Terms of Reference

Nomination Committee 

Constitution 

The Board has established a Committee of the Board to be known as the Nomination Committee. 

Membership 

The Nomination Committee shall, until otherwise determined by the Board, consist of all members of the Board. A majority of the Committee should be independent of the Investment Manager and a quorum shall be two members. 

The Chairman of the Nomination Committee shall be appointed by the Board. 

Meetings 

The Nomination Committee shall meet at least once a year. 

The Company Secretary shall be appointed as Secretary of the Committee. 

Authority 

The Nomination Committee is authorised by the Board to investigate any activity within its terms of reference. The Nomination Committee is authorised to obtain outside legal or other independent professional advice where necessary. 

Duties 

The duties of the Nomination Committee are: 

  • To be responsible for reviewing and nominating candidates for the approval of the Board to fill vacancies on the Board of Directors.
  • To consider and review the composition and balance of the Board from time to time and, where appropriate, to make recommendations to the Board.
  • To review the re-appointment of Directors, as they fall due for re-election, under the terms of their appointment and the AIC Code of Corporate Governance and the UK Corporate Governance Code of the UK Listing Authority, and to make recommendations to the Board as considered appropriate.
  • To consider other topics, as defined by the Board. 

Reporting Procedures 

The Secretary shall circulate the minutes of meetings of the Nomination Committee to all members of the Board at the next Board meeting following a Nomination Committee meeting. 

Membership: J P Williams (Chairman), M C Ginman, S E Hansen, T F Mahony, R E Talbut

Engagement and Remuneration Committee 

Constitution 

The Board has established a Committee of the Board to be known as the Engagement and Remuneration Committee. 

Membership 

The Engagement and Remuneration Committee shall be appointed by the Board from amongst the independent non-executive directors of the Company. A quorum shall be two members. 

The Chairman of the Engagement and Remuneration Committee shall be appointed by the Board. 

Meetings 

The Engagement and Remuneration Committee shall meet at least once a year. 

Authority 

The Engagement and Remuneration Committee is authorised by the Board to advise on any activity within its terms of reference. The Engagement and Remuneration Committee is authorised to obtain independent professional advice where necessary.

Duties 

The duties of the Engagement and Remuneration Committee are to review the terms and conditions of the appointment of the Investment Manager, the Manager and the Company’s other principal service provisions and to review the terms and conditions of the Directors’ appointment. 

Reporting Procedures 

The Company Secretary shall circulate the minutes of meetings of the Engagement and Remuneration Committee to all members of the Board. 

Membership: J P Williams (Chairman), M C Ginman, S E Hansen, T F Mahony, R E Talbut 

Audit Committee 

Constitution 

The Board resolves to establish a Committee of the Board to be known as the Audit Committee (the “Committee”). 

Membership 

The Committee shall be appointed by the Board and shall comprise the independent non-executive directors of the Company. The Committee as a whole should have competence relevant to the investment trust sector. At least one member of the Committee shall have recent and relevant financial experience. A quorum shall be three members. 

As permitted by the AIC Code of Corporate Governance, the Chairman of the Board is a member of the Committee. 

The Chairman of the Committee shall be appointed by the Board. 

Meetings 

The Committee shall meet at least three times a year, and where appropriate should coincide with key dates in the Company’s financial reporting cycle.  The Committee shall have the opportunity to meet the Company’s external auditor, without representatives from the Investment Manager and the Company Secretary being present. The external auditor may request a meeting if they consider that one is necessary. 

The Company Secretary shall be appointed as Secretary of the Committee. 

Authority  

The Committee is authorised by the Board to: 

  • Investigate any activity within its terms of reference.
  • Seek any information that it requires from the investment manager or any other supplier to the Company in order to perform its duties.
  • Obtain, at the expense of the Company, outside legal or other independent professional advice on any matters within its terms of reference and such advisors may attend a meeting as necessary.
  • Have access to sufficient resources in order to carry out its duties, including access to the Company Secretary for assistance as required. 

Duties 

The Committee to carry out the following: 

External Auditor 

The Committee shall: 

