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Audit Committee



1. Membership

1.1. Members of the Committee shall be appointed by the Board in consultation with the Chairman of the Audit Committee. The Committee shall be made up of at least two members.

1.2. A majority of the members of the Committee shall be independent non-executive directors at least one of whom shall have recent and relevant financial experience.

1.3. Only members of the Committee have the right to attend Committee meetings. However, other individuals such as the Chairman, the Chief Executive and the Finance Director shall normally be in attendance for meetings and other Executive Directors, the Group Risk Manager, and representatives from the finance function may be invited to attend all or part of any meeting as and when appropriate.

1.4. The external auditors shall normally be in attendance for meetings. However, at least once a year the Committee shall meet with the external auditors without any Executive Directors present.

1.5. The Board shall appoint the Committee Chairman who shall be an independent non-executive director, and determine the period for which he/she will hold office. In the absence of the Committee Chairman and/or an appointed deputy, the remaining members present shall elect one of themselves to chair the meeting.

2. Secretary

2.1. The Company Secretary or their nominee shall act as the Secretary of the Committee.

3. Quorum

3.1. The quorum necessary for the transaction of business shall be two members. A duly convened meeting of the Committee at which a quorum is present shall be competent to exercise all or any of the authorities, powers and discretions vested in or exercisable by the Committee.

4. Frequency of Meetings

4.1. The Committee shall meet at least three times a year at appropriate times in the reporting and audit cycle and otherwise as required.

5. Notice of Meetings

5.1. Meetings of the Committee shall be called by the Secretary of the Committee at the request of any of its members or at the request of external or internal auditors if they consider it necessary.

5.2. Unless otherwise agreed by a quorum of Members, notice of each meeting confirming the venue, time and date together with an agenda of items to be discussed, shall be forwarded to each member of the Committee, and any other person required to attend, normally one week before the date of the meeting or as otherwise agreed with the Chairman of the Committee. Supporting papers shall be sent to Committee members and to other attendees as appropriate, normally at the same time.

6. Minutes of Meetings

6.1. The Secretary shall minute the proceedings and resolutions of all meetings of the Committee, including recording the names of those present and in attendance.

6.2. The Secretary shall ascertain, at the beginning of each meeting, the existence of any conflicts of interest and minute them accordingly.

6.3. Minutes of Committee meetings shall be circulated promptly to all members of the Committee and, once agreed, at the next meeting of the Main Board, unless a conflict of interest exists.

7. Annual General Meeting

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

8. Duties

The Committee should carry out the duties below for the parent company, major subsidiary undertakings and the group as a whole, as appropriate.

8.1. Financial Reporting

8.1.1. The Committee shall monitor the integrity of the financial statements of the company, including its annual and half-yearly reports, interim management statements, preliminary results’ announcements and any other formal announcement relating to its financial performance, reviewing significant financial reporting issues and judgements which they contain. Any other financial information contained in certain other documents, such as announcements of a price sensitive nature, may be reviewed by the Executive team on the understanding that they will always consult with the Company’s broker and/or other financial advisor before the documents are published.

8.1.2. The Committee shall review and challenge where necessary: the consistency of, and any changes to, accounting policies both on a year on year basis and across the company/group; the methods used to account for significant or unusual transactions where different approaches are possible; whether the company has followed appropriate accounting standards and made appropriate estimates and judgements, taking into account the views of the external auditor; the clarity of disclosure in the company’s financial reports and the context in which statements are made; and whether it is fair, balanced and understandable; and all material information presented with the financial statements, such as the operating and financial review and the corporate governance statement (insofar as it relates to the audit and risk management);

8.2. Internal Controls and Risk Management Systems

The Committee shall:

8.2.1. keep under review the adequacy and effectiveness of the company’s internal controls and risk management systems by means of at least an annual review formally presented to the Committee; and

8.2.2. review and note the statements to be included in the Annual Report concerning internal controls and risk management (which will be approved by the Board as a whole).

8.3. Compliance, Whistleblowing and Fraud

8.3.1 The Committee will oversee the company’s arrangements for its employees to raise concerns, in confidence, about possible wrongdoing in financial reporting or other matters including providing access to the Chairman of the Committee as the first point of contact when employees use the Company’s “Whistle-Blowing Line”. The Committee Chairman supported by the Company Secretary shall ensure that these arrangements allow proportionate investigation of such matters by appropriate personnel and that appropriate follow up action is taken.

