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Wednesday 29 April, 2015

British & American

Annual Financial Report


British & American Investment Trust PLC
                                       
                                       
Annual Financial Report                
for the year ended 31 December 2014    
                                       
Registered number: 00433137            
                                       
                                       
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 2015                     
                                                                                     

This is the Annual Financial Report as required to be published under DTR 4 of
the UKLA Listing Rules.

 

Financial Highlights

For the year ended 31 December 2014

                                                 2014                     2013        
                                                                    (restated)        
                                                                                      
                        Revenue    Capital      Total    Revenue    Capital      Total
                         return     return                return     return           
                                                                                      
                           £000       £000       £000       £000       £000       £000
                                                                                      
Profit/(loss)             2,416                 1,703      2,696    (6,222)    (3,526)
before tax -                    (713)                                                 
realised                                                                              
                                                                                      
(Loss)/profit before          -    (3,226)    (3,226)          -     11,018     11,018
tax - unrealised                                                                      
                                                                                      
                     __________ __________ __________ __________ __________ __________
                                                                                      
(Loss)/profit before      2,416    (3,939)    (1,523)      2,696      4,796      7,492
tax - total                                                                           
                                                                                      
                     __________ __________ __________ __________ __________ __________
                                                                                      
Earnings per £1                                                                       
ordinary share -          8.48p   (15.76)p    (7.28)p      9.57p     19.18p     28.75p
basic                                                                                 
                                                                                      
                     __________ __________ __________ __________ __________ __________
                                                                                      
Earnings per £1                                                                       
ordinary share -          7.06p   (11.25)p    (4.19)p      7.83p     13.70p     21.53p
diluted                                                                               
                                                                                      
                     __________  _________ __________ __________  _________ __________
                                                                                      
Net assets                                                                      30,895
                                             27,126                                   
                                                                                      
                                           __________                       __________
                                                                                      
Net assets per                                                                        
ordinary share                                                                        
                                                                                      
- deducting                                                                           
preference                                        69p                              84p
   shares at par                                                                      
                                                                                      
                                           __________                       __________
                                                                                      
- diluted                                         78p                              88p
                                                                                      
                                           __________                       __________
                                                                                      
                                                                                      
Diluted net asset                                                                     
value per ordinary                                                                    
share at 23 April                                                                     
2015                                              98p                                 
                                                                                      
                                           __________                                 
                                                                                      
Dividends declared                                                                    
or proposed for the                                                                   
period                                                                                
                                                                                      
per ordinary share                                                                    
                                                                                      
- interim paid                                   2.7p                             2.7p
                                                                                      
- final proposed                                 5.3p                             5.1p
                                                                                      
per preference share                             3.5p                             3.5p
                                                                                      
                                                                                      
                                                                                      
Basic net assets and earnings per share are calculated using a value of par for       
the preference shares.                                                                
                                                                                      
Consequently, when the net asset value attributed to ordinary shares remains          
below par the diluted net asset value will show a higher value than the basic         
net asset value.                                                                      
                                                                                      

 


Chairman's Statement

I report our results for the year ended 31 December 2014. Shareholders should
note that from this year the group's operations are being reported on as single
company accounts under IFRS (International Financial Reporting Standards) and
not as previously on a consolidated basis. This follows the introduction of the
new reporting standard IFRS 10 which changes the accounting treatment of
subsidiaries of investment companies. The implications of this, which are
unhelpful for an investment trust group such as ourselves, are explained and
commented on in more detail below and throughout these accounts. Most
significantly, under the new reporting standard these accounts now only show
income received in the parent company and not for the group as a whole, as
previously. This change has also required us to restate the prior year results
to allow a comparable presentation.

Revenue

The return on the revenue account before tax amounted to £2.4 million (2013:  £
2.7 million), a decrease of 10 percent.  As reported at the interim stage, this
reflected the lower level of external dividends sought during the period and
their replacement by gains registered within the subsidiary companies and
distributed within the group. Gross revenues totalled £2.9 million (2013:  £3.0
million). In the previous presentation of our accounts, we were able to show
the split in our income between portfolio investments and film, property and
other income as received in our subsidiaries but this is unfortunately no
longer the case under the new reporting standard, as further explained in the
Managing Director's report below.  However, because of the importance we attach
to these alternative sources of income we show them separately in note 2 to the
accounts. This shows that film income of £165,000 (2013:  £139,000) and
property unit trust income of £24,000 (2013: £22,000) was received in our
subsidiary companies. It should be noted for the sake of clarity that this
income is not included within the revenue figures noted above.

The total return before tax amounted to a loss of £1.5 million (2013:  £7.5
million gain), which comprised net revenue of £2.4 million, a realised loss of
£0.5 million and an unrealised loss of £3.2 million. The revenue return per
ordinary share was 8.5p (2013:  9.6p) on an undiluted basis and 7.1p (2013: 
7.8p) on a diluted basis.

Net Assets and Performance

Net assets at the year end were £27.1 million (2013:  £30.9 million), a
decrease of 12.2 percent. This compares to decreases in the FTSE 100 and All
Share indices of 2.7 percent and 2.1 percent, respectively, over the period. On
a total return basis, after adding back dividends paid during the year, our net
assets decreased by 4.8 percent compared to a total return on the two indices
of between approximately 0.5 percent and 1.0 percent. It is worth noting that
over a period of two years our portfolio achieved a total return of 34 percent,
compared to a total return of 21 percent by our benchmark indices.

