REG - Scot.Mort Inv Tst - Scottish Mortgage Final Results
22/05/2025 07:00
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RNS Number : 6883J Scottish Mortgage Inv Tst PLC 22 May 2025
RNS Announcement: Final Results
Scottish Mortgage Investment Trust PLC
Legal Entity Identifier: 213800G37DCS3Q9IJM38
Results for the year to 31 March 2025
NAV (borrowings at fair value)* 11.2%
NAV (borrowings at book value)* 10.9%
Share Price* 6.0%
FTSE All-World Index† 5.5%
Source: LSEG / Baillie Gifford. All figures are total return*. See disclaimer
at the end of this announcement.
* Alternative Performance Measure - see Glossary of terms and Alternative
Performance Measures at the end of this announcement.
† In sterling terms.
The following is the Preliminary Results Announcement for the year to 31 March
2025 which was approved by the Board on 21 May 2025.
Statement from the Chair
Introduction
Global equities performed well in 2024, largely due to advances in AI and
semiconductor demand. However, the start of 2025 has been marked by
volatility, particularly due to geopolitical tensions and economic policies.
After the Company's year-end, a significant selloff occurred in early April
2025, triggered by threats of U.S. tariffs and China's retaliatory measures,
leading to a dramatic drop in major indices. At the same time, the investment
trust sector continues to face headwinds to demand, and the average share
price discount to NAV is currently 9.1%. Against this backdrop, I am pleased
to be able to report on a positive year for your Company.
Performance
Total return* (%) 12 months to 12 months to
31 March 2025 31 March 2024
NAV (borrowings at fair value) 11.2 11.5
Share price 6.0 32.5
FTSE All-World Index (in sterling terms) 5.5 21.0
Global Sector Average - NAV 5.5 17.3
Global Sector Average - share price 4.1 24.8
Source: AIC/LSEG/Baillie Gifford.
* Alternative Performance Measure - see Glossary of terms and Alternative
Performance Measures at the end of this announcement.
Over the year to 31 March 2025, the Company's net asset value ('NAV') total
return was 11.2% and its share price total return was 6.0%. Over the same
period, the FTSE All-World index total return was 5.5%. Whilst it is pleasing
to note these one-year returns, we feel that this represents too short a time
frame on which to judge performance given the long-term nature of the
investment strategy.
Over the last decade, the Scottish Mortgage Managers have delivered
outperformance for shareholders. The NAV per share has increased by 320%
compared to a 182% increase in the FTSE All-World index, on a total return
basis. Clearly, recent years have been a rollercoaster ride in share price
terms. Although unsettling, this serves as a useful reminder of what one can
expect from a growth investment strategy seeking to maximise returns.
Investing in companies at the forefront of structural change means share price
peaks and troughs are inevitable, for both the companies we own and the
Company itself. We ask that shareholders be aligned to our long investment
horizon and are aware that returns are not delivered in a straight line.
Total return* (%) Five years to Ten years to
31 March 31 March
2025 2025
NAV (borrowings at fair value) 87.0 319.6
Share price 68.1 275.8
FTSE All-World Index (in sterling terms) 99.0 181.6
Global Sector Average - NAV 88.1 203.8
Global Sector Average - share price 74.8 202.8
Source: AIC/LSEG/Baillie Gifford.
* Alternative Performance Measure - see Glossary of terms and Alternative
Performance Measures at the end of this announcement.
Value for money
We continue to strive to keep the cost of investing low so that shareholders
retain as much of the return on their investment as possible. Ongoing charges
for the year were 0.31%.
Few other investment companies provide access to both public and private
companies in one portfolio. However, the Company's ongoing charges are less
than most actively managed funds invested in public equities and significantly
less than private equity funds. Scottish Mortgage is not only low-cost but,
once long-term performance has been incorporated, provides excellent value for
money for shareholders. This will continue to be a central tenet for both the
Board and Managers.
Financial position
The Board remains committed to the strategic use of borrowing, which is one of
the principal advantages of the investment trust structure. The nature and
level of the gearing is discussed by the Board and Managers at each Board
meeting.
As reported last year, gearing had been reduced significantly over the
previous year. Although some bank facilities were refinanced in the year to 31
March 2025 (as noted in the Business Review on page 48 of the Annual Report
and Financial Statements), the level of borrowings remained unchanged over the
year. At the end of the year gearing had increased to 13% (31 March 2024 -
11%). In comparison to Federal Reserve and Bank of England base rates, the
average interest rate cost of the Company's debt remains low at 3.1% as at 31
March 2025 (3.2% as at 31 March 2024).
Earnings and dividend
The investment portfolio does not generate significant income as the companies
held typically re-invest earnings to maximise their growth opportunities.
Although income from the equity portfolio was similar to the previous year,
overall revenue earnings per share fell by 40% mainly due to the write-off of
income accrued from the Northvolt promissory note.
The Board recognises the importance to some shareholders of a predictable and
growing dividend. The Company is an 'AIC Dividend Hero' having increased its
dividend for 42 consecutive years. The Board plans to continue this trend and
is recommending that this year the total dividend be increased by 3.3% to 4.38
pence per share (2024 - 4.24 pence per share). Assuming approval by
shareholders, a final dividend of 2.78 pence per share will be paid on 10 July
2025.
Liquidity
The share price discount to NAV widened from 4.5% to 9.0% over the year. We
sought to address the excess supply of shares by buying back 210 million
shares over the period from 1 April 2024 to the date of this report, which
represented 15.2% of the share capital in issue at the start of the year, at a
total cost of £1.9 billion.
The Company has bought back shares for consideration of £2.0 billion since
the Board announced in March 2024 that the Company would make available at
least £1 billion for the purpose of buybacks over the following two years.
Over the last year, Directors held useful meetings with representatives of
several shareholders, whose clients represent a large portion of the register
in percentage terms. Some advocate increased buyback activity, whilst others
feel capital is best deployed into long-term investments. Balance is required.
We take a pragmatic approach in making capital allocation calls between buying
back shares and other uses of capital such as making new investments and
reducing debt. The Board and the Managers remain committed to the continuation
of the buyback.
Environmental, Social and Governance ('ESG')
The Board recognises the importance of considering ESG factors when making
investments and has asked the Managers to take these issues into account. Some
examples of the Managers' engagement with portfolio holdings on governance
matters are provided in the Stewardship and Governance Engagement report on
page 19 of the Annual Report and Financial Statements.
It is the Board's responsibility to monitor activity and progress in areas
such as voting and engagement.
The Company's voting record can be found on the website, scottishmortgage.com.
Shareholder engagement
The Annual General Meeting will be held at 4.30pm on Thursday 3rd July 2025 at
the National Galleries of Scotland, Princes Street Gardens entrance,
Hawthornden Lecture Theatre, The Mound, Edinburgh, EH2 2EL.
The Board extends a warm invitation to shareholders to attend, raise any
questions and exercise their votes. Shareholders are also able to submit proxy
voting forms before the applicable deadline and to direct any comments or
questions for the Board in advance of the meeting through the Company's
Managers, Baillie Gifford. Alternatively, they may also get in touch via
either of the Corporate Brokers, Jefferies International and Deutsche Numis.
Contact details for all three firms are included later in the Annual Report
and are available on their respective websites.
We continue to prioritise engagement with our shareholders. The Managers and
investment specialists host a comprehensive programme of events and meetings
throughout the year. The inaugural Digital Conference last September was a
highlight, featuring discussions with the founder of a portfolio holding and
an expert in the semiconductor industry. Season 3 of the Scottish Mortgage
podcast, Invest in Progress, is also underway. This remains a vital resource
for shareholders, offering insightful conversations between our Managers and
the leaders of our portfolio companies. The Company introduced a quarterly
update video and data pack to ensure that shareholders receive timely updates
on both the Company and our portfolio holdings. And enhancements continue to
be made across the Scottish Mortgage website, email database and social media
channels as we strive for excellence in our digital offering to shareholders.
Board Composition
After serving on the Board for 10 years, I will retire at the Annual General
Meeting. I will be succeeded by Christopher Samuel, an experienced Chairman
and non executive director. Christopher's biography is set out on page 58 of
the Annual Report and Financial Statements.
