Source - RNS
RNS Number : 7167S
Scottish Mortgage Inv Tst PLC
08 November 2019
 

RNS Announcement

 

 

 

Scottish Mortgage Investment Trust PLC

 

 

 

Legal Entity Identifier: 213800G37DCS3Q9IJM38

 

 

 

Results for the six months to 30 September 2019

 

The following is the unaudited Interim Financial Report for the six months to 30 September 2019 which was approved by the Board on 7 November 2019.

 

 

Interim management report

 

           

 

We are determined long term growth investors. We continue to believe that the opportunities available today are compelling. We have not become pessimists. But none of this resolute optimism is to deny that there are and will always be periods of underperformance. We have endured such a period over the last six months. Since the end of March our net asset value per share, with debt at fair value ('NAV'), rose but only by 3.2% compared with 9.9% for the FTSE All-World Index (both in total return terms). As is often the case, this has been exacerbated by the shares falling to a discount from the premium that has been the case for most of our recent history. The longer term performance record remains good. Over five years the NAV has gained 137.5% versus 86.5% and over 10 years it has increased by 415.1% against 204.4% (both against the index).

Although shareholders are well-aware that our focus is on the generation of long term increases in capital values we, in turn, are aware that a small but consistent dividend is of value to many investors. The Board is therefore recommending an unchanged interim dividend of 1.39p. This is despite a 18.5% fall in earnings on this occasion.

 

Portfolio

Whilst the short term oscillations of markets frequently contain little meaning and much noise, we always endeavour to winnow through events to discern if beneath emotions and market positioning there have been structural changes that we should reflect in our portfolio. The last six months have seen markets become so concerned at the current low levels of global economic growth and political harmony that the equities of preference have been those perceived to possess minimal sensitivity to the perils of stagnation. This is, though, no more our preoccupation than the equally common perception of twelve months ago that US economic growth was so formidable that interest rates would rise remorselessly.

But we must acknowledge underlying concerns where they exist. The most significant may be gathering evidence of cracks in the dominance of some of the internet platforms that we have invested in both heavily and successfully in the last decade. This suggests that their longevity may be more questionable than we thought. But there is an irony here. It's not in the US that these fissures have emerged despite market nerves provoked by regulatory and media scrutiny. Instead the issues have been in China. The threat to incumbents has come neither from regulators nor public discontent but from extraordinary dynamism. The major casualty has been Baidu (once a very significant holding) and the major disruptor has been Bytedance. That we own a holding in the unquoted Bytedance is some compensation.

The contrasting relative fortunes of Baidu and Bytedance are not isolated examples of a divergence between quoted and unquoted competitors. Contrary to the mood of the moment our experience has been that in both underlying progress and valuation, our unquoted companies are generally outperforming their listed counterparts. It is common knowledge that there are high profile examples of unquoted or recently listed companies that have suffered serious problems but it seems to us that generalising from these distinctly colourful sagas is misguided. The flaws of their business models were not impossible to identify. Although we are wary of treating our unquoted assets as a separate portfolio our experience remains encouraging. In aggregate since our first unquoted investment on 2 June 2010 to 30 September 2019 the return of all the stocks that we initially owned in unquoted form (whether now listed or not) has been 445.3% versus 341.4% for Scottish Mortgage overall and 183.8% for the FTSE All-World. In specific developments, two still unquoted companies, Ginkgo Bioworks (synthetic biology) and You and Mr Jones (digital advertising) have enjoyed substantial business progress and consequent valuation increases whilst the now quoted Meituan and HelloFresh continue to reverse initial market scepticism in impressive fashion.

 

Unquoted philosophy and commitment

This seems the appropriate moment to stress as strongly as we can that we believe that our ability and willingness to invest in unquoted companies at scale and globally as part of a portfolio offering high overall liquidity is critically important to both our future returns and to the unique proposition Scottish Mortgage can offer to individual shareholders. We are convinced that the long term risk taking, essential to economic and social progress, is continuing to migrate to private markets and at an accelerating pace. It's important that all our shareholders, from the smallest holders to the very largest, have access to such innovative enterprises and the enduring real value which they create. That we offer this whilst our ongoing charges have edged down once again (to 0.36% of average assets over the rolling twelve month period to the end of September) seems to us to be a worthwhile achievement that is not a common characteristic of the industry in general or managers of unquoted equities in particular. We have no intention of being deterred from this philosophy of investing or from driving charges lower.

 

Outlook

We are emphatically optimistic about the aggregate and underlying progress of our companies and therefore our portfolio. We see no evidence that the dim global economic conditions or the unappealing international political environment are undermining the tectonic shifts and structural advances driven by broadening and accelerating technological progress. We look forward to putting this case to investors in the months and years ahead.

 

 

The principal risks and uncertainties facing the Company are set out at the end of this document.

