SANDITON INVESTMENT TRUST PLC
Annual Results for the year ended to
30 June 2016
Performance Highlights
|
As at |
As at |
|
30 June
2016 |
30 June 2015 |
Share price |
106.40p |
106.50p |
Premium to net asset value per
share |
1.0% |
3.4% |
Dividends per ordinary share |
1.10p |
0.45p |
Ongoing charges |
1.27% |
1.20% |
|
|
Period since
launch |
|
Year ended |
on 27 June 2014 |
Total Return Performance |
30 June
2016 |
to 30 June 2015 |
NAV per ordinary share (including
dividend) |
+2.7% |
+3.0% |
Share price |
-0.1% |
+6.5% |
Hurdle rate (RPIX + 2%) |
+3.7% |
+3.1% |
FTSE All-Share Index (Total
Return) |
+2.2% |
+2.5% |
RPIX |
+1.7% |
+1.1% |
Commenting on the results, the
Chairman, Rupert Barclay said:
“After a poor first six months of your Company’s financial year,
I am pleased to report that your Company finished the year with a
Net Asset Value (“NAV”) of 105.3p including the first uplift in
valuation for the Company’s holding in Sanditon Asset Management
Limited (“SAM”) which I discuss below. Combined with the dividend
paid in December of 0.45p, this represented a return of 2.7% for
the year.
The Company’s primary objective is to preserve the real value of
your capital, which so far it has achieved, but also to try to grow
it by 2% above the Retail Price Index excluding mortgage interest
payments (“RPIX”). June 2016 RPIX was
1.7% per annum, so your Company is just behind its minimum
objective since launch, with a total return of 5.8% against its
minimum benchmark return of 6.9%. Its secondary objective is to
provide low correlation with traditional equity portfolios and the
correlation of the Company’s share price to the FTSE All Share
index remains an encouragingly low 0.19x since launch.
Your Company’s share price finished the year at 106.4p, a modest
premium to NAV, but it should be noted that the stake in SAM was
revalued on the last day of your Company’s financial year and
reported to the market on 1 July. The shares have traded at a
modest premium throughout the year and due to the broadly market
neutral structure of the portfolio have exhibited materially lower
volatility than the European and UK equity markets.
The investment manager gives a thorough review of performance in
his report that follows.
Stake in Sanditon Asset Management
The Board have agreed the valuation methodology for the
Company’s holding in SAM which it believes to be straightforward,
conservative and fair. The Board has decided to use a simple
average of 1% of SAM’s year end assets under management (“AUM”) and
5x after tax profits (adjusted to exclude any performance fees
earned and any associated staff bonuses paid – SAM’s policy is to
pay out a maximum of 50% of performance fees earned to staff).
SAM finished its financial year (31/03/16) with AUM of just over
£595m and adjusted after tax profits of £1.515m. This resulted in
the Directors approving an uplift in your Company’s holding in SAM
from the book cost of £200,000 to £1,353,000. Whilst SAM has had an
encouraging first two years, evidenced by dividends received from
SAM to your Company amounting to 85% of the initial capital
deployed, the last six months have been more challenging and have
seen assets under management fall from a peak of over £630m to
£568m at 30 June 2016. 2016 has been
a very challenging period for the investment industry with the
Brexit referendum acting as a constraint on buying UK funds in
particular. Time will tell, now the referendum is out of the way,
whether conditions get any easier.
The Directors plan to keep the valuation methodology constant
but we will annually review the multiples used to ensure that they
remain appropriate.
Charges and fees
Our total ongoing charges at 30 June
2016 were 1.27% per annum. Performance fees are only accrued
if the lower of NAV or the share price exceeds the hurdle rate of
RPIX +2%. No performance fees were accrued as at 30 June 2016.
Share buy back
As the shares have traded for most of the year at a modest
premium to NAV, the Board will not be asking shareholders for
permission to buy back shares this year. The Board will continue to
review this decision annually.
