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 Ordinary Share Value US$'000 | 2022 C Share Value
US$'000 | 2022 Total Value
US$'000 | 2022 % of net assets
% | 2021 Value
US$'000 |
| ByteDance Limited | Social media and news aggregation company | China | 58,378 | - | 58,378 | 4.0 | 37,230 |
| Affirm Holdings Inc - Listed
| Online platform which provides point of sale consumer finance | United States | 57,033 | - | 57,033 | 3.9 | 88,322 |
| Space Exploration Technologies Corp | Designs, manufactures and launches advanced rockets and spacecraft | United States | 50,992 | - | 50,992 | 3.5 | 36,142 |
| Wise PLC - Listed | Online international money transfer service | United Kingdom | 36,509 | 12,135 | 48,644 | 3.3 | 26,412 |
| Scopely Inc | Online gaming company | United States | 47,918 | - | 47,918 | 3.3 | 32,792 |
| Warby Parker (JAND Inc) - Listed | Online and physical corrective eyewear retailer | United States | 47,868 | - | 47,868 | 3.2 | 37,017 |
| Stripe Inc | Online payment platform | United States | 45,046 | - | 45,046 | 3.1 | 37,476 |
| Grammarly Inc | Online platform for checking grammar, spelling and improving written communication | United States | - | 45,002 | 45,002 | 3.0 | - |
| 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 Innovation Limited) | Telephone voice, data, text messaging, and roaming services | India | 33,236 | - | 33,236 | 2.3 | - |
| Genki Forest Technology Group Holdings Limited | Non-alcoholic beverages | United States | - | 33,000 | 33,000 | 2.2 | - |
| Northvolt AB | Lithium-ion battery manufacturer | Sweden | 24,177 | 6,798 | 30,975 | 2.0 | 10,321 |
| Nuro Inc | Developer of autonomous delivery vehicles | United States | 14,554 | 15,320 | 29,874 | 2.0 | 10,000 |
| 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 Limited) | Pet food and accessories | Australia | - | 28,182 | 28,182 | 1.9 | - |
| Solugen Inc | Combines enzymes and metal catalysts to make chemicals | United States | - | 28,129 | 28,129 | 1.9 | - |
| Allbirds Inc - Listed* | Sustainable direct-to-customer footwear brand | United States | 21,018 | 6,582 | 27,600 | 1.9 | 21,806 |
| Tempus Labs Inc | Oncological records aggregator and diagnostic testing provider | United States | 27,089 | - | 27,089 | 1.9 | 30,356 |
|
|
|
|
|
|
|
|
|
| Name | Business | Country | 2022 Ordinary Share Value US$'000 | 2022 C Share Value
US$'000 | 2022 Total Value
US$'000 | 2022 % of net assets
% | 2021 Value
US$'000 |
| Rappi Inc | Provider of an on demand delivery platform designed to connect consumers with local stores | United States | - | 25,542 | 25,542 | 1.7 | - |
| Workrise Technologies Inc | Jobs marketplace for the energy sector | United States | 25,026 | - | 25,026 | 1.7 | 15,787 |
| 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 shippers | United States | 12,185 | 5,000 | 17,185 | 1.2 | 11,898 |
| Indigo Agriculture Inc | Microbial seed treatments to increase crop yields and grain marketplace | United States | 16,958 | - | 16,958 | 1.1 | 18,241 |
| Wayve Technologies Ltd | AI based software for self-driving cars | United Kingdom | - | 16,267 | 16,267 | 1.1 | - |
| Graphcore Limited | Computer chip developer | United Kingdom | 16,600 | - | 16,600 | 1.1 | 13,812 |
| Brex Inc | Corporate credit cards for startups | United States | 15,709 | - | 15,709 | 1.1 | - |
| PsiQuantum | Silicon photonic quantum computing | United States | - | 15,000 | 15,000 | 1.0 | - |
| Jiangxiaobai Holdings Ltd | Producer of alcoholic beverages | China | 14,187 | - | 14,187 | 1.0 | 9,993 |
| Blockstream Corp Inc | Financial software developer | United States | - | 13,937 | 13,937 | 0.9 | - |
| Carbon Inc | Manufactures and develops 3D printers | United States | 12,920 | - | 12,920 | 0.9 | 13,671 |
| 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 accommodation | United States | 11,828 | - | 11,828 | 0.8 | 14,120 |
