Scottish Mortgage Preliminary Results

RNS Number : 5595M

Scottish Mortgage Inv Tst PLC

08 May 2015

 

RNS Announcement: Preliminary Results

Scottish Mortgage Investment Trust PLC

Results for the year to 31 March 2015

The following is the unaudited preliminary statement for the year to 31 March 2015 which was approved by the Board on 7 May 2015.

Chairman's Statement

I am pleased to report on another strong year for our shareholders. Scottish Mortgage's net asset value (NAV) total return (capital and income) for the year to the end of March 2015 was 27.7% and the share price total return was 29.6%; these returns were ahead of that of the broader global equities benchmark, the FTSE All-World Index, which produced a total return over the period of 19.2%.

Whilst this is more than satisfactory, I urge shareholders not to pay undue attention to short term numbers, no matter how good they may be. The Company is required to report these on an annual basis, but the investment approach adopted has a much longer-term philosophy and - as ever - I would encourage shareholders to think of their investment in Scottish Mortgage in this context. The five and ten year results, which are aligned with the investment thesis employed by the managers, are the appropriate basis on which to judge performance and are the figures by which to assess the managers' performance. I am happy to say these also remain excellent. 

The table below shows the ten and five year total returns in percentage terms to 31 March 2015, alongside the Association of Investment Companies (AIC) Global Sector average for comparison.

	Total Return %
	Ten Years	Five Years
NAV	280.6	105.0
Share Price	387.7	139.0
FTSE All-World Index	155.1	61.2
Global Sector Av - NAV	157.5	62.0
Global Sector Av - share price	173.7	71.4

Source AIC/Morningstar (ten year NAV performance at par and five year NAV performance at fair)

The Board takes this opportunity to congratulate the managers on their continued excellent performance. These figures support our belief that active management can provide very attractive returns for shareholders, both in absolute terms and relative to the returns from the broad global equity markets, when undertaken in a committed and patient long term manner.  In January 2015, the Company announced Tom Slater's promotion to joint manager of the portfolio, in recognition of the contribution he has already made to Scottish Mortgage as Deputy Manager.

It was another landmark year for the Company: we bought back 6.6m shares near the start of the period and - with our shares trading at a premium - we subsequently issued 25.6m shares from treasury to meet market demand, resulting in net proceeds of around £49m. This is the first time that Scottish Mortgage has been in a position to issue shares in this way.

Looking ahead, the usual cautionary notes apply: past performance is no guarantee of future performance. I would emphasise that Scottish Mortgage is best suited to those who adopt a patient long term investment approach, as there may well be periods of under-performance in both absolute and relative terms.

This year, the managers' report provides an exposition on the evolution of the broader ideas underpinning the selection of the individual stocks for the portfolio over the last decade and into the next, together with a paper on the managers' approach to investment risk analysis; I encourage all present and prospective shareholders to read this. The Board continues to endorse wholeheartedly the managers' committed long-term approach to investing by thorough research of individual companies which may have the potential to grow substantially.

Earnings and dividends

Scottish Mortgage is clear in its focus as a growth investment trust. Our objective is to maximise total returns to shareholders, and the aim is to achieve this primarily through capital appreciation over the long term. The Board considers it important that the managers are not constrained by having to acquire short term income for dividend payments, but be allowed to concentrate on finding the best growth companies in order to maximise the potential total returns to shareholders; indeed, this is where we feel their talent lies. A change was made at the AGM last year to the dividend policy to reflect this objective, removing the requirement for growth in dividend payments in real terms. The Board does recognise, however, that dividends are valued by many shareholders and the intention to grow the dividend remains.

This year's earnings per share were 2.24p, 7.8% lower than in 2013/14 (2.43p, adjusted for the 5:1 share split in June 2014). This is not unexpected. The companies in which Scottish Mortgage invests tend to retain their earnings and invest them for the future growth of their own businesses rather than paying them out as dividends. Whilst this is entirely consistent with the approach that the managers seek in their investments and ought to be positive for the long term capital return prospects of these companies (and therefore of our own), the corollary is that we expect Scottish Mortgage's earnings to continue to fall in the foreseeable future.

