REG - Monks Inv.Trust - The Monks Investment Trust PLC Interim Results
08/12/2023 07:00
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RNS Number : 0977W Monks Investment Trust PLC 08 December 2023
RNS Announcement
The Monks Investment Trust PLC (MNKS)
Legal Entity Identifier: 213800MRI1JTUKG5AF64
Results for the six months to 31 October 2023
The following is the unaudited Interim Financial Report for the six months to
31 October 2023 which was approved by the Board on 7 December 2023.
Chairman's statement
Performance
During the first half of the financial year, the Company produced a net asset
value (NAV) total return of -3.3% compared to +2.1% for the comparative index
(FTSE World in sterling). The share price total return was -7.3%, as the
discount widened from 8.7% to 11.6%. The investment trust sector is trading at
discounts last seen during the financial crisis.
This is disappointing. Beyond the seven mega-cap stocks in the US, growth
stocks have been out of favour during a period of rising interest rates. We
believe that in the long run growth stocks will continue to deliver better
investment returns, particularly as technology continues to transform
economies in sometimes unpredictable ways. We also share the investment
managers' optimism that the period of sharply rising rates is now behind us.
Some of the underperformance, however, has been driven by specific stock
selection, and commentary on the largest detractors from performance over the
period is included in the Managers' report.
Discount management
Apart from challenging the manager, an essential role of an investment company
board is to determine the company's policy in respect of discount management.
Monks has bought back approximately £300m of its own stock since the
beginning of last year, when the Company's shares moved from a premium to a
discount. Repurchasing shares provides NAV accretion, reduces share price
volatility and reassures shareholders and potential investors that the Board
is alive to the question of discount management. The Board therefore intends
to continue to buy back while the Company's shares trade at a substantial
discount to NAV. It continues to evaluate the range of alternative options at
its disposal to seek to address the discount.
Gearing
An advantage of the investment trust structure is that the Company can deploy
borrowing to enhance returns in the long run. In 2020, the Board took
advantage of low interest rates to issue debt to an insurer to provide
structural gearing, securing £100m of borrowing with a maturity of 30
years at an interest rate of 1.8%. The Board believes that it is beneficial
for the Company to have flexibility in its capital structure, so not all of
the Company's borrowing is structural. The Company also has a revolving debt
facility of £150m at a floating rate of interest, the cost of which has risen
with market rates. This facility expires in November 2024. The Board is
considering potential options to replace this facility and will update
shareholders in due course.
The Board
As previously reported, Jeremy Tigue has indicated his intention not to offer
himself for re-election at the AGM in September 2024 and, accordingly, Belinda
Richards has succeeded him as Senior Independent Director ('SID') in order to
oversee the necessary recruitment and succession planning. A recruitment
process is under way to add further members to the Board. We expect to be in a
position to announce the new appointments before the end of the Company's
current financial year.
Outlook
Monks has a well-diversified portfolio of growth stocks, with less than 4%
underlying exposure to unquoted companies. The Board believes that the
Company's diversified approach offers investors exposure to a wide range of
growth opportunities that are likely to drive returns in the years ahead.
Karl Sternberg
Chairman
7 December 2023
Interim management report
The investment performance of Monks' portfolio in the first half of its
financial year has been disappointing. This continues a run of poor relative
returns that began two years ago, which has erased - for the time being - the
superior returns delivered for shareholders since the Global Alpha team took
over eight years ago. This stands in contrast to our view of the long-term
growth prospects of the companies in the Monks portfolio.
Rapidly rising inflation and the increases in interest rates that began in the
first half of 2022 suppressed investors' appetite for growth assets and
precipitated sharp share price falls of companies held in the Monks portfolio.
The portfolio was too concentrated in rapidly growing, earlier-stage companies
that bore the brunt of share price declines. We have taken action by selling
holdings poorly positioned in an environment of persistently higher inflation
and interest rates, while restoring greater balance across the portfolio's
three growth profiles (Stalwart, Rapid, Cyclical). Furthermore, we have
strengthened the analytical inputs to our investment process, specifically,
those related to valuations and stock correlations.
We believe that good times are ahead for the portfolio. The inflation and
interest rate environment is stabilising and we expect the portfolio to
deliver substantially higher levels of earnings growth than the market.
Indeed, the three-year forecast earnings growth of portfolio companies is more
than double the market average (+12.8% p.a. compared to +5.5% p.a.), its
highest level relative to the index in a decade. The forecast
price-to-earnings ratio of the portfolio companies in 2024 is 17.5x, an +18%
premium to the index (14.8x). This is an attractive trade-off that we believe
will drive future returns for Monks shareholders.
Performance
During the first half of the financial year, the Company produced a net asset
value (NAV)* total return of -3.3% compared to +2.1% for the comparative index
(FTSE World in sterling). The share price total return was -7.3%. Since our
team took over the management of the portfolio in March 2015, the Company has
produced a NAV total return +119.3% compared to +132.2% for the comparative
index. The share price total return was +114.4%.
Among the largest detractors from performance were the holdings in The
Schiehallion Fund (a closed-ended investment company managed by Baillie
Gifford that invests in late-stage private companies), Pernod Ricard (spirits
and drinks), and Shiseido (cosmetics).
Although the NAV of the Schiehallion Fund fell by 5%, it was a widening
discount between the share price and NAV (from 25% to 50% in the period) that
drove its underperformance. This reflects a more challenging operating
environment for companies and investors' aversion to assets whose valuations
are founded on long-term potential. This has contributed to share price
weakness across the portfolio more broadly too. We continue to favour a modest
level of exposure to private companies (3.9% of the portfolio, of which
Schiehallion is 1.5%), but are enthusiastic about the potential of both
Schiehallion and the handful of directly held private securities (which
include Bytedance and SpaceX that are also held in Schiehallion).
The sharp share price falls (20-30%) for Pernod Ricard, the French spirits
business, and Shiseido, the Japanese cosmetics company have, in part, been
down to weaker demand from the Chinese market. Consumer appetite in China has
been slower to return post-pandemic, which has been felt most acutely in
'premium' products of the type sold by Pernod and Shiseido. We believe that
these developments are temporary. For example, in the case of Shiseido, it
continues to focus on its 'prestige' brands (Cle de Peu, Anessa and Zanessa)
in the Chinese market where we believe volumes and operating margins will be
materially higher (versus 2019 levels) in the next 2-3 years.
On a sector basis, the portfolio's healthcare holdings have accounted for
around 40% of the underperformance relative to the index over the period. For
most of these, we remain enthusiastic about their long-term growth potential.
For example, Moderna, the infectious disease vaccine producer, has seen
revenue growth slow after demand for Covid vaccines fell. Whilst the share
price spiked through the pandemic to over $400 and has fallen sharply, Moderna
remains a relatively new position for Monks (purchased just two years ago) and
the current price is above our initial purchase price (~$77 per share).
Moderna has proven itself capable of executing and we believe that focusing on
near-term demand for Covid vaccines ignores the strength of Moderna's pipeline
of treatments (36 programs in clinical trials deploying mRNA technology to
make infectious disease vaccines). Our conviction in Moderna's ability to be
one of the leading biotech companies of the future, solving health challenges
for millions of people, remains intact.
In contrast, where long-term growth prospects are faltering, we have taken
action. This is true for Illumina (gene sequencing). We have sold the
portfolio's holding as a result of significant management changes and poor
operational execution of its acquisition of Grail (cancer testing), which it
continues to contest with regulators.
Despite the poor share price reactions we have seen, the operational progress
of a majority of holdings remains on track. Several of our long-established
cyclical operators, such as building and aggregates businesses Martin Marietta
and CRH, have contributed positively to NAV. These companies continue to
demonstrate exceptional capital allocation discipline and very strong pricing
power that has driven robust growth in profitability. For example, Martin
Marietta increased pricing by 17% and grew gross profits by 38% year-on-year.
