         -   473,739  1,085,970           -   1,085,970 
 
Investment management fee              (86,710)        -   (86,710)  (70,499)        -   (70,499)  (113,705)          -    (113,705) 
 
Other administrative expenses         (112,373)        -  (112,373) (161,389)        -  (161,389)  (342,277)          -    (342,277) 
 
Return before finance costs            421,941   (68,107)  353,834   241,851  (278,129)  (36,278)   629,988    (820,170)   (190,182) 
and taxation 
 
Return before taxation                 421,941   (68,107)  353,834   241,851  (278,129)  (36,278)   629,988    (820,170)   (190,182) 
 
Taxation                                  (673)        -      (673)     (551)        -      (551)      (995)          -        (995) 
 
Return after taxation                  421,268   (68,107)  353,161   241,300  (278,129)  (36,829)   628,993    (820,170)   (191,177) 
 
Other comprehensive income 
 
Movement in unrealised 

appreciation on investments 
held as available for sale: 
 
  * Recognised in equity                     -   307,824   307,824         -    64,267    64,267          -    (151,492)   (151,492) 
 
Recognised in return after                   -         -         -         -         -         -          -    (188,607)   (188,607) 
taxation 
 
Other comprehensive income                   -   307,824   307,824         -    64,267    64,267          -    (340,099)   (340,099) 
after taxation 
 
Total comprehensive income             421,268   239,717   660,985   241,300  (213,862)   27,438    628,993  (1,160,269)   (531,276) 
after taxation 
 
Statutory return after 
taxation per 50p ordinary 
share 
 
Basic and diluted                   3     8.83p   (1.43)p     7.40p     5.09p   (5.87)p   (0.78)p     13.27p    (17.30)p     (4.03)p 
 
Total comprehensive income 
return per 50p ordinary share 
 
Basic and diluted                   3     8.83p     5.02p    13.85p     5.09p   (4.51)p     0.58p     13.27p    (24.48)p    (11.21)p 
 
The total column of this statement is the Condensed Consolidated Statement of 
Total Comprehensive Income of the Group prepared in accordance with 
International Financial Reporting Standards ("IFRS"). The supplementary revenue 
and capital 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 below form part of these financial statements. 
 
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY 
For the six months ended 31 December 2016 
 
                              Ordinary     Share     Capital Revaluation                Revenue       Total 
                                 share   premium  redemption     reserve    Capital     account           GBP 
                               capital         GBP     reserve           GBP    reserve           GBP 
                                     GBP                     GBP                      GBP 
 
Balance at 1 July 2016       2,386,025 4,453,903   2,408,820   2,000,848  6,155,368    (413,325) 16,991,639 
 
Total comprehensive income 
 
Net return for the period            -         -           -           -    (68,107)    421,268     353,161 
 
Movement in unrealised 
appreciation on investments 
held as available for sale: 
 
  * Recognised in equity             -         -           -     307,824          -           -     307,824 
 
Transactions with 
shareholders recorded 
directly to equity 
 
Ordinary dividends paid              -         -           -           -          -    (510,609)   (510,609) 
 
Balance at 31 December 2016  2,386,025 4,453,903   2,408,820   2,308,672  6,087,261    (502,666) 17,142,015 
 
                             2,386,025 4,453,903   2,408,820   2,340,947  6,858,154       5,121  18,452,970 
Balance at 1 July 2015 
 
Total comprehensive income 
 
Net return for the period            -         -           -           -   (278,129)    241,300     (36,829) 
 
Movement in unrealised 
appreciation on investments 
held as available for sale: 
 
  * Recognised in equity             -         -           -      64,267          -           -      64,267 
 
Transactions with 
shareholders recorded 
directly to equity 
 
Ordinary dividends paid              -         -           -           -          -    (573,485)   (573,485) 
 
Balance at 31 December 2015  2,386,025 4,453,903   2,408,820   2,405,214  6,580,025    (327,064) 17,906,923 
 
Balance at 1 July 2015       2,386,025 4,453,903   2,408,820   2,340,947  6,858,154       5,121  18,452,970 
 