Dividends
The yield of your Company’s long book has continued to trade at
a significant premium to the yield of the short book, so despite a
broadly market neutral structure through the year, the portfolio
has generated a useful income surplus of 1.19p per share and the
Board is pleased to recommend an annual dividend of 1.10p per
share, which is a 144.4% increase on last year. The £150,000
dividend received from your Company’s holding in SAM represented
about 15% of total income. Your Company also benefitted from some
special dividends which may not be repeated next year.
Providing an income is not an objective for your Company and
there remains no assurance that your Company will always generate
surplus income to allow a dividend to be paid.
Outlook
Negative interest rates, elevated asset prices and anaemic
global growth remain a significant hurdle for all investors. The
United Kingdom’s decision to vote to leave the EU at the end of the
period has created another layer of uncertainty which is likely to
create extra volatility as governments and investors work out the
implications. We can but hope that common sense prevails and this
vote does not usher in a period of protectionism but as the
Investment Manager discusses in his report, Brexit or no Brexit,
these are very challenging times for all investors. We all have to
get used to an era of low (or no) returns.
The U.K. equity market has gyrated in a 10% range since your
Company launched in 2014, with the FTSE All Share Index at year end
down 2.5% since launch. Against this backdrop, your Board is
encouraged that your Company has delivered modest positive returns
with low correlation to the market and believes that your Company
has the structure to adapt to different market conditions.”
Principal risks associated with the
Company (also see note 18 on pages 36 to 42 of the Annual
report).
Investment and strategy risk
The Board regularly reviews the investment mandate and long-term
investment strategy in relation to the market and economic
conditions. The Board also regularly monitors the Company’s
investment performance against the objective to deliver at least 2%
return above inflation, and monitors its compliance with the
investment guidelines.
Accounting, legal and regulatory
risk
In order to qualify as an investment trust, the Company must
comply with the provisions contained in Section 1158 of the
Corporation Taxes Act 2010. A breach of Section 1158 in an
accounting period could lead to the Company being subject to
corporation tax on gains realised in that accounting period.
Section 1158 qualification criteria are monitored by the Investment
Manager and any adverse results reported to the Board at its
regular meetings. The Company must also comply with the Companies
Act and the UKLA Listing Rules. The Board relies on the services of
the administrator, Northern Trust Global Services Limited and its
professional advisers to ensure compliance with the Companies Act
and the UKLA Listing Rules.
Loss of investment team or Investment
Manager SAM
A sudden departure of the Investment Manager or several members
of the investment management team could result in a deterioration
in investment performance.
Discount
A disproportionate widening of the discount relative to the
Company’s peers could result in loss of value for shareholders.
Operational risk
Like most other investment trust companies, the Company has no
employees and therefore relies upon the services provided by third
parties and is dependent on the control systems of the Investment
Manager, the Custodian, the Administrator and the Company’s other
service providers. The security, for example, of the Company’s
assets, dealing procedures, accounting records and maintenance of
regulatory and legal requirements, depend on the effective
operation of these systems. The Custodian and the Administrator
produce reports on their internal controls which are reviewed by
their auditors and give assurance regarding the effective operation
of controls. These reports are reviewed by the Board. Details of
material contracts entered into by the Company can be found on
pages 14 and 15 of the Annual Report.
Financial risk
The financial risks faced by the Company are disclosed in note
18 on pages 36 to 42 of the Annual Report.
The Board considers these risks to have remained unchanged
throughout the year under review.
Statement under the Disclosure &
Transparency Rules 4.1.12
The Directors each confirm to the best of their knowledge
that:
a) the financial statements, prepared in accordance with
applicable accounting standards, give a true and fair view of the
assets, liabilities, financial position and profit or loss of the
Company; and
b) the Strategic Report contained in the Annual Report includes
a fair review of the development and performance of the business
and the position of the Company, together with a description of the
principal risks and uncertainties that it faces.
