Sanditon Investment Trust plc
INTERIM ACCOUNTS
For the six months
to 31 December 2015
COMPANY NUMBER 09040176
Investment Objective
The Company’s investment objective is to:
• Deliver absolute returns of at least 2% per annum, compounded
annually, above RPIX; and
• Be an asset diversifier for shareholders by targeting low
correlation with leading large capitalisation equity indices.
Contents
Investment Objective |
|
Chairman’s Statement |
1 |
Investment Manager’s Report |
2-4 |
Portfolio |
5 |
Income Statement |
6-7 |
Statement of Financial Position |
8 |
Statement of Changes in Equity |
8 |
Notes to the Interim Accounts |
10-12 |
Interim Management Report |
13-15 |
Directors and Officers |
16 |
Chairman’s Statement
for the six months to 31 December
2015
Performance
Your Company had a disappointing six months with the net asset
value closing at 99.3p which, after including the 0.45p maiden
dividend paid to shareholders in December, amounted to a loss of
3.25% over the period. Your Company’s share price closed the year
at 107.4p, up 0.8% since 30 June
2015, leaving the shares trading at an expanded premium of
8.2% to net asset value. Inflation over the period remained
becalmed with the RPIX up just 1.3% p.a. in December and returns
from the UK equity market in the second half of 2015 fell by over
3.5% affected by sharp falls in commodity shares. The Investment
Manager gives a thorough review of performance in the report that
follows.
Stake in Sanditon Asset Management
Your Company’s only unlisted holding, a 20% stake in Sanditon
Asset Management (SAM), has continued to make good progress with
asset gathering finishing 2015 with assets under management of just
over £630 million, more than double the amount at the start of the
year. Approximately 35% of the assets are in hedge fund structures.
Whilst this is an encouraging start for a business which launched
its first fund in the summer of 2014, the key to SAM’s future
growth will be improving the investment performance of its fund
range.
In these interim accounts we continue to value the stake in SAM
at cost but as previously communicated to shareholders we have
reviewed the basis of valuation which we will use in the
30 June 2016 annual accounts. Valuing
a stake in an unlisted asset management company is as much an art
as a science. After consulting with your Company’s auditor and
broker and reviewing listed companies’ valuations and the valuation
methodologies used by a range of unlisted asset management
companies, the Board is close to completing its review of the
valuation metrics it proposes to use for your stake in SAM. As I
said in my last report to you, the Board are keen to have a
methodology which was as simple as possible, conservative and which
we hope will remain constant.
We have decided to use a simple 50/50 hybrid of a percentage of
funds under management and an adjusted after tax profit multiple,
based on SAM’s audited results to 31 March
2016. Both multiples will be at significant discounts to
listed peers to reflect, inter alia, the infancy of the business, a
narrow product range, the lack of historical higher margin assets
compared to peers and a greater concentration of customers than its
competitors.
We believe this approach will produce a valuation which is both
conservative but fair and we hope it is one which can remain
constant, although the Board will review the nominal multiples we
decide upon annually in relation to quoted peers.
Director
Mr. Charles Harman retired from
the Board in December 2015, having
taken up a full time position with your Company’s broker. I would
like to take this opportunity to thank Charles for his thoughtful
insights and contribution to the Board since launch. The Board is
in the process of interviewing a replacement non-executive
director, the outcome of which will be announced in due course.
Outlook
In my previous reports I stated that the investment environment
was likely to be challenging through 2015. So it remains. The turn
in the U.S interest rate cycle, the ongoing collapse in the price
of most commodities and worrying signs that Chinese growth is
slowing very sharply have contributed to a dramatic collapse in
risk appetite as we start 2016. Quantitative easing worked in
boosting asset prices post the 2008 crash but even a modest
tightening of the monetary tiller makes it look as if preserving
capital is going to be the real challenge for all investors in
2016.
Rupert
Barclay
Chairman
18 February 2016
Investment Manager’s Report
for the six months to 31 December
2015
The performance of your Company’s underlying assets over the
second half of 2015 was disappointing. Whilst the share price held
relatively stable, the net asset value fell back to 99.3p. The loss
for the half year of 3.25% was well behind the reported inflation
rate at the end of December 2015
(RPIX was 1.3%), even if modestly ahead of the FTSE A All Share’s
capital return of -3.6% for the period.
