苏格兰抵押投资信托 — 经理人回顾，截至2016年3月31日年报（詹姆斯·安德森与汤姆·斯莱特）

Managers’ Review It has been a year of sound and fury. In conventional terms it has signified very little. Markets and our portfolio ended the 12 months little changed in prices after varied and frenetic zigzags throughout the period. Mr. Market has been more than usually emotional in his moods but has ended up back much where he was a year ago. Equally the shape of the portfolio is familiar. The top 5 holdings are in the same companies for the second year running. We still own 29 of the top 30 shares from the previous year. Despite the indecision of markets we believe that the last year may come to be seen as one of those rare occasions when the world we are likely to inhabit underwent radical change. Naturally many of the shifts have long antecedents and may still be but dimly grasped but this should not be allowed to disguise the reality of extraordinary change.

With such a backdrop it is not surprising that ructions have been frequent and market progress halting – there are many companies and investment approaches that are raging against the dying of the old lights. This process is bound to be uncomfortable. Last year we concluded that we needed to concentrate on three new questions in order both to convey the direction of our thoughts to shareholders and to assess whether our views and portfolio are productive and meaningful interpretations of the investment world. So far we think all three of these questions retain their relevance. Will major and accelerating improvements in core technologies lead to progress in healthcare, energy and transportation analogous to those in information technology in recent years? Or will secular stagnation and limited productivity gains dominate? This seems to us to have become the central debate of our investing – perhaps even our economic – times.

It needs scarcely be added that the predominant mood in markets, politics and the media is that we are condemned to an era of pervasive doom and gloom. The academic version of this is perhaps best captured by Robert Gordon’s ‘The Rise and Fall of American Growth’ but the market version has been buttressed by the widespread belief that low stated GDP growth and minimal inflation are indicators of distress and justification for negative government bond yields in several countries. In equity terms this has been matched by an assumption that this must mean that we are condemned to a low return world and by a chronic lack of confidence that active investment management is worthwhile. We disagree with this vision of futility. Unfortunately the more the investment world endorses these pessimistic mantras the more likely they become. If the world’s savings are merely tied up in bonds yielding little or nothing issued by governments attempting little or nothing or in seeking out those quoted companies that have the least conceivable need of capital or desire to invest in uncertain future growth then we can hardly be surprised if stagnation is the result.

The only compensation is that the returns for those few who aspire to more are likely to rise as competition falls. But the simplest reason we do not adhere to the dystopian version of the investment world is that it has been badly misguided. Ultimately for equity investors the economic context as defined by GDP growth, government deficits, inflation and bond yields is at best of minor and unclear relevance to markets and at worst a dangerous distraction. What matters is the creation of wealth by companies. This has already happened in the 21st century in quite astonishing scale. Whilst cynics, value investors and commentators can argue all they like as to the precisely ‘correct’ valuations afforded to the great (predominately) technology driven companies of our era even the most dedicated and morose cannot wish away their existence. That Apple and Alphabet (Google) are the two largest companies in the world by market capitalization is hardly a figment of fevered speculation but of levels of profitability that even conservative valuation principles cannot ignore.

For an equity investor this ought to matter far more than endless speculation over the odds of a quarter point rise in the Federal Reserve’s monetary settings or the trajectory of UK GDP growth (or otherwise) in 2016. What matters still more and next is whether the extraordinary value creation of the recent past can be replicated or bettered in the future. We think that it can. Indeed we think that the chances that this is so in the future have increased and are increasing. The evidence that this is so appears to us to be particularly compelling in the fields of transportation and energy. Until recently we thought that the mutually reinforcing trio of electric vehicles, autonomous vehicles and renewable energy would require at the very least five years (and more probably a decade) to become a significant economic influence.

This did not mean that we regarded these areas as unfit for investment but that we felt the lengthy time frames and inevitable uncertainties of technological and competitive clarity combined with bureaucratic and selfinterested inertia and obstructionism by incumbents did require more than our usual patience and willingness to be wrong in return for significant upside potential. Our position sizing reflected this. This has proven unduly conservative. That this is so is principally to the credit of Tesla. Whilst the underlying trends have been supportive, the ability to tie the strands together, to apply the necessary capital, to thereby drive down the cost of batteries and storage, to manufacture from scratch and to build electric vehicles of performance and allure has transformed the probabilities and the time scale involved. Sheer ambition matters. The extraordinary success of the Model 3 unveiling seems to us to be one of those rare moments that have meaning beyond the normal.

