REG - Sherborne Inv. C Ld - Half-year Report
05/09/2023 07:00
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RNS Number : 3430L Sherborne Investors (Guernsey)C Ltd 05 September 2023
SHERBORNE INVESTORS (GUERNSEY) C LIMITED
Interim Report and Unaudited Condensed Consolidated Financial Statements
For the period from 1 January 2023 to 30 June 2023
Company Summary
The Company Sherborne Investors (Guernsey) C Limited (the "Company") is a Guernsey
domiciled limited company and its shares are admitted to trading on the London
Stock Exchange's Specialist Fund Segment ("SFS"). The Company was incorporated
on 25 May 2017. The Company commenced dealings on the SFS on 12 July 2017.
Investment Objective To realise capital growth from investment in a target company identified by
the Investment Manager, with the aim of generating a significant capital
return for Shareholders.
Investment Policy To invest in a company which is publicly quoted which it considers to be
undervalued as a result of operational deficiencies and which it believes can
be rectified by the Investment Manager's active involvement, thereby
increasing the value of the investment. The Company will only invest in one
target company at a time.
Investment Manager Sherborne Investors Management LP provides investment management services to
SIGC LLC. See Note 9 for details of changes in the period.
Chairman's Statement
For the period ended 30 June 2023
Dear Shareholder,
I am pleased to present the Interim Report of Sherborne Investors (Guernsey) C
Limited (the "Company") for the period 1 January 2023 to 30 June 2023.
As at 30 June 2023, the net asset value ("NAV") attributable to shareholders
of the Company was £570.6 million (30 June 2022: £464.1 million and 31
December 2022: £529.3 million) or 81.5 pence per share (30 June 2022: 66.3
pence per share and 31 December 2022: 75.6 pence per share) (see Note 8).
The Company co‐invests in Navient Corporation ("Navient") with other
investors through Newbury Investors LLC ("Newbury") which is managed by
Sherborne Investors Management LP ("Sherborne Investors"). Newbury currently
owns 24% of Navient's outstanding shares, making it the largest shareholder in
Navient. Newbury has separately disclosed a 20.7% interest in the outstanding
shares of the Company. The Company is pursuing its investment strategy through
its indirect shareholding in Navient.
On 15 May 2023, it was announced that Navient's Chief Executive Officer had
been terminated and that a member of the board had been appointed Chief
Executive Officer. Sherborne Investors has advised the Board that they intend
to work with the new Chief Executive Officer to achieve their investment
objectives at Navient.
On 18 May 2023, it was announced by the Company that, it has been advised by
the Investment Manager, that following the distribution to the Company of any
proceeds from the Company's indirect investment in Navient, the Investment
Manager does not intend to seek to recall any funds for further investment. To
effectuate this, on 24 May 2023, SIGC, LP (Incorporated) (the "Investment
Partnership") assigned to the Company the Investment Partnership's interest in
SIGC LLC, as the constitutional documents of SIGC LLC do not permit the recall
of distributed capital for reinvestment. As a result of the assignment, the
Investment Partnership was dissolved by operation of its limited partnership
agreement. For further details see Note 1 and Note 9 of the Condensed
Consolidated Financial Statements.
For further information on Navient, including their strategy and performance,
please refer to their publicly available financial statements and
presentations available at www.sec.gov (http://www.sec.gov/) or Navient's
website at www.navient.com (http://www.navient.com/) .
I am pleased to announce that the Company is declaring a 0.5 pence per share
dividend to be paid on 6 October 2023 to shareholders of record on 15
September 2023. The present intention is to pay a further 0.5 pence per share
to shareholders following the full year results.
On 23 May 2023, the Company announced that all resolutions proposed at the
2023 AGM were passed with the necessary majority. One shareholder however
voted against Mr Ash's re-election due to an internal policy regarding board
attendance. The Board attempted to engage with the shareholder prior to the
AGM without success, and has continued to attempt to engage with the
shareholder subsequently.
The principal risks and uncertainties of the Company are in relation to
performance risk, market risk, relationship risk and operational risk. These
are unchanged from 31 December 2022, and further details may be found in the
Directors' Report within the Annual Report and Audited Consolidated Financial
Statements of the Company for the year ended 31 December 2022. The Directors
will continue to assess the principal risks and uncertainties relating to the
Company for the remaining six months of the year but expect these to remain
unchanged.
Details of related party transactions during the period are included in Note 9
of the Condensed Consolidated Financial Statements.
We are grateful for your continued support and will keep you informed of the
status of our investment as it develops.
Responsibility statement
We confirm that to the best of our knowledge:
• The condensed set of financial statements has been prepared in
accordance with IAS 34 'Interim Financial Reporting' as adopted in the
European Union;
• The interim management report includes a fair review of the
information required by DTR 4.2.7R (indication of important events during the
first six months and their impact on the condensed financial statements and
description of principal risks and uncertainties for the remaining six months
of the year);
• The interim management report includes a fair review of the
information required by DTR 4.2.8R (disclosure of related parties'
transactions and changes therein); and
• The condensed set of financial statements, which has been
prepared in accordance with the applicable set of accounting standards, gives
a true and fair view of the assets, liabilities, financial position and profit
or loss of the issuer, or the undertakings included in the consolidation as a
whole as required by DTR 4.2.4R.
Going Concern
The Condensed Consolidated Financial Statements have been prepared on the
going concern basis. The net current asset position as at 30 June 2023 is
£1.6 million. The Directors have considered the impact to the Company, as
well as to Navient Corporation's ("Navient") and the Company's stock prices,
of the current economic environment, including the current interest rates and
inflationary environment, and have concluded that there is no impact on the
going concern. At 30 June 2023 the Company had a NAV of £570.6 million. The
Company, via its investment in SIGC LLC and other funds (the "Funds"), has
sufficient liquid assets to meet expected costs. The Investment Manager, has
the full intent and ability to provide the Company with funds as and if
required. Therefore, after making enquiries and based on the sufficient cash
reserves as at 30 June 2023, the Directors are of the opinion that the Company
has adequate resources to continue its operational activities for the
foreseeable future. The Board is therefore of the opinion that the going
concern basis should be adopted in the preparation of the Condensed
Consolidated Financial Statements.
