Annual Financial Report

RNS Number : 0513J

Monks Investment Trust PLC

26 June 2017

 

RNS Announcement: Preliminary Results

The Monks Investment Trust PLC

Legal Entity Identifier: 213800MRI1JTUKG5AF64

Unaudited Preliminary Results for the year to 30 April 2017

Over the year to 30 April 2017, the Company's net asset value (NAV) total return* was 40.0% compared to a total return of 31.0% for the FTSE World Index (in sterling terms). The share price total return for the same period was 53.9%, with the discount to NAV* narrowing to 0.6%.

¾       Amazon, Royal Caribbean Cruises and Naspers were the most notable positive contributors to absolute returns in the period during which 29 of our holdings appreciated by more than 50% in Sterling terms.

¾       Portfolio turnover for the 12 months was 13.8%.

¾       As at the financial year end, the Company's equity gearing stood at 6.2%, which was unchanged over the year.

¾       A single final dividend of 1.25p is being recommended, compared to a total of 1.5p last year. This is the minimum required to maintain the Company's investment trust status, reflecting its priority which is capital growth.

¾       Despite the strong performance over the past year, the Managers are optimistic that future portfolio returns should be positive, based on continued profit growth from a range of strong and adaptable businesses with superior prospects.

* 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, an independent fund management group, which has around £171 billion under management and advice as at 22 June 2017.

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 London 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^‡. Past performance is not a guide to future performance. See disclaimer at the end of this announcement.

‡    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.

26 June 2017

For further information please contact:

Anzelm Cydzik, Baillie Gifford & Co

Tel: [phone]

Roland Cross, Director, Four Broadgate

Tel: [phone] 

The following is the unaudited preliminary financial results statement for the year to 30 April 2017 which was approved by the Board on 23 June 2017.

Chairman's Statement

Monks has had an excellent year, as you will see from this report. The weakness in Sterling contributed to the result, but the key to it was the performance of our new portfolio which was established two years ago. Our managers have commented on this as follows:

'Our approach is to focus on a range of the world's best businesses and to hold them for several years, often through political and economic cycles and uncertainties.  The long-term revenue and profit growth potential of our investments dominates our analysis, as opposed to guesswork surrounding variations in global GDP, interest rates or politics.  Indeed, one of the strengths which defines successful businesses is their ability to adapt and evolve in the face of changing external circumstances, with the best managers also having the ambition and vision to exploit new opportunities as and when they appear.  Such companies should over time contribute greatly to social and economic development; they are the wealth creators and we as their shareholders can profit from their efforts.  The bulk of our investments produced revenue and profit growth in line or ahead of our expectations during the reporting period.' 

We are encouraged by the results that the implementation of the new approach has produced so far, but we note the caveat in the Managers' Report below that performance should be judged over a period of at least five years.

Performance

In the year to 30 April 2017, the total return for the FTSE World Index was 31.0% while the Company's net asset value total return (NAV), with borrowings at fair value, was 40.0%. The share price total return was greater at 53.9% because of the narrowing of the discount. The Company's one year net asset value performance ranked it third out of 23 AIC Global sector peer trusts.

Earnings and Dividend

Earnings per share increased from 2.31p to 2.36p. The Board is recommending that a single final dividend of 1.25p should be paid for the year, compared to a total of 1.5p last year. This is the minimum required to maintain the Company's investment trust status, reflecting our priority which is capital growth. No interim dividend was paid during the year.

Borrowings and Gearing

As advocates of the potential for strong real returns from equities over the long term, our managers will typically maintain a geared position. At present, we have agreed with them a gearing range of 5% net cash to plus 10% invested in equities. As at the financial year end, Monks equity gearing was 6.2%, which was unchanged over the year.

In addition to the £40m debenture that expires in 2023, the Company has a multi-currency revolving credit facility with National Australia Bank, of which US$87m is drawn at present.

Discount

The discount has narrowed substantially over the last two years. When the current team was appointed in March 2015 the discount (when calculated with borrowings at fair value) was 14.3%; by end April 2016 it had narrowed to 9.5% and as at the end of April 2017 it had moved to 0.6%. Since the year end the Company has occasionally traded at a small premium. If a clear premium to NAV emerges, we may issue shares to satisfy the demand from the market.

Management Fee

We have agreed a new tiered management fee with effect from 1 May 2017. The annual management fee payable to Baillie Gifford & Co Limited is now 0.45% on the first £750m of total assets and 0.33% on the remaining total assets, where total assets is defined as the total value of all assets held less all liabilities (other than any liability in the form of borrowings intended for investment purposes). Previously the fee payable was a flat 0.45% on total assets less current liabilities. Applying the new arrangement to the financial year to 30 April 2017, it is estimated that the ongoing charge would have been reduced by approximately £508,000. The new fee arrangement was instigated by our managers and ensures that shareholders benefit from economies of scale. The ongoing charge for the Company's last financial year was 0.59%.

The Board

During the financial year under review, we welcomed Belinda Richards and Professor Sir Nigel Shadbolt to the Board. Belinda Richards is a former senior partner at Deloitte LLP with a thirty year career specialising in business operations and strategy development with a particular focus on the Financial Services and Consumer Products sectors. Professor Sir Nigel Shadbolt is Principal of Jesus College, Oxford, Professorial Research Fellow in the Department of Computer Science, University of Oxford and a visiting Professor of Artificial Intelligence at the University of Southampton. He specialises in open data and artificial intelligence.

