TIDMMNKS
RNS Number : 8166I
Monks Investment Trust PLC
07 December 2022
RNS Announcement
The Monks Investment Trust PLC (MNKS)
Legal Entity Identifier: 213800MRI1JTUKG5AF64
Results for the six months to 31 October 2022
The following is the unaudited Interim Financial Report for the
six months to 31 October 2022 which was approved by the Board on 6
December 2022.
Interim Management Report
The performance of the Monks portfolio over the past six months
has been disappointing. The backdrop of an ongoing war in Europe
between Russia and Ukraine, rising inflation, and aggressive
central bank rate rises have done little to ease investor
nervousness. Investors' appetite for risk has been reduced, their
timeframes have shrunk, and the value the market is prepared to
place on future profits has fallen. The sort of structurally
expanding businesses Monks invests in, particularly those where
profits lie a few years out, remain out of favour.
During the first half of our financial year, the Company
produced a negative net asset value (NAV)* total return of -5.2%
compared to -0.3% for the comparative index (FTSE World in
sterling). The share price total return was -7.6%. Since the Global
Alpha team took over the management of the portfolio in March 2015,
the Company has produced a NAV total return of +118.4% compared to
+119.7% for the comparative index. The share price total return was
+129.7%.
Resilience, quality, growth
Given ongoing market challenges, it is important we reconfirm to
shareholders our convictions. Our confidence in the portfolio is
underpinned by the underlying holdings' superior resilience,
quality, and growth characteristics. The portfolio holdings remain
significantly less indebted (Net Debt to Equity 10% versus 50% for
the market) and have higher margin structures (for example, gross
margins of 40% versus 29%) than the broader market. These are
desirable in a world where both input and funding costs are rising
and the demand environment for companies is less certain. The
operational performance of investee companies remains strong. In
aggregate, revenue and earnings growth has outpaced the broader
market by a considerable margin (annualised revenue and earnings
growth has been 60% and 30% faster, respectively, in the five years
to end October). As we look forward, revenue and earnings are
forecast to grow twice as fast as the market average over the next
year - our conviction strengthens over longer periods.
Portfolio activity
Year-to-date, we have sold 20 holdings and established nine new
ones. The greater number of sales reflects a proactive and ruthless
portfolio 'weeding' exercise. These sales can be broadly
categorised into three main groups.
The first comprises companies that we believe to be materially
challenged in an inflationary environment or that are exposed to a
potential tapering of consumer demand. Positions sold include
Peloton (home fitness), Carvana (online used car retail) and
Teladoc (telemedicine). Peloton and Carvana have been
disappointingly short-lived holdings. In Peloton's case, it became
clear that the company had mismanaged the hardware side of its
business, significantly overestimating demand for its exercise
bikes. This necessitated the appointment of a new CEO and a period
of stabilisation. We moved on as our confidence in management had
been undermined and our original thesis overwhelmed. Carvana buys
its inventory (used cars) on credit and sells to consumers who are
often reliant on credit. In a period of rising interest rates and
weakening demand for highly discretionary goods, our view is that
Carvana's probability of success is narrowing. Teladoc had been a
longer-term holding (purchased in September 2019). A combination of
slowing growth, and significant write-downs relating to an
acquisition, undermined our confidence in the long-term investment
case. We continue to contemplate the long-term implications for the
likes of Wayfair (online furniture retail), Oscar Health (health
insurance) and Adidas (sports apparel).
The second group is Chinese companies. Positions in Brilliance
China Automotive (auto retail), KE Holdings (online property),
Tencent Music Entertainment (online music and entertainment) and
Naspers (South African investment company, included here due to its
significant stake in Chinese gaming business, Tencent) have been
sold. For each company, there are fundamental reasons behind our
decision to sell. For example, emerging competition in the cases of
KE Holdings and TME and governance concerns at Brilliance China
Automotive. However, it is important to recognise the prevailing
regulatory environment for private enterprise in China. We believe
that it is increasingly difficult for private enterprises in China
to generate supernormal profits of the sort that we seek for Monks'
portfolio. Therefore, a more modest overall exposure to China
better reflects our view of the potential upside.
The third group is where the investment case has played out or
where we have been disappointed by management's ability to execute.
In the former camp, Hays, Page Group (both recruitment) and ICICI
Bank (retail banking), have delivered operationally and in share
price terms. In Hays and Page Groups' case, the future threat of
online platforms like LinkedIn compelled us to move on, whilst
ICICI Bank has grown its loan book, asset quality and net interest
margins strongly. In the latter camp, Lyft (ride hailing),
Stericyle (waste management) and Vimeo (video software) failed
either to meet our ambitions for their business or underwhelmed
operationally.
