REG - Scot.Mort Inv Tst - Scottish Mortgage Inv Trust Half-year Report
11/11/2022 07:16
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RNS Number : 0636G Scottish Mortgage Inv Tst PLC 11 November 2022
RNS Announcement
Scottish Mortgage Investment Trust PLC
Legal Entity Identifier: 213800G37DCS3Q9IJM38
Results for the six months to 30 September 2022
The following is the unaudited Interim Financial Report for the six months to
30 September 2022 which was approved by the Board on 10 November 2022.
Interim Management Report
Scottish Mortgage's long-term capital appreciation has come from financing and
patiently supporting the development of growth companies. The trust was
founded to provide capital to businesses with big opportunities but restricted
access to funding following the market panic of 1907. It is important at times
of stress to remember this founding story: corporate potential has little to
do with the cycles of greed and fear in stock markets.
Long-term growth investing is crucial for driving society forward. After a
long period of global expansion, it's easy to slip into the mindset that
investors passively benefit from broader progress and economic growth. We
believe causality flows in the other direction: long-term investment enables
growth and progress. Technology and new ways of doing things aren't adopted
simply because their time has come. They happen because investors give
entrepreneurs the financing and time to build their visions into reality.
Without investment in technology, infrastructure and entrepreneurship, it will
be tough to dig ourselves out of our current malaise. If so little of
aggregate savings are directed into ventures exploring new technologies and
approaches, what does it imply for the future? We risk condemning ourselves to
the environment of anaemic growth and stagnant wages that has characterised
the United Kingdom over the past decade.
Financing the development of long-term growth companies is not what interests
most investors. To understand that, you need only observe the commentary of
recent months, focused on 'risk off', deleveraging and the flight to safety.
The market's focus has narrowed to a handful of economic variables. Stock
prices react dramatically to each monthly update. This environment is
off-putting, but it is not relevant to our investment decision-making.
Instead, we must evaluate the ongoing position of our holdings, unpicking the
growth engines of recent years and verifying that they're still functioning.
At the same time, we are redoubling our efforts to find new investments that
can adapt to difficult economic conditions and position themselves to do well
in the future.
Returns
Over ten years, Scottish Mortgage's net asset value per share with debt at
fair value (NAV) has increased by 528% versus a 208% increase in the FTSE
All-World index (both in total return terms). Over five years, it has
increased by 115% against 53%. Six months of data is always too short a period
to infer much that is useful from stock prices. However, since the end of
March, our NAV has decreased by 15% compared to a 7% decrease in the index.
Although our focus remains on long-term capital appreciation, we are aware
that a small but consistent dividend is of value to many shareholders. The
Board is therefore recommending an interim dividend of 1.60p per share, an
increase of 5% over last year's payment of 1.52p. We do not believe that this
increase will have any bearing on our investment decisions or unduly constrain
future capital appreciation.
Portfolio
Moderna, the mRNA therapeutics company, remains our largest holding. It
continues to make progress in its infectious disease portfolio with the
bivalent booster for Covid but one practical example. It was particularly
encouraging to see pharmaceutical company Merck paying Moderna $250m to
jointly develop and commercialise a personalised cancer vaccine to treat
melanoma. Our contention has always been that Moderna's technology would have
applications well beyond Covid, and commercial partners are now committing
serious capital to such developments.
Despite the economic headwinds, Tesla has been able to sell every car it can
manufacture and continues to scale up its production capabilities rapidly. Its
execution in a challenging operating environment has been impressive, as has
its ability to control costs whilst growing sales. The Model Y SUV is the
crucial volume driver over the next few years, with production ramping in
Berlin and Texas. Scaling the battery cells supply chain remains the most
significant constraint.
We made a further investment into Northvolt during the period and it is now
one of our largest positions. This private European battery producer is
looking increasingly well-placed to supply the rapidly growing demand for
electric vehicles. We also supported capital raisings from two nascent private
companies with ambitious plans to reduce the world's carbon footprint. Swiss
company Climeworks is developing a technology for capturing carbon directly
from the air, which is likely to be necessary given the finite capacity for
re-forestation. Its challenge is to scale up its impact. Upside Foods is
seeking to produce animal protein in bioreactors which will allow for meat
production without the carbon emissions from rearing and slaughtering animals.
It is working with regulators towards product launches.
We have reduced several Chinese holdings, including long-standing investments
in Alibaba and Tencent. The regulatory environment in China remains
challenging, and we are concerned that ongoing uncertainty will harm the
risk-tolerant culture that has driven the long-term success of China's private
sector.
Outlook
Powerful forces of change are creating significant opportunities. These
include society's transition away from carbon-fuelled transport and energy
generation and the application of information technology to our understanding
of the molecular basis of disease. While rising interest rates and increasing
friction between the United States and China create a problematic environment
to navigate, the long-term advantages of companies are often built in periods
of stress and capital shortage.
The principal risks and uncertainties facing the Company are set out at the
end of this document.
10 November 2022
For a definition of terms see Glossary of Terms and Alternative Performance
Measures at the end of this document
Total return information sourced from Refinitiv/StatPro/Baillie Gifford.
See disclaimer at end of this document.
Past performance is not a guide to future performance.
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 and Transparency Rule 4.2.7R (indication of important
events during the first six months, their impact on the condensed set of
Financial Statements and a description of the 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 and Transparency Rule 4.2.8R (disclosure of related
party transactions and changes therein).
By order of the Board
Fiona McBain
Chair
10 November 2022
Income Statement (unaudited)
For the six months ended For the six months ended
30 September 2022 30 September 2021
Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
(Losses)/gains on investments - (2,368,395) (2,368,395) - 2,721,589 2,721,589
Currency losses - (176,320) (176,320) - (15,778) (15,778)
Income from investments and interest receivable 25,904 - 25,904 13,640 - 13,640
Investment management fee (note 3) - (18,557) (18,557) - (27,179) (27,179)
Other administrative expenses (3,135) - (3,135) (3,644) - (3,644)
Net return before finance costs and taxation 22,769 (2,563,272) (2,540,503) 9,996 2,678,632 2,688,628
Finance costs of borrowings - (32,405) (32,405) - (19,526) (19,526)
Net return on ordinary activities before taxation 22,769 (2,595,677) (2,572,908) 9,996 2,659,106 2,669,102
Tax on ordinary activities (2,050) (471) (2,521) (1,281) (4,905) (6,186)
Net return on ordinary activities after taxation 20,719 (2,596,148) (2,575,429) 8,715 2,654,201 2,662,916
Net return per ordinary share (note 4) 1.44p (180.36p) (178.92p) 0.62p 187.38p 188.00p
Dividends proposed per ordinary share (note 5) 1.60p 1.52p
The accompanying notes on the following pages are an integral part of the
Financial Statements.
The total column of this statement is the profit and loss account of the
Company. The supplementary revenue and capital return columns are prepared
under guidance published by the Association of Investment Companies.
All revenue and capital items in this statement derive from continuing
operations.
A Statement of Comprehensive Income is not required as all gains and losses of
the Company have been reflected in the above statement.
