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Monks Inv.Trust (MNKS)

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Wednesday 07 December, 2016

Monks Inv.Trust

Monks Investment Trust half-year results

RNS Number : 1137R
Monks Investment Trust PLC
07 December 2016
 

RNS Announcement

 

The Monks Investment Trust PLC

 

Results for the six months to 31 October 2016

 

Over the six month period, the Company's net asset value (NAV) total return* was 25.3% compared to a total return of 23.6% for the FTSE World Index (in sterling terms). The share price total return for the same period was 27.5%, with the discount to NAV* narrowing to 8.0%.

-  The biggest positive contributors to performance were technology stocks: US and Chinese on-line retailers Amazon and Alibaba, South African group Naspers, Taiwanese semiconductor manufacturer TSMC, US online search engine group Alphabet and German enterprise software company SAP.

-  Portfolio turnover for the six months was 17.3% on an annualised basis.

-  While most of the portfolio is not directly affected by Brexit, the Managers made reductions to CRH and Ryanair. Market weakness after the vote provided an opportunity to add to Prudential.  No adjustment has been made to the portfolio as a result of Donald Trump's election success in the United States.

-  Earnings per share were 1.68p compared to 0.89p in the corresponding period. As flagged in the 2016 annual report, no interim dividend is to be paid.

-  The Managers believe that the portfolio consists of companies which are sufficiently flexible and resilient to cope with changing circumstances within their markets and remain excited by the possibilities and prospects afforded to long term investors.

 

*   With borrowings deducted at fair value.

 

The Monks Investment Trust PLC invests globally in order to achieve capital growth. This takes priority over income and dividends. Monks is managed by Baillie Gifford, the independent Edinburgh based fund management group with around £140 billion under management and advice as at 5 December 2016.

 

Past performance is not a guide to future performance. Monks is a listed UK company. The value of its shares and any income from them can fall as well as rise and investors may not get back the amount invested. The Company is listed on the UK Stock Exchange and is not authorised or regulated by the Financial Conduct Authority.

 

You can find up to date performance information about Monks at www.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.

7 December 2016

 

For further information please contact:

Anzelm Cydzik, Baillie Gifford & Co  

Tel: 0131 275 2000

Roland Cross, Director, Four Broadgate

Tel: 0203 697 4200 or 07831 401309

 

 

 

The Monks Investment Trust PLC

 

The following is the unaudited Interim Financial Report for the six months to 31 October 2016.

 

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 Rules 4.2.7R (indication of important events during the first six months, and their impact on the Financial Statements, and a description of 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 Rules 4.2.8R (disclosure of related party transactions and changes therein).

 

By order of the Board

JGD Ferguson

Chairman

6 December 2016

 

 

The Monks Investment Trust PLC

 

Interim Management Report

 

"Events, my dear boy, events". This was the pithy response of Harold Macmillan when asked what might throw his government off track. Yet it hardly does justice to the impact of the UK's European Union Referendum in June and the US Presidential Election in November. Few anticipated the 'Brexit' result. In the immediate aftermath equities fell and assets perceived as safe - for example government bonds and gold - rose. Yet by the end of the period under review, equities were up. The most significant casualty of Brexit to date has been the value of sterling. Fast forward five months and Donald Trump has been elected to the Presidency of the United States and it is still far too early to tell what the implications of this will be.

The consequences of Brexit have been very good news for Monks in the short term. This is not only because of the post-Brexit rally of equities, but more so because over 90% of the portfolio's assets are denominated in currencies other than sterling. The fall in the currency - Monks did not hedge any currency exposure during the period - plus the rise in equities translated to a net asset value1 total return of 25.3% and a share price total return of 27.5% over the six months to end October 2016. By comparison, the global equity index total return was 23.6%.