Professor Maxwell, Senior Independent Director, intends to retire from the
Board, at the Annual General Meeting in 2026. The Board will communicate his
successor as Senior Independent Director in due course.
Outlook
As we look towards 2026 and beyond, the Managers' investment landscape is
shaped by key themes of resilience, adaptability, and innovation. In a
volatile world, resilience is a strategic advantage, allowing companies to
adapt and emerge stronger. The rise of AI and digital platforms is reshaping
industries, driving operational leverage and creating new market
opportunities. Your Managers' focus remains on identifying outlier companies
capable of delivering exceptional returns. These companies, characterised by
their unique growth trajectories, innovative approaches, adaptive leaders and
cultures are rare, but can be immensely rewarding for shareholders over the
long term. By focusing on these key themes, the Board is confident in the
Managers' ability to navigate the challenges and opportunities that lie ahead,
supporting exceptional growth companies for the long term.
Justin Dowley
Chair
21 May 2025
Past performance is not a guide to future performance.
See disclaimer at the end of this announcement.
Manager Review - Tom Slater
The year just passed has been one of compounding progress despite a
disorientating backdrop. Markets remain volatile. Interest rates are high,
confidence remains fragile, and economic uncertainty endures. But beneath the
surface noise, the companies we back have, in many cases, delivered quietly
impressive operational results. They have grown more resilient, more
disciplined, and in several cases, more profitable.
This wasn't inevitable. Two years ago, many of the businesses we own faced
sharply higher funding costs and less forgiving public markets. The most
ambitious took those signals seriously. They cut back on headcount growth,
refocused on their core strengths, and made the kind of long-term decisions
that only become obvious in hindsight. As the environment has stabilised,
these companies are emerging stronger. Margins have widened. Free cash flow
has accelerated. Many of the themes we've followed for a decade such as
digital platforms, AI, electrification and personalised medicine are
translating into tangible results.
The Rise of AI and the Shifting Shape of Value
Few developments this year were more consequential than the rise of generative
AI. The conversation has moved quickly from theory to practice. We see its
impact most clearly in software engineering, where productivity is already
rising dramatically. This matters because software sits at the core of the
modern economy, and many of our companies are already putting these gains to
work. Several have increased output without increasing engineering headcount.
Others have launched new products with surprisingly lean teams. AI is not a
distant promise. It is driving real operational leverage today.
How should we, as investors, respond to such a powerful, yet hard-to-quantify
force? Our largest holding at the start of the year, NVIDIA, sits at the heart
of the current AI boom. Its dominance in training large AI models is
unmatched. However, to be truly transformational, we believe AI must become
ubiquitous-and that implies commoditisation. A world built on $70,000 chips
and 60% margins may not be sustainable. As a result, we chose to reduce our
position significantly over the year. This does not reflect diminished respect
for the company. It reflects our long-held discipline: we seek asymmetric
outcomes. And at the prevailing valuations, the risk/reward looked more
balanced than we prefer.
Conversely, we added to companies that will benefit from the broader adoption
of AI tools. Meta has rebuilt its business with greater efficiency, while
embedding AI more deeply into its product and advertising stack. It has many
opportunities to drive its revenue growth today using this technology. Last
year the company noted an 8% increase in time spent on Facebook as a result of
AI driven content recommendations to its users. The performance of its stock
reflected that progress. Spotify, likewise, is emerging as one of the most
efficient scaled platforms in the world using AI to personalise content
discovery, improve advertising targeting and, potentially, to create a broader
content ecosystem. Both were among the strongest contributors to returns.
We initiated a new position in TSMC, recognising that compute demand will
remain structurally strong as AI moves from the training phase to deployment
at scale. The appetite for semiconductors across datacentres, vehicles,
devices and infrastructure continues to grow. TSMC has solidified its
leadership in the global semiconductor foundry market as competitors such as
Intel have stumbled.
Resilience as a Strategic Advantage
In an environment defined by unpredictability, resilience is not a secondary
virtue; it is central to long-term success. We are increasingly convinced that
the companies most likely to endure and thrive are those capable of adapting.
This means not just those with strong balance sheets, but with leadership
teams willing to evolve, reallocate capital, and make difficult decisions
without losing sight of their long-term mission.
This year brought a fresh reminder of how interconnected, and vulnerable, the
global system has become. Just after our financial year end, the United States
announced sweeping new tariffs on several of its key trading partners. The
reaction from markets was immediate and severe. We are cautious about leaping
to conclusions, but we do not view these developments as transitory. The
underlying imbalances in the US and global economy whether in trade, debt
accumulation, inequality or political cohesion are increasingly unsustainable.
As Herbert Stein's Law famously states, "If something cannot go on forever, it
will stop." It appears the current administration is accelerating that moment
of reckoning.
Equity markets offer no hiding places in such a landscape. Few companies will
be unaffected by a reordering of the global trading regime. What matters is
how they respond. Our task as investors is to seek out businesses with the
adaptability to recalibrate and the cultural foundations to withstand
disruption. In this context, resilience becomes not just about enduring shocks
but learning from them and emerging stronger.
Several of our portfolio companies exemplify this mindset. Amazon, having
invested heavily during the pandemic to expand its fulfilment network, is now
reaping the rewards of that decision. It has emerged from a period of cost
inflation and operational challenge with a far leaner and more productive
infrastructure. Its margins have increased and it has ample cashflow to make
the necessary investments for an AI-led future. Shopify, too, made a conscious
shift by offloading capital-intensive logistics infrastructure while
refocusing on its core mission of enabling merchants. Staff numbers have
fallen despite considerable topline growth and this may well continue. In a
recent internal memo, CEO Tobi Lütke stated that before requesting additional
headcount or resources, teams must first demonstrate why AI cannot fulfil the
required tasks.
In the digital infrastructure layer, Cloudflare has the potential to be a
foundational enabler of AI services. In the past two years it has combined
this potential with a sharp improvement in the profitability of its internet
services business. This makes it more robust and gives it the flexibility to
invest and take advantage of the opportunities ahead. DoorDash has quietly
become one of the most reliable scaled logistics networks in North America. It
has grown beyond takeaway delivery into grocery, retail, and local logistics.
As it has grown it has shown operational discipline and delivered fifteen
percentage points of margin improvement in only two years, becoming decisively
profitable in the process.
These examples highlight what we increasingly view as a shared trait across
the most promising businesses in our portfolio: not simply speed or scale, but
the capacity to absorb shocks, learn quickly, and reorient without losing
momentum. In a world that is becoming more fragmented, more protectionist, and
more unpredictable, this kind of organisational flexibility will matter more
than ever.
Resilience is far from guaranteed. A few of our investments faced more serious
challenges. Moderna, once our largest holding, underperformed meaningfully.
Vaccine fatigue and lower uptake of COVID boosters weighed on near-term
demand, but we believe its mRNA platform remains one of the most promising in
modern medicine. The company's work on respiratory combinations and
personalised cancer vaccines continues to advance. But better commercial
execution is essential if the company is going to turn its technical
excellence into real-world treatments with its existing financial resources.
Northvolt, once a substantial private holding, failed to deliver. Despite deep
demand for battery manufacturing in Europe, the company struggled to scale
production and was unable to justify further support. The investment has been
written down and offers hard lessons about capital-intensive ventures and the
importance of execution in manufacturing.
Beyond the US
While much of the AI revolution is being led by US companies, we continue to
believe that innovation is geographically diffuse and that great companies are
being built in every corner of the world. One of the privileges of the
Scottish Mortgage mandate is the freedom to invest globally without benchmark
constraint. This year, we made full use of it.
In Latin America, our largest public company investment, MercadoLibre
delivered another set of strong results. In ecommerce, it has continued to
take share as competitors retrench. Investments in logistics are paying off,
with faster fulfilment times and improved customer experience reinforcing user
loyalty. Despite macroeconomic challenges in key markets like Argentina and
Brazil, the company's geographic breadth and operational flexibility have
allowed it to navigate currency pressures and local inflation effectively.
MercadoPago has become a leading digital wallet and payments infrastructure
across multiple markets, with rising adoption not only online but at physical
point-of-sale. It has moved beyond simply facilitating transactions on
MercadoLibre's platform to becoming an embedded part of daily life in the
region. The company typifies the earlier description of operational discipline
leading to higher margins, cashflows and subsequent resilience.
