Annual Financial Report

RNS Number : 7127H

Monks Investment Trust PLC

02 June 2011

 



THE MONKS INVESTMENT TRUST PLC

Results for the year to 30 April 2011

In the year to 30 April 2011 Monks net asset value total return was 11.2% and the share price total return was 16.7% while the FTSE World Index in sterling terms returned 9.3%.

·	Over 5 years to 30 April 2011 Monks net asset value total return was 33.6% and the share price total return was 33.8% compared to a 30.3% return on the FTSE World Index.
·	Earnings per share were 4.06p an increase of 1.0% from the prior year and a final dividend of 2.5p is recommended making the total dividend for the year 3.0p, unchanged from last year.
·	Additional borrowings of £40m were taken for a three year term at a fixed rate and existing shorter term borrowings of £40m were rolled over. There was net investment mainly in equities. Call options on the Japanese market were purchased.  The level of gearing was managed through the sale of index futures.
·	The near term outlook is clouded by the forthcoming ending of quantitative easing in the USA, inflationary pressures and concerns about the solvency of governments, but profits are exceeding expectations and the longer term picture, helped by the growth of demand in emerging economies, is more encouraging.

The Monks Investment Trust PLC invests internationally in order to achieve capital growth, which takes priority over income and dividends. Monks is managed by Baillie Gifford & Co, the independent Edinburgh based fund management group with around £76 billion under management and advice as at 31 May 2011.

Past performance is not a guide to future performance. Monks is listed on the stock market. As a result, the value of the shares, and any income from them, can fall as well as rise and investors may not get back the amount invested.  As Monks invests in overseas securities, changes in the rates of exchange may also cause the value of your investment (and any income it may pay) to go down or up. As the aim of Monks is to achieve capital growth you should not expect a significant, or steady, annual income from the shares.

Investment Trusts are UK public listed companies and are not authorised or regulated by the Financial Services Authority.

1 June 2011

- ends -

For further information please contact:

James Budden, Baillie Gifford & Co                  07780 704404 or 0131 275 2816

Roland Cross, Broadgate                                  07831 401309 or 0207 776 0512

THE MONKS INVESTMENT TRUST PLC

 

CHAIRMAN'S STATEMENT

Performance

In the year to 30 April 2011 the net asset value total return, with borrowings at fair value, was 11.2% and the share price total return was 16.7% while the FTSE World Index in sterling terms returned 9.3%. For our portfolio the gains were relatively evenly spread between the first and second halves of the year with a bias to the first half, while changes to the comparative index showed a different pattern, falling in the first half and rising in the second. During the first half of the year net asset value per share rose by 5.9%, while the comparative index fell by 2.1%, and during the second half net asset value per share rose by a further 4.7% and the index rose by 8.8%.  Over the five years to 30 April 2011 the net asset value total return was 33.6% and the share price total return was 33.8% while the comparative index returned 30.3%.

There were a number of events during the Company's year that one might have expected to have had a major negative effect on markets. These included the earthquake, tsunami and nuclear accident in Japan, revolutions in the Arab world, and sovereign debt crises necessitating bailouts within the eurozone. The Japanese market fell sharply in March and has yet to recover to its pre-disaster level, but other markets suffered only transient reversals in response to these events. Monetary policy appears to have been a more powerful influence and in this respect the most important event of the year was a speech by the chairman of the US Federal Reserve in August 2010 in which he announced that the US Central Bank would engage in a new round of quantitative easing. Prior to that point the trend in markets was downwards, after it the trend was upwards, notwithstanding the potential shocks noted above.

Elsewhere in the world the direction of monetary policy was towards tightening, either in response to the problems of excessive growth and inflation in the case of major emerging economies such as China, India and Brazil, or in order to pre-empt inflation in the case of the eurozone and countries such as Sweden and Australia. Possibly in response, international investors withdrew funds from emerging markets during the later part of the year, leading to relative underperformance of these markets compared to those of the United States, Europe and the United Kingdom. Given our significant exposure to Brazil and other emerging markets, this had an adverse effect on performance during this period.

The Managers' Report below contains more detail on the individual investments that made the greatest positive and negative contributions to performance. Of particular note is the positive contribution of our investments in Japan during a period when the Japanese market fell in sterling terms.

Earnings and Dividend

Earnings per share were 4.06p compared with 4.02p last year, an increase of 1.0%. Income from investments rose despite a reduction in income from bonds owing to purchases of high yielding equities. This was, however, largely offset by higher payments arising from increased borrowings and a rise in other costs. Monks invests with the aim of achieving capital growth rather than income and all costs are charged to the Revenue Account.