The 2014 UK Corporate Governance Code also requires Directors to
ensure that the Annual Report and financial statements are fair,
balanced and understandable. In order to reach a conclusion on this
matter, the Board has requested that the Audit Committee advise on
whether it considers that the Annual Report and financial
statements fulfil these requirements. The process by which the
Committee has reached these conclusions are set out in the Audit
Committee’s report on pages 18 and 19 of the Annual Report. As a
result, the Board has concluded that the Annual Report and
financial statements for the year ended 30
June 2016, taken as a whole, are fair, balanced and
understandable, and provide the information necessary for
shareholders to assess the Company’s performance, business model
and strategy.
For and on behalf of the Board
Rupert
Barclay
Chairman
21 September
2016
Portfolio as at 30 June 2016
Country Breakdown (% of
NAV)* |
Long |
Short |
Net |
Gross |
United Kingdom |
39.1 |
-30.9 |
8.2 |
70.0 |
Denmark |
1.2 |
0.0 |
1.2 |
1.2 |
France |
0.0 |
-3.9 |
-3.9 |
3.9 |
Germany |
0.0 |
-2.0 |
-2.0 |
2.0 |
Italy |
1.1 |
-2.2 |
-1.1 |
3.3 |
Netherlands |
4.8 |
0.0 |
4.8 |
4.8 |
Total |
____
46.2
==== |
____
-39.0
==== |
____
7.2
==== |
____
85.2
==== |
Business Cycle Groupings (% of
NAV)* |
Long |
Short |
Net |
Gross |
Commodity Cyclical |
5.5 |
-2.8 |
2.7 |
8.3 |
Consumer Cyclical |
6.3 |
-2.0 |
4.3 |
8.3 |
Industrial Cyclical |
5.2 |
-10.1 |
-4.9 |
15.3 |
Growth |
1.5 |
-17.1 |
-15.6 |
18.6 |
Financial |
7.6 |
-1.0 |
6.6 |
8.6 |
Growth Defensive |
14.6 |
-3.6 |
11.0 |
18.2 |
Value Defensive |
5.5 |
-2.4 |
3.1 |
7.9 |
Total |
____
46.2
==== |
____
-39.0
==== |
____
7.2
==== |
____
85.2
==== |
Top 20 Long Positions (% of
NAV)** |
% |
TM Sanditon UK Select
Fund |
9.9 |
Babcock International |
6.0 |
Reed Elsevier NV |
4.8 |
Diageo |
3.0 |
ITV |
2.7 |
Sanditon Asset
Management |
2.6 |
Ashmore |
2.5 |
Laird |
2.4 |
Man Group |
2.2 |
J Sainsbury |
2.0 |
BHP Billiton |
2.0 |
BT Group |
1.8 |
HSBC |
1.8 |
Mothercare |
1.7 |
Glaxosmithkline |
1.7 |
GKN |
1.6 |
Inmarsat |
1.5 |
Ophir Energy |
1.5 |
AP Moeller-Maersk ‘B’ |
1.2 |
Halfords |
1.2 |
Total |
________
54.1***
======== |
Total number of positions (long
and short)** |
50 |
* Excluding holdings in Sanditon Asset Management
and TM Sanditon UK Select Fund
** Including holdings in Sanditon Asset Management and TM
Sanditon UK Select Fund
*** The top 20 long positions are presented based on the
notional value of CFD holdings and the actual value of equity
holdings
Income Statement
for the year ended 30 June 2016
|
|
Year ended |
Year ended |
Year ended |
Period from |
Period from |
Period from |
|
|
30 June
2016 |
30 June
2016 |
30 June
2016 |
14 May 2014 to 30 June
2015 |
14 May 2014 to 30 June
2015 |
14 May 2014 to 30 June
2015 |
|
|
Revenue |
Capital |
Total |
Revenue |
Capital |
Total |
|
Notes |
£000 |
£000 |
£000 |
£000 |
£000 |
£000 |
Gains on investments held at fair
value |
|
|
|
|
|
|
|
through profit or loss |
|
– |
1,038 |
1,038 |
– |
2,177 |
2,177 |
Income |
2 |
993 |
– |
993 |
571 |
– |
571 |
Management fee |
3 |
(96) |
(287) |
(383) |
(95) |
(286) |
(381) |
Other expenses |
4 |
(268) |
– |
(268) |
(220) |
– |
(220) |
Return on ordinary
activities |
|
|
|
|
|
|
|
before taxation |
|
629 |
751 |
1,380 |
256 |
1,891 |
2,147 |
Taxation on ordinary activities |
|
(32) |
30 |
(2) |
(11) |
– |
(11) |
Return for the
year/period |
|
____
597 |
____
781 |
_____
1,378 |
____
245 |
____
1,891 |
_____
2,136 |
|
|
==== |
==== |
==== |
==== |
==== |
==== |
|
|
|
|
|
|
|
|
Return per Ordinary Share
(pence): |
8 |
1.19 |
1.57 |
2.76 |
0.49 |
3.78 |
4.27 |
The total column of this statement is the profit and loss
account of the Company. All the revenue and capital items in the
above statement derive from continuing operations.
