The Investment Company Plc – Annual Results

The Investment Company Plc

Annual Results Announcement for the year ended 30 June 2019

STRATEGIC REPORT

* The total return per ordinary share is based on total comprehensive income after taxation as detailed in the Consolidated Statement of Comprehensive Income and in note 6 and is shown to enable comparison with other investment trust companies.

FINANCIAL CALENDAR

November                                            Payment of quarterly interim dividend.

December                                             Annual General Meeting.

February                                              Payment of quarterly interim dividend.

February/March                                 Announcement of Half-Yearly Financial Report.

May                                                      Payment of quarterly interim dividend.

August                                                 Payment of quarterly interim dividend.

October                                                Announcement of Annual Results.

CHAIRMAN'S STATEMENT

This statement covers the year to 30 June 2019.

Following a change of Investment Manager in February 2018, and changes to the composition of the Board in July 2018, there has now been substantially a full year of the Company under new management. In this period there have been several substantive changes in portfolio, costs and dividends.

Overall impact on NAV

I am mindful of the fact that I am reporting a decline in both the net asset value (“NAV”) and share price over the last

year.

Between 30 June 2018 and 30 June 2019 the FTSE All Share Index fell by 3.5%. During the same period, the Company's portfolio outturn was also a fall of 3.45%.

The NAV, which has a portfolio invested in both fixed income and equities, was 4.12% lower within that period.

During the year the Company's share price discount to NAV varied between 8.88% and 14.44%. Your board has considered the appropriateness of the Company buying back its shares, but having taken advice does not believe this is currently in the best interests of the Company and its shareholders. Your board will continue to keep this matter under review.

Portfolio Changes

Almost a year ago we, as your new board, set out what we expected of our investment managers. Your investment manager has broadened the number of investments and has invested in a number of new stocks in keeping with the mandate changes initiated earlier in the financial year. There is still much to be done on the legacy portfolio. The creation of wealth through these and other initiatives is taking some time to feed through to our NAV.

The Investment Manager's review of the portfolio is set out fully in the Investment Manager's Report.

Portfolio investments were previously reported as being divided between Investments available for sale, and Investments held at fair value through profit and loss. Your Board has taken advantage of IFRS 9 to now report all Portfolio investments as being held at fair value through profit and loss. We believe that this results in a clearer Statement of Comprehensive Income.

Costs

Total operating costs have reduced from £466,471 in the prior year to £401,168 in the year under review. This is against a background of continuing increasing regulatory and associated costs. Although one can expect costs to rise in the next year, your board continues to pay close attention to minimising such a drag on performance.

Dividends

As highlighted in last year's annual report, your new board is, after consultation with larger shareholders, pursuing a more prudent approach to dividend payments. Our target is to have dividends covered by income net of operating costs. In terms of implementation, the first two dividends paid out during the year were made under the 'old' stance with the result that the total payout during the year to June 2019 was £868,000, being 18.2p per share (June 2018: 20.7p).

Overall, the surplus of income over expenses was £752,636 in the year, which was £115,877 short of covering the dividend paid. The current run rate of 3.75p per quarterly payout amounts to 15p in a full year which would equate to a total of £775,458. Our target is to get portfolio income up to the point where the costs and this dividend are covered.

Outlook and Recommendation

The Company remains small relative to its fixed cost base, and its viability is dependent not just upon performance but also its ability to grow by attracting further capital. My board colleagues and I are wholly committed to exploring all appropriate opportunities that are likely to enhance long term shareholder returns. We remain fully cognisant of the risks to capital in what are proving to be testing markets.

As a board we firmly believe that continuation would be in the best interests of all shareholders as it will enable your new board to continue to explore with confidence new options for the growth of the Company. The Company has put forward an ordinary resolution for the continuation of the Company, and accordingly, your Directors recommend that members vote in favour of continuation.