BRITISH & AMERICAN INVESTMENT
TRUST PLC |
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FINANCIAL HIGHLIGHTS |
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For the six months ended 30 June
2017 |
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Unaudited
6 months
to 30 June
2017
£’000 |
Unaudited
6 months
to 30 June
2016
£’000 |
Audited
Year ended
31 December
2016
£’000 |
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Revenue |
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Return before tax |
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1,152 |
1,179 |
1,474 |
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_________ |
_________ |
_________ |
Earnings per £1 ordinary shares –
basic (note 5) |
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3.97p |
4.06p |
4.63p |
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_________ |
_________ |
_________ |
Earnings per £1 ordinary shares –
diluted (note 5) |
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3.34p |
3.40p |
4.31p |
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_________ |
_________ |
_________ |
Capital |
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Total equity |
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21,863 |
21,377 |
22,682 |
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_________ |
_________ |
_________ |
Revenue reserve (note 9) |
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1,474 |
2,440 |
1,906 |
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_________ |
_________ |
_________ |
Capital reserve (note 9) |
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(14,611) |
(16,063) |
(14,224) |
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_________ |
_________ |
_________ |
Net assets per ordinary share (note
6) |
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- Basic |
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£0.47 |
£0.46 |
£0.51 |
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_________ |
_________ |
- Diluted |
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£0.62 |
£0.61 |
£0.65 |
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_________ |
_________ |
_________ |
Diluted net assets per ordinary share at 27 September 2017 |
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£0.56 |
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_________ |
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Dividends* |
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Dividends per ordinary share (note
4) |
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2.7p |
2.7p |
8.4p |
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_________ |
_________ |
_________ |
Dividends per preference share (note
4) |
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1.75p |
1.75p |
3.5p |
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_________ |
_________ |
_________ |
* Dividends declared for the period. Dividends shown in
the accounts are, by contrast, dividends paid or
approved
in the period.
Basic net assets and earnings per share are calculated using a
value of par for the preference shares. Consequently, when the net
asset value attributed to ordinary shares remains below par the
diluted net asset value will show a higher value than the basic net
asset value.
Copies of this report will be posted to shareholders and be
available for download at the company’s website:
www.baitgroup.co.uk.
INVESTMENT PORTFOLIO |
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As at 30 June 2017 |
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Company |
Nature of Business |
Valuation
£’000 |
Percentage of
portfolio
% |
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Geron Corporation (USA) |
Biomedical |
6,693 |
21.61 |
Biotime Inc (USA) |
Biotechnology |
3,565 |
11.51 |
St. James’s Place Global Equity |
Unit Trust |
2,637 |
8.51 |
Dunedin Income Growth |
Investment Trust |
2,628 |
8.48 |
Asterias Biotherapeutics (USA) |
Pharmaceuticals |
2,189 |
7.06 |
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________ |
________ |
Scottish American Investment
Company |
Investment Trust |
1,406 |
4.54 |
Merchants Trust |
Investment Trust |
1,273 |
4.11 |
Invesco Income Growth Trust |
Investment Trust |
915 |
2.95 |
Aberdeen Diversified Income &
Growth |
Investment Trust |
838 |
2.70 |
Shires Income |
Investment Trust |
498 |
1.61 |
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________ |
________ |
Jupiter Income Trust |
Unit Trust |
280 |
0.91 |
Angle |
Support Services |
186 |
0.60 |
JZ Capital Partners |
Investment Trust |
174 |
0.56 |
Oncocyte (USA) |
Biotechnology |
169 |
0.55 |
Barclays – 6% Non-Cum. Callable
Pref.Shares |
Bank retail |
149 |
0.48 |
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________ |
________ |
Vodafone Group |
Telecommunications |
135 |
0.44 |
Braemar Shipping Services |
Transport |
129 |
0.42 |
Invesco Perpetual Enhanced |
Investment Trust |
92 |
0.30 |
Aberdeen Smaller |
Investment Trust |
87 |
0.28 |
B.S.D. Crown |
Software and computer services |
83 |
0.27 |
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________ |
________ |
20 Largest investments (excluding
subsidiaries) |
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24,126 |
77.89 |
Investment in subsidiaries |
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6,569 |
21.20 |
Other investments (number of
holdings : 16) |
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282 |
0.91 |
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________ |
________ |
Total investments |
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30,977 |
100.00 |
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________ |
________ |
Unaudited Interim Report
As at 30 June 2017
Registered number : 433137
Directors |
Registered office |
J Anthony V Townsend
(Chairman) |
Wessex House |
Jonathan C Woolf
(Managing Director) |
1 Chesham Street |
Dominic G Dreyfus
(Non-executive) |
London SW1X 8ND |
Ronald G Paterson
(Non-executive) |
Telephone: 020 7201
3100 |
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Website:
www.baitgroup.co.uk |
Chairman’s Statement
I report our results for the 6 months to 30 June 2017.
Revenue
The profit on the revenue account before tax amounted to £1.1
million (30 June 2016: £1.2 million),
a decrease of 2.3 percent. This relatively small difference
was despite a somewhat larger reduction in investment income of
16.3 percent, due to lower levels of dividends received in the
period compared to the elevated levels received in 2016.
Lower levels of costs and foreign exchange losses in the period
helped to reduce the effect of this on profit before tax.
To assist shareholders in forming some opinion on the earnings
performance of the group as a whole, we show in Note 3 to the
accounts the film and other income of our subsidiaries. This shows
that film income of £36,000
(30 June 2016: £18,000) and
property unit trust income of £7,000 (30
June 2016: £8,000) was received.
A loss of £0.3 million (30 June 2016:
£8.3 million loss) was registered on the capital account before
capitalised expenses, incorporating a realised loss of £1.5 million
(30 June 2016: £2.1 million loss) and
an unrealised gain of £1.2 million (30 June
2016: £6.2 million loss).
Revenue earnings per ordinary share were 4.0
pence on an undiluted basis (30 June
2016: 4.1 pence) and
3.3 pence on a fully diluted basis
(30 June 2016: 3.4 pence).