 

7 November 2019

 

Past performance is not a guide to future performance.

Total return information sourced from Refinitiv.

See disclaimer at end of this document.

 

 

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 Rules 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 Rules 4.2.8R (disclosure of related party transactions and changes therein).

 

By order of the Board

Fiona McBain

Chairman

7 November 2019

 

 

Income statement (unaudited)

 

 

For the six months ended

 30 September 2019

For the six months ended

 30 September 2018

 

 

 

 

 

 

 

 

Revenue

£'000

Capital

£'000

Total

£'000

Revenue

£'000

Capital

£'000

Total

£'000

 

Gains on investments

289,983 

289,983 

1,219,964 

1,219,964 

Currency losses

(10,394)

(10,394)

(12,186)

(12,186)

Income from investments and interest receivable

18,860 

18,860 

22,481 

22,481 

Investment management fee (note 3)

(11,613)

(11,613)

(11,270)

(11,270)

Other administrative expenses

(1,926)

(1,926)

(2,080)

(2,080)

Net return before finance costs and taxation

16,934 

267,976 

284,910 

20,401 

1,196,508 

1,216,909 

Finance costs of borrowings

(15,741)

(15,741)

(14,259)

(14,259)

Net return on ordinary activities before taxation

16,934 

252,235 

269,169 

20,401 

1,182,249 

1,202,650 

Tax on ordinary activities

(622)

(622)

(1,194)

(1,194)

Net return on ordinary activities after taxation

16,312 

252,235 

268,547 

19,207 

1,182,249 

1,201,456 

Net return per ordinary share (note 4)

1.10p

17.01p

18.11p

1.35p

83.03p

84.38p

Dividends proposed per ordinary share (note 5)

1.39p

 

 

1.39p

 

 

 

 

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)

 

 

At 30 September 2019

 

£'000

At 31 March 2019

(audited)

£'000

Fixed assets

 

 

Investments held at fair value through profit or loss (note 6)

8,297,688 

8,098,819 

Current assets

 

 

Debtors

5,932 

27,892 

Cash and cash equivalents

156,273 

35,587 

 

162,205 

63,479 

Creditors

 

 

Amounts falling due within one year:

 

 

Bank loans (note 7)

(296,194)

(280,112)

Debenture stock (note 7)

(20,305)

Other creditors

(13,446)

(28,907)

 

(329,945)

(309,019)

Net current liabilities

(167,740)

(245,540)

Total assets less current liabilities

8,129,948 

7,853,279 

Creditors

 

 

Amounts falling due after more than one year:

 

 

Loan notes

(274,536)

(274,526)

Debenture stocks

(128,254)

(148,823)

 

(402,790)

(423,349)

 

7,727,158 

7,429,930 

Capital and reserves

 

 

Share capital

74,239 

73,713 

Share premium account

764,521 

710,569 

Capital redemption reserve

19,094 

19,094 

Capital reserve

6,852,992 

6,602,885 

Revenue reserve

16,312 

23,669 

Shareholders' funds

7,727,158 

7,429,930 

Net asset value per ordinary share

(after deducting borrowings at book)*

520.4p

504.0p

Ordinary shares in issue (note 9)

1,484,780,880 

1,474,255,880 

*          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 2019

 

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 2019

73,713

710,569

19,094

6,602,885 

23,669 

7,429,930 

Net return on ordinary activities after taxation

-

-

-

252,235 

16,312 

268,547 

Shares issued (note 9)

526

53,952

-

54,478 

Dividends paid during the period (note 5)

-

-

-

(2,128)

(23,669)

(25,797)

Shareholders' funds at 30 September 2019

74,239

764,521

19,094

6,852,992 

16,312 

7,727,158 

 

 

For the six months ended 30 September 2018

 

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 2018

71,086

352,375

19,094

5,741,352 

3,849 

6,187,756 

Net return on ordinary activities after taxation

-

-

-

1,182,249 

19,207 

1,201,456 

Shares sold from treasury (note 9)

-

91,044 

-

42,069 

133,113 

Shares issued (note 9)

1,416

152,283 

-

153,699 

Dividends paid during the period (note 5)

-

-

-

(19,917)

(3,849)

(23,766)

Shareholders' funds at 30 September 2018

72,502

595,702

19,094

6,945,753 

19,207 

7,652,258 

 

* The Capital Reserve balance at 30 September 2019 includes investment holding gains on fixed asset investments of £4,129,108,000 (30 September 2018 - gains of £4,368,413,000).

 

The accompanying notes on the following pages are an integral part of the Financial Statements.

