Results for the Year Ended 31 December 2017 (au...

To:                   RNS

Date:               17 April 2018

From:              F&C Commercial Property Trust Limited (the “Company”)

L.E.I.                213800A2B1H4ULF3K397

Results in Respect of the Year Ended 31 December 2017 (audited)

Highlights

• Share price total return of 3.9 per cent*
• Portfolio total return of 8.7 per cent*
• Dividend cover decreased to 83.1 per cent from 87.0 per cent*
• Yield on year-end share price of 4.4 per cent*. Maintained dividend at 6.0 pence per share for the 12^th successive year

*see Alternative Performance Measures

Chairman’s Statement

Introduction

UK commercial property experienced positive demand during 2017 as investors, particularly from overseas but also UK institutions, continued to look to invest in core assets with a secure income stream. Investment activity in 2017 moved up sharply from the previous year’s levels as sentiment adjusted to the changed circumstances following the referendum result and the economy continued to advance more strongly than initially feared. Against this backdrop, progress on the Brexit negotiations was slow and uneven and many uncertainties remain, politically, economically, domestically and internationally. The market has seen polarization, with industrials and distribution out-performing strongly, while regional town centre retail has remained under pressure.

Performance for the Year

The net asset value (‘NAV’) total return for the year was 8.8* per cent and the share price total return was 3.9* per cent. The total return from the portfolio was 8.7* per cent, lagging the total return of 10.3 per cent from the MSCI Investment Property Databank (‘IPD’) Quarterly Benchmark Index. The longer-term performance of the portfolio remains strong with IPD rating it upper quartile over three and five years and top quartile over ten years.

The share price at the year-end was 135.9p, representing a discount of 3.8* per cent to the NAV per share of 141.2p.

The following table provides an analysis of the movement in the NAV per share for the year:

	Pence
NAV per share as at 31 December 2016	135.5
Unrealised increase in valuation of direct property portfolio	6.6
Increase in valuation of interest rate swap	0.1
Other net revenue	5.0
Dividends paid	(6.0)
NAV per share as at 31 December 2017	141.2

During 2017 the Company experienced capital growth of 4.2* per cent, compared to the MSCI IPD index which recorded a capital return of 5.4 per cent. As with 2015 and 2016, the strongest returns were experienced in the logistics and industrial sector.

The underperformance against the index can primarily be attributed to the Company’s underweight position in Industrials in the South East, which accounted for 0.9 per cent of the relative underperformance. The Company’s holdings in the office sector lagged the index because of increased voids and shortening unexpired lease terms. The Company has no exposure to shopping centres which was the poorest performing segment.

In absolute terms, the most significant positive contributors to returns were:

• London, St Christopher’s Place Estate – reflecting the completion of the Wigmore Street development, new lettings and strong rental growth.
• London, Cassini House – successfully agreed new letting to the anchor tenant for 15 years, incorporating the full refurbishment of the building.
• Daventry, Site E4, DIRFT – following the completion of a rent renewal on a ten-year lease and the continued demand for prime logistics.
• Chorley, Units 6 & 8 Revolution Park- significant yield compression due to the continued demand for logistics.

Negative contributions came from:

• Uxbridge, Stockley Park – reflecting the fact that the building has a shortening lease expiry.
• Reading, Thames Valley One, Thames Valley Park – reflecting void space following the exit of the tenant.

The Company purchased 1 Cathedral Square, Bristol in December 2017 for £33.5 million. Bristol as a location had been targeted given its positive balance of supply and demand and outlook for rental growth. The purchase is also in accordance with the Company strategy to invest in prime office assets, on attractive yields, in town centres which score highly for connectivity and quality of life and thereby provide sustainable occupational demand and a skilled and young working population.

Borrowings

The Group’s available borrowings comprise a £260 million term loan with Legal & General Pensions Limited, maturing on 31 December 2024, and both a £50 million term loan facility and an undrawn £50 million revolving credit facility with Barclays, available until June 2021. The Group’s net gearing, was 19.6 per cent at the end of the year. The weighted average interest rate on the Group’s total current borrowings is 3.3 per cent.

Dividends and Dividend Cover

Twelve monthly interim dividends, each of 0.5p per share were paid during the year, maintaining the annual dividend of 6.0p per share since 2006 and providing a dividend yield of 4.4* per cent based on the year-end share price. Barring unforeseen circumstances, the Board intends that dividends in 2018 will continue to be paid monthly at the same rate.

The Company’s level of dividend cover for the year (excluding capital gains on properties) was 83.1* per cent. This was lower than the 87.0* per cent cover achieved last year due to:

• a reduced level of rental income following the sale of the office building in Great Pulteney Street in December 2016, on a very low yield, reducing exposure to the West End of London office market. A significant portion of the proceeds of this sale has now been reinvested at a higher yield in the property in Bristol. The level of cover was also impacted by the voids at Thames Valley One, Reading and Nevis/Ness House, Edinburgh.
• The cover was further reduced by an increase in the base management fee negotiated at the start of the year, following the removal of the performance fee. The base fee rate is higher than the effective rate of the total fees earned in 2016, when the Manager did not maximise the performance fee, but lower than the effective rate of fees earned in the previous years.
• The level of tax payable in the current year increased as taxable losses were fully utilised in two subsidiaries of the Group.

Board Composition

As recorded in last year’s Annual Report, Paul Marcuse, formerly Head of Global Real Estate for UBS Global Asset Management, was appointed to the Board as a Non-Executive Director on 12 January 2017. Peter Niven, who had been a Non-Executive Director of the Company since its launch in 2005, retired from the Board at the Annual General Meeting on 31 May 2017 and was the last of the Company’s founding directors to retire in favour of fresh appointments.

At the end of October 2018, I will have served on the Board for nine years. In accordance with good corporate governance I plan to retire at the Annual General Meeting in 2019, once my successor as chairman has been chosen. The Board is mindful of the recommendations of the Hampton-Alexander Review “Improving gender balance in FTSE Leadership”. In particular the review recommends that a Board should have at least 33 per cent female representation by 2020 and the Board will consider this during the recruitment process for the next Non-Executive Director.

Responsible Property Investment

The Board has taken further steps this year to develop our Responsible Property Investment (‘RPI’) approach. Building upon the principles and procedures established by our Property Manager’s comprehensive RPI Strategy+, we have developed a framework of specific targets and objectives for the Group. These reflect the importance of a range of environmental, social and governance (‘ESG’) factors to the UK property market generally, and to the Group’s portfolio and investment strategy specifically.

