Half Yearly Report

RNS Number : 4691D

Monks Investment Trust PLC

02 December 2009

 



THE MONKS INVESTMENT TRUST PLC

Half-Yearly Results to 31 October 2009

Monks benefited from the strength of markets: net asset value per share rose by 20.8% over 6 months and was up 30.4% over a year. Over the same periods, the FTSE World Index was up 12.4% and 16.5% respectively. The Company's share price rose by 12.4% over 6 months and 26.6% over a year.

• Strong gains were produced by holdings in Emerging Markets, energy related companies and bonds issued by banks.

• During the period there was net investment of £143m into equities, funded by cash and a net reduction of £75.2m in bonds.  

• Earnings were down from 4.17p to 2.25p, partly due to the earlier period benefiting from the recovery of VAT paid in previous years. A dividend of 0.5p has been declared (1.0p).

• There are encouraging signs concerning the outcome of exceptional monetary and fiscal policies. The Managers believe that growth may be restrained in Developed Markets. Prospects appear better for some Emerging Markets and parts of the world that entered the crisis with high levels of saving, sound public finances and well regulated financial systems. However, investment opportunities are likely to arise in both areas. 

• Over five years the total share price return (capital and dividends) was 60.6% while the FTSE World Index return on the same basis was 36.9%.     

2 December 2009

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 £53 billion under management and advice as at 1 December 2009.

Past performance is not a guide to future performance. The value of an investment in Monks and any income from it is not guaranteed and may go down as well as up and investors may not get back the amount invested. You should view your investment as long term. 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. You can find up to date performance information about Monks at www.monksinvestmenttrust.co.uk

- ends -

For further information please contact:

James Budden

Baillie Gifford & Co                              07507201208

Roland Cross, Director

Broadgate Marketing                            020 7726 6111

The following is the unaudited Half-Yearly Financial Report for the six months to 31 October 2009.

THE MONKS INVESTMENT TRUST PLC

Half-Yearly Financial Report 31 October 2009

Responsibility Statement

We confirm that to the best of our knowledge:

• the condensed set of financial statements has been prepared in accordance with the Accounting Standards Board's statement 'Half-Yearly Financial Reports';

• the Half-Yearly Management Report includes a fair review of the information required by Disclosure and Transparency Rules 4.2.7R (indication of important events during the first six months, and their impact on the financial statements, and a description of principal risks and uncertainties for the remaining six months of the year); and

• the Half-Yearly Financial Report includes a fair review of the information required by Disclosure and Transparency Rules 4.2.8R (disclosure of related party transactions and changes therein).

By order of the Board

J G D Ferguson

Chairman

2 December 2009

THE MONKS INVESTMENT TRUST PLC

Half-Yearly Management Report to 31 October 2009

Results

Over the six months to 31 October, net asset value, with borrowings deducted at fair value, rose by 20.8%, from 255.0p to 308.1p, at which level it was 30.4% above the figure twelve months ago. The FTSE World Index, our principal comparative index, was up 12.4% over six months and 16.5% over a year. Over the same periods, the Company's share price rose by 12.4% and 26.6% respectively.

Earnings per share were 2.25p, down from 4.17p in the corresponding period a year ago. A decrease in dividend income was the main reason for the change in earnings, but it is also the case that the 4.17p for the earlier period includes an amount for the recovery of VAT paid in previous years together with interest thereon and excluding this the figure would have been 3.40p. The Board has declared an interim dividend of 0.50p, to be paid in January 2010 and, as mentioned in the most recent Annual Report, a second interim payment may also be made prior to the Company's year end. 

On a number of measures the current recession is the worst since the end of the Second World War. Unemployment has risen around the world, capacity stands idle, the volume of world trade has declined and large parts of the banking system have come close to the brink of failure, giving rise to concerns of a return to the sort of economic conditions that prevailed during the nineteen thirties. Despite this rather uninspiring background, a combination of extraordinary monetary policy measures and massive fiscal stimulus appears, for the moment at least, to have succeeded in re-invigorating growth in China and other leading Emerging Market economies, stabilising the Western banking system and restoring confidence to financial markets. This has been beneficial for our portfolio with strong gains coming from holdings in Emerging Markets, energy-related companies and bonds issued by banks. 

The best returns were from Emerging Markets, notably the Brazilian market which rose by 45.4% in sterling terms. Of the major stockmarkets of the Developed World, the best performing for a sterling based investor was the UK, where the FTSE All Share rose by 18.9%, and the worst was Japan, where the market was flat. Sterling strengthened against the US dollar (and currencies linked to the dollar) but weakened against a number of other freely floating currencies such as the Brazilian real, Australian dollar and Norwegian krone and was little changed against the euro.

