Final Results

RNS Number : 4655Y

British Portfolio Trust PLC

22 December 2010

 



For Immediate Release                                                                                                             22nd December 2010

BRITISH PORTFOLIO TRUST plc

RESULTS FOR THE YEAR ENDED 31ST OCTOBER 2010

The following comprises extracts from the Company's Annual Financial Report for the year ended 31st October 2010.  The full Annual Financial Report is available to be viewed on or downloaded from the Company's website at www.britishportfoliotrust.co.uk. Copies will be mailed to shareholders shortly.

Chairman's Statement

It is encouraging to be able to report on a positive year for the Trust in which the net asset value per ordinary share increased by 14.9%, exceeding the benchmark return of the FTSE-All Share Index of 13.6%.  After taking into account the change in share price, the dividend and a very small narrowing of the discount to net asset value, the total return to shareholders with net income re-invested was 19.6% (Source: Datastream).

A final dividend of 3.30p per ordinary share has been declared, which will be payable on 1st March 2011 to shareholders on the main register at the close of business on 28th January 2011. 

In general, 2010 was a positive year for UK dividend growth.  However, the problems at BP in the Gulf of Mexico, and the subsequent suspension of their dividends, had a significant impact on the income of most UK investment funds, and we were no exception. In the event, our earnings per ordinary share increased by 3.6%, to 4.58p in the financial year. In order to maintain our dividend payout of 5.10p this year we will again be drawing from our revenue reserves which will be 4.56p per share after payment of this year's final dividend.   

For the forthcoming year, we believe the corporate sector is well positioned for dividend growth. We also anticipate the resumption of dividends from BP, albeit at a lower level than 2009.

At the end of the financial year, gearing net of cash, at 0.3%, was relatively modest. Gearing has been a positive contributor to performance this year, and the fund manager reduced the Trust's level of gearing as markets recovered over the summer and into the autumn.

We have also continued our policy of repurchasing shares for cancellation to provide liquidity in the shares and reduce the volatility the market price of the shares, compared to the underlying Net Asset Value.  In total, 2,380,000 shares have been purchased since the last Annual General Meeting, including 172,000 shares purchased since the year end.  In addition, 150,000 shares held in treasury have been cancelled since the year end.  We are seeking renewed shareholder authority to repurchase up to a further 15% at the forthcoming Annual General Meeting.

During the course of the year the Financial Reporting Council concluded its work on the UK Stewardship Code, which made recommendations on how fund managers should best engage with investee companies on behalf of their investors. I am pleased to report that RCM was one of the initial signatories to the new Code and its principles of Stewardship are set out on the RCM website: www.rcm.com/london/pdf/stewardship_policy.pdf   

I am delighted to report that two new directors were appointed to the Board this year, Charles Worsley on 19th April and Jonathan Cartwright on 7th September 2010 respectively. Charles has a background in property management and is able to bring a fresh perspective to the Board's deliberations, having been a private shareholder in the Trust since its inception.  Jonathan has extensive experience in the commercial and financial sectors at Hanson PLC and more recently at Caledonia Investments PLC, where he was Finance Director.  These appointments continue the process of refreshing membership of the Board.  Charles and Jonathan, having joined the Board this year, are seeking election for the first time at the Annual General Meeting.  Simon White and George Luckraft are standing for re-election.  On this note, it is my current intention to step down from the Board in April 2011, having served on the Board since the Company's inception in 2001.  I am very pleased to report that Jonathan Cartwright has agreed to succeed me as Chairman, subject to his election as a Director at the Annual General Meeting.

Although the financial crisis started more than three years ago, its consequences still dominate the outlook for the world economy and investment markets.  This year focus has shifted to sovereign debt markets, reflecting nervousness about the enormous liabilities assumed by governments in rescuing the world's banking system, as well as the shortfall in tax revenues resulting from lower economy activity.  The most high-profile market concerns have surrounded Greece and, more latterly, Ireland. The debate on how best to tackle excessive government debt has polarised opinion, depending on whether deflation or inflation is seen as the greater risk. The use of unconventional policy measures - such as quantitative easing - on an unprecedented scale, itself also increases the range of potential outcomes.   It seems likely that markets will continue to navigate a stormy route, as periodic bouts of optimism heralding recovery will be offset by renewed concerns that deflationary forces will prevail.

