Committee Charters

1. Charter of Audit Committee

1. Purpose

The primary objective of the Audit Committee (the “Committee”) of Turquoise Hill Resources Ltd. (the “Corporation”) is to act as a liaison between the Board of Directors of the Corporation (the “Board”) and the Corporation’s independent auditors (the “Auditors”) and to assist the Board in fulfilling its oversight responsibilities with respect to: (a) the accounting and financial reporting processes of the Corporation, including the integrity of the financial statements and other financial information provided by the Corporation to its shareholders, the public and others, (b) the Corporation’s compliance with legal and regulatory requirements, (c) the audit of the Corporation’s financial statements, (d) the qualifications, independence and performance of the Auditors, (e) the Corporation’s risk management and internal financial and accounting controls, and management information systems, including the performance of the Corporation’s internal audit function, and (f) such other matters as shall be mandated under applicable laws, rules and regulations.

2. Organization of the Audit Committee

The Committee shall consist of three or more directors and shall satisfy the independence, financial literacy, expertise and financial experience requirements of applicable securities laws, stock exchanges and any other regulatory requirements. The members of the Committee shall be appointed by the Board on the recommendation of the Nominating and Corporate Governance Committee and serve at the pleasure of the Board.  A majority of the members of the Committee shall constitute a quorum.

Members of the Committee must be financially literate as the Board interprets such qualification in accordance with applicable Canadian and U.S. securities legislation and regulations, as well as the New York Stock Exchange (“NYSE”) standards relating to corporate governance and Nasdaq Capital Market (“Nasdaq”) standards relating to corporate governance.

No member of the Committee may serve simultaneously on the audit committees of more than three public companies, including the Corporation, unless the Board determines that such simultaneous service would not limit or impair the ability of such members to effectively serve on the Committee.  The basis for such determination shall be disclosed as required by law or stock exchange regulation.

The Committee has at all times a direct line of communication with the internal auditors and the Auditors.

Meetings of the Audit Committee

The Committee shall meet as many times as the Committee deems necessary to carry out its duties effectively, but not less frequently than four times per year.  The Committee will meet with management, the Corporation’s internal auditors and the Auditors in separate executive sessions to discuss any matters that the Committee or each of these groups believe should be discussed privately. Meetings shall be called by the chair of the Committee or by a majority of the members of the Committee.

The Board, or failing such selection, the members of the Committee, shall select a chair who will preside at each meeting of the Committee.

The chair of the Committee shall ensure that the agenda for each upcoming meeting of the Committee is circulated to each member of the Committee on a timely basis in advance of such meeting.

The Corporation’s internal auditors shall attend any meeting when requested to do so by the chair of the Committee.

4. Responsibilities of the Committee

The Committee shall have the following responsibilities:

(a) With respect to the Auditors

  • Be directly responsible for the appointment, compensation, retention (including termination) and oversight of the work of any independent registered public accounting firm engaged by the Corporation (including for the purposes of preparing or issuing an audit report or performing other audit, review or attestation services or other work for the Corporation and including the resolution of disagreements between management and the Corporation’s independent registered public accounting firm regarding financial reporting) and ensure that such firm shall report directly to it; recommend to the Board the independent auditors to be nominated for appointment as Auditors of the Corporation at the Corporation’s annual meeting, the remuneration to be paid to the Auditors for services performed during the preceding year; and recommend to the Board and the shareholders the termination of the appointment of the Auditors, if and when advisable. The Committee shall have the sole authority to determine the terms of engagement and the extent of funding necessary (and to be provided by the Corporation) for payment of compensation to the Auditors retained to advise the Committee and ordinary administrative expenses of the Committee that are necessary or appropriate in carrying out its duties.
  • Review the Auditor’s audit plan with the Auditor and management and approve the scope, extent and schedule of such audit plan.
  • Evaluate on an annual basis the performance of the Auditors, including the lead audit partner.
  • Take reasonable steps to confirm the independence of the Auditors, which include:
    • Reviewing the annual written statement of the Auditors regarding all of their relationships with the Corporation and other engagements that may reasonably be thought to bear on the independence of the Auditors, and discussing any relationships or services that may impact on their objectivity or independence;
    • Approving and overseeing the disclosure of all audit services provided by the external advisors to the Corporation or any of its subsidiaries, pre-approving all non-audit services provided by the Auditors and, exceptionally, approving and overseeing the disclosure of permitted non-audit services to be performed by the Auditors; and
    • As necessary, taking or recommending that the Board take appropriate action to oversee the independence of the Auditors.
  • Review and approve any disclosures required to be included in periodic reports under applicable securities laws, rules and regulations and stock exchange and other regulatory requirements with respect to non-audit services.
  • Consider the tenure of the lead audit partner on the engagement in light of applicable securities laws, stock exchange or applicable regulatory requirements.
  • Review all reports required to be submitted by the Auditors to the Committee under applicable securities laws, rules and regulations and stock exchange or other regulatory requirements.
  • Review and approve policies for the hiring of employees, partners, former employees or former partners of the Auditors or the Corporation’s former independent auditors.

