Corporate Governance

The Board up to 2nd August 2010 consisted of five nonexecutive Directors and the Chairman is John Shakeshaft. The Directors consider that the Chairman is independent for the purposes of the AIC Code. During the year, Douglas Maccabe was a director of the company and of the Investment Manager. From 2nd August 2010, Douglas Maccabe resigned from the Board and Donald Adamson and David Pirouet were appointed as non-executive Directors. Donald Adamson is the Chairman of the Investment Manager until such time as that company is liquidated. Helen Grant resigned from the Board with effect from 3rd August 2010.

The company has no executive directors and no employees. However, the Board has engaged external companies to undertake the investment management, administrative activities of the company and the production of the Annual Report and Financial Statements which are independently audited. Clear documented contractual arrangements are in place between these firms that define the areas where the Board has delegated responsibility to them. Whilst the Board delegates responsibility, it retains accountability for the functions it delegates and is responsible for the systems of internal control.

The Board meets at least four times a year and between these formal meetings there is regular contact with the Manager, Adviser, Nomad and Broker. The Directors are kept fully informed of investment and financial controls, and other matters that are relevant to the business of the company and should be brought to the attention of the Directors. The Directors also have access to the Secretary and, where necessary in the furtherance of their duties, to independent professional advice at the expense of the company.

The Board has a breadth of experience relevant to the company and they have access to independent professional advice at the company's expense where they deem it necessary to discharge their responsibility as Directors. The Directors believe that any changes to the Board's composition can be managed without undue disruption. With any new appointment of a Director to the Board, consideration will be given as to whether a formal induction process is appropriate and if any relevant training is to be offered.

The Board considers agenda items laid out in the notice and agenda which are formally circulated to the Board in advance of a meeting as part of the Board papers and therefore Directors may request any agenda items to be added that they consider appropriate for Board discussion. Additionally, each Director is required to inform the Board of any potential or actual conflicts of interest prior to Board discussion.

All members of the Board are expected to attend each Board meeting and to arrange their schedules accordingly, although non-attendance is unavoidable in certain circumstances.

During the period 16 board and 3 audit committee meetings were held each of which were attended by the necessary quorum of Directors.

The Board has been continuously engaged in a review of the company's strategy with the Adviser and Manager to ensure the employment of appropriate strategies under prevailing market, political and economic conditions at any particular time, within the overall investment restrictions of the company.

To support the review of the strategy, the Board has focused at Board Meetings on a review of individual investments and returns, country exposure, the overall portfolio performance and associated matters such as gearing and pipeline investment opportunities. Additionally a strong focus of attention is given to marketing/investor relations, risk management and compliance, peer group information and industry issues.

The Board evaluates each Director's own performance on an annual basis and believes that the mix of skills, experience, ages and length of service are appropriate to the requirements of the company and in accordance with the AIC Code. Directors shall retire and stand for reelection at intervals of no more than three years. Each Director is appointed subject to the provisions of the Articles of Association in relation to retirement.

The Board meets at least four times a year to consider, as appropriate, such matters as:

1. The overall objectives for the company; - Risk assessment and management, including reporting, monitoring, governance and control;
2. Any shifts in strategy that may be appropriate in light of changes in market conditions;
3. The appointment, and ongoing monitoring, through regular reports and meetings of the Investment Manager, administrator and other service providers;
4. Review of the company's investment performance;
5. Share price performance;
6. Statutory obligations and public disclosure;
7. The shareholder profile of the company; and
8. Transactional and other general matters affecting the company

These matters are discussed by the Board to clearly demonstrate the seriousness with which the Directors take their fiduciary responsibilities and as an ongoing means of measuring and monitoring the effectiveness of their actions.

The Board has not deemed it necessary to appoint a nomination or remuneration committee as, being comprised wholly of non-executive Directors, the whole Board considers these matters.

The Board operates an Audit Committee which consists of David Pirouet, Donald Adamson, Matt Christensen and Sian Hansen. The Audit Committee operates within defined terms of reference as agreed by the Board which are available from the company Secretary upon request.

The Audit Committee function is to ensure the company's financial performance is properly reported on and monitored and the Committee reviews the following:

1. The annual and interim financial statements;
2. Results;
3. Internal control systems and procedures;
4. Accounting policies of the company;
5. The auditor's effectiveness and independence;
6. Announcements; and
7. The auditor's remuneration and engagement, as well as any non-audit services provided by them.

When required the Audit Committee meetings are also attended by the Administrator and the company's Auditors. The number of meetings of the Audit Committee attended by each Director is set out above.