ELX.L Regulatory News (ELX)

28 Apr 2006 12:20

El Oro And Exploration Co Plc28 April 2006 El Oro and Exploration Company p.l.c.28 April 2006 Change of Accounting Reference DateSecond Interim Report and Declaration of dividend El Oro and Exploration Company p.l.c. (the "Company") announces that the Boardhas resolved to change the Company's accounting reference date from 31 Decemberto 30 June. In consequence the Company's next statutory reporting period willcover the eighteen month period ended 30 June 2006. As a result of the change of accounting reference date, the Company also todaypublishes a second interim report and declares a dividend covering the twelvemonth period ended 31 December 2005, the text of which forms part of thisannouncement. The principal reason for the change of accounting reference date is to enablethe Company to conclude a review of its strategic options to address certainpotential financial, taxation, structural and operational matters which arisefrom the Company's adoption of IFRS in accordance with the Listing Rules, theTransparency Directive and the IAS Regulation (1606/2002 EC). The Boardconsiders that it is in the best interests of its stockholders to conclude thisreview before the Company is required to publish a preliminary statement offinal results. The Board wants to examine a range of alternatives which couldbe more favourable for the Company and its stockholders. This review isexpected to examine the most appropriate operating and listing structure for theGroup to ensure that it is able to operate efficiently in an administrative andregulatory environment appropriate to its size and the nature of its activity. As part of that review, the Company is considering whether AIM would be a moreappropriate market for the Company's stock units. No decision has yet beenreached by the Board on this or any other aspect of the strategic review.Specifically, any decision to de-list, if taken, from the Official List of theUKLA will be subject to prior stockholder approval. Second interim Report and Chairman's Statement The Group profit before tax for the twelve month period ended 31 December 2005was £8,934,524 (2004: £3,005,700). Group net assets at 31 December 2005 underIFRS, taking all assets at fair value were £65,763,460 (equal to 607p per stockunit) as compared with £67,905,581 under UK GAAP at 31 December 2004 (equal to573p per stock unit). The difference between the IFRS and UK GAAP measurement of the fair value of netassets is that under UK GAAP at 31 December 2004 the figure took no account ofthe £11,294,608 potential corporation tax due on the excess of market values ofnet investments over net book cost at that date, which is recognized in the IFRSfigures at 31 December 2005. We are declaring an interim dividend for the twelve month period ended 31December 2005 of 12p per stock unit. The dividend will be paid on 26 October2006 to members registered on the books of the Company at the close of businesson 20 September 2006. Those were the days my friend, we thought they'd never end.... Were it appropriate to be exultant, now would indeed be the time on presentingthe most exuberant results in your company's history. However, in an era ofexcess in pay, profits and debt, pride comes before a fall. Whilst acknowledgingprogress, the successes of our portfolio are also tinged with sadness to haveseen so many stalwarts depart to takeovers; WMC Resources, East Surrey Water,Gales Brewery, Burtonwood, following hard on the heels of Glenmorangie. Theseonce small stones became the rocks on which this great portfolio has been built,and will be hard to replace, at a time when we sniff a hint of euphoria in theair, particularly in the mining arena. We have nevertheless meandered from the mountains of Mendoza to the desert dunesof Mauritania, via pubs of McMullens, not to mention the endless expanses ofAustralia, searching for value; hopefully some future gems are already ensconcedwithin the selection of shares to replace and replicate the gains of thosedeparted. We remain well represented across the metals spectrum, with several prospectsapproaching the early stage of mine-construction. The strength of base metalshas so far confounded the sceptics, and exceeded the wildest hopes of theoptimists, especially copper, zinc and latterly nickel. Whilst we are advisedthat radical reforms are afoot in China that will change that country's emphasisaway from energy and resource-reliant