TIDMSMT
RNS Number : 9583N
Scottish Mortgage Inv Tst PLC
26 May 2020
Scottish Mortgage Investment Trust PLC
Legal Entity Identifier: 213800G37DCS3Q9IJM38
Regulated Information Classification: Annual Financial and Audit
Reports
Annual Report and Financial Statements
Further to the preliminary statement of audited annual results
announced to the Stock Exchange on 15 May 2020, Scottish Mortgage
Investment Trust PLC ("the Company") announces that the Company's
Annual Report and Financial Statements for the year ended 31 March
2020, including the Notice of Annual General Meeting, has today
been posted to shareholders and submitted electronically to the
National Storage Mechanism where it will shortly be available for
inspection at
https://data.fca.org.uk/#/nsm/nationalstoragemechanism
It is also available on the Company page of the Baillie Gifford
website at: www.scottishmortgageit.com (as is the preliminary
statement of audited annual results announced by the Company on 15
May 2020).
Covid-19 coronavirus - Important note regarding arrangements for
the Annual General Meeting (AGM)
The Board of Scottish Mortgage Investment Trust PLC (Scottish
Mortgage) recognises the public health risk associated with the
Covid-19 outbreak arising from public gatherings and notes the
Government's measures restricting such gatherings, travel and
attendance at workplaces.
At the same time, the Board is conscious of the legal
requirement for Scottish Mortgage to hold its AGM before the end of
September. Given the current uncertainty around when public health
concerns will have abated, the Board has for the time being decided
to aim to follow the Company's customary corporate timetable and,
accordingly, the Company's AGM is being convened to take place as
scheduled at 4.30pm on Thursday 25 June 2020 at the offices of
Baillie Gifford & Co, Calton Square, 1 Greenside Row, Edinburgh
EH1 3AN without access for shareholders. The Board will, however,
continue to monitor developments and any changes will be advised to
shareholders by post and details will be updated on the Company's
website. In the meantime, the Board encourages all shareholders to
submit proxy voting forms as soon as possible and, in any event, by
no later than 4.30pm on 23 June 2020.
We would encourage shareholders to monitor the Company's website
at www.scottishmortgageit.com . Should shareholders have questions
for the Board or the Managers or any queries as to how to vote,
they are welcome as always to submit them by email to
trustenquiries@bailliegifford.com or call 0800 917 2112. Baillie
Gifford may record your call.
Responsibility Statement of the Directors in respect of the
Annual Financial Report
The Directors confirm that, to the best of their knowledge:
3/4 the Financial Statements set out in the Annual Report and
Financial Statements, prepared in accordance with the applicable
set of accounting standards, give a true and fair view of the
assets, liabilities, financial position and profit or loss of the
Company; and
3/4 the Strategic Report set out in the Annual Report and
Financial Statements includes a fair review of the development and
performance of the business and the position of the issuer,
together with a description of the principal risks and
uncertainties that they face (as also set out below).
The Directors consider that the Annual Report and Financial
Statements taken as a whole are fair, balanced and understandable
and provide the information necessary for shareholders to assess
the Company's position and performance, business model and
strategy.
Principal Risks relating to the Company
As explained on page 42 of the Annual Report and Financial
Statements, there is an ongoing process for identifying, evaluating
and managing the risks faced by the Company on a regular basis. The
Directors have carried out a robust assessment of the principal and
emerging risks facing the Company including those that would
threaten its business model, future performance, solvency or
liquidity. A description of these risks and how they are being
managed or mitigated is set out below.
Financial Risk - the Company's assets consist mainly of listed
securities and its principal and emerging financial risks are
therefore market related and include market risk (comprising
currency risk, interest rate risk and other price risk), liquidity
risk and credit risk. An explanation of those risks and how they
are managed is contained in note 19 to the Financial Statements on
pages 70 to 77 of the Annual Report and Financial Statements. The
Board has, in particular, considered the impact of heightened
market volatility since the coronavirus outbreak. To mitigate these
risks, the Board considers at each meeting various metrics
including portfolio concentration, regional and industrial sector
weightings, top and bottom stock contributors to performance and
contribution to performance by industrial sector. The Managers
provide the rationale for stock selection decisions and both the
investment strategy and portfolio risk are formally considered in
detail at least annually. The Board has considered the potential
impact on sterling from the remaining Brexit related uncertainties.
