GLOBE TELECOM, INC. AUDIT and Related Party Transactions (RPT) COMMITTEE CHARTER

Transcription

1 GLOBE TELECOM, INC. AUDIT and Related Party Transactions (RPT) COMMITTEE CHARTER

2 Contents Page Introduction 3 Purpose/Mission 4 Authority 5 Audit and RPT Committee Membership 6 Roles and Responsibilities 7 Meetings 18 Audit and RPT Committee Report to the Board of Directors 19 Performance Evaluation and Continuous Improvement 20 Functional and Secretariat Support 21 2

3 Introduction: The Audit and Related Party Transactions (RPT) Committee Charter (the Charter) defines clearly the purpose/mission, authority, composition, oversight function and responsibility of the Audit and RPT Committee of the Board of Directors (the Board) of Globe Telecom, Inc. (Globe) in upholding strong corporate governance that supports Globe s long term success aligned with the corporate objectives set by the Board and the best interest of its stockholders and stakeholders. The members of the Audit and RPT Committee shall review the Charter, at least annually, focusing on the relevance and appropriateness of all its provisions, with reference to Globe s Manual of Corporate Governance and in compliance with legal and regulatory requirements for publicly-listed companies. Any revisions made in the Charter are approved by all members of the Audit and RPT Committee and are subject to final approval of the Board. A soft file copy of the Charter is available in the corporate governance section of Globe s official website accessible to the public. 3

4 Purpose/Mission: To support the Board in the discharge of its functions, primarily on internal controls, risk management, material related party transactions (RPTs) and other key corporate governance matters, it is the policy of Globe to constitute and maintain a competent and working Audit and Related Party Transactions (RPT) Committee with fiduciary roles, responsibilities and accountabilities. These will be defined in an Audit and RPT Committee Charter (the Charter) approved by the Board and made known to all shareholders and stakeholders of Globe. The Audit and RPT Committee shall provide assistance to the Board in fulfilling its purpose to maximize Globe s long-term success and create sustainable value for its shareholders and stakeholders by carrying out the Committee s oversight responsibility relating to Globe s: Financial statements and disclosures, financial reporting principles, process, policies and systems; Internal Controls; External/independent auditors; Internal Audit function; Risk Management; and Compliance with relevant legal, regulatory and corporate governance requirements To demonstrate full commitment in fulfilling its roles and responsibilities, all members of the Audit and RPT Committee of the Board shall: Exemplify high ethical standards and exercise objective and independent judgment in the discharge of its function, always with due consideration to the interests and rights of Globe s shareholders and stakeholders as established by laws and contractual relations and obligations. Devote the time and attention required to perform its duties and responsibilities, including sufficient time to be knowledgeable of Globe s business. Maintain free and open communication with Globe s Management, external/independent auditors, internal auditors and the Board. Globe s Management is responsible for the day-to-day operations of the organization. This includes, among others: 1. Ensuring the integrity of Globe s financial statements, reporting and disclosures; 2. Establishing and maintaining an adequate and effective system of internal controls; and 3. Operating an effective risk management process, risk management strategies, policies and systems. The external/independent auditors are directly responsible to the Audit and RPT Committee in helping ensure the integrity of Globe s financial statements. The internal auditors help the Audit and RPT Committee identify the risks, controls and financial reporting issues through the continuous review of the effectiveness of Globe s risk management, internal controls and corporate governance processes. 4