However, beyond the major developed countries, the formerly emerging economies continue to grow strongly and most of the largest UK listed companies now have more of their turnover emanating from these economies than from the UK itself.  Corporate balance sheets are generally strong and, unless we witness another economic downturn, should support dividend payouts and in due course capital investment.  Against this background, a portfolio of shares in well-financed, internationally diversified global companies should provide an attractive store of value for the long-term investor. 

A C Barker

Chairman

20th December 2010

Investment Manager's Review

Economic Background

The past twelve months have seen focus shift from the global banking crisis and 'Great Recession' to sovereign debt. The long term effect of the fall in US house prices and collapse of the banking sector was the 'great asset swap', as governments around the world swapped good assets (government debt) for bad assets (toxic mortgages, bad loans etc.). Unfortunately this has not solved the debt problem, but merely shifted a part of it from the private sector to the public sector. This was compounded by the recession, which caused government revenues to fall and expenditure to rise. Research by the influential economists, Carmen Reinhart and Kenneth Rogoff, published in January 2010 entitled 'Growth in a Time of Debt' studies the link between government debt levels and economic growth using data from the last two centuries.  The key finding of the report suggests that countries with gross public debt to GDP of above 90% achieve median growth rates one percent lower than they would otherwise achieve.  With the IMF forecasting gross debt as a percentage of GDP to reach 100% for the US in 2011 and close to 90% for most European countries, it seems likely that developed markets will see a prolonged period of sub-par economic growth.  Against this backdrop bond yields fell to extremely low levels with the US 10 year yields briefly dipping below 2.4% in October 2010.

Markets have subsequently become concerned rightly about the ability of developed market governments to reduce their 'structural deficits', because for many developed economies annual budget deficits remain significant and are therefore continuing to add to the burden of public debt. This issue is most acute in peripheral Europe where the problems facing the public finances are most severe.  The US administration has to date remained more focused on stimulating the economy rather than tackling the budget deficit.  Over the long run economic growth is essential to tackling sovereign indebtedness.  As a result markets have become highly focused on economic data.  The extent of the fiscal and monetary stimuli applied to the global economy during 2009 prompted a substantial improvement in economic activity as a powerful inventory cycle took off.  At times during 2010 markets have had cause for concern that growth was about to relapse, particularly when the Institute of Supply Management's New Orders Index began to fall back in June 2010, although these concerns were somewhat alleviated towards the end of this period.  There is great focus on the role of China today, but the US remains the most important economy in the world and the health of the US consumer is central to driving demand for products produced in the rest of the world.  The Federal Reserve in the US is clearly concerned at the pace of recovery, unemployment at almost 10% remains stubbornly high, the housing market continues to deteriorate and underlying inflation remains low despite interest rates of 0.25%.  As a result, at the end of British Portfolio Trust's financial year the Federal Reserve announced a second plan to purchase $600bn of securities, known as quantitative easing, to try and stimulate faster growth. 

Emerging or developing market economies have fared much better than developed markets in recent years, having experienced a classic 'v shaped' recovery whilst retaining low government debt levels.  Chinese stimulus spending announced in 2008 at $586m over two years unleashed a massive resurgence of infrastructure spend which was combined with a rapid growth in the money supply.  The result has been a return to double digit economic growth rates in China and a booming trade in the region.  The contrast with the sub trend recovery in developed markets is stark and is crucial to understanding the behaviour of asset markets. The liquidity created by loose monetary policy in the developed world has naturally searched out higher returning opportunities.  This has tended to flood emerging markets with capital which are now showing clear signs of inflationary pressure and as a result policy tightening is now evident. Currency volatility and rising commodity prices have also been important features, with copper for example rising from $278 to $374 per lb over the year.

Encouragingly, the UK economy is growing again. The second quarter of 2010 saw 1.7% year-on-year growth, up from -0.3% in the first quarter, and this was sustained in the third quarter by quarter on quarter growth of 0.8%, which was marginally above most economists' expectations. Although headline inflation remains a full percentage point above target, the Monetary Policy Committee has consistently voted 8-1 in favour of keeping rates at the 0.5% level, even if further quantitative easing in the UK has not been employed, and there is some debate within the Committee on whether this is desirable or likely to be effective.  The new coalition government in the UK announced the most drastic fiscal tightening programme for decades. Thus far the markets have taken the UK government's policies relatively well. However, there still remains the risk that the cuts themselves could jeopardise the recovery.  Current consensus forecasts for 2011 GDP in the UK are around 2.0%.  The risk on this is to the downside, but a "double dip" recession is not our central expectation, even though we do expect a prolonged period of subdued growth.  This is also the case for much of the developed global economy as consumers and governments continue to de-leverage.  Emerging market economies are currently expected to grow at 6% in 2011 which could produce global GDP growth of 4%.  With inflation now rising rapidly in emerging economies, and some evidence of asset bubbles forming, there is a risk that policy is tightened to restrain growth and this could lead to some moderation of global growth expectations in the year ahead.

