TIDMMNTN TIDMMNTC
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 -1.47c (period to 31 January 2021, -0.33c) and the net revenue
return per C share was -0.28c. 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 C Share Total % of Value
Share net assets
Value Value Value
US$'000 %
US$'000 US$'000 US$'000
===================== ============================ ========== ========= ======== ======== ============ ========
Social media and news
ByteDance Limited aggregation company China 58,378 - 58,378 4.0 37,230
Online platform which
Affirm Holdings provides
Inc - point of sale consumer United
Listed finance States 57,033 - 57,033 3.9 88,322
Designs, manufactures
and
Space Exploration launches advanced
Technologies rockets and United
Corp spacecraft States 50,992 - 50,992 3.5 36,142
Online international
money United
Wise PLC - Listed transfer service Kingdom 36,509 12,135 48,644 3.3 26,412
United
Scopely Inc Online gaming company States 47,918 - 47,918 3.3 32,792
Warby Parker Online and physical
(JAND corrective United
Inc) - Listed eyewear retailer States 47,868 - 47,868 3.2 37,017
United
Stripe Inc Online payment platform States 45,046 - 45,046 3.1 37,476
Online platform for
checking
grammar, spelling
and improving United
Grammarly Inc written communication States - 45,002 45,002 3.0 -
Chime Financial Digital current account United
Inc provider States 15,530 28,827 44,357 3.0 10,000
Faire Wholesale United
Inc Online wholesale marketplace States - 36,703 36,703 2.5 -
Telephone voice, data,
DailyHunt (Ver text
se messaging, and roaming
Innovation Limited) services India 33,236 - 33,236 2.3 -
Genki Forest
Technology Group United
Holdings Limited Non-alcoholic beverages States - 33,000 33,000 2.2 -
Lithium-ion battery
Northvolt AB manufacturer Sweden 24,177 6,798 30,975 2.0 10,321
Developer of autonomous United
Nuro Inc delivery vehicles States 14,554 15,320 29,874 2.0 10,000
United
Tanium Inc Online security management States 29,773 - 29,773 2.0 19,170
United
Epic Games Inc Video game developer 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 -
Combines enzymes and
metal
catalysts to make United
Solugen Inc chemicals States - 28,129 28,129 1.9 -
Sustainable
Allbirds Inc direct-to-customer United
- Listed (*) footwear brand States 21,018 6,582 27,600 1.9 21,806
Oncological records
aggregator
and diagnostic testing United
Tempus Labs Inc provider States 27,089 - 27,089 1.9 30,356
Name Business Country 2022 2022 2022 2022 2021
Ordinary C Share Total % of Value
Share net assets
Value Value Value
US$'000 %
US$'000 US$'000 US$'000
====================== ========================== ========= ========= ======== ========= ============ ========
Provider of an on
demand
delivery platform
designed to
connect consumers
with local United
Rappi Inc stores States - 25,542 25,542 1.7 -
Jobs marketplace for
Workrise Technologies the energy United
Inc sector States 25,026 - 25,026 1.7 15,787
United
Databricks Inc Data software solutions States - 24,766 24,766 1.7 -
FlixMobility European mobility
GmbH 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 -
Marketplace for truckers
and United
Convoy Inc shippers States 12,185 5,000 17,185 1.2 11,898
Microbial seed treatments
to
increase crop yields
Indigo Agriculture and grain United
Inc marketplace States 16,958 - 16,958 1.1 18,241
AI based software
Wayve Technologies for self-driving United
Ltd cars Kingdom - 16,267 16,267 1.1 -
United
Graphcore Limited Computer chip developer Kingdom 16,600 - 16,600 1.1 13,812
Corporate credit cards
for United
Brex Inc startups States 15,709 - 15,709 1.1 -
Silicon photonic quantum United
PsiQuantum computing States - 15,000 15,000 1.0 -
Jiangxiaobai
Holdings Producer of alcoholic
Ltd beverages China 14,187 - 14,187 1.0 9,993
Blockstream Corp Financial software United
Inc developer States - 13,937 13,937 0.9 -
Manufactures and develops
3D United
Carbon Inc printers States 12,920 - 12,920 0.9 13,671
Honor Technology Provider of home-care United
Inc services States 5,585 6,458 12,043 0.9 5,000
United
Cohesity Inc Data storage States 11,930 - 11,930 0.8 12,840
Travel and lifestyle United
Away (JRSK Inc) brand States 11,920 - 11,920 0.8 8,831
Online market place
Airbnb Inc - for travel United
Listed accommodation States 11,828 - 11,828 0.8 14,120
Gene sequencing equipment United
Illumina - Listed and consumables States 9,396 - 9,396 0.6 17,306
Develops software
for
cardiovascular disease United
HeartFlow Inc diagnosis and treatment States 11,413 - 11,413 0.8 9,794
MasterClass (Yanka United
Industries Inc) Online education platform States 8,542 - 8,542 0.6 -
Oscar Health
Inc - Healthcare insurance United
Listed provider States 5,508 - 5,508 0.4 22,965
Zymergen Inc United
- Listed Synthetic biology 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).
