Corporate Governance

Audit and Risk Committee Charter

• A. Establishment

  The board of AWI Group (the "Company") hereby agrees and establishes the Audit & Risks (ARC) committee of the board (the "Committee"), with all the powers and duties set forth in these Regulations and subsequent resolutions of the board. Certain capitalized or uncapitalized terms used but not defined in these regulations have the meanings given to them in the charter of the board. The Audit & Risks Committee is a committee of the Board.

• B. Purpose

  The board establishes the Committee to assist the board in overseeing the: (1) the integrity of internal controls and financial reporting; (2) the qualification and independence of the company's external auditor; (3) the performance of the company's internal audit function and of its external auditor; (4) the company’s compliance with legal and regulatory requirement; (5) the quality and integrity of the accounting, auditing and reporting practices of the company and such other duties as directed by the company’s board, and (6) prepares Audit & Risks Committee report to the board annually.

• C. Composition and Qualification of Members of the Audit & risks committee

  I. Composition

  The board shall select at least three of its members to serve on the audit & risks committee, each of whom shall be "independent”, as defined in Section B.I.d. (Chapter I: Composition of the Board; Independence) of the charter of the board. One of such members shall be designated by the board as the Committee's chairman. The board shall ensure that all members of the Committee are financially literate and possess the professional skills and personal characteristics necessary to carry out their duties as members of the Committee. The board recognizes that it is desirable that at least one member of the Committee (preferably the Committee's chairman) be a financial professional, with accounting and auditing or related financial management expertise.

   

  II. Chairman

  The Committee's chairman:

   

  1. Will be responsible to the board for the smooth conduct of the Committee's activities;
  2. Will, after consultation with the board and the other members of the Committee, establish the agenda for each meeting of the Committee;
  3. Will propose the Committee's annual calendar and program of activities for approval by the Committee;
  4. Will authorize and request other members of the board, company management, employees and outsiders to be present and participate at meetings of the Committee as deemed necessary and appropriate to the conduct of the Committee's work;
  5. Will, on behalf of the Committee, request information required by the Committee from company management, employees and others in the conduct of its work;
  6. Will ensure that the activities and resolutions of the Committee are duly recorded, communicated to the board, and followed-up on;
  7. Will organize and oversee the annual evaluation of the Committee's effectiveness; and
  8. Will prepare such periodic reports of the Committee's activities as are requested by the board and, in any case, will prepare (for approval by the Committee) the Committee's annual reports to the board and shareholders.

   

  III. Chairman’s Vote Breaks Tie

  In the event of a tie vote of Committee members, the vote of the chairman has the deciding vote. Any matters requiring a decision will be decided by a majority of votes of members present.

   

  IV. Member Participation

  Each member of the audit & risks committee:

   

  1. Will have voice and vote in all Committee matters (except as provided under "Committee Operating Principles," below);
  2. May not designate substitutes;
  3. Will keep the Committee informed of all matters that may affect their independence and ability to carry out their responsibilities as Committee members; and
  4. Will carry out such tasks as the Committee may assign to such member.

• D. Specific Duties of the Committee

  I. External Audit Function

  The audit & risks committee shall:

   

  1. Oversee the work of the company's external auditor, including reviewing the preparation and execution of the auditor’s annual program of work for the company;
  2. Review the terms of reference of the external auditor and report to the board and the annual general assembly the Committee's recommendations with respect to the audit engagement fees and the overall terms of service to be provided by the Independent external auditor;
  3. Review, on an annual basis, a report of the external auditor describing in detail any relationships the external auditor has with the company, its management, its shareholders or any of their affiliates that may adversely affect such auditors' independence;
  4. Review, on an annual basis, a report of the external auditor describing in detail the external auditor’s quality control procedures and practices, any material issues raised by its most recent quality control review or peer review, and any inquiry or investigation by governmental authorities or professional standards boards regarding any audits conducted by such auditors in the past five years, together with all steps taken to address such issues;
  5. Review in advance the terms of all non-audit services proposed by company management to be performed by the external auditor, assess such services in accordance with the company’s policy regarding independent external auditor and report to the board the Committee's opinion as to whether or not the company should engage the external auditor to perform such services;
  6. Evaluate, on an annual basis, the qualification, independence, and performance of the external auditor and report to the board and the annual general assembly meeting the Committee's opinion with respect to the adequacy of its performance and independence. Such report will include the Committee's recommendation on the reappointment or termination of the external auditor and, if required, such firm's replacement. In the event that the full board ultimately disagrees with the Committee's evaluation and recommendations, the Committee's report shall nonetheless be submitted to the general assembly and included in the agenda for such meeting.
  7. Review, on an annual basis, the company's policies on the selection of external auditor and its policy on rotation of its external auditor and audit partners, and report to the board the Committee's recommendations for any modification of such policies; and
  8. Reviewing, no less than annually, with company management, the external auditor, and the internal auditing and financial control departments:
  9. Significant financial reporting issues and judgments identified and made in connection with the preparation of the company's financial statements;
  10. Major issues regarding the company's accounting and auditing principles and practices, including key accounting policies, and major changes in auditing and accounting principles and practices suggested by the external auditor, the company’s internal auditing and financial control departments or company management;
  11. Any audit problems or difficulties encountered and raised by the external auditor in the course of its work for the company, including any restrictions on the scope of such activities or on access to personnel or information, and disagreements with company management or members of its internal auditing and financial control departments; and
  12. Principles of accounting proposed or adopted by regulators or accounting authorities and brought to the attention of the external auditor, company management, the company’s internal auditing or financial control departments or the board.

