## THE SCHIEHALLION
## FUND LIMITED
## Annual Report and Financial Statements
## For the year to 31 January 2023
### Investment Objective
### The Schiehallion Fund Limited seeks to generate capital growth
### for investors through making long-term minority investments in
### later stage private businesses that the Company considers to
### have transformational growth potential and to have the potential
### to become publicly traded.
### Contents

| Strategic Report | Financial Report |
| --- | --- |
| 1 Summary of Results | 41 Independent Auditor’s Report |
| 3 Chairperson’s Statement | 45 Statement of Comprehensive Income |
| 5 Business Review | 46 Statement of Financial Position |
| 12 Investment Manager’s Review | 47 Statement of Changes in Equity |
| 14 Valuing Private Companies | 48 Statement of Cash Flows |
| 15 Approach to Environmental, Social and | 49 Notes to the Financial Statements |

Governance Considerations (ESG)
Shareholder Information
16 Baillie Gifford Statement on Stewardship
67 Notice of Annual General Meeting
and Stewardship Principles for Public
71 Further Shareholder Information
Companies
72 Alternative Investment Fund Managers
17 Review of Investments
Regulations
21 List of Investments
72 Glossary of Terms and Alternative
23 Allocation of Net Assets
Performance Measures
24 Distribution of Net Assets
74 Sustainable Finance Disclosure
Governance Report Regulation (‘SFDR’)
25 Directors and Management
27 Directors’ Report
31 Corporate Governance Report
36 Audit Committee Report
38 Directors’ Remuneration Report
40 Statement of Directors’ Responsibilities
Notes
None of the views expressed in this document should be construed as advice to buy or sell a particular investment.
THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION.
If you are in any doubt as to the action you should take you should consult your stockbroker, bank manager, solicitor,
accountant or other independent financial adviser authorised under the Financial Services and Markets Act 2000 if
you are in the United Kingdom or, if not, from another appropriately authorised financial adviser.
If you have sold or otherwise transferred all of your ordinary shares in The Schiehallion Fund Limited, please
forward this document, together with any accompanying documents, but not your personalised Form of Proxy,
as soon as possible to the purchaser or transferee, or to the stockbroker, bank or other agent through whom
the sale or transfer was or is being effected for delivery to the purchaser or transferee.
Strategic Report
### Strategic Report
### This Strategic Report includes pages 1 to 24 and incorporates the Chairperson’s Statement.
*
### Summary of Results
### The following information illustrates how The Schiehallion Fund Limited performed over the
### year ended 31 January 2023.
Ordinary shares 31 January 2023 31 January 2022 % change
Shareholders’ funds US$597.61m US$791.66m
Net asset value per ordinary share 119.42¢ 158.20¢ (24.5)
Share price 92.00¢ 212.00¢ (56.6)
(Discount)/premium † (23.0%) 34.0%
Number of shares in issue 500,430,002 500,430,002
Market capitalisation US$460.40m US$1,060.91m

| Ongoing charges | † |  |  | 0.87% 0.89% |  |  |
| --- | --- | --- | --- | --- | --- | --- |
|  |  | Year ended |  |  | Year ended |  |
|  |  |  | 31 January 2023 |  |  | 31 January 2022 |

Revenue loss per share (0.98¢) (1.47¢)
Period from
26 April 2021 #
C shares 31 January 2023 to 31 January 2022 % change
Shareholders’ funds US$555.57m US$680.85m
Net asset value per C share 79.37¢ 97.26¢ (18.4)
Share price 49.00¢ 118.00¢ (58.5)
(Discount)/premium † (38.3%) 21.3%
Number of shares in issue 700,000,000 700,000,000
Market capitalisation US$343.00m US$826.00m
Ongoing charges † 0.71% 0.38%
Period from
Year Ended 26 April 2021 #
31 January 2023 to 31 January 2022
Revenue loss per share (0.35¢) (0.28¢)
Notes
* For a definition of terms see Glossary of Terms and Alternative Performance Measures on pages 72 and73
† Alternative performance measure, see Glossary of Terms and Alternative Performance Measures on pages 72 and 73.
# 26 April 2021, the date the Company’s C shares were admitted to trading on the Specialist Fund Segment of the Main Market of the
London Stock Exchange.
All investment strategies have the potential for profit and loss.
Past performance is not a guide to future performance.
The Schiehallion Fund Limited 01
Strategic Report
*
### Summary of Results (continued)
Period’s High and Low
Ordinary shares Year ended 31 January 2023 Year ended 31 January 2022
Period’s high and low High Low High Low
Net asset value per ordinary share 153.18¢ 116.84¢ 198.40¢ 146.57¢
Share price 214.00¢ 91.50¢ 296.00¢ 180.00¢

| Premium/(Discount) | † | 40.5% (26.9%) 64.9% 17.4% |  |  |  |
| --- | --- | --- | --- | --- | --- |
|  |  |  | Period from 26 April 2021 |  | # |
| C shares Year ended 31 January 2023 |  |  |  | to 31 January 2022 |  |

Period’s high and low High Low High Low
Net asset value per C share 97.20¢ 77.32¢ 101.21¢ 97.17¢
Share price 129.00¢ 49.00¢ 145.00¢ 117.50¢
Premium/(Discount) † 36.1% (41.1%) 42.4% 17.9%
Performance Since Inception
Ordinary shares 31 January 2023 27 March 2019 ‡ % change
Net asset value per ordinary share 119.42¢ 99.66¢ 19.8
Share price 92.00¢ 100.00¢ (8.0)
C shares 31 January 2023 26 April 2021 # % change
Net asset value per C share 79.37¢ 99.25¢ (20.0)
Share price 49.00¢ 124.00¢ (60.5)
Notes
* For a definition of terms see Glossary of Terms and Alternative Performance Measures on pages 72 and 73.
† Alternative performance measure, see Glossary of Terms and Alternative Performance Measures on pages 72 and 73.
# 26 April 2021, the date the Company’s C shares were admitted to trading on the Specialist Fund Segment of the Main Market of the
London Stock Exchange.
‡ 27 March 2019, the date the Company’s ordinary shares were admitted to trading on the Specialist Fund Segment of the Main Market
of the London Stock Exchange.
02 Annual Report 2023
Strategic Report

## Chairperson's Statement

The Schiehallion Fund Limited (the 'Company' or 'Schiehallion') seeks to generate capital growth for investors through long-term minority investments in later stage private businesses that the Company considers to have transformational growth potential and to have the potential to become publicly traded.

The last year has been a period of great public market share price volatility. Public market prices are incorporated into the Company's private company valuation process and have, therefore, impacted the Company's carrying values of its investments. The Company's valuation policy is set out on page 14.

The Board meets quarterly with the Company's portfolio managers and holds meetings to review the Company's investment valuations twice a year. We also have regular contact with the Investment Manager outside of formal Board meetings. Last week, I visited one of the Company's larger investments and two potential investments with the portfolio manager. The Investment Manager has a dedicated Private Companies investment team, supported by a specialist operations team that ensures that investments are monitored at all stages. Details of the Investment Manager's resources are set out on page 26.

The Board has complete confidence in the Investment Manager's ability to scrutinise and oversee private company investments. In the view of the Board which includes a director who has 40 years of private equity and venture capital experience, the Investment Manager has the most rigorous process of any investor in this area. The Board is wholly committed to the aim of the company that seeks to generate returns of three times capital over a rolling ten year period through long-term minority investments in later stage private businesses.

### Investment Performance

During the financial year to 31 January 2023, the Company's ordinary share price and net asset value returned negative 56.6% and negative 24.5%, respectively. Over the period from 27 March 2019 (launch date) to 31 January 2023, the Company's ordinary share price and net asset value returned negative 8.0% and positive 19.8%, respectively.

During the financial year to 31 January 2023, the Company's C share price and net asset value returned negative 58.5% and negative 18.4%, respectively. During the period from admission to trading on 26 April 2021 to 31 January 2023, the Company's C share price and net asset value returned negative 60.5% and negative 20.0%, respectively.

Commentary on performance is included in the Investment Managers' Review.

### Share Price Discount

In each of the Company's previous Annual Reports, I noted the level of premium to net asset value at which the Company's shares have traded and explained that investors should bear in mind that shares bought at a high premium to net asset value can quickly lose substantial value if the premium is eroded. Unfortunately, this proved to be the case over the last 12 months as sentiment turned against growth stocks and private company investments. The ordinary shares derated from a 34.0% premium to net asset value at the start of 2022 to a 23.0% discount to net asset value at the year end. The C shares also derated from a 21.3% premium to net asset value to a 38.3% discount to net asset value over the same period.

Although there is no current intention to exercise the authority to purchase the Company's shares, the Company will be seeking authority to renew the buy-back authority for the ordinary shares at the forthcoming Annual General Meeting ('AGM'). The Company is also seeking authority at the AGM to purchase the Company's C shares. No shares were bought back during the year ended 31 January 2023.

The Company has a general authority to issue further shares if the Directors determine such issues to be in the best interests of shareholders and the Company as a whole. At 31 January 2023 the Company had authority, which was granted at the initial launch, to issue a further 242.75 million shares. This authority expires at the end of the period concluding immediately prior to the Annual General Meeting to be held in 2024 (or, if earlier five years from 15 March 2019, the date the special resolution was passed).

### Deployment of Capital

The C shares will convert into ordinary shares once at least 85 per cent. of the net placing proceeds of the C share issue have been deployed. When the C shares were issued in April 2021, your Board said it would be reasonable to expect that the C share proceeds would be two-thirds invested within two years. As at 31 January 2023, approximately 79% of C share proceeds had been invested in 25 companies. There is commentary on the Company's portfolio in the Investment Manager's Review and Review of Investments on pages 12 to 24.

### Cost

The ongoing charges for the ordinary shares as at 31 January 2023 were 0.87%. Last year, the ongoing charges for the ordinary shares were 0.89%.

The ongoing charges for the C shares as at 31 January 2023 were 0.71%. Last year, the ongoing charges, for the period from 26 April 2021 to 31 January 2022, for the C shares were 0.38%. Management fees are not charged on cash and cash equivalents, so the ongoing charges have risen as the C share proceeds have been deployed. As at 31 January 2023 the C share capital has been 79% deployed, increasing from 60% in the previous year.

Past performance is not a guide to future performance.

For a definition of terms see Glossary of Terms and Alternative Performance Measures on pages 72 and 73.

The Schiehallion Fund Limited 03
Strategic Report

## Chairperson's Statement (continued)

### Earnings and Dividend

The Company's priority is to generate capital growth over the long term. The Company therefore has no dividend target and will not seek to provide shareholders with a particular level of distribution. This period the net revenue return per ordinary share was a negative 0.98 cents (year to 31 January 2022, negative 1.47 cents) and the net revenue return per C share was negative 0.35 cents (period to 31 January 2022, negative 0.28 cents). The Board is recommending that no final dividend be paid.

### Board

Members of the Board come from a broad variety of backgrounds and the Board can draw on a very extensive pool of knowledge and experience. Directors' biographies can be found on page 25.

The Board undertook an external evaluation during the year and has considered its balance of skills, which was deemed to be suitable for the Company. All the Directors are subject to annual re-election at the AGM in May.

### Annual General Meeting

The AGM will be held at 12 noon on Friday 12 May 2023 at the offices of Alter Domus in Guernsey. Shareholders are reminded that they are able to submit proxy voting forms before the applicable deadline on Wednesday 10 May 2023 and also to direct any questions for the Board or Manager in advance by email to trustenquiries@bailliegifford.com or by calling 0800 917 2112. (Please note that Baillie Gifford may record your call).

Information on the resolutions can be found on pages 67 and 68. The Directors consider that all resolutions to be put to shareholders are in their and the Company's best interests as a whole and recommend that shareholders vote in their favour.

### Investment Outlook

The past year has been characterised by geo-political uncertainties, inflationary pressures, higher interest rates, increased cost of borrowing, and a recessionary environment. The macro context worsened the disruption caused by supply chains stemming in part from the COVID-19 pandemic. Although inflationary pressures have begun to ease, these factors have collectively contributed to a challenging economic and market environment.

Despite the considerable uncertainties, the Board and the Investment Manager are optimistic about the outlook for the Company with its focus on the long-term and investing in companies with transformational potential. The Company solely invests in companies with exceptional growth potential which are not widely accessible in public markets. The potential of the companies in our portfolio is generally dependent on their ability to take advantage of opportunities. Therefore, the Board is positive about the growth prospects of these companies, and the pipeline of private companies that the Investment Manager has access to. The Board and the Investment Manager are confident in the investment outlook for the Company.

Dr Linda Yueh CBE  
Chairperson  
27 March 2023

04 Annual Report 2023
Strategic Report
### Business Review
Business Model The Company will only invest in private businesses that are
considered to have some or all of the following features:
Business and Status
The Schiehallion Fund Limited (the ‘Company’) is a non-cellular — the potential to grow revenue and earnings multiple fold
investment company limited by shares, registered and incorporated over the long term;
in Guernsey under the Companies (Guernsey) Law, 2008 (the
— scalable business models that should enable those
‘Companies Law’) on 4 January 2019, with registration number
businesses to grow into their opportunity;
65915. The Company is a registered closed-ended investment
— robust competitive advantages;
scheme registered pursuant to the Protection of Investors (Bailiwick
of Guernsey) Law 2020 and the Registered Collective Investment — exceptional management teams;
Scheme Rules, 2021 issued by the Guernsey Financial Services
— an entry price which significantly undervalues the long-term
Commission (‘GFSC’). The Company is listed on the Specialist
opportunity for the business; and
Fund Segment of the Main Market of the London Stock Exchange.
— an ambition and ability to become stand-alone public companies.
The Company has fixed share capital consisting of both ordinary
Investee companies may be from any sector and any geography.
and C shares, although subject to shareholder approval, it may
While there are no specific limits placed on exposure to any one
purchase its own ordinary and/or C shares or issue ordinary and/
sector, the Company will at all times seek to invest and manage
or C shares.
the portfolio in a manner consistent with spreading investment risk.
The authority to purchase ordinary shares expires at the end of
With prior approval of the Board, the Company may permit the use
the Company’s Annual General Meeting (‘AGM’) and the Directors
of derivatives for the purpose of currency hedging, though it currently
are seeking to renew this authority at the AGM on 12 May 2023.
does not expect to do so. Save for this and for investments made
The Directors are also seeking authority at the AGM to purchase
using equity-related instruments as described above, the Company
C shares.
may not engage in derivative transactions for any purpose.
The authority to issue ordinary shares will expire at the end
The Board does not intend to use structural gearing with a view
of the period immediately prior to the AGM to be held in 2024
to enhancing equity returns on investments. The Company may
(or, if earlier, five years from 15 March 2019, the date the special
employ gearing on a short-term basis for the purpose of bridging
resolution was passed). The price of the ordinary shares and
investments and general working capital purposes. The Company
C shares is determined, like other listed shares, by supply and
may in aggregate borrow amounts equalling up to 10% of net
demand. The Company’s ordinary shares and C shares are
asset value, calculated at the time of drawdown.
denominated in US dollars.
The Company is subject to the following investment restrictions:
The Company is an Alternative Investment Fund (‘AIF’) for the
purposes of the UK Alternative Investment Fund Managers — an investee company must be a private investee company at
Regulations. the time of the Company’s initial investment in that investee
company. The Company may, however, make subsequent
Company Culture
investments in the investee company, even if the investee
The Board acknowledges the importance of a strong corporate
company has been admitted to trading on a public stock
governance culture that meets the requirements of the Code of
exchange in the period since the Company’s initial investment;
Corporate Governance issued by the Guernsey Financial Services
— a private investee company must have a value of at least
Commission (the ‘Guernsey Code’), the UK Listing Rules and
US$500 million at the time of the Company’s initial investment
other bodies such as the AIC and that contributes to the Company’s
in the private investee company. This restriction will not apply
long-term success.
to the Company’s subsequent investments in the investee
Life of the Company company, if any;
The Company has been established with an unlimited life.
— the Company may not make an initial investment in a private
investee company which exceeds in value 10% (calculated at
Investment Objective
the time of investment) of the most recently published net
The Company’s investment objective is to generate capital growth
asset value (save to the extent that breach of this 10% limit is
for investors through making long-term minority investments in
due to a change in the value of the Company’s invested assets
later stage private businesses that the Company considers to
or currency fluctuations from the time of the Company’s firm
have transformational growth potential and to have the potential
commitment to make the investment to the time of investment);
to become publicly traded.
— the Company may not make any investment in a private
Investment Policy
investee company that would cause the value of the
In making its initial investment in a business, the Company will seek
Company’s holding in that private investee company to
to invest in private businesses which it considers have the potential
exceed 19.9% (calculated at the time of investment) of the
to become admitted to trading on a public stock exchange. Those
most recently published net asset value; and
investments will typically take the form of equity or equity-related
— the Company may not make any investment in an investee
instruments (which may include, without limitation, preference
company that would cause the Company’s holding in that
shares, convertible debt instruments, equity-related and equity-
investee company to exceed 20% (calculated at the time of
linked notes and warrants) issued by investee companies.
investment) of the total issued share capital of the investee
company.
The Schiehallion Fund Limited 05
Strategic Report

A reference to the value of assets of the Company (including investee companies) in the restrictions above shall refer to the value as determined in accordance with the Company's valuation policy from time to time.

The Company does not currently expect the portfolio to be majority invested in public investee companies at any point in time, but it has not set a limit on the percentage of the portfolio which can be invested in public investee companies at a given time.

As disclosed in the Company's C Share Prospectus, it is intended that the Company would, subsequent to the issue of the C shares, be two-thirds invested by the end of the investment period of two years from the date of Admission. However, during that period the Company could at any time hold overnight or term deposits or, pending investment in investee companies, invest in a range of cash equivalent instruments such as US Treasury Bills or money market funds. There was no restriction on the amount of cash or cash equivalent instruments that the Company could hold. At 31 January 2023, the Company's ordinary shares net assets were 93.6% invested and held the remaining 6.4% in cash and other current assets and liabilities. At 31 January 2023, the Company's C share net assets were 74.3% invested and held the remaining 25.7% in US Treasury Bills, cash and other current assets and liabilities.

#### Dividend Policy

The Company's priority is to produce capital growth over the long term. Given the nature of the Company's investments, the Company does not expect to pay dividends in the foreseeable future and therefore has no dividend target and will not seek to provide shareholders with a particular level of income. If any dividends or distributions are made, they will at all times be subject to compliance with the solvency test prescribed by Guernsey law.

#### Liquidity Policy

The Directors will consider repurchasing ordinary and/or C shares in the market if they believe it to be in the interests of shareholders as a whole and as a means of addressing imbalances between supply and demand for the shares.

The timing, price and volume of any buyback of ordinary and/or C shares will be at the absolute discretion of the Directors and is subject to the Company having sufficient working capital for its requirements and surplus cash resources available. The acquisition of shares pursuant to the authorities is subject to compliance with the solvency test and any other relevant provisions of the Companies Law.

**Share Buybacks** – At the last Annual General Meeting the Company was granted authority to purchase up to 75,014,457 ordinary shares (equivalent to 14.99% of its issued share capital as at 12 May 2022), such authority to expire at the 2023 Annual General Meeting. The Directors are seeking shareholders' approval at the Annual General Meeting to renew the authority to make market purchases of up to 75,014,457 ordinary shares representing approximately 14.99% of the Company's ordinary shares in issue as at 24 March 2023, being the latest practicable date prior to the publication of this document, such authority to expire at the Annual General Meeting of the Company to be held in 2024.

The Directors are also seeking shareholders' approval at the 2023 Annual General Meeting to make market purchases of up to 104,930,000 C shares representing approximately 14.99% of the Company's C shares in issue as at 27 March 2023, being the latest practicable date prior to the publication of this document, such authority to expire at the Annual General Meeting of the Company to be held in 2024.

In the event that the Board decides to repurchase shares, purchases will only be made through the market for cash at prices (after taking account of all commissions, costs and expenses of the purchases) not exceeding the last reported net asset value per ordinary or C share, as applicable.

Shares purchased by the Company may be cancelled or held in treasury (or a combination of both). Shares may be sold from treasury but not at a price per share which would be less (after taking account of all commissions, costs and expenses of such sale) than the last reported net asset value per share at the relevant time. No shares were bought back by the Company during the year ended 31 January 2023.

**Treasury Shares** – The Company is permitted to hold shares acquired by way of market purchase in treasury, rather than being obliged to cancel them. A maximum of 10% of the ordinary shares and 10% of the C shares in issue at the relevant time may be held in treasury. Such shares may be subsequently cancelled or sold for cash. Holding shares in treasury would give the Company the ability to sell shares from treasury quickly and in a cost efficient manner, and would provide the Company with additional flexibility in the management of its capital base. However, the issue of shares from treasury will be subject to the Articles of Incorporation and the provisions relating to rights of pre-emption contained therein, further details of which are referred to in the section entitled 'Share Issuance' below. No shares were held in treasury at the year end.

**Share Issuance** – The Directors have authority to issue further ordinary shares. Further issues of ordinary shares will only be made if the Directors determine such issues to be in the best interests of shareholders and the Company as a whole. Relevant factors in making such determination include the Company's performance, the discount/premium at which the ordinary shares trade to the prevailing net asset value per ordinary share, perceived investor demand and investment opportunities. Ordinary shares will only be issued at prices per ordinary share which, after taking into account any placing commission and expenses payable in respect of such issues, are not less than the last reported net asset value per ordinary share.

There are no provisions of Guernsey law which confer rights of pre-emption in respect of the issue of ordinary shares. The Articles of Incorporation do, however, contain pre-emption rights in relation to issue of ordinary shares for cash, although such pre-emption rights have, by a resolution passed on 15 March 2019, been disapplied in respect of up to 720 million ordinary shares or C shares (such figure to include the ordinary shares issued pursuant to the Placing) for a period concluding immediately prior to the Annual General Meeting of the Company to be held in 2024 (or, if earlier, five years from the date of the passing of the relevant resolution).

06 Annual Report 2023
Strategic Report
477,250,000 shares were issued in the initial placing leaving the Borrowings
ability to issue up to a further 242,750,000 shares. There have The Company’s approach to borrowings is noted within the
been 23,180,000 shares issued since the initial placing hence the Investment Policy detailed on page 5.
Directors have authority to issue a further 219,570,000 shares.
There were no borrowings as at 31 January 2023.
By way of a special resolution dated 18 March 2021 the Directors
have a general authority to allot up to 700,000,000 C shares. Principal and Emerging Risks
On 26 April 2021, the Company issued 700,000,000 C shares As explained on pages 33 and 34, there is a process for
of US$1 each raising gross proceeds of US$700,000,000. identifying, evaluating and managing the risks, including emerging
risks, faced by the Company on a regular basis. The Directors
Performance
have carried out a robust assessment of the principal and
At each Board meeting, the Directors consider a number of emerging risks facing the Company, including those that would
performance measures to assess the Company’s success in threaten
achieving its objectives. its business model, future performance, solvency or liquidity.
A description of these risks and how they are being managed
Key Performance Indicators
or mitigated is set out in the table below.
The key performance indicators (‘KPIs’) used to measure the
The Board considers the implications of geopolitical tensions,
progress and performance of the Company over time are
such as those arising from the Russian invasion of Ukraine,
established industry measures and are as follows:
tensions between the USA and China regarding tariffs, the impact
— the movement in net asset values per share;
of Brexit and the Covid-19 pandemic to be factors which
— the movement in the share prices; exacerbate existing risks, rather than discrete risks, within the
context of an investment fund. While the risk due to Covid-19
— the premium/discount of the share price to the net asset value
has declined over the year, it still remains a potential threat in
per share; and
some businesses and geographies. Their impact is considered
— ongoing charges. within the relevant risks.
An explanation of these measures can be found in the Glossary of
Terms and Alternative Performance Measures on pages 72 and 73.
The KPIs for the year ended 31 January 2023 are shown on
pages 1 and 2.
Impact How the risk is managed Current assessment of risk
Investment and Strategic Risk
Liquidity of Investments The Company’s investments are By diversification of the portfolio, Increasing: The Company
predominately in private investee in accordance with the Company’s has not seen any significant
companies or companies which investment limits and risk impact on underlying liquidity
have recently completed an IPO. diversification policies. of investments, however, the
Such investments may not be liquid economic climate has led to
or may have restrictions on sale or lower IPO activity during the
transfer of shares. This may limit year.
the Company’s ability to realise
investments at short notice or at all.

| Market, Economic, | From time to time a large proportion | The Board assesses this risk by | Increasing: This risk is seen |
| --- | --- | --- | --- |
| Political and | of the total value of the Company’s | considering, at each meeting, | as increasing due to increased |
| Environmental Risks | portfolio could be concentrated in a | metrics which have contributed | volatility as a result of the |
|  | limited number of investee companies, | to performance as well as | Russian invasion of Ukraine, |
|  | which could be adversely affected | discussion with the investment | increasing energy prices and |
|  | by an unexpected change in their | manager on specific conditions | inflation rates, as well as the |
|  | markets, by governmental intervention | which the underlying investee | global reach of the increasing |
|  | or by a reputational issue. This could | companies face. This risk is also | political tension between the |
|  | have a material impact on the overall | managed by the Company’s | US and China. The Covid-19 |
|  | value of the Company’s portfolio and | investment diversification policy. | pandemic continues to have a |
|  | consequential adverse effects on the |  | lingering impact on the global |
|  | Company’s share price. |  | economic environment. |

The Schiehallion Fund Limited 07
Strategic Report
Impact How the risk is managed Current assessment of risk
Investment and Strategic Risk (continued)
Valuation Risk The Company invests in late-stage The Investment Manager has Increasing: This risk is seen
private businesses which are valued a robust valuation methodology, as increasing due to the ongoing
in accordance with International which it applies consistently. The invasion of Ukraine by Russia,
Private Equity and Venture Capital Board meets with the Investment increasing energy prices and
Valuation (‘IPEV’) Guidelines using Manager at special meetings solely inflation rates and the impact
events these are having on
appropriate valuation methods. to consider the valuations for the
global markets. Reduced
Such methods include an element Interim and Annual Financial
valuations of public listed
of judgement which may lead to a Statements. At these meetings
companies have had an impact
material misstatement of the valuation there is an opportunity for the
by depressing the inputs used
and consequently in the Company’s Board to challenge the valuations
to value the Company’s private
net asset value. and to request further information.
listed investee companies.
Investment Strategy Risk Pursuing an investment strategy The Board regularly reviews and Stable: Controls are working
to fulfil the Company’s objective monitors the Company’s investment effectively with no change during
which the market perceives to be policy and strategy, the investment the current year.
unattractive or inappropriate, or portfolio and its performance, the
ineffective implementation of the level of discount/premium to net
Company’s investment strategy, asset value at which the shares
may lead to lower returns for trade and movements in the share
shareholders and a consequential register. A strategy meeting is
impact on share price. also held annually. In addition, the
Investment Manager keeps in close
contact with key shareholders and
provides regular feedback to the
Board.
Discount Risk The discount/premium at which the The Board monitors the level of Increasing: The risk is
Company’s shares trade relative to discount/premium at each Board increasing as the Company’s
its net asset value can change. meeting. The Company has shares moved from a premium
Such an imbalance can diminish authorities in place to buy back to a discount during the year.
the attractiveness of the Company’s or issue shares, when deemed
shares to existing investors and to be in the best interest of the
lead to a lack of liquidity in the Company and its shareholders.
Company’s share trading.
Environmental, Social Failure by the Investment Manager The Investment Manager has an Stable: This risk is mitigated
and Governance (‘ESG’) to identify potential future problems application process integrated by the Investment Manager’s
on ESG matters in an investee into the investment process, as strong ESG stewardship and
company could lead to the well as upfront and ongoing due engagement policies.
Company’s shares being less diligence which the Investment
attractive to investors as well as Manager undertakes on each
potential valuation issues in the investee company. This includes
underlying investee company. the risk inherent in climate change
(see page 35).
External Risks
Political and Associated Global political changes in policy or Political developments and other Increasing: This risk is
Economic Risk direction changes in areas in which social trends are closely monitored increasing as Governments and
the Company invests or may invest by the Board and are regularly consumers around the world
may have practical consequences for discussed at Board meetings. continue to assess the impact of
the Company and impact financial the Russian invasion of Ukraine,
performance. including sanctions applied in
response, increasing energy
prices and inflation rates and
intensifying of US-China tensions.
The ongoing assessment of the
longer term impacts of Covid-19
on international policy remains a
factor for consideration.
08 Annual Report 2023
Strategic Report
Impact How the risk is managed Current assessment of risk
External Risks (continued)
Legal and Regulatory Risk Failure to comply with tax or The Board receives regular Stable: All control procedures
regulatory rules could lead to updates from the Investment working effectively. There have
suspension of the Company’s stock Manager and Administrator on been no material regulatory
exchange listing, financial penalties Compliance and the Investment changes that have occurred
or a qualified audit report. Changes Manager’s monitoring programmes. during the year.
in tax legislation may lead to the External legal advice is sought on
Company being subject to tax on any areas of concern.
capital gains.
Operational Risks

