RNS Announcement

The Monks Investment Trust PLC (MNKS)

Legal Entity Identifier: 213800MRI1JTUKG5AF64

Results for the six months to 31 October 2024

The following is the unaudited Interim Financial Report for the six months to 31 October 2024 which was approved by the Board on 3 December 2024.

Chairman's statement

Performance

During the first half of the financial year, the Company produced a net asset value (NAV^*) total return of +6.3% compared to +8.1% for the comparative index (FTSE World in sterling). The share price total return was +3.1%. Commentary on performance and portfolio positioning is contained in the Managers' Report.

Capital allocation

The Board has continued to be active in buying back shares at a discount to NAV. The Company bought back approximately 15 million of its own shares over the six months to 31 October 2024, at a cost of £176 million and an average discount of 9.1%. Since the Company commenced its buyback programme in January 2022 it has bought back 54 million shares at a total cost of £582 million and an average discount of 8.6%. This represents 22.9% of the share capital outstanding at the end of December 2021.

Gearing

An advantage of the investment trust structure is that the Company can deploy borrowing to enhance returns in the long term. The Company has a mixture of long term, structural debt and shorter term, more flexible debt. The Company's revolving credit facility of £150 million with National Australia Bank Limited expired at the end of November 2024 and has been replaced by a £100 million revolving credit facility with The Royal Bank of Scotland International. £50 million is drawn under this facility. At the period end, net gearing was 7.3% and the weighted average interest rate across all borrowings was 3.6%.

The Board

Jeremy Tigue retired from the Board at the AGM in September 2024, and Claire Boyle has succeeded him as Audit Committee Chair. As I announced at the AGM, it is my intention to step down at or before the Company's 2025 AGM. The Board has recruited three new Directors over the four years since I became its Chairman and the Board's succession plan will be announced in due course.

Outlook

Monks has a well-diversified portfolio of growth stocks. The Board believes that the Company's diversified approach offers investors exposure to a wide range of growth opportunities that are likely to drive returns in the years ahead.

Karl Sternberg

Chairman

3 December 2024

^*    NAV with debt at fair value. For a definition of terms used see Glossary of terms and Alternative Performance Measures towards the end of this announcement.

Total return information is sourced from Baillie Gifford/LSEG and relevant underlying index providers. See disclaimer towards the end of this announcement.

Interim management report

Global equity markets have continued to make progress in the six months to the end of October, delivering +8.1% in sterling terms. There has been no shortage of news for investors to digest. The US Federal Reserve began to cut interest rates amidst optimism that the United States would pull off a "soft landing" by both tempering inflation and maintaining economic growth. China announced a significant package of stimulus measures designed to boost its economy in September. And of course, the prospect of a new US president, coupled with what feels like rising geopolitical barriers, gathered substantial attention through the period.

The implications of these moves will be felt over our investment time horizon of five years and beyond but they are far from the only things that matter: Massive infrastructure spending catch-up is being deployed in some of the largest economies in the world; a billion more people have joined the global online population since 2020; and a new era of space transport was ushered in when Space X's super heavy booster rocket landed safely back at its launch site in October.

As always, we remain focused on making the best long-term choices for the Company. So far this year, that has meant pursuing the areas outlined in our annual Research Agenda, engaging with current holdings, and 'kicking the tyres' (literally, in some cases) of new investment ideas. In the past six months, we have visited the US, Brazil, and China (more on this later), seeking to broaden the base for growth within the Monks portfolio.

Performance

In the first half of the financial year the Company produced a net asset value (NAV) total return of +6.3% compared to +8.1% for the comparative index (FTSE World in sterling). The share price total return was +3.1%. This represents continued progress in the recovery of the portfolio's NAV which has increased by +29.2% in the twelve months to 31 October 2024, modestly ahead of the benchmark index's return of +26.1% over the same period.

The portfolio's NAV performance lagged the stock market in the past six months for two key reasons. First, some very large businesses have found strong favour in markets based on their scale and technology advantages in an emerging era of artificial intelligence. We share that excitement. The Company is invested in the likes of Microsoft, NVIDIA, Meta and Amazon. But we do not hold all the biggest businesses in this space, and in some cases hold them in smaller sizes than the index, and this has detracted from our relative returns. Those deliberate choices reflect the return opportunities we see elsewhere in the portfolio.

