BRITISH & AMERICAN INVESTMENT
TRUST PLC |
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FINANCIAL HIGHLIGHTS |
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For the six months ended 30 June
2019 |
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Unaudited
6 months
to 30 June
2019
£’000 |
Unaudited
6 months
to 30 June
2018
£’000 |
Audited
Year ended
31 December
2018
£’000 |
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Revenue |
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Return before tax |
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356 |
864 |
2,489 |
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_________ |
_________ |
_________ |
Earnings per £1 ordinary shares –
basic (note 5) |
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0.77p |
2.81p |
8.68p |
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_________ |
_________ |
_________ |
Earnings per £1 ordinary shares –
diluted (note 5) |
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1.05p |
2.51p |
7.20p |
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_________ |
_________ |
_________ |
Capital |
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Total equity |
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8,243 |
17,518 |
7,919 |
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_________ |
_________ |
_________ |
Revenue reserve (note 9) |
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414 |
929 |
1,721 |
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_________ |
_________ |
_________ |
Capital reserve (note 9) |
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(27,171) |
(18,411) |
(28,802) |
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_________ |
_________ |
_________ |
Net assets per ordinary share (note
6) |
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- Basic* |
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£0.24 |
£0.50 |
£0.23 |
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_________ |
_________ |
_________ |
- Diluted |
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£0.24 |
£0.50 |
£0.23 |
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_________ |
_________ |
_________ |
Diluted net assets per ordinary
share at 25 September 2019 |
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£0.23 |
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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 |
8.7p |
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_________ |
_________ |
_________ |
Dividends per preference share (note
4) |
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1.75p |
1.75p |
3.5p |
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_________ |
_________ |
_________ |
*Basic net assets and earnings per share are calculated using a
value of fully diluted net asset value for the preference shares.
Basic net assets per ordinary share at 30
June 2018 and at 31 December
2018 have been restated using a value of fully diluted net
asset value for the preference shares instead of using a value of
par for the preference shares.
**Dividends declared for the period. Dividends shown in
the accounts are, by contrast, dividends paid or
approved
in the period.
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 2019 |
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Company |
Nature of
Business |
Valuation
£’000 |
Percentageof portfolio
% |
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Dunedin Income Growth |
Investment Trust |
2,750 |
18.21 |
Geron Corporation (USA) |
Biomedical |
2,507 |
16.60 |
Biotime Inc (USA) |
Biotechnology |
1,849 |
12.24 |
Aberdeen Diversified Income &
Growth |
Investment Trust |
771 |
5.11 |
Invesco Income Growth Trust |
Investment Trust |
543 |
3.60 |
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________ |
________ |
Merchants Trust |
Investment Trust |
490 |
3.25 |
AgeX (USA) |
Biotechnology |
349 |
2.31 |
Braemar Shipping Services |
Transport |
87 |
0.58 |
Angle |
Support Services |
57 |
0.37 |
ADVFN |
Other financial |
34 |
0.22 |
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________ |
________ |
10 Largest investments (excluding
subsidiaries) |
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9,437 |
62.49 |
Investment in subsidiaries |
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5,537 |
36.66 |
Other investments (number of
holdings : 11) |
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128 |
0.85 |
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________ |
________ |
Total investments |
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15,102 |
100.00 |
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________ |
________ |
Unaudited Interim Report
As at 30 June 2019
Registered number: 433137
Directors |
Registered
office |
David G Seligman
(Chairman) |
Wessex House |
Jonathan C Woolf
(Managing Director) |
1 Chesham Street |
Dominic G Dreyfus
(Non-executive and Chairman of the Audit Committee) |
London SW1X 8ND |
Alex Tamlyn
(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 2019.
Revenue
The profit on the revenue account before tax amounted to £0.4
million (30 June 2018: £0.9 million),
a decrease of 54.9 percent. This difference was primarily due
to a reduction in income received during the period from subsidiary
companies but also a reduction in dividends received from external
investments.
The figures presented above relate to the parent company only
and not to the consolidated group, as required by accounting rule
IFRS10. For information purposes, we show in Note 3 to the accounts
the film and other income of our subsidiaries. This shows that film
income of £31,000 (30 June 2018:
£36,000) and property unit trust income of £7,000 (30 June 2018: £7,000) was received.
