Annual Financial Report

SHERBORNE INVESTORS (GUERNSEY) B LIMITED

Annual Report and Consolidated Financial Statements

For the year ended 31 December 2014

COMPANY SUMMARY

CHAIRMAN'S STATEMENT

For the year ended 31 December 2014

To our Shareholders:

As noted in our half-year results, the Investment Manager informed the Company in November 2013 that 3i Group plc ("3i") would no longer be pursued as a turnaround investment and that all economic exposure to the investment had been offset through the use of derivatives. A residual investment in shares and derivative securities of 3i included in the net asset value of the Company at 31 December 2013 was sold in January 2014. Proceeds realised from the sale of 3i, net of previously distributed profits, were retained for deployment into a new investment.

In December 2013, the Investment Manager proposed an investment by SIGB, LP in a New Selected Target Company, Electra Private Equity plc ("Electra"). The Board of Directors of the Company approved the Electra investment and the price up to which the Investment Manager could purchase shares in it. In January 2014, SIGB, LP began to acquire an economic interest in Electra.

On 22 August 2014, the Investment Manager requisitioned Electra to call a general meeting of the company's shareholders to consider resolutions that Edward Bramson and Ian Brindle be appointed as directors of Electra and that Geoffrey Cullinan be removed as a director. The resolutions were not approved by shareholders at a meeting held in October 2014.

On 20 February 2015, Electra released to the market a TR-1 notification from the Investment Manager which stated that as at 17 February 2015, SIGB, LP held 8,967,089 ordinary shares, or approximately 25.2% of Electra's outstanding shares. Pursuant to its existing authority, the Investment Manager may sell, short or otherwise dispose of all or a part of such shares held in Electra or purchase additional securities at any time.

During the year Numis Securities Limited was appointed as the sole financial adviser and corporate broker to the Company with effect from 28 February 2014.

The Group intends to continue to pursue its strategy as set out in its prospectus.

We are grateful for your continued support and will keep you informed of the status of our investments as they develop.

Yours sincerely,

Talmai Morgan

Chairman

BOARD OF DIRECTORS

Talmai Phillip Morgan (62) (Chairman)

Appointed to the Board 8 November 2012.

Mr. Morgan has been a non-executive director of a number of investment companies since 2005. He is currently chairman of NB Private Equity Partners Limited and Global Fixed Income Realisation Limited as well as Sherborne Investors (Guernsey) B Limited. He also serves on the board of BH Macro Limited, BH Global Limited, NB Distressed Debt Investment Fund Limited, John Laing Infrastructure Fund Limited and Real Estate Credit Investments PCC Limited. All of these companies are publicly listed. From 1999 to 2004, Mr. Morgan was Director of Fiduciary Services and Enforcement at the Guernsey Financial Services Commission where he was responsible for the design and implementation of Guernsey's law relating to the regulation of fiduciaries, administration businesses and company directors. He was also 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 M.A. in economics and law from the University of Cambridge.

Trevor Charles Ash

Appointed to the Board 8 November 2012

Mr. Ash has been a non-executive director of a number of investment entities since 1999, including funds managed by Sherborne Investors, Rothschild, Insight, Cazenove, Merrill Lynch, ING, Thames River Capital and the Dexion Group. He is currently Chairman of J.P. Morgan 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.

Christopher Fawcus Lovell Legge (Chairman of the Audit Committee)

Appointed to the Board 10 May 2013

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, holding that position until 2003. He is currently a director of a number of investment entities including Senior Independent Director of BH Macro Limited, non-executive director of Third Point Offshore Investors Limited, non-executive director of Ashmore Global Opportunities Limited and non-executive Director of TwentyFour Select Monthly Income Fund Limited. Mr. Legge is an FCA and holds a BA (Hons) in Economics from the University of Manchester.

Messrs. Morgan, Ash and Legge have expertise in connection with the investment policy as a result of their experience in the investment fund industry in a variety of roles, including service on the boards of a number of listed investment funds.

DIRECTORS' REPORT

The Directors present their annual report on the affairs of the Company and its subsidiary (together, the "Group"), together with the financial statements and auditor's independent report, for the year ended 31 December 2014.

Principal activities and investing policy

Sherborne Investors (Guernsey) B Limited (the ''Company") is a Guernsey domiciled company incorporated on 8 November 2012 with limited liability. The Company's shares were admitted to trading on SFM on 7 May 2013.

The Company is a limited partner in SIGB, LP (the "Investment Partnership"), a limited partnership registered in Guernsey on 6 November 2012, holding a 99.98% capital interest. The Company aims to provide investors with capital growth through its investment in the Investment Partnership to which it had committed £200 million, representing substantially all of the Company's net proceeds from its initial public offering.

The Company will effect its investment policy indirectly through the Investment Partnership, which seeks to invest in a company (the ''Selected Target Company'') which is publicly quoted, most likely on a UK stock exchange, which it considers to be undervalued as a result of operational deficiencies and which it believes can be rectified by the Investment Manager's active involvement, thereby increasing the value of the investment (a "Turnaround"). The investment will thus not be passive. The Company's investment may be made on-market or off-market.

The Group intends that the holding in the Selected Target Company shall not reach such a level as to require the Group to make a bid for the entire Selected Target Company and, therefore, the Group will not have control over the Selected Target Company.