The strongest contributors have demonstrated increasing earnings power this
year. This is true of Meta (social media) and Amazon (ecommerce and cloud).
Mark Zuckerberg announced 2023 as Meta's 'year of efficiency', indeed, revenue
growth is returning to faster growth (+23% year-on-year) and net income rose
164% year-on-year. We believe this is only the beginning of a material uptick
in Meta's profitability. Its advertising estate (that includes Facebook,
Instagram and Whatsapp platforms) reaches 3.6 billion users and is
under-monetised. We are excited about its potential and have added twice this
year. Amazon invested heavily in its logistics network during the pandemic.
Utilisation rates are growing and its retail division is becoming more
profitable, while its highly profitable Cloud computing division, Amazon Web
Services, continues to make strong progress. Recent deals struck with other
ecommerce platforms (such as Shopify and Pinterest) to provide fulfilment
services for transactions on their platforms have underlined Amazon's
credentials as the leading provider of infrastructure in this market.
Elsewhere, there are similar stories of strong execution at the likes of The
Trade Desk (programmatic advertising) and Doordash (food and grocery
delivery). Doordash - led by founder Tony Xu - has a relentless focus on
improving customer service and profitability. The business has taken its time
to develop its business model in the suburbs of the US and is now proving its
strength in city centre locations. The latest results saw its earnings grow
just under 300% year-on-year.
Gearing
We continue to believe in the value of gearing to enhance long-term
shareholder returns. Gross gearing has increased from 7.2% to 8.3% in the
period. We drew down a modest sum from Monks' revolving debt facility which
has supported both ongoing share buybacks and additions to existing positions.
The £100m of structurally low-cost (1.8%) gearing secured for a 30-year term
in 2020 has provided an excellent foundation from which to generate future
excess return for shareholders and afforded us the latitude to consider the
merits of further borrowing on behalf of investors.
Positioning and opportunity
Macroeconomic factors have been a key driver of share prices. Nevertheless, we
continue to revisit the underlying growth drivers that underpin Monks'
portfolio. We remain confident that the growth tailwinds will either endure
despite global economic challenges or strengthen because of them.
The critical imperatives for upgrading crumbling infrastructure, decarbonising
the economy and better meeting the needs of ageing populations have not gone
away. Nor have structural bottlenecks in critical resources, cloud
infrastructure and logistics networks. At the same time, we believe that
machine learning remains in the foothills and that deepening fissures between
the US and China will broaden innovation into new developing markets. All
these tailwinds remain intact, regardless of the market's focus.
These themes are consistent with our Research Agenda
(https://www.bailliegifford.com/en/uk/individual-investors/insights/ic-article/2023-q1-monks-research-agenda-2023-10018515/)
which outlines a handful of potentially rich seams for stock pickers. We have
continued to pursue opportunities in these areas and have been adding
selectively to the Monks portfolio. We highlight below some of the themes and
positions which informed recent additions to the portfolio:
1. New Growth Frontiers - if the growth engines of the past decade were
the internet, mobile, and software, the next decade will be based on the
cloud, data, and artificial intelligence. These technologies are likely to
bridge the digital and physical world, having potentially profound
implications for a range of industries.
We consider semiconductors to be the "picks and shovels" of this modern 'Gold
Rush', underpinning many of these exciting growth trends. Research on various
semiconductor opportunities has seen Monks' overall exposure to semiconductors
double to 6% of assets in the past twelve months. Among the most recent new
purchases in this area are Advanced Micro Devices, Samsung Electronics and
NVIDIA. The latter is a market leader in graphics processing units (GPUs) that
are essential in a world that has an insatiable demand for ever-increasing
computing power. Around 90% of generative AI (artificial intelligence)
programs are trained on NVIDIA hardware, and 3 million of the world's machine
learning engineers (nearly all of them) have used NVIDIA's tools. Its dominant
position in GPUs (as a fundamental enabler of AI model learning) supports
attractive upside. We can see a plausible case for NVIDIA's revenue growing at
40% per annum over the next five years. Its dominant position should afford it
pricing power and control of margins. While, even with a derating, the
expected operational performance can drive a doubling of NVIDIA's share
price through to 2028.
2. Infrastructure Upgrade - we have continued to invest where companies
may be beneficiaries of an 'Infrastructure Upgrade', particularly in the US.
There are several factors including re-shoring trends and infrastructure
spending bills which are likely to support a material uptick in capital
spending on areas including roads, energy and digital networks.
The most recent purchase is Comfort Systems, an installer of heating,
ventilation and air conditioning systems in the US. Over the last 25 years,
Comfort has grown earnings before interest and tax at an annualised rate of
17%, and yet the opportunity to maintain this growth for many more years
remains enormous. Industrial policy is spurring record construction starts,
accelerating the growth outlook for various companies across the portfolio.
Comfort joins that cohort. To meet our growth hurdle, Comfort needs to
continue to consolidate the industry, although we are optimistic that growth
may in fact accelerate on account of its strategic focus on smaller cities and
large towns in the US. This affords it a cost advantage and allows it to
better serve these communities by being based locally.
3. Increased Return from Patience - during periods of fear and
uncertainty, time horizons shrink and investors focus on the here and now. As
long-term investors, this gives us a heightened advantage in identifying
secular growth companies that are facing near-term headwinds that are
obscuring the potential for long-term growth.
We have been seeking opportunities to pick up a bargain where valuations look
materially lower than history but the fundamental growth prospects remain
intact. An example of this is the recent purchase of YETI Holdings (purchased
on 16x forward earnings), a premium North American outdoor brand. Its appeal
lies in its superior quality, built-to-last products such as beverage cups and
coolers which are seen as premium outdoor products. Management is thoughtful
in its approach to managing the brand while expanding the product range and
growing the business outside North America. Another is Nippon Paint. A
Japanese paint products manufacturing company, Nippon has a strong position in
the Chinese market via its subsidiary, Nipsea. Brand and distribution are key
competitive advantages and a well-aligned management team has a strong track
record of success. China's per capita spend on paint is one-third that of
developed markets and we believe it has huge growth potential. Nipsea is
already the market leader and well-positioned to capture growth in China and
Asia more broadly.
On the other side of the ledger, we have moved on from holdings that looked
more fully valued or where the growth outlook had diminished. Examples of the
former include Booking Holdings (online travel) and Axon Enterprises (security
and law enforcement services). In the case of Booking Holdings, we felt a
combination of a strong post-pandemic recovery in travel and a sharp increase
in the share price diminished the upside for the business, but were also
cognisant of the potential competitive threat that artificial intelligence
applications might pose to Booking's online search platform. In Axon's case,
the share price had doubled in the prior 12 months taking the valuation on a
price-to-sales basis to over 10x. This has been a successful investment for
Monks since first investing in 2019 (its share price grew nearly three-fold),
but the probability of hitting our returns hurdle (a doubling in share price
over the next 5 years) had fallen significantly. A diminishing growth outlook
underpins the sales of long-term holding and financial exchange operator
Deutsche Boerse, Japanese auto part manufacturer DENSO, and Chinese food
delivery business, Meituan. The latter was subject to regulatory pressure to
reduce take rates and increase staff benefits which reduced profitability. The
scale of the opportunity perhaps led us to hold on too long, but we have
exited with the shares up nearly two-fold since purchase five years ago.
Ultimately, an increasingly competitive marketplace and a capped upside led us
to sell the shares.
Outlook
It has been a bruising period performance-wise. But beneath the difficult
headline numbers resides a portfolio in robust health. Forecast earnings
growth - at nearly twice the market average - is coiled and ready to drive
returns for shareholders in the years ahead. At the same time, portfolio
companies boast superior gross and net margins relative to the index (37.2%
versus 28.7% and 11.3% versus 9.0%, respectively) and are materially less
indebted, with net debt-to-equity of 20% versus the index at 50%. The superior
financial robustness of our holdings supports their ability to allocate more
capital to Research and Development (R&D to sales for Monks holdings is
7.3% compared to the index at 4.6%). These investments will extend their
competitive advantages and enable our companies to outcompete peers in years
to come.
