TIDMSIT
Sanditon Investment Trust plc
ANNUAL REPORT & ACCOUNTS
For the year ended
30 June 2019
Investment Objective
The Company's investment objective is to:
* deliver absolute returns of at least 2% per annum, compounded annually, above
RPIX; and
* be an asset diversifier for shareholders by targeting low correlation with
leading large capitalisation equity indices.
Contents
Investment Objective
Financial Highlights 1
Performance 1
Financial Calendar 1
Chairman's Statement 2
Investment Manager's Report 3-5
Portfolio 6
Directors 7
Strategic Report 8-10
Directors' Report 11-13
Statement of Corporate Governance 14-16
Directors' Remuneration Report 17-18
Audit Committee Report 19-20
Statement of Directors' 21
Responsibilities in Respect of the
Annual Report and the Financial
Statements
Independent Auditor's Report 22-25
Income Statement 26
Statement of Financial Position 27
Statement of Changes in Equity 28
Cash Flow Statement 29
Notes to the Financial Statements 30-44
Shareholder Information 45
Glossary of Terms and Alternative 46-47
Performance Measures
Notice of Annual General Meeting 48
Notes to the Notice of Annual General 49-50
Meeting
Directors and Advisers 51
Financial Highlights
As at As at
30 June 2019 30 June 2018
Total GBP44,347 GBP45,981
shareholders'
funds (GBP000)
NAV per Ordinary 88.69p 91.96p
Share (cum income)
Share price 81.00p 82.00p
Discount to Net -8.7% -10.8%
Asset Value per
Share
Dividends per 0.60p 0.50p
Ordinary Share
Ongoing charges 1.31% 1.29%
Performance
Year ended Year ended
Total Return 30 June 2019 30 June 2018
Performance
NAV per Ordinary -3.0% -7.6%
Share (including
dividend and
provision for
liquidation costs)
Share price -1.2% -15.8%
Hurdle rate (RPIX +4.8% +5.4%
+ 2%)
FTSE All-Share +0.6% +9.0%
Index (Total
Return)
RPIX +2.8% +3.4%
Financial Calendar
Company's year end 30 June
Annual results announced October
Annual General Meeting 5 December 2019
Company's half year end 31 December
Dividend payment December 2019
Chairman's Statement
for the period 1 January 2019 to 30 June 2019
Performance
Sanditon Investment Trust's (the "Company") net asset value ("NAV") fell by 5%,
to 89p per Ordinary Share, over the second half of the Company's financial
year, to leave a loss for the year of 3.0%. The share price closed the
financial year at 81p, a fall of 7% to widen the discount to NAV to 9%. Your
Company has recently been inversely correlated with equity markets and remains
so (-0.14x over the last year), despite the Manager briefly going net long at
the end of 2018. Equity markets reversed the sharp falls of the second half of
2018 with most developed markets showing double digit returns. The cause of the
bounce was the Federal Reserve's signal that it would pivot on interest rates
from a tightening to a loosening mode. Sharp falls in bond yields led equities
higher, as the hope of looser money overrode deteriorating economic momentum
across the globe.
Dividends
The Board is pleased to recommend a dividend of 0.6p per share to be paid to
shareholders on the register at the close of business on 22 November 2019. The
Board also intends to pay a stub dividend for the first half of the Company's
new financial year, which will be announced in mid-November and again will be
paid to shareholders on the register at the close of business on 22 November
2019.
Charges and fees
Our total ongoing charges at 30 June 2019 were 1.31% per annum. No performance
fees have been paid or accrued.
Stake in Sanditon Asset Management
Sanditon Asset Management ("SAM") finished the period with assets under
management ("AUM") of GBP524 million, a decrease of 4.5% since our last report at
the end of December and a decrease of 7.5% since SAM's year end of 31 March
2019. Your Company's stake in SAM was revalued in June using our notified
valuation methodology of the average of 1% of AUM and 5x profit after tax. This
led to a 7.5% diminution in value of our stake to GBP1,305,000, giving an overall
valuation for SAM of GBP6,525,000.
Continuation Vote/Voluntary Liquidation
At the outset of your Company, a shareholder-friendly continuation vote
structure was put in place to ensure that shareholders were not stuck in a
small, relatively illiquid vehicle if the prospects for SAM were not bright.
The first continuation vote is due to be held in December 2020. Having spoken
with significant shareholders including members of SAM itself who speak for 21%
of the Company's equity, the Board of SIT and SAM have reluctantly concluded
that the chance of a successful continuation vote in 2020 is slim. As a result
of this feedback, SAM informed the Board that it did not wish to continue
managing the Company for the next year as, in its view, it was in the best
interests of all shareholders to propose an early liquidation of the Company.
The Board considered alternatives to winding down the Company including
appointing a new manager or merging the Company with another investment trust.
We concluded, after consultations with our advisors, that none of these
solutions were optimal. Therefore, rather than wait for an unsuccessful
continuation vote in 2020, the Board have decided to put a resolution to
shareholders at a general meeting to be held immediately following the
forthcoming AGM, authorising a voluntary liquidation of your Company. The Board
will vote in favour of the resolution in respect of their own shareholdings and
recommend all shareholders vote in favour.
The enclosed circular to shareholders sets out the proposed timetable should
shareholders vote in favour of the resolution. Should shareholders vote in
favour of the resolution, SAM will liquidate the investment portfolio promptly.
The Board of SIT expects to receive a sum for its SAM stake where any
difference between the current holding valuation (GBP6.525 per Ordinary Share)
and the eventual value is immaterial to the SIT shareholders.
Outlook
The Fed's pivot on interest rates to a dovish position was harmful to our
performance in the first half of 2019 but in a fast moving market it is
encouraging that your Company's performance has improved in the new financial
year. We are naturally disappointed that our bearish investment view has led to
indifferent performance and that we have had to conclude that it is in the best
interests of all shareholders that we propose a voluntary liquidation of your
Company. We thank all our shareholders for their support.
Rupert Barclay
Chairman
30 October 2019
Investment Manager's Report
for the period 1 January 2019 to 30 June 2019
"If you can keep your head when all around you are losing theirs"
Overview
As we report on another frustrating six months for your Trust, it is always
worth reflecting on one's own investment sanity. Our central thesis since your
Trust launched in 2014 has been that Quantitative Easing (QE) and extremely
loose monetary policy has seriously distorted all asset prices and that even a
partial reversal of QE would lead to a serious setback in asset prices.
Monetary tightening took a lot longer to occur than we expected, but with the
first (fairly modest) attempt at normalising monetary policy by the Federal
Reserve (the only major developed country to attempt to normalise), markets did
indeed take fright in the second half of 2018. The first half of 2019 has been
a very different story with most equity markets up between 10-20%, oil up 20%,
gold up 10% and bonds up sharply as the US 10-year yield collapsed to 2%, from
over 3% as recently as last November. The cause of all this excitement? A
Federal Reserve in retreat from its attempt to normalise monetary policy, by
admitting defeat and cutting interest rates in July, rather than raising them
three more times as the markets expected at the beginning of the fourth quarter
of 2018.
There is no doubt that global growth is slowing with several developed
countries flirting with recession, including the Brexit paralysed UK. Mr.
Trump's much publicised trade wars are doubtless partly to blame for the
slowdown in global growth, but we have no doubt that the modest monetary
tightening in the US and the modest tightening in credit in China are the main
causes. For all that most of us want to think that Mr. Trump is a bit of a
fool, he sees the dangers of tighter money raining on his re-election parade.
His sniping at the Fed has paid off and he is unlikely to let up this side of
the election campaign. Central bankers' backbones have been pretty brittle
since the crash of 2008, but most depressing for us was Mr. Powell's press
conference announcing the quarter point cut in the Fed funds rate in July,
which the Fed had characterised as a 'one-off cut' in a mid-cycle economic
correction. When told during the press conference that markets were falling (as
they were expecting at least two more cuts in 2019), he started blustering that
of course the Fed would be watching the data closely etc. etc. Do not doubt
that the current crop of central bankers are slaves to the market.
Over in Europe, with the global slowdown impacting growth in its economic
powerhouse Germany, along with many others, the departing president of the ECB
announced that his successor is likely to have to cut already negative interest
rates further and restart QE, only a few months after stopping it. As Ms.
Lagarde comes from the existing clique of policy makers responsible for current
central bank thinking, we have little doubt that she will follow through with
her predecessor's inclination. So what that an ECB balance sheet of 4.7
trillion euros and negative interest rates has not restored Europe to a
sustainable growth path? It must be that we haven't done enough! With most bond
yields in EU countries now negative and even stricken Italy able to borrow 10
year money at 1.8%, it cannot be the cost of money that is holding Europe back.
When will central bankers work that out?
The answer probably lies in what comes next. Central bankers will not admit it,
but QE has failed. It has helped fuel the rise of populism as the vast majority
feel left out of the economic recovery enjoyed since the 2008 crash. Yes, Gini
coefficients have been relatively stable throughout Europe and the US since the
crash, but wealth inequality has grown significantly. QE has disproportionately
benefitted those who have assets; the rich.
Continuing on the same path seems foolish to us, as it is likely to bolster
left (or right) wing populists who, if they reach power, are likely to test
markets' resolve with significant fiscal expansion. Mr. Salvini, a convert from
the left may be the first to test the bond market's current bout of
complacency, but closer to home, it is very likely that the current or next
administration will enter into a period of fiscal profligacy. And in some sense
who could blame them with UK 30-year yields at 1.1% (and inflation running
around 2%), why not spend large on updating the countries creaking
infrastructure? Mr. Johnson has entered office with promises of more money for
almost everyone. The Conservative led administrations under Mr. Cameron and
Mrs. May had got the annual deficit back to GBP25.5 billion for the last
financial year, at a manageable 1.2% of GDP but the debt to GDP ratio remains
at a lofty 85.2% (the Maastricht guidelines of 60% are long forgotten!). Yet
the bond market seems unfazed by the prospect of financial profligacy.
Parliament may, for now, have stopped a No Deal Brexit but now that we are in
election mode it is likely a government of any hue will announce a significant
boost to infrastructure spending. For the economy it may well be the right
thing to do (and better in our mind than more mindless QE) but for the bond
market? The same pressures exist throughout the world. We have become hostages
to a debt burden, where central bankers are too terrified to raise the cost of
money for fear of the economic repercussions, yet they know the outcome of
their policies will be an ever-rising debt burden. Money is free!
"If you can trust yourself when all men doubt you but make allowance for their
doubting too"
We have been bearish since the start of your Trust but have tried to be
pragmatic and adjust our bearishness into market falls. Indeed, at the end of
2018 when the market was back at our launch levels in 2014, we did go 40% net
long of the market, suspecting the Fed would abandon their hawkishness.
However, our overall investment bias of being long value and defensive stocks
and short of growth and cyclical stocks has not been where the market is at,
(although many cyclical stocks have seen substantial profit deterioration and
some have seen sharp falls). The market in its wisdom has wanted to chase
growth stocks at the expense of everything else. There is certainly some
justification for rerating solid long duration stocks as the risk-free rate
falls, but the investment herding and scale of rerating has dwarfed previous
episodes, apart from the brief TMT bubble at the turn of the millennium. We
have been wary of describing the UK equity market as a bubble, as we do think
there are pockets of cheap valuations, however we remain convinced that asset
markets overall are inflated and likely to see a substantial correction. We try
to continue to doubt our investment sanity, but when we see Greek 10-year
government bond yields trade in line with US 10-year yields (as they did
briefly during the first half of 2019), we are convinced that central bankers'
policies have distorted the market's sanity!
Portfolio Performance and Structure
The first six months of 2019 saw your portfolio lose 4.3% before charges,
resulting in a loss for the financial year of 1.7%. The long book made 2.8% but
the short book lost 7.1%, representing returns on capital of 6.3% and -14.1%
respectively against the market return of 13.0%. The disappointing performance
of our long book relative to the market is largely explained by the chart below
that shows the correlation of value and growth stocks to the bond market.
Falling bond yields have simply been destructive for 'value' stocks but have
helped 'growth' stocks rerate to historic highs. We have been on the wrong side
of this trade since your Trust's launch, with only brief periods of respite.
An equity market driven by bonds not profits - MSCI World decile portfolios
based on US bond correlation
[GRAPHIC REMOVED]
Source: SG Cross Asset Research/Equity Quant
We went temporarily long of the market in December, expecting the US Federal
Reserve to moderate its planned monetary tightening as a result of last year's
equity market weakness. The Fed did indeed turn more dovish, leading to the
collapse in bond yields and substantial equity market rallies mentioned
earlier. Our futures long positioned added 1.2% but was mitigated by selling
too early and reverting to a short futures position which cost 0.7%. The main
change in portfolio structure has been reverting to a net short position of
15%, from the last reported 40% net long, with little change in the portfolio's
underlying structure.
Our poor performance is largely attributable to our long value/defensive and
short growth/cyclical skew. As our long book does not hold many highly rated
growth stocks, we had few substantial winners on our long book. Diageo and
RELX, both held since launch added 1.0% and 0.7% respectively as the shares
gained 21% and 18%. Diageo trades on 24x earnings for 7% growth and RELX trades
on just over 20x for similar forecast growth, but with probably greater risks
to their subscription-based revenue model from the growing pressure for free
access to research. Both benefitted from falling bond yields and weakening
sterling, as did most other growth defensive shares over the half year.
Value stocks on our long book were mostly disappointing over the period, with
continued share price weakness from BT (-17%), ITV (-13%), Sainsbury's (-26%),
Vodafone (-15%) and Wood Group (-10%). Collectively, these five stocks
detracted 1.5% from NAV. Whilst some of these had company specific reasons,
(Sainsbury's merger with Asda was blocked by the CMA), their performance was
fairly typical of value stocks in the first half and the polarisation seen in
the chart above. We only made money in three value stocks. We sold our position
in BAT after a 16% gain for a 0.3% profit, and modest recoveries in Equiniti
and Greene King's share prices added 0.2% each.
Losses on our short book were generally widespread, despite significant
earnings downgrades from some of our shorts. This included our biggest negative
contribution, Ocado, which cost 2.2% as its shares leapt by 47% as concerns
about a fire destroying its Andover facility (15% of its UK capacity) were
overcome by its deal to sell 50% of its UK business to M&S for up to GBP750
million. We do not dispute this was a good deal for Ocado (and a desperate one
from M&S) but profits remain elusive for Ocado and their business model shows
no sign of reducing its capital intensity. Earnings forecasts for the current
year for Ocado have dropped to a loss per share of 13p from 0p at the start of
the year. Analysts now hope it will make 14p in 2023, coincidentally the same
number they forecast Ocado would make last year when we started your Trust in
2014. The actual result? A loss of 3.6p.
Whilst Just Eat did not cost us in the latest half year, it was disappointing
that it did not reward us either, as their earnings forecasts continued to fall
sharply, with 2019 forecasts now an astonishing 75% lower than they were a year
ago. Growing sales is relatively easy, profits less so. Shareholders can find
more details on our performance from our two quarterly fact sheets at
www.sanditonam.com.
Your portfolio retains its strong value bias with the average P/E of the long
book at 12.3x remaining at around a third of our short book P/E of 32x
(excluding the loss making Ocado). We are well aware that we are standing in
the way of current market momentum and investment flows which remain resolutely
anti-value. Whilst we have always believed our hedge fund structure would
deliver low correlation with equity markets, we did not necessarily expect it
to be inversely correlated which is where we have been over the last year with
a correlation of -0.14x to the UK equity market.
The fifth line of Kipling's famous poem asks
"If you can wait and not be tired by waiting".
Investment requires pragmatism and patience, accepting one's views might be
wrong or just out of tune with current market trends. We think we have been
patient but we accept that our returns have been disappointing. We put
continuation votes into our structure at the outset of the Trust to ensure that
if investors' patience was shorter in duration than ours then they could get
their money back.
Conversations with key shareholders led us to believe we had no chance of
achieving a successful continuation vote next year. In those circumstances
Sanditon Asset Management decided that, in the interests of all shareholders,
the best course of action was to ask the Board of SIT to offer an early vote on
a voluntary liquidation of your Company. The management of SAM will be voting
in favour of the resolution.
It only remains for me to thank shareholders for their support and wish them
financial success in what we are sure are going to be very tricky markets.
Tim Russell
Sanditon Asset Management Limited
30 October 2019
Portfolio
as at 30 June 2019
Country Long Short Net Gross
Breakdown (%
of NAV)*
Germany 0.0 -1.4 -1.4 1.4
Italy 0.0 -5.2 -5.2 5.2
United 37.4 -46.4 -9.0 83.8
Kingdom
Total 37.4 -53.0 -15.6 90.4
Business Long Short Net Gross
Cycle
Groupings (%
of NAV)*
Commodity 0.0 0.0 0.0 0.0
Cyclical
Consumer 5.7 -2.4 3.3 8.1
Cyclical
Industrial 4.3 -10.4 -6.1 14.7
Cyclical
Growth 0.0 -20.2 -20.2 20.2
Financial 6.6 0.0 6.6 6.6
Growth 12.1 -7.6 4.5 19.7
Defensive
Value 8.7 0.0 8.7 8.7
Defensive
FTSE 100 0.0 -12.4 -12.4 12.4
Future
Total 37.4 -53.0 -15.6 90.4
Long Positions (% of NAV) %
**
TM Sanditon UK Select 10.0
Diageo 5.7
ITV 4.1
RELX 3.9
Babcock 3.4
Sanditon Asset Management 2.9
Melrose 2.8
Aviva 2.8
Vodafone 2.7
IG Group 1.8
Greene King 1.6
Capita 1.5
John Wood Group 1.4
Equiniti 1.3
Reckitt Benckiser 1.3
Man Group 1.2
J Sainsbury 1.1
JUST Group 0.8
Total 50.3***
Total number of positions 38
(long and short)**
* 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 long positions are presented based on the notional value of CFD
holdings and the actual value of equity holdings
Directors
Rupert Barclay - Chairman
Mr Barclay is currently Chairman of Impact Healthcare REIT plc and a former
director and chair of the audit committee of Lowland Investment Company plc. He
is a founder and managing partner of the strategic advisory firm Cairneagle
Associates LLP and a number of private companies, and was formerly senior
independent director of Dimension Data plc until its acquisition by NTT
Communications Corporation in 2010 and a director of Instinet Inc. In his
strategic advisory career he is a former partner of LEK Consulting and former
Head of Strategy and M&A at two top 50 UK companies, Allied Domecq and Reuters.
He has an MA in Classics from Cambridge, an MBA with Distinction from INSEAD
and is a Fellow of the Institute of Chartered Accountants in England & Wales.
Christopher Keljik OBE
Mr Keljik was with Standard Chartered Plc for most of his career serving in
Singapore, New York, Hong Kong and London. At retirement he was the Group
Executive Director with responsibilities for Africa, the Middle East, South
Asia, Europe and the Americas. He was the Senior Independent Director of
Foreign & Colonial Investment Trust plc, Schroder Asian Total Return Investment
Company plc and Millennium & Copthorne Hotels plc and a non executive director
of Jardine Lloyd Thompson Group plc. He is a Fellow of the Institute of
Chartered Accountants in England and Wales.
Hugo Dixon
Mr Dixon is an author and columnist. He is the founder of Reuters
Breakingviews. Before founding Breakingviews in 1999, which he edited until
2012, Mr Dixon spent 13 years at the Financial Times, the last five as head of
Lex. He began his journalistic career at The Economist. Mr Dixon has a first
class degree in philosophy, politics and economics from Oxford University. He
is the author of The In/Out Question, The Penguin Guide to Finance and Finance
Just in Time.
