Interim Results

Merrill Lynch UK Inv Tst PLC 1 May 2001 30 April 2001 MERRILL LYNCH UK INVESTMENT TRUST plc INTERIM RESULTS FOR THE SIX MONTHS ENDED 31 MARCH 2001 * The Company changed its name from Mercury Keystone Investment Trust plc to Merrill Lynch UK Investment Trust plc on 29 December 2000. * Discount of share price to net asset value ('NAV') narrowed from 14% to 7% over the six months ended 31 March 2001. * Decrease in NAV per share with net income reinvested of 12.4% over the six months ended 31 March 2001. * Interim dividend of 10.00p declared (2000: 10.00p). The Chairman, John Stancliffe, comments: 'Shareholders will be aware that markets have been extremely volatile during the period under review, reflecting a general loss of confidence by investors. Recent high profile profit warnings have led to a reduction in the market's expectations for corporate earnings, resulting in a significant cut in forecast levels. 'During the six months the Company's share price declined by 5.6% compared with a fall of 9.4% in the FTSE All-Share Index, with income reinvested. Although the reduction in value of the portfolio was only modestly larger than the market as a whole, the effect of the Company's gearing resulted in a somewhat greater fall in the Net Asset Value per share ('NAV') of 12.4%. This figure allows for the 82,000 shares that the Company bought back advantageously and cancelled during November, at discounts in excess of 17%. 'Group earnings per share were 4.27p, compared with 13.23p for the same period of last year, reflecting the impact at 31 March 2001 of unrealised losses in Keysec, the Company's trading subsidiary. Underlying earnings of the portfolio were 11.02p, which was closer to the 13.02p of the previous period. 'The Board appreciates that for some shareholders dividends are an important element in the return provided by their shares. It has therefore been decided to supplement current income with a transfer from the revenue reserves previously accrued and has declared an interim dividend of 10.00p, unchanged from the same period last year.' Commenting upon the outlook for the Company, Steve Thompson of Merrill Lynch Investment Managers Limited noted: 'We foresee the global economy beginning to recover during the second half of this year. The aggressive reduction of interest rates by the US Federal Reserve is expected to be successful in returning US (and as a result, global) economic growth to a sustainable growth path. The disparity between the rate of US economic growth in the first quarter of 2000 (8% annualised) and the first quarter of 2001 (2% annualised) has had a marked negative impact on year-on-year earnings' comparisons. We think that this is more than reflected in valuations, and year-on-year relativities are expected to be more positive towards the end of 2001. 'We anticipate that the downturn in UK economic growth will be fairly shallow, underpinned by fairly robust consumer demand and government spending. Consumer confidence is relatively stronger in the UK, and the economy's comparatively low exposure to a downturn in technology spending increases its resilience. The rate of increase in house price and mortgage approval data is positive, whilst falling business optimism looks to have levelled off. Inflation is under control, balance sheets are healthy and the current account deficit is modest. 'Interest rate cuts should provide support for the UK stockmarket this year. Inflation has now been below the government's target for a considerable time, which gives the Bank of England plenty of room to act should domestic economic growth show signs of slowing more sharply. In addition, the UK consumer is among the most sensitive in the world to changes in interest rates, which increases the likelihood that monetary policy action will prove to be effective in bolstering the economy.' For further information, please contact: Ian Barby Managing Director, Investment Trusts Merrill Lynch Investment Managers Limited Tel: 020 7743 5224 or Mark Johnson Merrill Lynch Investment Managers Limited Tel: 020 7743 2300 or Andrew Waterworth Financial Dynamics Tel: 020 7269 7127 CONSOLIDATED REVENUE STATEMENT for the six months