Final Results

British & American Investment Trust PLC Preliminary Announcement for the year ended 31 December 2006 Registered number: 433137 Directors Registered office J Anthony V Townsend (Chairman) Wessex House Jonathan C Woolf (Managing Director) 1 Chesham Street Dominic G Dreyfus (Non-executive) London SW1X 8ND Ronald G Paterson (Non-executive) Telephone: 020 7201 3100 Registered in England No.433137 30 April 2007 Financial Highlights For the year ended 31 December 2006 2006 2005 Revenue Capital Total Revenue Capital Total return return return return Â£000 Â£000 Â£000 Â£000 Â£000 Â£000 Return before tax - 1,829 (53) 1,776 1,759 479 2,238 realised Return before tax - - 5,159 5,159 - 4,665 4,665 unrealised __________ __________ __________ __________ __________ __________ Return before tax - 1,829 5,106 6,935 1,759 5,144 6,903 total __________ __________ __________ __________ __________ __________ Earnings per Â£1 ordinary share - 5.85p 20.43p 26.28p 5.41p 20.57p 25.98p basic __________ __________ __________ __________ __________ __________ Earnings per Â£1 ordinary share - 5.18p 14.59p 19.77p 4.86p 14.70p 19.56p diluted __________ _________ __________ __________ _________ __________ Net assets 47,647 42,765 __________ __________ Net assets per ordinary share - deducting preference 151p 131p shares at par __________ __________ - diluted 136p 122p __________ __________ 133p Diluted net asset value per ordinary share at 24 April 2007 __________ Dividends declared or proposed for the period per ordinary share - interim paid 2.5p 2.3p - final proposed 3.5p 3.25p - special paid 1.0p 1.0p per preference 3.5p 3.5p share Chairman's Statement I am pleased to report our results for the year ended 31 December 2006. Revenue The return on the revenue account before tax amounted to Â£1.8 million (2005: Â£ 1.8 million). Gross income amounted to Â£2.1 million (2005: Â£2.0 million), of which Â£1.7 million (2005: Â£1.6 million) represented income from investments and Â£0.4 million (2005: Â£0.4 million) film, property and other income. As in the previous year, income from investments included the receipt of special dividends from a number of our investee companies which was recognised by the payment of a special dividend of 1 penny per share during the year. Total profit before tax, which includes realised and unrealised capital appreciation, amounted to Â£6.9 million (2005: Â£6.9 million) and reflected the growth in share values over the year, as discussed below. The capital element of this total was represented by Â£0.1 million of realised gains and Â£5.1 million of unrealised gains. The revenue return per ordinary share was 5.8p (2005: 5.4p) on an undiluted basis and 5.2p (2005: 4.9p) on a diluted basis. Net Assets Group net assets were Â£47.6 million (2005: Â£42.8 million), an increase of 11.2 percent. This compares to increases in the FTSE 100 and All Share indices of 10.7 percent and 13.1 percent, respectively, over the period. On a total return basis, after adding back dividends paid in the year, our portfolio returned 15.2 percent. This compares to an increase over the same period of 13.7 percent (dividends reinvested) in the FTSE 100 share index and 16.1 percent (dividends reinvested) in the All Share index. The net asset value per ordinary share increased to 136p (2005: 122p) on a diluted basis. Deducting prior charges at par, the net asset value per ordinary share increased to 151p (2005: 131p). Dividends We are pleased to recommend an increased final dividend of 3.5p per ordinary share, which together with the interim dividend makes a total payment for the year of 6.0p (2005: 5.55) per ordinary share. This represents an increase of 8.1 percent over the previous year's total dividend. The final dividend will be payable on 28 June 2007 to shareholders on the register at 1 June 2007. A dividend of 1.75p will be paid to preference shareholders resulting in a total payment for the year of 3.5p per share. In addition to these regular dividends, we paid an additional special dividend of 1p per share during the year, in recognition of special dividends received during the year. By separating out our special dividend we believe shareholders will find it easier to keep track of our normal interim and final dividends and monitor their progress. Shares and performance The discount to NAV at which our shares