Mark Little - Chairman of the Audit Committee
Mr Little is a non-executive director of Securities Trust of Scotland Plc,
Majedie Investment Trust Plc and an investment director with 7 Investment
Management Ltd. He was formerly Managing Director of Barclays Wealth (Scotland
and Northern Ireland). He is a member of the Institute of Chartered Accountants
of Scotland.
Strategic Report
for the year ended 30 June 2019
The Directors submit to the shareholders their Strategic Report, Directors'
Report and the Audited Financial Statements of the Company for the year ended
30 June 2019.
Business and tax status
The Company is an investment trust listed on the London Stock Exchange and its
principal activity is portfolio investment. The Company has been accepted by HM
Revenue & Customs as an investment trust subject to the Company continuing to
meet the eligibility conditions contained in Section 1158 of the Corporation
Tax Act 2010 and the ongoing requirements outlined in Chapter 3 of Part 2 of
the Regulations for all accounting periods starting on or after 27 June 2014.
In the opinion of the Directors, the Company has conducted its affairs during
the period under review, and subsequently, so as to maintain its status as an
investment trust for the purposes of Chapter 4 of Part 24 of the Corporation
Tax Act 2010.
The Company is an investment company as defined in Section 833 of the Companies
Act 2006. The Company is not a close company for taxation purposes.
The Company's status as an investment trust allows it to obtain an exemption
from paying taxes on the profits made from the sale of its investments.
Investment objective
The Company's investment objective is to:
* Deliver absolute returns of at least 2% per annum, compounded annually, above
RPIX; and
* Be an asset diversifier for shareholders by targeting low correlation with
leading large capitalisation equity indices.
Alternative Investment Fund Management Directive ("AIFMD")
Sanditon Asset Management Limited (the "Manager") is authorised and regulated
by the FCA and as such is subject to its rules in the conduct of its investment
business. The Manager is a Small Authorised UK AIFM. To qualify for such
status, the Manager must continue to meet certain conditions including a limit
on the Manager's assets under management in certain types of investment fund,
including any assets acquired through the use of leverage. The Company is the
Manager's only Alternative Investment Fund. If the gross assets of the Company
exceed the EUR100m limit allowed to be a Small Authorised UK AIFM, the Manager
will apply to the FCA for authorisation to be a Full-Scope UK AIFM. The Board
does not expect such application process to have any impact on the Company or
the management of its assets on the basis that, once such application is made
by the Manager, the Manager would be able to continue managing the Company's
assets until the FCA has approved the application.
Investment policy
The Company invests predominantly in listed equity securities of companies:
* incorporated in; or
* which derive a significant proportion of their revenues or profits from; or
* which are predominantly operating in;
the EU, the EEA or Switzerland.
The Company utilises derivative instruments, including contracts for
differences and other equity-related derivative instruments, for investment
purposes, efficient portfolio management and gearing. Any use of derivatives
for investment purposes will be made on the basis of the same principles of
risk spreading and diversification that apply to the Company's direct
investments. The gross exposure of the Company's portfolio shall not exceed
200% of the net asset value.
Assets denominated in currencies other than sterling will not automatically be
hedged.
The Company holds a 20 per cent equity interest in SAM acquired on Admission in
2014 in order to benefit from the potential growth in the Manager's business.
The Company acquired such interest at the same price per share at which the SAM
Founder Shareholders subscribed for their shares in SAM. The Company will not
invest in unlisted securities other than its equity interest in SAM.
The Company has the ability to invest in investment funds managed or advised by
SAM ("SAM Funds"). Such investment shall only be made with the prior approval
of the Board and on terms whereby any management and performance fees which
would otherwise be payable by the Company to the Manager pursuant to the
Management Agreement in respect of such investment are not double charged. The
Company invested GBP4,950,000 in the TM Sanditon UK Select Fund during the period
ended 30 June 2015. There were no additional investments in investment funds
managed by SAM in the year to 30 June 2019 (30 June 2018: none).
The Company will manage and invest its assets in accordance with its published
investment policy. Any material change to this policy will only be made with
the approval of shareholders by ordinary resolution unless otherwise permitted
by the Listing Rules.
Key performance indicators
The Company's Directors meet regularly to review the performance of the Company
and its shares. The key performance indicators ("KPIs") used to measure the
progress and performance of the Company over time are as follows:
1)The share price in absolute terms and relative to RPIX plus 2%.
2)The net asset value per share return in absolute terms and relative to RPIX
plus 2%.
3)Ongoing charges. The annualised ongoing charges figure for the year was 1.31%
(2018: 1.29%). This figure, which has been prepared in accordance with the
recommended methodology of the Association of Investment Companies, represents
the annual percentage reduction in shareholder returns as a result of recurring
operational expenses excluding performance fee. There is no performance fee
accrual in respect of the year ended 30 June 2019 (2018: no performance fee
accrued). The Board reviews each year an analysis of the Company's ongoing
charges figure.
All of these areas were examined throughout the year and the table below
summarises the results:
As at or year to
30 June
2019
Total Return Performance
NAV per Ordinary Share
(including dividend and provision for -3.0%
liquidation costs)
Share price -1.2%
RPIX + 2% +4.8%
Ordinary Share Performance
Net Asset Value per Ordinary Share 88.69p
(cum income)
Net dividends declared per Ordinary 0.60p
Share
Ongoing charges? 1.31%
?See glossary of terms on pages 46 and 47.
Return per share - basic
The total return per Ordinary Share based on the net total return on ordinary
activities after taxation of GBP(1,234,000) (2018: GBP(3,811,000)) was (2.47)p
(2018: (7.63)p).
These calculations are based on the number of 50,000,000 Ordinary Shares in
issue during the year to 30 June 2019 (2018: 50,000,000). The return per
Ordinary Share can be further analysed between revenue and capital as below:
Year ended Year ended
30 June 2019 30 June 2019
Pence per Ordinary Share GBP000
Net revenue return 0.68p 340
Net capital return (3.15)p (1,574)
Net total return (2.47)p (1,234)
The Company does not have any dilutive securities.
Dividends
The Company is managed to target absolute return rather than for dividend
yield. Accordingly, the Board does not seek to target any particular level of
dividend and intends rather to distribute by way of dividend most of the net
revenue earnings available for this purpose. The Board recommends a final
dividend of 0.60p per share. Subject to approval at the Annual General Meeting,
the recommended final dividend will be paid on 20 December 2019 to members on
the register at the close of business on 22 November 2019 and the shares will
be marked ex-dividend on 21 November 2019.
Net asset value
The net asset value per Ordinary Share, including revenue reserve, at 30 June
2019 was 88.69p (2018: 91.96p).
Principal risks associated with the Company (also see note 18 on pages 38 to
44).
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 SE 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 lead Investment manager or several members of the
investment management team or a change in Investment Manager could result in a
deterioration in investment performance. The Investment Manager reports to the
Board on developments at SAM including succession and business continuity
plans.
Discount
A disproportionate widening of the discount relative to the Company's peers
could result in loss of value for shareholders.
The Board undertakes a regular review of the level of premium/discount and
consideration is given to ways in which share price performance may be
enhanced, including the effectiveness of marketing.
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 15 and 16.
Financial risk
The financial risks faced by the Company are disclosed in note 18 on pages 38
to 44.
The Board considers these risks to have remained unchanged throughout the year
under review.
Viability statement
As is set out in the Chairman's' Statement on page 2, the Board has put forward
a proposal to shareholders that the Company be wound up and placed into
voluntary liquidation. A general meeting to consider this will be held on 5
December 2019 following the companies AGM.
Taking account of this, the principal risks that the Company faces and their
potential impact on its future developments and prospects, the Directors have
assessed the viability of the Company, to the extent that they are able to do
so to 5 December 2019. The Directors confirm that they have a reasonable
expectation that the Company will be able to continue in operation and meet its
liabilities as they fall due in the period of assessment up to 5 December 2019.
Board diversity
The Nomination Committee considers diversity, including the balance of skills,
knowledge, gender and experience, amongst other factors when reviewing the
composition of the Board and appointing new directors, but does not consider it
appropriate to establish targets or quotas in this regard. The Board comprises
four non-executive Directors all of whom are male. The Company has no
employees.
Social, community and human rights
The Company does not have any specific policies on social, community or human
rights issues as it is an investment company which does not have any physical
assets, property, employees or operations of its own.
For and on behalf of the Board
Rupert Barclay
Chairman
30 October 2019
Directors' Report
for the year ended 30 June 2019
Directors
The present Directors are listed below and on page 7. They are all
non-executive and have served throughout the year.
Rupert Barclay - Chairman
Christopher Keljik OBE
Hugo Dixon
Mark Little - Chairman of the Audit Committee
None of the Directors, nor any persons connected with them, had a material
interest in any of the Company's transactions, arrangements or agreements
during the year. None of the Directors has, or has had, any interest in any
transaction which is, or was, unusual in its nature or conditions or
significant to the business of the Company, and which was effected by the
Company during the current financial year.
At the date of this report, there are no outstanding loans or guarantees
between the Company and any Director.
Conflicts of interest
The Board has put in place a framework for Directors to report conflicts of
interest or potential conflicts of interest which it believes has worked
effectively during the year. All Directors are required to notify the Company
Secretary of any situations where they consider that they have a direct or
indirect interest, or duty that would conflict, or possibly conflict, with the
interests of the Company. No such situations however, have been identified.
There remains a continuing obligation to notify the Company Secretary of any
new situation that may arise, or any change to a situation previously notified.
It is the Board's intention to review all notified situations on a quarterly
basis.
Corporate governance
The statement of Corporate Governance, as shown on pages 14 to 16, is
incorporated by cross reference into this report.
Bribery prevention policy
The provision of bribes of any nature to third parties in order to gain a
commercial advantage is prohibited and is a criminal offence. The Board has a
zero tolerance policy towards bribery and a commitment to carry out business
fairly, honestly and openly. The Board takes its responsibility to prevent
bribery by the Company's Manager on its behalf very seriously and the
Investment Manager has anti-bribery policies and procedures in place. The
Company's other key service providers have anti-bribery policies.
Modern slavery act
The Company is an investment vehicle and does not provide goods or services in
the normal course of its business, or have customers. Accordingly, the
Directors consider that the Company is not within the scope of the Modern
Slavery Act 2015.
Prevention of the facilitation of tax evasion
In response to the implementation of the Criminal Finances Act 2017, the Board
have adopted a zero-tolerance approach to the criminal facilitation of tax
evasion. A copy of the Company's policy on preventing the facilitation of tax
evasion can be found on the Company's website: www.sanditonam.com. The policy
is reviewed annually by the Audit Committee.
Global greenhouse gas emissions
for the year ended 30 June 2019
The Company has no greenhouse gas emissions to report from the operations of
the Company, nor does it have responsibility for any other emission producing
sources under the Companies Act 2006 (Strategic Report and Directors' Report)
Regulations 2013.
Substantial shareholdings
As at the date of this report the Company had been notified of the following
substantial interests in the Ordinary share capital of the Company.
Number Number
of shares at % of total of shares at % of total
22 October voting 30 June 2019 voting
2019? rights rights
Premier Fund 13,491,833 27.0% 12,301,833 24.6%
Managers
Limited
Hargreaves 6,201,281 12.4% 6,193,459 12.4%
Lansdown
Tim Russell 6,082,125 12.2% 5,900,000 11.8%
Schroders 4,799,584 9.6% 4,876,750 9.8%
plc
Ravenscroft 4,000,000 8.0% 4,000,000 8.0%
Limited
J. Safra 2,344,289 4.7% 2,478,894 5.0%
Sarasin
?The latest practicable date prior to the publication of this
report.
Going concern
Given that the Board has put forward a proposal to shareholders that the
Company be wound up and placed into voluntary liquidation on 5 December 2019,
the Directors believe that it would not be reasonable to adopt the going
concern basis in preparing the financial statements. Therefore the financial
statements have been prepared under the 'break up' basis after including a
provision for the liquidation of the Company based on estimated costs to
liquidate the Company. Please refer to note 1 on page 30 of the accounting
policies.
Performance
An outline of the performance, market background, investment activity and
portfolio strategy during the period under review, as well as the investment
outlook, is provided in the Chairman's Statement on page 2 and Investment
Manager's Report on pages 3 to 5.
UK Stewardship Code
The UK Stewardship Code is overseen and published by the Financial Reporting
Council, the independent regulator overseeing financial reporting, accounting
and auditing and corporate governance. The Code, first published in 2010, sets
the benchmark in the UK for institutional investors to meet ownership
obligations in respect of their holdings of UK equities.
SAM's stewardship policy, the principles of which are set out below, has been
reviewed by the Board and responsibilities for voting have been delegated to
SAM.
Principle 1: Policy on operation of stewardship responsibilities
SAM manages client assets with the objective of generating returns consistent
with clients' objectives. It is therefore central to SAM's investment process
to consider each company's ability to create, sustain and protect value. It is
essential to question and challenge companies about issues that SAM perceives
may affect their value. Engagement and actively voting the shares it manages on
behalf of clients should therefore be seen as integral to its equity investment
process.
Principle 2: Conflicts of interest
Asset management is SAM's only business. Even so, it is possible that
situations may arise that would lead to concerns over possible conflicts of
interest. Such considerations are included in and covered by SAM's Conflicts of
Interest Policy.
Principle 3: Monitoring
Typically, monitoring by the Investment Manager (supported by SAM's mid office
team who are responsible for monitoring corporate actions and related
deadlines) will occur around financial reporting, general meetings, in
connection with news and announcements and when, for whatever reason, SAM might
be conducting research into investment ideas or reviewing holdings.
Principle 4: Implementation
Engagement, if required or appropriate, will be conducted through meetings with
company management. It may include further contact with executives, meeting or
otherwise communicating with non-executive Directors or the chairman, voting,
communicating via the Company's advisers, submitting resolutions at general
meetings or requisitioning extraordinary general meetings. SAM may conduct
these additional engagements in connection with specific issues or as part of
the general, regular contact with companies.
Principle 5: Working with other shareholders
There are rare occasions when it may be better to work with other shareholders
to effect change. This may involve sharing views and ideas with other
institutions. It may also involve meeting companies jointly with other
shareholders or using the services of third-party membership organisations or
other collaborative or informal groups.
Principles 6 & 7: Voting & Reporting
It is the policy of SAM's UK equity business to vote all shares at all meetings
except where there are onerous restrictions - for example, where trading is
restricted prior to a meeting in shares committed to vote (share blocking), SAM
will usually only vote where the benefit of voting outweighs the benefit of the
ability to trade.
Full details of SAM's policy in respect of the Stewardship Code can be found on
its website www.sanditonam.com.
Companies Act 2006 Disclosures
In accordance with Section 992 of the Companies Act 2006 the Directors disclose
the following information:
* the Company's capital structure and voting rights are summarised on pages 49
and 50, and there are no restrictions on voting rights nor any agreement
between holders of securities that result in restrictions on the transfer of
securities or on voting rights;
* there exist no securities carrying special rights with regard to the control
of the Company;
* details of the substantial shareholders in the Company are listed on page 11;
* the Company does not have an employees' share scheme;
* the rules concerning the appointment and replacement of Directors, amendment
of the Articles of Association and powers to issue or buy back the Company's
shares are contained in the Articles of Association of the Company and the
Companies Act 2006;
* there exist no agreements to which the Company is party that may affect its
control following a takeover bid; and
* there exist no agreements between the Company and its Directors providing for
compensation for loss of office that may occur because of a takeover bid.
Auditor
Ernst & Young LLP have expressed their willingness to continue in office as
Auditor and a resolution proposing their reappointment and to authorise the
Board to determine their remuneration will be submitted at the Annual General
Meeting.
Subject to a successful vote to wind up the Company at the General Meeting the
auditors will not be re-appointed.
The Directors who held office at the date of approval of this Directors' Report
confirm that, so far as they are each aware, there is no relevant audit
information of which the Company's Auditor is unaware; and each Director has
taken all the steps that they ought to have taken as Directors to make
themselves aware of any relevant audit information and to establish that the
Company's Auditor is aware of that information.
By Order of the Board
Rupert Barclay
Chairman
30 October 2019
Statement of Corporate Governance
Introduction
The Board is accountable to the Company's shareholders for the governance of
the Company's affairs and this statement describes how the principles of the
Financial Reporting Council's UK Corporate Governance Code issued in April 2016
("the Code") have been applied to the affairs of the Company. In applying the
principles of the Code, the Directors have also taken account of the Code of
Corporate Governance published by the Association of Investment Companies ("the
AIC Code") by reference to the AIC Corporate Governance Guide for Investment
Companies ("the AIC Guide") issued in July 2016, which has established a
framework of best practice specifically for the boards of investment trust
companies. There is some overlap in the principles laid down by the two Codes
and there are some areas where the AIC Code is more flexible for investment
trust companies.
The revised UK Corporate Governance Code published in 2018, together with the
AIC Code of Corporate Governance published in February 2019, which is effective
for financial years beginning after 1 January 2019 will apply in the financial
year ending 30 June 2020.
Board of Directors
The Board currently consists of four non-executive Directors all of whom are
independent of the Investment Manager. Their biographies are set out on page 7.
Collectively the Board has the requisite range of business and financial
experience which enables it to provide clear and effective leadership and
proper stewardship of the Company.
The number of meetings of the Board, the Audit Committee, the Nomination
Committee and the Management Engagement Committee held during the financial
year and the attendance of individual Directors are shown below:
Management
Audit Nomination Engagement
Board Committee Committee Committee
Number of
meetings
in the year 4 2 1 1
Rupert Barclay 4 2 1 1
Christopher 4 2 1 1
Keljik
Hugo Dixon 4 2 1 1
Mark Little 4 2 1 1
The Board deals with the Company's affairs, including the setting of gearing
and investment policy parameters, the monitoring of gearing and investment
policy and the review of investment performance. The Investment Manager takes
decisions as to asset allocation and the purchase and sale of individual
investments. The Board papers circulated before each meeting contain full
information on the financial condition of the Company. Key representatives of
the Investment Manager attend the Board meetings, enabling Directors to seek
clarification on matters of concern.
Matters specifically reserved for discussion by the full Board have been
defined and a procedure adopted for the Directors to take independent
professional advice if necessary at the Company's expense.
The Chairman of the Company was independent of the Investment Manager at the
time of his appointment as an independent non-executive Director and continues
to be considered independent by the other Board members. A senior non-executive
Director has not been identified as the Board is comprised entirely of
non-executive Directors.
In accordance with the Articles of Association, new Directors stand for
election at the first Annual General Meeting following their appointment. The
Articles require that at every Annual General Meeting, there shall retire from
office any Director who shall have been a Director at each of the two preceding
Annual General Meetings and who was not appointed or re-elected by the Company
in General Meeting at, or since, either such Annual General Meeting. However,
the Board has taken the decision to adopt corporate governance best practice
resulting in the annual re-election of all Directors.
Performance evaluation/re-election of Directors
An appraisal process has been established in order to review the effectiveness
of the Board, the Committees and individual Directors. This process involves
the consideration by the Chairman and the Board of responses from individual
Directors to a questionnaire which is completed on an annual basis. In
addition, the other Directors meet collectively once a year to evaluate the
performance of the Chairman. The Board recommends the re-election of Mr Rupert
Barclay, Mr Christopher Keljik, Mr Hugo Dixon and Mr Mark Little, who offer
themselves for re-election.