Total comprehensive income 
 
Net return for the period            -         -           -           -   (820,170)    628,993    (191,177) 
 
Movement in unrealised 
appreciation on investments 
held as available for sale: 
 
  * Recognised in equity             -         -           -    (151,492)         -           -    (151,492) 
 
  * Recognised in return             -         -           -    (188,607)         -           -    (188,607) 
    after taxation 
 
Transactions with 
shareholders recorded 
directly to equity 
 
Sale of Treasury shares              -         -           -           -    117,384           -     117,384 
 
Ordinary dividends paid              -         -           -           -          -  (1,047,439) (1,047,439) 
 
Balance at 30 June 2016      2,386,025 4,453,903   2,408,820   2,000,848  6,155,368    (413,325) 16,991,639 
 
The notes below form part of these financial statements. 
 
CONDENSED CONSOLIDATED BALANCE SHEET 
As at 31 December 2016 
 
                                  31 December     31 December         30 June 
                                         2016            2015            2016 
                                   (unaudited)     (unaudited)       (audited) 
 
                            Note            GBP               GBP               GBP 
 
 
Non-current assets 
 
Investments                        16,290,888      17,288,218      16,410,045 
 
Current assets 
 
Trade and other                       172,147         172,304         425,351 
receivables 
 
Investments held for                    2,193           1,933           1,952 
trading 
 
Cash and bank balances                801,200         607,284         664,859 
 
                                      975,540         781,521       1,092,162 
 
 
Current liabilities 
 
Trade and other payables              124,413         162,816         510,568 
 
                                      851,127         618,705         581,594 
Net current assets 
 
Net assets                         17,142,015      17,906,923      16,991,639 
 
 
Capital and reserves 
 
Issued ordinary share          5    2,386,025       2,386,025       2,386,025 
capital 
 
Share premium                       4,453,903       4,453,903       4,453,903 
 
Capital redemption                  2,408,820       2,408,820       2,408,820 
reserve 
 
Revaluation reserve                 2,308,672       2,405,214       2,000,848 
 
Capital reserve                     6,087,261       6,580,025       6,155,368 
 
Revenue reserve                      (502,666)       (327,064)       (413,325) 
 
Shareholders' funds                17,142,015      17,906,923      16,991,639 
 
NAV per 50p ordinary           7        359.22p         377.82p         356.07p 
share 
 
The notes below form part of these financial statements. 
 
CONDENSED CONSOLIDATED CASH FLOW STATEMENT 
 
For the six months ended 31 December 2016 
 
                                             6 months to   6 months to    Year ended 
                                             31 December   31 December       30 June 
                                                    2016          2015          2016 
                                              (unaudited)   (unaudited)     (audited) 
                                       Notes           GBP             GBP             GBP 
 
Cash flows from operating activities 
 
Cash received from investments                   636,736       491,850     1,087,015 
 
Sundry income                                      2,520             -           627 
 
Investment management fees paid                  (49,863)      (76,377)     (121,053) 
 
Cash paid to and on behalf of                    (18,543)      (17,934)      (36,111) 
employees 
 
Other cash payments                             (177,638)     (165,224)     (319,804) 
 
Withholding tax paid                                (673)         (551)         (995) 
 
Net cash inflow from operating                   392,539       231,764       609,679 
activities 
 
Cash flows from financing activities 
 
Sale of Treasury shares                          117,384             -             - 
 
Dividends paid on ordinary shares               (510,609)     (573,485)   (1,047,439) 
 
Net cash outflow from financing                 (393,225)     (573,485)   (1,047,439) 
activities 
 
Cash flows from investing activities 
 
Purchase of investments                       (1,636,401)     (852,977)   (2,252,996) 
 
Sale of investments                            1,773,702     1,288,738     2,840,914 
 
Net cash inflow from investing                   137,301       435,761       587,918 
activities 
 
Net increase in cash and cash                    136,615        94,040       150,158 
equivalents 
 
Reconciliation of net cash flow to 
movement in net cash 
 
Increase in cash                                 136,615        94,040       150,158 
 
Exchange rate movements                             (274)          388         1,845 
 
Increase in net cash                             136,341        94,428       152,003 
 
Net cash at start of period                      664,859       512,856       512,856 
 
Net cash at end of period                        801,200       607,284       664,859 
 
 
The notes below form part of these financial statements. 
 