Engaging with our shareholders was a crucial part of this process and we are very grateful to those who took the time to meet with our advisor to discuss their expectations, as well as those that responded to our survey on ESG priorities. In total, shareholders representing over 50 per cent of the equity in the Company provided valuable input to this process and I am confident that they will see that we have responded positively and robustly to their expectations and will continue to do so.

+ see bmorep.com/our-capabilities

Taxation

The UK government has announced that non-resident landlords will be taxable under the UK corporation tax regime, rather than the UK income tax regime from April 2020. This change could have a material impact on the Company’s tax affairs and we are in consultation with our tax advisors on this, in particular, on whether the Company should apply for UK Real Estate Investment Trust (‘REIT’) status.

Annual General Meeting

The Annual General Meeting will be held at 12.30pm on Wednesday 6 June 2018 at The Fermain Valley Hotel, Fermain Lane, St. Peter Port, Guernsey.

Outlook

The property market out-performed initial expectations for 2017 but an environment of higher interest rates and inflation, subdued economic growth, political uncertainty and some keen pricing may begin to weigh more heavily on investor sentiment this year. Performance is expected to be driven by income return in the next few years and property as an asset class to remain attractive to those seeking a secure income return and access to a large, mature and relatively liquid property investment market. Investment opportunity is likely to be seen as a result of the impact of technology, infrastructure and demographic change on commercial property.

The Company has a well-positioned and resilient portfolio where the priority continues to be to invest in and complete asset management initiatives within the portfolio and to exploit any external opportunity to provide a dependable and long-term rental income.

Chris Russell

Chairman

*see Alternative Performance Measures

Managers’ Review

Property highlights over the Year

• 12 month total return of 8.7* per cent. The Company maintains outperformance against the IPD Benchmark over a three, five and ten year time horizon.

• The retail portfolio outperformed over the year driven by strong performance for St Christopher’s Place which delivered a 10.3* per cent total return.
• Acquired One Cathedral Square, Bristol for £33.5 million.

Property Market Review for 2017

The market total return for the year, as measured by the MSCI Investment Property Databank ('IPD') Quarterly Universe (the Benchmark) was 10.3 per cent, which is a much stronger return than anticipated at the start of the year. Total returns have been on an improving trend over the course of the year. Investment activity has rebounded, driven largely by investment from overseas, and the final quarter saw a return to net investment by UK institutional investors. Although considerable uncertainty remains, sentiment appears to have stabilised after the initial shock of the referendum vote in June 2016. Capital growth resumed, rental growth held steady and yields compressed at the all-property level.

Key Benchmark Metrics – All Property
	2017	2016
Total Returns	10.3	3.6
Income Return	4.6	4.7
Capital Return	5.4	(1.1)
Open Market Rental Value Growth	2.2	2.2
Initial Yield	4.7	4.9
Equivalent Yield	5.6	5.9

Source: MSCI Inc

The year saw an indecisive general election, political disunity, rising inflation, Brexit uncertainty and the first rise in official interest rates in a decade. Despite this, there appears to be ample equity, especially from overseas, and fears of a Brexit related sell-off have not been realised. There have been concerns about pricing levels in some parts of the market and a search for yield from some buyers. In this environment, investors have generally been cautious, selective and are favouring core assets and secure income streams.

There has been a polarization in performance by segment. The year saw standard industrial and distribution warehousing drive performance, and the composite industrial benchmark delivered a 19.4 per cent total return and South East Industrials 22.3 per cent. In contrast, the composite benchmark returns from the retail and office sectors both underperformed the all property total return, which just emphasises the strength of the industrial and logistics sector. The alternatives sector is becoming evermore popular with investors, and this diverse group registered an 11.9 per cent total return. Offices delivered an 8.2 per cent total return, with City offices, helped by overseas buying, out-performing at 9.1 per cent and the West End lagging at 7.5 per cent. Regional offices showed an upturn towards the end of the year to deliver 9.0 per cent. The retail sector remained the weakest sub-market with a 6.9 per cent total return. Shopping centres were out of favour, with capital values falling and benchmark returns of only 3.2 per cent. As in previous years, regional retail has struggled but Central London has out-performed and in 2017 delivered an 11.2 per cent benchmark return.

Polarization was also apparent with regard to yields. CBRE data showed stable yields across much of the market in 2017 including high street shops, supermarkets, prime shopping centres, retail warehouse parks, and some offices but it moved yields inwards for City and regional offices and for prime distribution, and made a major yield re-rating for standard industrial. In contrast, yields for secondary shopping centres rose by 75 basis points. Rental growth was very much focused on the industrials market and was negative for regional retail.

2017 represented a year of recovery following the dislocation caused by the Brexit vote. However, the performances at the all-property level disguise wide differences by segment and different drivers behind this variance. The perceived impact of Brexit, technological change, structural change, the role of overseas money and the search for yield and long leases are just some of the factors that affected the market in 2017 and are likely to persist into future years.

Valuation and Portfolio

Total Portfolio Performance
	2017	2016
No of properties	37	36
Valuation (£’000)	1,418,612	1,322,455
Average Lot Size (£’m)	38.3	36.7
	Portfolio (%)	Benchmark (%)
Portfolio Capital Return*	4.2	5.4
Portfolio Income Return*	4.4	4.6
Portfolio Total Return*	8.7	10.3

Source: BMO REP Asset Management plc, MSCI Inc

The total return from the portfolio over the year was 8.7* per cent (75th percentile) compared with the benchmark return of 10.3 per cent. The portfolio has delivered a strong track record of outperformance over the longer term: upper quartile over three and five years and top quartile over ten years.

Geographical Analysis (% of total property portfolio)
	2017 (%)	2016 (%)
South East	25.2	26.6
London – West End	34.3	33.9
Eastern	2.0	2.0
Midlands	12.5	12.4
Scotland	11.8	12.9
North West	10.6	10.8
Rest of London	1.4	1.4
South West	2.2	nil

Source: BMO REP Asset Management plc

Sector Analysis (% of total property portfolio)
	2017 (%)	2016 (%)
Offices	36.2	35.5
Retail	31.0	31.5
Retail Warehouses	13.1	14.0
Industrial	16.9	16.2
Other	2.8	2.8

Source: BMO REP Asset Management plc

Income analysis

The portfolio benefits from a highly secure income stream. The current void rate excluding developments and refurbishments is 6.9 per cent which is in line with the benchmark. The portfolio is graded by MSCI as upper quartile in terms of safety of income. The vacancy presents an opportunity and progress is currently being made in attracting new secure tenants to the portfolio.

