The Board of the Company (the "Board") resolved to establish a committee of the Board known as the Audit Committee (the "Committee") at a meeting held on 12 May 2005, when terms of reference were formally agreed. The terms of reference for the Committee were revised and approved by the Board on 27 June 2008.

Purpose

1. Purpose The purpose of the Committee is to monitor the integrity of the Company’s financial statements, to review, challenge and approve its accounting policies and to scrutinise the effectiveness of the internal and external auditors and the Company’s risk management systems.

Membership and Secretary

2. Composition The Committee members shall be appointed by the Board, on the recommendation of the Nomination Committee in consultation with the Chairman of the Committee. The appointments shall be made in accordance with the Company’s Articles of Association.  The Committee shall comprise a minimum of three members, each of whom shall be an independent non-executive director of the Company. Each member of the Committee shall be free from any relationship or conflict of interest that may interfere with the exercise of his or her judgment as a member of the Committee and shall meet the independence requirements of applicable law, regulations and the listing rules of the UK Listing Authority. 

3. Committee Membership Each member shall hold office as a Committee member for a period of up to three years, which may be extended by no more than two additional three-year periods, so long as members continue to be independent.

4. Financial experience At least one Committee member shall have recent and relevant financial experience. The remaining members should at a minimum have experience of dealing with financial and accounting matters.

5. Chairman The Chairman of the Committee shall be appointed by the Board on the recommendation of the Nomination Committee. In the absence of the Chairman of the Committee, the members present at any meeting of the Committee shall elect one of their number to chair the meeting.

6. Secretary The Company Secretary or, with the consent of the Committee, his or her nominee shall be the secretary of the Committee.

Meetings

7.Attendance The Committee may invite any person to attend its meetings and the Company’s Finance Director and Head of Internal Audit shall normally attend its meetings. Other than by invitation, no other person is entitled to be present at a meeting of the Committee.  It is expected that the external audit lead partner will be invited regularly to attend meetings.

At least once a year, the Committee shall meet with representatives of the external auditors and the Head of Internal Audit, without management present, to discuss matters relating to its remit and any issues arising from audit work.

8. Frequency and Notice The Committee Chairman, in consultation with the Secretary, shall decide the frequency and timing of the Committee's meetings.  In any event, meetings shall be held not less than three times a year to coincide with key dates in the Company’s financial reporting cycle.  A meeting shall be held as soon as reasonably practicable upon a request for any such meeting by the Company's internal or external auditors.  The Secretary shall send out the agenda and relevant papers for each meeting in a timely manner.

9. Quorum The quorum for meetings of the Committee shall be two members present throughout the meeting. 

10. Minutes The Secretary shall prepare minutes of any meeting of the Committee and circulate them to all members of the Committee.

Authorities

11. Resources The Committee shall be provided with sufficient resources to undertake its duties.

12. Advice The Committee is authorised by the Board to obtain outside legal, accounting or other independent professional advice and to secure the attendance of third parties with relevant experience and expertise, if it reasonably considers this necessary, at the Company's expense. The Committee shall have access to the external auditors as required.

13. Support The Committee shall have access to the services of the Secretary on all Committee matters.

14. Investigation The Committee is authorised by the Board to investigate any activity within the scope of its duties and to intervene if the Committee considers it appropriate and/or if the Board instructs it to do so.   

15. Information The Committee is authorised to seek any information it requires from any employee, consultant or contractor of the Company or any of its subsidiaries in order to perform its duties and shall have access to the Head of Internal Audit. 

16. Reports The Committee shall have full authority to commission any reports or surveys which it deems necessary to help it fulfil its obligations.

17. Delegation The Committee may delegate such of its duties and responsibilities to any one or more members of the Committee as it may deem appropriate having regard to the purpose of the Committee.

18. Duties and responsibilities The Committee shall undertake the following:

(A)     General

• Shareholder interests  The Committee shall ensure the interests of the shareholders are properly protected in relation to financial reporting and internal control;
• Financial controls  The Committee shall satisfy itself that there is a proper system and allocation of responsibilities for the day-to-day monitoring of financial controls;
• Subsidiaries  The Committee shall review issues that relate to particular subsidiaries or activities carried on by the group; and
• Pension funds The Committee shall review the annual financial statements of the Company’s pension funds where such are not reviewed by the Board as a whole.

