Annual Report and
Financial Statements
The Schiehallion
Fund Limited
31 January 2024
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 reside in the United Kingdom and 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
immediately. If you reside outside the United Kingdom you should
consult an 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.
Investor disclosure document
The UK Alternative Investment Fund Managers Regulations require
certain information to be made available to investors prior to their
investment in the Company. The Company’s Investor Disclosure
Document is available for viewing at schiehallionfund.com
The Schiehallion Fund Limited
01
Contents
Introduction
Financial highlights 02
An overview of The Schiehallion Fund Limited 04
Strategic report
Chairperson’s statement 06
Investment Manager’s review 09
Environmental, social and governance (ESG) considerations 13
Environmental, social and governance engagement 14
Baillie Gifford – proxy voting 16
One year summary 18
Review of investments 20
Portfolio executive summary 24
Baillie Gifford’s approach to valuing private companies 28
List of investments 29
Business review 33
Governance report
Directors and management 50
Directors’ report 54
Corporate governance report 60
Audit committee report 67
Directors’ remuneration report 70
Statement of Directors’ responsibilities 73
Financial report
Independent auditor’s report 75
Statement of comprehensive income 80
Statement of financial position 81
Statement of changes in equity 82
Statement of cash flows 83
Notes to the Financial Statements 84
Shareholder information
Notice of Annual General Meeting 109
Further shareholder information 115
Alternative Investment Fund Managers (‘AIFM’) Regulations (Unaudited) 117
Third party data provider disclaimer 118
Sustainable Finance Disclosure Regulation (‘SFDR’) 119
Glossary of Terms and Alternative Performance Measures (‘APM’) Unaudited 120
Company information 122
Strategic Report
Annual Report and Financial Statements 2024
02
Financial highlights
Year to 31 January 2024
Ordinary share price return
*
(22.3%)
NAV return
*
(0.9%)
* Source: LSEG/Baillie Gifford. See disclaimer on page 118. All figures are stated on a total return basis.
Total return is an Alternative Performance Measure – see Glossary of Terms and Alternative Performance Measures on pages 120 and 121.
The Company’s C shares converted into Ordinary Shares on 8 September 2023 (see page 36).
All investment strategies have the potential for profit or loss.
Past performance is not a guide to future performance.
The Schiehallion Fund Limited
03
Strategic Report
Annual Report and Financial Statements 2024
04
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.
An overview of
The Schiehallion
Fund Limited
Our philosophy:
Long-term
We have a very long-term view, which leads us to
invest in companies, sometimes years before they
go public, and sometimes years after. We understand
that building a great company is a journey, not
something that happens overnight or changes at
Initial Public Offering (‘IPO’). We are simply trying
to invest in companies for the longest and steepest
part of their growth curves.
Growth
Innovation drives growth. Some of the world’s most
innovative and disruptive companies are in the
private markets. We believe that over the long-run,
the size or pace of change that innovations in
production, process and technology can bring is
misunderstood, over-estimating it in the short-run
and under-estimating in the long-run. We aim to
invest in companies that are at an inflection point
– scaling into true growth businesses.
Companies, not countries or themes
We invest in high-growth private companies, globally,
and across sectors. Our emphasis on finding
exceptional companies naturally leads us away
from macroeconomics or thematic investing, towards
bottom-up analysis. We believe we are able to excel
at doing this because we have a differentiated
analytical approach, access to the best companies
in our universe, and a unique strategy for adding
value to our companies.
Investment Manager
The Company has appointed Baillie Gifford & Co
Limited as the investment manager (the ‘Investment
Manager’ or ‘Baillie Gifford’).
The Strategic Report includes
pages 6 to 48 and incorporates
the Chairperson’s Statement and
the Investment Manager’s Review.
Strategic
report
Annual Report and Financial Statements 2024
06
Chairperson’s
statement
For a definition of terms see Glossary of terms and alternative performance measures on pages 120 and 121.
Past performance is not a guide to future performance.
Dr Linda Yueh CBE
Chairperson since
inception in 2019
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.
Investment performance
During the financial year to 31 January 2024, the
Company’s ordinary share net asset value (‘NAV’)
returned negative 0.9% and share price returned
negative 22.3%. The share price discount to NAV
widened from 23% to 40% as sentiment remained
against growth stocks and private company
investments. Further commentary on performance
is included in the Investment Manager’s Review
on page 9.
Over the period from 27 March 2019 (launch date)
to 31 January 2024, the Company’s ordinary share
NAV returned positive 18.8% and price returned
negative 28.5%.
Capital allocation
In November 2023, the Board announced a capital
allocation update, noting that:
• its priority is to ensure that the Company has
sufficient capital to deliver on its objectives,
including supporting existing investments and
satisfying the Company’s ongoing working capital
requirements;
• it believed that the Ordinary Shares represented
an attractive investment opportunity at a deep
discount to NAV;
• the Company intended to allocate up to
US$20 million towards share repurchases given
the limited available capital at that time; and
• it would keep this capital allocation and associated
share buyback policy under review.
07
The Schiehallion Fund Limited
Over the three months to 31 January 2024, the
Company has bought back 2.6 million shares at
a cost of approximately $1.9 million. Since the
financial year end, the Company has bought back
an additional 1.1 million shares.
The Company will be seeking authority to renew
the buyback authority for the ordinary shares at
the forthcoming Annual General Meeting (‘AGM’).
The Directors are also seeking a 10% share
issuance authority at the AGM. This authority
would expire at the conclusion of the AGM in 2025.
Conversion of C shares
In August 2023, the Board announced that the
C Shares proceeds were 86.6% deployed. The
calculation date for the conversion of the C Shares
into ordinary shares was 31 August, and the
conversion ratio was 0.7601 ordinary shares for
each C Share. The new ordinary shares were
admitted to trading on 12 September 2023.
Costs and charges
The ongoing charges for the ordinary shares as at
31 January 2024 were 0.85% (2023 – 0.87%).
The Company has a tiered management fee, which
means that the benefits of scale are shared with
investors. In addition, no management fee is charged
on cash and the Investment Manager absorbs the
valuation costs and legal costs associated with
making private company investments.
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 negative 0.12 cents (year to 31 January 2023,
negative 0.98 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 pages
50 to 52.
During the year, the Board undertook a due
diligence visit at the Investment Manager’s offices,
meeting representatives from the Investment
Manager’s private company investment, valuation
and legal teams. I also visited portfolio companies
in San Francisco, which allowed me to observe the
Investment Manager’s investment process in action.
All the Directors are subject to annual re-election
at the AGM in May. Whilst Director remuneration has
been frozen for the forthcoming year, the Board is
seeking shareholder approval to increase the level
of the limit on the aggregate fees that may be paid
to Directors from £360,000 per annum to £430,000
per annum. This proposed increase would provide
additional flexibility for future Board planning.
Strategic report
Annual Report and Financial Statements 2024
08
Annual General Meeting
The AGM will be held at 3pm on Friday
10 May 2024 at the offices of Herbert Smith
Freehills, Exchange House, Primrose Street,
London EC2A 2EG. Shareholders are reminded
that they are able to submit proxy voting forms
before the applicable deadline on Wednesday
8 May 2024 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).
The Board is also seeking approval for amendments
to the Company’s Articles of Incorporation clarifying
the Company’s general authority to buyback
its shares.
Information on the resolutions can be found on
pages 110 and 111. 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 tensions, inflationary pressures, higher
interest rates, increased cost of borrowing, and a
recessionary environment. The Israel-Hamas conflict
worsened the uncertainties in the global economy.
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 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
3 April 2024
09
The Schiehallion Fund Limited
Investment Manager’s
review
For a definition of terms see Glossary of Terms and Alternative Performance Measures on pages 120 and 121.
Past performance is not a guide to future performance.
Performance
The 12 months to 31 January 2024 saw public
market recovery and less private market volatility.
The Net Asset Value (NAV) Total Return was negative
0.9% for the Ordinary Shares. Although the year
ended with a small negative return, this was the
result of a weak first half followed by a recovery
in the second half of the year.
Performance for the year was driven by a mix of
public market uplift and increased valuations in
private holdings. Listed holdings, Affirm, Wise, and
Oscar Health, saw significant increases in their
share prices throughout 2023 of 408%, 272%,
and 64%, respectively. Private holdings, such as
Bending Spoons and SpaceX, also experienced
strong increases in their valuations. Bending Spoons’
valuation increased over 150% in Q4 on the back of
strong operational performance following successful
integrations of their recent acquisitions and a new
funding round where the company was valued at
$2.55 billion. SpaceX conducted another substantial
secondary tender offer that values the company
at $180 billion, making it the second most valuable
start-up in the world behind ByteDance, which is
also in your portfolio.
The largest detractors of NAV performance were
private holdings, specifically Convoy, which ceased
operations in October 2023, Indigo Agriculture,
and Solugen. When considering the broader
portfolio, companies are well capitalised, with over
90% by capital weighting having more than 12
months of cash runway. In recent months, we have
seen an increased focus on capital efficiency as
companies seek to strike the right balance between
growth and profitability. We remain optimistic about
the resilience and potential of the companies in your
portfolio. Operational performance and efficiency
continue to improve, and in several cases, are better
than expected following rate hikes and broader
economic and political tension.
Peter Singlehurst
Portfolio Manager
Robert Natzler
Deputy Manager
Strategic report
Annual Report and Financial Statements 2024
10
Portfolio
The operational performance within the portfolio
remained solid overall, particularly the top 20
companies which generated an average of
approximately 40% revenue growth and with
over 40% gross margins. Operating margins have
also improved as companies continue to focus on
efficiency and a path toward profitability. By capital
weighting, over one fifth of the portfolio comprised
profitable companies. At last available reporting
approximately 10% of companies have less than
a year of cash runway remaining but the majority
have since raised or are raising more capital.
The mean average years of remaining cash
runway was over five years.
At the reporting date the five largest holdings –
SpaceX, Wise, Affirm, ByteDance, and Bending
Spoons – represent our ability to construct a unique
portfolio that is unconstrained by geography or
sector. The holdings range from a manufacturer of
rockets and spacecrafts to payment platforms to
digital media apps. The average top-line growth rate
for these companies was 48%, with average gross
margins of 57%. Each company is cash-generative,
and three of the five companies are profitable.
Outside of the five largest, holdings such as Oddity,
the beauty and wellness platform, achieved 57%
net revenue growth, 64% gross margin growth,
and 130% free cash flow growth in FY 2024. Flix,
the global bus and train operator, continued strong
top-line performance, and is profitable and cash-
generative. As such, the company is a strong IPO
candidate in 2024. Tempus AI, the data and artificial
intelligence healthcare platform also achieved
strong top-line growth, fattening gross margins,
and improved operational efficiency for the year.
While the operating performance of the broader
portfolio has been solid, some companies faced
challenges, specifically Convoy, a U.S. based
freight company, which shut down its operations
in October 2023. Convoy struggled with a perfect
storm of a contraction in capital markets and a
freight recession, which impacted revenues. The
company explored both raising capital and being
acquired, but was ultimately unsuccessful. Due
to the challenging capital market environment and
the nature of investing in private companies, such
an outcome, while disappointing, is not unexpected
on occasion. Brex, the business credit cards and
cash management platform, saw its growth rates
slow versus the prior year as it looked to diversify
its product offering in the face of declining spend
of venture-backed businesses. Despite current
headwinds, the company has a significant cash
runway and is focused on operational efficiency
and profitability before entering public markets.
Deployment
Historically, the two options for capital deployment
within Schiehallion were investing in new companies,
or putting additional capital into existing ones.
Following the merger of the C-Share and Ordinary
pools, and within the context of the shares trading
at a large discount, we announced a share buyback
programme. We believe this represents an attractive
opportunity to create value for shareholders
through the accretive effect on Net Asset Value.
However, our primary objective continues to be
concentrating capital into the existing portfolio to
support our companies’ ongoing growth and into
new opportunities that have the disruptive and
growth potential we seek, and to take advantage of
valuations that might be at an attractive discount. As
of year-end, we had bought back 2.6 million shares.
Alongside the buyback programme, we see
continued opportunities to put more capital into
existing investments. As well as the follow-on
investments discussed in the Interim Report, we also
made a small additional investment in Databricks
and a more substantial investment in ByteDance.
The latter is a company often in the news, with
much of the focus being on TikTok and its fate in the
U.S. What the reporting in Western media outlets
often fails to mention is the scale and profitability of
ByteDance’s domestic Chinese businesses, where
their Toutiao and Douyin apps generate substantial
cash flows. Our investment case for ByteDance rests
on the domestic opportunity, with some optionality
around the international monetisation of TikTok.
We purchased shares in a secondary transaction
at a compelling price given the growth and
profitability of ByteDance.
11
The Schiehallion Fund Limited
New investments are the third string to our capital
deployment bow. As Schiehallion has closed in on
full deployment, the pace of new investments has
naturally slowed, though we do have some remaining
capacity. The bar for new investments is high given
the opportunity to buy back our own shares at
a discount or invest more in existing companies
where we have a longer history. But where we see
new opportunities clearing this bar, we will invest
in them until we hit the buffer of reserved capital.
The team has recently looked at companies in
Australia, Germany, India, Israel, Singapore, South
Korea, and of course, the USA. These businesses
are in a wide range of industries, from precision
medicine to immersive entertainment, fintech,
and defence. Over half of our current pipeline
is generating top-line growth in excess of 50%,
and more than a third is profitable.
In the second half of the year, we took advantage
of public liquidity to sell and trim some holdings.
We sold our holdings in both Ginkgo Bioworks
and Illumina. Both these holdings came about
from acquisitions of private companies, Zymergen
and Grail, respectively. We also trimmed our
holding in Affirm. Affirm remains a high conviction
holding for us, showing both strong fundamental
and share price growth over the course of 2023.
Despite trimming the holding, it remains amongst
Schiehallion’s five largest positions.
Looking forward
We are operating in a highly bifurcated market.
Companies seem to either be significantly
over- or under-priced. This is a perfect market for
bottom-up stock pickers, applying fundamental
analysis to businesses and valuations. In general,
the over-priced companies seem to be clustered
around the heartland of Silicon Valley and the
Venture Capital (‘VC’) ecosystem. It is off the beaten
path that we are finding real value. Bootstrapped
companies that have evaded the trappings of
overcapitalisation are of particular interest to us.
We are finding an excellent fit with the kind of
capital these businesses need, and the kind of
capital offered by Schiehallion and Baillie Gifford.
We are also spending significant time looking at
business outside of the U.S.
It is no great secret that there is a wall of
‘dry powder’ sitting in VC funds. Timebound
investment windows within these funds will likely
incentivise many investors to over-deploy in
the coming years. We believe this will largely be
deployed into areas where investors feel ‘safe’.
In other words, in the same kinds of businesses
in which their peers are investing. Now could be a
dangerous time to invest with the ‘herd’, but it could
also be the perfect time to be a contrarian, applying
our long-term investment philosophy and rigorous
analytical framework to identify the best companies
for our shareholders.
Peter Singlehurst
3 April 2024
Strategic Report
Annual Report and Financial Statements 2024
12
13
The Schiehallion Fund Limited
Environmental, social and governance (‘ESG’)
considerations are integral when Baillie Gifford’s
Private Companies Team research high growth
private companies.
ESG in our philosophy
The Schiehallion Fund invests in companies with a
more than five-year time horizon. Good governance
is crucial to enabling companies to flourish over the
long term. Over our investment period, we believe
scalability and profitability depends not only on
a company’s ability to serve customers well and
execute on its business model, but also on its ability
to do this without jeopardising its social licence to
operate. As such, we don’t break out consideration
of a company’s role in the broader system from our
investment work, under ESG or any other rubric.
These considerations are core to long-term investing.
It is the long-term nature of the growth ambition
within our investment philosophy that causes us to
pay special attention to the positive and/or negative
external effects of a company’s operations. Over
five-year-plus periods, these can have profound
impacts on a company’s relationship with customers,
regulators and staff. They can hugely help or hinder
the growth of a business. 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 the value of their capital over the long term.
ESG in our process
The Private Companies Team structures our research
into potential investments by using a proprietary
‘10 Questions’ research framework. These questions
aim to address issues such as the scale of the
opportunity, the competitive edge and potential
returns, whilst others focus specifically on ESG
related topics. Question Four (‘How will the leadership
and cultural attributes help this business achieve its
long-term vision?’) asks about the stakeholders within
a firm, the culture within the workplace, whether it
Environmental, social
and governance (ESG)
considerations
cultivates a healthy organisational mindset capable of
delivering the mission and whether a company is well
managed, well governed and worthy of being trusted
with our clients’ capital. To answer this question, we
typically speak with former and current employees
and board members, as well as gathering the relevant
information from the company and publicly available
sources. We have declined companies in the past
based on negative signals from this question.
Meanwhile, Question Five asks about external
stakeholders (‘Do the company’s customers like
them? And why?’). This question helps us evaluate
the strength of customer relationships, as well as
to understand why customers use the company’s
products or services, and so the social purpose that
they serve.
Question Six explores the E and S of ESG in greater
depth (‘How do environmental and social factors
create opportunities and risks?’), focusing on
material factors that could affect a specific
company positively or negatively in the next five
years. We believe this qualitative, company-specific
and nuanced approach is best suited to help us
understand the most important environmental and
social factors for a company.
Finally, we ask ourselves how can we help a specific
company. Very often, we focus on governance.
While we don’t take active board seats, we
occasionally take observer seats and frequently
provide encouragement, input and introductions as
companies look to evolve a stronger governance
structure that is better suited for public markets.
As with other research questions, the Private
Companies Team is supported by a wider network
within and outside of Baillie Gifford. On ESG topics in
particular, we benefit from the research and expertise
of Baillie Gifford’s broader team of ESG professionals,
academic networks and impact and climate-focused
investment teams.
Strategic report
Annual Report and Financial Statements 2024
14
The Company has given discretionary voting
powers to Baillie Gifford. For public holdings within
the Fund, the Investment Manager votes against
resolutions they consider may damage shareholders’
rights or economic interests.
The Company believes that it is in the shareholders’
interests to consider environmental, social and
governance (‘ESG’) factors when selecting and
retaining investments and has asked the Investment
Manager to take these issues into account. The
Investment Manager does not exclude companies
from their investment universe purely on the grounds
of ESG factors but adopt 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 considers governance factors
across the portfolio as part of the investment case
and address environmental and social factors in terms
of material risks and opportunities. The Investment
Manager’s Statement of Compliance with the UK
Stewardship Code can be found on the Manager’s
website: bailliegifford.com. The Investment Manager’s
policy has been reviewed and endorsed by the Board.
The Investment Manager, Baillie Gifford & Co, are
signatories to the United Nations Principles for
Responsible Investment.
Environmental, social and
governance engagement
By engaging with both the private and public
companies within the Schiehallion Fund’s portfolio,
the Investment Manager seeks to build constructive
relationships with them, to better inform our
investment activities and, where necessary, effect
changes within our holdings, ultimately with the goal
of achieving better returns for our shareholders.
As earlier owners of these companies in the private
markets, the Investment Manager is able to gain
insight that is deeper and build relationships that
are stronger due to the increased access to
management and information in private markets.
As we hold through the Initial Public Offering (‘IPO’),
these relationships continue into public markets.
The continuation of ownership, and therefore
relationship, is a key reason these companies
choose Schiehallion as a partner.
Engagement Topics
Due to the private nature of the majority of companies
within the Schiehallion Fund, we are unable to
disclose the exact nature of our discussions with
specific management teams. That said, there are
common themes that we engage with companies
on as they are at a specific inflection point on their
journey to scalable, profitable growth.
15
The Schiehallion Fund Limited
The IPO Process:
When thinking about the IPO process, the
Investment Manager often engages with portfolio
companies. Baillie Gifford can not only advise on
the practicalities – where to list, what reporting is
necessary, employee stock options etc. – but also
on what kind of public company they want to be.
With Baillie Gifford’s decades of experience and
aligned interests, we believe Baillie Gifford are
useful conversation partners here, though admittedly
the current IPO drought has meant that we have
had fewer discussions around IPOs than in
previous years.
Capital Structures:
Increasingly, the Investment Manager has been
discussing capital structures with investee
companies. As the fundraising environment has
toughened over the past year or so, companies are
exploring other options – such as debt or capital
structure. With the Fund’s long-term horizon, the
Investment Manager is able to offer well-aligned
advice that hopefully limits unintended and
potentially destructive consequences of complicated
capital structures. When negotiating terms, the
Investment Manager seeks clean terms that are well
aligned with long-term interests of our shareholders.
Board Composition:
Where the Investment Manager can add value is with
board composition and, more specifically, board
transition. Companies within the Schiehallion Fund
are often transitioning from an investor-led board to
an independent board as they grow. The Investment
Manager supports companies to build a board of
directors that is useful in the long term. Owing
to Baillie Gifford’s experience investing in and
engaging with public companies for decades, the
Investment Manager has a network of potential
board members that can be introduced to relevant
companies and can engage our internal Governance
team to advise on good board composition more
broadly. The importance of a strong board cannot
be underestimated in the growth and late-stage
venture market, and into the public markets.
Chief Financial Officers (‘CFOs’):
Baillie Gifford recently held a forum for 25 of
its portfolio company CFOs (including 16 from
Schiehallion portfolio companies). The title of the
forum was ‘From Private to Public to Perpetuity’
with the content of the agenda structured around
the IPO milestone in the life of a high growth
company. The Investment Manager found the event
to be a success, with engaged discussions across
a variety of topics, including in environmental,
social and governance areas, as well as receiving
positive feedback from the CFOs who attended
and a number of follow up discussions as a
result. What was perhaps most striking is that,
regardless of sector or geography, the challenges
and opportunities faced by CFOs are similar and,
unsurprisingly, numerous. All parties found the
event to be informative.
Strategic report
Annual Report and Financial Statements 2024
16
Baillie Gifford –
proxy voting
We believe that ‘active ownership’ of our clients’
holdings is as important as selecting the right
investments in the first instance. These guidelines
are aligned with our stewardship principles and
describe our approach to proxy voting and company
engagement, the key levers of active ownership,
often described as ‘stewardship’.
While these guidelines are intended to provide an
insight into how we approach voting on our clients’
behalf, it is important to note that we assess every
company individually. In voting, we will always
evaluate proposals on a case-by-case basis, based
on what we believe to be in the best long-term
interests of our clients, rather than rigidly applying
a policy.
A broad cross-section of our investment staff
is involved in our ongoing work on stewardship.
In the same way that our investment approach is
based around empowered and independent teams,
our voting and engagement is led by the individual
investment teams. In keeping with our decentralised
and autonomous culture, our investment teams will,
on occasion, elect to vote differently on the same
general meeting resolutions. Where this happens,
we report accordingly in the proxy voting disclosure
on our website. We also have clear processes in
place to identify, prevent and manage potential
proxy voting related conflicts of interest to ensure
that in all cases the firm acts in the clients’ best
interest. Baillie Gifford’s firm-wide conflict of
interest disclosure is available on its website.
Prior to taking any voting action, we usually address
specific ESG concerns by engaging directly with the
company, using voting as an escalation mechanism
if we have not seen sufficient progress.
Portfolio company meeting record*
Voting distribution
†
Percentage of portfolio company
meetings voted with management
96%
Percentage of portfolio company
meetings with at least one vote
against, withheld or abstained
4%
* The Company voted at 49 meetings in the
year, voting entirely in favour of management
on 47 occasions.
Percentage of votes for 90%
Percentage of votes against 2%
Percentage of votes withheld,
abstained or not submitted
8%
† Votes were cast for 199 of the 215 resolutions
proposed over the 49 meetings held in the year.
194 votes were submitted in favour, 4 against
and 1 vote was withheld.
17
The Schiehallion Fund Limited
Strategic report
Annual Report and Financial Statements 2024
18
One year
summary
*
The following information
illustrates how The Schiehallion
Fund Limited performed
over the year ended
31 January 2024.
For a definition of terms see Glossary of Terms and Alternative Performance Measures on pages 120 and 121.
* Key performance indicator.
†
Alternative performance measure, see Glossary of Terms and Alternative Performance Measures on pages 120 and 121.
#
The C shares converted on 8 September 2023 (see page 36).
Source: Baillie Gifford/LSEG. See disclaimer on page 118
Ordinary shares
31 January
2024
31 January
2023 % change
Shareholders’ funds US$1,219.14m US$597.61m
Net asset value per ordinary share 118.37¢ 119.42¢ (0.9%) *
Share price 71.50¢ 92.00¢ (22.3%) *
Discount
†
* (39.6%) (23.0%)
Number of shares in issue 1,029,898,907 500,430,002
Market capitalisation US$736.38m US$460.40m
Ongoing charges
†
* 0.85% 0.87%
Year ended
31 January
2024
Year ended
31 January
2023
Revenue loss per share (0.12¢) (0.98¢)
C shares
#
31 January
2023
Shareholders’ funds US$555.57m
Net asset value per C share 79.37¢
Share price 49.00¢
Discount
†
* (38.3%)
Number of shares in issue 700,000,000
Market capitalisation US$343.0m
Ongoing charges
†
* 0.71%
Year ended
31 January
2023
Revenue loss per share (0.35¢)
19
The Schiehallion Fund Limited
* Key performance indicator.
†
Alternative performance measure, see Glossary of Terms and Alternative Performance Measures on pages 120 and 121.
¶
The C shares converted on 8 September 2023 (see page 36).
Source: Baillie Gifford/LSEG. See disclaimer on page 118.
