Last checked at 11 Nov 2022 07:00
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 30 September 2022 | For the six months ended 30 September 2021 | |||||
Revenue £'000 | Capital £'000 | Total £'000 | Revenue £'000 | Capital £'000 | Total £'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 2022 £'000 | At 30 September 2022 £'000 | At 31 March 2022 (audited) £'000 | At 31 March 2022 (audited) £'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 capital £'000 | Share premium account £'000 | Capital redemption reserve £'000 | Capital reserve * £'000 | Revenue reserve £'000 | Shareholders' funds £'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 activitiesafter taxation | - | - | - | (2,596,148) | 20,719 | (2,575,429) | |
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 capital £'000 | Share premium account £'000 | Capital redemption reserve £'000 | Capital reserve * £'000 | Revenue reserve £'000 | Shareholders' funds £'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 activitiesafter taxation | - | - | - | 2,654,201 | 8,715 | 2,662,916 | |
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 £'000 | 2021 £'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 Technologies U | 3.2 |
| Adyen | 1.3 |
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 Pharmaceuticals Inc p | 0.8 |
| Honor Technology Inc U | 0.4 |
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 Finance Corporation10 | 0.8 |
| Jiangxiaobai Holdings Ltd U | 0.5 |
| Capsule Corp U | 0.3 |
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 | |
Warby Parker Inc p | 0.3 |
| Aurora Innovation Inc p | 0.3 |
| ARCH Ventures Fund XII U | |
Zocdoc Inc U | 0.2 |
| Wayfair | 0.3 |
| Antler East Africa Fund I LP U | |
Sinovation Fund III U | 0.1 |
| Lilium NV p | 0.3 |
| Beam Therapeutics | |
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 Development Fund U 10 | 0.1 | Joby Aviation Inc p | 0.2 | ||||
| Carvana | 0.1 |
| ||||
WI Harper Fund VII U 10 | 0.1 | ARCH Ventures Fund X Overage U | 0.1 | ||||
Global AI Opportunities Fund 10 |
|
| |||||
| ARCH Ventures Fund X U | 0.1 |
|
| |||
Rubius Therapeutics Inc p | Zymergen Inc p |
|
|
| |||
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 30 September 2022 £'000 | %of total assets | Contribution to absolute performance* % | Notes† | Fair value 31 March 2022 £'000 |
Moderna | Clinical stage biotechnology company | 974,886 | 6.9 | (1.1) | 1,204,059 | |
Tesla Inc | Electric cars, autonomous driving and solar energy | 971,935 | 6.8 | (1.1) | 1,115,783 | |
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 Series E1 Pref. U | Battery developer and manufacturer, specialised in lithium-ion technology for electric vehicles | 273,451 | 1.9 | 0.3 | 232,425 | |
Northvolt AB Series E2 Pref. U | Battery developer and manufacturer, specialised in lithium-ion technology for electric vehicles | 142,647 | 1.0 | 0.2 | 119,977 | |
Northvolt AB Promissory Note U | Battery developer and manufacturer, specialised in lithium-ion technology for electric vehicles | 78,832 | 0.5 | - | New purchase | - |
Northvolt AB Series A Ord. U | Battery developer and manufacturer, specialised in lithium-ion technology for electric vehicles | 30,660 | 0.2 | - | 26,060 | |
Northvolt AB Series D1 Pref. U | Battery developer and manufacturer, specialised in lithium-ion technology for electric vehicles | 995 | - | - | 845 | |
526,585 | 3.6 | 0.5 | 379,307 | |||
Meituanp | Local services aggregator | 488,205 | 3.4 | 0.8 | 389,841 | |