This outturn has significantly narrowed the underperformance registered at the
half year by approximately 7 percentage points. This is due in part to a
recovery in the second half in the sterling value of our largest US investment,
Geron Corporation, following a strengthening in the value of the US dollar by 9
percent.

Over the year, the value of our investment in Geron has varied significantly in
response to a number of very important corporate events which have taken place.
As previously reported, the value of this investment had increased
substantially at the end of 2013 following the release in the final quarter of
that year of very favourable clinical oncology trial results. However, in March
of 2014, Geron's share price fell significantly following the imposition of a
clinical hold on these trials by the US Federal Department of Health (FDA)
pending clarification of certain observed abnormalities. Soon thereafter, in
June 2014, this hold was partially lifted (and fully lifted in October 2014).
In July 2014, the spin off to shareholders of Geron's important but mothballed
regenerative medicine business took place providing additional value to
investors as this business was then re-activated and separately quoted with its
true value and potential better recognised. Finally, in November 2014, Geron
entered into a transformational and very advantageous partnership with Johnson
& Johnson, the world's largest pharmaceutical company, to develop its oncology
platform for which it will receive milestone payments of almost $1 billion and
a share of future royalties.

This has therefore been a momentous year for Geron and over that time its share
price has moved dramatically, increasing at one point by 250 percent when the
Johnson & Johnson partnership was announced, although over the year as a whole
the share price has not changed significantly (in US dollar terms). A more
detailed account of these developments is given in the Managing director's
report below together with views on prospects going forward post the
partnership with Johnson & Johnson.

More generally, global equity markets remained firm in 2014. As reported at the
interim stage, the UK market was steady, trading within a tight range, despite
the development of growing political and financial uncertainties worldwide.
Equity markets had found continuing support from the high levels of liquidity
being provided by central banks in the developed economies. 

In the second half, however, increasing levels of market volatility were shown
as geopolitical concerns began to be taken more seriously and the expectation
of the first upward movement in interest rates in the USA and UK would soon
occur after an unprecedentedly long period of unchanged and low rates. In the
fourth quarter, the US and UK equity markets dipped by 10 percent only to
recover swiftly to opening year levels as expectations of the proximity of
interest rate rises then receded against a background of slowing economic
growth in the USA arising out of the significantly stronger US dollar.  Thus,
the pattern of markets reacting primarily to expectations of changes in
interest rates continued unabated in 2014.

The net asset value per ordinary share decreased to 78p (2013:  88p) on a
diluted basis. Deducting prior charges at par, the net asset value per ordinary
share decreased to 69p (2013: 84p).

Dividend

We are pleased to recommend an increased final dividend of 5.3p per ordinary
share, which together with the interim dividend makes a total payment for the
year of 8.0p (2013:  7.8p) per ordinary share. This represents an increase of
2.6 percent over the previous year's total dividend and a yield of 9.6 percent
based on the share price of 83p at the end of the year. The final dividend will
be payable on 26 June 2015 to shareholders on the register at 15 May 2015. A
dividend of 1.75p will be paid to preference shareholders resulting in a total
payment for the year of 3.5p per share.

Outlook

Equity markets in the UK and USA grew strongly in the first quarter of 2015 by
6 percent and in March exceeded the all time highs registered before the
economic crash in 2008. The vast amounts of liquidity pumped into the markets
by the central banks of the USA, UK and recently the Eurozone through their
quantitative easing programmes have pushed up valuations in both equity and
other investment markets as these newly created funds seek a home against a
background of historically low and in some cases negative official interest
rates.

It has to be asked how long this situation can continue as valuations start to
be stretched and investment bubbles continue to inflate. In these conditions,
any unexpected or even expected shock or change such as a rise in interest
rates could lead to a sharp reversal in markets.  As noted at the interim
stage, we will measure any new investment decisions against the shorter term
risks which the current situation poses. Given, however, that the market has
continued to rise significantly despite growing uncertainties in the UK arising
out of the forthcoming general election and more generally in the US, the
Eurozone and globally, we have started to reduce our exposure to the market and
sterling by selling down some of our larger and previously core investment
holdings in the UK.

As at 23 April 2015, our net assets had increased to £34.3 million, an increase
of 26.6 percent since the beginning of the calendar year. This increase
reflects a rise in the value of our US investments. This is equivalent to 97
pence per share (prior charges deducted at par) and 98 pence per share on a
diluted basis. Over the same period the FTSE 100 increased 7.4 percent and the
All Share Index increased 7.8 percent.

Anthony Townsend

29 April 2015


Managing Director's report

2014 saw the occurrence of a number of notable events both in markets generally
and in relation to our own portfolio.

As reported at the interim stage, most leading economies, including the UK,
finally returned to their pre-recession levels.  However, the return to growth
had been long and anaemic and economies were still very reliant on the vast
levels of liquidity provided by central banks through quantitative easing
programmes and the accompanying ultra low interest rates to maintain momentum.
By the autumn of 2014, the Federal Reserve had completed its programme of
quantitative easing but the softness of the recovery there combined with a
strong dollar and continuing weakness globally prompted indications that it was
in no hurry to commence raising rates at any time in the near future.

Developed countries sought to boost economic growth through both domestic
demand and exports through the use of ultra low and in some cases negative
official interest rates as a tool to achieve competitive currency devaluation
and, in the case of countries such as Switzerland, Germany, Denmark and Norway,
as a countermeasure against safe haven deposit inflows.

