Terms of Reference of the Management Engagement Committee

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Woodford Patient Capital Trust plc

Membership

  • Members of the Management Engagement Committee will be appointed by the Board in consultation with the chairman of the Management Engagement Committee. The Management Engagement Committee will be made up of the Board
  • All members of the Management Engagement Committee will be independent non-executive Directors
  • Only members of the Management Engagement Committee have the right to attend Management Engagement Committee meetings. However, other individuals such as representatives from the Portfolio Manager and the Manager may be invited to attend all or part of any meeting as and when appropriate

Chairman

  • The Management Engagement Committee will be chaired by the chairman of the Board
  • In the absence of the chairman of the Management Engagement Committee and/or an appointed deputy, the remaining members present should elect one of themselves to chair the meetings of the Management Engagement Committee

Secretary

  • The Company Secretary (or his/her delegate) or such other person as the Board may determine from time to time will be the secretary of the Management Engagement Committee
  • The secretary of the Management Engagement Committee or his/her delegate will attend meetings of the Management Engagement Committee to take minutes
  • In the absence of the secretary of the Management Engagement Committee, the members present at the meeting should elect another person to act as the secretary for the purposes of that meeting

Quorum

  • The quorum necessary for the transaction of business of the Management Engagement Committee is two members, each of whom should be an independent non-executive Director
  • The secretary should ascertain, at the beginning of each meeting, the existence of any conflicts of interest and minute them accordingly. The relevant member of the Management Engagement Committee must not be counted towards the quorum and he/she must abstain from voting on any resolution of the Management Engagement Committee in which he/she and/or his/her associates have a material interest
  • A duly convened meeting of the Management Engagement Committee at which a quorum is present will be competent to exercise all or any of the authorities, powers and discretions vested in or exercisable by the Management Engagement Committee

Frequency of meetings

  • The Management Engagement Committee will meet at least once a year and at such other times as the chairman of the Management Engagement Committee requires
  • Any member of the Management Engagement Committee may request a meeting if he/she considers that one is necessary

Attendance at meetings

  • Members of the Management Engagement Committee may attend meetings of the Management Engagement Committee either in person or through other telephonic and/or electronic means of communication
  • If any member of the Management Engagement Committee wishes to attend a meeting through telephonic and/or electronic communications, prior arrangements should be made with the secretary of the Management Engagement Committee

Notice of meetings

  • Meetings of the Management Engagement Committee will be summoned by the secretary of the Management Engagement Committee at the request of any of its members or at the request of the chairman of the Management Engagement Committee
  • Unless otherwise agreed, notice of each meeting confirming the venue, time and date together with an agenda of items to be discussed, will be forwarded to each member of the Management Engagement Committee and to any other person required to attend within a reasonable time prior to the date of the meeting. Supporting papers will be sent to Management Engagement Committee members and to other attendees as appropriate, within a reasonable time prior to the date of the meeting
  • Any member of the Management Engagement Committee will be entitled, by notice to the secretary of the Management Engagement Committee, to include other matters relevant to the functions of the Management Engagement Committee in the agenda of a Management Engagement Committee meeting

Minutes of meetings

  • The secretary of the Management Engagement Committee (or his/her delegate) in attendance at the meetings of the Management Engagement Committee will minute in sufficient detail all proceedings and resolutions of all such meetings, including the names of those present and in attendance. The minutes should also include any concerns raised by any member of the Management Engagement Committee and/or dissenting views expressed
  • Draft minutes of the Management Engagement Committee meetings will be sent to all Management Engagement Committee members for their comments within a reasonable time after the meeting. Once they are agreed, the secretary of the Management Engagement Committee will circulate the final version of the minutes, and reports of the Management Engagement Committee, to all members of the Management Engagement Committee and to all members of the Board, unless it is considered inappropriate to do so
  • Minutes of the Management Engagement Committee meetings will be kept by the secretary of the Management Engagement Committee and will be available for inspection by any member of the Management Engagement Committee or Director at any reasonable time on reasonable notice

Annual general meeting

  • The chairman of the Management Engagement Committee should attend the annual general meeting of the Company and be prepared to respond to any Shareholder questions on the Management Engagement Committee’s activities

Duties

  • The Management Engagement Committee is responsible for:
    • Monitoring and evaluating the Portfolio Manager’s investment performance and compliance with the terms of the Portfolio Management Services Agreement and, if necessary, providing appropriate guidance, which may include considering the merit of obtaining an independent appraisal of the Portfolio Manager’s services on a regular basis
    • Requiring the Portfolio Manager to provide attribution and volatility analyses and considering whether this should be published at least annually
    • Reviewing the terms of the Portfolio Management Services Agreement annually to ensure that the terms conform with market and industry practice and remain in the best interests of Shareholders and making recommendations to the Board on any variation to the terms of the Portfolio Management Services Agreement which it considers necessary or desirable
    • Reviewing the terms of the Management Agreement annually to ensure that the terms thereof conform with market and industry practice and remain in the best interests of Shareholders and making recommendations to the Board on any variation to the terms of the Management Agreement which it considers necessary or desirable
    • Reviewing and making the appropriate recommendations to the Board as to whether the continuing appointment of the Portfolio Manager and the Manager are in the best interests of the Company and Shareholders, and the reasons for this recommendation
    • Monitoring compliance by providers of other services to the Company with the terms of their respective agreements from time to time
    • Reviewing the level and method of remuneration of the Portfolio Manager, the basis on which the performance fees (if any) are calculated with a view to ensuring that any such performance fee does not encourage risk and that it rewards demonstrably superior performance by the Portfolio Manager against the stated objectives of the Company when compared to a suitable benchmark and the notice period of the Portfolio Manager, pursuant to the terms of the Portfolio Management Services Agreement, and the notice period of the Manager, pursuant to the terms of the Management Agreement, giving due consideration to the competitive position of the Company against the peer group
    • Reviewing, considering and recommending any amendments to the terms of the appointment and remuneration of providers of other services to the Company
    • Considering any points of conflict of interest which may arise between the providers of services to the Company

