Final Results
British Empire Sec & Gen Tst PLC
13 November 2006
BRITISH EMPIRE SECURITIES AND GENERAL TRUST plc
Preliminary Announcement of Annual Results for the year ended 30 September 2006
• Net asset value ('NAV') on a total return basis increases by 14.3%
• NAV outperforms MSCI World Index by 5.6 percentage points
• Shares are at a premium of 3.5% to NAV at the year end
Chairman's Statement
The past year has been another good one for your Company and for the value of your investments. Our net asset value
per share increased by 14.3% compared with an increase of 12.1% in our benchmark, the Datastream Global Growth
Investment Trust Index, 8.7% in the MSCI World Index and 14.7% in the FTSE All Share Index, all on a total return
basis.
Over 3 years the net asset value total return per share has grown by 104.1%
At the interim stage, we indicated our caution about market valuations and decided to bank some of the profits from
well performing investments where we believed upsides were limited and the investment was trading closer to fair value.
The market shake-out in May allowed us to use some of the liquidity to go back into the market for shares which we
felt were again standing at discounts to valuation. Market levels are now close to their year's high and we have again
been taking some profits, leading to a higher level of liquidity available for investment at the year end.
Our income levels have remained strong as a combination of increasing dividends from our invested companies and income
from our liquidity work their way straight through to our bottom line. As Shareholders know, we are obliged to pay a
minimum of 85% of our net income to Shareholders by way of dividend if we are to retain our all-important investment
trust status. In recent years the higher yields from our gilt investments have persuaded us to pay part of the
dividend as a special dividend to reflect the possibility that, were we to become fully invested in equities again,
yields on our portfolio might fall, leading to a possible reduction in our total dividends in future. On this basis we
are this year again recommending a special dividend of 1.0p (2005: 1.4p) per share. In addition, your Directors, taking
into account the favourable prospects for the longer term growth of dividends on our investments and the fact that our
opening revenue reserves were strong, are recommending a final dividend of 3.2p per share (2005: 1.6p) which, together
with the interim dividend of 0.8p (2005: 0.6p) brings the total ordinary and special dividends for the year to 5.0p, an
increase of 39% on last year's total of 3.6p.
These are our first full year accounts to be prepared under International Financial Reporting Standards. The move to
bid pricing resulted in a reduction in the value of our investments of some 2p per share. Other than this and the
requirement to show this year's final and special dividends in next year's accounts (which I am unconvinced adds to the
clarity of our figures) there is little in the adoption of IFRS to bring to Shareholders' attention. However, the
additional work, particularly on the transitional figures, has imposed considerable extra effort on our administrators,
Phoenix Administration, our auditors and our audit committee and I am grateful to them all for rising to the
challenge.
Your Board has been strengthened this year with the appointment of Steve Bates who brings wide industry experience to
our deliberations. As Chairman I feel we have the balance of the Board about right. All members make thoughtful and
often incisive contributions to our discussions and I am grateful to them for the time and effort which they put into
our meetings. The annual evaluation of our Board and its committees has very much supported my view. I very much hope
that Shareholders will support the election of Steve Bates to the Board for the first time, together with the
re-election of Strone Macpherson who retires this year in accordance with the Company's Articles of Association. In
addition, having served for over ten years I am also standing for re-election. The Board does not believe that in an
Investment Trust where experience of the investment cycle is essential to the Board's deliberations, length of service
of itself should disqualify a Director. We do recognize the need, however, to refresh the Board periodically.
John Pennink has again performed excellently in the management of your Company's investment portfolio. He has good
touch, a deep understanding of what drives markets and a singular focus on finding value in markets which are ever
better researched. Consequently we had no hesitation in renewing our management contract with Asset Value Investors.
£1000 invested when John took over full time management of the portfolio four years ago would now be worth £2,912 while
your dividends have increased from 1.70p per share to 5.0p per share - enough said. I commend the Investment Manager's
Review for your reading.
As Chairman I believe your Board's primary focus should be on the Company's investments and investment performance and
so it is. Your Board also looks at wider areas of risk and reviews the policies on areas such as gearing, hedging and
management of share premium or discount at least annually and more frequently if appropriate. Our shares have been
trading at a premium throughout the year and we have considered whether to issue new shares into this market strength.
Given our high levels of liquidity and the difficulty in finding new under-valued investments which meet our investment
philosophy we decided not to undertake such issuance at the moment, but it remains open to us in the future. We also
believe that the see-through discount on our equity portfolio is in excess of 10% which more than compensates for the
premium on the shares.
