Monks Investment Trust Preliminary Annual Results

RNS Number : 4916A

Monks Investment Trust PLC

08 June 2016

 

RNS Announcement: Preliminary Results

Results for the year to 30 April 2016

Over the year to 30 April 2016, the Company's net asset value total return was minus 0.4% compared to a total return of 0.5% for the FTSE World Index (in sterling terms). The share price total return for the same period was minus 1.3%.

¾   Stock selection was a positive contributor to returns led by Amazon, Ryanair and Alphabet.

¾   After excluding the deployment of gearing and sale of the US Treasury bond, portfolio turnover for the 12 months was around 14%.

¾   Some gearing was invested across the existing portfolio of stocks following the market declines in September 2015 and again in January 2016. As at the financial year end, the Company's equity gearing stood at 6.2% compared to nil a year ago, with effective gearing (including bonds) at 6.9%.

¾   Earnings per share for the financial year, 2.31p, were notably lower than the 4.74p of the previous year. A final dividend of 1p (3.45p) makes for a total dividend for the year of 1.5p (3.95p).

¾   The Board and Managers believe the Company's portfolio is set to grow at an above average rate, even in an environment of only modest economic expansion and the portfolio has broad exposure to the themes of Asian consumption, underlying growth of the US economy and technology.

¾   At this year's Annual General Meeting the authority of shareholders is being sought to enable the Company to re-sell shares held in Treasury at a premium to the prevailing net asset value per share.

8 June 2016

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 £122 billion under management and advice as at 6 June 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 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^‡

‡    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.

For further information please contact:

Anzelm Cydzik, Baillie Gifford & Co

Tel: [phone]

Cara Penkethman, Account Director, Four Broadgate 

Tel: [phone]

The following is the unaudited preliminary statement for the year to 30 April 2016 which was approved by the Board on 7 June 2016.

Chairman's Statement

In March 2015 the Board announced a change to the management team responsible for Monks, with a switch to Baillie Gifford's Global Alpha team led by Charles Plowden.  The Managers focus their attention on companies expected to grow at an above average rate over periods of 5 years or more and build a diversified portfolio of the best ideas drawn from across Baillie Gifford's 96 investment professionals (more details of their investment approach are set out in the Managers' Report and The Managers Core Investment Beliefs below).  They have followed and refined this approach since 2005 and have established a strong performance record.  We believe this is a natural fit with our investment policy and objective which remains long-term capital growth from global equities.

Following the significant reorganisation of the portfolio which took place in April 2015 there have been relatively modest further changes to the equity portfolio, which is discussed more fully in the Managers' Report.  The main change has been to the Balance Sheet with the Managers increasing the Company's exposure to equities through the use of borrowings and the sale of the US Treasury bond.  Some gearing was invested opportunistically across the existing portfolio of stocks following the market's sharp declines in September 2015 and again in January 2016, at which time the Company repaid its ¥15.5bn loan and replaced it with a five year multi-currency revolving credit facility, drawing US$67.5m.  As at the financial year end, the Company's equity gearing stood at 6.2% compared to nil a year ago, with effective gearing (including bonds) at 6.9%.

The Managers have been active in presenting the new approach to existing shareholders and to prospective investors in the Company.  No shares were bought back during the year, for the first time since 2004, and the discount (at fair value) ended the financial year modestly higher at 9.5% compared to 8.6% at the prior year end. It is too early to judge the success of this new approach, which is about long term investment, but we are encouraged by the quality of our portfolio and we are optimistic about its prospects.

Performance

In the year to 30 April 2016 the net asset value total return (capital and income), with borrowings at fair value, was minus 0.4% and the total return for the FTSE World Index was a positive 0.5%.  The share price total return was minus 1.3% after the slight widening in the discount. For a discussion of performance please see the Managers' Report below.

Earnings and Dividend

As flagged at the interim stage, earnings per share for the financial year, 2.31p, were notably lower than the 4.74p of the previous year, a decrease of 51%. We are recommending a final dividend of 1p, the minimum required to maintain investment trust status.  Together with the interim (0.5p) already paid, this makes the total dividend for the year 1.5p, a decrease of 62% from the 3.95p paid last year. Future dividends will be paid by way of a single final payment, reflecting our priority which is capital growth.