THE MONKS INVESTMENT TRUST PLC

CHAIRMAN'S STATEMENT (CTD)

The Board is recommending a final dividend of 2.50p, which together with the interim (0.50p) already paid, would make the total dividend for the year 3.00p, unchanged from last year.

Long Term Borrowing

During the year we borrowed an additional £40m for a three year term at a fixed rate of 3.57%. We also rolled over shorter term borrowings of the same amount taken out last year in combination with a thirty year interest rate swap. While the rate paid under the thirty year swap agreement is fixed, there is some variability in the overall rate paid on the combination of swap and shorter term borrowings arising from changes in margin and the current rate is 5.1% compared to 5.4% at this time last year. The 11% debenture stock will mature in 2012 (and the 6 3/8% debenture stock in 2023) and the new borrowings undertaken this year and last reflect a strategic view of the Company's capital structure and the attraction of locking in interest rates that are low relative to history, rather than a desire to increase the gearing of the Company. The new borrowings have been largely invested in equities whose current yields in aggregate more than cover the interest paid and the additional exposure to general movements in share prices has been hedged out through the sale of index futures.

Investment Activity

Over the course of the year there was a net investment of £34.1m, of which £31.2m was in equities. There were net sales of equities in North America and non-Asian Emerging Markets and net purchases in all other regions. We also purchased call options on the Japanese market and sold futures on United Kingdom, American and eurozone markets.

The call options enable us to participate in future capital appreciation of the Japanese market for a modest initial outlay and potential losses are capped at this amount. We purchased the first of these options in November and added to the position in March, following the Japanese earthquake. We currently hold options maturing in December 2011 and December 2012. The purchase of call options introduces a form of gearing, as their market value varies more than that of the underlying Japanese index, and this is taken into account when setting policy for the overall level of gearing.

The sale of futures reduces the sensitivity of the net asset value to changes in the level of the United Kingdom, American and eurozone markets while changes in the value of our holdings in these markets relative to the market indices covered by the futures contracts become a more important factor. In this way the sale of futures reduces gearing to general moves in markets and so acts to mitigate the gearing introduced by investing additional borrowed funds and holding call options.

At the year end, holdings of equities amounted to 103.7% of shareholders' funds and holdings of equities and bonds together to 112.5% but when the effects of holding options and selling futures are taken into account the effective gearing was equivalent to 10% of shareholders' funds.

THE MONKS INVESTMENT TRUST PLC

CHAIRMAN'S STATEMENT (CTD)

Discount and Buybacks

The discount (at fair value) narrowed to 9.9% from 14.0% over the course of the year. The Board considers the level of discount and has authorised the repurchase of shares when this will be of benefit to continuing shareholders as well as being in the interest of those shareholders who may need to sell some or all of their shares. In order to assist it with the control of the discount and the communication of the Company's objectives and positioning the Board has engaged Cannacord Genuity.

During the year to 30 April 2011 £807,000 was spent on the repurchase of 250,000 shares. Since the power to buy back shares was first granted in 1999, 127.2m shares have been bought back and cancelled, representing 33% of the share capital at the start of that period. The Board will continue to buy back shares if suitable opportunities appear.

Outlook

Whatever one's view of the aggressive buying of bonds and other financial assets by central banks that is known as quantitative easing, one immediate and intended consequence of this process is that the prices of financial assets are higher than they would have been had central banks not been buying. One therefore has to wonder what will happen when they stop.  An optimist would probably argue that quantitative easing will only end if the economic recovery is well established with the financial system well on its way back to robust health and that, if these conditions are in place, asset prices can be driven higher by the usual processes of credit growth and saving. A pessimist would argue that the withdrawal of buyers whose aim has been to boost the price of the assets they are purchasing will lead to a sharp correction. These fears are voiced most clearly with respect to government bonds but, given the way money flows between different asset classes, all financial investments are likely to be affected to a greater or lesser extent. It seems likely that we will find out which side is right fairly soon and until the answer is clearer it seems prudent to adopt a cautious attitude with respect to changes in the general level of markets and to focus on creating value through the selection of individual investments.

On a more positive note, corporate profitability has increased greatly in recent years in many countries and borrowing costs for those companies with access to bond markets are extremely low. If these conditions are sustained, companies are likely to pay higher dividends, repurchase shares and take each other over, all activities which are normally associated with good returns for equity investors. One risk to this scenario is that of rising inflation. This has already become an issue in some of the leading Emerging Market economies and there are indications of similar pressures elsewhere. Another is the rather precarious finances of various governments, not only in Europe but also at various different administrative levels in the United States. So far governments have responded in different ways, but some are now exploring the limits of tolerance of the markets, their populations or their neighbours.

