Interim Results

BRITISH & AMERICAN INVESTMENT TRUST PLC Interim Report 30 June 2004 Registered number : 433137 Directors Jonathan C Woolf (Chairman and Managing Director) Dominic G Dreyfus (Non-executive) J Anthony V Townsend (Non-executive) Ronald G Paterson (Non-executive) Registered office Wessex House 1 Chesham Street London SW1X 8ND Telephone: 020 7201 3100 Chairman's Statement I report our results for the 6 months to 30 June 2004. The return on revenue account before tax amounted to £0.66 million (£0.71 million). This decline was almost entirely due to the reduction in the full year dividend from Prudential Corporation, our second largest investment. Total return before taxation, which includes both realised and unrealised capital appreciation, recorded an increase of £1.1 million (£1.9 million). The revenue return per ordinary share was 1.9 pence on an undiluted basis (2.1 pence) and 1.9 pence on a fully diluted basis (2.0 pence). Group net assets were £33.6 million (£33.2 million at 31 December 2003), an increase of 1.2 percent. This compares to a decrease over the same six month period of 0.3 percent in the FTSE 100 share index and an increase of 1.0 percent in the FTSE All Share index. The net asset value per £1 ordinary share on a fully diluted basis was 96 pence, equivalent to 95 pence (prior charges deducted at par). We intend to pay an interim dividend of 2.1 pence per ordinary share on 11 November 2004 to shareholders on the register at 15 October 2004. This represents an increase of 5.0 percent from last year's interim dividend. A preference dividend of 1.75 pence will be paid to preference shareholders on the same date. In the six months to 30 June 2004, the UK equity markets have traded within a relatively narrow range compared to previous periods of approximately 5 percent. The period was categorised by two declines at the end of each quarter followed by fairly swift recoveries to previous levels. The leading companies index finished the period slightly below its level at the beginning of the year while the All Share index finished slightly ahead, continuing the out-performance seen in the previous period albeit at more modest levels. This pattern of swings within a narrow range shows an underlying lack of direction which reflects the general uncertainties of economic outlook over the medium term after a period of recovery in 2003 combined with vulnerability to short term external shocks or surprises. There have been no particularly notable sectoral patterns, although the service sectors, particularly financials, insurance and retail remained firm until midyear as growth rates stayed buoyant on the back of a strong housing market. Higher yielding stocks were also in favour as the Bank of England continued its programme of adjusting sterling interest rates upwards closer to perceived equilibrium levels. Since the end of the second quarter, the pattern described above has continued and a strong upswing to the top of the trading range and slightly above took place over the summer months, albeit at low volumes. Markets, particularly in the USA, are now focusing on the upcoming presidential election period and have been relieved by continuing firm earnings reports, particularly in the technology sector which had been a cause for concern earlier in the year as economic growth flattened out in the USA. Since the last report, we have added to our small investment in US technology stocks with a further investment in Geron Corporation, a biopharmaceutical company active in the areas of reproductive medicine and oncology. As at 24 September, group net assets, after deducting the interim dividend declared today, were £34.6 million, an increase of 2.8 percent since 30 June. This compares with an increase of 2.6 percent in the FTSE 100 index and 2.0 percent in the All Share index over the same period, and is equivalent to 98 pence per share (prior charges deducted at par) and 99 pence per share on a fully diluted basis. Finally, I should report that, with effect from 1 October 2004, the roles of chairman and managing director will be separated and Anthony Townsend, our senior non-executive director, will become non-executive chairman. I will remain as managing