Final Results

British Assets Trust PLC 10 November 2004 BRITISH ASSETS TRUST PLC Date: 10 November 2004 Unaudited results for the year ended 30 September 2004 • Net asset value total return of 14.2 per cent compared to a return of 13.6 per cent from the benchmark index • Dividend yield of 5.3 per cent • Discount of 11.6 per cent Global stockmarkets rose for the second year in succession. The Company's net asset value total return, with net dividends reinvested, was 14.2 per cent. This compares with a total return of 13.6 per cent from the benchmark index of 75 per cent FTSE All-Share Index and 25 per cent FTSE World (ex UK) Index. Gearing enhanced returns in rising markets and the use of the Company's share buy back powers also contributed to the returns for the year. The UK portfolio, which represents the majority of the Company's investments, delivered positive stock selection. However, overseas stock selection, principally in North America, was disappointing. This issue has been discussed with the Managers and the Board is looking for an improvement in performance from this area. Regional asset allocation was neutral. The Company's corporate bond portfolio continues to be an important contributor to the Revenue Account. The turnaround in the world economy since the middle of 2003 has been encouraging. With the help of substantial policy stimulus, global GDP growth in 2004 is set to be the strongest since 1988, although the effect of recent monetary tightening is likely to lead to lower growth in 2005. In line with many other investment trusts, the Company's discount of share price to net asset value widened during the latter part of the year and was 11.6 per cent as at 30 September 2004, compared to 5.9 per cent as at the end of the previous year. The Company's discount however, remains lower than the majority of similar investment trusts, reflecting the ongoing support for the Company's investment approach and the attractive dividend yield. At 5.3 per cent, this was some 26 per cent higher than that available from any other investment trust within the AITC's Global Growth & Income sector. Activity During the first half of the year the Company's exposure to Europe was reduced following a period of strong outperformance, and the exposure to Japan was increased by £10 million, funded by sales of UK equities. Corporate profits in Japan continue to surprise on the upside and, although there is likely to be slower growth in the months ahead due to reduced demand from the US and China, the prospects are still bright set against the standards of the last decade. Elsewhere, the Company has maintained an overweight position in the Pacific (ex Japan) where the Managers remain confident of the region's growth prospects. China, rather than America, is driving the rebound in exports across Asia and there has been a rising demand from China as it becomes a significant manufacturing processing centre as well as an important end user. Corporate profits across the region are heading back to historic highs and free cash flow remains strong. Gearing At the end of the year the Company's gearing, net of cash, was 28.3 per cent, compared to 29.7 per cent as at 30 September 2003. The level of gearing is represented by 20.2 per cent in equities and 8.1 per cent in corporate bonds. The nominal value of the Company's borrowings totals £120 million and comprises two £60 million Bonds, one maturing in 2008 and one in 2031. Earnings and Dividends The Company's earnings were 3.96p per Ordinary Share in respect of the year ended 30 September 2004. At the end of the year the level of dividend cover provided by the Company's Revenue Reserve was 130 per cent which compares to 153 per cent as at 30 September 2003. Shareholders will recall that, when the Company's Growth Shares converted into Ordinary Shares in September 2001, the level of revenue reserves had been built up so that dividend levels following the conversion could be maintained despite the initial shortfall in retained earnings that would be caused by the increased number of Ordinary Shares in issue. Throughout the year, the Board has continued to monitor carefully the Company's revenue projections and its ability to pay dividends. The Board remains clear about the attractions to shareholders of the above average dividend yield. However, it is also aware of the need to balance this with the prime objective of maximising total return that is capital growth plus the dividend yield. On the whole, dividend increases from UK companies so far in 2004 have been ahead of expectations. However, a significant proportion of dividends paid by major UK companies are denominated in US dollars and the Company's income levels have been adversely affected by its weakness against sterling. As stated below, the Company exercised its buy-back powers during the year and will seek to renew these powers at the Annual General Meeting. In