About Cathay Real Estate

Purpose of Internal Audit

Cathay RED carries out the internal audit aiming to promote its sound operation, assist the board of directors and managers to check and review the effectiveness of the internal control system, ensure the effectiveness and efficiency of operation, the reliability, timeliness, transparency and compliance with relevant regulations and laws of reporting in a reasonable manner, and provide suggestions for improvement as appropriate to ensure the continuous and effective implementation of all systems. Cathay RED takes the internal audit as a basis for the review and amendment of internal control systems to achieve the objectives set by the board of directors and managers.

Organization and Responsibilities of Internal Audit

Cathay RED's auditors shall carry out internal audit directly under the board of directors, and submit the audit reports to the independent directors for review upon completion.The appointment and removal of the internal auditing officer shall be subject to the approval of the Audit Committee and the adoption of a resolution by the board of directors.

Organization

Operation of Internal Audit

I. Object and scope of audit

The audit shall be performed covering all financial, business and other operation and management functions of the Company, which are divided into 8 operation cycle control procedures, 18 management control procedures and computerized information processing. Every control  procedure shall be audited respectively.

The audit also cover all units of the Company and include the supervision and management of the audit activities of each subsidiary.

II. Timing for Internal Audit

1. Routine internal audit  In order to maintain the effective implementation of the Company's internal control systems, the audit office shall formulate the annual audit plan at the end of each year based on the characteristics of each operation cycle and by referring to the key audit points to be emphasized as promulgated by the Securities and Futures Bureau, and implement accordingly upon approval by the board of directors.
2. Irregular internal audit  In order to maintain the effective implementation of the Company's internal control systems, an audit or inventory of specific audit items for each unit and subsidiary shall be carried out based on the actual situation and business needs.
3. Self-evaluation shall be carried out for the Company's implementation of self-monitoring mechanism and improvement for the inspection quality and efficiency of the internal audit. Each unit and subsidiary shall conduct self-evaluation twice a year, once in the first and second half of the year, and submit the evaluation results to the internal audit unit for review upon completion.。

Appointment and Removal of Internal Auditors

The appointment and removal, evaluation, salary and remuneration of internal auditors of the Company shall be handled according to the provisions of "Work Rules", "Employee Remuneration Measures", "Employee Performance Evaluation Measures" and "Measures for Personnel Transfer at all Levels". The evaluation shall be carried out once a year. The aforementioned appointment and removal, evaluation, salary and remuneration shall be submitted to and approved by the chairman by following the signing and approval process.