The chair of Baillie Gifford’s flagship £8 billion fund, the Scottish Mortgage Investment Trust plc, has warned shareholders they should not rely too much on a dividend for returns from the fund.

The warning came in the fund’s results for the year to March 31, 2019.

Scottish Mortgage chair Fiona McBain said although the fund company has again maintained its policy of paying a small and growing dividend, in future “shareholders should anticipate that returns will primarily come through long term capital appreciation.”

McBain said that because the Scottish Mortgage company’s revenue earnings for the year were insufficient to cover the entire dividend, the balance would be paid from “realised capital reserves.”

The fund’s biggest investments include large equity stakes in Tesla, Amazon, Alibaba, Tencent, Netflix, Ferrari, Spotify and Baidu.

In recent years, Scottish Mortgage has also increased its stakes in private companies that are not listed on a stock market

The fund reported a rise in net asset value (NAV) of 14.6% for the year versus a global sector average NAV rise of 9.9% and a share price rise for the year of 16.5% versus a global sector average of 11.7%.

Over 10 years, the fund’s NAV stands at 647.4% versus global sector average NAV of 361%.

The Scottish Mortgage company is the largest investment trust in the UK and, with a stock market value of around £7.7 billion, it is listed in the FTSE 100.

McBain wrote in the annual results: “By now there can be few investors who seek a significant dividend yield from their shares in Scottish Mortgage.

“The Board has repeatedly highlighted that, while the formal investment objective is “to maximise total return … enabling the company to provide capital and dividend growth” shareholders should anticipate that returns will primarily come through long term capital appreciation.

“One common characteristic of many of the businesses in the portfolio is the retention and investment of most if not all of their earnings to support future growth.

“This tends to result in a relatively low level of dividend income for Scottish Mortgage.

“However the board acknowledges that a significant number of shareholders value the modest level of income they do receive and has therefore maintained the policy of paying a small and growing dividend.

“The consistent application of this policy allows those shareholders to plan their own portfolio income.

“The board has therefore decided not to change the current dividend policy.

“Those who do not require the income may elect to reinvest their cash dividend.

“The board proposes paying a final dividend of 1.74 pence which, together with the interim dividend, would give a total of 3.13 pence per share for the year.

“This is an increase of 2% over last year (3.07 pence).

“As the company’s revenue earnings for the year are insufficient to cover the entire dividend, the balance is paid from realised capital reserves.

“The board believes this to be appropriate, given the relatively immaterial size of the element paid from capital, compared with the scale of the distributable capital gains over the long term.

“The board will continue to keep the dividend policy and use of realised capital reserves under review.”