Your Board is also very conscious of its obligation to ensure that there are proper control systems in place to
safeguard your funds. We have reviewed these systems and the performance of our service providers and consider that
there are robust controls in place. There is further detail later in the Report.
For the future we are remaining cautious. Interest rate tightening takes time to work its way through to the real
economy and we at least are not clear that the full effects have yet been seen in the US and UK economies, or that
policymakers' objectives have been met. The recent softening in the oil price is welcome both as a stimulus and in
easing inflationary pressures. However, we believe that our investment philosophy of seeking out under-valued
investments remains valid and we shall continue to invest in line with that philosophy as opportunities arise.
Our marketing over the past three years has been targeted towards increasing our individual Shareholder base and I am
delighted that private Shareholders now account for over 50% of the ownership of the Company. The Directors would like
to invite all Shareholders to a buffet lunch after the AGM. If you would like to attend please reply on the enclosed
card. I look forward to renewing my acquaintance with many of you then and to welcoming some of our many new
Shareholders to the meeting.
Iain Samuel Robertson CBE
Chairman
13 November 2006
Unaudited Consolidated Income Statement of the Group for the year ended 30
September 2006
Income
2006 2006 2006 2005 2005 2005
Revenue Capital Total Revenue Capital Total
return return return return
£'000 £'000 £'000 £'000 £'000 £'000
Investment income 16,626 - 16,626 13,110 - 13,110
Gains on investments held at fair - 85,053 85,053 - 188,196 188,196
value
Losses on Index Stock - (7) (7) - (764) (764)
Gains on forward sales of Euro - - - - 1,221 1,221
Realised exchange losses - (2,343) (2,343) - (610) (610)
16,626 82,703 99,329 13,110 188,043 201,153
Expenses
Investment management fee
(including irrecoverable VAT) (2,006) (3,685) (5,691) (1,404) (3,265) (4,669)
Other expenses
(including irrecoverable VAT) (1,221) - (1,221) (1,147) - (1,147)
Profits before finance costs and 13,399 79,018 92,417 10,559 184,778 195,337
tax
Finance costs (2,391) (8) (2,399) (2,361) (7) (2,368)
Profit before tax 11,008 79,010 90,018 8,198 184,771 192,969
Taxation (2,488) 1,105 (1,383) (1,584) 922 (662)
Profit for the period 8,520 80,115 88,635 6,614 185,693 192,307
Earnings per ordinary share
Basic - ordinary shares (see note 5.32p 50.05p 55.37p 4.13p 116.00p 120.13p
3)
The total column of this statement represents the Group's Income Statement, prepared in accordance with IFRS. The
revenue return and capital return columns are supplementary to this and are prepared under the guidance published by
the Association of Investment Companies.
All items in the above statement derive from continuing operations.
All income is attributable to the equity holders of British Empire Securities and General Trust plc. There are no
minority interests.
The accompanying notes are an integral part of the financial statements.
Unaudited Consolidated and Company Statements of Changes in Equity for the year
ended 30 September 2006
Ordinary Capital Share Capital Capital Merger Revenue Total
share redemption premium reserve reserve reserve reserve
capital reserve realised unrealised
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Group
For the year to
30 September 2005
Restated
(see note 7(a) )
Balance at 30 16,008 2,927 28,078 246,363 82,214 41,406 12,478 429,474
September 2004
Profit for the - - - 105,491 80,202 - 6,614 192,307
period
Ordinary - - - - - - (3,042) (3,042)
dividends paid
Balance as at 30 16,008 2,927 28,078 351,854 162,416 41,406 16,050 618,739
September 2005
For the year to
30 September
2006
Balance at 30 16,008 2,927 28,078 351,854 162,416 41,406 16,050 618,739
September 2005
Profit for the - - - 144,369 (64,254) - 8,520 88,635
period
Ordinary - - - - - - (3,842) (3,842)
dividends paid
Special dividend - - - - - - (2,241) (2,241)
paid
Balance as at 30 16,008 2,927 28,078 496,223 98,162 41,406 18,487 701,291
September 2006
Company
For the year to
30 September 2005
Restated
(see note 7(a))
Balance at 30 16,008 2,927 28,078 246,363 83,999 41,406 10,693 429,474
September 2004
Profit for the - - - 105,491 80,201 - 6,615 192,307
period
Ordinary - - - - - - (3,042) (3,042)
dividends paid
