TIDMMNKS
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 GBP300m 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 GBP100m 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 GBP150m 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 GBP100m 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 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
GBP'000 assets
------------------------------- ------------------------------------------------ ---------- ----------
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
Electronic payments network and related
MasterCard 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
Global unlisted growth equity investment
The Schiehallion Fund 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
Markets and underwrites speciality insurance
Markel 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
Scientific instruments, consumables and
Thermo Fisher Scientific 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
Biotechnology company, specialised equipment
Sartorius Stedim Biotech 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
Chinese online payments and financial services
Ant International (u) 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
Biotechnology company focusing on solid
Novocure 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 Total
assets* 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*
Growth Cyclical 31.5 Holding
Holding size stalwarts 37.7% Rapid growth 30.8% growth % size
----------------------- --------------- ----- -------------------- ----- ----------------- ----- ------------------ ----- ------------------ ----- ------------------ ----- ---------
Martin
Highest conviction Marietta Total
holdings Microsoft 3.8 MasterCard 2.1 Amazon.com 3.2 Prosus 2.2 Materials 3.3 CRH 2.5 in this
Elevance Service Corporation Reliance holding
c.2.0% each Health 3.5 International 2.1 Industries 2.3 Ryanair 2.0 size
Moody's 2.8 Pernod Ricard 36.7%
Meta Platforms 2.5
Alphabet 2.5 1.9
--------------------------------------- ----- -------------------- ----- ----------------- ----- ------------------ ----- ------------------ ----- ------------------ ----- ---------
Average sized AIA 1.5 S&P Global 1.1 The Schiehallion 1.5 Alibaba 0.9 TSMC 1.5 Ping An Insurance 0.9 Total
holdings Fund Entegris in this
c.1.0% each Arthur 1.4 Adobe Systems 1.1 The Trade B3 Group 0.8 Royalty 1.2 Rio Tinto 0.9 holding
J. Gallagher Desk Pharma size
Analog Prudential 1.0 Li Auto 1.2 Shopify 0.8 BHP Group 1.2 Advanced 0.8 41.4%
Devices Drainage
Systems
Broadridge 1.2 CoStar 0.8 MercadoLibre 1.1 Cloudflare 0.8 HDFC 1.2 SiteOne Landscape 0.8
Financial Supply
Solutions
Olympus 1.2 Shiseido 0.8 Alnylam 1.0 ByteDance 0.8 Markel 1.0 CBRE Group
Pharmaceuticals
Thermo Fisher 0.7 Doordash 1.0 Tesla 0.8 Eaton 1.0 SMC 0.8
Scientific
NVIDIA 0.7 Richemont 1.0
1.2 0.9 Schibsted 0.7 Charles 0.9 0.7
Schwab
Atlas Copco 0.9 0.7
Teradyne 0.9
--------------------------------------- ----- -------------------- ----- ----------------- ----- ------------------ ----- ------------------ ----- ------------------ ----- ---------
I ncubator YETI Holdings 0.6 Chewy 0.4 Netflix 0.6 Datadog 0.3 Albemarle 0.6 Redrow 0.4 Total
holdings c.0.5% in this
each
adidas 0.6 Sartorius 0.3 Coupang 0.6 Exact Sciences 0.3 Epiroc 0.6 Ashtead Group 0.4 holding
Stedim Biotech size
Sysmex 0.6 Hoshizaki Moderna 0.6 Space Exploration 0.3 ASM International 0.5 Nippon Paint 0.4 21.9%
Corp Technologies
Estée 0.5 Certara 0.3 Genmab 0.5 CyberAgent Sands China Bellway 0.3
Lauder
LVMH 0.5 0.3 Stripe 0.5 Midwich 0.3 Pool Corporation 0.5 Woodside 0.3
Energy Group
Topicus.com 0.4 ICICI Prudential 0.5 Staar Surgical 0.2 Nexans 0.5 Persimmon
Life Insurance
PDD Holdings BIG Technologies 0.2 Samsung 0.5 Silk Invest 0.2
Electronics Africa Food
Fund
Bytes Technology Ant International 0.2 Comfort 0.5 Jet2 0.1
Group Systems
USA
Snowflake 0.5 Adyen 0.2 Floor & Sberbank
Décor of Russia
Holdings
Block 0.5 Lemonade 0.2 Howard 0.5 0.1
Hughes
Epic Games Wayfair 0.2 0.0
Adevinta Illumina 0.2 0.5
Asa
Sea Limited Farfetch 0.1
Advanced 0.4 Novocure 0.1 0.4
Micro Devices
Spotify 0.4 Illumina 0.1
CVR
0.4 Abiomed CVR 0.1
0.4 0.0
0.4
0.4
0.4
--------------------------------------- ----- -------------------- ----- ----------------- ----- ------------------ ----- ------------------ ----- ------------------ ----- ---------
* Excludes net liquid assets.
