Scot.Mort Inv Tst - Annual Financial Report
03/06/2024 12:56
For best results when printing this announcement, please click on link below:
http://newsfile.refinitiv.com/getnewsfile/v1/story?guid=urn:newsml:reuters.com:20240603:nRSC8943Qa&default-theme=true
RNS Number : 8943Q Scottish Mortgage Inv Tst PLC 03 June 2024
Scottish Mortgage Investment Trust PLC (SMT)
Legal Entity Identifier: 213800G37DCS3Q9IJM38
Regulated Information Classification: Annual Financial and Audit Reports
Annual Report and Financial Statements
Further to the preliminary statement of audited annual results announced to
the Stock Exchange on 23 May 2024, Scottish Mortgage Investment Trust PLC
("the Company") announces that the Company's Annual Report and Financial
Statements for the year ended 31 March 2024, including the Notice of Annual
General Meeting, has today been posted to shareholders and submitted
electronically to the National Storage Mechanism where it will shortly be
available for inspection at
https://data.fca.org.uk/#/nsm/nationalstoragemechanism
(https://data.fca.org.uk/#/nsm/nationalstoragemechanism)
It is also available on the Company page of the Baillie Gifford website at:
scottishmortgage.com (http://www.scottishmortgage.com/) (as is the preliminary
statement of audited annual results announced by the Company on 23 May 2024).
Responsibility Statement of the Directors in respect of the Annual Financial
Report
The Directors consider that the Annual Report and accounts, taken as a whole,
is fair, balanced and understandable and provides the information necessary
for shareholders to assess the Company's position and performance, business
model and strategy.
We confirm to the best of our knowledge:
· the Company financial statements, which have been prepared in
accordance with United Kingdom Accounting Standards, comprising FRS 102, give
a true and fair view of the net return of the Company; and
· the Strategic Report includes a fair review of the development
and performance of the business and the position of the Company, together with
a description of the principal risks and uncertainties that it faces.
In the case of each Director in office at the date the Directors' report is
approved:
· so far as the Director is aware, there is no relevant audit
information of which the Company's Auditors are unaware; and
· they have taken all the steps that they ought to have taken as a
Director in order to make themselves aware of any relevant audit information
and to establish that the Company's Auditors are aware of that information.
Principal and Emerging Risks relating to the Company
As explained on page 62 of the Annual Report and Financial Statements there is
a process for identifying, evaluating and managing the risks faced by the
Company on a regular basis. The Directors have carried out a robust assessment
of the principal and emerging risks facing the Company, including those that
would threaten its business model, future performance, solvency or liquidity.
A description of these risks and how they are being managed or mitigated is
set out below.
The Board considers heightened macroeconomic and geopolitical concerns to be
factors which exacerbate existing risks, rather than being new emerging risks.
Their impact is considered within the relevant risks. There have been no
significant changes to the principal risks during the year other than cyber
security risk having moved from emerging
to principal risks.
↑ Increasing Risk ↓ Decreasing Risk ↔ No Change
What is the risk? How is it managed? Current assessment of risk
Financial risk The Company's assets consist mainly of listed securities and its principal The Board has, in particular, considered the impact of heightened ↑ This risk is considered to have increased. Although macroeconomic risks such
risks are therefore market related and include market risk (comprising macroeconomic and geopolitical concerns, including continued high interest as rising interest rates have reduced, the prospect of market volatility
currency risk, interest rate risk and other price risk), liquidity risk and rates, the ongoing Russia-Ukraine war, heightened tensions between China and remains from deteriorating geopolitical stability such as the ongoing
credit risk. An explanation of those risks and how they are managed is both the US and Taiwan, and the conflict in the Middle East. The Board also Russia-Ukraine war, increasing trade tensions between the West and China and
contained in note 19 to the Financial Statements on pages 96 to 105 of the considers the commercial impact of changes in regulatory posture in local escalating hostilities in the Middle East.
Annual Report and Financial Statements. market jurisdictions. The Board Considers at each meeting various metrics
including portfolio concentration, regional and industrial sector weightings,
top and bottom stock contributors to performance and contribution to
performance by industrial sector. The Managers provide the rationale for stock
selection decisions and both the investment strategy and portfolio risks are
formally considered in detail at least annually.
Private company investments The Company's risk could be increased by its investment in private company The Board considers the private company investments in the context of the ↔ This risk is seen as stable. In periods of market volatility the Private
securities. These investments may be more difficult to buy or sell, assessment overall investment strategy and provides guidance to the Managers on the Company Valuations Group will perform trigger analyses and, if appropriate,
of their value is more subjective than for investments listed on a recognised maximum exposure to private company investments. The investment policy limits revalue the relevant investments, as described in the report on page 82 of the
stock exchange and their valuations may be perceived to be more volatile or the amount which may be invested in private companies to 30 per cent. of the Annual Report and Financial Statements. The Managers consider market
out of date. total assets of the Company, measured at time of purchase (see page 42 of the understanding of the valuations process to have improved.