Space Exploration Technologies Series J Pref. U | Designs, manufactures and launches rockets and spacecraft | 202,281 | 1.4 | 0.4 | 144,901 | |
Space Exploration Technologies Series N Pref. U | Designs, manufactures and launches rockets and spacecraft | 162,575 | 1.1 | 0.4 | 116,458 | |
Space Exploration Technologies Class A Common U | Designs, manufactures and launches rockets and spacecraft | 79,306 | 0.5 | 0.2 | 56,810 | |
Space Exploration Technologies Class C Common U | Designs, manufactures and launches rockets and spacecraft | 24,461 | 0.2 | 0.1 | 17,523 | |
468,623 | 3.2 | 1.1 | 335,692 | |||
MercadoLibre | Latin American e-commerce platform | 418,298 | 2.9 | (0.5) | Significantaddition | 333,435 |
Amazon.com | Online retailer and cloud computing | 409,676 | 2.9 | (0.6) | 500,852 | |
Tencent Holdings | Internet services | 395,527 | 2.8 | (0.8) | Significant reduction | 708,821 |
ByteDance Ltd Series E Pref. U | Social media | 189,407 | 1.3 | 0.2 | 165,590 | |
ByteDance Ltd Series E-1 Pref. U | Social media | 170,396 | 1.2 | 0.2 | 148,970 | |
359,803 | 2.5 | 0.4 | 314,560 | |||
Kering | Luxury goods producer and retailer | 338,969 | 2.4 | (0.4) | 409,853 | |
NIO Incp | Designs and manufactures electric and autonomous vehicles | 317,065 | 2.2 | (0.1) | 359,220 | |
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 IncSeries E Pref. U | Offers molecular diagnostics tests for cancer and aggregates clinical oncology records | 133,217 | 0.9 | 0.1 | 114,805 | |
Tempus Labs Inc Series F Pref. U | Offers molecular diagnostics tests for cancer and aggregates clinical oncology records | 48,627 | 0.4 | - | 41,906 | |
Tempus Labs Inc Series G-3 Pref. U | Offers molecular diagnostics tests for cancer and aggregates clinical oncology records | 44,004 | 0.3 | - | New purchase | - |
Tempus Labs Inc Series G-2 Pref. U | Offers molecular diagnostics tests for cancer and aggregates clinical oncology records | 41,221 | 0.3 | - | 35,187 | |
Tempus Labs Inc Series G Pref. U | Offers molecular diagnostics tests for cancer and aggregates clinical oncology records | 7,848 | 0.1 | - | 6,763 | |
274,917 | 2.0 | 0.1 | 198,661 | |||
Stripe Inc Series G Pref. U | Online payment platform | 178,763 | 1.3 | - | 166,921 | |
Stripe Inc Class B Common U | Online payment platform | 62,937 | 0.4 | - | 58,768 | |
Stripe Inc Series H Pref. U | Online payment platform | 26,678 | 0.2 | - | 24,487 | |
268,378 | 1.9 | - | 250,176 | |||
Pinduoduo Inc | Chinese e-commerce | 261,463 | 1.8 | 1.0 | 142,114 | |
Ginkgo BioWorks Inc p | Bio-engineering company | 253,779 | 1.8 | (0.1) | 277,228 | |
Wise Plc p | Online platform to send and receive money | 245,042 | 1.7 | 0.5 | 183,614 | |
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 Incp | Developer of a SaaS-based cloud data warehousing platform | 192,587 | 1.4 | (0.1) | Significantaddition | 163,321 |
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 Therapeuticsp | Biotechnology | 169,181 | 1.2 | 0.2 | 150,121 | |
Netflix | Subscription service for TV shows and movies | 161,031 | 1.1 | (0.4) | 264,214 | |
Zipline International Inc Series D Pref. U | Logistics company that designs, manufactures and operates drones to deliver medical supplies | 56,172 | 0.4 | - | 58,508 | |
Zipline International Inc Series E Pref. U | Logistics company that designs, manufactures and operates drones to deliver medical supplies | 48,330 | 0.4 | - | 44,887 | |
