1
Annu
al Report and Audited Consolidated Financial Statements
For the year ended 31 December 2023
Contents
1
Pages
THE COMPANY AND ITS ADVISERS
1
COMPANY SUMMARY
2
CHAIRMAN
’
S STATEMENT
3
-
4
BOARD OF DIRECTORS
5
DIRECTORS
’
REPORT (INCLUDING THE
STRATEGIC REPORT
)
6
-
1
2
DIRECTORS’ REMUNERATION REPORT
13-14
CORPORATE GOVERNANCE REPORT
1
5
-
26
REPORT OF THE AUDIT COMMITTEE 27-30
STATEMENT OF DIRECTORS’ RESPONSIBILITIES 31-32
INDEPENDENT AUDITOR’S REPORT 33-43
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
44
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
4
5
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
46
CONSOLIDATED STATEMENT OF CASH FLOWS
47
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
48-60
The Company and Its Advisers
1
Non-Executive Directors
Talmai Morgan (Chairman)
Trevor Ash
Ian Brindle
Helen Sinclair
Linda Wilding
Christopher Legge, resigned 23 May 2023
(all care of the registered office)
Investment Manager
Sherborne Investors Management LP
135 East 57
th
Street
New York, NY 10022
Legal Advisers (as to English law)
Herbert Smith Freehills LLP
Exchange House
Primrose Street
London, EC2A 2EG
Registrar
Link Market Services (Guernsey) Limited
Mont Crevelt House
Bulwer Avenue
St Sampson
Guernsey, GY2 4LH
Administrator, Designated Manager and
Company Secretary
Apex Fund and Corporate Services (Guernsey)
Limited
1 Royal Plaza
Royal Avenue
St Peter Port
Guernsey, GY1 2HL
General Partner to the Investment Partnership
Until 24 May 2023
Sherborne Investors (Guernsey) GP, LLC
135 East 57
th
Street
New York, NY 10022
Company Website:
www.sherborneinvestorsguernseyc.com
Registered Office
Registered Number 63600
Independent Auditor
Deloitte LLP
Regency Court
Glategny Esplanade
St Peter Port
Guernsey, GY1 3HW
Legal Advisers (as to Guernsey law)
Ogier
Redwood House
St Julian’s Avenue
St Peter Port
Guernsey, GY1 1WA
Broker
Deutsche Numis
The London Stock Exchange Building
10 Paternoster Square
London, EC4M 7LT
Investment Partnership
Until 24 May 2023
SIGC, LP (Incorporated)
1 Royal Plaza, Royal Avenue
St Peter Port
Guernsey, GY1 2HL
Custodian
The Bank of New York Mellon
240 Greenwich Street
New York, NY 10286
Company Summary
2
The Company Sherborne Investors (Guernsey ) C Limited (the “Company”) is a
Guernsey domiciled limited company and its shares are admitted
to trading on the London Stock Exchange Specialist Fund Segment
(“SFS”). The Company was incorporated on 25 May 2017. The
Company commenced dealings on the SFS on 12 July 2017.
Investment Objective To realise capital growth from investment in a target company
identified by the Investment Manager, with the aim of generating
a significant capital return for Shareholders.
Investment Policy To invest in a company which is publicly quoted which it considers
to be undervalued as a result of operational deficiencies and
which it believes can be rectified by the Investment Manager’s
active involvement, thereby increasing the value of the
investment. The Company will only invest in one target company
at a time.
Investment Manager
Sherborne Investors
Management LP
(including affiliates, the
“Investment Manager”) provides investment management
services to SIGC LLC and other funds in which the Company is
indirectly an investor (the “Funds”). See Note 1 and Note 9 for
details of changes in the year.
Chairman’s Statement
3
For the year ended 31 December 2023
Dear Shareholder
I am pleased to present the Annual Report and Audited Consolidated Financial Statements of the Company for
the year from 1 January 2023 to 31 December 2023.
At 31 December 2023, the net asset value (“NAV”) attributable to shareholders of the Company was £566.3
million (2022: £529.4 million) or 80.9 pence per share (2022: 75.6 pence per share) (see Note 8). As at 31 March
2024 the estimated (unaudited) NAV, as reported, was 77.1 pence per share.
The Company co-invests in Navient Corporation (“Navient”) with other investors through Newbury Investors LLC
(“Newbury”) which is managed by Sherborne Investors Management LP (“Sherborne Investors”). Newbury
currently owns 26.1% of Navient’s outstanding shares, making it the largest shareholder in Navient. Newbury
also currently owns a 24.9% interest in the outstanding shares of the Company. The Company is pursuing its
investment strategy through its indirect shareholding in Navient. See Note 5 of the Notes to the Consolidated
Financial Statements.
For further information on Navient, including its strategy and performance, please refer to its publicly available
financial statements and presentations available at www.sec.gov or Navient’s website at www.navient.com.
In May 2023, the Company announced that it had been advised by the Investment Manager that, following
the distribution to the Company of any proceeds from the Company’s indirect investment in Navient, the
Investment Manager did not intend to seek to recall any funds for further investment. To effectuate this, on
24 May 2023, SIGC, LP (Incorporated) (the “Investment Partnership”) assigned to the Company the Investment
Partnership’s interest in SIGC LLC, as the constitutional documents of SIGC LLC do not permit the recall of
distributed capital for reinvestment. As a result of the assignment, the Investment Partnership was dissolved
by operation of its limited partnership agreement. For further details see Note 1 and Note 9 of the
Consolidated Financial Statements.
Also in May 2023, it was announced that Navient’s Chief Executive Officer had been terminated and that a
member of the board had been appointed Chief Executive Officer. Sherborne Investors advised the Board that
they intended to work with the new Chief Executive Officer to achieve their investment objectives at Navient.
Subsequently, on 8 December 2023, Mr Edward Bramson, a partner in Sherborne Investors, was appointed
Vice Chairman of the board of directors of Navient. Through this role, Sherborne Investors assisted the Navient
board with the formulation of Navient’s strategic review update announced on 30 January 2024. In connection
with Mr. Bramson’s appointment as Vice Chairman, Navient and Sherborne Investors extended their April
2022 nomination and cooperation agreement to a latest date of 30 June 2024.
During 2023 Navient paid dividends to shareholders totalling $0.64 per share, of which the Company received
its proportionate share. The Company paid a dividend with respect to 2022 results of 0.5 pence per share on
26 May 2023 and a further interim dividend of 0.5 pence per share with respect to 2023 on 6 October 2023. I
am pleased to announce that the Company is declaring a further 0.5 pence per share dividend to be paid on
31 May 2024 to shareholders of record on 10 May 2024, bringing the total dividends paid in respect of 2023
results to 1.0 pence per share.
Chairman’s Statement (continued)
4
Details of Related Party Transactions are contained in Note 9 of the Consolidated Financial Statements.
We are grateful for your continued support and will keep you informed of the status of our investment as it
develops.
Yours sincerely,
Talmai Morgan
Chairman
30 April 2024
Board of Directors
5
Talmai Morgan (Chairman)
Appointed to the Board 25 May 2017
Mr Morgan has served as a non-executive director on the board of 14 publicly listed investment
companies (including 3 FTSE 250 companies) since 2005. He is currently Chairman of Sherborne
Investors (Guernsey) C Limited. From 1999 to 2004, Mr Morgan worked as a financial services
regulator (Director of Fiduciary Services and Enforcement at the Guernsey Financial Services
Commission) and was particularly involved in the activities of the Financial Action Task Force and the
Offshore Group of Banking Supervisors. Prior to 1999, Mr Morgan held positions at Barings and the
Bank of Bermuda. He qualified as a barrister in 1976 and holds an MA in Economics and Law from the
University of Cambridge.
Linda Wilding (Audit Committee Chairman)
Appointed to the Board 1 February 2023
Ms Wilding has previously served as Chair and non-executive director of various public and private
equity backed companies for over 20 years. After gaining a PhD in Biochemistry she joined EY and
trained as a Chartered Accountant. From the late 1980s she spent over a decade at Mercury Asset
Management as a fund manager in their private equity division. She is currently also on the Boards of
BCPT plc, a real estate investment trust and Wesleyan Assurance Society, a specialist financial services
mutual, and Odyssean Investment Trust plc, investment trust.
Trevor Ash (Director)
Appointed to the Board 25 May 2017
Mr Ash has been a non-executive director of a number of investment entities since 1999, including
funds managed by Rothschild, Insight, Cazenove, Merrill Lynch and Thames River Capital. He was
formerly Chairman of JPEL Private Equity Limited. Prior to 1999, Mr Ash spent 27 years with the
Rothschild Group in various capacities, most recently as Managing Director of Rothschild Asset
Management (CI) Limited and as a non-executive director of Rothschild Asset Management Limited in
London. Mr Ash is a fellow of the Chartered Institute for Securities & Investment.
Ian Brindle (Director)
Appointed to the Board 25 May 2017
Mr Brindle was the Senior Partner of Price Waterhouse from 1991 to 1998 and Chairman of
PricewaterhouseCoopers until 2001. Mr Brindle was a member of the Accounting Standards Board
between 1992 and 2001 and Deputy Chairman of the Financial Reporting Review Panel between 2001
and 2008. Mr Brindle has served as a non-executive director on a number of Boards including Electra
Private Equity PLC, F&C Asset Management PLC, Spirent Communications PLC, Elementis PLC and 4
Imprint Group PLC.
Helen Sinclair (Director)
Appointed to the Board 1 February 2023
Ms Sinclair has a degree in Economics from Cambridge and an MBA from INSEAD business school. She
began her career in investment banking and then moved into private equity investment at 3i. Prior to
her focus on non-executive director roles, Helen co-founded and ran Matrix Private Equity (which
became Mobeus Equity Partners LLP). Helen has a thirty-year track record as an investor, board
member and board observer in a range of sectors. Helen serves on the Boards of Octopus Future
Generations VCT plc, BlackRock Smaller Companies Trust plc, Shires Income plc and North East Finance
Ltd.
6
The Directors present their annual report on the affairs of Sherborne Investors (Guernsey) C Limited
and its subsidiaries (together, the “Group”), until their dissolution, together with the audited
consolidated financial statements, for the year ended 31 December 2023.
Principal activities and investing policy
The Company is a Guernsey domiciled company incorporated on 25 May 2017 with limited liability.
The Company’s shares were admitted to trading on the SFS on 12 July 2017.
SIGC Midco Limited, a former wholly-owned subsidiary of the Company, was dissolved in early 2023,
and therefore the Company became a limited partner in the Investment Partnership, a limited
partnership registered in Guernsey on 24 May 2017, until its dissolution in May 2023, following which
the Company became an investor in the Funds. For further details see Note 1 and Note 9 of the
Consolidated Financial Statements. All references to the Investment Partnership herein shall be only
until its date of dissolution.
The Company aims to provide investors with capital growth through its investment in the Investment
Partnership, to which it has committed £700,000,000.
The Company’s investment policy, which it will affect indirectly through its investment in the
Investment Partnership or the Funds, is to invest in a company which is publicly quoted, and which
the Investment Manager considers to be undervalued as a result of operational deficiencies and which
it believes can be rectified by the Investment Manager’s active involvement, thereby increasing the
value of the investment (a ‘‘Turnaround’’). Accordingly, the investment will not be passive. The
Company’s investment may be made on-market or off-market.
The Company may invest, through the Investment Partnership or the Funds, in a company operating
in any economic sector but will only be invested in one company at a time. Thus, it will not seek to
reduce risk through diversification. The choice of target company will be subject to a vote in the
affirmative of a majority in interest of the limited partners of the Investment Partnership or the Funds,
in effect giving the Board a veto on such decision since the Company owns, and is currently expected
to continue to own, more than 50% of the interests in the Investment Partnership or the Funds.
The investment in a target company is intended to be in shares, but could also be in warrants,
convertibles, derivatives and any other equity, debt or other securities.
