Prelim. Announce.of Results

Mercury Keystone Inv Trust PLC 14 November 2000 MERCURY KEYSTONE INVESTMENT TRUST plc PRELIMINARY ANNOUNCEMENT OF RESULTS in respect of the year ended 30th September 2000 The consolidated net asset value per ordinary share, with net income reinvested, rose by 4.2%. The directors propose an unchanged final dividend of 20.00p (net) per ordinary share (1999:20.00p), making total ordinary dividend payments for the year of 30.00p (net) per ordinary share (1999:30.00p). Shareholder approval is being sought at the AGM to change the name of the Company to Merrill Lynch UK Investment Trust plc, to reflect the change in name of the Investment Manager and that the Company mainly invests in companies in the UK. Shareholder approval is also being sought at the AGM to renew the authority to buy back up to 14.99% of the Company's issued ordinary share capital. The Chairman, Mr John Stancliffe, commented: 'The portfolio showed a positive total return for the year of 4.2%. Meanwhile, due to a widening in the discount to net asset value at which the shares sell, the price fell by 6.8%. This discount was 14% at the close of business on 10th November 2000, which is similar to the discount at which shares of comparable trusts trade. During the year the FTSE All-Share Index rose by 9.5%. 'As I have mentioned previously, the FTSE All-Share Index is constructed using the market capitalisations of the 800 companies on which it is based. This means that changes in the prices of a handful of shares - five now account for 29% of the Index - have an exaggerated influence, upwards and downwards, on movements in the Index. 'The Board believes that the portfolio, which will now be managed by the UK Specialist Equity team within Merrill Lynch Investment Managers, should reflect their judgement on the merit of the individual holdings and should not be driven primarily by the make-up of the Index. The composition of the portfolio may therefore differ significantly from the composition of the Index, and performance is also likely to diverge. In the absence of a better alternative, the Index must remain the accepted measure of performance of the Investment Manager. 'The average dividend yield of UK equities has fallen in recent years, while increasingly certain special dividends are treated as capital. Having reviewed the expected split of long-term returns between revenue and capital, the Board has decided to increase the rate of allocation of management fees and finance costs to capital, from 50% to 75% to reflect this. 'It is also proposed to reduce the management fee payable by the Company from 0.6% p.a. to 0.5% p.a. while at the same time introducing an incentive fee of up to 1.0%. This incentive fee will be 15% of any outperformance of the FTSE All-Share Index, subject to a minimum outperformance of 2% p.a. being achieved. 'Finally, Ian Steers will retire from the Board with effect from the close of this year's Annual General Meeting. He has served as a director of the Company since 1988 and as Chairman of the Audit Committee since July 1996. He has been a most valuable colleague whose wise advice will be greatly missed. We offer him our best wishes and warmest thanks.' Commenting on the outlook, Merrill Lynch Investment Managers Limited, noted: 'Looking forward, the Investment Manager will continue to seek attractively valued companies across the new/old economy divide. The Investment Manager does not believe that the market will see a return of growth-biased, momentum-driven shares in the short term. 'The portfolio is positioned on the expectation that UK interest rates are nearing their peak. UK economic growth is flattening out in response to the interest rate increases already implemented, and the Government is likely to be keen to avoid a significant economic slowdown given the possibility of a general election next year. 'A strategy of focusing on stock selection, whilst avoiding any significant style-bias and/or sector positions is, in the opinion of the Investment Manager, appropriate in the current highly rotational market environment.' Contacts: Ian Barby - Managing Director, Investment Trusts 020 7743 5224 Jonathan Ruck Keene 020 7743 2178 Merrill Lynch Investment Managers Andrew Waterworth 020 7831 3113 Financial Dynamics CONSOLIDATED REVENUE ACCOUNT for the year ended 30th September 2000 Year ended Year ended 30th 30th September September 2000 1999 £'000 £'000 (audited) (audited) (restated) Income (Note 3) 6,106 7,860 Investment management fee (Note 4) (375) (748) Operating expenses (259) (207) ----- ----- Net return before finance costs and taxation 5,472 6,905 Finance costs (761) (1,522) ----- ----- Return from ordinary activities before taxation 4,711 5,383 Taxation on ordinary activities (78) (162) ----- ----- Return on ordinary activities after taxation 4,633 5,221 Dividends in respect of non-equity shares (12) (10) ----- ----- Revenue attributable to equity shareholders 4,621 5,211 Dividends in respect of equity shares (Note 2) (4,244) (4,291) ----- ----- Transfer to reserve 377 920 ===== ===== TOTAL RETURN PER ORDINARY SHARE For the year ended 30th September 2000 2000 1999 (audited) (audited) Earnings per ordinary share 32.42p 36.44p Capital return per share 16.07p 149.55p ------ ------- Total Return per ordinary share 48.49p 185.99p ====== ======= Dividends per ordinary share 30.00p 30.00p ====== ======= SUMMARISED CONSOLIDATED BALANCE SHEET as at 30th September 2000 30th September 2000 30th September 1999 £'000 £'000 (audited) (audited) Fixed assets Listed investments at market valuation 207,258 205,346 Unlisted investments at director's valuation 201 420 ------- ------- 207,459 205,766 Current assets Investments of subsidiary undertaking 140 - Debtors 1,406 1,169 Cash at bank 5,491 6,397 ------- ------- 7,037 7,566 Creditors: amounts falling due within one year 4,641 4,888 ------- ------- Net current assets 2,396 2,678 ------- ------- Total assets less current liabilities 209,855 208,444 Creditors: amounts falling due after one year 39,495 39,473 ------- ------- Net assets 170,360 168,971 ======= ======= Capital and reserves Called-up share capital 7,338 7,401 Share premium 1,258 1,258 Other capital reserves 156,107 155,032 Revenue reserve 5,657 5,280 ------- ------- Total shareholders' funds 170,360 168,971 ======= ======= Total shareholders' funds are attributable to: Equity shareholders 170,110 168,721 Non-equity shareholders 250 250 ------- ------- 170,360 168,971 ======= ======= Net asset value per ordinary share 1200.02p 1179.66p ======== ======== CONSOLIDATED CASH FLOW STATEMENT for the year ended 30th September 2000 Year ended Year ended 30th 30th September September 2000 1999 £'000 £'000 (audited) (audited) Net cash flow from operating activities 4,428 7,134 Returns on investments and servicing of finance (3,034) (3,031) Taxation recovered - 59 Purchase of fixed asset investments (183,155) (124,592) Proceeds from the sale of fixed asset investments 186,420 116,294 Equity dividends paid (4,286) (6,007) Purchase of ordinary shares for cancellation (1,279) - -------- -------- Net cash outflow (906) (10,143) ======== ======== RECONCILIATION OF NET RETURN BEFORE FINANCE COSTS AND TAXATION TO NET CASH INFLOW FROM OPERATING ACTIVITIES 30th September 30th September 2000 1999 £'000 £'000 (audited) (audited) (restated) Income before interest payable and taxation 5,472 6,905 Investment management and performance fees capitalised (1,124) (767) Net (purchases)/sales of investments by subsidiary undertaking (40) 138 Decrease in accrued income 112 735 Increase in creditors 108 182 Tax on investment income included within gross income - (38) Profit on investment dealing by subsidiary undertaking (100) (21) ------ ----- Net cash inflow from operating activities 4,428 7,134 ===== ===== Notes 1. Basis of preparation The preliminary financial statements have been prepared under the historical cost convention, modified to include the revaluation of investments, and are in accordance with section 230 of, and schedule 4 to, the Companies Act 1985 and with applicable accounting standards and the Statement of Recommended Practice 'Financial Statements of Investment Trust Companies' ('SORP'), except for the treatment of the management fee, as detailed in the Annual Report. The figures for income and taxation in the year to 30th September 1999 have been restated in accordance with FRS16 'Current Tax'. The investment management fee and finance costs are charged 75% to capital and 25% to revenue (1999: 50% to capital, 50% to revenue). 2. Dividend The preliminary results were approved by the Board on 13th November 2000. The Directors will recommend to shareholders at the Annual General Meeting to be held on 18th December 2000 a final dividend of 20.00p (1999: 20.00p) per ordinary share to be paid on 20th December 2000 to ordinary shareholders on the register of members at the close of business on 24th November 2000. The final dividend cost has been based on the number of shares in issue on 10th November 2000. 3. Income 2000 1999 £'000 £'000 (restated) Income from investments: Dividends: - UK listed 5,700 6,712 - Overseas listed 3 - Interest bearing: - UK listed 2 191 ----- ----- 5,705 6,903 ----- ----- Interest receivable and other income: - Deposit interest 301 936 - Profit on investment dealing by subsidiary undertaking 125 21 - Unrealised loss on investment dealings by subsidiary undertaking (25) - ----- ----- 401 957 ----- ----- Total income 6,106 7,860 ===== ===== 4. Investment management fee Revenue Capital Total 2000 1999 2000 1999 2000 1999 £'000 £'000 £'000 £'000 £'000 £'000 Investment management fee 319 636 957 637 1,276 1,273 Performance related fee on unquoted portfolio - - - 16 - 16 Irrecoverable VAT thereon 56 112 167 114 223 226 ----- ----- ----- ----- ----- ----- 375 748 1,124 767 1,499 1,515 ===== ===== ===== ===== ===== ===== 5. Gearing ratios as a percentage of the Net Asset Value 30th September 2000 Total borrowings 23.2% Net borrowings (total borrowings, less net current assets, i.e. effective gearing) 21.8% 6. Publication of non-statutory accounts The financial information contained in this announcement does not constitute statutory accounts within the meaning of section 240 of the Companies Act 1985. The annual report and financial statements for the year ended 30th September 2000 will be filed with the Registrar of Companies in due course. The figures set out above have been reported upon with no qualification by the auditors. The comparative figures are extracts from the audited financial statements of Mercury Keystone Investment Trust plc for the year ended 30th September 1999, which have been filed with the Registrar of Companies, as restated in accordance with FRS16. The report of the auditors on those accounts contained no qualification or statement under section 237 of the Companies Act. Copies of the annual report will be sent to members shortly and will be available from the registered office, c/o the Company Secretary, Mercury Keystone Investment Trust plc, 33 King William Street, London EC4R 9AS. 8. The Annual General Meeting of the Company will be held at 33 King William Street, London EC4 on Monday, 18th December 2000 at 11.00am. 33 King William Street London EC4R 9AS

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