As a consequence of the increase in the number of Directors and with a view to giving flexibility for the future, we are seeking shareholder authority at the Annual General Meeting to increase the Company's aggregate Directors' fees limit from £200,000 to £300,000 per annum. This aggregate level was last increased in 2003 and the Board has no intention of increasing the Directors' fees this year.

Outlook

Despite the present political uncertainties, the global economy is enjoying its most rapid expansion for many years. US consumer confidence is high, and the European economy is now recovering strongly. As long-term investors in growth, our portfolio managers see many bright spots about which to be optimistic, based on their analysis of the companies in our portfolio.

Annual General Meeting

I hope shareholders will come to the Annual General Meeting, which will be held on Wednesday 2 August 2017 at 11.00am at the Institute of Directors. The managers will give a short presentation and there will be an opportunity to ask questions and to meet them and the Directors informally.

James Ferguson

Chairman

23 June 2017

Past performance is not a guide to future performance. See disclaimer at the end of this announcement.

The Managers' Core Investment Beliefs

We believe the following features of Monks provide a sustainable basis for adding value for shareholders.

Active Management

¾ We invest in attractive companies using a 'bottom-up' investment process. Macroeconomic forecasts are of relatively little interest to us.

¾ High active share* provides the potential for adding value.

¾ 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.

¾ Large swathes of the market are unattractive and of no interest to us.

¾ As index agnostic global investors we can go anywhere and only invest in the best ideas.

¾ As the portfolio is very different from the index, we expect portfolio returns to diverge - sometimes substantially and often for prolonged periods.

Committed Growth Investors

¾ In the long run, share prices follow fundamentals; growth drives returns.

¾ We aim to produce a portfolio of stocks with above average growth - this in turn underpins the ability of Monks to add value.

¾ 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.

¾ The use of these four growth categories ensures a diversity of growth drivers within a disciplined framework.

Long-Term Perspective

¾ Long-term holdings mean that company fundamentals are given time to drive returns.

¾ We prefer companies that are managed with a long-term mindset, rather than those that prioritise the management of market expectations.

¾ We believe our approach helps us focus on what is important during the inevitable periods of underperformance.

¾ Short-term portfolio results are random.

¾ As longer-term shareholders we are able to have greater influence on environmental, social and governance matters.

Dedicated Team with Clear Decision-making Process

¾ Senior and experienced team drawing on the full resources of Baillie Gifford.

¾ Alignment of interests - the investment team responsible for Monks all own shares in the Company.

Portfolio Construction

¾ Equities are held in three broad holding sizes - as set out in the Equity Portfolio by Growth Category table below.

¾ 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.

¾ '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

¾ Investors should not be penalised by high management fees.

¾ 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.

 

Managers' Report

Background

Markets were strong in the year to end April 2017, with returns to Sterling investors flattered by the pronounced weakness in the pound which followed the UK's decision to leave the European Union.  Global headlines throughout the period were dominated by political uncertainties and predictions of economic gloom, yet the reality was that few of these fears were realised and companies across the world were, in general, able to produce good revenue and profit growth against a background of stable low inflation and continuing low interest rates.  There was limited divergence of performance between the major markets or between sectors; it was a year when stock selection dominated.

Performance

During the year to 30 April 2017 the Company's net asset value (NAV), with borrowings at fair value, returned 40.0%, significantly ahead of the FTSE World Index at 31.0%.  While this is a more than satisfactory outcome, we believe that performance should only be judged over longer time periods of five years or more, so it is still early days for the new management team.  Over the two years since the change in approach the NAV return has been 39.4% compared to the benchmark at 31.6%.

Remarkably 29 of our holdings appreciated by more than 50% in Sterling during the year and 7 by more than 100%.  These big winners come disproportionately from two of our favourite growth areas: Platform businesses and Technology companies, notably those involved in semi-conductors.  Among the Platforms we saw big contributions from long-term holdings including Amazon which is now our largest holding, MercadoLibre and Alibaba (respectively the leading Brazilian and Chinese ecommerce platforms), Naspers, a South African based internet investor, and MarketAxess which is an electronic bond trading platform.  The diverse nationality of these companies demonstrates that geography was not a big influence but rather similarities in business model and scale alongside secular changes in behaviour enabled by the internet and the development of mobile services were the key success factors.  It is interesting to note that despite very strong share price appreciation we made no sales of any of these holdings but rather added to Alibaba and Naspers during the year as we continue to believe such companies are capable of substantial further growth. 

Broader technological progress is also driving demand for advanced electronics and in particular for the semi-conductors which enable everything from our mobile phones to industrial automation, medical diagnostics and treatments and electric (and eventually autonomous) vehicles.  The semi-conductor industry has historically proven highly cyclical and unpredictable but it remains our contention that significant consolidation across several strands of the industry will result in more dominant leaders and more rational behaviour, particularly as it relates to new capacity and pricing.  Combined with a rapid uptick in demand based on this wide range of new applications, this should produce significant future profits and a more positive assessment of the companies involved.  The strong share price performance of holdings such as Nvidia, Teradyne, Samsung Electronics and Veeco, each of which more than doubled in the year, along with Rohm and TSMC suggests that this process has begun, though as with the Platform winners, we believe there is considerably more to go for.

