Audit and Risk Committee

Members of the Audit and Risk Committee

Matthew Lester - Chairman
Patrick O’Sullivan
Nina Shapiro

The Audit and Risk Committee (the “Committee”) of the Board of Directors was originally constituted by resolution of the Directors passed on 23 August 1994. These revised terms of reference were adopted by resolution of the Directors passed on 25 May 2011.

Purpose

The Committee supports the Board by performing defined roles in relation to the Interim and Annual Financial Statements; the Company’s relationship with its External Auditors; the effectiveness of risk management and internal control; and oversight of the Compliance and Internal Audit functions. Specific responsibilities are set out for each of these roles. The existence of the Committee does not relieve the directors of any of their responsibilities.

Membership

The members of the Committee shall be appointed by the Board. All members of the Committee shall be independent non-executive directors of the Company, one of whom shall have significant, recent and relevant financial experience. The Committee shall consist of no fewer than three members. The quorum shall be three independent non-executive directors but if, from time to time, there are fewer than three independent non-executive directors serving on the Board, the quorum shall be three, comprising all independent non-executive directors serving on the board of directors and such other non-executive directors(s) (to be nominated by the Chair of the Committee) as is required to convene a quorate meeting.

The Board will from time to time review the composition of the Committee to ensure that, where appropriate, membership of the Committee rotates amongst the Company's independent non-executive directors.

The Chair of the Committee shall be appointed by the Board from amongst the independent non-executive directors.

If any member of the Committee is unable to attend a Committee meeting for any reason, the Chair of the Committee may appoint any other independent non-executive director of the Company to act as alternate for the member of the Committee who is unable to attend.

Attendance at meetings

The Finance Director, Chief Operating Officer, General Counsel and Chief Risk Officer shall attend meetings of the Committee and the Head of Internal Audit, Head of Group Risk, Group Financial Controller and a representative of the external auditors will usually attend as invited by the Committee.

The Chairman of the Board, the Chief Executive and other relevant parties may attend meetings of the Committee if invited by the Committee.

There should be at least one meeting a year, or part thereof, where the external auditors attend without management present and similarly one meeting with internal audit.

The Secretary of the Committee shall be designated by the Chair of the Committee and shall attend meetings.

In some circumstances it may be necessary for members to attend meetings by telephone or video conference, which shall be permitted.

Frequency of meetings

Meetings shall be held not less than four times a year and, where appropriate, should coincide with key dates in the Company's financial reporting cycle.

External auditors or internal auditors may request an additional meeting of the Committee if they consider that one is necessary.

Authority

The Committee shall be authorised by the Board to:

• investigate any activity within its terms of reference;
• seek any information that it requires from any employee of the Group; and
• obtain, at the Company's expense, outside legal or independent professional advice and such advisors may, if invited, attend meetings as necessary.

The Committee shall have access to sufficient resources in order to carry out its duties.

Responsibilities: Interim and Annual Financial Statements

The Committee shall monitor the integrity of financial information through review and challenge, where necessary, of the actions and judgments of management, in relation to public announcements of financial performance and the interim and annual financial statements before submission to the Board paying particular attention to:

• critical accounting policies and practices, and any changes in them;
• decisions requiring a significant element of judgement;
• the methods used to account for significant or unusual transactions where different approaches are possible;
• off balance sheet items;
• the extent to which the financial statements are affected by any unusual transaction in the relevant period and the manner in which they are disclosed;
• the adequacy and completeness of disclosures;
• significant adjustments resulting from the audit, including the requirement to be advised of unadjusted differences;
• the "going concern" requirements;
• compliance with applicable accounting standards;
• compliance with applicable UKLA, stock exchange and other regulatory requirements; and
• any other matter referred to it by the Board or the Remuneration Committee.

The Committee shall consider the following matters of relevance to remuneration of Man staff:

• items in the financial statements where there is a current or future risk of the outcome being significantly different from the reported position;
• the timing or likelihood of future revenues;
• the impact of planned bonus payments on Man’s capital and liquidity position, or its growth prospects.

The Committee shall review all statements to be included in the annual report concerning internal controls and risk management prior to endorsement by the Board. This shall include all other 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).

In relation to the Board’s obligations under the Combined Code, the Committee shall review at least annually the effectiveness of the Group’s system of internal controls and report its conclusions and recommendations to the Board. The review shall cover all material controls, including financial, operational and compliance controls, risk management systems and internal controls over financial reporting.