Period’s high and low
For the period 1 February 2023
to 8 September 2023
For the period 9 September
2023 to 31 January 2024 Year ended 31 January 2023
Ordinary shares High Low High Low High Low
Net asset value per ordinary share 117.98¢ 103.94¢ 118.66¢ 103.40¢ 153.18¢ 116.84¢
Share price 92.50¢ 59.00¢ 74.00¢ 45.00¢ 214.00¢ 91.50¢
(Discount)/premium
†
(22.53)% (44.93)% (36.29)% (56.48)% 40.5% (26.90%)
For the period 1 February 2023
to 8 September 2023 Year ended 31 January 2023
C shares
¶
High Low High Low
Net asset value per ordinary share 80.78¢ 73.83¢ 97.20¢ 77.32¢
Share price 49.00¢ 39.50¢ 129.00¢ 49.00¢
(Discount)/premium
†
(38.43)% (50.38)% 36.1% (41.10%)
NAV and ordinary share price total return
*
(figures rebased to 100 at 31 January 2023)
Ordinary share discount to net asset value
*
(figures plotted on a monthly basis)
J
2024
J
2023
F MAMJJAS N
OD
● NAV*
●
Share price*
40
110
100
90
80
70
60
50
20242023
JJFMAMJ JASN
OD
● Discount*
(60%)
(20%)
(40%)
(50%)
(30%)
Strategic report
Annual Report and Financial Statements 2024
20
Review of
investments
A review of the Company’s
ten largest investments as
at 31 January 2024.
Space Exploration
Technologies Corp (SpaceX)
SpaceX designs, manufactures
and launches spacecraft.
SpaceX built its business around
simplicity, innovation and
affordability leading to a vertically
integrated, lean and nimble
organisation that can iterate and
manufacture quickly. SpaceX’s re-
useable rockets deliver economies
of scale and operating leverage
that create a uniquely disruptive
business model. The company has
now launched more than 3,300
satellites for its Starlink service.
Geography United States
Valuation at
31 January 2024
US$88,324,000
% of net assets at
31 January 2024
7.2%
Valuation at
31 January 2023
US$70,113,000
% of net assets
at 31 January 2023
6.1%
Net purchases/(sales) in
year to 31 January 2024
–
© SpaceX
ByteDance
Famous for video-sharing social
networking platforms TikTok
and Douyin, as well as the news
aggregator app, Toutiao. The
company uses machine learning to
deliver relevant and individualised
content. Further innovations
include enabling advertisers to
target customers with precision.
TikTok is one of the few Chinese
companies to grow a successful
overseas operation. Performance
remains strong, with earnings
growth exceeding that of peers and
active users encroaching on Meta,
although regulatory challenges
remain outside of China.
Geography China
Valuation at
31 January 2024
US$63,835,000
% of net assets at
31 January 2024
5.2%
Valuation at
31 January 2023
US$49,808,000
% of net assets
at 31 January 2023
4.3%
Net purchases/(sales) in
year to 31 January 2024
US$18,180,000
© Imaginechina Limited/Alamy Stock Photo
Denotes listed investments previously held in
the portfolio as a private company investment.
21
The Schiehallion Fund Limited
Wise
Wise, the international money
transfer business, enables
customer and business payments,
but eliminates intermediaries and
limits transaction costs. Wise
listed in July 2021 at a market
capitalisation of c.US$11bn after
successive years of successful
execution. New features, such
as interest and cashback on
balances, beyond its flagship
offering of international currency
exchange, have resulted in
customer growth of a third year
on year. The company continues
to engage in banking partnerships
expanding into Australia, India,
Canada, and Japan.
Geography United Kingdom
Valuation at
31 January 2024
US$61,991,000
% of net assets at
31 January 2024
5.1%
Valuation at
31 January 2023
US$40,121,000
% of net assets
at 31 January 2023
3.5%
Net purchases/(sales) in
year to 31 January 2024
–
© Wise
Affirm
Affirm is a digital financial
services company that offers
simple consumer loans to buy
an array of consumer goods.
Affirm experienced impressive
growth up to its IPO in 2021 and
has continued this as a public
company. It continues to expand its
user base and merchant partners,
such as Amazon and Walmart, and
recently partnered with Google
Pay, expanding the user base to
Android users. Affirm’s share price
since going public has recovered
recently. We chose to reduce the
position during December 2023.
Geography United States
Valuation at
31 January 2024
US$52,578,000
% of net assets at
31 January 2024
4.3%
Valuation at
31 January 2023
US$31,864,000
% of net assets
at 31 January 2023
2.8%
Net purchases/(sales) in
year to 31 January 2024
US$(30,240,000)
© Bloomberg/Getty Images
Geography Italy
Valuation at
31 January 2024
US$48,922,000
% of net assets at
31 January 2024
4.0%
Valuation at
31 January 2023
–
% of net assets
at 31 January 2023
–
Net purchases/(sales) in
year to 31 January 2024
US$20,622,000
Bending Spoons
New purchase
Bending Spoons is a developer
and acquirer of digital consumer
applications. The company
leverages its shared set of tools
to use across different apps, with
the shared goal of maximising
long-term value creation while
simultaneously minimising
customer acquisition cost
and improving the product for
consumers. Scaling its current
suite of apps and strategically
acquiring new apps will be crucial
to its success.
Strategic report
Annual Report and Financial Statements 2024
22
Geography United States
Valuation at
31 January 2024
US$40,212,000
% of net assets at
31 January 2024
3.3%
Valuation at
31 January 2023
US$35,733,000
% of net assets
at 31 January 2023
3.1%
Net purchases/(sales) in
year to 31 January 2024
–
Brex
Initially offering corporate credit
cards to start-ups, Brex now
provides a range of services to
businesses. Brex’s digital-first
approach has allowed them to
expand from a corporate credit
card provider to offer every
service a business needs in a
better and cheaper fashion than
incumbents. Due to the nature of
its customers, and the business
environment for start ups and
the venture community, Brex is
weathering a challenging period.
However, active customers
continue to grow while customer
churn remains low.
Geography India
Valuation at
31 January 2024
US$41,006,000
% of net assets at
31 January 2024
3.3%
Valuation at
31 January 2023
US$32,032,000
% of net assets
at 31 January 2023
2.8%
Net purchases/(sales) in
year to 31 January 2024
–
Dailyhunt
Dailyhunt (parent company VerSe)
is India’s leading local language
news and video aggregator. Its
two core platforms are Dailyhunt,
a multi-platform news app, and
Josh, a short-form video app,
often referred to as India’s TikTok.
Dailyhunt drives shareholder
value by the virtuous cycle of
improved content, user growth and
increased monetisation. The Indian
advertising market is evolving from
TV and print to digital and drives
revenue higher. Dailyhunt has
generated cash to grow Josh and
the results can be seen through
user numbers accelerating.
McMakler
McMakler is the developer of
an online real estate marketing
platform designed to improve
service quality, pricing and
corporate presentation into the
sector. The German real estate
market is incredibly fragmented,
McMakler’s platform centralises
and automates functions, creating
a better system for buyers, sellers
and real estate agents. The
macroeconomic environment
has had an adverse effect on the
property market especially so in
Germany. Despite a slowdown in
transactions McMakler continues
to grow and take market share.
Geography Germany
Valuation at
31 January 2024
US$37,242,000
% of net assets at
31 January 2024
3.1%
Valuation at
31 January 2023
US$24,621,000
% of net assets
at 31 January 2023
2.1%
Net purchases/(sales) in
year to 31 January 2024
US$10,880,000
23
The Schiehallion Fund Limited
Geography United Kingdom
Valuation at
31 January 2024
US$34,001,000
% of net assets at
31 January 2024
2.8%
Valuation at
31 January 2023
US$9,728,000
% of net assets
at 31 January 2023
0.8%
Net purchases/(sales) in
year to 31 January 2024
–
Wayve Technologies
Wayve is developing software for
autonomous vehicles, using end-
to-end deep learning. Using an
entirely machine-learnt approach
and training their system in central
London, Wayve promises to safely
meet the edge cases that have
previously hampered the self-
driving industry. Their approach
uses simple and comparatively
cheap hardware, making it easier
to adopt than rivals. These factors
– plus Wayve’s strong team,
partnerships and track record –
put it in a unique position to lead
the commercialisation of safe
autonomous driving.
Geography Germany
Valuation at
31 January 2024
US$32,996,000
% of net assets at
31 January 2024
2.7%
Valuation at
31 January 2023
US$26,665,000
% of net assets
at 31 January 2023
2.3%
Net purchases/(sales) in
year to 31 January 2024
–
Flix
Flix, the bus and train operator
in Europe and the USA, provides
a booking app for customers,
payment processing, route
coordination software, and
branding. Founded in Germany in
2013, Flix quickly achieved more
than 90% market share in its
home market, expanded across
Europe and now to the US.
The company has recovered
well from the pandemic-induced
halting of public transport, where
they took the opportunity to
acquire Greyhound in the US and
have since shown encouraging
operational results.
© FlixMobility GmbH
© Wayve
Strategic report
Annual Report and Financial Statements 2024
24
Performance
1 year
%
3 years
%
Since inception
% *
Share price (22.3%) (60.3%) (28.5%)
NAV (0.9%) (19.5%) 18.8%
*
Inception date: 27 March 2019.
All figures are stated on a total return basis† for periods to 31 January 2024.
†
Alternative Performance Measure – see Glossary of Terms and Alternative Performance Measures on pages 120 and 121.
Source: Baillie Gifford/LSEG. See disclaimer on page 118.
Portfolio executive
summary
Denotes listed investment previously held in the portfolio as a private company investment.
Contributors
†
Absolute return *
(%)
Affirm
147.3
Bending Spoons 138.8
Wise 54.1
Wayve 252.1
Pet Circle 103.6
*
Absolute performance (in US$ terms) has been calculated on a total return basis (including reinvestment of any dividends paid by portfolio holdings)
over the period 1 February 2023 to 31 January 2024.
†
The contributors and detractors to Company performance are listed in descending order.
Source: Revolution.
Detractors
†
Absolute return *
(%)
Scopely
(36.2)
Solugen (32.5)
Indigo Agriculture (94.9)
Convoy (100)
Epic Games (380)
Key contributors and detractors to Company performance – year to 31 January 2024
New buys
Bending Spoons
Oddity
Reductions
Affirm
Complete sales
Ginkgo Bioworks
Illumina
Scopely
Additions
ByteDance
Databricks
HeartFlow
Honor
McMakler
Stripe
25
The Schiehallion Fund Limited
Distribution of net assets
Geographical as at 31 January 2024
The above sectoral distribution is not derived from any index.
Sectoral
% at
31 January
2024
% at
31 January
2023
Number of
investments
at 31 January
2024
1 Information technology 21.3 20.8 13
2 Financial 18.0 14.4 6
3 Industrials 13.0 14.1 6
4 Consumer discretionary 10.1 11.1 7
5 Communication services 8.8 7. 7 3
6 Consumer staples 4.2 5.1 4
7 Real estate 4.0 3.5 2
8 Healthcare 3.6 3.5 4
9 Materials 2.6 4.2 1
10 Net current assets 14.4 15.6
Sectoral as at 31 January 2024
Geographical
% at
31 January
2024
% at
31 January
2023
Number of
investments
at 31 January
2024
1 United States 49.1 57.5 31
2 United Kingdom 8.4 5.1 3
3 China 7. 7 8.0 3
4 Germany 5.8 4.4 2
5 Italy 4.0 – 1
6 India 3.4 2.8 1
7 Sweden 2.7 3.4 1
8 Australia 1.8 1.0 1
9 Israel 1.6 – 1
10 Brazil 0.9 1.4 1
11 Canada 0.2 0.8 1
12 Net current assets 14.4 15.6
3
4
5
7
12
2
6
1
3
4
5
10
2
6
7
8
9
1
Strategic report
Annual Report and Financial Statements 2024
26
Transaction value
Showing all transactions prior to report date (US$’000).
Historical snapshot
Since our inception in 2019, The Schiehallion Fund Limited has deployed US$1.12bn of capital.
0
600,000
500,000
300,000
200,000
400,000
100,000
20242023202220212020
Follow on
Buy
Listed Takeover
Sale
08
private companies listed
38
private companies currently held
02
private companies taken over
Company size
Our portfolio tends to be weighted to the upper end of the maturity curve, focused on late stage private
companies who are scaling up and becoming profitable, as well as listed holdings that we held prior to IPO.
The below table represents total equity value at 31 January 2024.
Cap Total equity value (US$) Portfolio %
Number of
private companies
Number of
listed holdings
Micro <$300m 1.9 4 1
Small $300m–$2bn 22.1 13 1
Medium $2bn–$10bn 38.2 15 2
Large >$10bn 37.8 6 4
100.0 38 8
As at 31 January 2024.
27
The Schiehallion Fund Limited
Denotes listed investment previously held in the portfolio as a private company investment.
Year ended
31 January 2024
US$’000
Year ended
31 January 2023
US$’000
Opening fair value
853,014 937,283
Purchases at cost 71,914 113,068
Sales – proceeds (38,795) (1,848)
– gains/(losses) 17,370 –
Change in categorisation (10,000) –
Change in fair value (23,794) (195,489)
Closing fair value 869,709 853,014
Private company overview
Concentration
At 31 January 2024 we held 38 private companies
which equated to 71.3% of total assets.
Net current assets represent 14.4% of total net assets.
All figures stated as percentage of total net assets, as at 31 January 2024.
Portfolio exposure
(31 January 2024)
Space Exploration Technologies 7.2%
ByteDance 5.2%
Wise 5.1%
Affirm Holdings 4.3%
Bending Spoons 4.0%
Rest of portfolio 59.8%
Net current assets 14.4%
Portfolio activity – year to 31 January 2024
US$71.9 million was deployed in private companies
during the year. New investments in Bending
Spoons and Oddity, follow on investments in Stripe,
McMakler, Honor, Databricks and ByteDance.
Oddity, after initial investment, listed in the period.
Total assets – 100%
Top 10 – 41.0%
Total investments – 85.6%
Top 5 – 25.8%
Strategic report
Annual Report and Financial Statements 2024
28
We aim to hold our private company investments
at ‘fair value’, i.e. the price that would be paid in an
open-market transaction. Valuations are adjusted
both during regular valuation cycles and on an
ad hoc basis in response to ‘trigger events’. Our
valuation process ensures that private companies
are valued in both a fair and timely manner.
The valuation process is overseen by a valuations
group at Baillie Gifford, which takes advice from an
independent third party (S&P Global). The valuations
group is independent from the investment team with
all voting members being from different operational
areas of the firm, and the portfolio managers only
receive final valuation notifications once they have
been applied.
We revalue the private holdings on a three-month
rolling cycle, with one-third of the holdings
reassessed each month. During stable market
conditions, and assuming all else is equal, each
investment would be valued four times in a
twelve-month period. For Schiehallion and our
investment trusts, the prices are also reviewed
twice per year by the respective boards and are
subject to the scrutiny of external auditors in the
annual audit process.
Beyond the regular cycle, the valuations team also
monitors the portfolio for certain ‘trigger events’.
These may include changes in fundamentals, a
takeover approach, an intention to carry out an
Initial Public Offering (‘IPO’), company news which
is identified by the valuation team or by the portfolio
managers, or meaningful changes to the valuation
of comparable public companies. Any ad hoc change
to the fair valuation of any holding is implemented
swiftly and reflected in the next published net asset
value (‘NAV’). There is no delay.
The valuations team also monitors relevant market
benchmarks 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.
Periods of market volatility during the year has meant
that valuations continue to be reviewed much more
frequently, in some instances resulting in a further
valuation movement. The data below quantifies the
revaluations carried out during the year to 31 January
2024, however it does not reflect the ongoing
monitoring of the private investment portfolio that
has resulted in no changes in valuation.
The Schiehallion Fund*
Instruments valued 406
Instruments held
76
Percentage of portfolio revalued up to 4 times
30.3%
Percentage of portfolio revalued 5 or more times 69.7%
*
Data reflecting year to 31 January 2024.
In the year ended 31 January 2024, we have seen
several investments in the portfolio raise additional
capital at flat and increased valuations with
improved market conditions. The average movement
in company valuations and share prices across the
portfolio are shown below.
Valuation movements
Average movement in company valuation 18.3%
Average movement in share price
2.3%
Alternative performance measures - see Glossary of Terms and
Alternative Performance Measures on page 120 and 121.
Baillie Gifford typically holds preference stock and
the improvement in valuation is less pronounced at
a share price level due to the downside protection
associated with these investments which came
into play when valuation write downs were
previously applied.
Baillie Gifford’s approach to
valuing private companies
29
The Schiehallion Fund Limited
Name Business Country
2024
Total
value
US$’000
2024
% of net
assets *
2023
Ordinary
shares value
US$’000
2023
C share
value
US$’000 *
2023
Total
value
US$’000
Space Exploration
Technologies Corp
Designs, manufactures and
launches advanced rockets
and spacecraft
United
States
88,324 7. 2 70,113 – 70,113
ByteDance Ltd Social media and news
aggregation company
China 63,835 5.2 49,808 – 49,808
Wise PLC – Listed Online platform to send
and receive money
United
Kingdom
61,991 5.1 30,112 10,009 40,121
Affirm Holdings Inc
– Listed
Online platform which
provides point of sale
consumer finance
United
States
52,578 4.3 14,437 17,427 31,864
Bending Spoons
S.P.A
Mobile application software
developer
Italy
48,922 4.0
– – –
Dailyhunt (Ver Se
Innovation Limited)
Indian news aggregator
application
India 41,006 3.3 32,032 – 32,032
Brex Inc Corporate credit cards
for startups
United
States
40,212 3.3 11,292 24,441 35,733
McMakler GmbH Real estate services Germany 37,242 3.1 – 24,621 24,621
Wayve Technologies
Ltd
AI based software for
self-driving cars
United
Kingdom
34,001 2.8
– 9,728 9,728
Flix SE European mobility provider Germany 32,996 2.7 13,309 13,356 26,665
Solugen Inc Combines enzymes and metal
catalysts to make chemicals
United
States
32,293 2.6 – 47,881 47,881
Northvolt AB Lithium ion battery
manufacturer
Sweden
31,772 2.6
22,525 16,280 38,805
Databricks Inc Data software solutions United
States
29,873 2.5 – 23,523 23,523
Faire Wholesale Inc Online wholesale marketplace United
States
28,509 2.4 – 29,404 29,404
Stripe Inc Online payment platform United
States
27,468 2.3
27,943 – 27,943
Chime Financial Inc Digital current account
provider
United
States
26,697 2.2 7,417 19,294 26,711
Tempus Labs Inc Oncological records
aggregator and diagnostic
testing provider
United
States
26,402 2.2 20,177 4,210 24,387
Grammarly Inc Online platform for
checking grammar, spelling
and improving written
communication
United
States
23,976 2.0 – 22,353 22,353
List of
investments
As at 31 January 2024
* Investments held in the C share portfolio were transferred to the Ordinary share portfolio when the C shares converted on 8 September 2023.
Strategic report
Annual Report and Financial Statements 2024
30
Name Business Country
2024
Total
value
US$’000
2024
% of net
assets *
2023
Ordinary
shares value
US$’000
2023
C share
value
US$’000 *
2023
Total
value
US$’000
Kepler Computing Inc Semiconductor company United
States
23,137 1.9
– 15,919 15,919
Pet Circle
(Millell Pty Ltd)
Pet food and accessories Australia 22,975 1.9 – 11,357 11,357
Genki Forest
Technology Group
Holdings Limited
Non-alcoholic beverages China 22,628 1.9 – 29,727 29,727
Rappi Inc Provider of an on-demand
delivery platform designed to
connect consumers with local
stores
United
States
21,825 1.8 – 19,922 19,922
Oddity – Listed Direct to consumer cosmetics Israel
19,181 1.6
– – –
Tanium Inc Online security management United
States
17,974 1.5 11,799 – 11,799
Epic Games Inc Video game developer United
States
17,565 1.4 28,320 – 28,320
Warby Parker
(JAND Inc) – Listed
Online and physical corrective
eyewear retailer
United
States
16,398 1.3 20,774 – 20,774
PsiQuantum Silicon photonic quantum
computing
United
States
13,996 1.1 – 13,195 13,195
Workrise
Technologies Inc
Jobs marketplace for the
energy sector
United
States
13,392 1.1
17,073 – 17,073
Nuro Inc Developer of autonomous
delivery vehicles
United
States
13,044 1.1
9,100 12,112 21,212
Loft Holdings Ltd Online property platform Brazil 11,556 0.9 – 15,569 15,569
Cohesity Inc Data storage United
States
11,526 0.9 8,033 – 8,033
Airbnb Inc – Listed Online market place for travel
accommodation
United
States
11,082 0.9
8,544 – 8,544
HeartFlow Inc Develops software for
cardiovascular disease
diagnosis and treatment
United
States
10,939 0.9 2,029 – 2,029
Merlin Labs Inc Autonomous flight technology United
States
10,632 0.9 – 13,842 13,842
Away (JRSK Inc) Travel and lifestyle brand United
States
10,590 0.9 12,355 – 12,355
Oscar Health Inc
– Listed
Healthcare insurance provider United
States
10,292 0.8
3,157 – 3,157
Carbon Inc Manufactures and develops
3D printers
United
States
9,062 0.7 9,670 – 9,670
Jiangxiaobai Holdings
Ltd
Producer of alcoholic
beverages
China 8,012 0.7 12,892 – 12,892
Graphcore Ltd Computer chip developer United
Kingdom
6,469 0.5 8,706 – 8,706
Honor Technology Inc Provider of home-care
services
United
States
5,379 0.4 2,990 3,888 6,878
MasterClass
(Yanka Industries Inc)
Online education platform United
States
2,732 0.2 6,487 – 6,487
Allbirds Inc – Listed Sustainable direct-to-
customer footwear brand
United
States
2,142 0.2 4,659 1,459 6,118
*
Investments held in the C share portfolio were transferred to the Ordinary share portfolio when the C shares converted on 8 September 2023.
31
The Schiehallion Fund Limited
Name Business Country
2024
Total
value
US$’000
2024
% of net
assets *
2023
Ordinary
shares value
US$’000
2023
C share
value
US$’000 *
2023
Total
value
US$’000
Blockstream Corp Inc Financial software developer Canada 1,947 0.2 – 8,885 8,885
Indigo Agriculture Inc Microbial seed treatments to
increase crop yields and grain
marketplace
United
States
801 0.1 15,839 – 15,839
Illumina CVR Gene sequencing equipment
and consumables
United
States
407 0.0 7,355 – 7,355
Convoy Inc Marketplace for truckers and
shippers
United
States
0 0.0 9,165 4,210 13,375
Scopely Inc Online gaming company United
States
– – 60,223 – 60,223
Total investments 1,043,781 85.6% 559,420 412,612 972,032
Name
2024
Total value
US$’000
2024
% of net
assets
2023
Ordinary
shares
value
US$’000
2023
C shares
value
US$’000
2023
Total
value
US$’000
US Treasury Bill 05/09/2024 27,909 2.3 – – –
US Treasury Bill 13/06/2024 27,935 2.3 – – –
US Treasury Bill 18/04/2024 27,949 2.3 – – –
US Treasury Bill 22/02/2024 27,948 2.3 – – –
US Treasury Bill 31/10/2024 27,859 2.2 – – –
US Treasury Bill 29/11/2024 27,922 2.3 – – –
US Treasury Bill 18/05/2023 – – – 23,112 23,112
US Treasury Bill 13/07/2023 – – – 22,874 22,874
US Treasury Bill 07/09/2023 – – – 22,870 22,870
US Treasury Bill 23/03/2023 – – – 22,801 22,801
US Treasury Bill 02/11/2023 – – – 22,630 22,630
US Treasury Bill 28/12/2023 – – – 22,510 22,510
Total US Treasury Bills 167,522 13.7 – 136,797 136,797
Cash 11,306 0.9 38,872 6,927 45,799
Other current assets and liabilities (2,638) (0.2) (684) (761) (1,445)
Capital gains tax provision (834) –
– – –
Net current assets less capital gains tax provision 175,321 14.4 38,188 142,963 181,151
Total net assets less capital gains tax provision 1,219,137 100.0 597,608 555,575 1,153,183
Listed
investments
%
Private
company
investments
%
Net current
assets
%
Net
assets
%
31 January 2024 14.3 71.3 14.4 100.0
31 January 2023 10.3 74.0 15.7 100.0
Strategic report
Annual Report and Financial Statements 2024
32
Allocation of net assets
Name
2024
Total value
US$’000
2024
% of net
assets *
2023
Ordinary
shares value
US$’000
2023
C shares
value
US$’000
2023
Total value
US$’000
Listed investments 174,072 14.3 90,123 28,895 119,018
Private company investments 869,709 71.3 469,297 383,717 853,014
US Treasury Bills 167,522 13.7 – 136,797 136,797
Cash and cash equivalents 11,306 0.9 38,872 6,927 45,799
Net current assets less capital gains tax provision (3,472) (0.2) (684) (761) (1,445)
Total net assets 1,219,137 100 597,608 555,575 1,153,183
Company metrics
Capital
deployed
*
Number
of private
company
acquisitions
Number
of private
company
realisations
Number of
IPOs/listings
Gross
Internal
Rate of
Return
(IRR)
*
Gross
Multiple on
Invested
Capital
(MOIC)
*
Since launch US$1,122m 48 3 8 0.7% 1.0
*
Alternative performance measure, see Glossary of Terms and Alternative Performance Measures on pages 120 and 121.
33
The Schiehallion Fund Limited
Business model
Business and status
The Schiehallion Fund Limited (the ‘Company’)
is a non-cellular investment company limited by
shares, registered and incorporated in Guernsey
under the Companies (Guernsey) Law, 2008
(the ‘Companies Law’) on 4 January 2019, with
registration number 65915. The Company is a
registered closed-ended investment scheme
registered pursuant to the Protection of Investors
(Bailiwick of Guernsey) Law 2020 and the Registered
Collective Investment Scheme Rules, 2021 issued
by the Guernsey Financial Services Commission
(‘GFSC’). The Company has been admitted to trade
on the Specialist Fund Segment of the Main Market
of the London Stock Exchange.
The Company has a fixed share capital consisting
of ordinary shares, although, subject to shareholder
approval, it may purchase its own shares or
issue shares.
The authority to purchase shares expires at the end
of the Company’s Annual General Meeting (‘AGM’)
and the Directors are seeking to renew this authority
at the AGM on 10 May 2024.
