Terms of Reference of the Audit Committee

Constitution

1. The Board has resolved the establishment of the Audit Committee on 27 June, 2004.

Membership

2. The Audit Committee shall be appointed by the Board. It shall consist of not less than 3 members appointed from amongst the non-executive directors, at least one of whom is an independent non-executive director with appropriate professional qualifications or accounting or related financial management expertise as required under rule 3.10(2) of the Rules Governing the Listing of Securities on the Stock Exchange of Hong Kong Limited (the “Listing Rules”). The majority of the Audit Committee members must be independent non-executive directors. A quorum shall be 2 members and one of them must be an independent non-executive director. The chairman of the Audit Committee shall be appointed by the Board and must be an independent non-executive director.

A former partner of the Company’s existing auditing firm should be prohibited from acting as a member of the Company’s Audit Committee for a period of 1 year commencing on the date of his ceasing:

(a) to be a partner of the firm; or

(b) to have any financial interest in the firm,

whichever is the later.

Attendance at meetings

3. The Chief Financial Officer, a representative of the external auditors and the Head of Internal Audit, if any, shall normally attend meetings. However, at least once a year the Committee shall meet with the external and internal auditors without executive Board members present.

4. The company secretary shall be the secretary of the Committee.

Frequency of meetings

5. Meetings shall be held not less than three times a year. The external auditors may request a meeting if they consider that one is necessary.

Authority

6. The Committee is authorized by the Board to investigate any activity within its terms of reference. It is authorized to seek any information it requires from any employee and all employees are directed to co-operate with any request made by the Committee.

7. The Committee is authorized by the Board to obtain outside legal or other independent professional advice and to secure the attendance of outsiders with relevant experience and expertise if it considers this necessary.

Responsibility

8. The Committee is to serve as a focal point for communication between other directors, the external auditor and the internal auditor (if any) as regards their duties relating to financial and other reporting, internal controls, external and internal (if any) audits and such other matters as the board determines from time to time.

9. The Committee is to assist the board in fulfilling its responsibilities by providing an independent review and supervision of financial reporting, by satisfying themselves as to the effectiveness of the internal controls of the Company and its subsidiaries (the “group”), and as to the adequacy of the external and internal (if any) audits.

Duties

10. The duties of the Committee shall be:

(a) 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;

(b) 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 auditor the nature and scope of the audit (including the engagement letter) and reporting obligations before the audit commences.;

(c) 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;

(d) to monitor integrity of financial statements, annual report and accounts, half-year report and, if prepared for publication, quarterly reports, and to review significant financial reporting judgements contained in them. In this regard, in reviewing the annual report and accounts, half-year report and, if prepared for publication, quarterly reports before submission to the board, the committee should focus particularly on:

(i) any changes in accounting policies and practices;

(ii) major judgemental areas;

(iii) significant adjustments resulting from the audit;

(iv) the going concern assumption and any qualifications;

(v) compliance with accounting standards; and

(vi) compliance with the Exchange Listing Rules and legal requirements in relation to financial reporting;

(e) In regard to (d) above:

(i) members of the committee must liaise with the board of directors and senior management and the committee must meet, at least once a year, with the Company’s auditors; and

(ii) the 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 employee responsible for the accounting and financial reporting function, compliance officer or auditors;

(f) to review the Company’s financial controls, internal control and risk management systems;

(g) 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;

(h) 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;

(i) 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;

(j) to review the group’s financial and accounting policies and practices;

(k) to review the external auditors 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;

(l) to ensure that the board will provide a timely response to the issues raised in the external auditor’s management letter;

(m) to report to the board on the matters set out in this code provision; and

(n) to consider other topics, as defined by the Board.

Reporting procedures

11. The secretary shall circulate the minutes of meetings and reports of the Committee to all members of the Board.