Balance as at 30 16,008 2,927 28,078 351,854 164,200 41,406 14,266 618,739
September 2005
For the year to
30 September 2006
Balance at 30 16,008 2,927 28,078 351,854 164,200 41,406 14,266 618,739
September 2005
Profit for the - - - 144,369 (64,256) - 8,522 88,635
period
Ordinary - - - - - - (3,842) (3,842)
dividends paid
Special dividend - - - - - - (2,241) (2,241)
paid
Balance as at 16,008 2,927 28,078 496,223 99,944 41,406 16,705 701,291
30 September 2006
Unaudited Consolidated and Company Balance Sheets as at 30 September 2006
Company Group
Restated Restated
(see note 7(a)) (see note 7(a))
2006 2005 2006 2005
£'000 £'000 £'000 £'000
Non-current assets
Investments held at fair value through 733,205 651,258 731,173 649,224
profit or loss
Current assets
Investments - - 5 5
Sales for future settlement 1,738 2,426 1,738 2,426
Other receivables 3,586 2,893 3,586 2,893
Cash and cash equivalents 9,242 2,404 9,245 2,410
14,566 7,723 14,574 7,734
Total assets 747,771 658,981 745,747 656,958
Current liabilities
Purchases for future settlement (9,423) (3,754) (9,423) (3,754)
Other payables (5,827) (5,255) (3,803) (3,232)
(15,250) (9,009) (13,226) (6,986)
Total assets less current liabilities 732,521 649,972 732,521 649,972
Non-current liabilities
103/8 per cent Debenture Stock 2011 (8,515) (8,515) (8,515) (8,515)
81/8 per cent Debenture Stock 2023 (14,879) (14,871) (14,879) (14,871)
Index Stock (7,518) (7,702) (7,518) (7,702)
Provision for deferred tax (318) (145) (318) (145)
Net assets 701,291 618,739 701,291 618,739
Equity attributable to equity
Shareholders
Ordinary share capital 16,008 16,008 16,008 16,008
Capital redemption reserve 2,927 2,927 2,927 2,927
Share premium 28,078 28,078 28,078 28,078
Capital reserve realised 496,223 351,854 496,223 351,854
Capital reserve unrealised 99,944 164,200 98,162 162,416
Merger reserve 41,406 41,406 41,406 41,406
Revenue reserve 16,705 14,266 18,487 16,050
Total equity (see note 4) 701,291 618,739 701,291 618,739
Net asset value per ordinary share - 438.08p 386.51p 438.08p 386.51p
basic
(see note 4)
Number of shares in issue 160,080,089 160,080,089 160,080,089 160,080,089
Unaudited Consolidated and Company Cash Flow Statements for the year ended 30
September 2006
Company Group
Restated Restated
(see note 7 (see note 7
(c)) (c))
2006 2005 2006 2005
£'000 £'000 £'000 £'000
Net cash inflow from operating activities (see 15,455 6,348 15,452 6,352
below)
Financing activities
Dividends paid (6,083) (3,042) (6,083) (3,042)
Buyback of Equity Index Stock (191) (348) (191) (348)
Cash outflow from financing activities (6,274) (3,390) (6,274) (3,390)
Increase in cash and cash equivalents 9,181 2,958 9,178 2,962
Exchange movements (2,343) (610) (2,343) (610)
Change in cash and cash equivalents 6,838 2,348 6,835 2,352
Cash and cash equivalents at beginning of year 2,404 56 2,410 58
Cash and cash equivalents at end of year 9,242 2,404 9,245 2,410
(see note 5)
Reconciliation of profit before taxation to net cash inflow from operating activities
Profit before taxation 90,018 192,969 90,018 192,969
Losses on Index Stock held at fair value 7 764 7 764
Profits on forward currency contracts - (1,221) - (1,221)
Losses on exchange movements 2,343 610 2,343 610
Gains on investments held at fair value through (85,051) (188,196) (85,053) (188,196)
profit or loss
Purchases of investments (553,088) (420,652) (553,088) (420,652)
Sales of investments 562,549 421,682 562,549 421,682
Net proceeds from forward currency contracts - 1,221 - 1,221
Increase in other receivables (590) (1,027) (590) (1,028)
Increase in creditors 13 694 13 694
Taxation (754) (503) (754) (498)
Amortisation of Debenture issue expenses 8 7 8 7
Decrease in value on investments - current - - 1 -
assets
Purchase of investments - current assets - - (2) -
Net cash inflow from operating activities 15,455 6,348 15,452 6,352
Notes to the Accounts
1. Accounting policies
The financial statements of the Group and the Company have been prepared in accordance with International Financial
Reporting Standards ('IFRS'). These comprise standards and interpretations approved by the International Accounting
Standards Board ('IASB'), together with interpretations of the International Accounting Standards and Standing
Interpretations Committee approved by the International Accounting Standards Committee ('IASC') that remain in effect,
to the extent that IFRS have been adopted by the European Union.
