Final Results

British Assets Trust PLC 16 November 2005 BRITISH ASSETS TRUST PLC Date: 16 November 2005 Unaudited results for the year ended 30 September 2005 • Net asset value total return of 27.8 per cent compared to a return of 24.6 per cent from the benchmark index • Share price total return of 31.1 per cent reflecting narrowing of the discount to 9.7 per cent • Dividend yield of 4.2 per cent CHAIRMAN'S STATEMENT The Year to 30 September 2005 was a strong year for global stockmarkets. The Company's net asset value total return, with net dividends reinvested, was 27.8 per cent. This compares well with a total return of 24.6 per cent from the benchmark index of 75 per cent FTSE All-Share Index and 25 per cent FTSE World (ex UK) Index. The share price total return for the year was 31.1 per cent, helped by the narrowing of the discount of share price to net asset value from 11.6 per cent to 9.7 per cent. Asset allocation, gearing and share buy backs enhanced returns for shareholders during the year. Overall stock selection was positive compared to the benchmark. Good performance in Europe was offset by underperformance in the early part of the financial year in North America. However, since the appointment by F&C Asset Management plc of a new fund manager for North America, at the end of 2004, we have seen an improvement in performance from this portfolio. The Board will continue to keep this area under careful review. Corporate bond returns lagged equities during the year but the portfolio still delivered a return of 10.1 per cent, well above the cost of the Company's borrowings, whilst providing an attractive yield and making an important contribution to the Revenue Account. During the first half of the year, the FTSE All-Share Index increased in value on the back of strong dividend growth, share buy backs and bid rumours. This trend continued through the second half of the year and in particular during the final quarter. There was also good growth from overseas markets, in particular from the Pacific (ex Japan) region, where economic growth remains strong and Japan, which is benefiting from ongoing reform and improving economic conditions. The poorest performing region during the year was North America where the prospect of slower earnings growth and rising interest rates have capped returns. Activity During the year, the Company remained overweight in Japan and the Pacific (ex Japan) regions, and underweight in North America. In the early part of the year, the Managers raised cash out of North America reflecting concerns at that time over further weakness in the US Dollar. This cash, together with cash raised out of Europe and the Pacific (ex Japan) regions later in the year following a period of strong outperformance, was used principally to fund share buy backs. Gearing At the end of the year the Company's gearing level, net of cash, was 22.1 per cent, compared to 28.3 per cent as at 30 September 2004. The level of gearing is represented by 14.6 per cent in equities and 7.5 per cent in corporate bonds. The Company's borrowings are made up of two £60 million Bonds, one which matures in 2008 and the other in 2031. Earnings and Dividends The Company's earnings were 4.75p per Ordinary Share in respect of the year ended 30 September 2005, an increase of 19.9 per cent compared to the previous year. During the year, the Company benefited from strong dividend growth from its investee companies, particularly in the UK where we were also in receipt of some special dividends. Share buy backs for cancellation, which reduce the number of shares on which the Company's own dividend is payable, have further improved the Company's earnings per share. At the end of the year the level of dividend cover provided by the Company's Revenue Reserve was 132 per cent, which compares to 136 per cent as at 30 September 2004. Shareholders will recall from previous Annual and Interim Reports that, prior to the Company's 46,770,630 Growth Shares being converted into Ordinary Shares in September 2001, and becoming entitled to dividends, the level of revenue reserves had been built up so that dividend levels following the conversion could be maintained despite the initial shortfall in retained earnings that would be caused by the increased number of Ordinary Shares in issue. Since September 2001, the Company has bought back 31,050,000 Ordinary Shares for cancellation. Taken together with the strong growth in dividends paid by investee companies over the past two years, this has improved the Company's dividend paying ability. The Board is aware of the attractions to shareholders of the above average dividend yield which, at 30 September 2005, was 4.2 per cent and