A gain of £1.8 million (30 June 2018:
£2.8 million gain) was registered on the capital account before
capitalised expenses, comprising a realised loss of £0.1 million
(30 June 2018: £0.6 million loss) and
an unrealised gain of £1.9 million (30 June
2018: £3.4 million gain).
Revenue earnings per ordinary share were 0.8
pence on an undiluted basis (30 June
2018: 2.8 pence) and
1.0 pence on a fully diluted basis
(30 June 2018: 2.5 pence).
Net Assets and performance
Company net assets were £8.2 million (£7.9 million, at
31 December 2018), an increase of 4.1
percent. Over the same six month period, the FTSE 100 index
increased by 10.4 percent and the All Share index increased by 10.4
percent. On a total return basis, after adding back dividends
paid during the period, company net assets increased by 25.2
percent compared to an increase of the total return on the FTSE 100
index of approximately 13.5 percent. The net asset value per
£1 ordinary share was 24 pence on a
fully diluted basis.
The increase in net assets over the period reflected gains of 35
percent in the value of our largest US holding, Geron Corporation,
over the period. Despite this substantial rise in value from
the lows reached at the end of 2018 following the withdrawal of its
partner Johnson & Johnson in September last year, it was not
sufficient to produce outperformance in the portfolio as a whole
when measured against the benchmarks which had themselves showed
strong performances in the first 6 months of 2019. However,
on a total return basis, the portfolio significantly outperformed
the benchmarks notwithstanding their strong performance.
As noted in my statement of 30th April, Geron’s share
price had started to recover in the early months of 2019 after the
sudden shock of Johnson & Johnson’s withdrawal which had
resulted in a drop of over 80 percent in the fourth quarter of
2018. In April we had been able to report a gain of 90
percent since the beginning of the year, but this had reduced to 35
percent by the half year, following the substantial fall in stock
markets generally in the second quarter, as discussed in more
detail below. More detailed commentary on the performance and
prospects of Geron Corporation and the portfolio as a whole is set
out in the Managing Director’s Report below.
The general investment climate has not changed markedly from
when I reported in April. The two principal drivers of
interest rate expectations and progress or otherwise in the trade
stand-off between the USA and
China have continued to dominate
short-term equity market movements in the USA and the UK.
In addition in the UK, the continuing and substantial political
and economic uncertainties of the Brexit process have added an
element of high volatility to pound sterling values with
concomitant effects on UK large capitalisation stocks with high
foreign earnings. Between the second and third quarters,
sterling fell by 10 percent as the likelihood of a no-deal Brexit
increased on the back of the political stalemate in Parliament, the
extension of the 31st March deadline to 31st
October and the change of prime-minister in June. However,
the cheaper currency helped to support UK equity prices which
climbed more than 8 percent over this period despite the worsening
outlook and a slowdown in economic growth to nil over the summer
months.
In the USA, equities rose by
almost 15 percent in the first half of 2019, supported by the
continuing effects of Trump’s 2017 tax cuts on corporate earnings
and increased expectations of a standstill or even reversal in the
Federal Reserve’s prior year policy of gradually increasing
interest rates. Even though economic growth and reported
earnings continued relatively firm, the growing strains and
uncertainties placed on businesses by the deteriorating trade
dispute with China was beginning
to change the outlook, with expectations developing of a possible
recession in 2020. This was further underlined by the
reversion in the US dollar yield curve in August, an indicator
which usually presages a reversal in economic growth in the short
to medium term.
Dividend
We intend to pay an interim dividend of 2.7
pence per ordinary share on 12
December 2019 to shareholders on the register at
22 November 2019. 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.
As noted in my full year statement in April, we generate a
significant proportion of our income reserves from gains earned by
our subsidiary companies and this allows us to pay dividends
considerably in excess of overall portfolio yield. Unless the value
of our largest investment, Geron Corporation, recovers further over
the coming period towards the levels seen during 2018 we will not
be able to maintain our dividend going forward at current
levels.
Outlook
The determination of markets to ignore the growing political and
economic headwinds and uncertainties reported in my last statement
in April seems to have faltered. Equity markets in the
USA and UK retrenched considerably
in the second quarter showing increased levels of volatility and
this has continued into the third quarter. While the current major
unresolved politico-economic issues such as Brexit, the
China/USA trade war and looming global economic
downturn remain unresolved, markets appear likely to remain below
the peaks achieved in 2018 following years of monetary and fiscal
stimulus. Without a positive resolution of these issues or a
return to substantial monetary intervention by central banks which
seems unlikely, markets generally seem to be preparing for a period
of underperformance.