| Performance and | In common with other investment | The Audit Committee receives | Decreasing: All control |
| --- | --- | --- | --- |
| Reliance on Third Party | companies the Company has no | reports from the Investment | procedures working effectively. |
| Service Providers | direct employees and relies entirely | Manager’s Business Risk | Portfolio management and all |
|  | for its operations on third party | Department on their monitoring | regulatory and administrative |
|  | service providers. Failure of the | programme of internal controls. | tasks have continued |
|  | Investment Manager’s systems or | The Audit Committee also receives | uninterrupted. This risk is |
|  | those of another service provider | ISAE 3402 or equivalent reports | decreasing due to the reduced |
|  | could lead to an inability to accurately | on the Investment Manager | impact of the Covid-19 |
|  | report or lead to a misappropriation | and other service providers. | pandemic. |
|  | of assets. | These 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 are investigated.
Cyber Security Threats Errors, fraud or control failures The Audit Committee and the Increasing: Increasing risk
by the Company’s key service Board receive confirmation that all due to recent indications that
providers or loss of data through service providers have appropriate developments relating to the
increasing cyber threats or business Cyber/IT policies to ensure that Russian invasion of Ukraine
continuity could damage the controls are in place including could lead to cyber attacks.
Company’s reputation or investors business continuity and disaster As a result of operational changes
interests or result in losses. recovery arrangements. made during the height of the
Covid-19 pandemic, service
providers are using a hybrid
approach of remote and office
working, thereby creating a
higher potential of a Cyber
Security Threat, highlighted by
a growing number of attacks
on high profile companies.
Key Professionals Loss of Key Professionals, particularly The Board reviews the Investment Stable: All procedures are
in relation to the Investment Manager Manager’s performance annually satisfactory.
could impact the Company’s ability as well as the resources of the
to implement its investment strategy. Investment Manager for attracting
and r etaining talent.
The Schiehallion Fund Limited 09
Strategic Report
Emerging Risks Since the Company outsources its operations to third parties,
As explained on pages 7 to 9 the Board has regular discussions the viability of the Company could be impacted if a service
on principal risks and uncertainties, including any risks which are provider was unable to provide or withdrew their services.
not an immediate threat but could arise in the longer term. The recent COVID-19 pandemic has stress tested the resilience
of third party service providers which include its Investment
The Board considers that the key emerging risks arise from two
Manager, Administrator, Custodian and Depositary, Registrar,
areas:
Auditor and Broker. None have experienced any significant
— The global reach of the investment portfolio and its exposure operational difficulties which affected the services they provide to
to external and emerging threats such as the Russian invasion the Company. In addition, the Board considers outsourced third
of Ukraine, US/China tensions, cyber risk and the decreasing party service providers could be replaced at relatively short
but lasting risk of coronavirus. An escalation in tensions may notice where necessary.
lead to sanctions being imposed on China with the potential
Finally, the Investment Manager monitors closely the Company’s
of adversely affecting the Company’s Chinese investments.
cash requirements to meet ongoing fees and expenses and
Rising inflation, increasing energy costs and increasing interest
expects to maintain around 2% of its assets in cash or near cash
rates are likely to add pressures to the companies in the
to meet these obligations. At 31 January 2023, the Company held
investment portfolio. These are mitigated by the Investment
cash and cash equivalent investments amounting to $182 million.
Manager’s close links to the investee companies and their
These liquid assets could sustain the Company’s annual operating
ability to ask questions on contingency plans. The Investment
expenses for the year, including the management fee of US$8.9
Manager believes the impact of such events may be to slow
million, for at least 20 years. The Company also has liquid listed
growth rather than to invalidate the investment rationale; and
investments of US$119 million which could be sold should the
— As investors place increased emphasis on Environmental, need arise.
Social and Governance issues (‘ESG’), any failure by the
As a result of this analysis, the Board believes the Company can
Investment Manager to identify potential future problems on
effectively manage the principal and emerging risks and uncertainties
ESG matters in an investee company could lead to the
and remains confident that the Company will be able to continue
Company’s shares being less attractive to investors as well as
in operation, and does not envisage any change in strategy,
potential valuation issues in the underlying investee company.
objectives or events that would prevent the Company from operating
This is mitigated by the Investment Manager’s strong ESG
over the period of at least five years. This period has been
policies, which have been adopted by the Company, and
increased from three to five years to better reflect the medium
which are fully integrated into the investment process as well
to long-term investment horizon of the Company.
as the extensive upfront and ongoing due diligence which the
Investment Manager undertakes on each investee company. In determining the period of assessment, the Directors consider
These include the risks inherent in climate change (see page 35). that five years is appropriate given the reduced rate of deployment of
capital over the last year and when valuing the underlying companies
Viability Statement
we would normally look to a medium term. The Company takes
In accordance with the requirements of the AIC Code that the note that it has an even longer term time horizon when applying
Directors assess the prospects of the Company over a defined its investment strategy of 10 years however, projecting longer
period, the Board has evaluated the long-term prospects of the term financial and economic scenarios presents difficulties and
Company beyond the twelve month time horizon assumption therefore making five years the period of assessment is considered
within the going concern framework taking account of the longer more appropriate.
term investment strategy of the Company. Details of how that
Relations with Stakeholders
assessment has been undertaken are set out below.
Although the Company is domiciled in Guernsey, the Board has
The Board undertakes a robust risk assessment of the principal
considered the guidance set out in the AIC Code in relation to
and emerging risks, detailed on pages 33 and 34, facing the
section 172 of the Companies Act 2006 in the UK. Section 172
Company but believes that a sudden or prolonged downturn in
of the Companies Act requires that the Directors of a Company
global economies is the most significant risk facing the Company.
must act in the way they consider, in good faith, would be most
Such a downturn could significantly affect valuations of the
likely to promote the success of the Company for the benefit of its
Company’s investments and its net asset value as well as
stakeholders as a whole and in doing so have regard (amongst
impacting liquidity since the Company may not be able to realise
other matters and to the extent applicable) to:
its investments at a reasonable price. The Board believes the
Company would still be viable during such a downturn, similar (a) the likely consequences of any decision in the long term;
to that seen in the early part of the COVID-19 pandemic, since
(b) the interests of the Company’s employees;
it does not have any long-term gearing obligations which might
(c) the need to foster the Company’s business relationships with
require immediate repayment or has any obligation to pay
suppliers, customers and others;
dividends. The Company also holds a well-diversified portfolio of
investments in various industries in order to minimise the impact (d) the impact of the Company’s operations on the community
of any economic shock. Specific leverage and liquidity testing was and the environment;
conducted during the year, including consideration of the risk of
(e) the desirability of the Company maintaining a reputation for
further market deterioration resulting from the Russian invasion
high standards of business conduct; and
of Ukraine and the ongoing COVID-19 pandemic. The stress
(f) the need to act fairly between stakeholders of the Company.
testing did not indicate any matters of concern.
10 Annual Report 2023
Strategic Report
In this context and having regard to Schiehallion being an Managers and raise questions and concerns. The Chairperson is
externally managed investment company with no employees, available to meet with shareholders as appropriate independently
the Board considers that the Company’s key stakeholders are of the Managers. The Managers communicate regularly with
its existing and potential new shareholders, its externally- current and potential shareholders and their representatives,
appointed managers, Baillie Gifford & Co Limited, and other reporting their views back to the Board. Directors can also attend
service providers (Administrator, Corporate Broker, Registrar, investor presentations, in order to gauge sentiment first hand.
Auditor and Depositary), as well as wider society and the Investors may also communicate with members of the Board at
environment. any time by writing to them at the Company’s registered office or
to the Company’s broker. These communication opportunities
Great importance is placed by the Board on communication
help inform the Board when considering how best to promote the
with shareholders as described in Relations with Shareholders
success of the Company for the benefit of all stakeholders over
on page 34.
the long term.
The Board seeks to engage with its managers and other service
In addition to ensuring that the Company’s stated investment
providers in a collaborative and collegiate manner, with open and
objective was being pursued, key decisions and actions during
respectful discussion and debate being encouraged, whilst also
the year which have required the Directors to have regard to
ensuring that appropriate and regular challenge is brought and
applicable section 172 factors include:
evaluation is conducted. The aim of this approach is to enhance
service levels and strengthen relationships with the Company’s — the appointment of Lintstock to carry out an external
third-party service providers with a view to ensuring the interests performance evaluation of the Board as a whole and its
of the Company’s shareholders are best served by keeping cost committees (see page 33 for further information): and
levels proportionate and competitive, by maintaining the highest
— the annual evaluation of all service providers and review
standards of business conduct and by upholding the Company’s
of their remuneration.
values.
Employees, Human Rights and Community Issues
Whilst the Company’s operations are limited (with all substantive
The Board recognises the requirement to provide information
operations being conducted by the Company’s third-party service
about employees, human rights and community issues. As the
providers), the Board is aware of the need to consider the impact
Company has no employees, all its Directors are non-executive
of the Company’s investment strategy and policy on wider society
and all its functions are outsourced, there are no disclosures to
and the environment. The Board considers that its oversight of
be made in respect of employees, human rights and community
Environmental, Social and Governance (‘ESG’) matters is an
issues.
important part of its responsibility to all stakeholders and that
proper consideration of ESG considerations are factored into the Gender and Ethnic Representation
Investment Manager’s decision making process and described by
The Board comprises five Directors, two women, including the
the Investment Manager as follows:
Chairperson who is from an ethnic minority background, and
The Investment Manager is often asked how Environmental, three men. The Company has no employees. The Board’s policy
Social and Governance (‘ESG’) considerations are factored into on diversity is set out on page 32.
our investment thinking. Schiehallion does not have an explicit
Environmental, Social and Governance Policy
ESG mandate, but these questions are still woven through our
Details of the Company’s policy on socially responsible investment
research. There is a common perception that ESG analysis is
can be found under Corporate Governance and Stewardship on
somehow distinct from fundamental business analysis. This might
page 16.
be true over short time periods, but over our time horizon of ten
years and beyond, these two types of analysis converge. How a The Company makes efforts to hold board meetings virtually and
business is run, its impact on broader stakeholders, and the provide reports digitally, to limit non-essential travel and usage of
perception of whether it is a force for good or ill, will come to have paper. All publicly available documentation produced is made
a direct impact on the growth prospects of a given business, just available digitally.
as much as the business’s competitive advantage and margin
The Company considers that it does not fall within the scope of
structure. In our research framework, we ask of every company
the Modern Slavery Act 2015 (‘the Act’) and it is not, therefore,
‘What is your impact on society?’. We ask this question, not to
obliged to make a slavery and human trafficking statement. In any
satisfy some abstract ESG criteria, but because it unlocks insight
event, the Company considers its supply chains to be of low risk
into long-term opportunities and risks for companies.
as its suppliers are typically professional advisers. A statement by
The Board recognises the importance of keeping the interests of the Investment Manager under the Act has been published on the
the Company’s shareholders, and of acting fairly towards them, Investment Manager’s website at bailliegifford.com.
firmly front of mind in its key decision making and the Investment
Future Developments of the Company
Manager is at all times available to the Board to ensure that suitable
The outlook for the Company for the next twelve months is set
consideration is given to the range of factors to which the Directors
out in the Chairperson’s Statement on page 4 and the Investment
should have regard. The Annual General Meeting provides the key
Manager’s Review on page 13.
forum for the Board and Managers to present to shareholders on
the Company’s performance, future plans and prospects. It also
allows shareholders the opportunity to meet with the Board and
The Schiehallion Fund Limited 11
Strategic Report

## Investment Manager's Review

The role of the annual Investment Managers' review is to look both backwards and forwards. Looking backwards, we are disappointed with what we delivered for shareholders over the last 12 months. However, looking forward to 2023 and beyond, we feel a sense of profound optimism for the portfolio and new opportunities.

### Performance

Our aspiration is to generate a net return for the Company of approximately three times invested capital over rolling 10 year periods, measured on the basis of NAV total return on the portfolio. During the year to 31 January 2023, the NAV total return of the ordinary shares and the C shares was negative 24.5% and negative 18.4% respectively. The path to long-term capital growth is never straight, and periods of volatility and underperformance are inevitable. However, even in this context, 2022 was a year in which we stepped backwards rather than forwards. We are conscious that this has been particularly felt by newer investors, who did not experience the strong performance of the ordinary shares in the previous two financial years.

Across The Schiehallion Fund, poor NAV performance was driven by significant declines in the value of our holdings that had entered the public markets, markdowns in the carrying values of our private company investments due to reductions in the valuations of comparable public companies and indices, and poor operational performance from some portfolio companies. Pain for both ordinary and C shareholders was exacerbated by share price swings from significant premiums to NAV to discounts to NAV.

### Portfolio

Whilst we can feel gloomy looking at investment returns over the last 12 months, we only need to look at the companies in The Schiehallion Fund to start feeling more optimistic. We believe shareholders' capital is invested in some of the best private companies in the world, capable of delivering outsized investment returns over the long run. This is not without risk, or even in some cases, controversy. As we exited 2022, the five largest holdings were SpaceX, Scopely, ByteDance, Solugen, and Wise. It would be hard to imagine a more diverse set of businesses than those making money selling access to space, virtual in-game goods, advertising, speciality chemicals, and foreign exchange. In each of these companies, there are strong founders, robust competitive advantages, and huge addressable markets. The average growth rate of these companies was approximately 50% and three of the five are profitable.

It is not just at the top end of the portfolio where the quality of companies and the scale of potential upside gives us real optimism. Looking at the whole portfolio, the average revenue growth rate was just over 50%† in the last 12 months. Holdings such as Databricks are helping organisations use advances in AI to improve their use of data to inform product development and decision-making. Away, a direct-to-consumer luggage business, has seen a significant upswing in its business after a tough time during Covid-19. McMackler, a digital German real estate broker, is weathering a tough operating environment but (we believe) taking significant share from its competitors. We hope the extra detail around portfolio companies included in the review of investments on pages 17 to 24 will help convey this excitement and optimism to shareholders.

Of course, some companies met challenges in 2022. Consumer-facing companies that saw leaps forward in demand in 2020–2022 saw growth rates come back as consumer spending retrenched, and they started to lag those big increases. We saw this in companies such as Affirm, Warby Parker, Masterclass and Pet Circle. Epic Games faced another kind of challenge in a large fine by the FTC for historical issues around online child protection and payment practices. These issues have long since been rectified, but it was nevertheless short of the standards we expect of our companies.

### Investing in Late-stage Private Companies

We typically invest in late-stage private companies that are scaling up and becoming profitable. At the stage we invest, founders are no longer looking for the operational support traditional venture capital firms offer. Instead, we provide long-term patient capital to fund further expansion, often holding businesses after they have listed on public markets, to capture their full growth potential.

One of the benefits of investing in late stage private companies is that these companies tend to have well-established financing teams and diversified banking relationships. This benefit was evident during the recent uncertainty in the banking sector. We engaged with all the private companies in our portfolios to help better understand their banking relationships and any potential impacts. The vast majority of investee companies had no material exposure to Silicon Valley Bank. In addition, we were reassured by the Federal Reserve's announcements that deposits would be accessible and that affected companies were able to access their deposits and continue with business as usual.

### Deployment

2022 was also a frustrating year for deployment. Our universe has no shortage of attractive companies, but we made fewer investments in the last 12 months than in any year since inception. Three factors drove this. Firstly, many good companies chose not to raise due to adverse market conditions. Secondly, there was often a mismatch between companies' valuation expectations and what we believed reflected market conditions. This led to us walking away from opportunities after deep diligence based on price. Finally, in one notable instance where we found a good business at a compelling price, misalignments uncovered in our legal due diligence process caused us to walk away from the investment.

The net result was that deployment from the C-Share pool was slower than anticipated.

During the year, we invested in two new companies, Kepler Computing and Merlin Labs; further information on each is included in the review of investments. We also added to existing investments in Loft, Northvolt, Affirm, Brex, Databricks, Faire Wholesale, Solugen, Tempus and Ver Se. As at 31 January 2023, approximately 79% of C share proceeds had been deployed.

†Alternative performance measure, see Glossary of Terms and Alternative Performance Measures on pages 72 and 73.

12 Annual Report 2023
Strategic Report
Looking Forward
From a deployment perspective, 2023 has got off to a good start.
We are currently in deep diligence on companies in the US, China,
Italy, and Israel. In all these instances, price realism exists,
sometimes at valuations below previous rounds. We believe
normalising down rounds is essential for high-growth private
markets. Far from viewing it as a marker of failure, we applaud
those founders and boards willing to adjust their expectations to
market norms. We have more respect for those companies that
raise rounds at lower valuations than those that use artificial means
to maintain valuations set in an environment that no longer exists.
Most of the capital we have deployed from Schiehallion has been
primary investment into companies. Companies create and issue
new shares, with the capital we use to buy them going directly
onto the companies’ balance sheets. This is our preferred means
of investment as it gives companies extra resources to fund their
growth. Put another way, the investment itself favourably twists the
odds and magnitude of success. This contrasts with secondary
investment, where shares are bought from existing investors, with
none of the capital going to the company’s benefit in the same
direct manner. Our preference has always been, and will continue
to be, for primary over secondary investment, but in the current
environment, we are seeing some compelling secondary
opportunities that are too good to ignore. Early investors at the
end of their fund life are coming under pressure to realise gains
and return capital to their clients. This is giving rise to a spike in
the supply of shares in private companies, with a corresponding
decline in the price at which we can buy these shares. We have
been more actively exploring this market in conjunction with our
dealing team. Though we have not yet transacted in this manner,
we see it as an extra string to our bow that, over time, has the
potential to broaden the opportunity set for The Schiehallion Fund.
We want to finish by thanking shareholders for their support in 2022.
As we look into 2023, we see strong reasons for optimism for both
our existing holdings and new opportunities. Our proposition around
long-termism and alignment with companies is more relevant
today than it ever had been and we maintain our conviction that
this will lead to attractive returns for shareholders.
Peter Singlehurst
27 March 2023
The Schiehallion Fund Limited 13
Strategic Report
### Valuing Private Companies
We hold our private company investments at ‘fair value’ i.e.,
The Schiehallion Fund*
the price that would be received to sell an asset or paid to
transfer a liability in an orderly transaction between market Instruments valued 451
participants at the measurement date. Valuations are adjusted Instruments held 74
both during regular valuation cycles and on an ad hoc basis in
Percentage of portfolio revalued up to 4 times 18.9%
response to ‘trigger events’. Our valuation process ensures that
Percentage of portfolio revalued 5 or more times 81.1%
private companies are valued in both a fair and timely manner.
* Data reflecting year to 31 January 2023.
The valuation process is overseen by a valuations committee at
Baillie Gifford which takes advice from an independent third party During the year, most valuations have resulted in decreases.
(S&P Global). The Baillie Gifford valuations committee is
Valuation movements †
independent from the portfolio managers, as well as Baillie Gifford’s
Private Companies Specialist team, with all voting members being Average movement per instrument (16.7%)
from different operational areas of the firm, and the portfolio Average mark-down per instrument (28.1%)
managers only receive final valuation notifications once they have
Average movement at private company level (28.5%)
been applied.
Average mark-down at private company level (40.6%)
We revalue private company investments on a three-month rolling
† Alternative performance measures, see Glossary of Terms and Alternative
cycle, with one-third of the holdings reassessed each month.
Performance Measures on pages 72 and 73.
For Schiehallion, and our investment trusts, the prices are also
Share prices have decreased less than headline valuations
reviewed twice per year by the respective boards and are subject
because Schiehallion typically holds preference stock, which
to the scrutiny of external auditors in the annual audit process.
provides downside protection. The share price movement reflects
Recent market volatility has meant that recent pricing has moved
a probability weighted average of both the regular valuation,
much more frequently than would have been the case with the
which would be realised in an IPO, and the downside protected
quarterly valuations cycle.
valuation, which would normally be triggered in the event of a
Beyond the regular cycle, the valuations committee also monitors
corporate sale or liquidation.
each of the private company investments for certain ‘trigger
events’. These may include changes in fundamentals; a takeover
approach; an intention to carry out an Initial Public Offering (‘IPO’);
or changes to the valuation of comparable public companies.
The valuations committee also monitors relevant market indices
on a weekly basis and updates valuations in a manner consistent
with our external valuer’s (S&P Global) most recent valuation
report where appropriate. When market volatility is particularly
pronounced the team do these checks daily. Any ad hoc change
to the fair valuation of any holding is implemented swiftly and
reflected in the next published NAV. There is no delay.
14 Annual Report 2023
Strategic Report
### Approach to Environmental, Social and Governance Considerations (‘ESG’)
The environmental, social and governance considerations at play when Baillie Gifford’s Private Companies Team researches late-stage
private companies.
ESG In Our Philosophy ESG In Our Process
Over our long-term horizon, we believe there is a convergence The Private Companies Team structures our research into potential
between what is good for a business and what is good for the world investments by using a proprietary ‘10 Questions’ research
at large. The conventional wisdom that there is tension between framework. These questions aim to address issues such as the
profitability and doing the right thing is based on short-term thinking. scale of the opportunity, the competitive edge and potential
Over our investment horizon, we believe profitability depends not returns, whilst others focus specifically on ESG related topics.
only on a company’s ability to serve customers well but also on its
Question Four (‘How does the company’s culture help it achieve
ability to do this without jeopardising its social licence to operate.
the leadership’s long-term business vision?’) asks about the
As such, we don’t break out consideration of a company’s role stakeholders within a firm, the culture within the workplace, and
in the broader system from our core investment work, under ESG whether it cultivates a healthy organisational mindset capable of
or any other rubric. These considerations are core to long-term delivering the mission. We have declined companies in the past
investing. It is the long-term nature of the growth ambition within based on negative behaviours toward staff as part of this question.
our investment philosophy that causes us to pay special attention to Meanwhile, Question Five asks about external stakeholders
the positive and/or negative externalities produced by a company’s (‘Do the company’s customers like them?’). This question is
operations. Over five-year-plus periods, these can have profound geared towards ecosystem impact in terms of opportunities and
impacts on a company’s relationship with customers, regulators potential strengths, not just uncovering risks. Question Six explores
and staff. They can hugely help or hinder the growth of a business. the E and S of ESG in greater depth (‘How do environmental and
social factors create opportunities and risks?’).
This is not about being a moral conscience for our clients. Rather,
it is a vital part of practising the philosophy that we believe will grow Ultimately, this approach enables us to explore the inevitable grey
the value of their capital over the long term. areas. Companies, like economies, are complex ecosystems.
Judging such a system as ‘good’ or ‘bad’ based on a single metric
or factor strikes us as profoundly unwise. Factors must be weighed
together. Consideration must be subjective and nuanced. The key
data points are inherently qualitative. We would be doing our clients
and our companies a disservice if we portrayed it as anything else.
The Schiehallion Fund Limited 15
Strategic Report
### Baillie Gifford Statement on Stewardship
Reclaiming Activism for Long-Term Investors
Baillie Gifford’s over-arching ethos is that we are ‘actual’ investors. We have a responsibility to behave as supportive and constructively
engaged long-term investors. We invest in companies at different stages in their evolution, across vastly different industries and
geographies and we celebrate their uniqueness. Consequently, we are wary of prescriptive policies and rules, believing that these
often run counter to thoughtful and beneficial corporate stewardship. Our approach favours a small number of simple principles
which help shape our interactions with companies.
### Our Stewardship Principles for Public Companies
Prioritisation of Long-term Value Creation Fair Treatment of Stakeholders
We encourage company management and their boards to be We believe it is in the long-term interests of companies to maintain
ambitious and focus their investments on long-term value creation. strong relationships with all stakeholders, treating employees,
We understand that it is easy for businesses to be influenced by customers, suppliers, governments and regulators in a fair and
short-sighted demands for profit maximisation but believe these transparent manner. We do not believe in one-size-fits-all governance
often lead to sub-optimal long-term outcomes. We regard it as our and we recognise that different shareholder structures are appropriate
responsibility to steer businesses away from destructive financial for different businesses. However, regardless of structure,
engineering towards activities that create genuine economic value companies must always respect the rights of all equity owners.
over the long run. We are happy that our value will often be in
Sustainable Business Practices
supporting management when others do not.
We look for companies to act as responsible corporate citizens,
A Constructive and Purposeful Board working within the spirit and not just the letter of the laws and
We believe that boards play a key role in supporting corporate regulations that govern them. We believe that corporate success
success and representing the interests of minority shareholders. will only be sustained if a business’s long-run impact on society
There is no fixed formula, but it is our expectation that boards and the environment is taken into account. Management and
have the resources, cognitive diversity and information they need boards should therefore understand and regularly review this
to fulfil these responsibilities. We believe that a board works best aspect of their activities, disclosing such information publicly
when there is strong independent representation able to assist, alongside plans for ongoing improvement.
advise and constructively test the thinking of management.
Long-Term Focused Remuneration with Stretching
Targets
We look for remuneration policies that are simple, transparent and
reward superior strategic and operational endeavour. We believe
incentive schemes can be important in driving behaviour, and
we encourage policies which create alignment with genuine
long-term shareholders. We are accepting of significant pay-outs
to executives if these are commensurate with outstanding
long-run value creation, but plans should not reward mediocre
outcomes. We think that performance hurdles should be skewed
towards long-term results and that remuneration plans should be
subject to shareholder approval.
16 Annual Report 2023
Strategic Report
### Review of Investments
### A review of the Company’s top ten investments as at 31 January 2023 is given below.
What Does It Do? Why We Like It Update
SpaceX designs, By fully embracing SpaceX continues to make impressive progress in its
manufactures and innovation and vertical mission. The company is close to finalising Starship,
## SPACEX

| launches rockets | integration, SpaceX | a fully reusable spacecraft designed to carry crew and |
| --- | --- | --- |
| and spacecrafts. | has opened up a series | cargo that NASA has selected to land astronauts on the |
|  | of cost and capability | moon. Starship is SpaceX’s next step from the five |
|  | improvements which | operational crew launches the company has achieved |
|  | are transforming the | with NASA and eight in total in the last two years. |
|  | space industry. SpaceX | SpaceX has now launched more than 3,300 satellites for |
|  | is methodically moving | its Starlink service and used its Falcon 9 rocket to launch |
|  | closer to its vision of | satellites for communications providers OneWeb, and |
|  | making humanity an | Eutelsat in the last few months. This impressive operational |
|  | interplanetary species. | performance has led to continued strength in the |

company’s share price even amongst weaker market
performance.
© SpaceX.
Scopely is a Scopely is rapidly Scopely has grown steadily since our initial investment
private becoming the partner in 2019 and the share price has held up well in 2022 due
## SCOPELY

| independent | of choice for intellectual | to continuing demand and the clear desire of companies |
| --- | --- | --- |
| publisher of | property owners to | such as Microsoft and Sony to acquire and grow the |
| interactive | monetise their content | gaming side of their businesses. Scopely continued to |
| entertainment for | without devaluing their | invest to grow the business in 2022, most notably acquiring |
| both casual and | brand. | Stumble Guys in September as well as other local gaming |
| committed gamers. |  | studios. Its acquisition of GSN games from Sony, in the |

previous year, has driven revenue growth and improved
margins, which it looks to further enhance by expanding
beyond mobile to web and PC platforms, thereby avoiding
the high commission rates charged by Google and Apple
and expanding each game’s potential market.
ByteDance ByteDance’s unique ByteDance continues to show impressive operational
is the Chinese culture of innovation performance amidst headwinds which have weighed
## BYTEDANCE

| technology | has led to the incredible | on technology company valuations in China, such as the |
| --- | --- | --- |
| developer behind | growth of users across | ongoing geopolitical tensions with the U.S. and Europe |
| short-form video | its platform, both in | ByteDance’s daily and monthly active users have grown |
| platforms Douyin | China and worldwide. | across its platform, including short-form video apps, TikTok |
| and TikTok and | Despite its significant | and Douyin and its news app Toutiao. Rising user numbers |
| news aggregator | scale, its under- | and engagement led to 70% revenue growth in 2021, |
| Toutiao. | monetised user base | continued growth in 2022, and a positive cash flow |
|  | and continually improving | position. Although we have seen evidence of an active |
|  | customer experience | secondary market for ByteDance shares and some |
|  | leave it positioned to | company buybacks at a lower valuation, the opportunity |
|  | continue to grow. | remains strong, having yet to fully monetise TikTok, one of |

the most visited internet sites in the world.
© AFP/Getty Images.
Solugen is a Solugen is pioneering Since our initial investment in 2021, Solugen has continued
synthetic biology a revolutionary to make meaningful progress in its bid to scale up synthetic
## SOLUGEN

| and chemicals | approach which has | biology and bring greener chemicals to the world. Solugen |
| --- | --- | --- |
| company. It | the potential to make | has performed well over the last year, enabling them to raise |
| designs and | chemicals at much | capital at a higher valuation despite the difficult fundraising |
| manufactures | better yields, costs | environment. Solugen has strong demand both for its |
| enzymes to use | and environmental | chemical sales, having shipped more than 50m pounds of |
| together with | footprints than | products in 2021 and for the use of its original 10 kilotons |
| catalysts to | traditional processes. | per annum (‘KTA’) Bioforge in Houston. The company |
| transform |  | hopes to reach 250KTA of capacity in the next five years. |
| feedstock into |  | Solugen also has continued to produce new molecules, |
| finished chemicals. |  | with four in 2021 and the announcement of its new glucaric |

molecules in 2022. Increasing capacity not only unlocks
chemical demand but should also enable it to accelerate
© Solugen.
new molecule production in the next few years.
The Schiehallion Fund Limited 17
Strategic Report
What Does It Do? Why We Like It Update
Wise is an Wise’s integrated Wise has delivered exceptional progress since our initial
international platform and lower investment in 2019, with payment volumes growing from
## WISE

| money transfer | cost base allow it to | c.$10bn in 2016 to a predicted c.$100bn for FY 2022, |
| --- | --- | --- |
| business. | not only charge lower | with expected revenue growth of c.70%. Wise now has |
| It enables customer | transaction fees and | over 5.8m users on its platform who continue to increase |
| and business | improve the user | their payment volumes, underlining the value it delivers to |
| payments that | experience but | its customers based on price, speed, convenience and |
| eliminate | establish itself as | transparency. To maintain its lead, Wise continues to |
| intermediaries | an infrastructure layer | invest to improve its platform and add new features such |
| and minimise | for a growing foreign | as ‘interest’ for UK customers, removing fees for certain |
| transaction costs. | exchange market. | domestic transfers in Europe and improving pay-ins for |

businesses. Even after this investment, the company is
highly profitable and cash generative and well poised to
continue to expand market share in a growing market.
© Shutterstock/rarrarorro.
Listed – July 2021
Northvolt operates Still in the early innings Northvolt now has over $55bn in orders from car
lithium-ion battery of the energy transition, manufacturers such as BMW, Polestar and Volkswagen
## NORTHVOLT

| plants intended to | moving away from | to deliver on, in addition to the implementation of its |
| --- | --- | --- |
| produce eco- | fossil fuel cars is a | large-scale battery recycling program. To satisfy the rapidly |
| friendly batteries | vast and long growth | expanding demand for electric vehicles, Northvolt raised |
| for electric vehicles. | opportunity, with | $1.1bn in the summer to finance the continued expansion |
|  | batteries the critical | of battery cell and cathode production in Europe. However, |
|  | enabler of change. | due to the European energy cost crisis, the company are |
|  | Northvolt’s excellent | considering whether to delay its plans to build a third facility |
|  | team, focus on | in Heide, Germany, to potentially expand to North America |
|  | sustainability and | first, where it believes it could build batteries for between |
|  | commitments from | 30%–40% less. Northvolt also continues to innovate in its |
|  | manufacturers leave it | use of sustainable materials. It announced an agreement |
|  | well-positioned against | with Stora Enso to produce a battery anode made from |

