Final Results

RNS Number : 6498G

Scottish Mortgage Inv Tst PLC

09 May 2014

 



RNS Announcement: Preliminary Results

Scottish Mortgage Investment Trust PLC

Results for the year to 31 March 2014

The following is the unaudited preliminary statement for the year to 31 March 2014 which was approved by the Board on 8 May 2014.

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 2014 was 23.1% and the share price total return was 28.9%; these far surpassed the benchmark (the FTSE All-World Index) total return of 6.8%. It was a landmark year for the Company in many aspects: our share price crossed the £10 threshold, our gross assets exceeded £3 billion and by some measures we became the largest UK conventional investment trust.

Again I urge Shareholders not to pay too much attention to short term numbers, no matter how good they may be. While the Company is required to report these on an annual basis, the investment approach adopted has a much longer horizon. The five and ten year results which the Board uses to assess the Managers' performance are much more relevant and, likewise, excellent. 

The table below shows the five and ten year total returns in percentage terms to 31 March 2014 and also includes the Association of Investment Companies (AIC) Global Sector average.

	Total Return %
	Five Years	Ten Years
NAV	196	241
Share Price	226	314
FTSE All-World Index	101	132
Global Sector Av - NAV	109	149
Global Sector Av - share price	108	173

Source AIC/Thomson Reuters Datastream

The figures speak for themselves and suggest that active management can provide superior returns both in absolute terms and relative to an index. 

The usual caveats apply: past performance will not necessarily be repeated; Scottish Mortgage is best suited to those who adopt a similarly long investment horizon and there will undoubtedly be periods of under-performance in both absolute and relative terms. In congratulating the Managers on their excellent performance, I would add that this has been achieved despite our portfolio being held as to nearly 90% in non-sterling denominated investments through a year when sterling has been among the world's strongest currencies.

The Managers' Report provides an investment commentary which is well worth reading. It suffices to say here that a long term and global approach driven by thorough research of individual companies as adopted by the Managers enjoys the Board's full confidence.

Low Cost

I am very pleased that, in agreement with the Managers, Scottish Mortgage announced a reduction in the annual management fee from 0.32% to 0.30% effective from 1 April 2014. Compared to other funds the level of fee was already modest and this reduction improves this advantage. It is hard to overstate the compound positive long term impact of low charges on Shareholder returns; we believe that the lion's shares of investment returns need to accrue to Shareholders and not to third parties. For the year just passed, the figure for Scottish Mortgage's "Ongoing Charges Ratio" is just 0.50%, one of the lowest figures reported on the investment trust sector.

Earnings and dividends

As foreseen in last year's Statement, earnings per share were lower this year, totalling 12.14p as opposed to 15.59p in 2012/13.  A final dividend of 7.6p is proposed which gives a total of 14.5p for the year, an increase of 3.6%. If approved this will entail using 2.4p of revenue reserves.

With an objective to maximise total returns, Scottish Mortgage is primarily a growth trust. Dividends form part of the total return and are valued by many Shareholders. However, the Board considers it important that the Managers are not constrained as growth investors by having to chase income when constructing the portfolio. To this end a Resolution is to be proposed at the AGM to amend the Objective and Policy so that while dividend growth remains within the Objective, the aspiration to increase the dividend in real terms (that is, ahead of inflation) is removed so that the potential to achieve growth and maximise total returns is not constrained. The intention remains to grow the dividend, but not necessarily ahead of inflation.

There are Revenue Reserves of 26p per share set aside to cover any shortfall in earnings; furthermore permission is being sought this year to amend the Articles of Association to delete the provision which expressly prohibits the distribution of any surplus arising from the realisation of any investments. While your Board has no immediate plans to make use of this provision, it will give the Company greater flexibility in its distribution policy in the long term. 

Both of these Resolutions are set out in detail in the Circular that accompanies the Annual Report and Financial Statements.

A further change that has been made and has been approved by the Board is a revision to the allocation of the investment management fee and borrowing costs from 50% against revenue and 50% against capital to 25% against revenue and 75% against capital. This change has been applied from 1 April 2014 and reflects more realistically the recent split of returns from the portfolio and indeed where we expect them to be derived in the future.

Gearing

Scottish Mortgage remains committed to the use of gearing and gearing levels were maintained throughout the year.