 

Cash flow statement (unaudited)

 

 

Six months to

 30 September 2019

 

£'000

Six months to

 30 September 2018

 

£'000

Cash flows from operating activities

 

 

Net return on ordinary activities before taxation

269,169 

1,202,650 

Gains on investments

(289,983)

(1,219,964)

Currency losses

10,394 

12,186 

Finance costs of borrowings

15,741 

14,259 

Overseas withholding tax refunded

145 

1,665 

Overseas withholding tax incurred

(767)

(1,194)

Changes in debtors and creditors

(748)

763 

Cash from operations

3,951 

10,365 

Interest paid

(16,053)

(12,437)

Net cash outflow from operating activities

(12,102)

(2,072)

Net cash inflow/(outflow) from investing activities

98,419 

(430,173)

Equity dividends paid (note 5)

(25,797)

(23,766)

Stamp duty paid on shares bought back

(67)

Shares sold from treasury

133,113 

Shares issued

54,478 

150,995 

Bank loans repaid

(28,221)

Bank loans drawn down and loan notes issued (note 7)

226,207 

Net cash inflow from financing activities

28,681 

458,261 

Increase in cash and cash equivalents

114,998 

26,016 

Exchange movements

5,688 

7,811 

Cash and cash equivalents at start of period

35,587 

34,974 

Cash and cash equivalents at end of period

156,273 

68,801 

 

†      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 2019

 

More than 5 years

 

 

2-5 years

 

Less than 2 years

Name

% of total assets

 

Name

% of total assets

 

Name

% of total assets

Amazon.com10

9.0

 

Netflix

2.4

 

Ant InternationalU

2.5

Illumina

7.5

 

Ginkgo BioworksU

1.9

 

Tempus Labs IncU

1.0

Alibaba GroupP

6.1

 

Delivery Hero

1.9

 

Shopify

0.8

Tencent Holdings10

6.1

 

Spotify Technology SAP

1.8

 

CarbonU

0.7

Tesla Inc

4.6

 

You & Mr JonesU

1.5

 

BytedanceU

0.7

ASML

3.8

 

NVIDIA

1.4

 

ZiplineU

0.7

Kering10

3.3

 

Meituan DianpingP

1.3

 

Space Exploration

  TechnologiesU

0.7

Ferrari

3.0

 

TransferWiseU

1.2

 

Inditex

2.4

 

GrailU

1.0

 

Pinduoduo

0.6

Alphabet10

1.7

 

AnaplanP

0.8

 

TaniumU

0.5

Facebook

1.4

 

Indigo AgricultureU

0.8

 

Uptake TechnologiesU

0.5

Workday

1.4

 

Bluebird Bio Inc

0.8

 

HeartFlowU

0.5

Intuitive Surgical10

1.3

 

Rocket Internet

0.7

 

Recursion

  PharmaceuticalsU

0.5

Zalando

1.3

 

HelloFreshP

0.7

Ctrip.com10

1.2

 

Vir BiotechnologyU

0.7

 

Away Inc (JRSK) U

0.5

Housing Development

  Finance Corporation10

1.1

 

LyftP

0.6

 

The Production BoardU

0.4

ThumbtackU

0.6

 

Bolt ThreadsU

0.4

Baidu10

1.1

 

Orchard TherapeuticsP

0.6

 

NIOP

0.4

Kinnevik

1.1

 

Auto1U

0.4

 

Full Truck AllianceU

0.3

Atlas Copco10

1.0

 

JAND Inc (Warby Parker) U

0.4

 

AffirmU

0.3

Renishaw

0.6

 

Denali TherapeuticsP

0.4

 

KSQ TherapeuticsU

0.2

Essence HealthcareU

0.6

 

Palantir TechnologiesU

0.3

 

AuroraU

0.2

Innovation Works

  Development FundU

0.3

 

AirbnbU

0.3

 

Grubhub

0.2

Clover HealthU

0.3

 

Slack TechnologiesP

0.2

Alnylam

  Pharmaceuticals

0.3

 

EventbriteP

0.3

 

Zoom

0.2

Rubius TherapeuticsP

0.3

 

Sana BiotechnologyU

0.1

WI Harper Fund VIIIU

0.1

 

Intarcia TherapeuticsU

0.2

 

ARCH Ventures Fund XU

<0.1

WI Harper Fund VIIU

0.1

 

ZocdocU

0.2

 

Arch Ventures Fund X

  OverageU

<0.1

Level E Maya Fund

0.1

 

Unity BiotechnologyP

0.2

 

 

 

 

CureVacU

0.2

 

 

 

 

 

 

ARCH Ventures Fund IXU

0.1

 

 

 

 

 

 

Funding CircleP

0.1

 

 

 

 

 

 

UdacityU

0.1

 

 

 

 

 

 

Sinovation Fund IIIU

0.1

 

 

 

Total

60.5

 

Total

24.6

 

Total

13.1

 

U        Denotes unlisted security.

p            Denotes listed security previously held in the portfolio as an unlisted security.

10          Denotes security held for more than 10 years.

Net liquid assets represent 1.8% of total assets. See Glossary of Terms and Alternative Performance Measures at the end of this announcement.