The second reason has been the poor share price performance of a subset of our healthcare holdings. Elevance Health and Novo Nordisk have both suffered share price falls on disappointing news. Elevance is the second largest US health insurer after United Health, which we also own within the portfolio. We believe a growing need for health insurance coverage (as the population ages and treatment becomes more expensive) provides a structural tailwind for growth in the years ahead. The recent weakness in Elevance's shares is a result of its government-supported Medicaid customers falling as eligibility criteria are tightened post-pandemic. This has increased the company's medical loss ratio and weighed on margins, but we believe this is a temporary phenomenon. Elevance's pricing power should allow it to grow its margins again and deliver sustainable double-digit earnings growth over the long term.

Novo Nordisk could become one of the scale providers of weight loss drugs to a vast and structurally undersupplied market. Its current drug (Wegovy) is driving strong growth for the business, whilst there has been exciting potential shown in late-stage trials of a more efficacious iteration called CagriSema (which has the potential of up to 25% weight loss). Recently, its shares fell following disappointing results from a small trial of weight loss pills (existing products are taken by injection). This looks overdone to us in the context of the overall opportunity. We believe that Novo's significant investment in capacity and its scalable manufacturing process leave it positioned to grow materially from here.

Finally, Moderna's revenues continue to fall from Covid vaccine highs. We have been disappointed by the company's respiratory syncytial virus vaccine which took too long to reach the market. While the platform potential of its mRNA technology remains exciting, and progress in personalised cancer vaccines is encouraging, we want to see improved commercial execution from the business as it seeks to become a multi-drug company.

We have seen stronger results from other healthcare holdings in the portfolio. Alnylam Pharmaceuticals' pioneering drugs restrict the production of specific genes that can cause disease. It reached a significant milestone after positive results from its late-stage trial to treat a rare heart condition. This could multiply its addressable patient population tenfold. We took some profits on shareholders' behalf after the share price rose by 80% but remain excited by the company's potential to address even larger patient populations.

Other notable contributors include The Trade Desk (TTD) and CBRE. The Trade Desk's programmatic ad-buying platform is market-leading and allows advertisers to place targeted adverts online. It is the largest and fastest-growing platform (revenues at +27% year-on-year) but remains in the early stages of its growth. It is expanding strategic partnerships with major platforms like Disney and Netflix which suggests that they recognise its importance. The connected TV market (adverts being sold on streaming platforms) is forecast to double to $13.5bn over the next 5 years and we believe that TTD is strongly positioned to take an outsized share of these revenues. We have reflected our enthusiasm by adding to the position. CBRE is a diversified real estate business and plays an important 'stalwart' role within the portfolio. Whilst property transactions are down against a backdrop of higher interest rates, CBRE's recurring revenue services have performed strongly. These results are a testament to management's efforts to make CBRE a more robust business by widening the scope of property management services it provides. We are encouraged by the progress of each of these companies and by the breadth of growth they represent.

Boldly seeking diversification

Our approach deliberately seeks different sources of growth. These are reflected in our growth profiles as set out on the following pages, into which we categorise all our holdings. We invest in some of the largest and fastest-growing companies in the world, but we value the latitude to seek a broader base for growth. Market forecasts suggest that the outlook for earnings growth is changing. Whilst the large technology companies look set to remain important contributors, they will not retain a monopoly on earnings growth.

Broadening outlook

(% contribution of S&P 500 earnings growth year-over-year^*)

http://www.rns-pdf.londonstockexchange.com/rns/6767O_1-2024-12-3.pdf - Market Concentration Graph 

Source: BoFA Global Research, Factset.

^*    3Q25E, as of 16 May 2024.

We believe the stage is set for returns from a more diversified group of companies. Our task, therefore, is to ensure that we identify where the rewards for growth are most seriously underappreciated. Our Research Agenda helps ensure that we remain return-seeking in our outlook and focus our research productively.

01.     Generative AI - the next frontier - We are witnessing the dawn of a major technological revolution. Like previous revolutions, it will precipitate profound social and economic changes. Unlike previous revolutions, the pace of diffusion will surely be rapid.

