RIT Capital Partners Regulatory News (RCP)

18 Nov 2005 16:35

RIT Capital Partners PLC18 November 2005 PRELIMINARY ANNOUNCEMENT OF INTERIM RESULTS FOR THE SIX MONTHS ENDED 30SEPTEMBER 2005 The following is derived from the Chairman's Statement which will appear in theInterim Report CHAIRMAN'S STATEMENT During the half year to 30 September, your Company's net asset value per shareincreased by 14.8% from 712.7p to 818.1p. We were therefore able to out-performthe relevant indices during this period, when the Morgan Stanley CapitalInternational Index (in Sterling), the FTSE All-Share Index and the InvestmentTrust Net Assets Index rose by 13.6%, 11.7% and 13.0% respectively. RITCP's net asset value per share at 11 November, the latest available date, was807.3p. QUOTED PORTFOLIO In my Chairman's Statement in the Annual Report, I commented on the risks posedby the continuing imbalances in the global economy and the unusually complexoutlook for world markets. I added that we were continuing to find opportunitiesin terms of specific stocks, special situations and outstanding new managers.Although this remains the case, since the end of the reporting period we havereduced some of our quoted holdings, especially in categories that have enjoyedstrong gains over the preceding period. As a result of this, our portfolio isnow somewhat more cautiously positioned than at the end of September. In August, to take advantage of low levels of interest rates, we completed a€150 million seven year loan, at an effective fixed interest rate of 3.732% perannum. Taken together with our US$150 million loan, which bears aninterest rate of 3.93%, we have total long-term borrowings equivalent to £187million. At 30 September, £932.8 million, or 64.9% of the portfolio, was held directly inquoted investments, compared with 56.3% at 31 March. A further £211.1 million,or 14.7% of the portfolio, was held in hedge and long equity funds which investmainly in quoted securities. Taking these two categories together, some 80% ofthe portfolio was invested in quoted or other marketable securities, comparedwith 69% at 31 March. £46.5 million, or 3.2% of the portfolio, was invested ingovernment securities and money market funds, compared with 10% at 31 March. UNQUOTED PORTFOLIO In total, your Company's unquoted investments were valued at some £219.5million, or 15.3% of the portfolio. Of this, £132.7 million, or 9.3%, representsinvestments made directly by management and £86.8 million, or 6%, representsinvestments in limited partnerships managed by third parties. The main liquidity event during the period was the repayment of £12.7 million ofpart of our investment in Esporta, the health club operator. Investments in property amounted to £27.5 million, or 1.9% of the portfolio. INVESTMENT AND CURRENCY EXPOSURE By the interim stage, your Company's net assets had increased to £1,277.7million and its portfolio of investments to £1,437.4 million. The difference of£159.7 million, or 12% of our net assets, represents the extent to which we haddeployed our borrowings to make investments. During the period, we reduced our exposure to Sterling from 45.7% to 25.8% andincreased our exposure to the US Dollar and Yen to 25.6% and 21.0% respectively. APPOINTMENTS I was pleased to announce at the Annual General Meeting in July the appointmentof Christopher Hohn as an additional independent non-executive Director. TheChildren's Investment Fund (TCI), where Chris is the founder and principal, hasdeveloped an outstanding investment record. At the AGM, your board also welcomedthe appointment of David Haysey as Chief Investment Officer. David has adistinguished record in the asset management sector, first at S G Warburg andmost recently at Deutsche Bank Asset Management. Rothschild18 November 2005 Consolidated Income Statement Six months ended 30 September 2005 Notes Revenue Capital Total return return £'000 £'000 £'000 Income Investment income 13,604 - 13,604 Other income 871 - 871 Losses on dealing investments held at fair value (7,829) - (7,829) ___________________________________Total income 6,646 - 6,646 Gains on portfolio investments held at fair value - 197,552 197,552 Other capital items - (11,079) (11,079) ___________________________________ 6,646 186,473 193,119 Expenses Administrative expenses (3,748) (4,307) (8,055) Investment management fees (3,530) (2,813) (6,343) ___________________________________Profit before finance costs and tax (632) 179,353 178,721 Finance costs (2,510) - (2,510) ___________________________________Profit before tax (3,142) 179,353 176,211 Taxation (931) (5,901) (6,832) ___________________________________Profit for the period (4,073) 173,452 169,379 ___________________________________ Profit attributable to minority interests - 9 9 Profit attributable to equity shareholders (4,073) 173,443 169,370 ___________________________________ (4,073) 173,452 169,379 ___________________________________ Earnings per ordinary share 2 108.5p The total column of this statement represents the Group's Income Statement,prepared in accordance with International Financial Reporting Standards. Thesupplementary revenue return and capital return columns are both prepared underguidance published by the Association of Investment Trust Companies. All itemsin the above statement derive from continuing operations. Consolidated Income Statement (continued) Six months ended 30 September 2004 Year ended 31 March 2005 ---------------------------------- --------------------------------- Restated Restated Revenue Capital Revenue Capital return return Total return return Total £'000 £'000 £'000 £'000 £'000 £'000 Income Investment income 11,741 - 11,741 20,838 - 20,838 Other income 214 - 214 350 - 350 Losses on dealing investments held at fair value (7,630) - (7,630) (12,644) - (12,644) __________________________________ ________________________________ Total income 4,325 - 4,325 8,544 - 8,544 Gains on portfolio investments held at fair value - 13,712 13,712 - 146,038 146,038 Other capital items - (3,362) (3,362) - 8,999 8,999 __________________________________ ________________________________ 4,325 10,350 14,675 8,544 155,037 163,581 Expenses Administrative expenses (3,436) (1,548) (4,984) (6,119) (4,042) (10,161) Investment management fees (2,194) (442) (2,636) (4,860) (5,347) (10,207) __________________________________ ________________________________ Profit before finance costs and tax (1,305) 8,360 7,055 (2,435) 145,648 143,213 Finance costs (1,688) - (1,688) (3,285) - (3,285) __________________________________ ________________________________ Profit before tax (2,993) 8,360 5,367 (5,720) 145,648 139,928 Taxation (990) 2,879 1,889 (374) 1,241 867 __________________________________ ________________________________ Profit for the period (3,983) 11,239 7,256 (6,094) 146,889 140,795 __________________________________ ________________________________ Profit attributable to minority interests - 1 1 - 91 91 Profit attributable to equity shareholders (3,983) 11,238 7,255 (6,094) 146,798 140,704 __________________________________ ________________________________ (3,983) 11,239 7,256 (6,094) 146,889 140,795 __________________________________ ________________________________ Earnings per ordinary share 4.7p 90.0p The total column of this statement represents the Group's Income Statement,prepared in accordance with International Financial Reporting Standards. Thesupplementary revenue return and capital return columns are both prepared underguidance published by the Association of Investment Trust Companies. All itemsin the above statement derive from continuing operations. Consolidated Statement of Changes in Equity Share Capital Cash-flow Foreign Capital Retained Minority Total capital redemption hedging currency reserve earnings interests £'000 Six months ended reserve reserve translation £'000 £'000 £'000 30 September 2005 £'000 £'000 £'000 reserve ----------------- £'000 Balance at 31 March 2005 156,178 33,978 - (52) 914,206 8,812 134 1,113,256 Profit for the period - - - - 173,443 (4,073) 9 169,379 Cash-flow hedges Gains/(losses) taken to equity - - (854) - - - - (854) Transferred to the income statement for the period - - 157 - - - - 157 Exchange movements arising on consolidation - - - 741 - - - 741 Ordinary dividend paid - - - - - (4,842) - (4,842) ___________________________________________________________________________________________________ Balance at 30 September 2005 156,178 33,978 (697) 689 1,087,649 (103) 143 1,277,837 ___________________________________________________________________________________________________ Six months Share Capital Cash-flow Foreign Capital Retained Minority Total ended capital redemption hedging currency reserve earnings interests £'000 30 September £'000 reserve reserve translation £'000 £'000 £'000 2004 £'000 £'000 reserve restated £'000 ------------ Balance at 31 March 2004 156,848 33,308 - - 771,085 19,768 43 981,052 Profit for the period - - - - 11,238 (3,983) 1 7,256 Exchange movements arising on consolidation - - - 29 - - - 29 Ordinary dividend paid - - - - - (4,862) - (4,862) Purchase of own shares (670) 670 - - (3,677) - - (3,677) _____________________________________________________________________________________________________ Balance at 30 September 2004 156,178 33,978 - 29 778,646 10,923 44 979,798 _____________________________________________________________________________________________________ Year ended Share Capital Cash-flow Foreign Capital Retained Minority Total 31 March capital redemption hedging currency reserve earnings interests £'000 2005 £'000 reserve reserve translation £'000 £'000 £'000 restated £'000 £'000 reserve -------- £'000 Balance at 31 March 2004 156,848 33,308 - - 771,085 19,768 43 981,052 Profit for the period - - - - 146,798 (6,094) 91 140,795 Exchange movements arising on consolidation - - - (52) - - - (52) Ordinary dividend paid - - - - - (4,862) - (4,862) Purchase of own shares (670) 670 - - (3,677) - - (3,677) _____________________________________________________________________________________________________ Balance at 31 March 2005 156,178 33,978 - (52) 914,206 8,812 134 1,113,256 _____________________________________________________________________________________________________ Consolidated Balance Sheet Notes 30 September 31 March 30 September 2005 2005 2004 £'000 Restated Restated £'000 £'000 Non-current assets Investments held at fair value 4 1,437,440 1,126,244 969,726Tangible fixed assets 227 214 220Retirement benefit asset 589 734 -Deferred tax asset 2,570 8,736 9,374 ______________________________________ 1,440,826 1,135,928 979,320 Current assets Dealing investments held at fair value 2,030 - 5,161Sales for future settlement 65,274 20,026 31,979Other receivables 12,092 12,365 14,794Tax receivable 148 26 385Cash at bank 80,398 70,416 76,860 ______________________________________ 159,942 102,833 129,179 ______________________________________Total assets 1,600,768 1,238,761 1,108,499 ______________________________________ Current liabilities Bank loans and overdrafts (63,793) (7,829) (1,953)Securities sold short (9,958) (7,893) (7,815)Purchases for futuresettlement (37,998) (7,596) (15,759)Other payables (3,929) (8,580) (4,851) ______________________________________ (115,678) (31,898) (30,378) Net current assets 44,264 70,935 98,801 ______________________________________Total assets less currentliabilities 1,485,090 1,206,863 1,078,121 ______________________________________ Non-current liabilities Bank loans (186,822) (79,304) (82,804)Provisions (20,431) (14,303) (12,070)Retirement benefit liability - - (3,448) ______________________________________ (207,253) (93,607) (98,322) ______________________________________Net assets 1,277,837 1,113,256 979,799 ______________________________________ Equity attributable to equity holders Ordinary share capital 156,178 156,178 156,178Capital redemption reserve 33,978 33,978 33,978Cash-flow hedging reserve (697) - -Foreign currency translationreserve 689 (52) 29Capital reserve-realised 809,684 757,544 681,371Capital reserve-unrealised 277,965 156,662 97,276Retained earnings (103) 8,812 10,923 ______________________________________Total shareholders' equity 1,277,694 1,113,122 979,755Minority interest in equity 143 134 44 ______________________________________Total equity 1,277,837 1,113,256 979,799 ______________________________________ Net asset value per ordinary share 818.1p 712.7p 627.3p Consolidated Cash Flow Statement Notes 30 September 30 September 31 March 2005 2004 2005 £'000 Restated Restated £'000 £'000Cash outflow from OperatingActivities 8 (141,210) (2,207) (15,769) ______________________________________ Investing Activities Purchase of fixed assets (105) (34) (81)Sale of fixed assets 46 13 19 ______________________________________Net cash outflow fromInvesting Activities (59) (21) (62) ______________________________________Financing Activities - (3,676) (3,677)Buy-back of ordinary sharesIncrease in term loan 103,358 - -Equity dividend paid (4,842) (4,862) (4,862)Minority interests - - 91 ______________________________________Net cash inflow/(outflow)from Financing Activities 98,516 (8,538) (8,448) ______________________________________Decrease in cash and cashequivalents in the period (42,753) (10,766) (24,279)Cash and cash equivalents atthe start of the period 77,443 101,925 101,925Effect of foreign exchangerate changes (3,481) 124 (203) ______________________________________Cash and cash equivalents atthe period end 31,209 91,283 77,443 ______________________________________ Reconciliation: Cash at bank 80,398 76,860 70,416Money market funds (includedin portfolio investments) 14,604 16,376 14,856Bank loans and overdrafts (63,793) (1,953) (7,829) ______________________________________Cash and cash equivalents atthe period end 31,209 91,283 77,443 ______________________________________ Notes to the Financial Statements 1. ACCOUNTING POLICIES BASIS OF ACCOUNTING All listed companies in the European Union ("EU") are required to present theirconsolidated financial statements for accounting periods beginning on or after 1January 2005 in accordance with International Financial Reporting Standards("IFRS") as adopted by the EU. Therefore, the Group's consolidated financialstatements for the year ending 31 March 2006 will be presented on this basiswith IFRS comparatives. These interim financial statements have been prepared onthe basis of the IFRS accounting polices expected to be adopted in the year endconsolidated financial statements. Reconciliations have been provided on certainkey figures to UK Generally Accepted Accounting Principles ("UK GAAP"), andthese, together with the explanation of the resulting changes in accountingpolicies, are set out in notes 5, 6 and 7. The Group's transition date for the adoption of IFRS, including theimplementation of IAS 32 and IAS 39 dealing with financial instruments, is 1April 2004. This transition date has been selected in accordance with IFRS 1,First-time Adoption of International Financial Reporting Standards. Although there is now a fairly stable platform, standards continue to evolve andthose currently in issue and endorsed by the EU are subject to interpretation bythe International Financial Reporting Interpretations Committee ("IFRIC") andfurther standards may be issued and endorsed by the EU before 31 March 2006.These uncertainties could result in the need to change the basis of accountingor presentation of certain financial information from that applied in thepreparation of this document. The Group is required to apply its IFRS accounting policies retrospectively todetermine its opening IFRS balance sheet as at the transition date of 1 April2004 and the comparative information for the periods ended 30 September 2004 and31 March 2005. The financial statements have been prepared on the historical cost basis, exceptfor the revaluation of certain financial instruments and investment properties.The principal accounting policies adopted are set out below. Where thepresentational guidance set out in the Statement of Recommended Practice("SORP") for investment trusts issued by the Association of Investment TrustCompanies ("AITC") in January 2003 is consistent with the requirements of IFRS,the Directors have sought to prepare the financial statements on a basis whichcomplies with the recommendation of the SORP. BASIS OF CONSOLIDATION The consolidated financial statements incorporate the financial statements ofthe Company and entities controlled by the Company (its subsidiaries) made up to31 March each year. Control is achieved where the Company has the power togovern the financial and operating policies of an investee entity so as toobtain benefits from its activities. All intra-group transactions, balances,income and expenses are eliminated on consolidation. PRESENTATION OF INCOME STATEMENT In order to reflect better the activities of an investment trust company, and inaccordance with guidance issued by the AITC, supplementary information whichanalyses the income statement between items of a revenue and capital nature hasbeen presented alongside the income statement. In accordance with the Company'sstatus as an investment trust, net capital returns may not be distributed by wayof dividend. Additionally, the net revenue is the measure the Directors believeappropriate in assessing the Company's compliance with certain requirements setout in Section 842 of the Income and Corporation Taxes Act 1988. INCOME Dividend income from investments is recognised when the shareholder's right toreceive payment 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 has elected to receive dividends in the form of additionalshares 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 amountof the cash dividend foregone 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. Interest income is accrued on a time basis, by reference to the principaloutstanding at the effective interest rate applicable, which is the rate thatdiscounts estimated future cash receipts through the expected life of thefinancial asset to that asset's net carrying amount. Underwriting commission is recognised as earned. EXPENSES All expenses and interest costs are accounted for on an accruals basis. Inrespect of the analysis between revenue and capital items presented within theincome statement, all expenses have been presented as revenue items except thoseitems listed below: • Expenses are allocated to capital where a direct connection with the maintenance or enhancement of the value of the investments can be demonstrated. Expenses are allocated to revenue where there is an indirect connection. • Investment management fees are considered to be indirect costs and are therefore allocated to revenue. Performance fees are allocated to capital as they arise as a result of the capital performance of the relevant investment portfolio. • The Group has in force certain incentive arrangements whereby fees payable are based entirely on the increase in the values of certain unquoted investments. The cost of these incentive arrangements is considered to be a direct cost of enhancing the value of these investments and is therefore allocated to capital. • The Group has in force long-term incentive arrangements for Lord Rothschild and Duncan Budge, both executive Directors of RITCP, and for other senior executives, whereby they receive additional remuneration based entirely on any increase in the Company's share price subject to a performance condition. The primary objective of the Company is to deliver long-term capital growth for its investors. The costs of these arrangements derive principally from the capital performance of the Group and consequently the Directors consider it appropriate to allocate the costs of these arrangements in their entirety to capital. • The Group has an Executive Bonus Plan for Lord Rothschild and Duncan Budge, whereby they receive a bonus calculated by reference to the Company's three-year moving average outperformance over three key total return indices. The amount of the bonus depends principally on the capital performance of the Group and therefore the Directors consider it appropriate to charge the whole of the bonus to capital. • Expenses which are incidental to the disposal of an investment are deducted from the disposal proceeds of the investment. • Costs incurred in connection with abortive portfolio investment transactions are also allocated to capital. FINANCE COSTS Finance costs are accounted for on an effective yield basis. Since these costsare considered to