Annual Financial Report

Scottish Mortgage Inv Tst PLC

01 June 2026

 

Scottish Mortgage Investment Trust PLC (SMT)

Legal Entity Identifier: 213800G37DCS3Q9IJM38

Regulated Information Classification: Annual Financial and Audit Reports

Annual Report and Financial Statements

Further to the Final Results announced to the Stock Exchange on 27 May 2026, Scottish Mortgage Investment Trust PLC ("the Company") announces that the Company's Annual Report and Financial Statements for the year ended 31 March 2026, including the Notice of Annual General Meeting, has today been posted to shareholders and submitted electronically to the National Storage Mechanism where it will shortly be available for inspection at https://data.fca.org.uk/#/nsm/nationalstoragemechanism

It is also available on the Company page of the Baillie Gifford website at: scottishmortgage.com (as are the Final Results announced by the Company on 27 May 2026).

Responsibility Statement of the Directors in respect of the Annual Financial Report

The Directors consider that the Annual Report and accounts, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the Company's position and performance, business model and strategy.

We confirm to the best of our knowledge:

• the Company financial statements, which have been prepared in accordance with United Kingdom Accounting Standards, comprising FRS 102, give a true and fair view of the assets, liabilities, financial position and return of the Company; and

• the Strategic Report includes a fair review of the development and performance of the business and the position of the Company, together with a description of the principal risks and uncertainties that it faces.

In the case of each Director in office at the date the Directors' report is approved:

• so far as the Director is aware, there is no relevant audit information of which the Company's Auditors are unaware; and

• they have taken all the steps that they ought to have taken as a Director in order to make themselves aware of any relevant audit information and to establish that the Company's Auditors are aware of that information.

Principal and Emerging Risks relating to the Company

As explained on page 66 of the Annual Report and Financial Statements there is an ongoing process for identifying, evaluating and managing the risks faced by the Company. The Directors have carried out a robust assessment of the principal and emerging risks facing the Company, including those that would threaten its business model, future performance, regulatory compliance, solvency or liquidity.

In light of the requirements of Provision 29 of the UK Corporate Governance Code and Provision 34 of the AIC Code, the Board continues to review and enhance the Company's risk management and internal control framework in preparation for compliance with the enhanced reporting requirements applicable to financial years beginning on or after 1 January 2026. This review is focused on identifying the Company's material risks, being those risks which could have the most significant impact on the Company's ability to achieve its investment objective and continue in operation, and on assessing the material controls in place to manage or mitigate those risks.

As a result, the Board has rationalised and consolidated its risk disclosures into a smaller number of clearly defined material risks. This consolidation reflects the interrelated nature of a number of previously disclosed risks, particularly where macroeconomic, geopolitical and regulatory factors act as amplifiers of underlying investment and operational risks, rather than representing standalone risks.

The Board considers that the following represent the Company's material risks. These will form the basis for the Board's future assessment of the effectiveness of the Company's material controls. Further information on the Board's oversight of risk management and internal controls, including the Audit Committee's review of the Company's internal control environment, is set out in the Corporate Governance Report on page 67 and the Audit Committee Report on pages 69 to 70 of the Annual Report and Financial Statements.

The Board also considers emerging risks, being those that may not have an immediate impact but could arise over the longer term. The Board considers that the key emerging risks arise from the interconnectedness of global economies and the related exposure of the Company's portfolio to external developments. These include risks associated with the societal and financial implications of escalating geopolitical tensions, rapid technological developments (including artificial intelligence) and changes in the global regulatory environment.

The Board monitors these risks on an ongoing basis and considers their potential impact within the context of the material risks outlined below.