We know from experience that this is exactly the kind of environment where
patience will be handsomely rewarded. Managing the assets of the Monks
Investment Trust is a privilege. Holding course and owning a portfolio of
high-quality companies that will deliver superior earnings is the best way to
deliver attractive returns for Monks shareholders in the years ahead.
* With debt at fair value
Baillie Gifford & Co
Managers
7 December 2023
For a definition of terms see Glossary of Terms and Alternative Performance
Measures at the end of this document
Total return information sourced from LSEG/Baillie Gifford. See disclaimer at
end of this document.
Past performance is not a guide to future performance.
The Managers' core investment beliefs
We believe the following features of Monks provide a sustainable basis for
adding value for shareholders.
Active management
- We invest in attractive companies using a 'bottom-up' investment
process. Macroeconomic forecasts are of relatively little interest to us.
- High active share* provides the potential for adding value.
- We ignore the structure of the index - for example the location of
a company's HQ and therefore its domicile are less relevant to us than where
it generates sales and profits.
- Large swathes of the market are unattractive and of no interest to
us.
- As index agnostic global investors we can go anywhere and only
invest in the best ideas.
- As the portfolio is very different from the index, we expect
portfolio returns to vary - sometimes substantially and often for prolonged
periods.
Committed growth investors
- In the long run, share prices follow fundamentals; growth drives
returns.
- We aim to produce a portfolio of stocks with above average growth
- this in turn underpins the ability of Monks to add value.
- We have a differentiated approach to growth, focusing on the type
of growth that we expect a company to deliver. All holdings fall into one of
three growth categories - as set out below.
- The use of these three growth categories ensures a diversity of
growth drivers within a disciplined framework.
Long-term perspective
- Long-term holdings mean that company fundamentals are given time
to drive returns.
- We prefer companies that are managed with a long-term mindset,
rather than those that prioritise the management of market expectations.
- We believe our approach helps us focus on what is important during
the inevitable periods of underperformance.
- Short-term portfolio results are random.
- As longer-term shareholders we are able to have greater influence
on environmental, social and governance matters.
Dedicated team with clear decision-making process
- Senior and experienced team drawing on the full resources of
Baillie Gifford.
- Alignment of interests - the investment team responsible for Monks
all own shares in the Company.
Portfolio construction
- Investments are held in three broad holding sizes - as set out
below.
- This allows us to back our judgement in those stocks for which we
have greater conviction, and to embrace the asymmetry of returns through
'incubator' positions in higher risk/return stocks.
- 'Asymmetry of returns': some of our smaller positions will
struggle and their share prices will fall; those that are successful may rise
many fold. The latter should outweigh the former.
Low cost
- Investors should not be penalised by high management fees.
- Low turnover and trading costs benefit shareholders.
*For a definition of terms see Glossary of Terms and Alternative Performance
Measures at the end of this document
Responsibility statement
We confirm that to the best of our knowledge:
a) the condensed set of Financial Statements has been prepared in
accordance with FRS 104 'Interim Financial Reporting';
b) the Interim Management Report includes a fair review of the information
required by Disclosure and Transparency Rule 4.2.7R (indication of important
events during the first six months, their impact on the condensed set of
Financial Statements and a description of the principal risks and
uncertainties for the remaining six months of the year); and
c) the Interim Financial Report includes a fair review of the information
required by Disclosure and Transparency Rule 4.2.8R (disclosure of related
party transactions and changes therein).
By order of the Board
Karl Sternberg
Chairman
7 December 2023
List of Investments as at 31 October 2023
Name Business Value % of total assets
£'000
Microsoft Software and cloud computing enterprise 91,934 3.7
Elevance Health Healthcare insurer 85,258 3.5
Martin Marietta Materials Cement and aggregates manufacturer 79,776 3.2
Amazon.com Online retailer 77,219 3.1
Moody's Credit rating agency 67,202 2.7
Meta Platforms Social networking website 62,061 2.5
CRH Diversified building materials company 61,598 2.5
Alphabet Online search engine 59,970 2.4
Reliance Industries Indian energy conglomerate 55,101 2.2
Prosus Media and ecommerce company 52,586 2.1
MasterCard Electronic payments network and related services 52,322 2.1
Service Corporation International Death care services 51,414 2.1
Ryanair Low cost European airline 48,746 2.0
Pernod Ricard Global spirits manufacturer 46,753 1.9
AIA Asian life insurer 37,537 1.5
The Schiehallion Fund Global unlisted growth equity investment company 36,820 1.5
TSMC Semiconductor manufacturer 35,510 1.4
Arthur J. Gallagher Insurance broker 34,806 1.4
Royalty Pharma Biopharmaceutical royalties portfolio 30,543 1.2
Analog Devices Integrated circuits 30,422 1.2
BHP Group Mineral exploration and production 29,354 1.2
Broadridge Financial Solutions Administrative solutions for financial services 29,350 1.2
Olympus Optoelectronic products 29,079 1.2
The Trade Desk Advertising technology company 29,065 1.2
HDFC Indian mortgage provider 28,231 1.1
Li Auto Chinese electric vehicle manufacturer 27,098 1.1
S&P Global Global credit rating agency 27,055 1.1
Adobe Systems Software products and technologies 26,619 1.1
Markel Markets and underwrites speciality insurance products 24,973 1.0
Prudential International life insurance 24,701 1.0
MercadoLibre Latin American ecommerce platform 24,452 1.0
Alnylam Pharmaceuticals RNA interference based biotechnology 24,067 1.0
Eaton Industrial engineering products 23,674 1.0
Richemont Luxury goods company 23,395 0.9
Charles Schwab Online savings and trading platform 22,503 0.9
Atlas Copco Industrial equipment 22,369 0.9
Teradyne Semiconductor testing equipment manufacturer 21,967 0.9
Doordash Online commerce platform 21,810 0.9
Ping An Insurance Chinese life insurer 21,455 0.9
Alibaba Online commerce company 21,391 0.9
Entegris Supplier of materials to high-tech industries 21,346 0.9
B3 Group Brazilian stock exchange operator 20,698 0.8
Shopify Online commerce platform 20,669 0.8
Rio Tinto Global commodities businesses 20,495 0.8
Cloudflare Cloud based IT services business 19,985 0.8
ByteDance (u) Social media and ecommerce 19,467 0.8
CoStar Commercial property portal 19,322 0.8