If shareholders look back at our first two reports since launch
(which can be seen on our website at www.sanditonam.com), you will
see that we have been broadly right about how generating returns
from equities was likely to get a lot more difficult for all
investors. It remains our view that all investors should be very
wary of pretty much every asset class, so distorted have all assets
been by extraordinary monetary experiments undertaken by most of
the world’s leading central banks. Over the 18 month period since
your Company launched, the FTSE A All Share Index has had four
corrections of roughly 10% only to bounce back to levels roughly
where we started. At the end of December
2015 the index was down 4.4% since launch and I am sure
shareholders will have seen that volatility continuing at the start
of 2016. We have broadly done well in the down periods for equity
markets but have given back gains into equity rallies. This sort of
volatility is not untypical towards the end of bull markets and we
are probably closer to the stage when one of these corrections is
the start of something more significant.
MSCI Europe Growth Index/MSCI Europe Value Index – normalised as
of 31/01/1995
[GRAPHIC REMOVED]
Source: Bloomberg
The reason for our lagging the rallies is illustrated in the
chart below which shows the outperformance of ‘growth’ stocks
against ‘value’ stocks as represented by the MSCI indices. We have,
since launch, been short of growth stocks and our value bias is
best seen by the average price earnings ratio of our long book at
December 2015 of 16.5x being not far
off half the price earnings ratio of our short book at 32.4x. Not
since the TMT boom in 1999 has growth been so highly rated relative
to value and the outperformance has now lasted for a decade, with
only a brief renaissance for value in the early days of
Quantitative Easing programmes in 2009. Of course, charts like
these tell you about the past and not necessarily about the future
but as a business cycle investor we are always interested in areas
of the market which have gone in a continuous line for too long.
Cycles, be they economic or investment, usually correct such linear
extensions and we are minded to be patient with our current value
tilt.
Market Review
The second half of 2016 was dominated by two events - the
continuing collapse in commodity prices with oil, for example,
falling from $50 to $30 over the
period and the first increase in interest rates in the U.S. since
the crisis of 2008. The collapse in oil was a continuation of a
trend that has now lasted five years with OPEC’s latest meeting
failing or unwilling to make production cuts to offset the increase
in supply coming from US shale and the re-emergence of Iran on the world stage. The collapse in
commodities may cause many corporate casualties, which is clearly
what Saudi Arabia is hoping for in
its battle with US shale. Time will tell whether over-leveraged
companies can survive a lower for longer commodity environment –
especially in US shale where we understand some low quality crude
grades are now selling for less than $2 a barrel. As we wrote last time, falling
prices always lead to a collapse in capital spending and if that is
exacerbated by corporate casualties tightening supply in the longer
term, prices are likely to stabilise and then increase. We know
there are plenty of believers predicting the end of the fossil fuel
age, but it strikes us that the one thing ensuring that is an
unlikely outcome is low fossil fuel prices.
The Federal Reserve eventually raised rates in December having
been scared off in October by weak markets and weak data from
China. What changed in
China between October and December
to convince the Fed to move is not entirely clear to this investor,
but we are generally of the view that the move was better late than
never. That is not to say that it might not have a more significant
impact on both the economy and markets than one would normally
expect from a modest first increase in rates. We fully expect it
to. The removal of zero rates should change investors reckless
chasing of all other risk assets and we rather expect within the
market it may have an impact on the chart above.
A modest tightening in US monetary policy is coming at a time of
significant market tightening in the credit markets and at the same
time as a huge unwinding of foreign currency reserves from
China, Saudi Arabia and many other commodity surplus
countries which are now fighting serious deteriorations in their
budgetary positions. It will be interesting to see whether the Fed
feel able to push through further interest rate increases as Ms.
Yellen tries to normalise rates. We suspect one more might be
enough to push the US decisively into a downturn. The markets are
bound to test her and other policy makers’ nerves in the months
ahead. It seems very safe to predict that our own Governor’s nerves
are not up to much. The MPC look incapable of making a decision and
it looks assured we will go into the next downturn with no
conventional monetary levers to pull.
Portfolio Structure and
Performance
The shape of your portfolio was little changed over the six
months, although we increased our exposure to ‘growth’ shorts to
-23.5% net from -15% last time and increased our exposure to
defensives to +14.5% from +9%.
Our overall net position ended the period at +6%, (almost market
neutral and little changed over the previous period end) but we did
use the FTSE futures through the period as a quick way to adjust
our net position into sharp falls and rallies with our net exposure
range through the period being +18% to -16%. Our futures activity
added 1.25% to NAV (positive contributions from both a short
position in the middle of the period and a long position towards
the end) helping to mitigate what was generally a poor portfolio
shape for the period under review.