Buybacks, Treasury and Discount

We monitor the level of discount and have authorised the repurchase of shares when deemed appropriate. In future, any shares bought back are likely to be held in Treasury rather than cancelled automatically, as has been the case historically. At this year's Annual General Meeting the authority of shareholders is being sought to enable the Company to re-sell shares held in Treasury at a premium to the prevailing net asset value per share. This means that any issuance would increase the net asset value per share for existing shareholders.

Outlook and Portfolio

Our portfolio is constructed on a 'bottom-up' basis, with the strength of each individual investment case determining whether any stock should be held and in what size. Diversification is across growth types and the allocation to industries and regions is a function of where the portfolio managers identify the most attractive investment ideas.

The resulting portfolio consists of a wide range of stocks from all around the world.  Indeed, the Managers currently feel the choice of investments which meet their growth criteria is as wide as it has been at any point over the last decade. The diversity of opportunities is healthy and is enhanced by rapid technological progress across a range of industries.  With over 40% of the portfolio considered to be economically agnostic, it has a broad balance which ought to serve shareholders well over time and in most scenarios.  Following the sale of the US Treasury bond in October 2015, listed equities now account for over 97% of total assets.  Further information on the portfolio in various forms is shown below.

The Board

Carol Ferguson will be retiring at the forthcoming Annual General Meeting. We are grateful for her very considerable contribution to Monks over the last thirteen years.

AGM

I would encourage shareholders to attend the Annual General Meeting, which will be held on 3 August 2016 at 11.00am at the Institute of Directors. Our 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

7 June 2016

Past performance is not a guide to future performance.

 

Managers' Report

Performance

The year to end April 2016 was a volatile time for stock markets. The FTSE World index returned a pedestrian 0.5%, suggesting a lot of huffing and puffing for little reward. During the summer of 2015 commentators fretted about Chinese growth and its effect on the world economy. As the end of 2015 approached, these worries were repeated along with fears over the prospect of rising US interest rates and continued weakness in oil and other commodity prices. This led to a turbulent few weeks for markets, mainly during December and January.

Our job, as long-term investors, is to look past short-term headlines and identify those businesses that can sustainably grow their cash flows and earnings at above average rates. This perspective allows us to place short-term news and events firmly in context, stick to our approach, and add value over the long term, using gearing to take advantage of indiscriminate market weakness by buying equities at attractive valuations.

During the year to April Monks net asset value, with borrowings at fair value, returned minus 0.4%, with the second half of the period being a challenging environment with a number of our holdings suffering amidst worries about global growth. Particularly affected were companies with exposure to Asian consumption and those which had performed strongly earlier in the year. Not surprisingly, the few energy companies the portfolio did own, such as Ultra Petroleum and Inpex, performed poorly and both have been sold. 

Many of the top contributors have come from our enthusiasm for the growth of the US economy - such as Royal Caribbean Cruises, Markel, the specialist insurance provider, and Martin Marietta, a leading US building aggregates supplier, and our enthusiasm for technology - such as the internet giants Amazon.com, Facebook and Alphabet (formerly Google). Elsewhere Ryanair, Europe's leading low cost airline, produced exceptional operating and share price performance as did Japan's M3, which provides online information for doctors; both demonstrating that great investments can be found within unpromising economies.

If there was any real surprise in these results it was that our performance came in so close to the index return. The portfolio has a high active share (93%), which means that the overlap with the index is low (at 7%), so we would expect very different performance for the portfolio over the long run.

Portfolio Restructuring

As noted in last year's report, there was a very significant portfolio reorganisation following the change of portfolio management team. Since we settled in the most notable changes have been to the Company's borrowings and an associated change in gearing position.  

We view the ability of investment trusts to borrow funds to invest in long-term equities as a key advantage relative to other investment vehicles. We expect Monks to carry positive gearing to equity markets most of the time, typically in the range of 5-15% of shareholders' funds.  However, a strong rise in equity markets over previous years had argued for some caution a year ago.  Subsequent market volatility provided a welcome opportunity to add to the equity portfolio at significantly lower levels in both September 2015 and January 2016.  At the end of April net gearing to equities amounted to 6.2% and we would anticipate taking it higher should markets decline. This seems appropriate given the borrowing cost of our new US dollar loan is around 1.8% per annum, which is well below the historic long term return from equity markets.

Equity Portfolio

If we exclude the sale of the US Treasury bond and the purchase of approximately 7% of the portfolio related to the deployment of gearing, described above, then underlying portfolio turnover during the year was relatively modest, at around 14%, which indicates an average holding period of over 7 years, consistent with our long-term investment approach.  This level of turnover means that changes in the split of the portfolio between our growth categories have been minimal.  However, reasonably significant trends can be discerned within our 'Growth Stalwart' and 'Rapid Growth' categories.