Oil prices fell by almost 50 percent over the year in reaction to muted global
demand, the failure of OPEC to control supply and increasing production in the
US and Canada coming on stream from fracking and tar sands sources. And
although this began to stimulate some activity in retail demand in the US, the
deflationary effect both in the US and globally only served to support central
banks' determination to continue their liquidity provision operations,
culminating in early 2015 with the European Central Bank finally introducing
its own programme of quantitative easing in response to deflationary pressures
in the Eurozone and continuing economic weakness arising out of debt-related
austerity programmes.

This combination of circumstances gave rise to a number of effects, most
significantly the boom in equity prices which by the turn of the year had
reached all time highs in the USA having more than doubled there since 2008 and
almost doubled in the UK as investors sought a home for the vast amount of
liquidity being created by the central banks in the absence of any meaningful
increases in retail bank domestic lending operations. However, because of
investors' growing concerns over the many instances of global financial and
geopolitical instability, investors at the same time also increased their
exposure to the sovereign bonds of safe haven issuers such as the USA,
Switzerland and Germany to the extent that short term yields became negative
and long term yields remained at all time lows of below 1 percent.

In our portfolio, the underperformance reported at the interim stage due to the
extreme volatility noted above in our major US investment, Geron Corporation,
was reduced as a result of an improvement in the second half in the sterling
value of this investment.  During the year, the value of this investment both
fell and rose over 50 percent for the reasons discussed below, closing the year
approximately 30 percent below the year opening price in dollar terms.
Excluding this investment, the portfolio achieved a positive return of
approximately 2.8 percent, outperforming the bench mark indices.  Over a period
of two years and including this investment our portfolio achieved a total
return of 34 percent, compared to a total return of 21 percent by our benchmark
indices.


 

GeronCorporation

As mentioned above, Geron experienced a number of very notable events over the
year which both boosted and decreased significantly the value of this
investment over the period:

The previously reported success of its clinical trial results in the treatment
of Myelofibrosis, a blood cancer, using its proprietary drug Imetelstat, by its
investigators at the Mayo Clinic in the USA had boosted its share price by 250
percent in late 2013 only for it to fall by over 50 percent in March 2014
following the imposition of a clinical hold on these trials by the US Federal
Department of Health (FDA) pending clarification of certain observed low grade
liver function abnormalities.  This hold was partially lifted in June 2014 and
then fully lifted in October 2014. Despite this, however, Geron's share price
did not return to the higher levels of over $5 prior to the imposition of the
clinical hold but remained at approximately 50 percent below this level.  

 In July 2014, Geron spun off its regenerative medicine (stem cell) business to
shareholders in a new vehicle called Asterias Biotherapeutics.  This important
business which had previously represented a major part of Geron's operations
and in which Geron was the acknowledged world leader had been inexplicably
discontinued by Geron a year earlier. After its distribution to shareholders,
including ourselves, the business was reactivated by new management, refinanced
and separately listed.  Since when, the market value of Asterias and
accompanying options has more than doubled, thus creating additional value for
Geron shareholders.  We are most grateful to our own major shareholder, Romulus
Films, who were instrumental in procuring the demerger and its financing.

In November 2014, Geron announced a transformational partnership with Johnson &
Johnson, the world's largest pharmaceutical company, to develop its Imetelstat
oncology platform for which it will receive milestone payments of almost $1
billion and a share of future royalties. This is a very advantageous
transaction for Geron as it transfers the development of its ground breaking
oncology technology to one of the world's most financially, technically and
operationally strong pharmaceutical companies, thereby eliminating many of the
risks encountered by small biotech companies seeking to bring a major new and
disruptive product to market.   Geron's share price rose by 250 percent on the
announcement of this transaction as the market recognised its benefits;
however, this remains far below the value achieved at the end of 2013 when the
initial clinical trial results were revealed and before the Johnson & Johnson
partnership was announced.  For this reason, we believe that there is scope for
significant value appreciation in Geron and we will remain invested until such
time as the benefits of the Johnson & Johnson partnership begin to be fully
recognised and valued by the market.  We will also maintain our investments in
Asterias Biotherapeutics and its parent Biotime Inc, both of which have
performed well over the last year, as the regenerative medicine business of
these two companies develops further in this increasingly important market over
the coming years.   

 


 

Outlook

 

The persistently low levels of volatility in equity markets during most of 2014
were puzzling given the array of financial, economic and geopolitical
uncertainties which had been getting steadily more acute over the period.

Towards the end of 2014 and into 2015 markets finally recognised these
uncertainties and began reinvesting in safe haven instruments such as developed
country bonds, accepting in some case even negative returns as security against
the perceived risks of deflation, long term stagnation and political
instability. Nevertheless, equity market investment has continued to be
favoured in a bid to find yield, resulting in stretched valuations developing
in these markets.

In the UK, we have the additional uncertainty of a very unpredictable and
potentially politically destabilising general election in May. The prospect of
this has already caused markets to show increased volatility with the FTSE 100
rising and falling up to 5 percent a number of times in March and April.

Such volatility is only likely to persist as the election approaches and when
combined more generally with the record growth seen in most equity markets over
the past seven years despite the growing global economic and geopolitical
uncertainties, we have as a precaution started to reduce our exposure to the
market and sterling by selling down some of our larger and previously core
investment holdings in the UK. We will maintain this cautionary stance for the
foreseeable future until it is clear whether the various risks alluded to above
are mitigated through successful management by central banks and governments of
the difficulties and imbalances currently being experienced by economies,
markets and countries around the world.

