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TERMS OF REFERENCE FOR THE COMPENSATION COMMITTEE

CONSTITUTION

Pursuant to Article 128 of the Company's Article of Association, the board of directors ("Board") of Sa Sa International Holdings Limited ("Company") had formed a compensation committee ("Compensation Committee") in December 1999 and then formally established in March 2000 with its terms of reference adopted by the Board minutes on 25th June 2003 ("Terms of Reference"). The Terms of Reference have been revised to cope with the amendments of the rules governing the listing of securities on The Stock Exchange of Hong Kong Limited ("Listing Rules") from time to time.

MEMBERSHIP AND QUORUM

The Compensation Committee shall be appointed by the Board amongst its members and shall consist of not less than three (3) members. A majority of the members of the Compensation Committee should be independent non-executive directors. A quorum shall be two (2) members provided that if any member of the Compensation Committee is interested in any contract or transaction submitted to the Compensation Committee for consideration or approval, such member shall declare the nature of his interest and shall not be counted in the quorum present at the meeting and his vote shall also not be counted.

The chairman of the Compensation Committee ("Chairman") shall be one of the Compensation Committee members appointed by the Board.

ATTENDANCE AT MEETINGS OF COMMITTEE

4	The Chairman and Department Head of Human Resources shall normally attend meetings of the Compensation Committee. Other Board members shall also have the right of attendance.
5	The Company Secretary shall be the secretary of the Compensation Committee. In the absence of the Company Secretary in any meeting of the Compensation Committee, members of the Compensation Committee shall be entitled to appoint any other person to act as the secretary of such meeting of the Compensation Committee.
6	The secretary shall circulate the minutes of meeting of the Compensation Committee to all members of the Compensation Committee after each meeting.

MEETING SCHEDULE

7	Meetings of the Compensation Committee shall be held not less than once a year.

AUTHORITY

Upon reasonable request, the Compensation Committee members can obtain independent professional advice in appropriate circumstances as and when deem necessary and fit pursuant to the guideline for directors to obtain independent professional advice approved by the Board and adopted by the Company from time to time. The Compensation Committee should be provided with sufficient resources to discharge its duties. At the next meeting of the Board following a meeting of the Compensation Committee, the Committee shall report to the Board on the findings and recommendations, if any, of the Committee.

The Compensation Committee is authorized by the Board:-

(a)	to set policy on executive directors' remuneration and fix the remuneration packages for all directors;
(b)	to delegate its authority and duties to sub-committees, or individual members of the Compensation Committee, as it deems appropriate;
(c)	to do any such things to enable the Compensation Committee to discharge its authority and duties conferred on it by the Board; and
(d)	to conform to any requirement, direction, and regulation that may from time to time be prescribed by the Board or contained in the constitution of the Company or imposed by legislation.

DUTIES

The duties of the Compensation Committee shall primarily include, among others, the following:

(a)

to determine the policy for the remuneration of executive directors, assess their performance and approve terms of their service contracts;

(b)

to consult the chairman and/or chief executive officer of the Company about their proposals relating to the remuneration of other executive directors and have access to professional advice if considered necessary;

(c)

to make recommendations to the Board on the Company’s policy and structure for all remuneration of directors and senior management and on the establishment of a formal and transparent procedure for developing policy on such remuneration;

(d)

to have the delegated responsibility to determine the specific remuneration packages of all executive directors and senior management, including benefits in kind, pension rights and compensation payments, including any compensation payable for loss or termination of their office or appointment, and make recommendations to the Board of the remuneration of non-executive directors. The Compensation Committee should consider factors such as salaries paid by comparable companies, time commitment and responsibilities of the directors, employment conditions elsewhere in the group and desirability of performance-based remuneration;

(e)

to review and approve performance-based remuneration by reference to corporate goals and objectives resolved by the Board from time to time;

(f)

to review and approve the compensation payable to executive directors and senior management in connection with any loss or termination of their office or appointment to ensure that such compensation is determined in accordance with relevant contractual terms and that such compensation is otherwise fair and not excessive for the Company;

(g)

to review and approve compensation arrangements relating to dismissal or removal of directors for misconduct to ensure that such arrangements are determined in accordance with relevant contractual terms and that any compensation payment is otherwise reasonable and appropriate;

(h)

to ensure that no director or any of his associates is involved in deciding his own remuneration. The Compensation Committee shall advise the shareholders of the Company on how to vote with respect to any service contracts of directors that require shareholders' approval under rule 13.68 in Chapter 13 of the Listing Rules;

(i)

to advise on any issues relating to the design of suitable compensation and benefits scheme for all staff of the Company;

(j)

to advise on the design of suitable share option and incentive schemes for all staff of the Company;

(k)

subject to the terms and conditions of the respective share option schemes of the Company adopted on 22 May 1997 and 29 August 2002 ("Share Option Schemes"),

(i)

to consider and if deem appropriate, to grant option(s) entitling each grantee of the Share Option Schemes to subscribe for less than one million shares of the Company;

(ii)

to specify the terms of the grant on which the option(s) is/are to be granted. Such terms may at the discretion of the Compensation Committee, include:-

(1)	a minimum period for which option(s) must be held before it/they can be exercised; and/or
(2)	performance target(s) that must be reached, before the option(s) can be exercised in whole or in part; and
(3)	any other terms, all of which may be imposed (or not imposed) either on a case-by-case basis or generally.

(iii)

to fix and notify the grantee(s) (if deemed appropriate) upon cessation of their employment the exercise period of their option(s) provided that the exercise period shall not exceed 6 months from their last day of employment; and

(l)

to advise on any issues relating to human resources management and policy formulation of the Company.

For the purpose of the Terms of Reference, "senior management" should refer to the same category of persons as referred to in the Company's annual report and is required to be disclosed under paragraph 12 of Appendix 16 of the Listing Rules.

ATTENDENCE IN ANNUAL GENERAL MEETING

11	The Chairman or in the absence of the Chairman, another member of the Compensation Committee or failing this his duly appointed delegate, shall attend the annual general meeting of the Company and be available to answer questions at the annual general meeting of the Company.

AVAILABILITY OF TERMS OF REFERENCE

12	The Compensation Committee should make available its Terms of Reference, explaining its role and the authority delegated to it by the Board, by making it available on request and by including the information on the Company's website.