In the light of this, we have trimmed some of our long term
investment positions in recent months. We believe, however, the
value of our principal US investment will continue to recover and
then grow as its outstanding results and prospects become valued
again by the market after the unexpected shock experienced last
year. We are, therefore, currently focused on capturing the
uplift in value which we believe this investment will bring to the
portfolio.
As at 25 September, company net assets were £8.0 million, a
decrease of 2.9 percent since 30 June. This compares with a
decrease in the FTSE 100 index of 1.8 percent and a decrease of 1.3
percent in the All Share index over the same period, and is
equivalent to 22.9 pence per share
(prior charges deducted at fully diluted value) and 22.9 pence per share on a fully diluted
basis.
David Seligman
27 September 2019
Managing Director’s Report
The arrival of 2019 saw US and UK equity markets enter one of
the longest periods of uninterrupted growth on record, with the UK
market growing by 105 percent and the US market growing by 275
percent over the last 10 years. This followed the falls of 50
percent in these markets in the aftermath of the ‘great recession’
of 2008.
In 2008/9, central banks commenced a programme of unprecedented
monetary stimulus measures which included many years of near zero
or even negative interest rates and large quantitative easing
programmes to promote what turned out to be only a gradual and slow
multi-year recovery in developed country economies. In 2017,
the Trump White House added to these measures with a substantial
late-cycle and politically-motivated fiscal stimulus in the form of
large-scale corporate tax reductions and reliefs, which had the
effect of temporarily boosting growth and employment statistics in
the USA.
The record longevity of the current equity bull market can only
be ascribed to these unprecedentedly large and extended measures
since, at the same time, and particularly over the last two years,
investors have had to contend with a growing number and severity of
international political and economic concerns and disruptions which
would normally dampen investor appetite for equity
holding.
As we have reported here in previous periods, these have ranged
from haphazard policy making, erratic international relations and
isolationism from the USA,
potential nuclear stand-off in the Korean peninsula, a damaging
trade war between the USA and
China, unprecedented and
uncontrolled levels of political and economic migration into
Europe and the USA leading to civil disquiet and distorted
policy making, Brexit, interference by a recidivist Russia in the elections, sovereignty and
security of other countries, disruption of traditional industries
by AI and the new digital economy and the gradual erosion of norms
relating to the international rules based system through populism
which have provided an important measure of long term
certainty and stability for corporate planning and
investment. Despite all this, equity markets have forged
ahead continuously over the last decade without significant
correction and seemingly oblivious to the worrying world political
and economic trends which were establishing themselves.
In recent months, however, signs have emerged that investors’
resilience to these concerns may now be on the wane, particularly
in the UK where the continuing and unresolved Brexit drama is now
weighing on the real economy with growth and investment stalling in
the second quarter. In the USA, the Federal Reserve’s prior policy of
gradually increasing interest rates has been reversed with the
first cut in rates last July since 2008 and a further cut announced
this month as economic growth rates decline under pressure from
self-imposed international trade tariffs. In Europe growth in
the major economies of Germany and
France has stalled as
international economic growth and activity declines. All
these developments have started to dampen investor sentiment with
volatility levels rising, fixed interest yields falling again and
recently an inversion in the US dollar yield curve occurring,
albeit with a small margin and for a short period of time.
All these events would appear to indicate a measure of realism
creeping into investor calculations and a period of weakness ahead
in equity markets.
As indicated in prior reports and in recognition of the above
described concerns, we have preferred not to take on new investment
positions but have reduced borrowing and made some modest
reductions in some of our longer held fund positions. We
continue to place our main focus on achieving our capital growth
objectives through exposure to our targeted US biotechnology
investments and our income objectives through our existing UK fund
investments, capturing special dividends and income received from
group subsidiaries.