Board tenure
The Board subscribes to the view expressed in the AIC Code that long-serving
Directors should not be prevented from forming part of an independent majority.
It does not consider that the length of a Director's tenure reduces his or her
ability to act independently. The Board's policy on tenure is that continuity
and experience add significantly to the strength of the Board and, as such, no
limit on the overall length of service of any of the Company's Directors has
been imposed, although the Board believes in the merits of periodic and
progressive refreshment of its composition.
Committees
The Board believes that the interests of shareholders in an investment trust
company are best served by limiting the size of the Board such that all
Directors are able to participate fully in all the activities of the Board. It
is for this reason that the membership of the Audit, Management Engagement and
Nomination Committees is the same as that for the Board as a whole.
Audit Committee
Mr Little is the Chairman of the Audit Committee and as permitted by the AIC
Code of Corporate Governance the Chairman of the Board, Mr Barclay, is a member
of the Audit Committee. This is considered to be appropriate given the small
size of the Board and that all Directors are independent. The Audit Committee
reviews audit matters within clearly-defined written terms of reference (copies
of which are available upon request from the Company Secretary). The Audit
Committee Report is set out on pages 19 and 20.
Management Engagement Committee
Mr Barclay is the Chairman of the Management Engagement Committee which is
responsible for reviewing the performance of the Investment Manager and of all
other third party service providers, their terms of appointment and
remuneration. The Committee meets annually.
Nomination Committee
Mr Barclay is the Chairman of the Nomination Committee which operates within
defined terms of reference available from the Company Secretary. This is
responsible for the Board appraisal process, reviews the Board's size and
structure and is responsible for succession planning. The Board has due regard
for the benefits of diversity in its membership and seeks to ensure that its
structure, size and composition, including the skills, knowledge, diversity
(including gender) and experience of Directors, is sufficient for the effective
direction and control of the Company. The Nomination Committee meets at least
annually and comprises all the non-executive Directors of the Board.
Remuneration Committee
The Board as a whole considers Directors' remuneration and therefore has not
appointed a separate remuneration committee. As the Company is an investment
trust and all Directors are non-executive the Company is not required to comply
with the Code in respect of executive Directors' remuneration. Directors' fees
are detailed in the Directors' Remuneration Report on pages 17 and 18.
Risk management and internal control
The UK Corporate Governance Code requires the Directors, at least annually, to
review the effectiveness of the Company's system of risk management and
internal control and to report to shareholders that they have done so. This
encompasses a review of all controls which the Board has identified as
including: business, financial, operational, compliance and risk management.
The Directors are responsible for the Company's system of risk management and
internal control which is designed to safeguard the Company's assets, maintain
proper accounting records and ensure that financial information used within the
business, or published, is reliable. However, such a system can only be
designed to manage rather than eliminate the risk of failure to achieve
business objectives and therefore can only provide reasonable, but not
absolute, assurance against fraud, material misstatement or loss.
The Board as a whole is primarily responsible for the monitoring and review of
risks associated with investment matters and the Audit Committee is primarily
responsible for other risks.
As the Board has contractually delegated to other companies the investment
management, the custodial services and the day-to-day accounting and company
secretarial requirements, the Company relies significantly upon the system of
risk management and internal controls operated by those companies. Therefore,
the Directors have concluded that the Company should not establish its own
internal audit function, but will review this decision annually. Investment
management is performed by Sanditon Asset Management Limited and administration
services by Northern Trust Global Services SE. Details of the agreements with
the Investment Manager and the Administrator are set out below. The custodian
is The Northern Trust Company.
An investment limits and restrictions checklist has been considered at all
regular Board meetings. The risk map has been considered at regular meetings of
the Audit Committee. As part of the risk review process, regular reports are
received from the Investment Manager on all investment related matters
including compliance with the investment mandate, the performance of the
portfolio compared with relevant indices and compliance with investment trust
status requirements. The Board also receives and reviews reports from the
custodian on its internal controls and their operation.
The Board as a whole regularly reviews the terms of the management and
secretarial contracts.
The Board confirms that appropriate procedures to review the effectiveness of
the Company's system of risk management and internal control have been in
place, throughout the year and up to the date of this report, which cover all
controls including financial, operational and compliance controls and risk
management.
Investment Manager
The Company's Manager is Sanditon Asset Management Limited. Under the terms of
the Management Agreement the Manager is entitled to a management fee, accrued
daily and payable monthly in arrears, at the rate of 0.75 per cent. per annum
of the Company's Net Asset Value. The Manager may also become entitled to a
performance fee (see note 3 on page 32). The Management Agreement is terminable
upon 6 months' written notice, and at any time in the event of the insolvency
of the Company or the Manager.
The investment performance is reviewed at each regular Board meeting at which
representatives of the Investment Manager are required to provide answers to
any questions raised by the Board. The Board has instigated an annual formal
review of the Investment Manager which includes consideration of:
* performance compared with the hurdle;
* investment resources dedicated to the Company; and
* investment management fee arrangements and notice period compared with the
peer group.
It is not considered appropriate to continue with the appointment of the
Investment Manager given the decision to propose to shareholders that the
Company be wound-up (see Chairman's Statement on page 2).
Administrator
Northern Trust Global Services SE has been appointed as the Administrator of
the Company. The Investment Fund Services Agreement is terminable by the
Company on 6 months' notice or by the Administrator on 12 months' notice.
Company Secretary
Sanditon Asset Management Limited was appointed as the Company Secretary of the
Company on 22 February 2018 (in place of Northern Trust Global Services SE).
The Board has direct access to the advice and services of the Company
Secretary, Sanditon Asset Management Limited, which is responsible for ensuring
that Board and Committee procedures are followed and that applicable
regulations are complied with. The Secretary is also responsible to the Board
for ensuring timely delivery of information and reports and that statutory
obligations of the Company are met. The Secretary provides its services through
Northern Trust Global Services SE.
Individual Directors may take independent professional advice on any matter
concerning them in the furtherance of their duties at the Company's expense.
The Company also maintains Directors' and Officers' liability insurance to
cover legal defence costs.
Custodian
The Northern Trust Company has been appointed as custodian to provide custody
services to the Company. The Custody Agreement is terminable upon 30 days'
written notice by either party.
Relations with shareholders
The Board, the Investment Manager and all the Directors are available to enter
into dialogue with shareholders.
All shareholders are encouraged to attend and vote at the Annual General
Meeting, during which the Board and the Investment Manager are available to
discuss issues affecting the Company and shareholders have the opportunity to
address questions to the Investment Manager, the Board and the Chairmen of the
Board's standing committees.
Any shareholder who would like to lodge questions in advance of the Annual
General Meeting is invited to do so in writing to the Company Secretary at the
address detailed on page 51. The Company always responds to letters from
individual shareholders.
The Annual and Interim Reports of the Company present a full and readily
understandable review of the Company's performance. Copies are dispatched to
shareholders by mail and are also available for download from the Investment
Manager's website: www.sanditonam.com.
A quarterly fact sheet is produced by the Investment Manager and is also
available via its website. If a shareholder would like to contact the Board
directly, they should write to the Chairman, Sanditon Investment Trust plc, c/o
Sanditon Asset Management Limited, Fifth Floor, 33 Cannon Street, London EC4M
5SB, marking their letter "Private and Confidential".
Statement of compliance
The Board believes that it has complied with all the material provisions, in so
far as they apply to the Company's business, of the Code throughout the period
under review. It did not, however, comply with the following provisions, as
explained previously:
* due to the small size of the Board and nature of the business a separate
remuneration committee has not been established; and the Board has considered
there is no need to nominate a senior non-executive Director
The Board has also adhered to the principles of the AIC Code in all material
respects.
By Order of the Board
Rupert Barclay
Chairman
30 October 2019
Directors' Remuneration Report
for the year ended 30 June 2019
Introduction
This report is prepared in accordance with Schedule 8 to The Large and
Medium-sized Companies and Groups (Accounts and Reports) (Amendment)
Regulations 2013 and in accordance with the Listing Rules of the Financial
Conduct Authority and the Companies Act 2006. An ordinary resolution for the
approval of this report will be put to the shareholders at the forthcoming
Annual General Meeting.
The Company's Remuneration Policy was approved by the shareholders at the
Annual General Meeting on 6 December 2018 under Section 439 of the Companies
Act 2006.
The Company is not able to make remuneration payments to a Director, or loss of
office payments to a current or past Director, unless the payment is consistent
with the approved policy or has otherwise been approved by the shareholders.
The law requires your Company's Auditor to audit certain of the disclosures
provided. Where disclosures have been audited, they are indicated as such. The
Auditor's opinion in respect of these disclosures is included in their report
on pages 22 to 25.
Remuneration Committee
The Board as a whole fulfils the function of a Remuneration Committee. All
Directors are non-executive and the Company has no employees. No professional
adviser was consulted in the year for setting the level of Directors' fees.
Directors' beneficial and family interests (audited)
The interests of the Directors and their families in the Ordinary Shares of the
Company were as follows:
Ordinary Shares Ordinary Shares
at 22 October 2019? at 30 June 2019
Rupert Barclay 200,000 200,000
Christopher Keljik 265,000 265,000
Hugo Dixon 260,000 260,000
Mark Little 11,818 11,818
?The latest practicable date prior to the publication of this report.
Directors' remuneration policy
The Board's policy is that the remuneration of non-executive Directors should
reflect the experience of the Board as a whole and be fair and comparable to
that of other investment trusts that are similar in size, have a similar
capital structure and have similar investment objectives. It is intended that
this policy will continue in subsequent years.
The fees for the non-executive Directors are determined within the limit of GBP
500,000 set out in the Company's Articles of Association. The Directors are not
eligible for bonuses, pension benefits, share options, long-term incentive
schemes or other benefits. Directors are entitled to be reimbursed for any
reasonable expenses properly incurred by them in connection with the
performance of their duties and attendance at Board and general meetings and
committees.
Directors' service contracts
It is the Board's policy that none of the Directors has a service contract.
Letters confirming the terms of their appointment provide that a Director shall
retire and be subject to re-election at the first Annual General Meeting after
his/her appointment. The terms also provide that a Director may be removed
without notice and that compensation will not be due on leaving office. Copies
of the Letters of Appointment are available for inspection at the registered
office of the Company. Directors and officers insurance is maintained and paid
for by the Company on behalf of the Directors.
Your Company's performance
For the purposes of this report the Board is required to select an index
against which the Company's performance can be measured. The Board has decidedit should be the RPIX +2%, which is referenced in the Company's investment
objective.
The graph below shows the total return (assuming all dividends are reinvested)
to Ordinary Shareholders against the RPIX +2%, for the period from 27 June 2014
(the date the shares were admitted to trading on the London Stock Exchange) to
30 June 2019.
[GRAHIC REMOVED]
ANNUAL REPORT ON REMUNERATION
Directors' emoluments for the year (audited)
The Directors who served in the year received the following emoluments in the
form of fees:
Fees Expenses Total year Total year
year ended year ended ended ended
30 June 30 June 30 June 30 June
2019 2019 2019 2018
GBP GBP GBP GBP
Rupert Barclay 30,000 - 30,000 30,000
Christopher 20,000 - 20,000 20,000
Keljik
Hugo Dixon 20,000 - 20,000 20,000
Mark Little 24,000 790 24,790 24,522
Total 94,000 790 94,790 94,522
From 1 July 2017 Directors' fees are paid at the following rates: Chairman GBP
30,000; Chairman of the Audit Committee GBP24,000; and other Directors GBP20,000.
Expected fees to
5 December 2019
GBP
Chairman 15,000
Chairman of the Audit Committee 12,000
Non-executive Director 10,000
Fees in the above table are based on the assumption the Company is wound up on
5 December 2019 as explained in the Chairman's Statement on page 2.
Spend on pay
As the Company has no employees, the Directors do not consider it appropriate
to present a table comparing remuneration paid to employees with distributions
to shareholders. The total fees paid to Directors are shown above.
Statement of Voting at the Annual General Meeting
At the Annual General Meeting of the Company held on 6 December 2018 a binding
resolution was put to shareholders to approve the Directors' Remuneration
Policy, set out in the 2018 Annual Report and Accounts. This resolution was
passed on a show of hands. The proxy votes registered in respect of the binding
resolution were:
For Against Withheld
Number of proxy 11,087,087 100,000 5,497
votes
At the Annual General Meeting of the Company held on 6 December 2018 an
advisory resolution was put to shareholders to approve the Directors'
Remuneration Report, set out in the 2018 Annual Report and Accounts. This
resolution was passed on a show of hands. The proxy votes registered in respect
of the advisory resolution were:
For Against Withheld
Number of proxy 11,192,584 0 0
votes
Approval
A resolution for the approval of the Directors' Remuneration Report for the
year ended 30 June 2019 will be proposed at the Annual General Meeting to be
held on 5 December 2019.
By Order of the Board
Rupert Barclay
Chairman
Signed on behalf of the Board of Directors
30 October 2019
Audit Committee Report
The composition of the Audit Committee which comprises the whole Board, all of
whom are independent, is set out on page 14.
The terms of reference of the Audit Committee require that the Committee shall
review and challenge where necessary:
* the consistency of, and any changes to, accounting policies both on a year on
year basis and across the Company;
* the methods used to account for significant or unusual transactions where
different approaches are possible;
* whether the Company has followed appropriate accounting standards and made
appropriate estimates and judgements, taking into account the views of the
external Auditor;
* the clarity of disclosure in the Company's financial reports and the context
in which statements are made; and
* all material information presented with the financial statements, such as the
Strategic Report and the Statement of Corporate Governance (insofar as it
relates to the audit and risk management).
The Audit Committee meets at least twice a year and is responsible for
reviewing the annual and interim reports, the nature and scope of the external
audit and the findings thereon, and the terms of appointment of the Auditor,
including their remuneration and the provision of any non-audit services by
them. The Audit Committee has considered the independence of the Auditor and
the objectivity of the audit process and is satisfied that Ernst & Young LLP
("EY") is independent and has fulfilled its obligations to shareholders. The
Audit Committee has satisfied itself as to the Auditor's effectiveness,
objectivity, independence and the competitiveness of its fees before
recommending its re-appointment. This is the fourth year that EY has served as
the Company's Auditor and the lead partner is rotated every five years. To
comply with the provision of the Code the Company will review the option to
re-tender the external auditor on a regular basis.
The Audit Committee meets representatives of the Investment Manager who report
as to the proper conduct of business in accordance with the regulatory
environment in which both the Company and the Investment Manager operate and
reviews the Investment Manager's internal controls. The Company's external
Auditor also attends this Committee at its request and reports on its findings
in relation to the Company's statutory audit.
As the Company has no employees, section C.3.4 of the Code, which deals with
arrangements for staff to raise concerns in confidence about possible
improprieties in respect of financial reporting or other matters, is not
directly relevant to it. The Audit Committee has confirmed with the Investment
Manager and the Administrator that they do have "whistle blowing" policies in
place for their staff.
The Audit Committee met in February 2019 and considered the form and content of
the Company's interim report to 31 December 2018.
The Committee reviewed the key risks of the Company and the internal control
framework operating to control risk. The Committee also reviewed the terms of
engagement of the audit firm and its proposed programme for the year end audit.
The Audit Committee met a number of times in the second half of the year to
review the outcome of the audit work and the final draft of the financial
statements for the year end 30 June 2019. During this review the Audit
Committee met with representatives of both the Investment Manager and the
Administrator and sought assurances where necessary. The external Auditor
attended the half year and year end Audit Committee meetings and presented
reports on their audit plan and subsequently their audit findings. These did
not include any significant matters of concern in relation to the financial
statements.
Contracts for non-audit services must be notified to the Audit Committee who
consider any such engagement in the light of the requirement to maintain audit
independence.
The Auditor is responsible for the annual statutory audit. No other services
are provided by the Auditor and it is the Company's policy not to seek
substantial non-audit services from its Auditor.
Significant issues for the Audit Committee
The Audit Committee identified and considered the following significant issues:
Proposal to wind up the Company in December 2019
The Board approved a proposal for the voluntary liquidation of the Company and
the Audit Committee subsequently reviewed the financial statements prepared on
a break up basis. The enclosed circular sets out the recommended process and
timetable for the liquidation. The Audit Committee also reviewed the annual
report disclosures addressing the preparation of the financial statements on a
break up basis prior to recommending to the Board that they should be approved.
The accuracy of the valuation of the investment portfolio
The Company's investments have been valued in accordance with the accounting
policies, as discussed in note 1 (b) on page 30. Within FRS 102 Fair Value
Hierarchy, all investments are categorised as either Level 1 or 2, other than
the sole unquoted investment detailed below which is categorised as Level 3.
The Committee notes that Level 1 and 2 investments are valued using stock
exchange prices provided by third party financial data providers. During the
year the Committee reviewed internal controls reports from the Administrator
concerning the systems and controls around the pricing and valuation of
securities. As a result of preparing the financial statement on a break up
basis, the Audit Committee reviewed the fair values of Level 1 and 2
investments and satisfied itself that they were materially equivalent to their
net realisable values.
As detailed in note 1(b) on page 30 the Company's only unquoted investment is
valued by the Directors at GBP1,304,790. In determining that this amount
appropriately reflected its fair value, the Committee considered inter alia the
2019 audited results of SAM, other analyses prepared by SAM and the agreed
valuation methodology as set out in note 7(b) on page 35. These documents have
also been reviewed by the Auditor who presented their findings to the Committee
at the meeting to approve the year end financial statements.
As a result of preparing the financial statements on a break up basis, the
Board agreed with SAM that the basis for determining the net realisable value
of the Company's investment in SAM would be with reference to its pro-rata
share of SAM's net assets, adjusted to include forecast cashflows prior to the
planned closure of SAM and any further associated costs pertaining to its
winding up. The Audit Committee compared the carrying fair value of its stake
in SAM to its share of the net asset value of SAM reported in its 30 September
management accounts, which had been adjusted for forecast cashflows and
estimated closure costs, and concluded that no adjustments were required to the
carrying fair value calculated under the originally agreed methodology. This
was on the grounds that the difference between the fair value and estimated net
realisable value required under the break up basis of accounting were
immaterial to the Company's financial statements.
The risk of misappropriation of assets and unsecured ownership of investments
The Committee reviews reports from its service providers on key controls over
the assets of the Company. Any significant issues are reported by SAM to the
Committee. SAM has put in place procedures to ensure that investments can only
be made to the extent that the appropriate contractual and legal arrangements
are in place to protect the Company's assets.
As part of the day to day controls of the Company there are regular
reconciliations between the accounting records and the records kept by the
custodian of the assets they safeguard which are owned by the Company. During
the year and at the year-end there were no matters brought to light which call
into question that the key controls in this area were not working, or that the
assets recorded in the books of account are not held in safe custody.
The accuracy of the calculation of management and performance fees
The Committee receives reports on the calculation of any performance fee
accruals that have been included in the Company's NAV. The management fee and
any performance fee are calculated in accordance with the contractual terms in
the investment management agreement by the Administrator and are reviewed in
detail by SAM and are also subject to a monthly review and approval by the
Chairman of the Audit Committee. The audit also includes checks on the
calculation of the management fee and any performance fee to ensure that they
are correctly calculated.
The external audit plan was reviewed with the external Auditor and the
Committee concluded that suitable audit procedures had been implemented to
obtain reasonable assurance that the Financial Statements as a whole would be
free of material misstatements. Specifically with reference to the highlighted
issue:
The Committee was satisfied that the procedures put in place by the external
Auditors allowed them to independently test the valuation of the investment
portfolio including the Company's stake in SAM.