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 
 
1. Significant accounting policies 
 
Basis of preparation 
 
The condensed 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", have been 
prepared in accordance with IFRS, as adopted by the European Union, and as 
applied in accordance with the provisions of the Companies Act 2006. The 
financial statements have been prepared in accordance with the AIC SORP, except 
to any extent where it is not consistent with the requirements of IFRS. The 
accounting policies are as set out in the Report and Accounts for the year 
ended 30 June 2016. 
 
The half year financial statements have been prepared in accordance with IAS 34 
"Interim Financial Reporting". 
 
The financial information contained in this half year financial report does not 
constitute statutory accounts as defined by the Companies Act 2006. The 

financial information for the periods ended 31 December 2016 and 31 December 
2015 have not been audited or reviewed by the Company's Auditors. The figures 
and financial information for the year ended 30 June 2016 are an extract from 
the latest published audited statements and do not constitute the statutory 
accounts for that year. Those accounts have been delivered to the Registrar of 
Companies and include a report of the Auditor, which was unqualified and did 
not contain a statement under either Section 498(2) or 498(3) of the Companies 
Act 2006. 
 
Going concern 
 
The Directors have made an assessment of the Group's ability to continue as a 
going concern and are satisfied that the Group has adequate resources to 
continue in operational existence for the foreseeable future (being a period of 
12 months from the date these financial statements were approved). Furthermore, 
the Directors are not aware of any material uncertainties that may cast 
significant doubt upon the Group's ability to continue as a going concern, 
having taken into account the liquidity of the Group's investment portfolio and 
the Group's financial position in respect of its cash flows, borrowing 
facilities and investment commitments (of which there are none of 
significance). Therefore, the financial statements have been prepared on the 
going concern basis and on the basis that approval as an investment trust will 
continue to be met. 
 
2. Income 
 
                                          6 months to   6 months to    Year ended 
                                          31 December   31 December       30 June 
                                                 2016          2015          2016 
                                           (unaudited)   (unaudited)     (audited) 
                                                    GBP             GBP             GBP 
 
Income from investments 
 
UK dividends                                  240,166       244,862       547,381 
 
Unfranked dividend income                     185,351        64,101       171,642 
 
Fixed interest                                173,146       151,485       313,733 
 
                                              598,663       460,448     1,032,756 
 
Other income 
 
Underwriting commission                         2,520             -           627 
 
Net dealing gains of subsidiaries              19,841        13,291        52,587 
 
Total income                                  621,024       473,739     1,085,970 
 
3. Return per ordinary share 
 
Returns per share are based on the weighted average number of shares in issue 
during the period. Normal and diluted return per share are the same as there 
are no dilutive elements on share capital. 
 
                       6 months to          6 months to          Year ended 
                    31 December 2016     31 December 2015       30 June 2016 
                       (unaudited)          (unaudited)           (audited) 
 
                          Net      Per       Net       Per         Net       Per 
                       return    share    return     share      return     share 
                            GBP    pence         GBP     pence           GBP     pence 
 
Return on total 
comprehensive 
income 
 
Revenue               421,268     8.83   241,300      5.09     628,993     13.27 
 
Capital               239,717     5.02  (213,862)    (4.51) (1,160,269)   (24.48) 
 
Total                 660,985    13.85    27,438      0.58    (531,276)   (11.21) 
comprehensive 
income 
 
Weighted average             4,772,049           4,739,549             4,739,727 
number of 
ordinary shares 
 
4. Dividends per ordinary share 
 
Amounts recognised as distributions to equity holders in the period. 
 