We also saw strong relative share price performance across a broad spread of holdings including financials such as Sberbank, First Republic and HDFC (respectively Russian, American and Indian banks); industrials such as Renishaw, Atlas Copco, CRH and Lincoln Electric; and consumer companies including Royal Caribbean Cruises.  The only notable negative contributors to performance, both of which remain in the portfolio, were Myriad Genetics (medical diagnostics) and Novo Nordisk, the world leader in diabetes treatment.  Both fell victim to pricing pressures as regulators and competitors combined to try to get US healthcare costs under control but we believe each has technical leadership which should enable a better long-term outcome.

Performance was also helped by gearing, with borrowed funds invested in the equity markets contributing approximately 1.7% to returns for the year.  We put the equity gearing in place in two stages following market weakness in late 2015 and early 2016.  We have been waiting patiently for an opportunity to take the level of borrowings to what we consider the long-term norm of 10% of shareholders' funds.  The market's strength has dissuaded us from taking out further borrowings for the time being but we remain alert to opportunities and we have scope within our existing bank arrangements to move quickly should the chance arise. 

In addition to the strong performance of the underlying portfolio and the positive impact of gearing, shareholders also benefited during the year from a narrowing of the discount from 9.5% to 0.6% (calculated with borrowings at fair value).  This boosted the share price total return to a gain of 53.9%.  The reduction in the discount was the result of our efforts to generate more buyers of Monks' shares in the market while reducing the level of selling by existing shareholders.  The approach we have taken is to explain clearly and consistently our investment approach to both existing and potential shareholders, focusing on those we consider to be the natural long-term holders, namely private individuals, those advised by intermediaries such as wealth managers and smaller charities and foundations.  The main factor tying these groups together is their willingness to take a very long-term view of their investments, without the inclination for expensive and uncertain short-term portfolio trading. 

We are encouraged by progress so far but recognise that if we are to prevent the discount from widening out again, we shall have to continue to demonstrate ongoing potential for strong performance.  We are pleased that this is the second successive year where the Company has not needed to buy back shares and, in contrast, we are now approaching the position where we might potentially issue new shares at a premium to NAV in order to satisfy demand from buyers.  Now that we have agreed a new lower tiered fee scale with the Board, any growth in assets will result in lower costs for all shareholders.

Portfolio changes

New Purchases	Complete Sales
Abiomed	Aggreko
AP Moller-Maersk	American Express
China Biologic Products	Banco Popular Español
Ctrip.com International	Coca Cola HBC
GRAIL	Dolby Laboratories
HTC	eBay
Infineon Technologies	Ferrari
Interactive Brokers Group	Jardine Matheson
Jardine Strategic Holdings	Monsanto
Kansai Paint	Nanoco
LendingTree	Praxair
Line	Qualcomm
PageGroup	Shimano
Resmed	SK Hynix
SiteOne Landscape Supply	Softbank
Trupanion	Stratasys
Verisk Analytics	THK
	Victrex
	Volvo
	Wolseley

Portfolio turnover was lower than in recent years at 13.8%, suggesting an average holding period of over seven years, in line with our long-term perspective.  The table above shows the new purchases and complete sales. We sold a number of successful investments where valuations now largely discount future prospects, including Shimano, Ferrari, Wolseley and Dolby and in a similar vein we also reduced Markel, First Republic, Ryanair and CRH.  The balance of disposals were of companies which have failed to develop as we had previously hoped, many of which had entered the portfolio as smaller 'incubator' positions, reflecting the wide range of possible outcomes and uncertainties.  It is our practice not to dwell on such unknowns as risk taking is at the heart of our investment approach and failures are inevitable; the key is to include as many successes as possible.

Several of the new purchases were of 'Rapid' growth stocks, including a number of relatively immature but high potential companies which address large markets with innovative solutions.  Examples include Abiomed (heart pumps), LendingTree (consumer finance portal), China Biologics (plasma products) and GRAIL (cancer diagnosis).  GRAIL is a start up company, working on the development of blood tests for the early detection of cancer.  It is currently not listed on the stockmarket but has a pedigree list of backers including Illumina, Google and a number of leading pharmaceutical companies.  One of the advantages of investment trusts relative to open-ended vehicles is this ability to invest in unquoted companies.  We will continue to look out for further unique and high potential opportunities not otherwise accessible through public markets, however, we do not expect to hold more than a handful of such companies.  Other new purchases represented more established growth businesses such as Resmed, Verisk, Infineon and Ctrip.  Lastly, we acquired initial incubator sized holdings in two out of favour 'Latent' growth stocks HTC and AP Moller-Maersk.  In each case we are hoping for much improved future prospects, especially as capacity is now growing more slowly than demand while self help and restructuring offer benefits on top.  Both are strongly financed and would look significantly undervalued should our positive case come through.

