Annual Financial Report and Circular
Scottish Mortgage Investment Trust PLC
Circular and Annual Financial Report
The Company has today published a circular (the "Circular") containing notice of the Annual General Meeting of the Company. In addition to the customary business conducted at an annual general meeting the notice also includes additional matters, as outlined in the Chairman's Statement, and the Directors are seeking approval to:
§ sub-divide each current ordinary share of 25p into five ordinary shares of 5p to assist monthly savers and to improve liquidity of the Company's shares;
§ grant the Directors the powers to allot new shares, issue existing shares held in Treasury and make market purchases of the Company's own shares;
§ adopt a new investment objective and policy which, amongst other matters, removes the hurdle of generating real growth in income from the objective while keeping the intention to grow the dividend and removes the current investment restriction whereby individual holdings of over 3% of total assets must together be less than 40% of total assets; and
§ adopt new Articles of Association which will remove the prohibition of the distribution of any surplus arising from the realisation of investments.
Full details of all the resolutions are set out in the Circular. Copies of the Circular are available for inspection during normal business hours on any weekday (Saturdays, Sundays and public holidays excepted) at the offices of Baillie Gifford & Co, Calton Square, 1 Greenside Row, Edinburgh EH1 3AN.
A copy of the Circular will also be available free of charge via the National Storage Mechanism at http://www.morningstar.co.uk/uk/NSM
Expected Timetable
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Latest time and date for receipt of forms of direction |
4.30 p.m. on 19 June 2014 |
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Latest time and date for receipt of forms of proxy |
4.30 p.m. on 24 June 2014 |
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Annual General Meeting |
4.30 p.m. on 26 June 2014 |
A copy of the Annual Report and Financial Statements for the year ended 31 March 2014 has been submitted electronically to the National Storage Mechanism and will shortly be available for inspection at http://www.morningstar.co.uk/uk/NSM
The Circular and Annual Report and Financial Statements for the year ended 31 March 2014 are also available on Scottish Mortgage's page of the Baillie Gifford website at:http://www.scottishmortgageit.co.uk
The unedited full text of those parts of the Annual Report and Financial Statements for the year ended 31 March 2014 which require to be published by DTR 4.1 is set out on the following pages.
Baillie Gifford & Co
Company Secretaries
23 May 2014
Chairman's statement
I am pleased to report on another strong year for our Shareholders. Scottish Mortgage's net asset value (NAV) total return (capital and income) for the year to the end of March 2014 was 23.1% and the share price total return was 28.9%; these far surpassed the benchmark (the FTSE All-World Index) total return of 6.8%. It was a landmark year for the Company in many aspects: our share price crossed the £10 threshold, our gross assets exceeded £3 billion and by some measures we became the largest UK conventional investment trust.
Again I urge Shareholders not to pay too much attention to short term numbers, no matter how good they may be. While the Company is required to report these on an annual basis, the investment approach adopted has a much longer horizon. The five and ten year results which the Board uses to assess the Managers' performance are much more relevant and, likewise, excellent.
The table below shows the five and ten year total returns in percentage terms to 31 March 2014 and also includes the Association of Investment Companies (AIC) Global Sector average.
|
|
Total Return % |
|
|
|
Five Years |
Ten Years |
|
NAV |
196 |
241 |
|
Share Price |
226 |
314 |
|
FTSE All-World Index |
101 |
132 |
|
Global Sector Av - NAV |
109 |
149 |
|
Global Sector Av - share price |
108 |
173 |
Source: AIC/Thomson Reuters Datastream
The figures speak for themselves and suggest that active management can provide superior returns both in absolute terms and relative to an index.
The usual caveats apply: past performance will not necessarily be repeated; Scottish Mortgage is best suited to those who adopt a similarly long investment horizon and there will undoubtedly be periods of under-performance in both absolute and relative terms. In congratulating the Managers on their excellent performance, I would add that this has been achieved despite our portfolio being held as to nearly 90% in non-sterling denominated investments through a year when sterling has been among the world's strongest currencies.
The Managers' Report provides an investment commentary which is well worth reading. It suffices to say here that a long term and global approach driven by thorough research of individual companies as adopted by the Managers enjoys the Board's full confidence.
Low Cost
I am very pleased that, in agreement with the Managers, Scottish Mortgage announced a reduction in the annual management fee from 0.32% to 0.30% effective from 1 April 2014. Compared to other funds the level of fee was already modest and this reduction improves this advantage. It is hard to overstate the compound positive long term impact of low charges on Shareholder returns; we believe that the lion's shares of investment returns need to accrue to Shareholders and not to third parties. For the year just passed, the figure for Scottish Mortgage's "Ongoing Charges Ratio" is just 0.50%, one of the lowest figures reported on the investment trust sector.
Earnings and dividends
As foreseen in last year's Statement, earnings per share were lower this year, totalling 12.14p as opposed to 15.59p in 2012/13. A final dividend of 7.6p is proposed which gives a total of 14.5p for the year, an increase of 3.6%. If approved this will entail using 2.4p of revenue reserves.
With an objective to maximise total returns, Scottish Mortgage is primarily a growth trust. Dividends form part of the total return and are valued by many Shareholders. However, the Board considers it important that the Managers are not constrained as growth investors by having to chase income when constructing the portfolio. To this end a Resolution is to be proposed at the AGM to amend the Objective and Policy so that while dividend growth remains within the Objective, the aspiration to increase the dividend in real terms (that is, ahead of inflation) is removed so that the potential to achieve growth and maximise total returns is not constrained. The intention remains to grow the dividend, but not necessarily ahead of inflation.
There are Revenue Reserves of 26p per share set aside to cover any shortfall in earnings; furthermore permission is being sought this year to amend the Articles of Association to delete the provision which expressly prohibits the distribution of any surplus arising from the realisation of any investments. While your Board has no immediate plans to make use of this provision, it will give the Company greater flexibility in its distribution policy in the long term.
Both of these Resolutions are set out in detail in the Circular that accompanies the Annual Report and Financial Statements.
A further change that has been made and has been approved by the Board is a revision to the allocation of the investment management fee and borrowing costs from 50% against revenue and 50% against capital to 25% against revenue and 75% against capital. This change has been applied from 1 April 2014 and reflects more realistically the recent split of returns from the portfolio and indeed where we expect them to be derived in the future.
Gearing
Scottish Mortgage remains committed to the use of gearing and gearing levels were maintained throughout the year.
Buybacks and Share Issuance
Over the year the shares moved from a discount of 4.1% to close the year at a premium of 0.4% and at one point the premium rose to 4.2%. The proposition offered by Scottish Mortgage has been clearly articulated by the Board and Managers and there has been extensive press coverage which, along with other marketing initiatives, has led to demand for shares from existing and new investors. It is particularly gratifying to see that there has been growing demand from direct investors through the Baillie Gifford Savings Schemes and also through other share dealing platforms.
As the provision of liquidity is important at times when supply and demand do not immediately coincide, during the year 5,805,000 shares were bought back by the Company and were placed in Treasury for subsequent re-issue. Buying back shares, even at narrow discounts, does enhance net asset value for continuing shareholders. A total of 39,006,279 ordinary shares are now held in Treasury.
Permission is again being sought to reissue shares from Treasury at a premium to NAV and also to issue new shares. The premium is specified as that reached when net asset value is calculated on the basis of the Company's debt at fair value, as distinct from par value. This is the standard industry measure as used by the AIC when compiling its statistics. The accompanying Circular gives full details of the terms of any issuance and of the authorities being sought from Shareholders to meet regulatory requirements and comply with the Listing Rules.
If the share price moves to a premium and there is unfulfilled demand, the intention is that shares will be issued from Treasury and this will be undertaken with a long term purpose in mind rather than on a short term opportunistic basis. Increasing the scale of the Company means that the burden of costs is shared across a wider base, while the provision of liquidity in our shares remains an important factor. While no discount limit or target is set, the Board is aware that Shareholders will expect the Company to continue to act to provide liquidity and buy back shares when supply exceeds demand. The Board's actions in this regard are intended to establish levels of trust and confidence for the future.
Proposed Sub-Division of Shares
The share price exceeded £10 for much of the period and closed the year at £10.44. A high share price can be unattractive to new investors while also making the administration of Savings Schemes difficult since small amounts are invested on a regular basis and a large share price presents an unhelpful lack of granularity as savers cannot buy fractions of shares. To improve marketability and as described in the accompanying Circular, a sub-division of each of the current ordinary shares of 25p shares into five ordinary shares of 5p nominal value is proposed. This means that, if the Resolution is approved, your holding will be multiplied by five as of 30 June 2014, while the share price in the market will presumably adjust accordingly. For those who hold their shares in certificated form, new share certificates will be issued and the old certificates will become invalid.
Changes to Investment Policy
I have already highlighted that permission is being sought from Shareholders to remove the hurdle of generating real growth in income from the Objective; this Resolution also asks you to approve other changes to the Objective and Investment Policy. The principal change for which approval is being sought is the removal of the current investment restriction whereby individual holdings of over 3% of total assets must together be less than 40% of total assets. This historic restriction has meant that successful investments with the potential for further growth have had to be reduced. This runs counter to the way the portfolio is now managed whereby companies are backed for the long term and turnover of investments is low. It also contradicts the Managers' core investment beliefs and, we feel, could limit Shareholders' long term returns. The Board favours its removal.
