It warned that if the Government-imposed 29.5 per cent restriction was broken, it would be forced to make the last foreign arrivals on its share register sell to British residents or face a forced sale by the company at 'the best price reasonably obtainable'.
Since it was privatised BAe has, like Rolls-Royce, had restrictions on the amount of its capital foreigners can hold.
At one time they were restricted to 15 per cent. The ceilings were later raised to 29.5 per cent.
Overseas investors in Rolls-Royce have in the past breached their limit and, much to their annoyance, been forced to sell surplus shares. But it is the first time BAe has been caught in the trap.
The ceilings were introduced to keep the groups under British control because of their defence links.
Rolls and BAe are thought to be keen for the restriction to be lifted. The Government has suggested it should go to 49.5 per cent, but a campaign is being waged in Brussels to abolish the restriction altogether, a move yet to impress British authorities.
BAe shares slipped 1p to 506p and Rolls, including a 3p dividend payment, 3.5p to 181p.
The rest of the market had a lacklustre session with American influences destroying the fragile confidence that had crept back after recent nervousness.
Anticipating a New York bonds revival, gilts turned in a strong performance and even the futures market sent out bullish signals.
But hopes of a New York recovery were shattered and blue chips wilted, reducing a lunchtime FT- SE 100 index gain of 21.3 points to a mere 0.5 at 3,129.5 by the close. Government stocks halved earlier gains to pounds 1.
It was a subdued start to the Easter account. Many investors, after their bruising experience in the last account, were reluctant to chance their arm in what is one of the shortest trading periods, covering eight days, for a long while. Normally, the Easter account embraces three weeks.
The main company results had contrasting impacts. Pearson rose 31p to 666p but Inchcape tumbled 37p to 515p.
Rights rumours continued to circulate with Lasmo down 2p at 123p and Pentos off 1.5p at 30.5p. Blagden Industries, a drum maker, reported losses and forecast a cash call, falling 26p to 127p.
Meyer International, the timber group, lost 6p to 505p despite a sharp profit upgrade by Barclays de Zoete Wedd. The securities house has lifted this year's estimate from pounds 35m to pounds 40m and next year's from pounds 55m to pounds 58m.
Airtours, up 14p to 499p, was another to attract support with Hoare Govett repeating its buy recommendation. It expects the holiday market to increase by 10 per cent, with Airtours outperforming. The problems at the Aspro holiday side, it believes, have been exaggerated and the division is trading profitably.
Kingfisher attracted an S G Warburg buy recommendation, gaining 7p to 557p.
Utilities returned to favour as dividend attractions were highlighted. Although managing impressive gains, they closed below their best levels.
The failure of Opec to cut oil production had a mixed response, with British Petroleum off 7p at 366p but Shell a touch firmer at 657p.
The end of Manchester United's treble dream left the shares down 30p at 639p after 625p. David Lloyd Leisure was little changed at 221p on vague talk that chairman David Lloyd could get more deeply involved in running the British tennis team.
Trafalgar House, the struggling construction to leisure conglomerate, was unchanged at 100p as Smith New Court moved to place 20 million shares at, it seemed, 98p.
It was not clear whether all the stock found a new home. SNC recently placed 25 million convertible shares. The identity of the seller has not been disclosed, but some suggested it was the Abu Dhabi Investment Authority.
Newcomer Robert Wiseman, sold at 100p, closed at 103p. Beazer Homes, one of last week's debutants, remained below its 165p offer price at 163p. Maid edged ahead 2p to 104p against a 110p placing and McDonald Information Systems stuck at 254p, 6p below its issue price.
Westland, the helicopter group, rose 7.5p to 325p with talk of a higher bid from GKN, down 3p at 551p.
Umeco, an aerospace components distributor, caused a stir when it appeared to take the Stock Exchange disclosure rules to a new extreme.
Its shares gained 2p to 49p after it announced that its stockbroker, Beeson Gregory, had lifted its profit forecast to pounds 450,000, 'significantly higher' than previous estimates.
The FT-SE 100 index closed with a 0.5-point gain to 3,129.5 but the FT-SE 250 index put on 10.5 to 3,785.7. Turnover was 516.9 million shares with 37,424 bargains. The account ends on 8 April with settlement on 18 April.
Acorn Computers, riding at 117p a year ago, rose 7p to 70p as suggestions resurfaced that it was seeking to float its associate, Advance Risc Machines, developer of a new micro chip. There is talk of a US share sale while some think a Rule 535 presence is likely. Acorn, controlled by Olivetti of Italy, will announce its annual results soon. Interim figures were disappointing.
Bridgend, which mixes the distribution of bathroom and kitchen fittings with running two hotels, held at 24p. The Co-operative Retirement Benefit Fund has become a fan of the group, lifting its stake from 6.2 per cent in July to become the biggest shareholder with 26 per cent. Its build-up was helped when ex-England cricketer Phil Edmonds sold a block of shares in February.
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