Earnings Release • Jun 17, 2020
Earnings Release
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RNS Number : 1553Q
Monks Investment Trust PLC
17 June 2020
RNS Announcement: Preliminary Results
The Monks Investment Trust PLC
Regulated Information Classification: Additional regulated information required to be disclosed under applicable laws
Legal Entity Identifier: 213800MRI1JTUKG5AF64
Results for the year to 30 April 2020
Over the year to 30 April 2020, the Company's net asset value (NAV) total return* was 3.4% compared to a total return of -1.0% for the FTSE World Index (in sterling terms). The share price total return for the same period was 3.7%.
¾ Among the strongest contributors to performance were several online enabled technology businesses, including Amazon (ecommerce and cloud), Shopify (ecommerce) and Teladoc (telemedicine), all of which have seen an acceleration in demand for their services.
¾ Portfolio turnover for the 12 months was 16% and the Company's invested gearing stood at 6.5% at the financial year end.
¾ A single final dividend of 2.50p is being recommended, compared to 1.85p last year. This is the minimum required to maintain the Company's investment trust status, reflecting its priority which is capital growth.
¾ Over the period, 4,960,000 shares were issued at a premium to NAV, being 2.3% of the Company's share capital, raising over £46 million. The share price ended the year at a 4.4% premium to NAV*.
¾ Ongoing charges for the year to 30 April 2020 were 0.48%, down from 0.50% in the prior year.
¾ The managers remain focused on the fundamental task at hand - to invest in companies with durable growth opportunities, deepening competitive advantages and rising real earnings power.
¾ Since the change in approach in March 2015 the NAV total return at fair value has been 82.7% and the share price total return 115.5% against the comparative index at 55.1%#.
* With borrowings at fair value
Past performance is not a guide to future performance. Total return information is sourced from Baillie Gifford /Refinitiv. See disclaimer at the end of this announcement. For a definition of terms see Glossary of Terms and Alternative Performance Measures at the end of this announcement.
The Monks Investment Trust PLC aims to deliver above average long-term returns for shareholders by keeping fees and costs low and harnessing the long-term growth potential of companies. Monks 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 £240 billion under management and advice.
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.
16 June 2020
For further information please contact:
Jon Henry, Baillie Gifford & Co
Tel: 0131 275 2000
Mark Knight, Four Communications
Tel: 0203 697 4200 or 07803 758810
The following is the Preliminary Results Announcement for the year to 30 April 2020 which was approved by the Board on 16 June 2020.
Chairman's Statement
In the year to 30 April 2020 Monks produced a modest positive return, with the net asset value (NAV) and share price both reaching an all-time high in February before the Covid-19 virus impacted financial markets in March. A sharp rally in April then took us back into positive territory for the year. These violent month on month swings can be alarming for shareholders but are of little relevance to long-term returns and had minimal impact on the make up of the portfolio.
The Board is pleased to be able to report that our managers have moved seamlessly to working remotely and that both portfolio management and all regulatory and administrative tasks have continued uninterrupted. The managers continue to stick to their proven investment approach which is based on long-term investment in a broad range of superior growth businesses. Their focus on the future and on a range of secular growth trends has left the portfolio partially insulated from the very severe pressures impacting many traditional industries, such that Monks' returns, particularly in the second half of the financial year, were materially better than the comparative index.
Performance
During the year the NAV total return, with borrowings calculated at fair value, was 3.4% and the share price total return was 3.7%, while the FTSE World Index returned -1.0%. It is now five years since the change in investment approach was implemented in March 2015 and the Board believes that this is an appropriate time to review the results. The NAV total return at fair value has been 82.7% against the comparative index at 55.1%*. Over the same period the share price total return was 115.5%, benefiting from the closing of the discount to NAV at which the shares had previously traded.
Share Issuance
In recent years the managers have dedicated significant efforts to promoting Monks to those financial intermediaries and advisors who help individual investors manage their long-term savings. These efforts have succeeded in generating incremental buyers of Monks shares, which has served to reduce and then eliminate the discount to NAV, and enabled the issuance of new shares at a premium to meet demand. With the shares trading at a consistent premium throughout the year (apart from a brief period of market dislocation in March) the Company was able to issue 4,960,000 new shares at a premium to NAV, being 2.3% of Monks share capital and raising over £46 million of new funds for investment. The premium to NAV with borrowings calculated at fair value stood at 4.4% at 30 April 2020, up from 4.0% at the start of the year.
Borrowings and Gearing
Among the advantages of investment trusts over other forms of collective investment is the ability to invest borrowed funds to enhance shareholder returns over the long term. At the financial year end, the invested gearing was 6.5%, unchanged on a year earlier, which remains below the 10% level which we regard as the long-term neutral position. The Board and managers are currently reviewing the structure and extent of existing short and long-term borrowing.
Management Expenses
Monks is competitive on fees and expenses, which helps to enhance returns to shareholders. The total ongoing charges ratio for the year to 30 April 2020 was 0.48%, down from 0.50% in the prior year and 0.58% at April 2015. The current tiered management fee scale (see note 3 to the Financial Statements) should ensure that all shareholders will benefit from economies of scale should Monks continue to grow.
* Total returns from 31 March 2015 to 30 April 2020.
Earnings and Dividend
Monks invests with the aim of maximising capital growth rather than income and all costs are charged to the Revenue Account. The Company's policy is to pay the minimum dividend required to maintain investment trust status. Retained earnings are reinvested in the portfolio. Therefore, the Board is recommending that a single final dividend of 2.5p should be paid, compared to 1.85p last year.
The Board
Claire Boyle joined the Board on 1 May and will be standing for election at the AGM in September. The success of the investment approach over the last five years has put Monks in a very strong position so the AGM is a suitable time for me to retire from the Board. Edward Harley, who has been a Director since 2003, will be retiring in 2021. After a thorough selection process the Board has asked Karl Sternberg to succeed me as Chairman. Karl is a very experienced investor and director and I am sure Monks will go from strength to strength under his leadership.
Outlook
The last decade has seen an anaemic recovery in Western economies accompanied by dormant inflation, historically low interest rates and steadily strengthening stock markets. While this combination has surprised some observers, it is less surprising when one considers the main contributors to the rise in markets. Most of the gains have been driven by new technologies, many of them deflationary, which have allowed new corporate champions to appear and expand globally at an unprecedented rate. The level of change is remarkable, with seven of the ten most valuable quoted companies in the world now being technology companies, up from three a decade ago. The key point from an investment perspective is that a small number of companies have caused the markets' rise, while many traditional industries have struggled to adapt or grow. This has highlighted the growing gap between corporate winners and losers.
The current pandemic is likely to accelerate trends that were already in play, driven by technological change and environmental necessity. Monks is well placed to benefit from these trends, with a significant exposure to the industries and companies of the future. The approach being followed allows the managers to hold a diversified portfolio of growth stocks, chosen from around the world and including younger and even unlisted companies as well as established market leaders. The Board remains confident that Monks represents an attractive long-term savings vehicle for private investors, who benefit from high quality professional portfolio management together with independent board oversight at a competitive cost.
Annual General Meeting
The Company's AGM has been scheduled to take place on 1 September 2020 at the Institute of Directors, Pall Mall, London SW1Y 5ED but, given the ongoing uncertainty around when public health concerns will abate, the Board will continue to monitor developments and may decide to prohibit shareholders from attending in person. Accordingly, the Board encourages all shareholders to exercise their votes at the AGM by completing and submitting a form of proxy. We would encourage shareholders to monitor the Company's website at www.monksinvestmenttrust.co.uk where any updates will be posted and market announcements will also be made, as appropriate. Should shareholders have questions for the Board or the Managers or any queries as to how to vote, they are welcome as always to submit them by email to [email protected] or call 0800 917 2112
James Ferguson
Chairman
16 June 2020
Past performance is not a guide to future performance. Total return information is sourced from Baillie Gifford /Refinitiv. See disclaimer at the end of this announcement. For a definition of terms used see Glossary of Terms and Alternative Performance Measures 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 holdings fall into one of four growth categories - as set out in the Investment 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 Investments are held in three broad holding sizes - as set out in the Investment 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.
