Corporate Governance

The Board of EPE Special Opportunities Limited ("ESO" or the "Company") is pleased to inform shareholders of the Company’s adoption of the Quoted Companies Alliance Corporate Governance Code (the “QCA Code”).

The Company is committed to the highest standards of corporate governance, ethical practices and regulatory compliance. The Board believe that these standards are vital for the generation of long-term, sustainable value for the Company’s shareholders. In particular the Board is concerned that the Company is governed in manner to allow efficient and effective decision making, with robust risk management procedures.

As an investment vehicle, the Company is reliant upon its service providers for many of its operations. The Board maintains ongoing and rigorous review of these providers. Specifically the Board reviews the governance and compliance of these entities to ensure they meet the high standards of the Company.

The Board is dedicated to upholding these high standards and will look to strengthen the Company’s governance on an ongoing basis.

The Company will provide annual updates on changes to compliance with the QCA Code.

 

Geoffrey Vero

Chairman

27 September 2018

1. Strategy and business model

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.

ESO Compliance

The annual and interim reports detail the Company’s investment strategy, historic performance, current portfolio and future outlook.

These reports discuss challenges faced by the Company and the portfolio and how these are mitigated.

Further the Company provides updates to shareholders on significant changes in the Company’s or the portfolio’s position or prospects through ad hoc announcements, as required.

2. Shareholder needs and expectations

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.

ESO Compliance

The Board seeks to develop a strong and ongoing dialogue with the Company’s shareholders.

The Board is available to respond to or address any queries or concerns raised by shareholders. Such concerns should be raised via the Company’s investment advisor or the company’s administrator, as appropriate.

Throughout the year the Company’s investment advisor and NomAd meet with key shareholders to keep them informed of the Company’s progress. Both these advisors report to the Board on these interactions regularly.

The Company holds general meetings of its shareholders on an annual basis, where the annual report is presented to shareholders for their approval. The Board attends these meetings and is available to respond to or address any queries or concerns raised by attendees.

3. Stakeholder and social responsibilities

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.

ESO Compliance

The Company seeks to invest capital in a responsible and sustainable manner, generating benefit to shareholders, its portfolio companies and the wider economy.

The Company, as a vehicle for holding investments, has limited, direct relationships with stakeholders (outside of its shareholder base). That said, the Board is keen that the portfolio companies, in which the Company has an interest, act in a responsible manner with consideration to their various 

The Company’s investment advisor, in its capacity as manager of these portfolio assets, provides feedback to the Board on their performance and interaction with the wider community. The Board gives consideration to steps which might be taken to enhance the impact the Company’s investments might have on the wider economy, within the Company’s strategic objectives. The Board makes specific equity of the investmet advisor where relevant to the activities or scale of these portfolio assets.

4. Risk management

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).

ESO Compliance

The Board maintains a robust risk management framework, which is reviewed and challenged on an ongoing basis.

The Board has established a Risk and Audit Committee to advise the Board on the Company’s risk management approach and overall risk profile. The Committee meets at least twice a year and undertakes periodic business risk assessments. The key risks categories for the Company are portfolio performance and operational performance.

In relation to the risks associated with the portfolio’s performance, the Company’s investment advisor manages the portfolio. The performance and capabilities of the investment advisor are reviewed on an ongoing basis and in particular, via an annual site visit by the Board to the investment advisor. Further the Board receives updates on the portfolio on a quarterly basis (and on an ad hoc basis, as required) and challenges the investment advisor, as appropriate. The portfolio is relatively concentrated with a target size of 2-10 assets.

In relation to risks associated with the Company’s operational performance, the Company has no direct employees or operations, and has instead delegated its operations to certain service providers, in particular the Company’s investment advisor, NomAd, administrator and financial administrator. The Company reviews the performance of these key suppliers on an annual basis with site visits and in-person meetings with all key advisors. In the case of the financial administrator, the Company receives independent ISAE compliance reports on a three year cycle (and when procedures are significantly amended). The Committee ensures that all service providers remain compliant with relevant regulation and remain suitable to provide their contracted services.

5. Board composition

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.

ESO Compliance

All members of the Board are considered to be of independent thought and are non-executive directors. In particular, the Board feel that they are sufficiently independent of the investment advisor and sufficiently challenge the advice received from the investment advisor.

Several Board members have long periods of service. The Board believe that the experience and familiarity with the Company is to the benefit of the Company, its portfolio, its shareholders and objectives. The investment period of portfolio assets matches the long period of service held by certain Board members, providing deep knowledge of the Company’s investment portfolio. Board members voluntarily retire by rotation for re-election by shareholders, on 4-year cycles.

The Board has established the following committees to advise on the Boards responsibilities:

  • Risk and Audit Committee
  • Investment Committee

All directors are members of these committees.

The Board does not feel that that the establishment of either a Remuneration Committee or a Nomination Committee would be appropriate for an investment company of the Company’s current size.