The authority to issue ordinary shares will expire
on 15 March 2024. Shareholder approval will be
sought to renew the authority to issue shares at
the 10 May 2024 AGM. The price of the ordinary
shares is determined, like other listed shares, by
supply and demand. The Company’s shares are
denominated in US dollars.
The Company is an Alternative Investment Fund
(‘AIF’) for the purposes of the UK Alternative
Investment Fund Managers Regulations.
Investment objective
The Company’s investment objective is 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.
Investment policy
In making its initial investment in a business,
the Company will seek to invest in private
businesses which it considers have the potential
to become admitted to trading on a public stock
exchange. Those investments will typically take
the form of equity or equity-related instruments
(which may include, without limitation, preference
shares, convertible debt instruments, equity-related
and equity-linked notes and warrants) issued by
investee companies.
The Company will only invest in private businesses
that are considered to have some or all of the
following features:
• the potential to grow revenue and earnings
multiple fold over the long term;
• scalable business models that should enable
those businesses to grow into their opportunity;
• robust competitive advantages;
• exceptional management teams;
• an entry price which significantly undervalues
the long-term opportunity for the business; and
• an ambition and ability to become stand-alone
public companies.
Business review
Strategic report
Annual Report and Financial Statements 2024
34
Investee companies may be from any sector and any
geography. While there are no specific limits placed
on exposure to any one sector, the Company will at
all times seek to invest and manage the portfolio in
a manner consistent with spreading investment risk.
With prior approval of the Board, the Company
may permit the use of derivatives for the purpose
of currency hedging, though it currently does not
expect to do so. Save for this and for investments
made using equity-related instruments as described
above, the Company may not engage in derivative
transactions for any purpose.
The Board does not intend to use structural
gearing with a view to enhancing equity returns
on investments. The Company may employ gearing
on a short-term basis for the purpose of bridging
investments and general working capital purposes.
The Company may in aggregate borrow amounts
equalling up to 10% of net asset value, calculated
at the time of drawdown.
The Company is subject to the following investment
restrictions:
• an investee company must be a private investee
company at the time of the Company’s initial
investment in that investee company. The Company
may, however, make subsequent investments
in the investee company, even if the investee
company has been admitted to trading on
a public stock exchange in the period since
the Company’s initial investment;
• a private investee company must have a value
of at least US$500 million at the time of the
Company’s initial investment in the private
investee company. This restriction will not
apply to the Company’s subsequent investments
in the investee company, if any;
• the Company may not make an initial investment
in a private investee company which exceeds in
value 10% (calculated at the time of investment)
of the most recently published net asset value
(save to the extent that breach of this 10% limit
is due to a change in the value of the Company’s
invested assets or currency fluctuations from the
time of the Company’s firm commitment to make
the investment to the time of investment);
• the Company may not make any investment in
a private investee company that would cause the
value of the Company’s holding in that private
investee company to exceed 19.9% (calculated
at the time of investment) of the most recently
published net asset value; and
• the Company may not make any investment
in an investee company that would cause the
Company’s holding in that investee company to
exceed 20% (calculated at the time of investment)
of the total issued share capital of the investee
company.
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.
It is intended that the Company will be substantially
invested in normal market conditions. However,
the Company may 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 is no restriction on the amount
of cash or cash-equivalent instruments that the
Company may hold.
Company culture
The Board recognises the importance of a strong
corporate governance culture that meets the
requirements of the Code of Corporate Governance
issued by the Guernsey Financial Services
Commission (the ‘Guernsey Code’), the UK Listing
Rules and other bodies such as the AIC and that
contributes to the Company’s long-term success.
Life of the company
The Company has been established with an
unlimited life.
The Schiehallion Fund Limited
35
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 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 buy back of
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.
The Company announced on 1 November 2023 that
the Board and Investment Manager believed that the
ordinary shares represented an attractive investment
opportunity following a significant widening of the
discount and the Company intended to allocate up
to US$20m towards share repurchases, given the
limited available capital at the time. The Board will
keep this capital allocation and associated share
buyback policy under review.
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 24 March 2023), such authority to expire at
the 2024 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 154,220,703 ordinary
shares representing approximately 14.99% of the
Company’s ordinary shares in issue as at 1 April
2024, 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 2025.
Share repurchases 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 share.
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. 2,601,000 ordinary shares were
bought back for cancellation by the Company for
$1,851,000 during the year ended 31 January 2024
(31 January 2023 – nil shares).
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 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.
Strategic Report
Annual Report and Financial Statements 2024
36
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
on 15 March 2024.
The Directors are seeking shareholders’ approval
at the AGM to dis-apply the pre-emption rights in
respect of the issue of up to 102,882,390 ordinary
shares or C Shares or the sale of 102,882,390
ordinary shares or C Shares held as treasury shares
of the Company for a period concluding immediately
prior to the Annual General Meeting of the Company
to be held in 2029 (or, if earlier, five years from the
date of passing of such shareholders’ resolution).
477,250,000 ordinary were issued in the initial
placing leaving the ability to issue up to a further
242,750,000 shares. There have been 23,180,002
ordinary shares issued since the initial placing
hence the Directors have authority to issue a further
219,569,998 shares.
By way of a special resolution dated 18 March
2021 the Directors had a general authority to allot
up to 700,000,000 C shares. On 26 April 2021,
the Company issued 700,000,000 C shares which
converted on 8 September 2023 as noted in the
following section.
C Share conversion
On 3 August 2023, the Board announced that
the C shares proceeds were 86.6% deployed,
having crossed the 85% deployment threshold set
out in the Prospectus published on 18 March 2019.
The conversion ratio was calculated in accordance
with the methodology prescribed in the Prospectus
and was determined by the relative net asset values
of the C shares and the ordinary shares at the time
of conversion. This ensured that the conversion
was fair and not dilutive to the interests of ordinary
or C shareholders. The calculation date for the
conversion of the C Shares into ordinary shares was
31 August 2023, and the conversion ratio of 0.7601
ordinary shares for each C Share was announced
on 7 September 2023. The C share conversion took
place on 8 September 2023 with 532,069,905
new ordinary shares being admitted to trade on
12 September 2023.
Borrowings
The Company’s approach to borrowings is noted
within the Investment Policy detailed on page 34.
There were no borrowings as at 31 January 2024.
Performance
At each Board meeting, the Directors consider
a number of performance measures to assess
the Company’s success in achieving its objectives.
The performance measures below are up to
31 January 2024.
37
The Schiehallion Fund Limited
Key performance indicators
The Board uses key performance
indicators (KPIs) to measure
the progress and performance
of the Company over time when
discharging its duties as set
out on page 73. These KPIs are
established industry measures.
-50
-25
0
25
50
● NAV total
return
● Share
price total
return
1 year Since
inception
†
Share price and net asset
value total returns
*
The returns are shown for the
ordinary shares only following
the conversion of the C shares
into ordinary shares on
8 September 2023 as
explained on page 36.
Commentary on the Company’s
performance is provided in the
Chairperson’s Statement and
Investment Manager’s Review.
† First day of trading on 27 March 2019
* Alternative performance measure – see Glossary of Terms and Alternative Performance Measures on page 120 and 121.
# The C shares were issued in April 2021 and converted to ordinary shares on 8 September 2023 (see page 36)
Past performance is not a guide to future performance.
Share price (discount)/premium
since inception
*
Market sentiment has not favoured
growth capital investing recently. The
discount widened significantly over the
year to 31 January 2024, narrowing
slightly towards the end of the year
following the announcement that the
Company intended to repurchase up
to US$20m of its shares.
-60
-40
-20
0
20
40
● Share price (discount)/
premium
27 Mar 2019
%
31 Jan 2024
Ongoing charges ratio
*
The ongoing charges ratio is the total
recurring expenses (excluding the
Company’s cost of dealing in investments)
incurred by the Company as a percentage
of the daily average net asset value.
0.0
0.5
1.0
1.5
2.0
● Ordinary shares ● C shares
#
Jan
20
Jan
21
Jan
22
Jan
23
Jan
24
%
The Investment Manager seeks 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. The Board reviews
progress towards this aim and also reviews performance against peer group investment companies
and other growth orientated investment trusts. Across these measures, the Board looks for relative
outperformance over the long term, while remaining mindful that the nature of the investment policy
and the growth characteristics of the portfolio investments may entail periods of underperformance
over the short and medium term. The Board is satisfied with the Company’s progress and performance.
Further commentary is provided in the Chairperson’s Statement on page 6.
Strategic report
Annual Report and Financial Statements 2024
38
39
The Schiehallion Fund Limited
Principal and emerging risks
As explained on pages 64 and 65, there is a process for identifying, evaluating and managing the risks,
including emerging risks, faced by the Company on a regular basis. The Directors have carried out a robust
assessment of the principal and emerging risks facing the Company, including those that would threaten
its business model, future performance, solvency or liquidity. A description of these risks and how they
are being managed or mitigated is set out in the table below.
The Board considers the heightened macroeconomic and geopolitical concerns to be factors which
exacerbate existing risks, rather than discrete risks, within the context of an investment company.
Their impact is considered within the relevant risks.
Investment and strategic risk
Liquidity of
investments
What is the risk?
The Company’s investments are
predominantly in private investee
companies or companies which
have recently completed an IPO.
Such investments may not be
liquid or may have restrictions on
sale or transfer of shares. This
may limit the Company’s ability
to realise investments at short
notice or at all.
How is it managed?
By diversification of the
portfolio, in accordance with the
Company’s investment limits and
risk diversification policies.
Current assessment of risk
Stable: The Company has
not seen any significant
impact on underlying liquidity
of investments, however,
the economic climate, in
a continuation of trends
observed in the previous
year, has continued to
depress IPO activity.
Market,
economic,
political and
environmental
risks
What is the risk?
From time to time a large
proportion of the total value of
the Company’s portfolio could
be concentrated in a limited
number of investee companies,
which could be adversely
affected by an unexpected
change in their markets, by
governmental intervention or
by a reputational issue. This
could have a material impact
on the overall value of the
Company’s portfolio and
consequential adverse effects
on the Company’s share price.
How is it managed?
The Board assesses this risk
by considering, at each meeting,
metrics which have contributed
to performance as well as
discussion with the portfolio
managers on specific conditions
which the underlying investee
companies face. This risk is also
managed by the Company’s
investment diversification policy.
Current assessment of risk
Increasing: This risk is
seen as increasing due
to increased volatility as
a result of the ongoing
Russian invasion of Ukraine
and conflict in Gaza, high
energy prices, inflation and
interest rates, as well as the
global reach of the increased
political tensions between the
US and China.
Decreasing RiskIncreasing Risk Stable
Strategic report
Annual Report and Financial Statements 2024
40
Valuation
risk
What is the risk?
The Company invests in late
stage private businesses which
are valued in accordance with
International Private Equity
and Venture Capital Valuation
(‘IPEV’) Guidelines using
appropriate valuation methods.
Such methods include an
element of judgement which
may lead to a material
mis-statement of the valuation
and consequently of the
Company’s net asset value.
How is it managed?
The Investment Manager has a
robust valuation methodology,
which is applied consistently. The
Investment Manager’s valuation
process revalues each of the
private company investments
every 3 months and additional
valuations are carried out in
response to trigger events to
ensure the investments are
carried at fair value. The valuation
process is overseen by the
Private Companies Valuations
Group at Baillie Gifford which is
independent from the portfolio
managers and which takes advice
from an independent third party
(S&P Global). The valuations are
subject to review and challenge
by the Board every 6 months and
are subject to scrutiny annually
by the external Auditor.
Current assessment of risk
Stable: This risk is seen as
stable. In periods of market
volatility the Private Company
Valuations Group will perform
a trigger analyses and,
if appropriate, revalue the
affected investments,
as described in the report
on page 28.
Investment
strategy risk
What is the risk?
Pursuing an investment strategy
to fulfil the Company’s objective
which the market perceives to
be unattractive or inappropriate,
or ineffective implementation
of the Company’s investment
strategy, may lead to reduced
returns for shareholders and, as
a result, decreased demand for
the Company’s shares. This may
lead to the Company’s shares
trading at a widening discount
to their net asset value.
How is it managed?
The Board regularly reviews
and monitors the Company’s
investment policy and strategy,
the investment portfolio and
its performance, the level of
discount/premium to net asset
value at which the shares trade
and movements in the share
register. A strategy meeting is
also held annually. In addition,
the Investment Manager
keeps in close contact with
key shareholders and provide
regular feedback to the Board.
Current assessment of risk
Increasing: The risk is
seen as increasing as the
market’s appetite for direct
or indirect investment in
growth stocks is reduced due
to ongoing macroeconomic
and geopolitical concerns.
Discount
risk
What is the risk?
The discount/premium at which
the Company’s shares trade
relative to its net asset value
can change. Such an imbalance
can diminish the attractiveness
of the Company’s shares to
existing investors and lead
to a lack of liquidity in the
Company’s share trading.
How is it managed?
The Board monitors the level of
discount/premium at each Board
meeting. The Company has
authorities in place to buy back
or issue shares, when deemed
to be in the best interest of the
Company and its shareholders.
Current assessment of risk
Increasing: Although the
discount narrowed following
the announcement that the
Company would buy back
shares, the risk is considered
to be increasing as overall
the discount widened
significantly over the year.
Decreasing RiskIncreasing Risk Stable
41
The Schiehallion Fund Limited
Climate and
governance
risk
What is the risk?
Perceived problems on
environmental, social and
governance (‘ESG’) matters in
an investee company could lead
to that company’s shares being
less attractive to investors,
adversely affecting its share
price, in addition to potential
valuation issues arising from
any direct impact of the
failure to address the ESG
weakness on the operations or
management of the investee
company (for example in the
event of an industrial accident
or spillage). Repeated failure
by the Investment Manager
to identify ESG weaknesses
in investee companies could
lead to the Company’s own
shares being less attractive to
investors, adversely affecting
its own share price. In addition,
the valuation of investments
could be impacted by climate
change due to climate-related
operational challenges, changes
in end demand or failure to
identify a pathway to Net Zero.
How is it managed?
This is mitigated by the
Investment Manager’s ESG
stewardship and engagement
policies, which are integrated
into the investment process, as
well as the extensive upfront and
ongoing due diligence which the
Investment Manager undertakes
on each investee company.
This includes the risk inherent
in climate change (see page 66).
Current assessment of risk
Stable: The Investment
Manager continue to employ
strong ESG stewardship and
engagement policies.
External risks
Political and
associated
economic risk
What is the risk?
Global political changes result
in policy changes in areas in
which the Company invests
or may invest may have
practical consequences for the
Company and impact financial
performance.
How is it managed?
Political developments and
other social trends are closely
monitored by the Board and
are regularly discussed at
Board meetings.
Current assessment of risk
Increasing: This risk is
increasing as governments
and consumers around the
world continue to assess
the impact of the ongoing
Russia-Ukraine war, including
sanctions applied in response,
heightened tensions between
the US and China, the conflict
in Gaza and the impact of high
inflation and interest rates.
Decreasing RiskIncreasing Risk Stable
Strategic report
Annual Report and Financial Statements 2024
42
Legal and
regulatory
risk
What is the risk?
Changes to the regulatory
environment could negatively
impact the Company. Failure to
comply with applicable legal,
regulatory and tax requirements
could lead to suspension of the
Company’s Stock Exchange
listing, financial penalties, a
qualified Audit Report or the
Company being subject to tax
on capital gains.
How is it managed?
To mitigate this risk, Baillie
Gifford’s Business Risk,
Internal Audit and Compliance
Departments provide regular
reports to the Audit Committee
on Baillie Gifford’s monitoring
programmes. The Administrator
provides regular compliance
reports to the Audit Committee
to confirm the relevant Guernsey
submissions are made to
protect the legal and tax
status of the Company. Major
regulatory change could impose
disproportionate compliance
burdens on the Company. In such
circumstances representation is
made to ensure that the special
circumstances of investment
companies are recognised.
Shareholder documents and
announcements, including the
Company’s published Interim
and Annual Report and Financial
Statements, are subject to
stringent review processes and
procedures are in place to ensure
adherence to the Transparency
Directive and the Market Abuse
Directive with reference to inside
information.
Current assessment of risk
Stable: All control procedures
working effectively. There
have been no material
regulatory changes that have
occurred during the year.
Operational risks
Performance
and reliance
on third
party service
providers
What is the risk?
In common with most other
investment companies the
Company has no direct
employees and relies entirely
for its operations on third party
service providers. Failure of the
Investment Manager’s systems
or those of another service
provider, such as the Custodian
and Depositary, could lead to
an inability to accurately report
or lead to a misappropriation
of assets.
How is it managed?
The Audit Committee receives
six monthly reports from
the Investment Manager’s
Business Risk Department on
their monitoring programme
of internal controls. The Audit
Committee also receives ISAE
3402 or equivalent reports on the
Investment Manager and other
service providers. 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.
Current assessment of risk
Stable: All control procedures
are deemed to be working
effectively. Portfolio
management and all
regulatory and administrative
tasks have continued
uninterrupted during the year.
Decreasing RiskIncreasing Risk Stable
43
The Schiehallion Fund Limited
Cyber
security
threats
What is the risk?
Errors, fraud or control failures
by the Company’s key service
providers or loss of data
through increasing cyber
threats or business continuity
interruptions could damage
the Company’s reputation or
investors’ interests or result
in losses.
How is it managed?
The Audit Committee receives
confirmation that key service
providers have appropriate cyber/
IT policies to ensure that controls
are in place including business
continuity and disaster recovery
arrangements.
Current assessment of risk
Increasing: This risk is
seen as increasing due to
recent indications that the
continuation of geopolitical
tensions could lead to more
cyber attacks. Emerging
technologies, including AI,
could potentially increase
information security risks.
In addition, service providers
operate a hybrid approach
of remote and office working,
thereby increasing the
potential of a cyber security
threat.
Key
professionals
What is the risk?
Loss of key professionals,
particularly in relation to the
Investment Manager could
impact the Company’s ability
to implement its investment
strategy.
How is it managed?
The Board reviews the Investment
Manager’s performance annually
as well as the resources of the
Investment Manager for attracting
and retaining talent.
Current assessment of risk
Stable: All procedures are
satisfactory.
Decreasing RiskIncreasing Risk Stable
Strategic report
Annual Report and Financial Statements 2024
44
Emerging risks
As explained on pages 39 to 43 the Board has regular discussions on principal risks and uncertainties,
including any risks which are not an immediate threat but could arise in the longer term. The Board
considers that the key emerging risks arise from two areas; the proliferation of AI and the exposure
of the portfolio to further geopolitical and macroeconomic headwinds as described below:
Emerging
risks
What is the risk?
The ever-increasing capacity
and wide adoption of AI tools,
in daily life and businesses
globally. The proliferation of this
technology increases the risk
of both its malicious use such
as cyberattacks and fraud as
well as unintentional negative
effects given the novel nature
of these tools. There are also
considerations regarding the
societal effects of AI as it
develops and becomes adopted
more broadly.
How is it managed?
The Investment Manager has
established a group to monitor
the risks associated with emerging
technologies such as AI. The Audit
Committee receives confirmation
that key service providers have
appropriate cyber/IT policies to
ensure that controls are in place
including business continuity and
disaster recovery arrangements.
Current assessment of risk
Increasing. This risk is seen
as increasing due to the rapid
adoption and development
of AI tools.
The global reach of the
investment portfolio and its
exposure to external and
emerging threats such as an
escalation of the Russia-Ukraine
war, broadening conflict in the
Middle East and heightened
cyber risk. An escalation in
tensions between the US and
China may lead to sanctions
being imposed on China with
the potential for adversely
affecting the Company’s
Chinese investments. Higher
inflation, interest rates and
energy costs could add
pressure to the companies in
the investment portfolio.
The risks are mitigated by the
Investment Manager’s close links
to the investee companies and
their ability to ask questions on
contingency plans. The Investment
Manager believes the impact of
such events may be to slow
growth rather than to invalidate
the investment rationale.
The Investment Manager monitors
the risks emerging in certain
geographies and have established
a group to manage the response
to any future events that might
result in heightened levels of
market volatility. Regular exercises
are carried out to test the
Investment Manager’s response
to various scenarios.
Increasing. This risk is
seen as increasing due
to escalating geopolitical
tensions globally.
Decreasing RiskIncreasing Risk Stable
45
The Schiehallion Fund Limited
Viability statement
In accordance with the requirements of the AIC
Code that the Directors assess the prospects of
the Company over a defined period, the Board has
evaluated the long-term prospects of the Company
beyond the twelve-month time horizon assumption
within the going concern framework, taking account
of the longer-term investment strategy of the
Company. Details of how that assessment has been
undertaken are set out below.
The Board undertakes a robust risk assessment of
the principal and emerging risks, detailed on pages
39 to 44, facing the Company but believes that a
sudden or prolonged downturn in global economies
is the most significant risk facing the Company. Such
a downturn could significantly affect valuations of
the Company’s investments and its net asset value
as well as impacting liquidity since the Company
may not be able to realise its investments at a
reasonable price. The Board believes the Company
would still be viable during such a downturn, since
it does not have any long-term gearing obligations
which might require immediate repayment nor has it
any obligation to pay dividends. The Company also
holds a well-diversified portfolio of investments in
various industries in order to minimise the impact of
any economic shock. Specific liquidity testing was
conducted during the year, including consideration
of the risk of further market volatility resulting from
increasing geopolitical tensions. The stress testing
did not indicate any matters of concern.
Since the Company outsources its operations to
third parties, the viability of the Company could be
impacted if a service provider was unable to provide
or withdrew its services. None of the third party
service providers have experienced any significant
operational difficulties which affected the services
they provide to the Company. In addition, the Board
considers outsourced third party service providers
could be replaced at relatively short notice where
necessary.
Finally, the Investment Manager monitors closely
the Company’s cash requirements to meet ongoing
fees and expenses and expects to maintain around
2% of its assets in cash or near cash to meet these
obligations. At 31 January 2024, the Company held
cash and cash equivalent investments amounting
to US$178.8 million. These liquid assets could
sustain the Company’s annual operating expenses
for the year, including the management fee of
US$9.4 million, for at least 19 years. The Company
also has liquid listed investments of US$174.1 million
which could be sold should the need arise.
As a result of this analysis, the Board believes the
Company can effectively manage the principal
and emerging risks and uncertainties and remains
confident that the Company will be able to continue
in operation, and does not envisage any change in
strategy, objectives or events that would prevent
the Company from operating over a period of at least
five years.
In determining the period of assessment, the
Directors consider that five years is appropriate given
the continued reduced rate of deployment of capital
over the last year and when valuing the underlying
companies we would normally look to a medium
term. The Company has an even longer-term time
horizon when applying its investment strategy of
10 years, however, projecting longer-term financial
and economic scenarios presents difficulties and
therefore making five years the period of assessment
is considered more appropriate.
Relations with Stakeholders
Although the Company is domiciled in Guernsey,
the Board has considered the guidance set out
in the AIC Code in relation to section 172 of the
Companies Act 2006 in the UK. Section 172 of
the Companies Act requires that the Directors of a
Company must act in the way they consider, in good
faith, would be most likely to promote the success
of the Company for the benefit of its stakeholders
as a whole and in doing so have regard (amongst
other matters and to the extent applicable) to:
a. the likely consequences of any decision in the
long term;
b. the interests of the Company’s employees;
c. the need to foster the Company’s business
relationships with suppliers, customers and others;
d. the impact of the Company’s operations on the
community and the environment;
e. the desirability of the Company maintaining
a reputation for high standards of business
conduct; and
f. the need to act fairly between stakeholders
of the Company.
In this context and having regard to Schiehallion
being an externally managed investment company
with no employees, the Board considers that the
Company’s key stakeholders are its existing and
potential new shareholders, its externally-appointed
Investment Manager, Baillie Gifford & Co Limited,
and other service providers (Administrator, Corporate
Broker, Registrar, Auditor, Custodian and Depositary),
as well as wider society and the environment.
Strategic report
Annual Report and Financial Statements 2024
46
Stakeholder Why we engage How we engage and what we do
Shareholders Shareholders are, collectively, the Company’s
owners: providing them with a return for their
investment in accordance with the Company’s
investment policy and objective is the reason
for its existence.
The Board places great importance on communication with
shareholders. The Annual General Meeting provides an
opportunity for the Board and Investment Manager 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 Investment Manager and raise
questions and concerns. The Chairperson and Senior
Independent Director are available to meet with shareholders
as appropriate and met with major shareholders during the
year. The Investment Manager meets regularly with shareholders
and their representatives, reporting their views back to the
Board. Directors also attend certain shareholder presentations,
in order to gauge shareholder sentiment first hand.
Shareholders may also communicate with members of the
Board at any time by writing to them at the Company’s registered
office or to the Company’s broker. These communication
opportunities help inform the Board when considering how
best to promote the success of the Company for the benefit
of all shareholders over the long term.
Baillie Gifford,
Investment Manager
and Alter Domus,
Administrator
and Secretaries
The Company’s Board has delegated the
management of the Company’s portfolio
to Baillie Gifford, and the administration
of the Company’s operations including
fulfilment of regulatory and taxation reporting
requirements, to Alter Domus. Baillie Gifford
and Alter Domus are therefore responsible
for the substantial activities of the Company
and have the most immediate influence on
its conduct towards the other stakeholders,
subject to the oversight and strategic
direction provided by the Board.
The Board seeks to engage with its Investment Manager,
Administrator and other service providers in a collaborative
and collegiate manner, encouraging open and constructive
discussion and debate, while also ensuring that appropriate
and regular challenge is brought and evaluation conducted.
This approach aims to enhance service levels and strengthen
relationships with the Company’s providers, with a view to
ensuring the interests of the Company’s shareholders are best
served by keeping cost levels proportionate and competitive,
and by maintaining the highest standards of business conduct.