* For a definition of terms used see Glossary of Terms and Alternative Performance Measures at the end of this announcement.
Managers' Report
Background
In many parts of the world, normal life has come to a juddering halt. In a world plagued by hyperbole, the 2020 version of the plague has been met by stoicism not hysteria and by community action rather than factional in-fighting. The talented, selfless and hard-working health professionals and other front-line workers have rightly garnered praise as they calmly deal with the coronavirus pandemic.
Calmness, experience of prior crises, and a dose of optimism have helped us through these early days. We at Baillie Gifford have been fortunate enough to be supported by a technology department and robust business continuity planning which have allowed us to pivot from business as usual to working from home. This has allowed us to continue our usual pattern of company updates, stock discussions, and talking to the management of portfolio companies and prospective holdings. Indeed, now more than ever, we believe it vital to retain our long-term mindset in pursuit of growth companies that we believe can generate attractive returns for Monks shareholders in years to come.
Performance
It is just over 5 years since the Global Alpha team took over the management of the Monks Investment Trust. This period represents our minimum investment time horizon and the period over which we seek to outperform for investors. Pleasingly, over this period we have delivered a cumulative NAV total return of +82.7%* (share price +115.5%*) compared to the comparative index (FTSE World) which is up +55.1%*. The contributors to performance over that period are an eclectic mix of businesses from online enabled companies like Amazon, Alibaba and Alphabet to credit rating agency Moody's and biotech company Seattle Genetics. This diversity of growth businesses underpins our approach and is central to why we believe we can continue to deliver attractive returns over the next five years and beyond. During the year the Company's net asset value (NAV), with borrowings at fair value, returned 3.4% compared with the FTSE World Index at -1.0%. The impact of the coronavirus pandemic on equity markets was felt most keenly in March (the FTSE World Index fell around 11%) as investors attempted to calibrate the economic impact of widespread lockdowns. Our immediate priority was to examine further the resilience of the portfolio by stress testing the holdings, conservatively assuming a prolonged period of zero revenues, the results of which were reassuring. This was consistent with prior analysis undertaken late last year on the quality and debt profile of the portfolio. We believe Monks is on a firm footing and we continue to focus on investing in quality growth businesses.
Among the best performers were the healthcare and online technology companies. In the healthcare setting, Seattle Genetics (cancer treatment), Olympus (medical endoscopes) and Alnylam (gene silencing) saw their share prices rise, underpinned by strong operational progress. The holding which has most directly benefitted in the current environment is Teladoc, a relatively recent purchase, which is the largest provider of telemedicine consultations in the US. Accelerated growth at this point in the development of the industry may see Teladoc's leadership position entrenched and represent the tipping point in widespread adoption of telemedicine in the US and beyond.
The acceleration of demand for online goods and services has benefitted several technology holdings. Two particularly strong performers were ecommerce businesses, Amazon and Shopify. As well as its burgeoning ecommerce platform, Amazon is also a logistics and delivery service for both durable goods and groceries, a music and video entertainment platform and a cloud service provider. In short, it is central to the lives and livelihoods of millions of people. If the company can serve people well during this time, then it may emerge from this crisis in a far stronger position than it entered it. The Canadian software company Shopify enables businesses to sell products online and has been growing internationally and expanding its addressable market from small and medium sized enterprises to large corporates. Demand for its services is likely to be at a premium in the coming months. Other likely beneficiaries in the portfolio include the likes of Naspers (food delivery, classified advertising and social media), Netflix (online entertainment), Chegg (online education) and Meituan Dianping (food delivery).
Tesla, the electric vehicle manufacturer has also been a strong performer over the period. Despite a hugely volatile ride in share price terms (Tesla's share price more than doubled in the early part of this year, at which point we reduced our holding) the company has executed well. It posted record deliveries in the last quarter of 2019 (112k vehicles). We see a clear path for further growth following the completion of the Shanghai production facility (Berlin is next) and believe that Elon Musk and his team retain a suitably ambitious vision for the company.
The largest detractor from performance has been Prudential. The market has priced in concerns relating to the creditworthiness of its fixed income investments. Prudential has been held since we took over Monks in 2015. Our enthusiasm for the company's growth to date, and the long-term growth potential of Asian markets, have yet to be borne out in the share price. We continue to view this as a multi-decade opportunity.
Markets have not been kind to companies operating in the energy sector. The unprecedented shift of oil prices into negative territory compounded a broader pandemic-related downturn. Monks has modest exposure to oil and gas (1.9% at the end of April), nevertheless, the portfolio's principal oil and gas holdings - EOG Resources and Apache - alongside businesses related to the energy sector, such as Kirby Corporation (inland barge operator), were among the largest detractors from the portfolio's performance. Prior to the onset of the market downturn, we elected to sell Apache because of its poor operational execution and senior personnel changes. We retain the position in EOG which possesses a higher quality asset portfolio and is more focused on returns.
Perhaps unsurprisingly, other notable detractors included banks and travel related businesses, where we again held a modest but unhelpful exposure. The prospect of a significant economic slowdown negatively impacted the share prices of both Banco Bradesco and Bank of Ireland. Against this backdrop, the ability for these companies to grow their loan books and expand margins is likely to be severely curtailed. Therefore, we took the decision to sell both companies. In travel, Trip.com (Chinese online travel platform) has been significantly impacted, with typical domestic Chinese flight volumes down around 80%. There are some signs of recovery, however, this sector is highly competitive, and we are questioning Trip.com's ability to be a long-term winner in this market.
Portfolio Changes
| New Purchases | Complete Sales |
| Appian | AP Moller-Maersk |
| Axon Enterprise | Apache |
| Brilliance China Automotive | Baidu |
| Broadridge Financial Solutions | Banco Bradesco |
| CBRE Group | Bank of Ireland |
| Denali Therapeutics | Fiat Chrysler Automobiles |
| Farfetch | First Republic Bank |
| Hoshizaki Corp | Iida Group Holdings |
| Illumina | Infineon Technologies |
| Ping An Healthcare & Technology | MarketAxess |
| SEA Limited | MultiChoice Group |
| Sensyne Health | Persol Holdings |
| SoftBank Group | Royal Caribbean Cruises |
| Sysmex | Signify |
| Teladoc | Veeco Instruments |
| The Trade Desk | Verisk Analytics |
| Ubisoft Entertainment |
During the year we purchased seventeen new holdings and sold sixteeen. These transactions are summarised above. Portfolio turnover remained close to 16%. This equates to a holding period of six years and is consistent with our long-term time horizon. This approach has enabled us to remain calm as share prices have moved quickly and often irrationally in response to the pandemic. The portfolio is relatively well positioned for what is likely to continue to be a challenging environment; it has low levels of indebtedness, is minimally exposed to the energy sector and is only modestly exposed to cyclical or economically sensitive companies.
Indeed, we have continued to reduce the portfolio's cyclical exposure, which has fallen from over 30% in 2015 to around 18% today. These decisions were stock driven and include the sales of Royal Caribbean Cruises (leading US cruise company), Fiat Chrysler Automobiles (car manufacturer) and First Republic Bank (US niche bank). In all three cases, share price performance had outstripped operational progress and we decided to allocate capital to areas where we considered the long-term growth prospects to be better.