Investment Changes

We made a net addition to equities of £143.0m and a net reduction to bonds of £75.2m, as we sold corporate bonds purchased at distressed valuations in earlier periods into a recovering market and added to equities. Within equities net additions were made in all regions with the largest net additions being in Asia excluding Japan and other Emerging Markets. Net sales of bonds were made in all regions with the exception of Brazil where there was no change.

The analysis below shows the distribution of investments by geography and industrial sector at the end of October and the end of April. Cash and fixed interest holdings exceeded the value of borrowings at the end of the first half of the year but by a much smaller margin than at the start of the period.

Outlook

We are living at a time of a great economic experiment, as the current combination of monetary and fiscal policies has never been applied as aggressively before and the circumstances that have prompted these measures are also extreme. The closest parallel in terms of the use of fiscal stimulus and unconventional monetary policy in response to the bursting of a property bubble and consequent banking crisis is Japan in the 1990s and early 2000s. This is a discouraging precedent given the limited impact of these measures in Japan. So far the signs are relatively encouraging, and it is possible that the earlier and more aggressive application of the same techniques in North America, the United Kingdom and a number of European countries will result in a much more successful outcome this time around. It seems unwise, however, to base one's entire investment strategy on a rapid return to the way things were before the crisis and it seems more probable that growth will be restrained by the need to address the legacy of a long period of inadequate saving and debt-financed consumption in these countries. The increased indebtedness of governments is also extremely troubling.

The prospects appear much better for those parts of the world that entered the crisis with high levels of saving, sound public finances and well regulated financial systems. A number of the larger Emerging Markets score highly in this respect. Fortunately the weight of these countries in global GDP is now large and their economies have generally responded well to fiscal and monetary stimulus, thus providing a useful counterbalance to contraction in activity elsewhere. 

The divergence in prospects between the larger Developed Market economies and their Emerging counterparts has been reflected in the relative performance of equities and bonds in their respective markets and, where allowed, in changes in exchange rates. The most widely held view is probably that this divergence in performance will continue. There are many good reasons for believing that this will prove correct, but investment opportunities are also likely to arise in Developed Markets. 

The principal risks and uncertainties facing the Company are set out on the inside front cover of this report.

THE MONKS INVESTMENT TRUST PLC

INCOME STATEMENT 

(unaudited)

	For the six months ended 31 October 2009				For the six months ended 31 October 2008			For the year ended 30 April 2009
	Revenue £'000	Capital £'000		Total £'000	Revenue £'000	Capital £'000	Total £'000	Revenue £'000	Capital £'000	Total £'000
Gains/(losses) on sales of investments	-	35,572		35,572	-	(6,019)	(6,019)	-	(83,336)	(83,336)
Changes in fair value of investments	-	120,736		120,736	-	(388,331)	(388,331)	-	(278,092)	(278,092)
Currency(losses)/gains	-	(7,446)		(7,446)	-	(1,352)	(1,352)	-	6,011	6,011
Income from investments and interest receivable	12,643	-		12,643	18,789	-	18,789	33,890	-	33,890
Other income	22	-		22	34	-	34	59	-	59
Investment management fee (note 3)	(1,928)	-		(1,928)	(1,975)	-	(1,975)	(3,637)	-	(3,637)
Recovered VAT (note 4)	-	-		-	1,738	-	1,738	1,738	-	1,738
Other administrative expenses	(480)	-		(480)	(474)	-	(474)	(914)	-	(914)
Net return before finance costs and taxation	10,257	148,862		159,119	18,112	(395,702)	(377,590)	31,136	(355,417)	(324,281)
Finance costs of borrowings	(3,491)	-		(3,491)	(3,492)	-	(3,492)	(6,982)	-	(6,982)
Net return on ordinary activities before taxation	6,766	148,862		155,628	14,620	(395,702)	(381,082)	24,154	(355,417)	(331,263)
Tax on ordinary activities	(853)	-		(853)	(3,619)	-	(3,619)	(5,770)	-	(5,770)
Net return on ordinary activities after taxation	5,913	148,862		154,775	11,001	(395,702)	(384,701)	18,384	(355,417)	(337,033)
Net return per ordinary share (note 5)	2.25p		56.52p	58.77p	4.17p	(150.05p)	(145.88p)	6.97p	(134.79p)	(127.82p)
Note: Dividends per share paid and payable in respect of the period (note 6)	0.50p				1.00p			6.00p