Annual Report and Financial Statements). The Managers have a robust valuation
methodology, which is applied consistently. The Managers' valuation process
involves a revaluation of each of the private company investments every 3
months and additional valuations are carried out in response to trigger events
to ensure the investments are carried at fair value. The valuation process is
overseen by the Private Companies Valuations Group at Baillie Gifford which is
independent from the portfolio managers and which takes advice from an
independent third party (S&P Global). The valuations are subject to review
and challenge by the Board every 6 months and are subject to scrutiny annually
by the external Auditor. The Managers have endeavoured to improve market
understanding of the valuation process.
Investment strategy risk Pursuing an investment strategy to fulfil the Company's objective which the The Board regularly reviews and monitors the Company's objective and ↓ The market appetite for growth investing is considered to have improved over
market perceives to be unattractive or inappropriate, or the ineffective investment policy and strategy, the investment portfolio and its performance, the year and the discount of the Company's shares to the net asset value has
implementation of an attractive or appropriate strategy, may lead to reduced the level of discount/premium to net asset value at which the shares trade and narrowed.
returns for shareholders and, as a result, a decreased demand for the movements in the share register.
Company's shares. This may lead to the Company's shares trading at a widening
discount to their net asset value.
Climate and governance risk As investors place increased emphasis on Environmental, Social and Governance This is mitigated by the Managers' strong ESG stewardship and engagement ↔ The Managers continue to employ strong ESG stewardship and engagement
('ESG') issues, perceived problems on ESG matters in an investee company could policies which are available to view on the Managers' website policies.
lead to that company's shares being less attractive to investors, adversely bailliegifford.com and have been reviewed and endorsed by the Company and
affecting its share price, in addition to potential valuation issues arising fully integrated into the investment process, as well as the extensive
from any direct impact of the failure to address the ESG weakness on the up-front and ongoing due diligence which the Managers' undertake on each
operations or management of the investee company (for example in the event of investee company. This due diligence includes assessment of the risks inherent
an industrial accident or spillage). Repeated failure by the Managers to in climate change (see page 52 of the Annual Report and Financial Statements).
identify ESG weaknesses in investee companies could lead to the Company's own An explanation of how these policies are applied in the context of Scottish
shares being less attractive to investors, adversely affecting its own share Mortgage's long term investment approach is available at scottishmortgage.com.
price. In addition, the valuation of investments could be impacted by climate
change due to climate-related operational challenges, changes in end demand or The Managers utilise data sourced from a third-party provider to map the
failure to identify a pathway to Net Zero. carbon footprint of the portfolio. This analysis estimates that the carbon
intensity of Scottish Mortgage is 95.7% less than the index albeit that is
based on only 67.9% of the value of the Company's equity portfolio which
reports on carbon emissions and other carbon related characteristics (see page
52 of the Annual Report and Financial Statements).
Discount risk The discount/premium at which the Company's shares trade relative to its net The Board monitors the level of discount/premium at which the shares trade and ↔ This risk is seen as
asset value can change. The risk of a widening discount is that it may the Company has authority to buyback its existing shares when deemed by the
undermine investor confidence in the Company. Board to be in the best interests of the Company and its shareholders. The stable notwithstanding
Company announced on 15 March 2024 that it would allocate at least £1 billion
for share buybacks over a two year period. that the discount has narrowed following the announcement on 15 March 2024
that the Company would make available at least £1 billion for share buybacks
over a two year period, and subsequent increased buyback activity.
Regulatory risk Changes to the regulatory environment could negatively impact the Company. Baillie Gifford's Business Risk, Internal Audit and Compliance Departments ↔ All control procedures are working effectively. There have been no material
Failure to comply with applicable legal and regulatory requirements such as provide regular reports to the Audit Committee on Baillie Gifford's monitoring regulatory changes in the year.
the tax rules for investment trust companies, the FCA Listing Rules and the programmes. Major regulatory change could impose disproportionate compliance
Companies Act could lead to suspension of the Company's Stock Exchange burdens on the Company. In such circumstances representation is made to ensure
listing, financial penalties, a qualified audit report or the Company being that the special circumstances of investment trusts are recognised.
subject to tax on capital gains. Shareholder documents and announcements, including the Company's published
Interim and Annual Report and Financial Statements, are subject to stringent
review processes and procedures are in place to ensure adherence to the
Transparency Directive and the Market Abuse Directive with reference to inside
information.