Should the new Objective and Investment Policy be approved, we will nonetheless retain the current restriction whereby the maximum investment in any one holding at time of purchase must be less than 8% of total assets. Monitoring the portfolio concentrations so that adequate levels of diversification are achieved will continue to be an important and regular undertaking for the Board as has been the case in the past.
Other changes to the Objective and Investment Policy are suggested for the sake of simplification and clarification. The wording of the current and proposed Objective and Investment Policy is set out on pages 9 and 10 of the Circular.
The Board believes that these changes are in the best interests of the Company and Shareholders as a whole and it unanimously recommends that you vote in favour of all of the Resolutions as the Directors intend to so do in respect of their own holdings.
AIFMD
As mentioned last year the Company is required to comply with the EU-wide Alternative Investment Fund Managers Directive (AIFMD). To this end a new investment management agreement has been entered into between the Company and Baillie Gifford & Co Limited, a wholly owned subsidiary of the Baillie Gifford & Co partnership and the entity which will fulfil the role of Alternative Investment Fund Manager (AIFM) under the Directive. A depositary agreement has been drawn up with Bank of New York Mellon and the intention is that they will fulfil the function of depositary as required by the AIFMD.
Scottish Referendum
The Company's primary purpose is to provide investment returns to Shareholders and it is not the Board's intention to take a political stance over the Referendum on Scottish independence which will take place on 18 September 2014. Scottish Mortgage, as its name suggests, is registered as a Scottish company and the Managers, Baillie Gifford & Co, form a Scottish partnership. The Board is well aware of the issues arising out of the vote and there are many actions that might be taken to prepare for various contingencies, and all of these come at a cost. Consequently, our current view is that to start any processes now before the result of the vote is known and before the relevant putative issues have emerged would not be a good use of Shareholders' funds and management resource.
In the event of a Yes vote we understand that there will be a period of negotiations which will probably be followed by a transitional period following independence. Consequently the Board believes it will have ample time to assess the economic (including taxation and currency), political and regulatory landscape which might emerge and to formulate Scottish Mortgage's response accordingly.
This Referendum is only one of a variety of political risks facing the Company which are considered by the Board on a regular basis. The Directors are aware that a large number of Shareholders are resident outside Scotland and they will act in a pragmatic and measured way to ensure that Shareholders' interests as a whole are protected.
Board and AGM
I am very pleased that Dr Paola Subacchi agreed to join the Board with effect from 1 April 2014. Paola brings to the Board a broad set of skills and knowledge that spans political and economic fields both in Europe and China.
The Annual General Meeting will be held in Edinburgh at Baillie Gifford's offices at 4.30pm on 26 June 2014. As usual, James Anderson and Tom Slater will make a presentation on the investments and take questions. I do hope you will be able to attend.
Investment and Outlook
In investment terms this has been a significant period for Scottish Mortgage. I have covered performance earlier and now re-iterate the Board's wholehearted endorsement of the Managers' core investment beliefs which are again set out in an unchanged form on page 14 of the Annual Report and Financial Statements. It is the strict adherence to these well articulated beliefs which represent the foundations of the Company's investment success over recent years.
The philosophy focuses on individual companies and seeks to ignore short term market noise and trends whose observance can be extremely destructive. This philosophy does to a large extent render observations about the short term outlook and market preoccupations almost redundant.
I will restrict myself to noting that there has been continued progress at economic and company level. Political factors as always act as a de-stabilising element in the short term; the impact of the withdrawal of monetary stimulus may not be straightforward and there will be upsets as the Chinese economy adjusts towards an increasing domestic focus. However, overall the commercial and trading environment for companies is broadly benign. This, coupled with an outstanding and accelerating pace of technological advance across so many fronts, makes for an environment where well managed companies with sound strategies and an eye on the long term should be capable of making sustained and attractive returns. Scottish Mortgage's business is to back such companies and what is important is that our Managers see no lack of such opportunities.
John Scott
Chairman
14 May 2014
Past performance is not a guide to future performance.
Managers' review
We have made few changes to your portfolio. We still own all but one of the 30 largest holdings of last year. Most have been in place for several years. Rather to our surprise markets have seen fit to reward many of these holdings with substantial share price rises in the last year. Six of the current top 30 have seen their share prices more than double in the last 12 months. Two are Chinese technology companies (Tencent and the soon to be quoted Alibaba) whilst three are innovative Californian ventures in the shape of Illumina, Facebook and Tesla. The last, and perhaps most surprising, member of the group is Fiat. Fortunately all of these were large holdings before the surges in their prices occurred with the frustrating exception of Tesla. In truth the conduct and progress of these companies has changed little. It is beyond us to explain, even in retrospect, why markets chose to recognize their achievements in the last 12 months. Previously informed opinion had been markedly hostile to most of these six and several more strong performers. Facebook is perhaps the clearest example of this dramatic change in market sentiment.
As usual we would like to structure our comments around the three themes that we have stressed for several years. These all still appear vital. In order to turn them into our portfolio of individual stocks we operate according to our Core Investment Beliefs that are set out on page 14 of the Annual Report and Financial Statements.
The Underestimated Power of Technological Change
Last year's report included Tom Slater's contribution describing his months spent amongst Northern Californian capitalists. His reflections have been extremely helpful in allowing us to interpret the waves of innovation and disruption that have emanated from the San Francisco Bay area. Our principal preoccupation this year has lain in our attempts to see how far these have spread into new industries and geographies outside their traditional information technology redoubts. For all the remarkable progress that the last two decades have offered in electronics there has been a lingering feeling of disappointment that innovation has predominately been confined to the electronic world. As the acerbic venture capitalists Peter Thiel and Max Levchin have frequently observed 'if you look outside the computer and the internet, there has been 40 years of stagnation' and that the US innovation system is 'near death'. They exaggerate. But more importantly we think that marked improvement is imminent. We believe that this is the single most important contention that we have at present. On its accuracy or otherwise will our future returns depend.
2013-14 appears to have been the year in which structural change began to transform the healthcare landscape. A year ago we noted encouraging developments in genomic science. Since then the sharp falls in sequencing costs and increases in data scope and utility have prompted a transition from academic to practical enthusiasm. Illumina's considerable lead in the provision of sequencing has similarly translated into significant new machines, strong orders and much broader market opportunities.
If the clinical benefits that seem likely to follow do come to fruition then the scale and longevity of the investment opportunity in genomic science ought to be very substantial. Presumably even Mr Thiel would accept that making most forms of cancer a manageable disease would count as beneficial progress.
The car and utility industries have been two of the dullest, least innovatory and most uninteresting sectors in the world for several decades. Some would go further than this. The CEO of US generator NRG has described his utility industry as 'the least innovative industry in America, maybe the world, in history.' The power of the incumbents to block real change has been far-reaching. Only major internal corporate mistakes have been threatening. Many have been made, especially in Detroit, to compensate for the lack of external stimulus. But these industries may now be subject to radical re-shaping. Whilst the combination of inertia and offsetting technological improvements are critical the trigger is the effervescent Elon Musk. Between Tesla and Solar City his companies are directly attacking the incumbents. That Tesla has become a realistic competitor to the internal combustion engine's 130 year dominance and to even the better run luxury car companies is remarkable. The next challenges of building a mass market business and solving the storage conundrums are formidable but seem attainable in comparison with the challenges that have already been met. Increasingly our belief is that our previous unsatisfactory forays into alternative energy were premature and flawed in company selection rather than fundamentally doomed.
China and Emerging Markets
Last year we commented on the disdain shown to Chinese equities amidst generalized antipathy to the once beloved emerging markets. Twelve months on the situation appears little different on the surface. Domestic Chinese equity markets continue to lag. Economic commentators and the international media have picked up on the popular hedge fund mantra that China faces a housing bubble and debt crisis. Robert Peston has shifted his attention away from Europe and towards China in the desperate search for economic catastrophe to fill our screens. Brazil, India, Turkey, Indonesia and Russia have regularly swapped places as candidates for imminent crisis. Russia has now taken a deserved and potentially sustainable lead in this race to the bottom.
But beneath the furore there is evidence of changing perspectives and greater differentiation. Much of this stems from the corporate sector. Whilst we would endorse the economic and political case for optimism over Chinese prospects the argument has been advanced much more powerfully by the remarkable growth and achievements of the Chinese internet companies. Tencent, Alibaba and Baidu have begun to command global respect for their innovation, popular appeal and sheer scale as well as their stock market success. Thus it is hard to know whether to admire Alibaba more for its ability to grow at well-over 50% whilst already producing more traffic than Amazon and eBay combined, to envy their ability to make in-roads into financial services in a manner their western brethren struggle to achieve or to watch in amazement as US analysts compete to come up with the most dramatic sum in potential market capitalization for its forthcoming flotation.
Unfortunately we see little of similar attraction in the other major low income economies. It is a relief to have only modest Brazilian exposure. Sales of once large holdings such as Petrobras seemed painful at the time but sadly now appear thoroughly justified in retrospect. Beyond the economic and political difficulties that Brazil and its peers face our greatest disappointment has been how few individual companies have convinced us of their appeal even at much lower prices and ratings. The modest exceptions to this depressing conclusion have been in building small holdings in Magnit (an impressive grocery chain well-removed from the Putin circle) and BIM (a discount retailer with tentacles well-beyond Turkey's fascinating but puzzling economic and political growth pains). For us China and its great innovative companies stands out from its presumed rivals ever more dramatically.