addition to enhancing net asset value, the buying back of shares for cancellation reduces the number of shares on which dividends are payable. The Board continues to believe that, unless there are significant reductions in dividends paid by companies in which the Company is invested, it will be able to maintain the current level of dividend in the short term and it would hope to be in a position to grow the dividend again in the medium term. The Board therefore recommends a final dividend of 1.414p per Ordinary Share, payable on 7 January 2005 to shareholders on the register on 10 December 2004. Taken together with the three interim dividends already paid, this brings the total dividend for the year to 5.326p per Ordinary Share, unchanged from the previous year. Marketing As in previous years the Board has placed emphasis on generating demand for the Company's shares through the ZeroCharge(TM)Individual Savings Accounts (Isas) and Investment Plans, in particular during the first quarter of the calendar year when the demand for Isas is at its greatest. The Board was encouraged that demand for the Company's shares during the 2004 Isa season was more than twice that of the previous year. It will continue to place emphasis on marketing the Company's shares through the ZeroCharge(TM) plans, to private client stockbrokers and directly to private investors and their intermediaries. Share Buy-Backs During the year the Company bought back 15,550,000 Ordinary Shares for cancellation, equivalent to 4.4 per cent of the shares in issue at the previous year end, for a total consideration of £15.7 million. These buy backs enhanced the net asset value by 0.52p per share. The Board is of the view that it is important to have a share buy-back facility in place. It will therefore seek to renew its authority at the Annual General Meeting. Management On 2 July 2004, the Company's Managers, ISIS Asset Management plc, announced a proposed merger with F&C Group Limited to create F&C Asset Management plc, one of the UK's largest asset managers. The merger became effective on 11 October 2004. Board Composition During the year the Board sought suitable candidates through the medium of search consultants and was pleased to announce the appointment of Ms Lynn Ruddick as a Director of the Company on 1 October 2004. She has significant investment experience and recently retired as a Managing Director of Merrill Lynch Investment Managers. Corporate Governance Many shareholders will be aware of new corporate governance provisions which are contained within the recently revised Combined Code and the AITC's own Code of Corporate Governance. The Board places great importance on corporate governance matters and, during the year, put in place the necessary procedures to ensure that it had implemented the requirements of the revised Combined Code by the end of the year. The Board's statement on Corporate Governance, which reports under the revised Code one year earlier than is required, will be included in the Annual Report. Outlook Slower economic growth, rising inflation and tighter monetary policy are likely to pose a more challenging environment for investors. Stockmarkets have discounted a modest slowdown in global growth but investors are likely to remain risk averse. Whilst higher oil prices and terrorism remain risks to global growth, the Board is cautiously optimistic that global stockmarkets will make some progress during the year ahead. Enquiries: Julie Dent/Gordon Hay Smith F & C Asset Management plc - 0131 465 1000 Unaudited Statement of Total Return (Incorporating the revenue account) for the Year ended 30 September 2004 Notes 2004 2004 2004 Revenue Capital Total £'000 £'000 £'000 Gains on investments - 42,521 42,521 Exchange differences - 793 793 Income 17,605 - 17,605 Investment management fee (444) (1,946) (2,390) Other expenses (1,180) - (1,180) Net return before finance costs & taxation 15,981 41,368 57,349 Finance costs (1,954) (5,860) (7,814) Return on ordinary activities before tax 14,027 35,508 49,535 Tax on ordinary activities (254) - (254) Return attributable to shareholders 13,773 35,508 49,281 Dividends in respect of Ordinary Shares 2 (18,197) - (18,197) Transfer (from)/to reserves (4,424) 35,508 31,084 Return per Ordinary Share 1 3.96p 10.22p 14.18p Audited Statement of Total Return (Incorporating the revenue account) for the Year ended 30 September 2003 Notes 2003 2003 2003 Revenue Capital Total £'000 £'000 £'000 Gains on investments - 48,491 48,491 Exchange differences - (377) (377) Income 17,943 - 17,943 Investment management fee (413) (1,240) (1,653) Other expenses (870) - (870) ______ ______ ______ Net return before finance costs & taxation 16,660 46,874 63,534 Finance costs (1,983) (5,946) (7,929) ______ ______ ______ Return on ordinary activities before tax 14,677 40,928 55,605 Tax on ordinary activities (270) - (270) ______ ______ ______ Return