TIDMSIGC
RNS Number : 6368W
Sherborne Investors (Guernsey)C Ltd
20 August 2020
SHERBORNE INVESTORS (GUERNSEY) C LIMITED
Interim Report and Unaudited Condensed Consolidated Financial
Statements
For the period from 1 January 2020 to 30 June 2020
Company Summary
The Company Sherborne Investors (Guernsey) C Limited (the
"Company") is a Guernsey domiciled limited company
and its shares are admitted to trading on the
London Stock Exchange's Specialist Fund Segment
("SFS"). The Company was incorporated on 25 May
2017. The Company commenced dealings on the SFS
on 12 July 2017.
Investment Objective To realise capital growth from investment in
a target company identified by the Investment
Manager, with the aim of generating a significant
capital return for Shareholders.
Investment Policy To invest, through its investment in SIGC, LP
(Incorporated) (the "Investment Partnership"),
in a company which is publicly quoted which it
considers to be undervalued as a result of operational
deficiencies and which it believes can be rectified
by the Investment Manager's active involvement,
thereby increasing the value of the investment.
The Company will only invest in one target company
at a time.
Investment Manager Sherborne Investors (Guernsey) GP, LLC (the "General
Partner") and the Investment Partnership have
appointed Sherborne Investors Management (Guernsey)
LLC (the "Investment Manager") to provide investment
management services to the Investment Partnership.
Chairman's Statement
For the period ended 30 June 2020
Dear Shareholder,
I am pleased to present the Interim Report of Sherborne
Investors (Guernsey) C Limited (the "Company") for the period 1
January 2020 to 30 June 2020.
During the period the Company continued to pursue its investment
strategy through its shareholding in Barclays PLC ("Barclays").
SIGC, LP (Incorporated) co-invests in Barclays with other
third-party investors through funds (the "Funds") managed by
affiliates of Sherborne Investors Management (Guernsey) LLC (the
"Investment Manager"). Following recent purchases with cash on hand
these Funds currently own an interest of 5.9%, making them the
largest shareholder in Barclays.
As at 30 June 2020, the net asset value ("NAV") attributable to
shareholders of the Company was GBP351.0 million (30 June 2019:
GBP469.9 million and 31 December 2019: GBP546.3 million) or 50.15
pence per share (30 June 2019: 67.13 pence per share and 31
December 2019: 78.04 pence per share) (see Note 9).
The Investment Manager has advised the Board that it believes
that addressing the issues it has discussed with Barclays' board
could increase Barclays' financial strength and its long-term
competitive position, leading to an increase in shareholder value
in line with the Investment Manager's customary return objectives.
The Investment Manager's present intention is to continue its
dialogue with Barclays for as long as it appears to be appropriate
to do so.
The principal risks and uncertainties of the Company are in
relation to performance risk, market risk, relationship risk and
operational risk. These are unchanged from 31 December 2019, and
further details may be found in the Directors' Strategic Report
within the Annual Report and Audited Consolidated Financial
Statements of the Company for the year ended 31 December 2019. The
Directors will continue to assess the principal risks and
uncertainties relating to the Company for the remaining six months
of the year but expect these to remain unchanged.
Details of related party transactions during the period are
included in Note 10 of the Condensed Consolidated Financial
Statements.
The Company intends to continue to pursue its strategy as set
out in its prospectus.
During the period, the coronavirus ("COVID-19") outbreak has
caused extensive disruptions to businesses and economic activities
globally. The uncertainties over the emergence and spread of
COVID-19 have caused market volatility on a global scale. Due to
current market conditions, since 31 December 2019 the Barclays
share price has declined approximately 36% to 30 June 2020. As
announced on 31 March 2020, the Barclays board cancelled the
payment of the full year 2019 dividend and any potential interim
2020 dividends at the request of the UK regulator as a prudent
measure given the current environment. Currently, no definitive
guidance has been provided by either Barclays or the regulator with
respect to future dividends. The cancelled dividend has, however,
helped improve Barclays' capital position which at 30 June 2020 was
stated to be above its targeted range. The situation is constantly
evolving as governments and businesses continue to combat the
impact of the pandemic. As an investment company, for day to day
operations the Company is ultimately dependent on the Investment
Manager, Administrator and Company Secretary all of whom have
robust business continuity plans in place to ensure that they can
continue to service the Company. These business continuity plans
have been in place and have been proven effective over the
period.
We are grateful for your continued support and will keep you
informed of the status of our investment as it develops.
Statement of Directors' Responsibility
Responsibility statement
We confirm that to the best of our knowledge:
-- The condensed set of financial statements has been prepared
in accordance with IAS 34 'Interim Financial Reporting' as adopted
in the European Union;
-- The interim management report includes a fair review of the
information required by DTR 4.2.7R (indication of important events
during the first six months and their impact on the condensed
financial statements and description of principal risks and
uncertainties for the remaining six months of the year);
-- The interim management report includes a fair review of the
information required by DTR 4.2.8R (disclosure of related parties'
transactions and changes therein); and
-- The condensed set of financial statements, which has been
prepared in accordance with the applicable set of accounting
standards, gives a true and fair view of the assets, liabilities,
financial position and profit or loss of the issuer, or the
undertakings included in the consolidation as a whole as required
by DTR 4.2.10R.
Going Concern
The Directors have undertaken a rigorous review of the Company's
ability to continue as a going concern including reviewing the
on-going cash flows and the level of cash balances as of the
reporting date as well as taking forecasts of future cash flows
into consideration.
During the period, the COVID-19 outbreak has caused extensive
disruptions to businesses and economic activities globally. The
uncertainties over the emergence and spread of COVID-19 have caused
market volatility on a global scale. For further details on the
COVID-19 related impact to the Company refer to the Chairman's
Statement.
After making enquiries of the Investment Manager and the
Administrator, the Directors have a reasonable expectation that the
Company has adequate resources to continue in operational existence
for the foreseeable future. Accordingly, they continue to adopt a
going concern basis in preparing these unaudited Condensed
Consolidated Financial Statements.