Independent Auditor's Review Report to the Members of Sherborne Investors
(Guernsey) C Limited
We have been engaged by the Company to review the condensed consolidated set
of financial statements in the half-yearly financial report for the six months
ended 30 June 2023 which comprises the condensed consolidated statement of
comprehensive income, condensed consolidated statement of financial position,
condensed consolidated statement of changes in equity, condensed consolidated
statement of cash flows and related notes 1 to 12.
Based on our review, nothing has come to our attention that causes us to
believe that the condensed consolidated set of financial statements in the
half-yearly financial report for the six months ended 30 June 2023 is not
prepared, in all material respects, in accordance with International
Accounting Standard 34 as adopted in the European Union and the Disclosure
Guidance and Transparency Rules of the United Kingdom's Financial Conduct
Authority.
Basis for Conclusion
We conducted our review in accordance with International Standard on Review
Engagements (UK) 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 (ISRE (UK) 2410). 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.
As disclosed in note 1, the annual financial statements of the company are
prepared in accordance with international accounting standards. The condensed
set of financial statements included in this half-yearly financial report has
been prepared in accordance with International Accounting Standard 34 as
adopted by the European Union, "Interim Financial Reporting".
Conclusion Relating to Going Concern
Based on our review procedures, which are less extensive than those performed
in an audit as described in the Basis for Conclusion section of this report,
nothing has come to our attention to suggest that the directors have
inappropriately adopted the going concern basis of accounting or that the
directors have identified material uncertainties relating to going concern
that are not appropriately disclosed.
This Conclusion is based on the review procedures performed in accordance with
ISRE (UK) 2410; however future events or conditions may cause the entity to
cease to continue as a going concern.
Responsibilities of 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.
In preparing the half-yearly financial report, the directors are responsible
for assessing the Company's ability to continue as a going concern, disclosing
as applicable, matters related to going concern and using the going concern
basis of accounting unless the directors either intend to liquidate the
Company or to cease operations, or have no realistic alternative but to do so.
Auditor's Responsibilities for the review of the financial information
In reviewing the half-yearly financial report, we are responsible for
expressing to the Company a conclusion on the condensed set of financial
statement in the half-yearly financial report. Our Conclusion, including our
Conclusion Relating to Going Concern, are based on procedures that are less
extensive than audit procedures, as described in the Basis for Conclusion
paragraph of this report.
Use of our report
This report is made solely to the company in accordance with ISRE (UK) 2410.
Our work has been undertaken so that we might state to the company those
matters we are required to state to it in an independent review report and for
no other purpose. To the fullest extent permitted by law, we do not accept or
assume responsibility to anyone other than the company, for our review work,
for this report, or for the conclusions we have formed.
Condensed Consolidated Statement of Comprehensive Income (Unaudited)
For the period from 1 January 2023 to 30 June 2023
1 January 2023 to 1 January 2022 to 1 January 2022 to
30 June 2023 30 June 2022 31 December 2022
(unaudited) (unaudited) (audited)
Notes £ £ £ £ £ £
Income 1(e)
Unrealised gain/(loss) on financial assets at fair value through profit or 1(d), 5
loss
47,380,435 (114,319,958) (42,799,033)
Interest income 3,237 - 853
Total income/(loss) 47,383,672 (114,319,958) (42,798,180)
Expenses 1(f)
Management fees 9 2,087,689 2,119,512 4,329,768
Professional fees 2 252,614 181,140 342,753
Directors' fees 2, 9 105,791 80,000 160,000
Administrative fees 73,206 70,539 141,574
Other fees 2,265 13,167 210,045
Foreign exchange gain 81,405 (452,033) (428,695)
Total operating expenses 2,602,970 2,012,325 4,755,445
Comprehensive income/(loss) 44,780,702 (116,332,283) (47,553,625)
Comprehensive income/(loss) attributable to:
Equity Shareholders 44,771,098 (116,309,767) (47,546,039)
Non-controlling interest (NCI) 1(b) 9,604 (22,516) (7,586)
Weighted average number of shares outstanding 4 700,000,000 700,000,000 700,000,000
Basic and diluted (deficit)/earnings per share attributable to shareholders 4 6.40p (16.62)p (6.79)p
(excluding NCI)
All revenue and expenses are derived from continuing operations.
Although not required by IAS 34 - 'Interim Financial Reporting', the
comparative figures for the preceding year and the related notes have been
included on a voluntary basis.
The accompanying notes form an integral part of these Condensed Consolidated
Financial Statements.
Condensed Consolidated Statement of Financial Position (Unaudited)
As at 30 June 2023
30 June 2023 30 June 2022 31 December 2022
(unaudited) (unaudited) (audited)
Notes £ £ £ £ £ £
Non-Current Assets
Financial assets at fair value through profit or loss 1(d), 5 569,043,450 458,563,506 524,662,582
569,043,450 458,563,506 524,662,582
Current Assets
Cash and cash equivalents 1(h) 1,665,200 5,675,805 4,974,113
Prepaid expenses 50,934 46,864 29,831
1,716,314 5,722,669 5,003,944
Current Liabilities
Trade and other payables 1(i), 6 149,329 124,953 227,346
149,329 124,953 227,346
Net Current Assets 1,566,805 5,597,716 4,776,598
Net Assets 570,610,255 464,161,222 529,439,180
Capital and Reserves
Called up share capital and share premium 7 688,939,403 688,939,403 688,939,403
Retained reserves (118,329,148) (224,874,682) (159,610,954)
Equity attributable to the Company 570,610,255 464,064,721 529,328,449
Non-controlling interest (NCI) 1(b) - 96,501 110,731
Total Equity 570,610,255 464,161,222 529,439,180
NAV Per Share (excluding NCI) 8 81.52p 66.29p 75.62p
The Condensed Consolidated Financial Statements were approved by the Board of
Directors for issue on 25 August 2023.