Buybacks and Share Issuance

Over the year the shares moved from a discount of 4.1% to close the year at a premium of 0.4% and at one point the premium rose to 4.2%.  The proposition offered by Scottish Mortgage has been clearly articulated by the Board and Managers and there has been extensive press coverage which, along with other marketing initiatives, has led to demand for shares from existing and new investors. It is particularly gratifying to see that there has been growing demand from direct investors through the Baillie Gifford Savings Schemes and also through other share dealing platforms.

As the provision of liquidity is important at times when supply and demand do not immediately coincide, during the year 5,805,000 shares were bought back by the Company and were placed in Treasury for subsequent re-issue.  Buying back shares, even at narrow discounts, does enhance net asset value for continuing shareholders. A total of 39,006,279 ordinary shares are now held in Treasury.

Permission is again being sought to reissue shares from Treasury at a premium to NAV and also to issue new shares. The premium is specified as that reached when net asset value is calculated on the basis of the Company's debt at fair value, as distinct from par value. This is the standard industry measure as used by the AIC when compiling its statistics. The accompanying Circular gives full details of the terms of any issuance and of the authorities being sought from Shareholders to meet regulatory requirements and comply with the Listing Rules. 

If the share price moves to a premium and there is unfulfilled demand, the intention is that shares will be issued from Treasury and this will be undertaken with a long term purpose in mind rather than on a short term opportunistic basis. Increasing the scale of the Company means that the burden of costs is shared across a wider base, while the provision of liquidity in our shares remains an important factor. While no discount limit or target is set, 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. The Board's actions in this regard are intended to establish levels of trust and confidence for the future.

Proposed Sub-Division of Shares

The share price exceeded £10 for much of the period and closed the year at £10.44. A high share price can be unattractive to new investors while also making the administration of Savings Schemes difficult since small amounts are invested on a regular basis and a large share price presents an unhelpful lack of granularity as savers cannot buy fractions of shares. To improve marketability and as described in the accompanying Circular, a sub-division of each of the current ordinary shares of 25p shares into five ordinary shares of 5p nominal value is proposed. This means that, if the Resolution is approved, your holding will be multiplied by five as of 30 June 2014, while the share price in the market will presumably adjust accordingly. For those who hold their shares in certificated form, new share certificates will be issued and the old certificates will become invalid. 

Changes to Investment Policy

I have already highlighted that permission is being sought from Shareholders to remove the hurdle of generating real growth in income from the Objective; this Resolution also asks you to approve other changes to the Objective and Investment Policy. The principal change for which approval is being sought is the removal of the current investment restriction whereby individual holdings of over 3% of total assets must together be less than 40% of total assets. This historic restriction has meant that successful investments with the potential for further growth have had to be reduced.  This runs counter to the way the portfolio is now managed whereby companies are backed for the long term and turnover of investments is low. It also contradicts the Managers' core investment beliefs and, we feel, could limit shareholders' long term returns. The Board favours its removal.

Should the new Objective and Investment Policy be approved, we will nonetheless retain the current restriction whereby the maximum investment in any one holding at time of purchase must be less than 8% of total assets.  Monitoring the portfolio concentrations so that adequate levels of diversification are achieved will continue to be an important and regular undertaking for the Board as has been the case in the past.

Other changes to the Objective and Investment Policy are suggested for the sake of simplification and clarification. The wording of the current and proposed Objective and Investment Policy is set out in the Circular.

The Board believes that these changes are in the best interests of the Company and Shareholders as a whole and it unanimously recommends that you vote in favour of all of the Resolutions as the Directors intend to so do in respect of their own holdings.

AIFMD

As mentioned last year the Company is required to comply with the EU-wide Alternative Investment Fund Managers Directive (AIFMD). To this end a new investment management agreement has been entered into between the Company and Baillie Gifford & Co Limited, a wholly owned subsidiary of the Baillie Gifford & Co partnership and the entity which will fulfil the role of Alternative Investment Fund Manager (AIFM) under the Directive. A depositary agreement has been drawn up with Bank of New York Mellon and the intention is that they will fulfil the function of depositary as required by the AIFMD.