Lease Expiry Profile
At 31 December 2017 the weighted average lease length for the portfolio, assuming all break options are exercised, was 7.3 years (2016: 7.1 years)
% of leases expiring (weighted by rental value)	2017 (%)	2016 (%)
0 – 5 years	46.9	40.2
5 – 10 years	27.3	31.7
10 – 15 years	15.6	17.4
15 – 25 years	10.2	10.7

Source: BMO REP Asset Management plc

Covenant Strength (% of income by risk bands)
	2017 (%)	2016 (%)
Unscored and ineligible	5.0	1.2
Maximum	4.0	3.9
High	1.8	3.0
Medium to High	2.5	5.3
Low to Medium	4.8	6.1
Low	16.8	21.9
Negligible and Government	65.1	58.6

Source: IRIS Report, MSCI Inc

The largest occupiers, based as a percentage of contracted rent, as at 31 December 2017, are summarised as follows:

Income Concentration
Company name	% of Total Income
GB Gas Holdings Limited	4.4
Virgin Atlantic Limited	4.1
Kimberly-Clark Limited	4.0
Apache North Sea Limited	3.9
Nexen Petroleum UK Limited	3.8
Mothercare UK Limited	3.5
JP Morgan Chase Bank	3.4
Asda Stores Limited	3.1
University of Winchester	2.9
DHL Supply Chain Limited	2.8
Total	35.9

Source: BMO REP Asset Management plc

The bad debt provision as at 31 December 2017 was low at £67,000, which is all rent receivable that is greater than three months overdue and represents 0.1 per cent of the contracted rent. There is a wide diversity of occupiers within the portfolio, which is set out below, and is compared with the Benchmark by contracted rent, as at 31 December 2017. The portfolio does not have as high a concentrated risk against retail trade and services occupiers and has a higher exposure to financial services and manufacturing.

Income Concentration by Industry % Contracted Rent
	Portfolio (%)	Benchmark (%)
Retail Trade	28.0	34.9
Financial Services	23.3	14.7
Manufacturing	19.6	7.5
Services	13.8	22.6
Transportation, Communications	4.1	6.2
Mining	3.8	0.5
Wholesale Trade	3.0	5.6
Public Administration	2.9	4.1
Other	1.5	3.9

Source: IRIS Report, MSCI Inc

Retail

Retail Portfolio Performance
	2017	2016
No of properties **	8	8
Valuation (£’000)	626,400	601,030
	Portfolio (%)	Benchmark (%)
Retail Portfolio Capital Return*	3.6	1.7
Retail Portfolio Income Return*	4.1	5.1
Retail Portfolio Total Return*	7.8	6.9

Source: BMO REP Asset Management plc, MSCI Inc

** St Christopher’s Place is regarded as 1 investment which comprises of 44 individual properties.

The total return on the retail portfolio was 7.8* per cent compared with the benchmark total return of 6.9 per cent.

St Christopher’s Place

St Christopher’s Place Estate is the largest asset in the portfolio with a year-end value in excess of £320 million. The Estate is a core holding for the Company and comprises 44 individual properties across a range of uses including traditional retail, restaurants, offices and a growing number of residential units. The Estate performed strongly over the period with a total return of 10.3* per cent and a 7.3 per cent increase in its capital value as a result of a number of asset management initiatives and rental growth across the retail, restaurant and office sectors.

In the first half of the year the redevelopment of 71-77 Wigmore Street completed on time and under budget and the entire redevelopment is now let at rents exceeding appraisal targets. Restaurant operator Hoppers opened at number 77 in September; Danish Bakery Ole & Steen commenced trading at number 71 in early 2018, whereas all residential units were let within three months of opening. The project demonstrates the strength of occupational demand and calibre of tenants attracted to this core Central London asset.

The re-positioning of the food and beverage offer on James Street has also progressed over the year. Following the surrender of the La Tasca lease at 30-34 James Street we have exchanged terms for a new letting to a prestigious London operator. The rent has also increased significantly from £211,000 per annum to £360,000 per annum. Elsewhere at 42 and 44 James Street we achieved the surrender of two leases and have been able to agree terms to a new concept food operator for a newly configured and modern double frontage unit.

At 374 Oxford Street, the Company secured the renewal of two Body Shop leases for their unit at a combined rent of £1,166,000 per annum, reflecting a significant uplift of c. 75 per cent. The Estate continues to offer further value enhancement opportunities over the short and medium term.

The Elizabeth Line (Crossrail 1) is due to open in December 2018, which has prompted a public consultation on a proposed ‘Transformation of Oxford Street’ which promotes the eventual pedestrianisation of Oxford Street. To support this process, as well as to protect and improve the interests of the Company, we remain actively engaged with key stakeholders including Transport for London, Westminster City Council and the New West End Company. We continue to promote opportunities for reduced through traffic on James Street and we aim for this to form part of the overall strategy for environmental improvements to this part of the West End.

Other In-Town Retail

At the Company’s retail and leisure holding in Wimbledon, Blacks renewed their lease for a term of 10 years at a higher rent, which will positively support the current round of rent reviews and lease renewals. We are actively consulting with Merton Council on future planning policy for Wimbledon Town Centre, which is undergoing a major review and also continue to consult as necessary on a potential Crossrail 2. Although final announcements on the future of the project have been delayed, the potential impact of Crossrail 2 would present significant long-term opportunities for the asset. We will continue to explore these projects over the coming year.

Retail Warehouses

There was positive income growth at the Company’s “out of town retail” holdings. At Newbury Retail Park Unit 14, the only vacant unit is now under offer to two well-known occupiers who will complement the existing offer at the park. The unit, which comprises 5,000 sq ft, is being split into two premises. This provides more variety of unit size at the park and achieves overall rent of c. £50,000 per annum higher than the existing rental value for the unit. Planning consent has been received with enabling works already underway and occupation expected this summer.

At Sears Retail Park in Solihull, the completion of a long outstanding 2012 rent review saw additional income received of £18,400 per annum. Having secured planning consent, the project team is in detailed discussions with Argos and Boots to allow works to start on the upgrade to the shop fronts of units 3 and 4, which is part of the ongoing retail park refurbishment program. Unfortunately, 2017 saw furniture retailer Multiyork enter administration. The retailer accounted for c. 4.4 per cent of income at the park and ceased trading in January 2018. Marketing of the space has commenced and owing to the local dominance of the park this presents the Company a number of opportunities to secure stronger long-term income for the asset.

