Interim Results

British Empire Sec & Gen Tst PLC 17 May 2006 BRITISH EMPIRE SECURITIES AND GENERAL TRUST PLC Announcement of un-audited results for the six months ended 31 March 2006, approved by the Board of Directors on 16 May 2006. Objective of the Company The Company's investment objective is to achieve capital growth through a focused portfolio of investments, particularly in companies whose share prices stand at a discount to estimated underlying net asset value. Performance summary Capital return As at 31 March 2006 As at 30 September 2005 + % change Net assets Â£744.20m Â£618.74m 20.28 Net asset value per share 464.89p 386.51p 20.28 Share price (mid market) 483.00p 400.00p 20.75 Premium/(discount) 3.90% 3.49% - Six months to 31 March 2006 Six months to 31 March 2005 Revenue earnings and dividends Revenue earnings per share 2.08p 1.11p Interim dividend per share 0.80p 0.60p Six months to 31 March 2006 Year to 30 September 2005 Performance comparison British Empire Securities and General Trust plc (NAV total return) 21.06% 44.48% Morgan Stanley Capital International World Index (Â£ adjusted total return) 12.27% 22.24% Datastream Global Growth Investment 15.46% 30.58% Trust Index* * Index (based on total return) is subject to daily revision and the latest published figure is at 2 May 2006 + The 30 September 2005 Net assets and Net asset value per share figures are restated, in accordance with International Financial Reporting Standards (see Note 8). Accordingly, the Company's percentage changes reflect these restated figures. Chairman's Statement Your Company has continued to perform well in the first half of the year with Net Asset Value up by 21.0% against a rise of 15.5% in our benchmark index (total return basis). We have been trading at a small premium to Net Asset Value over recent months reflecting a period of out-performance by John Pennink of Asset Value Investors, our manager. We remain of the view that many assets in which we are invested are themselves trading at a discount to their underlying worth representing an unrealised store of value for our shareholders. We would however, caution shareholders that there will be times when our investment style does not suit the mood of the market and that continuing out-performance should not be assumed. There has been a significant level of merger and acquisition activity over the past six months from which your Company has benefited but we believe that this has further narrowed discounts in our favoured stocks. As a result we are erring on the side of caution in our stock selections while taking profits where discounts have narrowed. Last year your Board concluded that the balance between our interim and final dividends had become too wide. As a result the Board decided that, subject to prevailing trading conditions, it would seek to pay interim dividends of around 35% of the previous year's total ordinary dividends. Consequently, in the light of the first half's results and continuing liquidity generating higher income, we are increasing the interim dividend this year from 0.6p per share to 0.8p per share. The interim dividend will be payable on 9 June 2006 to holders of ordinary shares on the register at 26 May 2006 (ex-dividend 24 May 2006). We shall make our recommendation on the full year's dividend to shareholders later in the year in the light of the annual results and trading conditions at the time. Iain Samuel Robertson CBE Chairman 16 May 2006 Investment Manager's Report For the first six months of the financial year, the Company's net asset value per share rose 21.0% compared with rises of 15.5% for the Datastream Global Growth Investment Trust Index (NAV total return), 12.3% for the MSCI World Index (Â£) and 12.7% for the FTSE All Share Index* (All figures are on a total return basis). Over the five year period to 31 March 2005, the Company's net asset value per share rose 133.6% compared to an increase of 48.5% for the weighted sector average*. The largest contributors to our +21.0% NAV performance during the reporting period were Paladin Resources +1.51%, Mitsubishi Estates +1.34%, Deutsche Wohnen +1.00%, PD Ports +0.75%, Forth Ports +0.59%, JPMF Japanese Smaller Companies +0.58%, Birch Mountain Resources +0.55%, Lundbergforetagen +0.54% and The Dejima Fund +0.54%. There were no individual stocks contributing losses of more than 0.5% in size to the NAV. As at 31 March 2006, the geographical profile on a look-through basis was as follows: Continental Europe 23.0%, UK 21.4%, Japan 