Final Results

RNS Number : 9004V

Monks Investment Trust PLC

04 June 2008

 



THE MONKS INVESTMENT TRUST PLC

Results for the year to 30 April 2008

In the year to 30 April 2008, Monks share price increased by 15.9% in contrast to a 1.4% fall in the FTSE All World Index (in sterling terms). 

	Over the year net asset value (NAV) per share also increased by 14.2% with borrowings at fair value. All the increase was achieved in the first half.   The largest positive contributions were made by holdings in the oil and gas, metals and mining industries. The holdings in cash and overseas bonds also made significant contributions.   During the year there were net sales of companies likely to suffer from the adverse effects of the bursting of the US housing bubble in the United States. This included some companies listed in the United Kingdom and Europe.   The bond holdings were increased and the yen borrowings (with a sterling equivalent of £81.2m) were repaid.
	Earnings per share were 4.53p (3.91p) and a final dividend of 3.20p (2.65p) is being recommended to bring the total to 3.70p (3.15p).
	During the year £54.7m was spent on the repurchase of 16.47m shares representing 5.9% of shares in issue at the start of the financial year. This brings the percentage of shares bought back since powers were granted in 1999 to 32%.
	Certain sectors still look attractive (resources, metals, shipping and some engineers) but the overall assessment of the outlook for the year ahead is uncertain.  Cash balances are available to exploit opportunities in deteriorating markets.

Monks, with total assets of £1.1 billion, invests internationally in order to achieve capital growth. Monks is managed by Baillie Gifford & Co, the independent Edinburgh based fund management group with around £56 billion under management and advice at 3 June 2008.

4 June 2008

- ends -

For further information please contact:

Gerald Smith, Manager    

The Monks Investment Trust PLC         0131 275 2000

Robert O'Riordan                                  0131 275 3181

Baillie Gifford & Co                               07730 412007

Roland Cross, Director

Broadgate Marketing                             020 7726 6111

THE MONKS INVESTMENT TRUST PLC

CHAIRMAN'S STATEMENT

Performance

In the year to 30 April 2008 net asset value per share, with borrowings at fair value, rose by 14.2% and the FTSE World Index in sterling terms fell by 1.4%. All of the increase in net asset value per share was achieved in the first half of the Company's year, during which period the comparative index rose by 4.4%. In the second half, net asset value per share fell by 0.3% and the index fell by 5.6%. The share price ended the year at 348.0p, 15.9% higher than at the end of the previous year and 2.2% off the record high reached in October.

Our holdings in oil and gas producers, oil service companies, mining companies and steelmakers performed particularly strongly, though it was notable that in the second half of the year these companies performed less well despite the oil price reaching a new record high, large increases in iron ore and coal prices, and rising exploration and development spending in the oil and gas industries. We also benefited from a large rise in the value of the Brazilian currency during the year and from holding cash. For the year as a whole, the main disappointment was the poor performance of Japanese property shares. In the second half there was also a significant fall in Asia ex-Japan, the impact of which was mitigated by sales following large gains in the earlier part of the year.

Earnings and Dividend

Earnings per share were 4.53p compared with 3.91p last year, an increase of 15.9%. Pre-tax earnings rose by 30.3% as a result of increased income from shares, bonds and cash and the recovery of VAT paid in previous years. We have exhausted tax losses carried forward and are now paying corporation tax with the result that post-tax earnings rose by only 9.9%.  Excluding the impact of the recovery of VAT, the increase was 2.6% in post-tax earnings and 8.2% in earnings per share. The larger increase on a per share basis is a result of a reduction of 5.0% in the weighted average number of shares outstanding owing to share buy backs.

Monks invests with the aim of achieving capital growth rather than income and all costs are charged to the Revenue Account. As a result, earnings may fluctuate considerably from year to year and the Board has taken this into account in recommending a final dividend of 3.20p compared with 2.65p for the previous year. If approved, this will make the total dividend for the year 3.70p, an increase of 17.5% from the 3.15p paid last year. 

