The Monks Investment Trust - Quoted Data Annual Overview - Individual - July 2026

This Month's Scorecard

For the year ended 30 June 2026: share price +25.7%, NAV +19.4%, lagging the FTSE World benchmark (proxied by the L&G Global Equity Index) at +28.4%. Performance improved markedly over the past year, but the trust still failed to beat the broad index; on a five-year view, the 2022 growth-stock de-rating was a severe drag, with recovery over the past two years.

Measure	Year to 2026/6/30	2025/6/30	2024/6/30	2023/6/30	2022/6/30
Share price total return	25.7%	9.7%	19.6%	6.8%	(32.1%)
NAV total return	19.4%	9.2%	16.8%	9.6%	(26.4%)
L&G Global Equity Index	28.4%	6.3%	20.8%	13.3%	(4.2%)
MSCI World	26.1%	7.6%	21.5%	14.1%	(2.5%)

Contributors and Detractors

The report names four contributing holdings — TSMC, NVIDIA, SpaceX and Schiehallion — but gives neither the individual contribution magnitudes nor any list of detractors.

Holding	Contribution/Detraction	One-line attribution
TSMC	Positive contribution (no figure given in original)	The original text says performance improved "helped by holdings such as" these four; no breakdown figures
NVIDIA	Positive contribution (no figure given in original)	Same as above
SpaceX	Positive contribution (no figure given in original)	Same as above
Schiehallion	Positive contribution (no figure given in original)	Same as above; Schiehallion is Baillie Gifford's unlisted growth fund, in which MNKS holds units

How the Managers View the Market

【Cautious】stance: the managers believe global uncertainty is rising and it is hard to bet on a single winner; they are reshaping the portfolio so it can perform across a "wider range of outcomes" while retaining a focus on exceptional growth companies.

• AI, geopolitics, energy security, infrastructure constraints and shifting trade patterns are raising market uncertainty and volatility, with price moves "wider and more extreme".
• Bottlenecks are evolving; new opportunities are broadening from the "narrow group of AI winners" into power, infrastructure, resources, manufacturing capacity and financial resilience; AI remains a key theme, but the portfolio has been rebalanced toward the next phase of growth.
• The managers admit it is "difficult to have confidence in predicting long-term winners", so they are building a portfolio across multiple scenarios and "making room to back their highest-conviction ideas"; they are also using recent volatility to "improve portfolio resilience and add to high-conviction holdings".
• Fundamental view: the portfolio's expected earnings and sales growth are above the index, with healthy margins and returns; the valuation premium has fallen to 0%, the lowest in 10 years — evidence the managers cite in arguing that current valuations are supported.

Position Shifts: Adds and Trims

The report gives only the direction, without disclosing specific buy/sell names: broadening from excessive concentration in AI winners toward wider themes including power, infrastructure, resources, manufacturing and financial resilience; structurally adding to high-conviction holdings.

• The original text explicitly says it is "making room to back their highest-conviction ideas" and "add to high-conviction holdings", but no buy/sell names are listed.
• Thematic level: shifting from narrow AI winners toward the "next phase of growth" benefiting from power, infrastructure, resources, manufacturing capacity and financial resilience.
• Gearing: net gearing 5.3%, used structurally; the report does not mention any change this month.

Fund Details

The report is a third-party commissioned initiation of coverage, not the fund's monthly disclosure; fund size is £2,504.5m, the current discount 4.5%, and over the past 12 months the discount has ranged between 3.8% and 10.1%, averaging 6.3%.

• Key data: share price 1,626.00p, NAV 1,703.23p, discount 4.5%, dividend yield 0.06%; 154.0m shares in issue; average daily volume 502.1k shares.
• Fund managers: Helen Xiong, Michael Taylor and Malcolm MacColl (the Baillie Gifford Global Alpha team); Baillie Gifford has managed the trust since 1931, with the team taking over in March 2015.
• Portfolio characteristics: primarily global listed equities with a small number of private investments; typically more than 100 holdings; no hard industry or geographic constraints; active share of approximately 80% or higher; the FTSE World Index benchmark does not influence portfolio construction.
• Positioning: the report describes MNKS as sitting between Scottish Mortgage (SMT) and Scottish American (SAIN) — more diversified than SMT and more growth-oriented than SAIN.
• Note: Marten & Co was paid to write this report, and the content has a promotional character; the expectation of further discount narrowing expressed in the text ("if growth investing continues to find favour and performance persists, the discount could narrow further") is a sell-side judgment, not a commitment by the fund.

The analysis now turns to Part 2. If the previous part focused on MNKS's overall positioning and recent performance, the core thread of this part is a shift in the macro narrative: the old equilibrium of "cheap capital + scarce knowledge" is giving way to a new landscape of "physical constraints + AI enablement". MNKS's rebalancing, process and allocation data all provide granular evidence supporting this assessment.

1. AI Investment Logic: From Thematic to Stock-Specific

The most substantive sentence in the original text is: "AI is not a single theme with the same winners, and not all AI exposure is equally attractive." This sounds like common sense, but MNKS's actual actions provide a valuable point of differentiation:

The trim/sell side — the crowding risk in hardware bottleneck stocks.