The Western Financial Systems and its Flaws
Whilst technology and China move on at pace there is little evidence that our financial system is other than stuck. The sad majority of banks remain complex, greedy and unrepentant. Fund managers still appear reluctant to exert their full influence over the managements in question. Hedge funds in aggregate appear ever more impatient and collusive. All too often major companies appear effectively without committed owners.
What is welcome is that piecemeal reform has made the potential returns from investment banking gradually appear less alluring relative to equity requirements. But as with other similarly troubled industries the best hope of serious structural reform must surely come from new competitors from outside the traditional finance industry. We need the help of great and disruptive technology companies in finance as in healthcare and energy.
Conclusion
It is reasonable to expect that after the last year that many of our stocks would experience share price set-backs. This has already been the case in recent weeks. In the long-run it is better that this is so. It is never comfortable to see our holdings in the portfolios of momentum players and hedge fund princes. It is pleasanter to see them reappear amongst their preferred shorts and the objects of the habitual scorn of the Financial Times and Barron's.
Meanwhile, the overall tone of markets has reverted to the nervous jumping at available and imagined shadows that has been so prevalent since 2008. From Cyprus twelve months ago to Ukraine now and from the assumed implosion of the Eurozone to the presumed terrors implied by Federal Reserve monetary tapering anxiety and gloom remains deeply fashionable. This mood has its troubling asset allocation analogy in the ceaseless search for low volatility and the determination to 'de-risk' the future by replacing active equity ownership with such splendid prospective investments as governments bonds, gold and forests. The only consolation is that this makes our own task easier as the competition to assess and own companies for the long-term weakens by the day.
But above all we would like to stress that we are excited by the opportunities available. Excitement is usually perceived to be akin to naivety. If that is so then we plead guilty. We are fascinated by the changes in the transforming global economy and thrilled by the opportunities for rapid, highly-profitable and long-lasting growth that are available to the great companies that it is our responsibility to identify and own.
James Anderson
Tom Slater
Berlin trip note
You can do anything you want in Berlin. Only crossing empty roads without the permission of the little green electric man with a jaunty hat who is one of the sole survivors of the unlamented East Germany evokes discontent. This observation is hard to avoid and hence unoriginal. Yet it is important. It conveys both the tolerance that is so refreshing a contrast with too much of Berlin's past and the whiff of the 1920's that it still carries. But it also illustrates the marked contrast between Berlin and the bourgeois sensibilities of West Germany's recent centres of power and corporate responsibility. For all that Berlin is the seat of Federal authority and the key to decisions that are central to European politics and economics it is equally and profoundly a metropolis that has little in common with the rest of the country. Perhaps this is also true of London but Berlin has no confidence at all that it is a model, powerhouse and guide for the rest of the country. Such a view would, it scarcely requires saying, be risible in Munich, Stuttgart or Frankfurt even if Berlin was confident enough to propound it.
My plan to work in Berlin for an extended period was initially prompted by the wish to understand better the motivations behind the political power that it carries (often reluctantly). It has long seemed strange and exploitable that markets pay such exorbitant attention to the posturing of the London financial and media establishment whilst barely contemplating or caring what Berlin thinks - or more importantly does. This appears to us to be a practical example of persistent market inefficiency.
Europe seen from Berlin
There still appears to be no evidence that the Berlin government has any intention of deserting the Eurozone. Moreover events in the last year have considerably encouraged the German establishment in adhering to existing European policy. Domestically the two anti-Euro political parties have respectively collapsed (the FDP) and failed to enter the Bundestag (the AfW). Only the Federal Court in Karlsruhe has any significant potential qualms about monetary assistance as even the Bundesbank appears to accept the Merkel, Schauble and Draghi mix of policies.
The dominant view in official Berlin is that the European periphery has begun to see the benefits of its traumatic experiences of recent years. It is generally added that this has been less about inflexible German backing for austerity than about a necessary reform process bringing greater economic flexibility and political honesty to bear on structurally troubled countries.
Inevitably it is the fortunes of Spain and Italy that are of dominant interest. There is little patience for the notion that the problems of either country are primarily the result of Eurozone membership. Global economic crisis would have shown up their serious weaknesses whatever the institutional framework. The question is instead whether that membership gives two critical partners the impetus to make structural reforms that they would otherwise have refused to confront. This is not an obviously unfair critique. If the current policies can be maintained for a reasonable period then sustained growth is thought to be achievable in both countries. The remarkable decline in long-term interest rates in peripheral Europe and the indications of modest economic growth returning in Southern Europe have created confidence that the turmoil has been worthwhile. There are many who would like to see a similar reform dynamic in France and regret that such seems unlikely. Perhaps speculation that Mrs. Merkel would eventually like to move to Brussels might help to advance such a cause.
Berlin does not admire finance. In this it captures both the local ethos and the national consensus. The 2008-9 crisis removed any temptation to emulate the Anglo-American model. There is little appetite to allow its interests to dominate Europe. If there is one policy that unites the different geographical and political strands of the broad German establishment it is that the German economy and its companies must be kept out of the hands of speculators and in those of families and foundations. The return of Deutsche Bank to industrial sense from its unrewarding venture into finance capital is eagerly awaited. This requires the retirement of its Goldman Sachs trained Chairman.
Energy policy has been the most evident failure of the German government in recent years. What probably amounts to over €100bn of solar subsidies have failed to lower overall national emission levels, to sustain a local industry of global value or end Russian gas imports. European energy policy under a feeble German Commissioner has only exacerbated the situation. The domestic decision to ban nuclear power has been the cause of many of these unintended miscalculations.
It is, however, doubtful that major change is imminent. There is full awareness that powerful and successful companies such as BASF must have competitive energy prices. At the same time there is a strong conviction that in the long-term alternative energy sources will be both economically rewarding and environmentally necessary. The required fiscal, industrial and political compromises are to be endured in the meantime. There is little sympathy for Mr. Putin but nor is there much belief that his danger should be equated with that of the Soviet Union. This is hardly surprising in a city that has learnt to differentiate between serious and very present danger and mutual political posturing. Talk about the deteriorating conditions in Ukraine seems less apocalyptic when strolling across what was once the death strip of the Berlin Wall.
The Berlin Economy
Although this is the capital of Europe's most powerful economy there is much local emphasis on the comparative poverty of Berlin. It sees itself as 'poor but sexy' in the words of the longstanding Mayor. This is backed by a deep suspicion of what are perceived as the rich, privileged, conservative, hierarchical and complacent cities of recent German economic leadership. Berlin has very little in common with Munich from wealth to local politics to conceptions of urban beauty. This predates the division of East and West Berlin. An extraordinary surge of manufacturing activity in late 19th century Berlin left a radical political heritage and cramped living conditions more redolent of Glasgow or Philadelphia than princely and agricultural Munich. The aging radicals who fled to West Berlin to avoid military service and to riot in 1968 reinforced an entrenched suspicion of capitalism that Brecht would have been proud of and that the economic collapse of the East only reinforced. This has many admirable consequences. There are audiences of thousands ready to boo Deutsche Bank available at any time of the day or (preferably) night. There is a willingness to think critically and radically that has little in common with the persistent, incremental and successful family capitalism of rich Germany.
The consequences of the complex history of Berlin have combined in an entirely unpredictable manner to create an extraordinarily vibrant and innovative local culture. Here is a city with a population lower than in 1914 but with a dense urban geography dating from before then. Much of the housing stock after the fall of the Wall was far too decrepit to appeal to shortsighted speculators. Nor could they see that ramshackle factories and breweries were ripe to serve as unique artistic spaces, night-clubs and cafes in a manner quite obvious to any aspiring member of the creative class.
Moreover, the anti-capitalist ethos made it inevitable that even newly fashionable areas would still remain stocked with a social mixture unthinkable in more conventional world cities from Shanghai to New York. After all even newly enriched Prenzlauer Berg refuses to let owners add balconies as this would mean that prices would rise too far. But even if Prenzlauer is out of reach for many price is the ingredient that makes Berlin unique. Rental costs are approximately 70% below London levels. Educational costs are low, university standards are rising sharply and opportunities for foreigners to gain admission are pleasingly high. Entertainment is cheap and very plentiful. It has therefore become a haven for the young of almost anywhere, looking for almost anything from a job to social welfare to freedom.
The irony is that this idealistic and ostensibly anti-capitalist brew may well have created the near perfect ingredients for modern economic development. It has translated into a flurry of youthful, quirky, highly skilled and intensely multicultural start-ups that is entirely accidental and much the better for being so. After all the doomed efforts to create alternative Silicon Valleys (or mere Roundabouts) Berlin may just have done so via serendipity. Heavy industry will not return to recreate 19th century Berlin but from software to healthcare the potential replacements are starting to emerge.
As yet this dynamism is comparatively hard to channel into the Scottish Mortgage portfolio. But it is becoming easier. We have a holding in Kinnevik which is a major backer in turn of Rocket Internet and Zalando. Rocket is probably the most interesting venture capital group anywhere outside Silicon Valley. It is turning innovation into an industrial process from a down at heel building in central Berlin whilst Zalando has become one of the world's largest internet clothing retailer from an equally modest communist era structure a mile further east. Over the coming years we would hope and expect that we can find more opportunities of similar pedigree. Some of these may be unquoted ventures. This reflects our belief that from the catastrophes of the 20th century Berlin is rapidly becoming the most important key to understanding European economic, social and political prospects in the 21st century.