trade in the market has continued to improve annually and, at approximately 5 percent, now stands at a quarter of its level of four years ago. In addition, with performance based on net assets and total share price return modestly outperforming in one case and tracking in another our benchmark indices and the AIC Growth and Income sector over the year, the five year record of out-performance against these benchmarks has been maintained. We will shortly be applying to CRESTCo to allow our shares to be traded through the Crest system. This will facilitate dealing in our shares and will allow certain fund management companies offering flexible trading accounts to their customers to hold our shares. Outlook We look forward to continuing advances in the current year as equity and other financial markets remain generally firm although periods of greater volatility can now be expected as the continuing recovery in markets reaches a level of maturity. As at 24 April 2007, group net assets had decreased to Â£46.6 million, a decrease of 2.1 percent since the beginning of the calendar year. This is equivalent to 147 pence per share (prior charges deducted at par) and 133 pence per share on a diluted basis. Over the same period the FTSE 100 increased 3.4 percent and the All Share Index increased 3.7 percent. Anthony Townsend 30 April 2007 Managing Director's report Performance In 2006, the overall UK equity market grew strongly by 13 percent, although the rise was achieved in two roughly equal stages which were interrupted by a dramatic and sudden correction of 10 percent at the end of the first half. As reported at the interim stage, this reversal was the result of a sudden change in sentiment after a multi-year period of high annual growth as inflationary fears set in, particularly in relation to overheating in commodities prices and in industrial growth in China. By October, however, the first-half high point had been regained and the market continued further steady growth through to the year end, reaching levels last seen in the year 2000. The growth seen in 2006 was broadly based, led as in the previous year by the commodities sector but also reflecting high levels of domestic and international corporate activity as a result of mergers and particularly private capital buyouts of increasingly large-size quoted companies. Our portfolio tracked the UK indices during the year, slightly out-performing the leading stocks index while slightly under-performing the wider index which, as in the previous year, grew faster reflecting higher post-recovery growth rates in smaller capitalisation companies. The portfolio's overall performance was dampened somewhat by the exposure to US stocks which showed no growth over the year in sterling terms. While the US leading index grew by 16 percent and the NASDAQ index grew by 9.5 percent over the year, the US dollar fell by 11 percent against sterling over the period. As in previous years, we have been able to pay dividends this year substantially in excess (by over 50 percent, excluding special dividends) of index and sector yields while maintaining our capital base in line with our benchmark indices. The receipt of special dividends from investee companies has contributed to this result and our ability to pay another special dividend ourselves this year. This income strategy is in accordance with our policy of maintaining a balance of income and growth and measuring the success of the policy in terms of total shareholder return. Furthermore, the improvements in our share price discount in recent years, as noted in the Chairman's statement, have resulted in levels of share price total return which have outperformed the other investment trusts in our AIC peer group. We remain committed to our US investments which now account for approximately 20 percent of the portfolio, and in particular to our largest holding in Geron Corporation, a ground-breaking bio-medical company based in California. This Nasdaq-listed company has developed technology in the areas of oncology and regenerative medicine based on stem cell science which is likely to represent a paradigm shift in medicine. The company's discoveries are protected by a world-wide patent estate and it has already concluded collaborative/licensing agreements with a number of leading international pharmaceutical and