Half-year Report

RNS Number : 7534P

British Empire Trust PLC

31 May 2018

BRITISH EMPIRE TRUST PLC

('British Empire' or the 'Company')

LEI: 213800QUODCLWWRVI968

Announcement of unaudited results for the half year ended 31 March 2018

OBJECTIVE

The investment objective of the Company is to achieve capital growth through a focused portfolio of investments, particularly in companies whose shares stand at a discount to estimated underlying net asset value.

FINANCIAL HIGHLIGHTS

- Net asset value ('NAV') per share increased on a total return basis by 2.25%

- Share price total return 1.92%

- Benchmark index decreased on a total return basis by 0.60%

- Interim dividend maintained at 2.00p

PERFORMANCE SUMMARY

Net asset value per share (total return) for six months to 31 March 2018¹				2.25%

Share price total return for six months to 31 March 2018				1.92%

	31 March 2018	31 March 2017	30 September 2017	% change since 30 September 2017
Benchmark
MSCI All Country World ex-US Index (£ adjusted total return)	448.10	429.48	450.81	-0.6

Share Price Discount
(difference between share price and net asset value)²	10.34%	11.43%	9.92%

	Six months to	Six months to
	31 March 2018	31 March 2017
Earnings and Dividends
Investment income	£5.94m	£3.46m
Revenue earnings per share	3.03p	0.89p
Capital earnings per share	14.34p	91.52p
Total earnings per share	17.37p	92.41p
Ordinary dividends per share	2.00p	2.00p

Ongoing Charges Ratio (annualised)
Management, marketing and other expenses (as percentage of average net asset value)	0.87%	0.88%

Period Highs/Lows	High	Low
Net asset value per share	844.60p	771.52p
Net asset value per share (debt at fair value)	835.67p	764.29p
Share price (mid market)	753.00p	683.00p

¹As per guidelines issued by the Association of Investment Companies ('AIC'), performance is calculated using net asset values per share inclusive of accrued income and debt marked to fair value.

²As per guidelines issued by the AIC, the discount is calculated using the net asset value per share inclusive of accrued income and with the debt at fair value.

Buy-backs

During the period, the Company purchased 1,696,404 Ordinary Shares, all of which have been placed into treasury.

CHAIRMAN'S STATEMENT

This is my first report to you as Chairman of British Empire Trust plc and I would like to start by thanking my predecessor, Strone Macpherson, for his long service to the Company and for his sound guidance. My fellow Board members and I wish him well in his future endeavours.

Since the last Annual Report was published, we announced the appointment of Anja Balfour as a non-executive Director. Anja has over 20 years' experience in managing Japanese and International Equity portfolios for Stewart Ivory, Baillie Gifford and Axa Framlington. Since stepping down from full time investment management in 2010 she has gained considerable experience as a non-executive director and is currently a director of Martin Currie Asia Unconstrained Trust plc, of Schroder Japan Growth Fund plc and of F&C Global Smaller Companies plc. Anja is an excellent addition to the Board.

Investment Performance

For the first three months of the period under review, equity markets generally continued to strengthen but then, from mid-January, became more volatile. I am pleased to report that, at the half year stage against this background, your Company's net asset value had made a respectable level of progress overall, recording a total return of +2.25% over the period. This compares with a small decline of -0.60% in our benchmark index. The Investment Manager's report sets out the drivers of investment performance and current portfolio positioning.

Income and Dividend

Your Board has decided to pay an unchanged interim dividend of 2.0 pence per share, which will be paid on 29 June 2018.

As ever, at the half year stage it is difficult to predict revenues for the full year. As my predecessor regularly stated, the Board remains of the view that the primary focus of AVI should be on seeking superior investment returns and that this should not be compromised by setting a particular income target.

The Board expects at least to maintain the level of annual dividend paid for the last financial year. The Company has substantial revenue reserves and is also permitted to distribute capital profits as dividends, should the need arise.

Gearing

As reported in the last annual accounts, British Empire's debt was increased by the issue of €20 million private placement notes at an annual interest rate of 2.93% on 1 November 2017. The level of gearing as at 31 March 2018 was 9.8%; gearing net of cash was 7.5%.

The strategy adopted by the Investment Manager, and supported by your Board, is to run the investment portfolio more or less fully invested, with only a small working cash balance.

Discount

Over the six months under review, British Empire's shares traded at discounts to net asset value (with debt at fair value) in the range 8.7% to 11.7% and at 31 March 2018 the discount stood at 10.3%.

The Board is disappointed that the discount has remained so wide despite strong investment returns, both in absolute terms and relative to our benchmark index. The Board and Investment Manager continue to be proactive, both in seeking new shareholders through a comprehensive marketing programme and in buying back shares.

Annual General Meeting

All resolutions at the Annual General Meeting held on 20 December 2017 were passed by a large majority and I would like to thank shareholders for their continuing support.

Outlook

Volatility returned to equity markets in 2018 after a long period of relative calm. Markets remain unpredictable, at least in part reflecting a more difficult political background as companies and markets seek to understand the potential effects on world trade of the threat of protectionism. The reduction and eventual end of quantitative easing, and the corresponding reduction in the supply of "cheap" money, is also making markets more volatile.

Our Investment Manager's distinctive investment style is not driven by positioning a portfolio relative to a benchmark market index but is focused on finding investments which are, on their detailed analysis, inexpensive and where there is a realistic prospect of realising value. While any strategy investing in equities will inevitably be affected by markets in general, volatility may also produce the valuation anomalies which our Investment Manager seeks to exploit. As set out in the Investment Manager's report, there is significant underlying value in the investment portfolio, which provides the potential for future returns and can also act as a buffer against the effects of market volatility.

Susan Noble

Chairman

30 May 2018

INVESTMENT MANAGER'S REPORT

Performance Summary

Over the six-month period to 31 March 2018, your Company generated a net asset value ('NAV') total return of +2.25%, which compares to a total return of -0.60% in Sterling terms from the MSCI All Country World ex-US Index (our Benchmark), for an outperformance of +2.85% over the period.

Following a long period of rising stock markets, the early part of 2018 saw a return of market volatility fuelled first by concerns over the end of the sustained period of low interest rates in the US, and more recently by fears of the prospect of a global trade war.

Longstanding investors and readers of the Company's reports will be aware that our primary focus is on bottom-up fundamental valuations rather than broad macro-economic themes, and that one of the key indicators of value that we use is the discount to our estimate of a company's net asset value ('NAV'). Over time, we have tracked the weighted average discount of your Company's portfolio and this has ranged from 10% in 2006 to 35% in 2009 and 2011. At the start of this period, at 30 September 2017, the weighted average discount of the portfolio was 25.6%, whereas at 31 March 2018 it had widened out to 27.6%. This widening of discounts is consistent with a period of increased volatility as, to an extent, it is a reflection of risk aversion.

