The Board believes that a sound corporate governance structure and commitment to good corporate governance practices will facilitate the Company to achieve long term growth and sustainable development, and are attributes that are part and parcel of a successful company being able to protect shareholders' interest and enhance shareholders' value. The Board will endeavour to promote high standard of corporate governance across all operations of the Company for the benefit of its shareholders and other stakeholders with particular emphasis on effective control, fair disclosure and accountability.

The Stock Exchange of Hong Kong Limited ("Stock Exchange") has revised and renamed the Code on Corporate Governance Practices (the "former Code") set out in Appendix 14 to the Rules Governing the Listing of Securities on the Stock Exchange ("Listing Rules") to the Corporate Governance Code (the "new Code") effective from 1st April 2012. During the year ended 30th June 2012, the Company has complied with the respective provisions of the former Code and the new Code for the relevant periods in which they are in force, except for the deviations from code provisions A.2.1, A.6.7 and E.1.2 with considered reasons as explained below.

The Company is headed by the Board which currently comprises twelve directors, including seven executive directors, two non-executive directors and three independent non-executive directors. The names, biographical details and relationship amongst them, if any, are set out on pages 80 to 85 of this annual report.

The Board, led by the Chairman, is collectively responsible for the management and operations of the Company. It formulates the overall strategy of the Group, sets the business directions and financial performance target of the Group, and ensures that a good corporate governance framework and procedures are established and practised throughout the Group. It is accountable to the shareholders of the Company for its performance and activities and is the ultimate decision making body of the Group except for those matters that are reserved for approval by shareholders in accordance with the articles of association of the Company, the Listing Rules and other applicable laws and regulations.

The running of the day-to-day businesses of the Company is delegated by the Board to the management who is working under the leadership and supervision of the Managing Director and the Executive Committee of the Board except that authority is reserved for the Board to approve interim and annual financial statements, dividend policy, annual budgets, business plans and significant operational matters.

The management is responsible for contributing to the success of the implementation of the policies laid down by the Board in connection with the conduct of the businesses of the Group. It is accountable to the Board and is required to obtain prior approval from the Executive Committee before making decision over matters prescribed by the Executive Committee or entering into commitment on the Company's behalf. The Executive Committee will monitor the performance of the management with reference to the Group's corporate goals and objectives and business plan as determined and approved by the Board from time to time.

Dr. Cheng Kar-shun, Henry is the Chairman and Managing Director of the Company. In his dual capacity as Chairman and Managing Director, Dr. Cheng Kar-shun, Henry is responsible for effective running of the Board and formulating business strategies. He also provides leadership for effective running of the Company's business and implementing the policies devised by the Board.

The code provision A.2.1 provides that the roles of chairman and chief executive should be separate and should not be performed by the same individual. However, the Board believes that Dr. Cheng Kar-shun, Henry, in his dual capacity as the Chairman and Managing Director, will provide strong and consistent leadership for the development of the Group.

Independent non-executive directors ("INED") have a significant role in the Board by virtue of their independent judgement and their views carry significant weight in the Board's decisions. In particular, they bring an impartial view to bear on issues of the Company's strategy, performance and control, and take the lead where potential conflicts of interest arise.

During the year, the Company has complied with Rules 3.10(1) and 3.10(2) of the Listing Rules regarding the appointment of at least three INEDs and is having an INED with relevant professional qualifications or accounting or relating financial management expertise. Two of the INEDs, namely Dr. Cheng Wai-chee, Christopher and Mr. Tien Pei-chun, James, have served the Company in this capacity for more than nine years since 1999. Notwithstanding their long term service, given their wide spectrum of knowledge, extensive business experience and familiarity with the Company's affairs, the Board is of the opinion that they continue to bring independent and objective perspectives to the Company's affairs. A written annual confirmation of independence was received from each of the three INEDs pursuant to Rule 3.13 of the Listing Rules and the Company considers each of the INEDs to be independent.

Under Rule 3.10A of the Listing Rules, listed issuers are required to appoint INEDs representing at least one-third of the Board by 31st December 2012. The three INEDs of the Company currently represent one-fourth of the Board and the Company will ensure compliance with Rule 3.10A before 31st December 2012.

A Director may be appointed either by the shareholders in a general meeting or by the Board and the key terms of appointment are set out in a service contract with the Company. Each director is appointed for a fixed term of three years pursuant to the service contract subject to retirement by rotation and re-election at least once every three years at the annual general meeting of the Company in accordance with the Company's articles of association. New director appointed by the Board will be subject to re-election by the shareholders at the first general meeting after his/her appointment. The names of directors who are eligible for re-election at general meetings will be disclosed in the notice of the relevant general meetings and their biographical details will be provided in the accompanying circulars. The election of each director will be subject to vote of shareholders by separate resolutions.

