Punch Taverns plc 2007 Annual Report and Financial Statements

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Corporate governance continued What are the Company’s main internal controls The Board is responsible for the Company’s systems of internal control and risk management and for reviewing the effectiveness of those systems in order to safeguard shareholders interests and Company assets. Such systems are designed to manage rather than eliminate risk of failure to achieve the Company’s strategic objectives. It should be recognised that such systems can only provide reasonable and not absolute assurance against material misstatement or loss. The Combined Code requires the Directors to review the effectiveness of the Company’s system of internal controls. This relates to all controls, covering financial, operational, compliance and risk management matters. The Company has ongoing processes for identifying, evaluating and managing the significant risks of the Group in the form of a risk management framework (Company Risk Register) which is reviewed and updated by the Board regularly as required. The processes are in accordance with the guidance of the Turnbull Committee and have been in place for the whole of the financial year and up to the date of this report. The key procedures which the Directors have established with a view to providing effective internal control are as follows: regular Board meetings to consider a schedule of matters reserved for Directors’ consideration; an annual review of corporate strategy, which includes a review of risks facing the business; a risk management framework (Company Risk Register) which identifies the key risks facing the business and how these risks are monitored and managed on an ongoing basis; an established organisational structure with clearly defined lines of responsibility and delegation of authority; a review procedure for organisational restructuring following Company acquisitions; documented and enforced policies and procedures; appointment of staff of the necessary calibre to fulfil their allotted responsibilities; comprehensive budgets and forecasts, approved by the Board, reviewed and revised on a regular basis, with performance monitored against them and explanations obtained for material variances; a detailed investment approval process, requiring Board approval for major projects. Post investment appraisals are conducted and are reviewed by the Board; an Audit Committee of the Board, comprising independent Non-executive Directors, which considers significant financial control matters as appropriate; an internal audit function which performs continuous assessments of the quality and effectiveness of risk management and internal control; regular reporting by the Audit Committee to the Board of Directors regarding internal audit and control updates; documented fraud and whistleblowing policies and procedures and regular review of current whistleblowing regulations; reporting by the Audit Committee to the Board of Directors of any changes to accounting policies and of any accounting and legal developments; a regular review of treasury policies and activities by the Audit Committee; and an established programme of management and staff development and succession planning. The Board has conducted a review of the effectiveness of the system of internal control during the year, and has considered any material developments which have taken place since the year end. The review was carried out through the monitoring process set out above. In the opinion of the Board, the review did not indicate that the internal control system was ineffective or unsatisfactory. What is the role of the Audit Committee The Audit Committee is made up of Ian Fraser (Chairman), Fritz Ternofsky and Randl Shure and meets at least four times each year. Senior management, including the Finance Director, and internal and external auditors are invited to attend for part or all of each meeting. The internal and external auditors have unrestricted access to the Audit Committee and its Chairman, and the Head of Internal Audit and Group Risk meets at least annually with the Chairman without the presence of management. All of the members of the Audit Committee are independent Non-executive Directors and at least one meets the requirement of the Combined Code for recent relevant financial experience. The Audit Committee considers all matters relating to internal control and reporting, internal and external audits, the scope and results of the audits and the independence and objectivity of the auditors. It also establishes that an effective system of internal financial control is maintained. The Audit Committee has primary responsibility for making a recommendation on the appointment or re-appointment of the external auditors. In order to maintain the independence of the external auditors, the Board has determined policies as to what non-audit services can be provided by the Company’s external auditors. Under those policies, work of a consultancy nature is not offered to the external auditors unless there are clear efficiencies and value-added benefits to the Company. The Audit Committee monitors the level of non-audit fees paid to the external auditors. 30 2 www.punchtaverns.com
