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The Company has applied the principles of, and complied with, the applicable code provisions of the CG Code during the year ended 31 December 2008, except for certain deviations as specified. The reasons for such deviations are explained below.

The Board will review the current practices at least annually, and make appropriate changes if considered necessary.

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During the year, the Non-Executive Directors (the majority of whom were independent) provided the Group with a wide range of expertise and experience. Their active participation in the Board and Committee meetings brought independent judgement on issues relating to the Group's strategy, performance and management process, at the same time taking into account the interests of all shareholders.

Throughout the year, and up to the date of this Report, the Company has four INEDs representing more than one-third of the Board. Two of the four INEDs have the appropriate professional qualifications or accounting or related financial management expertise specified under Rule 3.10 of the Listing Rules. The Board has received from each INED an annual confirmation of his independence and considers that all the INEDs are independent in accordance with the guidelines set out in Rule 3.13 of the Listing Rules.

The Board meets regularly to discuss the overall strategy as well as the operations and financial performance of the Group, in addition to the meetings for reviewing and approving the Group's annual and interim results and other ad hoc matters which need to be dealt with by the Board. The Chief Financial Officer, and other relevant senior executives, are invited to attend Board meetings to make presentations and answer the Board's enquiries.

During the year, eight Board meetings were held and the attendance of each Director at the Board meetings is set out as follows:

	Number of Board meetings attended/held
Executive Directors:
Lee Seng Huang	8/8
Joseph Tong Tang	8/8
Non-Executive Directors:
Abdulhakeem Abdulhussain Ali Kamkar	8/8
Amin Rafie Bin Othman (also as alternate to Abdulhakeem Abdulhussain Ali Kamkar, appointed on 7 April 2008, resigned and ceased to be an alternate on 27 March 2009)	6/8
Patrick Lee Seng Wei	5/8
Independent Non-Executive Directors:
David Craig Bartlett	5/8
Alan Stephen Jones	8/8
Carlisle Caldow Procter	8/8
Peter Wong Man Kong	4/8

The Board has reserved for its decision or consideration matters covering mainly the Group's overall strategy, annual operating budget, annual and interim results, recommendations on Directors' appointment or re-appointment, material contracts and transactions as well as other significant policy and financial matters. The Board has delegated the daily operations and administration to the executive management under the supervision of the Executive Committee which has its specific written Terms of Reference. The respective functions of the Board and management of the Company have been formalised and set out in writing. The Board reviews these procedures from time to time to ensure that they are consistent with the existing rules and regulations.

Regular Board meetings each year are scheduled in advance to facilitate maximum attendance of Directors. At least 14 days' notice of a Board meeting is normally given to all Directors, who are given an opportunity to put matters for discussion on the Agenda. The Company Secretary assists the Chairman in preparing the Agenda for meetings, and ensures that all applicable rules and regulations are complied with. The Agenda and the accompanying Board papers are normally sent to all Directors at least three days before the intended date of a regular Board meeting (and as soon as practicable for other Board meetings). Draft Minutes of each Board meeting are circulated to all Directors for their comment before being tabled at the following Board meeting for approval. All Minutes are kept by the Company Secretary and are open for inspection at any reasonable time on reasonable notice by any Director.

According to current Board practice, if a substantial shareholder or a Director has a conflict of interest in a matter to be considered by the Board which the Board has determined to be material, the matter cannot be dealt with by a Board Resolution but must be dealt with by the Board at a duly convened Board meeting. The Articles of Association of the Company stipulate that save for the exceptions as provided therein, a Director shall abstain from voting and not be counted in the quorum at meetings for approving any contract or arrangement in which such Director or any of his associates have a material interest.

Every Director is entitled to have access to Board papers and related materials and has access to the advice and services of the Company Secretary. The Board and each Director also have separate and independent access to the Company's senior management. Directors will be continuously updated on major developments of the Listing Rules and other applicable regulatory requirements to ensure compliance and upkeep of good corporate governance practices. In addition, a written procedure was established in June 2005 (and revised in September 2007) to enable the Directors, in the discharge of their duties, to seek independent professional advice in appropriate circumstances at a reasonable cost to be borne by the Company.