 

Investment Approach

Despite the changing economic and political landscape, the approach to managing the portfolio has remained unchanged. Relying on fundamental research, the Managers remain committed to picking stocks from across the globe, drawing on the best stock ideas generated across Baillie Gifford, investing in a wide range of companies in order to construct a diversified portfolio. The approach to diversification is helped by categorising each company into one of four broad types of growth - 'stalwart', 'rapid', 'cyclical' and 'latent' - as set out below. The aim is to make long term investments in companies that grow at an above average rate so over time producing above average returns for Monks shareholders. The diversification should enable these returns to be independent of any particular economic or political backdrop.

 

Results

What is the underlying rate of earnings growth for companies in the portfolio? In percentage terms it has been running at mid teens which is reassuring as 10% is the Managers' minimum target for each holding. The focus continues to be on the long-term growth rate of underlying earnings, rather than the short term gyrations of share prices.

The biggest positive contributors to performance were technology stocks. The top six were also larger than average holdings, further boosting their contributions. While their common thread is technology, they were diversified both by operations and geography: US and Chinese on-line retailers Amazon and Alibaba, South African group Naspers, Taiwanese semiconductor manufacturer TSMC, US online search engine group Alphabet, and German enterprise software company SAP.

Less helpfully, three healthcare holdings underperformed. Two of these, Alnylam and Myriad Genetics, are relatively young businesses exposed to the inevitable risks involved in developing novel treatments. To reflect these risks, they are held in smaller than average size. The third, Novo Nordisk, sells insulin for diabetes patients. This very well established global leader is suffering an increasing level of pricing pressure, particularly in the US.

 

Portfolio Changes

While most of the portfolio is not directly affected by Brexit, the Managers made reductions to the building materials company CRH and airline Ryanair. Their direct exposure to both the UK and broader EU is likely to be unhelpful for their future growth. The market weakness seen immediately after the Brexit vote did provide an opportunity to add to one high quality business at a lower price, Prudential. Although it is a UK listed company, much of its growth comes from Asia and this remains on track.

Brexit aside, 12 new holdings were bought in the period. In particular the Managers continued to identify new stocks for the 'rapid' growth category. Three are in the US. Interactive Brokers is a fast growing online share trading platform, used by a combination of private and institutional investors. Its low cost structure enables it to undercut rivals such as Charles Schwab. LendingTree and Trupanion are both earlier stage companies, involved in price comparison websites and pet insurance respectively. Both offer exciting growth opportunities if market penetration for their innovative services can increase significantly. The Managers have also found further beneficiaries of economic growth in Asia: Line and China Biologic Products. Line operates the leading on-line messaging system in Japan and is rolling out similar services in other markets such as Indonesia. China Biologic Products is a supplier of medical fluids (such as saline and blood plasma) into the Chinese healthcare system. China's consumption of these fluids is still very low by western standards and this company is well placed to capitalise on the growth opportunity.

For each new purchase, careful thought is given to the size of the new position. All the companies listed above entered the portfolio as smaller c.0.5% 'incubator' holdings reflecting their higher-risk-higher-reward characteristics. Two other positions were introduced at the 1% level: Resmed and Verisk Analytics. Resmed supplies equipment to help treat a common medical condition known as sleep apnoea, while Verisk is a data analytics company primarily serving the insurance industry. The more established and stable nature of these businesses justifies the larger holding size.

The Managers sold 14 stocks during the period. Some, such as the industrial gases group Praxair and the mechanical component developer and manufacturer THK, were made on valuation grounds. Others, such as American Express, Volvo, Banco Popular Espanol and Aggreko, were smaller positions where the investment case had not developed as first hoped. Further work on internet 'winner takes all' markets resulted in the sale of eBay. Elsewhere in the technology field, Qualcomm and SK Hynix were sold as the Managers' confidence in their respective positions in the semiconductor market deteriorated. Lastly, the K1 Life Settlements bond matured during the period.

 

Gearing

The level of invested gearing at the period end stood at 6.7%, compared to 6.9% six months earlier. Any future weakness in markets might be an opportunity to increase the position further. It is expected that invested gearing will be maintained in the range of 5% - 15%.

 

Dividend

As flagged in the 2016 Annual Report, any future dividends will be paid by way of one final payment after the full year results.  This reflects the Company's focus on capital growth.