THE MONKS INVESTMENT TRUST PLC

CHAIRMAN'S STATEMENT (CTD)

Looking further ahead it seems likely that the pattern of the closing years of the last century and the first years of this will continue. Global economic growth has been accelerating as more rapidly growing parts of the world come to account for more of total economic activity and technological developments have created huge new markets for things that did not exist before. While this creates opportunities for investment in new areas, it also leads to greater pressure on scarce resources and rising demand for many traditional products. Supplying that rising demand remains one of the main themes within our portfolio.

AGM

I hope shareholders will come to the Annual General Meeting, which will be held on 2 August 2011 at 11.00am at the Institute of Directors. Our manager will give a short presentation and there will be an opportunity to ask questions.

James Ferguson

Chairman

1 June 2011

THE MONKS INVESTMENT TRUST PLC

MANAGERS' PORTFOLIO REVIEW

Among the changes made to the portfolio during the Company's year was the complete sale of the holding in the Baillie Gifford Pacific Fund and its replacement with a number of new direct holdings in Chinese companies, most of which are listed in Hong Kong. This completed a process of moving to direct holdings within the Asia-Pacific region that had been underway for some years. We also reduced our exposure to the markets of the Middle East and sold our holding in a fund investing in Vietnam. Taken together with reductions and sales in Turkey and Brazil, these sales more than offset new purchases of holdings in Emerging Markets.  We still have a very significant exposure to these markets and continue to believe that this will prove rewarding in the long run despite the short-term headwind created by the need to tighten monetary and fiscal policy in response to rising inflation.

Our increased investment in Japan is slightly more opportunistic in nature and reflects a view that the Japanese market is out of favour and cheap despite the fact that it contains many companies that should benefit from rising global demand. The longer term outlook for Japan is, however, extremely challenging given its poor demographics and large stock of government debt. Part of the exposure to Japan is through call options on the Nikkei 225 index, some of which expire in December 2011 and the rest in 2012 with strike prices ranging from 9,500 to 11,000. The initial position was bought in November 2010 and added to in March 2011 following the earthquake and tsunami.

We are relatively optimistic about economic developments in the large countries of the eurozone, notably Germany which seems to be enjoying something of a boom. This success greatly complicates the work of the European Central Bank as it strives to contain inflation while supporting a banking system that has heavy exposure to the small troubled nations of the periphery. It also adds to existing concerns about the future profitability of banks in an environment of increasing regulation and has led us to sell a number of holdings such as Banco Santander while at the same time looking for more opportunities in 'core Europe' such as the German housing company Deutsche Wohnen.

With the additional funds raised by new borrowings we have added to holdings of higher yielding stocks and our positions include companies in a number of sectors and countries ranging from telephone companies in the United States, Europe and Asia to the bus and train group Go-Ahead in the United Kingdom and out of favour technology stocks in Taiwan. The one thing they have in common is that we believe that the market is underestimating their ability to maintain or increase their dividends. This additional investment was hedged through the sale of index futures on the FTSE 100, S&P 500 and Euro Stoxx 50 indices in approximately equal amounts. By hedging our equity exposure in this way exposure to market movements in the United Kingdom, the United States and the eurozone has been reduced but no hedging has been applied to our holdings in Japan or Emerging Markets. In the second half of the Company's year this was unhelpful for performance.

When the sale of futures and the purchase of call options are taken into account the geographical exposures are somewhat different to those shown in the table below for the distribution of assets. In particular, the exposure to Japan rises to 13% from 5% while exposures to the UK, European and US markets fall to 14%, 13% and 15% from 17%, 16% and 17% respectively.

THE MONKS INVESTMENT TRUST PLC

MANAGERS' PORTFOLIO REVIEW (CTD)

The ten largest positive and negative individual stock contributors to performance are described below. In aggregate the positives outweighed the negatives by a comfortable margin. Four of the largest positive contributors, Aggreko, Seadrill, OGX and the Athena Debt Opportunities Fund, were also in the top ten positives last year and OGX was also in the top ten positives two years ago. Of this year's largest negative contributors, Petrobras was in the top positives last year whereas Allied Irish Banks and OSX were among last year's top ten negative contributors.

Largest positive contributions to performance:

Healthspringis a US provider of Medicare Advantage healthcare plans. We bought it in late 2009, at the height of concerns over US healthcare reforms. We felt that the fears were overdone, and that Healthspring's more efficient operating model would allow it to exploit an environment of tighter costs in which weaker players would exit.   Our hypothesis has played out.  Healthcare reforms were less revolutionary than was feared and Healthspring has been able to grow fast, gaining market share and picking up some good value acquisitions. Alongside rapid earnings growth, the stock has re-rated.