biomedical companies and institutions including Merck, Roche, Procter & Gamble, Corning and Edinburgh and Oxford Universities. Over the coming years, as these discoveries and collaborations are translated into marketed products, the importance and value of this company should become evident. In the meantime, as with all technology stocks, a certain degree of above market volatility can be expected which may be further compounded by movements in the US dollar/sterling exchange rate. Over the last two years, the sterling value of our US investments has been squeezed following a substantial downward revaluation in the US dollar against world currencies. This has been a long awaited adjustment to compensate for the structural imbalances which have grown up in the US economy over the past six years. At slightly over $2.00 to the pound sterling, the dollar has reached a 26 year low against sterling which itself has been viewed as over-valued given the imbalances in the UK's current and trade accounts. With the current interest rate cycle in both countries seen to be close to peak and the US congress now re-asserting control over the legislative programme, further significant deterioration in the US dollar/ sterling rate affecting the sterling value of our US dollar investments is not expected and this should serve to minimise further adverse currency movements affecting our US investments. Outlook The growth trend of the previous year in equities continued into the first quarter of 2007, with the UK indices gaining a further 7 percent to the end of February. At that point, a sudden reversal occurred in global equity markets and the UK indices fell by 7 percent in 2 weeks to lose all the gains since the beginning of the year. This reversal, which was again precipitated by concerns over growth in China and in the US housing market which fuelled a flight from risk was only short term in nature and by the end of March the UK indices had returned to their previous levels. As noted in the Chairman's statement, higher levels of volatility have returned to global equity and other financial markets, reflecting the growing maturity of the 5-year long market recovery but also to the increasingly destabilising effects of the ever more inter-connected and geared global market in financial instruments. While companies continue to grow profits and interest rates in the developed economies are perceived to be close to the top of their current cycles, continued firmness in equity prices can be expected, together however, with dramatic short-term market movements arising out of unforeseen and seemingly unconnected localised events. Against this background, we will continue to pursue our generalist investment approach, remaining invested in leading stocks with good yield and in targeted stocks in the USA. Jonathan Woolf 30 April 2007 Consolidated income statement For the year ended 31 December 2006 2006 2005 Revenue Capital Total Revenue Capital Total return return return return Â£000 Â£000 Â£000 Â£000 Â£000 Â£000 Investment income (note 2) 2,105 - 2,105 2,032 - 2,032 Gains on fair value through profit or loss assets - - 5,159 5,159 - 4,665 4,665 unrealised Gains on fair value through profit or loss assets - - 97 97 - 618 618 realised Expenses (276) (150) (426) (273) (139) (412) ________ ________ ________ ________ ________ ________ Profit before tax 1,829 5,106 6,935 1,759 5,144 6,903 Tax (15) - (15) (57) - (57) ________ ________ ________ ________ ________ ________ Profit for the period 1,814 5,106 6,920 1,702 5,144 6,846 ________ ________ ________ ________ ________ ________ Earnings per share Basic - ordinary shares 5.85p 20.43p 26.28p 5.41p 20.57p 25.98p ________ ________ ________ ________ ________ ________ Diluted - ordinary shares 5.18p 14.59p 19.77p 4.86p 14.70p 19.56p ________ ________ ________ ________ ________ ________ The total column of this statement represents the Group's Income Statement, prepared in accordance with IFRS. The supplementary revenue return and capital return columns are both prepared under 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 the parent company. There are no minority interests. Consolidated statement of changes in equity For the year ended 31 December 2006 Share Capital Capital Retained Total capital reserve reserve earnings realised unrealised Â£000 Â£000 Â£000 Â£000 Â£000 