Audit committee terms of reference

A committee to be known as the Audit Committee is hereby constituted with the following terms of reference:

Membership

• The Committee shall be a Committee of the Board of SABMiller plc. The Committee shall consist of not less than three members, all of whom shall be independent nonexecutive directors appointed by the Board. At least one member of the Committee shall have recent and relevant financial experience. A quorum for any meeting shall be two members.
• The Chairman of the Committee shall be one of the independent non-executive directors and shall be appointed by the Board.
• Appointments to the Committee shall be for a period of up to three years which may be extended for two further three year periods, provided the director remains independent.
• Members of the Committee should be provided with appropriate and timely training, both in the form of induction and on an ongoing basis.

Attendance at meetings

• Only members of the Committee have the right to attend meetings. The Chief Financial Officer, the Chief Executive Officer, the Chief Internal Auditor, a representative of the external auditors, the Chairman of the Board, other Directors and senior management may attend meetings on invitation, standing or specific, of the Chairman of the Committee.
• The Secretary of the Committee shall be appointed by the Board and shall normally be the group Secretary. The Secretary, in conjunction with the Chairman of the Committee, shall draw up an agenda, which shall be circulated, with all necessary information and papers, on a timely basis to all members and invitees.

Frequency of meetings

• Meetings shall be held not less than three times a year, and where appropriate should coincide with key dates in the company’s financial reporting cycle. There will be a reasonable interval between Committee meetings and Board meetings to allow actions points to be followed up.
• Sufficient time will be allowed to enable the Committee to undertake as full a discussion as required.
• The Committee Chairman may meet key people involved in the company’s governance throughout the year.
• All members of the Committee have the right to call a meeting of the Committee.

Authority

• The Committee is authorised by the Board to conduct or authorise investigations into any matters within its scope of responsibility. To fulfil such responsibilities, the Audit Committee is empowered to seek any information it requires from any:

-	Officer or employee of the Company or its subsidiary companies. (Such persons shall be required to co-operate with and respond to any request made by the Audit Committee).
-	External party, and may obtain outside legal or independent advice and counsel as required at the company’s expense. (Such advisors may attend meetings as necessary).

• The Audit Committee:

-	May not perform any management functions or assume any management responsibilities.
-	Shall have access to sufficient resources in order to carry out its duties, including access to company secretariat as required.
-	Shall mainly make recommendations to the Board for its approval or final decision and shall have no executive powers with regard to its findings and recommendations.

• The Audit Committee shall be entitled to review the workings of subsidiary Audit Committees.

Responsibilities

• The duties of the Committee relate to the group as a whole.
• The Committee should establish formal and transparent arrangements for considering how they should apply the financial reporting and internal control principles and for maintaining an appropriate relationship with the company’s auditors.
• The Committee responsibilities are fixed by the Board. There will be an annual review of the Committee’s effectiveness.
• The specific duties of the Audit Committee are as follows:

(A) Financial reporting

• Review, and challenge where necessary, the annual financial statements and interim and preliminary announcements before their submission to the Board for approval, determine whether they are complete and consistent with the information known to the Committee members, paying particular attention to:
  
  

  -	Significant accounting policies and practices, and any changes in them.
  -	Consistency of accounting policies both on a year to year basis and across the group.
  -	Major judgemental areas, for example those involving the valuation of assets and liabilities, warranty, product and environmental liability, litigation reserves and other commitments and contingencies.
  -	The impact and disclosure of significant, complex and/ or unusual transactions, especially where the accounting treatment is open to different approaches.
  -	Context, completeness and clarity of disclosures.
  -	Adjustments resulting from the audit or processed at year-end.
  -	Compliance with appropriate accounting standards and recent professional pronouncements.
  -	Compliance with local and international stock exchange and legal requirements.
  -	The implementation of significant, new, financial systems.
  -	Tax and litigation matters involving uncertainty.
  -	Capital adequacy.
  -	Impact of foreign exchange.

  
  
• Be briefed on how management develops preliminary announcements, interim financial information and analysts’ briefings, the extent of internal audit involvement and the extent to which the external auditors review such information. Review necessity of an independent audit of the interim results in comparison to the current process of having the external auditors issue a review report.
  
  
• Review the contents of any bid document or listing particulars and review any profit forecasts or working capital statements to be published in such documents.

(B) Internal controls and risk management systems

• Examine and review the internal control environment within the group and review the group’s statement on internal control systems (which are included in the annual report) prior to endorsement by the Board. In particular to review:
  

  -	Integrity of the company’s internal financial controls.
  -	Policies and procedures for preventing or detecting fraud or illegal acts.
  -	Policies and procedures for ensuring the group complies with relevant regulatory and legal requirements.
  -	The semi-annual letters of representation from the group’s business units.
  -	The operational effectiveness of the policies and procedures.
  -	The extent to which management is setting the appropriate “control culture” by communicating the importance of internal control and the management of risks and ensuring that all employees have an understanding of their roles and responsibilities.
  -	Assess the scope and effectiveness of the system established by management to identify, assess, manage and monitor financial and non-financial risks.

