Schiehallion: finding growth before the market

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<p><strong>As with any investment, your capital is at risk. Past performance is not a guide to future returns.</strong></p> <p>&nbsp;</p> <p class="MsoNormal"><strong>Gustav Venter (GV):</strong> All right, good day and welcome to everyone to this online update for the Schiehallion Fund. My name is Gustav Venter and I'm an investment specialist within Baillie Gifford's private companies team. Now, I'm delighted to be facilitating today's conversation with the head of our team, Peter Singlehurst. And during the conversation, we'll be touching on a few elements. Firstly, performance and activity over the last 12 months, operational progress across our fund holdings, as well as how Schiehallion will continue to invest in the next generation of exciting private growth companies. Now, during the course of today's webinar, we'd also be delighted to handle any questions that you might have. So please do send these through by using the Q&amp;A functionality within your Zoom screen. Now, before we bring Peter into the conversation, I'm first going to hand over to the Chair of the Schiehallion Board, Dr. Linda Yueh, for a couple of opening remarks. Over to you, Linda.</p> <p class="MsoNormal"><strong>Linda Yueh (LY): </strong>Thank you very much, Gustav. I just wanted to add a quick welcome from me to our shareholders. Thank you for your support and for supporting us as long-term investors as we invest in companies with transformative potential. It has been a fantastic year in many ways, including the Schiehallion Fund moving our listing and becoming a constituent of the FTSE 250. So on behalf of the board, I want to thank you in supporting our capital allocation decisions. And I shall now hand over to Peter to walk you through what the year has looked like and what might be coming up next.</p> <p class="MsoNormal"><strong>GV: </strong>Thank you very much, Linda, and we can welcome Peter into the virtual room at this point. But before we turn to his specific remarks, perhaps just a couple of additional high-level points. To anyone on the webinar who might be unfamiliar with Schiehallion’s objective, this is essentially to invest in the very best private growth companies wherever they may be on offer around the globe. As such, any new investment in the fund is by definition private, but of course we also have the ability to continue holding these investments once they journey into public markets. At the end of Q1 this year, the fund had approximately 10 percent of its net asset value invested in listed companies. Then as Linda just pointed out, there are a couple of very positive developments within the fund this year, which we'll touch on in a moment, but there are also a couple of notable structural developments outside the fund. As she mentioned, the first of these was the change of the listing segment on the LSE, which took place towards the end of last year. This has made the shares a lot more accessible to a potential wider base of new shareholders. And then as you also mentioned, indexation took place in March this year for the very first time, another notable milestone for the fund. But so let's then turn to performance and Peter, I'd like to bring you into the conversation here.</p> <p class="MsoNormal">A positive year for the fund with the shares up 96 percent over the last 12 months and the net asset value up 35 percent. From your perspective, how would you frame these performance developments and what else did you see in private growth markets over the last year?</p> <p class="MsoNormal"><strong>Peter Singlehurst (PS):</strong> Yeah, thanks Gustav and thank you everybody for joining today. So I think we're sort of quietly gratified with the results that we delivered for shareholders over the course of the year. When you look at what really drove performance, the main drivers were businesses like SpaceX, Bending Spoons, Databricks was also a big driver of performance. These are all private companies, but I think the interesting thing about last year was that these are actually the largest positions in the fund. SpaceX and Bending Spoons were amongst the largest positions going into the year. Two things worked out well for us, for shareholders, last year. It was the stock selection, the stock picking, finding those companies capable of delivering outsized returns. But it was also the position size. We had the largest positions as the companies that actually went on to really drive performance. So it was that combination of stock selection and portfolio construction and position sizing that really contributed to the results that shareholders enjoyed over the course of the last year.</p> <p class="MsoNormal">When I think about the broader market, I think we are living in a sort of two-speed market right now. There is AI, and there is everything else. And you can probably figure out where you have to pay higher multiples and where maybe there are some more compelling multiples to be found. Now, I think it's really important that we look at both. We are after all a globalist and a generalist growth equity fund. We're trying to find the very best growth companies wherever they may arise. And we're finding great companies actually in both parts of this market. As we'll come on to talk about, we invested in Anthropic last year. So that's very much kind of part of the sort of AI trend that we're seeing at the moment. But we found a lot of great companies that were truly great growth companies growing really quickly, but were very much off the beaten path and not so much part of the AI revolution. You could point to a business like Motu in Brazil, which is a motorbike rental company, not really an AI company at all. So yeah, very much two speed markets. But I think what's important is that we make sure we're keeping looking at both when we are keeping shareholders exposed to all aspects of the private growth markets and the very best companies that we can find.