THE ROUSE COMPANY

Amended and Restated Charter of the Audit Committee

of the Board of Directors

 

I.

 

Purposes; Authority

 

 

A.

 

The Audit Committee (the “Committee”) is appointed by or with the concurrence of the Board of Directors of The Rouse Company (the “Company”) to assist the Board in fulfilling its oversight responsibilities regarding the Company. The Committee’s primary purposes are to:

 

 

1.

 

Assist Board oversight of (a) the integrity of the Company’s financial statements, (b) the Company’s compliance with legal and regulatory requirements, (c) the independent auditor’s qualifications and independence, and (d) the performance of the Company’s internal audit function (“Internal Audit”) and independent auditors; and

 

 

2.

 

Prepare the report required by the Securities and Exchange Commission (“SEC”)’s proxy rules to be included in the Company’s annual proxy statement, or if the Company does not file a proxy statement, in the Company’s annual report filed on Form 10-K with the SEC.

 

 

B.

 

The Committee has the authority to conduct any investigation appropriate to fulfilling its responsibilities, and it shall have direct access to the independent auditors, Internal Audit and anyone else in the Company. The Committee shall have sole authority to retain, at the Company’s expense, such special legal, accounting, or other advisors, consultants or experts as the Committee deems necessary in the performance of its duties.

 

 

C.

 

Although the Committee has the powers and responsibilities set forth in this Charter, the role of the Committee is oversight. The members of the Committee are not full-time employees of the Company, and individual members may or may not be accountants or auditors by profession or experts in the fields of accounting or auditing and, in any event, do not serve on the Committee in such capacity. Consequently, it is not the duty of the Committee to conduct audits or to determine that the Company’s financial statements and disclosures are complete and accurate and are in accordance with generally accepted accounting principles and applicable rules and regulations. These are the responsibilities of Management and the Company’s independent auditors, on whom the Committee is entitled to rely.

 

 

 

II.

 

Audit Committee Composition and Meetings

 

 

A.

 

The Committee shall be comprised of three or more directors as determined by the Board.

 

 

B.

 

All members of the Committee shall satisfy the applicable requirements of The New York Stock Exchange and other regulatory requirements.

 

 

C.

 

All members of the Committee shall be financially literate. To be financially literate, a person shall be able to read and understand fundamental financial statements, including a balance sheet, income statement and cash flow statement.

 

 

D.

 

Committee members shall be appointed by or with the concurrence of, and serve at the pleasure of, the Board. Committee members shall have the qualifications specified in this Charter and shall meet any other requirements of the New York Stock Exchange and other regulatory requirements.

 

 

 

E.

 

The Board shall appoint a Chairman who will preside at Committee meetings and report on behalf of the Committee to the Board. If the Chairman is not present at a meeting, the member with the longest service on the Committee shall serve as the Chairman for that meeting.

 

 

F.

 

The Committee generally will have four regularly scheduled meetings annually, but may meet more frequently as circumstances dictate. In addition to regularly scheduled meetings, the Committee shall meet at the request of any member. The Committee shall meet privately in executive session at least annually with the Director of Internal Audit and the independent auditors. In addition, the Committee shall meet privately in executive session at any time upon the request of management, the Director of Internal Audit or the independent auditors.

 

III.

 

Audit Committee Responsibilities and Duties

 

The Committee’s specific responsibilities and duties shall include the following:

 

 

A.

 

Independent Auditors.

 

 

1.

 

Directly appoint, retain and terminate the Company’s independent auditors.

 

 

2.

 

At least annually, obtain and review a report by the independent auditors describing: The firm’s internal quality-control procedures; any material issues raised by the most recent internal quality-control review, or peer review, of the firm, or by any inquiry or investigation by governmental or professional authorities, within the preceding five years, respecting one or more independent audits carried out by the firm, and any steps taken to deal with any such issues; and (to assess the auditor’s independence) all relationships between the independent auditor and the Company.