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The Board believes that this structure spreads the workload that would otherwise be borne by an individual CEO, allowing the growing businesses of the Group to be overseen by the appropriately qualified and experienced senior executives in those fields. Furthermore, it enhances communications and speeds up the decision making process across the Company. The Board also considers that this structure will not impair the balance of power and authority between the Board and the management of the Company. An appropriate balance can be maintained by the operation of the Board, which holds at least four regular meetings a year to discuss the business and operational issues of the Group.

The Executive Chairman is responsible for the leadership of the Board, ensuring that all significant policy issues are discussed by the Board in a timely and constructive manner, that all Directors are properly briefed on issues arising at Board meetings, and that the Directors receive adequate, reliable and timely information.

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New Directors, on appointment, will be given an induction package containing all key applicable legal and Listing Rules requirements, as well as guidelines on the responsibilities and obligations to be observed by a Director. The package will also include the latest published financial reports of the Company and the documented corporate governance practices adopted by the Board. Senior management will subsequently conduct such briefings as necessary to give the new Directors more detailed information on the Group's businesses and activities.

All Non-Executive Directors (including INEDs) of the Company were appointed for a specific term of one year, subject to the relevant provisions of the Articles of Association of the Company or any other applicable laws whereby the Directors shall vacate or retire from their office but eligible for re-election. The Non-Executive Directors have been re-appointed for a further year from 1 January 2009.

According to the Articles of Association of the Company, any Director appointed to fill a casual vacancy shall hold office until the Company's first general meeting after the appointment and be eligible for re-election. Any Director appointed as an addition to the Board shall also hold office only until the next following Annual General Meeting ("AGM") of the Company and shall be eligible for re-election at that meeting. Further, at each AGM of the Company, 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. Every Director shall be subject to retirement by rotation at least once every three years.

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Remuneration Committee
The Remuneration Committee (formerly known as the Compensation Committee) has been established since April 1985 and currently consists of the four INEDs, including Messrs. Peter Wong Man Kong (Chairman of the Committee), David Craig Bartlett, Alan Stephen Jones and Carlisle Caldow Procter. The Remuneration Committee is provided with sufficient resources to discharge its duties and has access to independent professional advice in accordance with the Company's policy if considered necessary.

The major roles and functions of the Remuneration Committee are:

1. to review and recommend to the Board the remuneration policy and packages of the Directors and, where appropriate, to consult the Chairman about the Committee's proposals relating to the remuneration of other Executive Directors;
2. to review and recommend performance-based remuneration by reference to corporate goals and objectives approved by the Board from time to time;
3. to review and recommend the compensation payable to Executive Directors relating to any loss or termination of their office or appointment;
4. to review and recommend compensation arrangements relating to dismissal or removal of Directors for misconduct; and
5. to ensure that no Director is involved in deciding his own remuneration.

The Terms of Reference of the Remuneration Committee of the Company are in line with the code provision of the CG Code, but with a deviation from the code provision of the Remuneration Committee's responsibilities to determine the specific remuneration packages of all Executive Directors and senior management of a listed company. The Board considers that the Remuneration Committee of the Company should review (as opposed to determine) and make recommendations to the Board on the remuneration packages of Executive Directors only and not senior management for the following reasons:

1. the Board believes that the Remuneration Committee is not properly in a position to evaluate the performance of senior executives and that this evaluation process is more effectively carried out by the Executive Directors;
2. all the Remuneration Committee members are INEDs who come from differing professions and backgrounds, and they are not involved in the daily operation of the Company. They may have little direct knowledge of industry practice and standard compensation packages. The Remuneration Committee is thus not in a position to properly determine the remuneration of the Executive Directors;
3. the Executive Directors must be in a position to supervise and control senior management and thus must be able to control their compensation; and
4. there is no reason for Executive Directors to pay senior management more than industry standards and thus shareholders will benefit by reducing costs in the fixing of such compensation packages.