</p> <p class="MsoNormal"><strong>GV: </strong>Yes, you’ve mentioned AI obviously front of mind and a lot of news flow around that. So, you know, maybe as an opening salvo, let's start off with Anthropic as one of the new investments in the fund last year. What were we seeing there and what led us to that move?</p> <p class="MsoNormal"><strong>PS:</strong> So we followed the LLM space really since it started. And the question that we've been grappling with is, what does competitive advantage look like for AI companies, for foundational models? And what will dictate where value accrues in the value chain? And until the middle of last year, we didn't really have very good answers to these questions. And yeah, we spent plenty of time with Anthropic, plenty of time with OpenAI. We've known these companies, we've had access to them, but we've not been able to build conviction in Edge and not been able to build conviction in why companies in this space have gone to become highly profitable businesses over the longer term. And over the course of last year, we saw significant changes at Anthropic in particular. We saw them start to have a very clear strategic focus on winning in the enterprise. And we started to see big changes in their margin structure, becoming much more profitable at the gross margin level than they had been. So on the enterprise focus of the business, I think one of our worries historically had been that OpenAI, Anthropic, and if you go back a year or two, Lama, Gemma, all of these companies would basically commoditise each other.</p> <p class="MsoNormal">But what we saw over the course of last year was that there started to be sort of clear water open up really between OpenAI, Anthropic and probably Gemini and everybody else. And we started to see Anthropic become much more focused on the enterprise and OpenAI sort of really consolidate that position amongst consumers. I have an enormous amount of respect for what OpenAI has built in their consumer business, but I believe that the enterprise is long term a much better place to be. It's a harder business to build, but if you can build it, you have customers that are stickier and you have customers that have much more demanding use cases. And what that means is that you can continue to have pricing power by remaining at the bleeding edge of technology, because business use cases are very, very sophisticated and we're nowhere close to being able to really meet all of them. And so this led us to the belief that, in fact, Anthropic might well be the better business with a longer term durable moat that would enable them to continue to have pricing power and competitive advantage. And that's what ultimately led us to invest in Anthropic for Schiehallion shareholders.</p> <p class="MsoNormal"><strong>GV: </strong>Right, and I guess that's another example of just the type of disruption that is currently emanating from within private growth markets as well. So maybe then let's use this as a sort of a jumping off point to the largest position in the fund, namely Bending Spoons. Now, this is obviously an Italian digital product acquirer. I guess the open question then is with all this AI related disruption going on the so-called SaaSpocalypse narrative, how does that potentially read across to Bending Spoons? And what would you say about this company's performance? More recently, it's one of the top performance over the last 12 months as well.</p> <p class="MsoNormal">When you unpick what people are really worried about when it comes to SaaS and AI, there are sort of two components. And we can sort of explore both of those and then explore how those might or might not apply to bending spoons. So the first concern that people have with a lot of enterprise SaaS companies is that if you have a seat-based pricing business model, and if enterprises and businesses are reducing headcount as they get more efficiencies from AI, well, that is going to be bad for your revenues because there will be fewer seats. that you sell and so your revenues will go down. This worry just doesn't apply to bending spoons. They focus overwhelmingly on consumers and so that aspect of the so-called SaaS apocalypse is not something that we're worried about for bending spoons. The second sort of concern or worry would go something along the lines of, well, with advances in AI coding, surely people will be vibe coding their own products. People won't need to pay for software in the future because you can just ask Claude to create you your own application. I think this worry is worth taking a little bit more seriously, but ultimately, I actually don't worry about whether it applies. I don't worry about the risks to Bending Spoons as a result of it.</p> <p class="MsoNormal">Virtually all of the applications that Bending Spoons owns, whether that's Evernote or Vimeo or Eventbrite or WeTransfer, have competed for their entire existence with dozens and dozens, in some cases hundreds of other applications in app stores, many of which are free. And so the risk that's posed to these apps by more free Vibe-coded applications, I believe, is actually very low. These apps are already kind of battle-tested. And what leads users to keep coming back is habit, it's stickiness, it's the infrastructure that sits behind them, like the large-scale cloud computing agreements that they have with Google Cloud, which enables them to operate at low cost and at scale. arbitraged away with AI. And indeed, many of the tools that they have actually are very AI-heavy tools, whether that's their video editing app or their photo editing app or some of the writing assistance tools that they have. In addition, I actually think Bending Spoons is going to be really well-placed to acquire companies at lower multiples as a result of the sort of sell-off in SaaS. So I see them much more as a net beneficiary of what's happening in AI than as a business that is threatened by it.