© Northvolt
its rivals. Lignin, a plant polymer derived from Nordic forest wood.
Brex provides Today’s system of tools Brex recently decided to move away from small businesses
credit cards, for a business to raise, to focus on institutionally backed and scaled companies.
## BREX

| current accounts | manage and spend | It also continues to evolve its software platform, introducing |
| --- | --- | --- |
| and cash | money is often a | spending management tools, an international payroll |
| management | disjointed, expensive | system and enhanced customisation of financial data in the |
| software to | and frustrating | last year. Its work here is bearing fruit as its card and spend |
| underserved | experience. With Brex’s | management solution, Empower, crossed $3bn annualised |
| growing | business model and | processing volume in its first three months of going live. |
| businesses. | customer alignment, | Brex announced in October that it had laid off 11% of its |
|  | they can expand to | workforce, showing the company is not immune to the |
|  | provide every service | challenging macroeconomic environment, which has also |
|  | a growing business | caused weakness in its share price due to a fall in the |
|  | needs in an integrated | valuation of its fintech peers in public markets. |

and cheaper fashion.
18 Annual Report 2023
Strategic Report
What Does It Do? Why We Like It Update
Daily Hunt is With internet and Daily Hunt’s high-quality, specialised content and
the developer of smartphone penetration recommendation engine continue to drive growth for the
## DAILY HUNT
content and video increasing steadily, Daily business. It continues to hit new highs in terms of both the
platforms for local Hunt serves a rapidly number of users and engagement across its platform of
## (VER SE)

| language internet | growing population of | apps. It has also announced plans to expand into the Middle |
| --- | --- | --- |
| users in India. | 500m local language | East, its first foray into the global market and an area of close |
|  | users and an evolving | cultural alignment with its core Indian user base. This should |
|  | advertising market. | provide a chance to boost user and revenue growth further |
|  | The company’s local | alongside the long-term structural opportunities presented |
|  | content creator network | in India. Daily Hunt is sharpening its focus on profitability, |
|  | and personalisation | announcing both headcount cuts across its workforce and |
|  | algorithms leave it in | more disciplined sales and marketing expenditure without so |
|  | a strong position to | far affecting its revenue generation. The company is well |
|  | delight users and add | positioned, with its video platform app, Josh, growing quickly |
|  | new products. | without yet being properly monetised and its news app, |

Daily Hunt, performing well.
Affirm is a digital Consumer loans and Affirm’s share price has been hit hard recently amidst
financial services credit card markets, a broader sell-off in consumer credit companies due to
## AFFIRM

| company that | reliant on late fees | worsening inflation, rising interest rates and growing |
| --- | --- | --- |
| offers simple, | and opaque charging | recession fears. Affirm had previously experienced rapid |
| transparent and | structures, are ripe for | share price growth during the pandemic. Despite the |
| affordable | disruption. Affirm’s | challenging environment, it continues to grow, with its |
| consumer loans to | proprietary credit | gross merchandise value (GMV) and revenue increasing |
| buy anything from | checking model, | 62% and 34%, respectively, year on year. Higher interest |
| electronics to | better user experience | rates are impacting funding costs and margins, but |
| home furnishings | and honest approach | reassuringly, Affirm’s delinquency rates have remained |
| and holidays. | create the foundation | stable and below pre-pandemic levels, validating their |
|  | to integrate themselves | proprietary credit checking model, which should continue |
|  | into the financial lives | to improve. The management team is confident in the |
|  | of customers and | company’s ability to disrupt incumbent credit card |
|  | merchants. | companies and help its merchant partners with improved, |

cost-effective customer acquisition. We added to our
position in Affirm in 2022 on share price weakness.
Genki Forest Genki has anticipated Previously reliant on third-party manufacturers, Genki has
is a fast-growing consumer demand recently raised money to expand its own manufacturing
## GENKI
beverage company for healthy and new capabilities with six self-built factories now operational
in China, mainly products with its rapid across China. It also has a vast distribution network,
## FOREST

| offering sugar-free | data-driven product | cooperating with over 1,000 dealers in 2021. China’s zero |  |
| --- | --- | --- | --- |
| sparkling water | development process, | covid policy during the pandemic has impacted Genki’s | TECHNOLOGY |
| and ready-to-drink | particularly for China’s | growth domestically and the resultant supply chain |  |
| teas. | 400m Gen Z customers. | disruption has also impaired overseas expansion plans. |  |
|  | This scalable formula, | Competitors are also increasingly encroaching on their |  |
|  | married with its | turf, with many releasing new health-orientated beverages |  |
|  | experimental distribution | and trying to push Genki out of their expanding offline |  |
|  | approach, could lead | distribution channels. Despite the competition locally, |  |
|  | it to establish itself as | pandemic restrictions easing should allow Genki to |  |
|  | China’s version of | continue to grow internationally, with the company now |  |

© VCG/Getty Images.
Coca-Cola. selling its products in more than 40 countries globally.
The Schiehallion Fund Limited 19
Strategic Report
### A review of the Company’s new investments made during the year to 31 January 2023
### is given below.
When Who Why How
Baillie Gifford first Kepler Computing is a Kepler Computing aims to be Baillie Gifford
invested in Kepler semiconductor company, a new type of semiconductor sourced Kepler
## KEPLER
Computing in July founded in 2018 to develop next company combining elements Computing through
2022 (Schiehallion generation memory and CPU of ARM’s licensing model with its proprietary
## COMPUTING

| – July 2022). | chips based on a ferroelectric | the manufacturing and materials | network, with an |
| --- | --- | --- | --- |
|  | material. In contrast to many | expertise of a TSMC or Intel. | introduction from |
|  | other semiconductor startups, | In the shorter term, the | Gates Frontier and |
|  | the idea is not to provide a new | technology could help relieve | Addition. |
|  | chip architecture, but to go one | the current supply chain |  |
|  | level deeper and rethink the | constraints in the semiconductor |  |
|  | underlying units that a chip | industry. In the longer term, |  |
|  | architecture is composed of. | it would be adopted by leading |  |

edge incumbents and second-
Developer of a next-generation
tier foundries.
computing technology.
Baillie Gifford first Merlin Labs is building a system Merlin Labs is focused on Baillie Gifford
invested in Merlin that will enable aircraft to fly crew reduction rather than full sourced Merlin Labs
## MERLIN
Labs in April 2022 themselves. Making use of autonomy, which is unique in the directly, with an
(Schiehallion off-the-shelf hardware and industry and has allowed Merlin introduction coming
## LABS

| – April 2022). | innovative proprietary software, | Labs to make significant progress | from Google |
| --- | --- | --- | --- |
|  | Merlin Labs has been able to | with the regulators. The fully- | Ventures. |
|  | build a capable, reliable and | burdened cost of a commercial |  |
|  | certifiable AI pilot. | airline pilot to a large airline is up |  |

to $500,000 per year, so the
possibility of reducing the number
of pilots required on a flight from
© Merlin Labs.
two (or more) down to just one
makes for a very attractive
Manufacturer of autonomous flying
product offering.
technology.
20 Annual Report 2023
Strategic Report
### List of Investments as at 31 January 2023
2023

|  |  |  | Ordinary |  |  | 2023 |  |  | 2023 |  | 2022 |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
|  |  |  |  | shares | C shares |  |  | 2023 | % of |  | Total |
|  |  |  |  | value |  | value | Total value |  | net |  | value |
| Name | Business | Country | US$’000 |  | US$’000 |  | US$’000 |  | assets | US$’000 |  |
| Space Exploration | Designs, manufactures and launches |  |  |  |  |  |  |  |  |  |  |
| Technologies Corp | advanced rockets and spacecraft United States 70,113 – 70,113 6.1 50,992 |  |  |  |  |  |  |  |  |  |  |

Scopely Inc Online gaming company United States 60,223 – 60,223 5.2 47,918
ByteDance Ltd Social media and news aggregation
company China 49,808 – 49,808 4.3 58,378
Solugen Inc Combines enzymes and metal
catalysts to make chemicals United States – 47,881 47,881 4.2 28,129
Wise PLC – Listed Online platform to send and receive
money United Kingdom 30,112 10,009 40,121 3.5 48,644
Northvolt AB Lithium ion battery manufacturer Sweden 22,525 16,280 38,805 3.4 30,975
Brex Inc Corporate credit cards for startups United States 11,292 24,441 35,733 3.1 15,709
Daily Hunt (Ver Se Telephone voice, data, text
Innovation Limited) messaging, and roaming services India 32,032 – 32,032 2.8 33,236
Affirm Holdings Inc – Online platform which provides point
Listed of sale consumer finance United States 14,437 17,427 31,864 2.8 57,033
Genki Forest Technology
Group Holdings Limited Non-alcoholic beverages China – 29,727 29,727 2.6 33,000
Faire Wholesale Inc Online wholesale marketplace United States – 29,404 29,404 2.6 36,703
Epic Games Inc Video game developer United States 28,320 – 28,320 2.5 29,013
Stripe Inc Online payment platform United States 27,943 – 27,943 2.4 45,046
Chime Financial Inc Digital current account provider United States 7,417 19,294 26,711 2.3 44,357
Flix SE European mobility provider Germany 13,309 13,356 26,665 2.3 21,865
McMakler GmbH Real estate services Germany – 24,621 24,621 2.1 28,583
Tempus Labs Inc Oncological records aggregator and
diagnostic testing provider United States 20,177 4,210 24,387 2.1 27,089
Databricks Inc Data software solutions United States – 23,523 23,523 2.0 24,766
Grammarly Inc Online platform for checking
grammar, spelling and improving
written communication United States – 22,353 22,353 1.9 45,002
Nuro Inc Developer of autonomous delivery
vehicles United States 9,100 12,112 21,212 1.8 29,874

| Warby Parker (JAND Inc) – | Online and physical corrective |
| --- | --- |
| Listed | eyewear retailer United States 20,774 – 20,774 1.8 47,868 |
| Rappi Inc | Provider of an on-demand delivery |

platform designed to connect
consumers with local stores United States – 19,922 19,922 1.7 25,542
Workrise Technologies Inc Jobs marketplace for the energy
sector United States 17,073 – 17,073 1.5 25,026
Kepler Computing Inc Semiconductor company United States – 15,919 15,919 1.4 –
Indigo Agriculture Inc Microbial seed treatments to increase
crop yields and grain marketplace United States 15,839 – 15,839 1.4 16,958
Loft Holdings Ltd Online property platform Brazil – 15,569 15,569 1.4 19,223
Merlin Labs Inc Autonomous flight technology United States – 13,842 13,842 1.2 –
The Schiehallion Fund Limited 21
Strategic Report
2023

|  |  |  | Ordinary |  |  | 2023 |  |  | 2023 |  | 2022 |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
|  |  |  |  | shares | C shares |  |  | 2023 | % of |  | Total |
|  |  |  |  | value |  | value | Total value |  | net |  | value |
| Name | Business | Country | US$’000 |  | US$’000 |  | US$’000 |  | assets | US$’000 |  |

Convoy Inc Marketplace for truckers and shippers United States 9,165 4,210 13,375 1.2 17,185
PsiQuantum
Silicon photonic quantum computing United States – 13,195 13,195 1.1 15,000
Jiangxiaobai Holdings Ltd Producer of alcoholic beverages China 12,892 – 12,892 1.1 14,187
Away (JRSK Inc) Travel and lifestyle brand United States 12,355 – 12,355 1.1 11,920
Tanium Inc Online security management United States 11,799 – 11,799 1.0 29,773
Pet Circle (Millell Pty Ltd) Pet food and accessories Australia – 11,357 11,357 1.0 28,182
Wayve Technologies Ltd AI based software for self-driving cars United Kingdom – 9,728 9,728 0.8 16,267
Carbon Inc Manufactures and develops 3D
printers United States 9,670 – 9,670 0.8 12,920
Blockstream Corp Inc Financial software developer United States – 8,885 8,885 0.8 13,937
Graphcore Ltd Computer chip developer United Kingdom 8,706 – 8,706 0.7 16,600
Airbnb Inc – Listed Online market place for travel
accommodation United States 8,544 – 8,544 0.7 11,828
Cohesity Inc Data storage United States 8,033 – 8,033 0.7 11,930
Illumina Inc – Listed Gene sequencing equipment and
consumables United States 7,355 – 7,355 0.6 9,396
Honor Technology Inc Provider of home-care services United States 2,990 3,888 6,878 0.6 12,043
MasterClass (Yanka
Industries Inc) Online education platform United States 6,487 – 6,487 0.6 8,542
Allbirds Inc – Listed Sustainable direct-to-customer
footwear brand United States 4,659 1,459 6,118 0.5 27,600
Oscar Health Inc – Listed Healthcare insurance provider United States 3,157 – 3,157 0.3 5,508
HeartFlow Inc Develops software for cardiovascular
disease diagnosis and treatment United States 2,029 – 2,029 0.2 11,413
Ginkgo Bioworks Holdings Genetic engineering for industrial
Inc – Listed * applications United States 1,085 – 1,085 0.1 3,162
Total securities 559,420 412,612 972,032 84.3 1,148,322
* During the year Zymergen was taken over by Ginkgo Bioworks.
22 Annual Report 2023
Strategic Report
2023

|  | Ordinary |  |  | 2023 |  |  |  |  |  | 2022 |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
|  |  | shares | C shares |  |  | 2023 |  | 2023 |  | Total |
|  |  | value |  | value | Total value |  | % of net |  |  | value |
| Name | US$’000 |  | US$’000 |  | US$’000 |  |  | assets | US$’000 |  |

US Treasury Bill 18/05/2023 – 23,112 23,112 2.0 –
US Treasury Bill 13/07/2023 – 22,874 22,874 2.0 –
US Treasury Bill 07/09/2023 – 22,870 22,870 2.0 –
US Treasury Bill 23/03/2023 – 22,801 22,801 2.0 –
US Treasury Bill 02/11/2023 – 22,630 22,630 2.0 –
US Treasury Bill 28/12/2023 – 22,510 22,510 1.9 –
US Treasury Bill 24/03/2022 – – – – 44,697
US Treasury Bill 16/06/2022 – – – – 44,738
US Treasury Bill 14/07/2022 – – – – 44,786
US Treasury Bill 08/09/2022 – – – – 44,782
US Treasury Bill 03/11/2022 – – – – 44,698
US Treasury Bill 29/12/2022 – – – – 44,515
Total US Treasury Bills – 136,797 136,797 11.9 268,216
Cash 38,872 6,927 45,799 3.9 86,898
Other current assets and liabilities (684) (761) (1,445) (0.1) (30,924)
Net current assets 38,188 142,963 181,151 15.7 324,190
Net assets 597,608 555,575 1,153,183 100.0 1,472,512
Private
Listed company Net current Net
investments investments assets assets
Name % % % %
31 January 2023 10.3 74.0 15.7 100.0
31 January 2022 14.3 63.7 22.0 100.0
### Allocation of Net Assets
As at 31 January 2023
2023

| Ordinary |  |  | 2023 |  | 2023 |  |  |  | 2022 |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
|  | shares | C shares |  |  | Total |  | 2023 |  | Total |
|  | value |  | value |  | value | % of net |  |  | value |
| US$’000 |  | US$’000 |  | US$’000 |  |  | assets | US$’000 |  |

Listed investments 90,123 28,895 119,018 10.3 211,039
Private company investments 469,297 383,717 853,014 74.0 937,283
US treasury bills – 136,797 136,797 11.9 268,216
Cash and cash equivalents 38,872 6,927 45,799 3.9 86,898
Net current assets (684) (761) (1,445) (0.1) (30,924)
Total net assets 597,608 555,575 1,153,183 100.0 1,472,512

|  |  |  |  |  |  | Gross | Gross |
| --- | --- | --- | --- | --- | --- | --- | --- |
|  | Number of |  | Number of |  |  | Internal | Multiple on |
| Capital |  | private |  | private |  | Rate of | Invested |
| deployed | company |  | company |  | Number of | Return | Capital |
| (US$’000) * | acquisitions |  | realisations |  | IPOs/listings | (IRR) * | (MOIC) * |

Company metrics 1,046,802 46 1 7 (2.7%) 1.0
* Alternative performance measure, see Glossary of Terms and Alternative Performance Measures on pages 72 and 73.
The Schiehallion Fund Limited 23
Strategic Report
### Distribution of Net Assets
Ordinary Shares
Geographical as at 31 January 2023 (31 January 2022) Sectoral as at 31 January 2023 (31 January 2022)

|  |  |  |  | Net Current Assets 6.4% | (6.3%) |  |
| --- | --- | --- | --- | --- | --- | --- |
| Net Current Assets | 6.4 | % (6.3%) |  |  |  |  |
|  |  |  | China 10.6% (9.1%) |  |  | Communications Services |

14.9% (12.7%)
Materials 0.2% (0.4%)
India 5.4 % (4.2%) Germany 2.2 % (1.3%)
Sweden 3.8 % (3.0%)
Information
United Kingdom Technology
Consumer
6.4 % (6.7%) 21.0% (18.7%)
Discretionary
11.6 % (14.6%)
Consumer Staples
4.8 % (3.9%)
Industrials
19.9 % (14.2%)
Financials
15.7 % (22.2%)
United States 65.2 % (69.4%) Healthcare
5.5% (7.0%)
The above sectoral distribution is not derived from any index.
C Shares
Geographical as at 31 January 2023 (31 January 2022) Sectoral as at 31 January 2023 (31 January 2022)

|  | Net Current Assets | 1.1 | % (0.9%) |  |  |  |  |  |  |  |  | Net Current Assets | 1.1 | % (0.9%) | Consumer Discretionary |  |  |  |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
|  |  |  |  | Germany |  | 6.8 | % (5.9%) |  |  |  |  |  |  |  | 10.4 | % (11.5%) |  |  |
|  |  |  |  |  | Sweden 2.9% |  |  | (0.9%) |  |  |  |  |  |  |  |  |  |  |
|  |  |  |  |  |  | United Kingdom |  |  | 3.6 | % |  |  |  |  |  |  |  |  |
| US Treasury Bills |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | Consumer Staples |  |
|  |  |  |  |  |  | (4.2%) |  |  |  |  | US Treasury Bills |  |  |  |  |  |  |  |
| 24.7% (39.4%) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 5.4 | % (4.8%) |

24.7% (39.4%)
Financials 12.8 %
(6.1%)

| Australia | 2.0 | % |  |  |  |
| --- | --- | --- | --- | --- | --- |
|  | (4.1%) |  |  | Real Estate | Healthcare |
|  |  |  |  | 7.2% (7.0%) | 1.5% (0.9%) |
|  | Brazil | 2.8 | % |  |  |
|  |  | (2.8%) |  |  | Industrials |

7.8% (4.7%)
Materials 8.6% (4.1%)
China 5.4 %
(Nil) United States
Information
50.7 % (41.8%)
Technology
20.5% (20.6%)
The above sectoral distribution is not derived from any index.
The Strategic Report which incorporates pages 1 to 24 was approved by the Board on 27 March 2023.
Dr Linda Yueh CBE
Chairperson
24 Annual Report 2023
Governance Report

## Directors and Management

Members of the Board come from a broad variety of backgrounds. The Board can draw on a very extensive pool of knowledge and experience.

### Directors

#### Dr Linda Yueh CBE

**Dr Linda Yueh was appointed a Director and Chairperson on 4 January 2019 and is also Chairperson of the Nomination Committee.** Dr Linda Yueh is an experienced Board director, academic economist and adviser on economic policy. She is a fellow in economics at St Edmund Hall, University of Oxford and adjunct professor of economics at London Business School. She was visiting professor at the LSE and visiting professor of economics at Peking University. Dr Yueh is an Adviser to the UK Board of Trade and was a member of the Ring-fencing and Proprietary Trading Review Panel for the UK government. She is also a non-executive director of Rentokil Initial PLC, SEGRO PLC and Standard Chartered PLC. She was previously Senior Independent Director of Fidelity China Special Situations PLC and a non-executive director of Baillie Gifford's flagship Scottish Mortgage Investment Trust PLC and JPMorgan Asian Growth and Income PLC. In the King's New Year Honours List of 2023, Dr Yueh was awarded a CBE for Services to Economics.

#### John Mackie CBE

**Mr John Mackie was appointed a Director on 4 January 2019 and is also the Senior Independent Director.** Following an early career in retail management, Mr Mackie went to the University of Glasgow as a mature student and then qualified as a chartered accountant with Arthur Andersen & Co in Glasgow. He then spent five years with 3i Group before joining Morgan Grenfell Private Equity in 1990 as a founder director. Mr Mackie was made a director of Morgan Grenfell & Co in 1993. From 2000 to 2006, Mr Mackie was chief executive of the British Venture Capital Association and was a partner in Parallel Private Equity LLP until 2011. He was, until 2013, chairman of Henderson Private Equity Investment Trust PLC, until 2014, a director of Baronsmead VCT PLC and, until September 2018, the senior independent director at Mithras Investment Trust PLC. Mr Mackie is currently a partner in Mithras Capital Partners LLP and chairman of the advisory boards at Amadeus and Angels Seed Fund and Amadeus IV Early Stage Fund. In the 2006 New Years Honours list he was awarded a CBE for services to business.

#### Dr David Chiswell OBE

**Dr David Chiswell was appointed a Director on 2 September 2021.** Dr Chiswell has over 30 years' experience in the biotechnology industry. In 1990, Dr Chiswell co-founded Cambridge Antibody Technology and served as its chief executive officer ('CEO') from 1996 to 2002. He served as CEO of Kymab Ltd from 2015 to 2018 and prior to that as CEO of Nabriva Therapeutics from 2009 to 2012. He served as a director of Arakis and non-executive chairman of Sosei, Arrow Therapeutics, Daniolabs, Nabriva Therapeutics and Kymab. Dr Chiswell is currently chairman of Albireo Pharma Inc and, Epsilogen Ltd and a board member of Avillion Bond 2 Development 2 GP. Dr Chiswell is also a past chairman of the UK BioIndustry Association and his contributions to the field were recognised in 2006 when he was awarded the OBE by HM the Queen for services to the biotechnology industry.

#### Trudi Clark

**Ms Trudi Clark was appointed a Director on 4 January 2019 and is also Chairperson of the Audit Committee.** Ms Clark graduated in business studies and qualified as a chartered accountant with Robson Rhodes in Birmingham before moving to Guernsey in 1987. In Guernsey she joined KPMG, where she was responsible for an audit portfolio including some of the major financial institutions in Guernsey. After 10 years in public practice, Ms Clark was recruited by the Bank of Bermuda as head of European internal audit, later moving into corporate banking. In 1995 she joined Schroders in the Channel Islands as CFO and was promoted in 2000 to banking director and in 2003 to managing director. From 2006 to 2009, Ms Clark established a family office, specialising in alternative investments. From 2009 to 2018 she returned to public practice specialising in corporate restructuring services. Since 2018, Ms Clark is audit committee chair of BMO Commercial Property Trust Limited and Taylor Maritime Investments Limited, and a non-executive director of NB Private Equity Partners Ltd where she is a member of the audit committee and chairs the remuneration, nomination and management engagement committees. Ms Clark also holds a personal fiduciary licence issued by the GFSC and acts as non-executive director and consultant to one high net worth family.

#### Richard Holmes

**Mr Richard Holmes was appointed a Director on 2 September 2021.** Mr Holmes completed a BSc in Economics at London School of Economics and then a Masters at Warwick University. He worked in various marketing roles at Unilever in London, Paris and Milan from 1983 to 1995. He then moved to Boots Plc where he was marketing director and launched the Boots Advantage Card and set up Boots.com. In 2007, he moved to Guernsey to join the board of Specsavers Optical Group as group marketing director. He retired from full time work in 2018. He currently holds various non-executive positions, including Lok'nStore Plc, Moorfields Eye Hospital and Citizens Advice Guernsey.

All the Directors are members of the Audit Committee with the exception of Dr Yueh. Dr Yueh stepped down from the Audit Committee in March 2022. All Directors are members of the Nomination Committee.

The Schiehallion Fund Limited 25
Governance Report
Investment Manager
The Company has appointed Baillie Gifford & Co Limited, a
wholly-owned subsidiary of Baillie Gifford & Co, as Investment
Manager and as Alternative Investment Fund Manager (the
‘Investment Manager’). Baillie Gifford and Co Limited has delegated
portfolio management services to Baillie Gifford Overseas Limited.
Baillie Gifford & Co is an investment management firm formed in
1927 out of the legal firm Baillie & Gifford, WS which had been
involved in investment management since 1908.
Baillie Gifford is one of the largest investment trust managers in
the UK and, as well as Schiehallion, currently manages twelve
investment trusts together with investment portfolios on behalf
of pension funds, charities and other institutional clients, both in
the UK and overseas. Funds under management or advice of
Baillie Gifford totalled around £230 billion as at 24 March 2023.
Based in Edinburgh it is one of the leading privately-owned
investment management firms in the UK, with 51 partners.
Baillie Gifford has a dedicated Private Companies investment
team of eight investors. In addition, Baillie Gifford has a further
29 investors who research and invest in both private and public
companies. Baillie Gifford’s Private Company investors are
supported by a team of specialist deal lawyers, valuation analysts
and other operational staff to ensure that the investments are
monitored at all stages from pre-buy to ongoing relations with
the companies.
The portfolio manager of Schiehallion is Peter Singlehurst and
the deputy portfolio manager is Robert Natzler. Peter joined
Baillie Gifford in 2010 and is head of the Private Companies
Team and Robert joined in 2015.
Baillie Gifford & Co Limited, Baillie Gifford & Co and Baillie Gifford
Overseas Limited are all authorised and regulated by the Financial
Conduct Authority.
26 Annual Report 2023
Governance Report

## Directors' Report

The Directors present their Report together with the audited Financial Statements of the Company for the year ended 31 January 2023.

### Listing Status

Since the Company's ordinary shares were admitted to trading on the Specialist Fund Segment of the London Stock Exchange, a regulated market, on 27 March 2019, the Company is subject to the Prospectus Rules, the Disclosure Guidance and Transparency Rules, the Market Abuse Regulation and the London Stock Exchange's Admission and Disclosure Standards.

### Corporate Governance

The Corporate Governance Report is set out on pages 25 to 40 and forms part of this Report.

### Investment Manager

The Company has appointed Baillie Gifford & Co Limited as its Investment Manager (the 'Investment Manager'). As the entity appointed to be responsible for risk management and portfolio management, the Investment Manager has also been appointed as the Company's Alternative Investment Fund Manager ('AIFM'). Baillie Gifford & Co Limited has delegated portfolio management services to Baillie Gifford Overseas Limited. The Investment Management Agreement is terminable on not less than six months' notice. Compensation fees would only be payable in respect of the notice period if termination by the Company were to occur within a shorter notice period. Under the terms of the Investment Management Agreement and with effect from the date the Company's ordinary shares were admitted to trading on the Specialist Fund Segment of the Main Market of the London Stock Exchange, the Investment Manager is entitled to an annual fee of: 0.9% on the net asset value excluding cash or cash equivalent assets up to and including US$650 million; 0.8% on the net asset value excluding cash or cash equivalent assets exceeding US$650 million up to and including US$1.3 billion; and 0.7% on the net asset value excluding cash or cash equivalent assets exceeding US$1.3 billion. Management fees are calculated and payable quarterly.

The Board is of the view that calculating the fee with reference to performance would be unlikely to exert a positive influence on performance.

The Board as a whole fulfils the functions of the Management Engagement Committee. The Board considers the Company's investment management arrangements and administration arrangements (detailed below) on a continuing basis and a formal review is conducted at least annually.

The Board considers, amongst others, the following topics in its review:

- the quality of the personnel assigned to handle the Company's affairs;
- the investment process and the results achieved to date; and
- the administrative services provided by the Investment Manager.

Following the most recent review, it is the opinion of the Directors that the continuing appointment of Baillie Gifford & Co Limited as Investment Manager and AIFM and the delegation of the portfolio management services to Baillie Gifford Overseas Limited, on the

terms agreed, is in the interests of the Company and the shareholders as a whole due to the strength of the investment management team, the Investment Manager's commitment to the investment funds sector and the quality of the administrative function.

### Administrator

Alter Domus (Guernsey) Limited has been appointed as Administrator, Secretary and Designated Manager of the Company (the 'Administrator'). The Administrator is responsible for certain aspects of the day-to-day administration and general secretarial functions of the Company in conjunction with the Investment Manager (including but not limited to the maintenance of the Company's statutory records). The Administrator is entitled to receive a fixed annual fee of £69,900 (exclusive of goods and services tax), payable quarterly in arrears. This fee is subject to an annual increase in line with Guernsey RPI. The Administrator is also entitled to reimbursement of reasonable costs, expenses and disbursements properly incurred.

### Depositary

In accordance with the Alternative Investment Fund Managers Directive, the AIFM must appoint a Depositary to the Company. The Bank of New York Mellon (International) Limited has been appointed as the Company's Depositary. The Depositary's responsibilities include cash monitoring, safe keeping of the Company's financial instruments, verifying ownership and maintaining a record of other assets and monitoring the Company's compliance with investment limits and leverage requirements. The custody function is also undertaken by The Bank of New York Mellon (International) Limited.

### Directors

The names and biographical details of the Board members who served on the Board as at the year end and up to the date the Financial Statements were signed can be found on page 25. The Corporate Governance Code requires that all Directors be subject to annual election by shareholders. As a result, the Directors will retire at the Annual General Meeting on 12 May 2023 and offer themselves for re-election. Following a formal performance evaluation, the Chairperson confirms that the Board members consider that their performance continues to be effective and that they remain committed to the Company. The Board therefore recommends their re-election to shareholders.

### Director Indemnification and Insurance

The Company has entered into qualifying third-party deeds of indemnity in favour of each of its Directors. The deeds, which were in force during the year ended 31 January 2023 and up to the date of approval of this Report, cover any liabilities that may arise to a third party, other than the Company, for negligence, default or breach of trust or duty. The Directors are not indemnified in respect of liabilities to the Company, any regulatory or criminal fines, any costs incurred in connection with criminal proceedings in which the Director is convicted or civil proceedings brought by the Company in which judgement is given against him/her. In addition, the indemnity does not apply to any liability to the extent that it is recovered from another person.

The Company maintains Directors' and Officers' liability insurance.

The Schiehallion Fund Limited 27
Governance Report

## Conflicts of Interest

Each Director submits a list of potential conflicts of interest at each Board meeting. The Board considers these carefully, taking into account the circumstances surrounding them when deciding whether or not the potential conflicts should be authorised.