The Group's investment policy is to invest in one target company at a time. Therefore, the Group will not seek to reduce risk through diversification. If, after acquiring a shareholding, the share price of the Selected Target Company rises to a level at which further investment and the effort of a Turnaround is, in the Investment Manager's opinion, no longer justified or otherwise no longer presents a viable Turnaround opportunity, the Investment Partnership intends to sell (and distribute the proceeds to the Company) or distribute in kind the holding to the limited partners, rather than seeking to join the Board of Directors or otherwise to engage with the company. In these circumstances, the Company intends to distribute any realised net profits received from the Investment Partnership to the Shareholders. In such event, an amount equal to the Company's capital contribution for the initial Selected Target Company (less any losses on the sale) may be recalled by the Investment Partnership and invested into a new target (a "New Target Company"). This process may be repeated until a Turnaround has been effected.

The investment in the Selected Target Company may be in shares but can also be in warrants, convertibles, derivatives and any other equity, debt or other securities. The holding period for the investment in the Selected Target Company is neither fixed nor predictable, but the Company expects that a typical holding period would be greater than one year.

Late in 2013, the Company's Board of Directors approved a turnaround investment in Electra Private Equity PLC ("Electra") which was proposed by SIGB, LP's investment manager, Sherborne Investors Management (Guernsey) LLC.

This is a further investment in the Investment Partnership to which it has committed the proceeds realised from the sale of 3i, net of previously distributed profits.

At 25 February 2015, SIGB, LP had acquired approximately 25.2% of Electra's outstanding shares.

Share Price Performance

As at 31 December 2014 the Net Asset Value ("NAV") attributable to the Company was £219,479,515 (2013: £197,439,633), which is an increase of 11.16% on the NAV at 31 December 2013. As at 31 December 2014 the Ordinary Share of the Company was trading at 95pence per share (2013: 95 pence).

Post balance sheet events

Details of events that have occurred after the date of the Consolidated Statement of Financial Position are provided in note 14 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 working capital, is to pay dividends to Shareholders following receipt of any distributions from the Investment Partnership. This will be dependent on the frequency with which the Selected Target Company pays dividends to its shareholders (of which the Investment Partnership will be one).

If dividends are received from the Selected Target Company, the Investment Partnership intends to distribute to its limited partners substantially all of the dividend proceeds after allowing for the Investment Partnership's expenses. The Company, in turn, intends promptly to distribute to Shareholders substantially all of the dividend proceeds after allowing for the Company's expenses.

Business review

A review of the Company's business during the period 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 11 to the Consolidated Financial Statements. All shares carry equal voting rights.

Substantial interests

As of 25 February 2015, the Company had received notification of the following material shareholdings:

The Directors currently hold no shares in the Company.

Dividend

There were no dividends declared during the year. (A distribution of £41.4million was paid in 2013).

Independent Auditor

The Board of Directors elected to re-appoint Deloitte LLP as auditors to the Company at the Annual General Meeting of the Company on 6 May 2014. Deloitte LLP have indicated their willingness to continue as auditors.

By order of the Board of Directors

Director Director

DIRECTORS' REMUNERATION REPORT

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.

As per the Company's Articles of Association, 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 £120,000. 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. No increase in non-executive Director fees has been proposed for 2015.

As outlined in the Articles of Association, 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 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.

No Director has any entitlement to pensions, paid bonuses or performance fees, granted share options or has been invited to participate in long-term incentive plans. No loans have been taken on behalf of a Director by the Company.

None of the Directors has a service contract with the Company. Each of the Directors has entered into a letter of appointment with the Company, subject to election at the first Annual General Meeting, or as determined in line with the Company's Articles, and re-election at subsequent Annual General Meetings 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 period 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' and Officers' liability insurance cover is maintained by the Company but is not considered a benefit in kind nor constitutes as 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.

Directors' Emoluments

The Directors received the following fees during the period under review:

1 Retired on 7 May 2013

2 Appointed on 10 May 2013

By order of the Board

Ipes (Guernsey) Limited

Company Secretary

25 February 2015

CORPORATE GOVERNANCE

As an unregulated Guernsey incorporated company quoted on the SFM, the Company is not required to comply with the UK Corporate Governance Code 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 take appropriate measures to ensure that the Company operates with due consideration to any codes of corporate governance which the Board deems appropriate, 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, enhance business integrity and to maintain confidence in the Company. To further these aims, the Board has decided to voluntarily comply with the UK Corporate Governance Code dated September 2014 (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.

The Board is of the view that throughout the year, the Company has been compliant with the Code's provisions, on a comply or explain basis. Key issues affecting the Company's corporate governance responsibilities, how they are addressed by the Board and application of the Main Principles of the Code is provided below.

Section A: Leadership

The Chairman is responsible for the leadership of the Board and ensuring its effectiveness on all aspects of its role.

Board Responsibilities

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 Sherborne Investors (Guernsey) GP, LLC, 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.

The Company holds appropriate Directors' and Officers' Liability Insurance cover in respect of any legal action taken against the Board.

Board Composition

The Board consists of three non-executive members. For further information relating to the Board, please refer to Page 5.

Board Committees

The Board has established an Audit Committee composed of all members of the Board, all of whom are independent. The Chairman of the Board is included as a Committee member to enable a full understanding of the issues facing the Company, but would not be appointed as its Chair. The Committee, its membership and its terms of reference 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 annual and interim accounts, results announcements, internal control systems and procedures and accounting policies.