The Terms of Reference of the Remuneration Committee are available on the website of the Company. The Remuneration Committee shall meet at least once a year in accordance with its Terms of Reference. One Committee meeting was held in 2008 and the attendance of each member is set out as follows:

	Number of Committee meeting attended/held
Committee members:
Peter Wong Man Kong (Chairman)	1/1
David Craig Bartlett	1/1
Alan Stephen Jones	1/1
Carlisle Caldow Procter	1/1

Apart from Committee meetings, the Remuneration Committee also dealt with matters by way of circulation during 2008. In 2008, the Remuneration Committee performed work as summarised below:

1. reviewed the policy and structure for the remuneration of Directors;
2. reviewed the remuneration packages of the Executive Directors;
3. reviewed and recommended the Directors' bonuses for the year ended 31 December 2007 for the Board's approval; and
4. reviewed the proposed service fees of the INEDs and the renewal of the term of appointment of the Non-Executive Directors for one year commencing from 1 January 2009 and recommended the same for the Board's approval.

Each Director will be entitled to a fee which is to be proposed for shareholders' approval at the AGM of the Company. Further remuneration payable to Directors (including any service fees to the INEDs) for their additional responsibilities and services will depend on their respective contractual terms under their service contracts as approved by the Board on the recommendation of the Remuneration Committee. Details of the Directors' remuneration are set out in note 7 to the consolidated financial statements. Details of the Group's staff remuneration policy are also set out in the "Human Resources and Training" section in the Management Discussion and Analysis on Annual Report 2008 pages 19 and 20.

Subsequent to the balance sheet date, a Committee meeting was held to review the policy and structure of the remuneration of Directors and the remuneration packages of the Executive Directors, Messrs. Lee Seng Huang and Joseph Tong Tang. The bonuses for the said two Executive Directors in respect of the year 2008 were recommended by the Remuneration Committee and subsequently approved by the Board. Further details are also set out in note 7 to the consolidated financial statements.

Audit Committee
The Audit Committee has been established since April 1985 and currently consists of the four INEDs. The Audit Committee is chaired by an INED with appropriate professional qualifications or accounting or related financial management expertise. The current members of the Audit Committee are Messrs. Alan Stephen Jones (Chairman of the Committee), David Craig Bartlett, Carlisle Caldow Procter and Peter Wong Man Kong. The Audit Committee is provided with sufficient resources to discharge its duties and has access to independent professional advice according to the Company's policy if considered necessary.

The major roles and functions of the Audit Committee are:

1. to consider and recommend to the Board the appointment, re-appointment and removal of the external auditor, to approve the remuneration and terms of engagement of the external auditor, and address any questions of resignation or dismissal of such auditor;
2. to consider and discuss with the external auditor the nature and scope of each year's audit;
3. to review and monitor the external auditor's independence and objectivity;
4. to review the interim and annual financial statements before submission to the Board;
5. to discuss any problems and reservations arising from the interim review and final audit, and any matters the external auditor may wish to discuss;
6. to review the external auditor's management letters and management's response;
7. to review the Group's financial controls, internal control and risk management systems;
8. to review the internal audit plan, promote co-ordination between the internal and external auditors, and check whether the internal audit function is adequately resourced and has appropriate standing within the Group; and
9. to consider any matters arising from internal audit's investigations and management's responses.

The Terms of Reference of the Audit Committee of the Company are revised from time to time to comply with the code provisions, in particular code C.3.3 of the CG Code, but with deviations from the code provision regarding the Audit Committee's responsibilities to:

1. implement policy on the engagement of the external auditor to supply non-audit services;
2. ensure that management has discharged its duty to have an effective internal control system; and
3. ensure co-ordination between the internal and external auditors, and ensure that the internal audit function is adequately resourced and has appropriate standing within the listed company.

The Board considers that the Audit Committee of the Company should recommend (as opposed to implement) the engagement of the external auditor to supply non-audit services for the following reasons:

1. it is proper and appropriate for the Board and its Committees to develop policy and make appropriate recommendations;
2. the proper and appropriate mechanism for implementation of such policy and recommendations is through the Executive Directors and management; and
3. INEDs are not in an effective position to implement policy and follow up the same on a day-to-day basis.