Risk	What is the risk?	How is it managed?	Current assessment of risk
Financial Risk	The Company's assets consist mainly of listed securities and unlisted investments and its principal financial risks are therefore market related. These include market risk (comprising currency risk, interest rate risk and other price risk), liquidity risk and credit risk. Further explanation of market risk, liquidity risk and credit risk and illustrative sensitivities is provided in Note 19 to the Financial Statements. The Company's investment strategy, including its focus on long-term growth companies and its unconstrained approach to portfolio construction, may result in increased volatility and periods of underperformance relative to the comparative index. The pursuit of this strategy, or the ineffective implementation of it through stock selection and portfolio construction, may lead to reduced returns for shareholders and a decreased demand for the Company's shares. The Company's exposure to private (unlisted) investments may increase these risks. Such investments: • may be more difficult to buy or sell • are less liquid than listed securities • require the use of subjective valuation methodologies • may be perceived to be more volatile or their valuations less certain, particularly in periods of market stress or where funding conditions are constrained The Company may also have significant exposure to individual holdings, meaning that the performance of a limited number of investments can have a material impact on overall portfolio returns. Macroeconomic and geopolitical developments, including changes in interest rates, inflation, global trade dynamics and political instability, together with changes in regulatory posture in local market jurisdictions, and environmental, social and governance factors (including climate-related risks and regulatory developments), may exacerbate these risks by: • increasing market volatility • affecting capital availability and funding conditions • influencing company valuations and investor sentiment These risks are interrelated and ultimately manifest through the Company's net asset value, share price performance and long-term shareholder returns.	The Board has, in particular, considered the impact of heightened macroeconomic and geopolitical concerns on the Company's investment portfolio. The Board considers at each meeting a range of portfolio metrics, including: • individual stock performance and weightings • the top and bottom contributors to performance • sector and geographic exposures • levels of portfolio concentration The Managers provide detailed rationale for stock selection decisions and portfolio positioning. To mitigate these risks, the Board: • regularly reviews and monitors the Company's investment objective, policy and strategy and their implementation • undertakes periodic in-depth reviews of investment strategy and portfolio construction, including consideration of performance outcomes • monitors the Company's exposure to private company investments, ensuring adherence to investment policy limits and regular and robust valuation processes, including oversight of valuations supported by an independent third-party valuation adviser (S&P Global), and with reference to the Managers' valuation policy detailed in Note 1(c) to the Financial Statements • reviews the balance between conviction and diversification, particularly in relation to larger holdings • considers the potential impact of currency movements, including the interaction between portfolio assets and foreign currency borrowings • engages closely with the Managers, including through an annual update from the Managers' investment risk team, to ensure that portfolio risks are identified, understood and appropriately managed	This risk remains high but stable given ongoing market volatility and the Company's long-term growth investment approach. The external environment continues to be characterised by heightened geopolitical tensions, including ongoing conflicts and shifting global alliances, together with greater unpredictability in government policy and international trade dynamics, which may contribute to increased market volatility and uncertainty. In addition, rapid technological developments, particularly in areas such as artificial intelligence, are creating both significant opportunities and uncertainty. The potential implications for business models, capital allocation and wider society may influence investor sentiment and contribute to periods of market dislocation. The Company's exposure to private company investments and the increased concentration of the portfolio, including as a result of valuation uplifts in certain holdings, may further amplify the impact of adverse market movements on overall returns, particularly where a limited number of holdings represent a significant proportion of the portfolio.
Discount Risk	The Company's shares may trade at a discount to net asset value. A sustained or widening discount may: • reduce shareholder returns • undermine investor confidence • increase the risk of shareholder activism or pressure on capital allocation decisions The level of the discount is influenced by a range of factors, including the Company's performance, investor sentiment towards the investment trust sector and broader market conditions.	The Board monitors the level of discount and shareholder sentiment on an ongoing basis. The Board has authority to undertake share buybacks where considered to be in the best interests of shareholders. During the year to 31 March 2026, the Company bought back 122.9 million shares at a total cost of £1.31 billion. Over the two-year period to 31 March 2026, the Company has bought back 307.7 million shares at a total cost of £3.02 billion, representing approximately 22% of the issued share capital as at 31 March 2024. The Board continues to take a pragmatic approach to capital allocation, balancing the use of share buybacks with other uses of capital, including new investments. The Board engages actively with shareholders and monitors developments within the wider investment trust sector.	This risk is considered to be reducing and moderate. The Company's average discount remained broadly stable, narrowing from 9.7% to 9.6% over the year to 31 March 2026, although the year-end discount widened slightly from 9.0% to 9.5%. Following the year end, the shares moved to a premium. While discount volatility remains influenced by market conditions and investor sentiment, the scale of share buybacks undertaken by the Company and the Board's continued focus on capital allocation have strengthened its ability to manage this risk effectively.
Regulatory Risk	Failure to comply with applicable legal and regulatory requirements could result in: • financial penalties • reputational damage • suspension of the Company's shares from listing • loss of investment trust status A breach of the conditions required to maintain investment trust status could result in the Company losing its approved status and becoming liable to pay tax on capital gains, which would have a significant adverse impact on shareholder returns. In addition, changes to the regulatory environment affecting investment trusts could increase the administrative and compliance burden on the Company or reduce its operational flexibility.	The Board relies on the Managers' compliance, risk and internal audit functions to ensure adherence to applicable regulations. The Audit Committee receives regular reports on compliance monitoring and the effectiveness of internal controls. Shareholder communications, including the Annual and Interim Reports, are subject to robust internal review processes to ensure compliance with applicable requirements. Procedures are also in place to ensure adherence to relevant market regulations, including disclosure obligations. The Board and Managers monitor regulatory developments closely and, where appropriate, make representations in respect of proposed changes to ensure that the interests of the Company and its shareholders are recognised.	This risk is considered to be low and stable. The Company continues to operate within a well-established regulatory framework and control procedures are considered to be operating effectively.
