Final Results

British & American Investment Trust PLC British & American Investment Trust PLC Preliminary Announcement for the year ended 31 December 2004 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 29 April 2005 Financial Highlights For the year ended 31 December 2004 2004 2003 Revenue Capital Total Revenue Capital Total £000 £000 £000 £000 £000 £000 Return before taxation 1,487 3,946 5,433 1,653 4,458 6,111 __________ __________ __________ __________ __________ __________ Earnings per £1 ordinary share - basic 4.33p 15.78p 20.11p 5.18p 17.83p 23.01p __________ __________ __________ __________ __________ __________ Earnings per £1 ordinary share - diluted 4.09p 11.28p 15.37p 4.70p 12.74p 17.44p __________ _________ __________ __________ _________ __________ Net asset value 36,972 33,244 __________ __________ Net assets per ordinary share - deducting preference shares at par 108p 93p __________ __________ - diluted 106p 95p __________ __________ Diluted net asset value per 108p ordinary share at 22 April 2005 - unaudited (net of recommended final ordinary dividend of 3.1p per share and preference dividend of 1.75p per share). __________ Chairman's Statement Following our adoption last year of the industry's current corporate governance standards, Jonathan Woolf stood down as Chairman to concentrate on his role of Managing Director and I was appointed. I am therefore pleased to report for the first time as Chairman our results for the year ended 31 December 2004. The return on the revenue account before tax amounted to £1.5 million (2003: £1.7 million). Gross income amounted to £1.9 million (2003: £2.0 million), of which £1.6 million (2003: £1.8 million) represented income from investments and £0.3 million (2003: £0.2 million) film, property and other income. The small decline in income was primarily accounted for by the reduction in dividend from Prudential plc, our second largest investment. Total return before tax, including realised and unrealised capital appreciation, amounted to £5.4 million (2003: £6.1 million). The return on the revenue account per ordinary share was 4.3p (2003: 5.2p) on an undiluted basis and 4.1p (2003: 4.7p) on a diluted basis. Group net assets were £37.0 million (2003: £33.2 million), an increase of 11.2 percent. This compares to an increase over the same period of 7.5 percent in the FTSE 100 share index and 9.2 percent in the All Share index. The net asset value per ordinary share increased to 106p (2003: 95p) on a diluted basis. Deducting prior charges at par, the net asset value per ordinary share increased to 108p (2003: 93p). We are pleased to recommend a final dividend of 3.1p per ordinary share. Together with the interim dividend this makes a total payment for the year of 5.2p (2003: 5.0p) per Ordinary share, representing an increase of 4.0 percent over the previous year's dividend. 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 the last quarter of 2004, we became a member of the Association of Investment Trust Companies ("AITC") and I am pleased to report that since joining, the company has consistently been rated in the top quartile of its investment trust sector, UK Income and Growth, by total return. I can also report that since the beginning of 2005, the company's shares, which have historically traded at a discount range of between 15 and 25 percent, have traded at the narrower discount of approximately 10 percent and below. In addition, in February of this year, our shares traded at above 100p for the first time since 2001. I believe that the recent share price performance more appropriately reflects the investment potential of an investment trust which has outperformed its benchmark, the UK All Share index, over a period of 10 years while at the same time paying dividends substantially in excess of the benchmark yield. As a minor housekeeping measure, we are proposing a slight amendment to the wording of our investment policy at this year's AGM to take into account the modest growth in our investments in US stocks, as noted in the Chairman's statement at the interim stage. Shareholders will also note some change in the presentation of our accounts this year, particularly in relation to the reporting of corporate governance issues, as a result of the adoption of new standards on corporate governance and also the newly introduced International Financial Reporting Standards. We will be adopting these latter fully commencing from the 2005 Interim Report but it is not expected that these measures will have any substantial effect on the accounting procedures or presentation of our accounts While, we look forward to another encouraging year in which asset values will hopefully consolidate the recovery seen in the last year from the multi-year declines experienced since 2000, the market has shown signs of weakness since the first quarter and increased levels of volatility. As at 22 April 2005, group net assets had increased to £37.8 million (net of the recommended final ordinary dividend, equivalent to 3.1p per ordinary share, and preference dividend, payable in June), an increase of 2.3 percent since the beginning of the calendar year. This is equivalent to 111 pence per share (prior charges deducted at par) and 108 pence per share on a diluted basis. Over the same period the FTSE 100 increased 0.7 percent and the All Share Index increased 0.9 percent. Anthony Townsend 29 April 2005 Managing Director's report As reported at the interim stage, UK equity markets moved in a narrow range in the first half of 2004 and finished the first half relatively unchanged. Markets firmed during the third quarter, following a lead from the USA, commencing a period of sustained growth through to the end of the year. During this period, coinciding