Portfolio companies As all of the Company’s operations are
conducted by third party professional providers,
it is the companies held in its investment
portfolio which have the primary real-world
impact in terms of social and environmental
change, both positively and negatively, as
well as generating, through their commercial
success, the investment growth sought by
the Company’s shareholders. The investee
companies have an interest in understanding
their shareholders’ investment rationale in order
to assure themselves that long-term business
strategies will be supported.
The Board is cognisant of the need to consider the impact of
the Company’s investment strategy and policy on wider society
and the environment. The Board considers that its oversight
of environmental, social and governance (‘ESG’) matters is
an important part of its responsibility to all stakeholders.
The Board’s review of the Investment Manager includes an
assessment of their ESG approach and its application in
making investment decisions. The Board reviews Governance
Engagement reports, which document the Investment
Manager’s interactions with investee companies on ESG
matters (see pages 13 to 15). The portfolio managers regularly
report to the Board on discussions with portfolio companies on
operational and strategic matters.
Broker The Company’s brokers provide an interface
between the Company’s Board and its
institutional shareholders.
The Company’s brokers regularly attend Board meetings,
and provide reports to those meetings, in order to keep the
Board apprised of shareholder and wider market sentiment
regarding the Company. They also arrange opportunities for
shareholders to meet the Chairperson outside the normal
general meeting cycle.
The Board considers that the Company’s key
stakeholders are aligned, in terms of wishing to see
the Company deliver sustainable long-term growth,
in line with the Company’s stated objective and
strategy, and meet the highest standards of legal,
regulatory, and commercial conduct, with the
differences between stakeholders being merely
a matter of emphasis on those elements.
The Board’s methods for assessing the Company’s
progress in the context of its stakeholders’ interests
are set out below.
47
The Schiehallion Fund Limited
Stakeholder Why we engage How we engage and what we do
Registrar The Company’s registrars provide an
interface with those shareholders who
hold the Company’s shares directly.
The Investment Manager liaises with the registrars to ensure
the frequency and accuracy of communications to
shareholders is appropriate, and monitor shareholder
correspondence to ensure that the level of service provided
by the registrar is acceptable. The Investment Manager’s
risk function reviews the registrar’s internal controls report
and reports on the outcome of this review to the Board.
Auditor The Company’s Auditor has a responsibility
to provide an opinion on whether the
Company’s Financial Statements present a
true and fair view of the state of affairs of
the Company and its profit or loss for the
period, and as a whole are free from material
misstatement, as set out in more detail in the
Auditor’s report to the Members on page 75.
The Company’s Auditor meets with the Audit Chair and the
Board, in the absence of the Investment Manager where
deemed necessary, and the Investment Manager, Company
Secretary and Administrator undertake to provide all
information requested by the Auditor in connection with
the Company’s annual audit promptly and to ensure that
it is complete and accurate in all respects.
Depositary
and Custodian
The depositary is responsible for the
safekeeping of the Company’s financial
instruments, as set out in more detail on
page 55.
The Depositary provides the Audit Committee with a report on
its monitoring activities. The Investment Manager’s Business
Risk team reviews the relevant Bank of New York Mellon
internal controls report and reports any relevant matters to
the Audit Committee. The Board and Investment Manager
seeks to engage with the Depositary and Custodian in a
collaborative and collegiate manner, encouraging open and
constructive discussion and debate, while also ensuring that
appropriate and regular challenge is brought and evaluation
conducted. This approach aims to enhance service levels and
strengthen relationships , with a view to ensuring the interests
of the Company’s shareholders are best served by keeping
cost levels proportionate and competitive, and by maintaining
the highest standards of business conduct.
AIC/industry peers The Association of Investment Companies
(‘AIC’) and the Company’s investment
trust industry peers have an interest in the
Company’s conduct and performance,
as adverse market sentiment towards
one investment trust can affect attitudes
towards the wider industry.
The Company is a member of the AIC, and the Directors
and/or the Investment Manager and Secretaries (as
appropriate) participate in technical reviews, requests for
feedback on proposed legislation or regulatory developments,
corporate governance discussions and/or training.
Investment platforms Investment platforms provide an interface
with shareholders who invest in the
Company indirectly.
The Investment Manager liaises with the various investment
platforms on strategies for improving communications with
the Company’s shareholders who hold their shares via these
platforms. An annual timetable of key dates is published on
the Company’s website, for the ease of reference of such
shareholders.
Wider society and
the environment
No entity, corporate or otherwise, can exist
without having an influence on the society
in which it operates or utilising the planet’s
resources. Through its third-party relationships,
as noted above, the Company seeks to be a
positive influence and, in circumstances
where that is not possible, to mitigate its
negative impacts insofar as is possible.
The primary real-world impact of the
Company’s operations are through the
companies held in its investment portfolio
– please refer to ‘Portfolio companies’
section above.
The Board and Investment Manager’s interactions with the
various stakeholders as noted above form the principal forms
of direct engagement with wider society and in respect of the
environment (commercial, financial, and in terms of planetary
health and resources).
Strategic report
Annual Report and Financial Statements 2024
48
Environmental, social and governance policy
Details of the Company’s policy on socially
responsible investment can be found under
Corporate Governance and Stewardship on page 66.
The Company makes efforts to hold board
meetings virtually and provide reports digitally,
to limit non-essential travel and usage of paper.
All publicly available documentation produced is
made available digitally.
The Company considers that it does not fall within
the scope of the Modern Slavery Act 2015 (‘the Act’)
and it is not, therefore, obliged to make a slavery
and human trafficking statement. In any event,
the Company considers its supply chains to be of
low risk as its suppliers are typically professional
advisers. A statement by the Investment Manager
under the Act has been published on the Investment
Manager’s website at bailliegifford.com.
Future developments of the company
The outlook for the Company for the next twelve
months is set out in the Chairperson’s Statement
on page 6 to 8 and the Investment Manager’s
Review on page 9 to 11.
The Strategic Report, which includes pages 6
to 48 was approved by the Board of Directors
and signed on its behalf on 3 April 2024.
Dr Linda Yueh CBE
Chairperson
Stakeholder Why we engage How we engage and what we do
Regulatory Bodies Engagement with regulatory bodies is
important to ensure effective compliance with
law and regulation. Failure to maintain good
relations with regulatory bodies, or comply
with relevant law and regulation, could lead
to penalties and damage the Company’s
reputation. Regulatory risk can be mitigated
by making representations to regulators
regarding the specific circumstances of
investment companies.
The Investment Manager engages regularly with the Financial
Reporting Council (‘FRC’) and reports to the Board. During the
year, the Company engaged with the FRC regarding its review
of the Annual Report and Financial Statement for the year to
31 January 2023 – see the Audit Committee Report on page 68.
The Board recognises the importance of keeping
the interests of the Company’s shareholders, and of
acting fairly towards them, firmly front of mind in its
key decision making and the Investment Manager
is at all times available to the Board to ensure that
suitable consideration is given to the range of
factors to which the Directors should have regard.
In addition to ensuring that the Company’s stated
investment objective was being pursued, key
decisions and actions during the year which have
required the Directors to have regard to applicable
section 172 factors include:
• The annual evaluation of the Board as a whole
and its committees (see page 64 for further
information);
• The annual evaluation of all service providers and
review of their remuneration; and
• The decision to buy back 2,601,000 ordinary
shares at a discount to net asset value enhancing
the NAV for continuing shareholders.
Employees, human rights and
community issues
The Board recognises the requirement to provide
information about employees, human rights
and community issues. As the Company has no
employees, all its Directors are non-executive
and all its functions are outsourced, there are no
disclosures to be made in respect of employees,
human rights and community issues.
Gender and ethnic representation
At 31 January 2024, the Board comprises five
Directors, two of whom are women, including
the Chairperson who is from an ethnic minority
background, and three men. The Company has
no employees. The Board’s policy on diversity
is set out on page 63.
Governance
report
This governance report, which
includes pages 50 to 73 outlines
the Board’s approach to the
governance of your Company.
We believe that good governance
builds better outcomes and we
are committed to high standards
of corporate governance and
transparency.
Governance report
Annual Report and Financial Statements 2024
50
Directors and
management
Dr Linda Yueh CBE
Chairperson
Appointed 2019
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. Dr Yueh is a fellow in economics at St
Edmund Hall, University of Oxford and adjunct professor of economics
at London Business School.
Dr Yueh was visiting professor at the LSE and visiting professor of
economics at Peking University. Dr Yueh was an adviser to the UK
Board of Trade and a member of the Ring-fencing and Proprietary
Trading Independent Review Panel for the UK government. She is chair
of the Royal Commonwealth Society and a trustee of the Fidelity UK
Foundation and Fidelity International Foundations. 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.
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.
John Mackie CBE
Director
Appointed 2019
Directors
51
The Schiehallion Fund Limited
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, Epsilogen Ltd and is 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 The Queen for services to the biotechnology industry.
Dr David Chiswell
OBE
Director
Appointed 2021
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 has held a portfolio of non-executive
directorships, she is the audit chair of Taylor Maritime Investments 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.
Trudi Clark
Director
Appointed 2019
Governance report
Annual Report and Financial Statements 2024
52
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. All Directors are members of the Nomination Committee.
Richard Holmes
Director
Appointed 2021
53
The Schiehallion Fund Limited
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’
or ‘Baillie Gifford’). 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
Investment Manager
Peter is the Head of Private Companies at Baillie Gifford. He joined
the firm in 2010 and became a partner in 2022. He graduated BA
in Philosophy, Politics and Economics in 2008 and MA in Philosophy
in 2009, both from the University of Durham.
Peter Singlehurst
Portfolio Manager
Robert joined the firm in 2015 and is an investment manager in the
Private Companies Team. He graduated BA (Hons) in Philosophy,
Politics and Economics from the University of Oxford in 2014.
Robert Natzler
Deputy Manager
around £230 billion as at 1 April 2024. Based in
Edinburgh it is one of the leading privately-owned
investment management firms in the UK, with
57 partners.
Baillie Gifford has a dedicated Private Companies
investment team of 9 investors. In addition,
Baillie Gifford has a further 13 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.
Baillie Gifford & Co Limited, Baillie Gifford & Co and
Baillie Gifford Overseas Limited are all authorised
and regulated by the Financial Conduct Authority.
Governance report
Annual Report and Financial Statements 2024
54
The Directors present their
Report together with the audited
Financial Statements of the
Company for the year to
31 January 2024.
Directors’ report
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 60 to 69 and forms part of this Report.
Investment Manager
The Company has appointed Baillie Gifford & Co
Limited as its Investment Manager (the ‘Investment
Manager’ or ‘Baillie Gifford’). 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.
55
The Schiehallion Fund Limited
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 £75,249 (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 pages 50 to 52.
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 10 May 2024
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.
Governance report
Annual Report and Financial Statements 2024
56
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 2024 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.
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.
Dividends
The ordinary 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.
Share Capital
Capital structure
The Company’s capital structure, as at 31 January
2024, consisted of 1,029,898,907 ordinary shares
of US$1 each (2023 – 500,430,002 ordinary shares
and 700,000,000 C shares of US$1 each). The C
shares converted to ordinary shares on 8 September
2023 (see page 36). The 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 shareholders in proportion
to their respective shareholdings.
Voting
Each 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 109 and 116
As detailed on page 36, the C shares converted to
ordinary shares after the C share portfolio was more
than 85% invested. The new ordinary shares were
admitted to trade on 12 September 2023.
Major interests disclosed in the Company’s shares
Name
No. of ordinary
shares held
at 31 January
2024
% of
issue
Florida Retirement System
Trust Fund (Direct)
190,900,000 18.5
Baillie Gifford & Co (Indirect)
1
01,543,085 9.9
RBC Canadian Master Trust
(Indirect)
84,000,772 8.2
The number of ordinary shares listed above is
calculated using the latest TR 1 filings for the
ordinary shares and C shares and applying where
relevant the C share conversion ratio of 0.7601.
There have been no other changes to the major
interests in the Company’s shares intimated up to
1 April 2024.
57
The Schiehallion Fund Limited
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
1 April 2024.
Nature of
interest
Ordinary
shares
held at
31 January
2024
C shares
held at
31 January
2023 *
L Yueh Beneficial 44,573 58,641
J Mackie Beneficial 91,278 57,642
D Chiswell Beneficial 395,251 520,000
T Clark Beneficial 60,808 80,000
R Holmes Beneficial 54,801 72,098
*
The Company’s C shares converted to ordinary shares on 8 September
2023. (see page 36)
The Directors held no ordinary shares at 31 January
2023.
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, with a further
23,180,002 ordinary shares subsequently issued.
The Company has the ability to issue a further
219,569,998 ordinary shares under this existing
authority which expires on 15 March 2024.
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 24 March 2023, such authority to
expire at the 2024 Annual General Meeting.
In the year to 31 January 2024, no ordinary shares
were issued (2023 – nil) and over the period from
31 January 2024 to 1 April 2024, no ordinary
shares were issued. 2,601,000 shares were bought
back during the year ended 31 January 2024 for
US$1,851,000 (2023 – nil) and in the period
from 31 January 2024 to 1 April 2024 a further
1,075,000 shares were bought back for
US$667,800.
No shares were held in treasury at 31 January 2024.
Annual General Meeting
The Notice of Annual General Meeting is on page
109. An outline of certain resolutions being proposed
is provided below.
Resolution 11 – Issuance of shares and
disapplication of pre-emption rights
The Directors are seeking shareholders’ approval
to dis-apply the pre-emption rights in respect of the
issue of up to 102,882,390 ordinary shares or C
shares or the sale of 102,882,390 ordinary shares or
C shares held as treasury shares of the Company for
a period concluding immediately prior to the Annual
General Meeting of the Company to be held in 2029
(or, if earlier, five years from the date of passing
of such shareholders’ resolution). Further issues
or sales of ordinary shares or C 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. Ordinary shares or C shares will only
be issued at prices per ordinary or C 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 or C share.
Resolution 12 – Market purchases of shares
by the Company
The Directors are seeking shareholders’ approval
at the 2024 Annual General Meeting to renew
the authority to make market purchases up
to 154,220,703 ordinary shares representing
approximately 14.99% of the Company’s ordinary
shares in issue as at 1 April 2024, 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 2025.
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.
iii. as a capital allocation decision due to
discount levels.
The Company may hold bought back shares in
treasury and then:
Governance report
Annual Report and Financial Statements 2024
58
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 share
over the five business days immediately preceding
the date of purchase; and
ii. an amount equal to the higher of the price of
the last independent trade of an ordinary share
and the highest current independent bid for an
ordinary share on the trading venue where the
purchase is carried out.
The minimum price (exclusive of expenses) that may
be paid will be the nominal value of an ordinary share.
Purchases of shares will be made within guidelines
established, from time to time, by the Board.
Resolution 13 – Adoption of New Articles
of Incorporation
Resolution 13 of the Notice of Annual General
Meeting, which will be proposed as a special
resolution, seeks shareholder approval for the
adoption of new Articles of Incorporation (the
‘New Articles’). The proposed amendments being
introduced in the New Articles relate to (i) clarifying
the Company’s general authority to acquire its own
shares and (ii) increasing the cap on the aggregate
fees paid to Directors from £360,000 per annum
to £430,000 per annum.
A summary of these amendments being introduced
in the New Articles is set out in the appendix to the
Notice of AGM (see page 114).
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 16 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,
59
The Schiehallion Fund Limited
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 and Streamlined
Energy and Carbon Reporting (‘SECR’)
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
reasons as set out above, the Company a low
energy user under the SECR regulations.
Bribery
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.
Subsequent events
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 3 April 2024.
On behalf of the Board
Dr Linda Yueh CBE
Chairperson
3 April 2024
Governance report
Annual Report and Financial Statements 2024
60
Corporate
governance report
The Board is committed to
achieving and demonstrating
high standards of corporate
governance. The Board has
taken note of the Code of
Corporate Governance issued
by the Guernsey Financial
Services Commission (the
‘Guernsey Code’). The Guernsey
Code provides a governance
framework for GFSC licensed
entities, authorised and collective
investment schemes. Companies
reporting in compliance with the
UK Corporate Governance Code
(the ‘UK Code’) or The Association
of Investment Companies Code of
Corporate Governance (the ‘AIC
Code’) are deemed to satisfy the
provisions of the Guernsey Code.
This statement outlines how the
principles of the AIC Code were
applied throughout the financial
year ended 31 January 2024. The
Company intends to comply with
the AIC Code for the year ended
31 January 2025. The AIC Code
can be found at theaic.co.uk.
Compliance
The Board confirms that the Company has complied
throughout the year under review with the relevant
provisions and recommendations of the AIC Code with
the exception that the Company does not have a separate
internal audit function as explained on page 68.
The Board
The Board has overall responsibility for the Company’s
affairs. It has a number of matters formally reserved for its
approval including strategy, investment policy, currency
hedging, gearing, treasury matters, dividend and corporate
governance policy. A separate strategy session is held
annually. The Board also reviews the Financial Statements,
investment transactions, and performance of the Company.
Full and timely information is provided to the Board to enable
the Board to function effectively and to allow Directors to
discharge their responsibilities.
As at 31 January 2024 the Board comprised five Directors
all of whom are non-executive. The Chairperson, Dr Linda
Yueh, is responsible for organising the business of the Board,
ensuring its effectiveness and setting its agenda. The Board
reviews its composition annually.
The executive responsibilities for investment management
have been delegated to the Company’s Alternative Investment
Fund Manager (‘AIFM’), Baillie Gifford & Co Limited, and in
the context of a Board comprising entirely Non-Executive
Directors, there is no chief executive officer. Mr John Mackie
is the Company’s Senior Independent Director (‘SID’). Mr
Mackie is available to shareholders if they have concerns
not properly addressed by the Chairperson. The SID leads
the Chairperson’s appraisal.
The Directors believe that the Board has a balance of
skills and experience which enable it to provide effective
strategic leadership and proper governance of the Company.
Information about the Directors, including their relevant
experience, can be found on pages 50 to 52.
There is an agreed procedure for Directors to seek
independent professional advice if necessary at the
Company’s expense.
61
The Schiehallion Fund Limited
Board of Directors
Comprises independent
non-executive Directors
Chairperson: Linda Yueh
Senior Independent Director:
John Mackie
Audit
Committee
Chairperson: Trudi Clark
Purpose: The primary
purpose of the Company’s
Audit Committee is to
provide oversight of the
financial reporting process,
the audit process,
the Company’s system
of internal controls
and compliance with
laws and regulations.
Nomination
Committee
Chairperson: Linda Yueh
Purpose: The main purpose
of the Nomination
Committee is to oversee
Board recruitment and
succession planning as well
as Board appraisals
including identifying
training needs.
Key Third Party Service Providers
Appointed by the Board
Investment Manager and Alternative Investment Fund Manager:
Baillie Gifford & Co Limited (wholly owned
subsidiary of Baillie Gifford & Co)
Dealing activity and transaction reporting:
Baillie Gifford Overseas Limited and
Baillie Gifford Asia (Hong Kong) Limited
Administrator, Secretary and Designated Manager
Alter Domus (Guernsey) Limited
KPMG Channel
Islands Limited
Auditor
The Bank of
New York Mellon
(International) Limited
Depositary
Computershare
Investor Services
(Guernsey) Limited
Registrar
Winterflood
Securities Limited
Company Broker
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Annual Report and Financial Statements 2024
62
Appointments to the Board
The terms and conditions of Directors’ appointments
are set out in formal letters of appointment which
are available for inspection on request.
Under the provisions of the Company’s Articles of
Incorporation, a Director appointed during the period
is required to retire and seek election by shareholders
at the next Annual General Meeting. In accordance
with the principals of the AIC Code, all Directors will
offer themselves for re-election annually.
The reasons why the Board supports the election
and re-election of the Directors are set out on page
55. Directors are not entitled to any termination
payments in relation to their appointment.
Independence of Directors
All of the Directors are considered by the Board
to be independent of the Investment Manager and
the Administrator and free of any business or other
relationship which could interfere with the exercise
of their independent judgement.
The Directors recognise the importance of
succession planning for company boards and review
the Board composition annually. The Board is of
the view that length of service will not necessarily
compromise the independence or contribution
of Directors of an investment company, where
continuity and experience can be a benefit to the
Board.
Following formal performance evaluation, the Board
considers that each Director continues to be
independent in character and judgement and
his/her skills and experience were a significant
benefit to the Board.
Chairperson and Directors’ Tenure
The Nomination Committee has considered
the question of tenure for directors, noting the
provisions in the AIC Code, and has concluded that
there should not be a set maximum time limit for
a chairperson or director to serve on the Board.
The Nomination Committee keeps under review
the balance of skills, knowledge, experience,
performance and length of service of the Directors
ensuring the Board has the right combination of
skills and preservation of knowledge and experience
balanced with the appointment of new Directors
bringing in fresh ideas and perspective.
Meetings
There is an annual cycle of Board meetings which
is designed to address, in a systematic way, overall
strategy, review of investment policy, investment
performance, premium/discount, dividend policy
and communication with shareholders. The Board
considers that it meets sufficiently regularly to
discharge its duties effectively. The following table
shows the attendance record for the core Board and
Committee meetings held during the year ended
31 January 2024 (various additional meetings were
also held).
Directors’ attendance at meetings
Board
Audit
committee
Nomination
committee
Board
valuations
meeting
Number of meetings 4 2 1 2
L Yueh* 4 – 1 2
J Mackie 4 2 1 2
D Chiswell 4 2 1 2
T Clark 4 2 1 2
R Holmes 4 2 1 2
*
Dr Yueh is not a member of the Audit Committee but has attended all
meetings by invitation.
Nomination Committee
The Nomination Committee consists of the
whole Board and the Chairperson of the Board is
Chairperson of the Committee. The Committee
meets on an annual basis and at such other
times as may be required. The Committee has
written terms of reference which include reviewing
the composition of the Board, identifying and
nominating new candidates for appointment to
the Board, Board appraisal, succession planning
and training. The Committee also considers whether
Directors should be recommended for re-election
by shareholders. The Committee is responsible for
considering Directors’ potential conflicts of interest
and for making recommendations to the Board on
whether or not the potential conflicts should be
authorised.
The Committee’s terms of reference are available on
request from the Company and on the Company’s
website: schiehallionfund.com.
63
The Schiehallion Fund Limited
Diversity
Appointments to the Board are made on merit with
due regard for the benefits of diversity including
gender, social and ethnic backgrounds and cognitive
and personal strengths. The priority in succession
planning and appointing new Directors is to identify
the candidates with the best range of skills and
experience to complement existing Directors.
The Board will not display any bias for age, gender,
race, sexual orientation, religion, ethnic or national
origins, disability or socioeconomic background in
considering the appointment of its Directors. It is the
Board’s policy to ensure that all appointments are
made on the basis of merit against the specification
prepared for each appointment.
The Board currently complies with the FCA Listing
Rules diversity targets. The Board will endeavour to
remain compliant with diversity targets in the future
but notes that an orderly succession plan can, when
implemented thoughtfully and having regard to the
best interests of the Company and its shareholders,
take a significant period of time to develop and
may result in periods when the diversity targets
are not met.
Board composition
In order to fulfil its obligations, the Board recognises
the importance of having a range of skilled and
experienced Directors, balancing the benefits of
length of service and knowledge of the Company
with the desirability of ensuring regular refreshment
of the Board. The Board reviews its composition
annually.
Board gender as at 31 January 2024
Number of
Board Members
Percentage
of the Board
Number of
senior positions
on the Board *
Men 3 60% 1
Women 2 40% 1
Board ethnic background as at 31 January 2024
Number of
Board Members
Percentage
of the Board
Number of
senior positions
on the Board *
White British or other White (including minority-white groups) 4 80% 1
Asian/Asian British 1 20% 1
*
The Board Chairperson and SID, being senior positions in accordance with the FCA Listing Rules. The Board also considers the Audit Committee Chair
to be a senior position (not reflected in these disclosures). The Audit Committee Chair is a woman.
The disclosures below are provided in respect
of the FCA Listing Rules targets that: i) 40% of
a board should be women; ii) at least one senior
role should be held by a woman; and iii) at least
one board member should be from a non-white
ethnic background, as defined by the Office
of National Statistics criteria. As an externally
managed investment company with no chief
executive officer or chief financial officer, the roles
which qualify as senior under FCA guidance are
Chair and Senior Independent Director (‘SID’). The
Board also considers the Audit Committee Chair
to represent a senior role within this context (the
Audit Committee Chair is not recognised as a senior
position under the FCA guidance and therefore is
not reflected in the numerical disclosures below. The
Audit Committee Chair is a woman). The Board has
resolved that the Company’s year end date is the
most appropriate date for disclosure purposes.
The composition of the Board is two-fifths female,
including the Chairperson who is from a minority
ethnic background, which complies with the targets
outlined in the FCA Listing Rules. The Board further
includes one Director with a registered disability.
All recruitment for new Board members will be
external, through the use of an external recruitment
agency. A recruitment agency will be engaged
to undertake the selection of a list of suitable
candidates for consideration and approval by
the Board. The external recruitment agency will
be asked to put forward candidates with the
desired skill set and also with a diverse range of
characteristics. The Board will take the Listing Rule
diversity targets and any other best practice matters
into account when determining the appropriateness
of a candidate and final appointment.
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Annual Report and Financial Statements 2024
64
Performance evaluation
An appraisal of the Chairperson, each Director and
a performance evaluation and review of both the
Board as a whole and of the individual Committees
was carried out by the Nomination Committee
during the year. After inviting each Director and
the Chairperson to consider and respond to an
evaluation questionnaire, the performance of each
Director was appraised by the Chairperson and
the Chairperson’s appraisal was led by Mr Mackie
the Company’s Senior Independent Director.
The appraisals and evaluations considered,
amongst other criteria, the balance of skills of the
Board, training and development requirements, the
contribution of individual Directors and the overall
effectiveness of the Board and its Committees.
Following the process, it was concluded that the
performance of each Director, the Chairperson,
the Board and its committees continues to
be effective and each Director, including the
Chairperson, remains committed to the Company.