International Financial Reporting Standard (IFRS) 10

The introduction in 2014 of the new accounting standard IFRS 10 which affects
the accounting treatment of the subsidiaries of investment companies has
required us to change the presentation of our accounts from consolidated group
accounts to accounts of the parent company only. As a result, we no longer show
all the assets and movements within the parent company and its subsidiaries
grouped together, but instead we are now required to show only the assets and
movements of the parent company plus a fair value investment valuation of the
subsidiaries in the parent, without an account of the operations of those
subsidiaries.

We understand that this change, which we believe is singularly unhelpful for an
investment trust group such as ourselves for the reasons given below, was in
response to representations made by the private capital industry whose typical
structure comprises a group of disparate investment vehicles which they believe
is not susceptible to a consolidation approach.

Because of a very late and substantial amendment introduced in December 2014 by
the International Accounting Standards Board to the precise definitions
contained in IFRS 10, we are advised that this now applies to our structure as
a group of subsidiary investment companies below an authorised investment trust
parent. It is most unfortunate that this late amendment has resulted in our
having to apply two different bases of accounting within the same year (our
2014 interim accounts were prepared on a consolidated basis), but more
importantly we believe that going forward having to present our accounts on the
IFRS and non-consolidated basis is, in our case, very disadvantageous to our
shareholders and potential investors, reducing greatly the level of
transparency within the group and the visibility of our group's investment
performance and potential.

For example, as the individual operations of the subsidiary companies are not
reported upon in this new presentation, the level of film royalties earned by
our film library subsidiary is no longer shown. Nor is the level of property
related income received by another subsidiary shown.  Instead, a fair value
calculation of these assets is made (resulting this year in a write up of the
value of the film library by £795,000 as part of the fair value investment
valuation by the parent company in its subsidiaries). No reporting of the level
or pattern of film or other income in the subsidiaries is made on which
shareholders or potential investors could form a view of the quantum, balance,
valuation and future income potential of these assets and the group as a whole.
Similarly, all other operations of the subsidiary companies whether income or
expenditure in nature (ie dividend or non-dividend income, management expenses
or interest costs) and their investments  are no longer reported upon and
remain obscure.

 We do not believe that this is at all helpful for investors in a listed
investment trust seeking to evaluate and understand the existing value and
future potential of their investment.  For this reason, we have decided to
include in a separate note an account of the film and property revenues
received by the subsidiaries, both of which are important elements in our
group's operations by providing an alternative and steady source of income
which we know is of interest to investors and differentiates our group from
other investment trusts.

Furthermore, we believe that this new presentation of our accounts is likely to
add considerable volatility to the reporting of earnings in the years to come. 
This is because the income of the subsidiaries is no longer reported (as noted
above) and consequently, unless the subsidiaries' income is distributed up to
the parent during the year, our accounts will no longer show total group
income.  In previous years we have both distributed such income and not
distributed it, depending on circumstances such as the availability of
distributable reserves in the various parts of the group, the nature of the
income (whether for example income or capital gain) and varying levels of
expenditure in any one year. Clearly, it is a disadvantage for investors not to
have the visibility of a relatively predictable pattern of group income and by
extension an understanding of the distributable reserves potential within the
group available for future dividend payments.  Income generation and
sustainability, portfolio yield and dividend potential are some of the most
important metrics which investors use to analyse and evaluate investment trusts
and these will be considerably less visible, if measurable at all on a group
basis, under the new reporting format.

It is a great pity that by the introduction of IFRS 10 in an inflexible way the
accounting standards profession has once again failed in our case to address
the realities and requirements of all companies to which it seeks to apply its
rules.

Jonathan Woolf

29 April 2015


Income statement

For the year ended 31 December 2014

                                                 2014              2013        
                                                             (restated)        
                                                                               
                         Revenue    Capital    Total  Revenue  Capital    Total
                          return     return            return   return         
                                                                               
                           £ 000      £ 000    £ 000    £ 000    £ 000    £ 000
                                                                               
Investment income (note    2,871          -    2,871    3,073        -    3,073
2)                                                                             
                                                                               
Holding (losses)/gains                                                         
on investments at fair                                                         
value through profit or                                                        
loss                           -    (3,226)  (3,226)        -   11,018   11,018
                                                                               
Losses on disposal of                                                          
investments at fair            -      (313)    (313)        -  (6,013)  (6,013)
value through profit or                                                        
loss                                                                           
                                                                               
Foreign exchange losses        -      (147)    (147)        -        -        -
                                                                               
Expenses                   (398)      (225)    (623)    (372)    (209)    (581)
                                                                               
                        ________   ________ ________ ________ ________ ________
                                                                               
(Loss)/profit before                (3,911)                                    
finance costs and tax      2,473             (1,438)    2,701    4,796    7,497
                                                                               
Finance costs               (57)       (28)     (85)      (5)        -      (5)
                                                                               
                        ________   ________ ________ ________ ________ ________
                                                                               
(Loss)/profit before       2,416                        2,696                  
tax                                 (3,939)  (1,523)             4,796    7,492
                                                                               
Tax                           54                  54       46        -       46
                                     -                                         
                                                                               
                        ________   ________ ________ ________ ________ ________
                                                                               
(Loss)/profit for the      2,470                        2,742                  
period                              (3,939)  (1,469)             4,796    7,538
                                                                               
                        ________   ________ ________ ________ ________ ________
                                                                               
Earnings per share                                                             
                                                                               
Basic - ordinary shares    8.48p   (15.76)p  (7.28)p    9.57p   19.18p   28.75p
                                                                               
                        ________   ________ ________ ________ ________ ________
                                                                               
Diluted - ordinary         7.06p   (11.25)p  (4.19)p    7.83p   13.70p   21.53p
shares                                                                         
                                                                               
                        ________   ________ ________ ________ ________ ________
                                                                               

 

The company does not have any income or expense that is not included in the
profit for the period. Accordingly, the '(Loss)/profit for the period' is also
the 'Total Comprehensive Income for the period' as defined in IAS 1 (revised)
and no separate Statement of Comprehensive Income has been presented.