Responsibilities: External Audit

The Committee shall:

• have primary responsibility for making a recommendation on the appointment, reappointment and removal of the external auditors. If the Board does not accept the Committee's recommendation, it should include in the annual report, and in any papers recommending appointment or re-appointment, a statement from the Committee explaining the recommendation and should set out reasons why the Board has taken a different position;
• discuss with the external auditor and with management the accounting principles, policies and practices adopted in preparation of the financial statements and to be assured that they comply with statutory requirements and generally accepted accounting standards;
• review the findings of the audit with the external auditor; this shall include but not be limited to, a discussion of any major issues which arose during the audit, any accounting and audit judgements, levels of errors identified during the audit and the responses of management to external audit findings and recommendations;
• assess the independence of the external auditors, ensuring that key partners at / representatives of the external auditor are rotated at appropriate intervals;
• approve the letter of appointment and annual engagement letter of the external auditor and recommend the audit fee to the Board and pre-approve fees in accordance with the Committee's policy on non-audit services provided by the external auditors and to ensure that the provision of non-audit services does not impair the external auditors' independence or objectivity;
• monitor and review, on an annual basis, the external auditors' qualifications, independence, objectivity and effectiveness, taking into consideration relevant UK professional and regulatory requirements and including, if the Committee considers it appropriate, the obtaining of a report on the external auditor's own internal quality control procedures;
• review the external auditors' management letter and any other material written or email communication from the external auditor and the management's response to these;
• approve and monitor the policy relating to the hiring of personnel from the external auditors;
• consider at each meeting a formal report from the Chair of the Committee, the Finance Director and representatives of the external auditors of any significant items of discussion between external audit and senior management and external audit and the Chair since the last Committee meeting;
• review annually the policy on the engagement of the external auditors to supply non-audit services and report to the Board on the nature and extent of non-audit services supplied by the auditors, identifying any matters in respect of which action or improvement is needed and making recommendations as to the steps to be taken;
• discuss with the external auditors, before the audit commences, the nature and scope of the audit, the auditors' quality control procedures and steps taken by the auditor to respond to changes in regulatory and other requirements; and
• meet the external auditor at least once a year, without management being present, to discuss their remit and any issues arising from the audit.

Responsibilities: Risk Management, Internal Control and Compliance

The Committee shall review the effectiveness of systems for risk management and internal control, including periodic review of:

• the Group’s policies and process for the identification, assessment and management of risk;
• the Group Risk Framework including reports on the Group's risk profile and related internal controls;
• the effectiveness of the Risk Assurance Committee in risk governance;
• all significant issues reported to it by the Chair of the Risk Assurance Committee;
• Code Staff roles and their identification in the context of the risk control framework and responsibility for risk management;
• the Group's Regulatory Reporting activities and Compliance functions and request appropriate reports thereon;
• the Group's arrangements for its staff 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;
• codes of conduct, ethics and related corporate responsibility policies and how these are communicated to staff and monitored; and
• management's follow-up of risk management and compliance failures and consideration of whether any are relevant to the remuneration of individuals, or groups of staff.

At its meetings ahead of the financial period end the Committee shall review updates of the Board’s most recent statement in respect of its obligations under the Internal Control section of the Combined Code on Corporate Governance.

The Committee shall consider whether any current or future risks may be relevant to remuneration of Man staff.

The Committee shall consider other relevant risk or internal control topics, as and when required by the Board or requested by the Remuneration Committee.

Responsibilities: Internal Audit

The Committee shall:

• review annually the remit and effectiveness of internal audit including the internal audit programme and ensure that the internal audit function is adequately resourced and has appropriate standing within the Group. This review to be supported by a report from external/independent consultants at least every five years;
• review promptly all significant internal audit recommendations and findings;
• consider management's response to and progress in addressing internal audit recommendations and findings;
• consider whether any individual control finding or the control environment within a particular business area is a matter relevant to the remuneration of individuals, or groups of staff;
• approve the appointment or dismissal of the Head of Internal Audit;
• oversee the co-ordination of internal and external audit activities; and
• meet the Head of Internal Audit at least once a year, without management being present, to discuss their remit and any issues arising from the internal audits carried out.

Reporting procedures

The Secretary of the Committee shall circulate the minutes of meetings of the Committee to the Chair of the Committee and all members of the Board.

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

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

The Chair of the Committee shall make reports formally to the Remuneration Committee ahead of the financial period end:

• on the robustness of risk control framework in place for the financial period;
• to include confirmation that Code Staff roles have been correctly identified in the context of the risk control framework and responsibility for risk management;
• to notify any risk items in the financial statements that may have an impact on the bonus compensation pool principles and calculation, and
• to notify any risk or control matter relevant to the remuneration of individuals, or groups of staff.

The Chair of the Committee or, as a minimum, another member of the Committee, shall attend the Board meeting at which the accounts are approved.

The Board shall conduct an annual review of the effectiveness of the Committee and these terms of reference and where necessary approve resultant changes.

The Committee shall report the Committee's duties, activities and the frequency of, and attendance by members at, Committee meetings, in the relevant period, in the Company's annual report.

The Chair of the Committee shall attend the Company's AGM and shall answer questions, through the Chairman of the Board, on the Committee's activities and their responsibilities.

Administration

The Committee shall 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.