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					      SUMMARY OF AMENDMENTS TO THE MAIN BOARD LISTING RULES
                               EFFECTIVE 31 MARCH, 2004
                                     (THE ‘RULES’)



I.     CHANGES TO           INITIAL     LISTING         CRITERIA     AND     CONTINUING
       OBLIGATIONS

A.     INITIAL LISTING CRITERIA

1.     TRADING RECORD PERIOD AND MANAGEMENT AND OWNERSHIP
       CONTINUITY

       The Rules codify the current requirements for:

       (i)     a trading record of not less than 3 financial years;
       (ii)    management continuity for the 3 financial year trading track period; and
       (iii)   ownership continuity and control for at least the most recent audited financial
               year.

2.     ALTERNATIVE FINANCIAL STANDARDS TO PROFIT REQUIREMENT

2.1    The existing profit requirement has been maintained as one of the quantative tests.
       Two alternative tests have been introduced.

2.2    Market Capitalization/Revenue Test (Rule 8.05(3))

       The requirements are:

       (i)     a market capitalization of at least HK$4 billion at the time of listing;
       (ii)    revenue of at least HK$500 million for the most recent audited financial year;
       (iii)   at least 1,000 shareholders at the time of listing;
       (iv)    a trading record of not less than 3 financial years;
       (v)     management continuity for at least the 3 preceding financial years; and
       (vi)    ownership continuity and control for at least the most recent audited financial
               year.

       Waiver of 3 financial year Trading Track Record

       The Exchange will grant a waiver of the 3 financial year trading record requirement
       under substantially the same management (required under (iv) and (v) above) if the
       applicant can satisfy the Exchange:

       (i)     as to management continuity for the most recent audited financial year; and
       (ii)    that its directors and management have sufficient and satisfactory experience
               of at least 3 years in the applicant’s line of business and industry.

2.3    Market Capitalization/Revenue/Cash Flow Test (Rule 8.05(2))

       The requirements are:

       (i)     a market capitalization of at least HK$2 billion at the time of listing;
       (ii)    revenue of at least HK$500 million for the most recent audited financial year;



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       (iii)   positive cash flow from operating activities of the new applicant or its group
               of at least HK$100 million in aggregate for the 3 preceding financial years;
       (iv)    a trading record of not less than 3 financial years;
       (v)     management continuity for at least the 3 preceding financial years; and
       (vi)    ownership continuity and control for at least the most recent audited financial
               year.

       Calculation of Revenue

       For both new tests, only revenue arising from the applicant’s principal activities and
       not items of revenue or gains arising incidentally will be recognized. Revenue from
       ‘book transactions’ is disregarded.

3.     MARKET CAPITALIZATION

3.1    Increase of Minimum Expected Market Capitalization at Time of Listing (Rule
       8.09(2))

       The initial minimum expected market capitalization has been increased to HK$200
       million (from HK$100 million). Applicants listing under the market
       capitalization/revenue test or market capitalization/revenue/cash flow test must meet
       the applicable standards of HK$4 billion and HK$2 billion, respectively.

3.2    Determination of Market Capitalization

       Expected market capitalization at the time of listing is calculated on the basis of all
       issued share capital of the issuer including:

       (i)     the class of securities to be listed;
       (ii)    any other class(es) of securities that are unlisted or listed on other regulated
               markets.

       The expected issue price of the securities to be listed is to be used in determining the
       market value of other classes of securities that are unlisted or listed on other markets.

4.     PUBLIC FLOAT

4.1    The Rules require a 25% public float having an expected market capitalization at the
       time of listing of at least HK$50 million.

       Amendments require that where a listing applicant has more than 1 class of securities,
       the total securities held by the public on all regulated market(s) including the
       Exchange must be at least 25% of the issuer’s total issued share capital. The
       securities to be listed on the Exchange must not be less than 15% of the issuer’s total
       issued share capital, having an expected market capitalization at the time of listing of
       at least HK$50 million.

       Exchange’s Discretion to Accept Lower Public Float (Rule 8.08(1)(d))

       The Rules have been amended so that:

       (i)     the minimum percentage of public float which the Exchange may accept is
               between 15% (instead of 10%) and 25%; and
       (ii)    the issuer’s expected market capitalization at the time of listing must exceed
               HK$10 million (instead of HK$4 billion).


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       This public float waiver is only available on initial listing. It cannot be applied for
       after listing if an issuer later satisfies the HK$10 billion market capitalization
       requirement. This does not affect issuers that have been granted a waiver before
       March 31, 2004.

