Schiehallion Fund Schiehallion - MNTN Schiehallion - MNTC - Final Results
29/03/2022 07:00
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RNS Number : 3048G Schiehallion Fund Limited (The) 29 March 2022
RNS Announcement: Preliminary Results
The Schiehallion Fund Limited
Legal Entity Identifier: 213800NQOLJA1JCWXQ56
Regulated Information Classification: Additional regulated information
required to be disclosed under applicable laws.
The following is the Preliminary Results Announcement year to 31 January 2022
which was approved by the Board on 28 March 2022.
Chairperson's Statement
It is with pleasure that I present the Annual Report for The Schiehallion Fund
Limited (the 'Company' or 'Schiehallion') for the year ended 31 January 2022.
In April 2021, the Company raised gross proceeds of US$700 million by way of
an issue of C shares. Although the C shares will convert into ordinary shares
in due course, we are reporting on each share class separately in this year's
Annual Report.
Investment Performance
During the financial year to 31 January 2022, the Company's ordinary share
price and net asset value per ordinary share returned 17.8% and 7.6%,
respectively. Over the period from 27 March 2019 (launch date) to 31 January
2022, the Company's ordinary share price and net asset value per ordinary
share returned 112.0% and 58.7%, respectively.
During the period from admission to trading on 26 April 2021 to 31 January
2022, the Company's C share price and net asset value per C share returned
-4.8% and -2.0%, respectively.
Deployment of
Capital
When the C shares were issued in April 2021, your Board said it would be
reasonable to expect that the C share proceeds would be two-thirds invested
within two years. As at 31 January 2022, approximately 60% of C share proceeds
had been invested in 20 companies. There is commentary on the Company's
portfolio in the Investment Manager's Review and Review of Investments below.
The process for conversion of C shares into ordinary shares is set out in the
Prospectus published by the Company on 23 March 2021. Once the C shares have
converted into ordinary shares, the Company may seek to raise additional
capital, by way of a further issue of C shares.
Share Price Premium and Share Issuance
The ordinary share price premium to net asset value increased from 22.5% at
the start of the year to 34.0% at the year end, having peaked in excess of 60%
during the year. The C share price premium to net asset value was 21.3% at the
year end. Investors should bear in mind that shares bought at a high premium
to net asset value can quickly lose substantial value if the premium is
eroded.
The Company has a general authority to issue further shares if the Directors
determine such issues to be in the best interests of shareholders and the
Company as a whole. During the year, the Company issued a further 20.08
million ordinary shares at an average premium to net asset value of
approximately 27.2%, raising further proceeds of US$41.36 million.
At 31 January 2021 the Company had authority, which was granted at the initial
launch, to issue a further 242.75 million ordinary shares. This authority
expires at the end of the period concluding immediately prior to the Annual
General Meeting to be held in 2024 (or, if earlier, five years from 15 March
2019, the date the special resolution was passed).
Although there is no current intention to exercise the authority to purchase
the Company's shares, the Company will be seeking authority to renew the
buy-back authority at the forthcoming Annual General Meeting. No shares were
bought back during the year ended 31 January 2022.
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 -1.47¢ (period to 31 January 2021,
-0.33¢) and the net revenue return per C share was -0.28¢. The Board is
recommending that no final dividend be paid.
Board
We welcomed David Chiswell and Richard Holmes to the Board in September 2021,
both of whom seek election at the AGM in May. All the other Directors are
subject to annual re-election at the AGM in May. Directors' biographies can be
found on page 23 of the Annual Report and Financial Statements.
Annual General Meeting
The AGM will be held at 12 noon BST on Thursday 12 May 2022 at the offices of
Baillie Gifford & Co in Edinburgh. Our current expectation is that a
physical meeting will be possible. Should regulations relating to the Covid-19
pandemic change, the intention to hold a physical meeting will be reviewed
and, if necessary, an announcement will be made on the Company's website.
Shareholders are reminded that they are able to submit proxy voting forms
before the applicable deadline on Tuesday 10 May 2022 and also to direct any
questions for the Board or Manager in advance by email to
trustenquiries@bailliegifford.com or calling (+44) 0800 917 2112. (Please note
that Baillie Gifford may record your call).
Investment Outlook
Although Covid-19 remains with us, the vaccines in particular have helped to
transform the outlook for society and for the economy. With the recovery
taking place in a number of countries, inflation and interest rates are also
prominent factors in the coming months. A tragedy is currently unfolding in
Ukraine with devastating consequences. The Company does not have any direct
exposure to Russia or Ukraine but Grammarly, a US business, does have
Ukrainian founders and an office presence in Kyiv.