Over the period our long book lost 1.9% and our short book lost
0.55%, representing returns on capital employed of -3.6% and -1.1%
respectively. Our biggest losses came from being long commodities
(-2.7%) where we were demonstrably too early removing our shorts in
this space earlier in the year. Unsurprisingly, given the continued
sharp falls in commodity prices, the oil & gas and the mining
sectors were the worst two in the market with falls of 15% and 40%
respectively. We were particularly hit by BHP Billiton’s exposure
to the Samarco mining disaster in Brazil which cost 1% and the continuing
precipitous collapse in Anglo-American which cost 1.1%. We bought
the shares almost 80% off their peak and they have more than halved
again as investors have taken fright of anything with financial
leverage. It is incontrovertible that the more a share price falls,
the higher the debt/equity ratio becomes and the more dilutive an
equity raise will be. In Anglo’s case their debt maturities of over
6 years should have given them some breathing space but the market
is in a fear phase and Anglo, like many others, have left it rather
late to raise equity, so the market is fearful it will have to sell
good assets at the wrong stage of the cycle. We do not deny that
trying to time the bottom of a commodity cycle is a perilous task
and we have been too early so far, although we did not get carried
away with the size of our positions.
Our short position to ‘growth’ stocks was also costly in the
second half (-2.1% to NAV). The only positive came from Ocado which
fell by 32% adding 1.1%, which was gratifying as we wrote about it
last time. Shorts in Just Eat and Moneysupermarket, amongst others,
were less successful. All our shorts are highly rated, have seen
insider selling and have business models which seem to us could be
as easily disrupted as they have disrupted others. They are also
generally asset light so when things do go wrong share price falls
could be precipitate as they were in the aftermath of the TMT boom.
It remains the highest conviction view in your Company at
present.
We expect the outlook for equity markets to remain very tricky
so are unlikely to change our low net exposure approach at present.
However, like Pavlov’s dog, we are becoming conditioned to expect
the market to have sharp rallies after steep falls and our current
approach of adding to our net exposure into falls always runs the
risk that one of the falls turns into something more dramatic. We
are certainly not reassured that Central bankers can continue to
support markets like they have since 2009.
2016 will see several electoral events (Scottish elections, US
presidential elections and a possible Brexit referendum) which
combined with continuing competitive currency devaluations and
significant geopolitical tensions in the Middle East are likely to result in a volatile
year for markets. It is likely that capital preservation will
remain our goal in the near-term.
Sanditon Asset Management Limited
18 February 2016
Portfolio
as at 31 December 2015
Country Breakdown (% of NAV)*
|
Long |
Short |
Net |
Gross |
United Kingdom |
42.2 |
-35.4 |
6.8 |
77.6 |
France |
0.0 |
-3.0 |
-3.0 |
3.0 |
Germany |
0.0 |
-4.7 |
-4.7 |
4.7 |
Italy |
0.0 |
-4.2 |
-4.2 |
4.2 |
Denmark |
1.0 |
0.0 |
1.0 |
1.0 |
Netherlands |
4.5 |
0.0 |
4.5 |
4.5 |
|
_______ |
_______ |
_______ |
_______ |
|
47.7 |
-47.3 |
0.4 |
95.0 |
|
====== |
====== |
====== |
====== |
Business Cycle Groupings (% of
NAV)*
|
Long |
Short |
Net |
Gross |
Commodity Cyclicals |
4.5 |
0.0 |
4.5 |
4.5 |
Consumer Cyclicals |
8.5 |
-0.9 |
7.6 |
9.4 |
Industrial Cyclicals |
4.6 |
-15.5 |
-10.9 |
20.1 |
Growth |
1.4 |
-24.9 |
-23.5 |
26.3 |
Financial |
9.0 |
-0.9 |
8.1 |
9.9 |
Growth Defensives |
14.8 |
-3.4 |
11.4 |
18.2 |
Value Defensives |
4.8 |
-1.7 |
3.1 |
6.5 |
Top 20 Long Positions (% of NAV)**
|
% |
TM Sanditon UK Select Fund |
10.39 |
FTSE 100 Future Mar’16 |
5.00 |
Babcock |
4.81 |
RELX |
4.52 |
Ashmore Group |
4.86 |
Melrose Industries |
3.66 |
Diageo |
2.81 |
HSBC |
2.16 |
Mothercare |
2.15 |
Man Group |
2.00 |
WPP |
1.89 |
BT |
1.81 |
BHP Billiton |
1.68 |
Kingfisher |
1.66 |
Ophir Energy |
1.64 |
GlaxoSmithKline |
1.52 |
WM Morrison Supermarkets |
1.49 |
Equiniti Group |
1.43 |
Spirent Communication |
1.43 |
Capita |
1.22 |
|
_______ |
Total |
58.13 |
|
====== |
|
|
Total number of positions** |
49 |
|
====== |
*?Excluding holdings in Sanditon Asset Management, TM Sanditon
UK Select and Future.
