Interim Results

RNS Number : 3958Y

Trian Investors 1 Limited

09 September 2020

 

9 September 2020

TRIAN INVESTORS 1 LIMITED
(the "Company")

Interim Results

Interim Report and Unaudited Condensed Financial Statements for the period from 1 January 2020 to 30 June 2020

The Company announces its results for the six month period ended 30 June 2020. Further information is available on the Company's website www.trianinvestors1.com .

For further information, please contact:

Ocorian Administration (Guernsey) Limited
(Administrator and Company Secretary)
[phone]
Mariana Enevoldsen

Overview of the Company

Trian Investors 1 Limited (the "Company") is a Guernsey-domiciled limited company incorporated on 24 August 2018. The Ordinary Shares of the Company were admitted to trading on the Specialist Fund Segment of the London Stock Exchange ("SFS") on 27 September 2018 ("Admission").

The investment objective of the Company, through its investment in Trian Investors 1, L.P. (Incorporated) (the "Investment Partnership"), is to generate significant capital appreciation through the investment activity of Trian Investors Management, LLC (the "Investment Manager") and its parent, Trian Fund Management, L.P. (collectively, "Trian"). Trian's investment strategy is to act as a highly engaged shareowner at the companies in which it invests, combining concentrated public equity ownership with operational expertise.

In accordance with its investment policy, the Company has made a substantial minority investment through the Investment Partnership, in the amount of approximately £250 million, in Ferguson Plc ("Ferguson"), where Trian believes it has developed a compelling set of operational and strategic initiatives that will help generate significant shareholder value.

Chairman's Statement

For the period from 1 January 2020 to 30 June 2020

Dear Shareholder,

On behalf of the Board of Directors (the "Board"), I am pleased to present to you the Interim Report of the Company covering the period from 1 January 2020 to 30 June 2020.

In July 2019, the Board announced that funds managed by Trian, including the Investment Partnership through which the Company invests, had acquired a 5.98% interest in shares of Ferguson, valued at approximately £736 million at the time.  The Company through the Investment Partnership invested approximately £250 million in Ferguson at an average cost basis of £52.85 per share.

Since that time, the Company has remained invested in Ferguson and the Board has been pleased with the results of the investment to date. As described further in the Investment Manager's Report, Ferguson's business has performed resiliently despite the economic disruption caused by the coronavirus ("COVID-19"). After Ferguson's share price declined significantly in March to a low of £40.86, it rebounded to trade at £66.12 as at 30 June 2020 compared with the price of £68.50 at 31 December 2019. This share price movement was reflected in the Company's net asset value ("NAV"), which dropped to 115.66 pence per Ordinary Share as at 30 June 2020 compared with 121.34 pence at 31 December 2019. 

As at 31 August 2020, the Company's NAV had risen to 127.02 pence per Ordinary Share driven by the increase in Ferguson's share price to £73.76.

Trian has kept the Board informed about its engagement with Ferguson's management team and board of directors, and it continues to believe that Ferguson represents an attractive investment opportunity.  Furthermore, Trian is encouraged by Ferguson's decision to pursue an additional listing in the United States, as well as the company's stated intention to transition to a U.S. primary listing in due course.

On 12 February 2020, the Board declared a dividend of 0.52 pence per share to be paid to the Company's shareholders of record on 21 February 2020, and announced a £3,000,000 share repurchase (which was completed on 24 February 2020 and 25 February 2020). On 15 April 2020, Ferguson announced that it would withdraw its interim dividend due for payment on 30 April 2020.  The Board and Trian believe that Ferguson's balance sheet and liquidity position remains strong, and that the company's decision to withdraw its dividend was made out of an abundance of caution. When announcing the withdrawal, Ferguson stated that it would review this decision later in the financial year as trading conditions become clearer, and we expect Ferguson to provide further guidance regarding its dividend policy in subsequent trading updates.  If Ferguson resumes dividend payments in the future, the Board expects to continue paying dividends to the Company's shareholders, subject to the Company's continued investment in Ferguson.  In accordance with the revision to the Company's dividend policy announced on 12 February 2020, the Company and the Investment Partnership have the flexibility to use a portion of any dividend payments received from Ferguson in the future for other purposes, such as repurchases of Company shares or hedging activities designed to mitigate foreign currency risk.

The principal risks and uncertainties of the Company are unchanged from 31 December 2019, and further details may be found in the Report of the Directors within the Annual Report and Audited Financial Statements of the Company for the period 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 current fiscal year in light of the Ferguson investment and COVID-19, but currently expects them to remain substantially the same.

The Board is grateful for your support and we will continue to keep you informed of developments at the Company as appropriate.

Yours sincerely,

Chris Sherwell

Chairman

8 September 2020

Investment Manager's Report

For the period from 1 January 2020 to 30 June 2020

Dear Shareholder,

In April 2019, we recommended that the Company invest in Ferguson, the largest U.S. distributor of plumbing supplies, pipes, valves and fittings and fire and fabrication products and one of the largest U.S. distributors of industrial and heating, ventilation and cooling (HVAC) products.  As detailed further in the Investment Manager's Report included in the Company's Annual Report for the period ended 31 December 2019 (the "2019 Annual Report"), we believe that Ferguson possesses an underappreciated and attractive U.S. business.  Among other attractive attributes, Ferguson benefits from an extensive network of branches and showrooms, which allow the company to offer greater convenience and availability to its customers than competitors. We also believe that Ferguson will benefit from continued reinvestment in growth initiatives such as e-commerce, and we take comfort that approximately 60% of Ferguson's sales are oriented towards repair, maintenance, and improvement (RMI) activity, which is less cyclical than new construction.

Recent Trading Results

The economic disruption and the government imposed lockdowns precipitated by COVID-19 created uncertainty about Ferguson's business prospects in March and April, and Ferguson issued a trading update on 15 April 2020 which indicated that its results had begun to worsen as lockdowns took effect.  However, Ferguson's recent trading updates have reported better than expected results and have reaffirmed our belief in the resilience of the company's business model. 

On 13 May 2020, Ferguson released its third quarter trading update for the three months ending 30 April 2020, which indicated that April results were better than some analysts had initially feared, with U.S. sales declining only -9.3% during the month year over year.

More recently, on 24 July 2020, Ferguson released a trading update for the period of 1 May 2020 through 21 July 2020, ahead of the company's planned fiscal year 2020 earnings release in September.  The trading update highlighted improvement in Ferguson's U.S. business over this roughly three-month period and noted that revenue trends were sequentially improving each month since April.  For the period from 1 May 2020 through 21 July 2020, U.S. revenue (which accounts for approximately 88% of the company's overall revenue) declined only -0.6% year over year, a significant improvement over April's revenue decline of -9.3%. Revenue within Ferguson's Blended Branch business declined -4.6% during this same period on account of showrooms being at less than full capacity, but revenue grew within Ferguson's Waterworks and HVAC businesses, 1.8% and 12.7%, respectively. Ferguson's e-commerce businesses continue to perform strongly, growing 30.4% during this period. Ferguson's results indicate that the residential market (accounting for approximately 50% of Ferguson's overall revenue) has been more resilient than initially expected. Furthermore, the significant growth within Ferguson's e-commerce business speaks to the strength of the company's digital tools. Ferguson's management team has previously noted that having best-in-class digital tools is highly important to Ferguson's franchise strength, as COVID-19 will likely transform the way customers order and receive products going forward.  We believe that Ferguson's continuing investment in its technology, including its market-leading online platforms (Build.com and Ferguson.com), will prove to be a significant competitive advantage in the coming years.