Historically, global consumer staples companies have made up much of our exposure to Growth Stalwarts, being companies with strong brands, low economic sensitivity and decent growth opportunities especially within developing markets.  For many years Nestlé has been pre-eminent amongst such corporations and has been a prominent holding in our portfolios - but we have recently sold it for two main reasons.  First, the low level of bond yields worldwide has forced investors into reliable dividend payers, such as Nestlé, in a desperate search for income. This has driven valuations of such low risk, stable equities to unusually high levels. Second, we fear that Nestlé's future growth (and that of a number of its peers) is likely to be more modest than in the past given trends towards healthier eating, weaker demand from a number of markets and already high profit margins. Instead we have been buying into Growth Stalwart companies with higher growth potential such as software company SAP, clinical waste collector Stericycle and the world's leading diabetes care company Novo Nordisk.

Within the Rapid Growth category there has been little change despite strong price performance from a number of our larger holdings such as Amazon, Alphabet, Facebook and Naspers.  We increasingly believe that platform and network businesses such as these tend to 'winner takes all' outcomes as greater scale reduces costs and increases utility; as a result we sold Twitter and reduced eBay, both of which are falling further behind their respective market leaders, Facebook and Amazon, respectively.  We have continued to add new holdings, taking smaller incubator (around 0.5%) positions in Nvidia, which designs graphic chips for advanced computing including virtual reality, Autohome, a Chinese online car portal, and Grubhub, which is involved with online ordering and physical delivery of takeaway meals.  Such companies face considerable challenges and risks but offer very significant potential upside should they succeed and this asymmetry of returns is what we are explicitly trying to capture.

In our two other categories, 'Cyclical Growth' and 'Latent Growth', there were no discernible structural shifts. We did, however, continue to sell companies when we believed the prospects were correctly priced in by the market or where the investment case was not materialising as hoped. The funds were used to purchase companies with more exciting prospects and greater share price upside. New holdings include train equipment manufacturer Wabtec, the Macau hotel and casino operator Sands China, Swiss conglomerate OC Oerlikon and US barge operator Kirby.

Outlook

Whilst picking individual stocks remains at the heart of what we do, there are three broad exposures about which we are enthusiastic. The first is Asian consumption: with 100m consumers entering the Asian middle class every year there is a good deal of opportunity for companies in China and beyond to grow strongly. Second is the underlying growth of the US economy which received another fillip in 2015 as lower gasoline prices had the effect of a meaningful tax cut. The third exposure is related to companies that use technology and innovation to disrupt existing traditional business models - online businesses, the use of the cloud, better use of data which is being crunched by ever more advanced computers and the prevalence of mobile telephony; all are creating some major changes in the world to the advantage of many new emerging businesses.

The Company's top holdings reflect these enthusiasms. Prudential (life insurance & wealth management) generates 57% of its new business profits from Asia where it has leading positions in many countries in the region built on its strengths in distribution and product design. The US recovery is represented by Royal Caribbean Cruises (cruise holidays are very popular with Americans), CRH (an Irish domiciled building materials company with extensive US interests) and CarMax (US second hand car retailer). Examples of technology companies include Amazon.com (retail and cloud computing), Alphabet (formerly Google, the world's biggest search engine), SAP (software for business customers) and TSMC (the largest semi-conductor fabrication company in the world).

The portfolio now reflects many of the very best ideas from across the globe, researched by a wide range of our colleagues across the different investment teams within Baillie Gifford.  We believe the portfolio is set to grow at an above-average rate, even in an environment of only modest economic expansion.  The broad spread of investments ensures a natural diversification while the clear structure of the portfolio provides a framework which helps both analysis and decision making.  There will be periods when fundamentals are not reflected in shareholder returns, such as when our growth style is out of favour.  However, we remain confident that our process will create significant value for investors over the long-term.

Charles Plowden,

Spencer Adair

Malcolm MacColl

7 June 2016

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

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 vary - 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 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  Stocks 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.