During the year the IASB issued IFRIC10 Interim Financial Reporting and Impairment Standard (effective 1 November
2006) and IFRS7 Financial Instruments: Disclosures (effective 1 January 2007). The Directors do not anticipate that
the adoption of these Standards will have a material impact on the financial statements in the period of initial
application.
The functional currency of the Group is pounds sterling because this is the currency of the primary economic
environment in which the Group operates. The financial statements are also presented in pounds sterling.
(a) Basis of preparation
The principal accounting policies adopted are set out below. Where presentational guidance set out in the Statement of
Recommended Practice ('the SORP') for investment trusts issued by the Association of Investment Companies ('the AIC')
in January 2003 (revised in December 2005) is consistent with the requirements of IFRS, the directors have sought to
prepare the financial statements on a basis compliant with the recommendations of the SORP.
(b) Basis of consolidation
The consolidated financial statements incorporate the financial statements of the Company and entities controlled by
the Company (its subsidiary) made up to 30 September each year. Control is achieved where the Company has the power to
govern the financial and operating policies of an entity so as to obtain benefits from its activities. All intra-group
transactions, balances, income and expenses are eliminated on consolidation.
(c) Presentation of Income Statement
In order to reflect better the activities of an investment trust company and in accordance with guidance issued by the
AIC, supplementary information which analyses the Income Statement between items of a revenue and capital nature has
been presented alongside the Income Statement. In accordance with the Company's status as a UK investment company under
section 266 of the Companies Act 1985, net capital returns may not be distributed by way of dividend. Additionally,
the net revenue is the measure the directors believe appropriate in assessing the Company's compliance with certain
requirements set out in section 842 of the Income and Corporation Taxes Act 1988.
(d) Income
Dividends receivable on equity shares are recognised as revenue for the year on an ex-dividend basis. Where an
ex-dividend date is not available, dividends received on or before the year end are treated as revenue for the year.
Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest
rate applicable, which is the rate that discounts estimated future cash receipts through the expected life of the
financial asset to the asset's net carrying amount. Interest receivable from cash and short term deposits is accrued
to the end of the year.
(e) Expenses
All expenses and interest payable are accounted for on an accruals basis. Expenses have been treated as revenue except
as follows:
• The base management fee of 0.30% has been treated as revenue. The remainder of the base management fee at the rate
of 0.25% (or 0.30% if the Company out-performs its benchmark index or under-performs by no more than 5%) together with
the performance element of the management fee are charged to capital;
• expenses which are incidental to the purchase or sale of an investment are recognised within the Income Statement as
a capital item;
• expenses are presented as capital where a connection with the maintenance or enhancement of the value of investments
can be demonstrated.
(f) Taxation
The tax expense represents the sum of the tax currently payable and deferred tax.
The tax currently payable is based on the taxable profit for the year. Taxable profit differs from profit before tax
as reported in the Income Statement because it excludes items of income or expense that are taxable or deductible in
other years and it further excludes items that are never taxable or deductible. The Group's liability for current tax
is calculated using tax rates that were enacted or substantively enacted by the balance sheet date.
In line with the recommendations of the SORP, the allocation method used to calculate tax relief on expenses presented
against capital returns in the supplementary information in the Income Statement is the 'marginal basis'. Under this
basis, if taxable income is capable of being offset entirely by expenses presented in the revenue return column of the
Income Statement, then no tax relief is transferred to the capital return column.
Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and
liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit and
is accounted for using the balance sheet liability method. Deferred tax liabilities are recognised for all taxable
temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits
will be available against which deductible temporary differences can be utilised. Deferred tax is charged or credited
in the Income Statement, except when it relates to items charged or credited directly to equity, in which case the
deferred tax is also dealt with within equity.
Investment trusts which have approval as such under section 842 of the Income and Corporation Taxes Act 1988 are not
liable for taxation on capital gains.
(g) Investments held at fair value through profit or loss
When a purchase or sale is made under a contract, the terms of which require delivery within the timeframe of the
relevant market, the investments concerned are recognised or derecognised on the trade date.