Depending on the size of the investment, all or part of the Company’s assets will be invested in the
Selected Target Company (“STC”), through the Investment Partnership, less the minimum capital
requirements. The investment objective and investment policy of the Investment Partnership or the
Funds are the same as those of the Company. In selecting the STC, the Investment Manager will
consider the relevant Environmental, Social and Governance (“ESG”) aspects of the STC and will seek
to positively influence the relevant policies and performance of the STC through its active involvement
in seeking to effect a turnaround.
The holding period for investments is neither fixed nor predictable, but the Company expects that a
typical holding period would be greater than one year. The average holding period of the four
completed UK Turnarounds in companies with which the Investment Manager’s key personnel have
been involved is 28 months; however, this should not be taken as being indicative of the holding period
to be adopted in effecting the Company’s investment policy.
Directors’ Report (Including the Strategic Report)
Directors’ Report (Including the Strategic Report) (continued)
7
The Investment Partnership or the Funds may engage in hedging transactions to protect the market
value of its investment in any company in which it is invested and may also engage in stock lending.
The Company, the Investment Partnership, and the Funds do not currently intend to undertake
borrowings but are permitted to do so. Any borrowings undertaken by the Company and the
Investment Partnership will not, in aggregate, be greater than 30% of the Company’s Gross Assets as
measured at the time that such borrowings are incurred.
In the event that the Board considers it appropriate to amend materially the investment objective or
policy of the Company, Shareholder approval to any such amendment will be sought. For further
details on the current investment refer to the Chairman’s Statement on page 3.
Risk Management
The Directors are responsible for supervising the overall management of the Company, whilst the day-
to-day management of the Company’s assets has been delegated to the Investment Manager.
Portfolio exposure has been limited by the guidelines which are detailed within the Principal activities
and investment policy section of the annual report above. The Board has undertaken a robust
assessment of the principal risks facing the Company and has undertaken a detailed review of the
effectiveness of the risk management and internal control systems.
In its role as a third-party fund administration services provider, Apex Fund and Corporate Services
(Guernsey) Limited produced an annual SSAE 18 and ISAE 3402 Type 2 Assurance Report on the
internal control procedures in place for the year ended 30 September 2023 and this is subject to
review by the Audit Committee and the Board.
The principal risks facing the Group and Company relate to the Company’s investment activities and
these risks include the following:
performance risk;
market risk;
relationship risk;
operational risk;
emerging risk;
cyber security risk; and
Accounting, legal and regulatory risks
An explanation of these principal risks and how they are managed is set out below.
The Board can confirm that the principal risks of the Company, including those which would threaten
its business model, future performance, solvency or liquidity, have been robustly assessed for the year
ended 31 December 2023.
Performance risk - The Board is responsible for approving the Investment Manager’s
recommended investment in a STC and monitoring the performance of the Investment Manager.
An inappropriate strategy or poor execution of strategy may lead to underperformance. To
manage that risk the Investment Manager will typically have several potential target companies
under review at any one time in various stages of analysis. The Investment Manager’s
recommendation of a STC includes an assessment of the capital appreciation potential of the
proposed investment, assuming certain operating improvements and capital realignment are
successfully implemented. The Company intends that its holding in the STC will be less than 30%
Directors’ Report (Including the Strategic Report) (continued)
8
of the outstanding shares if the STC is a UK company, so that it is not required to make a bid for
the entire company. Accordingly, the Company will not control the STC. The Investment
Manager’s involvement in the Turnaround of the STC requires the support of other independent
shareholders. The Board receives regular updates of the Investment Partnership’s and the Funds’
ownership interest in the STC and other information that impacts its Turnaround strategy. The
Audit Committee is responsible for all matters pertaining to risks and it formally monitors the
investment performance of the Company at least three times a year including when the
Investment Advisor reports on the performance of the Company’s portfolio at board meetings.
Market risk - Market risk arises from uncertainty about the future operating performance and
market response to the Company’s investment in the STC. The Company’s objective of market risk
assessment is to manage and control market risk exposures within acceptable parameters while
optimising the return on investment. The Company’s investment approach is to invest in only one
company at a time. Such investment concentration may subject the Company to greater market
fluctuation and loss than might not result from a diversified investment portfolio. The market’s
valuation of the STC is also subject to fluctuations in overall market prices as well as fluctuations
in the industry sectors in which the STC operates. The Investment Manager does not typically
hedge against overall market or sector fluctuations. The Company also may use a limited amount
of short-term leverage to acquire a portion of its ownership interest in the STC which will amplify
the results of the STC. In addition to interest and dividend income received from the STC, the
source of debt repayment could come from the proceeds realised from the sale of a portion of
the STC. The Company’s market risk is managed by the Investment Manager in accordance with
policies and procedures in place as disclosed in the Company’s prospectus. The Company’s market
risk is monitored closely and managed and mitigated as far as possible by the Investment Advisor
through active portfolio management. The Investment Advisor reports to the Board on these
matters.
Relationship risk - Neither the Company, the Investment Partnership, nor the Funds has a physical
presence (employees and/or premises). The Company and Investment Partnership are heavily
dependent on the Investment Manager for the selection of an appropriate STC and for the day-
to-day management and operation of the STC’s business and the execution of its Turnaround
strategy. The Company has no employees and so enters into a series of contracts/legal
agreements with a series of service providers to ensure that both operational performance and
regulatory obligations are met. The Board performs ongoing internal monitoring of processes and
controls and receives regular reports from the administrators of the Company and other service
providers, along with a report from the Auditors.
Operational risk – The Board is ultimately responsible for all operational facets of performance
including cash management, asset management, regulatory and listing obligations. The risks are
reviewed by the Board at each Board meeting. The Board also monitors the Company’s investment
performance and activities since the last Board meeting to ensure that the Investment Manager
adheres to the agreed investment policy and approved investment guidelines. Further, at each
Board meeting, the Board receives reports from the Company Secretary and Administrator in
respect of compliance matters and duties performed by it on behalf of the Company.
Fraud and cybersecurity risk – fraud or large-scale network disruption such as hacking, malware,
phishing, disrupted denial of service attacks could be disruptive to the Company and also pose a
reputational risk if they are not dealt with effectively. The Company’s Board is provided with
regular updates on any cyber security issues from its service providers and how they are managing
Directors’ Report (Including the Strategic Report) (continued)
9
the risk. All access to the offices of service providers is strictly controlled and Data protection
policies are in place.
Accounting, legal and regulatory risks – the Company is exposed to the risk of action or sanction
by shareholders, counterparties or regulators if it fails to comply with the regulations of the UK
Listing Authority or the Guernsey Financial Services Commission or if it fails to maintain accurate
accounting records. Increased regulation (including climate change and ESG) may increase the
Company’s compliance burden and require changes to policies, procedures or disclosure
requirements. The Administrator provides the Board with regular reports on changes in
regulations and accounting requirements, including increased regulation relating to ESG and
climate change. These contribute to the Board’s ability to maintain its awareness and knowledge
of climate/ESG related reporting requirements and its review of best practice for investment
companies.
Emerging risks – the Board is constantly alert to the identification of any new or emerging risks
through the monitoring of the Company’s investment portfolio and by conducting regular reviews
of the Company’s risk assessment matrix. When an emerging risk is identified, the risk assessment
matrix is updated and appropriate mitigating measures are agreed. No emerging risks have been
identified during the course of the year.
Other risks faced by the Company are described in detail within the Company’s Offering Document and
can be obtained at www.sherborneinvestorsguernseyc.com.
Other risks faced by the STC are described in detail within the STC’s publicly available financial
statements and can be obtained at www.sec.gov or the STC’s website at www.navient.com.
The Board describes in the annual report how opportunities and risks to the future success of the
business have been considered and addressed, the sustainability of the company’s business model and
how its governance contributes to the delivery of its strategy. Most of the Code requirements will
ordinarily be met by the description of a company’s business model and strategy required by Section
414C(8) (a) and (b) of the Companies Act 2006.
The Board has considered the Company’s solvency and liquidity risk and disclosure of this is made in
Note 10 of the Consolidated Financial Statements and in the Viability Statement below.
The Company has no employees, and does not own any physical assets, therefore it is not directly
exposed to climate change risk. The Board also made enquiries of key service providers in respect of
their assessment of how climate change and ESG risk impacts their own operations and has been
assured that this has no impact on their ability to continue to supply their services to the Company.
The Board has considered the impact of climate change on the Company and believes that it does not
give rise to a material impact on the financial statements of the Company.
The Board remains ultimately responsible for the identification and assessment of risk as well as
implementing and monitoring procedures to control such risks where possible. The Board seeks to
mitigate and manage these risks through continual review, policy-setting, enforcement of contractual
obligations and monitoring of the Company’s investment portfolio.
Directors’ Report (Including the Strategic Report) (continued)
10
Viability Statement
In accordance with provision 31 principle O of the UK Corporate Governance Code 2018, the Directors
have assessed the viability of the Group and Company as at 31 December 2023. The Directors have
assessed the prospects of the Company over a longer period than the 12 months minimum required
by the ‘going concern’ provision. For the purposes of this statement, having regard to the economic
planning cycle and the Company’s strategy review period, the Board has adopted a three year viability
period to 31 December 2026.
In its assessment of the Company’s viability, the Board has considered each of the Company’s principal
risks as detailed above and any emerging risks, and in particular the impact of a significant fall in the
value of the Company’s investment portfolio. The three year period is the maximum period over which
to provide its viability statement in order to keep in line with its investment strategy. The holding
period for the investment in the STC is neither fixed nor predictable, but the Company expects that a
holding period of 3-4 years would be sufficient to execute the Investment Manager’s Turnaround
strategy.
The Directors have identified the following factors as potential contributors to ongoing viability:
The liquidity of the Company’s portfolio; and
The ongoing relevance of the Company’s investment objective in the current environment.
At 31 March 2024 the Company had an estimated (unaudited) NAV of £539.9 million. The Company
and the Funds have sufficient liquid assets to meet expected costs. Expected costs are primarily based
on contractual obligations and are therefore not subject to material fluctuations. The nature and
amount of these costs are consistent with the prior year and are expected to be materially similar for
the foreseeable future. The primary source of cash inflows are dividends paid by STC to the Funds. The
STC has paid a quarterly dividend since 2015. Should the STC cease paying dividends and should
additional liquidity be required by the Funds or by the Company, shares of the STC, even if the share
value were to decline by 50%, could be sold with sufficient liquidity provided to the Company. The
Investment Manager has the full intent and ability to provide the Company with funds as and if
required.
Based on the foregoing, the Directors have a reasonable expectation that the Company will be able to
continue in operation and meet its obligations as and when they fall due over the three year period
to 31 December 2026.
Auditor’s Opinion
It may be noted that the Company’s financial statements have received a “limitation on scope”
qualified opinion from the Auditors for the year ended 31 December 2023. Refer to independent
auditor’s report on pages 33 to 43. So that this issue does not reoccur in future, the Investment
Manager has agreed with the Board to undertake a restructuring of the underlying funds to segregate
the Company’s assets.
Subsequent events
Details of events that have occurred after the date of the Consolidated Statement of Financial Position
are provided in Note 12 to the Consolidated Financial Statements.
Dividend policy
The Company’s dividend policy, subject to the discretion of the Directors who reserve the right to
retain amounts for minimum capital requirements, is to pay dividends to Shareholders following
Directors’ Report (Including the Strategic Report) (continued)
11
receipt of any distributions from the Investment Partnership or the Funds, subject always to
compliance with the solvency test prescribed by the Companies (Guernsey) Law, 2008, as amended
(the “Companies Law”).
This will be dependent on the frequency with which the STC pays dividends to its shareholders as well
as the extent to which such dividends are first required to be used to repay outstanding indebtedness
and meet the minimum working capital requirements.
Dividend
During the year the Company declared and paid dividends to Shareholders as follows:
Period
end
Dividend per
share (p)
Announcement
date
Ex div date
Record
date
Paid date
Ad hoc 0.5 20.04.2023 04.05.2023 05.05.2023 26.05.2023
Ad hoc
0.