Equity Portfolio by Growth Category as at 30 April 2016 (unaudited)

Holding Size	Growth Stalwarts  22.7%	%	Rapid Growth 32.8%	%	Cyclical Growth 29.3%	%	Latent Growth 15.2%	%
	(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: 34.0%	Prudential	3.5	Amazon.com	3.3	Royal Caribbean Cruises	2.9	CRH	2.7
	SAP	2.1	Naspers	2.5	TSMC	1.9	MS&AD Insurance	1.8
	Anthem	2.0	Alphabet	2.4	Markel	1.8
	Moody's	1.7	Ryanair	1.9	Carmax	1.8
					First Republic Bank	1.7
Average sized holdings c.1.0% each Total: 46.7%	Schindler Visa MasterCard American Express Colgate-Palmolive Monsanto Bureau Veritas Waters Shimano Olympus Novo Nordisk Stericycle	1.3 1.3 1.2 0.9 0.9 0.8 0.8 0.8 0.8 0.8 0.7 0.7	AIA Facebook Baidu ICICI Bank Softbank Alibaba MercadoLibre Myriad Genetics Schibstead Tesla Motors Yandex TripAdvisor Seattle Genetics HDFC MarketAxess IP Group iRobot	1.4 1.4 1.2 1.1 1.1 1.0 1.0 0.9 0.9 0.8 0.8 0.8 0.8 0.7 0.7 0.7 0.7	TD Ameritrade Martin Marietta Materials Wolseley EOG Resources Richemont Svenska Handelsbanken Hays Brambles Atlas Copco CH Robinson Worldwide SMC Teradyne Lincoln Electric Wabtec	1.5 1.3 1.1 1.0 1.0 0.9 0.9 0.9 0.9 0.9 0.8 0.8 0.8 0.7	Apache Samsung Electronics Fairfax Financial Carlsberg Sberbank of Russia Dolby Laboratories Bank of Ireland	1.2 1.1 1.0 0.8 0.7 0.7 0.7

Equity Portfolio by Growth Category as at 30 April 2016 (unaudited) (Ctd)

Holding Size	Growth Stalwarts  22.7%	%	Rapid Growth 32.8%	%	Cyclical Growth 29.3%	%	Latent Growth 15.2%	%
	(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: 19.3%	Praxair Qualcomm Dia eBay Tsingtao Brewery Coca Cola HBC	0.6 0.5 0.5 0.5 0.2 0.1	M3 Cyberagent BMF Bovespa Japan Exchange Autohome GrubHub Renishaw Nividia Financial Engines Alnylam Pharmaceuticals Qiagan Zillow Intuitive Surgical Nanoco Stratasys Ferrari	0.6 0.6 0.6 0.5 0.5 0.5 0.5 0.4 0.4 0.4 0.4 0.4 0.3 0.2 0.2 0.2	THK Rolls Royce Deutsche Boerse Ritchie Bros Auctioneers Jardine Matheson Volvo DistributionNOW Victrex Sands China Leucadia National SK Hyniz Aggreko Ferro Alloy Resources	0.6 0.6 0.6 0.6 0.6 0.5 0.5 0.5 0.4 0.3 0.2 0.2 0.1	Silk Invest Africa Food    Fund Toyota Tsusho Kirby Veeco Insruments Howard Hughes Rohm OC Oerlikon Fiat Chrysler Autos MTN Banco Popular Español Juridicia Investments Doric Nimrod Air One	0.6 0.5 0.5 0.5 0.5 0.4 0.4 0.3 0.3 0.3 0.1 0.1

Portfolio Positioning as at 30 April 2016 (unaudited)

Thematic Risk Categories

Category		At 30 April 2016 %
Economically Agnostic		42.7
	Internet Winners	17.1
	Innovation	15.7
	Consumer Stalwarts	8.9
US Re-emergence		23.6
	Industrial	7.0
	Consumer	6.4
	Normalisation	6.4
	Government Budgets	2.0
	Capital Cycle	1.8
European and Japanese Healing		15.3
	Consumer	5.3
	Industrial	4.0
	Abenomics	3.6
	Normalisation	2.4
Developing Market Growth		15.3
	Consumer Catch-Up	11.4
	Commodities	2.2
	Industrial	1.7
Bonds and Net Liquid Assets		9.0
	Net Liquid Assets	8.4
	Bonds	0.6
Other		0.9
Total Assets		100.0

Portfolio Positioning as at 30 April 2016 (unaudited) (Ctd)

Geographical Analysis

	At 30 April 2016 %	At 30 April 2015 %
North America	46.4	38.7
Continental Europe	17.7	14.0
Emerging Markets	14.2	13.7
United Kingdom	8.3	9.3
Japan	8.3	10.7
Developed Asia	3.2	2.7
Bonds	0.6	6.5
Net Liquid Assets	1.6	4.4
Total Assets	100.0	100.0