Reward seeking
The significant markdown in share prices that we have seen this
year has brought valuations of many attractive growth companies
into our purview. We have begun to take advantage of this by
investing in companies we have long admired. Examples include the
purchases of Adobe (digital content), Analog Devices
(semiconductors), and Royalty Pharma (healthcare funding) in the
first half of the calendar year. In the last six months, we have
purchased new holdings in Eaton (electrical power equipment) and
Shiseido (cosmetics). Eaton is a manufacturer of vital electrical
power management equipment and has a strong track record of
operational efficiency. We believe that the structural trend toward
digitalisation and an increased focus on higher-margin products
should underpin strong growth in the future. Shiseido is a Japanese
cosmetics manufacturer with a portfolio of high-end brands. Whilst
pandemic lockdowns across Asia have stymied growth, we believe that
over the long term the emerging middle classes are likely to
underpin attractive returns for Shiseido. Elsewhere, we have been
able to add to existing positions where we think that the share
price falls are unjustified. This has been the case for Farfetch
(online luxury), Coupang (ecommerce) and Chewy (online pet
supplies).
We believe that the portfolio is opportunistically poised to
deploy capital from the 'Stalwarts' (which have held up well in
relative terms and account for nearly 40% of the portfolio) into
selective opportunities where the relative return potential is
greater. We have been preparing the ground for this by looking both
at potential cyclical opportunities and, against a background of
scarcer capital, companies that have capital readily available to
deploy. We are excited about the abundance of opportunities and are
building conviction in several names.
Back on the road
We have been energised by the return of in-person meetings with
investee companies and prospective holdings. We have been able to
travel both locally and further afield, including to the US and
Latin America. We met with a variety of existing and potential
holdings across a diverse range of sectors and industries.
Indeed, we were fortunate to spend significant time with the
founder and four members of the executive management team of
holding MercadoLibre. This access afforded us a better
understanding of the depth of MercadoLibre's executive talent pool
and the future drivers of growth for the business. Likewise, we
spent a day with Farfetch, which helped further our understanding
of the business and the likelihood of it becoming the predominant
global ecommerce platform for luxury goods.
The value of these in-person conversations should not be
underestimated. Not only were we able to directly address questions
about the competitive landscape for MercadoLibre's ecommerce
platform and the stability of its financing arm, but our broader
view of where there may be structural growth opportunities was
enriched. Our recent trip involved meetings with several innovative
financial disruptors and a venture capital provider. The financial
sector in many Latin American countries appears ripe for disruption
given the egregious fees charged by incumbent banks. We were left
in no doubt about the potential for disruption, and that this area
could be subject to significant change and opportunity in the
future.
Independent Investment Trust
In early November the Monks portfolio received GBP173m of assets
following the voluntary liquidation and rollover of The Independent
Investment Trust PLC. This was made up of around GBP100m in equity
investment holdings, which have been reviewed and assessed for fit
with Monks' portfolio, and GBP73m in cash. The stocks inherited are
a mix of cyclical companies such as UK housebuilders Persimmon,
Redrow, and Bellway and early-stage growth companies like Midwich,
a distributor of audiovisual equipment, and Bytes Technology, a
software solutions provider. Benefits to shareholders include
increased scale, resulting in an estimated reduction to its ongoing
charges ratio of two basis points, and cash at an advantageous
point in the performance cycle.
Gearing
The level of invested gearing at the period end stood at 8.6%,
compared to 7.3% six months earlier. The modest increase in gearing
levels reflects the fall in NAV and deployment of cash into equity
markets. Over the medium term, and where the appropriate
opportunity presents itself, we would expect to move the gearing
level towards the intended long-term target position of 10%.
Dividend
No interim dividend is being paid. A single final dividend will
typically be paid after the AGM, reflecting the Company's focus on
capital growth.
Outlook
Consistency of investment approach, particularly through
difficult times, is of utmost importance. Our investment edge
remains in identifying and owning growth companies for the long
term. The purpose of this is to allow the power of compound growth
in revenues, earnings, and cashflows to drive share price
appreciation - shareholders should rightly challenge us if we
appear to be veering off course. Operating conditions for companies
change. We recognise this. This has prompted us to spend
considerable time assessing where there may be quality cyclical
opportunities - we are deepening our conviction in several names.
We are confident that we own a collection of companies that should
be well-placed to navigate a period of rising costs and potentially
weaker demand. Indeed, the financial characteristics and the
competitive positions of a vast majority of holdings lead us to
believe many will outcompete their peers and emerge stronger .
* With debt at fair value
The principal risks and uncertainties facing the Company are set
out at the end of this document.