In the first two days Tesla received 232,000 orders (with a $1,000 reservation fee) and a potential $8.1bn in revenue. In comparison in the first two days of the original iPhone in 2007 Apple sold 270,000 units for $135m. Whether electric vehicles have come of age or not Tesla itself most certainly has. By 2020 the impact on the mass market ought to be apparent. By 2030 Musk believes the entire market will be 100% electric and 100% autonomous. Given the sustained improvement in performance and price electric vehicles will, he suggests, be cheaper even if the price of oil ‘goes to zero’. Tesla’s Autopilot already seems to have cut accident rates by 50%. We have bought more Tesla shares. Our contentions that healthcare is embarking on a path of radical reinvention survive – but they have not advanced as much as those surrounding transportation and energy. It’s tempting to say that this is unsurprising as healthcare is complex, highly politicized and at the mercy of incumbent interests.

But this may be indulgent: all these apply to energy and transport too and the economic and personal motivations ought to be at least as strong in creating pressure for healthcare improvements. Equally it is

Tesla Model 3 232,000 orders within two days of unveiling.

unclear that the breakthroughs that are occurring in healthcare are less significant than in transportation. Our experience over the last year has been that of listening to expert industry veterans repeating as in a mantra that they do not like to use the term ‘cure’ but that this is what they are observing at least at the conceptual level. At an individual company level it is not even obvious that the time and capital required are out of kilter with that expended by Tesla. But at an industry level this translates into a very high barrier. Immunotherapy oncology is a clear example. The clinical testing for each specific type of cancer usually runs into billions of dollars and as genomic science progresses, the indications become more and more specific. It is only in rare instances that an appeal to the public directly can accelerate the process. Illumina’s non-invasive Down’s syndrome test has been a clear instance of such a success.

We would now go further than in the past. It seems to us that there is usually no longevity without volatility. As with states and individuals, exaggerated stability leads to complacency and an inability to respond to changed circumstances. From the storied supposed safety of newspaper franchises (even Warren Buffett believed in this one for too long) to the downfall of notable food retailers (‘people will always need food’) decades of effortless prosperity proved a recipe for disaster. Barnes & Noble and Borders proved much more prone to permanent loss of capital than the volatile and supposedly risky Amazon. Investors redouble the problem. In the search for low volatility positive returns they push companies to manage for stability, cash-flow and dividends thereby frequently undermining the necessary investment. Many then gear up their portfolios and trading position on the basis that these stocks are virtually riskless according to the models.

Eventually we do believe that the promise of new technologies in healthcare will reward patient investors. From genomics to immunotherapy to gene editing and therapy the methodology, the proofs of concept and the economics are falling into place. Much of what is needed now is the building out of scale, data, training and experience.

These considerations seem to us to be likely to be even more relevant in the future. On the one hand the rise of low volatility and passive investing are clear. They unduly support the apparently stable and the complacent large. On the other the direct assault on the businesses of the apparently secure is rapidly growing. If Musk is right about transportation in 2030 then whither oil companies or the inventors of the combustion engine? If personalized medicine and early cures do indeed arrive then what happens to the trillions in market capitalization enjoyed by the exploiters of questionable blockbuster drugs and unquestionably unjustified pharmaceutical price inflation? Valeant’s demise is likely to be the lead indicator of much greater pain.

Which companies will prove to have the greatest profitability resilience and longevity? We wrote last year about the risks that matter to us as investors. Tom Slater pointed out that we do not believe that risk can be defined as volatility and that doing so indeed detracts from the ability to discern true risk in the form of a permanent loss of capital.

