BREI.L Regulatory News (BREI)

F&C UK REAL ESTATE INVESTMENTS LTD - Annual Financial Report

PR Newswire

London, September 28

To: RNSDate: 29 September 2015From: F&C UK Real Estate Investments Limited 

Chairman’s Statement

It has been an extremely demanding and positive 12 months for the Company. Performance continues to be good with the market capitalisation increasing from £194 million as at 30 June 2014 to £233 million as at 30 June 2015.

Share price performance has been strong during the year and the shares were trading at a premium to net asset value of 2.6 per cent at the year end, with the price at 99.5 pence per share. This represented a share price total return for the year of 24.9 per cent.

The net asset value (‘NAV’) total return for the year was 22.7 per cent with a NAV as at 30 June 2015 of 97.0 pence per share, up from 83.4 pence per share at the prior year end.

Property Market and Portfolio

The UK commercial property market has delivered double digit returns of 15.7 per cent in the year to June 2015, as measured by the Investment Property Databank (‘IPD’) UK Quarterly Index. With strong competition for stock during the year, IPD data showed initial yields at the all-property level reducing to 5.0 per cent in the year to June.

Whereas the property market has delivered another year of strong performance, prime yields have moved to very low levels by past standards and these returns may not be sustained over the longer-term.

The occupational market has improved with rental growth of 3.8 per cent in the year to June. However, rental growth of more than 10 per cent for London offices contrasted with continued negative rental growth for standard retail in the rest of the UK, outside London and other key locations.

In line with the wider market, the Company’s property portfolio witnessed strong performance with an ungeared return of 16.7 per cent over the period, outperforming the IPD UK Quarterly Index of 15.7 per cent, with the value of the property portfolio increasing to £337.5 million before adjustment for lease incentives.

Market values have increased over the year, driven by a weight of money entering the sector. The Manager has been careful not to join the ranks of ‘forced buyers’ but has acquired two office investments for a total of £10.25 million over the last year. The Company has sold a further four properties during this last financial year for £5.7 million.

As a result of purchases adding longer term income to the portfolio, as well as lease re-gearing and other asset management deals, the average weighted unexpired lease term of the portfolio has been maintained at 7.7 years compared with the 7.8 years reported as at 30 June 2014. In the meantime, the void rate in the portfolio has fallen to 3.3 per cent of rental value, from 5.7 per cent a year earlier.

Borrowings and Refinancing

The net gearing level as at 30 June 2015 was 29.7 per cent, which compares with 31.7 per cent as at 30 June 2014 and 40.0 per cent at launch on 1 June 2004. The fall in the gearing percentage was due to a combination of the loan being reduced to £102 million from £109 million and an increase in the overall market value of the portfolio. This was offset by a reduction in cash held by £12.1 million. The Group had £4.7 million of cash available at 30 June 2015 and an undrawn loan facility of £13 million.

The Board has been considering a refinancing of the existing loan facility with Lloyds Bank plc (the ‘Existing Facility’) which is due for repayment in January 2017 and has agreed terms to refinance this through a new long-term term loan facility with Canada Life Investments and a new revolving credit facility with Barclays Bank plc (the ‘New Facilities’). The Group has entered into heads of terms with Canada Life Investments and Barclays Bank plc for new debt facilities of up to £110 million, under a proposed £90 million 11 year term loan with Canada Life Investments and a £20 million 5 year revolving credit facility with Barclays. 

Based on UK Gilt rates as at the current date, and assuming the New Facilities are drawn down in full, it is estimated that the total interest rate payable under the New Facilities would be approximately 3.3 per cent per annum. This is significantly lower than the existing cost of debt which is approximately 5.8 per cent per annum and will make a significant contribution towards improving dividend cover.

On the basis that all conditions are met with both parties, the Board intends to complete the refinancing transaction prior to 31 October 2015. The Board believes that it is in the interests of the Group to repay the Existing Facility early to ensure that the Group has certainty of available funds in advance of the fixed repayment date in January 2017 and so that the Group can take advantage of the current availability of long term borrowings at attractive rates of interest. There is no early repayment penalty in respect of the Existing Facility but the Group will be liable for the cost of breaking the relevant interest rate swap which was accounted for as a liability of £6.6 million at the year end. No further swap is required given the fixed nature of the principal loan.