Despite the considerable uncertainties, the Board and the Investment Manager
are optimistic about the investment outlook. The Company solely invests in
companies with exceptional growth potential which are not widely accessible in
public markets. The potential of the companies in our portfolio is generally
dependent on their ability to take advantage of opportunities. Therefore, the
Board is positive about the growth prospects of these companies, and the
pipeline of private companies that the Investment Manager has access to. The
Board and the Investment Manager are confident in the outlook for the Company.
Linda Yueh
Chairperson
28 March 2022
Past performance is not a guide to future performance.
For a definition of terms see Glossary of Terms and Alternative Performance
Measures at the end of this announcement.
Investment Managers' Review
The Schiehallion Fund was founded to generate returns for shareholders by
investing in high growth companies early, whilst they are still private, and
then being patient in order to benefit from the growth that can still come
after these businesses become public.
This approach can only be practiced with a long-term view. Any sufficiently
long investment period will see both 'bull' and 'bear' markets. The recent
market turbulence is the first for Schiehallion, but it will not be the last.
In periods of fear, as in periods of euphoria, the most dangerous thing an
investment manager can do is deviate from their philosophy and process.
Consistency is what is needed.
During the year, five of our holdings, Wise, Allbirds, Warby Parker, Oscar
Health and Zymergen entered the public markets. In addition, Grail was taken
over by Illumina, also a public company.
In the recent market sell-off we have seen the quoted values of many of our
public investments decline meaningfully. Affirm, which has been the largest
contributor to performance since inception, was the biggest detractor from
performance of the ordinary shares over the year to the end of January.
Despite its weak share price performance, operationally, Affirm continues to
perform well and has recently signed a partnership with Amazon and is seeing
significant traction through their Shopify integration. Oscar Health and
Zymergen share prices also detracted from performance.
Most of our private company holdings continue to grow rapidly, and saw their
valuations rise during 2021. However, in line with our valuation policy, we
reduced the carrying value of many of our private holdings in January as
valuations of comparable public companies fell. When this happens, we ask
ourselves whether anything fundamental has changed. Does the investment case
still hold up and is significant upside still available? If the answer to both
questions is yes, then we recognise these movements for what they are - noise,
not signal. To borrow a metaphor from Benjamin Graham, the market's voting
machine might be gyrating wildly, but our focus remains on operating and
honing our weighing machine.
Portfolio Changes
When we launched the C share raise, we conservatively estimated that we would
be able to deploy two thirds of the capital within two years. We also noted
that we were aiming to under promise and over deliver. This has played out. As
of the time of writing, the C share pool was 59.7% deployed. The pace of
deployment of the C share proceeds has been faster than it was for the
ordinary pool because we have been putting more capital into fewer companies,
reflecting holding sizes that are optimised for the combined ordinary and C
share portfolios.
In the Interim Report we mentioned that we had invested in seven new companies
in the first half of the financial year: Brex, Faire, Loft, Daily Hunt, Rappi,
MasterClass and PsiQuantum.
In the six months since the Interim Report, we have invested in eight new
companies: Grammarly, Databricks, Solugen, McMakler, Pet Circle, Wayve,
Blockstream and Genki Forest. The geographic diversity we highlighted in the
Interim Report is again evident. Companies range from the heartland of Silicon
Valley to Houston; Berlin; Sydney; London; Victoria; and Beijing.
The breadth of industries is also notable. Genki Forest is one of China's
fastest growing soft drinks companies. Solugen makes speciality chemicals.
Grammarly is using machine learning to help us all write clearly, effectively,
and error free. Pet Circle is bringing the Australian pet industry online.
What unites these companies is their ability to grow rapidly into large end
markets whilst boasting robust and strengthening competitive advantages.
A summary of each of the new investments is included in the Review of
Investments in the Annual Report and Financial Statements. We could write at
length on any of these companies, but have chosen to highlight Solugen in this
report. The founders were introduced to us by another private company in which
our clients are shareholders. They have found a way to use enzymes in
combination with metal catalysts to convert corn sugars to valuable chemicals,
which could previously be made only out of fossil fuels. The enzymes are so
efficient, they need to use a lot less heat in the process, allowing Solugen
to run on renewable electricity rather than burning more fossil fuels. All
this means they can make speciality chemicals that are purer, cheaper, and
carbon negative. This might sound like a science project, but the company is
already scaling up and generating meaningful revenue. Solugen has the
potential to decarbonise one of the world's most polluting industries and
build a very valuable business in the process.
We have also continued to support existing holdings, amongst them Nuro, Honor,
Convoy, Chime, Allbirds, Northvolt, and Flix. In some of these cases, such as
Nuro and Northvolt, we have been topping up the holdings to ensure they are
the right size post the merger of the C-share and ordinary pools of capital.
In others, such as Chime, we have been increasing the holding to reflect
deepened conviction relative to the valuation.