5 Authority: The Audit and RPT Committee has the authority to: 1. Request reports or information from Management relevant to the agenda set in every Audit and RPT Committee meeting, in accordance with the Charter. 2. Challenge, inquire and/or probe on reports submitted and representations made by Management, external/independent auditors, the Chief Audit Executive, and external consultants. 3. Appoint, compensate and oversee the work of the public accounting firm contracted by Globe as external/independent auditor to conduct the audit/review of Globe s annual financial statements in connection with the statutory and regulatory requirements. This firm will report directly to the Audit and RPT Committee. 4. Facilitate discussions and resolve any disagreements between Management and the external/independent auditor regarding financial reporting and disclosures. 5. Direct the Internal Audit function. 6. Retain independent consultants, subject matter experts or other professionals to advise the Audit and RPT Committee or assist in the conduct of an investigation, when necessary, without the permission of Management. The Audit and RPT Committee shall be provided with the needed resources to support its work. 7. Seek any information it requires from employees (all of whom are directed to cooperate with the Audit and RPT Committee s requests) and/or external parties relevant to the discharge of its function. 8. Meet with Globe s Chief Audit Executive, Management, external/independent auditors, or external consultants, as often as necessary, to discuss any issue arising from the audit process. 5

6 Audit and RPT Committee Membership: In accordance with Globe s Manual of Corporate Governance (MCG): 1. The Audit and RPT Committee shall be appointed by the Board of Directors from among their members, as supported by an approved Board Resolution. 2. The Audit and RPT Committee shall be composed of such number of members as the Board may designate, but in no case less than three (3) members, majority of whom shall be Independent Directors including its Chairman; a director who has no executive responsibility and does not perform any work related to the operations of Globe, including its subsidiaries, affiliates and special purpose entities. 1 Majority of the members of the Audit and RPT Committee should be independent of Management and the controlling shareholders, free from any business or other relationship, with no direct or indirect control over Globe, its directors, Management, shareholders and related interests, including such other person(s) or juridical entity that may pose a potential conflict of interest(s), of Globe, its subsidiaries, affiliates and special purpose entities, which, in the opinion of the Board of Directors, would interfere significantly with the exercise of objective and independent judgment in carrying out the functions of the Audit and RPT Committee Members of the Audit and RPT Committee shall elect a Chairman of the Committee who should be both a non-executive director and an independent director. The Chairman of the Audit and RPT Committee cannot be the Chairman of the Board or of any other committees of the Board The Chairman of the Audit and RPT Committee shall be responsible for ensuring the effective interaction among the Audit and RPT Committee members and with Management and the internal and external/independent auditors. 5. Each member of the Audit and RPT Committee shall have an adequate working knowledge, experience and/or expertise that is relevant to Globe s operations and financial management systems and controls; and in particular, an understanding of accounting and auditing principles, and Globe s regulatory environment, to enable, individually and collectively, effective discharge of its roles and responsibilities. 6. For first-time members of the Audit and RPT Committee, copies of the Audit and RPT Committee Charter and Internal Audit Charter will be provided, together with an orientation conducted by the Chief Audit Executive covering, at minimum, the following: Globe Group ownership structure, subsidiaries, joint ventures and associates Globe Organization Globe Internal Audit Department key responsibilities, annual audit planning process, annual work plan, overall audit report rating framework and audit issue rating framework 1 Based on SEC CG Code for PLCs Definition of Terms for Non-Executive Director, Independent Director and Related Party. 2 Source: SEC CG Code for PLCs, Principle no. 3, Establishing Board Committees, Recommendation no

7 Roles and Responsibilities: To support the Board in the optimal performance of its roles and responsibilities, the Audit and RPT Committee is expected, through the provision of checks and balances, to oversee Globe s financial reporting and disclosures, audit, risk management, material RPTs and other key corporate governance matters, acting on a fully informed basis, in good faith, with due diligence and care, and in the best interest of the company and all shareholders 3. Specifically, the Audit and RPT Committee shall be responsible for the following: 1. Financial Reporting and Disclosure 1.1 Review financial statements and all related disclosures and reports certified by the Chief Financial Officer, and released to the public and/or submitted to the Philippine Securities and Exchange Commission (SEC) for compliance with both the internal financial management handbook and pertinent accounting standards, including legal and regulatory requirements. 1.2 Review quarterly, half-year and annual financial statements before submission to the Board of Directors, focusing on changes in accounting policies and practices, alternative accounting treatments and major judgmental areas, significant adjustments resulting from the audit, going concern assumptions, compliance with accounting standards, tax, legal, and regulatory requirements. 1.3 Ensure that Management formulates accounting/reporting processes and practices in accordance with the Philippine Financial Reporting Standards (PFRS), including rules and procedures in compliance with the financial reporting requirements of various regulatory agencies. 3 Source: SEC CG Code for PLCs, Principle nos. 2 and 3, Recommendations 2.1 and 3.1, respectively. 7