Geron Corporation
A detailed report of the events which occurred at the end
of last year and which adversely affected the value of our largest
investment, Geron Corporation, was given April in our annual
report. The unexpected withdrawal of Johnson & Johnson from its
partnership with Geron in September
2018 resulted in a substantial fall of 80 percent in Geron’s
stock value in the fourth quarter of 2018. Subsequently, however,
the stock value recovered by 90 percent in the first four months of
2019 from its end 2018 lows, following the publication in
December 2018 of outstanding Phase 2
clinical trial results in two major hematologic cancer indications
(MDS and MF) in which Geron’s drug, Imetelstat, outperformed the
drugs currently on the market and in development for these
diseases. Also, in the first quarter of 2019, Geron announced
the hiring of a number of highly experienced clinical trial
executives who until last September had led Imetelstat’s clinical
trials at Johnson & Johnson which had produced such impressive
Phase 2 results.
Since April, additional updated clinical trial results have been
reported showing further improved results and additional highly
experienced clinical trial executives previously with Johnson &
Johnson have been hired. The formal transfer from Johnson &
Johnson to Geron of 100 percent of Imetelstat, its intellectual and
trial data and materials, was completed and in August Geron also made the important
announcement of the initiation of Phase 3 clinical trials in
MDS.
All these positive developments have helped Geron’s stock price
recover somewhat in 2019 as the market begins to move past the
shock of the unexpected event of 2018 and begins to value again
Geron’s future potential as it had begun to do in 2018. In
recent months, three leading industry analysts have assigned short
to medium term price targets to Geron’s stock at three times its
current level, based on the results of the clinical trials to date
and the size of its potential market and the lack of alternative
effective drugs in the these markets. As at 25 September 2019, Geron’s stock price has
recovered by 38.8 percent from the end 2018 lows.
For these reasons, we believe that Geron continues to represent
a strong and compelling investment opportunity and it remains the
focus of our efforts to realise capital gain in the portfolio given
the current outlook for the wider investment markets, as discussed
above.
27 September 2019
CONDENSED INCOME STATEMENT |
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Six
months ended 30 June 2019 |
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Unaudited
6 months to 30 June 2019 |
Unaudited
6 months to 30 June 2018
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Audited
Year ended 31 December 2018
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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 |
597 |
- |
597 |
1,104 |
- |
1,104 |
3,056 |
- |
3,056 |
Holding
gains/(losses) on investments at fair value through profit or
loss |
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- |
1,925 |
1,925 |
- |
3,549 |
3,549 |
- |
(4,644) |
(4,644) |
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Losses on disposal of
investments at fair value through profit or loss |
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- |
(152) |
(152) |
- |
(643) |
(643) |
- |
(2,647) |
(2,647) |
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Foreign exchange losses |
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(1) |
(1) |
(2) |
(12) |
(12) |
(24) |
(61) |
(62) |
(123) |
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Expenses |
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(215) |
(116) |
(331) |
(203) |
(116) |
(319) |
(457) |
(237) |
(694) |
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_____ |
_____ |
_____ |
_____ |
_____ |
_____ |
_____ |
_____ |
_____ |
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Profit/(loss)
before finance costs and tax |
|
381 |
1,656 |
2,037 |
889 |
2,778 |
3,667 |
2,538 |
(7,590) |
(5,052) |
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Finance costs |
|
(25) |
(25) |
(50) |
(25) |
(22) |
(47) |
(49) |
(45) |
(94) |
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_____ |
_____ |
_____ |
_____ |
_____ |
_____ |
_____ |
_____ |
_____ |
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Profit/(loss) before tax |
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356 |
1,631 |
1,987 |
864 |
2,756 |
3,620 |
2,489 |
(7,635) |
(5,146) |