Advanced Drainage Systems Manufacturer of pipes and drainage systems 19,090 0.8
Tesla Electric cars and renewable energy solutions 18,974 0.8
Shiseido Japanese cosmetics manufacturer 18,577 0.8
SiteOne Landscape Supply US distributor of landscaping supplies 18,403 0.7
Thermo Fisher Scientific Scientific instruments, consumables and chemicals 18,357 0.7
CBRE Group Commercial real estate operator 18,145 0.7
SMC Producer of factory automation equipment 17,789 0.7
NVIDIA(†) Graphics processing, gaming, AI technology 17,665 0.7
Schibsted Media and classified advertising platforms 17,144 0.7
Netflix Subscription service for TV shows and movies 15,810 0.6
Albemarle Speciality chemicals 15,657 0.6
Epiroc Construction and mining machinery 15,609 0.6
Coupang South Korean ecommerce 15,523 0.6
YETI Holdings(†) Outdoor lifestyle company 15,515 0.6
adidas Sports apparel manufacturer 15,179 0.6
Moderna Vaccine manufacturer 14,764 0.6
Sysmex Medical testing equipment 13,623 0.6
ASM International Semiconductor component supplier 13,260 0.5
Sands China Macau casino operator 13,231 0.5
Estée Lauder Global cosmetic brands business 12,217 0.5
LVMH(†) French luxury goods conglomerate 12,000 0.5
Pool Corporation Swimming pool supplies and equipment 11,955 0.5
Genmab Biotechnology company 11,737 0.5
Stripe (u) Payments platform 11,663 0.5
ICICI Prudential Life Insurance Life insurance services 11,612 0.5
PDD Holdings(†) Chinese ecommerce 11,507 0.5
Nexans Subsea electric cabling 11,443 0.5
Bytes Technology Group Computer software 11,423 0.5
Samsung Electronics(†) Semiconductors and consumer electronics 11,400 0.5
Comfort Systems USA(†) HVAC systems and solutions 11,384 0.5
Floor & Décor Holdings Hard flooring retailer 11,256 0.5
Topicus.com Software and solutions 10,714 0.4
Snowflake Cloud based data insight application 10,625 0.4
Block(†) Financial technology 10,431 0.4
Epic Games (u) Gaming software developer 10,383 0.4
Howard Hughes US real estate developer 10,298 0.4
Adevinta Asa Media and classified advertising platforms 9,994 0.4
Redrow Housebuilding company 9,720 0.4
Sea Limited Gaming and ecommerce 9,718 0.4
Ashtead Group Industrial equipment rental company 9,406 0.4
Nippon Paint(†) Japanese paint manufacturing company 9,144 0.4
Advanced Micro Devices(†) American multinational semiconductor company 8,840 0.4
Chewy Online pet supplies retailer 8,801 0.4
Spotify Online music streaming service 8,628 0.3
Bellway Housebuilder 8,344 0.3
Datadog Cloud based IT system monitoring application 8,187 0.3
Sartorius Stedim Biotech(†) Biotechnology company, specialised equipment for research 7,706 0.3
Exact Sciences Cancer detection and treatment 7,610 0.3
Hoshizaki Corp Commercial kitchen equipment manufacturer 7,176 0.3
Certara Drug discovery and development 6,844 0.3
Woodside Energy Group Australian oil and gas extractor 6,762 0.3
Space Exploration Technologies (u) Space rockets and satellites 6,675 0.3
CyberAgent Japanese internet advertising and content 6,391 0.3
Midwich Distributor of technology solutions 6,029 0.2
Staar Surgical Implantable contact lenses 5,840 0.2
BIG Technologies Electronic monitoring solutions 5,340 0.2
Persimmon Housebuilder 5,080 0.2
Ant International (u) Chinese online payments and financial services business 5,008 0.2
Adyen Digital payments 4,957 0.2
Lemonade Data and insurance 4,682 0.2
Wayfair Online home furnishings business 4,003 0.2
Silk Invest Africa Food Fund (u) Africa focused private equity fund 3,562 0.1
Jet2 Low cost airline 2,978 0.1
Illumina Gene sequencing business 2,671 0.1
Farfetch Online fashion retailer 2,580 0.1
Novocure Biotechnology company focusing on solid tumour treatment 1,598 0.1
Illumina CVR (u) Gene sequencing business 1,327 0.1
Sberbank of Russia Russian commercial bank - -
Abiomed CVR (u) Medical implant manufacturer - -
Total investments 2,442,132 98.8
Net liquid assets* 29,236 1.2
Total assets* 2,471,368 100.0
Borrowings (189,860) (7.7)
Shareholders' funds 2,281,508 92.3
Listed Schiehallion Unlisted Net liquid assets* Total assets*
equities Fund securities(#) % %
% % %
31 October 2023 94.9 1.5 2.4 1.2 100.0
30 April 2023 94.4 2.0 1.9 1.7 100.0
* For a definition of terms used see Glossary of Terms and Alternative
Performance Measures at the end of this document.
(U) Denotes unlisted/private company holding.
† New purchase during the period. Complete sales during the period included:
Axon Enterprise; Booking Holdings; Bumble; DENSO; Deutsche Boerse; Meituan; On
the Beach; Team 17 Group; and Wizz Air Holdings.
# Includes holdings in preference shares, ordinary shares and contingent value
rights (CVR).
Investment portfolio by growth category as at 31 October 2023*
Holding size Growth stalwarts 37.7% Rapid growth 30.8% Cyclical growth 31.5% Holding size
Highest conviction holdings Microsoft 3.8 MasterCard 2.1 Amazon.com 3.2 Prosus 2.2 Martin Marietta Materials 3.3 CRH 2.5 Total in this
c.2.0% each
holding size
Elevance Health 3.5 Service Corporation International 2.1 Reliance Industries 2.3 Ryanair 2.0
36.7%
Moody's 2.8 Pernod Ricard 1.9
Meta Platforms 2.5
Alphabet 2.5
Average sized holdings AIA 1.5 S&P Global 1.1 The Schiehallion Fund 1.5 Alibaba 0.9 TSMC 1.5 Ping An Insurance Entegris 0.9 Total in this
c.1.0% each
holding size
Arthur J. Gallagher 1.4 Adobe Systems 1.1 The Trade Desk 1.2 B3 Group 0.8 Royalty Pharma 1.2 Rio Tinto 0.9
41.4%
Analog Devices Prudential 1.0 Li Auto 1.1 Shopify 0.8 BHP Group 1.2 Advanced Drainage Systems 0.8
Broadridge Financial Solutions 1.2 CoStar 0.8 MercadoLibre 1.0 Cloudflare 0.8 HDFC 1.2 SiteOne Landscape Supply 0.8
Olympus 1.2 Shiseido 0.8 Alnylam Pharmaceuticals 1.0 ByteDance 0.8 Markel 1.0 CBRE Group 0.8
1.2 Thermo Fisher Scientific 0.7 Doordash 0.9 Tesla 0.8 Eaton 1.0 SMC 0.7
NVIDIA 0.7 Richemont 1.0 0.7
Schibsted 0.7 Charles Schwab 0.9
Atlas Copco 0.9
Teradyne 0.9
Incubator holdings c.0.5% each YETI Holdings 0.6 Chewy 0.4 Netflix 0.6 Datadog 0.3 Albemarle 0.6 Redrow 0.4 Total in this
holding size
adidas 0.6 Sartorius Stedim Biotech 0.3 Coupang 0.6 Exact Sciences 0.3 Epiroc 0.6 Ashtead Group 0.4
21.9%
Sysmex 0.6 Hoshizaki Corp 0.3 Moderna 0.6 Space Exploration Technologies 0.3 ASM International 0.5 Nippon Paint 0.4
Estée Lauder 0.5 Certara 0.3 Genmab 0.5 CyberAgent 0.3 Sands China 0.5 Bellway 0.3
LVMH 0.5 Stripe 0.5 Midwich 0.2 Pool Corporation 0.5 Woodside Energy Group 0.3
Topicus.com 0.4 ICICI Prudential Life Insurance 0.5 Staar Surgical 0.2 Nexans 0.5 Persimmon 0.2
PDD Holdings 0.5 BIG Technologies 0.2 Samsung Electronics 0.5 Silk Invest Africa Food Fund 0.1
Bytes Technology Group 0.5 Ant International 0.2 Comfort Systems USA 0.5 Jet2 0.1
Snowflake 0.4 Adyen 0.2 Floor & Décor Holdings 0.5 Sberbank of Russia 0.0
Block 0.4 Lemonade 0.2 Howard Hughes 0.4
Epic Games 0.4 Wayfair 0.2
Adevinta Asa 0.4 Illumina 0.1
Sea Limited 0.4 Farfetch 0.1
Advanced Micro Devices 0.4 Novocure 0.1
Spotify 0.4 Illumina CVR 0.1
Abiomed CVR 0.0
* Excludes net liquid assets.