The total column of this statement represents the  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 profit and total comprehensive income is attributable to the equity holders
of the company.


Statement of changes in equity

For the year ended 31 December 2014

                                         Share    Capital     Retained    Total   
                                         capital  reserve     earnings         
                                                                               
                                            £ 000       £ 000    £ 000    £ 000
                                                                               
Balance at 31 December 2012 -              35,000    (11,151)    1,758   25,607
restated*                                                                      
                                                                               
(note 6(c))                                                                    
                                                                               
Changes in equity for 2013 -                                                   
restated*                                                                      
                                                                               
Profit for the period                           -                2,742    7,538
                                                  4,796                        
                                                                               
Ordinary dividend paid (note 4)                 -           -  (1,900)  (1,900)
                                                                               
Preference dividend paid (note 4)               -           -    (350)    (350)
                                                                               
                                         ________    ________ ________ ________
                                                                               
Balance at 31 December 2013 -              35,000     (6,355)    2,250   30,895
restated*                                                                      
                                                                               
(note 6(a))                                                                    
                                                                               
Changes in equity for 2014                                                     
                                                                               
(Loss)/profit for the period                    -     (3,939)    2,470  (1,469)
                                                                               
Ordinary dividend paid (note 4)                 -           -  (1,950)  (1,950)
                                                                               
Preference dividend paid (note 4)               -           -    (350)    (350)
                                                                               
                                         ________    ________ ________ ________
                                                                               
Balance at 31 December 2014                35,000    (10,294)    2,420   27,126
                                                                               
                                         ________    ________ ________ ________
                                                                               

 

* restated - see note 6


Registered number: 00433137

Balance Sheet

For the year ended 31 December 2014

                                                    2014        2013        2012       
                                                         (restated*) (restated*)
                                                                                
                                                   £ 000       £ 000       £ 000      
                                                                                
Non-current assets                                                              
                                                                                
Investments - fair value through profit or        27,334      29,559      18,654
loss                                                                            
                                                                                
Subsidiaries - fair value through profit or        6,499       8,338       4,526
loss                                                                            
                                                                                
                                              __________  __________  __________
                                                                                
                                                  33,833      37,897      23,180
Current assets                                                                  
                                                                                
Receivables                                        1,406       1,647       2,943
                                                                                
Derivatives - fair value through profit or                                 2,635
loss                                                  87         395            
                                                                                
Cash and cash equivalents                            250         225         716
                                                                                
                                              __________  __________  __________
                                                                                
                                                   1,743       2,267       6,294
                                                                                
                                              __________  __________  __________
                                                                                
Total assets                                      35,576      40,164      29,474
                                                                                
                                              __________  __________  __________
                                                                                
Current liabilities                                                             
                                                                                
Trade and other payables                           1,414       3,690       1,293
                                                                                
Bank loan                                          2,743       1,448           -
                                                                                
                                              __________  __________  __________
                                                                                
                                                 (4,157)     (5,138)     (1,293)
                                                                                
                                              __________  __________  __________
                                                                                
                                                                                
                                                                                
Total assets less current liabilities             31,419      35,026      28,181
                                                                                
                                              __________  __________  __________
                                                                                
                                                                                
                                                                                
Non - current liabilities                        (4,293)     (4,131)     (2,574)
                                                                                
                                                                                
                                                                                
Net assets                                        27,126      30,895      25,607
                                                                                
                                              __________  __________  __________
                                                                                
Equity attributable to equity holders                                           
                                                                                
Ordinary share capital                            25,000      25,000      25,000
                                                                                
Convertible preference share capital              10,000      10,000      10,000
                                                                                
Capital reserve                                 (10,294)     (6,355)    (11,151)
                                                                                
Retained revenue earnings                          2,420       2,250       1,758
                                                                                
                                              __________  __________  __________
                                                                                
Total equity                                      27,126      30,895      25,607
                                                                                
                                              __________  __________  __________
                                                                                

 

* restated - see note 6

 

Approved: 29 April 2015


Cash flow statement

For the year ended 31 December 2014

                                                   Year ended      Year ended
                                                   2014            2013
                                                                             
                                                   £ 000           £ 000     
                                                                             
CASH FLOWS FROM OPERATING ACTIVITIES                                         
                                                                             
(Loss)/profit before tax                           (1,523)         7,492     
                                                                             
Adjustments for:                                                             
                                                                             
Losses/(profits) on investments                    3,539           (5,005)   
                                                                             
Scrip dividends                                    (25)            (9)       
                                                                             
                                                                         
Income tax deducted at source                      -               (83)   
                                                                             
Proceeds on disposal of investments at fair                                  
value through profit and loss                      5,866           22,129    
                                                                             
Purchases of investments at fair value through                               
profit and loss                                    (4,170)         (22,831)  
                                                                             