The Total column of this 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

BALANCE SHEET

 (unaudited)

	At 31 October 2009	At 31 October 2008	At 30 April 2009
	£'000	£'000	£'000
Fixed assets
Investments	890,596	648,205	664,627
Current assets
Debtors	5,672	18,561	9,438
Cash and short term deposits	11,751	55,843	98,958
	17,423	74,404	108,396
Creditors
Amounts falling due within one year	(8,209)	(7,098)	(11,895)
Net current assets	9,214	67,306	96,501
Total assets less current liabilities	899,810	715,511	761,128
Creditors
Amounts falling due after more than one year:
Debenture stocks	(79,565)	(79,533)	(79,549)
Provisions for liabilities and charges
Deferred taxation	-	(254)	(823)
Total net assets	820,245	635,724	680,756
Capital and reserves
Called-up share capital	13,140	13,182	13,182
Share premium	11,100	11,100	11,100
Capital redemption reserve	6,258	6,216	6,216
Capital reserve	758,245	571,202	611,487
Revenue reserve	31,502	34,024	38,771
Shareholders' funds	820,245	635,724	680,756

Net asset value per ordinary share (after deducting borrowings at fair value) (note 7)	308.1p	236.3p	255.0p
Net asset value per ordinary share  (after deducting borrowings at par)	312.0p	241.0p	258.0p
Ordinary shares in issue (note 8)	262,794,859	263,644,859	263,644,859

  THE MONKS INVESTMENT TRUST PLC

RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS (unaudited)

For the six months ended 31 October 2009

	Share capital £'000	Share premium £'000	Capital redemption reserve £'000	Capital reserve* £'000	Revenue reserve £'000	Total 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	-	-	-	148,862	5,913	154,775
Shares purchased for cancellation†	(42)	-	42	(2,104)	-	(2,104)
Dividends paid during the period#	-	-	-	-	(13,182)	(13,182)
Shareholders' funds at 31 October 2009	13,410	11,100	6,258	758,245	31,502	820,245

For the six months ended 31 October 2008

	Share capital £'000	Share premium £'000	Capital redemption reserve £'000	Capital reserve* £'000	Revenue reserve £'000	Total shareholders' funds £'000
Shareholders' funds at 1 May 2008	13,209	11,100	6,189	968,894	31,460	1,030,852
Net return on ordinary activities after taxation	-	-	-	(395,702)	11,001	(384,701)
Shares purchased for cancellation	(27)	-	27	(1,990)	-	(1,990)
Dividends paid during the period#	-	-	-	-	(8,437)	(8,437)
Shareholders' funds at 31 October 2008	13,182	11,100	6,216	571,202	34,024	635,724

For the year ended 30 April 2009

	Share capital £'000	Share premium £'000	Capital redemption reserve £'000	Capital reserve* £'000	Revenue reserve £'000	Total shareholders' funds £'000
Shareholders' funds at 1 May 2008	13,209	11,100	6,189	968,894	31,460	1,030,852
Net return on ordinary activities after taxation	-	-	-	(355,417)	18,384	(337,033)
Shares purchased for cancellation	(27)	-	27	(1,990)	-	(1,990)
Dividends paid during the year#	-	-	-	-	(11,073)	(11,073)
Shareholders' funds at 30 April 2009	13,182	11,100	6,216	611,487	38,771	680,756

• The Capital Reserve balance at 31 October 2009 includes a gain of £115,855,000 relating to the revaluation of investments (31 October 2008 - loss of £115,120,000; 30 April 2009 - loss of £4,881,000).