Widening discounts can be a headwind to performance, and this makes the outperformance of the Company's benchmark particularly encouraging. Furthermore, we continue to find compelling investment opportunities. Although discounts on average across our investment universe have narrowed over the past three years, some companies have not benefited from discount narrowing, as yet. This means that investors continue to overlook a number of under-valued (and in our view mis-priced) investment opportunities, making this an exciting time for us.

Your Company outperformed its benchmark index by 2.85%, with an important contribution from our Japanese investments, consisting of Tokyo Broadcasting, Digital Garage and a basket of 20 special situation investments. Over the past 12 months we have found a number of attractive investment opportunities in Japan and almost 20% of your Company's assets are invested there (versus under 10% one year ago). In aggregate, these added almost 2.8 percentage points to total returns over the six month period and are worthy of particular comment. The companies which we own in Japan all trade on substantial discounts to NAV. A large part of our exposure there is to companies with a significant proportion of their market capitalisation in net cash and listed equities, allowing us to buy into attractive businesses on extremely low implied earnings multiples. The economic backdrop in Japan is helpful as many of our companies have reported strong earnings growth over the past year. At the same time, the combination of attractive valuations and corporate governance reform continue to make Japan a compelling opportunity. Over the period, our investments in Japan generated a total return of 14.0% compared to 4.1% for the broad Japanese index (TOPIX).

In addition to the positive contribution from our investments in Japan, we continue to benefit from the active ownership of family-controlled holding companies elsewhere and from our active engagement with boards and managers of closed end funds. In the following section, we describe in some detail the main contributors and detractors to performance over the period.

Contributors and Detractors

Contributors	Contribution
Digital Garage	1.4%
Aker ASA	1.2%
Japan Special Situations	0.9%
JPEL Private Equity	0.5%
Fondul Proprietatea	0.4%

Detractors
Vivendi	-0.3%
Wendel	-0.4%
Investor AB 'A'	-0.5%
Pershing Square Holdings	-0.6%
Jardine Strategic Holdings	-0.7%

Top Positive Contributors

Digital Garage (+1.38% contribution to total return/weight 1.1%*)

Digital Garage was our largest contributor, adding 1.38% to the Company's NAV. We first purchased shares in Digital Garage in March 2016, and, while we have only held the position for a reasonably short time, it has given total returns of 74% against the TOPIX total return of 37%. Our investment thesis was predicated on our belief that the market was inefficiently valuing Digital Garage's unlisted assets and instead focusing solely on its stake in the listed company Kakaku, Japan's largest online price comparison and restaurant review company. There was no compelling reason for this and, given the growth rates of Digital Garage's unlisted assets, we did not believe that this would persist.

In recent months, the discount of Digital Garage has narrowed sharply and at times traded below 5%, and even briefly at a premium. While we are advocates of Digital Garage's strategy, such narrow discounts do not provide the opportunity for adequate returns and as such we sold approximately three-quarters of our position over the six months to 31 March 2018, subsequently exiting the position post the reporting period. We benefited from both discount narrowing and NAV growth, with an average exit discount of 10% compared to our average purchase discount of 31% and NAV growth of 31%.

* % of total assets less current liabilities.

Aker ASA (+1.17%/4.0%)

Aker ASA was the second-largest contributor to performance over the period, adding 1.17% to total returns. The discount tightened by 7 percentage points (from 29% to 22%), driven by strong share price growth (+35%) in excess of NAV growth (+22%).

Aker BP (72% of Aker ASA's NAV) was the principal driver of the NAV growth, with its share price up by 38% over the period. This strong growth was driven by Aker BP's announcement in October 2017 that it had agreed to acquire the Norwegian division of Hess Corp for US$2.2bn in a transaction which includes Hess' 64% share in the Valhall field, its 63% share of the Hod field and a US$1.5bn carried-forward tax loss.

In addition to the Hess Corp/Aker BP transaction, Aker ASA was aided by a strong oil price - the value of a barrel of Brent crude rose 22% in US Dollar terms - and an announcement that it would increase its annual dividend by 12.5% to NOK18 per share, equivalent to a yield of 4.1%.

Following Aker BP's transaction, the oil price and the dividend increase, Aker ASA's discount began to narrow and we took advantage of this strength to sell a small proportion of our position at discounts of c.21% in March.

Japan Special Situations (+0.87%/11.2%)

The Japan Special Situations basket is composed of 20 stocks that have inefficient balance sheets, with a large amount of capital that is superfluous to the operating business. Collectively, this basket of stocks added 0.87% to performance over the period, making it the third largest contributor.

Despite the strong performance since inception, both absolutely (+19.6% in GBP terms) and relative to the TOPIX (+3.0%), we believe that the basket continues to present an attractive opportunity to capitalise on a general improvement in Japanese corporate governance. Indeed, we have been encouraged by recent updates to the corporate governance code in Japan which have put a greater emphasis on scrutinising cross-shareholdings and dismissing CEOs based on business results. Continued pressure from the government and engaged shareholders will lead to a more efficient corporate Japan, but this will not happen overnight. The building blocks to a shareholder conscious Japan have been set and, while we wait for further progress, we have positioned the portfolio attractively. There are few markets in the world in which one can build a portfolio with 57% net cash as a percentage of market cap, 75% excess capital as a percentage of market cap and a free cash flow yield of 7%.

JPEL Private Equity (+0.48%/4.1%)

JPEL Private Equity ('JPEL') contributed 0.48% to total returns over the period. The discount narrowed by 7% (from 19% to 12%) driven by strong share price growth (10%) and modest NAV growth (2%).

JPEL disposed of two large holdings amounting to 16% of its portfolio during the half-year: Accela, a provider of regulation management software was partially sold in October for US$29m, resulting in a 35% IRR for JPEL and a 2.1x return on cost; Celerion, a clinical research outsource provider, was sold in November at a 25% uplift to NAV, resulting in a 49% IRR and a 3.3x return on cost. The total sales proceeds came to approximately US$74m.

Following these two disposals, JPEL announced that it would be conducting another mandatory redemption in December, the third of its kind. The redemption saw 17% of NAV (US$75m) returned to shareholders via a share buyback at a price of US$1.66, equivalent to the NAV published at the end of October 2017. In the last week of March 2018, JPEL announced a fourth mandatory redemption - equivalent to 7% of NAV (US$25m) - which will take place in April 2018 at a price of US$1.70.