The Board meets regularly to discuss the overall strategy as well as the operation and financial performance of the Group. Directors may participate either in person or through electronic means of communications. Five full board meetings were convened in the year under review, four of which were regular board meetings for reviewing and approving the financial operating performance of the Group.

The attendance of each individual director at the board meetings and general meetings is set out in the following table:

The Audit Committee is responsible for the review and supervision of the Group's financial reporting process, internal controls and review of the Company's financial statements. The Audit Committee meets regularly with the Company's external auditors to discuss the audit process and accounting issues. Their written terms of reference had been updated during the year in line with the provision of the new Code and are available on the websites of the Company and the Stock Exchange.

Members of the audit committee comprise three INEDs including Dr. Cheng Wai-chee, Christopher as Chairman, Messrs. Tien Pei-chun, James and Lee Luen-wai, John, as members.

The Audit Committee met two times during the fiscal year. During the meetings, the Audit Committee has reviewed the audit plans, internal control procedures and financial reporting system. They have also considered the interim and final results of the Group for the fiscal year as well as the audit report prepared by the external auditors relating to accounting issues and major findings in course of audit. They have also reviewed with the management the internal audit report in respect of certain property projects of the Group. Full minutes of the meetings are kept and sent to all members of the Committee.

The attendance of individual member of the Audit Committee at the meetings is set out in the following table:

The Remuneration Committee is responsible for making recommendations to the board on the Company's policy and structure for all remuneration of the directors and senior management of the Company and on the establishment of a formal and transparent procedure for developing remuneration policy. They have the delegated responsibility to determine the specific remuneration packages of individual executive director and senior management. Their written terms of reference had been updated during the year in line with the provision of the new Code and are available on the websites of the Company and the Stock Exchange.

Members of the Remuneration Committee comprise three INEDs and one executive director including Dr. Cheng Wai-chee, Christopher as Chairman, Messrs. Tien Pei-chun, James, Lee Luen-wai, John and Ms. Ngan Man-ying, Lynda as members.

The Remuneration Committee convened one meeting during the fiscal year. The members have reviewed the remuneration policy of the Company and made recommendation to the Board regarding the amount of directors' fees for the fiscal year. They have also considered and approved the salary packages to the executive directors and senior management of the Company by reference to their duties and responsibilities with the Company, prevailing market situation and the Company's performance.

The attendance of individual member of the Remuneration Committee at the meeting is set out in the following table:

An induction would be given to the newly appointed director to provide information regarding the businesses and operation of the Company as well as his/her responsibilities under the statutes, rules and regulations. The Company Secretary updates directors on the latest developments and changes to the Listing Rules and the applicable legal and regulatory requirements regarding subjects necessary in the discharge of their duties. With effect from 1st April 2012, the Company provides all members of the Board with monthly updates on the Company's performance, position and prospects.

Directors are encouraged to participate in continuing professional development to develop and refresh their knowledge and skills. The Company has devised a training record in order to assist the directors to record the training they have undertaken and they are asked to submit a signed training record to the Company on annual basis.

Since 1st April 2012, the Company has organised a seminar on the new Code and the latest listing rules amendment in collaboration with professional firms as part of the continuing professional development for directors and has provided presentation materials to the directors about environmental, social and governance reporting. Individual director has also attended training courses or workshop relevant to his/her profession and/or duties as directors. A summary of the training they have received for the three months ended 30th June 2012 is as follows:

In recognition of their services with the Company, directors are paid directors' fees annually with the approval of the shareholders of the Company. Monthly salaries are also paid to directors commensurable with their duties in the Group. To provide an opportunity for the directors to participate in the equity of the Company as well as to motivate them to optimize their performance, most directors have been granted share options to subscribe for shares of the Company under the share option schemes of the Company. In addition, all directors are covered by appropriate insurance on directors' liabilities from their risk exposure arising from the management of the Group.

During the year, the Company has updated the compliance manuals on notifiable transactions and price sensitive information in accordance with the Listing Rules as guideline for its employees to report unpublished price sensitive information to the Company to ensure consistent and timely disclosure and fulfillment of the Company's continuous disclosure obligations. The Board has also devised a shareholders' communication policy to set out the Company's strategies for maintaining continuous and open communication with shareholders and the investment community at large.

The Board, supported by the finance department, is responsible for the preparation of the financial statements of the Company and the Group. In preparing the financial statements, the generally accepted accounting standards in Hong Kong have been adopted together with the accounting standards issued by the Hong Kong Institute of Certified Public Accountants and appropriate accounting policies have been used and applied consistently.