Corporations, states and citizens. Who wins? Beneath so many of the headlines of the last year lurks the increasingly acrimonious battle for the share of the spoils of economies and societies. It is not possible to assume any longer that the effortless dominance of capital over labour, or in popular terms the 1% over the 99%, will continue as it has done since the late 1970’s. From Donald Trump to Yanis Varoufakis many of the most colourful people and episodes over the last year have explored such issues. But almost as frequently the relative power of the state and the corporate sector has been the issue at stake. From iPhone encryption to Google’s tax affairs tensions have grown. Once again this has not been confined to the west. Facebook has been involved in both a vitriolic argument about Indian Internet access at low cost and an elaborate minuet with the Chinese authorities, who in turn seem increasingly unsure whether to be proud of the modernizing impact of their technology companies or scared of their allure to a querulous middle-class. Amazon founder Jeff Bezos.

In contrast we increasingly believe that the business models and mentalities of the (frequently volatile) companies that make up the bulk of the Scottish Mortgage portfolio have the capability to enjoy long as well as profitable lives. We noted last year that from their very long-term visions to their low capital requirements and strong networks, there might be reason to doubt the all too prevalent assumption that the internet platform companies of today would turn out to be the inflated but near identical brethren of the 1990’s bubble. The last year has provided substantial practical evidence of this in ways that have both helped and hindered our results. In both the US and China, the current evidence is that instead of the power of the internet incumbents being threatened by the next innovation, rather their reach and authority has expanded, thereby squeezing both smaller competitors and the pre-internet behemoths. For good or ill Tencent, Alibaba and Baidu appear to control directly or indirectly almost the entire internet ecosystem in China. At the same time they are starting to encroach on the world of finance and banking in an apparently remorseless manner. In America the clearest example may be Facebook. It has used its data, insights and financial power in a manner that appears to be extending its reach and potential longevity as each new technology and business model comes into view. Through analyzing and buying Instagram, WhatsApp and Oculus Rift Facebook has made itself the leading presence in emergent areas rather than disappearing as AOL or My Space did. What we have to acknowledge is that this dominant position has increasingly come at the cost of the smaller players in the market. The prospects of Twitter and LinkedIn have soured.

Whilst these issues continue to rise up the agenda we find it hard to come to any conclusions as to what the likely impact and resolutions will be at this stage. This is principally because none of the parties to these messy struggles seems to be very convincing in conveying its case. Noise levels are high. Our own sole conviction is that we should use our limited influence to persuade the companies in which we invest that they are better thinking of their long-run credibility than their short-run profit maximization. We are quite prepared to be outspoken about these issues.

Concluding Observations We find ourselves in a very strange environment. The investment world appears to be becoming ever more self-referential, ever more short-term, ever more obsessed by positioning and macroeconomic soothsaying. Neither building great companies nor sensibly allocating precious capital resources appears to be of much interest. As we have discussed the market mood is full of pessimism and negativity. We need to reiterate in closing that to us this is misguided. The opportunities for fundamental, long-term growth investment do not turn on stated GDP growth or on central banks or overall corporate earnings. They are instead dependent on the skills, circumstances and opportunities available to build great businesses at scale with high and persistent returns. The flow of such companies, quoted and unquoted and frequently at quite enormous scale, seems to us to have increased and be increasing. The territory is fertile. James Anderson

Investing in Private Companies for Scottish Mortgage Scottish Mortgage’s portfolio of unlisted companies has been growing and we believe there are some tremendous opportunities to deploy capital in this area. Our reputation as a long-term supportive shareholder helps us to get access to appealing growth businesses and our scale enables us to invest in them at a cost that few can match. Why are a growing number of our investment ideas coming from outside of the listed sphere? Our philosophy and process are unchanged and we are not becoming early stage venture capitalists. What has changed is that the capital cost of building a company has collapsed. Ten years ago, businesses had to buy servers, infrastructure and software. Today they use free development tools and pay a fee to Amazon Web Services to host their infrastructure. Ten years ago, their addressable market was the three hundred million people that could access a website using a desktop computer, most of whom were in the United States. Today there are more than three billion people across the globe accessing the Internet with a mobile device, which means breakthrough businesses can achieve huge scale whilst raising only modest amounts of capital. Without pressure from dominant early funding partners wanting to recoup their capital, the attitude of the entrepreneurs involved has changed. They are staying private longer, avoiding the burdens of the public markets and being selective about their investors. They are listing at a time and on terms to suit their businesses. This provides a challenge for public market investors if they wish to retain their opportunity set. This was starkly illustrated by the listing of Alibaba in September 2014 at a market capitalisation of over $150bn. A great deal of value creation had taken place before it became a listed company. Retaining private status allows companies to make decisions in a different way from those beholden to stock markets. It allows founders to think long-term and invest in projects without immediate payoffs. Such an approach is often difficult for listed companies. The average holding period across major stock markets has declined significantly and as a result, the focus on quarterly earnings statements has increased, as has the demand for predictable and increasing short-term profitability. This forces decisions to be taken in a different way, which we believe is increasingly detrimental to the chances of long-term outsized returns. As a result, unlisted companies may have a structure that confers an advantage over our investment time horizon. Scottish Mortgage has two important assets when seeking unlisted investments. The first is our reputation as a long-term and supportive custodian. We’ve held Amazon shares in size for over ten years and that kind of behaviour stands out amidst short-termism elsewhere. This matters because the management teams involved are careful about whom they will allow onto their shareholder register. Just because companies don’t want to go public, it doesn’t mean they don’t have financing requirements and, for rapidly scaling companies, this can require the resources of public market investors. Our second asset is our structure.