Zipline International Inc Series C Pref. U | Logistics company that designs, manufactures and operates drones to deliver medical supplies | 47,969 | 0.3 | - | 49,964 | |
152,471 | 1.1 | - | 153,359 | |||
Ant International Ltd Class C Ord. U | Online financial services platform | 136,322 | 1.0 | - | 136,502 | |
Alibaba Groupp | Online retailing and financial services | 135,032 | 0.9 | (0.4) | Significant reduction | 419,268 |
Recursion Pharmaceuticals Incp | Uses image recognition/machine learning and automation to improve drug discovery | 132,756 | 0.8 | 0.5 | 75,850 | |
Spotify Technology SAp | Online music streaming service | 127,851 | 0.8 | (0.4) | 189,643 | |
Blockchain.com Series C-1 Pref. U | Software platform for digital assets | 51,988 | 0.4 | (1.1) | 182,169 | |
Blockchain.com Series D Pref. U | Software platform for digital assets | 51,056 | 0.4 | (0.2) | 75,950 | |
Blockchain.com Inc Promissory note U | Software platform for digital assets | 4,479 | - | - | New purchase | - |
107,523 | 0.8 | (1.3) | 258,119 | |||
Housing Development Finance Corporation | Indian mortgage provider | 106,950 | 0.8 | 0.1 | 101,717 | |
Zalando | International online clothing retailer | 99,729 | 0.7 | (0.9) | 220,640 | |
Solugen Inc Series C-1 Pref. U | Solugen exists to scale synthetic biology and bring green chemicals to the world | 98,185 | 0.7 | 0.2 | 67,922 | |
HelloFreshp | Grocery retailer | 89,238 | 0.7 | (0.5) | 161,987 | |
Redwood Materials Inc Series C Pref. U | Environmental battery recycling | 85,550 | 0.7 | 0.1 | 74,535 | |
The Production Board Series A-2 Pref. U | Holding company for food technology companies | 50,882 | 0.4 | (0.2) | 77,166 | |
The Production Board Series A-3 Pref. U | Holding company for food technology companies | 34,593 | 0.3 | - | 28,266 | |
85,475 | 0.7 | (0.2) | 105,432 | |||
Carbon Inc Series D Pref. U | Manufactures and develops 3D printers | 49,627 | 0.4 | - | 49,205 | |
Carbon Inc Series E Pref. U | Manufactures and develops 3D printers | 31,046 | 0.2 | - | 30,782 | |
80,673 | 0.6 | - | 79,987 | |||
Indigo Agriculture Inc Series D Pref. U | Analyses plant microbiomes to increase crop yields | 28,569 | 0.2 | - | 25,049 | |
Indigo Agriculture Inc Series E Pref. U | Analyses plant microbiomesto increase crop yields | 19,912 | 0.1 | - | 14,670 | |
Indigo Agriculture Inc Series F Pref. U | Analyses plant microbiomesto increase crop yields | 18,942 | 0.1 | - | 14,776 | |
Indigo Agriculture Inc Series G Pref. U | Analyses plant microbiomesto increase crop yields | 11,689 | 0.1 | - | 9,447 | |
Indigo Agriculture Inc Common U | Analyses plant microbiomes to increase crop yields | 1,047 | - | - | 2,221 | |
80,159 | 0.5 | - | 66,163 | |||
Roblox | Human co-experience platform enabling shared experiences among users | 79,871 | 0.5 | (0.1) | New purchase | - |
Jiangxiaobai Holdings Ltd Series C Pref. U | Producer of alcoholic beverages | 75,305 | 0.5 | 0.1 | 55,950 | |
ChargePoint Holdings Inc | Electric vehicle charging solutions | 76,055 | 0.5 | - | Significantaddition | 69,111 |
Atlas Copco | Engineering | 73,141 | 0.5 | - | 86,205 | |
Affirm Holdings Inc Class Ap | Online platform which provides lending and consumer credit services | 68,947 | 0.5 | (0.5) | 144,207 | |
Zoom | Remote conferencing service provider | 67,691 | 0.5 | (0.1) | 91,537 | |
Blockstream Corporation Inc Series B-1 Pref. U | Financial software developer | 66,713 | 0.5 | (0.1) | 71,135 | |