Investment Activity

During the year we made considerable changes to the portfolio and the Managers' Report explains many of these in more detail. Net sales of equities of £162.6m were partially offset by £45.4m of net purchases of bonds, so that net sales of equities and bonds combined amounted to £117.2m. The proceeds of these sales were used to repay all of our yen borrowings and repurchase shares. There was a small decline in the amount of cash held but effective gearing has been reduced, at the year end net current assets (mainly consisting of cash) were well in excess of the fair value of outstanding debt. Equities as a percentage of shareholders' funds were 87.8% and equities and bonds together were 98.1%. 

A motivation for many of the sales was the reduction of exposure to companies likely to suffer adverse effects from the bursting of the housing bubble in the United States, and the likelihood of similar problems occurring in the United Kingdom. The largest net reduction was unsurprisingly made in North America, followed by the UK. Profits were also taken in Asia after a period of rapidly rising share prices in the first half of the Company's year. 

THE MONKS INVESTMENT TRUST PLC

CHAIRMAN'S STATEMENT (Ctd)

Net purchases were made in Continental Europe and in non-Asian Emerging Markets. It should be emphasised, however, that these changes in geographical weightings were the outcome of decisions made to avoid or favour certain types of companies rather than to avoid or favour countries or regions. In general, what a company does and where it does it are more important than where its shares happen to be quoted.

In the second half of the Company's year we formed a negative view on the outlook for sterling and since then the majority of cash balances have been held in other currencies. We also decided not to roll over maturing forward contracts that had been designed to improve the match between the currencies in which we have borrowings and the distribution of assets. Together with the repayment of yen borrowings, these changes leave the Company with all of its borrowings in sterling in the form of existing long-term debentures.

Discount and Buybacks

The discount (at fair value) narrowed from 11.3% to 10.0% 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 not have the luxury of choosing the optimum time to sell some or all of their shares.

During the year to 30 April 2008 £54.7m was spent on the repurchase of 16.47m shares, increasing net asset value per share by 0.7%. If the proposed final dividend is approved, the total amount of money paid to continuing and exiting shareholders for the year (based on the issued share capital at the year end) will be £64.5m. This would be a substantial increase over the equivalent figure of £27.7m for the previous year.

Since the power to buy back shares was first granted in 1999, 123.8m shares have been bought back and cancelled, representing 32% of the share capital at the start of that period. The Board will continue to buy back shares if suitable opportunities appear.

VAT 

Following the rulings in various court cases during the year, VAT is no longer payable on management fees. In addition, the Company will be able to recover some of the VAT paid in previous years. We have recognised £1.2m as a debtor in the accounts in respect of the period from 2000. There could be further recoveries in respect of this period and the period from 1990 to 1996 but the amounts are uncertain. Further information is included in note 3.

Outlook

Despite, or possibly because of, the increasing integration of the global economy the prospects for parts of the world appear very different. In those countries such as the United States, the United Kingdom, Spain, Ireland and Australia, where growth in recent years has been accompanied by, and to varying extents fuelled by, a massive increase in property prices and a matching increase in indebtedness, the most likely outcome is a period of low growth or even contraction. As explained in more detail in the Managers' Report, banks are short of both capital and liquid funds and as a result credit has become much less freely available. 

THE MONKS INVESTMENT TRUST PLC

CHAIRMAN'S STATEMENT (Ctd)

A period of retrenchment, rising savings rates and falling property prices was overdue and is probably necessary to correct the imbalances created in recent years. In the countries in which the majority of the world's population live the situation is very different. The biggest concern here is that unwelcome consequence of too rapid growth, inflation. Here savings are abundant and exceed even the need for funds to support the high levels of investment in productive capacity and infrastructure that are accompanying the rapid growth of their economies. 