</p> <p class="MsoNormal"><strong>GV:</strong> Well, we've talked a little bit on news flow in the case of Anthropic. Let's turn then to another large holding in the fund that is perpetually in the news, and that is, of course, SpaceX. It's also the top performer in the fund over the last year, and incidentally, also the first holding. So we've been on a journey with this one, and there's obviously a lot of news around the potential IPO. What are we thinking at the moment with this one, and what can you update the viewers on in terms of SpaceX overall?</p> <p class="MsoNormal"><strong>PS:</strong> I think SpaceX has one of the most robust competitive advantages of any business I've ever looked at. What they do with regards to getting mass into orbit, at the cost that they're able to do it at, and the scale and regularity that they're able to do it at, is an incredible technical achievement. And there is nowhere that is even close to them. They launched about 85 percent of mass that was launched all over the world into space last year. So they have an incredibly robust competitive advantage. They also have a history of validating outlandish hypotheses. First, it was reusable rockets. Nobody thought that would be possible. They proved that you could do it. Then it was Starlink, a space-based broadband internet service.</p> <p class="MsoNormal">It simply didn't exist. It was a theory when we first invested. They validated it. They've gone a long way to validating the largest rocket ship ever in the form of Starship. And now they have a next big sort of bet ahead of them, which is orbital data centres. And like all of these other outlandish hypotheses that have been validated, this one is currently at a nascent stage and is yet to be validated. And there's going to be risk that comes with that, for sure. I think when we think about it from a portfolio context, what we do from here is going to be really down to our views on two things, and those are valuation and position sizing. There's no question about the quality of SpaceX as a business. The two questions really are, number one, what is the upside in SpaceX from here relative to the opportunities of redeploying that capital elsewhere?</p> <p class="MsoNormal">And number two, as they go after orbital data centres, as they execute on their AI strategy, what are the risks involved in that? And how do we express our view of those risks in the position size of the business?</p> <p class="MsoNormal"><strong>GV:</strong> Yes, thank you. That's very interesting. And, you know, we'd like to talk about Shaolin being a global fund. I mentioned at the outset, we’re looking for those growth companies wherever they may be on offer. So let's maybe then transition to China and more specifically ByteDance, another significant holding within the fund and a strong performer. What can we say about this one? It's also been in the news, you know, you've got the US TikTok situation. So, you know, what are our thoughts there at the moment?</p> <p class="MsoNormal"><strong>PS:</strong> I think ByteDance is the most misunderstood business in the world. It is the market leader in China in online advertising. It is amongst the very largest ecommerce companies in China. And they also have one of the leading Chinese LLMs. So you have, in the form of ByteDance, a business that is an amalgamation or could be viewed as Meta, Amazon and OpenAI all rolled into one business. And yet it trades at a much lower valuation than any of those companies, certainly than Meta. And the narrative that we hear in the West is really all around TikTok. And there has been uncertainty around TikTok. And as owners of the business, we've had to sort of ride out that uncertainty.</p> <p class="MsoNormal">But we've always had conviction in ByteDance because of the core strength of the underlying Chinese business and our view that even in a worst case scenario, if TikTok was worth nothing, we could still see a path to making a five times return based solely on what was happening with their domestic Chinese business. So from where we stand today, There's much more certainty around TikTok than there ever has been. That is going to enable them to lean more heavily on monetisation of TikTok. But I think it's also going to enable investors to start to realise what else sits in ByteDance over and above TikTok, which is Douyin, it's Taobao, it's their LLMs in China. It's a phenomenal business. It's growing, still growing quickly. It's highly profitable. And I think it still has an enormous amount of value still to be delivered for Schiehallion shareholders.</p> <p class="MsoNormal">So, you know, an investment that's worked well so far for Schiehallion shareholders, but also one where we still see a lot of upside.</p> <p class="MsoNormal"><strong>GV:</strong> Now, so far we've touched a little bit on some of the largest private growth companies in the world, you know, like ByteDance, Anthropic, SpaceX, et cetera. And the slide that we have at the moment basically shows that Schiehallion currently holds six of the 10 largest private growth names in the world. But let's talk a little bit about the next sort of three to five years and some of the other names in the fund that might eventually work their way into this sort of positioning. Are there any particular candidates or names that are front of mind for you that you're really positive about at this time?