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 15 to 16.

Board and Committee Meeting Attendance

The Board met four times during the period. Individual attendance at Board and Committee meetings is set out below.

Division of Responsibilities

There are no executive directors appointed to the Board. The non-executive director's 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 Chairman

Appointed to the position of Chairman of the Board on 7 May 2013, Talmai 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.

Role of the non-executive Directors

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 on page 17 for further information.

Section B: Effectiveness

The Board believes that the balance of skills, experience and knowledge, provides for a sound base from which the interest of investors will be served to a high standard.

Board Composition & Independence

For the purposes of assessing compliance with the UK Corporate Governance 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.

Composition of the Board is explained in Section A of the Corporate Governance Report, page 9.

Board Appointments Process

Appointment Process

There is currently no Nominations 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.

The Board has chosen not to adopt a definitive policy with quantitative targets for Board diversity. However, gender, knowledge, skills, experience, residency and governance credentials are all considered by the Board when deliberating new appointments and in formulating succession plans.

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, identified within their biographies and the impact explained on page 5.

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.

Information and Support

Information Provided to the Board

Reports and papers, 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. This ensures that Directors are capable of contributing to, and validating, the development of Company strategy and management. The regular reports also provide information that enables scrutiny of the Company's, Investment Manager's 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.

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.

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 evaluation of its performance and that of the Audit Committee. Additionally, an evaluation focusing on individual commitment, performance and contribution of each Director is conducted. The Chairman meets with each Director to fully understand their views of the Company's strengths and to identify potential weaknesses. If appropriate, new members are 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

Each Director is required to be elected by shareholders at the first Annual General Meeting following his initial appointment to the Board. The Board recommends the on-going re-election of each Director and supporting biographies, including length of service, are disclosed on page 5.

Section C: Accountability

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 company as a whole, whilst the Chairman's Statement includes a fair view of the development and performance of the business and the position of the Company.

Financial and Business Reporting

Financial and Business Information

An explanation of the Directors' roles and responsibilities in preparing the Annual Report and Accounts for the year ending 31 December 2014 is provided in the Report of the Directors, pages 6 and 7.

Further information enabling shareholders to assess the Company's performance, business model and strategy can be sourced in the Chairman's Statement, page 4, and the Report of the Directors on pages 6 and 7.

Going concern

The Consolidated Financial Statements have been prepared on the going concern basis. As a result of the repayment of the loan facility being within 12 months, the Company has a net current liability position. The Directors are confident that the loan facility will be extended beyond this, allowing the Company to fulfil its current obligations. In addition, the Company has significant publicly quoted securities in respect of its investment in Electra Private Equity Plc ("Electra"), whose value is substantially in excess of liabilities maturing within one year. Therefore, after making enquiries and based on the substantial cash reserves as at 31 December 2014, 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.

Investment Manager

After careful consideration of Sherborne Investment Management (Guernsey) LLC ("SIMG") performance, primarily in terms of advice, managing the portfolio and communicating effectively with stakeholders, the Board agreed that it would be in the best interests of the Company that SIMG continue on the agreed contractual terms.

Risk Management and Risk Control

The Directors have reviewed the principal risks and uncertainties of the Company, and have determined that these have not changed from those noted in the prospectus previously issued to shareholders. These include risks around: The concentration of business risk on a single asset; The ability of the Investment Manager to effect their turnaround strategy; Difficulty in exiting the Company's investment position in the event of illiquidity in the selected target company.

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. It is the role of the Board to review and manage all risks, mitigating these either directly or through the delegation of certain responsibilities to the Audit Committee, Investment Manager and Investment Adviser. The Board performs a review of a risk matrix at each Board Meeting. and has documented these controls and reviews their effectiveness on an ongoing basis accounting period. The controls are designed to ensure that the risk of failure to achieve business objectives is managed rather than eliminated, and are intended to provide reasonable, rather than absolute, assurance against material misstatement or loss. Through regular meetings and meetings of the Audit Committee, the Board seeks to maintain full and effective control over all strategic, financial, regulatory and operational issues. The Board maintains an organisational and committee structure with clearly defined lines of responsibility and delegation of authorities.

The Company's system of internal control includes inter alia the overall control exercise, procedures for the identification and evaluation of business risk, the control procedures themselves and the review of these internal controls by the Audit Committee on behalf of the Board. Each of these elements that make up the Company's system of internal control is explained in further detail as follows:

(i) Control environment

The Company is ultimately dependent upon the quality and integrity of the staff and management of both its Investment Manager, Sherborne Investors Management (Guernsey) LLC, and Fund Administration & Company Secretarial service provider, Ipes (Guernsey) Limited. 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, the Ipes Group, of which Ipes (Guernsey) Limited is a part, produces an annual AAF 01/06 Assurance Report on the internal control procedures in place within the Group, which is subject to review by the Audit Committee and the Board.

(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 target company, 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 have been in full compliance with the various policies and external regulations, including:

§ Investment policy, as outlined in the IPO documentation

§ Personal Account Dealing, as outlined in the Model Code

§ Whistleblowing Policy

§ Anti-Bribery Policy

§ Applicable Financial Conduct Authority Regulations

§ Treatment and handling of confidential information

§ Conflicts of interest

§ Compliance policies

There were no protected disclosures made pursuant to the whistleblowing policy of service providers in relation to the Company, during the year to 31 December 2014.