The value of the Company's investment portfolio would be affected
by any impact, positively or negatively, on sterling but would be
partially offset by the effect of exchange movements on the
Company's US$ denominated borrowings.
Unlisted Investments - the Company's risk could be increased by
its investment in unlisted investments. These assets may be more
difficult to buy or sell, so changes in their prices may be greater
than for listed investments. To mitigate this risk, the Board
considers the unlisted investments in the context of the overall
investment strategy and provides guidance to the Managers on the
maximum exposure to unlisted investments. The investment policy
limits the amount which may be invested in unlisted companies to 25
per cent. of the total assets of the Company, measured at time of
purchase. The Board is seeking shareholder approval at the
forthcoming Annual General Meeting to increase the limit to 30 per
cent. (see pages 7 and 19 of the Annual Report and Financial
Statements).
Investment Strategy Risk - pursuing an investment strategy to
fulfil the Company's objective which the market perceives to be
unattractive or inappropriate, or the ineffective implementation of
an attractive or appropriate strategy, may lead to reduced returns
for shareholders and, as a result, a decreased demand for the
Company's shares. This may lead to the Company's shares trading at
a widening discount to their net asset value. To mitigate this
risk, the Board regularly reviews and monitors the Company's
objective and investment policy and strategy; the investment
portfolio and its performance, the level of premium/discount to net
asset value at which the shares trade; and movements in the share
register.
Discount Risk - the premium/discount at which the Company's
shares trade relative to its net asset value can change. The risk
of a widening discount is that it may undermine investor confidence
in the Company. To manage this risk, the Board monitors the level
of premium/discount at which the shares trade and the Company has
authority to buy back its existing shares when deemed by the Board
to be in the best interests of the Company and its
shareholders.
Regulatory Risk - failure to comply with applicable legal and
regulatory requirements such as the tax rules for investment trust
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. To mitigate this risk, Baillie Gifford's
Business Risk, 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. Shareholder
documents and announcements, including the Company's published
Interim and Annual Report and Financial Statements, are subject to
stringent review processes, and procedures are in place to ensure
adherence to the Transparency Directive and the Market Abuse
Directive with reference to inside information.
Custody and Depositary Risk - safe custody of the Company's
assets may be compromised through control failures by the
Depositary, including cyber security incidents. To mitigate this
risk, the Board receives six monthly reports from the Depositary
confirming safe custody of the Company's assets held by the
Custodian. Cash and portfolio holdings are independently reconciled
to the Custodian's records by the Managers. The Custodian's audited
internal controls reports are reviewed by Baillie Gifford's
Internal Audit Department and a summary of the key points is
reported to the Audit Committee and any concerns investigated.
Operational Risk - failure of Baillie Gifford's systems or those
of other third party service providers could lead to an inability
to provide accurate reporting and monitoring or a misappropriation
of assets. To mitigate this risk, Baillie Gifford has a
comprehensive business continuity plan which facilitates continued
operation of the business in the event of a service disruption
(including disruption resulting from the coronavirus outbreak) or
major disaster. Since the introduction of the Covid-19
restrictions, almost all Baillie Gifford staff have been working
from home and operations have continued very largely as normal. The
Board reviews Baillie Gifford's Report on Internal Controls and the
reports by other key third party providers are reviewed by Baillie
Gifford on behalf of the Board. The other key third party service
providers have not experienced significant operational difficulties
affecting their respective services to the Company.
Leverage 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. To mitigate this risk, all borrowings require the prior
approval of the Board and leverage levels are discussed by the
Board and Managers at every meeting. Covenant levels are monitored
regularly. The majority of the Company's investments are in quoted
securities that are readily realisable. Further information on
leverage can be found on page 83 and in the Glossary of Terms and
Alternative Performance Measures on pages 87 to 89 of the Annual
Report and Financial Statements.
Political Risk - political developments are closely monitored
and considered by the Board. Following the departure of the UK from
the European Union on 31 January 2020, the Board continues to
assess the potential consequences for the Company's future
activities. Whilst there remains considerable uncertainty, the
Board believes that the Company's global portfolio, with no
significant exposure to the United Kingdom, positions the Company
to be suitably insulated from Brexit-related risk (see page 4 of
the Annual Report and Financial Statements).
Baillie Gifford & Co Limited
Company Secretaries
26 May 2020
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END
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