Net Assets and performance
Company net assets were £21.9 million (£22.7 million, at
31 December 2016), a decrease of 3.6
percent. Over the same six month period, the FTSE 100 index
increased by 2.7 percent and the All Share index increased by 3.7
percent. On a total return basis, after adding back dividends
paid during the period, company net assets increased by 3.4 percent
compared to an increase of the total return on the FTSE 100 index
of approximately 5.7 percent. The net asset value per £1
ordinary share was 47 pence (prior
charges deducted at par) and 62 pence
on a fully diluted basis.
The decrease in net assets relative to our benchmark reflected
losses of 13 percent and 23 percent in our second and third largest
US holdings in Biotime Inc and Asterias Biotherapeutics
respectively. By contrast, our largest US holding, Geron
Corporation, gained by 34 percent. These moves compared to a gain
in the NASDAQ index of 13 percent over the period and represented
for Geron a partial recovery from the large fall of 57 percent
recorded in 2016. The underperformance by Biotime and
Asterias followed equity fundraising issues in the first half of
the year in those stocks. In addition, the US dollar depreciated
against Sterling by 6 percent over the period following its
significant gain of 16 percent in the previous year. Our UK
investments broadly tracked changes in our benchmark index.
The multi-year growth in US equity prices sustained since the
end of the recession in 2009 was given a further significant boost
in November 2016 by the election of
Donald Trump in anticipation of his
reflationary agenda. This accelerated level of growth
continued through into the first quarter of 2017 resulting in
record highs being reached by the leading indices in the
USA and the UK until doubts about
the administration’s ability to deliver its programme of fiscal
stimulus and infrastructure investment began to surface in
March. This followed its failure to persuade a Republican
controlled Congress to pass its first measure relating to
healthcare, resulting in a serious breakdown in relations between
the White House and Congress. Equity markets flattened at
this point but nevertheless remained steady as expectations of
further US dollar interest rate increases which had previously been
expected for the rest of the year began to be scaled back, giving
renewed support to equity markets. At the same time, this
placed downward pressure on the US dollar, as noted above.
In the UK, this pattern was somewhat interrupted by the
unexpected calling of a snap general election in April. This
initially pushed the UK equity market up markedly by over 5 percent
in the second quarter on expectations of a strongly increased
majority for the Conservative party, which was considered helpful
in the context of the Brexit process and negotiations.
However, the unexpected result which lost the Conservatives their
overall majority reversed much of those gains by the end of
June. Despite this, however, and other uncertainties arising
out of the Brexit situation, equity levels in the UK have remained
close to their historical highs, supported by continued low
interest rates, weak Sterling and accommodative monetary policy
from the Bank of England in
anticipation of significantly weaker levels of economic growth
going forward.
Dividend
We intend to pay an interim dividend of 2.7
pence per ordinary share on 30
November 2017 to shareholders on the register at
10 November 2017. This represents an
unchanged dividend from last year’s interim dividend. A preference
dividend of 1.75 pence will be paid
to preference shareholders on the same date.
Board
I am very pleased to welcome David
Seligman to our board. David spent 25 years at S.G. Warburg,
one of the City’s leading merchant banks, and its successor firms,
as a senior director in corporate finance and where he created and
ran the private equity advisory business. In 2003, he formed
Seligman Private Equity Select, a private equity fund-of-funds and
secondaries manager, which he continues to run. He brings
many years of experience in corporate finance and asset management
which will complement our already very well experienced board of
directors.
Outlook
In April I commented that a number of non-financial drivers
could affect market performance in surprising ways this year and
into the medium term. These drivers included the high number
of elections in Europe with the
potential to usher in more anti-government populist sentiment,
Brexit and the unpredictability of the Trump administration.
Markets have nevertheless remained steady in the interim, if no
longer on their previous growth path.
While a number of the European election issues have now been
resolved in market friendly ways, other new challenges have
emerged, such as the growing political instability in South East Asia surrounding North Korea’s push
to complete its nuclear weapons programme with overt threats to the
USA together with China’s
determination to dominate in the South China Sea, a significantly
strengthened Euro threatening to stifle renascent economic growth
in Europe and interfere with the
ECB’s programme of slowly withdrawing monetary stimulus and a very
destructive hurricane season in the Caribbean and southern USA seeming to presage the long term economic
costs of global warming.
At the same time, the dysfunctional start to the Trump
presidency has weakened its ability to deliver its programme of
economic stimulus and tax reform in the USA, reversing the prospects of higher levels
of economic growth, risking adding substantially to an already
bloated national debt and scuppering any plans there might have
been to address the issue of income inequality which appears to be
producing increasing levels of social unease. In the UK, the
difficulties surrounding Brexit in the UK have placed significant
downward pressure on corporate investment and interest rates while
the terms of its exit and the country’s ensuing long term economic
prospects are negotiated.
Despite these looming and significant concerns, equity markets
in leading economies have remained close to their multi-year highs
with no signs of a major correction in prospect. Developing
country economies and markets have also showed strength in recent
months. This general market strength seems to be based on
continued expectations of modest growth in corporate earnings in
the USA and clear evidence now of
a recovery in corporate earnings in Europe together with the prospects for
continued low interest rates in these areas.
However, markets seem to be ignoring the unpredictable and long
tail risks facing global markets as noted above based simply on the
expectation of continued ultra low levels of interest rates which
have supported markets and inflated asset prices for some
considerable time. This has prompted much uneasy comment in
recent months from economists and market analysts worried about the
sustainability of the situation. Central Banks have proved
unable to push ahead with their plans to reduce emergency levels of
liquidity brought in following the recession of 2009 in any
meaningful way and as a result Central Bank balance sheets and
corporate and retail debt levels are stuck at historical high
levels. At some point, analysts argue, these imbalances
must be addressed and the longer it takes for this to happen the
more difficult the adjustment is likely to be.
While there have been many attempts to call the end of the
current bull market in recent years, as yet unsuccessfully, it is a
truism that the longer such market persists the more likely it is
about to correct. Given the already unprecedented levels of
imbalance in asset prices and debt, which will only be added to on
this path, the concern must be that when the market does eventually
unwind, whether through sheer exhaustion or from an as yet
unexpected event or series of events, it will be in a way which
causes significant disruption and damage to investment and asset
prices.