With EBITDA and revenues growing at mid-single-digit rates, reasonable valuations of underlying holdings and significant levels of cash being returned at NAV, AVI continues to view JPEL Private Equity as a highly attractive proposition.

Fondul Proprietatea (+0.44%/4.9%)

Fondul Proprietatea ('FP'), the Franklin Templeton-managed closed-end fund, was the sixth-largest contributor to total returns over the period (adding 0.44%) despite a broadly unchanged discount (ending at 28%). FP is listed in Romania with a secondary listing of GDRs in London, and it is the latter line that accounts for our holding following our switches from the local shares into GDRs on the rare occasions when they have traded at parity. In local currency, our position gained 10.5% over the half year (8.7% in GBP).

Fondul Proprietatea, literally meaning "Property Fund" in Romanian, was listed in Romania in 2011 having been established several years previously as a restitution fund to compensate those Romanian citizens whose property had been confiscated from them under communism. The mechanism by which the government structured the scheme saw some of its stakes in Romanian businesses transferred to FP, with FP shares then being issued to the victims.

With the share register having transitioned to US and UK institutional investors, and in recognition that FP was (and is) far too large for its local market, various stringent discount control mechanisms were agreed and include the adoption of a policy that no new investments can be made until the discount is consistently below 15%. It is also proposed to introduce an incentivisation plan to encourage the manager to return capital and narrow the discount. Today, FP has stakes in 37 companies (10 listed and 27 unlisted), down from 83 when it listed in 2011, with the bulk of its NAV represented by Hidroelectrica (unlisted; 36% of NAV), OMV Petrom (listed; 18% of NAV), ENEL subsidiaries (14% of NAV), and Bucharest Airports (8% of NAV).

An eventful six months for FP has seen the sale of its stakes in Electrica's subsidiaries, special dividends from Hidroelectrica and Bucharest Airports, the continuation of the buyback in the market, a tender offer for 14% of shares that generated significant accretion to NAV per share, and a 36% increase in the annual dividend.

While it appears increasingly likely that the IPO of Hidroelectrica will be delayed until 2019 at the earliest, and in the face of delays in corporate governance reform, we think FP is compellingly valued at its current discount of 28%. In particular, the likelihood of a positive outcome from the sales process for its stakes in the ENEL Romania subsidiaries (ENEL has announced a strategy of looking to consolidate its subsidiaries globally, but is unable to do so in Romania without FP's consent) gives ground for optimism. These ENEL subsidiaries account for 14% of FP's NAV, have very high levels of net cash, and it is quite possible they will pay out special dividends before or as part of any sale of FP's stakes. In addition, Hidroelectrica and Bucharest Airports are high quality assets carried cheaply in FP's NAV and will continue to generate sizeable cash-flows, while OMV Petrom has obvious attractions with a near 20% free cash flow yield.

Major Detractors

Jardine Strategic (-0.74%/4.3%)

Jardine Strategic ('JS') was British Empire's weakest performer over the period, reducing NAV by 0.74%. Its underlying assets performed satisfactorily during a period of heightened volatility, with JS's NAV largely flat. Discount widening was the main cause for underperformance as the discount moved from 24% as at the end of September to 32% as at the end of March.

We have often extolled the benefits of family-controlled companies, with their long-term views and hidden assets. A strategic review by Mandarin Oriental (7% of JS's NAV) of one of their freehold hotels, The Excelsior in Hong Kong, gives evidence of both. The review led to speculation that this asset could be worth as much as HK$15bn, which was similar to Mandarin Oriental's market cap at the time, with the prospect of a return of capital to shareholders. Subsequently Mandarin Oriental announced that although proposals had been received, they did not give rise to an acceptable offer. Consideration is now being given to a number of options for the site including possible redevelopment as a commercial property. Market speculation is that the latter might be in conjunction with Hongkong Land, another company in the Jardine stable. While a return of capital in the short term would have been attractive, the long-term view from the company that it could create further value by strategic investment of this sort should be commended.

As the prospect of a potential large return of capital to JS from one of its holdings disappeared, the market then began to fear a capital increase from another, Jardine Cycle and Carriage ('JCNC'). In November 2017, JCNC (24% of NAV) bought a 10% stake in Vinamilk, the Vietnamese dairy producer. This led to JCNC moving from a position of net cash to net debt with rising concerns that JCNC would have to raise cash to reduce its debt position, thus requiring capital from parent company JS. Management of JCNC stated that they were comfortable with their debt levels during their annual results presentation, reducing the prospect of a near-term capital increase. JCNC is itself a holding company and we would expect the discount of c.20% to narrow to its long-term average of 14% over time.

We commented in the 2017 Annual Report that additional buying by Jardine Matheson into JS is something to watch as it gives a signal as to where the controlling shareholders see value. This has continued over the reporting period but has not managed to narrow the discount. While this has been a period of poor performance, we still see the underlying holdings as attractively valued and continue to hold confidently.

Pershing Square (-0.58%/4.3%)

Pershing Square Holdings ('PSH') was our second largest detractor over the period, costing 0.58%. While the very wide discount ended the period at 24%, largely unchanged from where it began, the shares had at times traded materially narrower by around 16%. A declining NAV was instead the culprit, falling by 7%, with the weak US dollar exacerbating the fall for British Empire and resulting in our position suffering a loss in Sterling terms of 11%. The key detractors in PSH's portfolio over the six months were the short position in Herbalife (now exited) and the long positions in Restaurant Brands International, Fannie Mae and Freddie Mac (the latter two holdings being essentially option-style plays on US housing finance reform).

We first invested in PSH in June 2017. The manager's reputation had been damaged by the catastrophic losses experienced in their out-sized position in Valeant Pharmaceuticals, but this meant that we were able to initiate our position at a 15% discount to NAV despite the manager's still-impressive long-term record. This discount continued to widen following our initial purchases, and we took the opportunity to add to our stake at discounts approaching 25%.

Our investment thesis was predicated on our detailed work on the underlying portfolio, which is highly concentrated and in which we still see scope for material upside, and our view that it was (and is) untenable for a high-profile activist manager to preside over a listed vehicle trading at such a wide discount to NAV.

The six-month period was an eventful one on the corporate front. In January 2018, Pershing Square Capital Management ('PSCM') announced a $300m tender offer for PSH shares at a discount range of 16-24%. To facilitate the tender offer, the board of PSH granted a waiver to PSCM exempting them from the 5% ownership limit that exists to prevent inadvertent breaches of US tax laws relating to investments in real estate.