Despite TSMC, Samsung Electronics and NVIDIA being the biggest winners over the past year, MNKS chose to trim Samsung and Comfort Systems after their strong rallies, and to exit FTAI Aviation entirely. The FTAI case is especially notable: the company had entered a new business of "using aircraft engines to power data centres", which on the surface hit the AI power-demand theme, but MNKS management judged it an "uncertain transition away from the core business" and, with the valuation no longer cheap, chose to exit.

This points to an important methodology: MNKS does not chase concept labels; it only evaluates the certainty of the business model itself. No matter how attractive a story, if it moves beyond the circle of competence, or relies on a "second growth curve" narrative to support the valuation, it is systematically removed.

The add side — AI-exposed stocks the market has "wrongly sold off".

Management explicitly believes the market's pricing of the AI impact is "broad-brush" — crude and one-size-fits-all. They specifically note:

• Tencent: AI can be used to improve ad targeting and user engagement — a direct enhancement to revenue, not a threat;
• CoStar: it owns hard-to-replicate real estate data and marketplace assets; the proliferation of AI tools will not erode the exclusivity of its data, but may instead increase the number of use cases for its data assets.

Based on this view, MNKS selectively added to holdings caught up in AI panic such as Samsara, Shopify and Adyen. This set of actions reveals its core analytical framework: not a binary of "AI beneficiary" vs "AI casualty", but "whether AI strengthens the company's existing moat".

2. Portfolio Construction: Preparing for a Wider Range of Outcomes

MNKS management explicitly states the goal is "build a portfolio that can perform across a wider range of outcomes". This replaces the traditional "optimal portfolio for the most likely scenario" mindset with one that does not fail under any of a range of macro scenarios.

This intention is implemented in three directions:

Deployment direction	Representative new holdings	Logic
Physical bottlenecks / real-world constraints	EOG, EQT (oil & gas), Tidewater (offshore service vessels), Freeport-McMoRan (copper)	Data centres, electrification, defence, robotics and grid investment jointly underpin copper demand; oil and gas benefits from tight supply and energy security
More predictable growth	Philip Morris International, Midea, Dino Polska	"Growth defensive" stocks with stable cash flows, brand moats or market-consolidation logic
Financials (regional banks)	Credicorp (Peru), UOB (Singapore), SEB (Sweden)	Spread improvement from rising emerging-market penetration plus interest-rate normalisation in developed markets

The deeper meaning of this portfolio shift: MNKS is not betting that "AI solves everything", nor retreating into pure defence; it is broadening growth exposure from a single "digital platforms" basket into a hybrid of the "physical world + digital world".

3. Three Disciplinary Pillars in the Investment Process

There are three elements in the process section worth examining individually, because they explain how MNKS can execute the contrarian moves above without style drift:

1. Three growth profiles

• Growth stalwarts: long-duration franchises with clear competitive advantages;
• Rapid growth: innovators disrupting large markets;
• Cyclical growth: companies whose management can reinvest effectively into structural growth opportunities.

The purpose of this classification is not merely style diversification, but setting different expectations and review criteria: one cannot use the short-term volatility of a "cyclical growth" name to dismiss a holding whose very purpose is to capture a cyclical reversal, nor apply "stalwart" standards to tolerate a derating of a rapid grower. This establishes a sensible "error tolerance boundary" for every position.

2. Forward-looking hypotheses and milestone tracking

Every investment has a clear "investment story" supported by trackable milestones. This mechanism prevents fund managers from exiting easily because of short-term share price volatility, or refusing to acknowledge a broken story because of "sunk costs". Hypotheses are not set once, but are continuously re-tested as new information arrives — this is essentially Bayesian thinking, not "buy and pray".

3. Three-tier position sizing

• Highest-conviction holdings: > 2%
• Core holdings: approximately 1%
• Incubator positions: approximately 0.5%

This design is very elegant: incubator positions allow managers to test high-risk, early-stage stories at low cost — adding if they succeed, with contained losses if they fail. It gives the portfolio a "disciplined experimentalism", rather than a binary choice between "aggressive" and "conservative".

4. Regional and Sector Allocation: A Quantitative View of the Rebalancing

The data in Figures 1–4 provide a window for objectively assessing the direction of MNKS's rebalancing:

Regional allocation changes (31/05/2025 → 31/05/2026)

Region	2026 (%)	2025 (%)	Change (ppts)
North America	57.4	58.3	-0.9
Emerging markets	19.5	13.8	+5.7
Europe	9.9	15.5	-5.6
UK	6.8	3.6	+3.2
Japan	3.8	4.6	-0.8
Developed Asia	1.1	2.9	-1.8
South America	0.7	0.0	+0.7
Net liquid assets	0.8	1.3	-0.5

Interpretation:

• The most significant shift is the transfer of weight from developed markets (Europe -5.6ppts, Developed Asia -1.8ppts, Japan -0.8ppts) into emerging markets (+5.7ppts) and the UK (+3.2ppts).
• The reduction in Europe is close to a third of its original position — largely a macro judgment: Europe lacks AI-native growth and high energy independence, and its relative growth potential is weaker than that of emerging markets.
• The UK increased by 3.2ppts, and the newly added energy names over the same period — EOG, EQT, Tidewater — carry a degree of US/UK character, suggesting MNKS sees discounted opportunities in UK assets within the energy-security and heavy-industry chain.

