XLON:SIGC ESEF Annual Report
SHERBORNE INVESTORS (GUERNSEY) C LIMITED (XLON:SIGC)
ESEF Annual Report
2023-05-02
For: 2022-12-31
View Original
Added on
September 23, 2026
Annual Report and Audited Consolidated Financial Statements
For the year ended 31 December 2022
Contents
Page
THE COMPANY AND ITS ADVISERS
1
COMPANY SUMMARY
2
CHAIRMAN’S STATEMENT
3
BOARD OF DIRECTORS
5
DIRECTORS’ REPORT (INCLUDING THE STRATEGIC REPORT)
7
DIRECTORS’ REMUNERATION REPORT
12
CORPORATE GOVERNANCE REPORT
14
REPORT OF THE AUDIT COMMITTEE
25
STATEMENT OF DIRECTORS’ RESPONSIBILITIES
29
INDEPENDENT AUDITOR’S REPORT
31
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
40
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
41
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
42
CONSOLIDATED STATEMENT OF CASH FLOWS
43
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
44
The Company and Its Advisers
1
Non-Executive Directors
Talmai Morgan (Chairman)
Trevor Ash
Christopher Legge
Ian Brindle
Helen Sinclair, appointed 1 February 2023
Linda Wilding, appointed 1 February 2023
(all care of the registered office)
Investment Manager
Sherborne Investors Management (Guernsey) LLC
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
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
Numis Securities Limited
45 Gresham Street
London, EC2V 7BF
Investment Partnership
SIGC, LP (Incorporated)
1 Royal Plaza, Royal Avenue
St Peter Port
Guernsey, GY1 2HL
Custodian to the Investment Partnership
From 22 September 2022
The Bank of New York Mellon
240 Greenwich Street
New York, NY 10286
From 4 January 2022 to 4 October 2022
Bank of America, National Association
540 West Madison Street
IL4-540-21-03
Chicago, IL 60661
Until 3 January 2022
UBS Financial Services Inc.
299 Park Avenue, 8th Floor
New York, NY 10171
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, through its investment in SIGC, LP (Incorporated) (the
“Investment Partnership”), in a company which is publicly
quoted, which the Company 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 (Guernsey) GP, LLC (the “General Partner”)
and the Investment Partnership have appointed Sherborne
Investors Management (Guernsey) LLC (the “Investment
Manager”) to provide investment management services to the
Investment Partnership.
Chairman’s Statement
3
For the year ended 31 December 2022
Dear Shareholder
I am pleased to present the Annual Report and Audited Consolidated Financial Statements of the Company
for the year from 1 January 2022 to 31 December 2022.
At 31 December 2022, the net asset value (“NAV”) attributable to shareholders of the Company was £529.3
million (2021: £576.6 million) or 75.62 pence per share (2021: 82.38 pence per share) (see Note 8). As at 31
March 2023 the estimated (unaudited) NAV, as reported, was 73.50 pence per share.
The Company co-invests in Navient Corporation (“Navient”) with other investors through Newbury Investors
LLC (“Newbury”), which is managed by an affiliate of the Investment Manager, Sherborne Investors
Management LP (“Sherborne Investors”). Newbury currently owns 23% of the outstanding shares of Navient.
The Company is pursuing its investment strategy through its indirect shareholding in Navient. Newbury has
separately disclosed a 20.7% interest in the outstanding shares of the Company. See Note 5 of the Notes to
the Consolidated Financial Statements.
For further information on Navient, including their strategy and performance, please refer to their publicly
available financial statements and presentations available at www.sec.gov or Navient’s website at
www.navient.com.
On 14 April 2022, Navient and Sherborne Investors entered into an agreement that, among other things,
provided for Navient to nominate and recommend the election of Mr. Edward Bramson, a partner in Sherborne
Investors, to the board of directors of Navient at Navient’s Annual General Meeting of shareholders on 2 June
2022. Mr. Bramson was subsequently elected to Navient’s board of directors by shareholders at the Annual
General Meeting on 2 June 2022.