16.1%, Asia Pacific 16.0%, Eastern Europe, Middle East and Africa 3.1%, North America 4.3% and liquidity 16.1%. The trends we have remarked upon in past Manager's Reports have largely remained in place during the period under review. Easy monetary policy has led to rising asset prices and falling discounts on investment companies and has fuelled bid activity in the public markets. Economic activity in most major economies is strong. We are now in a situation in which the central banks of the US, Europe and Japan are all removing liquidity from the system in tandem for the first time since the 1980s. As monetary policy works with a lag of some months, we will not know whether the tightening of policy has been appropriate or excessive until after the fact. This is increasing uncertainty in the markets and also increasing the chances of financial dislocations. Inflation is low and interest rates are unlikely to increase enough to crush economic activity. Rising rates may, however, take some of the air out of more speculative areas of the market and 'risk aversion' may increase. In our investment universe, this could mean a return to wider discounts at some point. We have been cautious on the prospects for markets as a result and we have had net cash throughout the period. Despite the 'cash drag', we have more than fully participated in the market rise and outperformed the benchmark by 5.5%. Our outperformance has been helped by strong gains in mining stocks and Japan. We have also benefited from corporate activity in Deutsche Wohnen, PD Ports, OUE, Placer Dome and Tethyan Copper. Over the reporting period discounts on investment trusts and investment holding companies have narrowed. As contrarians by nature, we are aware that outperformance by any sector or asset class ultimately carries the seeds of its own destruction as valuations are bid up. We are trying to be diligent about taking profits where stocks no longer fit our value criteria. We may as a result carry higher liquidity balances from time to time. John Pennink Asset Value Investors Limited 16 May 2006 *Sources: Fundamental Data, Thompson Financial Datastream, JPMorganCazenove, Bloomberg New Accounting Standards New accounting standards known as International Financial Reporting Standards or 'IFRS' are now being adopted by UK listed companies and this should lead to a more consistent treatment of accounts between companies in the UK and abroad. The Company has therefore produced its first set of accounts in this Interim Report under IFRS and this has necessitated showing a restatement of prior financial periods under the new standards. In consequence, the financial statements in this Interim Report are significantly longer than for previous reports and this will also be the case for the audited accounts for the year to 30 September 2006. Details of the changes brought about by IFRS are given in the Notes to the Interim Financial Statements. Consolidated Income Statement for the six months ended 31 March 2006 For the six months to 31 March For the six months to 31 For the year to 30 September 2006 (unaudited) March 2005 (unaudited) 2005 (audited) Restated (see note 7) Restated (see note 8) Revenue Capital Revenue Capital Revenue Capital return return Total return return Total return return Total Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Income Investment 7,145 - 7,145 4,607 - 4,607 13,110 - 13,110 Income Gains on - 131,749 131,749 - 77,108 77,108 - 188,196 188,196 investments held at fair value Losses on Index - (436) (436) - (39) (39) - (764) (764) Stock Gains on forward - - - - - - - 1,221 1,221 sales of Euro Realised - (1,556) (1,556) - 86 86 - (610) (610) exchange (losses) / gains 7,145 129,757 136,902 4,607 77,155 81,762 13,110 188,043 201,153 Expenses Investment (1,005) (3,606) (4,611) (716) (2,379) (3,095) (1,404) (3,265) (4,669) management fee (including recoverable VAT) Other expenses (570) - (570) (569) - (569) (1,147) - (1,147) Profit before 5,570 126,151 131,721 3,322 74,776 78,098 10,559 184,778 195,337 finance costs and tax Finance costs (1,198) (4) (1,202) (1,180) (4) (1,184) (2,361) (7) (2,368) Profit before 4,372 126,147 130,519 2,142 74,772 76,914 8,198 184,771 192,969 tax Taxation (1,047) 789 (258) (363) 251 (112) (1,584) 922 (662) Profit for the 3,325 126,936 130,261 1,779 75,023 76,802 6,614 185,693 192,307 period Earnings per ordinary share (see note 2) Basic - ordinary 2.08p 79.30p 81.38p 1.11p 46.87p 47.98p 4.13p 116.00p 120.13p shares 