Although not required by IAS 34 - 'Interim Financial Reporting', the
comparative figures for the preceding year and the related notes have been
included on a voluntary basis.
The accompanying notes form an integral part of these Condensed Consolidated
Financial Statements.
Condensed Consolidated Statement of Changes in Equity (Unaudited)
For the period from 1 January 2023 to 30 June 2023
Share Capital Retained Non- Total
and Share Reserves Controlling Equity
Premium Interest
Notes £ £ £ £
Balance at 1 January 2023 (audited) 688,939,403 (159,610,954) 110,731 529,439,180
Comprehensive income - 44,771,098 9,604 44,780,702
Distributions - (3,500,000) (103,982) (3,603,982)
Non-Controlling Interest transfer - 10,708 (16,353) (5,645)
Balance at 30 June 2023 (unaudited) 688,939,403 (118,329,148) - 570,610,255
Share Capital Retained Non- Total
and Share Reserves Controlling Equity
Premium Interest
£ £ £ £
Balance at 1 January 2022 (audited) 688,939,403 (112,276,754) 3,830,856 580,493,505
Comprehensive loss - (116,309,767) (22,516) (116,332,283)
Incentive allocation 9 - 3,711,839 (3,711,839) -
Balance at 30 June 2022 (unaudited) 688,939,403 (224,874,682) 96,501 464,161,222
Share Capital Retained Non- Total
and Share Reserves Controlling Equity
Premium Interest
£ £ £ £
Balance at 1 January 2022 (audited) 688,939,403 (112,276,754) 3,830,856 580,493,505
Comprehensive loss - (47,546,039) (7,586) (47,553,625)
Incentive allocation 9 - 3,711,839 (3,711,839) -
Distributions - (3,500,000) (700) (3,500,700)
Balance at 31 December 2022 (audited) 688,939,403 (159,610,954) 110,731 529,439,180
Although not required by IAS 34 - 'Interim Financial Reporting', the
comparative figures for the preceding year and the related notes have been
included on a voluntary basis.
The accompanying notes form an integral part of these Condensed Consolidated
Financial Statements.
Condensed Consolidated Statement of Cash Flows (Unaudited)
For the period from 1 January 2023 to 30 June 2023
Notes 1 January 2023 to 30 June 2023
(unaudited) 1 January 2022 1 January 2022 to
£ to 30 June 2022 31 December 2022
(unaudited) (audited)
£ £
Net cash flow used in operating activities See (2,702,090) (2,045,297) (4,668,991)
below
Investing activities
Contribution to investments 5 (633,786) - -
Distributions from 5 3,633,353 2,694,436 8,116,285
investments
Non-Controlling Interest transfer (5,645) - -
Interest income 3,237 - 853
Net cash flow from investing activities 2,997,159 2,694,436 8,117,138
Financing activities
Distributions to non-controlling interest 11 (103,982) - (700)
Distributions to shareholders 11 (3,500,000) - (3,500,000)
Net cash flow used in financing activities (3,603,982) - (3,500,700)
Net movement in cash and cash equivalents (3,308,913) 649,139 (52,553)
Opening cash and cash equivalents 4,974,113 5,026,666 5,026,666
Closing cash and cash equivalents 1,665,200 5,675,805 4,974,113
Net cash flow used in operating activities
Comprehensive income/(loss) 44,780,702 (116,332,283) (47,553,625)
Unrealised (gain)/loss on financial assets at fair value through profit or 5 (47,380,435) 114,319,958
loss
42,799,033
Movement in prepaid (21,103) (29,275) (12,242)
expenses
Movement in trade and other payables 6 (78,017) (3,697) 98,696
Interest income (3,237) - (853)
Net cash flow used in operating (2,702,090) (2,045,297) (4,668,991)
activities
Although not required by IAS 34 - 'Interim Financial Reporting', the
comparative figures for the preceding year and the related notes have been
included on a voluntary basis.
The accompanying notes form an integral part of these Condensed Consolidated
Financial Statements.
Notes to the Condensed Consolidated Financial Statements
For the period from 1 January 2023 to 30 June 2023
1. Summary of significant accounting policies
Reporting entity
Sherborne Investors (Guernsey) C Limited (the "Company") is a closed-ended
investment company with limited liability formed under the Companies
(Guernsey) Law, 2008 (as amended). The Company was incorporated and registered
in Guernsey on 25 May 2017. The Company commenced dealings on the London Stock
Exchange's Specialist Fund Segment on 12 July 2017. The Company's registered
office is 1 Royal Plaza, Royal Avenue, St Peter Port, Guernsey, Channel
Islands, GY1 2HL. During the period SIGC Midco Limited, a former wholly-owned
subsidiary of the Company, was dissolved and liquidated. Also during the
period, the investment manager of SIGC, LP (Incorporated) (the "Investment
Partnership"), a subsidiary of the Company, advised the Company that following
the distribution to the Company of any proceeds from the Company's indirect
investment in Navient Corp., it does not intend to seek to recall any funds
for further investment. To effectuate this, the Investment Partnership's
investment manager assigned to the Company the Investment Partnership's
interest in SIGC LLC, as the constitutional documents of SIGC LLC do not
permit the recall of distributed capital for reinvestment. As a result of the
assignment, the Investment Partnership was dissolved by operation of its
limited partnership agreement. The liquidation of the Investment Partnership's
remaining residual net assets is being finalised and as such the Investment
Partnership's results for the period are included in these Condensed
Consolidated Financial Statements. The "Group" is defined as the Company and
its subsidiaries, SIGC, LP (Incorporated) and SIGC Midco Limited (up until its
liquidation). Both subsidiaries were established/incorporated in Guernsey.