 

 

3.

 

Determine hiring policies for employees or former employees of the independent auditors.

 

 

B.

 

Review Procedures

 

 

1.

 

Review and reassess the adequacy of this Charter at least annually. Submit the Charter to the Board of Directors for approval and have the document published at least every three years in accordance with SEC regulations.

 

 

2.

 

Annually, review the Company’s business and financial risks to ensure that the Company’s significant risks are being adequately addressed by the Company’s internal auditors, external auditors, compliance officer, outside counsel and/or other appropriate parties.

 

 

3.

 

Review the Company’s annual audited financial statements and quarterly financial statements, in draft and substantially final form prior to filing or public distribution. Review should include discussion with Management and independent auditors of significant issues regarding accounting principles, practices and judgments and discussions with the independent auditors about the quality of the accounting principles as applied in the preparation of the Company’s financial statements, and the Company’s disclosures under “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” If significant issues are identified prior to filing or public distribution of the financial statements, the Committee shall be informed of these issues and shall meet to review them.

 

 

4.

 

With respect to the Company’s annual and quarterly financial statements, discuss any items required to be communicated by the independent auditors in accordance with Statement on Auditing Standards Number 61. The Committee also should review and discuss the internal audit report issued regarding the Company’s process for providing CEO and CFO certifications of its annual and quarterly financial statements. The Chairman of the Committee may represent the

 

 

 

entire Committee for purposes of this discussion for issues arising after the Committee’s discussion of the annual and quarterly financial statements, after making reasonable efforts to poll a majority of members of the Committee to obtain their views.

 

 

5.

 

Discuss earnings press releases, as well as financial information and earnings guidance provided to analysts and rating agencies.

 

 

6.

 

In consultation with Management, the independent auditors, and Internal Audit, consider the integrity of the Company’s financial reporting processes and controls. Review recommendations presented by the independent auditors in their “management letter,” including the status of previous recommendations, together with management’s responses.

 

 

7.

 

Review the independent auditors’ audit plan and discuss the general audit approach, scope, staffing and reliance upon management and Internal Audit.

 

 

8.

 

Periodically review the Company’s Business Conduct and Ethics Policy and the Company’s program for implementing and monitoring compliance with it.

 

 

 

C.

 

Internal Audit Department; Legal Compliance and Risk Management.

 

 

1.

 

Review an annual report from Internal Audit regarding its activities, audit plan, budget and staffing, and periodic reports identifying any change therein. Review the Company’s process for ensuring compliance with its Business Conduct and Ethics Policy. Review any significant reports prepared for management by Internal Audit and management’s response and follow-up to these reports.

 

 

2.

 

On at least an annual basis, review with the Company’s counsel any legal matters that could have a significant impact on the Company’s financial statements, the Company’s compliance with applicable laws and regulations, and inquiries received from regulators or governmental agencies.

 

 

3.

 

Periodically discuss policies with respect to risk assessment, risk management and the structure and utilization of Internal Audit.

 

 

4.

 

Meet separately, periodically, with management, with internal auditors and with independent auditors.

 

 

D.

 

Other Audit Committee Responsibilities

 

 

1.

 

Prepare a report to stockholders to be included in the Company’s annual proxy statement as required by SEC regulations.

 

 

2.

 

Annually conduct a Committee performance evaluation and report to the Board on the Committee’s activities. Provide the Board with such additional reports as are appropriate.

 

 

3.

 

Establish procedures for:

 

 

(a)

 

the receipt, retention, and treatment of complaints received by the Company or Management regarding accounting, internal accounting controls, or auditing matters; and

 

 

(b)

 

the confidential, anonymous submission by employees of the Company of concerns regarding questionable accounting or auditing matters.

 

 

4.

 

Report regularly to the Board of Directors.

 

 

5.

 

Perform any other activities consistent with this Charter, the Company’s Bylaws and governing law as the Committee or the Board deems necessary or appropriate.