During 2022 Navient paid dividends to shareholders totalling $0.64 per share, of which the Group received its
proportionate share. During the year the Company commenced the payment of dividends, initially with 0.5
pence per share being paid on 16 September 2022 to shareholders of record on 26 August 2022. I am pleased
to announce that the Company is declaring a further 0.5 pence per share dividend to be paid on 26 May 2023
to shareholders of record on 5 May 2023, bringing the total dividends paid in respect of 2022 to 1.0 pence per
share.
On 26 May 2022, the Company announced that all resolutions proposed at the 2022 AGM were passed with
the necessary majority. Two shareholders however voted against the Board’s re-election and one further
shareholder withheld its vote against my re-election. The Board has had productive engagement with these
shareholders and, as a result, has appointed two new directors who will improve the Board’s diversity and
offer fresh perspectives. Further details regarding the 2022 AGM vote can be found in the Corporate
Governance section on page 18.
Chris Legge will not be standing for re-election to the Board at the forthcoming AGM and I would like to take
this opportunity to thank Chris for the valuable contribution which he has made to the Company and for having
been such a wonderful colleague.
On 1 February 2023 the Company welcomed the appointment of Helen Sinclair and Linda Wilding to the board
as non-executive directors. We are very pleased that we were able to attract such highly qualified individuals
and look forward to working with them as board colleagues. Further details of Helen and Linda can be found
on pages 5 and 6.
Chairman’s Statement (continued)
4
Details of Related Party Transactions are contained in Note 9 of the Notes to 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
19 April 2023
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.
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.
Christopher Legge (Audit Committee Chairman)
Appointed to the Board 25 May 2017
Mr Legge is a Chartered Accountant having started his career at Pannell Kerr Forster (PKF), before
moving to Ernst & Young in 1983, where he became a partner in 1986 and managing partner Guernsey
in 1998. Since leaving Ernst & Young in 2003 he has taken on a number of non-executive directorships.
He is currently non-executive director of Multi-Manager Investment Programmes PCC Limited and NB
Distressed Debt Investment Fund Limited. Mr Legge is an FCA and holds a BA (Hons) in Economics
from the University of Manchester. Mr Legge intends to step down from the Board at the Company’s
next annual general meeting.
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 is Chairman of Octopus Future Generations
VCT plc, and serves on the Boards of WH Ireland plc, BlackRock Smaller Companies Trust plc, Shires
Income plc and North East Finance Ltd.
Board of Directors (continued)
6
Linda Wilding (Director)
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.
Directors’ Report (including the Strategic Report)
7
The Directors present their annual report on the affairs of Sherborne Investors (Guernsey) C Limited
and its subsidiaries (together, the “Group”), together with the audited consolidated financial
statements, for the year ended 31 December 2022.
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 wholly-owned subsidiary of the Company, was dissolved in early 2023, and
therefore the Company is now a limited partner in the Investment Partnership, a limited partnership
registered in Guernsey on 24 May 2017. 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 effect indirectly through its investment in the
Investment Partnership, 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, 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, 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.
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 are the
same as those of the Company. In selecting the STC, the Investment Manager will consider the relevant
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.
The Investment Partnership 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 and the Investment Partnership 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.
Directors’ Report (including the Strategic Report) (continued)
8
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. In its role as a third-party fund
administration services provider, Apex Fund and Corporate Services (Guernsey) Limited produced an
annual PERE SSAE 18 and ISAE 3402 Type 2 Assurance Report on the internal control procedures in
place for the year ended 30 September 2022 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; and
• operational risk.
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 2022.
• 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%
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 ownership
interest in the STC and other information that impacts its Turnaround strategy.
• 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 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 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
Directors’ Report (including the Strategic Report) (continued)
9
portion of the STC. The Group’s market risk is managed by the Investment Manager in accordance
with policies and procedures in place as disclosed in the Group’s prospectus.
