The £1.1bn Monks investment trust, managed in Edinburgh by Baillie Gifford, has signalled its caution over the near-term outlook for world markets by eliminating its net borrowings.

The trust has reported a 5.9% rise in net asset value for last year, ahead of a 4.7% rise in its benchmark world index, after a year of two halves.

In the first half, the trust lost 5.9% of NAV against only 1.6% for the benchmark, but it came storming back in the second period to record a 12.5% rise, double the index level.

The trust reduced investment in the US while lifting exposure to Europe, the Pacific and emerging markets, but more significantly eliminated the borrowings which trusts use to ramp up their exposure to equities when confidence is high.

It cut stakes in oil and gas producers while increasing them in oil service companies, which now account for over half of the 17% oil and gas sector weighting.

Manager Gerald Smith has also cut Japanese holdings from 25 to 16, and how holds only 11% of assets in Japan, against 21% the previous year.

James Ferguson, the chairman, warned that although growth was strong throughout much of the world and suitable long-term equity investment opportunities were identifiable, companies dependent on consumption and increasing indebtedness in the US and the UK might suffer.

Monks is paying a final dividend of 2.65p (1.4p) to bring the total to 3.15p (1.9p).