Schiehallion Fund Schiehallion - MNTN Schiehallion - MNTC - Annual Financial Report
06/04/2023 11:27
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RNS Number : 6567V Schiehallion Fund Limited (The) 06 April 2023
The Schiehallion Fund Limited
Legal Entity Identifier: 213800NQOLJA1JCWXQ56
Regulated Information Classification: Annual Financial and Audit Reports
Annual Report and Financial Statements
Further to the preliminary statement of audited annual results announced to
the Stock Exchange on 27 March 2023, The Schiehallion Fund Limited
("Schiehallion" or "the Company") announces that the Company's Annual Report
and Financial Statements for the year ended 31 January 2023, including the
Notice of Annual General Meeting, has today been posted to shareholders and
submitted electronically to the National Storage Mechanism where it will
shortly be available for inspection at
data.fca.org.uk/#/nsm/nationalstoragemechanism
(https://data.fca.org.uk/#/nsm/nationalstoragemechanism) .
It is also available on the Schiehallion page of the Baillie Gifford website
at: schiehallionfund.com (http://www.schiehallionfund.com/) (as is the
preliminary statement of audited annual results announced by the Company on 27
March 2023).
The Company's Annual General Meeting (AGM) is being convened at 12 noon on
Friday, 12 May, at the offices of at the offices of Alter Domus, North Suite,
1st Floor, Regency Court, Glategny Esplanade St Peter Port, Guernsey, Channel
Islands, GY1 1WW.
The Board encourages all shareholders to submit proxy voting forms, appointing
the chairperson of the AGM, as soon as possible and, in any event, by no later
than 12 noon on 10 May 2023.
We would encourage shareholders to monitor the Company's website at
schiehallionfund.com. Should shareholders have questions for the Board or the
Managers or any queries as to how to vote, they are welcome as always to
submit them by email to adgg-aafa-f@alterdomus.com or call Hannah Dunnell at
Alter Domus (Guernsey) Limited on +44 (0) 1481 742 255.
Alter Domus (Guernsey) Limited may record your call.
If you or, if appointed, your proxy wish to attend the Annual General Meeting
electronically you, or your proxy, will have the same right to attend, be
counted in the quorum, participate in the business of the Annual General
Meeting, speak and vote as if you, or your proxy, had attended the meeting in
person. Details of how to attend the Annual General Meeting electronically can
be obtained from Alter Domus (Guernsey) Limited on the contact details
provided above.
Responsibility Statement of the Schiehallion Directors in respect of the
Annual Report and Financial Statements
The Schiehallion Fund Limited Directors confirm that, to the best of their
knowledge:
¾ the Financial Statements set out in the Annual Report and 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
¾ the Strategic Report set out in the Annual Report and Financial
Statements 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.
The Directors 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.
Principal and Emerging Risks relating to the Company
As explained on pages 33 and 34 of the Annual Report and Financial Statements,
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 ongoing coronavirus (Covid-19) pandemic to be a factor
which continues to exacerbate existing risks, and its impact is considered
within the relevant risks.
How the risk is managed Current assessment of risk
Impact
Investment and Strategic Risk
Liquidity of Investments The Company's investments are predominately in private investee companies or By diversification of the portfolio, in accordance with the Company's Increasing:
companies which have recently completed an IPO. Such investments may not be investment limits and risk diversification policies.
liquid or may have restrictions on sale or transfer of shares. This may limit The Company has not seen any significant impact on underlying liquidity of
the Company's ability to realise investments at short notice or at all. investments during the Covid-19 pandemic and has continued to see IPO activity
during the current year.
Market, Economic, Political and Environmental Risks From time to time a large proportion of the total value of the Company's The Board oversees this risk by considering at each meeting metrics which have Increasing:
portfolio could be concentrated in a limited number of investee companies, contributed to performance as well as discussion with the Investment Manager
which could be adversely affected by an unexpected change in their markets, by on specific conditions which the underlying investee companies face. This risk This risk is seen as increasing due to increased volatility as a result of the
governmental intervention or by a reputational issue. This could have a is also managed by the Company's investment diversification policy. Russian invasion of Ukraine,
material impact on the overall value of the Company's portfolio and
consequential adverse effects on the Company's share price. increasing energy prices and
inflation rates, as well as the
global reach of the increasing
political tension between the
US and China. The Covid-19
pandemic continues to have a
lingering impact on the global
economic environment.
How the risk is managed Current assessment of risk
Impact
Investment and Strategic Risk (continued)
Valuation Risk The Company invests in late-stage private businesses which are valued in The Investment Manager has a robust valuation methodology, which it applies Increasing:
accordance with International Private Equity and Venture Capital Valuation consistently. The Board meet with the Investment Manager at special meetings
('IPEV') Guidelines using appropriate valuation methods. Such methods include solely to consider the valuations for the Interim and Annual Financial This risk is seen
an element of judgement which may lead to a material misstatement of the Statements. At these meetings there is an opportunity for the Board to
valuation and consequently in the Company's net asset value. challenge the valuations and to request further information. as increasing due to the ongoing
invasion of Ukraine by Russia,
increasing energy prices and
inflation rates and the impact
events these are having on
global markets. Reduced
valuations of public listed
companies have had an impact
by depressing the inputs used
to value the Company's private
listed investee companies.