James Anderson
The Managers' core investment beliefs
Whilst fund managers claim to spend much of their careers assessing the competitive advantage of companies they are notoriously reluctant to perform any such analysis on themselves. The tendency is to cite recent performance as evidence of skill despite the luck, randomness and mean-reverting characteristics of most such data. If this does not suffice then attention turns to a discussion of the high educational qualifications, hard work and exotic remuneration packages that the fund manager enjoys. Sometimes the procedural details of the investment process are outlined with heavy emphasis on risk controls. Little attention is given to either the distinctiveness of the approach or the strategic advantages the manager might enjoy in order to make imitation improbable. We think we should try to do better than this.
¾ We are long term in our investment decisions. It is only over periods of at least five years that the competitive advantages and managerial excellence of companies becomes apparent. It is these characteristics that we want to identify and support. We own companies rather than rent shares. We do not regard ourselves as experts in forecasting the oscillations of economies or the mood swings of markets. Indeed we think that it is hard to excel in such areas as this is where so many market participants focus and where so little of the value of companies lies. Equally Baillie Gifford is more likely to possess competitive advantages for the good of shareholders when it adopts a long term perspective. We are a 100 year old Scottish partnership. We think about our own business over decades not quarters. Such stability may not be exciting but it does encourage patience in this most impatient of industries. We only judge our investment performance over five year plus time horizons. In truth it takes at least a decade to provide adequate evidence of investment skill.
¾ The investment management industry is ill-equipped to deal with the behavioural and emotional challenges inherent in today's capital markets. Our time frame and ownership structure help us to fight these dangers. We are besieged by news, data and opinion. The bulk of this information is of little significance but it implores you to rapid and usually futile action. This can be particularly damaging at times of stress. Academic research argues that most individuals dislike financial losses twice as much as they take pleasure in gains. We fear that for fund managers this relationship is close to tenfold. Internal and external pressures make the avoidance of loss dominant. This is damaging in a portfolio context. We need to be willing to accept loss if there is an equal or greater chance of (almost) unlimited gain.
¾ We are very dubious about the value of routine information. We have little confidence in quarterly earnings and none in the views of investment banks. We try to screen out rather than incorporate their noise. In contrast we think that the world offers joyous opportunities to hear views, perspectives and visions that are barely noticed by the markets. There is more in the investment world than the Financial Times or Wall Street Journal describe.
¾ We are global in stock selection, asset allocation and attribution. We are active not passive - or far worse - index plus in stock selection. Holding sizes reflect the potential upside and its probability (or otherwise) rather than the combination of the market capitalization and geographical location of the company and its headquarters. We do not have sufficient confidence in our top-down asset allocation skills to wish to override stock selection. We do not have enough confidence in our market timing abilities to wish to add or remove gearing at frequent intervals. We do, however, have strong conviction that our portfolio should be comparatively concentrated, and that it is of little use to shareholders to tinker around the edges of indices. We think this produces better investment results and it certainly makes us more committed shareholders in companies. We suspect that selecting stocks on the basis of the past (their current market capitalization) is a policy designed to protect the security of tenure of asset managers rather than to build the wealth of shareholders. Companies that are large and established tend to be internally complacent and inflexible. They are often vulnerable to assault by more ambitious and vibrant newcomers.
¾ We are Growth stock investors. Such has been the preference for Value and the search to arbitrage away minor rating differentials that investors find it very hard to acknowledge the extraordinary growth rates and returns that can be found today. The growth that we are particularly interested in is of an explosive nature and often requires minimal fixed assets or indeed capital. We think of it as 'Growth at Unreasonable Prices' rather than the traditional discipline of 'Growth at a Reasonable Price'. We need to be willing to pay high multiples of immediate earnings because the scale of future potential and returns can be so dramatic. On the stocks that flourish the valuation will have turned out to be derisorily low. On the others we will lose money.
¾ We believe that it is our first duty to shareholders to limit fees. Both the investment management fee (equivalent to 0.32% falling to 0.30% as of 1 April 2014) and ongoing charges ratio (0.5%) are low by comparative standards but at least adequate in absolute terms. We think that the malign impact of high fees is frequently underestimated. The difference between ongoing charges ratio of 0.5% and one of 1.5% may not appear great but if the perspective is altered to think of costs as a percentage of expected annual returns then the contrast becomes obvious. If annual returns average 10% (sadly they have not in recent years) then this is the difference between removing 5% or 15% of your returns each year. Nor do we believe in a performance fee. Usually it undermines investment performance. It increases pressure and narrows perspective.
Thirty largest holdings and twelve month performance at 31 March 2014
|
Name |
Business |
Fair value 31 March 2014 £'000 |
% of total assets |
Absolute Performance† % |
Contribution to absolute performance % |
Fair Value 31 March 2013 £'000 |
|
Amazon.com |
Online retailer |
228,053 |
7.64 |
15.0 |
1.7 |
214,120 |
|
Illumina |
Biotechnology equipment |
202,134 |
6.77 |
150.9 |
5.1 |
76,518 |
|
Baidu |
Online search engine |
181,226 |
6.07 |
58.2 |
3.9 |
128,692 |
|
Tencent Holdings |
Internet services |
173,092 |
5.80 |
100.0 |
4.2 |
94,668 |
|
Inditex |
International clothing retailer |
154,504 |
5.17 |
4.8 |
0.5 |
125,978 |
|
|
Online search engine |
114,128 |
3.82 |
27.8 |
1.2 |
91,998 |
|
Atlas Copco |
Engineering |
90,343 |
3.02 |
(5.1) |
(0.5) |
134,345 |
|
Kering (formerly PPR) |
Luxury goods producer and retailer |
84,744 |
2.84 |
(12.5) |
(0.5) |
129,785 |
|
Banco Santander |
Banking |
81,129 |
2.72 |
43.3 |
1.0 |
53,199 |
|
Apple |
Computer technology |
77,629 |
2.60 |
12.8 |
0.4 |
61,270 |
|
Prudential |
International insurance |
74,351 |
2.49 |
22.4 |
0.7 |
67,109 |
|
|
Social networking site |
72,842 |
2.44 |
114.5 |
1.5 |
29,493 |
|
Alibaba Group# |
Online retail |
69,728 |
2.33 |
86.1 |
1.3 |
38,064 |
|
Fiat |
Automobiles |
68,871 |
2.31 |
99.1 |
1.5 |
34,599 |
|
Salesforce |
Cloud computing and hosting |
66,857 |
2.24 |
16.1 |
0.6 |
81,120 |
|
BASF |
Chemicals |
62,202 |
2.08 |
18.9 |
0.4 |
49,848 |
|
Tesla Motors |
Electric cars |
54,771 |
1.83 |
92.1* |
0.2* |
- |
|
Intuitive Surgical |
Surgical robots |
50,642 |
1.70 |
(18.8) |
(0.7) |
62,307 |
|
Whole Foods Market |
Food retailer |
47,745 |
1.60 |
7.3 |
0.3 |
40,351 |
|
Novozymes |
Enzyme manufacturer |
45,570 |
1.53 |
19.1 |
0.4 |
50,676 |
|
Reckitt Benckiser |
Consumer goods company |
44,345 |
1.48 |
6.4 |
0.1 |
57,706 |
|
Rolls-Royce Group |
Aerospace equipment |
42,960 |
1.44 |
(3.4) |
(0.0) |
45,200 |
|
Brazil CPI Linked 2045 |
Brazilian government inflation linked bond |
42,653 |
1.43 |
(34.9) |
(1.1) |
66,857 |
|
New Oriental Education & Technology |
Education and training |
40,927 |
1.37 |
50.6 |
0.8 |
35,730 |
|
Arm Holdings |
Semiconductor and software design company |
37,028 |
1.24 |
8.7 |
0.2 |
24,533 |
|
Linkedin Corp |
Business-related social networking site |
35,297 |
1.18 |
(4.1) |
0.1 |
27,475 |
|
Porsche |
Automobiles |
34,812 |
1.17 |
31.5 |
0.4 |
21,932 |
|
Aggreko |
Power equipment rental |
29,520 |
0.99 |
(14.5) |
(0.2) |
23,532 |
|
Telefonica O2 Czech Republic |
Fixed and mobile telecoms |
28,998 |
0.97 |
(0.5) |
(0.1) |
13,163 |
|
Renishaw |
Electronic equipment |
28,221 |
0.94 |
8.3 |
0.0 |
26,571 |
|
|
|
2,365,322 |
79.21 |
|
|
1,906,839 |
† Absolute performance (in sterling terms) has been calculated on a total return basis over the period 1 April 2013 to 31 March 2014.
* Figures relate to part period returns where the equity has been purchased during the period.
# Denotes holding in unlisted convertible preference shares.
Figures relate to part-period returns where the equity has been purchased during the period.
Source: Baillie Gifford & Co/StatPro.
Past performance is not a guide to future performance.
Distribution of assets
|
|
At 31 March 2014 % |
At 31 March 2013 % |
|
|
North America |
38.4 |
32.3 |
|
|
South America |
0.9 |
2.5 |
|
|
Europe |
38.4 |
44.5 |
|
|
|
United Kingdom |
11.4 |
13.9 |
|
|
Eurozone |
18.1 |
17.8 |
|
|
Developed Europe (non euro) |
5.2 |
8.9 |
|
|
Rest of Europe |
3.7 |
3.9 |
|
Africa and Middle East |
0.3 |
0.4 |
|
|
Asia |
20.4 |
17.3 |
|
|
|
China |
16.5 |
12.6 |
|
|
India |
1.6 |
1.8 |
|
|
Japan |
0.7 |
0.4 |
|
|
Rest of Asia |
1.6 |
2.5 |
|
Total equities |
98.4 |
97.0 |
|
|
Brazilian real denominated bonds |
1.4 |
2.6 |
|
|
Net liquid assets |
0.2 |
0.4 |
|
|
Total assets (before deduction of loans and debentures) |
100.0 |
100.0 |
|
Related party transactions
The Directors' fees for the year are detailed in the Directors' Remuneration Report on page 30 of the Annual Report and Financial Statements in the Annual Report and Financial Statements.
