Final Results
Keystone Investment Trust plc
Unaudited Preliminary Announcement of Final Results
for the Year ended 30 September 2005
Chairman's Statement
In the year to 30 September 2005, the Company's shares provided a total return
of 32.5%. The total return of the net asset value per share was 30.7%. In the
same period, the total return of the Company's benchmark for the purpose of
performance measurement, the FTSE All-Share Total Return Index, was 24.9%. All
these figures are with income reinvested. The discount of the share price
relative to net asset value per share narrowed slightly from 9.4% at the end of
September 2004 to 8.9% at 30 September 2005.
Performance 6 months One Year Since
appointment of
current
Manager on 1
January 2003
Share Price Total Return +15.7% +32.5% +106.4%
NAV Total Return per share +13.0% +30.7% +84.3%
FTSE All-Share Total Return +13.6% +24.9% +59.6%
Index
The performance of the Company's shares since the present Manager started
managing the Company's portfolio is the result mainly of strong stock selection
by the Manager; and also of the fact that the shares now trade at a much
smaller discount to net asset value than they did, this being a reflection of
the market's positive view of the Manager.
Borrowings and effective gearing
The Company's borrowings, in the form of long-term debentures, amount to £40
million. Some of the proceeds of these borrowings have been balanced by cash
deposits in order to reduce the level of effective gearing.
Equity exposure decreased slightly during the year from 116.1% of net assets to
115.0%. The Board sets limits for this exposure. To give the Manager a little
more flexibility, the effective gearing limits have been increased somewhat
during the year. The position now is that the Manager must make no net
purchases if equity exposure is more than 117.5% of net assets, and must make
sales if, as a result of market movements, equity exposure exceeds 122.5% of
net assets. It remains up to the Manager to decide on exposure subject to those
limits.
As explained in the last annual report, equity exposure can be supplemented by
holdings of corporate bonds with a total value of up to £4 million in order to
improve the return on the Company's net assets with limited risk. This policy
has been successful. However, at the Company's year-end, no fixed interest
securities were held in the portfolio.
Dividends
The Company's objective is long-term growth of capital. The Board recognises,
however, that income, in the form of dividends, is important to many
shareholders. The Board has declared a final dividend of 18.5p per share (last
year 17.25p), giving a total dividend for the year of 31.5p per share, compared
with 30.0p last year. Earnings per share in this year were 32.3p.
Expenses
The Company's total expenses, excluding performance fees, were 1.1% of average
net assets in the year ended 30 September 2005. Including performance fees -
which, of course, are only payable because the Manager's performance has been
good - the total expense ratio was 2.8%.
The Manager
During the year the Board reviewed all facets of the service provided by the
Manager and the terms of the Manager's appointment. We are satisfied with these
services and the terms of appointment.
Special Business at the Annual General Meeting (AGM)
As special business of the AGM, the Board wishes to renew the Directors'
authority to allot up to an aggregate nominal amount of £334,200 new ordinary
shares, this being 5% of the Company's issued ordinary share capital, whilst
disapplying pre-emption rights. This authority, set out in Resolution 7, will
expire at the AGM in 2006.
Resolution 8 seeks to renew the Directors' authority to purchase up to
2,000,000 of its own shares, this being just under 14.99% of the Company's
issued ordinary share capital. Again, this authority will expire at the AGM in
2006.
Finally, in Resolution 9, the Directors are proposing to adopt new Articles of
Association for the Company. Further to a review of the current Articles, which
were last updated in 1999, the Board considered it appropriate to bring them
more in line with current practice and recent changes in legislation. The main
differences between the proposed new and the existing Articles of Association
are summarised in the Explanatory Notes to the Notice of Annual General Meeting
set out in the Annual Report and Accounts.
Outlook
We remain confident that the Company has the right Manager to provide a good
return to shareholders in the years ahead.