Portfolio positioning as at 31 October 2023(*†)
Geographical region % at % at
31 October
30 April
2023
2023
North America 56.9 52.4
Continental Europe 15.4 16.3
Emerging Markets 12.6 10.9
United Kingdom 5.7 8.6
Japan 4.3 5.2
Developed Asia 3.9 4.9
Net liquid assets 1.2 1.7
Total assets 100.0 100.0
Sector % at % at
31 October
2023 30 April
2023
Technology 25.2 21.6
Consumer discretionary 21.9 22.4
Financials 16.1 17.8
Industrials 15.5 13.3
Healthcare 10.7 12.5
Basic materials 2.6 4.0
Energy 2.5 2.6
Consumer staples 1.9 2.3
Real estate 1.9 1.8
Telecommunications 0.5 -
Net liquid assets 1.2 1.7
Total assets 100.0 100.0
* Expressed as a percentage of total assets.
(†)For a definition of terms used see Glossary of Terms and Alternative
Performance Measures at the end of this announcement.
Income statement (unaudited)
For the six months ended For the six months ended For the year ended
31 October 2023 31 October 2022 30 April 2023 (audited)
Notes Revenue Capital Total Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Losses on investments - (96,176) (96,176) - (164,112) (164,112) - (78,421) (78,421)
Currency (losses)/gains - (50) (50) - (120) (120) - 293 293
Income from investments and interest receivable 16,092 - 16,092 15,932 - 15,932 30,211 - 30,211
Investment management fee 3 (4,592) - (4,592) (4,419) - (4,419) (8,878) - (8,878)
Other administrative expenses (830) - (830) (1,000) - (1,000) (1,833) - (1,833)
Net return before finance costs and taxation 10,670 (96,226) (85,556) 10,513 (164,232) (153,719) 19,500 (78,128) (58,628)
Finance cost of borrowings (3,892) - (3,892) (3,515) - (3,515) (7,225) - (7,225)
Net return on ordinary activities before taxation 6,778 (96,226) (89,448) 6,998 (164,232) (157,234) 12,275 (78,128) (65,853)
Tax on ordinary activities 4 (1,219) (559) (1,778) (863) (183) (1,046) (1,561) (430) (1,991)
Net return on ordinary activities after taxation 5,559 (96,785) (91,226) 6,135 (164,415) (158,280) 10,714 (78,558) (67,844)
Net return per ordinary share 5 2.44p (42.41p) (39.97p) 2.75p (73.78p) (71.03p) 4.70p (34.47p) (29.77p)
The total column of this statement is the profit and loss account of the
Company. The supplementary revenue and capital return columns are prepared
under guidance published by the Association of Investment Companies.
All revenue and capital items in this statement derive from continuing
operations.
A Statement of Comprehensive Income is not required as the Company does not
have any other comprehensive income and the net return on ordinary activities
after taxation is both the profit and total comprehensive income for the
period.
Balance sheet (unaudited)
Notes At 31 October At 30 April
2023
£'000 2023
(audited)
£'000
Fixed assets
Investments held at fair value through profit or loss 7 2,442,132 2,574,408
Current assets
Debtors 7,785 20,441
Cash and cash equivalents 29,072 42,191
36,857 62,632
Creditors
Amounts falling due within one year:
National Australia Bank Limited Loan (90,000) (75,000)
Other creditors (5,902) (18,142)
(95,902) (93,142)
Net current liabilities (59,045) (30,510)
Total assets less current liabilities 2,383,087 2,543,898
Creditors
Amounts falling due after more than one year:
Loan notes 8 (99,860) (99,858)
Provision for tax liability 9 (1,719) (1,160)
(101,579) (101,018)
Net assets 2,281,508 2,442,880
Capital and reserves
Share capital 12,659 12,659
Share premium account 433,714 433,714
Capital redemption reserve 8,700 8,700
Capital reserve 1,755,662 1,915,385
Revenue reserve 70,773 72,422
Shareholders' funds 10 2,281,508 2,442,880
Shareholders' funds per ordinary share (borrowings at book value) 10 1,017.3p 1,058.5p
Net asset value per ordinary share* (borrowings at par value) 1,017.2p 1,058.5p
Net asset value per ordinary share* (borrowings at fair value) 1,042.1p 1,080.0p
Ordinary shares in issue 10 224,275,666 230,796,666
* See Glossary of Terms and Alternative Performance Measures at the
end of this announcement.
The accompanying notes on the following pages are an integral part of the
Financial Statements
Statement of changes in equity (unaudited)
For the six months ended 31 October 2023
Notes Share capital £'000 Share Capital Capital Revenue reserve £'000 Shareholders'
reserve *
premium redemption £'000 funds
£'000
account reserve
£'000 £'000
Shareholders' funds at 1 May 2023 12,659 433,714 8,700 1,915,385 72,422 2,442,880
Net return on ordinary activities after taxation - - - (96,785) 5,559 (91,226)
Ordinary shares bought back 11 - - - (62,938) - (62,938)
Dividends paid during the period 6 - - - - (7,208) (7,208)
Shareholders' funds at 31 October 2023 12,659 433,714 8,700 1,755,662 70,773 2,281,508
For the six months ended 31 October 2022
Notes Share capital £'000 Share Capital Capital Revenue reserve £'000 Shareholders'
reserve *
premium redemption £'000 funds
£'000
account reserve
£'000 £'000
Shareholders' funds at 1 May 2022 11,823 262,183 8,700 2,129,483 66,975 2,479,164
Net return on ordinary activities - - - (164,415) 6,135 (158,280)
after taxation
Ordinary shares issued/bought back 11 - (548) - (98,615) - (99,163)
Dividends paid during the period 6 - - - - (5,267) (5,267)
Shareholders' funds at 31 October 2022 11,823 261,635 8,700 1,866,453 67,843 2,216,454
(* ) The Capital Reserve balance at 31 October 2023 includes
holding gains on investments of £520,850,000 (31 October 2022 - gains of
£598,370).
The accompanying notes on the following pages are an integral part of the
Financial Statements
Cash flow statement (unaudited)
Notes Six months to Six months to
31 October 2023
£'000 31 October 2022
£'000
Cash flows from operating activities
Net return on ordinary activities before taxation (89,448) (157,234)
Net losses on investments 96,176 164,112
Currency losses 50 120
Finance costs of borrowings 3,892 3,515
Overseas tax incurred (1,244) (894)
Changes in debtors and creditors 1,302 1,308
Cash from operations* 10,728 10,927
Interest paid (3,427) (3,443)
Net cash inflow from operating activities 7,301 7,484
Net cash inflow from investing activities 39,429 90,862
Cash flow from financing activities
Equity dividends paid 6 (7,208) (5,267)
Ordinary shares bought back (67,591) (105,473)
Borrowings drawn down 15,000 -
Net cash outflow from financing activities (59,799) (110,740)
Decrease in cash and cash equivalents (13,069) (12,394)
Exchange movements (50) (120)
Cash and cash equivalents at start of period 42,191 35,879
Cash and cash equivalents at end of period 29,072 23,365
(* ) Cash from operations includes dividends received of
£16,998,000 (31 October 2022 - £17,838,000) and deposit interest received of
£727,000 (31 October 2022 - £94,000).
The accompanying notes are an integral part of the Financial Statements.
Notes to the condensed financial statements (unaudited)
1. Basis of accounting
The condensed Financial Statements for the six months to 31 October 2023
comprise the statements set out above together with the related notes below.
They have been prepared in accordance with FRS 104 'Interim Financial
Reporting' and the AIC's Statement of Recommended Practice issued in November
2014 and updated in July 2022 with consequential amendments. They have not
been audited or reviewed by the Auditor pursuant to the Auditing Practices
Board Guidance on 'Review of Interim Financial Information'. The Financial
Statements for the six months to 31 October 2023 have been prepared on the
basis of the same accounting policies as set out in the Company's Annual
Report and Financial Statements at 30 April 2023.