Review of the Auditor
The Audit Committee has reviewed the effectiveness of the Auditor including:
* independence (the Auditor reports to the Audit Committee at the half-year and
year end the steps it takes to ensure its independence and objectivity and
makes the Committee aware of any potential issues, explaining all relevant
safeguards);
* quality of the audit work including the ability to resolve issues in a timely
manner, its communication with the Company; and
* the quality of people and services.
The Audit Committee was satisfied that the audit process was effective for the
year under review.
Financial statements
In finalising the financial statements for recommendation to the Board for
approval the Committee has concluded that it is not appropriate to prepare the
accounts on a going concern basis as detailed in the Chairman's Statement on
page 2. The Audit Committee has also satisfied itself that the Annual Report
and financial statements 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. All of the above
were satisfactorily addressed through the 'page turn' review of the financial
statements at the year end Audit Committee meeting and consideration of reports
provided by, and discussed with, the Investment Manager and the Auditor. The
Board as a whole have approved the conclusions arrived at by the Audit
Committee as disclosed in the Statement of Directors' Responsibilities in
respect of the Annual Report and the financial statements on page 21.
Mark Little
Chairman of the Audit Committee
30 October 2019
Statement of Directors' Responsibilities
in Respect of the Annual Report and the Financial Statements
The Directors are responsible for preparing the annual report and the financial
statements in accordance with applicable law and regulations.
Company law requires the Directors to prepare financial statements for each
financial period. Under that law, the Directors have elected to prepare the
financial statements in accordance with UK Accounting Standards and applicable
law, including FRS 102 "the Financial Reporting Standard applicable in the UK
and Republic of Ireland".
Under company law the Directors must not approve the financial statements
unless they are satisfied that they give a true and fair view of the state of
affairs of the Company and of the profit or loss of the Company for that
period.
In preparing these financial statements, the Directors are required to:
* select suitable accounting policies and then apply them consistently;
* make judgements and estimates that are reasonable and prudent;
* state whether applicable UK Accounting Standards have been followed, subject
to any material departures disclosed and explained in the financial statements;
and
* prepare the financial statements on the going concern basis unless it is
inappropriate to presume that the Company will continue in business.
For reasons stated in the Directors' Report and note 1, the financial
statements of the Company have been prepared on a break up basis as the Company
is not a going concern.
The Directors are responsible for keeping adequate accounting records which 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
Act 2006. They are also responsible for safeguarding the assets of the Company
and hence for taking reasonable steps for the prevention and detection of fraud
and other irregularities.
Under applicable law and regulations, the Directors are also responsible for
preparing a Strategic Report, Directors' Report, Directors' Remuneration
Report, Statement of Corporate Governance and Audit Committee Report that
complies with that law and those regulations.
The financial statements are published on the www.sanditonam.com website, which
is maintained by the Company's Investment Manager. The maintenance and
integrity of the website maintained by Sanditon Asset Management Limited is, so
far as it relates to the Company, the responsibility of Sanditon Asset
Management Limited.
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 2016 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 19 and 20. As a result, the Board has concluded
that the Annual Report and financial statements for the year ended 30 June
2019, 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
30 October 2019
Independent Auditor's Report
to the members of Sanditon Investment Trust plc
OPINION
We have audited the financial statements of Sanditon Investment Trust Plc for
the year ended 30 June 2019 which comprise the Income statement, the Statement
of financial position, the Statement of changes in equity, the Cash flow
statement and the related notes 1 to 18, including a summary of significant
accounting policies. The financial reporting framework that has been applied in
their preparation is applicable law and United Kingdom Accounting Standards
including FRS 102 "The Financial Reporting Standard applicable in the UK and
Republic of Ireland" (United Kingdom Generally Accepted Accounting Practice).
In our opinion, the financial statements:
* give a true and fair view of the Company's affairs as at 30 June 2019 and of
its loss for the year then ended;
* have been properly prepared in accordance with United Kingdom Generally
Accepted Accounting Practice; and
* have been prepared in accordance with the requirements of the Companies Act
2006.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing
(UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards
are further described in the Auditor's responsibilities for the audit of the
financial statements section of our report below. We are independent of the
Company in accordance with the ethical requirements that are relevant to our
audit of the financial statements in the UK, including the FRC's Ethical
Standard as applied to public interest entities, and we have fulfilled our
other ethical responsibilities in accordance with these requirements.
We believe that the audit evidence we have obtained is sufficient and
appropriate to provide a basis for our opinion.
Emphasis of matter - financial statements prepared on a break up basis
We draw attention to Note 1(a) of the financial statements, which explains that
the Company would be wound up and therefore the Directors do not consider it to
be appropriate to adopt the going concern basis of accounting in preparing the
financial statements. Accordingly, the financial statements have been prepared
on a break up basis as described in Note 1 (a).
Our opinion is not modified in respect of this matter.
Overview of our audit approach
Key audit matters * Preparation of the financial
statements on the break up basis.
* Performance fees or the high
watermark to be carried forward are
not calculated in line with the
Investment Management Agreement
("IMA").
* Incorrect valuation of the unquoted
investment in the Manager, Sanditon
Asset Management Limited ("SAM").
Materiality * Overall materiality of GBP445k (2018:
GBP460k) which represents 1% of Net
Assets of the Company as at 30 June
2019.
Key audit matters
Key audit matters are those matters that, in our professional judgment, were of
most significance in our audit of the financial statements of the current
period and include the most significant assessed risks of material misstatement
(whether or not due to fraud) that we identified. These matters included those
which had the greatest effect on: the overall audit strategy, the allocation of
resources in the audit; and directing the efforts of the engagement team. These
matters were addressed in the context of our audit of the financial statements
as a whole, and in our opinion thereon, and we do not provide a separate
opinion on these matters.
Risk Our response to the risk Key observations
communicated to the Audit
Committee
Preparation of the * We concluded that it
financial statements on was appropriate for the
the break up basis financial statements to
be prepared under the
break up basis and that
appropriate adjustments
had been made to the
quantitative and
qualitative disclosures.
Refer to the Directors' * Based on the work
Report (pages 11 to 13), performed we had no
the Audit Committee matters to report to the
Report (pages 19 and 20); Audit Committee.
Note 1a of the Accounting
policies (page 30); and
Notes 7 and 9 of the
Financial Statements
(pages 34 and 36).
The Company's financial
statements have been
prepared on a break up
basis. Consequently,
assets and liabilities of
the Company should be
accounted at the net
realisable or settlement
values.
The fair value of quoted
investments and
derivatives based on
underlying quoted
securities (2019: GBP8,180k
and -GBP2,542k, 2018: GBP
8,853k and -GBP2,795k) is
considered representative
of their net realisable
value and no accounting
measurement adjustment
has been recorded. The
fair value of the
Company's stake in SAM
(2019: GBP1,305k, 2018: GBP
1,461k) has also been
assessed as materially
equivalent to its net
realisable value for the
purpose of the Company's
financial statements.
Estimated liquidation We have performed the
costs of GBP150,000 have following procedures:
been recorded as a
provision and disclosed
in the notes to the
financial statements.
* Obtained evidence from
the Company's broker
presenting shareholder
feedback in relation to
the continuation vote.
* Reviewed evidence that
the Board had approved
the preparation of a
circular setting out
proposals to place the
Company into voluntary
liquidation subject to
the passing of a special
resolution at the 2019
AGM.
* Obtained and reviewed
the estimate of
liquidation expenses
recorded in the financial
statements.
* Reviewed the financial
statement accounting
policies and disclosures
to confirm that necessary
adjustments to apply the
break up basis of
presentation were
complete and accurate.
Performance fees or the We have performed the * Based on the work
high watermark to be following procedures: performed we had no
carried forward are not matters to report to the
calculated in line with Audit Committee.
the Investment Management
Agreement ("IMA")
Refer to the Audit * Obtained an
Committee Report (pages understanding of the
19 and 20); Accounting Administrator's processes
policies (page 30); and for calculating the
Note 3 of the Financial performance fees.
Statements (page 32).
The Company's performance * Recalculated the
fee for the period performance fees or the
amounted to GBPNil (2018: GBP high watermark to be
Nil). carried forward and
ensured the calculations
are in line with the
Investment Management
Agreement.
The performance fee is * Validated all key
calculated using a external inputs used in
methodology as set out in the calculations to third
the Investment Management party data.
Agreement between the
Company and the Manager
described on page 32 of
financial statements.
Incorrect calculation of
this fee could have a
material impact on the
return generated for
shareholders.
Incorrect valuation of We have performed the * The difference between
the unquoted investment following procedures: the fair value and net
in the Manager, Sanditon realisable value of the
Asset Management Limited Company's stake in SAM
("SAM") was immaterial to the
Company's financial
statements.
Refer to the Audit * Performed our * Based on the work
Committee Report (pages walkthrough procedures to performed we had no
19 and 20); Accounting gain an understanding of matters to report to the
policies (page 30); and SAM processes and Audit Committee.
Notes 8 and 18 of the controls surrounding the
Financial Statements valuation of unquoted
(pages 34 and 38). investment in the Manager
to assess whether they
have been designed
effectively.
The Company has a 20% * Discussed the valuation
holding in SAM amounting methodology with the
to GBP1.30m (2018: GBP1.46m). Board of directors of the
Company and confirmed
with SAM and the Board
that the Company's stake
will be disposed of with
reference to its share of
SAM's net assets at the
time of liquidation
proposals being approved
by shareholders.
In accordance with the * We agreed the inputs to
Company's valuation the fair valuation of SAM
policy and UK GAAP, the in the Company's accounts
holding in SAM is carried to amounts disclosed in
at fair value determined SAM's audited accounts as
by the directors. at 31 March 2019 and AUM
data to published
information from the
Administrator.
Under the break up basis * We obtained the 30
of presentation, the September management
Company is required to accounts of SAM and
value its stake in SAM at agreed the cash balances
its estimated net and receivables to bank
realisable value. statements and invoices.
We also agreed a sample
of the recorded
liabilities to supporting
documentation and
enquired as to the
presence of unrecorded
liabilities.
Fair value is determined * We compared the
using the following carrying fair value of
formula described on page the Company's investment
35 of the financial in SAM to its pro rata
statements: a simple share of audited net
average of 1% of SAM's assets of SAM as at 31
year end assets under March 2019 and the 30
management ("AUM") and 5x September management
after tax profits accounts adjusted to
(adjusted to exclude any include forecast
performance fees earned). cashflows prior to the
closure of SAM to assess
the difference between
the carrying fair value
of the investment and the
net realisable value
estimated by the Board of
directors and SAM.
There are no changes to the risks reported in the prior year except for the
preparation of the financial statements under the break up basis of
presentation.
AN OVERVIEW OF THE SCOPE OF OUR AUDIT
Tailoring the scope
Our assessment of audit risk, our evaluation of materiality and our allocation
of performance materiality determine our audit scope for the Company. This
enables us to form an opinion on the financial statements. We take into account
size, risk profile, the organisation of the Company and effectiveness of
controls, including controls and changes in the business environment when
assessing the level of work to be performed.
Our application of materiality
We apply the concept of materiality in planning and performing the audit, in
evaluating the effect of identified misstatements on the audit and in forming
our audit opinion.
Materiality
The magnitude of an omission or misstatement that, individually or in the
aggregate, could reasonably be expected to influence the economic decisions of
the users of the financial statements. Materiality provides a basis for
determining the nature and extent of our audit procedures.
We determined materiality for the Company to be GBP445k (2018: GBP460k), which is
1% (2018: 1%) of the Company's net assets value as at 30 June 2019. We believe
that net assets value is the most important financial metric on which
shareholders judge the performance of the Company and it is generally accepted
auditing practice for investment trust audits.
Performance materiality
The application of materiality at the individual account or balance level. It
is set at an amount to reduce to an appropriately low level the probability
that the aggregate of uncorrected and undetected misstatements exceeds
materiality.
On the basis of our risk assessments, together with our assessment of the
Company's overall control environment, our judgment was that performance
materiality was 75% (2018: 75%) of our planning materiality, namely GBP334k
(2018: GBP345k). We have set performance materiality at this percentage due to
our past experience of the audit that indicates a lower risk of misstatements,
both corrected and uncorrected.
Reporting threshold
An amount below which identified misstatements are considered as being clearly
trivial.
We agreed with the Audit Committee that we would report to them all uncorrected
audit differences in excess of GBP22k (2018: GBP23k), which is set at 5% (2018: 5%)
of planning materiality, as well as differences below that threshold that, in
our view, warranted reporting on qualitative grounds.
We evaluate any uncorrected misstatements against both the quantitative
measures of materiality discussed above and in light of other relevant
qualitative considerations in forming our opinion.
Other information
The other information comprises the information included in the annual report
set out on pages 1 to 21, including the Strategic Report and Directors' Report
set out on pages 8 to 13, other than the financial statements and our auditor's
report thereon. The directors are responsible for the other information.
Our opinion on the financial statements does not cover the other information
and, except to the extent otherwise explicitly stated in this report, we do not
express any form of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is
to read the other information and, in doing so, consider whether the other
information is materially inconsistent with the financial statements or our
knowledge obtained in the audit or otherwise appears to be materially
misstated. If we identify such material inconsistencies or apparent material
misstatements, we are required to determine whether there is a material
misstatement in the financial statements or a material misstatement of the
other information. If, based on the work we have performed, we conclude that
there is a material misstatement of the other information, we are required to
report that fact.
We have nothing to report in this regard.
In this context, we also have nothing to report in regard to our responsibility
to specifically address the following items in the other information and to
report as uncorrected material misstatements of the other information where we
conclude that those items meet the following conditions:
* Fair, balanced and understandable set out on page 21
the statement given by the directors that they consider the annual report and
financial statements taken as a whole is fair, balanced and understandable and
provides the information necessary for shareholders to assess the Company's
performance, business model and strategy, is materially inconsistent with our
knowledge obtained in the audit; or
* Audit committee reporting set out on pages 19 and 20
the section describing the work of the Audit Committee does not appropriately
address matters communicated by us to the Audit Committee; or
* Directors' statement of compliance with the UK Corporate Governance Code set
out on pages 14 to 16
the parts of the directors' statement required under the Listing Rules relating
to the Company's compliance with the UK Corporate Governance Code containing
provisions specified for review by the auditor in accordance with Listing Rule
9.8.10R(2) do not properly disclose a departure from a relevant provision of
the UK Corporate Governance Code.
Opinions on other matters prescribed by the Companies Act 2006
In our opinion the part of the directors' remuneration report to be audited has
been properly prepared in accordance with the Companies Act 2006.
In our opinion, based on the work undertaken in the course of the audit:
* the information given in the Strategic Report and the Directors' Report for
the financial year for which the financial statements are prepared is
consistent with the financial statements; and
* the Strategic Report and Directors' Reports have been prepared in accordance
with applicable legal requirements.
Matters on which we are required to report by exception
In the light of the knowledge and understanding of the Company and its
environment obtained in the course of the audit, we have not identified
material misstatements in the Strategic Report or Directors' Report.
We have nothing to report in respect of the following matters in relation to
which the Companies Act 2006 requires us to report to you if, in our opinion:
* adequate accounting records have not been kept, or returns adequate for our
audit have not been received from branches not visited by us; or
* the financial statements and the part of the Directors' Remuneration Report
to be audited are not in agreement with the accounting records and returns; or
* certain disclosures of directors' remuneration specified by law are not made;
or
* we have not received all the information and explanations we require for our
audit.
Responsibilities of Directors
As explained more fully in the Statement of Directors' Responsibilities set out
on page 21, the directors are responsible for the preparation of the financial
statements and for being satisfied that they give a true and fair view, and for
such internal control as the directors determine is necessary to enable the
preparation of financial statements that are free from material misstatement,
whether due to fraud or error.
In preparing the financial statements, 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 audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial
statements as a whole are free from material misstatement, whether due to fraud
or error, and to issue an auditor's report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that
an audit conducted in accordance with ISAs (UK) will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and
are considered material if, individually or in the aggregate, they could
reasonably be expected to influence the economic decisions of users taken on
the basis of these financial statements.
Explanation as to what extent the audit was considered capable of detecting
irregularities, including fraud
The objectives of our audit, in respect to fraud, are; to identify and assess
the risks of material misstatement of the financial statements due to fraud; to
obtain sufficient appropriate audit evidence regarding the assessed risks of
material misstatement due to fraud, through designing and implementing
appropriate responses; and to respond appropriately to fraud or suspected fraud
identified during the audit. However, the primary responsibility for the
prevention and detection of fraud rests with both those charged with governance
of the entity and management.
Our approach was as follows:
* We obtained an understanding of the legal and regulatory frameworks that are
applicable to the Company and determined that the most significant are the
Companies Act 2006, the Listing Rules, the UK Corporate Governance Code and
section 1158 of the Corporation Tax Act 2010.
* We understood how the Company is complying with those frameworks through
discussions with the Audit Committee and Company Secretary and review of the
Company's documented policies and procedures.
* We assessed the susceptibility of the Company's financial statements to
material misstatement, including how fraud might occur by considering the key
risks impacting the financial statements. We identified risks with respect to
incorrect valuation of the unquoted investment in SAM and incorrect calculation
of performance fees. Further discussion of our approach is set out in the
section on key audit matters above.
* Based on this understanding we designed our audit procedures to identify
non-compliance with such laws and regulations. Our procedures involved review
of the reporting to the directors with respect to the application of the
documented policies and procedures and review of the financial statements to
ensure compliance with the reporting requirements of the Company.
A further description of our responsibilities for the audit of the financial
statements is located on the Financial Reporting Council's website at https://
www.frc.org.uk/auditorsresponsibilities. This description forms part of our
auditor's report.
Other matters we are required to address
* We were appointed by the Company at the launch to audit the financial
statements for the year ending 30 June 2015 and subsequent financial periods.
The period of total uninterrupted engagement including previous renewals and
reappointments is 5 years, covering the years ending 30 June 2015 to 30 June
2019.
* The non-audit services prohibited by the FRC's Ethical Standard were not
provided to the Company and we remain independent of the Company in conducting
the audit.
* The audit opinion is consistent with the additional report to the Audit
Committee.
Use of our report
This report is made solely to the Company's members, as a body, in accordance
with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been
undertaken so that we might state to the Company's members those matters we are
required to state to them in an auditor's 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 and the Company's members as a body, for our
audit work, for this report, or for the opinions we have formed.
Matthew Price (Senior statutory auditor)
for and on behalf of Ernst & Young LLP, Statutory Auditor
London
30 October 2019
Notes:
1. The maintenance and integrity of the Sanditon Investment Trust plc web site
is the responsibility of the directors; the work carried out by the auditors
does not involve consideration of these matters and, accordingly, the auditors
accept no responsibility for any changes that may have occurred to the
financial statements since they were initially presented on the web site.
2. Legislation in the United Kingdom governing the preparation and
dissemination of financial statements may differ from legislation in other
jurisdictions.
Income Statement
for the year ended 30 June 2019
Year Year Year Year Year Year
ended 30 ended 30 ended 30 ended 30 ended 30 ended 30
June June June June June June
2019 2019 2019 2018 2018 2018
Revenue Capital Total Revenue Capital Total
Notes GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Losses on
investments
held
at fair 7 - (1,364) (1,364) - (3,895) (3,895)
value
through
profit or
loss
Income 2 732 - 732 682 - 682
Management 3 (86) (259) (345) (88) (263) (351)
fee
Other 4 (257) - (257) (253) - (253)
expenses
Return on
ordinary
activities
before 389 (1,623) (1,234) 341 (4,158) (3,817)
taxation
Taxation on 5 (49) 49 - (24) 30 6
ordinary
activities
Return for 340 (1,574) (1,234) 317 (4,128) (3,811)
the year
Return per 15 0.68 (3.15) (2.47) 0.63 (8.26) (7.63)
Ordinary
Share
(pence):
The total column of this statement is the profit and loss account of the
Company.