Value Creation at Ferguson

Since announcing our investment in Ferguson in July 2019, Trian has constructively engaged with Ferguson's management team and board of directors, and it has developed a productive relationship with Ferguson's Group CEO, Kevin Murphy.  Furthermore, Ferguson has announced a number of initiatives that we believe will create long-term value, and the company continues to make progress towards executing on these plans. 

After first announcing its intention to demerge its UK business in September 2019, in May 2020 Ferguson reaffirmed its commitment to the transaction and continues to move forward with the demerger process, although timing of the transaction will depend on stabilisation of market conditions.

In addition, after completing an extensive shareholder consultation earlier this year, on 15 April 2020, Ferguson announced its intention to relocate the company's primary listing to the United States and proposed a two-step process for doing so .  As an initial step, Ferguson will pursue an additional listing of its shares on a U.S. stock exchange (in addition to the company's primary listing on the London Stock Exchange) .  Ferguson believes that the additional U.S. listing will facilitate increased share ownership by domestic U.S. funds, and in connection with the additional listing, Ferguson's Executive Team plans to undertake extensive additional investor marketing in the U.S. to enhance understanding and awareness of Ferguson's business amongst these investors.  At the same time, Ferguson believes that the additional listing will provide for an appropriate transition period that will enable Ferguson shareholders with mandates that could restrict their long-term ownership of Ferguson to sell their holdings in an orderly fashion.

The additional listing was approved by Ferguson shareholders at a General Meeting held on 29 July 2020 with overwhelming support (99.5 per cent of votes cast at the meeting were in favour of the proposal) and is expected to take effect in the first half of calendar year 2021. Once the additional listing takes effect, Ferguson intends to seek shareholder approval for a primary listing on a U.S. exchange in due course.

Trian's Perspective on Ferguson's Investment Prospects

Trian continues to believe that Ferguson remains an attractive investment opportunity.  Despite the disruption caused by COVID-19, we were encouraged to see that Ferguson's financial results were better than expected during April through July, and we are optimistic that RMI activity can remain resilient during the pandemic.  We also believe that Ferguson is better positioned than many of its competitors to take advantage of shifting customer behaviour, given the presence of its market leading online platforms.  Finally, Ferguson has a strong balance sheet (Ferguson expects the ratio of net debt to last twelve months EBITDA  to be below 1.0x as at 31 July 2020), as well as a flexible cost structure that should allow it to maintain profitability and cash flow even if it encounters weakness in certain end markets. 

We are encouraged by Ferguson's decision to seek an additional listing in the U.S., as well as its stated intention to transition to a primary U.S. listing in due course. As we've previously stated, we believe that a relisting would result in numerous benefits to Ferguson ( including higher ownership among U.S. institutions, increased U.S. research coverage, comparison to a more appropriate set of peers, and increased employee engagement (as most of Ferguson's employees are based in the U.S.).   And while Ferguson's valuation has improved since we initially made our investment, we note that the company's shares remain undervalued as compared with its US-listed speciality distribution peers.  Finally, given Ferguson's strong liquidity position and competitive advantages, we believe that it will have numerous opportunities to increase market share as COVID-19 subsides (through both acquisitions and organic growth) in an industry which remains highly fragmented. 

As always, there are risks to our investment outlook, including management's ability to execute on its operational plans, the possibility that Ferguson shareholders may not approve a U.S. primary listing, and the continuing impact of the COVID-19 outbreak on Ferguson's operations and end markets.  Please also refer to the Company's Prospectus dated 21 September 2018 (the "Prospectus") and the section titled "Principal risks and uncertainties" in the Company's 2019 Annual Report for further information on the risks associated with an investment in the Company.

Concluding Thoughts

We look forward to continuing our constructive engagement with Ferguson and working with its management team and board of directors to create long-term value.  We appreciate your ongoing support and will continue to work diligently towards fulfilling the investment objectives of the Company.

Yours sincerely,

Trian Investors Management, LLC

Directors' Responsibility Statement

Responsibility Statement

The Directors are responsible for preparing the Interim Report and Unaudited Condensed Interim Financial Statements in accordance with applicable law and regulations. The Board confirms that to the best of their knowledge:

• The condensed set of financial statements has been prepared in accordance with IAS 34 'Interim Financial Reporting';

  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 as required by DTR 4.2.10R.

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy, at any time, the financial position of the Company and which enable them to ensure that the financial statements comply with the Companies (Guernsey) Law, 2008.  They are also responsible for the maintenance and integrity of the corporate and financial information included on the Company's website ( www.trianinvestors1.com ). Legislation in Guernsey governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

Going Concern

Under the UK Corporate Governance Code and applicable regulations, the Directors are required to satisfy themselves that it is reasonable to assume that the Company is a going concern.

The Directors monitor the capital and liquidity requirements of the Company on a regular basis. They have undertaken a rigorous review of the Company's ability to continue as a going concern including reviewing the ongoing cash flows and the level of cash balances as at the reporting date as well as taking forecasts of future cash flows into consideration and are of the opinion that the Company has adequate resources to continue its operational activities for at least twelve months. The Directors are of the opinion that the COVID-19 outbreak should not impact the Company's ability to continue as a going concern despite the resulting uncertainty it has created.

Based on these sources of information and their own judgement, the Directors believe it is appropriate to prepare the financial statements of the Company on a going concern basis.

On behalf of the Board

Chris Sherwell

Chairman

8 September 2020

INDEPENDENT REVIEW REPORT TO TRIAN INVESTORS 1 LIMITED We have been engaged by 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 Unaudited Condensed Statement of Comprehensive Income, the Unaudited Condensed Statement of Financial Position, the Unaudited Condensed Statement of Changes in Equity, the Unaudited Condensed Cash Flow Statement and related notes 1 to 17. We have read the other information contained in the half-yearly 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 Guidance and Transparency Rules of the United Kingdom's Financial Conduct Authority. As disclosed in note 2, the annual financial statements of the company are prepared in accordance with IFRSs as adopted by the European Union. The condensed set of financial statements included in this half-yearly financial report have been prepared in accordance with the accounting policies the company intends to use in preparing its next annual financial statements. 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 ended 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 Guidance 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. Deloitte LLP Statutory Auditor St Peter Port, Guernsey 8 September 2020

Unaudited Condensed Statement of Financial Position

As at 30 June 2020

			30 June 2020 (unaudited)	30 June 2019 (unaudited)	31 December 2019 (audited)
	Notes		£'000	£'000	£'000
Non-current assets
Investment in Midco	5, 6		308,014	276,047	326,228
Total non-current assets			308,014	276,047	326,228
Current assets
Cash and cash equivalents			1,742	2,453	2,057
Receivables and prepayments	7		56	23	96
Total current assets			1,798	2,476	2,153
Current liabilities
Trade and other payables	8		44	104	60
Total liabilities			44	104	60
Net assets			309,768	278,419	328,321
Equity
Share capital	9		262,876	265,876	265,876
Retained earnings			46,892	12,543	62,445
Total equity			309,768	278,419	328,321
Number of ordinary shares in issue			267,825,147	270,585,977	270,585,977
NAV per share (pence)	10		115.66	102.89	121.34

The Unaudited Condensed Interim Financial Statements were approved by the Board and authorised for issue on 8 September 2020.