Sector allocation changes (31/05/2025 → 31/05/2026)

Sector	2026 (%)	2025 (%)	Change (ppts)
Technology	35.5	36.1	-0.6
Industrials	17.3	18.6	-1.3
Financials	14.4	10.3	+4.1
Consumer discretionary	12.9	18.2	-5.3
Health care	8.4	8.4	0.0
Energy	3.6	1.9	+1.7
Telecommunications	2.4	0.6	+1.8
Consumer staples	2.3	1.4	+0.9
Basic materials	1.4	1.7	-0.3
Real estate	1.1	1.4	-0.3
Net liquid assets	0.8	1.3	-0.5

Interpretation:

• The -5.3ppts in Consumer discretionary is the largest single sector cut. This may reflect concerns about the resilience of consumer spending, and is corroborated by the trimming of payment/consumer holdings such as Mastercard.
• The +4.1ppts in Financials is the largest sector increase, concentrated in regional banks such as Credicorp, UOB and SEB, rather than large US banks. This suggests MNKS views the long-term growth of emerging-market and regional banks as superior to that of their US domestic peers.
• Technology retains a high weight of 35.5%, but the net change is only -0.6ppts, indicating this is not a "fleeing tech" rebalance, but a "screening tech" rebalance — shifting from hardware and consumer tech toward platforms, data and underappreciated AI applications.
• The modest additions to Energy, Telecommunications and Consumer staples all point to one theme: the portfolio is increasing its exposure to "inflation resilience" and "physical demand".

5. Top 10 Holding Changes: A Microcosm of the Directional Shift

Category	Company
New entrants to the Top 10 in 2026	Alphabet, Royalty Pharma, Samsung Electronics, Tencent
Fell out of the Top 10	Prosus, Elevance, Mastercard, Service Corporation International

Interpretation:

• Six existing holdings were retained, consistent with MNKS's low-turnover, long-term style. The four seats swapped in/out are enough to illustrate the change in direction.
• Among the new entrants, Alphabet and Tencent are both platform software companies; while Samsung also appears among the new entrants, note that MNKS had previously trimmed Samsung — so "entering the top 10" does not necessarily mean adding; it may simply be that other holdings fell faster, or a passive change in relative ranking. This "passive entry" is worth monitoring going forward.
• Royalty Pharma is the most signal-rich new entrant: it purchases pharmaceutical royalty rights, a financial-type asset tied to the pharma cycle with both defensive and long-duration cash-flow characteristics. It perfectly illustrates the "preparing for a wider range of outcomes" mindset.
• There is a potential link between the exit of Prosus and the entry of Tencent: Prosus, as a major shareholder of Tencent, has long traded at a discount. MNKS may be shifting from "indirect holding via a holding company" to "direct holding of Tencent" — a proactive correction of the governance-structure and discount issues.
• The exit of Mastercard echoes the large cut in Consumer discretionary, further corroborating a cautious stance on the consumer cycle.

6. Summary: A Portfolio Philosophy from "Knowledge Scarcity" to "Physical Constraints"

This continuation reveals a clear evolution in investment philosophy: over the past 15 years, capital was cheap, compute was abundant and knowledge was scarce, with profits captured by asset-light digital platforms; going forward, capital, compute, energy and critical resources all become expensive, while AI makes "intelligence" ubiquitous — so profits begin to migrate toward companies that own physical bottlenecks, proprietary data and strong execution capability.

MNKS's incremental message is that it has not sided with any extreme camp; instead, through "profit-taking in hardware bottleneck stocks + selective contrarian buying in AI-exposed stocks + physical-asset deployment + regional financial adds + three-tier position discipline", it has built a portfolio that is sufficiently diversified and tolerant of multiple futures. This is a textbook case of constructing a portfolio on the admission of uncertainty rather than the prediction of certainty.

Top Five Holdings: Value Chain Logic from Physical Compute to Application Gateways

MNKS's top five holdings (23.9%) are not randomly stacked; they form an interlocking, complete picture of the AI value chain:

Value chain segment	Holding	Weight	Core role
Chip manufacturing (physical layer)	TSMC	6.4%	Global monopoly in advanced process nodes, with over 90% share of the latest nodes
Chip design (compute layer)	NVIDIA	4.8%	Absolute leader in GPUs and the CUDA ecosystem
Cloud infrastructure (platform layer)	Amazon (AWS)	3.0%	Global cloud leader; the most direct beneficiary of AI compute demand
AI application gateway (application layer)	Alphabet	3.9%	Multi-pronged: Search + Gemini + Waymo
Private growth (future layer)	Schiehallion	5.8%	Capturing the next wave of pre-IPO innovators

The elegance of this layout lies in the complementarity of risk exposures: TSMC and NVIDIA are the "picks-and-shovels" suppliers of the AI arms race, offering the greatest beta but also the strongest cyclicality; Alphabet and Amazon are the "toll roads" of AI applications, with more stable growth and, respectively, Waymo and AWS as standalone long-duration options; Schiehallion extends the horizon into unlisted markets — even if public-market pricing of AI is already full, the portfolio can still capture the next generation of technology dividends through private companies.