• Relationship risk - Neither the Company nor the Investment Partnership 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.
• Operational risk - Operational risk is reviewed by the Board at each Board meeting. The Board
also monitors the Group’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.
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 have 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.
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 2022. The Directors have
determined that the three year period to 31 December 2025 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 principal risks documented in the Directors’ Report as set out above;
• The liquidity of the Group’s portfolio; and
• The ongoing relevance of the Group’s investment objective in the current environment.
At 31 March 2023 the Company (excluding NCI) had an estimated (unaudited) NAV of £514.6 million.
The Company, via the Investment Partnership and other funds (the "Funds”), has sufficient liquid assets
to meet expected costs. Should additional liquidity be required at the Funds level, shares could be sold
and the investment manager of the Funds has the full intent and ability to provide the Group (via the
Investment Partnership) with funds as and if required.
Based on the foregoing, the Directors have a reasonable expectation that the Group and 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 2025.
Directors’ Report (including the Strategic Report) (continued)
10
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
receipt of any distributions from the Investment Partnership, 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 (of
which the Investment Partnership is an indirect holder) as well as the extent 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 (£)
Announcement
date
Ex div date
Record date
Paid date
Ad hoc
0.005
18.08.2022
25.08.2022
26.08.2022
16.09.2022
The Company has declared a dividend of 0.5 pence per share, payable on 26 May 2023 to shareholders
on the register at 5 May 2023.
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 2022, the Company is aware of the following material shareholdings:
Shareholder
Number of Ordinary
Shares
% of issued
share capital
Sherborne Investors Management LP*
144,681,485
20.7
Invesco Limited
139,467,736
19.9
Columbia Threadneedle
129,298,511
18.5
Janus Henderson Group plc
73,267,400
10.5
Fidelity International Limited
70,000,000
10.0
*Shares are owned by Newbury Investors LLC, an indirect subsidiary of SIGC LLC (formerly known as
Whistle Investors III LLC). Refer to Note 5 in 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)
11
Independent Auditor
A resolution to re-appoint the Auditors to the Company will be proposed at the Annual General
Meeting of the Company on 23 May 2023. Deloitte LLP have indicated their willingness to continue as
Auditors.
By order of the Board of Directors
Talmai Morgan
Chairman
19 April 2023
Directors’ Remuneration Report
12
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
2022 Actual £
Base fee £
Chairman (Talmai Morgan)
50,000
50,000
Audit Committee Chairman (Christopher Legge)
40,000
40,000
Non-Executive Director (Trevor Ash)
35,000
35,000
Non-Executive Director (Ian Brindle)
35,000
35,000
Total
160,000
160,000
Two new directors were appointed on 1 February 2023. Remuneration for both Linda Wilding and
Helen Sinclair is £35,000 per annum. Linda Wilding will be appointed as Audit Committee Chair when
Chris Legge resigns after the Annual General Meeting at which point her remuneration will increase
to £40,000.
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 2022.
No Director has any entitlement to pensions, paid bonuses or performance fees, 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)
13
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
19 April 2023
Corporate Governance Report
14
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
2022, 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 pages 15 and 16 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 19 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 22 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 17 and 18 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. See the statements on Board and
Committee responsibilities for further information.
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,
Corporate Governance Report (continued)
15
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 Directors place a great deal of importance on communication with shareholders. The Investment
Manager and Numis Securities Limited (the “Broker”) aim to meet with large 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.
Please also refer to pages 18 and 19 relating to the shareholder votes cast at the 2022 AGM.
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)
16
Board and Committee Meeting Attendance
The Board met four 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 subsequent to the year end on 1 February 2023, and
therefore did not attend any meetings during the year.
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.
Management of the Investment Partnership is the responsibility of the General Partner, which has
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, has 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.
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
4
N/A
Trevor Ash
3
2
Christopher Legge
4
3
Ian Brindle
4
3
Total Meetings for Year
4
3
Corporate Governance Report (continued)
17
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 were engaged to liaise with the Company in the process of the appointments.
