Interim Results

BRITISH & AMERICAN INVESTMENT TRUST PLC CONSOLIDATED STATEMENT OF CHANGES IN EQUITY Unaudited Six months ended 30 June 2005 Retained Share earnings Total £'000 £'000 capital £'000 Balance at 31 December 2004 35,000 2,869 37,869 Profit for the period - 3,035 3,035 Ordinary dividend paid - (775) (775) Preference dividend paid - (175) (175) Balance at 30 June 2005 35,000 4,954 39,954 Unaudited Six months ended 30 June 2004 Restated (see note 9) Retained Share earnings Total £'000 £'000 capital £'000 Balance at 31 December 2003 35,000 (854) 34,146 Profit for the period - 1,046 1,046 Ordinary dividend paid - (750) (750) Preference dividend paid - (175) (175) Balance at 30 June 2004 35,000 (733) 34,267 Unaudited+ Year ended 31 December 2004 Restated (see note 8) Retained Share earnings Total £'000 £'000 capital £'000 Balance at 31 December 2003 35,000 (854) 34,146 Profit for the period - 5,348 5,348 Ordinary dividend paid - (1,275) (1,275) Preference dividend paid - (350) (350) Balance at 31 December 2004 35,000 2,869 37,869 Unaudited Unaudited 30 Unaudited+ 30 June June 31 December 2005 2004 2004 Restated Restated (see note 9) (see note 8) £'000 £'000 £'000 Non current assets Investments - fair value through profit or loss (note 1) 36,524 33,469 35,610 Current assets Other receivables 391 229 187 Cash and cash equivalents 3,495 1,183 2,227 3,886 1,412 2,414 Total assets 40,410 34,881 38,024 Current liabilities Other payables (456) (614) (155) Total assets less current liabilities 39,954 34,267 37,869 Net assets 39,954 34,267 37,869 Equity attributable to equity holders Called up ordinary share capital 25,000 25,000 25,000 Convertible preference share capital 10,000 10,000 10,000 Retained earnings 4,954 (733) 2,869 Total equity 39,954 34,267 37,869 Unaudited Unaudited Unaudited+ 6 months to 6 months Year 30 June to 30 June ended 2005 2004 31 December Restated 2004 £'000 £'000 Restated £'000 Net cash inflow from operating activities 1,131 613 (note 11) 1,458 Net cash inflow/(outflow) from investing activities 1,087 (86) 813 Net cash inflow before financing 2,218 527 2,271 Net cash outflow from financing activities (950) (925) (1,625) Net increase/(decrease) in cash and cash 1,268 (398) equivalents 646 Cash and cash equivalents at start of period 2,227 1,581 1,581 Cash and cash equivalents at end of period 3,495 1,183 2,227 1. ACCOUNTING POLICIES Basis of preparation 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 International Financial Reporting Standards (IFRS), with the Statement of Recommended Practice, "Financial Statements of Investment Trust Companies" and accounting policies consistent with preceding annual accounts except as noted below. The disclosure required by IFRS 1 concerning the transition from UK GAAP to IFRS is given in notes 8, 9 and 10. These financial statements are presented in pounds sterling as this is the currency of primary economic environment in which the Group operates. The financial statements of the Group for the year ending 31 December 2005 will also be prepared in accordance with IFRS. Basis of consolidation The consolidated financial statements comprise the financial statements of the company and the entities controlled by the company (its subsidiaries) made up to 31 December each year. All intra-group transactions, balances, income and expenses are eliminated on consolidation. Significant accounting policies In accordance with the expected long term division of returns 50% (2004 - 100%) of investment management and related costs for the year is charged to the revenue account and 50% (2004 - nil%) is charged to capital reserves, net of any incremental corporation tax relief. Changes in accounting policies In order to better reflect the activities of an investment trust company, and in accordance with guidance issued by the AITC, supplementary information which analyses the Income Statement between items of a revenue and capital nature has been presented alongside the Income statement. In accordance with the Company's status as a UK investment company under section 266 of the Companies Act 1985, net capital returns may not be distributed by way of dividend. Additionally, the net revenue is the measure the directors believe appropriate in assessing the Group's compliance with certain requirements set out in section 842 of the Income and Corporation Taxes Act 1988. Investments have been valued at fair value through profit and loss in accordance with IAS 39 'Financial