Offices

Offices Portfolio Performance
	2017	2016
No of properties	17	16
Valuation (£’000)	513,562	469,375
	Portfolio (%)	Benchmark (%)
Offices Portfolio Capital Return*	1.6	4.2
Offices Portfolio Income Return*	4.2	3.9
Offices Portfolio Total Return*	5.9	8.2

Source: BMO REP Asset Management plc, MSCI Inc

The total return for the office portfolio was 5.9* per cent compared to the benchmark total return of 8.2 per cent. The Company’s relative underperformance is driven by the higher than average level of vacancy in the South East out of town assets, notably TVP One at Thames Valley Park in Reading and Building B at Watchmoor Park in Camberley, as well as the former HSBC office in Edinburgh Park.

Owing to a challenging office occupational market, planning consent for residential use was sought and successfully achieved for one building at Watchmoor Park, although this was unsuccessful at Thames Valley Park where we are now exploring other options. The strategy at Watchmoor Park is to exit at least one of the buildings via a sale to a residential developer. At Edinburgh Park, we are now in advanced legal negotiations for a lease of the entire building to a major multi-national corporate and we aim to complete the lease in H1 2018. Enabling works for the proposed refurbishment are already progressing.

Our London assets let well during the year. New leases were contracted for five floors within Cassini House, St James’ Street SW1, at rents of £50 to £107 per sq ft. At 2-4 King Street the refurbishment works are now compete with two further floors letting up at rents of £90 to £99 per sq ft, with the final vacant floor under offer. 82 King Street in Manchester is fully let with the latest letting achieving £35 per sq ft and reflecting the growth of prime rents for strong regional centres across the UK.

The City occupational market for small suites remains challenging. At 7 Birchin Lane, EC3, two new lettings were secured on the ground and first floor (c. 5,200 sq ft) with one regear on the fifth floor (c. 2,500 sq ft) at rents ranging from £54 to £61 per sq ft. The property is now over 70 per cent occupied with one further suite under offer. The recent lettings success at the property has been influenced by the strategy to offer more flexible lease terms to tenants to compete with co-working providers.

Office Purchase

In December the Company completed the purchase of 1 Cathedral Square, Bristol, a four-storey Grade-A office at a purchase price of £33.5m (reflecting a net initial yield of 5.00 per cent). The property is let to two strong covenants in Dyson Technology Limited and the University of Bristol. Bristol has been a targeted location for the Company given the prospects for rental growth driven by strong occupational demand and a lack of supply of prime accommodation. The purchase is in accordance with the Company strategy to acquire prime office assets in city and town centres which attract a skilled, professional and young working population which should support long-term tenant demand and prove to be resilient to structural change.

Industrial & Logistics

Industrial & Logistics Portfolio Performance
	2017	2016
No of properties	11	11
Valuation (£’000)	239,350	214,450
	Portfolio (%)	Benchmark (%)
Industrial & Logistics Portfolio Capital Return*	11.6	13.9
Industrial & Logistics Portfolio Income Return*	5.6	4.9
Industrial & Logistics Portfolio Total Return*	17.7	19.4

Source: BMO REP Asset Management plc, MSCI Inc

The total return for the industrial and logistics portfolio delivered 17.7* per cent versus the benchmark total return of 19.4 per cent, representing another strong year for the sector. If 2016 was characterised by the notable performance of “Big Box’s’”, where the majority of the portfolio’s assets in this sector are held, 2017 saw the broader industrial market deliver high capital growth with significant yield compression for secondary and tertiary assets, especially

for those located in the South East. As noted elsewhere the lower than benchmark weighting to South East industrials contributed to underperformance of both the sector and portfolio. However, the rest of UK Industrial outperformed its segment and the portfolio has achieved prolonged outperformance in this sector over the longer term.

In terms of asset activity, at Plot E4 DIRFT in Daventry we completed the lease renewal to Mothercare in February. The new agreement saw a c. 20 per cent increase in valuation of the asset from £28.25 million to £33.9 million. At the DHL logistics facility in Liverpool we achieved a 20 per cent increase in rent at the review in March, supporting our positive long-term view of the logistics market in the North West Region.

There was much activity at our multi-let trading estate, Cowdray Trade Park in Colchester. The rental tone has increased recently to between £6.25 to £7.00 per sq ft, which was captured in a number of rent reviews and lease renewals including Rexel UK Limited extending for a further five years. There is also a 1.45 acre site incorporating a former dilapidated unit, where we will shortly be submitting a planning application for a number of trade counter units ranging from 3,715 to 20,000 sq ft with a target to commence works later in 2018.

The weight of investor demand has seen pricing of opportunities in both the Industrial and Logistics markets look a little over-heated for many assets but we continue to monitor the market closely and will look to invest further into opportunities offering fair value and long-term growth prospects.

Industrial Sale

The Company exchanged contracts to sell Ozalid Works in Colchester to Persimmon Homes Limited subject to a satisfactory planning consent being received. The property comprises a site and dilapidated light industrial units that are currently being vacated. A revised planning application was submitted in January 2018 with a target decision date of spring 2018. The sale has been divided into two separate plots and if a revised satisfactory planning consent is achieved the sale will be phased over twelve months.

The Alternative Property Sector

The student accommodation block, let in its entirety to the University of Winchester on a long lease, remains the Company’s only exposure to this sector. The property produced a total return of 8.9* per cent last year in addition to consecutive years of strong performance. This lease is subject to annual RPI increases and the annual rent is now £1,809,382 per annum.

Outlook

After another year of absolute high total returns for the UK commercial property market, we expect 2018 to produce more muted but stable returns broadly in line with the long-term average. The yield compression experienced in the industrial markets that has driven recent performance is likely to abate and we believe most commercial sectors have reached a pricing apex.

Uncertainty from the Brexit negotiations will continue and this should soften rental growth in some markets. Interest rates increased over the year from historic lows and following a period of strong inflation and economic growth we expect further increases over 2018.

The environment and outlook in retail has deteriorated recently with a number of Company Voluntary Arrangements (‘CVA’s) and restructurings being announced. This will not only put pressure on rental growth from this sector but also on maintaining current income.

In terms of property pricing, the margin above government bonds (the adopted proxy for the risk-free rate of investment) has been far above the long-term average for a sustained period. Therefore, current pricing is reasonably well placed to absorb further increases in interest rates but any continued yield compression is unlikely.