| Illumina - Listed† | Gene sequencing equipment and consumables | United States | 9,396 | - | 9,396 | 0.6 | 17,306 |
| HeartFlow Inc | Develops software for cardiovascular disease diagnosis and treatment | United States | 11,413 | - | 11,413 | 0.8 | 9,794 |
| MasterClass (Yanka Industries Inc) | Online education platform | United States | 8,542 | - | 8,542 | 0.6 | - |
| Oscar Health Inc - Listed | Healthcare insurance provider | United States | 5,508 | - | 5,508 | 0.4 | 22,965 |
| 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 US$'000 | 2022 C shares Value US$'000 | 2022 Total value US$'000 | 2022 % of net assets | 2021 Total value US$'000 |
| US Treasury Bill 24/03/2022 | - | 44,697 | 44,697 | 3.0 | - |
| US Treasury Bill 16/06/2022 | - | 44,738 | 44,738 | 3.0 | - |
| US Treasury Bill 14/07/2022 | - | 44,786 | 44,786 | 3.1 | - |
| US Treasury Bill 08/09/2022 | - | 44,782 | 44,782 | 3.1 | - |
| US Treasury Bill 03/11/2022 | - | 44,698 | 44,698 | 3.0 | - |
| US Treasury Bill 29/12/2022 | - | 44,515 | 44,515 | 3.0 | - |
| US Treasury Bill 25/02/2021 | - | - | - | - | 12,642 |
| US Treasury Bill 20/05/2021 | - | - | - | - | 14,093 |
| US Treasury Bill 17/06/2021 | - | - | - | - | 12,393 |
| US Treasury Bill 12/08/2021 | - | - | - | - | 12,692 |
| US Treasury Bill 04/11/2021 | - | - | - | - | 12,690 |
| US Treasury Bill 27/01/2022 | - | - | - | - | 12,490 |
| Total US Treasury Bills | - | 268,216 | 268,216 | 18.2 | 77,000 |
| Cash | 51,442 | 35,456 | 86,898 | 5.9 | 16,113 |
| Other current assets and liabilities | (1,342) | (29,582) | (30,924) | (2.1) | (1,212) |
| Net current assets | 50,100 | 274,090 | 324,190 | 22.0 | 91,101 |
| Net assets | 791,663 | 680,849 | 1,472,512 | 100.0 | 706,080 |
|
| Listed investments % | Private company investments % |
Net current assets % |
Net assets % |
| 31 January 2022 | 14.3 | 63.7 | 22.0 | 100.0 |
| 31 January 2021 | 14.5 | 72.5 | 13.0 | 100.0 |
|
Allocation of Net Assets |
As at 31 January 2022
|
| 2022 Ordinary shares value US$'000 | 2022 C shares value US$'000 | 2022 Total Value US$'000 |
2022 % of net assets |
| 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 * (US$'000) | Number of private company acquisitions | Number of private company realisations | Number of IPOs/listings | Gross Internal Rate of Return (IRR)* | Gross Multiple on Invested Capital (MOIC) * |
| Company metrics | 909,760 | 44 | 1 | 7 | 24.63% | 1.29% |
* Alternative performance measure, see Glossary of Terms and Alternative Performance Measures at the end of this announcement.
Distribution of Net Assets
Ordinary Shares
Geographical Sectoral
|
| As at 31 January 2022 % | As at 31 January 2021 % |
|
| As at 31 January 2022 % | As at 31 January 2021 % |
| China | 9.1 | 6.6 |
| Communication Services | 12.7 | 5.2 |
| Germany | 1.3 | 1.5 |
| Consumer Discretionary | 14.6 | 13.2 |
| Sweden | 3.0 | 1.5 |
| Consumer Staples | 3.9 | 4.0 |
| United Kingdom | 6.7 | 5.7 |
| Financials | 22.2 | 26.2 |
| United States | 69.4 | 71.7 |
| Healthcare | 7.0 | 8.9 |
| India | 4.2 | 0.0 |
| Industrials | 14.2 | 11.9 |
| US Treasury Bills | 0.0 | 10.9 |
| Information Technology | 18.7 | 16.2 |
| Net Current Assets | 6.3 | 2.1 |
| Materials | 0.4 | 1.4 |
|
|
|
|
| US Treasury Bills | 0.0 | 10.9 |
|
|
|
|
| Net Current Assets | 6.3 | 2.1 |
|
| 100.0 | 100.0 |
|
| 100.0 | 100.0 |
C Shares
Geographical Sectoral
|
| As at 31 January 2022 % |
|
| As at 31 January 2022 % |
| Germany | 5.9 |
| Consumer Discretionary | 11.5 |
| Sweden | 0.9 |
| Consumer Staples | 4.8 |
| United Kingdom | 4.2 |
| Financials | 6.1 |
| United States | 41.8 |
| Healthcare | 0.9 |
| Brazil | 2.8 |
| Industrials | 4.7 |
| Australia | 4.1 |
| Information Technology | 20.6 |
| US Treasury Bills | 39.4 |
| Materials | 4.1 |
| Net Current Assets | 0.9 |
| Real Estate | 7.0 |
|
|
|
| US Treasury Bills | 39.4 |
|
|
|
| Net Current Assets | 0.9 |
|
| 100.0 |
|
| 100.0 |
The above sectoral distribution is not derived from any index.