Sectoral Analysis

		At 30 April 2016 %	At 30 April 2015 %
Equities:	Oil and Gas	2.7	4.4
	Basic Materials	1.2	1.4
	Industrials	18.9	14.3
	Consumer Goods	7.8	10.2
	Health Care	7.0	6.0
	Consumer Services	18.8	14.6
	Financials	26.8	26.6
	Technology	13.3	11.2
	Telecommunications	1.3	0.4
		97.8	89.1
Bonds		0.6	6.5
Net Liquid Assets		1.6	4.4
Total Assets		100.0	100.0

	List of Investments at 30 April 2016 (unaudited)
Name		Business	Growth category	Fair value £'000	% of total assets	Cumulative % of total assets
Prudential		International financial services	Stalwart	37,531	3.4
Amazon.com		Online retailer	Rapid	35,472	3.2
Royal Caribbean Cruises		Cruise line operator	Cyclical	31,195	2.8
CRH		Diversified building materials	Latent	29,239	2.7
Naspers		Media and e-commerce	Rapid	26,279	2.4
Alphabet		Online search engine	Rapid	25,411	2.3
SAP		Enterprise software	Stalwart	22,225	2.0
Anthem		Healthcare insurer	Stalwart	21,342	2.0
Ryanair		Low cost airline	Rapid	20,414	1.9
TSMC		Semiconductor manufacturer	Cyclical	20,089	1.8		24.5
Markel		Speciality insurance	Cyclical	19,380	1.8
Carmax		Used car retailer	Cyclical	18,771	1.7
MS&AD Insurance		Non-life insurer	Latent	18,742	1.7
First Republic Bank		Retail bank	Cyclical	18,403	1.7
Moody's		Credit rating agency	Stalwart	18,091	1.7
TD Ameritrade		Online brokerage	Cyclical	16,244	1.5
AIA		Insurance	Rapid	15,408	1.4
Facebook		Social networking	Rapid	14,674	1.3
Schindler		Elevator and escalator manufacturer	Stalwart	14,592	1.3
Visa		Global electronic payments network	Stalwart	14,168	1.3		39.9
Martin Marietta Materials		Cement and aggregates producer	Cyclical	13,720	1.3
Apache		Oil exploration and production	Latent	13,248	1.2
Baidu		Chinese internet search engine	Rapid	13,191	1.2
MasterCard		Global electronic payments network	Stalwart	13,145	1.2
Wolseley		Building materials distributor	Cyclical	12,013	1.1
ICICI Bank		Banking and financial services	Rapid	11,459	1.1
Softbank		Telecom operator and internet investor	Rapid	11,282	1.0
Samsung Electronics		Consumer and industrial electronic equipment	Latent	11,251	1.0
EOG Resources		Oil and gas explorer and producer	Cyclical	11,197	1.0
Fairfax Financial		Financial services holding company	Latent	11,060	1.0		51.0
Alibaba		Online and mobile commerce	Rapid	11,020	1.0
MercadoLibre		Latin American e-commerce platform	Rapid	10,955	1.0
Richemont		Luxury goods designer and manufacturer	Cyclical	10,455	1.0
Svenska Handelsbanken		Retail bank	Cyclical	10,016	0.9
Hays		Recruitment	Cyclical	9,945	0.9
Myriad Genetics		Genetic testing	Rapid	9,891	0.9
American Express		Global payment and travel company	Stalwart	9,885	0.9
Schibsted		Print and online newspapers and classifieds	Rapid	9,506	0.9
Brambles		Pallet pool operator	Cyclical	9,281	0.9
Atlas Copco		Industrial compressors and mining equipment   producer	Cyclical	9,273	0.9		60.3
CH Robinson Worldwide		Delivery and logistics	Cyclical	9,190	0.8
Colgate-Palmolive		Consumer goods	Stalwart	9,163	0.8
Monsanto		Agricultural biotechnology	Stalwart	9,116	0.8
Tesla Motors		Electric cars	Rapid	8,930	0.8

List of Investments at 30 April 2016 (unaudited) (Ctd)

