BRITISH & AMERICAN INVESTMENT
TRUST PLC |
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FINANCIAL HIGHLIGHTS |
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For the six months ended 30 June
2018 |
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Unaudited
6 months
to 30 June
2018
£’000 |
Unaudited
6 months
to 30 June
2017
£’000 |
Audited
Year ended
31 December
2017
£’000 |
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Revenue |
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Return before tax |
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864 |
1,152 |
2,210 |
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_________ |
_________ |
_________ |
Earnings per £1 ordinary shares –
basic (note 5) |
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2.81p |
3.97p |
7.58p |
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_________ |
_________ |
_________ |
Earnings per £1 ordinary shares –
diluted (note 5) |
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2.51p |
3.34p |
6.41p |
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_________ |
_________ |
_________ |
Capital |
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Total equity |
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17,518 |
21,863 |
15,534 |
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_________ |
_________ |
_________ |
Revenue reserve (note 9) |
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929 |
1,474 |
1,701 |
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_________ |
_________ |
_________ |
Capital reserve (note 9) |
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(18,411) |
(14,611) |
(21,167) |
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_________ |
_________ |
_________ |
Net assets per ordinary share (note
6) |
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- Basic |
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£0.30 |
£0.47 |
£0.22 |
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_________ |
_________ |
_________ |
- Diluted |
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£0.50 |
£0.62 |
£0.44 |
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_________ |
_________ |
_________ |
Diluted net assets per ordinary
share at 25 September 2018 |
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£0.75 |
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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 |
8.6p |
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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 2018 |
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Company |
Nature of
Business |
Valuation
£’000 |
Percentageof
portfolio
% |
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Geron Corporation (USA) |
Biomedical |
6,822 |
30.67 |
Dunedin Income Growth |
Investment Trust |
2,560 |
11.51 |
Biotime Inc (USA) |
Biotechnology |
2,169 |
9.75 |
Asterias Biotherapeutics (USA) |
Pharmaceuticals |
1,123 |
5.05 |
Merchants Trust |
Investment Trust |
1,060 |
4.76 |
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________ |
________ |
Aberdeen Diversified Income &
Growth |
Investment Trust |
860 |
3.87 |
Invesco Income Growth Trust |
Investment Trust |
580 |
2.61 |
JZ Capital Partners |
Investment Trust |
146 |
0.66 |
Braemar Shipping Services |
Transport |
120 |
0.54 |
Invesco Perpetual Enhanced |
Investment Trust |
84 |
0.38 |
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________ |
________ |
B.S.D. Crown |
Software and computer services |
67 |
0.30 |
OncoCyte (USA) |
Biotechnology |
59 |
0.26 |
Angle |
Pharmaceuticals &
Biotechnology |
50 |
0.23 |
ADVFN |
Other financial |
38 |
0.17 |
City Merchants High Yield Trust |
Investment Trust |
32 |
0.14 |
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________ |
________ |
Biotime Promissory Note (USA) |
Biotechnology |
30 |
0.14 |
Audioboom Group |
Media |
19 |
0.09 |
Walker Crips Group |
Financial services |
15 |
0.07 |
Sherborne Investors |
Financial services |
12 |
0.05 |
Sarossa Capital |
Biotechnology |
5 |
0.02 |
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________ |
________ |
20 Largest investments (excluding
subsidiaries) |
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15,851 |
71.27 |
Investment in subsidiaries |
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6,375 |
28.66 |
Other investments (number of
holdings : 6) |
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15 |
0.07 |
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________ |
________ |
Total investments |
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22,241 |
100.00 |
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________ |
________ |
Unaudited Interim Report
As at 30 June 2018
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 |
Ronald G Paterson
(Non-executive) – retired 30 June 2018 |
Telephone: 020 7201
3100 |
Alex Tamlyn
(Non-executive) – appointed as Director 1 July
2018 |
Website:
www.baitgroup.co.uk |
Chairman’s Statement
I report our results for the 6 months to 30 June 2018.
Revenue
The profit on the revenue account before tax amounted to £0.9
million (30 June 2017: £1.2 million),
a decrease of 25.0 percent. This difference was primarily due
to a reduction in investment income received during the period,
with costs decreasing by a relatively similar amount of 22.0
percent compared to the previous year.
