Scottish Mortgage Investment Trust : Interim Financial Report 30 September 2023

Interim Financial Report

30 September 2023

Scottish Mortgage aims to identify, own and support the world's most exceptional growth companies. We aim to provide long-term funding and support for the companies and entrepreneurs building the future of our economy.

Benchmark

The portfolio benchmark against which performance is measured is the FTSE All-World Index (in sterling terms).

Principal risks and uncertainties

The principal risks facing the Company are financial risk, private company investments risk, investment strategy risk, climate and governance risk, discount risk, regulatory risk, custody and depositary risk, operational risk, cyber security risk, leverage risk, political risk and emerging risks. An explanation of these risks and how they are managed is set out on pages 42 and 43 of the Company's Annual Report and Financial Statements for the year to 31 March 2023 which is available on the Company's website: scottishmortgage.com.

The principal risks and uncertainties have not changed since the date of that report.

Responsibility statement

We confirm that to the best of our knowledge:

1. the condensed set of Financial Statements has been prepared in accordance with FRS 104 'Interim Financial Reporting';
2. the Interim Management Report includes a fair review of the information required by Disclosure and Transparency Rule 4.2.7R (indication of important events during the first six months, their impact on the condensed set of Financial Statements and a description of the principal risks and uncertainties for the remaining six months of the year); and
3. the Interim Financial Report includes a fair review of the information required by Disclosure and Transparency Rule 4.2.8R (disclosure of related party transactions and changes therein).

By order of the Board Justin Dowley Chair

3 November 2023

SCOTTISH MORTGAGE INVESTMENT TRUST PLC	01

Summary of unaudited results

31 March

30 September2023

2023 (audited) % change

Shareholders' funds*

Gearing†

Net asset value per ordinary share

(after deducting borrowings at fair value)†

Net asset value per ordinary share (after deducting borrowings at book)*

FTSE All-World Index (in sterling terms) Share price

Discount (after deducting borrowings at fair value)† Active share†

£11,074.0m	£11,498.0m
15%	14%
818.9p	843.9p	(3.0)
787.7p	816.8p	(3.6)
		3.0
669.6p	678.6p	(1.3)
(18.2%)	(19.6%)
93%	94%

	Six months to	Six months to
	30 Sept 2023	30 Sept 2022	% change
Revenue earnings per share	1.62p	1.44p	12.5
Interim dividend per share#	1.60p	1.60p	-
	Six months to	Six months to
	30 Sept 2023	30 Sept 2022

Total returns (%)†

Net asset value per ordinary share

(after deducting borrowings at fair value)†

Net asset value per ordinary share (after deducting borrowings at book)*

Share price

FTSE All-World Index (in sterling terms)

(2.7)(14.9)

(3.3)(17.4)

(1.0)(23.5)

4.3(7.0)

Six months to 30 Sept 2023

Year to 31 March 2023

Periods high and low

Share price

Net asset value per ordinary share

(after deducting borrowings at fair value)†

Premium/(discount)

(after deducting borrowings at fair value)† Average sector discount (AIC Global Sector)

High Low

735.8p 612.2p

883.4p 777.3p

(15.3%) (22.7%)

(11.7%) (14.3%)

High Low

1,045.0p 643.0p

1,074.5p 778.7p

0.4% (21.6%)

(3.3%) (12.2%)

• See Glossary of Terms and Alternative Performance Measures on pages 28 and 29.

• Alternative Performance Measure - see Glossary of Terms and Alternative Performance Measures on pages 28 and 29.
  # See note 5, page 23.
  Source: AIC/Refinitiv/Baillie Gifford and relevant underlying index providers. See disclaimer on page 27.

Past performance is not a guide to future performance.

02

INTERIM FINANCIAL REPORT 2023

Interim management report

Our portfolio of growth investments is in robust health. Financial conditions have pushed companies to focus and prioritise profitable growth. Declines in stock prices have made valuations more attractive. This combination provides a strong underpinning for the long-term outlook.

We will have periods when we underperform the market, and the six months in question was one. Since the end of March, our net asset value per share, with debt at fair value ('NAV'), fell by 2.7% compared with a rise of 4.3% for the FTSE All-World Index (both in total return terms). The longer-term performance record remains good. Over five years, the NAV has gained 59.6% versus 49.6%, and over 10 years it has increased by 358.1% against 189.5% (both against the index).