One such area is healthcare. In our interim update we noted the portfolio's increasing exposure to what we term 'transformational healthcare', which has now reached close to 10%. Many of these businesses are highly innovative and are pushing the boundaries of medical advancement, whilst others address the perennial problem of cost and access to healthcare. In the former category we purchased, and subsequently added to, positions in Illumina (gene sequencing) and Abiomed (miniature heart pumps) and established a holding in Denali Therapeutics (neurodegenerative disease treatments). In the latter, we purchased shares in Teladoc (noted above) and Ping An Healthcare and Technology which provide telemedicine services in the US and China respectively. In the context of a global pandemic the merits of online medical consultations are clear. Our focus is always on the long term and we believe there is evidence to suggest that these companies have significant utility for both patients and healthcare systems, which may tip the scales in favour of widespread adoption.
Elsewhere, we have purchased shares in Ubisoft and SEA, both of which should benefit from the tectonic changes under way in gaming, particularly the arrival of streaming and the continuation of digitalisation. Ubisoft has established game development software which allows others to create and market gaming titles, affording it royalty payments in a rapidly growing market. SEA has the exclusive rights to distribute Tencent's games across South East Asia and owns fast-growing ecommerce platform, Shopee.
As is consistent with our balanced and diversified approach, we added new holdings to the portfolio which offer the potential for returns which are uncorrelated to the existing portfolio. In January we established a position in Hoshizaki, a leading provider of kitchen and restaurant equipment in Japan and the US, whilst in April we purchased shares in CBRE, the commercial real estate operator. The former is a high-quality business which registers strong returns. We believe future growth is likely to be driven by the formalisation of restaurant dining in many emerging markets. CBRE is an improving business which is underpinned by some significant structural trends, including increased institutional investment in real estate assets and a growing tendency of corporations to outsource real estate management. CBRE's breadth of offering and scale leave it well placed to grow both its existing relationships and establish new ones.
We continued our discipline of 'testing the upside' of the portfolio, particularly for those holdings where share prices had risen strongly. The results were encouraging. So much so that we subsequently added to Alphabet (parent company of Google), Microsoft (software company) and Naspers (holding company for several high growth internet businesses), where the strength of our conviction in the growth prospects of these companies had increased. Indeed, another holding which fared well in our analysis was Alibaba, to which our recent purchase of SoftBank is related. SoftBank owns around 30% of Alibaba, alongside a range of other exciting technology assets. Despite some high-profile hiccups in recent times, we continue to admire the capital allocation skills of Masayoshi Son, the CEO of SoftBank, who has a strong track record of delivering returns for investors. Therefore, we elected to trim the portfolio's position in Alibaba to facilitate investment in SoftBank's shares. These trade at a significant discount to SoftBank's stake in Alibaba and its broader asset base.
We continued to trim positions in companies whose operational execution has been strong or where valuations were closer to our sense of their future worth. These include Visa (electronic payment), Schindler (elevator manufacturer), Tesla (electric vehicle and energy storage) and Seattle Genetics (biotech).
Management Team
In May, we announced that Charles Plowden will retire at the end of April next year. Charles will continue to manage the Monks Investment Trust until 30 April 2021, after which Spencer Adair will step up to become the lead manager. Malcolm MacColl will continue as deputy manager of Monks.
Outlook
An economic crisis can tilt the playing field in favour of innovation and the most adaptable companies. Whilst early days in the coronavirus pandemic, many of the portfolio's holdings have risen to the challenge. We believe that the current crisis is likely to accelerate many changes which were already underway, perhaps most obviously in the growth of digital solutions to consumption, entertainment, healthcare and business operations. There is also the possibility of significant new developments, for example in the impetus towards addressing global warming, through policy and tax changes. While the economic and political implications of the pandemic will undoubtedly be far reaching, we remain focused on the fundamental task at hand - to invest in companies with durable growth opportunities, deepening competitive advantages and rising real earnings power. We are optimistic about the opportunities which lie ahead and remain confident that our approach will continue to deliver capital growth for Monks shareholders over the long term.
Charles Plowden
Spencer Adair
Malcolm MacColl
16 June 2020
* Total returns from 31 March 2015 to 30 April 2020.
Past performance is not a guide to future performance.
Total return information is sourced from Baillie Gifford/Refinitiv. See disclaimer at the end of this announcement.
For a definition of terms used see Glossary of Terms and Alternative Performance Measures at the end of this announcement.
Investment Portfolio by Growth Category* as at 30 April 2020
| 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: 38.9% |
Moody's | 2.4 | Amazon.com | 4.2 | SoftBank Group | 1.7 | ||
| Microsoft | 2.2 | Naspers | 3.0 | |||||
| Anthem | 2.2 | Alphabet | 2.8 | |||||
| MasterCard | 2.1 | Alibaba | 2.6 | |||||
| Prudential | 2.0 | The Schiehallion Fund | 2.3 | |||||
| AIA | 2.0 | 1.6 | ||||||
| Pernod Ricard | 1.6 | Ping An Insurance | 1.6 | |||||
| Olympus | 1.6 | Shopify | 1.5 | |||||
| Thermo Fisher Scientific | 1.5 | |||||||
| Average sized holdings c.1.0% each Total: 34.2% |
SAP | 1.4 | Tesla | 1.2 | CRH | 1.2 | MS&AD Insurance | 1.1 |
| ResMed | 1.4 | Alnylam Pharmaceuticals | 1.1 | Martin Marietta Materials | 1.2 | BHP Billiton | 0.9 | |
| Arthur J. Gallagher | 1.2 | HDFC | 1.1 | TSMC | 1.1 | Kirby | 0.7 | |
| Visa | 1.1 | Teladoc | 1.1 | SMC | 0.8 | |||
| Sysmex | 0.9 | Prosus | 1.0 | Teradyne | 0.8 | |||
| Broadridge Financial Solutions | 0.9 | Seattle Genetics | 1.0 | Markel | 0.8 | |||
| Service Corporation International | 0.8 | M3 | 1.0 | Advantest | 0.7 | |||
| Bureau Veritas | 0.7 | Reliance Industries | 0.9 | Ryanair | 0.7 | |||
| Waters | 0.7 | Illumina | 0.9 | Atlas Copco | 0.7 | |||
| Meituan Dianping | 0.8 | Deutche Boerse | 0.7 | |||||
| Zillow | 0.8 | EOG Resources | 0.7 | |||||
| Netflix | 0.7 | |||||||
| Ping An Healthcare & Technology |
0.7 | |||||||
| SEA Limited | 0.7 |
Investment Portfolio by Growth Category* as at 30 April 2020 (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: 26.9% |
Schindler | 0.5 | The Trade Desk | 0.6 | SiteOne Landscape Supply | 0.6 | Sumitomo Mitsui Trust Holdings | 0.6 |
| Hoshizaki Corp | 0.4 | Trupanion | 0.6 | Richemont | 0.6 | Sberbank of Russia | 0.6 | |
| Farfetch | 0.6 | TD Ameritrade | 0.5 | Tsingtao Brewery | 0.6 | |||
| CyberAgent | 0.6 | Ritchie Bros Auctioneers | 0.5 | Brilliance China Automotive | 0.5 | |||
| Just EatTakeaway.com | 0.6 | Albemarle | 0.5 | Stericycle | 0.5 | |||
| Autohome | 0.5 | CBRE Group | 0.5 | Fairfax Financial Howard Hughes |
0.5 0.4 |
|||
| Chipotle Mexican Grill | 0.5 | Epiroc | 0.4 | |||||
| Spotify | 0.5 | Wabtec | 0.4 | Toyota Tsusho | 0.3 | |||
| MercadoLibre | 0.5 | Jefferies Financial Group | 0.4 | M&G Prudential | 0.2 | |||
| ICICI Prudential Life Insurance | 0.5 | Hays | 0.3 | DistributionNOW | 0.2 | |||
| Axon Enterprise | 0.5 | Orica | 0.3 | Lindblad Expeditions Holdings | 0.2 | |||
| Genmab | 0.5 | Sands China | 0.3 | Silk Invest Africa Food Fund | 0.1 | |||
| Ubisoft Entertainment | 0.5 | PageGroup | 0.3 | MRC Global | 0.1 | |||
| Ant International | 0.5 | Jardine Strategic Holdings | 0.3 | Ferro Alloy Resources | 0.0 | |||
| Renishaw | 0.5 | |||||||
| ICICI Bank | 0.5 | |||||||
| B3 Group | 0.5 | |||||||
| Mail.ru Group | 0.4 | |||||||
| Abiomed | 0.4 | |||||||
| 58.com | 0.4 | |||||||
| Chegg | 0.4 | |||||||
| Denali Therapeutics | 0.4 | |||||||
| Schibsted | 0.4 | |||||||
| Trip.com | 0.4 | |||||||
| Appian | 0.4 | |||||||
| GRAIL | 0.4 | |||||||
| iRobot | 0.4 | |||||||
| LendingTree | 0.4 | |||||||
| GrubHub | 0.4 | |||||||
| Novocure | 0.4 | |||||||
| Interactive Brokers Group | 0.3 | |||||||
| Myriad Genetics | 0.2 | |||||||
| Adevinta ASA | 0.2 | |||||||
| Sensyne Health | 0.2 | |||||||
| Istyle | 0.2 | |||||||
| Total | 27.6 | 47.9 | 15.3 | 9.2 |
* Excludes net liquid assets.