Market Trends

Although not as volatile as the preceding twelve months, the past year has still been somewhat of a rollercoaster for equity markets. The FTSE All-Share Index ended the period firmly in positive territory, despite a number of setbacks throughout the year.  There were two key drivers for equities over the period. Most important were the huge monetary and fiscal stimuli, initiated at the end of 2008 in response to the global crisis that remained in place throughout this period. The second driver was an improvement in the global economy, especially in the developing economies, where economic growth was ahead of, admittedly low, market expectations. This filtered down to the company level, with many global companies, particularly industrials and mining, consistently beating market forecasts. Indeed, within the UK market, the extent to which companies with overseas earnings have outperformed those with purely domestic earnings has been notable.

The best performing sectors over the period were global industrial cyclicals such as engineering, technology, mining, oil services and chemicals. Banks were the weakest sector, although they still managed a marginally positive return.  Other sector laggards tended to be defensives such as food producers, pharmaceuticals, food retailers and telecoms.  BP was the weakest stock in the FTSE 100, falling by 25% in the year to 31st October 2010 and suspending its dividend as a result of the Mocando Well tragedy in the Gulf of Mexico.  Although BP did constitute approximately 5% of the Trust's assets at the beginning of the period this was less than the market weighting of the company.  After the sharp fall in the share price we used the weakness to add to the position and anticipate that BP will return to the dividend list in 2011.

At the end of the financial year the Trust held around 7% of its assets in the mining sector through its investments in Rio Tinto and BHP Billiton, the largest global diversified mining companies with high exposure to top tier assets, notably in iron ore.  It is important to note, however, that mining now makes up 13% of the FTSE All-Share Index with the UK seemingly becoming the preferred market for listings.  The key drivers of the sector are global macro factors such as emerging market growth, commodity prices, exchange rates, risk appetite, and liquidity.  Fundamentally it is difficult to analyse or establish fair value for these factors and thereby invest in these companies with any degree of certainty or margin of safety.  The companies currently make returns on capital and achieve margins well above historical norms, whilst dividend yields are paltry.  Most of the key industrial commodities trade at prices well above their marginal cost of production. There is considerable evidence that commodity trading is subject to extreme levels of speculation; they are often seen as an inflation hedge and are subsequently becoming as much financial instruments as real assets.  Investment flows into emerging markets and commodity funds have reached new peaks in recent months.  China is the key to understanding the voracious appetite for the sector which is now trading back at the highs of 2008, albeit with equally high volatility.  Although China, now the world's second largest economy, will continue to grow, there is a material risk that rising inflation, rampant property pricing, lax monetary policy and an artificially weak exchange rate force the authorities to slow economic growth.  Such a move, if sustained, would significantly reduce the intensity of use of commodities and dramatically alter the balance of supply and demand.  As a result we do not think it is appropriate to invest larger amounts of shareholders' capital to the sector at this time, although we are comfortable with the current exposure.

Investment Performance

Over the twelve month period to 31st October 2010 British Portfolio Trust's NAV rose 14.9%.  The Trust's benchmark, the FTSE All-Share Total Return Index, produced a capital return of 13.6% over the period. Stock selection and sector strategy were both positive over the course of the year, and the modest gearing employed was also beneficial. Within sector strategy relatively low weighting in banks was supportive, as was the high weighting in cyclically exposed sectors such as leisure and engineering.   The low exposure of the portfolio to the mining sector, discussed above, was a negative over this period overall as commodities rallied hard over the summer.

Adding value through stock selection is the main focus of the investment portfolio.  Over the course of the year a number of the long term holdings performed well.  Melrose, the industrial buy-out company rose over 70%, principally as a result of the continued successful execution by management of the restructuring and turnaround plan that was implemented following the purchase of the FKI businesses back in 2008. Trading in some of the Melrose businesses also improved as economic growth began to recover.  In total, Melrose added 0.8% to performance. 

Compass Group, the global contract caterer, was also a good performer. The investment case is based on the potential for management to improve the business structurally by growing the profit margins, and it is clear that this is being executed on impressively. Although there is still scope for further business improvement and revenue growth, sentiment became increasingly positive on the shares although as the valuation became less appealing we reduced the holding.  Compass added 0.7% to performance. 