**?Including holdings in Sanditon Asset Management, TM Sanditon
UK Select and Future.
Income Statement
for the six months to 31 December
2015
|
|
(Unaudited) |
(Unaudited) |
(Audited) |
|
|
Six months
to 31 December 2015 |
Period
from 14 May 2014 to 31 December 2014 |
For the
period from 14 May 2014 to 30 June 2015 |
|
|
Revenue |
Capital |
Total |
Revenue |
Capital |
Total |
Revenue |
Capital |
Total |
|
Notes |
£000 |
£000 |
£000 |
£000 |
£000 |
£000 |
£000 |
£000 |
£000 |
(Losses)/gains on investments held
at fair value |
|
|
|
|
|
|
|
|
|
|
through profit or loss |
|
– |
(1,740) |
(1,740) |
– |
226 |
226 |
– |
2,177 |
2,177 |
Income |
|
431 |
– |
431 |
299 |
– |
299 |
571 |
– |
571 |
Management fee |
2 |
(48) |
(144) |
(192) |
(48) |
(145) |
(193) |
(95) |
(286) |
(381) |
Other expenses |
|
(137) |
– |
(137) |
(115) |
– |
(115) |
(220) |
– |
(220) |
|
|
_______ |
_______ |
_______ |
_______ |
_______ |
_______ |
_______ |
_______ |
_______ |
Return before finance costs &
taxation |
|
246 |
(1,884) |
(1,638) |
136 |
81 |
217 |
256 |
1,891 |
2,147 |
Finance costs |
|
– |
– |
– |
– |
– |
– |
– |
– |
– |
|
|
_______ |
_______ |
_______ |
_______ |
_______ |
_______ |
_______ |
_______ |
_______ |
Return on ordinary activities before
taxation |
|
246 |
(1,884) |
(1,638) |
136 |
81 |
217 |
256 |
1,891 |
2,147 |
Taxation on ordinary activities |
|
(3) |
– |
(3) |
– |
– |
– |
(11) |
– |
(11) |
|
|
_______ |
_______ |
_______ |
_______ |
_______ |
_______ |
_______ |
_______ |
_______ |
Return on ordinary activities after
taxation |
|
|
|
|
|
|
|
|
|
|
attributable to shareholders |
|
243 |
(1,884) |
(1,641) |
136 |
81 |
217 |
245 |
1,891 |
2,136 |
|
|
====== |
====== |
====== |
====== |
====== |
====== |
====== |
====== |
====== |
|
|
|
|
|
|
|
|
|
|
|
Return per Ordinary Share
(pence): |
|
0.49 |
(3.77) |
(3.28) |
0.27 |
0.16 |
0.43 |
0.49 |
3.78 |
4.27 |
|
|
====== |
====== |
====== |
====== |
====== |
====== |
====== |
====== |
====== |
The notes on pages 10 to 12 form part of these accounts.
The total column of this statement is the profit and loss
account of the Company. All the revenue and capital items in the
above statement derive from continuing operations.
There is no other comprehensive income.