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 Trust 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. Consolidated Statement of Changes in Equity Ordinary Capital Share Capital Capital Merger Revenue Total Share redemption reserve reserve reserve reserve capital reserve premium realised unrealised Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 For the six months to 31 March 2005 (unaudited) Restated (see note 7) Balance at 30 16,008 2,927 28,078 246,363 82,214 41,406 12,478 429,474 September 2004 Profit for the - - - 51,617 23,406 - 1,779 76,802 period Ordinary dividend - - - - - - (2,081) (2,081) paid Balance at 31 March 16,008 2,927 28,078 297,980 105,620 41,406 12,176 504,195 2005 For the year to 30 September 2005 (audited) Restated (see note 8) 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 dividend - - - - - - (3,042) (3,042) paid Balance at 30 16,008 2,927 28,078 351,854 162,416 41,406 16,050 618,739 September 2005 For the six months to 31 March 2006 (unaudited) Balance at 30 16,008 2,927 28,078 351,854 162,416 41,406 16,050 618,739 September 2005 Profit for the - - - 96,633 30,303 - 3,325 130,261 period Ordinary dividend - - - - - - (2,561) (2,561) paid Special dividend - - - - - - (2,241) (2,241) paid Balance at 31 March 16,008 2,927 28,078 448,487 192,719 41,406 14,573 744,198 2006 Consolidated Balance Sheet As at 31 As at 31 March As at 30 March 2006 2005 September 2005 (unaudited) (unaudited) (audited) Restated Restated Notes (see note 7) (see note 8) Â£'000 Â£'000 Â£'000 Non current assets Investments held at fair value through profit or 1(g) 755,435 526,947 649,224 loss Current assets Investments 5 5 5 Sales for future settlement 20,408 4,036 2,426 Other receivables 2,640 2,596 2,893 Cash and cash equivalents 5,435 5,063 2,410 28,488 11,700 7,734 Total assets 783,923 538,647 656,958 Current liabilities Purchases for future settlement (3,974) (1,123) (3,754) Other payables (4,078) (2,791) (3,232) Bank overdrafts and loans - - - (8,052) (3,914) (6,986) Total assets less current liabilities 775,871 534,733 649,972 Non-current liabilities 10 3/8 per cent Debenture Stock 2011 (8,515) (8,515) (8,515) 8 1/8 per cent Debenture Stock 2023 (14,875) (14,868) (14,871) Index Stock (8,138) (7,155) (7,702) Provision for deferred tax (145) - (145) Net assets 744,198 504,195 618,739 Equity attributable to equity holders Ordinary share capital 16,008 16,008 16,008 Capital redemption reserve 2,927 2,927 2,927 Share premium 28,078 28,078 28,078 Capital reserve realised 448,487 297,980 351,854 Capital reserve unrealised 192,719 105,620 162,416 Merger reserve 41,406 41,406 41,406 Revenue reserve 14,573 12,176 16,050 Total equity 744,198 504,195 618,739 Net asset value per ordinary share: - basic 5 464.89p 314.96 386.51p Number of shares in issue 160,080,089 160,080,089 160,080,089 Consolidated Cash Flow Statement Six months to Six months to Year to 31 March 2006 31 March 2005 30 September 2005 (unaudited) (audited) (unaudited) Restated (see note Restated (see note 7) 8) Â£'000 Â£'000 Â£'000 Net cash inflow from operating activities (see 9,383 7,169 6,352 below) Financing activities Dividends paid (4,802) (2,081) (3,042) Buy-back of Equity Index Stock - (169) (348) Cash outflow from financing activities (4,802) (2,250) (3,390) Increase in cash and cash equivalents 4,581 4,919 2,962 Exchange movements (1,556) 86 (610) Change in cash and cash equivalents 3,025 5,005 2,352 Cash and cash equivalents at beginning of 2,410 58 58 period Cash and cash equivalents at end of period 5,435 5,063 2,410 Reconciliation of profit before taxation to net cash inflow from operating activities Profit before taxation 130,519 76,914 192,969 Losses on Index Stock held at fair value 436 39 764 Losses/(gains) on exchange movements 1,556 (86) 610 Gains on investments held at fair value through (131,749) (77,108) (188,196) profit or loss Purchases of investments (295,536) (173,308) (420,652) Sales of investments 303,312 181,286 421,682 Decrease/(increase) in other receivables 213 (850) (1,028) Increase in creditors 846 253 694 Taxation (218) 25 (498) Amortisation of reorganisation costs 4 4 7 Net cash inflow from operating activities 9,383 7,169 6,352 Notes to the Financial Statements 1. Significant accounting policies The financial statements of the Group 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. These are the first financial statements prepared in accordance with IFRS. Previously the financial statements were prepared in accordance with UK Generally Accepted Accounting