While we would ordinarily welcome a manager aligning themselves further with shareholders with such a large personal investment, we had several concerns. Firstly, we believed that a vote should be held on whether to restrict PSH's investment in real estate-related holdings (via common stock; positions could still be replicated via derivatives) and thus allow ownership limits to be permanently removed for all shareholders. Secondly, we felt that PSH should be acquiring its own shares in the event that ownership limits were removed, thereby generating accretion to NAV per share which is absent from a manager-led tender offer. We also believed that if the discount were to remain wide and a tender were held in future by PSH, then PSCM would have been given an unfair opportunity to acquire cheap stock ahead of the company's other shareholders.

Having made these points to the board and manager, we were pleased with the eventual climb-down. Instead of PSCM conducting the tender, it will now be PSH doing so, and a resolution removing the ownership caps was proposed and passed at the AGM in late-April. It is our understanding that PSCM is now likely to accumulate shares in PSH in the open market in lieu of their proposed tender.

While the company-led tender is likely to help the rating, we continue to believe that a more structural solution may be required, and we continue to engage constructively with the board and manager.

Investor AB (-0.51%/2.9%)

Investor's NAV was down by 3.5% and the discount widened by 3.0% over the six months to the end of March. Overall, Investor's share price was down 7.2% over the period, resulting in a negative contribution of 0.5%.

During the period, the company released their annual results giving important information on Patricia Industries, which holds their unlisted assets. While valuations of the unlisted portfolio were up, with adjusted NAV (which is based on estimated market values for unlisted subsidiaries) up by 16% over the year, the major component of Patricia, Mölnlycke, has room for improvement. The market value of Mölnlycke was up 2.4%, as we saw margin improvement in the last quarter. However, revenue growth over the last quarter of 2% was seen as unexciting by the market.

While news was thin on the ground, the company continues to be involved in M&A, acquiring further assets within Patricia. Sarnova, a US distributor of healthcare products, and Cogentix Medical were acquired during the six months, while in the listed portfolio, Investor increased their position in Ericsson to 6.6%.

While Investor's discount has widened to 24%, its Swedish peers are trading at single digit discounts or premiums to NAV. We think that this spread to peers is unwarranted given Investor's track record. Investor has long been an active investor in its underlying holdings and we believe that this will provide continued outperformance in the long term for Investor's shareholders.

Wendel (-0.35%/4.7%)

Despite strong performance at the start of the period - with press reports that an IPO of IHS, the African mobile phone towers business, was increasingly likely - an accelerated sell-off following the announcement of results on 22 March saw the discount widen out to 30%, versus 20% at the start of February and 26% at the end of September.

The sell-off seems to have been driven by two factors: a change in Wendel's NAV methodology and currency volatility at IHS. The change in NAV methodology resulted in Wendel's official NAV being 2% lower than it would have otherwise been. However, this had no impact on our calculated NAV as we use our own proprietary estimates of value, and its impact is limited to those investors who do not calculate the valuation of Wendel's unlisted assets themselves.

A large portion of IHS phone tower business is in Nigeria and the currency situation there has been unstable, which has affected the valuation of IHS when converted back to US Dollars. While this is certainly a negative, the underlying operating business of IHS is unaffected - particularly as IHS can pass on a large proportion of the Naira depreciation to its customers. Moreover, the magnitude of the fall in Wendel's share price is equivalent to the valuation of IHS, which given the limited impact that this depreciation has on the underlying operations, seems unwarranted.

This kind of market reaction shows the market inefficiency prevalent in the shares of holding companies, even those of a substantial size (€6bn). We took advantage of such inefficiency by adding to Wendel. The current discount does not reflect the high quality of Wendel's unlisted assets and we believe IPOs/sales of unlisted assets could cause a substantial narrowing.

Outlook

Your Company holds stakes in a group of companies owning high quality-assets, trading on wide discounts to their realisable value. The drivers of discount narrowing remain in place. Corporate activity levels remain elevated, and our constructive engagement with the boards and management of all our investee companies is designed to help companies unlock value for all shareholders.

Whilst the broader market environment has become more complex in recent months, the fact that we continue to find such attractive opportunities gives us confidence that this portfolio is well placed to deliver strong returns over the coming years.

Thank you for your continued support.

Joe Bauernfreund

Asset Value Investors Limited

30 May 2018

INVESTMENT PORTFOLIO

INVESTMENTS AT 31 MARCH 2018
Company	Nature of business	% of investee company	Valuation £'000	% of total assets less current liabilities
EXOR	Investment Holding Company	0.5	56,471	5.7
Pargesa	Investment Holding Company	1.1	51,931	5.3
Tokyo Broadcasting	Asset-backed Company	1.9	51,425	5.2
Riverstone Energy	Investment Company	4.8	48,218	4.9
SC Fondul Proprietatea	Investment Company	0.1	48,133	4.9
Symphony International Holdings	Investment Company	17.0	47,030	4.8
Wendel	Investment Holding Company	0.9	46,422	4.7
Tetragon Financial	Investment Company	5.2	45,875	4.6
Third Point Offshore	Investment Company	4.4	43,686	4.4
Pershing Square Holdings	Investment Company	2.1	42,949	4.3
Top ten investments			482,140	48.8
Jardine Strategic	Investment Holding Company	0.1	42,697	4.3
Cosan Ltd	Investment Holding Company	3.4	42,533	4.3
JPEL Private Equity	Investment Company	17.5	40,273	4.1
Aker ASA	Investment Holding Company	1.3	39,590	4.0
Swire Pacific 'B'	Investment Holding Company	1.0	36,478	3.7
Investor AB 'A'	Investment Holding Company	0.3	28,692	2.9
Vivendi	Investment Holding Company	0.1	28,574	2.9
NB Private Equity Partners	Investment Company	2.9	28,537	2.9
Vietnam Phoenix Fund 'C'	Investment Company	23.5	26,895	2.7
Adler Real Estate	Real Estate Company	2.9	19,792	2.0
Top twenty investments			816,201	82.6
GP Investments	Investment Company	14.6	14,452	1.5
Digital Garage	Investment Holding Company	1.0	10,895	1.1
Toshiba Plant Systems*	Asset-backed Company	0.7	10,389	1.1
Kato Sangyo*	Asset-backed Company	1.0	9,345	0.9
Nishimatsuya Chain*	Asset-backed Company	1.6	8,732	0.9
Pasona Group*	Asset-backed Company	1.3	8,334	0.8
Daiwa Industries*	Asset-backed Company	1.8	7,996	0.8
Tachi-S*	Asset-backed Company	1.7	7,878	0.8
Yamato Kogyo*	Asset-backed Company	0.5	6,940	0.7
Melco Holdings*	Asset-backed Company	1.3	6,827	0.7
Top thirty investments			907,989	91.9
Amuse*	Asset-backed Company	1.8	6,651	0.7
Kanaden*	Asset-backed Company	2.2	6,632	0.7
SK Kaken*	Asset-backed Company	0.5	6,163	0.6
Dragon Capital Vietnam Property	Investment Company	15.4	4,428	0.5
Nippon Road*	Asset-backed Company	1.3	4,269	0.4
Better Capital (2009)	Investment Company	2.0	3,843	0.4
Enplas*	Asset-backed Company	0.8	3,359	0.3
Nakano Corporation*	Asset-backed Company	2.2	3,234	0.3
Denyo*	Asset-backed Company	1.1	3,154	0.3
Ashmore Global Opportunities - GBP	Investment Company	12.6	2,570	0.3
Top forty investments			952,292	96.4
Nissan Shatai*	Asset-backed Company	0.2	2,429	0.3
Teikoku Sen-I*	Asset-backed Company	0.7	2,422	0.2
Japan Petroleum*	Asset-backed Company	0.3	2,289	0.2
Chofu Seisakusho*	Asset-backed Company	0.3	1,624	0.2
Matsui Construction*	Asset-backed Company	0.9	1,508	0.2
EF Realisation	Investment Company	8.4	1,329	0.1
Total equity investments			963,893	97.6