Against this background, we remain fully invested, but as
previously reported we have taken the opportunity to exit our fixed
income investments realising capital gains in the process and
maintain a portfolio balanced as to income primarily from
collective investment vehicles and growth from a targeted selection
of long term investments in US stocks.
As at 27 September, company net assets were £19.7 million, a
decrease of 9.7 percent since 30 June. This compares with no
change in the FTSE 100 index and an increase of 0.3 percent in the
All Share index over the same period, and is equivalent to
39 pence per share (prior charges
deducted at par) and 56 pence per
share on a fully diluted basis.
Anthony Townsend
29 September 2017
Managing Director’s Report
In the first six months of 2017 in the UK, the economic agenda
and political sentiment has been dominated by Brexit and the
calling of a snap general election. While in the USA and Europe the reflationary effects of the Trump
election and a long awaited recovery in Europe has held sway with their respective
markets and currencies reacting accordingly, in the UK the expected
economic cooling, increase in inflation and boost to exports on the
weaker pound which had not been apparent in the immediate aftermath
of the Brexit vote began to become apparent. As a
consequence, while investment sentiment and growth levels held up
reasonably well in the second half of 2016 with quarterly GDP
results still outperforming those in Europe, by the turn of the year, this
situation reversed with Europe
then growing faster than the UK, albeit from the lower accumulated
levels of previous years.
Against this backdrop, the equity market in the UK remained
relatively steady in the first three months of 2017 and did not
follow the exuberance seen in the USA after Trump’s election when the market
climbed 8 percent. It did, however, react in April upon the
calling of the snap general election, rising by 5 percent only to
fall back in June to its March levels following the unexpected
result which denied the Conservative party an overall majority in
Parliament, forcing them to agree a voting pact with a minor party
to stay in office.
This result and the subsequent voting pact arrangement
significantly weakened the government which until that point had
been pursuing a path of ‘hard Brexit’ in its exit negotiations with
the EU. This had put on the table the possibility of exiting
with no agreement on future trade relations in order to achieve a
complete break with the EU in the areas of border control, exit
costs and EU court jurisdiction. Since the election, however, the
government has had to mollify this stance and pursue a so called
‘softer Brexit’ which acknowledges ongoing financial obligations
and the implementation of a transition period post Brexit to avoid
a cliff edge effect.
This approach has been much more acceptable to the corporate
sector in the UK and although investment levels have weakened while
companies wait to see the outcome of the exit negotiations and some
have already decided to move their head offices to European
countries to guarantee continued EU access for their businesses,
there have also been some examples of significant new investment in
the UK by large international businesses and levels of corporate
investment still remain positive. The prospects for the UK
economy generally, however, are still inextricably bound up with
the outcome of the exit negotiations eventually agreed with the EU
irrespective of developments in the wider world.
Having divested our holdings of fixed interest £ sterling
investments, our portfolio is less exposed to the outcome of these
negotiations, being invested primarily in collective investment
vehicles which themselves are invested in leading stocks with
international rather than UK exposures and in growth stocks in the
USA on which we reported in detail
in our last annual report. Our policy of investing for income
and growth can therefore continue without being unduly affected by
developments whether political or economic from a UK
perspective. This does not mean that the portfolio would be
immune from the wider and longer term risks in global terms
described in the Chairman’s statement above, but we have operated
and positioned the portfolio over recent years in terms of asset
and currency exposure to minimise these risks, while continuing to
generate significant levels of total return for our
shareholders.
Jonathan C Woolf
29 September 2017
CONDENSED INCOME STATEMENT |
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Six
months ended 30 June 2017 |
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Unaudited
6 months to 30 June 2017 |
Unaudited
6 months to 30 June 2016
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Audited
Year ended 31 December 2016
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Note |
Revenue
return
£’000 |
Capital
return
£’000 |
Total
£’000 |
Revenue
return
£’000 |
Capital
return
£’000 |
Total
£’000 |
Revenue
return
£’000 |
Capital
return
£’000 |
Total
£’000 |
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Investment
income |
3 |
1,420 |
- |
1,420 |
1,696 |
- |
1,696 |
2,263 |
- |
2,263 |
Holding
gains/(losses) on investments at fair value through profit or
loss |
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- |
1,230 |
1,230 |
- |
(6,221) |
(6,221) |
- |
(4,134) |
(4,134) |
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Losses on disposal of
investments at fair value through profit or loss |
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- |
(1,487) |
(1,487) |
- |
(2,068) |
(2,068) |
- |
(2,081) |
(2,081) |
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Foreign exchange
gains/(losses) |
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17 |
17 |
34 |
(124) |
(55) |
(179) |
(143) |
(138) |
(281) |
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Expenses |
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(258) |
(133) |
(391) |
(366) |
(125) |
(491) |
(596) |
(267) |
(863) |
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_____ |
_____ |
_____ |
_____ |
_____ |
_____ |
_____ |
_____ |
_____ |
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Profit/(loss) before
finance costs and tax |
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1,179 |
(373) |
806 |
1,206 |
(8,469) |
(7,263) |
1,524 |
(6,620) |
(5,096) |
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Finance costs |
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(27) |
(14) |
(41) |
(27) |
(6) |
(33) |
(50) |
(16) |
(66) |
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_____ |
_____ |
_____ |
_____ |
_____ |
_____ |
_____ |
_____ |
_____ |
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Profit/(loss) before
tax |
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1,152 |
(387) |
765 |
1,179 |
(8,475) |
(7,296) |
1,474 |
(6,636) |
(5,162) |
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Taxation |
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16 |
- |
16 |
12 |
- |
12 |
33 |
- |
33 |
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_____ |
_____ |
_____ |
_____ |
_____ |
_____ |
_____ |
_____ |
_____ |
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Profit/(loss)
for the period |
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1,168 |
(387) |
781 |
1,191 |
(8,475) |
(7,284) |
1,507 |
(6,636) |
(5,129) |
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_____ |
_____ |
_____ |
_____ |
_____ |
_____ |
_____ |
_____ |
_____ |
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Earnings per
ordinary share |
5 |
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Basic |
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3.97p |
(1.55)p |
2.42p |
4.06p |
(33.90)p |
(29.84)p |
4.63p |
(26.55)p |
(21.92)p |
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Diluted |
|
3.34p |
(1.11)p |
2.23p |
3.40p |
(24.21)p |
(20.81)p |
4.31p |
(18.96)p |
(14.65)p |
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The company does not have any income or expense that is not
included in profit/(loss) for the period and all items derive from
continuing operations. Accordingly, the ‘Profit/(loss)’ for
the period is also the ‘Total Comprehensive Income for the period’
as defined in IAS 1(revised) and no separate Statement of
Comprehensive Income has been presented.
