Source - RNS
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: 0131 275 2000

 

Roland Cross, Director, Four Broadgate

Tel: 0203 697 4200 

 

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)

 

 

 

 

 

 

 

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.ukon 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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