Custody and depositary risk Safe custody of the Company's assets may be compromised through control The Board receives six monthly reports from the Depositary confirming safe ↔ All control procedures are working effectively.
failures by the Depositary, including cyber security incidents. custody of the Company's assets held by the Custodian. Cash and portfolio
holdings are independently reconciled to the Custodian's records by the
Managers who also agree uncertificated unlisted portfolio holdings to
confirmations from investee companies. The Custodian's internal controls
assurance reports are reviewed by Baillie Gifford's Business Risk Department
and a summary of the key points is reported to the Audit Committee and any
concerns investigated.
Operational risk Failure of Baillie Gifford's systems or those of other third party service Baillie Gifford has a comprehensive business continuity plan which facilitates ↔ All control procedures are working effectively.
providers could lead to an inability to provide accurate reporting and continued operation of the business in the event of a service disruption or
monitoring or a misappropriation of assets. major disaster. The Audit Committee reviews Baillie Gifford's Report on
Internal Controls and the reports by other key third party providers are
reviewed by Baillie Gifford on behalf of the Board and a summary of the key
points is reported to the Audit Committee and any concerns investigated. The
other key third party service providers have not experienced significant
operational difficulties affecting their respective services to the Company.
Cyber security risk A cyber attack on Baillie Gifford's network or that of a third party service The Audit Committee reviews Reports on Internal Controls published by Baillie ↑ This risk is seen as increasing due to recent indications that the
provider could impact the confidentiality, integrity or availability of data Gifford and other third party service providers. Baillie Gifford's Business continuation of geopolitical tensions could lead to more cyber attacks.
and systems. Risk Department report to the Audit Committee on the effectiveness of Emerging technologies, including AI, could potentially increase information
information security controls in place at Baillie Gifford and its business security risks. In addition, service providers operate a hybrid approach of
continuity framework. Cyber security due diligence is performed by Baillie remote and office working, thereby increasing the potential of a cyber
Gifford on third party service providers which includes a review of crisis security threat.
management and business continuity frameworks.
Leverage risk The Company borrows money for investment purposes, sometimes known as All borrowings require the prior approval of the Board and leverage levels are ↓ During the year to 31 March £153 million of bank loans have been repaid. The
'gearing' or 'leverage'. If the investments fall in value, borrowings will discussed by the Board and Managers at every meeting. Covenant levels are Company has undrawn revolving credit facilities of US$495 million.
magnify the impact of this loss. If borrowing facilities are not renewed, the monitored regularly. Details of the Company's borrowings can be found in Notes
Company may have to sell investments to repay borrowings. 11 and 12 on pages 92 to 93 of the Annual Report and Financial Statements. The
majority of the Company's investments are in quoted securities that are
readily realisable. Further information on leverage can be found on page 111
of the Annual Report and Financial Statements and the Glossary of terms and
Alternative Performance Measures on pages 115 to 117 of the Annual Report and
Financial Statements.
Political risk Political change in areas in which the company invests or may invest may have Political developments are closely monitored and considered by the Board. The ↑ This risk is seen as increasing as deteriorating geopolitical stability
practical consequences for the company. Board continues to assess the potential consequences for the Company's future increases the prospect of trade conflict and sanctions.
activities including those that may arise from geopolitical tensions and
constitutional change. The Board believes that the Company's global portfolio
partially helps to mitigate such political risks.
Emerging risks As explained on page 62 of the Annual Report and Financial Statements, the
Board has regular discussions on principal risks and uncertainties, including
any risks which are not an immediate threat but could arise in the longer
term. The Board considers that the key emerging risks arise from the
interconnectedness of the global economy (including factors such as supply
chain constraints and economic sanctions) and the related exposure of the
investment portfolio to societal and financial implications of an escalation
of geopolitical tensions, cyber risk and coronavirus variants or similar
public health threats. These are mitigated by the Managers' close links to the
investee companies and their ability to ask questions on contingency plans.
The Managers believe the impact of such events may be to impact the pace of
growth rather than to invalidate the investment rationale over the long term.
Baillie Gifford & Co Limited
Company Secretaries
3 June 2024
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact
rns@lseg.com (mailto:rns@lseg.com)
or visit
www.rns.com (http://www.rns.com/)
.
RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our
Privacy Policy (https://www.lseg.com/privacy-and-cookie-policy)
. END ACSFJMBTMTAMBII
Recent news on Scottish Mortgage Investment Trust
See all newsUK Stocks-Factors to watch on June 11 (updated)
Corrected: UK Stocks-Factors to watch on June 11
Brief: Scottish Mortgage Investment Says SpaceX Represents 21% Of Total Assets As At June 3 2026
Scot.Mort Inv Tst - Update on NAV and SpaceX Valuation
Scot.Mort Inv Tst Mitsubishi UFJ Fin. - Holding(s) in Company