In order to pay an increased dividend over last year, it will therefore be necessary to utilise some of the Company's revenue reserve. Bearing all this in mind, a final dividend of 1.55p is proposed, giving a total of 2.93p for the year, an increase of 1.0%. If approved, this will entail using 0.7p per share of the revenue reserves. In so doing, this will leave around 4p per share available to support future distributions. Shareholders will recognise that, while there is no immediate threat to the level of the dividend which your Company is paying, as revenue reserves deplete dividends may be constrained by prevailing earnings, subject to any future decisions on augmenting the resources from which dividends are paid with contributions from capital.

Gearing

Scottish Mortgage remains committed to the use of strategic gearing, in the belief that being geared into prospective long run equity market returns will benefit shareholders in the long term, especially with debt at historically cheap levels. No attempt is made to deploy short term tactical gearing shifts to capture the gyrations of markets, as we do not believe this to be one of our competitive advantages.  The Board continues to monitor the level of strategic gearing.

Buybacks and Share Issuance

The proposition offered by Scottish Mortgage has been clearly articulated by the Board and managers and has generated extensive press coverage which, along with marketing initiatives, has led to demand for shares from existing and new investors. It is particularly gratifying to see that there have been substantial inflows from direct investors through the Baillie Gifford Savings Schemes as well as through other share dealing platforms.

As mentioned earlier, the Company issued shares from treasury for the first time in its history, and was a net issuer of shares over the 12 month period. As per the intention expressed in last year's Annual Report, as the share price moved to a premium to the underlying net asset value the Company met market demand by issuing shares in this manner. Such market actions, whether in terms of share buybacks or share issuance, are undertaken with a long term purpose in mind of aiding an efficient market in the Company's shares in normal market conditions, rather than on a short term opportunistic basis. I would reiterate what has been said in previous years, that no discount limit or premium target is set, but the Board is aware that shareholders will expect the Company to continue to act to provide liquidity and buy back shares when supply exceeds demand.

Whilst the provision of liquidity in our shares remains the most important factor behind such share issuance, the Board also believes there to be a clear benefit to both new and existing shareholders from increasing the scale of the Company, such that the burden of costs is shared across a wider base.

Following the end of this financial year, the Company has seen continued investor demand and the shares have again traded at a premium to the underlying NAV, leading to further share issuance. Permission is therefore again being sought to sell treasury shares at a premium to NAV and also to issue new shares. As per the permission sought and granted in the previous year, the premium is specified as that reached when net asset value is calculated on the basis of the Company's debt at fair value. The Board believes these powers to be essential to aiding a liquid market in the Company's shares and determining the relationship between the price paid by shareholders and the underlying assets in which they are investing.

Low Cost

The Board strongly believes low operating costs to be an important competitive advantage of the Company', given the corrosive impact of high costs on compounded returns to shareholders. I am therefore very pleased to report that for the year to 31 March 2015, Scottish Mortgage's 'Ongoing Charges Ratio' (as defined by the AIC) again fell and now stands at 0.48% (2014: 0.50%), which remains one of the lowest figures reported in the investment trust sector.  This reflects, in the main, the competitive management fee charged by our managers - currently 0.3% on gross assets.

AIFMD

As of July 2014, the Company is required to comply with the EU-wide Alternative Investment Fund Managers Directive (AIFMD). As a result, Baillie Gifford &Co Limited was appointed as the AIFM. BNY Mellon Trust & Depositary has now been engaged to act as depositary, the additional costs of which are included in the ongoing charges ratio. I am pleased to note that this transition was implemented smoothly in the course of business as usual. 

Board and AGM

The Annual General Meeting will be held in Edinburgh at The Balmoral Hotel at 4.30pm on 23 June 2015. The joint managers of the portfolio, James Anderson and Tom Slater, will make a presentation to shareholders on the investments and take questions.  I do hope you will be able to attend.