       Other amendments are:

       (i)     Not more than 50% of the public float can be beneficially owned by the 3
               largest public shareholders; and
       (ii)    The guideline of at least 3 holders for each HK$1 million of the issue has
               been deleted.

5.     INCREASE IN THE MINIMUM NUMBER OF SHAREHOLDERS AT THE
       TIME OF LISTING

       The minimum number of shareholders at the time of listing has been increased to 300
       (from 100), except where the issuer chooses the market capitalization/revenue test
       which requires a minimum of 1,000 shareholders.

6.     WORKING CAPITAL SUFICIENCY

       There is a new requirement for a working capital statement in the listing document.
       The applicant must be satisfied after due and careful enquiry that it and its subsidiary
       undertakings have sufficient working capital for the group’s present requirements (ie.
       for at least the next 12 months). In addition, the applicant’s sponsor must provide
       written confirmation to the Exchange that:

       (i)     it has obtained written confirmation from the listing applicant as to the
               sufficiency of the working capital (as above); and
       (ii)    it is satisfied that the confirmation has been given after due and careful
               enquiry by the applicant and that the providers of finance have stated in
               writing that the financing facilities exist.

       The Rules also expressly prohibit the issue of pre-deal research by the sponsor and/or
       underwriters unless the profit forecast is also included in the initial listing document.
       This applies equally to any forward looking statements.

B.     CONTINUING OBLIGATIONS

       The Rules make the continuing obligations requirements in the Listing Agreement
       and existing Practice Note 19 part of the Rules. Continuing obligations are now set
       out in a new Chapter 13 and Chapters 19 and 19(A).

1.     TIMELINESS OF ACCOUNTS (Rule 13.50)

       The trading of securities of issuers who fail to publish their financial results on the
       due date will be immediately suspended. Trading will only be resumed on
       publication of the requisite financial statements. There will be a transitional period
       up to December 31, 2004 for existing issuers.




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2.     PUBLIC FLOAT (Rule 13.32)

2.1    Amendments provide that:

       (i)     Issuers must maintain the minimum public float specified in Rule 8.08 (ie
               25%) at all times;
       (ii)    The Exchange will normally require suspension of trading if an issuer’s
               public float falls below 15% (rather than 10% currently);
       (iii)   Where a public float waiver is granted at the time of initial listing under Rule
               8.08(1)(d):

               (a)     the percentage fixed at the time of listing (between 15% and 25%)
                       will apply to the issuer throughout its listing; and
               (b)     suspension of trading will be required where its public float falls
                       below 10%; and

       (iv)    Issuers must include a statement of sufficiency of public float in their annual
               reports.

2.2    Temporary Waiver (Rule 13.33)

       The Exchange may grant a temporary waiver of the minimum public float
       requirement where an issuer is the subject of a general offer under the Takeovers
       Code (including a privatization offer). The waiver will be for a reasonable period
       (normally 3 months) after the close of the general offer.

2.3    Exchange’s Discretion not to Suspend Trading (Rule 13.32(4))

       The Exchange retains its discretion not to suspend trading if satisfied that there
       remains an open market in the securities and either:

       (i)     the percentage shortfall arises purely from an increased or new holding by a
               person or entity (which the Exchange expects to be institutional investors
               with a wide spread of investments) that becomes a connected person only
               because he is a substantial shareholder of the issuer or its subsidiaries after
               such acquisition and is otherwise independent of the issuer. He must not be
               the controlling or single largest shareholder; or

       (ii)    the issuer and the controlling shareholder(s) or single largest shareholder
               undertake to the Exchange to restore the minimum public float within a
               period acceptable to the Exchange.

3.     SPREAD OF SHAREHOLDERS

       If the Exchange has reason to believe that the issuer’s securities lack a genuine open
       market, or may be concentrated in the hands of a few shareholders to the detriment or
       without the knowledge of the investing public, the issuer may be required to:

       (i)     publish an announcement to that effect and reminding the public to exercise
               caution when dealing in its securities; and

       (ii)    conduct an investigation under Section 329 Securities and Futures Ordinance
               and publish the results of the investigation.

C.     DISCLOSURE REQUIREMENTS AT THE TIME OF LISTING


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       They are new disclosure requirements for:

       (i)          over-allotment options and price stabilizing activities;

       (ii)         information about persons in control of the listing applicant;

       (iii)        information about the issuer’s management; and

       (iv)         prospects of the group

       The new disclosure requirements will become effective on March 31, 2004.