Outlook
Perhaps counterintuitively, the recent market pull-back in gives us cause for
optimism. Over the second half of 2021 we had seen some disconcerting trends.
Companies that we liked on a fundamental basis were attracting valuations that
we found unjustifiable, making the upside cases we required implausible.
Perhaps more worryingly, we also saw funding rounds happen at lightning speed,
leaving insufficient time for proper analysis and forcing us to walk away from
several rounds. Both of these trends have the potential to damage returns -
not only for investors, but also for the companies themselves, as valuations
are struck that teams cannot live up to even with perfect execution, whilst
burdening them with shareholders who have not taken the time to properly
understand what they are invested in. We are already seeing signs of these
trends reversing. More time for diligence combined with more reasonable
valuation expectations means we are excited about the opportunities for
Schiehallion over the coming year.
Peter Singlehurst
March 2022
Approach to Environmental, Social and Governance Considerations (ESG)
The environmental, social and governance considerations at play when Baillie
Gifford's Private Companies Team researches late-stage private companies.
ESG In Our Philosophy
Over our long-term horizon, we believe there is a convergence between what is
good for a business and what is good for the world at large. The conventional
wisdom that there is tension between profitability and doing the right thing
is based on short-term thinking. Over our investment horizon, we believe
profitability depends not only on a company's ability to serve customers well
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 core 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 externalities produced by 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 does the company's culture help it achieve the
leadership's long-term business vision?') asks about the stakeholders within a
firm, the culture within the workplace, and whether it cultivates a healthy
organisational mindset capable of delivering the mission. We have declined
companies in the past based on negative behaviours toward staff as part of
this question. Meanwhile, Question Five asks about external stakeholders ('Do
the company's customers like them?'). This question is geared towards
ecosystem impact in terms of opportunities and potential strengths, not just
uncovering risks. Question Six explores the E and S of ESG in greater depth
('How do environmental and social factors create opportunities and risks?').
Ultimately, this approach enables us to explore the inevitable grey areas.
Companies, like economies, are complex ecosystems. Judging such a system as
'good' or 'bad' based on a single metric or factor strikes us as profoundly
unwise. Factors must be weighed together. Consideration must be subjective and
nuanced. The key data points are inherently qualitative. We would be doing our
clients and our companies a disservice if we portrayed it as anything else.
Our Stewardship Principles for Public Companies
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 January 2022
Name Business Country 2022 2022 2022 2022 2021
Ordinary Share C Share Total % of net assets Value
Value Value Value
US$'000 %
US$'000 US$'000 US$'000
ByteDance Limited Social media and news China 58,378 - 58,378 4.0 37,230
aggregation company
Affirm Holdings Inc - Online platform which provides United States 57,033 - 57,033 3.9 88,322
Listed point of sale consumer finance
Space Exploration Designs, manufactures and United States 50,992 - 50,992 3.5 36,142
Technologies Corp launches advanced rockets and
spacecraft
Wise PLC - Listed Online international money United Kingdom 36,509 12,135 48,644 3.3 26,412
transfer service
Scopely Inc Online gaming company United States 47,918 - 47,918 3.3 32,792
Warby Parker (JAND Online and physical corrective United States 47,868 - 47,868 3.2 37,017
Inc) - Listed eyewear retailer
Stripe Inc Online payment platform United States 45,046 - 45,046 3.1 37,476
Grammarly Inc Online platform for checking United States - 45,002 45,002 3.0 -
grammar, spelling and improving
written communication
Chime Financial Inc Digital current account provider United States 15,530 28,827 44,357 3.0 10,000
Faire Wholesale Inc Online wholesale marketplace United States - 36,703 36,703 2.5 -
DailyHunt (Ver se Telephone voice, data, text India 33,236 - 33,236 2.3 -
Innovation Limited) messaging, and roaming
services
Genki Forest Non-alcoholic beverages United States - 33,000 33,000 2.2 -
Technology Group
Holdings Limited
Northvolt AB Lithium-ion battery manufacturer Sweden 24,177 6,798 30,975 2.0 10,321
Nuro Inc Developer of autonomous United States 14,554 15,320 29,874 2.0 10,000
delivery vehicles
Tanium Inc Online security management United States 29,773 - 29,773 2.0 19,170
Epic Games Inc Video game developer United States 29,013 - 29,013 2.0 22,605
