Audit Committee Terms of Reference
Adopted on 5th August 2009

1. Membership

1. Members of the Committee shall be appointed by the Board of Directors ("Board"). The Committee shall comprise of a minimum of 3 members.

2. All members of the Committee shall be independent non-executive directors at least one of whom shall have recent and relevant financial experience.

3. Only members of the Committee have the right to attend Committee meetings. The external auditors, Head of Internal Audit, executive Board members or management will be invited to attend meetings of the Committee on a regular basis.

4. Others such as directors and representatives and staff from within the NBPOL Group may be invited to attend all or part of any meeting where appropriate.

5. The Board shall appoint the Committee chairman who shall be an independent non-executive director. In the absence of the Committee chairman, the remaining members present shall elect one of the member to chair the meeting.

The Company secretary shall act as the secretary of the Committee.

The quorum necessary for the transaction of business shall be 2 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.

1. The Committee shall meet four times a year at appropriate times in the reporting and audit cycle and otherwise as required.

2. It shall be permitted for members to attend meetings by telephone or video conference where necessary.

Meetings of the Committee shall be called 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.

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.

2. The Chairman shall ascertain, at the beginning of each meeting, the existence of any conflicts of interest and the secretary shall minute them accordingly.

The chairman of the Committee shall be available to answer questions at the Annual General Meeting on the Committee's activities.

A. Financial reporting

1. The Committee shall monitor the integrity of the financial statements of the Company, including its annual and half-yearly reports, preliminary results' announcements and any other formal announcement relating to its financial performance, reviewing significant financial reporting issues and judgements which they contain.

2. The Committee shall review and challenge where necessary:

   1. the consistency of, and any changes to, accounting policies both on a year on year basis and across the Company/Group;

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

   3. whether the Company has followed appropriate accounting standards and made appropriate estimates and judgements, taking into account the views of the external auditor;

   4. the clarity of disclosure in the Company's financial reports and the context in which statements are made; and

   5. all 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);

B. Internal controls and risk management systems

The Committee shall:

1. keep under review the effectiveness of the Company's internal controls and risk management systems; and

2. review and approve the statements to be included in the annual report concerning internal controls and risk management

C. Whistleblowing and fraud

The Committee shall review on a yearly basis 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.

D. Internal audit

If the Company does not have an Internal Audit function, the Committee shall consider annually whether there is a need for an internal audit function where no such function exists.

If the Company has an Internal Audit function, the Committee shall:

1. monitor and review the effectiveness of the Company's internal audit function in the context of the Company's overall risk management system;

2. 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;

3. review and assess the annual internal audit plan;

4. review promptly all reports on the Company from the internal auditors;

5. review and monitor management's responsiveness to the findings and recommendations of the internal auditor; and

6. 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. 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.

7. be consulted on the appointment or removal of the head of audit.

E. External Audit

The Committee shall:

1. consider and make recommendations to the Board, to be put to shareholders for approval at the AGM, 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

2. oversee the relationship with the external auditor including (but not limited to):

   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;

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

   3. assessing annually their independence and objectivity taking into account relevant professional and regulatory requirements and the relationship with the auditor as a whole, including the provision of any non-audit services;

   4. 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

   5. 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)

   6. seeking to ensure co-ordination with the activities of the internal audit function

3. meet with the external auditors in person once a year. For the other meetings where the external auditors are not physically present, they shall join the meeting via telephone or other instantaneous means of conferring for the dispatch of business which allows each person present to hear and be heard. 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.

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

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

   1. a discussion of any major issues which arose during the audit;

   2. any accounting and audit judgements; and

   3. levels of errors identified during the audit.

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

7. review the management letter and management's response to the auditor's findings and recommendations

8. develop and recommend to the Board a policy in relation to the supply of non-audit services by the external auditor, taking into account any relevant ethical guidance on the matter

F. Reporting responsibilities

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

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.

3. The Committee shall include in the Company's Annual Report a report on its activities.

G. Other matters

The Committee shall:

1. have access to sufficient resources in order to carry out its duties, including access to the Company secretariat for assistance as required;

2. give due consideration to laws and regulations, the provisions of the Combined Code and the requirements of the UK Listing Authority's Listing, Prospectus and Disclosure and Transparency Rules, the laws and regulations of Papua New Guinea and the rules and regulations of Port Moresby Stock Exchange as appropriate; and

3. oversee any investigation of activities which are within its terms of reference and act for internal purposes as a court of the last resort.

The Committee is authorised to:

1. seek any information it requires from any employee of the Company in order to perform its duties

2. obtain, at the Company's expense, outside legal or other professional advice on any matter within its terms of reference

3. call any employee to be questioned at a meeting of the Committee as and when required

- End -