Nubank, which we added to the portfolio, is now the largest independent
digital bank in the world outside China. It has gained over 100 million users
primarily through organic growth, which significantly reduces customer
acquisition costs compared with those of competitors. The company's
digital-first approach provides a substantial cost advantage by eliminating
traditional bank branches, resulting in industry-leading profitability. Nu has
also expanded beyond credit cards into highly profitable areas such as
personal loans and secured lending, with significant potential still remaining
untapped in Brazil, Mexico, and Colombia. It still retains ample opportunity
for expansion, both geographically within Latin America and through further
product diversification.
We took a new position in Sea Limited which has a fast-growing ecosystem
across e-commerce, digital financial services, and gaming in South East Asia.
Shopee, its e-commerce arm, is gaining market share, supported by scale
advantages and an expanding logistics network, helping drive operational
efficiency and gross margin improvements. SeaMoney is emerging as a major
fintech player, riding the wave of digital lending in underbanked markets and
delivering strong growth with healthy credit metrics. Its main competition in
ecommerce are subsidiaries of our Chinese holdings PDD and Bytedance.
Ferrari, was among the strongest contributors to returns this decade. It
represents a different flavour of growth for the portfolio. It is not built on
technological disruption, but on brand power, scarcity, and executional
excellence. It exemplifies the idea that transformational value creation
doesn't always come from novelty, but sometimes from a deep, sustained focus
on what doesn't change. Its electrification strategy, and pricing power
underscore the durability of its brand and the value of long-term stewardship.
We also added a small position in Hermès, as it possesses qualities similar
to those that have made Ferrari one of the most quietly powerful contributors
to the portfolio. While its products couldn't be more different (handbags and
scarves versus supercars), the business models share a set of rare
characteristics such as extraordinary pricing power, deliberate scarcity and
multi-decade growth with minimal capital intensity.
China: From Retrenchment to Renewal?
Over the past five years, investing in China has demanded a combination of
conviction and patience. The regulatory wave that began with the blocking of
the Ant Financial IPO signalled a new era where private enterprise would be
expected to align more closely with national objectives. Many global investors
exited. We did not. Our exposure declined, but we remained committed to the
best businesses China had to offer.
This year brought tentative signs of a thaw. A highly symbolic handshake
between President Xi and Alibaba founder Jack Ma suggested an evolving tone.
Government rhetoric has turned to supporting private-sector job creation, and
valuations, once priced for ruin, have started to recover. Our Chinese
holdings, though concentrated, are among the most operationally dynamic in the
portfolio. Meituan successfully maintained its dominance in food delivery
against competition from Douyin, improved efficiency by raising commission
rates, and strategically cut lower quality, unprofitable business lines. It
leveraged its strength in operational execution and merchant relationships,
increasing advertising revenue and attracting more merchants back to its
platform by promising sustainable returns. PDD has taken its discount
ecommerce model global through Temu. China still represents the vast majority
of profits. To mitigate tariff risks and logistical challenges, PDD is
transitioning toward local warehousing and fulfilment centres in overseas
markets.
We added a new position in electric vehicle manufacturer BYD. The company has
a strong position in the ruthlessly competitive Chinese electric vehicle
market, driven primarily by vertical integration, significant scale
advantages, and a dominant market share in lower priced segments. The company
is expanding rapidly outside China and recently exceed $100billion in annual
revenue. Despite potential challenges, such as slowing growth in China's EV
market, geopolitical uncertainties, and intense competition in higher-end
segments, BYD's substantial investments in battery technology, cost
leadership, and strategic international expansion position it for robust
long-term growth.
We remain alert to risks, including geopolitical frictions and potential
tariffs. But we also recognise that China remains home to an enormous,
educated, and entrepreneurial population and a huge share of global GDP. With
roughly 14% of the portfolio now invested in Chinese companies, we are
managing our overall exposure but responding when we find compelling long-term
opportunities.
Looking to the Next Generation of Winners
The nature of long-term investing is to plant seeds today that may become
giants tomorrow. We are always seeking companies that could shape the next
decade and this year offered real progress from some of our most ambitious
private holdings.
SpaceX has fundamentally altered the economics of space launch through rapid
innovation and vertical integration. But the launch business, while
impressive, is only part of the story. SpaceX's satellite internet division,
Starlink, is rapidly becoming a significant telecoms player in its own right,
with over five million subscribers and a growing footprint in underserved
markets. Its unique access to launch capacity provides it with a moat that
others are struggling to overcome. Even Amazon's Project Kuiper despite
enormous capital backing is years behind in deployment.
Then there is Starship, SpaceX's next-generation rocket. Once operational, it
will offer payload capacity and unit economics that dwarf anything currently
available. Starship could enable entirely new industries such as large-scale
in-orbit manufacturing, deep-space missions, or even space-based energy
infrastructure. That capability may sound speculative, but SpaceX's track
record suggests otherwise.
What makes SpaceX so attractive to us is not just its current lead, but the
culture that sustains it. This is a business defined by urgency, ambition, and
engineering excellence. It continues to execute with speed and discipline,
even at scale. In a world of capital-light, software-dominated models, SpaceX
reminds us that the physical world still offers enormous room for innovation
and that the rewards for solving the hard problems can be extraordinary.
We are also seeing advances in next-generation transportation. Our holding in
Aurora Innovation, a leader in autonomous trucking, is expected to begin
commercial operations imminently. Aurora recognised that long-haul trucking
and goods transport are among the most promising, near-term applications for
autonomy. The United States has faced a chronic shortage of truck drivers for
years and the problem is expected to get significantly more acute over the
next decade. Highways are more structured environments than urban roads which,
combined with a compelling business case make this one of the more promising
entrants in self-driving.
Joby Aviation entered the final phase of FAA certification for its electric
vertical take-off and landing aircraft. The US Air Force took delivery of its
second vehicle and Joby acquired a production facility in Dayton Ohio. The
concept of urban air mobility has often felt like science fiction, but with
growing support from regulators and real-world test flights underway,
commercial deployment is coming into view. If successful, Joby could redefine
regional transport and alleviate pressure on congested infrastructure.
Zipline, the drone logistics company, is moving beyond its original use case
of delivering medical supplies in Africa. Its technology has been adapted for
broader commercial applications, including rapid local delivery in urban
environments. It launched this service in Dallas in April 2025 in partnership
with Walmart. Residents within a two mile radius of the Walmart Supercenter in
Mesquite can now receive deliveries of over 65,000 items in thirty minutes or
less.
These investments represent the kind of calculated risk that defines Scottish
Mortgage's approach: backing bold ideas and exceptional teams, with the
patience to let them prove themselves over time.
Enduring Approach
We are often asked how we forecast product developments for our holdings or
inflection points in their growth. We don't. Our focus is on two core
questions: Is the opportunity the company addresses transformational and is it
getting bigger or smaller? Is the likelihood of capturing that opportunity
increasing or decreasing?
This lens helps us remain invested in companies like SpaceX, which once seemed
speculative but now dominates commercial space launch. Or Tempus AI, where the
promise of genomic data to personalise cancer treatment continues to evolve.
Or Stripe which has grown from an obscure internet payment processor into a
platform handing volumes equivalent to 1.3% of global GDP.
Periods of rapid change are often uncomfortable. But they are also rich with
opportunity. The environment ahead is unlikely to be more stable than the one
we leave behind. Technology, demographics, energy, and geopolitics all
continue to shift. And that is why our job remains what it has always been: to
find the world's most exceptional growth companies, support them for the long
term, and allow them to do the heavy lifting on behalf of our shareholders.
Tom Slater
Manager Review - Lawrence Burns
Most companies simply do not matter. Research shows that only a small number
of companies make investing in the stock market worthwhile. These companies
are outliers that exploit the asymmetric pay-off structure of equities:
uncapped upside yet mathematically bounded downside. Whether the world is
serene or chaotic, our objective remains the same: to find and invest in
extraordinary companies capable of delivering outlier returns.
Asymmetric Returns
The Scope for Uncapped Upside and Bounded Downside
Finding outliers is a challenging endeavour. They are, by definition, very
rare, whilst their characteristics are heterogeneous. Define the parameters of
your search too narrowly, and you risk missing out on a new generation of
outliers that might look very different from those of the past. It is
therefore important for us to be open-minded about the sources of growth,
maturity, financial characteristics and nature of operational excellence that
lead to outlier outcomes.
