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Undervalued Assets (SVU)

  Print      Mail a friend       Annual reports

Friday 19 May, 2000

Undervalued Assets

Final Results

Undervalued Assets Trust PLC
19 May 2000



Results for the year to 31 March 2000

Key Points

* Net asset value per share increased by 32.3% to 226.92p and the share price
grew by 40.6%, compared with a 9.9% rise in the Trust's benchmark's index,
the FTSE All Share Index. 
* Over the five year period to 31 December 1999, UAT's performance is 4th and
5th, in terms of share price and NAV respectively, out of 41 competing
* An unchanged single final dividend of 2.35p per share will be paid on 10
July 2000 to shareholders on the register on 9 June 2000. 
* The Directors seek shareholder approval to introduce an investment
management incentive fee, based on investment performance relative to the
Trust's benchmark. 
* At the forthcoming AGM, an ordinary resolution will be proposed that the
Trust should continue as an investment trust for a further five year period.  
* During the year under review, the Board undertook a vigorous re-purchase
programme and bought back 15.8 million shares and the discount has been
materially reduced from its peak level from 15% to 9%. 

For further information, please contact:
Colin McLean,           Scottish Value Management          0131 226 6699
Roland Cross,                Broadgate Marketing           020 7726 6111

Undervalued Assets Trust plc 
Results for the year ended 31 March 2000 
Commenting on the results, Chairman, Professor John Kay, said:
I am pleased to report that Undervalued Assets Trust had a good year. Over
the twelve months under review, the net asset value per share grew by 32.3%
to 226.92p. The share price gained 40.6%. Over the same period, the Company's
benchmark index, the FTSE All Share Index, rose by 9.9%.
Over the five year period to 31 March 2000, UAT's net asset value return,
with reinvested dividends, is 144.3%, compared with the return of 133.6%
achieved by its benchmark. This performance places it in the top quartile of
investment trusts investing in the UK in both share price and NAV return
terms. Over this period, its performance is fourth and fifth, in terms of
share price and NAV, respectively, out of 41 competing trusts. This
demonstrates that the Company has delivered on our stated policy to produce
superior long term capital growth.
Over the year, market conditions were favourable to the investment approach
of your Company. The portfolio emphasises growing businesses and has a more
even spread of size of company than the All Share Index. Effective
stockpicking in the technology sector was the key to our success in the last
year. We believe that these shares offer a potential for continued growth,
contrasting with an environment of increasing price competition in many
industrial sectors. The portfolio also benefited from corporate activity
during the year. There were bids for a number of the Company's major
investments, including Rugby Group, Mannesmann and Racal Electronics.
Early last year, the Board embarked on one of the most vigorous re-purchase
programmes adopted by any investment trust. During the year, the Company
bought back 15.8 million shares following the approval of the buy-back
resolution at the AGM in June. A substantial proportion of the authority was
used in the first half of the year. Shareholders renewed this authority for
up to a further 15% in December and the serial buy-back programme was
subsequently resumed. We are pleased to report that the discount has
materially reduced from its peak level and over the twelve months under
review fell from 15% to 9%. Volatility of the discount has also lessened and
we will continue to make further share re-purchases as appropriate.
The independent Directors have decided to make changes to the investment
management agreement. We are proposing to introduce an incentive fee, based
on investment performance relative to the Company's benchmark. The basic fee
for management and secretarial services will be reduced from 1.0% to 0.75%.
The incentive fee allows the Managers to earn an amount above the lower base
fee, but only in proportion to outperformance in net asset value. We have
agreed a high water mark with the Managers, which ensures that payment will
not be made unless the Company has more than recouped any previous
Very few trusts have a performance related element included in the investment
management agreement. We hope that we are continuing to lead the pack on this
and other corporate governance issues. Your Board believes that linking
rewards to results in this way demonstrates an alignment of interests between
you, the shareholders, and the Managers. On many issues, UAT has been among
the first to establish best practice, seeking shareholder permission for
buy-backs in 1998 and being one of the first to implement a serial buy-back
in 1999. We will, of course, seek shareholder approval for the revised
contract at the AGM.
The Board believes that gearing has the potential to enhance returns for
shareholders, and the Company has operated with a bank facility equivalent to
10% of gross assets. Earlier this year, the Board gave the Managers
additional authority to allow gearing at times to be up to a maximum of 20%.
At 31 March 2000, gearing was 15%.
The Company's Annual General Meeting will be held in London on 22 June 2000
and details of the resolutions to be proposed are given in the Notice of
Meeting. Last year we moved the AGM to London to allow more people to attend
and were encouraged by the response. We also plan to repeat the practice of
making a presentation to shareholders in Scotland in September. The AGM will
be at 12.30 p.m. and will be preceded at 12 noon by a presentation from the
Managers, who will review the portfolio and investment policy, and answer any
questions from shareholders. Copies of the presentation will be available
upon request to all shareholders and will be put on the Managers' website.
As required by the Company's Articles of Association, at the forthcoming
Annual General Meeting an ordinary resolution will be proposed that the
Company should continue as an investment trust for a further five year
period. We have consulted our larger shareholders and have concluded that we
should recommend that shareholders vote in favour of continuation. The Board
believes that continuation is in the best interests of shareholders, as the
investment record to date demonstrates the Company's ability to achieve
superior investment returns.
An unchanged single final dividend of 2.35p per share will be paid on 10 July
2000 to shareholders on the register on 9 June 2000.