Name	Business	Growth category	Fair value £'000	% of total assets	Cumulative % of total assets
Carlsberg	Brewer	Latent	8,827	0.8
Yandex	Internet search and other services	Rapid	8,594	0.8
Bureau Veritas	Consulting services company	Stalwart	8,516	0.8
Waters	Liquid chromatography products and services	Stalwart	8,459	0.8
SMC	Factory automation equipment producer	Cyclical	8,305	0.8
Teradyne	Semiconductor testing equipment manufacturer	Cyclical	8,236	0.8	68.3
Shimano	Cycling component manufacturer	Stalwart	8,228	0.8
TripAdviser	Online travel review platform	Rapid	8,182	0.8
Lincoln Electric	Welding equipment manufacturer	Cyclical	8,170	0.8
Olympus	Optics manufacturer	Stalwart	8,084	0.7
Seattle Genetics	Biotechnology treatments for cancer	Rapid	8,035	0.7
Novo Nordisk	Pharmaceutical company	Stalwart	8,021	0.7
HDFC	Indian mortgage provider	Rapid	7,922	0.7
Wabtec	Technology products and services provider for   the rail industry	Cyclical	7,678	0.7
MarketAxess	Electronic bond trading platform	Rapid	7,622	0.7
IP Group	Intellectual property commercialisation	Rapid	7,509	0.7	75.6
Sberbank of Russia	Banking and financial services	Latent	7,461	0.7
Dolby Laboratories	Audio noise reduction and encoding/   compression	Latent	7,240	0.7
Bank of Ireland	Retail and commercial bank	Latent	7,128	0.7
Stericycle	Medical waste management services	Stalwart	7,044	0.6
iRobot	Domestic robots	Rapid	6,980	0.6
M3	Online medical database	Rapid	6,948	0.6
THK	Linear motion systems manufacturer	Cyclical	6,920	0.6
Rolls Royce	Power systems manufacturer	Cyclical	6,821	0.6
Deutsche Boerse	Stock exchange operator	Cyclical	6,571	0.6
Silk Invest Africa Food Fund*	Africa-focused private equity fund	Latent	6,255	0.6	81.9
Praxair	Industrial gas supplier	Stalwart	6,215	0.6
Cyberagent	Internet advertising and content	Rapid	6,168	0.6
Ritchie Bros Auctioneers	Industrial equipment auctioneer	Cyclical	5,972	0.5
Jardine Matheson	Investment holding company	Cyclical	5,968	0.5
Toyota Tsusho	Trading company	Latent	5,865	0.5
BMF Bovespa	Stock exchange operator	Rapid	5,798	0.5
Qualcomm	Semiconductor manufacturer and wireless   patents	Stalwart	5,776	0.5
Volvo	Commercial vehicle manufacturer	Cyclical	5,774	0.5
Kirby	Marine shipping company	Latent	5,614	0.5
Veeco Instruments	Semiconductor equipment company	Latent	5,557	0.5	87.1
Japan Exchange	Stock exchange operator	Rapid	5,526	0.5
Autohome	Online destination for automobile consumers in   China	Rapid	5,503	0.5
GrubHub	Food ordering and delivery platform	Rapid	5,344	0.5
Howard Hughes	Real estate developer	Latent	5,241	0.5
Renishaw	Measurement and calibration equipment   manufacturer	Rapid	5,224	0.5

 

List of Investments at 30 April 2016 (unaudited) (Ctd)

Name	Business	Growth category	Fair value £'000		% of total assets	Cumulative % of total assets
DistributionNOW	Oilfield drilling equipment distributor	Cyclical	5,154	0.5
Dia	Discount food retailer	Stalwart	5,111	0.5
eBay	Internet auction site	Stalwart	5,101	0.5
Victrex	Speciality high-performance chemicals   manufacturer	Cyclical	5,087	0.5
Nvidia	Interactive 3D graphics provider	Rapid	4,614	0.4		92.0
Financial Engines	Investment advisory firm	Rapid	4,551	0.4
Alnylam Pharmaceuticals	Biotechnology	Rapid	4,501	0.4
Qiagen	Biotechnology equipment	Rapid	4,470	0.4
Sands China	Casino operator	Cyclical	4,452	0.4
Rohm	Semiconductor manufacturer	Latent	4,442	0.4
OC Oerlikon	Industrial equipment manufacturer	Latent	4,303	0.4
Zillow	US online real estate services	Rapid	3,738	0.3
Intuitive Surgical	Surgical robots	Rapid	3,632	0.3
Fiat Chrysler Autos	Vehicle manufacturer	Latent	3,551	0.3
Leucadia National	Holding company	Cyclical	3,375	0.3		95.6
MTN	South African wireless telecom company	Latent	3,111	0.3
Banco Popular Español	Retail bank	Latent	2,824	0.3
SK Hynix	Semiconductor manufacturer	Cyclical	2,667	0.2
Nanoco	Quantum dot manufacturer	Rapid	2,562	0.2
Tsingtao Brewery	Brewer	Stalwart	2,463	0.2
Stratasys	3D printer manufacturer	Rapid	2,116	0.2
Ferrari	Vehicle manufacturer	Rapid	1,992	0.2
Aggreko	Power generation equipment rental	Cyclical	1,869	0.2
Coca Cola HBC	Soft drink producer and distributor	Stalwart	1,539	0.1
Ferro Alloy Resources*	Vanadium mining	Cyclical	1,402	0.1		97.6
Juridica Investments	Litigation financing	Latent	1,210	0.1
Doric Nimrod Air One	Aircraft leasing	Latent	1,202	0.1
Total Equity Investments			1,072,202	97.8		97.8
Bonds
Credit Suisse 0% Swap    Rate Linked Note 2017*	Variable redemption linked to 30 year GBP swap rate		5,933		0.5
K1 Life Settlements 0%    2016*	Bond linked to life insurance policies		1,299		0.1
Total Bonds			7,232		0.6
Total Investments			1,079,434		98.4	98.4
Net Liquid Assets			17,370		1.6
Total Assets at Fair Value			1,096,804		100.0	100.0