sectors, we are inclined to believe thatmetal prices will not revert to the lower levels prevailing over the lastdecade. The portfolio has already, in recent months, been boosted by offers for BristolWater and further afield, for Tethyan Copper in Pakistan. We believe that theneed to secure supplies will sustain good projects in the metals and energysectors. We note the incipient unrest in Latin America, unleashed by HugoChavez and visible in Bolivia and Peru at present, also in Indonesia, where theheady mix of nationalism with whipped-up environmental concerns, threatenvarious projects and Mines. We notice that, Phoenix-like, there are suggestionsthat Bougainville, the great copper mine of the early 70's, may reopen, provingthe adage 'what goes around, comes around' (great mines, like Rockers, neverdie, even if the equipment does succumb to rust). Our goal, in the light of such uncertainty, is to spread our assets so that themore secure areas can take up the slack, should exciting but vulnerable projectssuccumb to these types of threats, just as Bougainville did 20 years ago. At the same time, our gold holdings, of shares and bullion, shouldcounterbalance instability: in emerging markets, currently undergoing ashakeout, Europe, with its sclerotic and change-resistant populace, and theperennially-threatened dollar. Whilst the latter remains the currency of choice, except perhaps in Iran, thewaning stature of the United States, consequent on its financial andmorale-sapping involvement in Iraq, combined with the US Budget and Tradedeficits, has severe implications for the health both of the dollar and thesecurity of the World. Whilst the two deficits have been present to a greateror lesser extent over the last 30 years, the figures have now ballooned beyondany semblance of control. Indeed Congress has now had to raise the permissibleborrowing limit to nine trillion dollars. We feel the time approaches when aswith Belshazzar, the unseen hand writes: "Mene, Mene, Tekel, uPharsin" wesuspect the Dollar will be found wanting, and may well see vengeance exacted bythe successors to the Medes and Persians. However benign or perverse the progress of the world economy, at home we remainunderpinned by our excellent array of Breweries, Pubs and Real Estate andUtilities. Few things could be more cheering than the sight of that fresh-facedenthusiast, the fearsome and fearless Freddie Flintoff clutching his pint ofbeer after his team's signal success in Bombay. How sad that our Chancellor somisses the mood of the moment that duty on champagne is pegged, whilst that onbeer is raised. The socialists have already wreaked their vengeance on thisbest of British drink, with their ridiculous and expensive new licensing laws,as well as their assault on the freedom to smoke in specific venues. Theserequirements have undoubtedly adversely affected the refreshment industry andour interests therein. The ferociously fighting Oxford crew's notable triumphover Cambridge has dispersed at least some of that champagne. The Gauleiters have even taking to rifling through our rubbish to see if we haveinadvertently mixed business mail with the domestic collection, threateningfines: not only is there a succession of trucks removing different types ofrefuse, but civil servants taking on the role of Bombay street urchins,searching through the litter. No wonder the State now needs one quarter of thepopulation to spy on those few wistfully working, Satellites and Helicopters areused to monitor farmers' land, and whether they have supplied correctinformation: given the complexity of the new forms, it would be something of amiracle if there were no errors. Despite this use of technology, it is beyondthe power of Defra to process and pay the grants due to the working farmers ofEngland. Needless to say no heads roll, however inadequate the implementationof government policy. The Government's cruise amongst increasing shoals ofcalamitous overspending is compounded by almost inconceivable incompetence,threatening the stability of the Public Services and rule of Law. Thereputation of Parliament has been thoroughly besmirched, amongst the greed forglory and degraded titles. As if that were insufficient, we are now faced withthe spectacle of repeated private deceit, adding to public deception. Sadly, in the midst of this mayhem, the new leader of the opposition isensconced in his Japanese-made excuse for a solution to the impact