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 £36,000 (30 June 2017:
£36,000) and property unit trust income of £7,000 (30 June 2017: £7,000) was received.
A gain of £2.8 million (30 June 2017:
£0.3 million loss) was registered on the capital account before
capitalised expenses, comprising a realised loss of £0.6 million
(30 June 2017: £1.5 million loss) and
an unrealised gain of £3.4 million (30 June
2017: £1.2 million gain).
Revenue earnings per ordinary share were 2.8
pence on an undiluted basis (30 June
2017: 4.0 pence) and
2.5 pence
on a fully diluted basis (30 June
2017: 3.3 pence).
Net Assets and performance
Company net assets were £17.5 million (£15.5 million, at
31 December 2017), an increase of
12.8 percent. Over the same six month period, the FTSE 100
index decreased by 0.7 percent and the All Share index decreased by
0.5 percent. On a total return basis, after adding back
dividends paid during the period, company net assets increased by
23.4 percent compared to an increase of the total return on the
FTSE 100 index of approximately 1.5 percent. The net asset
value per £1 ordinary share was 30
pence (prior charges deducted at par) and 50 pence on a fully diluted basis.
The increase in net assets relative to our benchmark reflected
gains of 91 percent in the value of our largest US holding, Geron
Corporation. As noted in my statement of 27th April,
Geron’s share price had increased substantially in the first
quarter of 2018 by 136 percent and these significant gains were
largely retained by the period end. The increase in Geron’s value
reflected a positive update of Geron’s clinical trials and an
accelerated third quarter 2018 date for the final decision by
Johnson & Johnson, Geron’s development partner, on taking
forward its commitment to develop and commercialise Geron’s
oncology drug, Imetelstat. This outstanding performance by our
largest investment, more than reversing the declines of 2017,
overshadowed that of our other investments. In the UK, our
investments broadly tracked our benchmark index, while our other
two major US investments performed weakly following capital raising
exercises, although this was not sufficient to offset significantly
the strong performance by Geron. In the period since the half year,
Geron’s value has risen by a further 86 percent to its highest
level for 9 years in anticipation of the imminent decision by
Johnson & Johnson by the current quarter end.
More generally, the multi-year pattern of growth in equity
markets in the UK and USA broke
down in the first half of 2018. The extraordinarily long
period of low volatility seen in 2017 in particular, which had
delivered steadily and strongly rising markets throughout the year,
came to an abrupt halt in the first quarter of 2018 as the markets
experienced two corrections of around 10 percent. Erratic
policy making in trade and foreign relations from a White House
under considerable political and legal investigatory pressure and,
in the UK, a strong headwind in the Brexit negotiations with the EU
Commission, weighed on sentiment despite continued strong
performance from corporates in the USA. The artificial boost
to economic growth in the USA
provided by the administration’s reduction in taxes at a time of
relatively robust growth, raised the prospect of higher interest
rates to curb anticipated inflation concerns and, for the longer
term, an unsustainable increase in the already high US government
deficit. This caused equity markets to falter and the US
dollar yield curve to flatten in anticipation of recessionary
conditions ahead in the medium term.
Equity markets in the USA and
UK ended the period relatively unchanged as prices recovered their
poise towards the end of the second quarter. In the UK
however, the main driver of this recovery related to the decrease
in the value of sterling following its rapid rise in the first
quarter to a high of £1.43 against the US dollar, which was
equivalent to the level prevailing immediately prior to the
announcement of the Brexit referendum result in June 2016.
Since that time, UK equity market prices have tracked closely
changes in Sterling’s value as FTSE index companies derive a
significant proportion of their earnings and therefore valuations
in foreign currencies.
Dividend
We intend to pay an interim dividend of 2.7
pence per ordinary share on 29
November 2018 to shareholders on the register at
9 November 2018. 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 Alex
Tamlyn who joins our board on 1st July following
Ronald Paterson’s retirement on 30th June. The board and
I thank Ronald for his many years of service and experience which
has been of great value to the company.
Alex is a Partner and Head of Capital Markets EMEA at DLA Piper
where he specialises in corporate finance, UK and international
securities offerings, schemes of arrangement, corporate governance
and securities. As with Ronald before him, Alex will bring to
the board many years of experience in corporate finance and
securities regulation.