8 2. Internal Controls Where internal control is defined as a process designed and effected by the Board of Directors, Management, and all levels of personnel in the organization to provide reasonable assurance on the achievement of Globe s objectives through efficient and effective operations; reliable, complete and timely financial and management information; and compliance with applicable laws, regulations, and Globe s policies and procedures 1, the Audit and RPT Committee shall: 2.1 Ensure existence of sound and comprehensive internal control procedures and processes encompassing governance of Globe s operations, maintained/updated regularly, documented and approved, in order to: Safeguard Globe s resources and assure effective utilization Prevent occurrence of fraud and wrongdoing Protect the accuracy and reliability of Globe s financial and management reports Protect the integrity of information systems and logical assets Ensure compliance with applicable laws and regulations 2.2 Ensure that a transparent financial and operational management system, supported by a Procedures and Policies Handbook that will be used by the entire organization, is established to ensure the integrity of internal control activities throughout Globe. 2.3 Consider and discuss with Management, the internal auditors, and the external/independent auditors, the major issues as to the adequacy and effectiveness of Globe s internal control processes covering operational control systems, information technology system and security controls, financial process and management reporting controls, compliance monitoring and reporting controls, and any special audit steps adopted in light of material control deficiencies. 2.4 For significant control weaknesses identified, request Management to explain the impact and the actions taken to rectify the identified control weaknesses. 2.5 Receive an annual attestation from the President/Chief Executive Officer, the Chief Finance Officer and the Chief Audit Executive on the existence of adequate and effective internal control system in the conduct of Globe s business, in general. 1 Source: SEC CG Code for PLCs, Definition of Terms for Internal Control. 8

9 3. External/Independent Auditor The Audit and RPT Committee ensures that Globe has set appropriate policies and processes that strengthens the external/independent auditor s independence and improves audit quality. 4 In performing its oversight function over external/independent auditor, the Audit and RPT Committee shall: 3.1 Recommend the appointment, retention or discharge of the external/independent auditors accredited by SEC, including the fixing of their remuneration. The external/independent auditor appointment, re-appointment, removal and fees shall be approved by the Board and ratified by the shareholders. 4 Every five (5) years, or when the need arises as decided by the Audit and RPT Committee, a bid for the annual statutory audit of Globe s financial statements is carried out by the Chief Audit Executive in accordance with Globe s Procurement policy. The bid is offered to the top public accounting firms duly accredited by SEC, and the request for bid proposal covers, among others: Compliance statement on the firm s understanding of the work to be done, commitment to perform work within the required time period and why the firm believes it to be the best qualified to perform the engagement Technical proposal s mandatory elements: independence, license to practice in the Philippines, record of relevant engagement, legal/disciplinary proceedings taken or pending against the firm, quality assurance and professional practice development, professional services offered and deliverable reports and communication of results Critical elements: industry experience including global reputation, audit quality, audit approach and methodology, use of technology, proposed engagement team composition, business continuity plans Details of professional Fees 3.2 In the case of discharge or change of external/independent auditor, ensure that there is process for reporting to the regulators and the public through Globe s website and Annual Report the reasons for discharge or change and the date thereof, including the nature of nonaudit services performed by the external/independent auditor, as applicable. A preliminary copy of the said report shall be given by Globe to the external/independent auditor before its submission to the SEC and stockholders Ensure the rotation of the lead engagement partner at least once every five (5) years, or earlier and consider whether there should be regular rotation of the audit firm itself. 4 Source: SEC CG Code for PLCs, Principle no.9, Strengthening the External Auditor s Independence and Improving Audit Quality, Recommendation no

