The Board has overall responsibility for maintaining sound and effective internal control systems to safeguard the Company’s assets and the Shareholders’ interests.

As the internal control system serves as an integral part of the Company’s management system, the responsibility of day-to-day management of operational risks and implementation of mitigation measures rests with management and individual business units.

The Board conducts regular reviews of the effectiveness of the Company’s internal control system. The system is designed to provide reasonable, but not absolute, assurance against misstatement or loss, and to manage risks of failure in the Company’s operational systems. The key processes that the Board established to provide effective internal controls are summarized as follows:
(i) an organizational structure with defined lines of responsibility and delegation of authority is devised;
(ii) systems and procedures are in place to identify and measure risks on an ongoing basis. The Risk Management Committee shall regularly review the risk assessment process and monitor the progress of risk mitigation plans;
(iii) the Investment Committee shall oversee Company’s strategic and investment plans on a regular basis;
(iv) financial performance of each business unit will be analysed and monitored against budget monthly with variances being accounted for and appropriate actions will be taken to rectify deficiencies; and
(v) the Internal Audit Department shall independently evaluate the adequacy and effectiveness of major controls over principal operations. Major findings and recommendations, if any, shall be reported to the Audit Committee on a regular basis.

The system is being under review and will be modified from time to time to ensure that it remains efficient and effective. The internal audit plays an important role in monitoring and evaluating the internal controls of the Company.

Internal Audit function
The Internal Audit Department performs regular reviews of the Company’s internal controls based on the annual audit plan approved by the Audit Committee.

The annual audit plan was arrived at using a risk-based approach to determine the priorities of the internal audit activity. The Audit Committee has the final authority to approve the annual audit plan. Special reviews may also be performed on areas of concern identified by the Audit Committee or the management from time to time. The Audit Committee assesses the effectiveness of the internal control system by reviewing the work of the Internal Audit Department and its findings.

During the year ended 31st December 2007, the Internal Audit Department has performed reviews on all major aspects of the Company’s operations in Hong Kong and the PRC according to the approved internal audit plan. The work of the Internal Audit Department covered all major financial, operational and compliance controls. Findings and recommendations on internal control deficiencies were well communicated with the management such that action plans were developed by the management to address the issues identified. Post-audit reviews were scheduled to ensure the action plans were executed as designed. Key findings of each internal control review assignment were reported to and reviewed by the Audit Committee.

In 2007, no suspected frauds, irregularities or infringement of laws, rules and regulations or material control failures were found. The Audit Committee is satisfied with the results, and concluded that the Company’s internal control system is effective and that the Company had adopted the necessary control mechanisms to monitor the internal system.