9. Internal Control

  The Company values the importance of internal control in protecting it
  from possible damage. The Company sets clear objectives, operating
  plans, strategies, and procedures as operating and measurement tools.

  To ensure a good internal control and audit system, the Audit
  Committee is assigned to make regular assessments to the Company’s
  internal control system, at least once a year, and to report the
  findings to the Board of Directors after each assessment.

  In 2009, the Audit Committee assessed the Company’s internal control
  system by conducting questioning and discussion with management. Such
  assessment revealed that the Company had sufficient internal controls
  over the 5 major parts of its operations, namely, the organizational
  structure and environment, risk management, control over management,
  operations, information technology and communication, and follow-up
  procedures.

-   Organizational Structure and Environment, The structure and
    operating environment of the Company promotes effective operations
    and sufficient internal controls. Clear segregation of duties
    creates a check and control system in each working process.
    Operating manuals and procedures ensure standard practice in each of
    the operating units. Subsystem process and reduction of double work
    are reviewed regularly for efficiency improvement. The Company also
    sets clear and attainable annual targets and undertakes measurement
    of results, taking into account all variable factors such as the
    economic situation, market conditions and competition.

-   Risk Management, The Company closely follows the changes in risk
    factors such as taxation, the increase of raw material prices and
    other costs, in order to assess the impact and set up action plans
    for the survival of the business. The Company holds meetings with
    its management and employees on a regular basis to communicate the
    situation and the impact of external risks influencing the Company’s
    operations and continuously sets up measurements to minimize the
    impact of those risks. In each operating units, the head of the unit
    is responsible for risk management and prevention in his/her own
    unit.

-   Management Control, The Company sets clear responsibilities, duties,
    and authorization of the management emphasizing the segregation of
    duties for authorization, recording, and safeguarding of assets. The
    transactions with major shareholders, directors, and management
    require approval from the Board of Directors to ensure no conflict
    of interest in the authorized transactions and to ensure the
    greatest benefit to the Company. The Company has an operating manual
    of authorization limits and approvals, and has set up a physical
    asset verification procedure to ensure the completed count on every
    item is done within three years and there is a sample count by the
    internal audit function to reconcile with the fixed asset register
    and accounting record.

-   Information System and Communication, The Company submits sufficient
    and accurate information necessary for Board of Directors’
    decisions. Record keeping and accounting transactions are prepared
    according to recognized accounting standards, and are audited and
    reviewed by the Audit Committee and the external auditors.

-   Follow-up Procedures, The Company monitors its performance compared
    to its objectives and reports the results to the Board of Directors’
    meeting every two months. Any major changes in factors affecting the
    Company’s operations will result in a modification of the operating
    plan.