The notes form an integral part of these financial statements.

Chris Sherwell    Mark Thompson

Director  Director

Unaudited Condensed Statement of Comprehensive Income

For the period from 1 January 2020 to 30 June 2020

	Notes	1 January 2020 to 30 June 2020 (unaudited) £'000	1 January 2019 to 30 June 2019 (unaudited) £'000	1 January 2019 to 31 December 2019  (audited) £'000
Income
Unrealised (loss)/gain on investment in Midco	5	(15,214)	12,047	62,228
Dividends received from Midco	5	1,407	-	-
		(13,807)	12,047	62,228
Expenses
Administration fees	14	86	69	128
Directors' fees	13	70	70	140
Auditor fees and non-audit fees	15	20	15	39
Trademark licence fees	14	23	35	40
Other operating expenses		143	103	232
Total expenses		342	292	579
Operating (loss)/profit		(14,149)	11,755	61,649
Finance income and expense
Interest income		3	542	550
Net (loss)/profit		(14,146)	12,297	62,199
Total comprehensive (loss)/income
		(14,146)	12,297	62,199
Basic (loss)/earnings per share (pence)	11	(5.26)	4.54	22.99

All activities derive from continuing operations.

The notes form an integral part of these financial statements

Unaudited Condensed Statement of Changes in Equity

For the period from 1 January 2020 to 30 June 2020

	Notes	Share capital	Retained earnings	Total
		£'000	£'000	£'000
As at 1 January 2020		265,876	62,445	328,321
Loss for the period		-	(14,146)	(14,146)
Total comprehensive loss		-	(14,146)	(14,146)
Share buyback	9	(3,000)	-	(3,000)
Dividend paid	16	-	(1,407)	(1,407)
		(3,000)	(1,407)	(4,407)
As at 30 June 2020		262,876	46,892	309,768

For the period from 1 January 2019 to 30 June 2019

	Notes	Share capital	Retained earnings	Total
		£'000	£'000	£'000
As at 1 January 2019		265,876	246	266,122
Profit for the period		-	12,297	12,297
Total comprehensive income		-	12,297	12,297
As at 30 June 2019		265,876	12,543	278,419

For the year from 1 January 2019 to 31 December 2019

	Notes	Share capital	Retained earnings	Total
		£'000	£'000	£'000
As at 1 January 2019		265,876	246	266,122
Profit for the year		-	62,199	62,199
Total comprehensive income		-	62,199	62,199
As at 31 December 2019		265,876	62,445	328,321

The notes form an integral part of these financial statements

Unaudited Condensed Statement of Cash Flows

For the period from 1 January 2020 to 30 June 2020

		1 January 2020 to 30 June  2020 (unaudited)	1 January 2019 to 30 June  2019 (unaudited)	1 January 2019 to 31 December  2019  (audited)
	Notes	£'000	£'000	£'000
Operating activities
(Loss)/profit before tax		(14,146)	12,297	62,199
Adjustments to reconcile (loss)/profit before tax to net cash flows:
Unrealised loss/(gain) on investment Dividends received Interest income Movement in receivables and prepayments		15,214 (1,407) (3) 40	(12,047) - (542) 142	(62,228) - (550)   69
Movement in trade and other payables		(16)	(106)	(150)
Net cash flows from operating activities		(318)	(256)	(660)
Investing activities
Dividends received		1,407	-	-
Investment into Midco		-	(264,000)	(264,000)
Capital distribution from Midco		3,000	-	-
Finance income		3	542	550
Net cash flows from investing activities		4,410	(263,458)	(263,450)
Financing activities
Shares repurchased	9	(3,000)	-	-
Dividend paid	16	(1,407)	-	-
Net cash flows from financing activities		(4,407)	-	-
Net movement in cash and cash equivalents		(315)	(263,714)	(264,110)
Opening cash and cash equivalents		2,057	266,167	266,167
Closing cash and cash equivalents
		1,742	2,453	2,057

The notes on form an integral part of these financial statements

Notes to the Unaudited Condensed Interim Financial Statements

For the period from 1 January 2020 to 30 June 2020

1.  Corporate information

The Company is incorporated in and controlled from Guernsey as a company limited by shares with registered number 65419. The Ordinary Shares of the Company (the "Shares") are admitted to the SFS.

2.  Accounting policies

The principal accounting policies applied in the preparation of these Unaudited Condensed Interim Financial Statements are set out below.

Basis of preparation

The annual financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRS"), as adopted by the European Union, which comprise standards and interpretations approved by the International Accounting Standards Board and International Financial Reporting Interpretations Committee and in accordance with the Companies (Guernsey) Law, 2008.  The financial statements have been prepared on a historical cost basis as amended from time to time by the fair valuing of certain financial assets and liabilities. 

These condensed interim financial statements have been prepared in accordance with IAS 34, Interim Financial Reporting. The same accounting policies and methods of computation are followed in the interim financial statements as compared with the annual financial statements. These condensed interim financial statements do not include all information and disclosures required in the annual financial statements and should be read in conjunction with the Company's annual financial statements as of 31 December 2019.

Going concern

The Directors monitor the capital and liquidity requirements of the Company on a regular basis. They have undertaken a rigorous review of the Company's ability to continue as a going concern, including by reviewing the Company's ongoing cash flows and level of liquid investments and cash balances as at the reporting date, as well as forecasting future cash flows, and they are of the opinion that the Company has adequate resources to continue its operational activities for at least twelve months. The Directors are of the opinion that the COVID-19 outbreak should not impact the Company's ability to continue as a going concern despite the resulting uncertainty it has created.

Based on these sources of information and their own judgement, the Directors believe it is appropriate to prepare the interim financial statements of the Company on a going concern basis.

New and amended standards and interpretations applied

The following accounting standards and updates were applicable in the current period but did not have a material impact on the Company:

-  IFRS 3:  Business Combinations amendments

-  IFRS 7: Financial Instruments Disclosures amendments

-  IFRS 9: Financial Instruments amendments

-  IAS 1: Presentation of Financial Statements amendment

-  IAS 8: Accounting Policies, Changes in Accounting Estimates and Errors amendment

-  IAS 39: Financial Instruments: Recognition and Measurement amendment

New and amended standards and interpretations not applied

The following new and amended standards and interpretations in issue are applicable to the Company but are not yet effective or have not been adopted by the European Union and therefore, have not been adopted by the Company: 

-  IFRS 17: Insurance Contracts (effective 1 January 2023)

The Company has considered the IFRS standards and interpretations that have been issued, but are not yet effective. None of these standards or interpretations are likely to have a material effect on the Company, as the Company does not expect to carry out any transactions that fall within their scope.

Segment reporting

The Directors are of the opinion that the Company is currently engaged in a single segment of business, being the investment in a single target company ("Target Company"), Ferguson.