Balance Sheet (unaudited)
Notes At 30 September At 30 September At 31 March 2022 At 31 March 2022
2022 2022 (audited) (audited)
£'000 £'000 £'000 £'000
Fixed assets
Investments held at fair value through profit or loss 6 14,003,641 16,669,469
Current assets
Debtors 2,948 13,142
Cash and cash equivalents 230,387 229,962
233,335 243,104
Creditors
Amounts falling due within one year:
Bank loans 7 (403,117) (502,032)
Buybacks outstanding and related stamp duty (11,579) -
Other creditors and accruals (23,080) (23,814)
(437,776) (525,846)
Net current liabilities (204,441) (282,742)
Total assets less current liabilities 13,799,200 16,386,727
Creditors
Amounts falling due after more than one year:
Bank loans 7 (609,074) (516,384)
Loan notes 7 (1,041,561) (985,613)
Debenture stocks 7 (127,388) (127,559)
Provision for deferred tax liability (1,642) (1,172)
(1,779,665) (1,630,728)
Net assets 12,019,535 14,755,999
Capital and reserves
Share capital 74,239 74,239
Share premium account 928,400 928,400
Capital redemption reserve 19,094 19,094
Capital reserve 10,977,083 13,717,685
Revenue reserve 20,719 16,581
Shareholders' funds 12,019,535 14,755,999
Net asset value per ordinary share
(after deducting borrowings at book)* 841.7p 1,021.8p
Ordinary shares in issue 9 1,428,019,945 1,444,131,650
* See Glossary of Terms and Alternative Performance Measures at the
end of this announcement.
The accompanying notes on the following pages are an integral part of the
Financial Statements
Statement of Changes in Equity (unaudited)
For the six months ended 30 September 2022
Notes Called up share Share Capital Capital Revenue Shareholders'
capital premium redemption reserve * reserve funds
£'000 account reserve £'000 £'000 £'000
£'000 £'000
Shareholders' funds at 1 April 2022 74,239 928,400 19,094 13,717,685 16,581 14,755,999
Net return on ordinary activities - - - (2,596,148) 20,719 (2,575,429)
after taxation
Shares bought back 9 - - - (131,171) - (131,171)
Dividends paid during the period 5 - - - (13,283) (16,581) (29,864)
Shareholders' funds at 30 September 2022 74,239 928,400 19,094 10,977,083 20,719 12,019,535
For the six months ended 30 September 2021
Notes Called up share Share Capital Capital Revenue Shareholders'
capital premium redemption reserve * reserve funds
£'000 account reserve £'000 £'000 £'000
£'000 £'000
Shareholders' funds at 1 April 2021 74,239 781,771 19,094 16,105,297 9,069 16,989,470
Net return on ordinary activities - - - 2,654,201 8,715 2,662,916
after taxation
Shares bought back 9 - - - (137,732) - (137,732)
Shares sold from treasury 9 - 3,175 - 9,038 - 12,213
Dividends paid during the period 5 - - - (18,915) (9,069) (27,984)
Shareholders' funds at 30 September 2021 74,239 784,946 19,094 18,611,889 8,715 19,498,883
* The Capital Reserve balance at 30 September 2022 includes
investment holding gains on fixed asset investments of £3,838,304,000 (30
September 2021 - gains of £12,122,474,000).
The accompanying notes on the following pages are an integral part of the
Financial Statements
Cash Flow Statement (unaudited)
For the six months ended 30 September
Notes 2022 2021
£'000 £'000
Cash flows from operating activities
Net return on ordinary activities before taxation (2,572,908) 2,669,102
Losses/(gains) on investments 2,368,395 (2,721,589)
Currency losses 176,320 15,778
Finance costs of borrowings 32,405 19,526
Overseas capital gains tax incurred - (3,335)
Overseas withholding tax incurred (2,286) (1,281)
Changes in debtors and creditors 2,964 1,657
Cash from operations 4,890 (20,142)
Interest paid (31,937) (18,518)
Net cash outflow from operating activities (27,047) (38,660)
Net cash inflow/(outflow) from investing activities 348,800 (172,338)
Equity dividends paid 5 (29,864) (27,984)
Shares bought back into treasury and stamp duty thereon (119,592) (163,149)
Shares sold from treasury - -
Bank loans repaid (1,026,906) -
Bank loans drawn down and loan notes issued 7 855,034 386,090
Net cash (outflow)/inflow from financing activities (321,328) 194,957
Increase/(decrease) in cash and cash equivalents 425 (16,041)
Exchange movements - 2,748
Cash and cash equivalents at start of period 229,962 212,128
Cash and cash equivalents at end of period* 230,387 198,835
* Cash and cash equivalents represent cash at bank and short term
money market deposits repayable on demand.
The accompanying notes are an integral part of the Financial Statements.
Holding Period of Investments as at 30 September 2022 (unaudited)
More than 5 years 2-5 years Less than 2 years
Name % of total assets Name % of total assets Name % of total assets
Tesla Inc 6.8 Northvolt AB U 3.6 Moderna 6.9
ASML 5.2 Space Exploration 3.2 Adyen 1.3
Technologies U
Illumina10 4.2 Blockchain.com U 0.8
Meituan (p) 3.4 MercadoLibre 2.9 Solugen Inc U 0.7
Amazon.com10 2.9 ByteDance Ltd U 2.5 Redwood Materials Inc U 0.7
Tencent Holdings10 2.8 NIO Inc p 2.2 Roblox 0.5
Kering10 2.4 Tempus Labs Inc U 2.0 ChargePoint Holdings Inc 0.5
The Brandtech Group U 2.0 Stripe Inc U 1.9 Blockstream Corporation Inc U 0.5
Ginkgo BioWorks Inc p 1.8 Pinduoduo Inc 1.8 Databricks Inc U 0.5
Wise Plc p 1.7 Snowflake Inc p 1.4 Rappi Inc U 0.5
Delivery Hero 1.6 Epic Games Inc U 1.3 Nuro Inc U 0.5
Ferrari 1.6 Zipline International Inc U 1.1 GoPuff Inc U 0.4
NVIDIA 1.4 Ant International Ltd U 1.0 Salt Pay Co Ltd U 0.4
Denali Therapeutics p 1.2 Recursion 0.8 Honor Technology Inc U 0.4
Pharmaceuticals Inc p
Netflix 1.1 Relativity Space Inc U 0.4
Alibaba Group p 10 0.9 The Production Board U 0.7 Horizon Robotics U 0.4
Spotify Technology SA p 0.8 Carbon Inc U 0.6 Climeworks AG U 0.3
Housing Development 0.8 Jiangxiaobai Holdings Ltd U 0.5 Capsule Corp U 0.3
Finance Corporation10
Affirm Holdings Inc p 0.5 10x Genomics 0.3
Zalando 0.7 Zoom 0.5 Workrise Technologies Inc U 0.3
HelloFresh p 0.7 Ocado 0.5 Cloudflare 0.3
Indigo Agriculture Inc U 0.5 Shopify 0.4 DoorDash 0.3
Atlas Copco10 0.5 Tanium Inc U 0.4 PsiQuantum U 0.1
Vir Biotechnology Inc p 0.5 Bolt Threads Inc U 0.4 Upside Foods Inc U 0.1
Kinnevik 0.4 JRSK Inc (Away) U 0.4 Clear Secure Inc 0.1
Essence Healthcare U 0.4 Convoy Inc U 0.3 Clover Health Investments p 0.1
Thumbtack Inc U 0.3 Uptake Technologies Inc U 0.3 ARCH Ventures Fund XI U <0.1
Warby Parker Inc p 0.3 Aurora Innovation Inc p 0.3 ARCH Ventures Fund XII U <0.1
Zocdoc Inc U 0.2 Wayfair 0.3 Antler East Africa Fund I LP U <0.1
Sinovation Fund III U 0.1 Lilium NV p 0.3 Beam Therapeutics <0.1
ARCH Ventures Fund IX U 0.1 Heartflow Inc U 0.3
WI Harper Fund VIII U 0.1 KSQ Therapeutics U 0.2
Udacity Inc U 0.1 Sana Biotechnology Inc p 0.2
Innovation Works 0.1 Joby Aviation Inc p 0.2
Development Fund U 10
Carvana 0.1
WI Harper Fund VII U 10 0.1 ARCH Ventures Fund X 0.1
Overage U
Global AI Opportunities <0.1
Fund 10
ARCH Ventures Fund X U 0.1
Rubius Therapeutics Inc p <0.1 Zymergen Inc p <0.1
Intarcia Therapeutics U -
Total 47.7 Total 33.3 Total 17.6
(U ) (Denotes unlisted (private company) security.)