Independent Auditor's Review Report to the Members of Sherborne
Investors (Guernsey) C Limited
We have been engaged by Sherborne Investors (Guernsey) C Limited
(the "Company") to review the condensed set of financial statements
in the half-yearly financial report for the six months ended 30
June 2020 which comprises the Condensed Consolidated Statement of
Comprehensive Income, the Condensed Consolidated Statement of
Financial Position, the Condensed Consolidated Statement of Changes
in Equity, the Condensed Consolidated Statement of Cash Flows and
related notes 1 to 13. We have read the other information contained
in the interim financial report and considered whether it contains
any apparent misstatements or material inconsistencies with the
information in the condensed set of financial statements.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and
has been approved by, the Directors. The Directors are responsible
for preparing the half-yearly financial report in accordance with
the Disclosure and Transparency Rules of the United Kingdom's
Financial Conduct Authority.
As disclosed in note 1, the annual financial statements of the
Group are prepared in accordance with IFRSs as adopted by the
European Union. The condensed set of financial statements included
in this interim financial report has been prepared in accordance
with International Accounting Standard 34, "Interim Financial
Reporting", as adopted by the European Union.
Our responsibility
Our responsibility is to express to the Company a conclusion on
the condensed set of financial statements in the half-yearly
financial report based on our review.
Scope of review
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410 "Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity" issued by the Financial Reporting Council for use in
the United Kingdom. A review of interim financial information
consists of making inquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other
review procedures. A review is substantially less in scope than an
audit conducted in accordance with International Standards on
Auditing (UK) and consequently does not enable us to obtain
assurance that we would become aware of all significant matters
that might be identified in an audit. Accordingly, we do not
express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the half-yearly financial report for the six months to 30 June
2020 is not prepared, in all material respects, in accordance with
International Accounting Standard 34 as adopted by the European
Union and the Disclosure and Transparency Rules of the United
Kingdom's Financial Conduct Authority.
Use of our report
This report is made solely to the Company in accordance with
International Standard on Review Engagements (UK and Ireland) 2410
"Review of Interim Financial Information Performed by the
Independent Auditor of the Entity" issued by the Financial
Reporting Council. Our work has been undertaken so that we might
state to the Company those matters we are required to state to it
in an independent review report and for no other purpose. To the
fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the Company, for our review
work, for this report, or for the conclusions we have formed.
Condensed Consolidated Statement of Comprehensive Income
(Unaudited)
For the period from 1 January 2020 to 30 June 2020
1 January 2020 1 January 2019 1 January 2019
to to to
30 June 2020 30 June 2019 31 December
201 9
(audited)
Notes GBP GBP GBP GBP GBP GBP
----------------- ------ ------------ -------------------- -------- -------------- ---------- -------------
Income 1(e)
Unrealised
gain/(loss)
on financial
assets
at fair value
through 1(d),
profit or loss 5 (192,993,896) 1,184,206 77,433,561
Dividend income 6 - 3,488,732 6,105,282
Interest income 1,194 24,550 62,870
----------------- ------ ------------ -------------------- -------- -------------- ---------- -------------
Total
income/(loss) (192,992,702) 4,697,488 83,601,713
----------------- ------ ------------ -------------------- -------- -------------- ---------- -------------
Expenses 1(f)
Management fees 10 2,014,455 2,117,179 4,211,140
Professional
fees 120,433 1,079,496 1,314,395
Directors' fees 2, 10 80,000 80,000 160,000
Administrative
fees 73,866 77,878 151,290
Other fees 1,161 152,074 193,688
-------------
Total operating
expenses 2,289,915 3,506,627 6,030,513
----------------- ------ ------- ------------------------- -------- ------------------ -----------------
Comprehensive
income/(loss) (195,282,617) 1,190,861 77,571,200
----------------- ------ ------- ------------------------- -------- ------------------ -----------------
Comprehensive
income/(loss)
attributable to:
Equity
Shareholders (195,244,021) 1,190,147 77,554,752
Non-controlling
interest (NCI) 1(b) (38,596) 714 16,448
----------------- ------ ------- ------------------------- -------- ------------------ -----------------
Weighted average
number of
shares
outstanding 4 700,000,000 700,000,000 700,000,000
Basic and
diluted
earnings per
share
attributable to
shareholders
(excluding
NCI) 4 (27.89)p 0.17p 11.08p
----------------- ------ ------- ------------------------- -------- ------------------ -----------------
All revenue and expenses are derived from continuing
operations.
Although not required by IAS 34 - 'Interim Financial Reporting',
the comparative figures for the preceding year and the related
notes have been included on a voluntary basis.
The accompanying notes form an integral part of these Condensed
Consolidated Financial Statements.
Condensed Consolidated Statement of Financial Position
(Unaudited)
As at 30 June 20 20
30 June 2020 30 June 20 19 31 December 2019
(audited)
Notes GBP GBP GBP GBP GBP GBP
-------------------- ------ ---------- -------------- -------------- -------------- ---------- --------------
Non-Current
Assets
Financial assets
at fair value
through profit 1(d),
or loss 5 346,926,656 441,571,407 537,820,762
-------------------- ------ ---------- -------------- -------------- -------------- ---------- --------------
346,926,656 441,571,407 537,820,762
-------------------- ------ ---------- -------------- -------------- -------------- ---------- --------------
Current Assets
Cash and cash 1(h),
equivalents 11 4,248,227 8,545,306 8,688,050
Treasury gilts 1(m) - 20,011,139 -
Prepaid expenses 44,162 38,220 17,224
-------------------- ------ ---------- -------------- -------------- -------------- ---------- --------------
4,292,389 28,594,665 8,705,274
-------------------- ------ ---------- -------------- -------------- -------------- ---------- --------------
Current Liabilities
Trade and other 1(i),
payables 7 106,339 151,688 131,313
----------------
106,339 151,688 131,313
-------------------- ------ ---------- -------------- -------------- -------------- ---------- ----------------
Net Current
Assets 4,186,050 28,442,977 8,573,961
-------------------- ------ ---------- -------------- ---------- ------------------ ---------- ----------------
Net Assets 351,112,706 470,014,384 546,394,723
-------------------- ------ ---------- -------------- ---------- ------------------ ---------- ----------------
Capital and
Reserves
Called up share
capital and
share premium 8 688,939,403 688,939,403 688,939,403
Retained reserves (337,898,824) (219,019,408) (142,654,803)
-------------------- ------ ---------- -------------- ---------- ------------------ ---------- ----------------
Equity attributable
to the Company 351,040,579 469,919,995 546,284,600
-------------------- ------ ---------- -------------- ---------- ------------------ ---------- ----------------
Non-controlling
interest (NCI) 1(b) 72,127 94,389 110,123
-------------------- ------ ---------- -------------- ---------- ------------------ ---------- ----------------
Total Equity 351,112,706 470,014,384 546,394,723
-------------------- ------ ---------- -------------- ---------- ------------------ ---------- ----------------
NAV Per Share
(excluding NCI) 9 50.15p 67.13p 78.04p
-------------------- ------ ---------- -------------- ---------- ------------------ ---------- ----------------
The Condensed Consolidated Financial Statements were approved by
the Board of Directors for issue on 19 August 2020.