of nature,whilst seeking the salve for the Conservative soul in the Samuel Smiles Schoolof Self-Help; an exercise similar, we suspect to that engaged upon by the Churchof England with its abandonment of the Book of Common Prayer in an ever morefrantic and futile attempt to appeal to a new generation of believers. TheChancellor has decided to dispense with improving British education, andconcentrates on that of Africa. It may hearten him to know that the childrenand adults of Akjouit in Mauritania are already flocking to school before hishelp arrives to destroy privately supplied education. Believing, as we do, thatthe provision of clean water is more important to the world thanhybrid-engines, or the difference between private and state education, we wouldrefer our leaders to the words of the prophet Isaiah, ch.41 vv17 -19,written twoand a half thousand years ago: 'When the poor and needy seek water, and there isnone, I the Lord will hear them,...I will open rivers in high places, andfountains in the midst of the valleys: I will make the wilderness a pool ofwater,...' How much worthier a challenge, than gazing at Glaciers. Somehow, we suspect that we will muddle through these and other assaults orneglects, as we have done since the foundation of the company in 1886, althoughit may be a forlorn hope to wish for a Government that helps rather than hindersin almost every area of life and business. We are at least grateful to theconductor on the Great Western, delayed at Maidenhead, who offered thepassengers a chance to 'stretch your legs and have a smoke': something the greatAnton Rupert of Remgro continued to do in moderation until his recent death atthe age of 86, whilst spending his life building a broad and brilliant business. We can hardly do better than quote, once again, the venerable and wise RichardRussell, of Dow Theory Letters: "In the new inflationary world, it makes senseto get in harmony with inflation. That means gold, oil, raw materials....youmust take long-term positions. These are new bull markets that are just gettingstarted. But as I've warned a thousand times, the hardest thing to do in theinvestment business is to assume the correct position - and then to STAY withthat position through thick and thin, through vicious corrections, through allkinds of ignorant propaganda, through endless Government interference - untilthe bull market finally blows its top somewhere far down the line." We willstrive with every fibre to follow this maxim. We are hugely grateful to all those executives who work so tirelessly for ourinvestments, such as John Jones building mines and a new team at Troy; and TimBonham, who leaves such a good legacy at Hardys and Hanson; the teams at Youngsand M.P.Evans, and many other unsung heroes, both here and abroad. Within our own, crumbling walls, Chris enters the final furlong with us, withthe mammoth task of meeting new regulations and deadlines; even his legendarytimeliness is tested to its limit. Abbie steadily shrinks whilst her workloadincreases, and is tackled with her inimitable enthusiasm and fortitude. Andreahas reinforced the blondes on the team, whilst Rosanna breeds bonny babies toentrance the aural chords of England. My thanks to them all, my co-Directors, colleagues and advisers for sage adviceand support. C. Robin Woodbine Parish28 April 2006 CONSOLIDATED INCOME STATEMENT(Unaudited)for the 12 month period ended 31 December Group Group 2005 2004 restated * £ £Revenue 13,555,296 5,184,007Movement in fair value through the income statement investments 110,090 0Movement in fair value of investment properties (15,114) (4,621)Impairment (loss)/ reversal of impairment on available for sale investments (2,346,191) 798,513Expenses (1,628,357) (2,236,176) Operating profits 9,675,724 3,741,723 Finance costs: Banks 734,900 716,455 Other 6,300 19,568 741,200 736,023 Profit before taxation 8,934,524 3,005,700Taxation 2,752,454 1,080,051Profit for the period 6,182,070 1,925,649 Earnings per stock unit (basic and 56.80p 16.15pdiluted) CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSE(Unaudited)for the 12 month period ended 31 December Group Group Company Company 2005 2004 2005 2004 restated * restated * £ £ £ £Profit for the period 6,182,070 1,925,649 6,237,023 1,966,605Recognition of financial instruments at 1January 2005: Available for sale reserve 25,640,476 0 25,640,476 0 Retained earnings (232,665) 0 (232,665) 0Revaluation of available for