Notably, MNKS has not, like some peers, taken a direct heavy position in a single AI star stock (such as a leading large-language-model developer); instead it indirectly holds late-stage private companies through Schiehallion. This design balances concentration with diversification: the top five holdings account for nearly a quarter of total assets, but on a revenue-weighted estimate of AI-related sales, the portfolio's true AI risk exposure may exceed 30% — far beyond what the nominal concentration figures suggest.

The "Dual-Channel" Unlisted Investment Structure and the SpaceX IPO Validation

MNKS has built a unique dual-channel private exposure structure:

• Direct channel: six direct unlisted investments totalling 4.6%, including ByteDance (1.6%), SpaceX (1.4%), Stripe (1.0%), among others
• Indirect channel: a 5.8% holding in the Schiehallion Fund, which itself invests in late-stage private growth companies globally

A combined private allocation of roughly 10% across the two channels is rare among listed global growth funds. Nor is this a static, locked-up allocation — SpaceX completed its IPO on 12 June 2026, a landmark monetisation event for this pipeline. Once SpaceX "graduates" from the direct unlisted holdings, its valuation will be re-marked with the public market, delivering a one-off book-value uplift to NAV; at the same time, it validates that MNKS's private-investment exit path is workable.

The potential IPO candidate worth tracking next in the pipeline is ByteDance (1.6%). As one of the world's largest unicorns, a confirmed listing would have a comparable catalytic effect on the portfolio's NAV. In addition, Stripe (1.0%) and Epic Games (0.3%) also have medium-term listing potential. The existence of this "private pipeline" means MNKS's sources of performance extend beyond public-market beta, and its transmission mechanism into the IPO market deserves to be tracked as an independent indicator.

A Quantitative Read of the Performance Cycle: Still Generating Excess Returns Over the Decade

Figure 13's data reveal a clear time structure. Using the L&G Global Equity Index (which tracks the FTSE World Index) as the benchmark, NAV excess returns are:

Horizon	MNKS NAV	L&G Index	NAV excess	MNKS share price	Share price excess
1 year	19.4%	28.4%	-9.0pp	25.7%	-2.7pp
3 years	52.2%	64.8%	-12.6pp	65.0%	+0.2pp
5 years	22.9%	78.8%	-55.9pp	19.6%	-59.2pp
10 years	245.5%	240.3%	+5.2pp	283.6%	+43.3pp

Four key insights:

1. The 5-year period is the biggest area of underperformance: the -55.9pp shortfall comes almost entirely from two shocks — the violent growth/value rotation following the 2021 vaccine rally and the 2022 Russia-Ukraine war. But the peer average over the same period was only 35.9%; the growth style's overall lag was a systemic phenomenon, and MNKS's deviation is on the larger side within its style cohort.

2. The 1-year period is already catching up: NAV still trails the index by 9pp, but it leads the peer average by 5.2pp (19.4% vs 14.2%). The share price return (25.7%) has narrowed the gap even more markedly, indicating that market recognition of the portfolio's asset quality is recovering.

3. The 10-year horizon returns to positive excess returns: cumulative NAV excess is +5.2pp, and share price excess is as high as +43.3pp. This means that after every growth-stock crisis, MNKS's portfolio has been able to recover and surpass over the long term. But it must be acknowledged that the contrast between the 10-year and 5-year numbers also implies: if the AI rally continues to broaden, the speed of MNKS's recovery will depend heavily on the timing of profit realisation in its core holdings such as TSMC and NVIDIA.

4. The NAV/share price divergence: over the 10-year horizon, the share price return (283.6%) is well ahead of NAV (245.5%), with the expansion of the premium contributing additional returns. Particularly at the 1- and 3-year horizons, share price excess returns are significantly better than NAV excess returns, indicating that investor trust in MNKS is being rebuilt — the process of discount narrowing is itself a source of return.

Dual Fee Governance: A Rarely Seen Shareholder-Friendly Design

For its 5.8% position in Schiehallion, MNKS excludes that asset from the management-fee base. The practical significance: Schiehallion already charges its own management fee, and if MNKS were to charge a further layer on its market value, shareholders would be paying twice for the same asset. Baillie Gifford manages both funds, yet voluntarily forgoes one layer of the fee base — not a common practice among affiliated cross-holdings in the UK investment trust industry. This design both avoids any suggestion of conflict of interest and saves shareholders an estimated 0.3–0.4 basis points of implicit cost per year (by the 5.8% × 0.45% management-fee calculation, roughly 2.6bp of NAV per year) — a governance positive worth tracking.

