China Suntien Green Energy : Terms of Reference of Audit Committee

Audit Committee of the Board of Directors of

China Suntien Green Energy Corporation Limited*

Terms of Reference

Chapter 1 General Provisions

Article 1 With a view to enhance the decision-making function of the Board of Directors of China Suntien Green Energy Corporation Limited (hereinafter referred to as "Company" or "the Company"), to conduct pre-audit and professional audit, to guarantee the Board of Directors' efficient supervision towards the Company's operational management, and to improve the administration structure of Company, we hereby formulate this Terms of Reference based on Rules Governing the Listing of Securities on the Stock Exchange of Hong Kong Limited (hereinafter referred to as "Hong Kong Listing Rules"), the Articles of Association of China Suntien Green Energy Corporation Limited (hereinafter referred to as "the Articles of Association"), the Working Statute for the Board of Directors of China Suntien Green Energy Corporation Limited (hereinafter referred to as "Statute of Board of Directors"), as well as other relevant laws, regulations and regulatory documents.

Article 2 The Audit Committee is a special unit subordinated to the Board of Directors mainly responsible for assisting the Board of Directors to independently review the financial status, internal control and the implementation and results of risk management system in the Company, for issuing the proposal for internal management, and for independently communicating, supervising and verifying with the internal audit department as well as external audit institutions.

Chapter 2 Composition of the Committee

Article 3 The Audit Committee shall at least consist of three members. All members of the Audit Committee must be non-executive directors, and independent non-executive directors shall be in the majority. One of the independent non-executive directors must have appropriate professional qualifications or accounting or related financial management expertise.

Article 4 Members of the Audit Committee shall be nominated by the Chairman of the Board together with more than half of the independent non-executive directors or one third of all directors, and be elected by the Board of Directors.

Article 5 There shall be a Chairman for the Audit Committee, who shall be an independent non- executive director responsible for presiding over the works of the Committee. That independent non- executive director must have appropriate professional qualifications or accounting or related financial management expertise. The appointment and dismissal of the Chairman of the Audit Committee shall be determined by the Board of Directors. The Chairman of the Audit Committee shall exercise the following functions and powers:

(1) to chair the Committee Meeting;

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1. to propose and call meetings;
2. to lead the Audit Committee and make sure that it operates and performs its responsibilities efficiently;
3. to ensure every resolution discussed by the Audit Committee will come into a clear and definitive conclusion, including agreed, disagreed or to be further discussed after supplementing materials;
4. to define the agenda of each Committee Meeting;
5. other functions and powers specified by this Terms of Reference.

Article 6 Members of the Audit Committee shall meet the qualifications as required by relevant Chinese laws, regulations and the Hong Kong Listing Rules.

Article 7 Members of the Audit Committee share the same term of office with that of the Board of Directors. The members may upon the expiry of their term of office be re-elected to serve a consecutive term. During this period, if members are no longer the Directors of Company or serve an executive position of the Company, or members being independent non-executive directors have lost the independence stipulated in the Articles of Association and Hong Kong Listing Rules, they will automatically lose the qualification for being a Committee member. Then, the Board of Directors shall fill their vacancy according to Articles 4 and 5 in this Terms of Reference, and the supplementary member's term of office shall end by the expiry of term of office for his/her serving as Director.

Article 8 As the supporting and contacting department for the Audit Committee, the Audit Department of the Company is responsible for the daily communication and organization of Committee meetings.

Article 9 The members of the supporting and contacting department may attend the Committee meeting when required by the Audit Committee. If necessary, the Committee can also invite directors, supervisors, Senior Management and persons in charge of relevant departments to attend the Audit Committee meeting.

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Article 10 A former partner of the Company's existing auditing firm shall not act as a member of its audit committee for a period of 2 years from the date of his ceasing:

1. to be a partner of the firm; or
2. to have any financial interest in the firm,
   whichever is later.

Chapter 3 Duties and Responsibilities of the Committee

Article 11 The Audit Committee shall exercise the following functions and powers:

1. to review the major financial objective, supervise the implementation of financial and accounting rules and regulations, supervise the financial work, review and analyze the financial and accounting policy and practice of the Company and its subsidiaries;
2. to review and analyze the financial supervision, risk control, internal supervision system and major control objective; discuss risk management and internal control system with the management to make sure that management has performed its duty to have an effective internal control system, discussions shall include the adequacy of resources, qualifications and experience of staff of the Company's accounting and financial reporting function, and their training programmes and budget; monitor the soundness, applicability and effectiveness of execution of the Company's finance, internal and risk control system, guide the Company's risk management; to consider major investigations findings on risk management and internal control matters as delegated by the board or on its own initiative and management's response to these findings;
3. to work out a policy on collateral management and review the collateral business;
4. to review the annual budget and final accounts and supervise the implementation;
5. to review the financial analysis and monitor the implementation result of material investment projects, organize the review of the post-evaluation of these material financing projects;
6. to review the proposals on profit allocation and loss remedial solutions, and make recommendations;
7. to review the Company's annual internal audit working plan;
8. to monitor the internal audit system and its implementation, make recommendations on the setting up of internal audit system as well as the appointment and removal of person in charge of the audit institutions;

