Half Yearly Report

RNS Number : 2198X

Monks Investment Trust PLC

02 December 2010

 



THE MONKS INVESTMENT TRUST PLC

Half-Yearly Results to 31 October 2010

Over the six months to the end of October 2010 Monks' net asset value (NAV) per share and the share price rose by 6%.   The FTSE World Index fell by 2% in sterling terms over the same period.

§ Over one year to the end of October:  NAV per share and the share price are 25% higher and the FTSE World Index is up 15%.

§ Earnings per share were 2.45p (2.25p in the corresponding period a year ago).  The interim dividend is 0.5p (0.5p in the corresponding period).

§ During the half year, markets fluctuated in a manner characterised as switching between 'risk on' and 'risk off' as new information was digested in a period of considerable uncertainty about the prospects for the world's major economies.

§ The portfolio benefited from the strong performance of individual holdings notably in the UK, Brazilian and US equity markets.

§ The process of rebalancing the world economy is creating dangers as politicians and their constituents try to resist the changes it is forcing on them.  Existing trends may continue for many years but it is also likely that at least some of the consequences are now sufficiently well understood to be incorporated in prices. 

§ Monks remains modestly geared, both shares and bonds together representing approximately 112% of shareholders' funds at 30 November 2010. Borrowing rates are low and uncertain times and dysfunctional markets create opportunities. 

1 December 2010

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 £67 billion under management and advice as at 1 December 2010.

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. 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.

- ends -

For further information please contact:

James Budden

Baillie Gifford & Co                                                                              07507201208

Roland Cross, Director

Broadgate Marketing                                                                            020 7726 6111

Neither the contents of the Company's website nor the contents of any website accessible from hyperlinks on the Company's website (or any other website) is incorporated into, or forms part of, this announcement.

The following is the unaudited Half-Yearly Financial Report for the six months to 31 October 2010.

 

THE MONKS INVESTMENT TRUST PLC

 

Half-Yearly Financial Report 31 October 2010

Responsibility Statement

 

We confirm that to the best of our knowledge:

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

b)   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

c)   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

1 December 2010

THE MONKS INVESTMENT TRUST PLC

Half-Yearly Management Report to 31 October 2010

Results

Over the six months to 31 October, net asset value, with borrowings deducted at fair value, rose by 5.9%, from 364.1p to 385.7p, at which level it was 25.2% above the figure twelve months ago.    The FTSE World Index, our principal comparative index, was down 2.1% over six months and up 14.5% over a year. Over the same periods, the Company's share price rose by 5.8% and 24.5% respectively.

Earnings per share were 2.45p, up from 2.25p in the corresponding period a year ago. An increase in dividend income that more than outweighed a decline in income from bonds was the main reason for the change in earnings. The Board has declared an interim dividend of 0.50p (2009: 0.50p), to be paid in January 2011.

During the half year, markets fluctuated in a manner that has been characterised as switching between 'risk on' and 'risk off' as they digested new information in a period of considerable uncertainty about the prospects for the world's major economies. In general terms, the pattern that built up was one of a deceleration of growth in the United States, rising inflationary pressures in China and other emerging economies, and surprisingly strong growth in Germany (while the peripheral members of the eurozone continued to struggle with their burdens of debt). Growing pessimism about the prospects for employment growth in America outweighed positive news on corporate earnings until the Chairman of the US Central Bank indicated in a speech in August that a further round of quantitative easing aimed at stimulating the US economy would be forthcoming. Following this statement there was a strong rally in most equity and bond markets, although the details of the measures to be taken were not announced until the first week in November.

The best returns by region were from Emerging Markets. Overall, Europe fared a little less well but within it the German market was strong and the UK market also rose.  The Japanese market was by a large margin the worst of the world's major markets, producing a significant negative return for sterling based investors despite a large rise in the value of the yen. Sterling rose against the US dollar and currencies linked to it but fell in value against the Swiss franc as well as the yen. Against the euro it was little changed. Our portfolio benefited from the strong performance of individual holdings, most notably in the UK, Brazilian and US equity markets.

Investment Changes

We made a net reduction to equities of £13.7m and a net addition to bonds of £9.6m. Within equities net reductions were made in North America and Emerging Markets and net additions were made in all other regions. Net additions were made to sterling and US dollar denominated bonds. The amounts involved are small relative to the overall size of the portfolio and so there was no significant change in gearing as a result. During the period the holding in the Baillie Gifford Pacific fund was sold and replaced with additional direct holdings in the Asia-Pacific region. After the half year end, Japanese equity exposure was increased by the purchase of Nikkei call options.