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.

Audit Committee and Auditors

Audit Committee Responsibilities

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 are given in the Report of the Audit Committee on pages 15 to 16.

As previously indicated, all Directors are members of the Committee, and the Board perceives that all have sufficient recent and relevant financial experience. Christopher Legge served as Committee Chairman for 2014.

The Committee met three times during 2014. The meeting attendance record is displayed on page 10 of the Corporate Governance declarations. The Company Secretary acts as the secretary to the Committee.

Audit Committee Terms of Reference are available at the registered office upon request.

Owing to the size and structure of the Company, there is no internal audit function. The Committee has reviewed the need for an internal audit function, and perceived that the internal control systems in place within Sherborne and its service providers, as evidenced by the internal control reports provided by the providers, give sufficient assurance that a sound system of internal control is maintained that safeguards shareholders' investment and Company assets.

Section D: Remuneration

Level and Components of Remuneration

Directors are paid in accordance with agreed principles aimed at focusing on long-term performance of the Company. Further information can be sourced in the Directors' Remuneration Report, page 8.

Procedures

The Company has a formal remuneration policy, outlined in the Directors' Remuneration Report, page 8.

Section E: Relations with Shareholders

Dialogue with Shareholders

The Directors place a great deal of importance on communication with shareholders. The Company's Chairman, Investment Manager and Broker aim to meet with large shareholders at least annually. The Board also receives reports from the Brokers on shareholder issues. The Annual Report and 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.

All Directors are available for discussions with the shareholders, in particular the Chairman and the Audit Committee Chairman, as and when required.

Constructive Use of the AGM

The Notice of AGM is sent out at least 20 working days in advance of the meeting. All shareholders will have the opportunity to put questions to the Board or Manager, either formally at the Company's Annual General Meeting on 5 May 2015, informally following the meeting, or in writing at any time during the year via the Company Secretary. The Company Secretary is available to answer general shareholder queries at any time throughout the year.

By order of the Board

Talmai Morgan

Chairman, 25 February 2015

1 Royal Plaza, Royal Avenue,

St Peter Port, Guernsey GY1 2HL

REPORT OF THE AUDIT COMMITTEE

The Board is supported by the Audit Committee, which comprised all the Directors during the year; including the Chairman of the Board to enable a greater understanding of the issues facing the Company. The Board has considered the composition of the Committee and is satisfied that there are sufficient recent relevant skills and experience.

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, 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 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 Annual General Meeting;

§ Development and implementation of the Company's policy on the provision of non-audit services by the external auditors, as appropriate;

§ 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 itself at each Board meeting.

The Committee met three times during the period under review; individual attendance of Directors is outlined on page 10. The main matters discussed at those meetings were:

§ 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 and annual review;

§ Review and approval of the interim review plan of the external auditors;

§ Review of auditor independence;

§ Assessment of the effectiveness of the external audit process as described below;

§ Review of the Company's key risks and internal controls; and

§ Consideration of the 2014 UK Corporate Governance Code, Guidance on Audit Committees and other regulatory guidelines, and the subsequent impact upon the Company.

The Committee has also reviewed and considered the whistleblowing policy in place for the 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.

Significant Risks in Relation to the Financial Statements

Throughout the period, the Audit Committee identified a number of significant issues and areas of key audit risks in respect of the Annual Report and 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 table on page 16 sets out the key areas of risk identified and how the Committee addressed the issues.

Auditor Tenure and Objectivity

The Company's current auditors, Deloitte LLP, have acted in this capacity since the Company's inaugural meeting on 9 November 2012. The Committee reviews the auditor's performance on a regular basis to ensure the Company receives an optimal service. Subject to annual appointment by shareholder approval at the Annual General Meeting, the appointment of the auditor is formally reviewed by the Committee on an annual basis. The Auditors are required to rotate the audit partner regularly every 5 years, and the audit partner rotated following the end of the 31 December 2013 audit. The Audit Committee intends to undertake a formal review of the external auditor for the year ending 31 December 2015.

Deloitte LLP regularly updates the Committee on the rotation of audit partners, staff, level of fees in proportion to overall fee income of the Auditor, details of any relationships between the auditor, the Company and any target company, and also provides overall confirmation from the auditors' of their independence and objectivity. There are no contractual obligations that restrict the Company's choice of auditors.

The Auditors have not carried out any non audit work in the period other than the interim review which is audit related.. Any non-audit work would be reviewed by the Committee and approved by the Committee Chairman prior to the auditors undertaking any work.

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 auditors to the Board.

Conclusions in Respect of the Financial Statements

The production and the audit of the Company's Annual Report and 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 is 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, auditors 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, the Committee has concluded that the Annual Report for the year ended 31 December 2014, 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 page 17.

Audit Committee Chairman

25 February 2015

STATEMENT OF DIRECTORS' RESPONSIBILITIES

The directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable law and regulations.

