Monks Investment Trust : Annual Report and Financial Statements 30 April 2023

THE MONKS INVESTMENT TRUST PLC

Global growth from different perspectives

Annual Report and Financial Statements 30 April 2023

Global growth from different perspectives

The Monks Investment Trust 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.

Contents

1	Financial Highlights	Financial Report
Strategic Report	38	Independent Auditor's Report
2	Chairman's Statement	44	Income Statement
4	Managers' Report	45	Balance Sheet
7	The Managers' Core Investment Beliefs	46	Statement of Changes in Equity
8	Investment Portfolio by Growth Category	47	Cash Flow Statement
10	Portfolio Positioning	48	Notes to the Financial Statements
11	List of Investments	Shareholder Information
14	Baillie Gifford's Approach to Valuing	66	Notice of Annual General Meeting
	Private Companies	68	Further Shareholder Information
15	One Year Summary	68	Analysis of Shareholders
16	Five Year Summary	70	Automatic Exchange of Information
17	Ten Year Summary	70	Alternative Investment Fund
18	Business Review		Managers Regulations
Governance Report	70	Sustainable Finance Disclosure Regulation
23	Directors and Management	71	Communicating with Shareholders
25	Directors' Report	71	Third Party Data Provider Disclaimer
28	Corporate Governance Report	72	Glossary of Terms and Alternative
33	Audit Committee Report		Performance Measures

35 Directors' Remuneration Report

37 Statement of Directors' Responsibilities

Investor Disclosure Document

The UK Alternative Investment Fund Managers Regulations require certain information to be made available to investors prior to their investment in the Company. The Company's Investor Disclosure Document is available for viewing at monksinvestmenttrust.co.uk.

Notes

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

Investment trusts are UK public listed companies and as such comply with the requirements of the Financial Conduct Authority. They are not authorised or regulated by the Financial Conduct Authority (FCA).

Monks currently conducts its affairs, and intends to continue to conduct its affairs, so that the Company's Ordinary Shares can qualify to be considered as a mainstream investment product and can be recommended by Independent Financial Advisers to ordinary retail investors in accordance with the rules of the FCA in relation to non-mainstream investment products.

THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION.

If you are in any doubt as to the action you should take you should consult your stockbroker, bank manager, solicitor, accountant or other independent financial advisor authorised under the Financial Services and Markets Act 2000 immediately if you are in the United Kingdom or, if not, from another appropriately authorised financial adviser.

If you have sold or otherwise transferred all of your ordinary shares in The Monks Investment Trust PLC, please forward this document, together with accompanying documents, but not your personalised Form of Proxy, as soon as possible to the purchaser or transferee or to the stockbroker, bank or other agent through whom the sale or transfer was or is being effected for delivery to the purchaser or transferee.

Financial Highlights

Financial Highlights - Year to 30 April 2023

Share Price* (7.0%)	NAV* (2.6%)	NAV* (1.6%)	Benchmark*† 3.2%
	(borrowings at par)	(borrowings at
		fair value)

• Source: Refinitiv/Baillie Gifford. All figures are stated on a total return basis. Total return is an Alternative Performance Measure
  - see Glossary of Terms and Alternative Performance Measures on pages 72 to 74.

Share Price (pence)

Share price

NAV and Benchmark

(figures rebased to 100 at 30 April 2022)

NAV total return (after deducting borrowings at fair value#)

1200

1100

1000

900

800

A M J J	A S O N D J	F M A
2022		2023

110

105

100

Benchmark† total return	95
	90

A M J J	A S O N D J	F M A
2022		2023

Discount#(4)

Discount (after deducting

borrowings at fair value#) (6) plotted as at month end

dates(8)

(10)

(12)

A M J J	A S O N D J	F M A
2022		2023

Source: Refinitiv/Baillie Gifford and relevant underlying index providers. See disclaimer on page 71.

• Benchmark - the FTSE World Index (in sterling terms) is the principal index against which performance is measured.
  #Alternative Performance Measure - see Glossary of Terms and Alternative Performance Measures on pages 72 to 74.

Past performance is not a guide to future performance.