In accordance with IFRS recognition and measurement principles all the Group's investments are classified as
investments designated at fair value through profit or loss and are described in these financial statements as
investments held at fair value.
All investments are designated as held at fair value upon initial recognition and are measured at subsequent reporting
dates at fair value, which is either the bid price or the last traded price, depending on the convention of the
exchange on which the investment is quoted.
Fair values for unquoted investments, or investments for which the market is inactive, are established by using various
valuation techniques. These may include recent arm's length market transactions, the current fair value of another
instrument which is substantially the same, discounted cash flow analysis and option pricing models. Where there is a
valuation technique commonly used by market participants to price the instrument and that technique has been
demonstrated to provide reliable estimates of prices obtained in actual market transactions, that technique is
utilised. Where no reliable fair value can be estimated for such instruments, they are carried at cost subject to any
provision for impairment.
Investments held by the subsidiary undertaking are classified as 'held for trading' and are valued at fair value in
accordance with the policies above for listed and unlisted holdings. Profits or losses on investments 'held for
trading' are taken to revenue.
Foreign exchange gains and losses for fair value through profit or loss investments are included within the changes in
its fair value.
(h) Movements in fair value
Changes in fair value of not held for trading investments are recognised in the Income Statement as a capital item. On
disposal, realised gains and losses are also recognised in the Income Statement as capital items.
(i) Cash and cash equivalents
Cash comprises cash in hand and at bank and short-term deposits. Cash equivalents are short-term, highly liquid
investments that are readily convertible to known amounts of cash and that are subject to an insignificant risk of
changes in value.
(j) Dividends payable
Interim and final dividends are recognised in the period in which they are paid.
(k) Foreign currency translation
Transactions in currencies other than sterling are recorded at the rates of exchange prevailing on the date of the
transaction. At each balance sheet date, monetary items that are fair valued and are denominated in foreign currencies
are retranslated at the rates prevailing on the balance sheet date. Foreign exchange differences arising on translation
are recognised in the Income Statement.
(l) Equities Index Unsecured Loan Stock 2013
In accordance with the IFRS recognition and measurement principles the Equities Index Unsecured Loan Stock 2013 is
classified as a financial liability designated at fair value through profit or loss and is valued at the closing offer
price. Changes in its fair value are recognised in the Income Statement as a capital item. On cancellation, realised
gains and losses are also recognised through the Income Statement as capital items. Prior to the adoption of IFRS the
capital value was determined by reference to the level of the FTSE All-Share Index at the close of business. Interest
paid on the Index Stock is charged to the Income Statement as a revenue item.
(m) Finance costs
Finance costs are accounted for on an accruals basis and are recognised through the Income Statement as revenue items.
This does not comply with the Statement of Recommended Practice for Financial Statements of Investment Trust Companies,
which would require the finance costs of the Debenture Stocks and the Index Stock to be allocated between revenue and
capital in the same proportions as the Management Fee. However, the Directors consider that the treatment adopted,
which is consistent with previous years, is the most appropriate given the liquidity of the Company and the nature of
the Index Stock.
(n) Debenture pricing
The 81/8 per cent Debenture Stock 2023 and 103/8 per cent Debenture Stock 2011 are valued at par and secured by a
floating charge over all assets of the Company. Costs in relation to arranging the debt finance of the 81/8 per cent
Debenture Stock 2023 have been capitalised and are amortised over the term of the finance.
2. Dividends 2006 2005
£'000 £'000
Amounts recognised as distributions to equity holders in the year:
Final dividend for the year ended 30 September 2005 of 1.60p (2004 - 1.30p) per 2,561 2,081
Ordinary Share
Special dividend for the year ended 30 September 2005 of 1.40p (2004 - nil) per 2,241 -
Ordinary Share
Interim dividend for the year ended 30 September 2006 of 0.80p (2005 - 0.60p) per 1,281 961
Ordinary Share
6,083 3,042
Set out below is the final and special dividend proposed on Ordinary Shares in respect of the
financial year, which
is the basis on which the requirements of section 842 of the Income and Corporation Taxes Act 1998
are considered.
Interim dividend for the year ended 30 September 2006 of 0.80p (2005 - 0.60p) per 1,281 961
Ordinary Share
Proposed final dividend for the year ended 30 September 2006 of 3.20p (2005 - 5,122 2,561
1.60p) per Ordinary Share
Proposed special dividend for the year ended 30 September 2006 of 1.00p (2005 - 1,601 2,241
1.40p) per Ordinary Share
8,004 5,763
International Accounting Standard (IAS) 10 'Events after the Balance Sheet date' requires dividends to be recognised in
the period in which they are paid.