The supplementary revenue and capital columns are both prepared
under guidance from the Association of Investment Companies.
There is no other comprehensive income and therefore the return
for the year is also the total comprehensive income for the
year.
Statement of Financial Position
as at 30 June
2016
|
|
30 June |
30 June |
|
|
2016 |
2015 |
|
Notes |
£000 |
£000 |
Fixed assets |
|
|
|
Investments held at fair value
through profit or loss |
|
12,255 |
12,772 |
|
|
|
|
Current assets |
|
|
|
Debtors |
|
99 |
25 |
Amounts due in respect of contracts
for difference |
|
2,466 |
1,157 |
Collateral paid in respect of
contracts for difference |
|
10,306 |
11,844 |
UK Treasury Bills |
|
22,969 |
21,481 |
Cash and short term deposits |
|
8,421 |
8,457 |
Total current assets |
|
44,261 |
42,964 |
|
|
|
|
Current liabilities |
|
|
|
Creditors |
|
(147) |
(133) |
Amounts payable in respect of
contracts for difference |
|
(3,708) |
(4,095) |
Total current
liabilities |
|
(3,855) |
(4,228) |
Net current assets |
|
40,406 |
38,736 |
|
|
|
|
Total assets less current
liabilities |
|
52,661 |
51,508 |
Net assets |
|
______
52,661
====== |
______
51,508
====== |
|
|
|
|
Capital and reserves |
|
|
|
Share capital |
6 |
500 |
500 |
Share premium |
|
48,872 |
48,872 |
Capital reserve |
|
2,672 |
1,891 |
Revenue reserve |
|
617 |
245 |
Total shareholders’
funds |
|
______
52,661
====== |
______
51,508
====== |
|
|
|
|
Net asset value per share –
Ordinary Share (pence) |
|
105.32 |
103.02 |
Statement of Changes in Equity
for the year ended 30 June 2016
|
|
Share |
|
|
|
|
Share |
Premium |
Capital |
Revenue |
|
|
Capital |
Account |
Reserve |
Reserve |
Total |
For the year ended 30 June
2016 |
£000 |
£000 |
£000 |
£000 |
£000 |
Balance at 1 July 2015 |
500 |
48,872 |
1,891 |
245 |
51,508 |
Return for the year |
– |
– |
781 |
597 |
1,378 |
Dividends paid |
– |
– |
– |
(225) |
(225) |
Balance at 30 June 2016 |
______
500
====== |
______
48,872
====== |
______
2,672
====== |
______
617
====== |
______
52,661
====== |
|
|
Share |
|
|
|
|
Share |
Premium |
Capital |
Revenue |
|
|
Capital |
Account |
Reserve |
Reserve |
Total |
For the period from 14 May 2014
to 30 June 2015 |
£000 |
£000 |
£000 |
£000 |
£000 |
Balance at 14 May 2014 |
– |
– |
– |
– |
– |
Return for the period |
– |
– |
1,891 |
245 |
2,136 |
Issue of Ordinary Shares |
500 |
49,500 |
– |
– |
50,000 |
Launch costs |
– |
(628) |
– |
– |
(628) |
Balance at 30 June 2015 |
______
500
====== |
______
48,872
====== |
______
1,891
====== |
______
245
====== |
______
51,508
====== |
Cash Flow Statement
for the year ended 30 June 2016
|
|
Period from |
|
Year ended |
14 May 2014 |
|
30 June |
to 30 June |
|
2016 |
2015 |
|
£000 |
£000 |
Return on ordinary activities
before taxation* |
1,380 |
2,147 |
Capital return before finance costs
and taxation |
(751) |
(1,891) |
Increase in accrued income and
prepayments |
(74) |
(25) |
Increase in other creditors |
14 |