Portfolio Positioning as at 30 April 2020
Thematic Exposure
| At 30 April 2020 | ||||
| Category | % | % | ||
| Developed Market Growth | 16.6 | |||
| Industrial | 6.8 | |||
| Consumer | 3.1 | |||
| Capital Markets/Asset Inflation | 3.0 | |||
| Japanese Reflation | 1.7 | |||
| Resources | 1.2 | |||
| Interest Rate Normalisation | 0.8 | |||
| Developing Economies | 18.1 | |||
| Emerging Markets Middle Classes | 15.1 | |||
| EM Financial Development | 8.1 | |||
| EM Consumer Catch-up | 7.0 | |||
| Resources | 2.1 | |||
| Industrial | 0.9 | |||
| New Economy | 44.2 | |||
| Internet Winners | 26.1 | |||
| Developed World | 19.1 | |||
| Emerging World | 7.0 | |||
| Innovation | 18.1 | |||
| Disruptive Health | 9.4 | |||
| Other Innovation | 6.2 | |||
| Semi-Conductor Chips | 2.5 | |||
| Economically Agnostic | 20.2 | |||
| Stalwarts | 17.8 | |||
| Insurance Cycle | 2.4 | |||
| Net Liquid Assets | 0.9 | |||
| Total Assets | 100.0 |
Portfolio Positioning as at 30 April 2020 (Ctd)
Geographical Analysis
| At 30 April 2020 % |
At 30 April 2019 % |
|
| North America | 48.6 | 45.8 |
| Continental Europe | 12.2 | 13.6 |
| Emerging Markets | 17.6 | 21.0 |
| United Kingdom | 7.3 | 8.1 |
| Japan | 9.9 | 7.0 |
| Developed Asia | 3.5 | 3.4 |
| Net Liquid Assets | 0.9 | 1.1 |
| Total Assets | 100.0 | 100.0 |
Sectoral Analysis
| At 30 April 2020 % |
At 30 April 2019 % |
||
| Oil and Gas | 1.9 | 4.1 | |
| Basic Materials | 1.7 | 1.7 | |
| Industrials | 11.9 | 15.5 | |
| Consumer Goods | 5.4 | 4.6 | |
| Healthcare | 14.1 | 8.3 | |
| Consumer Services | 19.2 | 18.6 | |
| Financials | 25.2 | 32.0 | |
| Technology | 18.1 | 14.1 | |
| Telecommunications | 1.6 | - | |
| Total Investments | 99.1 | 98.9 | |
| Net Liquid Assets | 0.9 | 1.1 | |
| Total Assets | 100.0 | 100.0 |
List of Investments at 30 April 2020
| Name | Business | Growth category | Fair value £'000 |
% of total assets | Cumulative % of total assets | |
| Amazon.com | Online retailer | Rapid | 87,481 | 4.2 | ||
| Naspers | Media and ecommerce company | Rapid | 62,850 | 3.0 | ||
| Alphabet | Online search engine | Rapid | 57,641 | 2.7 | ||
| Alibaba | Online commerce company | Rapid | 54,203 | 2.6 | ||
| Moody's | Credit rating agency | Stalwart | 49,167 | 2.3 | ||
| The Schiehallion Fund ± | Global unlisted growth equity investment trust | Rapid | 48,052 | 2.3 | ||
| Microsoft | Software and cloud computing enterprise | Stalwart | 45,674 | 2.2 | ||
| Anthem | Healthcare insurer | Stalwart | 45,655 | 2.2 | ||
| MasterCard | Electronic payments network and related services | Stalwart | 43,289 | 2.1 | ||
| Prudential | International life insurance | Stalwart | 42,401 | 2.0 | 25.6 | |
| AIA | Asian life insurer | Stalwart | 42,164 | 2.0 | ||
| SoftBank Group | Technology focused investment group | Latent | 34,558 | 1.6 | ||
| Pernod Ricard | Global spirits manufacturer | Stalwart | 34,235 | 1.6 | ||
| Olympus | Optoelectronic products | Stalwart | 34,198 | 1.6 | ||
| Social networking website | Rapid | 33,478 | 1.6 | |||
| Ping An Insurance | Chinese life insurer | Rapid | 33,116 | 1.6 | ||
| Thermo Fisher Scientific | Scientific instruments, consumables and chemicals | Stalwart | 31,917 | 1.5 | ||
| Shopify | Online commerce platform | Rapid | 30,659 | 1.5 | ||
| SAP | Enterprise software provider | Stalwart | 30,137 | 1.4 | ||
| ResMed | Develops and manufactures medical equipment | Stalwart | 29,222 | 1.4 | 41.4 | |
| Tesla | Electric cars and renewable energy solutions | Rapid | 25,938 | 1.2 | ||
| CRH | Diversified building materials company | Cyclical | 25,652 | 1.2 | ||
| Martin Marietta Materials | Cement and aggregates manufacturer | Cyclical | 25,450 | 1.2 | ||
| Arthur J. Gallagher | Insurance broker | Stalwart | 25,008 | 1.2 | ||
| Alnylam Pharmaceuticals | RNA interference based biotechnology | Rapid | 23,697 | 1.1 | ||
| HDFC | Indian mortgage provider | Rapid | 23,258 | 1.1 | ||
| MS&AD Insurance | Japanese insurer | Latent | 22,905 | 1.1 | ||
| Teladoc | Healthcare services provider | Rapid | 22,280 | 1.1 | ||
| TSMC | Semiconductor manufacturer | Cyclical | 22,090 | 1.0 | ||
| Visa | Electronic payments network and related services | Stalwart | 21,974 | 1.0 | 52.6 | |
| Prosus | Media and ecommerce company | Rapid | 21,797 | 1.0 | ||
| Seattle Genetics | Antibody based therapies | Rapid | 21,597 | 1.0 | ||
| M3 | Online medical services | Rapid | 20,869 | 1.0 | ||
| Reliance Industries | Indian energy conglomerate | Rapid | 19,453 | 0.9 | ||
| Sysmex | Medical testing equipment | Stalwart | 19,306 | 0.9 | ||
| BHP Billiton | Mineral exploration and production | Latent | 19,303 | 0.9 | ||
| Broadridge Financial Solutions |
Provides technology based solutions to the financial services industry |
Stalwart | 19,194 | 0.9 | ||
| Illumina | Gene sequencing business | Rapid | 18,347 | 0.9 | ||
| SMC | Producer of factory automation equipment | Cyclical | 17,292 | 0.8 | ||
| Meituan Dianping | Online commerce platform | Rapid | 17,032 | 0.8 | 61.7 | |
| Service Corporation International |
Death care services | Stalwart | 16,422 | 0.8 | ||
| Zillow | US online real estate services | Rapid | 16,295 | 0.8 | ||
| Teradyne | Semiconductor testing equipment manufacturer |
Cyclical | 15,866 | 0.8 | ||
| Markel | Markets and underwrites speciality insurance products |
Cyclical | 15,784 | 0.8 | ||
| Netflix | Subscription service for TV shows and movies | Rapid | 15,511 | 0.7 | ||
| Kirby | US barge operator | Latent | 15,261 | 0.7 | ||
| Advantest | Semiconductor testing services | Cyclical | 14,945 | 0.7 | ||
| Ryanair | Low cost European airline | Cyclical | 14,809 | 0.7 | ||
| Ping An Healthcare & Technology |
Chinese telemedicine business | Rapid | 14,676 | 0.7 | ||
| Atlas Copco | Industrial equipment | Cyclical | 14,510 | 0.7 | 69.1 | |
List of Investments at 30 April 2020 (Ctd)
| Name | Business | Growth category | Fair value £'000 |
