Scottish Mortgage Investment Trust PLCFigures

The other companies in this universe have a manager, often a family, sometimes a pact. Scottish Mortgage has no chief executive, no finance director and no employees. Its governance therefore reads on two floors that never merge. On the first, the manager: Baillie Gifford picks the securities, values them and reports; it is not a controlling shareholder, it is a contractor. On the second, the board: seven directors, all non-executive, whose role is not to manage but to supervise the provider, negotiate its fees and be able to dismiss it. The matters the board reserves to itself are listed: strategy, investment policy, currency hedging, borrowings, gearing, share buyback and issuance policy, treasury, dividend and governance. It is the complete reversal of the family pattern: here the power to appoint and dismiss belongs to directors who own nothing.

The management contract is the real lever, and it carries a structural conflict of interest worth knowing. The scale is 0.30% on the first four billion pounds of total assets less current liabilities, then 0.25% above that, paid quarterly, with no performance fee at all, and terminable on not less than six months' notice. It is charged on total assets, not on net assets. Yet total assets include the GBP 1.40bn of borrowing at 30 June 2026: borrowing therefore mechanically enlarges the manager's fee base. The board holds the counterweight, since borrowing policy is among its reserved matters, and it states each year whether the manager should be retained. Fees paid over the 2026 financial year come to GBP 40,121k, for ongoing charges of 0.33%.

Share buybacks are the board's second lever, and they are an instrument of governance rather than of communication. A programme announced on 15 March 2024 for at least one billion pounds was executed at GBP 3.10bn and 318.6 million shares over two years, more than three times the announced commitment. At 31 March 2026, 406,614,074 shares out of 1,078,166,806 issued are held by the company itself, that is 37.7% of the issued capital, recalculated. The direction then reversed after the year end: no buyback between 1 April and 21 May 2026, and 24,750,000 shares reissued out of that reserve over the same period. A safeguard is written down, those shares being reissuable only at a price below the prevailing net asset value. The board also refuses to set a discount target: its stated criterion is a significant imbalance between supply and demand for the shares.

That leaves the committees, and what has not yet been tested. None of the seven directors has a service contract. The audit committee has been chaired by Mark FitzPatrick since 2022. The nomination committee is the whole board. A remuneration committee was created during the year and had not formally met at 31 March 2026. And a valuations group has been set up, chaired by Vikram Kumaraswamy, to support the board's oversight of private company valuations: this is the body to watch, since it answers directly to the vehicle's main risk, namely that 20.4% of assets are valued by a process internal to the manager. The report sets the caveat itself, these bodies having just been created and their roles still expected to evolve. On diversity, finally, two of the UK regulator's three targets are met at 31 March 2026, and the third, at least one senior board position held by a woman, is resolved by an already announced succession.