Going concern
The Directors have considered the Company's principal risks and uncertainties,
as set out in note 13 below, together with the Company's current position,
investment objective and policy, the level of demand for the Company's shares,
the nature of its assets, its liabilities and projected income and
expenditure. The Board has, in particular, considered the impact of market
volatility over recent months, owing to macroeconomic and geopolitical
concerns, including increased inflation and interest rates, the Russia-Ukraine
conflict and Israel-Palestine hostilities. It is the Directors' opinion that
the Company has adequate resources to continue in operational existence for
the foreseeable future. The vast majority of the Company's investments are
readily realisable and can be sold to meet its liabilities as they fall due.
All borrowings require the prior approval of the Board. Gearing levels and
compliance with covenants are reviewed by the Board on a regular basis. The
Company has continued to comply with the investment trust status requirements
of section 1158 of the Corporation Tax Act 2010 and the Investment Trust
(Approved Company) Regulations 2011. Accordingly, the Directors consider it
appropriate to adopt the going concern basis of accounting in preparing these
Financial Statements and confirm that they are not aware of any material
uncertainties which may affect the Company's ability to continue to do so over
a period of at least twelve months from the date of approval of these
Financial Statements.
2. Financial information
The financial information contained within this Interim 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 2023
has been extracted from the statutory accounts which have been filed with the
Registrar of Companies. The Auditor's Report on those accounts was not
qualified, did not include a reference to any matters to which the Auditor
drew attention by way of emphasis without qualifying its report, and did not
contain statements under sections 498(2) or (3) of the Companies Act 2006.
3. Investment managers
Baillie Gifford & Co Limited, a wholly owned subsidiary of Baillie Gifford
& Co, has been appointed by the Company as its Alternative Investment Fund
Managers (AIFM) and Company Secretaries. The investment management function
has been delegated to Baillie Gifford & Co. The management agreement can
be terminated on six months' notice. The annual management fee is 0.45% on the
first £750 million of total assets, 0.33% on the next £1 billion of total
assets and 0.30% on the remaining total assets. For fee purposes, total assets
is defined as the total value of all assets held less all liabilities (other
than any liability in the form of debt intended for investment purposes) and
excludes the value of the Company's holding in The Schiehallion Fund a
closed-ended investment company managed by Baillie Gifford & Co. The
Company does not currently hold any other collective investment vehicles
managed by Baillie Gifford & Co. Where the Company holds investments in
open-ended collective investment vehicles managed by Baillie Gifford, such as
OEICs, Monks' share of any fees charged within that vehicle will be rebated to
the Company. All debt drawn down during the periods under review is intended
for investment purposes.
4. Tax on ordinary activities
The revenue tax charge arises from withholding tax suffered on overseas
dividends. The capital tax charge results from the Provision for Tax Liability
in respect of Indian capital gains tax as detailed in note 9.
5. Net return per ordinary share
Six months to Six months to Year to
31 October 2023
31 October 2022
30 April 2023 (audited)
£'000 £'000 £'000
Revenue return on ordinary activities after taxation 5,559 6,135 10,714
Capital return on ordinary activities after taxation (96,785) (164,415) (78,558)
Total net return (91,226) (158,280) (67,844)
Net return per ordinary share is based on the above totals of revenue and
capital and on 228,211,498 (31 October 2022 - 222,840,019; 30 April 2023 -
227,887,889) ordinary shares, being the weighted average number of ordinary
shares in issue during the period.
There are no dilutive or potentially dilutive shares in issue.
6. Dividends
Six months to Six months to Year to
31 October 2023
31 October 2022 30 April 2023
£'000
(audited)
£'000
£'000
Amounts recognised as distributions in the period: 7,208 5,267 5,267
Previous year's final dividend of 3.15p (2022 - 2.35p),
paid 13 September 2023
Amounts paid and payable in respect of the period: - - 7,208
Final dividend (2023 - 3.15p)
No interim dividend has been declared in respect of the current period.
7. Fair value hierarchy
The Company's investments are financial assets held at fair value through
profit or loss. The fair value hierarchy used to analyse the basis on which
the fair values of such financial instruments are measured is described below.
Fair value measurements are categorised on the basis of the lowest level input
that is significant to the fair value measurement.
Level 1 - using unadjusted quoted prices for identical instruments in an
active market;
Level 2 - using inputs, other than quoted prices included within Level 1, that
are directly or indirectly observable (based on market data); and
Level 3 - using inputs that are unobservable (for which market data is
unavailable).
An analysis of the Company's financial asset investments based on the fair
value hierarchy described above is shown below.
Level 1 Level 2 Level 3 Total
£'000
£'000
£'000
£'000
As at 31 October 2023
Listed equities 2,347,227 36,820 - 2,384,047
Unlisted securities - - 58,085 58,085
Total financial asset investments 2,347,227 36,820 58,085 2,442,132
Level 1 Level 2 Level 3 Total
£'000
£'000
£'000
£'000
As at 30 April 2023 (audited)
Listed equities 2,466,713 53,277 - 2,519,990
Unlisted securities - - 54,418 54,418
Total financial asset investments 2,466,713 53,277 54,418 2,574,408
The fair value of listed investments is either bid price or last traded price
depending on the convention of the exchange on which the investment is listed.
Listed Investments are categorised as Level 1 if they are valued using
unadjusted quoted prices for identical instruments in an active market and as
Level 2 if they do not meet all these criteria but are, nonetheless, valued
using market data. Unlisted investments are valued at fair value by the
Directors following a detailed review and appropriate challenge of the
valuations proposed by the Managers. The Managers' unlisted investment policy
applies methodologies consistent with the
International Private Equity and Venture Capital Valuation Guidelines
('IPEV'). These methodologies can be categorised as follows: (a) market
approach (multiples, industry valuation benchmarks and available market
prices); (b) income approach (discounted cash flows); and (c) replacement cost
approach (net assets). The Company's holdings in unlisted investments are
categorised as Level 3 as unobservable data is a significant input to their
fair value measurements.
8. Financial liabilities
At 31 October 2023 the total book value of the Company's borrowings amounted
to £189,860,000 (30 April 2023 - £174,858,000). This comprised loan notes of
£60m repayable in 2054 (30 April 2023 - £60m), loan notes of £40m repayable
in 2045 (30 April 2023 - £40m) and £90m drawn under the revolving credit
facility with National Australia Bank Limited (30 April 2022 - £75m).
The fair value of borrowings at 31 October 2023 was £134,261,000 (30 April
2023 - £125,404,000).
9. Provision for tax liability
The tax liability provision at 31 October 2023 of £1,719,000 (30 April 2023 -
£1,160,000) relates to a potential liability for Indian capital gains tax
that may arise on the Company's Indian investments should they be sold in the
future, based on the net unrealised taxable capital gain at the period end and
on enacted Indian tax rates. The amount of any future tax amounts payable may
differ from this provision, depending on the value and timing of any future
sales of such investments and future Indian tax rates.
10. Shareholders' funds
31 October 30 April
2023 2023
Shareholders' funds £2,281,508,000 £2,442,880,000
Number of ordinary shares in issue excluding treasury shares 224,275,666 230,796,666
Shareholders' funds per ordinary share 1,017.3p 1,058.5p
The shareholders' funds figures above have been calculated after deducting
borrowings at book value, in accordance with the provisions of FRS 104.
Reconciliations between shareholders' funds and net asset values, calculated
after deducting borrowings at par value and fair value, are shown in the
Glossary of Terms and Alternative Performance Measures below.