 

List of investments at 30 September 2019 (unaudited)

 

Name

Business

Fair value

30 September 2019

£'000

% of total assets

Contribution to absolute performance*

%

Notes

Fair value

31 March

2019

£'000

 

Amazon.com

Online retailer and cloud computing

762,431

9.0

0.4 

 

778,843

 

Illumina

Biotechnology equipment

634,701

7.5

0.5 

 

613,045

 

Alibaba GroupP

Online retailing and financial services

516,072

6.1

 

(0.2)

 

532,441

 

Tencent Holdings

Internet services

515,163

6.1

(0.3)

 

531,946

 

Tesla Inc

Electric cars, autonomous driving

  and solar energy

389,756

4.6

(0.6)

 

428,304

 

ASML

Lithography

324,645

3.8

1.2 

 

233,003

 

Kering

Luxury goods producer and retailer

281,205

3.3

(0.1)

 

299,236

 

Ferrari

Luxury automobiles

250,829

3.0

0.7 

 

246,825

 

Ant International

  Limited Class C Ord.U

Online financial services platform

212,275

2.5

0.3 

 

191,858

 

Netflix

Subscription service for tv shows

  and movies

201,685

2.4

(0.6)

 

254,115

 

Inditex

Global clothing retailer

198,970

2.4

0.3 

 

178,783

 

Ginkgo Bioworks Inc

  Series D Pref.U

Bio-engineering company

76,637

0.9

0.7 

 

22,796

 

Ginkgo Bioworks Inc

  Series C Pref.U

Bio-engineering company

74,524

0.9

0.7 

 

21,867

 

Ginkgo Bioworks Inc

  Series E Pref.U

Bio-engineering company

12,883

0.1

New purchase

-

 

 

 

164,044

1.9

1.4 

 

44,663

 

Delivery Hero

Online food delivery service

162,182

1.9

0.5 

 

124,960

 

Spotify Technology SAP

Online music streaming service

153,136

1.8

(0.3)

 

176,293

 

Alphabet

Holding company for Google and

  associated ventures

145,156

1.7

0.1 

 

132,109

 

You & Mr Jones Class

  A UnitsU

Digital advertising

122,535

1.5

0.8 

 

50,650

 

NVIDIA

Visual computing

122,227

1.4

 

119,284

 

Facebook

Social networking site

119,499

1.4

0.2 

 

105,764

 

Workday

Enterprise information technology

116,054

1.4

(0.1)

 

124,657

 

Meituan DianpingP

Local services aggregator

107,964

1.3

0.5 

 

67,254

 

Intuitive Surgical

Surgical robots

107,048

1.3

 

106,974

 

Zalando

International online clothing retailer

105,635

1.3

0.3 

Significant reduction

116,867

 

Transferwise Ltd

  Series D Pref.U

Online money transfer services

47,929

0.6

 

45,327

 

Transferwise Ltd

  Series Ord.U

Online money transfer services

20,372

0.3

 

19,266

 

Transferwise Ltd

  Series A Pref.U

Online money transfer services

11,147

0.1

 

10,542

 

Transferwise Ltd

  Series B Pref.U

Online money transfer services

10,139

0.1

 

9,588

 

Transferwise Ltd

  Series E Pref.U

Online money transfer services

5,797

0.1

 

5,482

 

Name

Business

Fair value

30 September 2019

£'000

% of total assets

Contribution to absolute performance*

%

Notes

Fair value

31 March

2019

£'000

Transferwise Ltd

  Series Seed Pref.U

Online money transfer services

2,713

<0.1

 

2,565

Transferwise Ltd

  Series C Pref.U

Online money transfer services

426

<0.1

 

403

 

 

98,523

1.2

 

93,173

Ctrip.com

Travel agent

97,996

1.2

(0.5)

 

138,253

Housing Development

  Finance Corporation

Indian mortgage provider

96,109

1.1

0.1 

 

92,568

Baidu

Online search engine

93,428

1.1

(0.6)

 

141,665

Kinnevik

Investment company

90,783

1.1

0.1 

 

84,359

Atlas Copco

Engineering

87,312

1.0

0.2 

 

71,839

Grail Inc Series B

  Pref.U

Clinical stage biotechnology

  company

86,544

1.0

0.3 

 

66,768

Tempus Labs Inc

  Series E Pref.U

Offers molecular diagnostics tests for

  cancer and aggregates clinical

  oncology records

62,224

0.7

0.1 

Significant addition

40,849

Tempus Labs Inc

  Series F Pref.U

Offers molecular diagnostics tests for

  cancer and aggregates clinical

  oncology records

22,860

0.3

New purchase

-

 

 

85,084

1.0

0.1 

 

40,849

Anaplan Inc CommonP

Enterprise planning software

71,324

0.8

0.2 

 