†   See note 8

#     See note 6

THE MONKS INVESTMENT TRUST PLC

CONDENSED CASH FLOW STATEMENT (unaudited)
	Six months to 31 October 2009 £'000	Six months to 31 October 2008 £'000	Year to 30 April 2009 £'000
Net cash inflow from operating activities	13,218	20,971	29,056
Net cash outflow from servicing of finance	(3,475)	(3,475)	(6,950)
Total tax paid	(2,924)	(1,656)	(4,531)
Net cash (outflow)/inflow from financial investment	(76,486)	(39,132)	2,536
Equity dividends paid	(13,182)	(8,437)	(11,073)
Net cash (outflow)/inflow before use of liquid resources and financing	(82,849)	(31,729)	9,038
Net cash inflow from use of liquid resources	43,924	17,826	19,638
Shares purchased for cancellation	(2,104)	(1,990)	(1,990)
(Decrease)/increase in cash	(41,029)	(15,893)	26,686
Reconciliation of net cash flow to movement in net (debt)/funds
(Decrease)/increase in cash in the period	(41,029)	(15,893)	26,686
Decrease in short term deposits	(43,924)	(17,826)	(19,638)
Exchange movements on short term deposits	(2,254)	1,546	3,894
Other non-cash changes	(16)	(17)	(33)
Movement in net (debt)/funds in the period	(87,223)	(32,190)	10,909
Net funds at start of the period	19,409	8,500	8,500
Net (debt)/funds at end of the period	(67,814)	(23,690)	19,409
Reconciliation of net return before finance costs and taxation to net cash inflow from operating activities
Net return before finance costs and taxation	159,119	(377,590)	(324,281)
Net (gains)/losses on investments	(156,308)	394,350	361,428
Currency losses/(gains)	7,446	1,352	(6,011)
Amortisation of fixed income book cost	(1,908)	(420)	(1,855)
Changes in debtors and creditors	4,869	3,279	(225)
Net cash inflow from operating activities	13,218	20,971	29,056

  THE MONKS INVESTMENT TRUST PLC

THIRTY LARGEST EQUITY HOLDINGS at 31 October 2009 (unaudited)
Name	Region	Business	Value £'000	% of total assets
Baillie Gifford Pacific Fund	Asia Pacific	Investment fund	45,596	5.1
OGX	Other Emerging Markets	Oil and gas exploration and production	40,832	4.5
Petrobras	Other Emerging Markets	Integrated oil	28,604	3.2
Goldman Sachs	North America	Bank	15,988	1.8
McDonalds	North America	Fast food restaurants	14,777	1.6
Aggreko	United Kingdom	Temporary power units	13,530	1.5
National Bank of Greece	Continental Europe	Bank	12,038	1.3
Dragon Oil	Continental Europe	Integrated oil company	11,391	1.3
Petrofac	United Kingdom	Oilfield services company	10,887	1.2
Transocean	North America	Offshore drilling contractor	10,520	1.2
Mediatek	Asia Pacific	Electronic components	10,195	1.2
Seadrill	Continental Europe	Contract drilling services	10,193	1.1
Banco Santander	Continental Europe	Bank	10,138	1.1
Diamond Offshore Drilling	North America	Offshore drilling	9,675	1.1
Vale	Other Emerging Markets	Diversified mining group	9,653	1.1
Solera Holdings	North America	Transactional software	9,623	1.1
Cameron International	North America	Oilfield equipment manufacturer	9,391	1.0
Nestle	Continental Europe	Food and consumer products	9,316	1.0
Healthspring	North America	Medicare	9,292	1.0
Novozymes	Continental Europe	Enzyme producer	9,275	1.0
LG Electronics	Asia Pacific	Electronic goods	9,207	1.0
Kellog	North America	Food manufacturer	9,117	1.0
Taiwan Semicon Manufacturing	Asia Pacific	Semiconductor manufacturer	8,983	1.0
Medco Health Solutions	North America	Pharmacy benefit manager	8,884	1.0
Garanti Bankasi	Other Emerging Markets	Bank	8,878	1.0
Atlas Copco	Continental Europe	Industrial compressors and mining equipment	8,814	1.0
BHP Billiton	Asia Pacific	Diversified resources	8,799	1.0
Berkshire Hathaway	North America	Insurance	8,750	1.0
Naspers	Other Emerging Markets	Media company	8,686	1.0
National Oilwell Varco	North America	Drilling equipment manufacturer	8,629	1.0
			389,661	43.4

DISTRIBUTION OF ASSETS

 (unaudited)

			At 31 October 2009 %	At 31 October 2008 %	At 30 April  2009 %
Equities:	United Kingdom		9.4	10.9	7.8
	Continental Europe		15.7	14.4	10.8
	North America		21.9	21.8	21.2
	Japan		4.2	5.5	3.6
	Asia Pacific		17.2	12.1	11.4
	Other Emerging Markets		18.0	11.1	12.0
Total equities			86.4	75.8	66.8
Bonds			12.6	14.8	20.6
Net liquid assets			1.0	9.4	12.6
Total assets (before deduction of borrowings)			100.0	100.0	100.0

THE MONKS INVESTMENT TRUST PLC

Notes to the condensed financial statements (unaudited)