We will seek new acquisitions on a selective basis and we will continue to favour quality industrial and logistics, town centre offices in targeted locations and the alternative sector. We will continue to focus on asset management initiatives apparent in the portfolio and to reducing the exposure to voids. Despite forecasting more modest performance in the short term, UK commercial property continues to offer investors attractive long-term income returns and the Company’s portfolio is well positioned whilst we navigate this period of political uncertainty.

Richard Kirby

Fund Manager

BMO REP Asset Management plc

*see Alternative Performance Measures

F&C Commercial Property Trust Limited

Consolidated Statement of Comprehensive Income (audited)

		Year ended 31 December 2017	Year ended 31 December 2016
		£’000	£’000
Revenue
Rental income		64,775	64,628
		---------	---------
Total revenue		64,775	64,628
Gains on investment properties
Unrealised gains on revaluation of investment properties		52,854	9,507
(Losses)/gains on sale of investment properties realised		(5)	215
		----------	----------
Total income		117,624	74,350
		----------	----------
Expenditure
Investment management fee		(7,692)	(6,406)
Other expenses		(5,659)	(5,056)
		----------	----------
Total expenditure		(13,351)	(11,462)
		-----------	-----------
Operating profit before finance costs and taxation		104,273	62,888
		-----------	-----------
Net finance costs
Interest receivable		72	69
Finance costs		(10,932)	(11,269)
Loss on redemption of interest rate swap		-	(1,283)
		-----------	-----------
		(10,860)	(12,483)
		-----------	-----------
Profit before taxation		93,413	50,405
Taxation		(703)	(251)
		----------	----------
Profit for the year		92,710	50,154
		----------	----------
Other comprehensive income
Items that are or may be reclassified subsequently to profit or loss
Net change in fair value of swap reclassified to profit and loss			1,546
Movement in fair value of effective interest rate swaps		457	(717)
		----------	----------
Total comprehensive income for the year, net of tax		93,167	50,983
		----------	----------
Basic and diluted earnings per share		11.6p	6.3p

All of the profit and total comprehensive income for the year is attributable to the owners of the Group.

All items in the above statement derive from continuing operations.
F&C Commercial Property Trust Limited

Consolidated Balance Sheet (audited)

	As at 31 December 2017 £’000	As at 31 December 2016 £’000
Non-current assets
Investment properties	1,398,894	1,306,002
Trade and other receivables	20,734	17,827
	------------	------------
	1,419,628	1,323,829
	------------	------------
Current assets
Trade and other receivables	3,288	3,093
Cash and cash equivalents	35,156	85,021
	------------	------------
	38,444	88,114
	------------	------------
Total assets	1,458,072	1,411,943
	------------	------------
Current liabilities
Trade and other payables Taxation payable	(18,936) (739)	(18,631) (240)
	------------	------------
	(19,675)	(18,871)
Non-current liabilities
Trade and other payables	(1,812)	(1,565)
Interest-bearing loans	(307,675)	(307,345)
Interest rate swaps	(260)	(717)
	------------	------------
	(309,747)	(309,627)
	------------	------------
Total liabilities	(329,422)	(328,498)
	------------	------------
Net assets	1,128,650	1,083,445
	------------	------------
Represented by:
Share capital	7,994	7,994
Share premium	-	127,612
Reverse acquisition reserve	-	831
Special reserve	589,593	461,150
Capital reserve – investments sold	7,063	7,068
Capital reserve – investments held	408,440	355,586
Hedging reserve	(260)	(717)
Revenue reserve	115,820	123,921
	------------	------------
Equity shareholders’ funds	1,128,650	1,083,445
	------------	------------
Net asset value per share	141.2p	135.5p

F&C Commercial Property Trust Limited

Consolidated Statement of Changes in Equity

for the year ended 31 December 2017 (audited)

	Share Capital £’000	Share Premium £’000	Reverse Acquisition Reserve £’000	Special Reserve £’000	Capital Reserve - Investments Sold £’000	Capital  Reserve – Investments Held £’000	Hedging Reserve £’000	Revenue Reserve £’000	Total £’000
At 1 January 2017	7,994	127,612	831	461,150	7,068	355,586	(717)	123,921	1,083,445
Total comprehensive income for the year
Transfer to Special Reserve		(127,612)	(831)	128,443
Profit for the year	-	-	-	-	-	-	-	92,710	92,710
Movement in fair value of interest rate swaps							457		457
Transfer in respect of unrealised gains on investment properties						52,854		(52,854)
Loss on sale of investment properties realised					(5)
Total comprehensive income for the year	-	(127,612)	(831)	128,443	(5)	52,854	457	39,861	93,167
Transactions with owners of the Company recognised directly in equity
Dividends paid	-	-	-	-	-	-	-	(47,962)	(47,962)
At 31 December 2017	7,994	-	-	589,593	7,063	408,440	(260)	115,820	1,128,650

Consolidated Statement of Changes in Equity

for the year ended 31 December 2016 (audited)

	Share Capital £’000	Share Premium £’000	Reverse Acquisition Reserve £’000	Special Reserve £’000	Capital Reserve - Investments Sold £’000	Capital  Reserve – Investments Held £’000	Hedging Reserve £’000	Revenue Reserve £’000	Total £’000
At 1 January 2016	7,994	127,612	831	474,529	(21,408)	374,340	(1,546)	118,072	1,080,424
Total comprehensive income for the year
Profit for the year	-	-	-	-	-	-	-	50,154	50,154
Movement in fair value of interest rate swaps							829		829
Transfer in respect of unrealised gains on investment properties						9,507		(9,507)
Gains on sale of investment properties realised					215			(215)
Transfer of prior years’ revaluation to realised reserve					28,261	(28,261)
Transfer from special reserve				(13,379)				13,379
Total comprehensive income for the year	-	-	-	(13,379)	28,476	(18,754)	829	53,811	50,983
Transactions with owners of the Company recognised directly in equity
Dividends paid	-	-	-	-	-	-	-	(47,962)	(47,962)
At 31 December 2016	7,994	127,612	831	461,150	7,068	355,586	(717)	123,921	1,083,445

F&C Commercial Property Trust Limited

Consolidated Statement of Cash Flows (audited)