</p> <p class="MsoNormal"><strong>PS:</strong> Yeah, I mean, there's lots that I could choose, but maybe I'll sort of highlight one that's kind of a little bit closer to home, a European business, and I'll highlight sort of one American business. So the European business I would highlight is Vinted. Vinted is a marketplace business that has found a way to make low-value consumer-to-consumer marketplace transactions viable from a unit economics perspective, and that enabled them to get a foothold in the second-hand clothes market. They've grown very, very quickly within second-hand clothes, initially starting at low-value items, but now they're expanding into higher-value apparel, They're expanding into additional verticals such as electronics. And there is also a geographic expansion playbook here as well, which is adding a sort of third leg of growth to the business. Now, this company originated, was based in Lithuania. It's a company we followed for a really long time, and it's a real European champion amongst the sort of scaled up growth equity companies. And it's a holding within the Schiehallion Fund.</p> <p class="MsoNormal">So that's the European one I wanted to mention. The US one that I wanted to mention is Angeril. This is a defence company. There are two defence businesses that we own within Schiehallion. One is Teceva, which is a Portuguese business, which is a little bit lesser known under the radar, as it were. And then there's Anduril, which is much better known. Anduril is the leading next-generation defence company, pioneering affordable, autonomous and attritable hardware. And whilst there is a secret source in their products and in their technology, One of the most impressive things that Andrew has cracked is that ability and trust to sell into governments and sell into the US government. It's growing far quicker than we thought when we first invested.</p> <p class="MsoNormal">Very, very strong execution. And I very much believe one of the sort of next generation of very, very large high-growth private businesses.</p> <p class="MsoNormal"><strong>GV: </strong>Right, well, so far, we've touched on quite a few of the positive elements within the fund. I think it's only fair to also touch on a couple of the more sort of disappointing names over the last year. I guess as a fund manager, you're always awake about something going on in the portfolio. And so two of the names I would like your sort of comment on here is Dalyant, the Indian business, and then Oddity, one of the listed names in the fund, both showing up as sort of large detractors over the last 12 months. And what can you say on these names?</p> <p class="MsoNormal"><strong>PS:</strong> Yeah, so Daily Hunt is an Indian social media company. Their initial breakout product was a news app. And then they had a sort of second hero product in the form of Josh, which was a short form video product. they saw a sharp decline in their advertising revenues over the course of last year. There was a rather messy situation where their auditor initially said that there were accounting irregularities. Now, in fact, Daily Hunt was eventually vindicated in this that there had been no such irregularities. But the result of the auditor making those accusations led to a lot of their advertising partners to churn off and their revenues declined substantially. So a rather sorry, unfortunate situation. As a result of this, they've had to really pull back on Josh, the short form video, application and really that's what we're trying to get the business now to a sort of steady footing of kind of being breakeven and then take it from there. But a disappointing situation and one that would have been very hard to sort of forecast slightly kind of came out of the blue and as I said sort of in the end turned out to not actually have been Daily Hunt's fault. The second one that was a big detractor for performance was Oddity. Oddity is a US business with Israeli roots in the beauty space. So they own the Il Makiage beauty brand and the Spoiled Child brand as well. The irony with Oddity is that actually, in the main, last year was a very good year for them. Q4, they had a strong beat and raise. I should say Oddity is a public company, one that we first invested in privately since it's become a public business. So they've been having a strong set of results since they went public. And their third brand, which is an Acme brand, is actually also going very, very well.</p> <p class="MsoNormal">But they had a big misstep in Q1 where changes to advertising algorithms within the Meta platform caught them off guard and significantly hampered new customer acquisition. The company believes they've now solved these problems. So we still have a lot of faith in the business. We see lots of strong signs of execution, but we're going to be monitoring what happens over the coming quarters to really see if what was sold as a blip within the business turns out to be as the company have said. We're quietly confident that it is going to be a blip, as I said, again, driven by the fact that outside of this one misstep with regards to the advertising algorithms, the company has been executing very well. And there are lots of reasons for optimism. But you can imagine that when the company had the profit warning in Q1, the market took it very badly and the shares sold off substantially.</p> <p class="MsoNormal"><strong>GV:</strong> Right, well, so far we've talked a little bit about specific names. Maybe we can go slightly higher, just one at a high level and talk about the portfolio positioning more broadly. The slide that we have up at the moment is an aggregation of some of the fundamentals across the fund. You know, most notably the sort of growth that's on off-year, two and a half times that of the NASDAQ 100 public index, which just sort of speaks to the sort of type of growth that's on off-year. From your perspective, how would you characterise the fundamentals across the fund at the moment?