Schiehallion Fund Schiehallion - MNTN Schiehallion - MNTC - Schiehallion Fund Ltd Half Yearly Financial Report
05/09/2022 07:00
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RNS Number : 1760Y Schiehallion Fund Limited (The) 05 September 2022
RNS Announcement
The Schiehallion Fund Limited
Legal Entity Identifier: 213800NQOLJA1JCWXQ56
Regulated Information Classification: Half Yearly Financial Report
The following is the unaudited Interim Financial Report for the six months to
31 July 2022 which was approved by the Board on 2 September 2022.
Summary of Unaudited Results*
31 January 2022
31 July (audited) %
Ordinary shares 2022 change
Shareholders' funds US$652.42m US$791.66m
Net asset value per ordinary share 130.37¢ 158.20¢ (17.6)
Share price 125.00¢ 212.00¢ (41.0)
(Discount)/premium(†) (4.1%) 34.0%
Number of shares in issue 500,430,002 500,430,002
Market capitalisation US$625.54m US$1,060.91m
Six months Six months
to 31 July 2022 to 31 July 2021
Revenue earnings per share (0.57¢) (0.75¢)
31 January 2022
C shares 31 July (audited) %
2022 change
Shareholders' funds US$605.73m US$680.85m
Net asset value per C share 86.53¢ 97.26¢ (11.0)
Share price 73.00¢ 118.00¢ (38.1)
(Discount)/premium(†) (15.6%) 21.3%
Number of shares in issue 700,000,000 700,000,000
Market capitalisation US$511.00m US$826.00m
31 July 2022 Period from 26 April 2021(#)
to 31 July 2021
Revenue earnings per share (0.31¢) (0.04¢)
Notes
* For a definition of terms see Glossary of Terms and Alternative Performance
Measures at the end of this announcement.
† Alternative performance measure, see Glossary of
Terms and Alternative Performance Measures at the end of this announcement.
(#) 26 April 2021, the date the Company's C shares were admitted to trading on
the Specialist Fund Segment of the Main
Market of the London Stock Exchange.
All investment strategies have the potential of profit and loss.
Past performance is not a guide to future performance.
Summary of Unaudited Results*(Ctd)
Period's High and Low
Six months to 31 July 2022 Year to 31 January 2022
Ordinary shares High Low High Low
Net asset value per ordinary share 159.79¢ 126.31¢ 198.40¢ 146.57¢
Share price 214.00¢ 119.50¢ 296.00¢ 180.00¢
Premium/(discount) (†) 40.5% (8.8%) 64.9% 17.4%
Six months to 31 July 2022 Period from 26 April 2021(#)
to 31 July 2022
C shares High Low High Low
Net asset value per C share 97.29¢ 86.34¢ 101.21¢ 97.17¢
Share price 129.00¢ 66.00¢ 145.00¢ 117.50¢
Premium/(discount) (†) 36.1% (24.6%) 42.4% 17.9%
Performance Since Inception
31 July 27 March %
Ordinary shares 2022 2019(‡) change
Net asset value per ordinary share 130.37¢ 99.66¢ 30.8
Share price 125.00¢ 100.00¢ 25.0
31 July 26 April %
C shares 2022 2021(#) change
Net asset value per C share 86.53¢ 99.25¢ (12.8)
Share price 73.00¢ 124.00¢ (41.1)
Notes
* For a definition of terms see Glossary of Terms and Alternative Performance
Measures at the end of this announcement.
(†) Alternative performance measure, see Glossary of Terms and Alternative
Performance Measures at the end of this
announcement.
(‡) 27 March 2019, the date the Company's ordinary shares were admitted to
trading on the Specialist Fund Segment
of the Main Market of the London Stock Exchange.
(# )26 April 2021, the date the Company's C shares were admitted to trading
on the Specialist Fund Segment of the Main
Market of the London Stock Exchange.
All investment strategies have the potential of profit and loss.
Past performance is not a guide to future performance.
Investment Objective and Policy
Investment Objective
The Schiehallion Fund Limited seeks to generate capital growth for investors
through making long-term minority investments in later stage private
businesses that the Company considers to have transformational growth
potential and to have the potential to become publicly traded.
Principal and Emerging Risks and Uncertainties
The principal and emerging risks facing the Company are:
- Investment and Strategic Risks - Liquidity of investments; Market,
Economic, Political and Environmental Risks; Valuation Risk; Investment
Strategy Risk; Discount Risk; and Environmental, Social and Governance (ESG).
- External Risks - Political and Associated Economic Risk; Legal and
Regulatory Risk; and Covid-19.
- Operational Risks - Performance and Reliance on Third Party Service
Providers; Cyber Security Threats; and Key Professionals.
- Emerging Risks - Geopolitical tensions including the ongoing Russia
Ukraine conflict, Cyber risk, Environmental Social and Governance issues
(ESG), increasing energy prices and double-digit inflation.
An explanation of these risks and how they are managed is set out on pages 6
to 9 of the Company's Annual Report and Financial Statements for the year to
31 January 2022 which is available on the Company's website:
schiehallionfund.com.