A review of the Chairperson’s and other Directors’
commitments was carried out and the Nomination
Committee is satisfied that they are capable of
devoting sufficient time to the Company. There were
no significant changes to the Chairperson’s other
commitments during the year ended 31 January 2024.
Induction and training
New Directors are provided with an induction
programme which is tailored to the particular
circumstances of the appointee. During the year
ended 31 January 2024, briefings on industry and
regulatory matters were provided to the Board by
the Investment Manager and Administrator. Directors
receive other relevant training as necessary.
Remuneration
As all the Directors are non-executive, there is
no requirement for a separate Remuneration
Committee. Directors’ fees are considered by
the Board as a whole within the limits approved
by shareholders. The Company’s policy on
remuneration is set out in the Directors’
Remuneration Report on pages 70 to 72.
Audit committee
The report of the Audit Committee is set out on
pages 67 to 69.
Internal controls and risk management
The Directors acknowledge their responsibility
for the Company’s risk management and
internal controls systems and for reviewing their
effectiveness. The systems are designed to manage
rather than eliminate the risk of failure to achieve
business objectives and can only provide reasonable
but not absolute assurance against material
misstatement or loss.
The Board confirms that there is a continuing
process for identifying, evaluating and managing
the significant risks faced by the Company in
accordance with the FRC guidance, ‘Guidance on
Risk Management, Internal Control and Related
Financial and Business Reporting’.
The practical measures in relation to the design,
implementation and maintenance of control policies
and procedures to safeguard the Company’s
assets and to manage its affairs properly, including
the maintenance of effective operational and
compliance controls have been delegated to the
Investment Manager and Administrator.
The Board oversees the functions delegated to the
Investment Manager and Administrator and the
controls managed by the AIFM in accordance with
the Alternative Investment Fund Managers Directive
(as detailed below). Baillie Gifford & Co’s Internal
Audit and Compliance Departments and the AIFM’s
permanent risk function provide the Audit Committee
with regular reports on their monitoring programmes.
The reporting procedures for these departments
are defined and formalised within a service level
agreement. Baillie Gifford & Co conducts an annual
review of its system of internal controls which is
documented within an internal controls report which
complies with ISAE 3402 and Technical Release
AAF 01/06 – Assurance Reports on Internal Controls
of Service Organisations made available for Third
Parties. This report is independently reviewed by
Baillie Gifford & Co’s auditor and a copy is submitted
to the Audit Committee.
A report identifying the principal and emerging
risks faced by the Company and the key controls
employed to manage these risks is reviewed by the
Audit Committee at each Audit Committee meeting.
These procedures ensure that consideration is given
regularly to the nature and extent of risks facing the
Company and that they are being actively monitored.
Where changes in risk have been identified during
the period they also provide a mechanism to assess
whether further action is required to manage
these risks.
65
The Schiehallion Fund Limited
The Directors confirm that they have reviewed the
effectiveness of the Company’s risk management
and internal controls systems which accord with
the FRC guidance, ‘Guidance on Risk Management,
Internal Control and Related Financial and Business
Reporting’ and they have procedures in place to
review their effectiveness on a regular basis. No
significant weaknesses were identified in the year
under review and up to the date of this Report.
The Board confirms that these procedures have
been in place throughout the Company’s financial
year and continue to be in place up to the date of
approval of this Report.
To comply with the Alternative Investment Fund
Managers Directive, The Bank of New York Mellon
(International) Limited acts as the Company’s
Depositary and Baillie Gifford & Co Limited as
its AIFM.
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 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 Company’s
Depositary also acts as the Company’s Custodian.
The Custodian prepares reports on its key controls
and safeguards which are independently reviewed
by KPMG LLP. The 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.
The Depositary provides the Audit Committee with
a report on its monitoring activities.
The AIFM has established a permanent risk
management function to ensure that effective risk
management policies and procedures are in place
and to monitor compliance with risk limits. The AIFM
has a risk management policy which covers the risks
associated with the management of the portfolio,
and the adequacy and effectiveness of this policy
is reviewed and approved at least annually. This
review includes the risk management processes
and systems and limits for each risk area.
The risk limits, which are set by the AIFM and
approved by the Board, take into account the
objectives, strategy and risk profile of the portfolio.
These limits, including leverage (see page 117) are
monitored and the sensitivity of the portfolio to key
risks is undertaken periodically as appropriate to
ascertain the impact of changes in key variables
in the portfolio. Exceptions from limits monitoring
and stress testing undertaken by Baillie Gifford’s
Business Risk Department are escalated to the
AIFM and reported to the Board along with any
remedial measures being taken.
Going concern
In accordance with The Financial Reporting Council’s
guidance on going concern and liquidity risk, the
Directors have undertaken a rigorous review of the
Company’s ability to continue as a going concern.
In undertaking this review, the Board has,
considered the Company’s principal risks and
uncertainties, as set out on pages 39 to 44, and
in particular considered the impact of heightened
market volatility due to macroeconomic and
geopolitical concerns, including the conflict in Gaza,
the Russia-Ukraine war and heightened tensions
between China and both the USA and Taiwan.
Liquidity stress testing has been carried out and
having done so the Board does not believe the
Company’s going concern status is affected.
The Company maintains sufficient cash balances
to enable it to meet its liabilities as they fall due.
In managing the Company’s assets, the Investment
Manager will seek to ensure that the Company
holds at all times a proportion of assets that is
sufficiently liquid to enable it to discharge its
payment obligations.
Accordingly, the Financial Statements have been
prepared on the going concern basis as it is the
Directors’ opinion, having assessed the principal
and emerging risks and other matters set out in
the Viability Statement on page 45 which assesses
the prospects of the Company over a period of five
years, that the Company will continue in operational
existence for a period of at least twelve months from
the date of approval of these Financial Statements.
Governance report
Annual Report and Financial Statements 2024
66
Relations with shareholders
The Board places great importance on communication
with shareholders. The Company’s Investment
Manager meets regularly with shareholders and
their representatives and reports shareholders’
views to the Board. The Chairperson and Senior
Independent Director are available to meet with
shareholders as appropriate. Shareholders wishing
to communicate with any member of the Board may
do so by writing to them at the Company’s registered
office or through the Company’s broker, Winterflood
Securities Limited (see contact details on page 122).
The Company’s Annual General Meeting provides
a forum for communication with all shareholders.
These communication opportunities help inform
the Board when considering how best to promote
the success of the Company for the benefit of
all shareholders over the long term. The level
of proxies lodged for each resolution will be
announced at the Annual General Meeting
and will be published on the Company’s page
of the Investment Manager’s website
schiehallionfund.com subsequent to the meeting.
Shareholders and potential investors may obtain
up-to-date information on the Company at
schiehallionfund.com.
Corporate governance and stewardship
The Company believes that it is in the shareholders’
interests to consider environmental, social and
governance (‘ESG’) factors when selecting and
retaining investments and has asked the Investment
Manager to take these issues into account as long
as the investment objectives are not compromised.
The Investment 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 Company’s approaxch to ESG is
set out on pages 13 to 15. The Investment Manager,
has considered the Sustainable Finance Disclosure
Regulation (‘SFDR’) and further details can be found
on page 119.
The Company has given discretionary voting powers
to Baillie Gifford & Co. The Investment Manager
votes against resolutions it considers may damage
shareholders’ rights or economic interests.
The Investment Manager, Baillie Gifford & Co, are
signatories 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. The Investment Manager’s pursuit
of long-term growth opportunities typically involves
investment in entrepreneurial, disruptive and
technology-driven businesses. These companies are
often capital-light with a low carbon footprint. The
Investment Manager believes that carbon footprint
metrics in isolation are unhelpful – that some firms
pollute more than others is a mostly meaningless
observation. As 71.3% of the Company’s portfolio is
private companies there is insufficient data available
to calculate the carbon intensity of the portfolio.
Baillie Gifford’s Task Force on Climate-Related
Financial Disclosures (‘TCFD’) Climate Report
is available on the Investment Manager’s website
at bailliegifford.com. Baillie Gifford published the
Company’s first TFCD Report in June 2023. This
report is a means by which the portfolio’s carbon
footprint and exposure to climate risk are measured
and reported. Companies disclosing their emission
and communicating emissions plans will be a helpful
place from which to begin more useful discussions
with management teams, industry experts and
regulators.
On behalf of the Board
Dr Linda Yueh CBE
Chairperson
3 April 2024
67
The Schiehallion Fund Limited
The Company’s Audit Committee
is chaired by Ms Trudi Clark,
and meets twice a year or more
often if required. Ms Clark is a
Chartered Accountant. The Board
considers that the members
of the Audit Committee have
the requisite financial skills
and experience to fulfil the
responsibilities of the Audit
Committee. The Committee
consists of all the Directors,
except for Dr Yueh. Although
not a member of the Committee,
Dr Yueh was invited to and
attended all the Committee’s
meetings during the year.
Audit
Committee report
The Committee’s authority and duties are clearly
defined within its written terms of reference which
are available on request from the Administrator and
on the Company’s website at schiehallionfund.com.
The terms of reference are reviewed annually.
The Committee’s effectiveness is reviewed on an
annual basis as part of the Board’s performance
evaluation process.
At least once a year the Committee meets with
the external Auditor without any representative
of the Investment Manager being present.
Main activities of the Committee
KPMG Channel Island Limited (‘KPMG’) attended
both Audit Committee meetings held during the
year along with the meeting held on 25 March
2024 to approve the Annual Report and Financial
Statements. Baillie Gifford & Co’s Internal Audit and
Compliance Departments and the AIFM’s permanent
risk function provided reports on their monitoring
programmes at both meetings held during the year.
The matters considered, monitored and reviewed by
the Committee covering the year ended 31 January
2024 include the following:
• the interim results announcement and the Interim
Report;
• the Company’s accounting policies and practices
and the implementation of the Investment
Manager’s Valuation Policy for investments in
private companies;
• the regulatory changes impacting the Company;
• the fairness, balance and understandability of
the Annual Report and Financial Statements and
whether it provided the information necessary
for shareholders to assess the Company’s
performance, business model and strategy;
Governance report
Annual Report and Financial Statements 2024
68
• the effectiveness of the Company’s internal
control environment;
• appointment/reappointment, remuneration and
terms of engagement of the external Auditor;
• 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.
Internal audit
The Committee continues to believe that the
compliance and internal controls systems and the
internal audit function in place within the Investment
Manager provides sufficient assurance that a
sound system of internal control, which safeguards
shareholders’ investment and the Company’s assets,
is maintained. An internal audit function specific to
the Company is therefore considered unnecessary.
Financial reporting
The Committee considers that the most significant
area of risk likely to impact the Financial Statements
is the valuation of private company investments
as they represent 71.3% of the Company’s net
assets and since the valuation of these investments
requires the use of estimates, assumptions and
judgements.
Private company investments
The Committee reviewed the Investment Manager’s
valuation approach for investments in private
companies (as described in note 1(e) on page 85)
and approved the valuations of the private company
investments following a detailed review of the
valuation of each investment and relevant challenge
where appropriate.
The Investment Manager agreed the holdings
in certificated form to confirmations from the
Company’s Custodian and holdings of uncertificated
private company investments were agreed to
confirmations from the relevant investee companies.
Listed investments
Investments in quoted securities have market
prices which are readily available from independent
external pricing sources. The Committee reviewed
the Investment Manager’s Report on Internal
Controls which details the controls in place
regarding the recording and pricing of investments.
The Investment Manager agreed the prices of all the
listed investments at 31 January 2024 to external
price sources and the holdings were agreed to
confirmations from the Company’s Custodian or
Transfer Agent.
Other matters
The Committee reviewed the Investment Manager’s
Report on Internal Controls which details the
controls in place regarding the complete and
accurate recording of investment income.
At the meeting held on 25 March 2024, the
Investment Manager and external Auditor confirmed
to the Committee that they were not aware of
any material misstatements in the context of
the Financial Statements as a whole and that
the Financial Statements are in accordance with
applicable law and accounting standards.
FRC Review
The Financial Reporting Council (‘FRC’) reviewed the
Company’s Annual Report and Financial Statements
for the year ended 31 January 2023.
The FRC asked for clarification on certain aspects
of the tabular analysis disclosed to demonstrate
the sensitivity of private company investments
to changes in the assumptions underpinning the
calculation of their fair value (see note 16 on pages
101 to 106 for amended disclosures reflecting these
comments).
The FRC notes that its review does not provide
assurance that the Annual Report and Financial
Statements are correct in all material respects
and that its role is not to verify the information
provided but to consider compliance with reporting
requirements.
Internal controls and risk management
The Committee reviewed the effectiveness of the
Company’s risk management and internal controls
systems as described on pages 64 and 65. No
significant weaknesses were identified in the period
under review.
69
The Schiehallion Fund Limited
External auditor
To fulfil its responsibility regarding the independence
of the external Auditor, the Committee reviewed:
• the Auditor’s audit strategy for the financial year
ended 31 January 2024 which included a report
from the Auditor describing their arrangements
to manage auditor independence and received
confirmation of their independence; and
• the extent of non-audit services provided by the
external Auditor. The non-audit fees in the year
to 31 January 2024 paid to KPMG Channel Islands
Limited were for providing procedural services
related to the conversion of the Company’s C
shares. The fees charged for these services
were US$21,000 (see note 4 on page 88). 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. Mr Steven Stormonth
is the lead audit partner and has held the role for
five years and will continue as audit partner until
the conclusion of the 2024 audit.
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 Audit Quality Review Team of the Financial
Reporting Council performed a review of the audit
of the Company for the year ended 31 January 2023
with no major findings arising from their review.
In the opinion of the Audit Committee the outcome
was satisfactory, which provides further comfort
on the effectiveness of KPMG.
Having carried out the review described above,
the Committee is satisfied that the Auditor is
independent and effective for the purposes
of this year’s audit.
There are no contractual obligations restricting
the Committee’s choice of external Auditor.
Accountability and audit
The respective responsibilities of the Directors
and the Auditor in connection with the Financial
Statements are set out on pages 73 to 79.
On behalf of the Board
Ms Trudi Clark
Audit Committee Chairperson
3 April 2024
Governance report
Annual Report and Financial Statements 2024
70
Directors’
remuneration report
Statement by the Chairperson
The Directors’ Remuneration Policy is subject to shareholder
approval every three years or sooner if an alteration to the
policy is proposed. The Remuneration Policy, which is set out
below, was last approved at the Annual General Meeting in
May 2023 and no changes are proposed to the policy at the
Annual General Meeting to be held in 2024.
Directors’ fees are increased in line with inflation annually,
however, the Board has resolved not to apply an inflationary
increase for the year ending 31 January 2025. A resolution
to amend the aggregate limit for Directors’ fees will be put to
shareholders as and when required – an increase in the limit
is being proposed at the upcoming Annual General Meeting
(see page 109).
Directors’ remuneration policy
The Board is composed wholly of non-executive Directors,
none of whom has a service contract with the Company. There
is no separate remuneration committee and the Board as a
whole considers changes to Directors’ fees from time to time.
The Board’s policy is that the remuneration of Directors
should be set at a reasonable level that is commensurate
with the duties 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 should reflect the experience
of the Board as a whole, be fair and should take account of
the level of fees paid by comparable investment companies.
Baillie Gifford & Co Limited provides comparative information
when the Board considers the level of Directors’ fees. The
Board also receives advice from independent companies, for
instance, Trust Associates, which produces an annual report
on Directors’ fees for the sector. Any views expressed by
shareholders on the fees being paid to Directors will be taken
into consideration by the Board when reviewing the Board’s
policy on remuneration.
71
The Schiehallion Fund Limited
Non-executive Directors are not eligible for any
other remuneration or benefits apart from the
reimbursement of allowable expenses. 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.
Limits on Directors’ remuneration
The fees for the non-executive Directors are
payable quarterly in arrears and are determined
within the limit set out in the Company’s Articles
of Incorporation, which is currently £360,000
per annum in aggregate. Any change to this limit
requires shareholder approval by way of an ordinary
resolution.
The Board is seeking shareholders’ approval at the
forthcoming Annual General Meeting to increase the
aggregate annual limit, which has not changed since
2022, to £430,000 to provide flexibility to allow for
an increase in the number of Directors should the
Board believe it to be appropriate as part of its long
term succession planning. Your attention is drawn
to Resolution 10 in the Notice of Annual General
Meeting on page 110.
The basic and additional annual fees payable to
Directors in respect of the year to 31 January 2024
and the expected fees payable in respect of the year
ending 31 January 2025 are set out in the following
table. The fees payable to the Directors in the
subsequent financial periods are subject to annual
increases in line with inflation.
Statement of voting at Annual General
Meeting
At the Annual General Meeting held on 12 May
2023, of the proxy votes received in respect of the
Directors’ Remuneration Report that approved the
annual increases in line with inflation, 96.7% were
in favour, 3.3% were against and no votes were
withheld.
Expected fees
per annum for
year ending
31 January
2025
£
Fees for
the year
ending
31 January
2024
£
L Yueh (Chairperson) 90,300 90,300
J Mackie (Senior Independent
Director)
72,200 72,200
D Chiswell 60,200 60,200
T Clark (Audit Committee
Chairperson)
75,500 75,500
R Holmes 60,200 60,200
358,400 358,400
Total aggregate annual fees that
can be paid to the Directors in
any year under the Directors’
Remuneration Policy, as set out
in the Company’s Articles of
Incorporation
430,000
*
360,000
*
Subject to the passing of Resolution 10 at the forthcoming
Annual General Meeting.
Annual report on remuneration
An ordinary resolution for the approval of this report
will be put to the members at the forthcoming
Annual General Meeting.
Governance report
Annual Report and Financial Statements 2024
72
Directors’ remuneration for the year
The Directors who served during the year ended 31 January 2024 received the following remuneration in
the form of fees and benefits. This represents the entire remuneration paid to the Directors.
For the year ended
31 January 2024
For the year ended
31 January 2023
Name
Fees
£
Total
£
Fees
£
Total
£
L Yueh (Chairperson) 90,300 90,300 82,500 82,500
J Mackie (Senior Independent Director) 72,200 72,200 66,000 66,000
D Chiswell 60,200 60,200 55,000 55,000
T Clark (Audit Committee Chairperson) 75,500 75,500 69,000 69,000
R Holmes 60,200 60,200 55,000 55,000
358,400 358,400 327,500 327,500
*
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$9,000 (2023 – US$6,000).
Annual percentage change in remuneration
This represents the annual percentage change
in the entire remuneration paid to the Directors.
Name
% from 2023
to 2024
% from 2022
to 2023
% from 2021
to 2022
L Yueh 9.4 43.8 27.5
J Mackie 9.4 50.5 33.3
D Chiswell* 9.4 36.0 –
T Clark 9.4 48.3 32.9
R Holmes* 9.4 36.0 –
Total Directors’
remuneration
†
9.4 80.5
†
60.7
†
* R Holmes and D Chiswell were appointed to the Board on 2 September
2021. Their fees for the period from 2 September 2021 to 31 January
2022 have been annualised in order to provide the above annual
percentage change from 2022 to 2023.
†
Total Directors’ remuneration percentage change is greater than
the increases at individual Director level as it reflects the change in
overall Directors’ remuneration and is not adjusted for appointments/
retirements.
Relative importance of spend on pay
The table below shows the actual expenditure (fees
and benefits) during the year in relation to Directors’
remuneration and distributions to shareholders.
Name
2024
US$’000
2023
US$’000
Change
%
Directors’
remuneration
358 328 9.4
Share
buybacks
1,851 – n/a
Directors’ service details
Name
Date of
appointment
Due date
for re-election
L Yueh 4 January 2019 AGM in 2024
J Mackie 4 January 2019 AGM in 2024
D Chiswell 2 September 2021 AGM in 2024
T Clark 4 January 2019 AGM in 2024
R Holmes 2 September 2021 AGM in 2024
Approval
The Report on remuneration on pages 70 to 72 was
approved by the Board of Directors and signed on its
behalf on 3 April 2024.
Dr Linda Yueh CBE
Chairperson
73
The Schiehallion Fund Limited
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 as
are reasonably open to them to safeguard the assets
of the Company and to prevent and detect fraud and
other irregularities.
The Directors are responsible for the maintenance
and integrity of the corporate and financial
information included on the Company’s website.
Legislation in Guernsey governing the preparation
and dissemination of Financial Statements may
differ from legislation in other jurisdictions.
Responsibility Statement of the Directors in
Respect of the Annual Report and Financial
Statements
We confirm to the best of our knowledge:
• the Financial Statements, prepared in accordance
with the applicable set of accounting standards,
give a true and fair view of the assets, liabilities,
financial position and profit or loss of the
Company; and
• the Strategic Report includes a fair review of the
development and performance of the business
and the position of the issuer, together with a
description of the principal risks and uncertainties
they face.
We consider the Annual Report and Financial
Statements, taken as a whole, is fair, balanced
and understandable and provides the information
necessary for shareholders to assess the Company’s
position and performance, business model and
strategy.
On behalf of the Board
Dr Linda Yueh CBE
3 April 2024
The Directors are responsible for preparing
the Annual Report and Financial Statements in
accordance with applicable law and regulations.
Company law requires the Directors to prepare
Financial Statements for each financial year. Under
that law they have elected to prepare the Financial
Statements in accordance with International
Financial Reporting Standards as issued by the
International Accounting Standards Board.
Under company law, the Directors must not approve
the Financial Statements unless they are satisfied
that they give a true and fair view of the state of
affairs of the Company and of its profit or loss for
that period.
In preparing these Financial Statements, the Directors
are required to:
• select suitable accounting policies and then
apply them consistently;
• make judgements and estimates that are
reasonable and prudent;
• state whether applicable accounting standards
have been followed, subject to any material
departures disclosed and explained in the
Financial Statements;
• assess the Company’s ability to continue
as a going concern, disclosing as applicable,
matters relating to going concern; 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
Statement of Directors’
responsibilities
in respect of the Annual Report and the Financial Statements
Financial
report
The Financial Statements for the
year to 31 January 2024 set out
on pages 80 to 83 together with
the accompanying notes on pages
84 to 107 have been prepared
in accordance with International
Financial Reporting Standards
as issued by the International
Accounting Standards Board.
75
The Schiehallion Fund Limited
Independent
Auditor’s report
to the members of The Schiehallion Fund Limited
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 2023):
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 2024, the statements of comprehensive
income, changes in equity and cash flows for
the year then ended, and notes, comprising
material 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 2024, 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.
Financial report
Annual Report and Financial Statements 2024
76
The risk Our response
Valuation of private
company investments
US$ 869,709,000 (2023 –
US$ 853,014,000)
Refer to the Audit
Committee Report on page
68 of the Annual Report,
note 1 (d), 1 (e), 7 and 16
of the financial statements
Basis:
The Company’s investments are classified,
recognised and measured at fair value through
profit or loss in accordance with IFRS 9. Private
company investments represent 71% of the
Company’s net assets as at 31 January 2024.
The directors review and challenge the valuation
of private company investments proposed by
Baillie Gifford & Co Limited (the ‘Investment
Manager’). The Investment Manager’s investment
valuation policy applies techniques consistent
with the International Private Equity and Venture
Capital Valuation (‘IPEV’) Guidelines 2022.
In assessing fair value the Investment Manager
considers information provided by their
independent third party valuation firm
(the ‘Valuation Agent’).
Risk:
The valuation of the Company’s private company
investments is a significant risk area of our audit,
given that they represent a significant portion
of the net assets of the Company. The valuation
of the Company’s private company investments
incorporates a risk of error given the significance
of estimates and judgements that may be
involved in the determination of their fair value.
Our audit procedures included but were not
limited to:
Internal Controls:
We evaluated the design and implementation
of the control in place in relation to the valuation
of the Company’s private company investments.
Challenging management’s assumptions and
inputs including use of our KPMG valuation
specialist:
For the private company investments, with the
support of our KPMG valuation specialist, we:
• assessed the scope of the services provided
by the Valuation Agent in relation to the private
company investments as well as the objectivity,
capability and competence of the Valuation
Agent;
• held discussions with the Investment Manager
to understand the valuation approach;
• read the valuation reports and memoranda
produced by the Valuation Agent and by the
Investment Manager, including the Investment
Manager’s considerations of the Valuation
Agent’s reports;
• assessed the reasonableness and
appropriateness of the valuation approach and
methodology applied to each private company
investment;
• benchmarked the assumptions established in
the valuation models employed to observable
market data;
• obtained an understanding of how the impact
of global economic factors and the resultant
increase in uncertainty have been reflected in
the valuation of private company investments;
and
• corroborated material investee company inputs
and recent investment transactions used in the
valuation models to supporting documentation.
Assessing disclosures:
We also considered the Company’s disclosures
(see notes 1 (d) and 16) in relation to the use
of estimates and judgements relating to the
valuation of private company investments and the
Company’s investment valuation policies adopted
in note 1 (e) and fair value disclosures in note 7
for compliance with International Financial
Reporting Standards.
77
The Schiehallion Fund Limited
Our application of materiality and an
overview of the scope of our audit
Materiality for the financial statements as a whole
was set at $24,400,000, determined with reference
to a benchmark of net assets of $1,219,137,000,
of which it represents approximately 2.0%
(2023: 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% (2023: 75%) of materiality for the
financial statements as a whole, which equates to
$18,300,000. 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
$1,220,000, 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.
Financial report
Annual Report and Financial Statements 2024
78
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.
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.
79
The Schiehallion Fund Limited
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 73, 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.