  • Have primary responsibility for making recommendations to the Board in relation to the appointment, re-appointment and removal of the Company’s external auditor.
  • Be responsible for the selection process of the external auditor by tender (at least every 10 years), rotation or by way of casual vacancy and if an auditor resigns the Committee shall investigate the issues leading to this and decide whether any action is required.
  • Oversee the relationship with the external auditor, including: 
    • Approval of their remuneration and its appropriateness given the quality of work
    • Scope of audit work.
    • Terms of engagement.
    • Influencing the appointment of the engagement partner.
    • Develop and implement policy on the supply of non-audit services by the external auditor to avoid any threat to auditor to auditor objectivity and independence, taking into account any relevant ethical guidance.
    • Pre-approval of any non-audit work provided by the auditor and the fees in respect of non-audit services provided (in line with the Company’s policy). 
  • Assess annually
    • The qualifications, expertise and resources of the external auditor and the effectiveness of the audit process which shall include a report from the auditor on their own internal quality procedures.
    • Their independence and objectivity, taking into account relevant UK professional and regulatory requirements (including compliance with Ethical Standards) and the relationship with the external auditor as a whole including the provision of any non audit services. 
  • Satisfy itself that there are no relationships between the external auditor and the Company (other than in the ordinary course of business) which could adversely affect the external auditor’s independence and objectivity.
  • Agree with the Board a policy on the employment of former employees of the Company’s external auditor, and monitor the implementation of this policy.
  • Monitor the external auditor’s compliance with relevant ethical and professional guidance on the rotation of audit partners and tendering of audits and the safeguarding of the quality of the audit. If an engagement partner is to act for more than five years (a maximum of seven is permitted) then the reasons for extending the appointment must be explained to shareholders as early as practicable.
  • Review the findings of the external audit with the external auditor including: 
    • Any major issues, accounting and audit judgements which arose during the external audit and how they were resolved or not.
    • Any views from the external auditor on the interaction with the Investment Manager and Company Secretary in conducting the external audit and the quality of the information received.
    • Consider any evidence in relation to each of the areas of significant judgement and review key accounting and audit judgements.
    • Levels of errors identified during the external audit and the effectiveness of the audit.
    • Review any correspondence received from the external auditor in the course of the year, including any letters of representation. 

Internal Controls and Risk Management Systems

The Board has ultimate responsibility for the risk management and internal control systems and the Committee assists the Board in discharging this responsibility. The Committee will review the controls in place to manage these risks by the utilisation of a Risk Map through which the Company’s and its suppliers’ internal controls can be robustly reviewed and monitored via the Company Secretary where appropriate throughout the financial year.

Investment Manager 

The Committee shall:

  • Review the Investment Manager’s internal controls, financial reporting and risk management including monitoring arrangements in relation to the Company including any internal audit programme. Any reports issued by them shall be made available to the Committee so far as they relate to the Company.
  • Consider the Investment Manager’s response to any major external or internal audit recommendations.
  • Receive and consider reports from the Investment Manager on: 
    • The Investment Manager’s current status with its Regulatory Authorities.
    • The structure and nature of the Investment Manager’s compliance monitoring of the Company’s activities.
    • Any compliance matters that have arisen concerning, or in relation to the Investment Manager’s business which may have an impact on the Company. 

Other Suppliers 

The Committee shall review the internal controls reports provided by the Company’s other principal service providers.

Risk Management 

The Committee will: 

  • Keep under review the adequacy and effectiveness of the Company’s internal controls and risk management systems.
  • Undertake an annual review of any policies, practices and controls, including any reports for breaches or potential breaches of directly applicable UK or EU legislation. This will include the monitoring of the Investment Manager’s risk and compliance functions to ensure that these are in place for the prevention and investigation of fraud, bribery or other financial wrongdoing.
  • 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.
  • Consider at each Committee meeting a monitoring report on developing risks and changes to the existing risks or controls.
  • Review and approve the statements to be included in the annual report concerning internal controls and risk management. 

Internal Audit

The Committee shall monitor the need for an internal audit function in the context of the Company’s overall risk management system and consider the other processes needed to provide assurance that the internal controls are functioning as intended and the effectiveness of such other processes. 

Financial Reporting and Published Financial Information 

The Committee shall monitor the integrity of the annual and half-year financial statements before submission to the Board, and any formal announcements relating to the Company’s financial performance, focusing particularly on: 

  1. any changes in accounting principles, policies and practices;
  2. major judgmental areas;
  3. significant adjustments resulting from audit;
  4.  the going concern assumption;
  5. compliance with accounting standards and all relevant statutory requirements;
  6. compliance with the UK Listing Authority; and
  7. provide advice to the Board 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. 

The Committee shall review and challenge where necessary: 

  • The consistency of, and any changes to, accounting policies both on a year on year basis and across the Company and compliance with accounting standards.
  • The methods used to account for significant or unusual transactions where different approaches are possible.
  • Whether the Company has followed appropriate accounting standards and made appropriate estimates and judgements, taking into account the views of the external auditor.
  • The clarity of disclosure in the Company’s financial reports and the context in which statements are made including compliance with the stock exchange and other legal requirements. 

Reporting Procedures 

The Company Secretary shall circulate the minutes of meetings of the Committee to all members of the Board in advance of the next Board Meeting. 

The work of the Committee in discharging its responsibilities shall be disclosed in the Company’s Annual Report. 

The Chairman of the Committee shall attend the AGM and answer questions through the Chairman of the Board, on the Committee’s activities and responsibilities. 

Membership: M C Ginman (Chairman), S E Hansen, T F Mahony, J P Williams, R E Talbut.

 

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