No Director has a contract of service with the Company. During the year no Director was interested in any contract or other matter requiring disclosure under section 412 of the Companies Act 2006.
Management fee arrangements
|
|
2014 £'000 |
|
2013 £'000 |
|
Investment management fee |
9,130 |
|
7,672 |
Baillie Gifford & Co is employed by the Company as Managers and Secretaries under a management agreement which is terminable on not less than six months' notice, or on shorter notice in certain circumstances. For the year to 31 March 2014 Baillie Gifford's annual remuneration was calculated at 0.08% of total assets less current liabilities (excluding short term borrowings for investment purposes) per quarter. The management fee is levied on all assets, including holdings in collective investment schemes (OEICs) managed by Baillie Gifford & Co; however the OEICs' share class held by the Company does not itself attract a management fee.
The management fee was reduced to 0.075% of total assets less current liabilities (excluding short term borrowings for investment purposes) per quarter with effect from 1 April 2014.
Principal risks and uncertainties
As an Investment Trust, the Company invests in equities and makes other investments so as to achieve its investment objective of maximising total return, whilst also generating real dividend growth, from a focused and actively managed global portfolio. In pursuing its investment objective, the Company is exposed to various types of risk that are associated with the financial instruments and markets in which it invests.
These risks are categorised here as market risk (comprising currency risk, interest rate risk and other price risk), liquidity risk and credit risk. The Board monitors closely the Company's exposures to these risks but does so in order to reduce the likelihood of a permanent loss of capital rather than to minimise the short term volatility. Risk provides the potential for both loss and gains and in assessing risk, the Board encourages the Managers to exploit the opportunities that risk affords.
The risk management policies and procedures outlined in this note have not changed substantially from the previous accounting period.
Market Risk
The fair value of future cash flows of a financial instrument or other investment held by the Company may fluctuate because of changes in market prices. This market risk comprises three elements - currency risk, interest rate risk and other price risk. The Board of Directors reviews and agrees policies for managing these risks and the Company's Investment Managers both assess the exposure to market risk when making individual investment decisions and monitor the overall level of market risk across the investment portfolio on a continuing basis. Details of the Company's investment portfolio are shown in note 9 and on pages 43 to 44 of the Annual Report and Financial Statements.
Currency Risk
Certain of the Company's assets, liabilities and income are denominated in currencies other than sterling (the Company's functional currency and that in which it reports its results). Consequently, movements in exchange rates may affect the sterling value of those items.
The Investment Managers monitor the Company's exposure to foreign currencies and report to the Board on a regular basis. The Investment Managers assess the risk to the Company of the foreign currency exposure by considering the effect on the Company's net asset value and income of a movement in the rates of exchange to which the Company's assets, liabilities, income and expenses are exposed. However, the country in which a company is listed is not necessarily where it earns its profits. The movement in exchange rates on earnings may have a more significant impact upon a company's valuation than a simple translation of the currency in which the company is quoted.
Foreign currency borrowings can limit the Company's exposure to anticipated future changes in exchange rates which might otherwise adversely affect the value of the portfolio of investments.
Exposure to currency risk through asset allocation, which is calculated by reference to the currency in which the asset or liability is quoted, is shown below.
|
As at 31 March 2014 |
Investments £'000 |
Cash and deposits £'000 |
Loans and debentures £'000 |
Other debtors and creditors* £'000 |
Net exposure £'000 |
|
US dollar |
1,535,300 |
1,646 |
(187,740) |
(412) |
1,348,794 |
|
Euro |
538,834 |
- |
(50,430) |
856 |
489,260 |
|
Hong Kong dollar |
173,092 |
- |
- |
- |
173,092 |
|
Swedish krona |
97,091 |
17,177 |
- |
- |
114,268 |
|
Brazilian real |
52,765 |
- |
- |
1,344 |
54,109 |
|
Indian rupee |
47,601 |
- |
- |
- |
47,601 |
|
Danish krone |
45,570 |
- |
- |
- |
45,570 |
|
Polish zloty |
38,000 |
- |
- |
- |
38,000 |
|
Czech koruna |
28,998 |
- |
- |
- |
28,998 |
|
Japanese yen |
21,294 |
35 |
- |
32 |
21,361 |
|
Turkish lira |
14,145 |
- |
- |
- |
14,145 |
|
Swiss franc |
14,081 |
- |
- |
- |
14,081 |
|
Indonesian rupiah |
13,285 |
- |
- |
- |
13,285 |
|
Other overseas currencies |
17,855 |
- |
- |
- |
17,855 |
|
Total exposure to currency risk |
2,637,911 |
18,858 |
(238,170) |
1,820 |
2,420,419 |
|
Sterling |
342,722 |
2,847 |
(150,697) |
(17,578) |
177,294 |
|
|
2,980,633 |
21,705 |
(388,867) |
(15,758) |
2,597,713 |
* Includes net non-monetary assets of £35,000.
|
As at 31 March 2013 |
Investments £'000 |
Cash and deposits £'000 |
Loans and debentures £'000 |
Other debtors and creditors* £'000 |
Net exposure £'000 |
|
US dollar |
1,143,473 |
3,750 |
(172,539) |
(139) |
974,545 |
|
Euro |
461,445 |
- |
(51,586) |
409 |
410,268 |
|
Hong Kong dollar |
103,779 |
- |
- |
- |
103,779 |
|
Swedish krona |
149,675 |
- |
- |
- |
149,675 |
|
Brazilian real |
82,806 |
- |
- |
1,578 |
84,384 |
|
Indian rupee |
46,678 |
- |
- |
- |
46,678 |
|
Danish krone |
50,676 |
- |
- |
69 |
50,745 |
|
Polish zloty |
60,200 |
- |
- |
- |
60,200 |
|
Czech koruna |
13,163 |
- |
- |
- |
13,163 |
|
Japanese yen |
11,195 |
33 |
- |
- |
11,228 |
|
Turkish lira |
18,305 |
- |
- |
- |
18,305 |
|
Swiss franc |
29,473 |
- |
- |
- |
29,473 |
|
Indonesian rupiah |
18,149 |
- |
- |
- |
18,149 |
|
Other overseas currencies |
31,832 |
- |
- |
4 |
31,836 |
|
Total exposure to currency risk |
2,220,849 |
3,783 |
(224,125) |
1,921 |
2,002,428 |
|
Sterling |
361,000 |
10,084 |
(150,953) |
(4,191) |
215,940 |
|
|
2,581,849 |
13,867 |
(375,078) |
(2,270) |
2,218,368 |
* Includes net non-monetary assets of £14,000.
Currency Risk Sensitivity
At 31 March 2014, if sterling had strengthened by 5% in relation to all currencies, with all other variables held constant, total net assets and total return on ordinary activities would have decreased by the amounts shown below. A 5% weakening of sterling against all currencies, with all other variables held constant, would have had an equal but opposite effect on the financial statement amounts. The analysis is performed on the same basis for 2013.
|
|
2014 £'000 |
2013 £'000 |
|
US dollar |
67,440 |
48,727 |
|
Euro |
24,463 |
20,513 |
|
Hong Kong dollar |
8,655 |
5,189 |
|
Swedish krona |
5,713 |
7,484 |
|
Brazilian real |
2,705 |
4,219 |
|
Indian rupee |
2,380 |
2,334 |
|
Danish krone |
2,279 |
2,537 |
|
Polish zloty |
1,900 |
3,010 |
|
Czech koruna |
1,450 |
658 |
|
Japanese yen |
1,068 |
561 |
|
Turkish lira |
707 |
915 |
|
Swiss franc |
704 |
1,474 |
|
Indonesian rupiah |
664 |
908 |
|
Other overseas currencies |
893 |
1,592 |
|
|
121,021 |
100,121 |
Interest Rate Risk
Interest rate movements may affect directly:
¾ the fair value of the investments in fixed interest rate securities;
¾ the level of income receivable on cash deposits;
¾ the fair value of the Company's fixed-rate borrowings; and
¾ the interest payable on the Company's variable rate borrowings.
Interest rate movements may also impact upon the market value of the Company's investments outwith fixed income securities. The effect of interest rate movements upon the earnings of a company may have a significant impact upon the valuation of that company's equity.
The possible effects on fair value and cash flows that could arise as a result of changes in interest rates are taken into account when making investment decisions and when entering borrowing agreements.
The Board reviews on a regular basis the amount of investments in cash and fixed income securities and the income receivable on cash deposits, floating rate notes and other similar investments.
The Company finances part of its activities through borrowings at approved levels. The amount of such borrowings and the approved levels are monitored and reviewed regularly by the Board. Movements in interest rates, to the extent that they affect the market value of the Company's fixed rate borrowings, may also affect the amount by which the Company's share price is at a discount or a premium to the net asset value at fair value.