Responsibility Statement
The Directors of The Schiehallion Fund Limited confirm that to the best of
their knowledge:
a) the Interim Financial Report has been prepared in accordance with IAS
34 Interim Financial Reporting and the Directors have elected to prepare
financial statements that comply with International Financial Reporting
Standards as issued by the International Accounting Standards Board;
b) the Interim Management Report includes a fair review of the information
required by:
i) DTR 4.2.7R of the Disclosure Guidance and Transparency Rules, being
an indication of important events that have occurred during the first six
months of the financial year and their impact on the condensed set of
financial statements, and a description of the principal risks and
uncertainties for the remaining six months of the financial year; and
ii) DTR 4.2.8R of the Disclosure Guidance and Transparency Rules, being
related party transactions that have taken place in the first six months of
the current financial year and that have materially affected the financial
position or the performance of the enterprise during that period.
By Order of the Board
Linda Yueh
Chairperson
2 September 2022
Interim Management Report
The six month period to the end of July has been one of great market price
volatility.
This has not impacted our investment approach. We are long-term growth
investors who seek to value opportunities based on our assessment of their
fundamental business prospects. Our strategy is to apply this consistently
through all market environments, in the belief that this is the best path to
long-term outperformance for Schiehallion shareholders. We have held to that
thus far and will continue to do so.
This price volatility has impacted our portfolio carrying values. The NAV
total return of the ordinary shares and the C shares during this period was
-17.6% and -11.0% respectively. This is in line with our carrying valuations
methodology, a reiteration of which is included in this interim report. Both
the Company's ordinary and C shares each moved from trading at a premium to
trading at a discount, as market sentiment turned against growth stocks.
Portfolio
Market price volatility has also had an impact on the opportunities we have
been seeing. Companies are reluctant to raise money if this involves doing so
at a lower valuation. As a result, many businesses with the option to defer
capital raising have done so. We have also seen a growth in the number of
convertible rounds taking place, many of them entirely with insiders. The
result was an adverse selection effect, with many of the best companies
selecting to postpone significant fundraises. This only started to abate
towards the end of the period.
We only made two new additions during the period: Kepler Computing and Merlin
Labs. These were both introductions through our relationship network. Both
companies also fit into the subset of the portfolio that contains
earlier-stage companies, and as such received smaller initial investments.
Whilst the vast majority of Schiehallion - by capital and by holdings - is
made up of late-stage, revenue- and often cashflow-generating, rapid growth
companies, we have always had some room for truly exceptional earlier stage
opportunities. Roughly 10% of the portfolio is now in these companies. We do
not anticipate significantly increasing our allocation to early-stage
companies from here.
Given the market backdrop, more team time has been given to working with
holdings. A subset of our portfolio holdings had been planning on raising
capital through the period. Others have had their operations impacted by the
Russian invasion of Ukraine, and the energy market turmoil caused by the
ensuing sanctions.
Here again our approach has been consistent. The management of our holdings
know that further capital support is not unconditional and must be underpinned
by continued thesis conviction and appropriate upside. Where these have not
been present, we have declined to participate in follow-on financings. In
other instances, we have taken the opportunity to add to holdings at
attractive prices. We have topped up our positions in Northvolt, Solugen,
Tempus Labs, Daily Hunt (which, as mentioned in last year's interim report,
can only be held in the ordinary share portion of the portfolio) and Affirm.
It is worth noting that our addition to Affirm has been done in public
markets. A key part of Schiehallion's differentiated access comes from our
ability to support companies even after they list. We reviewed Affirm
following a period of extreme share price weakness and took the opportunity to
add to our holding from within the C share portfolio.
Looking forwards
We have also added a new team member: a global investment analyst, based in
Shanghai. We continue to see differentiated deal-flow in China, with roughly
9% of the current invested capital being into Chinese companies. Our
admiration for the Chinese innovation economy is balanced with an awareness of
the geopolitical risks. As such, it has been key for us to design this role
from the outset as a globally-oriented position.
The period's volatility has reinforced our conviction that Schiehallion's
structure helps us behave in a differentiated way through the market cycle. We
have seen forced private market selling from crossover investors running
open-ended and/or highly-levered structures, and have felt the benefits of the
support of our public market colleagues in helping us make calm and long-term
decisions around Schiehallion's public market holdings.
At the end of the reporting period, the C share pool was approximately 78%
invested. As a reminder, conversion will take place once the C share pool
reaches 85% invested. We have managed Schiehallion without differentiating
between these share classes in anticipation of this moment.
The principal risks and uncertainties facing the Company are set out above.
Peter Singlehurst
Robert Natzler
Valuing Private Companies
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 committee at Baillie Gifford
who take advice from an independent third party (S&P Global). The
investment managers feed into the process, but the valuations committee owns
the process and the investment 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. 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. Recent market volatility has meant that recent pricing has moved much
more frequently than would have been the case with the quarterly valuations
cycle.
Beyond the regular cycle, the valuations committee 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);
or changes to the valuation of comparable public companies. The valuations
committee also monitors relevant market indices on a weekly basis and updates
valuations in a manner consistent with our external valuer's (S&P Global)
most recent valuation report where appropriate. When market volatility is
particularly pronounced the team does these checks daily. Any ad hoc change to
the fair valuation of any holding is implemented swiftly and reflected in the
next published NAV. There is no delay.
The Schiehallion Fund*
Instruments valued 72
Revaluations performed 252
Percentage of portfolio revalued 2+ times 71%
Percentage of portfolio revalued 5+ times 11%
* Data reflecting period from 31 January 2022 to 31 July 2022.