</p> <p class="MsoNormal"><strong>PS:</strong> Yeah, I think looking at data like this is really interesting when you think about why Schiehallion exists. So Schiehallion exists because many of the world's best growth stage companies are staying private longer and longer. And it exists to give people exposure to those businesses. It exists because there are great businesses growing really quickly to be found in this part of the market. And when I look at this data on the rates of growth in Schiehallion versus the rates of growth within the Nasdaq 100, I think it completely vindicates that hypothesis. The argument here is, hey, if you want access to really fast-growing, exceptionally high-quality businesses, you cannot afford to just own public companies. You have to have exposure to the kinds of businesses that we own in Schiehallion. And within Schiehallion, we give you that sort of historied stock picking capability of having been in this part of the market for as long as it has existed. So to see the average company in Schiehallion growing sort of two and a half times faster than the average company in the Nasdaq 100 to me very much validates why Schiehallion exists and why we get up in the morning to deliver value for our shareholders by finding these companies. I think also the profitability numbers here really show that you can and get exposure to really high levels of growth without having to just own companies that are highly capital consumptive, you know, with two thirds of the portfolio in businesses that are already profitable. I think there's this really sort of sweet spot combination in our markets and in the Schiehallion portfolio, where you can find companies that are growing really quickly, but doing so in ways that are profitable.</p> <p class="MsoNormal"><strong>GV:</strong> Great, now the next slide will summarize some of the investment activity that we've seen over the last year. Now it's been a sort of a busy time at a portfolio level. Interestingly, the fund has become fully deployed for the first time in 2025, and there were eight new investments over the course of the year. We've got one or two questions also relating to this, but before getting to those, perhaps just initially your high level thoughts on deployment over the last 12 months or so.</p> <p class="MsoNormal"><strong>PS:</strong> Yeah, so over the last 12 months, We've made new investments and follow-on investments from sort of two sources. One is utilizing those sort of last bits of dry powder that we had within the fund. As many will recall, we initially kept dry powder within, we held them in T-bills. Last year, we sort of sold down our last T-bills, sort of quite a big moment for the fund. And then we also funded some of those investments through either complete sales of some public companies or through taking a little bit off the table of some public and indeed some private businesses. We're now at a point where the portfolio is fully deployed. We have about 10 percent of the fund in public businesses. I think it's important that we don't run that public part of the portfolio too low because it provides us that firepower and that flexibility if we need to step in to support any of our portfolio companies or if anything really exceptional comes along. And so from here, new investments will come about when we take liquidity from positions that are either public or if we do that, in the private markets and there as fund managers we have a simple sort of opportunity cost way up to make. Do we believe we can continue to earn high returns by owning businesses that have already gone public or do we believe that we should be recycling that capital into new companies? Our deal flow and our pipeline of opportunities at Baillie Gifford remains as broad and as deep and as rich as ever. There are a number of different pools of capital that we invest from, and they enable us to stay in the market and continue to have a strong pipeline, even when Schiehallion is fully deployed, so that as and when we do have liquidity, we are able to invest in those companies. So yeah, we're sort of in that kind of state of Schiehallion now where it's sort of business as usual, portfolios substantially deployed. And our job now is really just continuously optimising the portfolio to make sure that this really is a portfolio of the world's best growth stage companies.</p> <p class="MsoNormal"><strong>GV:</strong> Maybe we can briefly touch on a sort of a related question that's just come in. So it's framed as follows. It looks like some of the largest private companies, many of them in this portfolio will go public in the next one or two years. At that point, what happens with our opportunity set from there?</p> <p class="MsoNormal"><strong>PS: </strong>Yeah, so I think what that leads to is a greater degree of optionality for the fund. So when companies are public, we have the option, should we choose it, of liquidity. This is after lockups have expired, of course. And that will enable us to recycle capital. into new opportunities. Now, I think it's important to stress that these needn't be binary decisions. It needn't necessarily be that you sell the entirety of a public position, but it can be the case that you can sort of trim that position to fund new investments into the ongoing deal flow that we have. And so everything else being equal, when there is more liquidity within the fund, you should expect to see more recycling within the fund. and more new names making it into the portfolio.