Annual Results Announcement - 1 December 2008

Aberdeen Asset Management has today announced its final results for the year to 30 September 2008 (unaudited).

HIGHLIGHTS

• Assets under management increased to £111.1 billion (2007: £95.3 billion)
• Clean profit before tax £95.1 million (2007: £94.3 million)
• Final dividend of 3.0p per share, 5.8p for the full year
• New business wins of £21.8 billion funded in the year, plus £1.9 billion awarded but not funded at year end
• Promising demand across diverse asset classes

FINANCIAL HIGHLIGHTS

	2008	2007
Revenue	£430.1m	£347.8m
Pre-tax profit
Before exceptional items and amortisation of intangibles	£95.1m	£94.3m
After exceptional items and amortisation of intangibles	£60.5m	£23.7m
Diluted earnings per share
Before exceptional items and amortisation of intangibles	9.01p	11.09p
After exceptional items and amortisation of intangibles	4.52p	3.50p
Total dividend per share	5.8p	5.5p
Gross new business - funded	£21.8bn	£22.8bn
Net new business - funded	£1.0bn	£8.7bn
- awarded but not funded at year end	£1.9bn	£3.1bn
Assets under management at the year-end	£111.1bn	£95.3bn

Martin Gilbert, Chief Executive of Aberdeen Asset Management commented:

““We are very pleased to report that Aberdeen continued to grow during the past year despite the unprecedented market difficulty. Conditions in the asset management industry are tough and will remain so for some time.

We believe that our Group is better placed than ever to confront these challenges. Our diverse asset and client base, our performance and our transparent investment processes all give me great confidence in the future. We will continue to manage the business tightly, but we also remain keen to take advantage of relevant growth opportunities that may emerge during this turbulent period.”"

Chairman’s Statement

2008 marked Aberdeen’s twenty-fifth year as an independent asset management group; it has also been a year of unprecedented uncertainty in financial markets and volatility in the asset classes that we manage. Nonetheless, I am pleased to report that the Group has shown considerable resilience. It has continued to achieve success both organically, through new business flows, and strategically, through several acquisitions, thus diversifying and strengthening the Group’s distribution as well as its investment capabilities.

The Group continued to attract healthy levels of new business, particularly from Continental Europe, with gross inflows running at similar levels to last year. However, to a large extent these wins have been offset by higher redemptions because of increased risk aversion. Nevertheless, gross new business for 2008 of £21.8 billion, with a further £1.9 billion of mandates awarded but not funded at the year end, are testament to our product strength. After deducting redemptions of £20.8 billion, net new business for the year totalled £1.0 billion, a respectable balance in the circumstances. Margins overall however remain under pressure in volatile conditions and our previously reported cost reduction programme continues in light of the difficult market environment.

Financials

Revenue has increased by 24% to £430.1 million. This increase has been spread over the investment management and property divisions, with the benefit of new revenues from acquisitions outweighing the adverse effects of the generally lower market levels.

Operating costs have increased by 32%, largely as a result of businesses acquired during the year. However, as reported in the Interim Management Statement in July 2008, we have implemented a programme to reduce annual operating costs by approximately £57 million which, after factoring in the consequent income reduction, will deliver a net annualised benefit of approximately £40 million. Some £3 million of this net benefit is reflected in the second half of the reported year, with the balance of the savings to come through in 2008/09. Restructuring costs of £10.3 million associated with these savings have been incurred in the year to 30 September 2008. Additionally, we are now implementing further annualised cost savings of approximately £20 million, which we expect to be fully implemented by September 2009.

Overall, the Group’s operating profit is slightly ahead of last year at £100.0 million, although the operating margin is somewhat lower this year at 23.3%. We will continue to manage the cost base to ensure that the Group is positioned to benefit from an eventual improvement in market conditions.

The balance sheet remains healthy, with approximately £137 million of net debt supported by £743 million of equity. Whilst we chose to finance two of the three acquisitions completed during the year from borrowings, new equity was issued to fund the acquisition of Goodman Property Investors, thus maintaining the Group’s gearing at a comfortable level of 18%.

Results and dividend

The Group’s underlying profit, which we define as profit before taxation, exceptional items and amortisation of intangible assets, was £95.1 million compared to £94.3 million in 2007. This represents underlying earnings per share, on a diluted basis, of 9.0p, a decrease of 19 % on last year. After accounting for exceptional items and amortisation, we report a pre-tax profit of £60.5 million, compared to £23.7 million in 2007.

The Board is recommending a final dividend of 3.0p per share, making a total payment for the year of 5.8p per share, an increase of 5.5% on the total payment for 2007.

Corporate activity

After the year end, the Group announced a business and capital alliance with Mitsubishi UFJ Trust and Banking Corporation (“MUTB”), under which MUTB will promote selected Aberdeen products to the Japanese institutional market. MUTB has also purchased approximately 10% of Aberdeen’s issued share capital, with the right to purchase further shares in the market up to a maximum holding of 19.9%.