Ocado | Online grocery retailer and technology provider | 66,289 | 0.5 | (0.6) | Significant addition | 102,395 |
Databricks Inc Series H Pref. U | Data software solutions | 66,222 | 0.5 | - | 58,997 | |
Vir Biotechnology Incp | Biotechnology company developing anti-infective therapies | 65,664 | 0.5 | - | 73,365 | |
Rappi Inc Series F Pref. U | Provider of an on-demand delivery platform designed to connect consumers with local stores | 64,951 | 0.5 | - | 58,899 | |
Nuro Inc Series C Pref. U | Delivery business, using self- driving purpose-built electric vehicles | 39,217 | 0.3 | (0.1) | 55,561 | |
Nuro Inc Series D Pref. U | Delivery business, using self- driving purpose-built electric vehicles | 25,693 | 0.2 | - | 28,433 | |
64,910 | 0.5 | (0.1) | 83,994 | |||
Shopify | Cloud-based commerce platform provider | 62,916 | 0.4 | (0.5) | 133,802 | |
GoPuff Inc (GoBrands) Series G Pref. U | On demand retail delivery service | 61,948 | 0.4 | - | 55,476 | |
Salt Pay Co Ltd Non-Voting Ordinary Shares U | Payment and management solutions | 53,520 | 0.4 | (0.1) | 60,434 | |
Salt Pay Co Ltd Voting Ordinary Shares U | Payment and management solutions | 1 | - | - | 1 | |
53,521 | 0.4 | (0.1) | 60,435 | |||
Honor Technology Inc Series D Pref. U | Provider of home-care services | 31,498 | 0.3 | (0.1) | 37,375 | |
Honor Technology Inc Series E Pref. U | Provider of home-care services | 21,989 | 0.1 | - | 24,766 | |
53,487 | 0.4 | (0.1) | 62,141 | |||
Tanium Inc Class B Common U | Provides security and systems management solutions | 53,227 | 0.4 | (0.4) | 104,374 | |
Relativity Space Inc Series D Pref. U | Aerospace company, designs and builds rockets using 3D printers | 32,902 | 0.3 | - | 44,217 | |
Relativity Space Inc Series E Pref. U | Aerospace company, designs and builds rockets using 3D printers | 19,666 | 0.1 | (0.1) | 21,583 | |
52,568 | 0.4 | (0.1) | 65,800 | |||
Bolt Threads Inc Series D Pref. U | Natural fibres and fabrics manufacturer | 27,621 | 0.2 | - | 25,308 | |
Bolt Threads Inc Series E Pref. U | Natural fibres and fabrics manufacturer | 23,860 | 0.2 | - | 21,696 | |
51,481 | 0.4 | - | 47,004 | |||
Kinnevik | Investment company | 50,675 | 0.4 | (0.2) | 85,605 | |
Horizon Robotics Series C Pref. U | Designer and developer of AI chips and algorithms principally for advanced driving assistance systems and autonomous vehicles | 49,819 | 0.4 | - | 44,187 | |
Essence Healthcare Series 3 Pref. U | Cloud-based health provider | 49,569 | 0.4 | 0.1 | 38,304 | |
JRSK Inc (Away) Series D Pref. U | Manufactures luggage | 20,085 | 0.1 | - | 17,355 | |
JRSK Inc (Away) Series Seed Pref. U | Manufactures luggage | 10,830 | 0.1 | - | 9,651 | |
JRSK Inc (Away) Convertible Promissory Note U | Manufactures luggage | 8,653 | 0.1 | - | 8,034 | |
JRSK Inc (Away) Convertible Promissory Note 2021 U | Manufactures luggage | 8,653 | 0.1 | - | 8,034 | |
48,221 | 0.4 | - | 43,074 | |||
Thumbtack Inc Series G Pref. U | Online directory service for local businesses | 28,948 | 0.2 | - | 33,513 | |
Thumbtack Inc Series I Pref. U | Online directory service for local businesses | 11,022 | 0.1 | - | 11,741 | |
Thumbtack IncSeries H Pref. U | Online directory service for local businesses | 5,790 | - | - | 6,703 | |
Thumbtack Inc Class A Common U | Online directory service for local businesses | 871 | - | - | 3,023 | |
Thumbtack Inc Series A Pref. U | Online directory service for local businesses | 514 | - | - | 1,783 | |