Company law requires the directors to prepare financial statements for each financial year. Under that law the directors are required to prepare the group financial statements in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union. Under company law the directors must not approve the accounts unless they are satisfied that they give a true and fair view of the state of affairs of the Group and of the profit or loss of the Group for that period. In preparing these financial statements, International Accounting Standard 1 requires that directors:

The directors are responsible for keeping adequate 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:

In accordance with section 249 of the Companies (Guernsey) Law, 2008, each of the Directors confirms that, to the best of their knowledge:

For Sherborne Investors (Guernsey) B Limited

Talmai Morgan

Chairman

25 February 2015

INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF SHERBORNE INVESTORS (GUERNSEY) B LIMITED

David Becker

for and on behalf of Deloitte LLP

Chartered Accountants and Recognised Auditor

Guernsey, Channel Islands

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the year ended 31 December 2014

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

As at 31 December 2014

The Consolidated Financial Statements were approved by the Board of Directors for issue on 25 February 2015.

Signed on behalf of the Board:

Director

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the year ended 31 December 2014

CONSOLIDATED STATEMENT OF CASH FLOWS

For the year ended 31 December 2014

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the year ended 31 December 2014

1. Summary of significant accounting policies

Reporting entity

Sherborne Investors (Guernsey) B Limited (the ''Company") is a closed-ended investment company with limited liability formed under The Companies (Guernsey) Law, 2008. The Company was incorporated and registered in Guernsey on 8 November 2012. The Company commenced dealings on the London Stock Exchange's AIM market on 29 November 2012 and moved from AIM to the Specialist Fund Market ("SFM") on 7 May 2013. The Company's registered office is 1 Royal Plaza, Royal Avenue, St Peter Port, Guernsey GY1 2HL. The "Group" is defined as the Company and its subsidiary, SIGB, LP.

Basis of preparation

The Consolidated Financial Statements of the Group have been prepared in accordance with International Financial Reporting Standards ("IFRS") as adopted by the European Union, which comprise standards and interpretations approved by the International Accounting Standards Board (the "IASB") and International Accounting Standards and Standing Interpretations Committee interpretations approved by the International Accounting Standards Committee (the ''IASC'') that remain in effect, together with applicable legal and regulatory requirements of Guernsey law. The directors of the Company have taken the exemption in Section 244 of The Companies (Guernsey) Law, 2008 (as amended) and have therefore elected to only prepare Consolidated Financial Statements for the year.

These Consolidated Financial Statements have been prepared on the historical cost basis, as modified by the measurement at fair value of investments and derivatives.

Going concern

The Consolidated Financial Statements have been prepared on the going concern basis. As a result of the repayment of the loan facility being within 12 months, the Company has a net current liability position. The Directors are confident that the loan facility will be extended beyond this, allowing the Company to fulfil its current obligations. Barring this, the Company has significant publicly quoted securities in respect of its investment in Electra Private Equity Plc ("Electra"), whose value is substantially in excess of liabilities maturing within one year. Therefore, after making enquiries, and on the overall strength of its Consolidated Statement of Financial Position, 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.

Critical accounting judgments and key sources of estimation uncertainty

The preparation of the Group's Consolidated Financial Statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities and contingencies at the date of the Group's Consolidated Financial Statements and revenue and expenses during the reported year. Actual results could differ from those estimated.

As more fully described in Note 15, "Related Party Transactions", the Special Limited Partner is entitled to receive an incentive allocation once aggregate distributions to Partners of the Investment Partnership exceed a certain level. The basis of the incentive calculation differs depending on how the investment in the Selected Target Company is ultimately characterized (i.e as a Turnaround or Stake Building Investment). Otherwise there are no significant estimates utilised for the preparation of the Group's Consolidated Financial Statements as at 31 December 2014 due to the nature of the activities that have occurred in this year, together with the sole investment held by the Group being quoted on the London Stock Exchange. Fair value of financial assets held through profit or loss is therefore based on the quoted closing bid price at 31 December 2014.

IFRS 10, Investment entities amendment came into effect for annual reporting periods beginning on or after 1 January 2014 and was therefore applicable for the Group for this year. Under the new requirements, ownership interests in entities controlled by investment entities are generally to be accounted for at fair value in accordance with International Accounting Standard 39 ("IAS 39") ''Financial Instruments: Recognition and Measurement'', rather than being consolidated. In assessing the impact of the adoption of these amendments to IFRS 10, critical judgements were made assessing whether the consolidated financial statements of the Group should account for SIGB, LP at fair value in accordance with IAS 39 rather than it being consolidated. In light of the circumstances that exist between SIGB, LP and the Company, the fact that SIGB, LP itself does not qualify as an investment entity, and the lack of exit strategy that the Company has for its investment in SIGB, LP, it is established that SIGB, LP is effectively an extension of the Company's business and thus the position adopted by the Group, of consolidation, is technically supportable.

Adoption of new and revised standards

(i) Amendments early adopted by the Company:

There were no standards, amendments and interpretations adopted early by the Company.

(ii) Standards, amendments and interpretations that are in issue but not yet effective:

Unless stated otherwise, the Directors do not consider the adoption of new and revised Accounting Standards and Interpretations to have a material impact.

a. Basis of consolidation

The Consolidated Financial Statements incorporate the financial statements of the Company and an entity controlled by the Company (its subsidiary). Control is achieved where the Company has the power to govern the financial and operating policies of an investee entity so as to obtain benefits from its activities.

Non-controlling interests in the net assets of the consolidated subsidiary are identified separately from the Group's equity therein. Non-controlling interests consist of the amount of those interests at the date of the original business combination and the non-controlling entities' share of changes in equity since the date of the combination. Losses applicable to the non-controlling entities in excess of their interest in the subsidiary's equity are allocated against their interests to the extent that this would create a negative balance.