 

*      Denotes an unlisted security
 

Income statement (unaudited)

	For the year ended 30 April 2016			For the year ended 30 April 2015
	Revenue £'000	Capital £'000	Total £'000	Revenue £'000	Capital £'000	Total £'000
(Losses)/gains on investments	-	(10,799)	(10,799)	-	99,275	99,275
Currency gains	-	1,655	1,655	-	4,892	4,892
Income	15,149	-	15,149	20,215	-	20,215
Investment management fee	(4,617)	-	(4,617)	(4,668)	-	(4,668)
Other administrative expenses	(1,150)	-	(1,150)	(1,087)	-	(1,087)
Net return before finance costs and taxation	9,382	(9,144)	238	14,460	104,167	118,627
Finance costs of borrowings	(3,291)	-	(3,291)	(2,846)	-	(2,846)
Net return on ordinary activities before taxation	6,091	(9,144)	(3,053)	11,614	104,167	115,781
Tax on ordinary activities	(1,137)	-	(1,137)	(1,065)	-	(1,065)
Net return on ordinary activities after taxation	4,954	(9,144)	(4,190)	10,549	104,167	114,716
Net return per ordinary share (note 2)	2.31p	(4.27p)	(1.96p)	4.74p	46.84p	51.58p
Note: Dividends per share paid and payable in respect of the year (note 3)	1.50p			3.95p

The total column of this statement represents 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.

 

Balance sheet (unaudited)

	At 30 April 2016 £'000	At 30 April 2015 £'000
Fixed assets
Investments held at fair value through profit or loss	1,079,434	1,096,625
Current assets
Debtors	3,330	2,032
Cash and cash equivalents	15,930	50,815
	19,260	52,847
Creditors
Amounts falling due within one year (note 4)	(47,968)	(86,136)
Net current liabilities	(28,708)	(33,289)
Total assets less current liabilities	1,050,726	1,063,336
Creditors
Amounts falling due after more than one year (note 4)	(39,777)	(39,745)
Net assets	1,010,949	1,023,591
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	934,814	943,958
Revenue reserve	45,637	49,135
Shareholders' funds	1,010,949	1,023,591
Net asset value per ordinary share (after deducting borrowings at fair value)	470.1p	476.0p
Net asset value per ordinary share (after deducting borrowings at par)	472.4p	478.3p
Ordinary shares in issue (note 5)	213,963,859	213,963,859

 

Statement of changes in equity (unaudited)

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

For the year ended 30 April 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 2014	11,394	11,100	8,004	894,882	47,516	972,896
Net return on ordinary activities after taxation	-	-	-	104,167	10,549	114,716
Shares purchased for cancellation	(696)	-	696	(55,091)	-	(55,091)
Dividends paid during the year (note 3)	-	-	-	-	(8,930)	(8,930)
Shareholders' funds at 30 April 2015	10,698	11,100	8,700	943,958	49,135	1,023,591

 

Cash flow statement (unaudited)