Instruments: Recognition and Measurement'. The effect is to move from a mid to bid basis of valuation for quoted investments with closing prices for SETS stocks being sourced from The London Stock Exchange. Fair value for unquoted investments is established using various valuation techniques. Where no reliable fair value can be estimated for unquoted investments they are carried at cost less any provision for impairment. This change has resulted in a reduction in value of investments and retained earnings of £36,000 (30 June 2004 - £60,000; 31 December 2004 - £53,000). Changes in the fair value of all investments held at fair value are recognised in the Income Statement. On disposal, realised gains and losses are also recognised in the Income Statement. Derivatives designated as fair value through profit and loss with a negative value are included in current liabilities. In compliance with IAS 10 'Events after the Balance Sheet Date', ordinary and preference dividends declared after the period end are no longer treated as a liability at the period end. The effect is to reduce creditors and increase revenue retained earnings by £1,000,000 (30 June 2004 - £700,000; 31 December 2004 - £950,000). Segmental reporting The directors are of the opinion that the Group is engaged in a single segment of business, that is investment business, and therefore no segmental reporting is provided. 2. INVESTMENT INCOME Unaudited Unaudited Unaudited+ 6 months to 6 months to Year ended 30 June 30 June 31 December 2005 2004 2004 Restated Restated £'000 £'000 £'000 Turnover - film revenue 72 71 197 Income from investments 1,015 694 1,513 Interest receivable 56 34 62 Other income 59 48 92 1,202 847 1,864 3. DIVIDENDS* Unaudited Unaudited 6 months to 30 June 2005 6 months to 30 June 2004 Pence per Pence per share £ share £ Ordinary shares - interim 2.3 575,000 2.1 525,000 Ordinary shares - special 1.0 250,000 0.0 - Preference shares - fixed 1.75 175,000 1.75 175,000 1,000,000 700,000 The directors have declared an interim dividend of 2.3p (2004 - 2.1p) per ordinary share, payable on 17 November 2005 to shareholders registered on 21 October 2005. The shares will be quoted ex-dividend on 19 October 2005. The directors have further declared a special dividend of 1.0p (2004 - nil) per ordinary share, payable on 15 December 2005 to shareholders registered on 21 October 2005. The shares will be quoted ex-dividend on 19 October 2005. 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. * Dividends shown in the statement of changes in equity are those paid or approved in the period rather than declared. 4. EARNINGS PER ORDINARY SHARE Unaudited Unaudited Unaudited+ 6 months to 6 months Year ended 30 June to 30 June 31 December 2005 2004 2004 Restated Restated (see note 9) (see note 8) £'000 £'000 £'000 Basic earnings per share Calculated on the basis of: Net profit after preference dividends 887 479 1,082 Net capital profit 1,973 392 3,916 Net total earnings after preference dividends 2,860 871 4,998 Ordinary shares in issue 25,000 25,000 25,000 Fully diluted earnings per share Calculated on the basis of: Net revenue profit 1,062 654 1,432 Net capital profit 1,973 392 3,916 Profit after taxation 3,035 1,046 5,348 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 TO ORDINARY SHARES ON A ONE FOR ONE BASIS, 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: Unaudited Unaudited Unaudited+ 30 June 30 June 31 December 2004 2004 2005 Restated Restated £'000 £'000 £'000 Total net assets 39,954 34,267 37,869 Less convertible preference shares (10,000) (10,000) (10,000) Net assets attributable to ordinary shareholders 29,954 24,267 27,869 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 to ordinary shares on a one for one basis, under certain conditions, at any time during the period 1 January 2006 to 31 December 2025 (both dates inclusive). The 3.5% cumulative convertible preference shares issued by the company have been classified as equity instruments in accordance with IAS 32 - 'Financial Instruments - Disclosure and Presentation'. The directors are of the opinion that due to the fact the company has an unconditional right to avoid paying the preference dividend, the company has no contractual obligation to pay these dividends and thus they are correctly classified as equity and do not represent a financial liability. 