Having considered the lists of potential conflicts, there were no situations which gave rise to a direct or indirect interest of a Director which conflicted with the interests of the Company.

## Share Capital

### Capital Structure

The Company's capital structure, as at 31 January 2023, consisted of 500,430,002 ordinary shares of US$1 each (2022 – 500,430,002 ordinary shares of US$1 each and 700,000,000 C shares of US$1 each (2022 – 700,000,000)). The ordinary and C shares are subject to transfer restrictions and forced transfer provisions for investors in the United States and certain other jurisdictions.

### Capital Entitlement

On a winding up, after meeting the liabilities of the Company, the surplus assets of the respective share classes will be paid to ordinary and C shareholders in proportion to their respective shareholdings.

### Dividends

The ordinary and C shares carry a right to receive dividends. Given the nature of the Company's investments, the Company does not expect to pay dividends in the foreseeable future. If any dividends or distributions are made, they will at all times be subject to compliance with the solvency test prescribed by Guernsey law.

### Voting

Each ordinary and C shareholder present in person or by proxy is entitled to one vote on a show of hands and, on a poll, to one vote for every share held.

Restrictions on voting apply to those shareholders who are subject to restrictions under the United States Bank Holding Company Act of 1956 (BHCA restricted holder) and may apply to those shareholders who are pension plans subject to section 11 of Schedule III to the Pension Benefits Standards Regulations, 1985 (Canada) (CPP Certifying Shareholder). It is recommended that each shareholder give consideration to the Company's Articles of Incorporation and their rights thereunder when considering whether they may be subject to restricted voting rights.

Information on the deadlines for proxy appointments can be found on pages 69 and 70.

C shares will convert to ordinary shares once the C share portfolio is at least 85% invested. It is expected that conversion will occur within 12 months of the issuance of this report.

## Major Interests Disclosed in the Company's Shares

|  Name | No. of ordinary shares held at 31 January 2023 | % of issue  |
| --- | --- | --- |
|  Florida Retirement System Trust Fund (Direct) | 190,900,000 | 38.2  |
|  RBC Canadian Master Trust (Indirect) | 47,725,000 | 9.5  |
|  Baillie Gifford & Co (Indirect) | 47,725,000 | 9.5  |
|  Winnipeg Civic Employee's Benefits Program | 42,500,000 | 8.5  |
|  Textron Inc. Master Trust (Direct) | 35,000,000 | 7.0  |
|  NAV Canada Pension Plan (Direct) | 25,000,000 | 5.0  |

|  Name | No. of C shares held at 31 January 2023 | % of issue  |
| --- | --- | --- |
|  Baillie Gifford & Co (Indirect) | 70,803,954 | 10.1  |
|  Blackrock (Indirect) | 48,709,834 | 7.0  |
|  RBC Canadian Master Trust (Indirect) | 47,725,000 | 6.8  |
|  Columbia Threadneedle Investments (Indirect) | 44,373,439 | 6.3  |
|  Sarasin & Partners (Indirect) | 40,105,682 | 5.7  |

There have been no disclosed changes to the major interests in the Company's ordinary or C shares disclosed up to 24 March 2023.

### Directors' Interests

The Directors are not required to hold shares in the Company. The Directors at the end of the year under review, and their interests in the Company are shown in the following table. There have been no changes intimated in the Directors' interests up to 24 March 2023.

|   | Nature of interest | C shares held at 31 January 2023 | C shares held at 31 January 2022  |
| --- | --- | --- | --- |
|  L Yueh | Beneficial | 58,641 | –  |
|  J Mackie | Beneficial | 57,642 | –  |
|  D Chiswell | Beneficial | 520,000 | –  |
|  T Clark | Beneficial | 80,000 | –  |
|  R Holmes | Beneficial | 72,098 | –  |

### Issuance of Shares and Share Buybacks

By way of a special resolution dated 15 March 2019 the Directors have a general authority to allot up to 720 million ordinary shares or C shares, such figure to include the ordinary shares issued at the initial placing. 477,250,000 ordinary shares were issued at the Company's initial placing hence the Company has the ability to issue a further 242,750,000 ordinary shares under this existing authority which expires at the end of the period concluding immediately prior to the Annual General Meeting of the Company to be held in 2024 (or, if earlier, five years from the date of the resolution).

28 Annual Report 2023
Governance Report

In the year to 31 January 2023, no ordinary shares were issued (2022 – 20,080,000 ordinary shares raising net proceeds of US$41,431,000). In the period from 31 January 2023 to 24 March 2023, no ordinary shares have been issued.

In the year to 31 January 2023, no C shares were issued (2022 – 700,000,000 C shares raising net proceeds of US$694,802,000). In the period from 31 January 2023 to 24 March 2023, no C shares have been issued.

## Annual General Meeting

### Market Purchases of Shares by the Company

At the last Annual General Meeting, the Company was granted authority to purchase up to 75,014,457 ordinary shares (equivalent to 14.99% of its issued share capital) at 12 May 2022, such authority to expire at the 2023 Annual General Meeting. The Directors are seeking shareholders' approval at the 2023 Annual General Meeting to renew the authority to make market purchases up to 75,014,457 ordinary shares representing approximately 14.99% of the Company's ordinary shares in issue as at 24 March 2023, being the latest practicable date prior to publication of this document (or, if less, up to 14.99% of the ordinary shares in issue (excluding treasury shares) on the date on which the resolution is passed), such authority to expire at the Annual General Meeting of the Company to be held in 2024.

The Directors are also seeking shareholder approval at the 2023 Annual General Meeting to make market purchases of up to 104,930,000 C shares representing approximately 14.99% of the Company's C shares in issue at 24 March 2023, being the latest practicable date prior to the publication of this document (or, if less, up to 14.99% of the C shares in issue on the date on which the resolution is passed), such authority to expire at the Annual General Meeting of the Company to be held in 2024.

No shares were bought back during the year (2022 – none) and no shares are held in treasury.

Share buybacks may be made principally:

- (i) to enhance net asset value for continuing shareholders by purchasing shares at a discount to the prevailing net asset value; and
- (ii) to address any imbalance between the supply of and the demand for the Company's shares that results in a discount of the quoted market price to the published net asset value per share.

The Company may hold bought back shares in treasury and then:

- (i) sell such shares (or any of them) for cash; or
- (ii) cancel the shares (or any of them).

Shares will only be re-sold from treasury at a premium to net asset value per ordinary share.

In accordance with the Listing Rules of the UK Listing Authority, the maximum price (excluding expenses) that may be paid on the exercise of the authority must not exceed the higher of:

- (i) 5% above the average closing price on the London Stock Exchange of an ordinary or C share over the five business days immediately preceding the date of purchase; and

- (ii) the higher of the price of the last independent trade and the highest current independent bid as stipulated by Article 5(1) of Commission Regulation (EC) 22 December 2003 implementing the Market Abuse Directive as regards exemptions for buyback programmes and stabilisation of financial instruments (No. 2273/2003).

The minimum price (exclusive of expenses) that may be paid will be the nominal value of an ordinary or C share. Purchases of shares will be made within guidelines established, from time to time, by the Board. Your attention is drawn to Resolutions 11 and 12 in the Notice of Annual General Meeting.

## Recommendation

The Board considers each resolution being proposed at the Annual General Meeting to be in the best interests of the Company and its shareholders as a whole and it unanimously recommends that all shareholders vote in favour of them.

## Financial Instruments

The Company's financial instruments comprise its investment portfolio, US Treasury Bills, cash balances and debtors and creditors that arise directly from its operations such as sales and purchases awaiting settlement and accrued income. The financial risk management objectives and policies arising from its financial instruments and the exposure of the Company to risk are disclosed in note 15 to the Financial Statements.

## Articles of Incorporation

The Company's Articles of Incorporation may only be amended by special resolution at a general meeting of shareholders.

## Disclosure of Information to Auditor

The Directors confirm that so far as each of the Directors is aware there is no relevant audit information of which the Company's Auditor is unaware and the Directors have taken all the steps that they ought to have taken as Directors in order to make themselves aware of any relevant audit information and to establish that the Company's Auditor is aware of that information.

## Independent Auditor

The Auditor, KPMG Channel Islands Limited, appointed upon the Company's incorporation, is willing to continue in office. Resolutions concerning KPMG Channel Islands Limited's reappointment and remuneration will be submitted to the Annual General Meeting.

## Greenhouse Gas Emissions

All of the Company's activities are outsourced to third parties. The Company therefore has no greenhouse gas emissions to report from its operations, nor does it have responsibility for any other emissions producing sources under the Companies Act 2006 (Strategic Report and Directors' Reports) Regulations 2013. For the same reason as set out above, the Company is a low energy user under the SECR regulations and has no energy and carbon information to disclose.

The Schiehallion Fund Limited 29
Governance Report
Bribery Act
The Company has a zero tolerance policy towards bribery and is
committed to carrying out business fairly, honestly and openly.
The Investment Manager also adopts a zero tolerance approach
and has policies and procedures in place to prevent bribery.
Tax Evasion
The Company has a commitment to zero tolerance towards the
criminal facilitation of tax evasion.
Events after the Reporting Date
The Directors confirm that there have been no events after the
reporting date which require adjustment of, or disclosure in,
the Financial Statements or notes thereto up to 27 March 2023.
On behalf of the Board
Dr Linda Yueh CBE
Chairperson
27 March 2023
30 Annual Report 2023
Governance Report
### Corporate Governance Report
The Board is committed to achieving and demonstrating high The reasons why the Board supports the election and re-election
standards of Corporate Governance. The Board has taken note of of the Directors are set out on page 27.
the Code of Corporate Governance issued by the Guernsey Financial
Directors are not entitled to any termination payments in relation
Services Commission (the ‘Guernsey Code’). The Guernsey Code
to their appointment.
provides a governance framework for GFSC licensed entities,
authorised and collective investment schemes. Companies Independence of Directors
reporting in compliance with the UK Corporate Governance Code All of the Directors are considered by the Board to be
(the ‘UK Code’) or The Association of Investment Companies independent of the Investment Manager and the Administrator
Code of Corporate Governance (the ‘AIC Code’) are deemed to and free of any business or other relationship which could
satisfy the provisions of the Guernsey Code. This statement outlines interfere with the exercise of their independent judgement.
how the principles of the AIC Code were applied throughout the
The Directors recognise the importance of succession planning
financial year ended 31 January 2023. The Company intends to
for company boards and review the Board composition annually.
comply with the AIC Code for the year ended 31 January 2024.
The Board is of the view that length of service will not necessarily
The AIC Code can be found at theaic.co.uk.
compromise the independence or contribution of Directors of an
Compliance investment company, where continuity and experience can be a
benefit to the Board. The Board concurs with the view expressed
The Board confirms that the Company has complied throughout
in the AIC Code that long serving Directors should not be
the year under review with the relevant provisions of the AIC Code
prevented from being considered independent.
and the recommendations of the AIC Code.
Following formal performance evaluation, the Board considers
The Board
that each Director continues to be independent in character and
The Board has overall responsibility for the Company’s affairs.
judgement and his/her skills and experience were a significant
It has a number of matters formally reserved for its approval
benefit to the Board.
including strategy, investment policy, currency hedging, gearing,
treasury matters, dividend and corporate governance policy. Tenure of Directors
A separate strategy session is held annually. The Board also The Nomination Committee has considered the question of tenure
reviews the Financial Statements, investment transactions, revenue for directors, noting the provisions in the AIC Code, and has
budgets and performance of the Company. Full and timely concluded that there should not be a set maximum time limit for
information is provided to the Board to enable the Board to function a chairperson or director to serve on the Board. The Nomination
effectively and to allow Directors to discharge their responsibilities. Committee keeps under review the balance of skills, knowledge,
experience, performance and length of service of the Directors
The Board currently comprises five Directors all of whom are
ensuring the Board has the right combination of skills and
non-executive. The Chairperson, Dr Linda Yueh, is responsible for
preservation of knowledge and experience balanced with the
organising the business of the Board, ensuring its effectiveness and
appointment of new Directors bringing in fresh ideas and perspective.
setting its agenda. The Board reviews its composition annually.
The executive responsibilities for investment management have Meetings
been delegated to the Company’s Alternative Investment Fund There is an annual cycle of Board meetings which is designed
Manager (‘AIFM’), Baillie Gifford & Co Limited, and in the context to address, in a systematic way, overall strategy, review of
of a Board comprising entirely Non-Executive Directors, there investment policy, investment performance, premium/discount,
is no chief executive officer. Mr John Mackie is the Company’s marketing, revenue budgets, dividend policy and communication
Senior Independent Director (SID). Mr Mackie is available to with shareholders. The Board considers that it meets sufficiently
shareholders if they have concerns not properly addressed regularly to discharge its duties effectively. The following table
by the Chairperson. The SID leads the Chairperson’s appraisal. shows the attendance record for the Board and Committee
meetings held during the year ended 31 January 2023.
The Directors believe that the Board has a balance of skills
and experience which enable it to provide effective strategic
Directors’ Attendance at Meetings
leadership and proper governance of the Company. Information
about the Directors, including their relevant experience, can be Board
Audit Nomination Valuation
found on page 25.
Board Committee Committee Meetings
There is an agreed procedure for Directors to seek independent
Number of meetings 4 2 2 2
professional advice if necessary at the Company’s expense.
L Yueh * 4 1 2 2
Appointments to the Board
J Mackie 4 2 2 2
The terms and conditions of Directors’ appointments are set out
D Chiswell 4 2 2 2
in formal letters of appointment which are available for inspection
on request. T Clark 4 2 2 2
R Holmes 4 2 2 2
Under the provisions of the Company’s Articles of Incorporation,
a Director appointed during the period is required to retire and
* Dr Yueh stepped down from the Audit Committee following the
seek election by shareholders at the next Annual General Meeting.
meeting, held in March 2022, to approve the Company’s 2022
In accordance with the principals of the AIC Code, all Directors
year end accounts.
will offer themselves for re-election annually.
The Schiehallion Fund Limited 31
Governance Report
Nomination Committee The composition of the Board is two-fifths female, which complies
The Nomination Committee consists of the whole Board and with the target outlined in the FCA Listing Rules. The Board consists
the Chairperson of the Board is Chairperson of the Committee. of one Director who is from an ethnic minority background, thereby
The Committee meets on an annual basis and at such other meeting the recommendations of the Parker Review. The Board
times as may be required. The Committee has written terms of further includes one Director with a registered disability.
reference which include reviewing the composition of the Board, Although the Company is not required to report against the
identifying and nominating new candidates for appointment to targets set out in the FCA’s Listing Rule 9.8.6R(9)(a) until the 2024
the Board, Board appraisal, succession planning and training. Annual Report, the boar d has resolved to do so for the year ended
The Committee also considers whether Directors should be 31 January 2023. In relation to Listing Rule 9.8.6R(9), (10) and (11)
recommended for re-election by shareholders. The Committee is the Board provides the following information in relation to its
responsible for considering Directors’ potential conflicts of interest Diversity.
and for making recommendations to the Board on whether or not
As an externally managed investment fund, there are no executive
the potential conflicts should be authorised.
staff, and therefore the Company does not have a chief executive
Diversity officer (‘CEO’) or a chief financial officer (‘CFO’), both of which are
Appointments to the Board are made on merit with due regard for deemed senior board positions by the FCA. The Board however
the benefits of diversity including gender and ethnicity. The priority considers the Chair of the Audit Committee to be a senior board
in appointing new Directors is to identify the candidate with the best position and the following disclosures are made on this basis.
range of skills and experience to complement existing Dir ectors. The FCA recognises the Chairperson and Senior Independent
The Board will not display any bias for age, gender, race, sexual Director to be senior board positions. The Board has also resolved
orientation, r eligion, ethnic or national origins, or disability in that the Company’s year end date is the most appropriate date for
considering the appointment of its Directors. However, it is the disclosure purposes.
Board’s policy to ensure that all appointments are made on the basis
of merit against the specification prepared for each appointment.
Board Gender as at 31 January 2023
Number of Number in Percentage of
Number of Percentage senior positions executive executive
Board Members of the Board * on the Board # management management
Men 3 60% 1 n/a n/a
Women 2 40% 2 n/a n/a
* Target of 40% of board are women is met per the Hampton-Alexander Review.
# The positions of the Chairperson and Chair of the Audit Committee are held by women. The position of Senior Independent Director is held by
a man. This exceeds the target that at least one senior board position should be held by a woman.
Board Ethnic Background as at 31 January 2023
Percentage Number of Number in Percentage
Number of of the senior positions executive of executive
Board Members Board on the Board management management
White British or
other White (including
minority-white groups) 4 80% 2 n/a n/a
Minority ethnic 1 20% 1 n/a n/a
† Target of at least one member of the board is from a minority background is met per the Parker Review.
The Committee’s terms of reference are available on request from the Company and on the Company’s website: schiehallionfund.com.
32 Annual Report 2023
Governance Report
Performance Evaluation Internal Controls and Risk Management
During the year the Board appointed Lintstock, a firm which assists The Directors acknowledge their responsibility for the Company’s
companies with external board evaluations. Lintstock has no risk management and internal controls systems and for reviewing
other connection with the Company or its Directors. Each Director their effectiveness. The systems are designed to manage rather
completed a questionnaire, provided by Lintstock, which was than eliminate the risk of failure to achieve business objectives
followed up with a telephone interview carried out by a and can only provide reasonable but not absolute assurance
representative of Lintstock. The Board evaluation included a against material misstatement or loss.
review of the following areas:
The Board confirms that there is a continuing process for identifying,
— Board composition and expertise; evaluating and managing the significant risks faced by the
Company in accordance with the FRC guidance, ‘Guidance on
— Board dynamics;
Risk Management, Internal Control and Related Financial and
— Management and focus of meetings;
Business Reporting’.
— Board information and support;
The practical measures in relation to the design, implementation
— Audit and Nomination Committees; and maintenance of control policies and procedures to safeguard
the Company’s assets and to manage its affairs properly, including
— Investment Strategy and performance;
the maintenance of effective operational and compliance controls
— External relations; have been delegated to the Investment Manager and Administrator.
— Risk management; and The Board oversees the functions delegated to the Investment
Manager and Administrator and the controls managed by the
— Succession.
AIFM in accordance with the Alternative Investment Fund Managers
Lintstock reviewed the information from the questionnaires and
Directive (as detailed below). Baillie Gifford & Co’s Internal Audit
interviews. It is intended that an external evaluation will be carried
and Compliance Departments and the AIFM’s permanent risk
out every three years.
function provide the Audit Committee with regular reports on their
Following the process, it was concluded that the performance of monitoring programmes. The reporting procedures for these
each Director, the Chairperson, the Board and its committees departments are defined and formalised within a service level
continues to be effective and each Director, including the agreement. Baillie Gifford & Co conducts an annual review of its
Chairperson remains committed to the Company. system of internal controls which is documented within an internal
controls report which complies with ISAE 3402 and Technical
A review of the Chairperson’s and other Directors’ commitments
Release AAF 01/06 – Assurance Reports on Internal Controls of
was carried out and the Nomination Committee is satisfied that
Service Organisations made available for Third Parties. This report
they are capable of devoting sufficient time to the Company.
is independently reviewed by Baillie Gifford & Co’s auditor and a
There were no significant changes to the Chairperson’s other
copy is submitted to the Audit Committee.
commitments during the year ended 31 January 2023.
A report identifying the principal and emerging risks faced by the
Induction and Training
Company and the key controls employed to manage these risks
New Directors are provided with an induction programme which
is reviewed by the Audit Committee at each Audit Committee
is tailored to the particular circumstances of the appointee.
meeting.
During the year ended 31 January 2023, briefings on industry and
These procedures ensure that consideration is given regularly to
regulatory matters were provided to the Board by the Investment
the nature and extent of risks facing the Company and that they
Manager and Administrator. Directors receive other relevant
are being actively monitored. Where changes in risk have been
training as necessary.
identified during the period they also provide a mechanism to
Remuneration assess whether further action is required to manage these risks.
As all the Directors are non-executive, there is no requirement
The Directors confirm that they have reviewed the effectiveness
for a separate Remuneration Committee. Directors’ fees are
of the Company’s risk management and internal controls systems
considered by the Board as a whole within the limits approved
which accord with the FRC guidance, ‘Guidance on Risk
by shareholders. The Company’s policy on remuneration is set
Management, Internal Control and Related Financial and Business
out in the Directors’ Remuneration Report on pages 38 and 39.
Reporting’ and they have procedures in place to review their
effectiveness on a regular basis. No significant weaknesses were
Audit Committee
identified in the year under review and up to the date of this Report.
The report of the Audit Committee is set out on pages 36 and 37.
The Schiehallion Fund Limited 33
Governance Report
The Board confirms that these procedures have been in place The Board has, in particular, considered the impact of heightened
throughout the Company’s financial year and continue to be in market volatility due to the macroeconomic and geopolitical
place up to the date of approval of this Report. concerns, including rising inflation and interest rates, the Russian
invasion of Ukraine as well as the lingering effects of the Covid-19
To comply with the Alternative Investment Fund Managers
pandemic. Specific leverage and stress testing has been carried
Directive, The Bank of New York Mellon (International) Limited
out by the Board and having done so the Board does not believe
acts as the Company’s Depositary and Baillie Gifford & Co Limited
the Company’s going concern status is affected. The Company
as its AIFM.
maintains sufficient cash balances to enable it to meet its liabilities
The Depositary’s responsibilities include cash monitoring, safe
as they fall due.
keeping of the Company’s financial instruments, verifying ownership
In managing the Company’s assets, the Investment Manager will
and maintaining a record of other assets and monitoring the
seek to ensure that the Company holds at all times a proportion
Company’s compliance with investment limits and leverage
of assets that is sufficiently liquid to enable it to discharge its
requirements. The Depositary is liable for the loss of financial
payment obligations.
instruments held in custody. The Depositary will ensure that any
delegate segregates the assets of the Company. The Company’s Accordingly, the Financial Statements have been prepared on the
Depositary also acts as the Company’s Custodian. The Custodian going concern basis as it is the Directors’ opinion, having assessed
prepares reports on its key controls and safeguards which are the principal and emerging risks and other matters set out in the
independently reviewed by KPMG LLP. The reports are reviewed Viability Statement on page 10 which assesses the prospects of
by Baillie Gifford’s Business Risk Department and a summary of the Company over a period of five years, that the Company will
the key points is reported to the Audit Committee and any continue in operational existence for a period of at least twelve
concerns are investigated. months from the date of approval of these Financial Statements.
The Depositary provides the Audit Committee with a report on its
Relations with Shareholders
monitoring activities.
The Board places great importance on communication with
The AIFM has established a permanent risk management function shareholders. The Company’s Investment Manager meets
to ensure that effective risk management policies and procedures regularly with shareholders and their representatives and reports
are in place and to monitor compliance with risk limits. The AIFM shareholders’ views to the Board. The Chairperson is available
has a risk management policy which covers the risks associated to meet with shareholders as appropriate. Shareholders wishing
with the management of the portfolio, and the adequacy and to communicate with any member of the Board may do so by
effectiveness of this policy is reviewed and approved at least writing to them at the Company’s registered office or through the
annually. This review includes the risk management processes Company’s broker, Winterflood Securities Limited (see contact
and systems and limits for each risk area. details on the back cover). The Company’s Annual General
Meeting provides a forum for communication with all shareholders.
The risk limits, which are set by the AIFM and approved by the
These communication opportunities help inform the Board when
Board, take into account the objectives, strategy and risk profile
considering how best to promote the success of the Company
of the portfolio. These limits are monitored and the sensitivity of
for the benefit of all shareholders over the long term. The level
the portfolio to key risks is undertaken periodically as appropriate
of proxies lodged for each resolution will be announced at the
to ascertain the impact of changes in key variables in the portfolio.
Annual General Meeting and will be published on the Company’s
Exceptions from limits monitoring and stress testing undertaken
page of the Investment Manager’s website schiehallionfund.com
by Baillie Gifford’s Business Risk Department are escalated to the
subsequent to the meeting.
AIFM and reported to the Board along with any remedial
measures being taken. Shareholders and potential investors may obtain up-to-date
information on the Company at schiehallionfund.com.
Going Concern
In accordance with the Financial Reporting Council’s guidance on Corporate Governance and Stewardship
going concern and liquidity risk, the Directors have undertaken a The Company has given discretionary voting powers to Baillie
rigorous review of the Company’s ability to continue as a going Gifford & Co. The Investment Manager votes against resolutions
concern they consider may damage shareholders’ rights or economic
interests.
In undertaking this review, the Directors have considered the
Company’s principal and emerging risks. The Company’s principal The Company believes that it is in the shareholders’ interests to
risks are market-related and include market risk, liquidity risk and consider environmental, social and governance (‘ESG’) factors
credit risk. An explanation of these risks and how they are when selecting and retaining investments and has asked the
managed is set out on pages 7 to 10 and contained in note 15 Investment Manager to take these issues into account as long as
to the Financial Statements on pages 61 to 66. the investment objectives are not compromised. The Investment
34 Annual Report 2023
Governance Report
Manager does not exclude companies from its investment
universe purely on the grounds of ESG factors but adopts a
positive engagement approach whereby matters are discussed
with management with the aim of improving the relevant policies
and management systems and enabling the Investment Manager
to consider how ESG factors could impact long-term investment
returns. The Investment Manager’s statement of compliance with
the UK Stewardship Code can be found on the Investment
Manager’s website at bailliegifford.com. The Investment
Manager’s policy has been reviewed and endorsed by the Board.
The Baillie Gifford Statement on Stewardship and its Stewardship
Principals are set out on page 16. Baillie Gifford & Co, the
Managers, has considered the Sustainable Finance Disclosure
Regulation (‘SFDR’) and further details can be found on page 74.
The Investment Manager, Baillie Gifford & Co, is a signatory to the
United Nations Principles for Responsible Investment and the
Carbon Disclosure Project and is also a member of the Asian
Corporate Governance Association and International Corporate
Governance Network.
Climate Change
The Board recognises that climate change poses a serious threat
to our environment, our society and to economies and companies
around the globe. Addressing the underlying causes is likely to
result in companies that are high emitters of carbon facing greater
societal and regulatory scrutiny and higher costs to account for
the true environmental impact of their activities.
Baillie Gifford’s Task Force on Climate-Related Financial Disclosures
(‘TCFD’) Climate Report is available on the Managers’ Website
at bailliegifford.com. The Managers, Baillie Gifford & Co, are
signatories to the Carbon Disclosure Project.
On behalf of the Board
Dr Linda Yueh CBE
Chairperson
27 March 2023
The Schiehallion Fund Limited 35
Governance Report
### Audit Committee Report
The Company’s Audit Committee is chaired by Ms Trudi Clark, Internal Audit
and meets twice a year or more often if required. Ms Clark is a The Committee believes that the compliance and internal controls
Charter ed Accountant. The Board considers that the members systems and the internal audit function in place within the
of the Audit Committee have the requisite financial skills and Investment Manager provides sufficient assurance that a sound
experience to fulfil the r esponsibilities of the Audit Committee. system of internal control, which safeguards shareholders’
The Committee consists of all the Directors, except for Dr Yueh, investment and the Company’s assets, is maintained. An internal
who stood down from the Audit Committee in March 2022. audit function specific to the Company is therefore considered
Although not a member of the Committee, Dr Yueh was invited unnecessary.
to and attended all the meetings.
Financial Reporting
The Committee’s authority and duties are clearly defined within
The Committee considers that the most significant area of risk
its written terms of reference which are available on request
likely to impact the Financial Statements is the valuation of private
from the Administrator and on the Company’s website at
company investments as they represent 74.0% of the Company’s
schiehallionfund.com. The terms of reference are reviewed
net assets and since the valuation of these investments requires
annually.
the use of estimates, assumptions and judgements.
The Committee’s effectiveness is reviewed on an annual basis
as part of the Board’s performance evaluation process. Private Company Investments
The Committee reviewed the Investment Manager’s valuation
At least once a year the Committee meets with the external
approach for investments in private companies (as described in
Auditor without any representative of the Investment Manager
note 1(e) on page 50) and approved the valuations of the private
being present.
company investments following a detailed review of the valuation
Main Activities of the Committee of each investment and relevant challenge where appropriate.
KPMG Channel Island Limited (‘KPMG’) attended both Audit The Investment Manager agreed the holdings in certificated form
Committee meetings held during the year along with the meeting to confirmations from the Company’s Custodian and holdings of
held on 27 March 2023 to approve the Annual Report and uncertificated private company investments were agreed to
Financial Statements. Baillie Gifford & Co’s Internal Audit and confirmations from the relevant investee companies.
Compliance Departments and the AIFM’s permanent risk function
provided reports on their monitoring programmes at both Listed Investments
meetings held during the year. Investments in quoted securities have market prices which are
readily available from independent external pricing sources.
The matters considered, monitored and reviewed by the
The Committee reviewed the Investment Manager’s Report on
Committee covering the year ended 31 January 2023 include
Internal Controls which details the controls in place regarding
the following:
the recording and pricing of investments.
— the interim results announcement and the Interim Report;
The Investment Manager agreed the prices of all the listed
— the Company’s accounting policies and practices and the investments at 31 January 2023 to external price sources and
implementation of the Investment Manager’s Valuation the holdings were agreed to confirmations from the Company’s
Policy for investments in unquoted companies; Custodian or Transfer Agent.
— the regulatory changes impacting the Company;
Other Matters
— the fairness, balance and understandability of the Annual The Committee reviewed the Investment Manager’s Report on
Report and Financial Statements and whether it provided Internal Controls which details the controls in place regarding the
the information necessary for shareholders to assess the complete and accurate recording of investment income.
Company’s performance, business model and strategy;
At the meeting held on 27 March 2023, the Investment Manager
— the effectiveness of the Company’s internal control and external Auditor confirmed to the Committee that they were
environment; not aware of any material misstatements in the context of the
— appointment/reappointment, remuneration and terms of Financial Statements as a whole and that the Financial Statements
engagement of the external Auditor; are in accordance with applicable law and accounting standards.
— the policy on the engagement of the external Auditor to
supply non-audit services;
— the independence and objectivity of the external Auditor;
— the need for the Company to have its own internal audit
function;
— internal controls reports received from the Investment
Manager and Custodian; and
— the arrangements in place within the Investment Manager
and Administrator whereby their staff may, in confidence,
raise concerns about possible improprieties in matters of
financial reporting or other matters.
36 Annual Report 2023
Governance Report
Internal Controls and Risk Management Having carried out the review described above, the Committee
The Committee reviewed the effectiveness of the Company’s risk is satisfied that the Auditor is independent and effective for the
management and internal controls systems as described on purposes of this year’s audit.
pages 33 and 34. No significant weaknesses were identified in the There are no contractual obligations restricting the Committee’s

| period under review. | choice of external Auditor. |
| --- | --- |
| External Auditor | Accountability and Audit |
| To fulfil its responsibility regarding the independence of the | The respective responsibilities of the Directors and the Auditor |
| external Auditor, the Committee reviewed: | in connection with the Financial Statements are set out on |
| — the Auditor’s audit strategy for the financial year ended | pages 40 to 44. |