3. Earnings per Ordinary Share 2006 2006 2006 2005 2005 2005
Revenue Capital Total Revenue Capital Total
Basic 5.32p 50.05p 55.37p 4.13p 116.00p 120.13p
The total basic earnings per Ordinary Share is based on Group net gains for the financial year of £88,635,000 (2005:
£192,307,000 as restated) and on 160,080,089 (2005: 160,080,089) Ordinary Shares, being the weighted average number of
Ordinary Shares in issue during the year.
The total basic earnings per Ordinary Share figures detailed above can be further analysed between revenue and capital,
as below.
The basic revenue earnings per Ordinary Share is based on Group revenue after taxation for the financial year of
£8,520,000 (2005: £6,614,000) and on 160,080,089 (2005: 160,080,089) Ordinary Shares, being the weighted average number
of Ordinary Shares in issue during the year.
The basic capital earnings per Ordinary Share is based on Group net gains for the financial year of £80,115,000 (2005:
£185,693,000 as restated) and on 160,080,089 (2005: 160,080,089) Ordinary Shares, being the weighted average number of
Ordinary Shares in issue during the year.
4. Net asset value
The net asset value per share and the net asset value attributable to the Ordinary Shares at the year end are
calculated in accordance with their entitlements in the Articles of Association and were as follows:
Net asset values Net asset values
attributable attributable
Company Group
Restated Restated
(see note 7(a)) (see note 7(a))
2006 2005 2006 2005
p p p p
Ordinary Shares 438.08 386.51 438.08 386.51
(basic)
Net asset values Net asset values
attributable attributable
Company Group
Restated Restated
(see note7(a)) (see note 7(a))
2006 2005 2006 2005
£'000 £'000 £'000 £'000
Ordinary Shares 701,291 618,739 701,291 618,739
(basic)
The movement during the year of the Group assets attributable to the Ordinary
Shares were as follows:
2006 2005
Ordinary shares (basic) Ordinary shares
(basic)
£'000 £'000
Total net assets attributable at beginning of year (as restated - 618,739 429,474
see notes 6 and 7(a))
Total profit for the year 88,635 192,307
Dividends appropriated in the year (6,083) (3,042)
Net assets attributable at end of year 701,291 618,739
Basic net asset value per Ordinary Share is based on net assets and on 160,080,089 (2005: 160,080,089)
Ordinary Shares being the number of Ordinary Shares in issue at the year end.
At the year end the net asset value per share adjusted to include the Debenture Stocks at market value rather
than par was 433.66p (2005: 381.78p as restated).
5. Analysis of cash and cash equivalents at end of year
At 1 October 2005 Cash flow Exchange At 30 September 2006
movement
£'000 £'000 £'000 £'000
Group
Cash at bank and on deposit 2,410 9,178 (2,343) 9,245
Company
Cash at bank and on deposit 2,404 9,181 (2,343) 9,242
6. Restatement of opening balances as at 30 September 2004
At 1 October 2005 the Company adopted International Financial Reporting Standards. In accordance with IFRS 1 (First
Time Adoption of International Financial Reporting Standards) the following is a reconciliation of the balances as at
30 September 2004 previously reported under the applicable UK Accounting Standards and with the SORP to the restated
IFRS results.