	Year ended 30 April 2016		Year ended 30 April 2015
	£'000	£'000	£'000	£'000
Cash flows from operating activities
Net return on ordinary activities before taxation		(3,053)		115,781
Net losses/(gains) on investments		10,799		(99,275)
Currency gains		(1,655)		(4,892)
Amortisation of fixed income book cost		(353)		(444)
Finance costs of borrowings		3,291		2,846
Overseas tax incurred		(1,125)		(987)
Changes in debtors and creditors		(1,257)		(562)
Cash from operations		6,647		12,467
Interest paid		(3,214)		(2,809)
Net cash inflow from operating activities		3,433		9,658
Cash flows from investing activities
Acquisitions of investments	(209,105)		(956,481)
Disposals of investments	215,791		930,889
Net cash inflow/(outflow) from investing activities		6,686		(25,592)
Cash flows from financing activities
Equity dividends paid	(8,452)		(8,930)
Shares purchased for cancellation	(2)		(55,089)
Borrowings drawn (repaid)/drawn down	(39,536)		84,382
Net cash (outflow)/inflow from financing activities		(47,990)		20,363
(Decrease)/increase in cash and cash equivalents		(37,871)		4,429
Exchange movements		2,986		4,794
Cash and cash equivalents at 1 May		50,815		41,592
Cash and cash equivalents at 30 April		15,930		50,815

Notes to the condensed financial statements (unaudited)

1.	The Financial Statements for the year to 30 April 2016 have been prepared in accordance with The Financial Reporting Standard applicable in the UK and Republic of Ireland ('FRS 102') which the Company must adopt for its financial year ending 30 April 2016. Following the application of the new reporting standard and the AIC's issued Statement of Recommended Practice, there has been no impact on the Company's Income Statement, Balance Sheet or Statement of Changes in Equity (previously called the Reconciliation of Movements in Shareholders' Funds) for the period previously reported. The Cash Flow Statement reflects the presentational requirements of FRS 102, which are different to FRS 1. In addition, the Cash Flow Statement reconciles to cash and cash equivalents whereas under previous UK GAAP the Cash Flow Statement reconciled to cash. The Company has early adopted the amendments to Section 34 of FRS 102 regarding fair value hierarchy disclosures.
2.	Net Return per Ordinary Share	2016				2015
	Revenue return	2.31p				4.74p
	Capital return	(4.27p)				46.84p
	Total return	(1.96p)				51.58p
	Revenue return per ordinary share is based on the net revenue return on ordinary activities after taxation of £4,954,000 (2015 - £10,549,000) and on 213,963,859 (2015 - 222,374,615) 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 loss for the financial year of £9,144,000 (2015 - gain of £104,167,000) and on 213,963,859 (2015 - 222,374,615) 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		2016	2015			2016 £'000	2015 £'000
	Amounts recognised as distributions in the year:
	Previous year's final (paid 7 August 2015)		3.45p	3.45p			7,382	7,824
	Interim (paid 29 January 2016)		0.50p	0.50p			1,070	1,106
			3.95p	3.95p			8,452	8,930
	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 £4,954,000 (2015 - £10,549,000).

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

3.	Ordinary Dividends	2016	2015	2016 £'000	2015 £'000
	Amounts paid and payable in respect of the financial year:
	Adjustment to previous year's final dividend re shares bought back	-	-	-	(38)
	Interim (paid 29 January 2016)	0.50p	0.50p	1,070	1,106
	Proposed final (payable 5 August 2016)	1.00p	3.45p	2,140	7,382
		1.50p	3.95p	3,210	8,450
	If approved the recommended final dividend will be paid on 5 August 2016 to shareholders on the register at the close of business on 8 July 2016. The ex-dividend date is 7 July 2016. The Company's Registrar offers a Dividend Reinvestment Plan and the final date for elections for this dividend is 15 July 2016.
4.	At 30 April 2016 the book value of the Company's borrowings amounted to £86m (2015 - £124m), comprising a £40m   6 3/8% debenture stock repayable in 2023 (2015 - £40m) and a short-term bank loan of US$67.5m (2015 - ¥15.5bn). The fair value of borrowings at 30 April 2016 was £91m (2015 - £129m).
5.	The Company did not buy back any ordinary shares during the year. At 30 April 2016 the Company had authority to buy back 32,073,182 ordinary shares, being 14.99% 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 24 June 2016.
7.	The financial information set out above does not constitute the Company's statutory accounts for the year ended 30 April 2016. The financial information for 2016 is derived from the statutory accounts for 2015 which have been delivered to the Registrar of Companies. The Auditors have reported on the 2015 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 2016 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.

- ends -

 

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