          Over the past two years, we have been building the portfolio's exposure to the drivers and beneficiaries of AI. This has seen the proportion of the portfolio invested in semiconductors rise from 2% to 11% today, and underpinned investments in second and third-order beneficiaries like Comfort Systems, which provides data centres with essential cooling and ventilation equipment. In recent months we have added to both Microsoft (enterprise software and cloud) and NVIDIA (semiconductors) where we believe AI is widening their competitive moat and serving to elongate their runway for growth. In contrast, we have reduced our position in Alphabet where we believe the emergence of AI search platforms may threaten Alphabet's core search advertising business.

          Elsewhere, we have sold our position in Adobe (creative software). The mass adoption of generative AI tools is likely to disrupt Adobe's creative platform, materially lowering barriers to entry. Whilst Tesla is embracing AI too, having built its own supercomputer for AI machine learning, we have sold the portfolio's position because the valuation looked stretched relative to its growth prospects. Electric vehicle competition is intensifying, and we have reservations about the management team's ability to deliver sufficient growth from its self-driving software.

02.     Infrastructure upgrade and the resurgence of the domestic champion - We believe there are businesses positioned to benefit from the repair and enhancement of physical infrastructure. Developed nations have underinvested for decades. Resilience and longer-term economic growth have suffered. Roads need repaired; bridges rebuilt; power grids upgraded; advanced manufacturing installed. Our conviction that we are witnessing the early stages of an industrial super-cycle across the western world has deepened further.

          Our exposure to domestic US infrastructure-related opportunities continues to grow. Over the past year, we have added a handful of new positions to the portfolio, including Advanced Drainage Systems (storm drains) and Stella Jones (utility poles). A core attraction of these businesses is that they either have a first-mover advantage or are the largest player which underpins their ability to grow through pricing power. The former is the case for Advanced Drainage Systems, which has a dominant position in plastic storm drains that are replacing crumbling concrete equivalents. The latter is true of Stella Jones, which owns around 70% of the market's supply of lumber for utility poles, an essential component of the energy grid upgrade. Our most recent purchase is Builders FirstSource. It is establishing a first-mover advantage and changing the way that building products and prefabricated components are supplied to professional builders in the US. We think that it will continue to take market share as its prefabricated products are market-leading, allowing for greater efficiencies and lower construction costs. Growth is underpinned by a structural shortage of housing and sensible consolidation through M&A should support growth further.

03.     Capital cycles and emerging scarcity - The impact of higher rates in some ways was immediate and obvious: Long-duration assets such as high-growth equities became less valuable. We have certainly felt that. However, in other ways, the impact has been slower to materialise. Changes to the supply side take time but in the long run the impact of capital scarcity on spending, and therefore competition, should be far more impactful than merely a higher discount rate today.

          As several of our technology companies have focused on operational execution and profitable growth, we have added where our conviction has been growing. For example, we have increased our positions in DoorDash (food delivery) and Adyen (digital payments). DoorDash, now a top 10 holding within the fund, has grown its US market share from 18% in 2018 to 70% today. We believe that its focus on operational execution and customer experience has been the driver of this success. Revenues are growing at over +20%, whilst its nascent grocery delivery offering is growing both the frequency and average order value of customers. Adyen provides an end-to-end digital payment solution for global companies in search of a simple solution for the complexities of global trade. Its solution takes care of a range of services from risk management and payment processing to dealing with issuing banks. The company's premium pricing strategy, justified by the value-added services it offers, appears to be gaining traction and revenues are growing at more than +20%, per annum.

          Elsewhere, we took a new position in Norwegian Cruise Line Holdings, one of three big players - alongside Carnival and Royal Caribbean - that control 85% of the cruise shipping market. We believe that the current valuation (13x forward price-to-earnings) underappreciates the improving outlook for the business. Norwegian is set to address a supply bottleneck by bringing thirteen new ships to market through 2036. Allied with falling debt levels and margin expansion we are excited by the potential return dynamic of the shares.