with the conclusion of the US presidential elections, the leading US indices rose by almost 10 percent and in the UK, the FTSE 100 index by over 10 percent and the FTSE All Share by over 12 percent. While these gains were broadly based across all sectors, hi-tech stocks in particular benefited from sustained buying interest as sentiment towards these sectors recovered from the multi- year bear market following the severe downturn in 2000. Growth stocks generally were favoured as the perception took hold that continued growth in the US economy was achievable absent external shocks to the system. As already noted, indices in the UK finished the year comfortably in positive territory by which time the FTSE had recovered approximately 30 percent of the decline experienced since the sustained downtrend commencing in 2000. Our portfolio outperformed the rise in leading UK stock prices over the year and exceeded the even greater recovery in the All Share index, as noted above. At the same time, we have been able to maintain our high level of income return to ordinary shareholders through dividend distribution. Dividends, excluding special dividends, have increased each year since 1995 and ordinary shareholders have consistently received distributions substantially in excess of general market yields over many years. Over the last 10 years, our total return (including special dividends) has averaged 77 percent against 60 percent for the All Share index (dividends reinvested). In the first quarter of 2005, growth in the UK and US equity markets extended further reaching 2 year highs in February. Significant gains in oil and commodity stocks particularly drove this upward momentum on the back of strong commodity prices. This firm sentiment was also evident in the revival of the new issue market, particularly AIM in the UK, again being strongly focused on the oil and commodities sectors. By March, however, the upward trend had cooled and consolidation was seen as the beginnings of inflationary concerns began to be mooted in the USA following the ninth monthly increase in US dollar rates and an expectation that the pace of monetary tightening might quicken in the months ahead. Against this background, we will continue to pursue our generalist investment approach, remaining invested in leading stocks with good yield. We also intend to continue to build our exposure to targeted US stocks where good long term value is perceived. The outlook for the current year remains promising with growth in the UK and the USA underpinned by relatively benign interest and inflation rate conditions. Demand within these economies is relatively well balanced against supply, with the exception of oil prices which are subject to political and other external forces. With effect from January of this year, we will introduce a change in our accounting policy with respect to the allocation of expenses. As recommended by the Statement of Recommended Practice for Investment Trusts, our expenses will now be split equally between capital and revenue accounts to reflect more fairly the application of these expenses in the running of the company. Jonathan Woolf Consolidated statement of total return (incorporating the revenue account) For the year ended 31 December 2004 2004 2003 Revenue Capital Total Revenue Capital Total £000 £000 £000 £000 £000 £000 Income Dividends 1,407 - 1,407 1,648 - 1,648 Interest 168 - 168 122 - 122 Film revenues 197 - 197 154 - 154 Property units 102 - 102 102 - 102 Other income (10) - (10) (13) - (13) Realised gains on investments - 457 457 - 508 508 Increase in unrealised appreciation - 3,489 3,489 - 3,950 3,950 ________ ________ ________ ________ ________ ________ 1,864 3,946 5,810 2,013 4,458 6,471 Administrative expenses (377) - (377) (330) - (330) ________ ________ ________ ________ ________ ________ Net return before finance costs and 1,487 3,946 5,433 1,683 4,458 6,141 taxation Interest payable and similar charges - - - (30) - (30) ________ ________ ________ ________ ________ ________ Return on ordinary activities before tax for the financial year 1,487 3,946 5,433 1,653 4,458 6,111 Tax on ordinary activities (55) - (55) (9) - (9) ________ ________ ________ ________ ________ ________ Return on ordinary activities after tax for the financial year 1,432 3,946 5,378 1,644 4,458 6,102 Dividends and other appropriations in respect of preference shares (350) - (350) (350) - (350) ________ ________ ________ ________ ________ ________ Return attributable to ordinary shareholders 1,082 3,946 5,028 1,294 4,458 5,752 Dividends in respect of ordinary shares (1,300) - (1,300) (1,250) - (1,250) ________ ________ ________ ________ ________ ________ Transfer (from)/to reserves (218) 3,946 3,728 44 4,458 4,502 ________ ________ ________ ________ ________ ________ Return per ordinary share Basic 4.33p 15.78p 20.11p 5.18p 17.83p 23.01p ________ ________ ________ ________ ________ ________ Diluted 4.09p 11.28p 15.37p 4.70p 12.74p 17.44p ________ ________ ________ ________ ________ ________ The revenue column of this statement is the consolidated profit and loss account of the group. All revenue and capital items in the above statement for the year ended 31 December 2004 and the year ended 31 December 2003 derive from continuing operations. No operations were acquired in the year. Consolidated Balance Sheet For the year ended 31 December 2004 Group 2004 2003 £000 £000 Fixed assets Investments 35,663 32,482 Current assets Debtors 187 162 Cash at bank and in hand 2,227 1,581 __________ __________ 2,414 1,743 Creditors: amounts falling due within one year (1,105) (981) __________ __________ Net current assets 1,309 762 __________ __________ Total assets less current liabilities 36,972 33,244 __________ __________ Net assets 36,972 33,244 __________ __________ Capital and reserves Called-up share capital 35,000 35,000 Other reserves - Capital reserve - realised 13,114 14,824 - Capital reserve - unrealised (12,740) (18,396) Revenue reserve 1,598 1,816 __________ __________ Total shareholders' funds 36,972 33,244 __________ __________ Total shareholders' funds attributable to: Equity shareholders 26,972 23,244 Preference shareholders 10,000 10,000 __________ __________ Net asset value per ordinary share: - Basic 108p 93p - Diluted 106p 95p Consolidated cash flow statement For the year ended 31 December 2004 2004 2004 2003 2003 £000 £000 £000 £000 Net cash inflow from operating activities 1,458 1,726 Servicing of finance Interest paid - (30) Preference dividends paid (350) (350) __________ __________ Net cash outflow from servicing of finance (350) (380) Taxation UK tax paid - (267) Financial investment Purchases of investments (5,952) (4,605) Sales of investments 6,765 4,563 __________ __________ Net cash inflow/(outflow) from capital 813 (42) expenditure and financial investment Equity dividends paid (1,275) (1,250) __________ __________ Cash inflow/(outflow) before management of liquid resources and financing 646 (213) Financing - - __________ __________ Increase/(decrease) in cash 646 (213) __________ __________ Reconciliation of net cash flow to movement in net funds Increase/(decrease) in cash 646 (213) __________ __________ Change in net funds 646 (213) Net funds at 1 January 1,581 1,794 __________ __________ Net funds at 31 December 2,227 1,581 __________ __________ 1 Accounting policies All figures stated are based on the financial statements prepared under the historical cost convention as modified by the revaluation of investments and in accordance with applicable United Kingdom law and accounting standards. The accounting policies adopted are consistent with those in the most recently published set of annual financial statements. 2 Return per ordinary share 2004 2003 Revenue Capital Total Revenue Capital Total Group: Basic 4.33p 15.78p 20.11p 5.18p 17.83p 23.01p __________ __________ __________ __________ __________ __________ Diluted 4.09p 11.28p 15.37p 4.70p 12.74p 17.44p __________ __________ __________ __________ __________ __________ Basic revenue return per ordinary share is based on the net revenue on ordinary activities after taxation and after deduction of dividends in respect of preference shares of £1,082,000 (2003 - £1,294,000) and on 25 million (2003: 25 million) ordinary shares in issue. The diluted revenue return is based on the net revenue on ordinary activities after taxation of £1,432,000 (2003 - £1,644,000) and on 35 million (2003 - 35 million) shares in issue. Basic capital return per ordinary share is based on capital gains/(losses), both realised and unrealised, for the financial year of £3,946,000 (2003: capital gains - £4,458,000) and on 25 million (2003: 25 million) ordinary shares in issue. The diluted capital return per share is based on the same aggregate return but on 35 million (2003 - 35 million) shares in issue. 3 Dividends 2004 2003 £000 £000 Dividends on ordinary shares: Interim paid of 2.1p per £1 share (2003: 2.0p per share) 525 500 Final proposed of 3.1p per £1 share (2003: 3.0p per share) 775 750 __________ __________ 1,300 1,250 __________ __________ Dividends on 3.5% cumulative convertible preference shares: 1.75p paid 175 175 1.75p payable - proposed 175 175 __________ __________ 350 350 __________ __________ The dividends on ordinary shares are based on 25 million (2003 - 25 million) ordinary £1 shares in the year to 31 December 2004. Dividends on preference shares are based on 10 million (2003 - 10 million) non-voting 3.5% cumulative convertible preference shares of £1 in the year to 31 December 2004. The holders of the 3.5% cumulative convertible preference shares will be paid a dividend of £175,000 being 1.75p per share. The payment will be made on the same date as the dividend to the ordinary shareholders. 4 Diluted net asset value per ordinary £1 share The diluted net asset value per £1 ordinary share is based on net assets of £36,972,000 (2003 - £33,244,000) and 35 million shares in issue. 5 Reconciliation of operating revenue to net cash inflow from operating activities Group 2004 2003 £000 £000 Net revenue before finance costs and taxation 1,487 1,683 Scrip dividends (4) (3) Increase/(decrease) in other creditors 19 (25) (Increase)/decrease in debtors (40) 74 Tax on unfranked investment income - - Tax on film revenue (4) (3) __________ __________ Net cash inflow from operating activities 1,458 1,726 __________ __________ 6 Analysis of net funds Balance Balance 1 January 31 December 2004 Cash flow 2004 £000 £000 £000 Cash at bank 839 159 998 Liquid resources - cash at brokers 742 487 1,229 __________ __________ __________ 1,581 646 2,227 __________ __________ __________ Announcement based on draft accounts The financial information set out in the announcement does not constitute the company's statutory accounts for the year ended 31 December 2004 or 2003. The financial information for the year ended 31 December 2003 is derived from the statutory accounts for that year which have been delivered to the Registrar of Companies. The auditors' report on those accounts was unqualified and did not contain any statement under section 237(2) or (3) Companies Act 1985. The statutory accounts for the year ended 31 December 2004 will be finalised on the basis of the financial information presented by the directors in this preliminary announcement and will be delivered to the Registrar of Companies following the company's annual general meeting. British & American Investment Trust Plc

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