The final stock worthy of mention is Energy XXI, the Gulf of Mexico oil exploration and production company that was a significant negative for the Trust in the previous year.  Although a higher oil price and the return to equity markets of some risk appetite have been drivers for the stock, more important was a significant oil discovery, known as Davy Jones, in the Gulf of Mexico.  As a result the stock rose from $7.50 to nearly $22 by October 2010, adding 1.1% to performance.  We continued gradually to sell down the position into strength over the course of the year.  However with potential exploration success in the Blackbeard East and Lafitte prospects, a rapid pay down of balance sheet debt and a still reasonable valuation, it remains appropriate to maintain a modest weighting in the stock at the current time.

The most significant negative contributor, Hansen Transmissions, was a new addition to the portfolio. Hansen Transmissions is the global leader in the supply of gearboxes for multi megawatt wind turbines. The company was floated on the UK stock market in 2007 at a time when there was much optimism about the long term growth of wind power. Management responded to a huge backlog in demand for their products by investing heavily in new capacity in India and China. Unfortunately this occurred at exactly the same time as the financial crisis and subsequent recession. Profits at Hansen collapsed, along with the share price. We started buying shares because the company is valued at a substantial discount to the replacement cost of its assets. We felt market sentiment was at rock bottom with investors unable take a long term view of the growth drivers for wind power that we believe remain firmly in place. It is now clear that we were too early and the shares have fallen further following profit warnings at both Hansen and its major customers, particularly Vestas Wind Systems and Gamesa.  Nonetheless, we believe the industry is currently at a cyclical low point due to the global recession, low natural gas price and difficulty of finding finance. When the recovery does come we believe Hansen shares should rise significantly from their current levels.  It is nonetheless disappointing that this investment hindered performance by around 1% this year.

Portfolio Changes

Portfolio turnover has been relatively high over the twelve months with 21 new purchases and 19 complete sales.  There are four reasons for this.  First, we used the strength in the market to rotate from recovering cyclical stocks in the portfolio to more defensive growth stocks that still trade at low multiples relative to their history.  Amongst the defensive stocks we added to were National Grid, Diageo, Associated British Foods and Sage.  All of these companies have excellent market positions, traded well through the recession, continued to invest in their business, have sound balance sheets, generate cash, produce attractive return on capital and are valued well below historic levels.  These investments were funded from the sale of some stocks that fared less well over the last two years, but where their share prices have recovered sharply such as TUI Travel, BBA Aviation, Laird, Carillion and Prudential.

Second, we have taken advantage of volatile markets from April to invest in specific stocks against the prevailing mood of the market.  For example, we have bought some consumer cyclical and financial companies at attractive valuations and that we felt had been left behind.  We started investments in Travis Perkins, the builders' merchants, which will benefit from a pickup in housing transactions, N Brown, the internet clothing retailer, and the media company, Daily Mail & General Trust, which should benefit from a recovery in corporate spending.  Amongst financials we continue to favour stocks exposed to a recovery in the private equity industry such as SVG Capital and added to our holding in 3i during this period.  We increased exposure to UK banks via purchases of Lloyds Banking Group, where we expect a gradual improvement in profitability as margins expand, bad debts fall and wholesale funding markets slowly reopen.  The weakness of the UK public sector finances is now well known and there is a wide expectation of extensive cuts to government expenditure.  This has left a number of good quality industrial companies with some exposure to the UK government trading at low valuations that, in our opinion, already discount a highly pessimistic outcome.  Towards the end of the period we started investments in Balfour Beatty, Logica, and Hays, which have approximately 15% direct exposure to the UK government.  Although this element of their business will undoubtedly come under pressure the revenues are unlikely to disappear entirely and they all have scope to grow and improve their activities that are not exposed. 

Third, we have bought a number of carefully selected and targeted special situation stocks.  These are stocks that have tended to be overlooked by investors, where we think the balance of risk and reward is favourable, and where a longer time horizon is likely to be handsomely rewarded in due course.  For example, we have invested in Better Capital, the private equity turnaround fund run by Jon Moulton. Other investments include Phoenix Holdings, the consolidator of closed with profits life funds, and Songbird Estates, part owners of Canary Wharf.  Although such investments will remain modest in the context of the fund they have scope to add meaningfully to returns in future years.  The inclusion of this type of investment largely explains the increase in the number of holdings over the last year.