The notes on pages 30 to 44 form part of these accounts.
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 2019
30 June 30 June
2019 2018
Notes GBP000 GBP000
Fixed assets
Investments 7 9,485 10,314
held at fair
value through
profit or loss
Current assets
Debtors 8 105 189
Amounts due in 9 1,035 1,239
respect of
contracts for
difference
Collateral paid 8,108 10,006
in respect of
contracts for
difference
UK Treasury 25,178 21,122
Bills
Cash at bank 4,412 9,247
Total current 38,838 41,803
assets
Current
liabilities
Provision for 10 (150) -
liquidation
costs
Creditors 10 (249) (2,102)
Amounts payable 9 (3,577) (4,034)
in respect of
contracts for
difference
Total current (3,976) (6,136)
liabilities
Net current 34,862 35,667
assets
Total assets 44,347 45,981
less current
liabilities
Net assets 44,347 45,981
Capital and
reserves
Share capital 11 500 500
Share premium 12 48,872 48,872
Capital reserve 13 (5,547) (3,823)
Revenue reserve 522 432
Total 44,347 45,981
shareholders'
funds
Net asset value 88.69 91.96
per share -
Ordinary Share
(pence)
The financial statements on pages 26 to 44 of Sanditon Investment Trust plc,
Company number 09040176, were approved by the Board and authorised for issue on
30 October 2019 and were signed on its behalf by:
Rupert Barclay
Chairman
The notes on pages 30 to 44 form part of these accounts.
Statement of Changes in Equity
for the year ended 30 June 2019
Share Share Capital Revenue
Capital Premium Reserve Reserve Total
For the Notes GBP000 GBP000 GBP000 GBP000 GBP000
year ended
30 June
2019
Balance at 500 48,872 (3,823) 432 45,981
1 July 2018
Return for - - (1,574) 340 (1,234)
the year
Provision - - (150) - (150)
for
liquidation
costs
Dividends 6 - - - (250) (250)
paid
Balance at 500 48,872 (5,547) 522 44,347
30 June
2019
Share Share Capital Revenue
Capital Premium Reserve Reserve Total
For the GBP000 GBP000 GBP000 GBP000 GBP000
year ended
30 June
2018
Balance at 500 48,872 305 565 50,242
1 July
2017
Return for - - (4,128) 317 (3,811)
the year
Dividends - - - (450) (450)
paid
Balance at 500 48,872 (3,823) 432 45,981
30 June
2018
The notes on pages 30 to 44 form part of these accounts.
Distributable reserves comprise: the revenue reserve and capital reserves
attributable to realised profits.
All investments are held at fair value through profit or loss. When the Company
revalues the investments still held during the period, any gains or losses
arising are credited/charged to the capital reserve.
Cash Flow Statement
for the year ended 30 June 2019
Year ended Year ended
30 June to 30 June
2019 2018
GBP000 GBP000
Return on ordinary (1,234) (3,817)
activities before
taxation*
Capital return 1,623 4,158
before finance
costs and taxation
Decrease/ 84 (24)
(increase) in
debtors
(Decrease)/ (1,853) 1,988
increase in other
creditors
Investment (259) (263)
management fee
capitalised
Net movement in 1,898 (373)
collateral pledged
to broker
Gains/(losses) on 120 (3,130)
futures and CFDs
realised during
the period
Decrease in 204 668
amounts due in
respect of CFDs
Decrease in (457) (1,183)
amounts payable in
respect of CFDs
Overseas tax - 6
recovered/(paid)
Net cash inflow/ 126 (1,970)
(outflow) from
operating
activities
Cashflow from
investing
activities
Purchases of (3,680) (1,734)
investments
Sales of 3,025 6,554
investments
Net cash (outflow) (655) 4,820
/inflow from
investing
activities
Cashflow from
financing
activities
Equity dividends (250) (450)
paid
Net cash outflow (250) (450)
from financing
activities
(Decrease)/ (779) 2,400
increase in cash
and cash
equivalents
Cash and cash 30,369 27,969
equivalents at the
start of the year
Cash and cash 29,590 30,369
equivalents at the
end of the year
Comprised of:
UK Treasury Bills 25,178 21,122
Cash at bank 4,412 9,247
Cash and cash 29,590 30,369
equivalents at the
end of the year
*Cash inflow from dividends was GBP603,000 (2018: GBP617,000) and cash inflow from
interest was GBP208,000 (2018: GBP68,000).
The notes on pages 30 to 44 form part of these accounts.
Notes to the Financial Statements
for the year ended 30 June 2019
1.ACCOUNTING POLICIES
A summary of the principal accounting policies is set out below:
(a) Basis of accounting
The financial statements have been prepared under the historical cost
convention as modified to include the revaluation of investments and in
accordance with applicable UK Accounting Standards and with the Statement of
Recommended Practice ("SORP") 'Financial Statements of Investment Trust
Companies and Venture Capital Trusts' issued by the Association of Investment
Companies (issued November 2014 and updated in February 2018).
The financial statements have been prepared in accordance with FRS 102 ("the
Financial Reporting Standard applicable in the UK and Republic of Ireland"
issued by the Financial Reporting Council).
The Board has put forward a proposal to shareholders that the Company be wound
up and placed into voluntary liquidation on 5 December 2019. Therefore these
financial statements have been prepared under the 'break up' basis, where all
assets and liabilities are stated at their net realisable and/or settlement
values. The carrying fair value of the Company's only unlisted investment in
SAM has been compared to its estimated net realisable value based on the 30
September management accounts adjusted to take account of forecast cashflows
and estimated closure costs associated with the planned liquidation of SAM in
December 2019. No adjustments were required to the carrying fair value
calculated under the originally agreed methodology on the grounds that the
difference between the fair value and estimated net realisable value required
under the break up basis of accounting were immaterial to the Company's
financial statements. A provision for liquidation costs of GBP150,000 has been
included in the financial statements. All liabilities including liquidation
costs are stated at the estimated amount.
(b) Investments
As the Company's business is investing in financial assets with a view to
profiting from their total return in the form of increases in fair value,
financial assets are designated as held at fair value through profit or loss in
accordance with FRS 102 Section 11: 'Basic Financial Instruments', and Section
12: 'Other Financial Instruments'. The Company manages and evaluates the
performance of these investments on a fair value basis in accordance with its
investment strategy, and information about the investments is provided on this
basis to the Board of Directors.
The Company's investments, including financial derivative instruments, are
classified as held at fair value through profit or loss. After initial
recognition, these continue to be measured at fair value, which for quoted
investments is either the bid price or the last traded price depending on the
convention of the exchange on which the investment is listed. For investments,
including financial derivative instruments, that are not actively traded or
where active stock exchange quoted prices are not available, fair value is
determined by reference to a variety of valuation techniques including broker
quotes and price modelling. Gains or losses on investments, including financial
derivative instruments are recognised in the capital column of the Income
Statement. Purchases and sales of the financial assets are recognised on the
trade date, being the date which the Company commits to purchase or sell the
assets.
The sole unlisted investment is the Company's 20% stake in SAM and is valued by
the Directors at fair value, using the guidelines on valuation published by the
International Private Equity and Venture Capital Association ("IPEVC Valuation
Guidelines").
Changes in the fair value of investments held at fair value through profit or
loss and gains or losses on disposal are included in the capital column of the
Income Statement within "gains/(losses) on investments held at fair value
through profit or loss".
(c) Derivatives
Derivatives which comprise of Contracts for Differences ("CFDs") and futures
contracts are held at fair value based on traded prices. The sources of the
return under the derivative contract (e.g. notional dividends, financing costs,
interest returns and capital changes) are allocated to the revenue and capital
columns of the Income Statement in accordance with the nature of the underlying
source of income and in accordance with the guidance given in the SORP issued
by the Association of Investment Companies.
Notional dividend income arising on long or short CFD positions is apportioned
wholly to the revenue account. Notional interest income on short CFD positions
is allocated wholly to the capital account. Notional interest expense on long
and short CFD positions is allocated wholly to capital. Changes in value
relating to underlying price movements of securities in relation to CFD
exposures are allocated to capital.
Futures contracts may be entered into for investment purposes and any fair
value changes and profits and losses on the closure of positions are included
in capital.
(d) Foreign currency
Transactions denominated in foreign currencies are translated into sterling at
actual exchange rates as at the date of the transaction. Monetary assets and
liabilities denominated in foreign currencies at the period end are reported at
the rates of exchange prevailing at the year end. Any gain or loss arising from
a change in exchange rates subsequent to the date of the transaction is
included as an exchange gain or loss to capital or revenue in the income
statement as appropriate. Foreign exchange movements on investments are
included in the Income Statement within gains on investments.
(e) Income
Investment income has been accounted for on an ex-dividend basis or when the
Company's right to the income is established. Special dividends are credited to
capital or revenue in the Income Statement, according to the circumstances
surrounding the payment of the dividend. UK dividends are accounted for net of
any tax credits. Overseas dividends are included gross of withholding tax.
Interest receivable on cash deposits is accounted for on an accruals basis.
Income from fixed income securities is recognised in the income statement using
the effective interest method.
(f) Expenses
All expenses are accounted for on an accruals basis and are charged as follows:
* the basic investment management fee is charged 25% to revenue and 75% to
capital;
* any performance fee earned is allocated to capital;
* investment transaction costs are allocated to capital; and
* other expenses are charged wholly to revenue.
(g) Taxation
The charge for taxation is based upon the net revenue for the year. The tax
charge is allocated to the revenue and capital accounts according to the
marginal basis whereby revenue expenses are first matched against taxable
income arising in the revenue account. Deferred taxation is recognised in
respect of all timing differences which are differences between taxable profits
and return for the year that arise from the inclusion of income and expenses in
tax assessments in periods different from those in which they are recognised in
the financial statements.
As an approved investment trust in the UK, the Company does not suffer tax on
capital profits and UK dividend income received into the revenue account is
also not taxable.
(h) Cash and cash equivalents
Cash and cash equivalents comprise cash on hand, short term deposits in banks
and short term investments in UK Government Bills that are readily convertible
to known amounts of cash and which are subject to an insignificant risk of
changes in value.
2.INCOME
Year ended Year ended
30 June 2019 30 June 2018
GBP000 GBP000
Income from investments
UK franked dividends 133 183
UK treasury bills 152 50
interest
Income from contracts for 412 411
difference
Other income 35 38
732 682
3.INVESTMENT MANAGEMENT FEE
Year ended Year ended
30 June 2019 30 June 2018
GBP000 GBP000
Basic fee:
25% charged to revenue 86 88
75% charged to capital 259 263
345 351
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" was 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. 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 2019
GBP35,000 (2018: GBP35,000) was included within Other Income (note 2).
4.OTHER EXPENSES
Year ended Year ended
30 June 2019 30 June 2018
GBP000 GBP000
Secretarial services and 55 55
fund administration fees
Other administration 26 24
expenses
Registrar's fees 13 14
Printing and postage 6 5
Custody fees 11 12
Subscription and listing 19 17
fees
Auditor's remuneration* 23 22
Directors' fees 94 94
Irrecoverable VAT 10 10
257 253
*There were no non-audit services in 2019 (2018: nil).
5.TAXATION
(a) Analysis of Charge in the Year:
Year Year Year Year Year Year
ended 30 ended 30 ended 30 ended 30 ended 30 ended 30
June 2019 June 2019 June 2019 June 2018 June 2018 June 2018
Revenue Capital Total Revenue Capital Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Current 49 (49) - 30 (30) -
tax
Overseas - - - (6) - (6)
tax
Total tax 49 (49) - 24 (30) (6)
charge
for the
year (see
note 5
(b))
(b)Factors Affecting the Current Tax Charge for the Year:
The tax assessed for the year is higher than the standard rate of corporation
tax in the UK for a large company of 19.00% (2018: 19.00%). The differences are
explained below:
Year Year Year Year Year Year
ended 30 ended 30 ended 30 ended 30 ended 30 ended 30
June June 2019 June 2019 June June 2018 June 2018
2019 2018
Revenue Capital Total Revenue Capital Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Total return 389 (1,623) (1,234) 341 (4,158) (3,817)
before
taxation
UK 74 (308) (234) 65 (790) (725)
corporation
tax at
19.00%
(2018:
19.00%)
Effects of:
Capital - 259 259 - 740 740
losses not
subject to
corporation
tax
UK dividends (25) - (25) (35) - (35)
which are
not taxable
Overseas tax - - - (6) - (6)
suffered
Movement in - - - - 20 20
unutilised
management
expenses
Total tax 49 (49) - 24 (30) (6)
charge
The Company is not liable to tax on capital gains due to its status as an
investment trust. Due to the Company's status as an investment trust, and the
intention to continue meeting the conditions required to obtain approval in the
foreseeable future, the Company has not provided for deferred tax on any
capital gains and losses arising on the revaluation or disposal of investments.
After claiming relief against accrued income taxable on receipt, the Company
has a deferred tax asset of approximately GBP89,000 (2018: GBP89,000) relating to
excess expenses of GBP495,000 (2018: GBP495,000). It is unlikely that the Company
will generate sufficient taxable profits in the future to utilise these
expenses and therefore no deferred tax asset in respect of these expenses has
been recognised.
6.DIVID
The dividend relating to the year ended 30 June 2019 which is the basis on
which the requirements of Section 1159 of the Corporation Tax Act 2010 are
considered is detailed below:
Year ended Year ended Year ended Year ended
30 June 2019 30 June 2019 30 June 2018 30 June 2018
Pence Per Pence Per
Ordinary GBP000 Ordinary GBP000
Share Share
Annual - - 0.50p 250
dividend -
payable on
19 December
2018*
Annual 0.60p 300 - -
dividend -
payable on
20 December
2019**
*Not included as a liability in the year ended 30 June 2018 accounts.
**Not included as a liability in the year ended 30 June 2019 accounts.
The annual dividend will be paid on 20 December 2019 to members on the register
at the close of business on 22 November 2019. The shares will be marked
ex-dividend on 21 November 2019.
7.INVESTMENTS
(a) Summary of Valuation
30 June 2019 30 June 2018
GBP000 GBP000
UK:
Investments listed on a 3,711 4,207
recognised investment
exchange
TM Sanditon UK Select 4,469 4,646
Fund
Unquoted investment 1,305 1,461
9,485 10,314
(b)Movements
In the year ended 30 June 2019
Quoted Unquoted Quoted Unquoted
Holdings Holdings Total Holdings Holdings Total
UK UK 2019 UK UK 2018
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Book cost at 9,409 200 9,609 13,817 200 14,017
beginning of
year
Gains/
(losses) on
investments
held
at beginning (556) 1,261 705 533 1,349 1,882
of year
Valuation at 8,853 1,461 10,314 14,350 1,549 15,899
beginning of
year
Purchases at 3,680 - 3,680 1,734 - 1,734
cost
Sales:
- proceeds (3,025) - (3,025) (6,554) - (6,554)
- (losses)/ (403) - (403) 412 - 412
gains on
investment
holdings sold
in the year
Movements in
losses on
investment
holdings held (925) (156) (1,081) (1,089) (88) (1,177)
at end of
year
Valuation at 8,180 1,305 9,485 8,853 1,461 10,314
end of year
Total Total
Year ended Year ended
30 June 2019 30 June 2018
GBP000 GBP000
Comprising:
Book cost at end of year 9,861 9,609
(Losses)/gains on (376) 705
investment holdings at
year end
Valuation at end of year 9,485 10,314
Transaction costs on investment purchases for the year ended 30 June 2019
amounted to GBP24,600 (2018: GBP17,200) and on investment sales for the year
amounted to GBP5,500 (2018: GBP9,800).
The Company's 20% investment in SAM was acquired on 15 July 2014. Having
considered alternative methods of measurement using information from the
audited financial information of SAM to 31 March 2019 and subsequent business
performance projections with due regard to the risks applicable in its early
years of trading, the Board have agreed the valuation methodology for the
Company's holding in SAM using 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). The Directors concluded
the fair value of the investment as at 30 June 2019 to be GBP1,304,790 (as at 30
June 2018: GBP1,461,151). This represents the most appropriate approximation of
the fair value of the Company's investment in SAM. The Board have considered
the net realisable value of its stake in SAM by reviewing the liquidation value
of SAM's Balance Sheet and determined that there was no need to adjust the
formula driven fair value on the grounds that the difference is not material to
the Company's financial statements.
(c) Losses on Investments
Total Total
Year ended Year ended
30 June 2019 30 June 2018
GBP000 GBP000
(Losses)/gains on (403) 412
investment holdings sold
in year
Movements in losses on (1,081) (1,177)
investment holdings held
at the year end
Total losses on (1,484) (765)
investments
Total gains/(losses) on 120 (3,130)
futures and on CFD assets
and liabilities held at
fair value through profit
or loss
Total losses on (1,364) (3,895)
investments held at fair
value through profit or
loss
8.DEBTORS
30 June 2019 30 June 2018
GBP000 GBP000
Amounts due from brokers 77 102
Accrued income - 57
Overseas withholding tax 3 2
receivable
Prepayments 25 28
105 189
9.DERIVATIVES
Whilst the Company may use a variety of derivative contracts, the main
derivatives entered into during the year were contracts for difference under a
master agreement with the Company's CFD counterparties to enable the Company to
gain long or short exposure on individual securities through CFDs. CFDs are
synthetic equities and are valued by reference to the underlying market value
of the corresponding security.
Notional dividend income on long positions amounted to GBP669,000 (2018: GBP
657,000) and notional dividend expenses on short positions amounted to GBP257,000
(2018: GBP246,000) during the year. The net amount of GBP412,000 (2018: GBP411,000)
is included within dividend income in note 2 on page 32. Realised and
unrealised gains on contracts for difference are shown in note 7(c).
The fair value of the CFDs at 30 June 2019 was negative GBP2,542,000 (2018:
negative GBP2,795,000) comprising revaluation gains of GBP1,035,000 (2018:
revaluation gains of GBP1,239,000) recorded in current assets and revaluation
losses of GBP3,577,000 (2018: revaluation losses of GBP4,034,000) recorded in
current liabilities.
The Company also invested in FTSE futures during the year, the realised gains
amounted to GBP257,000 (2018: losses of GBP216,000) which are included in note 7(c)
above.