Treasury shares

The Company has the ability to repurchase shares and hold them in Treasury. Shares that are repurchased and held in Treasury are removed from the share capital reserve.

3.  Significant accounting judgements, estimates and assumptions

The preparation of the financial statements requires the Directors to make estimates and assumptions that affect the amounts reported for assets and liabilities as at the statement of financial position date and the amounts reported for revenue and expenses during the period. The nature of the estimation means that actual outcomes could differ from those estimates.  Estimates and underlying assumptions are reviewed on an ongoing basis.  Revisions to accounting estimates are recognised in the period in which the estimates are revised and in any future periods affected. 

The Directors also need to make judgements (other than those involving estimates) that have a significant impact on the application of accounting standards.  The following critical judgements apply to the Company's investment.

i) Use of last sales price published by the exchange: 

The Directors believe that a key judgement relates to the valuation of the investment in Ferguson held through the Investment Partnership. The Ordinary Shares of Ferguson are listed on the Main Market of the London Stock Exchange and the Directors must determine whether the market is sufficiently liquid for the last sales price published by the exchange to be a fair value in accordance with IFRS principles.  The Directors have assessed that there is a sufficiently active market in Ferguson Ordinary Shares and accordingly they consider the quoted share price to be the appropriate basis for the valuation of this investment.

ii) Investment entity exemption:

The Directors have considered whether the Company meets the definition of an investment entity as stipulated in the provisions of IFRS 10. Entities that meet the definition of an investment entity within IFRS 10 are required to measure their subsidiaries, other than those that provide investment services to the Company and do not themselves meet the definition of an investment entity, at fair value through profit or loss rather than consolidate them.

When entities are formed in connection with each other, the criteria for qualification as an investment entity is applied to the structure as a whole rather than for the entity in isolation.

The criteria which define an investment entity are as follows:

• An entity that obtains funds from one or more investors for the purpose of providing those investors with investment services;

• An entity that commits to its investors that its business purpose is to invest funds solely for returns from capital appreciation, investment income or both; and

• An entity that measures and evaluates the performance of substantially all of its investments on a fair value basis.

The Company's purpose is to invest through the Investment Partnership in a Target Company for capital appreciation and it will measure performance (of the Target Company) on a fair value basis. The Company has made an investment in a single Target Company, Ferguson, through its wholly owned subsidiary, Trian Investors 1 Midco Limited ("Midco"), which in turn holds 99.83 per cent of the commitment in the Investment Partnership. The Board has assessed whether the Company has all the elements of control as prescribed by IFRS 10 in relation to the Company's investment in the Investment Partnership and has concluded that the Company does have control of the Investment Partnership. Midco and the Investment Partnership are therefore both classified as subsidiaries of the Company. The Board has also assessed that the Company meets the criteria of an investment entity and therefore the subsidiaries are recorded at fair value through profit and loss rather than being consolidated. The Board's determination that the Company is classified as an investment entity involves a degree of judgement due to the complexity of the wider structure encompassing the Company, Midco and the Investment Partnership.

4.  Income tax

The Company is exempt from taxation in Guernsey under the provisions of the Income Tax (Exempt Bodies) (Guernsey) Ordinance, 2008 and is charged an annual exemption fee of £1,200.  

5.  Investment at fair value through profit or loss

	1 Jan to 30 Jun 2020	1 Jan to 30 Jun 2019	1 Jan to 31 Dec 2019
	(unaudited)	(unaudited)	(audited)
	£'000	£'000	£'000
Cost
Brought forward	264,000	-	-
Investment	-	264,000	264,000
Capital distribution	(3,000)	-	-
Carried forward	261,000	264,000	264,000
Fair value adjustment through profit or loss
Brought forward	62,228	-	-
Fair value movement	(15,214)	12,047	62,228
Carried forward	47,014	12,047	62,228
Fair value	308,014	276,047	326,228

As at 30 June 2020, the Company held 264,000,000 Ordinary Shares in Midco, representing 100 per cent of the share capital, which were subscribed for at 100 pence per share (30 June 2019: 264,000,000 ; 31 December 2019: 264,000,000 ), and Midco has contributed £264,000,000 to the Investment Partnership (30 June 2019: £ 264,000,000 ; 31 December 2019: £ 264,000,000 ). As at 30 June 2020, Midco held 99.83 per cent of the commitment in the Investment Partnership (30 June 2019: 99.83 per cent; 31 December 2019: 99.83 per cent). During the period from 1 January 2020 to 30 June 2020 the Company received cash from Midco of £4,407,000, comprising of a £1,407,000 dividend and a £3,000,000 capital distribution, which it used to declare a £1,407,000 dividend to shareholders and to conduct a £3,000,000 share repurchase (period to 30 June 2019: £nil ; year to 31 December 2019: £nil ).

Investments at fair value through profit or loss comprise Midco's pro rata portion of the fair value of the Investment Partnership's investment in Ferguson, currency option, cash and working capital balance, including the incentive allocation ("Incentive Allocation") allocable from the Investment Partnership to Trian Investors 1 SLP, L.P. The Investment Partnership's investment in Ferguson is currently treated as a "Stake Building Investment".  If the investment continues to be a "Stake Building Investment" until realisation, the Incentive Allocation will be equal to 20 per cent of net returns on the investment, payable after the Investment Partnership has distributed to its partners an amount equal to the aggregate capital contributions made in respect of the investment (excluding any capital contributions attributable to management fees). The Investment Partnership's investment in Ferguson, unless otherwise agreed with the Company, will cease to be considered a "Stake Building Investment", and will instead be considered an "Engaged Investment", if and when the Investment Manager obtains representation on Ferguson's board of directors, through one or more partners of Trian Fund Management, L.P. ("Trian Management").  If the investment becomes an "Engaged Investment", the Incentive Allocation will be equal to 10 per cent to 25 per cent of the Investment Partnership's net returns on the investment (excluding any capital contributions attributable to management fees), as set forth in greater detail in the Company's Prospectus dated 21 September 2018 (the "Prospectus"). In addition, the Investment Partnership invested in a £125,000,000 currency call option to offset a portion of the Investment Partnership's U.S. Dollar exposure arising from its investment in Ferguson, which receives the vast majority of its revenues in U.S. Dollars. The option offered protection against a weakening in the U.S. Dollar against Pounds Sterling and expired on 16 June 2020. In March 2020, the Investment Partnership entered into an additional currency call option, expiring in March 2021, to purchase £125,000,000 for US$165,875,000, in order to hedge the Company's currency exposure for a further nine months. 

The accounting for the Investment Partnership is prepared under IFRS.