Statement of Financial Position
as at 31 December 2015
|
|
(Unaudited) |
(Unaudited) |
(Audited) |
|
|
31 December |
31 December |
30 June |
|
|
2015 |
2014 |
2015 |
|
Notes |
£000 |
£000 |
£000 |
Fixed assets |
|
|
|
|
Investments at fair value through
profit or loss |
4 |
11,106 |
13,085 |
12,772 |
|
|
_______ |
_______ |
_______ |
Current assets |
|
|
|
|
Debtors |
|
44 |
20 |
25 |
Amounts due in respect of contracts
for difference |
|
1,853 |
1,472 |
1,157 |
Collateral paid in respect of
contracts for difference |
|
8,072 |
9,432 |
11,844 |
UK Treasury Bills |
|
21,483 |
22,484 |
21,481 |
Cash and short term deposits |
|
14,677 |
5,756 |
8,457 |
|
|
_______ |
_______ |
_______ |
|
|
46,129 |
39,164 |
42,964 |
Creditors – amounts falling due
within one year |
|
|
|
|
Creditors |
|
(200) |
(121) |
(133) |
Amounts payable in respect of
contracts for difference |
|
(7,393) |
(2,539) |
(4,095) |
|
|
_______ |
_______ |
_______ |
Creditors |
|
(7,593) |
(2,660) |
(4,228) |
|
|
_______ |
_______ |
_______ |
Net current assets |
|
38,536 |
36,504 |
38,736 |
Total assets less current
liabilities |
|
49,642 |
49,589 |
51,508 |
|
|
_______ |
_______ |
_______ |
Net assets |
|
49,642 |
49,589 |
51,508 |
|
|
_______ |
_______ |
_______ |
Capital and reserves |
|
|
|
|
Share capital |
|
500 |
500 |
500 |
Share premium |
|
48,872 |
48,872 |
48,872 |
Capital reserve |
|
7 |
81 |
1,891 |
Revenue reserve |
|
263 |
136 |
245 |
|
|
_______ |
_______ |
_______ |
Total shareholders’
funds |
|
49,642 |
49,589 |
51,508 |
|
|
====== |
====== |
====== |
|
|
|
|
|
Net asset value per share –
Ordinary Share (pence) |
|
99.28 |
99.18 |
103.02 |
|
|
====== |
====== |
====== |
The notes on pages 10 to 12 form part of these accounts.
Statement of Changes in Equity
Six months to 31 December 2015
(unaudited)
|
|
Share |
|
|
|
|
Share |
Premium |
Capital |
Revenue |
|
|
Capital |
Account |
Reserve |
Reserve |
Total |
|
£000 |
£000 |
£000 |
£000 |
£000 |
Balance at 30 June
2015 |
500 |
48,872 |
1,891 |
245 |
51,508 |
|
|
|
|
|
|
Return on ordinary activities |
_______ |
_______ |
_______ |
_______ |
_______ |
after taxation |
– |
– |
(1,884) |
243 |
(1,641) |
Ordinary dividends paid |
– |
– |
– |
(225) |
(225) |
|
_______ |
_______ |
_______ |
_______ |
_______ |
Balance at 31 December
2015 |
500 |
48,872 |
7 |
263 |
49,642 |
|
====== |
====== |
====== |
====== |
====== |
For the period from 14 May 2014 to
31 December 2014 (unaudited) |
|
|
|
|
|
|
|
Share |
|
|
|
|
Share |
Premium |
Capital |
Revenue |
|
|
Capital |
Account |
Reserve |
Reserve |
Total |
|
£000 |
£000 |
£000 |
£000 |
£000 |
Balance at 14 May 2014 |
– |
– |
– |
– |
– |
|
_______ |
_______ |
_______ |
_______ |
_______ |
Return on ordinary activities |
|
|
|
|
|
after taxation |
– |
– |
81 |
136 |
217 |
Issue of Ordinary Shares |
500 |
49,500 |
– |
– |
50,000 |
IPO costs |
– |
(628) |
– |
– |
(628) |
|
_______ |
_______ |
_______ |
_______ |
_______ |
Balance at 31 December
2014 |
500 |
48,872 |
81 |
136 |
49,589 |
|
====== |
====== |
====== |
====== |
====== |
For the period from 14 May 2014 to
30 June 2015 (audited) |
|
|
|
|
|
|
|
Share |
|
|
|
|
Share |
Premium |
Capital |
Revenue |
|
|
Capital |
Account |
Reserve |
Reserve |
Total |
|
£000 |
£000 |
£000 |
£000 |
£000 |
Balance at 14 May 2014 |
– |
– |
– |
– |
– |
|
_______ |
_______ |
_______ |
_______ |
_______ |
Return on ordinary activities |
|
|
|
|
|
after taxation |
– |
– |
1,891 |
245 |
2,136 |
Issue of Ordinary Shares |
500 |
49,500 |
– |
– |
50,000 |
IPO costs |
– |
(628) |
– |
– |
(628) |
|
_______ |
_______ |
_______ |
_______ |
_______ |
Balance at 30 June 2015 |
500 |
48,872 |
1,891 |
245 |
51,508 |
|
====== |
====== |
====== |
====== |
====== |
The notes on pages 10 to 12 form part of these accounts.