Where necessary, adjustments are made to the financial statements of the subsidiary to bring the accounting policies used into line with those used by the Group.

All intra-group transactions, balances and expenses are eliminated on consolidation.

The Company owns 99.98% of the capital interest in SIGB, LP. Whilst the general partner of SIGB, LP, Sherborne Investors (Guernsey) GP, LLC, a company registered in Delaware, USA, is responsible for directing the day to day operations of SIGB, LP, the Company, through its majority interest in SIGB, LP, has the ability to approve the proposed investment of SIGB, LP and to remove the general partner. Hence, the Company has consolidated SIGB, LP in its financial statements.

b. Non-controlling interest

The interest of non-controlling parties in the subsidiary is measured at the minority's proportion of the net fair value of the assets, liabilities and contingent liabilities recognised.

c. Functional currency

Items included in the Consolidated Financial Statements of the Group are measured using the currency of the primary economic environment in which the entity operates ("the functional currency"). The Consolidated Financial Statements are presented in GBP(£), which is the Group's functional and presentational currency. Transactions in currencies other than £ are translated at the rate of exchange ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies at the date of the Consolidated Statement of Financial position are retranslated into £ at the rate of exchange ruling at that date. Exchange differences are reported in the Consolidated Statement of Comprehensive Income.

d. Financial assets at fair value through profit or loss

Investments, including equity and loan investments in associates, are designated as fair value through profit or loss in accordance with IAS 39, as the Company is an investment company whose business is investing in financial assets with a view to profiting from their total return in the form of interest and changes in fair value. Investments in voting shares and derivative contracts are initially recognised at cost. The investments in voting shares and derivative contracts are subsequently re-measured at fair value, as determined by the Directors. Unrealised gains or losses arising from the revaluation of investments in voting shares and derivative contracts are taken directly to the Consolidated Statement of Comprehensive Income.

Fair Value is determined as follows:

The carrying value of other receivables and payables are assumed to approximate their fair values.

Investments measured and reported at fair value are classified and disclosed in one of the following categories:

Level I - An unadjusted quoted price in an active market provides the most reliable evidence of fair value and is used to measure fair value whenever available. As required by IFRS 13, the Group will not adjust the quoted price for these investments, even in situations where it holds a large position and a sale could reasonably impact the quoted price.

Level II - Inputs are other than unadjusted quoted prices in active markets, which are either directly or indirectly observable as of the reporting date, and fair value is determined through the use of models or other valuation methodologies.

Level III - Inputs are unobservable for the investment and include situations where there is little, if any, market activity for the investment. The inputs into the determination of fair value require significant management judgment or estimation.

The investments held by the Group at the year end are classified as meeting the definition of Level I (2013: Investments in 3i Ordinary Shares of £145,890,134 classified as Level I and derivative contracts of minus £10,498,783 classified as Level II).

e. Revenue recognition

Dividend income is recognised when the Group's right to receive payment has been established. Tax suffered on dividend income for which no relief is available is treated as an expense.

Interest receivable from short-term deposits and investment income are recognised on an accruals basis. Where receipt of investment income is not likely until the maturity or realisation of an investment then the investment income is accounted for as an increase in the fair value of the investment.

f. Expenses

All expenses are accounted for on an accruals basis. Expenses are charged through the Consolidated Statement of Comprehensive Income. Expenses in 2014 include £283,000 of direct costs incurred in conjunction with the Extraordinary General Meeting of Electra's shareholders to consider certain director resolutions which were not approved.

g. Finance cost

Finance costs include interest on bank loan and amortised transaction costs. Finance cost is recognised using the effective interest method.

h. Prepaid expenses and trade receivables

Trade and other receivables are initially recognised at fair value. A provision for impairment of trade receivables is established when there is objective evidence the Group will not be able to collect all amounts due according to the original terms of the receivables.

i. Cash and cash equivalents

Cash and cash equivalents comprises cash in hand, call and current balances with banks and similar institutions, which are readily convertible to known amounts of cash and which are subject to insignificant risk of changes in value. This definition is also used for the Consolidated Statement of Cash Flows.

j.Trade and other payables

Trade and other payables are initially recognised at fair value and subsequently, where necessary, re-measured at amortised cost using the effective interest method. 

k. Loan payable

Loans are recognised in the Group's Consolidated Statement of Financial Position when the Group becomes a party to the contractual provisions of the loan. The Group derecognises a loan when its contractual obligations are discharged or cancelled or expire.

Loans are initially recognised at fair value less any directly attributable transactions costs. Subsequently these are measured at

amortised cost using effective interest rate method.

l. Segmental reporting

As the Group invests in one investee company, there is no segregation between industry, currency or geographical location. No further disclosures have been made in conjunction with IFRS 8 Operating Segments as it is deemed not to be applicable.

m.Incentive allocation

The incentive allocation is accounted for on an accruals basis and the calculation is disclosed in Note 15. It was calculated as £6,199,438 at 31 December 2014. The incentive is payable to Non-Controlling Interest and therefore recognised in the Consolidated Statement of Changes in Equity on page 24 rather than recognised as an expense in the Consolidated Statement of Comprehensive Income.