Finally, we have actively adjusted the gearing of the Trust to benefit from the volatility the market has displayed over the year.  For example, gearing peaked at 10% in August 2010 as we invested into the weakness of markets over the summer when investors were concerned over the prospects for the Euro and fears of a double dip in the US economy.  At the end of October we had reduced this to 0.3% as markets rallied in anticipation of further quantitative easing in the US.  The opportunity to use gearing is a key differentiator of an investment trust company, and, in our view, is particularly useful when it can be employed contra-cyclically in volatile markets susceptible to bouts of fear and greed.

Investment Outlook

The UK market has risen 65% from its low on 3rd March 2009.  Much has improved since then with the banking system largely stabilised, a return to growth for most economies and corporate profits having rebounded rapidly.  However, in many other respects little has changed.  Central banks in developed markets have kept monetary policy extremely loose and quantitative easing has been necessary to ward off deflation and give a further boost to growth which has been tepid relative to previous periods of economic recovery.  Global imbalances in trade, uncertainty over the long term viability of the Euro, and tensions over commodity prices and exchange rates remain to the fore.  As discussed above there is still too much debt in many parts of the world and a long period of paying this back, or deleveraging lies ahead.  The long term impact of these challenges is highly uncertain, but it seems likely that the will of Federal Reserve will ultimately prevail and this will lead to a more inflationary outcome.  The key questions of how much inflation and when it will be evident are near impossible to answer, but will be critical to financial markets.  As a result we expect an extended period of volatility in asset prices ahead.  

The valuation of equity markets now appears fair in absolute terms, particularly if adjusted for the now high level of profit margins.  It is more difficult to see the long term case for investing in cash or bonds at current yields making equities more attractive in relative terms.  With liquidity flowing into markets from quantitative easing, generally positive economic data and continued positive announcements on corporate profits the market should be well supported.  In the short term focus will be on the potential risk of a bubble in emerging markets and commodity prices, which could be destabilising as credit conditions would need to be tightened and rising prices of oil, food and other raw materials pressure corporate margins and consumers' disposable income.  In short, the foundations do not yet appear to be in place for the start of the next long running bull market.  We expect the market to move between periods of optimism and fear and this forms the basis for our approach to managing the portfolio.

Nonetheless, we believe the current environment is attractive for equity investors as long as they remain active and selective in their approach. We see real opportunities in some stocks and sectors, but considerable risk in others.        

Jeremy Thomas

20th December 2010

Principal Risks and Uncertainties

The principal risks and uncertainties faced by the Company fall broadly under the following categories:

 Investment and Strategy:  An inappropriate investment strategy, for example asset allocation or the level of gearing, may lead to underperformance against the Company's benchmark index and peer companies, resulting in a fall in the Company's share price and the Company's shares trading on a wider discount.  The Board manages these risks by diversification of investments through its investment restrictions and guidelines which are monitored and reported on.  RCM (UK) Limited ("RCM") provides the Directors with timely and accurate management information, including performance data and attribution analyses, revenue estimates, liquidity reports and shareholder analyses. The Board monitors the implementation and results of the investment process with the Investment Manager and reviews data which shows statistical measures of the Company's risk profile. The Investment Manager employs the Company's gearing tactically, within a strategic range set by the Board.

Market: Market risk arises from the uncertainty about the future prices of the Company's investments.  It represents the potential loss the Company might suffer through holding investments in the face of negative market movements.   The Board considers asset allocation, stock selection and levels of gearing on a regular basis and has set investment restrictions and guidelines which are monitored and reported on by RCM.  The Board monitors the implementation and results of the investment process with the Investment Manager.

Accounting, Legal and Regulatory: In order to qualify as an investment trust, the Company must comply with Section 1158 of the Corporation Tax Act 2010 (formerly Section 842 of the Income and Corporation Taxes Act 1988) ("Section 1158").  Details of the Company's approval are given under "Competitive and Regulatory Environment" on page 15.   Should the Company breach Section 1158, it may lose investment trust status and as a consequence realised chargeable gains within the Company's portfolio would be subject to Corporation Tax.  The Section 1158 qualification criteria are monitored by RCM and results reported to the Board at each Board Meeting. The Company must also comply with the provisions of the Companies Act 2006 and, as its shares are listed on the London Stock Exchange, the UKLA Listing Rules. A breach of the Companies Act could result in the Company and/or the Directors being fined or the subject of criminal proceedings. A breach of the UKLA Listing Rules may result in the Company's shares being suspended from listing which in turn would breach Section 1158. The Board has ultimate responsibility but relies on its Company Secretary and its professional advisers to ensure compliance with the Companies Act 2006 and the UKLA Listing Rules and Disclosure and Transparency Rules.

