- The Audit Committee will consist of all of the Directors of the Company, as appointed from time to time.
- The Audit Committee must comprise of a minimum of two members from amongst the non-executive Directors of the Company. At least two members shall be independent, non-executive Directors. At least one member shall have recent and relevant financial experience.
- All members should have sufficient competence to understand, analyse and, when necessary, challenge the management accounts and draft public financial statements.
- Only members of the Audit Committee shall have the right to attend Audit Committee meetings. However, other individuals, such as the Portfolio Manager and other representatives from the finance function of the Company may be invited to attend all or part of any meeting.
- The external auditors will be invited to attend meetings of the Audit Committee on a regular basis.
- Membership of the Audit Committee can be varied at any time by a majority resolution of the existing members of the Audit Committee.
- Appointments to the Audit Committee shall be for a period of up to three years, which may be extended for two further three-year periods, provided that the members continue to be independent.
- The Board shall appoint the chairman of the Audit Committee. The chairman has the responsibility of liaising with the Board.
- The chairman shall chair the meetings of the Audit Committee.
- In the absence of the chairman of the Audit Committee, the remaining members present shall elect one of themselves to chair the meetings of the Audit Committee.
- The Chairman of the Board may be a member of the Audit Committee but shall not chair the Audit Committee.
- The Company Secretary (or his/her delegate) or such other person as the Board may determine from time to time shall be the secretary of the Audit Committee.
- The secretary of the Audit Committee or his/her delegate shall attend meetings of the Audit Committee to take minutes.
- In the absence of the secretary of the Audit Committee, the members present at a meeting of the Audit Committee shall elect another person to act as the secretary for the purposes of that meeting.
- The quorum necessary for the transaction of business of the Audit Committee shall be two members.
- The secretary shall ascertain, at the beginning of each meeting, the existence of any conflicts of interest and minute them accordingly. The relevant member of the Audit Committee shall not be counted towards the quorum and he/she must abstain from voting on any resolution of the Audit Committee in which he/she and/or his/her associates have a material interest.
- A duly convened meeting of the Audit 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 Audit Committee.
Frequency of meetings
- The Audit Committee shall meet at least twice a year and at such other times as the chairman of the Audit Committee shall require.
- Any member of the Audit Committee, the internal auditors (if an internal audit function has been established) or the external auditors may request a meeting if they consider that one is necessary.
- Meetings of the Audit Committee will be arranged, to the extent reasonably possible, to tie in with the publication of the Company’s financial statements.
- Outside of the formal meeting programme, the chairman of the Audit Committee will maintain dialogue with key individuals involved in the Company’s governance, including the Chairman of the Board, the Portfolio Manager, the administrator and the external auditor.
Attendance at meetings
- Members of the Audit Committee may attend meetings of the Audit Committee either in person or through other telephonic and/or electronic means of communication.
- Should any member of the Audit Committee wish to attend a meeting through telephonic and/or electronic communications, prior arrangements shall be made with the secretary of the Audit Committee.
- Other than members of the Audit Committee, the Portfolio Manager and a representative of the external auditors shall normally attend meetings along with the members of the Audit Committee.
Notice of meetings
- Meetings of the Audit Committee shall be summoned by the secretary of the Audit Committee at the request of any of its members or at the request of the chairman of the Audit Committee.
- 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 Audit Committee, and to any other person required to attend within a reasonable time prior to the date of the meeting. Supporting papers shall be sent to Audit Committee members and to other attendees as appropriate, within a reasonable time prior to the date of the meeting.
- Any member of the Audit Committee shall be entitled, by notice to the secretary of the Audit Committee, to include other matters relevant to the functions of the Audit Committee in the agenda of an Audit Committee meeting.
Minutes of meetings
- The secretary of the Audit Committee (or his/her delegate) in attendance at the meetings of the Audit Committee shall minute in sufficient detail all proceedings and resolutions of all such meetings, including the names of those present and in attendance. The minutes should also include any concerns raised by any member of the Audit Committee and/or dissenting views expressed.
- Draft minutes of the Audit Committee meetings shall be sent to all Audit Committee members for their comments within a reasonable time after the meeting. Once they are agreed, the secretary of the Audit Committee shall circulate the final version of the minutes to all members of the Audit Committee and to all members of the Board, unless it is considered inappropriate to do so by the chairman.
- Minutes of the Audit Committee meetings shall be kept by the secretary of the Audit Committee and shall be available for inspection by any member of the Audit Committee or Director at any reasonable time on reasonable notice.
Annual general meeting
- The chairman of the Audit Committee shall attend the annual general meeting of the Company and be prepared to respond to any Shareholder questions on the Audit Committee’s activities.
- The Audit Committee shall produce an annual report to be included in a separate section of the Directors’ report to the annual report of the Company describing the Audit Committee’s role and detailing its activities and how independent oversight over both management and external auditors has been exercised.
The Audit Committee shall be responsible for performing the duties set out below:
- Financial Reporting
- The Audit Committee shall monitor the integrity of the financial statements of the Company, including its annual and half-yearly reports, interim management statements and any other formal announcement relating to its financial performance and review significant financial reporting issues and judgement which they contain.
- In particular, the Audit Committee shall review and challenge where necessary:
- the consistency of, and any changes to, significant accounting policies on a year on year basis;
- the methods used to account for significant or unusual transactions where different approaches are possible;
- whether the Company has followed appropriate accounting policies and made appropriate estimates and judgments, taking into account the views of the external auditor;
- the clarity of disclosure in the company’s financial statements and the context in which statements are made; and
- all material information presented with the financial statements, such as the business review and the corporate governance statement (insofar as it relates to the audit and risk management).
- Where 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.