10 3.4 Review and pre-approve the external/independent auditors plans to understand the basis for their risk assessment and financial statement materiality, including the scope and frequency of the audit. In this regard, the Audit and RPT Committee shall discuss with the external/independent auditors, before the audit commences, the nature, scope and related fees of the audit, and ensure proper coordination when more than one professional service firm is needed. 3.5 Monitor coordination of efforts between the external/independent auditors and internal auditors. The Audit and RPT Committee shall ensure that the internal auditors and external/independent auditors act independently from each other. 3.6 Ensure that the external/independent auditor has unrestricted access to all records, properties and personnel to enable performance of the required audit. 3.7 Review and approve proportion of audit versus non-audit work both in relation to their significance to the external/independent auditors and in relation Globe s year-end financial statements, and total expenditure on consultancy, to ensure that non-audit work will not be in conflict with the audit functions of the external/independent auditor. The non-audit work of external/independent auditor allowed by the Audit and RPT Committee shall be disclosed in Globe s Annual Report and Annual Corporate Governance Report. 3.8 Review with the external/independent auditor any problems or difficulties, including any restrictions on the scope of the external/independent auditor s activities or on access to requested information and any significant disagreements with Management. The review may also include discussion of any proposed accounting adjustments that were passed or not recorded. 3.9 Review of the external/independent auditor s evaluation of internal accounting controls. External/independent auditors shall provide feedback to the Audit and RPT Committee on their observations of internal control weaknesses arising from statutory financial audits. External/independent auditors should highlight findings which are disputed by Management or where Management has not agreed to implement remedial actions that would rectify the identified weaknesses Conduct a separate meeting in executive session, with the external/independent auditors to discuss any matters that the Audit and RPT Committee or external/independent auditors believe should be discussed privately, including the results of the audit, year-end financial statements, and the quality of the management, financial and accounting controls. 10

11 3.11 Review the disposition of the recommendations in the external/independent auditor s management letter Allow the external/independent auditors to present their views in a report, if the external/independent auditor believes that the statements made in an annual report, information or proxy statements filed during their engagement are incorrect or incomplete Ensure the attendance of the external/independent auditors in the Annual General Stockholders Meeting to address queries within the audit scope Review the performance of the external/independent auditors, through the conduct of annual survey of external/independent auditors performance by Internal Audit among all Globe Management and employees identified to have substantial interaction with the external/independent auditors relevant to the annual statutory audit engagement. The survey covers evaluation of the external/independent auditors performance based on the following criteria: Quality of Services and Processes Credibility and Sufficiency of Resources Audit Scope Communication and Interaction Liaison/Relationship with Internal Audit Independence, Objectivity and Professional Skepticism The survey also includes eliciting feedback/comments from the respondents on the perceived strengths and weaknesses of the external/independent auditors. 5 Source: SEC CG Code for PLCs, Principle no.3, Establishing Board Committees, Recommendation no. 3.2 (i). 11

12 4. Internal Audit Function The Audit and RPT Committee, through the Internal Audit Department, monitors and evaluates the adequacy, effectiveness and reliability of Globe s overall internal control systems covering financial and management reporting, organization management, operations, information technology, security of physical and logical assets, compliance monitoring and reporting. In this regard, the Audit and RPT Committee shall: 4.1 Review and approve the Internal Audit Charter and obtain concurrence by the Board, including subsequent revisions thereto. 4.2 Oversee the implementation of an independent internal audit function as stated in the approved Internal Audit Charter. 4.3 Have a qualified Chief Audit Executive set up and oversee the Internal Audit Department; and be responsible for the internal audit activities, including those outsourced to third party service providers. 4.4 Recommend the appointment and/or grounds for approval of the Chief Audit Executive. The Audit and RPT Committee shall establish and identify the reporting line of the Chief Audit Executive, i.e., functionally report directly to the Audit and RPT Committee, so that the reporting levels allow the internal audit activity to fulfill properly its duties and responsibilities. The terms and conditions for the appointment/dismissal of the Chief Audit Executive shall be in accordance with the existing Globe policy for hiring/dismissal of heads of functions/departments. The Audit and RPT Committee, having appointed the Chief Audit Executive, shall also concur in his/her replacement, re-assignment or dismissal. 4.5 Review with Management and the Chief Audit Executive the plans, activities, staffing, and organizational structure of the internal audit function. 4.6 Review and approve the Annual Internal Audit Work Plan and all deviations therefrom, and ensure that internal audit examinations cover at least the evaluation of adequacy and effectiveness of controls encompassing Globe s governance of operations, information systems, reliability and integrity of financial and management information, effectiveness and efficiency of operational systems and processes, safeguarding of resources and ensure effective utilization, and compliance with laws, rules and regulations. The Annual Internal Audit Plan shall include the audit scope, resources and budget necessary to implement it. The Audit and RPT Committee shall also ensure that audit resources are allocated reasonably to the areas of highest risk and further ensure that the Annual Internal Audit Plan is in conformity with the objectives of Globe. 12