133 |
Investment management fee
capitalised |
(287) |
(286) |
Net movement in collateral pledged
to broker |
1,538 |
(11,844) |
Gains on futures and CFDs realised
during the period |
667 |
695 |
Increase in amounts due in respect
of CFDs |
(1,309) |
(1,157) |
(Increase)/decrease in amounts
payable in respect of CFDs |
(387) |
4,095 |
Tax paid |
(2) |
(11) |
Net cash inflow/(outflow) from
operating activities |
______
789
====== |
______
(8,144)
====== |
|
|
|
Cashflow from investing
activities |
|
|
Purchases of investments |
(7,190) |
(23,634) |
Sales of investments |
8,078 |
12,344 |
Net cashflow provided by/(used
in) investing activity |
888 |
(11,290) |
Net cash inflow/(outflow) before
financing activities |
______
888
====== |
______
(11,290)
====== |
|
|
|
Cashflow from financing
activities |
|
|
Issue of Ordinary Shares |
– |
50,000 |
Payment of issue costs |
– |
(628) |
Equity dividends paid |
(225) |
– |
Net cash (outflow)/inflow from
financing activities |
(225) |
49,372 |
Increase in cash and cash
equivalents |
______
1,452
====== |
______
29,938
====== |
|
|
|
Cash and cash equivalents at the
start of the year |
29,938 |
– |
Cash and cash equivalents at the end
of the year |
31,390 |
29,938 |
|
|
|
Comprised of: |
|
|
UK Treasury Bills |
22,969 |
21,481 |
Cash and cash equivalents |
8,421 |
8,457 |
Cash and cash
equivalents |
______
31,390
====== |
______
29,938
====== |
*Cash inflow from dividends was
£783,000 (2015: £437,000) and cash inflow from interest was
£130,000 (2015: £109,000). |
Notes to the Financial Statements
for the year ended 30 June 2016
1. ACCOUNTING POLICIES
(a) Basis of accounting
The financial statements have been prepared under the historical
convention as modified to include the revaluation of investments
and in accordance with applicable UK Accounting Standards and with
the Statement of Recommended Practice “Financial Statements of
Investment Trust Companies and Venture Capital Trusts” (issued in
November 2014).
The financial statements have been prepared for the first time
in accordance with FRS 102 (“the Financial Reporting Standard
applicable in the UK and Republic of Ireland” issued by the
Financial Reporting Council). Previously, the financial statements
were prepared in accordance with previously extant UK Generally
Accepted Accounting Practice (“UK GAAP”). The transition to FRS 102
did not result in any significant changes to the accounting
policies. Restatement of opening balances relating to equity
values, assets and liabilities and profits and losses of the
Company between previously extant UK GAAP as previously reported
and under FRS 102 as restated have not been presented as there have
been no required changes to the reported amounts. Therefore
restatement tables have not been prepared for any of the primary
statements.
The Company’s cashflow statement reflects the presentational
requirements of FRS 102, which are different from those of FRS
1.