Dividends

Three interim dividends of 1.25 pence per share were paid during the year with a fourth interim dividend of 1.25 pence per share to be paid on 30 September 2015. This gives a total dividend for the year ended 30 June 2015 of 5.0 pence per share, a yield of 5.0 per cent on the year end share price. In the absence of unforeseen circumstances, it is the intention of the Group to continue to pay quarterly interim dividends at this rate. It should be noted, following the Company adopting UK REIT status, the third interim dividend was paid as a property income distribution, rather than as an ordinary dividend and it is expected that the majority of future dividends will be paid in this way.

Share Issues

As part of the Company’s premium management programme the Board may look to issue shares in order to provide liquidity to the market and to reduce volatility in any premium to net asset value. During this financial year, the Company has experienced continued market demand for its shares and issued 3 million Ordinary Shares in January and February this year at a premium to the published net asset value at the time of each issuance, raising proceeds of £2.6 million. Subsequent to these issues, the Board took the decision to hold off on any further issuances until properties meeting the appropriate profile for the portfolio were identified for purchase. This type of asset at the appropriate price has proved challenging to identify and no further shares have been issued to date.

Further to this, we had previously advised of our intention to issue a prospectus, providing the Company with the flexibility to raise additional share capital through a Placing Programme of up to 100 million shares. Whilst the issuance of a prospectus would give the Company the potential flexibility to issue shares to finance any property purchases, the difficulty in sourcing property meant that it was deemed prudent to delay with a view to revisiting this later in the year.

At the year-end there were 233,855,539 Ordinary Shares in issue.

UK REIT Status

Shareholder approval was given at an extraordinary general meeting, held in December 2014, for the Company to become tax resident in the UK for the purposes of entering into the UK REIT regime. The Company therefore entered the UK REIT regime with effect from 1 January 2015.

The Group is no longer subject to UK income tax on the profits and gains from their qualifying property rental business provided that it meets certain conditions. This will effectively reduce the burden of taxation for most shareholders as the payment of UK income tax on the Group's property rental income was likely to increase significantly moving forward, if UK REIT status had not been obtained.

Board Composition

As mentioned previously in the Group’s Interim Report, Mr Christopher Sherwell and Mr Graham Harrison retired from the Board with effect from 31 December 2014.The Board have subsequently appointed two new Non-Executive Directors.

Mr David Ross was appointed with effect from 26 March 2015. David was a founding partner of Aberforth Partners LLP, an investment management firm specialising in investing in UK smaller companies, from which he recently retired.

Mr Mark Carpenter was appointed with effect from 28 May 2015. Mark is a director of investment at TH Real Estate, formerly the property business of Henderson Global Investors, a global real estate asset management company.

We are delighted to have David and Mark join the Board and believe that they have the appropriate range of skills and experience to contribute significantly to the Board.

Following the repositioning of the Company over the last two years with the merger with our sister company ISIS Property Trust, the conversion to a UK REIT, the ongoing refinancing, and the refreshing of the Board, I feel that now is the appropriate time to retire from the Board and I will not therefore be offering myself for re-election at the Annual General Meeting in November. At that time the new Board members will have settled in and to maintain continuity the Board have selected Vikram Lall as my successor as Chairman. Vikram was Chair of the Audit Committee of ISIS Property Trust with whom we merged and currently fulfils the same position with the Company. He is therefore totally familiar with the portfolio and the business.

I would like to express my thanks to all my colleagues past and present, the Company Secretariat, the Administrators and Investment Manager for their support and guidance during my period as Chairman.

Fund Manager

After 10 years, Ian McBryde has indicated his intention to step down from his role as Fund Manager and retire from our investment manager in 2016. The Board is fully engaged with our management company in ensuring a smooth handover of responsibilities and we are pleased to announce that Peter Lowe will become lead fund manager of your Company with effect from the end of 2015. Peter joins the management company from DTZ Investors where he has worked for the last 9 years on a number of mandates including Pearl Assurance, Universities Staff Superannuation Fund and Imperial Tobacco Pension Funds.