Balance at 31 December 2004 35,000 13,114 (12,793) 2,548 37,869 Changes in equity for 2005 Profit for the period - 2,027 3,117 1,702 6,846 Ordinary dividend paid (note - - - (1,600) (1,600) 4) Preference dividend paid - - - (350) (350) (note 4) ________ ________ ________ ________ ________ Balance at 31 December 2005 35,000 15,141 (9,676) 2,300 42,765 Changes in equity for 2006 Profit for the period - 2,013 3,093 1,814 6,920 Ordinary dividend paid (note - - - (1,688) (1,688) 4) Preference dividend paid - - - (350) (350) (note 4) ________ ________ ________ ________ ________ Balance at 31 December 2006 35,000 17,154 (6,583) 2,076 47,647 ________ ________ ________ ________ ________ Consolidated Balance Sheet For the year ended 31 December 2006 Group 2006 2005 Â£000 Â£000 Non-current assets Investments - fair value through profit or 45,876 42,369 loss Current assets Receivables 553 3,379 Cash and cash equivalents 1,554 3,263 __________ __________ 2,107 6,642 __________ __________ Total assets 47,983 49,011 __________ __________ Current liabilities (336) (6,246) __________ __________ Total assets less current liabilities 47,647 42,765 __________ __________ Net assets 47,647 42,765 __________ __________ Equity attributable to equity holders Ordinary share capital 25,000 25,000 Convertible preference share capital 10,000 10,000 Capital reserve - realised 17,154 15,141 Capital reserve - unrealised (6,583) (9,676) Retained earnings 2,076 2,300 __________ __________ Total equity 47,647 42,765 __________ __________ Approved: 30 April 2007 Consolidated cash flow statement For the year ended 31 December 2006 Year ended Year ended 2006 2005 Â£000 Â£000 CASH FLOWS FROM OPERATING ACTIVITIES Profit before tax 6,935 6,903 Adjustments for: Gains on investments (5,256) (5,283) Scrip dividends and interest (27) (4) Film income tax deducted at source (4) (4) Proceeds on disposal of investments 20,510 6,406 at fair value through profit and loss Purchases of investments at fair (19,452) (7,552) value through profit and loss __________ __________ Operating cash flows before 2,706 466 movements in working capital Decrease/(increase) in receivables 13 (52) (Decrease)/increase in payables (2,305) 2,576 __________ __________ Net cash from operating activities 414 2,990 before income taxes Income taxes paid (85) (4) __________ __________ NET CASH FLOWS FROM OPERATING 329 2,986 ACTIVITIES __________ __________ CASH FLOWS FROM FINANCING ACTIVITIES Dividends paid on ordinary shares (1,688) (1,600) Dividends paid on preference shares (350) (350) __________ __________ NET CASH USED IN FINANCING (2,038) (1,950) ACTIVITIES __________ __________ NET (DECREASE)/INCREASE IN CASH AND CASH EQUIVALENTS (1,709) 1,036 CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 3,263 2,227 __________ __________ CASH AND CASH EQUIVALENTS AT END OF YEAR 1,554 3,263 __________ __________ Purchases and sales of investments are considered to be operating activities of the company, given its purpose, rather than investing activities. 1 Basis of preparation The financial information set out above contains the financial information of the company and its subsidiaries (together referred to as the "Group") for the year ended 31 December 2006. The financial statements have been prepared on the historical cost basis except for the measurements at fair value of investments and derivative financial instruments and the inclusion of a subsidiary at cost. The financial information set out above does not constitute the company's statutory accounts for the years ended 31 December 2006 or 2005. Statutory accounts for 2005, which were prepared under IFRS as adopted by the EU, have been delivered to the registrar of companies and those for 2006, prepared under IFRS as adopted by the EU, will be delivered in due course. The auditors have reported on the 31 December 2006 year end accounts and their reports were unqualified and did not include references to any matters to which the auditors drew attention by way of emphasis without qualifying their reports and did not contain statements under section 237(2) or (3) of the Companies Act 1985. 