Corporate governance

THE QUOTED COMPANY ALLIANCE (QCA) CODE

The Directors, in acknowledgement of the importance of good corporate governance, have adopted the Quoted Companies Alliance Corporate Governance Code (the “QCA Code”), as the basis of the Company’s governance framework, and consider that the Company complies with the QCA Code so far as is practicable having regard to the size, nature and current stage of the Company’s development.

The Board recognises that good corporate governance can reduce risks within the business, can promote confidence and trust amongst its stakeholders and underpins the effectiveness of the Company’s management framework.

The QCA Code includes ten broad principles that the Company holds in mind as it seeks to deliver growth to its shareholders in the medium and long-term. These principles and the manner in which the Company seeks to comply with them can be summarised as follows in the table below

Oliver Cooke, Chairman
This disclosure was last reviewed and updated on 4 September 2020

The Directors recognise the importance of sound corporate governance and with that aim, the Company has voluntarily adopted those of the recommendations of the QCA Guidelines that they consider appropriate to the Company’s size at this time. To the extent that the Company is not compliant with the QCA Guidelines it is intended that it will become so as its business matures.

The Board meets regularly to review key operational issues, strategic development and the financial performance of the Company. All matters of a significant nature are discussed in the forum of board meetings. The Board is responsible for internal controls to minimise the risk of financial or operational loss or material misstatement. These controls have been designed to meet the particular needs of the Company having regard to the nature of its business.

THE PRINCIPLES OF THE QCA CODE

DELIVER GROWTH

QCA Code Principle

Application (as set out by QCA)

What we do and why

1.   Establish a strategy and business  model which promote long-term value for shareholders.

The board must be able to express a shared view of the company’s purpose, business model and strategy. It should go beyond the simple description of products and corporate structures and set out how the company intends to deliver shareholder value in the medium to long-term. It should demonstrate that the delivery of long-term growth is underpinned by a clear set of values aimed at protecting the company from unnecessary risk and securing its long-term future.

The management of retail investors’ funds on a discretionary basis, delivering an institutional quality service at a fair value price, lies at the heart of the Group’s operations. The basis upon which the Group’s investment management business has developed its funds, and the manner in which those funds are managed, have been designed to ensure, as far as it is practical to do so, that this business operates with a substantially fixed cost base. Once this cost base has been exceeded and the investment management business becomes profitable, which it has already achieved, the incremental revenues earned from additional inflows of FUM flow directly through to its bottom line and enhance the profitability both of the investment management business and of the Group. The business has achieved a very high level of asset retention.

The Group’s funds are designed to be both relevant and attractive to its customer base. For example, within the Group’s current fund range are three Protection Portfolios designed specifically to shield clients from sharp and sustained falls in financial markets, such as those that have occurred recently and are anticipated to recur with the onset of a recession or in the event of further waves of the coronavirus. Morgan Stanley & Co International Plc provides these funds with their protection levels, set at between 85-90% of their net asset value’s highest level.

The Group’s advisory business trades profitably in its own right and in addition, represents a channel for the distribution of the Group’s funds, subject to their being suitable for each client’s individual circumstances.

 The Board’s focus is on managing the regulatory risks associated with the operation of advisory and investment businesses and on developing other distribution channels capable of generating fund inflows, thereby enhancing the Group’s profitability.

Key risks have been addressed in the Strategic Report.

2. Seek to understand and meet shareholder needs and expectations
Directors must develop a good understanding of the needs and expectations of all elements of the company’s shareholder base.
The board must manage shareholders’ expectations and should seek to understand the motivations behind shareholder voting decisions.

To ensure that its strategy, operational results and financial performance are clearly understood, the Company is committed to engaging with and updating its shareholders through its regulatory announcements, and practices two-way communication with both its institutional and private investors. From time to time it also attends investor events at which shareholders and potential shareholders are able to engage with the Company’s Executive Directors.

The Company believes that shareholder expectations are most effectively managed through the release of regulatory announcements and through discussion with shareholders at the Company’s Annual General Meeting. All Board members endeavour to attend the AGM in person.

The Executive Directors meet regularly with the Company’s major shareholders and ensure that the views expressed by them are communicated fully to the Board.

Board members make themselves available to meet with shareholders and with potential investors as and when required.

3. Take into account wider stakeholder and social responsibilities and their implications for long-term success
Long-term success relies upon good relations with a range of different stakeholder groups both internal (workforce) and external (suppliers, customers, regulators and others). The board needs to identify the company’s stakeholders and understand their needs, interests and expectations.

Where matters that relate to the company’s impact on society, the communities within which it operates, or the environment have the potential to affect the company’s ability to deliver shareholder value over the medium to long-term, then those matters must be integrated into the company’s strategy and business model.

Feedback is an essential part of all control mechanisms. Systems need to be in place to solicit, consider and act on feedback from all stakeholder groups.

The Company recognises the importance of engagement with its stakeholder groups, which, in addition to investors, include its employees, clients, strategic partners and the relevant authorities. It also seeks to treat each of these groups in a fair and open manner.