compared to a yield of 3.0 per cent on the FTSE All-Share Index. The Board is also conscious of the Company's stated aim to seek to achieve a progressive dividend policy. However, as I have stated in previous reports to shareholders, we need to balance this aim with the overriding objective of maximising total return, that is capital growth plus the dividend yield. With all of this in mind, the Board has continued to monitor carefully the Company's revenue projections. We would expect, subject to there being no material reductions in dividends paid by our investee companies, to be in a position to grow the dividend paid to shareholders in respect of the year ended 30 September 2007. At this stage, it is unlikely that we will increase the dividend for the year ended 30 September 2006 but if dividend growth from our investee companies is significantly ahead of expectations by the end of this financial year, we may be in a position to accelerate the date at which we can increase the dividend. In respect of the year ended 30 September 2005, the Board recommends a final dividend of 1.414p per Ordinary Share, payable on 6 January 2006 to shareholders on the register on 9 December 2005. Taken together with the three interim dividends already paid, this brings the total dividend for the year to 5.326p per Ordinary Share, unchanged from the previous year. Share Buy Backs During the year the Company bought back 14,500,000 Ordinary Shares for cancellation, equivalent to 4.3 per cent of the shares in issue at the previous year end, for a total consideration of £16.3 million. These buy backs enhanced the net asset value by 0.54p per share and, as stated above, provided a benefit to the Revenue Account by reducing the number of shares on which dividends are payable. The Company will seek to renew its share buy back authority at the forthcoming Annual General Meeting. Board Composition Sir Malcolm Rifkind retired as a Director on 31 May 2005, having served on the Board since 1998. On behalf of the Board I would like to thank Sir Malcolm for his significant contribution to Board matters over this time. As previously reported to shareholders, Ms Lynn Ruddick was appointed as a Director on 1 October 2004. Whilst the current composition of the Board is already compliant with the recommendations of the Combined Code on Corporate Governance, it is our intention to seek to recruit an additional independent non-executive Director during the current financial year so as to continue to refresh the overall composition of the Board. Outlook After excellent returns in 2005, it is difficult to see gains of a similar scale in 2006. The backdrop for equities will become more challenging as growth slows. That said, valuations and earnings prospects are reasonable, and stock market sentiment is generally good. W R E Thomson Chairman Enquiries: Julie Dent/Gordon Hay Smith F & C Asset Management plc - 0131 465 1000 Unaudited Statement of Total Return (Incorporating the revenue account) for the Year ended 30 September 2005 Notes 2005 2005 2005 Revenue Capital Total £'000 £'000 £'000 Gains on investments - 92,103 92,103 Exchange differences - 198 198 Income 19,479 1,167 20,646 Investment management fee - basic (460) (1,380) (1,840) Investment management fee - performance - (1,588) (1,588) Other expenses (1,090) - (1,090) ______ ______ ______ Net return before finance costs & taxation 17,929 90,500 108,429 Finance costs (1,954) (5,860) (7,814) ______ ______ ______ Return on ordinary activities before tax 15,975 84,640 100,615 Tax on ordinary activities (270) - (270) ______ ______ ______ Return attributable to shareholders 15,705 84,640 100,345 Dividends in respect of Ordinary Shares 3 (17,348) - (17,348) ______ ______ ______ Transfer (from)/to reserves (1,643) 84,640 82,997 ______ ______ ______ Return per Ordinary Share 1 4.75p 25.62p 30.37p Audited Statement of Total Return (Incorporating the revenue account) for the Year ended 30 September 2004 Notes 2004 2004 2004 Revenue Capital Total £'000 £'000 £'000 Gains on investments - 42,521 42,521 Exchange differences - 793 793 Income 17,605 - 17,605 Investment management fee - basic (444) (1,333) (1,777) Investment management fee - performance - (613) (613) Other expenses (1,180) - (1,180) Net return before finance costs & taxation 15,981 41,368 57,349 Finance costs (1,954) (5,860) (7,814) Return on ordinary activities before tax 14,027 35,508 49,535 Tax on ordinary activities (254) - (254) Return attributable to shareholders 13,773 35,508 49,281 Dividends in respect of Ordinary Shares (18,197) - (18,197) Transfer (from)/to reserves (4,424) 35,508 31,084 Return per Ordinary Share 1 3.96p 10.22p 14.18p Unaudited Balance Sheet as