Senior Independent Director

I would like to take this opportunity to thank Mr. Michael Gray for his many years of service on the Board of Scottish Mortgage. He has decided that after more than ten years as a non executive director it is not his intention to stand for re-election at the forthcoming AGM. We will miss his considerable contribution to the Board but we wish him all the very best in his future endeavours. He will be succeeded in his role as senior independent director by Prof. John Kay.

Investment Strategy

The Statement of the managers' core investment beliefs is again set out in an unchanged form in the Annual Report and Financial Statements.

The consistency of the investment philosophy underpinning Scottish Mortgage over the last decade has been one of its greatest strengths.   The managers are stock pickers, searching for those extraordinary businesses which have the potential to grow their earnings much faster than the broader market over a sustained period. Rather than speculating on short term market gyrations, they focus on analysing individual businesses, their opportunities and the calibre of the minds and the motivations of those controlling them. This philosophy is based on the premise that a company's worth is driven by what it can earn from its assets, and in the long run that its share price will move to reflect the growth in the underlying earnings.

Both the managers and the Board believe that the true investment risk for our shareholders is in the permanent loss of capital in our investments over the long term, not in short term share price movements relative to an index. In fact short term market swings may even present Scottish Mortgage, as a long term investor, with opportunities.

Outlook

This is perhaps an appropriate moment to take stock and reflect on what has been achieved by your Company in the past decade.  The first point to make is that Scottish Mortgage decided to pursue a fundamentally different investment strategy as compared with those employed by many of its competitors in the global growth sector; a higher conviction, much more concentrated portfolio emerged with, to use one of the indicators employed in the industry, one of the highest 'Active Shares' in the business - this being a measure of how far the portfolio deviates from its benchmark.

Secondly, the performance has been remarkable and, looking back, I notice that the theme of my recent statements has been along the lines of "we have had another good year, but don't rely on this continuing…"  Not very long ago there was considerable debate as to whether our shares would ever exceed the supposedly magic barrier of £10, which they indeed passed some 18 months ago.  We have since done a 5:1 split, which adjusts the currency of this argument, so it is worth pointing out that our shares on their new basis were at £2.67 as at 31 March 2015, this would have been £13.36 per share in 'old money'. By way of comparison our share price (in pre share split terms) was £3.33 on 31 March 2005.

I am acutely aware that there are serious issues for the world to address, whether these be Russian foreign policy, Chinese social shifts, tensions in the South China Sea or terrorism in all its guises across the world, which from time to time may have a dramatic impact on investment markets. Yet at such points it is important to stand at one step removed and ask: what might the longer term impact be on the individual companies in which Scottish Mortgage invests?

Meanwhile, I hope that the investment proposition from Scottish Mortgage remains clear.  We aim to manage our investors' money, with a long term view, in an active and effective manner and to do so at a cost level which is below that of almost all our competitors. It is to be expected that we will encounter more volatility than some in our short term performance, both absolute and relative, as indeed we have experienced in the recent past. But in a world which is changing faster every year, our strategy gives rise to enormous opportunities for growth and I therefore remain excited by the prospects for Scottish Mortgage well into the future.

John Scott

Chairman

7 May 2015

Past performance is not a guide to future performance.

 

Income statement (unaudited)