6. COMPARATIVE INFORMATION The financial information for the year ended 31 December 2004 has been derived from audited UK GAAP information adjusted for the impact of IFRS and is therefore unaudited. The financial information for the period ended 30 June 2004 has been derived from unaudited UK GAAP information adjusted for the impact of IFRS. The interim information, together with the comparative information contained in this report for the year ended 31 December 2004, does not constitute statutory accounts within the meaning of section 240 of the Companies Act 1985. However, the information has been reviewed by the Company's auditors, Deloitte & Touche LLP, and their report appears on page 21. The UK GAAP statutory accounts for the year ended 31 December 2004 have been reported on by the Company's auditors, Deloitte & Touche LLP, and delivered to the Registrar of Companies. The report of the auditors on those accounts was unqualified and did not contain a statement under section 237(2) or (3) of the Companies Act 1985. 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. 7. RETAINED EARNINGS The table below shows the movement in the retained earnings analysed between revenue and capital items. Unaudited Unaudited Unaudited Revenue Capital Total £'000 £'000 £'000 At 1 January 2005 (as restated) 2,548 321 2,869 Movement during the period: Net profit for the period 1,062 1,973 3,035 Dividends paid on ordinary shares (775) - (775) Dividends paid on preference shares (175) - (175) At 30 June 2005 2,660 2,294 4,954 Analysis of capital item Unaudited Unaudited Unaudited Realised Unrealised Total £'000 £'000 £'000 At 1 January 2005 (as restated) 13,114 (12,793) 321 Movement during the period: Net profit for the period 198 1,775 1,973 At 30 June 2005 13,312 (11,018) 2,294 8. Restatement of balances for the year ended 31 December 2004 Balance Sheet Audited Previously reported Effect of Restated (UKGAAP) transition 31 December to (IFRS) 2004 IFRS 31 December Notes £'000 2004 £'000 £'000 Non current investments 1 (53) 35,663 35,610 Current assets - 2,414 2,414 Current liabilities 2 950 (1,105) (155) Total assets less current liabilities 36,972 37,869 Net assets 36,972 37,869 Equity attributable to equity holders Called up share capital - ordinary shares - 25,000 25,000 - preference shares - 10,000 10,000 Capital reserves - realised 3 (13,114) 13,114 - Capital reserves - unrealised 3 12,740 (12,740) - Revenue reserve/Retained earnings 1,2,3 1,271 1,598 2,869 Total equity 36,972 37,869 Notes 1. Investments (excluding derivatives) are designated as held at fair value under IFRS and are carried at bid prices. Previously, under UK GAAP approximately 77 percent by value were already carried at bid equivalent with the balance being carried at mid prices or cost. This results in a downward revaluation of £53,000 in investments and a decrease in retained earnings. 2. No provision has been made for the final dividend on the ordinary and preference shares for the year ended 31 December 2004 of £950,000. Under IFRS the final dividend is not recognised until approved by shareholders. 3. Under IFRS there is no differentiation between capital and revenue gains and losses. The previous headings of Capital reserve - realised and Capital reserve - unrealised are now included under the heading Retained earnings. 8. Restatement of balances for the year ended 31 December 2004 (continued) Reconciliation of the Statement of Total Return to the 2004 Income Statement for the year ended 31 December 2004 Notes £'000 Total transfer to reserves per the Statement of Total Return (UKGAAP) 3,728 Add back ordinary and preference dividends paid and proposed 1 1,650 Investments held at fair value changed from mid to bid basis at 23 31 December 2003 Investments held at fair value changed from mid to bid basis at 2 (53) 31 December 2004 Net return per the Income Statement (IFRS) 5,348 Notes 1. Under IFRS ordinary and preference dividends declared and paid during the period are dealt with through the Statement of Changes in Equity. 2. The investment valuations at 31 December 2003 and 31 December 2004 are valued at fair value under IFRS calculated at bid price rather than mid price where not already the case. These values are different from the previous valuations by £23,000 and £53,000 respectively. Reconciliation of the Cash Flow Statement Audited for the year ended 31 December 2004 Previously reported Effect of Adjusted (UKGAAP) transition cash flows cash flows to (IFRS) 2004 IFRS 2004 £'000 £'000 Notes £'000 Net cash inflow from operating activities 1 1,458 - 1,458 Returns on investments and servicing of 2 (350) 350 - finance Taxation - - - Net cash inflow from financial investment 813 - 813 Equity dividends paid 2 (1,275) 1,275 - Net cash inflow before financing 646 1,625 2,271 Financing 2 - (1,625) (1,625) Increase in cash 646 - 646 Notes 1. Bank interest and taxation are now analysed within operating activities. 