5
05.09.2023
14.09.2023
15.09.2023
06.10.2023
The Company has declared a dividend of 0.5 pence per share, payable on 31 May 2024 to shareholders
on the register at 10 May 2024.
Business review
A review of the Company’s business during the year and an indication of likely future developments
are contained in the Chairman’s Statement.
Capital
Details of the Company’s capital are provided in Note 7 to the Consolidated Financial Statements. All
shares carry equal voting rights.
Substantial interests
As at 31 December 2023, the Company is aware of the following material shareholdings:
Shareholder
Number of Ordinary
Shares
% of issued share
capital
Sherborne Investors Management LP*
174,000,447
2
4.9
Invesco Limited
139,467,736
19.9
Columbia Threadneedle 129,298,511 18.5
Fidelity International Limited 77,210,833 11.0
Janus Henderson Group plc
73,267,400
10.5
Aviva plc 59,015,109 8.4
*Shares are owned by Newbury Investors LLC, an indirect investment of SIGC LLC. Refer to Note 5 to
the Consolidated Financial Statements for additional detail.
The Directors currently hold no shares in the Company (unchanged from prior year).
Directors’ Report (Including the Strategic Report) (continued)
12
Independent Auditor
A resolution to re-appoint the Auditors to the Company will be proposed at the Annual General
Meeting of the Company on 21 May 2024.
By order of the Board of Directors
Talmai Morgan
Chairman
30 April 2024
Directors’ Remuneration Report
13
Remuneration Policy & Components
The Board endeavours to ensure the Remuneration Policy reflects and supports the Company’s
strategic aims and objectives throughout the period under review. It has been agreed that, due to
the small size and structure of the Company, a separate Remuneration Committee would be
inefficient; therefore, the Board is responsible for discussions regarding remuneration. No external
remuneration consultants were appointed during the period under review.
The remuneration for the Directors has not changed since incorporation and, as such, there is no
annual percentage change.
As per the Company’s Articles of Incorporation (“Articles”), all Directors are entitled to such
remuneration as is stated in the Company’s Prospectus or as the Company may by ordinary resolution
determine; the aggregate overall limit is currently set at £250,000. Subject to this limit, it is the
Company’s policy to determine the level of Directors’ fees, having regard for the level of fees payable
to non-executive Directors in the industry generally, the role that individual Directors fulfil in respect
of responsibilities related to the Board and Audit Committee and the time dedicated by each Director
to the Company’s affairs. Base fees are set out below.
Base Fees and Fees Received 2023
Actual £
Annual
Base fee £
2022
Actual £
Annual
Base fee £
Chairman (Talmai Morgan) 50,000 50,000 50,000 50,000
Audit Committee Chairman (Linda Wilding) 35,008 40,000 - -
Audit Committee Chairman (Christopher
Legge) (until 23 May 2023)
16,060 40,000 40,000 40,000
Non-Executive Director (Trevor Ash) 35,000 35,000 35,000 35,000
Non-Executive Director (Ian Brindle) 35,000 35,000 35,000 35,000
Non
-
Executive Director (
Helen Sinclair
)
31,986
35,000
-
-
Total 203,054 235,000 160,000 160,000
As outlined in the Articles, the Directors may also be paid for all reasonable travelling, hotel and other
out-of-pocket expenses properly incurred in the attendance of Board or Committee meetings,
General meetings, or meetings with shareholders of the Company or otherwise in the discharge of
their duties; and all reasonable expenses properly incurred by them seeking independent
professional advice on any matter that concerns them in the furtherance of their duties as Directors
of the Company, such expenses having been immaterial during 2023.
No Director has any entitlement to pensions, paid bonuses or performance fees, has been granted
share options or has been invited to participate in long-term incentive plans. No loans have been
extended to a Director by the Company and neither have any loans to a Director been guaranteed by
the Company.
None of the Directors have a service contract with the Company. Each of the Directors has entered
into a letter of appointment with the Company, were subject to election at the first Annual General
Meeting (“AGM”), or as determined in line with the Company’s Articles, and re-election at
subsequent AGMs in accordance with the Company’s Articles and all due regulations and provisions.
The Directors do not have any interests in contractual arrangements with the Company or its
investment during the year under review, or subsequently. Each appointment can be terminated in
accordance with the Company’s Articles and without compensation. No notice period is stated in the
Articles and is terminable at will of both parties.
Directors’ Remuneration Report (continued)
14
Directors’ and Officers’ liability insurance cover is maintained by the Company but is not considered
a benefit in kind nor does it constitute part of the Directors’ Remuneration. The Company’s Articles
indemnify each Director, Secretary, agent and officer of the Company, former or present, out of
assets of the Company in relation to charges, losses, liabilities, damages and expenses incurred during
the course of their duties, in so far as the law allows and provided that such indemnity is not available
in circumstances of fraud, wilful misconduct or negligence.
Talmai Morgan
Chairman
30 April 2024
15
As an unregulated, Guernsey incorporated company quoted on the SFS, the Company is not required
to comply with the UK Corporate Governance Code 2018 or the GFSC Finance Sector Code of
Corporate Governance. The Directors, however, place great importance on ensuring that high
standards of corporate governance are maintained. Accordingly, the Directors will take appropriate
measures to ensure that the Company operates with due consideration to any codes of corporate
governance that the Board deems appropriate and may choose to operate in accordance with the UK
Corporate Governance Code 2018 and/or the GFSC Finance Sector Code of Corporate Governance, in
each case having regard to the Company’s size and nature of business. The Board perceives that good
corporate governance practice is necessary for delivering sustainable value, enhancing business
integrity and maintaining shareholder confidence in the Company. To further these aims, the Board
has decided to voluntarily comply with the UK Corporate Governance Code dated July 2018 (the
“Code”), which sets out guidance in the form of principles and provisions for companies to follow
good corporate governance practice. Further information on the Code can be obtained from
www.frc.org.uk.
Except as disclosed below and within the report, the Board is of the view that the Company has
complied with the principles and provisions of the Code throughout the year ended 31 December
2023, with the following exceptions:
- The Company has no Chief Executive, as envisaged by principle G and provision 9 of the Code.
See the Division of Responsibilities on page 17 below;
- The Company has no internal audit function, as envisaged by principle M and provision 25 of
the UK Code. See the Audit, Risk and Internal control section on pages 21 to 22 below;
- The Company does not have a remuneration committee, as required by principle Q and
provision 32 of the UK Code. See the Remuneration section on page 24 to 25 below; and
- The Company does not have a Nomination Committee, as required by principle J and provision
17 of the Code. See Board Appointments Process on pages 19 below.
Key issues affecting the Company’s corporate governance responsibilities, how they are addressed by
the Board and application of the Code are presented below.
Board Leadership and Company Purpose
The Board is composed entirely of non-executive Directors, who meet as required without the
presence of the Investment Manager and service providers to scrutinise the achievement of agreed
goals and objectives and monitor performance. Through the Audit Committee, they are able to
ascertain the integrity of financial information and confirm that all financial controls and risk
management systems are robust. In addition, a non-executive Director may provide a written
statement outlining any concerns to the Chairman upon resignation.
Role of the Board
The Board is the Company’s governing body and has overall responsibility for ensuring the Company’s
success by directing and supervising the affairs of the business and meeting the appropriate interests
of shareholders and relevant stakeholders, while enhancing the value of the Company and also
ensuring protection of investors. A summary of the Board’s responsibilities is as follows –
– statutory obligations and public disclosure;
– strategic matters and financial reporting;
– capital management, including gearing and dividend policy;
– review of investment performance and associated matters;
Corporate Governance Report
Corporate Governance Report (continued)
16
– risk assessment and management including reporting compliance, governance, monitoring
and control; and
– other matters having a material effect on the Company.
The Board’s responsibilities for the Annual Report are set out in the Statement of Directors’
Responsibilities on pages 31 to 32.
The Board needs to ensure that the 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.
In seeking to achieve this, the Directors have set out the Company’s investment objective and strategy
(see page 2) and have explained how the Board and its delegated Committees operate and how the
Directors review the risk environment within which the Company operates and set appropriate risk
controls. Furthermore, throughout the Financial Statements the Board has sought to provide further
information to give shareholders a fair, balanced and understandable view.
Information and Support
Information Provided to the Board
Reports and papers of corporate governance matters, containing relevant, concise and clear
information, are provided to the Board and Committees in a timely manner to enable review and
consideration prior to both scheduled and ad-hoc specific meetings. Investment updates are provided
verbally at scheduled and ad hoc meetings. This ensures that Directors are capable of contributing to,
and validating, the development of Company strategy and management. The regular reports also
provide information that enables scrutiny of the Company’s Investment Manager and other service
providers’ performance. When required, the Board has sought further clarification of matters with the
Investment Manager and other service providers, both in terms of further reports and via in-depth
discussions, in order to make a more informed decision for the Company. Should Directors raise
concerns in relation to the operation of the Board or the management of the Company, these concerns
are recorded in the Board minutes.
Information on Shareholders
The Board welcomes shareholders’ views and places great importance on communication with its
shareholders. The Board receives regular reports on the views of its shareholders from the Company’s
Broker and Investment Manager which are taken into consideration as part of the Board’s decision-
making process.
The Chairman and other Directors are available to meet shareholders if required and the AGM of the
Company provides a forum for shareholders to meet and discuss issues with the Directors of the
Company. The Chairman and Directors offer to meet with shareholders at regular investor
presentations co-ordinated by the Investment Manager to discuss key strategic matters and any issues
raised by shareholders.
Corporate Governance Report (continued)
17
The Directors place a great deal of importance on communication with shareholders. The Investment
Manager and Deutsche Numis Securities Limited (the “Broker”) aim to meet with all shareholders at
least annually. The Board also receives reports from the Broker on shareholder issues. The Annual
Report and Audited Consolidated Financial Statements are widely distributed to other parties who
have an interest in the Company’s performance and are available on the Company’s website. The
Chairman also meets with major shareholders independently of the Investment Manager from time
to time.
All Directors are available for discussions with the shareholders, in particular the Chairman and the
Audit Committee Chairman, at the AGM and as and when required.
Division of Responsibilities
The Chairman
Appointed to the position of Chairman of the Board on 25 May 2017, Mr Morgan is responsible for
leading the Board in all areas, including determination of strategy, organising the Board’s business and
ensuring the effectiveness of the Board and individual Directors. He also endeavours to produce an
open culture of debate within the Board. Mr Morgan is a non-executive Independent Director.
The Chairman of the Board must be independent for the purposes of Chapter 15 of the Listing Rules.
Mr Morgan is considered independent because he:
- has no current or historical employment with the Investment Manager;
- has not provided any professional advisory services to the Investment Manager; and
- has no current directorships in any other investment funds managed by the Investment
Manager.
There are no executive Directors appointed to the Board, no employees and therefore there is no
requirement for a Chief Executive. The non-executive Directors are all independent and their
responsibilities are clearly defined within the Schedule of Matters reserved to the Board. All day to
day functions are outsourced to external service providers.
The Board believes that its balance of skills, experience and knowledge, provides for a sound base
from which the interest of investors will be served to a high standard. Due to the size and structure
of the Company, the appointment of a senior independent director is not deemed appropriate.
Corporate Governance Report (continued)
18
Board and Committee Meeting Attendance
The Board met five times and the Audit Committee met three times during the year. Individual
attendance at Board and Audit Committee meetings is set out below.
Helen Sinclair and Linda Wilding were appointed during the year on 1 February 2023, while
Christopher Legge retired during the year on 23 May 2023.
The Board ensures that the Company’s contracts of engagement with the Investment Manager,
Administrator and other service providers are operating satisfactorily so as to ensure the safe and
accurate management and administration of the Company’s affairs and business and that they are
competitive and reasonable for Shareholders. Terms of Reference that contain a formal schedule of
matters reserved for the Board of Directors and its duly authorised Committee for decision has been
approved and can be reviewed at the Company’s registered office.