The total column of this statement is the company’s Income
Statement, prepared in accordance with IFRS. The
supplementary revenue return and capital return columns are both
prepared under guidelines published by the Association of
Investment Companies.
All profit and total comprehensive income is attributable to the
equity holders of the company.
CONDENSED STATEMENT
OF CHANGES IN EQUITY |
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Six months ended 30 June
2017 |
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Unaudited
Six months ended 30 June 2017 |
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Share
capital*
£’000 |
Capital
reserve
£’000 |
Retained
earnings
£’000 |
Total
£’000 |
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Balance at 31 December 2016 |
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35,000 |
(14,224) |
1,906 |
22,682 |
Profit/(loss) for the period |
|
- |
(387) |
1,168 |
781 |
Ordinary dividend paid |
|
- |
- |
(1,425) |
(1,425) |
Preference dividend paid |
|
- |
- |
(175) |
(175) |
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________ |
________ |
________ |
________ |
Balance at 30 June 2017 |
|
35,000 |
(14,611) |
1,474 |
21,863 |
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________ |
________ |
________ |
________ |
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Unaudited
Six months ended 30 June 2016
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|
Share
capital*
£’000 |
Capital
reserve
£’000 |
Retained
earnings
£’000 |
Total
£’000 |
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Balance at 31 December 2015 |
|
35,000 |
(7,588) |
2,799 |
30,211 |
(Loss)/profit for the period |
|
- |
(8,475) |
1,191 |
(7,284) |
Ordinary dividend paid |
|
- |
- |
(1,375) |
(1,375) |
Preference dividend paid |
|
- |
- |
(175) |
(175) |
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________ |
________ |
________ |
________ |
Balance at 30 June 2016 |
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35,000 |
(16,063) |
2,440 |
21,377 |
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________ |
________ |
________ |
________ |
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Audited
Year ended 31 December 2016
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Share
capital*
£’000 |
Capital
reserve
£’000 |
Retained
earnings
£’000 |
Total
£’000 |
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Balance at 31 December 2015 |
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35,000 |
(7,588) |
2,799 |
30,211 |
(Loss)/profit for the period |
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- |
(6,636) |
1,507 |
(5,129) |
Ordinary dividend paid |
|
- |
- |
(2,050) |
(2,050) |
Preference dividend paid |
|
- |
- |
(350) |
(350) |
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________ |
________ |
________ |
________ |
Balance at 31 December 2016 |
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35,000 |
(14,224) |
1,906 |
22,682 |
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________ |
________ |
________ |
________ |
*The company’s share capital comprises £35,000,000 (2016 -
£35,000,000) being 25,000,000 ordinary shares of £1 (2016 -
25,000,000) and 10,000,000 non-voting convertible preference shares
of £1 each (2016 - 10,000,000).
CONDENSED BALANCE SHEET |
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As at 30 June 2017 |
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Note |
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Unaudited
30 June
2017
£’000 |
Unaudited
30 June
2016
£’000 |
Audited
31 December
2016
£’000 |
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Non-current assets |
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|
Investments – fair value through
profit or loss (note 1) |
|
|
24,408 |
22,641 |
23,654 |
Subsidiaries – fair value through
profit or loss |
|
|
6,569 |
6,269 |
6,058 |
|
|
|
_________ |
_________ |
_________ |
|
|
|
30,977 |
28,910 |
29,712 |
|
|
|
|
|
|
Current assets |
|
|
|
|
|
Receivables |
|
|
2,089 |
2,739 |
1,469 |
Cash and cash equivalents |
|
|
789 |
137 |
423 |
|
|
|
_________ |
_________ |
_________ |
|
|
|
2,878 |
2,876 |
1,892 |
|
|
|
|
|
|
|
|
|
_________ |
_________ |
_________ |
Total assets |
|
|
33,855 |
31,786 |
31,604 |
|
|
|
_________ |
_________ |
_________ |
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
Trade and other payables |
|
|
(2,512) |
(2,211) |
(1,000) |
Bank loan |
|
|
(4,363) |
(3,579) |
(3,490) |
|
|
|
_________ |
_________ |
_________ |
|
|
|
(6,875) |
(5,790) |
(4,490) |
|
|
|
_________ |
_________ |
_________ |
|
|
|
|
|
|
Total assets less current
liabilities |
|
|
26,980 |
25,996 |
27,114 |
|
|
|
_________ |
_________ |
_________ |
|
|
|
|
|
|
Non – current
liabilities |
|
|
(5,117) |
(4,619) |
(4,432) |
|
|
|
_________ |
_________ |
_________ |
Net assets |
|
|
21,863 |
21,377 |
22,682 |
|
|
|
_________ |
_________ |
_________ |
Equity attributable to equity
holders |
|
|
|
|
|
Ordinary share capital |
|
|
25,000 |
25,000 |
25,000 |
Convertible preference share
capital |
|
|
10,000 |
10,000 |
10,000 |
Capital reserve |
|
|
(14,611) |
(16,063) |
(14,224) |
Retained revenue earnings |
|
|
1,474 |
2,440 |
1,906 |
|
|
|
_________ |
_________ |
_________ |
Total equity |
|
|
21,863 |
21,377 |
22,682 |
|
|
|
_________ |
_________ |
_________ |
Net assets per ordinary share –
basic |
6 |
|
£0.47 |
£0.46 |
£0.51 |
|
|
|
_________ |
_________ |
_________ |
Net assets per ordinary share –
diluted |
6 |
|
£0.62 |
£0.61 |
£0.65 |
|
|
|
_________ |
_________ |
_________ |
CONDENSED CASHFLOW
STATEMENT |
|
|
|
|
Six months ended 30 June
2017 |
|
|
|
|
|
|
|
|
|
|
|
Unaudited
6 months to
30 June
2017
£’000 |
Unaudited
6 months to
30 June
2016
£’000 |
Audited
Year ended
31 December
2016
£’000 |
|
|
|
|
|
Cash flow from operating
activities |
|
|
|
|
|
|
|
|
|
Profit/(loss) before tax |
|
765 |
(7,296) |
(5,162) |
|
|
|
|
|
Adjustment for: |
|
|
|
|
Losses on investments |
|
257 |
8,289 |
6,215 |
Scrip dividends |
|
- |
(4) |
(4) |
Proceeds on disposal of investments
at fair value |
|
|
|
|
through profit or loss |