 

Current Positioning and Outlook

The portfolio remains positioned for growth and is well diversified across regions, sectors, industries and growth types. While market sentiment will at times impact the performance of equities as an asset class, for long term patient investors underlying corporate fundamentals will drive the performance of individual stocks.

As with Brexit, the opacity of Trump's policies means that it is hard to fathom what might happen to the growth patterns of individual companies, particularly those with direct US exposure. The introduction of trade barriers and protectionism might lead to lower levels of international trade, which would not be the optimal backdrop for the portfolio. Nonetheless, Trump's stated desire of stimulating growth through internal investment could prove a boon to the US economy and the Managers remain confident in the underlying growth of the US economy.

With the political and policy background so fluid it is too early to draw long term conclusions following Trump's success. No adjustment has been made to the portfolio as a consequence; however, the Managers remain alert to any developments in his policies that could impact the operational performance of the holdings. The Managers believe that the portfolio consists of companies which are sufficiently flexible and resilient to cope with changing circumstances within their markets and remain excited by the possibilities and prospects afforded to long term investors.

The principal risks and uncertainties facing the Company are set out in note 11.

 

By order of the Board

JGD Ferguson

Chairman

6 December 2016

 

Past performance is not a guide to future performance.

[1] With borrowings priced at fair value

The Monks Investment Trust PLC

 

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 and do not influence the selection of stocks.

-  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 equity holdings fall into one of four growth categories - as set out in the Equity Portfolio by Growth Category table below.

-  The use of these four 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

-  Equities are held in three broad holding sizes - as set out in the Equity Portfolio by Growth Category table 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.

 

*      Active share, a measure of how actively a portfolio is managed, is the percentage of the 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.

The Monks Investment Trust PLC

 

Equity Portfolio by Growth Category as at 31 October 2016 (unaudited)   

 

Holding Size

Growth Stalwarts  20.6%

%

Rapid Growth 36.3%

%

Cyclical Growth 28.4%

%

Latent Growth 14.7%

%

 

(c.10%p.a. earnings growth)

 

 

(c.15% to 25% p.a. earnings growth)

 

(c.10% to 15% p.a. earnings growth through a cycle)

 

 

(earnings growth to accelerate over time)

 

 

 

Company Characteristics

-    Durable franchise

-    Deliver robust profitability in most macroeconomic environments

-    Competitive advantage includes dominant local scale, customer loyalty and strong brands

 

 

Company Characteristics

-    Early stage businesses with vast growth opportunity

-    Innovators attacking existing profit pools or creating new markets

 

Company Characteristics

-    Subject to macroeconomic and capital cycles with significant structural growth prospects

-    Strong management teams highly skilled at capital allocation

 

Company Characteristics

-    Company specific catalyst will drive above average earnings in future

-    Unspectacular recent operational performance and therefore out of favour

 

Highest conviction holdings

c.2.0% each

 

Total: 35.4%

Prudential

2.9

Amazon.com

3.8

Royal Caribbean Cruises

2.8

CRH

2.1

SAP

2.2

Naspers

2.9

TSMC

2.3

MS&AD Insurance

1.8

Moody's

1.7

Alphabet

2.6

First Republic Bank

1.7

 

 

Anthem

1.7

Alibaba

2.0

TD Ameritrade

1.7

 

 

 

 

 

 

CarMax

1.6

 

 

Markel

1.6

 

 

 

 

 

 

 

 

 

Average sized holdings

c.1.0% each

 

Total: 43.9%

Visa

1.4

Facebook

1.5

Martin Marietta Materials

1.3

Samsung Electronics

1.5

Schindler

1.3

AIA

1.4

EOG Resources

1.1

Apache

1.3

MasterCard

1.3

Ryanair

1.4

Richemont

1.0

Fairfax Financial

0.9

Novo Nordisk

0.9

MercadoLibre

1.3

Wolseley

1.0

Sberbank of Russia

0.8

Monsanto

0.9

ICICI Bank

1.2

Atlas Copco

0.9

Carlsberg

0.7

Resmed

0.9

Baidu

1.1

Svenska Handelsbanken

0.9

Howard Hughes

0.7

Colgate-Palmolive

0.8

Seattle Genetics

1.0

Teradyne

0.9

 

