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 Â£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 â€¢ Net gearing was eliminated during the year. â€¢ Increased investment in Europe, Pacific and Emerging Markets and a reduction in the US. â€¢ 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. â€¢ 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. â€¢ 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 Â£164m with 9% of total assets in cash. Borrowings at fair value stand at Â£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 Â£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 Â£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 Â£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, Â£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 Â£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 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Â£'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 Â£'000 Â£'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 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Â£'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 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Â£'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 Â£'000 Â£'000 Â£'000 Â£'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 Â£'000 assets Â£'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 Â£'000 Â£'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 Â£11,182,000 (2006 - Â£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 Â£41,379,000 (2006 - Â£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 Â£'000 Â£'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 Â£11,182,000 (2006 - Â£6,352,000). 2007 2006 2007 2006 Â£'000 Â£'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 Â£162,651,000 (2006 - Â£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 Â£335,000 at a total cost of Â£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

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