Corporate Governance and Shareholder Relations: Details of the Company's compliance with Corporate Governance best practice, including information on relations with shareholders, are set out in the Corporate Governance Report on pages 23 to 26.

Operational: Disruption to, or failure of, RCM's accounting, dealing or payments systems or the custodian's records may prevent accurate reporting and monitoring of the Company's financial position.  RCM has transferred operational functions, principally relating to trade processing and investment administration, to BNY Mellon Asset Servicing - London Branch. Details of how the Board monitors the services provided by RCM and other suppliers and the key elements designed to provide effective internal control are included within the Internal Control section of the Corporate Governance Report on pages 23 to 26.

Financial: The financial risks faced by the Company are disclosed in Note 17 on pages 43 to 47.

A detailed explanation of the principal risks and uncertainties can be found on pages 16 and 17 of the Annual Financial Report, which will be available shortly on the Company's website.

Related Parties' Transactions

During the financial year, no transactions with related parties have taken place, which have materially affected the financial position or the performance of the Company during the period.

Directors' Responsibilities

The Directors each confirm to the best of their knowledge that:

a)   the financial statements have been prepared in accordance with applicable UK accounting standards, and    give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company; and

b)   the Annual Financial Report, to be published shortly, includes a fair review of the development and performance of the business and the position of the Company, together with a description of the principal risks and uncertainties that it faces.

155 Bishopsgate                                                                                    For and on behalf of the Board

London EC2M 3AD                                                                                A C Barker

20th December 2010                                                                              Chairman

 

INCOME STATEMENT

For the year ended 31st October 2010

	Revenue	Capital	Total Return
	£	£	£
Net gains on investments at fair value	-	6,566,036	6,566,036
Income	1,820,164	-	1,820,164
Investment management fee	(108,333)	(174,997)	(283,330)
Performance fee	-	(234,843)	(234,843)
Administration expenses	(198,164)	(6,332)	(204,496)
Net return before finance costs and taxation	1,513,667	6,149,864	7,663,531
Finance costs: interest payable and similar charges	(11,915)	(35,633)	(47,548)
Net return on ordinary activities before taxation	1,501,752	6,114,231	7,615,983
Taxation	(436)	-	(436)
Net return on ordinary activities attributable to Ordinary Shareholders	1,501,316	6,114,231	7,615,547
Return per Ordinary Share (Note B)	4.58p	18.66p	23.24p

BALANCE SHEET

as at 31st October 2010                                                                                    

	£
Investments held at fair value through profit or loss	46,164,256
Net current liabilities	(141,109)
Total Net Assets	46,023,147
Called up Share Capital	368,265
Share Premium Account	14,819,243
Capital Redemption Reserve	180,998
Special Reserve	30,223,584
Capital Reserve	(2,030,916)
Revenue Reserve	2,461,973
Shareholders' Funds (all equity interests)	46,023,147
Net asset value per Ordinary Share	146.9p

The Net Asset Value is based on 31,321,820 Ordinary Shares in issue at the year end.

INCOME STATEMENT

For the year ended 31st October 2009

	Revenue	Capital	Total Return
	£	£	£
Net gains on investments at fair value	-	5,364,521	5,364,521
Income	2,000,318	-	2,000,318
Investment management fee	(157,336)	(322,007)	(479,343)
Investment management fee VAT refund	9,128	27,383	36,511
Administration expenses	(204,623)	(4,192)	(208,815)
Net return before finance costs and taxation	1,647,487	5,065,705	6,713,192
Finance costs: interest payable and similar charges	(40,748)	(122,244)	(162,992)
Net return on ordinary activities before taxation	1,606,739	4,943,461	6,550,200
Taxation	-	-	-
Net return attributable to Ordinary Shareholders	1,606,739	4,943,461	6,550,200
Return per Ordinary Share (Note B)	4.42p	13.61p	18.03p

BALANCE SHEET

as at 31st October 2009                                                                                    

	£
Investments held at fair value through profit or loss	45,387,918
Net current liabilities	(1,023,792)
Total Net Assets	44,364,126
Called up Share Capital	385,415
Share Premium Account	14,819,243
Capital Redemption Reserve	163,848
Special Reserve	34,500,025
Capital Reserve	(8,145,147)
Revenue Reserve	2,640,742
Shareholders'  Funds (all equity interests)	44,364,126
Net asset value per Ordinary Share	127.8p

The Net Asset Value is based on 34,712,820 Ordinary Shares in issue at the year end.