(p ) (Denotes listed security previously held in the
portfolio as an unlisted (private company) security)(.)
(10)( ) (Denotes security held for more than 10 years.)
(Net liquid assets represent 1.4% of total assets. See Glossary of Terms and
Alternative Performance Measures at the end of this announcement)
( )
( )
( )
List of Investments at 30 September 2022 (unaudited)
Name Business Fair value % Contribution Notes† Fair value
of total
30 September 2022
to absolute performance* 31 March 2022
assets
£'000 % £'000
Moderna Clinical stage biotechnology 974,886 6.9 (1.1) 1,204,059
company
Tesla Inc Electric cars, autonomous 971,935 6.8 (1.1) 1,115,783
driving and solar energy
ASML Lithography 735,111 5.2 (1.9) 1,080,697
Illumina Biotechnology equipment 577,118 4.1 (3.0) 1,078,156
Northvolt AB Battery developer and 273,451 1.9 0.3 232,425
Series E1 Pref. (U) manufacturer, specialised in
lithium-ion technology for
electric vehicles
Northvolt AB Battery developer and 142,647 1.0 0.2 119,977
Series E2 Pref. (U) manufacturer, specialised in
lithium-ion technology for
electric vehicles
Northvolt AB Battery developer and 78,832 0.5 - New purchase -
Promissory Note (U) manufacturer, specialised in
lithium-ion technology for
electric vehicles
Northvolt AB Battery developer and 30,660 0.2 - 26,060
Series A Ord. (U) manufacturer, specialised in
lithium-ion technology for
electric vehicles
Northvolt AB Battery developer and 995 - - 845
Series D1 Pref. (U) manufacturer, specialised in
lithium-ion technology for
electric vehicles
526,585 3.6 0.5 379,307
Meituan(p) Local services aggregator 488,205 3.4 0.8 389,841
Space Exploration Designs, manufactures and launches rockets and spacecraft 202,281 1.4 0.4 144,901
Technologies
Series J Pref. (U)
Space Exploration Designs, manufactures and 162,575 1.1 0.4 116,458
Technologies launches rockets and
Series N Pref. (U) spacecraft
Space Exploration Designs, manufactures and 79,306 0.5 0.2 56,810
Technologies launches rockets and
Class A spacecraft
Common (U)
Space Exploration Designs, manufactures and 24,461 0.2 0.1 17,523
Technologies launches rockets and
Class C spacecraft
Common (U)
468,623 3.2 1.1 335,692
MercadoLibre Latin American e-commerce 418,298 2.9 (0.5) Significant 333,435
addition
platform
Amazon.com Online retailer and cloud 409,676 2.9 (0.6) 500,852
computing
Tencent Holdings Internet services 395,527 2.8 (0.8) Significant reduction 708,821
ByteDance Ltd Social media 189,407 1.3 0.2 165,590
Series E Pref. (U)
ByteDance Ltd Social media 170,396 1.2 0.2 148,970
Series E-1 Pref. (U)
359,803 2.5 0.4 314,560
Kering Luxury goods producer and 338,969 2.4 (0.4) 409,853
retailer
NIO Inc(p) Designs and manufactures 317,065 2.2 (0.1) 359,220
electric and autonomous
vehicles
The Brandtech Group Class A-3 (U) Digital advertising 214,538 1.5 (0.1) 240,053
The Brandtech Group Class A-1 (U) Digital advertising 73,026 0.5 (0.2) 81,711
287,564 2.0 (0.3) 321,764
Tempus Labs Inc Offers molecular diagnostics 133,217 0.9 0.1 114,805
Series E Pref. (U)
tests for cancer and
aggregates clinical oncology
records
Tempus Labs Inc Offers molecular diagnostics 48,627 0.4 - 41,906
Series F Pref. (U) tests for cancer and
aggregates clinical oncology
records
Tempus Labs Inc Offers molecular diagnostics 44,004 0.3 - New purchase -
Series G-3 Pref. (U) tests for cancer and
aggregates clinical oncology
records
Tempus Labs Inc Offers molecular diagnostics 41,221 0.3 - 35,187
Series G-2 Pref. (U) tests for cancer and
aggregates clinical oncology
records
Tempus Labs Inc Offers molecular diagnostics 7,848 0.1 - 6,763
Series G Pref. (U) tests for cancer and
aggregates clinical oncology
records
274,917 2.0 0.1 198,661
Stripe Inc Series Online payment platform 178,763 1.3 - 166,921
G Pref. (U)
Stripe Inc Class B Online payment platform 62,937 0.4 - 58,768
Common (U)
Stripe Inc Series Online payment platform 26,678 0.2 - 24,487
H Pref. (U)
268,378 1.9 - 250,176
Pinduoduo Inc Chinese e-commerce 261,463 1.8 1.0 142,114
Ginkgo BioWorks Bio-engineering company 253,779 1.8 (0.1) 277,228
Inc (p)
Wise Plc (p) Online platform to send and 245,042 1.7 0.5 183,614
receive money
Delivery Hero Online food delivery service 231,231 1.6 0.1 231,834
Ferrari Luxury automobiles 228,722 1.6 - 228,349
NVIDIA Visual computing 195,357 1.4 (1.6) Significant reduction 582,378
Snowflake Inc(p) Developer of a SaaS-based 192,587 1.4 (0.1) Significant 163,321
addition
cloud data warehousing
platform
Adyen Global payment company 191,335 1.3 (0.4) 223,895
Epic Games Inc (U) Gaming platform 186,870 1.3 0.3 144,064
Denali Biotechnology 169,181 1.2 0.2 150,121
Therapeutics(p)
Netflix Subscription service for TV shows and movies 161,031 1.1 (0.4) 264,214
Zipline Logistics company that 56,172 0.4 - 58,508
International Inc designs, manufactures and
Series D Pref. (U) operates drones to deliver
medical supplies
Zipline Logistics company that 48,330 0.4 - 44,887
International Inc designs, manufactures and
Series E Pref. (U) operates drones to deliver
medical supplies
Zipline Logistics company that 47,969 0.3 - 49,964
International Inc designs, manufactures and
Series C Pref. (U) operates drones to deliver
medical supplies
152,471 1.1 - 153,359
Ant International Online financial services 136,322 1.0 - 136,502
Ltd Class C Ord. (U) platform
Alibaba Group(p) Online retailing and financial 135,032 0.9 (0.4) Significant reduction 419,268
services
Recursion Uses image 132,756 0.8 0.5 75,850
Pharmaceuticals recognition/machine learning