Portfolio Liquidity Categorisation and Risk Buffer

MNKS's assets form a natural liquidity ladder:

Tier	Representative holdings	Liquidity characteristics	Combined weight
High-liquidity large caps	Alphabet, Amazon, Microsoft, Meta	Listed on major global exchanges, with large average daily volumes	~12%
Mid-liquidity growth stocks	TSMC, NVIDIA, Samsung	Good market depth, but exposure to process-node cycles/geopolitical risk	~14%
Low-liquidity listed fund	Schiehallion	Closed-ended fund with its own discount/premium fluctuations	5.8%
Direct unlisted holdings	ByteDance, Stripe, Epic Games, etc.	Exit dependent on IPO or acquisition	4.6%

In favourable conditions this design provides return enhancement (the lag in private valuations can create book-value discounts, with value released upon listing); in adverse conditions it provides room to manoeuvre — the high-liquidity positions can be adjusted at any time, while the private portion, due to its low valuation frequency, naturally dampens the portfolio's book-value volatility. Worth monitoring continuously is the movement of Schiehallion's own discount/premium: if it trades at a persistent discount, MNKS is in theory obtaining private exposure at a cheaper price; if it turns to a premium, it means market enthusiasm for the underlying assets is high and could lift MNKS's net asset value.

Three Key Watch Points Going Forward

Based on the above analysis, ongoing assessment of this trust should anchor on three dimensions:

1. The pace of private-pipeline monetisation: after SpaceX, the IPO windows for ByteDance and Stripe are the most important NAV catalysts

2. Position-adjustment signals in TSMC and NVIDIA: together they account for 11.2%; a significant reduction should be read as a leading signal that the managers believe AI valuations are too high

3. The linkage between the discount/premium and Schiehallion: the discount/premium trends of the two can cross-validate market attitudes toward the pricing of MNKS's private allocation; if Schiehallion trades at a discount while MNKS's discount narrows, it suggests investors are paying a premium for the dual private exposure — which could be either a signal of inflows or a warning of valuation overheating.

Differentiated Positioning in Peer Comparison

Looking at the NAV return data in Figure 14, MNKS ranks 4th over three years (52.2%) and 2nd over ten years (245.5%) — solid performance. But the five-year numbers are more striking: MNKS at only 22.9%, ranking 6th among the nine members, clearly behind both the peer average of 35.9% and SMT's 93.0%. This gap does not stem from investment skill, but from the fact that after the end of the post-vaccine rally, growth stocks went through a significant valuation contraction (de-rating). As a pure growth strategy trust, MNKS naturally took a bigger hit; meanwhile, the value-leaning Lindsell Train's five-year return of -11.9% confirms from the opposite side the violent rotation in style factors.

Metric (as at 30 June 2026)	MNKS	SMT	Peer average (ex-MNKS)
3-year cumulative NAV return (%)	52.2	93.0	41.8
5-year cumulative NAV return (%)	22.9	20.4	37.5
10-year cumulative NAV return (%)	245.5	525.0	238.8

SMT's ten-year return is far ahead, but the cost is a NAV return volatility of 25.68% — the highest among peers; MNKS's volatility is 17.32%, only slightly above the peer average of 15.87%, yet it achieved the second-highest ten-year return. This shows that MNKS, while maintaining a growth style, has effectively controlled tail risk through moderate diversification (notably more diversified in private-company holdings than SMT). SMT's concentrated holdings are magnified in bull markets, but can become a double-edged sword in volatile environments.

From Fees to Gearing: Balancing Efficiency and Aggression

Figure 15 shows MNKS's ongoing charges at 0.44% — the second lowest among the nine peers, ahead of only SMT's 0.33%, and below F&C (0.45%) and Alliance Witan (0.47%). Given that MNKS's market value (approximately £2.5bn) is only about half of Alliance Witan's, its fee advantage does not simply depend on scale effects; it more reflects the design of Baillie Gifford's management agreement.

The gearing level is worth attention: MNKS's net gearing is 5.3%, second only to Alliance Witan's 3.9% — which is actually lower (note: in the table, Alliance Witan's net gearing is 3.9% and AVI Global's 3.8%; however, per the ranking notes, MNKS's net gearing ranks 8th, i.e. second highest). This shows MNKS actively uses borrowing to enhance long-term returns, while still exercising restraint in the current rate environment (far below historically common levels). And the two peers that use no gearing (Lindsell Train and Mid Wynd) have performed relatively weakly in recent years, indirectly demonstrating the benefit of moderate gearing to a growth strategy.

Dividend: Symbolic Rather Than Functional

MNKS's dividend policy differs from what most investors expect of an investment trust. A final dividend of 0.9p corresponds to a yield of just 0.06% — the lowest among peers (ranked 9/9). This is no accident: MNKS's constitutional objective is capital growth, and the dividend exists solely to maintain the trust's tax status as an investment trust. But the revenue reserves are worth noting: as at 30 April 2026 they stood at £75.6m, or 48.04p per share, up approximately 24% from 38.69p the previous year. Even at the very low payout level, dividends have been covered by revenue surpluses for over a decade, meaning the trust has extremely high financial flexibility — in extreme market conditions, management could choose to raise the dividend to support the share price without affecting the portfolio.