The interest rate risk profile of the Company's financial assets and liabilities at 31 March is shown below:
Financial Assets
|
|
2014 |
2013 |
||||
|
|
Fair value £'000 |
Weighted average interest rate |
Weighted average period until maturity* |
Fair value £'000 |
Weighted average interest rate |
Weighted average period until maturity* |
|
Floating rate: |
|
|
|
|
|
|
|
Brazilian bonds (index linked) |
42,653 |
11.2% |
31 years |
66,857 |
8.8% |
32 years |
|
Cash and short-term deposits: |
|
|
|
|
|
|
|
Other overseas currencies |
18,858 |
- |
n/a |
3,783 |
- |
n/a |
|
Sterling |
2,847 |
0.5% |
n/a |
10,084 |
0.1% |
n/a |
* Based on expected maturity date.
The cash deposits generally comprise call or short term money market deposits of less than one month which are repayable on demand. The benchmark rate which determines the interest payments received on cash balances is the Interbank market rates.
Financial Liabilities
The interest rate risk profile of the Company's bank loans and debentures (at amortised cost) and the maturity profile of the undiscounted future cash flows in respect of the Company's contractual financial liabilities at 31 March are shown below.
Interest Rate Risk Profile
The interest rate risk profile of the Company's financial liabilities at 31 March was:
|
|
2014 £'000 |
2013 £'000 |
|
|
Floating rate |
- US$ denominated |
89,971 |
65,196 |
|
Fixed rate |
- Sterling denominated |
150,697 |
150,953 |
|
|
- Euro denominated |
50,430 |
51,586 |
|
|
- US$ denominated |
97,769 |
107,343 |
|
|
388,867 |
375,078 |
|
Maturity Profile
The maturity profile of the Company's financial liabilities at 31 March was:
|
|
2014 |
2013 |
||||
|
|
Within 1 year £'000 |
Between 1 and 5 years £'000 |
More than 5 years £'000 |
Within 1 year £'000 |
Between 1 and 5 years £'000 |
More than 5 years £'000 |
|
Repayment of loans and debentures |
238,170 |
- |
145,675* |
65,196 |
158,929 |
145,675* |
|
Accumulated interest on loans and debentures to maturity date |
15,200 |
55,947 |
70,782 |
17,776 |
57,067 |
84,738 |
|
|
253,370 |
55,947 |
216,457 |
82,972 |
215,996 |
230,413 |
* Includes £675,000 irredeemable debenture stock.
Interest Rate Risk Sensitivity
An increase of 100 basis points in bond yields as at 31 March 2014 would have decreased total net assets and total return on ordinary activities by £5,298,000 (2013 - £10,442,000) and would have increased the net asset value per share (with borrowings at fair value) by 3.40p (2013 - increased by 2.93p). A decrease of 100 basis points would have had an equal but opposite effect.
Other Price Risk
Changes in market prices other than those arising from interest rate risk or currency risk may also affect the value of the Company's net assets.
The Board manages the market price risks inherent in the investment portfolio by ensuring full and timely access to relevant information from the Investment Managers. The Board meets regularly and at each meeting reviews investment performance, the investment portfolio and the rationale for the current investment positioning to ensure consistency with the Company's objectives and investment policies. The portfolio does not seek to reproduce the index, investments are selected based upon the merit of individual companies and therefore performance may well diverge from the short term fluctuations of the benchmark.
Other Price Risk Sensitivity
Fixed asset investments are valued at bid prices which equate to their fair value. A full list of the Company's investments is given on pages 18 to 20 of the Annual Report and Financial Statements. In addition, a geographical analysis of the portfolio, an analysis of the investment portfolio by broad industrial or commercial sector and a list of the 30 largest investments by their aggregate market value are contained in the Strategic Report.
108.8% (2013 - 111.0%) of the Company's net assets are invested in quoted equities. A 3% increase in quoted companies equity valuations at 31 March 2014 would have increased total assets and total return on ordinary activities by £84,774,000 (2013 - £73,895,000). A decrease of 3% would have had an equal but opposite effect.
Liquidity Risk
This is the risk that the Company will encounter difficulty in meeting obligations associated with financial liabilities.
Liquidity risk is potentially significant but the majority of the Company's assets are investments in quoted securities that are believed to be readily realisable. The Board provides guidance to the Investment Managers as to the maximum exposure to any one holding and to the maximum aggregate exposure to substantial holdings.
The Company has the power to take out borrowings, which give it access to additional funding when required.
Credit Risk
This is the risk that a failure of a counterparty to a transaction to discharge its obligations under that transaction could result in the Company suffering a loss.
This risk is managed as follows:
¾ Where the Investment Managers make an investment in a bond or other security with credit risk, that credit risk is assessed and then compared to the prospective investment return of the security in question.
¾ The Board regularly receives information from the Investment Managers on the credit ratings of those bonds and other securities in which the Company has invested.
¾ The Company's listed investments are held on its behalf by The Bank of New York Mellon (acting as agent), the Company's custodian. Bankruptcy or insolvency of the custodian may cause the Company's rights with respect to securities held by the custodian to be delayed. The Investment Managers monitor the Company's risk by reviewing the custodian's internal control reports and reporting its findings to the Board.
¾ Investment transactions are carried out with a large number of brokers whose creditworthiness is reviewed by the Investment Managers. Transactions are ordinarily undertaken on a delivery versus payment basis whereby the Company's custodian bank ensures that the counterparty to any transaction entered into by the Company has delivered on its obligations at the same time as any transfer of cash or securities away from the Company is completed.
¾ Transactions involving derivatives, and other arrangements wherein the creditworthiness of the entity acting as broker or counterparty to the transaction is likely to be of sustained interest, are subject to rigorous assessment by the Investment Managers of the creditworthiness of that counterparty. The Company's aggregate exposure to each such counterparty is monitored regularly by the Board.
¾ Cash is held only at banks that are regularly reviewed by the Managers.
Credit Risk Exposure
The maximum exposure to credit risk at 31 March was:
|
|
2014 £'000 |
2013 £'000 |
|
Fixed interest investments |
42,653 |
66,857 |
|
Cash and short term deposits |
21,705 |
13,867 |
|
Debtors and prepayments |
5,093 |
5,401 |
|
|
69,451 |
86,125 |
None of the Company's financial assets are past due or impaired.
Fair Value of Financial Assets and Financial Liabilities
The Directors are of the opinion that the financial assets and liabilities of the Company are stated at fair value in the balance sheet with the exception of long term borrowing. Long term borrowings in relation to debentures are included in the accounts at the amortised amount of net proceeds after issue, plus accrued finance costs in accordance with FRS26. The fair value of bank loans is calculated with reference to government bonds of comparable maturity and yield. A comparison with the fair value (closing offer value) is as follows:
|
|
2014 |
2013 |
||||
|
|
Par/nominal £'000 |
Book £'000 |
Fair £'000 |
Par/nominal £'000 |
Book £'000 |
Fair £'000 |
|
8-14% stepped interest debenture stock 2020 |
20,000 |
21,476 |
30,140 |
20,000 |
21,619 |
33,618 |
|
6.875% debenture stock 2023 |
75,000 |
74,673 |
87,968 |
75,000 |
74,636 |
92,287 |
|
6-12% stepped interest debenture stock 2026 |
50,000 |
53,873 |
78,145 |
50,000 |
54,023 |
87,430 |
|
4.5% irredeemable debenture stock |
675 |
675 |
540 |
675 |
675 |
565 |
|
Total debentures |
145,675 |
150,697 |
196,793 |
145,675 |
150,953 |
213,900 |
|
Fixed rate loans |
|
148,199 |
148,414 |
|
158,929 |
160,461 |
|
Floating rate loans |
|
89,971 |
89,971 |
|
65,196 |
65,196 |
|
Total borrowings |
|
388,867 |
435,178 |
|
375,078 |
439,557 |
All short term floating rate borrowings are stated at fair value, which is considered to be equal to their par value.
Deducting long term borrowings at fair value would have the effect of reducing the net asset value per share from 1,060.9p to 1,039.9p. Taking the market price of the ordinary shares at 31 March 2014 of 1,044.0p, this would have given a premium to net asset value of 0.4% as against a discount of 1.6% on a debt at par basis. At 31 March 2013 the effect would have been to reduce the net asset value from 885.4p to 857.6p. Taking the market price of the ordinary shares at 31 March 2013 of 822.5p, this would have given a discount to net asset value of 4.1% as against 7.1% on a debt at par basis.
Investments
|
31 March 2014 |
Level 1 £'000 |
Level 2 £'000 |
Level 3 £'000 |
Total £'000 |
|
Listed equities/funds |
2,825,799 |
4,924 |
- |
2,830,723 |
|
Listed debt securities |
- |
42,653 |
- |
42,653 |
|
Unlisted equities |
- |
- |
107,257 |
107,257 |
|
Total financial asset investments |
2,825,799 |
47,577 |
107,257 |
2,980,633 |
|
31 March 2013 |
Level 1 £'000 |
Level 2 £'000 |
Level 3 £'000 |
Total £'000 |
|
Listed equities/funds |
2,463,152 |
4,498 |
- |
2,467,650 |
|
Listed debt securities |
- |
66,857 |
- |
66,857 |
|
Unlisted equities |
- |
- |
47,342 |
47,342 |
|
Total financial asset investments |
2,463,152 |
71,355 |
47,342 |
2,581,849 |
Investments in securities are financial assets designated at fair value through profit or loss on initial recognition. In accordance with Financial Reporting Standard 29 'Financial Instruments: Disclosures', the preceding tables provide an analysis of these investments based on the fair value hierarchy described below, which reflects the reliability and significance of the information used to measure their fair value.