13 4.7 Approve the terms and conditions for outsourcing internal audit services. When specialized skills are not available within the Internal Audit organization to carry-out reviews of complex operations or sophisticated integrated systems, the Audit and RPT Committee may approve the augmentation of the expertise of the Internal Audit organization through the engagement of external specialists (e.g., IT security, forensic, fraud, telecommunication system experts, etc.) on a project or retainer basis. 4.8 Ensure that the internal auditors have free and full access to all of Globe s records, properties, and personnel relevant to and required by its function and that the internal audit activity shall be free from interference in determining its scope, performing its work and communicating its results. 4.9 Review Internal Audit s periodic reports and the Internal Audit Annual Report. Periodic reports shall highlight the status of projects in accordance with the audit plan approved by the Audit and RPT Committee, as well as, any unplanned projects. Such reports shall include a summary of key findings and recommendations, including the status of implementation. The Annual Report shall discuss the Internal Audit Department s activities and performance relative to the audit plans and strategies approved by the Audit and RPT Committee Review and monitor Management s responsiveness to the Internal Auditor s findings and recommendations. 6 On an ongoing basis, Internal Audit shall provide the Audit and RPT Committee with confirmation on the implementation of remedial actions agreed by Management in response to internal audit reports and other reports from the external/independent auditor, external counsel or the regulators Review the effectiveness of the internal audit function, including compliance with the Institute of Internal Auditors International Standards for the Professional Practice of Internal Auditing Provide inputs on the performance of the Internal Audit Department and communicate/discuss such inputs with the Chief Executive Officer who shall then translate these into a performance appraisal applicable to the Chief Audit Executive and internal auditors taken as a whole Conduct separate meetings with the Chief Audit Executive to discuss any matter arising from the internal auditors work that the Audit and RPT Committee or the auditors may deem necessary to be discussed privately. 6 Source: SEC CG Code for PLCs, Principle no.3, Establishing Board Committees, Recommendation no. 3.2 (e). 13

14 5. Compliance Oversight In order to coordinate, monitor and facilitate compliance with laws, rules and regulations 7, the Audit and RPT Committee shall: 5.1 Ensure that effective procedures are established for: (i) The receipt, retention, and treatment of complaints received by Globe regarding noncompliance with internal policies, including accounting controls, or auditing matters; and (ii) The confidential, anonymous submission by employees or other interested persons of concerns regarding questionable accounting or auditing matters. (iii) Appropriate corporate culture promoting ethical behavior. 5.2 Review control environment of Globe to assess whether Management sets the right tone that supports culture of integrity and promotes the corporate values of Globe. 5.3 Review the process for communicating the code of conduct, ethics policy, and anti-fraud policy to all of Globe s personnel. 5.4 Review internal control framework implemented by Management for fraud prevention and detection, including review of significant RPTs. On an annual basis, Management, together with Internal Audit, shall assess the effectiveness of Globe s Anti-Fraud Policy framework and present the results of its assessment to the Audit and RPT Committee, together with proposed improvement on the anti-fraud policies and controls to be adopted to address any gaps noted from the review. The Audit and RPT Committee shall also be provided by Management with reports on all cases of suspected and actual frauds and breaches of laws and regulations on a quarterly basis or more frequent, as necessary. 5.5 Review the process for monitoring and reporting compliance with applicable laws and regulations. 5.6 Review reports of internal and external/independent auditors, and regulatory agencies, where applicable, ensuring that Management is taking appropriate actions in a timely manner, including addressing control and compliance issues. 5.7 As necessary, institute and oversee special investigation, and, if appropriate, hire special counsel or experts to provide the necessary assistance. 7 Source: SEC CG Code for PLCs, Principle no.3, Establishing Board Committees, Recommendation no. 3.2 (k). 14