31 January 2023 which included a report from the Auditor

|  | describing their arrangements to manage auditor | On behalf of the Board |
| --- | --- | --- |
|  | independence and received confirmation of their | Trudi Clark |
|  | independence; and | Audit Committee Chairperson |
| — there were no non-audit services provided by the external |  | 27 March 2023 |

Auditor in the year to 31 January 2023. The non-audit fees in
the previous year to 31 January 2022 paid to KPMG Channel
Islands Limited were for providing procedural services related
to the issue of the Company’s C shares. The fees charged for
these services were US$83,000 (see note 4 on page 52).
The Committee does not believe this impaired the Auditor’s
independence and confirmed the services provided are
permitted under the non-audit services policy of the
Company.
To assess the effectiveness of the external Auditor, the Committee
had detailed discussions with audit personnel to challenge audit
processes and deliverables.
To fulfil its responsibility for oversight of the external audit process
the Committee considered and reviewed:
— the Auditor’s engagement letter;
— the Auditor’s proposed audit strategy;
— the audit fee; and
— a report from the Auditor on the conclusion of the audit.
KPMG Channel Islands Limited was appointed as the Company’s
Auditor, by the Directors, upon the Company’s incorporation.
The audit partner responsible for the audit is to be rotated at least
every five years in accordance with professional and regulatory
standards in order to protect independence and objectivity and to
provide fresh challenge to the business.
KPMG Channel Islands Limited has confirmed that it believes it is
independent within the meaning of regulatory and professional
requirements and that the objectivity of the audit partner and staff
is not impaired.
The Schiehallion Fund Limited 37
Governance Report
### Directors’ Remuneration Report
Statement by the Chairperson Limits on Directors’ Remuneration
The Directors’ Remuneration Policy is subject to shareholder The fees for the non-executive Directors are payable quarterly in
approval every three years or sooner if an alteration to the policy arrears and are determined within the limit set out in the Company’s
is proposed. As the Remuneration Policy, which is set out below, Articles of Incorporation, which is currently £360,000 per annum
was last approved at the Annual General Meeting in May 2020, in aggregate. Any change to this limit requires shareholder
shareholders’ approval is being sought at the forthcoming Annual approval by way of an ordinary resolution.
General Meeting. Shareholders’ attention is drawn to Resolution 2
The basic and additional annual fees payable to Directors in
in the Notice of Annual General Meeting on page 67. The policy
respect of the year to 31 January 2023 and the expected fees
for which approval is sought is set out below and is unchanged
payable in respect of the year ending 31 January 2024 are set
from that currently in force.
out in the table below. The fees payable to the Directors in the
Directors’ fees are increased in line with inflation annually. A resolution subsequent financial periods are subject to annual increases in
to amend the aggregate limit for Directors’ fees will be put to line with inflation.
shareholders as and when required.
Statement of Voting at Annual General Meeting
Directors’ Remuneration Policy At the Annual General Meeting held on 12 May 2022, of the proxy
The Board is composed wholly of non-executive Directors, none votes received in respect of the Directors’ Remuneration Report
of whom has a service contract with the Company. There is no that approved the annual increases in line with inflation, 100.0%
separate remuneration committee and the Board as a whole were in favour, 0.0% were against and 0.0% were withheld.
considers changes to Directors’ fees from time to time.
Expected fees Fees for the
The Board’s policy is that the remuneration of Directors should be

|  | per annum for | year ending |  |
| --- | --- | --- | --- |
| set at a reasonable level that is commensurate with the duties | year ending | 31 January |  |
|  | 31 January 2024 |  | 2023 |

and responsibilities of the role and consistent with the requirement
£ £
to attract and retain Directors of the appropriate quality and
experience. The Board believes that the fees paid to the Directors L Yueh 90,300 82,500
should reflect the experience of the Board as a whole, be fair and
J Mackie 72,200 66,000
should take account of the level of fees paid by comparable
D Chiswell 60,200 55,000
investment companies. Baillie Gifford & Co Limited provides
T Clark 75,500 69,000
comparative information when the Board considers the level of
R Holmes 60,200 55,000
Directors’ fees. The Board also receives advice from independent
Total aggregate annual fees that can be
companies, for instance, Trust Associates, who produces an
paid to the Directors in any year under the
annual report on Directors’ fees for the sector, had reviewed the
Directors’ Remuneration Policy, as set out
Board’s fees. Any views expressed by shareholders on the fees
in the Company’s Articles of Incorporation 360,000 360,000
being paid to Directors will be taken into consideration by the
Board when reviewing the Board’s policy on remuneration.
Annual Report on Remuneration
Non-executive Directors are not eligible for any other remuneration
An ordinary resolution for the approval of this report will be put to
or benefits apart from the reimbursement of allowable expenses.
the members at the forthcoming Annual General Meeting.
There are no performance conditions relating to Directors’ fees
and there are no long-term incentive schemes or pension schemes.
There is no notice period and no compensation is payable on loss
of office.
38 Annual Report 2023
Governance Report

## Directors' Remuneration for the Year

The Directors who served during the year ended 31 January 2023 received the following remuneration in the form of fees and taxable benefits. This represents the entire remuneration paid to the Directors.

|  Name | For the year ended 31 January 2023 |   | For the year ended 31 January 2022  |   |   |
| --- | --- | --- | --- | --- | --- |
|   |  Fees £ | Total £ | Fees £ | Other fees* £ | Total £  |
|  L Yueh (Chairperson) | 82,500 | **82,500** | 52,359 | 5,000 | **57,359**  |
|  J Mackie (Senior Independent Director) | 66,000 | **66,000** | 38,867 | 5,000 | **43,867**  |
|  D Chiswell (appointed 2 September 2021) | 55,000 | **55,000** | 16,852 | – | **16,852**  |
|  T Clark (Audit Committee Chairperson) | 69,000 | **69,000** | 41,517 | 5,000 | **46,517**  |
|  R Holmes (appointed 2 September 2021) | 55,000 | **55,000** | 16,852 | – | **16,852**  |
|   | **327,500** | **327,500** | **166,447** | **15,000** | **181,447**  |

*Each Director, appointed at the time of the C share issuance, received a one-off fee of £5,000 which covered services relating to the issue of the Company's C shares. As these fees related to the listing of the Company's C shares, they were included within the cost of issuing shares (see note 10).

No other remuneration or compensation was paid or is payable by the Company during the period to any of the Directors, other than travel expenses of US$6,000 (2022 – nil).

## Annual Percentage Change in Remuneration

This represents the annual percentage change in the entire remuneration paid to the Directors.

|   | % from 2022 to 2023 | % from 2021 to 2022  |
| --- | --- | --- |
|  L Yueh | 43.8 | 27.5  |
|  J Mackie | 50.5 | 33.3  |
|  D Chiswell* | 36.0 | –  |
|  T Clark | 48.3 | 32.9  |
|  R Holmes* | 36.0 | –  |

*R Holmes & D Chiswell were appointed to the board on 2 September 2021. Their fees for the period from 2 September 2021 to 31 January 2022 have been annualised in order to provide the above annual percentage change from 2022 to 2023.

## Relative Importance of Spend on Pay

As the Company has no employees, the Directors do not consider it appropriate to present a table comparing remuneration paid to employees with distributions to shareholders. The Directors' remuneration for the period is set out on the previous page. There were no distributions to shareholders by way of dividend or share repurchases during the period.

## Directors' Service Details

|  Name | Date of appointment | Due date for re-election  |
| --- | --- | --- |
|  L Yueh | 4 January 2019 | AGM in 2023  |
|  J Mackie | 4 January 2019 | AGM in 2023  |
|  D Chiswell | 2 September 2021 | AGM in 2023  |
|  T Clark | 4 January 2019 | AGM in 2023  |
|  R Holmes | 2 September 2021 | AGM in 2023  |

## Approval

The Report on remuneration on pages 38 and 39 was approved by the Board of Directors and signed on its behalf on 27 March 2023.

Dr Linda Yueh CBE Chairperson

The Schiehallion Fund Limited 39
Governance Report
### Statement of Directors’ Responsibilities
The Directors are responsible for preparing the Annual Report The Directors are responsible for the maintenance and integrity
and Financial Statements in accordance with applicable law and of the corporate and financial information included on the
regulations. Company’s website. Legislation in Guernsey governing the
preparation and dissemination of Financial Statements may differ
Company law requires the Directors to prepare Financial
from legislation in other jurisdictions.
Statements for each financial year. Under that law they have
elected to prepare the Financial Statements in accordance with
Responsibility Statement of the Directors in Respect
International Financial Reporting Standards as issued by the
of the Annual Report and Financial Statements
International Accounting Standards Board.
We confirm to the best of our knowledge:
Under company law, the Directors must not approve the Financial
— the Financial Statements, prepared in accordance with the
Statements unless they are satisfied that they give a true and fair
applicable set of accounting standards, give a true and fair
view of the state of affairs of the Company and of its profit or loss
view of the assets, liabilities, financial position and profit or
for that period.
loss of the Company; and
In preparing these Financial Statements, the Directors are
— the Strategic Report includes a fair review of the development
required to:
and performance of the business and the position of the
— select suitable accounting policies and then apply them issuer, together with a description of the principal risks and
consistently; uncertainties they face.
— make judgements and estimates that are reasonable and We consider the Annual Report and Financial Statements, taken
prudent; as a whole, is fair, balanced and understandable and provides the
information necessary for shareholders to assess the Company’s
— state whether applicable accounting standards have been
position and performance, business model and strategy.
followed, subject to any material departures disclosed and
explained in the Financial Statements;
On behalf of the Board
— assess the Company’s ability to continue as a going concern,
Dr Linda Yueh CBE
disclosing as applicable, matters relating to going concern;
27 March 2023
and
— use the going concern basis of accounting unless they either
intend to liquidate the Company or to cease operations, or
have no realistic alternative but to do so.
The Directors are responsible for keeping proper accounting
records that are sufficient to show and explain the Company’s
transactions and disclose with reasonable accuracy at any time
the financial position of the Company and enable them to ensure
that its Financial Statements comply with the Companies
(Guernsey) Law, 2008. They are responsible for such internal
control as they determine is necessary to enable the preparation
of Financial Statements that are free from material misstatement,
whether due to fraud or error, and have general responsibility for
taking such steps are reasonably open to them to safeguard the
assets of the Company and to prevent and detect fraud and
other irregularities.
Note
The following note relates to financial statements published on a website and is not included in the printed version of the Annual Report
and Financial Statements:
— The Directors have delegated responsibility to the Managers for the maintenance and integrity of the Company’s page of the
Managers’ website; the work carried out by the auditors does not involve consideration of these matters and, accordingly, the
auditors accept no responsibility for any changes that may have occurred to the financial statements since they were initially
presented on the website.
40 Annual Report 2023
Financial Report
### Independent Auditor’s Report
### To the Members of The Schiehallion Fund Limited
Our opinion is unmodified
We have audited the financial statements of The Schiehallion Fund Limited (the ‘Company’), which comprise the statement of financial
position as at 31 January 2023, the statements of comprehensive income, changes in equity and cash flows for the year then ended,
and notes, comprising significant accounting policies and other explanatory information.
In our opinion, the accompanying financial statements:
— give a true and fair view of the financial position of the Company as at 31 January 2023, and of the Company’s financial performance
and cash flows for the year then ended;
— are prepared in accordance with International Financial Reporting Standards; and
— comply with the Companies (Guernsey) Law, 2008.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (‘ISAs (UK)’) and applicable law. Our responsibilities
are described below. We have fulfilled our ethical responsibilities under, and are independent of the Company in accordance with, UK ethical
requirements including the FRC Ethical Standard as required by the Crown Dependencies’ Audit Rules and Guidance. We believe that the
audit evidence we have obtained is a sufficient and appropriate basis for our opinion.
Key audit matters: our assessment of the risks of material misstatement
Key audit matters are those matters that, in our professional judgment, were of most significance in the audit of the financial statements
and include the most significant assessed risks of material misstatement (whether or not due to fraud) identified by us, including those
which had the greatest effect on: the overall audit strategy; the allocation of resources in the audit; and directing the efforts of the
engagement team. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming
our opinion thereon, and we do not provide a separate opinion on these matters. In arriving at our audit opinion above, the key audit
matter was as follows (unchanged from 2022):
The risk Our response
Valuation of private Basis: Our audit procedures included but were not limited to:
company investments The Company’s investments are Internal Controls:
classified, recognised and measured We evaluated the design and implementation of the control in place in
US$ 853,014,000
at fair value through profit or loss in relation to the valuation of the Company’s private company investments.
(2022 – US$ 937,283,000)
accordance with IFRS 9. Private Challenging management’s assumptions and inputs including
Refer to the Audit
company investments represent 74% use of our KPMG valuation specialist:
Committee Report on page
of the Company’s net assets as at For the private company investments, with the support of our KPMG
36 of the Annual Report,
31 January 2023. valuation specialist, we:
note 1 (d), 1 (e), 7 and 15
— assessed the scope of the services provided by the Valuation
of the financial statements The directors review and challenge
Agent in relation to the private company investments as well as
the valuation of private company
the objectivity, capability and competence of the Valuation Agent;
investments proposed by Baillie Gifford
& Co Limited (the ‘Investment Manager’). — held discussions with the Investment Manager to understand the
The Investment Manager’s investment valuation approach;
valuation policy applies techniques
— read the valuation reports and memoranda produced by the
consistent with the International Private
Valuation Agent and by the Investment Manager, including the
Equity and Venture Capital Valuation
Investment Manager’s considerations of the Valuation Agent’s reports;
(‘IPEV’) Guidelines 2018. In assessing
— assessed the reasonableness and appropriateness of the valuation
fair value the Investment Manager
approach and methodology applied to each private company
considers information provided by their
investment;
independent third party valuation firm
— benchmarked the assumptions established in the valuation models
(the ‘Valuation Agent’).
employed to observable market data;
Risk:
— obtained an understanding of how the impact of global economic
The valuation of the Company’s private
factors and the resultant increase in uncertainty have been
company investments is a significant
reflected in the valuation of private company investments; and
risk area of our audit, given that they
represent a significant portion of the — corroborated material investee company inputs and recent investment
net assets of the Company. transactions used in the valuation models to supporting documentation.
Assessing disclosures:
The valuation of the Company’s private
We also considered the Company’s disclosures (see notes 1 (d) and 15)
company investments incorporates a
in relation to the use of estimates and judgements relating to the valuation
risk of error given the significance of
of private company investments and the Company’s investment valuation
estimates and judgements that may
policies adopted in note 1 (e) and fair value disclosures in note 7 for
be involved in the determination of
compliance with International Financial Reporting Standards.
their fair value.
The Schiehallion Fund Limited 41
Financial Report
Our application of materiality and an overview of the scope of our audit
Materiality for the financial statements as a whole was set at $23,100,000, determined with reference to a benchmark of net assets of
$1,153,183,000, of which it represents approximately 2.0% (2022 – 2.0%).
In line with our audit methodology, our procedures on individual account balances and disclosures were performed to a lower threshold,
performance materiality, so as to reduce to an acceptable level the risk that individually immaterial misstatements in individual account
balances add up to a material amount across the financial statements as a whole. Performance materiality for the Company was set at
75% (2022 – 75%) of materiality for the financial statements as a whole, which equates to $17,325,000. We applied this percentage in
our determination of performance materiality because we did not identify any factors indicating an elevated level of risk.
We reported to the Audit Committee any corrected or uncorrected identified misstatements exceeding $1,155,000, in addition to other
identified misstatements that warranted reporting on qualitative grounds.
Our audit of the Company was undertaken to the materiality level specified above, which has informed our identification of significant
risks of material misstatement and the associated audit procedures performed in those areas as detailed above.
Going concern
The directors have prepared the financial statements on the going concern basis as they do not intend to liquidate the Company or
to cease its operations, and as they have concluded that the Company’s financial position means that this is realistic. They have also
concluded that there are no material uncertainties that could have cast significant doubt over its ability to continue as a going concern
for at least a year from the date of approval of the financial statements (the ‘going concern period’).
In our evaluation of the directors’ conclusions, we considered the inherent risks to the Company’s business model and analysed how
those risks might affect the Company’s financial resources or ability to continue operations over the going concern period. The risk that
we considered most likely to affect the Company’s financial resources or ability to continue operations over this period was the availability
of capital to meet operating costs and other financial commitments.
We considered whether this risk could plausibly affect the liquidity in the going concern period by comparing severe, but plausible
downside scenarios that could arise from this risk against the level of available financial resources indicated by the Company’s financial
forecasts.
We considered whether the going concern disclosure in note 1 (a) to the financial statements gives a full and accurate description of
the directors’ assessment of going concern.
Our conclusions based on this work:
— we consider that the directors’ use of the going concern basis of accounting in the preparation of the financial statements is
appropriate;
— we have not identified, and concur with the directors’ assessment that there is not, a material uncertainty related to events or
conditions that, individually or collectively, may cast significant doubt on the Company’s ability to continue as a going concern
for the going concern period; and
— we found the going concern disclosure in the notes to the financial statements to be acceptable.
However, as we cannot predict all future events or conditions and as subsequent events may result in outcomes that are inconsistent
with judgements that were reasonable at the time they were made, the above conclusions are not a guarantee that the Company will
continue in operation.
Fraud and breaches of laws and regulations – ability to detect
Identifying and responding to risks of material misstatement due to fraud
To identify risks of material misstatement due to fraud (‘fraud risks’) we assessed events or conditions that could indicate an incentive
or pressure to commit fraud or provide an opportunity to commit fraud. Our risk assessment procedures included:
— enquiring of management as to the Company’s policies and procedures to prevent and detect fraud as well as enquiring whether
management have knowledge of any actual, suspected or alleged fraud;
— reading minutes of meetings of those charged with governance; and
— using analytical procedures to identify any unusual or unexpected relationships.
As required by auditing standards, we perform procedures to address the risk of management override of controls, in particular the risk
that management may be in a position to make inappropriate accounting entries. On this audit we do not believe there is a fraud risk
related to revenue recognition because the Company’s revenue streams are simple in nature with respect to accounting policy choice,
and are easily verifiable to external data sources or agreements with little or no requirement for estimation from management. We did
not identify any additional fraud risks.
42 Annual Report 2023
Financial Report
We performed procedures including
— Identifying journal entries and other adjustments to test based on risk criteria and comparing any identified entries to supporting
documentation; and
— incorporating an element of unpredictability in our audit procedures.
Identifying and responding to risks of material misstatement due to non-compliance with laws and regulations
We identified areas of laws and regulations that could reasonably be expected to have a material effect on the financial statements
from our sector experience and through discussion with management (as required by auditing standards), and from inspection of the
Company’s regulatory and legal correspondence, if any, and discussed with management the policies and procedures regarding
compliance with laws and regulations. As the Company is regulated, our assessment of risks involved gaining an understanding of
the control environment including the entity’s procedures for complying with regulatory requirements.
The Company is subject to laws and regulations that directly affect the financial statements including financial reporting legislation and
taxation legislation and we assessed the extent of compliance with these laws and regulations as part of our procedures on the related
financial statement items.
The Company is subject to other laws and regulations where the consequences of non-compliance could have a material effect on
amounts or disclosures in the financial statements, for instance through the imposition of fines or litigation or impacts on the Company’s
ability to operate. We identified financial services regulation as being the area most likely to have such an effect, recognising the
regulated nature of the Company’s activities and its legal form. Auditing standards limit the required audit procedures to identify non-
compliance with these laws and regulations to enquiry of management and inspection of regulatory and legal correspondence, if any.
Therefore if a breach of operational regulations is not disclosed to us or evident from relevant correspondence, an audit will not detect
that breach.
Context of the ability of the audit to detect fraud or breaches of law or regulation
Owing to the inherent limitations of an audit, there is an unavoidable risk that we may not have detected some material misstatements
in the financial statements, even though we have properly planned and performed our audit in accordance with auditing standards.
For example, the further removed non-compliance with laws and regulations is from the events and transactions reflected in the financial
statements, the less likely the inherently limited procedures required by auditing standards would identify it.
In addition, as with any audit, there remains a higher risk of non-detection of fraud, as this may involve collusion, forgery, intentional
omissions, misrepresentations, or the override of internal controls. Our audit procedures are designed to detect material misstatement.
We are not responsible for preventing non-compliance or fraud and cannot be expected to detect non-compliance with all laws and
regulations.
Other information
The directors are responsible for the other information. The other information comprises the information included in the annual report but
does not include the financial statements and our auditor’s report thereon. Our opinion on the financial statements does not cover the
other information and we do not express an audit opinion or any form of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider
whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise
appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this
other information, we are required to report that fact. We have nothing to report in this regard.
We have nothing to report on other matters on which we are required to report by exception
We have nothing to report in respect of the following matters where the Companies (Guernsey) Law, 2008 requires us to report to you if,
in our opinion:
— the Company has not kept proper accounting records; or
— the financial statements are not in agreement with the accounting records; or
— we have not received all the information and explanations, which to the best of our knowledge and belief are necessary for the
purpose of our audit.
Respective responsibilities
Directors’ responsibilities
As explained more fully in their statement set out on page 40, the directors are responsible for: the preparation of the financial
statements including being satisfied that they give a true and fair view; such internal control as they determine is necessary to enable the
preparation of financial statements that are free from material misstatement, whether due to fraud or error; assessing the Company’s
ability to continue as a going concern, disclosing, as applicable, matters related to going concern; and using the going concern basis of
accounting unless they either intend to liquidate the Company or to cease operations, or have no realistic alternative but to do so.
The Schiehallion Fund Limited 43
Financial Report
Auditor’s responsibilities
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue our opinion in an auditor’s report. Reasonable assurance is a high level of
assurance, but does not guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement
when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in aggregate, they could
reasonably be expected to influence the economic decisions of users taken on the basis of the financial statements.
A fuller description of our responsibilities is provided on the FRC’s website at frc.org.uk/auditorsresponsibilities.
The purpose of this report and restrictions on its use by persons other than the Company’s members, as a body
This report is made solely to the Company’s members, as a body, in accordance with section 262 of the Companies (Guernsey) Law,
2008. Our audit work has been undertaken so that we might state to the Company’s members those matters we are required to state to
them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to
anyone other than the Company and the Company’s members, as a body, for our audit work, for this report, or for the opinions we have
formed.
Steven Stormonth
For and on behalf of KPMG Channel Islands Limited
Chartered Accountants and Recognised Auditors
Guernsey
27 March 2023
44 Annual Report 2023
Financial Report

## Statement of Comprehensive Income

|   | Notes | For the year ended 31 January 2023 |   |   | For the year ended 31 January 2022  |   |   |
| --- | --- | --- | --- | --- | --- | --- | --- |
|   |   |  Revenue US$'000 | Capital US$'000 | Total US$'000 | Revenue US$'000 | Capital US$'000 | Total US$'000  |
|  (Losses)/gains on investments | 7 | – | (311,938) | **(311,938)** | – | 39,460 | **39,460**  |
|  Currency losses |  | – | (17) | **(17)** | – | (19) | **(19)**  |
|  Income | 2 | 2,800 | – | **2,800** | 362 | – | **362**  |
|  Investment management fee | 3 | (8,931) | – | **(8,931)** | (8,427) | – | **(8,427)**  |
|  Other administrative expenses | 4 | (1,233) | – | **(1,233)** | (1,100) | – | **(1,100)**  |
|  **Operating (loss)/profit before finance costs and taxation** |  | (7,364) | (311,955) | **(319,319)** | (9,165) | 39,441 | **30,276**  |
|  Finance costs of borrowings |  | (10) | – | **(10)** | (7) | – | **(7)**  |
|  **Operating (loss)/profit before taxation** |  | (7,374) | (311,955) | **(319,329)** | (9,172) | 39,441 | **30,269**  |
|  Tax on ordinary activities |  | – | – | – | – | – | –  |
|  **(Loss)/profit and total comprehensive (loss)/income for the year** |  | **(7,374)** | **(311,955)** | **(319,329)** | **(9,172)** | **39,441** | **30,269**  |
|  **Total comprehensive (loss)/income for the year analysed as follows:** |  |  |  |  |  |  |   |
|  Attributable to ordinary shareholders |  | (4,923) | (189,131) | **(194,054)** | (7,238) | 51,460 | **44,222**  |
|  Attributable to C shareholders |  | (2,451) | (122,824) | **(125,275)** | (1,934) | (12,019) | **(13,953)**  |
|  **(Loss)/profit and total comprehensive (loss)/income for the year** |  | **(7,374)** | **(311,955)** | **(319,329)** | **(9,172)** | **39,441** | **30,269**  |
|  (Loss)/earnings per ordinary share | 5 | (0.98¢) | (37.79¢) | **(38.77¢)** | (1.47¢) | 10.46¢ | **8.99¢**  |
|  Loss per C share | 5 | (0.35¢) | (17.55¢) | **(17.90¢)** | (0.28¢) | (1.72¢) | **(2.00¢)**  |

The total column of this statement represents the Statement of Comprehensive Income of the Company. The supplementary revenue and capital columns are prepared under guidance published by the Association of Investment Companies.

All revenue and capital items in this statement derive from continuing operations.

The accompanying notes on pages 49 to 66 are an integral part of the Financial Statements.

The Schiehallion Fund Limited 45
Financial Report

## Statement of Financial Position

As at 31 January

|   | Notes | 2023 US$'000 | 2023 US$'000 | 2022 US$'000 | 2022 US$'000  |
| --- | --- | --- | --- | --- | --- |
|  **Fixed assets**  |   |   |   |   |   |
|  Investments held at fair value through profit or loss | 7 |  | 972,032 |  | 1,148,322  |
|  **Current assets**  |   |   |   |   |   |
|  US Treasury Bills | 15 | 136,797 |  | 268,216 |   |
|  Cash and cash equivalents | 15 | 45,799 |  | 86,898 |   |
|  Debtors | 8 | 884 |  | 405 |   |
|   |  | 183,480 |  | 355,519 |   |
|  **Current liabilities**  |   |   |   |   |   |
|  Amounts falling due within one year | 9 | (2,329) |  | (31,329) |   |
|  **Net current assets** |  |  | 181,151 |  | 324,190  |
|  **Net assets** |  |  | **1,153,183** |  | **1,472,512**  |
|  **Capital and reserves**  |   |   |   |   |   |
|  Share capital | 10/11 |  | 1,216,503 |  | 1,216,503  |
|  Capital reserve | 11 |  | (51,536) |  | 260,419  |
|  Revenue reserve | 11 |  | (11,784) |  | (4,410)  |
|  **Shareholders' funds** |  |  | **1,153,183** |  | **1,472,512**  |
|  **Shareholders' funds – ordinary shares**  |   |   |   |   |   |
|  Net asset value per ordinary share | 12 |  | 597,608 |  | 791,663  |
|  Number of ordinary shares in issue | 10 |  | 119.42¢ |  | 158.20¢  |
|   |  |  | 500,430,002 |  | 500,430,002  |
|  **Shareholders' funds – C shares**  |   |   |   |   |   |
|  Net asset value per C share | 12 |  | 555,575 |  | 680,849  |
|  Number of C shares in issue | 10 |  | 79.37¢ |  | 97.26¢  |
|   |  |  | 700,000,000 |  | 700,000,000  |

The Financial Statements of The Schiehallion Fund Limited (Company registration number 65915) were approved and authorised for issue by the Board of Directors and were signed on 27 March 2023.

Dr Linda Yueh CBE Chairperson

The accompanying notes on pages 49 to 66 are an integral part of the Financial Statements.

46 Annual Report 2023
Financial Report
### Statement of Changes in Equity
For the year ended 31 January 2023

|  |  | Share | Capital | Revenue | Shareholders’ |  |  |
| --- | --- | --- | --- | --- | --- | --- | --- |
|  |  | capital | reserve | reserve |  |  | funds |
| Notes | US$’000 |  | US$’000 | US$’000 |  | US$’000 |  |

Shareholders’ funds at 1 February 2022 1,216,503 260,419 (4,410) 1,472,512
Ordinary shares issued 10/11 – – – –
C shares issued 10/11 – – – –
Total comprehensive loss – ordinary shares – (189,131) (4,923) (194,054)
Total comprehensive loss – C shares – (122,824) (2,451) (125,275)
Shareholders’ funds at 31 January 2023 1,216,503 (51,536) (11,784) 1,153,183
For the year ended 31 January 2022

|  |  | Share | Capital | Revenue | Shareholders’ |  |  |
| --- | --- | --- | --- | --- | --- | --- | --- |
|  |  | capital | reserve | reserve |  |  | funds |
| Notes | US$’000 |  | US$’000 | US$’000 |  | US$’000 |  |

Shareholders’ funds at 1 February 2021 480,340 220,978 4,762 706,080
Ordinary shares issued 10/11 41,361 – – 41,361
C shares issued 10/11 694,802 – – 694,802
Total comprehensive income/(loss) – ordinary shares – 51,460 (7,238) 44,222
Total comprehensive loss – C shares – (12,019) (1,934) (13,953)
Shareholders’ funds at 31 January 2022 1,216,503 260,419 (4,410) 1,472,512
The accompanying notes on pages 49 to 66 are an integral part of the Financial Statements.
The Schiehallion Fund Limited 47
Financial Report

## Statement of Cash Flows

|   | Notes | For the year ended 31 January 2023 |   | For the year ended 31 January 2022  |   |
| --- | --- | --- | --- | --- | --- |
|   |   |  US$'000 | US$'000 | US$'000 | US$'000  |
|  **Cash flows from operating activities**  |   |   |   |   |   |
|  Operating (loss)/profit before taxation |  |  | (319,329) |  | 30,269  |
|  US Treasury Bills interest |  |  | (1,618) |  | (166)  |
|  Net losses/(gains) on investments |  |  | 311,938 |  | (39,460)  |
|  Currency losses |  |  | 17 |  | 19  |
|  Changes in debtors and creditors |  |  | (899) |  | 879  |
|  **Net cash used in operating activities*** |  |  | **(9,891)** |  | **(8,459)**  |
|  **Cash flows from investing activities**  |   |   |   |   |   |
|  Acquisitions of US Treasury Bills |  | (161,229) |  | (1,031,088) |   |
|  Disposals of US Treasury Bills |  | 294,266 |  | 840,039 |   |
|  Acquisitions of investments | 7 | (166,076) |  | (474,843) |   |
|  Disposals of investments | 7 | 1,848 |  | 8,740 |   |
|  **Net cash used in investing activities** |  |  | **(31,191)** |  | **(657,152)**  |
|  **Cash flows from financing activities**  |   |   |   |   |   |
|  Ordinary shares issued | 10/11 | – |  | 41,613 |   |
|  C shares issued | 10/11 | – |  | 694,802 |   |
|  **Net cash inflow from financing activities** |  |  | **–** |  | **736,415**  |
|  **Net (decrease)/increase in cash and cash equivalents** |  |  | **(41,082)** |  | **70,804**  |
|  Effect of exchange rate fluctuations on cash and cash equivalents |  |  | (17) |  | (19)  |
|  Cash and cash equivalents at 1 February |  |  | 86,898 |  | 16,113  |
|  **Cash and cash equivalents at 31 January** |  |  | **45,799** |  | **86,898**  |

*Cash from operations includes interest received of US$700,000 (2022 – US$1,000).

|   | 2023 US$'000 | 2022 US$'000  |
| --- | --- | --- |
|  **Cash and cash equivalents comprise the following:**  |   |   |
|  Cash at bank | **45,799** | **86,898**  |

The accompanying notes on pages 49 to 66 are an integral part of the Financial Statements.