Fair Value Hierarchy
The fair value hierarchy used to analyse the fair values of financial assets 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:
¾ Level 1 - investments with quoted prices in an active market;
¾ Level 2 - investments whose fair value is based directly on observable current market prices or is indirectly being derived from market prices; and
¾ Level 3 - investments whose fair value is determined using a valuation technique based on assumptions that are not supported by observable current market prices or are not based on observable market data.
Other risks faced by the Company include the following:
Regulatory Risk - failure to comply with applicable legal and regulatory requirements such as the tax rules for investment companies, the UKLA Listing Rules and the Companies Act could lead to suspension of the Company's Stock Exchange Listing, financial penalties, a qualified audit report or the Company being subject to tax on capital gains. Baillie Gifford's Internal Audit and Compliance Departments provide regular reports to the Audit Committee on Baillie Gifford's monitoring programmes.
Major regulatory change could impose disproportionate compliance burdens on the Company. In such circumstances representation is made to ensure that the special circumstances of investment trusts are recognised.
Operational/Financial Risk - failure of the Managers' accounting systems or those of other third party service providers could lead to an inability to provide accurate reporting and monitoring or a misappropriation of assets. The Managers have a comprehensive business continuity plan which facilitates continued operation of the business in the event of a service disruption or major disaster. The Board reviews the Managers' Report on Internal Controls and the reports by other key third party providers are reviewed by the Managers on behalf of the Board.
Premium/Discount Volatility - the premium/discount at which the Company's shares trade can change. The Board monitors the level of premium/discount and the Company has authority to sell shares in treasury and buy back its own shares.
Gearing Risk - the Company may borrow money for investment purposes. If the investments fall in value, any borrowings will magnify the extent of this loss. If borrowing facilities are not renewed, the Company may have to sell investments to repay borrowings.
All borrowings require the prior approval of the Board and gearing levels are discussed by the Board and Managers at every meeting. The majority of the Company's investments are in quoted securities that are readily realisable.
Political Risk - the Board is aware that the Scottish Referendum Vote introduces elements of political uncertainty which may have practical consequences; developments will be closely monitored and considered by the Board and Managers. However, the Referendum is only one of a variety of political risks facing the Company which are considered by the Board on a regular basis.
Capital Management
The capital of the Company is its share capital and reserves as set out in notes 13 and 14 of the Annual Report and Financial Statements together with its borrowings (see notes 11 and 12 of the Annual Report and Financial Statements). The objective of the Company is to maximise total return, whilst also generating real dividend growth, from a focused and actively managed global portfolio. The Company's investment policy is set out on page 7 of the Annual Report and Financial Statements. In pursuit of the Company's objective, the Board has a responsibility for ensuring the Company's ability to continue as a going concern and details of the related risks and how they are managed are set out on page 25 of the Annual Report and Financial Statements. The Company has the authority to issue and buy back its shares (see page 29 of the Annual Report and Financial Statements) and changes to the share capital during the year are set out in notes 13 and 14 of the Annual Report and Financial Statements. The Company does not have any externally imposed capital requirements other than the covenants on its loans which are detailed in notes 11 and 12 of the Annual Report and Financial Statements.
Statement of directors' responsibilities in respect of the annual report and the financial statements
The Directors are responsible for preparing the Annual Report, the Directors' Remuneration Report and the financial statements in accordance with applicable law and regulations.
Company law requires the Directors to prepare financial statements for each financial year. Under that law they have elected to prepare the financial statements in accordance with applicable law and UK Accounting Standards (UK Generally Accepted Accounting Practice). Under company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Company and of the profit or loss of the Company for that period. In preparing these financial statements, the Directors are required to:
¾ select suitable accounting policies and then apply them consistently;
¾ make judgements and accounting estimates that are reasonable and prudent;
¾ state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements respectively; and
¾ prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business.
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the financial statements and the Directors' Remuneration Report comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
Under applicable law and regulations, the Directors are also responsible for preparing a Strategic Report, Directors' Report, Directors' Remuneration Report and Corporate Governance Statement that complies with that law and those regulations.
The Directors have delegated responsibility to the Managers for the maintenance and integrity of the Company's pages on the Managers' website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
Each of the Directors, whose names and functions are listed within the Directors and Managers section, confirms that, to the best of their knowledge:
¾ the financial statements, which have been prepared in accordance with applicable law and UK Accounting Standards (UK Generally Accepted Accounting Practice), give a true and fair view of the assets, liabilities, financial position and net return of the Company;
¾ the Annual Report and Financial Statements taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the Company's performance, business model and strategy; and
¾ the Strategic Report includes a fair review of the development and performance of the business and the position of the Company, together with a description of the principal risks and uncertainties that it faces.
By order of the Board
John Scott
14 May 2014
Income statement
|
|
For the year ended 31 March 2014 |
|
For the year ended 31 March 2013 |
||||
|
|
Revenue £'000 |
Capital £'000 |
Total £'000 |
|
Revenue £'000 |
Capital £'000 |
Total £'000 |
|
Gains on investments |
- |
435,494 |
435,494 |
|
- |
244,988 |
244,988 |
|
Currency gains/(losses) |
- |
18,766 |
18,766 |
|
- |
(10,396) |
(10,396) |
|
Income (note 2) |
50,385 |
- |
50,385 |
|
58,950 |
- |
58,950 |
|
Investment management fee |
(4,565) |
(4,565) |
(9,130) |
|
(3,836) |
(3,836) |
(7,672) |
|
Other administrative expenses |
(2,835) |
- |
(2,835) |
|
(2,379) |
- |
(2,379) |
|
Net return before finance costs and taxation |
42,985 |
449,695 |
492,680 |
|
52,735 |
230,756 |
283,491 |
|
Finance costs of borrowings |
(9,174) |
(9,174) |
(18,348) |
|
(9,215) |
(9,215) |
(18,430) |
|
Net return on ordinary activities before taxation |
33,811 |
440,521 |
474,332 |
|
43,520 |
221,541 |
265,061 |
|
Tax on ordinary activities |
(3,602) |
- |
(3,602) |
|
(4,010) |
- |
(4,010) |
|
Net return on ordinary activities after taxation |
30,209 |
440,521 |
470,730 |
|
39,510 |
221,541 |
261,051 |
|
Net return per ordinary share (note 3) |
12.14p |
176.96p |
189.10p |
|
15.59p |
87.42p |
103.01p |
The total column of this statement is the profit and loss account of the Company.
All revenue and capital items in this statement derive from continuing operations. No operations were acquired or discontinued during the year.
A Statement of Total Recognised Gains and Losses is not required as all gains and losses of the Company have been reflected in the above statement.
Balance sheet
|
|
At 31 March 2014 £'000 |
At 31 March 2013 £'000 |
|
|
Fixed assets |
|
|
|
|
Investments held at fair value through profit or loss |
2,980,633 |
2,581,849 |
|
|
|
|
|
|
|
Current assets |
|
|
|
|
Debtors |
5,093 |
5,401 |
|
|
Cash and short term deposits |
21,705 |
13,867 |
|
|
|
26,798 |
19,268 |
|
|
Creditors |
|
|
|
|
Amounts falling due within one year |
(259,021) |
(72,867) |
|
|
Net current liabilities |
(232,223) |
(53,599) |
|
|
Total assets less current liabilities |
2,748,410 |
2,528,250 |
|
|
Creditors |
|
|
|
|
Amounts falling due after more than one year |
(150,697) |
(309,882) |
|
|
|
2,597,713 |
2,218,368 |
|
|
Capital and reserves |
|
|
|
|
Called up share capital |
71,086 |
71,086 |
|
|
Capital redemption reserve |
19,094 |
19,094 |
|
|
Capital reserve |
2,429,523 |
2,045,003 |
|
|
Revenue reserve |
78,010 |
83,185 |
|
|
Shareholders' funds |
2,597,713 |
2,218,368 |
|
|
Net asset value per ordinary share (after deducting borrowings at fair value) (note 6) |
1,039.9p |
857.6p |
|
|
Net asset value per ordinary share (after deducting borrowings at par) |
1,060.9p |
885.4p |
|
|
Ordinary shares in issue (note 7) |
245,339,897 |
251,144,897 |
|
Reconciliation of movements in shareholders' funds
For the year ended 31 March 2014
|
|
Share capital £'000 |
Capital redemption reserve £'000 |
Capital reserve† £'000 |
Revenue reserve £'000 |
Shareholders' funds £'000 |
|
Shareholders' funds at 1 April 2013 |
71,086 |
19,094 |
2,045,003 |
83,185 |
2,218,368 |
|
Net return on ordinary activities after taxation |
- |
- |
440,521 |
30,209 |
470,730 |
|
Shares bought back (note 7) |
- |
- |
(56,001) |
- |
(56,001) |
|
Dividends paid during the year (note 4) |
- |
- |
- |
(35,384) |
(35,384) |
|
Shareholders' funds at 31 March 2014 |
71,086 |
19,094 |
2,429,523 |
78,010 |
2,597,713 |
For the year ended 31 March 2013
|
|
Share capital £'000 |
Capital redemption reserve £'000 |
Capital reserve† £'000 |
Revenue reserve £'000 |
Shareholders' funds £'000 |
|
Shareholders' funds at 1 April 2012 |
71,086 |
19,094 |
1,844,229 |
77,914 |
2,012,323 |
|
Net return on ordinary activities after taxation |
- |
- |
221,541 |
39,510 |
261,051 |
|
Shares bought back (note 7) |
- |
- |
(20,767) |
- |
(20,767) |
|
Dividends paid during the year (note 4) |
- |
- |
- |
(34,239) |
(34,239) |
|
Shareholders' funds at 31 March 2013 |
71,086 |
19,094 |
2,045,003 |
83,185 |
2,218,368 |
† The Capital Reserve balance at 31 March 2014 includes investment holding gains on fixed asset investments of £1,213,115,000 (31 March 2013 - gains of £894,384,000).