Figure 16 shows that revenue return declined year after year from 4.7p in 2021 to 1.75p in 2026, while the dividend over the same period held at 0.5p and then rose to 0.9p. This divergence reflects the long-term drift of the portfolio toward low-dividend growth stocks, and underscores that MNKS's dividend policy serves entirely to maintain its trust status, not shareholder cash-flow needs.

Discount Repair: From Panic to Rational Normalisation

Figure 17 traces a clear path of discount evolution. Before the end of 2021, MNKS traded at a persistent premium; as the Fed turned hawkish and inflation expectations rose, growth stocks suffered a systemic sell-off and the discount widened to 14.7% in October 2023. Thereafter, the board stepped up buybacks, which — together with strong contributions from holdings such as SpaceX and Schiehallion — gradually narrowed the discount. As at 13 July 2026, the discount rate was 4.5%, below not only the five-year average of 8.5% but also clearly better than the peer-average discount of 8.4%.

The temporary widening caused by the "Liberation Day" tariff shock is worth noting — it shows external macro events can still move the discount over short horizons, but the discount-repair trend for MNKS was not reversed by it. Compared with peers, MNKS's discount has narrowed more substantially, due both to the realisation of performance in its underlying holdings (such as AI-related private companies) and to the market's renewed recognition of the investment value of growth stocks. That said, a 4.5% discount still offers investors a margin of safety — particularly given that the trust's NAV volatility is slightly above average; the discount can serve as compensation for volatility risk.

Fine-Grained Fee Structure Management

MNKS's management fee uses a tiered schedule: 0.45% on assets below £750m, 0.33% on the £750m–£1.75bn tranche, and 0.30% above £1.75bn. This structure makes the fee rate decline as assets grow, passing savings to shareholders. A key detail is that the holding in The Schiehallion Fund is excluded from the fee base — that fund is also managed by Baillie Gifford, and failing to exclude it would mean charging twice for the same asset. Such an arrangement is uncommon in the investment trust industry and reflects the manager's prudence in handling conflicts of interest.

The absence of a performance fee is also commendable. For a growth trust, a performance fee could incentivise managers to take excessive risk; MNKS instead uses a flat fee combined with a size-based ladder, aligning the manager's interests with asset growth rather than short-term excess returns. The six-month notice period for termination also gives the board a monitoring and constraint mechanism. Overall, MNKS's fee competitiveness ranks among the top of the nine peers (0.44% vs an average of 0.57%) — a particularly attractive level given that the investment remit covers private-market companies.

Fees and Cost Efficiency: Marginal Pressure Under Scale Effects

Metric	FY2024	FY2025	FY2026	Trend
General administrative expenses	—	£510k	£474k	↓ 7.1%
Custody fees	—	£347k	£330k	↓ 4.9%
Depositary fees	—	£260k	£250k	↓ 3.8%
Ongoing charges ratio	0.44%	0.43%	0.44%	Roughly flat

Looking at the fee composition, all three absolute expense items fell year on year, but the ongoing charges ratio (OCR) rose rather than fell — the core reason being that growth in average net assets did not fully offset the rigidity of fixed costs, a typical feature of periods when the NAV is at relatively low levels. Notably, the slight OCR increase in 2026 differs from the 2024 case: 2024 was mainly weighed down by a low NAV base, whereas in 2026 the absolute expense amounts were actually contracting, so the rise more likely reflects a slowdown in average net asset growth and a pause in the benefit from share-count expansion.

Peer comparison: the median OCR for global growth investment trusts is typically in the 0.5%–0.7% range; MNKS's 0.44% keeps it in the top quartile of the industry. The decline in the OCR from 0.56% to 0.44% over the past decade (a reduction of approximately 21%) rests on two engines: first, scale effects — net assets rose from approximately £1.8bn to approximately £3.3bn; second, the normalisation of issuance at a premium — multiple premium placings of new shares during 2017–2021 diluted fixed costs. But as the report notes, the 2021–2022 inflation shock pushed the trust to a discount, closed the issuance channel and interrupted the scale-effect chain. The current mid-single-digit discount implies that, to push the OCR down further, management would need to re-establish the ability to issue at a premium; otherwise the OCR will most likely fluctuate within a narrow 0.42%–0.46% range.

Debt Management in the Capital Structure: Low-Coupon Lock and Multi-Currency Exposure

MNKS's debt instruments display a clear "time-layered" character: the earlier sterling fixed-rate notes carry extremely low coupons (1.77%–1.86%) with very long maturities (to 2045/2054), locking in cheap capital for shareholders through the rate-hiking cycle; by contrast, the euro notes issued in the past decade carry significantly higher coupons (4.29%–4.55%), reflecting the financing-cost environment at the time of issuance. This layering leaves the weighted average interest rate at only about 3.4%, well below current market benchmark rates.

The risk point worth noting is currency mismatch: approximately 22% of debt is denominated in yen and euros (estimated at current exchange rates). Although these foreign-currency borrowings are not hedged with currency swaps, the trust's asset side is itself predominantly global equities, naturally embedding US dollar, euro and yen exposure — so the multi-currency structure on the debt side forms, to a degree, a natural hedge with the global income stream on the asset side. However, in the event of sharp regional exchange-rate moves, the sterling-converted value of yen and euro debt would directly disturb the gearing ratio: for example, yen depreciation would reduce the sterling-measured debt stock and passively pull net gearing down; the reverse would push it up. At 5.3%, current net gearing is far below the board's 10% strategic target, leaving ample headroom.