	For the year ended 31 March 2015			For the year ended 31 March 2014 (audited)
	Revenue £'000	Capital* £'000	Total £'000	Revenue £'000	Capital £'000	Total £'000
Gains on investments	-	747,859	747,859	-	435,494	435,494
Currency (losses)/gains	-	(32,287)	(32,287)	-	18,766	18,766
Income (note 2)	38,964	-	38,964	50,385	-	50,385
Investment management fee	(2,562)	(7,685)	(10,247)	(4,565)	(4,565)	(9,130)
Other administrative expenses	(3,315)	-	(3,315)	(2,835)	-	(2,835)
Net return before finance costs and taxation	33,087	707,887	740,974	42,985	449,695	492,680
Finance costs of borrowings	(4,452)	(13,357)	(17,809)	(9,174)	(9,174)	(18,348)
Net return on ordinary activities before taxation	28,635	694,530	723,165	33,811	440,521	474,332
Tax on ordinary activities	(1,095)	-	(1,095)	(3,602)	-	(3,602)
Net return on ordinary activities after taxation	27,540	694,530	722,070	30,209	440,521	470,730
Net return per ordinary share† (note 4)	2.24p	56.50p	58.74p	2.43p	35.39p	37.82p

*      From 1 April 2014, the investment management fee and finance costs are charged 25% to revenue and 75% to capital (previously 50% to revenue and 50% to capital).

†      Prior year figures restated for the five for one share split on 30 June 2014.

The total column of this statement is the profit and loss account of the Company.

All revenue and capital items in this statement derive from continuing operations.  

A Statement of Total Recognised Gains and Losses is not required as all gains and losses of the Company have been reflected in the above statement.

 

Balance sheet (unaudited)

	At 31 March 2015 £'000	At 31 March 2014 (audited) £'000
Fixed assets
Investments held at fair value through profit or loss	3,747,288	2,980,633
Current assets
Debtors	3,693	5,093
Cash and short term deposits	76,543	21,705
	80,236	26,798
Creditors
Amounts falling due within one year	(118,234)	(259,021)
Net current liabilities	(37,998)	(232,223)
Total assets less current liabilities	3,709,290	2,748,410
Creditors
Amounts falling due after more than one year	(376,072)	(150,697)
	3,333,218	2,597,713
Capital and reserves
Called up share capital	71,086	71,086
Capital redemption reserve	19,094	19,094
Capital reserve	3,173,033	2,429,523
Revenue reserve	70,005	78,010
Shareholders' funds	3,333,218	2,597,713
Net asset value per ordinary share† (after deducting borrowings at fair value) (note 7)	262.4p	208.0p
Net asset value per ordinary share† (after deducting borrowings at par)	268.0p	212.2p
Ordinary shares in issue† (note 8)	1,245,674,485	1,226,699,485

†      Prior year figures restated for the five for one share split on 30 June 2014.

 

Reconciliation of movements in shareholders' funds (unaudited)

For the year ended 31 March 2015

	Share capital £'000	Capital redemption reserve £'000	Capital reserve* £'000	Revenue reserve £'000	Shareholders' funds £'000
Shareholders' funds at 1 April 2014	71,086	19,094	2,429,523	78,010	2,597,713
Net return on ordinary activities after taxation	-	-	694,530	27,540	722,070
Shares bought back (note 8)	-	-	(13,730)	-	(13,730)
Shares issued (note 8)	-	-	62,710	-	62,710
Dividends paid during the year (note 5)	-	-	-	(35,545)	(35,545)
Shareholders' funds at 31 March 2015	71,086	19,094	3,173,033	70,005	3,333,218

For the year ended 31 March 2014 (audited)

	Share capital £'000	Capital redemption reserve £'000	Capital reserve* £'000	Revenue reserve £'000	Shareholders' funds £'000
Shareholders' funds at 1 April 2013	71,086	19,094	2,045,003	83,185	2,218,368
Net return on ordinary activities after taxation	-	-	440,521	30,209	470,730
Shares bought back (note 8)	-	-	(56,001)	-	(56,001)
Dividends paid during the year (note 5)	-	-	-	(35,384)	(35,384)
Shareholders' funds at 31 March 2014	71,086	19,094	2,429,523	78,010	2,597,713

*      The Capital Reserve balance at 31 March 2015 includes investment holding gains of £1,776,507,000 (31 March 2014 - gains of £1,213,115,000).