	Year ended 31 December 2017	Year ended 31 December 2016
	£’000	£’000
Cash flows from operating activities
Profit for the year before taxation	93,413	50,405
Adjustments for:
Finance costs	10,932	11,269
Interest receivable	(72)	(69)
Unrealised gains on revaluation of investment properties	(52,854)	(9,507)
Losses/(Gains) on sale of investment properties realised	5	(215)
Loss on redemption of interest rate swap	-	1,283
Increase in operating trade and other receivables	(3,204)	(888)
Increase/(Decrease) in operating trade and other payables	200	(5,746)
	-----------	-----------
	48,420	46,532
	-----------	-----------
Interest received	72	69
Interest and bank fees paid	(10,559)	(10,778)
Tax paid	(203)	(71)
	-----------	-----------
	(10,690)	(10,780)
	-----------	-----------
Net cash inflow from operating activities	37,730	35,752
	-----------	-----------
Cash flows from investing activities
Purchase of investment properties	(32,802)	-
Sale of investment properties	-	54,291
Capital expenditure	(6,831)	(10,510)
	-----------	-----------
Net cash (outflow)/inflow from investing activities	(39,633)	43,781
	-----------	-----------
Cash flows from financing activities
Dividends paid	(47,962)	(47,962)
Draw down of Barclays Loan, net of costs	-	49,489
Repayment of Barclays Loan	-	(50,000)
Revolving credit facility arrangement costs	-	(511)
Swap breakage costs Draw down of Barclays Loan revolving credit facility Repayment of Barclays Loan revolving credit facility	- 35,000 (35,000)	(1,283)
	-----------	-----------
Net cash outflow from financing activities	(47,962)	(50,267)
	-----------	-----------
Net (decrease)/increase in cash and cash equivalents	(49,865)	29,266
Opening cash and cash equivalents	85,021	55,755
	-----------	-----------
Closing cash and cash equivalents	35,156	85,021
	-----------	-----------

F&C Commercial Property Trust Limited

Principal Risks and Future Prospects

Each year the Board carries out a comprehensive, robust assessment of the principal risks and uncertainties that could threaten the Company's success. The consequences for its business model, liquidity, future prospects and viability form an integral part of this assessment.

The Board applies the principles detailed in the internal control guidance issued by the Financial Reporting Council, and has established an ongoing process designed to meet the particular needs of the Company in managing the risks and uncertainties to which it is exposed.

Principal risks and uncertainties faced by the Company are described below and in note 2, which provides detailed explanations of the risks associated with the Company’s financial instruments.

•        Market – the Company’s assets comprise direct investments in UK commercial property and it is therefore exposed to movements and changes in that market.

•        Investment and strategic – poor investment decisions and incorrect strategy, including sector and geographic allocations, use of gearing, inadequate asset management activity and tenant defaults could lead to poor returns for shareholders.

•        Regulatory – breach of regulatory rules could lead to suspension of the Company’s London Stock Exchange listing, financial penalties or a qualified audit report.

•        Environmental – inadequate attendance to environmental factors by the Managers, including those of a regulatory and market nature and particularly those relating to energy performance, health and safety, flood risk and environmental liabilities, leading to the reputational damage of the Company, reduced liquidity in the portfolio, and/or negative asset value impacts.

•        Tax structuring and compliance – changes that cause the management and control of the Company to be exercised in the United Kingdom could lead to the Company becoming liable to United Kingdom taxation on income and capital gains. Changes to tax legislation could have an adverse financial impact.

•        Operational – failure of the Managers’ accounting systems or disruption to its business, or that of other third party service providers, could lead to an inability to provide accurate reporting and monitoring, leading to a loss of shareholders’ confidence.

•        Financial – inadequate controls by the Managers or other third party service providers could lead to misappropriation of assets. Inappropriate accounting policies or failure to comply with accounting standards could lead to a qualified audit report, misreporting or breaches of regulations. Breaching Guernsey solvency test requirements or loan covenants could lead to a loss of shareholders’ confidence and financial loss for shareholders.

The Board seeks to mitigate and manage these risks through continual review, policy-setting and enforcement of contractual obligations. It also regularly monitors the investment environment and the management of the Company’s property portfolio. The Managers seek to mitigate these risks through active asset management initiatives and carrying out due diligence work on potential tenants before entering into any new lease agreements. All of the properties in the portfolio are insured.

The principal risks encountered during the year, how they are mitigated and actions taken to address these are set out in the table below.

Principal Risk	Mitigation	Actions taken in the year
Valuers have difficulty in valuing the property assets due to lack of market evidence or market uncertainty. Error in the calculation/ application of the Company Net Asset Value ('NAV') leads to a material misstatement.	Professional external valuers are appointed to value the portfolio on a quarterly basis. There is regular liaison with the valuers regarding all elements of the portfolio. There is attendance by one or more Directors at the valuation meetings and the Auditors attend the year end valuation meeting.	Valuing properties was challenging in the aftermath of the Brexit vote in June 2016. There has been more transactional based market evidence this year which the valuers have used to assist them in producing the quarterly valuations. There was attendance by one or more Directors at the valuation meetings throughout the year.
Risk reduced in the year under review
Unfavourable markets, poor stock selection, inappropriate asset allocation and under-performance against benchmark and/or peer group. This risk may be exacerbated by gearing levels.	The underlying investment strategy, performance, gearing and income forecasts are reviewed with the Investment Manager at each Board Meeting. The Company's portfolio is well diversified and of a high quality. Gearing is kept at modest levels.	The Board review the Manager's performance at quarterly Board Meetings against key performance indicators and is satisfied that the Manager's long-term performance is in line with expectations.
Risk unchanged throughout the year under review
Non-resident landlords will be taxable under the UK corporation tax regime from April 2020. This change could have a material impact on the Company's tax affairs. Additionally, new capital gains tax rules are set to be implemented in April 2019 which will also impact the Company moving forward.	Adoption of UK REIT status is under consideration. Under current tax legislation, the principal tax advantage for the Company in doing this is that the Group's net rental income derived from its property rental business would be exempt from UK taxation. The same treatment would apply to capital gains arising on the disposal of relevant rental properties.	The changes in taxation were formalised in the UK Chancellor's Budget in November 2017 and the Company's professional advisors have been engaged to advise on these regulatory changes and look at the feasibility of the Company adopting UK REIT status.
Risk increased in the year under review
The retail market has witnessed a number of company voluntary arrangements, profit warning announcements and administrations in recent months. There is an increased risk of tenant defaults in this sector which could put the level of dividend cover at risk.	The Manager provides regular information on the expected level of rental income that will be generated from the underlying properties. The Portfolio is well diversified by geography and sector and the exposure to individual tenants is monitored and managed to ensure there is no over exposure.	The portfolio has been lightly impacted to date and the Manager has business plans in place to asset manage any tenant default.
Risk increased in the year under review

Viability Assessment and Statement

The Board conducted this review over a five year time horizon, a period thought to be appropriate for a Company investing in commercial property with a long-term investment outlook; with primary borrowings secured for a further seven years and a property portfolio with an average unexpired lease length of 7.3 years. The assessment has been undertaken, taking into account the principal risks and uncertainties faced by the Group which could threaten its objective, strategy, future performance, liquidity and solvency.