2. Ordinary and preference dividends paid are now analysed within financing. 9. Restatement of balances for the period ended 30 June 2004 Balance Sheet Audited Previously reported Effect of Restated (UKGAAP) transition (IFRS) 30 June to 30 June 2004 IFRS 2004 £'000 £'000 Notes £'000 Non current investments 1 33,529 (60) 33,469 Current assets 1,412 - 1,412 Current liabilities 2 (1,314) 700 (614) Total assets less current liabilities 33,627 34,267 Net assets 33,627 34,267 Equity attributable to equity holders Called up share capital - ordinary shares 25,000 - 25,000 - preference shares 10,000 - 10,000 Capital reserves - realised 3 12,065 (12,065) - Capital reserves - unrealised 3 (15,208) 15,208 - Revenue reserve/Retained earnings 1,2,3 1,770 (2,503) (733) Total equity 33,627 34,267 Notes 1. Investments (excluding derivatives) are designated as held at fair value under IFRS and are carried at bid prices. Previously, under UK GAAP approximately 76 percent by value were already carried at bid equivalent with the balance being carried at mid prices or cost. This results in a downward revaluation of £60,000 in investments and a decrease in retained earnings. 2. No provision has been made for the interim dividend on the ordinary and preference shares for the period ended 30 June 2004 of £700,000 as this was not declared until after the balance sheet date. Under IFRS the interim dividend is not recognised until declared. 3. Under IFRS there is no differentiation between capital and revenue gains and losses. The previous headings of Capital reserve - realised and Capital reserve - unrealised are now included under the heading Retained earnings. 9. Restatement of balances for the period ended 30 June 2004 (continued) Reconciliation of the Statement of Total Return to the 2004 Income Statement for the period ended 30 June 2004 Notes £'000 Total transfer to reserves per the Statement of Total Return (UKGAAP) 383 Add back ordinary and preference dividends paid and proposed 1 700 Investments held at fair value changed from mid to bid basis at 23 31 December 2003 Investments held at fair value changed from mid to bid basis at 2 (60) 30 June 2004 Net return per the Income Statement (IFRS) 1,046 Notes 1. Under IFRS ordinary and preference dividends declared and paid during the period are dealt with through the Statement of Changes in Equity. 2. The investment valuations at 31 December 2003 and 30 June 2004 are valued at fair value under IFRS calculated at bid price rather than mid price where not already the case. These values are different from the previous valuations by £23,000 and £60,000 respectively. Reconciliation of the Cash Flow Statement Audited for the period ended 30 June 2004 Previously reported Effect of Adjusted (UKGAAP) transition cash flows cash flows to (IFRS) 2004 IFRS 2004 £'000 £'000 Notes £'000 Net cash inflow from operating activities 1 613 - 613 Returns on investments and servicing of 2 (175) 175 - finance Taxation - - - Net cash outflow from financial investment (86) - (86) Equity dividends paid 2 (750) 750 - Net cash (outflow)/inflow before financing (398) 925 527 Financing 2 - (925) (925) Decrease in cash (398) - (398) Notes 1. Bank interest and taxation are now analysed within operating activities. 2. Ordinary and preference dividends paid are now analysed within financing. 10. Restatement of opening balances as at 31 December 2003 Balance Sheet Audited Previously Effect of reported transition Restated (UKGAAP) to (IFRS) 31 December IFRS 31 December 2003 2003 Notes £'000 £'000 £'000 Non current investments 1 (23) 32,482 32,459 Current assets - 1,743 1,743 Current liabilities 2 925 (981) (56) Total assets less current liabilities 33,244 34,146 Net assets 33,244 34,146 Equity attributable to equity holders Called up share capital - ordinary shares - 25,000 25,000 - preference shares - 10,000 10,000 Capital reserves - realised 3 (14,824) 14,824 - Capital reserves - unrealised 3 18,396 (18,396) - Revenue reserve/Retained earnings 1,2,3 (2,670) 1,816 (854) Total equity 33,244 34,146 Notes 1. Investments (excluding derivatives) are designated as held at fair value under IFRS and are carried at bid prices. Previously, under UK GAAP approximately 76 percent were already carried at bid equivalent with the balance being carried at mid prices or cost. This results in a downward revaluation of £23,000 in investments and a decrease in retained earnings. 