Although our focus remains on long-term capital appreciation, we know that a small and consistent dividend is of value to many shareholders. The Board is therefore recommending an interim dividend of 1.60p per share,

no increase over last year's payment.

Our objective is to find companies with the potential for exceptional growth and then own them patiently as they deliver. There are times when stock markets reward this approach and times, as now, when they do not. We constantly revisit the case for our investments and expect that we will sometimes find our optimism misplaced. However, we do not revisit the underlying investment philosophy that has served us well for many years. The value created by the innovation and dedication of exceptional companies will deliver returns for our fellow shareholders. In turn, Scottish Mortgage's patient ownership and support can increase the likelihood of entrepreneurial success.

Not all large companies capable of outsized growth are listed on public stock markets. Accessing such opportunities at a reasonable cost is a distinctive part of our role for shareholders. The operational performance of our major private businesses has been strong despite the difficult prevailing conditions. The average revenue growth rate of the top ten private holdings was 38% in 2022. Market scepticism around the performance and valuation of our private assets is misplaced, and we believe they will be a significant source of value creation for the Trust in the coming years. We deployed approximately £74m into

6 private companies in the half year, and one of our private holdings, the beauty company Oddity, went public.

Divining much that is useful from stock markets over a six-month period is challenging. The market's positive return has been driven by a handful of large technology companies that would seem to be the early beneficiaries of developments in Artificial Intelligence ('AI'). The capabilities of today's AI systems are sufficient for widespread commercial deployment. Their ability to communicate in natural language based on an 'understanding' of the relevant concepts lends itself to many different use cases. Building a foundational AI model can cost billions of dollars, so only those with the deepest pockets can compete. Giant consumer technology companies have those resources and vast user bases to whom they can deploy the resulting applications.

Chipmaker NVIDIA, whose shares we bought in 2016, has been the key provider of the necessary computing infrastructure for AI, or as CEO Jensen Huang put it, 'if you don't build it, they won't show up'. The acceleration in its business has been breathtaking. Revenue guidance for the third quarter is $16bn, which compares to less than $6bn a year ago. The step change that we have seen in AI's capabilities would have been impossible without NVIDIA's silicon. The pace of progress has exceeded our expectations and has been well ahead of what Moore's Law would have dictated for traditional computing. Instead of seeing the end of an aberrant growth era, we may be entering a period of even faster development. If so, the consequences will be yet more profound.

We are mindful that the pioneers may be the easiest to identify when seismic shifts occur in the technology landscape, but they are not always the biggest beneficiaries. Often, nimble new entrants emerge and arrogate opportunities before a dominant incumbent can react. This creates dramatic and long-lasting investment opportunities, as we saw in the PC, Internet and Mobile transformations.

We do not claim to be able to predict macroeconomic developments and are often bemused by the level of coverage given to the future course of interest rates. We can, though, observe the changes we have seen at the companies we own. Unable to assume that markets will provide capital, they are generating their own supply. They are trimming costs and focusing on the most promising projects. We are encouraged that they continue to spend heavily on research and development but believe a higher cost of capital introduces a healthy dose of prioritisation. The free cash flow from our listed portfolio more than doubled in the twelve months to the end of June.

Rising rates have little impact on our company. During the years of exceptionally low interest rates we proactively extended the term of our debt. The majority of our borrowings do not come due until after 2036 and our interest cost is below 3%.

Progress is being made across a broad swathe of technologies. What makes this so exciting for growth investors is that the number of ways companies can combine these technologies grows exponentially. Accelerated computing drives artificial intelligence, which can be applied to vast datasets in the Cloud, enabling breakthroughs in healthcare and so on. Our companies are fitter for the future, and the opportunity they address grows at an accelerating pace. Economic news is usually dreary, and geopolitics rarely reassuring, but entrepreneurs' collective creativity and productivity are a source of great confidence and optimism.

The principal risks and uncertainties facing the Company are set out on the inside front cover of this report.

Tom Slater

Baillie Gifford & Co Limited

Managers and Secretaries

For a definition of terms see Glossary of Terms and Alternative Performance Measures on pages 28 and 29. Total return information sourced from Refinitiv/Baillie Gifford.

See disclaimer on page 27.

