DAIWA ASSOCIATE 年报 2012-2013

DAIWA ASSOCIATE 年报 2012-2013

DAIWA ASSOCIATE 年报 2012-2013

Corporate Information DIRECTORS Executive directors Mr. LAU Tak Wan (President)Ms. CHAN Yuen Mei, Pinky (Vice-president)Mr. WAN Chor Fai Mr. CHEUNG Wai Ho Mr. CHONG Wing Kam, James Mr. FUNG Wai Ching Independent non-executive directors Dr. Barry John BUTTIFANT Mr. Choi Yuk Fan Dr. Liu Ngai Wing COMPANY SECRETARY Mr. MAN Wai Chuen PRINCIPAL BANKERS The Hong Kong and Shanghai Banking Corporation Limited China CITIC Bank International Ltd.AUDITOR PricewaterhouseCoopers Certified Public Accountants LEGAL ADVISERS TO THE COMPANY Baker & Mckenzie LEGAL ADVISERS ON BERMUDA LAW Appleby Spurling Hunter REGISTERED OFFICE Canon’s Court, 22 Victoria Street Hamilton HM12, Bermuda HEAD OFFICE AND PRINCIPAL PLACE OF BUSINESS 11th Floor, Block G, East Sun Industrial Centre 16 Shing Yip Street, Kwun Tong, Kowloon, Hong Kong PRINCIPAL REGISTRAR Butterfield Fulcrum Group (Bermuda) Limited 26 Burnaby Street Hamilton HM11Bermuda REGISTRAR IN HONG KONG Tricor Abacus Limited 26/F., Tesbury Centre 28 Queen’s Road East, Wanchai, Hong Kong ADR DEPOSITARY BNY Mellon Shareowner Services PO Box 358516, Pittsburgh PA 15252-8516, USA STOCK CODE-1037

Appleby Spurling Hunter

Canon’s Court, 22 Victoria Street Hamilton HM12, Bermuda

16

G 11

Butterfield Fulcrum Group (Bermuda) Limited 26 Burnaby Street

Hamilton HM11

Bermuda

28

26

BNY Mellon Shareowner Services PO Box 358516, Pittsburgh

PA 15252-8516, USA -1037

DAIWA ASSOCIATE 年报 2012-2013

Contents

Pages

President’s Statement 2Financial Summary

9Corporate Governance Report 12Report of the Directors 23Independent Auditor’s Report 36Consolidated Income Statement

38Consolidated Statement of Comprehensive Income 39Consolidated Balance Sheet 40Balance Sheet

41Consolidated Statement of Changes in Equity 42Consolidated Statement of Cash Flows 44Notes to the Financial Statements

45

Daiwa Industrial Complex in Heyuan Hi-Tech Development Zone

DAIWA ASSOCIATE 年报 2012-2013

President’s Statement

On behalf of the Board of Directors, I would like to present to shareholders the annual results of Daiwa Associate H oldings Limited (the “Company”) and its subsidiaries (collectively the “Group”) for the year ended 31 March 2013.I am taking this opportunity to express our gratitude to the Group’s staff for their contributions enabling the Group to work through a tough year.RESULTS AND FINANCIAL REVIEW For the year ended 31 March 2013, due to the impact of discontinued business, turnover of continuing business was reported as H K$547.9 million (2012: H K$643.0 million, restated), representing a decrease of 14.8% when compared with last financial year. Gross profit decreased by 2.6% to HK$68.7 million (2012: HK$70.5 million).? The earnings of continuing business before interest, tax, depreciation and amortization (EBITDA) were HK$23.0 million (2012: HK$51.5 million), representing a decrease of H K$28.5 million when compared to the last corresponding period.? The operating profit (EBIT) of the continuing business of the Group was H K$16.7 million (2012: H K$44.4 million), representing an decrease of HK$27.7 million when compared to the last corresponding period.? The net loss of the Group after the loss from discontinued operations was H K$170.7 million (2012: profit H K$8.8 million), representing an decrease of HK$179.5 million when compared to the last year.The Board of Directors has not recommended any payment of a final dividend. During the year, the Group did not declare any interim dividend.At 31 March 2013, the Group’s current assets amounted to H K$272.7 million (2012: H K$609.3 million) and the shareholders’ equity were H K$212.9 million (2012: H K$378.5 million). The current liabilities were H K$225.1 million (2012: HK$429.9 million).