I would like to express our thanks to Ian for the contribution he has made to the Company over the last 10 years and wish him well in his forthcoming retirement. Your Board are confident that Peter, supported by the wider investment team within BMO Real Estate Partners, will build on Ian’s achievements and continue to deliver long-term performance for you as shareholders.

Outlook

In line with consensus forecasts, we believe that UK commercial property will continue to deliver positive total returns over the next few years, although this may be front-loaded. There are global uncertainties which may make investors wary. Further yield compression may be limited especially if interest rates start to rise. Returns are more likely to be income driven but aided by rental growth in certain key areas and sectors.

We continue to believe in the importance of sound stock selection and that the protection and enhancement of the income stream will remain key in delivering performance.

Manager’s Review

The UK commercial property market delivered a benchmark total return of 15.7 per cent in the year to June 2015, as measured by the Investment Property Databank (‘IPD’) UK Quarterly Index for all-property. This compared with 16.7 per cent in the previous 12 month period. Property is currently delivering total returns well in excess of the 6.9 per cent per annum average over the past twenty years.

Performance was supported by an income return of 5.0 per cent, but driven by an annual 10.3 per cent uplift in capital values.

The UK economy continued to deliver positive growth, with recovery broadening to the regions and employment reaching new highs. The inflation rate moved lower, affected by falling food and oil prices to finish the reporting period at zero on an annual basis. This supported some improvement in consumer confidence as real incomes benefited. The general election in May and the earlier referendum in Scotland both created uncertainty during the year while the rise in sterling may have affected business sentiment. Fiscal policy remains tight as the government aims to bring the public accounts into balance over the long-term. The Bank of England kept interest rates unchanged throughout the year and ten-year gilt yields remained low, finishing the period at 2.1 per cent.

The year saw a high level of investment activity, totalling more than £72 billion, which was around double the long-term average. Overseas buyers and UK institutions were the main purchasers of property during the period. Banks continued to wind down their problem loans but also were more willing to undertake new lending, alongside new entrants, for well-secured assets. Demand was strong for property across the board but with the greatest annual gains seen for leisure and non-traditional property assets such as healthcare and student accommodation. Prime remained in favour but investors also looked to the regions and more secondary stock in an effort to secure assets and yield.

The strong competition for stock fed through to further yield compression for property, aided by an ultra-low risk-free rate during the year. IPD data showed initial yields at the all-property level moving in by 40 basis points to 5.0 per cent in the year to June.

The period saw considerable polarisation by market segment. City and West End offices, together with offices and industrials in the South East, all delivered total returns in excess of 20 per cent over the year to June 2015. Rest of UK offices almost matched the UK all-property average, following a period of under-performance. Retail property delivered a reasonable performance in absolute terms but lagged behind offices and industrials. Central London retail continued to be robust but with a total return of 6.0 per cent, standard retail outside the South East saw only muted growth. Supermarkets have struggled as customer preferences evolve.

The occupational market has seen signs of improvement with tenant interest more apparent and incentives reducing. Net income growth was positive, but modest, over the year at 1.7 per cent according to IPD market data. Rental growth at open-market values was 3.8 per cent in the year to June but with wide differences by sub-market. Rental growth of more than 10 per cent for City and West End offices contrasted with negative rental growth for regional standard retail. Shortage of supply in several established office and industrial locations has led to a revival in development activity, some of it speculative. To date, these new schemes have generally let well. In retail, a few shopping centre schemes have been revived but the supermarkets have drastically re-scaled their expansion plans and vacancy levels have remained stubbornly high in weaker locations.

The year saw secondary stock generally out-perform prime in terms of total returns, due largely to a strong investment market and limited availability of prime stock. In contrast, net income growth, which is determined more by occupier fundamentals was still in decline at the secondary end in several parts of the market. It would appear that the investment market in some instances is running ahead of the occupational market.

The property market has delivered another strong performance over the year to June 2015. However, prime yields have moved to very low levels by past standards, the investment market for secondary assets seems out of kilter with the fundamentals, and development activity has started to add to supply. The current momentum may not be sustained over the longer-term.