                                         6 months to   6 months to  Year ended 
                                         31 December   31 December     30 June 
                                                2016          2015        2016 
                                          (unaudited)   (unaudited)   (audited) 
                                                   GBP             GBP           GBP 
 
Ordinary shares 
 
Prior year fourth interim dividend of 
7.10p paid on 21 August 2015                       -       336,508     336,508 
 
Prior year first interim dividend of 
5.00p paid on  20 November 2015                    -       236,977     236,977 
 
Prior year second interim dividend of 
5.00p paid on 19 February 2016                     -             -     236,977 
 
Prior year third interim dividend of 
5.00p paid on                                      -             -     236,977 
20 May 2016 
 
Prior year fourth interim dividend of 
5.70p paid on  19 August 2016                272,007             -           - 
 
Current year first interim dividend of 
5.00p paid on 18 November 2016               238,602             -           - 
 
Total dividends                              510,609       573,485   1,047,439 
 
The Board declared a second interim dividend of 5.00p per ordinary share, which 
was paid on 17 February 2017 to shareholders registered at the close of 
business on 27 January 2017. This dividend has not been included as a liability 
in these financial statements. 
 
5. Issued ordinary share capital 
 
                               6 months to         6 months to          Year ended 
                               31 December         31 December             30 June 
                                      2016                2015                2016 
                                (unaudited)         (unaudited)           (audited) 
 
                          Number         GBP     Number        GBP     Number        GBP 
 
Ordinary shares of 50p 
each                   4,772,049 2,386,025  4,772,049 2,386,025 4,772,049 2,386,025 
 
 
The Company does not hold any shares in Treasury as at 31 December 2016 (31 
December 2015: 32,500 and 30 June 2016: Nil). 
 
6. Issued preference share capital 
 
The 1,717,565 fixed rate preference shares of 50p each are non-voting, 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. These are a component of the equity of the Company. The whole of the issue 
is held by New Centurion Trust Limited, a wholly-owned subsidiary of the 
Company, which has no impact on the consolidated accounts, the Group NAV or the 
return per ordinary share. 
 
7. Net asset value per ordinary share 
 
Net asset value per ordinary share is based on net assets at the period end and 
4,772,049 (31 December 2015: 4,739,549 and 30 June 2016: 4,772,049) ordinary 
shares in issue at the period end excluding shares held in Treasury. 
 
8. Management fee 
 
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. 
 
9. Fair value hierarchy 
 
The fair value is the amount at which an asset could be sold in an ordinary 
transaction between market participants, at the measurement date, other than a 
forced or liquidation sale. The Group measures fair values using the following 
hierarchy that reflects the significance of the inputs used in making the 
measurements. 
 
Categorisation within the hierarchy has been determined on the basis of the 
lowest level input that is significant to the fair value measurement of the 
relevant asset as follows: 
 
Level 1 - valued using quoted prices, unadjusted in active markets for 
identical assets and liabilities. 
 
Level 2 - valued by reference to valuation techniques using observable inputs 
for the asset or liability other than quoted prices included in Level 1. 
 
Level 3 - valued by reference to valuation techniques using inputs that are not 
based on observable market data for the asset or liability. 
 
The table below sets out fair value measurement of financial instruments as at 
31 December 2016, by the level in the fair value hierarchy into which the fair 
value measurement is categorised. 
 
At 31 December 2016                   Level 1     Level 2     Level 3       Total 
                                            GBP           GBP           GBP           GBP 
 
Fixed asset investments held by    11,200,999     406,586   4,683,303  16,290,888 
the Company 
 
Current asset investments held by                      88 
a trading subsidiary                    2,105                       -       2,193 
 
                                   11,203,104     406,674   4,683,303  16,293,081 
 
 
 
At 31 December 2015                   Level 1     Level 2     Level 3       Total 
                                            GBP           GBP           GBP           GBP 
 
Fixed asset investments held by 
the Company                        12,409,715     398,883   4,479,620  17,288,218 
 
Current asset investments held by                       -           -       1,933 
a trading subsidiary                    1,933 
 
                                   12,411,648     398,883   4,479,620  17,290,151 
 
 
 
 
At 30 June 2016                       Level 1     Level 2     Level 3       Total 
                                            GBP           GBP           GBP           GBP 
 
Fixed asset investments held by 
the Company                        11,309,018     395,902   4,705,125  16,410,045 
 
Current asset investments held by 
a trading subsidiary                    1,868          84           -       1,952 
 
                                   11,310,886     395,986   4,705,125  16,411,997 
 
The Company's subsidiary, Abport Limited, completes trading transactions. The 
value of the current asset investments held for trading is the expected price 

of realisation. The difference between the sale and purchase of assets is 
recognised as trading income in the Condensed Consolidated Statement of 
Comprehensive Income. 
 