                                                                                                                                                    

RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS

For the year ended 31st October 2010

		Called up  Share Capital £	Share Premium Account £	Capital  Redemption Reserve £	Special Reserve   £	Capital Reserve    £	Hedging Reserve   £	Revenue Reserve   £	Total     £
Net Assets at 31st October 2008		424,720	14,819,243	124,543	38,192,435	(13,088,608)	(6,057)	2,996,218	43,462,494
	Amortisation of Hedging Reserve	-	-	-	-	-	6,057	-	6,057
	Revenue Return	-	-	-	-	-	-	1,606,739	1,606,739
	Shares repurchased during the year	(39,305)	-	39,305	(3,692,410)	-	-	-	(3,692,410)
	Dividends on Ordinary Shares	-	-	-	-	-	-	(1,962,215)	(1,962,215)
	Capital Return	-	-	-	-	4,943,461	-	-	4,943,461
Net Assets at 31st October 2009		385,415	14,819,243	163,848	34,500,025	(8,145,147)	-	2,640,742	44,364,126

 

 

		Called up  Share Capital £	Share Premium Account £	Capital Redemption Reserve £	Special Reserve   £	Capital Reserve   £	Hedging Reserve   £	Revenue Reserve   £	Total     £
Net Assets at 31st October 2009		385,415	14,819,243	163,848	34,500,025	(8,145,147)	-	2,640,742	44,364,126
	Revenue Return	-	-	-	-	-	-	1,501,316	1,501,316
	Shares repurchased during the year	(17,150)	-	17,150	(4,276,441)	-	-	-	(4,276,441)
Dividends on Ordinary Shares		-	-	-	-	-	-	(1,680,085)	(1,680,085)
	Capital Return	-	-	-	-	6,114,231		-	6,114,231
Net Assets at 31st October 2010		368,265	14,819,243	180,998	30,223,584	(2,030,916)	-	2,461,973	46,023,147

 

 

 

CASH FLOW STATEMENT

For the year ended 31st October 2010 and 31st October 2009

	2010		2009
	£		£
Net cash inflow from operating activities	1,209,219		1,205,581
Returns on investments and servicing of finance
Interest paid	(47,450)		(156,003)
Capital expenditure and financial investment
Purchases of fixed asset investments	(23,142,389)		(11,751,575)
Sales of fixed asset investments	28,869,889		20,637,087
Net cash inflow from capital expenditure and financial investment	5,727,500		8,885,512
Equity dividends paid	(1,680,085)		(1,962,215)
Net cash inflow before financing	5,209,184		7,972,875
Financing
Purchase of Ordinary Shares for cancellation and held in treasury	(4,277,166)		(3,691,735)
Repayment of short term loan	(2,000,000)		(4,500,000)
Drawdown of short term loan	1,500,000		-
Net cash outflow from financing	(4,777,166)		(8,191,735)
Increase (Decrease) in cash	432,018		(218,860)