Principles ('UK GAAP') including the Statement of Recommended Practice ('SORP') for investment trusts issued by the Association of Investment Trust Companies ('AITC') in 2003. UK GAAP differs in certain respects from IFRS. When preparing the financial statements to 31 March 2006 the directors have amended certain accounting and valuation methods applied in the UK GAAP financial statements to comply with IFRS. Reconciliations of Balance Sheet, Statement of Total Return to the Income Statement and Cash Flow Statement at the date of conversion from UK GAAP to IFRS (1 October 2004) are shown in notes 6 to 8. These financial statements are presented in sterling because this is the currency of the primary economic environment in which the Group operates. The financial statements of the Company and Group for the year ending 30 September 2006 will also be prepared on the same basis in accordance with IFRS. (a) Basis of preparation The financial statements have been prepared on the historical cost basis, except for the revaluation of certain financial instruments. The principle accounting policies adopted are set out below. Where presentational guidance set out in the SORP 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 31 March 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 AITC, supplementary information which analyses the Income Statement between items of 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. (d) Income Dividends receivable on equity shares are recognised as revenue for the period on an ex-dividend basis. Where an ex-dividend date is not available, dividends receivable on or before the period end are treated as revenue for the period. Provision is made for any dividends not expected to be received. 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 that asset's net carrying amount. Interest receivable from cash and short term deposits is accrued to the end of the period. (e) Expenses All expenses and interest payable are accounted for on an accruals basis. An analysis of retained earnings broken down into revenue (distributable) items and capital (non-distributable) items is given in note 4. In arriving at this breakdown, 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 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 of an investment are recognised within the income statement (capital) as an expense item; - expenses which are incidental to the sale of an investment are deducted from the proceeds of the sale of that investment; - 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 period. 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. (g) Investments 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 the 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 for 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 all investments held at fair value are recognised in the Income Statement. On disposal, realised gains and losses are also recognised in the Income Statement. (i) Cash and cash equivalents Cash comprises cash in hand and banks 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. (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 instrument designated at fair value through profit or loss and is valued at the closing offer price. Changes in the fair value are recognised in the Income Statement. On cancellation, realised gains and losses are also recognised through the Income Statement. 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. 2. Earnings per ordinary share The basic revenue earnings per Ordinary Share is based on Group revenue after taxation for the six months to 31 March 2006 of Â£3,325,000 (six months to 31 March 2005: Â£1,779,000 as restated; year ended 30 September 2005: Â£6,614,000 as restated) and on 160,080,089 (six months to 31 March 2005: 160,080,089, year ended 30 September 2005: 160,080,089) Ordinary Shares, being the weighted average number of Ordinary Shares in issue during the period. The basic capital earnings per Ordinary Share is based on Group net gains for the six months to 31 March 2006 of Â£126,936,000 (six months to 31 March 2005: Â£75,023,000 as restated; year ended 30 September 2005: Â£185,693,000 as restated) and on 160,080,089 (six months to 31 March 2005: 160,080,089, year ended 30 September 2005: 160,080,089) Ordinary Shares, being the weighted average number of Ordinary Shares in issue during the period. The total basic earnings per Ordinary Share is based on Group net gains for the six months to 31 March 2006 of Â£130,261,000 (six months to 31 March 2005: Â£76,802,000 as restated; year ended 30 September 2005: Â£192,307,000 as restated) and on 160,080,089 (six months to 31 March 2005: 160,080,089, year ended 30 September 2005: 160,080,089) Ordinary Shares, being the weighted average number of Ordinary Shares in issue during the period. 