(B)       External Auditor

• Appointment and removal  The Committee shall oversee the process for selecting the external auditors and make appropriate recommendations to the Board, to be put to shareholders for their approval in general meeting regarding the appointment, re-appointment or removal of the external auditors;
• Remuneration The Committee shall approve the remuneration payable to the external auditors in respect of both audit fees and any fees which are payable to them in relation to non-audit services;
• Limit of Liability   The Committee shall consider and, if appropriate, approve any limit of liability the external auditor wishes to place upon their engagement;
• Committee recommendation  The Committee shall, if the Board does not accept its recommendation on the appointment, re-appointment or removal of external auditors, prepare a statement explaining the Committee's recommendation which shall be included in the annual report and in any papers recommending appointment or re-appointment, together with the Board's reasons for taking a different position;
• Auditor meetings The Committee shall meet with the external audit lead partner and other audit partners and staff as required and in accordance with these terms of reference; 
• Expertise The Committee shall assess annually the qualifications, expertise, resources and independence of the external auditors and the effectiveness of the audit process.  The assessment shall cover all aspects of the audit service provided by the audit firm and include obtaining a report on the audit firm’s own internal quality control procedures; 
• Resignation The Committee shall, if the external auditor resigns, investigate the issues leading to such resignation and consider whether any action is required;
• Engagement letter  The Committee shall review and agree the engagement letter with the external auditors at the start of each audit, ensuring that it has been updated to reflect changes in circumstances arising since the previous year;
• Audit scope The Committee shall discuss and agree with the external auditors before the audit commences (and keep under review) the scope and results of the audit; arrange for additional work to be undertaken if the scope is not adequate; review whether the level of fee payable is appropriate for the provision of those services; and ensure co-ordination where more than one audit firm is involved;
• Independence The Committee shall monitor the application of the Company’s policy in relation to the external auditors’ independence and objectivity and the effectiveness of the audit process.  This should be done annually on the basis of the policy, taking into consideration relevant professional and regulatory requirements.  In addition, should the Company employ any former employees of the external auditors, the Committee shall monitor those employees involved in the audit process;
• Ethical and professional standards  The Committee shall monitor the external auditors’ 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 and other related requirements;
• Non-audit services policy The Committee shall develop and implement a policy on the provision of non-audit services by the external auditors, taking into account relevant ethical guidance; to report to the Board, identifying any matters in respect of which it considers that action or improvement is needed and make recommendations as to the steps to be taken (so as to ensure that the provision of such services does not impair the external auditors’ independence and objectivity);
• Annual audit plan The Committee shall at the start of each annual audit cycle ensure that appropriate plans are in place for the audit;
• Review work plan The Committee shall consider the external auditors’ work plan for the annual and any interim audit and proposed resources in light of the scope of the audit;
• Monitor audit programme The Committee shall monitor the planned programme of audits and ascertain the reason for any change or delay in the programme;

• Review audit findings The Committee shall review with the external auditors (in the absence of management if necessary) the results of its work in conducting the annual and any interim audit.  This shall include:
• any major issues that arose during the course of the audit (both resolved 
  and unresolved issues);
• whether the Company has followed appropriate key accounting standards
  and made appropriate estimates and judgements;
• levels of errors identified during the audit, obtaining explanations from management and, where necessary, the external auditors as to why certain errors might remain unadjusted; and
• any reservations that the external auditors may have and other matters that they wish to raise;
• Representation letters The Committee shall review the audit representation letters before signature by management, giving particular consideration to matters where representation has been requested in relation to non-standard issues.  It shall also give consideration to whether the information provided is complete and appropriate, based on its own knowledge;
• Management letter  The Committee shall review the external auditors’ management letter and review and monitor management's response to the external auditors’ findings and recommendations; and
• Effectiveness of audit The Committee shall at the end of the annual audit cycle assess the effectiveness of the audit process.