Interest paid                                      85              5         
                                                                             
                                                   __________      __________
                                                                             
Operating cash flows before movements in                                     
working capital                                    3,772           1,698     
                                                                             
Increase in receivables                            (784)           (2,031)   
                                                                             
(Decrease)/increase in payables                    (2,277)         428       
                                                                             
                                                   __________      __________
                                                                             
NET CASH FROM OPERATING ACTIVITIES BEFORE                                    
INTEREST                                           711             95
                                                                             
Interest paid                                      (85)            (5)       
                                                                             
                                                   __________      __________
                                                                               
NET CASH FROM OPERATING ACTIVITIES AFTER                                     
INTEREST BEFORE TAXATION                           626             90
                                                                             
Taxation                                           54              46
                                                                             
                                                   __________      __________
                                                                             
NET CASH FROM OPERATING ACTIVITIES                 680             136
                                                                             
CASH FLOWS FROM FINANCING ACTIVITIES                                         
                                                                             
Dividends paid on ordinary shares                  (1,950)         (1,900)
                                                                             
                                                                        
Dividends paid on preference shares                -               (175)  
                                                                             
Bank loan                                          1,295           1,448     
                                                                             
                                                   __________      __________
                                                                             
NET CASH USED IN FINANCING ACTIVITIES              (655)           (627)
                                                                             
                                                   __________      __________
                                                                             
NET INCREASE/(DECREASE) IN CASH AND CASH                                     
EQUIVALENTS                                        25              (491)    
                                                                             
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR                               
                                                   225             716
                                                                             
                                                   __________      __________
                                                                             
CASH AND CASH EQUIVALENTS AT END OF YEAR                                     
                                                   250             225
                                                                             
                                                   __________      __________
                                                                             

 

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 and going concern

The financial information set out above contains the financial information of
the company for the year ended 31 December 2014. This is the first year that
the company has presented its financial statements under IFRS. The last set of
annual financial statements was for the year ended 31 December 2013, and the
date of transition to IFRS was therefore 1 January 2013. Accordingly, a full
reconciliation of the changes is shown in Note 6. The financial statements have
been prepared on the historical cost basis except for the measurements at fair
value of investments, derivative financial instruments and subsidiaries. The
same accounting policies as those published in the group consolidated statutory
accounts for 31 December 2013 have been applied in the company statutory
accounts for the year ended 31 December 2014.

The information for the year ended 31 December 2014 is an extract from the
statutory accounts to that date. Statutory group consolidated accounts for
2013, which were prepared under IFRS as adopted by the EU, and included company
accounts prepared under UK GAAP, have been delivered to the registrar of
companies and company statutory accounts for 2014, prepared under IFRS as
adopted by the EU, will be delivered in due course.

The auditors have reported on the 31 December 2014 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 498(2) or (3) of the Companies Act
2006.

The directors, having made enquiries, consider that the company has adequate
financial resources to enable it to continue in operational existence for the
foreseeable future. Accordingly, the directors believe that it is appropriate
to continue to adopt the going concern basis in preparing the company's
accounts.


2 Income

 

                                                                               
                                                      2014                2013
                                                                               
                                                     £ 000               £ 000              
                                                                               
Income from investments                                                        
                                                                               
                                                                               
                                                                               
UK dividends                                           528               2,431 
                                                                               
Overseas dividends                                      42                 484 
                                                                               
Scrip and in specie dividends                           25                   9 
                                                                               
Dividend from subsidiary                             2,151                   -
                                                                               
Interest on fixed income securities                    103                 102 
                                                                               
                                                 __________          __________
                                                                               
                                                      2,849               3,026
                                                                               
                                                 __________          __________
                                                                               
                                                                               
                                                                               
Other income                                             22                  47
                                                                               
                                                 __________          __________
                                                                               
Total income                                          2,871               3,073
                                                                               
                                                 __________          __________
                                                                               
                                                                               
                                                                               
Total income comprises:                                                        
                                                                               
                                                                               
                                                                               
Dividends                                            2,746               2,924 
                                                                               
Interest                                               103                 102 
                                                                               
Gain on foreign exchange                                  -                 46 
                                                                               
Other interest                                          22                   1
                                                                               
                                                 __________          __________
                                                                               
                                                      2,871               3,073
                                                                               
                                                 __________          __________
                                                                               
Income from investments                                                        
                                                                               
                                                                               
                                                                               
Listed investments                                     595               2,924 
                                                                               
Unlisted investments                                 2,151                   -
                                                                               
                                                 __________          __________
                                                                               
                                                      2,746               2,924
                                                                               
                                                 __________          __________
                                                                               

 

Of the £2,746,000 (2013 - £2,924,000) dividends received in the company
accounts, £nil (2013 - £2,351,000) related to special and other dividends
received from investee companies that were bought after the dividend
announcement. There was a corresponding capital loss of £nil (2013 - £
2,442,000), on these investments.