Thumbtack Inc Series C Pref. U | Online directory service for local businesses | 150 | - | - | 521 | |
Thumbtack Inc Series B Pref. U | Online directory service for local businesses | 35 | - | - | 121 | |
47,330 | 0.3 | - | 57,405 | |||
Climeworks AG Series F Preferred U | Renewable energy equipment | 46,925 | 0.3 | - | New purchase | - |
Climeworks AG Non Voting Shares U | Renewable energy equipment | 358 | - | - | New purchase | - |
47,283 | 0.3 | - | - | |||
Capsule Corp Series D Pref. U | Digital platform providing home delivery of prescription medication | 46,779 | 0.3 | - | 47,719 | |
10x Genomics | A life science and diagnostics company | 45,611 | 0.3 | (0.4) | 103,343 | |
Convoy Inc Series D Pref. U | Marketplace for truckers and shippers | 28,978 | 0.2 | - | 27,763 | |
Convoy Inc Series E Pref. U | Marketplace for truckers and shippers | 16,909 | 0.1 | - | 15,190 | |
45,887 | 0.3 | - | 42,953 | |||
Uptake Technologies Inc Promissory Note U | Designs and develops enterprise software | 24,870 | 0.2 | - | 22,785 | |
Uptake Technologies Inc Series D Pref. U | Designs and develops enterprise software | 20,435 | 0.1 | (0.2) | 41,545 | |
45,305 | 0.3 | (0.2) | 64,330 | |||
Workrise Technologies Inc Series E Pref. U | Online platform connecting contractors with work | 45,165 | 0.3 | (0.1) | 51,918 | |
Warby Parker Incp | Online and physical glasses retailer | 45,092 | 0.3 | (0.4) | 96,854 | |
Cloudflare | Application software developer | 43,023 | 0.3 | - | New purchase | - |
DoorDash | Provides restaurant food delivery services | 40,849 | 0.3 | (0.3) | 81,972 | |
Aurora Innovation Inc Commonp | Developer of driverless vehicle technology | 40,349 | 0.3 | (0.4) | 86,922 | |
Wayfair | Online household goods retailer | 38,716 | 0.3 | (0.5) | 111,760 | |
Lilium NVp | On demand air transportation | 36,309 | 0.3 | (0.1) | 53,503 | |
Heartflow Inc Series E Pref. U | Develops software for cardiovascular disease diagnosis and treatment | 33,066 | 0.3 | (0.1) | 41,525 | |
KSQ Therapeutics Inc Series C Pref. U | Biotechnology company | 22,792 | 0.1 | - | 19,996 | |
KSQ Therapeutics Inc Series D Pref. U | Biotechnology company | 8,476 | 0.1 | - | 7,303 | |
31,268 | 0.2 | - | 27,299 | |||
Sana Biotechnology Incp | Biotechnology company creating and delivering engineered cells as medicine | 29,976 | 0.2 | - | 35,003 | |
Zocdoc Inc Series D-2 Pref. U | Online platform for searching for doctors and booking appointments | 29,630 | 0.2 | 0.1 | 22,321 | |
Joby Aviation Incp | Electric aircraft | 29,391 | 0.2 | - | 38,040 | |
PsiQuantum Series D Pref. U | Operates as a biotechnology company | 21,084 | 0.1 | - | 18,988 | |
Upside Foods Inc Series C-1 Pref. U | Cultivated meat producer | 20,602 | 0.1 | - | New purchase | - |
Clear Secure Inc | Biometric security firm | 20,478 | 0.1 | - | 20,393 | |
Carvana | Online platform for buying used cars | 18,343 | 0.1 | (0.5) | 83,168 | |
Sinovation Fund III U | Venture capital fund | 13,692 | 0.1 | - | 10,145 | |
ARCH Ventures Fund IX U | Venture capital fund to invest in biotech start-ups | 13,655 | 0.1 | - | 16,579 | |
Illumina CVR | Biotechnology equipment | 13,524 | 0.1 | - | - | |
WI Harper Fund VIII U | Venture capital fund | 12,134 | 0.1 | - | 9,757 | |
Clover Health Investments B Common p | Healthcare insurance provider | 7,785 | 0.1 | - | - | |
Clover Health Investments A Commonp | Healthcare insurance provider | 4,005 | - | (0.1) | 20,938 | |
11,790 | 0.1 | 20,938 | ||||
Udacity Inc Series D Pref. U | Online education | 10,572 | 0.1 | - | 8,269 | |