sale 19,578,921 0 19,578,921 0investmentsTax on revaluation of available for sale (5,873,676) 0 (5,873,676) 0investmentsTotal recognised income and expense for 45,295,126 1,925,649 45,350,079 1,966,605the period * Restated for the effect of adoption of IFRS - see notes below BALANCE SHEETS(Unaudited) at 31 December Group Group Company Company 2005 2004 2005 2004 restated * restated *Assets £ £ £ £Non-current assetsProperty, plant and equipment 758,338 1,343,175 758,338 752,777Investment property 496,688 611,475 496,688 261,475Investments in subsidiary 0 0 461,938 493,249companies 1,255,026 1,954,650 1,716,964 1,507,501 Current assetsTrade and other receivables 327,007 380,635 327,007 315,247Financial assets: Available for sale investments 95,435,014 39,693,884 95,428,192 39,686,909 Derivative financial instruments 0 39,325 0 39,325 Commodities 1,236,774 0 1,236,774 0Cash and cash equivalents 202,043 173,608 191,878 161,412 97,200,838 40,287,452 97,183,851 40,202,893 LiabilitiesCurrent liabilitiesFinancial liabilities: Borrowings 15,971,052 12,400,813 15,971,052 12,266,154 Derivative financial instruments 0 128,481 0 128,481Trade and other payables 896,145 735,117 14,736,958 14,739,528Current tax liabilities 7,498,377 846,027 7,498,377 846,027 24,365,574 14,110,438 38,206,387 27,980,190 Net current assets 72,835,264 26,177,014 58,977,464 12,222,703 Non Current liabilitiesDeferred tax liabilities 8,572,530 1,764 8,572,530 1,764 Net assets 65,517,760 28,129,900 52,121,898 13,728,440 Stockholders' equityOrdinary stock units 541,785 592,045 541,785 592,045Share premium 6,017 6,017 6,017 6,017Capital redemption reserve 344,442 294,182 344,442 294,182Merger reserve 3,563 (149,798) 0 0Other reserve (Available for sale 33,700,049 0 33,700,049 0investments)Retained earnings 30,921,904 27,387,454 17,529,605 12,836,196Total equity 65,517,760 28,129,900 52,121,898 13,728,440 * Restated for the effect of adoption of IFRS - see notes below CONSOLIDATED CASH FLOW STATEMENT(Unaudited)for the 12 month period ended 31 December Group Group Company Company 2005 2004 2005 2004 restated restated £ £ £ £Operating activitiesNet profit from operating activities 6,182,070 1,925,649 6,237,023 1,966,605Adjustments for: 0 0 0 0Depreciation 29,240 58,933 29,240 31,900Impairment (loss)/ reversal of impairment on available for 2,346,191 (798,513) 2,346,191 (798,513)sale investmentsLoss on disposal of Danby Registrars 0 0 31,311 0LimitedForeign exchange profits (875,886) (109,017) (875,886) (109,017)Movement in fair value of investment 15,114 4,621 15,114 4,621propertiesMovement in fair value through the income (110,090) 0 (110,090) 0statement investmentsInterest expense 741,200 736,023 741,200 723,988Income tax expense 2,987,918 1,080,051 2,987,918 1,114,281Cash flow from operating profit before 11,315,757 2,897,747 11,402,021 2,933,865changes in working capital Increase in available for sale (9,355,728) (2,756,496) (9,355,883) (1,478,046)investments(Increase)/decrease in fair value through income (622,203) 1,289,813 (622,203) 0statement investmentsDecrease/(increase) in trade and other 11,174 651,417 (7,357) 847,596receivables(Decrease)/increase in trade and other (57,943) 215,302 (221,598) (4,797,904)payablesCash generated from operations 1,291,057 2,297,783 1,194,980 (2,494,489) Income taxes paid (2,221,389) (1,191,264) (2,176,870) (1,211,467)Cash flow from operating activities (930,332) 1,106,519 (981,890) (3,705,956) Investing activitiesNet cash disposed of with Danby (5,000) 0 0 0Registrars LimitedCost of stock units repurchased and (14,621) (398,846) (95,691) (398,846)cancelledPurchase of property, plant and (34,801) (120,524) (34,801) (767,977)equipmentPurchase of investment property (250,327) (138,787) (250,327) (138,787)Cash flow from investing activities (304,749) (658,157) (380,819) (1,305,610) Cash flow in financing activitiesInterest paid (758,739) (702,759) (758,739) (690,724)Dividends paid to equity stockholders (1,215,694) (1,311,727) (1,215,694) (1,311,727)New mortgages 194,402 97,950 194,402 97,950Repayment of mortgages (3,801) (2,229) (3,801) (2,229)Cash flow from in financing activities (1,783,832) (1,918,765) (1,783,832) (1,906,730) Net decrease in cash and cash (3,018,913) (1,470,403) (3,146,541) (6,918,296)equivalents Cash and cash equivalents at start of (12,079,276) (10,608,873) (11,956,813) (5,038,517)periodEffect of foreign exchange rate changes (98,789) 0 (98,789) 0Recognition of forward