Year to date, most revaluations have been decreases. A handful of companies
have raised capital at an increased valuation. The average movement in both
valuation and share price for those which have decreased in value is shown
below.
Fund Average movement in company valuation Average movement in share price
Schiehallion* -24% -10%
Schiehallion* (excl. outliers) -32% -21%
* Data reflecting period from 31 January 2022 to 31 July 2022.
Share prices have decreased less than headline valuations because Baillie
Gifford typically holds preference stock, which provides downside protection.
The share price movement reflects a probability weighted average of both the
regular valuation, which would be realised in an IPO, and the downside
protected valuation, which would be normally be triggered in the event of a
corporate sale or liquidation.
Baillie Gifford Statement on Stewardship
Reclaiming Activism for Long-Term Investors
Baillie Gifford's over-arching ethos is that we are 'actual' investors. We
have a responsibility to behave as supportive and constructively engaged
long-term investors. We invest in companies at different stages in their
evolution, across vastly different industries and geographies and we celebrate
their uniqueness. Consequently, we are wary of prescriptive policies and
rules, believing that these often run counter to thoughtful and beneficial
corporate stewardship. Our approach favours a small number of simple
principles which help shape our interactions with companies.
Our Stewardship Principles
Prioritisation of long-term value creation
We encourage company management and their boards to be ambitious and focus
their investments on long-term value creation. We understand that it is easy
for businesses to be influenced by short-sighted demands for profit
maximisation but believe these often lead to sub-optimal long-term outcomes.
We regard it as our responsibility to steer businesses away from destructive
financial engineering towards activities that create genuine economic value
over the long run. We are happy that our value will often be in supporting
management when others do not.
A constructive and purposeful board
We believe that boards play a key role in supporting corporate success and
representing the interests of minority shareholders. There is no fixed
formula, but it is our expectation that boards have the resources, cognitive
diversity and information they need to fulfil these responsibilities. We
believe that a board works best when there is strong independent
representation able to assist, advise and constructively test the thinking of
management.
Long-term focused remuneration with stretching targets
We look for remuneration policies that are simple, transparent and reward
superior strategic and operational endeavour. We believe incentive schemes can
be important in driving behaviour, and we encourage policies which create
alignment with genuine long-term shareholders. We are accepting of significant
pay-outs to executives if these are commensurate with outstanding long-run
value creation, but plans should not reward mediocre outcomes. We think that
performance hurdles should be skewed towards long-term results and that
remuneration plans should be subject to shareholder approval.
Fair treatment of stakeholders
We believe it is in the long-term interests of companies to maintain strong
relationships with all stakeholders, treating employees, customers, suppliers,
governments and regulators in a fair and transparent manner. We do not believe
in one-size- fits-all governance and we recognise that different shareholder
structures are appropriate for different businesses. However, regardless of
structure, companies must always respect the rights of all equity owners.
Sustainable business practices
We look for companies to act as responsible corporate citizens, working within
the spirit and not just the letter of the laws and regulations that govern
them. We believe that corporate success will only be sustained if a business's
long-run impact on society and the environment is taken into account.
Management and boards should therefore understand and regularly review this
aspect of their activities, disclosing such information publicly alongside
plans for ongoing improvement.
List of Investments as at 31 July 2022 (unaudited)
2022 Ordinary Shares
Value 2022 2022 2022
US$'000 C Shares Total % of
Value Value US$'000 net assets*
Name Business Country US$'000
Scopely Inc Online gaming company United States 66,444 - 66,444 5.3
Space Exploration Technologies Designs, manufactures and launches United States 63,739 - 63,739 5.1
Corp advanced rockets and spacecraft
Affirm Holdings Inc - Listed Online platform which provides point of sale consumer finance United States 23,909 28,861 52,770 4.2
Solugen Inc Combines enzymes and metal catalysts United States - 47,881 47,881 3.8
to make chemicals
ByteDance Ltd Social media and news aggregation China 44,290 - 44,290 3.5
company
Brex Inc Corporate credit cards for startups United States 13,897 30,079 43,976 3.5
Daily Hunt (Ver Se Innovation Telephone voice, data, text messaging, India 41,248 - 41,248 3.2