be an indirect cost of maintaining the value of theinvestments they are allocated in full to revenue. FOREIGN CURRENCIES The individual financial statements of each Group entity are presented in thecurrency of the primary economic environment in which the entity operates, i.e.its functional currency. For the purpose of the consolidated financialstatements, the results and financial position of each entity are expressed inpounds sterling ("sterling") which is the functional currency of the Company,and the presentational currency of the Group. Transactions in currencies otherthan sterling are recorded at the rate of exchange prevailing on the dates ofthe transactions. At each balance sheet date, monetary items and non-monetaryassets and liabilities that are fair valued and are denominated in foreigncurrencies are retranslated at the rates prevailing on the balance sheet date.Gains and losses arising on retranslation are included in net profit or loss forthe period in respect of those investments which are classified as fair valuethrough profit or loss. All foreign exchange gains and losses, except thosearising from the translation of foreign subsidiaries, are recognised in theincome statement. In accordance with IFRS, a foreign currency translationreserve has been established in respect of the exchange movements arising onconsolidation since 31 March 2004. TAXATION The tax expense represents the sum of the tax currently payable and deferredtax. The tax currently payable is based on taxable profit for the year. Taxableprofit differs from profit before tax as reported in the income statementbecause it excludes items of income or expense that are taxable or deductible inother years and it further excludes items that are not subject to tax or are notdeductible for tax purposes. The Group's liability for current tax is calculatedusing tax rates that have been enacted or substantively enacted by the balancesheet date. Investment trusts which have approval under Section 842 of the Income andCorporation Taxes Act 1988 are not subject to tax on capital gains. In view ofthe Company's status as an investment trust, and its intention to continuemeeting the conditions required to obtain approval for the foreseeable future,the Company has not provided current or deferred tax on any capital gains orlosses arising on the revaluation or disposal of investments. The carrying amount of the deferred tax asset is reviewed at each balance sheetdate and reduced to the extent that it is no longer probable that sufficienttaxable profits will be available to allow all or part of the asset to berecovered. Deferred tax is calculated at the tax rates that are expected to apply in theperiod when the liability is settled or the asset is realised. Deferred tax ischarged or credited in the income statement, except when it relates to itemscharged or credited directly to equity, in which case the deferred tax is alsodealt with in equity. 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. All of the Group's investments are defined by IFRS as investments designated atfair value through profit and loss but are also described in these financialstatements as investments held at fair value. All investments are designated upon initial recognition as held at fair valueand, except as noted below, are measured at subsequent reporting dates at fairvalue. Fair value is either the bid price or the last traded price, depending onthe convention of the exchange on which the investment is quoted. Investments inhedge funds and long equity funds are valued at the closing price, the bid priceor the single price as appropriate, released by the relevant investment manager.Changes in the fair value of all investments held at fair value are recognisedin the income statement. On disposal, realised gains and losses are alsorecognised in the income statement. Transaction costs, including bid-offerspreads, are included within gains on investments held at fair value. In respect of unquoted instruments, or where the market for a financialinstrument is not active, fair value is established by using valuationtechniques, which may include using recent arm's length market transactionsbetween knowledgeable, willing parties, if available, reference to the currentfair value of another instrument that is substantially the same and discountedcash flow analysis. Where there is a valuation technique commonly used by marketparticipants to price the instrument and that technique has been demonstrated toprovide reliable estimates of prices obtained in actual market transactions,that technique is utilised. Where no reliable fair value can be estimated forsuch unquoted equity instruments, they are carried at cost, subject to anyprovision for impairment. Where securities are designated upon initial recognition as fair value throughprofit or loss, gains and losses arising from changes in fair value are includedin net profit or loss for the period as a capital item. Foreign exchange gains and losses arising on investments held at fair value areincluded within the changes in their fair values. Investment properties are measured initially at cost, including relatedtransaction costs. After initial recognition at cost, investment properties arecarried at their fair values based on the professional valuation made as of eachreporting date. Valuation surpluses and deficits arising in the period areincluded in the income statement. The gain or loss arising on the disposal of aproperty is determined as the difference between the sales proceeds and thecarrying amount of the asset at the beginning of the period and is recognised inthe income statement. DEALING INVESTMENTS Current asset investments held by the dealing subsidiary undertaking, includingfutures, options and other derivative instruments, are stated in the balancesheet at fair value. The movements in fair value of trading positions areincluded in the revenue return column of the income statement. Securities soldshort are valued at their offer prices in accordance with IFRS. CASH AND CASH EQUIVALENTS Cash at bank in the consolidated balance sheet comprises cash balances anddeposits held at call and short notice with banks. Bank overdrafts that arerepayable on demand and which form an integral part of the Group's cashmanagement are included as a component of cash and cash equivalents for thepurposes of the consolidated cash flow statement. Short-term highly liquidinvestments with original maturities of three months or less are also includedas a component of cash and cash equivalents for the purposes of the consolidatedcash flow statement. PROVISIONS A provision is recognised in the balance sheet when the Group has a constructiveor legal obligation as a result of a past event and it is probable that anoutflow of economic benefits will be required to settle the obligation. If theeffect is