gold contracts at 1 (456,274) 0 (456,274) 0January 2005 in accordance with IAS39Cash disposed of with subsidiary 5,000 0 0 0Cash and cash equivalents at end of (15,648,252) (12,079,276) (15,658,417) (11,956,813)period NOTES TO THE CONSOLIDATED INTERIM STATEMENTS Primary note to the financial statements The consolidated interim financial statements for the twelve month period ended31 December 2005 have been prepared in accordance with International FinancialReporting Standards and IFRIC interpretations (collectively 'IFRS'), issued bythe International Accounting Standard Board (IASB). Comparatives for the twelvemonth period to 31 December 2004 and at 31 December 2004 have been restated fromUK GAAP to IFRS, with the exception of the requirements of IAS32 "FinancialInstruments: Disclosure and Presentation" and IAS39 "Financial Instruments:Recognition and Measurement", which have been applied with effect from 1 January2005. Significant accounting policies El Oro and Exploration Company p.l.c. is a company domiciled in the UnitedKingdom. The consolidated interim financial statements of the Group for thetwelve month period ended 31 December 2005 comprise the Company and itssubsidiaries (together referred as the "Group"). The consolidated interim financial statements were authorised by the Directorsfor issuance on 27 April 2006. a. Statement of compliance The consolidated interim financial statements have been prepared in accordancewith International Financial Reporting Standards and IFRIC interpretations(collectively 'IFRS'), issued by the International Accounting Standard Board(IASB). The consolidated interim financial statements do not include all of theinformation required for full annual financial statements. An explanation of howthe transition to IFRS has affected the reported financial position andperformance of the Group is provided in note o. This note includesreconciliations of equity and profit or loss for comparative periods reportedunder UK GAAP (previous GAAP) to those reported for those periods under IFRS. b. Basis of preparation The financial statements are presented in sterling. They are prepared under thehistorical cost convention as modified by the revaluation of financialinstruments held for trading, financial instruments classified as available forsale and investment properties. The accounting policies set out below have been applied in preparing thefinancial information contained in this report. The Group has not adopted IAS34- Interim Financial Reporting This interim report is unaudited and does not constitute statutory accountswithin the meaning of Section 240 of the Companies Act 1985. The statutoryaccounts for the year ended 31 December 2004, which was prepared under UK GAAP,and on which the auditors issued an unqualified opinion, have been delivered tothe Registrar of Companies. The preparation of interim financial statements requires management to makejudgements, estimates and assumptions that affect the application of policiesand reported amounts of assets and liabilities, income and expenses. Actualresults may differ from these estimates. Although these estimates are based onmanagements knowledge of the amount, event or actions, where such judgements aremade they are indicated within the accounting policies below. The IFRS that will be effective or available for voluntary early adoption in thefinancial statements for the eighteen month period ended 30 June 2006 are stillsubject to change and to the issue of additional interpretation(s) and thereforecannot be determined with certainty. Accordingly, the accounting policies forthat annual period that are relevant to this interim financial information willbe determined only when the first IFRS financial statements are prepared for theeighteen month period ended 30 June 2006. The preparation of the consolidated interim financial statements resulted inchanges to the accounting policies as compared with the most recent annualfinancial statements prepared under previous GAAP. Comparatives have beenprepared under IFRS, with the exception of items accounted for under IAS32 andIAS39 where the exemption for restatement of comparatives has been taken. Theimpact on the transition from previous GAAP to IFRSs is explained in note o. The accounting policies have been applied consistently throughout the Group forthe purpose of these consolidated interim financial statements. c. Basis of consolidation i. Subsidiaries Subsidiaries