Investment Strategy Risk Pursuing an investment strategy to fulfil the Company's objective which the The Board regularly reviews and monitors the Company's investment policy and Stable:
market perceives to be unattractive or inappropriate, or ineffective strategy, the investment portfolio and its performance, the level of
implementation of the Company's investment strategy, may lead to lower returns discount/premium to net asset value at which the shares trade and movements in Controls are working effectively with no change during the current year.
for shareholders and a consequential impact on share price. the share register. A strategy meeting is also held annually. In addition, the
Investment Manager keeps in close contact with key shareholders and provides
regular feedback to the Board.
Discount Risk The discount/premium at which the Company's shares trade relative to its net The Board monitors the level of discount/premium at each Board meeting. The Increasing:
asset value can change. Such an imbalance can diminish the attractiveness of Company has authorities in place to buy back or issue shares, when deemed to
the Company's shares to existing investors and lead to a lack of liquidity in be in the best interest of the Company and its shareholders. The risk is increasing as the Company's shares moved from a premium to a
the Company's share trading. discount during the year.
Environmental, Social and Governance (ESG) Failure by the Investment Manager to identify potential future problems on ESG The Investment Manager has an application process integrated into the Stable:
matters in an investee company could lead to the Company's shares being less investment process, as well as upfront and ongoing due diligence which the
attractive to investors as well as potential valuation issues in the Investment Manager undertakes on each investee company. This includes This risk is mitigated by the Investment Manager's strong ESG stewardship and
underlying investee company.
engagement policies.
the risk inherent in climate change.
External Risks
Political and Associated Political changes in areas in which the Company invests or may invest may have Political developments and other social trends are closely monitored by the Increasing:
practical consequences for the Company and impact financial performance. Board and are regularly discussed at Board meetings.
Economic Risk This risk is increasing as Governments and consumers around the world
continue to assess the impact of
the Russian invasion of Ukraine,
including sanctions applied in
response, increasing energy
prices and inflation rates and
intensifying of US-China tensions.
The ongoing assessment of the
longer term impacts of Covid-19
on international policy remains a
factor for consideration.
How the risk is managed Current assessment of risk
Impact
External Risks (continued)
Legal and Regulatory Risk Failure to comply with tax or regulatory rules could lead to suspension of the The Board receives regular updates from the Investment Manager and Stable:
Company's stock exchange listing, financial penalties or a qualified audit Administrator on Compliance and the Investment Manager's monitoring
report. Changes in tax legislation may lead to the Company being subject to programmes. External legal advice is sought on any areas of concern. All control procedures working effectively. There have been no material
tax on capital gains. regulatory changes that have occurred during the year.
Operational Risks
Performance and Reliance on Third Party Service Providers In common with other investment trusts the Company has no direct employees and The Audit Committee receives reports from the Investment Manager's Business Decreasing:
relies entirely for its operations on third party service providers. Failure Risk Department on their monitoring programme of internal controls. The Audit
of the Investment Manager's systems or those of another service provider could Committee also receives ISAE 3402 or equivalent reports on the Investment All control procedures working effectively. Portfolio management and all
lead to an inability to accurately report or lead to a misappropriation of Manager and other service providers. These reports are reviewed by Baillie regulatory and administrative
assets. Gifford's Business Risk Department and a summary of the key points is reported
to the Audit Committee and any concerns are investigated. tasks have continued uninterrupted. This risk is decreasing due to the reduced
impact of the Covid-19
pandemic.
Cyber Security Threats Errors, fraud or control failures by the Company's key service providers or The Audit Committee and the Board receive confirmation that all service Increasing:
loss of data through increasing cyber threats or business continuity could providers have appropriate Cyber/IT policies to ensure that controls are in
damage the Company's reputation or investors interests or result in losses. place including business continuity and disaster recovery arrangements. Increasing risk
due to recent indications that
developments relating to the
Russian invasion of Ukraine
could lead to cyber attacks.
As a result of operational changes
made during the height of the
Covid-19 pandemic, service
providers are using a hybrid
approach of remote and office
working, thereby creating a
higher potential of a Cyber
Security Threat, highlighted by
a growing number of attacks
on high profile companies.
Key Professionals Loss of Key Professionals, particularly in relation to the Investment Manager The Board reviews the Investment Manager's performance annually as well as the Stable:
could impact the Company's ability to implement its investment strategy. resources of the Investment Manager for attracting and retaining talent.
All procedures are satisfactory.
Emerging Risks
As explained on pages 7 to 9 of the Annual Report and Financial Statements,
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 global reach of the investment portfolio and its exposure to external
and emerging threats such as the Russian invasion of Ukraine, US/China
tensions, cyber risk and the decreasing but lasting risk of coronavirus. An
escalation in tensions may lead to sanctions being imposed on China with the
potential of adversely affecting the Company's Chinese investments. Rising
inflation, increasing energy costs and increasing interest rates are likely to
add pressures to the companies in the investment portfolio. These 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; and
- As investors place increased emphasis on Environmental, Social and
Governance issues ('ESG'), any failure by the Investment Manager to identify
potential future problems on ESG matters in an investee company could lead to
the Company's shares being less attractive to investors as well as potential
valuation issues in the underlying investee company. This is mitigated by the
Investment Manager's strong ESG policies, which have been adopted by the
Company, and which are fully integrated into the investment process as well as
the extensive upfront and ongoing due diligence which the Investment Manager
undertakes on each investee company. These include the risks inherent in
climate change
Baillie Gifford & Co Limited
06 April 2023
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