The analysis below shows the distribution of investments by geography and industrial sector at the end of October and the end of April.

Outlook

In broad terms, the recent past has seen a continuation of developments in the global economy that have been underway for many years. The United States, United Kingdom and other 'G7' countries are becoming a smaller part of the global economy as China, India and other emerging countries are growing more rapidly. On some measures China has already overtaken Japan as the second largest economy and Germany as the largest exporter of manufactured goods. It is becoming an increasingly important end market as well as a production base for export to the rest of the world. Other populous but hitherto economically underdeveloped countries such as India and Indonesia appear set to follow China down this road while Brazil, for decades apparently stuck in a state of arrested development, is at last realising its potential.

THE MONKS INVESTMENT TRUST PLC

Half-Yearly Management Report to 31 October 2010 (Ctd)

It seems reasonable to expect these economic trends to continue for many years but it is also likely that at least some of the consequences are now sufficiently well understood to be already incorporated in prices. This applies both to opportunities for companies and to the implications for relative adjustments to currencies and asset prices. Failure to live up to high expectations is a risk and this is probably greatest in relation to companies selling to consumers in emerging markets and least in more out of favour areas of the market.

This process of rebalancing the world economy is also creating dangers as politicians and their constituents try to resist the changes it is forcing on them. China and other leading emerging economies are reluctant to allow their currencies to appreciate and there is a risk of a rerun of the competitive devaluations and protectionism that contributed to the deepening of the depression in the 1930s. The aggressive expansion of the US Central Bank's balance sheet is seen by some as the main defence against destructive deflation but by others it is seen as an attempt to debase the value of the world's reserve currency with destabilising and ultimately inflationary effects. The problems of Greece and Ireland have also highlighted the institutional weaknesses in the European Union and exposed the continuing vulnerability of the financial system arising from the misclassification of government debt as risk free.

Despite these concerns we are happy to remain modestly geared, both shares and bonds together representing approximately 112% of shareholders' funds at 30 November 2010. Borrowing rates are low and uncertain times and dysfunctional markets create opportunities.

THE MONKS INVESTMENT TRUST PLC

INCOME STATEMENT

(unaudited)

	For the six months ended 31 October 2010				For the six months ended 31 October 2009			For the year ended 30 April 2010
	Revenue £'000	Capital £'000		Total £'000	Revenue £'000	Capital £'000	Total £'000	Revenue £'000	Capital £'000	Total £'000
Gains on sales of investments	-	42,623		42,623	-	35,572	35,572	-	59,411	59,411
Changes in investment holding   gains/(losses)	-	8,382		8,382	-	120,736	120,736	-	246,312	246,312
Currency gains/(losses)	-	960		960	-	(7,446)	(7,446)	-	(11,670)	(11,670)
Income from investments and   interest receivable	14,494	-		14,494	12,643	-	12,643	23,842	-	23,842
Other income	223	-		223	22	-	22	45	-	45
Investment management fee (note 3)	(2,416)	-		(2,416)	(1,928)	-	(1,928)	(4,186)	-	(4,186)
Other administrative expenses	(529)	-		(529)	(480)	-	(480)	(1,062)	-	(1,062)
Net return before finance costs and    taxation	11,772	51,965		63,737	10,257	148,862	159,119	18,639	294,053	312,692
Finance costs of borrowings	(4,590)	-		(4,590)	(3,491)	-	(3,491)	(7,483)	-	(7,483)
Net return on ordinary activities   before taxation	7,182	51,965		59,147	6,766	148,862	155,628	11,156	294,053	305,209
Tax on ordinary activities	(781)	-		(781)	(853)	-	(853)	(587)	-	(587)
Net return on ordinary activities   after taxation	6,401	51,965		58,366	5,913	148,862	154,775	10,569	294,053	304,622
Net return per ordinary share   (note 4)	2.45p		19.91p	22.36p	2.25p	56.52p	58.77p	4.02p	111.99p	116.01p
Note: Dividends per share paid and payable   in respect of the period (note 5)	0.50p				0.50p			3.00p