3. Comparative information The financial information contained in this interim report does not constitute statutory accounts as defined in section 240 of the Companies Act 1985. The financial information for the six months ended 31 March 2006 and 31 March 2005 has not been audited. The information for the six months ended 31 March 2005 has been extracted from the latest published unaudited interim report, as restated to comply with IFRS (see note 7). The information for the year ended 30 September 2005 has been extracted from the latest published audited financial statements, as restated to comply with IFRS (see note 8). The audited financial statements for the year ended 30 September 2005 have been filed with the Registrar of Companies. The report of the auditors on those accounts under section 235 of the Companies Act 1985 contained no qualification or reference to any matters to which the auditors drew attention by way of emphasis without qualifying the audit report or statement under section 237(2) or (3) of the Companies Act 1985. Those statutory accounts were prepared under UK GAAP and in accordance with the SORP. 4. Retained earnings The table below shows the movement in the retained earnings analysed between revenue and capital items Revenue Capital Total Â£'000 Â£'000 Â£'000 At 30 September 2005 (as restated) 16,050 514,270 530,320 Movement during the period: Net income for the period 3,325 126,936 130,261 Ordinary dividend paid: ordinary shares (2,561) - (2,561) Special dividend paid: ordinary shares (2,241) - (2,241) At 31 March 2006 14,573 641,206 655,779 5. Net asset value per ordinary share The net asset value per Ordinary Share is based on the net assets of Â£744,198,000 (six months to 31 March 2005: Â£504,195,000 as restated; year ended 30 September 2005: Â£618,739,000 as restated) and on 160,080,089 (six months to 31 March 2005: 160,080,089, year ended 30 September 2005: 160,080,089) Ordinary Shares, being the number of Ordinary Shares in issue at the period end. 6. Restatement of opening balances as at 30 September 2004 At 1 October 2004 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. (Audited) Previously reported Effect of Restated 30 September transition to 30 September Notes 2004 IFRS 2004 Â£'000 Â£'000 Â£'000 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 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 - 246,363 Capital reserve - unrealised 1, 3 85,922 (3,708) 82,214 Merger Reserve 41,406 - 41,406 Revenue reserve 2 10,397 2,081 12,478 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 under IFRS and are carried at bid prices which total Â£458,164,000. They were carried at mid prices previously under UK GAAP. The aggregate differences, being a revaluation downwards of Â£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 Â£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 under IFRS and carried at the offer price with a fair value of Â£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 Â£331,000, also decreased capital reserve - unrealised. 7 (a) Restatement of balances as at 31 March 2005 At 1 October 2004 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 31 March 2005 previously reported under the applicable UK Accounting Standards and with the SORP, to the restated IFRS results. (Unaudited) Effect of transition Previously to reported IFRS Restated Notes 31 March 2005 Â£'000 31 March 2005 Â£'000 Â£'000 Investments 1 529,292 (2,345) 526,947 Current assets 11,700 - 11,700 Creditors: amounts falling due within one year 2 (4,875) 961 (3,914) Total assets less current liabilities 536,117 (1,384) 534,733 Creditors: amounts falling due after more than 3 (30,710) 172 (30,538) one year Net assets 505,407 (1,212) 504,195 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 297,980 - 297,980 Capital reserve unrealised 1, 3 107,793 (2,173) 105,620 Merger reserve 41,406 - 41,406 Revenue reserve 2 11,215 961 12,176 Total equity 505,407 (1,212) 504,195 Net asset value per ordinary share - Basic 315.72p (0.76p) 314.96p Notes to the reconciliation 1. Investments are designated as held at fair value under IFRS and are carried at bid prices which total Â£526,947,000. They were carried at mid prices previously under UK GAAP. The aggregate differences, being a revaluation downwards of Â£2,345,000, also decreased Capital reserve - unrealised. 