The Company supports a national charity, the Clock Tower Foundation, and the involvement of staff in various local and national fund-raising events.

The Company endeavours to take account of feedback received from these stakeholders, and where appropriate to revise and improve its working arrangements.

Environmental responsibility and sustainability are important to the Company, and a number of initiatives have been pursued to improve the recycling of paper, to reduce the use of plastics and to reduce its carbon footprint through the greater use of online meeting technology and through a reduction in the number of office premises retained for use by its staff.

4. Embed effective risk management, considering both opportunities and threats, throughout the organisation
The board needs to ensure that the company’s risk management framework identifies and addresses all relevant risks in order to execute and deliver strategy; companies need to consider their extended business, including the company’s supply chain, from key suppliers to end-customer.

Setting strategy includes determining the extent of exposure to the identified risks that the company is able to bear and willing to take (risk tolerance and risk appetite).

The principal risks and uncertainties facing the Group are summarised in the Strategic Report.

The Company has in place a robust and effective Compliance department and regime, as it is required to do by regulation. Regular reports are prepared by this department and are submitted for review by the Board.

The Group has also established a separate Risk Committee, which examines and assesses the risks associated with all aspects of the Group’s operations. This committee has recently been strengthened through the recruitment of an experienced professional risk manager. Regular reports are prepared by this committee and are submitted to the Board. These reports are also reviewed by the Audit Committee.

The Group’s IT systems have been subjected to third party review, to independent penetration testing and have been enhanced through the installation of additional email filtering software.

Commercial risks and opportunities are considered by the Board and by the Group’s management board, which is comprised of the Executive Directors and the heads of all major Group functions. The management board liaises regularly and meets formally on a quarterly basis.

MAINTAIN A DYNAMIC MANAGEMENT FRAMEWORK

QCA Code Principle

Application (as set out by QCA)

What we do and why

5. Maintain the board as a well- functioning, balanced team led by the chair
The board members have a collective responsibility and legal obligation to promote the interests of the company, and are collectively responsible for defining corporate governance arrangements. Ultimate responsibility for the quality of, and approach to, corporate governance lies with the chair of the board.

The board (and any committees) should be provided with high quality information in a timely manner to facilitate proper assessment of the matters requiring a decision or insight.

The board should have an appropriate balance between executive and non-executive directors and should have at least two independent non- executive directors. Independence is a board judgement.

The board should be supported by committees (e.g. audit, remuneration, nomination) that have the necessary skills and knowledge to discharge their duties and responsibilities effectively.

Directors must commit the time necessary to fulfil their roles.

The composition, roles and responsibilities of the Board and of the various Committees are set out on page 14 of the Report and Accounts. The number of meetings held, and Directors’ attendance is also detailed.

To enable the Board to discharge its duties in an effective manner, all Directors receive appropriate and timely information. The Agenda for each meeting is determined by the Chairman who arranges for briefing papers to be distributed to all participants for consideration ahead of meetings. All meetings are minuted, and the accuracy of the minutes is confirmed at the subsequent meeting before being approved and signed by the Chairman

Both the Chairman, Oliver Cooke, and the Chief Executive, Brian Raven, have considerable experience of operating at board level in public and in private companies. The Chairman is a qualified Chartered Accountant and has served as finance director on the boards of various public companies. The Chief Executive has held a number of sales, operational and leadership roles at board level within public companies. The Non-Executive Directors, Roderic Rennison and Peter Dornan, both have extensive sector knowledge and experience and come from strong regulatory backgrounds.

The Executive Directors devote the whole of their time to the business of the Group. The Non-Executive Directors devote one to two days per month to their duties.

Under the terms of their contracts, the Non-Executive Directors are required to obtain the prior written consent of the Board before accepting additional commitments that might conflict with the interests of the Group or impact the time that they are able to devote to their role as a Non-Executive Director of the Company.

The Company does not currently have a separate Nominations Committee as this is considered unnecessary given the Company’s size and stage of development. The need for such a committee will be kept under review by the Board as the Company develops.

6. Ensure that between them the directors have the necessary up-to-date experience, skills and capabilities
The board must have an appropriate balance of sector, financial and public markets skills and experience, as well as an appropriate balance of personal qualities and capabilities. The board should understand and challenge its own diversity, including gender balance, as part of its composition.

The board should not be dominated by one person or a group of people. Strong personal bonds can be important but can also divide a board.

As companies evolve, the mix of skills and experience required on the board will change, and board composition will need to evolve to reflect this change.

Biographies for each of the Directors can be found in the Directors’ Report.

The Chairman complies with the continuing professional development requirements of the Institute of Chartered Accountants in England and Wales, of which he is a long-standing member. The Chief Executive Officer, in conjunction with other members of the executive team, ensures that the Directors’ knowledge is kept up to date on key issues and developments pertaining to the Company, its operational environment and to the Directors’ responsibilities as members of the Board. During the course of the year, Directors have consulted and received advice as well as updates from the Company’s nominated advisors, brokers, company secretary, legal counsel and various other external advisers on a number of matters, including corporate governance.

From time to time, members of the Board also participate in industry forums.