Limited) and roaming services
Stripe Inc Online payment platform United States 40,520 - 40,520 3.2
Genki Forest Technology Group Non-alcoholic beverages China - 39,229 39,229 3.0
Holdings Limited
Faire Wholesale Inc Online wholesale marketplace United States - 36,847 36,847 3.0
Epic Games Inc Video game developer United States 34,507 - 34,507 2.8
Wise PLC - Listed Online platform to send and receive United Kingdom 25,871 8,599 34,470 2.8
money
Northvolt AB Lithium ion battery manufacturer Sweden 23,423 10,537 33,960 2.8
Tempus Labs Inc Oncological records aggregator and United States 28,793 4,892 33,685 2.7
diagnostic testing provider
Chime Financial Inc Digital current account provider United States 9,030 22,160 31,190 2.5
Grammarly Inc Online platform for checking grammar, United States - 29,075 29,075 2.3
spelling and improving written
communication
McMakler GmbH Real estate services Germany - 24,590 24,590 2.0
Rappi Inc Provider of an on-demand delivery Colombia
platform designed to connect
consumers with local stores - 21,752 21,752 1.7
Nuro Inc Developer of autonomous delivery United States 8,955 11,966 20,921 1.7
vehicles
Databricks Inc Data software solutions United States - 20,727 20,727 1.6
Workrise Technologies Inc Jobs marketplace for the energy sector United States 20,280 - 20,280 1.6
Tanium Inc Online security management United States 18,598 - 18,598 1.5
Flix SE European mobility provider Germany 8,612 9,286 17,898 1.4
List of Investments as at 31 July 2022 (unaudited)
2022 Ordinary Shares
Value 2022 2022 2022
Name Business Country US$'000 C Shares Total % of
Value Value US$'000 net assets*
US$'000
Warby Parker (JAND Inc) - Listed Online and physical corrective eyewear United States 15,935 - 15,935 1.3
retailer
Convoy Inc Marketplace for truckers and shippers United States 10,783 4,719 15,502 1.3
Pet Circle (Millell Pty Ltd) Pet food and accessories Australia - 15,401 15,401 1.3
Loft Holdings Ltd Online property platform Brazil - 15,386 15,386 1.2
Kepler Computing Inc Semiconductor company United States - 15,000 15,000 1.2
Merlin Labs Inc Autonomous flight technology United States - 15,000 15,000 1.2
Jiangxiaobai Holdings Ltd Producer of alcoholic beverages China 14,475 - 14,475 1.1
PsiQuantum Silicon photonic quantum computing United States - 14,121 14,121 1.1
Graphcore Ltd Computer chip developer United Kingdom 11,922 - 11,922 1.0
Allbirds Inc - Listed Sustainable direct-to-customer footwear United States 8,740 2,738 11,478 0.9
brand
Away (JRSK Inc) Travel and lifestyle brand United States 11,292 - 11,292 0.9
Blockstream Corp Inc Financial software developer United States - 10,652 10,652 0.8
Carbon Inc Manufactures and develops 3D printers United States 10,634 - 10,634 0.8
Wayve Technologies Ltd AI based software for self-driving cars United Kingdom - 10,568 10,568 0.8
HeartFlow Inc Develops software for cardiovascular United States 9,127 - 9,127 0.7
disease diagnosis and treatment
Cohesity Inc Data storage United States 8,885 - 8,885 0.7
Airbnb Inc - Listed Online market place for travel United States 8,534 - 8,534 0.7
accommodation
Honor Technology Inc Provider of home-care services United States 3,675 4,701 8,376 0.7
Indigo Agriculture Inc Microbial seed treatments to increase United States 7,664 - 7,664 0.6
crop yields and grain marketplace
MasterClass (Yanka Industries Inc) Online education platform United States 6,591 - 6,591 0.5
Illumina Inc - Listed Gene sequencing equipment and United States 5,843 - 5,843 0.4
consumables
Oscar Health Inc - Listed Healthcare insurance provider United States 4,431 - 4,431 0.3
Zymergen Inc - Listed Synthetic biology United States 1,505 - 1,505 0.1
Total investments 612,152 454,767 1,066,919 84.8
2022 Ordinary Shares
Value 2022 2022 2022
Name US$'000 C Shares Total % of
Value Value US$'000 net assets*
US$'000
US Treasury Bill 08/09/2022 - 24,598 24,598 2.0
US Treasury Bill 03/11/2022 - 24,440 24,440 1.9
US Treasury Bill 29/12/2022 - 24,392 24,392 1.9
US Treasury Bill 23/03/2023 - 24,657 24,657 2.0
US Treasury Bill 18/05/2023 - 24,787 24,787 2.0
US Treasury Bill 13/07/2023 - 24,549 24,549 1.9
Total US Treasury Bills - 147,423 147,423 11.7
Cash 41,143 4,586 45,729 3.7
Other current assets and liabilities (876) (1,045) (1,921) (0.2)
Net current assets 40,267 150,964 191,231 15.2
Net assets 652,419 605,731 1,258,150 100.0
* See Glossary of Terms and Alternative Performance Measures at the end of
this announcement.
The Company may hold various classes of shares in investee companies, some of
which may have a preference on winding up.
Allocation of Net Assets (Unaudited)
2022 Ordinary Shares
Value 2022 2022 2022
Name US$'000 C Shares Total % of
Value Value US$'000 net assets*
US$'000
Listed investments 94,768 40,198 134,966 10.9
Private company investments 517,384 414,569 931,953 73.9
US Treasury Bills - 147,423 147,423 11.7
Cash 41,143 4,586 45,729 3.7
Net current assets (876) (1,045) (1,921) (0.2)
Total net assets 652,419 605,731 1,258,150 100.0
* See Glossary of Terms and Alternative Performance Measures at the end of
this announcement.