Notes to the Interim Accounts
1. ACCOUNTING POLICIES
A summary of the principal accounting policies is set out
below:
(a) Basis of accounting
The financial statements have been prepared in accordance with
the applicable UK Accounting Standards, being FRS102 –The Financial
Reporting Standard – and with the Statement of Recommended Practice
“Financial Statements of Investment Trust Companies and Venture
Capital Trusts” (issued in November
2014). The half-year accounts are prepared in accordance
with Financial Reporting Standard 104 – Interim Financial
Reporting.
Previously, the financial statements were prepared in accordance
with UK Generally Accepted Accounting Practice (“UK GAAP”). The
transition to FRS did not result in any significant changes to the
accounting policies.
The financial information for the period ended 30 June 2015 included in this report, has been
taken from the Company’s full accounts, as restated to comply with
FRS from the transition date 1 July
2015. Restatement of opening balances relating to equity
values, assets and liabilities and profits and losses of the
Company between UK GAAP as previously reported and under FRS as
restated have not been presented as there have been no required
changes to the reported amounts. Therefore restatement tables have
not been prepared for any of the primary statements.
They have also been prepared on the assumption that approval as
an investment trust will continue to be granted. The financial
statements have been prepared on a going concern basis.
2. INVESTMENT MANAGEMENT FEE
|
(Unaudited) |
(Unaudited) |
(Audited) |
|
Six months ended |
Period ended |
Period ended |
|
31 December |
31 December |
30 June |
|
2015 |
2014 |
2015 |
|
£000 |
£000 |
£000 |
Basic fee: |
|
|
|
25% charged to revenue |
48 |
48 |
95 |
75% charged to capital |
144 |
145 |
286 |
|
_______ |
_______ |
_______ |
|
192 |
193 |
381 |
|
====== |
====== |
====== |
|
|
|
|
Performance fee charged 100% to
capital: |
|
|
|
Performance fee accrual |
– |
– |
– |
|
_______ |
_______ |
_______ |
|
– |
– |
– |
|
====== |
====== |
====== |
The Company’s investment manager is Sanditon Asset Management
Limited. With effect from Admission, the Manager shall be entitled
to receive from the Company in respect of its services provided
under the Management Agreement, a management fee accrued daily and
payable monthly in arrears calculated at the rate of one-twelfth of
0.75 per cent. per calendar month of the Company’s Net Asset Value.
In accordance with the Directors’ policy on the allocation of
expenses between income and capital, in each financial period 75
per cent. of the management fee payable is expected to be charged
to capital and the remaining 25 per cent. to income.
The Manager is also entitled to a performance fee which equals
15 per cent. of the amount by which the Reference Amount at the end
of a Performance Period exceeds the higher of (a) the Hurdle (the
“Hurdle” means the Initial Gross Proceeds adjusted for the total
amount of any dividends paid or payable) increased by RPIX plus 2
per cent. per annum, compounded annually (on a pro-rata basis where
applicable) from Admission and (b) the High Watermark (the “High
Watermark” means, as at the end of the relevant Performance Period,
the highest of (i) the Reference Amount of the previous Performance
Period, (ii) the Reference Amount of the most recent Performance
Period in respect of which a performance fee was paid; and (iii)
the Initial Gross Proceeds; and in each case adjusted for any
repurchases by the Company of Ordinary Shares or any dividends paid
or payable during the relevant Performance Period multiplied by the
time weighted average of the total number of Shares in issue during
that Performance Period).
The first “Performance Period” is the period from 27 June 2014 (the date of Admission to the London
Stock Exchange) to the end of the Company’s third accounting period
and each subsequent Performance Period begins immediately after the
previous Performance Period and ends at the end of the Company’s
third accounting period thereafter; provided that where the
Management Agreement is terminated the date of such termination
shall be the end of the then current Performance Period.
The “Reference Amount” means, in respect of a given Performance
Period, the lower of (i) the Net Asset Value on the last Business
Day of a Performance Period and (ii) the average of the closing
mid-market prices for the five Business Days ending on the last
Business Day of a Performance Period of an Ordinary Share as
derived from the Official List of the UK Listing Authority,
multiplied by the number of Ordinary Shares in issue on the last
Business Day of that Performance Period; and in each case adjusted
for the total amount of any dividends paid or payable during that
Performance Period and any accrual for unpaid performance fees.
3. DIVIDEND
No interim dividend has been declared in respect of the six
months to 31 December 2015.