Until the dissolution of the Investment Partnership in May 2023, management of the Investment
Partnership was the responsibility of the General Partner, which had delegated investment decisions
and day-to-day management of the Investment Partnership to the Investment Manager under the
terms of an Investment Management Agreement. Through its majority interest in the Investment
Partnership, the Company and therefore the Board, had the ability to approve proposed investments
and to remove the General Partner. The performance of the Investment Manager is subject to regular
review by the Board. Please refer to page 48 in Note 1 for further information.
Other matters for the Board include review of the Company’s overall strategy and business plans;
approval of the Company’s half-yearly and annual financial statements; review and approval of any
alteration to the Group’s accounting policies or practices and valuation of investments; approval of
any alteration to the Company’s capital structure; approval of dividend policy; appointments to the
Board and constitution of Board Committees; and performance review of key service providers.
Directors’ Indemnity
The Company holds appropriate Directors’ and Officers’ Liability Insurance cover in respect of any legal
action taken against the Board.
Conflicts of interest
Directors are required to disclose all actual and potential conflicts of interest as they arise for approval
by the Board, who may impose restrictions or refuse to authorise conflicts. The process of
consideration and, if appropriate, approval will be conducted only by those Directors with no material
interest in the matter being considered. The Board maintains a Conflicts of Interest policy which is
reviewed periodically and a Conflicts of Interest Register which is reviewed by the Board at each
quarterly Board meeting.
Board
Audit Committee
Talmai Morgan 5 N/A
Trevor Ash 4 2
Ian
Brindle
5
3
Linda Wilding
4
3
Helen Sinclair 4 3
Christopher Legge 2 1
Corporate Governance Report (continued)
19
Commitment
Chairman’s Commitment
Prior to the Chairman’s appointment, discussions were undertaken to ensure the Chairman was
sufficiently aware of the time needed for his role and agreed to upon signature of his appointment
letter. Other significant commitments of the Chairman were disclosed prior to appointment to the
Board, and any changes declared as and when they arise. These commitments, and their subsequent
impact, can be identified in his biography on page 5.
Non-executive Directors’ Commitments
The terms and conditions of appointment for non-executive Directors are outlined in their letters of
appointment and are available for inspection by any person at the Company’s registered office during
normal business hours and at the AGM for fifteen minutes prior to and during the meeting. As with
the Chairman, significant appointments are declared prior to appointment, any changes reported as
and when appropriate.
Development
The Board believes that the Company’s Directors should develop their skills and knowledge through
participation at relevant courses. The Chairman is responsible for reviewing and discussing the training
and development of each Director according to identified needs. Upon appointment, all Directors
participate in discussions with the Chairman and other Directors to understand the responsibilities of
the Directors, in addition to the Company’s business and procedures.
The Company also provides regular opportunities for the Directors to obtain a thorough understanding
of the Company’s business by regularly meeting members of the senior management team from the
Investment Manager and other service providers, both in person and by phone.
Company Secretary
Under the direction of the Chairman, the Company Secretary facilitates the flow of information
between the Board, Committees, Investment Manager and other service providers’ through the
development of comprehensive meeting packs, agendas and other media.
Full access to the advice and services of the Company Secretary is available to the Board; in turn, the
Company Secretary is responsible for advising on all governance matters through the Chairman. The
Articles and schedule of matters reserved for the Board indicate the appointment and resignation of
the Company Secretary is an item reserved for the full Board. A review of the performance of the
Company Secretary is undertaken by the Board on a regular basis.
Composition, succession and evaluation
Board Appointments Process
Appointment Process
There is currently no Nomination Committee for the Company as it is deemed that the size,
composition and structure of the Company would mean the process would be inefficient and counter-
productive. When new Directors are appointed to the Company, an in-depth recruitment process
takes place. For the appointments of Linda Wilding and Helen Sinclair in February 2023, Cornforth
Consulting an independent firm from any of the directors or management were engaged to liaise with
the Company in the process of the appointments.
Corporate Governance Report (continued)
20
Board Diversity
In compliance with FCA Listing Rule 9.8.6 (LR 9.8.6), the Company has provided information, set out in
the tables below, on how it has met the following targets on Board diversity-
- at least 40% of the Board is female
- at least one senior position on the Board is held by a woman
As 31 December 2023, the Company has not met the targets on board diversity set out in LR 9.8.6
(9)(a), contrary to the FCA’s target for listed companies. The composition of the Board is monitored
annually, and the future appointments will be based on merit with due regard for the benefits of
diversity, including both gender and ethnic diversity.
Gender identity Number of Board
members
% of the Board
Number of senior
positions on the
Board
Men
3
6
0
1
Women
2
40
1
Ethnic background Number of Board
members
% of the Board
Number of senior
positions on the
Board
White British or other white
5
100
2
(including minority white groups)
The Listing Rules specify the positions of Chief Executive Officer (“CEO”), Chief Finance Officer (“CFO”)
and Chair as senior positions. The Board notes that as an externally-managed investment company,
with a Board comprised entirely of non-executives Directors, it does not have the roles of a CEO or
CFO as envisaged in LR 9.8.6, and therefore for the purpose of the above targets, it considers the
senior positions on the Board to include the roles of Chair and Chair of any permanent committee of
the Board.
Each Director is required to be elected by shareholders at the first AGM following their initial
appointment to the Board. The Board recommends the on-going annual re-election of each Director
and supporting biographies, including length of service, are disclosed on pages 5 and 6.
The Board currently consists of five non-executive members.
For the purposes of assessing compliance with the Code, the Board considers the Directors are
independent of the Investment Manager and free from any business or other relationship that could
materially interfere with the exercise of their independent judgment.
Evaluation
Board and Director Evaluation
Using a pre-determined template based on the Code’s provisions as a basis for review, the Board
undertakes an internal evaluation of its performance and that of the Audit Committee. The Chairman
led the process using a pre-determined template and met with each of the Directors to ascertain their
views on the functioning of the Board and the Audit Committees. In addition, the Chairman reviewed
the performance commitment and contribution of each Director. Following discussions with the other
Corporate Governance Report (continued)
21
Directors, the Audit Committee Chairman reviewed the performance of the Chairman. This was last
completed in April 2023. The Board evaluated the investment matters, internal controls and corporate
governance, administration and support services, and the committees with a positive outcome where
all the Directors were in agreement. Additionally, an evaluation focusing on individual commitment,
performance and contribution of each Director is conducted. If appropriate, new members would be
proposed to resolve the perceived issues, or a resignation sought. Due to the size and structure of the
Board the evaluation of the Chairman of the Board and Audit Committee is dealt with within the Board
and Audit evaluations.
Given the Company’s size and the structure of the Board, no external facilitator or independent third
party is used in the performance evaluation.
Re-election and Board Tenure
The Board has considered the need for a policy regarding tenure of office; however, the Board believes
that any decisions regarding tenure should consider the Company’s investment objective and the
average length of seeking to achieve that, the need for continuity and maintenance of knowledge and
experience and to balance this against the need to periodically refresh Board composition and have a
balance of skills, experience, age and length of service.
The Board remains satisfied that the individual contributions of each Director are, and will continue
to be, important to the Company’s long term sustainable success. Accordingly, at the AGM of the
Company to be held on 21 May 2024, Talmai Morgan, Ian Brindle, Trevor Ash, Helen Sinclair and Linda
Wilding will be proposed for re-election. Chris Legge has retired from the Board during the year on 23
May 2023.
Board succession planning
The Board considers it has a breadth of experience relevant to the Company, and the Directors believe
that any changes to the Board’s composition can be managed without undue disruption. An induction
programme is in place for all Director appointees. Any proposals for a new Director are discussed and
approved by the Board.
The Board’s succession planning policy seeks to ensure that the Board remains well balanced and that
the Directors have a sufficient level of skills, knowledge and experience to meet the needs of the
Company. The Directors are ever-cognisant of the need for the Board to have a balance of gender and
other attributes.
Audit, Risk and Internal Control
The Board has established an Audit Committee composed of Trevor Ash, Ian Brindle, Helen Sinclair
and Linda Wilding, each of whom are independent. Chris Legge stood down as Audit Committee
Chairman and from the Audit Committee following the Company’s AGM on 23 May 2023, upon which
Mrs Wilding took over as Chairman of the Audit Committee. The Chairman of the Board, is not a
member of the Audit Committee, in accordance with Provision 24 of the Code which states that the
Chair of the Board shall not be a member of the Audit Committee. The Committee, its membership
and its terms of reference, which can be found on the Company’s website, are kept under regular
review by the Board.
Corporate Governance Report (continued)
22
The Audit Committee meets at least twice a year and is responsible for ensuring that the financial
performance of the Company is properly reported on and monitored, including reviews of the half-
yearly and annual financial statements, results announcements, internal control systems and
procedures and accounting policies.
The Audit Committee is intended to assist the Board in discharging its responsibilities for the integrity
of the Company’s financial statements, as well as aid the assessment of the Company’s internal control
effectiveness and objectivity of external auditors. Further information on the Committee’s
responsibilities and the work of the Committee is given in the Report of the Audit Committee on pages
27 to 30.
The Board has reviewed the need for an internal audit function and has decided that the systems and
procedures employed by the Administrator and Investment Manager, including their own internal
controls and procedures, provide sufficient assurance that a sound system of risk management and
internal control, which safeguards shareholders’ investment and the Group and Company’s assets, is
maintained. An internal audit function specific to the Group is therefore considered unnecessary, as
explained on page 25.
The Audit Committee considers the scope and effectiveness of the Company’s external audit. The
Company’s Auditor, Deloitte LLP, may also provide additional non-audit services to the Company,
which in the Audit Committee’s opinion, will not compromise the independence of Deloitte LLP’s audit
team. Further information is provided in the Report of the Audit Committee on pages 27 to 30.
The Directors’ Responsibility Statement confirms that the financial statements, prepared in
accordance with the applicable set of accounting standards, give a true and fair view of the assets,
liabilities, financial position and profit or loss of the Group as a whole, whilst the Chairman’s Statement
includes a fair view of the development and performance of the business and the position of the
Group.
Financial and Business Reporting
An explanation of the Directors’ roles and responsibilities in preparing the Annual Report and Audited
Consolidated Financial Statements for the year ended 31 December 2023 is provided in the Directors’
Report, pages 6 to 12, and Statement of Directors’ Responsibilities, pages 31 and 32.
Further information enabling shareholders to assess the Company’s performance, business model and
strategy can be sourced in the Chairman’s Statement, pages 3 and 4, and the Directors’ Report on
pages 6 to 12.
Going concern
The Consolidated Financial Statements have been prepared on the going concern basis. The net current
asset position at year end is approximately £0.8 million. The estimated (unaudited) net current asset
position as at 31 March 2024 is £0.6m. At 31 March 2024 the Company had an estimated (unaudited)
NAV of £539.9 million. The Company, via the Funds, has sufficient liquid assets to meet expected costs.
The Investment Manager has the full intent and ability to provide the Company with funds as and if
required. Therefore, after making enquiries and based on the sufficient cash reserves as at 31
December 2023, the Directors are of the opinion that the Company has adequate resources to continue
its operational activities for the foreseeable future. The Board is therefore of the opinion that the going
Corporate Governance Report (continued)
23
concern basis should be adopted in the preparation of the Consolidated Financial Statements. Further
detail can be found in the Viability Statement on page 10.
Investment Manager
After careful consideration of the Investment Manager’s performance, primarily in terms of advice,
managing the portfolio and communicating effectively with shareholders, the Board agreed that it
would be in the best interests of the Company and its shareholders that the Investment Manager
continues on the current agreed contractual terms.