Aggreko is a global provider of temporary power systems.  It is benefitting from strong growth due to increasing demand for electricity supply, especially in Emerging Markets, and this looks set to continue over the long term.  Management continue to execute well in terms of expansion.

Odontoprevis a Brazilian dental plan company that is consolidating an immature market. It has acquired its main large but ineffectual competitors, owned by two of Brazil's biggest banks, and should now be able to grow both rapidly and profitably. Average monthly charges for its plans are very modest at present and there is scope to increase profitability by raising prices. Financial characteristics are exceptional and we expect nearly all of profits to be paid out as dividends.

Cetip is a depositary and registrar that lies at the heart of the Brazilian financial system, and it is a legal requirement that it participates in all financial transactions. The number of such transactions is growing and likely to increase further as credit expands, corporate bonds are more widely issued and over the counter derivatives evolve from the present very low level. We expect to see both rapid growth and substantial cash generation.

Digital Garageis a Japanese internet incubator company. Its main assets are cash and quoted investments, including a large stake in Japan's leading price comparison website, plus stakes in Twitter Japan and its US unquoted parent company, Twitter Inc. The company participated in early stage funding rounds for Twitter Inc, the world's leading micro-blogging service, which at the time we acquired our holding, appeared to contribute nothing to Digital Garage's share price as its market capitalisation was exceeded by other public and liquid assets. From this point, following some share price appreciation, the debate revolves more around the potential worth of Twitter.

THE MONKS INVESTMENT TRUST PLC

MANAGERS' PORTFOLIO REVIEW (CTD)

Seadrill is the owner of the world's largest modern fleet of deepwater drilling rigs and vessels. John Fredriksen timed his entry into this market with great skill during the last big downturn and now has both a peerless fleet and an unrivalled set of contracts with the best funded major global oil companies. We expect there to be some further consolidation in the market, with Seadrill playing some part in that, and for capital allocation to distinguish Seadrill significantly and favourably from its competitors. Seadrill is a beneficiary of the increasingly hard work that has to go into finding and recovering oil as global exploration moves further offshore.

SINA is a Chinese language social networking and gaming website that has attracted a large and loyal following worldwide. The shares appreciated dramatically and, eventually, to a point where we felt that prospects were over represented and so sold our holding.

OGX obtained very valuable offshore exploration licences in key Brazilian basins before most other bidders were aware of their potential worth. The shares did extremely well subsequently and we steadily cut back our position. We maintain a holding, albeit a smaller one.

National Oilwell Varco is the leading global supplier to the oil services industry. A long industry drought spread over two decades or more afforded the group the chance to put together, by acquisition, a uniquely strong portfolio of businesses and build unrivalled global distribution and customer support. As the industry now enjoys benign conditions and a strong oil price, the group is able to exploit its carefully constructed strengths.

Athena Debt Opportunities Fund is a fund that we commissioned to try to exploit the revulsion markets were showing towards securitised mortgage backed securities of various types. The premise was simply that these had become significantly undervalued and that, by buying senior tranches at a large discount, we might hope to recover most of our book cost from cash flows relatively rapidly. This would leave a potentially very cheap option on further recoveries within widely diverse residential and commercial property portfolios.

Largest negative contributors to performance:

Mediatekdesigns and sells semiconductor chipsets predominantly for mobile phone handsets. We bought it to benefit from growth in the quantity and sophistication of mobile phones and Mediatek's strong market position, especially in China.  While its position is very strong in 2G phones, this market is now declining, having been superseded by 3G and smart phones. It is finding these new markets more competitive but we believe that the market is underestimating the ability of Mediatek to develop new product lines.

THE MONKS INVESTMENT TRUST PLC

MANAGER'S PORTFOLIO REVIEW (CTD)

Vision Opportunities China is a closed-end fund listed in London but which invests in a clearly defined range of Chinese growth businesses. Typically, these are family owned and unquoted, require funding to assist them to exploit an immature opportunity and offer VOC the chance to negotiate attractive investment terms prior to listing the businesses, mainly in the US. Unfortunately, some of these businesses have encountered significant problems and major questions have arisen over capital allocation, business practices and cash flows. Despite investing at what appeared to be a large discount, subsequent events have led to large falls in net asset values. Much work remains to be done here to bring about improvement but, with a substantial proportion of its market value held in the form of cash, we believe there is the potential to recover more of the value of the investment through active engagement than through selling in the market.

