Terms of Reference – Audit and Management Engagement Committees

These terms were produced in line with the AIC Code of Corporate Governance by reference to the AIC Corporate Governance Guide for Investment Companies both issued in February 2006 and revised in May 2007, March 2009, October 2010, February 2013, February 2015 and July 2016.  The AIC Code was first endorsed in February 2006 by the FRC as the only code against which investment companies are required to report.

Membership

The Board appoints the Chairman and the members of the Audit & Management Engagement Committee with reference to recommendations made by the Nominations Committee. The Chairman of the Committee will not usually be the Chairman of the Board and shall be appointed by a majority of the Board, giving particular consideration to those Board members with recent and relevant financial experience.

At the Board meeting held on 10 February 2004, it was resolved that Lord Waldegrave would hold the position as Chairman of the Committee. On 26 July 2005, it was resolved that Lord Waldegrave step down and Peter Keen be appointed as Chairman of the Committee.

The Committee shall consist of those Directors considered to be independent by the Board , and a quorum for meetings and decisions of the Committee shall be three members present . A member of the management company may also be invited to each Audit & Management Engagement Committee.

All Directors seek re-election on an annual basis. Members are appointed to this Committee on the same basis.

Meetings and attendance

The Committee shall meet at least twice per year and at such other times as it sees fit.

A representative of the external auditors shall attend not less than one meeting per year, such meeting will include the review of the annual results. The Chairman or another member shall meet the audit partner at least once during the year to discuss audit planning and the auditors remit.

The external auditors may request additional meetings if they consider them necessary.

The Company Secretary will be the Secretary of the Committee.

The Chairman of the Committee shall attend the Annual General Meeting of the Company to respond to any questions that may be raised as matters within the Committee’s area of responsibility.

The Committee shall, at least once a year, evaluate its own performance, constitution and terms and make any necessary recommendations for change to the Board, to ensure the continued maximum effectiveness of the Committee.

Authority

The members of the Committee are authorised by the Board to carry out any investigation relevant to its terms of reference. Members are authorised to seek any information they require from any Company officer and to obtain expert advice from the Company’s external auditors, professional advisers or otherwise, and to take independent professional advice and to request any officer or adviser as they see fit, and at the expense of the Company, to attend meetings of the Committee in order to obtain such information or advice.

Duties – audit

The Committee will at all times act so as to ensure, with the agreement of the full Board, that the Company complies with the Listing Rules published by the Financial Conduct Authority (“the Listing Rules”), the recommendations of the Combined Code (Principles of Good Governance and Code of Best Practice – revised July 2003, June 2010, September 2012 and September 2014 (also renamed the UK Code of Corporate Governance) and guidance from The Association of Investment Trust Companies published in February 2006 and revised in May 2007, March 2009, October 2010, February 2013, February 2015 and July 2016.

In particular, the duties of the Committee are:

  • to monitor the integrity of the annual and half year report and accounts and any formal announcements relating to the Company’s financial performance, reviewing significant financial reporting judgments contained in them (see 1 below).
  • to review the internal financial controls and risk management systems (see 2-3 below).
  • to review annually the requirement for an internal audit function.
  • in relation to the external auditors:
    • to recommend to the board their appointment, re-appointment or removal;
    • to approve their remuneration and service agreement;
    • to develop and implement a policy on the engagement of the external auditors;
    • to review and monitor their independence and objectivity;
    • to review the effectiveness of the audit process; and
    • where the auditors supply a substantial volume of non-audit services, to approve fees and to keep the nature and extent of such fees under review.
    • to review the implications for the Company of the revised UK Corporate Governance Code.
  • to consider other topics, as defined by the Board and to report to the Board on how it has discharged its responsibilities.

1. to review the half year and annual report and accounts (including the drafting of the Audit Committee report to form part of the Annual Report and Accounts) before submission to the Board, focusing particularly on:

1.1 major judgmental areas;

1.2 significant adjustments resulting from the audit;

1.3 the going concern assumption adopted in the annual report and accounts;

1.4 compliance with accounting standards;

1.5 statement concerning internal controls and risk management;

1.6 compliance with the Listing Rules and tax and legal requirements; and

1.7 provide advice on whether the annual report and accounts, 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.