The Investment Management Agreement will continue in force until terminated: (i) upon the
dissolution of the Funds; (ii) by the Investment Manager, voluntarily, upon 180 days’ prior written
notice to the Managing Member; -(iii) resignation of the Managing Member; or (iv) upon the date of
the Managing Member’s delivery to the Investment Manager of a written notice terminating the
agreement.
There are no arrangements relating to the termination of their appointment, including compensation
payable in the event of termination. See the related parties transactions note 9 on pages 56 and 57.
Risk Management and Risk Control
The Board is required to annually review the effectiveness of the Company’s key internal controls such
as financial, operational and compliance controls and risk management. The Board has documented
the controls to be reviewed and will review their effectiveness on an ongoing basis. The controls are
designed to ensure that the risk of failure to achieve business objectives is managed rather than
eliminated, and are intended to provide reasonable, rather than absolute, assurance against material
misstatement or loss. Through regular meetings and meetings of the Audit Committee, the Board
seeks to maintain full and effective control over all strategic, financial, regulatory and operational
issues.
The Board maintains an organisational and committee structure with clearly defined lines of
responsibility and delegation of authorities. The Company’s system of internal control includes inter
alia the overall control exercise, procedures for the identification and evaluation of business risk, the
control procedures themselves and the review of these internal controls by the Audit Committee on
behalf of the Board. Each of these elements that make up the Company’s system of internal control is
explained in further detail as follows:
(i) Control environment
The Company is ultimately dependent upon the quality and integrity of the staff and management of
both its Investment Manager and Administration and Company Secretarial service provider. In each
case, qualified and able individuals have been selected at all levels. The staff of both the Investment
Manager and Administrator are aware of the internal controls relevant to their activities and are also
collectively accountable for the operation of those controls. Appropriate segregation and delegation
of duties is in place. The Audit Committee undertakes a review of the Company’s financial controls on
a regular basis.
In its role as a third-party fund administration services provider, Apex Fund and Corporate Services
(Guernsey) Limited produced an annual SSAE 18 and ISAE 3402 Type 2 Assurance Report on the
internal control procedures in place for the year ended 30 September 2023 and this is subject to
review by the Audit Committee and the Board.
Corporate Governance Report (continued)
24
During April 2023 the board performed a thorough evaluation of the controls of the Investment
Manager Administration and the Company Secretarial service provider. No exceptions were noted
during the review.
(ii) Identification and evaluation of business risks
Another key business risk is the performance of the Company’s investment. This is managed by the
Investment Manager, who undertakes regular analysis and reporting of business risks in relation to
the STC, who then proposes appropriate courses of action to the Board for their review.
(iii) Key procedures
In addition to the above, the Board’s key procedures involve a comprehensive system for reporting
financial results to the Board regularly. A review of controls is conducted by the Audit Committee
annually, and a twice-yearly review of investment valuations by the Board, including reports on the
underlying investment performance.
Due to the size and nature of the Company and the outsourcing of key services to the Administrator
and Investment Manager, the Company does not have an internal audit function. It is the view of the
Board that the controls in relation to the operating, accounting, compliance and IT risks performed
robustly throughout the year. In addition, all key procedures have been in full compliance with the
various policies and external regulations, including:
Investment policy, as outlined in the IPO documentation
Personal Account Dealing
Whistleblowing Policy
Anti-Bribery Policy
Applicable Financial Conduct Authority Regulations
Treatment and handling of confidential information
Conflicts of interest
Compliance policies
Market Abuse Regulation
The Company has delegated the provision of all services to external service providers whose work is
overseen by the Board. Each year a short questionnaire is circulated to all external service providers
requesting thorough details in regard to controls, personnel and information technology, amongst
others. This is in order to provide additional detail when reviewing the performance pursuant to their
terms of engagement.
There were no protected disclosures made pursuant to the whistleblowing policy of service providers
in relation to the Company, during the year ended 31 December 2023 (unchanged from prior year).
In summary, the Board considers that the Company’s existing internal controls, coupled with the
analysis of risks inherent in the business models of the Company and its subsidiaries, continues to
provide appropriate tools for the Company to monitor, evaluate and mitigate its risks.
Remuneration
There is currently no Remuneration Committee for the Company as it is deemed that the size,
composition and structure of the Company would mean the process would be inefficient and counter-
productive.
Corporate Governance Report (continued)
25
Level and Components of Remuneration
Directors are paid in accordance with agreed principles covering various functions. Further
information can be sourced in the Directors’ Remuneration Report, pages 13 and 14.
Procedures
The Company has a formal remuneration policy, outlined in the Directors’ Remuneration Report, on
pages 13 and 14.
UK Companies Act, Section 172 Statement
Whilst directly applicable to UK domiciled companies, the intention of the AIC Code is that matters set
out in section 172 of the UK Companies Act, 2006 (“s172 of the Companies Act”) are reported. The
Board considers the view of the Company’s other key stakeholders as part of its discussions and
decision-making process. As an investment company, the Company does not have any employees and
conducts its core activities through third-party service providers. Each provider has an established
track record and, through regulatory oversight and control, are required to have in place suitable
policies to ensure they maintain high standards of business conduct, treat customers fairly, and
employ corporate governance best practice.
The Board’s commitment to maintaining the high-standards of corporate governance recommended
in the AIC Code, combined with the directors’ duties incorporated into the Companies (Guernsey) Law,
2008, the constitutive documents, the Disclosure Guidance and Transparency Rules, and Market
Abuse Regulation, ensures that shareholders are provided with frequent and comprehensive
information concerning the Company and its activities.
Consistent with the above, the Board is satisfied that its policies, practices and behaviour throughout
the business are aligned with the Company’s purpose, values and strategy.
Whilst the primary duty of the Directors is owed to the Company as a whole, the Board considers as
part of its decision making process the interests of all stakeholders. Particular consideration being
given to the continued alignment between the activities of the Company and those that contribute to
delivering the Board’s strategy, which include the Investment Manager and Administrator.
The Board, in conjunction with the Investment Manager and Broker, engages actively with
Shareholders to understand their views and to ensure their interests are taken into consideration
when determining the Company’s strategic direction. Refer also to the Information and Support
Section on pages 17 and 17 above.
Risk Management
In order to minimise the risk of failure to achieve business objectives and promote the success of the
Company, the Company and the Board actively identifies, evaluates, manages and mitigates risk as
well as continually evolving the approach to risk management. Further details in connection with Risk
Management can be found on pages 7 and 9 of the Directors’ Report and pages 23 and 24 of the
Corporate Governance Report.
Corporate Governance Report (continued)
26
People, Community and Environment
As an externally managed investment company, the Company has no direct employees and minimal
direct impact on the environment, nor is it responsible for the emission of greenhouse gases. The
principal responsibility to shareholders is ensuring that the portfolio is properly managed. The
Investment Manager is responsible for the management of the portfolio and engages with the STC in
relation to their corporate governance practices and wider community responsibilities. For further
details on their corporate governance and social practices, refer to the Social Responsibility page of
the STC’s website.
Anti-Bribery and Corruption
The Board acknowledges that the Company’s international operations may give rise to possible claims
of bribery and corruption. In consideration of The Bribery Act 2010, enacted in the UK, at the date of
this report the Board had conducted a review of the perceived risks to the Company arising from
bribery and corruption to identify aspects of business which may be improved to mitigate such risks.
The Board has adopted a zero tolerance policy towards bribery and has reiterated its commitment to
carry out business fairly, honestly and openly.
Criminal Finances Act
The Board has a zero tolerance commitment to preventing persons associated with it from engaging
in criminal facilitation of tax evasion and will not work with any service provider who does not
demonstrate the same commitment. The Board has satisfied itself in relation to its key service
providers that they have reasonable provisions in place to prevent the criminal facilitation of tax
evasion by their own staff or any associated persons.
UK Modern Slavery Act
The Board acknowledges the requirement to provide information about human rights in accordance
with the UK Modern Slavery Act. The Board conducts the business of the Company ethically and with
integrity, and has a zero tolerance policy towards modern slavery in all its forms. As the Company has
no employees, all its Directors are non-executive and all its functions are outsourced, there are no
further disclosures to be made in respect of employees and human rights.
Business Relationships
In order for the Company to succeed, it requires to develop and maintain long term relationships with
service providers for services such as custodian, investment management, administration, company
secretarial, external audit, among others. The Company values all of its service providers and engages
with them on a regular basis.
Business Conduct
The Company is committed to act responsibly and ensure that the business operates in a responsible
and effective manner and with high standards in order to meet its objectives.
Shareholders
The Board place a great deal of importance on communication with all shareholders and envisages to
continue effective dialogue with all shareholders. Further information in connection with shareholder
engagement can be found on pages 16 and 17 of the Corporate Governance Report. Throughout 2023,
the Board, both individually and collectively, will continue to review and challenge how the Company
can continue to act in good faith to promote the success of the Company for the benefit of its members
in the decisions taken.
Report of the Audit Committee
27
The Board is supported by the Audit Committee, which was comprised of five of the directors, not
including the Chairman of the Board. The Committee dropped to four members when Chris Legge
retired on 23 May 2023. His successor, Linda Wilding, took over as Chairman of the Audit Committee
on 23 May 2023, who also has a background as a Chartered Accountant. The Board has considered
the composition of the Committee and is satisfied that there are sufficient recent relevant skills and
experience, in particular with the Chairman of the Audit Committee, Linda Wilding. The Board is also
satisfied that the Committee as a whole has competence relevant to the sector in which the Company
operates.
Role and Responsibilities
The primary role and responsibilities of the Audit Committee are outlined in the Committee’s Terms
of Reference, available at the registered office, including:
Monitoring the integrity of the financial statements of the Company and any formal
announcement relating to the Company’s financial performance, consideration of the viability
statement and reviewing significant financial reporting judgements contained within said
statements and announcements;
Reviewing the Company’s internal financial controls, and the Company’s internal control and risk
management systems;
Monitoring the need for an internal audit function annually;
Monitoring and reviewing the scope, independence, objectivity and effectiveness of the external
auditors, taking into consideration relevant regulatory and professional requirements;
Making recommendations to the Board in relation to the appointment, re-appointment and
removal of the external auditors and approving their remuneration and terms of engagement,
which in turn can be placed to the shareholders for their approval at the AGM;
Developing and implementing policy on the engagement of the external auditor to supply non-
audit services, taking into account relevant ethical guidance regarding the provision of non-audit
services by the external auditors, and reporting to the Board, identifying any matters in respect of
which it considers that action or improvement is needed and making recommendations as to the
steps to be taken;
Reviewing the arrangements in place to enable Directors and staff of service providers to, in
confidence, raise concerns about possible improprieties in matters of financial reporting or other
matters insofar as they may affect the Company;
Providing advice to the Board on whether the annual 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; and
Reporting to the Board on how the Committee discharged all relevant responsibilities, undertaken
by the Chairman at each Board meeting.
Financial Reporting
The primary role of the Audit Committee in relation to the financial reporting is to review with the
Administrator, Investment Manager and the Auditor the appropriateness of the Annual Report and
Audited Consolidated Financial Statements and Interim Condensed Consolidated Financial
Statements, concentrating on, amongst other matters:
The quality and acceptability of accounting policies and practices;
The clarity of the disclosures and compliance with financial reporting standards and relevant
financial and governance reporting requirements;
Material areas in which significant judgements have been applied or there has been discussion
with the Auditor;
Report of t
he Audit Committee (continued)
28
Whether the Annual Report and Audited Consolidated Financial Statements, taken as a whole, is
fair, balanced and understandable and provides the information necessary for the shareholders
to assess the Company’s performance, business model and strategy; and
Any correspondence from regulators in relation to the Company’s financial reporting.
To aid its review, the Audit Committee considers reports from the Administrator and Investment
Manager and also reports from the Auditor on the outcomes of their half-year review and annual
audit. The Audit Committee supports the Auditor in displaying the necessary professional scepticism
their role requires.