Portfolio

Over the year, the Company’s property portfolio witnessed strong performance with an ungeared return of 16.7 per cent over the period outperforming the IPD UK Quarterly Index return of 15.7 per cent. The major driver of this strong return was capital growth of 10.5 per cent. At 30 June 2015 the value of the property portfolio increased to £337.5 million, after sales and purchases, compared with £300.6 million as at the previous year end.

For the second year running, industrial and distribution properties produced the highest returns for the portfolio at 22.8 per cent. Offices, boosted by holdings in the South East returned 16.5 per cent. The retail sector outperformed its sector benchmark returning 13.6 per cent, although this fell well short of the all property index. However, the Company’s retail warehouse portfolio performed extremely well returning 16.3 per cent compared with the IPD sub sector benchmark of 10.3 per cent.

A number of specific assets were responsible for boosting returns, not only as a result of a strengthening investment and occupational market, but also due to asset management and successful lettings. The largest contribution to returns came from Units 1-2 Network, Eastern Road, Bracknell, which produced a total return of 30.8 per cent following the re-letting of one of the units on a ten year term, without break, at a new rental level of £367,300 per annum, which equates to £10.50 per square foot, some 19 per cent higher than the previous passing rent.

Echo Park, Banbury, a large distribution unit with a floor area of 195,000 square feet, let to Bidvest for a further ten and a half years, returned 21.6 per cent as a result of the continued yield shift enjoyed by large distribution property investments, reflecting the weight of money being invested into the sector, as well as increased occupier demand.

Lakeside Industrial Estate, Colnbrook, a multi-let industrial estate consisting of 8 units close to Heathrow Airport and the M25 and M4 motorways, returned 24.0 per cent as a result of the estate being fully let for the first time in several years, and with rental levels approaching the peak last seen in the previous cycle.

1-2, Lochside Way, Edinburgh Park, saw returns of 30.5 per cent over the year following the re-gearing of the lease with HSBC plc who will continue to occupy the property for another ten years (subject to a break at the fifth year). The property, located in Edinburgh Park, Scotland’s premier out of town office location, comprises two linked buildings totalling 42,400 square feet constructed in 1998. The rent agreed equated to £16.50 per square foot, subject to a rent free period of 12 months but a penalty if the tenant exercises the break.

Whereas returns from the property portfolio were, in aggregate, well above the benchmark, challenges do remain amongst some of the smaller regional retail and office properties and further asset management opportunities need to be implemented to add value prior to sales in accordance with strategy.

The year has seen significant uplifts in values, driven by a weight of money entering the sector. Yields have fallen to, in some cases, historic low levels which investors are happy to accept as a result of generally low interest rates elsewhere. With stiff competition to purchase property, the Manager has been very selective with regard to purchases.

The Company completed the acquisition of Unit A3, Glory Park, High Wycombe in July 2014 for £7.0 million, reflecting a yield of 7.0 per cent. The property comprises a Grade A specification, modern business park office building, close to the M40 motorway. Totalling 19,572 square feet on three floors, the building is let to two tenants in the pharmaceutical sector with the majority of the income secured for 10 years. Since purchase in July 2014, the property has returned 19.0 per cent, principally as a result of increased capital value due to inward yield movement.

The Company also acquired, an office building, Park View House, The Ropewalk, Nottingham, for £3.25 million, reflecting a net initial yield of 7.1 per cent. The building extending to 16,000 square feet on three floors with car parking, had been recently refurbished to a high standard and was let on ten year terms without breaks, to Gateleys, Mazzars and AIB. 

Since the merger with ISIS Property Trust, and as part of the strategy of disposing of small non-core holdings, the Manager has sold a further four properties during this last financial year. Three retail properties in Southend, Brighton and Rochdale were sold for a total of £4.0 million, and a further vacant office building in Marlow was sold for £1.7 million.

With an improvement in the occupational demand for property, the Company has achieved a good success rate in new lettings and lease renewals. Over the financial year a number of vacant units have been let, or leases renewed. These include the key industrial lettings in Bracknell and Colnbrook and a refurbished floor in 14 Berkeley Street, let for five years at a new rental equating to £92.25 per square foot. At 30 June 2015, the vacancy rate across the portfolio was down to 3.3 per cent, of rental value, which compared with 5.7 per cent as at June 2014.