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 2010	At 31 October 2009	At 30 April 2010
	£'000	£'000	£'000
Fixed assets
Investments	1,103,083	890,596	1,054,003
Current assets
Debtors	6,833	5,672	26,589
Cash and short term deposits	31,199	11,751	14,449
	38,032	17,423	41,038
Creditors
Amounts falling due within one year:
Bank loan (note 6)	(40,000)	-	(40,000)
Other creditors	(6,927)	(8,209)	(17,066)
	(46,927)	(8,209)	(57,066)
Net current (liabilities)/assets	(8,895)	9,214	(16,028)
Total assets less current liabilities	1,094,188	899,810	1,037,975
Creditors
Amounts falling due after more than one year:
Debenture stocks (note 6)	(79,598)	(79,565)	(79,582)
Provisions for liabilities and charges
Deferred taxation	-	-	(57)
Total net assets	1,014,590	820,245	958,336
Capital and reserves
Called-up share capital	13,038	13,140	13,051
Share premium	11,100	11,100	11,100
Capital redemption reserve	6,360	6,258	6,347
Capital reserve	949,386	758,245	898,228
Revenue reserve	34,706	31,502	29,610
Shareholders' funds	1,014,590	820,245	958,336

Net asset value per ordinary share (after deducting borrowings at fair value) (note 6)	385.7p	308.1p	364.1p
Net asset value per ordinary share (after deducting borrowings at par)	388.9p	312.0p	367.0p
Ordinary shares in issue (note 7)	260,764,859	262,794,859	261,014,859

 

THE MONKS INVESTMENT TRUST PLC

 

RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS (unaudited)

For the six months ended 31 October 2010

	Share capital £'000	Share premium £'000	Capital redemption reserve £'000	Capital reserve* £'000	Revenue reserve £'000	Shareholders' funds £'000
Shareholders' funds at 1 May 2010	13,051	11,100	6,347	898,228	29,610	958,336
Net return on ordinary activities after taxation	-	-	-	51,965	6,401	58,366
Shares purchased for cancellation (note 7)	(13)	-	13	(807)	-	(807)
Dividends paid during the period (note 5)	-	-	-	-	(1,305)	(1,305)
Shareholders' funds at 31 October 2010	13,038	11,100	6,360	949,386	34,706	1,014,590

For the six months ended 31 October 2009

	Share capital £'000	Share premium £'000	Capital redemption reserve £'000	Capital reserve* £'000	Revenue reserve £'000	Shareholders' funds £'000
Shareholders' funds at 1 May 2009	13,182	11,100	6,216	611,487	38,771	680,756
Net return on ordinary activities after taxation	-	-	-	148,862	5,913	154,775
Shares purchased for cancellation	(42)	-	42	(2,104)	-	(2,104)
Dividends paid during the period (note 5)	-	-	-	-	(13,182)	(13,182)
Shareholders' funds at 31 October 2009	13,410	11,100	6,258	758,245	31,502	820,245

For the year ended 30 April 2010

	Share capital £'000	Share premium £'000	Capital redemption reserve £'000	Capital reserve* £'000	Revenue reserve £'000	Shareholders' funds £'000
Shareholders' funds at  1 May 2009	13,182	11,100	6,216	611,487	38,771	680,756
Net return on ordinary activities after taxation	-	-	-	294,053	10,569	304,622
Shares purchased for cancellation	(131)	-	131	(7,312)	-	(7,312)
Dividends paid during the year (note 5)	-	-	-	-	(19,730)	(19,730)
Shareholders' funds at 30 April 2010	13,051	11,100	6,347	898,228	29,610	958,336

*      The Capital Reserve balance at 31 October 2010 includes investment holding gains on fixed asset investments of £252,191,000 (31 October 2009 - gains of £115,855,000; 30 April 2010 - gains of £242,079,000).

