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COMMITTEES

The Board of Directors has referred certain responsibilities to two Board Committees, the Audit Committee and the Remuneration Committee. These Committees operate within defined terms. To read these terms click on the name of the relevant committee below.

Audit Committee:

Nigel Moore (chairman), John Kenny

Financial Reporting

The Audit Committee shall monitor the integrity of the financial statements of the company, including its annual and interim reports, preliminary results' announcements and any other formal announcement relating to its financial performance, reviewing significant financial reporting issues and judgments which they contain. The Audit Committee shall also review summary financial statements, significant financial returns to regulators and any financial information contained in certain other documents, such as announcements of a price sensitive nature.

The Audit 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 judgments, 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
all material information presented with the financial statements, such as the operating and financial reports and the corporate governance statement (insofar as it relates to the audit and risk management);
The Audit Committee shall review the annual financial statements of the pension funds where not reviewed by the Board as a whole.

Internal Controls and Risk Management Systems

The Audit Committee shall:

keep under review the effectiveness of the company's internal controls and risk management systems; and
review and approve the statements to be included in the annual report concerning internal controls and risk management.

Whistleblowing

The Audit Committee shall review the company's arrangements for its employees to raise concerns, in confidence, with the Company Secretary or the Audit Committee about possible wrongdoing in financial reporting or other matters. The Audit Committee shall ensure that these arrangements allow proportionate and independent investigation of such matters and appropriate follow up action.

Internal Audit

Although the company does not have an internal audit function, the Audit Committee will consider on an annual basis whether or not there should be one and if so make recommendations to the Board accordingly.

if or when relevant, approve the appointment and removal of the head of the internal audit function;

External Audit

The Audit Committee shall:

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 Audit Committee shall oversee the selection process for new auditors and if an auditor resigns the Audit Committee shall investigate the issues leading to this and decide whether any action is required;

oversee the relationship with the external auditor including (but not limited to):

- - approval of their remuneration, whether fees for audit or non-audit services and that the level of fees 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 [UK] professional and regulatory requirements and the relationship with the auditor as a whole, including the provision of any non-audit services;
  - satisfying itself that there are no relationships (such as family, employment, investment, financial or business) between the auditor and the company (other than in the ordinary course of business);
  - agreeing with the Board a policy on the employment of former employees of the company's auditor, then monitoring the implementation of this policy;
  - 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 annually 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;
meet regularly with the external auditor, including once at the planning stage before the audit and once after the audit at the reporting stage. The Audit Committee shall meet the external auditor at least once a year, without management being present, to discuss their remit and any issues arising from the audit;
review and approve the annual audit plan and ensure that it is consistent with the scope of the audit engagement;
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 judgments, and
- levels of errors identified during the audit.
The Audit Committee shall also review the effectiveness of the audit.
review any representation letter(s) requested by the external auditor before they are signed by management;
review the management letter and management's response to the auditor's findings and recommendations; and
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.
Reporting Responsibilities
The Audit Committee Chairman shall report formally to the Board on its proceedings after each meeting on all matters within its duties and responsibilities.
The Audit Committee shall make whatever recommendations to the Board it deems appropriate on any area within its remit where action or improvement is needed.
The Audit Committee shall compile a report to shareholders on its activities to be included in the company's annual report.
Other Matters
The Audit Committee shall:
- have access to sufficient resources in order to carry out its duties, including access to the company secretariat for assistance as required;
- 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;
- give due consideration to laws and regulations, the provisions of the Combined Code and the requirements of the UK Listing Authority's Listing Rules as appropriate;
- be responsible for co-ordination of the internal and external auditors;
- oversee any investigation of activities which are within its terms of reference and act as a court of the last resort; and
- 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 considersnecessary to the Board for approval.

Remuneration Committee

Jonathan Legg (chairman), Nigel Moore

The Remuneration Committee shall:

determine and agree with the Board the framework or broad policy for the remuneration of the company's Chairman, the executive directors, and the company secretary. The remuneration of non-executive directors shall be a matter for the Chairman and the executive members of the Board. No director or manager shall be involved in any decisions as to their own remuneration;

in determining such policy, take into account all factors which it deems necessary.

The objective of such policy shall be to ensure that members of the executive management of the company are provided with appropriate incentives to encourage enhanced performance and are, in a fair and responsible manner, rewarded for their individual contributions to the success of the company;

review the ongoing appropriateness and relevance of the remuneration policy;

approve the design of, and determine targets for, any performance related pay schemes operated by the company and approve the total annual payments made under such schemes;

review the design of all share incentive plans for approval by the Board and shareholders. For any such plans, determine each year whether awards will be made, and if so, the overall amount of such awards, the individual awards to executive directors and other senior executives and the performance targets to be used;

determine the policy for, and scope of, pension arrangements for each executive director and other senior executives;

ensure that contractual terms on termination, and any payments made, are fair to the individual, and the company, that failure is not rewarded and that the duty to mitigate loss is fully recognised;

within the terms of the agreed policy determine the total individual remuneration package of each executive director including bonuses, incentive payments and share options or other share awards;

in determining such packages and arrangements, give due regard to any relevant legal requirements, the provisions and recommendations in the Combined Code and the UK Listing Authority's Listing Rules and associated guidance;

review and note annually the remuneration trends across the company or group;

oversee any major changes in employee benefits structures throughout the company or group;

agree the policy for authorising claims for expenses from the Chief Executive and Chairman;

ensure that all provisions regarding disclosure of remuneration including pensions, as set out in the Directors' Remuneration Report Regulations 2002 and the Combined Code are fulfilled; and

be exclusively responsible for establishing the selection criteria, selecting, appointing and setting the terms of reference for any remuneration consultants who advise the committee: and to obtain reliable, up-to-date information about remuneration in other companies. The Committee shall have full authority to commission any reports or surveys which it deems necessary to help it fulfil its obligations.