|
7,186 |
26,366 |
31,918 |
Purchases of investments at fair
value |
|
|
|
|
through profit or loss |
|
(7,686) |
(27,060) |
(23,689) |
Interest |
|
41 |
33 |
66 |
|
|
________ |
________ |
________ |
Operating cash flows before
movements |
|
|
|
|
in working capital |
|
563 |
328 |
9,344 |
(Increase)/decrease in
receivables |
|
(254) |
(76) |
141 |
Increase/(decrease) in payables |
|
820 |
(123) |
(8,138) |
|
|
________ |
________ |
________ |
Net cash from operating
activities |
|
|
|
|
before interest |
|
1,129 |
129 |
1,347 |
Interest paid |
|
(36) |
(26) |
(52) |
|
|
________ |
________ |
________ |
Net cash from operating
activities |
|
|
|
|
after interest before taxation |
|
1,093 |
103 |
1,295 |
Taxation |
|
- |
- |
33 |
|
|
________ |
________ |
________ |
|
|
|
|
|
Net cash flows from operating
activities |
|
1,093 |
103 |
1,328 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flow from financing
activities |
|
|
|
|
Dividends paid on ordinary
shares |
|
(1,425) |
(1,375) |
(2,050) |
Dividends paid on preference
shares |
|
(175) |
(175) |
(350) |
Bank loan |
|
873 |
1,240 |
1,151 |
|
|
________ |
________ |
________ |
|
|
|
|
|
Net cash used in financing
activities |
|
(727) |
(310) |
(1,249) |
|
|
________ |
________ |
________ |
|
|
|
|
|
|
|
|
|
|
Net
increase/(decrease) in cash and cash
equivalents |
|
366 |
(207) |
79 |
|
|
|
|
|
Cash and cash equivalents at
beginning of period |
|
423 |
344 |
344 |
|
|
________ |
________ |
________ |
Cash and cash equivalents at end
of period |
|
789 |
137 |
423 |
|
|
________ |
________ |
________ |
NOTES TO THE COMPANY’S CONDENSED
FINANCIAL STATEMENT
1. Accounting policies
Basis of preparation and statement of
compliance
This interim report is prepared in accordance with IAS 34
‘Interim Financial Reporting’ and on the basis of the accounting
policies set out in the company’s Annual Report and financial
statements at 31 December 2016.
Certain changes to the investment policy, as disclosed in the
Annual Report at 31 December 2016,
were approved at the AGM on 27 June
2017 and will be reflected in the statutory accounts for
31 December 2017.
The company’s condensed financial statements have been prepared
in accordance with International Financial Reporting Standards
(IFRS) as adopted by the European Union, which comprise standards
and interpretations approved by the IASB and International
Accounting Standards and Standing Interpretations Committee
interpretations approved by the IASC that remain in effect, and to
the extent they have been adopted by the European Union.
In accordance with IFRS 10, the group does not consolidate its
subsidiaries and therefore instead of preparing group accounts it
prepares separate financial statements for the parent entity
only.
The financial statements have been prepared on the historical
cost basis except for the measurement at fair value of investments,
derivative financial instruments, and subsidiaries. The same
accounting policies as those published in the statutory accounts
for 31 December 2016 have been
applied.
Significant accounting policies
In order to better reflect the activities of an investment trust
company and in accordance with guidance issued by the Association
of Investment Companies (AIC), supplementary information which
analyses the income statement between items of a revenue and
capital nature has been presented alongside the income
statement.
As the entity’s business is investing in financial assets with a
view to profiting from their total return in the form of interest,
dividends or increases in fair value, listed equities and fixed
income securities are designated as fair value through profit or
loss on initial recognition. The company manages and evaluates the
performance of these investments on a fair value basis in
accordance with its investment strategy, and information about the
group is provided internally on this basis to the entity’s key
management personnel.
Investments held at fair value through profit or loss, including
derivatives held for trading, are initially recognised at fair
value.
All purchases and sales of investments are recognised on the
trade date.
After initial recognition, investments, which are designated as at
fair value through profit or loss, are measured at fair value.
Gains or losses on investments designated as at fair value through
profit or loss are included in net profit or loss as a capital
item, and material transaction costs on acquisition and disposal of
investments are expensed and included in the capital column of the
income statement. For investments that are actively traded in
organised financial markets, fair value is determined by reference
to Stock Exchange quoted market bid prices or last traded prices,
depending upon the convention of the exchange on which the
investment is quoted at the close of business on the balance sheet
date. Investments in units of unit trusts or shares in OEICs are
valued at the closing price released by the relevant investment
manager.
In respect of unquoted investments, or where the market for a
financial instrument is not active, fair value is established by
using an appropriate valuation technique.
Investments of the company in subsidiary companies are held at
the fair value of their underlying assets and liabilities.
This includes the valuation of film rights in British and
American Films Limited and thus the fair value of its immediate
parent BritAm Investments Limited. In determining the fair value of
the film rights, estimates are made. These include future film
revenues which are estimated by the management. Estimations made
have taken into account historical results, current trends and
other relevant factors.
Where a subsidiary has negative net
assets it is included in investments at £nil value and a provision
is made for it on the balance sheet where the ultimate parent
company has entered into a guarantee to pay the liabilities if they
fall due.
Dividend income from investments is recognised as income when the
shareholders’ rights to receive payment has been established,
normally the ex-dividend date.