(b) With respect to accounting and financial reporting

  • Review and discuss with management, the financial and accounting officer(s) and the Auditors, the Corporation’s annual audited financial statements and accompanying notes, the Auditors’ report thereon and the related press release, including disclosures made in management’s discussion and analysis, and obtain explanations from management on all significant variances with comparative periods, prior to recommending approval by the Board and the release thereof.
  • Review and discuss with management, the financial and accounting officer(s) and the Auditors, the Corporation’s interim and annual financial statements (and the interim or annual profit or loss press release associated therewith), management’s discussion and analysis and the Auditor’s review thereof, before recommending the approval by the Board and the release thereof.
  • Be satisfied that adequate procedures are in place for the review and approval, if required, of the Corporation’s disclosure of financial information extracted or derived from the Corporation’s financial statements and periodically assess the adequacy of these procedures.
  • Review with management and the Auditors the quality and not just the acceptability of the Corporation’s accounting policies and any changes that are proposed to be made thereto, including: (i) all critical accounting policies and practices used, (ii) any alternative treatments of financial information that have been discussed with management, the ramification of their use and the Auditors’ preferred treatment, and (iii) any other material communications with management with respect thereto, and reviewing the disclosure and impact of contingencies and the reasonableness of the provisions, reserves and estimates that may have a material impact on financial reporting.
  • Discuss with the Auditors the matters required to be discussed by applicable auditing standards requirements relating to the conduct of the audit.
  • Discuss with management and the Auditors major issues regarding accounting principles used in the preparation of the Corporation’s financial statements, including any significant changes in the Corporation’s selection or application of accounting principles.  Review and discuss analyses prepared by management and/or the Auditors setting forth significant financial reporting issues and judgments made in connection with the preparation of the financial statements, including analyses of the effects of alternative approaches under generally accepted accounting principles.
  • Review the Corporation’s Annual Information Form and Form 40-F and recommend these for approval by the Board.

With respect to risk management and internal controls

  • Take all reasonable measures to ensure that management has designed and implemented effective systems of risk management and internal controls and, at least annually, review the effectiveness of the implementation of such systems.  In consultation with the Auditors and the internal audit group, review the adequacy of the Corporation’s internal controls and its procedures designed to ensure compliance with laws and regulations, and any special audit steps adopted in light of material control deficiencies.
  • Establish procedures for (a) the receipt, retention and treatment of complaints received by the Corporation with respect to any matter, including accounting, internal accounting controls or auditing matters and (b) the confidential, anonymous submission by employees of the Corporation of concerns respecting any aspect of the Corporation’s business, including questionable accounting or auditing matters.

(d) With respect to the internal auditors

  • Monitor the qualifications of the internal auditors.
  • Maintain a direct report relationship with the internal auditors and review: (i) the internal control reports prepared by management, including management’s assessment of the effectiveness of the Corporation’s internal control structure and procedures for financial reporting; and (ii) the performance of the internal auditors on an annual basis.
  • Discuss with management, the internal auditors and the Auditors any changes in internal control over financial reporting considered for disclosure in the Corporation’s public filings.
  • Review the internal audit plan periodically and monitor its execution.