Distribution of Total Net Assets (unaudited)
Ordinary Shares Geographical
As at As at
31 July 2022 31 January 2022
% %
United States 67.7 69.4
United Kingdom 5.9 6.7
China 9.0 9.1
India 6.3 4.2
Sweden 3.6 3.0
Germany 1.3 1.3
Net current assets 6.2 6.3
Total 100.0 100.0
Ordinary Shares Sectoral
As at As at
31 July 2022 31 January 2022
% %
Communication Services 14.1 12.7
Consumer Discretionary 10.3 14.6
Consumer Staples 3.4 3.9
Financials 18.1 22.2
Healthcare 7.3 7.0
Industrials 17.3 14.2
Information Technology 23.1 18.7
Materials 0.2 0.4
Net current assets 6.2 6.3
Total 100.0 100.0
( )
C Shares Geographical
As at As at
31 July 2022 31 January 2022
% %
United States 49.6 33.2
United Kingdom 3.0 4.2
Germany 5.6 5.9
Sweden 1.8 0.9
Australia 2.5 4.1
Brazil 2.5 2.8
China 6.5 4.8
Colombia 3.6 3.8
US Treasury Bills 24.3 39.4
Net Current Assets 0.6 0.9
Total 100.0 100.0
C Shares Sectoral
As at As at
31 July 2022 31 January 2022
% %
Consumer Discretionary 10.8 11.5
Consumer Staples 6.5 4.8
Financials 14.9 6.1
Healthcare 1.6 0.9
Industrials 6.8 4.7
Information Technology 20.0 20.6
Materials 7.9 4.1
Real Estate 6.6 7.0
US Treasury Bills 24.3 39.4
Net Current Assets 0.6 0.9
Total 100.0 100.0
The above sectoral distribution is not derived from any index.
Income Statement (unaudited)
For the six months For the six months For the year to
to 31 July 2022 to 31 July 2021 31 January 2022
Revenue Capital Total Revenue Capital Total Revenue Capital Total
Notes US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
(Losses)/gains on investments - (209,332) (209,332) - 86,674 86,674 - 39,460 39,460
Currency (losses)/gains - (33) (33) - 338 338 - (19) (19)
Income 2 218 - 218 148 - 148 362 - 362
Investment management fee 3 (4,611) - (4,611) (3,534) - (3,534) (8,427) - (8,427)
Other administrative expenses 4 (595) - (595) (509) - (509) (1,100) - (1,100)
Operating (loss)/profit before finance costs and taxation
(4,988) (209,365) (214,353) (3,895) 87,012 83,117 (9,165) 39,441 30,276
Finance cost of borrowings (9) - (9) - - - (7) - (7)
Operating (loss)/profit before taxation (4,997) (209,365) (214,362) (3,895) 87,012 83,117 (9,172) 39,441 30,269
Tax on ordinary activities - - - - - - - - -
(Loss)/profit and total comprehensive
(loss)/income for the period (4,997) (209,365) (214,362) (3,895) 87,012 83,117 (9,172) 39,441 30,269
For the six months For the six months For the year to
to 31 July 2022 to 31 July 2021 31 January 2022
Revenue Capital Total Revenue Capital Total Revenue Capital Total
US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
(Loss)/profit and total comprehensive (loss)/income for the period analysed as
follows:
Attributable to ordinary shareholders (2,835) (136,408) (139,243) (3,645) 83,252 79,607 (7,238) 51,460 44,222
Attributable to C shareholders (2,162) (72,957) (75,119) (250) 3,760 3,510 (1,934) (12,019) (13,953)
(Loss)/profit and total comprehensive
(loss)/income for the period (4,997) (209,365) (214,362) (3,895) 87,012 83,117 (9,172) 39,441 30,269
(Loss)/earnings per ordinary share (0.57¢) (27.26¢) (27.83¢) (0.75¢) 17.15¢ 16.40¢ (1.47¢) 10.46¢ 8.99¢
(Loss)/earnings per C share (0.31¢) (10.42¢) (10.73¢) (0.04¢) 0.54¢ 0.50¢ (0.28¢) (1.72¢) (2.00¢)
The total column of this Statement represents the Statement of Comprehensive
Income of the Company. The supplementary revenue and capital columns are
prepared under guidance published by the Association of Investment Companies.
All revenue and capital items in this statement derive from continuing
operations.
Statement of Financial Position (unaudited)
At 31 July At 31 July At 31 January At 31 January
2022 2022 2022 2022
Notes
US$'000 US$'000 US$'000 US$'000
Fixed assets
Investments held at fair value through profit or loss 7 1,066,919 1,148,322
Current assets
US Treasury Bills 147,423 268,216
Cash and cash equivalents 45,729 86,898
Debtors 557 405
193,709 355,519
Current liabilities
Amounts falling due within one year (2,478) (31,329)
Net current assets 191,231 324,190
Net assets 1,258,150 1,472,512
Capital and reserves
Share capital 8 1,216,503 1,216,503
Capital reserve 51,054 260,419
Revenue reserve (9,407) (4,410)
Shareholders' funds 1,258,150 1,472,512
At 31 July At 31 January
2022 2022
Shareholders' funds per Ordinary share (US$'000) 652,419 791,663
Net asset value per Ordinary share 130.37¢ 158.20¢
Number of Ordinary shares in issue 500,430,002 500,430,002
Shareholders' funds per C share (US$'000) 605,731 680,849
Net asset value per C share 86.53¢ 97.26¢
Number of C shares in issue 700,000,000 700,000,000
Statement of Changes in Equity (unaudited)
Six months to 31 July 2022
Share Capital reserve* US$'000 Revenue reserve US$'000 Shareholders'
capital funds
Notes US$'000 US$'000
Shareholders' funds at 31 January 2022 1,216,503 260,419 (4,410) 1,472,512
Ordinary shares - - - -
issued
8
C shares - - - -
issued
8
Total comprehensive loss for the period - Ordinary - (136,408) (2,835) (139,243)
shares
Total comprehensive loss for the period - C shares - (72,957) (2,162) (75,119)
Shareholders' funds at 31 July 2022 1,216,503 51,054 (9,407) 1,258,150
Six months to 31 July 2021
Share Capital reserve* US$'000 Revenue reserve US$'000 Shareholders'
capital funds
Notes US$'000 US$'000
Shareholders' funds at 31 January 2021 480,340 220,978 4,762 706,080
Ordinary shares 24,975 - - 24,975
issued
8
C shares 694,802 - - 694,802
issued
8
