Interim Results

Unaudited Interim Report

30 June 2006

Registered number : 433137

Directors
J Anthony V Townsend (Chairman)
Jonathan C Woolf (Managing Director)
Dominic G Dreyfus (Non-executive)
Ronald G Paterson (Non-executive)

Registered office
Wessex House
1 Chesham Street
London SW1X 8ND
Telephone: [phone]

Chairman's Statement

I report our results for the 6 months to 30 June 2006.

Revenue

The  profit on revenue account before tax amounted to £1.4million (30 June 2005: £1.1 million), an increase  of
27  percent. As in the previous year, this increase reflects the receipt of special dividends from a number  of
our investee companies over the period.

Total profit before taxation, which includes income and both realised and unrealised capital appreciation,  was
£1.4  million  (£3.0  million). The capital element of this total was represented by £0.2 million  of  realised
losses  and  £0.3  million of unrealised gains. The net profit during the period was therefore composed  almost
entirely of income return.

The  earnings  per  ordinary share were 4.7 pence on an undiluted basis (3.5 pence) and 3.9 pence  on  a  fully
diluted basis (3.0 pence).

Net Assets

Group  net  assets  were £43.2 million (£42.8 million, at 31 December 2005), an increase of 1.0  percent.  This
compares to an increase over the same six month period of 3.8 percent in the FTSE 100 share and 4.2 percent  in
the  All  Share index. This underperformance was principally due to relative declines in the value  of  our  US
investments which form a greater part of our portfolio than before together with weakness in the US dollar,  as
noted more fully below. The net asset value per £1 ordinary share was 133 pence (prior charges deducted at par)
and 123 pence on a fully diluted basis.

Dividends

We intend to pay an interim dividend of 2.5 pence per ordinary share on 16 November 2006 to shareholders on the
register  at  18 October 2006. This represents an increase of 8.7 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  addition,  we
intend  to  pay  a  special dividend of 1 penny per ordinary share on 14 December 2006 to shareholders  on  the
register  at 18 October 2006 in recognition of the special dividends received from investee companies over  the
period.

Discount and performance

Our  discount has remained relatively stable over the period at between 4 and 8 percent which is in  line  with
the  market for smaller size income and growth investment trusts. However, our yield at approximately 5 percent
(excluding  special  dividends)  is  considerably higher than most such trusts,  which  should  be  helpful  in
maintaining or even narrowing discount levels in the future.

Our  higher levels of dividend distribution have enabled us to out-perform the trusts in the AITC UK Income and
Growth  sector on share price total return. Over one year we are ranked first of 26 such trusts  and  over  two
years we are ranked second.

As  at  25  September,  group net assets were £43.4 million, an increase of 0.6 percent  since  30  June.  This
compares  with a decrease of 0.6 percent in the FTSE 100 index and an increase of 0.1 percent in the All  Share
index  over the same period, and is equivalent to 134 pence per share (prior charges deducted at par)  and  124
pence per share on a fully diluted basis.

Anthony Townsend

MANAGING DIRECTOR'S REPORT

Performance

In  the  six  months to 30 June 2006, the UK equity market advanced overall by 4 percent. However, this  result
masks  a  considerably  more volatile movement, particularly in the second quarter. Prices  rose  strongly  and
consistently in the first four months across all sectors lead by the natural resources sector, peaking in early
May  to  register a gain of 8.6 percent since the beginning of the year. Similar growth patterns were  seen  in
equity  markets globally including in the leading US stocks, although NASDAQ quoted stocks experienced a  lower
level of increase by comparison.

In  May,  a  dramatic correction in equity prices occurred over a period of just a few days when the UK  equity
market  fell by 9.2 percent, taking the indices back below their year opening levels. Leading stocks in the  US
declined  similarly  but NASDAQ listed stocks declined significantly further. This general correction  was  not
unexpected  given  the unusually high gains of the previous months and was precipitated by  a  perception  that
inflationary  trends were returning and the high levels of growth in China which had contributed  to  unusually
large  rises  in  commodity  prices and therefore natural resource company stock values,  would  not  continue.
Commodity prices fell back accordingly together with natural resource company stock prices, leading the markets
down  as  well  given  their  weightings in the indices. After this rapid correction,  the  markets  stabilised
relatively quickly, however, and resumed a pattern of albeit unsteady growth to register an overall gain by the
period end.

Our  portfolio  under-performed the market over the period by 3 percent, despite out-performing  in  the  first
quarter.  This  under-performance  in the second quarter was principally  due  to  price  weakness  in  our  US
investments which tracked the relative declines in the NASDAQ, noted above. In addition, valuations of  our  US
holdings  were  affected by a significant decline in the US dollar of 7 percent over the period.  As  noted  in
previous  reports,  our under-weighting in oil and commodity stocks may tend to result in a  level  of  capital
under-performance  in  current markets. Furthermore, our increased holdings of US  dollar  denominated  NASDAQ-
listed  stocks  will also give rise to an amount of relative volatility when measured against the  UK  indices.
Since  the  period end, the portfolio has slightly out-performed the FTSE 100 and All Share indices,  as  noted
above.

Dividends/Total return

As  a result of special dividends received during the period, we are able to repeat again this year our special
dividend  distribution of 1p per share at the interim stage. Together with the interim  dividend  of  2.5p  per
share, this results in an income return to shareholders of approximately 3 percent on market price for the half
year  period.  Total  portfolio return over the period, after adding back dividends for  the  period,  was  3.3
percent  compared  to  5.2  percent  from the leading stocks index. As noted  above,  our  levels  of  dividend
distribution and discount have enabled us to outperform on the basis of share price total return.

Outlook

The  general  growth  trends seen in most of the developed economies in recent years are expected  to  continue
although  at  lower levels as resource costs escalate and monetary tightening continues or quickens  to  offset
inflation expectations. Equity markets are expected to remain generally firm but are increasingly vulnerable to
external shocks arising from global political and environmental events.

Since June, equity markets have maintained a generally rising trend, despite the political uncertainties in the
Middle  East over the summer months. UK equities, however, have not regained the year highs registered  in  the
Spring  and  remain 3 percent below this peak. Our portfolio has performed in line with the UK and  US  indices
over the period.

We  will  continue to maintain our generalist investment approach in the UK and remain invested in specifically
identified stocks in the USA.

Jonathan C Woolf
28 September 2006

British & American Investment Trust Plc