ended 31 March 2001 Six months Six months Year ended 30 ended 31 March ended 31 March September 2000 2001 2000 £'000 £'000 £'000 (unaudited) (unaudited)* (audited) Income (Note 3) 1,295 2,656 6,106 Investment (138) (197) (375) management fees (Note 4) Other expenses (121) (148) (259) ____________ ____________ ______________ Net return before finance costs and taxation 1,036 2,311 5,472 Finance costs (379) (384) (761) ____________ ____________ ______________ Return on ordinary activities 657 1,927 4,711 before taxation Taxation on ordinary (48) (30) (78) activities ____________ ____________ ______________ Return on ordinary 609 1,897 4,633 activities after taxation Dividends in respect (6) (6) (12) of non-equity shares ____________ ____________ ______________ Return attributable 603 1,891 4,621 to equity shareholders Dividends in respect (1,409) (1,425) (4,244) of equity shares ____________ ____________ ______________ (Note 5) Transfer (from)/to (806) 466 377 reserves ========== ========== ============ TOTAL RETURN PER ORDINARY SHARE Six months ended Six months ended Year ended 31 March 2001 31 March 2000 30 (unaudited) (unaudited)* September 2000 (audited) Earnings per share 4.27p 13.23p 32.42p Capital return per (154.29p) 110.36p 16.07p ordinary share ____________ ____________ ___________ Total return per (150.02p) 123.59p 48.49p ordinary share ========== ========== ========== Dividend per 10.00p 10.00p 30.00p ordinary share ========== ========== ========== * The interim comparisons have been adjusted to reflect the accounting treatments adopted in the annual accounts. CONSOLIDATED BALANCE SHEET as at 31 March 2001 31 March 31 March 30 September 2001 2000 2000 £'000 £'000 £'000 (unaudited) (unaudited)* (audited) Fixed assets Listed investments at market 184,729 221,672 207,258 valuation Unlisted investments at 108 173 201 directors' valuation _________ ___________ ____________ 184,837 221,845 207,459 Current assets Investments of subsidiary 2,432 - 140 undertaking Debtors 3,203 1,800 1,406 Cash 723 5,087 5,491 _________ ___________ ____________ 6,358 6,887 7,037 Creditors: amounts falling due 4,777 4,522 4,641 within one year _________ ___________ ____________ Net current assets 1,581 2,365 2,396 _________ ___________ ____________ Total assets less current 186,418 224,210 209,855 liabilities Creditors: amounts falling due 39,506 39,484 39,495 after one year _________ ___________ ____________ Net assets 146,912 184,726 170,360 ======== ========== ========== Capital and reserves Equity interests: Called-up share capital 7,047 7,125 7,088 Share premium 1,258 1,258 1,258 Capital redemption reserve 104 - 63 Capital reserve - realised 146,162 137,808 149,074 Capital reserve - unrealised (12,760) 32,539 6,970 Revenue reserve 4,851 5,746 5,657 ________ ___________ ____________ 146,662 184,476 170,110 Non-equity interests: Cumulative preference shares 250 250 250 _________ ___________ ____________ 146,912 184,726 170,360 ======== ========== ========== Net asset value per ordinary 1040.63p 1294.52p 1200.02p share ======== ========== ========== * The interim comparisons have been adjusted to reflect the accounting treatments adopted in the annual accounts. CONSOLIDATED CASH FLOW STATEMENT for the six months ended 31 March 2001 Six months Six months Year ended ended 31 ended 31 30 September March 2001 March 2000 2000 £'000 £'000 £'000 (unaudited) (unaudited)* (audited) Net cash flow from (2,146) 1,744 4,428 operating activities Returns on investments and (796) (1,361) (3,034) servicing of finance Taxation paid (155) (138) - Purchase of fixed asset (174,109) (97,709) (183,155) investments Proceeds from the sale of 176,128 99,501 186,420 fixed asset investments Equity dividends paid (2,819) (2,861) (4,286) Purchase of ordinary (871) (486) (1,279) shares __________ ___________ ____________ Net cash outflow (4,768) (1,310) (906) ========= ========== ========== * The interim comparisons have been adjusted to reflect the accounting treatments adopted in the annual accounts. RECONCILIATION OF NET RETURN BEFORE FINANCE COSTS AND TAXATION TO NET CASH FLOW FROM OPERATING ACTIVITIES 31 March 31 March 30 September 2001 2000 2000 £'000 £'000 £'000 (unaudited) (unaudited)* (audited) Net