Outlook
The uncertainties for equity markets which have characterised
2018 to date are likely to continue for some time, despite
continued strength being shown in corporate profitability. We are
currently focused on the important near term inflection point in
our largest investment’s fortunes which will inform our investment
strategy over the medium and longer term.
As at 25 September, company net assets were £26.1 million, an
increase of 49.2 percent since 30 June. This compares with a
decrease in the FTSE 100 index of 1.7 percent and a decrease of 1.7
percent in the All Share index over the same period, and is
equivalent to 65 pence per share
(prior charges deducted at par) and 75
pence per share on a fully diluted basis.
David Seligman
27 September 2018
Managing Director’s Report
The erratic positions on world trade being taken by the White
House, threatening a trade war between the world’s two largest
trading blocks, the USA and
China, together with further
threats against the third largest block, the European Union,
produced two episodes of correction (10 percent) in the first
quarter of 2018 in equity markets in the USA and the UK. By the end of second
quarter, however, these markets had recovered to their end 2017
levels which themselves represented historic highs and the
culmination of 10 years of steady growth since the recession of
2008/9. This has equated to the longest equity bull market period
in history as these markets progressed steadily upwards without a
decrease of at least 20 percent during that time.
In the UK, short term movements in the equity market, in
addition to reflecting volatile events in international affairs,
have also reacted to the ebbs and flows of the Brexit
negotiations. At times when the negotiations were proceeding
steadily, with a so-called soft Brexit in prospect, £ sterling
would firm and the UK equity market would soften as the value of UK
leading stocks reflects the high content (75 percent) of their
foreign currency earnings. Conversely, at time when the
negotiations have stalled or are proceeding badly, which has been
the pattern of the last few months, £ sterling has fallen and the
equity market has risen in anticipation of the future costs of a
no-deal Brexit together with the prospect of lower interest rates
to offset an anticipated economic downturn.
During this long and unprecedented period of capital growth in
the two equity markets in which we invest, our portfolio has
tracked these markets on a total return basis, despite the value of
our largest investment over that period, Geron Corporation, having
badly languished. The significant drag that this has represented on
our performance has, however, been largely offset by our programme
to enhance income over the period.
With the substantial recovery in the value of Geron’s stock
price since the first half of 2018 to levels last seen in 2009, our
portfolio has now performed better in terms of capital growth and
our investment in Geron now stands at a profit in our books.
As already reported, this recovery in Geron’s share price has
been the result of a positive update in the first quarter of
Geron’s clinical trials and an accelerated third quarter 2018 date
for the final decision by Johnson & Johnson, Geron’s
development partner, on taking forward its commitment to develop
and commercialise Geron’s oncology drug, Imetelstat. These
developments were announced in March of this year and since then
there have been a number of other indications which suggest that
the imminent decision by Johnson & Johnson is likely to be
favourable. Such a decision would also indicate Johnson &
Johnson’s confidence not only in the efficacy of Imetelstat but
also in its ability to obtain regulatory clearance to market
it. Consequently, investors have been pushing the price of
Geron stock forward over the past few months, despite the existence
of a substantial position of short sold stock which has accumulated
over the years and which, in recent months, has risen dramatically
to over 60 million shares, representing one third of all of Geron’s
issued stock.
The ultimate value of Geron will depend on the nature of the
marketing clearance it obtains and the number of cancer
indications which it will cover. Currently, the clinical trials
cover two hematologic (blood) cancer indications with unmet medical
need, MF (Myelofibrosis) and MDS (Myelodysplastic syndrome),
each with a $1billion dollar
market. Johnson & Johnson has also let it be known in its
presentations that it plans to trial Imetelstat for AML (Acute
Myeloid Leukemia), a blood cancer with an even larger patient
population and a $2 billion
market. Furthermore, as Johnson & Johnson has acquired
exclusive world rights from Geron covering all cancer types, solid
tumours as well as liquid (blood) tumours, there may also be other
substantial patient populations in the future which Imetelstat
could serve, including the possibility of combination therapies
with other already approved oncology drugs. A foretaste
of this possibility has already been seen in combination trials
with the chemotherapy drug Paclitaxel (or Taxol) for breast and
other cancers (developed by Bristol Myers Squib and marketed by
many leading pharma companies, including Pfizer) and a number of
patents applications filed by other leading pharma compnies, such
as Abbvie, Novartis and Johnson & Johnson itself, to cover the
use of Imetelstat as a combination with their own oncology drugs
such Venetoclax, a blockbuster AML cancer drug. The progress
of these developments and their likely impact on Imetelstat’s
prospects over the coming years will inform our own strategy with
regard to Geron as our largest and strategic portfolio
investment.
