株式会社
NIRAKU GC HOLDINGS, INC.*(Incorporated in Japan with limited liability)(Stock Code: 1245)

Audit CommitteeRules* for identification purposes only–1–Preamble
1.

株式会社

(NIRAKU GC HOLDINGS, INC.*)(the “ Company ” ) was listed on the Main Board of The Stock Exchange of Hong
Kong Limited (the “ HKEx ” ) on 8 April 2015.
In compliance with the code of provision of the Corporate Governance Codes
issued by the HKEx (the “ Corporate Governance Code ” ), an audit committee (the“ Audit Committee ” ) needs to be established with the terms of reference as set
out and adopted herein.
Constitution
2.

The Audit Committee was established by on 25 June 2014. These rules wereadopted by the Audit Committee on 16 March 2015 in substitution for and to theexclusion of the existing rules of the Audit Committee.

Membership3.

The members of the Audit Committee shall be appointed by the Board of theCompany (the “ Board ” , each director of the Board, a “ Director ” ) from amongst
the non-executive Directors and shall consist of not less than three members,
a majority of whom should be independent non-executive Directors and at least
one of whom should be an independent non-executive Director with appropriate
professional qualifications or accounting or related financial management expertiseas required by the Rules Governing the Listing of Securities on HKEx (the “ListingRules ” ). The quorum of an Audit Committee meeting shall be all members of theAudit Committee.

4.

A former partner of the Company ’ s existing auditing firm shall be prohibited fromacting as a member of the Audit Committee for a period of one year from the dateof his ceasing:(a) to be a partner of the firm; or(b) to have any financial interest in the firm, whichever is the later.

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The chairman of the Audit Committee shall be appointed by the Board and should
be an independent non-executive Director.

6.

The term of office of a member of the Audit Committee shall expire at theconclusion of the annual general meeting of the Company relating to the mostrecent business year ending within one year following the date of these rules.

Attendance at meetings
7.

The accounting auditors, financial controller, the head of internal audit of theCompany and representatives of the accounting auditors shall normally attend
meetings.

Frequency and procedure of meetings
8.

Unless otherwise stated herein, the meetings of the Audit Committee are governedby the provisions regulating the meetings and proceedings of Directors in theCompany ’ s articles of incorporation.

9.

Meetings shall be held not less than twice a year or more frequently if the Audit
Committee determines it to be necessary. Meetings may be conducted by way oftelephone or other electronic means.

10. The secretary of the Audit Committee shall be a company secretary of theCompany or her appointed delegate.
11. An agenda and any accompanying Committee papers should be sent in full to
all members of the Audit Committee in a timely manner and at least seven days
before the proposed date of a meeting of the Audit Committee (or other agreedperiod).
12. The Company is obliged to supply the members of the Audit Committee withadequate information, in a timely manner, in order to enable them to makeinformed decisions. Where more detailed and complete information is requested
from the member of the Audit Committee, the respective Director shall makefurther inquiries if needed. The Audit Committee or individual member(s) of theAudit Committee could contact the executive officers and/or senior managementof the Company individually and independently.

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Annual General Meeting
13. The chairman of the Audit Committee shall attend the Company ’ s annual general
meeting and be prepared to respond to any shareholder ’ s questions on the Audit
Committee ’ s activities.
14. If the chairman of the Audit Committee is unable to attend an annual general
meeting of the Company, he shall arrange for another member of the Audit
Committee, or failing this, his duly appointed delegate, to attend in his place. Suchperson shall be prepared to respond to any shareholder ’ s questions on the Audit
Committee ’ s activities.
Authority
15. The Audit Committee is authorised to seek any information it requires from any
employee of the Company or its subsidiaries in order to perform its duties unlessthe relevant subsidiaries are reasonably justified not to provide such information
under Article 405, Paragraph 3 of the Companies Act of Japan (Act No. 86 of2005 of the law of Japan) and the relevant employees are directed to co-operatewith any request made by the Audit Committee. It is also authorised to investigate
any activity mentioned in these rules or otherwise affecting the integrity of theCompany.
16. The Audit Committee is authorised to obtain outside independent professional
advice, at the Company ’ s expense, and to secure the attendance of outsiders
with relevant experience and expertise if it considers this necessary. The Audit
Committee shall be exclusively responsible for establishing the selection criteria,
selecting, appointing and setting the terms of reference for any accounting
auditors who advise the Audit Committee.
17. The Audit Committee is authorised to review the effectiveness of the Company ’ s
and its subsidiaries ’ internal control systems, covering all material controls,
including financial, operational and compliance controls and risk management
functions including financial, business, operational and other risks of the Company
and its subsidiaries to undertake any related investigations.