In October 2007, we purchased a US fund management business from Nationwide Financial Services adding approximately US$7 billion (£3.5 billion) of assets under management (“AuM”), principally in sub-advisory mandates. This acquisition not only broadened and strengthened our US equity capability but will increase Aberdeen’s distribution resources and presence in the US mutual fund market. We intend to build our US mutual fund activities from this platform.

Two further acquisitions have added to our property division: DEGI, the German-based property asset manager, and Goodman Property Investors (“GPI”), which brings a UK capability to complement our European operations. As well as broadening Aberdeen’s client base, bringing £5.8 billion of additional AuM, the DEGI transaction also further strengthened our distribution base and profile in Germany. In May 2008, the GPI deal added further AuM of £7.0 billion. Our property division is now the second largest property fund manager in the UK and a top ten global property manager, with AuM of £25.4 billion at the year end.

Overall, these transactions added £16.3 billion to AuM and total AuM at the year end increased by 17% to £111.1 billion (2007: £95.3 billion).

The operating environment

Without doubt, we are now operating in an environment that is challenging all asset management firms in a number of ways. At the most fundamental level, fee income is under pressure, as assets fall and margin pressures increase. The management team has addressed this through a cost reduction programme I have described above.

We have seen extraordinary declines in asset prices over the past twelve months. Unfortunately, whatever action is undertaken by governments and central banks, markets are likely to remain difficult in the shorter term even if a measure of confidence does return. Traditional managers with transparent processes and business models at least can offer products that can be understood; as independent asset managers we can provide these services without conflicts of interest or balance sheet risk.

Our investment philosophy is to identify fundamentals that will drive asset prices over the long term. Our global equities team have continued to deliver performance well ahead of benchmark over both the short and long term. Our fixed income teams have experienced unprecedented market conditions because of the global credit crunch. Whilst the credit teams managed to avoid the perils of the CDO market, the magnitude of deleveraging and illiquidity in many areas of the market have led to even high quality securities moving to extreme valuations. The impact of this has hurt our US credit performance, and to a lesser extent our other credit teams globally. Property as an asset class has also suffered during this turbulent period. We are fortunate that most clients by value are institutional investors that have long-term time horizons and have invested in funds with lengthy lock-in periods.

New business

The Group continued to attract new business from a broad range of investment disciplines and the office network afforded by our property division is now also helping to contribute across a number of key European countries outside the UK. Whilst our operations in the Netherlands, Germany and the Nordic regions have again been successful in gaining new local clients, we are further encouraged by the breadth of our newer client base in other domiciles worldwide, with new asset flows of note from the Middle East, Canada and Korea. Gross inflows were sourced from Continental Europe (33%), the UK (18%), the United States and Canada (20%), Asia Pacific (14%) and the Middle East and Africa (15%). The composition of new business flows is summarised in the following table.

[

<strong>Funded £m</strong>

<strong>Yet to fund £m</strong>

<strong>Total £m</strong>

Fixed income:
Gross inflows	8,515	629	9,144
Outflows	(9,955)	-	(9,955)
Net flow	(1,440)	629	(811)
Equities:
Gross inflows	9,459	507	9,966
Outflows	(8,399)	-	(8,399)
Net flow	1,060	507	1,567
Property:
Gross inflows	3,293	724	4,017
Outflows	(1,648)	-	(1,648)
Net flow	1,645	724	2,369
Multi asset:
Gross inflows	487	50	537
Outflows	(765)	-	(765)
Net flow	(278)	50	(228)
Group total:
Gross inflows	21,754	1,910	23,664
Outflows	(20,767)	-	(20,767)
Net flow	987	1,910	2,897

]

Outlook

The first two months of our new financial year have seen the turmoil in global markets deepen. However, we enter it with a stable balance sheet, a strong range of core products and a well diversified global client base. Our priorities are to make sustainable cost reductions, achieve synergies from new business and identify avenues to further profitable growth, such as our recent partnership with Mitsubishi. The turmoil in our industry and world financial markets will create numerous opportunities for growth as well as obstacles and we remain alert to both. Finally, we are aware of the importance of our people, and the Board recognises the commitment and professionalism of our staff in what have been, and remain, extremely challenging times.

I will be retiring from the Board at the forthcoming AGM after nine years as chairman and I am delighted that Roger Cornick, who joined the board in 2004, has agreed to succeed me as chairman. These last nine years have been an exhilarating period of growth for Aberdeen and, although we are currently experiencing unprecedented economic conditions, I firmly believe that we have the platform in place to grow the business in the years ahead and become an even more significant player in the global asset management industry. None of this would have been possible without the continual hard work and commitment of all of our staff, for which I am deeply grateful and I would also like to thank my colleagues on the board for their contribution and support during my term as Chairman.

Charles Irby
Chairman

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