(e) With respect to the Committee

  • Review and assess annually its own performance and the adequacy of this Charter and recommend to the Nominating and Corporate Governance Committee any changes to this Charter deemed appropriate by the Committee.

In fulfilling its duties and responsibilities under this Charter, the Committee will be entitled to reasonably rely on (a) the integrity of those persons within the Corporation and of the professionals and experts (such as the Auditors) from which it receives information, (b) the accuracy of the financial and other information provided to the Committee by such persons, professionals or experts, and (c) the representations made by the Auditors as to any services provided by it to the Corporation.

5. Reporting

The chair of the Committee reports regularly to the Board on the business of the Committee as well as at such time and in such manner as the Board may otherwise require.

The Committee shall review with the full Board any issues that have arisen with respect to the quality or integrity of the Corporation’s financial statements, the Corporation’s compliance with legal or regulatory requirements, the performance or independence of the Auditors or the performance of the Corporation’s financial and accounting group.

6. Retention of Independent Advisors

In performing its responsibilities, the Committee may, as required and subject to advising the chairman of the Board, engage an outside advisor for advice and assistance at the expense of the Corporation.

7. Additional

  • Note that the Corporation is subject to the requirements set forth in the following agreements which may affect the above:
  • The Private Placement Agreement dated October 18, 2006 among the Corporation and Rio Tinto International Holdings Limited;
  • The Heads of Agreement dated December 8, 2010 among the Corporation and Rio Tinto International Holdings Limited;
  • The Memorandum of Agreement dated April 17, 2012 among the Corporation, Rio Tinto International Holdings Limited and Rio Tinto South East Asia Limited, as amended pursuant to an Amending Agreement dated May 22, 2012;
  • The Memorandum of Agreement dated August 23, 2013 among the Corporation, Rio Tinto International Holdings Limited and Rio Tinto South East Asia Limited, as amended pursuant to an Amending Agreement dated November 14, 2013; and
  • The Financing Support Agreement dated December 15, 2015 among the Corporation and Rio Tinto plc.

Nothing contained in this Charter is intended to expand applicable standards of conduct under statutory, regulatory or exchange requirements for the directors of the Corporation or the members of the Committee.

2. Charter of Nominating & Corporate Governance Committee

1. Purpose

The primary objective of the Nominating & Corporate Governance Committee (the “Committee”) of Turquoise Hill Resources Ltd. (the “Corporation”) is to assist the Board of Directors of the Corporation (the “Board”) in fulfilling its oversight responsibilities by (a) identifying individuals qualified to become Board and Board committee members and recommending that the Board select director nominees for appointment or election to the Board; (b) developing and recommending to the Board corporate governance guidelines for the Corporation and making recommendations to the Board with respect to corporate governance practices; (c) recommending such permanent or ad hoc committees as it deems necessary for the purposes of assisting in the corporate governance of the Corporation; and (d) addressing such other matters as shall be mandated under applicable laws, rules and regulations.

2. Organization of the Committee

The Committee shall consist of three or more directors and shall satisfy the independence requirements of applicable securities laws, stock exchanges and any other regulatory requirements. The members of the Committee shall be appointed by the Board on the recommendation of the Committee and serve at the pleasure of the Board. All members shall have a working familiarity with corporate governance practices. A majority of the members of the Committee shall constitute a quorum.

3. Meetings of the Committee

The Committee shall meet as many times as the Committee deems necessary to carry out its duties effectively, but not less frequently than three times per year.  Meetings shall be called by the chair or a majority of the members of the Committee.

The Board, or failing such selection, the members of the Committee, shall select a chair who will preside at each meeting of the Committee. The chair shall be an independent director.

The chair of the Committee shall ensure that the agenda for each upcoming meeting of the Committee is circulated to each member of the Committee on a timely basis in advance of such meeting.