Scottish Referendum

The Company's primary purpose is to provide investment returns to Shareholders and it is not the Board's intention to take a political stance over the Referendum on Scottish independence which will take place on 18 September 2014.  Scottish Mortgage, as its name suggests, is registered as a Scottish company and the Managers, Baillie Gifford & Co, form a Scottish partnership. The Board is well aware of the issues arising out of the vote and there are many actions that might be taken to prepare for various contingencies, and all of these come at a cost. Consequently, our current view is that to start any processes now before the result of the vote is known and before the relevant putative issues have emerged would not be a good use of Shareholders' funds and management resource.

In the event of a Yes vote we understand that there will be a period of negotiations which will probably be followed by a transitional period following independence. Consequently the Board believes it will have ample time to assess the economic (including taxation and currency), political and regulatory landscape which might emerge and to formulate Scottish Mortgage's response accordingly.

This Referendum is only one of a variety of political risks facing the Company which are considered by the Board on a regular basis.  The Directors are aware that a large number of Shareholders are resident outside Scotland and they will act in a pragmatic and measured way to ensure that Shareholders' interests as a whole are protected.

Board and AGM

I am very pleased that Dr Paola Subacchi agreed to join the Board with effect from 1 April 2014. Paola brings to the Board a broad set of skills and knowledge that spans political and economic fields both in Europe and China. 

The Annual General Meeting will be held in Edinburgh at Baillie Gifford's offices at 4.30pm on 26 June 2014. As usual, James Anderson and Tom Slater will make a presentation on the investments and take questions.  I do hope you will be able to attend.

Investment and Outlook

In investment terms this has been a significant period for Scottish Mortgage. I have covered performance earlier and now re-iterate the Board's wholehearted endorsement of the Managers' core investment beliefs which are again set out in an unchanged form in the Annual Report and Financial Statements. It is the strict adherence to these well articulated beliefs which represent the foundations of the Company's investment success over recent years.

The philosophy focuses on individual companies and seeks to ignore short term market noise and trends whose observance can be extremely destructive. This philosophy does to a large extent render observations about the short term outlook and market preoccupations almost redundant.

I will restrict myself to noting that there has been continued progress at economic and company level. Political factors as always act as a de-stabilising element in the short term; the impact of the withdrawal of monetary stimulus may not be straightforward and there will be upsets as the Chinese economy adjusts towards an increasing domestic focus. However, overall the commercial and trading environment for companies is broadly benign. This, coupled with an outstanding and accelerating pace of technological advance across so many fronts, makes for an environment where well managed companies with sound strategies and an eye on the long term should be capable of making sustained and attractive returns. Scottish Mortgage's business is to back such companies and what is important is that our Managers see no lack of such opportunities.

John Scott

Chairman

8 May 2014

Past performance is not a guide to future performance.

Income statement (unaudited)

	For the year ended 31 March 2014			For the year ended 31 March 2013 (audited)
	Revenue £'000	Capital £'000	Total £'000	Revenue £'000	Capital £'000	Total £'000
Gains on investments	-	435,494	435,494	-	244,988	244,988
Currency gains/(losses)	-	18,766	18,766	-	(10,396)	(10,396)
Income (note 2)	50,385	-	50,385	58,950	-	58,950
Investment management fee	(4,565)	(4,565)	(9,130)	(3,836)	(3,836)	(7,672)
Other administrative expenses	(2,835)	-	(2,835)	(2,379)	-	(2,379)
Net return before finance costs and taxation	42,985	449,695	492,680	52,735	230,756	283,491
Finance costs of borrowings	(9,174)	(9,174)	(18,348)	(9,215)	(9,215)	(18,430)
Net return on ordinary activities before taxation	33,811	440,521	474,332	43,520	221,541	265,061
Tax on ordinary activities	(3,602)	-	(3,602)	(4,010)	-	(4,010)
Net return on ordinary activities after taxation	30,209	440,521	470,730	39,510	221,541	261,051
Net return per ordinary share (note 4)	12.14p	176.96p	189.10p	15.59p	87.42p	103.01p

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. No operations were acquired or discontinued during the year.