They have also been prepared on the assumption that approval as
an investment trust will continue to be granted. The financial
statements have been prepared on a going concern basis.
2. INCOME
|
Year ended |
Period ended |
|
30 June
2016 |
30 June 2015 |
|
£000 |
£000 |
Income from investments |
|
|
UK franked dividends |
803 |
437 |
UK treasury bills interest |
96 |
82 |
Overseas dividends |
54 |
25 |
Other income |
40 |
27 |
|
_____
993
===== |
_____
571
===== |
3. INVESTMENT MANAGEMENT FEE
|
Year ended |
Period ended |
|
30 June
2016 |
30 June 2015 |
|
£000 |
£000 |
Basic fee: |
|
|
25% charged to revenue |
96 |
95 |
75% charged to capital |
287 |
286 |
|
____
383
==== |
____
381
==== |
|
|
|
Performance fee charged 100% to
capital: |
|
|
Performance fee accrual |
– |
– |
|
____
–
==== |
____
–
==== |
The Company’s investment manager is Sanditon Asset Management
Limited (the “Manager”). The Manager shall be entitled to receive
from the Company in respect of its services provided under the
Management Agreement, a management fee accrued daily and payable
monthly in arrears calculated at the rate of one-twelfth of 0.75
per cent per calendar month of the Company’s Net Asset Value. In
accordance with the Directors’ policy on the allocation of expenses
between income and capital, in each financial period 75 per cent of
the management fee payable is expected to be charged to capital and
the remaining 25 per cent to revenue.
The Manager is also entitled to a performance fee which equals
15 per cent of the amount by which the Reference Amount at the end
of a Performance Period exceeds the higher of (a) the Hurdle (the
“Hurdle” means the Initial Gross Proceeds adjusted for the total
amount of any dividends paid or payable) increased by RPIX plus 2
per cent per annum, compounded annually (on a pro-rata basis where
applicable) and (b) the High Watermark (the “High Watermark” means,
as at the end of the relevant Performance Period, the highest of
(i) the Reference Amount of the previous Performance Period, (ii)
the Reference Amount of the most recent Performance Period in
respect of which a performance fee was paid; and (iii) the Initial
Gross Proceeds; and in each case adjusted for any repurchases by
the Company of Ordinary Shares or any dividends paid or payable
during the relevant Performance Period be multiplied by the time
weighted average of the total number of Shares in issue during that
Performance Period).
The first “Performance Period” is the period from 27 June 2014 (the date of Admission to the London
Stock Exchange) to the end of the Company’s third accounting period
and each subsequent Performance Period begins immediately after the
previous Performance Period and ends at the end of the Company’s
third accounting period thereafter; provided that where the
Management Agreement is terminated the date of such termination
shall be the end of the then current Performance Period.
The Company may invest in other funds operated by the Manager
and where it does the management fee is credited back to the
Company by the Manager and any gain on the funds is excluded from
the performance fee calculation. At 30 June
2016 £40,000 (2015: £18,000) was due to be credited back and
is included within Other Income (note 2).
4. OTHER EXPENSES
|
Year ended |
Period ended |
|
30 June
2016 |
30 June 2015 |
|
£000 |
£000 |
Secretarial services and fund
administration fees |
55 |
56 |
Other administration expenses |
18 |
14 |
Registrar’s fees |
13 |
8 |
Printing and postage |
6 |
10 |
Custody fees |
49 |
8 |
Subscription and listing fees |
17 |
11 |
Auditor’s remuneration – audit
services |
23 |
18 |
– tax compliance services |
8 |
7 |
Directors’ fees |
69 |
78 |
Irrecoverable VAT |
10 |
10 |
|
____
268
==== |
____
220
==== |
5. DIVIDEND
The dividend relating to the year ended 30 June 2016 which is the basis on which the
requirements of Section 1159 of the Corporation Tax Act 2010 are
considered is detailed below:
|
Year ended 30 June
2016 |
Year ended 30 June
2016 |
Period ended 30 June
2015 |
Period ended 30 June
2015 |
|
Pence Per |
|
Pence Per |
|
|
Ordinary
Share |
£000 |
Ordinary Share |
£000 |
Annual dividend – payable on 19
December 2016* |
1.10p |
550 |
0.45p |
225 |
*Not included as a liability in the
year ended 30 June 2016 accounts. |
The annual dividend will be paid on 19
December 2016 to members on the register at the close of
business on 18 November 2016. The
shares will be marked ex-dividend on 17
November 2016.