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
www.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
3 April 2024
Financial report
Annual Report and Financial Statements 2024
80
For the year ended 31 January
Notes
2024
Revenue
US$’000
2024
Capital
US$’000
2024
Total
US$’000
2023
Revenue
US$’000
2023
Capital
US$’000
2023
Total
US$’000
Gains/(losses) on investments 7 – 69,768 69,768 – (311,938) (311,938)
Currency gains/(losses) – 75 75 – (17) (17)
Income 2 8,211 – 8,211 2,800 – 2,800
Investment management fee 3 (8,152) – (8,152) (8,931) – (8,931)
Other administrative expenses 4 (1,263) – (1,263) (1,233) – (1,233)
Operating profit/(loss) before
finance costs and taxation
(1,204) 69,843 68,639 (7,364) (311,955) (319,319)
Finance costs of borrowings – – – (10) – (10)
Operating profit/(loss) before
taxation
(1,204) 69,843 68,639 (7,374) (311,955) (319,329)
Tax on ordinary activities 10 – (834) (834) – – –
Profit/(loss) and total
comprehensive income/(loss)
for the year
(1,204) 69,009 67,805 (7,374) (311,955) (319,329)
Total comprehensive income/
(loss) for the year analysed as
follows:
Attributable to ordinary
shareholders
(1,204) 69,009 67,805 (4,923) (189,131) (194,054)
Attributable to C shareholders* – – – (2,451) (122,824) (125,275)
Profit/(loss) and total
comprehensive income/(loss)
for the year
(1,204) 69,009 67,805 (7,374) (311,955) (319,329)
Earnings/(loss) per
ordinary share
5 (0.12¢) 6.69¢ 6.57¢ (0.98¢) (37.79¢) (38.77c)
Loss per C share* 5 – – – (0.35¢) (17.55¢) (17.90¢)
*
The Company’s C shares converted into Ordinary shares on 8 September 2023 as detailed on page 36 and therefore there is no C shares income/(loss)
to report for the year ended 31 January 2024.
The total column of this statement represents the Statement of Comprehensive Income of the Company. The supplementary revenue and capital columns
are prepared under guidance published by the Association of Investment Companies.
All revenue and capital items in this statement derive from continuing operations.
The accompanying notes on pages 84 to 107 are an integral part of the Financial Statements.
Statement of
comprehensive
income
81
The Schiehallion Fund Limited
As at 31 January
Notes
2024
US$’000
2024
US$’000
2023
US$’000
2023
US$’000
Non-current assets
Investments held at fair value through profit or loss 7 1,043,781 972,032
Current assets
US Treasury Bills 16 167,522 136,797
Cash and cash equivalents 16 11,306 45,799
Debtors 8 1,743 884
180,571 183,480
Current liabilities
Amounts falling due within one year: 9 (4,381) (2,329)
Net current assets 176,190
181,151
Non-current liabilities
Amounts falling due after more than one year:
Provision for tax liability 10 (834) –
Net assets 1,219,137 1,153,183
Capital and reserves
Share capital 11/12 1,213,903 1,216,503
Capital reserve 12 15,621 (51,536)
Capital redemption reserve 12 2,601 –
Revenue reserve 12 (12,988) (11,784)
Shareholders’ funds 1,219,137 1,153,183
Shareholders’ funds – ordinary shares 1,219,137 597,608
Net asset value per ordinary share 13 118.37¢ 119.42¢
Number of ordinary shares in issue 11 1,029,898,907 500,430,002
Shareholders’ funds – C shares * 555,575
Net asset value per C share 13 79.37¢
Number of C shares in issue 11 700,000,000
*
The C shares converted on 8 September 2023 as detailed on page 36 and therefore there were no C shares in issue at 31 January 2024.
The Financial Statements of The Schiehallion Fund Limited (Company registration number 65915) were
approved and authorised for issue by the Board of Directors and were signed on 3 April 2024.
Dr Linda Yueh CBE
Chairperson
The accompanying notes on pages 84 to 107 are an integral part of the Financial Statements.
Statement of
financial position
Financial report
Annual Report and Financial Statements 2024
82
For the year ended 31 January 2024
Notes
Share
capital
US$’000
Capital
reserve
US$’000
Capital
redemption
reserve
US$’000
Revenue
reserve
US$’000
Shareholders’
funds
US$’000
Shareholders’ funds at 1 February 2023 1,216,503 (51,536) – (11,784) 1,153,183
Ordinary shares bought back and cancelled 11/12 (2,600) (1,852) 2,601 – (1,851)
Total comprehensive income/(loss) – 69,009 – (1,204) 67,805
Shareholders’ funds at 31 January 2024 1,213,903 15,621 2,601 (12,988) 1,219,137
For the year ended 31 January 2023
Notes
Share
capital
US$’000
Capital
reserve
US$’000
Capital
redemption
reserve
US$’000
Revenue
reserve
US$’000
Shareholders’
funds
US$’000
Shareholders’ funds at 1 February 2022 1,216,503 260,419 – (4,410) 1,472,512
Total comprehensive loss – ordinary shares – (189,131) – (4,923) (194,054)
Total comprehensive loss – C shares* – (122,824) – (2,451) (125,275)
Shareholders’ funds at 31 January 2023 1,216,503 (51,536) – (11,784) 1,153,183
* The C shares converted on 8 September 2023 and therefore there is no C share (loss)/income to report for the year ending 31 January 2024.
The accompanying notes on pages 84 to 107 are an integral part of the Financial Statements.
Statement of
changes in equity
83
The Schiehallion Fund Limited
The accompanying notes on pages 83 to 107 are an integral part of the Financial Statements.
For the year ended 31 January
Notes
2024
US$’000
2024
US$’000
2023
US$’000
2023
US$’000
Cash flows from operating activities
Operating profit/(loss) before taxation 68,639 (319,329)
US Treasury Bills interest 2 (5,305) (1,618)
Net (gains)/losses on investments (69,768) 311,938
Currency (gains)/losses (75) 17
Changes in debtors and creditors 1,194 (899)
Net cash used in operating activities
*
(5,315) (9,891)
Cash flows from investing activities
Acquisitions of US Treasury Bills (201,508) (161,229)
Disposals of US Treasury Bills 176,088 294,266
Acquisitions of investments 7 (75,589) (166,076)
Disposals of investments 7 73,608 1,848
Net cash used in investing activities (27,401) (31,191)
Cash flows from financing activities
Ordinary shares bought back and cancelled 11/12 (1,852) –
Net cash outflow from financing activities (1,852) –
Net decrease in cash and cash equivalents (34,568) (41,082)
Effect of exchange rate fluctuations on cash and cash equivalents 75 (17)
Cash and cash equivalents at 1 February 45,799 86,898
Cash and cash equivalents at 31 January 11,306 45,799
*
Cash from operations includes interest received of US$2,044,000 (2023 – US$700,000).
2024
US$’000
2023
US$’000
Cash and cash equivalents comprise the following:
Cash at bank
11,306 45,799
Statement of
cash flows
Financial report
Annual Report and Financial Statements 2024
84
The Schiehallion Fund Limited is a non-cellular investment
company limited by shares, registered and incorporated in
Guernsey under the Companies (Guernsey) Law, 2008 (the
‘Companies Law’) on 4 January 2019, with registration number
65915. The Company is a registered closed-ended investment
scheme registered pursuant to the Protection of Investors
(Bailiwick of Guernsey) Law, 2020 and the Registered Collective
Investment Scheme Rules 2021 issued by the Guernsey Financial
Services Commission.
The Company’s shares are admitted to trading on the Specialist
Fund Segment of the Main Market of the London Stock Exchange.
01 Principal accounting policies
The Financial Statements for the year ended 31 January 2024
have been prepared in accordance with International Financial
Reporting Standards (‘IFRS’) as issued by the International
Accounting Standards Board (‘IASB’).
a. Basis of accounting
The Financial Statements have been prepared in
accordance with International Financial Reporting
Standards (‘IFRS’). The Financial Statements give a true
and fair view and comply with the Companies (Guernsey)
Law, 2008. Where presentational guidance set out in
the Statement of Recommended Practice (‘SORP’) for
Investment Companies issued by the Association of
Investment Companies (‘AIC’) updated in July 2022
(the ‘AIC SORP’) is consistent with the requirements
of IFRS, the Directors have sought to prepare the
Financial Statements on a basis compliant with the
recommendations of the SORP.
Going concern
In accordance with The Financial Reporting Council’s
guidance on going concern and liquidity risk, the Directors
have undertaken a rigorous review of the Company’s
ability to continue as a going concern.
In undertaking this review, the Board has considered
the Company’s principal risks and uncertainties, as set
out on page 39 to 44. Liquidity stress testing has been
carried out and having done so the Board does not believe
the Company’s going concern status is affected. The
Company maintains sufficient cash balances to enable
it to meet its liabilities as they fall due.
In managing the Company’s assets, the Investment
Manager will seek to ensure that the Company holds at
all times a proportion of assets that is sufficiently liquid
to enable it to discharge its payment obligations.
Accordingly, the Financial Statements have been prepared
on the going concern basis as it is the Directors’ opinion,
having assessed the principal risks and uncertainties, that
the Company will continue in operational existence for a
period of at least 12 months from the date of approval of
these Financial Statements.
b. Functional and presentational currency
The Company’s functional and presentational currency is
the US dollar. The US dollar is the functional currency as
the Company has issued its share capital in US dollars,
its shareholders are based globally and the Company’s
investment policy has global reach. The Company’s
performance is evaluated and its liquidity is managed in US
dollars. Therefore, the US dollar is considered the currency
that most closely represents the economic effects of the
underlying transactions, events and conditions.
c. Basis of measurement
The Financial Statements have been prepared under the
historical cost convention, adjusted for the revaluation of
fixed asset investments at fair value through profit or loss.
d. Accounting judgements, estimates and assumptions
The preparation of the Financial Statements requires
the use of estimates, assumptions and judgements.
These estimates, assumptions and judgements affect the
reported amounts of assets and liabilities at the reporting
date. While estimates are based on best judgement
using information and financial data available, the actual
outcome may differ from these estimates. The key
sources of estimation and uncertainty relate to the fair
valuation of the private company investments.
Judgements
The Directors consider that the preparation of the
Financial Statements involves the following key
judgements:
i. the determination of the functional currency of the
Company as US dollars (see rationale in 1(b) above);
and
ii. the fair valuation of the private company investments.
Notes to the
Financial Statements
85
The Schiehallion Fund Limited
The key judgements in the fair valuation process are:
i. the Investment Manager’s determination of the
appropriate application of the International Private
Equity and Venture Capital Valuation (‘IPEV’) Guidelines
2022 to each private company investment; and
ii. the Directors’ consideration of whether each fair
value is appropriate following detailed review and
challenge. The judgement applied in the selection of the
methodology used (see 1(e) below) for determining the
fair value of each private company investment can have
a significant impact upon the valuation.
Estimates
The key estimate in the Financial Statements is the
determination of the fair value of the private company
investments by the Investment Manager for consideration
by the Directors. This estimate is key as it significantly
impacts the valuation of the private company investments
at the date of the Statement of Financial Position. The
fair valuation process involves estimation using subjective
inputs that are unobservable (for which market data is
unavailable). The main estimates involved in the selection
of the valuation process inputs are:
i. the selection of appropriate comparable companies
in order to derive revenue multiples and meaningful
relationships between enterprise value, revenue and
earnings growth. Comparable companies are chosen
on the basis of their business characteristics and
growth patterns;
ii. the selection of a revenue metric (either historical
or forecast);
iii. the application of an appropriate discount factor
to reflect the reduced liquidity of private company
companies versus their listed peers;
iv. the estimation of the probability assigned to an exit
being through an initial public offering (‘IPO’) or a
company sale;
v. the selection of an appropriate industry benchmark
index to assist with the valuation validation or the
application of valuation adjustments, particularly in the
absence of established earnings or closely comparable
peers; and
vi. the calculation of valuation adjustments derived from
milestone analysis (i.e. incorporating operational
success against the plan/forecasts of the business
into the valuation).
Fair value estimates are cross-checked to alternative
estimation methods where possible to improve the
robustness of the estimates. As the valuation outcomes
may differ from the fair value estimates a price sensitivity
analysis is provided in Other Price Risk Sensitivity in note
16 on pages 103 to 106 to illustrate the effect on the
Financial Statements of an over or under estimation of the
unobservable inputs used in the estimation of fair values.
The risk of an over or under estimation of fair values
is greater when methodologies are applied using more
subjective inputs.
Assumptions
The determination of fair value by the Investment
Manager involves key assumptions dependent upon the
valuation technique used. As explained in 1(e) below, the
primary technique applied under the IPEV Guidelines is
the Multiples approach. Where the Multiples approach is
used the valuation process recognises also, as stated in
the IPEV Guidelines, that the price of a recent investment
may be an appropriate calibration for estimating fair
value. The Multiples approach involves subjective inputs
and therefore presents a greater risk of over or under
estimation and particularly in the absence of a recent
transaction.
The key assumptions for the Multiples approach are
that the selection of comparable companies provides
a reasonable basis for identifying relationships between
enterprise value, revenue and growth to apply in the
determination of fair value. Other assumptions include:
i. the discount applied for reduced liquidity versus listed
peers;
ii. the probabilities assigned to an exit being through
either an IPO or a company sale; and
iii. that the application of milestone analysis and industry
benchmark indices are a reasonable basis for applying
appropriate adjustments to the valuations.
Valuations are cross-checked for reasonableness to
alternative Multiples-based approaches or benchmark
index movements as appropriate.
e. Investments
The Company’s investments are classified, recognised
and measured at fair value through profit or loss in
accordance with IFRS 9. Changes in fair value of
investments and gains and losses on disposal are
recognised as capital items in the Statement of
Comprehensive Income.
Recognition and initial measurement
Purchases and sales of investments are accounted for on
a trade date basis. Expenses incidental to purchase and
sale are written off to capital at the time of acquisition or
disposal. All investments are designated as valued at fair
value through profit or loss upon initial recognition and
are measured at subsequent reporting dates at fair value.
Measurement and valuation
Listed investments
The fair value of listed security investments is bid value,
or, in the case of holdings on certain recognised overseas
exchanges, at last traded prices depending on the custom
of the relevant exchange.
Private company investments
Private company investments are valued at fair value by
the Directors following a detailed review and appropriate
challenge of the valuations proposed by the Investment
Manager. The Investment Manager’s private company
investment valuation policy applies techniques consistent
with the IPEV Guidelines.
Financial report
Annual Report and Financial Statements 2024
86
The techniques applied are predominantly market-based
approaches. The market-based approaches available
under the IPEV Guidelines are set out below and are
followed by an explanation of how they are applied to
the Company’s private companies portfolio:
• Multiples;
• Industry Valuation Benchmarks; and
• Available Market Prices.
The nature of the private company portfolio currently
will influence the valuation technique applied. The
valuation approach recognises that, as stated in the
IPEV Guidelines, the price of a recent investment,
if resulting from an orderly transaction, generally
represents fair value as at the transaction date and
may be an appropriate starting point for estimating fair
value at subsequent measurement dates. However,
consideration is given to the facts and circumstances
as at the subsequent measurement date, including
changes in the market or performance of the investee
company. Milestone analysis is used where appropriate
to incorporate the operational progress of the investee
company into the valuation. Additionally, the background
to the transaction must be considered. As a result,
various Multiples-based techniques are employed to
assess the valuations particularly in those companies with
established revenues. Discounted cashflows are used
where appropriate. An absence of relevant industry peers
may preclude the application of the Industry Valuation
Benchmarks technique and an absence of observable
prices may preclude the Available Market Prices approach.
All valuations are cross-checked for reasonableness by
employing relevant alternative techniques.
The private company investments are valued according
to a three monthly cycle of measurement dates. The fair
value of the private company investments will be reviewed
before the next scheduled three monthly measurement
date on the following occasions:
• at the year end and half year end of the Company; and
• where there is an indication of a change in fair value
as defined in the IPEV guidelines (commonly referred
to as ‘trigger’ events).
A trigger event may include any of the following:
• a subsequent round of financing by the investee
company;
• a secondary transaction involving the investee
company where there is sufficient information
available to enable an assessment of the nature of the
transaction;
• a recent material change in the current or expected
financial and/or operational performance of the
investee company;
• a material milestone achieved or missed by the investee
company;
• a change in the management personnel of the investee
company;
• a material change in the market environment in which
the investee company operates; or
• a material change in market indices or economic
indicators.
Derecognition
Financial assets are derecognised when the contractual
rights to cash flows from the asset expire or the Company
transfers the financial assets and substantially all of the
risks and rewards of ownership have been transferred.
On derecognition of a financial asset, the difference
between the weighted average carrying amount of the
asset (or the carrying 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.
Financial liabilities are derecognised when the contractual
obligations are discharged, cancelled or expired.
Gains and losses
Gains and losses on investments, including those
arising from foreign currency exchange differences,
are recognised in the Statement of Comprehensive
Income as capital items.
The Investment Manager monitors the investment
portfolio on a fair value basis and uses the fair value
basis for investments in making investment decisions
and monitoring financial performance.
f. US treasury bills
Assets that are held in order to collect contractual
cash flows that are solely payments of principal and
interest are measured at amortised cost. These assets
are subsequently measured at amortised cost using
the effective interest rate method less impairment
recognised using the expected credit loss method.
As at 31 January 2024 impairment recognised was nil
(31 January 2023 – nil).
g. Cash and cash equivalents
Cash and cash equivalents include cash in hand and
deposits repayable on demand. Deposits are repayable
on demand if they can be withdrawn at any time without
notice and without penalty or if they have a maturity or
period of notice of not more than one working day.
h. Financial liabilities
Bank loans and overdrafts are classified as loans and are
initially recorded at the proceeds received net of direct
costs and subsequently measured at amortised cost.
i. Income
i. Income from equity investments is brought into account
on the date on which the investments are quoted ex-
dividend or, where no ex-dividend date is quoted, when
the Company’s right to receive payment is established.
ii. If scrip dividends are taken in lieu of dividends in
cash, the net amount of the cash dividend declared
is credited to the revenue account. Any excess in the
value of the shares received over the amount of the
cash dividend foregone is recognised as capital.
iii. Special dividends are treated as repayments of capital
or income depending on the facts of each particular
case.
iv. Overseas dividends include the taxes deducted at
source.
87
The Schiehallion Fund Limited
v. Interest receivable on bank deposits is recognised on
an accruals basis.
vi. Interest from fixed interest securities is recognised on
an effective interest rate basis. Where income returns
are for a non-fixed amount, the impact of these returns
on the effective interest rate is recognised once such
returns are known. 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
shares, in which case they are added to the buyback cost
or deducted from the share issuance proceeds.
k. Taxation
The Company has applied for and been granted
exemption from liability to income tax in Guernsey under
the Income Tax (Exempt Bodies) (Guernsey) Ordinance,
1989 in Guernsey for the current period. The exemption
must be applied for annually and will be granted, subject
to the payment of an annual fee, which is currently fixed
at £1,200 per applicant, provided the Company qualifies
for exemption under the applicable legislation.
It is the intention of the Directors to conduct the affairs
of the Company so as to ensure that it continues to
qualify for exempt company status for the purposes
of Guernsey taxation. The Company may be subject to
withholding tax on any dividend income. Capital gains
tax is payable on realised investment gains in certain
jurisdictions – see note 10 for details of the tax provision
recognised in the year.
l. Foreign currencies
Transactions involving foreign currencies other than US
dollars are converted at the rate ruling at the time of the
transaction. Assets and liabilities in such currencies are
translated at the closing rates of exchange at the date
of the Statement of Financial Position. Any gain or loss
arising from a change in exchange rate subsequent to
the date of the transaction is included as an exchange
gain or loss in the capital reserve or revenue reserve as
appropriate. Foreign exchange movements on investments
are included in the Statement of Comprehensive Income
within gains or losses on investments.
m. Capital reserve
Gains and losses on disposal of investments, changes
in the fair value of investments held and realised and
unrealised foreign exchange differences of a capital
nature are dealt with in this reserve after being recognised
in the Statement of Comprehensive income. Purchases
of the Company’s own shares may be funded from
this reserve.
n. Capital redemption reserve
The nominal value of ordinary share capital repurchased
and cancelled is transferred out of called-up share capital
and into the capital redemption reserve.
o. Revenue reserve
Income and expense items of a revenue nature are
included in the Revenue Reserve after being recognised in
the Statement of Comprehensive Income. Any dividends
paid by the Company would be funded from this reserve.
p. Single segment reporting
The chief operating decision maker is the Board of
Directors. The Directors are of the opinion that the
Company is engaged in a single segment of business,
being investment business, consequently no segmental
analysis is presented.
q. New and revised Standards
The following standards, amendments to standards or
interpretations are effective for periods beginning on
1 January 2023. The impact of these standards is not
material to the reported results and financial position
of the Company.
• Disclosure of Accounting Policies (Amendments
to IAS 1 and IFRS Practice Statement 2), effective
1 January 2023
• Definition of Accounting Estimate (Amendments
to IAS 8), effective 1 January 2023
Other accounting standards and interpretations have
been published and will be mandatory for the Company’s
accounting periods beginning on or after 1 January 2024
or later periods.
The impact of these standards is not expected to be
material to the reported results and financial position
of the Company.
New and amended standards and interpretations not
applied in these Company’s Financial Statements
(issued but not yet effective)
• Classification of liabilities as current or non-current
(Amendments to IAS 1), effective 1 January 2024
• Non-current Liabilities with Covenants – Amendments
to IAS 1 and Classification of Liabilities as Current
or Non-current – amendments to IAS 1, effective
1 January 2024
• IFRS S1 – General Requirements for Disclosure of
Sustainability-related Financial Information and IFRS
S2 Climate-related Disclosures (The implementation
and the effective dates of IFRS Sustainability
Disclosure Standards are subject to local regulation).
The impact of these standards is not expected to be
material to the reported results and financial position
of the Company.
Financial report
Annual Report and Financial Statements 2024
88
02 Income
2024
US$’000
2023
US$’000
US Treasury Bill interest 5,305 1,618
Overseas interest 862 482
Deposit interest 2,044 700
Total income 8,211 2,800
03 Investment management fee
2024
US$’000
2023
US$’000
Investment Management fee 8,152
8,931
Details of the Investment Management Agreement are set out on page 54. 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$1.3 billion.
Management fees are calculated and payable quarterly. Cash equivalents include US Treasury Bills.
04 Other administrative expenses
2024
US$’000
2023
US$’000
General administrative expenses 275 305
Administrator’s fee 105 86
Auditor’s remuneration for audit services 296 236
Directors’ fees 450 394
Depositary and custody fees 108 185
Registrar fees 29 27
1,263 1,233
In the year to 31 January 2024 there was US$21,000 (31 January 2023: US$nil) paid to the Auditor, KPMG Channel Islands
Limited, in respect of non-audit services (included within ‘General administrative expenses’ above). These fees were related to
the engagement of KPMG Channel Islands Limited to verify that the C share conversion ratio was calculated correctly and in
accordance with the prospectus.
05 Earnings per share
Year ended
31 January 2024
Year ended
31 January 2023
Ordinary shares US$’000 ¢ US$’000 ¢
Revenue return on ordinary activities after taxation (1,204) (0.12) (4,923) (0.98)
Capital return on ordinary activities after taxation 69,009 6.69 (189,131) (37.79)
Profit/(loss) and total comprehensive income/(loss) for the year 67,805 6.57 (194,054) (38.77)
Weighted average number of ordinary shares in issue 1,032,208,365 500,430,002
89
The Schiehallion Fund Limited
05 Earnings per share (continued)
Year ended
31 January 2023
C shares* US$’000 ¢
Loss return on ordinary activities after taxation (2,451) (0.35)
Capital return on ordinary activities after taxation (122,824) (17.55)
Loss and total comprehensive loss for the year (125.275) (17.90)
Weighted average number of C shares in issue 700,000,000
*
The Company’s C shares were converted into ordinary shares on 8 September 2023 as explained on page 36 and therefore there were no
C shares in issue at 31 January 2024 and no allocable (loss)/income to report for the year ending 31 January 2024.
06 Ordinary dividends
There were no dividends paid or proposed in respect of the year to 31 January 2024 (2023 – US$nil).
07 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 84. 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 2024
Level 1
US$’000
Level 2
US$’000
Level 3
US$’000
Total
US$’000
Listed equities 174,072 – – 174,072
Private company ordinary shares/warrants – – 172,693 172,693
Private company preference shares* – – 684,298
684,298
Private company convertible promissory notes – – 12,718 12,718
Total financial asset investments 174,072 – 869,709 1,043,781
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
*
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 2024, the investment in Oddity with a fair value (IPO price) of US$11,800,000 was transferred
from Level 3 to Level 1 on becoming listed. During the prior year no investments listed and transferred from Level 3 to Level 1.
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.
Financial report
Annual Report and Financial Statements 2024
90
07 Financial instruments (continued)
Listed
securities
US$000
Private
company
securities
US$000
Total
US$000
Cost of investments at 1 February 2023 158,283 863,244 1,021,527
Investment holding gains and losses at 1 February 2023 (39,265) (10,230) (49,495)
Fair value of investments at 1 February 2023 119,018 853,014 972,032
Movements in the period:
Purchases at cost
†
3,675 71,914 75,589
Sales – proceeds
†
(34,813) (38,795) (73,608)
– gains on disposal 6,469 17,370 23,839
Changes in categorisation 10,000 (10,000) –
Changes in investment holding gains and losses 69,723 (23,794) 45,929
Fair value of investments at 31 January 2024 174,072 869,709 1,043,781
Cost of investments at 31 January 2024 143,614 903,733 1,047,347
Investment holding gains and losses at 31 January 2024 30,458 (34,024) (3,566)
Fair value of investments at 31 January 2024* 174,072 869,709 1,043,781
*
Includes holdings in preference shares, promissory notes, ordinary shares and warrants.
†
The purchases and sales figures above include transaction costs of US$nil (2023 – US$nil).
91
The Schiehallion Fund Limited
07 Financial instruments (continued)
Listed
securities
US$’000
Private
company
securities
US$’000
Total
US$’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
*
During the year to 31 January 2023 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$1,367,163. The Ginkgo Bioworks Holdings Inc shares received
are a non-cash item and hence are not reflected in the Statement of Cash Flows on page 83.
†
Includes holdings in preference shares, promissory notes, ordinary shares and warrants.