The Audit Committee met three times during the year under review; individual attendance of
Directors is outlined on page 18. The main matters discussed at those meetings were:
Review of auditor independence;
Review and approval of the annual audit plan of the external auditors;
Discussion and approval of the fee for the external audit;
Detailed review of the Half Year Report and Accounts and Annual Report and Consolidated
Financial Statements and recommendation for approval by the Board;
Discussion of reports from the external auditors following their interim review and annual audit;
Assessment of the effectiveness of the external audit process as described below;
Review of the Company’s key risks and internal controls, including valuation uncertainty as
described below; and
Consideration of the UK Corporate Governance Code 2018, Guidance on Audit Committees and
other regulatory guidelines, and the subsequent impact upon the Company.
The Committee has also reviewed and considered the whistleblowing policies in place for the
Investment Manager and Administrator and is satisfied the relevant staff can raise concerns in
confidence about possible improprieties in matters of financial reporting or other matters insofar as
they may affect the Company.
Annual General Meeting
The Audit Committee Chairman, or other members of the Audit Committee appointed for the purpose,
shall attend each AGM of the Company, prepared to respond to any shareholder questions on the
Audit Committee’s activities.
Internal Audit
The Audit Committee considers at least once a year whether or not there is a need for an internal
audit function. Currently, the Audit committee does not consider there to be a need for an internal
audit function, given that there are no employees in the Group and all outsourced functions are with
parties / administrators who have their own internal controls and procedures. This is evidenced by
the internal control reports provided by the providers, which give sufficient assurance that a sound
system of internal control is maintained.
Significant Risks in Relation to the Financial Statements
Throughout the year, the Audit Committee identified a number of significant issues and areas of key
audit risks in respect of the Annual Report and Audited Consolidated Financial Statements. The
Committee reviewed the external audit plan at an early stage and concluded that the appropriate
areas of audit risk relevant to the Company had been identified and that suitable audit procedures
had been put in place to obtain reasonable assurance that the financial statements as a whole would
be free of material misstatements. The below table sets out the key areas of risk identified and how
the Committee addressed the issues.
Report of the Audit Committee (continued)
29
Significant Risks in Relation to the Financial Statements (continued)
Significant Issue Actions to Address Issue
Valuation of investment – focus upon one target
company means that any errors in valuation,
depending on their size, can be highly material.
A key risk is incorrect pricing used based on
requirement of IFRS taking into account the
market for those shares.
The Audit Committee and Board review detailed
portfolio valuations on a regular basis
throughout the year under review, and receive
confirmation from the Investment Manager that
the pricing basis is appropriate and in line with
relevant accounting standards.
At 31 December 2023, the Group’s investment
consists solely of a non-controlling interest in
SIGC LLC, which has received unqualified audit
opinions since inception and measures its
balance sheet at fair value. The net asset value of
SIGC LLC, obtained from the audited SIGC LLC
financial statements at year end, is used as a
proxy for fair value to measure the fair value of
the investment in SIGC LLC.
Auditor Tenure and Objectivity
The Company’s Auditor, Deloitte LLP, has been appointed to act pursuant to an Engagement Letter
signed in 30 April 2024 and has been the Company’s Auditor since inception in 2017. The Committee
reviews the Auditor’s performance on a regular basis with a detailed formal review conducted on an
annual basis to ensure the Company receives an optimal service. The re-appointment of the
Company’s Auditor will be subject to annual shareholder approval at the AGM. The Auditor is required
to rotate the audit partner regularly every five years. A new audit partner, Marc Cleeve, was appointed
to the Company during 2023. There are no contractual obligations restricting the choice of external
auditor and the Company will consider putting the audit services contract out to tender at least every
ten years. In line with the Audit Committee’s review of auditor independence and audit partner
rotation the tender of the audit was considered during 2019, however it was the collective view of the
Audit Committee that they were satisfied with Deloitte LLP’s performance and therefore would
recommend them for re-appointment at the Company’s Annual General Meeting. The re-appointment
of Deloitte was approved by the shareholders at the AGM held on 23 May 2023.
Deloitte LLP regularly updates the Committee on the rotation of audit partners, staff, level of fees in
proportion to overall fee income of the Company, details of any relationships between the Auditor,
the Company and any target company, and also provides overall confirmation from the Auditor of
their independence and objectivity.
Prior to the implementation of the new Crown Dependency Audit Rules 2020 for the period
commencing 1 January 2021, Deloitte ceased providing tax compliance services to the Company. No
non-audit services are provided by Deloitte LLP other than the interim review which is a permissible
non-audit service. See Note 2 of the consolidated financial statements which summarises fees payable
to Deloitte LLP.
Report of the Audit Committee (continued)
30
The audit Committee undertook a formal review of the external auditor for the year ended 31
December 2023, with no issues arising. As a result of their review, the Committee is satisfied that
Deloitte LLP is independent of the Company, the Investment Manager and other service providers and
recommends the continuing appointment of the Auditor to the Board.
Conclusions in Respect of the Financial Statements
The production and the audit of the Company’s Annual Report and Audited Consolidated Financial
Statements is a comprehensive process requiring input from a number of different contributors. In
order to reach a conclusion on whether the Company’s financial statements are fair, balanced and
understandable, the Board has requested that the Committee advise on whether it considers that the
Annual Report and Financial Statements fulfils these requirements. In outlining their advice, the
Committee has considered the following:
The comprehensive documentation that is in place outlining the controls in place for the
production of the Annual Report, including the verification processes in place to confirm the
factual content;
The detailed reviews undertaken at various stages of the production process by the Investment
Manager, Administrator and the Committee that are intended to ensure consistency and overall
balance; and
The controls enforced by the Investment Manager, Administrator and other third party service
providers to ensure complete and accurate financial records and security of the Company’s assets.
As a result of the work performed during the year, the Audit Committee has concluded it has acted in
accordance with its Terms of Reference and ensured the independence and objectivity of the external
Auditor. The Annual Report for the year ended 31 December 2023, 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, and has reported on these findings to the Board. The
Board’s conclusions in this respect are set out in the Statement of Directors’ Responsibilities on pages
31 and 32.
Linda Wilding
Audit Committee Chairman
30 April 2024
Statement of Directors’ Responsibilities
31
The Directors are responsible for preparing the Annual Report and the Consolidated Financial
Statements for each financial year which give a true and fair view, in accordance with applicable
laws and regulations, of the state of affairs of the Company and of the profit and loss of the
Company for that year.
The Companies (Guernsey) Law, 2008 requires the directors to prepare financial statements for
each financial year. The financial statements have been prepared in accordance with
International Financial Reporting Standards (“IFRS”) as adopted by the European Union. In
preparing these financial statements, International Accounting Standard 1 (“IAS1”) requires that
directors:
properly select and apply accounting policies;
present information, including accounting policies, in a manner that provides relevant,
reliable, comparable and understandable information;
provide additional disclosures when compliance with the specific requirements in IFRSs
are insufficient to enable users to understand the impact of particular transactions,
other events and conditions on the Group’s financial position and financial performance;
and
make an assessment of the Group’s ability to continue as a going concern.
The Directors confirm that they have complied with the above requirements in preparing the
Consolidated Financial Statements.
The Directors are responsible for keeping proper accounting records that are sufficient to show
and explain the Group’s transactions and disclose with reasonable accuracy at any time the
financial position of the Company and enable them to ensure that the financial statements
comply with the Companies (Guernsey) Law, 2008.
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. The Directors
are responsible for the maintenance and integrity of the corporate and financial information
included on the Company’s website. Legislation in Guernsey governing the preparation and
dissemination of financial statements may differ from legislation in other jurisdictions.
Responsibility statement
We confirm that to the best of our knowledge:
the financial statements, prepared in accordance with IFRS as adopted in the European
Union, give a true and fair view of the assets, liabilities, financial position and profit or
loss of the Company as required by DTR 4.1.12;
the annual report and consolidated 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; and
The Annual Financial Report including information detailed in the Chairman’s review, the
Report of the Directors and the notes to the Financial Statements, 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, as required by
Statement of Directors’ Responsibilities (continued)
32
a) DTR 4.1.8 and DTR 4.1.9 of the Disclosure and Transparency Rules, being a fair review of the
Company business and a description of the principal risks and uncertainties facing the
Company and
b) DTR 4.1.11 of the Disclosure and Transparency Rules, being an indication of important
events that have occurred since the end of the financial year and the likely future
development of the Company.
In accordance with section 249 of the Companies (Guernsey) Law, 2008, each of the Directors
confirms that, to the best of their knowledge:
There is no relevant audit information of which the Company’s Auditors are unaware; and
All Directors have taken the necessary steps that they ought to have taken to make themselves
aware of any relevant audit information and to establish that the Auditor is aware of said
information.
For Sherborne Investors (Guernsey) C Limited
Talmai Morgan
Chairman
30 April 2024
Independent Auditor’s Report to the Members of Sherborne Investors
(Guernsey) C Limited
33
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF SHERBORNE
INVESTORS (GUERNSEY) C LIMITED
Report on the audit of the financial statements
1. Q
ualified opinion
I
n our opinion, except for the possible effects of the matter described in the basis for qualified opinion section of
our
report, the financial statements of Sherborne Investors (Guernsey) C Limited (the ‘Company’) and its
s
ubsidiaries (the ‘Group’):
gi
ve a true and fair view of the state of the Group’s affairs as at 31 December 2023 and of its profit for the
y
ear then ended;
have been properly prepared in accordance with International Financial Reporting Standards (IFRSs) as
adopte
d by the European Union and IFRSs as issued by the International Accounting Standards Board (IASB);
hav
e been prepared in accordance with the requirements of the Companies (Guernsey) Law, 2008.
We
have audited the financial statements which comprise:
the Consolidated Statement of Comprehensive Income;
the Consolidated Statement of Financial Position;
the Consolidated Statement of Changes in Equity;
the Consolidated Statement of Cash Flows; and
the related notes 1 to 12.
The financial reporting framework that has been applied in their preparation is applicable law and IFRSs as
adopted by the European Union and IFRSs as issued by IASB.
2. Basis for
qualified opinion
Of the Group’s financial asset at fair value through profit or loss represented by its investment in SIGC LLC of
£565.5m on the statement of financial position as at 31 December 2023, £32.4m is represented by other net
assets of intermediary holding entities under SIGC LLC which excludes the investment in the Selected Target
Company (‘Other net assets’).
We have been unable to obtain sufficient appropriate evidence to support the fair value of these Other net assets
in the underlying intermediary holding entities held by SIGC LLC and the related unrealised gain for the year
because the investment managers of SIGC LLC did not grant us access to the pertinent financial information.
Consequently, we were unable to determine whether any adjustments to those amounts were necessary.
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.
Independent Auditor’s Report to the Members of Sherborne Investors
(Guernsey) C Limited
34
We are independent of the Group in accordance with the ethical requirements that are relevant to our audit of
the financial statements in the UK, including the Financial Reporting Council’s (the ‘FRC’s’) Ethical Standard as
applied to listed public interest entities, and we have fulfilled our other ethical responsibilities in accordance with
these requirements.
We confirm that we have not provided any non-audit services prohibited by the FRC’s Ethical Standard to the
Group or the Company.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
qualified opinion.
3.
Summary of our audit approach
Key audit matters
The key audit matters that we identified in the current year were:
Valuation of the Other net assets of the underlying intermediary holding
entities held by SIGC LLC (see basis for qualified opinion section above); and
Valuation of listed investments at fair value through profit or loss held
through SIGC LLC.
Within this report, key audit matters are identified as follows:
Newly identified
Increased level of risk
Similar level of risk
Decreased level of risk
Materiality The materiality that we used for the Group financial statements in the current year
was £5.7m which was determined on the basis of 1% of net asset value (“NAV”).
Scoping Balances were scoped in for testing based on our assessment of risk of material
misstatement. As part of our risk assessment process, we have engaged
auditors of
SIGC LLC to perform specific procedures under our direction and supervision on the
incentive allocation, market price risk disclosure and any reportable matters that
would have an impact to the fair value of the investment in SIGC LLC.