Total investments			963,893	97.6
Net current assets			24,132	2.4
Total assets less current liabilities			988,025	100.0

*Constituent of Japanese Special Situations basket. This basket accounts for 11.2% of the Company's total assets less current liabilities and has a total market value of £110.2m.

STATEMENT OF COMPREHENSIVE INCOME

for the six months ended 31 March 2018 (unaudited)

		For the six months to 31 March 2018			For the six months to 31 March 2017			For the year to 30 September 2017
		Revenue	Capital		Revenue	Capital		Revenue	Capital
		return	return	Total	return	return	Total	return	return	Total
	Notes	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Income
Investment income	2	5,943	-	5,943	3,461	-	3,461	17,393	-	17,393
Gains on investments held at fair value		-	20,822	20,822	-	116,397	116,397	-	137,833	137,833
Exchange losses on currency balances		-	(767)	(767)	-	(780)	(780)	-	(1,579)	(1,579)
		5,943	20,055	25,998	3,461	115,617	119,078	17,393	136,254	153,647
Expenses
Investment management fee		(965)	(2,251)	(3,216)	(906)	(2,113)	(3,019)	(1,856)	(4,332)	(6,188)
Other expenses (including irrecoverable VAT)		(808)	-	(808)	(875)	-	(875)	(1,628)	-	(1,628)
Profit before finance costs and tax		4,170	17,804	21,974	1,680	113,504	115,184	13,909	131,922	145,831
Finance costs		(565)	(1,330)	(1,895)	(496)	(1,167)	(1,663)	(997)	(2,346)	(3,343)
Exchange gains/(losses) on loan revaluation		-	67	67	-	293	293	-	(480)	(480)

Profit before taxation		3,605	16,541	20,146	1,184	112,630	113,814	12,912	129,096	142,008
Taxation		(114)	-	(114)	(91)	-	(91)	(309)	-	(309)
Profit for the year		3,491	16,541	20,032	1,093	112,630	113,723	12,603	129,096	141,699

Basic and diluted Earnings per Ordinary Share	3	3.03p	14.34p	17.37p	0.89p	91.52p	92.41p	10.44p	106.99p	117.43p

The total column of this statement is the Income Statement of the Company prepared in accordance with IFRS, as adopted by the European Union. The supplementary revenue and capital columns are presented in accordance with the Statement of Recommended Practice issued by the Association of Investment Companies ('AIC SORP').

All revenue and capital items in the above statement derive from continuing operations. No operations were acquired or discontinued during the year.

There is no other comprehensive income, and therefore the profit for the six months after tax is also the total comprehensive income.

The accompanying notes are an integral part of these financial statements.

STATEMENT OF CHANGES IN EQUITY

for the six months ended 31 March 2018 (unaudited)

Ordinary	Capital
share	redemption	Share	Capital	Merger	Revenue
capital	reserve	premium	reserve	reserve	reserve	Total
£'000	£'000	£'000	£'000	£'000	£'000	£'000

For the six months to 31 March 2018


Balance as at 30 September 2017	12,953	5,982	28,078	781,555	41,406	33,255	903,229
Ordinary Shares bought back and held in treasury	-	-	-	(12,185)	-	-	(12,185)
Total comprehensive income for the period	-	-	-	16,541	-	3,491	20,032
Ordinary dividends paid (see note 6)	-	-	-	-	-	(11,557)	(11,557)
Balance as at 31 March 2018	12,953	5,982	28,078	785,911	41,406	25,189	899,519

For the six months ended 31 March 2017

Balance as at 30 September 2016	16,001	2,934	28,078	717,051	41,406	38,503	843,973
Ordinary Shares bought back and held in treasury	-	-	-	(36,869)	-	-	(36,869)
Ordinary Shares held in treasury cancelled	(3,048)	3,048	-	-	-	-	-
Total comprehensive income for the period	-	-	-	112,630	-	1,093	113,723
Ordinary dividends paid (see note 6)	-	-	-	-	-	(15,471)	(15,471)
Balance as at 31 March 2017	12,953	5,982	28,078	792,812	41,406	24,125	905,356

For the year ended 30 September 2017

Balance as at 30 September 2016	16,001	2,934	28,078	717,051	41,406	38,503	843,973
Ordinary Shares bought back and held in treasury	-	-	-	(64,592)	-	-	(64,592)
Ordinary Shares held in treasury cancelled	(3,048)	3,048	-	-	-	-	-
Total comprehensive income for the year	-	-	-	129,096	-	12,603	141,699
Ordinary dividends paid (see note 6)	-	-	-	-	-	(17,851)	(17,851)
Balance as at 30 September 2017	12,953	5,982	28,078	781,555	41,406	33,255	903,229

The accompanying notes are an integral part of these financial statements.