 (C)       Internal Audit

• Remit The Committee shall review and approve the internal audit function's remit, having regard to the role fulfilled by the external audit function;
• Access for Head of Internal Audit The Committee shall ensure that the Head of Internal Audit has direct access to the Chairman of the Company and to the Committee, and shall, if it is appropriate, meet with the Head of Internal Audit without management present, to discuss their remit and any issues arising from the internal audits undertaken; 
• Effectiveness of Internal Audit The Committee shall monitor and review the effectiveness of the internal audit function; to ensure that the internal audit function is adequately resourced, has access to the information necessary to enable it to fulfil its mandate, and is able to perform in accordance with appropriate professional standards for internal auditors, and to ensure the function has adequate standing and is free from management and other restrictions; 
• Internal Audit Plan The Committee shall review and assess the annual internal audit plan; and
• Head of Internal Audit The Committee shall approve the appointment or termination of appointment of the Head of Internal Audit.

(D)       Integrity of Financial Statements

The Committee shall monitor the integrity of the financial statements of the Company, including the preliminary announcement, the half yearly report and the interim management statements  and any other formal announcements relating to the Company's financial performance, reviewing significant financial reporting issues and judgements contained in them, focusing particularly on:

• Significant policies considering significant accounting policies, any changes to them and any significant estimates and judgements;
• Appropriate accounting treatment where the accounting treatment is open to different approaches, considering whether the Company has adopted appropriate accounting policies and, where necessary, made appropriate estimates and judgements, taking into account the external auditors’ view;
• Disclosures reviewing the clarity and completeness of disclosures in the financial statements and considering whether the disclosures made are set properly in context;
• Adequacy of financial reporting where, following its review, the Committee is not satisfied with any aspect of the proposed financial reporting by the Company, it shall report its views to the Board; and
• Review related information reviewing related information presented with the financial statements, including the business review (including in particular the analysis of principal risks and non financial KPIs), and corporate governance statements relating to audit and risk management.

(E)       Internal Control and Risk Management

• Review systems The Committee shall review the Company's internal financial controls (that is, the systems established to identify, assess, manage and monitor financial risks) and review the group's internal control and risk management systems (including the Company’s policy for the avoidance of potential conflicts of interest);
• Whistleblowing  The Committee shall review arrangements by which staff of the Company may, in confidence, raise concerns about possible improprieties relating to financial reporting or other matters, so as to ensure that arrangements are in place for the proportionate and independent investigation of such matters, and for appropriate follow-up action; and
• Internal investigations The Committee shall consider the major findings of internal investigations and management's response.

(F)       Reporting Responsibilities

• Going concern statement  The Committee shall review the statement by the Directors to be included in the annual accounts on the going concern status of the Company and the group and any supporting assumptions and qualifications;
• Committee report The Committee shall assist the Board by preparing a statement for inclusion in the Corporate Governance  Report (to shareholders as contained in the annual report) describing the roles and responsibilities of the Committee and actions taken by the Committee to discharge those responsibilities; to list the names of the Chairman and other members of the Committee, the number of Committee meetings and attendance by each member;
• Internal control statement The Committee shall produce for the Board's approval the statement for inclusion in the Corporate Governance  report (to shareholders as contained in the annual report) in relation to internal control and the management of risk;
• Non-audit services The Committee shall if the external auditor provides non-audit services, keep under review the level of such services and provide an explanation for inclusion in the Corporate Governance report (to shareholders as contained in the annual report) of how auditor objectivity and independence is safeguarded;
• Board The Chairman of the Committee shall report formally to the Board on its proceedings after each meeting on all matters within its duties and responsibilities.  The Chairman will identify any matters in respect of which it considers that action or improvement is needed and make recommendations as to the steps to be taken; and
• AGM The Chairman of the Committee shall be available to answer questions about the Committee's activities at the Annual General Meeting of the Company.

(G)       Other

• Auditors The Committee shall ensure co-ordination of the internal and external auditors;
• Combined Code The Committee shall give due regard to the Combined Code on Corporate Governance;
• Terms of Reference The Committee shall make available these terms of reference on request and by including the information on the Company's website;
• Performance review  The Committee shall at least once a year review its own performance, composition and terms of reference to ensure it is operating at maximum effectiveness and to recommend any changes it considers necessary to the Board for approval; and
• Other matters The Committee shall consider any other matters referred to it by the Board.