Furthermore, the Board considers that the Audit Committee of the Company only possesses the effective ability to scrutinise (as opposed to ensure) whether management has discharged its duty to have an effective internal control system. The Committee is not equipped to ensure that the same is in place, as this would involve day-to-day supervision and the employment of permanent experts. Similarly, the Audit Committee is not in a position to ensure co-ordination between the internal and external auditors, but it can promote the same. The Committee cannot ensure that the internal audit function is adequately resourced but it can review whether it is adequately resourced, and recommend the correction of any identified deficiency.

The Terms of Reference of the Audit Committee are available on the website of the Company. The Audit Committee shall meet at least three times a year in accordance with its Terms of Reference. Four meetings were held in 2008 and the attendance of each member is set out as follows:

	Number of Committee meetings attended/held
Committee members:
Alan Stephen Jones (Chairman)	4/4
David Craig Bartlett	3/4
Carlisle Caldow Procter	4/4
Peter Wong Man Kong	2/4

Apart from Committee meetings, the Audit Committee also dealt with matters by way of circulation during 2008. In 2008, the Audit Committee performed the work as summarised below:

1. considered and approved the terms of engagement and fees proposed by the external auditor regarding the final audit of the Group for the year ended 31 December 2007 and the interim review for the six months ended 30 June 2008;
2. reviewed the client service plan of the external auditor for the year ended 31 December 2007;
3. reviewed the reports from the external auditor and management representation letters in relation to the final audit of the Group for the year ended 31 December 2007 as well as the management's responses for the interim review for the six months ended 30 June 2008;
4. reviewed the financial reports for the year ended 31 December 2007 and for the six months ended 30 June 2008 and recommended the same for the Board's approval;
5. reviewed the internal control system of the Group on the basis of an internal controls review report prepared by an external consultant and the risk assessment review performed by the Risk Management Committee for the year ended 31 December 2007;
6. reviewed the audit planning memorandum for the year ended 31 December 2008 submitted by the Internal Audit Department; and
7. (vii) reviewed the lists of audit reports issued by the Internal Audit Department and discussed the risk and internal control issues of the Group.

Executive Committee
The Executive Committee has been established since November 1983 and currently consists of two Executive Directors, being Messrs. Lee Seng Huang (Chairman of the Committee) and Joseph Tong Tang. The Executive Committee is vested with all the general powers of management and control of the activities of the Group, save for those matters which are reserved for the Board's decision and approval pursuant to the written Terms of Reference of the Executive Committee.

The Executive Committee is mainly responsible for undertaking and supervising the day-to-day management of the Company, and is empowered, subject to the general policies adopted by the Board:

1. to formulate and implement policies for the business activities, internal control and administration of the Group; and
2. to plan and decide on strategies to be adopted for the business activities of the Group.

Risk Management Committee
The Risk Management Committee ("RMC" or the "Committee") was established in January 2007 and consists of two Executive Directors, being Messrs. Lee Seng Huang (Chairman of the Committee) and Joseph Tong Tang (Alternate Chairman of the Committee), and four other members from the Company's senior management.

The major roles and functions of the RMC are:

1. to analyse and define the risks likely to be encountered by the Group in the various aspects of its operation;
2. to ensure through appropriate mechanisms including committee(s) and divisional heads, where applicable, the review, assessment, recording and monitoring of the various risks which may be encountered by the Group and the effectiveness of the Group's system of internal controls, including without limitation, financial, operational and compliance controls and risk management functions;
3. to act as a provider of assurance (in conjunction with the Group's Internal Audit and Compliance and the Group's external auditor) to the Board in its annual review of:
   1. the changes in the nature and extent of significant risks likely to be encountered by the Group since the last annual review, and the Group's ability to respond to such changes in its business and external environment;
   2. the scope and quality of management's ongoing monitoring of risks and the system of internal controls;
   3. the adequacy of communication, its extent and frequency to the Board on the results of monitoring, enabling the RMC and the Audit Committee to develop a cumulative assessment on the state of control undertaken by the Group and the effectiveness with which risk is being managed;
   4. any major incidents that pose substantial risk and/or loss exposure to the Group, whether actual loss is incurred or not; in the event of probable or actual violations of the Code of Conduct or applicable laws, regulations, regulatory guidelines/codes; significant internal policy, operational or technological failures; and any other significant events that may expose the Group to substantial reputational risk;
   5. the effectiveness of the Group's processes relating to financial reporting and Listing Rules compliance; and
   6. all other relevant issues appropriate to risk identification and management and internal control issues.