Inc(p) and automation to improve
drug discovery
Spotify Online music streaming 127,851 0.8 (0.4) 189,643
Technology SA(p) service
Blockchain.com Software platform for digital 51,988 0.4 (1.1) 182,169
Series C-1 Pref. (U) assets
Blockchain.com Software platform for digital 51,056 0.4 (0.2) 75,950
Series D Pref. (U) assets
Blockchain.com Software platform for digital 4,479 - - New purchase -
Inc Promissory assets
note (U)
107,523 0.8 (1.3) 258,119
Housing Indian mortgage provider 106,950 0.8 0.1 101,717
Development
Finance
Corporation
Zalando International online clothing 99,729 0.7 (0.9) 220,640
retailer
Solugen Inc Solugen exists to scale 98,185 0.7 0.2 67,922
Series C-1 Pref. (U) synthetic biology and bring
green chemicals to the world
HelloFresh(p) Grocery retailer 89,238 0.7 (0.5) 161,987
Redwood Environmental battery 85,550 0.7 0.1 74,535
Materials Inc recycling
Series C Pref. (U)
The Production Holding company for food 50,882 0.4 (0.2) 77,166
Board Series A-2 technology companies
Pref. (U)
The Production Holding company for food 34,593 0.3 - 28,266
Board Series A-3 technology companies
Pref. (U)
85,475 0.7 (0.2) 105,432
Carbon Inc Manufactures and develops 49,627 0.4 - 49,205
Series D Pref. (U) 3D printers
Carbon Inc Manufactures and develops 31,046 0.2 - 30,782
Series E Pref. (U) 3D printers
80,673 0.6 - 79,987
Indigo Agriculture Analyses plant microbiomes 28,569 0.2 - 25,049
Inc Series D to increase crop yields
Pref. (U)
Indigo Agriculture Analyses plant microbiomes 19,912 0.1 - 14,670
to increase crop yields
Inc Series E
Pref. (U)
Indigo Agriculture Analyses plant microbiomes 18,942 0.1 - 14,776
to increase crop yields
Inc Series F
Pref. (U)
Indigo Agriculture Analyses plant microbiomes 11,689 0.1 - 9,447
to increase crop yields
Inc Series G
Pref. (U)
Indigo Agriculture Analyses plant microbiomes 1,047 - - 2,221
Inc Common (U) to increase crop yields
80,159 0.5 - 66,163
Roblox Human co-experience 79,871 0.5 (0.1) New purchase -
platform enabling shared
experiences among users
Jiangxiaobai Producer of alcoholic 75,305 0.5 0.1 55,950
Holdings Ltd beverages
Series C Pref. (U)
ChargePoint Electric vehicle charging 76,055 0.5 - Significant 69,111
addition
Holdings Inc solutions
Atlas Copco Engineering 73,141 0.5 - 86,205
Affirm Holdings Online platform which 68,947 0.5 (0.5) 144,207
Inc Class A(p) provides lending and
consumer credit services
Zoom Remote conferencing service 67,691 0.5 (0.1) 91,537
provider
Blockstream Financial software developer 66,713 0.5 (0.1) 71,135
Corporation Inc
Series B-1 Pref. (U)
Ocado Online grocery retailer and 66,289 0.5 (0.6) Significant 102,395
technology provider addition
Databricks Inc Data software solutions 66,222 0.5 - 58,997
Series H Pref. (U)
Vir Biotechnology Biotechnology company 65,664 0.5 - 73,365
Inc(p) developing anti-infective
therapies
Rappi Inc Series F Provider of an on-demand 64,951 0.5 - 58,899
Pref. (U) delivery platform designed to
connect consumers with
local stores
Nuro Inc Series C Delivery business, using self- 39,217 0.3 (0.1) 55,561
Pref. (U) driving purpose-built electric
vehicles
Nuro Inc Series D Delivery business, using self- 25,693 0.2 - 28,433
Pref. (U) driving purpose-built electric
vehicles
64,910 0.5 (0.1) 83,994
Shopify Cloud-based commerce 62,916 0.4 (0.5) 133,802
platform provider
GoPuff Inc On demand retail delivery 61,948 0.4 - 55,476
(GoBrands) service
Series G Pref. (U)
Salt Pay Co Ltd Payment and management 53,520 0.4 (0.1) 60,434
Non-Voting solutions
Ordinary
Shares (U)
Salt Pay Co Ltd Payment and management 1 - - 1
Voting Ordinary solutions
Shares (U)
53,521 0.4 (0.1) 60,435
Honor Provider of home-care 31,498 0.3 (0.1) 37,375
Technology Inc services
Series D Pref. (U)
Honor Provider of home-care 21,989 0.1 - 24,766
Technology Inc services
Series E Pref. (U)
53,487 0.4 (0.1) 62,141
Tanium Inc Class Provides security and systems 53,227 0.4 (0.4) 104,374
B Common (U) management solutions
Relativity Space Aerospace company, designs 32,902 0.3 - 44,217
Inc Series D and builds rockets using 3D
Pref. (U) printers
Relativity Space Aerospace company, designs 19,666 0.1 (0.1) 21,583
Inc Series E and builds rockets using 3D
Pref. (U) printers
52,568 0.4 (0.1) 65,800
Bolt Threads Inc Natural fibres and fabrics 27,621 0.2 - 25,308
Series D Pref. (U) manufacturer
Bolt Threads Inc Natural fibres and fabrics 23,860 0.2 - 21,696
Series E Pref. (U) manufacturer
51,481 0.4 - 47,004
Kinnevik Investment company 50,675 0.4 (0.2) 85,605
Horizon Robotics Designer and developer of AI 49,819 0.4 - 44,187
Series C Pref. (U) chips and algorithms
principally for advanced
driving assistance systems
and autonomous vehicles
Essence Cloud-based health provider 49,569 0.4 0.1 38,304
Healthcare
Series 3 Pref. (U)
JRSK Inc (Away) Manufactures luggage 20,085 0.1 - 17,355
Series D Pref. (U)
JRSK Inc (Away) Manufactures luggage 10,830 0.1 - 9,651
Series Seed
Pref. (U)
JRSK Inc (Away) Manufactures luggage 8,653 0.1 - 8,034
Convertible
Promissory
Note (U)
JRSK Inc (Away) Manufactures luggage 8,653 0.1 - 8,034
Convertible
Promissory Note
2021 (U )
48,221 0.4 - 43,074
Thumbtack Inc Online directory service for 28,948 0.2 - 33,513
Series G Pref. (U) local businesses
Thumbtack Inc Online directory service for 11,022 0.1 - 11,741
Series I Pref. (U) local businesses
Thumbtack Inc Online directory service for local businesses 5,790 - - 6,703
Series H Pref. (U)
Thumbtack Inc Online directory service for 871 - - 3,023