 

Waters

0.8

HDFC

0.9

SMC

0.8

 

 

 

 

iRobot

0.8

Wabtec

0.8

 

 

 

 

MarketAxess

0.8

Hays

0.8

 

 

 

 

Nvidia

0.8

CH Robinson Worldwide

0.8

 

 

 

 

Yandex

0.7

Lincoln Electric

0.8

 

 

 

 

TripAdvisor

0.7

Brambles

0.8

 

 

 

 

GrubHub

0.7

Jardine Strategic Holdings

0.7

 

 

 

 

Schibsted

0.7

 

 

 

 

 

 

M3

0.7

 

 

 

 

 

 

Cyberagent

0.7

 

 

 

 

 

 

 

Tesla Motors

0.7

 

 

 

 

 

Holding Size

Growth Stalwarts  20.6%

%

Rapid Growth 36.3%

%

Cyclical Growth 28.4%

%

Latent Growth 14.7%

%

 

(c.10%p.a. earnings growth)

 

 

(c.15% to 25% p.a. earnings growth)

 

(c.10% to 15% p.a. earnings growth through a cycle)

 

(earnings growth to accelerate over time)

 

 

 

 

 

 

 

 

 

 

Incubator Holdings

c.0.5% each

 

Total: 20.7%

Olympus

0.6

BMF Bovespa

0.6

Ritchie Bros Auctioneers

0.6

Veeco Instruments

0.6

Bureau Veritas

0.6

Trupanion

0.5

Deutsche Boerse

0.6

Toyota Tsusho

0.5

Tsingtao Brewery

0.6

Renishaw

0.5

Rolls Royce

0.6

HTC

0.5

Kansai Paint

0.6

Line

0.5

DistributionNOW

0.5

Kirby

0.5

Stericycle

0.5

Ctrip.com International

0.5

Sands China

0.5

Dolby Laboratories

0.5

Verisk Analystics

0.5

IP Group

0.5

Victrex

0.5

Rohm

0.5

Dia

0.4

Myriad Genetics

0.5

PageGroup

0.4

Bank of Ireland

0.4

 

 

China Biologic Products

0.5

Leucadia National

0.3

Silk Invest Africa Food Fund

0.4

 

 

Japan Exchange

0.5

Ferro Alloy Resources

0.1

OC Oerlikon

0.4

 

 

Zillow

0.5

 

 

Fiat Chrysler Autos

0.3

 

 

LendingTree

0.4

 

 

MTN

0.2

 

 

Qiagen

0.4

 

 

Doric Nimrod Air One

0.1

 

 

Interactive Brokers Group

0.4

 

 

Juridica Investments

-  

 

 

Autohome

0.4

 

 

 

 

 

 

Intuitive Surgical

0.4

 

 

 

 

 

 

Financial Engines

0.3

 

 

 

 

 

 

Alnylam Pharmaceuticals

0.2

 

 

 

 

 

 

Ferrari

0.2

 

 

 

 

 

 

Stratsys

0.1

 

 

 

 

 

The Monks Investment Trust PLC

 

Portfolio Positioning as at 31 October 2016 (unaudited)

 

Thematic Risk Categories

 

 

Category

At 31 October 2016

%

Economically Agnostic

47.0

 

Internet Winners

18.8

 

Innovation

18.6

 

Consumer Stalwarts

8.6

 

Idiosyncratic

1.0

US Re-emergence

21.9

 

Normalisation

6.5

 

Industrial

6.3

 

Consumer

5.5

 

Capital Cycle

2.0

 

Government Budgets

1.6

Continued Progress of Asia/Latin America

17.0

 

Consumer Catch-Up

13.1

 

Commodities

2.4

 

Industrial

1.5

European and Japanese Healing

12.2

 

Consumer

4.1

 

Industrial

3.1

 

