The board of directors (the “Board”) of the Company is pleased to present the Corporate Governance Report for the year ended 31 December 2012.

The Board is committed to enhancing the Group’s corporate governance standards by improving corporate transparency through effective channels of information disclosure. The Board believes that good corporate governance is beneficial for maintaining close and trustful relationships with its employees, business partners, shareholders and investors.

CORPORATE GOVERNANCE CODE

The Board adopted the code provisions of the Code on Corporate Governance Practices as set out in Appendix 14 to the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited ("Listing Rules") as the guidelines for corporate governance of the Group, and has taken steps to comply with this code wherever appropriate. Appendix 14 was revised and renamed as “Corporate Governance Code and Corporate Governance Report” (the “Code”) by The Stock Exchange of Hong Kong in October 2011. On 23 March 2012, the Board adopted the code provisions (the “Code Provisions”) contained in the Code as the latest guidelines for corporate governance of the Group. 

In the opinion of the Board, the Company has complied with the Code Provisions set out in the Code throughout the year ended 31 December 2012 with the following exceptions: 

CODE PROVISION A.6.7 STIPULATES THAT INDEPENDENT NON-EXECUTIVE DIRECTORS AND OTHER NON -EXECUTIVE DIRECTORS SHOULD ATTEND GENERAL MEETINGS AND DEVELOP A BALANCED UNDERSTANDING OF THE VIEWS OF THE SHAREHOLDERS.

Due to other pre-arranged business commitments which must be attended to by Mr. Chao Tien-Shin, Mr. Han Chia-Yau, Mr. Harn Jia-Chen and Mr. Nicholas William Rosa, the non-executive directors, and Mr. Way Yung Do, Dr. Chen Chih and Mr. Liu Fuchun, the independent non-executive directors, they were not present at the annual general meeting of the Company held on 29 June 2012. However, Ms. Chen Li-Chin, the former executive director who resigned on 26 October 2012, present in the annual general meeting was elected as chairman of that meeting pursuant to the Articles of Association to ensure an effective communication with the Shareholders at that meeting.

Due to other pre-arranged business commitments which must be attended to by Mr. Chao Tien-Shin, Mr. Han Chia-Yau, Mr. Harn Jia-Chen and Mr. Nicholas William Rosa, the non- executive directors, and Dr. Chen Chih and Mr. Liu Fuchun, the independent non-executive directors, they were not present at the extraordinary general meeting of the Company held on 18 December 2012 whereat resolutions relating to (i) various continuing connected transactions, (ii) renewal of various continuing connected transactions, (iii) revision of annual caps for continuing connected transactions; (iv) the proposed variation deed for the purpose of supplementing the existing non- competition deed as amended by an earlier variation deed; and (v) the investment in 15-20% equity interest in a PRC joint venture involving property development were considered and passed by the Shareholders. 

CODE PROVISION D.1.4 STIPULATES THAT ALL DIRECTORS SHOULD CLEARLY UNDERSTAND DELEGATION ARRANGEMENTS IN PLACE AND THAT THE COMPANY SHOULD HAVE FORMAL LETTERS OF APPOINTMENT FOR DIRECTORS SETTING OUT THE KEY TERMS AND CONDITIONS OF THEIR APPOINTMENT.

The Company has no formal letters of appointment for all directors other than Mr. Han Jia-Hwan as most of them have been serving as directors for a considerable period of time and a clear understanding of the terms and conditions of their appointment has already existed between the Company and the directors. Thus, no written record of the terms and conditions of appointment is considered necessary. In any event, all directors, including those without a letter of appointment and those appointed for a specific term, must retire by rotation in the manner prescribed under the articles of association of the Company, and on re-election of the retiring directors, shareholders are given information that is reasonably necessary for them to make an informed decision on the reappointment of the relevant directors. 

CODE PROVISION E.1.2 STIPULATES THAT THE CHAIRMAN OF THE BOARD SHOULD ATTEND THE ANNUAL GENERAL MEETING. 

Due to other pre-arranged business commitments which must be attended to by Mr. Han Jia-Hwan, the chairman, he was not present at the annual general meeting held on 29 June 2012. However, Ms. Chen Li-Chin, a former executive director who resigned on 26 October 2012, present in the annual general meeting was elected as chairman of that meeting pursuant to the Articles of Association to ensure an effective communication with the Shareholders at that meeting.

CODE PROVISION F.1.1 STIPULATES THAT THE COMPANY SECRETARY SHOULD BE AN EMPLOYEE OF THE COMPANY AND HAVE THE DAY-TO-DAY KNOWLEDGE OF THE COMPANY’S AFFAIRS. 

The company secretary of the Company, Ms. Pang Siu Yin, is a partner of the Company’s legal adviser, Cheung Tong & Rosa Solicitors. Ms. Pang has been appointed as the company secretary of the Company since February 2008. The Company has also assigned a member of the senior management, Ms. Chen Hong, head of legal department of the Company, as the contact person with Ms. Pang. Since the information concerning the performance, financial position and other major developments and affairs of the Group (including but not limited to the management monthly report to the Board) are speedily delivered to Ms. Pang through the contact persons assigned, Ms. Pang is very familiar with the operations and management of the Group. Having in place a mechanism that promptly informs Ms. Pang of the Group’s development without material delay and with her expertise and experience, the Board is confident that having Ms. Pang as the company secretary is beneficial to the Group’s compliance of the relevant board procedures, applicable laws, rules and regulations.