are entities that are controlled by the Company. Control existswhen the Company has the power, directly or indirectly, to govern the financialand operating policies of an entity so as to obtain benefits from itsactivities. ii. Transactions eliminated on consolidation Intra-group balances and income and expenses arising from intra-grouptransactions, are eliminated in preparing the consolidated interim financialstatements. d. Foreign currency Transactions in foreign currencies are translated at the foreign exchange rateruling at the date of the transaction. Monetary assets and liabilitiesdenominated in foreign currencies at the balance sheet date are translated tosterling at the foreign exchange rate ruling at that date. Foreign exchangedifferences arising on translation are recognised in the income statement andthe cash flow statement includes cash flow differences at average rates. e. Property, plant and equipment i. Owned assets Items of property, plant and equipment are stated at cost less accumulateddepreciation. ii. Depreciation Depreciation is charged to the income statement on a straight-line basis overthe estimated useful lives of each item of property, plant and equipment. Therates of depreciation are as follows: Freehold property 2%Paintings 2%Computer equipment 33%Fixtures and fittings 33% f. Investments Investments are recognised and de-recognised on the trade date where a purchaseor sale is made under a contract whose terms require delivery within thetimeframe established by the market concerned, and are initially measured atfair value. i. Investments in debt and equity securities and other financial assets The Group's investments are defined by IFRS as investments designated at fairvalue through the income statement or available for sale, depending on thepurpose for which the investment or asset was acquired. The Group's accounting policy for each category is as follows: Fair value through the income statement: This category comprises only derivatives and commodities. They are carried inthe balance sheet at fair value with changes in fair value recognised in theincome statement. Fair value is either the bid price or the last traded price,depending on the convention of the exchange on which the investment is listed.On disposal, realised gains and losses are also recognised in the incomestatement. Transaction costs are charged to revenue in the income statement.The Group does not have any other assets held for trading nor does itvoluntarily classify any other financial assets as being at fair value throughthe income statements. All other investments in debt and equity securities and other financial assets,including available for sale instruments: Non-derivative and commodities financial instruments not included in the abovecategories are classified as available for sale and comprise the Group'sstrategic investments in entities not qualifying as subsidiaries. They arecarried at fair value with changes in fair value recognised directly in equity. Fair value is either the bid price or the last traded price, depending on theconvention of the exchange on which the investment is listed. On disposal,realised gains and losses are recognised in the income statement. Transactioncosts are included within the cost of the investments. Where a decline in thefair value of an available for sale investment constitutes objective evidence ofimpairment, the amount of the loss is removed from equity and recognised in theincome statement. In respect of unlisted investments, or where the market for a financialinstrument is not active, fair value is established by using valuationtechniques, which may include using recent arms length market transactionsbetween knowledgeable, willing parties, if available or reference to the currentfair value of another instrument that is substantially the same. Where there isa valuation technique commonly used by market participants to price theinstrument and that technique has been demonstrated to provide reliableestimates of prices obtained in actual market transactions, that technique isutilised. Where no reliable fair value can be estimated for such unlistedinvestments, they are carried at cost, subject to any provision for impairment.Foreign exchange gains and losses arising from investments fair valued throughthe income statement are included within the changes in their fair values. Foreign exchange gains and losses arising on available for sale investments