Final Results
Monks Investment Trust PLC
06 June 2007
THE MONKS INVESTMENT TRUST PLC
Results for the year to 30 April 2007
The share price ended the year at an all time high of £3 with net asset value
(NAV) per share rising by 5.9%, ahead of a 4.7% increase in the FTSE World Index
(in sterling terms).
The second half was much stronger than the first half: NAV per share rose by
12.5% while the index rose by 6.2%. (In the first half NAV fell by 5.9% while
the index fell by 1.3%).
Investment activity
• Net gearing was eliminated during the year.
• Increased investment in Europe, Pacific and Emerging Markets and a
reduction in the US.
• Investment in oil and gas producers reduced and investment in oil service
companies increased. The latter group now account for over half of the
17% oil and gas sector weighting.
• A reduction in exposure to the Japanese market from 21% of total assets
to 11% with the number of holdings falling from 25 to 16.
• Sterling, euro and US dollar bonds were sold and purchases were made of
higher yielding Brazilian local currency index-linked bonds. Cash and
fixed interest investments account for £164m with 9% of total assets
in cash. Borrowings at fair value stand at £163m.
Outlook
Growth remains strong throughout much of the world and suitable long-term equity
investment opportunities are identifiable but companies dependent on consumption
and increasing indebtedness in America and the UK may suffer. Abnormally low
interest rates on risky loans and large scale capital raising by private equity
funds have created a potentially unstable situation unless the combination of
low interest rates and high levels of profitability can be maintained, which
seems unlikely in the long run. The policy remains to invest internationally to
achieve capital growth but our near term caution on the outlook for markets is
reflected by absence of net gearing.
Earnings and Dividend
Earnings per share were 3.91p (2.2p) and a final dividend of 2.65p (1.4p) is
being recommended to bring the total to 3.15p (1.9p).
Buybacks
During the year 2.3% of shares issued were bought back bringing the percentage
of share bought back since 1999 to 28%.
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 £53.6 billion
under management and advice at 4 June 2007.
1.With borrowings at fair value
- 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
Mike Lord, Director
Broadgate Marketing 020 7726 6111
THE MONKS INVESTMENT TRUST PLC
CHAIRMAN'S STATEMENT
Performance
In the year to 30 April 2007 net asset value per share, with borrowings at fair
value, rose by 5.9%. The FTSE World Index in sterling terms rose by 4.7%. The
performance in the two halves of the Company's year was considerably different.
In the first half, net asset value per share fell by 5.9% and the Index fell by
1.3%, while in the second half, net asset value per share rose by 12.5% and the
Index rose by 6.2%. The share price ended the Company's year at a new all time
high of 300.2p, an increase of 3.5% on the price at the end of the previous
year. The share price rose less than net asset value per share as the discount
to net asset value at which shares traded in the market widened despite the
repurchase and cancellation of 2.3% of the shares in issue at the start of the
year.
In the first half there were significant falls in the two areas that made the
largest contributions to the good performance of the previous year. These were
the large positions in Japan and in the oil sector. While the Japanese market
remained lacklustre in the final six months of the year, there was an
improvement in the contribution from our holdings in that market, and an
increased weighting in oil services companies within a broadly unchanged
position in energy-related investments also proved beneficial. Two factors
common to both halves of the Company's year were a positive contribution from
holdings in the Far East excluding Japan and the strength of sterling against
almost all other currencies, which reduced the return to sterling-based
investors from investment in international markets.
Earnings and Dividend
Earnings per share were 3.91p compared with 2.20p last year, an increase of
77.7%. This change arose largely as a result of a big increase in income from
holdings of bonds and cash combined with a much smaller increase in the main
items of expense, the investment management fee and loan interest. As Monks
invests with the aim of achieving capital growth rather than income and all
costs are charged to the Revenue Account, earnings may fluctuate considerably
from year to year and the Board has taken these factors into account in
recommending a final dividend of 2.65p compared with 1.40p. If approved, this
will make the total dividend for the year 3.15p, an increase of 65.8% from the
1.90p paid last year.