Abenomics

3.1

 

Normalisation

1.9

Bonds and Net Liquid Assets

1.3

 

Net Liquid Assets

0.8

 

Bonds

0.5

Other

0.6

Total Assets

100.0

 

The Monks Investment Trust PLC

 

Portfolio Positioning as at 31 October 2016 (unaudited) (ctd)

 

Geographical Analysis

 

At

31 October 2016

%

At

30 April 2016

%

North America

47.6

46.1

Emerging Markets

18.2

14.2

Continental Europe

15.4

17.7

United Kingdom

7.2

8.3

Japan

7.0

8.3

Developed Asia

3.3

3.2

Bonds

0.5

0.6

Net Liquid Assets

0.8

1.6

Total Assets

100.0

100.0

 

Sectoral Analysis

 

 

At

31 October 2016

%

At

30 April 2016

%

Equities:

Oil and Gas

2.9

2.7

 

Basic Materials

1.1

1.2

 

Industrials

17.6

18.9

 

Consumer Goods

7.8

7.8

 

Health Care

7.8

7.0

 

Consumer Services

20.6

18.8

 

Financials

26.1

26.8

 

Technology

14.6

13.3

 

Telecommunications

0.2

1.3

 

98.7

97.8

Bonds

0.5

0.6

Net Liquid Assets

0.8

1.6

Total Assets

100.0

100.0

The Monks Investment Trust PLC

 

Thirty largest equity holdings at 31 October 2016 (unaudited)

 

Name

 

 

 

 

Growth

Category

Business

Fair Value £'000

% of
Total Assets

Amazon.com

Rapid

Online retailer

50,963

3.7

Prudential

Stalwart

International financial services

39,160

2.9

Naspers

Rapid

Media and e-commerce

38,349

2.8

Royal Caribbean Cruises

Cyclical

Cruise line operator

37,188

2.7

Alphabet

Rapid

Online search engine

34,865

2.6

TSMC

Cyclical

Semiconductor manufacturer

31,062

2.3

SAP

Stalwart

Enterprise software

30,065

2.2

CRH

Latent

Diversified building materials

28,260

2.1

Alibaba

Rapid

Online and mobile commerce

26,347

1.9

MS&AD Insurance

Latent

Non-life insurer

24,081

1.8

First Republic Bank

Cyclical

Retail bank

23,379

1.7

Moody's

Stalwart

Credit rating agency

22,791

1.7

TD Ameritrade

Cyclical

Online brokerage

22,376

1.6

Anthem

Stalwart

Healthcare insurer

22,166

1.6

CarMax

Cyclical

Used car retailer

21,242

1.6

Markel

Cyclical

Speciality insurance

20,922

1.5

Samsung Electronics

Latent

Consumer and industrial electronic equipment

20,549

1.5

Facebook

Rapid

Social networking

19,625

1.4

AIA

Rapid

Insurance

19,405

1.4

Ryanair

Rapid

Low cost airline

18,495

1.4

Visa

Stalwart

Global electronic payments network

18,154

1.3

Martin Marietta Materials

Cyclical

Cement and aggregates producer

18,040

1.3

Schindler

Stalwart

Elevator and escalator manufacturer

17,854

1.3

MercadoLibre

Rapid

Latin American e-commerce platform

17,679

1.3

MasterCard

Stalwart

Global electronic payments network

17,400

1.3

Apache

Latent

Oil exploration and productions

17,378

1.3

ICICI Bank

Rapid

Banking and financial services

15,966

1.2

EOG Resources

Cyclical

Oil and gas explorer and producer

14,703

1.1

Baidu

Rapid

Chinese internet search engine

14,409

1.1

Richemont

Cyclical

Luxury goods designer and manufacturer

14,109

1.0

 

 

 

716,982

52.6

The Monks Investment Trust PLC

 

Income Statement (unaudited)

 

 

 

For the six months ended

31 October 2016

For the six months ended

31 October 2015

For the year ended

30 April 2016

 

Revenue

£'000

Capital

£'000

Total

£'000

Revenue

£'000

Capital

£'000

Total

£'000

 