Richard Oldfield
Chairman
17 November 2005
Statement of Total Return (incorporating the revenue account)
for the year ended 30 September
2005 2004
Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
Gains on investments - 35,307 35,307 - 17,901 17,901
Foreign exchange (losses)/ - (78) (78) - 898 898
gains
Special dividends - 21 21 - 216 216
Income 5,737 - 5,737 5,659 - 5,659
Investment management fees (275) (2,968) (3,243) (248) (1,359) (1,607)
Other expenses (285) - (285) (255) - (255)
Net return before finance
costs and taxation 5,177 32,282 37,459 5,156 17,656 22,812
Finance costs (761) (2,283) (3,044) (761) (2,283) (3,044)
Return on ordinary activities
before tax 4,416 29,999 34,415 4,395 15,373 19,768
Tax on ordinary activities (91) - (91) (85) - (85)
Return on ordinary activities
after tax for the financial 4,325 29,999 34,324 4,310 15,373 19,683
year
Dividends in respect of
non-equity shares (12) - (12) (12) - (12)
Return attributable to equity
shareholders 4,313 29,999 34,312 4,298 15,373 19,671
Dividends in respect of
ordinary shares (4,211) - (4,211) (4,011) - (4,011)
Transfer to reserves 102 29,999 30,101 287 15,373 15,660
Return per ordinary share
Basic 32.3p 224.4p 256.7p 32.2p 115.0p 147.2p
Dividend per ordinary share 31.50p - - 30.00p - -
The revenue column of this statement is the profit and loss account of the
Company. All revenue and capital items in the above statement derive from
continuing operations. No operations were acquired or discontinued in the year.
Reconciliation of Movement in Shareholders' Funds
for the year ended 30 September
2005 2004
£'000 £'000
Revenue return for the year 102 287
Capital return for the year 29,999 15,373
Net movement in Shareholders' funds 30,101 15,660
Opening Shareholders' funds 111,474 95,814
Closing Shareholders' funds 141,575 111,474
Balance Sheet
as at 30 September
2005 2004
£'000 £'000
Fixed assets
Investments 162,519 130,559
Current assets
Debtors 595 1,163
Cash 23,667 24,085
24,262 25,248
Creditors: amounts falling due within one year (4,703) (4,058)
Net current assets 19,559 21,190
Total assets less current liabilities 182,078 151,749
Creditors: amounts falling due after
more than one year (39,606) (39,992)
Provisions for liabilities and charges (897) (283)
Net assets 141,575 111,474
Capital and reserves
Called up share capital 6,685 6,685
Share premium account 1,258 1,258
Other reserves:
Capital reserves - realised 96,100 85,664
Capital reserves - unrealised 33,260 13,697
Capital redemption reserve 466 466
Revenue reserve 3,556 3,454
Equity Shareholders' funds 141,325 111,224
Non-equity interests:
Cumulative preference shares 250 250
Total Shareholders' funds 141,575 111,474
Net asset value per ordinary share
Basic 1,057.1p 832.0p
Cash Flow Statement
for the year ended 30 September
2005 2004
£'000 £'000
Cash inflow from operating activities 3,359 3,523
Servicing of finance (3,033) (3,033)
Capital expenditure and financial investment 3,303 (1,958)
Equity dividends paid (4,045) (3,977)
Net cash outflow before management of liquid resources
and financing (416) (5,445)
Management of liquid resources 287 (4,399)
(Decrease)/increase in cash (129) (9,844)
Reconciliation of net cash flow to movement in net debt
Decrease in cash (129) (9,844)
Cash (outflow)/inflow from movement in liquid resources (287) 4,399
Exchange movements (51) 1,135
Debenture stock non-cash movement (22) (22)
Movement in net debt in the year (489) (4,332)
Net debt at beginning of year (15,499) (11,167)
Net debt at end of year (15,988) (15,499)
Notes to the Financial Statements
1. Income
2005 2004
£'000 £'000
Income from listed investments
UK dividends 3,979 3,701
Dividend from subsidiary - 129
Overseas dividends 593 575
STIC interest 692 592
UK unfranked investment income - interest 34 225
5,298 5,222
Other income
Deposit interest 423 427
Underwriting commission 16 10
439 437
Total income 5,737 5,659
Special dividends of £21,000 (2004: 216,000) were in relation to dividends
received in lieu of capital distributions. These have been allocated to capital
reserve - realised.
2. Investment management fees
2005 2004
Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
Investment management fee 234 701 935 195 584 779
Profit realisation fee on
unquoted portfolio - - - 1 4 5
Performance-related fee
relating to:
31 December 2003 - - - - 282 282
31 December 2004 - 1,062 1,062 - - -
Provision for
performance-related
fee relating to:
31 December 2004 - 240 240
31 December 2005 - 763 763 - - -
Irrecoverable VAT thereon 41 442 483 52 249 301
275 2,968 3,243 248 1,359 1,607
Details of the management agreement are disclosed in the Directors' Report in
the Annual Report and Accounts. Performance-related fees are based on a
calendar year.