Although not required by IAS 34 - 'Interim Financial Reporting',
the comparative figures for the interim period and the related
notes have been included on a voluntary basis.
The accompanying notes form an integral part of these Condensed
Consolidated Financial Statements.
Condensed Consolidated Statement of Changes in Equity
(Unaudited)
For the period from 1 January 20 20 to 30 June 2020
Share Capital Non-
and Share Retained Controlling Total
Premium Reserves Interest Equity
GBP GBP GBP GBP
------------------------- -------------- -------------- ------------- --------------
Balance at 1 January
2020 688,939,403 (142,654,803) 110,123 546,394,723
-------------------------- -------------- -------------- ------------- --------------
Comprehensive loss - (195,244,021) (38,596) (195,282,617)
Contributions - - 600 600
Balance at 30 June 2020 688,939,403 (337,898,824) 72,127 351,112,706
-------------------------- -------------- -------------- ------------- --------------
Share Capital Non-
and Share Retained Controlling Total
Premium Reserves Interest Equity
GBP GBP GBP GBP
------------------------- -------------- -------------- ------------- ------------
Balance at 1 January
2019 688,939,403 (220,209,555) 93,675 468,823,523
-------------------------- -------------- -------------- ------------- ------------
Comprehensive income - 1,190,147 714 1,190,861
Balance at 30 June 2019 688,939,403 (219,019,408) 94,389 470,014,384
-------------------------- -------------- -------------- ------------- ------------
Share Capital Non-
and Share Retained Controlling Total
Premium Reserves Interest Equity
GBP GBP GBP GBP
------------------------ -------------- -------------- ------------- ------------
Balance at 1 January
2019 688,939,403 (220,209,555) 93,675 468,823,523
------------------------- -------------- -------------- ------------- ------------
Comprehensive income - 77,554,752 16,448 77,571,200
Balance at 31 December
2019 (audited) 688,939,403 (142,654,803) 110,123 546,394,723
------------------------- -------------- -------------- ------------- ------------
Although not required by IAS 34 - 'Interim Financial Reporting',
the comparative figures for the preceding year and the related
notes have been included on a voluntary basis.
The accompanying notes form an integral part of these Condensed
Consolidated Financial Statements.
Condensed Consolidated Statement of Cash Flows (Unaudited)
For the period from 1 January 2020 to 30 June 2020
1 January 1 January
1 January 201 9 2019 to
2020 to 30 to 30 June 31 December
June 2020 201 9 201 9
(audited)
Notes GBP GBP GBP
------------------------------------ ---------- -------------- ------------- --------------
Net cash flow from/(used in) operating
activities See below (2,341,827) 10,577 103,860
------------------------------------------------ -------------- ------------- --------------
Investing activities
Capital contributions 5 (4,849,515) - (20,000,000)
Purchase of Treasury gilts 1(m) - (20,001,441) -
Interest income 1,194 14,850 62,870
Capital distributions 5 2,749,725 - -
Net cash flow used in investing
activities (2,098,596) (19,986,591) (19,937,130)
------------------------------------------------ -------------- ------------- --------------
Financing activities
Contributions from non-controlling 600 - -
interest
Net cash flow from financing activities 600 - -
------------------------------------------------ -------------- ------------- --------------
Net movement in cash and cash
equivalents (4,439,823) (19,976,014) (19,833,270)
Opening cash and cash equivalents 8,688,050 28,521,320 28,521,320
------------------------------------------------ -------------- ------------- --------------
Closing cash and cash equivalents 4,248,227 8,545,306 8,688,050
------------------------------------------------ -------------- ------------- --------------
Net cash flow from/(used in)
operating activities
------------------------------------------------ -------------- ------------- --------------
Comprehensive income/(loss) (195,282,617) 1,190,861 77,571,200
Unrealised (gain)/loss on
financial assets at fair
value through profit or loss 5 192,993,896 (1,184,206) (77,433,561)
Movement in prepaid expenses (26,938) (16,450) 4,544
Movement in trade and other
payables 7 (24,974) 44,922 24,547
Interest income (1,194) (24,550) (62,870)
---------------------------------------- ------ -------------- ------------- --------------
Net cash flow from/(used in) operating
activities (2,341,827) 10,577 103,860
------------------------------------------------ -------------- ------------- --------------
Although not required by IAS 34 - 'Interim Financial Reporting',
the comparative figures for the preceding year and the related
notes have been included on a voluntary basis.
The accompanying notes form an integral part of these Condensed
Consolidated Financial Statements.
Notes to the Condensed Consolidated Financial Statements
1. Summary of significant accounting policies
Reporting entity
Sherborne Investors (Guernsey) C Limited (the "Company") is a
closed-ended investment company with limited liability formed under
the Companies (Guernsey) Law, 2008 (as amended). The Company was
incorporated and registered in Guernsey on 25 May 2017. The Company
commenced dealings on the London Stock Exchange's Specialist Fund
Segment on 12 July 2017. The Company's registered office is 1 Royal
Plaza, Royal Avenue, St Peter Port, Guernsey, Channel Islands, GY1
2HL. The "Group" is defined as the Company and its subsidiaries,
SIGC, LP (the "Investment Partnership") and SIGC Midco Limited.