Interest income on fixed interest securities is recognised on a
time apportionment basis so as to reflect the effective interest
rate of the security.
When special dividends are received, the underlying
circumstances are reviewed on a case by case basis in determining
whether the amount is capital or income in nature. Amounts
recognised as income will form part of the company's distribution.
Any tax thereon will follow the accounting treatment of the
principal amount.
All expenses are accounted for on an accruals basis. Expenses
are charged as revenue items in the income statement except as
follows:
– transaction costs which are incurred on the purchase or sale
of an investment designated as fair value through profit or loss
are expensed and included in the capital column of the income
statement;
– expenses are split and presented partly as capital items where
a connection with the maintenance or enhancement of the value of
the investments held can be demonstrated, and accordingly
investment management and related costs have been allocated 50%
(2016 – 50%) to revenue and 50% (2016 –50%) to capital, in order to
reflect the directors' long-term view of the nature of the expected
investment returns of the company.
The 3.5% cumulative convertible non-redeemable preference shares
issued by the company are classified as equity instruments in
accordance with IAS 32 ‘Financial Instruments – Presentation’ as
the company has no contractual obligation to redeem the preference
shares for cash or pay preference dividends unless similar
dividends are declared to ordinary shareholders.
2. Segmental reporting
The directors are of the opinion that the company is engaged in
a single segment of business, that is investment business, and
therefore no segmental reporting is provided.
3. Investment income
|
|
Unaudited
6 months
to 30 June
2017
£’000 |
Unaudited
6 months
to 30 June
2016
£’000 |
Audited
Year ended
31 December
2016
£’000 |
|
|
|
|
|
Dividends and interest received |
|
1,407 |
1,683 |
2,239 |
Other income |
|
13 |
13 |
24 |
|
|
_________ |
_________ |
_________ |
|
|
1,420 |
1,696 |
2,263 |
|
|
_______ |
_______ |
_______ |
Of the £1,406,000 (30 June 2016 –
£1,626,000, 31 December 2016 –
£2,169,000) dividends received in the company accounts, £860,000
(30 June 2016 – £1,349,000,
31 December 2016 – £1,693,000)
related to special and other dividends received from investee
companies that were bought after the dividend announcement. There
was a corresponding capital loss of £898,000 (30 June 2016 – £1,631,000, 31 December 2016 – £1,976,000), on these
investments.
Under IFRS 10 the income analysis is for the parent company only
rather than that of the consolidated group shown in previous
years. Thus film revenues of £36,000 (30 June 2016 - £18,000, 31
December 2016 - £85,000) received by the subsidiary British
& American Films Limited and property unit trust income of
£7,000 (30 June 2016 - £8,000,
31 December 2016 - £15,000) received
by the subsidiary BritAm Investments Limited are shown separately
in this paragraph for information purposes.
4. Proposed dividends
|
Unaudited
6 months to
30 June 2017 |
Unaudited
6 months to
30 June 2016 |
Audited
Year ended
31 December 2016 |
|
Interim |
Interim |
Final |
|
|
|
|
|
Pence per share |
£’000 |
Pence per share |
£’000 |
Pence per share |
£’000 |
|
|
|
|
|
|
|
Ordinary shares |
2.7 |
675 |
2.7 |
675 |
5.7 |
1,425 |
Preference shares –
fixed |
1.75 |
175 |
1.75 |
175 |
1.75 |
175 |
|
|
_________ |
|
_________ |
|
_________ |
|
|
850 |
|
850 |
|
1,600 |
|
|
_______ |
|
_______ |
|
_______ |
The directors have declared an interim dividend of 2.7p (2016 –
2.7p) per ordinary share, payable on
30 November 2017 to shareholders
registered on 10 November 2017. The
shares will be quoted ex–dividend on 9
November 2017.
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.
Amounts recognised as distributions to ordinary shareholders in the
period:
|
Unaudited
6 months to
30 June 2017 |
Unaudited
6 months to
30 June 2016 |
Audited
Year ended
31 December 2016 |
|
|
|
|
|
|
|
|
Pence per share |
£’000 |
Pence per share |
£’000 |
Pence per share |
£’000 |
|
|
|
|
|
|
|
Ordinary shares –
final |
5.7 |
1,425 |
5.5 |
1,375 |
5.5 |
1,375 |
Ordinary shares –
interim |
- |
- |
- |
- |
2.7 |
675 |
Preference shares –
fixed |
1.75 |
175 |
1.75 |
175 |
3.5 |
350 |
|
|
_________ |
|
_________ |
|
_________ |
|
|
1,600 |
|
1,550 |
|
2,400 |
|
|
_______ |
|
_______ |
|
_______ |
5. Earnings per ordinary share
|
|
Unaudited
6 months
to 30 June
2017
£’000 |
Unaudited
6 months
to 30 June
2016
£’000 |
Audited
Year ended
31 December
2016
£’000 |
Basic earnings per share |
|
|
|
|
Calculated on the basis of: |
|
|
|
|
Net revenue profit after preference
dividends |
|
993 |
1,016 |
1,157 |
Net capital loss |
|
(387) |
(8,475) |
(6,636) |
|
|
_________ |
_________ |
_________ |
Net total earnings after preference
dividends |
|
606 |
(7,459) |
(5,479) |
|
|
_______ |
_______ |
_______ |
Ordinary shares in issue |
|
25,000 |
25,000 |
25,000 |
|
|
_______ |
_______ |
_______ |
Diluted earnings per
share |
|
|
|
|
Calculated on the basis of: |
|
|
|
|
Net revenue profit |
|
1,168 |
1,191 |
1,507 |
Net capital loss |
|
(387) |
(8,475) |
(6,636) |
|
|
_________ |
_________ |
_________ |
Profit/(loss) after taxation |
|
781 |
(7,284) |
(5,129) |
|
|
_______ |
_______ |
_______ |
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).