The portfolio of unlisted companies has been growing. Images clockwise from top: www.alamy.com; © HelloFresh 2016; Courtesy of Skyscanner; Britta Pedersen/dpa/Corbis.

Being closed-ended means that we can own these investments on a long-term time horizon. We do not have the liquidity constraints of open-ended funds or the limited life constraints of most venture capital structures. As outlined elsewhere in this report, we value our unlisted holdings using the International Private Equity and Venture Capital guidelines. An important element of this accounting approach is that we regularly estimate the price at which a company would trade if there were a market in its shares. We are concerned that this pushes us to become the conduit through which exaggerated stock market volatility is transmitted to unlisted companies. We do not wish to make it harder for the management of investee companies to take long-term decisions, thereby eroding one of the key advantages that originally attracted us to them. Within the context of the guidelines we therefore aim to have a robust and thoughtful valuation process that emphasises the evolving performance of these businesses and does not simply reflect stock market noise. We are in the fortunate position to get the opportunity to invest in unlisted companies with great potential and remarkable management teams. We need to continue to earn a reputation as desirable shareholders to ensure that we remain able to invest in the best growth companies available globally. We are excited about the prospects for long-term returns and committed to keeping the costs of investing low. Tom Slater

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.

visions that are barely noticed by the markets. There is more in the investment world than the Financial Times or Wall Street Journal describe.

— 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.

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.

— 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 capitalisation 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 — We are long term in our investment little use to shareholders to tinker around decisions. It is only over periods of at the edges of indices. We think this least five years that the competitive produces better investment results and it advantages and managerial excellence certainly makes us more committed of companies becomes apparent. It shareholders in companies. We suspect is these characteristics that we want that selecting stocks on the basis of the to identify and support. We own past (their current market capitalisation) is a companies rather than rent shares. policy designed to protect the security of We do not regard ourselves as experts tenure of asset managers rather than to in forecasting the oscillations of build the wealth of shareholders. economies or the mood swings of Companies that are large and established markets. Indeed we think that it is hard tend to be internally complacent and to excel in such areas as this is where We are growth investors. inflexible. They are often vulnerable to so many market participants focus and assault by more ambitious and vibrant where so little of the value of newcomers. companies lies. Equally Baillie Gifford is more likely to possess competitive advantages for the good of — We are Growth stock investors. Such has been the preference shareholders when it adopts a long term perspective. We are for Value and the search to arbitrage away minor rating a 100 year old Scottish partnership. We think about our own differentials that investors find it very hard to acknowledge the business over decades not quarters. Such stability may not be extraordinary growth rates and returns that can be found exciting but it does encourage patience in this most impatient today. The growth that we are particularly interested in is of an of industries. We only judge our investment performance over explosive nature and often requires minimal fixed assets or five year plus time horizons. In truth it takes at least a decade indeed capital. We think of it as ‘Growth at Unreasonable to provide adequate evidence of investment skill. Prices’ rather than the traditional discipline of ‘Growth at a

— 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

— We believe that it is our first duty to shareholders to limit fees. Both the investment management fee (0.30%) and ongoing charges ratio (0.45% as at 31 March 2016) 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 an ongoing charges ratio of 0.45% 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% then this is the difference between removing approximately 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.