48 Annual Report 2023
Financial Report
### Notes to the Financial Statements
The Schiehallion Fund Limited is a non-cellular investment company (d) Accounting Estimates, Assumptions and Judgements
limited by shares, registered and incorporated in Guernsey under the The preparation of the Financial Statements requires the use of
Companies (Guernsey) Law, 2008 (the ‘Companies Law’) on 4 January estimates, assumptions and judgements. These estimates,
2019, with registration number 65915. The Company is a registered assumptions and judgements affect the reported amounts of
closed-ended investment scheme registered pursuant to the Protection assets and liabilities, at the reporting date. While estimates are
of Investors (Bailiwick of Guernsey) Law, 2020 and the Registered based on best judgement using information and financial data
Collective Investment Scheme Rules 2021 issued by the Guernsey available, the actual outcome may differ from these estimates.
Financial Services Commission. The key sources of estimation and uncertainty relate to the fair
The Company’s shares are listed on the Specialist Fund Segment of valuation of the private company investments.
the Main Market of the London Stock Exchange. Judgements
The Directors consider that the preparation of the Financial
1 Principal Accounting Policies
Statements involves the following key judgements:
The Financial Statements for the year ended 31 January 2023 have
been prepared in accordance with International Financial Reporting (i) the determination of the functional currency of the Company
Standards (‘IFRS’) as issued by the International Accounting Standards as US dollars (see rationale in 1(b) above); and
Board (‘IASB’). (ii) the fair valuation of the private company investments.
(a) Basis of Accounting The key judgements in the fair valuation process are:
The Financial Statements have been prepared in accordance with
(i) the Investment Manager’s determination of the appropriate
International Financial Reporting Standards (‘IFRS’). The Financial
application of the International Private Equity and Venture
Statements give a true and fair view and comply with the Companies
Capital Valuation (‘IPEV’) Guidelines 2018 to each private
(Guernsey) Law, 2008. Where presentational guidance set out in
company investment; and
the Statement of Recommended Practice (‘SORP’) for Investment
(ii) the Directors’ consideration of whether each fair value
Companies issued by the Association of Investment Companies
is appropriate following detailed review and challenge.
(‘AIC’) updated in July 2022 (the ‘AIC SORP’) is consistent with the
The judgement applied in the selection of the methodology
requirements of IFRS, the Directors have sought to prepare the
used (see 1(e) below) for determining the fair value of each
Financial Statements on a basis compliant with the recommendations
private company investment can have a significant impact
of the SORP.
upon the valuation.
Going Concern
Estimates
The Directors have adopted the going concern basis in preparing
The key estimate in the Financial Statements is the determination
the Company’s Financial Statements. The Board has, in particular,
of the fair value of the private company investments by the
considered the impact of heightened market volatility due to
Investment Manager for consideration by the Directors. This
macroeconomic and geopolitical concerns, including rising
estimate is key as it significantly impacts the valuation of the private
inflation and interest rates, the Russian invasion of Ukraine as well
company investments at the date of the Statement of Financial
as the lingering effects of the Covid-19 pandemic. The Board
Position. The fair valuation process involves estimation using
does not believe the Company’s going concern status is affected.
subjective inputs that are unobservable (for which market data is
The Company maintains sufficient cash balances to enable it to
unavailable). The main estimates involved in the selection of the
meet its liabilities as they fall due. It is the Directors’ opinion that
valuation process inputs are:
the Company has adequate resources to continue in operational
(i) the selection of appropriate comparable companies in order
existence for a period of at least twelve months from the date
to derive revenue multiples and meaningful relationships
of approval of these Financial Statements. In reaching this
between enterprise value, revenue and earnings growth.
conclusion the Directors considered the Company’s investment
Comparable companies are chosen on the basis of their
portfolio, cash position and expenses.
business characteristics and growth patterns;
(b) Functional and Presentational Currency
(ii) the selection of a revenue metric (either historical or forecast);
The Company’s functional and presentational currency is the US
dollar. The US dollar is the functional currency as the Company (iii) the application of an appropriate discount factor to reflect the
has issued its share capital in US dollars, its shareholders are reduced liquidity of private companies versus their listed peers;
based globally and the Company’s investment policy has global (iv) the estimation of the probability assigned to an exit being
reach. The Company’s performance is evaluated and its liquidity is through an initial public offering (‘IPO’) or a company sale;
managed in US dollars. Therefore, the US dollar is considered the
(v) the selection of an appropriate industry benchmark index to
currency that most closely represents the economic effects of the
assist with the valuation validation or the application of
underlying transactions, events and conditions.
valuation adjustments, particularly in the absence of
(c) Basis of Measurement established earnings or closely comparable peers; and
The Financial Statements have been prepared under the historical
(vi) the calculation of valuation adjustments derived from
cost convention, adjusted for the revaluation of fixed asset
milestone analysis (i.e. incorporating operational success
investments at fair value through profit or loss.
against the plan/forecasts of the business into the valuation).
The Schiehallion Fund Limited 49
Financial Report
Fair value estimates are cross-checked to alternative estimation The techniques applied are predominantly market-based
methods where possible to improve the robustness of the approaches. The market-based approaches available under
estimates. As the valuation outcomes may differ from the fair the IPEV Guidelines are set out below and are followed by an
value estimates a price sensitivity analysis is provided in Other explanation of how they are applied to the Company’s private
Price Risk Sensitivity in note 15 on pages 63 to 65 to illustra te the companies portfolio:
effect on the Financial Statements of an over or under estimation
— Multiples;
of the unobservable inputs used in the estimation of fair values.
— Industry Valuation Benchmarks; and
The risk of an over or under estimation of fair values is greater
— Available Market Prices.
when methodologies are applied using more subjective inputs.
The nature of the private companies portfolio currently will
Assumptions
influence the valuation technique applied. The valuation approach
The determination of fair value by the Investment Manager involves
recognises that, as stated in the IPEV Guidelines, the price of a
key assumptions dependent upon the valuation technique used.
recent investment, if resulting from an orderly transaction, generally
As explained in 1(e) below, the primary technique applied under
represents fair value as at the transaction date and may be an
the IPEV Guidelines is the Multiples approach. Where the Multiples
appropriate starting point for estimating fair value at subsequent
approach is used the valuation process recognises also, as stated
measurement dates. However, consideration is given to the facts
in the IPEV Guidelines, that the price of a recent investment may
and circumstances as at the subsequent measurement date,
be an appropriate calibration for estimating fair value. The Multiples
including changes in the market or performance of the investee
approach involves subjective inputs and therefore presents a
company. Milestone analysis is used where appropriate to
greater risk of over or under estimation and particularly in the
incorporate the operational progress of the investee company into
absence of a recent transaction. The key assumptions for the
the valuation. Additionally, the background to the transaction must
Multiples approach are that the selection of comparable companies
be considered. As a result, various Multiples-based techniques are
provides a reasonable basis for identifying relationships between
employed to assess the valuations particularly in those companies
enterprise value, revenue and growth to apply in the determination
with established revenues. Discounted cashflows are used where
of fair value. Other assumptions include:
appropriate. An absence of relevant industry peers may preclude
(i) the discount applied for reduced liquidity versus listed peers;
the application of the Industry Valuation Benchmarks technique
(ii) the probabilities assigned to an exit being through either an and an absence of observable prices may preclude the Available
IPO or a company sale; and Market Prices approach. All valuations are cross-checked for
(iii) that the application of milestone analysis and industry reasonableness by employing relevant alternative techniques.
benchmark indices are a reasonable basis for applying The private company investments are valued according to a three
appropriate adjustments to the valuations. monthly cycle of measur ement dates. The fair value of the private
company investments will be reviewed before the next scheduled
Valuations are cross-checked for reasonableness to alternative
three monthly measurement date on the following occasions:
Multiples-based approaches or benchmark index movements
as appropriate. — at the year end and half year end of the Company; and
(e) Investments — where there is an indication of a change in fair value as defined
in the IPEV guidelines (commonly referred to as ‘trigger’ events).
The Company’s investments are classified, recognised and
measured at fair value through profit or loss in accordance with A trigger event may include any of the following:
IFRS 9. Changes in fair value of investments and gains and losses
— a subsequent round of financing by the investee company;
on disposal are recognised as capital items in the Statement of
— a secondary transaction involving the investee company
Comprehensive Income.
where there is sufficient information available to enable an
Recognition and Initial Measurement
assessment of the nature of the transaction;
Purchases and sales of investments are accounted for on a trade
— a recent material change in the current or expected financial
date basis. Expenses incidental to purchase and sale are written
and/or operational performance of the investee company;
off to capital at the time of acquisition or disposal. All investments
— a material milestone achieved or missed by the investee
are designated as valued at fair value through profit or loss upon
company;
initial recognition and are measured at subsequent reporting
dates at fair value. — a change in the management personnel of the investee company;
Measurement and Valuation — a material change in the market environment in which the
investee company operates; or
Listed Investments
The fair value of listed security investments is bid value, or, in the — a material change in market indices or economic indicators.
case of holdings on certain recognised overseas exchanges, at last Derecognition
traded prices depending on the custom of the relevant exchange.
Financial assets are derecognised when the contractual rights to
Private Company Investments cash flows from the asset expire or the Company transfers the
Private company investments are valued at fair value by the Directors financial assets and substantially all of the risks and rewards of
following a detailed review and appropriate challenge of the ownership have been transferred.
valuations proposed by the Investment Manager. The Investment On derecognition of a financial asset, the difference between the
Manager’s private company investment valuation policy applies weighted average carrying amount of the asset (or the carrying
techniques consistent with the IPEV Guidelines. amount allocated to the proportion of the asset derecognised),
and the consideration received (including new asset obtained
less any liability assumed), is recognised in profit and loss.
50 Annual Report 2023
Financial Report
Financial liabilities are derecognised when the contractual (k) Taxation
obligations are discharged, cancelled or expired. The Company has applied for and been granted exemption from
Gains and Losses liability to income tax in Guernsey under the Income Tax (Exempt
Bodies) (Guernsey) Ordinance, 1989 in Guernsey for the current
Gains and losses on investments, including those arising from
period. The exemption must be applied for annually and will be
foreign currency exchange differences, are recognised in the
granted, subject to the payment of an annual fee, which is
Statement of Comprehensive Income as capital items.
currently fixed at £1,200 per applicant, provided the Company
The Investment Manager monitors the investment portfolio on a fair
qualifies for exemption under the applicable legislation.
value basis and uses the fair value basis for investments in making
It is the intention of the Directors to conduct the affairs of the
investment decisions and monitoring financial performance.
Company so as to ensure that it continues to qualify for exempt
(f) US Treasury Bills
company status for the purposes of Guernsey taxation.
Assets that are held in order to collect contractual cash flows
(l) Foreign Currencies
that are solely payments of principal and interest are measured
Transactions involving foreign currencies other than US dollars
at amortised cost. These assets are subsequently measured
are converted at the rate ruling at the time of the transaction.
at amortised cost using the effective interest rate method less
Assets and liabilities in such currencies are translated at the
impairment recognised using the expected credit loss method.
closing rates of exchange at the date of the Statement of
As at 31 January 2023 impairment recognised was nil (31 January
Financial Position. Any gain or loss arising from a change in
2022 – nil).
exchange rate subsequent to the date of the transaction is
(g) Cash and Cash Equivalents
included as an exchange gain or loss in the capital reserve or
Cash and cash equivalents include cash in hand and deposits
revenue reserve as appropriate. Foreign exchange movements
repayable on demand. Deposits are repayable on demand if they
on investments are included in the Statement of Comprehensive
can be withdrawn at any time without notice and without penalty
Income within gains or losses on investments.
or if they have a maturity or period of notice of not more than one
(m) Capital Reserve
working day.
Gains and losses on disposal of investments, changes in the fair
(h) Financial Liabilities
value of investments held and realised and unrealised foreign
Bank loans and overdrafts are classified as loans and are initially
exchange differences of a capital nature are dealt with in this
recorded at the proceeds received net of direct costs and
reserve after being recognised in the Statement of Comprehensive
subsequently measured at amortised cost.
income. Purchases of the Company’s own shares may be funded
(i) Income from this reserve.
(i) Income from equity investments is brought into account on
(n) Revenue Reserve
the date on which the investments are quoted ex-dividend or,
Income and expense items of a revenue nature are included in
where no ex-dividend date is quoted, when the Company’s
the Revenue Reserve after being recognised in the Statement
right to receive payment is established.
of Comprehensive Income. Any dividends paid by the Company
(ii) If scrip dividends are taken in lieu of dividends in cash, the net would be funded from this reserve.
amount of the cash dividend declared is credited to the
(o) Single Segment Reporting
revenue account. Any excess in the value of the shares
The chief operating decision maker is the Board of Directors.
received over the amount of the cash dividend foregone is
The Directors are of the opinion that the Company is engaged
recognised as capital.
in a single segment of business, being investment business,
(iii) Special dividends are treated as repayments of capital or
consequently no segmental analysis is presented.
income depending on the facts of each particular case.
(p) New and Revised Standards
(iv) Overseas dividends include the taxes deducted at source.
The following accounting standards were issued but not yet
(v) Interest receivable on bank deposits is recognised on an effective at the year end. The Directors have considered their
accruals basis. impact and have concluded they will not have a significant impact
(vi) Interest from fixed interest securities is recognised on an on the Financial Statements:
effective interest rate basis. Where income returns are for a (i) Disclosure of Accounting Policies – Amendments to IAS 1
non-fixed amount, the impact of these returns on the effective and IFRS Practice Statement 2
interest rate is recognised once such returns are known. (ii) Definition of Accounting Estimates – Amendments to IAS 8
If there is reasonable doubt that a return will be received,
its recognition is deferred until that doubt is removed.
(j) Expenses
All expenses are accounted for on an accruals basis. Expenses
are charged through the revenue column of the Statement of
Comprehensive Income except where: (i) they relate directly to
the acquisition or disposal of an investment (transaction costs),
in which case they are recognised as capital within losses/gains
on investments; and (ii) they relate directly to the buyback/
issuance of shar es, in which case they are added to the buyback
cost or deducted from the share issuance proceeds. Expenses
which do not explicitly relate to either the ordinary shares or
C shares are allocated 50:50 between both share classes (based
on appr oximate net asset values at time of C share issuance).
The Schiehallion Fund Limited 51
Financial Report

## 2 Income

|   | 2023 US$'000 | 2022 US$'000  |
| --- | --- | --- |
|  US Treasury Bills interest | 1,618 | 166  |
|  Overseas interest | 482 | 195  |
|  Deposit interest | 700 | 1  |
|  **Total income** | **2,800** | **362**  |

## 3 Investment Management Fee

|   | 2023 US$'000 | 2022 US$'000  |
| --- | --- | --- |
|  Investment management fee | **8,931** | **8,427**  |

Details of the Investment Management Agreement are set out on page 27. Under the terms of the Investment Management Agreement and with effect from the date the Company's ordinary shares were admitted to trading on the Specialist Fund Segment of the Main Market of the London Stock Exchange, the Investment Manager is entitled to an annual fee (exclusive of VAT, which shall be added where applicable) of: 0.9% on the net asset value excluding cash or cash equivalent assets up to and including US$650 million; 0.8% on the net asset value excluding cash or cash equivalent assets exceeding US$650 million up to and including US$1.3 billion; and 0.7% on the net asset value excluding cash or cash equivalent assets exceeding US$1.3 billion. Management fees are calculated and payable quarterly.

Cash equivalents include US Treasury Bills.

## 4 Other Administrative Expenses

|   | 2023 US$'000 | 2022 US$'000  |
| --- | --- | --- |
|  General administrative expenses | 517 | 511  |
|  Administrator's fee | 86 | 92  |
|  Auditor's remuneration for audit services | 236 | 248  |
|  Directors' fees | 394 | 249  |
|   | **1,233** | **1,100**  |

In the year to 31 January 2023 there were no fees paid to the Auditor, KPMG Channel Islands Limited, in respect of non-audit services. In the year to 31 January 2022 non-audit fees paid to the Auditor amounted to US$83,000 in respect of procedural services related to the issuance of the Company's C shares. As these costs related to the issuance of the C shares, they are capital in nature and included within the costs of issuing shares (see note 11).

## 5 Earnings per Share

|  Ordinary shares | Year ended 31 January 2023 |   | Year ended 31 January 2022  |   |
| --- | --- | --- | --- | --- |
|   |  US$'000 | ¢ | US$'000 | ¢  |
|  Revenue return on ordinary activities after taxation | (4,923) | (0.98) | (7,238) | (1.47)  |
|  Capital return on ordinary activities after taxation | (189,131) | (37.79) | 51,460 | 10.46  |
|  (Loss)/profit and total comprehensive (loss)/income for the year | **(194,054)** | **(38.77)** | **44,222** | **8.99**  |
|  **Weighted average number of ordinary shares in issue** | **500,430,002** |   | **491,934,440**  |   |

|  C shares | Year ended 31 January 2023 |   | Period from 27 April 2021 to 31 January 2022  |   |
| --- | --- | --- | --- | --- |
|   |  US$'000 | ¢ | US$'000 | ¢  |
|  (Loss)/revenue return on ordinary activities after taxation | (2,451) | (0.35) | (1,934) | (0.28)  |
|  Capital return on ordinary activities after taxation | (122,824) | (17.55) | (12,019) | (1.72)  |
|  Profit and total comprehensive (loss)/income for the year/period | **(125,275)** | **(17.90)** | **(13,953)** | **(2.00)**  |
|  **Weighted average number of C shares in issue** | **700,000,000** |   | **700,000,000**  |   |

52 Annual Report 2023
Financial Report

## 6 Ordinary Dividends

There were no dividends paid or proposed in respect of the year to 31 January 2023 (2022 – US$nil).

## 7 Financial Instruments

### Fair Value Hierarchy

The fair value hierarchy used to analyse the fair values of financial assets is described below. The levels are determined by the lowest (that is the least reliable or least independently observable) level of input that is significant to the fair value measurement for the individual investment in its entirety as follows:

**Level 1** – using unadjusted quoted prices for identical instruments in an active market;

**Level 2** – using inputs, other than quoted prices included within Level 1, that are directly or indirectly observable (based on market data); and

**Level 3** – using inputs that are unobservable (for which market data is unavailable).

The valuation techniques used by the Company are explained in the accounting policies on page 50. Transfers between levels of the fair value hierarchy take place when the criteria for recognition in another level are met, such as the listing of an investment.

|  As at 31 January 2023 | Level 1 US$'000 | Level 2 US$'000 | Level 3 US$'000 | Total US$'000  |
| --- | --- | --- | --- | --- |
|  Listed equities | 119,018 | – | – | **119,018**  |
|  Private company ordinary shares/warrants | – | – | 131,977 | **131,977**  |
|  Private company preference shares* | – | – | 708,914 | **708,914**  |
|  Private company convertible promissory notes | – | – | 12,123 | **12,123**  |
|  Total financial asset investments | **119,018** | – | **853,014** | **972,032**  |

|  As at 31 January 2022 | Level 1 US$'000 | Level 2 US$'000 | Level 3 US$'000 | Total US$'000  |
| --- | --- | --- | --- | --- |
|  Listed equities | 211,039 | – | – | **211,039**  |
|  Private company ordinary shares/warrants | – | – | 167,268 | **167,268**  |
|  Private company preference shares* | – | – | 765,207 | **765,207**  |
|  Private company convertible promissory notes | – | – | 4,808 | **4,808**  |
|  Total financial asset investments | **211,039** | – | **937,283** | **1,148,322**  |

* The investments in preference shares are not classified as equity holdings as they include liquidation preference rights that determine the repayment (or multiple thereof) of the original investment in the event of a liquidation event such as a take-over.

During the year ended 31 January 2023, investments with a fair value (IPO price) of US$nil (2022 – US$197,699,000) were transferred from Level 3 to Level 1 on becoming listed.

Investments in securities are financial assets held at fair value through profit or loss. In accordance with IFRS 13, the table above provides an analysis of these investments based on the fair value hierarchy described above, which reflects the reliability and significance of the information used to measure their fair value.

The Schiehallion Fund Limited 53
Financial Report
7 Financial Instruments (continued)
Fair Value Hierarchy (continued)
Private

|  | Listed | company |  |  |
| --- | --- | --- | --- | --- |
| securities |  | securities * |  | Total |
| US$’000 |  | US$’000 | US$’000 |  |

Cost of investments at 1 February 2022 147,488 752,024 899,512
Investment holding gains and losses at 1 February 2022 63,551 185,259 248,810
Fair value of investments at 1 February 2022 211,039 937,283 1,148,322
Movements in the period:
Purchases at cost † 25,795 113,068 138,863
Sales – proceeds (1,367) (1,848) (3,215)
– loss on disposal (13,633) – (13,633)
Changes in categorisation – – –
Changes in investment holding gains and losses (102,816) (195,489) (298,305)
Fair value of investments at 31 January 2023 119,018 853,014 972,032
Cost of investments at 31 January 2023 158,283 863,244 1,021,527
Investment holding gains and losses at 31 January 2023 (39,265) (10,230) (49,495)
Fair value of investments at 31 January 2023 * 119,018 853,014 972,032
* Includes holdings in preference shares, promissory notes, ordinary shares and warrants.
† During the period the Company disposed of its investment in Zymergen in exchange for proceeds comprising Ginkgo Bioworks Holdings
Inc shares, the equivalent value of which on the transaction date was US$1,367,163. The Ginkgo Bioworks Holdings Inc shares received
are a non-cash item and hence are not reflected in the Statement of Cash Flows on page 48.
The purchases and sales proceeds figures above include transaction costs of US$nil (2022 – US$99,000) and US$nil (2022 – US$nil) respectively.
Private

|  | Listed | company |  |  |
| --- | --- | --- | --- | --- |
| securities |  | securities * |  | Total |
| US$’000 |  | US$’000 | US$’000 |  |

Cost of investments at 1 February 2021 19,126 374,084 393,210
Investment holding gains and losses at 1 February 2021 83,316 137,653 220,969
Fair value of investments at 1 February 2021 102,442 511,737 614,179
Movements in the period:
Purchases at cost † 43,588 472,519 516,107
Sales – proceeds – (21,424) (21,424)
– gains on sales – 11,424 11,424
Changes in categorisation 197,699 (197,699) –
Changes in investment holding gains and losses (132,690) 160,726 28,036
Fair value of investments at 31 January 2022 211,039 937,283 1,148,322
Cost of investments at 31 January 2022 147,488 752,024 899,512
Investment holding gains and losses at 31 January 2022 63,551 185,259 248,810
Fair value of investments at 31 January 2022 * 211,039 937,283 1,148,322
* Includes holdings in preference shares, promissory notes, ordinary shares and warrants.
† During the period the Company disposed of its investment in Grail in exchange for proceeds comprising cash of US$8,740,000 and llumina
shares, the equivalent value of which on the transaction date was US$12,684,000. The Illumina shares received are a non-cash item and
hence are not reflected with the Statement of Cash Flows on page 44.
The purchases and sales proceeds figures above include transaction costs of US$99,000 (2021 – US$31,000) and US$nil (2021 – US$nil) respectively.
2023 2022
US$’000 US$’000
Net gains on investments designated at fair value through profit or loss
(Losses)/gains on investments disposed/taken over during the year (13,633) 11,424
Changes in investment holding gains on investments still held at year-end 45,244 176,112
Changes in investment holding losses on investments still held at year-end (343,549) (148,076)
(311,938) 39,460
54 Annual Report 2023
Financial Report
7 Financial Instruments (continued)
Investment Holdings
Details of significant holdings are noted below in accordance with the disclosure requirements of paragraph 82 of the AIC Statement
of Recommended Practice ‘Financial Statements of Investment Trust Companies and Venture Capital Trusts’ (updated in July 2022),
in relation to the private company investments. As required, this disclosure includes turnover, pre-tax profits and net assets attributable
to investors, as reported within the most recently audited financial statement of the investee companies.
Ordinary share private company
investment portfolio as at
31 January 2023 Proportion Income Net assets

|  |  | Latest | of capital |  |  |  | Book |  |  | recognised |  |  | Pre-tax | attributable to |  |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
|  | Financial |  |  | owned |  |  | cost |  | Value | from holding | Turnover | profit/(loss) |  | shareholders |  |
| Name Business | Statements |  |  |  | % | US$’000 |  | US$’000 |  | in the period | US$’000 |  | US$’000 |  | US$’000 |

Space

| Exploration | Designs, manufactures and |
| --- | --- |
| Technologies | launches advanced |
| Corp | rockets and spacecraft n/a 0.03 22,100 70,114 nil |

Scopely Inc Online gaming company n/a 0.87 21,299 60,223 nil
ByteDance Ltd Social media and news
aggregation company n/a 0.02 25,000 49,808 nil

| Daily Hunt (Ver | Telephone voice, data, text |
| --- | --- |
| Se Innovation | messaging, and roaming |
| Limited) | services n/a 1.34 37,119 32,032 nil |

Epic Games Inc Video game developer n/a 0.10 22,054 28,320 nil
Stripe Inc Online payment platform n/a 0.04 18,052 27,943 nil
Northvolt AB Lithium ion battery
manufacturer n/a 0.20 10,351 22,525 nil
Tempus Labs Oncological records
Inc aggregator and diagnostic
testing provider n/a 0.37 13,468 20,177 nil
Workrise
Information not publicly available

| Technologies | Jobs marketplace for the |
| --- | --- |
| Inc | energy sector n/a 0.94 22,500 17,073 nil |
| Indigo | Microbial seed treatments to |
| Agriculture Inc | increase crop yields and |

grain marketplace n/a 0.50 16,873 15,838 nil
Flix SE European mobility provider n/a 0.44 11,153 13,309 nil
Jiangxiaobai Producer of alcoholic
Holdings Ltd beverages n/a 0.54 9,996 12,892 nil
Away (JRSK Inc) Travel and lifestyle brand n/a 4.76 14,375 12,355 nil
Tanium Inc Online security management n/a 0.32 24,352 11,799 nil
Brex Inc Corporate credit cards for
startups n/a 0.13 10,006 11,291 nil
Carbon Inc Manufactures and develops
3D printers n/a 0.37 10,000 9,670 nil
Convoy Inc Marketplace for truckers and
shippers n/a 0.31 10,000 9,165 nil
Nuro Inc Developer of autonomous
delivery vehicles n/a 0.18 10,000 9,100 nil
Graphcore Ltd Computer chip developer n/a 0.49 11,200 8,706 nil 50,444 (184,540) 342,723
Cohesity Inc Data storage n/a 0.37 10,000 8,033 nil
Chime Financial Digital current account
Inc provider n/a 0.07 10,000 7,417 nil
MasterClass
(Yanka
Industries Inc) Online education platform n/a 0.36 10,000 6,488 nil
Information not publicly available
Honor
Technology Provider of home-care
Inc services n/a 0.46 5,000 2,990 nil
HeartFlow Inc Develops software for
cardiovascular disease
diagnosis and treatment n/a 0.28 10,000 2,029 nil
Ordinary share private company investment portfolio total 364,898 469,297
The Schiehallion Fund Limited 55
Financial Report
7 Financial Instruments (continued)
Investment Holdings
C share private company
investment portfolio
as at 31 January 2023 Proportion Income Net assets

|  |  | Latest | of capital |  |  | Book |  | recognised |  |  | Pre-tax | attributable to |  |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
|  | Financial |  | owned |  |  | cost | Value | from holding | Turnover | profit/(loss) |  | shareholders |  |
| Name Business | Statements |  |  | % | US$’000 |  | US$’000 | in the period | US$’000 |  | US$’000 |  | US$’000 |