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Duties
18. The duties of the Audit Committee shall include:

Relationship with the Company ’s auditors(a) making proposal to the shareholders on the appointment, reappointment
and/or removal of the accounting auditors, and to approve the remunerationand terms of engagement of the accounting auditors, and to consider any
questions of resignation or dismissal of those auditors;(b) reviewing and monitoring the accounting auditor ’ s independence andobjectivity and the effectiveness of the audit process in accordance withapplicable standards;(c) developing and implementing policy on the engagement of the accounting
auditors to supply non-audit services, and to report to the Board, identifying
and making recommendations on any matters requiring action or improvement;(d) discussing with the accounting auditors before the audit commences, thenature and scope of the audit, and ensuring co-ordination where more than
one audit firm is involved;(e) discussing problems and reservations arising from the interim and final audits,
and any matters the accounting auditors may wish to discuss;

Review of financial information of the Company(f)monitoring the integrity of financial statements, annual reports and accounts,
interim reports and, if prepared for publication, quarterly reports, and toreview significant financial reporting judgments contained in them. In reviewing
these reports and 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;–5–

(iv) the going concern assumptions and any qualifications;(v)

compliance with accounting standards; and(vi) compliance with any requirements from the HKEx and other legal
requirements in relation to financial reporting;(g) in regard to (f) above:(i)liaising with the Board, financial controller and the person appointed as
the Company ’ s accounting auditors;(ii)

meeting, at least twice a year, with the Company ’ s accounting auditors;
and(iii) considering any significant or unusual items that are, or may need to be,reflected in such financial statements, reports and accounts and giving
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 accounting auditors;

Oversight of the Company ’s risk management, financial reporting system andinternal control procedures(h) reviewing the Company ’ s financial controls, internal control and risk
management systems;(i)discussing the internal control system with the senior management and toensure that the senior management has performed its duties in establishingand maintaining an effective internal control system, including adequacyof resources, staff qualifications and experience, training programmes andbudget of the Company ’ s accounting and financial reporting function;(j)considering the findings of major investigations on internal control matters as
delegated by the Board or on its own initiative and the senior management ’ s
response to those findings;–6–

(k) where an internal audit function exists, ensuring co-ordination between theinternal and accounting auditors and further ensuring that the internal audit
function is adequately resourced and has appropriate standing within theCompany, reviewing and monitoring its effectiveness, monitoring the planningof internal audit processes and overseeing the result of the work of the internal
audit function;(l)reviewing the financial and accounting policies and practices of the Company
and its subsidiaries and associated companies at the relevant time or, where
the context so requires, in respect of the period before the Company became
the holding company of its present subsidiaries and associated companies,
the present subsidiaries and associated companies of the Company or thebusinesses operated by its present subsidiaries and associated companies or(as the case may be) its predecessor;(m) reviewing the accounting auditor ’ s management letter, any material queriesraised by the auditor to the senior management about accounting records,
financial accounts or systems of control and the senior management ’ sresponse;(n) ensuring that the Board will provide a timely response to the issues raised in
the accounting auditor ’ s management letter;(o) reporting to the Board on the matters set out in these rules;(p) where internal audit function exist, to ensure cooperation between theinternal and independent auditors, to ensure that the internal audit function isadequately resourced and has appropriate standing within the Company, andto review and monitor the effectiveness thereof:•the Audit Committee shall maintain close contact with the internal
audit team of the Company and its subsidiaries to enable organizedand effective oversight of the operations and financial conditions of theCompany and its subsidiaries, as well as any other audit tasks;•providing instructions and assistance to the internal audit team uponreceipt of a report from the same regarding any particular audit conducted
thereby which, in the opinion of the Audit Committee requires verification;
and–7–•

where an audit support staff has provided instructions to the internal
audit team or have received reports from the same, or under other similar
circumstances, the Audit Committee shall formulate a system whereby
such audit support staff shall report to the Audit Committee on the statusand details of the relevant circumstances in a timely and appropriatemanner.

