This Remuneration Report sets out the Group's remuneration policies and amounts for all staff including Executive Directors, Non-executive Directors and senior management. Sections 2, 3 and 4 comprise the auditable part of the Remuneration Report and form an integral part of the Group's financial statements.

At 31 December 2012, the Group employed a total of 327 full time, shore-based staff (2011: 389).

GROUP'S REMUNERATION POLICY

The Board, through the Remuneration Committee, seeks to attract and retain staff with the skills, experience and qualifications needed to manage and grow the business successfully by providing remuneration packages that are competitive, accord with market practice, reward short-term as well as long-term performance and align interests with those of shareholders.

Equity awards are provided through the Company's Long Term Incentive Scheme which is designed to provide Executive Directors, senior management and other employees with long-term financial benefits that are aligned to and consistent with increasing shareholder value.

The Group's principal retirement benefit scheme is the Mandatory Provident Fund Scheme, a defined contribution scheme provided under the Hong Kong Mandatory Provident Fund Schemes Ordinance for those staff employed under the jurisdiction of the Hong Kong Employment Ordinance. Other locations provide pension contributions in line with the local regulations.

Below sets out the key components of remuneration:

REMUNERATION FOR THE YEAR ENDED 31 DECEMBER 2012

Note:
(1) Mr. Berglund was appointed as Executive Director and Chief Executive Officer on 1 June 2012.
(2) Includes a director's fee of US$96,000.
(3) Mr. Kocherla was appointed on 25 June 2012. The remuneration in the above table represents his remuneration for the whole of 2012.
(4) Mr. Nyborg resigned on 15 March 2012 and 2,124,000 share awards lapsed resulting in a credit to the income statement.
(5) Mr. Hext resigned on 9 March 2012.

The five individuals whose emoluments were the highest in the Group include five Executive Directors (2011: four Executive Directors and one senior manager). The emoluments of the one senior manager of 2011 fell within the band of HK$6,500,001 to HK$7,000,000 (US$833,333 to US$897,436).

During the year, the Group did not pay the Directors any inducement to join or upon joining the Group. Mr. Turnbull voluntarily requested a reduction of his 2012 approved restricted share awards from 618,000 Shares to 300,000 Shares. No other Directors waived or agreed to waive any emoluments during the year.

The median salary of employees excluding the Chief Executive Officer during the year was US$58,500. In view of the challenging market conditions and our weaker group results, cash bonuses payable to Executive Directors were reduced by 9% (2011:33%) overall. Cash bonuses payable to all other staff were reduced by 20% (2011: 22%)

In addition, certain Other Employees benefit from a profit sharing arrangement amounting to approximately US$3,160,000 (2011: US$4,924,000). This amount combined with the above total remuneration forms the total employee benefit expenses as presented in Note 5 to the financial statements.

REMUNERATION FOR THE YEAR ENDED 31 DECEMBER 2011

Note: (1) Includes a director's fee of US$40,000.

ACCOUNTING POLICIES ON EMPLOYEE BENEFiTS

Bonuses

The Group recognises a liability and expense for bonuses when there is a contractual or constructive obligation or where there is a past practice that created a constructive obligation.

Retirement Benefit Obligations

Mandatory Provident Fund Scheme
The Group operates the Mandatory Provident Fund Scheme (the "MPF Scheme") under the Hong Kong Mandatory Provident Fund Schemes Ordinance for those employees employed under the jurisdiction of the Hong Kong Employment Ordinance. The MPF Scheme is a defined contribution scheme, the assets of which are held in separate trustee- administered funds.

Under the MPF scheme, the employer and its employees are each required to make regular mandatory contributions to the scheme at 5% of the employees' relevant income, subject to a cap of monthly relevant income of HK$25,000. The Group also makes voluntary contribution in addition. The Group's contributions to the scheme are expensed as incurred. When employees leave the scheme prior to the full vesting of the employer's voluntary contributions, the amount of forfeited contributions is used to reduce the contributions payable by the Group.
Other defined contribution Schemes
The Group also operates a number of defined contribution retirement schemes outside Hong Kong in accordance with local statutory requirements. The assets of these schemes are generally held in separate administered funds and are generally funded by payments from employees and by the relevant group companies.

The Group's contributions to the defined contribution retirement schemes are expensed as incurred and are reduced by contributions forfeited by those employees who leave the schemes prior to contributions being fully vested.

Share-Based Compensation

The Group operates an equity-settled, share-based compensation scheme. Restricted share awards and share options are recognised as an expense in the income statement with a corresponding credit to reserves, based on the fair value of employee services.

The total amount to be expensed is calculated by reference to the fair value of the equity instruments granted, excluding the impact of any non-market vesting conditions (for example, requirement of an employee to remain in employment for a specified time period). The number of equity instruments that are expected to vest takes into account non-market assumptions, including expectations of an employee remaining in the Group during the vesting period. The total amount expensed is charged through the vesting period. At each balance sheet date, the Company reviews its estimates of the number of equity instruments that are expected to vest based on the non-market vesting conditions. It recognises the impact of the revision of the original estimates, if any, in the consolidated income statement with a corresponding adjustment to equity.

In respect of share options, the proceeds received, net of any directly attributable transaction costs, are credited to share capital and share premium accounts when the share options are exercised.