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 2014 £'000	At 31 March 2013 (audited) £'000
Fixed assets
Investments held at fair value through profit or loss	2,980,633	2,581,849
Current assets
Debtors	5,093	5,401
Cash and short term deposits	21,705	13,867
	26,798	19,268
Creditors
Amounts falling due within one year	(259,021)	(72,867)
Net current liabilities	(232,223)	(53,599)
Total assets less current liabilities	2,748,410	2,528,250
Creditors
Amounts falling due after more than one year	(150,697)	(309,882)
	2,597,713	2,218,368
Capital and reserves
Called up share capital	71,086	71,086
Capital redemption reserve	19,094	19,094
Capital reserve	2,429,523	2,045,003
Revenue reserve	78,010	83,185
Shareholders' funds	2,597,713	2,218,368
Net asset value per ordinary share (after deducting borrowings at fair value) (note 7)	1,039.9p	857.6p
Net asset value per ordinary share (after deducting borrowings at par)	1,060.9p	885.4p
Ordinary shares in issue (note 8)	245,339,897	251,144,897

Reconciliation of movements in shareholders' funds (unaudited)

For the year ended 31 March 2014

	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

For the year ended 31 March 2013 (audited)

	Share capital £'000	Capital redemption reserve £'000	Capital reserve* £'000	Revenue reserve £'000	Shareholders' funds £'000
Shareholders' funds at 1 April 2012	71,086	19,094	1,844,229	77,914	2,012,323
Net return on ordinary activities after taxation	-	-	221,541	39,510	261,051
Shares bought back (note 8)	-	-	(20,767)	-	(20,767)
Dividends paid during the year (note 5)	-	-	-	(34,239)	(34,239)
Shareholders' funds at 31 March 2013	71,086	19,094	2,045,003	83,185	2,218,368

*      The Capital Reserve balance at 31 March 2014 includes investment holding gains on fixed asset investments of £1,213,115,000 (31 March 2013 - gains of £894,384,000).

Cash flow statement (unaudited)

	Year to 31 March 2014 £'000               £'000		Year to 31 March 2013 (audited) £'000               £'000
Net cash inflow from operating activities		39,354		48,335
Servicing of finance
Interest paid	(18,535)		(18,693)
Net cash outflow from servicing of finance		(18,535)		(18,693)
Taxation
Income tax refunded	3		19
Overseas tax incurred	(3,635)		(4,061)
Total tax paid		(3,632)		(4,042)
Financial investment
Acquisitions of investments	(399,505)		(287,065)
Disposals of investments	436,215		310,571
Realised currency loss	(319)		(1,088)
Net cash inflow from financial investment		36,391		22,418
Equity dividends paid (note 5)		(35,384)		(34,239)
Net cash inflow before financing		18,194		13,779
Financing
Shares bought back (note 8)	(43,486)		(20,767)
Bank loans repaid	(64,311)		-
Bank loans drawn down	97,441		-
Net cash outflow from financing		(10,356)		(20,767)
Increase/(decrease) in cash		7,838		(6,988)
Reconciliation of net cash flow to movement in net debt
Increase/(decrease) in cash in the period		7,838		(6,988)
Decrease/(increase) in bank loans		(33,130)		-
Exchange movement on bank loans		19,085		(9,308)
Other non-cash changes		256		226
Movement in net debt in the year		(5,951)		(16,070)
Net debt at 1 April		(361,211)		(345,141)
Net debt at 31 March		(367,162)		(361,211)
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		492,680		283,491
Gains on investments		(435,494)		(244,988)
Currency (gains)/losses		(18,766)		10,396
Decrease in accrued income		742		1,116
(Increase)/decrease in debtors		(403)		130
(Increase)/decrease in creditors		595		(1,810)
Net cash inflow from operating activities		39,354		48,335

Thirty largest holdings and twelve month performance (unaudited)