Allied Irish Banks operates retail and business banking franchises in Ireland and the UK. When we bought it, we recognised that it was a high risk investment that could either go up several times or go to zero.  Unfortunately Ireland's woes and AIB's exposure to them appear to be worse than feared, so we have sold out.

Marfin Investment Group is a Greek holding company.  Its main businesses are in food, healthcare and transport and are heavily exposed to the Greek economy. With Greece's economy continuing to go through a severe recession, all of the core businesses have struggled and their valuations have been written down sharply.  The management have failed to explain their strategy and this has also hurt sentiment towards the company.  In spite of this we have continued to hang on as the businesses appear to be stabilising and look well positioned should things improve.  

LG Electronicsis a manufacturer of consumer electronics, most notably mobile phones and TVs.  Its products looked well designed and good value, and the company seemed to be building a decent brand.  Unfortunately, LG missed out on the growth in smart phones and has fallen badly behind as a result.  With the mobile division the largest contributor to sales, the loss of position and collapse in profitability severely dented the investment case. The holding was sold during the year.

Renheoperates a unique and highly profitable business model developing and operating underground shopping centres in Chinese cities. Over the past year, the company has continued to expand rapidly, building up a strong development pipeline for the future, and selling on some of its completed developments at high prices. In spite of solid progress, Renhe's shares have performed poorly due to concerns of a bubble in Chinese real estate.  We think these concerns are overdone, with tightening measures directed at residential real estate, while commercial property looks more sensibly priced.  We also take comfort from the large management ownership of the shares, the dividend and recent buybacks and added to the holding.

THE MONKS INVESTMENT TRUST PLC

MANAGER'S PORTFOLIO REVIEW (CTD)

Aldar Properties is a state-backed property development company in Abu Dhabi.  Following the financial crisis and problems in neighbouring Dubai, the property market has remained weak.  Aldar was heavily indebted and while there was little doubt that the government of Abu Dhabi has both the means and the will to assist the company with its forthcoming refinancing requirements, we decided to sell out near the end of 2010 as we were concerned that the terms might well be unfavourable to minority shareholders.

Sevan Marineowns an innovative technology that allows for greater stability and improved uptime in the oil rig industry. Unfortunately, their attempts to capitalise upon this technology have led the company to excessive leverage from a base of what now looks like naive optimism. We have sold out of our holdings as any value creation from here will most likely accrue to bondholders and not equity owners.

Petrobras is the Brazilian national oil company. Following many years of exciting and favourable news flow as discoveries multiplied upon one another, the Brazilian government has changed local oil laws and altered the terms on which Petrobras will be able to exploit their reserves and potential reserves. The group's capital expenditure programme will be of a size never previously undertaken even in the oil industry and doubts relate to the rate of return that will ultimately emerge from this. We sold our remaining holdings in a group that has made the Company a good deal of money over the years.

OSX is a related company to OGX, being the shipyard that intends to build the equipment required by OGX to exploit its considerable reserves. OSX has run into a series of problems with planning permissions. Time is important for the business model, too, as a good deal of leverage is intended to be applied. Increased unpredictability of timing and funding with regard to OGX's drilling campaigns, therefore, has led to share price weakness.

Gerald Smith

Baillie Gifford & Co

1 June 2011

THE MONKS INVESTMENT TRUST PLC

 

DISTRIBUTION OF ASSETS

at 30 April 2011

(unaudited)

 

				30 April 2011 %		30 April 2010 %
Equities:	United Kingdom			16.6		13.1
	Continental Europe			16.3		15.1
	North America			17.4		22.1
	Japan			5.3		2.8
	Asia Pacific			16.8		16.7
	Other Emerging Markets			17.7		20.8
				90.1		90.6
Bonds:                 United Kingdom				2.8		2.9
Overseas				4.9		4.3
Net liquid assets				2.2		2.2
Total assets (before deduction of borrowings)				100.0		100.0

 

THE MONKS INVESTMENT TRUST PLC

 