Summary financial information for Midco's pro rata share of the Investment Partnership

	30 Jun 2020	30 Jun 2019	31 Dec 2019
	(unaudited)	(unaudited)	(audited)
Net asset value	£'000	£'000	£'000
Investment in Ferguson at cost	249,566	249,566	249,566
Unrealised gain on investment in Ferguson	62,685	14,893	73,924
Total value of investment in Ferguson	312,251	264,459	323,490
Foreign exchange option	1,326	3,008	2,984
Cash and cash equivalents	7,334	11,598	15,324
Other net liabilities	(22)	(7)	(13)
Incentive Allocation payable	(12,875)	(3,011)	(15,557)
Total net asset value	308,014	276,047	326,228
	1 Jan - 30 Jun	1 Jan - 30 Jun Jun	1 Jan - 31 Dec
	2020	2019	2019
	(unaudited)	(unaudited)	(audited)
Summary income statement	£'000	£'000	£'000
Unrealised (loss)/gain on investment in Ferguson	(11,240)	14,893	73,924
Unrealised (loss)/gain on foreign exchange option	(859)	148	124
Realised loss on foreign exchange option	(2,860)	-	-
Ferguson dividend income	-	-	5,311
Interest income	12	145	182
Management fee expense	(1,488)	(121)	(1,590)
Other operating expense	(54)	(7)	(166)
Incentive Allocation payable	2,682	(3,011)	(15,557)
(Loss)/profit	(13,807)	12,047	62,228

6.  Fair value

IFRS 13 'Fair Value Measurement' requires disclosure of fair value measurement by level.

The level in the fair value hierarchy within which the financial assets or financial liabilities are categorised is determined on the basis of the lowest level input that is significant to the fair value measurement.

Financial assets and financial liabilities are classified in their entirety into only one of the three levels.

The only financial instruments carried at fair value are the investments which are fair valued at each reporting date.

The Company holds 99.83 per cent of the commitment in the Investment Partnership through Midco, a wholly owned subsidiary. Midco's investment in the Investment Partnership has been classified within Level 2 as the Investment Partnership primarily invests in quoted securities which are classified within Level 1. The amount of Midco's investment in the Investment Partnership classified under Level 2 as at 30 June 2020 is £308,014,000 (30 June 2019: £276,047,000; 31 December 2019: £326,228,000). The amount of Midco's pro rata portion of the Investment Partnership's investments that is classified within Level 1, consisting of the Investment Partnership's investment in Ferguson Ordinary Shares, as at 30 June 2020 is £312,251,000 (30 June 2019: £264,459,000; 31 December 2019: £323,490,000), and the amount that is classified within Level 2, consisting of the Investment Partnership's investment in a currency option, as at 30 June 2020 is £1,326,000 (30 June 2019: £3,008,000; 31 December 2019: £2,984,000).

Transfers during the period

A reconciliation of fair value measurements in Level 2 is set out in the following table. Due to the nature of the investments, they are always expected to be classified under Level 2.

	1 Jan 2020 - 30 Jun 2020	1 Jan 2019 - 30 Jun 2019	1 Jan 2019 - 31 Dec 2019
	(unaudited)	(unaudited)	(audited)
	£'000	£'000	£'000
Opening fair value at beginning of the period/year	326,228	-	-
Purchases at cost	-	264,000	264,000
Capital distribution	(3,000)	-	-
Movement in fair value	(15,214)	12,047	62,228
Closing fair value at the end of the period/year	308,014	276,047	326,228

Valuation techniques

The value of Midco's investment in the Investment Partnership is based on the value of Midco's limited partner capital account within the Investment Partnership. This is based on the components within the Investment Partnership, principally the value of the underlying investee company, the currency option, cash and the Incentive Allocation. Any fluctuation in the value of the underlying investee company will directly impact the value of Midco's investment in the Investment Partnership.

Valuations are determined in accordance with IFRS principles or as otherwise determined by the Board.

In accordance with the Investment Partnership Agreement dated 21 September 2018 (the "Investment Partnership Agreement"), for the purposes of calculating the net asset value of the Investment Partnership, its assets will be valued on the following basis:

The shares in Ferguson are listed on the Main Market of the London Stock Exchange and are valued at the last sales price published by the exchange.

The valuation of the currency option is performed by utilising an external data source which uses proprietary software and valuation models to perform the fair value calculation. The valuation model used to value the currency option is the Black-Scholes model.

The Company approves the valuations performed by the Investment Manager and, at each reporting date, monitors the range of reasonably possible changes in significant observable inputs.

7.  Receivables and prepayments

	30 Jun 2020 (unaudited) £'000	30 Jun 2019 (unaudited) £'000	31 Dec 2019 (audited) £'000
Other prepaid expenses	46	23	89
Receivable from Investment Partnership	10	-	7
	56	23	96
The carrying value of receivables and prepayments approximates their fair value.

8.  Trade and other payables

	30 Jun 2020 (unaudited) £'000	30 Jun 2019 (unaudited) £'000	31 Dec 2019 (audited) £'000
Administration fees	10	48	20
Audit fees	12	8	24
Non-audit fees	17	16	7
Trademark licence fees	-	18	-
Other professional fees	5	14	9
	44	104	60

The carrying value of trade payables and other payables approximates their fair value.

9.  Share capital and capital management

Capital risk management

The Company's objective for capital risk management is to safeguard the Company's ability to continue as a going concern and to provide returns for shareholders. The Company considers its capital to consist of the shares issued and retained earnings.

The Board regularly reviews the Company's NAV, as calculated in accordance with IFRS, and the Company's Share price (as well as its discount or premium to NAV per Share) in the context of market conditions, with input from the Investment Manager and its Corporate Brokers. The Company used £3,000,000 to repurchase Shares in February 2020, and on 12 February 2020 the Company announced an update to its dividend policy that will allow it more flexibility to use Target Company dividends for Share repurchases, among other uses.

The Company has the ability to hold its own Shares in Treasury. The Shares repurchased by the Company in February 2020 are currently being held in Treasury, and the Company may use this ability again from time to time in the future. The Company's Articles of Incorporation and the Companies Law do not limit the number of Shares held in Treasury provided that at least one share of any class is held by a person other than the Company.

Ordinary shares of no par value

					No.
Issued and fully paid:
As at 1 January 2020					270 ,585,977
Repurchased on 24 February 2020					(2,170,000)
Repurchased on 25 February 2020					(590,830)
As at 30 June 2020					267,825,147
Issued and fully paid:
As at 1 January 2019					270 ,585,977
As at 30 June 2019					270 ,585,977
Issued and fully paid:
As at 1 January 2019					270 ,585,977
As at 31 December 2019					270 ,585,977
The Company's authorised share capital as at 30 June 2020, 30 June 2019 and 31 December 2019 is 300,000,000 Ordinary shares. As at 30 June 2020, 2,760,830 shares were held in Treasury (30 June 2019: nil; 31 December 2019: nil).
					£'000
Issued and fully paid:
As at 1 January 2020					265,876
Repurchased on 24 February 2020					(2,358)
Repurchased on 25 February 2020					(642)
As at 30 June 2020					262,876
Issued and fully paid:
As at 1 January 2019					265,876
As at 30 June 2019					265,876
Issued and fully paid:
As at 1 January 2019					265,876
As at 31 December 2019					265,876

10. Net Asset Value per Share

	30 Jun 2020	30 Jun 2019	31 Dec 2019
	(unaudited)	(unaudited)	(audited)
IFRS Net Assets (£'000)	309,768	278,419	328,321
Number of Ordinary Shares in issue	267,825,147	270,585,977	270,585,977
IFRS NAV per Share (pence)	115.66	102.89	121.34

The IFRS NAV per Share is arrived at by dividing the IFRS Net Assets by the number of Ordinary Shares in issue.