THE MONKS INVESTMENT TRUST PLC

CONDENSED CASH FLOW STATEMENT (unaudited)
	Six months to 31 October 2010 £'000	Six months to 31 October 2009 £'000	Year to 30 April 2010 £'000
Net cash inflow from operating activities	13,639	13,218	19,921
Net cash outflow from servicing of finance	(4,555)	(3,475)	(6,990)
Total tax paid	(836)	(2,924)	(3,645)
Net cash inflow/(outflow) from financial investment	10,610	(76,486)	(104,499)
Equity dividends paid	(1,305)	(13,182)	(19,730)
Net cash inflow/(outflow) before use of liquid resources and financing	17,553	(82,849)	(114,943)
Net cash inflow from use of liquid resources	-	43,924	43,924
Shares purchased for cancellation	(803)	(2,104)	(7,312)
Bank loans drawn	-	-	40,000
Increase/(decrease) in cash	16,750	(41,029)	(38,331)
Reconciliation of net cash flow to movement in net (debt)/funds
Increase/(decrease) in cash in the period	16,750	(41,029)	(38,331)
Decrease in short term deposits	-	(43,924)	(43,924)
Exchange movements on short term deposits	-	(2,254)	(2,254)
Net cash inflow from bank loans	-	-	(40,000)
Other non-cash changes	(16)	(16)	(33)
Movement in net (debt)/funds in the period	16,734	(87,223)	(124,542)
Net (debt)/funds at start of the period	(105,133)	19,409	19,409
Net (debt)/funds at end of the period	(88,399)	(67,814)	(105,133)
Reconciliation of net return before finance costs and taxation to net cash inflow from operating activities
Net return before finance costs and taxation	63,737	159,119	312,692
Net gains on investments	(51,005)	(156,308)	(305,723)
Currency (gains)/losses	(960)	7,446	11,670
Amortisation of fixed income book cost	(453)	(1,908)	(2,348)
Changes in debtors and creditors	2,320	4,869	3,630
Net cash inflow from operating activities	13,639	13,218	19,921

THE MONKS INVESTMENT TRUST PLC

THIRTY LARGEST EQUITY HOLDINGS at 31 October 2010 (unaudited)
Name	Region	Business	Value £'000	% of total assets
OGX	Other Emerging Markets	Oil and gas exploration and production	55,201	4.9
Aggreko	United Kingdom	Temporary power units	28,039	2.5
Seadrill	Continental Europe	Contract drilling services	21,306	1.9
Healthspring	North America	Health maintenance organization	19,509	1.7
Eldorado Gold	North America	Gold mining	17,652	1.6
Odontoprev	Other Emerging Markets	Health care providers and services	17,417	1.5
Petrofac	United Kingdom	Oilfield services company	16,936	1.5
McDonalds	North America	Fast food restaurants	15,595	1.4
TKI Garanti BSKI	Other Emerging Markets	Bank	15,328	1.4
Solera Holdings	North America	Transactional software	14,795	1.3
Atlas Copco	Continental Europe	Industrial compressors and mining equipment	13,931	1.2
Novozymes	Continental Europe	Enzyme producer	13,790	1.2
Cetip	Other Emerging Markets	Investment services	13,027	1.1
Naspers	Other Emerging Markets	Media company	12,995	1.1
IG Group	United Kingdom	Spread betting	12,633	1.1
Vale	Other Emerging Markets	Diversified mining group	12,572	1.1
Sino Forest	North America	Forestry and paper	12,358	1.1
Dragon Oil	Other Emerging Markets	Oil and gas exploration and production	12,276	1.1
Wellstream Holdings	United Kingdom	Flexible pipes manufacturer	12,153	1.1
BIM Birlesik Magazalar	Other Emerging Markets	Discount food and consumer goods	11,971	1.1
Kone 'B'	Continental Europe	Industrial machinery	11,912	1.1
Ryanair	Continental Europe	Travel and tourism	11,831	1.0
National Oilwell Varco	North America	Drilling equipment manufacturer	11,669	1.0
Telekomunikacja Polska	Other Emerging Markets	Diversified telecommunication services	11,388	1.0
Chungwa Telecom	Asia Pacific	Fixed line telecommunications	11,365	1.0
Nestlé	Continental Europe	Food and consumer products	11,274	1.0
Deutsche Telekom	Continental Europe	Telecommunications services	11,162	1.0
Renhe Commercial Holding	Asia Pacific	Real estate holding and development	11,119	1.0
Verizon Communications	North America	Fixed line telecommunications	10,996	1.0
Marine Harvest	Continental Europe	Salmon farmer	10,973	1.0
			463,173	41.0

 

THE MONKS INVESTMENT TRUST PLC

DISTRIBUTION OF ASSETS

(unaudited)

Geographical Analysis

		At 31 October 2010 %	At 30 April 2010 %
Equities:	United Kingdom	15.8	13.1
	Continental Europe	15.9	15.1
	North America	18.1	22.1
	Japan	3.0	2.8
	Asia Pacific	15.9	16.7
	Other Emerging Markets	20.4	20.8
Total equities		89.1	90.6
Bonds		8.2	7.2
Net liquid assets		2.7	2.2
Total assets (before deduction of borrowings)		100.0	100.0