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Taxation |
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12 |
- |
12 |
14 |
- |
14 |
31 |
- |
31 |
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_____ |
_____ |
_____ |
_____ |
_____ |
_____ |
_____ |
_____ |
_____ |
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Profit/(loss)
for the period |
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368 |
1,631 |
1,999 |
878 |
2,756 |
3,634 |
2,520 |
(7,635) |
(5,115) |
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_____ |
_____ |
_____ |
_____ |
_____ |
_____ |
_____ |
_____ |
_____ |
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Earnings per
ordinary share |
5 |
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Basic |
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0.77p |
6.52p |
7.29p |
2.81p |
11.03p |
13.84p |
8.68p |
(30.54)p |
(21.86)p |
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Diluted |
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1.05p |
4.66p |
5.71p |
2.51p |
7.87p |
10.38p |
7.20p |
(21.81)p |
(14.61)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
2019 |
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Unaudited
Six months ended 30 June 2019 |
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Share
capital*
£’000 |
Capital
reserve
£’000 |
Retained
earnings
£’000 |
Total
£’000 |
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Balance at 31 December 2018 |
|
35,000 |
(28,802) |
1,721 |
7,919 |
Profit for the period |
|
- |
1,631 |
368 |
1,999 |
Ordinary dividend paid |
|
- |
- |
(1,500) |
(1,500) |
Preference dividend paid |
|
- |
- |
(175) |
(175) |
|
|
________ |
________ |
________ |
________ |
Balance at 30 June 2019 |
|
35,000 |
(27,171) |
414 |
8,243 |
|
|
________ |
________ |
________ |
________ |
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Unaudited
Six months ended 30 June 2018 |
|
|
Share
capital*
£’000 |
Capital
reserve
£’000 |
Retained
earnings
£’000 |
Total
£’000 |
|
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|
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Balance at 31 December 2017 |
|
35,000 |
(21,167) |
1,701 |
15,534 |
Profit for the period |
|
- |
2,756 |
878 |
3,634 |
Ordinary dividend paid |
|
- |
- |
(1,475) |
(1,475) |
Preference dividend paid |
|
- |
- |
(175) |
(175) |
|
|
________ |
________ |
________ |
________ |
Balance at 30 June 2018 |
|
35,000 |
(18,411) |
929 |
17,518 |
|
|
________ |
________ |
________ |
________ |
|
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|
|
|
|
|
|
|
Audited
Year ended 31 December 2018
|
|
|
Share
capital*
£’000 |
Capital
reserve
£’000 |
Retained
earnings
£’000 |
Total
£’000 |
|
|
|
|
|
|
Balance at 31 December 2017 |
|
35,000 |
(21,167) |
1,701 |
15,534 |
Profit/(loss) for the period |
|
- |
(7,635) |
2,520 |
(5,115) |
Ordinary dividend paid |
|
- |
- |
(2,150) |
(2,150) |
Preference dividend paid |
|
- |
- |
(350) |
(350) |
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|
________ |
________ |
________ |
________ |
Balance at 31 December 2018 |
|
35,000 |
(28,802) |
1,721 |
7,919 |
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|
________ |
________ |
________ |
________ |
*The company’s share capital comprises £35,000,000 (2018 -
£35,000,000) being 25,000,000 ordinary shares of £1 (2018 -
25,000,000) and 10,000,000 non-voting convertible preference shares
of £1 each (2018 - 10,000,000).
CONDENSED BALANCE SHEET |
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As at 30 June 2019 |
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Note |
|
Unaudited
30 June
2019
£’000 |
Unaudited
30 June
2018
£’000 |
Audited
31 December
2018
£’000 |
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Non-current assets |
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Investments – fair value through
profit or loss (note 1) |
|
|
9,565 |
15,866 |
8,722 |
Subsidiaries – fair value through
profit or loss |
|
|
5,537 |
6,375 |
5,269 |
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|
_________ |
_________ |
_________ |
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|
15,102 |
22,241 |
13,991 |
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Current assets |
|
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|
|
|
Receivables |
|
|
3,543 |
4,055 |
3,417 |
Cash and cash equivalents |
|
|
232 |
725 |
244 |
|
|
|
_________ |
_________ |
_________ |
|
|
|
3,775 |
4,780 |
3,661 |
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|
|
|
|
|
|
|
|