   

  II. Internal Controls and Internal Audit Function

  The audit & risks committee shall:

   

  1. Review with the company’s chief financial officer (CFO), its internal auditing and financial control departments and any other interested parties, the quality and adequacy of the company’s internal controls, including whether the company’s management are communicating the importance of internal controls, evaluating the security of computer systems and applications and any contingency plans for processing financial and other information in the event of a computer systems breakdown;
  2. Review with the company's internal auditor the preparation, execution and results of the company's annual internal audit work program, as well as any activities undertaken outside such annual program; and
  3. Review with the company’s internal auditor and report to the board on the adequacy of structure, responsibilities, staffing, resources and functioning of the company's internal auditing department, such review will include an annual evaluation of the performance and qualifications of the head of the department.

   

  III. Financial Reporting

  The audit & risks committee shall:

   

  1. Gain an understanding of the current areas of financial and operational risk and how the company’s management is managing such risks;
  2. Consider, together with the external auditor and the internal audit department; any fraud, illegal acts, deficiencies in internal control or similar issues;
  3. Review significant accounting and reporting issues, including professional and regulatory pronouncements and assess their impact on the company’s financial statements;
  4. Ask company management, the external auditor and the internal audit department about significant risks and exposures and the plans to minimize such risks;
  5. Review any legal matters which could significantly impact the financial statements;
  6. Review the annual financial statements and determine whether they are complete and consistent with the information known to Committee members and assess whether the financial statements reflect appropriate accounting principles;
  7. Assess the impact of any complex or unusual transactions, such as restructuring charges and derivative disclosures, on the company’s financial statements;
  8. Consider and judgments made in preparing the company’s financial statements, including any valuation of assets and liabilities; warranty, product or environmental liability; litigation reserves; and other commitments and contingencies;
  9. Meet with company management and the external auditor to review the financial statements and the results of the audit;
  10. Assess the fairness of the preliminary and interim statements and disclosures, obtain explanations from company management, the external auditor and the internal audit department on whether:
      1. Actual financial results for the interim period varied significantly from budgeted or projected results;
      2. Changes in financial ratios and relationships in the interim financial statements are consistent with changes in the company’s operations and financing practices;
      3. Applicable Accounting Standards have been consistently applied;
      4. There are any actual or proposed changes in accounting or financial reporting practices;
      5. There are any significant or unusual events or transactions;
      6. The company’s financial and operating controls are functioning effectively; and
      7. The preliminary announcements and interim financial statements contain adequate and appropriate disclosures

   

   

  IV. Risk Review Procedures

  The internal auditors are responsible for providing reliable and timely information to the board of directors and senior management concerning the quality and effectiveness of, and the level of adherence to, the Company’s control procedures and risk management systems. It is not the responsibility of the Committee to plan or conduct investigations or to assure compliance with laws and regulations and the Company’s corporate governance code. Each member of the Committee shall be entitled to rely in good faith on information, opinions, reports, or statements, including financial statements and other financial data, prepared, or presented by those persons and under those circumstances specified by the law.

   

  The Committee shall:

   

  1. Review the risk appetite of the Company and formulate appropriate policies for its implementation
  2. Review significant financial and other risk exposures and the steps management has taken to monitor, control and report such exposures, including, without limitation, review of credit, market, fiduciary, liquidity, reputation, HSE, compliance, operational, fraud and strategic risks; and evaluate risk exposure and tolerance and approve appropriate transaction or trading limits.
  3. Except to the extent subject to the jurisdiction of another committee of the board of directors pursuant to that committee’s charter:
     • Review reports and significant findings with respect to the risk management activities of the Company, together with management’s responses and follow-up to these reports; and
     • Review significant reports from regulatory agencies relating to risk issues, and management’s responses.
  4. Review and re-assess the adequacy of this charter periodically and recommend changes to the board when necessary.