Basis of preparation
The annual financial statements of the Group are prepared in accordance with
International Financial Reporting Standards ("IFRSs") as adopted in the
European Union. The financial information for the year ended 31 December 2022,
as included in this Interim Report, is derived from the financial statements
delivered to the Listing Authority and does not constitute statutory accounts
as defined by the Companies (Guernsey) Law, 2008 (as amended). The Auditor
reported in the statutory financial statements for the year ended 31 December
2022: their report was unqualified; did not draw attention to going concern by
way of emphasis; and did not contain a statement under Section 263(2) or
263(3) of the Companies (Guernsey) Law, 2008 (as amended).
The Condensed Consolidated Financial Statements of the Group have been
prepared in accordance with International Accounting Standard 34, 'Interim
Financial Reporting' ("IAS 34") as adopted in the European Union, together
with applicable legal and regulatory requirements of Guernsey Law. The
Directors of the Company have taken the exemption in Section 244 of the
Companies (Guernsey) Law, 2008 (as amended) and have therefore elected to only
prepare Condensed Financial Statements for the period.
These Condensed Consolidated Financial Statements have been prepared on the
historical cost basis, as modified by the measurement at fair value of
investments. The accounting policies adopted are consistent with those of the
previous financial year and corresponding interim period.
Going concern
The Condensed Consolidated Financial Statements have been prepared on the
going concern basis. The net current asset position as at 30 June 2023 is
£1.6 million. The Directors have considered the impact to the Company, as
well as to Navient Corporations's ("Navient") and the Company's stock prices,
of the current economic environment, including the current interest rates and
inflationary environment, and have concluded that there is no impact on the
going concern. At 30 June 2023 the Company had a NAV of £570.6 million. The
Company, via its investment in SIGC LLC and other funds (the "Funds"), has
sufficient liquid assets to meet expected costs. The Investment Manager of the
Funds has the full intent and ability to provide the Company with funds as
and if required. After making enquiries of Sherborne Investors Management LP,
the investment manager of SIGC LLC (the "Investment Manager") and Apex Fund
and Corporate Services (Guernsey) Limited (the "Administrator") and based on
the sufficient cash reserves as at 30 June 2023, the Directors have a
reasonable expectation that the Company has adequate resources to continue its
operational activities for the foreseeable future. Accordingly, they continue
to adopt a going concern basis in preparing these Condensed Consolidated
Financial Statements.
Critical accounting judgments and key sources of estimation uncertainty
The preparation of the Group's Condensed Consolidated Financial Statements
requires management to make estimates and assumptions that affect the reported
amounts of assets, liabilities and contingencies at the date of the Group's
Condensed Consolidated Financial Statements and revenue and expenses during
the reported period. Actual results could differ from those estimated.
i) Critical accounting judgement: Incentive allocation
As more fully described in Note 9, until 24 May 2023 when the Investment
Partnership was dissolved, the Special Limited Partner was entitled to receive
an incentive allocation once aggregate distributions to partners of the
Investment Partnership exceed a certain level. The basis of the incentive
calculation differs depending on how the investment in the Selected Target
Company ("STC") is ultimately characterised (i.e. as a Turnaround or Stake
Building Investment). The incentive allocation has been computed on a Stake
Building Investment basis, as it does not meet the criteria of a Turnaround
investment.
ii) Critical accounting judgement: Consolidation of entities
As described further in Note 5, as of 30 June 2023 the Group holds a
non-controlling interest in SIGC LLC (formerly known as Whistle Investors III
LLC). Whilst the Group holds a majority interest in SIGC LLC and holds access
to the rewards and benefits, it does not exercise control over the day to day
operations nor does it have the ability to remove the controlling party. As
such, SIGC LLC is not considered a subsidiary and is not consolidated but held
at fair value through profit or loss.
iii) Source of estimation uncertainty: Financial assets at fair value through
profit or loss
The Group's investments are measured at fair value for financial reporting
purposes. The fair value of financial assets are based on the net asset value
("NAV") of the investment. The main contribution to their NAV is the quoted
closing price of the STC and the Company at 30 June 2023, together with cash
balances. Please see Note 5 for further details.
Adoption of new and revised standards
(i) New standards adopted as at 1 January 2023:
The following standards are effective for the first time for the financial
period beginning 1 January 2023 and are relevant to the Group and Company's
operations:
· IAS 1 (amended), 'Presentation of Financial Statements',
· IAS 8 (amended), 'Accounting Policies, Changes in Accounting
Estimates and Errors'.
The above standards have been adopted and did not have a material impact on
the financial statements.
(ii) Standards, amendments and interpretations early adopted by the Group:
There were no standards, amendments and interpretations early adopted by the
Group.
(iii) Standards, amendments and interpretations in issue but not yet
effective:
Unless stated otherwise, the Directors do not consider the adoption of any new
and revised accounting standards and interpretations to have a material impact
as the new standards or amendment are not relevant to the operations of the
Group.
a. Basis of consolidation
The Condensed Consolidated Financial Statements incorporate the financial
statements of the Company and two entities previously controlled by the
Company (its subsidiaries). Control is achieved where the Company has the
power to govern the financial and operating policies of an investee entity so
as to obtain benefits from its activities. Investments where a majority
interest is held but control is not achieved are held at fair value through
profit or loss.