</p> <p class="MsoNormal"><strong>GV:</strong> Yeah, we've maybe, you know, we've talked a little bit about sort of activity over the last 12 months. Another one sort of on a forward looking basis, and maybe we can touch a little bit on the pipeline and what the team is seeing. But the question is essentially, what do we look for in tomorrow's winners? And how do you think about the risks and portfolio sizing when investing in tomorrow's winners? Maybe sort of a process point, and then maybe just in terms of any aspects that the team is seeing from a pipeline perspective going forward.</p> <p class="MsoNormal"><strong>PS:</strong> The first part of the answer, I think, is, in a sense, a slightly mundane one. What do we look for? Well, we look for the same thing that we've always looked for in identifying exceptional growth stage companies. We look for companies that are able to grow their revenues multiple fold over a five and 10-year view. We look for companies where there are enduring determinants of success, so robust competitive advantages, exceptional management teams, effective cultures able to deliver on the vision and execution of the management team, where the revenue growth can translate not just into high levels of profit but high levels of return on equity relative to the capital that's been invested by shareholders. And then where there are valuations that enable us to make at least a five times upside for our clients, where there is a big gap between the market price that we pay today and what we believe that the long-term intrinsic value will be. It's what we've always looked for, and it's what we will continue to look for in the companies that we invest in. Gustav, remind me what the second question is.</p> <p class="MsoNormal"><strong>GV:</strong> Pipeline question around some specific themes or things that the team is thinking about.</p> <p class="MsoNormal"><strong>PS:</strong> Yeah, pipeline. I sort of feel we have a bit of an embarrassment of riches in our pipeline at the moment. As a business, we've continued to invest in the private companies team. So we have more investors today working in private companies, dedicated to private companies than we ever have done. Our brand, our reputation has always been strong, but goes from strength to strength. We are, in a way, we're the sort of you know we're the incumbents in this this market we've been we were sort of at the at ground zero of private companies staying you know private companies staying private for longer and we've been in the market for as long as it has existed and so we have a very robust rich and deep deal flow that's truly global in nature so yes a lot in the u. s but you know we're continuing to find interesting companies in Europe, Latin America and China and growth that we're finding right across industries, but also growth that we are finding, yes, kind of in the heartland of the venture capital ecosystems, but also growth that's kind of really off the beaten path. In some cases where we'll be the first or amongst a very small number of institutional investors, in companies that can be in geographies that people aren't generally looking.</p> <p class="MsoNormal">Of course, the biggest position in the fund today was an example of that when we first invested, Bending Spoons, based in Milan. I already mentioned Teceva, based in Portugal. And our pipeline has a lot of these opportunities that are, some of which are the ones, the companies you will have all heard of, some of which are not businesses that anybody will have heard of, but are still exceptionally high quality. growth businesses and so I get excited in seeing that plurality of growth within our pipeline.</p> <p class="MsoNormal"><strong>GV: </strong>100 percent. We've got a couple of questions coming in around share issuance and potential future fundraising. So maybe we can sort of deal with all of them in one bucket. You know, the fund has, since the early part of this year, been trading at a premium again for the first time since 2022. And so one of the questions was, you know, why have we recently issued shares before the potential flotation of SpaceX and the recent valuation uplift in Anthropic? That was sort of one question. And then there's a couple of other ones around capital allocation more broadly, you know, signalling to the public markets and any plans for a future additional share raise down the line.</p> <p class="MsoNormal"><strong>PS:</strong> Yeah. OK, so issuance, capital allocation and sort of future fundraising. Questions of issuance and buybacks and also a huge capital allocation. These are topics that we discuss regularly with the board and they are obviously matters that the board ultimately has responsibility over. I think when we look at the experience that shareholders had over the course of the life of Schiehallion so far, the movement in the underlying net asset value has been exacerbated by the movements in the premium and the discount. Until relatively recently, the only place Schiehallion had never traded was NAV. You'll recall when we first launched the fund, it jumped almost straight away to a very large premium. In 2022, it swung to a very large discount. And we are now about as close as we've ever been to the actual net asset value. And I think going forward, we want to be a little bit more mindful about that sort of volatility of share price relative to NAV.</p> <p class="MsoNormal">So you saw us introduce the buyback policy a couple of years ago. I think that was relatively effective. in helping steer the share price back towards NAV, though of course there are multiple factors going on there. And then I think also using issuance to make sure that the share price doesn't run away from the net asset value will also be important. So relatively small amounts of shares that we issued. I think the question also sort of asked, you know, doing this before markups in SpaceX and Anthropic. I think it's important to say that the valuation decisions and valuation policy is an independent process. We have a dedicated team for that. We use external parties. a very high level of oversight from third-party auditors, from the valuation committee, from the audit committee within the Schiehallion fund.