New property acquisitions and re-gearings of leases to protect and enhance income streams and add value to the portfolio have resulted in an average weighted unexpired lease term of 7.7 years (to include breaks where appropriate).

Borrowings

In line with the Group’s Investment Policy, gearing is kept at prudent levels and the net level of borrowings at the year-end was 29.7 per cent, a level with which the Manager is comfortable.

With the existing loan facility due to expire in January 2017, the Group has looked into opportunities to refinance early and take advantage of the low rates of interest currently achievable in the market. As explained in more detail in the Chairman’s Statement, we are currently well advanced on agreeing terms to refinance through a new long-term £90 million term loan facility with Canada Life Investments and a new revolving £20 million credit facility with Barclays Bank plc.

Outlook

The Company believes that the property portfolio is well positioned and well balanced across the regions and the sectors to deliver sound returns and be resilient to market adjustments over the next few years. The Company will continue to dispose of the smaller, and non-core assets into a market which is receptive to such assets. At the same time, the Manager will seek investment opportunities that deliver sound returns for the portfolio but will remain selective in its acquisition strategy, whilst a significant weight of money competes for commercial property assets.

If the economy performs in line with consensus forecasts, we believe that property will continue to deliver positive total returns, although performance may be front-loaded. There are uncertainties in Europe, the US and China and as the UK referendum on EU membership approaches, this could lead to investors delaying decisions until the result is known. The scope for further yield compression may be limited once the UK authorities act to raise official interest rates and property performance is likely to become more reliant on rental growth and the income return. We continue to believe in the importance of sound stock selection and that the protection and enhancement of the income stream will remain key in delivering performance.

All enquiries to:Ian McBrydeScott MacraeF&C Investment Business LimitedTel: 0207 628 8000

The Company SecretaryNorthern Trust International Fund Administration Services (Guernsey) LimitedPO BOX 255Trafalgar CourtLes BanquesSt Peter PortGuernsey GY1 3QLTel: 01481 745001

F&C UK Real Estate Investments Limited

Consolidated Statement of Comprehensive Income

All items in the above statement derive from continuing operations.All of the profit for the year is attributable to the owners of the Company.

F&C UK Real Estate Investments Limited

Consolidated Balance Sheet

F&C UK Real Estate Investments Limited

Consolidated Statement of Changes in Equity

For the year ended 30 June 2015

For the year ended 30 June 2014

F&C UK Real Estate Investments Limited

Consolidated Cash Flow Statement

F&C UK Real Estate Investments Limited

Principal Risks and Risk Management

The Group’s assets consist of direct investments in UK commercial property. Its principal risks are therefore related to the commercial property market in general, but also the particular circumstances of the properties in which it is invested and their tenants. More detailed explanations of these risks and the way in which they are managed are contained under the headings of Credit Risk, Liquidity Risk, Interest Rate Risk and Market Price Risk. The Manager also seeks 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.

Other risks faced by the Group include the following:

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 Group’s property portfolio, and applies the principles detailed in the internal control guidance issued by the Financial Reporting Council. 

The Board and the Manager recognise the importance of the share price relative to net asset value in maintaining shareholder value. The Manager meets with current and potential new shareholders, and with stockbroking analysts who cover the investment trust sector, on a regular basis. In addition, communication of quarterly portfolio information is provided through the Group’s website.

Financial Instruments and Investment Property

The Group’s investment objective is to provide ordinary shareholders with an attractive level of income together with the potential for income and capital 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 comprise cash, receivables, a bank loan, an interest rate swap and payables.

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 was no foreign currency risk as at 30 June 2015 or 30 June 2014 as assets and liabilities are maintained in Sterling.

The nature and extent of the financial instruments outstanding at the balance sheet date and the risk management policies employed by the Group are detailed below.

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 until it is re-let. The Board receives regular reports on concentrations of risk and any tenants in arrears. The Manager monitors such reports in order to anticipate, and minimise the impact of, defaults by occupational tenants.