Class A local businesses
Common (U)
Thumbtack Inc Online directory service for 514 - - 1,783
Series A Pref. (U) local businesses
Thumbtack Inc Online directory service for 150 - - 521
Series C Pref. (U) local businesses
Thumbtack Inc Online directory service for 35 - - 121
Series B Pref. (U) local businesses
47,330 0.3 - 57,405
Climeworks AG Renewable energy equipment 46,925 0.3 - New purchase -
Series F
Preferred (U)
Climeworks AG Renewable energy equipment 358 - - New purchase -
Non Voting
Shares (U)
47,283 0.3 - -
Capsule Corp Digital platform providing 46,779 0.3 - 47,719
Series D Pref. (U) home delivery of prescription
medication
10x Genomics A life science and diagnostics 45,611 0.3 (0.4) 103,343
company
Convoy Inc Marketplace for truckers and 28,978 0.2 - 27,763
Series D Pref. (U) shippers
Convoy Inc Marketplace for truckers and 16,909 0.1 - 15,190
Series E Pref. (U) shippers
45,887 0.3 - 42,953
Uptake Designs and develops 24,870 0.2 - 22,785
Technologies Inc enterprise software
Promissory
Note (U)
Uptake Designs and develops 20,435 0.1 (0.2) 41,545
Technologies Inc enterprise software
Series D Pref. (U)
45,305 0.3 (0.2) 64,330
Workrise Online platform connecting 45,165 0.3 (0.1) 51,918
Technologies Inc contractors with work
Series E Pref. (U)
Warby Parker Inc(p) Online and physical glasses 45,092 0.3 (0.4) 96,854
retailer
Cloudflare Application software 43,023 0.3 - New purchase -
developer
DoorDash Provides restaurant food 40,849 0.3 (0.3) 81,972
delivery services
Aurora Innovation Developer of driverless vehicle 40,349 0.3 (0.4) 86,922
Inc Common(p) technology
Wayfair Online household goods 38,716 0.3 (0.5) 111,760
retailer
Lilium NV(p) On demand air transportation 36,309 0.3 (0.1) 53,503
Heartflow Inc Develops software for 33,066 0.3 (0.1) 41,525
Series E Pref. (U) cardiovascular disease
diagnosis and treatment
KSQ Therapeutics Biotechnology company 22,792 0.1 - 19,996
Inc Series C
Pref. (U)
KSQ Therapeutics Biotechnology company 8,476 0.1 - 7,303
Inc Series D
Pref. (U)
31,268 0.2 - 27,299
Sana Biotechnology company 29,976 0.2 - 35,003
Biotechnology creating and delivering
Inc(p) engineered cells as medicine
Zocdoc Inc Online platform for searching 29,630 0.2 0.1 22,321
Series D-2 Pref. (U) for doctors and booking
appointments
Joby Aviation Inc(p) Electric aircraft 29,391 0.2 - 38,040
PsiQuantum Operates as a biotechnology 21,084 0.1 - 18,988
Series D Pref. (U) company
Upside Foods Inc Cultivated meat producer 20,602 0.1 - New purchase -
Series C-1 Pref. (U)
Clear Secure Inc Biometric security firm 20,478 0.1 - 20,393
Carvana Online platform for buying 18,343 0.1 (0.5) 83,168
used cars
Sinovation Fund Venture capital fund 13,692 0.1 - 10,145
III (U)
ARCH Ventures Venture capital fund to invest 13,655 0.1 - 16,579
Fund IX (U) in biotech start-ups
Illumina CVR Biotechnology equipment 13,524 0.1 - -
WI Harper Fund Venture capital fund 12,134 0.1 - 9,757
VIII (U)
Clover Health Healthcare insurance provider 7,785 0.1 - -
Investments B
Common (p)
Clover Health Investments A Common(p) Healthcare insurance provider 4,005 - (0.1) 20,938
11,790 0.1 20,938
Udacity Inc Online education 10,572 0.1 - 8,269
Series D Pref. (U)
Innovation Works Venture capital fund 10,431 0.1 - 16,201
Development
Fund (U)
ARCH Ventures Venture capital fund to invest 8,706 0.1 - 6,840
Fund X in biotech start-ups
Overage (U)
ARCH Ventures Venture capital fund to invest 8,412 0.1 - 6,331
Fund X (U) in biotech start-ups
WI Harper Fund Venture capital fund 8,066 0.1 - 7,589
VII (U)
ARCH Ventures Venture capital fund to invest 6,448 <0.1 - Significant 3,362
Fund XI (U) in biotech start-ups addition
Zymergen Inc(p) Developer of molecular 5,511 <0.1 - 4,840
technology
Global AI Artificial intelligence based 4,466 <0.1 - 5,114
Opportunities algorithmic trading
Fund
ARCH Ventures Venture capital fund to invest 1,571 <0.1 0.1 New purchase -
Fund XII (U) in biotech start-ups
Rubius Biotechnology 1,334 <0.1 - 14,309
Therapeutics
Inc(p)
Antler East Africa VC Fund helping 990 <0.1 - 276
Fund I LP (U) entrepreneurs establish their
businesses in
East Africa
Beam Biotechnology company 440 <0.1 - 447
Therapeutics
Intarcia Implantable drug delivery - - - -
Therapeutics Inc system
Common‡(U)
Intarcia Implantable drug delivery - - - -
Therapeutics Inc system
Convertible
Bond‡ (U)
Intarcia Implantable drug delivery - - - -
Therapeutics Inc system
Series EE
Pref.‡ (U)
- - -
Total Investments 14,003,641 98.6
Net Liquid Assets# 198,676 1.4
Total Assets# 14,202,317 100.0
* Contribution to absolute performance has been calculated on a
total return basis over the period 1 April 2022 to 30 September 2022. For a
definition of total return please see the Glossary of Terms and Alternative
Performance Measures at the end of this announcement.
† Significant additions and reductions to investments have
been noted where the change is at least a 20% movement from the value of the
holding at 31 March 2022. The change in value over the period also reflects
the share price performance and the movement in exchange rates.
# See Glossary of Terms and Alternative Performance Measures at
the end of this announcement.
‡ The Intarcia Therapeutics holdings are valued at nil at 30
September 2022.
(U) Denotes unlisted (private company) security.
(p) Denotes listed security previously held in the portfolio
as an unlisted (private company) security.
( )
Source: Baillie Gifford/StatPro. See disclaimer at the end of this
announcement.
