Update: Monks sees more caution on dividends

9th Jun 2010 07:38

Monks Investment Trust, which focuses on international growth stocks, gave its benchmark index a whipping in the last financial year.Net asset value per share rose by 42.8% in the year to 30 April 2010, compared to a 31.5% increase in the FTSE World Index in sterling terms.The largest positive contribution to performance was made by emerging markets equities. The bond holdings also made a strong contribution.Earnings per share, however, dipped to 4.02p from the previous year's "exceptionally high" 6.97p. In response to this the full year dividend has been halved to 3p from the previous year's 6p per share pay out. "The year before was an exceptional period in terms of income received from investments as many of the companies in which we invest increased their dividends despite the deteriorating economic background, and we also received a relatively large amount of income from bonds. Since then, companies have become more cautious in their dividend policies in response to an increase in uncertainty about future revenues and the availability of financing from banks," said James Ferguson, Monks' chairman.This year's 3p dividend is lower than the 3.7p paid in 2008 and the 3.15p paid in 2007.The company took the view that long term interest rates are likely to rise and during the year additional one year borrowings of £40m were taken out and were matched by a 30 year interest rate swap to give an overall cost for the additional borrowings of 5.3%. Looking ahead, the investment managers believe that equities currently look more attractive than government and corporate bonds while the value of cash is falling in real terms. "Taking a longer term view, the prospects for achieving capital growth through exposure to the areas of most rapid growth in demand remain bright," Ferguson said.The deterioration of public finances is a cause of considerable concern but the prospects for achieving capital growth through exposure to the areas of most rapid growth in demand remain bright, the company said. Monks is managed by Baillie Gifford, the independent Edinburgh based fund management group with around £59bn under management and advice as at 7 June 2010.