_________ |
_________ |
_________ |
Total assets |
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|
18,877 |
27,021 |
17,652 |
|
|
|
_________ |
_________ |
_________ |
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
Trade and other payables |
|
|
(1,593) |
(2,006) |
(547) |
Bank loan |
|
|
(2,772) |
(2,717) |
(2,790) |
|
|
|
_________ |
_________ |
_________ |
|
|
|
(4,365) |
(4,723) |
(3,337) |
|
|
|
_________ |
_________ |
_________ |
|
|
|
|
|
|
Total assets less current
liabilities |
|
|
14,512 |
22,298 |
14,315 |
|
|
|
_________ |
_________ |
_________ |
|
|
|
|
|
|
Non – current
liabilities |
|
|
(6,269) |
(4,780) |
(6,396) |
|
|
|
_________ |
_________ |
_________ |
Net assets |
|
|
8,243 |
17,518 |
7,919 |
|
|
|
_________ |
_________ |
_________ |
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 |
|
|
(27,171) |
(18,411) |
(28,802) |
Retained revenue earnings |
|
|
414 |
929 |
1,721 |
|
|
|
_________ |
_________ |
_________ |
Total equity |
|
|
8,243 |
17,518 |
7,919 |
|
|
|
_________ |
_________ |
_________ |
Net assets per ordinary share –
basic |
6 |
|
£0.24 |
£0.50 |
£0.23 |
|
|
|
_________ |
_________ |
_________ |
Net assets per ordinary share –
diluted |
6 |
|
£0.24 |
£0.50 |
£0.23 |
|
|
|
_________ |
_________ |
_________ |
CONDENSED CASHFLOW
STATEMENT |
|
|
|
|
Six months ended 30 June
2019 |
|
|
|
|
|
|
|
|
|
|
|
Unaudited
6 months to
30 June
2019
£’000 |
Unaudited
6 months to
30 June
2018
£’000 |
Audited
Year ended
31 December
2018
£’000 |
|
|
|
|
|
Cash flow from operating
activities |
|
|
|
|
|
|
|
|
|
Profit/(loss) before tax |
|
1,987 |
3,620 |
(5,146) |
|
|
|
|
|
Adjustment for: |
|
|
|
|
(Gains)/losses on investments |
|
(1,739) |
(2,906) |
7,291 |
Scrip dividends |
|
- |
- |
(290) |
Proceeds on disposal of investments
at fair value |
|
|
|
|
through profit or loss |
|
7,459 |
7,699 |
13,635 |
Purchases of investments at fair
value |
|
|
|
|
through profit or loss |
|
(7,638) |
(5,967) |
(12,335) |
Interest |
|
50 |
47 |
94 |
|
|
________ |
________ |
________ |
Operating cash flows before
movements |
|
|
|
|
in working capital |
|
119 |
2,493 |
3,249 |
Decrease/(increase) in
receivables |
|
567 |
(269) |
(712) |
Decrease in payables |
|
(12) |
(491) |
(773) |
|
|
________ |
________ |
________ |
Net cash from operating
activities |
|
|
|
|
before interest |
|
674 |
1,733 |
1,764 |
Interest paid |
|
(50) |
(44) |
(90) |
|
|
________ |
________ |
________ |
|
|
|
|
|
Net cash flows from operating
activities |
|
624 |
1,689 |
1,674 |
|
|
________ |
________ |
________ |
|
|
|
|
|
Cash flows from financing
activities |
|
|
|
|
Dividends paid on ordinary
shares |
|
(618) |
(1,475) |
(1,839) |
Dividends paid on preference
shares |
|
- |
(175) |
(350) |
Bank loan |
|
(18) |
(1,527) |
(1,454) |
|
|
________ |
________ |
________ |
|
|
|
|
|
Net cash used in financing
activities |
|
(636) |
(3,177) |
(3,643) |
|
|
________ |
________ |
________ |
|
|
|
|
|
|
|
|
|
|
Net decrease in cash
and cash
equivalents |
|
(12) |
(1,488) |
(1,969) |
|
|
|
|
|
Cash and cash equivalents at
beginning of period |
|
244 |
2,213 |
2,213 |
|
|
________ |
________ |
________ |
Cash and cash equivalents at end
of period |
|
232 |
725 |
244 |
|
|
________ |
________ |
________ |
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 2018 with
the exception of the application of new accounting standards.
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 2018 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 at fair value through
profit or loss are included in 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 closing 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%
(2018 – 50%) to revenue and 50% (2018 – 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. Income
|
|
Unaudited
6 months
to 30 June
2019
£’000 |
Unaudited
6 months
to 30 June
2018
£’000 |
Audited
Year ended
31 December
2018
£’000 |
|
|
|
|
|
Income from investments |
|
568 |
1,083 |
3,008 |
Other income |
|
29 |
21 |
48 |
|
|
_________ |
_________ |
_________ |
|
|
597 |
1,104 |
3,056 |
|
|
_______ |
_______ |
_______ |
Of the £568,000 (30 June 2018 –
£783,000, 31 December 2018 –
£1,562,000) dividends received from listed investments in the
company accounts, £434,000 (30 June
2018 – £641,000, 31 December
2018 – £997,000) related to special and other dividends
received from investee companies that were bought after the
dividend announcement. There was a corresponding capital loss of
£498,000 (30 June 2018 – £573,000,
31 December 2018 – £1,007,000) on
these investments.