Outliers can be young, fast-growing companies, such as Chinese e-commerce
giant PDD, which is still less than 10 years old. PDD falls just outside our
top ten outliers, but has still delivered a 6x return for shareholders since
its IPO in 2018. This has been achieved through explosive growth, compounding
revenues on average over 110% each year while going from heavily loss-making
to generating $15bn in profit last year.
Outliers can also be much older businesses with less explosive but steadier,
more resilient growth. Ferrari celebrated its 85th birthday last year, but was
still able to deliver an 11x return for Scottish Mortgage shareholders over
the decade. Since we invested in 2015, the company has grown the number of
cars it sells each year by less than 7%, but with incredible pricing power,
rising margins, and the market's growing appreciation of both the resilience
and duration of demand for its products has still delivered outlier returns.
We believe the portfolio today has a diverse range of potential outliers. With
companies founded across the globe, from Stockholm to São Paulo to Singapore.
The nature of the growth is also diverse, from rockets to digital banking apps
to the most coveted handbags in the world.
We would be wary of being too prescriptive as to the characteristics of
outliers, but there are several commonalities we have observed over the years:
1) Outliers are Unconventional
It is not possible to achieve extraordinary outcomes through ordinary methods.
Therefore, the strategy, culture and leaders of outliers usually appear as
unorthodox.
In the case of SpaceX, to dramatically lower launch costs, it took a radically
different approach. It sought to make rockets reusable. To accelerate
innovation, it rejected the traditional aerospace approach of extensive
planning and validation before building a prototype. Instead, it adopted an
iterative approach of rapidly building prototypes, testing them, analysing the
results and implementing improvements in subsequent designs.
In practice, this has meant early test flights, which have often ended in
spectacular explosions. Traditional aerospace companies go to great lengths to
avoid public failures, whilst SpaceX broadcasts them live to global audiences
and frames them as valuable learning opportunities. This approach to learning
has allowed the company to develop rockets in a fraction of the time and at a
fraction of the cost of their competitors.
Backing unconventional companies can look prescient when they are successful,
but when they fail, you usually end up looking very foolish. However, a
willingness to look foolhardy is a necessary requirement for investing
in outliers.
2) Outliers are Long-Term Focused
It takes many years, not quarters, to seize large market opportunities and for
formidable competitive advantages to form. To succeed, outliers are focused on
these long-term outcomes, not maximising value creation over the short or even
medium-term.
For much of its history, Amazon's approach to profitability defied stock
market conventions. The company chose not to make profits for many years and
instead constantly reinvested back into the business. This long-term approach
allowed the company to build out its delivery infrastructure, deepening its
competitive moat, seed new business areas such as Amazon Web Services, and
deter others who did want to make a profit from competing against them.
Many of the companies we invest in are founder-run because such a leadership
structure enables long-term decision making. Others, like Ferrari and Hermès,
benefit from multi-generational family ownership to provide a long-term
perspective. The Hermès family owners have even committed not to sell any
shares until 2041 at the earliest. We find it pleasing to own companies that
can make us appear short-term by comparison.
3) Outliers Address Large Opportunities
Unsurprisingly, outliers need a large market opportunity. This allows a
company to grow to multiples of its current size. Wise, the UK-based financial
technology company, facilitated £68 billion in cross-border transfers in just
6 months last year. However, it still served less than 5% of the consumer
cross-border market and less than 1% of the business cross-border market. The
company's mission is thus to create the financial infrastructure capable of
serving not billions but trillions. It has ample space to grow and to continue
its outlier journey.
The most rewarding outliers have what we call multiple acts. Having achieved
success in one large market, they leverage their advantages to be successful
in another. Amazon started as an online book seller but leveraged its
e-commerce business to build its cloud services business. Today, Amazon Web
Services contributes 70% of Amazon's operating profit. Nvidia started out
producing graphics chips for PC gamers before investing heavily and
presciently in artificial intelligence.
Mercadolibre started as a Latin American e-commerce platform. However, to
reduce the friction of completing transactions when few people had credit or
even debit cards, it developed a payment platform and started offering credit.
It leveraged the relationship with its e-commerce customers and its data
insights from their purchases to offer a broad range of financial services.
Today, its fintech revenues exceed 40% of the business. It may even have a
third act emerging as an advertising platform, leveraging the data its
e-commerce and fintech platforms provide to tailor adverts to users.
Spotify is leveraging its leading position in music streaming to offer
podcasts, audiobooks and is running a pilot program for education content here
in the UK. This pattern of multiple acts is repeated again and again amongst
the most rewarding outliers. As business analysts, it requires us to take an
imaginative and creative approach to model the possible (never the certain)
value of additional acts at a nascent and uncertain stage. The challenge is
often to imagine just how valuable an outlier can become.
4) Outliers are Adaptable
Outliers are not static but adapt to both opportunities and challenges.
Companies must evolve to changing circumstances because to be static is to
become obsolete.
The history of outlier companies is one of adaptation. Meituan started 15
years ago as a Groupon clone, fighting with an estimated 5,000 start-ups in
China that were also using the group-buying model. It emerged from the
so-called "Clone Wars" victorious, pivoting the business into food delivery,
travel and other services before we eventually invested.
Hermès started as a manufacturer of high-quality equestrian gear for the
horse-drawn carriages of noblemen and royalty. It took a century before it
produced its first luxury handbag. When I first met the founder of Bytedance
(TikTok's parent company), it was to talk about its flagship product, Toutiao,
a personalised news aggregation app. A precursor to Douyin and TikTok.
The end of the pandemic made even clearer the importance of investing in
adaptable organisations. The world changed, demand for digital products and
services slowed, and the cost of capital rose as interest rates soared. A
number of the leaders in our portfolio recognised this shift in the external
environment and pivoted their companies. Mark Zuckerberg of Meta and Daniel Ek
of Spotify both sought to right-size their organisations to the new
environment early, focusing on efficiency and profitability. At the same time,
both still invested in new growth areas, with Meta spending billions to
develop AI tools such as its large-language AI model Llama, whilst Spotify
entered into the audiobook market. I remember visiting Mercadolibre in Uruguay
in 2022, where the management team talked with confidence about the size of
future growth opportunities, but also the realisation that profitless growth
would no longer be rewarded by the stock market. The pivot to balance growth
and profitability has rewarded both them and their shareholders handsomely in
the years since that visit.
The world is constantly changing. We cannot predict all the ways in which it
will change over our five-to ten-year investment horizon. Right now, no one
can even predict what global trade will look like 90 days from now. However,
if we are able to invest in companies with adaptive leaders and cultures, we
can at least outsource some of this challenge to them. It is for this reason
that we endeavour to back great businesses that are run by people far smarter
than ourselves.
Lawrence Burns
Portfolio executive summary, 30 largest holding and list of investments at 31
March 2025 can be accessed here. (insert PDF titled Scottish Mortgage
Portfolio Executive Summary)
Income statement
For the year ended 31 March
Notes 2025 2025 2025 2024 2024 2024
Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
Gains on investments - 1,273,082 1,273,082 - 1,405,658 1,405,658
Currency gains - 22,682 22,682 - 22,211 22,211
Income 2 32,906 - 32,906 40,046 - 40,046
Investment management fee 3 - (37,022) (37,022) - (35,580) (35,580)
Other administrative expenses (12,653) - (12,653) (5,634) - (5,634)
Net return before finance costs and taxation 20,253 1,258,742 1,278,995 34,412 1,392,289 1,426,701
Finance costs of borrowings - (55,682) (55,682) - (54,981) (54,981)
Net return before taxation 20,253 1,203,060 1,223,313 34,412 1,337,308 1,371,720
Tax (2,377) (3,177) (5,554) (1,723) (4,034) (5,757)
Net return after taxation 17,876 1,199,883 1,217,759 32,689 1,333,274 1,365,963
Net return per ordinary share 4 1.39p 93.18p 94.57p 2.33p 94.95p 97.28p
The total column of this statement is the profit and loss account of the
Company. The supplementary revenue and capital return columns are prepared
under guidance published by the Association of Investment Companies.