( )
( )
( )
Distribution of Assets* (unaudited)
Geographical Analysis
At At
30 September 2022 31 March 2022
% %
North America 58.8 59.7
United States 57.9 58.5
Canada 0.9 1.2
Europe 21.8 21.9
United Kingdom 2.4 2.0
Eurozone 14.1 15.5
Developed Europe (non Euro) 5.3 4.4
South America 2.9 2.0
Brazil 2.9 2.0
Asia 16.5 16.4
China 15.7 15.8
India 0.8 0.6
Total assets 100.0 100.0
Sectoral Analysis
At At
30 September 2022 31 March 2022
% %
Consumer Staples 3.0 3.0
Consumer Discretionary 33.7 33.5
Technology 22.4 24.9
Healthcare 18.6 19.4
Financials 5.8 5.3
Industrials 10.4 9.1
Basic Materials 3.6 2.7
Real Estate 0.0 0.1
Energy 1.1 0.7
Net Liquid Assets 1.4 1.3
Total assets 100.0 100.0
(*) See Glossary of Terms and Alternative Performance Measures at end of this
announcement.
Listed Unlisted Unlisted Net liquid Total
equities
(private company)
(private company)
assets
securities†
bonds
%
%
%
% %
30 September 2022 66.8 30.9 0.9 1.4 100.0
31 March 2022 73.9 24.6 0.2 1.3 100.0
† Includes holdings in preference shares and ordinary shares.
http://www.rns-pdf.londonstockexchange.com/rns/0636G_2-2022-11-10.pdf
(http://www.rns-pdf.londonstockexchange.com/rns/0636G_2-2022-11-10.pdf)
http://www.rns-pdf.londonstockexchange.com/rns/0636G_1-2022-11-10.pdf
(http://www.rns-pdf.londonstockexchange.com/rns/0636G_1-2022-11-10.pdf)
Absolute Performance to 30 September 2022 (unaudited)
Total return (%)# Total return (%)# Total return (%)#
for five years For ten years since inception (2 June 2010)‡
Overall investment portfolio 106.7 495.4 625.5
Private and previously private companies 92.0 886.0 726.0
FTSE All-World Index (in sterling terms) 52.7 207.9 273.9
# For a definition of total return please see Glossary of Terms
and Alternative Performance Measures at the end of this announcement.
‡ Date of investment in first private company security. Source:
StatPro/Baillie Gifford and underlying index providers.
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 committee at Baillie Gifford
which takes advice from an independent third party (S&P Global). The
portfolio managers feed into the process, but the valuations committee owns
the process 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. The prices are also reviewed twice per
year by the Scottish Mortgage Board and are subject to the scrutiny of
external auditors in the annual audit process.
Recent market volatility has meant that recent pricing has moved much more
frequently than would have been the case with the quarterly valuations cycle.
Beyond the regular cycle, the valuations committee 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);
or changes to the valuation of comparable public companies.
The valuations committee also monitors relevant market indices on a weekly
basis and update 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 undertake these checks daily.
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.
Scottish Mortgage Investment Trust
Instruments valued 87
Revaluations performed 297
Percentage of portfolio revalued 2+ times 97%
Percentage of portfolio revalued 4+ times 40%
Year to date, most revaluations have been decreases. A handful of companies
have raised capital at an increased valuation. The average movement in both
valuation and share price for those which have decreased in value is shown
below.
Average movement in investee company valuation* Average movement in investee company share price
Scottish Mortgage* (17.8%) (13.7%)
* Data reflecting period 1 April 2022 - 30 September 2022 to align with the
Company's reporting period end
Share prices have decreased less than headline valuations because Scottish
Mortgage typically holds preference stock, which provides downside protection.
The share price movement reflects a probability weighted average of both the
regular valuation, which would be realised in an IPO, and the downside
protected valuation, which would be normally be triggered in the event of a
corporate sale or liquidation.
Notes to the Condensed Financial Statements (unaudited)
1. The condensed Financial Statements for the six months to 30 September
2022 comprise the statements set out on above 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 30 September 2022 have been prepared on the
basis of the same accounting policies as set out in the Company's Annual
Report and Financial Statements at 31 March 2022.
Going Concern
The Directors have considered the nature of the Company's assets, its
liabilities, projected income and expenditure together with its investment
objective and policy, dividend policy and principal risks and uncertainties,
as set out at the end of this document. The Board has, in particular,
considered the impact of heightened market volatility since the Covid-19
pandemic and over recent months due to the macroeconomic and geopolitical
concerns, including the Russia-Ukraine war and US-China tensions. It has
reviewed the results of specific leverage and liquidity stress testing, but
does not believe the Company's going concern status is affected. The Company's
assets, the majority of which are in quoted securities which are readily
realisable, exceed its liabilities significantly. All borrowings require the
prior approval of the Board. Gearing levels and compliance with borrowing
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 considered 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 in
operational existence for a period of at least twelve months from the date of
approval of these Financial Statements.
2. 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 31
March 2022 has been extracted from the statutory accounts which have been
filed with the Registrar of Companies. The Auditors' Report on those accounts
was not qualified, did not include a reference to any matters to which the
Auditors 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.
3. Baillie Gifford & Co Limited, a wholly owned subsidiary of
Baillie Gifford & Co, has been appointed by the Company as its Alternative
Investment Fund Manager ('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 0.30% on the first £4 billion of total assets less current
liabilities (excluding short term borrowings for investment purposes) and
0.25% thereafter, calculated and payable quarterly.
4. Net Return per Ordinary Share
Six months to Six months to
30 September 30 September
2022 2021
£'000 £'000
Revenue return on ordinary activities after taxation 20,719 8,715
Capital return on ordinary activities after taxation (2,596,148) 2,654,201
Total net return (2,575,429) 2,662,916
Weighted average number of ordinary shares in issue 1,439,460,353 1,416,515,214
The net return per ordinary share figures are based on the above totals of
revenue and capital and the weighted average number of ordinary shares in
issue during each period.
There are no dilutive or potentially dilutive shares in issue.
5. Dividends
Six months to Six months to
30 September 30 September
2022 2021
£'000 £'000
Amounts recognised as distributions in the period:
Previous year's final dividend of 2.07p (2021 - 1.97p), paid 1 July 2022 29,864 27,984
29,864 27,984
Dividends proposed in the period:
Interim dividend for the year ending 31 March 2023 of 1.60p (2022 - 1.52p) 22,848 21,459
22,848 21,459
The interim dividend was declared after the period end date and has therefore
not been included as a liability in the Balance Sheet. It is payable on 16
December 2022 to shareholders on the register at the close of business on 25
November 2022. The ex-dividend date is 24 November 2022. The Company's
Registrars offer a Dividend Reinvestment Plan and the final date for elections
for this dividend is 29 November 2022.
6. Fair Value Hierarchy
The fair value hierarchy used to analyse the basis on which the fair values of
financial instruments held at fair value through the profit and loss account
are measured is described below. The levels are determined by the lowest (that
is the least reliable or least independently observable) level of input that
is significant to the fair value measurement for the individual investment in
its entirety as follows:
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).
The Company's investments are financial assets designated at fair value
through profit or loss. An analysis of the Company's financial asset
investments based on the fair value hierarchy described above is shown below.
