CORPORATE GOVERNANCE PRACTICES

The Company has complied with the provisions of the Code on Corporate Governance Practices (the "CG Code") set out in Appendix 14 of the Listing Rules throughout the accounting year ended 31 December 2009, save for the exceptions that the Company has not fixed the terms of appointment for the nonexecutive Directors which deviates from the provision of A.4.1 of the CG Code. However, they are subject to retirement by rotation and re-election at the annual general meeting of the Company in accordance with the provision to the Company's Articles of Association (the "Articles"), and their appointment will be reviewed when they are due for re-election. As such, in the opinion of the Directors, the principle of CG Code A.4 that all directors should be subject to re-election at regular intervals has been up held.

CODES OF CONDUCT ON DIRECTORS'SECURITIES TRANSACTION

The Company has adopted a code of conduct for securities transactions and dealings (the "Code of Conduct") based on the Model Code for Securities Transactions by Directors of Listed Issuers (the "Model Code") set out in Appendix 10 of the Listing Rules. The terms of the Code of Conduct are no less exacting than the standards in the Model Code, and the Code of Conduct applies to all the relevant persons as defined in the Model Code, including the Directors of the Company, any employee of the Company, or a Director or employee of a subsidiary or holding company of the Company who, because of such office or employment, are likely to be in possession of unpublished price sensitive information in relation to the Company or its securities. Having made specific enquiry, all Directors have fully complied with the required standard set out in the Model Code throughout the year of 2009.

BOARD OF DIRECTORS

During the year, the Board comprised two executive and seven non-executive Directors of whom three are independent as defined by the Stock Exchange. The number of independent non-executive Directors and the non-executive Directors represents 33% and 44% of the Board respectively. To enhance independence and accountability, the role and responsibility of the Group Chairman, Mr. Koo, Cheng-Yun, Leslie and the Group Managing Director, Mr. Wu Yih Chin, is separated (the biographical details of the Directors are set out on pages 23 to 28).

In accordance with the Articles, all Directors appointed to fill a causal vacancy should be subject to election by shareholders at the first general meeting after their appointment. At every annual general meeting, one-third of the Directors for the time being, or, if their number is not three or a multiple of three, then the number nearest to but not less than one-third shall retire from office by rotation.

The Board meets in person or through other electronic means of communication at least four times every year. The Board is responsible for overseeing the Group's businesses and development, formulating long term strategies and policies. The Board also monitors and controls operating and financial performance in pursuit of the Group's strategic objectives. All Directors and Board committees have recourse to external legal counsel and other professionals for independent advice at the Group's expense if they require it. The Board has delegated the day-to-day management and operation of the Group's businesses to management.

Pursuant to the requirements of the CG Code, two Board committees, namely, the Audit Committee and the Remuneration Committee were established to oversee particular aspects of the Group's affairs.

Details of the attendance of individual Directors at the Board meetings and the two Committees meetings during the year are set out in the table below:

NOMINATION OF DIRECTORS

According to the Articles of the Company, the Board has the power from time to time and at any time to appoint any person as a Director either to fill a causal vacancy or as an addition to the Board. The nomination should be taken into consideration of the nominee's qualification, ability and potential contributions to the Company.

AUDIT COMMITTEE

The Audit Committee was established in 1999 and its members comprise three independent non-executive Directors and an nonexecutive Director:

• Mr. Liao Poon Huai, Donald (Chairman of the Committee)
• Dr. Chih Ching Kang, Kenneth
• Mr. Shieh, Jen-Chung, Roger
• Ms. Wang, Lishin, Elizabeth

All members possess diversified industry experiences and appropriate professional qualifications as required under the Listing Rules.