material, provisions are determined by discounting the expected futurecash flows at a pre-tax rate that reflects current market assessments of thetime value of money and, where appropriate, the risks specific to the liability. SHARE-BASED PAYMENTS In accordance with IFRS 2, Share-based payment, a charge is required for allshare-based payments which includes the long-term incentives provided under theCompany's Share Appreciation Rights Plan ("SARs"). The cost of granting theseSARs to employees and Directors is recognised through the income statement. TheCompany has used the binomial option valuation model and the resulting value isamortised through the income statement over the vesting periods of the relevantSARs. The charge is reversed if it appears likely that the performance criteriawill not be met. TANGIBLE FIXED ASSETS Tangible fixed assets are shown at cost less depreciation. Depreciation isprovided on all tangible fixed assets. It is calculated by the Group on astraight line basis by reference to original cost, estimated useful life andresidual value. The period of estimated useful life for this purpose is betweenthree and four years. PENSIONS J. Rothschild Capital Management Limited, a wholly-owned subsidiary undertaking,is a participating employer in the Group's non-contributory funded, definedbenefit retirement scheme, which is currently closed to new members and theassets of which are held in a trustee administered fund. The Group accounts for its defined benefit retirement scheme by reference to IAS19, Employee benefits. For the defined benefit retirement scheme, the cost ofbenefits accruing during the year in respect of current and past service ischarged to the income statement and allocated to revenue. The expected return onthe scheme's assets, actuarial gains and losses and the increase in the presentvalue of the scheme's liabilities arising from the passage of time are alsorecognised in the income statement. An actuarial valuation of the definedbenefit retirement scheme is undertaken every three years as at 1 January and isupdated as at each 31 March and 30 September during the intervening valuationdates. The valuation is carried out using the projected unit method of fundingbasis. The income statement also includes costs incurred in respect of definedcontribution schemes and these costs comprise the contributions payable in theyear. OTHER RECEIVABLES Other receivables do not carry any interest and are short-term in nature: theyare accordingly stated at their nominal value as reduced by appropriateallowances for estimated irrecoverable amounts. BANK BORROWINGS Interest-bearing bank loans and overdrafts are recorded initially at theproceeds received, net of direct issue costs. Finance charges, includingpremiums payable on settlement or redemption and direct issue costs, areaccounted for on an accruals basis in the income statement using the effectiveinterest method and are added to the carrying amount of the instrument to theextent that they are not settled in the period in which they arise. OTHER PAYABLES Other payables are not interest-bearing and are stated at their nominal value. DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGE ACCOUNTING The Group's activities expose it primarily to the financial risks of changes inforeign currency exchange rates and interest rates. From time to time, the Groupuses foreign exchange forward contracts and interest rate swap contracts tohedge these exposures. The dealing subsidiary may also use derivative financialinstruments for trading purposes. The Group has adopted trade date accounting. Accordingly, derivative financialinstruments are recognised on the date the Group enters into the relevantcontract, and are de-recognised on the date which it commits to their sale. Changes in the fair value of derivative financial instruments that aredesignated and effective as hedges of future cash flows are recognised directlyin equity and any ineffective portion is recognised immediately in the incomestatement. The amount in equity is released to income when the forecasttransaction impacts profit or loss. Changes in the fair value of derivative financial instruments that do notqualify for hedge accounting are recognised in the income statement as theyarise. If capital in nature, the associated change in value is presented as acapital item in the income statement. Hedge accounting is discontinued when the hedging instrument expires or is sold,terminated, or exercised, or no longer qualifies for hedge accounting. At thattime, any cumulative gain or loss on the hedging instrument recognised in equityfor cash flow hedges is retained in equity until the forecasted transactionoccurs. If a hedged transaction is no longer expected to occur, the netcumulative gain or loss recognised in equity is transferred to net profit orloss in the period. Derivatives embedded in other financial instruments or non-financial hostcontracts are treated as separate derivatives when their economiccharacteristics and risks are not closely related to those of the host contractsand the financial instrument is not classified at fair value through profit orloss. ALLOCATION TO CAPITAL All expenses and interest payable are accounted for on an accruals basis. Inrespect of the analysis between revenue and capital items presented within theincome statement and the statement of changes in equity, all expenses have beenpresented as revenue items except as listed below: The following are presented as realised capital items: • gains and losses on the realisation of investments • realised exchange differences of a capital nature • expenses, together with the related taxation effect, allocated to capital in accordance with the above policies • realised gains and losses on transactions undertaken to hedge an exposure of a capital nature • the cost of purchasing ordinary shares for cancellation. The following are presented as unrealised capital items: • increases and decreases in the valuation of investments held at the year end • unrealised exchange differences of a capital nature • unrealised gains and losses on transactions undertaken to hedge an exposure of a capital nature. 