All revenue and capital items in this statement derive from continuing
operations.
A Statement of Comprehensive Income is not required as all gains and losses of
the Company have been reflected in the above statement.
Balance sheet
As at 31 March
Notes 2025 2025 2024 2024
£'000 £'000 £'000 £'000
Fixed assets
Investments held at fair value through profit or loss 6 13,665,731 14,118,531
Current assets
Debtors 69,511 266,379
Cash at bank and in hand 9,013 123,762
78,524 390,141
Creditors
Amounts falling due within one year: 7
Bank loans (441,592) (213,735)
Other creditors and accruals (37,923) (227,143)
(479,515) (440,878)
Net current liabilities (400,991) (50,737)
Total assets less current liabilities 13,264,740 14,067,794
Creditors
Amounts falling due after more than one year: 8
Bank loans (139,454) (379,937)
Loan notes (991,493) (998,991)
Debenture stock (51,328) (51,793)
Provision for deferred tax liability (7,259)
(1,182,275) (1,437,980)
Net assets 12,082,465 12,629,814
Capital and reserves
Called up share capital 10 74,239 74,239
Share premium account 928,400 928,400
Capital redemption reserve 19,094 19,094
Capital reserve 11,057,697 11,591,680
Revenue reserve 3,035 16,401
Total shareholders' funds 12,082,465 12,629,814
Net asset value per ordinary share (after deducting borrowings at book)* 1006.0p 911.3p
The Financial Statements of Scottish Mortgage Investment Trust PLC (Company
registration No. SC007058), on pages 82 to 105 of the Annual Report and
Financial Statements, were approved and authorised for issue by the Board, and
were signed on its behalf on 21 May 2025.
Justin Dowley
Chair
* See Glossary of terms and Alternative Performance Measures at the end of
this announcement.
Statement of changes in equity
For the year ended 31 March 2025
Notes Called up Share Capital Capital Revenue Total shareholders'
share premium redemption reserve * reserve * funds
capital account reserve £'000 £'000 £'000
£'000 £'000 £'000
Shareholders' funds at 1 April 2024 74,239 928,400 19,094 11,591,680 16,401 12,629,814
Net return after taxation - - - 1,199,883 17,876 1,217,759
Ordinary shares bought back into treasury 10 - - - (1,709,766) - (1,709,766)
Dividends paid during the year 5 - - - (24,100) (31,242) (55,342)
Shareholders' funds at 31 March 2025 74,239 928,400 19,094 11,057,697 3,035 12,082,465
For the year ended 31 March 2024
Notes Called up Share Capital Capital Revenue Total shareholders'
share premium redemption reserve * reserve * funds
capital account reserve £'000 £'000 £'000
£'000 £'000 £'000
Shareholders' funds at 1 April 2023 74,239 928,400 19,094 10,434,896 41,371 11,498,000
Net return after taxation - - - 1,333,274 32,689 1,365,963
Ordinary shares bought back into treasury 10 - - - (176,490) - (176,490)
Dividends paid during the year 5 - - - - (57,659) (57,659)
Shareholders' funds at 31 March 2024 74,239 928,400 19,094 11,591,680 16,401 12,629,814
* The revenue reserve and the capital reserve (to the extent it
constitutes realised profits) are distributable.
Cash flow statement
For the year ended 31 March
Notes 2025 2025 2024 2024
£'000 £'000 £'000 £'000
Cash flows from operating activities
Net return before taxation 1,223,313 1,371,720
Adjustments to reconcile company net return before tax to net cash flow from
operating activities
(Gains)/losses on investments (1,273,082) (1,405,658)
Currency (gains)/ losses (22,682) (22,211)
Finance costs of borrowings 55,682 54,981
Taxation
Overseas withholding tax and capital gains tax incurred (12,611) (1,685)
Other capital movements
Changes in debtors and creditors 3,663 (4,344)
Cash from operations (25,717) (7,197)
Interest paid (56,746) (55,193)
Net cash outflow from operating activities (82,463) (62,390)
Cash flows from investing activities
Acquisitions of investments (2,234,476) (677,577)
Disposals of investments 4,002,653 1,014,781
Net cash inflow from investing activities 1,768,177 337,204
Cash flows from financing activities
Equity dividends paid 5 (55,342) (57,659)
Ordinary shares bought back into treasury and stamp duty thereon (1,747,606) (122,056)
Bank loans repaid (843,506) (657,625)
Bank loans drawn down 843,506 504,505
Net cash outflow from financing activities (1,802,948) (332,835)
Decrease in cash at bank and in hand (117,234) (58,021)
Exchange movements 2,485 (3,162)
Cash at bank and in hand at start of period 123,762 184,945
Cash at bank and in hand at end of period* 9,013 123,762
* Cash at bank and in hand represent cash at bank and short term money
market deposits repayable on demand.
Notes to the financial statements
1. The Financial Statements for the year to 31 March 2025 have been
prepared in accordance with FRS 102 'The Financial Reporting Standard
applicable in the UK and Republic of Ireland' and on the basis of the
accounting policies set out below which are unchanged from the prior year and
have been applied consistently.
2. Income
2025 2024
£'000 £'000
Income from investments
Overseas dividends* 28,423 28,452
Overseas interest 1,215 7,512
29,638 35,964
Other income
Deposit interest 3,268 4,082
Total income 32,906 40,046
Total income comprises:
Dividends from financial assets designated at fair value through profit or 28,423 28,452
loss
Interest from financial assets designated at fair value through profit or loss 1,215 7,512
Interest from financial assets not at fair value through profit or loss 3,268 4,082
32,906 40,046
* Overseas dividend income represents income from equity holdings. There
was no income from preference share (non-equity) holdings during the year
(2024 - nil).
3. Baillie Gifford & Co Limited, a wholly owned subsidiary
of Baillie Gifford & Co, has been appointed as the Company's Alternative
Investment Fund Manager ('AIFM') and Company Secretaries. Baillie Gifford
& Co Limited has delegated portfolio management services to
Baillie Gifford & Co. Dealing activity and transaction reporting has been
further sub-delegated to Baillie Gifford Overseas Limited and Baillie Gifford
Asia (Hong Kong) Limited.
The Investment Management Agreement sets out the matters
over which the Managers have authority in accordance with the policies and
directions of, and subject to restrictions imposed by, the Board.
The Investment Management Agreement is terminable on not less than six
months' notice. The annual management fee for the year to 31 March 2025 was
0.30% on the first £4 billion of total assets less current liabilities
(excluding short term borrowings for investment purposes) and 0.25% on the
remaining assets.
4. Net return per ordinary share
2025 2025 2025 2024 2024 2024
Revenue Capital Total Revenue Capital Total
Net return per ordinary share 1.39p 93.18p 94.57p 2.33p 94.95p 97.28p
Revenue return per ordinary share is based on the net revenue after taxation
of £17,876,000 (2024 - £32,689,000), and on 1,287,655,573 (2024 -
1,404,228,553) ordinary shares, being the weighted average number of ordinary
shares (excluding treasury shares) during the year.
Capital return per ordinary share is based on the net capital return for the
financial year of £1,199,883,000 (2024 - net capital return of
£1,333,274,000), and on 1,287,655,573 (2024 - 1,404,228,553) ordinary shares,
being the weighted average number of ordinary shares (excluding treasury
shares) during the year.
There are no dilutive or potentially dilutive shares in issue.
5. Ordinary dividends
2025 2024 2025 2024
£'000 £'000
Amounts recognised as distributions in the year:
Previous year's final (paid 11 July 2024) 2.64p 2.50p 35,175 35,190
Interim (paid 13 December 2024) 1.60p 1.60p 20,167 22,469
4.24p 4.10p 55,342 57,659
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 £17,876,000 (2024 -
£32,689,000).
2025 2024 2025 2024
£'000 £'000
Dividends paid and payable in respect of the year:
Interim dividend per ordinary share 1.60p 1.60p 20,167 22,469
(paid 13 December 2024)
Proposed final dividend per ordinary share (payable 10 July 2025) 2.78p 2.64p 33,389 36,587
4.38p 4.24p 53,556 59,056
If approved, the recommended final dividend on the ordinary shares will be
paid on 10 July 2025 to shareholders on the register at the close of business
on 13 June 2025. The ex-dividend date is 12 June 2025. The Company's
Registrars offer a Dividend Reinvestment Plan and the final date for elections
for this dividend is 19 June 2025.