Past performance is not a guide to future performance.

Valuing private companies

We aim to hold our private company investments at 'fair value', i.e. the price that would be paid in an open-market transaction. Valuations are adjusted both during regular valuation cycles and on an ad hoc basis in response to 'trigger events'. Our valuation process ensures that private companies are valued in both a fair and timely manner.

The valuation process is overseen by a valuations group at Baillie Gifford, which takes advice from an independent third party (S&P Global). The valuations group is independent from the investment team with all voting members being from different operational areas of the firm, and the investment managers only receive final valuation notifications once they have been applied.

We revalue the private holdings on a three-month rolling cycle, with one-third of the holdings reassessed each month. During stable market conditions, and assuming all else is equal, each investment would be valued twice in a six-month period. For Scottish Mortgage, as well as all other investment trusts, the prices are also reviewed twice per year by the respective boards and are subject to the scrutiny of external auditors in the annual audit process.

Beyond the regular cycle, the valuations team also monitors the portfolio for certain 'trigger events'. These may include changes in fundamentals, a takeover approach, an intention to carry out an Initial Public Offering ('IPO'), company news which is identified by the valuation team or by the portfolio managers, or meaningful changes to the valuation of comparable public companies. Any ad hoc change to the fair valuation of any holding is implemented swiftly and reflected in the next published net asset value ('NAV'). There is no delay.

The valuations team also monitors relevant market indices on a weekly basis and updates valuations in a manner consistent with our external valuer's (S&P Global) most recent valuation report where appropriate.

Continued market volatility has meant that recent asset pricing has moved much more frequently than during stable market conditions. The data below quantifies the revaluations carried out during the six months to

30 September 2023, however doesn't reflect the ongoing monitoring of the private investment portfolio that hasn't resulted in a change in valuation.

Year to date, most revaluations have been decreases, with a small number of companies successfully raising capital, and in some cases easing short-term liquidity pressures.

The average movement in company valuations and share prices for those are shown below.

SCOTTISH MORTGAGE INVESTMENT TRUST PLC

03

Scottish Mortgage Investment Trust*

Percentage of portfolio revalued up to 2 times	70%
Percentage of portfolio revalued up to 4 times	97%
Percentage of portfolio revalued at least 5 times	3%

• Each private holding valuation is assessed at least once in a six-month period, in accordance with the Baillie Gifford valuation policy.

During the six-month period ended 30 September 2023 we have written down some of the valuations as a result of company specific circumstances which have challenged the economic reality of the liquidation preferences. This has contributed to the divergence in the average movement in valuation at instrument level in comparison to the underlying company value.

Valuation movements	%
Average movement in investee company securities price	(2.4)
Average movement in investee company valuation	(0.5)

04

INTERIM FINANCIAL REPORT 2023

Performance

Six months total return performance†

(plotted on a monthly basis, rebased to 100 at 31 March 2023)

110

105

100

95

90

Mar	Apr	May	Jun	Jul	Aug	Sep
2023						2023

Source: Refinitiv and relevant underlying index providers#. Share price total return†

NAV total return† (after deducting borrowings at fair value) Benchmark‡ total return

Five year total return performance†

(figures rebased to 100 at 30 September 2018)

300

200

100

0

Sep	Sep	Sep	Sep	Sep	Sep
2018	2019	2020	2021	2022	2023

Cumulative to 30 September

Source: Refinitiv and relevant underlying index providers#. Share price total return†

NAV total return† (after deducting borrowings at fair value) Benchmark‡ total return

Six month discount to Net Asset Value†

(plotted on a weekly basis)

(14%)

(16%)

(18%)

(20%)

(22%)

(24%)

Mar	Apr	May	Jun	Jul	Aug	Sep
2023						2023

Source: Baillie Gifford and relevant underlying index providers#.