Previously Effect of Restated
reported transition to 30 September
30 September IFRS 2004
2004
Notes (£'000) (£'000) (£'000)
Group
Investments 1 461,541 (3,377) 458,164
Current assets 4,714 - 4,714
Creditors: amounts falling due within one year 2 (4,820) 2,081 (2,739)
Total assets less current liabilities 3 461,435 (1,296) 460,139
Creditors: amounts falling due after more than (30,334) (331) (30,665)
one year
Net assets 431,101 (1,627) 429,474
Capital and reserves
Called up Ordinary share capital 16,008 - 16,008
Capital redemption reserve 2,927 - 2,927
Share premium 28,078 - 28,078
Capital reserve - realised 246,363 - 246,363
Capital reserve - unrealised 1,3 85,922 (3,708) 82,214
Merger reserve 41,406 - 41,406
Revenue reserve 2 2,081 12,478
10,397
Total equity 431,101 (1,627) 429,474
Net asset value per Ordinary Share - Basic 269.30p (1.02)p 268.28p
Company
Investments 1 463,576 (3,377) 460,199
Current assets 4,702 - 4,702
Creditors: amounts falling due within one year 2 (6,843) 2,081 (4,762)
Total assets less current liabilities 461,435 (1,296) 460,139
Creditors: amounts falling due after more than 3 (30,334) (331) (30,665)
one year
Net assets 431,101 (1,627) 429,474
Capital and reserves
Called up Ordinary share capital 16,008 - 16,008
Capital redemption reserve 2,927 - 2,927
Share premium 28,078 - 28,078
Capital reserve - realised 246,363 (3,708) 246,363
Capital reserve - unrealised 1,3 87,707 - 83,999
Merger reserve 41,406 2,081 41,406
Revenue reserve 2 8,612 - 10,693
Total equity 431,101 (1,627) 429,474
Net asset value per Ordinary Share - Basic 269.30p (1.02)p 268.28p
Notes to the reconciliation
1. Investments are designated as held at fair value through profit or loss under IFRS and are carried at bid prices
which total £458,164,000 for the Group and £460,199,000 for the Company. They were carried at mid prices previously
under UK GAAP. The aggregate differences, being a revaluation downwards of £3,377,000 also decreased Capital reserve -
unrealised.
2. No provision has been made for the final dividend on the Ordinary Shares for the year ended 30 September 2004 of
£2,081,000. Under IFRS, the final dividend is not recognised until paid.
3. The Equities Index Unsecured Loan Stock 2013 is designated as held at fair value through profit or loss under IFRS
and carried at the offer price with a fair value of £7,286,000. Previously the capital value was determined by
reference to the level of the FTSE All-Share Index. The difference, being a revaluation downwards of £331,000 also
decreased Capital reserve - unrealised.
7. (a) Restatement of opening balances as at 30 September 2005
At 1 October 2005 the Company adopted International Financial Reporting Standards. In accordance with IFRS 1 (First
Time Adoption of International Financial Reporting Standards) the following is a reconciliation of the balances as at
30 September 2005 previously reported under the applicable UK Accounting Standards and with the SORP to the restated
IFRS results.
Previously Effect of Restated 30
reported 30 transition to September 2005
September IFRS
2005
Notes (£'000) (£'000) (£'000)
Group
Investments 1 652,456 (3,232) 649,224
Current assets 7,734 - 7,734
Creditors: amounts falling due within one year 2 (11,788) 4,802 (6,986)
Total assets less current liabilities 648,402 1,570 649,972
Creditors: amounts falling due after more than 3 (31,366) 278 (31,088)
one year
Provision for deferred tax (145) - (145)
Net assets 616,891 1,848 618,739
Capital and reserves
Called up Ordinary share capital 16,008 - 16,008
Capital redemption reserve 2,927 - 2,927
Share premium 28,078 - 28,078
Capital reserve - realised 351,854 - 351,854
Capital reserve - unrealised 1,3 165,370 (2,954) 162,416
Merger reserve 41,406 - 41,406
Revenue reserve 2 4,802 16,050
11,248
Total equity 616,891 1,848 618,739
Net asset value per Ordinary Share - Basic 385.36p 1.15p 386.51p
Company
Investments 1 654,490 (3,232) 651,258
Current assets 7,723 - 7,723
Creditors: amounts falling due within one year 2 (13,811) 4,802 (9,009)
Total assets less current liabilities 648,402 1,570 649,972
Creditors: amounts falling due after more than 3 (31,366) 278 (31,088)
one year
Provision for deferred tax (145) - (145)
Net assets 616,891 1,848 618,739
Capital and reserves
Called up Ordinary share capital 16,008 - 16,008
Capital redemption reserve 2,927 - 2,927
Share premium 28,078 - 28,078
Capital reserve - realised 351,854 - 351,854
Capital reserve - unrealised 1,3 167,154 (2,954) 164,200
Merger reserve 41,406 - 41,406
Revenue reserve 2 4,802 14,266
9,464
Total equity 616,891 1,848 618,739
Net asset value per Ordinary Share - Basic 385.36p 1.15p 386.51p
Notes to the reconciliation
1. Investments are designated as held at fair value through profit or loss under IFRS and are carried at bid prices
which total £649,224,000 for the Group and £651,258,000 for the Company. They were carried at mid prices previously
under UK GAAP. The aggregate differences, being a revaluation downwards of £3,232,000 also decreased Capital reserve -
unrealised.