Total comprehensive income/(loss) for the period - Ordinary - 83,252 (3,645) 79,607
shares
Total comprehensive income/(loss) for the period - C shares - 3,760 (250) 3,510
Shareholders' funds at 31 July 2021 1,200,117 307,990 867 1,508,974
* Includes investment holdings gains of US$133,855,000 (31 July 2021
- US$307,643,000)
Statement of Cash Flows (unaudited)
Six months to Six months to
31 July 2022 31 July 2021
Notes US$'000 US$'000 US$'000 US$'000
Cash flows from operating activities
Operating (loss)/profit before taxation (214,362) 83,117
US Treasury Bills interest (60) (78)
Net losses/(gains) on investments 209,332 (86,674)
Currency losses/(gains) 33 (338)
Changes in debtors and creditors (422) 481
Net cash used in operating activities* (5,479) (3,492)
Cash flows from investing activities
Acquisitions of US Treasury Bills (93,886) (752,036)
Disposals of US Treasury Bills 214,739 251,524
Acquisitions of investments (158,358) (196,956)
Disposals of investments 1,848 -
Net cash used in investing activities (35,657) (697,468)
Cash flows from financing activities
Ordinary shares issued - 24,821
C shares issued - 694,802
Net cash inflow from financing activities - 719,623
Net (decrease)/increase in cash and cash equivalents (41,136) 18,663
Effect of exchange rate fluctuations on cash and cash
equivalents (33) 338
Cash and cash equivalents at start of period 86,898 16,113
Cash and cash equivalents at 31 July 45,729 35,114
* Cash from operations includes interest received of US$33,000 (2021
- US$1,000)
Notes to the Financial Statements (unaudited)
1. Basis of Accounting
The condensed Financial Statements for the six months to 31 July 2022 comprise
the statements set out on the previous pages together with the related notes
below. They have been prepared in accordance with International Financial
Reporting Standards (IFRS). The Financial Statements for the six months to 31
July 2022 have been prepared on the basis of the same accounting policies as
set out in the Company's Annual Report and Financial Statements at 31 January
2022.
Equity instruments
The ordinary shares and C shares of the Company are classified as equity in
accordance with the definition of equity instruments under IAS 32 Financial
Instruments: presentation (IAS 32). The proceeds from the issue of shares are
recognised in the Statement of Changes in Equity net of incremental issuance
costs.
Going Concern
In accordance with The Financial Reporting Council's guidance on going concern
and liquidity risk, including its Covid-19 guidance, the Directors have
undertaken a rigorous review of the Company's ability to continue as a going
concern and specifically in the context of the Covid-19 pandemic, the
hostilities in Ukraine and current economic conditions.
Having considered the Company's principal risks and uncertainties, as set out
in the inside front cover, together with its current position, investment
objective and policy, its assets and liabilities, and projected income and
expenditure, it is the Directors' opinion that the Company has adequate
resources to continue in operational existence for the foreseeable future. The
Directors have considered the Company's principal and emerging risks as
detailed on pages 6 to 9 of the Company's Annual Report and Financial
Statements for the year to 31 January 2022 and the Investment Manager ensures
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 Directors consider it appropriate to adopt the going concern
basis of accounting in preparing these Financial Statements and confirm that
they are not aware of any material uncertainties which may affect the
Company's ability to continue to do so over a period of at least twelve months
from the date of approval of the Financial Statements.
2. Income
6 months to 6 months to Year to
31 July 2022 31 July 2021 31 January 2022
US$'000 US$'000 US$'000
US Treasury Bills interest 60 148 166
Overseas interest 124 - 195
Deposit interest 34 - 1
Total income 218 148 362
3. Investment Management Fee
6 months to 6 months to Year to
31 July 2022 31 July 2021 31 January 2022
US$'000 US$'000 US$'000
Investment Management Fee 4,611 3,534 8,427
The Company has appointed Baillie Gifford & Co Limited as its Investment
Manager (the 'Investment Manager'). As the entity appointed to be responsible
for risk management and portfolio management, the Investment Manager has also
been appointed as the Company's Alternative Investment Fund Manager ('AIFM').
Baillie Gifford & Co Limited has delegated portfolio management services
to Baillie Gifford Overseas Limited. The Investment Management Agreement is
terminable on not less than six months' notice.
Under the terms of the Investment Management Agreement, the Investment Manager
will be 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 of the Company 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$1.3 billion. Management
fees are calculated and payable quarterly. Cash equivalents include US
Treasury Bills.
Notes to the Financial Statements (unaudited) (Ctd)
4. Other Administrative Expenses
6 months to 6 months to Year to
31 July 2022 31 July 2021 31 January 2022
US$'000 US$'000 US$'000
General administrative expenses 202 239 511
Administrator's fee 74 55 92
Auditor's remuneration for audit services 121 113 248
Directors' Fees(*) 198 102 249
595 509 1,100
Expenses relating directly to a share class are charged to that share class.