In the year ahead we will discover whether this divergence of fortunes can continue or whether we are only witnessing a lag between weakening demand in America and weakening activity in Asia, with knock-on effects on demand for commodities and capital goods, which will have the effect of spreading the impact to Latin America, Europe and beyond. In the longer run there seems little doubt that the economic centre of gravity of the world has shifted back to the East and the driving force of global growth will be rising consumption in China, India and other populous and rapidly developing countries, but it remains to be seen just how far along this road we have already travelled. Our portfolio is currently positioned to benefit from the continuation of global growth, with significant exposure to commodity and energy producers and to the companies that supply these industries.

An immediate concern is that one of the supports for equity markets in recent years, namely a net reduction in the quantity of publicly traded equity as companies have repurchased shares or been taken private, has been kicked away and companies are now raising large amounts of additional capital. Sovereign wealth funds have provided significant amounts of new equity for troubled financial institutions but their appetite is likely to be finite and there is a risk that there will be an overall downward pressure on equity markets. We also see inflation as a greater risk than deflation as the high cost of energy feeds through into other costs. In such circumstances opportunities are likely to arise in equity and fixed income markets to invest our cash into assets at prices that will yield attractive returns over the long run. We begin the year well-placed, with a substantial amount of cash available to invest.

AGM

Following the introduction of the Companies Act 2006, a number of changes to the Articles of Association are proposed. 

I hope shareholders will come to the Annual General Meeting, which will be held on    
5 August 2008 at 11:00am at the RSA. Our Manager will give a short presentation and there will be an opportunity to ask questions.

THE MONKS INVESTMENT TRUST PLC

The following is the unaudited preliminary statement for the year to 30 April 2008 which was approved by the Board on 3 June 2008. The Directors of The Monks Investment Trust PLC are recommending to the Annual General Meeting of the Company to be held on 5 August 2008 the payment of a final dividend of 3.20p net (2.65p net last year) per ordinary share, making a total of 3.70p net (3.15p net last year) per ordinary share for the year ended 30 April 2008.

INCOME STATEMENT

(unaudited)

	For the year ended 30 April 2008				For the year ended 30 April 2007
	Revenue £'000	Capital £'000	Total £'000		Revenue £'000	Capital £'000	Total  £'000
Gains on investments	-	118,594	118,594		-	36,155	36,155
Currency (losses)/gains	-	(67)	(67)		-	5,224	5,224
Income (note 2)	28,735	-	28,735		25,738	-	25,738
Investment management fee	(5,248)	-	(5,248)		(4,903)	-	(4,903)
Recoverable VAT (note 3)	1,164	-	1,164		-	-	-
Other administrative expenses	(1,018)	-	(1,018)		(735)	-	(735)
Net return before finance costs and taxation	23,633	118,527	142,160		20,100	41,379	61,479
Finance costs of borrowings	(7,872)	-	(7,872)		(8,002)	-	(8,002)
Net return on ordinary activities before taxation	15,761	118,527	134,288		12,098	41,379	53,477
Tax on ordinary activities	(3,476)	-	(3,476)		(916)	-	(916)
Net return on ordinary activities after taxation	12,285	118,527	130,812		11,182	41,379	52,561
Net return per ordinary share (note 4)	4.53p	43.68p	48.21p		3.91p	14.49p	18.40p
Dividends paid and proposed per ordinary share (note 5)	3.70p				3.15p

   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 2008

(unaudited)

		30 April 2008		30 April 2007
		£'000		£'000
Fixed assets
Investments		1,011,054		1,009,631
Current assets
Debtors		17,245		7,719
Cash and deposits		88,016		98,450
		105,261		106,169
Creditors
Amounts falling due within one year		(4,997)		(3,421)
Net current assets		100,264		102,748
Total assets less current liabilities		1,111,318		1,112,379
Creditors
Amounts falling due after more than one year (note 6)		(79,516)		(148,942)
Provisions for liabilities and charges
Deferred taxation		(950)		-
Total net assets		1,030,852		963,437
Capital and Reserves
Called-up share capital		13,209		14,033
Share premium		11,100		11,100
Capital redemption reserve		6,189		5,365
Capital reserve - realised		695,683		632,275
Capital reserve - unrealised		273,211		272,795
Revenue reserve		31,460		27,869
Equity shareholders' funds		1,030,852		963,437
Net asset value per ordinary share		386.5p		338.4p
(after deducting borrowings at fair value)
Net asset value per ordinary share		390.0p		343.1p
(after deducting borrowings at par)
Ordinary shares in issue (note 7)		264,179,859		280,652,693