10.CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR
30 June 2019 30 June 2018
GBP000 GBP000
Provision 150 -
for
liquidation
costs
Purchases 133 1,997
for future
settlement
Accrued 116 105
expenses
Total 399 2,102
creditors
11.SHARE CAPITAL
Year ended 30 Year ended 30 Year ended 30 Year ended 30
June 2019 June 2019 June 2018 June 2018
Number of Number of
Shares GBP000 Shares GBP000
Allotted,
issued & fully
paid:
Opening balance 50,000,000 500 50,000,000 500
Ordinary Shares
of GBP0.01
50,000,000 500 50,000,000 500
12.SHARE PREMIUM
Year ended Year ended
30 June 2019 30 June 2018
GBP000 GBP000
Opening balance 48,872 48,872
Closing balance 48,872 48,872
13.CAPITAL RESERVE
Year ended Year ended Year Year ended Year ended Year
30 June 2019 30 June 2019 ended 30 June 2018 30 June 2018 ended
30 June 30 June
2019 2018
Gains/ Investment Gains/ Investment
(losses) (losses)
on sale of holdings on sale of holdings
investments gains/ Total investments gains/ Total
(losses) (losses)
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Opening (4,528) 705 (3,823) (1,577) 1,882 305
balance
(Losses)/
gains on
investment
holdings
sold in the (403) - (403) 412 - 412
year
Total gains/
(losses) on
futures and
on CFD
assets and
liabilities
held at fair
value
through 120 - 120 (3,130) - (3,130)
profit or
loss in the
year
Movements in
losses on
investment
holdings - (1,081) (1,081) - (1,177) (1,177)
held at the
year end
Investment (259) - (259) (263) - (263)
management
fee charged
to capital
Current tax 49 - 49 30 - 30
transfer
Provision (150) - (150) - - -
for
liquidation
costs
Closing (5,171) (376) (5,547) (4,528) 705 (3,823)
balance
14.FINANCIAL COMMITMENTS
At 30 June 2019 there were no commitments in respect of unpaid calls and
underwritings (2018: none).
15.RETURN PER SHARE - BASIC
Total return per Ordinary Share is based on the return for the year after
taxation of GBP(1,234,000) (year to 30 June 2018: GBP(3,811,000)).
These calculations are based on the 50,000,000 Ordinary Shares in issue during
the year to 30 June 2019 (year to 30 June 2018: 50,000,000 Ordinary Shares).
The return per Ordinary Share can be further analysed between revenue and
capital as below:
Year ended 30 Year ended 30 Year ended 30 Year ended 30
June 2019 June 2019 June 2018 June 2018
Pence Pence
per share GBP000 per share GBP000
Net revenue 0.68p 340 0.63p 317
return
Net capital (3.15)p (1,574) (8.26)p (4,128)
return
Net total (2.47)p (1,234) (7.63)p (3,811)
return
16.NET ASSET VALUE PER SHARE
Total shareholders' funds and the net asset value per share attributable to the
ordinary shareholders at the year end calculated in accordance with the
Articles of Association were are as follows:
Net asset value Net asset value
per share per share
30 June 2019 30 June 2018
Total shareholders' funds 44,347 45,981
(GBP000)
Net asset value per share 88.69p 91.96p
The net asset value per share is based on total shareholders' funds above and
on the 50,000,000 Ordinary Shares in issue at the year end (30 June 2018:
50,000,000 Ordinary Shares).
17.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 2019 GBP11,150 (2018: GBP11,060) of this
fee remained outstanding after taking into account the GBP17,249 (2018: GBP17,216)
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 (see note 3 on page 32).
Full details of Directors' interests are set out in the Directors' Remuneration
Report on page 17. Fees paid to the Directors are disclosed in the Directors'
Remuneration Report on page 18. No fees were outstanding to be paid to the
Directors at the year end.
The Company has an investment in TM Sanditon UK Select Fund of GBP4,469,355 at 30
June 2019 (GBP4,646,565 at 30 June 2018).
The Company has a 20% holding in the Investment Manager, Sanditon Asset
Management Limited (see note 7 on pages 34 and 35).
18.FINANCIAL INSTRUMENTS AND CAPITAL DISCLOSURES
Risk Management Policies and Procedures
As an investment trust the Company invests in equities and equity related
derivatives for the long-term so as to secure its investment objective stated
on page 8. In pursuing its investment objective, the Company is exposed to a
variety of risks that could result in either a reduction in the Company's net
assets or a reduction of the profits available for dividends.
These risks, include market risk (comprising currency risk, interest rate risk,
and other price risk), liquidity risk, and credit risk, and the Directors'
approach to the management of them are set out below.
The objectives, policies and processes for managing the risks, and the methods
used to measure the risks, are set out below.
(a) Market Risk
The fair value or future cash flows of a financial instrument held by the
Company may fluctuate because of changes in market prices. This market risk
comprises three elements - currency risk (see (i) below), interest rate risk
(see (ii) below) and other price risk (see (iii) below). The Board of Directors
reviews and agrees policies for managing these risks. The Company's Investment
Manager assesses the exposure to market risk when making each investment
decision, and monitors the overall level of market risk on the whole of the
investment portfolio on an ongoing basis.
(i) Currency Risk
A proportion of the Company's assets, liabilities, and income are denominated
in currencies other than sterling (the Company's functional currency, in which
it reports its results). The Investment Manager does not hedge currency
exposure. As a result, movements in exchange rates may affect the sterling
value of those items.
The Investment Manager monitors the Company's exposures and reports to the
Board on a regular basis.
Income denominated in foreign currencies is converted to sterling on receipt.
The Company does not use financial instruments to mitigate the currency
exposure in the period between the time that income is included in the
financial statements and its receipt.
Foreign currency exposures
An analysis of the Company's equity investments and Contracts for Differences
that are priced in a foreign currency is:
As at As at
30 June 2019 30 June 2018
GBP000 GBP000
Contracts for
Differences:
Euro (2,931) (2,176)
Total (2,931) (2,176)
Foreign currency sensitivity
Due to the insignificant impact of fluctuations in foreign currency no
sensitivity analysis is shown.
(ii) Interest Rate Risk
Interest rate risk is the risk that the fair value or future cash flows of a
financial instrument will fluctuate because of changes in market interest
rates.
The Company is exposed to interest rate risk specifically through its cash
holdings, holdings of UK Treasury Bills and on positions within the CFD
portfolio. Interest rate movements may affect the level of income receivable
from any cash at bank and on deposits. The effect of interest rate changes on
the earnings of the companies held within the portfolio may have a significant
impact on the valuation of the Company's investments. Movements in interest
rates will also have an impact on the valuation of the CFD derivative
contracts, see below for further details.
Interest rate exposure
The exposure at 30 June 2019 of financial assets and liabilities to interest
rate risk is shown by reference to floating interest rates - when the interest
rate is due to be re-set.
30 June 2019 30 June 2018
due within due within
one year one year
GBP000 GBP000
Exposure to floating
interest rates:
CFD derivative contract
- Notional long positions 12,873 12,865
- Notional short (18,055) (20,962)
positions
Cash at bank 4,412 9,247
Collateral paid in 8,108 10,006
respect of contracts for
difference
UK Treasury Bills 25,178 21,122
The possible effects on fair value and cash flows that could arise as a result
of changes in interest rates are taken into account when making investment
decisions. Derivative contracts are not used to hedge against the exposure to
interest rate risk.
The Company is exposed to interest rate risk on cash holdings and CFD positions
held within the portfolio.
The Company does not have any fixed rate exposure at 30 June 2019 (30 June
2018: none).
If interest rates had been +/- 25 basis points and all other variables were
held constant, the Company's return attributable to shareholders for the year
ended 30 June 2019 would have been increased/(decreased) by approximately +/- GBP
81,000.
(iii) Other Price Risk
Other price risk is the risk that the fair value or future cash flows of a
financial instrument will fluctuate because of changes in market prices (other
than those arising from interest rate risk or currency risk), whether those
changes are caused by factors specific to the individual financial instrument
or its issuer, or factors affecting similar financial instruments traded in the
market.
The Company is exposed to market price risk arising from its equity investments
and its exposure to the positions within the CFD portfolio. The movements in
the prices of these investments result in movements in the performance of the
Company.
The Company's exposure to other changes in market prices at 30 June 2019 on its
equity investments was GBP9,485,000 (30 June 2018: GBP10,314,000). In addition, the
Company's gross market exposure to these price changes through its CFD
portfolio was GBP12,873,000 (30 June 2018: GBP12,865,000) through long positions
and GBP18,055,000 (30 June 2018: GBP20,962,000) through short positions.
The Company utilises CFDs, as part of its investment policy. These instruments
can be highly volatile and potentially expose investors to a higher risk of
loss. The low initial margin deposits normally required to establish a position
in such instruments permit a high degree of leverage. As a result, depending on
the type of instrument, a relatively small movement in the price of a contract
may result in a profit or loss which is high in proportion to the value of the
net exposures in the underlying CFD positions. In addition, daily limits on
price fluctuations and speculative position limits on exchanges may prevent
prompt liquidation of positions resulting in potentially greater losses.
The Company limits the gross market exposure, and therefore the leverage, of
this strategy to approximately 200% of the Company's net assets. The CFDs
utilised have a linear performance to referenced stocks quoted on exchanges and
therefore have the same volatility profile to the underlying stocks. Short CFD
positions carry a greater risk of loss than a simple long exposure or CFD long
positions which are limited to the initial capital invested. Possible losses
from securities sold short can theoretically be unlimited. Market exposures to
derivative contracts are disclosed below.
Economic exposure through derivatives is restricted to 200% of the Company's
net assets. The gross value represents the aggregate of the long and short
exposures without netting and so within this limit, market exposure may be
significantly less. The net exposure refers to the market exposure the Company
has to the underlying securities on long CFD positions, less the market
exposure to the underlying securities on which the Company has taken short
positions.
Exposures are monitored daily by the Investment Manager. The Company's Board
also reviews exposures regularly.
The CFD positions are diversified across sectors and geographies comprising 30
positions as at 30 June 2019 (25 positions as at 30 June 2018).
30 June 30 June 30 June 30 June
2019 2019 2018 2018
GBP000 % of net GBP000 % of net
assets assets
CFDs - (18,055) -40.6 (20,962) -45.6
gross
exposure
relating
to short
positions
CFDs - 12,873 28.9 12,865 28.0
gross
exposure
relating
to long
positions
FTSE 100 (5,527) -12.4 (9,122) -19.8
Future
Net (10,709) -24.1 (17,219) -37.4
market
exposure
The Board of Directors manages the market price risks inherent in the
investment portfolio by ensuring full and timely access to relevant information
from the Investment Manager. The Board meets regularly and at each meeting
reviews investment performance. The Board monitors the Investment Manager's
compliance with the Company's objective.
When appropriate, the Company manages its exposure to risk by using futures
contracts or by buying put options on indices and on quoted equity investments
in its portfolio. During the year, FTSE futures contracts were used as being a
short term efficient instrument to alter the Company's net exposure.
Concentration of exposure to other price risks
A sector breakdown and geographical allocation of the portfolio is contained in
the Portfolio on page 6.
Other price risk sensitivity
The following table illustrates the sensitivity of the profit after taxation
for the year to an increase or decrease of 10% in the fair values of the
Company's equities and CFDs. This level of change is considered to be
reasonably possible based on observation of current market conditions. The
sensitivity analysis is based on the Company's equities and net fair value of
the CFDs as at the balance sheet date, with all other variables held constant.
Increase in Decrease in Increase in Decrease in
fair value fair value fair value fair value
2019 2019 2018 2018
GBP000 GBP000 GBP000 GBP000
Impact on 1,410 (1,410) 1,559 (1,559)
capital return
- increase/
(decrease)
Return after 1,410 (1,410) 1,559 (1,559)
taxation -
increase/
(decrease)
(b) Liquidity Risk
This is the risk that the Company will encounter difficulty in meeting
obligations associated with financial liabilities.
Liquidity risk exposure
The undiscounted gross cash outflows of the financial liabilities as at 30 June
2019, based on the earliest date on which payment can be required, were as
follows:
30 June 2019 30 June 2018
less than 3 months less than 3 months
GBP000 GBP000
Provision for liquidation 150 -
costs
Amounts payable in 3,577 4,034
respect of contracts for
differences
Other payables 249 2,102
3,976 6,136
The Company is exposed to liquidity risks from the leverage employed through
exposure to long and short CFD positions. However, timely sale of trading
positions can be impaired by many factors including decreased trading volume
and increased price volatility. As a result, the Company may experience
difficulties in disposing of assets to satisfy liquidity demands. Liquidity
risk is minimised by holding sufficient liquid investments which can be readily
realised to meet liquidity demands. The Company's liquidity risk is managed on
a daily basis by the Investment Manager in accordance with established policies
and procedures in place.
The investment in unquoted securities may have limited liquidity and be
difficult to realise. At 30 June 2019 the unquoted securities are valued at GBP
1,304,790 (30 June 2018: GBP1,461,151) which relates to the investment in
Sanditon Asset Management Limited.
(c) Credit Risk
The failure of the counterparty to a transaction to discharge its obligations
under that transaction could result in the Company suffering a loss.
The cash is subject to counterparty credit risk as the Company's access to its
cash could be delayed should the counterparties
become insolvent or bankrupt.
The Company's holdings in CFD contracts present counterparty credit risk. The
Company's maximum exposure to counterparty credit risk from holding these
contracts will be equal to the notional amount of any net unrealised gains as
disclosed in the financial statements. CFD contracts generally require
variation margins and the counterparty credit risk is monitored by the
Investment Manager.
In summary, the exposure to credit risk at 30 June 2019 was as follows:
30 June 2019 30 June 2018
3 months or less 3 months or less
GBP000 GBP000
Cash at bank 4,412 9,247
UK Treasury Bills 25,178 21,122
Amounts due in respect of 1,035 1,239
contracts for difference
Collateral paid in 8,108 10,006
respect of contracts for
difference
Debtors 105 189
38,838 41,803
None of the above assets were impaired or past due but not impaired.
Investment transactions are carried out with a number of brokers, whose
credit-standing is reviewed periodically by the Investment Manager, and limits
are set on the amount that may be due from any one broker. This is monitored by
the Board as part of the investment limits and restrictions checklist (as shown
on page 15).
Cash at bank is held only with reputable banks with high quality external
credit ratings. The Company generally holds significant cash balances and seeks
to limit exposure to any one bank to 20% of net assets. The Company's principal
counterparties are Northern Trust and CFD provider Bank of America Merrill
Lynch. Cash is also held in UK Treasury Bills.
(d) Fair Value Measurements of Financial Assets and Financial Liabilities
Fair value is the amount for which an asset could be exchanged, a liability
settled, or an equity instrument granted could be exchanged, between
knowledgeable, willing parties in an arm's length transaction.
The valuation techniques used by the Company are explained in the accounting
policies note 1 (b) on page 30.
The table below sets out fair value measurements using fair value hierarchy.
Financial Level 1 Level 2 Level 3 Total
assets at
fair value
through GBP000 GBP000 GBP000 GBP000
profit or
loss at 30
June 2019
Assets:
Equity 3,711 - 1,305 5,016
investments
TM Sanditon - 4,469 - 4,469
UK Select
Fund
Contracts - 1,035 - 1,035
for
difference -
fair value
gains
Liabilities:
Contracts - (3,577) - (3,577)
for
difference -
fair value
losses
Total 3,711 1,927 1,305 6,943
Financial Level 1 Level 2 Level 3 Total
assets at
fair value
through GBP000 GBP000 GBP000 GBP000
profit or
loss at 30
June 2018
Assets:
Equity 4,207 - 1,461 5,668
investments
TM Sanditon - 4,646 - 4,646
UK Select
Fund
Contracts - 1,239 - 1,239
for
difference -
fair value
gains
Liabilities:
Contracts - (4,034) - (4,034)
for
difference -
fair value
losses
Total 4,207 1,851 1,461 7,519
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.
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). 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 2019 and at 30 June 2018, 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 a
reduction in your Company's holding in SAM from GBP1,461,151 to GBP1,304,790.
The Board have considered the net realisable value of its stake in SAM by
reviewing the liquidation value of SAM's Balance Sheet and determined that
there was no need to adjust the formula driven fair value on the grounds that
any difference is not material to the Company's financial statements.
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 2019
Investments
GBP000
Opening fair value 1,461
Decrease in fair value of investment (156)
in Sanditon Asset Management Limited
Closing fair value 1,305
Level 3 financial assets at fair
value through profit or loss
As at
30 June 2018
Investments
GBP000
Opening fair value 1,549
Increase in fair value of investment (88)
in Sanditon Asset Management Limited
Closing fair value 1,461
(e) Capital Management Policies and Procedures
The Company's capital management objectives are:
* to ensure that the Company will be able to continue as a going concern up
until the liquidation vote and thereafter if the vote is not passed; and
* to deliver absolute returns of at least 2% per annum, compounded annually,
above RPIX.
The key performance indicators are contained in the strategic report on page 9.
The Company is subject to several externally imposed capital requirements:
* As a public company, the Company has to have a minimum share capital of GBP
50,000.
* In order to be able to pay dividends out of profits available for
distribution by way of dividends, the Company has to be able to meet one of the
two capital restriction tests imposed on investment companies by company law.
The Company's capital at 30 June 2019 comprises of called up share capital and
reserves totalling GBP44,347,000 (30 June 2018: GBP45,981,000).
The Board regularly monitors, and has complied with, the externally imposed
capital requirements. This is unchanged from the prior period.
Shareholder Information
SHARE PRICE AND PERFORMANCE INFORMATION
The Ordinary Shares are listed on the London Stock Exchange. Information about
the Company can be obtained directly from:
www.sanditonam.com
Contact Sanditon on 020 3595 2900, or by e-mail to info@sanditonam.com
SHARE DEALING
Shares can be purchased through a stockbroker.
SHARE REGISTER ENQUIRIES
The register for the Ordinary Shares is maintained by Link Asset Services. In
the event of queries regarding your holding, please contact the Registrar on
0871 664 0300 (calls cost 12p per minute plus network extras, lines are open
Monday to Friday 9:00 a.m. to 5:30 p.m.); overseas +44 371 664 0300; or e-mail
enquiries@linkgroup.co.uk. Changes of name and/or address must be notified in
writing to the Registrar.
STATEMENT REGARDING NON-MAINSTREAM INVESTMENT PRODUCTS
The Company currently conducts its affairs so that the Ordinary Shares issued
by the Company can be recommended by IFAs to retail investors in accordance
with the FCA's rules in relation to non-mainstream investment products and
intends to continue to do so for the foreseeable future.
Sanditon Investment Trust's shares fall outside the restrictions which apply to
non-mainstream investment products because Sanditon Investment Trust plc is an
investment trust.
A member of the Association of Investment Companies.
Glossary of Terms and Alternative Performance Measures
ALTERNATIVE PERFORMANCE MEASURES ("APMs")
We assess our performance using a variety of measures that are not specifically
defined under FRS and therefore termed APMs. The APMs that we use may not be
directly comparable with those used by other companies.
DISCOUNT/PREMIUM
If the share price of an investment trust is lower than the NAV per share, the
shares are said to be trading at a discount. The size of the discount is
calculated by subtracting the share price from the NAV per share and is usually
expressed as a percentage of the NAV per share. If the share price is higher
than the NAV per share, the shares are said to be trading at a premium. The
discount/premium is shown on page 1. The Board monitors the level of discount
or premium.
As at
Page 30 June 2019
NAV per Ordinary a 1 88.69p
Share
Share price b 1 81.00p
Discount (b÷a)-1 -8.7%
ONGOING CHARGES
The ongoing charges represent the Company's management fee and all other
operating expenses, excluding finance costs, expressed as a percentage of the
average of the daily net assets during the year (see page 9).
Page GBP000
Average NAV a 46,103
Annualised b 602
expenses
Ongoing charges (b÷a) 1 1.31%
NET ASSET VALUE ("NAV")
The NAV is the assets attributable to shareholders expressed as an amount per
individual share.
Page
Net assets (GBP000) a 1 44,347
Ordinary Shares in b 36 50,000,000
issue
NAV per share (a÷b) 1 88.69p
TOTAL RETURN
The combined effect of any dividends paid, together with the rise or fall in
the share price or NAV. Total return statistics enable the investor to make
performance comparisons between companies with different dividend policies.