Investment Activity
During the year we made significant sales of both equities and fixed income
investments amounting to £111.8m. The largest reductions were in Japanese and
North American equities and there was also a modest reduction in the UK. In
equities the largest net increase was in Europe and there were also net
increases in the Far East excluding Japan and other Emerging Markets. In fixed
interest there were net sales of sterling, euro and US dollar bonds, which were
partially offset by purchases of higher yielding Brazilian local currency
index-linked bonds. The effect of these sales was to increase the proportion of
assets held in cash deposits and to increase the income from the fixed income
portfolio despite the reduction in its size. At the end of the year cash and
fixed income investments were approximately equal to borrowings at fair value.
Steps were taken to address the mismatch between the currencies in which the
Company's investments and its borrowings are denominated. Through the use of
forward currency contracts, borrowings and investments are now approximately
equally distributed by currency, reflecting no particularly strong view on the
likely direction of future movements in currencies. At times we have had views
on currencies and on some of these occasions we have either engaged in hedging
to protect the value of our investments or moved part of our cash balance from
one currency to another to achieve a similar effect.
Discount, Buybacks and Buyback Policy
During the year the discount widened from 9.3% to 11.3%. For shareholders who
have no desire to sell their shares in the foreseeable future the fluctuation of
the discount is a matter of largely academic interest, on a par with the weather
forecast for a place they have no intention of visiting, but for those
shareholders who may need to realise some or all of their investment, the
possibility that they might only be able to do so by selling their shares at
substantially less than their net asset value is a more pressing concern. Since
the price at which the shares trade is determined by the balance between those
willing to buy and those willing to sell at a given price, an investment trust
can, in principle, prevent the discount from widening beyond a predetermined
amount by buying back shares. In practice, however, under certain market
conditions this could involve the Company repurchasing so much of its
outstanding share capital that it would be forced to liquidate its underlying
investments at disadvantageous prices and the expense ratio would rise to an
unacceptable degree. In such circumstances the interests of continuing
shareholders would be harmed. The Board has to take into account the interests
of all shareholders when considering its policy on buybacks and seeks to adopt
an approach that is equitable.
During the year to 30 April 2007, £18.9m was spent on the repurchase of 6.71m
shares at discounts ranging between 10.1% and 14.3%. This increased net asset
value per share by 0.3% and, 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 £27.7m, an amount
comfortably in excess of the Company's earnings during the period.
Since the power to buy back shares was first granted in 1999, 107.3m shares have
been bought back and cancelled, representing 27.7% of the issued share capital
at the start of that period. The Board will continue to buy back shares if
suitable opportunities appear.
Outlook
One of the most remarkable features of the last year was the strong performance
of UK equities during a period when sterling was also exceptionally strong
against the currencies in which a large proportion of the profits of companies
quoted on the London Stock Exchange is earned. As a result, returns for a
sterling-based investor from investment in overseas markets compared
unfavourably with the rise in the FTSE All-Share Index. Had exchange rates not
moved as they did, relative performance would have been reversed, as in local
currency terms the major international markets, with the notable exception of
that of Japan, rose by more than the UK market. While not wishing to enter into
speculation about the future course of exchange rates, recognition of the
unusual nature of the recent past cautions against extrapolation of the relative
returns to a sterling-based investor during this period into the future. Our
policy will remain to invest internationally to achieve capital growth.
By the end of the Company's year it had become apparent that global economic
growth was continuing at a robust pace, despite predictions that the bursting of
a bubble in the US housing market would have dire consequences for growth
elsewhere. For much of the world the problems appear to be those associated with
excessively rapid growth, notably a rise in inflationary pressures, and the
general trend in interest rates has been upward. It remains to be seen whether
there will be a sustained retrenchment on the part of American consumers as a
whole and also, if there is, whether this really matters, given the powerful
driving forces of Chinese and Indian economic development and signs of life in
the previously moribund parts of Europe. It may, however, be extremely relevant
for the prospects of individual companies. For example, it may well be that
those companies that have prospered on the back of the willingness of
individuals in Britain, America and a handful of other countries to become ever
more indebted will experience tougher conditions, while those more sensitive to
the need to make up for years of under investment in mining, oil and gas
extraction or to the growth of aviation in Asia will struggle to keep pace with
demand.