Investments held at fair value through profit or loss
As at 30 September 2022 Level 1 Level 2 Level 3 Total
£'000 £'000 £'000 £'000
Equities/funds 9,471,002 - - 9,471,002
Private company ordinary shares - - 656,843 656,843
Private company preference shares* - - 3,652,682 3,652,682
Private company convertible note - - 125,486 125,486
Limited Partnership Investments - - 84,104 84,104
Contingent Value Rights - - 13,524 13,524
Total financial asset investments 9,471,002 - 4,532,639 14,003,641
As at 31 March 2022 (audited) Level 1 Level 2 Level 3 Total
£'000 £'000 £'000 £'000
Equities/funds 12,473,650 - - 12,473,650
Private company ordinary shares - - 609,779 609,779
Private company preference shares* - - 3,470,105 3,470,105
Private company convertible note - - 38,853 38,853
Limited Partnership Investments - - 77,082 77,082
Total financial asset investments 12,473,650 - 4,195,819 16,669,469
During the period, no investments were transferred from Level 3 to Level 1 on
becoming listed. The fair value of listed investments is bid value or, in the
case of holdings on certain recognised overseas exchanges, last traded price.
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.
* The investments in preference shares are not classified as equity
holdings as they include liquidation preference rights that determine the
repayment (or multiple thereof) of the original investment in the event of a
liquidation event such as a take-over.
Private company investments
The Company's holdings in unlisted (private company) investments are
categorised as Level 3. Private company 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' private company investment
policy applies techniques consistent with the International Private Equity and
Venture Capital Valuation Guidelines 2018 ('IPEV'). The techniques applied are
predominantly market-based approaches. The market-based approaches available
under IPEV are set out below and are followed by an explanation of how they
are applied to the Company's private company portfolio:
¾ Multiples;
¾ Industry Valuation Benchmarks; and
¾ Available Market Prices.
The nature of the private company portfolio will influence the valuation
technique applied. The valuation approach recognises that, as stated in the
IPEV Guidelines, the price of a recent investment, if resulting from an
orderly transaction, generally represents fair value as at the transaction
date and may be an appropriate starting point for estimating fair value at
subsequent measurement dates. However, consideration is given to the facts and
circumstances as at the subsequent measurement date, including changes in the
market or performance of the investee company. Milestone analysis is used
where appropriate to incorporate the operational progress of the investee
company into the valuation. Additionally, the background to the transaction
must be considered. As a result, various multiples-based techniques are
employed to assess the valuations particularly in those companies with
established revenues. Discounted cashflows are used where appropriate. An
absence of relevant industry peers may preclude the application of the
Industry Valuation Benchmarks technique and an absence of observable prices
may preclude the Available Market Prices approach. All valuations are
cross-checked for reasonableness by employing relevant alternative techniques.
The private company investments are valued according to a three monthly cycle
of measurement dates. The fair value of the private company investments will
be reviewed before the next scheduled three monthly measurement date on the
following occasions:
¾ At the year end and half year end of the Company; and
¾ Where there is an indication of a change in fair value as defined in
the IPEV guidelines (commonly referred to as 'trigger' events).
Further information on the private company valuation process is provided under
'Valuing Private Companies' above.
7. The total value of the borrowings (at book) is £2,181,140,000 (31
March 2022 - £2,131,588,000).
The bank loans falling due within one year are a US$350 million revolving 3
year loan with National Australia Bank Limited ('NAB') and a US$100 million
revolving 3 year loan with Scotiabank (31 March 2022 - US$391 million
revolving 3 year loan with NAB, a US$50 million revolving 5 year loan with The
Royal Bank of Scotland International Limited ('RBSI'), a US$100 million
revolving 3 year loan with Scotiabank and a US$120 million revolving 3 year
loan with Industrial and Commercial Bank of China ('ICBC')).
During the period, the US$391 million revolving 3 year loan with NAB was
reduced to a facility of US$350 million and the ICBC US$120 million revolving
3 year loan was repaid. The RBSI US$50 million revolving 5 year loan facility
was repaid and subsequently reduced to a facility of US$25 million.
The bank loans falling due after more than one year are a US$200 million fixed
rate loan and a US$180 million fixed rate loan with RBSI and a US$300 million
fixed rate loan with Scotiabank (31 March 2022 - US$200 million fixed rate
loan and a US$180 million fixed rate loan with RBSI and a US$300 million fixed
rate loan with Scotiabank).
8. The fair value of the borrowings at 30 September 2022 was
£1,705,071,000 (31 March 2022 - £2,001,685,000).
9. Share Capital: Ordinary Shares of 5p Each
At 30 September At 31 March
2022 2022
No. of shares (audited)
No. of shares
Allotted, called up and fully paid ordinary shares of 5p each 1,428,019,945 1,444,131,650
Treasury shares of 5p each 56,760,935 40,649,230
Total 1,484,780,880 1,484,780,880
In the six months to 30 September 2022, the Company sold no ordinary shares
from treasury (year to 31 March 2022 - 34,950,000 ordinary shares at a premium
to net asset value, with a nominal value of £1,747,500 raising net proceeds
of £518,246,000).
In the six months to 30 September 2022, 16,111,705 ordinary shares with a
nominal value of £805,585 were bought back at a total cost of £131,171,000
and held in treasury (year to 31 March 2022 - 12,437,319 shares with a nominal
value of £621,000 were bought back at a total cost of £157,597,000 and held
in treasury). At 30 September 2022 the Company had authority remaining to buy
back 204,723,592 ordinary shares.
10. Transaction costs on acquisitions within the portfolio amounted to
£383,000 (30 September 2021 - £382,000) and transaction costs on sales
amounted to £1,089,000 (30 September 2021 - £190,000). These costs are
included in the book cost of acquisitions and in the net proceeds of
disposals.
11. 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.
None of the views expressed in this document should be construed as advice to
buy or sell a particular investment.
Glossary of Terms and Alternative Performance Measures (APM)
Total Assets
Total assets less current liabilities, before deduction of all borrowings.
Net Asset Value
Also described as shareholders' funds. Net Asset Value ('NAV') is the value of
total assets less liabilities (including borrowings). Net Asset Value is
calculated on the basis of borrowings stated at book value or fair value. An
explanation of each basis is provided below. The NAV per share is calculated
by dividing this amount by the number of ordinary shares in issue (excluding
treasury shares).
Net Asset Value (Borrowings at Book)/Shareholders' Funds
Borrowings are valued at adjusted net issue proceeds. The value of the
borrowings at book is set out in note 7 above.
Net Asset Value (Borrowings at Fair Value) (APM)
Borrowings are valued at an estimate of their market worth. The value of the
borrowings at fair is set out in note 8 above and a reconciliation to Net
Asset Value with borrowings at book value is provided below.
30 September 2022 31 March 2022
Net Asset Value per ordinary share (borrowings at book value) 841.7p 1,021.8p
Shareholders' funds (borrowings at book value) £12,019,535,000 £14,755,999,000
Add: book value of borrowings £2,181,140,000 £2,131,588,000
Less: fair value of borrowings (£1,705,071,000) (£2,001,885,000)
Net Asset Value (borrowings at fair value) £12,495,604,000 £14,885,702,000
Shares in issue at year end (excluding treasury shares) 1,428,019,945 1,444,131,650
Net Asset Value per ordinary share (borrowings at fair value) 875.0p 1,030.8p
Net Liquid Assets
Net liquid assets comprise current assets less current liabilities, excluding
borrowings.