6 Fair value hierarchy
As at 31 March 2025 Level 1 Level 2 Level 3 Total
£'000 £'000 £'000 £'000
Equities/funds 9,880,944 - - 9,880,944
Private company ordinary shares - - 835,363 835,363
Private company preference shares† - - 2,875,069 2,875,069
Private company convertible notes - - 18,872 18,872
Limited partnership investments - - 54,928 54,928
Contingent value rights - - 555 555
Total financial asset investments 9,880,944 - 3,784,787 13,665,731
As at 31 March 2024 Level 1 Level 2 Level 3 Total
£'000 £'000 £'000 £'000
Equities/funds 10,370,152 - - 10,370,152
Private company ordinary shares - - 822,338 822,338
Private company preference shares† - - 2,766,518 2,766,518
Private company convertible notes - - 90,155 90,155
Limited partnership investments - - 66,289 66,289
Contingent value rights - - 3,079 3,079
Total financial asset investments 10,370,152 - 3,748,379 14,118,531
During the period, Bolt Projects Holdings, Tempus AI Inc and Horizon (book
cost - £51,643,000, £159,627,000 and £37,062,000 respectively) were
transferred from Level 3 to Level 1 on becoming listed (2024 - Oddity;
bookcost - £26,689,000). The fair value of listed investments is bid value
or, in the case of holdings on certain recognised overseas exchanges, last
traded price. Listed investments are categorised as Level 1 if they are valued
using unadjusted quoted prices for identical instruments in an active market
and as Level 2 if they do not meet all these criteria but are, nonetheless,
valued using market data.
† The investments in preference shares are not classified as equity
holdings as they include liquidation preference rights that determine the
repayment (or multiple thereof) of the original investment in the event of a
liquidation event such as a take-over.
Investments in securities are financial assets designated at fair value
through profit or loss on initial recognition. In accordance with Financial
Reporting Standard 102, 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.
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:
Level 1 - using unadjusted quoted prices for identical instruments in an
active market;
Level 2 - using inputs, other than quoted prices included within Level 1, that
are directly or indirectly observable (based on market data); and
Level 3 - using inputs that are unobservable (for which market data is
unavailable).
The valuation techniques used by the Company are explained in the accounting
policies on page 86 of the Annual Report and Financial Statements. A
sensitivity analysis by valuation technique of the unlisted securities is on
page 105 of the Annual Report and Financial Statements.
During the year, Bolt Projects Holdings, Tempus AI Inc and Horizon (bookcost -
£51,643,000, £159,627,000 and £37,062,000 respectively) were transferred
from Level 3 to Level 1 on becoming listed (2024 - Oddity; bookcost -
£26,689,000).
Private company investments
Private company investments are valued at fair value by the Directors
following a detailed review and appropriate challenge of the valuations
proposed by the Managers. The valuation process is overseen by the Private
Companies Valuations Group at Baillie Gifford which is independent from the
portfolio managers and which takes advice from an independent third party
(S&P Global). The Managers' private company investment policy applies
techniques consistent with the International Private Equity and Venture
Capital Valuation Guidelines 2022 ('IPEV'). The techniques applied are
predominantly market-based approaches. The market-based approaches available
under IPEV are set out below and are followed by an explanation of how they
are applied to the Company's private company portfolio:
· Multiples;
· Industry Valuation Benchmarks; and
· Available Market Prices.
The nature of the private company portfolio currently will influence the
valuation technique applied. The valuation approach recognises that, as stated
in the IPEV Guidelines, the price of a recent investment, if resulting from an
orderly transaction, generally represents fair value as at the transaction
date and may be an appropriate starting point for estimating fair value at
subsequent measurement dates. However, consideration is given to the facts
and circumstances as at the subsequent measurement date, including changes in
the market or performance of the investee company. Milestone analysis is used
where appropriate to incorporate the operational progress of the investee
company into the valuation. Additionally, the background to the transaction
must be considered. As a result, various multiples-based techniques are
employed to assess the valuations particularly in those companies with
established revenues. Discounted cashflows are used where appropriate.
An absence of relevant industry peers may preclude the application of the
Industry Valuation benchmarks technique and an absence of observable prices
may preclude the Available Market Prices approach. Valuations are typically
cross-checked for reasonableness by employing relevant alternative techniques.
The private company investments are valued according to a three monthly cycle
of measurement dates. The fair value of the private company investments will
be reviewed before the next scheduled three monthly measurement date on the
following occasions:
· at the year end and half year end of the Company; and
· where there is an indication of a change in fair value as defined in
the IPEV guidelines (commonly referred to as 'trigger' events).
7. Creditors - amounts falling due within one year
2025 2024
£'000 £'000
The Royal Bank of Scotland International Limited 3 year revolving loan 131,706 134,574
National Australia Bank Limited 2 year revolving loan 77,474 -
Scotiabank US$300 million 2.23% fixed rate loan* 232,412 -
Scotiabank 3 year revolving loan - 79,161
Purchases for subsequent settlement - 149,148
Other creditors and accruals 37,923 77,995
479,515 440,878
* Expires on 29 March 2026 and included in creditors falling due after
less than one year at 31 March 2025.
Included in other creditors is £9,066,000 (2024 - £9,426,000) in respect of
the investment management fee.
Borrowing facilities at 31 March 2025
A 2 year US$100 million revolving loan facility has been arranged with
National Australia Bank (expiring 16 December 2026).
A 3 year US$170 million revolving loan facility has been arranged with The
Royal Bank of Scotland International Limited (expiring 8 January 2027).
A 5 year US$25 million revolving loan facility has been arranged with The
Royal Bank of Scotland International Limited (expiring 27 August 2026).
A 1 year US$75 million revolving loan facility has been arranged with
Industrial and Commercial Bank of China Limited (expiring 11 March 2026).
The revolving loan facilities are classified as due within one year due to the
revolving nature of the facilities and the short draw down periods. The
facilities are available until their termination dates which are noted above.
The maturity table on page 103 of the Annual Report and Financial Statements
reflects the termination dates of the revolving facilities.
At 31 March 2025 drawings were as follows:
National Australia Bank
Limited
US$100 million (revolving facility expiring 16 December 2026) at an interest
rate (at 31 March 2025) of 5.9553% per annum
The Royal Bank of Scotland International Limited US$170 million
(revolving facility expiring 8 January 2027) at an interest rate (at 31 March
2025) of 5.6287% per annum
At 31 March 2024 drawings were as follows:
Scotiabank
US$100 million (revolving facility expiring 17 December 2024) at an interest
rate (at 31 March 2024) of 6.360% per annum
The Royal Bank of Scotland International Limited US$170 million
(revolving facility expiring 8 January 2027) at an interest rate (at 31 March
2024) of 6.613% per annum
During the year the National Australia Bank ('NAB') US$350 million revolving
credit facility which had been undrawn was replaced with a US$100 million 2
year revolving credit facility from NAB which was used to refinance the fully
drawn US$100 million Scotiabank revolving credit facility when it expired. The
undrawn US$120 million revolving credit facility with Industrial and
Commercial Bank of China ('ICBC') was replaced following its expiry with a one
year US$75 million revolving credit facility with ICBC
The main covenants which are tested monthly are:
(i) Total borrowings shall not exceed 35% of the Company's
adjusted net asset value.
(ii) Total borrowings shall not exceed 35% of the Company's adjusted
total assets.
(iii) The Company's minimum net asset value shall be £2,500 million.
(iv) The Company shall not change the investment manager without prior
written consent of the lenders.