BALANCE SHEET

as at 31 March 2018 (unaudited)

	At 31 March 2018 £'000	At 31 March 2017 £'000	At 30 September 2017 £'000
Non-current assets
Investments held at fair value through profit or loss	963,893	952,386	950,511
	963,893	952,386	950,511
Current assets
Sales for future settlement	1,249	6,128	500
Other receivables	4,174	3,683	4,350
Cash and cash equivalents	20,920	19,225	25,496
	26,343	29,036	30,346
Total assets	990,236	981,422	980,857

Current liabilities
Purchases for future settlement	(843)	(4,452)	(4,215)
Other payables	(1,368)	(1,225)	(2,237)
	(2,211)	(5,673)	(6,452)
Total assets less current liabilities	988,025	975,749	974,405

Non-current liabilities
8¹/₈% Debenture Stock 2023	(14,961)	(14,954)	(14,957)
4.184% Series A Sterling Unsecured Loan Notes 2036	(29,882)	(29,874)	(29,878)
3.249% Series B Euro Unsecured Loan Notes 2036	(26,245)	(25,565)	(26,341)
2.93% Euro Senior Unsecured Loan Notes 2037	(17,418)	-	-
	(88,506)	(70,393)	(71,176)
Net assets	899,519	905,356	903,229

Equity attributable to equity shareholders
Ordinary share capital	12,953	12,953	12,953
Capital redemption reserve	5,982	5,982	5,982
Share premium	28,078	28,078	28,078
Capital reserve	785,911	792,812	781,555
Merger reserve	41,406	41,406	41,406
Revenue reserve	25,189	24,125	33,255
Total equity	899,519	905,356	903,229
Net asset value per Ordinary Share - basic	785.90p	753.39p	777.62p

Number of shares in issue excluding Treasury Shares	114,457,139	120,170,665	116,153,543

The accompanying notes are an integral part of these financial statements.

Registered in England & Wales No. 28203

STATEMENT OF CASH FLOWS

for the six months ended 31 March 2018 (unaudited)

	Six months to 31 March 2018	Six months to 31 March 2017	Year to 30 September 2017
	£'000	£'000	£'000
Reconciliation of profit before taxation to net cash (outflow)/inflow from operating activities
Profit before taxation	20,146	113,814	142,008
Gains on investments held at fair value through profit or loss	(20,822)	(116,397)	(137,833)
Decrease/(increase) in other receivables	107	31	(313)
Increase/(decrease) in other payables	248	(359)	(458)
Taxation	(47)	228	(314)
Amortisation of debenture issue expenses	13	10	19
Net cash (outflow)/inflow from operating activities	(355)	(2,673)	3,109

Investing activities
Purchases of investments	(227,773)	(231,751)	(502,357)
Sales of investments	231,088	293,207	594,865
Cash inflow from investing activities	3,315	61,456	92,508

Financing activities
Dividends paid	(11,557)	(15,471)	(17,851)
Payments for Ordinary Shares bought back and held in treasury	(13,301)	(37,747)	(66,536)
Issue of loans net of costs	17,385	-	-
Exchange (gain)/loss on Loan Notes	(67)	(293)	480
Cash outflow from financing activities	(7,540)	(53,511)	(83,907)
(Decrease)/increase in cash and cash equivalents	(4,580)	5,272	11,710
Reconciliation of net cash flow movements in funds:
Cash and cash equivalents at beginning of year	25,496	13,799	13,799
Exchange rate movements	4	154	(13)
Increase in cash and cash equivalents	(4,580)	5,272	11,710
(Decrease)/increase in net cash	(4,576)	5,426	11,697
Cash and cash equivalents at end of year	20,920	19,225	25,496

The accompanying notes are an integral part of these financial statements.

NOTES TO THE FINANCIAL STATEMENTS

for the six months ended 31 March 2018 (unaudited)

1. Significant accounting policies

The condensed financial statements of the Company have been prepared in accordance with International Accounting Standards (IAS) 34 - "Interim Financial Reporting" as adopted by the EU. The accounting policies used by the Company followed in these half-year financial statements are consistent with the most recent Annual Report for the year ended 30 September 2017.

Going concern

The Directors have reviewed the Company's current financial resources and the projected expenses of the Company for the next 12 months. On the basis of that review and as the majority of net assets are securities which are traded on recognised stock exchanges, the Directors are satisfied that the Company's resources are adequate for it to continue in business for the foreseeable future (being a period of at least 12 months from the date this Half Year Report is approved) and that it is appropriate to prepare the Company's financial statements on a going concern basis.

Comparative information

The financial information contained in this Half Year Report does not constitute statutory accounts as defined in the Companies Act 2006. The financial information for the half-year periods ended 31 March 2017 and 31 March 2018 has not been audited but has been reviewed by the Company's Auditor and its report can be found below. The comparative figures for the financial year ended 30 September 2017 are not the Company's statutory accounts for that financial year. Those accounts have been reported on by the Company's Auditor and delivered to the Registrar of Companies. The report of the Auditor was (i) unqualified, (ii) did not include a reference to any matters to which the Auditor drew attention by way of emphasis without qualifying their report, and (iii) did not contain a statement under section 498 (2) or (3) of the Companies Act 2006.

2. Income

	6 months to 31 March 2018	6 months to 31 March 2017	Year to 30 September 2017
	£'000	£'000	£'000
Income from investments
Listed investments	6,006	3,566	17,487

Other income
Deposit interest	47	-	16
Interest on French withholding tax received	-	-	29
Exchange losses on receipt of income	(110)	(105)	(139)
Total Other Income	(63)	(105)	(94)
Total income	5,943	3,461	17,393

3. Earnings per Ordinary Share

	6 months to 31 March 2018
	Revenue	Capital	Total
Net profit (£'000)	3,491	16,541	20,032
Weighted average number of Ordinary Shares	115,324,143
Earnings per Ordinary Share	3.03p	14.34p	17.37p

	6 months to 31 March 2017
	Revenue	Capital	Total
Net profit (£'000)	1,093	112,630	113,723
Weighted average number of Ordinary Shares	123,062,195
Earnings per Ordinary Share	0.89p	91.52p	92.41p

	Year to 30 September 2017
	Revenue	Capital	Total
Net profit (£'000)	12,603	129,096	141,699
Weighted average number of Ordinary Shares	120,666,358
Earnings per Ordinary Share	10.44p	106.99p	117.43p

There are no dilutive instruments issued by the Company. Both the basic and diluted earnings per share for the Company are represented above.

4. Net asset value per Ordinary Share

The net asset value per Ordinary Share is based on net assets of £899,519,000 (31 March 2017: £905,356,000; 30 September 2017: £903,229,000) and on 114,457,139 (31 March 2017: 120,170,665; 30 September 2017: 116,153,543) Ordinary Shares, being the number of Ordinary Shares in issue excluding shares held in treasury at the relevant period ends.

5. Share capital

During the period to 31 March 2018, 1,696,404 (six months to 31 March 2017: 5,698,000; year to 30 September 2017: 9,715,122) Ordinary Shares were bought back and placed in treasury for an aggregate consideration of £12,185,000 (six months to 31 March 2017: £36,869,000; year to 30 September 2017: £64,592,000).