4. Responsibilities of the Committee

The Committee shall have the following responsibilities:

(a) With respect to Board composition and succession planning

  • Examine the size and composition of the Board and committees of the Board and recommend adjustments from time to time to ensure that the Board and its committees are of a size and composition that facilitates effective decision making.
  • Identify and assess the necessary and desirable competencies and characteristics, including as to director independence and diversity, for Board membership and regularly assess the extent to which those competencies and characteristics are represented on the Board.
  • Identify individuals qualified to become members of the Board in a manner consistent with the criteria approved by the Board and make recommendations to the Board for the appointment or election of director nominees.
  • Make recommendations to the Board with respect to membership on committees of the Board.
  • Regularly review the time required from non-executive directors to perform their functions and assess whether they are satisfying those time requirements.
  • Ensure succession plans are in place to maintain an appropriate balance of skills on the Board and periodically review those plans.
  • Receive comments from all directors as to the Board’s performance, oversee the execution of a process assessing the effectiveness of the Board as a whole, the Board committees, Board and committee chairs, and the contribution of individual directors.

Assist the Board in determining whether individual directors have material relationships with the Corporation that may interfere with their independence, as provided under applicable regulatory requirements.

(b) With respect to corporate governance matters

  • Develop for approval by the Board, monitor and oversee the disclosure of appropriate corporate governance structures and procedures, including the identification of decisions requiring approval of the Board and, where appropriate, measures for receiving feedback from the shareholders.
  • Develop for approval by the Board, monitor and oversee the disclosure of a Code of Business Conduct applicable to the Corporation’s directors, officers, contractors, suppliers and employees, and review and approve any change of the foregoing.
  • Review the Corporation’s Management Information Circular and, with respect to corporate governance disclosure, the Annual Information Form and recommend these for approval by the Board.
  • Review at least annually the Corporation’s diversity policy and recommend to the Board any changes deemed appropriate by the Committee.
  • Advise the Board on the Corporation’s engagement with shareholders and other stakeholders.
  • Ensure that the Board has appropriate structures and procedures so that the Board can function with the proper degree of independence from management.
  • Establish induction programmes for new directors.
  • Develop and maintain continuing education programmes for directors.
  • Review any proposed changes to the Corporation’s articles and by-laws as such documents relate to corporate governance matters.
  • Reviewing periodically the mandate of the Board and charters of its committees.
  • Review the adequacy of this Charter and recommend to the Board any changes to this Charter deemed appropriate by the Committee.

5. Reporting

The chair of the Committee reports regularly to the Board on the business of the Committee as well as at such time and in such manner as the Board may otherwise require.

6. Retention of Independent Advisors

In performing its responsibilities, the Committee may, as required and subject to advising the chairman of the Board, engage an outside advisor for advice and assistance at the expense of the Corporation.

7. Additional

Note that the Corporation is subject to the requirements set forth in the following agreements which may affect the above:

  • The Private Placement Agreement dated October 18, 2006 among the Corporation and Rio Tinto International Holdings Limited;
  • The Heads of Agreement dated December 8, 2010 among the Corporation and Rio Tinto International Holdings Limited;
  • The Memorandum of Agreement dated April 17, 2012 among the Corporation, Rio Tinto International Holdings Limited and Rio Tinto South East Asia Limited, as amended pursuant to an Amending Agreement dated May 22, 2012;
  • The Memorandum of Agreement dated August 23, 2013 among the Corporation, Rio Tinto International Holdings Limited and Rio Tinto South East Asia Limited, as amended pursuant to an Amending Agreement dated November 14, 2013; and
  • The Financing Support Agreement dated December 15, 2015 among the Corporation and Rio Tinto plc.

Nothing contained in this Charter is intended to expand applicable standards of conduct under statutory, regulatory or exchange requirements for the directors of the Corporation or the members of the Committee.

3. Charter of Health, Safety, Environment & Communities Committee

1.    Purpose

The Health, Safety, Environment and Communities Committee (the “Committee”) of Turquoise Hill Resources Ltd. (the “Corporation”) assists the Board of Directors of the Corporation (the “Board”) in fulfilling its oversight responsibilities by ensuring the Corporation has established appropriate practices with respect to sustainable development matters affecting the Corporation in the following areas: health, safety, environment and relationships with communities.

2.    Organization of the Committee

The Committee shall consist of three or more directors, at least one of whom shall satisfy the independence requirements of applicable securities laws, stock exchanges and any other regulatory requirements.

