Terms of Reference

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 significant, recent and relevant financial experience and competence in accounting and/or auditing.

A quorum shall be three members.

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

Meetings

The Committee shall meet at least three times a year, and where appropriate meetings 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 AIFM or the Portfolio Manager 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 AIFM or the Portfolio 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.

Evaluation

The Committee shall annually 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

Duties

The Committee shall carry out the following:

External Auditor

The Committee shall:

• make 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.
• have primary responsibility for 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 objectivity and independence, taking into account any relevant ethical guidance; and
  • pre-approval of any non-audit work to be 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; and
  • the independence and objectivity of the external auditor, 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 Portfolio Manager and AIFM 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; and
  • review any correspondence received from the external auditor in the course of the year, including any letters of representation to be given by the Board to the external auditor.

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 Matrix through which the Company’s and its suppliers’ internal controls can be robustly reviewed and monitored, via the AIFM where appropriate, throughout the financial year.

AIFM and Portfolio Manager

The Committee shall:

• review the AIFM and the Portfolio 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 AIFM and the Portfolio Manager’s response to any major external or internal audit recommendations.
• receive and consider reports from the AIFM and the Portfolio Manager on:
  • their current status with the Regulatory Authorities.
  • the structure and nature of their compliance monitoring of the Company’s activities.
  • any compliance matters that have arisen concerning, or in relation to their 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 shall:

• 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 legislation. This will include the monitoring of the risk and compliance functions of the AIFM and the Portfolio Manager and of the Company’s other principal suppliers to ensure that these are in place for the prevention and investigation of fraud, bribery or other financial wrongdoing.
• review on an annual basis, the anti-bribery and corruption and the prevention of the facilitation of tax evasion policies put in place by the Company itself and also by its principal service providers.
• consider at each Committee meeting a monitoring report on emerging risks and changes to the existing risks or controls.
• review and recommend approval of the statements to be included in the annual report concerning internal controls and risk management.

Internal Audit

The Committee shall monitor and review annually the need for an internal audit function in the context of the Company’s overall risk management system, make an appropriate recommendation to the Board and where applicable ensure that the reasons for the absence of such a function are explained in the relevant section of the Annual Report.  The Committee shall 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:

• any changes in accounting principles, policies and practices;
• significant estimates and judgements;
• significant adjustments resulting from audit;
• the clarity and completeness of disclosures in the financial statements;
• the going concern assumption;
• the viability statement;
• compliance with accounting standards and all relevant statutory requirements;
• compliance with the UK Listing Authority; and
• providing 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, position, 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 Committee in advance of the next Committee meeting. Copies of the minutes will also be included in the papers for the next Board meeting following the meeting of the Committee.  The Chair of the Committee will report to the Board on the Committee’s decisions and recommendations, identifying any matters in respect of which the Committee considers that action or improvement is needed and making recommendations as to the steps to be taken.

The work of the Committee in discharging its responsibilities shall be disclosed in the Company’s Annual Report.  The Committee shall ensure disclosure in the Annual Report of all the relevant requirements set out in the AIC Code of Corporate Governance, as amended from time to time.

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

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 AIFM and the Portfolio 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:

a) To be responsible for reviewing and nominating candidates for the approval of the Board to fill vacancies on the Board of Directors.

b) To consider and review the composition and balance of the Board from time to time and, where appropriate, to make recommendations to the Board.

c) To ensure plans are in place for orderly succession to the Board.

d) To review and recommend for approval by the Board the policy on the tenure of the Chairman (and other non-executive directors, if deemed appropriate) and the Company’s diversity policy.

e) To consider the arrangements for the annual board evaluation and to be responsible for the selection, appointment and setting of the terms of reference for any external evaluators.

f) To review the election and re-election of Directors, under the terms of their appointment and the AIC Code of Corporate Governance and the UK Corporate Governance Code, and to make recommendations to the Board as considered appropriate.

g) 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. 

The Committee Chair shall report to the Board on the Committee’s proceedings after each meeting.

The Committee shall make a statement in the Annual Report about its activities, decisions and the rationale for those decisions including:

• The process used in relation to appointments, the approach to succession planning and how both support developing a diverse pipeline;
• How the Board evaluation has been conducted, the nature and extent of an external evaluator’s contact with the board and individual directors, the outcomes and actions taken, and how it has or will influence board composition; and
• The policy on diversity and inclusion, its objectives and linkage to company strategy, how it has been implemented and progress on achieving the objectives.

Membership:

J P Williams (Chairman)
M C Ginman
S E Hansen
R E Talbut
E T A Troughton
A M Impey

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 Portfolio Manager and the AIFM (including the level and method of remuneration and the notice period) and also the Company’s other principal service providers, to ensure they are competitive and in the interests of shareholders.
  
• To review the terms and conditions of the Directors’ appointments.
• To review and recommend for approval by the Board the Directors’ remuneration policy.
• To be responsible for the selection, appointment and setting of the terms of reference for any remuneration consultants who advise the Committee.
• To make proposals to the Board on any matter within its remit.

Reporting Procedures

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

The Committee Chair shall report to the Board on its proceedings after each meeting. 

The Committee shall make a statement in the Annual Report about its activities, decisions and the rationale for those decisions.

Evaluation

The Committee shall, at least once a year, review its own performance, constitution and terms of reference, ensuring it is operating at maximum effectiveness and recommend any changes it considers necessary to the Board for approval.

Membership:

S E Hansen (Chair)
M C Ginman
E Troughton
R E Talbut
J P Williams.
A M Impey