  Summarised Statement of Total Return                                        
                        Year to 31 March 2000        Year to 31 March 1999    
                      Revenue  Capital     Total   Revenue   Capital     Total
                        £'000    £'000     £'000     £'000     £'000     £'000
  Gains / (losses)          -   41,790    41,790         -   (9,990)   (9,990)
  on investments                                                              
  Income                3,288        -     3,288     5,345         -     5,345
  Investment            (192)  (1,726)   (1,918)     (200)   (1,802)   (2,002)
  management fees                                                             
  Other expenses        (322)        -     (322)     (191)         -     (191)
                      -------  -------  --------  --------  --------  --------
                           --        -         -         -         -         -
  Return before         2,774   40,064    42,838     4,954  (11,792)   (6,838)
  interest and                                                                
  Bank overdraft        (119)  (1,072)   (1,191)     (105)     (947)   (1,052)
                      -------  -------  --------  --------  --------  --------
                           --       --         -         -         -         -
  Return on                                                                   
  ordinary              2,655   38,992    41,647     4,849  (12,739)   (7,890)
  Before taxation                                                             
  Taxation                 43        -        43       (7)        27        20
                      -------  -------  --------  --------  --------  --------
                           --       --         -         -         -         -
  Return on                                                                   
  ordinary              2,698   38,992    41,690     4,842  (12,712)   (7,870)
  After taxation                                                              
  Dividends in                                                                
  respect of          (1,858)        -   (1,858)   (2,230)         -   (2,230)
  Equity shares                                                               
                      -------  -------  --------  --------  --------  --------
                           --       --         -         -         -         -
  Transfer to             840   38,992    39,832     2,612  (12,712)  (10,100)
                        =====    =====     =====     =====     =====     =====
  Return per            3.15p   45.46p    48.61p     4.73p  (12.42p)   (7.69p)
  ordinary share                                                              
  Dividend per                                                                
  ordinary share                                                              
  Final dividend        2.35p        -     2.35p     2.35p         -     2.35p

          Balance Sheet                              as at             
                                                                  as at
                                                  31 March     31 March
                                                      2000         1999
                                                     £'000        £'000
          Listed investments                       177,899      184,562
          Unlisted investments                      26,937        1,515
          Net current liabilities                 (25,406)     (21,518)
                                                ----------   ----------
          Ordinary shareholders funds              179,430      164,559
                                                    ======       ======
          Net asset value per ordinary share       226.92p      173.40p
1.     Returns per Ordinary Share are based on 85,759,283 shares in issue
during the year (31 March 1999 - 102,386,571). The number of shares in issue
at 31 March 2000 was 79,072,324. (31 March 1999 - 94,902,324).
2.     During the year, the Company purchased for cancellation 15,830,000
ordinary shares through the market for a total consideration of £24,961,000
at an average price of 157.7 pence per share. A total of £2,496,000 has been
charged to revenue and £22,465,000 has been charged to capital.
3.     Investment management fees and bank overdraft interest has been
allocated 10% to revenue and 90% to capital (1999: same). This allocation is
in line with the Board's expected long-term split of returns in the form of
income and capital gains respectively from the investment portfolio.
4.     The above figures do not constitute full group accounts in terms of
Section 240 of the Companies Act 1985. The accounts for the year to 31 March
1999, which were unqualified, have been lodged with the Registrar of
Companies. The annual report and accounts will be mailed to shareholders and
will be lodged with the Registrar of Companies towards the end of May 2000.
Copies will be available for inspection at 7 Castle Street, Edinburgh, the
registered office of the Company.

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