China

For us, getting out on the road helps to deepen our understanding of industries and companies, no more so than in China. Deputy Manager, Helen Xiong, spent a month there earlier this year assessing, among other things, the competitive landscape in the electric vehicle (EV) market. Her work underpinned our decision to add to our holding in Li Auto, the electric vehicle manufacturer. The EV market is fiercely competitive (there are more than 100 EV manufacturers in China). However, we view Li Auto as one of a small list of potential winners (alongside the likes of NIO and Xpeng which have strong capabilities too). Li's 'extended range' offering (an internal combustion system charges a battery pack and extends the vehicle's range) has been a success (its latest results show it is growing unit sales at +45% year-on-year) and has solved 'range anxiety' among early adopters. It has established a strong brand known for quality and innovation. We are confident that it is well-placed to continue its progress towards a fully electric car business (its first model was released this year) and has a strong chance of emerging as one of the leading brands in Chinese EVs.

More broadly, we have been tilting the portfolio's Chinese exposure toward the domestic consumer in recent years. At around 4% of the portfolio, our Chinese holdings tend to be 'local-for-local' (i.e. Chinese companies growing into domestic consumption). We added one new position in the period in Kweichow Moutai, China's leading producer of premium baiju (spirit drink). Its centuries-old production techniques, limited supply, and loyal customer base mean Moutai commands exceptional pricing power. Indeed, 24 bottles of Kweichow Moutai sold for $1.4m at Sotheby's in 2021! We took a position at a valuation considerably below its long-term average and believe it will be a resilient compounder for the portfolio. We recognise that there are risks associated with investing in China but believe that there remains significant opportunity too. You can read and hear more from Helen on the Chinese opportunity for global investors by clicking on 'Why growth investors can't ignore China' on bailliegifford.com.

We sold positions in Alibaba and Sands China. Having played a transformative role in transitioning China from traditional retail to ecommerce, we believe Alibaba is likely to be outcompeted by other players in its different markets (e.g. Pinduoduo in ecommerce, which we now hold in Monks). Sands China is a casino and hotel operator based in Macau. Having endured a very difficult spell through the pandemic, we had hoped that customers would return in numbers, but this has been slower than we had anticipated. We also have reservations about the extent of its alignment with the priorities of the Chinese state and 'common prosperity'.

Outlook

What excites us most is our ability to capture growth in all its forms. Artificial intelligence (AI) represents a paradigm shift in computing power and a transformational growth opportunity. We invest in the protagonists (NVIDIA, Microsoft, Amazon and Meta) in addition to a range of other beneficiaries. We have sown the seeds of future returns by investing in a range of overlooked growth companies in areas like cruise shipping, building materials, and auto parts.

The resulting portfolio is in good shape. Over the next three years, market consensus forecasts suggest that the portfolio will grow its sales twice as fast as the market average and earnings +50% faster. We recognise that share price performance in recent years has been disappointing. However, amid continued signs of progress from our portfolio holdings, we are increasingly confident in the portfolio's ability to deliver attractive returns for shareholders in the years ahead.

Baillie Gifford & Co

Managers

3 December 2024

For a definition of terms used see Glossary of terms and Alternative Performance Measures towards the end of this announcement.

Total return information is sourced from Baillie Gifford/LSEG and relevant underlying index providers. See disclaimer towards the end of this announcement.

Past performance is not a guide to future performance.

The Managers' core investment beliefs

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

Active management

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

•         High active share^* provides the potential for adding value.

•         We ignore the structure of the index - for example the location of a company's HQ and therefore its domicile are less relevant to us than where it generates sales and profits.

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

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

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

Committed growth investors

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

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

•         We have a differentiated approach to growth, focusing on the type of growth that we expect a company to deliver. All holdings fall into one of three growth categories - as set out on the following pages.

•         The use of these three growth categories ensures a diversity of growth drivers within a disciplined framework.

Long-term perspective

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

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

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

•         Short-term portfolio results are random.

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

Dedicated team with clear decision‑making process

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

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

Portfolio construction

•         Investments are held in three broad holding sizes, as set out on the following pages.

•         This allows us to back our judgement in those stocks for which we have greater conviction, and to embrace the asymmetry of returns through 'incubator' positions in higher risk/return stocks.