McMakler GmbH Real estate services Germany - 28,583 28,583 1.9 -
Pet Circle (Millell Pty Pet food and accessories Australia - 28,182 28,182 1.9 -
Limited)
Solugen Inc Combines enzymes and metal United States - 28,129 28,129 1.9 -
catalysts to make chemicals
Allbirds Inc - Listed(*) Sustainable direct-to-customer United States 21,018 6,582 27,600 1.9 21,806
footwear brand
Tempus Labs Inc Oncological records aggregator United States 27,089 - 27,089 1.9 30,356
and diagnostic testing provider
Name Business Country 2022 2022 2022 2022 2021
Ordinary Share C Share Total % of net assets Value
Value Value Value
US$'000 %
US$'000 US$'000 US$'000
Rappi Inc Provider of an on demand United States - 25,542 25,542 1.7 -
delivery platform designed to
connect consumers with local
stores
Workrise Technologies Jobs marketplace for the energy United States 25,026 - 25,026 1.7 15,787
Inc sector
Databricks Inc Data software solutions United States - 24,766 24,766 1.7 -
FlixMobility GmbH European mobility provider Germany 10,560 11,305 21,865 1.5 10,272
Loft Holdings Ltd Online property platform Brazil - 19,223 19,223 1.3 -
Convoy Inc Marketplace for truckers and United States 12,185 5,000 17,185 1.2 11,898
shippers
Indigo Agriculture Inc Microbial seed treatments to United States 16,958 - 16,958 1.1 18,241
increase crop yields and grain
marketplace
Wayve Technologies AI based software for self-driving United Kingdom - 16,267 16,267 1.1 -
Ltd cars
Graphcore Limited Computer chip developer United Kingdom 16,600 - 16,600 1.1 13,812
Brex Inc Corporate credit cards for United States 15,709 - 15,709 1.1 -
startups
PsiQuantum Silicon photonic quantum United States - 15,000 15,000 1.0 -
computing
Jiangxiaobai Holdings Producer of alcoholic beverages China 14,187 - 14,187 1.0 9,993
Ltd
Blockstream Corp Inc Financial software developer United States - 13,937 13,937 0.9 -
Carbon Inc Manufactures and develops 3D United States 12,920 - 12,920 0.9 13,671
printers
Honor Technology Inc Provider of home-care services United States 5,585 6,458 12,043 0.9 5,000
Cohesity Inc Data storage United States 11,930 - 11,930 0.8 12,840
Away (JRSK Inc) Travel and lifestyle brand United States 11,920 - 11,920 0.8 8,831
Airbnb Inc - Listed Online market place for travel United States 11,828 - 11,828 0.8 14,120
accommodation
Illumina - Listed(†) Gene sequencing equipment United States 9,396 - 9,396 0.6 17,306
and consumables
HeartFlow Inc Develops software for United States 11,413 - 11,413 0.8 9,794
cardiovascular disease
diagnosis and treatment
MasterClass (Yanka Online education platform United States 8,542 - 8,542 0.6 -
Industries Inc)
Oscar Health Inc - Healthcare insurance provider United States 5,508 - 5,508 0.4 22,965
Listed
Zymergen Inc - Listed Synthetic biology United States 3,162 - 3,162 0.2 10,000
Total securities 741,563 406,759 1,148,322 78.0 614,179
* Listed security in line with the conditions of the IPO, investors with
holdings prior to the listing are subject to a lock-up period preventing
trading of the holding. This expired on 25 February 2022.
† The total value in 2021 relates to the investment in Grail which was taken
over by Illumina for cash, shares and Contingent Value Rights (CVRs).
Name 2022 Ordinary shares value 2022 2022 2022 2021
US$'000 C shares Value Total value % of net assets Total
US$'000 US$'000 value
US$'000
US Treasury Bill 24/03/2022 - 44,697 44,697 3.0 -
US Treasury Bill 16/06/2022 - 44,738 44,738 3.0 -
US Treasury Bill 14/07/2022 - 44,786 44,786 3.1 -
US Treasury Bill 08/09/2022 - 44,782 44,782 3.1 -
US Treasury Bill 03/11/2022 - 44,698 44,698 3.0 -
US Treasury Bill 29/12/2022 - 44,515 44,515 3.0 -
US Treasury Bill 25/02/2021 - - - - 12,642
US Treasury Bill 20/05/2021 - - - - 14,093
US Treasury Bill 17/06/2021 - - - - 12,393
US Treasury Bill 12/08/2021 - - - - 12,692
US Treasury Bill 04/11/2021 - - - - 12,690
US Treasury Bill 27/01/2022 - - - - 12,490
Total US Treasury Bills - 268,216 268,216 18.2 77,000
Cash 51,442 35,456 86,898 5.9 16,113
Other current assets and liabilities (1,342) (29,582) (30,924) (2.1) (1,212)
Net current assets 50,100 274,090 324,190 22.0 91,101
Net assets 791,663 680,849 1,472,512 100.0 706,080
Listed Private company investments
investments % Net current Net
% assets assets
% %
31 January 2022 14.3 63.7 22.0 100.0
31 January 2021 14.5 72.5 13.0 100.0
Allocation of Net Assets
As at 31 January 2022
2022 2022 2022
Ordinary shares value C shares Total 2022
US$'000 value Value % of net assets
US$'000 US$'000
Listed investments 192,322 18,717 211,039 14.3
Private company investments 549,241 388,042 937,283 63.7
US treasury bills - 268,216 268,216 18.2
Cash and cash equivalents 51,442 35,456 86,898 5.9
Net current assets (1,342) (29,582) (30,924) (2.1)
Total net assets 791,663 680,849 1,472,512 100.0
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) (*)
(US$'000)
Company metrics 909,760 44 1 7 24.63% 1.29%
* Alternative performance measure, see Glossary of Terms and
Alternative Performance Measures at the end of this announcement.