Third Party Service Provider Risk	The Company relies on third-party service providers, including the Managers, depositary, custodian and registrar, for the provision of key operational, administrative and safeguarding functions. Failure of these providers' systems or controls could result in: • operational disruption • an inability to provide accurate reporting and monitoring • loss or misappropriation of assets The Company's exposure to private (unlisted) investments increases the importance of robust third-party processes and controls, particularly in relation to: • the valuation of investments, which involves the application of judgement and the use of external data inputs • the maintenance of accurate records and reporting, including for less liquid and less frequently priced assets Custody of the Company's assets may be compromised through control failures at the depositary or custodian, while failures in systems or processes may affect the integrity and timeliness of shareholder reporting.	The Board has delegated the design, implementation and operation of internal controls to the Managers but retains overall responsibility for oversight. Baillie Gifford & Co conducts an annual review of its system of internal controls, the results of which are documented in an independently audited internal controls report. This report is reviewed by the Managers' risk function, with a summary of key findings reported to the Audit Committee. The depositary, custodian and registrar provide regular reports on their control environments, including the safekeeping of assets and maintenance of shareholder records. Where available, independently audited internal controls reports are reviewed by the Managers' risk function and reported to the Audit Committee, with any issues investigated. The Managers conduct periodic due diligence on key third-party service providers, including consideration of their control environments and operational resilience, with findings reported to the Board as appropriate. The Company's assets are subject to independent reconciliation and verification procedures, including: • reconciliation of holdings to custodian records • confirmation of ownership of securities and cash balances • verification of holdings with counterparties and, where appropriate, investee companies In relation to private company investments, the valuation processes operated by the Managers, including the use of independent third-party inputs and the governance of valuation decisions, form part of Baillie Gifford's internal control framework and are subject to review by its internal audit function, with relevant findings reported to the Board. Baillie Gifford maintains business continuity and disaster recovery plans designed to ensure the continued operation of systems and processes in the event of a disruption. The Board considers the performance and resilience of all key service providers on an ongoing basis and believes that alternative providers could be engaged if required.	This risk is considered to be low and stable - control procedures are operating effectively. While the increasing complexity of private company investments places greater reliance on robust third-party processes, the Board considers that appropriate controls and oversight arrangements are in place.
Cyber Security Risk	A cyber attack on the systems of Baillie Gifford or the Company's third-party service providers could compromise the confidentiality, integrity or availability of data and systems, potentially resulting in: • operational disruption • financial loss • reputational damage The evolving nature of cyber threats, including the increasing sophistication of attacks and the potential for the malign use of emerging technologies such as artificial intelligence to automate, scale and target cyber attacks, may increase both the likelihood and potential impact of cyber incidents. In addition, the continued reliance on digital systems, the use of third-party service providers and the interconnectedness of those providers may increase exposure to cyber risks.	The Audit Committee receives regular reporting from Baillie Gifford's Business Risk function on the effectiveness of information security controls and the broader cyber security framework. Cyber security due diligence is performed on key third-party service providers, including an assessment of their information security controls, crisis management procedures and operational resilience. The Baillie Gifford Business Risk function also reviews internal controls reports provided by key third-party service providers, where available, and reports its findings to the Audit Committee. Baillie Gifford maintains business continuity and disaster recovery plans, designed to ensure the continued operation of systems and processes in the event of a cyber incident or other disruption. The Baillie Gifford Business Risk function reviews the resilience of key systems and service providers, with any significant matters reported to the Board.	This risk is considered to be moderate and increasing due to the evolving threat landscape, heightened geopolitical tensions and the growing sophistication of cyber attacks, including those enabled by emerging technologies.
Leverage Risk	The Company may borrow money for investment purposes, a practice also known as gearing or leverage. If the value of investments falls, any borrowings will magnify the impact of these losses. There is also a risk that borrowing facilities may not be renewed or that covenant requirements may not be met, which could require the Company to sell investments to repay borrowings at an unfavourable time. Further details of the Company's borrowings and related risks are set out in Notes 11 and 12 to the Financial Statements on pages 96 to 98.	The Board has set limits on the level of gearing and reviews these at each Board meeting. All borrowings require prior approval of the Board and compliance with loan covenants is monitored on an ongoing basis. During the year, all borrowing facilities that expired were successfully refinanced, demonstrating continued access to funding. The Company's borrowings are structured across a range of maturities, providing flexibility in managing gearing levels. Approximately 27% of the Company's debt is in the form of revolving credit facilities, which can be repaid at short notice, enhancing the Company's financial flexibility. The majority of the Company's investments are in listed securities which are readily realisable and could be sold to repay borrowings if required. The Company also maintains access to undrawn revolving credit facilities of US$70 million, providing additional flexibility in managing liquidity and gearing.	This risk is considered to be moderate and reducing. Gearing decreased from 13% to 11% over the year to 31 March 2026, reflecting a reduction in borrowings and active management of the balance sheet. While the use of leverage continues to introduce additional risk in adverse market conditions, the current level of gearing, the successful refinancing of facilities and the availability of undrawn facilities provide flexibility in managing this risk.

Baillie Gifford & Co Limited

Company Secretaries

1 June 2026

 

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