•         'Asymmetry of returns' - some of our smaller positions will struggle and their share prices will fall; those that are successful may rise many fold. The latter should outweigh the former.

Low cost

•         Investors should not be penalised by high management fees.

•         Low turnover and trading costs benefit shareholders.

^*    For a definition of terms used see Glossary of terms and Alternative Performance Measures towards the end of this announcement.

Responsibility statement

We confirm that to the best of our knowledge:

a.       the condensed set of Financial Statements has been prepared in accordance with FRS 104 'Interim Financial Reporting';

b.       the Interim Management Report includes a fair review of the information required by Disclosure Guidance and Transparency Rule 4.2.7R (indication of important events during the first six months, and their impact on the Financial Statements, and a description of principal risks and uncertainties for the remaining six months of the year); and

c.       the Interim Financial Report includes a fair review of the information required by Disclosure Guidance and Transparency Rule 4.2.8R (disclosure of related party transactions and changes therein).

On behalf of the Board

KS Sternberg

Chairman

3 December 2024

List of investments

as at 31 October 2024

^*    For a definition of terms used see Glossary of terms and Alternative Performance Measures towards the end of this announcement.

^§    Denotes unlisted/private company holding.

^    Denotes suspended investment.

^†    New purchase during the period.

^#    Includes holdings in preference shares, ordinary shares and contingent value rights (CVR).

Investment portfolio by growth category

as at 31 October 2024^*

^*    Excludes net liquid assets.

Portfolio positioning

as at 31 October 2024^*†

Although the Managers' approach to stock picking is resolutely 'bottom-up' in nature and pays no attention to the structure of the index, it is essential to understand the risks of each investment and, in turn, where there may be concentrations of exposures. The charts below outline some key exposures of the portfolio.

Geographical

Sectoral

^*    Expressed as a percentage of total assets.

^†    For a definition of terms used see Glossary of Terms and Alternative Performance Measures towards the end of this announcement.

Past performance is not a guide to future performance.

Income statement (unaudited)

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 period.

Balance sheet (unaudited)

^*    For a definition of terms used see Glossary of terms and Alternative Performance Measures towards the end of this announcement.

Statement of  changes in equity (unaudited)

For the six months ended 31 October 2024

For the six months ended 31 October 2023

^*    The Capital Reserve balance at 31 October 2024 includes holding gains on investments of £1,008,555 (31 October 2023 - gains of £520,850,000).

Condensed cash flow statement (unaudited)

^*    Cash from operations includes dividends received of £13,123,000 (31 October 2023 - £16,998,000) and deposit interest received of £940,000 (31 October 2023 - £727,000).

Notes to the condensed financial statements (unaudited)

01      Basis of accounting

The condensed Financial Statements for the six months to 31 October 2024 comprise the statements set out on the previous pages together with the related notes below. They have been prepared in accordance with FRS 104 'Interim Financial Reporting' and the AIC's Statement of Recommended Practice issued in November 2014 and updated in July 2022 with consequential amendments. They have not been audited or reviewed by the Auditor pursuant to the Auditing Practices Board Guidance on 'Review of Interim Financial Information'. The Financial Statements for the six months to 31 October 2024 have been prepared on the basis of the same accounting policies as set out in the Company's Annual Report and Financial Statements at 30 April 2024.

Going concern

The Directors have considered the Company's principal risks and uncertainties, as set out on the inside front cover, together with the Company's current position, investment objective and policy, the level of demand for the Company's shares, the nature of its assets, its liabilities and projected income and expenditure. The Board has, in particular, considered the impact of macroeconomic and geopolitical concerns, including hostilities in Ukraine and Gaza, and US-China and China-Taiwan tensions. It is the Directors' opinion that the Company has adequate resources to continue in operational existence for the foreseeable future. The vast majority of the Company's investments are readily realisable and can be sold to meet its liabilities as they fall due. All borrowings require the prior approval of the Board. Gearing levels and compliance with covenants are reviewed by the Board on a regular basis. The Company has continued to comply with the investment trust status requirements of section 1158 of the Corporation Tax Act 2010 and the Investment Trust (Approved Company) Regulations 2011. Accordingly, the Directors consider it appropriate to adopt the going concern basis of accounting in preparing these Financial Statements and confirm that they are not aware of any material uncertainties which may affect the Company's ability to continue to do so over a period of at least twelve months from the date of approval of these Financial Statements.