The purchases and sales proceeds figures above include transaction costs of US$nil (2022 – US$99,000) and US$nil (2022 – US$nil) respectively.
2024
US$’000
2023
US$’000
Net gains on investments designated at fair value through profit or loss
Gains on investments disposed/taken over during the year 33,512 –
Losses on investments disposed/taken over during the year (9,673) (13,633)
Changes in investment holding gains on investments still held at year-end
173,536
45,244
Changes in investment holding losses on investments still held at year-end
(127,607
)
(343,549)
69,768
(311,938)
Financial report
Annual Report and Financial Statements 2024
92
07 Financial instruments (continued)
Investment holdings
Details are disclosed below in accordance with the requirements of paragraph 82 of the AIC Statement of Recommended Practice
‘Financial Statements of Investment Trust Companies and Venture Capital Trusts’ (updated in July 2022) in relation to private
company investments. As required, this disclosure includes turnover, pre-tax profits and net assets attributable to investors,
as reported within the most recently audited financial statements of the investee companies.
As at 31 January 2024
Latest
Financial
Statements
Book
cost
US$’000
Market
value
US$’000
Income
recognised
from
holding in
the period
Turnover
US$’000
Pre-tax
profit/
(loss)
US$’000
Net assets
attributable
to
shareholders
US$’000Name Busine ss
Space
Exploration
Technologies
Corp
Designs,
manufactures and
launches advanced
rockets and
spacecraft
n/a 22,100 88,324 nil Information not publicly available
ByteDance Ltd Social media
and news
aggregation
company
n/a 43,180 63,835 nil Information not publicly available
Bending
Spoons S.P.A
Mobile
application
software
developer
n/a 20,622 48,922 nil Information not publicly available
Daily Hunt (Ver
Se Innovation
Limited)
Telephone
voice, data, text
messaging, and
roaming services
n/a 37,119 41,006 nil Information not publicly available
Brex Inc Corporate
credit cards for
startups
n/a 44,047 40,212 nil Information not publicly available
McMakler
GmbH
Real estate
services
n/a 39,955 37,242 nil Information not publicly available
Wayve
Technologies
Ltd
AI based
software for
self-driving cars
n/a 16,402 34,001 nil nil (23,515) 163,482
Flix SE European
mobility provider
n/a 25,001 32,996 nil Information not publicly available
Solugen Inc Combines
enzymes and
metal catalysts
to make
chemicals
n/a 45,000 32,293 nil Information not publicly available
Northvolt AB Lithium
ion battery
manufacturer
n/a 26,116 31,772 nil Information not publicly available
Databricks Inc Data software
solutions
n/a 27,550 29,873 nil Information not publicly available
Faire
Wholesale Inc
Online wholesale
marketplace
n/a 36,186 28,509 nil Information not publicly available
Stripe Inc Online payment
platform
n/a 21,893 27,468 nil Information not publicly available
Chime
Financial Inc
Digital current
account provider
n/a 40,000 26,697 nil Information not publicly available
93
The Schiehallion Fund Limited
As at 31 January 2024
Latest
Financial
Statements
Book
cost
US$’000
Market
value
US$’000
Income
recognised
from
holding in
the period
Turnover
US$’000
Pre-tax
profit/
(loss)
US$’000
Net assets
attributable
to
shareholders
US$’000Name Busine ss
Tempus
Labs Inc
Oncological
records
aggregator
and diagnostic
testing provider
n/a 18,468 26,402 nil Information not publicly available
Grammarly
Inc
Online platform
for checking
grammar,
spelling and
improving written
communication
n/a 45,002 23,976 nil Information not publicly available
Kepler
Computing Inc
Semiconductor
company
n/a 15,000 23,137 nil Information not publicly available
Pet Circle
(Millell Pty Ltd)
Pet food and
accessories
n/a 28,464 22,975 nil Information not publicly available
Genki Forest
Technology
Group
Holdings
Limited
Non-alcoholic
beverages
n/a 33,000 22,628 nil Information not publicly available
Rappi Inc Provider of an
on-demand
delivery platform
designed
to connect
consumers with
local stores
n/a 30,000 21,825 nil Information not publicly available
Tanium Inc Online security
management
n/a 24,353 17,974 nil Information not publicly available
Epic Games
Inc
Video game
developer
n/a 22,055 17,565 nil Information not publicly available
PsiQuantum Silicon photonic
quantum
computing
n/a 15,000 13,996 nil Information not publicly available
Workrise
Technologies
Inc
Jobs
marketplace
for the energy
sector
n/a 22,500 13,392 nil Information not publicly available
Nuro Inc Developer of
autonomous
delivery vehicles
n/a 26,000 13,044 nil Information not publicly available
Loft Holdings
Ltd
Online property
platform
n/a 21,718 11,556 nil Information not publicly available
Cohesity Inc Data storage n/a 10,000 11,526 nil Information not publicly available
HeartFlow Inc Develops
software for
cardiovascular
disease
diagnosis and
treatment
n/a 17,100 10,939 nil Information not publicly available
Merlin Labs
Inc
Autonomous
flight technology
n/a 15,000 10,632 nil Information not publicly available
Financial report
Annual Report and Financial Statements 2024
94
As at 31 January 2024
Latest
Financial
Statements
Book
cost
US$’000
Market
value
US$’000
Income
recognised
from
holding in
the period
Turnover
US$’000
Pre-tax
profit/
(loss)
US$’000
Net assets
attributable
to
shareholders
US$’000Name Busine ss
Away (JRSK
Inc)
Travel and
lifestyle brand
n/a 14,375 10,590 nil Information not publicly available
Carbon Inc Manufactures
and develops
3D printers
n/a 10,000 9,062 nil Information not publicly available
Jiangxiaobai
Holdings Ltd
Producer
of alcoholic
beverages
n/a 9,993 8,012 nil Information not publicly available
Graphcore Ltd Computer chip
developer
n/a 11,200 6,469 nil 2,715 (171,657) (161,678)
Honor
Technology
Inc
Provider of
home-care
services
n/a 12,462 5,379 nil Information not publicly available
MasterClass
(Yanka
Industries Inc)
Online education
platform
n/a 10,000 2,732 nil Information not publicly available
Blockstream
Corp Inc
Financial
software
developer
n/a 15,000 1,947 nil Information not publicly available
Indigo
Agriculture Inc
Microbial seed
treatments to
increase crop
yields and grain
marketplace
n/a 16,873 801 nil Information not publicly available
Convoy Inc Marketplace for
truckers and
shippers
n/a 15,000 0 nil Information not publicly available
Private company investment portfolio total 903,733 869,709
95
The Schiehallion Fund Limited
Ordinary private company
investment portfolio
as at 31 January 2023
Latest
Financial
Statements
Book
cost
US$’000
Market
value
US$’000
Income
recognised
from
holding in
the period
Turnover
US$’000
Pre-tax
profit/
(loss)
US$’000
Net assets
attributable
to
shareholders
US$’000Name Business
Space
Exploration
Technologies
Corp
Designs,
manufactures and
launches advanced
rockets and
spacecraft
n/a 22,100 70,114 nil Information not publicly available
Scopely Inc Online gaming
company
n/a 21,299 60,223 nil Information not publicly available
ByteDance
Ltd
Social media and
news aggregation
company
n/a 25,000 49,808 nil Information not publicly available
Daily Hunt
(Ver Se
Innovation
Limited)
Telephone
voice, data, text
messaging, and
roaming services
n/a 37,119 32,032 nil Information not publicly available
Epic Games
Inc
Video game
developer
n/a 22,054 28,320 nil Information not publicly available
Stripe Inc Online payment
platform
n/a 18,052 27,943 nil Information not publicly available
Northvolt AB Lithium ion battery
manufacturer
n/a 10,351 22,525 nil Information not publicly available
Tempus
Labs Inc
Oncological records
aggregator and
diagnostic testing
provider
n/a 13,468 20,177 nil Information not publicly available
Workrise
Technologies
Inc
Jobs marketplace
for the energy
sector
n/a 22,500 17,073 nil Information not publicly available
Indigo
Agriculture
Inc
Microbial seed
treatments to
increase crop
yields and grain
marketplace
n/a 16,873 15,839 nil Information not publicly available
Flix SE European mobility
provider
n/a 11,153 13,309 nil Information not publicly available
Jiangxiaobai
Holdings Ltd
Producer of
alcoholic beverages
n/a 9,996 12,892 nil Information not publicly available
Away (JRSK
Inc)
Travel and lifestyle
brand
n/a 14,375 12,355 nil Information not publicly available
Tanium Inc Online security
management
n/a 24,352 11,799 nil Information not publicly available
Brex Inc Corporate credit
cards for startups
n/a 10,006 11,292 nil Information not publicly available
07 Financial instruments (continued)
Investment holdings (continued)
Financial report
Annual Report and Financial Statements 2024
96
Ordinary private company
investment portfolio
as at 31 January 2023
Latest
Financial
Statements
Book
cost
US$’000
Market
value
US$’000
Income
recognised
from
holding in
the period
Turnover
US$’000
Pre-tax
profit/
(loss)
US$’000
Net assets
attributable
to
shareholders
US$’000Name Business
Carbon Inc Manufactures
and develops 3D
printers
n/a 10,000 9,670 nil Information not publicly available
Convoy Inc Marketplace for
truckers and
shippers
n/a 10,000 9,165 nil Information not publicly available
Nuro Inc Developer of
autonomous
delivery vehicles
n/a 10,000 9,100 nil Information not publicly available
Graphcore
Ltd
Computer chip
developer
n/a 11,200 8,706 nil 50,444 (184,540) 342,723
Cohesity Inc Data storage n/a 10,000 8,033 nil Information not publicly available
Chime
Financial Inc
Digital current
account provider
n/a
10,000 7,417 nil Information not publicly available
MasterClass
(Yanka
Industries Inc)
Online education
platform
n/a
10,000 6,487 nil Information not publicly available
Honor
Technology
Inc
Provider of home-
care services
n/a 5,000 2,990 nil Information not publicly available
HeartFlow Inc Develops software
for cardiovascular
disease diagnosis
and treatment
n/a 10,000 2,029 nil Information not publicly available
Private company investment portfolio total 364,898 469,297
97
The Schiehallion Fund Limited
07 Financial instruments (continued)
Investment holdings (continued)
C share private company investment
portfolio as at
31 January 2023*
Latest
Financial
Statements
Book
cost
US$’000
Market
value
US$’000
Income
recognised
from
holding in
the period
Turnover
US$’000
Pre-tax
profit/
(loss)
US$’000
Net assets
attributable
to
shareholders
US$’000Name Business
Solugen Inc Combines enzymes
and metal catalysts
to make chemicals
n/a 45,000 47,881 nil Information not publicly available
Genki Forest
Technology Group
Holdings Limited
Non-alcoholic
beverages
n/a 33,000 29,727 nil Information not publicly available
Faire Wholesale Inc Online wholesale
marketplace
n/a 36,186 29,404 nil Information not publicly available
McMakler GmbH Real estate services n/a 29,075 24,621 nil Information not publicly available
Brex Inc Corporate credit
cards for startups
n/a 34,040 24,441 nil Information not publicly available
Databricks Inc Data software
solutions
n/a 26,900 23,523 nil Information not publicly available
Grammarly Inc Online platform for
checking grammar,
spelling and
improving written
communication
n/a 45,002 22,353 nil Information not publicly available
Rappi Inc Provider of an on-
demand delivery
platform designed to
connect consumers
with local stores
n/a 30,000 19,922 nil Information not publicly available
Chime Financial Inc Digital current
account provider
n/a 30,000 19,294 nil Information not publicly available
Northvolt AB Lithium ion battery
manufacturer
n/a 15,766 16,280 nil Information not publicly available
Kepler Computing
Inc
Semiconductor
company
n/a 15,000 15,919 nil Information not publicly available
Loft Holdings Ltd Online property
platform
n/a 21,718 15,569 nil Information not publicly available
Merlin Labs Inc Autonomous flight
technology
n/a 15,000 13,842 nil Information not publicly available
Flix SE European mobility
provider
n/a 13,848 13,356 nil Information not publicly available
PsiQuantum Silicon photonic
quantum computing
n/a 15,000 13,195 nil Information not publicly available
*
The C share portfolio was combined with the ordinary share portfolio following the conversion of the C shares on 8 September 2023 – see page 36.
Financial report
Annual Report and Financial Statements 2024
98
C share private company investment
portfolio as at
31 January 2023*
Latest
Financial
Statements
Book
cost
US$’000
Market
value
US$’000
Income
recognised
from
holding in
the period
Turnover
US$’000
Pre-tax
profit/
(loss)
US$’000
Net assets
attributable
to
shareholders
US$’000Name Business
Nuro Inc Developer of
autonomous delivery
vehicles
n/a 16,000 12,112 nil Information not publicly available
Pet Circle (Millell
Pty Ltd)
Pet food and
accessories
n/a 28,464 11,357 nil Information not publicly available
Wayve
Technologies Ltd
AI based software for
self-driving cars
n/a 16,402 9,728 nil Information not publicly available
Blockstream Corp
Inc
Financial software
developer
n/a 15,000 8,885 nil Information not publicly available
Convoy Inc Marketplace for
truckers and shippers
n/a 5,000 4,210 nil Information not publicly available
Tempus Labs Inc Oncological records
aggregator and
diagnostic testing
provider
n/a 5,000 4,210 nil Information not publicly available
Honor Technology
Inc
Provider of home-
care services
n/a 6,945 3,888 nil Information not publicly available
C share private company investment portfolio total 498,345 383,717
Company private company investment portfolio total 861,243 853,014
*
The C share portfolio was combined with the ordinary share portfolio following the conversion of the Company’s C shares into Ordinary shares on
8 September 2023 – see page 36.
08 Debtors
2024
US$’000
2023
US$’000
Amounts falling due within one year:
Income accrued (net of withholding taxes) 1,616 759
Other debtors and prepayments 127 125
1,743 884
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 2024 (2023 – US$nil).
99
The Schiehallion Fund Limited
09 Creditors – amounts falling due within one year
2024
US$’000
2023
US$’000
Unsettled investment purchases 1,812 –
Investment management fee 2,250
2,106
Administrator’s fee 8
7
Other creditors and accruals 311 216
4,381 2,329
None of the above creditors at 31 January 2024 (2023 – US$nil) are financial liabilities designated at fair value through profit or loss.
10 Provision for tax liability
The tax liability provision at 31 January 2024 of US$834,000 (31 January 2023 – nil) relates to a potential liability for Indian capital
gains tax that may arise on the Company’s Indian investments should they be sold in the future, based on the net unrealised taxable
capital gain at the period end and on enacted Indian tax rates (long term capital gains are taxed at 10% and short term capital gains
are taxed at 15%). The amount of any future tax amounts payable may differ from this provision, depending on the value and timing
of any future sales of such investments and future Indian tax rates. The provision was created in the year to 31 January 2024 and
therefore the full amount has been reflected in the Statement of Comprehensive Income.
11 Share capital
2024
Number
2024
US$’000
2023
Number
2023
US$’000
Allotted, called up and fully paid ordinary shares of US$1 each 1,029,898,907 1,213,903 500,430,002 521,701
Allotted, called up and fully paid C shares of US$1 each* – – 700,000,000 694,802
*
The Company’s C shares converted into Ordinary shares on 8 September 2023 as detailed on page 36 and therefore there are no C shares in issue
at 31 January 2024.
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, with a further 23,180,002 ordinary shares subsequently issued. No ordinary shares were
issued in the year to 31 January 2024. Accordingly, the Company has the ability to issue a further 219,569,998 shares under this
existing authority which expires on 15 March 2024.
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 gross proceeds of US$700,000,000.
The issue costs in respect of the C share issue were US$5,198,000. These costs consisted of mainly broker commission
(US$4,066,000), legal fees (US$601,000) and listing fees (US$396,000). The C shares converted on 8 September 2023 with
532,069,905 new ordinary shares being admitted to trading on 12 September 2023. The conversion was triggered by the C share
capital deployment crossing the 85% threshold outlined in the prospectus. The C shares were converted proportionately based
on respective NAV at the calculation date 31 August 2023, the nearest practicable date selected by the Board. As a result the
conversion ratio was calculated to be 0.7601 ordinary shares per C share in issue on 8 September 2023.
By way of ordinary resolutions passed on 12 May 2023 the Directors of the Company have general authority to make market
purchases of up to 75,014,457 ordinary shares and 104,930,000 C shares, being 14.99% of the ordinary and C shares in issue
as at 24 March 2023, being the latest practicable date prior to the publication of the Company’s Annual Report and Financial
Statements for the year ended 31 January 2023. These authorities will expire at the conclusion of the Annual General Meeting
to be held on 10 May 2024. 2,601,000 ordinary shares were bought back during the year ended 31 January 2024 at a cost of
US$1,851,000 (31 January 2023 – nil) hence the remaining authority is 72,413,457 ordinary shares. No C shares were bought back
during the year ended 31 January 2024 and, following conversion no C shares were in issue at 31 January 2024. In the period from
31 January 2024 to 1 April 2024 1,075,000 ordinary shares were bought back and cancelled. The total cost of shares bought back
and cancelled is charged to the capital reserve. The nominal value of the shares is transferred from the share capital to the capital
redemption reserve.
Holders of ordinary shares have the right to receive income and capital from assets attributable to such share class. Ordinary
shareholders have the right to receive notice of general meetings of the Company and have the right to attend and vote at all
general meetings.
Financial report
Annual Report and Financial Statements 2024
100
12 Capital and reserves
Share
capital
US$’000
Capital
reserve
US$’000
Capital
redemption
reserve
US$’000
Revenue
reserve
US$’000
Shareholders’
funds
US$’000
At 1 February 2023 1,216,503 (51,536) – (11,784) 1,153,183
Changes in investment holding gains and losses – 69,768 – – 69,768
Exchange differences – 75 – – 75
Ordinary shares bought back in the year (2,600) (1,852) 2,601 – (1,851)
Provision for Indian capital gains tax – (834) – – (834)
Revenue earnings on ordinary activities after taxation – – – (1,204) (1,204)
At 31 January 2024 1,213,903 15,621 2,601 (12,988) 1,219,137
Share
capital
US$’000
Capital
reserve
US$’000
Capital
redemption
reserve
US$’000
Revenue
reserve
US$’000
Shareholders’
funds
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 – – – – –
Costs in relation to C share issue – – – (7,374) (7,374)
Revenue earnings on ordinary activities after taxation – – – – –
At 31 January 2023 1,216,503 (51,536) – (11,784) 1,153,183
The capital reserve includes investment holding losses of US$3,566,000 (2023 – losses of US$49,495,000) as disclosed in
note 7. The Company may make distributions including share buybacks under section 527 of Company (Guernsey) law 2008
if it is solvent.
13 Net asset value per share
The net asset value per ordinary and C share and the net assets attributable to the ordinary and C shareholders at 31 January
calculated in accordance with the Articles of Incorporation were as follows:
Ordinary shares 2024 2023
Shareholders’ funds US$ 1,219,137,000 US$597,608,000
Number of ordinary shares in issue at the year end 1,029,898,907 500,430,002
Net asset value per ordinary share 118.37¢ 119.42¢
C shares* 2023
Shareholders’ funds US$555,570,000
Number of C shares in issue at the year end 700,000,000
Net asset value per C share 79.37¢
*
The Company’s C shares converted into ordinary shares on 8 September 2023 as detailed on page 36 and therefore there are no C shares in
issue at 31 January 2024.
There are no dilutive or potentially dilutive shares in issue. The aggregate change in assets during the year attributable to the
shares is shown in note 12.
101
The Schiehallion Fund Limited
14 Contingencies, guarantees and financial commitments
The Company had a commitment at 31 January 2024 to purchase 23,438 shares in Bending Spoons for €9.2m. The payment
was made following the year end on 1 February 2024 and 9 February 2024.
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 31 January 2023, 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. During the year ended 31 January 2024 the Company
participated in a funding round for Stripe. As part of this equity funding round this put option was extinguished.
15 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 71 and 72.
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
Ordinary shares held at
31 January 2024
Ordinary shares held at
31 January 2023
C shares held at
31 January 2023
L Yueh Beneficial 44,573 – 58,641
J Mackie Beneficial 91,278 – 57,642
D Chiswell Beneficial 395,251 – 520,000
T Clark Beneficial 60,808 – 80,000
R Holmes Beneficial 54,801 – 72,098
The Directors’ holdings at 31 January 2024 reflect the conversion ratio applied on 8 September 2023, when the C shares
converted into ordinary shares. The holding of J Mackie also reflects a purchase during the year.
Details of the investment management agreement are set out in note 3. The management fee payable to the Investment Manager
by the Company for the year ended 31 January 2024, as disclosed in note 3, was US$8,152,000 (2023 – US$8,931,000) of which
US$2,250,000 was outstanding at 31 January 2024 (2023 – US$2,106,000), as disclosed in note 9.
The fee payable to the Administrator, for the year to 31 January 2024 as disclosed in note 4, was US$105,000 (2023 – US$86,000)
of which US$8,000 was outstanding at 31 January 2024 (2023 – US$7,000) as disclosed in note 9.
16 Risk Management
The Company predominantly invests in long-term minority investments in later stage private (unlisted) companies. 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.
Financial report
Annual Report and Financial Statements 2024
102
16 Risk Management (continued)
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 on pages 29 to 32 and 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 2024, no such
transactions were entered into (2023 – 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 below.
Currency risk
At 31 January 2024
Investments
US$’000
US Treasury
Bills and cash
US$’000
Other debtors
and creditors
US$’000 *
Net
exposure
US$’000
Sterling 95,992 76 (2,444) 93,624
Euro 119,160 3,544 – 122,704
Indian rupee 41,006 – (834) 40,172
Australian dollar 22,975 – – 22,975
Total exposure to currency risk 279,133 3,620 (3,278) 279,475
US dollar 764,648 175,208 (194) 939,662
1,043,781 178,828 (3,472) 1,219,137
At 31 January 2023
Investments
US$’000
US Treasury
Bills and cash
US$’000
Other debtors
and creditors
US$’000 *
Net
exposure
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
*
Includes net non-monetary assets of US$127,000 (2023 – US$124,000).
103
The Schiehallion Fund Limited
16 Risk Management (continued)
Currency risk sensitivity
At 31 January 2024, 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 2024 would have decreased by
US$27,948,000 (2023 (10%) – US$15,359,000). A 10% weakening of the US dollar to other currencies, with all other variables
held constant, would have had an equal but opposite effect on the Financial Statement amounts.
A change of 10% in foreign currency rates (2023 – 10%) has been considered to be a reasonably plausible change reflective
of market circumstance in the year.
ii. Interest rate risk
Interest rate movements may affect directly the level of income receivable on cash deposits and the interest payable on any
variable rate borrowings.
They may also impact upon the market value of investments as the effect of interest rate movements upon the earnings
of a company may have a significant impact upon the valuation of that company’s equity.
The possible effects on fair value and cash flows that could arise as a result of changes in interest rates are taken into account
when making investment decisions and when entering borrowing agreements.
The Board reviews on a regular basis the amount of investments in cash and the income receivable on cash deposits.
The Company may finance, on a short-term basis, part of its activities through borrowings at approved levels. The amount
of any such borrowings and the approved levels are monitored and reviewed regularly by the Board.
The interest rate risk profile of the Company’s financial assets and liabilities at 31 January 2024 and 31 January 2023 is
shown below.
Financial assets
2024
Fair value
US$’000
2024
Weighted
average
interest rate
2023
Fair value
US$’000
2023
Weighted
average
interest rate
Cash
US dollar 7,686 4.8% 45,562 –
Euro 3,544 3.8% – –
Sterling 76 4.5% 237 –
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.
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 2024 by US$113,000
(2023 – US$511,000). 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 Company’s exposure to changes in market prices relates to the fixed asset investments as disclosed
in note 7.
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.
Financial report
Annual Report and Financial Statements 2024
104
16 Risk Management (continued)
Other price risk sensitivity
A full list of the Company’s investments is given on pages 29 to 32. In addition, an analysis of the investment portfolio by broad
geographical, industrial or commercial sector is shown on page 25.
14.3% of the Company’s net assets are invested in listed investments.
71.3% of the Company’s net assets are invested in private company investments.
A 20% increase in quoted equity valuations at 31 January 2024 would have increased total net assets and net return after taxation
by US$34,814,000 (2023 – US$23,804,000). A decrease of 20% would have an equal but opposite effect.
The fair valuation of the private company investments is influenced by the estimates, assumptions and judgements made in
the fair valuation process (see note 1(d) on pages 84 and 85). This level of changed is considered to be reasonable based on
observations of current market conditions.
The private companies sensitivity analysis below recognises that the valuation methodologies employed involve different levels
of subjectivity in their significant unobservable inputs and illustrates the sensitivity of the valuations to these inputs as it involves
more significant subjective estimation than the recent transaction method. The inputs have been flexed by +/-10% with the
exception of the Recent Transaction Price valuation approach as it does not involve significant subjectivity. The table also provides
the range of values for the key unobservable inputs. A blend of valuation techniques is used for some holdings.
31 January
2024 Significant unobservable inputs*
Valuation
technique
Fair value of
investments
US$’000
Key
unobservable
inputs
Other
unobservable
inputs
†
Range
Weighted
average
range
#
Sensitivity
%
†
Sensitivity to changes
in significant
unobservable inputs
Market
approach
using
comparable
trading
multiples
365,576 Enterprise
Value Last
twelve months
(EV/LTM)
revenue
multiple
‡
a,b,c,d 1.6x to
9.0x
4.3x 10% If EV/LTM multiples
changed by +/-
10%, the fair value
would change by
US$22,659,036 and
(US$22,661,075).
Enterprise
Value/Next
twelve months
months EV/
NTM revenue
multiple
¶
a,b,c,d 3.0x to
4.7x
3.9x 10% If EV/NTM multiples
changed by +/- 10%,
the fair value would
change by U$3,200,143
and (US$3,250,694).