2. No provision has been made for the interim dividend on the Ordinary Shares for the six months ended 31 March 2005 of Â£961,000. Under IFRS, the interim dividend is not recognised until paid. 3. The Equities Index Unsecured Loan Stock 2013 is designated as held at fair value under IFRS and carried at the offer price with a fair value of Â£7,155,000. Previously the capital value was determined by reference to the level of the FTSE All-Share Index. The difference, being a revaluation upwards of Â£172,000, also increased Capital reserve - unrealised. 7. (b) Reconciliation of the Statement of Total Return to the Income Statement for the six months ended 31 March 2005 Under IFRS the Income Statement is the equivalent of the Statement of Total Return reported previously. Basic EPS impact pence Notes Â£'000 Total transfer to reserves per the Statement of Total Return 74,306 - Add back dividends paid and proposed 1 961 - Investments held at fair value changed from mid to bid basis at 30 2 3,377 2.11 September 2004 Investments held at fair value changed from mid to bid basis at 31 March 2 (2,345) (1.46) 2005 Equity Index Stock held at fair value changed from Index value to offer basis at 30 September 2004 3 331 0.21 Equity Index Stock held at fair value changed from Index value to offer basis at 31 March 2005 3 172 0.10 Net profit per the Income Statement 76,802 0.96 Notes to the reconciliation 1. 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 31 March 2005 are required to be valued at fair value under IFRS. These values are lower than the previous valuations by Â£3,377,000 and Â£2,345,000 respectively. 3. The Equity Index Stock valuation at 30 September 2004 and 31 March 2005 is required to be valued at fair value under IFRS. The value at 30 September 2004 is lower than the previous valuation by Â£331,000 and the value at 31 March 2005 is higher than the previous valuation by Â£172,000. 7. (c) Reconciliation of the Cash Flow Statement for the six months ended 31 March 2005 (Unaudited) Effect of Previously reported transition Adjusted cash to flows cash flows IFRS Â£'000 Notes Â£'000 Â£'000 Net cash inflow from operating activities 1 267 6,902 7,169 Servicing of finance 1 (1,161) 1,161 -- Taxation 1 85 (85) - Capital expenditure and financial investment 1 7,978 (7,978) - Equity dividends paid 2 (2,081) 2,081 - Net cash inflow before financing 5,088 2,081 7,169 Financing 2 (169) (2,081) (2,250) Increase in cash 4,919 - 4,919 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. (a) Restatement of balances as at 30 September 2005 At 1 October 2004 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. (Audited) Effect of Restated Previously transition reported to 30 September 30 September 2005 IFRS 2005 Notes Â£'000 Â£'000 Â£'000 Investments 1 652,456 (3,232) 649,224 Current assets 7,734 - 7,734 Creditors: amounts falling due within one 2 (11,788) 4,802 (6,986) year Total assets less current liabilities 648,402 1,570 649,972 Creditors: amounts falling due after more (31,366) 278 (31,088) than one year 3 Provision for liabilities and charges (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 11,248 4,802 16,050 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 under IFRS and are carried at bid prices which total Â£649,224,000. They were carried at mid prices previously under UK GAAP. The aggregate differences, being a revaluation downwards of Â£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 Â£2,561,000 and Â£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 under IFRS and carried at the offer price with a fair value of Â£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 Â£278,000, also increased Capital reserve -unrealised. 8. (b) Reconciliation of the Statement of Total Return to the 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. Basic EPS impact Notes Â£'000 pence Total transfer to reserves per the Statement of Total Return 185,790 - Add back dividends paid and proposed 1 5,763 - Investments held at fair value changed from mid to bid basis at 30 2 3,377 2.11 September 2004 Investments held at fair value changed from mid to bid basis at 30 2 (3,232) (2.02) September 2005 Equity Index Stock held at fair value changed from Index value to offer 3 331 0.21 basis at 30 September 2004 Equity Index Stock held at fair value changed from Index value to offer basis at 30 September 2005 3 278 0.17 