The members of the Committee shall be appointed by the Board on the recommendation of the Nominating and Corporate Governance Committee and serve at the pleasure of the Board. A majority of the members of the Committee shall constitute a quorum.

3.    Meetings of the Committee

The Committee shall meet as many times as the Committee deems necessary to carry out its duties effectively, but not less frequently than three times per year.  Meetings shall be called by the chair or a majority of the members of the Committee.

The Board, or failing such selection, the members of the Committee, shall select a chair who will preside at each meeting of the Committee. 

The chair of the Committee shall ensure that the agenda for each upcoming meeting of the Committee is circulated to each member of the Committee on a timely basis in advance of such meeting.

4.    Responsibilities of the Committee

The Committee shall have the following responsibilities:

  • Take all reasonable measures to ensure that appropriate health, safety, environmental and communities’ policies are in place and review and recommend, as appropriate, changes to such policies.
  • Take all reasonable measures to ensure that appropriate management reporting and control systems are in place to monitor the status of compliance with the Corporation’s health, safety, environmental and communities’ policies, as well as applicable laws and regulations in the areas of health, safety, environment and communities.
  • Assess the adequacy of the Corporation’s remedial actions following the identification of areas of concern with respect to health, safety, environmental and/or communities’ matters.
  • Review and assess management recommendations with respect to health, safety, environment and communities’ industry trends and recommendations for improvement of the Corporation’s health, safety, environmental and communities policies and procedures.
  • Take all reasonable measures to ensure that appropriate employee training standards and communications are developed.
  • Review the systems and controls in place to ensure appropriate scoping, estimating and accounting for environmental costs.
  • Review and assess annually its own performance and the adequacy of this Charter and recommend to the Nominating and Corporate Governance Committee any changes to this Charter deemed appropriate by the Committee.

5.    Reporting

The chair of the Committee reports regularly to the Board on the business of the Committee as well as at such time and in such manner as the Board may otherwise require.

6.    Retention of Independent Advisors

In performing its responsibilities, the Committee may, as required and subject to advising the chairman of the Board, engage an outside advisor for advice and assistance at the expense of the Corporation.

7.    Additional

  • Note that the Corporation is subject to the requirements set forth in the following agreements which may affect the above:
  • The Private Placement Agreement dated October 18, 2006 among the Corporation and Rio Tinto International Holdings Limited;
  • The Heads of Agreement dated December 8, 2010 among the Corporation and Rio Tinto International Holdings Limited; and
  • The Memorandum of Agreement dated April 17, 2012 among the Corporation, Rio Tinto International Holdings Limited and Rio Tinto South East Asia Limited, as amended pursuant to an Amending Agreement dated May 22, 2012;
  • The Memorandum of Agreement dated August 23, 2013 among the Corporation, Rio Tinto International Holdings Limited and Rio Tinto South East Asia Limited, as amended pursuant to an Amending Agreement dated November 14, 2013; and
  • The Financing Support Agreement dated December 15, 2015 among the Corporation and Rio Tinto plc.

Nothing contained in this Charter is intended to expand applicable standards of conduct under statutory, regulatory or exchange requirements for the directors of the Corporation or the members of the Committee.

4. Charter of Compensation & Benefits Committee

1. Purpose

The primary objective of the Compensation and Benefits Committee (the “Committee”) of Turquoise Hill Resources Ltd. (the “Corporation”) is to assist the Board of Directors of the Corporation (the “Board”) in discharging its responsibilities relating to compensation of the executive officers and directors of the Corporation.

2. Organization of the Committee

The Committee shall consist of three or more directors and shall satisfy the independence and experience requirements of applicable securities laws, stock exchanges and any other regulatory requirements. Members of the Committee shall have, as a whole: (i) direct experience in executive compensation, and (ii) skills and experience that should enable the Committee to make decisions on the suitability of compensation policies and practices, all as determined by the Board. The members of the Committee shall be appointed by the Board on the recommendation of the Nominating and Corporate Governance Committee and serve at the pleasure of the Board. A majority of the members of the Committee shall constitute a quorum.