Outlook for the Portfolio

Following the significant rise in the Monks share price over the last twelve months we must prepare ourselves for the likelihood of lower returns in the future.  But importantly, we still believe portfolio returns should be positive, based on continued profit growth from a range of strong and adaptable businesses with superior prospects.  We are less confident that aggregate stockmarket indices will make continued progress given the number of large companies and industries which look to us to be ripe for disruption and long-term decline.  Our job is to ensure that the portfolio has sufficient exposure to the winners and the foresight to avoid too many of the losers. 

Politics across the developed world does seem to be becoming less predictable, in part because of competition from fast developing economies and in part because of the impact of new technologies on societies.  While aggregate market valuations appear high and perhaps fail to reflect some of the external risks, we believe that the portfolio carries significantly lower redundancy risk and well above average growth potential, thereby justifying premium valuations.  Half of the portfolio is, in any case, not dependant on general economic development but rather on secular drivers.  Such companies, and we have already referred to several of them in discussion of performance and transactions, should succeed or fail on their own efforts and we describe these as 'economically agnostic' (see the Thematic Risk Categories table below).  In many cases we believe that the winner in a particular industry will take the vast majority of the rewards, so that as a dominant leader such as Amazon, Alibaba, Samsung or Facebook emerges, so the risks from competitors reduce, higher valuations can be justified and holdings can be allowed to rise in size.  While the growth rates of such companies will eventually slow, margins and cashflows should improve and returns to shareholders remain healthy.

The other half of the portfolio is more economically sensitive and reflects three broad themes: continued confidence in American growth; a revival in Emerging Markets; and cautious optimism that we are past the worst in Japan and Europe.  While the progress of the Trump administration's reforms are uncertain, we believe the direction of tax and industrial policy is broadly positive and should support the economy, with incentives to increase investment and research particularly important for the longer term.  A number of Emerging Markets are benefiting from a cyclical recovery after a difficult few years, supported by competitive currencies and praiseworthy efforts to improve governance and reduce corruption; in several such countries politics is actually becoming a cause for optimism.  The portfolio's exposure to Europe and Japan is currently modest but the passage of time and increased pressure for change and reform suggests growing scope for positive news. 

Overall we are seeing more opportunities for profitable investment all over the world and we look forward with confidence. We believe we are closely aligned with the interests of investors looking for a low cost, actively managed global trust which they can buy easily in the market and then hold for the very long term.

Charles Plowden,

Spencer Adair

Malcolm MacColl

23 June 2017

Past performance is not a guide to future performance. See disclaimer at the end of this announcement.

Equity Portfolio by Growth Category as at 30 April 2017 (unaudited)

Holding Size	Growth Stalwarts	%	Rapid Growth	%	Cyclical Growth	%	Latent Growth	%
	(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 ¾    Durable franchise ¾    Deliver robust profitability in most macroeconomic environments ¾    Competitive advantage includes dominant local scale, customer loyalty and strong brands		Company Characteristics ¾    Early stage businesses with vast growth opportunity ¾    Innovators attacking existing profit pools or creating new markets		Company Characteristics ¾    Subject to macroeconomic and capital cycles with significant structural growth prospects ¾    Strong management teams highly skilled at capital allocation		Company Characteristics ¾    Company specific catalyst will drive above average earnings in future ¾    Unspectacular recent operational performance and therefore out of favour
Highest conviction holdings c.2.0% each Total: 36.5%	Prudential	3.4	Amazon.com	3.8	Royal Caribbean Cruises	3.2	Samsung Electronics	1.8
	SAP	2.1	Naspers	3.1	TSMC	2.1	MS&AD Insurance	1.7
	Anthem	2.0	Alphabet	2.5	CRH	2.0
	Moody's	1.7	AIA	2.0	TD Ameritrade	1.6
			Alibaba	1.9	CarMax	1.6
Average sized holdings c.1.0% each Total: 42.1%	Visa Schindler MasterCard Verisk Analytics Novo Nordisk Waters Resmed Colgate-Palmolive	1.3 1.2 1.2 0.9 0.9 0.8 0.8 0.7	MercadoLibre Ryanair Facebook Seattle Genetics iRobot Ctrip.com International ICICI Bank Nvidia Baidu MarketAxess Tesla HDFC Yandex GrubHub LendingTree	1.5 1.5 1.4 1.2 1.1 1.1 1.0 1.0 0.9 0.9 0.9 0.9 0.9 0.7 0.7	Martin Marietta Materials Teradyne Richemont Markel Atlas Copco EOG Resources Leucadia National First Republic Bank Hays Lincoln Electric Svenska Handelsbanken Wabtec CH Robinson Worldwide SMC Jardine Strategic    Holdings	1.3 1.2 1.1 1.1 1.0 0.9 0.9 0.9 0.9 0.9 0.8 0.8 0.7 0.7 0.7	Bank of Ireland Apache Sberbank of Russia Veeco Instruments Fairfax Financial Carlsberg	0.9 0.9 0.8 0.7 0.7 0.7

Equity Portfolio by Growth Category as at 30 April 2017 (unaudited)  (Ctd)