1.	The condensed set of financial statements have been prepared on the basis of the same accounting policies as set out in the Company's Annual Financial Statements at 30 April 2009 and in accordance with the ASB's Statement 'Half-Yearly Financial Reports' and have not been audited or reviewed by the Auditors pursuant to the Auditing Practices Board Guidance on 'Review of Interim Financial Information'. The Half-Year Financial Report has been prepared on the going concern basis as it is the Directors' opinion that the Company will continue in operational existence for the foreseeable future.
2.	The financial information contained within this Half-Yearly Financial Report does not constitute statutory accounts as defined in sections 434 to 436 of the Companies Act 2006. The financial information for the year ended 30 April 2009 has been extracted from the statutory accounts which have been filed with the Registrar of Companies. The Auditors' Report on those accounts was unqualified and did not contain statements under sections 237(2) or (3) of the Companies Act 1985.
3.	Baillie Gifford & Co are employed by the Company as investment managers and secretaries under a management agreement which is terminable on not less than 12 months' notice, or on shorter notice in certain circumstances. The annual fee is 0.45% of total assets less current liabilities, calculated on a quarterly basis.
4.	Recovered 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. The Company received a reimbursement of VAT of £2,902,000 together with interest thereon of £1,078,000 during the year to 30 April 2009, of which £1,164,000 of the VAT had been recognized during 2008.
		Six months to  31 October  2009	Six months to 31 October  2008	Year to  30 April  2009
		£'000	£'000	£'000
5.	Net return per ordinary share
	Revenue return on ordinary activities after taxation	5,913	11,001	18,384
	Capital return on ordinary activities after taxation	148,862	(395,702)	(355,417)
	Total net return	154,775	(384,701)	(337,033)
	Net return per ordinary share is based on the above totals of revenue and capital and on 263,372,305 (31 October 2008 - 263,711,734; 30 April 2009 - 263,678,571) ordinary shares, being the weighted average number of ordinary shares in issue during each period.
6.	Dividends
	Amounts recognised as distributions in the period:
	Pervious year's final dividend of 5.00p (2008 - 3.20p), paid 7 August 2009	13,182	8,437	8,437
	Interim dividend for the year ended 30 April 2009 of 1.00p, paid 30 January 2009	-	-	2,636
		13,182	8,437	11,073
	Amounts paid and payable in respect of the period:
	Adjustment to provision for previous year's final dividend re shares bought back	-	(17)	(17)
	Interim dividend for the year ending 30 April 2010 of 0.50p (2009 - 1.00p)	1,314	2,636	2,636
	Final dividend (30 April 2009 - 5.00p)	-	-	13,182
		1,314	2,619	15,801
	The interim dividend was declared after the period end date and has therefore not been included as a liability in the balance sheet. It is payable on 29 January 2010 to shareholders on the register at the close of business on 8 January 2010. The ex dividend date is 6 January 2010. The Company operates a Dividend Reinvestment Plan and the final date for elections for reinvestment of this dividend is 12 January 2010.

THE MONKS INVESTMENT TRUST PLC

Notes to the condensed financial statements (unaudited)

(Ctd)

7.	The fair value of debentures at 31 October 2009 was £90.2m (31 October 2008 - £92.2m; 30 April 2009 - £87.9m).
8.	During the period under review the Company bought back 850,000 ordinary shares with a nominal value of £42,500 for a total consideration of £2,104,000. At 31 October 2009 the Company had the authority to buy back a further 38,670,364 shares.
9.	Transaction costs on purchases amounted to £546,000 (31 October 2008 - £313,000; 30 April 2009 - £581,000) and transaction costs on sales amounted to £85,000 (31 October 2008 - £130,000; 30 April 2009 - £376,000).
10.	None of the views expressed in this document should be construed as advice to buy or sell a particular investment.
11.	Shareholders will be notified on or around 16 December 2009 that the Half-Yearly Financial Report has been published and will be available on the Monks' page of the Managers' website www.monksinvestmenttrust.co.uk.
12.	Principal Risk and Uncertainties The principal risks facing the Company relate to the Company's investment activities. These risks are market risk (comprising currency risk, interest rate risk and other price risk), liquidity risk and credit risk. An explanation of these risks and how they are managed is contained in note 23 of the Company's full Annual Report and Accounts for the year to 30 April 2009. The Principal risks and uncertainties have not changed since the publication of the Annual Report which can be obtained free of charge from, Baillie Gifford & Co and is available on the Monks' page of the Managers' website: www.monksinvestmenttrust.co.uk.. Other risks facing the Company include the following: gearing risk (the use of borrowings can magnify the impact of falling markets) and regulatory risk (that the loss of investment trust status or a breach of the UKLA Listing Rules, could have adverse financial consequences and cause reputational damage).

 

END

 

 

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