Half-year Report

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 £351.0 million (30 June 2019: £469.9 million and 31 December 2019: £546.3 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 to						1 January 2019 to			1 January 2019  to
			30 June 2020						30 June 2019			31 December 201 9
												(audited)
	Notes		£			£			£	£		£			£
Income	1(e)
Unrealised gain/(loss) on financial assets at fair value through profit or loss	1(d), 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	£	£	£		£		£	£
Non-Current Assets
Financial assets at fair value through profit or loss	1(d), 5		346,926,656			441,571,407			537,820,762
			346,926,656			441,571,407			537,820,762
Current Assets
Cash and cash equivalents	1(h), 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 payables	1(i), 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 and Share Premium	Retained Reserves	Non- Controlling Interest	Total Equity
		£	£	£	£
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 and Share Premium	Retained Reserves	Non- Controlling Interest	Total Equity
		£	£	£	£
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 and Share Premium	Retained Reserves	Non- Controlling Interest	Total Equity
		£	£	£	£
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

	Notes		1 January 2020 to 30 June 2020 £	1 January 201 9 to 30 June 201 9 £	1 January 2019 to 31 December 201 9 (audited) £
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 interest			600	-	-
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 ("£"), which is the Group's functional and presentational currency. Transactions in currencies other than £ 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 £ 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: £20,011,139 and year ended 31 December 2019: £Nil).

2. Comprehensive income/(loss)

The comprehensive income/(loss) has been arrived at after charging:

	1 January 2020 to 30 June 20 20	1 January 2019 to 30 June 201 9	1 January 2019 to 31 December 2019
	£	£	£
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 £15,702 was due to the Auditor in relation to tax compliance services (period ended 30 June 2019: £14,600 and year ended 31 December 2019: £29,662).

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 £1,200) 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).

Date		Shares		Days in issue		Weighted Average 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 June 2020	As at 30 June 2019	As at 31 December 2019
	£	£	£
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	£	£	£	£
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	£	£	£	£
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	£	£	£	£
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 2020	As at 30 June 2019	As at 31 December 2019
	£	£	£
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: £3,488,732 and year ended 31 December 2019: £6,105,282).

7. Trade and other payables

	As at 30 June 2020	As at 30 June 201 9	As at 31 December 201 9
	£	£	£
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 2020	As at 30 June 2019	As at 31 December 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 2020	As at 30 June 2019	As at 31 December 2019
Share premium account	£	£	£
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 £2,014,455 (period ended 30 June 2019: £2,117,179 and year ended 31 December 2019: £4,211,140) had been paid by the Investment Partnership. No balance was outstanding at the period end (period ended 30 June 2019: £Nil and year ended 31 December 2019: £Nil).

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 £Nil (30 June 2019: £Nil and December 2019: £Nil) 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 £35,000 per annum. The Chairman of the Audit Committee receives £5,000 per annum in addition to such fee. The Chairman receives a fee payable by the Company currently at the rate of £50,000 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 £70,000 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:

As at 30 June 2020	Less than 1 month	1 - 12 months	Total
	£	£	£
Trade and other payables	36,782	69,557	106,339
	36,782	69,557	106,339

As at 30 June 2019	Less than 1 month	1 - 12 months	Total
	£	£	£
Trade and other payables	40,445	111,243	151,688
	40,445	111,243	151,688

As at 31 December 2019	Less than 1 month	1 - 12 months	Total
	£	£	£
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
	Less than 1 month	1 month to 3 months	3 months to 1 year	Non- interest bearing	Total
	£	£	£	£	£
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
	Less than 1 month	1 month to 3 months	3 months to 1 year	Non- interest bearing	Total
	£	£	£	£	£
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
	Less than 1 month	1 month to 3 months	3 months to 1 year	Non- interest bearing	Total
	£	£	£	£	£
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 £4,248,227 (30 June 2019: surplus of £28,362,247 and 31 December 2019: surplus of £8,688,050).

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 £4,248 (period ended 30 June 2019: £212,717 and year ended 31 December 2019: £65,160) 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 £21,241 or negative effect of £4,248 (period ended 30 June 2019: £70,906 and year ended 31 December 2019: £43,440) 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: £Nil and year ended 31 December 2019: £Nil).

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 £346.9 million to £330.0 million.

 

END

 

 

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