Page NAV (p)
Closing NAV per a 1 88.69
share
Plus: Dividend b 1 0.50
paid in the year
(note 6)
NAV Total Return 89.19
for year
Less: Opening NAV c 1 -91.96
per share
Decrease in NAV -2.77
Total Return for
year
% NAV Total return (a+b+c)÷c -3.0%
for year
GROSS EXPOSURE
The sum of all long and short assets held.
NET EXPOSURE
The difference between long assets held and short assets.
Notice of Annual General Meeting
to the members of Sanditon Investment Trust plc
Notice is hereby given that 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 Thursday, 5 December 2019, at 11:30 a.m. to consider and, if thought
fit, pass the following resolutions, which will be proposed as to resolutions
1, 2, 3, 4, 5, 6, 7 and 8 as ordinary resolutions:
ORDINARY RESOLUTIONS
1. To receive the Directors' Report and Financial Statements for the
year ended 30 June 2019.
2. To approve the Directors' Remuneration Report for the year ended
30 June 2019.
3. To approve the final dividend.
4. To re-elect Mr Rupert Barclay as a Director of the Company.
5. To re-elect Mr Christopher Keljik as a Director of the Company.
6. To re-elect Mr Hugo Dixon as a Director of the Company.
7. To re-elect Mr Mark Little as a Director of the Company.
8. To re-appoint Ernst & Young LLP as Auditor of the Company and to
authorise the Board to determine their remuneration.
By order of the Board
Sanditon Asset Management Limited
Secretary
30 October 2019
Notes to the Notice of Annual General Meeting
1. Members are entitled to appoint a proxy to exercise all or any of their
rights to attend and to speak and vote on their behalf at the meeting. A
shareholder may appoint more than one proxy in relation to the Annual General
Meeting provided that each proxy is appointed to exercise the rights attached
to a different share or shares held by that shareholder. A shareholder may not
appoint more than one proxy to exercise the rights attached to any one share. A
proxy need not be a shareholder of the Company.
A proxy form which may be used to make such appointment and give proxy
instructions accompanies this notice. If you do not have a proxy form and
believe that you should have one, or if you require additional forms, please
contact the Company's registrars, Link Asset Services (contact details can be
found on page 51).
2. To be valid any proxy form or other instrument appointing a proxy must be
received by post to Link Asset Services, PXS1, 34 Beckenham Road, Beckenham,
Kent BR3 4ZF or (during normal business hours only) by hand at the offices of
the Company's registrars, Link Asset Services, 34 Beckenham Road, Beckenham,
Kent, BR3 4TU no later than 11:30 a.m. on Tuesday, 3 December 2019.
3. The return of a completed proxy form, other such instrument or any CREST
Proxy Instruction (as described in paragraph 9 below) will not prevent a
shareholder attending the Annual General Meeting and voting in person if he/she
wishes to do so.
4. Any person to whom this notice is sent who is a person nominated under
section 146 of the Companies Act 2006 to enjoy information rights (a "Nominated
Person") may, under an agreement between him/her and the shareholder by whom he
/she was nominated, have a right to be appointed (or to have someone else
appointed) as a proxy for the Annual General Meeting. If a Nominated Person has
no such proxy appointment right or does not wish to exercise it, he/she may,
under any such agreement, have a right to give instructions to the shareholder
as to the exercise of voting rights.
5. The statement of the rights of shareholders in relation to the appointment
of proxies in paragraphs 1 and 2 above does not apply to Nominated Persons. The
rights described in these paragraphs can only be exercised by shareholders of
the Company.
6. To be entitled to attend and vote at the Annual General Meeting (and for the
purpose of the determination by the Company of the votes they may cast),
shareholders must be registered in the Register of Members of the Company by
11:30 a.m. on Tuesday, 3 December 2019 (or, in the event of any adjournment, on
the date which is two days before the time of the adjourned meeting for the
purposes of which no account is to be taken of any part of a day that is not a
working day). Changes to the Register of Members after the relevant deadline
shall be disregarded in determining the rights of any person to attend and vote
at the meeting.
7. As at 30 October 2019 (being the last business day prior to the publication
of this Notice) the Company's issued share capital consisted of 50,000,000
Ordinary Shares, carrying one vote each. Therefore, the total voting rights in
the Company as at 30 October 2019 are 50,000,000.
8. CREST members who wish to appoint a proxy or proxies through the CREST
electronic proxy appointment service may do so by using the procedures
described in the CREST Manual. CREST Personal Members or other CREST sponsored
members, and those CREST members who have appointed a service provider(s),
should refer to their CREST sponsor or voting service provider(s), who will be
able to take the appropriate action on their behalf.
9. In order for a proxy appointment or instruction made using the CREST service
to be valid, the appropriate CREST message (a "CREST Proxy Instruction") must
be properly authenticated in accordance with Euroclear UK & Ireland Limited's
specifications, and must contain the information required for such instruction,
as described in the CREST Manual (available via www.euroclear.com/CREST). The
message, regardless of whether it constitutes the appointment of a proxy or is
an amendment to the instruction given to a previously appointed proxy must, in
order to be valid, be transmitted so as to be received by the issuer's agent
(ID RA10) by 11:30 a.m. on Tuesday, 3 December 2019. For this purpose, the time
of receipt will be taken to be the time (as determined by the time stamp
applied to the message by the CREST Application Host) from which the issuer's
agent is able to retrieve the message by enquiry to CREST in the manner
prescribed by CREST. After this time any change of instructions to proxies
appointed through CREST should be communicated to the appointee through other
means.
10. CREST members and, where applicable, their CREST sponsors, or voting
service providers should note that Euroclear UK & Ireland Limited does not make
available special procedures in CREST for any particular message. Normal system
timings and limitations will, therefore, apply in relation to the input of
CREST Proxy Instructions. It is the responsibility of the CREST member
concerned to take (or, if the CREST member is a CREST personal member, or
sponsored member, or has appointed a voting service provider, to procure that
his or her CREST sponsor or voting service provider(s) take(s)) such action as
shall be necessary to ensure that a message is transmitted by means of the
CREST system by any particular time. In this connection, CREST members and,
where applicable, their CREST sponsors or voting system providers are referred,
in particular, to those sections of the CREST Manual concerning practical
limitations of the CREST system and timings.
11. The Company may treat as invalid a CREST Proxy Instruction in the
circumstances set out in Regulation 35(5)(a) of the Uncertificated Securities
Regulations 2001.
12. Any corporation which is a member can appoint one or more corporate
representatives who may exercise on its behalf all of its powers as a member
provided that they do not do so in relation to the same shares.
13. Under section 527 of the Companies Act 2006 members meeting the threshold
requirements set out in that section have the right to require the Company to
publish on a website a statement setting out any matter relating to:
(i) the audit of the Company's accounts (including the Auditor's report and the
conduct of the audit) that are to be laid before the Annual General Meeting; or
(ii) any circumstance connected with an Auditor of the Company ceasing to hold
office since the previous meeting at which annual accounts and reports were
laid in accordance with section 437 of the Companies Act 2006. The Company may
not require the shareholders requesting any such website publication to pay its
expenses in complying with sections 527 or 528 of the Companies Act 2006. Where
the Company is required to place a statement on a website under section 527 of
the Companies Act 2006, it must forward the statement to the Company's Auditor
not later than the time when it makes the statement available on the website.
The business which may be dealt with at the Annual General Meeting includes any
statement that the Company has been required under section 527 of the Companies
Act 2006 to publish on a website.
14. Any member attending the meeting has the right to ask questions. The
Company must cause to be answered any such question relating to the business
being dealt with at the meeting but no such answer need be given if (a) to do
so would interfere unduly with the preparation for the meeting or involve the
disclosure of confidential information, (b) the answer has already been given
on a website in the form of an answer to a question, or (c) it is undesirable
in the interests of the Company or the good order of the meeting that the
question be answered.
15. A copy of this notice, and other information required by s311A of the
Companies Act 2006, is available at the Investment Manager's website:
www.sanditonam.com
Directors and Advisers
as at 30 June 2019
Directors
Rupert Barclay, Chairman
Hugo Dixon
Christopher Keljik OBE
Mark Little
Investment Manager
Sanditon Asset Management Limited
Fifth Floor
33 Cannon Street
London EC4M 5SB
Telephone: 020 3595 2900
Administrator
Northern Trust Global Services SE
50 Bank Street
Canary Wharf
London E14 5NT
Company Secretary
Sanditon Asset Management Limited*
Fifth Floor
33 Cannon Street
London EC4M 5SB
*Appointed 22 February 2018
Registered office
Fifth Floor
33 Cannon Street
London EC4M 5SB
Company number
09040176
Auditor
Ernst & Young LLP
25 Churchill Place
Canary Wharf
London E14 5EY
Registrar
Link Asset Services
34 Beckenham Road
Beckenham
Kent BR3 4TU
Email: enquiries@linkgroup.co.uk
Stockbroker
JPMorgan Cazenove
25 Bank Street
Canary Wharf
London E14 5JP
Website
www.sanditonam.com
THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION. IT CONTAINS
PROPOSALS RELATING TO THE MEMBERS' VOLUNTARY LIQUIDATION OF SANDITON INVESTMENT
TRUST PLC ON WHICH SHAREHOLDERS ARE BEING ASKED TO VOTE. If you are in any
doubt about the contents of this document or the action you should take, you
are recommended to seek your own independent financial advice immediately from
your stockbroker, bank manager, solicitor, accountant or other independent
financial adviser who is authorised under the Financial Services and Markets
Act 2000.
If you have sold or otherwise transferred all your shares in Sanditon
Investment Trust plc (the "Company"), please forward this document, and the
accompanying Form of Proxy, as soon as possible to the purchaser or transferee
or to the stockbroker, bank or other agent through whom the sale or transfer
was effected for onward transmission to the purchaser or transferee. If you
have sold or transferred only part of your holding of shares in the Company,
you should retain this document and the accompanying Form of Proxy and consult
the stockbroker, bank or other agent through whom the sale or transfer was
effected.
SANDITON INVESTMENT TRUST PLC
(a public limited company incorporated under the laws of England and Wales with
registered number 09040176)
Recommended Members' Voluntary Liquidation of the Company
and
Notice of General Meeting
The proposals described in this document are conditional on Shareholder
approval. Your attention is drawn to the Letter from the Chairman of the
Company set out in Part I of this document which contains the recommendation of
the Directors that Shareholders should vote in favour of the Resolution which
is to be proposed at the General Meeting referred to below. Your attention is
drawn to the paragraph headed "Action to be taken" of Part I of this document.
Notice of a General Meeting of the Company, which is to be held at the offices
of Northern Trust, 50 Bank Street, Canary Wharf, London E14 5NT at 11.35 a.m.
(or as soon thereafter as the immediately preceding Annual General Meeting
shall have been concluded or adjourned) on Thursday, 5 December 2019, is set
out at the end of this document. To be valid, the Form of Proxy for use by
Shareholders at this meeting must be completed, signed and returned in
accordance with the instructions printed thereon so as to be received by the
Company's Registrar, Link Asset Services, The Registry, 34 Beckenham Road,
Beckenham, Kent, BR3 4TU, United Kingdom, as soon as possible and, in any
event, so as to arrive by not later than 11.35 a.m. on Tuesday, 3 December
2019.
Definitions
The following definitions apply throughout this document, unless the context
otherwise requires:
Annual General Meeting the annual general meeting of the
Company convened for 11.30 a.m. on 5
December 2019 (or any adjournment
thereof)
Articles of Association the articles of association of the
Company, as amended from time to time
Board or the Directors the board of directors of the Company
Company Sanditon Investment Trust plc
CREST the relevant system (as defined in
the CREST Regulations) in respect of
which Euroclear is the Operator (as
defined in the CREST Regulations)
CREST Member a person who has been admitted by
Euroclear as a system-member (as
defined in the CREST Regulations)
CREST Participant a person who is, in relation to
CREST, a system-participant (as
defined in the CREST Regulations)
CREST Regulations The Uncertificated Securities
Regulations 2001 (SI 2001/3755)
CREST Sponsor a CREST Participant admitted to CREST
as a CREST sponsor, being a
sponsoring system-participant (as
defined in the CREST Regulations)
CREST Sponsored Member a CREST member admitted to CREST as a
Sponsored Member
Distribution has the meaning given to it in the
paragraph headed "Shareholder
Distributions" in Part I of this
document
Euroclear Euroclear UK & Ireland Limited
Financial Conduct Authority or FCA the Financial Conduct Authority of
the United Kingdom
Form of Proxy the form of proxy accompanying this
document for use by Shareholders in
connection with the General Meeting
General Meeting the General Meeting of Shareholders
of the Company convened for 11.35
a.m. (or as soon thereafter as the
immediately preceding Annual General
Meeting shall have been concluded or
adjourned) on Thursday, 5 December
2019 at the offices of Northern
Trust, 50 Bank Street, Canary Wharf,
London E14 5NT, notice of which is
set out at the end of this document
HMRC HM Revenue & Customs
Investment Manager Sanditon Asset Management Limited
(registered number 08639467)
Liquidation Fund the cash to be retained by the
Liquidators to pay the Company's
known and contingent liabilities, the
VAT inclusive (if applicable) costs
of the liquidation, and an additional
retention for unknown contingencies
Liquidators the proposed joint liquidators of the
Company, namely Gareth Rutt Morris
and Andrew Martin Sheridan of FRP
Advisory LLP
London Stock Exchange London Stock Exchange plc
Main Market the London Stock Exchange's main
market for listed securities
Members' Voluntary Liquidation the proposed members' voluntary
liquidation of the Company as
described in this document
NAV or Net Asset Value the value of the assets of the
Company less its liabilities,
determined in accordance with the
accounting principles adopted by the
Company from time to time and the
Articles of Association
Notice or Notice of General Meeting the notice of general meeting set out
at the end of this document
Official List the Official List of the FCA
Ordinary Shares ordinary shares of nominal value 1
penny each in the capital of the
Company
Proposals the proposals for the members'
voluntary liquidation of the Company,
as described in more detail in this
circular
Record Date 6.00 p.m. on 4 December 2019
Register the register of members of the
Company
Registrar Link Asset Services of The Registry,
34 Beckenham Road, Beckenham, Kent
BR3 4TU
Resolution the special resolution set out in the
Notice of General Meeting to approve
the Members' Voluntary Liquidation
Shareholders holders of Ordinary Shares
Sterling or GBP pounds sterling, being the lawful
currency of the UK
United Kingdom or UK the United Kingdom of Great Britain
and Northern Ireland
Expected Timetable
2019
Date from which it is advised that close of business on Monday, 2
dealings in Ordinary Shares should December
only be for cash settlement and
immediate delivery of documents of
title
Latest time and date for receipt of 11.35 a.m. on Tuesday, 3 December
Forms of Proxy from Shareholders for
use at the General Meeting
Latest time for delivery to Registrar 5.00 p.m. on Wednesday, 4 December
of documents of title relating to
dealings in Ordinary Shares subject
to cash settlement
Close of the Register and Record Date 6.00 p.m. on Wednesday, 4 December
for participation in the Members'
Voluntary Liquidation
Suspension of Ordinary Shares from 7.30 a.m. on Thursday, 5 December
trading on the London Stock Exchange
and suspension of listing on the
Official List of the FCA
General Meeting to approve the 11.35 a.m. on Thursday, 5 December
Members' Voluntary Liquidation and,
if approved, the appointment of the
Liquidators
Cancellation of the listing of the 8.00 a.m. on Friday, 6 December
Ordinary Shares on the Official List
and cancellation of admission to
trading of the Ordinary Shares on the
Main Market
Expected date of Distribution Friday, 27 December
All references are to London time.
The dates and times set out in the expected timetable above may be adjusted by
the Company, in which event details of the new dates and/or times will be
notified to the FCA and the London Stock Exchange, and an announcement will be
made through a Regulatory Information Service.
Part I
Letter from the Chairman
Sanditon Investment Trust plc
(a public limited company incorporated under the laws of England
and Wales with registered number 09040176)
Directors: Registered Office:
Rupert Barclay, Chairman Fifth Floor
Hugo Dixon 33 Cannon Street
Christopher Keljik OBE London EC4M 5SB
Mark Little
31 October 2019
Dear Shareholder
Recommended Members' Voluntary Liquidation of the Company
Introduction
The Company has today announced proposals for a voluntary liquidation of the
Company. I am writing to provide you with details of these proposals, which are
subject to Shareholder approval, and to explain why your Board is recommending
that you vote in favour of the Resolution to be proposed at the General Meeting
of the Company to be held at 11.35 a.m. (or as soon thereafter as the
immediately preceding Annual General Meeting shall have been concluded or
adjourned) on Thursday, 5 December 2019. A notice of the General Meeting is set
out at the end of this document.
Background
On the Company's launch in 2014, the Board considered it desirable that
Shareholders should have the opportunity to review the future of the Company at
appropriate intervals. Accordingly, a Shareholder-friendly continuation vote
structure was put in place, under which a resolution for the continuation of
the Company would be proposed at the sixth annual general meeting of the
Company and, if passed, every three years thereafter. The first such
continuation vote is due to take place at the Company's annual general meeting
in 2020.
Having spoken with a number of significant Shareholders, including members of
the Investment Manager itself who speak for 21 per cent. of the Company's
equity, the Board, together with the Investment Manager, have reluctantly
concluded that the chance of a successful continuation vote in 2020 is slim. As
a result of this feedback, the Investment Manager informed the Board that it
did not wish to continue managing the Company for the next year as, in its
view, it was in the best interests of all Shareholders to propose an early
liquidation of the Company. The Board has considered alternatives to winding
down the Company including appointing a new manager or merging the Company with
another investment trust. However, after consultations with the Company's
advisers, the Board concluded that none of these solutions were optimal.
Therefore, rather than wait for the unsuccessful continuation vote in 2020, the
Board, in consultation with the Investment Manager, have decided to put a
resolution to Shareholders, at a general meeting to be held immediately
following the forthcoming Annual General Meeting, authorising a voluntary
liquidation of the Company.
The Members' Voluntary Liquidation
Under the Proposals, Shareholders on the Register on the Record Date will be
able to realise their investment in the Company through the Members' Voluntary
Liquidation.
This is conditional upon Shareholder approval of the Resolution by 75 per cent.
or more of the votes cast. If the Resolution is not passed, the Company shall
continue in operation until alternative proposals can be put forward.
If the Resolution is passed:
* Gareth Rutt Morris and Andrew Martin Sheridan of FRP Advisory LLP
will be appointed as joint Liquidators and will assume immediate responsibility
for the affairs of the Company;
* the Liquidators will proceed to wind up the Company in accordance
with the provisions of the Insolvency Act 1986;
* the Directors will resign and all powers of the Board will cease;
and
* the listing of Ordinary Shares on the Official List will be
cancelled.
Implementation of the Members' Voluntary Liquidation is conditional upon the
Resolution being passed at the General Meeting. In the event that the
Resolution is not passed, the Members' Voluntary Liquidation will not proceed
and the Company will continue in operation until alternative proposals can be
put forward and will have to bear the abortive costs of having proposed the
Members' Voluntary Liquidation.
Shareholder Distributions
Assuming the Resolution is passed, it is currently expected that the Company's
portfolio will be realised for cash on or around 11 December 2019. In this
case, the Liquidators expect to distribute the cash proceeds of the liquidation
of the Company's portfolio, less the costs of the Proposals and the amount
attributable to the Liquidation Fund, described below, on or around 27 December
2019 to those Shareholders appearing on the register of members as at the
Record Date (the "Distribution").