2. EARNINGS PER ORDINARY SHARE The earnings per ordinary share for the six months ended 30 September 2005 isbased on the net gain of £169.4 million (six months ended 30 September 2004:£7.3 million as restated; year ended 31 March 2005: £140.7 million as restated)and the weighted average number of ordinary shares in issue during the period of156.2 million (six months ended 30 September 2004: 156.7 million; year ended 31March 2005: 156.4 million). The earnings per ordinary share figure detailed above can be further analysedbetween revenue and capital as set out below: Six months Six months Year ended ended ended 31 March 30 September 30 September 2005 2005 2004 Restated £'000 Restated £'000 £'000 Net revenue loss (4,073) (3,983) (6,094) Net capital profit 173,443 11,238 146,798 ______________________________________ 169,370 7,255 140,704 Pence Pence Pence per share per share per share Revenue loss per ordinary share (2.6) (2.5) (3.9) Capital earnings per ordinary share 111.1 7.2 93.9 ______________________________________ 108.5 4.7 90.0 3. NET ASSET VALUE PER ORDINARY SHARE The net asset value per ordinary share as at 30 September 2005 is based on thenet assets attributable to the equity shareholders of £1,277.7 million (30September 2004: £979.8 million as restated; 31 March 2005: £1,113.1 million asrestated) and the number of ordinary shares in issue at 30 September 2005 of156.2 million (30 September 2004: 156.2 million; 31 March 2005: 156.2 million). 4. MOVEMENTS IN INVESTMENTS Quoted Unquoted Funds and Other Total £'000 and partnerships securities £'000 property £'000 £'000 £'000 At 31 March 2005(restated) 633,656 163,950 215,596 113,042 1,126,244 Additions 415,834 33,990 51,634 176,704 678,162 Disposals (228,940) (50,957) (12,930) (242,731) (535,558) Revaluation 112,212 13,220 43,650 (490) 168,592 ______________________________________________________________At 30 September 932,762 160,203 297,950 46,525 1,437,4402005 5. RESTATEMENT OF BALANCES AS AT 31 MARCH 2005 (a) Restatement of balances as at 31 March 2005 On 1 April 2005 the Group adopted International Financial Reporting Standards.In accordance with IFRS 1, First-time Adoption of International FinancialReporting Standards, the following analysis shows a reconciliation of net assetsand profit as previously reported under the applicable UK Accounting Standardsand the SORP as at 31 March 2005 to the restated net assets and profit underIFRS as reported in these financial statements. Notes Previously Effect of Restated reported transition 31 March 31 March 2005 to IFRS 2005 £'000 £'000 £'000 Non-current assets Investments held at fairvalue 1 1,127,346 (1,102) 1,126,244 Tangible fixed assets 214 - 214 Retirement benefit asset 2 - 734 734 Deferred tax asset 3 - 8,736 8,736 ______________________________________ 1,127,560 8,368 1,135,928 ______________________________________ Current assets Sales for future settlement 20,026 - 20,026Other receivables 12,365 - 12,365Tax receivable 26 - 26Deferred tax asset 3 9,205 (9,205) -Cash at bank 70,416 - 70,416 ______________________________________ 112,038 (9,205) 102,833 ______________________________________Total assets 1,239,598 (837) 1,238,761 ______________________________________Current liabilities Bank loans and overdrafts (7,829) - (7,829)Securities sold short 1 (7,879) (14) (7,893)Purchases for future settlement (7,596) - (7,596)Other payables (8,580) - (8,580)Proposed dividend 4 (4,842) 4,842 - ______________________________________ (36,726) 4,828 (31,898) ______________________________________Net current assets 75,312 (4,377) 70,935 ______________________________________Total assets less currentliabilities 1,202,872 3,991 1,206,863 ______________________________________Non-current liabilities Bank loans (79,304) - (79,304)Provisions 5 (14,738) 435 (14,303) ______________________________________ (94,042) 435 (93,607) ______________________________________Pension asset 2 514 (514) -Net assets 1,109,344 3,912 1,113,256 ______________________________________ Equity attributable to equityholders Ordinary share capital 156,178 - 156,178Capital redemption reserve 33,978 - 33,978Foreign currency translationreserve 6 - (52) (52)Capital reserve-realised 757,544 - 757,544Capital reserve-unrealised 1,5 157,578 (916) 156,662Retained earnings 1,4,6 3,932 4,880 8,812 ______________________________________Total shareholders' equity 1,109,210 3,912 1,113,122Minority interest in equity 134 - 134 ______________________________________Total equity 1,109,344 3,912 1,113,256 Notes to the reconciliation: 1. Quoted investments are designated as held at fair value under IFRS and arecarried at bid prices whereas previously, under UK GAAP, they were carried atmid prices. The aggregate difference is a downward revaluation of £1.1 millionand this also decreases retained earnings by the same amount. 2. In accordance with UK GAAP, the retirement benefit asset was previouslydisclosed in the balance sheet net of attributable deferred taxation. The rulescontained in IAS 19, Employee benefits, now require the deferred taxation to berecorded separately. In addition, actuarial gains and losses were previouslyrecorded in the Consolidated Statement of Total Recognised Gains and Losses:under IAS 19, these items are now recognised in the Consolidated IncomeStatement. 3. The deferred tax asset was previously included in current assets. Inaccordance with IFRS, it has now been reclassified as a non-current asset andthe restated amount now includes the deferred tax liability attributable to theretirement benefit asset. The deferred tax balance has also been reduced becauseof a reduction in the SAR provision referred to below. 4. Under UK company law, companies were required to provide for their proposeddividend in advance of the dividend being declared and approved at the AnnualGeneral Meeting. Under IAS 37, Provisions, contingent liabilities and contingent assets, the proposed dividend can no longer be provided for in the year end balance sheet since, at that date,the dividend did not represent a liability of the Company. At 31 March 2005 accrued dividends of £4.8 million were removed from other liabilities. 5. Under IFRS 2, Share-based payment, a charge is required for all share-basedpayments which includes the long-term incentives provided under the Company'sShare Appreciation Rights Plan ("SARs").The charge in the Consolidated IncomeStatement is now based on the difference between the fair value of the SARs fromone balance sheet date to the next. Under UK GAAP, the profit and loss chargewas based on the difference between the exercise price and the market price ofRITCP's shares at the relevant balance sheet date. 6. In accordance with IFRS, a foreign currency translation reserve has now beenrecognised in respect of the exchange movements arising on consolidation since31 March 2004. (b) Reconciliation of the Statement of Total Return to the Consolidated IncomeStatement for the year ended 31 March 2005 Under IFRS, the Consolidated Income Statement is the equivalent of theConsolidated Statement of Total Return reported previously. 2005 Earnings per share Notes £'000 (impact in pence) Total transfer to reserves per theConsolidated Statement of Total Return 138,267 Add back dividends paid and proposed 1 4,842 - Investments held at fair value changed frommid to bid basis at 31 March 2004 2 (693) (0.4) Investments held at fair value changed frommid to bid basis at 31 March 2005 2 (1,116) (0.7) Adjustment to SAR provision 3 30 - Actuarial gain on pension scheme 4 558 0.4 Deferred tax adjustment attributable to theabove 5 (1,184) (0.8) _______________________________Net profit per the Consolidated IncomeStatement 140,704 (1.5) Notes to the reconciliation: 1. Ordinary dividends declared and paid during the period are dealt with throughthe Consolidated Statement of Changes in Equity. 