Significant changes in
our approach
We have considered the key audit matter related to valuation of listed investments
at fair value through profit or loss separately from the valuation of the Other net
assets of the underlying intermediary holding entities held by SIGC LLC
which is
related to the basis
for qualified opinion.
4. Conclusions relating to going concern
In auditing the financial statements, we have concluded that the directors’ use of the going concern basis of
accounting in the preparation of the financial statements is appropriate.
Independent Auditor’s Report to the Members of Sherborne Investors
(Guernsey) C Limited
35
Our evaluation of the directors’ assessment of the Group’s and Company’s ability to continue to adopt the going
concern basis of accounting included:
Evaluated management’s going concern assessment and the appropriateness of the relevant disclosures in
the financial statements including assessing the current economic environment and the Group’s investment
performance;
Evaluated the cash flow forecasts for reasonableness; and
Assessed the key assumption that the Company used, via the underlying funds and whether there are
sufficient liquid assets to meet costs.
Based on the work we have performed, we have not identified any material uncertainties relating to events or
conditions that, individually or collectively, may cast significant doubt on the Group's and Company’s ability to
continue as a going concern for a period of at least twelve months from when the financial statements are
authorised for issue.
In relation to the reporting on how the Group has applied the UK Corporate Governance Code, we have nothing
material to add or draw attention to in relation to the directors’ statement in the financial statements about
whether the directors considered it appropriate to adopt the going concern basis of accounting.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the
relevant sections of this report.
5. Key audit matters
Key audit matters are those matters that, in our professional judgement, 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 forming
our opinion thereon, and we do not provide a separate opinion on these matters.
In addition to the matter described in the basis for qualified opinion section we have determined the matter
described below to be the key audit matter to be communicated in our report.
5.1. Valuation of listed investments at fair value through profit or loss
Key audit matter
description
The Company has a single Level 3 investment in SIGC LLC (formerly Whistle Investors
III LLC) as at 31 December 2023 of £565.5m (2022: £524.7m). Of that amount,
£533.1m (2022: £524.7m) is represented by the fair value of the underlying listed
investments in the Selected Target Company (“STC”) and Company itself. The
remaining balance relates to the value of the Other net assets of the underlying
intermediary holding entities held by SIGC LLC which is related to the basis for
qualified opinion.
Management have designated the total investment in SIGC LLC as Level 3 in the fair
value hierarchy due to the attributed fair value being measured at the NAV of the
Independent Auditor’s Report to the Members of Sherborne Investors
(Guernsey) C Limited
36
entity as not all inputs into the valuation of SIGC LLC are observable and there may
be judgement or estimation uncertainty within this balance.
Investments are the most quantitatively significant balance on the consolidated
statement of financial position and is an area of focus as they drive the performance
and net asset value of the Group. Owing to the fact that key performance indicators
and performance-based remuneration are based on the net asset value of the Group
we have determined there to be the potential for fraud through possible
manipulation of the balance through the value attributed to the investment.
Further details are included within Report of the Audit Committee on page 27, critical
accounting judgements and key sources of estimation uncertainty note in note 1 to
the financial statements.
How the scope of our
audit responded to the
key audit matter
In order to test
the valuation of the
investment balance as at 31 December 202
3,
we performed the following procedures:
We obtained an understanding of relevant controls around the reconciliation
of investments held and the year-end valuation of investments. This included
obtaining an understanding and testing relevant controls at the
administrator.
We evaluated the recognition of SIGC LLC as an investment that is held at
fair value through profit or loss despite the Company having a major
shareholding;
We obtained the audited financial statements of SIGC LLC from the
investment manager and assessed whether the NAV materially reflected that
entity’s fair value by recalculating the fair value of the listed investments
using independent pricing sources and number of units held as at year end;
We engaged the auditors of SIGC LLC to perform specific procedures on the
incentive allocation, market price risk disclosure and any reportable matters
and accordingly, reviewed their work. Further, we held discussions with the
auditors of SIGC LLC to ensure the valuation policy and methodology are
compliant with IFRS 13 – Fair Value Measurement and that this estimate of
fair value remains appropriate. We also enquired with the auditors of SIGC
LLC to consider the liquidity of SIGC LLC to ensure it is considered a going
concern; and
We agreed the capital contributions and distributions during the year into
SIGC LLC comprising the year-end value to operating agreements and to
bank statements.
Key observations Based on the work performed we conclude that the valuation of the listed
investment held at fair value through profit or loss held through SIGC LLC is
appropriate.
Independent Auditor’s Report to the Members of Sherborne Investors
(Guernsey) C Limited
37
6. O
ur application of materiality
6.1. M
ateriality
We define materiality as the magnitude of misstatement in the financial statements that makes it probable that
the economic decisions of a reasonably knowledgeable person would be changed or influenced. We use
materiality both in planning the scope of our audit work and in evaluating the results of our work.
Based on our professional judgement, we determined materiality for the financial statements as a whole as
follows:
Gro
up
Materia
lity
£5.7M (2022: £5.3M)
Ba
sis for
determ
ining
materiality
1% of the Group NAV (2022: 1% of the Group NAV)
Rationale for the
benc
hmark
a
pplied
In determining the materiality, we considered what the key balances on which the users of
the financial statements would judge the performance of the Group. As the investment
objective of the Group is to invest in a STC by the investment manager and realise a return
on the growth in fair value of the investment, we consider the NAV of the Group to be a key
performance indicator for shareholders. We have considered industry benchmarking and
applied the same benchmark of 1% as in prior year.
6.2. P
erformance materiality
We set performance materiality at a level lower than materiality to reduce the probability that, in aggregate,
uncorrected and undetected misstatements exceed the materiality for the financial statements as a whole. Group
performance materiality was set at 70% of Group materiality for the 2023 audit (2022: 70%). In determining
performance materiality, we considered the following factors:
the quality of the control environment and whether we were able to rely on controls, and
N
AV: £566.5m
Group materiality
£5.7m
Audit Committee
reporting threshold
£0.3m
NAV
Group materiality
Independent Auditor’s Report to the Members of Sherborne Investors
(Guernsey) C Limited
38
our
past experience of the audit, which has indicated a low number of corrected and uncorrected
misstatements identified in prior periods.
6.3. Error reporting threshold
We agreed with the Audit Committee that we would report to the Committee all audit differences in excess of
£283,000 (2022: £264,000), as well as differences below that threshold that, in our view, warranted reporting on
qualitative grounds. We also report to the Audit Committee on disclosure matters that we identified when
assessing the overall presentation of the financial statements.
7. An
overview of the scope of our audit
7.1. I
dentification and scoping of components
Our Group audit was scoped by obtaining an understanding of the Group and its environment, including Group-
wide controls, and assessing the risks of material misstatement at the Group level. Balances were scoped in for
testing based on our assessment of risk of material misstatement.
The Company was a limited partner in SIGC, LP (“the Investment Partnership”), holding a 99.98% capital interest
up until its dissolution in May 2023 and assignment of its interest in the underlying investment in the STC to the
Company. We have audited both the Group and the Investment Partnership until its dissolution in May 2023 and
therefore the audit team have audited the whole Group directly.
At the parent entity level we also tested the consolidation process and carried out analytical procedures to
confirm our conclusion that there were no significant risks of material misstatement of the aggregated financial
information of the remaining components not subject to audit or audit of specified account balances.
The administrator maintains the books and records of the Group. Our audit therefore included obtaining an
understanding of this service organisation (including obtaining and reviewing their controls assurance report) and
its relationship with the entity.
7.2. Our consideration of the control environment
The accounting function for the Group is provided by a third-party Guernsey regulated service provider. We have
obtained their ISAE 3402 Report for the period 1 October 2022 to 30 September 2023 which documents the
suitability of design and operating effectiveness of controls. We have reviewed the report and extracted the
controls relevant to the accounting functions undertaken by the service provider. As the reporting date of the
Group is 31 December 2023, we have obtained a bridging letter from the service provider detailing that there
have not been any material changes to the internal control environment nor any material deficiencies in the
internal controls. As part of our audit, we obtained an understanding and tested relevant controls around the
valuation and ownership of investments and NAV preparation process established at the service provider. We
inspected monthly NAV checklists and accompanying reports on a sample basis.
Independent Auditor’s Report to the Members of Sherborne Investors
(Guernsey) C Limited
39
7.3. Our consideration of climate-related risks
As part of our audit, we made enquiries of the management to understand the process they have adopted to
assess the potential impact of climate change on the financial statements. As disclosed in the Director’s Report
on page 9, the Board considers that the impact of climate change does not give rise to a material impact on
financial statements as the Company has no direct employees and minimal direct impact on the environment.
The Investment Manager is responsible for the management of the portfolio including discussions with the STC
in relation to their corporate governance practices and wider community responsibilities. We used our knowledge
of the Company to evaluate management’s assessment. We have also read the annual report to consider whether
the disclosures in relation to climate change made in the other information within the annual report are
materiality consistent with the financial statements and our knowledge obtained during our audit.
7.4. Working with other auditors
We directed and supervised the auditors of SIGC LLC by assessing their independence, objectivity and competence
through written instructions and reviewed their work virtually. We have obtained reporting deliverables from
them as evidence to support our response to the key audit matter.
8. Other information
The other information comprises the information included in the annual report, other than the financial
statements and our auditor’s report thereon. The directors are responsible for the other information contained
within the annual report.
Our opinion on the financial statements does not cover the other information and we do not express any form of
assurance conclusion thereon.
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 course of 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 this gives rise to a material misstatement in the financial statements themselves. If, based on the work
we have performed, we conclude that there is a material misstatement of this other information, we are required
to report that fact.
We have nothing to report in this regard.
9. Responsibilities of directors
As explained more fully in the directors’ responsibilities statement, 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 Group’s ability to continue
as a going concern, disclosing as applicable, matters related to going concern and using the going concern basis
Independent Auditor’s Report to the Members of Sherborne Investors
(Guernsey) C Limited
40
of accounting unless the directors either intend to liquidate the Group or to cease operations, or have no realistic
alternative but to do so.
10. 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.
A further description of our responsibilities for the audit of the financial statements is located on the FRC’s
website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.
11. Extent to which the audit was considered capable of detecting irregularities, including
fraud
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures
in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities,
including fraud. The extent to which our procedures are capable of detecting irregularities, including fraud is
detailed below.
11.1. Identifying and assessing potential risks related to irregularities
In identifying and assessing risks of material misstatement in respect of irregularities, including fraud and non-
compliance with laws and regulations, we considered the following:
the nature of the industry and sector, control environment and business performance including the
design of the Group’s remuneration policies, key drivers for directors’ remuneration, bonus levels and
performance targets;
results of our enquiries of management, the directors and the Audit Committee about their own
identification and assessment of the risks of irregularities, including those that are specific to the Group’s
sector;
any matters we identified having obtained and reviewed the Group’s documentation of their policies and
procedures relating to:
o identifying, evaluating and complying with laws and regulations and whether they were aware of any
instances of non-compliance;
o detecting and responding to the risks of fraud and whether they have knowledge of any actual,
suspected or alleged fraud;
o the internal controls established to mitigate risks of fraud or non-compliance with laws and
regulations;
the matters discussed among the audit engagement team including the auditors of SIGC LLC and relevant
internal specialists, including financial instrument specialists, regarding how and where fraud might occur
in the financial statements and any potential indicators of fraud.
As a result of these procedures, we considered the opportunities and incentives that may exist within the
organisation for fraud and identified the greatest potential for fraud in the valuation of the Other net assets
underlying intermediary holding entities held by SIGC LLC (see basis for qualified opinion section) and valuation
Independent Auditor’s Report to the Members of Sherborne Investors
(Guernsey) C Limited
41
of listed investments at fair value through profit or loss held through SIGC LLC In common with all audits under
ISAs (UK), we are also required to perform specific procedures to respond to the risk of management override.