Discount/Premium (APM)
As stockmarkets and share prices vary, an investment trust's share price is
rarely the same as its NAV. When the share price is lower than the NAV per
share it is said to be trading at a discount. The size of the discount is
calculated by subtracting the share price from the NAV per share and is
usually expressed as a percentage of the NAV per share. If the share price is
higher than the NAV per share, it is said to be trading at a premium.
30 September 2022 30 September 2021
2022 2022 2021 2021
NAV (book) NAV (fair) NAV (book) NAV (fair)
Net Asset Value per share (a) 841.7p 875.0p 1,381.1p 1,378.8p
Share price (b) 782.4p 782.4p 1,428.0p 1,428.0p
Discount ((b)-(a)) ÷ (a) (7.0%) (10.6%) 3.4% 3.6%
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. Gearing represents borrowings at book value less cash and
cash equivalents (including any outstanding trade settlements) expressed as a
percentage of shareholders' funds.
30 September 2022 31 March 2022
Borrowings (at book value) £2,181,140,000 £2,131,588,000
Less: cash and cash equivalents (£230,387,000) (£229,962,000)
Less: sales for subsequent settlement - (£6,450,000)
Add: purchases for subsequent settlement - -
Adjusted borrowings (a) £1,950,753,000 £1,895,176,000
Shareholders' funds (b) £12,019,535,000 £14,755,999,000
Gearing: (a) as a percentage of (b) 16% 13%
30 September 2022 31 March 2022
Borrowings (at book value) (a) £2,181,140,000 £2,131,588,000
Shareholders' funds (b) £12,019,535,000 £14,755,999,000
Potential gearing: (a) as a percentage of (b) 18% 14%
Turnover (APM)
Annual turnover is calculated on a rolling 12 month basis. The lower of
purchases and sales for the 12 months is divided by the average assets, with
average assets being calculated on assets as at each month's end.
Active Share (APM)
Active share, a measure of how actively a portfolio is managed, is the
percentage of the portfolio that differs from its comparative index. It is
calculated by deducting from 100 the percentage of the portfolio that overlaps
with the comparative index. An active share of 100 indicates no overlap with
the index and an active share of zero indicates a portfolio that tracks the
index.
Total Return (APM)
The total return is the return to shareholders after reinvesting the net
dividend on the date that the share price goes ex-dividend.
30 September 2022 30 September 2021
NAV NAV Share NAV NAV Share
(book) (fair) price (book) (fair) price
Closing NAV per share/share price (a) 841.7p 875.0p 782.4p 1,381.1p 1,378.8p 1,428.0p
Dividend adjustment factor* (b) 1.0025 1.0024 1.0026 1.0020 1.0012 1.0016
Adjusted closing NAV per share/share price (c = a x b) 843.8p 877.1p 784.4p 1,383.9p 1,380.4p 1,430.3p
Opening NAV per share/share price (d) 1,021.8p 1,030.8p 1,026.0p 1,195.1p 1,190.0p 1,137.0p
Total return (c ÷ d)-1 (17.4%) (14.9%) (23.5%) 15.8% 16.0% 25.8%
Principal Risks and Uncertainties
The principal risks facing the Company are financial risk, private company
investments risk, investment strategy risk, climate and governance risk,
discount risk, regulatory risk, custody and depositary risk, operational risk,
leverage risk, political risk and emerging risks. An explanation of these
risks and how they are managed is set out on pages 9 and 10 of the Company's
Annual Report and Financial Statements for the year to 31 March 2022 which is
available on the Company's website: scottishmortgage.com.
The principal risks and uncertainties have not changed since the date of that
report.
Shareholders will be notified on or around 18 November 2022 that the Interim
Financial Report has been published and will be available on the Scottish
Mortgage page of the Managers' website scottishmortgageit.com. (‡)
None of the views expressed in this document should be construed as advice to
buy or sell a particular investment.
Scottish Mortgage Investment Trust PLC is an actively managed, low cost
investment trust, investing in a concentrated global portfolio of companies
with the aim of maximising its total return over the long term. It looks for
strong businesses with above-average returns and aims to achieve a greater
return than the FTSE All-World Index (in sterling terms) over a five year
rolling period.
You can find up to date performance information about Scottish Mortgage on the
Scottish Mortgage page of the Managers' website at scottishmortgageit.com‡
‡ 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.
Scottish Mortgage is managed by Baillie Gifford & Co, the Edinburgh based
fund management group with over £221 billion under management and advice in
active equity and bond portfolios for clients in the UK and throughout the
world (as at 10 November 2022).
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.
10 November 2022
For further information please contact:
Stewart Heggie, Baillie Gifford & Co
Tel: 0131 275 5117
Jonathan Atkins, Four Communications
Tel: 0203 920 0555 or 07872 495396
Automatic Exchange of Information
In order to fulfil its obligations under UK tax legislation relating to the
automatic exchange of information, Scottish Mortgage Investment Trust PLC 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, Scottish Mortgage Investment Trust PLC 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.
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FTSE Index Data
London Stock Exchange Group plc and its group undertakings (collectively, the
'LSE Group'). ©LSE Group 2022. FTSE Russell is a trading name of certain LSE
Group companies. 'FTSE®', 'Russell®', 'FTSE Russell®', is/are a trade
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Sustainable Finance Disclosure Regulation ('SFDR')
The EU Sustainable Finance Disclosure Regulation ('SFDR') does not have a
direct impact in the UK due to Brexit, however, it applies to third-country
products marketed in the EU. As Scottish Mortgage Investment Trust PLC is
marketed in the EU by the AIFM, BG & Co Limited, via the National Private
Placement Regime ('NPPR') the following disclosures have been provided to
comply with the high-level requirements of SFDR.
The AIFM has adopted Baillie Gifford & Co's Governance and Sustainable
Principles and Guidelines as its policy on integration of sustainability risks
in investment decisions. Baillie Gifford & Co's approach to investment is
based on identifying and holding high quality growth businesses that enjoy
sustainable competitive advantages in their marketplace. To do this it looks
beyond current financial performance, undertaking proprietary research to
build an in-depth knowledge of an individual company and a view on its
long-term prospects. This includes the consideration of sustainability factors
(environmental, social and/or governance matters) which it believes will
positively or negatively influence the financial returns of an investment.
More detail on the Managers' approach to sustainability can be found in the
Governance and Sustainability Principles and Guidelines document, available
publicly on the Baillie Gifford website bailliegifford.com.
Taxonomy Regulation
The Taxonomy Regulation establishes an EU-wide framework of criteria for
environmentally sustainable economic activities in respect of six
environmental objectives. It builds on the disclosure requirements under SFDR
by introducing additional disclosure obligations in respect of Alternative
Investment Funds that invest in an economic activity that contributes to an
environmental objective. The Company does not commit to make sustainable
investments as defined under SFDR. As such, the underlying investments do not
take into account the EU criteria for environmentally sustainable economic
activities.
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