6. SHARE CAPITAL
|
Year ended 30 June
2016 |
Year ended 30 June
2016 |
Period ended 30 June
2015 |
Period ended 30 June
2015 |
|
Number of
Shares |
£000 |
Number of Shares |
£000 |
Allotted, issued & fully
paid: |
|
|
|
|
Opening balance Ordinary Shares of
£0.01 |
50,000,000 |
500 |
50,000,000 |
500 |
|
__________
50,000,000
========== |
____
500
==== |
__________
50,000,000
========== |
____
500
==== |
7. FINANCIAL COMMITMENTS
At 30 June 2016 there were no
commitments in respect of unpaid calls and underwritings (2015:
none).
8. RETURN PER SHARE – BASIC
Total return per Ordinary Share is based on the total
comprehensive income for the year after taxation of £1,378,000
(period to 30 June 2015:
£2,136,000).
These calculations are based on the 50,000,000 Ordinary Shares
in issue during the year to 30 June
2016 (period to 30 June 2015:
50,000,000 Ordinary Shares).
The return per Ordinary Share can be further analysed between
revenue and capital as below:
|
Year ended 30 June
2016 |
Year ended 30 June
2016 |
Period ended 30 June
2015 |
Period ended 30 June
2015 |
|
Pence |
|
Pence |
|
|
per share |
£000 |
per share |
£000 |
Net revenue return |
1.19p |
597 |
0.49p |
245 |
Net capital return |
1.57p |
781 |
3.78p |
1,891 |
Net total return |
2.76p |
1,378 |
4.27p |
2,136 |
9.?RELATED PARTY TRANSACTIONS AND
TRANSACTIONS WITH THE INVESTMENT MANAGER
Details of the investment management fee charged by Sanditon
Asset Management Limited is set out in note 3. At 30 June 2016 £12,138 (2015: £13,790) of this fee
remained outstanding after taking into account the £19,564 (2015:
£18,000) to be credited to the Company from Sanditon Asset
Management Limited in relation to the management fee on the
Company’s investment in TM Sanditon UK Select Fund.
Fees paid to the Directors are disclosed in note 4 above. There
have been no material transactions between the Company and its
Directors during the year and the only amounts paid to them were in
respect of Directors’ remuneration.
The Company has an investment in TM Sanditon UK Select Fund of
£5,227,200 at 30 June 2016
(£5,259,000 at 30 June 2015).
The Company has a 20% holding in the Investment Manager,
Sanditon Asset Management Limited.
10. Fair Value Measurements of
Financial Assets and Financial Liabilities
The financial assets and liabilities are either carried in the
balance sheet at their fair value, or the balance sheet amount is a
reasonable approximation of fair value (due from brokers, dividends
receivable, accrued income, due to brokers, accruals and cash and
cash equivalents).
The valuation techniques used by the Company are explained in
the accounting policies note 1(b) on page 28 of the Annual
Report.
The table below sets out fair value measurements using fair
value hierarchy.