We also obtained an understanding of the legal and regulatory framework that the Group operates in, focusing
on provisions of those laws and regulations that had a direct effect on the determination of material amounts
and disclosures in the financial statements. The key laws and regulations we considered in this context included
the Companies (Guernsey) Law, 2008 and the Listing Rules.
In addition, we considered provisions of other laws and regulations that do not have a direct effect on the financial
statements but compliance with which may be fundamental to the Group’s ability to operate or to avoid a material
penalty.
11.2. Audit response to risks identified
As a result of performing the above, we identified the valuation of the Other net assets underlying intermediary
holding entities held by SIGC LLC and valuation of listed investments at fair value through profit or loss as key
audit matters related to the potential risk of fraud. The basis for qualified opinion and key audit matters sections
of our report explain the matters in more detail.
In addition to the above, our procedures to respond to risks identified included the following:
reviewing the financial statement disclosures and testing to supporting documentation to assess
compliance with provisions of relevant laws and regulations described as having a direct effect on the
financial statements;
enquiring of management and the Audit Committee concerning actual and potential litigation and claims;
performing analytical procedures to identify any unusual or unexpected relationships that may indicate
risks of material misstatement due to fraud;
reading minutes of meetings of those charged with governance; a
nd
in
addressing the risk of fraud through management override of controls, testing the appropriateness of
journal entries and other adjustments; assessing whether the judgements made in making accounting
estimates are indicative of a potential bias; and evaluating the business rationale of any signific
ant
transactions that are unusual or outside the normal course of business.
We also communicated relevant identified laws and regulations and potential fraud risks to all engagement
team members, including internal specialists, and remained alert to any indications of fraud or non-
compliance with laws and regulations throughout the audit.
Report on other legal and regulatory requirements
12
. Corporate Governance Statement
Base
d on the work undertaken as part of our audit, we have concluded that each of the following elements of the
Co
rporate Governance Statement is materially consistent with the financial statements and our knowledge
obtaine
d during the audit:
the
directors’ statement with regards to the appropriateness of adopting the going concern basis of
a
ccounting and any material uncertainties identified set out on page 22;
the
directors’ explanation as to its assessment of the Group’s prospects, the period this assessment cover
s
a
nd why the period is appropriate set out on page 10;
Independent Auditor’s Report to the Members of Sherborne Investors
(Guernsey) C Limited
42
the directors' statement on fair, balanced and understandable set out on page 31;
the board’s confirmation that it has carried out a robust assessment of the emerging and principal risks set
out on page 7;
the section of the annual report that describes the review of effectiveness of risk management and internal
control systems set out on page 23; and
the section describing the work of the Audit Committee set out on page 27 to 30.
13. Matters on which we are required to report by exception
13.1. Adequacy of explanations received and accounting records
Arising solely from the limitation on scope of our work relating to the valuation of the Other net assets of the
underlying intermediary holding entities held by SIGC LLC, referred to in Section 2.
We have not obtained all the information and explanations that we considered necessary for the purpose of
our audit; and
We were unable to determine whether proper accounting records have been kept by the Company.
Under the Companies (Guernsey) Law, 2008 we are also required to report to you if, in our opinion:
the financial statements are not in agreement with the accounting records.
We have nothing to report in respect of this matter.
14. Other matters which we are required to address
14.1 Auditor tenure
Following the recommendation of the audit committee, we were appointed by the Board on 30 October 2017
to audit the financial statements for the year ended 31 December 2017 and subsequent financial periods. The
period of total uninterrupted engagement including previous renewals and reappointments of the firm is 7
years, covering the years ended 31 December 2017 to 31 December 2023.
14.2 Consistency of the audit report with the additional report to the audit committee
Our audit opinion is consistent with the additional report to the audit committee we are required to provide in
accordance with ISAs (UK).
15. Use of our report
This report is made solely to the company’s members, as a body, in accordance with Section 262 of the Companies
(Guernsey) Law, 2008. 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.
Independent Auditor’s Report to the Members of Sherborne Investors
(Guernsey) C Limited
43
As required by the Financial Conduct Authority (FCA) Disclosure Guidance and Transparency Rule (DTR) 4.1.15R –
DTR 4.1.18R, these financial statements will form part of the Electronic Format Annual Financial Report filed on
the National Storage Mechanism of the FCA in accordance with DTR 4.1.15R - DTR 4.1.18R. This auditor’s report
provides no assurance over whether the Annual Financial Report has been prepared in compliance with DTR
4.1.15R - DTR 4.1.18R.
Marc Cleeve, BA, FCA
For
and on behalf of Deloitte LLP
R
ecognised Auditor
St. Peter Port, Guernsey
_________
30 April 2024
44
Consoli
dated Statement of Comprehensive Income
For the year end
ed
31
December 202
3
1 J
anuary 2023 to
31 December 2023
1 January 2022 to
31 December 2022
Not
es £ £ £ £
Inc
ome
Unrealised gain/(loss) on financial assets
at fair value through profit or loss 1(d), 5
I
nterest income
Total income/(loss)
Expe
nses
1(f)
Management fees
9
Professiona
l fees
Di
rect
o
rs' fees
2
,9
Adm
inistrative fees
Oth
er fees
Foreign e
xchange
loss/(gain)
Total operating expenses
Comprehensive income/(loss)
(47,553,625 )
Comprehe
nsive income/(loss)
at
tributable to:
Equity
Shareholders
Non
-controlling interest (NCI) 1(b)
Weighted
average number of shares
outstanding
4
Basic and
diluted earnings
/(lo
ss) per
share
attributable to shareholders
(exclud
ing NCI)
4
All
Income
and
expenses are derived from continuing operations.
The
re are no items of other comprehensive
inco
me.
The accompanying notes form an integral part of these Consolidated Financial Statements.
45
Consoli
dated Statement of Financial Position
As at
31 December 2023
2023 2022
Note
s £ £ £ £
No
n-Current Assets
Financial assets at fair value
through profit or loss 1(d),5
Curre
nt Assets
Cash and cash equivalents 1(h),10
Prepaid expenses
Curre
nt Liabilities
Tra
de and other payables
1(i),6
Net Current Assets
Net Assets
Ca
pital and Reserves
Ca
lled up share capital and
share premium 7
Retained reserves
(122,688,870 )
(159,610,954 )
Eq
uity attributable to the
Company
Non-controlling interest (NCI)
1
(b)
Total Equity
NAV Per Share (excluding NCI)
8
The accompanying notes form an integral part of these Consolidated Financial Statements.
46
Consolid
ated Statement of Changes in Equity
For the year ended 31 December 2023
Share
Capital
and Share
Premium
Retained
Reserves
Non-
Controlling
Interests
Total
Equity
Notes
£ £ £ £
Balance at 1 January 2023
Comp
rehensive income - 43,911,376 9,604
Distributi
ons 11 - (7,000,000 ) (103,982 )
(7,103,982 )
NCI transf
er - 10,708 (16,353 )
(5,645 )
Balance
at 31 December 2023
Share
Capital
and Share
Premium
Retained
Reserves
Non-
Controlling
Interests
Total
Equity
Notes
£ £ £ £
Balance at 1 January 2022
Comp
rehensive income - (47,546,039 ) (7,586 )
(47,553,625 )
Incentiv
e allocation reversal
Distributions 11
Balance at 31 December 2022
The acco
mpanying notes form an integral part of these Consolidated Financial Statements.
47
Cons
olidated Statement of Cash Flows
F
or the year ended 31 December 2023 Notes
1 January
202
3
to
3
1 December 2023
1 January 202
2
to
31
December 2022
£
£ £
Cash flows from operating activities
Co
mprehensive income/(loss)
Adjustments for:
Unrealised (gain) /loss on financial assets at fair
value through profit or loss 5
(46,852,537 ) 42,799,033
Mo
vement in prepaid expenses
Movement in trade and other payables
6
(127,019 ) 98,696
Interest income
(6,807 ) (853 )
Ne
t cash flow used in operating activities
(3,054,267 ) (4,668,991 )
In
vesting activities
Contribution to
investmen
ts
5
(633,786 ) -
Distrib
ution from investments
5
Int
erest income
Net cash flow from investing activities
F
inancing activities
Distrib
utions to non-controlling interest 11
(109,627 ) (700 )
Distributions to shareholders
11
(7,000,000 ) (3,500,000 )
Ne
t cash flow used in financing activities
(7,109,627 ) (3,500,700 )
N
et movement in cash and cash equivalents
(4,157,520 ) (52,553 )
Op
ening cash and cash equivalents
Clos
ing cash and cash equivalents
T
he accompanying notes form an integral part of these Consolidated Financial Statements.
Notes to the Consolidated Financial Statements
48
For the year ended 31 December 2023
1. Summary of significant accounting policies
Notes to the Consolidated Financial Statements (continued)
49
1. Summary of significant accounting policies (continued)
Going concern (continued)
Notes to the Consolidated Financial Statements (continued)
50
1. Summary of significant accounting policies (continued)
Going concern (continued)
Notes to the Consolidated Financial Statements (continued)
51
For the year ended 31 December 2023
1. Summary of significant accounting policies (continued)
a. Basis of consolidation (continued)
Notes to the Consolidated Financial Statements (continued)
52
For the year ended 31 December 2023
1. Summary of significant accounting policies (continued)
d. Financial assets at fair value through profit or loss (continued)
Notes to the Consolidated Financial Statements (continued)
53
For the year ended 31 December 2023
3. Tax on ordinary activities
The Company has been granted exemption from income tax in Guernsey under the Income Tax (Exempt Bodies)
(Bailiwick of Guernsey) Ordinance 1989 and is liable to pay an annual fee (currently £1,200 per company) under
the provisions of the Ordinance. As such it will not be liable to income tax in Guernsey other than on Guernsey
source income (excluding deposit interest on funds deposited with a Guernsey bank). No withholding tax is
applicable to distributions to Shareholders by the Company.
The Investment Partnership was not itself subject to taxation in Guernsey. No withholding tax was applicable to
distributions to partners of the Investment Partnership.
Income which is wholly derived from the business operations conducted on behalf of the Investment Partnership
with, and investments made in, persons or companies who are not resident in Guernsey will not be regarded as
Guernsey source income. Such income will not therefore be liable to Guernsey tax in the hands of non-Guernsey
resident limited partners.
The Funds may be liable to pay withholding tax on behalf of non-US persons, such as the Company, on dividend
income from US sources, such as Navient. The maximum statutory withholding tax rate is 30%.
Notes to the Consolidated Financial Statements (continued)
54
For the year ended 31 December 2023
4. Earnings per share
The calculation of basic and diluted earnings per share is based on the return on ordinary activities less total
comprehensive income attributable to the non-controlling interest and on there being 700,000,000 (2022:
700,000,000) weighted average number of shares in issue during the year.
The earnings per share for the year attributable to equity shareholders ended 31 December 2023 amounted to
6.28 pence per share (31 December 2022: a loss of 6.79 pence per share).
Date
Shares
Days in issue
Weighted
Average Shares
31 December 2023
700,000,000
365
700,000,000
31 December 2022 700,000,000 365 700,000,000
Notes to the Consolidated Financial Statements (continued)
55
Notes to the Consolidated Financial Statements (continued)
56
For the year ended 31 December 2023
8. Net asset value per share attributable to the Company (excluding NCI)
Basic and Diluted
No. of Shares
Pence per Share
31 December 2023 700,000,000
80.90
31 December 2022 700,000,000
75.62
Notes to the Consolidated Financial Statements (continued)
57
For the year ended 31 December 2023
9. Related party transactions (continued)
Notes to the Consolidated Financial Statements (continued)
58
For the year ended 31 December 2023
10. Financial risk factors (continued)
Notes to the Consolidated Financial Statements (continued)
59
For the year ended
31 December 20
2
3
10. Financial risk factors (continued)
Notes to the Consolidated Financial Statements (continued)
60
For the year ended 31 December 2023