8.3.2 The Committee shall review the Company’s procedures for preventing and detecting fraud.

8.3.3 The Committee shall review the company’s systems and controls for the prevention of bribery and receive reports on non-compliance.

8.4. Internal Audit

The Committee shall consider annually whether there should be an internal audit function and make recommendation to the Board accordingly. The Committee shall approve the related disclosure in the Annual Report. The Committee shall consider annually the proposed internal audit programme and make suggestions as it sees fit on the matters covered in the programme. The manager responsible for internal audit will present regular reviews to the Committee on the programme of internal audits and how they are progressing and may request other members of the management team to attend Committee meetings to discuss related matters.

8.5. External Audit

The Committee shall:

8.5.1. consider and make recommendations to the Board, to be put to shareholders for approval at the AGM, in relation to the appointment, re-appointment and removal of the company’s external auditor. The Committee shall oversee the selection process for new auditors and if an auditor resigns the Committee shall investigate the issues leading to this and decide whether any action is required;

8.5.2. ensure that it has adequate processes to oversee the relationship with the external auditor including (but not limited to): approval of their remuneration for both audit and non audit services, including satisfying itself that the level of audit fee is appropriate to enable an adequate audit to be conducted; approval of their terms of engagement, including any engagement letter issued at the start of each audit and the scope of the audit; assessing annually their independence and objectivity taking into account relevant professional and regulatory requirements and the relationship with the auditor as a whole, including the provision of any non audit services; monitoring relationships (such as family, employment, investment, financial or business) between the auditor and the company (other than in the ordinary course of business) and satisfying itself that no such relationships are inappropriate; agreeing with the Board a policy on the employment of former employees of the company’s auditor, then monitoring the implementation of this policy and its consistency with relevant regulations; monitoring the auditor’s compliance with relevant ethical and professional guidance on the rotation of audit partners, the level of fees paid by the company compared to the overall fee income of the firm, office and partner and other related requirements; and assessing their qualifications, expertise and resources and the effectiveness of the audit process which shall include a report from the external auditor on their own internal quality procedures; seeking to ensure co-ordination with the activities of the internal audit function.

8.5.3. review and approve the annual audit plan and ensure that it is consistent with the scope of the audit engagement;

8.5.4. review the findings of the audit with the external auditor. This shall include but not be limited to, the following; a discussion of any major issues which arose during the audit, any accounting and audit judgements, and levels of errors identified during the audit. the effectiveness of the audit

8.5.5. review any representation letter(s) requested by the external auditor before they are signed by management;

8.5.6. review the management letter and management’s response to the auditor’s findings and recommendations; and

8.5.7. develop and implement a policy on the supply of non audit services by the external auditor, taking into account any relevant ethical guidance on the matter; and

8.5.8. meeting with the external auditor at least once a year, without management being present, to discuss the auditor’s remit, any issues arising from the audit and any other matters of concern which they wish to raise privately with the Committee.

8.6. Reporting Responsibilities

8.6.1. The Committee Chairman shall report formally to the Board on its proceedings after each meeting on all matters within its duties and responsibilities.

8.6.2. The Committee shall make whatever recommendations to the Board it deems appropriate on any area within its remit where action or improvement is needed.

8.6.3. The Committee shall request that the Secretary compile a report to shareholders on its activities to be included in the company’s Annual Report.

8.7. Other Matters

The Committee shall:

8.7.1. have access to sufficient resources in order to carry out its duties, including access to the company secretariat for assistance as required;

8.7.2. be provided with appropriate and timely training, both in the form of an induction programme for new members and on an ongoing basis for all members;

8.7.3. give due consideration to laws and regulations, the provisions of the UK Corporate Governance Code and the requirements of the UK Listing Authority’s Listing, Prospectus and Disclosure and Transparency Rules and any other applicable rules as appropriate;

8.7.4. be responsible for co-ordination between the external auditors and those responsible for supervising and/or conducting internal audits;

8.7.5. oversee any investigation of activities which are within its terms of reference and act as a court of the last resort; and

8.7.6. 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.

9. Authority

The Committee is authorised:

9.1. to seek any information it requires from any employee of the company in order to perform its duties;

9.2. to obtain, at the company’s expense, outside legal or other professional advice on any matter within its terms of reference and

9.3. to call any employee to be questioned at a meeting of the Committee as and when required.

10. Members

The members of the Committee for the time being shall be Ms L Fordham who will act as Chairman,
Mr J M Dunsmore and Mr A G Kerr.

Updated 2 April 2014

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