56,535

Indigo Agriculture Inc

  Series D Pref.U

Analyses plant microbiomes to

  increase crop yields

49,321

0.6

(0.1)

 

55,273

Indigo Agriculture Inc

   Series E Pref. U

Analyses plant microbiomes to

  increase crop yields

21,615

0.2

 

22,152

 

 

70,936

0.8

(0.1)

 

77,425

Shopify

Cloud-based commerce platform

  provider

65,910

0.8

0.3 

 

41,338

Bluebird Bio Inc

Provider of biotechnological

  products and services

64,949

0.8

(0.5)

 

123,604

Carbon Inc Series D

   Pref.U

Manufactures and develops 3D

  printers

38,908

0.4

 

36,796

Carbon Inc Series E

  Pref.U

Manufactures and develops 3D

  printers

24,345

0.3

 

23,023

 

 

63,253

0.7

 

59,819

Bytedance Ltd Series

  E Pref.U

Social media

60,862

0.7

New purchase

-

Zipline International Inc

  Series D Pref.U

Logistics company that designs,

  manufactures and operates drones

  to deliver medical supplies

32,460

0.4

 

30,697

Zipline International Inc

  Series C Pref.U

Logistics company that designs,

  manufactures and operates drones

  to deliver medical supplies

27,713

0.3

 

26,209

 

 

60,173

0.7

 

56,906

Rocket Internet

Internet start-up factory

58,883

0.7

0.1 

 

54,691

HelloFreshP

Grocery retailer

57,090

0.7

0.3 

 

33,661

                         

 

Name

Business

Fair value

30 September 2019

£'000

% of total assets

Contribution to absolute performance*

%

Notes †

Fair value

31 March

2019

£'000

Vir Biotechnology Inc

   Series A Pref.U

Biotechnology company developing

   anti-infective therapies

37,897

0.5

0.1 

 

30,697

Vir Biotechnology Inc

  Series B Pref.U

Biotechnology company developing

   anti-infective therapies

0.2

 

15,349

 

 

56,845

0.7

0.1 

 

46,046

Space Exploration

  Technologies Corp

  Series J Pref.U

Designs, manufactures and

  launches rockets and spacecraft

56,019

0.7

0.1 

 

50,502

Pinduoduo Inc

Chinese e-commerce

54,576

0.6

0.2 

 

39,711

Renishaw

Electronic equipment

53,026

0.6

 

53,663

Lyft IncP

Ridesharing services

51,171

0.6

(0.5)

 

92,448

Thumbtack Inc Series

  G Pref.U

Online directory service for local

  businesses

40,575

0.5

0.2 

 

25,791

Thumbtack Inc Series

  H Pref.U

Online directory service for local

   businesses

0.1

New purchase

-

 

 

48,690

0.6

0.2 

 

25,791

Orchard TherapeuticsP

Gene therapy for rare diseases

46,499

0.6

(0.3)

 

64,778

Essence Healthcare

  Series 3 Pref.U

Cloud-based health provider

45,673

0.6

 

46,105

Tanium Inc Class B

  CommonU

Provides security and systems

  management solutions

45,267

0.5

 

46,813

Uptake Technologies

  Inc Series D Pref.U

Designs and develops enterprise

  software

44,861

0.5

 

47,427

HeartFlow Inc Series

  E Pref.U

Develops software for

  cardiovascular disease diagnosis

  and treatment

42,601

0.5

 

40,065

Recursion

  Pharmaceuticals Inc

  Series C Pref.U

Uses image recognition/machine

  learning and automation to

  improve drug discovery

40,575

0.5

 

38,372

JRSK Inc (Away)

  Series D Pref.U

Luggage designer, manufacturer

  and retailer

22,823

0.3

New purchase

-

JRSK Inc (Away)

  Series Seed Pref.U

Luggage designer, manufacturer

  and retailer

0.2

New purchase

-

 

 

38,038

0.5

 

-

Auto1Group GmbH

  Series E Pref.U

Online retailer of used cars

36,234

0.4

0.1 

 

31,269

JAND Inc (Warby

  Parker) Series D Pref.U

Online and physical glasses retailer

19,179

0.2

 

17,087

JAND Inc (Warby

  Parker) Series A

  CommonU

Online and physical glasses retailer

12,367

0.1

 

11,019

JAND Inc (Warby

  Parker) Series E Pref.U

Online and physical glasses retailer

0.1

 

4,220

 

 

36,207

0.4

 

32,326

Denali TherapeuticsP

Biotechnology

36,174

0.4

(0.2)

 

51,851

The Production Board

  Series A-2 Pref.U

Holding company for food

  technology companies

35,056

0.4

 

31,925

Bolt Threads Inc

  Series D Pref.U

Natural fibres and fabrics

  manufacturer

29,625

0.4

 

