Under the AIC Code, the Board has overall responsibility for the Company’s system of internal controls, including its financial, operational and compliance controls, risk management, and for reviewing their effectiveness.
The key risk of the Company is the identification and evaluation of investments. As the principal objective of the Company is to invest in high-quality US and European microcap companies and US real estate, the responsibility of identifying appropriate investments has been delegated to the Company’s Investment Adviser, JZAI, which is highly regarded in the US and Europe and has many years of experience of making investments. JZAI is able to identify potential investments through a wide network of contacts and review these investments in conjunction with lawyers and accountants.
Other business risks identified by the Board include the risks associated with the various financial instruments issued by the investee companies such as market price, interest rate changes, foreign currency exchange rates and liquidity.
The main controls which relate to investments have been delegated to JZAI, and the Board reviews JZAI’s performance.
A control report is provided to the Board incorporating a key risk table that identifies the risks to which the Company is exposed, the controls in place to mitigate them and details of any known internal control concerns. The report is reviewed by the Audit Committee. Controls relating to the risks identified, covering financial, operational, compliance and risk management, are embedded in the operations of the Investment Adviser, Administrator and Secretary, and other outsourced service providers. There is a monitoring and reporting process to track risks identified by auditors and compliance functions of these service providers.
The Company’s system of internal controls is designed to manage rather than eliminate the risk of failure to achieve business objectives. However, no system can provide absolute assurance against material misstatement or loss. The Company’s system is designed to assist the Directors in obtaining reasonable, but not absolute, assurance that problems are being identified on a timely basis and are dealt with appropriately.