Audit Committee Terms of Reference

1. Membership

1.1. Members of the Committee shall be appointed by the Board, on the recommendation of the Nomination Committee in consultation with the Chairman of the Audit Committee. The Committee shall be made up of at least three members.

1.2. All 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 of the Board, Group Chief Executive, Group Finance Director, other Directors, the Group Director of Audit and Risk Management 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 will be invited to attend meetings of the Committee on a regular basis.

1.5. Appointments to the Committee shall be for a period of up to three years, which may be extended for two further three year periods, provided the Director remains independent.

1.6. The Board shall appoint the Committee Chairman who shall be an independent Non-executive Director. 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 Group 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, including before the release of any documents relating to a Class 1 transaction.

5. Notice of Meetings

5.1. Meetings of the Committee shall be summoned 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, 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 or invited to attend, no later than three working days before the date of the meeting. Supporting papers shall be sent to Committee members and to other attendees as appropriate, 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. Minutes of Committee meetings shall be circulated promptly to all members of the Committee and, once agreed, to all members of the Board.

7. Annual General Meeting

7.1. The Chairman of the Committee shall attend the Annual General Meeting 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 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 Interim reports, Interim and Preliminary results’ announcements and any other formal announcement relating to its financial performance, reviewing significant financial reporting issues and judgements which they contain. The Committee shall also review summary financial statements, significant financial returns by the Company to regulators and any financial information contained in certain other documents, such as announcements of a price sensitive nature.

8.1.2. The Committee shall review :

8.1.2.1 the consistency of, and any changes to, Group accounting policies on a year on year basis;

8.1.2.2 the methods used to account for significant or unusual transactions where different approaches are possible;

8.1.2.3 whether the Company/Group has followed appropriate accounting policies and made appropriate estimates and judgements, taking into account the views of the external auditor;

8.1.2.4 the clarity and completeness of disclosures in the Company’s/Group’s financial statements and whether they are set properly in context;

8.1.2.5 all material information presented with the financial statements, including the operating and financial review and the corporate governance statement relating to the audit and to risk management; and

8.1.2.6 a report on significant frauds reported to the Group.

8.1.3. Where, following its review, the Audit Committee is not satisfied with any aspect of the proposed financial reporting by the Company, it shall report its views to the Board.

8.2. Internal Controls and Risk Management Systems

The Committee shall review the Company’s internal financial controls and the Company’s internal control and risk management systems.

8.3. Whistleblowing

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

8.4. Internal Audit

The Committee shall:

8.4.1. monitor and review the effectiveness of the Company’s internal audit function;

8.4.2. approve the appointment and removal of the Head of the Internal Audit function;

8.4.3. consider and approve the remit of the internal audit function and ensure it has adequate resources and appropriate access to information to enable it to perform its function effectively and in accordance with the relevant professional standards. The Committee shall also ensure the function has adequate standing and is free from management or other restrictions;

8.4.4. review and assess the annual internal audit plan;

8.4.5. review periodically reports on the results of the internal auditors work;

8.4.6. review and monitor management’s responsiveness to the findings and recommendations of the internal auditor; and

8.4.7. meet the Head of Internal Audit at least once a year, without management being present. In addition, the Head of Internal Audit shall be given the right of direct access to the Chairman of the Board and to the Committee.

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 Annual General Meeting, 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. oversee the relationship with the external auditor including (but not limited to):

8.5.2.1. 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;

8.5.2.2. approval of their terms of engagement, including any engagement letter issued at the start of each audit and the scope of the audit;

8.5.2.3. 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;

8.5.2.4. 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);

8.5.2.5. agreeing with the Board a policy on the employment of former employees of the Company’s auditor, then monitoring the implementation of this policy;

8.5.2.6. 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

8.5.2.7. 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;

8.5.3. 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 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;

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

8.5.5. review the findings of the audit with the external auditor. This shall include but not be limited to, the following;

8.5.5.1. a discussion of any major issues which arose during the audit,

8.5.5.2. any accounting and audit judgements, and

8.5.5.3. levels of errors identified during the audit.

8.5.6. review the effectiveness of the audit;

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

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

8.5.9. 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.

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 compile a report to shareholders on its activities to be included in the Company’s Annual report.

8.7. Other

The Committee shall:

8.7.1. have access to sufficient resources in order to carry out its duties, including access to the Company Secretary 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 Combined Code and the requirements of the UK Listing Authority’s Listing Rules as appropriate;

8.7.4. be responsible for co-ordination of the internal and external auditors;

8.7.5. oversee any investigation of activities which are within its terms of reference;

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; and

8.7.7. ensure that the terms of reference of the Committee, including its role and the authority delegated to it by the Board are made available on request, and on the Company’s website.

9. Authority

9.1. The Committee and each of its members is authorised to seek any information it requires from any employee of the Company/Group in order to perform its duties; and

9.2. The Committee is authorised to obtain, at the Company’s expense, outside legal or other professional advice and to commission any surveys it deems necessary on any matter within its terms of reference.

References to ‘the Committee’ shall mean the Audit committee.

References to ‘the Board’ shall mean the Board of Directors.

References to the ‘Company’ or ‘Group’ shall mean Inchcape plc or the Inchcape Group.