Performance Evaluation Questionnaire Template …

1 Performance Evaluation Questionnaire Template for the Directors of Investment Trusts Prepared by Trust Associates Limited in accordance with the Performance Evaluation Guidance laid out in the Higgs Suggestions for Good Practice in the Combined Code, as updated in July 2003. Trust Associates Limited 2004 Trust Associates Limited 2004 2 Introduction The Combined Code, as updated in July 2003 to incorporate the recommendations of the Higgs Report, provides that the board of a company should ..undertake a formal and rigorous annual Evaluation of its own Performance and that of its committees and individual directors . This study is designed to assist the Chairman and Directors of investment trusts in complying with this provision. The relevant section of the Code further states: It is the responsibility of the Chairman to select an effective process and to act on its outcome.

2 The use of an external third party to conduct the Evaluation will bring objectivity to the process. The non-executive directors, led by the senior independent director, should be responsible for Performance Evaluation of the Chairman, taking into account the views of executive directors. The Evaluation process will be used constructively as a mechanism to improve board effectiveness, maximise strengths and tackle weaknesses. The results of board Evaluation should be shared with the board as a whole while the results of individual assessments should remain confidential between the chairman and the non-executive director concerned. The Code then goes on to outline questions that should be considered in Performance Evaluation with the caveat that companies ..will wish to tailor the questions to suit their own needs and circumstances.

3 The prescription, then, is for a combination of self-assessment, peer assessment and third-party scrutiny, all under the direction of the Chairman, with the specifics of the Evaluation being tailored to suit the nature of the company. This Questionnaire has been devised by Trust Associates Limited to comply this provision and should, we believe, assist boards, as part of a larger Evaluation process, in evaluating and improving their effectiveness in the supervision of their trusts, with particular reference to several issues which are of particular and exclusive relevance to a company of this kind. Our experience suggests, however, that boards should consider using third-party facilitation from time to time and that this can often highlight issues which simple self-assessment may not.

4 To discuss how we may be of assistance to you in this process, please email and one of our consultants will contact you. The Board Questionnaire - Guidance notes - Please read before completing The purpose of the Board Questionnaire is to encourage directors to reflect on the Performance of the board as a whole, and that of individual directors, in discharging their responsibilities. The questionnaires, which should be returned directly to the Chairman or the Senior Independent Director as appropriate, will be confidential, insofar as all comments will be reported to the Chairman or SID alone and this should encourage directors to be candid in their comments. It is important to stress that it would not be reasonable to expect all members of an investment trust board to possess a uniformly high degree of knowledge and Trust Associates Limited 2004 3competence with regard to all the topics which come under board scrutiny.

5 It should therefore be recognised that, although all directors should preferably have some minimum degree of familiarity with most subjects, the ascription of a low score to a director with regard to a particular subject, should not necessarily be regarded as personal criticism. Indeed, a fairly robust and candid approach to differential scoring, where appropriate, is essential if the Questionnaire is to form a useful part of the essential skills audit which the Code calls for. Low scores in an individual director s area of supposed specialist knowledge should, however, give cause for concern. In assessing the Performance of the board as a whole with regard to any topic, the appraiser should not necessarily deem it inconsistent if responses indicate, for example, a low level of competence and/or Performance on the part of most directors with regard to a particular topic and a high score for the board overall.

6 This might reasonably reflect a belief that one or two very competent individual members invariably can and very competently do, carry the board through certain topics. Such views would also be a useful contribution to the skills audit. This Questionnaire is based on a Template which, in the view of Trust Associates, represents an appropriate series of questions for consideration by an investment trust board going through this process, but it may be modified it in places, so as to more closely reflect the individual characteristics of your company. We hope that this will minimise the number of instances where you will feel obliged to omit responses because, for one reason or another, you deem the questions to be inapplicable or inappropriately framed. Please answer all the questions or use the space left for comments at the end of each section, to explain why you have not answered a particular question.

7 Except where otherwise indicated, the Questionnaire asks you to rate the board and its individual members on a rising 1-5 scale, with regard to their competence and Performance in relation to specific subjects. The questionnaires are homogeneous in this respect ( your own name is included in the list) and so self-assessment is required in this process. In scoring your responses, please follow the spirit of the following definitions: 0: Not applicable ( will not be scored) Please explain why where possible. 1: Lowest rating: This does imply some degree of criticism, in terms of any or all of: unacceptable lack of knowledge, interest, attendance, contribution etc. and suggests that some kind of remedial action is required. 2: Low rating: Not necessarily a criticism, but reflects a lower than average, minimally adequate or slightly inadequate rating in terms of knowledge, interest, attendance, contribution etc.

8 Such a score might not imply any need for remedial action, but rather some temporary factor or that the individual s strengths lie elsewhere. 3: Average/satisfactory rating: Implies that the individual can and does make a full contribution to the board s work in the specific subject. 4: High rating: Indicates that the individual makes a strong or above average contribution in the specific subject. 5: Highest rating: Implies outstanding strength and perhaps a dominant role in the board s work in the specific subject. Trust Associates Limited 2004 4 The Board Questionnaire Competence and Performance of the board: In this section, we ask you to rate the Performance of the board as a whole (including the Chairman) in discharging the various elements of its role and the contributions made by each director in relation to each subject.

9 In this context, we would ask you to appraise the chairman in his role as a director; you will be asked to comment on various aspects of his role as chairman in a separate section, the results of which will be communicated to the senior independent director. A: Investment matters A1: Performance monitoring and Evaluation How do you rate the competence and Performance of the board as a whole and of its individual members and evaluating relative and absolute investment Performance on the basis of all the data provided and bearing in mind all factors that impinge on Performance ? The Board:____ ; The Chairman:_____; Director 1:____; Director 2: ____ ; Director 3____ ; Director 4:____; Director 5_____; Director 6_____. A2: Evaluation of investment strategy ..monitoring and evaluating the manager s stated investment strategy?

10 The Board:____ ; The Chairman:_____; Director 1:____; Director 2: ____ ; Director 3____ ; Director 4:____; Director 5_____; Director 6_____. A3: Evaluation of portfolio management ..monitoring and evaluating the manager s portfolio management method and style? The Board:____ ; The Chairman:_____; Director 1:____; Director 2: ____ ; Director 3____ ; Director 4:____; Director 5_____; Director 6_____. A4:Macroeconomics ..understanding of the macroeconomic factors which have a bearing on the portfolio management policy? The Board:____ ; The Chairman:_____; Director 1:____; Director 2: ____ ; Director 3____ ; Director 4:____; Director 5_____; Director 6_____. Trust Associates Limited 2004 5 A5: Specific Investment focus ..understanding the sectors, technologies and companies which are the particular focus of the portfolio?