Solugen Inc Combines enzymes and
metal catalysts to make
chemicals n/a 2.31 45,000 47,881 nil
Genki Forest
Technology
Group
Holdings
Limited Non-alcoholic beverages n/a 0.21 33,000 29,727 nil
Faire Wholesale
Inc Online wholesale marketplace n/a 0.36 36,186 29,404 nil
McMakler
GmbH Real estate services n/a 2.89 29,075 24,621 nil
Brex Inc Corporate credit cards for
startups n/a 0.28 34,040 24,441 nil
Databricks Inc Data software solutions n/a 0.07 26,900 23,523 nil
Grammarly Inc Online platform for checking
grammar, spelling and
improving written
communication n/a 0.36 45,002 22,353 nil
Rappi Inc Provider of an on-demand
delivery platform designed
to connect consumers with
local stores n/a 0.55 30,000 19,922 nil
Chime Financial Digital current account
Inc provider n/a 0.12 30,000 19,294 nil
Northvolt AB Lithium ion battery
manufacturer n/a 0.11 15,766 16,280 nil Information not publicly available
Kepler
Computing
Inc Semiconductor company n/a 1.64 15,000 15,919 nil
Loft Holdings
Ltd Online property platform n/a 4.83 21,718 15,569 nil
Merlin Labs Inc Autonomous flight technology n/a 2.53 15,000 13,842 nil
Flix SE European mobility provider n/a 0.44 13,848 13,356 nil
PsiQuantum Silicon photonic quantum
computing n/a 0.49 15,000 13,195 nil
Nuro Inc Developer of autonomous
delivery vehicles n/a 0.18 16,000 12,112 nil
Pet Circle (Millell
Pty Ltd) Pet food and accessories n/a 3.56 28,464 11,357 nil
Wayve
Technologies AI based software for
Ltd self-driving cars n/a 1.72 16,402 9,728 nil
Blockstream
Corp Inc Financial software developer n/a 0.51 15,000 8,885 nil
Convoy Inc Marketplace for truckers and
shippers n/a 0.13 5,000 4,210 nil
Tempus Labs Inc Oncological records
aggregator and diagnostic
testing provider n/a 0.06 5,000 4,210 nil
Honor
Technology Provider of home-care
Inc services n/a 0.49 6,945 3,888 nil
C share private company investment portfolio total 498,345 383,717
Company private company investment portfolio total 861,243 853,014
56 Annual Report 2023
Financial Report
7 Financial Instruments (continued)
Investment Holdings (continued)
Ordinary share private company
investment portfolio
as at 31 January 2022 Proportion Income Net assets

|  |  | Latest | of capital |  |  | Book |  | recognised |  |  | Pre-tax | attributable to |  |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
|  | Financial |  | owned |  |  | cost | Value | from holding | Turnover | profit/(loss) |  | shareholders |  |
| Name Business | Statements |  |  | % | US$’000 |  | US$’000 | in the period | US$’000 |  | US$’000 |  | US$’000 |

ByteDance Ltd Social media and news
aggregation company n/a 0.02 25,000 58,378 nil
Space

| Exploration | Designs, manufactures and |
| --- | --- |
| Technologies | launches advanced rockets |
| Corp | and spacecraft n/a 0.05 22,100 50,991 nil |

Scopely Inc Online gaming company n/a 1.11 21,299 47,918 nil
Stripe Inc Online payment platform n/a 0.04 18,053 45,047 nil

| Daily Hunt (Ver | Telephone voice, data, text |
| --- | --- |
| Se Innovation | messaging, and roaming |
| Limited) | services n/a 1.37 30,153 33,236 nil |

Tanium Inc Online security management n/a 0.33 24,353 29,773 nil
Information not publicly available
Epic Games Inc Video game developer n/a 0.11 22,055 29,013 nil
Tempus Labs Oncological records
Inc aggregator and diagnostic
testing provider n/a 0.38 13,468 27,089 nil
Workrise
Technologies Jobs marketplace for the
Inc energy sector n/a 0.94 22,500 25,026 nil
Northvolt AB Lithium ion battery
manufacturer n/a 0.17 10,351 24,177 nil
Indigo Microbial seed treatments to
Agriculture Inc increase crop yields and
grain marketplace n/a 0.58 16,873 16,958 nil
Graphcore Ltd Computer chip developer n/a 0.49 11,200 16,600 nil 3,327 (140,945) 251,862
Brex Inc Corporate credit cards for
startups n/a 0.16 10,006 15,708 nil
Chime Financial Digital current account
Inc provider n/a 0.02 10,000 15,530 nil
Nuro Inc Developer of autonomous
delivery vehicles n/a 0.15 10,000 14,554 nil
Jiangxiaobai Producer of alcoholic
Holdings Ltd beverages n/a 0.54 9,993 14,187 nil
Carbon Inc Manufactures and develops
3D printers n/a 0.39 10,000 12,920 nil
Convoy Inc Marketplace for truckers and
shippers n/a 0.31 10,000 12,185 nil
Information not publicly available
Cohesity Inc Data storage n/a 0.41 10,000 11,930 nil
Away (JRSK Inc) Travel and lifestyle brand n/a 5.04 14,375 11,920 nil
HeartFlow Inc Develops software for
cardiovascular disease
diagnosis and treatment n/a 0.63 10,000 11,413 nil
Flix SE European mobility provider n/a 0.39 11,153 10,560 nil
MasterClass
(Yanka
Industries Inc) Online education platform n/a 0.37 10,000 8,542 nil
Honor
Technology Provider of home-care
Inc services n/a 0.52 5,000 5,585 nil
Ordinary share private company investment portfolio total 357,931 549,241
The Schiehallion Fund Limited 57
Financial Report
7 Financial Instruments (continued)
Investment Holdings (continued)
C share private company
investment portfolio
as at 31 January 2022 Proportion Income Net assets

|  |  | Latest | of capital |  |  | Book |  | recognised |  |  | Pre-tax | attributable to |  |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
|  | Financial |  | owned |  |  | cost | Value | from holding | Turnover | profit/(loss) |  | shareholders |  |
| Name Business | Statements |  |  | % | US$’000 |  | US$’000 | in the period | US$’000 |  | US$’000 |  | US$’000 |

Grammarly Inc Online platform for checking
grammar, spelling and
improving written
communication n/a 0.35 45,002 45,002 nil
Faire Wholesale
Inc Online wholesale marketplace n/a 0.31 27,179 36,703 nil
Genki Forest
Technology
Group
Holdings
Limited Non-alcoholic beverages n/a 0.21 33,000 33,000 nil
Chime Financial Digital current account
Inc provider n/a 0.05 30,000 28,827 nil
McMakler
GmbH Real estate services n/a 3.11 29,075 28,583 nil
Pet Circle
(Millell Pty Ltd) Pet food and accessories n/a 3.56 28,464 28,182 nil
Solugen Inc Combines enzymes and
metal catalysts to make
chemicals n/a 7.15 30,000 28,129 nil
Rappi Inc Provider of an on-demand
delivery platform designed
to connect consumers with Information not publicly available
local stores n/a 0.59 30,000 25,542 nil
Databricks Inc Data software solutions n/a 0.07 26,900 24,766 nil
Loft Holdings
Ltd Online property platform n/a 0.77 20,000 19,224 nil
Wayve
Technologies AI based software for
Ltd self-driving cars n/a 2.22 16,402 16,267 nil
Nuro Inc Developer of autonomous
delivery vehicles n/a 0.23 16,000 15,320 nil
PsiQuantum Silicon photonic quantum
computing n/a 0.51 15,000 15,000 nil
Blockstream
Corp Inc Financial software developer n/a 0.50 15,000 13,937 nil
Flix SE European mobility provider n/a 0.49 13,848 11,305 nil
Northvolt AB Lithium ion battery
manufacturer n/a 0.10 6,276 6,797 nil
Honor
Technology Provider of home-care
Inc services n/a 0.72 6,945 6,458 nil
Convoy Inc Marketplace for truckers and
shippers n/a 0.15 5,000 5,000 nil
C share private company investment portfolio total 394,092 388,042
Company private company investment portfolio total 752,023 937,283
58 Annual Report 2023
Financial Report
8 Debtors
2023 2022
US$’000 US$’000
Amounts falling due within one year:
Income accrued (net of withholding taxes) 759 278
Share issuance awaiting settlement – –
Other debtors and prepayments 125 127
884 405
None of the above debtors are financial assets designated at fair value through profit or loss. The carrying amount of debtors is a reasonable

|  | approximation of fair value. There were no debtors that were past due or impaired at 31 | January 2023 (2022 – US$nil) |  | . |  |  |
| --- | --- | --- | --- | --- | --- | --- |
| 9 Creditors – Amounts falling due within one year |  |  |  |  |  |  |
|  |  |  |  | 2023 |  | 2022 |
|  |  |  | US$’000 |  | US$’000 |  |

Unsettled investment purchases – 28,580
Investment management fee 2,106 2,459
Administrator’s fee 7 8
Other creditors and accruals 216 282
2,329 31,329
None of the above creditors at 31 January 2023 (2022 – US$nil) are financial liabilities designated at fair value through profit or loss.

| 10 | Share Capital |  |  |  |  |  |  |  |  |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
|  |  |  | 2023 |  | 2023 |  | 2022 |  | 2022 |
|  |  | Number |  | US$’000 |  | Number |  | US$’000 |  |

Allotted, called up and fully paid ordinary shares of US$1 each 500,430,002 521,701 500,430,002 521,701
Allotted, called up and fully paid C shares of US$1 each 700,000,000 694,802 700,000,000 694,802
By way of a special resolution dated 15 March 2019 the Directors have a general authority to allot up to 720,000,000 ordinary shares or C shares,
such figure to include the ordinary shares issued at the initial placing. 477,250,000 ordinary shares were issued at the Company’s initial
placing. During the year to 31 January 2023, the Company issued no ordinary and no C shares. In the period from 31 January 2023 to
24 March 2023 no further shares were issued. Consequently, the Company has the authority to issue a further 219,570,000 ordinary shares
under the existing authority which expires at the end of the period concluding immediately prior to the Annual General Meeting of the Company
to be held in 2024 (or, if earlier, five years from the date of the resolution).
By way of a special resolution dated 18 March 2021, the Directors have a general authority to allot up to 700,000,000 C shares. On 26 April
2021, the Company issued 700,000,000 C shares of US$1 each and raised net proceeds of US$694,802,000. The issue costs of US$5,198,000
consisted of mainly broker commission (US$4,066,000), legal fees (US$601,000) and listing fees (US$396,000).
By way of an ordinary resolution passed on 12 May 2022, the Directors of the Company have general authority to make market purchases
of up to 75,014,457 ordinary shares, being 14.99% of the ordinary shares in issue. This authority will expire at the end of the period
concluding immediately prior to the second Annual General Meeting of the Company to be held on 12 May 2023. No shares have been
bought back during the year ended 31 January 2023 hence the authority remains at 75,014,457 ordinary shares.
The Company maintains separate Ordinary and C share portfolios, as detailed in note 7.
Holders of ordinary shares have the right to receive income and capital from assets attributable to such share class. Assets are allocated
through the appreciation and realisation of investments acquired using the proceeds of the ordinary share issue. Ordinary shareholders
have the right to receive notice of general meetings of the Company and have the right to attend and vote at all general meetings.
Holders of C shares have the right to receive income and capital from assets attributable to such share class. Assets are allocated through
the appreciation and realisation of investments acquired using the proceeds of the C share issue. C shareholders have the right to receive
notice of general meetings of the Company and have the right to attend and vote at all general meetings.
The Schiehallion Fund Limited 59
Financial Report

| 11 | Capital and Reserves |  |  |  |  |  |  |  |
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
|  |  |  | Share | Capital | Revenue | Shareholders’ |  |  |
|  |  |  | capital | reserve | reserve |  |  | funds |
|  |  | US$’000 |  | US$’000 | US$’000 |  | US$’000 |  |

At 1 February 2022 1,216,503 260,419 (4,410) 1,472,512
Changes in investment holding gains and losses – (311,938) – (311,938)
Exchange differences – (17) – (17)
Ordinary shares issued – – – –
C shares issued – – – –
Revenue earnings on ordinary activities after taxation – – (7,374) (7,374)
At 31 January 2023 1,216,503 (51,536) (11,784) 1,153,183

|  | Share | Capital | Revenue | Shareholders’ |  |  |
| --- | --- | --- | --- | --- | --- | --- |
|  | capital | reserve | reserve |  |  | funds |
| US$’000 |  | US$’000 | US$’000 |  | US$’000 |  |

At 1 February 2021 480,340 220,978 4,762 706,080
Changes in investment holding gains and losses – 39,460 – 39,460
Exchange differences – (19) – (19)
Ordinary shares issued 41,361 – – 41,361
C shares issued 700,000 – – 700,000
Costs in relation to C share issue (5,198) – – (5,198)
Revenue earnings on ordinary activities after taxation – – (9,172) (9,172)
At 31 January 2022 1,216,503 260,419 (4,410) 1,472,512
The capital reserve includes investment holding losses of US$62,934,000 (2022 – gains of US$248,810,000) as disclosed in note 7.
The revenue reserve and the capital reserve (to the extent it constitutes realised profits) may be distributed by way of dividend.
12 Net Asset Value per Share
The net asset value per ordinary and C share and the net assets attributable to the ordinary and C shareholders at 31 January calculated in
accordance with the Articles of Incorporation were as follows:
Ordinary shares 2023 2022
Shareholders’ funds US$597,608,000 US$791,663,000
Number of ordinary shares in issue at the year end 500,430,002 500,430,002
Net asset value per ordinary share 119.42¢ 158.20¢
C shares 2023 2022
Shareholders’ funds US$555,570,000 US$680,849,000
Number of C shares in issue at the year end 700,000,000 700,000,000
Net asset value per C share 79.37¢ 97.26¢
There are no dilutive or potentially dilutive shares in issue. The aggregate change in assets during the year attributable to the ordinary and
C shares is shown in note 11.
13 Contingencies, Guarantees and Financial Commitments
In accordance with the Corporate Income Tax (‘CIT’) Law of the People’s Republic of China (‘PRC’) and its latest Detailed Implementation
Regulations (‘DIRs’), the Tax Collection and Administration Law of the PTC (‘TCAL’) and its DIRS, the transfer of shares in the Company’s
private Chinese resident holdings would be subject to Chinese withholding tax on a taxable gain. However, the tax basis for calculating
taxable gains is unclear, varying between different locations and tax authorities within the PRC. As such, the amount of any tax that may
arise on disposal of the Company’s private Chinese resident holdings is currently highly uncertain. The Directors are however satisfied that,
based on information available to them at the time of approving these financial statements, the quantum of any such tax charge would not
be material and consequently no accrual for withholding tax is recognised within the financial statements.
At the year end, the Company had an investment in Stripe, which had a right, but not an obligation, to sell to the Company, Series H
Preferred shares up to a maximum cost of US$1,920,000. Subsequent to the year end, the Company participated in a fund raise for Stripe.
As part of this equity funding round this put option was extinguished.
60 Annual Report 2023
Financial Report

## 14 Transactions with Related Parties and the Investment Manager and Administrator

Each of the Directors is entitled to receive a fee from the Company at such rate as may be determined in accordance with the Articles of Incorporation. Directors' fees for the year are detailed in the Directors' Remuneration Report on pages 38 and 39.

All of the Directors will also be entitled to be paid all reasonable expenses properly incurred by them in connection with the performance of their duties. These expenses will include those associated with attending general Board or committee meetings and legal fees. The Board may determine that additional remuneration may be paid, from time to time, to any one or more Directors in the event such Director or Directors are requested by the Board to perform extra or special services on behalf of the Company.

No Director has a contract of service with the Company.

The Directors have the following shareholdings in the Company:

|  Name | Nature of interest | C shares held at 31 January 2023 | C shares held at 31 January 2022  |
| --- | --- | --- | --- |
|  L Yueh | Beneficial | 58,641 | –  |
|  J Mackie | Beneficial | 57,642 | –  |
|  D Chiswell | Beneficial | 520,000 | –  |
|  T Clark | Beneficial | 80,000 | –  |
|  R Holmes | Beneficial | 72,098 | –  |

Details of the investment management contract are set out in note 3. The management fee payable to the Investment Manager by the Company for the year ended 31 January 2023, as disclosed in note 3, was US$8,931,000 (2022 – US$8,427,000) of which US$2,106,000 was outstanding at 31 January 2023 (2022 – US$2,459,000), as disclosed in note 9.

The fee payable to the Administrator, for the year to 31 January 2023 as disclosed in note 4, was US$86,000 (2022 – US$92,000) of which US$7,000 was outstanding at 31 January 2023 (2022 – US$8,000) as disclosed in note 9.

## 15 Risk Management

The Company predominantly invests in long-term minority investments in later stage private businesses. Pending investment in private companies the Company may invest in a range of cash equivalent instruments. The Company may employ gearing on a short-term basis for the purpose of bridging investments and general working capital purposes. In pursuing its investment objective, the Company is exposed to various types of risk that are associated with the financial instruments and markets in which it invests.

These risks are categorised as market risk (comprising currency risk, interest rate risk and other price risk), liquidity risk and credit risk. The Board monitors closely the Company's exposures to these risks but does so in order to reduce the likelihood of a permanent loss of capital rather than to minimise short-term volatility. Risk provides the potential for both losses and gains. In assessing risk, the Board encourages the Investment Manager to exploit the opportunities that risk affords.

### Market Risk

The fair value or future cash flows of a financial instrument or other investment held by the Company may fluctuate because of changes in market prices. This market risk comprises three elements – currency risk, interest rate risk and other price risk. The Board of Directors reviews and agrees policies for managing these risks and the Company's Investment Manager both assesses the exposure to market risk when making individual investment decisions and monitors the overall level of market risk across the investment portfolio on an ongoing basis.

Details of the Company's investment portfolio are shown in note 7. The Company may, from time to time, enter into derivative transactions to hedge specific market, currency or interest rate risk. In the year to 31 January 2023, no such transactions were entered into (2022 – no such transactions). The Company's Investment Manager may not enter into derivative transactions without the prior approval of the Board.

### (i) Currency Risk

The Company's assets, liabilities and income are principally denominated in US dollars, the Company's functional currency and that in which it reports its results. Consequently, movements in the exchange rate of its functional currency relative to other foreign currencies will affect the US dollar value of those items.

The Investment Manager monitors the Company's exposure to foreign currencies and reports to the Board on a regular basis. The Investment Manager assesses the risk to the Company of the foreign currency exposure by considering the effect on the Company's net asset value and income of a movement in the rates of exchange to which the Company's assets, liabilities, income and expenses are exposed. However, the country in which a company is listed is not necessarily where it earns its profits. The movement in exchange rates on overseas earnings may have a more significant impact upon a company's valuation than a simple translation of the currency in which the company is quoted.

Exposure to currency risk through asset allocation, which is calculated by reference to the currency in which the asset or liability is quoted, is shown over the page.

The Schiehallion Fund Limited 61
Financial Report
15 Risk Management (continued)
Currency Risk (continued)

|  |  |  | US Treasury |  | Other debtors |  | Net |
| --- | --- | --- | --- | --- | --- | --- | --- |
|  | Investments |  | Bills and cash |  | and creditors * | exposure |  |
| At 31 January 2023 |  | US$’000 |  | US$’000 | US$’000 | US$’000 |  |

Sterling 58,555 237 124 58,916
Euro 51,286 – – 51,286
Indian rupee 11,357 – – 11,357
Australian dollar 32,032 – – 32,032
Total exposure to currency risk 153,230 237 124 153,591
US dollar 818,802 182,359 (1,569) 999,592
972,032 182,596 (1,445) 1,153,183

|  |  |  | US Treasury |  | Other debtors |  | Net |
| --- | --- | --- | --- | --- | --- | --- | --- |
|  | Investments |  | Bills and cash |  | and creditors * | exposure |  |
| At 31 January 2022 |  | US$’000 |  | US$’000 | US$’000 | US$’000 |  |

Sterling 64,911 445 127 65,483
Euro 50,448 28,580 – 79,028
Indian rupee 33,236 – – 33,236
Australian dollar 28,182 – – 28,182
Total exposure to currency risk 176,777 29,025 127 205,929
US dollar 971,545 326,089 (31,051) 1,266,583
1,148,322 355,114 (30,924) 1,472,512
* Includes net non-monetary assets of US$124,000 (2022 – US$127,000).
Currency Risk Sensitivity
At 31 January 2023, if the US dollar had strengthened by 10% in relation to all other currencies, with all other variables held constant,
total net assets and profit and total comprehensive income for the year to 31 January 2023 would have decreased by US$15,359,000
(2022 (5%) – US$10,296,000). A 10% weakening of the US dollar to other currencies, with all other variables held constant, would have
had an equal but opposite effect on the Financial Statement amounts.
A change of 10% in foreign currency rates (2022 – 5%) has been considered to be a reasonably plausible change reflective of market
circumstance in the year.
(ii) Interest Rate Risk
Interest rate movements may affect directly the level of income receivable on cash deposits and the interest payable on any variable rate borrowings.
They may also impact upon the market value of investments as the effect of interest rate movements upon the earnings of a company may
have a significant impact upon the valuation of that company’s equity.
The possible effects on fair value and cash flows that could arise as a result of changes in interest rates are taken into account when making
investment decisions and when entering borrowing agreements.
The Board reviews on a regular basis the amount of investments in cash and the income receivable on cash deposits.
The Company may finance, on a short-term basis, part of its activities through borrowings at approved levels. The amount of any such borrowings
and the approved levels are monitored and reviewed regularly by the Board.
The interest rate risk profile of the Company’s financial assets and liabilities at 31 January 2023 and 31 January 2022 is shown below.
Financial Assets

|  | 2023 |  |  | 2023 |  | 2022 |  |  | 2022 |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Fair value |  | Weighted average |  |  | Fair value |  | Weighted average |  |  |
| US$’000 |  |  | interest rate |  | US$’000 |  |  | interest rate |  |

Cash
US dollar 45,562 – 57,873 –
Euro – – 28,580 –
Sterling 237 – 445 –
The cash deposits generally comprise overnight call or short-term money market deposits and earn interest at floating rates based on
prevailing bank base rates.
62 Annual Report 2023
Financial Report
15 Risk Management (continued)
Interest Rate Risk (continued)
Interest Rate Risk Sensitivity
Financial Liabilities
The Company currently has no financial liabilities.
An increase of 100 basis points in interest rates, with all other variables being held constant, would have increased the Company’s total net
assets and profit and total comprehensive income for the year ended 31 January 2023 by US$511,000 (2022 – US$517,000). This is mainly due
to the Company’s exposure to interest rates on its cash balances. A decrease of 100 basis points would have had an equal but opposite effect.
A change of 100 basis points in interest rates has been considered to be a reasonably plausible change taking account of the movement
in interest rates during the year.
(iii) Other Price Risk
Changes in market prices other than those arising from interest rate risk or currency risk may also affect the value of the Company’s net
assets. The Board manages the market price risks inherent in the investment portfolio by ensuring full and timely access to relevant
information from the Investment Manager. The Company’s portfolio of private company Level 3 investments is not necessarily affected by
market performance, however the valuations are affected by the performance of the underlying securities in line with the valuation criteria in
note 1(e). The Board meets regularly and at each meeting reviews investment performance, the investment portfolio and the rationale for
the current investment portfolio positioning to ensure consistency with the Company’s objectives and investment policies. Investments are
selected based upon the merit of individual companies. The portfolio does not seek to reproduce any index.
Other Price Risk Sensitivity
A full list of the Company’s investments is given on pages 21 to 23. In addition, an analysis of the investment portfolio by broad geographical,
industrial or commercial sector is shown on page 24.
15.1% of the Company’s ordinary shares net assets are invested in listed investments. 5.2% of the Company’s C shares net assets are
invested in listed investments.
78.5% of the Company’s ordinary shares net assets are invested in private company investments. 69.1% of the Company’s C shares net
assets are invested in private company investments.
A 20% increase in quoted equity valuations at 31 January 2023 would have increased total net assets and net return after taxation by
US$23,804,000 (2022 (10% increase) – US$21,104,000). A decrease of 20% would have an equal but opposite effect.
The fair valuation of the private company investments is influenced by the estimates, assumptions and judgements made in the fair valuation
process (see note 1(d) on pages 49 and 50).
The private companies sensitivity analysis below recognises that the valuation methodologies employed involve different levels of subjectivity in
their inputs. The sensitivity analysis applies a wider range of input variable sensitivity to the Multiples methodology as it involves more significant
subjective estimation than the recent transaction method (the risk of over or under estimation is higher due to the greater subjectivity involved,
for example, in selecting the most relevant measure of sustainable revenues and identifying appropriate comparable companies).
As at
31 January 2023
Fair value of

| Valuation | investments |  | Significant unobservable |  |  | Sensitivity |  | Sensitivity to changes in significant |
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
| technique |  | US$’000 | inputs | * Range |  |  | % | unobservable inputs |
| Market approach |  | 444,168 EV/LTM revenue multiple |  |  | 1.4x–7.7x |  | 10% | If EV/LTM multiples changed by |
| using comparable |  |  |  |  |  |  |  | +/-10%, the fair value would change |
| trading multiples |  |  |  |  |  |  |  | by $29,726,888 and ($30,223,319). |
|  |  |  | EV/NTM revenue multiple |  | 2.1x–4.5x |  | 10% | If EV/NTM multiples changed by |

+/-10%, the fair value would change
by $1,067,698 and ($1,067,709).
Valuation (discount)/ (18.7%) to 10% If a +/- 10% adjustment is applied to the
premium 117.6% calculated premiums and discounts the
fair value would change by $5,091,514
and ($4,392,862).

| Comparable | 310,833 Selection of comparable |  |  | (40%)–20% 10% If input comparable company performance |  |
| --- | --- | --- | --- | --- | --- |
| company |  |  | companies |  | changed by +/-10%, the fair value would |
| performance |  |  |  |  | change by $19,987,767 and ($20,249,838) |
| Price of expected |  | 2,029 Execution risk discount n/a 10% If the execution risk changed by |  |  |  |
| transaction |  |  |  |  | +/-10%, the fair value would change |

by +/- $202,908.
Recent transaction 125,711 n/a n/a n/a n/a
price
Total 853,014
The Schiehallion Fund Limited 63
Financial Report
15 Risk Management (continued)
Other Price Risk Sensitivity (continued)
Comparable company performance considers the movements in index performance and comparable company share prices from the last
transaction date to the point of valuation. Consideration is also given to the probability of different liquidation scenarios. For the investments
where an adjusted recent transaction was appropriate, the comparable share prices ranged from (40%) to 20%. Trading multiples involve
reviewing the performance of each holding against their respective peer-group. For the investments where a trading-multiples methodology
was appropriate, the enterprise value /last twelve months multiple ranged from 1.4x–7.7x and the enterprise value/forecast revenue was
2.1x–4.5x. The probability of all liquidation scenarios was deemed to be equal, aside from those holdings where an upcoming IPO/acquisition
is imminent, however there has been no impact on the disclosures above. These movements and scenarios were considered along with the
last transaction price to determine a fair value at the valuation point.
As at
31 January 2022
Fair value of

| Valuation | investments |  |  | Sensitivity |  | Sensitivity to changes in significant |
| --- | --- | --- | --- | --- | --- | --- |
| approach |  | US$’000 | Significant unobservable input* Range |  | % | unobservable inputs |
| Recent transaction |  | 317,595 n/a n/a n/a n/a |  |  |  |  |

price

| Market approach | 332,816 EV/LTM revenue multiple |  | 3.9x–13.2x |  | 10% | If EV/LTM multiples changed by +/-10%, |
| --- | --- | --- | --- | --- | --- | --- |
| using comparable |  |  |  |  |  | the fair value would change by |
| trading multiples |  |  |  |  |  | US$25,095,152 and (US$24,533,059) |
|  |  | EV/NTM revenue multiple |  | 2.7x | 10% | If EV/LTM multiples changed by |

+/-10%, the fair value would change by
US$1,041,740 and (US$932,671)
Valuation (discount)/ (14.5%)–70.6% If the valuation discount/premium
premium changed by +/-10% of the discount/
premium, the fair value would change
by US$1,716,750 and (US$2,754,025)
Price of expected 81,154 Execution risk discount 10% 10% If the execution risk changed by
transaction +/-10%, the fair value would change
by +/-US$8,115,427

| Comparable | 205,718 Selection of comparable |  | (34%)–22% 10% If input comparable company performance |  |
| --- | --- | --- | --- | --- |
| company |  | companies |  | changed by +/-10%, the fair value |
| performance |  |  |  | would change by US$14,909,056 |

and (US$15,162,494)
Total 937,283
*Significant Unobservable Inputs
The variable inputs applicable to each broad category of valuation basis will vary dependent on the particular circumstances of each private
company valuation. An explanation of each of the key variable inputs is provided below and includes an indication of the range in value for
each input, where relevant. The assumptions made in the production of the inputs are described in note 1(d) on pages 49 and 50.
Selection of Appropriate Benchmarks
The selection of appropriate benchmarks is assessed individually for each investment. The industry and geography of each company are key
inputs to the benchmark selection.
Selection of Comparable Companies
The selection of comparable companies is assessed individually for each investment at the point of investment, and the relevance of the
comparable companies is continually evaluated at each valuation. The key criteria used in selecting appropriate comparable companies are
the industry sector in which they operate, the geography of the company’s operations, the respective revenue and earnings growth rates
and the operating margins. Typically, between 4 and 10 comparable companies will be selected for each investment, depending on how
many relevant comparable companies are identified. The resultant revenue or earnings multiples derived will vary depending on the
companies selected and the industries they operate in.
Probability Estimation of Liquidation Events
The probability of a liquidation event such as a company sale, or alternatively an initial public offering (‘IPO’), is a key variable input in the
transaction-based and multiples-based valuation techniques. The probability of an IPO versus a company sale is typically estimated from
the outset to be 50:50 if there has been no indication by the company of pursuing either of these routes. If the company has indicated an
intention to IPO, the probability is increased accordingly to 7 5% and if an IPO has become a certainty the probability is increased to 100%.
Likewise, in a scenario where a company is pursuing a trade sale the weightings will be adjusted accordingly in favour of a sale scenario,
or in a situation where a company is underperforming expectations significantly and therefore deemed very unlikely to pursue an IPO.
64 Annual Report 2023
Financial Report
15 Risk Management (continued)
Other Price Risk Sensitivity (continued)
Application of Valuation Basis
Each investment is assessed independently, and the valuation basis applied will vary depending on the circumstances of each investment.
When an investment is pre-revenue, the focus of the valuation will be on assessing the recent transaction and the achievement of key
milestones since investment. Adjustments may also be made depending on the performance of comparable benchmarks and companies.
For those investments where a trading multiples approach can be taken, the methodology will factor in revenue, earnings or net assets as
appropriate for the investment, and where a suitable correlation can be identified with the comparable companies then a regression analysis
will be performed. Discounted cash flows will also be considered where appropriate forecasts are available.
Estimated Sustainable Earnings
The selection of sustainable revenue or earnings will depend on whether the company is sustainably profitable or not, and where it is not
then sustainable revenues will be used in the valuation. The valuation approach will typically assess companies based on the last twelve
months of revenue or earnings, as they are the most recent available and therefore viewed as the most reliable. Where a company has
reliably forecasted earnings previously or there is a change in circumstance at the business which will impact earnings going forward,
then forward estimated revenue or earnings may be used instead.
Application of Liquidity Discount
The application of a liquidity discount will be applied either through the calibration of a valuation against the most recent transaction,
or by application of a specific discount. The discount applied where a calibration is not appropriate is typically 10%, reflecting that the
majority of the investments held are substantial companies with some secondary market activity.
Liquidity Risk
This is the risk that the Company will encounter difficulty in meeting obligations associated with financial liabilities. Investments in private
businesses are expected to comprise a material proportion of the Company’s portfolio. Interests in private businesses are highly illiquid and
have no public market, which may affect the Company’s ability to vary its portfolio or dispose of or liquidate part of its portfolio in a timely
fashion, or at all, and at satisfactory prices in response to changes in economic or other conditions. At 31 January 2023, the Company,
within the allocation of net assets due to the C shares, held US$136,797,000 of US Treasury Bills (2022 – US$268,216,000) which are
fully realisable. The Board provides guidance to the Investment Manager as to the maximum exposure to any one holding and to the
maximum aggregate exposure to substantial holdings.
The Company has the power to take out borrowings, which give it access to additional funding when required. There are no borrowings as
at 31 January 2023 (2022 – US$nil).
Credit Risk
This is the risk that a failure of a counterparty to a transaction to discharge its obligations under that transaction could result in the Company
suffering a loss. This risk is managed as follows:
— where the Investment Manager makes an investment in a bond or other security with credit risk, that credit risk is assessed and then
compared to the prospective investment return of the security in question;
— the Depositary is liable for the loss of financial instruments held in custody. The Depositary will ensure that any delegate segregates the
assets of the Company. The Investment Manager monitors the Company’s risk by reviewing the Custodian’s internal control reports and
reporting its findings to the Board;
— investment transactions are carried out with brokers whose creditworthiness is reviewed by the Investment Manager. Transactions are
ordinarily undertaken on a delivery versus payment basis whereby the Company’s custodian bank ensures that the counterparty to any
transaction entered into by the Company has delivered on its obligations before any transfer of cash or securities away from the
Company is completed;
— the creditworthiness of the counterparty to transactions involving derivatives, structured notes and other arrangements, wherein the
creditworthiness of the entity acting as broker or counterparty to the transaction is likely to be of sustained interest, are subject to
rigorous assessment by the Investment Manager; and
— cash is only held at banks that are regularly reviewed by the Investment Manager. At 31 January 2023, all cash deposits were held with
the custodian bank which has a credit rating of F1+ (2022 – F1+).
The Schiehallion Fund Limited 65
Financial Report

## 15 Risk Management (continued)

### Credit Risk Exposure

The exposure to credit risk at 31 January was:

|   | 2023 US$'000 | 2022 US$'000  |
| --- | --- | --- |
|  US Treasury Bills | 136,797 | 268,216  |
|  Cash and short-term deposits | 45,799 | 86,898  |
|  Debtors and prepayments | 884 | 405  |
|   | **183,480** | **355,519**  |

The maximum exposure in cash and cash equivalents during the year to 31 January 2023 was US$319,868,000 (2022 – US$746,151,000) and the minimum was US$181,612,000 (2022 – US$69,589,000). None of the Company's financial assets are past due or impaired.