 

Cash flow statement (unaudited)

	Year to 31 March 2015 £'000               £'000		Year to 31 March 2014 (audited) £'000               £'000
Net cash inflow from operating activities		28,049		39,354
Servicing of finance
Interest paid	(18,104)		(18,535)
Net cash outflow from servicing of finance		(18,104)		(18,535)
Taxation
Income tax refunded	-		3
Overseas tax refunded	1,377		-
Overseas tax incurred	(2,469)		(3,635)
Total tax paid		(1,092)		(3,632)
Financial investment
Acquisitions of investments	(668,702)		(399,505)
Disposals of investments	650,501		436,215
Realised currency gain/(loss)	2,496		(319)
Net cash (outflow)/inflow from financial investment		(15,705)		36,391
Equity dividends paid (note 5)		(35,545)		(35,384)
Net cash (outflow)/inflow before financing		(42,397)		18,194
Financing
Shares bought back (note 8)	(29,337)		(43,486)
Shares issued (note 8)	62,710		-
Bank loans repaid	(234,746)		(64,311)
Bank loans drawn down	298,608		97,441
Net cash inflow/(outflow) from financing		97,235		(10,356)
Increase in cash		54,838		7,838
Reconciliation of net cash flow to movement in net debt
Increase in cash in the period		54,838		7,838
Increase in bank loans		(63,862)		(33,130)
Exchange movement on bank loans		(34,782)		19,085
Other non-cash changes		290		256
Movement in net debt in the year		(43,516)		(5,951)
Net debt at 1 April		(367,162)		(361,211)
Net debt at 31 March		(410,678)		(367,162)
Reconciliation of net return before finance costs and taxation to net cash inflow from operating activities
Net return on ordinary activities before finance costs and taxation		740,974		492,680
Gains on investments		(747,859)		(435,494)
Currency losses/(gains)		32,287		(18,766)
Decrease in accrued income		1,115		742
Decrease/(increase) in debtors		282		(403)
Increase in creditors		1,250		595
Net cash inflow from operating activities		28,049		39,354

Thirty largest holdings and twelve month performance (unaudited)

Name	Business	Fair Value at 31 March 2015 £'000	% of total assets	Absolute performance† %	Contribution to absolute performance# %	Fair value 31 March 2014 £'000
Amazon.com	Online retailer	305,142	8.0	24.2	1.9	228,053
Illumina	Biotechnology equipment	299,082	7.8	40.3	3.9	202,134
Tencent Holdings	Internet services	257,783	6.7	53.6	3.5	173,092
Baidu	Online search engine	254,498	6.7	53.5	5.2	181,226
Inditex	International clothing retailer	195,943	5.1	22.4	1.0	154,504
Alibaba Group	Online retail	151,530	4.0	117.9	3.5	69,728
Fiat	Automobiles	149,890	3.9	56.5	1.7	68,871
Facebook	Social networking site	125,367	3.3	53.3	1.8	72,842
Google	Online search engine	110,504	2.9	12.0	0.4	114,128
Atlas Copco	Engineering	102,647	2.7	29.7	0.9	90,343
BASF	Chemicals	100,452	2.6	3.5	0.1	62,202
Prudential	International insurance	98,001	2.6	34.9	1.0	74,351
Kering	Luxury goods producer and   retailer	91,043	2.4	9.7	0.3	84,744
Banco Santander	Banking	88,405	2.3	(3.5)	(0.1)	81,129
Kinnevik	Investment company	78,408	2.1	4.9	(0.3)	6,748
Tesla Motors	Electric cars	67,764	1.8	1.7	0.3	54,771
Rocket Internet	Internet startup factory	60,655	1.6	0.9*	0.2*	-
Apple	Computer technology	56,263	1.5	84.8	1.7	77,629
Intuitive Surgical	Surgical robots	55,041	1.4	29.5	0.5	50,642
LinkedIn Corp	Business-related social   networking site	53,626	1.4	51.7	0.7	35,297
Novozymes	Enzyme manufacturer	53,251	1.4	17.6	0.4	45,570
Housing Development Finance   Corporation	Mortgage bank	51,219	1.3	61.7	0.6	25,003
Whole Foods Market	Food retailer	50,315	1.3	16.4	0.1	47,745
Zalando	International clothing retailer	50,308	1.3	0.3*	-*	-
Rolls-Royce Group	Aerospace equipment	48,957	1.3	(9.1)	(0.2)	42,960
ARM Holdings	Semiconductor and software   design company	43,707	1.1	11.4	0.1	37,028
Magnit OJSC	Retailer	40,879	1.1	6.6	-	15,535
ASML Holding	Lithography	40,744	1.1	24.8	0.3	12,878
Brazil CPI Linked 2045	Brazilian government inflation   linked bond	38,110	1.0	(5.0)	-	42,653
Renishaw	Electronic equipment	35,359	0.9	28.1	0.2	28,221
		3,154,893	82.6