In the meantime, against the generally uncertain background
described above arising out of the exceptionally long bull market
in equities and instability in international economic affairs
precipitated by erratic policy making by the USA, we have continued to make modest
reductions in our investments in other areas to take advantage of
high historic valuations and have taken the opportunity over the
period to reduce our levels of gearing.
Jonathan C Woolf
27 September 2018
CONDENSED INCOME STATEMENT |
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Six
months ended 30 June 2018 |
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Unaudited
6 months to 30 June 2018 |
Unaudited
6 months to 30 June 2017
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Audited
Year ended 31 December 2017
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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 |
1,104 |
- |
1,104 |
1,420 |
- |
1,420 |
2,732 |
- |
2,732 |
Holding
gains/(losses) on investments at fair value through profit or
loss |
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- |
3,549 |
3,549 |
- |
1,230 |
1,230 |
- |
(5,249) |
(5,249) |
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Losses on disposal of
investments at fair value through profit or loss |
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- |
(643) |
(643) |
- |
(1,487) |
(1,487) |
- |
(1,442) |
(1,442) |
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Foreign exchange
gains/(losses) |
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(12) |
(12) |
(24) |
17 |
17 |
34 |
53 |
53 |
106 |
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Expenses |
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(203) |
(116) |
(319) |
(258) |
(133) |
(391) |
(526) |
(272) |
(798) |
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_____ |
_____ |
_____ |
_____ |
_____ |
_____ |
_____ |
_____ |
_____ |
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Profit/(loss) before
finance costs and tax |
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889 |
2,778 |
3,667 |
1,179 |
(373) |
806 |
2,259 |
(6,910) |
(4,651) |
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Finance costs |
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(25) |
(22) |
(47) |
(27) |
(14) |
(41) |
(49) |
(33) |
(82) |
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_____ |
_____ |
_____ |
_____ |
_____ |
_____ |
_____ |
_____ |
_____ |
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Profit/(loss) before tax |
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864 |
2,756 |
3,620 |
1,152 |
(387) |
765 |
2,210 |
(6,943) |
(4,733) |
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Taxation |
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14 |
- |
14 |
16 |
- |
16 |
35 |
- |
35 |
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_____ |
_____ |
_____ |
_____ |
_____ |
_____ |
_____ |
_____ |
_____ |
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Profit/(loss)
for the period |
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878 |
2,756 |
3,634 |
1,168 |
(387) |
781 |
2,245 |
(6,943) |
(4,698) |
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_____ |
_____ |
_____ |
_____ |
_____ |
_____ |
_____ |
_____ |
_____ |
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Earnings per
ordinary share |
5 |
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Basic |
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2.81p |
11.03p |
13.84p |
3.97p |
(1.55)p |
2.42p |
7.58p |
(27.77)p |
(20.19)p |
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Diluted |
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2.51p |
7.87p |
10.38p |
3.34p |
(1.11)p |
2.23p |
6.41p |
(19.84)p |
(13.43)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
2018 |
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Unaudited
Six months ended 30 June 2018 |
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Share
capital*
£’000 |
Capital
reserve
£’000 |
Retained
earnings
£’000 |
Total
£’000 |
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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) |
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|
________ |
________ |
________ |
________ |
Balance at 30 June 2018 |
|
35,000 |
(18,411) |
929 |
17,518 |
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________ |
________ |
________ |
________ |
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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 |
|
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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Audited
Year ended 31 December 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 |
|
35,000 |
(14,224) |
1,906 |
22,682 |
Profit/(loss) for the period |
|
- |
(6,943) |
2,245 |
(4,698) |
Ordinary dividend paid |
|
- |
- |
(2,100) |
(2,100) |
Preference dividend paid |
|
- |
- |
(350) |
(350) |
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________ |
________ |
________ |
________ |
Balance at 31 December 2017 |
|
35,000 |
(21,167) |
1,701 |
15,534 |
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________ |
________ |
________ |
________ |
*The company’s share capital comprises £35,000,000 (2017 -
£35,000,000) being 25,000,000 ordinary shares of £1 (2017 -
25,000,000) and 10,000,000 non-voting convertible preference shares
of £1 each (2017 - 10,000,000).