Reconciliation of Level 3 investments 
 
The following table summarises Level 3 investments that were accounted for at 
fair value. 
 
                                             6 months      6 months       Year 
                                                ended         ended      ended 
                                          31 December             31         30 
                                                 2016   December      June 
                                                    GBP          2015       2016 
                                           (unaudited)            GBP          GBP 
                                                         (unaudited)  (audited) 
 
Opening balance                             4,705,125     4,772,648  4,772,648 
 
Movement in impairment provision on           321,392        (5,193)   (47,788) 
investments available for sale 
 
Movement in unrealised appreciation on         95,184        44,457      4,340 
investments available for sale 
recognised in equity 
 
Movement in unrealised appreciation on              -             -        930 
investments available for sale 
recognised in return after taxation 
 
Purchase at cost                                    -       104,305    604,305 
 
Movement in unrealised gains/(losses) on      129,278       (71,229)     2,808 
investments at fair value through profit 
or loss 
 
Realised (loss)/gain                         (266,693)           56    (50,578) 
 
Sale proceeds                                (300,983)     (365,424)  (581,540) 
 
                                            4,683,303     4,479,620  4,705,125 
Closing balance 
 
10. Transactions with the Manager and related parties 
 
As disclosed in note 8 a fee is paid to the Manager in respect of its service 
provided to the Company. There were no other identifiable related parties at 
the half year. 
 
DIRECTORS AND ADVISERS 
 
DIRECTORS (all non-executive) 
Sir David Thomson Bt. (Chairman) 
M. H. W. Perrin (Audit Committee Chairman & Senior Independent Director) 
S. J. Cockburn 
P. S. Allen 
 
ADVISERS 
 
Secretary and Registered Office        Administrator 
 
Capita Company Secretarial Services    Capita Sinclair Henderson Limited 
Limited 
 
Beaufort House                         Beaufort House 
 
51 New North Road                      51 New North Road 
 
Exeter EX4 4EP                         Exeter EX4 4EP 
 
Telephone: [phone]                Independent Auditors 
 
                                       Saffery Champness 
 
Manager                                71 Queen Victoria Street 
 
Miton Asset Management Limited         London EC4V 4BE 
 
Paternoster House 
 
65 St Paul's Churchyard                Registrar 
 
London EC4M 8AB                        Capita Asset Services 
 
                                       The Registry 
 
Telephone: [phone]               34 Beckenham Road 
 
Website: www.mitongroup.com            Beckenham 
 
                                       Kent BR3 4TU 
 
Alternative Investment Fund Manager 
 
Miton Trust Managers Limited           Company Website 
 
Paternoster House                      www.mitongroup.com/tic 
 
65 St Paul's Churchyard 
 
London EC4M 8AB 
 
 
An investment company as defined under Section 833 of the Companies Act 2006. 
 
A copy of the Half-Yearly Financial Report will be submitted shortly to the 
National Storage Mechanism ("NSM") and will be available for inspection at the 
NSM, which is situated at: www.morningstar.co.uk/uk/NSM. 
 
The Half-Yearly Financial Report will be posted to shareholders shortly. The 
Report will also be available for download from the following website: 
www.mitongroup.com/tic or on request from the Company Secretary. 
 
Neither the contents of the Company's website nor the contents of any website 
accessible from hyperlinks on the Company's website (or any other website) is 
incorporated into, or forms part of this announcement. 
 
 
 
END 
 

(END) Dow Jones Newswires

February 21, 2017 02:00 ET (07:00 GMT)