Reporting responsibilities

  • The chairman of the Management Engagement Committee will report formally to the Board after each meeting on all matters within its duties and responsibilities
  • The Management Engagement Committee will make whatever recommendations to the Board it deems appropriate on any area within its remit where action or improvement is needed
  • The Management Engagement Committee will compile an annual report on its role and activities to be included in the Company’s annual report, setting out its decisions and rationale in relation to its review of the Portfolio Manager’s performance

Others

  • The Management Engagement Committee must have access to sufficient resources in order to carry out its functions and discharge its duties. In the event that the Management Engagement Committee determines that it has insufficient resources, it may make a request for additional resources to the Portfolio Manager and/or Manager, as appropriate. If the request for additional resources is denied, the Management Engagement Committee may, if it chooses, make a request to the Board. The Board will convene a Board meeting as soon as reasonably practicable to consider the request
  • All members of the Management Engagement Committee will have access to the advice and services of the secretary of the Management Engagement Committee with a view to ensuring that procedures of the Management Engagement Committee and all applicable rules and regulations are followed
  • In the event that the Management Engagement Committee or any member of the Management Engagement Committee requires access to independent professional advice in connection with his/her duties, a request may be made to the Company. All such requests shall be processed in accordance with the Company’s pre-defined procedures for seeking independent professional advice at the Company’s expense
  • Every member of the Management Engagement Committee must give sufficient time and attention to his/her duties as a member of the Management Engagement Committee. He/she will give the Company the benefit of his/her skills and expertise through regular attendance and active participation.
  • The Management Engagement Committee will, at least once a year, review its own performance, constitution and terms of reference to ensure it is operating at maximum effectiveness and recommend any changes it considers necessary to the Board for approval
  • The Management Engagement Committee will work and liaise as necessary with all other Board committees

Authority

  • The Management Engagement Committee is authorised by the Board to investigate any activity within its terms of reference

Definitions

In this Handbook, unless the context requires otherwise, the following definitions shall apply:
Board means the Board of Directors of the Company
Company means Woodford Patient Capital Trust plc
Company Secretary means the company secretary of the Company from time to time
Directors means the directors of the Company from time to time
Manager means Capita Financial Managers Limited
Portfolio Manager means Woodford Investment Management Ltd
Shareholders means the shareholders of the Company

What are the risks?

  • Long-term outcomes are more binary – extremely attractive rewards for success but some businesses will inevitably fail to fulfil their potential and this may expose investors to the risk of capital losses
  • As it can take years for young businesses to fulfil their potential, this investment requires patience
  • The value of the trust as well as any income it pays will fluctuate which may partly be the result of exchange rate changes
  • The price of shares in the trust is determined by market supply and demand, and this may be different to the net asset value of the trust. This means the price may be volatile in response to changes in demand
  • The trust may invest in overseas securities and be exposed to currencies other than pound sterling – as a result, exchange rate movements may cause the sterling value of investments to decrease or increase
  • The trust may invest in unquoted securities, which may be less liquid and more difficult to value, because they are generally not publicly traded – the lack of an open market may also make it more difficult to establish fair value
  • Young businesses have a different risk profile to mature blue-chip companies – risks are much more stock-specific, which implies a lower correlation with equity markets and the wider economy

Important information

We do not give investment advice so you need to decide if an investment is suitable for you. If you are unsure whether to invest, you should contact a financial adviser. The trust currently intends to conduct its affairs so that its securities can be recommended by IFAs to ordinary retail investors in accordance with the FCA’s rules in relation to non-mainstream investment products and intends to continue to do so for the foreseeable future. The securities are excluded from the FCA’s restrictions which apply to non-mainstream investment products because they are shares in an investment trust.

Woodford Investment Management Ltd is authorised and regulated by the Financial Conduct Authority (firm reference number 745433). Incorporated in England and Wales, company number 10118169. Registered address 9400 Garsington Road, Oxford OX4 2HN.

Woodford Patient Capital Trust plc is incorporated in England and Wales, company number 09405653. Registered as an investment company under section 833 of the Companies Act 2006. Registered address Beaufort House, 51 New North Road, Exeter, EX4 4EP.

© 2019 Woodford Investment Management Ltd.
All rights reserved.

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