?

?

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DAIWA ASSOCIATE 年报 2012-2013

President’s Statement

During the year, the Group had a major disposal of subsidiaries in electronics components distribution segment and resulted in substantial decrease in current assets and current liabilities, including bank borrowings. The inventory level, due to the same reason and an impairment for discontinued operations in manufacturing segment, decreased to HK$98.0 million (2012: HK$262.0 million). Average stock turnover was around 75 days based on closing stock at 31 March 2013 (2012: 70 days). The trade receivable (excluding notes receivable) also decreased by HK$97.1 million to HK$87.8 million (2012: HK$184.9 million).Because of the low utilization of banking facilities, the year end cash and bank balances were HK$60.2 million (2012: HK$105.4 million). Total available banking facilities of the Group were approximately H K$190.1 million (2012: H K$389.8 million), of which H K$75.1 million was available for use (2012: H K$78.7 million). Finance lease obligations outstanding as at 31 March 2013 amounted to HK$1.2 million (2012: H K$2.4 million). At 31 March 2013, the Company committed corporate guarantees of H K$293.0 million (2012: H K$484.0 million) in favor of banks for the granting of banking facilities to certain subsidiaries. The gearing ratio, which was defined as total borrowings after netting off cash and cash equivalents (net debt), to total capital (being total equity plus net debt) was 20% (2012: 30%).The Group’s assets were mostly financed by shareholders’ equity, trade payables and bank borrowings. Trade payables were repayable within one year. Bank borrowings comprised trade financing repayable within one year and term loans repayable in installments of 2 to 6 years based on original contractual maturity.The borrowings were mostly denominated in H ong Kong dollars and US dollars to prevent currency risk. The Group’s cash and cash equivalents were denominated in H ong Kong dollars, US dollars, Canadian dollars and Renminbi. The Group matched the payment and receipts of foreign currency arising from routine purchases and sales to control and minimize the financial cost and exchange risk. Most of the Group’s borrowings were interest bearing at floating rates which were based on the H ong Kong H IBOR rate or London LIBOR rate. As substantial part of trade payable and bank borrowings were denominated in H ong Kong and US dollars, the exchange risk for the Group was not expected

to be material, therefore the Group does not use derivative financial instruments for speculative purpose.

20% 30%

DAIWA ASSOCIATE 年报 2012-2013

President’s Statement

In the reported year, the Group successfully completed a rights issue of 78,847,889 ordinary shares of HK$0.1 each in the share capital at a subscription price of HK$0.20 per rights share in the proportion of one rights share for every four shares in issue, raising net proceeds of H K$14,923,000 for working capital purpose. The Group did not repurchase any ordinary shares in the open market.BUSINESS REVIEW AND PROSPECT In the reported year, due to the increase in minimum wages, labor shortage and appreciation of Renminbi, labor cost and other overheads of the manufacturing segment kept increasing. In the manufacturing segment of consumer electronics and telecommunications, due to the prolonged contraction of the American and European markets and the keen competition from small local Chinese manufacturers, the Group had suffered considerable losses in this segment. The Group has discontinued this business segment to eliminate continuous losses. The Group has also disposed part of the business in the segment of electronic components distribution to eliminate the high risk and low margin operations.In these discontinued operations, the Group had also provided for substantial impairment of plant and machinery, production equipment, tools, inventories and account receivables. This, being set off by the gain on disposal of subsidiaries of H K$39.5 million, has resulted in a loss from discontinued operations of HK$184.6 million.After the discontinuation of the Consumer Electronics and Electronic Components and Parts Manufacturing segment and after the disposition of some of the subsidiaries in electronic component distribution, the Group is engaged in the following major businesses:— Electronic Components Distribution;— Personal Computer Products Distribution; and — EMS (Contract Electronic Manufacturing Services).Electronic Components Distribution Turnover of electronic components distribution segment was H K$201.0 million (2012: H K$210.6 million, restated) representing a decrease of 4.6% when compared with the last financial year. 78,847,889 0.10 0.20 14,923,000