- Narrative Reporting
Where requested by the Board, the Audit Committee shall review and provide advice on whether the content of the annual report and accounts, taken as a whole, is fair, balanced and understandable and provides the information necessary for Shareholders to assess the Company’s performance, business model and strategy.
Internal controls and risk management systems
The Audit Committee shall review the adequacy and effectiveness of the Company’s internal financial controls and internal control and risk management systems and review and approve the statements to be included in the annual report concerning internal controls and risk management;
The Audit Committee shall consider at least once a year whether there is a need for an internal audit function. The reasons for an absence of such a function should be explained in the relevant section of the annual report.
The Audit Committee shall:
- make recommendations to the Board, for it to put to the Shareholders for their approval at a general meeting, in relation to the appointment, re-appointment and removal of the external auditor and if the Board does not accept the recommendation of the Audit Committee, ensure that a statement from the Audit Committee setting out the reasons why the Company has not taken the recommendations must be included in the annual report;
- in the event the external auditor resigns, investigate the issues leading to this decision and decide whether any action is required;
- monitor and annually review the external auditor’s independence and objectivity, taking into consideration relevant UK and other relevant professional and regulatory requirements, in order to satisfy itself that there are no relationships between the external auditor and the Company and/or the Portfolio Manager (other than in the ordinary course of business) which could adversely affect the auditor’s independence and objectivity;
- be responsible for making recommendations on the level of remuneration of the external auditor, including fees for audit and non-audit services, to ensure that the level of fees is appropriate to enable an effective and high quality audit to be conducted;
- approve the terms of engagement of any external auditor, including any engagement letter issued at the start of each audit and the scope of the audit;
- monitor the external auditor’s compliance with the relevant ethical and professional guidance on the rotation of the audit partner, the level of fees paid by the Company compared to the overall fee income of the firm, office and partner and other related requirements;
- annually assess the qualifications, expertise and resources of the external auditor and the effectiveness of the audit process;
- evaluate the risks to the quality and effectiveness of the financial reporting process and consideration of the need to include the risk of the withdrawal of the auditor from the market in that evaluation;
- review and approve the annual audit plan with the external auditor and ensure that it is consistent with the scope of the audit engagement, having regard to the seniority, expertise and experience of the audit team;
- review the findings of the audit with the external auditor, including discussing the major issues that arise during the audit, the key accounting and audit judgements, the levels of errors identified during the audit and the effectiveness of the audit process;
- review any representation letters and/or responses from the management before being given to the external auditor;
- meet with the auditors at least twice a year, once at the planning stage, where the nature and scope of the audit will be considered, and once post audit at the reporting stage, to discuss any key issues arising from the audit; and
- develop and implement policy on the supply of non-audit services by the external auditor to avoid any threat to auditor objectivity and independence, taking into account any relevant ethical guidance on the matter, and to report to the Board 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.
- The Audit Committee chairman shall report to the Board at least twice a year, after each meeting, to discuss how the Audit Committee is discharging its duties and responsibilities, with specific reference to: (i) significant issues noted in the financial statements, annual and half-yearly reports and how these issues were addressed, (ii) the effectiveness of the external audit process, including an explanation of how it has assessed the effectiveness of the external audit process, and the relationship with the external auditor, including the approach taken to the appointment or reappointment of the external auditor and information on the length of tenure of the current external auditor and when a tender was last conducted, (iii) any recommendation of the appointment or reappointment of the external auditor and (iv) any other issues as requested by the Board.
- 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 which will form part of the Company’s annual report on its role and activities in discharging its duties its responsibilities to be included in the Company’s Corporate Governance Report, which should include an explanation of the matters referenced at (i) – (iv) in paragraph 11.1 of these Terms of Reference. Where the external auditor also provides non-audit services, an explanation of how auditor objectivity is safeguarded should also be included in this report.
- The Audit Committee shall have access to sufficient resources in order to carry out its functions and discharge its duties. In the event that the Audit Committee determines that it has insufficient resources, it may make a request for additional resources to the Portfolio Manager. If the request for additional resources is denied, the Audit Committee may, if it chooses, make a request to the Board. The Board shall convene a Board meeting as soon as reasonably practicable to consider the request.
- All members of the Audit Committee shall have access to the advice and services of the secretary of the Audit Committee with a view to ensuring that procedures of the Audit Committee and all applicable rules and regulations are followed.
- In the event that the Audit Committee or any member of the Audit Committee requires access to independent professional advice in connection with its/his/her duties, a request may be made to the Company. All such requests shall be processed in accordance with the Company’s pre-defined procedures for seeking independent professional advice at the Company’s expense.
- Every member of the Audit Committee shall give sufficient time and attention to his/her duties as a member of the Audit Committee. He/she shall give the Company the benefit of his skills and expertise through regular attendance and active participation.
- The Audit Committee shall, 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.
- The Audit Committee shall give due consideration to laws and regulations relevant to the Group and in particular the provisions of the AIC Code of Corporate Governance (or such other relevant corporate governance code that the Company has resolved to comply with) and the Financial Conduct Authority’s Listing, Prospectus and Disclosure and Transparency Rules and any other applicable rules, as appropriate.
- The Audit Committee shall work and liaise as necessary with all other Board committees.
The Audit Committee is authorised by the Board to investigate any activity within its terms of reference. It is authorised to seek any information it reasonably requires from any Director and all Directors are directed to co-operate with any reasonable request made by the Audit Committee.
On this page, unless the context requires otherwise, the following definitions shall apply:
Board means the Board of Directors of the Company
Company means Woodford Patient Capital Trust plc
Company Secretary means the company secretary of the Company from time to time
Directors means the directors of the Company from time to time
Group means the Company and its subsidiaries from time to time
Portfolio Manager means Woodford Investment Management Ltd
Shareholders means the shareholders of the Company