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TERMS OF REFERENCE FOR THE AUDIT COMMITTEE

CONSTITUTION

Pursuant to Article 128 of Articles of Association of Sa Sa International Holdings Limited ("Company"), an audit committee ("Audit Committee") was formed with its term of reference adopted by the board of directors ("Board") of the Company on 13th October 1999. The term of reference ("Term of Reference") has been revised to cope with the amendments of the rules governing the listing of securities on The Stock Exchange of Hong Kong Limited ("Listing Rules") from time to time.

MEMBERSHIP AND QUORUM

The Audit Committee shall be appointed by the Board amongst the non-executive directors of the Company ("Non-Executive Director(s)") which shall consist of a minimum of three Non-Executive Director members,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 Listing Rules. The majority of the Audit Committee members must be independent Non-Executive Directors. Two independent Non-Executive Directors shall form a quorum.

The chairman of the Audit Committee ("Chairman") shall be one of the independent Non-Executive Directors therein appointed by the Board.

ATTENDANCE AT MEETINGS OF AUDIT COMMITTEE

4	The Chief Executive Officer and the Chief Financial Officer of the Company shall normally attend meetings and representative(s) of the external auditors shall attend the meetings for reviewing the interim and final results of the Company and any other meetings as invited by the Chairman. Head of internal audit function or designated team appointed for internal audit function (collectively “IA Function”) shall attend the meetings for presenting its internal audit reports to the Audit Committee from time to time. Other Board members shall also have the right of attendance. However,at least once a year the Audit Committee shall meet with the external auditors without the presence of the executive Board members.
5	The Company Secretary shall be the secretary of the Audit Committee. In the absence of the Company Secretary in any meeting of the Audit Committee,a member of the Audit Committee or such other person it may appoint shall act as the secretary of the meeting of the Audit Committee.
6	Full minutes of Audit Committee meetings should be kept by a duly appointed secretary of the meeting who should normally be the Company secretary. Draft and final versions of minutes of the Audit Committee meetings should be sent to all members of the Audit Committee for their comment and records respectively,in both cases within a reasonable time after the meeting. The secretary shall circulate the final version of minutes of meetings of the Audit Committee to all members of the Board as well.

MEETING SCHEDULE

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

AUTHORITY

Upon reasonable request,the Audit Committee members can obtain independent professional advice in appropriate circumstances as and when deem necessary and fit pursuant to the guideline for Directors to obtain independent professional advice approved by the Board and adopted by the Company from time to time. The Audit Committee should be provided with sufficient resources to discharge its duties. At the next meeting of the Board following a meeting of the Audit Committee, the Committee shall report to the Board on the findings and recommendations, if any, of the Committee.

The Audit Committee is authorized by the Board:-

(a)	to investigate any activity within its Terms of Reference. It is authorized to seek any information it requires from any employees and all employees are directed to co-operate with any request made by the Audit Committee;
(b)	to delegate its authority and duties to sub-committees,or individual members of the Audit Committee,as it deems appropriate;
(c)	to do any such things to enable the Audit Committee to discharge its authority and duties conferred on it by the Board; and
(d)	to conform to any requirement,direction,and regulation that may from time to time be prescribed by the Board or contained in the constitution of the Company or imposed by legislation.

DUTIES

The duties of the Audit Committee shall primarily include,among others,the followings: -

Relationship with the Company's auditors

(a)	to be primarily responsible for making recommendation to the Board on the appointment,reappointment and removal of the external auditor of the Company ("External Auditor"),and to approve the remuneration and terms of engagement of the External Auditor,and any questions of resignation or dismissal of the External 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 External Auditor the nature and scope of the audit 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;

Review of financial information of the Company

(d)

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 qualifications;
(v)	compliance with accounting standards; and
(vi)	compliance with the Listing Rules and other legal requirements in relation to financial reporting;

(e)

In regard to (d) above:-

(i)	members of the Audit Committee must liaise with the Company's Board,senior management and the person appointed as the Company's qualified accountant and the Audit Committee must meet,at least once a year,with the Company's auditors; and
(ii)	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 qualified accountant,compliance officer or auditors;

Oversight of the Company's financial reporting system and internal control procedures

(f)	to review the Company's financial controls,internal control and risk management systems and reports to the Board its finding for the Board's review;
(g)	to discuss with the management or the IA Function system of internal control and ensure that management has discharged its duty to have an effective internal control system;
(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 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;
(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 the Code Provisions C.3.1 to C.3.6 of Code on Corporate Governance Practices in Appendix 14 of the Listing Rules;
(n)	to consider other topics,as defined by the Board; and
(o)	to present and comment on the report prepared by the IA Function of the Company from time to time.

ATTENDENCE IN ANNUAL GENERAL MEETING

11	The Chairman,or in the absence of the chairman of the Committee,another member of the Audit Committee or failing this his duly appointed delegate,shall attend the annual general meeting of the Company and be available to answer questions at the annual general meeting of the Company.

AVAILABILITY OF TERMS OF REFERENCE

12	The Audit Committee should make available its terms of reference,explaining its role and the authority delegated to it by the Board,by making it available on request and by including the information on the Company's website.