at 30 September 2005 Audited 2004 £'000 £'000 Fixed assets Investments 553,125 495,632 ________ ________ Current assets Debtors 6,321 5,609 Cash at bank and on deposit 28,303 15,788 ________ ________ 34,624 21,397 Creditors: amounts falling due within one year (15,750) (11,782) ________ ________ Net current assets 18,874 9,615 ________ ________ Total assets less current liabilities 571,999 505,247 Creditors: amounts falling due after more than one year (119,158) (119,068) ________ ________ Net Assets 452,841 386,179 ________ ________ Capital and reserves Called-up share capital 80,828 84,453 Capital reserve - realised 255,862 267,622 Capital reserve - unrealised 85,899 5,834 Capital redemption reserve 7,513 3,888 Revenue reserve 22,739 24,382 ________ _______ Equity shareholders' funds 452,841 386,179 ________ _______ Net asset value per share 140.1p 114.3p Unaudited Summarised Statement of Cash Flows Audited Year to 30 Year to 30 September 2005 September 2004 £'000 £'000 Net cash inflow from operating activities 17,131 14,625 Servicing of finance (7,725) (7,725) Taxation 30 58 Capital expenditure and financial investment 37,264 26,702 Equity dividends paid (17,784) (18,591) ________ ________ Net cash inflow before financing 28,916 15,069 Financing (16,346) (15,717) ________ ________ Increase/(decrease) in cash 12,750 (648) ________ ________ Reconciliation of net cash flow to movement in net debt Increase/(decrease) in cash in the year 12,750 (648) ________ ________ Movement in net debt resulting from cash flows 12,570 (648) Currency (losses)/gains (55) 1,048 Increase in 6.625 per cent Bonds 2008 liability (63) (63) Increase in 6.25 per cent Bonds 2031 liability (27) (26) Opening net debt (103,280) (103,591) ________ ________ Closing net debt (90,855) (103,280) ________ ________ Reconciliation of net revenue before finance costs and taxation to net cash inflow from operating activities Net revenue before finance costs and taxation 17,929 15,981 Capital dividends 1,167 - (Increase)/decrease in accrued income and prepayments (117) 692 Increase in other creditors 1,423 165 Investment management fee charged to capital (2,968) (1,946) Tax on investment income (303) (267) ________ ________ Net cash inflow from operating activities 17,131 15,607 ________ ________ Notes 1. Return per Ordinary Share is based on a weighted average of 330,374,885 (2004:347,578,402) Ordinary Shares in issue. 2. Total income of £20,646,000 includes special dividends of £2,249,000 of which £1,082,000 is recognised through revenue and £1,167,000 is recognised through capital. 3. The proposed final dividend of 1.414p per Ordinary Share, will be paid on 6 January 2006 to ordinary shareholders on the register at close of business on 9 December 2005. The last date for receipt of mandate instructions for those shareholders who wish to join the Dividend Reinvestment Plan is 16 December 2005. 4. The Company had 323,312,282 (2004: 337,812,282) Ordinary Shares in issue as at 30 September 2005. 5. During the year, the Company purchased for cancellation 14,500,000 Ordinary Shares with an aggregate nominal value of £3.6 million for a total consideration of £16.3 million representing 4.3% of the Ordinary Shares in issue at the previous year end. 6. These are not full statutory accounts in terms of Section 240 of the Companies Act 1985. The full audited accounts for the year to 30 September 2004, which were unqualified, have been lodged with the Registrar of Companies. The 2005 Annual Report will be sent to shareholders during November 2005 and will be available for inspection at 80 George Street, Edinburgh EH2 3BU, the registered office of the Company. 7. The unaudited results have been prepared on the basis of the accounting policies set out in the statutory accounts of the Company for the year ended 30 September 2004. 8. The following table provides a breakdown of the estimated contributions to the total return for the year: Percentage Attribution of Return points Market/benchmark return 24.6 Stock selection UK equities 0.2 Overseas equities 0.0 Regional asset allocation 0.6 Corporate bonds -0.6 Gearing 3.4 Buy Backs 0.5 Expenses -0.9 -------- British Assets Trust total return 27.8 -------- 9. The Company's geographic exposure as a percentage of ordinary shareholders' funds was as follows: 30 September 30 September 2005 2004 UK 85.2 87.5 North America 13.4 15.1 Europe (ex UK) 5.9 6.7 Japan 6.1 5.7 Pacific (ex Japan) 4.0 5.2 Corporate Bonds 7.5 8.1 Gearing (22.1) (28.3) ------------ ----------- Total 100.0 100.0 ----------- ----------- This information is provided by RNS The company news service from the London Stock Exchange

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