2. to analyse the Board’s key procedures adopted to provide effective internal control, to review the effectiveness of such procedures and make recommendations to the Board and to consider whether the Board should express an opinion on the effectiveness of the procedures;

3. to receive and review information from the Company’s principal service providers on internal control and compliance:

4. to receive and review information from the company's depositary;

5. to discuss and agree with the external auditors, before the audit commences, the nature and scope of the audit;

6. to review annually the qualifications, expertise, resources and effectiveness of the audit process and procedures;

7. to monitor the auditors compliance with relevant ethical and professional guidance on the rotation of audit partners, the level of fees paid by the Company to the overall income of the audit firm, office or partner;

8. to discuss problems and reservations arising from the annual audit, the half year technical review where applicable, and any other matters the external auditors may wish to discuss; and

9. to review, on an annual basis, the anti bribery and corruption policies put in place by the Company itself and also by its principal service providers.

Duties – Management Engagement

The Committee will at all times ensure that the Company follows the AIC Code.

In particular, the duties of the Committee are:

to regularly review the terms of engagement of the Alternative Investment Fund Manager ('AIFM') and Portfolio Manager and to make any recommendations for change;

to review the level of fees payable to the AIFM and Portfolio Manager and to make recommendations to the Board;

to keep under review the contract notice period of the AIFM and Portfolio Management Agreements; and

to review the additional marketing, company secretarial and other sundry services provided by the AIFM.

Reporting procedures

The Secretary of the Committee shall minute the proceedings and resolutions of all meetings and will produce and circulate the minutes to all Committee members, once agreed, the minutes will be circulated to all members of the Board at the next scheduled Board meeting following the Committee meeting. The Chairman of the Committee shall report formally to the Board where it is deemed necessary.

The Committee shall compile a report to shareholders on its activities to be included in the Annual Report.

Terms of Reference – Nominations Committee

These terms were produced in line with the AIC Code of Corporate Governance by reference to the AIC Corporate Governance Guide for Investment Companies, both issued in February 2006 and revised in May 2007, March 2009, October 2010, February 2013, February 2015 and July 2016. The AIC Code was endorsed in February 2006 by the FRC as the only code against which investment companies are required to report.

Membership

The Board appoints the Chairman and members of the Nominations Committee.

The Chairman of the Board will continue to be the Chairman of the Committee with the exception of Committee meetings dealing with Board Chairmanship succession.

The Committee shall consist of those Directors considered to be independent by the Board and a quorum for meetings and decisions of the Committee shall be three members present. A member of the Alternative Investment Fund Manager ('AIFM') company may also be invited to each Nominations Committee meeting.

All Directors seek re-election on an annual basis. Members are appointed to this Committee on the same basis.

Meetings and attendance

The Committee will meet at least once per year and at such other times as it sees fit.

The Company Secretary shall be the Secretary of the Committee when requested by the Chairman, otherwise a nominated Director shall act as Secretary to the Committee.

The Chairman of the Committee shall attend the Annual General Meeting of the Company to respond to any questions that may be raised as matters within the Committee’s area of responsibility.

The Committee shall, at least once a year, evaluate its own performance, constitution and terms and make any necessary recommendations for change to the Board, to ensure the continued maximum effectiveness of the Committee.

Authority

The members of the Committee are authorised by the Board to carry out any action or investigation relevant to its terms of reference. Members are authorised to seek any information they require from any Company officer and to obtain expert advice from the Company’s external auditors, professional advisers or otherwise, and to take independent professional advice and to request any officer or adviser as they see fit, and at the expense of the Company, to attend meetings of the Committee in order to obtain such information or advice.

Duties

In February 2006, the Financial Reporting Council endorsed the revised AIC Code, the terms of this endorsement meaning that AIC members who report against the AIC Code and who follow the AIC Corporate Governance Guide for Investment Companies are meeting their obligations under the Code and related disclosure requirements of the Listing Rules.

The Committee will at all times ensure that the Company follows the AIC Code.