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1. to make recommendations on the appointment, re-appointment or dismissal of the external audit institutions to the Board of Directors, and to investigate and to approve their remuneration and terms of engagement, and any questions of its resignation or dismissal;
2. to help facilitate communication and coordination between the internal audit department and external audit institution to ensure that the internal audit department is adequately resourced for operation and adequately maintains its position; and to review and monitor the effectiveness of the internal audit department, and to serve as the major representatives between the Company and the external audit institution; and to oversee the relationships between the Company and external auditors;
3. to review the financial information of the Company and its publication, independently review and make recommendations on the integrity of the financial statements, annual and half-year reports and quarterly reports (if proposed to be published), and significant financial reporting judgements contained in these documentations. In reviewing these reports before submission to the Board of Directors, the committee should focus particularly on any changes in accounting policies and practices, major judgment areas, significant adjustments result from audit, the going concern assumptions and any qualifications, compliance with accounting standards, Hong Kong Listing Rules and legal requirements in relation to financial reporting;
4. In order to perform the duties as mentioned in item (11) above, members of the committee should liaise with the board and senior management and the committee must meet, at least twice a year, with the auditors and should consider any significant or unusual items that are, or may need to be, reflected in the reports and accounts, it should 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. to monitor and review the efficient operation of internal control system. While the employees of the company secretly raise concerns about the improprieties in financial statement, internal control system or other matters, it should ensure that proper arrangements are in place for Company to make a fair and independent investigation of these matters and for appropriate follow up action;
6. to study and monitor the independence and objectivity of the external audit institution, and the efficiency of audit procedure according to applicable standards; the Audit Committee shall discuss the nature and scope of audit as well as reporting duty with auditors prior to the audit;
7. to formulate and execute the policies for non-audit service provided by external audit institutions. The Audit Committee shall report and make recommendations to the Board of Directors on any actions or improvements that shall be taken;
8. to report to the Board of Directors about the work within its scope of responsibility and conduct research on other issues identified by the Board;

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1. to review the external auditor's management letter, any material queries raised by the auditor to management in respect of the about accounting records, financial accounts or systems of control and management's response; to ensure that the board will provide a timely response to the issues raised in the external auditor's management letter;
2. to report on the matters set out in the code provisions C.3.3 and C.3.7 in the Appendix 14 of Hong Kong Listing Rules;
3. other functions and powers conferred by the Board of Directors.

Article 12 The Audit Committee shall be responsible to the Board of Directors, and shall submit the resolutions, recommendations and reports of Committee to the Board of Directors for review. The Audit Committee shall coordinate with the Board of Supervisors for supervising and auditing activities.

Article 13 The Audit Committee is entitled to request the Senior Management of Company to provide full support to its work.

Article 14 The Senior Management shall fully support the work of the Audit Committee to make sure the information on risk management, operation and finance can be offered to the Committee in time. The Audit Committee is entitled to request the Senior Management to provide timely and comprehensive answers to the questions. The information offered to the Audit Committee should be correct and complete, and the format and quality should be appropriate and sufficient enough for the committee to make decisions accordingly.

Article 15 The Audit Committee is entitled to investigate the implementation of risk management, internal control, financial information and internal audits as delegated by the Board of Directors or on its own initiative. The investigation methods include but not limit to attending or sitting in on the relevant meetings of the Company and conducting investigation and research within the Company, or requiring the Senior Management or persons in charge of the Company to make verbal or written explanation to the Audit Committee within a specific period.

Article 16 After being authorized by the Board of Directors, the Committee, if necessary, may appoint intermediary institutions for providing professional opinion, and the relevant costs shall be borne by the Company.

Chapter 4 Decision-making Procedure of the Committee

Article 17 The Audit Committee is entitled to act within its responsibility scope, and ask for the necessary information from various departments and branches subordinated to the Company or the subsidiaries and associates of the Company. The supporting and contacting department shall be well- prepared for decision-making of Audit Committee, and shall collect and provide the written auditing materials to the Company, which including but not limited to:

(1) financial reports of Company;

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