Corporate Governance Report (continued)
18
The Board has chosen not to adopt a definitive policy with quantitative targets for board diversity. The
Board believes that the current mix of skills, experience, knowledge and age of the Directors is
appropriate to the requirements of the Company. In accordance with the Code, any Director who has
served on the Board for longer than nine years will be subject to rigorous review to ensure the need
for progressive refreshing of the Board is complied with.
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 consists of six non-executive members, with Chris Legge intending to step down at the next
AGM.
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. This was last
completed in March 2022 with a positive outcome. Additionally, an evaluation focusing on individual
commitment, performance and contribution of each Director is conducted. The Chairman will meet
with each Director to fully understand their views of the Company’s strengths and to identify potential
weaknesses. 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.
Statement on AGM 2022 Votes Against
On 26 May 2022, the Board of the Company announced that all resolutions proposed at the 2022 AGM
were passed with the necessary majority. In accordance with the requirement of provision 4 of the UK
Corporate Governance Code 2018, the Company is providing the following further update following
the significant minority votes against resolutions 3, 4, 5, and 6 for the re-elections of Mr T Morgan
(22.05%), Mr T Ash (19.10%), Mr C Legge (19.10%), and Mr I Brindle (19.10%), respectively, at the
AGM.
As previously noted, the Board has identified that the votes against these resolutions relate principally
to two shareholders and one further shareholder withheld its vote on resolution 3. The Board and the
Corporate Governance Report (continued)
19
Investment Manager engaged with these shareholders, both prior to and after the 2022 AGM, to
understand their views. In response, and as disclosed on 16 January 2023, the Board has appointed
two new non-executive directors, Helen Sinclair and Linda Wilding, effective from 1 February 2023, to
increase diversity and offer fresh perspectives. The Company remains committed to consultation with
its shareholders and continues its policy of maintaining an open dialogue.
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 23 May 2023, Helen Sinclair and Linda Wilding will be proposed for election,
and Talmai Morgan, Ian Brindle and Trevor Ash will be proposed for re-election. Chris Legge will retire
from the Board at the AGM.
Audit, Risk and Internal Control
The Board has established an Audit Committee composed of Chris Legge, Trevor Ash, Ian Brindle,
Helen Sinclair and Linda Wilding, each of whom are independent. Mr Legge is a Chartered Accountant
and is a previous partner of Ernst & Young, further information is provided on page 5. Mr Legge will
stand down as Audit Committee Chairman and from the Audit Committee following the Company’s
AGM on 23 May 2023, upon which Mrs Wilding will take 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.
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
25 to 28.
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 19.
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 25 to 28.
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
Corporate Governance Report (continued)
20
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 2022 is provided in the Directors’
Report, pages 7 to 11, and Statement of Directors’ Responsibilities, pages 29 and 30.
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 7 to 11.
Going concern
The Consolidated Financial Statements have been prepared on the going concern basis. The net current
asset position at year end is £4.8 million. The estimated (unaudited) net current asset position as at 31
March 2023 is £3.2m. At 31 March 2023 the Company had an estimated (unaudited) NAV of £514.6
million. The Company, via the Funds, has sufficient liquid assets to meet expected costs. The
Investment Manager, affiliates of which are also the investment manager of the Funds has the full
intent and ability to provide the Investment Partnership with funds as and if required. Therefore, after
making enquiries and based on the sufficient cash reserves as at 31 December 2022, the Directors are
of the opinion that the Group has adequate resources to continue its operational activities for the
foreseeable future. The Board is therefore of the opinion that the going concern basis should be
adopted in the preparation of the Consolidated Financial Statements. Further detail can be found in
the Viability Statement on page 9.
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 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 Investment Partnership; (ii) by the Investment Manager, voluntarily, upon 180 days’
prior written notice to the Managing Partner and the Investment Partnership; or (iii) automatically
upon removal of the General Partner.