Expenses pertaining to both ordinary and C share classes are split equally
between these share classes.
* Each Director, appointed at the time of the C share issuance,
received a one-off fee of £5,000 (US$6,953 equivalent) which covered services
relating to the initial listing of the Company's C shares in the year to 31
January 2022.
5.
Earnings per Share
6 months to 6 months to Year to
31 July 2022 31 July 2021 31 January 2022
Ordinary shares US$'000 ¢ US$'000 ¢ US$'000 ¢
Revenue return on ordinary activities after taxation (2,835) (0.57) (3,645) (0.75) (7,238) (1.47)
Capital return on ordinary activities after taxation (136,408) (27.26) 83,252 17.15 51,460 10.46
(Loss)/profit and total comprehensive (loss)/income for the period
(139,243) (27.83) 79,607 16.40 44,222 8.99
Weighted average number of Ordinary shares in issue
500,430,002 485,476,079 491,934,440
6 months to Period from 26 April 2021 to 31 July 2021 Period from 26 April 2021 to 31 January 2022
31 July 2022
C shares US$'000 ¢ US$'000 ¢ US$'000 ¢
Revenue return on ordinary activities after taxation (2,162) (0.31) (250) (0.04) (1,934) (0.28)
Capital return on ordinary activities after taxation (72,957) (10.42) 3,760 0.54 (12,019) (1.72)
(Loss)/profit and total comprehensive (loss)/income for the period
(75,119) (10.73) 3,510 0.50 (13,953) (2.00)
Weighted average number of C shares in issue 700,000,000 700,000,000 700,000,000
Net return per share is based on the above totals of revenue and capital and
the weighted average number of shares in issue during each period. There are
no dilutive or potentially dilutive shares in issue.
6. Ordinary Dividends
There were no dividends paid or proposed in respect of the six months for
either the ordinary shares or for the C shares (2021 - none).
Notes to the Financial Statements (unaudited) (Ctd)
7. Financial Instruments
Fair Value Hierarchy
The fair value hierarchy used to analyse the fair values of financial assets
is described below. The levels are determined by the lowest (that is the least
reliable or least independently observable) level of input that is significant
to the fair value measurement for the individual investment in its entirety as
follows:
Level 1 - using unadjusted quoted prices for identical instruments in an
active market;
Level 2 - using inputs, other than quoted prices included within Level 1, that
are directly or indirectly observable (based on market data); and
Level 3 - using inputs that are unobservable (for which market data is
unavailable).
Level 1 Level 2 Level 3 Total
As at 31 July 2022 US$'000 US$'000 US$'000 US$'000
Listed equities 134,966 - - 1
3
4
,
9
6
6
Unlisted ordinary shares - - 181,929 1
8
1
,
9
2
9
Unlisted preference shares* - - 745,634 7
4
5
,
6
3
4
Unlisted convertible promissory notes - - 4,390 4
,
3
9
0
Total financial asset investments 134,966 - 931,953 1
,
0
6
6
,
9
1
9
Level 1 Level 2 Level 3 Total
As at 31 January 2022 US$'000 US$'000 US$'000 US$'000
Listed equities 211,039 - - 2
1
1
,
0
3
9
Unlisted ordinary shares - - 167,268 1
6
7
,
2
6
8
Unlisted preference shares* - - 765,207 7
6
5
,
2
0
7
Unlisted convertible promissory notes - - 4,808 4
,
8
0
8
Total financial asset investments 211,039 - 937,283 1,148,322
* The investments in preference shares are not classified as equity holdings
as they include liquidation preference rights that determine the repayment (or
multiple thereof) of the original investment in the event of a liquidation
event such as a take-over.
During the six months to 31 July 2022, no investments were transferred from
Level 3 to Level 1 on becoming listed. During the year ended 31 January 2022,
investments with a fair value (IPO price) of US$197,699,000 were transferred
from Level 3 to Level 1 on becoming listed.
The valuation techniques used by the Company are explained in the accounting
policies on page 46 of the Company's Annual Report and Financial Statements
for the year to 31 January 2022. Listed investments are categorised as Level 1
if they are valued using unadjusted quoted prices for identical instruments in
an active market and as Level 2 if they do not meet all these criteria but
are, nonetheless, valued using market data. The Company's holdings in unlisted
investments are categorised as Level 3 as unobservable data is a significant
input to their fair value measurements.
Notes to the Financial Statements (unaudited) (Ctd)
8. Share Capital
31 July 31 July 31 January 31 January
2022 2022 2022 2022
Number US$'000 Number US$'000
Allotted, called up and fully paid Ordinary shares of US$1 each 500,430,002 521,701 500,430,002 521,701
Allotted, called up and fully paid C shares of US$1 each 700,000,000 694,802 700,000,000 694,802
By way of a special resolution dated 15 March 2019 the Directors have a
general authority to allot up to 720,000,000 ordinary shares or C shares, such
figure to include the ordinary shares issued at the initial placing.
477,250,000 ordinary shares were issued at the Company's initial placing, with
a further 23,180,002 ordinary shares subsequently issued, the Company has the
ability to issue a further 219,570,000 shares under this existing authority
which expires at the end of the period concluding immediately prior to the
Annual General Meeting of the Company to be held in 2024 (or, if earlier, five
years from the date of the resolution). During the six months to 31 July 2022
the Company issued no ordinary shares. As at 31 July 2022 the Company has the
authority to issue 75,014,457 ordinary shares. In the period from 1 August
2022 to 1 September 2022 the Company issued no further shares.
