Proxy Advisor Recommendation Clarification

Schiehallion Fund Limited (The)

01 December 2025

 

The Schiehallion Fund Limited

1 December 2025

Legal Entity Identifier: 213800NQOLJA1JCWXQ56

Clarification Regarding Proxy Advisor Recommendation Ahead of the Forthcoming EGM

The Schiehallion Fund Limited (the "Company") notes the recent voting recommendation issued by Institutional Shareholder Services ("ISS") in relation to the Company's Extraordinary General Meeting (the "EGM") to be held on 8 December 2025.

ISS has recommended voting against Resolutions 1 and 2 to be proposed at the EGM on the basis that, in its view, insufficient information was publicly disclosed to enable it to undertake a proper assessment as to whether the proposed governance arrangements are aligned with corporate governance best practices.

The Board would like to first thank ISS for the opportunity to discuss its concerns in greater detail, especially given the short deadlines involved in the EGM. Having considered the perspective of ISS, the Board offers the following clarifications to aid ISS and other shareholders in reaching their decisions.

Information availability

The Board wishes to clarify that the relevant information has been publicly available in various documents; however, consolidating these disclosures into a single source (being this announcement) and offering context for the forthcoming meeting is likely to be helpful to support shareholders' decision-making. The Company has therefore collated below the relevant disclosures previously published across several communications.

The Company's Prospectus dated 18 March 2019 (available on the Company's website here), provides detailed disclosure on the Company's assessment of the benefits to shareholders from maintaining Foreign Private Issuer ("FPI") status. As stated there and reiterated here, failure to maintain FPI status would have adverse consequences for the Company, for example it could be required to register as a US reporting company with the SEC under the US Exchange Act and/or as an investment company under the US Investment Company Act, which would subject it to potentially onerous and costly reporting requirements and substantive regulation with which it is not currently structured to comply (as described in further detail under "Consequences of losing FPI status" below).

The Company's circular dated 11 November 2025 (available on the Company's website here) (the "Circular"), clarifies that its current method of ensuring FPI status, in place since IPO, is not compliant with the requirements of the closed-ended investment funds category ("CEIF Category") of the Main Market. As such, and given both the existing benefits of maintaining FPI status and the envisaged benefits of listing on the CEIF Category ("Admission"), the Board has determined that the proposed B Share mechanism presents the optimum solution for the benefit of all shareholders. As described in the Circular, based on the Company's historical US Shareholding Percentage, the Board believes that a Trigger Event is unlikely and, as such, expects that the Company's voting structure will remain indistinguishable from that of a typical closed-ended investment company with shares admitted to listing on the CEIF Category. However, the potential consequences of a Trigger Event are viewed as sufficiently severe to warrant mitigation.

The Company's RNS announcement of the publication of the Circular (referenced above) includes a summary of the Board's expectations of the benefits to shareholders from supporting the proposals in full. The Board expects the Company will benefit from a CEIF Category listing by broadening the appeal of the Ordinary Shares to a wider range of investors. Admission is expected to improve the Company's ability to market the Ordinary Shares to retail investors (where appropriate) and improve the liquidity in the Ordinary Shares as a result of having access to a potentially larger pool of capital.

Consequences of losing FPI status

 If the Company were no longer to meet the relevant test for FPI status, it would be required to treat itself as a US domestic issuer, thereby losing a number of accommodations provided by the US federal securities laws to FPIs. In particular, one of the conditions for FPI status, which the proposed B Share mechanism is intended to address, is that no more than 50% of an issuer's outstanding "voting securities" (which, for these purposes, means securities that carry the right to vote in relation to the appointment or removal of directors) are directly or indirectly owned by US residents.

The consequences of the loss of FPI status could include, but are not limited to, the following:

·    the Company may be required to register under the US Exchange Act of 1934 (the "Exchange Act"), incurring costly and invasive on-going reporting obligations thereunder (including compliance with the Sarbanes-Oxley Act of 2002);

·    offerings of the Company's shares outside the US are likely to be subject to certain distribution compliance requirements because the Company would not be eligible for more lenient "Category 1" treatment under Regulation S pursuant to the US Securities Act of 1933;

·    the Company may be subject to ongoing disclosure requirements under US proxy rules, including individual reports on security holdings and transactions for insiders, as well as quarterly interim reporting obligations;

·    exemption from particular Exchange Act tender offer rules may not be available to the Company; and

·    the Company may lose the ability to rely on certain exemptions from registration under the US Investment Company Act of 1940, as amended (the "Investment Company Act").

If the Company was unable to benefit from an exemption from registration under the Investment Company Act and sought to register as an investment company, it may be required to apply for special permission from the Securities and Exchange Commission ("SEC"). As such permission is given only under "special circumstances or arrangements", it is not certain that such permission would be granted. Even assuming the SEC was to grant such special permission, the Company would find itself subject to extremely onerous substantive regulation once registered under the Investment Company Act. In light of these factors, in practice it is not common for foreign funds to register with the SEC as investment companies.

Governance appropriateness

The Board notes that the introduction of a class of special voting share is not considered usual in the broader UK market; however, the Board would note that this is more common in the narrower set of investment trusts with significant US shareholder bases, and believes the intent and context of the proposed arrangement is an important consideration.

The principles of good governance around one-share-one-vote and the broader protection and furtherance of minority shareholders' interests are not at issue in the proposed arrangement. The Company's proposed arrangement is explicitly designed to avoid a regulatory risk, the triggering of which would likely not be in the interests of all shareholders. Alternative arrangements for mitigating this risk, for example classifying certain US shareholders as prohibited and subject to forced transfer, introduce additional corporate governance and operational concerns that were determined to not be in the interests of all shareholders.

The proposed class structure is designed to create only enough differential voting rights to mitigate the regulatory risk. The voting rights of the Class B Share are deliberately limited in scope; they only apply in respect of resolutions proposing the appointment, election, re-election or removal of any Director (excluding the re-election of non-independent directors) and the amount of the Class B's voting power in respect of any such resolution will only be the minimum required to dilute US holders to below 35%. As stated in the Circular, the economic and other rights of the Ordinary Shares will be unaffected.

The need to maintain FPI status is necessarily dynamic and requires a continuous and balanced risk assessment. For example, the Board's previous provisions to manage this risk as it relates to Canadian shareholders are being removed in the New Articles, because the Board believes the risk of a regulatory event of that type is not sufficiently probable to warrant the governance complexity. On the basis of the information currently available to the Board, it takes the view that the composition of the Company's current shareholder base is such that the loss of FPI status is a meaningful risk, and therefore a governance mitigation in the New Articles which is proportionate to that risk is prudent and in the interest of all shareholders.

The Board also believes it is important to note that should these resolutions not pass, then shareholders will not be able to avail themselves of the proposed benefits as outlined in the Circular.

Board Recommendation

The Board believes that these disclosures taken collectively address the points raised by ISS and provide shareholders with the necessary information to make an informed decision on the resolutions. The Board continues to recommend unanimously that shareholders vote in favour of all resolutions at the EGM, as set out in the Notice and Circular published on 11 November 2025.

Further Information

Shareholders who require additional clarification ahead of the EGM are encouraged to contact the Investment Manager at [e-mail] or to review the information available on the Company's website at schiehallionfund.com.

Capitalised terms used but not defined in this announcement have the same meaning as set out in the Circular.

For further information, please contact:

Baillie Gifford & Co Limited Alex Blake	[phone]
Winterflood Securities Limited Neil Morgan	[phone]

 

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