Basis of preparation
The annual financial statements of the Group are prepared in
accordance with International Financial Reporting Standards
("IFRSs") as adopted in the European Union. The financial
information for the year ended 31 December 2019, as included in
this Interim Report, is derived from the financial statements
delivered to the Listing Authority and does not constitute
statutory accounts as defined by the Companies (Guernsey) Law, 2008
(as amended). The Auditor reported in the statutory financial
statements for the year ended 31 December 2019: their report was
unqualified; did not draw attention to any matters by way of
emphasis; and did not contain a statement under Section 263(2) or
263(3) of the Companies (Guernsey) Law, 2008 (as amended).
The Condensed Consolidated Financial Statements of the Group
have been prepared in accordance with International Accounting
Standard 34, 'Interim Financial Reporting' ("IAS 34") as adopted in
the European Union, together with applicable legal and regulatory
requirements of Guernsey Law. The Directors of the Company have
taken the exemption in Section 244 of the Companies (Guernsey) Law,
2008 (as amended) and have therefore elected to only prepare
Condensed Consolidated Financial Statements for the period.
These Condensed Consolidated Financial Statements have been
prepared on the historical cost basis, as modified by the
measurement at fair value of investments. The accounting policies
adopted are consistent with those of the previous financial year
and corresponding interim period.
Going concern
The Directors have undertaken a rigorous review of the Group's
ability to continue as a going concern including reviewing the
ongoing cash flows and the level of cash balances as of the
reporting date as well as taking forecasts of future cash flows
into consideration.
During the period, the coronavirus ("COVID-19") outbreak has
caused extensive disruptions to businesses and economic activities
globally. The uncertainties over the emergence and spread of
COVID-19 have caused market volatility on a global scale. The
specific impact on the Company's performance attributable to the
pandemic is difficult to quantify. The situation is constantly
evolving as governments and businesses continue to combat the
impact of the pandemic. As stated in the Chairman's Statement, the
Funds are the current largest shareholder of Barclays. The Company,
via the Funds, has sufficient liquid assets to meet expected costs
despite Barclays having cancelled dividend payments through 2020.
Sherborne Investors Management (Guernsey) LLC (the "Investment
Manager"), affiliates of which are also the investment manager of
the Funds has the full intent and authority to provide the
Investment Partnership with funds as and if required.
After making enquiries of the Investment Manager and Apex Fund
and Corporate Services (Guernsey) Limited (the "Administrator"),
the Directors have a reasonable expectation that the Group has
adequate resources to continue in operational existence for the
foreseeable future. Accordingly, they continue to adopt a going
concern basis in preparing these Condensed Consolidated Financial
Statements.
Critical accounting judgments and key sources of estimation
uncertainty
The preparation of the Group's Condensed Consolidated Financial
Statements requires management to make estimates and assumptions
that affect the reported amounts of assets, liabilities and
contingencies at the date of the Group's Condensed Consolidated
Financial Statements and revenue and expenses during the reported
period. Actual results could differ from those estimated.
i) Critical accounting judgement: Incentive allocation
As more fully described in Note 10, the Special Limited Partner
is entitled to receive an incentive allocation once aggregate
distributions to partners of the Investment Partnership exceed a
certain level. The basis of the incentive calculation differs
depending on how the investment in the Selected Target Company
("STC") is ultimately characterised (i.e. as a Turnaround or Stake
Building Investment). The incentive allocation has been computed on
a Stake Building Investment basis, as it does not meet the criteria
of a Turnaround investment.
ii) Critical accounting judgement: Consolidation of entities
As described further in Note 5, as of 30 June 2020 the Group
holds a non-controlling interest in Whistle Investors III LLC
("Whistle III"). Whilst the Group holds a majority interest in
Whistle III and holds access to the rewards and benefits, it does
not exercise control over the day to day operations nor does it
have the ability to remove the controlling party. As such, Whistle
III is not considered a subsidiary and is not consolidated but held
at fair value through profit or loss.
iii) Source of estimation uncertainty: Investments at fair value
through profit or loss
The Group's investments are measured at fair value for financial
reporting purposes. Fair value of financial assets are based on the
net asset value ("NAV") of the investment. The main contribution to
their NAV is the quoted closing price of the underlying investment
on the London Stock Exchange at 30 June 2020. Please see Note 5 for
further details.
Adoption of new and revised standards
(i) New standards adopted as at 1 January 2020:
All new standards effective from 1 January 2020 have been
adopted and do not have a material impact on the financial
statements.
(ii) Standards, amendments and interpretations early adopted by
the Group:
There were no standards, amendments and interpretations early
adopted by the Group.
(iii) Standards, amendments and interpretations in issue but not
yet effective:
Unless stated otherwise, the Directors do not consider the
adoption of any new and revised accounting standards and
interpretations to have a material impact as the new standards or
amendment are not relevant to the operations of the Group.
a. Basis of consolidation
The Condensed Consolidated Financial Statements incorporate the
financial statements of the Company and two entities controlled by
the Company (its subsidiaries). Control is achieved where the
Company has the power to govern the financial and operating
policies of an investee entity so as to obtain benefits from its
activities. Investments where a majority interest is held but
control is not achieved are held at fair value through profit or
loss.
Non-controlling interests in the net assets of the consolidated
subsidiaries are identified separately from the Group's equity
therein. Non-controlling interests consist of the amount of those
interests at the date of the original business combination and the
non-controlling entities' share of changes in equity since the date
of the combination. Losses applicable to the non-controlling
entities in excess of their interest in the subsidiaries equity are
allocated against their interests to the extent that this would
create a negative balance.
Where necessary, adjustments are made to the financial
statements of the subsidiary to bring the accounting policies used
into line with those used by the Group.
All intra-group transactions, balances and expenses are
eliminated on consolidation.
The Company, via SIGC Midco Limited, a 100% owned subsidiary,
owns 99.98% of the capital interest in the Investment Partnership.