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
Corporate Governance Report (continued)
21
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 PERE SSAE 18 and ISAE 3402 Type 2 Assurance Report on the
internal control procedures in place for the year ended 30 September 2022 and this is subject to
review by the Audit Committee and the Board. The Directors acknowledge one exception on controls
relevant to the Group, however are comfortable that this does not have a significant impact on the
control environment.
During March 2022 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 propose 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
Corporate Governance Report (continued)
22
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 2022 (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, continue 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.
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 12 and 13.
Procedures
The Company has a formal remuneration policy, outlined in the Directors’ Remuneration Report, on
pages 12 and 13.
UK Companies Act, Section 172 Statement
Whilst directly applicable to UK domiciled companies, the intention of the Code is that the below
matters set out in section 172 of the UK Companies Act, 2006 are reported on by all listed entities.
Under Section 172, directors have a duty to promote the success of the Company for the benefit of its
members as a whole and in doing so have regard to the consequences of any decisions in the long
term, as well as having regard to the Company’s stakeholders amongst other considerations.
The importance of stakeholder considerations, particularly in the context of decision-making, is taken
into account at every Board meeting. All discussions involve careful consideration of the longer-term
consequences of any decisions and their implications for stakeholders.
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 14 and 15 above.
In the current year the Board and the Investment Manager engaged with Shareholders both at the
Annual General Meetings but also held additional meetings with those shareholders who voted
against or withheld voting at the 2022 AGM. See pages 18 and 19 above.
Corporate Governance Report (continued)
23
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 8 and 9 of the Directors Report and page 20 of the Corporate
Governance Report.
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 outsources, 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.
Corporate Governance Report (continued)
24
Shareholders
The Board place a great deal of importance on communication with all shareholders and will
endeavour to continue effective dialogue with all shareholders. Further information in connection
with shareholder engagement can be found on pages 18 and 19 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
25
The Board is supported by the Audit Committee, which is comprised of five of the Directors, not
including the Chairman of the Board. This will drop to four members upon Chris Legge’s retirement on
23 May 2023. 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, Christopher Legge, having a background as a Chartered Accountant. His successor, Linda
Wilding, who will take over as Chairman of the Audit Committee on 23 May 2023, also has a
background as a Chartered Accountant. 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;
Report of the Audit Committee (continued)
26
• Material areas in which significant judgements have been applied or there has been discussion
with the Auditor;
• 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 Committee met three times during the year under review; individual attendance of Directors is
outlined on pages 15 and 16. 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.
Report of the Audit Committee (continued)
27
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.
Significant Issue
Actions to Address Issue
Valuation and ownership 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 2022, 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 Partnership’s 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 August 2022 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 was appointed to the
Company during 2019. 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 26 May 2022.
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.
Report of the Audit Committee (continued)
28
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.
The Audit Committee undertook a formal review of the external auditor for the year ended 31
December 2022, 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. There are currently no plans
for retendering the audit.
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 2022, 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
29 and 30.
Christopher Legge
Audit Committee Chairman
19 April 2023
Statement of Directors’ Responsibilities
29
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 Group;
• the Chairman’s Statement, Directors’ Report and Corporate Governance Statement
include a fair review of the development and performance of the business and the
position of the Group, together with a description of the principal risks and uncertainties
that they face; and
• 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.
Statement of Directors’ Responsibilities
30
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
19 April 2023
Independent Auditor’s Report to the Members of Sherborne Investors
(Guernsey) C Limited
31
Report on the audit of the financial statements
1. Opinion
In our opinion the financial statements of Sherborne Investors (Guernsey) C Limited (the ‘parent company’) and
its subsidiaries (the ‘Group’):
• give a true and fair view of the state of the Group’s affairs as at 31 December 2022 and of its loss for the
year then ended;
• have been properly prepared in accordance with International Financial Reporting Standards (IFRSs) as
adopted by the European Union;
• have 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.
2. Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable
law. Our responsibilities under those standards are further described in the auditor’s responsibilities for the
audit of the financial statements section of our report.
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 parent company
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
opinion.
3. Summary of our audit approach
Key audit matters
The key audit matter that we identified in the current year was:
• Valuation and ownership of investments at fair value through profit or loss.
Independent Auditor’s Report to the Members of Sherborne Investors
(Guernsey) C Limited
32
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 £5,294,000 which was determined on the basis of 1% of net asset value
(“NAV”).
Scoping
The response to the risk of material misstatement was performed directly by the
Group audit engagement team.
Significant changes in
our approach
There were no significant changes to the audit approach in the current year.
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.
Our evaluation of the directors’ assessment of the Group’s and parent company’s ability to continue to adopt
the going concern basis of accounting included:
• Evaluated management’s going concern assessment and 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, via the Investment Partnership and other underlying funds
and whether there is 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 parent 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
Independent Auditor’s Report to the Members of Sherborne Investors
(Guernsey) C Limited
33
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.
5.1. Valuation and ownership of investments at fair value through profit or loss
Key audit matter
description
The Group has a single Level 3 investment in SIGC LLC (formerly Whistle Investors III
LLC) as at 31 December 2022 of £524.7m (2021: £575.6m).
Management have designated it as Level 3 in the fair value hierarchy due to the
attributed fair value being comprised of the NAV of the entity. The material balances
within this entity are its investments which are designated as Level 3 investments, as
such not all inputs into the valuation of SIGC LLC are observable and there may be
judgement or estimation uncertainty within this balance, and also the corresponding
movement in unrealised gains or losses.
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, whether through manipulation of the ownership
holding or through the value attributed to the holding.
Further details are included within the director’s report on pages 7 to 11, the audit
committee report on pages 25 to 28, critical accounting estimates and judgements
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 investments balance as at 31 December 2022 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 of controls of the administrator, Apex Fund and
Corporate Services (Guernsey) Limited;
• We evaluated the ownership of SIGC LLC by agreeing the ownership amount
to the Limited Liability Company Agreement as provided by the Managing
Member of SIGC LLC;
• We evaluated the recognition of SIGC LLC as an investment that is held at
fair value through profit or loss despite SIGC, LP 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
Independent Auditor’s Report to the Members of Sherborne Investors
(Guernsey) C Limited
34
entity’s fair value;
• We assessed the correlation of the movement in the NAV of SIGC LLC with
the movement in the observable share price of the underlying investment;
and
• We obtained confirmation from the auditors of SIGC LLC of the procedures
they performed on the material balances and any reportable matters.
Key observations
Based on the work performed we conclude that the valuation and ownership of the
investment held at fair value through profit or loss is appropriate.
6. Our application of materiality
6.1. Materiality
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:
Group
Materiality
£5,294,000 (2021: £5,804,000)
Basis for
determining
materiality
1% of the Group NAV (2021: 1% of the Group NAV)
Rationale for the
benchmark
applied
In determining the materiality, we considered what the most important 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 Selected Target Company (“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 taken into account industry benchmarking and applied the same benchmark of 1% as
in prior year.
Independent Auditor’s Report to the Members of Sherborne Investors
(Guernsey) C Limited
35
6.2. Performance 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 2022 audit (2021: 70%). In
determining performance materiality, we considered the quality of the control environment including that
present at the administrator, Apex Fund and Corporate Services (Guernsey) Limited based on its ISAE 3402
report as well as 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
£264,000 (2021: £290,000), 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. Identification 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.
Sherborne Investors (Guernsey) C Limited is a limited partner in SIGC, LP (“the Investment Partnership”), holding
a 99.98% capital interest. The Investment Partnership holds the underlying investment in the STC. We have
audited both the Group and the Investment Partnership 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.
