Company Announcements

The Board has, in particular, considered the impact of heightened macroeconomic and geopolitical concerns, including continued high interest rates, the ongoing Russia-Ukraine war, heightened tensions between China and both the US and Taiwan, and the conflict in the Middle East. The Board also considers the commercial impact of changes in regulatory posture in local market jurisdictions. The Board Considers at each meeting various metrics including portfolio concentration, regional and industrial sector weightings, top and bottom stock contributors to performance and contribution to performance by industrial sector. The Managers provide the rationale for stock selection decisions and both the investment strategy and portfolio risks are formally considered in detail at least annually.

The Board considers the private company investments in the context of the overall investment strategy and provides guidance to the Managers on the maximum exposure to private company investments. The investment policy limits the amount which may be invested in private companies to 30 per cent. of the total assets of the Company, measured at time of purchase (see page 42 of the Annual Report and Financial Statements). The Managers have a robust valuation methodology, which is applied consistently. The Managers' valuation process involves a revaluation of each of the private company investments every 3 months and additional valuations are carried out in response to trigger events to ensure the investments are carried at fair value. The valuation process is overseen by the Private Companies Valuations Group at Baillie Gifford which is independent from the portfolio managers and which takes advice from an independent third party (S&P Global). The valuations are subject to review and challenge by the Board every 6 months and are subject to scrutiny annually by the external Auditor. The Managers have endeavoured to improve market understanding of the valuation process.

The Board regularly reviews and monitors the Company's objective and investment policy and strategy, the investment portfolio and its performance, the level of discount/premium to net asset value at which the shares trade and movements in the share register.

This is mitigated by the Managers' strong ESG stewardship and engagement policies which are available to view on the Managers' website bailliegifford.com and have been reviewed and endorsed by the Company and fully integrated into the investment process, as well as the extensive up-front and ongoing due diligence which the Managers' undertake on each investee company. This due diligence includes assessment of the risks inherent in climate change (see page 52 of the Annual Report and Financial Statements). An explanation of how these policies are applied in the context of Scottish Mortgage's long term investment approach is available at scottishmortgage.com.

The Managers utilise data sourced from a third-party provider to map the carbon footprint of the portfolio. This analysis estimates that the carbon intensity of Scottish Mortgage is 95.7% less than the index albeit that is based on only 67.9% of the value of the Company's equity portfolio which reports on carbon emissions and other carbon related characteristics (see page 52 of the Annual Report and Financial Statements).

The Board monitors the level of discount/premium at which the shares trade and the Company has authority to buyback its existing shares when deemed by the Board to be in the best interests of the Company and its shareholders. The Company announced on 15 March 2024 that it would allocate at least £1 billion for share buybacks over a two year period.

Baillie Gifford's Business Risk, Internal Audit and Compliance Departments provide regular reports to the Audit Committee on Baillie Gifford's monitoring programmes. Major regulatory change could impose disproportionate compliance burdens on the Company. In such circumstances representation is made to ensure that the special circumstances of investment trusts are recognised. Shareholder documents and announcements, including the Company's published Interim and Annual Report and Financial Statements, are subject to stringent review processes and procedures are in place to ensure adherence to the Transparency Directive and the Market Abuse Directive with reference to inside information.

The Board receives six monthly reports from the Depositary confirming safe custody of the Company's assets held by the Custodian. Cash and portfolio holdings are independently reconciled to the Custodian's records by the Managers who also agree uncertificated unlisted portfolio holdings to confirmations from investee companies. The Custodian's internal controls assurance reports are reviewed by Baillie Gifford's Business Risk Department and a summary of the key points is reported to the Audit Committee and any concerns investigated.

Baillie Gifford has a comprehensive business continuity plan which facilitates continued operation of the business in the event of a service disruption or major disaster. The Audit Committee reviews Baillie Gifford's Report on Internal Controls and the reports by other key third party providers are reviewed by Baillie Gifford on behalf of the Board and a summary of the key points is reported to the Audit Committee and any concerns investigated. The other key third party service providers have not experienced significant operational difficulties affecting their respective services to the Company.

The Audit Committee reviews Reports on Internal Controls published by Baillie Gifford and other third party service providers. Baillie Gifford's Business Risk Department report to the Audit Committee on the effectiveness of information security controls in place at Baillie Gifford and its business continuity framework. Cyber security due diligence is performed by Baillie Gifford on third party service providers which includes a review of crisis management and business continuity frameworks.

All borrowings require the prior approval of the Board and leverage levels are discussed by the Board and Managers at every meeting. Covenant levels are monitored regularly. Details of the Company's borrowings can be found in Notes 11 and 12 on pages 92 to 93 of the Annual Report and Financial Statements. The majority of the Company's investments are in quoted securities that are readily realisable. Further information on leverage can be found on page 111 of the Annual Report and Financial Statements and the Glossary of terms and Alternative Performance Measures on pages 115 to 117 of the Annual Report and Financial Statements.

Political developments are closely monitored and considered by the Board. The Board continues to assess the potential consequences for the Company's future activities including those that may arise from geopolitical tensions and constitutional change. The Board believes that the Company's global portfolio partially helps to mitigate such political risks.