6 December 2022
For a definition of terms see Glossary of Terms and Alternative
Performance Measures at the end of this document
Total return information sourced from Refinitiv/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
KS Sternberg
Chairman
6 December 2022
Thirty Largest Holdings as at 31 October 2022
Fair value % of total
Growth category GBP'000 assets
Name Business description *
========================== =================== ====================================== ================ ===========
Elevance Health Stalwart Healthcare insurer 116,152 4.8
Martin Marietta Materials Cyclical Cement and aggregates manufacturer 69,112 2.8
Reliance Industries Rapid Indian energy conglomerate 67,944 2.8
Software and cloud computing
Microsoft Stalwart enterprise 64,818 2.7
Global unlisted growth equity
The Schiehallion Fund investment
* Rapid company 35,234 1.5
Global unlisted growth equity
The Schiehallion Fund investment
- C Shares * Rapid company 27,058 1.1
================ ===========
62,292 2.6
Arthur J. Gallagher Stalwart Insurance broker 62,122 2.5
Alphabet Stalwart Online search engine 60,729 2.5
Moody's Stalwart Credit rating agency 58,574 2.4
Service Corporation
International Stalwart Death care services 56,697 2.3
Prosus Rapid Media and ecommerce company 54,518 2.2
Olympus Stalwart Optoelectronic products 49,051 2.0
Electronic payments network and
related
MasterCard Stalwart services 46,753 1.9
Pernod Ricard Stalwart Global spirits manufacturer 46,748 1.9
Biopharmaceutical royalties
Royalty Pharma Cyclical portfolio 45,050 1.9
Diversified building materials
CRH Cyclical company 43,596 1.8
Scientific instruments, consumables
Thermo Fisher Scientific Stalwart and chemicals 41,764 1.7
Amazon.com Rapid Online retailer 41,559 1.7
Ryanair Cyclical Low cost European airline 40,965 1.7
BHP Group Cyclical Mineral exploration and production 40,867 1.7
Albemarle Cyclical Speciality chemicals 36,357 1.5
Charles Schwab Cyclical Online savings and trading platform 36,307 1.5
Alnylam Pharmaceuticals Rapid RNA interference based biotechnology 35,991 1.5
AIA Stalwart Asian life insurer 34,523 1.4
Rio Tinto Cyclical Global commodities businesses 31,966 1.3
Moderna Rapid Drug discovery using mRNA technology 30,809 1.3
Prudential Stalwart International life insurance 30,465 1.3
HDFC Rapid Indian mortgage provider 29,797 1.2
Estee Lauder Stalwart Global cosmetic brands business 29,294 1.2
B3 Group Rapid Brazilian stock exchange operator 28,389 1.2
TSMC Cyclical Semiconductor manufacturer 27,790 1.1
========================== =================== ====================================== ================ ===========
1,420,999 58.4
===================================================================================== ================ ===========
For a definition of terms see Glossary of Terms and Alternative
Performance Measures at the end of this document
Investment Portfolio by Growth Category as at 31 October
2022*
Holding Growth Stalwarts % Rapid Growth % Cyclical Growth %
Size
(c.10% p.a. earnings (c.15% to 25% p.a. (c.10% to 15% p.a.
growth) earnings growth) earnings growth through
a cycle)
------------------------ ----- ----------------------- ----- ------------------------ -----
Company Company Company Characteristics
Characteristics Characteristics 3/4 Subject to
3/4 Durable 3/4 Early stage macroeconomic
franchise businesses and capital cycles
3/4 Deliver robust with vast growth with significant
profitability in opportunity structural
most 3/4 Innovators growth prospects
macroeconomic attacking 3/4 Strong management
environments existing profit pools teams highly skilled
3/4 Competitive or creating new at capital allocation
advantage markets
includes dominant
local scale,
customer
loyalty and strong
brands
------------------------ ----- ----------------------- ----- ------------------------ -----
Highest
conviction
holdings
c.2.0%
each
Total: Martin Marietta
47.7% Elevance Health 4.8 Reliance Industries 2.8 Materials 2.9
Microsoft 2.7 Prosus 2.3 Royalty Pharma 1.9
Arthur J. Gallagher 2.6 Amazon.com 1.7 CRH 1.8
Alnylam
Alphabet 2.5 Pharmaceuticals 1.5 Ryanair 1.7
Moody's 2.4 The Schiehallion Fund 1.5 BHP Group 1.7
Service Corporation
International 2.4 Albemarle 1.5
Olympus 2.0 Charles Schwab 1.5
MasterCard 1.9
Pernod Ricard 1.9
Thermo Fisher Scientific 1.7
Average
sized holdings
c.1.0%
each
Total:
33.3% AIA 1.4 Moderna 1.3 Rio Tinto 1.3
Prudential 1.3 HDFC 1.2 TSMC 1.2
Estee Lauder 1.2 B3 Group 1.2 Markel 1.1
The Schiehallion Fund
S&P Global 1.1 - C Shares 1.1 Booking Holdings 1.1
Broadridge Financial
Solutions 1.1 The Trade Desk 1.1 Richemont 0.9
CoStar 0.9 Tesla 1.1 Teradyne 0.9
Shiseido 0.9 Illumina 0.9 CBRE Group 0.9