THE MONKS INVESTMENT TRUST PLC

RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS

(unaudited)

For the year ended 30 April 2008

	Share capital £'000	Share premium £'000	Capital redemption reserve £'000	Capital reserve - realised £'000	Capital reserve - unrealised £'000	Revenue reserve £'000	Total shareholders' funds £'000
Shareholders' funds at 1 May 2007	14,033	11,100	5,365	632,275	272,795	27,869	963,437
Net return on ordinary activities after taxation	-	-	-	118,111	416	12,285	130,812
Shares purchased for cancellation	(824)	-	824	(54,703)	-	-	(54,703)
Dividends paid during the year	-	-	-	-	-	(8,694)	(8,694)
Shareholders' funds at 30 April 2008	13,209	11,100	6,189	695,683	273,211	31,460	1,030,852

For the year ended 30 April 2007

	Share capital £'000	Share premium £'000	Capital redemption reserve £'000	Capital reserve - realised £'000	Capital reserve - unrealised £'000	Revenue reserve £'000	Total shareholders' funds £'000
Shareholders' funds at 1 May 2006	14,368	11,100	5,030	519,996	362,574	22,130	935,198
Net return on ordinary activities after taxation	-	-	-	131,158	(89,779)	11,182	52,561
Shares purchased for cancellation	(335)	-	335	(18,879)	-	-	(18,879)
Dividends paid during the year	-	-	-	-	-	(5,443)	(5,443)
Shareholders' funds at 30 April 2007	14,033	11,100	5,365	632,275	272,795	27,869	963,437

  THE MONKS INVESTMENT TRUST PLC

SUMMARISED CASH FLOW STATEMENT (unaudited)
	For the year ended 30 April 2008			For the year ended 30 April 2007
	£'000	£'000			£'000	£'000
Net cash inflow from operating activities		21,486				18,412
Net cash outflow from servicing of finance		(8,222)				(8,027)
Taxation
Overseas tax incurred	(1,080)				(893)
Income tax incurred	(82)				(35)
Total tax paid		(1,162)				(928)
Financial investment
Acquisitions of investments	(454,078)				(386,008)
Disposals of investments	564,380				475,607
Forward currency contracts	130				(2,498)
Currency gains/(losses)	3,171				(2,878)
Net cash inflow from financial investment		113,603				84,223
Equity dividends paid		(8,694)				(5,443)
Net cash inflow before use of liquid resources and financing		117,011				88,237
Liquid resources
Decrease/(increase) in short term deposits	11,555				(65,000)
Net cash inflow/(outflow) from use of liquid resources		11,555				(65,000)
Financing
Shares purchased for cancellation	(54,706)				(18,876)
Bank loans repaid	(81,216)				-
Net cash outflow from financing		(135,922)				(18,876)
(Decrease)/increase in cash		(7,356)				4,361
Reconciliation of net cash flow to movement in net funds/(debt)
(Decrease)/increase in cash in the year		(7,356)				4,361
(Decrease)/increase in short term deposits		(11,555)				65,000
Net cash outflow from bank loans		81,216				-
Exchange movement on short term deposits		8,477				-
Exchange movement on bank loans		(11,758)				10,513
Other non-cash changes		(32)				(33)
Movement in net funds/(debt) in the year		58,992				79,841
Net debt at 1 May		(50,492)				(130,333)
Net funds/(debt) at 30 April		8,500				(50,492)
Reconciliation of net return before finance costs and taxation to net cash inflow from operating activities
Net return before finance costs and taxation		142,160				61,479
Gains on investments		(118,594)				(36,155)
Currency losses/(gains)		67				(5,224)
Amortisation of fixed interest book cost		(632)				(805)
Increase in accrued income		(411)				(823)
Increase in debtors		(1,111)				(81)
Increase in creditors		7				21
Net cash inflow from operating activities		21,486				18,412