02      Financial information

The financial information contained within this Interim Financial Report does not constitute statutory accounts as defined in sections 434 to 436 of the Companies Act 2006. The financial information for the year ended 30 April 2024 has been extracted from the statutory accounts which have been filed with the Registrar of Companies. The Auditor's Report on those accounts was not qualified, did not include a reference to any matters to which the Auditor drew attention by way of emphasis without qualifying its report, and did not contain statements under sections 498(2) or (3) of the Companies Act 2006.

03      Investment managers

Baillie Gifford & Co Limited, a wholly owned subsidiary of Baillie Gifford & Co, has been appointed by the Company as its Alternative Investment Fund Managers (AIFM) and Company Secretary. The investment management function has been delegated to Baillie Gifford & Co. The management agreement can be terminated on six months' notice. The annual management fee is 0.45% 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.

04      Tax on ordinary activities

The revenue tax charge arises from withholding tax suffered on overseas dividends. The capital tax charge results from the Provision for Tax Liability in respect of Indian capital gains tax as detailed in note 9.

05      Net return per ordinary share

Net return per ordinary share is based on the above totals of revenue and capital and on 208,004,715 (31 October 2023 - 228,211,498; 30 April 2024 -224,114,021) ordinary shares, being the weighted average number of ordinary shares in issue during the period.

There are no dilutive or potentially dilutive shares in issue.

06      Dividends

07      Fair value hierarchy

The Company's investments are financial assets held at fair value through profit or loss. The fair value hierarchy used to analyse the basis on which the fair values of such financial instruments 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).

An analysis of the Company's financial asset investments based on the fair value hierarchy described above is shown below.

The fair value of listed investments is either bid price or last traded price depending on the convention of the exchange on which the investment is listed. Listed Investments are categorised as Level 1 if they are valued using unadjusted quoted prices for identical instruments in an active market and as Level 2 if they do not meet all these criteria but are, nonetheless, valued using market data. Unlisted investments are valued at fair value by the Directors following a detailed review and appropriate challenge of the valuations proposed by the Managers. The Managers' unlisted investment policy applies methodologies consistent with the International Private Equity and Venture Capital Valuation Guidelines ('IPEV'). These methodologies can be categorised as follows: (a) market approach (multiples, industry valuation benchmarks and available market prices); (b) income approach (discounted cash flows); and (c) replacement cost approach (net assets). The Company's holdings in unlisted investments are categorised as Level 3 as unobservable data is a significant input to their fair value measurements.

08      Financial liabilities

The fair value of borrowings at 31 October 2024 was £174,188,000 (30 April 2024 - £173,210,000).

09      Provision for tax liability

The tax liability provision at 31 October 2024 of £1,148,000 (30 April 2024 - £1,896,000) relates to a potential liability for Indian capital gains tax that may arise on the Company's Indian investments should they be sold in the future, based on the net unrealised taxable capital gain at the period end and on enacted Indian tax rates. The amount of any future tax amounts payable may differ from this provision, depending on the value and timing of any future sales of such investments and future Indian tax rates.

10      Shareholders' funds

The shareholders' funds figures above have been calculated after deducting borrowings at book value, in accordance with the provisions of FRS 104. Reconciliations between shareholders' funds and net asset values, calculated after deducting borrowings at par value and fair value, are shown towards the end of this announcement.

11      Share capital

In the six months to 31 October 2024 the Company bought back 15,015,000 ordinary shares into treasury (31 October 2023 - 6,521,000 shares bought back). No shares were issued during the period and 54,055,794 shares were held in treasury at 31 October 2024 (31 October 2023 - 28,895,794, 30 April 2024 - 39,040,794). At 31 October 2024, the Company had authority to buy back 24,364,293 shares and to allot, or sell from treasury, 21,061,566 shares.

12      Related party transactions

There have been no transactions with related parties during the first six months of the current financial year that have materially affected the financial position or the performance of the Company during that period and there have been no changes in the related party transactions described in the last Annual Report and Financial Statements that could have had such an effect on the Company during that period.