2. No provision has been made for the final ordinary and special dividends on the Ordinary Shares for the year ended 30
September 2005 of £2,561,000 and £2,241,000 respectively. Under IFRS, the final ordinary and special dividends are not
recognised until paid.
3. The Equities Index Unsecured Loan Stock 2013 is designated as held at fair value through profit or loss under IFRS
and carried at the offer price with a fair value of £7,702,000. Previously the capital value was determined by
reference to the level of the FTSE All-Share Index. The difference, being a revaluation upwards of £278,000 also
increased Capital reserve - unrealised.
7. (b) Reconciliation of the Consolidated Statement of Total Return to the Consolidated
Income Statement for the year ended 30 September 2005
Under IFRS the Income Statement is the equivalent of the Statement of Total
Return reported previously.
Group Notes £'000 Basic EPS impact
pence
Total transfer to reserves per the Statement of Total 185,790 -
Return
Add back dividends paid and proposed 1 5,763 -
Investments held at fair value changed from mid to 2 3,377 2.11
bid basis at 30 September 2004
Investments held at fair value changed from mid to 2 (3,232) (2.02)
bid basis at 30 September 2005
Equity Index Stock held at fair value changed from 3 331 0.21
Index value to offer basis at 30 September 2004
Equity Index Stock held at fair value changed from 3 278 0.17
Index value to offer basis at 30 September 2005
Net profit per the Income Statement 192,307 0.47
Notes to the reconciliation
1. Interim, final and special ordinary dividends declared and paid during the period are dealt with through the
Statement of Changes in Equity.
2. The portfolio valuations at 30 September 2004 and 30 September 2005 are required to be valued at fair value under
IFRS. These values are lower than the previous valuations by £3,377,000 and £3,232,000 respectively.
3. The Equity Index Stock valuation at 30 September 2004 and 30 September 2005 is required to be valued at fair value
under IFRS. The value at 30 September 2004 is lower than the previous valuation by £331,000 and the value at 30
September 2005 is higher than the previous valuation by £278,000.
7. (c) Reconciliation of the Cash Flow Statements for the year ended 30 September 2005
Previously Effect of Adjusted cash flows
reported cash transition to
flows IFRS
Notes £'000 £'000 £'000
Group
Net cash inflow from operating 1 6,339 13 6,352
activities
Servicing of finance 1 (2,357) 2,357 -
Taxation 1 119 (119) -
Capital expenditure financial 2,251 (2,251) -
investment
Equity dividends paid 2 (3,042) 3,042 -
Net cash inflow before financing 3,310 3,042 6,352
Financing 2 (348) (3,042) (3,390)
Increase in cash and cash 2,962 - 2,962
equivalents
Company
Net cash inflow from operating 1 6,335 13 6,348
activities
Servicing of finance 1 (2,357) 2,357 -
Taxation 1 119 (119) -
Capital expenditure financial 2,251 (2,251) -
investment
Equity dividends paid 2 (3,042) 3,042 -
Net cash inflow before financing 3,306 3,042 6,348
Financing 2 (348) (3,042) (3,390)
Increase in cash and cash 2,958 - 2,958
equivalents
Notes to the reconciliation
1. Bank interest, debenture interest, Equity Index Stock interest, taxation and capital expenditure and financial
investment have now been analysed within operating activities.
2. Ordinary dividends paid are now analysed within financing.
8. The financial information set out in the announcement does not constitute the Company's statutory accounts for the
years ended 30 September 2006 or 2005. The financial information for the year ended 30 September 2005 is derived from
the statutory accounts for that year which have been delivered to the Registrar of Companies. The auditors reported on
those accounts; their report was unqualified and did not contain a statement under s237 (2) or (3) of the Companies Act
1985. The statutory accounts for the year ended 30 September 2006 will be finalised on the basis of the financial
information presented by the Directors in the preliminary announcement, will be audited and delivered to the Registrar
of Companies in due course. The preliminary announcement is not prepared on the same basis as set out in the previous
year's annual accounts due to the adoption of IFRS as detailed in Notes 6 and 7. This preliminary announcement was
approved by the Board of Directors on 13 November 2006.
9. Copies of the Annual Report will be posted to shareholders in due course and further copies may be obtained from the
Registered Office, Bennet House, 54 St James's Street, London SW1A 1JT. The Annual General Meeting will be held at 12
noon on Thursday 14 December 2006.
Phoenix Administration Services Limited
Company Secretary
13 November 2006
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