The Monks Investment Trust PLC 01

Strategic Report

Chairman's Statement

Performance

During the year the NAV total return, with borrowings calculated at fair value, was -1.6%. The share price total return was -7.0%, while the FTSE World Index returned +3.2%. This is a disappointing outcome against the backdrop of last year's declines. It is now eight years since the change in investment approach was implemented in March 2015. Since the end of March 2015, the NAV total return has been +126.7%* against the comparative index at +127.4%*. Over the same period, the share price total return was +131.3%*. Recent underperformance by growth stocks has wiped out the cumulative gains of the prior years. We are very mindful of the need to return to outperformance, in a variety of market conditions.

Share Capital

In what has been a difficult year from a performance perspective, we were pleased to issue new shares to former shareholders of The Independent Investment Trust PLC ('IIT'). The Company issued 16.7 million new ordinary shares in return for £173.1 million of IIT's assets, comprising £72.3 million cash and £100.8 million in equity investments, in accordance with the prospectus and circular published on 6 October 2022. This should be seen as an endorsement of Monks' credentials as a long-term growth vehicle for savers. Benefits to shareholders include increased scale, an estimated reduction to the ongoing charges ratio of two basis points, and cash to invest at an advantageous point in the performance cycle. The Board is delighted to welcome these new shareholders to the Company.

The Board does not have a formal discount control mechanism, however, against a backdrop of widening discounts across the investment trust sector, the Board has been active in buying shares in the open market. Having issued shares when Monks was at a premium, we feel it is our obligation to be ready buyers at a discount, not least because we believe that the market is underestimating the value in our portfolio. Buying in the Company's own shares at a discount to NAV enhances NAV per share for ongoing shareholders (approximately +0.48% in the year to end April 2023). With the shares trading at a consistent discount throughout the year, the Company bought back 13.6 million shares, costing £135.2 million. The discount to NAV with borrowings calculated at fair value was 9.7% as at 30 April 2023, compared to a discount of 4.4% at 30 April 2022.

Borrowings and Gearing

Our Investment Trust structure allows gearing, which should enhance long-term returns. The Board's strategic borrowing target is 10%. It is expected that gearing will be maintained in the range of minus 15% to plus 15%. Gearing was 7.3% at the start of the year and remained moderate throughout, ending the period at 5.3%. Our long-standing debenture matured in March 2023, leaving the Company with borrowings in the form of a revolving credit facility which was 50% drawn at 30 April 2023, and long-term debt issued to insurance companies at very attractive rates (1.8%) in 2020. The weighted average rate of interest is currently 3.4% (2022 - 2.8%), well below the current market rate.

Unlisted Exposure

We currently take comfort from the low exposure of Monks to unquoted companies, which represent 3.9% of total assets: 2.0% by way of The Schiehallion Fund, a publicly traded investment company; and 1.9% through direct investment (2022 - 6.6% combined exposure: 4.4% The Schiehallion Fund; 2.2% direct investment). These are often the fastest-growth companies, but they also have high financing needs, and that represents a risk in today's environment of tightening liquidity and competition for funds. Schiehallion's shares currently trade at a material discount to net asset value, which offers the potential for re-rating should sentiment towards growth capital improve. The Board has tested the valuations of the small number of investments we hold directly. We believe that they are realistic and that none is material to the Company. In the long run, the Manager and the Board believe that unquoted companies offer us the means to gain exposure to some of the best companies driving economic change.

Management Expenses

Monks remains competitive on fees and expenses, which helps to enhance returns to shareholders. The total ongoing charges ratio for the year to 30 April 2023 was 0.43%, up slightly from 0.40% in the prior year. The current tiered management fee scale should ensure that all shareholders will benefit from economies of scale as asset growth recovers.

Earnings and Dividend

Monks invests with the aim of maximising capital growth rather than income. All costs are charged to the Revenue Account. The Board's policy is to pay the minimum dividend required to maintain investment trust status. Retained earnings are reinvested in the portfolio. In order to build in headroom for further buybacks that may reduce the shares in issue qualifying for dividends,

the Board is recommending that a single final dividend of 3.15p be paid, compared to 2.35p last year, to ensure that the amount retained for the year does not exceed that permissible.