—

—

— (EMS)

DAIWA ASSOCIATE 年报 2012-2013

President’s Statement

Business in this segment is mainly to act as authorized distributor of various renowned brand names including the Group’s own manufactured electronic components. Major customers are manufacturers in H ong Kong and the PRC. Products of this segment include diodes, transistors, integrated circuits (IC), power management and devices, optical-electronics and illuminations as well as discrete components.The Group has about 30 years of experience in the business of distribution of electronic components. In addition to its solid base in H ong Kong, the Group is one of the pioneer distributors to penetrate in the PRC market. The Group has built up strong sales network and good logistics foundation in major PRC cities. The performance of Shenzhen, Shanghai and Beijing sales offices are outstanding among competitors. In order to explore new business opportunities, the Group has further strengthened the engineering capability in providing total solutions to customers and will continue bringing in new principal suppliers to sustain future growth.The Group has marketed an array of authorized distributorships of products from Rohm, Liteon, Arnold Magnetics, Diodes, SDC, Everlight, H avartech, PFC Device, AEM, Micrometal, Chino-Excel Technology (CET), and the Group’s own brand COS and TIP.Beijing, Shanghai and Shenzhen sales divisions kept playing an important role in this segment. The Group has also established sales offices in Zhaoqing and Chengdu.Personal Computer Products Distribution Turnover of this segment was H K$268.6 million (2012: H K$274.9 million) which represented a decrease of 2.3% in the reported year.Business in this segment is steady. In the reported year, the Group has extended the business from the main stream personal computers to the increasing demand for tablets, portable devices and peripherals. In addition to its core business, the Group continued to explore the business to mass merchants. Profit contribution from mass merchant business is improving.

(Rohm) Lite-On (Arnold Magnetics) Diodes SDC (Everlight) Havartech PFC Device AEM Micro-metal CET COS TIP

DAIWA ASSOCIATE 年报 2012-2013

President’s Statement

The Group has more than 20 years of experience in the market of personal computer systems and parts in North America. Products in this segment include motherboards, display cards, hard disk drives, optical storage devices, computer cases, power supplies, software, memories, desktop computers, notebook computers, tablet computers and computer accessories.EMS (Contract Electronic Manufacturing Services)Due to the elimination of some unprofitable products, turnover of this segment decreased to HK$78.3 million (2012: HK$157.6 million), representing a decrease of 50.3% when compared to last year.The Group has engaged in the professional production of telecommunication modules in mobile phone base stations, radar parts and electronic modules in automobiles as well as PCB assembly for industrial purpose products. The EMS plant is equipped with high speed SMT production lines with nitrogen filled reflow furnaces, precise solder paste screen printer, etc. Process reliability can be ensured by the inhouse RoHS Scanning Systems and X-Ray Inspection Machine and antistatic clear room.FUTURE PROSPECT After the strategic alignment of the Group’s business direction, the Group will focus in the business of low risk and higher gross margin with relative lower inventory levels. The Group expects that the business operation for the coming years will be more cost effective with reduced working capital requirement and more in-depth management concentration. This change releases resources of the Group to better identify the opportunity of growth.In the segment of Electronic Components Distribution, the Group will recover the turnover of the disposed business of this segment by the establishment of new distributorship of products from new principal suppliers. In addition to the existing product lines, the segment will also target the markets of optical electronics, illuminations and power management devices which are expected to have active growth in the coming years. (EMS)