Holding Size	Growth Stalwarts	%	Rapid Growth	%	Cyclical Growth	%	Latent Growth	%
	(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: 21.4%	Bureau Veritas Olympus Kansai Paint Stericycle Dia	0.6 0.6 0.5 0.5 0.4	Renishaw Cyberagent Schibsted Infineon Technologies BM&F Bovespa M3 Financial Engines Zillow Trupanion Qiagen Abiomed GRAIL TripAdvisor IP Group China Biologic Products Myriad Genetics Japan Exchange Interactive Brokers   Group Line Intuitive Surgical Alnylam Pharmaceuticals	0.6 0.6 0.6 0.5 0.5 0.5 0.4 0.4 0.4 0.4 0.4 0.4 0.4 0.4 0.4 0.4 0.4 0.4 0.4 0.4 0.3	Deutsche Boerse Brambles Rolls Royce Ritchie Bros Auctioneers PageGroup Kirby Sands China DistributionNOW SiteOne Landscape   Supply Ferro Alloy Resources	0.6 0.6 0.6 0.5 0.5 0.5 0.4 0.4 0.3 0.1	Howard Hughes Toyota Tsusho Tsingtao Brewery Rohm Autohome HTC Silk Invest Africa Food   Fund OC Oerlikon AP Moller-Maersk Fiat Chrysler Autos MTN Doric Nimrod Air One Juridica Investments	0.6 0.6 0.6 0.5 0.5 0.4 0.4 0.4 0.4 0.4 0.2 0.1   -
	Total	19.6%	Total	38.2%	Total	28.9%	Total	13.3%

Portfolio Positioning as at 30 April 2017 (unaudited)

Thematic Risk Categories

Category		At 30 April 2017 %
Economically Agnostic		47.6
	Internet Winners	19.1
	Innovation	18.9
	Consumer Stalwarts	8.5
	Idiosyncratic	1.1
US Re-emergence		22.9
	Industrial	5.9
	Consumer	5.8
	Normalisation	4.3
	Capital Cycle	3.6
	Government Budgets	2.0
	Energy	1.3
Continued Progress of Asia/Latin America		16.1
	Consumer Catch-up	12.8
	Energy	1.7
	Industrial	1.5
	Capital Cycle	0.1
European and Japanese Healing		11.5
	Consumer	3.7
	Industrial	2.7
	Abenomics	2.7
	Normalisation	2.3
	Capital Cycle	0.1
Bonds and Net Liquid Assets		1.3
	Net Liquid Assets	0.9
	Bonds	0.4
Other Equities		0.6
Total Assets		100.0

Portfolio Positioning as at 30 April 2017 (unaudited) (Ctd)

Geographical Analysis

	At 30 April 2017 %	At 30 April 2016 %
North America	47.1	46.1
Continental Europe	16.4	17.7
Emerging Markets	18.9	14.2
United Kingdom	6.3	8.3
Japan	6.3	8.3
Developed Asia	3.7	3.2
Bonds	0.4	0.6
Net Liquid Assets	0.9	1.6
Total Assets	100.0	100.0

Sectoral Analysis

		At 30 April 2017 %	At 30 April 2016 %
Equities:	Oil and Gas	2.2	2.7
	Basic Materials	0.6	1.2
	Industrials	17.3	18.9
	Consumer Goods	8.0	7.8
	Health Care	8.9	7.0
	Consumer Services	21.1	18.8
	Financials	25.5	26.8
	Technology	14.9	13.3
	Telecommunications	0.2	1.3
		98.7	97.8
Bonds		0.4	0.6
Net Liquid Assets		0.9	1.6
Total Assets		100.0	100.0

List of Investments at 30 April 2017 (unaudited)