CONDENSED BALANCE SHEET |
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As at 30 June 2018 |
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Note |
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Unaudited
30 June
2018
£’000 |
Unaudited
30 June
2017
£’000 |
Audited
31 December
2017
£’000 |
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Non-current assets |
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Investments – fair value through
profit or loss (note 1) |
|
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15,866 |
24,408 |
15,565 |
Subsidiaries – fair value through
profit or loss |
|
|
6,375 |
6,569 |
5,277 |
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|
_________ |
_________ |
_________ |
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|
22,241 |
30,977 |
20,842 |
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Current assets |
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Receivables |
|
|
4,055 |
2,089 |
2,399 |
Cash and cash equivalents |
|
|
725 |
789 |
2,213 |
|
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|
_________ |
_________ |
_________ |
|
|
|
4,780 |
2,878 |
4,612 |
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|
_________ |
_________ |
_________ |
Total assets |
|
|
27,021 |
33,855 |
25,454 |
|
|
|
_________ |
_________ |
_________ |
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
Trade and other payables |
|
|
(2,006) |
(2,512) |
(1,010) |
Bank loan |
|
|
(2,717) |
(4,363) |
(4,244) |
|
|
|
_________ |
_________ |
_________ |
|
|
|
(4,723) |
(6,875) |
(5,254) |
|
|
|
_________ |
_________ |
_________ |
|
|
|
|
|
|
Total assets less current
liabilities |
|
|
22,298 |
26,980 |
20,200 |
|
|
|
_________ |
_________ |
_________ |
|
|
|
|
|
|
Non – current
liabilities |
|
|
(4,780) |
(5,117) |
(4,666) |
|
|
|
_________ |
_________ |
_________ |
Net assets |
|
|
17,518 |
21,863 |
15,534 |
|
|
|
_________ |
_________ |
_________ |
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 |
|
|
(18,411) |
(14,611) |
(21,167) |
Retained revenue earnings |
|
|
929 |
1,474 |
1,701 |
|
|
|
_________ |
_________ |
_________ |
Total equity |
|
|
17,518 |
21,863 |
15,534 |
|
|
|
_________ |
_________ |
_________ |
Net assets per ordinary share –
basic |
6 |
|
£0.30 |
£0.47 |
£0.22 |
|
|
|
_________ |
_________ |
_________ |
Net assets per ordinary share –
diluted |
6 |
|
£0.50 |
£0.62 |
£0.44 |
|
|
|
_________ |
_________ |
_________ |
CONDENSED CASHFLOW
STATEMENT |
|
|
|
|
Six months ended 30 June
2018 |
|
|
|
|
|
|
|
|
|
|
|
Unaudited
6 months to
30 June
2018
£’000 |
Unaudited
6 months to
30 June
2017
£’000 |
Audited
Year ended
31 December
2017
£’000 |
|
|
|
|
|
Cash flow from operating
activities |
|
|
|
|
|
|
|
|
|
Profit/(loss) before tax |
|
3,620 |
765 |
(4,733) |
|
|
|
|
|
Adjustment for: |
|
|
|
|
(Gains)/losses on investments |
|
(2,906) |
257 |
6,691 |
Proceeds on disposal of investments
at fair value |
|
|
|
|
through profit or loss |
|
7,699 |
7,186 |
13,867 |
Purchases of investments at fair
value |
|
|
|
|
through profit or loss |
|
(5,967) |
(7,686) |
(11,570) |
Interest |
|
47 |
41 |
82 |
|
|
________ |
________ |
________ |
Operating cash flows before
movements |
|
|
|
|
in working capital |
|
2,493 |
563 |
4,337 |
Increase in receivables |
|
(269) |
(254) |
(780) |
(Decrease)/increase in payables |
|
(491) |
820 |
4 |
|
|
________ |
________ |
________ |
Net cash from operating
activities |
|
|
|
|
before interest |
|
1,733 |
1,129 |
3,561 |
Interest paid |
|
(44) |
(36) |
(75) |
|
|
________ |
________ |
________ |
|
|
|
|
|
Net cash flows from operating
activities |
|
1,689 |
1,093 |
3,486 |
|
|
________ |
________ |
________ |
|
|
|
|
|
Cash flows from financing
activities |
|
|
|
|
Dividends paid on ordinary
shares |
|
(1,475) |
(1,425) |
(2,100) |
Dividends paid on preference
shares |
|
(175) |
(175) |
(350) |
