Scottish Mortgage Release Final Results

Scottish Mortgage Investment Trust PLC

Legal Entity Identifier: 213800G37DCS3Q9IJM38

Results for the year to 31 March 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

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.

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.