(q) reviewing and monitoring the effectiveness of the implementation of thewhistle-blowing policy and other means that employees and those who deal
with the Company can use, in confidence, to raise concerns about possible
improprieties in any matters related to the Company and to ensure that proper
arrangements are in place for fair and independent investigation of thesematters and for appropriate follow-up action and ensuring the effectiveness of
the internal control committee, a sub-committee of the Audit Committee;(r)acting as the key representative body for overseeing the Company ’ s relation
with its accounting auditors;

Oversight of the Company ’s corporate governance functions(s)reviewing and monitoring the Company ’ s policies and practices on compliancewith legal and regulatory requirements;(t)reviewing and monitoring the training and continuous professional
development of Directors and senior management;(u) developing, reviewing and monitoring the code of conduct and compliancemanual (if any) applicable to employees and Directors;(v)developing and reviewing the Company ’ s policies and practices on corporate
governance and making recommendations to the Board and report to theBoard on matters;(w) reviewing the Company ’ s compliance with the Corporate Governance Codeand disclosure in the Corporate Governance Report;–8–(x)reviewing and monitoring the Company ’ s compliance with the Company ’ swhistle-blowing policy; and(y)considering any other topics, as determined by the Board.

Litigation between the Company and its directors and Executive Officers
19. The Audit Committee may, by resolution, nominate a member thereof to represent
the Company in litigation between the latter and any Director or executive officer
thereof (including former directors and executive officers, but not including themembers of the Audit Committee; the same below).
20. The Audit Committee member nominated by virtue of the preceding Paragraphshall represent the Company for the following purposes:•

to receive a request from the Company ’ s shareholders to initiate litigation
proceedings for pursuing liability against a Director or executive officer;•

to approve that demands for initiating the aforementioned legal action beeffected electronically; and•to receive a notice of an action from the Shareholder(s) under Article 849(3) ofthe Companies Act or a settlement notice from the court under Article 850(2)of the Companies Act.

Reporting Responsibility and Right to Seek Injunctions
21. The Audit Committee shall report to the Board without undue delay in the eventthat it has come to its attention that any of the Company ’ s directors or executive
officers has engaged in, or are likely to engage in, misconducts that are actually orpotentially in violation of the Company ’ s articles of incorporation, or any applicablelaws and regulations in Hong Kong and Japan.

–9–22. The members of the Committee may demand an executive officer or Director tocease and desist any act that actually or potentially violates the Company ’ s articles
of incorporation, or any applicable laws and regulations in Hong Kong and Japan,
in case where such act may cause material damages to the Company.
Post-Audit Review Activities
23. In connection with or following the completion of its review of the external audit
and internal audit, the Audit Committee or its chairman may in their discretion
meet with the accounting auditors, internal auditors or financial controller todiscuss any changes required in the audit plans for future periods and any otherappropriate matters regarding the audit process.
Failure to reach an agreement regarding accounting auditors
24. Where the Shareholders has taken a different view from the Audit Committee
regarding the selection, appointment, resignation or dismissal of accounting
auditors, the Audit Committee shall submit a statement to the Shareholders
explaining its recommendation, which statement will be disclosed by the Company
in the Corporate Governance Report in accordance with Appendix 23 of the Listing
Rules.
Reporting procedures
25. Full minutes of the Audit Committee ’ s meetings should be kept by the secretaryof the head office of the Company. The minutes shall be available for inspection at
any reasonable time on reasonable notice by any Director.
26. Minutes of meetings of the Audit Committee should record in sufficient detail thematters considered by the Audit Committee and decisions reached, including any
concerns raised by the Directors, members or dissenting views expressed. Draft
and final versions of minutes of such 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 such meetings. The minutes of the meeting shall besigned and sealed or electronically signed, by all committee members present.

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27. Without prejudice to the generality of the duties of the Audit Committee set out
above, the Audit Committee shall report back to the Board and keep the Board
fully informed of its decisions and recommendations, unless there are legal orregulatory restrictions on doing so.
Provision of Rules
28. The Audit Committee should provide these rules upon request and upload it tothe HKEx ’ s website and the Company ’ s website to explain the duties of the Audit
Committee and the authority the Board has granted to it.
Approval of Disclosure Statements
29. The Audit Committee shall be responsible for approving all disclosure statements
in relation to the Audit Committee, including but not limited to relevant disclosurestatements in annual reports, interim reports and information uploaded on theHKEx ’ s website and the Company ’ s website.
Review of Rules
30. The Audit Committee shall review these rules annually, and may consider andsubmit to the Board any proposed changes that the Audit Committee deems
appropriate or advisable.

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