The Audit Committee held three meetings during the year. Their major duties and responsibilities are set out in the terms of reference and the work conducted by the Audit Committee included the following matters:

1. Reviewed the Group's 2008 annual and 2009 interim reports, internal controls and corporate governance issues, financial and accounting policies and practices and made recommendations to the Board;
   
   
2. Recommended to the Board on the appointment of auditors and financial due diligence team for the proposed acquisition of the entire issued share capital of Upper Value Investments Limited and on the re-appointment of Deloitte Touche Tohmatsu as auditor and to develop policy on the engagement of an external auditor to supply non-audit services;
   
   
3. Discussed with the external auditors their independence and the nature and scope of the audit; and
   
   
4. Discussed with the external auditors any material queries raised by the auditors to management in respect of the accounting records, financial accounts or systems of control and management's response.

The Committee reviewed the Company's internal control based on the information obtained from the external auditors and Company's management and was of the opinion that there are adequate internal controls in place.

REMUNERATION COMMITTEE

The Remuneration Committee consists of three independent nonexecutive Directors and two executive Directors:

• Mr. Liao Poon Huai, Donald (Chairman of the Committee)
• Mr. Koo, Cheng-Yun, Leslie
• Mr. Wu Yih Chin
• Dr. Chih Ching Kang, Kenneth
• Mr. Shieh, Jen-Chung, Roger

Its major terms of reference are summarized as follows:

1. To formulate and recommend to the Board the policy for the remuneration of the executive Directors and other senior executives as designated by the Board;
   
   
2. To determine the individual remuneration package of each executive Director including base salary, annual bonus plans and allocation of share options;
   
   
3. To consider and recommend to the Board any payment or compensation commitment to be made to an executive Director on termination of his contract;
   
   
4. In formulating its policy, the Committee shall give due regard to the contents of the Listing Rules and shall also consider market forces and compare between different remuneration packages paid to directors of other companies of a similar size in comparable industries. The executive Directors may attend meetings of the Remuneration Committee when invited to do so, but not when their own remuneration is being discussed; and
   
   
5. To determine any performance related remuneration schemes and executive share option schemes.

The Remuneration Committee is authorized by the Board to seek any information it requires from any employee of the Company in order to perform its duties.

In connection with its duties, the Remuneration Committee is required by the Board to select, set terms of reference for and appoint remuneration consultants, at the Company's expense as the Remuneration Committee deems necessary in order to perform its duties.

The Remuneration Committee sets the remuneration policy for the executive Directors and senior management. Specifically, the Remuneration Committee agrees their service contracts, salaries, other benefits, including bonuses and other terms and conditions of employment. It also agrees terms for their cessation
of employment.

One meeting was held in 2009 with the attendance rate of 100%. No executive Director takes part in any discussion about his own remuneration.

AUDITOR'S REMUNERATION

During the year, the fees charged to the accounts of the Company and its subsidiaries for the non-statutory audit services amounted to HK$548,000. The non-statutory audit services consist of tax compliance and the interim review. The cost of statutory audit services provided by external auditors was HK$3,218,000. The responsibilities of the external auditors with respect to financial reporting are set out in the section of "Independent Auditor's Report" on pages 52 to 54.

CONNECTED TRANSACTIONS

During the year, the Group had issued announcement in respect of a number of 'connected transactions', details of which have been included in the Report of the Directors on pages 36 to 51 and the related announcements.

FINANCIAL REPORTING

The Board recognizes its responsibility to prepare the Company's accounts which give a true and fair view and are in accordance with generally accepted accounting standards published by the Hong Kong Institute of Certified Public Accountants. Appropriate accounting policies are selected and applied consistently; judgments and estimates made are prudent and reasonable.

INTERNAL CONTROL

The Board is entrusted with the overall responsibility for maintaining an adequate internal control system and reviewing its effectiveness through the Audit Committee. The Company management maintains and monitors the systems of controls on an ongoing basis.

Based on the assessment made by the Company's management and external auditors during its statutory audit, the Audit Committee satisfied that the internal control system is sufficient to provide reasonable assurances that the Group's assets are safeguarded against loss from unauthorized use or disposition, transactions are properly authorized and proper accounting records are maintained. In addition, the Board considered that the resources, qualifications and experience of the staff responsible for the Company's accounting and financial reporting function, their training and budget are adequate. The system is designed to provide reasonable, but not absolute assurance against material misstatement or loss, and to manage rather than eliminate risks of failure in the Group's operational system.