31,182

Name

Business

Fair value

30 September 2019

£'000

% of total assets

Contribution to absolute performance*

%

Notes †

Fair value

31 March

2019

£'000

NIO IncP

Designs and manufactures electric

  and autonomous vehicles

28,248

0.4

(0.8)

 

87,726

Full Truck Alliance Ltd

  Series A-15 Pref.U

Freight-truck matching platform

27,830

0.3

0.1 

 

23,023

Palantir Technologies

   Inc Series J Pref.U

Data integration software and

  service provider

26,517

0.3

 

23,394

Airbnb Inc Series E

  Pref.U

Online market place for travel

  accommodation

25,946

0.3

0.1 

 

20,648

Clover Health

  Investments Series D

  Pref.U

Healthcare insurance provider

23,862

0.3

0.1 

 

19,190

Innovation Works

  Development FundU

Venture capital fund

23,488

0.3

 

22,300

Eventbrite IncP

Online ticketing service

23,405

0.3

 

23,924

Affirm Inc Series F

  Pref.U

Online platform which provides

  lending and consumer credit

  services

23,127

0.3

 

21,872

Rubius Therapeutics

  IncP

Biotechnology

21,794

0.3

(0.3)

 

47,558

Alnylam

  Pharmaceuticals

Biotechnology

21,319

0.3

 

23,459

Intarcia Therapeutics

  Inc Convertible BondU

Implantable drug delivery system

12,057

0.1

 

11,511

Intarcia Therapeutics

  Inc Series EE Pref.U

Implantable drug delivery system

0.1

 

8,039

 

 

20,557

0.2

 

19,550

Aurora Innovation Inc

  Series B Pref.U

Developer of driverless vehicle

  technology

20,287

0.2

New purchase

-

KSQ Therapeutics Inc

   Series C Pref.U

Biotechnology company

20,287

0.2

 

19,186

Zoom

Remote conferencing service

  provider

18,504

0.2

0.1 

New purchase

-

Grubhub

US online food services

17,808

0.2

 

20,797

Slack Technologies IncP

Enterprise messaging platform

17,792

0.2

0.1 

 

10,338

Zocdoc Inc Series D-2

  Pref.U

Online platform for searching for

  doctors and booking

  appointments

17,698

0.2

 

17,492

Unity BiotechnologyP

Clinical stage biotechnology

  company

15,909

0.2

 

20,003

CureVac AG Series

  B Pref.U

Biotechnology

14,744

0.2

(0.1)

 

21,542

ARCH Ventures Fund

  IXU

Venture capital fund to invest in

  biotech start-ups

11,183

0.1

 

8,242

Funding CircleP

Facilitates loans to small and

  medium enterprises

10,260

0.1

(0.4)

 

42,748

Udacity Inc Series D Pref.U

Online education

9,673

0.1

 

9,606

Sinovation Fund IIIU

Venture capital fund

8,793

0.1

 

8,256

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Name

Business

Fair value

30 September 2019

£'000

% of total assets

Contribution to absolute performance*

%

 

 

 

Notes †

Fair value

31 March

2019

£'000

Sana Biotechnology

  Inc Series A-2 Pref.U

Biotechology company creating and

  delivering engineered cells as

  medicine

8,061

0.1

 

6,395

WI Harper Fund VIIIU

Venture capital fund

7,764

0.1

 

6,970

WI Harper Fund VIIU

Venture capital fund

6,996

0.1

Return of capital

9,885

Level E Maya Fund

Artificial intelligence based

  algorithmic trading

4,969

0.1

 

4,846

ARCH Ventures Fund

  XU

Venture capital fund to invest in

  biotech start-ups

710

<0.1

Additional investment

413

ARCH Ventures Fund

  X OverageU

Venture capital fund to invest in

  biotech start-ups

649

<0.1

Additional investment

397

Total Investments

 

8,297,688

98.2

 

 

 

Net liquid assets#

 

148,759

1.8

 

 

 

Total Assets#

 

8,446,447

100

 

 

 

 

 

*    Contribution to absolute performance has been calculated on a total return basis over the period 1 April 2019 to 30 September 2019. 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 2019. 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.

 

U   Denotes unlisted security. 

p    Denotes listed security previously held in the portfolio as an unlisted security.

 

The following investments were completely sold during the period: Home24, SurveyMonkey and Tableau Software

 

Source: Baillie Gifford/StatPro. See disclaimer at the end of this announcement.

 

Past performance is not a guide to future performance.