8. Creditors - amounts falling due after more than one year
Nominal Effective 2025 2024
rate % rate % £'000 £'000
Debenture stocks:
£50 million 6-12% stepped interest debenture stock 2026 12.0 10.8 50,653 51,118
£675,000 4½% irredeemable debenture stock 675 675
Unsecured loan notes:
£30 million 2.91% 2038 2.91 2.91 29,973 29,971
£150 million 2.30% 2040 2.30 2.30 149,852 149,842
£50 million 2.94% 2041 2.94 2.94 49,951 49,949
£45 million 3.05% 2042 3.05 3.05 44,922 44,918
£30 million 3.30% 2044 3.30 3.30 29,946 29,943
£20 million 3.65% 2044 3.65 3.65 19,974 19,973
€18 million 1.65% 2045 1.65 1.65 15,048 15,372
£30 million 3.12% 2047 3.12 3.12 29,944 29,942
£90 million 2.96% 2048 2.96 2.96 89,904 89,899
€27 million 1.77% 2050 1.77 1.77 22,571 23,057
£100 million 2.03% 2036 2.03 2.03 99,938 99,932
£100 million 2.30% 2046 2.30 2.30 99,930 99,927
US$175 million 2.99% 2052 2.99 2.99 135,426 138,368
US$110 million 3.04% 2057 3.04 3.04 85,123 86,973
US$115 million 3.09% 2062 3.09 3.09 88,991 90,925
Long term bank loans:
US$180 million RBSI 2.60% fixed rate loan 2026 2.60 2.60 139,454 142,490
US$300 million Scotiabank 2.23% fixed rate loan 2026 2.23 2.23 - 237,447
Provision for deferred tax liability (see note below) - 7,259
1,182,275 1,437,980
Debenture stocks
The debenture stocks are stated at the cumulative amount of net proceeds after
issue, plus accrued finance costs attributable to the stepped interest
debentures. The cumulative effect is to increase the carrying amount of
borrowings by £653,000 (2024 - £1,118,000) over nominal value. The debenture
stocks are secured by a floating charge over the assets of the Company.
Unsecured loan notes
The unsecured loan notes are stated at the cumulative amount of net proceeds
after issue. The cumulative effect is to reduce the carrying amount of
borrowing by £1,047,000 (2024 - £1,099,000).
Long term bank loans
The long term bank loans are stated at the cumulative amount of net proceeds
after issue. The cumulative effect is to reduce the carrying amount of
borrowing by £11,000 (2024 - £33,000). The main covenants are detailed in
note 7 above.
Provision for deferred tax liability
There is no deferred tax liability provision at 31 March 2025. The deferred
tax liability provision at 31 March 2024 of £7,259,000 related to a potential
liability for Indian capital gains tax that may have arisen on a sale of the
Company's Indian investment, based on the net unrealised taxable capital gain
at the period end and on enacted Indian tax rates. The Indian investment was
sold in the year.
Borrowing limits
Under the terms of the Articles of Association and the Debenture Trust Deeds,
total borrowings should not exceed a sum equal to one half of the adjusted
total of capital and reserves at the Company's year end.
9. The fair value of borrowings at 31 March 2025 was
£1,250,992,000 (2024 - £1,293,632,000). Net asset value per share (after
deducting borrowings at fair value) was 1,037.0p (2024 - 936.6p).
10. Called up share capital
2025 2025 2024 2024
Number £'000 Number £'000
Allotted, called up and fully paid ordinary shares of 5p each 1,201,051,727 60,053 1,385,868,493 69,293
Treasury shares of 5p each 283,729,153 14,186 98,912,387 4,946
Total 1,484,780,880 74,239 1,484,780,880 74,239
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 2025, 184,816,766 shares with a nominal value of £9,241,000 were
bought back at a total cost of £1,709,766,000 and held in treasury (2024 -
21,750,035 shares with a nominal value of £1,088,000 were bought back at a
total cost of £176,490,000 and held in treasury). At 31 March 2025 the
Company had authority to buy back 76,702,287 ordinary shares.
Under the provisions of the Company's Articles, the share buy-backs are funded
from the capital reserve.
In the year to 31 March 2025, the Company sold no treasury ordinary shares (31
March 2024 - no treasury ordinary shares). At 31 March 2025 the Company had
authority to issue or sell from treasury 133,992,280 ordinary shares
(283,729,153 shares were held in treasury at 31 March 2025).
11. Transaction costs on purchases amounted to £1,487,000 (2024 -
£187,000) and transaction costs on sales amounted to £1,459,000 (2024 -
£576,000).
12. The financial information set out above does not constitute the
Company's statutory accounts for the years ended 31 March 2025 or 2024 but is
derived from those accounts. Statutory accounts for 2024 have been delivered
to the Registrar of Companies, and those for 2025 will be delivered in due
course. The auditor has reported on those accounts; the reports were (i)
unqualified, (ii) did not include a reference to any matters to which the
auditor drew attention by way of emphasis without qualifying their report and
(iii) did not contain a statement under section 498 (2) or (3) of the
Companies Act 2006.
13. Related Party Transactions
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.
The management fee payable for the year end and details of the management fee
arrangements are included on note 3 above.
The Annual Report and Financial Statements will be available on the Managers'
website www.scottishmortgage.com (http://www.scottishmortgage.com/) ‡ on or
around 22 May 2025.
Glossary of terms and Alternative Performance Measures ('APM')
An Alternative Performance Measure ('APM') is a financial measure of
historical or future financial performance, financial position, or cash
flows, other than a financial measure defined or specified in the applicable
financial reporting framework. The APMs noted below are commonly used measures
within the investment trust industry and serve to improve comparability
between investment trusts.
Total assets
This is the Company's definition of adjusted total assets, being the total
value of all assets held less all liabilities (other than liabilities in the
form of borrowings).
Net asset value ('NAV')
Also described as shareholders' funds. Net asset value ('NAV') is the value of
total assets less liabilities (including borrowings). Net asset value can be
calculated on the basis of borrowings stated at book value, fair value and par
value. An explanation of each basis is provided below. The NAV per share is
calculated by dividing this amount by the number of ordinary shares in issue
(excluding treasury shares).
Net asset value (borrowings at book)/shareholders' funds
Borrowings are valued at adjusted net issue proceeds. The value of the
borrowings at book is set out on page 109 of the Annual Report and Financial
Statements.
Net asset value (borrowings at fair value) (APM)
Borrowings are valued at an estimate of their market worth. The value of the
borrowings at fair is set out on page 109 of the Annual Report and Financial
Statements and a reconciliation to Net asset value with borrowings at book
value is provided below.
31 March 2025 31 March 2024
Net asset value per ordinary share (borrowings at book value) 1006.0p 911.3p
Shareholders' funds (borrowings at book value) £12,082,465,000 £12,629,814,000
Add: book value of borrowings £1,623,867,000 £1,644,456,000
Less: fair value of borrowings (£1,250,992,000) (£1,293,632,000)
Net asset value (borrowings at fair value) £12,455,340,000 £12,980,638,000
Shares in issue at year end (excluding treasury shares) 1,201,051,727 1,385,868,493
Net asset value per ordinary share (borrowings at fair value) 1,037.0p 936.6p
Net asset value (borrowings at par) (APM)
Borrowings are valued at their nominal par value. The value of the borrowings
at par is set out on page 109 of the Annual Report and Financial Statements
and a reconciliation to Net asset value with borrowings at book value is
provided below.
31 March 2025 31 March 2024
Net asset value per ordinary share (borrowings at book value) 1006.0p 911.3p
Shareholders' funds (borrowings at book value) £12,082,465,000 £12,629,814,000
Add: allocation of interest on borrowings £739,000 £1,273,000
Less: expenses of debenture/loan note issue (£1,144,000) (£1,286,000)
Net asset value (borrowings at par value) £12,082,060,000 £12,629,801,000
Shares in issue at year end (excluding treasury shares) 1,201,051,727 1,385,868,493
Net asset value per ordinary share (borrowings at par value) 1006.0p 911.3p
Net Liquid Assets
Net liquid assets comprise current assets less current liabilities, excluding
borrowings and provisions for deferred liabilities.
Discount/premium (APM)
As stockmarkets and share prices vary, an investment trust's share price is
rarely the same as its NAV. When the share price is lower than the NAV per
share it is said to be trading at a discount. The size of the discount is
calculated by subtracting the share price from the NAV per share and is
usually expressed as a percentage of the NAV per share. If the share price is
higher than the NAV per share, it is said to be trading at a premium.