Statement of Comprehensive Income
|
| For the year ended 31 January 2022 | For the year ended 31 January 2021 | ||||
|
| Revenue US$'000 | Capital US$'000 | Total US$'000 | Revenue US$'000 | Capital US$'000 | Total US$'000 |
| Gains on investments | - | 39,460 | 39,460 | - | 209,901 | 209,901 |
| Currency losses | - | (19) | (19) | - | (1) | (1) |
| Income (note 2) | 362 | - | 362 | 2,764 | - | 2,764 |
| Investment management fee (note 3) | (8,427) | - | (8,427) | (3,603) | - | (3,603) |
| Other administrative expenses (note 4) | (1,100) | - | (1,100) | (759) | - | (759) |
| Operating profit before finance costs and taxation | (9,165) | 39,441 | 30,276 | (1,598) | 209,900 | 208,302 |
| Finance costs of borrowings | (7) | - | (7) | - | - | - |
| Operating profit before taxation | (9,172) | 39,441 | 30,269 | (1,598) | 209,900 | 208,302 |
| Tax on ordinary activities | - | - | - | - | - | - |
| Profit and total comprehensive income for the year | (9,172) | 39,441 | 30,269 | (1,598) | 209,900 | 208,302 |
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| Total comprehensive income/(loss) for the year analysed as follows: |
|
|
|
|
|
|
| Attributable to ordinary shareholders | (7,238) | 51,460 | 44,222 | (1,598) | 209,900 | 208,302 |
| Attributable to C shareholders | (1,934) | (12,019) | (13,953) | - | - | - |
| Profit and total comprehensive income for the year | (9,172) | 39,441 | 30,269 | (1,598) | 209,900 | 208,302 |
| (Loss)/earnings per ordinary share | (1.47¢) | 10.46¢ | 8.99¢ | (0.33¢) | 43.94¢ | 43.61¢ |
| Loss per C share | (0.28¢) | (1.72¢) | (2.00¢) | - | - | - |
The total column of this Statement represents the Statement of Comprehensive Income of the Company. The supplementary revenue and capital columns are prepared under guidance published by the Association of Investment Companies.
All revenue and capital items in this statement derive from continuing operations.
Statement of Financial Position
As at 31 January
|
| 2022 US$'000 | 2022 US$'000 | 2021 US$'000 | 2021 US$'000 |
| Fixed assets |
|
|
|
|
| Investments held at fair value through profit or loss (note 7) |
| 1,148,322 |
| 614,179 |
| Current assets |
|
|
|
|
| US Treasury Bills | 268,216 |
| 77,000 |
|
| Cash and cash equivalents | 86,898 |
| 16,113 |
|
| Debtors | 405 |
| 426 |
|
|
| 355,519 |
| 93,539 |
|
| Current liabilities |
|
|
|
|
| Amounts falling due within one year | (31,329) |
| (1,638) |
|
| Net current assets |
| 324,190 |
| 91,901 |
| Net assets |
| 1,472,512 |
| 706,080 |
| Capital and reserves |
|
|
|
|
| Share capital |
| 1,216,503 |
| 480,340 |
| Capital reserve |
| 260,419 |
| 220,978 |
| Revenue reserve |
| (4,410) |
| 4,762 |
| Shareholders' funds |
| 1,472,512 |
| 706,080 |
|
|
|
|
|
|
| Shareholders' funds - ordinary shares |
| 791,663 |
| 706,080 |
| Net asset value per ordinary share |
| 158.20¢ |
| 146.99¢ |
| Number of ordinary shares in issue |
| 500,430,002 |
| 480,350,002 |
| Shareholders' funds - C shares |
| 680,849 |
| - |
| Net asset value per C share |
| 97.26¢ |
| - |
| Number of C shares in issue |
| 700,000,000 |
| - |
Statement of Changes in Equity
For the year ended 31 January 2022
|
| Share capital US$'000 | Capital reserve* US$'000 | Revenue reserve US$'000 | Shareholders' funds US$'000 |
| Shareholders' funds at 1 February 2021 | 480,340 | 220,978 | 4,762 | 706,080 |
| Ordinary shares issued (note 8) | 41,361 | - | - | 41,361 |
| C shares issued | 694,802 | - | - | 694,802 |
| Total comprehensive income - ordinary shares | - | 51,460 | (7,238) | 44,222 |
| Total comprehensive income - C shares | - | (12,019) | (1,934) | (13,953) |
| Shareholders' funds at 31 January 2022 | 1,216,503 | 260,419 | (4,410) | 1,472,512 |
For the year ended 31 January 2021
|
| Share capital | Capital reserve* US$'000 | Revenue reserve US$'000 | Shareholders' funds US$'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$18,000).