 

Distribution of assets* (unaudited)

 

 

 

At

30 September 2019

%

At

31 March 2019

%

North America

54.7

52.8

 

United States

53.9

52.3

 

Canada

0.8

0.5

Europe

24.2

24.2

 

United Kingdom

2.6

3.5

 

Eurozone

17.7

16.6

 

Developed Europe (non Euro)

3.9

4.1

Asia

21.1

23.0

 

China

20.0

21.9

 

India

1.1

1.1

Total assets (before deduction of loans and debentures)

100.0

100.0

         

 

 

 

 

Listed Equities

%

Unlisted Securities

%

Unlisted

Bonds

%

Net Liquid Assets

%

Total

%

30 September 2019

76.0

22.1

0.1

1.8

100.0

31 March 2019

82.2

17.3

0.1

0.4

100.0

 

*      Total assets before deduction of debentures, long and short term borrowings. See Glossary of Terms and Alternative Performance Measures at the end of this announcement.

†      Includes holdings in preference shares and ordinary shares.

 

 

Notes to the condensed financial statements (unaudited)

 

1.    

The condensed Financial Statements for the six months to 30 September 2019 comprise the statements set out in the previous pages 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 October 2019. 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 2019 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 2019.

 

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 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. 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 435 of the Companies Act 2006. The financial information for the year ended 31 March 2019 has been extracted from the statutory accounts which have been filed with the Registrar of Companies. The Auditor's Report on those accounts was not qualified, did not include a reference to any matter to which the Auditor 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 2019

£'000

Six months to

30 September 2018

£'000

Revenue return on ordinary activities after taxation

16,312

19,207

Capital return on ordinary activities after taxation

252,235

1,182,249

Total net return

268,547

1,201,456

Weighted average number of ordinary shares in issue

1,482,684,432

1,423,915,955

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.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Notes to the condensed financial statements (unaudited) (ctd)

 

5.    

Dividends

Six months to

 30 September 2019

£'000

Six months to

30 September 2018

£'000

Amounts recognised as distributions in the period:

 

 

Previous year's final dividend of 1.74p (2018 - 1.68p), paid 2 July 2019

25,797

23,766

 

25,797

23,766

Dividends proposed in the period:

 

 

Interim dividend for the year ending 31 March 2020 of 1.39p (2019 - 1.39p)

20,638

20,229

 

20,638

20,229

 

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 6 December 2019 to shareholders on the register at the close of business on 22 November 2019.  The ex-dividend date is 21 November 2019. The Company's Registrars offer a Dividend Reinvestment Plan and the final date for elections for this dividend is 25 November 2019.

6.    

Fair Value

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. Fair value measurements are categorised on the basis of the lowest level input that is significant to the fair value measurement.

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 2019

Level 1

£'000

Level 2

£'000

Level 3

£'000

Total

£'000

Equities/funds

6,419,597

-

-

6,419,597

Unlisted ordinary shares

-

-

290,282

290,282

Unlisted preference shares

-

-

1,575,752

1,575,752

Unlisted convertible note

-

-

12,057

12,057

Total financial asset investments

6,419,597

-

1,878,091

8,297,688

 

 

 

 

As at 31 March 2019 (audited)

Level 1

£'000

Level 2

£'000

Level 3

£'000

Total

£'000

Equities/funds

6,680,183

-

-

6,680,183

Unlisted ordinary shares

-

-

268,956

268,956

Unlisted preference shares

-

-

1,138,169

1,138,169

Unlisted convertible note

-

-

11,511

11,511

Total financial asset investments

6,680,183

-

1,418,636

8,098,819

               

 

Notes to the condensed financial statements (unaudited) (ctd)

 

During the period an investment with a book cost of £8,644,000 was 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.

Unlisted Investments

The Company's holdings in unlisted investments are categorised as Level 3. Unlisted 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' unlisted 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 in the Company's unlisted portfolio:

-      Multiples;

-      Industry Valuation Benchmarks; and

-      Available Market Prices.

The nature of the unlisted 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 unlisted investments are valued according to a three monthly cycle of measurement dates. The fair value of the unlisted investments will be reviewed before the next scheduled three monthly measurement date on the following occasions:

-      At the year end and half year end of the Company; and

-      Where there is an indication of a change in fair value as defined in the IPEV guidelines (commonly referred to as 'trigger' events).

The total value of the borrowings (at book) is £719,289,000 (31 March 2019 - £703,461,000).

The bank loans falling due within one year are a US$200 million revolving 2 year loan with National Australia Bank Limited ('NAB'), a US$80 million revolving 3 year loan with The Royal Bank of Scotland International Limited ('RBS') and a US$85 million revolving 2 year loan with RBS (31 March 2019 - US$200 million revolving 2 year loan with NAB, a US$80 million revolving 3 year loan with RBS and a US$85 million revolving 2 year loan with RBS).

The debenture stock maturing within one year is the £20 million 8-14% stepped interest debenture (maturing 30 September 2020).

There were no bank loans falling due in more than one year (31 March 2019 - none).

During the period the US$85 million revolving 2 year loan with RBS was replaced with a US$85 million revolving 2 year loan with RBS.