Whilst the General Partner of the Investment Partnership, a company
registered in Delaware, USA, is responsible for directing the day
to day operations of the Investment Partnership, the Company,
through its majority interest in the Investment Partnership, has
the ability to approve the proposed investment of the Investment
Partnership and to remove the general partner. Hence, the Company
has consolidated the Investment Partnerhsip and SIGC Midco Limited
in its financial statements.
b. Non-controlling interest
The interest of non-controlling parties in the subsidiary is
measured at the minority's proportion of the net fair value of the
assets, liabilities and contingent liabilities recognised.
c. Functional currency
Items included in the Condensed Consolidated Financial
Statements of the Group are measured using the currency of the
primary economic environment in which the entity operates. The
Condensed Consolidated Financial Statements are presented in Pound
Sterling ("GBP"), which is the Group's functional and
presentational currency. Transactions in currencies other than GBP
are translated at the rate of exchange ruling at the date of the
transaction. Monetary assets and liabilities denominated in foreign
currencies at the date of the Condensed Consolidated Statement of
Financial Position are retranslated into GBP at the rate of
exchange ruling at that date. Exchange differences are reported in
the Condensed Consolidated Statement of Comprehensive Income.
d. Financial assets at fair value through profit or loss
Investments, including equity investments in associates, are
designated as fair value through profit or loss in accordance with
IFRS 9 'Financial instruments', as the Group's business model is to
invest in financial assets with a view to profiting from their
total return in the form of interest and changes in fair value.
Under International Accounting Standard 28 'Investments in
Associates', the fund can hold its investments at fair value
through profit or loss rather than as an associate as the
Investment Partnership is a closed-ended fund.
Investments in voting shares and derivative contracts are
initially recognised at cost and are subsequently re-measured at
fair value, as determined by the Directors. Unrealised gains or
losses arising from the revaluation of investments in voting shares
and derivative contracts are taken directly to the Condensed
Consolidated Statement of Comprehensive Income.
The Group's investments are measured at fair value for financial
reporting purposes as described earlier in Note 1 under critical
accounting judgements and key sources of estimation
uncertainty.
In determining fair value in accordance with IFRS 13 'Fair Value
Measurement' ("IFRS 13"), investments measured and reported at fair
value are classified and disclosed in one of the following
categories within the fair value hierarchy:
Level I - An unadjusted quoted price for identical assets and
liabilities in an active market provides the most reliable evidence
of fair value and is used to measure fair value whenever available.
As required by IFRS 13, the Group will not adjust the quoted price
for these investments, even in situations where it holds a large
position and a sale could reasonably impact the quoted price.
Level II - Inputs are other than unadjusted quoted prices in
active markets, which are either directly or indirectly observable
as of the reporting date, and fair value is determined through the
use of models or other valuation methodologies.
Level III - Inputs are unobservable for the investment and
include situations where there is little, if any, market activity
for the investment. The inputs into the determination of fair value
require significant management judgement or estimation.
The Group's investments are summarised by Level in Note 5. On
disposal of shares, cost of investments are allocated on a first
in, first out basis.
e. Revenue recognition
Dividend income is recognised when the Group's right to receive
payment has been established. Tax suffered on dividend income for
which no relief is available is treated as an expense.
Investment income and interest receivable from short-term
deposits and Treasury gilts are recognised on an accruals basis.
Where receipt of investment income is not likely until the maturity
or realisation of an investment then the investment income is
accounted for as an increase in the fair value of the
investment.
f. Expenses
All expenses are accounted for on an accruals basis. Expenses
are charged through the Condensed Consolidated Statement of
Comprehensive Income in the period in which they occur.
g. Prepaid expenses and trade receivables
Trade and other receivables are initially recognised at fair
value and subsequently, where necessary, re-measured at amortised
cost using the effective interest method. A provision for
impairment of trade receivables is established when there is
objective evidence the Group will not be able to collect all
amounts due according to the original terms of the receivables. The
Group only holds trade receivables with no financing component and
which have maturities of less than 12 months at amortised cost and
has therefore applied the simplified approach to expected credit
loss.
h. Cash and cash equivalents
Cash and cash equivalents comprise cash in hand, call and
current balances with banks and similar institutions, which are
readily convertible to known amounts of cash and which are subject
to insignificant risk of changes in value. This definition is also
used for the Condensed Consolidated Statement of Cash Flows. The
carrying amount of these assets approximate their fair value,
unless otherwise stated.
i. Trade and other payables
Trade and other payables are initially recognised at fair value
and subsequently, where necessary, re-measured at amortised cost
using the effective interest method.
j. Financial instruments
Financial assets and liabilities are recognised in the Group's
Condensed Consolidated Statement of Financial Position when the
Group becomes a party to the contractual provisions of the
instrument.
k. Segmental reporting
As the Group invests in one investee company, there is no
segregation between industry, currency or geographical location and
therefore no further disclosures are required in conjunction with
IFRS 8 'Operating Segments'.
l. Incentive allocation
The incentive allocation is accounted for on an accruals basis
and the calculation is disclosed in Note 10. The incentive
allocation is payable to the non-controlling interest and therefore
recognised in the Condensed Consolidated Statement of Changes in
Equity rather than recognised as an expense in the Condensed
Consolidated Statement of Comprehensive Income.
m. Treasury gilts
Treasury gilts are initially recognised at fair value and
subsequently, re-measured at amortised cost using the effective
interest method. As at 30 June 2020, no treasury guilts were held
(period ended 30 June 2019: GBP20,011,139 and year ended 31
December 2019: GBPNil).
2. Comprehensive income/(loss)
The comprehensive income/(loss) has been arrived at after
charging:
1 January 1 January 1 January 2019
2020 to 30 2019 to 30 to 31 December
June 20 20 June 201 9 2019
GBP GBP GBP
-------------------------- ------------ ------------ ----------------
Directors' fees 80,000 80,000 160,000
Auditor's remuneration -
Audit 17,021 16,166 34,230
Auditor's remuneration -
Interim review 21,900 21,801 21,900
In addition to the audit and half-yearly review related
remuneration above, a further GBP15,702 was due to the Auditor in
relation to tax compliance services (period ended 30 June 2019:
GBP14,600 and year ended 31 December 2019: GBP29,662).