The Terms of Reference of the RMC were adopted by the Board in January 2006 and revised in January 2007, with further amendments in September 2007.

The RMC meets as and when necessary, but at least once a month. During 2008, a total of 12 meetings were held. The attendance of each member is set out as follows:

	Number of RMC meetings attended/held
Committee members:
Lee Seng Huang (Chairman)	9/12
Joseph Tong Tang (Alternate Chairman)	9/12
Patrick Poon Mo Yiu (resigned on 1 August 2008)	5/12
Thomas Bennington Hulme	12/12
Tony Leung King Yuen	12/12
Kevin Tai Yiu Kuen (appointed on 22 October 2008)	3/12
Andy Chui Ka Hing (appointed on 17 December 2008)	1/12

During 2008, the RMC performed (or procured performance of) the following:

1. endorsed the formation of the Product Committee to set out systematic and comprehensive evaluation procedures for the launch of all new products;
2. instigated a Risk Awareness Quiz to promote improved awareness of risk-related issues associated with the launch of all new products;
3. conducted a review and presented recommendations to the Board on long-term alternative solutions as they relate to market risk management;
4. conducted a review and presented recommendations to the Board with respect to a Company-wide risk assessment review using the Group's "Responsibility Statement for Risk, Compliance and Internal Control Procedures", along with the recently undertaken independent review of internal control for 2008;
5. reviewed and approved risk management limits and thresholds, and procured the performance of various portfolio stress-testing models;
6. reported major incidents and findings to the Board;
7. formulated and endorsed the overall risk-related policies and procedures of the Group; and
8. reviewed the Risk Management Statistical Report and other risk-related matters.

The RMC has implemented two Group policies aimed at identifying and addressing instances of improper conduct or actions since 2007. The "Escalation and Incident Reporting Policy" addresses standard procedures for escalating and handling reported incidents that potentially lead to unforeseen risk and/or give rise to monetary loss exposure. The "Whistleblower Policy" outlines the communication procedures through which employees can report in good faith suspected departures from proper internal control procedures, incorrect or improper financial or other reporting, or any alleged unlawful or improper practices or wrongful conduct taking place within the Group. Throughout the year, there were seven major incidents which were escalated to the RMC, while there were no whistleblower cases.

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To comply with the code provision A.5.4 of the CG Code, the Company has also adopted the Model Code, to regulate dealings in the securities of the Company by certain employees of the Company or any of its subsidiaries who are considered to be likely in possession of unpublished price sensitive information in relation to the Company or its securities.

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The reporting responsibilities of the Company's external auditor, Messrs. Deloitte Touche Tohmatsu ("Deloitte"), are set out in the Independent Auditor's Report on Annual Report 2008 pages 92 and 93.

External Auditor's Remuneration During the year and up to the date of this Report, the remuneration paid to the Company's external auditor, Deloitte, is set out as follows:

	Fees paid HK$ million
Services rendered for the Group
Audit services	6.4
Non-audit services (taxation and other professional services)	1.7
Total	8.1

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Systems and procedures are in place to identify, measure, manage and control the risks arising from different business and functional activities. Risk control limits are established and approved as per the appropriate authorisation hierarchy. A more detailed discussion of the policies and procedures for management of each of the major types of risk the Group is exposed to are included in note 56 to the consolidated financial statements (financial risks including market risk, credit risk, liquidity risk, foreign exchange risk and interest rate risk) and under the "Management of Risks" section contained in the Management Discussion and Analysis.