Illiquidity
discount
e (10%) (10%) 10% If the illiquidity discount
is charged by +/(10%),
the fair value would
change by $2,462,370
and ($2,391,254).
Transaction
implied
premiums
and discounts
g (18.6%)
to 85.7%
55.8% 10% If a +/- 10% adjustment
is applied to the
calculated premiums
and discounts the fair
value would change
by $2,828,517 and
($2,917,313).
Benchmark
performance
301,337
Selection of
comparable
companies
indices and
ETFs
§
a,b,c,f (38.6%) to
25.4%
4.8% 10% If input comparable
benchmark performance
changed in absolute
terms by +/- 10%, the
fair value would change
by US$22,765,429 and
(US$22,395,064).
Price of
expected
transaction
8,416
Execution risk
discount
h 10% n/a 10% If the execution risk
changed by +/- 10%,
the fair value would
change by US$841,624
and (US$1,020,748).
Recent
transaction
price
217,008 n/a
**^
a,b n/a
n/a
n/a n/a
105
The Schiehallion Fund Limited
16 Risk Management (continued)
Other price risk sensitivity (continued)
As at
31 January
2023 Significant unobservable inputs*
Valuation
technique
Fair value of
investments
US$’000
Key
unobservable
inputs
Other
unobservable
inputs
#
Range
Weighted
average
range
†
Sensitivity
%
Sensitivity to changes
in significant
unobservable inputs
Market
approach
using
comparable
trading
multiples
444,168 Enterprise
Value/Last
twelve months
(EV/LTM)
revenue
multiple
‡
a,b,c,d 1.4x–7.7x 5.1x 10% If EV/LTM multiples
changed by
+/-10%, the fair value
would change by
US$29,726,888 and
(US$30,223,319).
**
Enterprise
Value/Next
twelve months
months (EV/
NTM) revenue
multiple
¶
a,b,c,d 2.1x–4.5x 3.4x 10% If the EV/NTM multiples
changed by +/-10%,
the fair value would
change by U$1,067,698
and (US$1,067,709).
**
Illiquidity
discount
(10%) (10%) If the illiquidity discount
is changed by +/(10%),
the fair value would
change by $1,786,764
and ($1,078,357).
Transaction
implied
premiums
and discounts
g (18.7%)
to
117.6%
22.9% 10% If a +/- 10% adjustment
is applied to the
calculated premiums
and discounts the fair
value would change by
USS$5,091,514 and
(US$4,392,862).
Comparable
company
performance
281,106
Selection of
comparable
companies
§
a,b,c,f (40%)–
20%
(10%) 10% If input comparable
company performance
changed in absolute
terms by +/-10%, the
fair value would change
by US$19,987,767 and
(US$20,249,838)
Price of
expected
transaction
2,029 Execution risk
discount
h
n/a
n/a
10% If the execution risk
changed by +/-
10%, the fair value
would change by +/-
US$202,908.
Recent
transaction
price
125,711 n/a
**^
a,b n/a n/a n/a n/a
* 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 84 and 85.
†
Weighted average is calculated by reference to the fair value of holdings as at the respective year-end. This therefore gives a clearer indication
of the typical multiple or adjustment being applied across the portfolio.
#
See explanation for other unobservable inputs on page 106 (sections ‘a’ to ‘h’ as relevant).
‡
Enterprise value (EV) divided by the last twelve months (LTM) revenue.
¶
Enterprise value (EV) divided by the next twelve months (NTM) forecast revenue.
§
See explanation for the selection of comparable companies on page 106 section ‘c’. The percentage movements reflect the movement in overall
company value for the basket of comparable companies relevant to each holding since the most recent transaction or since the last assessment.
^
Whilst a recent transaction price may be the most appropriate basis for a valuation, it will be corroborated by other techniques which factor in
the unobservable inputs noted in the above table. However, the transaction price itself is observable.
** Flexing the revenue figures by the same sensitivity would result in the same change in both directions.
Financial report
Annual Report and Financial Statements 2024
106
16 Risk Management (continued)
Significant unobservable inputs (continued)
a. 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.
b. Probability estimation of liquidation events
The probability of a liquidation event such as a company sale, or alternatively the probability of the shares being treated as
common stock, such as in the event of an initial public offering (‘IPO’), is a key variable input in the Transaction-based and
Multiples-based valuation techniques. The probability of a common stock equivalent (‘CSE’) outcome versus a company sale
is typically estimated from the outset to be 50:50 as no one outcome is more likely than the other. If the company has indicated
an intention to IPO, the probability is increased accordingly to 75% 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. The Company typically invests in higher ranking preference shares which carry more
protection, and this can therefore influence the end valuation. Option pricing models are used to corroborate the valuations
where there has been more notable company underperformance to ensure that the economic reality of the shares held by
the Schiehallion Fund remain appropriate.
c. 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 or share price movements derived will vary depending on the companies selected
and the industries they operate in.
d. 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 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.
e. Application of illiquidity discount
The application of an illiquidity 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 (see (g) below) is not appropriate
is typically 10%, reflecting that the majority of the investments held are substantial companies with some secondary market
activity.
f. 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, with either one or two key indices or benchmarks being used for
comparison where applicable.
g. Transaction implied premium and discount
Where there is an implied company valuation available as a result of an external arm’s length transaction, the ongoing valuation
will be calibrated to this by deriving a company valuation with reference to the average multiple from a set of comparable
companies and comparing this to a transaction implied valuation, and could result in an implied premium or discount compared
to comparable companies at the point of transaction. This discount or premium will be considered in future valuations, and may
be reduced due to factors such as period of time since the transaction and company performance. Where a calibrated approach
is not appropriate, a discount for illiquidity will be applied as noted in (e) above.
h. Execution risk
An execution risk discount is applied to all investments where an arm’s-length transaction is due to take place, however, hasn’t
closed prior to the reporting period end. The discount typically applied is 10%, acknowledging that the finer details of the
round may well still be negotiated which could impact the expected issue price. In valuing in line with an expected transaction
the arm’s-length nature of the deal has been assessed and legal documentation received.
107
The Schiehallion Fund Limited
16 Risk Management (continued)
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 2024, the Company, held US$167,522,000 of US Treasury Bills (2023 – US$136,797,000) which are fully realisable.
The Board provides guidance to the Investment Manager as to the maximum exposure to any one holding and to the maximum
aggregate exposure to substantial holdings.
The Company has the power to take out borrowings, which give it access to additional funding when required. There are no
borrowings as at 31 January 2024 (2022 – US$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 2024, all cash deposits were
held with the custodian bank which has a credit rating of F1+ (2023 – F1+).
Credit risk exposure
The exposure to credit risk at 31 January was:
2024
US$’000
2023
US$’000
US Treasury Bills 167,522 136,797
Cash and short-term deposits
11,306 45,799
Debtors and prepayments 1,743 884
180,571 183,480
The maximum exposure in cash and cash equivalents during the year to 31 January 2024 was US$196,047,000 (2023 –
US$319,868,000 and the minimum was US$158,930,000 (2022 – US$181,612,000). 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 12. 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 33 and 34. 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 65 and details of the related risks and how
they are managed are set out on pages 39 to 44 and pages 64 and 65, 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 11.
17 Subsequent events
As at the date of this report there are no events which require adjustment of, or disclosure in, the Financial Statements or notes
thereto.
Shareholder
information
109
The Schiehallion Fund Limited
Notice of Annual
General Meeting
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 3pm on 8 May 2024.
We would encourage shareholders to monitor the
Company’s website at schiehallionfund.com. Should
shareholders have questions for the Board or the
Manager 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 Alter Domus
(Guernsey) Limited on +44 (0) 1481 742 250.
Alter Domus (Guernsey) Limited may record your call.
Primrose Street
Appold Street
Pindar Street
The Annual General Meeting of the Company
will be held at the offices of Herbert Smith Freehills,
Exchange House, Primrose Street, London
EC2A 2EG on Friday, 10 May 2024 at 3pm.
Herbert Smith Freehills, London
Shareholder information
Annual Report and Financial Statements 2024
110
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 on previous page.
Notice is hereby given that the fifth Annual General
Meeting of The Schiehallion Fund Limited will
be held at the offices of Herbert Smith Freehills,
Exchange House, Primrose Street, London,
EC2A 2EG, on Friday, 10 May 2024 at 3pm
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 2024 with the Reports of
the Directors and of the Independent Auditor
thereon.
2. To approve the Directors’ Annual Report on
Remuneration for the year to 31 January 2024.
3. To re-elect Dr Linda Yueh as a Director.
4. To re-elect Mr John Mackie as a Director.
5. To re-elect Ms Trudi Clark as a Director.
6. To re-elect Dr David Chiswell as a Director.
7. To re-elect Mr Richard Holmes as a Director.
8. 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.
9. To authorise the Directors to determine the
remuneration of the Independent Auditor of
the Company.
10. Subject to the passing of Resolution 13 pursuant
to article 116(1) of the Company’s Articles of
Incorporation, there shall be paid
to the Directors (other than alternate directors)
such fees for their services in the office of
director as the Directors may determine, not
exceeding in the aggregate an annual sum
of £430,000 or such larger amount as the
Company may by ordinary resolution decide,
divided between the Directors as they may
determine. The fees shall be deemed to accrue
from day to day and shall be distinct from and
additional to any remuneration or other benefits
which may be paid or provided to any Director
pursuant to any other provision of the articles
of incorporation of Company.
To consider and, if thought fit, to pass Resolutions
11,12 and 13 as Special Resolutions.
11 To grant the Directors of the Company a general
authority to:
a. allot, without regard to the pre-emption rights
contained in the Articles of Incorporation
of the Company, up to 102,882,390
ordinary shares as defined in the Articles of
Incorporation) or C Shares (as defined in the
Articles of Incorporation); or
b. sell from treasury, without regard to the
pre-emption rights contained in the Articles
of Incorporation of the Company up to
102,882,390 ordinary Shares or C Shares
held as treasury shares of the Company,
such authorities to expire at the end of the
period concluding immediate prior to the
Annual General Meeting of the Company to be
held in 2029 (or, if earlier, five years from the
date of passing of this resolution.
111
The Schiehallion Fund Limited
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 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, 154,220,703 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:
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. an amount equal to the higher of the price
of the last independent trade of an ordinary
share and the highest current independent
bid for an ordinary share on the trading
venue where the purchase is carried out; and
iii. unless previously varied, revoked or
renewed by the Company in a general
meeting, the authority hereby conferred
shall expire at the conclusion of the Annual
General Meeting of the Company to be held
in respect of the year ending 31 January
2025, 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.
13 That the Articles of Incorporation produced to
the meeting and signed by the Chairperson for
the meeting for the purposes of identification
be approved and adopted as the Articles of
Incorporation of the Company in substitution
for, and to the exclusion of, the existing Articles
of Incorporation with effect from the conclusion
of the meeting.
By order of the Board
Alter Domus (Guernsey) Limited
Secretary
8 April 2024
Shareholder information
Annual Report and Financial Statements 2024
112
In connection with your votes on the resolutions
to be considered at the upcoming AGM of The
Schiehallion Fund Limited (‘Schiehallion’), you are
being requested to certify as to your status in the
three respects described below. It is important that
you make the correct certifications in order to avoid
your votes being capped or scaled down when that
is not necessary.
These certifications will also appear in the updated
CREST and on the hard copy proxy form as
additional resolutions.
Each certification is described below. The
certifications are required in accordance with
Articles 82 and 82A of Schiehallion’s articles of
incorporation, which are available to view on the
company’s website at schiehallionfund.com.
Please return confirmation of your status in respect
of each certification by 3pm (UK time) on 8 May
2024.
01. BHCA Certification
You are asked to certify whether, at the time of
the AGM, you are subject to restrictions under
the US Bank Holding Company Act of 1956
(‘BHCA’) in respect of certain of your equity
investments due to your relationship with a bank
holding company (as defined by the BHCA).
If you certify that you are subject to restrictions
under the BHCA, your votes will be disregarded
in respect of each resolution to appoint or
remove a director and may be capped in respect
of any other resolution.
02. US Shareholder Certification
You are asked to certify that, at the time of
voting: (a) you are not a US Person or US
Resident (each as defined in Schiehallion’s
articles – see below); and (b) to the extent that
you hold shares for the account or benefit of
another person, such other person is not a US
Person or US Resident.
In Schiehallion’s articles:
• a ‘US Person’ means a ‘U.S. person’ as defined
in Regulation S under the US Securities Act of
1933; and
• a ‘US Resident’ means a resident of the United
States within the meaning of Rule 405 under
the US Securities Act of 1933 or Rule 3b–4(c)
under the US Exchange Act of 1934.
If you do not certify that you are not a US
Person or US Resident (or holding shares for the
account of such a person), it will be assumed
that you are such a person and your votes may
be scaled down in respect of each resolution to
appoint or remove a director.
03. Canadian Pension Plan Certification
You are asked to certify whether, at the time of
the AGM, you are a pension plan governed by
the laws of Canada (or a jurisdiction thereof)
that is subject to section 11 of Schedule III to the
Pension Benefits Standards Regulations, 1985
(Canada) or a substantially similar restriction
contained in the legislation governing such
pension plan (a ‘Canadian Pension Plan’).
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.
Notes
01. As a member you are entitled to appoint a proxy
or proxies to exercise all or any of your rights
to attend, speak and vote at the AGM. A proxy
need not be a member of the Company but
must attend the AGM to represent you. You may
appoint more than one proxy provided each
proxy is appointed to exercise rights attached to
different shares. You can only appoint a proxy
using the procedure set out in these notes and
the notes to the proxy form. You may not use
any electronic address provided either in this
notice or any related documents (including
the Financial Statements and proxy form) to
communicate with the Company for any purpose
other than those expressly stated.
02. To be valid any proxy form or other instrument
appointing a proxy, together with any power
of attorney or other authority under which it
is signed or a certified copy thereof, must be
received by post or (during normal business
hours only) by hand at the Registrars of the
Company at Computershare Investor Services
(Guernsey) Limited, First floor, Tudor House,
Le Bordage, St Peter Port, Guernsey, Channel
Islands, GY1 1DB or eproxyappointment.com
no later than two days (excluding non-working
days) before the time of the meeting or any
adjourned meeting.
113
The Schiehallion Fund Limited
03. CREST members who wish to appoint a proxy
or proxies through the CREST electronic proxy
appointment service may do so by using the
procedures described in the CREST Manual
and/or by logging on to the website
euroclear.com/CREST. CREST personal
members or other CREST sponsored members,
and those CREST members who have appointed
a voting service provider(s), should refer to their
CREST sponsor or voting service provider(s),
who will be able to take the appropriate action
on their behalf.
04. In order for a proxy appointment or instruction
made using the CREST service to be valid, the
appropriate CREST message (a ‘CREST Proxy
Instruction’) must be properly authenticated
in accordance with Euroclear UK & Ireland
Limited’s specifications, and must contain the
information required for such instruction, as
described in the CREST Manual. The message,
regardless of whether it constitutes the
appointment of a proxy or is an amendment to
the instruction given to a previously appointed
proxy must, in order to be valid, be transmitted
so as to be received by the Company’s registrar
(ID 3RA50) no later than two days (excluding
non-working days) before the time of the
meeting or any adjournment. For this purpose,
the time of receipt will be taken to be the time
(as determined by the timestamp applied to
the message by the CREST Application Host)
from which the Company’s registrar is able to
retrieve the message by enquiry to CREST in
the manner prescribed by CREST. After this time
any change of instructions to proxies appointed
through CREST should be communicated to the
appointee through other means.
05. 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.
06. 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.
07. 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.
08. Pursuant to Regulation 41 of The Uncertificated
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.
09. 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.
Shareholder information
Annual Report and Financial Statements 2024
114
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 1 April 2024 (being the last practicable
day prior to the publication of this notice) the
Company’s issued share capital consisted of
1,028,823,907 ordinary shares, carrying one
vote each. Therefore, the total voting rights
in the Company as at 1 April 2024 were
1,028,823,907 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.
Appendix
Articles of Incorporation
The Board is proposing to amend the existing
Articles to (i) clarify the Company’s general authority
to acquire its own shares pursuant to section 312
of the Companies (Guernsey) Law, 2008 and (ii)
increase the cap on the aggregate fees paid to
Directors from £360,000 per annum to £430,000
per annum, which provides flexibility to allow for an
increase in the number of Directors should the Board
believe it to be appropriate as part of its long term
succession planning.
115
The Schiehallion Fund Limited
Sources of further information on the
company
The price of shares is quoted daily in the Financial
Times and can also be found on the Company’s
page of the Investment Manager’s website at
schiehallionfund.com, Trustnet at trustnet.co.uk
and on other financial websites. Monthly factsheets
are also available on the Baillie Gifford website.
These are available from Baillie Gifford on request.
The Schiehallion Fund Identifiers
ISIN GG00BJ0CDD21
Sedol BJ0CDD2
Ticker ordinary shares MNTN
Legal Entity Identifier 213800NQOLJA1JCWXQ56
The ordinary shares and the Company are listed
on the London Stock Exchange and their prices
are shown in the Financial Times under ‘Investment
Companies’.
Key dates
The Annual Report and Financial Statements are
normally issued in March and the Annual General
Meeting will normally be held in May.
Share register enquiries
Computershare Investor Services (Jersey) Limited
maintains the share register on behalf of the
Company. In the event of queries regarding shares
registered in your own name, please contact the
Registrars on +44 (0) 370 707 4040 or at
info@computershare.co.je.
This helpline also offers an automated self-service
functionality (available 24 hours a day, 7 days a
week) which allows you to:
• hear the latest share price;
• confirm your current share holding balance; and
• order Change of Address and Stock Transfer
forms.
You can also check your holding on the Registrars’
website at investorcentre.co.uk. They also offer a
free, secure share management website service
which allows you to:
• view your share portfolio and see the latest market
price of your shares;
• 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).
Further shareholder
information
Shareholder information
Annual Report and Financial Statements 2024
116
Electronic proxy voting
If you hold stock in your own name you can choose
to vote by returning proxies electronically at
eproxyappointment.com.
If you have any questions about this service please
contact Computershare on +44 (0) 370 707 4040
or at info@computershare.co.je.
CREST proxy voting
If you are a user of the CREST system (including
a CREST Personal Member), you may appoint one
or more proxies or give an instruction to a proxy by
having an appropriate CREST message transmitted.
For further information please refer to the CREST
Manual.
Data protection
The Company is committed to ensuring the
confidentiality and security of any personal data
provided to it. Further details on how personal data
is held and processed on behalf of the Company
can be found in the privacy policy available on the
Company’s website schiehallionfund.com.
Automatic exchange of information
In order to fulfil its legal obligations under the
Guernsey Common Reporting Standard Legislation
relating to the automatic exchange of information,
the Company is required to collect and report certain
information about certain shareholders.
The legislation will require investment companies
to provide personal information to the Guernsey
authorities on certain investors who purchase
shares in investment funds. As an affected company,
The Schiehallion Fund Limited will have to provide
information annually to the local authority on
the tax residencies of non-UK based certificated
shareholders and corporate entities.
Foreign account tax compliance act
Pursuant to the reciprocal information sharing
inter governmental agreement entered into by
the States of Guernsey and the US Treasury, and
for the purposes of the US Foreign Account Tax
Compliance Act (‘FATCA’) of the Company registered
with the Internal Revenue Service (‘IRS’) as a Foreign
Financial Institution (‘FFI’) and received a Global
Intermediary Identification Number (R2NXXB.9999.
SL.831). The Company can be located on the
IRS FFI list.
117
The Schiehallion Fund Limited
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 page 122) 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 2024 are shown below:
Gross
method
Commitment
method
Maximum limit 1.20:1 1.10:1
Actual 0.99:1 1.00:1
Shareholder information
Annual Report and Financial Statements 2024
118
Third party data
provider disclaimer
No third party data provider (‘Provider’) makes any
warranty, express or implied, as to the accuracy,
completeness or timeliness of the data contained
herewith nor as to the results to be obtained by
recipients of the data.
No Provider shall in any way be liable to any
recipient of the data for any inaccuracies, errors
or omissions in the index data included in this
document, regardless of cause, or for any damages
(whether direct or indirect) resulting therefrom. No
Provider has any obligation to update, modify or
amend the data or to otherwise notify a recipient
thereof in the event that any matter stated herein
changes or subsequently becomes inaccurate.
Without limiting the foregoing, no Provider shall have
any liability whatsoever to you, whether in contract
(including under an indemnity), in tort (including
negligence), under a warranty, under statute or
otherwise, in respect of any loss or damage suffered
by you as a result of or in connection with any
opinions, recommendations, forecasts, judgements,
or any other conclusions, or any course of action
determined, by you or any third party, whether or
not based on the content, information or materials
contained herein.
FTSE Index data
Source: London Stock Exchange Group plc and its
group undertakings (collectively, the ‘LSE Group’).
©LSE Group 2024. FTSE Russell is a trading name
of certain of the LSE Group companies. ‘FTSE®’
‘Russell®’, ‘FTSE Russell®, are trade marks of the
relevant LSE Group companies and are used by
any other LSE Group company under license.
All rights in the FTSE Russell indices or data
vest in the relevant LSE Group company which
owns the index or the data. Neither LSE Group
nor its licensors accept any liability for any errors
or omissions in the indices or data and no party
may rely on any indices or data contained in this
communication. No further distribution of data
from the LSE Group is permitted without the relevant
LSE Group company’s express written consent.
The LSE Group does not promote, sponsor or
endorse the content of this communication.
119
The Schiehallion Fund Limited
The EU Sustainable Finance Disclosure Regulation
(‘SFDR’) does not have a direct impact in the UK
due to Brexit, however, it applies to third-country
products marketed in the EU. As Schiehallion is
marketed in the EU by the AIFM, Baillie Gifford
& Co Limited, via the National Private Placement
Regime (‘NPPR’) the following disclosures have been
provided to comply with the high-level requirements
of SFDR.
The AIFM has adopted Baillie Gifford & Co’s
Governance and Sustainable Principles and
Guidelines as its policy on integration of
sustainability risks in investment decisions.
More detail on the Investment Manager’s approach
to sustainability can be found in the Governance and
Sustainability Principles and Guidelines document,
available publicly on the Baillie Gifford website
bailliegifford.com.
Sustainable Finance Disclosure
Regulation (‘SFDR’)
Taxonomy regulation
The Taxonomy Regulation establishes an EU-wide
framework of criteria for environmentally sustainable
economic activities in respect of six environmental
objectives. It builds on the disclosure requirements
under the SFDR by introducing additional
disclosure obligations in respect of AIFs that invest
in an economic activity that contributes to an
environmental objective.
The Company does not commit to make sustainable
investments as defined under SFDR. As such, the
underlying investments do not take into account the
EU criteria for environmentally sustainable economic
activities.
Shareholder information
Annual Report and Financial Statements 2024
120
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 net 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 stock markets 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 NAV per share from the share price 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* 2024 2023
Closing NAV per share (a) 118.37¢ 119.42¢
Closing share price (b) 71.50¢ 92.00¢
(Discount)/premium ((b – a) ÷ (a) expressed as a percentage) (39.6%) (23.0%)
*
The C shares converted on 8 September 2023 and therefore there are no C shares in issue at 31 January 2024.
Total Return
The total return is the return to shareholders after reinvesting the net dividend on the date that the share
price goes ex-dividend. The Company does not pay a dividend, therefore, the one year total returns for the
share price and NAV per share at book and fair value are the same as the percentage movements in the
share price and NAV per share at book and fair value as detailed on page 2.
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.
121
The Schiehallion Fund Limited
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.
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.
Ordinary shares*
2024
US$’000
2023
US$’000
Investment management fee 8,211 5,166
Other administrative expenses 1,263 637
Total expenses 9,474 5,803
Average net asset value 1,108,288 668,671
Ongoing Charges ((a) ÷ (b) expressed as a percentage) 0.85% 0.87%
*
The C shares converted on 8 September 2023 and therefore there are no C shares in issue at 31 January 2024
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 in company valuation/share price (APM)
Calculated by taking an average of all valuation movements (as a percentage) by portfolio company and
by line of portfolio company share class.
Shareholder information
Annual Report and Financial Statements 2024
122
Company
information
Directors
Chairperson: Dr Linda Yueh CBE
John Mackie CBE
Dr David Chiswell OBE
Trudi Clark
Richard Holmes
Registrar
Computershare Investor Services
(Jersey) Limited
First Floor, Tudor House
Le Bordage
St Peter Port
Guernsey, Channel Islands GY1 1DB
T: +44 (0)370 707 4040
Investment Manager and
Alternative Investment
Fund Managers
Baillie Gifford & Co Limited
Calton Square
1 Greenside Row
Edinburgh EH1 3AN
T: +44 (0)131 275 2000
bailliegifford.com
Depositary
The Bank of New York Mellon
(International) Limited
160 Queen Victoria Street
London EC4V 4LA
Company Broker
Winterflood Securities Limited
Riverbank House
2 Swan Lane
London EC4R 3GA
Independent Auditor
KPMG Channel Islands Limited
Glategny Court
Glategny Esplanade
St Peter Port
Guernsey, Channel Islands GY1 1WR
Company details
schiehallionfund.com
Company Registration No. 65915
ISIN: GG00BJ0CDD21
Sedol: BJ0CDD2
Ticker: MNTN
Legal Entity Identifier
213800NQOLJA1JCWXQ56
Further information
Client Relations Team
Baillie Gifford & Co
Calton Square
1 Greenside Row
Edinburgh EH1 3AN
T: +44 (0)800 917 2112
trustenquiries@bailliegifford.com
Administrator, Secretary,
Designated Manager and
Registered office
Alter Domus (Guernsey) Limited
North Suite
First Floor, Regency Court
Glategny Esplanade
St Peter Port
Guernsey, Channel Islands GY1 1WW
T: +44 (0)1481 742250
123
The Schiehallion Fund Limited
Calton Square, 1 Greenside Row, Edinburgh EH1 3AN
Telephone +44 (0)131 275 2000
schiehallionfund.com
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