Portfolio positioning as at 31 October 2023(*)
Geographical % at % at
region 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 30 April
2023 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)
Revenue Capital Total Revenue Capital Total Revenue Capital Total
Notes GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'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)
At 30 April
At 31 October 2023
2023 (audited)
Notes GBP'000 GBP'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
Share Capital Capital
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 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
Share Capital Capital
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 - (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 GBP520,850,000 (31 October 2022 -
gains of GBP598,370).
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
2023 2022
Notes GBP'000 GBP'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
GBP16,998,000 (31 October 2022 - GBP17,838,000) and deposit
interest received of GBP727,000 (31 October 2022 - GBP94,000).
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 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 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 Six months
to to Year to
31 October 31 October 30 April
2023 2022 2023 (audited)
GBP'000 GBP'000 GBP'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
Year to
Six months Six months 30 April
to to 2023
31 October 31 October
2023 2022 (audited)
GBP'000 GBP'000 GBP'000
------------------------------------ ------------ ----------- -----------
Amounts recognised as distributions
in the period:
Previous year's final dividend of
3.15p (2022 - 2.35p),
paid 13 September 2023 7,208 5,267 5,267
------------------------------------ ------------ ----------- -----------
Amounts paid and payable in respect
of the period:
Final dividend (2023 - 3.15p) - - 7,208
------------------------------------ ------------ ----------- -----------
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 Level Level
1 2 3 Total
As at 31 October 2023 GBP'000 GBP'000 GBP'000 GBP'000
---------------------------------- --------- -------- -------- ---------
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 Level Level
1 2 3 Total
As at 30 April 2023 (audited) GBP'000 GBP'000 GBP'000 GBP'000
---------------------------------- --------- -------- -------- ---------
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 GBP189,860,000 (30 April 2023 -
GBP174,858,000). This comprised loan notes of GBP60m repayable in
2054 (30 April 2023 - GBP60m), loan notes of GBP40m repayable in
2045 (30 April 2023 - GBP40m) and GBP90m drawn under the revolving
credit facility with National Australia Bank Limited (30 April 2022
- GBP75m).
The fair value of borrowings at 31 October 2023 was
GBP134,261,000 (30 April 2023 - GBP125,404,000).
9. Provision for tax liability
The tax liability provision at 31 October 2023 of GBP1,719,000
(30 April 2023 - GBP1,160,000) 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 GBP2,281,508,000 GBP2,442,880,000
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 31 October 30 April 30 April
2023 2023 2023 2023
GBP'000 per share GBP'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 31 October 30 April 30 April
2023 2023 2023 2023
GBP'000 per share GBP'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 30 April
2023 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
------------------------------------------ ----------- ---------- ---------
(c -
a) ÷
Discount to NAV with borrowings at par a (11.4%) (7.9%)
------------------------------------------ ----------- ---------- ---------
(c -
Discount to NAV with borrowings at fair b) ÷
value 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 31 October
2023 NAV 2023 NAV
(par) (fair)
------------------------------------------- ---------- ----------
Closing NAV per share (a) 1,017.2p 1,042.1p
Dividend adjustment factor* (b) 1.0028 1.0028
(c = a
Adjusted closing NAV per share x b) 1,020.0p 1,045.0p
Opening NAV per share (d) 1,058.5p 1,080.0p
------------------------------- ---------- ---------- ----------
(c ÷
Total return 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
(c = a
Adjusted closing share price x b) 903.8p
Opening share price (d) 975.0p
----------------------------- ---------- ------------
(c ÷
Total return 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 30 April
2023 2023
----------------------------------------------------- ---------------- ----------------
Borrowings (at book cost) (a) GBP189,860,000 GBP174,858,000
Less: cash and cash equivalents (GBP29,072,000) (GBP42,191,000)
Less: sales for subsequent settlement (GBP5,096,000) (GBP16,520,000)
Add: purchases for subsequent settlement GBP1,801,000 GBP14,546,000
Adjusted borrowings (b) GBP157,493,000 GBP130,693,000
Shareholders' funds (c) GBP2,281,508,000 GBP2,442,880,000
----------------------------------------- ---------- ---------------- ----------------
(a ÷
Gross (potential) gearing c) 8.3% 7.2%
----------------------------------------- ---------- ---------------- ----------------
(b ÷
Net (invested) gearing 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 GBP 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'). (c) LSE Group 2022. FTSE Russell
is a trading name of certain of the LSE Group companies. 'FTSE(R)'
'Russell(R)', FTSE Russell(R), 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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END
IR UBVBROKUURAA
(END) Dow Jones Newswires
December 08, 2023 02:00 ET (07:00 GMT)
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