arecredited or charged in the income statement. ii. Investment Income Income from investments includes all dividends, rents and interest onnon-government securities receivable within the year. Dividend income frominvestments is recognised when the Group's and Company's right to receivepayment has been established and this is normally the ex-dividend date.Provision is made for any dividends not expected to be received. Where the Group and Company has elected to receive dividends in the form ofshares rather than cash, the amount of the cash dividend foregone is recognisedas income. The excess, if any, in the value of shares received over the sum ofthe cash dividend forgone is recognised as a gain in the income statement. UK dividend income is recorded at the amount receivable without any attributabletax credit. Overseas dividend income is shown gross of withholding tax. Gains/losses on sale of investments are recognised in the income statementtogether with their related foreign exchange differences in respect of holdingsin foreign investments. iii. Investment properties Investment properties are properties owned by the Group which are held to earnrental income and for capital appreciation. Investment properties are initiallyrecognised at cost and revalued at the balance sheet date to full value asdetermined by professionally qualified external valuers on the basis of marketvalue. Any gain or loss arising from a change in fair value of investment properties isrecognised in the income statement. The Group has elected to use the fair valuemodel and depreciation is not provided on investments properties. Rental incomefrom investment property is accounted for when due. g. Trade and other receivables Trade and other receivables do not carry any interest and are short term innature; they are accordingly stated at their nominal values as reduced byappropriate allowances for estimated irrecoverable amounts. h. Cash and cash equivalents Cash and cash equivalents comprises cash balances with an original maturity ofthree months or less. Bank overdrafts that are repayable on demand and form anintegral part of the Group's cash management are included as a component of cashand cash equivalents for the purpose of the statement of cash flow. i. Transaction costs Transaction costs are included in the costs of investments purchased anddeducted from the proceeds of investments sold for available for saleinvestments. These costs are charged to the income statement for investmentsrecognised as fair value through the income statement. j. Financial liabilities The Group and Company classifies its financial liabilities into one of twocategories, depending on the purpose for which the asset was acquired. TheGroup's and Company's accounting policy for each category is as follows: Fair value through the income statement: This category comprises short derivative financial instruments. They arecarried in the balance sheet at fair value with changes in fair value recognisedin the income statement. Other financial liabilities: Other financial liabilities include the following items: • Trade payables and other short term monetary liabilities, which are short termin nature and are therefore stated at their nominal values; and • Bank borrowings and mortgages are initially recognised at the amount advancednet of any transaction costs directly attributable to the issue of theinstrument. Such interest bearing liabilities are subsequently measured atamortised cost using the effective interest rate method, which ensures that anyinterest expense over the period to repayment is at a constant rate on thebalance of the liability carried in the balance sheet. "Interest expense" inthis context includes initial transaction costs and premiums payable onredemption, as well as any interest or coupon payable while the liability isoutstanding. k. Taxation The charge for current taxation is based on the results for the year as adjustedfor items which are non-assessable or disallowed. It is calculated using ratesthat have been enacted or substantively enacted by the balance sheet date. Taxpayable upon realisation of revaluation gains recognised in prior periods isrecorded as a current tax charge with a release of the associated deferred tax. Deferred tax is provided using the balance sheet liability method in respect oftemporary differences between the carrying amount of assets and liabilities inthe financial statements and the corresponding