Name	Business	Growth category	Fair value £'000	% of total assets	Cumulative % of total assets
Amazon.com	Online retailer	Rapid	56,326	3.7
Prudential	International financial services	Stalwart	50,355	3.3
Royal Caribbean Cruises	Cruise line operator	Cyclical	48,657	3.2
Naspers	Media and e-commerce	Rapid	47,399	3.1
Alphabet	Online search and platform provider	Rapid	37,578	2.5
SAP	Enterprise software	Stalwart	32,272	2.1
TSMC	Semiconductor manufacturer	Cyclical	31,555	2.1
AIA	Asian insurance provider	Rapid	30,660	2.0
Anthem	Healthcare insurer	Stalwart	30,548	2.0
CRH	Diversified building materials	Cyclical	30,110	2.0		26.0
Alibaba	Online and mobile commerce	Rapid	28,245	1.9
Samsung Electronics	Consumer and industrial electronic equipment	Latent	26,560	1.7
Moody's	Credit rating agency	Stalwart	25,318	1.7
MS&AD Insurance	Non-life insurer	Latent	24,923	1.6
TD Ameritrade	Online brokerage	Cyclical	23,623	1.6
CarMax	Used car retailer	Cyclical	23,478	1.5
MercadoLibre	Latin American e-commerce platform	Rapid	22,735	1.5
Ryanair	Low cost airline	Rapid	22,090	1.5
Facebook	Social media platform	Rapid	21,240	1.4
Martin Marietta Materials	Cement and aggregates producer	Cyclical	20,221	1.3		41.7
Visa	Global electronic payments network	Stalwart	18,938	1.2
Schindler	Elevator and escalator manufacturer	Stalwart	18,504	1.2
MasterCard	Global electronic payments network	Stalwart	17,855	1.2
Seattle Genetics	Biotechnology treatments for cancer	Rapid	17,513	1.1
Teradyne	Semiconductor testing equipment manufacturer	Cyclical	17,398	1.1
Richemont	Luxury goods designer and manufacturer	Cyclical	17,283	1.1
Markel	Speciality insurance	Cyclical	17,150	1.1
iRobot	Domestic robots	Rapid	16,857	1.1
Ctrip.com International	Chinese online travel agency	Rapid	15,987	1.0
ICICI Bank	Banking and financial services	Rapid	15,724	1.0		52.8
Nvidia	Interactive 3D graphics provider	Rapid	15,338	1.0
Atlas Copco	Industrial compressors and mining equipment    producer	Cyclical	15,178	1.0
EOG Resources	Oil and gas explorer and producer	Cyclical	14,195	0.9
Baidu	Chinese internet search engine	Rapid	13,859	0.9
Leucadia National	Diversified holding and investment company	Cyclical	13,658	0.9
Bank of Ireland	Retail and commercial bank	Latent	13,587	0.9
First Republic Bank	Private banking and wealth management	Cyclical	13,554	0.9
MarketAxess	Electronic bond trading platform	Rapid	13,524	0.9
Apache	Oil exploration and production	Latent	13,415	0.9
Hays	Recruitment and human resources	Cyclical	13,302	0.9		62.0
Verisk Analytics	Data analytics provider	Stalwart	13,268	0.9
Tesla	Electric vehicle and solution provider	Rapid	13,193	0.9
Lincoln Electric	Welding equipment manufacturer	Cyclical	13,133	0.9
HDFC	Indian mortgage provider	Rapid	13,062	0.9
Novo Nordisk	Pharmaceutical company	Stalwart	12,978	0.9
Yandex	Internet search and online services	Rapid	12,954	0.9
Sberbank of Russia	Banking and financial services	Latent	12,531	0.8

 

List of Investments at 30 April 2017 (unaudited) (Ctd)

Name	Business	Growth category	Fair value £'000	% of total assets	Cumulative % of total assets
Waters	Liquid chromatography products and services	Stalwart	12,507	0.8
Resmed	Develops and manufactures medical equipment	Stalwart	12,431	0.8
Svenska Handelsbanken	Retail bank	Cyclical	12,090	0.8	70.6
Wabtec	Technology products and services provider for    the rail industry	Cyclical	11,540	0.8
Veeco Instruments	Semiconductor equipment company	Latent	11,291	0.7
CH Robinson Worldwide	Third party delivery and logistics business	Cyclical	10,661	0.7
Fairfax Financial	Financial services holding company	Latent	10,636	0.7
Colgate-Palmolive	Consumer goods	Stalwart	10,533	0.7
SMC	Factory automation equipment producer	Cyclical	10,361	0.7
Carlsberg	Brewer	Latent	10,254	0.7
Jardine Strategic Holdings	Trading company	Cyclical	9,948	0.7
GrubHub	Online takeaway ordering service	Rapid	9,920	0.6
LendingTree	Online loan marketplace	Rapid	9,802	0.6	77.5
Bureau Veritas	Consulting and testing services company	Stalwart	9,412	0.6
Renishaw	Measurement and calibration equipment    manufacturer	Rapid	9,410	0.6
Howard Hughes	Real estate developer	Latent	9,380	0.6
Cyberagent	Internet advertising and content	Rapid	8,920	0.6
Toyota Tsusho	Trading company	Latent	8,891	0.6
Schibsted	Online media and classifieds	Rapid	8,861	0.6
Deutsche Boerse	Stock exchange operator	Cyclical	8,832	0.6
Olympus	Optics manufacturer	Stalwart	8,674	0.6
Brambles	Pallet pool operator	Cyclical	8,524	0.6
Tsingtao Brewery	Brewer	Latent	8,324	0.5	83.4
Rolls Royce	Power systems manufacturer	Cyclical	8,273	0.5
Infineon Technologies	German semiconductor manufacturer	Rapid	8,020	0.5
BM&F Bovespa	Stock exchange operator	Rapid	7,846	0.5
Ritchie Bros Auctioneers	Industrial equipment auctioneer	Cyclical	7,724	0.5
Rohm	Semiconductor manufacturer	Latent	7,705	0.5
Kansai Paint	Paint manufacturer	Stalwart	7,494	0.5
PageGroup	Recruitment consultancy	Cyclical	7,314	0.5
Autohome	Online auto research platform	Latent	7,306	0.5
M3	Online medical database	Rapid	7,147	0.5
Stericycle	Medical waste management services	Stalwart	7,122	0.5	88.4
Kirby	Marine shipping company	Cyclical	7,027	0.5
Financial Engines	Investment advisory firm	Rapid	6,791	0.4
Zillow	US online real estate services	Rapid	6,748	0.4
Trupanion	Pet health insurance provider	Rapid	6,747	0.4
HTC	Mobile handset and visual hardware producer	Latent	6,677	0.4
Qiagen	Biotechnology equipment	Rapid	6,528	0.4
Sands China	Casino operator	Cyclical	6,374	0.4
Abiomed	Manufacturer of medical implant devices	Rapid	6,218	0.4

 