Under IFRS 10 the income analysis this year is for the parent company only
rather than that of the consolidated group shown in previous years. Thus film
revenues of £165,000 (2013 - £138,000) received by the subsidiary British and
American Films Limited and property unit trust income of £24,000 (2013 - £
22,000) received by the subsidiary BritAm Investments Limited are shown
separately in this paragraph.
3 Earnings per ordinary share

The calculation of the basic (after deduction of preference dividend) and
diluted earnings per share is based on the following data:

                                         2014                              2013
                                                                     (restated)
                                                                               
                Revenue    Capital      Total    Revenue    Capital       Total
                 return     return                return     return            
                                                                               
                 £ 000      £ 000      £ 000      £ 000      £ 000        £ 000         
                                                                          
                                                                               
Earnings:                                                                      
                                                                               
                                                                               
                                                                               
Basic             2,120    (3,939)    (1,819)      2,392      4,796       7,188
                                                                               
Preference                                                                     
dividend           350          -        350        350          -         350 
                                                                               
             __________ __________ __________ __________ __________  __________
                                                                               
Diluted           2,470    (3,939)    (1,469)      2,742      4,796       7,538
                                                                               
             __________ __________ __________ __________ __________  __________
                                                                               

 

Basic revenue, capital and total return per ordinary share is based on the net
revenue, capital and total return for the period after tax and after deduction
of dividends in respect of preference shares and on 25 million (2013: 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 after tax and on 35 million (2013: 35
million) ordinary and preference shares in issue.


4 Dividends

                                                          2014       2013      
                                                                         
                                                         £ 000      £ 000     
                                                                         
Amounts recognised as distributions to equity                            
holders in the period:                                                   
                                                                         
Dividends on ordinary shares:                                            
                                                                         
Final dividend for the year ended 31 December 2013                       
of 5.1p (2012:4.9) per share                             1,275      1,225
                                                                         
Interim dividend for the year ended 31 December                          
2014 of 2.7p                                               675        675
(2013:2.7p) per share                                                    
                                                                         
                                                                         
                                                                         
                                                    __________ __________
                                                                         
                                                         1,950      1,900
                                                                         
                                                    __________ __________
                                                                         
Proposed final dividend for the year ended 31                            
December 2014 of 5.3p (2013:5.1p) per share              1,325      1,275
                                                                         
                                                    __________ __________
                                                                         
                                                                         
                                                                         
Dividends on 3.5% cumulative convertible preference                      
shares:                                                                  
                                                                         
Preference dividend for the 6 months ended 31                            
December 2013 of 1.75p (2012:1.75p) per share              175        175
                                                                         
Preference dividend for the 6 months ended 30 June                       
2014 of 1.75p (2013:1.75p) per share                       175        175
                                                                         
                                                    __________ __________
                                                                         
                                                           350        350
                                                                         
                                                    __________ __________
                                                                         
Proposed preference dividend for the 6 months ended                      
31 December 2014 of 1.75p (2013:1.75p) per share           175        175
                                                                         
                                                    __________ __________
                                                                         
                                                                         
                                                                         

 

The preference dividends for the 6 months ended 31 December 2013 and the 6
months ended 30 June 2014 were paid as dividends in specie.

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 have set out below the total dividend payable in respect of the financial
year, which is the basis on which the retention requirements of Section 1158 of
the Corporation Tax Act 2010 are considered.

Dividends proposed for the period                                        
                                                                         
                                                                         
                                                          2014       2013
                                                                         
                                                         £ 000      £ 000
                                                                         
Dividends on ordinary shares:                                            
                                                                         
Interim dividend for the year ended 31 December                          
2014 of 2.7p (2013:2.7p) per share                         675        675
                                                                         
                                                                         
                                                                         
Proposed final dividend for the year ended 31                            
December 2014 of 5.3p (2013:5.1p) per share              1,325      1,275
                                                                         
                                                    __________ __________
                                                                         
                                                         2,000      1,950
                                                                         
                                                    __________ __________
                                                                         
Dividends on 3.5% cumulative convertible preference                      
shares:                                                                  
                                                                         
Preference dividend for the year ended 31 December                       
2014 of 1.75p (2013:1.75p) per share                       175        175
                                                                         
Proposed preference dividend for the year ended 31                       
December 2014 of 1.75p (2013:1.75p) per share              175        175
                                                                         
                                                    __________ __________
                                                                         
                                                           350        350
                                                                         
                                                    __________ __________
                                                                         

 

5 Net asset values

                                                                    Net assets
                            Net asset                               attributable
                            value per share                             
                   restated (restated)                     restated (restated)
                                                                                
              2014 2013     2012                    2014   2013     2012        
                                                                                
              £    £        £                       £ 000  £ 000    £ 000       
                                                                                
Ordinary                                                                        
shares                                                                          
                                                                                
Undiluted     0.69 0.84     0.62                    20,895 17,126   15,607      
                                                                                
Diluted       0.78 0.88     0.73                    30,895 27,126   25,607      
                                                                                

 

The undiluted and diluted net asset values per £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.

The undiluted net asset value per convertible £1 preference share is the par
value of £1.  The diluted net asset value per ordinary share assumes the
conversion of the preference shares to ordinary shares.


6 Transition to IFRS

This is the first year that the company has presented its separate financial
statements under IFRS. The last set of annual financial statements was for the
year ended 31 December 2013, and the date of transition to IFRS was therefore 1
January 2013. Accordingly, a full reconciliation of the changes is shown below.

