Page 57 - TreasuryChinaTrust

Treasury China Trust Annual Report 2010 40

CORPORATE GOVERNANCE REPORT

The Board and Audit Committee have access to the Guidebook for Audit Committees in Singapore issued by the Audit Committee Guidance Committee in October 2008. Where appropriate, the Audit Committee will adopt relevant best practices set out in the Guidebook, which will be used as a reference to assist the Committee in performing its functions.

A whistle blowing policy has been put in place to provide a channel through which employees of management may report, in good faith and in confidence, any concerns in financial and other matters, and arrangements have been put in place for independent investigation with appropriate follow-up action.

COCG Code Principle 12: Internal Controls

The Trustee-Manager has the dual responsibility of safeguarding the interests of the Unitholders, and managing the business conducted by TCT. In order to do this the Board has established a system of internal controls to safeguard the Unitholder investments and the assets of TCT. These controls include approval limits for capital expenditure, investments and divestments, bank borrowing as well as internal control arrangements in relation to cheque signatories. In addition sub-limits are also delegated to various management levels to facilitate operational efficiency.

The Board is assisted in assessing the internal controls by the Audit Committee whose responsibility, inter-alia, is to monitor and evaluate the compliance of principal internal control systems and procedures and risk management systems established by management of Treasury Holdings Real Estate Pte. Ltd and Treasury Holdings (Shanghai) Property Management Co., Ltd. and the effectiveness of these internal controls and risk management system. A review of the internal controls will be undertaken annually as part of the internal audit program. The external auditors will assess the findings of these reviews as part of their annual audit.

The Board is of the view that TCT and the Trustee-Manager currently have an adequate internal control system in place during the financial period under review to provide reasonable assurance that TCT’s assets are safeguarded, laws and regulations are complied with and that the financial reporting is reliable.

Whilst no system can provide absolute assurance against material loss or financial mis-statement, TCT’s internal financial controls are designed to provide reasonable assurance that assets are safeguarded, that proper accounting records are maintained, and that financial information used within the business and for publication is reliable. In designing these controls, the Board of the Trustee-Manager has regard to the risks to which the business is exposed, the likelihood of such risks occurring and the costs of protecting against them.

COCG Code Principle 13: Internal Audit

TCT’s internal audit function has been outsourced to SBA Stone Forest Corporate Advisory (Shanghai) Co., Ltd (“SBASF”). SBASF reports to the Audit Committee on internal audit matters and reports to the CEO administratively.

One internal audit review was undertaken for the financial period ended 31 December 2010. The Audit Committee has reviewed the internal audit program for 2011 and is satisfied that SBASF has the necessary resources to adequately perform the internal audit function. SBASF conducts its internal audit according to the International Professional Practices Framework (“IPPF”) issued by the Institute of Internal Auditors.

Specific duties included within the scope of work to be undertaken as part of the Internal Audit programme include:

• an annual risk assessment of the controls and operating effectiveness; and

• presentation of the internal audit program annually to the Board of the Trustee-Manager and reporting to the Board on the findings of the internal audit so that they may consider what action, if necessary, should be taken.

The Audit Committee will review at least annually to ensure the adequacy of the internal audit function.

The Board recognises that whilst they have resolved to outsource the internal audit function, they retain responsibility for maintaining an effective internal audit program.