11. (Loss)/earnings per share

		1 Jan 2020 to 30 Jun 2020	1 Jan 2019 to 30 Jun 2019	1 Jan 2019 to 31 Dec 2019
		(unaudited)	(unaudited)	(audited)
(Loss)/profit for the period/year (£'000)		(14,146)	12,297	62,199
Weighted average number of Ordinary Shares in issue		268,693,049	270,585,977	270,585,977
(Loss)/earnings per share (pence)		(5.26)	4.54	22.99

The comparative earnings per share is based on the profit of the Company for the period and on the weighted average number of Ordinary Shares for that period. The earnings per share disclosed are not annualised.

There were no dilutive potential Ordinary Shares in issue as at 30 June 2020, 30 June 2019 or 31 December 2019.

12. Financial risk management

Financial risk management objectives

The Company's activities expose it to various types of financial risk, principally market risk, liquidity risk and credit risk. The Board has overall responsibility for the Company's risk management and sets policies to manage those risks at an acceptable level.

Financial risk factors

The Company's investment objective is to realise capital growth from its investment in the Target Company with the aim of generating significant capital return for shareholders. At present the Company's only significant financial assets are those held through the Investment Partnership, via Midco, consisting of Ordinary Share of Ferguson, the currency call option and cash and cash equivalents held at both levels.

Credit risk

Credit risk is the risk that one party to a financial instrument will cause a financial loss for the other party by failing to discharge an obligation. The Company manages its credit risk by scrutinising the financial standing of counterparties with which it enters into transactions, using external credit ratings where available. Credit risk is reviewed periodically to identify balances that may have become impaired or uncollectable.

The Company is exposed to credit risk through its balances with banks and its holdings of money market funds which are classified as cash equivalents for the purposes of these financial statements. The table below shows the Company's material cash balances and the short-term issuer credit rating or money-market fund credit rating as at the period end date:

	Location	Rating	30 Jun 2020	30 Jun 2019	31 Dec 2019
			(unaudited)	(unaudited)	(audited)
			£'000	£'000	£'000
Bank of New York Mellon JP Morgan Goldman Sachs BlackRock
	UK UK UK UK	AA- AAA AAA AAA	1,742 - - -	2,382 23 25 23	2,057 - - -
			1,742	2,453	2,057

The table below shows the Investment Partnership's material cash balances and the short-term issuer credit rating or money-market fund credit rating as at the period end date:

	Location	Rating	30 Jun 2020	30 Jun 2019	31 Dec 2019
			(unaudited)	(unaudited)	(audited)
			£'000	£'000	£'000
Bank of New York Mellon
	UK	AA-	7,334	11,598	15,324
			7,334	11,598	15,324

Liquidity risk

Liquidity risk is the risk that an entity will encounter difficulty in meeting obligations associated with financial liabilities that are settled by delivering cash or another financial asset. The Company maintains a prudent approach to liquidity management by maintaining sufficient cash reserves to meet foreseeable working capital requirements.

As at 30 June 2020, 30 June 2019 and 31 December 2019, the Company had no financial liabilities other than trade and other payables. The Company had sufficient cash reserves to meet these obligations. The following table details these obligations:

 

30 June 2020	On demand	0-4 months	Total
(unaudited)	£'000	£'000	£'000
Trade and other payables	-	44	44
	-	44	44
30 June 2019	On demand	0-4 months	Total
(unaudited)	£'000	£'000	£'000
Trade and other payables	-	104	104
	-	104	104
31 December 2019	On demand	0-4 months	Total
(audited)	£'000	£'000	£'000
Trade and other payables
	-	60	60
	-	60	60

Market risk

Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate as a result of market price changes. The Company is exposed to market price risk, currency risk and interest rate risk. 

Market price risk

Market price risk arises as a result of the Company's exposure to the future values of the share price of Ferguson. It represents the potential loss the Company may suffer through investing in Ferguson. If the price of Ferguson moved by 10% as at 30 June 2020 the effect on the net asset value of the Company would be an increase or decrease of £24,980,000 (30 June 2019: £21,157,000; 31 December 2019: £25,879,000).

Currency Risk

As at 30 June 2020, the Company had exposure to currency risk through its investment through the Investment Partnership in Ferguson, which receives the vast majority of its revenue in U.S. Dollars.  In June 2019, the Company through the Investment Partnership entered into a currency hedge, in the form of an option to purchase £125,000,000 for US$165,875,000, to offset a portion of the U.S. Dollar exposure resulting from the Company's investment in Ferguson.  The option expired on 16 June 2020. In March 2020, the Company through the Investment Partnership entered into an additional option, expiring in March 2021, to purchase £125,000,000 for US$165,875,000, in order to hedge the Company's currency exposure for a further nine months.  There is no assurance that this hedging transaction will be effective at managing currency exposure.

Interest rate risk

The Company is subject to risks associated with changes in interest earned on its cash and cash equivalents which it seeks to mitigate by monitoring the placement of cash balances on an on-going basis in order to maximise the interest rates obtained.

As at 30 June 2020, the total interest sensitivity gap for interest bearing items at Company level was a surplus of £1,742,000 (30 June 2019: £2,453,000; 31 December 2019: £2,057,000). The following table summarises the Company's interest bearing assets:

30 June 2020	Interest bearing
(unaudited)	On demand	0-4 months	Non-interest bearing		Total
	£'000	£'000	£'000		£'000
Financial Assets
Investment at fair value through profit or loss	-	-	308,014		308,014
Cash and cash equivalents	1,742	-	-		1,742
Receivables	-	-	10		10
Total Financial Assets	1,742	-	308,024		309,766
Liabilities
Trade and other payables	-	-	(44)		(44)
Total Liabilities	-	-	(44)		(44)

30 June 2019	Interest bearing
(unaudited)	On demand		0-4 months	Non-interest bearing		Total
	£'000		£'000	£'000		£'000
Financial Assets
Investment at fair value through profit or loss	-		-	276,047		276,047
Cash and cash equivalents	2,453		-	-		2,453
Receivables	-		-	-		-
Total Financial Assets	2,453		-	276,047		278,500
Liabilities
Trade and other payables	-		-	(104)		(104)
Total Liabilities	-		-	(104)		(104)
31 December 2019		Interest bearing
(audited)		On demand	0-4 months	Non-interest bearing		Total
		£'000	£'000	£'000		£'000
Financial Assets
Investment at fair value through profit or loss		-	-	326,228		326,228
Cash and cash equivalents		2,057	-	-		2,057
Receivables		-	-	7		7
Total Financial Assets		2,057	-	326,235		328,292
Liabilities
Trade and other payables		-	-	(60)		(60)
Total Liabilities		-	-	(60)		(60)

As at 30 June 2020, interest rates reported by the Bank of England of 0.1 per cent (30 June 2019: 0.75 per cent; 31 December 2019: 0.75 per cent) would equate to net income of £2,000 (30 June 2019: £18,000; 31 December 2019: £15,000) per annum if interest bearing assets and liabilities remained constant. If interest rates were to fluctuate by 0.25 per cent, this would have a positive or negative effect of £4,000 (30 June 2019: £6,000; 31 December 2019: £5,000) on the Company's annual income.