(C) External audit

• Make recommendations to the Board, for it to put to the shareholders for their approval at the AGM, in relation to the appointment, re-appointment and removal of the external auditors and to approve the remuneration and terms of engagement of the external auditors. The Committee will ensure that the external audit fees are appropriate to enable an adequate audit to be performed.
• Review and monitor the external auditors’ independence and objectivity and the effectiveness of the audit process, taking into consideration relevant UK professional and regulatory requirements.
• Review annually the external auditors’qualifications, expertise and resources, including a review of the report from the external auditors on their own internal quality procedures.
• Develop, recommend to the board and oversee the implementation of the policy on the engagement of the external auditors to supply non-audit services, taking into account relevant ethical guidance regarding the provision of non-audit services by the external audit firm.
• Review the subsidiary Audit Committees’ reviews of the provision of non-audit services.
• Recommend the audit fee to the Board and pre-approve, as required by the currently applicable policy, any fees in respect of non-audit services provided by the external auditors. Arbitrate any dispute between management and the external auditors regarding their remuneration.
• Review with the external auditors the scope and planning of the audit, ensuring there are no unjustified restrictions or limitations. Review the findings of the external auditors, in particular any problems and reservations which the auditors may wish to discuss.
• Meet, at least annually, privately with the external auditor to discuss, without management present, their remit and any issues.
• Review the effectiveness of the external audit process.
  

(D) Internal audit

• Review periodically the effectiveness of the internal audit function throughout the group in the context of the company’s overall risk management system, with particular focus on the charter, annual work plans, activities, staffing, organisational and reporting structure and status of the function.
• Ensure that no unjustified restrictions or limitations are placed on the internal audit function, that the function has sufficient budget and staff resource to meet its objectives, and that the function has appropriate standing within the group and direct access to the Chairman of Board and the Audit Committee Chairman.
• Review periodically the results of work performed by the internal audit function and reports on the effectiveness of systems of internal control, corporate governance and risk management. Discuss their findings with the Chief Internal Auditor.
• Meet, at least annually, privately with the Chief Internal Auditor to discuss, without management present, their remit and any issues.
• Ensure that management responds to internal audit reports, identified issues and recommendations.
• Ensure co-ordination between the internal audit function and the external auditors.
• Review the qualifications of, and approve the appointment or dismissal of the Chief Internal Auditor.

(E) Compliance with laws and regulations

• Review the effectiveness of the system for monitoring compliance with laws and regulations (including the group’s semi-annual letters of representation) and the results of management’s investigation and follow-up (including disciplinary action) of any instances of non-compliance.
• Review the findings of any examinations by regulatory agencies, and any auditor observations.
• Obtain regular updates from management and group legal counsel regarding compliance matters, including tax compliance, litigation, disputes and claims.
  

(F) Subsidiary audit committees

• The Committee shall be entitled to call for and review the terms of reference of and minutes of proceedings of subsidiary and managed associate company Audit Committees in the group, to review the appointment, conduct and processes of the independent external auditors to those companies as well as the functions, processes and performances of the internal auditors within the group and to make recommendations to the Board relating to the aforegoing.

(G) Other responsibilities

• Perform other oversight functions and consider other topics, as requested by the full Board.
• If necessary, institute special investigations and, if appropriate, hire special counsel or experts to assist.
• Review and update the Committee’s terms of reference at least annually, and recommend changes to the Board.
• Conduct an annual review of the Committee’s work and report to the Board.
• Review arrangements by which staff of the group may, in confidence, raise concerns about possible improprieties in financial reporting or other matters. Ensure that arrangements are in place for the proportionate and independent investigation of such matters and for appropriate follow-up action.

Reporting procedures

• Once agreed by the Committee, the Secretary of the Committee shall circulate the minutes of all meetings of the Committee to all members of the Board.
• The Chairman of the Committee shall make a brief report, either written or oral, of the findings and recommendations of the Committee to the Board after each Committee meeting. The Committee shall make whatever recommendations to the Board of Directors it deems appropriate on any area within its remit where action or improvement is needed. The Chairman of the Committee or, as a minimum, another member of the Committee, shall attend the Board meetings at which the interim announcement, preliminary announcement and annual financial statements are approved.
• The Committee's terms of reference, including its role and delegated authority, and its activities during the year shall be made available to shareholders. A separate section in the annual report shall include:

-	a summary of the role of the Audit Committee.
-	the names and qualifications of all members of the Audit Committee.
-	the number of Audit Committee meetings.
-	a report on the way the Audit Committee has discharged its responsibilities; and
-	a report on how auditor objectivity and independence is safeguarded if the auditor provides non audit services.

• The Chairman of the Committee shall attend the AGM and shall answer questions, through the Chairman of the Board, on the Committee’s activities and its responsibilities.