attributable to shareholders 14,407 40,928 55,335 Dividends in respect of Ordinary Shares (18,821) - (18,821) ______ ______ ______ Transfer (from)/to reserves (4,414) 40,928 36,514 ______ ______ ______ Return per Ordinary Share 1 4.08p 11.58p 15.66p Unaudited Balance Sheet as at 30 September Audited 2004 2003 £'000 £'000 Fixed assets Investments 495,632 480,858 ________ ________ Current assets Debtors 5,609 5,660 Cash at bank and on deposit 15,788 15,388 ________ ________ 21,397 21,048 Creditors: amounts falling due within one year (11,782) (12,104) ________ ________ Net current assets 9,615 8,944 ________ ________ Total assets less current liabilities 505,247 489,802 Creditors: amounts falling due after more than one year (119,068) (118,979) ________ ________ Net Assets 386,179 370,823 ________ ________ Capital and reserves Called-up share capital 84,453 88,341 Special reserve - 476 Other reserves: Capital reserve - realised 267,622 287,017 Capital reserve - unrealised 5,834 (33,341) Capital redemption reserve 3,888 - Revenue reserve 24,382 28,330 ________ _______ Equity shareholders' funds 386,179 370,823 ________ _______ Net asset value per share 114.3p 104.9p Unaudited Summarised Statement of Cash Flows Audited Year to 30 Year to 30 September 2004 September 2003 £'000 £'000 Net cash inflow from operating activities 14,625 15,607 Servicing of finance (7,725) (7,845) Taxation 58 58 Capital expenditure and financial investment 26,702 26,276 Equity dividends paid (18,591) (18,821) ----------- ----------- Net cash inflow before financing 15,069 15,275 Financing (15,717) (22,429) ----------- ----------- Decrease in cash (648) (7,154) ----------- ----------- Reconciliation of net cash flow to movement in net debt Decrease in cash in the year (648) (7,154) Yen loan repaid - 22,429 ----------- ----------- Movement in net debt resulting from cash flows (648) 15,275 Currency gains/(losses) 1,048 (1,021) Increase in 6.625 per cent Bonds 2008 liability (63) (63) Increase in 6.25 per cent Bonds 2031 liability (26) (26) Net debt at 1 October (103,591) (117,756) ----------- ----------- Net debt at 30 September (103,280) (103,591) ----------- ----------- Reconciliation of net revenue before finance costs and taxation to net cash inflow from operating activities Net revenue before finance costs and taxation 15,981 16,660 Decrease in accrued income 629 567 Increase/ (decrease) in other creditors 165 (84) Investment management fee charged to capital (1,946) (1,240) Tax on investment income 267 (296) ----------- ----------- Net cash inflow from operating activities 14,625 15,607 ----------- ----------- Notes 1. Return per Ordinary Share is based on a weighted average of 347,578,402 (2003: 353,362,282) Ordinary Shares in issue. 2. The proposed final dividend of 1.414p per Ordinary Share, will be paid on 7 January 2005 to ordinary shareholders on the register at close of business on 10 December 2004. The last date for receipt of mandate instructions for those shareholders who wish to join the Dividend Reinvestment Plan is 3 December 2004. 3. The Company had 337,812,282 (2003: 353,362,282) Ordinary Shares in issue as at 30 September 2004. 4. During the year, the Company purchased for cancellation 15,550,000 Ordinary Shares with an aggregate nominal value of £3.9 million for a total consideration of £15.7 million representing 4.4% of the Ordinary Shares in issue at the previous year end. 5. These are not full statutory accounts in terms of Section 240 of the Companies Act 1985. The full audited accounts for the year to 30 September 2003, which were unqualified, have been lodged with the Registrar of Companies. The 2004 annual report will be sent to shareholders during November 2004 and will be available for inspection at 80 George Street, Edinburgh EH2 3BU, the registered office of the Company. 6. The unaudited results have been prepared on the basis of the accounting policies set out in the statutory accounts of the Company for the year ended 30 September 2003. 7. The following table provides a breakdown of the estimated contributions to the total return for the year: Attribution of Return Percentage points Market/benchmark return 13.6 Stock selection UK equities 0.2 Overseas equities -0.6 Regional asset allocation 0.0 Corporate bonds -0.2 Gearing 1.4 Buy Backs 0.5 Expenses -0.7 -------- British Assets Trust total return 14.2 -------- 8. The Company's geographic exposure as a percentage of ordinary shareholders' funds at 30 September 2004 was as follows (comparative figures are for 30 September 2003). 2004 2003 UK 87.5 86.4 North America 15.1 16.4 Europe (ex UK) 6.7 8.7 Japan 5.7 3.2 Pacific (ex Japan) 5.2 5.9 Corporate Bonds 8.1 9.1 Gearing (28.3) (29.7) ----------- ----------- Total 100.0 100.0 ----------- ----------- This information is provided by RNS The company news service from the London Stock Exchange

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