Innovation Works Development Fund U | Venture capital fund | 10,431 | 0.1 | - | 16,201 | |
ARCH Ventures Fund X Overage U | Venture capital fund to invest in biotech start-ups | 8,706 | 0.1 | - | 6,840 | |
ARCH Ventures Fund X U | Venture capital fund to invest in biotech start-ups | 8,412 | 0.1 | - | 6,331 | |
WI Harper Fund VII U | Venture capital fund | 8,066 | 0.1 | - | 7,589 | |
ARCH Ventures Fund XI U | Venture capital fund to invest in biotech start-ups | 6,448 |
| - | Significant addition | 3,362 |
Zymergen Incp | Developer of molecular technology | 5,511 |
| - | 4,840 | |
Global AI Opportunities Fund | Artificial intelligence based algorithmic trading | 4,466 | - | 5,114 | ||
ARCH Ventures Fund XII U | Venture capital fund to invest in biotech start-ups | 1,571 | 0.1 | New purchase | - | |
Rubius Therapeutics Incp | Biotechnology | 1,334 |
| - | 14,309 | |
Antler East Africa Fund I LP U | VC Fund helping entrepreneurs establish their businesses in East Africa | 990 |
| - | 276 | |
Beam Therapeutics | Biotechnology company | 440 |
| - | 447 | |
Intarcia Therapeutics Inc Common‡U | Implantable drug delivery system | - | - | - | - | |
Intarcia Therapeutics Inc Convertible Bond‡ U | Implantable drug delivery system | - | - | - | - | |
Intarcia Therapeutics Inc Series EE Pref.‡ U | Implantable drug delivery system | - | - | - | - | |
- | - | - | ||||
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 30 September 2022 % | At 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 30 September 2022 % | At 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.
Listedequities % | Unlisted (private company) securities† % | Unlisted(private company)bonds % | Net liquidassets % | Total % | |
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_1-2022-11-10.pdf
Absolute Performance to 30 September 2022 (unaudited)
|
|
|
|
|
Total return (%)# for five years | Total return (%)# For ten years | Total return (%)# 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 30 September 2022 £'000 | Six months to 30 September 2021 £'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 30 September 2022 £'000 | Six months to 30 September 2021 £'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 £'000 | Level 2 £'000 | Level 3 £'000 | Total £'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 £'000 | Level 2 £'000 | Level 3 £'000 | Total £'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 2022 No. of shares | At 31 March 2022 (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 NAV (book) | 2022 NAV (fair) | 2021 NAV (book) | 2021 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 (book) | NAV (fair) | Share price | NAV (book) | NAV (fair) | Share 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 mark(s) of the relevant LSE Group companies and is/are used by any other LSE Group company under license. All rights in the FTSE Russell indexes or data vest in the relevant LSE Group company which owns the index or the data. Neither LSE Group nor its licensors accept any liability for any errors or omissions in the indexes or data and no party may rely on any indexes or data contained in this communication. No further distribution of data from the LSE Group is permitted without the relevant LSE Group company's express written consent. The LSE Group does not promote, sponsor or endorse the content of this communication.
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.