2 Income 2006 2005 Â£000 Â£000 Income from investments UK dividends (cash and specie) 1,590 1,377 Overseas dividends 11 22 Scrip dividends 4 3 Interest on fixed income 130 176 securities Property unit trust income 100 102 Film revenues 185 205 __________ __________ 2,020 1,885 __________ __________ Other income Deposit interest 101 130 Other (16) 17 __________ __________ 85 147 __________ __________ Total income 2,105 2,032 __________ __________ Total income comprises: Dividends 1,605 1,402 Interest 231 306 Film revenues 185 205 Property unit trust income 100 102 (Loss)/profit on foreign (16) 17 exchange __________ __________ 2,105 2,032 __________ __________ Income from investments Listed investments 1,664 1,472 Unlisted investments 356 413 __________ __________ 2,020 1,885 __________ __________ Of the Â£1,605,000 dividends received in the group accounts, Â£686,000 related to special dividends received from investee companies. A corresponding capital loss of Â£587,000 was realised. 3 Earnings per ordinary share The calculation of the basic and diluted earnings per share is based on the following data: 2006 2005 Revenue Capital Total Revenue Capital Total return return return return Â£000 Â£000 Â£000 Â£000 Â£000 Â£000 Earnings: Basic 1,464 5,106 6,570 1,352 5,144 6,496 Preference dividend 350 - 350 350 - 350 __________ __________ __________ __________ __________ __________ Diluted 1,814 5,106 6,920 1,702 5,144 6,846 __________ __________ __________ __________ __________ __________ Basic revenue, capital and total return per ordinary share is based on the net revenue, capital and total return for the period and after deduction of dividends in respect of preference shares and on 25 million (2005: 25 million) ordinary shares in issue. The diluted revenue, capital and total return is based on the net revenue, capital and total return for the period and on 35 million (2005: 35 million) ordinary and preference shares in issue. 4 Dividends 2006 2005 Â£000 Â£000 Amounts recognised as distributions to equity holders in the period: Dividends on ordinary shares: Final dividend for the year ended 31 December 2005 of 3.25p (2004:3.1p) per share 813 775 Interim dividend for the year ended 31 December 2006 of 2.5p 625 575 (2005:2.3p) per share Special dividend for the year ended 31 December 2006 of 1.0p (2005:1.0p) per share 250 250 __________ __________ 1,688 1,600 __________ __________ Proposed final dividend for the year ended 31 December 2006 of 3.5p (2005:3.25p) per share 875 813 __________ __________ Dividends on 3.5% cumulative convertible preference shares: Preference dividend for the year ended 31 December 2005 of 1.75p (2004:1.75p) per share 175 175 Preference dividend for the year ended 31 December 2006 of 1.75p (2005:1.75p) per share 175 175 __________ __________ 350 350 __________ __________ Proposed preference dividend for the year ended 31 December 2006 175 175 of 1.75p (2005:1.75p) per share __________ __________ The proposed final dividend is subject to approval by shareholders at the Annual General Meeting and has not been included as a liability in these financial statements in accordance with IFRS. We also set out below the total dividend payable in respect of the financial year, which is the basis on which the retention requirements of Section 842 Income and Corporation Taxes Act 1988 are considered. 2006 2005 Â£000 Â£000 Dividends on ordinary shares: Interim dividend for the year ended 31 December 2006 of 2.5p (2005:2.3p) per share 625 575 Special dividend for the year ended 31 December 2006 of 1.0p (2005:1.0p) per share 250 250 Proposed final dividend for the year ended 31 December 2006 of 3.5p (2005:3.25p) per share 875 813 __________ __________ 1,750 1,638 __________ __________ Dividends on 3.5% cumulative convertible preference shares: Preference dividend for the year ended 31 December 2006 of 1.75p (2005:1.75p) per share 175 175 Proposed preference dividend for the year ended 31 December 2006 of 1.75p (2005:1.75p) per share 175 175 __________ __________ 350 350 __________ __________ 5 Net asset values Net asset Net assets value per attributable share 2006 2005 2006 2005 Â£ Â£ Â£000 Â£000 Ordinary shares Undiluted 1.51 1.31 37,647 32,765 Diluted 1.36 1.22 47,647 42,765 The undiluted and diluted net asset values per Â£1 ordinary share are based on net assets at the year end and 25 million (undiluted) ordinary and 35 million (diluted) ordinary and preference shares in issue. British & American Investment Trust PLC British & American Investment Trust PLC

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