director and fund manager. Anthony has been a director of the company since 1999 and has a wide range of experience in the financial and investment trust sectors. He recently retired as chairman of The Association of Investment Trust Companies and sits on the board of several other investment trusts, one of which he chairs. This change is intended to bring the company into compliance with recently introduced corporate governance requirements. Jonathan C Woolf 28 September 2004 GROUP FINANCIAL HIGHLIGHTS For the six months ended 30 June 2004 6 months 6 months Year to 30 to 30 ended 31 June June December 2004 2003 2003 £'000 £'000 £'000 Revenue return before 661 713 1,653 taxation Earnings per £1 ordinary 1.91p 2.14p 5.18p shares - basic Earnings per £1 ordinary 1.87p 2.03p 4.70p shares - fully diluted Investments at valuation 34,182 30,526 34,063 and cash at bank Interim dividend per ordinary share 2.1p 2.0p 2.0p Net assets per ordinary share -Basic £0.95 £0.80 £0.93 - Fully diluted £0.96 £0.86 £0.95 Fully diluted net assets per ordinary share at 24 September 2004 £0.99 GROUP CONSOLIDATED STATEMENT OF TOTAL RETURN Six months ended 30 June 2004 6 months to 30 June 2004 6 months to 30 June 2003 Year ended 31 December 2003 Note Revenue Capital Total Revenue Capital Total Revenue Capital Total £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 Income 2 847 - 847 903 - 903 2,013 - 2,013 Realised gains on - 139 139 - 145 145 - 508 508 investments Increase in - 290 290 - 1,093 1,093 - 3,950 3,950 unrealised appreciation Other expenses (186) - (186) (160) - (160) (330) - (330) Net return before 661 429 1,090 743 1,238 1,981 1,683 4,458 6,141 finance costs and taxation Interest payable - - - (30) - (30) (30) - (30) and similar charges Return before 661 429 1,090 713 1,238 1,951 1,653 4,458 6,111 taxation Taxation (7) - (7) (2) - (2) (9) - (9) Return on ordinary 654 429 1,083 711 1,238 1,949 1,644 4,458 6,102 activities after tax Dividend and other appropriations in (175) - (175) (175) - (175) (350) - (350) respect of preference shares Return attributable 479 429 908 536 1,238 1,774 1,294 4,458 5,752 to ordinary shareholders Dividend in respect 3 (525) - (525) (500) - (500) (1,250) - (1,250) of ordinary shares Transfer (from)/to reserves after (46) 429 383 36 1,238 1,274 44 4,458 4,502 dividends paid and proposed Return per ordinary share Basic 1.9p 1.7p 3.6p 2.1p 5.0p 7.1p 5.2p 17.8p 23.0p Fully diluted 4 1.9p 1.2p 3.1p 2.0p 3.6p 5.6p 4.7p 12.7p 17.4p GROUP INVESTMENT PORTFOLIO Six months ended 30 June 2004 Company Nature of Business Valuation Percentage of portfolio £'000 % Liberty International plc Property 4,490 13.39 Prudential plc Life Assurance 3,798 11.33 Electra Investment Trust plc Investment Trust 2,387 7.12 RIT Capital Partners plc Investment Trust 2,211 6.59 The Alliance Trust plc Investment Trust 2,021 6.03 Securities Trust of Scotland plc Investment Trust 1,827 5.45 Dunedin Income Growth Investment Trust plc Investment Trust 1,715 5.11 Investment Trust plc British Assets Trust plc Investment Trust 1,493 4.45 Matrix Chatham Maritime Trust Enterprise Zone Trust 1,250 3.73 St. James Place Capital-Unit Trust Unit Trust 1,009 3.01 Murray International Trust plc Investment Trust 754 2.25 Lloyds TSB plc Banks retail 734 2.19 Geron Corporation Inc USA 666 1.99 The Scottish American Investment Investment Trust 620 1.85 Company plc The Throgmorton Trust plc Investment Trust 505 1.51 Rothschilds Continuation Finance - Notes Financial 469 1.40 Invesco Income Growth Trust plc Investment Trust 450 1.34 Shires Income plc Investment Trust 409 1.22 British Sky Broadcasting Group PLC Media 404 1.20 Royal & Sun Alliance Insurance Group Insurance - Non-Life 400 1.19 PLC - Cumulative Irredeemable Preference 20 Largest investments 27,612 82.35 Other investments (number of holdings : 70) 5,917 17.65 Total investments 33,529 100.00 GROUP BALANCE SHEET Six months ended 30 June 2004 30 30 31 June June December 2004 2003 2003 £'000 £'000 £'000 FIXED ASSETS Investments 33,529 29,588 32,482 CURRENT ASSETS Debtors 229 554 162 Cash at bank and in hand 1,183 722 1,581 1,412 1,276 1,743 CREDITORS: amounts falling due within one year (1,314) (849) (981) NET CURRENT ASSETS 98 427 762 