An area of concern is the very small extra return currently demanded for lending
to borrowers who, based on historical patterns, may be unable to meet their
obligations. This willingness to lend at low rates of interest is also affecting
equity markets as private equity firms have also raised a lot of money, and the
low rates of interest at which they can borrow have given them an enormous
amount of 'firepower' with which to launch bids. Quoted companies are also
making an unusually large number of takeovers financed by cash rather than
through the issuance of shares. While this continues, there is likely to be
support for those equity markets in which there is a reasonable probability that
a takeover bid will succeed. The continuation of this state of affairs, however,
requires the continued willingness of lenders to lend at rates that do not
appear to compensate them for risk that they will not be repaid in full; and the
ability of highly leveraged companies to meet their obligations is dependent on
the maintenance of profitability that is, in many cases, already at a record
level. Against this background a cautious approach to the use of gearing seems
appropriate. Net cash (after deducting borrowings at fair value) at 30 April
2007 was 0.1% of net assets.
AGM
Following changes to Company Law, the Board is seeking shareholder approval to
amend the Company's Articles of Association to widen the indemnity which the
Directors and other officers are entitled to receive from the Company. Further
details of the proposed changes are set out in the Directors Report.
I hope shareholders will come to the Annual General Meeting, which will be held
on 1 August at 11am at the RSA, 8 John Adam Street, London. 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
2007 which was approved by the Board on 5 June 2007. The Directors of The Monks
Investment Trust PLC are recommending to the Annual General Meeting of the
Company to be held on 1 August 2007 the payment of a final dividend of 2.65p net
(1.40p net last year) per ordinary share, making a total of 3.15p net (1.90p
net last year) per ordinary share for the year ended 30 April 2007.
INCOME STATEMENT
(unaudited)
For the year ended For the year ended
30 April 2007 30 April 2006
Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
Gains on investments - 36,155 36,155 - 297,083 297,083
Currency gains/(losses) - 5,224 5,224 - (5,989) (5,989)
Income (note 2) 25,738 - 25,738 20,085 - 20,085
Investment management fee (4,903) - (4,903) (4,506) - (4,506)
Other administrative expenses (735) - (735) (937) - (937)
Net return before finance costs
and taxation 20,100 41,379 61,479 14,642 291,094 305,736
Finance costs of borrowings (8,002) - (8,002) (7,443) - (7,443)
Net return on ordinary activities
before taxation 12,098 41,379 53,477 7,199 291,094 298,293
Tax on ordinary activities (916) - (916) (847) - (847)
Net return on ordinary activities
after taxation 11,182 41,379 52,561 6,352 291,094 297,446
Net return per ordinary share
(note 3) 3.91p 14.49p 18.40p 2.20p 100.75p 102.95p
Dividends paid and proposed per
ordinary share (note 4) 3.15p 1.90p
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 2007
(unaudited)
30 April 2007 30 April 2006
£'000 £'000
Fixed assets
Investments 1,009,631 1,084,498
Current assets
Debtors 7,719 12,024
Cash and deposits 98,450 29,089
106,169 41,113
Creditors
Amounts falling due within one year (note 5) (3,421) (30,991)
Net current assets 102,748 10,122
Total assets less current liabilities 1,112,379 1,094,620
Creditors
Amounts falling due after more than one year (148,942) (159,422)
Total net assets 963,437 935,198
Capital and Reserves
Called-up share capital 14,033 14,368
Share premium 11,100 11,100
Capital redemption reserve 5,365 5,030
Capital reserve - realised 632,275 519,996
Capital reserve - unrealised 272,795 362,574
Revenue reserve 27,869 22,130
Equity shareholders' funds 963,437 935,198
Net asset value per ordinary share 338.4p 319.6p
(after deducting borrowings at fair value)
Net asset value per ordinary share 343.1p 325.3p
(after deducting borrowings at par)
THE MONKS INVESTMENT TRUST PLC
RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
(unaudited)
For the year ended 30 April 2007
Capital Capital Capital Total
redemption reserve - reserve - shareholders'
Share Share reserve realised unrealised Revenue funds
capital premium reserve
£'000 £'000 £'000 £'000 £'000 £'000 £'000
Shareholders' funds at
1 May 2006
14,368 11,100 5,030 519,996 362,574 22,130 935,198
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
For the year ended 30 April 2006
Capital Capital Capital Total
redemption reserve - reserve - shareholders'
Share Share reserve realised unrealised Revenue funds
capital premium reserve
£'000 £'000 £'000 £'000 £'000 £'000 £'000
Shareholders' funds at
1 May 2005 14,568 11,100 4,830 468,408 132,270 20,705 651,881
Return on ordinary
activities after
taxation - - - 60,790 230,304 6,352 297,446
Shares purchased for
cancellation (200) - 200 (9,202) - - (9,202)
Dividends paid during
the year - - - - - (4,927) (4,927)
Shareholders' funds at
30 April 2006 14,368 11,100 5,030 519,996 362,574 22,130 935,198
THE MONKS INVESTMENT TRUST PLC
SUMMARISED CASH FLOW STATEMENT
(unaudited)
For the year ended For the year ended
30 April 2007 30 April 2006
£'000 £'000 £'000 £'000
Net cash inflow from operating activities 17,484 11,890
Net cash outflow from servicing of finance (8,027) (6,971)
Net cash inflow/(outflow) from financial investment 84,223 (96,338)
Equity dividends paid (5,443) (4,927)
Net cash inflow/(outflow) before use of liquid resources
and financing 88,237 (96,346)
Net cash (outflow)/inflow from use of liquid resources (65,000) 18,000
Financing
Shares purchased for cancellation (18,876) (9,202)
Bank loans drawn down - 78,866
Net cash (outflow)/inflow from financing (18,876) 69,664
Increase/(decrease) in cash 4,361 (8,682)
Reconciliation of net cash flow to movement in net debt
Increase/(decrease) in cash in the year 4,361 (8,682)
Increase/(decrease) in short term deposits 65,000 (18,000)
Net cash inflow from bank loans - (78,866)
Exchange movement on bank loans 10,513 (1,105)
Other non-cash changes (33) (32)
Movement in net debt in the year 79,841 (106,685)
Net debt at 1 May (130,333) (23,648)
Net debt at 30 April (50,492) (130,333)
Reconciliation of net return before finance costs and
taxation to net cash inflow from operating activities
Net return on ordinary activities before finance costs and
taxation 61,479 305,736
Gains on investments (36,155) (297,083)
Currency (gains)/ losses (5,224) 5,989
Amortisation of fixed interest book cost (805) (22)
Changes in debtors and creditors (883) (1,568)
Overseas tax (893) (779)
Increase in UK income tax recoverable (35) (383)
Net cash inflow from operating activities 17,484 11,890
THE MONKS INVESTMENT TRUST PLC
DISTRIBUTION OF ASSETS
at 30 April 2007
(unaudited)
30 April 2007 30 April 2006
% %
Equities: United Kingdom 13.9 13.1
Continental Europe 13.9 9.6
North America 25.2 32.4
Japan 10.7 21.3
Asia Pacific 15.1 11.1
Other Emerging Markets 5.9 5.9
84.7 93.4
Bonds: United Kingdom 3.8 4.3
Overseas 2.3 1.4
Net liquid assets 9.2 0.9
Total assets (before deduction of borrowings) 100.0 100.0
THE MONKS INVESTMENT TRUST PLC
THIRTY LARGEST EQUITY HOLDINGS
at 30 April 2007
(unaudited)
2007 2006
Name Region Business
% of
Value total Value
£'000 assets £'000
Baillie Gifford Pacific Asia Pacific Investment fund 83,475 7.5 75,013
Fund
Schlumberger North America Oilfield services 30,153 2.7 12,931
Petrobras Other Emerging Markets Integrated oil 26,277 2.4 34,905
EOG Resources North America Natural gas 22,951 2.1 24,120
Baillie Gifford Japanese Japan Investment fund 20,253 1.8 17,733
Smaller Companies Fund
Atlas Copco Continental Europe Engineering 19,413 1.8 10,940
Todco North America Drilling services 17,783 1.6 -
Investor Continental Europe Investment company 17,539 1.6 8,017
Baillie Gifford British United Kingdom Small companies fund 16,620 1.5 10,015
Smaller Companies Fund
National Oilwell Varco North America Drilling rigs manufacturer 16,575 1.5 -
Diamond Offshore North America Offshore drilling 15,785 1.4 -
Drilling
Svenska Handelsbanken Continental Europe Retail banking 14,552 1.3 10,240
Suncor Energy North America Integrated oil 14,424 1.3 35,246