The Group has a diversified tenant portfolio. The maximum credit risk from the rent receivables of the Group at 30 June 2015 is £654,000 (2014: £520,000). It is the practice of the Group to provide for rental debtors greater than three months overdue unless there is certainty of recovery. As at 30 June 2015 the provision was £65,000 (2014: £78,000). Of this amount £43,000 was subsequently written off and £5,000 has been recovered.

All of the cash is placed with financial institutions with a credit rating of A or above. Bankruptcy or insolvency 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, the Manager would move the cash holdings to another financial institution.

The Group can also spread counterparty risk by placing cash balances with more than one financial institution. The Directors consider the residual credit risk to be minimal.

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 in which the Group invests is 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 Manager and monitored on a quarterly basis by the Board.

In certain circumstances, the terms of the Group’s bank loan entitles the lender to require early repayment, for example if covenants are breached, and in such circumstances the Group’s ability to maintain dividend levels and the net asset value attributable to the Ordinary Shares could be adversely affected. 

Interest rate risk

Some of the Group’s financial instruments are interest-bearing. These 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.

Interest is receivable on cash at a variable rate. At the year-end, rates receivable ranged from 0.5 per cent on current account balances to 0.16 per cent for deposit account balances. Interest is payable on the first £12.5 million of the bank loan at a variable rate of LIBOR plus 2.0 per cent; the remaining bank loan pays interest at LIBOR plus a margin of 0.705 per cent. The effect of the interest rate swap is to fix LIBOR on £100 million of the loan at 5.105 per cent per annum. The effective rate of interest on the loan is 0.74 per cent. Interest on financial instruments classified as floating rate is repriced at intervals of less than one year.

Exposure varies throughout the year as a consequence of changes in the composition of the net assets of the Group arising out of the investment and risk management policies.

In addition, tenant deposits are held in interest-bearing bank accounts. These accounts earn interest at base rate less 0.75 per cent and receive no interest at this time as the base rate is too low. Interest accrued on these accounts is paid to the tenant.

The Group’s exposure to interest rate risk relates primarily to the Group’s long-term debt obligations. The Group’s policy is to manage its interest rate risk using an interest rate swap, in which the Group has agreed to exchange the difference between fixed and variable interest amounts, calculated by reference to an agreed upon notional principal amount. The swap is designed to fix the interest payable on the loan. The interest rate swap covers £100 million of the loan and has the same duration. Interest fixing periods are identical and on this basis the swap contract complies with IAS 39’s criteria for hedge accounting.

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.

Directors’ Responsibilities in Respect of the Annual Report & Consolidated Accounts

In accordance with International Financial Reporting Standards as adopted by the EU and applicable law, we confirm that to the best of our knowledge:

On behalf of the Board

Q SpicerDirector29 September 2015

F&C UK Real Estate Investments Limited

Notes to the Consolidated Financial Statements

for the year ended 30 June 2015

1. The audited results of the Group which were approved by the Board on 28 September 2015 have been prepared on the basis of International Financial Reporting Standards as adopted by the EU and the accounting policies set out in the statutory accounts of the Group for the year ended 30 June 2015.

2. The fourth interim dividend of 1.25p will be paid on 30 September 2015 to shareholders on the register on 18 September 2015. The ex-dividend date is 17 September 2015.

3. There were 233,855,539 Ordinary Shares in issue at 30 June 2015. The earnings per Ordinary Share are based on the net profit for the year of £40,591,000 and on 232,096,635 Ordinary Shares, being the weighted average number of shares in issue during the year.

4. Two properties were purchased during the year for £10.25 million and four properties were sold during the year for £5.70 million (excluding costs).

5. The Group results consolidate those of F&C UK Real Estate Finance Limited, a wholly owned subsidiary which wholly owns IRP Holdings Limited and IPT Property Holdings Limited which hold and manage the investment properties.

6. These are not full statutory accounts. The full audited accounts for the year ended 30 June 2015 will be sent to shareholders in September 2015, and will be available for inspection at Trafalgar Court, Les Banques, St. Peter Port, Guernsey, the registered office of the Company. The full annual report and consolidated accounts will be available on the Company’s websites: www.fcre.co.uk or www.fcre.gg

7. The Annual General Meeting will be held on 25 November 2015.