THIRTY LARGEST EQUITY HOLDINGS at 30 April 2011 (unaudited)
Name	Region	Business	2011		2010
			Value £'000	% of total assets	Value £'000
Seadrill	Continental Europe	Contract drilling services	33,461	2.7	18,804
Aggreko	United Kingdom	Temporary power units	30,298	2.5	21,773
OGX	Other Emerging Markets	Oil and gas exploration and production	24,040	2.0	46,533
Vale	Other Emerging Markets	Diversified mining group	21,014	1.7	12,321
Cetip	Other Emerging Markets	Investment services	19,412	1.6	4,675
Odontoprev	Other Emerging Markets	Health care providers and services	18,337	1.5	10,253
Petrofac	United Kingdom	Oilfield services company	17,480	1.4	13,162
Eldorado Gold	North America	Gold mining	17,316	1.4	13,271
Healthspring	North America	Healthcare maintenance organization	16,335	1.3	12,290
National Oilwell Varco	North America	Drilling equipment manufacturer	15,958	1.3	9,975
Novozymes	Continental Europe	Enzyme producer	15,759	1.3	13,042
Dragon Oil	Other Emerging Markets	Oil and gas exploration and production	15,495	1.3	13,419
Sino Forest	North America	Forestry and paper	14,822	1.2	8,602
Samsung Heavy	Asia Pacific	Shipbuilding	14,762	1.2	-
Nikkei 225 Index Call   Options	Japan	Equity Index call options	14,357	1.2	-
Naspers	Other Emerging Markets	Media company	14,211	1.2	10,530
Atlas Copco	Continental Europe	Industrial compressors and mining equipment	13,992	1.1	11,271
Digital Garage	Japan	Software	13,411	1.1	-
Kone	Continental Europe	Lifts	13,387	1.1	-
Kunlun Energy Company	Asia Pacific	Oil and gas company	13,184	1.1	10,937
Iamgold	North America	Gold mining	13,107	1.1	-
McDonalds	North America	Fast food restaurants	12,722	1.0	19,158
Taiwan Semicon   Manufacturing	Asia Pacific	Semiconductor manufacturer	12,299	1.0	10,340
Deutshe Telekom	Continental Europe	Telecommunications services	12,298	1.0	4,718
Verizon Communications	North America	Telecommunications services	12,261	1.0	-
Nestlé	Continental Europe	Food and consumer products	12,192	1.0	10,524
Solera Holdings	North America	Transactional software	12,066	1.0	12,501
Drax Group	United Kingdom	Electricity	12,016	1.0	6,355
Telstra	Asia Pacific	Telecommunications services	11,912	1.0	-
Chungwa Telecom	Asia Pacific	Fixed line telecommunications	11,834	1.0	-
			479,738	39.3	294,454

THE MONKS INVESTMENT TRUST PLC

 

The following is the unaudited preliminary statement for the year to 30 April 2011 which was approved by the Board on 1 June 2011.  The Directors of The Monks Investment Trust PLC are recommending to the Annual General Meeting of the Company to be held on 2 August 2011 the payment of a final dividend of 2.5p (0.5p  last year) per ordinary share, making a total of 3.0p (3.0p last year) per ordinary share for the year ended 30 April 2011.

INCOME STATEMENT

(unaudited)

	For the year ended 30 April 2011				For the year ended 30 April 2010
	Revenue £'000	Capital £'000	Total £'000		Revenue £'000	Capital £'000	Total £'000
Gains on investments	-	94,317	94,317		-	305,723	305,723
Currency gains/(losses)	-	1,042	1,042		-	(11,670)	(11,670)
Income (note 2)	27,366	-	27,366		23,887	-	23,887
Investment management fee	(5,075)	-	(5,075)		(4,186)	-	(4,186)
Other administrative expenses	(1,172)	-	(1,172)		(1,062)	-	(1,062)
Net return before finance costs and taxation	21,119	95,359	116,478		18,639	294,053	312,692
Finance costs of borrowings	(9,374)	-	(9,374)		(7,483)	-	(7,483)
Net return on ordinary activities before taxation	11,745	95,359	107,104		11,156	294,053	305,209
Tax on ordinary activities	(1,145)	-	(1,145)		(587)	-	(587)
Net return on ordinary activities after taxation	10,600	95,359	105,959		10,569	294,053	304,622
Net return per ordinary share (note 4)*	4.06p	36.56p	40.62p		4.02p	111.99p	116.01p
Dividends per share paid and payable in respect of the year (note 5)	3.00p				3.00p

The total column of the Income Statement is the profit and loss account of the Company.

All revenue and capital items in this statement derive from continuing operations.

A Statement of Total Recognised Gains and Losses is not required as all gains and losses of the Company have been reflected in the above statement.