Consideration will be given to an annual dividend in respect of
the year ended 30 June 2016 at a
Board meeting to be held in September
2016. An announcement will be made shortly after that
meeting.
4. INVESTMENTS
|
(Unaudited) |
(Unaudited) |
(Audited) |
|
Six months ended |
Period ended |
Period ended |
|
31 December |
31 December |
30 June |
|
2015 |
2014 |
2015 |
|
£000 |
£000 |
£000 |
Investments listed on a recognised
investment exchange: |
|
|
|
UK |
10,906 |
12,006 |
11,059 |
Overseas |
– |
879 |
1,513 |
Unquoted investments: |
|
|
|
UK |
200 |
200 |
200 |
|
_______ |
_______ |
_______ |
|
11,106 |
13,085 |
12,772 |
|
====== |
====== |
====== |
5. SHARE CAPITAL
|
(Unaudited) |
(Unaudited) |
(Unaudited) |
(Unaudited) |
(Audited) |
(Audited) |
|
31 December 2015 |
31 December 2015 |
31 December 2014 |
31 December 2014 |
30 June 2015 |
30 June 2015 |
|
No. of Shares |
£000 |
No. of Shares |
£000 |
No. of Shares |
£000 |
Allotted, issued & fully
paid: |
|
|
|
|
|
|
Ordinary Shares of £0.01 |
50,000,000 |
500 |
50,000,000 |
500 |
50,000,000 |
500 |
|
______________ |
_______ |
______________ |
_______ |
______________ |
_______ |
|
50,000,000 |
500 |
50,000,000 |
500 |
50,000,000 |
500 |
|
============ |
====== |
============ |
====== |
============ |
====== |
Interim Management Report
six months ended 31 December
2015
General
The Company was incorporated in England and Wales as a public limited Company on
14 May 2014 with registered number
09040176. On 3 June 2014 the Company
announced it had published a prospectus in connection with an
initial public offering of up to 50 million ordinary shares at
100 pence per ordinary share.
Following the closing of the placing and offer for subscription for
ordinary shares the Board of the Company announced on 24 June 2014 that an aggregate of 50,000,000
ordinary shares in the Company (“Ordinary Shares”) would be issued
at a price of £1 per Ordinary Share. 13,494,900 Ordinary Shares
were issued pursuant to the offer and 36,505,100 were issued under
the placing. The fund raise was oversubscribed. The shares were
admitted to the Official List on 27 June
2014 and dealings commenced on that day.
Investment Objective
The Company’s investment objective is to:
• Deliver absolute returns of at least 2 per cent per annum,
compounded annually, above RPIX; and
• Be an asset diversifier for Shareholders by targeting low
correlation with leading large capitalisation equity indices.
Alternative Investment Fund Managers
Directive (“AIFMD”)
In order to comply with AIFMD, the Company has appointed
Sanditon Asset Management Limited (“SAM”) to act as its Alternative
Investment Fund Manager (“AIFM”). SAM has been approved as a Small
Authorised UK Alternative Investment Fund Manager by the UK’s
Financial Conduct Authority.
Going Concern
The Directors believe that, having considered the Company’s
investment objectives, risk management policies, capital management
policies and procedures, nature of the portfolio and expenditure
projections, the Company has adequate resources and an appropriate
financial structure in place to continue in operational existence
for the foreseeable future. The assets of the Company consist
mainly of securities which are readily realisable. For these
reasons, they consider that there is reasonable evidence to
continue to adopt the going concern basis in preparing the
accounts.
As at 31 December 2015 the Company
had net assets of £49.6 million and it has sufficient cash balances
to meet current obligations as they fall due. The Company continues
to meet day-to-day liquidity needs through its cash resources.
The Directors have a reasonable expectation that the Company
will continue in existence for the foreseeable future.
Principal risks and uncertainties
The key risks to the Company fall broadly under the following
categories:
• Investment and strategy
The Board will regularly review the investment mandate and
long-term investment strategy in relation to the market and
economic conditions. The Board also regularly monitors the
Company’s investment performance against the objective to deliver
at least 2% above inflation and its compliance with the investment
guidelines.
• Accounting, legal and regulatory
In order to qualify as an investment trust, the Company must
comply with the provisions contained in Section 1158 of the
Corporation Taxes Act 2010. A breach of Section 1158 in an
accounting period could lead to the Company being subject to
corporation tax on gains realised in that accounting period.