return before finance costs 1,036 2,311 5,472 and taxation Investment management and (415) (589) (1,124) performance fees capitalised Net (purchases)/sales of (3,296) 20 (40) investments by subsidiary undertaking (Increase)/decrease in accrued (405) (102) 112 income (Decrease)/increase in (70) 125 108 creditors Tax on investment income - (1) - included within gross income Loss/(profit) on investment 1,004 (20) (100) dealing by subsidiary undertaking __________ ___________ ____________ Net cash flow from operating (2,146) 1,744 4,428 activities ========= ========== ========== * The interim comparisons have been adjusted to reflect the accounting treatments adopted in the annual accounts. NOTES ON THE INTERIM STATEMENT 1. Principal activity The principal activity of the Company remains that of an investment company within the meaning of section 266 of the Companies Act 1985. The principal activity of its subsidiary undertaking is investment dealing. 2. Basis of preparation The interim financial statements have been prepared on the basis of the accounting policies set out in the Company's financial statements at 30 September 2000. Income and operating expenses have been recognised in accordance with the same principles used in the preparation of the annual financial statements. The taxation charge has been calculated by applying an estimate to the annual effective tax rate to the profit for the period. 3. Income Six months Six months Year ended ended 31 ended 31 30 March 2001 March 2000 September 2000 £'000 £'000 £'000 (unaudited) (unaudited)* (audited) Income from investments: Dividends: UK listed 2,057 2,507 5,700 Overseas 67 2 3 listed Unlisted 1 - - Interest 61 - 2 bearing __________ __________ ___________ 2,186 2,509 5,705 Interest receivable and other income: Deposit 113 127 301 interest (Loss)/ (1,004) 20 100 profit on investment dealing by __________ __________ ___________ subsidiary undertaking Total 1,295 2,656 6,106 ========= ========= ========== * The interim comparisons have been adjusted to reflect the accounting treatments adopted in the annual accounts. 4. Investment Management Fees REVENUE CAPITAL Six months Year Six months Year ended ended ended ended 31 March 30 Sept 31 March 30 Sept 2001 2000 2000 2001 2000 2000 £'000 £'000 £'000 £'000 £'000 £'000 (unaudited) (audited) (unaudited) (audited) Investment management fee 118 168 319 353 504 957 Performance fees - - - - (4) - Total irrecoverable VAT 20 29 56 62 89 167 Thereon ______ ______ ________ ______ ______ __________ 138 197 375 415 589 1,124 ===== ===== ======= ===== ===== ========= 5. Dividend The Board has declared an interim dividend of 10.00p per ordinary share (2000: 10.00p), which will be paid on 11 June 2001 to shareholders who are on the register on 11 May 2001. The shares will be quoted ex-dividend on 9 May 2001. 6. Gearing Ratios The ratio of borrowings to net assets were: 31 March 2001 Total borrowings 26.9% Effective borrowings (total borrowings, less 26.4% cash) 7. Ordinary Shares 31 March 31 March 30 2001 2000 September 2000 £'000 £'000 £'000 (unaudited) (unaudited) (audited) The weighted average number of ordinary shares in issue during the period, on which the return per ordinary share was calculated, was: 14,110,584 14,292,000 14,255,658 The number of ordinary shares in issue at the end of each period, on which the net 14,093,562 14,250,562 14,175,562 asset value was calculated, was: 8. Publication of Non-Statutory Accounts The financial information contained in this interim statement does not constitute statutory accounts as defined in section 240 of the Companies Act 1985. The financial information for the six months ended 31 March 2000 and 2001 has not been audited. The information for the year ended 30 September 2000 has been extracted from the latest published audited financial statements, which have been filed with the Registrar of Companies. The report of the auditors on those accounts contained no qualification or statement under sections 237(2) or (3) of the Companies Act 1985. 30 April 2001 33 King William Street London EC4R 9AS Trusts/MLUKIT/General/Interim Announcement 2001

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