2025 2025 2024 2024
NAV (book) NAV (fair) NAV (book) NAV (fair)
Closing NAV per share (a) 1006.0p 1,037.0p 911.3p 936.6p
Closing share price (b) 943.4p 943.4p 894.0p 894.0p
(Discount)/premium ((b) - (a)) ÷ (a) (6.2%) (9.0%) (1.9%) (4.5%)
Ongoing charges ratio (APM)
The total expenses (excluding borrowing costs) incurred by the Company as a
percentage of the average net asset value (with debt at fair value). The
ongoing charges have been calculated on the basis prescribed by the
Association of Investment Companies.
A reconciliation from the expenses detailed in the Income Statement above is
provided below.
2025 2024
£'000 £'000
Investment management fee £37,022 £35,580
Other administrative expenses* £3,878 £5,634
Total expenses (a) £40,900 £41,214
Average net asset value (with borrowings deducted at fair value) (b) £12,989,536 £11,877,157
Ongoing charges ((a) ÷ (b) expressed as a percentage) 0.31% 0.35%
* Ongoing charges have been calculated excluding the impairment provision
for the interest previously accrued relating to the Northvolt Convertible Note
of £8.8m, following Northvolt's filing for bankruptcy in the year.
Gearing (APM)
At its simplest, gearing is borrowing. Just like any other public company, an
investment trust can borrow money to invest in additional investments for its
portfolio. The effect of the borrowing on the shareholders' assets is called
'gearing'. If the Company's assets grow, the shareholders' assets grow
proportionately more because the debt remains the same. But if the value of
the Company's assets falls, the situation is reversed. Gearing can therefore
enhance performance in rising markets but can adversely impact performance in
falling markets.
Invested gearing represents borrowings at book value less cash at bank and in
hand (including any outstanding trade settlements) expressed as a percentage
of shareholders' funds.
31 March 2025 31 March 2024
£'000 £'000
Borrowings (at book value) £1,623,867 £1,644,456
Less: cash at bank and in hand (£9,013) (£123,762)
Less: sales for subsequent settlement (£62,263) (£253,707)
Add: purchases for subsequent settlement - £149,148
Adjusted borrowings (a) £1,552,591 £1,416,135
Shareholders' funds (b) £12,082,465 £12,629,814
Gearing: (a) as a percentage of (b) 13% 11%
Gross gearing is the Company's borrowings expressed as a percentage of
shareholders' funds.
31 March 2025 31 March 2024
£'000 £'000
Borrowings (at book value) (a) £1,623,867 £1,644,456
Shareholders' funds (b) £12,082,465 £12,629,814
Gross gearing: (a) as a percentage of (b) 13% 13%
Leverage (APM)
For the purposes of the UK Alternative Investment Fund Managers (AIFM)
Regulations, leverage is any method which increases the Company's exposure,
including the borrowing of cash and the use of derivatives. It is expressed as
a ratio between the Company's exposure and its net asset value and can be
calculated on a gross and a commitment method. Under the gross method,
exposure represents the sum of the Company's positions after the deduction of
sterling cash balances, without taking into account any hedging and netting
arrangements. Under the commitment method, exposure is calculated without the
deduction of sterling cash balances and after certain hedging and netting
positions are offset against each other.
Turnover
Annual turnover is calculated on a rolling 12 month basis. The lower of
purchases and sales for the 12 months is divided by the average assets, with
average assets being calculated on assets as at each month's end.
Active share (APM)
Active share, a measure of how actively a portfolio is managed, is the
percentage of the portfolio that differs from its comparative index. It is
calculated by deducting from 100 the percentage of the portfolio that overlaps
with the comparative index. An active share of 100 indicates no overlap with
the index and an active share of zero indicates a portfolio that tracks the
index.
Total return (APM)
The total return is the return to shareholders after reinvesting the net
dividend on the date that the share price goes ex-dividend.
2025 2025 2025 2024 2024 2024
NAV NAV Share NAV NAV Share
(book) (fair) price (book) (fair) price
Closing NAV per share/share price (a) 1006.0p 1,037.0p 943.4p 911.3p 936.6p 894.0p
Dividend adjustment factor* (b) 1.0046 1.0043 1.0047 1.0048 1.0046 1.0058
Adjusted closing NAV per share/share price (c = a x b) 1010.6p 1041.5p 947.8p 915.7p 940.9p 899.2p
Opening NAV per share/share price (d) 911.3p 936.6p 894.0p 816.8p 843.9p 678.6p
Total return (c ÷ d)-1 10.9% 11.2% 6.0% 12.1% 11.5% 32.5%
* The dividend adjustment factor is calculated on the assumption that the
dividends of 4.24p (2024 - 4.10p) paid by the Company during the year were
reinvested into shares of the Company at the cum income NAV per share/share
price, as appropriate, at the ex-dividend date.
Compound annual return (APM)
The compound annual return converts the return over a period of longer than
one year to a constant annual rate of return applied to the compound value at
the start of each year.
Private (unlisted) company
An unlisted or private company means a company whose shares are not available
to the general public for trading and are not listed on a stock exchange,
including all Level 3 investments as per the fair value hierarchy in note 6
above.
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Sustainable Finance Disclosure Regulation ('SFDR')
The EU Sustainable Finance Disclosure Regulation ('SFDR') does not have a
direct impact in the UK due to Brexit, however, it applies to third-country
products marketed in the EU. As Scottish Mortgage Investment Trust is marketed
in the EU by the AIFM, Baillie Gifford & Co Limited, via the National
Private Placement Regime ('NPPR') the following disclosures have been provided
to comply with the high-level requirements of SFDR.
The AIFM has adopted Baillie Gifford & Co's stewardship principles and
guidelines as its policy on integration of sustainability risks in investment
decisions.
Baillie Gifford & Co believes that a company cannot be financially
sustainable in the long run if its approach to business is fundamentally out
of line with changing societal expectations. It defines 'sustainability' as
a deliberately broad concept which encapsulates a company's purpose, values,
business model, culture, and operating practices.
Baillie Gifford & Co's approach to investment is based on identifying and
holding high quality growth businesses that enjoy sustainable competitive
advantages in their marketplace. To do this it looks beyond current financial
performance, undertaking proprietary research to build up an in-depth
knowledge of an individual company and a view on its long-term prospects. This
includes the consideration of sustainability factors (environmental, social
and/or governance matters) which it believes will positively or negatively
influence the financial returns of an investment. The likely impact on the
return of the portfolio from a potential or actual material decline in the
value of investment due to the occurrence of an environmental, social or
governance event or condition will vary and will depend on several factors
including but not limited to the type, extent, complexity and duration of an
event or condition, prevailing market conditions and existence of any
mitigating factors.
Whilst consideration is given to sustainability matters, there are no
restrictions on the investment universe of the Company, unless otherwise
stated within in its Investment Objective & Policy. Baillie Gifford &
Co can invest in any companies it believes could create beneficial long-term
returns for investors. However, this might result in investments being made in
companies that ultimately cause a negative outcome for the environment or
society.
More detail on the Investment Managers' approach to sustainability can be
found in the ESG Principles and Guidelines document, available publicly on the
Baillie Gifford website bailliegifford.com and by scanning the QR code below.
The underlying investments do not take into account the EU criteria for
environmentally sustainable economic activities established under the EU
Taxonomy Regulation.
None of the views expressed in this document should be construed as advice to
buy or sell a particular investment.
Scottish Mortgage is a low cost investment trust that aims to maximise total
return over the long term from a high conviction and actively managed
portfolio. It invests globally, looking for strong businesses with
above-average returns.
You can find up to date performance information about Scottish Mortgage on the
Scottish Mortgage page of the Managers' website at scottishmortgageit.com‡
Scottish Mortgage is managed by Baillie Gifford, the Edinburgh based fund
management group with around £207.7 billion under management and advice in
active equity and bond portfolios for clients in the UK and throughout the
world (as at 20 May 2025).
Investment Trusts are UK public limited companies and are not authorised or
regulated by the Financial Conduct Authority.
‡ 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.
Past performance is not a guide to future performance. The value of an
investment and any income from it is not guaranteed and may go down as well as
up and investors may not get back the amount invested. This is because the
share price is determined by the changing conditions in the relevant stock
markets in which the Company invests and by the supply and demand for the
Company's shares.
21 May 2025
For further information please contact:
Claire Shaw, Baillie Gifford & Co
Tel: 0131 474 5115
Jonathan Atkins, Four Communications
Tel: 0203 920 0555 or 07872 495396
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