THE MONKS INVESTMENT TRUST PLC

DISTRIBUTION OF ASSETS

at 30 April 2008

(unaudited)

				30 April 2008 %		30 April 2007 %
Equities:	United Kingdom			10.3		13.9
	Continental Europe			17.5		13.9
	North America			19.2		25.2
	Japan			6.3		10.7
	Asia Pacific			15.5		15.1
	Other Emerging Markets			12.7		5.9
				81.5		84.7
Bonds:    United Kingdom				5.2		3.8
Overseas				4.4		2.3
Net liquid assets				8.9		9.2
Total assets (before deduction of borrowings)				100.0		100.0

THE MONKS INVESTMENT TRUST PLC

THIRTY LARGEST EQUITY HOLDINGS  at 30 April 2008 (unaudited)
Name	Region		Business		2008				2007
					Value £'000	% of total assets	Value £'000
Baillie Gifford Pacific    Fund		Asia Pacific		Investment fund	79,956	7.2		83,475
Petrobras		Other Emerging Markets		Integrated oil	56,229	5.1		26,277
EOG Resources		North America		Gas exploration and      production	33,765	3.0		22,951
Schlumberger		North America		Oilfield services	32,962	3.0		30,153
National Oilwell Varco		North America		Drilling equipment      manufacturer	25,708	2.3		16,575
CVRD		Other Emerging Markets		General mining	22,306	2.0		11,826
US Steel		North America		Steel producers	21,539	1.9		-
BHP Billiton		Asia Pacific		Diversified resources	18,900	1.7		11,844
Reliance Industries		Asia Pacific		Petrochemical firm	18,380	1.7		12,632
Blackrock World Mining		United Kingdom		Investment trust	17,780	1.6		-
Diamond Offshore    Drilling		North America		Offshore drilling	17,722	1.6		15,785
Seadrill		Continental Europe		Contract drilling services	17,654	1.6		-
ArcelorMittal		Continental Europe		Steel company	16,333	1.5		-
Atlas Copco		Continental Europe		Industrial compressors and    mining equipment	16,136	1.5		19,413
Cameron International		North America		Oilfield equipment    manufacturer	15,712	1.4		-
Maritime Capital Partners		Asia Pacific		Marine transportation	15,450	1.4		-
Pacific Basin Shipping		Asia Pacific		Marine transportation	15,328	1.4		-
Rolls Royce Group		United Kingdom		Aerospace equipment    provider	14,024	1.3		-
Aker Solutions		Continental Europe		Engineering and construction    services	12,795	1.1		-
Norilsk Nickel		Other Emerging Markets		Nonferrous metals	12,678	1.1		9,057
Richemont		Continental Europe		Luxury goods	11,839	1.1		-
Rio Tinto		United Kingdom		Diversified mining group	11,820	1.1		12,292
Komatsu		Japan		Mining and construction    equipment	11,539	1.0		-
Nestlé		Continental Europe		Food  and consumer products	11,164	1.0		7,153
Alstom		Continental Europe		Power generation and    transport equipment	11,156	1.0		-
Imperial Energy		Other Emerging Markets		Oil and gas exploration and    production	10,880	1.0		-
Vallourec		Continental Europe		Specialty steel pipe    manufacturers	10,695	1.0		-
Canon		Japan		Copiers/printers and cameras	10,516	1.0		11,823
Aggreko		United Kingdom		Temporary power units	10,504	0.9		-
Intesa Sanpaolo		Continental Europe		Retail banking	10,333	0.9		11,515
					591,803	53.4		302,771