Two covenants in the debt agreements also merit attention: first, total borrowings are capped at 30% of adjusted NAV; second, minimum adjusted NAV must remain at £650m. The latter looks comfortable at the current NAV of approximately £3.3bn, but in an extreme drawdown (such as a 2020-style fall), it could become a hard constraint on refinancing capacity. In addition, the revolving credit facility (£100m, maturing November 2027) carries a floating rate of SONIA + 1.6%, which, given expectations of rate cuts, would further increase the downward flexibility of future interest costs.

Governance Details During the Board Transition

The current seven-member board is a typical orderly succession arrangement — two more than the usual five, with a clear purpose: to allow the two retiring directors (Richards, serving 9.8 years; Shadbolt, 9.4 years) to complete knowledge transfer during their tenure. This brings the average tenure down to 4.6 years, but excluding the two outgoing directors it is just 2.6 years, reflecting a board that will be very youthful after the transition.

Dimension	Data	Assessment
Average tenure (including retiring directors)	4.6 years	Within a reasonable range, but below the industry norm of 5–6 years
Average tenure (excluding retiring directors)	2.6 years	On the short side; governance continuity warrants attention
Average board shareholding as multiple of annual fee	1.7 years	Positive signal; aligned with shareholder interests
Director buy/sell activity over the past 12 months	Buys only, no sells	Reflects insider confidence
Board fee cap	£400k/year	Constrains the total under a seven-person board; room for increases once reduced to five

Both new directors (Ballance, serving 1.4 years; Curling, 0.8 years) have deep backgrounds in investment management or the investment trust sector, injecting an independent perspective complementary to Baillie Gifford's management style. The gender mix of 57/43 and ethnic diversity (14% Asian) are at the upper-middle level among UK investment trusts, and the explicit incorporation of diversity goals into succession planning matters more than the static ratios.

One fine detail: the prices at which two directors bought shares over the past 12 months (1,523.34p and 1,488.91p) are both below the current share price of 1,626p, implying paper gains of roughly 6%–9%. Though not large in size, voluntary additions by non-executive directors are often read as a vote of confidence in the discount-repair trajectory and the long-term strategy.

Extending the SWOT Strengths Section

The existing SWOT lists only the opening of the strengths — namely, "a clear, differentiated global growth mandate, explicitly prioritising capital appreciation over income". Drawing on the earlier information, this can be further supplemented:

• Strategy stability and deep resources: Baillie Gifford, as AIFM, has run its global growth strategy through dozens of complete market cycles, and portfolio management operates on a long-tenured team basis, so the strategy will not break apart if a single star manager leaves. This contrasts with some peers that depend on star fund managers.
• Fee competitiveness: an OCR of 0.44% is not only below most global trusts; it is also a direct expression of the "low-cost, long-termism" positioning of the Baillie Gifford brand — low cost makes the core compounding-growth strategy more attractive at the net-return level.
• Balance-sheet resilience: net gearing of 5.3% is well below the strategic target, and roughly 60% of debt is in long-dated fixed-rate notes, allowing the trust to maintain financial flexibility even with interest rates elevated and to add positions counter-cyclically during market panics.
• Distinctive shareholder base: approximately 46% of shares are held through platforms (such as Hargreaves Lansdown and Interactive Investor); such retail shareholders tend to be stickier, with lower turnover than institutional clients, providing a stable capital base for the long-term strategy.

The flip side of the strengths, however, is the exhaustion of further fee-rate reductions. If premium issuance cannot resume, scale effects are near their peak, and the board transition costs (seven directors rather than five) already put slight upward pressure on the fee ratio in FY2026. This is a thread that the "Weaknesses" section of the SWOT analysis will need to track closely in the next instalment.

Additional Analysis: Performance History, Discount Dynamics and the Competitive Landscape

1. Performance Evidence from the Downturn: Lessons from FY2023–FY2025

The report explicitly notes that MNKS experienced a significant drawdown between FY2023 and FY2025 — a key sample for understanding its risk characteristics. This period coincided with aggressive rate hikes by global central banks: the 10-year US Treasury yield climbed from roughly 1.5% in early 2022 to above 4% by mid-2023, putting broad pressure on long-duration growth stock valuations. MNKS's NAV underperformed the MSCI World index during this period, with the main drag coming from unprofitable technology companies and high-valuation growth stocks. This empirical evidence is more persuasive than theoretical reasoning — it quantifies the damage of the rate shock to the portfolio and explains why management is now more cautious in its use of gearing (in a -15% to +15% range). Notably, the report stresses that such drawdowns "should tend to reverse out over the longer term", implying Baillie Gifford sees them as the normal cost of style rotation rather than fundamental deterioration.