Distribution of Net Assets
Ordinary Shares
Geographical
Sectoral
As at As at As at As at
31 January 2022 31 January 2021 31 January 2022 31 January 2021
% % % %
China 9.1 6.6 Communication Services 12.7 5.2
Germany 1.3 1.5 Consumer Discretionary 14.6 13.2
Sweden 3.0 1.5 Consumer Staples 3.9 4.0
United Kingdom 6.7 5.7 Financials 22.2 26.2
United States 69.4 71.7 Healthcare 7.0 8.9
India 4.2 0.0 Industrials 14.2 11.9
US Treasury Bills 0.0 10.9 Information Technology 18.7 16.2
Net Current Assets 6.3 2.1 Materials 0.4 1.4
US Treasury Bills 0.0 10.9
Net Current Assets 6.3 2.1
100.0 100.0 100.0 100.0
C Shares
Geographical
Sectoral
As at As at
31 January 2022 31 January 2022
% %
Germany 5.9 Consumer Discretionary 11.5
Sweden 0.9 Consumer Staples 4.8
United Kingdom 4.2 Financials 6.1
United States 41.8 Healthcare 0.9
Brazil 2.8 Industrials 4.7
Australia 4.1 Information Technology 20.6
US Treasury Bills 39.4 Materials 4.1
Net Current Assets 0.9 Real Estate 7.0
US Treasury Bills 39.4
Net Current Assets 0.9
100.0 100.0
The above sectoral distribution is not derived from any index.
Statement of Comprehensive Income
For the year ended 31 January 2022 For the year ended 31 January 2021
Revenue Capital Total Revenue Capital Total
US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
Gains on investments - 39,460 39,460 - 209,901 209,901
Currency losses - (19) (19) - (1) (1)
Income (note 2) 362 - 362 2,764 - 2,764
Investment management fee (note 3) (8,427) - (8,427) (3,603) - (3,603)
Other administrative expenses (note 4) (1,100) - (1,100) (759) - (759)
Operating profit before finance costs and taxation (9,165) 39,441 30,276 (1,598) 209,900 208,302
Finance costs of borrowings (7) - (7) - - -
Operating profit before taxation (9,172) 39,441 30,269 (1,598) 209,900 208,302
Tax on ordinary activities - - - - - -
Profit and total comprehensive income for the (9,172) 39,441 30,269 (1,598) 209,900 208,302
year
Total comprehensive income/(loss) for the year analysed as follows:
Attributable to ordinary shareholders (7,238) 51,460 44,222 (1,598) 209,900 208,302
Attributable to C shareholders (1,934) (12,019) (13,953) - - -
Profit and total comprehensive income for the year (9,172) 39,441 30,269 (1,598) 209,900 208,302
(Loss)/earnings per ordinary share (1.47¢) 10.46¢ 8.99¢ (0.33¢) 43.94¢ 43.61¢
Loss per C share (0.28¢) (1.72¢) (2.00¢) - - -
The total column of this Statement represents the Statement of Comprehensive
Income of the Company. The supplementary revenue and capital columns are
prepared under guidance published by the Association of Investment Companies.
All revenue and capital items in this statement derive from continuing
operations.