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 2008 have been prepared on the basis of the accounting policies set out in the Company's Annual Financial Statements at 30 April 2007.
			2008					2007
			£'000					£'000
2.	Income
	Income from investments		23,482					21,905
	Other income		5,253					3,833
			28,735					25,738
3.	Recoverable VAT
	In 2004 the Association of Investment Companies (the 'AIC'), together with JPMorgan Claverhouse Investment Trust, launched a case against HM Revenue & Customs ('HMRC') to challenge whether Value Added Tax ('VAT') should be charged on investment management fees. In June 2007 the European Court of Justice found in favour of the AIC.  Since then HMRC has accepted that management fees should be exempt from VAT and has acknowledged its liability to pay claims in respect of VAT borne by investment companies. No VAT has been charged on management fees since July 2007 and the Manager has submitted repayment claims to HMRC for the periods from 2000 to 2007 and from 1990 to 1996. The Board is satisfied that at least £1.2m is certain to be recovered by the Manager on behalf of the Company in respect of the period 2000 to 2007 and therefore this amount has been recognised in the current year.  The Board however considers that there are too many uncertainties to allow any reasonable estimate of any further amounts potentially recoverable over both periods. The Company will receive from the Manager any interest paid by HMRC on the amounts eventually recovered.
4.	Net return per ordinary share
			2008					2007
	Revenue return		4.53p					3.91p
	Capital return		43.68p					14.49p
	Total return		48.21p					18.40p
	Revenue return per ordinary share is based on the net revenue on ordinary activities after taxation of £12,285,000 (2007 - £11,182,000) and on 271,319,153 (2007 - 285,637,104) 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 £118,527,000 (2007 - £41,379,000) and on  271,319,153 (2007 - 285,637,104) 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.
5.	Ordinary Dividends
		2008		2007		2008 £'000				2007 £'000
	Amounts recognised as distributions in the period:
	Previous year's final (paid 6 August 2007)	2.65p		1.40p		7,371				4,014
	Interim (paid 31 January 2008)	0.50p		0.50p		1,323				1,429
		3.15p		1.90p		8,694				5,443
	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 842 of the Income and Corporation Taxes Act 1988 are considered. The revenue available for distribution by way of dividend for the year is £12,285,000 (2007 - £11,182,000).

THE MONKS INVESTMENT TRUST PLC

NOTES (Ctd)

(unaudited)

5.	Ordinary Dividends (Ctd)
		2008		2007		2008 £'000		2007 £'000
	Dividends paid and proposed in the period:
	Adjustment to previous year's final dividend re shares bought back					(66)		(9)
	Interim dividend per ordinary share (paid 31 January 2008)	0.50p		0.50p		1,323		1,429
	Proposed final dividend per ordinary share (payable 8 August 2008)	3.20p		2.65p		8,454		7,437
		3.70p		3.15p		9,711		8,857
	If approved the final dividend will be paid on 8 August 2008 to all shareholders on the register at the close of business on 11 July 2008. The ex-dividend date is 9 July 2008.
6.	During the year the Company repaid ¥16.6bn borrowings at a cost of £81.2m. The fair value of borrowings at 30 April 2008 was £89,260,000 (2007 - £162,651,000).
7.	In the year to 30 April 2008 the Company bought back 16,472,834 ordinary shares with a nominal value of £824,000 at a total cost of £54,703,000. At 30 April 2008 the Company had authority to buy back a further 30,929,969 ordinary shares.
8.	The Report and Accounts will be available on the Managers' website www.bailliegifford.com on or around  27 June 2008.
9.	The financial information set out above does not constitute the Company's statutory accounts for the year ended  30 April 2008. The financial information for 2007 is derived from the statutory accounts for 2007 which have been delivered to the Registrar of Companies. The Auditors have reported on the 2007 accounts; their report was unqualified and it did not contain a statement under section 237(2) or (3) of the Companies Act 1985. The statutory accounts for 2008 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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