II.    AMENDMENTS RELATING TO CORPORATE GOVERNANCE

A.     NOTIFIABLE TRANSACTIONS (EXCEPT CONNECTED TRANSACTIONS)

       The new Rules contain separate chapters on Notifiable Transactions (Chapter 14) and
       Connected Transactions (Chapter 14A) in line with the format of the GEM Rules.

1.     Definition of ‘Transaction’ for the purposes of Notifiable Transactions (Rule
       14.04)

       The new non-exhaustive definition:

       (i)          excludes revenue transactions in the ordinary and usual course of business *,
                    except where a listed issuer enters into or terminates operating leases
                    representing a 200% or more increase in the issuer’s operations through such
                    lease arrangements;

       (ii)         excludes the issue of new securities for cash**;

       (iii)        includes the grant of an indemnity or a guarantee or the provision of financial
                    assistance by a listed issuer except (i) where the issuer is a ‘banking
                    company’ acting in its ordinary and usual course of business or (ii) to a
                    subsidiary (if a subsidiary is a connected person, the connected transaction
                    provisions apply).
       *
               Financial assistance is only regarded as being in the ordinary and usual course of business if
               provided by a banking company (ie. a bank, restricted licence bank or deposit taking company under
               the Banking Ordinance or an overseas bank).
       **
               These are however within the definition of ‘transaction’ for connected transactions.

2.     Classification of Notifiable Transactions

       There are 2 new classifications.

                   Very Substantial Disposals; and
                   Reverse Takeovers.

3.     VSAs

       The VSA provisions will apply to both listed and unlisted assets.



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4.     Very Substantial Disposals

       A new notifiable transaction where the tests produce a ratio of 75% or more.

5.     Reverse Takeovers (Rules 14.54-57)

5.1    The Exchange will treat a listed issuer proposing a reverse take-over as a new listing
       applicant. A ‘reverse takeover’ includes:

       (a)     an acquisition/series of acquisitions of assets constituting a very substantial
               acquisition where there is or which will result in a change in control (ie.
               30% or more of the voting rights) of the listed issuer; or

       (b)     an acquisition/series of acquisitions of assets from the incoming controlling
               shareholder(s) within 24 months after the change in control that had not
               been regarded as a reverse takeover, which individually or together reach the
               threshold for a VSA.

5.2    Shareholders’ approval of reverse takeovers

       Where there is a change in control and the existing controlling shareholder(s) will
       dispose of shares to any person, the existing controlling shareholder(s) cannot vote in
       favour of the acquisition of assets from the incoming controlling shareholder or his
       associates at the time of the change in control (Rule 14.55).

5.3    Restriction on Disposal

       The new Rules allow a listed issuer to dispose of its existing business within 24
       months of a change in control, if the assets acquired from the incoming controlling
       shareholder(s) (or associates) and any other assets acquired by the listed issuer after
       the change in control, can meet the trading record requirement of Rule 8.05.If not, on
       a disposal by a listed issuer of its existing business within 24 months of a change in
       control, the issuer will be treated as a new listing applicant.

6.     New Tests

       The following size tests have been adopted for the classification of notifiable
       transactions:

              Total assets test
              Profits test (no change)
              Revenue test
              Consideration test
              Equity capital test (no change)

       (i)     The total assets test is a stand-alone test to replace the net assets test. ‘Total
               assets’ means the fixed assets (including intangible assets) plus current and
               non-current assets. Intangible assets include goodwill (whether positive or
               negative).

       (ii)    The new consideration test is calculated by comparing the consideration for
               the transaction with the total market capitalization of the listed issuer (ie. the
               average closing price of the issuer’s securities as stated in the Exchange’s
               daily quotations sheets for the 5 business days immediately preceding the
               date of the transaction).


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       (iii)    The revenue test measures the level of activity of the target against that of
                the issuer. ‘Revenue’ means revenue arising from a company’s principal
                activities (not revenue arising incidentally).

7.     Revised Thresholds for Classifying Transactions

                                                  Revised thresholds (based on new size tests)

        Share transaction                         less than 5%

        Discloseable transaction                  5% or more but less than 25%

        Major transaction                         25% or more, but less than 100% for
                                                  acquisitions and less than 75% for disposals

        Very Substantial Acquisition              100% or more

        Very Substantial Disposal                 75% or more


8.     Valuation of Properties, Vessels and Aircraft (Rule 14.12)

       Where the issuer assumes repayment obligations for outstanding mortgages or loans,
       the outstanding amounts must be aggregated to the consideration for the numerator of
       the assets test.

9.     Valuation of Assets (Rules 14.61 and 14.62)

       Any valuation of assets (other than land and buildings) or businesses based on
       discounted cash flows or projections of profits, earnings or cash flows will be
       regarded as a profit forecast.