Non-controlling interests in the net assets of the consolidated subsidiaries
are identified separately from the Group's equity therein. Non-controlling
interests consist of the amount of those interests at the date of the original
business combination and the non-controlling entities' share of changes in
equity since the date of the combination. Losses applicable to the
non-controlling entities in excess of their interest in the subsidiaries
equity are allocated against their interests to the extent that this would
create a negative balance.
Where necessary, adjustments are made to the financial statements of the
subsidiary to bring the accounting policies used into line with those used by
the Group.
All intra-group transactions, balances and expenses are eliminated on
consolidation.
The Company, via SIGC Midco Limited, a 100% owned subsidiary until its
dissolution and liquidation in early 2023, owned 99.98% of the capital
interest in the Investment Partnership until its dissolution in May 2023.
Whilst the General Partner of the Investment Partnership, a company registered
in Delaware, USA, was responsible for directing the day to day operations of
the Investment Partnership, the Company, through its majority interest in the
Investment Partnership, had the ability to approve the proposed investment of
the Investment Partnership and to remove the general partner. The liquidation
of the Investment Partnership's remaining residual net assets is being
finalised and hence, the Company has consolidated the Investment Partnership
and SIGC Midco Limited (up until its liquidation) in its financial statements.
b. Non-controlling interest
The interest of non-controlling parties in the subsidiary is measured at the
minority's proportion of the net fair value of the assets, liabilities and
contingent liabilities recognised.
c. Functional currency
Items included in the Condensed Consolidated Financial Statements of the Group
are measured using the currency of the primary economic environment in which
the entity operates. The Condensed Consolidated Financial Statements are
presented in Pound Sterling ("£"), which is the Group's functional and
presentational currency. Transactions in currencies other than £ are
translated at the rate of exchange ruling at the date of the transaction.
Monetary assets and liabilities denominated in foreign currencies at the date
of the Condensed Consolidated Statement of Financial Position are retranslated
into £ at the rate of exchange ruling at that date. Exchange differences are
reported in the Condensed Consolidated Statement of Comprehensive Income.
d. Financial assets at fair value through profit or loss
Investments, including equity investments in associates, are designated as
fair value through profit or loss in accordance with IFRS 9 'Financial
instruments', as the Group's business model is to invest in financial assets
with a view to profiting from their total return in the form of interest and
changes in fair value. Under International Accounting Standard 28 'Investments
in Associates', the fund can hold its investments at fair value through profit
or loss rather than as an associate as the Investment Partnership is a
closed-ended fund.
Investments in voting shares and derivative contracts are initially recognised
at cost and are subsequently re-measured at fair value, as determined by the
Directors. Unrealised gains or losses arising from the revaluation of
investments in voting shares and derivative contracts are taken directly to
the Condensed Consolidated Statement of Comprehensive Income.
The Group's investments are measured at fair value for financial reporting
purposes as described earlier in Note 1 under critical accounting judgements
and key sources of estimation uncertainty.
In determining fair value in accordance with IFRS 13 'Fair Value Measurement'
("IFRS 13"), investments measured and reported at fair value are classified
and disclosed in one of the following categories within the fair value
hierarchy:
Level I - An unadjusted quoted price for identical assets and liabilities in
an active market provides the most reliable evidence of fair value and is used
to measure fair value whenever available. As required by IFRS 13, the Group
will not adjust the quoted price for these investments, even in situations
where it holds a large position and a sale could reasonably impact the quoted
price.
Level II - Inputs are other than unadjusted quoted prices in active markets,
which are either directly or indirectly observable as of the reporting date,
and fair value is determined through the use of models or other valuation
methodologies.
Level III - Inputs are unobservable for the investment and include situations
where there is little, if any, market activity for the investment. The inputs
into the determination of fair value require significant management judgement
or estimation.
The Group's investments are summarised by Level in Note 5. On disposal of
shares, cost of investments are allocated on a first in, first out basis.
e. Revenue recognition
Investment income and interest receivable from short-term deposits and
Treasury gilts are recognised on an accruals basis. Where receipt of
investment income is not likely until the maturity or realisation of an
investment then the investment income is accounted for as an increase in the
fair value of the investment.
f. Expenses
All expenses are accounted for on an accruals basis. Expenses are charged
through the Condensed Consolidated Statement of Comprehensive Income in the
period in which they occur.
g. Prepaid expenses and trade receivables
Trade and other receivables are initially recognised at fair value and
subsequently, where necessary, re-measured at amortised cost using the
effective interest method. A provision for impairment of trade receivables is
established when there is objective evidence the Group will not be able to
collect all amounts due according to the original terms of the receivables.
The Group only holds trade receivables with no financing component and which
have maturities of less than 12 months at amortised cost and has therefore
applied the simplified approach to expected credit loss.
h. Cash and cash equivalents
Cash and cash equivalents comprise cash in hand, call and current balances
with banks and similar institutions, which are readily convertible to known
amounts of cash and which are subject to insignificant risk of changes in
value. This definition is also used for the Condensed Consolidated Statement
of Cash Flows. The carrying amount of these assets approximate their fair
value, unless otherwise stated.
i. Trade and other payables
Trade and other payables are initially recognised at fair value and
subsequently, where necessary, re-measured at amortised cost using the
effective interest method.
j. Financial instruments
Financial assets and liabilities are recognised in the Group's Condensed
Consolidated Statement of Financial Position when the Group becomes a party to
the contractual provisions of the instrument.
k. Segmental reporting
As the Group invests in one investee company, there is no segregation between
industry, currency or geographical location and therefore no further
disclosures are required in conjunction with IFRS 8 'Operating Segments'.
l. Incentive allocation
Until 24 May 2023 when the Investment Partnership was dissolved, the incentive
allocation was accounted for on an accruals basis (see also Note 9). The
incentive allocation was payable to the non-controlling interest and would
therefore be recognised in the Condensed Consolidated Statement of Changes in
Equity rather than recognised as an expense in the Condensed Consolidated
Statement of Comprehensive Income.