No Ordinary Shares held in treasury were cancelled in the period (six months to 31 March 2017: 30,487,914; year ended 30 September 2017: 30,487,924).

6. Dividends

During the period, the Company paid a final dividend of 10.0p per Ordinary Share for the year ended 30 September 2017 on 5 January 2018 to ordinary shareholders on the register at 8 December 2017 (ex-dividend 7 December 2017).

An interim dividend of 2.0p per Ordinary Share for the period ended 31 March 2018 has been declared and will be paid on 29 June 2018 to ordinary shareholders on the register at the close of business on 15 June 2018 (ex-dividend 14 June 2018).

7. Values of financial assets and financial liabilities

Valuation of financial instruments

The Company measures fair values using the following hierarchy that reflects the significance of the inputs used in making the measurements.

The fair value is the amount at which the asset could be sold or the liability transferred in an orderly transaction between market participants, at the measurement date, other than a forced or liquidation sale.

Categorisation within the hierarchy has been determined on the basis of the lowest level input that is significant to the fair value measurement of the relevant assets as follows:

· Level 1 - valued using quoted prices, unadjusted in active markets for identical assets or liabilities.

· Level 2 - valued by reference to valuation techniques using observable inputs for the asset or liability other than quoted prices included in level 1.

· Level 3 - valued by reference to valuation techniques using inputs that are not based on observable market data for the asset or liability.

Financial assets

The tables below set out fair value measurements of financial instruments as at the period end, by the level in the fair value hierarchy into which the fair value measurement is categorised.

Financial assets at fair value through profit or loss at 31 March 2018	Level 1	Level 2	Level 3	Total
	£'000	£'000	£'000	£'000
Equity investments	932,570	31,323	-	963,893
	932,570	31,323	-	963,893

There have been no transfers during the period between levels 1 and 2 fair value measurements. Transfers into or out of level 3 fair value measurements are disclosed below in the table of level 3 investment movements.

Financial assets at fair value through profit or loss at 31 March 2017	Level 1	Level 2	Level 3	Total
	£'000	£'000	£'000	£'000
Equity investments	903,222	25,152	1,045	929,419
Fixed interest bearing securities	22,967	-	-	22,967
	926,189	25,152	1,045	952,386

Financial assets at fair value through profit or loss at 30 September 2017	Level 1	Level 2	Level 3	Total
	£'000	£'000	£'000	£'000
Equity investments	920,866	29,645	-	950,511
	920,866	29,645	-	950,511

Level 3 financial assets at fair value through profit or loss	At 31 March 2018 Level 3 £'000	At 31 March 2017 Level 3 £'000	At 30 September 2017 Level 3 £'000
Opening fair value of investments	-	-	-
Transfer from level 2 to level 3 investment	-	40,636	40,636
Total losses recognised in the Statement of Comprehensive Income	-	(6,884)	(33,549)
Sales - proceeds	-	(32,707)	(7,087)
Closing fair value of investments	-	1,045	-

Fair value through profit or loss

The inputs used to measure fair value are categorised into different levels of the hierarchy, and each investment is categorised entirely according to the lowest priority level that is significant to the fair value measurement of the relevant asset or liability. The Company's unquoted investments are categorised as level 3 and their fair values are determined in accordance with the International Private Equity and Venture Capital Valuation guidelines and set out in the Annual Report 2017. These include recent market transactions, discounted cash flow analysis and anticipated returns. The transfers from level 2 to 3 in the prior year were the result of the restructuring of an investment becoming segmented between realisable value (level 3) and the investment trading in an inactive market (level 2).

Financial liabilities

The Company's 8¹/₈% Debenture Stock 2023 and unsecured loan notes are measured at amortised cost, with the fair values set out below. Creditors are carried in the Balance Sheet at amortised cost.

	At 31 March 2018		At 31 March 2017		At 30 September 2017
	Book value £'000	Fair value £'000	Book value £'000	Fair value £'000	Book value £'000	Fair value £'000
8¹/₈% Debenture Stock 2023	(14,961)	(19,200)	(14,954)	(19,463)	(14,957)	(19,538)
4.184% Series A Sterling Unsecured Loan Notes 2036	(29,882)	(33,762)	(29,874)	(31,482)	(29,878)	(33,070)
3.249% Series B Euro Unsecured Loan Notes 2036	(26,245)	(27,621)	(25,565)	(26,593)	(26,341)	(27,518)
2.93% Euro Senior Unsecured Loan Notes 2037	(17,418)	(17,683)	-	-	-	-
	(88,506)	(98,266)	(70,393)	(77,538)	(71,176)	(80,126)

Quoted market prices have been used to determine the fair value of the Company's Debenture Stock. As there is no publicly available price for the Company's Loan Notes, their fair market value has been derived by calculating the relative premium (or discount) of the loan notes versus the publicly available market price of the reference market instrument, discounted cash flows and exchange rates.

8. Related parties and transactions with the Investment Manager

The Company paid management fees to Asset Value Investors Limited during the period amounting to £3,216,000 (six months to 31 March 2017: £3,460,000; year ended 30 September 2017: £6,188,000). At the half-year end, the following amounts were outstanding in respect of management fees: £nil (31 March 2017: £nil; 30 September 2017: £nil).

Fees paid to Directors for the six months ended 31 March 2018 amounted to £73,000 (six months to 31 March 2017: £67,000; year ended 30 September 2017: £144,000).

Strone Macpherson, who served as the Company's Chairman until 20 December 2017, was at that time, a trustee of The King's Fund who were paid £5,000 for use of facilities for the purpose of holding the Company's Annual General Meeting.

PRINCIPAL RISKS AND UNCERTAINTIES

The principal risks facing the Company are substantially unchanged since the date of the Annual Report 2017 and continue to be as set out on pages 10 and 11 of that report.

Risks faced by the Company include, but are not limited to, investment risk, portfolio diversification, gearing, discount, market risk, market price volatility, currency, liquidity risk, interest rate and credit and counterparty risk. Details of the Company's management of these risks and exposure to them are set out in the Annual Report 2017.

DIRECTORS' RESPONSIBILITY STATEMENT

The Directors confirm that to the best of their knowledge:

• the condensed set of financial statements has been prepared in accordance with International Accounting Standard 34, Interim Financial Reporting as adopted by the EU; and

• this Half Year Report includes a fair review of the information required by:

a) DTR 4.2.7R of the Disclosure Guidance and Transparency Rules, being an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed set of financial statements; and a description of the principal risks and uncertainties for the remaining six months of the year; and

b) DTR 4.2.8R of the Disclosure Guidance and Transparency Rules, being related party transactions that have taken place in the first six months of the current financial year and that have materially affected the financial position or performance of the Company during that period; and any changes in the related party transactions described in the last Annual Report that could do so.