1. A defined organisational structure has been set up with clear line of responsibility and authority. Division heads are assigned to the property projects in the PRC on regional basis to oversee and control the operational and financial aspects of the projects. Systems are in place to review, approve, and administer contract works, capital expenditures, sales and rental arrangement of the property projects.
2. A comprehensive management accounting system has been adopted to provide financial and operational performance indicators to the management in a timely manner. Proper controls are in place for the recording and verification of accounting data to provide accurate and timely management information.
3. The financial results of the property projects are measured against the annual operational and financial targets. Variances against the budgets are analysed and explained to identify area of improvement and appropriate corrective actions to be taken.
4. Evaluation of the Group's internal control is conducted by the internal audit department on an on-going basis. The internal audit department performs risk-based audits to review the effectiveness of the Group's material internal controls so as to provide assurance that key business and operational risks are identified and managed. The work carried out by the internal audit department will ensure the internal controls are in place and functioning as intended. The internal audit department reports to the Board with its findings and makes recommendations to improve the internal control of the Group. The department also sent their reports to the Audit Committee for review and discussion.

The Board has also reviewed the adequacy of resources, qualifications and experiences of staff of the Company's accounting and financial reporting function and their training programmes and budget.

The Company acknowledges the importance of communicating with shareholders, investors and the public. A shareholders' communication policy was adopted with effect from 1st April 2012 pursuant to the new Code which aims at establishing a two-way relationship and communication between the Company and its shareholders. To this end, various channels of communication have been established and maintained to ensure that shareholders and the investment community are kept abreast of the Company's latest news and development. Information relating to the Company's financial results, corporate details, notifiable transactions, property projects and major events are disseminated through publication of interim and annual report, announcements, circulars, press release and newsletters. These publications can also be obtained from the Company's website.

In addition, the Chairman, members of the Board and external auditors will attend the annual general meetings of the Company where the directors will answer questions raised by the shareholders on the performance of the Group. To ensure the general meetings are conducted in a fair and transparent manner, the Chairman has demanded voting by poll on each resolution considered at the general meetings held in the past year and appointed the branch share registrar in Hong Kong as the scrutineers to count the votes and explain to the shareholders at the meetings the procedures for voting by poll. The poll results were subsequently posted on the websites of the Company and the Stock Exchange.

The Company also holds press and analysts conferences at least twice a year following the release of interim and full year results announcements at which the executive directors and senior management of the Group are available to answer questions regarding the performance of the Group. The Group has participated in a number of roadshows and meetings with investors and organised a number of site visits during the fiscal year 2012.

The Company is offering options to the shareholders and the non-registered shareholders to receive corporate communication of the Company by electronic means or in printed form. The Board believes that electronic means of communication will increase the efficiency in communication between the Company and the shareholders. The Company will review and improve the policy and effectiveness of communication with shareholders and the public from time to time.

The code provision A.6.7 which is effective from 1st April 2012 provides that INEDs and non-executive directors should attend general meetings and develop a balanced understanding of the views of shareholders. In addition, the code provision E.1.2 provides that the chairman of the independent board committee should be available to answer questions at any general meeting to approve a connected transaction or other transaction that requires independent shareholders' approval.

Dr. Cheng Wai-chee, Christopher, who is the chairman of the independent board committee, was not able to attend the extraordinary general meeting of the Company held on 27th June 2012 owing to other business commitment. The Company had invited the independent financial adviser to attend the meeting and answer questions from the shareholders. Messrs. Doo Wai-hoi, William and Tien Pei-chun, James were also not able to attend the meeting owing to other business commitment.

Convening of extraordinary general meeting and putting forward proposals

1. The requisitionist(s) should sign a written request stating the objects of the meeting to be convened, and deposit the same at the principal place of business of the Company in Hong Kong situated at 9/F., New World Tower 1, 18 Queen's Road Central, Hong Kong for the attention of the Company Secretary.
2. The Company will then verify the request with the Company's branch share registrar in Hong Kong and upon confirmation that the request is proper and in order, the Company Secretary will ask the Board to convene an EGM by serving sufficient notice to all the registered shareholders in accordance with the requirements set out in the Listing Rules and the Articles of Association of the Company.
3. In the event that the request has been verified as not in order, the shareholders concerned will be advised of this outcome and accordingly, an EGM will not be convened as requested.
4. Where, within 21 days from the date of deposit of the requisition, the directors of the Company do not proceed duly to convene an EGM, the requisitionists themselves or any of them representing more than one-half of the total voting rights of all of them, may convene the general meeting in the same manner, as nearly as possible, as that in which meetings may be convened by the Board, provided that any meeting so convened shall not be held after the expiration of three months from the date of deposit of the requisition.