(SMT) X

DAIWA ASSOCIATE 年报 2012-2013

President’s Statement

Business in the personal computer business is steady. The Group is actively sourcing for the opportunity to act as authorized distributor of new suppliers. With the day by day increase in business from mega stores, this segment has established sourcing office in Mainland China to ensure more varieties of products with good quality and pricing. The Group will continue to diversify the personal computer distribution business to further penetrate into the field of tablet computers and smartphone accessories. The consolidation of the number of competitors will provide good opportunity for the growth of the segment.In EMS (Contract Electronic Manufacturing Services) segment, after elimination of low margin products, the earning per worker increased substantially. At the same time, order forecast from customers, especially on telecommunication modules, is increasing. The Group expects that this business will grow in the coming year.To further utilize unemployed facilities after changing the direction in manufacturing business, the Group has already started to lease out some of the shop floors in the production site in Heyuan.After consolidation of resources from discontinued business, the Group is actively looking for new partners with niche product portfolios. The Group also focuses on training new management talents to ensure they are aligned with the strategic outlook of the Group.The management believes that in the coming fiscal year, the Group will start a new page of steady growth.Employees At 31 March 2013, after discontinuing the business segment in consumer electronics, the Group employed a total of approximately 800 employees (31 March 2012: 2,300 employees) located in Hong Kong, Canada and PRC.The Group’s remuneration policy is in line with the prevailing market practices and is determined on the basis of performance and experience of the individual. Sales personnel are remunerated by salaries and incentives in accordance with the achievement of their sales target. General staff are offered year-end discretionary bonuses, which are based on the divisional performance and

individual appraisals. The Group also provides a Mandatory Provident Fund or ORSO scheme and medical benefits to all Hong Kong employees.

(EMS)

DAIWA ASSOCIATE 年报 2012-2013

President’s Statement

The Group is committed to devoting more resources in providing internal and external training to the employees. In addition to sending staff to participate in seminars and lectures, the Group continues recommending that qualified staff take part in professional courses such as the ISO9000, TS16949 and Six-Sigma Quality Systems. The training programs not only enhance employees’ career development and professional knowledge, but also contribute to upgrading the management system of the Group. ISO9000 TS16949 Six-Sigma

DAIWA ASSOCIATE 年报 2012-2013

Financial Summary

FIVE YEAR FINANCIAL SUMMARY

The following is a summary of the consolidated results, assets and liabilities of the Group for the last five years.

Note: Turnover of each of the previous periods included in the five year financial summary

has been restated to conform to the current year presentation as a result of the discontinued operations.

DAIWA ASSOCIATE 年报 2012-2013

Financial Summary

FIVE YEAR FINANCIAL SUMMARY (continued)

Net Assets

HK$ million

Turnover

HK$ million

DAIWA ASSOCIATE 年报 2012-2013

Financial Summary

TURNOVER (CONTINUING OPERATIONS) BY PRINCIPAL BUSINESS SEGMENT FOR 2013

TURNOVER (CONTINUING OPERATIONS) BY

GEOGRAPHICAL SEGMENT FOR 2013

Electronic components

distribution (37%)

Personal computer

products distribution

(49%)

DAIWA ASSOCIATE 年报 2012-2013

Corporate Governance Report

The board of directors of the Company (the “Board”) is committed to maintain

good corporate governance standard and procedures to ensure the integrity,

transparency and quality of disclosure in order to enhance the shareholders’

value.

The Company has adopted the principles and complied with all the applicable

code provisions of the Corporate Governance Code (the “Code”) as set out

in Appendix 14 of the Rules Governing the Listing of Securities on the Stock

Exchange of H ong Kong Limited (the “Listing Rules”) for the year ended

31 March 2013, save for the deviations discussed below. The Board will

continuously review and improve the corporate governance practices and

standards of the Company to ensure that business activities and decision making

processes are regulated in a proper and prudent manner.