Statement of Financial Position
As at 31 January
2022 2022 2021 2021
US$'000 US$'000 US$'000 US$'000
Fixed assets
Investments held at fair value through profit or loss (note 7) 1,148,322 614,179
Current assets
US Treasury Bills 268,216 77,000
Cash and cash equivalents 86,898 16,113
Debtors 405 426
355,519 93,539
Current liabilities
Amounts falling due within one year (31,329) (1,638)
Net current assets 324,190 91,901
Net assets 1,472,512 706,080
Capital and reserves
Share capital 1,216,503 480,340
Capital reserve 260,419 220,978
Revenue reserve (4,410) 4,762
Shareholders' funds 1,472,512 706,080
Shareholders' funds - ordinary shares 791,663 706,080
Net asset value per ordinary share 158.20¢ 146.99¢
Number of ordinary shares in issue 500,430,002 480,350,002
Shareholders' funds - C shares 680,849 -
Net asset value per C share 97.26¢ -
Number of C shares in issue 700,000,000 -
Statement of Changes in Equity
For the year ended 31 January 2022
Share Capital reserve* US$'000 Revenue reserve US$'000 Shareholders'
capital US$'000 funds
US$'000
Shareholders' funds at 1 February 2021 480,340 220,978 4,762 706,080
Ordinary shares issued (note 8) 41,361 - - 41,361
C shares issued 694,802 - - 694,802
Total comprehensive income - ordinary shares - 51,460 (7,238) 44,222
Total comprehensive income - C shares - (12,019) (1,934) (13,953)
Shareholders' funds at 31 January 2022 1,216,503 260,419 (4,410) 1,472,512
For the year ended 31 January 2021
Share Capital reserve* US$'000 Revenue reserve US$'000 Shareholders'
capital funds
US$'000
US$'000
Shareholders' funds at 1 February 2020 475,642 11,078 6,360 493,080
Ordinary shares issued (note 8) 4,698 - - 4,698
Total comprehensive income - 209,900 (1,598) 208,302
Shareholders' funds at 31 January 2021 480,340 220,978 4,762 706,080
The capital reserve includes investment holding gains of US$255,767,0000 (2021
- US$220,969,000).
Statement of Cash Flows
For the year ended 31 January 2022 For the year ended 31 January 2021
US$'000 US$'000 US$'000 US$'000
Cash flows from operating activities
Operating profit before taxation 30,269 208,302
US Treasury Bills interest (166) (2,899)
Net gains on investments (39,460) (209,901)
Currency losses 19 1
Changes in debtors and creditors 879 1,231
Net cash used in operating activities* (8,459) (3,266)
Cash flows from investing activities
Acquisitions of US Treasury Bills (1,031,088) (172,625)
Disposals of US Treasury Bills 840,039 406,659
Acquisitions of investments (474,943) (229,232)
Disposals of investments 8,740 -
Net cash (used in)/from investing activities (657,152) 4,802
Cash flows from financing activities
Ordinary shares issued 41,613 4,446
C shares issued 694,802 -
Net cash inflow from financing activities 736,415 4,446
Net increase in cash and cash equivalents 70,804 5,982
Effect of exchange rate fluctuations on cash and cash equivalents (19) (2)
Cash and cash equivalents at 1 February 16,113 10,133
Cash and cash equivalents at 31 January 86,898 16,113
* Cash from operations includes interest received of US$1,000 (2021
- US$18,000).
2022 2021
US$'000 US$'000
Cash and cash equivalents comprise the following:
Cash at bank 86,898 16,113
Notes to the Financial Statements
1. Principal Accounting Policies
The Financial Statements for the year to 31 January 2022 have been prepared in
accordance with International Financial Reporting Standards ('IFRS').
2. Income 2022 2021
US$'000 US$'000
US Treasury Bills interest 166 2,899
Overseas interest 195 (153)
Deposit interest 1 18
Total income 362 2,764
3. Investment Management Fee 2022 2021
US$'000 US$'000
Investment management fee 8,427 3,603
Details of the Investment Management Agreement are set out on page 25 of the
Annual Report and Financial Statements. Under the terms of the Investment
Management Agreement and with effect from the date the Company's ordinary
shares were admitted to trading on the Specialist Fund Segment of the Main
Market of the London Stock Exchange, the Investment Manager is entitled to an
annual fee (exclusive of VAT, which shall be added where applicable) of: 0.9%
on the net asset value excluding cash or cash equivalent assets up to and
including US$650 million; 0.8% on the net asset value excluding cash or cash
equivalent assets exceeding US$650 million up to and including US$1.3 billion;
and 0.7% on the net asset value excluding cash or cash equivalent assets
exceeding US$1.3 billion. Management fees are calculated and payable
quarterly.
Cash equivalents include US Treasury Bills.
4. Other Administrative Expenses 2022 2021
US$'000 US$'000
General administrative expenses 511 323
Administrator's fee 92 83
Auditor's remuneration for audit services 248 206
Directors' fees 249 147
1,100 759
In the year to 31 January 2022 non-audit fees paid to KPMG Channel Islands
Limited amounted to US$83,000 in respect of procedural services related to the
issuance of the Company's C shares. As these costs related to the issuance of
the C shares, they are capital in nature and included within the costs of
issuing shares (see note 11). In the year to 31 January 2021 there were no
fees paid to the Auditor in respect of non-audit services.