Name	Business	Fair Value at 31 March 2014 £'000	% of total assets	Absolute performance† %	Contribution to absolute performance %	Fair value 31 March 2013 £'000
Amazon.com	Online retailer	228,053	7.64	15.0	1.7	214,120
Illumina	Biotechnology equipment	202,134	6.77	150.9	5.1	76,518
Baidu	Online search engine	181,226	6.07	58.2	3.9	128,692
Tencent Holdings	Internet services	173,092	5.80	100.0	4.2	94,668
Inditex	International clothing retailer	154,504	5.17	4.8	0.5	125,978
Google	Online search engine	114,128	3.82	27.8	1.2	91,998
Atlas Copco	Engineering	90,343	3.02	(5.1)	(0.5)	134,345
Kering (formerly PPR)	Luxury goods producer and   retailer	84,744	2.84	(12.5)	(0.5)	129,785
Banco Santander	Banking	81,129	2.72	43.3	1.0	53,199
Apple	Computer technology	77,629	2.60	12.8	0.4	61,270
Prudential	International insurance	74,351	2.49	22.4	0.7	67,109
Facebook	Social networking site	72,842	2.44	114.5	1.5	29,493
Alibaba Group#	Online retail	69,728	2.33	86.1	1.3	38,064
Fiat	Automobiles	68,871	2.31	99.1	1.5	34,599
Salesforce	Cloud computing and hosting	66,857	2.24	16.1	0.6	81,120
BASF	Chemicals	62,202	2.08	18.9	0.4	49,848
Tesla Motors	Electric cars	54,771	1.83	92.1*	0.2*	-
Intuitive Surgical	Surgical robots	50,642	1.70	(18.8)	(0.7)	62,307
Whole Foods Market	Food retailer	47,745	1.60	7.3	0.3	40,351
Novozymes	Enzyme manufacturer	45,570	1.53	19.1	0.4	50,676
Reckitt Benckiser	Consumer goods company	44,345	1.48	6.4	0.1	57,706
Rolls-Royce Group	Aerospace equipment	42,960	1.44	(3.4)	(0.0)	45,200
Brazil CPI Linked 2045	Brazilian government inflation   linked bond	42,653	1.43	(34.9)	(1.1)	66,857
New Oriental Education &   Technology	Education and training	40,927	1.37	50.6	0.8	35,730
Arm Holdings	Semiconductor and software   design company	37,028	1.24	8.7	0.2	24,533
Linkedin Corp	Business-related social   networking site	35,297	1.18	(4.1)	0.1	27,475
Porsche	Automobiles	34,812	1.17	31.5	0.4	21,932
Aggreko	Power equipment rental	29,520	0.99	(14.5)	(0.2)	23,532
Telefonica O2 Czech Republic	Fixed and mobile telecoms	28,998	0.97	(0.5)	(0.1)	13,163
Renishaw	Electronic equipment	28,221	0.94	8.3	0.0	26,571
		2,365,322	79.21			1,906,839

†      Absolute performance (in sterling terms) has been calculated on a total return basis over the period 1 April 2013 to 31 March 2014.

#      Denotes holding in unlisted convertible preference shares.

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

Past performance is not a guide to future performance.

Distribution of assets (unaudited)

		At 31 March 2014 %	At 31 March 2013 %
North America		38.4	32.3
South America		0.9	2.5
Europe		38.4	44.5
	United Kingdom	11.4	13.9
	Eurozone	18.1	17.8
	Developed Europe (non euro)	5.2	8.9
	Rest of Europe	3.7	3.9
Africa and Middle East		0.3	0.4
Asia		20.4	17.3
	China	16.5	12.6
	India	1.6	1.8
	Japan	0.7	0.4
	Rest of Asia	1.6	2.5
Total equities		98.4	97.0
Brazilian real denominated bonds		1.4	2.6
Net liquid assets		0.2	0.4
Total assets (before deduction of loans and debentures)		100.0	100.0

Notes to the condensed financial statements (unaudited)