Analog Devices 0.7 Epic Games Atlas Copco 0.8
Sysmex 0.7
MercadoLibre 0.8 SMC 0.7
ByteDance 0.7 Deutsche Boerse 0.7
SiteOne Landscape
Genmab 0.7 Supply 0.7
Coupang LLC 0.7 Nexans 0.7
Alibaba 0.7
Shopify 0.7
Incubator
Holdings
c.0.5%
each
Total:
19.0% Adobe Systems 0.6 Axon Enterprise 0.6 Epiroc 0.6
Chewy Inc 0.6 Farfetch 0.6 DENSO 0.5
Meta Platforms Inc 0.6 Ping An Insurance 0.6 Eaton 0.5
adidas 0.4 Schibsted 0.6 Howard Hughes 0.4
Topicus.com 0.4 Abiomed 0.5 Woodside Energy Group 0.3
Certara 0.3 Cloudflare 0.5 Sands China 0.2
Silk Invest Africa
Hoshizaki Corp 0.3 Snowflake 0.5 Food Fund 0.2
Sea Limited 0.5 Wizz Air Holdings 0.2
ICICI Prudential Life
Insurance 0.5 IAC/Interactivecorp 0.2
Netflix 0.5 Sberbank of Russia 0.0
Adyen 0.5
Lemonade 0.5
CyberAgent 0.4
Staar Surgical 0.4
Renishaw 0.4
Twilio 0.4
Novocure 0.4
Bumble 0.4
Doordash 0.4
Li Auto 0.4
Trupanion 0.4
Datadog 0.4
Adevinta Asa 0.3
Meituan 0.3
Space Exploration
Technologies 0.3
Chegg 0.2
Spotify 0.2
Exact Sciences 0.2
Stripe 0.2
Ant International 0.2
Wayfair 0.2
Oscar Health 0.1
Illumina CVR 0.1
Total 37.4 Total 35.5 Total 27.1
* Excludes net liquid assets.
Portfolio Positioning as at 31 October 2022*
Thematic Exposure - Risks and Opportunities
At 31 October
2022
Category % % %
========================================= ==== ======== ========
New Economy 36.7
========================================= ==== ======== ========
Innovation 15.4
Transformational Health 6.7
Enterprise Cloud 3.5
Chips 2.7
Other Innovation 2.5
Platform Crush 9.2
Regulation/Anti-trust 8.9
Transformative/Unproven Model 3.2
Developing Economies 16.0
========================================= ==== ======== ========
Emerging Markets Middle Classes 9.7
Emerging Markets Consumer Catch-up 3.9
Emerging Markets Financial Development 5.8
Carbon Heavy 5.3
Lending/Underwriting Risk 0.6
Industrial Demand 0.4
========================================= ==== ======== ========
Economically Agnostic 29.5
========================================= ==== ======== ========
Highly Valued Compounders 17.3
Idiosyncratic 8.5
Insurance Cycle 3.7
Developed Market Growth 17.0
========================================= ==== ======== ========
Consumer Demand 4.0
Industrial Demand 6.7
Capital Markets/Asset Inflation 3.5
Carbon Pricing 2.8
Net Liquid Assets 0.8
========================================= ==== ======== ========
Total Assets 100.0
========================================= ==== ======== ========
Geographical
At At
31 October 30 April 2022
2022
% %
=========================== ============ ===============
North America 57.9 54.0
Continental Europe 14.0 14.5
United Kingdom 6.3 8.7
China 2.9 4.1
Emerging Markets ex China 8.4 8.1
Japan 5.5 4.5
Developed Asia 4.2 4.9
=========================== ============ ===============
Total Investments 99.2 98.8
Net Liquid Assets 0.8 1.2
Total Assets 100.0 100.0
=========================== ============ ===============
Sectoral
At At
31 October 30 April 2022
2022
% %
============= ============ ============ ===============
Financials 20.5 21.1
Technology 18.5 20.6
Consumer Discretionary 19.1 19.5
Healthcare 17.2 14.5
Industrials 12.1 10.6
Consumer Staples 1.9 2.0
Basic Materials 4.5 5.0
Energy 3.1 2.8
Real Estate 2.3 2.7
Total Investments 99.2 98.8
Net Liquid Assets 0.8 1.2
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 2022 31 October 2021 30 April 2022 (audited)
Revenue Capital Total Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
======================== ======== ========= ========= ======== ======== ======== ======== ========= =========
(Losses)/gains on
investments - (164,112) (164,112) - 203,591 203,591 - (631,829) (631,829)
Currency losses - (120) (120) - (383) (383) - (308) (308)
Income from investments
and interest receivable 15,932 - 15,932 16,018 - 16,018 27,811 - 27,811
Investment management
fee (note 3) (4,419) - (4,419) (5,719) - (5,719) (10,465) - (10,465)
Other administrative
expenses (1,000) - (1,000) (869) - (869) (1,888) - (1,888)
======================== ======== ========= ========= ======== ======== ======== ======== ========= =========
Net return before
finance costs and
taxation 10,513 (164,232) (153,719) 9,430 203,208 212,638 15,458 (632,137) (616,679)
======================== ======== ========= ========= ======== ======== ======== ======== ========= =========
Finance costs of
borrowings (3,515) - (3,515) (2,507) - (2,507) (5,298) - (5,298)
======================== ======== ========= ========= ======== ======== ======== ======== ========= =========
Net return on ordinary
activities before
taxation 6,998 (164,232) (157,234) 6,923 203,208 210,131 10,160 (632,137) (621,977)