15 6. Risk Management Globe s essential risk governance structure endorsed by the Board consists of the various Board committees designated with oversight function on specific risks: The Executive Committee has oversight on corporate strategic risks and operational risk management. The Finance Committee oversees Globe s financial risk management, including risks related to capital structure, acquisitions and divestments, treasury activities, tax strategy and compliance. The Finance Committee does not have principal oversight with respect to Globe s financial reporting risks which is the responsibility of the Audit and RPT Committee. The Audit and RPT Committee provides oversight of the financial reporting and operational risks specifically on financial statements and reporting, internal controls, legal or regulatory compliance, corporate governance, risk management and fraud risks. For this purpose, Management shall provide a quarterly report to the Audit and RPT Committee on information regarding risk exposures and risk management activities. The overlapping oversight functions of the various Board committees enable an integrated approach to risk management oversight at Board level. The Audit and RPT Committee shall report regularly to the Board of Directors on Globe s risk management efforts providing the Board with a more coordinated and effective review of risks across the company and assurance over Globe s overall risk management. Management, however, remains primarily responsible for the development and implementation of the risk management strategies, policies and systems intended to address the identified risks. 15

16 7. Related Party Transactions Globe s Policy on Related Party Transactions (RPTs) consists of: 8 Definition of related parties Coverage and materiality threshold Guidelines to ensure arm s-length terms Identification and prevention of management of potential or actual conflicts of interest Review by the Audit and RPT Committee Whistle-blowing mechanism Restitution of losses and other remedies for abusive RPTs Disclosure of RPTs In carrying out its oversight function over RPTs, the Audit and RPT Committee shall: Based on Globe s Policy on RPTs, assess on an ongoing basis, existing relations between and among businesses and counterparties to ensure that all related parties are identified continuously, RPTs are monitored, and subsequent changes in relationships with counterparties (from non-related to related, and vice versa) are captured. Subject to the coverage and materiality threshold defined in Section 2 of Globe s Policy on RPTs, related parties, RPTs and changes in relationships should be reflected in the relevant reports to the Board and regulators. 7.2 Review and approve all covered and material RPTs, as defined in Section 2 of Globe s Policy on RPTs, to ensure that these are not undertaken on more favorable economic terms (e.g., price, commissions, interest rates, fees, tenor, collateral requirement) to such related parties than similar transactions with non-related parties under similar circumstances and that no corporate or business resources of Globe are misappropriated or misapplied, and to determine any potential reputational risk issues that may arise as a result of or in connection with the transactions. In evaluating RPTs, the Audit and RPT Committee takes into account, among others, the following: The related party s relationship to Globe and interest in the transaction; The material facts of the proposed RPT, including the proposed aggregate value of such transaction; The benefits to Globe of the proposed RPT; The availability of other sources of comparable products or services; and An assessment of whether the proposed RPT is on terms and conditions that are comparable to the terms generally available to an unrelated party under similar circumstances. 8 Source: SEC CG Code for PLCs, Principle no.2, Establishing Clear Roles and Responsibilities of the Board, Recommendation no Source: SEC CG Code for PLCs, Principle no.3, Establishing Board Committees, Recommendation no. 3.5, items (a) to (f). 16