|
| 2022 US$'000 | 2021 US$'000 |
| Cash and cash equivalents comprise the following: |
|
|
| Cash at bank | 86,898 | 16,113 |
| Notes to the Financial Statements |
|
|
| ||||
| 1. | Principal Accounting Policies The Financial Statements for the year to 31 January 2022 have been prepared in accordance with International Financial Reporting Standards ('IFRS'). | ||||
| 2. | Income | 2022 US$'000 | 2021 US$'000 | ||
|
| US Treasury Bills interest | 166 | 2,899 | ||
|
| Overseas interest | 195 | (153) | ||
|
| Deposit interest | 1 | 18 | ||
|
| Total income | 362 | 2,764 | ||
|
|
|
|
| ||
| 3. | Investment Management Fee | 2022 US$'000 | 2021 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$1.3 billion. Management fees are calculated and payable quarterly. Cash equivalents include US Treasury Bills. | ||||
| 4. | Other Administrative Expenses |
| 2022 US$'000 | 2021 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$nil). |
| ||||||||||
| 7. | Financial Instruments |
| ||||||||||
|
| Fair Value Hierarchy |
| ||||||||||
|
| The fair value hierarchy used to analyse the fair values of financial assets is described below. The levels are determined by the lowest (that is the least reliable or least independently observable) level of input that is significant to the fair value measurement for the individual investment in its entirety as follows: Level 1 - using unadjusted quoted prices for identical instruments in an active market; Level 2 - using inputs, other than quoted prices included within Level 1, that are directly or indirectly observable (based on market data); and Level 3 - using inputs that are unobservable (for which market data is unavailable). The valuation techniques used by the Company are explained in the accounting policies on page 46 of the Annual Report and Financial Statements. Transfers between levels of the fair value hierarchy take place when the criteria for recognition in another level are met, such as the listing of an investment. |
| ||||||||||
|
|
As at 31 January 2022 | Level 1 US$'000 | Level 2 US$'000 | Level 3 US$'000 | Total US$'000 |
| ||||||
| Listed equities | 211,039 | - | - | 211,039 |
| |||||||
| Private company ordinary shares/warrants | - | - | 167,268 | 167,268 |
| |||||||
| Private company preference shares* | - | - | 765,207 | 765,207 |
| |||||||
| Private company convertible promissory notes | - | - | 4,808 | 4,808 |
| |||||||
| Total financial asset investments | 211,039 | - | 937,283 | 1,148,322 |
| |||||||
|
|
|
|
|
|
| |||||||
|
|
As at 31 January 2021 | Level 1 US$'000 | Level 2 US$'000 | Level 3 US$'000 | Total 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$47,656,000) were transferred from Level 3 to Level 1 on becoming listed. Investments in securities are financial assets held at fair value through profit or loss. In accordance with IFRS 13, the table above provides an analysis of these investments based on the fair value hierarchy described above, which reflects the reliability and significance of the information used to measure their fair value. | ||||
|
|
|
|
Listed securities US$'000 | Private company securities* 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$nil) respectively.
| 8. | Share Capital |
| 2022 Number | 2022 US$'000 | 2021 Number | 2021 US$'000 | ||
| 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‡ 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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