6 (a) Restatement of balances for the year ended 31 December 2013

                                            Previously                       
                                            reported    Effect of  Restated  
                                            (UK GAAP)   transition (IFRS)    
                                            31          to         31        
                                            December    IFRS       December  
                                            2013                   2013      
                                            £000        £000       £000      
                                                                             
Investments - fair value through profit     29,559      -          29,559    
or loss                                                                      
                                                                             
Subsidiaries - fair value through profit                                     
or loss (note 1)                            7,504       834        8,338     
                                                                             
Current assets                              2,267       -          2,267     
                                                                             
Current liabilities                         (5,138)     -          (5,138)   
                                                                             
                                            __________             __________
                                                                             
Total assets less current liabilities       34,192                 35,026    
                                                                             
                                            __________             __________
                                                                             
Non - current liabilities                   (4,131)                (4,131)   
                                                                             
                                            __________             __________
                                                                             
Net assets                                  30,061                 30,895    
                                                                             
                                            __________             __________
                                                                             
                                                                             
                                                                             
Equity attributable to equity holders                                        
                                                                             
Ordinary share capital                      25,000      -          25,000    
                                                                             
Convertible preference share capital        10,000      -          10,000    
                                                                             
Capital reserve (note 1)                    (7,189)     834        (6,355)   
                                                                             
Retained revenue earnings                   2,250       -          2,250     
                                                                             
                                            __________             __________
                                                                             
Total equity                                30,061                 30,895    
                                                                             
                                            __________             __________
                                                                             

 

Note 1

Investments are designated as held at fair value under IFRS. Previously, under
UK GAAP investments in subsidiaries included films rights recorded as an
amortised intangible asset.  This results in an upward revaluation of £834,000
in investments and an increase in capital reserves.


6 (b) Reconciliation of the Statement of Total Return to the Income Statement
for the year ended 31 December 2013

                                                                            
                                                                            
                                                             2013           
                                                                            
                                                             £000           
                                                                            
Reported revenue gain under UK GAAP                          2,742          
                                                                            
Reported capital gain under UK GAAP                          4,868          
                                                                            
                                                             __________     
                                                                            
                                                                            
                                                                            
Total return under UK GAAP                                   7,610          
                                                                            
Movement in fair value December 2012                         (906)          
                                                                            
Movement in fair value December 2013                         834            
                                                                            
                                                             __________     
                                                                            
Reported total return under IFRS                             7,538          
                                                                            
                                                             __________     
                                                                            

6 (c) Restatement of balances for the year ended 31 December 2012

                                            Previously                       
                                            reported    Effect of  Restated  
                                            (UK GAAP)   transition (IFRS)    
                                            31          to         31        
                                            December    IFRS       December  
                                            2012                   2012      
                                            £000        £000       £000      
                                                                             
Investments - fair value through profit     18,654      -          18,654    
or loss                                                                      
                                                                             
Subsidiaries - fair value through profit                                     
or loss (note 1)                            3,620       906        4,526     
                                                                             
Current assets                              6,294       -          6,294     
                                                                             
Current liabilities                         (1,293)     -          (1,293)   
                                                                             
                                            __________             __________
                                                                             
Total assets less current liabilities       27,275                 28,181    
                                                                             
                                            __________             __________
                                                                             
Non - current liabilities                   (2,574)     -          (2,574)   
                                                                             
                                            __________             __________
                                                                             
Net assets                                  24,701                 25,607    
                                                                             
                                            __________             __________
                                                                             
                                                                             
                                                                             
Equity attributable to equity holders                                        
                                                                             
Ordinary share capital                      25,000      -          25,000    
                                                                             
Convertible preference share capital        10,000      -          10,000    
                                                                             
Capital reserve (note 1)                    (12,057)    906        (11,151)  
                                                                             
Retained revenue earnings                   1,758       -          1,758     
                                                                             
                                            __________             __________
                                                                             
Total equity                                24,701                 25,607    
                                                                             
                                            __________             __________
                                                                             

Note 1

Investments are designated as held at fair value under IFRS. Previously, under
UK GAAP investments in subsidiaries included films rights recorded as an
amortised intangible asset. This results in an upward revaluation of £906,000
in investments and an increase in capital reserves.

Principal risks and uncertainties

The principal risks facing the company relate to its investment activities and
include market risk (other price risk, interest rate risk and currency risk),
liquidity risk and credit risk. The other principal risks to the company are
loss of investment trust status and operational risk. These will be explained
in more detail in the notes to the 2014 Annual Report and Accounts, but remain
unchanged from those published in the 2013 Annual Report and Accounts.

Related party transactions

The company rents its offices from Romulus Films Limited, and is also charged
for its office overheads.

The salaries and pensions of the company's employees, except for the three
non-executive directors, are paid by Remus Films Limited and Romulus Films
Limited and are recharged to the company.

There have been no other related party transactions during the period, which
have materially affected the financial position or performance of the company.

Capital Structure

The company's capital comprises £35,000,000 (2013 - £35,000,000) being
25,000,000 ordinary shares of £1 (2013 - 25,000,000) and 10,000,000 non-voting
convertible preference shares of £1 each (2013 - 10,000,000). The rights
attaching to the shares will be explained in more detail in the notes to the
2014 Annual Report and Accounts, but remain unchanged from those published in
the 2013 Annual Report and Accounts.

Directors' responsibility statement

The directors are responsible for preparing the financial statements in
accordance with applicable law and regulations. The directors confirm that to
the best of their knowledge the financial statements prepared in accordance
with the applicable set of accounting standards, give a true and fair view of
the assets, liabilities, financial position and the loss of the company and
that the Chairman's Statement, Managing Director's Report and the Directors'
report include a fair review of the information required by rules 4.1.8R to
4.2.11R of the FSA's Disclosure and Transparency Rules, together with a
description of the principal risks and uncertainties that the company faces.

Annual General Meeting

This year's Annual General Meeting has been convened for Thursday 25 June 2015
at 4.00pm at Wessex House, 1 Chesham Street, London SW1X 8ND.

a d v e r t i s e m e n t