3. Meetings of the Committee

The Committee shall meet as many times as the Committee deems necessary to carry out its duties effectively, but not less frequently than two times per year. Meetings shall be called by the chair or a majority of the members of the Committee.

The Board, or failing such selection, the members of the Committee, shall select a chair who will preside at each meeting of the Committee. The chair shall be an independent director.

The chair of the Committee shall ensure that the agenda for each upcoming meeting of the Committee is circulated to each member of the Committee on a timely basis in advance of such meeting.

4. Responsibilities of the Committee

The Committee shall have the following responsibilities:

(a) With respect to executive officers’ and directors’ compensation

  • Review and approve on an annual basis corporate goals and objectives relevant to Chief Executive Officer (“CEO”) compensation, evaluate the CEO’s performance in light of those goals and objectives and set the CEO’s compensation level based on this evaluation. The CEO shall not be present during voting or deliberations relating to his or her compensation.
  • Determine fees payable to members of any ad hoc committees established by the Board.
  • Review and make recommendations to the Board on an annual basis with respect to the adequacy and form of compensation and benefits of all executive officers and directors.
  • Administer and make recommendations to the Board with respect to the Corporation’s incentive compensation plans and equity-based plans, including setting performance targets so that incentive compensation aligns with the Corporation’s performance and the interests of all shareholders.
  • Review the recipients of, and the nature and size of equity-linked awards and bonuses granted from time to time, in compliance with applicable securities laws, stock exchanges and any other regulatory requirements.
  • Prepare any report as may be required under applicable securities laws, stock exchanges and any other regulatory requirements.
  • Oversee risk identification and management in relation to compensation policies and practices and reviewing disclosure in this respect.
  • Oversee the selection of a benchmark group for the purposes of comparing compensation or any element of compensation and reviewing disclosure in this respect.
  • Review the compensation discussion and analysis section of the Corporation’s management information circular and recommend its approval to the Board.

(b) With respect to other matters

  • Monitor the appropriate compensation structures in place so that the Corporation can attract, motivate and retain the quality of personnel required to meet its business objectives.
  • Maintain an assessment and compensation philosophy that rewards the creation of shareholder value.
  • Monitor strategic labour and human resources policies and practices.

(c) With respect to Committee issues

  • Review and assess annually its own performance and the adequacy of this Charter and recommend to the Nominating and Corporate Governance Committee any changes deemed appropriate by the Committee.

5. Reporting

The chair of the Committee reports regularly to the Board on the business of the Committee as well as at such time and in such manner as the Board may otherwise require.

6. Retention of Independent Advisors

In performing its responsibilities, the Committee may, as required and subject to advising the Chairman of the Board, engage an outside advisor (an “Advisor”) for advice and assistance at the expense of the Corporation. Before retaining an Advisor (other than in-house legal counsel and any Advisor whose role is limited to consulting on broad-based, non-discriminatory plans or providing information that is not customized in particular for the Corporation), the Committee shall consider the independence of such Advisor, including any independence factors that it is required to consider by applicable securities laws, stock exchanges or any other regulatory requirements.

7. Additional

  • Note that the Corporation is subject to the requirements set forth in the following agreements which may affect the above:
  • The Private Placement Agreement dated October 18, 2006 among the Corporation and Rio Tinto International Holdings Limited;
  • The Heads of Agreement dated December 8, 2010 among the Corporation and Rio Tinto International Holdings Limited;
  • The Memorandum of Agreement dated April 17, 2012 among the Corporation, Rio Tinto International Holdings Limited and Rio Tinto South East Asia Limited, as amended pursuant to an Amending Agreement dated May 22, 2012;
  • The Memorandum of Agreement dated August 23, 2013 among the Corporation, Rio Tinto International Holdings Limited and Rio Tinto South East Asia Limited, as amended pursuant to an Amending Agreement dated November 14, 2013; and
  • The Financing Support Agreement dated December 15, 2015 among the Corporation and Rio Tinto plc.

Nothing contained in this Charter is intended to expand applicable standards of conduct under statutory, regulatory or exchange requirements for the directors of the Corporation or the members of the Committee.

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