THE MONKS INVESTMENT TRUST PLC

SUMMARISED BALANCE SHEET

at 30 April 2011

(unaudited)

		30 April 2011		30 April 2010
		£'000		£'000
Fixed assets
Investments held at fair value through profit or loss		1,193,261		1,054,003
Current assets
Debtors		20,789		26,589
Cash and deposits		18,912		14,449
		39,701		41,038
Creditors
Amounts falling due within one year		(52,469)		(57,066)
Net current liabilities		(12,768)		(16,028)
Total assets less current liabilities		1,180,493		1,037,975
Creditors
Amounts falling due after more than one year (note 6)		(119,614)		(79,582)
Provisions for liabilities and charges
Deferred taxation		-		(57)
Total net assets		1,060,879		958,336
Capital and Reserves
Called-up share capital		13,038		13,051
Share premium		11,100		11,100
Capital redemption reserve		6,360		6,347
Capital reserve		992,780		898,228
Revenue reserve		37,601		29,610
Shareholders' funds		1,060,879		958,336
Net asset value per ordinary share		403.9p		364.1p
(after deducting borrowings at fair value)
Net asset value per ordinary share		406.7p		367.0p
(after deducting borrowings at par)
Ordinary shares in issue (note 7)		260,764,859		261,014,859

THE MONKS INVESTMENT TRUST PLC

 

RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS

(unaudited)

For the year ended 30 April 2011

	Share capital £'000	Share premium £'000	Capital redemption reserve £'000	Capital reserve £'000	Revenue reserve £'000	Shareholders' funds £'000
Shareholders' funds at 1 May 2010	13,051	11,100	6,347	898,228	29,610	958,336
Net return on ordinary activities after taxation	-	-	-	95,359	10,600	105,959
Shares purchased for cancellation	(13)	-	13	(807)	-	(807)
Dividends paid during the year	-	-	-	-	(2,609)	(2,609)
Shareholders' funds at 30 April 2011	13,038	11,100	6,360	992,780	37,601	1,060,879

For the year ended 30 April 2010

	Share capital £'000	Share premium £'000	Capital redemption reserve £'000	Capital reserve £'000	Revenue reserve £'000	Shareholders' funds £'000
Shareholders' funds at 1 May 2009	13,182	11,100	6,216	611,487	38,771	680,756
Net return on ordinary activities after taxation	-	-	-	294,053	10,569	304,622
Shares purchased for cancellation	(131)	-	131	(7,312)	-	(7,312)
Dividends paid during the year	-	-	-	-	(19,730)	(19,730)
Shareholders' funds at 30 April 2010	13,051	11,100	6,347	898,228	29,610	958,336

 

THE MONKS INVESTMENT TRUST PLC

SUMMARISED CASH FLOW STATEMENT (unaudited)
	For the year ended 30 April 2011			For the year ended 30 April 2010
	£'000	£'000		£'000	£'000
Net cash inflow from operating activities		5,270			19,921
Net cash outflow from servicing of finance		(9,461)			(6,990)
Taxation
Corporation tax paid	-			(2,332)
Overseas tax incurred	(1,188)			(1,278)
Income tax incurred	-			(35)
Total tax paid		(1,188)			(3,645)
Financial investment
Acquisitions of investments	(491,755)			(493,377)
Disposals of investments	463,417			398,939
Forward currency contracts	2,329			(6,161)
Currency losses	(733)			(3,900)
Net cash outflow from financial investment		(26,742)			(104,499)
Equity dividends paid		(2,609)			(19,730)
Net cash outflow before use of liquid resources and financing		(34,730)			(114,943)
Liquid resources
Decrease in short term deposits	-			43,924
Net cash inflow from use of liquid resources		-			43,924
Financing
Shares purchased for cancellation	(807)			(7,312)
Bank loans drawn	40,000			40,000
Net cash inflow from financing		39,193			32,688
Increase/(decrease) in cash		4,463			(38,331)
Reconciliation of net cash flow to movement in net debt
Increase/(decrease)/ in cash in the year		4,463			(38,331)
Decrease in short term deposits		-			(43,924)
Exchange movement on short term deposits		-			(2,254)
Net cash inflow from bank loans		(40,000)			(40,000)
Other non-cash changes		(32)			(33)
Movement in net debt in the year		(35,569)			(124,542)
Net (debt)/funds at 1 May		(105,133)			19,409
Net debt at 30 April		(140,702)			(105,133)
Reconciliation of net return before finance costs and taxation to net cash inflow from operating activities
Net return before finance costs and taxation		116,478			312,692
Gains on investments		(94,317)			(305,723)
Currency (gains)/losses		(1,042)			11,670
Amortisation of fixed interest book cost		(988)			(2,348)
(Increase)/decrease in accrued income		(319)			3,172
(Increase)/decrease in debtors		(14,709)			40
Increase in creditors		167			418
Net cash inflow from operating activities		5,270			19,921

THE MONKS INVESTMENT TRUST PLC

NOTES

(unaudited)