   

  V. Other Duties

  The audit & risks committee shall:

   

  1. Review all reports provided to company management by the external auditor, in particular those regarding the adequacy and effectiveness of the company's internal controls ("management letters" or "deficiency letters"), monitoring the company's implementation of the recommendations included in such letters and reporting to the board on the adequacy of such implementation;
  2. Review with the company's CFO the company's quarterly financial statements prior to their presentation by company management to the board;
  3. Review the company’s system for monitoring compliance with law;
  4. Review the results of any investigation and action taken (including any disciplinary action) by company management regarding any acts of fraud or financial non-compliance;
  5. Obtain regular updates from company management and legal counsel regarding compliance with law;
  6. Review, together with company management and any other parties that the Committee may deem appropriate, the details of any investigation, review or inquiry made by any public regulatory authority concerning the conduct of the company's activities or the preparation of its financial statements, and report to the board the results of such review;
  7. Review and monitor the propriety of related third-party transactions; and
  8. Perform any other activities consistent with this charter, the Company’s memorandum and articles of association and governing law as the board of directors shall specifically delegate to the Committee.

• E. Powers

  The audit & risks committee may undertake such investigations as the audit & risks committee deems necessary to carry out its duties. The Committee may request and obtain whatever information it requires from any employee of the company. All employees of the company must promptly provide all requested information to the audit & risks committee and must cooperate fully in any audit & risks committee investigations. The Committee may require company management and employees to prepare written reports or to participate in Committee meetings in order for them to provide information or advice to the Committee.

   

  The audit & risks committee may obtain external independent advice and assistance as they deem advisable, including professional advice regarding accounting, audit and internal controls; legal and regulatory matters; and corporate governance. The audit & risks committee may retain and compensate such professional service providers at the expense of the company.

• F. Committee Operating Principles

  Each member of the Committee will always act in an impartial, independent and objective manner, in the best interests of the company and in accordance with the company's articles of association, charters and by-laws. If a Committee member becomes aware that s/he has, or may have, a potential conflict of interest (as further described in the board charter), s/he shall fully disclose such conflict or potential conflict to the board and shall recuse himself from the Committee's consideration of such matter.

• G. Reviewing Audit & risks committee Effectiveness Against the Charter

  The Committee, by itself or with the assistance of outside advisors, will annually assess its effectiveness in performing its duties. Such annual assessment will include recommendations of the Committee for improvements in this charter and in the conduct of the Committee's activities. A report of the audit & risks committee's effectiveness will be prepared for delivery to the board and the annual general assembly. The results of the annual assessment will also be presented by the Committee's chairman at a meeting of the board and the board will adopt, reject or modify the recommendations of the Committee.

• H. Reporting

  The Committee will provide the board with reports as provided in this Committee charter, as the board may request or as the Committee decides appropriate. In any case, the Committee will provide the board and the annual general assembly with an annual report of its activities, including the results of the annual review of the Committee's effectiveness.

• I. Costs

  The costs of operation of the Committee, including costs associated with the contracting of professional advisors to the Committee shall be evaluated and authorized by the board on an annual basis, and in no event will be subject to the evaluation and approval of the company's management.

• J. Meetings

  The Committee will meet as often as necessary. The Committee shall meet at least quarterly. Meetings may be conducted in person or via teleconference.

   

  Meetings may be called at the initiative of the Committee's chairman or upon written request to the chairman signed by two Committee members. The day, time and place of each quarterly meeting shall be set out in the Committee's annual calendar of activities. The chairman shall notify the members of the Committee of the day, time and place of any additional meetings of the Committee at least five business days in advance. The chairman will arrange for members of the Committee to receive an agenda and required background materials at least five business days prior to any meeting. A quorum for Committee meetings will require the presence (in person or via teleconference) of the chairman and at least one other member of the Committee.

   

  The Committee will meet at least once each year with each of the external auditor, the company’s CFO and the company’s legal counsel, in each case in the absence of company management and any other employees of the company:

• K. Minutes and Records

  Minutes must be drawn up for every meeting of the Committee. The minutes will be signed by the chairman of the Committee and the minute taker and then will be added to the company’s records. Each member of the Committee shall receive a copy of the minutes at least five days before the next meeting of the Committee.

• L. Board Secretary Responsibilities

  The Board Secretary will fulfil the role of Secretary to the Audit & Risk Committee. The Secretary will assist the Chair develop and distribute committee agendas, papers, minutes, and calendar.

   

  The Secretary will ensure the agenda and supporting papers for each meeting are circulated at least one week before the meeting. Minutes must be approved by the Chair and circulated within two weeks of the meeting to each member.

   

  The minutes will be ratified by members in attendance/discussion and signed by the Committee Chair.

   

  The Committee Chair is to report to the Board following each meeting of the Committee. The manner of reporting may be by distribution of a copy of the minutes of the meeting supplemented by other written information if necessary, including any recommendations requiring Board action and/or approval.

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