The Board meets at four times a years to review the Company’s performance and operations. All directors attended the four routine meetings convened in the last twelve months.

The Board may convene additional meetings, as required to address matters arising. The Company does not disclose the attendance records of these additional Board meetings, given attendance is not representative of director participation as input is often provided by absent directors ahead of meetings.

The Risk and Audit Committee meets at least two times a year. The Chairman of the Audit and Risk Committee meets with the Company’s auditors at least three times a year. The Investment Committee meets as required.

The time commitment required of directors varies dependent upon the activity level of the Company. It is anticipated that 8-12 days per annum are required of directors for the attendance of routine meetings of the Board. In addition it is anticipated that 4-10 days per annum are required for the participation in other matters arsing,

6. Experience, skills and capabilities

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.

ESO Compliance

The experience and skills of the directors are detailed in their biographies included on the website and in the annual and interim reports.

The Board reviews the experience and skills of the Board, as a collective, on annual basis, along with the efficacy of the Board’s operations. Any deficiencies identified by these exercises are mitigated, where possible, by development of individual directors or recruitment of directors, when necessary.

Each director is responsible for the maintenance of their skills. All directors hold other complementary directorships and are active participants in the investment management community. By way of example, Jersey-based directors are required, under local regulations, to complete a certain amount of CPD each year.

The Board receives investment advice from its investment advisor on an ongoing basis. The Board receives compliance advice from the NomAd on an ongoing basis. The Board seeks legal advice where appropriate and for all significant corporate actions / legal agreements.

The Company’s secretary and administrator provide compliance advice, as relevant.

The Company’s advisors are detailed on the Company’s website and in the annual and interim reports.

The Company doesn’t have a senior independent director. The Board does not feel one is required given the independence of all directors.

7. Board performance

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.

ESO Compliance

The Board reviews the experience and skills of the Board, as a collective, on annual basis, along with the efficacy of the Board’s operations. Any deficiencies identified by these exercises are mitigated, where possible, by development of individual directors or recruitment of directors, when necessary.

This review is conducted by an anonymised questionnaire completed by directors, with results collated by the Company’s administrator. The matrix of skills and experience against which the Board reviews itself is broad and reflects the Company’s strategy and long-term objectives.

The review of the Board's skill mix carried out in the last twelve months highlighted areas for diversification which are under ongoing review.

The review of the Board's efficacy carried out in the current year highlighted no issues in the running of the Board’s functions.

The directors collectively review the succession plan for the Board on an annual basis, with recruitment of directors, when necessary, aligned to the skill reviews performed by the Board.

8. Culture

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.

ESO Compliance

The Company seeks to invest capital in a responsible and ethical manner, generating benefit to shareholders, its portfolio companies and the wider economy.

The Company, as a vehicle for holding investments, has no employees and limited capacity to effect changes in culture in companies it is affiliated with. That said, the Board is keen that the portfolio companies, in which the Company has an interest, act in an ethical manner with consideration to the wider community.

The Board ensures that all portfolio companies have policies in place to comply with applicable governance laws and regulations, such as anti-bribery and modern day slavery. The Board has a zero tolerance approach to breaches of these laws and regulations.

The Board promotes ethical behaviour thought the portfolio, through directions to the Company’s investment advisors in relation to the ethical management of the portfolio.

9. Governance Structures

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.

ESO Compliance

The roles and responsibilities of the directors are detailed in the Governance Report in the annual and interim reports.

A summary of the role and responsibilities of the chairman of the Board is included  on the Company’s website

All significant matters related to the operation of the Company are reserved to the Board, in particular given the Company does not have an executive function.

The committees of the Board have been established to advise the Board of certain matters.

A summary of the terms of reference of the Board and each of the committees of the Board is included on the Company’s website

The Company has engaged certain suppliers to provide services to the Company. These suppliers are engaged by and report to the Board.

10. Communication

10. Communicate how the company is governed and is performing by maintaining a dialogue with 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, appropriate communication and reporting structures 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).

ESO Compliance

The annual and interim reports include the following details:

  • The work of the Board during the period of review – please see the Chairman’s Statement
  • The work of the Audit and Risk Committee – please see the Governance Report

The annual and interim reports do not include a report from the Investment Committee, as their considerations and work is detailed in the Chairman’s Statement.

The annual and interim reports do not include a remuneration report as Board does not consider such a report appropriate, given the Company does not have executive directors and the remuneration of the non-executive directors is detailed elsewhere in the reports.

The directors of the Company participate in a share-based remuneration scheme. Participation in this scheme requires the purchase, by directors of shares in the Company. The Board feel that this scheme is appropriate as equity participation in the Company is important for fostering alignment with shareholders. The scheme has caps on director participation and has been approved by a general meeting of shareholders.

The outcomes of all votes of shareholders are disclosed shortly afterwards via announcement to the market. These announcements are retained on the Company’s website.

Historic interim and annual reports are contained on the Company’s website (last five years).