2022 Ordinary
shares
value 2021
US$'000 2022 2022 Total
C shares Total
Value value 2022 value
% of net
Name US$'000 US$'000 assets US$'000
US Treasury Bill 24/03/2022 - 44,697 44,697 3.0 -
US Treasury Bill 16/06/2022 - 44,738 44,738 3.0 -
US Treasury Bill 14/07/2022 - 44,786 44,786 3.1 -
US Treasury Bill 08/09/2022 - 44,782 44,782 3.1 -
US Treasury Bill 03/11/2022 - 44,698 44,698 3.0 -
US Treasury Bill 29/12/2022 - 44,515 44,515 3.0 -
US Treasury Bill 25/02/2021 - - - - 12,642
US Treasury Bill 20/05/2021 - - - - 14,093
US Treasury Bill 17/06/2021 - - - - 12,393
US Treasury Bill 12/08/2021 - - - - 12,692
US Treasury Bill 04/11/2021 - - - - 12,690
US Treasury Bill 27/01/2022 - - - - 12,490
------------------------------------- ------------- ========= ========= ========= ========
Total US Treasury Bills - 268,216 268,216 18.2 77,000
------------------------------------- ------------- ========= ========= ========= ========
Cash 51,442 35,456 86,898 5.9 16,113
Other current assets and liabilities (1,342) (29,582) (30,924) (2.1) (1,212)
===================================== ============= ========= ========= ========= ========
Net current assets 50,100 274,090 324,190 22.0 91,101
===================================== ============= ========= ========= ========= ========
Net assets 791,663 680,849 1,472,512 100.0 706,080
===================================== ============= ========= ========= ========= ========
Listed Private
investments company Net current Net
% investments assets assets
% % %
31 January 2022 14.3 63.7 22.0 100.0
================ ============ ============ ============= ========
31 January 2021 14.5 72.5 13.0 100.0
================ ============ ============ ============= ========
Allocation of Net Assets
=========================
As at 31 January 2022
2022 2022 2022
Ordinary C shares Total 2022
shares value
US$'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 Number of Number of Number of Gross Internal Gross Multiple
deployed private private IPOs/listings Rate of on Invested
(*) company company Return (IRR) Capital
acquisitions realisations (*) (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 31 January 31 January 31 January
2022 2021 2022 2021
% % % %
================ ================= ================= ======== ============== ================= =================
Communication
China 9.1 6.6 Services 12.7 5.2
Consumer
Germany 1.3 1.5 Discretionary 14.6 13.2
Consumer
Sweden 3.0 1.5 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 Information
Bills 0.0 10.9 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 31 January
2022 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
year (9,172) 39,441 30,269 (1,598) 209,900 208,302
====================================== =========== ========== ============= =========== =========== ============
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 (1.47c) 10.46c 8.99c (0.33c) 43.94c 43.61c
Loss per C share (0.28c) (1.72c) (2.00c) - - -
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$'000
Fixed assets
Investments held at fair value through profit or loss (note 7) 1,148,322 614,179
=============================================================== ======== ============ ======== ===========
Current assets
US Treasury Bills 268,216 77,000
Cash and cash equivalents 86,898 16,113
Debtors 405 426
=============================================================== ======== ============ ======== ===========
355,519 93,539
=============================================================== ======== ============ ======== ===========
Current liabilities
Amounts falling due within one year (31,329) (1,638)
Net current assets 324,190 91,901
=============================================================== ======== ============ ======== ===========
Net assets 1,472,512 706,080
=============================================================== ======== ============ ======== ===========
Capital and reserves
Share capital 1,216,503 480,340
Capital reserve 260,419 220,978
Revenue reserve (4,410) 4,762
=============================================================== ======== ============ ======== ===========
Shareholders' funds 1,472,512 706,080
Shareholders' funds - ordinary shares 791,663 706,080
Net asset value per ordinary share 158.20c 146.99c
Number of ordinary shares in issue 500,430,002 480,350,002
=============================================================== ======== ============ ======== ===========
Shareholders' funds - C shares 680,849 -
Net asset value per C share 97.26 c -
Number of C shares in issue 700,000,000 -
=============================================================== ======== ============ ======== ===========
Statement of Changes in Equity
For the year ended 31 January 2022
Share Capital Revenue Shareholders'
capital reserve* reserve funds
US$'000 US$'000 US$'000 US$'000
====================================== ========= ========= ======== =============
Shareholders' funds at 1 February
2021 480,340 220,978 4,762 706,080
Ordinary shares issued (note 8) 41,361 - - 41,361
C shares issued 694,802 - - 694,802
Total comprehensive income - ordinary
shares - 51,460 (7,238) 44,222
Total comprehensive income - C shares - (12,019) (1,934) (13,953)
====================================== ========= ========= ======== =============
Shareholders' funds at 31 January
2022 1,216,503 260,419 (4,410) 1,472,512
====================================== ========= ========= ======== =============
For the year ended 31 January 2021
Share Capital Revenue Shareholders'
capital reserve* reserve funds
US$'000 US$'000 US$'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 c US$'000 c
------------------------- ------------------------- -------- -------- ---------------------------
Revenue return on ordinary
activities after taxation (7,238) (1.47) (1,598) (0.33)
Capital return on ordinary
activities after taxation 51,460 10.46 209,900 43.94
============================= ========================= ======== ======== ===========================
Profit and total
comprehensive income for the
year 44,222 8.99 208,302 43.61
============================= ========================= ======== ======== ===========================
Weighted average number of
ordinary shares in issue 491,934,440 477,670,487
============================= =================================== =====================================
C shares Period from 27 April 2021 to 31
January 2022
US$'000 c
========================= ========================= ======== ======== ===========================
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
++ 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) 158.20c 146.99c
Closing share price (b) 212.00c 180.00c
======================================================== ===== ======== ========
Premium ((b - a) ÷ (a) expressed as a percentage) 34.0% 22.5%
=============================================================== ======== ========
C shares 2022 2021
======================================================= ==== ======== =====
Closing NAV per share (a) 97.26c -
Closing share price (b) 118.00c -
======================================================= ==== ======== =====
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 GBP 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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END
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(END) Dow Jones Newswires
March 29, 2022 02:00 ET (06:00 GMT)
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