Baillie Gifford - valuing private companies

We aim to hold our private company investments at 'fair value' i.e., the price that would be paid in an open-market transaction. Valuations are adjusted both during regular valuation cycles and on an ad hoc basis in response to 'trigger events'. Our valuation process ensures that private companies are valued in both a fair and timely manner.

The valuation process is overseen by a valuations group at Baillie Gifford which takes advice from an independent third party (S&P Global). The valuations group is independent from the investment team, with all voting members being from different operational areas of the firm, and the portfolio managers only receive final valuation notifications once they have been applied.

We revalue the private holdings on a three-month rolling cycle, with one-third of the holdings reassessed each month. During stable market conditions, and assuming all else is equal, each investment would be valued four times in a twelve month period. For investment trusts, the prices are also reviewed twice per year by the respective investment trust boards and are subject to the scrutiny of external auditors in the annual audit process.

Beyond the regular cycle, the valuations team also monitors the portfolio for certain 'trigger events'. These may include: changes in fundamentals; a takeover approach; an intention to carry out an Initial Public Offering (IPO); company news which is identified by the valuation team or by the portfolio managers or significant changes to the valuation of comparable public companies. Any ad hoc change to the fair valuation of any holding is implemented swiftly and reflected in the next published NAV. There is no delay.

The valuations team also monitors relevant market indices on a weekly basis and updates valuations in a manner consistent with our external valuer's (S&P Global) most recent valuation report where appropriate. When market volatility is particularly pronounced the team undertakes these checks daily.

In addition to the 2.4% of the portfolio holdings in direct private company investments, 2.2% of the portfolio is in The Schiehallion Fund, a closed ended investment company investing predominantly in private companies, which Monks values by reference to its market price.

Glossary of terms and Alternative Performance Measures ('APM')

An Alternative Performance Measure is a financial measure of historical or future financial performance, financial position, or cash flows, other than a financial measure defined or specified in the applicable financial reporting framework.

Total assets

This is the Company's definition of adjusted total assets, being 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.

The per share figures above are based on 199,115,666 (30 April 2024 - 214,130,666) ordinary shares of 5p, being the number of ordinary shares in issue at the period end excluding treasury shares.

Net Asset Value (borrowings at fair value) (APM)

Borrowings are valued at an estimate of market worth. The fair values of the loan notes are calculated using a comparable debt approach, by reference to a basket of corporate debt. 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.

The per share figures above are based on 199,115,666 (30 April 2024 - 214,130,666) ordinary shares of 5p, being the number of ordinary shares in issue at the period end excluding treasury shares.

Net liquid assets

Net liquid assets comprise current assets less current liabilities (excluding borrowings) and provisions for deferred liabilities.

Discount/premium (APM)

As stock markets 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 NAV per share from the share price 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.

Active share (APM)

Active share, a measure of how actively a portfolio is managed, is the percentage of the listed equity 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 net dividend on the date that the share price goes ex-dividend, as detailed below.

Net Asset Value total return

^*    The dividend adjustment factor is calculated on the assumption that the dividend of 2.10p paid by the Company during the period was reinvested into shares of the Company at the cum income NAV at the ex-dividend date.

Share price total return

^*    The dividend adjustment factor is calculated on the assumption that the dividend of 2.10p paid by the Company during the period was reinvested into shares of the Company at the share price at the ex-dividend date.

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.

Gross gearing, also referred to as potential gearing is the Company's borrowings expressed as a percentage of shareholders' funds (a ÷ c in the table below).

Net gearing, also referred to as invested or equity gearing is borrowings at book value less cash and cash equivalents (any certificates of deposit are not deducted) and brokers' balances expressed as a percentage of shareholders' funds (b ÷ c in the table below)^*.

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.

Unlisted, unquoted and private company investments

'Unlisted', 'unquoted' and 'private company' investments are investments in securities not traded on a recognised exchange.

Treasury shares

The Company has the authority to make market purchases of its ordinary shares for retention as treasury shares for future reissue, resale, transfer, or for cancellation. Treasury shares do not receive distributions and the Company is not entitled to exercise the voting rights attaching to them.