NAV: £529m
Group materiality
£5.29m
Audit Committee
reporting threshold
£0.26m
NAV
Group materiality
Independent Auditor’s Report to the Members of Sherborne Investors
(Guernsey) C Limited
36
7.2. Our consideration of the control environment
The accounting function for the Group is provided by Apex Fund and Corporate Services (Guernsey) Limited
(“Apex”). We have obtained their ISAE 3402 Report for the period 1 October 2021 to 30 September 2022 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 Apex. As the reporting date of the
Group is 31 December 2022, we have obtained a bridging letter from Apex detailing that there have not been
any material changes to the internal control environment nor any material deficiencies in the internal controls.
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 Corporate
Governance Report on page 14, management considers that the impact of climate change does not give rise to
a material impact on financial statements the Company has no direct employees and minimal direct impact on
the environment, with the Investment Manager being 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 in our audit
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.
Independent Auditor’s Report to the Members of Sherborne Investors
(Guernsey) C Limited
37
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
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 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 following areas: the valuation and
Independent Auditor’s Report to the Members of Sherborne Investors
(Guernsey) C Limited
38
ownership of investments at fair value through profit or loss. 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 and ownership of investments at fair value
through profit or loss as a key audit matter related to the potential risk of fraud. The key audit matters section
of our report explains the matter in more detail and also describes the specific procedures we performed in
response to that key audit matter.
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; and
• 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 significant
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
Based on the work undertaken as part of our audit, we have concluded that each of the following elements of
the Corporate Governance Statement is materially consistent with the financial statements and our knowledge
obtained during the audit:
Independent Auditor’s Report to the Members of Sherborne Investors
(Guernsey) C Limited
39
• the directors’ statement with regards to the appropriateness of adopting the going concern basis of
accounting and any material uncertainties identified set out on page 20;
• the directors’ explanation as to its assessment of the Group’s prospects, the period this assessment covers
and why the period is appropriate set out on page 9;
• the directors' statement on fair, balanced and understandable set out on page 29;
• the board’s confirmation that it has carried out a robust assessment of the emerging and principal risks set
out on page 8 and 9;
• the section of the annual report that describes the review of effectiveness of risk management and internal
control systems set out on page 8; and
• the section describing the work of the audit committee set out on page 25 to 28.
13. Matters on which we are required to report by exception
13.1. Adequacy of explanations received and accounting records
Under the Companies (Guernsey) Law, 2008 we are required to report to you if, in our opinion:
• we have not received all the information and explanations we require for our audit; or
• proper accounting records have not been kept by the parent company; or
• the financial statements are not in agreement with the accounting records.
We have nothing to report in respect of these matters.
14. 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.
As required by the Financial Conduct Authority (FCA) Disclosure Guidance and Transparency Rule (DTR) 4.1.14R,
these financial statements form part of the European Single Electronic Format (ESEF) prepared Annual Financial
Report filed on the National Storage Mechanism of the UK FCA in accordance with the ESEF Regulatory
Technical Standard ((‘ESEF RTS’). This auditor’s report provides no assurance over whether the annual financial
report has been prepared using the single electronic format specified in the ESEF RTS.
Nicola Sarah Paul FCA
For and on behalf of Deloitte LLP
Recognised Auditor
St. Peter Port, Guernsey
19 April 2023
40
Consolidated Statement of Comprehensive Income
For the year ended 31 December 2022
1 January 2022 to
31 December 2022
1 January 2021 to
31 December 2021
Notes
£
£
£
£
Income
1(e)
Unrealised gain/(loss) on financial assets
at fair value through profit or loss
1(d), 5
(42,799,033 )
Interest income
Total income/(loss)
(42,798,180 )
Expenses
1(f)
Management fees
9
Professional fees
Directors' fees
2,9
Administrative fees
Other fees
Foreign exchange gain
(428,695 )
Total operating expenses
Comprehensive income/(loss)
(47,55 3,625 )
Comprehensive income/(loss)
attributable to:
Equity Shareholders
(47,54 6,039 )
Non-controlling interest (NCI)
1(b)
(7,586 )
Weighted average number of shares
outstanding
4
Basic and diluted earnings per share
attributable to shareholders (excluding
NCI)
4
(6.79
All revenue and expenses are derived from continuing operations.
