HKEx Stock Code: 399
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Corporate Governance

Audit Committee - Terms of Reference

1. Constitution

The board of directors of the Company ("Board") had resolved to establish the Audit Committee prior to the resumption of trading in the shares of the Company on 18 July 2008.

2. Membership

2.1 The Audit Committee shall be appointed by the Board from amongst the non-executive directors of the Company and shall consist of not less than three members, a majority of whom should be independent, and at least one of whom is an independent non-executive director with appropriate professional qualifications or accounting or related financial management expertise.
2.2 The Chairman of the Committee shall be appointed by the Board and should be an independent non-executive director.
2.3 A former partner of the Company's existing auditing firm is prohibited from acting as a member of the Committee for a period of 1 year commencing on the date of his ceasing to be a partner of the audit firm, or to have any financial interest in the audit firm, whichever is later.

3. Meetings

3.1 Meetings of the Audit Committee shall be held not less than twice a year. The external auditor may request a meeting if they consider that is necessary. The chief financial officer, the head of internal audit, or a representative of the external auditors shall normally attend meetings.
3.2 A quorum of the meeting shall be two members.
3.3 Resolutions of the Committee at any meeting shall be passed by a majority of votes of members if more than two members are present and by a unanimous vote if only two members are present.
3.4 The attendance of members at meetings of the Committee shall be recorded by the Company Secretary and disclosed in the corporate governance report annually.

4. Authority

4.1 The Audit Committee shall have unrestricted access to other members of the Board, senior management, the qualified accountant and external auditor in execution of its duties and responsibilities. All relevant employees will be directed to co-operate with any request made by the Audit Committee.
4.2 The Audit Committee is authorised to obtain outside legal or other independent professional advice in accordance with the procedures adopted by the Company from time to time and to secure the attendance of any external professional with relevant experience and expertise if it considers necessary.

5. Responsibilities

5.1 Relationship with the Company's auditor
  1. to be primarily responsible for making recommendation to the Board on the appointment, reappointment and removal of the external auditor, and to approve the remuneration and terms of engagement of the external auditor, and any questions of resignation or dismissal of that auditor;
  1. to act as the key representative body for overseeing the Company's relation with the external auditor;
  1. to review and monitor the external auditor's independence and objectivity and the effectiveness of the audit process in accordance with applicable standard. The Audit Committee should discuss with the external auditor the nature and scope of the audit and reporting obligations before the audit commences;
  1. to develop and implement policy on the engagement of an external auditor to supply non-audit services. For this purpose, external auditor shall include any entity that is under common control, ownership or management with the audit firm or any entity that a reasonable and informed third party having knowledge of all relevant information would reasonably conclude as part of the audit firm nationally or internationally. The Audit Committee should report to the Board, identifying any matters in respect of which it considers that action or improvement is needed and making recommendations as to the steps to be taken;
5.2 Review of financial information of the Company
  1. to monitor integrity of financial statements of the Company and the Company's annual report and accounts, half-year report and, if prepared for publication, quarterly reports, and to review significant financial reporting judgments contained in them. In this regard, in reviewing the Company's annual report and accounts, half-year report and, if prepared for publication, quarterly reports before submission to the Board, the Audit Committee should focus particularly on:-
    i. any changes in accounting policies and practices;
    ii. major judgmental areas;
    iii. significant adjustments resulting from audit;
    iv. the going concern assumptions and any audit qualifications;
    v. compliance with accounting standards; and
    vi. compliance with Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited and other legal requirements in relation to financial reporting;
  1. in regard to clause (e) above, the members of the Audit Committee must liaise with the Board and senior management and the Audit Committee must meet, at least once a year, with the Company's auditors;
  1. in regard to clause (e) above, the Audit Committee should consider any significant or unusual items that are, or may need to be, reflected in such reports and accounts and must give due consideration to any matters that have been raised by the Company's staff responsible for the accounting and financial reporting function, compliance officer or auditors;
5.3 Oversight of the Company's financial reporting system and internal control procedures
  1. to review the Company's financial controls, internal control and risk management systems; and to review arrangements by which employees of the Company may, in confidence, raise concerns about possible improprieties in financial reporting, internal control or other matters. The Audit Committee should ensure that proper arrangements are in place for the fair and independent investigation of such matters and for appropriate follow-up action;
  1. to discuss with the management the system of internal control and ensure that management has discharged its duty to have an effective internal control system including the adequacy of resources, qualifications and experience of staff of the Company's accounting and financial reporting function, and their training programmes and budget;
  1. to consider any findings of major investigations of internal control matters as delegated by the Board or on its own initiative and management's response;
  1. Where an internal audit function exists, to ensure co-ordination between the internal and external auditors, and to ensure that the internal audit function is adequately resourced and has appropriate standing within the Company, and to review and monitor the effectiveness of the internal audit function;
  1. to review the group's financial and accounting policies and practices;
  1. to review the external auditor's management letter, any material queries raised by the auditor to management in respect of the accounting records, financial accounts or systems of control and management's response;
  1. to ensure that the Board will provide a timely response to the issues raised in the external auditor's management letter; and
  1. to consider other topics, as defined by the Board.

6. Reporting procedures

The Company Secretary shall circulate the minutes of meetings and reports of the Committee to all members of the Board for their comments and records within a reasonable time after the meetings.

7. Miscellaneous

The English text of this terms of reference will prevail over the Chinese text in case of any inconsistency.

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