tax bases used in computation oftaxable profit with the exception of deferred tax on revaluation surpluses wherethe tax basis used is the accounts historic cost. Deferred tax is provided on all temporary differences. Deferred tax willcrystallize when the asset for which a deferral of tax has been made or has beendisposed of. Deferred tax is determined using tax rates that have been enacted orsubstantially enacted by the balance sheet date and are expected to apply whenthe related deferred tax asset is realised or the deferred tax liability issettled. It is recognised in the income statement except when it relates toitems credited or charged directly to equity, in which case the deferred tax isalso dealt with in equity. l. Interest-bearing borrowings Interest-bearing borrowings are initially recognised at fair value less directlyattributable transaction costs. Subsequently, these borrowings are recognisedat amortised cost. m. Share capital i. Repurchase of share capital When share capital recognised as equity is repurchased, the amount of theconsideration paid, including directly attributable costs, is recognised as achange in equity. ii. Dividends Dividends to stockholders are recognised as a liability in the period in whichthey are declared. The following dividends were declared by the Group: 12 mths 12 mths to 31 Dec to 31 Dec 2005 2004 £ £ 11.5p (2004: 11.0p) per stock unit 1,247,601 1,313,722 The Directors are proposing an interim dividend of 12.0 pence (2004: 11.5 pence)per stock unit totalling £1,380,284 (2004: £1,247,601). The dividend will bepaid on 26 October 2006 to stockholders on the register of members on 20September 2006. m. Taxation The total tax charge and tax liability for the twelve months is treated withinthe financial statements as follows: 12 mths 12 mths to 31 Dec to 31 Dec 2005 2004 £ £ Shown within the consolidated income statement: Corporation tax charge for the twelve months 2,752,454 1,080,051 Included within current tax liabilities in the balance sheet: Amount due on mainstream corporation tax 4,044,275 846,027 Amount due on available for sale unrealized gains 3,454,102 0 since 1 January 2005 7,498,377 846,027 o. Explanation of transition to IFRS The above accounting policies have been applied in preparing the consolidatedinterim financial statements for the twelve months ended 31 December 2005 andthe comparative information for the twelve months ended 31 December 2004. Therequirements of IAS32 "Financial Instruments: Disclosure and Presentation" andIAS39 "Financial Instruments: Recognition and Measurement" have been adoptedwith effect from 1 January 2005. The comparative figures do not thereforeincorporate any restatements in respect of either IAS32 or IAS39. The following statement sets out the changes made to stockholders' funds at 1January 2004 and 31 December 2004 following the adoption of IFRS and separatelythe changes at 1 January 2005 to reflect the adoption of IAS32 and IAS39. Group Group Group Group Group Group Group Group Share Share Reval'n Cap Red Merger Profit Other Capital Premium Reserve Reserve Reserve and Loss Reserve Total (Available for sale investments) £ £ £ £ £ £ £ £At 1 Jan 2004 592,045 6,017 204,256 289,081 (149,798) 25,009,680 0 25,951,281(UK GAAP) Note 1 0 0 0 0 0 1,958,175 0 1,958,175 Note 2 (204,256) 204,256 0At 1 Jan 2004 592,045 6,017 0 289,081 (149,798) 27,172,111 0 27,909,456(IFRS) Note 3 0 0 0 5,101 0 (398,846) 0 (393,745) Note 4 0 0 0 0 0 1,995 0 1,995 Note 5 0 0 0 0 0 1,925,649 0 1,925,649 Note 6 0 0 0 0 0 (1,313,455) 0 (1,313,455)At 31Dec 2004 592,045 6,017 0 294,182 (149,798) 27,387,454 0 28,129,900(IFRS) Note 7 0 0 0 0 0 (232,665) 0 (232,665) Note 8 0 0 0 0 0 0 25,640,476 25,640,476At 1 Jan 2005 592,045 6,017 0 294,182 (149,798) 27,154,789 25,640,476 53,537,711(IFRS) Note 1 IRFS Adjustments: Increase in value to deemed cost of 41 Cheval Place-£654,738, reversal of the 2004 dividend to stockholders-£1,313,455 and adjustment to deferred taxation-£(10,018). Note 2 Reclassify Revaluation reserves. Note 3 Purchase and cancellation of own shares. Note 4 Forfeited dividends. Note 5 Profit for the twelve months. Note 6 Dividends paid in 2004. Note 7 Restatement of values of impaired stocks. Note 8 Adjustment at 1 January 2005 in respect of IAS32 and IAS39 : Increase in value of available for sale instruments, less taxation at 30% This information is provided by RNS The company news service from the London Stock Exchange