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Corporate Governance

Contents:
The Board
Corporate Governance
Senior Executives
FAQs

The Board is committed to the highest standards of ethical behaviour and an effective system of corporate governance commensurate with the size of the Company and the scope of its business operations. The key features of the Company’s system of corporate governance are set out below.

The Board regularly reviews their systems and policies to ensure they operate effectively in the best interests of the Company’s shareholders and take appropriate account of existing and emerging standards and regulatory guidelines such as the ASX Corporate Governance Principles.

The Company's Corporate Governance Statement for the financial year ended 30 June 2017 and the Company's Corporate Principles of Conduct are available.

Investment Committee

The Board has established an Investment Committee to make Investment decisions to support the Company's Corporate Objective.

Members of the Investment Committee are TA Campbell (Chairman), RE Barker, JC Hey, J Paterson, CM Walter and PJ Williams.

  Complete Charter

Audit Committee

The Audit Committee meets periodically to review the Company’s accounting policies; the content of financial statements; issues relating to the controls applied to the Company’s activities; the content, effectiveness and independence of the external audit; risk management issues; governance issues; compliance issues and other related matters. Meetings of the Audit Committee are regularly attended by a partner from the Company’s auditors, PricewaterhouseCoopers.

Members of the Audit Committee are PJ Williams (Chairman), John Paterson, DA Peever and CM Walter.

  Complete Charter

Remuneration Committee

The Remuneration Committee advises the Board on remuneration and related issues. In particular it reviews the level of Director fees, it also reviews the Managing Director’s remuneration package and the remuneration policy guidelines for other Senior Executives. The Committee also evaluates the performance of the Managing Director and Senior Executives and recommends to the Board the level of any short and long term performance based compensation.

Members of the Remuneration Committee are GR Liebelt (Chairman), TA Campbell, J Paterson and CM Walter.

  Complete Charter

Nomination Committee

The Nomination Committee considers matters relating to the orderly renewal of the Board, Board performance and how to attract and retain Directors of high calibre with the appropriate experience and skill to contribute successfully to the oversight of the Company.

Consideration of potential Directors to fill vacancies is also undertaken by the Nomination Committee. Matters considered by the Committee include the ability of the proposed Director to contribute towards achievement of the Company’s goals, breadth of business experience and knowledge of the Australian investment scene.

Members of the Nomination Committee are J Paterson (Chairman), JC Hey, TA Campbell and PJ Williams.

  Complete Charter

Compliance and Continuous Disclosure

The Company is committed to maintaining the utmost standards of integrity and seeks to ensure all its activities are undertaken with efficiency, honesty and fairness. We also maintain a high level of transparency regarding our actions consistent with the need to maintain commercial-in-confidence material confidential, and where appropriate, to protect our shareholders interests.

As a listed entity, the Company has an obligation under the ASX Listing Rules to maintain an informed market with respect to its securities. Accordingly, we keep the market advised of all information required to be disclosed under the rules which we believe would have material affect on the price or value of the Company’s securities.

In addition to the half yearly and annual reporting requirements, there is a continual stream of information being provided to the Securities Exchange. Of particular note is the disclosure after each month-end of the Company’s net asset backing per share. All important Securities Exchange announcements are also posted on the Company’s internet website.

  Continuous Disclosure Policy   Securities Dealing Policy

Risk Management Framework

The aim of this policy is to provide clear guidelines on the management of risks to enable the achievement of strategic and operational objectives. It aims to cover all material risks that the entity faces. It is to be adhered to by all employees and Board members and, where relevant, contractors and consultants. The risk management methodology adopted by AFIC is based on the AS / NZS ISO 31000:2009 Risk Management – Principles and Guidelines.

The Board is assisted in its Risk Management Activities by the Audit Committee. Co-ordination of Risk Management activities is done by the CFO, who reports to the Audit Committee on such matters.

  Risk Management Framework

Two key areas of risk have been identified: Investment Risk and Operational Risk.

Investment Risk

Investment risk includes:

  • market risk;
  • credit, counter-party and settlement risk;
  • liquidity risk; and
  • reputational risk (insofar as it relates to the investments that the Company enters into).

The Investment Committee is primarily responsible for dealing with issues arising from investment risk, and has delegated day-to-day management of the portfolios to an experienced investment team provided by AICS. All decisions of the team are reviewed, discussed and where necessary, ratified by the Committee.

By its nature as a listed investment company, the Company will always carry investment risk because it must invest its capital in securities which are not risk free. However, the Company seeks to reduce this investment risk by a policy of diversification of investments across industries and companies operating in various sectors of the market.

In addition to the investment portfolio, the Company also operates a trading portfolio for short term opportunities. The Company seeks to enhance the return from that portfolio by also selling call and put options. In normal circumstances, the Board restricts the size of the trading portfolio to a maximum size of 10 per cent of the assets of the Company. The Board, through its Investment Committee, maintains close control of option transactions. Option transactions are limited to stocks held in the trading portfolio or in a small sub category of the investment portfolio for the purpose of enhancing returns from that portfolio and buying and/or selling stocks at attractive prices.

Operational Risk

The Company’s management is primarily responsible for recognising and managing operational risk issues such as legal and regulatory risk, systems and process risk, human resource risk, reputation risk (insofar as it relates to the operations of the Company), disaster recovery risk, and occupational health and safety risk. A further risk comprises ensuring compliance with AICS’s Australian Financial Services Licence requirements. This aspect of management’s role is specifically overseen by the Risk Management, Audit and Remuneration Committee of AICS and reported to the Company’s Audit Committee. The Chairman of the Company’s Audit Committee, PJ Williams, is also Chairman of the AICS Risk Management, Audit and Remuneration Committee.

The Company has received a report from AICS outlining the control objectives for AICS and the specific policies and procedures established to meet these procedures. These policies include management oversight, segregation of duties, multiple sign-offs and specific authorisation levels. AICS has stated that these have been in place throughout the period, and have been effective in meeting the control objectives. This statement and verification have been confirmed by AICS’s internal auditors, Ernst & Young, under the requirements of ASAE 3150.

Shareholder Communications

The Board is accountable to its shareholders as owners of the Company. As such we seek to maintain active communication with them as far as practicable. In addition to the Annual and Half Year Reports sent to shareholders and the AGM, we conduct regular shareholder meetings in the mainland Australian capitals to provide shareholders the opportunity to meet with representatives of the Board and Management, to learn more about the Company’s activities and particularly to provide an opportunity to question the Board and Management about any aspect of the Company’s activities. We also maintain this website on which are our ASX announcements, Annual Reports, Half Yearly Reports, presentations to shareholders, and related material for shareholders and investors.