</p> <p class="MsoNormal">I think the fact that SpaceX and Anthropic were marked up shortly after that is genuinely nothing else but coincidence. And also the quantum of shares that are being talked about here in that issuance were relatively small. On broader capital allocation, I think there are really kind of three prongs that we have within the fund. We have making new investments, we have making follow-on investments, and we have making buybacks. Those are really the sort of three capital allocation decisions that we have. And of course, mirroring each one of those capital allocation decisions is sort of where do you take capital from? And our job as the managers of the fund is to appropriately manage the portfolio and the capital of the fund across that sort of trifecta of ways in which we can deploy capital. Now, of course, when the fund is fully deployed, and particularly with regards to that kind of first prong, that sort of making new investments, there's a choice that we, the board, and I think shareholders have as well. If the fund wants to be benefiting from the sort of ongoing access to private companies that we, Baillie Gifford as an institution, have, And if the fund is already deployed in very, very high-quality companies, there is that option of issuing additional shares at a larger scale, either through a placement or through a further C-share issuance.</p> <p class="MsoNormal">This is something that we sort of discuss with the board on a regular basis, but I think it's also something where we would really look to shareholders for guidance as to what it is that they believe we should do. What is it that shareholders want after all this shareholders' capsule here? We manage this fund on behalf of shareholders. And so for those shareholders on the call, if you have a strong view about whether the Schiehallion Fund should be contemplating an issue, contemplating a larger issue, please do get in touch. Let us know your thoughts. Or conversely, if you don't think we should, please also tell us. We really want to hear people's views on this topic.</p> <p class="MsoNormal"><strong>GV:</strong> Thanks Peter, that's very helpful. Maybe as we get sort of to the last few minutes of today's time allocation, we've got another question here on a sort of forward-looking basis and with regards to valuation. And so can you say something about valuation of these exciting growth companies? Are these now priced so richly that they may actually disappoint in the future?</p> <p class="MsoNormal"><strong>PS:</strong> As you can imagine, the portfolio, there is a spread of valuations. And yes, for sure, there are some companies that are on some fairly high multiples. Where that is the case, that's because those are the market prices of those businesses. I think shareholders would also be surprised to know actually how low some of the multiples many of these companies are on, particularly some of those more off-the-beaten-path businesses that I mentioned. In many cases, I think these companies are actually on multiples that drastically undervalues their growth and profitability and where there could be some real re-ratings of those businesses as and when they come to the public market. I think it's a spread, but I would very much push back against the notion that this would be a richly valued portfolio or that all of these companies would be on high multiples. There are some companies on high multiples. There are also plenty of companies that are on multiples that I believe are just too low.</p> <p class="MsoNormal"><strong>GV:</strong> Right, maybe then sort of towards the back end of today's discussion, let's just talk about the outlook going forward. The slide that we have, again, indicates the sort of revenue growth that's on offer. The fact that the fund provides access to arguably some of the most important private growth names around the globe. And then also we have this prospect of potentially large IPOs in 2026. So maybe just to end off with a final question to you from a personal perspective, is there anything particular that excites you as a private growth investor going forward?</p> <p class="MsoNormal"><strong>PS: </strong>I think the thing that excites me about Schiehallion is that I believe we have assembled a portfolio of the world's best growth companies here. Perhaps beauty is in the eye of the beholder, but I think there are real legitimate arguments to be made that you won't find a portfolio of better growth stage companies out there. And so not only do I view this as a portfolio of exceptional quality, when I look at the valuation uplifts that might well come, I don't mean from our processes, I just mean over the long term as these companies are realized and recognized for their quality, I think there is so much juice in the tank from this existing portfolio. And that makes me really excited. And ultimately, this portfolio will be the main driver of returns for clients rather than the next marginal investment. But when it comes to the pipeline, as I mentioned earlier, I think what excites me is the plurality of growth that we are finding across industries, sectors, and countries. And that includes many of the very high profile companies. The progress and the execution that we're seeing in Anthropic, you're probably one of the most high profile companies right now in the world and in the portfolio, is truly phenomenal. But if I look at some of the more off-the-beaten-path investments, a business like Omotu or a business like Avanci or Bend Experience, I also see exceptionally strong execution.