3. Tax on ordinary activities
The Company has been granted exemption from income tax in
Guernsey under the Income Tax (Exempt Bodies) (Bailiwick of
Guernsey) Ordinance 1989, and is liable to pay an annual fee
(currently GBP1,200) under the provisions of the Ordinance. As such
it will not be liable to income tax in Guernsey other than on
Guernsey source income (excluding deposit interest on funds
deposited with a Guernsey bank). No withholding tax is applicable
to distributions to Shareholders by the Company.
The Investment Partnership will not itself be subject to
taxation in Guernsey. No withholding tax is applicable to
distributions to partners of the Investment Partnership.
Income which is wholly derived from the business operations
conducted on behalf of the Investment Partnership with, and
investments made in, persons or companies who are not resident in
Guernsey will not be regarded as Guernsey source income. Such
income will not therefore be liable to Guernsey tax in the hands of
non-Guernsey resident limited partners.
Dividend income is shown gross of any withholding tax.
4. Earnings per share
The calculation of basic and diluted earnings per share is based
on the return on ordinary activities less total comprehensive
income attributable to the non-controlling interest and on there
being 700,000,000 weighted average number of shares in issue during
the period (30 June 2019: 700,000,000 and 31 December 2019:
700,000,000). The earnings per share for the period ended 30 June
2020 amounted to a deficit of 27.89 pence per share (period ended
30 June 2019: a surplus of 0.17 pence per share and year ended 31
December 2019: surplus of 11.08 pence per share).
Days in Weighted Average
Date Shares issue Shares
1 January
2020 700,000,000 700,000,000
30 June 2020 700,000,000 181 700,000,000
5. Financial assets at fair value through profit or loss
As at 30 As at 31 December
As at 30 June 2019
June 2020 2019
GBP GBP GBP
------------------------------------- -------------- ------------ ------------------
Opening fair value 537,820,762 440,387,201 440,387,201
Capital contributions 4,849,515 - 20,000,000
Capital distributions (2,749,725) - -
Unrealised gain/(loss) on financial
assets at fair value through
profit or loss (192,993,896) 1,184,206 77,433,561
Closing fair value 346,926,656 441,571,407 537,820,762
------------------------------------- -------------- ------------ ------------------
5. Financial assets at fair value through profit or loss
(continued)
The following tables summarise by level within the fair value
hierarchy the Group's financial assets and liabilities at fair
value as follows:
Level I Level II Level III Total
30 June 2020 GBP GBP GBP GBP
-------------------------------- ------------ ----------- ------------ ------------
Financial assets at fair value
through profit and loss - - 346,926,656 346,926,656
Level I Level II Level III Total
30 June 2019 GBP GBP GBP GBP
-------------------------------- ------------ ----------- ------------ ------------
Financial assets at fair value
through profit and loss 130,653,027 80,859,350 230,059,030 441,571,407
Level I Level II Level III Total
31 December 2019 GBP GBP GBP GBP
-------------------------------- ------------ ----------- ------------ ------------
Financial assets at fair value
through profit and loss - - 537,820,762 537,820,762
The Board of Directors approved Barclays PLC ("Barclays"), a
London Stock Exchange listed bank holding company, as the STC in
2018. During 2019, the Group contributed its direct holding of
Barclays shares and its interest in Whistle Investors LLC ("Whistle
I") and Whistle Investors II LLC ("Whistle II") to Whistle
Investors III LLC ("Whistle III") at fair value.
As at 30 June 2020, the Group's investments consist solely of a
non-controlling interest in Whistle III which was organised to
invest in the STC. Furthermore, the Level III investments disclosed
in the financial statements are solely comprised of the Group's
non-controlling interest in Whistle III. As at the period end,
Whistle III's investment consisted of a direct investment in
Barclays as well as a non-controlling interest in Whistle I and
Whistle II. The value of those investments equated to the Group's
maximum exposure to loss from the Whistle I, Whistle II and Whistle
III entities.
A reconciliation of fair value measurements in Level III is set
out in the following table:
As at 30 June As at 30 June As at 31 December
2020 2019 2019
GBP GBP GBP
---------------------------- -------------- -------------- ------------------
Opening fair value 537,820,762 222,817,957 222,817,957
Contribution to Whistle
III - - 236,387,018
Capital contributions 4,849,515 6,774,352 20,000,000
Capital distributions (2,749,725) - -
Unrealised gain/(loss)
on financial assets at
fair value through profit
or loss (192,993,896) 466,721 58,615,787
---------------------------- -------------- -------------- ------------------
Closing fair value 346,926,656 230,059,030 537,820,762
---------------------------- -------------- -------------- ------------------
The key unobservable inputs in the valuation of the Level 3
investment is the value of Whistle III's non-controlling interests
in Whistle I and Whistle II which is impacted by the Barclays share
price. Further information can be found in the Annual Report and
Audited Consolidated Financial Statements of the Company for the
year ended 31 December 2019.
6. Dividend income
As announced on 31 March 2020, the Barclays board cancelled the
payment of the full year 2019 dividend and any potential 2020
dividends at the request of the UK regulator as a prudent measure
given the current environment. The Group did not receive any cash
dividends during the period (period ended 30 June 2019:
GBP3,488,732 and year ended 31 December 2019: GBP6,105,282).
7. Trade and other payables
As at 30 June As at 30 June As at 31 December
2020 201 9 201 9
GBP GBP GBP
----------------------------- -------------- ---------------- --------------------
Professional fees payable 24,635 76,426 74,110
Administration fees payable 36,782 37,295 36,663
Audit fees payable 44,922 37,967 20,540
----------------------------- -------------- ---------------- --------------------
Total 106,339 151,688 131,313
----------------------------- -------------- ---------------- --------------------
8. Consolidated share capital and share premium
As at 30 June As at 30 June As at 31 December
2020 2019 2019
Authorised share capital No. No. No.
Ordinary Shares of no
par value Unlimited Unlimited Unlimited
-------------------------- -------------- -------------- ------------------
Issued and fully paid No. No. No.