### Fair Value of Financial Assets and Financial Liabilities

The Directors are of the opinion that the carrying amount of financial assets and liabilities of the Company in the Statement of Financial Position approximate their fair value.

### Capital Management

The capital of the Company is its share capital and reserves as set out in note 11. The objective of the Company is to invest predominantly in long-term minority investments in later stage private businesses in order to achieve capital growth. The Company's investment policy is set out on pages 5 and 6. In pursuit of the Company's objective, the Board has a responsibility for ensuring the Company's ability to continue as a going concern are set out on page 34 and details of the related risks and how they are managed are set out on pages 7 to 10 and pages 33 and 34, respectively. The Company has the authority to issue and buyback its shares and changes to the share capital during the period are set out in note 10.

## 16 Subsequent Events

A detailed in note 13, subsequent to the Company's year end the put option to acquire shares in Stripe was extinguished.

66 Annual Report 2023
Shareholder Information

## Notice of Annual General Meeting

The Company's Annual General Meeting (AGM) is being convened at 12 noon on Friday, 12 May, at the offices of at the offices of Alter Domus, North Suite, 1st Floor, Regency Court, Glategny Esplanade St Peter Port, Guernsey, Channel Islands, GY1 1WW.

The Board encourages all shareholders to submit proxy voting forms, appointing the chairperson of the AGM, as soon as possible and, in any event, by no later than 12 noon on 10 May 2023.

We would encourage shareholders to monitor the Company's website at schiehallionfund.com. Should shareholders have questions for the Board or the Managers or any queries as to how to vote, they are welcome as always to submit them by email to adgg-aafa-f@alterdomus.com or call Hannah Dunnel at Alter Domus (Guernsey) Limited on +44 (0) 1481 742 255.

Alter Domus (Guernsey) Limited may record your call.

If you or, if appointed, your proxy wish to attend the Annual General Meeting electronically you, or your proxy, will have the same right to attend, be counted in the quorum, participate in the business of the Annual General Meeting, speak and vote as if you, or your proxy, had attended the meeting in person. Details of how to attend the Annual General Meeting electronically can be obtained from Alter Domus (Guernsey) Limited on the contact details provided above.

Notice is hereby given that the fourth Annual General Meeting of The Schiehallion Fund Limited will be held at the offices of Alter Domus, North Suite, 1st Floor, Regency Court, Glategny Esplanade St Peter Port, Guernsey, Channel Islands, GY1 1WW., on Friday, 12 May 2023 at 12 noon for the following purposes:

To consider and, if thought fit, to pass the following Resolutions as Ordinary Resolutions:

1. To receive and adopt the Annual Report and Financial Statements of the Company for the year to 31 January 2023 with the Reports of the Directors and of the Independent Auditor thereon.
2. To approve the Directors' Remuneration Policy.
3. To approve the Directors' Annual Report on Remuneration for the year to 31 January 2023.
4. To re-elect Dr Linda Yueh as a Director.
5. To re-elect Mr John Mackie as a Director.
6. To re-elect Ms Trudi Clark as a Director.
7. To re-elect Dr David Chiswell as a Director.
8. To re-elect Mr Richard Holmes as a Director.
9. To reappoint KPMG Channel Islands Limited as Independent Auditor of the Company to hold office from the conclusion of this meeting until the conclusion of the next Annual General Meeting at which the Financial Statements are laid before the Company.
10. To authorise the Directors to determine the remuneration of the Independent Auditor of the Company.

![img-0.jpeg](img-0.jpeg)

To consider and, if thought fit, to pass Resolutions 11 and 12 as Special Resolutions.

11. That, in substitution for any existing authority but without prejudice to the exercise of any such authority prior to the date hereof, the Company be and is hereby generally and unconditionally authorised, pursuant to and in accordance with section 315(2)(b) of the Companies (Guernsey) Law, 2008 (the 'Law') to make market purchases (within the meaning of section 316 of the Law) of ordinary shares of no par value in the capital of the Company ('ordinary shares') (either for retention as treasury shares for future reissue, resale, transfer or cancellation), provided that:
(a) the maximum aggregate number of ordinary shares hereby authorised to be purchased is 75,014,457, or, if less, the number representing approximately 14.99% of the issued ordinary share capital of the Company as at the date of the passing of this resolution;
(b) the minimum price (excluding expenses) which may be paid for each ordinary share is US$1.00;
(c) the maximum price (excluding expenses) which may be paid for each ordinary share shall not be more than the higher of:

The Schiehallion Fund Limited 67
Shareholder Information
(i) 5% above the average closing price on the London (d) unless previously varied, revoked or renewed by the
Stock Exchange of an ordinary share over the five Company in a general meeting, the authority hereby
business days immediately preceding the date of conferred shall expire at the conclusion of the Annual
purchase; and General Meeting of the Company to be held in respect of
the year ending 31 January 2024, save that the Company
(ii) the higher of the last independent trade and the
may, prior to such expiry, enter into a contract to
highest current independent bid on the London Stock
purchase C shares under such authority which will or
Exchange as stipulated by Article 5(1) of Commission
might be completed or executed wholly or partly after the
Regulation (EC) 22 December 2003 implementing the
expiration of such authority and may make a purchase of
Market Abuse Directive as regards exemptions for
ordinary shares pursuant to any such contract.
buyback programmes and stabilisation of financial
instruments (No. 2273/2003).
(d) unless previously varied, revoked or renewed by the By order of the Board
Company in a general meeting, the authority hereby Alter Domus (Guernsey) Limited
conferred shall expire at the conclusion of the Annual Secretary
General Meeting of the Company to be held in respect of 27 March 2023
the year ending 31 January 2024, save that the Company
may, prior to such expiry, enter into a contract to
purchase ordinary shares under such authority which will
or might be completed or executed wholly or partly after
the expiration of such authority and may make a purchase
of ordinary shares pursuant to any such contract.
12. That, in substitution for any existing authority but without
prejudice to the exercise of any such authority prior to the
date hereof, the Company be and is hereby generally and
unconditionally authorised, pursuant to and in accordance
with section 315(2)(b) of the Companies (Guernsey) Law,
2008 (the `Law’) to make market purchases (within the
meaning of section 316 of the Law) of C shares of no par
value in the capital of the Company (`C shares’) (either for
retention as treasury shares for future reissue, resale, transfer
or cancellation), provided that:
(a) the maximum aggregate number of C shares hereby
authorised to be purchased is 104,930,000, or, if less,
the number representing approximately 14.99% of the
issued C share capital of the Company as at the date
of the passing of this resolution;
(b) the minimum price (excluding expenses) which may be
paid for each ordinary share is US$1.00;
(c) the maximum price (excluding expenses) which may be
paid for each C share shall not be more than the higher of:
(i) 5% above the average closing price on the London
Stock Exchange of an ordinary share over the five
business days immediately preceding the date of
purchase; and
(ii) the higher of the last independent trade and the
highest current independent bid on the London Stock
Exchange as stipulated by Article 5(1) of Commission
Regulation (EC) 22 December 2003 implementing the
Market Abuse Directive as regards exemptions for
buyback programmes and stabilisation of financial
instruments (No. 2273/2003).
68 Annual Report 2023
Shareholder Information
In connection with your votes on the resolutions to be considered General Notes
at the upcoming AGM of The Schiehallion Fund Limited 1. As a member you are entitled to appoint a proxy or proxies to
(‘Schiehallion’), you are being requested to certify as to your exercise all or any of your rights to attend, speak and vote at
status in the three respects described below. It is important that the AGM. A proxy need not be a member of the Company but
you make the correct certifications in order to avoid your votes must attend the AGM to represent you. You may appoint
being capped or scaled down when that is not necessary. more than one proxy provided each proxy is appointed to
exercise rights attached to different shares. You can only
These certifications will also appear in the updated CREST
appoint a proxy using the procedure set out in these notes
and on the hard copy proxy form as additional resolutions.
and the notes to the proxy form. You may not use any
Each certification is described below. The certifications are
electronic address provided either in this notice or any related
required in accordance with Articles 82 and 82A of Schiehallion’s
documents (including the Financial Statements and proxy
articles of incorporation, which are available to view on the
form) to communicate with the Company for any purpose
company’s website at schiehallionfund.com.
other than those expressly stated.
Please return confirmation of your status in respect of each
2. To be valid any proxy form or other instrument appointing a
certification by email to this email address by 5 pm (UK time)
proxy, together with any power of attorney or other authority
on 10 May 2023.
under which it is signed or a certified copy thereof, must be
1. BHCA Certification received by post or (during normal business hours only) by
You are asked to certify whether, at the time of the AGM, hand at the Registrars of the Company at Computershare
you are subject to restrictions under the US Bank Holding Investor Services (Guernsey) Limited, First floor, Tudor House,
Company Act of 1956 (‘BHCA’) in respect of certain of your Le Bordage, St Peter Port, Guernsey, Channel Islands,
equity investments due to your relationship with a bank GY1 1DB or eproxyappointment.com no later than two days
holding company (as defined by the BHCA). (excluding non-working days) before the time of the meeting
or any adjourned meeting.
If you certify that you are subject to restrictions under the
BHCA, your votes will be disregarded in respect of each 3. CREST members who wish to appoint a proxy or proxies
resolution to appoint or remove a director and may be through the CREST electronic proxy appointment service
capped in respect of any other resolution. may do so by using the procedures described in the CREST
Manual and/or by logging on to the website
2. US Shareholder Certification
euroclear.com/CREST. CREST personal members
You are asked to certify that, at the time of voting: (a) you
or other CREST sponsored members, and those CREST
are not a US Person or US Resident (each as defined in
members who have appointed a voting service provider(s),
Schiehallion’s articles – see below); and (b) to the extent that
should refer to their CREST sponsor or voting service
you hold shares for the account or benefit of another person,
provider(s), who will be able to take the appropriate action on
such other person is not a US Person or US Resident.
their behalf.
In Schiehallion’s articles:
4. In order for a proxy appointment or instruction made using the
— a ‘US Person’ means a ‘U.S. person’ as defined in CREST service to be valid, the appropriate CREST message
Regulation S under the US Securities Act of 1933; and (a ‘CREST Proxy Instruction’) must be properly authenticated
in accordance with Euroclear UK & Ireland Limited’s
— a ‘US Resident’ means a resident of the United States
specifications, and must contain the information required
within the meaning of Rule 405 under the US Securities
for such instruction, as described in the CREST Manual.
Act of 1933 or Rule 3b–4(c) under the US Exchange Act
The message, regardless of whether it constitutes the
of 1934.
appointment of a proxy or is an amendment to the instruction
If you do not certify that you are not a US Person or US
given to a previously appointed proxy must, in order to be
Resident (or holding shares for the account of such a person),
valid, be transmitted so as to be received by the Company’s
it will be assumed that you are such a person and your votes
registrar (ID 3RA50) no later than two days (excluding non-
may be scaled down in respect of each resolution to appoint
working days) before the time of the meeting or any
or remove a director.
adjournment. For this purpose, the time of receipt will be
3. Canadian Pension Plan Certification taken to be the time (as determined by the timestamp applied
You are asked to certify whether, at the time of the AGM, to the message by the CREST Application Host) from which
you are a pension plan governed by the laws of Canada (or a the Company’s registrar is able to retrieve the message by
jurisdiction thereof) that is subject to section 11 of Schedule III enquiry to CREST in the manner prescribed by CREST.
to the Pension Benefits Standards Regulations, 1985 (Canada) After this time any change of instructions to proxies appointed
or a substantially similar restriction contained in the legislation through CREST should be communicated to the appointee
governing such pension plan (a ‘Canadian Pension Plan’). through other means.
If you certify that you are a Canadian Pension Plan, your votes
may be scaled down in respect of each resolution to appoint
or remove a director.
The Schiehallion Fund Limited 69
Shareholder Information

5. CREST members and, where applicable, their CREST sponsors, or voting service providers should note that Euroclear UK & Ireland Limited does not make available special procedures in CREST for any particular message. Normal system timings and limitations will, therefore, apply in relation to the input of CREST Proxy Instructions. It is the responsibility of the CREST member concerned to take (or, if the CREST member is a CREST personal member, or sponsored member, or has appointed a voting service provider(s), to procure that his/her CREST sponsor or voting service provider(s) take(s)) such action as shall be necessary to ensure that a message is transmitted by means of the CREST system by any particular time. In this connection, CREST members and, where applicable, their CREST sponsors or voting service providers are referred, in particular, to those sections of the CREST Manual concerning practical limitations of the CREST system and timings.

6. The Company may treat as invalid a CREST Proxy Instruction in the circumstances set out in Regulation 34 of The Uncertified Securities (Guernsey) Regulations, 2009.

7. The return of a completed proxy form or other instrument of proxy will not prevent you attending the AGM and voting in person if you wish.

8. Pursuant to Regulation 41 of The Uncertified Securities (Guernsey) Regulations, 2009 and article 84 of the Company's Articles of Incorporation the Company specifies that to be entitled to attend and vote at the Annual General Meeting (and for the purpose of the determination by the Company of the votes they may cast), shareholders must be registered in the Register of Members of the Company no later than two days (excluding non-working days) prior to the commencement of the AGM or any adjourned meeting. Changes to the Register of Members after the relevant deadline shall be disregarded in determining the rights of any person to attend and vote at the meeting.

9. Any person to whom this notice is sent who is a person nominated by a shareholder holding their shares on behalf of that person to enjoy information rights (a 'Nominated Person') may, under an agreement between him/her and the shareholder by whom he/she was nominated, have a right to be appointed (or to have someone else appointed) as a proxy for the Annual General Meeting. If a Nominated Person has no such proxy appointment right or does not wish to exercise it, he/she may, under any such agreement, have a right to give instructions to the shareholder as to the exercise of voting rights.

10. The statement of the rights of shareholders in relation to the appointment of proxies in Notes 1 and 2 above does not apply to Nominated Persons. The rights described in those Notes can only be exercised by shareholders of the Company.

11. The members of the Company may require the Company to publish, on its website, (without payment) a statement (which is also passed to the Auditor) setting out any matter relating to the audit of the Company's Financial Statements, including the Auditor's report and the conduct of the audit. The Company will be required to do so once it has received such requests from members representing at least 5% of the total voting rights of the Company. Such requests must be made in writing and must state your full name and address and be sent to the Company at Albert House, South Esplanade, St Peter Port, Guernsey, Channel Islands, GY1 1AJ.

12. Information regarding the Annual General Meeting is available from the Company's page of the Investment Manager's website at schiehallionfund.com.

13. Members have the right to ask questions at the meeting and the Company must cause to be answered any such questions relating to the business being dealt with at the meeting, provided that no such answer need be given if:
(a) to do so would interfere unduly with the preparation for the meeting or involve the disclosure of confidential information;
(b) the answer has already been given on a website in the form of an answer to a question; or
(c) it is undesirable in the interests of the company or the good order of the meeting that the question be answered.

14. Members have the right to require the directors of the Company to call a general meeting upon receiving requests to do so from members who hold more than 10% of such of the capital of the Company as carries the right of voting at general meetings of the Company (excluding any capital held as treasury shares) and to require that notice of any resolutions identified in such a request as being intended to be moved at the meeting be circulated with notice of the meeting pursuant to section 204(2) of the Companies (Guernsey) Law, 2008.

15. Any corporation which is a member can appoint one or more corporate representatives who may exercise on its behalf all of its powers as a member provided that they do not do so in relation to the same shares.

16. As at 24 March 2023 (being the last practicable day prior to the publication of this notice) the Company's issued share capital consisted of 500,430,002 ordinary shares, carrying one vote each and 700,000,000 C shares carrying one vote each. Therefore, the total voting rights in the Company as at 24 March 2023 were 1,200,430,002 votes.

17. Any person holding 3% or more of the total voting rights of the Company who appoints a person other than the Chairperson of the meeting as his/her proxy will need to ensure that both he/she and his/her proxy complies with their respective disclosure obligations under the Disclosure Guidance and Transparency Rules.

70 Annual Report 2023
Shareholder Information
### Further Shareholder Information
Sources of Further Information on the Company Electronic Proxy Voting
The price of shares is quoted daily in the Financial Times and can If you hold stock in your own name you can choose to vote by
also be found on the Company’s page of the Investment Manager’s returning proxies electronically at eproxyappointment.com.
website at schiehallionfund.com, Trustnet at trustnet.co.uk and
If you have any questions about this service please contact
on other financial websites. Monthly factsheets are also available
Computershare on +44 (0) 370 707 4040 or at
on the Baillie Gifford website. These are available from Baillie Gifford
info@computershare.co.je.
on request.
CREST Proxy Voting
The Schiehallion Fund Identifiers
If you are a user of the CREST system (including a CREST
ISIN GG00BJ0CDD21
Personal Member), you may appoint one or more proxies or
Sedol BJ0CDD2 give an instruction to a proxy by having an appropriate CREST
message transmitted. For further information please refer to the
Ticker ordinary shares MNTN
CREST Manual.
Ticker C shares MNTC
Data Protection
Legal Entity Identifier 213800NQOLJA1JCWXQ56
The Company is committed to ensuring the confidentiality and
The ordinary shares and C shares of the Company are listed on
security of any personal data provided to it. Further details on
the London Stock Exchange and their prices are shown in the
how personal data is held and processed on behalf of the
Financial Times under ‘Investment Companies’.
Company can be found in the privacy policy available on the
Company’s website schiehallionfund.com.
Key Dates
The Annual Report and Financial Statements are normally issued Automatic Exchange of Information
in March and the Annual General Meeting will normally be held in
In order to fulfil its legal obligations under the Guernsey Common
May.
Reporting Standard Legislation relating to the automatic
exchange of information, the Company is required to collect and
Share Register Enquiries
report certain information about certain shareholders.
Computershare Investor Services (Guernsey) Limited maintains
the share register on behalf of the Company. In the event of The legislation will require investment companies to provide
queries regarding shares registered in your own name, please personal information to the Guernsey authorities on certain
contact the Registrars on +44 (0) 370 707 4040 or at investors who purchase shares in investment funds. As an
info@computershare.co.je. affected company, The Schiehallion Fund Limited will have to
provide information annually to the local authority on the tax
This helpline also offers an automated self-service functionality
residencies of non-UK based certificated shareholders and
(available 24 hours a day, 7 days a week) which allows you to:
corporate entities.
— hear the latest share price;
Foreign Account Tax Compliance Act
— confirm your current share holding balance; and
Pursuant to the reciprocal information sharing inter governmental
— order Change of Address and Stock Transfer forms. agreement entered into by the States of Guernsey and the US
You can also check your holding on the Registrars’ website at Treasury, and for the purposes of the US Foreign Account Tax
investorcentre.co.uk. They also offer a free, secure share Compliance Act (‘FATCA’) of the Company registered with the
management website service which allows you to: Internal Revenue Service (‘IRS’) as a Foreign Financial Institution
(‘FFI’) and received a Global Intermediary Identification Number
— view your share portfolio and see the latest market price
(R2NXXB.9999.SL.831). The Company can be located on the
of your shares;
IRS FFI list.
— calculate the total market price of each shareholding;
— view price histories and trading graphs;
— change address details; and
— use online dealing services.
To take advantage of this service, please log in at
investorcentre.co.uk and enter your shareholder Reference
Number and Company Code (this information
can be found on your share certificate).
The Schiehallion Fund Limited 71
Shareholder Information

## Alternative Investment Fund Managers ('AIFM') Regulations (unaudited)

In accordance with the Alternative Investment Fund Managers Regulations, information in relation to the Company's leverage and the remuneration of the Company's AIFM, Baillie Gifford & Co Limited, is required to be made available to investors. In accordance with the Directive, the AIFM's remuneration policy is available at bailliegifford.com or on request (see contact details on the back cover) and the numerical remuneration disclosures in respect of the AIFM's relevant reporting period are also available at bailliegifford.com.

The Company's maximum and actual leverage levels at 31 January 2023 are shown below:

|   | Gross method | Commitment method  |
| --- | --- | --- |
|  Maximum limit | 1.20:1 | 1.10:1  |
|  Actual | 0.96:1 | 1.00:1  |

## Glossary of Terms and Alternative Performance Measures ('APM') (unaudited)

An alternative performance measure is a financial measure of historical or future financial performance, financial position, or cash flows, other than a financial measure defined or specified in the applicable financial reporting framework.

### Total Assets

Total value of all assets held less current liabilities, other than liabilities in the form of borrowings.

### Net Asset Value

Also described as shareholders' funds, net asset value ('NAV') is the value of total assets less liabilities (including borrowings). The NAV per share is calculated by dividing this amount by the number of ordinary shares or C shares, as applicable, in issue.

### Net Current Assets

Net current assets comprise current assets less current liabilities excluding borrowings.

### Premium/(Discount) (APM)

As stockmarkets and share prices vary, the Company's share price is rarely the same as its NAV. When the share price is lower than the NAV per share it is said to be trading at a discount. The size of the discount is calculated by subtracting the share price from the NAV per share and is usually expressed as a percentage of the NAV per share. If the share price is higher than the NAV per share, this situation is called a premium.

|  Ordinary shares |  | 2023 | 2022  |
| --- | --- | --- | --- |
|  Closing NAV per share | (a) | 119.42¢ | 158.20¢  |
|  Closing share price | (b) | 92.00¢ | 212.00¢  |
|  **Discount/premium ((b - a) ÷ (a) expressed as a percentage)** |  | **(23.0%)** | **34.0%**  |
|  C shares |  | 2023 | 2022  |
|  Closing NAV per share | (a) | 79.37¢ | 97.26¢  |
|  Closing share price | (b) | 49.00¢ | 118.00¢  |
|  **Discount/premium ((b - a) ÷ (a) expressed as a percentage)** |  | **(38.3%)** | **21.3%**  |

### Capital Deployed (APM)

Capital deployed reflects cumulative amounts invested since inception of the Company.

### Internal Rate of Return (IRR) (APM)

The IRR indicates the annualised rate of return for the Company's investment portfolio.

### Gross Multiple on Invested Capital (MOIC) (APM)

The MOIC expresses, as a multiple, how much return the Company has made on investment realisations and income, relative to its book cost.

72 Annual Report 2023
Shareholder Information

## Ongoing Charges (APM)

The total recurring expenses (excluding the Company's costs of dealing in investments and borrowing costs) incurred by the Company as a percentage of the average net asset value (with debt at fair value).

|  Ordinary shares |  | 2023 US$'000 | 2022 US$'000  |
| --- | --- | --- | --- |
|  Investment management fee |  | 5,166 | 6,816  |
|  Other administrative expenses |  | 637 | 655  |
|  Total expenses | (a) | 5,803 | 7,471  |
|  Average net asset value (with borrowings deducted at fair value) | (b) | 668,671 | 835,470  |
|  **Ongoing Charges ((a) ÷ (b) expressed as a percentage)** |  | **0.87%** | **0.89%**  |
|  C shares |  | 2023 US$'000 | 2022 US$'000  |
|  Investment management fee |  | 3,765 | 1,611  |
|  Other administrative expenses |  | 596 | 445  |
|  Total expenses |  | 4,361 | 2,056*  |
|  Total expenses annualised | (a) | 4,361 | 2,680*  |
|  Average net asset value (with borrowings deducted at fair value) | (b) | 617,439 | 697,793  |
|  **Ongoing Charges ((a) ÷ (b) expressed as a percentage)** |  | **0.71%** | **0.38%**  |

*The total expenses above cover the period from 26 April 2021 to 31 January 2022. A period of 280 days.

## Leverage (APM)

For the purposes of the Alternative Investment Fund Managers Regulations, leverage is any method which increases the Company's exposure, including the borrowing of cash and the use of derivatives. It is expressed as a ratio between the Company's exposure and its net asset value and can be calculated on a gross and a commitment method. Under the gross method, exposure represents the sum of the Company's positions after the deduction of US dollar cash balances, without taking into account any hedging and netting arrangements. Under the commitment method, exposure is calculated without the deduction of sterling cash balances and after certain hedging and netting positions are offset against each other.

## Average Revenue Growth Rate (APM)

Calculated by taking an average of each investee company's last 12 months revenue growth (as a percentage).

## Average Movement at Private Company Level/Per Instrument (APM)

Calculated by taking an average of all valuation movements (as a percentage) by company and by line of share class.

## Average Mark-down at Private Company Level/Per Instrument (APM)

Calculated by taking an average of all valuation mark downs (as a percentage) by company and by line of share class.

The Schiehallion Fund Limited 73
Shareholder Information
### Sustainable Finance Disclosure Regulation (‘SFDR’)
The EU Sustainable Finance Disclosure Regulation (‘SFDR’) Taxonomy Regulation
does not have a direct impact in the UK due to Brexit, however, The Taxonomy Regulation establishes an EU-wide framework
it applies to third-country products marketed in the EU. of criteria for environmentally sustainable economic activities in
As Schiehallion is marketed in the EU by the AIFM, Baillie Gifford respect of six environmental objectives. It builds on the disclosure
& Co Limited, via the National Private Placement Regime (‘NPPR’) requirements under the SFDR by introducing additional disclosure
the following disclosures have been provided to comply with obligations in respect of AIFs that invest in an economic activity that
the high-level requirements of SFDR. contributes to an environmental objective.
The AIFM has adopted Baillie Gifford & Co’s Governance and The Company does not commit to make sustainable investments
Sustainable Principles and Guidelines as its policy on integration as defined under SFDR. As such, the underlying investments
of sustainability risks in investment decisions. do not take into account the EU criteria for environmentally
More detail on the Investment Manager’s approach to sustainable economic activities.
sustainability can be found in the Governance and Sustainability
Principles and Guidelines document, available publicly on the
Baillie Gifford website bailliegifford.com .
74 Annual Report 2023

| Directors | Administrator, Secretary, | Investment Manager |
| --- | --- | --- |
| Chairperson: | Designated Manager | and Alternative |
| Dr Linda Yueh CBE | and Registered Office | Investment Fund |
|  | Alter Domus (Guernsey) Limited | Manager |
| John Mackie CBE | North Suite | Baillie Gifford & Co Limited |
| Dr David Chiswell OBE | 1st Floor, Regency Court | Calton Square |

Glategny Esplanade
Trudi Clark 1 Greenside Row
St Peter Port
Richard Holmes Edinburgh
Guernsey
EH1 3AN
Channel Islands
Tel: +44 (0) 131 275 2000
GY1 1WW
bailliegifford.com
Tel: +44 (0) 1481 742250

| Registrar | Depositary | Corporate Broker |
| --- | --- | --- |
| Computershare Investor Services | The Bank of New York Mellon | Winterflood Securities Limited |
| (Guernsey) Limited | (International) Limited | The Atrium Building |
| First Floor | 160 Queen Victoria Street | Cannon Bridge House |
| Tudor House | Queen Victoria Street | 25 Dowgate Hill |
| Le Bordage | London | London |
| St Peter Port | EC4V 4LA | EC4R 2GA |

Guernsey
Channel Islands
GY1 1DB
Tel: +44 (0) 370 707 4040

| Independent Auditor | Company Details |
| --- | --- |
| KPMG Channel Islands Limited | schiehallionfund.com |
| Glategny Court | Company Registration |
| Glategny Esplanade | No. 65915 |
| St Peter Port | ISIN GG00BJ0CDD21 |
| Guernsey | Sedol BJ0CDD2 |
| Channel Islands | Ticker MNTN |
| GY1 1WR | Ticker MNTC |

Legal Entity Identifier
213800NQOLJA1JCWXQ56