The Group's three independent control divisions, namely Internal Audit, Compliance and Risks Control, all play an important role in providing assurance to the Board and management that a sound internal control system is being adopted, implemented and maintained.

Internal Audit performs periodical reviews, in accordance with its risk-based annual audit plan, of the internal control systems of the Group to ensure their adequacy, and that the controls are in place and working satisfactorily. These checks supplement the various internal control measures adopted by management and the various divisions within the Group. Reports published by Internal Audit are issued to the Chairman, the Audit Committee, senior management and other relevant managers, and are discussed at the Audit Committee meetings. Internal Audit also provides consultancy services to all divisions within the Group on internal control procedures upon request.

Compliance assists management in fulfilling its responsibilities and maintaining effective and appropriate policies, guidelines and procedures, carrying out ad-hoc and/or regular reviews and monitoring all divisions to ensure that the applicable rules and regulations set out by the regulators are complied with in accordance to internal policies and procedures. Compliance is an independent function reporting to the Chairman. The Head of Compliance also acts as the Group's designated Complaint Officer and Anti-Money Laundering Officer.

Risks Control formulates and reviews risk management policies and procedures for the Group. It also provides input on divisional policies in respect of the relevant risk management framework, such as the setting and types of limits. Risks Control conducts reviews in partnership with relevant parties across the Group on new products, processes, services and systems, to ensure that policies and procedures are maintained in a timely fashion and are constantly updated in accordance with risk-related changes in the operating environment. Risks Control is an independent function reporting directly to the Chairman, to whom it provides an independent assessment of different risk exposures relevant to the Group.

Each year, the Group conducts a review of the effectiveness of its internal control systems covering all major areas such as front-office, compliance, finance and operations. The self-assessment is conducted with the purpose of assessing and documenting key risks, while specifying required control framework improvements accordingly. Senior management provides guidelines for various divisions within the Group, including its principal subsidiary, UAF, to identify and evaluate risks. The assessment is performed by the operating divisions and co-ordinated by Risks Control. The results and findings are reported to the RMC, Audit Committee and the Board respectively.

In addition to this regular self-assessment, the Group engaged an external consultant in 2008 to perform an independent review of its existing control platform covering a significant part of the Group's operations. This additional measure was adopted to provide further insights on internal control mechanisms so as to strengthen and improve the overall corporate governance culture. The consultant's report was completed in early 2009 and was reported to the RMC, Audit Committee and the Board. Consequently, those divisions within the Group being reviewed will implement the findings.

The RMC, the Audit Committee and the Board have reviewed the effectiveness of internal control systems of the Group and fulfilled the requirement of the CG Code regarding internal control systems in general.

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The Company's AGM is a valuable forum for the Board to communicate directly with the shareholders. The Chairman actively participates in the AGM and personally chairs the meeting to answer any questions from the shareholders. The Chairmen of the Audit Committee and Remuneration Committee, or in their absence, other members of the respective committees, are also available to answer questions at the AGM. The chairman of any independent board committee formed as necessary or pursuant to the Listing Rules (or if no such chairman is appointed, at least a member of the independent board committee) will also be available to answer questions at any general meeting of the shareholders to approve a connected transaction or any other transaction that is subject to independent shareholders' approval.

Separate resolutions are proposed at the general meetings for each substantial issue, including the re-election of the retiring Directors.

The Company's last AGM was held on 5 June 2008 and the AGM circular was sent to shareholders at least 21 days prior to the meeting setting out the voting procedures (including the procedures for demanding and conducting a poll). The Chairman explained the procedures for demanding and conducting a poll again at the beginning of the meeting and revealed the level of proxies voted in respect of each resolution.

The next AGM will be held on 10 June 2009 and the notice thereof will be sent to shareholders at least 20 clear business days before the meeting. An explanation of the detailed procedures of conducting a poll will be provided to shareholders at the commencement of the meeting. The Chairman will answer any questions from shareholders regarding voting by way of a poll. The poll results will be published in the manner prescribed under the requirements of the Listing Rules effective 1 January 2009.

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