Scottish Mortgage discount† (after deducting borrowings at fair value)

Ten year total return performance†

(figures rebased to 100 at 30 September 2013)

900

600

300

0

Sep	Sep	Sep	Sep	Sep	Sep
2013	2015	2017	2019	2021	2023

Cumulative to 30 September

Source: Refinitiv and relevant underlying index providers#. Share price total return†

NAV total return† (after deducting borrowings at fair value) Benchmark‡ total return

Ten year turnover	†				Ten year active share relative to the benchmark
							†			‡
(rolling 12 months turnover, plotted on a monthly basis)		(plotted on a six monthly basis)
100%						100%
80%						80%
60%						60%
40%						40%
20%						20%
0%						0%
Sep	Sep	Sep	Sep	Sep	Sep	Sep	Sep	Sep	Sep	Sep	Sep
2013	2015	2017	2019	2021	2023	2013	2015	2017	2019	2021	2023
Source: Baillie Gifford.					Source: Baillie Gifford and relevant underlying index providers#.
Turnover†						Active share†

• Alternative Performance Measure - see Glossary of Terms and Alternative Performance Measures on pages 28 and 29.
  # See disclaimer on page 27.
  ‡ Benchmark: FTSE All-World Index (in sterling terms).

Past performance is not a guide to future performance.

SCOTTISH MORTGAGE INVESTMENT TRUST PLC	05

Portfolio executive summary

Performance

	6 months	1 year	3 years	5 years	10 years
Share price	(1.0%)	(13.9%)	(31.6%)	26.7%	288.0%
NAV	(2.7%)	(6.0%)	(16.5%)	59.6%	358.1%
Benchmark†	4.3%	11.1%	31.4%	49.6%	189.5%

All figures are stated on a total return basis* for period to 30 September 2023.

• Alternative Performance Measure - see Glossary of Terms and Alternative Performance Measures on pages 28 and 29.
  † Benchmark: FTSE All-World Index (in sterling terms).
  Source: AIC/Refinitiv/Baillie Gifford and relevant underlying index providers. See disclaimer on page 27.

Key contributors and detractors to performance - six months to 30 September 2023

	Absolute
Contributors	performance % *
NVIDIA	58.7
Tesla Inc	22.3
Pinduoduo Inc	30.8
Amazon.com	24.7
Wise Plc	26.1
Ginkgo BioWorks Inc	37.9

Detractors	Absolute
performance % *
Moderna	(31.9)
Adyen	(52.3)
Kering	(27.8)
ASML	(11.3)
Zalando	(45.9)

• Absolute performance (in sterling terms) has been calculated on a total return basis over the period 1 April 2023 to 30 September 2023. For the definition of total return see Glossary of Terms and Alternative Performance Measures on pages 28 and 29.

Denotes listed security previously held in the portfolio as an unlisted (private company) security.

Portfolio transactions - six months to 30 September 2023

New buys

Coupang LLC

Oddity#

Additions

Amazon.com

Aurora Innovation Inc Class A Common

Beam Therapeutics

Pinduoduo Inc

Private company follow-on rounds

Blockchain.com Series E Pref.

Databricks Inc Series I Pref.

Honor Technology Promissory Note

Redwood Materials Inc. Series D Pref. Stripe Inc Series I Pref.

Complete sales

Carvana

Lilium NV

Reductions

Illumina

Kering

Netflix

NIO Inc

Tencent Holdings

Tesla Inc

Denotes unlisted (private company) security.

Denotes listed security previously held in the portfolio as an unlisted (private company) security.

• Initially purchased in the period as a private company and listed on 19 July 2023.

06	INTERIM FINANCIAL REPORT 2023

Portfolio themes

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Technology meets healthcare As healthcare and technology merge, innovative treatments are being developed faster and cheaper than ever.

Decarbonisation

We are moving away from a world of carbon-based energy generation and transport towards electrification and renewables.

A digitalised world

The digital transformation that has revolutionised the retail, media and advertising industries is now broadening into fields such as food, finance and enterprise.

And beyond...

From space exploration to timeless luxury brands, we invest in many more companies pioneering progress elsewhere.

Source: Baillie Gifford & Co, and portfolio companies for use of their logo. Please note, this graphic highlights the most exciting themes in the portfolio.

It does not show all companies and themes.

Distribution of total assets*

Geographical analysis at 30 September 2023	Sectoral analysis at 30 September 2023
(31 March 2023)	(31 March 2023)

Africa & Middle East 0.6% (<0.1%)	North America 55.0% (54.8%)
Israel 0.6% (Nil)	United States 53.8% (53.6%)
Nigeria <0.1% (<0.1%)	Canada 1.2% (1.2%)
South America 4.6% (4.5%)	Europe 25.0% (26.8%)
Brazil 4.6% (4.5%)	United Kingdom 3.0% (2.5%)
Asia 14.8% (13.9%)	Eurozone 15.7% (18.8%)
Developed Europe (non euro)
China 13.4% (13.2%)	6.3% (5.5%)
India 0.8% (0.7%)
Korea 0.6% (Nil)

• Total assets represents total net assets before deduction of all borrowings.