======================== ======== ========= ========= ======== ======== ======== ======== ========= =========
Tax on ordinary
activities (note 4) (863) (183) (1,046) (910) (793) (1,703) (1,516) 293 (1,223)
======================== ======== ========= ========= ======== ======== ======== ======== ========= =========
Net return on ordinary
activities after
taxation 6,135 (164,415) (158,280) 6,013 202,415 208,428 8,644 (631,844) (623,200)
======================== ======== ========= ========= ======== ======== ======== ======== ========= =========
Net return per ordinary
share (note 5) 2.75p (73.78p) (71.03p) 2.54p 85.61p 88.15p 3.67p (268.58p) (264.91p)
======================== ======== ========= ========= ======== ======== ======== ======== ========= =========
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)
At 30 April
At 31 October 2022
2022 (audited)
Notes GBP'000 GBP'000
-------------------------------------- ----- ------------- -----------
Fixed assets
Investments held at fair value
through profit or loss 7 2,410,723 2,662,015
-------------------------------------- ----- ------------- -----------
Current assets
Debtors 2,200 8,072
Cash and cash equivalents 23,365 35,879
-------------------------------------- ----- ------------- -----------
25,565 43,951
-------------------------------------- ----- ------------- -----------
Creditors
Amounts falling due within one
year:
National Australia Bank Limited
Loan (75,000) (75,000)
Debenture stock (39,989) (39,973)
Other creditors (4,115) (11,284)
-------------------------------------- ----- ------------- -----------
(119,104) (126,257)
-------------------------------------- ----- ------------- -----------
Net current liabilities (93,539) (82,306)
-------------------------------------- ----- ------------- -----------
Total assets less current liabilities 2,317,184 2,579,709
-------------------------------------- ----- ------------- -----------
Creditors
Amounts falling due after more
than one year:
Loan notes 8 (99,855) (99,853)
Provision for tax liability 9 (875) (692)
-------------------------------------- ----- ------------- -----------
(100,730) (100,545)
-------------------------------------- ----- ------------- -----------
2,216,454 2,479,164
-------------------------------------- ----- ------------- -----------
Capital and reserves
Share capital 11,823 11,823
Share premium account 261,635 262,183
Capital redemption reserve 8,700 8,700
Capital reserve 1,866,453 2,129,483
Revenue reserve 67,843 66,975
-------------------------------------- ----- ------------- -----------
Shareholders' funds 10 2,216,454 2,479,164
-------------------------------------- ----- ------------- -----------
Shareholders' funds per ordinary
share
(borrowings at book value) 10 1,017.4p 1,089.0p
-------------------------------------- ----- ------------- -----------
Net asset value per ordinary share
*
(borrowings at par value) 1,017.4p 1,089.0p
-------------------------------------- ----- ------------- -----------
Net asset value per ordinary share
*
(borrowings at fair value) 1,040.1p 1,099.8p
-------------------------------------- ----- ------------- -----------
Ordinary shares in issue 10 217,849,065 227,645,309
-------------------------------------- ----- ------------- -----------
* 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 2022
Called Share Capital Capital
up share premium redemption reserve Revenue Shareholders'
capital account reserve * reserve funds
Notes GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'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 after taxation - - - (164,415) 6,135 (158,280)
Ordinary shares issued/bought
back 11,14 - (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
-------------------------------------- --------- -------- ----------- --------------- -------- -------------
For the six months ended 31 October 2021
Called Share Capital Capital
up share premium redemption reserve Revenue Shareholders'
capital account reserve * reserve funds
Notes GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------------- ----- --------- -------- ----------- --------------- -------- -------------
Shareholders' funds
at 1 May 2021 11,823 262,183 8,700 2,859,214 63,060 3,204,980
Net return on ordinary
activities after taxation - - - 202,415 6,013 208,428
Dividends paid during
the period 6 - - - - (4,729) (4,729)
Shareholders' funds at 31
October 2021 11,823 262,183 8,700 3,061,629 64,344 3,408,679
----------------------------------- --------- -------- ----------- --------------- -------- -------------
* The Capital Reserve balance at 31 October 2022 includes
holding gains on investments of GBP598,370,000 (31 October 2021 -
gains of GBP1,608,092,000).