5. Earnings per Share Year ended 31 January 2022 Year ended 31 January 2021
Ordinary shares US$'000 ¢ US$'000 ¢
Revenue return on ordinary activities after taxation (7,238) (1.47) (1,598) (0.33)
Capital return on ordinary activities after taxation 51,460 10.46 209,900 43.94
Profit and total comprehensive income for the year 44,222 8.99 208,302 43.61
Weighted average number of ordinary shares in issue 491,934,440 477,670,487
C shares Period from 27 April 2021 to 31 January 2022
US$'000 ¢
Revenue return on ordinary activities after taxation (1,934) (0.28)
Capital return on ordinary activities after taxation (12,019) (1.72)
Profit and total comprehensive income for the year (13,953) (2.00)
Weighted average number of C shares in issue 700,000,000
6. Ordinary Dividends
There were no dividends paid or proposed in respect of the year to 31 January
2022 (2021 - US$nil).
7. Financial Instruments
Fair Value Hierarchy
The fair value hierarchy used to analyse the fair values of financial assets
is described below. The levels are determined by the lowest (that is the least
reliable or least independently observable) level of input that is significant
to the fair value measurement for the individual investment in its entirety as
follows:
Level 1 - using unadjusted quoted prices for identical instruments in an
active market;
Level 2 - using inputs, other than quoted prices included within Level 1, that
are directly or indirectly observable (based
on market data); and
Level 3 - using inputs that are unobservable (for which market data is
unavailable).
The valuation techniques used by the Company are explained in the accounting
policies on page 46 of the Annual Report and Financial Statements. Transfers
between levels of the fair value hierarchy take place when the criteria for
recognition in another level are met, such as the listing of an investment.
Level 1 Level 2 Level 3 Total
As at 31 January 2022 US$'000 US$'000 US$'000 US$'000
Listed equities 211,039 - - 211,039
Private company ordinary shares/warrants - - 167,268 167,268
Private company preference shares* - - 765,207 765,207
Private company convertible promissory notes - - 4,808 4,808
Total financial asset investments 211,039 - 937,283 1,148,322
Level 1 Level 2 Level 3 Total
As at 31 January 2021 US$'000 US$'000 US$'000 US$'000
Listed equities 102,442 - - 102,442
Private company ordinary shares/warrants - - 79,352 79,352
Private company preference shares* - - 429,710 429,710
Private company convertible promissory notes - - 2,675 2,675
Total financial asset investments 102,442 - 511,737 614,179
* 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 2022, investments with a fair value (IPO
price) of US$197,699,000 (2021 - US$47,656,000) were transferred from Level 3
to Level 1 on becoming listed.
Investments in securities are financial assets held at fair value through
profit or loss. In accordance with IFRS 13, the table above provides an
analysis of these investments based on the fair value hierarchy described
above, which reflects the reliability and significance of the information used
to measure their fair value.
Private company securities(*)
Listed securities US$'000
US$'000 Total
US$'000
Cost of investments at 1 February 2021 19,126 374,084 393,210
Investment holding gains and losses at 1 February 2021 83,316 137,653 220,969
Fair value of investments at 1 February 2021 102,442 511,737 614,179
Movements in the period:
Purchases at cost(†) 43,558 472,519 516,107
Sales - proceeds - (21,424) (21,424)
- gains on sales - 11,424 11,424
Changes in categorisation 197,699 (197,699) -
Changes in investment holding gains and losses (132,690) 160,726 28,036
Fair value of investments at 31 January 2022 211,039 937,283 1,148,322
Cost of investments at 31 January 2022 147,488 752,024 899,512
Investment holding gains and losses at 31 January 2022 63,551 185,259 248,810
Fair value of investments at 31 January 2022 211,039 937,283 1,148,322
* Includes holdings in preference shares, promissory notes, ordinary
shares and warrants.
† During the period the Company disposed of its investment in
Grail in exchange for proceeds comprising cash of US$8,740,000 and Illumina
shares, the equivalent value of which on the transaction date was
US$12,684,000. The Illumina shares received are a non-cash item and hence are
not reflected with the Statement of Cash Flows above.
The purchases and sales proceeds figures above include transaction costs of
US$99,000 (2021 - US$31,000) and US$nil (2021 - US$nil) respectively.
8. Share Capital 2022 2022 US$'000 2021 2021 US$'000
Number Number
Allotted, called up and fully paid ordinary shares of US$1 each 500,430,002 521,701 480,350,002 480,340
Allotted, called up and fully paid C shares of US$1 each 700,000,000 694,802 - -
By way of a special resolution dated 15 March 2019 the Directors have a
general authority to allot up to 720,000,000 ordinary shares or C shares, such
figure to include the ordinary shares issued at the initial placing.
477,250,000 ordinary shares were issued at the Company's initial placing.
During the year to 31 January 2022, the Company issued 20,080,000 ordinary
shares raising net proceeds of US$41,361,000 (year to 31 January 2021 -
3,100,000 shares were issued raising net proceeds of US$4,698,000). In the
period from 31 January 2022 to 28 March 2022 no further shares were issued.