2. No provision has been made for the final dividend on the ordinary and preference shares for the year ended 31 December 2003 of £925,000. Under IFRS the final dividend is not recognised until approved by shareholders. 3. Under IFRS there is no differentiation between capital and revenue gains and losses. The previous headings of Capital reserve - realised and Capital reserve - unrealised are now included under the heading Retained earnings. 11. Reconciliation of profit before tax to net cash inflow from operating activities Unaudited Unaudited Unaudited+ 6 months 6 months Year ended 31 to 30 June to 30 June December 2004 2005 2004 Restated Restated (see note 8) (see note 9) £'000 £'000 £'000 Profit on ordinary activities before tax 3,041 1,053 5,403 Gains on investments designated as fair value through (2,039) (392) profit or loss* (3,916) Scrip dividends (2) (2) (4) Increase in payables 327 2 19 Increase in receivables (197) (46) (40) Tax on film revenue (1) (2) (4) UK tax recovered 2 - - Net cash inflow from operating activities 1,131 613 1,458 * The gains on investments held at fair value are after deducting purchase transaction costs. These costs are separately identified in the Income Statement. Introduction We have been instructed by the company to review the financial information for the six months ended 30 June 2005 which comprises the consolidated income statement, the consolidated statement of changes in equity, the consolidated balance sheet, the consolidated cash flow statement and related notes 1 to 11. We have read the other information contained in the interim report and considered whether it contains any apparent misstatements or material inconsistencies with the financial information. This report is made solely to the company in accordance with Bulletin 1999/4 issued by the Auditing Practices Board. Our work has been undertaken so that we might state to the company those matters we are required to state to them in an independent review report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company, for our review work, for this report, or for the conclusions we have formed. Directors' responsibilities The interim report, including the financial information contained therein, is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the interim report in accordance with the Listing Rules of the Financial Services Authority which requires that the accounting policies and presentation applied to the interim figures are consistent with those applied in preparing the preceding annual accounts except where any changes, and the reasons for them, are disclosed. International Financial Reporting Standards As disclosed in note 1, the next annual financial statements of the Group will be prepared in accordance with International Financial Reporting Standards as adopted for use in the EU. Accordingly, the interim report has been prepared in accordance with the recognition and measurement criteria of IFRS and the disclosure requirements of the Listing Rules. Review work performed We conducted our review in accordance with the guidance contained in Bulletin 1999/4 issued by the Auditing Practices Board for use in the United Kingdom. A review consists principally of making enquiries of group management and applying analytical procedures to the financial information and underlying financial data and, based thereon, assessing whether the accounting policies and presentation have been consistently applied unless otherwise disclosed. A review excludes audit procedures such as tests of controls and verification of assets, liabilities and transactions. It is substantially less in scope than an audit performed in accordance with International Standards on Auditing (UK and Ireland) and therefore provides a lower level of assurance than an audit. Accordingly, we do not express an audit opinion on the financial information. Review conclusion On the basis of our review we are not aware of any material modifications that should be made to the financial information as presented for the six months ended 30 June 2005. Deloitte & Touche LLP Chartered Accountants London 28 September 2005 British & American Investment Trust Plc

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