2. Comprehensive income

The consolidated comprehensive income has been arrived at after charging:

In addition to the audit and half-yearly review related remuneration above, no non-audit related fees were paid to the Auditor in the same year.

3. Tax on ordinary activities

The Company has been granted exemption from income tax in Guernsey under the Income Tax (Exempt Bodies) (Bailiwick of Guernsey) Ordinance 1989, and is liable to pay an annual fee (currently £600) under the provisions of the Ordinance. As such it will not be liable to income tax in Guernsey other than on Guernsey source income (excluding deposit interest on funds deposited with a Guernsey bank). No withholding tax is applicable to distributions to Shareholders by the Company.

The Investment Partnership will not itself be subject to taxation in Guernsey. No withholding tax is applicable to distributions to partners of the Investment Partnership.

Income which is wholly derived from the business operations conducted on behalf of the Investment Partnership with, and investments made in, persons or companies who are not resident in Guernsey will not be regarded as Guernsey source income. Such income will not therefore be liable to Guernsey tax in the hands of non-Guernsey resident limited partners.

Dividend income is shown gross of any withholding tax.

4. Gain per share

The calculation of basic and diluted gain per share is based on the return on ordinary activities less total comprehensive income attributable to the Non-Controlling Interest and on there being 207,000,000 shares in issue.

5. Financial assets at fair value through profit or loss

On 2 January 2014, the residual investment in 37,883,701 shares of 3i held was sold and the derivative contracts terminated. A residual gain of £18,392,793 was realised during the year. This brought the total realised gain on disposal of 3i to £45,914,173.

The Board of Directors approved an investment in Electra which was proposed by SIGB, LP's Investment Manager, Sherborne Investors Management (Guernsey) LLC in December 2013. Electra is a London Stock Exchange listed investment trust focused on private equity investments.

During 2014, SIGB, LP acquired 7,918,540 ordinary shares which is approximately 22.22% of Electra's outstanding shares.

During 2014, gains from derivative activity in relation to holdings in Electra were £2,611,257, net of expenses.

6. Prepaid Expenses

7. Income Receivable

8. Cash and cash equivalents

Cash and cash equivalents comprises cash held by the Group and short term deposits held with various banking institutions. The carrying amount of these assets approximates their fair value.

9. Trade and other payables

10. Bank loan - current

On 8 July 2014, SIGB, LP entered into a £50 million, unsecured term loan facility with a bank. Borrowings under the facility may be used to purchase shares, debt or derivative securities of Electra. As at 31 December 2014, £40 million of this facility has been drawn. The amount of interest during the year was £103,069.

At the date of this report £50 million of this facility has been drawn and is payable, with the interest, within twelve months. The rate of interest per annum on the loan is LIBOR rates plus 4%. The weighted average effective interest rate for the year was 4.68% per annum.

The Facility Agreement has the following main covenants:

i. Any dividend received from Electra shall be applied in prepayment of the Loan and accrued interest upto the amount of the dividend.

ii. Any disposal proceeds from the sale of Electra shares, debt instruments or relevant derivatives shall be applied in the prepayment of the Loan and accrued interest upto the amount of the disposal proceeds.

iii. Any partnership capital injections in SIGB, LP shall be applied in the prepayment of the Loan and accrued interest upto the amount of the capital injections.

iv. SIGB, LP is also required to maintain a Loan to Value (LTV) ratio below 50%. An LTV ratio of 50% or higher would entitle the bank to require full or partial prepayment to restore the required LTV ratio. The LTV ratio is the percentage of the Loan, any accrued interest and fees to the value of SIGB, LP's investment in Electra.

11. Share capital and share premium

12. Net asset value per share attributable to the Company

13. Dividend

The Company did not declare a dividend in the year (2013: £43,987,500).

14.Events after the balance sheet date

Since 31 December 2014, the share price of Electra has increased from 3,028 pence to 3,063 pence as at 25 February 2015. If this share price was used to value the Electra shares at 31 December 2014, it would have resulted in an increase in the closing fair value from £239,773,392 to £242,544,880.

As at 25 February 2015 the Group held an interest in Electra equivalent to 8,967,089 ordinary shares or approximately 25.2% of its outstanding shares.

On 8 January 2015, the remaining £10 million of the loan facility detailed in Note 10 was drawn down, utilising the full facility.

15. Related party transactions

The Investment Partnership and its General Partner, Sherborne Investors (Guernsey) GP, LLC, have engaged Sherborne Investors Management (Guernsey) LLC to serve as Investment Manager who is responsible for identifying the Selected Target Company, subject to approval by the Board of Directors of the Company, as well as day to day management activities of the Investment Partnership. The Investment Manager is entitled to receive from the Investment Partnership a monthly management fee equal to one-twelfth of 1% of the net asset value of the Investment Partnership, less cash and cash equivalents and certain other adjustments. At the year end, management fees of £1,595,936 had been paid by the Partnership. No balance was outstanding at the year end.

The sole member of Sherborne Investors (Guernsey) GP, LLC is Sherborne Investors LP (the non-controlling interest), which also serves as the Special Limited Partner of the Investment Partnership. The Special Limited Partner is entitled to receive an incentive allocation once aggregate distributions to Partners of the Investment Partnership, of which one is the Company, exceed a certain level of capital contributions to the Investment Partnership, excluding amounts contributed attributable to management fees.