Sector Analysis

		At 31 October 2010 %	At 30 April 2010 %
Equities:	Oil and Gas	16.3	17.9
	Basic Materials	5.9	6.8
	Industrials	9.1	8.6
	Consumer Goods	4.0	6.6
	Health Care	12.1	10.1
	Consumer Services	9.4	6.5
	Telecommunications	5.4	1.6
	Utilities	2.1	1.6
	Financials	18.2	25.7
	Technology	6.6	5.2
Total Equities		89.1	90.6
Bonds		8.2	7.2
Net liquid assets		2.7	2.2
Total assets (before deduction of borrowings)		100.0	100.0

 

THE MONKS INVESTMENT TRUST PLC

Notes to the condensed financial statements (unaudited)

1. .	The condensed 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 2010 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 Company's assets, the majority of which are investments in quoted securities which are readily realisable, exceed its liabilities significantly. All borrowings require the prior approval of the Board. Gearing levels and compliance with borrowing covenants are reviewed by the Board on a regular basis. Accordingly, the Half-Yearly 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 2010 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 498(2) or (3) of the Companies Act 2006.
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 6 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.
		Six months to 31 October  2010	Six months to 31 October 2009	Year to 30 April 2010
		£'000	£'000	£'000
4.	Net return per ordinary share
	Revenue return on ordinary activities after taxation	6,401	5,913	10,569
	Capital return on ordinary activities after taxation	51,965	148,862	294,053
	Total net  return	58,366	154,775	304,622
	Net return per ordinary share is based on the above totals of revenue and capital and on 260,974,099 (31 October 2009 - 263,372,305; 30 April 2010 - 262,582,039) ordinary shares, being the weighted average number of ordinary shares in issue during each period. There are no dilutive or potentially dilutive shares in issue.
5.	Dividends
	Amounts recognised as distributions in the period:
	Previous year's final dividend of 0.50p (2009 - 5.00p), paid 6 August 2010	1,305	13,182	13,182
	Interim dividend for the year ended 30 April 2010 of 0.50p (paid 29 January 2010)	-	-	1,310
	Second interim dividend for the year ended 30 April 2010 of 2.00p (paid 1 April 2010)	-	-	5,238
		1,305	13,182	19,730
	Amounts paid and payable in respect of the period:
	Interim dividend for the year ending 30 April 2011 of 0.50p (2010 - 0.50p)	1,304	1,314	1,310
	Second interim dividend (2010 - 2.00p)	-	-	5,238
	Final dividend (2010 - 0.50p)	-	-	1,305
		1,304	1,314	7,853
	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 31 January 2011 to shareholders on the register at the close of business on 7 January 2011.  The ex dividend date is 7 January 2011. The Company operates a Dividend Reinvestment Plan and the final date for elections for reinvestment of this dividend is 13 January 2011.

THE MONKS INVESTMENT TRUST PLC

Notes to the condensed financial statements (unaudited)

(Ctd)

6.	The bank loan falling due within one year comprises a £40m loan drawn down under a short term loan facility which expires on 2 March 2011.
	The fair value of debentures at 31 October 2010 was £88.3m (31 October 2009 - £90.2m; 30 April 2010 - £87.6m).
7.	During the period under review the Company bought back 250,000 ordinary shares with a nominal value of £12,500 for a total consideration of £807,000.  At 31 October 2010 the Company had the authority to buy back a further 38,876,127 shares.
8.	Transaction costs on purchases amounted to £649,000 (31 October 2009 - £546,000; 30 April 2010 - £1,016,000) and transaction costs on sales amounted to £363,000 (31 October 2009 - £85,000; 30 April 2010 - £252,000).
9.	None of the views expressed in this document should be construed as advice to buy or sell a particular investment.
10.	Shareholders will be notified on or around 16 December 2010 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.
11.	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 2010. 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: regulatory risk (that the loss of investment trust status or a breach of applicable legal and regulatory requirements could have adverse financial consequences and cause reputational damage); operational/financial risk (failure of service providers' accounting systems could lead to inaccurate reporting or financial loss); the risk that the discount can widen: and gearing risk (the use of borrowings can magnify the impact of falling markets).

 

END

 

 

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