2. The investment portfolios are required to be valued at fair value under IFRS.In previous periods certain discounts were applied to the valuation of somequoted investments to take account of their illiquidity: these discounts havenow been removed in accordance with IAS 39. The restated values differ from theprevious valuations by £0.7 million and £1.1 million respectively. 3. As mentioned above, the charge in respect of the SAR incentive plan has beenreduced pursuant to the new IFRS 2 accounting treatment. 4. The actuarial gain on the pension scheme was previously recorded in theConsolidated Statement of Recognised Gains and Losses. 5. This adjustment comprises the aggregate of the deferred tax adjustmentrelating to the SARs provision and the movement in deferred tax relating to thepension scheme (which was previously recorded in the Consolidated Statement ofRecognised Gains and Losses). 6. RESTATEMENT OF BALANCES AS AT 30 SEPTEMBER 2004 (a) Restatement of balances as at 30 September 2004 On 1 April 2005 the Group adopted International Financial Reporting Standards.In accordance with IFRS 1, First-time Adoption of International FinancialReporting Standards, the following analysis shows a reconciliation of net assetsand profit as previously reported under the applicable UK Accounting Standardsand the SORP as at 30 September 2004 to the restated net assets and profit underIFRS as reported in these financial statements. Previously Effect of Restated reported transition 30 September 30 September to IFRS 2004 2004 £'000 £'000 Notes £000's Non-current assets Investments held at fair value 1 970,263 (537) 969,726 Tangible fixed assets 220 - 220 Deferred tax asset 2 - 9,374 9,374 ______________________________________ 970,483 8,837 979,320 ______________________________________ Current assets Dealing investments held at fair value 5,161 - 5,161Sales for future settlement 31,979 - 31,979Other receivables 14,794 - 14,794Tax receivable 385 - 385Deferred tax asset 2 8,736 (8,736) -Cash at bank 76,860 - 76,860 ______________________________________ 137,915 (8,736) 129,179 ______________________________________Total assets 1,108,398 101 1,108,499 ______________________________________ Current liabilities Bank loans and overdrafts (1,953) - (1,953)Securities sold short 1 (7,800) (15) (7,815)Purchases for future settlement (15,759) - (15,759)Other payables (4,851) - (4,851) ______________________________________ (30,363) (15) (30,378) ______________________________________Net current assets 107,552 (8,751) 98,801 ______________________________________ Total assets less currentliabilities 1,078,035 86 1,078,121 Non-current liabilities Bank loans (82,804) - (82,804) Provisions 3 (12,838) 768 (12,070) Retirement benefit liability 4 - (3,448) (3,448) ______________________________________ (95,642) (2,680) (98,322) ______________________________________Net assets 982,393 (2,594) 979,799 ______________________________________ Equity attributable to equity holders Ordinary share capital 156,178 - 156,178 Capital redemption reserve 33,978 - 33,978 Foreign currency translation reserve 5 - 29 29 Capital reserve-realised 681,371 - 681,371 Capital reserve-unrealised 1,2,3 97,678 (402) 97,276Retained earnings 1,3,4,5 13,144 (2,221) 10,923 ______________________________________ Total shareholders' equity 982,349 (2,594) 979,755 Minority interest in equity 44 - 44 ______________________________________ Total equity 982,393 (2,594) 979,799 Notes to the reconciliation: 1. Quoted investments are designated as held at fair value under IFRS and arecarried at bid prices whereas previously, under UK GAAP, they were carried atmid prices. The aggregate difference is a downward revaluation of £0.5 millionand this also decreases retained earnings by the same amount. 2. The deferred tax asset was previously included in current assets. Inaccordance with IFRS, it has now been reclassified as a non-current asset andthe restated amount now includes the deferred tax asset attributable to theretirement benefit liability. The deferred tax balance has also been reducedbecause of a reduction in the SAR provision referred to below. 3. Under IFRS 2, Share-based payment, a charge is required for all share-basedpayments including long-term incentives provided under the Group's ShareAppreciation Rights Plan ("SARs").The charge in the Consolidated IncomeStatement is now based on the difference between the fair value of the SARs fromone balance sheet date to the next. Under UK GAAP, the profit and loss chargewas based on the difference between the exercise price and the market price ofRITCP's shares at the relevant balance sheet date. 4. The Group adopted FRS 17, Retirement Benefits as at 31 March 2005 but theinterim financial statements for the six months ended 30 September 2004 had beendrawn up in accordance with SSAP 24. It has therefore been necessary to restatethe balance sheet as at 30 September 2004 in accordance with IAS 19, Employeebenefits. 5. In accordance with IFRS, a foreign currency translation reserve has now beenrecognised in respect of the exchange movements arising on consolidation since31 March 2004. (b) Reconciliation of the Statement of Total Return to the Consolidated IncomeStatement for the six months ended 30 September 2004 Under IFRS, the Consolidated Income Statement is the equivalent of theConsolidated Statement of Total Return reported previously. 2004 Earnings per share Notes £'000 (impact in pence) Total transfer to reserves per the ConsolidatedStatement of Total Return 8,526 - Investments held at fair value changed from midto bid basis at 31 March 2004 1 (693) (0.4) Investments held at fair value changed from midto bid basis at 30 September 2004 1 (552) (0.3) Adjustment to SAR provision 2 24 - Actuarial loss on pension scheme 3 (75) - Deferred tax adjustment attributable to the above 4 25 - ____________________________Net profit per the Consolidated Income Statement 7,255 (0.7) Notes to the reconciliation: 1. The investment portfolios are required to be valued at fair value under IFRS.In previous periods certain discounts were applied to the valuation of somequoted investments to take account of their illiquidity: these discounts havenow been removed in accordance with IAS 39. The restated values differ from theprevious valuations by £0.7 million and £0.6 million respectively. 2. As mentioned above, the charge in respect of the SAR incentive plan has beenreduced pursuant to the new IFRS 2 accounting treatment. 