As at 30 June 2020, the total interest sensitivity gap for interest bearing items at the Investment Partnership level was a surplus of £7,334,000 (30 June 2019: £11,598,000; 31 December 2019: £15,324,000). The following table summarises the Investment Partnership's interest bearing assets:

30 June 2020	Interest bearing
(unaudited)	On demand	0-4 months	Non-interest bearing		Total
	£'000	£'000	£'000		£'000
Financial Assets
Investment in Ferguson	-	-	312,251		312,251
Foreign exchange option	-	-	1,326		1,326
Cash and cash equivalents	7,334	-	-		7,334
Total Financial Assets	7,334	-	313,577		320,911
Liabilities
Trade and other payables	-	-	(22)		(22)
Incentive Allocation payable	-	-	(12,875)		(12,875)
Total Liabilities	-	-	(12,897)		(12,897)

30 June 2019	Interest bearing
(unaudited)	On demand	0-4 months	Non-interest bearing		Total
	£'000	£'000	£'000		£'000
Financial Assets
Investment in Ferguson	-	-	264,459		264,459
Foreign exchange option	-	-	3,008		3,008
Cash and cash equivalents	11,598				11,598
Total Financial Assets	11,598	-	267,467		279,065
Liabilities
Trade and other payables	-	-	(7)		(7)
Incentive Allocation payable	-	-	(3,011)		(3,011)
Total Liabilities	-	-	(3,018)		(3,018)

31 December 2019	Interest bearing
(audited)	On demand	0-4 months	Non-interest bearing		Total
	£'000	£'000	£'000		£'000
Financial Assets
Investment in Ferguson	-	-	323,490		323,490
Foreign exchange option	-	-	2,984		2,984
Cash and cash equivalents	15,324	-	-		15,324
Total Financial Assets	15,324	-	326,474		341,798
Liabilities
Trade and other payables	-	-	(13)		(13)
Incentive Allocation payable	-	-	(15,557)		(15,557)
Total Liabilities	-	-	(15,570)		(15,570)

As at 30 June 2020, interest rates reported by the Bank of England of 0.1 per cent (30 June 2019: 0.75 per cent; 31 December 2019: 0.75 per cent) would equate to net income of £7,000 (30 June 2019: £87,000; 31 December 2019: £115,000) per annum if interest bearing assets and liabilities remained constant. If interest rates were to fluctuate by 0.25 per cent, this would have a positive or negative effect of £18,000 (30 June 2019: £29,000; 31 December 2019: £38,000) on the Company's annual income.

13. Related parties

Key management personnel

The Directors are considered to be the Key Management Personnel of the Company. They are all non-executive and receive only an annual fee denominated in Pounds Sterling.

The Chairman receives an annual fee of £55,000, the Chairman of the Audit Committee receives £45,000, and the other non-executive Director receives £40,000.

Directors' fees and expenses for the period to 30 June 2020 amounted to £70,000 (period to 30 June 2019: £70,000; year to 31 December 2019: £140,000), of which £nil was outstanding at the period end (period to 30 June 2019: £nil; year to 31 December 2019: £nil).

The Directors received dividends on their shares during the period to 30 June 2020 that amounted to a total of £1,000 (period to 30 June 2019: £nil; year to 31 December 2019: £nil).

Intergroup balances

As at 30 June 2020 the Investment Partnership owed £10,000 to the Company (30 June 2019: £nil; 31 December 2019: £7,000) in relation to custodian fee expenses paid on its behalf.

14. Significant Agreements

Trademark fees

Trian Management has granted to the Company, Midco and the Investment Partnership a non-exclusive licence to use the name, logo and graphic identity "Trian" in the UK and the Channel Islands in the corporate name of these entities and in connection with the conduct of their business affairs, and the Company is using the name, logo and graphic identity "Trian" within the Annual Report and these Interim Financial Statements pursuant to such licence. Trian Management receives a fee of £70,000 per annum split between the Company, Midco and the Investment Partnership for the use of the licensed name, logo and graphic identity. For the six month period ended 30 June 2020 fees of £23,000 were paid by the Company in relation to the licence (period ending 30 June 2019: £35,000; year ending 31 December 2019: £40,000).

Administration Agreement

On 19 September 2018, the Company and Ocorian Administration (Guernsey) Limited ("Ocorian") (formerly Estera International Fund Managers (Guernsey) Limited) entered into an administration agreement. Under the terms of the agreement the Company (alongside the Investment Partnership) is charged a fixed administration fee of £97,000 per annum payable monthly in arrears, compliance officer services of £6,000 per annum, MLRO services of £3,000 per annum and data protection services of £2,000 per annum. For the six month period ended 30 June 2020 aggregate fees of £86,000 were paid to Ocorian (period ended 30 June 2019: £69,000; year to 31 December 2019: £128,000).

Management Agreement

On 19 September 2018, the Investment Partnership and the Investment Manager entered into a management agreement. The Investment Manager is entitled to management fees in consideration of its work equal to one twelfth of 1 per cent of the adjusted net asset value of the Investment Partnership, calculated as of the last business day of the preceding month. The management fee is payable in advance to the Investment Manager on the first business day of each calendar month. For the six month period ended 30 June 2020 management fees of £1,488,000 were paid to the Investment Manager (period ended 30 June 2019 £121,000; year ended 31 December 2019: £1,590,000).

Investment Partnership Agreement

Under the terms of the Investment Partnership Agreement, Trian Investors 1 SLP, L.P., the special limited partner of the Investment Partnership, is entitled to receive an incentive allocation based on the investment performance of the Investment Partnership. The incentive allocation may be between 0 to 25 per cent of the net returns of the Investment Partnership.  The calculation of the incentive allocation is described in more detail in note 5 above and the Prospectus. As at 30 June 2020, there was an incentive allocation accrual of £12,875,000 (as at 30 June 2019: £3,011,000; as at 31 December 2019: £15,557,000).

15. Auditor remuneration

The auditors' remuneration relating to services to the Company for the period was:

	1 Jan 2020 to 30 Jun 2020 (unaudited) £'000	1 Jan 2019 to 30 Jun 2019 (unaudited) £'000	1 Jan 2019 to 31 Dec 2019 (audited) £'000
Audit fees	12	12	24
Non-audit fees	16	16	16
	28	28	40

Differences between the figures in the above table and the Statement of Comprehensive Income are due to accruals.

In addition the fee for the audit of the Investment Partnership of £6,000 (period to 30 June 2019: £6,000; year to 31 December 2019: £12,000) and a fee of £7,000 for non-audit services (period to 30 June 2019: £nil; year to 31 December 2019: £nil) are payable by the Investment Partnership.

16. Dividends

On 25 February 2020, the Company paid out a dividend to shareholders of 0.52 pence per share amounting to a total of £1,407,000 (period to 30 June 2019: £nil; year to 31 December 2019: £nil).

17. Subsequent events

The Company's net asset value as at 31 August 2020 was £340,187,000, or 127.02 pence per Ordinary Share, which is a 9.82% increase compared to 30 June 2020.

In the opinion of the Directors there have been no events after the reporting date that require disclosure in these interim financial statements.

