LONDON, March 5 (Reuters) - Aerospace and defence company Rolls-Royce RR.L, facing an investigation by Britain's anti-fraud watchdog, said it had cut the number of middlemen it uses as it steps up efforts to prevent bribery and corruption.
The British company said in its annual report on Wednesday that as well as cutting down on the number of intermediaries it uses, it has relaunched a 24-hour ethics telephone line for staff and created a new role of head of risk training.
The world's second-largest maker of aircraft engines said in December the Serious Fraud Office (SFO) had launched a formal investigation into concerns of possible bribery and corruption in China and Indonesia.
A year earlier, it had passed information to the SFO relating to bribery and corruption involving intermediaries in overseas markets, and said it could face prosecution.
Rolls-Royce is also facing an investigation into state-run Hindustan Aeronautics Ltd's (HAL) orders from Rolls-Royce.
Investigations over overseas corruption and bribery are a perennial risk facing makers of military equipment, given the huge contracts and high secrecy in the defence sector.
Rolls-Royce tasked lawyer David Gold with leading a review of its compliance procedures after the allegations emerged. He published his interim report in July. A final version is expected in due course.
"The number of intermediaries used by our businesses has continued to fall dramatically during the year," Rolls said in its annual report, adding that it was working to simplify its anti-bribery policies in line with Gold's recommendations.
Rolls-Royce said last month that U.S. and European spending cuts would halt profit growth in 2014, bringing to an end the group's decade-long record of increasing annual profits.
A pay freeze for top management will accompany the group's gloomier outlook for this year.
"There will be no increase in basic pay for most of the senior leadership team in 2014," the company said.
Rolls's performance over the previous three years was, however, strong enough to trigger rewards under a long term incentive plan.
The group's chief executive John Rishton earned a total of 6.2 million pounds ($10.3 million) in 2013, 36 percent higher than the 4.6 million pounds he took home the year before on account of the payout.
($1 = 0.5998 British Pounds)
(Reporting by Sarah Young, editing by Louise Heavens)