1.	The financial information within this preliminary announcement has been extracted from the unaudited financial statements for the year to 30 April 2011 have been prepared on the basis of the accounting policies set out in the Company's Annual Financial Statements at 30 April 2010.
			2011				2010
			£'000				£'000
2.	Income
	Income from investments and interest receivable		27,134				23,842
	Other income		232				45
			27,366				23,887
3.	Recoverable VAT
	In 2007 the European Court of Justice ruled that investment management fees should be exempt from VAT. Since then, HMRC has accepted the Managers' repayment claims for the periods from 1990 to 1996 and from 2000 to 2007. During the year ended 30 April 2009 the Company received a reimbursement of £2,902,000 in this regard of which £1,164,000. A case has been recently brought against HMRC to seek to recover the amounts relating to the intervening period, 1997 to 2000, together with interest on a compound basis. The Company's Auditors, PwC, have provided services in connection with this case for a fee of £35,000. Additional fees may become payable to PwC in the event of a successful outcome to the case. No amounts have been accrued in this regard. The potential recoveries of VAT and interest would be a significant multiple to the potential additional fees payable to PwC. No VAT or related interest recover has been accrued or recognised as a contingent asset, as the outcome of the case is expected to remain uncertain for several years.
			2011				2010
4.	Net return per ordinary share
	Revenue return		4.06p				4.02p
	Capital return		36.56p				111.99p
	Total return		40.62p				116.01p
	Revenue return per ordinary share is based on the net revenue return on ordinary activities after taxation of £10,600,000 (2010 - £10,569,000) and on 260,870,338 (2010 - 262,582,039) ordinary shares of 5p, being the weighted average number of ordinary shares in issue during the year. Capital return per ordinary share is based on the net capital gain for the financial year of £95,359,000 (2010 -£294,053,000) and on 260,870,338 (2010 - 262,582,039) ordinary shares, being the weighted average number of ordinary shares in issue during the year. There are no dilutive or potentially dilutive shares in issue.
		2011		2010		2011 £'000		2010 £'000
5.	Ordinary Dividends
	Amounts recognised as distributions in the year:
	Previous year's final (paid 6 August 2010)	0.50p		5.00p		1,305		13,182
	Interim (paid 31 January 2011)	0.50p		0.50p		1,304		1,310
	Second interim	-		2.00p		-		5,238
		1.00p		7.50p		2,609		19,730
	We also set out below the total dividends paid and proposed in respect of the financial year, which is the basis on which the requirements of section 1158 of the Corporation Tax Act 2010 are considered.  The revenue available for distribution by way of dividend for the year is £10,600,000 (2010 - £10,569,000).

THE MONKS INVESTMENT TRUST PLC

NOTES (Ctd)

(unaudited)

		2011		2010		2011 £'000		2010 £'000
5.	Ordinary Dividends (Ctd)
	Dividends paid and payable in respect of the financial year:
	Interim  (paid 31 January 2011)	0.50p		0.50p		1,304		1,310
	Second interim	-		2.00p		-		5,238
	Proposed final (payable 5 August 2011)	2.50p		0.50p		6,519		1,305
		3.00p		3.00p		7,823		7,853
	If approved the final dividend will be paid on 5 August 2011 to shareholders on the register at the close of business on 8 July 2011.  The ex-dividend date is 6 July 2011. The Company's Registrar offers a Dividend Reinvestment Plan and the final date for elections for this dividend is 15 July 2011.
6.	The fair value of borrowings falling due after more than one year at 30 April 2011 was £127,152,000 (2010 - £87,584,000).
7.	In the year to 30 April 2011 the Company bought back 250,000 ordinary shares with a nominal value of £12,500 at a total cost of £807,000. At 30 April 2011 the Company had authority to buy back a further 38,876,127 ordinary shares, being 14.91% of the shares in issue at the year end.
8.	The Report and Accounts will be available on the Managers' website www.bailliegifford.com on or around 28 June 2011.
9.	The financial information set out above does not constitute the Company's statutory accounts for the year ended 30 April 2011.  The financial information for 2010 is derived from the statutory accounts for 2010 which have been delivered to the Registrar of Companies.  The Auditors have reported on the 2010 accounts; their report was unqualified and it did not contain a statement under section 498(2) or (3) of the Companies Act 2006.  The statutory accounts for 2011 will be finalised on the basis of the financial information presented in this preliminary announcement and will be delivered to the Registrar of Companies following the Company's Annual General Meeting.
10.	None of the views expressed in this document should be construed as advice to buy or sell a particular investment.

 

END

 

 

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