Terms of Reference – Audit 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 last revised in 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 Committee (the ‘Committee’).

The Committee shall consist of not less than two independent, non-executive members (smaller company dispensation) and a quorum for meetings and decisions of the Committee shall be two members present. The Chairman of the Board shall be a member of the Committee.

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

Following the selection and appointment to the Board on 6 July 2006, it was agreed by the Board that David Hunt would be appointed as Chairman of the Committee.

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 a 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 Compliance Officer from Frostrow Capital LLP, the Company’s Alternative Investment Fund Manager ('AIFM'), shall attend one meeting per year; such a meeting will include the review of the draft annual report. A written report from the Compliance Officers of the Company’s AIFM and Portfolio Manager shall be submitted for consideration at each meeting of the Committee.

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, 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

The Committee will at all times comply 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 (also renamed the UK Corporate Governance Code) last revised in April 2016 and guidance (both the AIC Code and Guide) from the Association of Investment Companies last revised in July 2016.

In particular, the duties of the Committee are:

  • to monitor the integrity of the  annual report and accounts and any formal announcements relating to the Company’s financial performance, reviewing significant financial reporting judgements contained in them (see 1 below).
  • to review the internal financial controls and risk management systems (see 2 below).
  • to review annually whether an internal audit function is needed.
  • in relation to the external auditors:
    • to recommend to the Board their appointment, re-appointment or removal;
    • to approve their remuneration and terms of engagement;
    • to develop and implement a policy on the engagement of the external auditors;
    • to review and monitor their independence and objectivity; and
    • to review the effectiveness of the audit process; and where the auditors supply a substantial volume of non-audit services, to keep the nature and extent of such services under review.
  • to consider other topics, as defined by the Board
  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. any changes in accounting policies and practices;
    2. major judgmental areas;
    3. significant adjustments resulting from the audit;
    4. the going concern assumption adopted in the annual report and accounts;
    5. compliance with accounting standards;
    6. the statement concerning internal controls and risk management;
    7. compliance with the Listing Rules and tax and legal requirements; and
    8. 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, 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 discuss and agree with the external auditors, before the audit commences, the nature and scope of the audit;
  4. to review annually the qualifications, expertise, resources and effectiveness of the audit process and procedures;
  5. 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;
  6. 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
  7. 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.

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 (see 1 above).

Terms of Reference – Management Engagement 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 which were both issued in February 2006 and last revised in 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 Management Engagement Committee shall comprise all the independent non-executive directors. Unless otherwise agreed by the Board, the Chairman of the Committee will usually be the Chairman of the Board.

The Committee shall consist of not less than two independent non-executive directors and a quorum shall be two members present.

Members shall be appointed for an initial period of 3 years, which may be renewed or extended providing the director remains independent.

Meetings and attendance

The Committee will meet at least once each 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, from time to time, 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

The Committee will at all times comply 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 – last revised in September 2014, also renamed The UK Corporate Governance Code) and guidance from the Association of Investment Companies published in February 2006 and last revised in July 2016.

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, third party agreements and other sundry services provided by the AIFM and Portfolio Manager.

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.