List of Investments at 30 April 2017 (unaudited) (Ctd)

Name	Business	Growth category	Fair value £'000		% of total assets	Cumulative % of total assets
Dia	Discount food retailer	Stalwart	6,205	0.4
GRAIL*	Liquid biopsy cancer testing	Rapid	6,184	0.4		92.5
TripAdvisor	Online travel review platform	Rapid	6,173	0.4
IP Group	Intellectual property commercialisation	Rapid	6,076	0.4
Silk Invest Africa Food    Fund*	Africa-focused private equity fund	Latent	6,060	0.4
OC Oerlikon	Industrial equipment manufacturer	Latent	6,035	0.4
AP Moller-Maersk	Transport and logistics company	Latent	6,026	0.4
China Biologic Products	Biopharmaceuticals	Rapid	5,995	0.4
Myriad Genetics	Genetic testing	Rapid	5,718	0.4
Fiat Chrysler Autos	Vehicle manufacturer	Latent	5,660	0.4
Japan Exchange	Stock exchange operator	Rapid	5,594	0.4
Interactive Brokers Group	Online equity trading platform	Rapid	5,593	0.4		96.5
Line	Online social media platform	Rapid	5,545	0.4
DistributionNOW	Oilfield drilling equipment distributor	Cyclical	5,503	0.4
Intuitive Surgical	Surgical robots	Rapid	5,492	0.4
SiteOne Landscape Supply	Landscaping supplies distributor	Cyclical	4,819	0.3
Alnylam Pharmaceuticals	Biotechnology	Rapid	4,073	0.3
MTN	South African wireless telecom company	Latent	3,167	0.2
Ferro Alloy Resources*	Vanadium mining	Cyclical	1,390	0.1
Doric Nimrod Air One	Aircraft leasing	Latent	1,242	0.1
Juridica Investments	Litigation financing	Latent	248	-
Total Equity Investments			1,500,892	98.7		98.7
Bonds
Credit Suisse 0% Swap    Rate Linked Note 2017*	UK swap rate linked note		6,185		0.4
Total Bonds			6,185		0.4
Total Investments			1,507,077		99.1	99.1
Net Liquid Assets			14,053		0.9
Total Assets at Fair Value			1,521,130		100.0	100.0

*      Denotes an unlisted security

Income statement (unaudited)

	For the year ended 30 April 2017			For the year ended 30 April 2016
	Revenue £'000	Capital £'000	Total £'000	Revenue £'000	Capital £'000	Total £'000
Gains/(losses) on investments	-	403,486	403,486	-	(10,799)	(10,799)
Currency (losses)/gains	-	(3,264)	(3,264)	-	1,655	1,655
Income	17,593	-	17,593	15,149	-	15,149
Investment management fee	(6,011)	-	(6,011)	(4,617)	-	(4,617)
Other administrative expenses	(1,261)	-	(1,261)	(1,150)	-	(1,150)
Net return before finance costs and taxation	10,321	400,222	410,543	9,382	(9,144)	238
Finance costs of borrowings	(3,910)	-	(3,910)	(3,291)	-	(3,291)
Net return on ordinary activities before taxation	6,411	400,222	406,633	6,091	(9,144)	(3,053)
Tax on ordinary activities	(1,368)	-	(1,368)	(1,137)	-	(1,137)
Net return on ordinary activities after taxation	5,043	400,222	405,265	4,954	(9,144)	(4,190)
Net return per ordinary share (note 2)	2.36p	187.05p	189.41p	2.31p	(4.27p)	(1.96p)
Note: Dividends per share paid and payable in respect of the year (note 3)	1.25p			1.50p

The total column of this statement represents the profit and loss account of the Company. The supplementary revenue and capital 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 all gains and losses of the Company have been reflected in the above statement.

 

Balance sheet (unaudited)

	At 30 April 2017 £'000	At 30 April 2016 £'000
Fixed assets
Investments held at fair value through profit or loss	1,507,077	1,079,434
Current assets
Debtors	7,816	3,330
Cash and cash equivalents	15,208	15,930
	23,024	19,260
Creditors
Amounts falling due within one year (note 4)	(76,217)	(47,968)
Net current liabilities	(53,193)	(28,708)
Total assets less current liabilities	1,453,884	1,050,726
Creditors
Amounts falling due after more than one year (note 4)	(39,810)	(39,777)
Net assets	1,414,074	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	1,335,036	934,814
Revenue reserve	48,540	45,637
Shareholders' funds	1,414,074	1,010,949
Net asset value per ordinary share (after deducting borrowings at fair value)	656.8p	470.1p
Net asset value per ordinary share (after deducting borrowings at par)	660.8p	472.4p
Ordinary shares in issue (note 5)	213,963,859	213,963,859

 

Statement of changes in equity (unaudited)

For the year ended 30 April 2017

	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	-	-	-	400,222	5,043	405,265
Dividends paid during the year (note 3)	-	-	-	-	(2,140)	(2,140)
Shareholders' funds at 30 April 2017	10,698	11,100	8,700	1,335,036	48,540	1,414,074