% of total assets | Cumulative % of total assets |
| Deutche Boerse | Stock exchange operator | Cyclical | 14,327 | 0.7 | |
| SEA Limited | Online and digital gaming | Rapid | 14,264 | 0.7 | |
| EOG Resources | Natural gas explorer and producer | Cyclical | 14,238 | 0.7 | |
| Bureau Veritas | Global testing services company | Stalwart | 14,216 | 0.7 | |
| Waters | Liquid chromatography products and services | Stalwart | 14,134 | 0.7 | |
| SiteOne Landscape Supply | US distributor of landscaping supplies | Cyclical | 13,335 | 0.6 | |
| The Trade Desk | Advertising technology company | Rapid | 13,087 | 0.6 | |
| Trupanion | Pet health insurance provider | Rapid | 13,038 | 0.6 | |
| Sumitomo Mitsui Trust Holdings | Japanese trust bank and investment manager | Latent | 12,812 | 0.6 | |
| Farfetch | Online fashion retailer | Rapid | 12,558 | 0.6 | 75.6 |
| CyberAgent | Japanese internet advertising and content | Rapid | 12,514 | 0.6 | |
| Richemont | Luxury goods company | Cyclical | 12,057 | 0.6 | |
| Just Eat Takeaway.com | Online takeaway ordering service | Rapid | 11,556 | 0.5 | |
| Sberbank of Russia | Russian commercial bank | Latent | 11,518 | 0.5 | |
| Tsingtao Brewery | Chinese brewer | Latent | 11,499 | 0.5 | |
| Autohome | Chinese online automobile website | Rapid | 11,345 | 0.5 | |
| Chipotle Mexican Grill | Mexican restaurants | Rapid | 11,342 | 0.5 | |
| Spotify | Online music streaming service | Rapid | 11,309 | 0.5 | |
| TD Ameritrade | Online brokerage firm | Cyclical | 11,226 | 0.5 | |
| Brilliance China Automotive | Manufacture and sale of minibuses and automotive components |
Latent | 11,184 | 0.5 | 80.8 |
| MercadoLibre | Latin American ecommerce platform | Rapid | 11,103 | 0.5 | |
| ICICI Prudential Life Insurance | Life insurance services | Rapid | 10,873 | 0.5 | |
| Axon Enterprise | Manufacturer of law enforcement devices | Rapid | 10,576 | 0.5 | |
| Genmab | Biotechnology company | Rapid | 10,445 | 0.5 | |
| Ritchie Bros Auctioneers | Industrial equipment auctioneer | Cyclical | 10,419 | 0.5 | |
| Stericycle | Regulated medical waste management services | Latent | 10,209 | 0.5 | |
| Ubisoft Entertainment | Game development platform | Rapid | 10,054 | 0.5 | |
| Albemarle | Speciality chemicals | Cyclical | 9,983 | 0.5 | |
| Ant Internationalu | Chinese online payments and financial services business |
Rapid | 9,870 | 0.5 | |
| Schindler | Elevator and escalator company | Stalwart | 9,864 | 0.5 | 85.8 |
| Renishaw | World leading metrology company | Rapid | 9,661 | 0.5 | |
| ICICI Bank | Indian retail and corporate bank | Rapid | 9,639 | 0.5 | |
| B3 Group | Brazilian stock exchange operator | Rapid | 9,613 | 0.5 | |
| Fairfax Financial | Commercial insurance | Latent | 9,510 | 0.5 | |
| CBRE Group | Commercial real estate operator | Cyclical | 9,395 | 0.4 | |
| Epiroc | Construction and mining machinery | Cyclical | 9,246 | 0.4 | |
| Mail.ru Group | Russian internet and communication services | Rapid | 9,084 | 0.4 | |
| Abiomed | Medical implant manufacturer | Rapid | 9,065 | 0.4 | |
| 58.com | Chinese online marketplace | Rapid | 9,003 | 0.4 | |
| Chegg | Online educational platform | Rapid | 8,984 | 0.4 | 90.2 |
| Denali Therapeutics | Early stage biotech company | Rapid | 8,839 | 0.4 | |
| Schibsted | Media and classified advertising platforms | Rapid | 8,618 | 0.4 | |
| Trip.com | Online travel agency | Rapid | 8,368 | 0.4 | |
| Hoshizaki Corp | Commercial kitchen equipment manufacturer | Stalwart | 8,308 | 0.4 | |
| Appian | Enterprise software developer | Rapid | 8,242 | 0.4 | |
| Howard Hughes | US real estate developer | Latent | 8,095 | 0.4 | |
| GRAILu | Blood testing for early cancer detection | Rapid | 8,082 | 0.4 | |
| iRobot | Domestic and military robot manufacturer | Rapid | 8,006 | 0.4 | |
| Wabtec | Rail and transit products and services | Cyclical | 7,953 | 0.4 | |
| LendingTree | US online loan marketplace | Rapid | 7,912 | 0.4 | 94.2 |
List of Investments at 30 April 2020 (Ctd)
| Name | Business | Growth category | Fair value £'000 |
% of total assets | Cumulative % of total assets | |
| GrubHub | US online food service | Rapid | 7,621 | 0.4 | ||
| Novocure | Biotechnology company focusing on solid tumour treatment |
Rapid | 7,602 | 0.4 | ||
| Jefferies Financial Group | Investment bank | Cyclical | 7,568 | 0.4 | ||
| Hays | Recruitment consultancy | Cyclical | 7,281 | 0.3 | ||
| Orica | Australian industrial explosives company | Cyclical | 7,056 | 0.3 | ||
| Toyota Tsusho | African auto distributer | Latent | 6,999 | 0.3 | ||
| Interactive Brokers Group | Global electronic trading platform | Rapid | 6,753 | 0.3 | ||
| Sands China | Macau casino operator | Cyclical | 5,927 | 0.3 | ||
| PageGroup | Recruitment consultancy | Cyclical | 5,501 | 0.3 | ||
| Jardine Strategic Holdings | Asian retail/auto dealerships and property | Cyclical | 5,252 | 0.3 | 97.5 | |
| M&G Prudential | Investment management | Latent | 4,969 | 0.2 | ||
| DistributionNOW | Oilfield drilling equipment distributor | Latent | 4,823 | 0.2 | ||
| Myriad Genetics | Genetic testing company | Rapid | 3,937 | 0.2 | ||
| Lindblad Expeditions Holdings |
Specialist vacation operator | Latent | 3,707 | 0.2 | ||
| Adevinta ASA | Media and classified advertising platforms | Rapid | 3,511 | 0.2 | ||
| Sensyne Health | Healthcare technology company | Rapid | 3,240 | 0.2 | ||
| Istyle | Japanese cosmetics business | Rapid | 3,143 | 0.2 | ||
| Silk Invest Africa Food Fundu |
Africa focused private equity fund | Latent | 3,037 | 0.1 | ||
| MRC Global | Oilfield drilling equipment distributor | Latent | 2,762 | 0.1 | ||
| Ferro Alloy Resources | Vanadium mining | Latent | 942 | 0.0 | ||
| Total Investments* | 2,088,827 | 99.1 | 99.1 | |||
| Net Liquid Assets* | 18,559 | 0.9 | ||||
| Total Assets* | 2,107,386 | 100.0 | 100.0 | |||
u Denotes unlisted security.