17 7.3 As defined in Section 8 of Globe s Policy on RPTs, ensure that appropriate disclosure is made, and/or information is provided to regulatory authorities relating to Globe s RPT exposures, and policies on conflicts of interest or potential conflicts of interest. The disclosure should include information on the approach to managing material conflicts of interest that are inconsistent with such policies, and conflicts that could arise as a result of Globe s affiliation or transactions with other related parties; 7.4 Subject to the coverage and materiality threshold defined in Section 2 of Globe s Policy on RPTs, report to the Board of Directors on a regular basis the status and aggregate exposures to each related party, as well as, the total amount of exposures to all related parties; 7.5 Ensure that the covered RPTs as defined in Section 2 of Globe s Policy on RPTs, including writeoff of exposures, are subject to a periodic independent review or audit process; and 7.6 Oversee the implementation of the system for identifying, monitoring, measuring, controlling, and reporting RPTs, including a periodic review of RPT policies and procedures. 17

18 Meetings: 1. To provide a systematic guide for the discharge of its responsibilities, the Audit and RPT Committee will agree on an annual calendar. The Audit and RPT Committee shall meet at least quarterly. Preferably, the quarterly meetings will be held prior to the meeting of the Board of Directors. 2. In cases when there is a need for special meetings to take up any critical matters that would need approval in between the quarterly meetings, it shall be up to the Chairman of the Audit and RPT Committee to either call for a special meeting or just allow the routing of the relevant reports among all the Audit and RPT Committee members and document discussion and decision through correspondence. 3. The agenda for the meetings will be developed by the Chief Audit Executive, based on the agreed calendar of activities and inputs from the Audit and RPT Committee members, subject to the approval of the Audit and RPT Committee Chairman. 4. All members of the Audit and RPT Committee are informed of the approved agenda at least ten (10) business days prior to the Audit and RPT Committee meeting. 5. Globe key officers, such as the President and Chief Executive Officer and Chief Finance Officer, shall be requested to attend the Audit and RPT Committee meetings. As, and when, appropriate, the Audit and RPT Committee may require other members of Management to be present at the meetings. External subject matter experts, such as the appointed external/independent auditors and other consultants, may also be invited to the meetings. 6. The Audit and RPT Committee shall have separate meetings with the Chief Audit Executive, Chief Compliance Officer, Chief Risk Officer and external/independent auditors in executive session (without any executive director of the Board and/or any member of Management present) at least twice a year. 7. The Audit and RPT Committee shall meet with the Board at least every quarter without the presence of the Chief Executive Officer or other management team members, and periodically meets with the Chief Audit Executive The external/independent auditors and/or Chief Audit Executive may request a meeting with the Audit and RPT Committee whenever deemed necessary. 9. Minutes of the Audit and RPT Committee meetings shall be prepared by the Chief Audit Executive, reviewed by all members of the Audit and RPT Committee and attested by the Audit and RPT Committee Chairman. 10 Source: SEC CG Code for PLCs, Principle no.3, Establishing Board Committees, Recommendation no. 3.2 (last paragraph). 18