(Losses)/gains on sales of investments

(932)

(932)

11,056 

11,056 

2,441 

2,441 

Changes in investment  holding gains and (losses)

261,596 

261,596 

(49,791)

(49,791)

(13,240)

(13,240)

Currency (losses)/gains

(6,314)

(6,314)

1,104 

1,104 

1,655 

1,655 

Income from investments and interest receivable

9,614 

9,614 

6,925 

6,925 

15,149 

15,149 

Investment management fee (note 3)

(2,822)

(2,822)

(2,316)

(2,316)

(4,617)

(4,617)

Other administrative expenses

(588)

(588)

(566)

(566)

(1,150)

(1,150)

Net return before finance costs and  taxation

6,204 

254,350 

260,554 

4,043 

(37,631)

(33,588)

9,382 

(9,144)

238 

Finance costs of borrowings

(1,896)

(1,896)

(1,604)

(1,604)

(3,291)

(3,291)

Net return on ordinary activities before taxation

4,308 

254,350 

258,658 

2,439 

(37,631)

(35,192)

6,091 

(9,144)

(3,053)

Tax on ordinary activities

(713)

(713)

(545)

(545)

(1,137)

(1,137)

Net return on ordinary activities after taxation

3,595 

254,350 

257,945 

1,894 

(37,631)

(35,737)

4,954 

(9,144)

(4,190)

Net return per ordinary share (note 4)

1.68p

118.88p

120.56p

0.89p

(17.59p)

(16.70p)

2.31p

(4.27p)

(1.96p)

 

The total column of this statement is the profit and loss account of the Company.

All revenue and capital items in this statement derive from continuing operations.

A Statement of Comprehensive Income is not required as all gains and losses of the Company have been reflected in the above statement.

 

The Monks Investment Trust PLC

 

Balance Sheet (unaudited)

 

 

At 31 October 2016

£'000

At 30 April 2016

£'000

Fixed assets

 

 

Investments held at fair value through profit or loss (note 6)

1,351,588 

1,079,434 

Current assets

 

 

Debtors

3,218 

3,330 

Cash and short term deposits

11,795 

15,930 

 

15,013 

19,260 

Creditors

 

 

Amounts falling due within one year:

 

 

Bank loan (note 7)

(55,287)

(46,078)

Other creditors

(4,766)

(1,890)

 

(60,053)

(47,968)

Net current liabilities

(45,040)

(28,708)

Total assets less current liabilities

1,306,548 

1,050,726 

Creditors

 

 

Amounts falling due after more than one year:

 

 

Debenture stock (note 7)

(39,794)

(39,777)

Net assets

1,266,754 

1,010,949 

 

 

 

Capital and reserves

 

 

Called-up share capital

10,698 

10,698 

Share premium account

11,100 

11,100 

Capital redemption reserve

8,700 

8,700 

Capital reserve

1,189,164 

934,814 

Revenue reserve

47,092 

45,637 

Shareholders' funds

1,266,754 

1,010,949 

Net asset value per ordinary share

(after deducting borrowings at fair value) (note 7)

588.0p

470.1p

Net asset value per ordinary share

(after deducting borrowings at par)

591.9p

472.4p

Ordinary shares in issue (note 8)

213,963,859 

213,963,859 

 

 

 

The Monks Investment Trust PLC

 

Statement of Changes in Equity (unaudited)

 

 

For the six months ended 31 October 2016

 

Called up share
capital

£'000

Share premium account

£'000

Capital redemption reserve

£'000

Capital reserve*

£'000

Revenue reserve

£'000

Shareholders'
funds

£'000

Shareholders' funds at 1 May 2016

10,698

11,100

8,700

934,814 

45,637 

1,010,949 

Net return on ordinary activities after taxation

-

-

-

254,350 

3,595 

257,945 

Dividends paid during the period (note 5)

-

-

-

(2,140)

(2,140)

Shareholders' funds at 31 October 2016

10,698

11,100

8,700

1,189,164 

47,092 

1,266,754 

 