The major risks identified as relevant to the viability assessment were those relating to a downturn in the UK commercial property market and its resultant effect on the valuation of the investment property portfolio, the level of rental income being received and the effect that this would have on cash resources and financial covenants. The Board took into account the illiquid nature of the Company’s property portfolio, the existence of the long-term borrowing facility, the effects of any significant future falls in investment property values and property income receipts on the ability to repay and re-negotiate borrowings, maintain dividend payments and retain investors. These matters were assessed over a period to March 2023, and the Directors will continue to assess viability over five year rolling periods, taking account of foreseeable severe but plausible scenarios.

In the ordinary course of business, the Board reviews a detailed financial model on a quarterly basis, incorporating market consensus forecast returns, projected out to the maturity of its principal loan of £260 million which is due to mature in 2024 and coincides with the next continuation vote. This model uses prudent assumptions and factors in any potential capital commitments. For the purpose of assessing the viability of the Group, the model has been adjusted to look at the next five years and is stress tested with projected returns comparable to the commercial property market crash experienced between 2007 and 2009. The model projects a worst case scenario of an equivalent fall in capital and income values over the next two years, followed by three years of zero growth. The model demonstrated that even under these extreme circumstances the Company remains viable.

Based on their assessment, and in the context of the Group’s business model, strategy and operational arrangements set out above, the Directors have a reasonable expectation that the Group will be able to continue in operation and meet its liabilities as they fall due over the five year period to March 2023.

F&C Commercial Property Trust Limited

Going Concern

In assessing the going concern basis of accounting the Directors have had regard to the guidance issued by the Financial Reporting Council. They have reviewed detailed cash flow, income and expense projections in order to assess the Company’s ability to pay its operational expenses, bank interest and dividends. The Directors have examined significant areas of possible financial risk including cash and cash requirements and the debt covenants, in particular those relating to loan to value and interest cover. They have not identified any material uncertainties which cast significant doubt on the ability to continue as a going concern for a period of not less than 12 months from the date of the approval of the financial statements. The Board believes it is appropriate to adopt the going concern basis in preparing the financial statements.

Statement of Directors' Responsibilities in Respect of the Annual Report and Accounts

In accordance with Chapter 4 of the Disclosure and Transparency Rules, we confirm that to the best of our knowledge:

• The financial statements contained within the Annual Report and Accounts for the year ended 31 December 2017, of which this statement of results is an extract, have been prepared in accordance with applicable International Financial Reporting Standards as adopted by the EU, on a going concern basis, and give a true and fair view of the assets, liabilities, fiancial position and profit or loss of the Group and the undertakings included in the consolidation taken as a whole and comply with The Companies (Guernsey) Law, 2008 (as amended) ; and

• The Chairman’s Statement and Managers’ Review include a fair review of the development and performance of the business and the position of the Group and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face; and

• The consolidated financial statements include details of related party transactions; and

In the opinion of the Directors:

• The Annual Report and financial statements, taken as a whole, are fair, balanced and understandable and provide the information necessary for shareholders to assess the Group’s position and performance, business model and strategy.

On behalf of the Board

Chris Russell  
Director                                                           

F&C Commercial Property Trust Limited

Notes to the audited Consolidated Financial Statements
for the year ended 31 December 2017

1.         The Board has declared a twelfth, and last, interim dividend for the year of 0.50p per share to be paid on 30 April 2018 to shareholders on the register on 13 April 2018.

It is the Directors’ intention that the Company will continue to pay dividends monthly.

2.         Financial Instruments and investment properties
The Company’s investment objective is to provide ordinary shareholders with an attractive level of income together with the potential for capital and income growth from investing in a diversified UK commercial property portfolio.

Consistent with that objective, the Group holds UK commercial property investments. In addition, the Group’s financial instruments during the year comprised interest-bearing bank loans, cash and receivables and payables that arise directly from its operations. The Group does not have exposure to any derivative instruments other than the interest rate swap entered into to hedge the interest paid on the Barclays interest-bearing bank loan.

The Group is exposed to various types of risk that are associated with financial instruments. The most important types are credit risk, liquidity risk, interest rate risk and market price risk. There is no foreign currency risk as all assets and liabilities of the Group are maintained in pounds sterling.

The Board reviews and agrees policies for managing the Group’s risk exposure. These policies are summarised below and have remained unchanged for the year under review. These disclosures include, where appropriate, consideration of the Group’s investment properties which, whilst not constituting financial instruments as defined by IFRS, are considered by the Board to be integral to the Group’s overall risk exposure.

Credit risk
Credit risk is the risk that an issuer or counterparty will be unable or unwilling to meet a commitment that it has entered into with the Group.

In the event of default by an occupational tenant, the Group will suffer a rental shortfall and incur additional costs, including legal expenses, in maintaining, insuring and re-letting the property. The Board receives regular reports on concentrations of risk and any tenants in arrears. The Managers monitor such reports in order to anticipate, and minimise the impact of, defaults by occupational tenants.

All of the Group’s cash is placed with financial institutions with a long-term credit rating of A or better. Bankruptcy or insolvency of such financial institutions may cause the Group’s ability to access cash placed on deposit to be delayed or limited. Should the credit quality or the financial position of the banks currently employed significantly deteriorate, cash holdings would be moved to another bank.

Liquidity risk
Liquidity risk is the risk that the Group will encounter in realising assets or otherwise raising funds to meet financial commitments. The Group’s investments comprise UK commercial property. Property and property-related assets in which the Group invests are not traded in an organised public market and may be illiquid. As a result, the Group may not be able to liquidate quickly its investments in these properties at an amount close to their fair value in order to meet its liquidity requirements.

The Group’s liquidity risk is managed on an ongoing basis by the Managers and monitored on a quarterly basis by the Board. In order to mitigate liquidity risk, the Group aims to have sufficient cash balances (including the expected proceeds of any property sales) to meet its obligations for a period of at least twelve months.