Audit committee agenda

A.  Constitution	Sept (1)	Nov	Feb	May	Recommended attendance (2)
Review the audit committee's terms of reference.					AC
Assess independence, financial literacy, skills and experience of members.					AC
Establish the number of meetings for the forthcoming year (to be completed prior to meeting).					AC
Establish meeting agenda and attendees required (to be completed prior to meeting).					AC
B.  Overseeing financial reporting	Sept (1)	Nov	Feb	May	Recommended attendance (2)
Review financial statements (annual, half year, quarterly), including disclosures.					AC, MGMT, EA
Review other formal statements that contain financial information.	WR	WR	WR	WR	AC, MGMT, EA
Review significant accounting policies.					AC, MGMT, EA
Review the consistency of accounting policies both on a year-to-year basis and across the group.					AC, MGMT, EA
Understand management's judgments and accounting estimates applied in financial reporting.					AC, MGMT, EA
Consider the impact and disclosure of significant, complex and/or unusual transactions.	WR	WR	WR	WR	AC, MGMT, EA
Consider the adjustments resulting from the audit or processed at year end.
Discuss with External Audit appropriateness of accounting policies, estimates and judgements.					AC, MGMT, EA
Consider going concern and capital adequacy.					AC, MGMT, EA
Consider significant developments in financial systems, auditing, accounting, and reporting and tax matters.	WR	WR	WR		AC, MGMT, EA
Recommend approval of financial statements and other formal financial statements to Board.					AC, MGMT, EA
Review of bid documents or listing particulars	WR	WR	WR	WR	AC, MGMT, EA
Assess the subsidiary Audit Committees' reviews of the annual financial statements of the pension funds.					AC, MGMT, EA
Consider management's brief on how preliminary announcements, interim financial information and analysts' briefings are developed, and the extent of audit involvement (external and internal).	WR	WR	WR	WR	AC, MGMT, EA
C.  Overseeing the process relating to the companies financial risks and control environment	Sept (1)	Nov	Feb	May	Recommended attendance (2)
Review management representation of the internal control environment (control policies and procedures).					AC, MGMT, EA
Review the integrity of the company's internal financial controls and prevention/detection of fraud and illegal acts.					AC
Review the risk management process.					AC, RM,MGMT, IA, EA
Consider industry and market updates.	WR	WR	WR	WR	AC
Consider any significant information technology changes.	WR	WR	WR	WR	AC
Review the semi-annual letters of representation from the group's BUs.					AC
D.  Overseeing external audit process	Sept (1)	Nov	Feb	May	Recommended attendance (2)
Recommend appointment and approval of remuneration and terms of engagement.					AC, EA
Review external audit objectivity/ independence/ qualification and obtain confirmation from auditor.					AC, EA
Review policy in relation to non-audit services.					AC, EA
Review external audit findings and views on control environment					AC, MGMT, EA, IA
Review audit process, audit plan and scope of the audit work.					AC, MGMT, EA, IA
Assess the performance and appropriateness of the external audit team.					AC,EA
Approve audit fees and terms of engagement.					AC, MGMT, EA, IA
Private meeting with External Audit.	WR	WR	WR		AC, EA
E.  Overseeing internal auditor process	Sept (1)	Nov	Feb	May	Recommended attendance (2)
Assess the effectiveness of the internal audit function.					AC, IA
Assess the independence of the internal audit function.					AC, IA
Review internal audit process, audit plan, scope of the audit work and sufficiency of budget/resources.					AC, MGMT, EA, IA
Review significant internal audit findings and reports.					AC, MGMT, EA, IA
Review progress on actions taken in response to the committee's representations	WR	WR	WR	WR	AC, IA
Review the co-ordination between internal audit and external audit.					AC, MGMT, EA, IA
Review performance/qualification and recommend appointment of Head of Internal Audit.	WR	WR	WR	WR	AC, IA
Private meeting with Chief Internal Auditor.	WR	WR		WR	AC, IA
F.  Compliance with laws and regulations	Sept (1)	Nov	Feb	May	Recommended attendance (2)
Review findings of external examinations.	WR	WR	WR	WR	AC
Obtain updates from management and plc legal counsel.					AC
G.  Subsidiary audit committees	Sept (1)	Nov	Feb	May	Recommended attendance (2)
Review of Chief Internal Auditor's summary of key matters arising from subsidiary Audit Committees.	WR		WR		AC, IA
H.  Other responsibilities	Sept (1)	Nov	Feb	May	Recommended attendance (2)
Review whistle blowing arrangements.					AC, IA
Review report to shareholders on role and responsibilities of the committee.					AC
Perform self-assessment of audit committee performance.					AC
Conduct special investigations and perform other activities as appropriate.	WR	WR	WR	WR	AC
Maintain minutes and report to board.					AC

Legend

(1) - September meeting is provisional, as needed.
(2) - All attendees attend at the invitation of the Chairman of the Committee.
WR - When Required - Items are included in the respective meeting agendas as they arise.
AC - Audit Committee.
MGMT - Management.
EA - External Auditors.
IA - Internal Auditors.
RM - Risk Management.