1.	The financial statements for the year to 31 March 2014 have been prepared on the basis of the accounting policies set out in the Company's Annual Financial Statements at 31 March 2013. The Directors consider the Company's functional currency to be sterling as the Company's shareholders are predominantly based in the UK and the Company is subject to the UK's regulatory environment.
2.	Income			Year to 31 March 2014 £'000		Year to 31 March 2013 (audited) £'000
	Income from investments and interest receivable			50,385		58,950
	Other income			-		-
				50,385		58,950
3.	Baillie Gifford & Co are employed by the Company as Managers and Secretaries under a management agreement which is terminable on not less than six months' notice, or on shorter notice in certain circumstances.  For the year to 31 March 2013 Baillie Gifford's annual remuneration was calculated at 0.08% of total assets less current liabilities (excluding short term borrowings for investment purposes) per quarter. The management fee is levied on all assets, including holdings in collective investment schemes (OEICs) managed by Baillie Gifford & Co; however the OEICs' share class held by the Company does not itself attract a management fee. The management fee was reduced to 0.075% of total assets less current liabilities (excluding short term borrowings for investment purposes) per quarter with effect from 1 April 2014.
4.	Net Return per Ordinary Share			Year to 31 March 2014 £'000		Year to 31 March 2013 (audited) £'000
	Revenue return on ordinary activities after taxation			30,209		39,510
	Capital return on ordinary activities after taxation			440,521		221,541
	Total net return			470,730		261,051
	Weighted average number of ordinary shares in issue			248,939,459		253,421,883
	Net return per ordinary share figures are based on the above totals of revenue and capital and the weighted average number of ordinary shares in issue during each period. There are no dilutive or potentially dilutive shares in issue.
5.	Ordinary Dividends	2014	2013 (audited)		2014 £'000		2013 (audited) £'000
	Amounts recognised as distributions in the year:
	Previous year's final (paid 1July 2013)	7.30p	6.80p		18,261		17,246
	Interim (paid 29 November 2013)	6.90p	6.70p		17,123		16,993
		14.20p	13.50p		35,384		34,239
	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 £30,209,000 (2013 - £39,510,000).

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

5.	Ordinary Dividends (Ctd)
			2014	2013 (audited)		2014 £'000		2013 (audited) £'000
	Dividends paid and payable in respect of the year:
	Interim dividend per ordinary share (paid 29 November 2013)		6.90p	6.70p		17,123		16,993
	Proposed final dividend per ordinary share (payable 7 July 2014)		7.60p	7.30p		18,646		18,334
	Adjustment to previous year's final dividend re shares bought back		-	-		(73)		-
			14.50p	14.00p		35,696		35,327
	The final dividend was declared after the period end date and has therefore not been included as a liability in the balance sheet. If approved the final dividend will be paid on 7 July 2014 to all shareholders on the register at the close of business on 13 June 2014. The ex-dividend date is 11 June 2014. The Company's Registrars offer a Dividend Reinvestment Plan and the final date for elections for this dividend is 18 June 2014.
6.	The bank loan falling due within one year comprises US$150million, US$163 million and €61million (2013 - US$99 million). There were no bank loans falling due in more than one year comprise at 31 March 2014 (2013 - €61million and US$163 million). During the year the Bank of New York Mellon loan, which had drawings of US$99 million was repaid and a new one year £100 million loan was drawn down in US$ with State Street Bank and Trust Company . Since the year end the £100 million loan with State Street Bank and Trust Company has been renewed with a US$165 million facility.
7.	The fair value of borrowings at 31 March 2014 was £435,178,000 (2013 - £439,557,000). Net asset value per share (after deducting borrowings at fair value) was 1,039.9p (2013 - 857.6p).
8.					2014 Number of shares		2013 (audited) Number of shares
	Share capital: Ordinary shares of 25p each
	Allotted, called up and fully paid				245,339,897		251,144,897
	Treasury shares				39,006,279		33,201,279
	Total				284,346,176		284,346,176
	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 2014 a total of 5,805,000 (2013 - 2,475,000) ordinary shares with a nominal value of £1,451,000 (2013 - £619,000) were bought back at a total cost of £56,001,000 (2013 - £20,767,000) and held in treasury.  At 31 March 2014 the Company had authority to buy back a further 33,308,042 ordinary shares. Under the provisions of the Company's Articles the share buy-backs were funded from the capital reserve.
9.	Transaction costs on purchases amounted to £339,000 (2013 - £238,000) and transaction costs on sales amounted to £325,000 (2013 - £188,000).

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 2014. The financial information for 2013 is derived from the statutory accounts for 2013 which have been delivered to the Registrar of Companies. The Auditor has reported on the 2013 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 2014 are unaudited, however it is expected that the Auditor will issue an unqualified opinion. The statutory accounts for 2014 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 23 May 2014.

‡    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 focused 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^‡

‡    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.

Scottish Mortgage is managed by Baillie Gifford & Co, the Edinburgh based fund management group with around £100 billion under management and advice in active equity and bond portfolios for clients in the UK and throughout the world (as at 8 May 2014).

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.

9 May 2014

For further information please contact:

James Budden, Baillie Gifford & Co  

Tel: [phone] or 07507 201208

Roland Cross, Director, Broadgate Mainland

Tel: [phone]  

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