Punch Taverns plc Annual Report and Financial Statements 2007 313 During the year and to the date of this report, the work of the Audit Committee has included consideration of the following matters: the financial statements in the 2006 and 2007 Annual Report and Financial Statements and the interim report issued in May 2007. As part of this review, the Committee received reports from the external auditors in relation to the 2006 and 2007 final audits and the 2007 interim review; the independence and objectivity of the external auditors; the recommendation of the reappointment of Ernst & Young LLP as the external auditors and the approval of the 2007 external audit plan and fee proposal; the evaluation of the performance of the external auditors; the review and approval of changes to accounting policies and treatments under IFRS; the progress of the internal audit programme and matters arising and the effectiveness and workload of the internal audit department and the adequacy of available resource; the effectiveness of the Company’s internal controls; and the Company’s whistleblowing procedures including updates of any whistleblowing or fraud incidents which may occur. What is the role of the Nominations Committee The Nominations Committee is made up of Mike Foster (Chairman), Peter Cawdron and Ian Fraser and meetings are held as deemed necessary by the Chairman of the Committee. The majority of the Nominations Committee members, including the Committee Chairman, are independent Non-executive Directors. The Nominations Committee considers all matters relating to the structure, size and composition of the Board and makes necessary recommendations to the Board with regard to adjustments and new appointments where deemed necessary. The Committee considers the mix of skills and experiences that the Board requires and seeks the appointment of directors to meet its assessment of what is required to ensure that the Board is effective in discharging its responsibilities. What is the role of the Remuneration Committee The Remuneration Committee is made up of Fritz Ternofsky (Chairman), Peter Cawdron and Mike Foster and meets at least twice a year and at such other times as the Chairman of the Committee deems necessary. With the exception of Peter Cawdron, all of the members of the Remuneration Committee are independent Non-executive Directors. The Chief Executive and other Directors may be invited to attend meetings as considered appropriate by the Remuneration Committee. The Remuneration Committee will consider all material elements of the remuneration policy to ensure that remuneration is sufficient to attract, retain and motivate Executive Directors and senior management of the quality required to manage the Company successfully. This is performed with reference to independent remuneration research and professional advice, which is provided by Hewitt, in accordance with the Combined Code. The Remuneration Committee will recommend to the Board the framework for the remuneration packages of individual Executive Directors. The Board is then responsible for implementing the recommendations although no Director is involved in deciding his own remuneration. The Directors are not permitted to vote on their own terms and conditions of remuneration. The Remuneration Committee is responsible for preparation of the Report on Directors’ remuneration which forms part of this Annual Report and can be found on pages 32 to 44. How does the Company communicate with shareholders Communications with shareholders are given high priority and the Company aims to provide as much information as is commercially sensible to both existing and potential investors, recognising that transparency is the best way to develop understanding of the Company’s strategy, performance and growth potential. The Company encourages two-way communication with both its institutional and private shareholders and responds quickly to all enquiries. There is a regular dialogue with institutional shareholders as well as presentations after the Company’s preliminary announcement of the year end results and after announcement of its interim results. The Board uses the Annual General Meetings to communicate with private and institutional investors and welcomes their participation. The Chairman aims to ensure that the Chairmen of the Audit, Remuneration and Nomination Committees and the Senior Independent Non-executive Director are available at the AGM to answer relevant questions. The Chairman also writes to the top 20 major shareholders on an annual basis inviting them to correspond with the Non-executive Directors if they so wish.
Page 1 and 2: Passionate about our pubs Punch Tav
Page 3 and 4: Punch Taverns: Our Punch Taverns le
Page 5 and 6: Operational highlights • We conti
Page 7 and 8: Managed estate: We have significant
Page 9 and 10: award winning training. Our managed
Page 11 and 12: Operational review Overview The fin
Page 13 and 14: Whilst the leased and managed estat
Page 15 and 16: Passionate about our people ATTRACT
Page 17 and 18: Corporate social responsibility Com
Page 19 and 20: Our ‘NITA’ award winning retail
Page 21 and 22: Results for the year The financial
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Page 25 and 26: purchased by the Group as well as f
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Page 37 and 38: Introduction This report has been p
Page 39 and 40: Annual bonus Policy: maximum bonus
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28 Net debt continued (c) Reconcili
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30 Disposals On 17 September 2006,
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31 Pensions and other post-retireme
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31 Pensions and other post-retireme
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32 Operating lease commitments - mi
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Five year financial record Group tr
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Punch Taverns plc Annual Report and
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The paper used in this report is fu
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Punch Taverns plc 2007 Annual Report and Financial Statements

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