Compliance
The Board complies with the provisions set out in section 1 of the Revised Code of the Financial Reporting Council (the "Code") and the AIC Code of Corporate Governance except that since the Board members are all non-executive Directors and all independent, there is no need to appoint a senior independent Director. The Company and the Board comply with the Listing Rules.
Board independence
The Board recognises that its prime purpose is to direct the business so as to maximise shareholder value within a framework of proper controls, even though it contracts out the services that the Company requires to service providers. The Board is open, strong minded and independent.
Board Structure
There is a clear division of responsibility between the Chairman, the Board, the Manager and other third party service providers. No individual has unconstrained powers of decision. The Chairman leads the Board and ensures that the Directors receive accurate, timely and clear information. The Board leads on matters concerning the Company's investment objective, gearing, capital structure, governance, the appointment of service providers and it keeps in touch with shareholders. It is the sole responsibility of the Manager to take decisions on the purchase and sale of individual investments. Representatives of the Manager, the Secretary and Administrator attend each Board meeting. The Board, the Manager and the Company Secretary operate in a supportive and cooperative manner.
Board meetings and performance appraisal
The Board holds at least quarterly board meetings; most of the members also meet twice a year as an Audit Committee. The Board holds further ad hoc meetings whenever necessary.
The Board reviews the performance of the Manager at every Board meeting and it takes a close interest in the results of attribution analysis to stimulate and focus discussion. Board members also meet the Manager at times outside Board meetings to discuss the Manager's views. Periodically the Board visits investee countries and companies with the manager.
The Board reviews the services of the other service providers. The Audit Committee meets with the head of compliance of the Manager and reviews the reports on internal controls from service providers. The Board and Chairman largely write their own reports.
Tenure, appointment and succession
One Director, Mr. Aldous, stands for re-election each year as he has been on the Board for more than nine years. At present the other Directors do not see signs of this impairing his independence, but if that were to happen the other Directors would say so and the relevant Director would retire. Directors have Letters of Appointment, a Directors' Manual and training is available. Appointment is for a term of three years, subject to election at their first AGM, and is renewable thereafter unless the Director is deemed not to be independent, in which case they are required to stand for re-election annually.
The Chairman of the Company acts as Chairman of the Management Engagement Committee and the Nomination Committee except on those occasions when the Nomination Committee considers his successor. The Nomination Committee is responsible for Board succession planning and takes into account the balance of relevant skills, experience and age when selecting candidates for appointment to the Board.
Remuneration
Under the UK Listing Rules, where an investment trust company has no executive directors, the Code provisions relating to directors' remuneration do not apply. Details of the Directors' fees are given in the Directors' Remuneration Report on page 33 to 35 of the Annual Report for the financial year ended 31st January 2008.
Audit Committee
The Audit Committee comprises all the independent Directors and is chaired by Ed Warner who has had recent, relevant and extensive financial and analytical experience. The terms of reference of the Committee are available from the Company Secretary. Amongst other things, the Audit Committee receives reports on internal controls; it reviews the quality and effectiveness of the accounting records, and of published financial information. It considers the independence and objectivity of the external auditors, their apparent effectiveness, their suitability to undertake work other than the statutory audit and it recommends proposals for the appointment of external auditors.
Internal controls
The Company does not have an internal audit function as all its services are delegated to third parties. It satisfies itself about the effectiveness of internal controls by requiring service providers to report and give assurance on their internal controls to the Board and Audit Committee. Although the Directors can thereby provide reasonable assurance against material misstatement or loss, they acknowledge that risk cannot be eliminated altogether.
Their approach to managing internal control and risk conforms to the recommendations of the Internal Control Guidance for Directors ("Turnbull Guidance"). In the most recent annual review on 26 March 2008 the Manager in particular confirmed to the Directors that it has in place an internal control framework to provide reasonable assurance against material misstatement or loss to its clients. The Manager's compliance and risk department, the head of which attends the Audit Committee and reports through that committee to the Board, regularly assesses the effectiveness of those internal controls.