DIRECTORS’ SECURITIES TRANSACTION

The Company has adopted the Model Code for Securities Transactions by

Directors of Listed Issuers as set out in Appendix 10 to the Listing Rules as its

own code of conduct regarding directors’ securities transactions (the “Model

Code”). H aving made specific enquiry of all directors of the Company, the

directors of the Company have confirmed that they have fully complied with the

required standard as set out in the Model Code throughout the year ended 31

March 2013.

BOARD OF DIRECTORS

The Board focuses on overall strategies and policies with particular attention paid

to the growth and financial performance of the Group. The principal functions of

the Board are to:

(1) establish the strategic direction and development of the Group;

(2) determine the broad policies, strategic plans and performance objectives

of the Group;

(3) monitor management performance;

(4) approve financial plans and annual budgets, major funding proposals,

key funding and investment proposals;

(5) oversee the processes for evaluating the adequacy of internal controls,

risk management, financial reporting and compliance; and

(6) assume responsibility for corporate governance.

14

10

(1)

(2)

(3)

(4)

(5)

(6)

DAIWA ASSOCIATE 年报 2012-2013

Corporate Governance Report

BOARD OF DIRECTORS (continued)

The Board is collectively responsible for the leadership, control and overall strategic development of the Group, as well as overseeing internal control, financial performance, overall management and operations of the Group. The Board has delegated day-to-day operations to management, who is responsible for implementing the Group’s business strategies and managing the daily business operations.

The Board comprises four executive directors and three independent non- executive directors.

Regular Board meetings are held at least four times a year to approve annual and interim results, and to review the business operation and the internal control system of the Group. Apart from these regular meetings, Board meetings are also held to approve major or special issues.

Seven Board meetings were held during the year ended 31 March 2013.

The Company has received from each independent non-executive director an annual confirmation of independence pursuant to Rule 3.13 of the Listing Rules. The Company considers that all of the independent non-executive directors are independent.

Given the nature and business objectives of the Company, the Board has a balance of skill and experience appropriate for the requirements of the business of the Company. List of directors and their biographical details are set out on pages 25 to 27.

REMUNERATION PAID TO MEMBERS OF KEY

MANAGEMENT

Details of remuneration paid to members of key management (including all Directors and senior management as disclosed in section headed “Biographical Details of Directors and Senior Management” of this report) for the year ended 31 March 2013 fell within the following bands:

Number of individual

2013

2012

3,000,001 4,000,000 HK$3,000,001 – HK$4,000,000—12,000,001 3,000,000 HK$2,000,001 – HK$3,000,000211,000,001 2,000,000 HK$1,000,001— HK$2,000,000—2 1,000,000 Nil – HK$1,000,0006

3

3.13

25 27

DAIWA ASSOCIATE 年报 2012-2013

Corporate Governance Report

DIRECTORS’ ATTENDANCE AT MEETINGS

Members of the Board, number of Board meetings held and the attendance of

each member during the year are set out as follows:

Meeting attended/held during

the year ended 31 March 2013

Members of the Board

Board

General

Meeting

Executive directors

Mr. LAU Tak Wan (President)7/71/1

Ms. CHAN Yuen Mei, Pinky (Vice-president)7/71/1

Mr. WAN Chor Fai7/71/1

Mr. CHEUNG Wai Ho

(appointed on 27 March 2013)0/00/0

Mr. MAK Hon Kai, Stanly

(resigned on 27 March 2013)6/71/1

Independent non-executive directors

Mr. Barry John BUTTIFANT7/71/1

Mr. CHOI Yuk Fan7/71/1

Dr. LIU Ngai Wing7/71/1

BOARD MEETINGS

The executive directors meet on a regular basis to discuss the ordinary business

of the Company. Board meetings are held to discuss the overall development,

operation, financial performance, interim results, annual results and other

business of the Company that requires approval from the Board. Reasonable

notice has been given to Board members to give them an opportunity to attend.