Bank loan |
|
(1,527) |
873 |
754 |
|
|
________ |
________ |
________ |
|
|
|
|
|
Net cash used in financing
activities |
|
(3,177) |
(727) |
(1,696) |
|
|
________ |
________ |
________ |
|
|
|
|
|
|
|
|
|
|
Net
(decrease)/increase in cash and cash
equivalents |
|
(1,488) |
366 |
1,790 |
|
|
|
|
|
Cash and cash equivalents at
beginning of period |
|
2,213 |
423 |
423 |
|
|
________ |
________ |
________ |
Cash and cash equivalents at end
of period |
|
725 |
789 |
2,213 |
|
|
________ |
________ |
________ |
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 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 2017 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%
(2017 – 50%) to revenue and 50% (2017 – 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
2018
£’000 |
Unaudited
6 months
to 30 June
2017
£’000 |
Audited
Year ended
31 December
2017
£’000 |
|
|
|
|
|
Income from investments |
|
1,083 |
1,407 |
2,707 |
Other income |
|
21 |
13 |
25 |
|
|
_________ |
_________ |
_________ |
|
|
1,104 |
1,420 |
2,732 |
|
|
_______ |
_______ |
_______ |
Of the £783,000 (30 June 2017 –
£1,406,000, 31 December 2017 –
£2,304,000) dividends received from listed investments in the
company accounts, £641,000 (30 June
2017 – £860,000, 31 December
2017 – £1,891,000) related to special and other dividends
received from investee companies that were bought after the
dividend announcement. There was a corresponding capital loss of
£573,000 (30 June 2017 – £898,000,
31 December 2017 – £1,949,000), 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
2017 - £36,000,
31 December 2017- £101,000) received by the
subsidiary British & American Films Limited and property unit
trust income of £7,000 (30 June 2017
- £7,000, 31 December 2017 - £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 2018 |
Unaudited
6 months to
30 June 2017 |
Audited
Year ended
31 December 2017 |
|
Interim |
Interim |
Final |
|
|
|
|
|
Pence per
share |
£’000 |
Pence per share |
£’000 |
Pence per share |
£’000 |
|
|
|
|
|
|
|
Ordinary shares |
2.7 |
675 |
2.7 |
675 |
5.9 |
1,475 |
Preference shares –
fixed |
1.75 |
175 |
1.75 |
175 |
1.75 |
175 |
|
|
_________ |
|
_________ |
|
_________ |
|
|
850 |
|
850 |
|
1,650 |
|
|
_______ |
|
_______ |
|
_______ |
The directors have declared an interim dividend of 2.7p (2017 –
2.7p) per ordinary share, payable on 29
November 2018 to shareholders registered on 9 November 2018. The shares will be quoted
ex–dividend on 8 November 2018.
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 2018 |
Unaudited
6 months to
30 June 2017 |
Audited
Year ended
31 December 2017 |
|
|
|
|
|
|
|
|
Pence per
share |
£’000 |
Pence per share |
£’000 |
Pence per share |
£’000 |
|
|
|
|
|
|
|
Ordinary shares –
final |
5.9 |
1,475 |
5.7 |
1,425 |
5.7 |
1,425 |
Ordinary shares –
interim |
- |
- |
- |
- |
2.7 |
675 |
Preference shares –
fixed |
1.75 |
175 |
1.75 |
175 |
3.5 |
350 |
|
|
_________ |
|
_________ |
|
_________ |
|
|
1,650 |
|
1,600 |
|
2,450 |
|
|
_______ |
|
_______ |
|
_______ |
5. Earnings per ordinary share
|
|
Unaudited
6 months
to 30 June
2018
£’000 |
Unaudited
6 months
to 30 June
2017
£’000 |
Audited
Year ended
31 December
2017
£’000 |
Basic earnings per share |
|
|
|
|
Calculated on the basis of: |
|
|
|
|
Net revenue profit after preference
dividends |
|
703 |
993 |
1,895 |
Net capital gain/(loss) |
|
2,756 |
(387) |
(6,943) |
|
|
_________ |
_________ |
_________ |
Net total earnings after preference
dividends |
|
3,459 |
606 |
(5,048) |
|
|
_______ |
_______ |
_______ |
|
|
|
|
|
|
|
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 |
|
878 |
1,168 |
2,245 |
Net capital gain/(loss) |
|
2,756 |
(387) |
(6,943) |
|
|
_________ |
_________ |
_________ |
Profit/(loss) after taxation |
|
3,634 |
781 |
(4,698) |
|
|
_______ |
_______ |
_______ |
|
|
|
|
|
|
|
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
2018