 

For the six months ended 31 October 2015

 

Called up share
capital

£'000

Share premium account

£'000

Capital redemption reserve

£'000

Capital reserve*

£'000

Revenue reserve

£'000

Shareholders'
funds

£'000

Shareholders' funds at 1 May 2015

10,698

11,100

8,700

943,958 

49,135 

1,023,591 

Net return on ordinary activities after taxation

-

-

-

(37,631)

1,894 

(35,737)

Dividends paid during the period (note 5)

-

-

-

(7,382)

(7,382)

Shareholders' funds at 31 October 2015

10,698

11,100

8,700

906,327 

43,647 

980,472 

 

*      The Capital Reserve balance at 31 October 2016 includes holding gains on investments of £325,071,000 (31 October 2015 - gains of £26,924,000).

 

 

The Monks Investment Trust PLC

 

Condensed cash flow statement (unaudited)

 

 

 

Six months to

 31 October 2016

£'000

Six months to

 31 October 2015

£'000

Cash flows from operating activities

 

 

Net return on ordinary activities before taxation

258,658 

(35,192)

Net (gains)/losses on investments

(260,664)

38,735 

Currency losses/(gains)

6,314 

(1,104)

Amortisation of fixed income book cost

(203)

(159)

Finance costs of borrowings

1,896 

1,604 

Overseas tax incurred

(715)

(527)

Changes in debtors and creditors

1,305 

103 

Cash from operations

6,591 

3,460 

Interest paid

(1,871)

(1,451)

Net cash inflow from operating activities

4,720 

2,009 

Net cash (outflow)/inflow from investing activities

(9,610)

45,568 

Equity dividends paid (note 5)

(2,140)

(7,382)

Net cash outflow from financing activities

(2,140)

(7,382)

(Decrease)/increase in cash and cash equivalents

(7,030)

40,195 

Exchange movements

2,895 

(12)

Cash and cash equivalents at start of period

15,930 

50,815 

Cash and cash equivalents at end of period

11,795 

90,998 

 

 

The Monks Investment Trust PLC

 

Notes to the condensed financial statements (unaudited)

 

 

1.    

The condensed Financial Statements for the six months to 31 October 2016 comprise the Statements set out in the previous pages 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 have not been audited or reviewed by the Auditors pursuant to the Auditing Practices Board Guidance on 'Review of Interim Financial Information'. The Financial Statements for the six months to 31 October 2016 have been prepared on the basis of the same accounting policies set out in the Company's Annual Report and Financial Statements at 30 April 2016, which include the early adoption of Amendments to FRS 102 'The Financial Reporting Standard applicable in the UK and Republic of Ireland - fair value hierarchy disclosures'. 

Going Concern

Having considered the nature of the Company's principal risks and uncertainties, as set out in note 11 below, together with its current position, investment objective and policy, the level of demand on the Company's shares, the nature of its assets, its liabilities and projected income and expenditure, 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. 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 its 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 2016 has been extracted from the statutory accounts which have been filed with the Registrar of Companies. The Auditors' Report on those accounts was unqualified and did not contain statements under sections 498 (2), (3) or (4) 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% of total assets less current liabilities, calculated quarterly.

4.    

Net return per ordinary share

Six months to

 31 October

 2016

£'000

Six months to

31 October

 2015

£'000

Year to

30 April

2016

£'000

Revenue return on ordinary activities after taxation

3,595

1,894 

4,954 

Capital return on ordinary activities after taxation

254,350

(37,631)

(9,144)

Total net return

257,945

(35,737)

(4,190)

Net return per ordinary share is based on the above totals of revenue and capital and on 213,963,859 (31 October 2015 and 30 April 2016 - 213,963,859) 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.

 

 

 

 

 

 

 

 

 

 

The Monks Investment Trust PLC

 

Notes to the condensed financial statements (unaudited) (ctd)

 

 

 

5.    