The accompanying notes on the following pages are an integral
part of the Financial Statements
Cash Flow Statement (unaudited)
Six months Six months
to to
31 October 31 October
2022 2021
Notes GBP'000 GBP'000
-------------------------------------- ----- ----------- -----------
Cash flows from operating activities
Net return on ordinary activities
before taxation (157,234) 210,131
Net losses/(gains) on investments 164,112 (203,591)
Currency losses 120 383
Finance costs of borrowings 3,515 2,507
Overseas tax incurred (894) (1,010)
Changes in debtors and creditors 1,308 1,392
-------------------------------------- ----- ----------- -----------
Cash from operations * 10,927 9,812
Interest paid (3,443) (2,477)
-------------------------------------- ----- ----------- -----------
Net cash inflow from operating
activities 7,484 7,335
-------------------------------------- ----- ----------- -----------
Net cash inflow/(outflow) from
investing activities 90,862 (32,210)
-------------------------------------- ----- ----------- -----------
Cash flow from financing activities
Equity dividends paid 6 (5,267) (4,729)
Ordinary shares bought back (105,473) -
-------------------------------------- ----- ----------- -----------
Net cash outflow from financing
activities (110,740) (4,729)
-------------------------------------- ----- ----------- -----------
Decrease in cash and cash equivalents (12,394) (29,604)
Exchange movements (120) (383)
Cash and cash equivalents at
start of period 35,879 108,723
-------------------------------------- ----- ----------- -----------
Cash and cash equivalents at
end of period 23,365 78,736
-------------------------------------- ----- ----------- -----------
* Cash from operations includes dividends received of
GBP17,838,000 (31 October 2021 - GBP17,208,000) and interest
received of GBP94,000 (31 October 2021 - nil).
The accompanying notes are an integral part of the Financial
Statements.
Notes to the Condensed Financial Statements (unaudited)
1. The condensed Financial Statements for the six months to 31
October 2022 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 April
2021 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 2022 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 2022.
Going Concern
The Directors have considered the Company's principal risks and
uncertainties, 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 following the Covid-19
pandemic and, over recent months, owing to macroeconomic and
geopolitical concerns, including the Russian invasion of Ukraine,
energy supply and supply-chain constraints. 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. 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 2022 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. Baillie Gifford & Co Limited, a wholly owned subsidiary
of Baillie Gifford & Co, has been appointed by the Company as
its Alternative Investment Fund Manager (AIFM) and Company
Secretary. 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 GBP750 million of total assets, 0.33% on the
next GBP1 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 holdings 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 Six months
to to Year to
31 October 31 October 30 April
2022 2021 2022 (audited)
GBP'000 GBP'000 GBP'000
-------------------------------------- ----------- ----------- ---------------
Revenue return on ordinary activities
after taxation 6,135 6,013 8,644
Capital return on ordinary activities
after taxation (164,415) 202,415 (631,844)
-------------------------------------- ----------- ----------- ---------------
Total net return (158,280) 208,428 (623,200)
-------------------------------------- ----------- ----------- ---------------
Net return per ordinary share is based on the above totals of
revenue and capital and on 222,840,019 (31 October 2021 -
236,453,859; 30 April 2022 - 235,252,716) 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 Six months
to to Year to
31 October 31 October 30 April
2022 2021 2022 (audited)
GBP'000 GBP'000 GBP'000
---------------------------------------- ----------- ----------- ---------------
Amounts recognised as distributions
in the period :
Previous year's final dividend of
2.35p (2021 - 2.00p), paid 9 September
2022 5,267 4,729 4,729
---------------------------------------- ----------- ----------- ---------------
Amounts paid and payable in respect
of the period:
Final dividend (2022 - 2.35p) - - 5,267
---------------------------------------- ----------- ----------- ---------------
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
As at 31 October 2022 GBP'000 GBP'000 GBP'000 GBP'000
Listed equities 2,290,318 62,292 - 2,352,610
Unlisted securities - - 58,113 58,113
Total financial asset investments 2,290,318 62,292 58,113 2,410,723
Level 1 Level 2 Level 3 Total
As at 30 April 2022 (audited) GBP'000 GBP'000 GBP'000 GBP'000
Listed and suspended equities 2,479,464 120,306 5,636 2,605,406
Unlisted securities - - 56,609 56,609
Total financial asset investments 2,479,464 120,306 62,245 2,662,015
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. At 31 October 2022 the total book value of the Company's
borrowings amounted to GBP214,844,000 (30 April 2022 -
GBP214,826,000). This comprised a GBP40m 63/8% debenture stock
repayable in 2023 (30 April 2022 - GBP40m), loan notes of GBP60m
repayable in 2054 (30 April 2022 - GBP60m), loan notes of
GBP40m repayable in 2045 (30 April 2022 - GBP40m) and GBP75m
drawn under the revolving credit facility with National Australia
Bank Limited (30 April 2022 - GBP75m).
