Corporate governance
As a Guernsey registered company, the Company is not required to comply with the Combined Code on Corporate Governance issued by the Financial Reporting Council in July 2003 (‘the Code’).
However, it is the Company’s policy to comply with best practice on good corporate governance that is applicable to investment companies.
Arrangements in respect of corporate governance have therefore been made by the Board, which it believes are appropriate for the Company. Except as disclosed in the following two paragraphs, the Company believes that it complied with the provisions of the Code throughout the period. Since the Board consists entirely of non-executive Directors, the provisions of the Code in respect of Directors’ remuneration are not relevant to the Company except in so far as they relate to non-executive Directors.
No director has a service contract with the Company. Their letters of appointment, dated 5 September 2006, state that their appointment and any subsequent termination or retirement shall be subject to the provisions of the Articles of Association which require that all Directors retire by rotation at least every three years. The Board considers that it is not appropriate for the Directors to be appointed for a specified term as recommended by Code provision A.7.2, nor for a Senior Independent Director to be appointed as recommended by Code provision A.3.3, nor, at present, for there to be a Nomination Committee as recommended by Code provision A.4.1. The Company has not so far established a separate remuneration committee as the Board is satisfied that any relevant issues can be properly considered by the Board or by the established committees.
In addition, the Board did not consider it appropriate to carry out an evaluation of the performance of the Board, Committees and individual Directors during the first accounting period and the Company is therefore not able to provide the disclosure recommended by Code provision A.6.1. However, a performance evaluation will be undertaken during 2007.
Mr Weaver is Chairman. Mr Kennedy is an executive director of Kenmore, which is the ultimate parent company of the Investment Manager. He is not therefore considered to be an independent Director. All other Directors are considered by the Board to be independent of the Investment Manager. New Directors will receive an induction from the Investment Manager and Secretary on joining the Board and all Directors receive other relevant training as necessary.
The Company has no executive directors or employees. The Investment Management Agreement sets out the matters over which the Investment Manager has authority and the limits beyond which Board approval must be sought. All other matters, including strategy, investment and dividend policies, gearing, and corporate governance procedures, are reserved for the approval of the Board of Directors. The Board currently meets at least quarterly and receives full information on the Company’s investment performance, assets, liabilities and other relevant information in advance of Board meetings.
The Audit Committee, chaired by Mr Spencer, meets bi-annually and operates within clearly defined terms of reference and comprises all the Directors except for Mr Kennedy. The duties of the Audit Committee in discharging its responsibilities include reviewing the Annual and Interim Accounts; the system of internal controls; and the terms of appointment of the auditors together with their remuneration. It is also the forum through which the auditors report to the Board of Directors. The objectivity of the auditors is reviewed by the Audit Committee which also reviews the terms under which the external auditors are appointed to perform non-audit services. The Committee reviews the scope and results of the audit, its cost effectiveness and the independence and objectivity of the auditors, with particular regard to non-audit fees. Such fees amounted to £31,000 for the period ended 31 December 2006 and related to agreed procedures in respect of the completion accounts for the acquisition of the seed portfolio. Notwithstanding the provision of such services, the Audit Committee considers KPMG Channel Islands Limited to be independent of the Company and that the provision of such non-audit services is not a threat to the objectivity and independence of the conduct of the audit. The Audit Committee held its first meeting on 27 February 2007.
The Management Engagement Committee, chaired by Mr Weaver, comprises the full Board, except for Mr Kennedy, and reviews the performance of the Investment Manager and the continuing ability of Directors to act independently of any substantial shareholder, and their associates. The Management Engagement Committee will hold its first meeting during 2007.
Set out below are the number of Board and Committee meetings held during the period from the Company’s launch to 31 December 2006 and the number of meetings attended by each Director.
Meetings held / attended Board of Directors
CGH Weaver 3 / 3
JJ Gamble 3 / 3
HF Green 3 / 3
JAB Kennedy 3 / 3
CP Spencer 3 / 3
Individual Directors may, at the expense of the Company, seek independent professional advice on any matter that concerns them in the furtherance of their duties. The Company maintains appropriate Directors’ and Officers’ liability insurance. After making enquiries, and bearing in mind the nature of the Company’s business and assets, the Directors consider that the Company has adequate resources to continue in operational existence for the foreseeable future. For this reason, they continue to adopt the going concern basis in preparing the accounts.