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Amid soaring demand for rubber tyres for the emerging auto industry, Edinburgh lawyers Baillie & Gifford WS launch The Straits Mortgage and Trust Company with £50,000 of capital. Their big idea? To lend to the rubber industry in Malaya, squeezed by an Edwardian credit crunch. The new Trust offered ‘convertible loan stocks’, a special class of loan that could later be changed to normal shares. But the credit market recovered and few loans were made. Founders Carlyle Gifford and Colonel Augustus Baillie quickly pivoted to global investing. Four years after its foundation, the Trust became Scottish Mortgage and Trust Company Limited – a name that’s caused some confusion ever since.

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Scottish Mortgage amasses its first £1m in assets, largely thanks to the nimble, but shrewd and steady, management of Carlyle Gifford. Five years later, at the end of the ‘Roaring Twenties,’ that sum had risen to £4m. The reserves the Trust managed to build up in the first of the Trust’s several boom periods help it to weather the Great Depression ushered in by the Wall Street Crash of 1929. Success allowed its managers to continue to diversify a portfolio that, during this interwar period, was half invested in fixed interest (bonds) and half in UK and global equities.

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Retired as manager but now an influential board member, Mr Gifford goes to Wall Street at the outbreak of the second world war to act as HM Treasury’s representative. He is tasked with selling off the assets of UK investors in the US. These had been requisitioned by the UK Government as an emergency wartime measure as it needed the cash to pay for American equipment to support the war effort. Around 40 of Scottish Mortgage’s own holdings were requisitioned and sold off during the conflict in exchange for UK Government bonds.

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By now heavily weighted towards UK stocks, Scottish Mortgage nearly doubles in size by merging with two other investment trusts managed by Baillie Gifford (Second Scottish Mortgage and Scottish Capital), to form a £100m trust. The merger is in part a reaction to the shock of the 1965 Finance Act, introduced by Harold Wilson’s Labour Government, which levied new taxes on share transactions. The extra paperwork imposed by the Act encouraged the streamlining of Baillie Gifford-managed investment trusts to cut down on admin and costs.

Chairman Sir Donald MacKay orders a radical review of the Trust’s management and governance after shares consistently trade at discount. The review, conducted with manager James Anderson, establishes much of the character and methods of today’s Scottish Mortgage: Lower costs for investors, emphasis on the long term and on companies capable of exceptional performance, regardless of location or sector. Important (and initially controversial) Scottish Mortgage holdings such as Amazon, Tencent and Tesla all stem from this turning point in the Trust’s story.

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With a market capitalisation of just under £5bn, Scottish Mortgage Investment Trust PLC joins the FTSE 100 on 20 March, becoming only the sixth investment trust in the history of the index to join the UK’s corporate top table. In the following half-decade, the Trust’s profile as the UK’s largest investment trust grows, particularly its association with investments in technology and China.

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