3. Expenses
2005 2004
Revenue Revenue
£'000 £'000
Directors' fees 68 59
Auditors' remuneration:
- statutory audit 19 18
- review of interim financial statements 5 5
- tax compliance services 7 8
Other expenses 186 165
285 255
4. Finance costs
2005 2004
Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
Interest payable on borrowings
repayable as follows:
Debentures stock repayable
after
5 years 761 2,283 3,044 761 2,283 3,044
761 2,283 3,044 761 2,283 3,044
5. Dividends
2005 2004
£'000 £'000
Dividends on preference shares
2.50% paid on 31 March (2004: 2.50%) 6 6
2.50% paid on 30 September (2004: 2.50%) 6 6
12 12
Dividends on equity shares
Interim paid 13.00p per ordinary share (2004: 1,738 1,704
12.75p)
Proposed dividend of 18.50p per ordinary share 2,473 2,307
(2004: 17.25p)
4,211 4,011
6. Return per ordinary share
Basic revenue return per ordinary share is based on the net revenue on ordinary
activities after taxation and on 13,368,799 (2004: 13,368,799) shares being the
number of shares in issue throughout the year.
Basic capital return per ordinary share is based on the net capital gains on
ordinary activities after taxation and on 13,368,799 (2004: 13,368,799) shares
being the number of shares in issue throughout the year.
7. Provisions for liabilities and charges
2005 2004
£'000 £'000
Provision for performance-related fee 897 283
The provision for performance-related fee as at 30 September 2005 relates to
the calendar year 2005 (2004: related to the calendar year 2004). Details of
the performance-related fee are given in the Directors' Report in the Annual
Report and Accounts.
8. Called-up share capital
2005 2004
Number £'000 Number £'000
Authorised
5% Cumulative preference 250,000 250 250,000 250
shares of £1 each
Ordinary shares of 50p each 20,000,000 10,000 20,000,000 10,000
Allotted, called-up and
fully paid:
5% Cumulative preference 250,000 250 250,000 250
shares of £1 each
Ordinary shares of 50p each 13,368,799 6,685 13,368,799 6,685
Share Capital
The ordinary shares are fully participating and carry one vote per £1 nominal
held.
The dividend entitlement on the preference shares is cumulative and on a
winding-up holders would be entitled to repayment of capital of any arrears of
dividends in priority to the ordinary shares. Preference shareholders are not
entitled to vote at general meetings of the Company.
9. Net asset value per ordinary share
The net asset value per ordinary share and the net assets attributable at the
year end were as follows:
Net asset value per Net assets
share attributable
2005 2004 2005 2004
pence pence £'000 £'000
Ordinary shares
- Basic 1,057.1p 832.0p 141,325 111,224
10. Notes to the cash flow statement
Reconciliation of operating profit to operating cash flows
2005 2004
£'000 £'000
Net revenue before finance costs and taxation 5,177 5,156
Decrease/(increase) in debtors 320 (90)
Increase/(decrease) in creditors and 900 (186)
provisions
Investment management fee charged to capital (2,968) (1,359)
Special dividends received 21 216
Profits from subsidiary undertaking - (129)
Tax on unfranked investment income (91) (85)
Net cash inflow from operating activities 3,359 3,523
The financial information set out above does not constitute the Company's
statutory accounts for the year ended 30 September 2005 or 2004. The financial
information for 2004 is derived from the statutory accounts for 2004 which have
been delivered to the Registrar of Companies. The auditors have reported on the
2004 statutory accounts and their report was unqualified and did not contain a
statement under s237(2) or (3) of the Companies Act 1985. The statutory
accounts for 2005 will be finalised on the basis of the information presented
by the Directors in this preliminary announcement and will be delivered to the
Registrar of Companies following the Company's annual general meeting.
The preliminary announcement is prepared on the same basis as set out in the
previous year's accounts. The audit report on the full financial statements is
yet to be signed.
The audited Report and Accounts will be posted to shareholders shortly. Copies
may be obtained during normal business hours from the Company's Registered
Office, 30 Finsbury Square, London EC2A 1AG.
A final dividend of 18.5p per share is recommended for payment on 23 December
2005 to shareholders on the register of members on 25 November 2005.
The Annual General Meeting will be held at the Company's Registered Office on
Wednesday, 21 December 2005 at 11.00 am.
By order of the Board
INVESCO Asset Management Limited
17 November 2005
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