3. The Group adopted FRS l7, Retirement Benefits as at 31 March 2005 but theinterim financial statements for the six months ended 30 September 2004 had beendrawn up in accordance with SSAP 24. It has therefore been necessary to restatethe balance sheet as at 30 September 2004 in accordance with IAS 19, Employeebenefits. The actuarial loss on the pension scheme has been charged to theincome statement in accordance with IAS 19. 4. This adjustment comprises the aggregate of the deferred tax adjustmentrelating to the SARs provision and the movement in deferred tax relating to thepension scheme. 7. SUMMARY RECONCILIATION OF THE CHANGE IN EQUITY AT 1 APRIL 2004 1 April 2004 Notes £'000 UK GAAP equity (as previously reported) 975,389 _____________Proposed dividend 1 4,862 Investments held at fair value changed from mid to bid basis 2 693 Adjustment to SAR provision 3 405 Reduction in deferred tax asset arising from the change to the SAR provision 4 (297) _____________ IFRS - increase in equity 5,663 _____________ IFRS equity 981,052 Notes to the reconciliation: 1. Under UK company law, companies were required to provide for their proposeddividend in advance of the dividend being declared and approved at the AnnualGeneral Meeting. Under IAS 37, Provisions, contingent liabilities and contingentassets, the dividend cannot be provided for in the year end balance sheet since,at that date, the dividend did not represent a liability. Accrued dividends of £4.9 million have therefore been removed from other liabilities as at 31 March 2004. 2. Quoted investments are designated as held at fair value under IFRS and arecarried at bid prices whereas previously, under UK GAAP, they were carried atmid prices. As at 31 March 2004, certain discounts were applied to the valuationof some quoted investments to take account of their illiquidity: these discountshave therefore been removed in accordance with IAS 39. The aggregate differencewas an upward revaluation of £0.7 million and this also increased equity by thesame amount. 3. Under IFRS 2, Share-based payment, a charge is required for all share-basedpayments which includes the long-term incentives provided under the Company'sShare Appreciation Rights Plan ("SARs"). The SAR provision is now based on thefair value of the SARs using a binomial option valuation model whereaspreviously the provision was calculated by reference to the difference betweenthe exercise price and the market price of RITCP's shares at the balance sheetdate. 4. The deferred tax attributable to the SARs is calculated by reference to theirintrinsic value (amortised as appropriate during the term of the three yearvesting period).The reduction in the deferred tax asset at 31 March 2004amounted to £0.3 million. 8. CASH FLOW RECONCILIATIONS Reconciliation of the Consolidated Cash Flow Statement for the year ended 31March 2005 Notes Previously Effect of Restated reported transition 31 March 31 March to IFRS 2005 2005 £'000 £'000 £'000Cash outflow from operatingactivities 1 (3,731) (12,038) (15,769) Servicing of finance 1 (3,285) 3,285 - Taxation 1 (860) 860 - Net cash inflow from financialinvestment 1 51,970 (51,970) - Net cash outflow from capitalexpenditure (62) - (62) Equity dividend paid 2 (4,862) 4,862 - __________________________________Net cash inflow before managementof liquid resources and financing 39,170 (55,001) (15,831) Net cash inflow from management ofliquid resources 3 (63,310) 63,310 - Net cash outflow from financing 2 (3,586) (4,862) (8,448) __________________________________ Decrease in cash 4 (27,726) 3,447 (24,279) Reconciliation of the Consolidated Cash Flow Statement for the six months ended30 September 2004 Previously Effect of Restated reported transition 30 September 30 September to IFRS 2004 2004 Notes £'000 £'000 £'000 Cash outflow from operating activities 1 (845) (1,362) (2,207) Servicing of finance 1 (1,687) 1,687 - Taxation 1 (835) 835 - Net cash inflow from financialinvestment 1 71,807 (71,807) - Net cash outflow from capitalexpenditure (21) - (21) Equity dividend paid 2 (4,862) 4,862 - __________________________________ Net cash inflow beforemanagement of liquid resources and financing 63,557 (65,785) (2,228) Net cash inflow from managementof liquid resources 3 (75,287) 75,287 - Net cash outflow from financing 2 (3,676) (4,862) (8,538) __________________________________ Decrease in cash 4 (15,406) 4,640 (10,766) Notes to the reconciliations: 1. Bank interest paid, tax paid and the cash flows from investments (excludingmoney market funds) have now been analysed within operating activities. 2. Ordinary dividends paid are now analysed within financing. 3. The cash flows arising from the purchase and sale of government securitiesare now analysed within operating activities. 4. This adjustment represents the inclusion of money market funds in cash andcash equivalents. 9. LITIGATION In November 1997 proceedings were issued in the New York Courts against a totalof ten defendants, including the Company, by Richbell Information Services Inc.("RIS") and certain connected entities. The proceedings relate to the Company'sinvestment in H-G Holdings Inc. and a loan made to RIS by the Company'swholly-owned subsidiary, Atlantic and General Investment Trust Limited ("AGIT").The claim against all of the defendants was for approximately US$240 million. On15 March 2002 the New York Court dismissed the proceedings in their entirety attheir initial stage for failure to state a claim upon which relief could begranted. On 1 April 2002 the plaintiffs filed an appeal against that dismissal.On 23 September 2003 the New York Appellate Court affirmed the dismissal of theproceedings as to thirty causes of action included in the claim and as to AGIT.The New York Appellate Court reinstated three of the causes of action as toseven of the defendants, including the Company, and referred the matter back tothe New York Court for further proceedings with respect to those three causes ofaction. Based upon legal advice received, the Directors do not believe that theproceedings will have a material effect on the financial position of theCompany. 10. COMPARATIVE INFORMATION The financial information contained in this interim report does not constitutestatutory accounts as defined in section 240 of the Companies Act 1985. Thefinancial information for the half years ended 30 September 2005 and 30September 2004 has not been audited. The information for the year ended 31 March 2005 has been extracted from thelatest published audited financial statements, as restated to comply with IFRS(see Note 5). The audited financial statements for the year ended 31 March 2005have been filed with the Registrar of Companies and the report of the auditorson those accounts contained no qualification or statement under section 237(2)or (3) of the Companies Act 1985. This information is provided by RNS The company news service from the London Stock Exchange