Financial assets at fair value
through profit or loss |
Level 1 |
Level 2 |
Level 3 |
Total |
at 30 June 2016 |
£000 |
£000 |
£000 |
£000 |
Assets: |
|
|
|
|
Equity investments |
10,902 |
– |
1,353 |
12,255 |
Contracts for difference – fair
value gains |
– |
2,466 |
– |
2,466 |
Liabilities: |
|
|
|
|
Contracts for difference – fair
value losses |
– |
(3,708) |
– |
(3,708) |
Total |
______
10,902
====== |
______
(1,242)
====== |
______
1,353
====== |
______
11,013
====== |
Financial assets at fair value
through profit or loss |
Level 1 |
Level 2 |
Level 3 |
Total |
at 30 June 2015 |
£000 |
£000 |
£000 |
£000 |
Assets: |
|
|
|
|
Equity investments |
12,572 |
– |
200 |
12,772 |
Contracts for difference – fair
value gains |
– |
1,157 |
– |
1,157 |
Liabilities: |
|
|
|
|
Contracts for difference – fair
value losses |
– |
(4,095) |
– |
(4,095) |
Total |
______
12,572
====== |
______
(2,938)
====== |
____
200
==== |
_____
9,834
====== |
Categorisation within the hierarchy has been determined on the
basis of the lowest level input that is significant to the fair
value measurement of the relevant asset as follows:
Level 1 – valued using quoted prices in active markets for
identical assets.
Level 2 – valued by reference to valuation techniques using
observable inputs including quoted prices.
Level 3 – valued by reference to valuation techniques using
inputs that are not based on observable market data.
In preparing these financial statements the Company has early
adopted “Amendments to FRS 102: fair value hierarchy disclosure
(March 2016)” published by the FRC.
Level 3 fair values are determined by the Directors using
valuation methodologies in accordance with the IPEVC Guidelines and
as detailed in note 1 (b) of the Annual Report. Significant inputs
include investment cost, the value of the most recent capital
raising, the adjusted net asset value of funds and the Pricing
Committee’s valuations. In accordance with IPEVC Guidelines, new
investments are carried at cost, the price of the most recent
investment being a good indication of fair value. Thereafter, fair
value is the amount deemed to be the price that would be received
upon sale of an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date. At
30 June 2016 and at 30 June 2015, the Company’s Level 3 investments
relates to the investment in Sanditon Asset Management Limited. The
Board have agreed the valuation methodology for the Company’s
holding in SAM which it believes to be straightforward,
conservative and fair. The Board has decided to use a simple
average of 1% of SAM’s year end assets under management (“AUM”) and
5x after tax profits (adjusted to exclude any performance fees
earned and any associated staff bonuses paid – SAM pay out a
maximum of 50% of performance fees earned to staff). This resulted
in the Directors approving an uplift in your Company’s holding in
SAM from the book cost of £200,000 to £1,353,000.
A reconciliation of fair value measurements in Level 3 is set
out below.
Level 3 financial assets at fair value
through profit or loss
|
As at |
|
30 June
2016 |
|
Investments |
|
£000 |
Opening fair value |
200 |
Increase in fair value of investment
in Sanditon Asset Management Limited |
1,153 |
Closing fair value |
1,353 |
Level 3 financial assets at fair value
through profit or loss
|
As at |
|
30 June 2015 |
|
Investments |
|
£000 |
Opening fair value |
– |
Investment in Sanditon Asset
Management Limited |
200 |
Closing fair value |
200 |
11. Publication of non-statutory
accounts
The financial information contained in this announcement does
not constitute statutory accounts as defined in the Companies Act
2006. The 2016 annual report and financial statements will be
filed with the Registrar of Companies shortly.
The report of the Auditor for the year ended 30 June 2016 contains no qualification or
statement under section 498(2) or (3) of the Companies Act 2006.
This announcement was approved by the Board of Directors on
21 September 2016.
12. Annual results
Copies of the annual report will be sent to members shortly and
will be available from the registered office, c/o Northern Trust
Global Services Limited, 50 Bank Street, Canary Wharf, London E14 5NT.
13. Annual General Meeting
The Annual General Meeting of the Company will be held at the
offices of Northern Trust, 50 Bank Street, Canary Wharf,
London E14 5NT on Monday
5 December 2016, at 12:00 noon.