± The Schiehallion Fund is managed by Baillie Gifford. The Company's holding in The Schiehallion Fund is excluded from its assets when calculating the management fee. See note 3.
* For a definition of terms used see Glossary of Terms and Alternative Performance Measures at the end of this announcement.
Income statement
| For the year ended 30 April 2020 |
For the year ended 30 April 2019 |
|||||
| Revenue £'000 |
Capital £'000 |
Total £'000 |
Revenue £'000 |
Capital £'000 |
Total £'000 |
|
| Gains on investments (note 2) | - | 50,247 | 50,247 | - | 194,084 | 194,084 |
| Currency losses | - | (1,277) | (1,277) | - | (4,049) | (4,049) |
| Income | 26,691 | - | 26,691 | 23,268 | - | 23,268 |
| Investment management fee (note 3) | (7,644) | - | (7,644) | (6,992) | - | (6,992) |
| Other administrative expenses | (1,677) | - | (1,677) | (1,673) | - | (1,673) |
| Net return before finance costs and taxation | 17,370 | 48,970 | 66,340 | 14,603 | 190,035 | 204,638 |
| Finance costs of borrowings | (6,046) | - | (6,046) | (5,518) | - | (5,518) |
| Net return on ordinary activities before taxation | 11,324 | 48,970 | 60,294 | 9,085 | 190,035 | 199,120 |
| Tax on ordinary activities | (2,005) | - | (2,005) | (1,899) | - | (1,899) |
| Net return on ordinary activities after taxation | 9,319 | 48,970 | 58,289 | 7,186 | 190,035 | 197,221 |
| Net return per ordinary share (note 4) | 4.24p | 22.26p | 26.50p | 3.30p | 87.23p | 90.53p |
| Note: Dividends per share paid and payable in respect of the year (note 5) |
2.50p | 1.85p |
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 issued by the Association of Investment Companies.
All revenue and capital items in this statement derive from continuing operations.
A Statement of Comprehensive Income is not required as the Company does not have any other comprehensive income and the net return on ordinary activities after taxation is both the profit and total comprehensive income for the year.
Balance sheet
| At 30 April 2020 £'000 |
At 30 April 2019 £'000 |
|
| Fixed assets | ||
| Investments held at fair value through profit or loss (note 6) | 2,088,827 | 1,979,780 |
| Current assets | ||
| Debtors | 7,566 | 7,617 |
| Cash and cash equivalents | 19,537 | 25,919 |
| 27,103 | 33,536 | |
| Creditors | ||
| Amounts falling due within one year (note 7) | (112,398) | (110,626) |
| Net current liabilities | (85,295) | (77,090) |
| Total assets less current liabilities | 2,003,532 | 1,902,690 |
| Creditors | ||
| Amounts falling due after more than one year (note 7) | (39,908) | (39,875) |
| 1,963,624 | 1,862,815 | |
| Capital and reserves | ||
| Share capital | 11,178 | 10,930 |
| Share premium account | 94,328 | 48,007 |
| Capital redemption reserve | 8,700 | 8,700 |
| Capital reserve | 1,788,556 | 1,739,586 |
| Revenue reserve | 60,862 | 55,592 |
| Shareholders' funds | 1,963,624 | 1,862,815 |
| Shareholders' funds per ordinary share (note 8) (borrowings at book value) |
878.4p | 852.2p |
| Net asset value per ordinary share * (borrowings at par) |
878.3p | 852.1p |
| Net asset value per ordinary share * (borrowings at fair value) |
875.6p | 848.9p |
| Ordinary shares in issue (note 9) | 223,553,859 | 218,593,859 |
* See Glossary of Terms and Alternative Performance Measures at the end of this announcement.
Statement of changes in equity
For the year ended 30 April 2020
| 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 2019 | 10,930 | 48,007 | 8,700 | 1,739,586 | 55,592 | 1,862,815 |
| Net return on ordinary activities after taxation | - | - | - | 48,970 | 9,319 | 58,289 |
| Ordinary shares issued (note 9) | 248 | 46,321 | - | - | - | 46,569 |
| Dividends paid during the year (note 5) | - | - | - | - | (4,049) | (4,049) |
| Shareholders' funds at 30 April 2020 | 11,178 | 94,328 | 8,700 | 1,788,556 | 60,862 | 1,963,624 |
For the year ended 30 April 2019
| 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 2018 | 10,857 | 35,973 | 8,700 | 1,549,551 | 51,453 | 1,656,534 |
| Net return on ordinary activities after taxation | - | - | - | 190,035 | 7,186 | 197,221 |
| Ordinary shares issued | 73 | 12,034 | - | - | - | 12,107 |
| Dividends paid during the year (note 5) | - | - | - | - | (3,047) | (3,047) |
| Shareholders' funds at 30 April 2019 | 10,930 | 48,007 | 8,700 | 1,739,586 | 55,592 | 1,862,815 |
* The Capital Reserve balance at 30 April 2020 includes holding gains on investments of £643,697,000 (2019 - gains of £653,406,000).
Cash flow statement
| Year ended 30 April 2020 | Year ended 30 April 2019 | |||
| £'000 | £'000 | £'000 | £'000 | |
| Cash flows from operating activities | ||||
| Net return on ordinary activities before taxation | 60,294 | 199,120 | ||
| Net gains on investments | (50,247) | (194,084) | ||
| Currency losses | 1,277 | 4,049 | ||
| Finance costs of borrowings | 6,046 | 5,518 | ||
| Overseas tax incurred | (1,997) | (1,905) | ||
| Changes in debtors and creditors | (148) | 40 | ||
| Cash from operations* | 15,225 | 12,738 | ||
| Interest paid | (6,154) | (5,372) | ||
| Net cash inflow from operating activities | 9,071 | 7,366 | ||
| Cash flows from investing activities | ||||
| Acquisitions of investments | (353,934) | (320,097) | ||
| Disposals of investments | 293,267 | 273,472 | ||
| Net cash outflow from investing activities | (60,667) | (46,625) | ||
| Cash flows from financing activities | ||||
| Equity dividends paid | (4,049) | (3,047) | ||
| Ordinary shares issued | 45,973 | 13,177 | ||
| Borrowings drawn down | 1,065 | 32,133 | ||
| Net cash inflow from financing activities | 42,989 | 42,263 | ||
| (Decrease)/increase in cash and cash equivalents | (8,607) | 3,004 | ||
| Exchange movements | 2,225 | (59) | ||
| Cash and cash equivalents at 1 May | 25,919 | 22,974 | ||
| Cash and cash equivalents at 30 April | 19,537 | 25,919 |
* Cash from operations includes dividends received of £26,536,000 (2019 - £23,153,000) and interest received of £306,000 (2019 - £196,000).