£’000 |
Unaudited
30 June
2017
£’000 |
Audited
31 December
2017
£’000 |
|
|
|
|
Total net assets |
17,518 |
21,863 |
15,534 |
Less convertible preference
shares |
(10,000) |
(10,000) |
(10,000) |
|
__________ |
__________ |
__________ |
Net assets attributable to ordinary
shareholders |
7,518 |
11,863 |
5,534 |
|
________ |
________ |
________ |
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
2018
£’000 |
Unaudited
30 June
2017
£’000 |
Audited
31 December
2017
£’000 |
|
|
|
|
Opening
provision |
4,666 |
4,432 |
4,432 |
Increase in period |
114 |
685 |
234 |
|
__________ |
__________ |
__________ |
Closing
provision |
4,780 |
5,117 |
4,666 |
|
________ |
________ |
________ |
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 £17,000 (30 June 2017 –
£11,000 and 31 December 2017 –
£24,000) 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 2018 were £172,000
(30 June 2017 – £236,000 and
31 December 2017 – £473,000) in
respect of salary costs and £23,000 (30 June
2017 – £33,000 and 31 December
2017 – £58,000) in respect of pensions.
At the period end an amount of £44,000 (30 June 2017 – £370,000 and 31 December 2017 – £28,000) was due to Romulus
Films Limited and £8,000 (30 June
2017 – £389,000 and 31 December
2017 – £153,000) was due to Remus Films Limited.
During the period subsidiary BritAm Investments Limited paid
dividends of £300,000 (30 June 2017 –
£300,000 and 31 December 2017 –
£400,000) to the parent company, British & American Investment
Trust PLC.
British & American Investment Trust PLC has guaranteed the
liabilities of £4,780,000 (30 June
2017 – £5,117,000 and 31 December
2017 – £4,666,000) 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 2017 – £5,000 and
31 December 2017 – £5,000) and £3,000
(30 June 2017 – £nil and 31 December 2017 – £2,000) on the loan due to
BritAm Investments Limited and Second BritAm Investments Limited
respectively and which are included in the balances at 30 June 2018.
During the period the company received interest of £7,000
(30 June 2017 – £8,000 and
31 December 2017 – £16,000) from
British and American Films Limited, £nil (30
June 2017 – £4,000 and 31 December
2017 – £4,000) from Second BritAm Investments Limited and
£14,000 (30 June 2017 – £nil and
31 December 2017 – £5,000) 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 2018 |
(21,167) |
1,701 |
Allocation of profit
for the period |
2,756 |
878 |
Ordinary and
preference dividends paid |
- |
(1,650) |
|
_________ |
_________ |
At 30 June
2018 |
(18,411) |
929 |
|
_______ |
_______ |
The capital reserve includes £2,624,000 of investment holding
losses (30 June 2017 – £2,307,000
gain, 31 December 2017 – £5,653,000
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 2018 |
Level
1
£’000 |
Level
2
£’000 |
Level
3
£’000 |
Total
£’000 |
Investments including
derivatives: |
|
|
|
|
Investments held at
fair value through profit or loss |
15,831 |
- |
35 |
15,866 |
Subsidiary held at
fair value through profit or loss |
- |
- |
6,375 |
6,375 |
|
_________ |
_________ |
_________ |
_________ |
Total financial
assets and liabilities carried at fair value |
15,831 |
- |
6,410 |
22,241 |
|
_______ |
_______ |
_______ |
_______ |
With the exception of the Biotime Promissory Note, 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 2018 |
5,333 |
Purchases |
- |
Sales proceeds |
(22) |
Gain on sales |
4 |
Investment holding
gains |
1,095 |
|
_________ |
Closing fair value at
30 June 2018 |
6,410 |
|
_______ |
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.
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 2017.
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 2018 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 2018 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 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 2018 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
27 September 2018