All Board members are provided with relevant documentation covering the

subject matter of the board meetings. Board members are also provided with

sufficient information in a timely manner to review and consider matters to be

discussed at Board meetings. The Company utilizes telephone conferencing for

Directors who are not able to attend in person.

DAIWA ASSOCIATE 年报 2012-2013

Corporate Governance Report

BOARD MEETINGS (continued)During the Year, all Directors discharged their duties in a dedicated, diligent and proactive manner with reasonable prudence. They have executed their duties in accordance with statutory requirements, the Company’s Bye-laws (the “Bye-laws”) and the Listing Rules. All Directors have exercised due care in monitoring corporate matters of the Company and provided sufficient time and attention to all significant issues of Group.CHAIRMAN AND CHIEF EXECUTIVE OFFICER Under the Code provision A.2.1, the roles of the chairman and chief executive officer should be separated and should not be performed by the same individual.Mr. LAU Tak Wan is the Chairman of the Board and the president of the Company. In the opinion of the Board, the role of the president and the chief executive officer is the same. The Board considers that the present structure provides the Group with strong and consistent leadership and allows for efficient and effective business planning and execution. Hence, the Board believes that it is in the best interest of the shareholders of the Company that Mr. LAU Tak Wan will continue to assume the roles of the Chairman of the Board and the president of the Company. However, the Company will review the current structure as and when it becomes appropriate in future.INDEPENDENT NON-EXECUTIVE DIRECTORS The independent non-executive directors bring independent judgment to the Board. Each independent non-executive director sent a written confirmation of their independence pursuant to Rule 3.13 of the Listing Rules to the Company. Based on these confirmations, the Board considers that all independent non-executive directors have met the qualifications of Rule 3.13 of the Listing Rules for the Year.APPOINTMENT AND RE-ELECTION OF DIRECTORS Directors are appointed in accordance with their qualifications and experience to ensure they are capable to perform their duties and protect the interests of the stakeholders. Every newly appointed director receives a comprehensive and formal introduction to ensure that he/she has an understanding of the Group’s business and operation, his/her responsibilities and obligations under the Listing

Rules and relevant regulatory requirements, and the Model Code.

A.2.1

3.13 3.13

DAIWA ASSOCIATE 年报 2012-2013

Corporate Governance Report

APPOINTMENT AND RE-ELECTION OF

DIRECTORS (continued)

Under the Code provision A.4.1 stipulates that non-executive directors shall be

appointed for a specific term and be subject to re-election. The independent

non-executive directors of the Company have not appointed for a specific term

of office, which constitutes a deviation from A.4.1 of the Code. H owever, all

independent non-executive directors are subject to retirement by rotation at the

Annual General Meeting of the Company in accordance with the Company’s

Bye-laws.

According to the provisions of the Company’s Bye-laws and the Listing Rules,

any Director appointed by the Board to fill a casual vacancy shall hold office

until the next following general meeting of the Company, and in the case of an

addition to the existing Board, until the next following Annual General Meeting

of the Company. Furthermore, each Director, including those appointed for

a specific term or holding office as Chairman and/or Managing Director, are

subject to retirement by rotation at least once every three years.

CONTINUING PROFESSIONAL DEVELOPMENT

The Directors are encouraged to participate in continuous professional

development to develop and refresh their knowledge and skills. The Company

would provide a comprehensive induction package covering the summary of

the responsibilities and legal obligations of a director of a H ong Kong listed

company, the Company’s constitutional documents and the Guides on Directors’

Duties issued by the Companies Registry to each newly appointed Director to

ensure that he/she is sufficiently aware of his/her responsibilities and obligations

under the Listing Rules and other regulatory requirements.

Directors are continually updated on developments in the statutory and

regulatory regime and the business environment to facilitate the discharge of

their responsibilities. Continuing briefings and professional development to

Directors would be arranged whenever necessary.

During the year, all directors and Company Secretary confirmed that they have

complied with the code.