Notes to the financial statements
| 1. | The Financial Statements for the year to 30 April 2020 have been prepared in accordance with FRS 102, 'The Financial Reporting Standard applicable in the UK and Republic of Ireland' and on the basis of the accounting policies set out in the Annual Report and Financial Statements which are unchanged from the prior year and have been applied consistently. | |||||||
| 2. 3. |
Gains on investments | 2020 £'000 |
2019 £'000 |
|||||
| Realised gains on sales | 59,956 | 108,225 | ||||||
| Changes in investment holding gains | (9,709) | 85,859 | ||||||
| Total gains on investments | 50,247 | 194,084 | ||||||
| Baillie Gifford & Co Limited, a wholly owned subsidiary of Baillie Gifford & Co, has been appointed as the Company's Alternative Investment Fund Manager (AIFM) and Company Secretary. Baillie Gifford & Co Limited has delegated portfolio management services to Baillie Gifford & Co. The annual management fee payable to Baillie Gifford & Co Limited is 0.45% on the first £750 million of total assets, 0.33% on the next £1 billion of total assets and 0.30% on the remaining total assets. For fee purposes, total assets is defined as the total value of all assets held less all liabilities (other than any liability in the form of debt intended for investment purposes) and excludes the value of the Company's holding in The Schiehallion Fund, a closed-ended investment company managed by Baillie Gifford & Co. The Company does not currently hold any other collective investment vehicles managed by Baillie Gifford & Co. Where the Company holds investments in open-ended collective investment vehicles managed by Baillie Gifford, such as OEICs, Monks' share of any fees charged within that vehicle will be rebated to the Company. All debt drawn down during the periods under review is intended for investment purposes. | ||||||||
| 4. | Net Return per Ordinary Share | 2020 | 2019 | |||||
| Revenue return | 4.24p | 3.30p | ||||||
| Capital return | 22.26p | 87.23p | ||||||
| Total return | 26.50p | 90.53p | ||||||
| Revenue return per ordinary share is based on the net revenue return on ordinary activities after taxation of £9,319,000 (2019 - £7,186,000) and on 219,986,605 (2019 - 217,844,955) 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 £48,970,000 (2019 - gain of £190,035,000) and on 219,986,605 (2019 - 217,844,955) 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. |
||||||||
| 5. | Ordinary Dividends | 2020 | 2019 | 2020 £'000 |
2019 £'000 |
|||
| Amounts recognised as distributions in the year: | ||||||||
| Previous year's final (paid 6 September 2019) | 1.85p | 1.40p | 4,049 | 3,047 | ||||
| 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 £9,319,000 (2019 - £7,186,000). | ||||||||
Notes to the financial statements (ctd)
5.
Ordinary Dividends (Ctd)
2020
2019
2020
£'000
2019
£'000
Amounts paid and payable in respect of the financial year:
Proposed final (payable 4 September 2020)
2.50p
1.85p
5,589
4,049
If approved, the recommended final dividend on ordinary shares will be paid on 4 September 2020 to shareholders on the register at the close of business on 31 July 2020. The ex-dividend date is 30 July 2020. The Company's Registrar offers a Dividend Reinvestment Plan and the final date for elections for this dividend is 13 August 2020.
6.
| As at 30 April 2020 |
Level 1 £'000 |
Level 2 £'000 |
Level 3 £'000 |
Total £'000 |
| Listed equities | 2,019,786 | 48,052 | - | 2,067,838 |
| Unlisted equities | - | - | 20,989 | 20,989 |
| Total financial asset investments | 2,019,786 | 48,052 | 20,989 | 2,088,827 |
| As at 30 April 2019 |
Level 1 £'000 |
Level 2 £'000 |
Level 3 £'000 |
Total £'000 |
| Listed equities | 1,959,319 | - | - | 1,959,319 |
| Unlisted equities | - | - | 20,461 | 20,461 |
| Total financial asset investments | 1,959,319 | - | 20,461 | 1,979,780 |
Investments in securities are financial assets held at fair value through profit or loss. In accordance with Financial Reporting Standard 102, the preceding tables provide an analysis of these investments based on the fair value hierarchy described below, which reflects the reliability and significance of the information used to measure their fair value. During the year, a listed equity investment with a fair value at the previous year end of £41,002,000 was transferred from Level 1 to Level 2 as, although it is listed on the London Stock Exchange, it has not been traded frequently during the period.
Fair Value Hierarchy
The fair value hierarchy used to analyse the basis on which the fair values of financial instruments held at fair value through the profit and loss account are measured is described below. Fair value measurements are categorised on the basis of the lowest level input that is significant to the fair value measurement.
Level 1 - using unadjusted quoted prices for identical instruments in an active market;
Level 2 - using inputs, other than quoted prices included within Level 1, that are directly or indirectly observable (based on market data); and
Level 3 - using inputs that are unobservable (for which market data is unavailable).
Unlisted Investments
Unlisted investments are valued at fair value by the Directors following a detailed review and appropriate challenge of the valuations proposed by the Managers. The Managers' unlisted investment policy applies methodologies consistent with the International Private Equity and Venture Capital Valuation guidelines ('IPEV'). These methodologies can be categorised as follows: (a) market approach (multiples, industry valuation benchmarks and available market prices); (b) income approach (discounted cash flows); and (c) replacement cost approach (net assets). The valuation process recognises also, as stated in the IPEV Guidelines, that the price of a recent investment may be an appropriate starting point for estimating fair value, however it should be evaluated using the techniques described above.
7.
Creditors falling due within one year include drawings under the following borrowing facilities:
Borrowing facilities at 30 April 2020
A 5 year £100 million unsecured floating rate revolving facility, which expires 30 November 2020, has been arranged with National Australia Bank Limited.
A 4 year £5 million unsecured floating rate revolving facility, which expires 13 March 2022, has been arranged with Scotiabank (Ireland).
At 30 April 2020 drawings were as follows:
National Australia Bank Limited: US$124.7 million at an interest rate (at 30 April 2020) of 2.309% per annum, maturing in July 2020.
Scotiabank (Ireland): £5 million at an interest rate (at 30 April 2020) of 1.72775% per annum, maturing in June 2020.
At 30 April 2019 drawings were as follows:
National Australia Bank Limited: US$99 million at an interest rate (at 30 April 2019) of 3.80088% per annum and US$30.4 million at an interest rate (at 30 April 2019) of 3.83038% per annum, both maturing in July 2019.
The main covenants relating to the above loans are that total borrowings shall not exceed 30% of the Company's adjusted net asset value and that the Company's minimum adjusted net asset value shall be £650 million.
Creditors falling due after one year include the following:
£40 million 6 3/8% debenture stock with a repayment date of 1 March 2023.
Par, Book and Fair Value of Borrowings
2020
Par value
£'000
2020
Book value
£'000
2020
Fair value
£'000
2019
Par value
£'000
2019
Book value
£'000
2019
Fair value
£'000
Bank loans due within one year
103,854
103,854
103,854
99,287
99,287
99,287
6 3/8% debenture stock 2023
40,000
39,908
46,000
40,000
39,875
47,000
143,854
143,762
149,854
139,287
139,162
146,287
8.
Shareholders' Funds per ordinary share
2020
2019
Shareholders' funds
£1,963,624,000
£1,862,815,000
Number of ordinary shares in issue at the year end
223,553,859
218,593,859
Shareholders' funds per ordinary share
878.4p
852.2p
The shareholders' funds figures above have been calculated after deducting borrowings at book value, in accordance with the provisions of FRS 102. The net asset value figures shown in the Balance Sheet and in the Glossary of Terms and Alternative Performance Measures have been calculated after deducting borrowings at either par value or fair value. Reconciliations between shareholders' funds and both NAV measures are shown in the Glossary of Terms and Alternative Performance Measures at the end of this announcement.
9.
In the year to 30 April 2020, the Company issued 4,960,000 ordinary shares (nominal value of £248,000) at a premium to net asset value, raising net proceeds of £46,569,000 (2019 - £12,107,000). No shares were bought back during the year and no shares are held in treasury. At 30 April 2020 the Company had authority to buy back 32,786,706 ordinary shares and to allot or sell from treasury 17,192,385 ordinary shares without application of pre-emption rights. Under the provisions of the Company's Articles of Association share buy-backs are funded from the capital reserve.
