Douglas Paterson (Chairman) (appointed April 2004)

Bruce Carnegie-Brown (appointed September 2006)

Strone Macpherson (appointed May 2003)

Membership

Mr. D.G.J. Paterson, the chairman of the Audit Committee, as a senior partner in the banking and capital markets division of PricewaterhouseCoopers until 2004 and as a non-executive director of Goldman Sachs International Bank has, in the view of the board, the appropriate level of recent and relevant financial experience as required by the Combined Code. The Company Secretary or their nominee shall act as the Secretary of the Committee. The chief executive, finance director and heads of Group Finance, Risk, Compliance and Internal Audit attend by invitation. Representatives of the group’s auditors also generally attend the meetings at least twice a year. The Committee also meets regularly without members of the management present. The Committee had four scheduled meetings during the year.

Role

The role of the Committee includes:

• monitoring the integrity of the financial statements of the company and the form and content of published financial announcements;

• reviewing accounting policies, accounting treatments, judgements and disclosures in financial reports;

• reviewing the adequacy of the group’s system of risk management, regulatory compliance and internal control;

• reviewing the group’s whistleblowing procedures;

• monitoring and reviewing the effectiveness of Group Internal Audit; and,

• making recommendations to the board as to the appointment or reappointment and remuneration of the group’s external auditors, including assessing independence and objectivity, approving their terms of engagement, reviewing their findings and performance and overseeing the relationship with them.

The Committee reports to the board on all these issues identifying any matters in respect of which it considers that action or improvement is needed, and making recommendations as to the steps to be taken.

External auditors

As in previous years, the Committee conducted a review of the service provided by the group’s external auditors. The results of this review were shared with the external auditors and provide the basis for our recommendation as to their re-appointment.

Non-audit services policy

The Committee has agreed a clear policy on the engagement of our external auditors for non-audit services. Where work is closely related to the audit, for example accounting advice or stock exchange reporting, work may be awarded to the external auditors. If the work is of a nature such that a detailed understanding of the group is necessary, or where significant benefit can be gained from work previously conducted, for example tax advice or due diligence on transactions, the work may be awarded to the external auditors, except that if it exceeds £100,000 in value, it must first be approved by the Committee. The Committee believes that this policy provides a more relevant measure of auditor independence than the monetary ratios and guidelines followed by some investors.