7. Evaluate board performance based on clear and relevant objectives, seeking continuous improvement
The board should regularly review the effectiveness of its performance as a unit, as well as that of its committees and the individual directors.

The board performance review may be carried out internally or, ideally, externally facilitated from time to time. The review should identify development or mentoring needs of individual directors or the wider senior management team.

It is healthy for membership of the board to be periodically refreshed. Succession planning is a vital task for boards. No member of the board should become indispensable

The Group has established separate Remuneration and Audit Committees and through their operation the Non-Executive Directors are able to monitor and assess the performance of the Executive Directors and to hold them to account.

The respective Board members periodically review and cross-evaluate the Board’s performance and effectiveness in the Company. It remains the intention of the Board in due course to create a more formal process that will focus more closely on objectives and targets for improving performance.

Directors’ performance is open to assessment by shareholders and all Directors are subject to re-election by the shareholders at least once in every three years.

8. Promote a corporate culture that is based on ethical values and behaviours
The board should embody and promote a corporate culture that is based on sound ethical values and behaviours and use it as an asset and a source of competitive advantage.

The policy set by the board should be visible in the actions and decisions of the chief executive and the rest of the management team. Corporate values should guide the objectives and strategy of the company.

The culture should be visible in every aspect of the business, including recruitment, nominations, training and engagement. The performance and reward system should endorse the desired ethical behaviours across all levels of the company.

The corporate culture should be recognisable throughout the disclosures in the annual report, website and any other statements issued by the company.

The Company actively promotes a culture in which the client is placed at the centre of everything that the Company does. Its ethos is, to act at all times with honour, dependability and vigilance.

The Company is also committed to providing a safe and secure environment for its employees, with its policies and procedures enshrined in the Company’s Employee Handbook, which provides a guideline for employees on the day-to-day operations of the Company.

The Company is similarly committed to a transparent, flexible and open culture promoting family values and avoiding discrimination on the basis of gender, religious belief, age, ethnicity or sexual orientation.

The Company is mindful of the need for, and is committed to, environmental responsibility and sustainability.

9.   Maintain governance structures and processes that are fit for purpose and support good decision-making by the board
The company should maintain governance structures and processes in line with its corporate culture and appropriate to its:

• size and complexity; and
• capacity, appetite and tolerance for risk.

The governance structures should evolve over time in parallel with its objectives, strategy and business model to reflect the development of the company.

Good decision making requires information, consideration, discussion, and challenge followed by action, communication and the acceptance of collective responsibility. This is accomplished within the Company through the employment of Directors who have the confidence to express their views, through the prior circulation of briefing papers allowing adequate time for their proper consideration, through the open conduct of Board meetings with the accurate minuting of outcomes and the wider communication of those outcomes as appropriate.

The avoidance of conflicts of interest, through the delegation of responsibility for certain areas, such as audit and remuneration, to specialist committees, has strengthened the governance structure within the Company.

BUILD TRUST

QCA Code Principle

Application (as set out by QCA)

What we do and why

10. Communicate how the company is governed and is performing by maintaining a dialogue with shareholders and other relevant stakeholders.
A healthy dialogue should exist between the board and all of its stakeholders, including shareholders, to enable all interested parties to come to informed decisions about the company.

In particular, an appropriate communication and reporting structure should exist between the board and all constituent parts of its shareholder base. This will assist:

• the communication of shareholders’ views to the board; and
• the shareholders’ understanding of the unique circumstances and constraints faced by the company.

It should be clear where these communication practices are described (annual report or website).

Information on the Company’s commercial progress and its financial performance is disseminated to shareholders and to the market through the announcement of its full-year and half-year results, the posting of such announcements onto the Company’s website in a timely manner and by mailing copies of the Annual Report and Accounts to shareholders. These are also made available for discussion with shareholders at the Company’s AGM.

Departmental heads liaise regularly online and meet formally on a quarterly basis to be briefed on the Company’s progress to discuss progress within their areas of responsibility.

Other members of staff are briefed informally on an ad-hoc basis and more formally through a series of presentations delivered to them at the annual Company Day.

The Audit Committee

The audit committee is comprised of the Chairman and the non-executive directors and determines the terms of engagement of the Company’s auditors and will determine, in consultation with the auditors, the scope of the audit. The Audit Committee receives and reviews reports from management and the Company’s auditors relating to the interim and annual accounts and the accounting and internal control systems in use throughout the Company. The Audit Committee has unrestricted access to the Company’s auditors. This committee is chaired by Peter Dornan.

The Remuneration Committee

The remuneration committee, which comprises the non-executive directors, is chaired by Roderic Rennison. The committee reviews the scale and structure of the executive directors’ and senior employees’ remuneration and the terms of their service or employment contracts, including share option schemes and other bonus arrangements. The remuneration and terms and conditions of the non-executive directors are set by the entire Board.

City Code on Takeover and Mergers

The Company is subject to the City Code on Takeovers and Mergers.

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Tavistock Investments Plc, Registered in England and Wales. Registered Office: 1 Bracknell Beeches, Old Bracknell Lane, Bracknell RG12 7BW, Company Number 05066489.