Interest rate risk
Some of the Group’s financial instruments are interest bearing. They are a mix of both fixed and variable rate instruments with differing maturities. As a consequence, the Group is exposed to interest rate risk due to fluctuations in the prevailing market rate.

The Group’s exposure to interest rate risk relates primarily to its long-term debt obligations. Interest rate risk on long-term debt obligations is managed by fixing the interest rate on such borrowings, either directly or through interest rate swaps for the same notional value and duration. Long-term debt obligations and the interest rate risk they confer to the Group is considered by the Board on a quarterly basis. Long term debt obligations consist of a £260 million L&G loan on which the rate has been fixed at 3.32 per cent until the maturity date of 31 December 2024. The Group also has a £50 million interest-bearing bank loan with Barclays on which the rate has been fixed through an interest rate swap at 2.522 per cent per annum until the maturity date of 21 June 2021. The Group has agreed an additional revolving credit facility of £50 million with Barclays over the same period, which has not been drawn down as at 31 December 2017. The revolving credit facility pays an undrawn commitment fee of 0.60 per cent per annum.

When the Group retains cash balances, they are ordinarily held on interest-bearing deposit accounts. The benchmark which determines the interest income received on interest bearing cash balances is the bank base rate of the Bank of England which was 0.50 per cent as at 31 December 2017 (2016: 0.25 per cent). The Company’s policy is to hold cash in variable rate or short-term fixed rate bank accounts and not usually in fixed rate securities with a term greater than three months.

Market price risk
The Group’s strategy for the management of market price risk is driven by the investment policy. The management of market price risk is part of the investment management process and is typical of commercial property investment. The portfolio is managed with an awareness of the effects of adverse valuation movements through detailed and continuing analysis, with an objective of maximising overall returns to shareholders. Investments in property and property-related assets are inherently difficult to value due to the individual nature of each property. As a result, valuations are subject to substantial uncertainty. There is no assurance that the estimates resulting from the valuation process will reflect the actual sales price even where such sales occur shortly after the valuation date. Such risk is minimised through the appointment of external property valuers.

3.         There were 799,366,108 Ordinary Shares in issue at 31 December 2017 (2016: 799,366,108).

At 31 December 2017, the Company did not hold any Ordinary Shares in treasury (2016: nil).

4.         The basic and diluted earnings per Ordinary Share are based on the profit for the year of £92,710,000 (2016: £50,154,000) and on 799,366,108 (2016: 799,366,108) Ordinary Shares, being the weighted average number of shares in issue during the year.

5.         The Company owns 100 per cent of the issued ordinary share capital of FCPT Holdings Limited, a company registered in Guernsey. The principal activity of FCPT Holdings Limited is to act as a holding company and it owns 100 per cent of the ordinary share capital of F&C Commercial Property Holdings Limited, a company registered in Guernsey whose principal business is that of an investment and property company, and 100 per cent of the ordinary share capital of Winchester Burma Limited, a company registered in Guernsey whose principal business is that of an investment and property company.

The Company owns 100 per cent of the issued ordinary share capital of SCP Estate Holdings Limited, a company registered in Guernsey. The principal activity of SCP Estate Holdings Limited is to act as a holding company and it owns 100 per cent of the ordinary share capital of SCP Estate Limited, a company registered in Guernsey whose principal business is that of an investment and property company, and 100 per cent of the ordinary share capital of Prime Four Limited, a company registered in Guernsey whose principal business is that of an investment and property company.

The Company owns 100 per cent of the issued ordinary share capital of Leonardo Crawley Limited, a company registered in Guernsey whose principal business is that of an investment and property company.

The results of the above entities are consolidated within the Group financial statements.

6.         The Group had capital commitments totalling £6,800,000 as at 31 December 2017 (2016: £4,271,000). These commitments related mainly to contracted development work at the Group’s property at Cassini House, London SW1.

7.         These are not full statutory accounts. The full audited accounts for the year to 31 December 2017 will be sent to shareholders and will be available for inspection at Trafalgar Court, Les Banques, St Peter Port, Guernsey GY1 3QL, the registered office of the Company, and from the Company’s website: fccpt.co.uk

Alternative Performance Measures

The Company uses the following Alternative Performance Measures (‘APMs’). APMs do not have a standard meaning prescribed by GAAP and therefore may not be comparable to similar measures presented by other entities.

Discount or Premium – the share price of an Investment Company is derived from buyers and sellers trading their shares on the stock market. If the share price is lower than the NAV per share, the shares are trading at a discount. This usually indicates that there are more sellers than buyers. Shares trading at a price above the NAV per share, are said to be at a premium.

Dividend Cover – The percentage by which Profits for the period (less Gains/losses on investment properties and loss on redemption on interest rate swaps) cover the dividend paid.

A reconciliation of dividend cover is shown below:

			2017	2016
			£’000	£’000
Profit for the period			92,710	50,154
Add back:	Unrealised gains on revaluation of investment properties		(52,854)	(9,507)
	Losses/(gains) on sales of investment properties realised			(215)
	Loss on redemption of interest rate swap		-	1,283
Profit before investment gains and losses			39,861	41,715
Dividends			47,962	47,962
Dividend Cover percentage			83.1	87.0

Dividend Yield – The annualised dividend divided by the share price at the year end.

Net Gearing – Borrowings less cash divided by total assets (less current liabilities and cash).

Portfolio (Property) Capital Return – The change in property value during the period after taking account of property purchases and sales and capital expenditure, calculated on a quarterly time-weighted basis.

Portfolio (Property) Income Return – The income derived from a property during the period as a percentage of the property value, taking account of direct property expenditure, calculated on a quarterly time-weighted basis.

Portfolio (Property) Total Return – Combining the Portfolio Capital Return and Portfolio Income Return over the period, calculated on a quarterly time-weighted basis.

Total Return – The return to shareholders calculated on a per share basis by adding dividends paid in the period to the increase or decrease in the Share Price or NAV. The dividends are assumed to have been reinvested in the form of Ordinary Shares or Net Assets, respectively, on the date on which they were quoted ex-dividend.


All enquiries to:

The Company Secretary
Northern Trust International Fund Administration (Guernsey) Limited
Trafalgar Court
Les Banques
St. Peter Port
Guernsey GY1 3QL
Tel:      [phone]
Fax:     [phone]

Richard Kirby
BMO REP  Asset Management plc
Tel:      [phone]

Graeme Caton
Winterflood Securities Limited
Tel:      [phone]