Ensco Intl North America Drilling services 13,787 1.2 -
Merrill Lynch World United Kingdom Investment trust 13,251 1.2 -
Mining Trust
Moody's North America Bond rating agency 12,820 1.2 17,972
POSCO Asia Pacific Steel mill operator 12,753 1.2 -
Reliance Industries Asia Pacific Petrochemical firm 12,632 1.1 -
Rio Tinto United Kingdom General mining 12,292 1.1 -
BHP Billiton Asia Pacific Diversified resources 11,844 1.1 11,855
CVRD Other Emerging Markets General mining 11,826 1.1 -
Canon Japan Copiers and cameras 11,823 1.1 17,330
Intesa Sanpaolo Continental Europe Retail banking 11,515 1.0 -
GlaxoSmithKline United Kingdom Pharmaceuticals 11,497 1.0 12,354
Vietnam Enterprise and Asia Pacific Investment fund 11,291 1.0 -
Investment Fund
Brambles Asia Pacific Business support services 11,127 1.0 -
TMK Other Emerging Markets Pipe production 10,924 1.0 -
Infosys Technologies Asia Pacific Business consulting and 10,250 0.9 -
outsourcing services
Asahi Glass Japan Glass 10,168 0.9 11,620
Nissan Motor Japan Car manufacturer 10,062 0.9 14,274
515,662 46.5 324,565
THE MONKS INVESTMENT TRUST PLC
NOTES
(unaudited)
1. The financial statements for the year to 30 April 2007 have been prepared on the basis of the accounting
policies set out in the Company's Annual Financial Statements at 30 April 2006.
2007 2006
£'000 £'000
2. Income
Income from investments 21,905 18,120
Other income 3,833 1,965
25,738 20,085
3. Return per ordinary share
Revenue return 3.91p 2.20p
Capital return 14.49p 100.75p
Revenue return per ordinary share is based on the net revenue on ordinary activities after taxation of
£11,182,000 (2006 - £6,352,000) and on 285,637,104 (2006 - 288,939,679) 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 £41,379,000
(2006 - £291,094,000) and on 285,637,104 (2006 - 288,939,679) 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.
4. Ordinary Dividends
2007 2006 2007 2006
£'000 £'000
Amounts recognised as distributions in the
period:
Previous year's final (paid 4 August 2006) 1.40p 1.20p 4,014 3,490
Interim (paid 31 January 2007) 0.50p 0.50p 1,429 1,437
1.90p 1.70p 5,443 4,927
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 £11,182,000 (2006
- £6,352,000).
2007 2006 2007 2006
£'000 £'000
Dividends paid and proposed in the period:
Adjustment to provision for previous year's
final dividend re shares bought back - - (9) (6)
Interim dividend per ordinary share (paid 31
January 2007) 0.50p 0.50p 1,429 1,437
Proposed final dividend per ordinary share
(payable 6 August 2007) 2.65p 1.40p 7,437 4,023
3.15p 1.90p 8,857 5,454
If approved the final dividend will be paid on 6 August 2007 to all shareholders on the register at the
close of business on 13 July 2007. The ex-dividend date is 11 July 2007.
THE MONKS INVESTMENT TRUST PLC
NOTES (Ctd)
(unaudited)
5. Loans and debentures include two 5 year fixed rate yen loans of Y8,200 million and Y8,400 million maturing
on
6 December 2010 and 13 December 2010 respectively. The fair value of borrowings at 30 April 2007 was
£162,651,000 (2006 - £176,276,000).
6. In the year to 30 April 2007 the Company bought back 6,707,602 ordinary shares with a nominal value of
£335,000 at a total cost of £18,879,000. At 30 April 2007 the Company had authority to buy back a further
36,899,018 ordinary shares.
7. The Report and Accounts will be available on the Managers' website www.bailliegifford.com on or around
29 June 2007.
8. The financial information set out above does not constitute the Company's statutory accounts for the year
ended
30 April 2007. The financial information for 2006 is derived from the statutory accounts for 2006 which
have been delivered to the Registrar of Companies. The Auditors have reported on the 2006 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 2007 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.
None of the views expressed in this document should be construed as advice to buy or sell a particular
investment.
This information is provided by RNS
The company news service from the London Stock Exchange
Friday, 22nd November 2024
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