†      Absolute performance (in sterling terms) has been calculated on a total return basis over the period 1 April 2014 to 31 March 2015.

#      Contribution to absolute performance (in sterling terms) has been calculated to illustrate how an individual stock has contributed to the overall return. It is influenced by both share price performance and the weighting of the stock in the portfolio, taking account of any purchases or sales in the period.

*      Figures relate to part-period returns where the equity has been purchased during the period.                                      
Source: Baillie Gifford/StatPro.

Past performance is not a guide to future performance.

Distribution of portfolio (unaudited)

		At 31 March 2015 %	At 31 March 2014 %
North America		38.7	38.4
South America		1.2	2.4
Europe		37.7	38.5
	United Kingdom	9.3	10.9
	Eurozone	20.6	18.1
	Developed Europe (non euro)	6.2	5.8
	Rest of Europe	1.6	3.7
Africa and Middle East		-	0.3
Asia		22.4	20.4
	China	19.6	16.5
	India	2.1	1.6
	Japan	0.3	0.7
	Rest of Asia	0.4	1.6
		100.0	100.0

Notes to the financial statements (unaudited)

1.	The financial statements for the year to 31 March 2015 have been prepared on the basis of the accounting policies set out in the Company's Annual Financial Statements at 31 March 2014.
2.	Income			Year to 31 March 2015 £'000		Year to 31 March 2014 (audited) £'000
	Income from investments			38,660		50,346
	Other income			304		39
				38,964		50,385
3.	Baillie Gifford & Co Limited, a wholly owned subsidiary of Baillie Gifford & Co, has been appointed by the Company as its Alternative Investment Fund Manager (AIFM) and Company Secretary with effect from 1 July 2014. The investment management function has been delegated to Baillie Gifford & Co. The management agreement can be terminated on six months' notice. With effect from 1 April 2014 the annual management fee is 0.30% of total assets less current liabilities (excluding short term borrowings for investment purposes), calculated quarterly. The annual fee previously was 0.32% calculated quarterly on the same basis.
4.	Net Return per Ordinary Share			Year to 31 March 2015 £'000		Year to 31 March 2014 (audited) £'000
	Revenue return on ordinary activities after taxation			27,540		30,209
	Capital return on ordinary activities after taxation			694,530		440,521
	Total net return			722,070		470,730
	Weighted average number of ordinary shares in issue			1,229,231,951		1,244,697,295†
	Net return per ordinary share figures are based on the above totals of revenue and capital and the weighted average number of ordinary shares (excluding treasury shares) in issue during each period. There are no dilutive or potentially dilutive shares in issue.
5.	Ordinary Dividends	2015	2014† (audited)		2015 £'000		2014 (audited) £'000
	Amounts recognised as distributions in the year:
	Previous year's final (paid 7 July 2014)	1.52p	1.46p		18,646		18,261
	Interim (paid 5 December 2014)	1.38p	1.38p		16,899		17,123
		2.90p	2.84p		35,545		35,384
	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 £27,540,000 (2014 - £30,209,000).

†      Prior year figures restated for the five for one share split on 30 June 2014.