For the year ended 30 April 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 2015	10,698	11,100	8,700	943,958	49,135	1,023,591
Net return on ordinary activities after taxation	-	-	-	(9,144)	4,954	(4,190)
Dividends paid during the year (note 3)	-	-	-	-	(8,452)	(8,452)
Shareholders' funds at 30 April 2016	10,698	11,100	8,700	934,814	45,637	1,010,949

 

Cash flow statement (unaudited)

	Year ended 30 April 2017		Year ended 30 April 2016
	£'000	£'000	£'000	£'000
Cash flows from operating activities
Net return on ordinary activities before taxation		406,633		(3,053)
Net (gains)/losses on investments		(403,486)		10,799
Currency losses/(gains)		3,264		(1,655)
Amortisation of fixed income book cost		(409)		(353)
Finance costs of borrowings		3,910		3,291
Overseas tax incurred		(1,348)		(1,125)
Changes in debtors and creditors		627		(1,257)
Cash from operations		9,191		6,647
Interest paid		(3,858)		(3,214)
Net cash inflow from operating activities		5,333		3,433
Cash flows from investing activities
Acquisitions of investments	(183,649)		(209,105)
Disposals of investments	161,830		215,791
Net cash (outflow)/inflow from investing activities		(21,819)		6,686
Cash flows from financing activities
Equity dividends paid	(2,140)		(8,452)
Shares purchased for cancellation	-		(2)
Borrowings drawn down/(repaid)	15,608		(39,536)
Net cash inflow/(outflow) from financing activities		13,468		(47,990)
Decrease in cash and cash equivalents		(3,018)		(37,871)
Exchange movements		2,296		2,986
Cash and cash equivalents at 1 May		15,930		50,815
Cash and cash equivalents at 30 April		15,208		15,930

 

Notes to the condensed financial statements (unaudited)

1.	The unaudited financial results for the year to 30 April 2017 have been prepared in accordance with FRS 102 'The Financial Reporting Standard applicable in the UK and Republic of Ireland'. The accounting policies adopted are consistent with those of the previous financial year. The Company has early adopted the amendments to section 34 of FRS 102 regarding fair value hierarchy disclosures.
2.	Net Return per Ordinary Share		2017				2016
	Revenue return		2.36p				2.31p
	Capital return		187.05p				(4.27p)
	Total return		189.41p				(1.96p)
	Revenue return per ordinary share is based on the net revenue return on ordinary activities after taxation of £5,043,000 (2016 - £4,954,000) and on 213,963,859 (2016 - 213,963,859) ordinary shares of 5p, being the weighted average number of ordinary shares in issue during the year. Capital return per ordinary share is based on the net capital gain for the financial year of £400,222,000 (2016 - loss of £9,144,000) and on 213,963,859 (2016 - 213,963,859) ordinary shares, being the weighted average number of ordinary shares in issue during the year. There are no dilutive or potentially dilutive shares in issue.
3.	Ordinary Dividends			2017	2016			2017 £'000	2016 £'000
	Amounts recognised as distributions in the year:
	Previous year's final (paid 5 August 2016)			1.00p	3.45p			2,140	7,382
	Interim			-	0.50p			-	1,070
				1.00p	3.95p			2,140	8,452
	We also set out below the total dividends paid and proposed in respect of the financial year, which is the basis on which the requirements of section 1158 of the Corporation Tax Act 2010 are considered. The revenue available for distribution by way of dividend for the year is £5,043,000 (2016 - £4,954,000).
				2017	2016			2017 £'000	2016 £'000
		Amounts paid and payable in respect of the financial year:
		Interim		-	0.50p			-	1,070
		Proposed final (payable 4 August 2017)		1.25p	1.00p			2,675	2,140
				1.25p	1.50p			2,675	3,210
		If approved, the recommended final dividend on ordinary shares will be paid on 4 August 2017 to shareholders on the register at the close of business on 7 July 2017. The ex-dividend date is 6 July 2017. The Company's Registrar offers a Dividend Reinvestment Plan and the final date for elections for this dividend is 14 July 2017.

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

4.	At 30 April 2017 the book value of the Company's borrowings amounted to £107m (2016 - £86m), comprising a £40m   6 3/8% debenture stock repayable in 2023 (2016 - £40m) and a short-term bank loan of US$87m (2016 - US$67.5m). The fair value of borrowings at 30 April 2017 was £116m (2016 - £91m).
5.	The Company did not buy back or allot any ordinary shares during the year. At 30 April 2017 the Company had authority to buy back 32,073,182 ordinary shares, being 14.99% of the shares in issue at the year end, and to allot 21,396,385 ordinary shares without application of pre-emption rights, being 10% of the shares in issue at the year end.
6.	The Report and Accounts will be available on the Managers' website www.monksinvestmenttrust.co.uk‡ on or around 4 July 2017.
7.	The financial information set out above does not constitute the Company's statutory accounts for the year ended 30 April 2017. The financial information for 2016 is derived from the statutory accounts for 2016 which have been delivered to the Registrar of Companies. The Auditors have reported on the 2016 accounts; their report was unqualified and it did not contain a statement under section 498(2) or (3) of the Companies Act 2006. The statutory accounts for 2017 will be finalised on the basis of the financial information presented in this preliminary announcement and will be delivered to the Registrar of Companies following the Company's Annual General Meeting.
8.	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.

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