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 Â£3,377,000 and Â£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 Â£331,000 and the value at 30 September 2005 is higher than the previous valuation by Â£278,000 8. (c) Reconciliation of the Cash Flow Statement for the year ended 30 September 2005 (Audited) Effect of Previously reported transition Adjusted cash to flows cash flows IFRS Â£'000 Notes Â£'000 Â£'000 Net cash inflow from operating activities 1 6,339 13 6,352 Servicing of finance 1 (2,357) 2,357 - Taxation 1 119 (119) - Capital expenditure and financial investment 1 2,251 (2,251) - 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 2,962 - 2,962 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. 9. Transaction costs Investment transaction costs on purchases and sales of investments during the six months to 31 March 2006 amounted Â£433,000 and Â£300,000 respectively (six months to 31 March 2005 Â£717,000 and Â£504,000 respectively, year ended 30 September 2005 Â£933,000 and Â£646,000 respectively). Independent Review Report to British Empire Securities and General Trust plc Introduction We have been instructed by the Company to review the financial information for the six months ended 31 March 2006 which comprises the Consolidated Income Statement, Consolidated Statement of Changes in Equity, Consolidated Balance Sheet, Consolidated Cash Flow Statement and the related notes 1 to 9. We have read other information contained in the interim report and considered whether it contains any apparent misstatements or material inconsistencies with the financial information. This report is made solely to the Company in accordance with guidance contained in Bulletin 1999/4 'Review of interim financial information' issued by the Auditing Practices Board. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company for our work, for this report, or for the conclusions we have formed. Directors' responsibilities The interim report, including the financial information contained therein, is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the interim report in accordance with the Listing Rules of the Financial Services Authority. As discussed in note 1, the next annual financial statements of the Group will be prepared in accordance with those IFRSs adopted by the European Union. This interim report has been prepared in accordance with International Accounting Standard 34 'Interim Financial Reporting' and the requirements of IFRS 1 'First Time Adoption of International Financial Reporting Standards' relevant to interim reports. The accounting policies are consistent with those that the directors intend to use in the next financial statements. Review work performed We conducted our review in accordance with guidance contained in Bulletin 1999/4 'Review of interim financial information' issued by the Auditing Practices Board for use in the United Kingdom. A review consists principally of making enquiries of group management and applying analytical procedures to the financial information and underlying financial data, and based thereon, assessing whether the accounting policies have been applied. A review excludes audit procedures such as tests of controls and verification of assets, liabilities and transactions. It is substantially less in scope than an audit performed in accordance with International Standards on Auditing (UK and Ireland) and therefore provides a lower level of assurance than an audit. Accordingly, we do not express an audit opinion on the financial information. Review conclusion On the basis of our review we are not aware of any material modifications that should be made to the financial information as presented for the six months ended 31 March 2006. Ernst & Young LLP London 16 May 2006 Additional notes to the Interim Announcement 1. The results for the first six months should not be taken as a guide to the full year's results. 2. At 31 March 2006 the Company had 160,080,089 Ordinary Shares and 2,906,267 units of Equities Index Unsecured Loan Stock 2013 in issue. 3. The Interim Report will be sent to shareholders shortly. This information is provided by RNS The company news service from the London Stock Exchange

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Games Workshop shares jump in early trade as interim results are on track to impress, and Ithaca Energy continues its march higher off yesterday’s dividend news but Amigo slips as options for the future remain limited.

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