This Half Year Report was approved by the Board of Directors on 30 May 2018 and the above responsibility statement was signed on its behalf by Susan Noble, Chairman.

Susan Noble

Chairman

30 May 2018

GLOSSARY

Alternative Performance Measure ('APM')

An APM is a numerical measure of the Company's current, historical or future financial performance, financial position or cash flows, other than a financial measure defined or specified in the applicable financial framework.

Discount/Premium

If the share price is lower than the NAV per share it is said to be trading at a discount. The size of the discount is calculated by subtracting the share price from the NAV per share and is usually expressed as a percentage of the NAV per share. If the share price is higher than the NAV per share, this situation is called a premium.

The discount and performance is calculated in accordance with guidelines issued by the AIC. The discount is calculated using the net asset values per share inclusive of accrued income with debt at market value.

Gearing

Gearing refers to the ratio of the Company's debt to its equity capital. The Company may borrow money to invest in additional investments for its portfolio. If the Company's assets grow, the shareholders' assets grow proportionately more because the debt remains the same. But if the value of the Company's assets falls, the situation is reversed. Gearing can therefore enhance performance in rising markets but can adversely impact performance in falling markets.

The gearing of 9.84% represents borrowings of £88,506,000 expressed as a percentage of shareholders' funds of £899,519,000.

The gearing reduced by cash and other cash equivalents is 7.51%.

As at 31 March 2018, the values of Debenture Stock and Loan Notes were:

	Debenture 2023 £'000	GBP Loan 2036 £'000	EUR Loan 2036 £'000	EUR Loan 2037 £'000	Total £'000
Value of issue	15,000	30,000	22,962	17,526	85,488
Unamortised issue costs	(39)	(118)	(90)	(139)	(386)
Exchange	-	-	3,373	31	3,404
Amortised book cost	14,961	29,882	26,245	17,418	88,506
Market value	19,200	33,762	27,621	17,683	98,266
Redemption value	25,176	41,438	36,747	23,906	127,267

The values of the Loan Notes are calculated using net present values of future cash-flows, the yields taking account of the market spread and exchange rates. The redemption value includes the penalty payable on early redemption. The Debenture is valued from the current listing on the stock exchange and redemption value according to the Trust Deed.

Net Asset Value ('NAV')

The NAV is shareholders' funds expressed as an amount per individual share. Shareholders' funds are the total value of all of the Company's assets, at their current market value, having deducted all liabilities and prior charges at their par value, or at their asset value as appropriate. The total NAV per share is calculated by dividing the NAV by the number of Ordinary Shares in issue excluding Treasury Shares.

Ongoing Charges Ratio

As recommended by the AIC in its guidance, ongoing charges are the Company's annualised expenses of £8,048,000 (excluding finance costs and certain non-recurring items) expressed as a percentage of the average monthly net assets of £930,219,000 of the Company during the year.

Shares bought back and held in treasury

The Company may repurchase its own shares and shares repurchased may either be cancelled immediately or held in treasury. Shares repurchased, whether cancelled or held in treasury, do not qualify to receive dividends. Share repurchases may increase earnings per share. Further, to the extent that shares are repurchased at a price below the prevailing net asset value per share, this will enhance the net asset value per share for remaining shareholders.

Total Return - NAV and Share Price Returns

The combined effect of any dividends paid, together with the rise or fall in the share price or NAV. Total return statistics enable the investor to make performance comparisons between investment trusts with different dividend policies. Any dividends received by a shareholder are assumed to have been reinvested in either additional shares in the Company or in the assets of the Company at the prevailing NAV, in either case at the time that the shares begin to trade ex-dividend.

INDEPENDENT REVIEW REPORT TO BRITISH EMPIRE TRUST PLC

Conclusion

We have been engaged by the Company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 31 March 2018 which comprises the Statement of Comprehensive Income, Statement of Changes in Equity, Balance Sheet, Statement of Cash Flows and the related explanatory notes.

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 31 March 2018 is not prepared, in all material respects, in accordance with IAS 34, Interim Financial Reporting as adopted by the EU and the Disclosure Guidance and Transparency Rules ('the DTR') of the UK's Financial Conduct Authority ('the UK FCA').

Scope of Review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410 Review of Interim Financial Information Performed by the Independent Auditor of the Entity issued by the Auditing Practices Board for use in the UK. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. We read the other information contained in the half-yearly financial report and consider whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Directors' Responsibilities

The half-yearly financial report is the responsibility of, and has been approved by, the Directors. The Directors are responsible for preparing the half-yearly financial report in accordance with the DTR of the UK FCA.

The annual financial statements of the Company are prepared in accordance with International Financial Reporting Standards as adopted by the EU. The Directors are responsible for preparing the condensed set of financial statements included in the half-yearly financial report in accordance with IAS 34 as adopted by the EU.

Our Responsibility

Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.

The Purpose of Our Review Work and To Whom We Owe Our Responsibilities

This report is made solely to the Company in accordance with the terms of our engagement to assist the Company in meeting the requirements of the DTR of the UK FCA. Our review has been undertaken so that we might state to the Company those matters we are required to state to it in this report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company for our review work, for this report, or for the conclusions we have reached.

Philip Merchant

for and on behalf of KPMG LLP

Chartered Accountants

319 St Vincent Street

Glasgow

G2 5AS

30 May 2018

SHAREHOLDER INFORMATION

Dividends

Shareholders who wish to have dividends paid directly into a bank account rather than by cheque to their registered address can complete a mandate form for the purpose. Mandate forms may be obtained from Equiniti Limited, Aspect House, Spencer Road, Lancing, West Sussex BN99 6DA on request or downloaded from Equiniti's website www.shareview.co.uk. The Company operates the BACS system for the payment of dividends. Where dividends are paid directly into shareholders' bank accounts, dividend tax vouchers are sent to shareholders' registered addresses.

Share Prices

The Company's Ordinary Shares are listed on the London Stock Exchange under 'Investment Trusts'. Prices are given daily in The Financial Times, The Times, The Daily Telegraph, The Scotsman and The Evening Standard.

Change of Address

Communications with shareholders are mailed to the last address held on the share register. Any change or amendment should be notified to Equiniti Limited at the address given above, under the signature of the registered holder.

Daily Net Asset Value

The net asset value of the Company's shares can be obtained by contacting Customer Services on 020 7659 4800 or via the website: www.british-empire.co.uk.