2. The Game-Theoretic Nature of the Discount: The Potential Path from Discount to Premium

The bull case and bear case discussions of the discount reveal a distinctive investment logic for MNKS: the discount is itself a thermometer of sentiment, not an anchor of value. The report notes that before inflation expectations and interest rates began to rise, MNKS traded at a premium. This implies that if its NAV continues to improve, combined with a return of the growth style, discount narrowing — or even a return to premium — would directly enhance shareholder returns, a mechanism akin to leverage. But the risk also exists: if performance slips again, or investors shift toward passive strategies, the discount could widen. The buyback tool in the board's hands is a cushion, but historically buybacks can only mitigate, not reverse, the trend. Compared with peers, Scottish Mortgage's discount swings more widely, while MNKS's discount tends to be more stable given its more diversified holdings, offering long-term holders a relatively more controllable exit window.

3. Cost Competition: The Tug of War Between Active Fees and Passive ETFs

Although MNKS enjoys the tiered management-fee advantage that scale brings, its ongoing charges remain significantly higher than those of mainstream global ETFs. The following is a rough comparison (estimated from public data):

Product type	Ongoing charges (annual)	Transaction costs	Active stock-selection capability
MNKS	approximately 0.4–0.5%	Included in the fee	Yes, relying on analyst judgment
Mainstream global ETF (e.g. MSCI World ETF)	0.05%–0.20%	Very low	None, fully passive
Active global equity funds	0.6%–1.0%	Included in the fee	Yes, but of varying quality

MNKS has a clear cost advantage among active trusts, and the absence of a performance fee is consistent with a long-term investment philosophy. But in a phase when large US technology stocks dominate the market, the low fees and perfect index replication of ETFs make it hard for active management to outperform — the report candidly acknowledges this challenge. This also reinforces the necessity of MNKS's differentiation: it must prove that its diversified growth style can create excess alpha over a full market cycle. If market breadth broadens (for example, if small/mid-cap growth stocks and private equity perform better), MNKS's diversified holdings would give it the opportunity to demonstrate active value.

4. The Double-Edged Nature of AI Risk and Hedging Strategies

Artificial Intelligence is both MNKS's largest source of excess returns today and its most concentrated valuation risk exposure. The report notes that the top 10 holdings include core AI supply-chain companies such as TSMC, NVIDIA and Alphabet, while private equity holdings include frontier model companies such as Anthropic. This layout amplifies returns during AI booms, but if earnings are falsified in a 2000-style episode, the de-rating of high-valuation technology stocks would hit the public and private portions simultaneously. Management is aware of this and is "actively broadening the portfolio's exposure beyond the narrow group of AI-related names". The substance of this move is to reduce beta dependence on the AI supply chain and instead build positions in non-correlated growth areas such as healthcare innovation, automation and emerging-market consumption. Investors should track changes in concentration in MNKS's quarterly disclosures to assess the actual progress of this risk mitigation.

5. The Hidden Risk of Management Succession and Style Trust

The bear case specifically mentions that "board and management succession also need to be handled well to maintain confidence". Baillie Gifford is a partnership, with investment long dominated by core fund managers. If MNKS, as one of the flagship trusts, were to experience a change of investment manager, it could shake investor trust in its style discipline. Historical cases of active funds suffering heavy redemptions after a key figure leaves are not uncommon. Although MNKS relies on team-based research rather than an individual star, market identification with its growth style remains strongly tied to Baillie Gifford's brand reputation. This risk is not the current focus, but it constitutes a potential negative overhang for long-term investment decisions.

6. Structural Conclusion: Which Investors Is It Suitable For?

Synthesising this section's content, MNKS's positioning is very clear: it suits long-term capital that subscribes to the growth-investment logic, can tolerate cyclical volatility, needs no cash flow, and is psychologically prepared for discount fluctuation. Compared with Scottish Mortgage, MNKS trades some sharpness for diversification; compared with passive ETFs, it trades higher fees for alpha potential and private-equity exposure. It should be noted, however, that the Morningstar style box places it in the large-cap growth category, so in value-favourable years (such as 2022–2023) it will inevitably lag. Investors should treat it as a satellite rather than a core position in asset allocation, or as the sole growth allocation within the core — while accepting that it may continue to lag during rate-hiking cycles.

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以上补充基于对后续段落的深度挖掘，重点提炼了业绩实证、折扣机会、成本竞争、AI风险管理及继任风险五个新维度，与先前分析形成互补。

Concluding Addendum

The role of this closing paragraph in the overall Introduction is an "institutional endorsement." Its purpose is not to attract readers but to clearly delineate legal boundaries, allowing readers to use the information under informed consent. On balance, Marten & Co's statement meets industry standards but does not exceed the rigor of top-tier sell-side houses—for example, it lacks liability transfer clauses covering third-party data providers (Bloomberg, Refinitiv, etc.). As this is Part 7/7, one final data point can be raised that has been insufficiently emphasized: the company associated with registration number 07981621 was incorporated (via Companies House) in April 2012, which indicates that Marten & Co has been operating for over ten years—a moderate level of maturity among independent research institutions. Its continued survival itself attests to the commercial effectiveness of this legal disclaimer framework.