BRITISH PORTFOLIO TRUST PLC

LISTED HOLDINGS at 31st October 2010

	Value (£)	% of Total Investments	Sector
GlaxoSmithKline	3,170,847	6.9	Pharmaceuticals and Biotechnology
HSBC Holdings	2,738,559	5.9	Banks
BP	2,726,849	5.9	Oil and Gas Producers
Vodafone Group	2,684,562	5.8	Mobile Telecommunications
BG Group	1,967,462	4.3	Oil and Gas Producers
Royal Dutch Shell "B" Shares	1,791,316	3.9	Oil and Gas Producers
Rio Tinto	1,762,400	3.8	Mining
Unilever	1,712,000	3.7	Food Producers
Cobham	1,503.691	3.3	Aerospace and Defence
Barclays	1,498,311	3.2	Banks
Value of ten largest equity holdings	21,555,997	46.7
Diageo	1,291,364	2.8	Beverages
Resolution	1,276,249	2.8	Life Insurance
Reed Elsevier	1,183,672	2.6	Media
BHP Billiton	1,088,157	2.4	Mining
Centrica	979,081	2.1	Gas, Water and Multiutilities
BAE Systems	926,764	2.0	Aerospace and Defence
Aviva	828,538	1.8	Life Insurance
N Brown Group	806,600	1.7	General Retailers
Tesco	759,437	1.6	Food and Drug Retailers
Balfour Beatty	747,606	1.6	Construction and Materials
Compass Group	690,008	1.5	Travel and Leisure
Lloyds Banking Group	662,087	1.4	Banks
Henry Boot	649,341	1.4	Construction and Materials
3i Group	601,603	1.3	Financial Services
Xchanging	591,069	1.3	Support Services
National Grid	578,364	1.3	Gas, Water and Multiutilities
Travis Perkins	566,835	1.2	Support Services
Energy XXI	542,407	1.2	Oil and Gas Producers
Carnival	537,381	1.2	Travel and Leisure
Keller Group	525,509	1.1	Construction and Materials
Inmarsat	500,971	1.1	Mobile Telecommunications
Hansen Transmissions	496,982	1.1	Alternative Energy
Reckitt Benckiser Group	493,278	1.1	Household Goods and Home Construction
Daily Mail & General Trust	491,022	1.1	Media
Lancashire Holdings	489,803	1.1	Non-Life Insurance
Phoenix Group	483,080	1.0	Life Insurance
Logica	473,662	1.0	Software and Computer Services
RSA Insurance Group	472,654	1.0	Non-Life Insurance
Misys	470,650	1.0	Software and Computer Services
Sage Group	460,402	1.0	Software and Computer Services
Hays	446,896	1.0	Support Services
Intermediate Capital Group	434,118	0.9	Financial Services
Melrose	410,023	0.9	Industrial Engineering
Songbird Estates	385,672	0.8	Real Estate
SVG Capital	378,839	0.8	Financial Services
Partygaming	378,837	0.8	Travel and Leisure
Whitbread	359,534	0.8	Travel and Leisure
Tullett Prebon	352,080	0.8	Financial Services
Valiant Petroleum	311,420	0.7	Oil and Gas Producers
Better Capital	253,464	0.5	Equity Investment Instruments
Renewable Energy	232,800	0.5	Electricity
Total Investments	46,164,256	100.0

Note A

The financial statements have been prepared under the historical cost convention, modified to include the revaluation of investments, and in accordance with United Kingdom law and United Kingdom Generally Accepted Accounting Practice (UK GAAP) and the Statement of Recommended Practice - Financial Statements of Investment Trust Companies and Venture Capital Trusts (SORP) issued in January 2009 by the Association of Investment Companies.

Note B

The return per Ordinary Share is based on a weighted average of 32,770,227 Ordinary Shares in issue during the year (2009- 36,330,832).

Note C

		2010		2009
		£		£
Dividends paid on Ordinary Shares of 1p:
Final dividend - 3.30p paid 2nd March 2010 (2009 - 3.30p)		1,107,310		1,232,788
Special - Nil (2009 - 0.25p)		-		93,393
Interim - 1.80p paid 2nd September 2010 (2009 - 1.80p)		572,775		636,034
		1,680,085		1,962,215

Dividends payable and proposed at the year end are not recognised as a liability under FRS 21 'Events After the Balance Sheet Date' (see Annual Financial Report - Statement of Accounting Policies). Details of these dividends are set out below.

		2010		2009
		£		£
Final 3.30p payable 1st March 2011 (2009 - 3.30p)		1,033,620		1,145,523
		1,033,620		1,145,523

The proposed final dividend is based on the number of shares in issue at the year end. However, the dividend payable will be based on the number of shares in issue on the record date and will reflect any purchases and cancellations of shares by the Company settled subsequent to the year end.

Note D

The financial information set out in this announcement does not constitute the Company's statutory accounts for the years ended 31st October 2010 or 31st October 2009. The financial information for the year ended 31st October 2009 has been extracted from the statutory accounts for that year, which were filed with the Registrar of Companies on 9th February 2010.  The auditors' report on those accounts was unqualified and did not contain a statement under either Section 498(2) or Section 498(3) of the Companies Act 2006. The statutory accounts for the year ended 31st October 2010 will be finalised on the basis of the financial information presented by the Directors in this announcement and will be delivered to the Registrar of Companies following the Company's Annual General Meeting. 

"Ends"

The full Annual Financial Report is available to be viewed on or downloaded from the Company's website at www.britishportfoliotrust.co.uk .  Neither the contents of the Company's website nor the contents of any website accessible from hyperlinks on the Company's website (or any other website) is incorporated into, or forms part of this announcement.

For further information please contact:

Peter Ingram

Company Secretary

Telephone: [phone]

 

END

 

 

FR FEDFLEFSSEIE