Audit Committee (“the Committee”)

1. Membership

The Committee shall be appointed by the Board and shall consist of not less than three members, all of whom should be independent non-executive directors.

At least one member of the Committee shall have recent relevant financial knowledge.

The Board will also appoint the Committee Chairman and in the absence of the Chairman the remaining members present shall elect one of their number to chair the meeting.

The quorum shall be two members.

2. Attendance at meetings

Only members of the Committee shall have an automatic right of attendance at Committee meetings. The Board Chairman, other non-executive directors, the Chief Executive Officer, the Finance Director, the Heads of Risk and Internal Audit and a representative of the external auditors shall attend the Committee meetings at the invitation of the Committee. The Chairman of the meeting, at his discretion, may also call upon any other person to attend as and when appropriate.

The Company Secretary shall act as Secretary to the Committee.

3. Frequency of meetings

Meetings shall be held not less than 3 times a year and as otherwise required to enable the Committee to fulfil its obligations to the Company.

4. Authority

The Committee is authorised to:

• seek any information it reasonably requires from any employee of the Group in order to perform its duties;
• obtain, at the Company’s expense outside legal or other professional advice on any matters within its terms of reference; and
• call any employee to be questioned at a meeting of the Committee as and when required.

5. Duties

5.1 Financial Reporting

• to monitor the integrity of the annual, interim and preliminary financial statements of the Company reviewing significant financial reporting issues and judgements which they contain;
• to review and challenge where necessary
• the consistency of, and any changes to, accounting policies
• whether the company has followed appropriate accounting standards and made appropriate estimates and judgements, taking into account the view of the external auditor
• the clarity of disclosure in the Company’s financial reports

5.2 Internal Controls and Risk Management

The Committee shall:

• receive and consider the relevant reports of the Risk Management Committee;
• receive and consider the Annual Risk Control Statement;
• keep under review the effectiveness of the company’s internal controls and risk management systems, including as they directly relate to financial systems and to approve the relevant statements to be included in the Annual Report; and
• keep under review the Company’s arrangements for its employees to raise concerns, in confidence, about possible wrongdoing in financial reporting or other matters.

5.3 Internal Audit

The Committee shall:

• consider and approve the terms of reference of the internal audit function;
• review and assess the annual internal audit plan;
• review and monitor management’s responsiveness to the findings and recommendations of the internal auditor;
• review and monitor the effectiveness of the company’s internal audit function; and
• meet the head of internal audit at least once a year, without management being present, to discuss their remit and any issues arising from their work. The head of internal audit has a right of direct access to the Chairman of the Audit Committee.

5.4 External Audit

The Committee shall:

• consider and make recommendations to the Board, on the appointment and re-appointment of the Company’s external auditors;
• approve the level of remuneration for the auditors and the terms of their engagement, and develop and implement a policy on the provision of non audit services (see attached policy);
• review and approve the annual audit plan and subsequently review the findings and effectiveness of the audit;
• meet regularly with the auditors, with at least one meeting being held annually without management present in order to discuss their remit and any issues arising from the audit;
• review any representation letters requested by the auditors before they are signed by management;
• review the management letter and management’s subsequent response; and
• assess annually the independence and objectivity of the external auditors.

5.5 Compliance

The Committee shall:

• review and assess the annual Compliance plan;
• review and monitor management’s responsiveness to the findings and recommendations of the Compliance department;
• review and monitor the effectiveness of the company’s Compliance function;
• review and consider if any conflicts exist in the internal relationship between compliance and internal audit divisions: and
• meet the Global Head of Compliance at least once a year, without management being present, to discuss their remit and any issues arising from their work.

6. Reporting to the Board

Minutes of the Committee meetings shall be circulated to all members of the Committee and made available on request to all other members of the Board.

The Chairman of the Committee shall report formally to the Board on the Committee’s proceedings after each meeting.

7. Reporting to the shareholders

The Committee shall review and approve the statements to be included in the Annual Report concerning internal controls and risk management.

The Committee shall make a statement in the Annual Report on its activities.

The Chairman of the Committee shall attend the Annual General Meeting prepared to respond to any shareholder questions on the Committee’s activities.

8. Performance

The Committee shall, at least once a year, review its own performance, constitution and terms of reference to ensure that it is operating effectively and, if relevant, to recommend any changes necessary to the Board.