Ordinary Shares of no
par value 700,000,000 700,000,000 700,000,000
-------------------------- -------------- -------------- ------------------
As at 30 June As at 30 June As at 31 December
2020 2019 2019
Share premium account GBP GBP GBP
Share premium account
upon issue 700,000,000 700,000,000 700,000,000
Less: Costs of issue (11,060,597) (11,060,597) (11,060,597)
Closing balance 688,939,403 688,939,403 688,939,403
----------------------- -------------- -------------- ------------------
9. Net asset value per share attributable to the Company
No. of Shares Pence per Share
-------------------- -------------- ----------------
30 June 2020 700,000,000 50.15
30 June 2019 700,000,000 67.13
31 December 201 9 700,000,000 78.04
10. Related party transactions
The Investment Partnership and its General Partner, have engaged
Sherborne Investors Management (Guernsey) LLC to serve as
Investment Manager who is responsible for identifying the STC,
subject to approval by the Board of Directors of the Company, as
well as day to day management activities of the Investment
Partnership. The Investment Manager is entitled to receive from the
Investment Partnership a monthly management fee equal to
one-twelfth of 1% of the net asset value of the Investment
Partnership, less cash and cash equivalents and certain other
adjustments. During the period, management fees of GBP2,014,455
(period ended 30 June 2019: GBP2,117,179 and year ended 31 December
2019: GBP4,211,140) had been paid by the Investment Partnership. No
balance was outstanding at the period end (period ended 30 June
2019: GBPNil and year ended 31 December 2019: GBPNil).
The Special Limited Partner interest is held by Sherborne
Investors Limited, a wholly owned subsidiary of Sherborne Investors
LP (Sherborne Investors (Guernsey) GP, LLC and Sherborne Investors
Limited are the Non-controlling interests). The Special Limited
Partner is entitled to receive an incentive allocation once
aggregate distributions to partners of the Investment Partnership,
of which one is the Company, exceed a certain level of capital
contributions to the Investment Partnership, excluding amounts
contributed attributable to management fees.
For Turnaround investments, the incentive allocation is computed
at 10% of the distributions to all partners in excess of 110%,
increasing to 20% of the distributions to all partners in excess of
150% and increasing to 25% of the distributions to all partners in
excess of 200% of capital contributions, excluding amounts
contributed attributable to management fees. An investment is
considered a Turnaround investment when a member of the General
Partner is appointed chairman of, or accepts an executive role at,
the STC.
If, after acquiring a shareholding, the share price of the STC
rises to a level at which further investment and the effort of a
Turnaround is, in the Investment Manager's opinion, no longer
justified or otherwise no longer presents a viable Turnaround
opportunity, the Investment Partnership intends to sell (and
distribute the proceeds to the Company) or distribute in kind the
holding to the limited partners (in each case after deductions for
any costs and expenses and for the Investment Partnership's Minimum
Capital Requirements and subject to applicable law and regulation),
rather than seeking to join the Board of Directors or otherwise
engage with the STC (a "Stake Building Investment").
For Stake Building Investments, the incentive allocation is
computed at 20% of net returns on the investment of the Investment
Partnership, such amount to be payable after each partner in the
Investment Partnership has had distributed to it an amount equal to
its aggregate capital contribution to the Investment Partnership in
respect to the Stake Building Investment (excluding any capital
contributions attributable to management fees). The Special Limited
Partner may waive or defer all or any part of any incentive
allocation otherwise due.
At 30 June 2020, the incentive allocation has been computed
based on a Stake Building Investment basis and amounts to GBPNil
(30 June 2019: GBPNil and December 2019: GBPNil) in relation to the
investment held by the Investment Partnership.
Each of the Directors (other than the Chairman) receives a fee
payable by the Company currently at a rate of GBP35,000 per annum.
The Chairman of the Audit Committee receives GBP5,000 per annum in
addition to such fee. The Chairman receives a fee payable by the
Company currently at the rate of GBP50,000 per annum.
Individually and collectively, the Directors of the Company hold
no shares of the Company as at 30 June 20 20 (30 June 2019: Nil and
31 December 2019: Nil).
Sherborne Investors GP, LLC has granted to the Company a
non-exclusive licence to use the name "Sherborne Investors" in the
UK and the Channel Islands in the corporate name of the Company and
in connection with the conduct of the Company's business affairs.
The Company may not sub-licence or assign its rights under the
Trademark Licence Agreement. Sherborne Investors GP, LLC receives a
fee of GBP70,000 per annum for the use of the licenced name.
11. Financial risk factors
The Group's investment objective is to realise capital growth
from investment in the STC, identified by the Investment Manager,
with the aim of generating significant capital return for
Shareholders. Consistent with that objective, the Group's financial
instruments mainly comprise an investment in a STC. In addition,
the Group holds cash and cash equivalents as well as having trade
and other receivables and trade and other payables that arise
directly from its operations.
Liquidity risk
The Group's cash and cash equivalents are placed in demand
deposits with a range of financial institutions. The listed
investment in the STC could be partially redeemed relatively
quickly (within 3 months) should the Group need to meet obligations
or ongoing expenses as and when they fall due.
For the period from 1 January 2020 to 30 June 2020
The following table details the liquidity analysis for financial
liabilities at the date of the Condensed Consolidated Statement of
Financial Position:
Less than
As at 30 June 2020 1 month 1 - 12 months Total
GBP GBP GBP
-------------------------- ---------- -------------- --------
Trade and other payables 36,782 69,557 106,339
-------------------------- ---------- -------------- --------
36,782 69,557 106,339
-------------------------- ---------- -------------- --------
Less than
As at 30 June 2019 1 month 1 - 12 months Total
GBP GBP GBP
-------------------------- ---------- -------------- --------
Trade and other payables 40,445 111,243 151,688
-------------------------- ---------- -------------- --------
40,445 111,243 151,688
-------------------------- ---------- -------------- --------
Less than
As at 31 December 2019 1 month 1 - 12 months Total
GBP GBP GBP
-------------------------- ---------- -------------- --------
Trade and other payables 38,198 93,115 131,313
-------------------------- ---------- -------------- --------
38,198 93,115 131,313
-------------------------- ---------- -------------- --------
Credit risk
The Company is exposed to credit risk in respect of its cash and
cash equivalents, arising from possible default of the relevant
counterparty, with a maximum exposure equal to the carrying value
of those assets. The credit risk on liquid funds is mitigated
through the Group depositing cash and cash equivalents across
several banks. The Group is exposed to credit risk in respect of
its trade receivables and other receivable balances with a maximum
exposure equal to the carrying value of those assets. UBS Financial
Services Inc. and HSBC Holdings PLC currently have a stand alone
credit rating of A- with Standard & Poor's (30 June 2019: A-
with Standard & Poor's and 31 December 2019: A- with Standard
& Poor's), whilst Barclays Bank PLC has a standalone credit
rating of A with Standard & Poor's (30 June 2019: A with
Standard & Poor's and 31 December 2019: A with Standard &
Poor's). The Group considers these ratings to be acceptable.