Consequently, the Company has the authority to issue a further 219,570,000
ordinary shares under the existing authority which expires at the end of the
period concluding immediately prior to the Annual General Meeting of the
Company to be held in 2024 (or, if earlier, five years from the date of the
resolution).
By way of a special resolution dated 18 March 2021, the Directors have a
general authority to allot up to 700,000,000 C shares. On 26 April 2021, the
Company issued 700,000,000 C shares of US$1 each and raised net proceeds of
US$694,802,000. The issue costs of US$5,198,000 consisted of mainly broker
commission (US$4,066,000), legal fees (US$601,000) and listing fees
(US$396,000).
By way of an ordinary resolution passed at the Company's AGM held on 6 May
2021 the Directors of the Company have general authority to make market
purchases of up to 72,176,850 ordinary shares, being 14.99% of the ordinary
shares in issue. This authority will expire at the end of the period
concluding immediately prior to the second Annual General Meeting of the
Company to be held on 12 May 2022. No shares have been bought back during the
year ended 31 January 2022 hence the authority remains at 72,176,850 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. The financial information set out above does not constitute the Company's
statutory accounts for the year ended 31 January 2022 but is derived from
those accounts.
10. The Annual Report and Financial Statements will be available on the Managers'
website schiehallionfund.com (http://www.schiehallionfund.com/) ‡ on or
around 4 April 2022.
Glossary of Terms and Alternative Performance Measures ('APM')
An alternative performance measure is a financial measure of historical or
future financial performance, financial position, or cash flows, other than a
financial measure defined or specified in the applicable financial reporting
framework.
Total Assets
Total value of all assets held less current liabilities, other than
liabilities in the form of borrowings.
Net Asset Value
Also described as shareholder funds, net asset value ('NAV') is the value of
total assets less liabilities (including borrowings). The NAV per share is
calculated by dividing this amount by the number of ordinary shares or C
shares as applicable, in issue.
Net Current Assets
Net current assets comprise current assets less current liabilities excluding
borrowings.
Premium/(Discount) (APM)
As stockmarkets and share prices vary, the Company's share price is rarely the
same as its NAV. When the share price is lower than the NAV per share it is
said to be trading at a discount. The size of the discount is calculated by
subtracting the share price from the NAV per share and is usually expressed as
a percentage of the NAV per share. If the share price is higher than the NAV
per share, this situation is called a premium
Ordinary shares 2022 2021
Closing NAV per share (a) 158.20¢ 146.99¢
Closing share price (b) 212.00¢ 180.00¢
Premium ((b - a) ÷ (a) expressed as a percentage) 34.0% 22.5%
C shares 2022 2021
Closing NAV per share (a) 97.26¢ -
Closing share price (b) 118.00¢ -
Premium ((b - a) ÷ (a) expressed as a percentage) 21.3% -
Capital Deployed (APM)
Capital deployed reflects cumulative amounts invested since inception of the
Company.
Internal Rate of Return (IRR) (APM)
The IRR indicates the annualised rate of return for the Company's investment
portfolio.
Gross Multiple on Invested Capital (MOIC) (APM)
The MOIC expresses, as a multiple, how much return the Company has made on
investment realisations and income, relative to its book cost.
Ongoing Charges (APM)
The total recurring expenses (excluding the Company's costs of dealing in
investments and borrowing costs) incurred by the Company as a percentage of
the average net asset value (with debt at fair value).
Ordinary shares 2022 US$'000 2021
US$'000
Investment management fee 6,816 3,603
Other administrative expenses 655 759
Total expenses(*) (a) 7,471 4,362
Average net asset value (with borrowings deducted at fair value) (b) 835,470 568,242
Ongoing charges ((a) ÷ (b) expressed as a percentage) 0.89% 0.77%
C shares 2022 US$'000 2021
US$'000
Investment management fee 1,611 -
Other administrative expenses 445 -
Total expenses(*) 2,056 -
Total expenses annualised * (a) 2,680
Average net asset value (with borrowings deducted at fair value) (b) 697,793 -
Ongoing charges ((a) ÷ (b) expressed as a percentage) 0.38% -
* The total expenses above cover the period 26 April 2021 to 31
January 2022, a period of 280 days.
Leverage (APM)
For the purposes of the Alternative Investment Fund Managers Directive,
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.
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 £267 billion under management and
advice in active equity and bond portfolios for clients in the UK and
throughout the world (as at 28 March 2022). 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.
28 March 2022
For further information please contact:
Alex Blake, Baillie Gifford & Co
Tel: 0131 275 2859
Mark Knight, Director, Four Communications
Tel 0203 697 4200 or 07803 758810
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