11. Share capital
In the six months to 31 October 2023 the Company bought back 6,521,000
ordinary shares into treasury (31 October 2022 - 9,796,244 shares bought
back). No shares were issued during the period and 28,895,794 shares were held
in treasury at 31 October 2023. At 31 October 2023, the Company had authority
to buy back 31,323,652 shares and to allot, or sell from treasury, 22,988,666
shares.
12. Related party transactions
There have been no transactions with related parties during the first six
months of the current financial year that have materially affected the
financial position or the performance of the Company during that period and
there have been no changes in the related party transactions described in the
last Annual Report and Financial Statements that could have had such an effect
on the Company during that period.
13. Principal risks and uncertainties
The principal risks facing the Company, which have not changed since the date
of the Company's Annual Report and Financial Statements for the year ended 30
April 2023, are financial risk, investment strategy risk, climate and
governance risk, regulatory risk, custody and depositary risk, operational
risk, discount risk, political and associated economic risk and leverage risk.
An explanation of these risks and how they are managed is set out on pages 19
and 20 of that report, which is available on the Company's website:
monksinvestmenttrust.co.uk.(‡)
(‡) Neither the contents of the Managers' website nor the contents of any
website accessible from hyperlinks on the Managers' website (or any other
website) is incorporated into, or forms part of, this announcement.
None of the views expressed in this document should be construed as advice to
buy or sell a particular investment.
Baillie Gifford's approach to valuing private companies
We aim to hold our private company investments at 'fair value' i.e., the price
that would be paid in an open-market transaction. Valuations are adjusted both
during regular valuation cycles and on an ad hoc basis in response to 'trigger
events'. Our valuation process ensures that private companies are valued in
both a fair and timely manner.
The valuation process is overseen by a valuations group at Baillie Gifford
which takes advice from an independent third party (S&P Global). The
valuations group is independent from the investment team, with all voting
members being from different operational areas of the firm, and the portfolio
managers only receive final valuation notifications once they have been
applied.
We revalue the private holdings on a three-month rolling cycle, with one-third
of the holdings reassessed each month. During stable market conditions, and
assuming all else is equal, each investment would be valued four times in a
twelve month period. For investment trusts, the prices are also reviewed twice
per year by the respective investment trust boards and are subject to the
scrutiny of external auditors in the annual audit process.
Recent market volatility has meant that recent pricing has moved much more
frequently than would have been the case with the quarterly valuations cycle.
Beyond the regular cycle, the valuations team also monitors the portfolio for
certain 'trigger events'. These may include: changes in fundamentals; a
takeover approach; an intention to carry out an Initial Public Offering (IPO);
company news which is identified by the valuation team or by the portfolio
managers or changes to the valuation of comparable public companies. Any ad
hoc change to the fair valuation of any holding is implemented swiftly and
reflected in the next published NAV. There is no delay.
The valuations team also monitors relevant market indices on a weekly basis
and updates valuations in a manner consistent with our external valuer's
(S&P Global) most recent valuation report where appropriate. When market
volatility is particularly pronounced the team undertakes these checks daily.
In addition to the 2.4% of the portfolio holdings in direct private company
investments, 1.5% of the portfolio is in The Schiehallion Fund, a closed ended
investment company investing predominantly in private companies, which Monks
values by reference to its market price.
Glossary of terms and alternative performance measures (APM)
Total assets
This is the Company's definition of adjusted total assets, being the total
value of all assets held less all liabilities (other than liabilities in the
form of borrowings).
Shareholders' funds
Shareholders' funds is the value of all assets held less all liabilities, with
borrowings deducted at book cost.
Net asset value (APM)
Net asset value (NAV) is the value of all assets held less all liabilities,
with borrowings deducted at either par value or fair value as described below.
Per share amounts are calculated by dividing the relevant figure by the number
of ordinary shares in issue.
Net asset value (borrowings at par value) (APM)
Borrowings are valued at nominal par value. A reconciliation from
shareholders' funds (borrowings at book value) to net asset value after
deducting borrowings at par value is provided below.
31 October 2023 31 October 2023 30 April 30 April
2023
2023
£'000 per share
£'000 per share
Shareholders' funds (borrowings at book value) 2,281,508 1,017.3p 2,442,880 1,058.5p
Add: book value of borrowings 189,860 84.6p 174,858 75.8p
Less: par value of borrowings (190,000) (84.8p) (175,000) (75.8p)
Net asset value (borrowings at par value) 2,281,368 1,017.2p 2,442,738 1,058.5p
The per share figures above are based on 224,275,666 (30 April 2023 -
230,796,666) ordinary shares of 5p, being the number of ordinary shares in
issue
at the period end excluding treasury shares.
Net asset value (borrowings at fair value) (APM)
Borrowings are valued at an estimate of market worth. The fair values of the
loan notes are calculated using a comparable debt approach, by reference to a
basket of corporate debt. The fair value of the Company's short term bank
borrowings is equivalent to its book value.
A reconciliation from shareholders' funds (borrowings at book value) to net
asset value after deducting borrowings at fair value is provided below.
31 October 2023 31 October 2023 30 April 30 April
2023
2023
£'000 per share
£'000 per share
Shareholders' funds (borrowings at book value) 2,281,508 1,017.3p 2,442,880 1,058.5p
Add: book value of borrowings 189,860 84.6p 174,858 75.8p
Less: fair value of borrowings (134,261) (59.9p) (125,404) (54.3p)
Net asset value (borrowings at fair value) 2,337,107 1,042.1p 2,492,334 1,080.0p
The per share figures above are based on 224,275,666 (30 April 2023 -
230,796,666) ordinary shares of 5p, being the number of ordinary shares in
issue
at the period end excluding treasury shares.
Net liquid assets
Net liquid assets comprise current assets less current liabilities (excluding
borrowings) and provisions for deferred liabilities.
Discount/premium (APM)
As stock markets and share prices vary, an investment trust's share price is
rarely the same as its NAV. When the share price is lower than the NAV per
share it is said to be trading at a discount. The size of the discount is
calculated by subtracting the share price from the NAV per share and is
usually expressed as a percentage of the NAV per share. If the share price is
higher than the NAV per share, this situation is called a premium.
31 October 2023 30 April 2023
Closing NAV per share (borrowings at par) (a) 1,017.2p 1,058.5p
Closing NAV per share (borrowings at fair value) (b) 1,042.1p 1,080.0p
Closing share price (c) 901.0p 975.0p
Discount to NAV with borrowings at par (c - a) ÷ a (11.4%) (7.9%)
Discount to NAV with borrowings at fair value (c - b) ÷ b (13.5%) (9.7%)
Active share (APM)
Active share, a measure of how actively a portfolio is managed, is the
percentage of the listed equity portfolio that differs from its comparative
index. It is calculated by deducting from 100 the percentage of the portfolio
that overlaps with the comparative index. An active share of 100 indicates no
overlap with the index and an active share of zero indicates a portfolio that
tracks the index.
Total return (APM)
The total return is the return to shareholders after reinvesting the net
dividend on the date that the share price goes ex-dividend, as detailed below.
Net asset value total return
31 October 2023 NAV (par) 31 October 2023 NAV (fair)
Closing NAV per share (a) 1,017.2p 1,042.1p
Dividend adjustment factor* (b) 1.0028 1.0028
Adjusted closing NAV per share (c = a x b) 1,020.0p 1,045.0p
Opening NAV per share (d) 1,058.5p 1,080.0p
Total return (c ÷ d) -1 (3.6%) (3.2%)
*The dividend adjustment factor is calculated on the assumption that the
dividend of 3.15p paid by the Company during the period was reinvested into
shares of the Company at the cum income NAV at the ex-dividend date.
Share price total return
31 October 2023
share price
Closing share price (a) 901.0p
Dividend adjustment factor* (b) 1.0031
Adjusted closing share price (c = a x b) 903.8p
Opening share price (d) 975.0p
Total return (c ÷ d) -1 (7.3%)
*The dividend adjustment factor is calculated on the assumption that the
dividend of 3.15p paid by the Company during the period was reinvested into
shares of the Company at the share price at the ex-dividend date.