The Company's sole unlisted investment is its 20 per cent. holding in its
Investment Manager, Sanditon Asset Management PLC (the "SAM Holding"). The
Board and the Investment Manager expect the SAM Holding to be realised either
by means of a buyback of shares by the Investment Manager or, in the event that
an agreement on a buyback cannot be reached for whatever reason, through the
liquidation of the Investment Manager. In the event of a buyback, the Board and
the Investment Manager expect the price for the SAM Holding to be agreed on or
around 5 December 2019 on the basis of the net realisable value of the SAM
Holding. The Board and the Investment Manager do not expect the difference in
this price from the Company's latest valuation of the SAM Holding included in
its Annual Report and Accounts for the year ended 30 June 2019 to be material
to Shareholders in the context of the total Net Asset Value per Ordinary Share
to be realised.
At the Annual General Meeting, the Shareholders will be asked to approve a
final dividend for the financial year ended 30 June 2019. In order to retain
investment trust status for the period between 1 July 2019 and 4 December 2019,
the Company also intends to pay an interim dividend on or around 5 December
2019 to Shareholders on the Register on 22 November 2019. The exact amount and
timing of the payment of such dividend will be announced via RIS in or around
the week commencing 18 November 2019.
The Liquidators will retain sufficient funds in the Members' Voluntary
Liquidation to meet the current, future and contingent liabilities of the
Company, including the VAT inclusive (if applicable) costs and expenses of the
liquidation not already paid at the point of liquidation and an additional
retention of GBP50,000 for unknown contingencies (the "Liquidation Fund").
Once the Liquidators have realised the Company's assets and made the
Distribution, satisfied the claims of creditors of the Company and paid the
costs and expenses of the liquidation, it is expected that the Liquidators
would make a final distribution to Shareholders. This final distribution, if
any, would be made solely at the discretion of the Liquidators.
Nothing in the proposals contained in this document shall impose any personal
liability on the Liquidators or either of them.
Estimated costs of the Members' Voluntary Liquidation
It is anticipated that the total costs and expenses of winding-up the Company
will be approximately GBP150,000 (plus VAT, where applicable), which include the
fees of the Liquidators and those of the Company's advisers in connection with
the liquidation.
Service Providers
The Company's Investment Manager and company secretary, Sanditon Asset
Management Limited, is planning to terminate its contract with the Company. In
addition, the Company is taking steps to serve notice on certain other service
providers (including its administrator, Northern Trust Global Services SE and
its broker, JPMorgan Cazenove), such that their appointments will terminate
should the Resolution be passed.
However, the Liquidators will retain the services of the Company's Registrar,
Link Asset Services, and the Company's tax adviser, Deloitte LLP, during the
initial period after the Company enters liquidation and will review their
agreements as the Company moves forward with the liquidation process.
Suspension and cancellation of the Company's listing and trading of the
Ordinary Shares
The Register will be closed at 6.00 p.m. on Wednesday, 4 December 2019.
Application will be made to the FCA for suspension of listing of the Ordinary
Shares on the Official List of the FCA and application will be made to the
London Stock Exchange for suspension of trading in the Ordinary Shares at 7.30
a.m. on Thursday, 5 December 2019.
The last day for dealings in the Ordinary Shares on the London Stock Exchange
on a normal rolling two day settlement basis will be Monday, 2 December 2019.
After Monday, 2 December 2019, dealings should be for cash settlement only and
will be registered in the normal way if the transfer, accompanied by the
documents of title, is received by the Registrar by close of business on
Wednesday, 4 December 2019. Transfers received after that time will be returned
to the person lodging them and, if the Resolution is passed, the original
holder will receive any proceeds from distributions made by the Liquidators.
If the Resolution is passed, the Company will immediately make an application
for the cancellation of the admission of the Ordinary Shares to listing on the
Official List and to trading on the Main Market. The cancellation is expected
to take effect at 8.00 a.m. on Friday, 6 December 2019.
After the liquidation of the Company and the making of the final distribution
to Shareholders (if any), existing certificates in respect of the Ordinary
Shares will cease to be of value and any existing credit of the Ordinary Shares
in any stock account in CREST will be redundant.
General Meeting
The implementation of the Members' Voluntary Liquidation will require
Shareholders to vote in favour of the Resolution at the General Meeting. The
Resolution is being proposed to:
* place the Company into liquidation and to appoint the Liquidators;
and
* authorise the Liquidators to make in specie distribution(s) to
Shareholders; and
* fix the remuneration of the Liquidators on the basis of time spent
by them; and
* direct that the Company's books and records be held to the order of
the Liquidators.
You will find set out at the end of this document a Notice convening the
General Meeting to be held at 11.35 a.m. (or as soon thereafter as the
immediately preceding Annual General Meeting shall have been concluded or
adjourned) on Thursday, 5 December 2019. The Notice includes the full text of
the Resolution.
The Resolution to be proposed at the General Meeting will be proposed as a
special resolution and, in order to be passed, will require the approval of 75
per cent. or more of the votes cast at the General Meeting, whether in person
or by proxy.
All Shareholders are entitled to attend and vote at the General Meeting. In
accordance with the Articles of Association, all Shareholders present in person
or by proxy shall, upon a show of hands, have one vote each and on a poll shall
have one vote in respect of every Ordinary Share held.
Taxation
The following paragraphs, which are intended as a general guide only, are not
exhaustive, and do not constitute legal or tax advice, are based on current UK
legislation and published HMRC practice, both of which are subject to change
possibly with retrospective effect. They summarise certain limited aspects of
the UK tax treatment of the cash distributions made to Shareholders in
connection with the Members' Voluntary Liquidation of the Company, and they
relate only to the position of individual and corporate Shareholders who hold
their Ordinary Shares beneficially as an investment and (except in so far as
express reference is made to the treatment of non-UK residents) who are
resident (and in the case of individuals domiciled) in the UK for UK tax
purposes.
Shareholders are advised to take independent advice in relation to the tax
implications of any matters set out in this document and to consult an
appropriate professional tax adviser.
A Shareholder who receives a distribution of cash in the course of the Members'
Voluntary Liquidation should be treated as making a disposal or part disposal
of his Ordinary Shares for the purposes of UK taxation of chargeable gains
which may, depending on such Shareholder's individual circumstances (including
the availability of exemptions, reliefs and allowable losses), give rise to a
chargeable gain or allowable loss for the purposes of UK taxation of chargeable
gains.
Shareholders who are not resident in the UK (excluding, in the case of an
individual Shareholder, shareholders who are only temporarily non-resident in
the UK) for UK tax purposes should not be subject to UK tax on chargeable gains
on a disposal, or part disposal, of Ordinary Shares unless such Ordinary Shares
are used, held or acquired for the purposes of a trade, profession or vocation
carried on in the UK through a branch or agency or, in the case of a corporate
Shareholder, through a permanent establishment. Such Shareholders may be
subject to foreign tax on any gain under local law.
Action to be taken
Shareholders will find enclosed with this document a Form of Proxy for use in
relation to the General Meeting.
Whether or not you intend to be present at the General Meeting, you are asked
to complete and sign the accompanying Form of Proxy in accordance with the
instructions printed thereon and to return it to Link Asset Services, The
Registry, 34 Beckenham Road, Beckenham, Kent, BR3 4TU, United Kingdom, as soon
as possible and, in any event, so as to arrive by not later than 11.35 a.m. on
Tuesday, 3 December 2019. A reply paid envelope is enclosed with this document
for your convenience.
The completion and return of the Form of Proxy will not prevent you from
attending the General Meeting and voting in person if you wish to do so.
Recommendation
The Board considers the Members' Voluntary Liquidation to be in the best
interests of the Company and Shareholders as a whole.
Accordingly, the Board unanimously recommends Shareholders to vote in favour of
the Resolution to be proposed at the General Meeting, as the Directors intend
to do in respect of their own beneficial and non-beneficial holdings which, in
aggregate, amount to 736,818 Ordinary Shares (representing 1.47 per cent. of
the Company's issued share capital).
Yours faithfully
Rupert Barclay
Chairman
Sanditon Investment Trust plc
(a public limited company incorporated under the laws of England
and Wales with registered number 09040176)
Notice of General Meeting
Notice is hereby given that a General Meeting of Sanditon Investment Trust plc
(the "Company") will be held at the offices of Northern Trust, 50 Bank Street,
Canary Wharf, London E14 5NT at 11.35 a.m. (or as soon thereafter as the
immediately preceding Annual General Meeting shall have been concluded or
adjourned) on Thursday, 5 December 2019 for the purpose of considering and, if
thought fit, passing the following resolution which will be proposed as a
special resolution:
1 That:
1.1 the Company be and is hereby wound up voluntarily pursuant to
section 84(1)(b) of the Insolvency Act 1986, and that Gareth Rutt
Morris and Andrew Martin Sheridan of FRP Advisory LLP of Kings
Orchard, 1 Queen Street, Bristol, England, BS2 0HQ, having
consented to act, be and are hereby appointed as joint
liquidators (the "Liquidators") with the power to act jointly and
severally for the purposes of such winding-up including realising
and distributing the Company's assets and any power conferred on
them by law or by this resolution; and
1.2 the Liquidators be and are hereby authorised to distribute,
amongst the Shareholders, in specie all or any part of the assets
of the Company; and
1.3 the remuneration of the Liquidators be determined by reference to
the time properly given by them and their staff in attending to
matters prior to and during the winding-up of the Company and
they be and are hereby authorised to draw such remuneration
monthly or at such longer intervals as they may determine and to
pay any expenses properly incurred by them; and
1.4 the Company's books and records be held by the Company Secretary
to the order of the Liquidators until the expiry of twelve (12)
months after the date of dissolution of the Company, when they
may be disposed of, save for financial and trading records which
will be kept for a minimum of six years following the vacation of
the Liquidators from office.
Save where the context requires otherwise, the definitions contained in the
circular to Shareholders dated 31 October 2019 shall have the same meanings
where used in this Notice of General Meeting.
Registered office: By order of the Board
Fifth Floor, 33 Cannon Street, Sanditon Asset Management Limited
London, EC4M 5SB
Registered in England and Wales, No. 31 October 2019
09040176
Notes:
1 The Company, pursuant to Regulation 41 of the Uncertified Securities
Regulations 2001, specifies that only those Members registered in the
Register of Members of the Company at close of business on Tuesday, 3
December 2019 or, in the event that the meeting is adjourned, close of
business on the date which is two days before the date of the
adjourned meeting, shall be entitled to attend, speak and vote at the
aforementioned meeting in respect of the number of shares registered
in their name at the relevant time. Changes to entries in the Register
of Members after the relevant deadline shall be disregarded in
determining the rights of any person to attend and vote at
the meeting.
2 If you are a Member of the Company at the time set out in Note 1
above, you are entitled to appoint a proxy to exercise all or any of
your rights to attend, speak and vote at the meeting and you should
have received a Form of Proxy with this Notice of General Meeting. You
can only appoint a proxy using the procedures set out in these Notes
and the notes to the Form of Proxy. Appointment of a proxy will not
preclude you from subsequently attending and voting at the meeting
should you subsequently decide to do so.
3 A proxy need not also be a Member of the Company but must attend the
meeting to represent you. Details of how to appoint the Chairman of
the meeting or another person as a proxy using the Form of Proxy are
set out in the notes to the Form of Proxy and in Note 4 below. If you
wish your proxy to speak on your behalf at the meeting, you will need
to appoint their own choice of proxy (not the Chairman) and give your
instructions directly to them.
4 You may appoint more than one proxy provided each proxy is appointed
to exercise rights attached to different shares. You may not appoint
more than one proxy to exercise rights attached to any one share. You
should identify, in the designated box on the Form of Proxy, the
number of shares in relation to which the proxy is authorised to act
as your proxy. You should also indicate by marking an "X" in the box
provided if the proxy instruction is one of multiple instructions
being given. To appoint more than one proxy, you may photocopy your
Form of Proxy or contact the Company's Registrar, Link Asset Services,
by telephone on 0871 664 0300 (if calling from within the UK) or on
+44 (0) 371 664 0300 (if calling from outside the UK). Lines are open
from 9.00 a.m. to 5.30 p.m. (London time) Monday to Friday (excluding
public holidays in England and Wales). Calls cost 12p per minute plus
your phone company's access charge. Calls outside the United Kingdom
will be charged at the applicable international rate. Alternatively,
you may contact the Company's Registrar by email
(enquiries@linkgroup.co.uk) or by post (Link Asset Services, The
Registry, 34 Beckenham Road, Beckenham, Kent, BR3 4TU).
5 A vote withheld is not a vote in law, which means that the vote will
not be counted in the calculation of votes for or against the
resolution. If no voting indication is given, your proxy will vote or
abstain from voting at his or her discretion. Your proxy will vote (or
abstain from voting) as he or she thinks fit in relation to any other
matter which is put before the meeting.
6 Members (and any proxies or corporate representatives appointed)
agree, by attending the meeting, that they are expressly requesting
and are willing to receive any communications relating to the
Company's securities made at the meeting.
7 If you are not a Member of the Company but you have been nominated by
a Member of the Company to enjoy information rights, you do not have a
right to appoint any proxies under the procedures set out Note 2 to 4
above. Please read Note 15 below.
8 If the Chairman of the meeting, as a result of any proxy appointments,
is given discretion as to how the votes of those proxies are cast and
the voting rights in respect of those discretionary proxies, when
added to the interests of the Company's securities already held by the
Chairman, result in the Chairman holding such number of voting rights
that he has a notifiable obligation under the Disclosure Guidance and
Transparency Rules, the Chairman will make the necessary notifications
to the Company and the Financial Conduct Authority. As a result, any
Member holding three (3) per cent. or more of the voting rights in the
Company who grants the Chairman a discretionary proxy in respect of
some or all of those voting rights and so would otherwise have a
notification obligation under the Disclosure Guidance and Transparency
Rules, need not make a separate notification to the Company and the
Financial Conduct Authority.
9 A Form of Proxy is enclosed with this document. To be valid, it should
be lodged with the Company's Registrar, together with the power of
attorney or other authority, if any, under which it is signed or a
notarially certified copy thereof, so as to be received no later than
11.35 a.m. on Tuesday, 3 December 2019 or 48 hours (excluding
non-working days) before the time appointed for any adjourned meeting
or, in the case of a poll taken subsequent to the date of the meeting
or adjourned meeting, so as to be received no later than 24 hours
before the time appointed for taking the poll, at the offices of the
Company's Registrar, Link Asset Services.
10 CREST Members who wish to appoint a proxy or proxies through the CREST
electronic proxy appointment service may do so for the meeting to be
held on the above date and any adjournment(s) thereof by using the
procedures described in the CREST Manual, which can be viewed at the
Euroclear website (www.euroclear.com). CREST Personal Members or other
CREST Sponsored Members, and those CREST Members who have appointed a
voting service provider(s), should refer to their CREST Sponsor or
voting service provider(s), who will be able to take the appropriate
action on their behalf.
11 In order for a proxy appointment or instructions made by means of
CREST to be valid, the appropriate CREST message (a "CREST Proxy
Instruction") must be properly authenticated in accordance with
Euroclear's specifications and must contain the information required
for such instructions, as described in the CREST Manual. The message,
regardless of whether it constitutes the appointment of a proxy or an
amendment to the instruction given to a previously appointed proxy
must, in order to be valid, be transmitted so as to be received by the
Company's agent (ID: RA10) by the latest time(s) for receipt of proxy
appointments specified in Note 9 above. For this purpose, the time of
receipt will be taken to be the time (as determined by the timestamp
applied to the message by the CREST Applications Host) from which the
Company's agent is able to retrieve the message by enquiry to CREST in
the manner prescribed by CREST. After this time, any change of
instructions to proxies appointed through CREST should be communicated
to the appointee through other means.
CREST Members and, where applicable, their CREST Sponsors or voting
service providers should note that Euroclear does not make available
special procedures in CREST for any particular messages. Normal system
timings and limitations will therefore apply in relation to the input
of CREST Proxy Instructions. It is the responsibility of the CREST
Member concerned to take (or, if the CREST Member is a CREST Personal
Member or Sponsored Member or has appointed a voting service provider
(s), to procure that his CREST Sponsor or voting service provider(s)
take(s)) such action as shall be necessary to ensure that a message is
transmitted by means of the CREST system by any particular time. In
this connection, CREST Members and, where applicable, their CREST
Sponsors or voting service providers are referred, in particular, to
those sections of the CREST Manual concerning practical limitations of
the CREST system and timings.
The Company may treat as invalid a CREST Proxy Instruction in the
circumstances set out in Regulation 35(5)(a) of the Uncertificated
Securities Regulations 2001.
12 In the case of joint holders, where more than one of the joint holders
purports to appoint a proxy, only the appointment submitted by the
most senior holder will be accepted. Seniority is determined by the
order in which the names of the joint holders appear in the Company's
Register of Members in respect of the joint holding (the first name
being the most senior).
13 The termination of the authority of a person to act as proxy must be
notified to the Company in writing. Amended instructions must be
received by the Company's Registrar, Link Asset Services, by the
deadline for receipt of proxies.
14 As at 30 October 2019 (being the latest practicable date prior to the
publication of this Notice), the Company's issued voting share capital
was 50,000,000 Ordinary Shares carrying one vote each.
15 If you are a person who has been nominated under section 146 of the
Companies Act 2006 to enjoy information rights ("Nominated Person"),
you may have a right under an agreement between you and the Member of
the Company who has nominated you to have information rights
("Relevant Member") to be appointed or to have someone else appointed
as a proxy for the meeting. If you either do not have such a right or
if you have such a right but do not wish to exercise it, you may have
a right under an agreement between you and the Relevant Member to give
instructions to the Relevant Member as to the exercise of voting
rights. Your main point of contact in terms of your investment in the
Company remains the Relevant Member (or, perhaps, your custodian or
broker) and you should continue to contact them (and not the Company)
regarding any changes or queries relating to your personal details and
your interest in the Company (including any administrative matters).
The only exception to this is where the Company expressly requests a
response from you.
16 If a corporate Shareholder has appointed a corporate representative,
the corporate representative will have the same powers as the
corporation could exercise if it were an individual Member of the
Company. If more than one corporate representative has been appointed,
on a vote on a show of hands on a resolution, each representative will
have the same voting rights as the corporation would be entitled to.
If more than one authorised person seeks to exercise a power in
respect of the same shares, if they purport to exercise the power in
the same way, the power is treated as exercised; if they do not
purport to exercise the power in the same way, the power is treated as
not exercised.
17 You may not use any electronic address provided either in this Notice
of General Meeting or any related documents (including the Form of
Proxy) to communicate with the Company for any purpose other than
those expressly stated.
18 At the meeting, Shareholders have the right to ask questions relating
to the business of the meeting and the Company is obliged to answer
such questions, unless (i) answering the question would interfere
unduly with the preparation of the meeting or would involve the
disclosure of confidential information; (ii) the information has
already been given on the Company's website, http://www.sanditonam.com
/Navigate.aspx/Public/1/Sanditon-Investment-Trust/, in the form of an
answer to a question; or (iii) if it is undesirable in the interests
of the Company or the good order of the meeting that the question be
answered.
19 Further information regarding the meeting, including the information
required by section 311A of the Companies Act 2006, is available on
the Company's website, http://www.sanditonam.com/Navigate.aspx/Public/
1/Sanditon-Investment-Trust/.
END
(END) Dow Jones Newswires
October 30, 2019 14:01 ET (18:01 GMT)
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