19 Audit and RPT Committee Report to the Board of Directors: To keep the Board of Directors apprised on the results of the Audit and RPT Committee s activities, the Chairman of the Audit and RPT Committee shall submit a report every quarter to the Chairman of the Board of Directors; and shall be ready to present the report to the full Board during its meeting for the quarter. The Audit and RPT Committee Chairman will also submit and present an Annual Audit and RPT Committee report to the full Board during its first meeting following the immediate fiscal year. Other reporting responsibilities of the Audit and RPT Committee to the Board: 1. Report regularly to the Board of Directors about Audit and RPT Committee activities and issues that arise with respect to the quality or integrity of Globe s financial statements, the effectiveness of the system of internal controls, the performance and independence of Globe s external/independent auditors, the performance of the internal audit function and Globe s compliance with legal, regulatory or corporate governance requirements. 2. Highlight to the Board any serious concerns over the design or operating effectiveness of internal controls that may have a material impact on the financial statements. 3. For any awareness or knowledge of any suspected fraud or irregularity, or suspected infringement of any laws or regulations of any regulatory authority in the Philippines, which has or is likely to have a material impact on Globe s operating results or financial position, the Audit and RPT Committee must discuss such matter with the external/independent auditor and, at an appropriate time, report the matter to the Board. 4. Provide an open avenue of communication between internal auditors, the external/independent auditors, Management and the Board of Directors. 5. Report annually to the Board of Directors, describing the Audit and RPT Committee s composition, responsibilities and how they were discharged, and any other information required by rule, including approval of non-audit services. Confirm annually that all responsibilities outlined in this Charter have been carried out. 6. Review any other reports Globe issues that relate to the Audit and RPT Committee s responsibilities. 7. Review and assess the adequacy of the Audit and RPT Committee Charter at least annually, requesting Board of Directors approval for proposed changes and ensure appropriate disclosure as may be required by law or regulation. 8. Perform other activities related to this Charter as requested by the Board of Directors. 19

20 Performance Evaluation and Continuous Improvement: To ensure that the Audit and RPT Committee continues to fulfill effectively its responsibilities in accordance with global best practices and in compliance with Globe s Manual of Corporate Governance and other relevant regulatory requirements, the Audit and RPT Committee shall conduct an assessment of its performance and undergo training, at least annually. In this regard, the Audit and RPT Committee shall: 1. As a body, evaluate the effectiveness of the performance of the Audit and RPT Committee using as baseline the expectations set out in this Charter and documenting results of self-assessment in a worksheet, designed in compliance with SEC s guidelines 11 for the assessment of the Audit and RPT Committee s performance. To further improve the performance of the Audit and RPT Committee, members of Management, Internal Audit, General Counsel and external/independent auditors shall be required to comment and/or provide feedback using the same assessment questionnaire. The results of the said assessment may be validated by Globe s Compliance Officer. 2. Based on the results of the self-assessment, formulate and implement plans to improve its performance. These shall include the identification of relevant training needs intended to keep the members up-to-date with the developments in the business and changes in the legislative/regulatory environment, industry best practices, corporate governance, accounting and auditing standards, internal controls, risk management and other relevant issues (e.g., emerging risks). All members shall be given the opportunity to attend professional and technical development courses. 3. Semi-annually, review the status of implementation of such plans for improvement. In addition, the Audit and RPT Committee shall obtain and subject itself to an independent assessment by the Board of Directors relative to its performance in accordance with expectations set out in this Charter and the discharge of its responsibilities as specified in the Audit and RPT Committee Calendar of Activities. All documents and records pertinent to the assessment process shall be kept intact by the Internal Audit Department, which may be examined from time to time by the SEC and/or such other appropriate government agencies or instrumentalities. 11 Based on SEC Memo Circular No. 4, series of 2012: Guidelines for the Assessment of the Performance of Audit and RPT Committees of Companies Listed on the Exchange. 20

21 Functional and Secretariat Support: The Internal Audit Department, headed by the Chief Audit Executive, shall support the Audit and RPT Committee in the rendition of its functions, specifically: 1. Internal Audit shall provide all the secretariat support to the Audit and RPT Committee. 2. The Chief Audit Executive shall attend all the Audit and RPT Committee meetings and be primarily responsible for recording the minutes of the meetings. 3. Minutes of Audit and RPT Committee meetings, attested by the Audit and RPT Committee Chairman, shall be kept on file and accessible by all members of the Audit and RPT Committee. Minutes shall be available for inspection by any member of the Board of Directors, as and when requested. The Corporate Secretary shall be given a copy of the Audit and RPT Committee minutes for safekeeping. 4. The Chief Audit Executive oversees the drafting of the Audit and RPT Committee Charter and ensures conformity with regulatory requirements. 5. The Chief Audit Executive performs such other duties and responsibilities as may be provided by the Audit and RPT Committee in the discharge of the Committee s function. 21