CREDITORS: Amounts falling due after more than one - - - year Net assets 33,627 30,015 33,244 33,627 30,015 33,244 CAPITAL AND RESERVES Called up share capital - ordinary 25,000 25,000 25,000 - preference 10,000 10,000 10,000 Capital reserve - realised 12,065 14,595 14,824 Capital reserve - (15,208) (21,388) (18,396) unrealised Profit and loss account 1,770 1,808 1,816 33,627 30,015 33,244 GROUP CASH FLOW STATMENT Six months ended 30 June 2004 6 months 6 months Year to 30 to 30 ended 31 June June December 2004 2003 2003 £'000 £'000 £'000 Net cash inflow from 613 473 1,726 operating activities Servicing of finance - interest paid - (30) (30) - preference dividends paid (175) (175) (350) Taxation paid - (246) (267) Investment purchases (1,711) (1,635) (4,605) Investment sales 1,625 1,291 4,563 Equity dividends paid (750) (750) (1,250) Decrease in cash (398) (1,072) (213) NOTES TO THE GROUP RESULTS Six months ended 30 June 2004 1. ACCOUNTING POLICIES The results are based on unaudited Group consolidated accounts prepared under the historical cost convention as modified by the revaluation of investments. The results have been prepared in accordance with applicable Accounting Standards, with the Statement of Recommended Practice, "Financial Statements of Investment Trust Companies" and accounting policies consistent with preceding annual accounts. 2. TOTAL INCOME 6 months 6 months Year to 30 to 30 ended 31 June June December 2004 2003 2003 £'000 £'000 £'000 Turnover - film revenue 71 69 154 Income from investments 694 765 1,732 Interest receivable 34 18 37 Other income 48 51 90 847 903 2,013 3. DIVIDENDS 6 months to 30 June 2004 6 months to 30 June 2003 Pence per Pence per share £ share £ Ordinary shares - interim 2.1 525,000 2.0 500,000 Preference shares - fixed 1.75 175,000 1.75 175,000 700,000 675,000 The dividends on ordinary shares are based on 25,000,000 ordinary £1 shares. Dividends on preference shares are based on 10,000,000 non-voting 3.5% convertible preference shares of £1. The holders of the 3.5% convertible preference shares will be paid a dividend of £175,000 being 1.75p per share. The payment will be made on the same date as the dividend to the ordinary shareholders. 4. RETURN PER ORDINARY SHARE 6 months 6 months Year to 30 to 30 ended 31 June June December 2004 2003 2003 £'000 £'000 £'000 Standard earnings per share Calculated on the basis of: Return after taxation and 479 536 1,294 preference dividends Ordinary shares in issue 25,000 25,000 25,000 Fully diluted earnings per share Calculated on the basis of: Return after taxation 654 711 1,644 Ordinary and preference shares in issue 35,000 35,000 35,000 Diluted earnings per share is calculated taking into account the preference shares which are convertible, under certain conditions, at any time during the period 1 January 2006 to 31 December 2025 (both dates inclusive). 5. NET ASSET VALUE ATTRIBUTABLE TO EACH SHARE Basic net asset value attributable to each share has been calculated by reference to 25,000,000 ordinary shares, and group net assets attributable to shareholders as follows: 30 30 31 June June December 2004 2003 2003 £'000 £'000 £'000 Total net assets 33,627 30,015 33,244 Less preference shares (10,000) (10,000) (10,000) Net assets attributable to ordinary shareholders 23,627 20,015 23,244 In both cases the effective net assets of the group have been calculated taking investments at their market value. Diluted net asset value is calculated taking into account the preference shares which are convertible, under certain conditions, at any time during the period 1 January 2006 to 31 December 2025 (both dates inclusive). 6. The financial information set out above is unaudited and does not constitute statutory accounts within the meaning of section 240 of the Companies Act 1985. Statutory accounts for the year ended 31 December 2003, which received an unqualified auditors' report, have been filed with the Registrar of Companies. 7. The Interim Report will be sent to the company's shareholders shortly, and members of the public may obtain a copy at that time on application to the company's registered office. British & American Investment Trust Plc

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