</p> <p class="MsoNormal">And we see that same pattern in our pipeline as well. So it's that plurality of growth which continues to really excite me as well.</p> <p class="MsoNormal"><strong>GV: </strong>I think that's a very positive note on which to end off today. So I think to all our attendees, on behalf of Peter and Linda, I'd like to thank you for dialling into today's webinar and also for your continued support as shareholders. If you have any subsequent questions, please feel free to reach out to your relevant share and fund contact, and we'll be more than happy to deal with those. Have a great week further and we'll speak to you again soon. Thank you very much. Thanks, everyone.</p> <p class="MsoNormal">&nbsp;</p> <p class="MsoNormal">&nbsp;</p> <h3 class="TABLEHEADER1212pt">The Schiehallion Fund Limited</h3> <p><strong>Annual past performance to 31 March each year (%)</strong></p> <table border="1" style="border-collapse: collapse; width: 100%; border-width: 0px; height: 74.6668px;"> <tbody> <tr style="height: 18.6667px;"> <td style="border-width: 1px 1px 2px; border-style: solid; border-color: rgb(204, 204, 204) rgb(204, 204, 204) rgb(0, 0, 0); border-image: initial; padding: 10px; height: 18.6667px;">&nbsp;</td> <td style="border-width: 1px 1px 2px; border-style: solid; border-color: rgb(204, 204, 204) rgb(204, 204, 204) rgb(0, 0, 0); border-image: initial; padding: 10px; height: 18.6667px; text-align: right;"><strong>2022</strong></td> <td style="border-width: 1px 1px 2px; border-style: solid; border-color: rgb(204, 204, 204) rgb(204, 204, 204) rgb(0, 0, 0); border-image: initial; padding: 10px; height: 18.6667px; text-align: right;"><strong>2023</strong></td> <td style="border-width: 1px 1px 2px; border-style: solid; border-color: rgb(204, 204, 204) rgb(204, 204, 204) rgb(0, 0, 0); border-image: initial; padding: 10px; height: 18.6667px; text-align: right;"><strong>2024</strong></td> <td style="border-width: 1px 1px 2px; border-style: solid; border-color: rgb(204, 204, 204) rgb(204, 204, 204) rgb(0, 0, 0); border-image: initial; padding: 10px; height: 18.6667px; text-align: right;"><strong>2025</strong></td> <td style="border-width: 1px 1px 2px; border-style: solid; border-color: rgb(204, 204, 204) rgb(204, 204, 204) rgb(0, 0, 0); border-image: initial; padding: 10px; height: 18.6667px; text-align: right;"><strong>2026</strong></td> </tr> <tr style="height: 18.6667px;"> <td style="border: 1px solid rgb(204, 204, 204); padding: 10px; height: 18.6667px;">Share Price</td> <td style="border: 1px solid rgb(204, 204, 204); padding: 10px; height: 18.6667px; text-align: right;">2.2</td> <td style="border: 1px solid rgb(204, 204, 204); padding: 10px; height: 18.6667px; text-align: right;">-63.0</td> <td style="border: 1px solid rgb(204, 204, 204); padding: 10px; height: 18.6667px; text-align: right;">19.1</td> <td style="border: 1px solid rgb(204, 204, 204); padding: 10px; height: 18.6667px; text-align: right;">13.6</td> <td style="border: 1px solid rgb(204, 204, 204); padding: 10px; height: 18.6667px; text-align: right;">95.7</td> </tr> <tr style="height: 18.6667px;"> <td style="border: 1px solid rgb(204, 204, 204); padding: 10px; height: 18.6667px;">Net Asset Value</td> <td style="border: 1px solid rgb(204, 204, 204); padding: 10px; height: 18.6667px; text-align: right;">0.3</td> <td style="border: 1px solid rgb(204, 204, 204); padding: 10px; height: 18.6667px; text-align: right;">-25.0</td> <td style="border: 1px solid rgb(204, 204, 204); padding: 10px; height: 18.6667px; text-align: right;">6.9</td> <td style="border: 1px solid rgb(204, 204, 204); padding: 10px; height: 18.6667px; text-align: right;">8.9</td> <td style="border: 1px solid rgb(204, 204, 204); padding: 10px; height: 18.6667px; text-align: right;">34.5</td> </tr> </tbody> </table> <p>Source: Morningstar. Total return in US dollars.</p> <p><strong>Past performance is not a guide to future returns.</strong></p> <p>&nbsp;</p> <p><br><strong>Important Information</strong></p> <p data-start="23" data-end="206">This communication was produced and approved in April 2026 and has not been updated subsequently. It represents views held at the time of writing and may not reflect current thinking.</p> <p data-start="208" data-end="335">Unlisted investments such as private companies may be more difficult to buy or sell, so changes in their prices may be greater.</p> <p data-start="337" data-end="732">This communication should not be considered as advice or a recommendation to buy, sell or hold a particular investment. This communication contains information on investments which does not constitute independent investment research. Accordingly, it is not subject to the protections afforded to independent research and Baillie Gifford and its staff may have dealt in the investments concerned.</p> <p data-start="734" data-end="1199">Baillie Gifford &amp; Co and Baillie Gifford &amp; Co Limited are authorised and regulated by the Financial Conduct Authority (FCA). The investment trusts managed by Baillie Gifford &amp; Co Limited are listed on the London Stock Exchange and are not authorised or regulated by the FCA. The value of its shares, and any income from them, can fall as well as rise and investors may not get back the amount invested. A Key Information Document is available at bailliegifford.com.</p> <p data-start="1201" data-end="1488">Share prices may either be below (at a discount) or above (at a premium) the net asset value (NAV). The Trust may issue new shares when the price is at a premium which may reduce the share price. 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