10.
Transaction costs on purchases amounted to £338,000 (2019 - £488,000) and transaction costs on sales amounted to £145,000 (2019 - £293,000).
11.
The financial information set out above does not constitute the Company's statutory accounts for the years ended 30 April 2020 or 2019 but is derived from those accounts. Statutory accounts for 2019 have been delivered to the Registrar of Companies and those for 2020 will be delivered in due course. The auditor has reported on these accounts; the reports were (i) unqualified, (ii) did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying their report, and (iii) did not contain a statement under section 498 (2) or (3) of the Companies Act 2006.
12.
Related Parties and Transaction with the Manager
No Director has a contract of service with the Company. During the year no Director was interested in any contract or other matter requiring disclosure under section 412 of the Companies Act 2006.
Details of the management fee arrangements are included in note 3 above.
13.
The Report and Accounts will be available on the Managers' website www.monksinvestmenttrust.co.uk‡ on or around 14 July 2020.
‡ Neither the contents of the Managers' website nor the contents of any website accessible from hyperlinks on the Managers' website (or any other website) is incorporated into, or forms part of, this announcement.
None of the views expressed in this document should be construed as advice to buy or sell a particular investment.
Glossary of Terms and Alternative Performance Measures (APM)
Total Assets
The total value of all assets held less all liabilities (other than liabilities in the form of borrowings).
Shareholders' Funds
Shareholders' Funds is the value of all assets held less all liabilities, with borrowings deducted at book cost.
Net Asset Value (APM)
Net Asset Value (NAV) is the value of all assets held less all liabilities, with borrowings deducted at either par value or fair value as described below. Per share amounts are calculated by dividing the relevant figure by the number of ordinary shares in issue.
Net Asset Value (Borrowings at Par Value) (APM)
Borrowings are valued at nominal par value.
A reconciliation from shareholders' funds (borrowings at book value) to net asset value after deducting borrowings at par value is provided below:
| 2020 £'000 |
2020 per share |
2019 £'000 |
2019 per share |
|
| Shareholders' funds (borrowings at book value) | 1,963,624 | 878.4p | 1,862,815 | 852.2p |
| Add: book value of borrowings | 143,762 | 64.3p | 139,162 | 63.6p |
| Less: par value of borrowings | (143,854) | (64.4p) | (139,287) | (63.7p) |
| Net asset value (borrowings at par value) | 1,963,532 | 878.3p | 1,862,690 | 852.1p |
The per share figures above are based on 223,553,859 (2019 - 218,593,859) ordinary shares of 5p, being the number of ordinary shares in issue at the year end.
Net Asset Value (Borrowings at Fair Value) (APM)
Borrowings are valued at an estimate of market worth. The fair value of the Company's 6 3/8% debenture stock 2023 is based on the closing market offer price on the London Stock Exchange. The fair value of the Company's short term bank borrowings is equivalent to its book value.
A reconciliation from shareholders' funds (borrowings at book value) to net asset value after deducting borrowings at fair value is provided below:
| 2020 £'000 |
2020 per share |
2019 £'000 |
2019 per share |
|
| Shareholders' funds (borrowings at book value) | 1,963,624 | 878.4p | 1,862,815 | 852.2p |
| Add: book value of borrowings | 143,762 | 64.3p | 139,162 | 63.6p |
| Less: fair value of borrowings | (149,854) | (67.1p) | (146,287) | (66.9p) |
| Net asset value (borrowings at fair value) | 1,957,532 | 875.6p | 1,855,690 | 848.9p |
The per share figures above are based on 223,553,859 (2019 - 218,593,859) ordinary shares of 5p, being the number of ordinary shares in issue at the year end.
Discount/Premium (APM)
As stockmarkets and share prices vary, an investment trust's share price is rarely the same as its NAV. When the share price is lower than the NAV per share it is said to be trading at a discount. The size of the discount is calculated by subtracting the share price from the NAV per share and is usually expressed as a percentage of the NAV per share. If the share price is higher than the NAV per share, this situation is called a premium.
Net Liquid Assets
Net liquid assets comprise current assets less current liabilities (excluding borrowings).
Active Share (APM)
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.
Total Return (APM)
The total return is the return to shareholders after reinvesting the dividend on the date that the share price goes ex-dividend, as detailed below.
| 2020 NAV (par) |
2020 NAV (fair) |
2020 Share price |
2019 NAV (par) |
2019 NAV (fair) |
2019 Share price |
||
| Closing NAV per share/share price | (a) | 878.3p | 875.6p | 914.0p | 852.1p | 848.9p | 883.0p |
| Dividend adjustment factor* | (b) | 1.0020 | 1.0020 | 1.0019 | 1.0017 | 1.0017 | 1.0016 |
| Adjusted closing NAV per share/share price | (c = a x b) | 880.0p | 877.4p | 915.8p | 853.5p | 850.3p | 884.4p |
| Opening NAV per share/share price | (d) | 852.1p | 848.9p | 883.0p | 762.8p | 759.0p | 785.0p |
| Total return | (c ÷ d) - 1 | 3.3% | 3.4% | 3.7% | 11.9% | 12.0% | 12.7% |
* The dividend adjustment factor is calculated on the assumption that the dividend of 1.85p (2019 - 1.40p) paid by the Company during the year was reinvested into shares of the Company at the cum income NAV/share price, as appropriate, at the ex-dividend date.
Ongoing Charges (APM)
The total expenses (excluding dealing and borrowing costs) incurred by the Company as a percentage of the daily average net asset value (with borrowings at fair value), as detailed below.
| 2020 | 2019 | ||
| Investment management fee | £7,644,000 | £6,992,000 | |
| Other administrative expenses | £1,677,000 | £1,673,000 | |
| Total expenses | (a) | £9,321,000 | £8,665,000 |
| Average net asset value (with borrowings deducted at fair value) | (b) | £1,933,065,000 | £1,727,928,000 |
| Ongoing Charges | a ÷ b | 0.48% | 0.50% |
Gearing (APM)
At its simplest, gearing is borrowing. Just like any other public company, an investment trust can borrow money to invest in additional investments for its portfolio. The effect of the borrowing on the shareholders' assets is called 'gearing'. If the Company's assets grow, the shareholders' assets grow proportionately more because the debt remains the same. But if the value of the Company's assets falls, the situation is reversed. Gearing can therefore enhance performance in rising markets but can adversely impact performance in falling markets. The level of gearing can be adjusted through the use of derivatives which affect the sensitivity of the value of the portfolio to changes in the level of markets.
Potential gearing is the Company's borrowings expressed as a percentage of shareholders' funds.
Invested gearing is the Company's borrowings at par less cash and brokers' balances expressed as a percentage of shareholders' funds*.
Effective gearing, as defined by the Board and Managers of Monks, is the Company's borrowings at par less cash, brokers' balances and investment grade bonds maturing within one year, expressed as a percentage of shareholders' funds*.
*As adjusted to take into account the gearing impact of any derivative holdings.
Leverage (APM)
For the purposes of the Alternative Investment Fund Managers (AIFM) Directive, leverage is any method which increases the Company's exposure, including the borrowing of cash and the use of derivatives. It is expressed as a ratio between the Company's exposure and its net asset value and can be calculated on a gross and a commitment method. Under the gross method, exposure represents the sum of the Company's positions after the deduction of sterling cash balances, without taking into account any hedging and netting arrangements. Under the commitment method, exposure is calculated without the deduction of sterling cash balances and after certain hedging and netting positions are offset against each other.
Compound Annual Return (APM)
The compound annual return converts the return over a period of longer than one year to a constant annual rate of return applied to the compounded value at the start of each year.
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