The fair value of borrowings at 31 October 2022 was
GBP165,377,000 (30 April 2022 - GBP190,308,000).
The fair value of the borrowings at 31 October 2022 was
GBP165,377,000 (30 April 2022 - GBP190,308,000).
9. Provision for Tax Liability
The tax liability provision at 31 October 2022 of GBP875,000 (30
April 2022 - GBP692,000) 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
2022 2022
----------------------------------- ---------------- ----------------
Shareholders' funds GBP2,216,454,000 GBP2,479,164,000
Number of ordinary shares in issue
excluding treasury shares 217,849,065 227,645,309
Shareholders' funds per ordinary
share 1,017.4p 1,089.0p
----------------------------------- ---------------- ----------------
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. In the six months to 31 October 2022 the Company bought back
9,796,244 ordinary shares into treasury (31 October 2021 - no
shares issued or bought back). No shares were issued during the
period and 18,604,794 shares were held in treasury at 31 October
2022. At 31 October 2022, the Company had authority to buy back
30,318,989 shares and to allot, or sell from treasury, 22,480,758
shares.
12. Transaction costs on purchases amounted to GBP29,000 (31
October 2021 - GBP73,000; 30 April 2022 - GBP374,000) and
transaction costs on sales amounted to GBP120,000 (31 October 2021
- GBP69,000; 30 April 2022 - GBP173,000). Total transaction costs
were GBP149,000 (31 October 2021 - GBP142,000; 30 April 2022 -
GBP547,000).
13. 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.
14. Post Balance Sheet Event
On 8 November 2022, the Company issued 16,717,601 new ordinary
shares to former shareholders of The Independent Investment Trust
PLC ('IIT'), in accordance with the Scheme of Reconstruction as set
out in the Circular and Prospectus dated 6 October 2022. The
Company received GBP173 million of assets, comprising equity
investments and cash, as consideration for the new shares, the
entitlements of which were calculated in accordance with the
Scheme, being the relative FAVs at market close on 2 November 2022
of 454.237179 pence for IIT and 1,035.305776 pence for the Company,
producing a conversion ratio of 0.438747 new share for every IIT
share rolling over. Following this issuance there were 234,566,666
ordinary shares in issue, excluding treasury shares. At 31 October
2022 GBP548,000 of Scheme transaction costs were incurred or
accrued and these are reflected in the Statement of Changes in
Equity, as a charge to the Share Premium Account. Baillie Gifford
& Co Limited have waived their management fee on the GBP173
million rolled into the Company as a result of this transaction,
for the six months to 30 April 2023.
15. 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 2022, 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.
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 committee at
Baillie Gifford which takes advice from an independent third party
(S&P Global). The portfolio managers feed into the process, but
the valuations committee owns the process 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. The prices
are also reviewed twice per year by the Monks Board 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 committee 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); or changes to the valuation
of comparable public companies.
The valuations committee also monitors relevant market indices
on a weekly basis and update 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 undertake these checks daily. 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 Monks Investment Trust
--------------------------------------------------
Percentage of portfolio in direct private
company holdings 2.4%
------------------------------------------- -----
Instruments valued 8
Revaluations performed 33
Percentage of private company portfolio
revalued 3+ times 87%
------------------------------------------- -----
Year to date, most revaluations have been decreases. A handful
of companies have raised capital at an increased valuation. The
average movement in both valuation and private company share price
for those which have decreased in value is shown below.
Average movement Average movement in
in investee company investee company share
valuation* price
---------- --------------------- --------------------------
Monks* (8.2%) (4.0%)
---------- --------------------- --------------------------
* Data reflecting period 1 May 2022 - 31 October
2022 to align with the Company's reporting period
end
-----------------------------------------------------------
Private company share prices have decreased less than headline
valuations because Monks typically holds preference stock, which
provides downside protection. The private company share price
movement reflects a probability weighted average of both the
regular valuation, which would be realised in an IPO, and the
downside protected valuation, which would be normally be triggered
in the event of a corporate sale or liquidation.