Under IFRS 10 the income analysis is for the parent company only
rather than that of the consolidated group. Thus film revenues of
£31,000 (30 June 2018 - £36,000,
31 December 2018 - £92,000)
received by the subsidiary British & American Films Limited and
property unit trust income of £7,000 (30
June 2018 - £7,000, 31 December
2018 - £14,000) 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 2019 |
Unaudited
6 months to
30 June 2018 |
Audited
Year ended
31 December 2018 |
|
Interim |
Interim |
Final |
|
|
|
|
|
Pence per share |
£’000 |
Pence per share |
£’000 |
Pence per share |
£’000 |
|
|
|
|
|
|
|
Ordinary shares |
2.7 |
675 |
2.7 |
675 |
6.0 |
1,500 |
Preference shares –
fixed |
1.75 |
175 |
1.75 |
175 |
1.75 |
175 |
|
|
_________ |
|
_________ |
|
_________ |
|
|
850 |
|
850 |
|
1,675 |
|
|
_______ |
|
_______ |
|
_______ |
The directors have declared an interim dividend of 2.7p (2018 –
2.7p) per ordinary share, payable on 12
December 2019 to shareholders registered on 22 November 2019. The shares will be quoted
ex–dividend on 21 November 2019.
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 2019 |
Unaudited
6 months to
30 June 2018 |
Audited
Year ended
31 December 2018 |
|
|
|
|
|
|
|
|
Pence per share |
£’000 |
Pence per share |
£’000 |
Pence per share |
£’000 |
|
|
|
|
|
|
|
Ordinary shares –
final |
6.0 |
1,500 |
5.9 |
1,475 |
5.9 |
1,475 |
Ordinary shares –
interim |
- |
- |
- |
- |
2.7 |
675 |
Preference shares –
fixed |
1.75 |
175 |
1.75 |
175 |
3.5 |
350 |
|
|
_________ |
|
_________ |
|
_________ |
|
|
1,675 |
|
1,650 |
|
2,500 |
|
|
_______ |
|
_______ |
|
_______ |
5. Earnings per ordinary share
|
|
Unaudited
6 months
to 30 June
2019
£’000 |
Unaudited
6 months
to 30 June
2018
£’000 |
Audited
Year ended
31 December
2018
£’000 |
Basic earnings per share |
|
|
|
|
Calculated on the basis of: |
|
|
|
|
Net revenue profit after preference
dividends |
|
193 |
703 |
2,170 |
Net capital gain/(loss) |
|
1,631 |
2,756 |
(7,635) |
|
|
_________ |
_________ |
_________ |
Net total earnings after preference
dividends |
|
1,824 |
3,459 |
(5,465) |
|
|
_______ |
_______ |
_______ |
|
|
|
|
|
|
|
Number’000 |
Number’000 |
Number’000 |
|
|
|
|
|
Ordinary shares in issue |
|
25,000 |
25,000 |
25,000 |
|
|
_______ |
_______ |
_______ |
Diluted earnings per
share |
|
|
|
|
Calculated on the basis of: |
|
|
|
|
Net revenue profit |
|
368 |
878 |
2,520 |
Net capital gain/(loss) |
|
1,631 |
2,756 |
(7,635) |
|
|
_________ |
_________ |
_________ |
Profit/(loss) after taxation |
|
1,999 |
3,634 |
(5,115) |
|
|
_______ |
_______ |
_______ |
|
|
|
|
|
|
|
Number’000 |
Number’000 |
Number’000 |
|
|
|
|
|
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
2019
£’000 |
Unaudited
30 June
2018
£’000 |
Audited
31 December
2018
£’000 |
|
|
restated |
restated |
Total net assets |
8,243 |
17,518 |
7,919 |
Less convertible preference shares
at fully diluted value |
(2,355) |
(5,005) |
(2,263) |
|
__________ |
__________ |
__________ |
Net assets attributable to ordinary
shareholders |
5,888 |
12,513* |
5,656* |
|
________ |
________ |
________ |
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 fully diluted net asset value for the preference
shares.
*Net assets attributable to ordinary shareholders at
30 June 2018 and at 31 December 2018 have been restated using a value
of fully diluted net asset value for the preference shares instead
of using a value of par for the preference shares.