REMUNERATION COMMITTEE

The Remuneration Committee is responsible for making recommendations to

the Board on, among other things, the Company’s policy and structure for the

remuneration of all directors and senior management of the Company and is

delegated by the Board with the responsibility to determine on behalf of the

Board the specific remuneration packages for all Executive directors and senior

management of the Company.

A.4.1 A.4.1

DAIWA ASSOCIATE 年报 2012-2013

Corporate Governance Report

REMUNERATION COMMITTEE (continued) No. of Meeting Attended/ Members of Remuneration Committee:No. of Meeting Independent non-executive directors Dr. LIU Ngai Wing (Chairman)2/2Mr. CHOI Yuk Fan 2/2Executive director Mr. LAU Tak Wan 2/2NOMINATION COMMITTEE The principal duties of the Nomination Committee are to:(1) review the structure, size and composition of the Board (including the skills, knowledge and experience) on a regular basis and make recommendations to the Board regarding any proposed changes;(2) identify individuals suitably qualified to become Board members and select or make recommendations to the Board on the selection of, individuals nominated for directorships;(3) assess the independence of independent non-executive Directors;(4) make recommendations to the Board on relevant matters relating to the appointment or re-appointment of Directors and succession planning for Directors in particular the chairman and the president (chief executive); and (5) where the Board proposes a resolution to elect an individual as an independent non-executive Director at the general meeting, the Nomination Committee should set out in the circular to shareholders and/or explanatory statement accompanying the notice of the relevant general meeting why they believe the individual should be elected and

the reasons why they consider the individual to be independent.

(1)

(2)

(3)

(4)

(5)

DAIWA ASSOCIATE 年报 2012-2013

Corporate Governance Report

NOMINATION COMMITTEE

No. of Meeting Attended/

Members of Nomination Committee:No. of Meeting

Executive director

Mr. LAU Tak Wan (Chairman)2/2

Independent non-executive directors

Mr. Barry John BUTTIFANT2/2

Mr. CHOI Yuk Fan 2/2

AUDIT COMMITTEE

The Audit Committee was established with a specific written terms of reference.

The Audit Committee is responsible for reviewing and supervising the financial

reporting process and internal control system of the Group and providing advice

and recommendations to the Board.

Audit Committee is also authorised 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.

Two Audit Committee meetings were held during the year ended 31 March 2013.

Members of the Audit Committee, number of Audit Committee meetings held

and the attendance of each member during the year are set out as follows:

No. of meetings

attended/No. of

Audit Committee

Members of the Audit Committee meetings held

Independent non-executive directors:

Mr. Barry John BUTTIFANT (Chairman)2/2

Mr. CHOI Yuk Fan2/2

Dr. LIU Ngai Wing2/2

DAIWA ASSOCIATE 年报 2012-2013

Corporate Governance Report

AUDIT COMMITTEE (continued)During the year, the Audit Committee has performed the following duties:(1) reviewed the annual financial statements with the auditor and reviewed the unaudited interim financial statements, with recommendations to the Board for approval;(2) reviewed the changes in accounting standards and policies as well as assessment of potential impacts on the Group’s financial statements;(3) reviewed the Group’s internal control system and discussed the relevant issues including financial, operational and compliance controls, and risk management functions;(4) reviewed the compliance issues with the regulatory and statutory requirements;(5) considered and recommended the appointment, re-appointment and approved the remuneration and terms of engagement of external auditor;(6) discussed with external auditor the nature and scope of the audit and reporting obligations; and (7) reviewed and monitored external auditor’s independence and objectivity and the effectiveness of the audit process in accordance with applicable standards.DIRECTORS’ RESPONSIBILITY FOR THE FINANCIAL STATEMENTS The Board acknowledge their responsibility for the preparation of the financial statements of the Group and ensure that the financial statements are in accordance with statutory and regulatory requirements and applicable

accounting standards. The Board also ensure the timely publication of the financial statements of the Group.

(1)

(2)

(3)

(4)

(5)

(6)

(7)

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