2. Comprehensive income/(loss)
The comprehensive income/(loss) has been arrived at after charging:
1 January 2023 to 30 June 2023 1 January 2022 to 30 June 2022 1 January 2022 to 31 December 2022
£ £ £
Directors' fees 105,791 80,000 160,000
Auditor's remuneration - Audit 47,000 19,806 47,000
Auditor's remuneration - Interim review 28,000 24,150 28,000
3. Tax on ordinary activities
The Company has been granted exemption from income tax in Guernsey under the
Income Tax (Exempt Bodies) (Bailiwick of Guernsey) Ordinance 1989 and is
liable to pay an annual fee (currently £1,200) under the provisions of the
Ordinance. As such it will not be liable to income tax in Guernsey other than
on Guernsey source income (excluding deposit interest on funds deposited with
a Guernsey bank). No withholding tax is applicable to distributions to
Shareholders by the Company.
The Investment Partnership was not itself subject to taxation in Guernsey.
No withholding tax is applicable to distributions to partners of the
Investment Partnership.
Income which is wholly derived from the business operations conducted on
behalf of the Investment Partnership with, and investments made in, persons or
companies who are not resident in Guernsey will not be regarded as Guernsey
source income. Such income will not therefore be liable to Guernsey tax in
the hands of non-Guernsey resident limited partners.
4. Earnings per share
The calculation of basic and diluted earnings per share is based on the return
on ordinary activities less total comprehensive income attributable to the
non-controlling interest and on there being 700,000,000 weighted average
number of shares in issue during the period (30 June 2022: 700,000,000 and 31
December 2022: 700,000,000). The earnings per share attributable to
shareholders for the period ended 30 June 2023 amounted to 6.40 pence per
share (period ended 30 June 2022: a deficit of 16.62 pence per share and year
ended 31 December 2022: a deficit of 6.79 pence per share).
Date Shares Days in issue Weighted Average Shares
30 June 2023 700,000,000 181 700,000,000
31 December 2022 700,000,000 365 700,000,000
5. Financial assets at fair value through profit or loss
As at 30 June 2023 As at 30 June As at 31 December 2022
2022
£ £ £
Opening fair value 524,662,582 575,577,900 575,577,900
Contribution to investments 633,786 - -
Distributions from investments (3,633,353) (2,694,436) (8,116,285)
Unrealised gain/(loss) on financial assets at fair value through profit or 47,380,435 (114,319,958) (42,799,033)
loss
Closing fair value 569,043,450 458,563,506 524,662,582
The following tables summarise by level within the fair value hierarchy the
Group's financial assets and liabilities at fair value as follows:
Level I Level II Level III Total
30 June 2023 £ £ £ £
Financial assets at fair value through profit and loss - - 569,043,450 569,043,450
Level I Level II Level III Total
30 June 2022 £ £ £ £
Financial assets at fair value through profit and loss - - 458,563,506 458,563,506
Level I Level II Level III Total
31 December 2022 £ £ £ £
Financial assets at fair value through profit and loss - - 524,662,582 524,662,582
As at 30 June 2023, the Group's investment consists solely of a
non-controlling interest in SIGC LLC (formerly Whistle Investors III LLC)
which was organised to invest in the STC. With SIGC LLC's balance sheet being
measured at fair value, the NAV of SIGC LLC provides the best estimate of fair
value for the Company's investment in SIGC LLC. SIGC LLC's investment, via an
intermediary, consisted of its non-controlling interest in Newbury Investors
LLC ("Newbury"). Newbury's investment in the STC consisted of both common
stock of Navient and of the Company. The Investment Manager continually
evaluates the optimal allocation of Newbury's ownership of shares in Navient
versus those of the Company. The Investment Manager may from time to time buy
or sell shares in Navient and the Company to adjust the allocation. Some of
the factors in the allocation decision include the relative liquidity of the
shares of Navient and the Company, the discount to net asset value at which
the Company's shares trade and various tactical considerations, and general
market conditions. Furthermore, the level III investments disclosed in the
financial statements are solely comprised of the Company's non-controlling
interest in SIGC LLC. The value of those investments equated to the Company's
maximum exposure to loss from SIGC LLC and Newbury.
A reconciliation of fair value measurements in Level III is set out in the
following table:
As at 30 June 2023 As at 30 June 2022 As at 31 December 2022
£ £ £
Opening fair value 524,662,582 575,577,900 575,577,900
Contribution to investments 633,786 - -
Distributions from investments (3,633,353) (2,694,436) (8,116,285)
Unrealised gain/(loss) on financial assets at fair value through profit or 47,380,435 (114,319,958) (42,799,033)
loss
Closing fair value 569,043,450 458,563,506 524,662,582
Capital contributions made during the period ended 30 June 2023 were made
based on excess cash held at the Investment Partnership prior to its
dissolution. Capital distributions made during the period ended 30 June 2023
were made to fund the Company's dividend payment.
Capital distributions made during the year ended 31 December 2022 were made to
return excess funds drawn including the funding of the Company's dividend
payment.
The key unobservable inputs in the valuation of the Level III investment is
the value of SIGC LLC's indirect non-controlling interests in the underlying
intermediaries which is impacted by the share price of Navient and the
Company.
6. Trade and other payables
As at 30 June 2023
As at 30 June 2022 As at 31 December 2022
£ £ £
Professional fees payable 29,159 40,151 144,628
Administration fees payable 36,685 33,119 33,633
Audit fees payable 51,500 51,683 47,000
Other payables 31,985 - 2,085
Total 149,329 124,953 227,346
7. Consolidated share capital and share premium
As at 30 June 2023 As at 30 June 2022 As at 31 December 2022
Authorised share capital No. No. No.