Notes to the condensed financial statements (unaudited) (ctd)

5.	Ordinary Dividends (Ctd)
			2015	2014† (audited)		2015 £'000		2014 (audited) £'000
	Dividends paid and payable in respect of the year:
	Interim dividend per ordinary share (paid 5 December 2014)		1.38p	1.38p		16,899		17,123
	Proposed final dividend per ordinary share (payable 6 July 2015)		1.55p	1.52p		19,308		18,646
	Adjustment to previous year's final dividend re shares bought back		-	-		-		(73)
			2.93p	2.90p		36,207		35,696
	If approved the final dividend will be paid on 6 July 2015 to all shareholders on the register at the close of business on 12 June 2015. The ex-dividend date is 11 June 2015. The Company's Registrars offer a Dividend Reinvestment Plan and the final date for elections for this dividend is 15 June 2015.
6.	The bank loans falling due within one year comprises US$165million (2014 - US$150 million, €61 million and US$163million). The bank loans falling due in more than one year comprise US$50 million, US$200 million and US$85 million (2014 - nil).
7.	The fair value of borrowings at 31 March 2015 was £552,353,000 (2014 - £435,178,000). Net asset value per share (after deducting borrowings at fair value) was 262.4p (2014 - 208.0p†).
8.					2015 Number of shares		2014 (audited) Number of shares†
	Share capital: Ordinary shares of 5p each
	Allotted, called up and fully paid				1,245,674,485		1,226,699,485
	Treasury shares				176,056,395		195,031,395
	Total				1,421,730,880		1,421,730,880
	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 2015 a total of 6,625,000 (2014 - 29,025,000) ordinary shares with a nominal value of £331,000 (2014 - £1,451,000) were bought back at a total cost of £13,730,000 (2014 - £56,001,000) and held in treasury.  At 31 March 2015 the Company had authority to buy back a further 182,889,165 ordinary shares. Under the provisions of the Company's Articles the share buy-backs were funded from the capital reserve. In the year to 31 March 2015, the Company sold 25,600,000 ordinary shares from treasury at a premium to net asset value raising net proceeds of £62,710,000 (31 March 2014 - no ordinary shares sold from treasury). At 31 March 2015 the Company had authority to issue or sell from treasury a further 158,404,920 ordinary shares.
9.	Transaction costs on purchases amounted to £393,000 (2014 - £339,000) and transaction costs on sales amounted to £473,000 (2014 - £325,000).

†      Prior year figures restated for the five for one share split on 30 June 2014.

Notes to the condensed financial statements (unaudited) (ctd)

10.

The financial information set out above does not constitute the Company's statutory accounts for the year ended 31 March 2015. The financial information for 2014 is derived from the statutory accounts for 2014 which have been delivered to the Registrar of Companies. The Auditor has reported on the 2014 accounts, the report was unqualified and did not contain a statement under section 498(2) or (3) of the Companies Act 2006. The statutory accounts for 2015 are unaudited, however it is expected that the Auditor will issue an unqualified opinion. The statutory accounts for 2015 will be finalised on the basis of the financial information presented in this preliminary announcement and will be delivered to the Registrar of Companies following the Company's Annual General Meeting.

11.

The Annual Report and Financial Statements will be available on the Managers' website www.scottishmortgageit.com‡ on or around 8 May 2015.

‡    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.

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 www.scottishmortgageit.com^‡

Scottish Mortgage is managed by Baillie Gifford, the Edinburgh based fund management group with around £124 billion under management and advice in active equity and bond portfolios for clients in the UK and throughout the world (as at 7 May 2015).

Investment Trusts are UK public limited companies and are not authorised or regulated by the Financial Conduct Authority.

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.

7 May 2015

For further information please contact:

Catharine Flood, Baillie Gifford & Co

Tel: [phone]

James Budden, Baillie Gifford & Co  

Tel: [phone] or 07507 201208

Roland Cross, Director, Broadgate Mainland 

Tel: [phone]

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