7. Non – current liabilities
Guarantee of subsidiary
liability |
Unaudited
30 June
2019
£’000 |
Unaudited
30 June
2018
£’000 |
Audited
31 December
2018
£’000 |
|
|
|
|
Opening
provision |
6,396 |
4,666 |
4,666 |
(Decrease)/increase in period |
(127) |
114 |
1,730 |
|
__________ |
__________ |
__________ |
Closing
provision |
6,269 |
4,780 |
6,396 |
|
________ |
________ |
________ |
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 and 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 £17,000 (30 June 2018 –
£17,000 and 31 December 2018 –
£34,000) in respect of those services.
The salaries and pensions of the company’s employees, except for
the three non-executive directors and one employee, 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 2019 were £179,000
(30 June 2018 – £172,000 and
31 December 2018 – £364,000) in
respect of salary costs and £23,000 (30 June
2018 – £23,000 and 31 December
2018 – £40,000) in respect of pensions.
At the period end an amount of £876,000 (30 June 2018 – £44,000 and 31 December 2018 – £67,000) was due to Romulus
Films Limited and £560,000 (30 June
2018 – £8,000 and 31 December
2018 – £36,000) was due to Remus Films Limited.
During the period subsidiary BritAm Investments Limited paid
dividends of £nil (30 June 2018 –
£300,000 and 31 December 2018 –
£1,445,000) to the parent company, British & American
Investment Trust PLC.
British & American Investment Trust PLC has guaranteed the
liabilities of £6,269,000 (30 June
2018 – £4,780,000 and 31 December
2018 – £6,396,000) due from Second BritAm Investments
Limited to its fellow subsidiaries if they should fall due.
During the period the company paid interest of £nil
(30 June 2018 – £3,000 and
31 December 2018 – £3,000) on the
loan due to Second BritAm Investments Limited.
During the period the company received interest of £8,000
(30 June 2018 – £7,000 and
31 December 2018 – £14,000) from
British and American Films Limited, £2,000 (30 June 2018 – £nil and 31
December 2018 – £1,000) from Second BritAm Investments
Limited and £19,000 (30 June 2018 –
£14,000 and 31 December 2018 –
£33,000) from BritAm Investments Limited.
All transactions with subsidiaries were made on an arm’s length
basis.
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 2019 |
(28,802) |
1,721 |
Allocation of profit
for the period |
1,631 |
368 |
Ordinary and
preference dividends paid |
- |
(1,675) |
|
_________ |
_________ |
At 30 June
2019 |
(27,171) |
414 |
|
_______ |
_______ |
The capital reserve includes £7,255,000 of investment holding
losses (30 June 2018 – £2,624,000
loss, 31 December 2018 – £9,839,000
loss).
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.
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 2019 |
Level 1
£’000 |
Level
2
£’000 |
Level
3
£’000 |
Total
£’000 |
Investments: |
|
|
|
|
Investments held at
fair value through profit or loss |
9,564 |
- |
1 |
9,565 |
Subsidiary held at
fair value through profit or loss |
- |
- |
5,537 |
5,537 |
|
|
|
|
|
Total financial
assets and liabilities carried at fair value |
9,564 |
- |
5,538 |
15,102 |
|
|
|
|
|
With the exception of the Sarossa Capital, BritAm Investments
Limited (unquoted subsidiary) and Second BritAm Investments Limited
(unquoted subsidiary), which are categorised as Level 3, 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 2019 |
5,277 |
Purchases |
- |
Sales proceeds |
(8) |
Gains on sales |
- |
Investment holding
gains |
268 |
|
|
Closing fair value at
30 June 2019 |
5,537 |
|
|
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.
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.
11. Financial information
The financial information contained in this report does not
constitute statutory accounts as defined in Section 435 of the
Companies Act 2006. The financial information for the period ended
30 June 2019 and 30 June 2018 have not been audited by the
Company’s Auditor pursuant to the Auditing Practices Board
guidance. The information for the year to 31
December 2018 has been extracted from the latest published
Annual Report and Financial Statements, which have been lodged with
the Registrar of Companies, contained an unqualified auditors’
report and did not contain a statement required under Section
498(2) or (3) of the Companies Act 2006.
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 2018.
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 27 September 2019 and the above responsibility
statement was signed on its behalf by:
Jonathan C Woolf
Managing Director
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 2019 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.
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 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 2019 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.
Use of our report
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.
HAZLEWOODS LLP
AUDITOR
Cheltenham
27 September 2019