Dividends

Six months to

 31 October

2016

£'000

Six months to

31 October

 2015

£'000

 

Year to

30 April

2016

£'000

Amounts recognised as distributions in the period:

 

 

 

Previous year's final dividend of 1.00p (2015 - 3.45p), paid 5 August 2016

2,140

7,382

7,382

Interim dividend for the year ended 30 April 2016 of 0.50p, paid 29 January 2016

-

-

1,070

 

2,140

7,382

8,452

Amounts paid and payable in respect of the period:

 

 

 

Interim dividend (for the year ending 30 April 2016 0.50p)

-

1,070

1,070

Final Dividend (2016 - 3.45p)

-

-

2,140

 

-

1,070

3,210

 

No interim dividend has been declared in respect of the current period.  

6.

Fair Value Hierarchy

The fair value hierarchy used to analyse the basis on which the fair values of financial instruments held at fair value through the profit and loss account 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 date); and

Level 3 - using inputs that are unobservable (for which market data is unavailable).

The Company's investments are financial assets held at fair value through profit or loss. An analysis of the Company's financial asset investments based on the fair value hierarchy described above is shown below.

 

Investments held at fair value through profit or loss

 

 

 

 

 

 

As at 31 October 2016

Level 1

£'000

Level 2

£'000

Level 3

£'000

Total

£'000

Listed equities

1,337,934

-

-

1,337,934

Unlisted equities

-

-

7,519

7,519

Unlisted debt securities

-

-

6,135

6,135

Total financial asset investment

1,337,934

-

13,654

1,351,588

 

 

 

 

 

 

 

 

As at 30 April 2016

Level 1

£'000

Level 2

£'000

Level 3

£'000

Total

£'000

Listed equities

1,064,545

-

-

1,064,545

Unlisted equities

-

-

7,657

7,657

Unlisted debt securities

-

-

7,232

7,232

Total financial asset investment

1,064,545

-

14,889

1,079,434

 

 

 

The Monks Investment Trust PLC

 

Notes to the condensed financial statements (unaudited) (ctd)

 

 

There have been no transfers between levels of the fair value hierarchy during the period. The fair value of listed investments is bid price or, in the case of FTSE 100 constituents or holdings on certain recognised overseas exchanges, last traded price. Listed investments are categorised as level 1 if they are valued using unadjusted quoted prices for identical instruments in an active market and 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 (price of recent investment, 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.

7.    

At 31 October 2016 the book value of the Company's borrowings amounted to £95m (30 April 2016 - £86m).  This comprised a £40m 6 3/8% debenture stock repayable in 2023 (30 April 2016 - £40m) and a short term bank loan of US$67.5m (30 April 2016 - US$67.5m).

The fair value of borrowings at 31 October 2016 was £104m (30 April 2016 - £91m).

8.    

At 31 October 2016 the Company had authority to buy back 32,073,182 shares and to allot new shares/sell treasury shares up to an aggregate nominal amount of £1,069,819. No shares were bought back or allotted/ sold during the period and no shares were held in treasury at 31 October 2016.

9.    

Transaction costs on purchases amounted to £98,000 (31 October 2015 - £166,000; 30 April 2016 - £384,000) and transaction costs on sales amounted to £64,000 (31 October 2015 - £40,000; 30 April 2016 - £93,000).

10. 

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 www.monksinvestmenttrust.co.uk on or around 19 December 2016.

11. 

Principal Risks and Uncertainties

Political risk has been added as a principal risk facing the Company as the Board is of the view that political change in areas in which the Company invests or may invest may increasingly have practical consequences for the Company. To mitigate this risk, developments are closely monitored and considered by the Board. The other 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 2016, are financial risk, regulatory risk, custody and depositary risk,  operational risk, discount volatility and leverage risk. An explanation of these risks and how they are managed is set out on pages 15 and 16  of the Company's Annual Report and Financial Statements for the year to 30 April 2016 which is available on the Company's website: www.monksinvestmenttrust.co.uk.‡

12. 

None of the views expressed in this document should be construed as advice to buy or sell a particular investment.

 

‡    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.

 

- ends -

 

[1] With borrowings priced at fair value


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