Ordinary Shares of no par value Unlimited Unlimited Unlimited
Issued and fully paid No. No. No.
Ordinary Shares of no par value 700,000,000 700,000,000 700,000,000
As at 30 June 2023 As at 30 June 2022 As at 31 December 2022
Share premium account £ £ £
Share premium account upon issue 700,000,000 700,000,000 700,000,000
Less: Costs of issue (11,060,597) (11,060,597) (11,060,597)
Closing balance 688,939,403 688,939,403 688,939,403
8. Net asset value per share attributable to the Company
No. of Shares Pence per Share
30 June 2023 700,000,000 81.52
30 June 2022 700,000,000 66.29
31 December 2022 700,000,000 75.62
9. Related party transactions
The Investment Partnership and its General Partner engaged Sherborne Investors
Management (Guernsey) LLC to serve as Investment Manager until the Investment
Partnership's dissolution as disclosed in Note 1. The Investment Manager was
entitled to receive from the Investment Partnership a monthly management fee
equal to one-twelfth of 1% of the net asset value of the Investment
Partnership, less cash and cash equivalents and certain other adjustments.
During the period, management fees of £2,087,689 (period ended 30 June 2022:
£2,119,512 and year ended 31 December 2022: £4,329,768) had been paid by the
Investment Partnership. No balance was outstanding at the period end (period
ended 30 June 2022: £Nil and year ended 31 December 2022: £Nil).
The Special Limited Partner interest was held by Sherborne Investors LP until
the Investment Partnership's dissolution as disclosed in Note 1. The Special
Limited Partner was entitled to receive an incentive allocation once aggregate
distributions to partners of the Investment Partnership, of which one was the
Company, exceeded a certain level of capital contributions to the Investment
Partnership, excluding amounts contributed attributable to management fees.
For Turnaround investments, the incentive allocation was computed at 10% of
the distributions to all partners in excess of 110%, increasing to 20% of the
distributions to all partners in excess of 150% and increasing to 25% of the
distributions to all partners in excess of 200% of capital contributions,
excluding amounts contributed attributable to management fees. An investment
was considered a Turnaround investment when a member of the General Partner is
appointed chairman of, or accepts an executive role at, the STC.
If, after acquiring a shareholding, the share price of the STC rises to a
level at which further investment and the effort of a Turnaround is, in the
Investment Manager's opinion, no longer justified or otherwise no longer
presents a viable Turnaround opportunity, the Investment Partnership intends
to sell (and distribute the proceeds to the Company) or distribute in kind the
holding to the limited partners (in each case after deductions for any costs
and expenses and for the Investment Partnership's Minimum Capital Requirements
and subject to applicable law and regulation), rather than seeking to join the
Board of Directors or otherwise engage with the STC (a "Stake Building
Investment").
For Stake Building Investments, the incentive allocation was computed at 20%
of net returns on the investment of the Investment Partnership, such amount to
be payable after each partner in the Investment Partnership has had
distributed to it an amount equal to its aggregate capital contribution to the
Investment Partnership in respect to the Stake Building Investment (excluding
any capital contributions attributable to management fees). The Special
Limited Partner may waive or defer all or any part of any incentive allocation
otherwise due.
At 30 June 2023, there is no incentive allocation payable by the Investment
Partnership. At 30 June 2022 and 31 December 2022, the incentive allocation
was calculated based on a stake building basis and amounted to £nil.
The Investment Manager and managing member of SIGC LLC are entitled pursuant
to its constitutional documents, to receive a management fee and incentive
allocation, respectively, from SIGC LLC on the same economic terms as the
Investment Partnership's Investment Manager and the Special Limited Partner.
Each of the Directors (other than the Chairman) receives a fee payable by the
Company currently at a rate of £35,000 per annum. The Chairman of the Audit
Committee receives £5,000 per annum in addition to such fee. The Chairman
receives a fee payable by the Company currently at the rate of £50,000 per
annum.
Individually and collectively, the Directors of the Company hold no shares of
the Company as at 30 June 2023 (30 June 2022: Nil and 31 December 2022: Nil).
Sherborne Investors GP, LLC has granted to the Company a non-exclusive licence
to use the name "Sherborne Investors" in the UK and the Channel Islands in the
corporate name of the Company and in connection with the conduct of the
Company's business affairs. The Company may not sub-licence or assign its
rights under the Trademark Licence Agreement. Sherborne Investors GP, LLC
receives a fee of £70,000 per annum for the use of the licenced name.
10. Financial risk factors
The Group's investment objective is to realise capital growth from investment
in the STC, identified by the Investment Manager, with the aim of generating
significant capital return for Shareholders. Consistent with that objective,
the Group's financial instruments mainly comprise an investment in a STC. In
addition, the Group holds cash and cash equivalents as well as having trade
and other receivables and trade and other payables that arise directly from
its operations.
Liquidity risk
The Group's cash and cash equivalents are placed in demand deposits with a
range of financial institutions. The listed investment in the STC could be
partially redeemed relatively quickly (within 3 months) should the Group need
to meet obligations or ongoing expenses as and when they fall due.