Section 1158 qualification criteria are continually monitored by
the Investment Manager and the results reported to the Board at its
regular meetings. The Company must also comply with the Companies
Act and the UKLA Listing Rules. The Board relies on the services of
the administrator, Northern Trust Global Services Limited and its
professional advisers to ensure compliance with the Companies Act
and the UKLA Listing Rules.
• Loss of investment team or Investment Manager
A sudden departure of the Investment Manager or several members
of the investment management team could result in a short-term
deterioration in investment performance.
• Discount
A disproportionate widening of the discount relative to the
Company’s peers could result in loss of value for shareholders. A
potential buy-back of shares would be in accordance with London
Stock Exchange rules and at the Board’s discretion.
• Operational
Like most other investment trust companies, the Company has no
employees and therefore relies upon the services provided by third
parties and is dependent on the control systems of the Investment
Manager, the custodian and the Company’s other service providers.
The security, for example, of the Company’s assets, dealing
procedures, accounting records and maintenance of regulatory and
legal requirements, depend on the effective operation of these
systems. The custodian produces reports on its internal controls
which are reviewed by its auditors and give assurance regarding the
effective operation of controls.
• Market risk
The fair value or future cash flows of a financial instrument
held by the Company may fluctuate because of changes in market
prices. This market risk comprises three elements – currency risk,
interest rate risk and other price risk (see below).
• Currency risk
The Company may invest in overseas securities and its assets may
be subject to currency exchange rate fluctuations.
• Interest rate risk
Interest rate movements may affect the level of income
receivable on cash deposits.
• Other price risk
Other price risks (i.e. changes in market prices other than
those arising from interest rate risk or currency risk) may affect
the value of the investments.
• Credit risk
The failure of the counterparty to a transaction to discharge
its obligations under that transaction could result in the Company
suffering a loss.
• Liquidity risk
This is the risk that the Company will encounter difficulty in
meeting obligations associated with financial liabilities.
Transactions with the Investment
Manager
Under AIC Guidance, the Company is required to provide
additional information concerning its relationship with the
Investment Manager, Sanditon Asset Management Limited (“SAM”).
Details of the investment management fee charged by SAM are set out
in note 2 on pages 10 and 11. At 31 December
2015, £31,386 (31 December
2014: £32,000) of this fee remained outstanding. SAM
received £1,732 (31 December 2014:
£3,109 – website and some IPO related costs) in relation to a
contribution to the costs of the website.
Related party transactions
During the period no transactions with related parties have
taken place which materially affected the financial position or
performance of the Company. The Directors’ current level of
remuneration is £16,000 per annum for each Director, with the
Chairman of the Audit Committee receiving an additional fee of
£4,000 per annum. The Chairman’s fee is £25,000 per annum.
Directors’ responsibility
statement
The Directors are responsible for preparing the interim report,
in accordance with applicable law and regulations. The Directors
confirm that, to the best of their knowledge:
• The condensed set of financial statements within the interim
report has been prepared in accordance with FRS 104 issued by the
Accounting Standards board on “Half-Yearly Financial Reports”;
• The Interim Management Report includes a fair review of the
information required by 4.2.7R (indication of important events
during the first six months of the year, their impact on the
condensed set of financial statements, and a description of the
principal risks and perceived uncertainties for the remaining six
months of the financial year); and
• The Interim Management Report includes a fair review of the
information concerning related parties transactions as required by
Disclosure and Transparency Rule 4.2.8R.
For and on behalf of the Board
Rupert
Barclay
Chairman
18 February 2016
Directors and Officers
as at 31 December 2015
Directors
Rupert Barclay, Chairman
Hugo Dixon
Christopher Keljik
Charles Harman (retired
1 December 2015)
Investment Manager
Sanditon Asset Management Limited
Fifth Floor
33 Cannon Street
London EC4M 5SB
Telephone: 020 3595 2900
Secretary and Administrator
Northern Trust Global Services Limited
50 Bank Street
Canary Wharf
London E14 5NT
Registered office
Fifth Floor
33 Cannon Street
London EC4M 5SB
Company number
09040176
Auditor
Ernst & Young LLP
25 Churchill Place
Canary Wharf
London E14 5EY
Registrar
Capita Asset Services
The Registry
34 Beckenham Road
Beckenham
Kent BR3 4TU
Email: ssd@capitaregistrars.com
Stockbroker
JPMorgan Cazenove
25 Bank Street
Canary Wharf
London E14 5JP
Website
www.sanditonam.com