Market price risk
Market price risk arises as a result of the Group's exposure to
the future values of the share price of the STC. It represents the
potential loss that the Group may suffer through investing in the
STC. Further information can be found in the Annual Report and
Audited Consolidated Financial Statements of the Company for the
year ended 31 December 2019.
Foreign exchange risk
Foreign currency risk arises as the value of future
transactions, recognised monetary assets and monetary liabilities
denominated in other currencies fluctuate due to changes in foreign
exchange rates. The Investment Manager monitors the Group's
monetary and non-monetary foreign exchange exposure on a regular
basis. The Group has limited foreign exchange risk exposure. The
Investment Manager considers the foreign exchange exposure of
Whistle III to be a component of market price risk not foreign
currency risk.
Interest rate risk
The Group is subject to risks associated with changes in
interest rates in respect of interest earned on its cash and cash
equivalents. The Group seeks to mitigate this risk by monitoring
the placement of cash balances on an ongoing basis in order to
maximise the interest rates obtained.
As at 30 June
2020 Interest bearing
---------------------------------
1 month 3 months
Less than to to Non- interest
1 month 3 months 1 year bearing Total
GBP GBP GBP GBP GBP
------------------- ---------- ---------- --------- -------------- ------------
Assets
Cash and cash
equivalents 4,248,227 - - - 4,248,227
Financial assets
at fair value
through profit
or loss - - - 346,926,656 346,926,656
Prepaid expenses - - - 44,162 44,162
------------------- ---------- ---------- --------- -------------- ------------
Total Assets 4,248,227 - - 346,970,818 351,219,045
------------------- ---------- ---------- --------- -------------- ------------
Liabilities
Other payables - - - 106,339 106,339
------------------- ---------- ---------- --------- -------------- ------------
Total Liabilities - - - 106,339 106,339
------------------- ---------- ---------- --------- -------------- ------------
As at 30 June
2019 Interest bearing
----------------------------------
1 month 3 months
Less than to to Non- interest
1 month 3 months 1 year bearing Total
GBP GBP GBP GBP GBP
------------------- ----------- ---------- --------- -------------- ------------
Assets
Cash and cash
equivalents 8,545,306 - - - 8,545,306
Financial assets
at fair value
through profit
or loss - - - 441,571,407 441,571,407
Treasury gilts 9,928,349 9,888,592 - 194,198 20,001,139
Prepaid expenses - - - 38,220 38,220
------------------- ----------- ---------- --------- -------------- ------------
Total Assets 18,473,655 9,888,592 - 441,803,825 470,166,072
------------------- ----------- ---------- --------- -------------- ------------
Liabilities
Other payables - - - 151,688 151,688
------------------- ----------- ---------- --------- -------------- ------------
Total Liabilities - - - 151,688 151,688
------------------- ----------- ---------- --------- -------------- ------------
Interest rate risk
(continued)
As at 31 December
2019 Interest bearing
---------------------------------
1 month 3 months
Less than to to Non- interest
1 month 3 months 1 year bearing Total
GBP GBP GBP GBP GBP
--------------------------- ---------- ---------- --------- -------------- ------------
Assets
Cash and cash equivalents 8,688,050 - - - 8,688,050
Financial assets
at fair value through
profit or loss - - - 537,820,762 537,820,762
Prepaid expenses - - - 17,224 17,224
--------------------------- ---------- ---------- --------- -------------- ------------
Total Assets 8,688,050 - - 537,837,986 546,526,036
--------------------------- ---------- ---------- --------- -------------- ------------
Liabilities
Other payables - - - 131,313 131,313
--------------------------- ---------- ---------- --------- -------------- ------------
Total Liabilities - - - 131,313 131,313
--------------------------- ---------- ---------- --------- -------------- ------------
As at 30 June 2020, the total interest sensitivity gap for
interest bearing items was a surplus of GBP4,248,227 (30 June 2019:
surplus of GBP28,362,247 and 31 December 2019: surplus of
GBP8,688,050).
As at 30 June 20 20, interest rates reported by the Bank of
England were 0.1% (period ended 30 June 2019: 0.75% and year ended
31 December 2019: 0.75%) which would equate to income of GBP4,248
(period ended 30 June 2019: GBP212,717 and year ended 31 December
2019: GBP65,160) per annum if interest bearing assets remained
constant. If interest rates were to fluctuate by 50 basis points
(period ended 30 June 2019: 25 basis points and year ended 31
December 2019: 50 basis points), this would have a positive effect
of GBP21,241 or negative effect of GBP4,248 (period ended 30 June
2019: GBP70,906 and year ended 31 December 2019: GBP43,440) on the
Group's annual income.
Capital risk management
The capital structure of the Company consists of proceeds raised
from the issue of Ordinary Shares. As at 30 June 20 20, the Group
is not subject to any external capital requirement.
The Directors believe that at the date of the Condensed
Consolidated Statement of Financial Position there were no other
material risks associated with the management of the Group's
capital.
12. Distributions
No distributions were paid by the Group to non-controlling
interests during the period (period ended 30 June 2019: GBPNil and
year ended 31 December 2019: GBPNil).
13. Subsequent events
Since 30 June 2020, the share price of Barclays has decreased
from 114.42 pence to 107.94 pence as at 17 August 2020. If this
share price was used to value the investment at 30 June 2020, it
would have resulted in a decrease in the closing fair value from
GBP346.9 million to GBP330.0 million.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
IR KKLFFBVLFBBK
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