In particular, the duties of the Committee are:

  • to regularly review the structure, size and composition of the Board in relation to its current position and any recommendations for change.
  • to evaluate the balance of skills, knowledge and experience on the board and, in light of this evaluation, prepare a description of the role and capabilities for a particular appointment.
  • to lead the process for board appointments and make recommendations to the board.
  • to give full consideration to succession planning in the course of the committee’s work.
  • to review annually the time required from a non-executive director.
  • to keep under review the leadership needs of the organisation with a view to ensuring the continued ability of the organisation to compete effectively in the market place.
  • for the appointment of a chairman to prepare a job specification, including an assessment of the time commitment expected, recognising the need for availability in the event of crises.
  • to ensure that on appointment to the board non-executive directors receive a formal letter of appointment setting out clearly what is expected of them in terms of time commitment, committee service and involvement outside board meetings.

Reporting procedures

The Secretary of the Committee shall minute the proceedings and resolutions of all meetings and will produce and circulate the minutes to all Committee members, once agreed, the minutes will be circulated to all members of the Board, unless a conflict of interests exists, at the next scheduled Board meeting following the Committee meeting. The Chairman of the Committee shall report formally to the Board where it is deemed necessary.

Terms of Reference – Remuneration Committee

These terms were produced in line with the AIC Code of Corporate Governance by reference to the AIC Corporate Governance Guide for Investment Companies, both issued in February 2006 and revised in May 2007,March 2009, October 2010, February 2013, February 2015 and July 2016. The AIC Code was endorsed in February 2006 by the FRC as the only code against which investment companies are required to report.

Membership

On 10 July 2014, it was resolved that Mr Andrew Joy be appointed as Chairman of the Committee.

The Committee shall consist of those Directors considered to be independent by the Board and a quorum for meetings and decisions of the Committee shall be three members present. A member of the management company may also be invited to each Remuneration Committee meeting.

All Directors seek re-election on an annual basis. Members are appointed to this Committee on the same basis.

Meetings and attendance

The Committee will meet at least once per year and at such other times as it sees fit.

The Company Secretary shall be the Secretary of the Committee when requested by the Chairman, otherwise a nominated Director shall act as Secretary to the Committee.

The Chairman of the Committee shall attend the Annual General Meeting of the Company to respond to any questions that may be raised as matters within the Committee’s area of responsibility.

The Committee shall, at least once a year, evaluate its own performance, constitution and terms and make any necessary recommendations for change to the Board, to ensure the continued maximum effectiveness of the Committee.

Authority

The members of the Committee are authorised by the Board to carry out any investigation relevant to its terms of reference. Members are authorised to seek any information they require from any Company officer and to obtain expert advice from the Company’s external auditors, professional advisers or otherwise, and to take independent professional advice and to request any officer or adviser as they see fit, and at the expense of the Company, to attend meetings of the Committee in order to obtain such information or advice.

Duties

In February 2006, the Financial Reporting Council endorsed the revised AIC Code, the terms of this endorsement meaning that AIC members who report against the AIC Code and who follow the AIC Corporate Governance Guide for Investment Companies are meeting their obligations under the Code and related disclosure requirements of the Listing Rules.

The Committee will at all times ensure that the Company follows the AIC Code.

In particular, the duties of the Committee are:

  • to agree with the Board a framework and broad policy for determining the remuneration of the non-executive officers of the Company in line with the peer group and general industry standards, no director or manager shall be involved in any decisions as to their own remuneration.
  • to recommend to the board remuneration of chairman, board members and the manager.
  • to be exclusively responsible for establishing the selection criteria, selecting, appointing and setting the terms of reference for any remuneration consultants who advise the committee.
  • to ensure that provisions regarding disclosure of remuneration as set out in Sections 420 to 422 of the Companies Act 2006 and the revised Code are fulfilled.

Reporting procedures

The Secretary of the Committee shall minute the proceedings and resolutions of all meetings and will produce and circulate the minutes to all Committee members, once agreed, the minutes will be circulated to all members of the Board, unless a conflict of interest exists, at the next scheduled Board meeting following the Committee meeting. The Chairman of the Committee shall report formally to the Board where it is deemed necessary.