In addition to the 2.4% of the portfolio holdings in direct
private company investments, 2.6% 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
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 31 October 30 April 30 April
2 022 2 022 2022 2022
GBP'000 per share GBP'000 per share
-------------------------------- ---------- ---------- --------- ----------
Shareholders' funds (borrowings
at book value) 2,216,454 1,017.4p 2,479,164 1,089.0p
Add: book value of borrowings 214,844 98.6p 214,826 94.4p
Less: par value of borrowings (215,000) (98.6p) (215,000) (94.4p)
-------------------------------- ---------- ---------- --------- ----------
Net asset value (borrowings
at par value) 2,216,298 1,017.4p 2,478,990 1,089.0p
-------------------------------- ---------- ---------- --------- ----------
The per share figures above are based on 217,849,065 (30 April
2022 - 227,645,309) 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
value of the Company's 6 3/8% debenture stock 2023 is calculated
using a comparable debt approach and/or broker quotes where
available. 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 31 October 30 April 30 April
2 022 2 022 2022 2022
GBP'000 per share GBP'000 per share
-------------------------------- ---------- ---------- --------- ----------
Shareholders' funds (borrowings
at book value) 2,216,454 1,017.4p 2,479,164 1,089.0p
Add: book value of borrowings 214,844 98.6p 214,826 94.4p
Less: fair value of borrowings (165,377) (75.9p) (190,308) (83.6p)
-------------------------------- ---------- ---------- --------- ----------
Net asset value (borrowings
at fair value) 2,265,921 1,040.1p 2,503,682 1,099.8p
-------------------------------- ---------- ---------- --------- ----------
The per share figures above are based on 217,849,065 (30 April
2022 - 227,645,309) 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
2 022 30 April 2 022
---------------------------------- -------- ---------- --------------
Closing NAV per share (borrowings
at par) a 1,017.4p 1,089.0p
Closing NAV per share (borrowings
at fair value) b 1,040.1p 1,099.8p
Closing share price c 968.5p 1,051.0p
---------------------------------- -------- ---------- --------------
(c - a)
Discount to NAV with borrowings ÷
at par a (4.8%) (3.5%)
---------------------------------- -------- ---------- --------------
(c - b)
Discount to NAV with borrowings ÷
at fair value b (6.9%) (4.4%)
---------------------------------- -------- ---------- --------------
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 31 October 2
2 022 022
NAV (par) NAV (fair)
--------------------------- ---------- ---------- ------------
Closing NAV per share a 1,017.4p 1,040.1p
Dividend adjustment factor
* b 1.0022 1.0021
Adjusted closing NAV per c = a x
share b 1,019.6p 1,042.3p
Opening NAV per share d 1,089.0p 1,099.8p
--------------------------- ---------- ---------- ------------
(c ÷
Total return d) -1 (6.4%) (5.2%)
--------------------------- ---------- ---------- ------------
* The dividend adjustment factor is calculated on the assumption
that the dividend of 2.35p 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 2 022
Share price
--------------------------- ---------- ----------------
Closing share price a 968.5p
Dividend adjustment factor
* b 1.0023
Adjusted closing share c = a x
price b 970.7p
Opening share price d 1,051.0p
--------------------------- ---------- ----------------
(c ÷
Total return d) -1 (7.6%)
--------------------------- ---------- ----------------
* The dividend adjustment factor is calculated on the assumption
that the dividend of 2.35p 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 30 April 2
2 022 022
-------------------------------- --------- ---------------- ----------------
Borrowings (at book cost) a GBP214,544,000 GBP214,826,000
Less: cash and cash equivalents (GBP23,365,000) (GBP35,879,000)
Less: sales for subsequent
settlement (GBP226,000) (GBP4,741,000)
Add: purchases for subsequent
settlement - GBP7,045,000
-------------------------------- --------- ---------------- ----------------
Adjusted borrowings b GBP190,953,000 GBP181,251,000
-------------------------------- --------- ---------------- ----------------
Shareholders' funds c GBP2,216,454,000 GBP2,479,164,000
-------------------------------- --------- ---------------- ----------------
a ÷
Gross (potential) gearing c 9.7% 8.7%
-------------------------------- --------- ---------------- ----------------
b ÷
Net (invested) gearing c 8.6% 7.3%
-------------------------------- --------- ---------------- ----------------
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 16
December 2022.
++ 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 GBP 230 billion under
management and advice in active equity and bond portfolios for
clients in the UK and throughout the world (as at 6 December
2022).
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.
7 December 2022
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,
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whether or not based on the content, information or materials
contained herein.
FTSE Index Data
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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 Manager's 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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END
IR UPGWWPUPPGMQ
(END) Dow Jones Newswires
December 07, 2022 02:00 ET (07:00 GMT)
Monks Investment (LSE:MNKS)
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