Investment Manager's Report Disclosure Statements and Disclaimers

General Considerations

Please note that the Investment Manager's Report is for general informational purposes only, is not complete, and does not constitute any advice or recommendation to invest in Trian Investors 1 Limited (the "Company") or Ferguson plc ("Ferguson") or enter into or conclude any other transaction. The Investment Manager's Report should not be construed as legal, tax, investment, financial or other advice. It does not have regard to the specific investment objective, financial situation, suitability, or the particular need of any specific person who may receive the Investment Manager's Report and should not be taken as advice on the merits of any investment decision. The views expressed in the Investment Manager's Report represent the opinions of Trian Investors Management, LLC (the "Investment Manager") and its parent, Trian Fund Management, L.P. (collectively, "Trian") and are based on publicly available information with respect to Ferguson and the other companies referred to therein. Trian recognizes that there may be confidential information in the possession of Ferguson and the other companies discussed in the Investment Manager's Report that could lead such companies to disagree with Trian's conclusions. Trian does not endorse third-party estimates or research which are used in the Investment Manager's Report solely for illustrative purposes.

Select figures presented in the Investment Manager's Report, including investment values, have not been calculated using generally accepted accounting principles ("GAAP") or International Financing Reporting Standards ("IFRS") and have not been audited by independent accountants. Such figures may vary from GAAP or IFRS accounting in material respects and there can be no assurance that the unrealized values reflected in the Investment Manager's Report will be realized. Nothing in the Investment Manager's Report is intended to be a prediction of the future trading price or market value of securities of Ferguson or the Company. There is no assurance or guarantee with respect to the prices at which any securities of Ferguson or the Company will trade, and such securities may not trade at prices that may be implied in the Investment Manager's Report. The estimates, projections, pro forma information and potential impact of Trian's analyses set forth in the Investment Manager's Report are based on assumptions that Trian believes to be reasonable as of the date of the Investment Manager's Report, but there can be no assurance or guarantee that actual results or performance of Ferguson or the Company will not differ, and such differences may be material. The Investment Manager's Report does not recommend the purchase or sale of any security.

The Investment Manager's Report is based upon information reasonably available to Trian as of the date of the Report. Furthermore, the information, which includes information and data used and derived or obtained from filings made with regulatory authorities and from other public filings and third party reports, has been obtained from sources that Trian believes to be reliable; however, these sources cannot be guaranteed as to their accuracy or completeness. No representation, warranty or undertaking, express or implied, is given as to the accuracy or completeness of the information contained in the Invest Manager's Report, by Trian or any of its affiliates or its or their respective partners, members, or employees, and no liability is accepted by such persons for the accuracy or completeness of any such information. Trian reserves the right to change any of its opinions expressed in the Investment Manager's Report at any time as it deems appropriate. Trian disclaims any obligation to update the data, information or opinions contained in the Investment Manager's Report.

Forward Looking Statements

The Investment Manager's Report contains forward-looking statements. All statements contained in the Investment Manager's Report that are not clearly historical in nature or that necessarily depend on future events are forward-looking, and the words "anticipate," "believe," "expect," "estimate," "plan" and similar expressions are generally intended to identify forward-looking statements. The statements contained in the Investment Manager's Report that are not historical facts are based on current expectations, speak only as of the date of this meeting or Investment Manager's Report and involve risks, uncertainties and other factors that may cause actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such statements. Assumptions relating to the foregoing involve judgments with respect to, among other things, future economic, competitive and market conditions and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond the control of Trian. Although Trian believes that the assumptions underlying the forward-looking statements are reasonable, any of the assumptions could be inaccurate and, therefore, there can be no assurance that the forward-looking statements included in the Investment Manager's Report will prove to be accurate. In light of the significant uncertainties inherent in the forward-looking statements included in the Investment Manager's Report, the inclusion of such information should not be regarded as a representation as to future results or that the objectives and plans expressed or implied by such forward-looking statements will be achieved. Trian will not undertake and specifically declines any obligation to disclose the results of any revisions that may be made to any forward-looking statements in the Investment Manager's Report to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events.

Not an Offer to Sell or a Solicitation of an Offer to Buy

Under no circumstances is the Investment Manager's Report intended to be, nor should it be construed as, an offer to sell or a solicitation of an offer to buy any security. The funds managed by Trian are in the business of trading -- buying and selling -- securities. It is possible that there will be developments in the future that cause one or more of such funds from time to time to either purchase or sell shares of Ferguson in open market transactions or otherwise or trade in options, puts, calls, contracts for difference or other derivative instruments relating to such shares. Consequently, Trian's beneficial ownership of Ferguson's shares may vary over time depending on various factors, with or without regard to Trian's views of Ferguson's business, prospects or valuation (including the market price of Ferguson's ordinary shares), including without limitation, other investment opportunities available to Trian, concentration of positions in the portfolios managed by Trian, conditions in the securities markets and general economic and industry conditions. Trian also reserves the right to take any actions with respect to any investments in Ferguson as it may deem appropriate, including, but not limited to, communicating with the management of Ferguson, the board of directors of Ferguson, other investors and shareholders, members, stakeholders, industry participants, and/or interested or relevant parties about Ferguson or seeking representation on the board of directors of Ferguson, and to change its intentions with respect to any investments made in Ferguson at any time.

General Information Directors Chris Sherwell (Chairman) Mark Thompson (Chairman of the Audit Committee) Simon Holden Website: www.trianinvestors1.com Managing General Partner Trian Investors 1 General Partner, LLC 280 Park Avenue, 41st Floor New York, NY 10017 United States Corporate Brokers Numis Securities Limited The London Stock Exchange Building 10 Paternoster Square London EC4M 7LT United Kingdom Administrator and Company Secretary Ocorian Administration (Guernsey) Limited (formerly Estera International Fund Managers (Guernsey) Limited) PO Box 286, Floor 2 Trafalgar Court Les Banques St Peter Port Guernsey, GY1 4LY Advocates to the Company As to Guernsey law Ogier (Guernsey) LLP Redwood House St Julian's Avenue St Peter Port Guernsey GY1 1WA Registrar Link Market Services (Guernsey) Limited Mont Crevelt House Bulwer Avenue St Sampson Guernsey, GY2 4LH

Registered Office PO Box 286, Floor 2 Trafalgar Court Les Banques St Peter Port Guernsey, GY1 4LY Investment Partnership Trian Investors 1, L.P. (Incorporated) PO Box 286, Floor 2 Trafalgar Court Les Banques St Peter Port Guernsey, GY1 4LY Investment Manager Trian Investors Management, LLC 280 Park Avenue, 41st Floor New York, NY 10017 United States Corporate Brokers Jefferies International Limited Vintners Place 68 Upper Thames Street London EC4V 3BJ United Kingdom Solicitors to the Company As to English law and US Securities law Norton Rose Fulbright LLP 3 More London Riverside London SE1 2AQ United Kingdom Independent Auditor Deloitte LLP Regency Court Glategny Esplanade St Peter Port Guernsey, GY1 3HW Custodian to the Investment Partnership The Bank of New York Mellon - London Branch One Canada Square London E14 5AL United Kingdom Identifiers ISIN: GG00BF52MW15 SEDOL: BF52MW1 Ticker: TI1 LEI: 213800UQPHIQI5SPNG39

 

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