For Turnaround investments, the incentive allocation is computed at 10% of the distributions to all Partners in excess of 110%, increasing to 20% of the distributions to all Partners in excess of 150% and increasing to 25% of the distributions to all Partners in excess of 200% of capital contributions, excluding amounts contributed attributable to management fees.

If after acquiring a shareholding, the share price of the Selected Target Company rises to a level at which further investment and the effort of a Turnaround is, in the Investment Manager's opinion, no longer justified or otherwise no longer presents a viable Turnaround opportunity, the Investment Partnership intends to sell (and distribute the proceeds to the Company) or distribute in kind the holding to the limited partners (in each case after deductions for any costs and expenses and for the Investment Partnership's Minimum Capital Requirements and subject to applicable law and regulation), rather than seeking to join the Board of Directors or otherwise engage with Selected Target company ( a "Stake Building Investment").

For Stake Building Investments, the incentive allocation is computed at 20% of net returns on the investment of the Investment Partnership, such amount to be payable after each partner in the Investment Partnership has had distributed to it an amount equal to its aggregate capital contribution to the Investment Partnership in respect to the Stake Building Investment (excluding any capital contributions attributable to Management Fees). The Special Limited Partner may waive or defer all or any part of any incentive allocation otherwise due.

At 31 December 2014, the incentive allocation has been computed based on a Stake Building Investment and amounts to £6,199,438. If the incentive allocation had been computed on a Turnaround investment basis, the amount would have been £1,235,678 resulting in a NAV which would have been increased by £4,963,760 or 2.40 pence per share. The incentive allocation shall be computed on a Stake Building basis until such time as they have their proposed candidates appointed to the Board of Electra, at which point it shall be computed on a Turnaround basis.

Each of the directors (other than the Chairman) receives a fee payable by the Company currently at a rate of £30,000 per annum. The Chairman of the Audit Committee receives £5,000 per annum in addition to such fee. The Chairman receives a fee payable by the Company currently at the rate of £45,000 per annum.

Individually and collectively, the Directors of the Company hold no shares of the Company as at 31 December 2014.

Sherborne Investors GP, LLC has granted to the Company a non-exclusive licence to use the name "Sherborne Investors" in the UK and the Channel Islands in the corporate name of the Company and in connection with the conduct of the Company's business affairs. The Company may not sub-licence or assign its rights under the Trademark Licence Agreement. Sherborne Investors GP, LLC receives a fee of £20,000 per annum for the use of the licensed name.

16. Financial risk factors

The Group's investment objective is to realise capital growth from investment in the Selected Target Company, identified by the Investment Manager with the aim of generating significant capital return for Shareholders. Consistent with that objective, the Group's financial instruments mainly comprise of an investment in a Selected Target Company. In addition, the Group holds cash and cash equivalents as well as having trade and other receivables and trade and other payables that arise directly from its operations.

Liquidity risk

The Group's cash and cash equivalents are placed in demand deposits and short-term money market instruments with a range of financial institutions.

The following table details the liquidity analysis for financial liabilities at the date of the Consolidated Statement of Financial Position:

Credit risk

The Company is exposed to credit risk in respect of its cash and cash equivalents and derivative contracts, arising from possible default of the relevant counterparty, with a maximum exposure equal to the carrying value of those assets. The credit risk on liquid funds is mitigated through the Group depositing cash and cash equivalents across several banks. The credit risk associated with derivative contracts is monitored by reviewing the credit rating for counterparty.

The Group is exposed to credit risk in respect of its trade receivables and other receivable balances with a maximum exposure equal to the carrying value of those assets.

Market price risk

Market price risk arises as a result of the Group's exposure to the future values of the share price of the Selected Target Company. It represents the potential loss that the Group may suffer through investing in the Selected Target Company. As discussed in Note 1, the Group has a net current liability position. In the event that the Group could not refinance or extend the maturity of the current bank loan, the Group may be required to liquidate a portion of the investment in Electra to satisfy its repayment obligation. While the shares of Electra are publicly listed, a sale of such securities might result in the realisation of substantial losses to the Group as compared to the amounts reported in the Consolidated Statement of Financial Position as of 31 December 2014.

As at 31 December 2014 a +/-20% change in the price of Electra would positively or negatively affect the Group's net assets, income and consolidated comprehensive income for the year, by £47,954,677.

Interest rate risk

The Group is subject to risks associated with changes in interest rates in respect of interest earned on its cash and cash equivalents. The Group seeks to mitigate this risk by monitoring the placement of cash balances on an ongoing basis in order to maximize the interest rates obtained. This risk is also mitigated through the Group depositing cash and cash equivalents across several banks.

As at 31 December 2014, the total interest sensitivity gap for interest bearing items was a deficit of £12,903,752 (2013: surplus £69,519,409).

As at 31 December 2014, interest rates reported by the Bank of England were 0.5% which would equate to net expense of £64,519 (2013: income £347,597) per annum if interest bearing assets and liabilities remained constant. If interest rates were to fluctuate by 0.25%, this would have a positive or negative effect of £32,259 (2013: £173,799) on the Group's annual income.

Capital risk management

The capital structure of the Company consists of proceeds raised from the issue of Ordinary Shares. As at 31 December 2014, the Group is not subject to any external capital requirement.

The Board of Directors believe that at the date of the Consolidated Statement of Financial Position there were no other material risks associated with the management of the Company's capital.