The following table details the liquidity analysis for financial liabilities
at the date of the Condensed Consolidated Statement of Financial Position:
As at 30 June 2023 Less than 1 month 1 - 12 months Total
£ £ £
Trade and other payables 4,000 145,329 149,329
4,000 145,329 149,329
As at 30 June 2022 Less than 1 month 1 - 12 months Total
£ £ £
Trade and other payables 5,014 119,939 124,953
5,014 119,939 124,953
As at 31 December 2022 Less than 1 month 1 - 12 months Total
£ £ £
Trade and other payables 116,928 110,418 227,346
116,928 110,418 227,346
Credit risk
The Group is exposed to credit risk in respect of its cash and cash
equivalents, arising from possible default of the relevant counterparty, with
a maximum exposure equal to the carrying value of those assets. The credit
risk on liquid funds is mitigated through the Group depositing cash and cash
equivalents across several banks. The Group is exposed to credit risk in
respect of its trade receivables and other receivable balances with a maximum
exposure equal to the carrying value of those assets. The Bank of New York
Mellon currently has a stand-alone credit rating of AA- with Standard &
Poor's (31 December 2022: AA- with Standard & Poor's), Royal Bank of
Scotland International has a stand-alone credit rating of A- with Standard
& Poor's (31 December 2022: A- with Standard & Poor's) whilst Barclays
Bank PLC has a standalone credit rating of A with Standard & Poor's (30
June 2022: A with Standard & Poor's and 31 December 2022: A with Standard
& Poor's). The Group considers these ratings to be acceptable.
Market price risk
Market price risk arises as a result of the Group's exposure to the future
values of the share price of the STC, including the share price of Navient and
the Company. It represents the potential loss that the Group may suffer
through investing in the STC.
As at 30 June 2023, the share price of Navient and the Company were 18.58 US
dollars per share and 59.25 pence per share, respectively, which produced the
Group's NAV of £570.6 million. At 30 June 2023 a 10% increase in the share
price of Navient and the Company would increase the Group's NAV by
approximately £34.6 million. At 30 June 2023 a 10% decrease in the share
price of Navient and the Company would decrease the Group's NAV by
approximately £53.3 million.
Foreign exchange risk
Foreign currency risk arises as the value of future transactions, recognised
monetary assets and monetary liabilities denominated in other currencies
fluctuate due to changes in foreign exchange rates. The Investment Manager
monitors the Group's monetary and non-monetary foreign exchange exposure on a
regular basis. The Group has limited direct foreign exchange risk exposure.
SIGC LLC's investment in the US based STC during the year exposes SIGC LLC to
foreign currency risk, however, as a Group this is considered as part of
market price risk.
Interest rate risk
The Group is subject to risks associated with changes in interest rates in
respect of interest earned on its cash and cash equivalents. The Group seeks
to mitigate this risk by monitoring the placement of cash balances on an
ongoing basis in order to maximise the interest rates obtained.
As at 30 June 2023 Interest bearing
Less than 1 month to 3 months to Non- interest bearing Total
1 month 3 months 1 year
£ £ £ £ £
Assets
Cash and cash equivalents 1,665,200 - - - 1,665,200
Financial assets at fair value through profit or loss - - - 569,043,450 569,043,450
Prepaid expenses - - - 50,934 50,934
Total Assets 1,665,200 - - 569,094,384 570,759,584
Liabilities
Other payables - - - 149,329 149,329
Total Liabilities - - - 149,329 149,329
As at 30 June 2022 Interest bearing
Less than 1 month to 3 months to Non- interest bearing Total
1 month 3 months 1 year
£ £ £ £ £
Assets
Cash and cash equivalents 5,675,805 - - - 5,675,805
Financial assets at fair value through profit or loss - - - 458,563,506 458,563,506
Prepaid expenses - - - 46,864 46,864
Total Assets 5,675,805 - - 458,610,370 464,286,175
Liabilities
Other payables - - - 124,953 124,953
Total Liabilities - - - 124,953 124,953
As at 31 December 2022 Interest bearing
Less than 1 month to 3 months to Non- interest bearing Total
1 month 3 months 1 year
£ £ £ £ £
Assets
Cash and cash equivalents 4,974,113 - - - 4,974,113
Financial assets at fair value through profit or loss - - - 524,662,582 524,662,582
Prepaid expenses - - - 29,831 29,831
Total Assets 4,974,113 - - 524,692,413 529,666,526
Liabilities
Other payables - - - 227,346 227,346
Total Liabilities - - - 227,346 227,346
As at 30 June 2023, the total interest sensitivity gap for interest bearing
items was a surplus of £1,665,200 (30 June 2022: surplus of £5,675,805
and 31 December 2022: surplus of £4,974,113).
As at 30 June 2023, interest rates reported by the Bank of England were 5.0%
(30 June 2022: 1.25% and 31 December 2022: 3.5%) which would equate to net
income of £83,269 (period ended 30 June 2022: £70,948 and year ended 31
December 2022: £174,094) per annum if interest bearing assets remained
constant. If interest rates were to fluctuate by 100 basis points (period
ended 30 June 2022: 50 basis points and year ended 31 December 2022: 200 basis
points), this would have a positive or negative effect of £16,654 (period
ended 30 June 2022 a positive or negative effect of £56,758 and year ended 31
December 2022: a positive or negative effect of £49,741) on the Group's
annual income.
Capital risk management
The capital structure of the Company consists of proceeds raised from the
issue of Ordinary Shares. As at 30 June 2023, the Group is not subject to any
external capital requirement.
The Directors believe that at the date of the Condensed Consolidated Statement
of Financial Position there were no other material risks associated with the
management of the Group's capital.
11. Distributions
Distributions of £103,982 were paid by the Group to non-controlling interests
during the period (period ended 30 June 2022: £Nil and year ended 31 December
2022: £700). Distributions of £3.5 million were paid by the Group to
shareholders (period ended 30 June 2022 and year ended 31 December 2022: £3.5
million).
12. Subsequent events
The Company has declared a dividend of 0.5 pence per share, payable on 6
October 2023 to shareholders on the register at 15 September 2023.
During August 2023, SIGC LLC distributed to the company £3.0 million to fund
the Company's upcoming dividend payment.
There were no other material subsequent events that require disclosure in the
condensed consolidated financial statements.
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