Turnover (APM)

Turnover is a measure of portfolio change or trading activity. Monthly turnover is calculated as the minimum of purchases and sales in a month, divided by the average market value of the fund. Monthly numbers are added together to get the rolling 12 month turnover data.

Contingent value rights

'CVR' after an instrument name indicates a security, usually arising from a corporate action such as a takeover or merger, which represents a right to receive potential future value, should the continuing company achieve certain milestones. The Illumina CVR was received on Illumina's takeover of the Company's private company investment in GRAIL and the Abiomed CVR arose on Johnson & Johnson's takeover of Abiomed. In both cases the milestones relate to the performance of the technologies acquired through those takeovers. Any values attributed to these holdings reflect both the amount of the future value potentially receivable and the probability of the milestones being met within the time frames in the CVR agreement.

Automatic exchange of information

In order to fulfil its obligations under UK tax legislation relating to the automatic exchange of information, the Company is required to collect and report certain information about certain shareholders.

The legislation requires investment trust companies to provide personal information to HMRC on certain investors who purchase shares in investment trusts. Accordingly, the Company will have to provide information annually to the local tax authority on the tax residencies of a number of non-UK based certificated shareholders and corporate entities.

Shareholders, excluding those whose shares are held in CREST, who come on to the share register will be sent a certification form for the purposes of collecting this information.

For further information, please see HMRC's Quick Guide: Automatic Exchange of Information - information for account holders gov.uk/government/publications/exchange-of-information-account-holders.

Third party data provider disclaimer

No third party data provider ('Provider') makes any warranty, express or implied, as to the accuracy, completeness or timeliness of the data contained herewith nor as to the results to be obtained by recipients of the data.

No Provider shall in any way be liable to any recipient of the data for any inaccuracies, errors or omissions in the index data included in this document, regardless of cause, or for any damages (whether direct or indirect) resulting therefrom.

No Provider has any obligation to update, modify or amend the data or to otherwise notify a recipient thereof in the event that any matter stated herein changes or subsequently becomes inaccurate. Without limiting the foregoing, no Provider shall have any liability whatsoever to you, whether in contract (including under an indemnity), in tort (including negligence), under a warranty, under statute or otherwise, in respect of any loss or damage suffered by you as a result of or in connection with any opinions, recommendations, forecasts, judgements, or any other conclusions, or any course of action determined, by you or any third party, whether or not based on the content, information or materials contained herein.

FTSE Index Data

London Stock Exchange Group plc and its group undertakings (collectively, the 'LSE Group'). © LSE Group 2024. FTSE Russell is a trading name of certain of the LSE Group companies. 'FTSE®' 'Russell®', FTSE Russell®, is/are a trade mark(s) of the relevant LSE Group companies and is/are used by any other LSE Group company under license. All rights in the FTSE Russell indexes or data vest in the relevant LSE Group company which owns the index or the data. Neither LSE Group nor its licensors accept any liability for any errors or omissions in the indexes or data and no party may rely on any indexes or data contained in this communication.

No further distribution of data from the LSE Group is permitted without the relevant LSE Group company's express written consent. The LSE Group does not promote, sponsor or endorse the content of this communication.

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

The printed version of the Interim Financial Report will be sent to shareholders and will be available on the Monks' page of the Managers' website monksinvestmenttrust.co.uk ‡ on or around 18 December 2024.

^‡    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.

Monks is managed by Baillie Gifford & Co, the Edinburgh based fund management group with around £224 billion under management and advice in active equity and bond portfolios for clients in the UK and throughout the world (as at 2 December 2024).

Investment Trusts are UK public limited companies and are not authorised or regulated by the Financial Conduct Authority.

Past performance is not a guide to future performance. The value of an investment and any income from it is not guaranteed and may go down as well as up and investors may not get back the amount invested. This is because the share price is determined by the changing conditions in the relevant stock markets in which the Company invests and by the supply and demand for the Company's shares.

3 December 2024

For further information please contact:

Client Relations, Baillie Gifford & Co - Tel: 0131 275 2000

Jonathan Atkins, Four Communications - Tel: 0203 920 0555 or 07872 495396

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