Cash flow statement
|
|
Year to 31 March 2014 £'000 £'000 |
Year to 31 March 2013 £'000 £'000 |
||
|
Net cash inflow from operating activities (note 9) |
|
39,354 |
|
48,335 |
|
Servicing of finance |
|
|
|
|
|
Interest paid |
(18,535) |
|
(18,693) |
|
|
Net cash outflow from servicing of finance |
|
(18,535) |
|
(18,693) |
|
Taxation |
|
|
|
|
|
Income tax refunded |
3 |
|
19 |
|
|
Overseas tax incurred |
(3,635) |
|
(4,061) |
|
|
Total tax paid |
|
(3,632) |
|
(4,042) |
|
Financial investment |
|
|
|
|
|
Acquisitions of investments |
(399,505) |
|
(287,065) |
|
|
Disposals of investments |
436,215 |
|
310,571 |
|
|
Realised currency loss |
(319) |
|
(1,088) |
|
|
Net cash inflow from financial investment |
|
36,391 |
|
22,418 |
|
Equity dividends paid (note 4) |
|
(35,384) |
|
(34,239) |
|
Net cash inflow before financing |
|
18,194 |
|
13,779 |
|
Financing |
|
|
|
|
|
Shares bought back (note 7) |
(43,486) |
|
(20,767) |
|
|
Bank loans repaid |
(64,311) |
|
- |
|
|
Bank loans drawn down |
97,441 |
|
- |
|
|
Net cash outflow from financing |
|
(10,356) |
|
(20,767) |
|
Increase/(decrease) in cash |
|
7,838 |
|
(6,988) |
|
Reconciliation of net cash flow to movement in net debt |
|
|
|
|
|
Increase/(decrease) in cash in the period |
|
7,838 |
|
(6,988) |
|
Increase in bank loans |
|
(33,130) |
|
- |
|
Exchange movement on bank loans |
|
19,085 |
|
(9,308) |
|
Other non-cash changes |
|
256 |
|
226 |
|
Movement in net debt in the year |
|
(5,951) |
|
(16,070) |
|
Net debt at 1 April |
|
(361,211) |
|
(345,141) |
|
Net debt at 31 March |
|
(367,162) |
|
(361,211) |
Notes to the condensed financial statements
|
1. |
The financial statements for the year to 31 March 2014 have been prepared on the basis of the accounting policies set out in the Company's Annual Financial Statements at 31 March 2013. The Directors consider the Company's functional currency to be sterling as the Company's shareholders are predominantly based in the UK and the Company is subject to the UK's regulatory environment. |
||||||||||
|
2. |
Income |
Year to 31 March 2014 £'000 |
Year to 31 March 2013 £'000 |
||||||||
|
|
Income from investments and interest receivable |
50,385 |
58,950 |
||||||||
|
|
Other income |
- |
- |
||||||||
|
|
|
50,385 |
58,950 |
||||||||
|
3. |
Net Return per Ordinary Share |
|
Year to 31 March 2014 £'000 |
Year to 31 March 2013 £'000 |
|||||||
|
Revenue return on ordinary activities after taxation |
|
30,209 |
39,510 |
||||||||
|
Capital return on ordinary activities after taxation |
|
440,521 |
221,541 |
||||||||
|
Total net return |
|
470,730 |
261,051 |
||||||||
|
Weighted average number of ordinary shares in issue |
248,939,459 |
253,421,883 |
|||||||||
|
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. |
|||||||||||
|
4. |
Ordinary Dividends |
2014 |
2013
|
2014 £'000 |
2013 £'000 |
||||||
| Amounts recognised as distributions in the year: |
|
|
|
|
|||||||
| Previous year's final (paid 1July 2013) |
7.30p |
6.80p |
18,261 |
17,246 |
|||||||
| Interim (paid 29 November 2013) |
6.90p |
6.70p |
17,123 |
16,993 |
|||||||
|
14.20p |
13.50p |
35,384 |
34,239 |
||||||||
| Also set out below are the total dividends paid and proposed in respect of the financial year, which is the basis on which the requirements of section 1158 of the Corporation Tax Act 2010 are considered. The revenue available for distribution by way of dividend for the year is £30,209,000 (2013 - £39,510,000). | |||||||||||
|
|
|
2014 |
2013
|
2014 £'000 |
2013 £'000 |
||||||
| Dividends paid and payable in respect of the year: |
|
|
|
|
|||||||
| Interim dividend per ordinary share (paid 29 November 2013) |
6.90p |
6.70p |
17,123 |
16,993 |
|||||||
| Proposed final dividend per ordinary share (payable 7 July 2014) |
7.60p |
7.30p |
18,646 |
18,334 |
|||||||
| Adjustment to provision for previous year's final dividend re shares bought back |
- |
- |
(73) |
- |
|||||||
|
14.50p |
14.00p |
35,696 |
35,327 |
||||||||
|
|
The final dividend was declared after the period end date and has therefore not been included as a liability in the balance sheet. If approved the final dividend will be paid on 7 July 2014 to all shareholders on the register at the close of business on 13 June 2014. The ex-dividend date is 11 June 2014. The Company's Registrars offer a Dividend Reinvestment Plan and the final date for elections for this dividend is 18 June 2014. |
||||||||||
|
5. |
The bank loan falling due within one year comprises US$150million, US$163 million and €61million (2013 - US$99 million). There were no bank loans falling due in more than one year comprise at 31 March 2014 (2013 - €61million and US$163 million). During the year the Bank of New York Mellon loan, which had drawings of US$99 million was repaid and a new one year £100 million loan was drawn down in US$ with State Street Bank and Trust Company . Since the year end the £100 million loan with State Street Bank and Trust Company has been renewed with a US$165 million facility. |
||||||||||
|
6. |
The fair value of borrowings at 31 March 2014 was £435,178,000 (2013 - £439,557,000). Net asset value per share (after deducting borrowings at fair value) was 1,039.9p (2013 - 857.6p). |
||||||||||
|
7. |
|
|
2014 Number of shares |
2013 Number of shares |
|||||||
| Share capital: Ordinary shares of 25p each |
|
|
|
||||||||
| Allotted, called up and fully paid |
|
245,339,897 |
251,144,897 |
||||||||
| Treasury shares |
|
39,006,279 |
33,201,279 |
||||||||
| Total |
|
284,346,176 |
284,346,176 |
||||||||
|
|
The Company's authority permits it to hold shares bought back 'in treasury'. Such treasury shares may be subsequently either sold for cash (at, or at a premium to, net asset value per ordinary share) or cancelled. In the year to 31 March 2014 a total of 5,805,000 (2013 - 2,475,000) ordinary shares with a nominal value of £1,451,000 (2013 - £619,000) were bought back at a total cost of £56,001,000 (2013 - £20,767,000) and held in treasury. At 31 March 2014 the Company had authority to buy back a further 33,308,042 ordinary shares. Under the provisions of the Company's Articles the share buy-backs were funded from the capital reserve. |
||||||||||
|
8. |
Transaction costs on purchases amounted to £339,000 (2013 - £238,000) and transaction costs on sales amounted to £325,000 (2013 - £188,000). |
||||||||||
|
9. |
Reconciliation of net return before finance costs and taxation to net cash inflow from operating activities |
|
Year to 31 March 2014 £'000 |
Year to 31 March 2013 £'000 |
|||||||
|
|
Net return on ordinary activities before finance costs and taxation |
|
492,680 |
283,491 |
|||||||
|
Gains on investments |
|
(435,494) |
(244,988) |
||||||||
|
Currency (gains)/losses |
|
(18,766) |
10,396 |
||||||||
|
Decrease in accrued income |
|
742 |
1,116 |
||||||||
|
(Increase)/decrease in debtors |
|
(403) |
130 |
||||||||
|
Increase/(decrease) in creditors |
|
595 |
(1,810) |
||||||||
|
Net cash inflow from operating activities |
|
39,354 |
48,335 |
||||||||
|
10. |
The financial information set out above does not constitute the Company's statutory accounts for the year ended 31 March 2014. The financial information for 2013 is derived from the statutory accounts for 2013 which have been delivered to the Registrar of Companies. The Auditor has reported on the 2013 accounts, the report was unqualified and did not contain a statement under section 498(2) or (3) of the Companies Act 2006. The statutory accounts for 2014 are unaudited, however it is expected that the Auditor will issue an unqualified opinion. The statutory accounts for 2014 will be finalised on the basis of the financial information presented in this preliminary announcement and will be delivered to the Registrar of Companies following the Company's Annual General Meeting. |
||||||||||
|
11. |
The Annual Report and Financial Statements will be available on the Managers' website www.scottishmortgageit.com‡ on or around 23 May 2014. |
||||||||||
‡ 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.
None of the views expressed in this document should be construed as advice to buy or sell a particular investment.
- ends -
This information is provided by RNS
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