6. 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 company
net assets attributable to shareholders as follows:
|
Unaudited
30 June
2017
£’000 |
Unaudited
30 June
2016
£’000 |
Audited
31 December
2016
£’000 |
|
|
|
|
Total net assets |
21,863 |
21,377 |
22,682 |
Less convertible preference
shares |
(10,000) |
(10,000) |
(10,000) |
|
__________ |
__________ |
__________ |
Net assets attributable to ordinary
shareholders |
11,863 |
11,377 |
12,682 |
|
________ |
________ |
________ |
Diluted net asset value is calculated on the total net assets in
the table above and on 35,000,000 shares, 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).
Basic net assets and earnings per share are calculated using a
value of par for the preference shares.
Consequently, when the net asset value attributed to ordinary
shares remains below par the diluted net asset value will show a
higher value than the basic net asset value.
7. Non – current liabilities
Guarantee of subsidiary
liability |
Unaudited
30 June
2017
£’000 |
Unaudited
30 June
2016
£’000 |
Audited
31 December
2016
£’000 |
|
|
|
|
Opening provision |
4,432 |
4,543 |
4,543 |
Increase/(decrease) in period |
685 |
76 |
(111) |
|
__________ |
__________ |
__________ |
Closing provision |
5,117 |
4,619 |
4,432 |
|
________ |
________ |
________ |
The provision is in respect of a guarantee made by the company
for liabilities between its wholly owned subsidiaries, Second
BritAm Investments Limited, BritAm Investments Limited and British
and American Films Limited. The guarantee is to pay out the
liabilities of Second BritAm Investments Limited if they fall due.
There is no current intention for these liabilities to be
called.
8. Related party transactions
Romulus Films Limited and Remus Films Limited have significant
shareholdings in the company (6,902,812 (27.6%) ordinary shares
held by Romulus Films Limited, 7,868,750 (31.5%) ordinary shares
held by Remus Films Limited). Romulus Films Limited also holds
10,000,000 cumulative convertible preference shares.
The company rents its offices from Romulus Films Limited, and is
also charged for its office overheads. During the period the
company paid £11,000 (30 June 2016 –
£9,000 and 31 December 2016 –
£19,000) in respect of those services.
The salaries and pensions of the company’s employees, except for
the three non-executive directors, are paid by Remus Films Limited
and Romulus Films Limited and are recharged to the company. Amounts
charged by these companies in the period to 30 June 2017 were £236,000 (30 June 2016 – £216,000 and 31 December 2016 – £482,000) in respect of salary
costs and £33,000 (30 June 2016 –
£28,000 and 31 December 2016 –
£52,000) in respect of pensions.
At the period end an amount of £370,000 (30 June 2016 – £16,000 and 31 December 2016 – £173,000) was due to Romulus
Films Limited and £389,000 (30 June
2016 – £40,000 and 31 December
2016 – £41,000) was due to Remus Films Limited. These
amounts include final dividends due to Romulus Films Limited of
£315,000 and Remus Films Limited of £ 299,000 which were settled on
13 July 2017 and 11 July 2017 respectively.
During the period subsidiary BritAm Investments Limited paid
dividends of £300,000 (30 June 2016 –
£nil and 31 December 2016 – £nil) to
the parent company, British & American Investment Trust
PLC.
British & American Investment Trust PLC has guaranteed the
liabilities of £5,117,000 (30 June
2016 – £4,619,000 and 31 December
2016 – £4,432,000) due from Second BritAm Investments
Limited to its fellow subsidiaries if they should fall due.
During the period the company paid interest of £5,000
(30 June 2016 – £7,000 and
31 December 2016 – £14,000) on the
loan due to BritAm Investments Limited.
During the period the company received interest of £8,000
(30 June 2016 – £9,000 and
31 December 2016 – £18,000) from
British and American Films Limited and £4,000 (30 June 2016 – £2,000 and 31 December 2016 – £6,000) from Second BritAm
Investments Limited.
All transactions with subsidiaries were made on an arm’s length
basis.
8. Related party transactions
(continued)
During the period the company entered into a number of
investment transactions with Geminion Investments Limited, a
company in which Mr J C Woolf has an interest and is a director.
The purpose of these transactions listed below, which were all
conducted through a London Stock Exchange broker, was for the
company to purchase cum dividend stocks and sell these stocks ex
dividend so as to capture the associated dividends as disclosed in
Note 2 of the financial statements to generate distributable
reserves to achieve the company’s objective to sustain a
progressive dividend policy.
Date of purchase / sale |
Company |
Purchase |
Sale |
Dividend received |
2017 |
|
£’000 |
£’000 |
£’000 |
May / June |
National Grid |
6,055 |
5,377 |
639 |
The aggregate value of these transactions were purchases of
£6,055,000 (30 June 2016 –
£18,272,000 and 31 December 2016 –
£20,787,000), dividends received of £639,000 (30 June 2016 – £1,238,000 and 31 December 2016 – £1,485,000) and sales of
£5,377,000 (30 June 2016 –
£16,748,000 and 31 December 2016 –
£19,017,000 giving a net loss of £39,000 (30
June 2016 – £286,000 and 31 December
2016 – £285,000).
9. Retained earnings
The table below shows the movement in the retained earnings
analysed between revenue and capital items.
|
Capital
reserve
£’000 |
Retained
earnings
£’000 |
|
|
|
1 January 2017 |
(14,224) |
1,906 |
Allocation of
(loss)/profit for the period |
(387) |
1,168 |
Ordinary and
preference dividends paid |
- |
(1,600) |
|
_________ |
_________ |
At 30 June
2017 |
(14,611) |
1,474 |
|
________ |
________ |
The capital reserve includes £2,307,000 of investment holding
gains (30 June 2016 – £98,000 gain,
31 December 2016 – £1,465,000
gain).
10. Financial instruments
Financial instruments carried at fair
value
All investments are carried at fair value. Other financial
assets and liabilities of the company are held at amounts that
approximate to fair value. The book value of cash at bank and bank
loans included in these financial statements approximate to fair
value because of their short-term maturity.
Fair value hierarchy
The table below analyses recurring fair value measurements for
financial assets and financial liabilities.
These fair value measurements are categorised into different
levels in the fair value hierarchy based on the inputs to valuation
techniques used. The different levels are defined as follows:
Level 1: Quoted prices (unadjusted) in active markets for
identical assets or liabilities that the company can access at the
measurement date.