Governance and Sustainability

The Company's Manager's investment approach - long-term,bottom-up stock picking and research - marries well with a thoughtful approach to Environmental, Social and Governance (ESG) considerations. Understanding the complexities that individual businesses face is critical as the Manager seeks to assess the impact of ESG factors on the sustainability of investee companies. A dedicated Governance and Sustainability analyst supports the portfolio managers in their engagement with investee companies, and undertakes a range of thematic portfolio analyses which helps to inform and direct engagement priorities. Areas of past focus have included climate change, tax and executive compensation. More can be found about these assessments, and the Manager's broader approach, within the Monks Stewardship Report on the Company's page of the Manager's website.

• Total returns from 31 March 2015 to 30 April 2023.

Total return information is sourced from Baillie Gifford/Refinitiv and relevant underlying index providers. See disclaimer on page 71. For a definition of terms used see Glossary of Terms and Alternative Performance Measures on pages 72 to 74.

Past performance is not a guide to future performance.

02 Annual Report 2023

The Board

Following the retirement from the Board of James Ferguson and Edward Harley, the Directors reviewed the skills, experience, and balance of tenure lengths of the remaining Board members; considered recent and anticipated developments in the commercial and regulatory landscape; and appointed Odgers Berndtson to commence the search for a new Director. The Board is delighted to welcome Dr Dina Chaya, who was appointed a Director with effect from 30 November 2022. She brings her experience as a venture capital investor, with particular expertise in life sciences and unquoted investment.

The Board is cognisant of the need to ensure regular refreshment of its composition. Having seen the departure of a number of very long-serving Directors over the last few years, the Board considers that there is an equal need to manage succession so as to ensure adequate handover periods and retention of the corporate memory. Jeremy Tigue, who joined the Board in September 2014, will offer himself for re-election at the forthcoming Annual General Meeting, his ninth since appointment, but he will not offer himself for re-election at the 2024 AGM. Given this impending retirement, and other Directors' plans, the Board has asked that I should stay in post in order to make sufficient hirings to provide a successor who could be in post for longer than a couple of years. The Board's intention is to add one further Director before Jeremy steps down next year, and another shortly after that.

Outlook

The Board's most important role is to challenge the managers on your behalf, to justify why their chosen portfolio should deliver superior returns over the long term. We remain impressed by the breadth and depth of their research, and their willingness to look across geographies and sectors to find underappreciated growth, without a dogmatic approach of narrowing the opportunities to only the fastest growth companies in relatively new parts of economies.

The Board has challenged the managers with respect to recent underperformance, which the managers write about in their report on pages 4 to 6. The last two years have reminded the managers of the importance of valuation discipline. The aggressive period of monetary tightening has most certainly not reined in the pace of underlying change in economies, as the latest developments in artificial intelligence demonstrate. The managers remain focused on capturing this change, and finding the winners as the economic landscape shifts, even when overall growth is feeble. We believe that our managers have constructed a portfolio with very good long-term prospects, thoughtful diversification, and with only a relatively small premium price for much faster growth than the rest of the market will deliver. The Board shares Baillie Gifford's optimism that investors will, in due course, return to attractive growth companies with sustainable business models.

Strategic Report

Annual General Meeting

The Company's AGM will take place on Thursday 7 September 2023 at the Institute of Directors, Pall Mall, London, SW1Y 5ED. To accurately reflect the views of shareholders of the Company, the Board intends to hold the AGM voting on a poll, rather than on a show of hands as has been customary. This will ensure an exact and definitive result. We encourage all shareholders to complete and return the form of proxy enclosed with the Annual Report to ensure that your votes are represented at the meeting (whether or not you intend to attend in person). We recommend that shareholders monitor the Company's website

at monksinvestmenttrust.co.uk where any updates regarding the meeting will be posted. Market announcements will also be made in the event of any change to the scheduled arrangements.

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 [e-mail] or call 0800 917 2112.

KS Sternberg

Chairman

19 June 2023

The Monks Investment Trust PLC 03