Gearing (APM)
At its simplest, gearing is borrowing. Just like any other public company, an
investment trust can borrow money to invest in additional investments for its
portfolio. The effect of the borrowing on the shareholders' assets is called
'gearing'. If the Company's assets grow, the shareholders' assets grow
proportionately more because the debt remains the same. But if the value of
the Company's assets falls, the situation is reversed. Gearing can therefore
enhance performance in rising markets but can adversely impact performance in
falling markets. The level of gearing can be adjusted through the use of
derivatives which affect the sensitivity of the value of the portfolio to
changes in the level of markets.
Gross gearing, also referred to as potential gearing is the Company's
borrowings expressed as a percentage of shareholders' funds (a ÷ c in the
table below).
Net gearing, also referred to as invested gearing is borrowings at book value
less cash and cash equivalents (any certificates of deposit are not deducted)
and brokers' balances expressed as a percentage of shareholders' funds (b ÷ c
in the table below)*.
Effective gearing, as defined by the Board and Managers of Monks, is the
Company's borrowings at par less cash, brokers' balances and investment grade
bonds maturing within one year, expressed as a percentage of shareholders'
funds*.
* As adjusted to take into account the gearing impact of any
derivative holdings.
31 October 2023 30 April 2023
Borrowings (at book cost) (a) £189,860,000 £174,858,000
Less: cash and cash equivalents (£29,072,000) (£42,191,000)
Less: sales for subsequent settlement (£5,096,000) (£16,520,000)
Add: purchases for subsequent settlement £1,801,000 £14,546,000
Adjusted borrowings (b) £157,493,000 £130,693,000
Shareholders' funds (c) £2,281,508,000 £2,442,880,000
Gross (potential) gearing (a ÷ c) 8.3% 7.2%
Net (invested) gearing (b ÷ c) 6.9% 5.3%
Unlisted, Unquoted and Private Company Investments
'Unlisted', 'Unquoted' and 'Private Company' investments are investments in
securities not traded on a recognised exchange.
Treasury shares
The Company has the authority to make market purchases of its ordinary shares
for retention as treasury shares for future reissue, resale, transfer, or for
cancellation. Treasury shares do not receive distributions and the Company is
not entitled to exercise the voting rights attaching to them.
Turnover (APM)
Turnover is a measure of portfolio change or trading activity. Monthly
turnover is calculated as the minimum of purchases and sales in a month,
divided by the average market value of the fund. Monthly numbers are added
together to get the rolling 12 month turnover data.
None of the views expressed in this document should be construed as advice to
buy or sell a particular investment.
The printed version of the Interim Financial Report will be sent to
shareholders and will be available on the Monks' page of the Managers' website
monksinvestmenttrust.co.uk ‡ on or around 20 December 2023.
‡ Neither the contents of the Managers' website nor the
contents of any website accessible from hyperlinks on the Managers' website
(or any other website) is incorporated into, or forms part of, this
announcement.
Monks is managed by Baillie Gifford & Co, the Edinburgh based fund
management group with around £217 billion under management and advice in
active equity and bond portfolios for clients in the UK and throughout the
world (as at 6 December 2023).
Investment Trusts are UK public limited companies and are not authorised or
regulated by the Financial Conduct Authority.
Past performance is not a guide to future performance. The value of an
investment 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. This is because the
share price is determined by the changing conditions in the relevant stock
markets in which the Company invests and by the supply and demand for the
Company's shares.
8 December 2023
For further information please contact:
Client Relations, Baillie Gifford & Co - Tel: 0131 275 2000
Jonathan Atkins, Four Communications - Tel: 0203 920 0555 or 07872 495396
Automatic exchange of information
In order to fulfil its obligations under UK tax legislation relating to the
automatic exchange of information, the Company is required to collect and
report certain information about certain shareholders.
The legislation requires investment trust companies to provide personal
information to HMRC on certain investors who purchase shares in investment
trusts. Accordingly, the Company will have to provide information annually to
the local tax authority on the tax residencies of a number of non-UK based
certificated shareholders and corporate entities.
Shareholders, excluding those whose shares are held in CREST, who come on to
the share register will be sent a certification form for the purposes of
collecting this information.
For further information, please see HMRC's Quick Guide: Automatic Exchange of
Information - information for account holders
gov.uk/government/publications/exchange-of-information-account-holders.
Third party data provider disclaimer
No third party data provider ('Provider') makes any warranty, express or
implied, as to the accuracy, completeness or timeliness of the data contained
herewith nor as to the results to be obtained by recipients of the data.
No Provider shall in any way be liable to any recipient of the data for any
inaccuracies, errors or omissions in the index data included in this document,
regardless of cause, or for any damages (whether direct or indirect) resulting
therefrom.
No Provider has any obligation to update, modify or amend the data or to
otherwise notify a recipient thereof in the event that any matter stated
herein changes or subsequently becomes inaccurate. Without limiting the
foregoing, no Provider shall have any liability whatsoever to you, whether in
contract (including under an indemnity), in tort (including negligence), under
a warranty, under statute or otherwise, in respect of any loss or damage
suffered by you as a result of or in connection with any opinions,
recommendations, forecasts, judgements, or any other conclusions, or any
course of action determined, by you or any third party, whether or not based
on the content, information or materials contained herein.
FTSE index data
London Stock Exchange Group plc and its group undertakings (collectively, the
'LSE Group'). © LSE Group 2022. FTSE Russell is a trading name of certain of
the LSE Group companies. 'FTSE®' 'Russell®', FTSE Russell®, is/are a trade
mark(s) of the relevant LSE Group companies and is/are used by any other LSE
Group company under license. All rights in the FTSE Russell indexes or data
vest in the relevant LSE Group company which owns the index or the data.
Neither LSE Group nor its licensors accept any liability for any errors or
omissions in the indexes or data and no party may rely on any indexes or data
contained in this communication.
No further distribution of data from the LSE Group is permitted without the
relevant LSE Group company's express written consent. The LSE Group does not
promote, sponsor or endorse the content of this communication.
Sustainable finance disclosure regulation ('SFDR')
The EU Sustainable Finance Disclosure Regulation ('SFDR') does not have a
direct impact in the UK due to Brexit, however, it applies to third-country
products marketed in the EU. As The Monks Investment Trust PLC is marketed in
the EU by the AIFM, BG & Co Limited, via the National Private Placement
Regime ('NPPR') the following disclosures have been provided to comply with
the high-level requirements of SFDR.
The AIFM has adopted Baillie Gifford & Co's Governance and Sustainable
Principles and Guidelines as its policy on integration of sustainability risks
in investment decisions.
Baillie Gifford & Co's approach to investment is based on identifying and
holding high quality growth businesses that enjoy sustainable competitive
advantages in their marketplace. To do this it looks beyond current financial
performance, undertaking proprietary research to build up an in-depth
knowledge of an individual company and a view on its long-term prospects. This
includes the consideration of sustainability factors (environmental, social
and/or governance matters) which it believes will positively or negatively
influence the financial returns of an investment.
More detail on the Investment Managers' approach to sustainability can be
found in the Governance and Sustainability Principles and Guidelines document,
available publicly on the Baillie Gifford website bailliegifford.com.
Taxonomy regulation
The Taxonomy Regulation establishes an EU-wide framework or criteria for
environmentally sustainable economic activities in respect of six
environmental objectives. It builds on the disclosure requirements under SFDR
by introducing additional disclosure obligations in respect of Alternative
Investment Funds that invest in an economic activity that contributes to an
environmental objective.
The Company does not commit to make sustainable investments as defined under
SFDR. As such, the underlying investments do not take into account the EU
criteria for environmentally sustainable economic activities.
-ends-
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