Net Liquid Assets 0.2% (1.3%) Consumer Discretionary
Real Estate Nil (Nil)	37.6% (34.3%)
Technology 26.8% (26.2%)
Energy 0.8% (1.1%)
Healthcare 13.6% (17.2)
Basic Materials 2.5% (1.8%)
Industrials 10.3% (10.4%)
Consumer Staples 3.3% (2.9%)
Financials 4.9% (4.8%)

SCOTTISH MORTGAGE INVESTMENT TRUST PLC	07

Private companies summary

Historical snapshot

Since our first investment in Private Companies in 2012, Scottish Mortgage has deployed £4.5bn of capital in this area.

7 Takeover

Transaction value

Showing all transactions prior to report date (£m).

	1,400
32 Listed	1,200
5 Listed - SPAC	1,000
800
	600
	400
52 Currently held	200
	0	2010	2011	2012	2013	2014	2015	2016	2017	2018	2019	2020	2021	2022	2023
	Buy	Follow on		Listed - SPAC	Listed	Takeover	Sale

Portfolio activity - six months to 30 September 2023 £74m of new capital deployed in private companies during the period.

New buys		Follow on funding rounds
Oddity		ARCH Ventures Fund X Overage	Antler East Africa Fund I LP	Honor Technology Promissory Note
		ARCH Ventures Fund XI	Blockchain.com Series E Pref.	Redwood Materials Inc. Series D Pref.
		ARCH Ventures Fund XII	Databricks Inc Series I Pref.	Stripe Inc Series I Pref.

No private companies were taken-over during the year. Oddity listed on 19 July 2023.

Concentration

At 30 September 2023, we held 52 private companies which equated to 30% of total assets.

• Five companies account for nearly 50% of our private company exposure
• Ten companies account for over 65% of our private company exposure

	Space Exploration
	Technologies Corp
	3.9%
Others	30%
15.5%	Total private company exposure
	Northvolt AB
	3.4%

Private exposure			Top 10 - 20.2%
(30 September 2023)
ByteDance Ltd
2.7%			Top 5 - 14.5%
The Brandtech Group
2.6%
All figures stated as percentage of total assets, as at 30 September 2023.
Tempus Labs Inc
1.9%

08

Size

INTERIM FINANCIAL REPORT 2023

Our private company exposure tends to be weighted to the upper end of the maturity curve, focussed on late stage private companies who are scaling up and becoming profitable.

Cap	Total equity value (USD)	Portfolio %	Number of holdings
Micro	<$300m	0.4	6
Small	$300m-$2bn	4.5	15
Medium	$2bn-$10bn	10.5	14
Large	>$10bn	14.1	7
Total		29.5	42

As at 30 September 2023. There are ten limited partnership investment funds not included in the table above.

Overview

	Six months to	Year to
	30 September 2023	31 March 2023
	£'000	£'000
Opening balance	3,801,611	4,195,819
Purchases at cost	73,933	281,292
Sales - proceeds received	(1,605)	(8,182)
Gains†	1,282	5,365
Change in listing	(26,689)	-
Change in fair value	(8,281)	(672,683)
Closing balance	3,840,251	3,801,611

• Gains for both periods represent gains on distributions from limited partnership investment funds.

Individual private company valuation movements - six months to 30 September 2023

The blue bars on the chart below represent each of Scottish Mortgage's 42 private company holdings.

300%

250%

200%

Scottish Mortgage private company holdings -0.5%

Average change at private company level

Scottish Mortgage private company holdings -36.9%

Average valuation write-down per private company (excluding positive contributors)

changes	150%
100%
Valuation
50%
	(0%)
	(50%)
	(100%)
	Private companies	NASDAQ 8.2%*
	Six months to 30 September 2023

Source: Baillie Gifford. Scottish Mortgage private company valuation changes, six months to 30 September 2023.

• Source: Refinitiv. See disclaimer on page 27. Total return for NASDAQ composite.