10. Financial instruments
(continued)
Level 2: Inputs other than quoted prices included within Level 1
that are observable for the asset or liability, either directly or
indirectly:
- Prices of recent transactions for identical instruments.
- Valuation techniques using observable market data.
Level 3: Unobservable inputs for the asset or liability.
Financial assets
and financial liabilities at fair value through profit or loss at
30 June 2017 |
Level
1
£’000 |
Level
2
£’000 |
Level
3
£’000 |
Total
£’000 |
Investments including
derivatives: |
|
|
|
|
Investments held at
fair value through profit or loss |
21,410 |
2,918 |
80 |
24,408 |
Subsidiary held at
fair value through profit or loss |
- |
- |
6,569 |
6,569 |
|
_________ |
_________ |
_________ |
_________ |
Total financial
assets and liabilities carried at fair value |
21,410 |
2,918 |
6,649 |
30,977 |
|
_______ |
_______ |
_______ |
_______ |
With the exception of the Biotime Promissory Note, BritAm
Investments Limited (unquoted subsidiary) and Second BritAm
Investments Limited (unquoted subsidiary) which are categorised as
Level 3 and with the exception of the investments in unit trusts
which are categorised as Level 2 investments, all other investments
are categorised as Level 1.
Fair Value Assets in Level 3
The following table shows the reconciliation from the opening
balances to the closing balances for fair value measurement in
level 3 of the fair value hierarchy.
|
Level
3 |
|
£’000 |
Opening fair value at
1 January 2017 |
6,165 |
Purchases |
- |
Sales proceeds |
(21) |
Loss on sales |
(1) |
Investment holding
gains |
506 |
|
_______ |
Closing fair value at
30 June 2017 |
6,649 |
|
_______ |
Subsidiaries
The fair value of the subsidiaries is determined to be equal to
the net asset values of the subsidiaries at year end plus the
uplift in the revaluation of film rights in British and American
Films Limited, a subsidiary of BritAm Investments Limited.
10. Financial instruments
(continued)
The fair value of the film rights have been determined by
estimating the present value of the pre-tax film revenues in the
next 10 years discounted at a discount rate of 5%. The directors’
valuation of British & American Films Limited has been based on
pre-tax profits as sufficient group relief exists to mitigate the
tax effect.
There have been no transfers between levels of the fair value
hierarchy during the period. Transfers between levels of fair value
hierarchy are deemed to have occurred at the date of the event or
change in circumstances that caused the transfer.
DIRECTORS’ STATEMENT
Principal risks and uncertainties
The principal risks and uncertainties faced by the company continue
to be as described in the previous annual accounts. Further
information on each of these areas, together with the risks
associated with the company's financial instruments are shown in
the Directors' Report and notes to the financial statements within
the Annual Report and Accounts for the year ended 31 December 2016.
The Chairman’s Statement and Managing Director’s report include
commentary on the main factors affecting the investment portfolio
during the period and the outlook for the remainder of the
year.
Directors’ Responsibilities Statement
The Directors are responsible for preparing the half-yearly report
in accordance with applicable law and regulations. The Directors
confirm that to the best of their knowledge the interim financial
statements, within the half-yearly report, have been prepared in
accordance with IAS 34 'Interim Financial Reporting'. The Directors
are required to prepare the financial statements on the going
concern basis unless it is inappropriate to presume that the
company will continue in business. The Directors further confirm
that the Chairman’s Statement and Managing Director's Report
includes a fair review of the information required by 4.2.7R and
4.2.8R of the FCA’s Disclosure and Transparency Rules.
The Directors of the company are listed in the section preceding
the Chairman’s Statement.
The half-yearly report was approved by the Board on 29 September 2017 and the above responsibility
statement was signed on its behalf by:
Jonathan C Woolf
Independent review report to the
members of British & American Investment Trust PLC
Introduction
We have been engaged by the company to review the condensed set
of financial statements in the half-yearly financial report of
British & American Investment Trust PLC for the six months
ended 30 June 2017 which comprises
the Condensed Income Statement, the Condensed Statement of Changes
in Equity, the Condensed Balance Sheet, the Condensed Cashflow
Statement and related Notes to the Company results. We have read
the other information contained in the half-yearly financial report
being the Financial Highlights, the Chairman's Statement, the
Managing Director's Report, the Investment Portfolio and the
Directors' Statement, and considered whether it contains any
apparent misstatements or material inconsistencies with the
information in the condensed set of financial statements.
This report is made solely to the company, in accordance with
International Standard on Review Engagements (UK and Ireland) 2410, 'Review of Interim Financial
Information performed by the Independent Auditor of the Entity'
issued by the Auditing Practices Board. Our review work has been
undertaken so that we might state to the company those matters we
are required to state to it 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 conclusion we have
formed.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and
has been approved by, the directors. The directors are responsible
for preparing the half-yearly financial report in accordance with
the Disclosure and Transparency Rules of the United Kingdom's Financial Conduct
Authority.
As disclosed in note 1, the annual financial statements of the
company are prepared in accordance with International Financial
Reporting Standards as adopted by the European Union. The condensed
set of financial statements included in this half-yearly financial
report has been prepared in accordance with International
Accounting Standard 34, 'Interim Financial Reporting', as
adopted by the European Union.
Our responsibility
Our responsibility is to express a conclusion on the condensed
set of financial statements in the half-yearly financial report
based on our review.
Scope of review
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410, 'Review of Interim Financial
Information Performed by the Independent Auditor of the Entity'
issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial
information consists of making enquiries, primarily of persons
responsible for financial and accounting matters, and applying
analytical and other review procedures. A review is substantially
less in scope than an audit conducted in accordance with
International Standards on Auditing (UK and Ireland) and consequently does not enable us
to obtain assurance that we would become aware of all significant
matters that might be identified in an audit. Accordingly, we do
not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the half-yearly financial report for the six months ended
30 June 2017 is not prepared, in all
material respects, in accordance with International Accounting
Standard 34, 'Interim Financial Reporting', as adopted by the
European Union and the Disclosure and Transparency Rules of the
United Kingdom's Financial Conduct
Authority.
HAZLEWOODS LLP
AUDITOR
Cheltenham
29 September 2017