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).
By way of an ordinary resolution passed on 12 May 2022 the Directors of the
Company have general authority to make market purchases of up to 75,014,457
ordinary shares, being 14.99% of the ordinary shares in issue as at 28 March
2022, being the latest practicable date prior to the publication of the
Company's Annual Report and Financial Statements for the year ended 31 January
2022. This authority will expire at the conclusion of the Annual General
Meeting of the Company to be held in respect of the year ending 31 January
2023. No shares have been bought back during the six months ended 31 July 2022
(31 July 2021 - nil) hence the authority remains at 75,014,457 ordinary
shares.
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.
Holders of C shares have the right to receive income and capital from assets
attributable to such share class. C shareholders have the right to receive
notice of general meetings of the Company and have the right to attend and
vote at all general meetings.
9. Transaction Costs
During the period the Company incurred transaction costs on purchases of
investments of US$57,000 (31 July 2021 - US$99,000; 31 January 2022 -
US$99,000) and transaction costs on sales of US$nil (31 July 2021 - US$nil; 31
January 2022 - US$nil).
10. Transactions with Related Parties and the Investment Manager and Administrator
There have been no transactions with related parties during the first six
months of the current financial year that have materially affected the
financial position or the performance of the Company during that period and
there have been no changes in the related party transactions described in the
last Annual Report and Financial Statements that could have such an effect on
the Company during that period.
None of the views expressed in this document should be construed as advice to
buy or sell a particular investment.
Glossary of Terms and Alternative Performance Measures ('APM')
Total Assets
The total value of all assets held less all liabilities (other than
liabilities in the form of borrowings).
Shareholders' Funds and Net Asset Value
Shareholders' Funds is the value of all assets held less all liabilities, with
borrowings deducted at book cost. Net Asset Value (NAV) is the value of all
assets held less all liabilities, with borrowings deducted at either fair
value or par value. Per share amounts are calculated by dividing the relevant
figure by the number of Ordinary shares in issue.
Net Liquid Assets
Net liquid assets comprise current assets less current liabilities (excluding
borrowings).
Premium/(Discount) (APM)
As stock markets and share prices vary, an investment trust's share price is
rarely the same as its NAV. When the share price is lower than the NAV per
share it is said to be trading at a discount. The size of the discount is
calculated by subtracting the share price from the NAV per share and is
usually expressed as a percentage of the NAV per share. If the share price is
higher than the NAV per share, it is said to be trading at a premium.
Ordinary shares 31 July 2022 31 January 2022
Closing NAV per share (a) 130.37¢ 158.20¢
Closing share price (b) 125.00¢ 212.00¢
(Discount)/premium expressed as a percentage (b-a) ÷ a (4.1%) 34.0%
C shares 31 July 2022 26 April 2022
Closing NAV per share (a) 86.53¢ 97.26¢
Closing share price (b) 73.00¢ 118.00¢
(Discount)/premium expressed as a percentage (b-a) ÷ a (15.6%) 21.3%
Other Shareholder Information
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.
Other Shareholder Information (Ctd)
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.
Sustainable Finance Disclosure Regulation ('SFDR')
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 The Schiehallion Fund Limited is marketed in
the EU by the AIFM, BG & 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.
Baillie Gifford & Co's approach to investment is based on identifying and
holding high quality growth businesses that enjoy sustainable competitive
advantages in their marketplace. To do this it looks beyond current financial
performance, undertaking proprietary research to build an in-depth knowledge
of an individual company and a view on its long-term prospects. This includes
the consideration of sustainability factors (environmental, social and/or
governance matters) which it believes will positively or negatively influence
the financial returns of an investment.
More detail on the Managers' approach to sustainability can be found in the
Governance and Sustainability Principles and Guidelines document, available
publicly on the Baillie Gifford website
bailliegifford.com/literature-library/corporate-
governance/our-stewardship-approach-esg- principles-and-guidelines-2022
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 SFDR
by introducing additional disclosure obligations in respect of alternative
investment funds 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.
None of the views expressed in this document should be construed as advice to
buy or sell a particular investment.
You can find up to date performance information about The Schiehallion Fund on
the Schiehallion Fund page of the Managers' website at
schiehallionfund.com(‡)
The Schiehallion Fund Limited is managed by Baillie Gifford, the Edinburgh
based fund management group with around £356 billion under management and
advice in active equity and bond portfolios for clients in the UK and
throughout the world (as at 1 September 2021). The Administrator, Secretary
and Designated Manager is Alter Domus (Guernsey) Limited.
‡ Neither the contents of the Managers' website nor the contents of
any website accessible from hyperlinks on the Managers' website (or any other
website) is incorporated into, or forms part of, this announcement.
Past performance is not a guide to future performance. The value of an
investment and any income from it is not guaranteed and may go down as well as
up and investors may not get back the amount invested. This is because the
share price is determined by the changing conditions in the relevant stock
markets in which the Company invests and by the supply and demand for the
Company's shares.
2 September 2022
For further information please contact:
Alex Blake, Baillie Gifford & Co
Tel: 0131 275 2859 or 07773 246035
Jonathan Atkins, Four Communications
Tel: 0203 920 0555 or 07872 495396
- ends -
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