The accompanying notes form an integral part of these Consolidated Financial Statements.
41
Consolidated Statement of Financial Position
As at 31 December 2022
2022
2021
Notes
£
£
£
£
Non-Current Assets
Financial assets at fair value
through profit or loss
1(d),5
Current Assets
Cash and cash equivalents
1(h),10
Prepaid expenses
Current Liabilities
Trade and other payables
1(i),6
Net Current Assets
Net Assets
Capital and Reserves
Called up share capital and
share premium
7
Retained reserves
(159,610 ,954 )
(112,276 ,754 )
Equity attributable to the
Company
Non-controlling interest (NCI)
1(b)
Total Equity
NAV Per Share (excluding NCI)
8
The Consolidated Financial Statements were approved by the Board of Directors for issue on 19 April 2023.
Signed on behalf of the Board:
Director Director
The accompanying notes form an integral part of these Consolidated Financial Statements.
42
Consolidated Statement of Changes in Equity
For the year ended 31 December 2022
Share
Capital
and Share
Premium
Retained
Reserves
Non-
Controlling
Interests
Total
Equity
Notes
£
£
£
£
Balance at 1 January 2022
(112 ,276,754 )
Comprehensive loss
(47,546 ,039 )
(7,586 )
(47,553 ,625 )
Incentive allocation reversal
(3,711,839 )
Distributions
11
(3,500,000 )
(700 )
(3,500,700 )
Balance at 31 December 2022
(159 ,610,954 )
Share
Capital
and Share
Premium
Retained
Reserves
Non-
Controlling
Interests
Total
Equity
Notes
£
£
£
£
Balance at 1 January 2021
(267,456,731 )
Comprehensive income
Incentive allocation
(3,711,839 )
Contributions
Distributions
11
(109,72 0 )
(109,72 0 )
Balance at 31 December 2021
(112 ,276,754 )
The accompanying notes form an integral part of these Consolidated Financial Statements.
43
Consolidated Statement of Cash Flows
For the year ended 31 December 2022
Notes
1 January 2022 to
31 December 2022
1 January 2021 to
31 December 2021
£
£
£
Net cash flow used in operating activities
See below
(4,66 8,991 )
(3,31 4,498 )
Investing activities
Contribution to investments
5
(543,57 4,886 )
Distribution from investments
5
Interest income
Net cash flow (used in)/from investing activities
Financing activities
Contributions from non-controlling interest
Distributions to non-controlling interest
11
(700 )
(109,72 0 )
Distributions to shareholders
11
(3,500,000 )
Net cash flow (used in)/from financing activities
(3,50 0,700 )
(298 )
Net movement in cash and cash equivalents
(52,553 )
Opening cash and cash equivalents
Closing cash and cash equivalents
Net cash flow (used in)/from operating activities
Comprehensive income/(loss)
47
(47,553 ,625 )
Unrealised (gain) /loss on financial assets at fair
value through profit or loss
5
(162,29 3,243 )
Movement in prepaid expenses
(12,242 )
Movement in trade and other payables
6
Interest income
(853 )
(556 )
Net cash flow used in operating activities
(4,66 8,991 )
(3,31 4,498 )
The accompanying notes form an integral part of these Consolidated Financial Statements.
Notes to the Consolidated Financial Statements (continued)
45
For the year ended 31 December 2022
Notes to the Consolidated Financial Statements (continued)
46
For the year ended 31 December 2022
Notes to the Consolidated Financial Statements (continued)
47
For the year ended 31 December 2022
Notes to the Consolidated Financial Statements (continued)
48
For the year ended 31 December 2022
Notes to the Consolidated Financial Statements (continued)
52
For the year ended 31 December 2022