8.

The fair value of the borrowings at 30 September 2019 was £798,748,000 (31 March 2019 - £750,745,000).

 

 

 

Notes to the condensed financial statements (unaudited) (ctd)

 

  

 

 

9.

                                  

 

At

 30 September 2019

Number of shares

At

31 March 2019

(audited)

Number of shares

Share capital: Ordinary shares of 5p each

 

 

Allotted, called up and fully paid

1,484,780,880

1,474,255,880

 

 

 

 

In the six months to 30 September 2019, the Company issued 10,525,000 ordinary shares at a premium to net asset value raising net proceeds of £54,477,000 (year to 31 March 2019 - 26,367,671 shares sold from treasury raising net proceeds of £133,113,000 and issued 52,525,000 ordinary shares, with a nominal value of £2,627,000, at a premium to net asset value, raising proceeds of £269,777,000).

In the six months to 30 September 2019 no ordinary shares were bought back (year to 31 March 2019 - nil). At 30 September 2019 the Company had authority remaining to buy back 221,658,011 ordinary shares.

10.

Transaction costs on acquisitions within the portfolio amounted to nil (30 September 2018 - £517,000) and transaction costs on sales amounted to £133,000 (30 September 2018 - £246,000). 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.

 

 

 

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 or fair value. An explanation of each 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 2019

31 March 2019

Net Asset Value per ordinary share (borrowings at book value)

520.4p

504.0p

Shareholders' funds (borrowings at book value)

£7,727,158k

£7,429,930k

Add:  book value of borrowings

£719,289k

£703,461k

Less: fair value of borrowings

(£798,748k)

(£750,745k)

Net Asset Value (borrowings at fair value)

£7,647,699k

£7,382,646k

Shares in issue at year end (excluding treasury shares)

1,484,780,880

1,474,255,880

Net Asset Value per ordinary share (borrowings at fair value)

515.1p

500.8p

 

 

 

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.

 

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.

 

Turnover (APM)

Annual turnover is calculated by dividing the lower of purchases and sales by the average of opening and closing total assets.

 

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 2019

30 September 2018

 

 

NAV

(book)

NAV

(fair)

Share

price

NAV

(book)

NAV

(fair)

Share

price

Closing NAV per share/share price

(a)

520.4p

515.1p

503.5p

527.7p

524.9p

541.3p

Dividend adjustment factor*

(b)

1.0033

1.0033

1.0036

1.0034

1.0040

1.0031

Adjusted closing NAV per share/share price

(c = a x b)

522.1p

516.8p

505.3p

529.5p

527.0p

543.0p

Opening NAV per share/share price

(d)

504.0p

500.8p

512.0p

443.5p

439.9p

442.2p

Total return

(c ÷ d) - 1

3.6%

3.2%

(1.3%)

19.4%

19.8%

22.8%

                 

*      The dividend adjustment factor is calculated on the assumption that the final dividend of 1.74p (2018 - 1.68p) paid by the Company during the period was reinvested into shares of the Company at the cum income NAV per share/share price, as appropriate, at the ex-dividend date.

 

Principal Risks and Uncertainties

The principal risks facing the Company are financial risk, unlisted investments risk, investment strategy risk, discount risk, regulatory risk, custody and depositary risk, operational risk, leverage risk and political risk. An explanation of these risks and how they are managed is set out on pages 8 and 9 of the Company's Annual Report and Financial Statements for the year to 31 March 2019 which is available on the Company's website: www.scottishmortgageit.com.‡ The principal risks and uncertainties have not changed since the date of that report.

Shareholders will be notified on or around 20 November 2019 that the Interim Financial Report has been published and will be available on the Scottish Mortgage page of the Managers' website www.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 www.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 £207 billion under management and advice in active equity and bond portfolios for clients in the UK and throughout the world (as at 7 November 2019).

 

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.

 

7 November 2019

 

For further information please contact:

 

Catharine Flood, Baillie Gifford & Co

Tel: 0131 275 2718

 

Campbell MacKenzie, Baillie Gifford & Co  

Tel: 0131 275 3174

 

Mark Knight, Director, Four Communications

Tel: 0203 761 4438 or 07803 758810

 

 

 

 

 

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 https://www.gov.uk/government/publications/exchange-of-information-account-holders.

 

Third party data provider disclaimer

 

No third party data provider ('Provider') makes any warranty, express or implied, as to the accuracy, completeness or timeliness of the data contained herewith nor as to the results to be obtained by recipients of the data. No Provider shall in any way be liable to any recipient of the data for any inaccuracies, errors or omissions in the index data included in this document, regardless of cause, or for any damages (whether direct or indirect) resulting therefrom.

No Provider has any obligation to update, modify or amend the data or to otherwise notify a recipient thereof in the event that any matter stated herein changes or subsequently becomes inaccurate.

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