10.    Options (Rules 14.72 to 14.77)

       The Rules include a new section on options along the lines of the GEM provisions.

11.    Dilution of Interest in Subsidiaries Resulting in Deemed Disposals (Rule 14.29)

       The requirements relating to deemed disposal of interests in subsidiaries apply to
       allotments of share capital for any consideration, not just ‘cash consideration’.

12.    Notification, Publication and Shareholders’ Approval Requirements

12.1   The table below summarises the requirements which will generally apply for each
       category of notifiable transaction.


                                   Publication
                     Notification     of an     Circular to Shareholders’ Accountants’
                          to      announcement shareholders approval         report
                      Exchange        in the
                                   newspapers

        Share               Yes         Yes               No             No1            No


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                                     Publication
                       Notification     of an     Circular to Shareholders’ Accountants’
                            to      announcement shareholders approval         report
                        Exchange        in the
                                     newspapers

        transaction
        Discloseable       Yes               Yes                  Yes             No                 No
        transaction
        Major              Yes               Yes                  Yes            Yes2               Yes3
        transaction
        Very               Yes               Yes                  Yes            Yes2               Yes
        substantial
        disposal
        Very               Yes               Yes                  Yes            Yes2               Yes
        substantial
        acquisition
        Reverse            Yes               Yes                  Yes            Yes2               Yes
        takeover

       Notes:   1        No shareholder approval is necessary if the consideration shares are issued under a
                         general mandate. However, if the shares are not issued under a general mandate,
                         the listed issuer is required, pursuant to Rule 13.36(2)(b) or Rule 19A.38, to obtain
                         shareholders’ approval in general meeting prior to the issue of the consideration
                         shares.

                2        Any shareholder and his associates must abstain from voting if such shareholder has
                         a material interest in the transaction.

                3        Approval of the Exchange is necessary.

12.2   Shareholders’ Approval Requirements

       Shareholders' approval is required for major transactions, VSAs, VSDs, reverse
       takeovers and share transactions where the consideration shares are not issued under a
       general mandate. The requirement for all transactions subject to shareholders’
       approval is that a shareholder and his associates must abstain from voting on
       transactions in which the shareholder has a ‘material interest’ (Rule 2.15).

       There is a new explanation of ‘material interest’ (Rule 2.16) which applies throughout
       the Rules. Factors to be taken into account in determining whether a shareholder
       has a material interest include:

               whether the shareholder or his associate is a party to the transaction or
                arrangement;
               whether the transaction or arrangement confers upon the shareholder or his
                associate a benefit (whether economic or otherwise) not available to the
                issuer’s other shareholders.

       In addition, a poll vote is mandatory where any shareholder is required to abstain
       from voting (Rule 13.39).

12.3   Waiver of Requirement to hold General Meetings (Rule 14.44)

       Major transactions may be approved by written resolutions of shareholders in lieu of


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       an EGM if:

       (i)         no shareholder would be required to abstain from voting at an EGM; and

       (ii)        the written shareholders’ approval has been obtained from a shareholder or
                   closely allied group of shareholders* who (together) hold more than 50% in
                   nominal value of the shares giving the right to vote at the general meeting
                   approving the transaction.
       *
             The Rules elaborate on the meaning of ‘closely allied group of shareholders’ based on the existing
             definition in the GEM Rules.

       Written shareholders’ approval is not acceptable for VSAs, VSDs or reverse
       takeovers.

13.    Additional Information in all Announcements of Notifiable Transactions

       This includes:

       (i)         the book value and valuation (if any) of the target assets;
       (ii)        confirmation that the counter-party and its ultimate beneficial owner are 3rd
                   parties independent of the issuer and its connected persons;
       (iii)       the reasons for entering into the transaction and statement that the directors
                   believe the terms of the transaction are fair and reasonable and in the interests
                   of the shareholders as a whole; and
       (iv)        details of shareholders giving written approval of a major transaction.

       Circulars for discloseable transactions must include information as to the competing
       interests of the listed issuer’s directors and their associates (Rule 14.64(8)).

14.    Other Announcement Requirements (Rule 14.36)

       A further announcement is required for a transaction previously announced on:

       (i)         the termination of the transaction;
       (ii)        any material variation in its terms; and
       (iii)       a material delay in completion of the agreement.

15.    Enhanced Disclosure of Financial Information in Circulars for Notifiable
       Transactions

       The new requirements include a management discussion and analysis:

       (i)         on the target for a major acquisition;
       (ii)        on the enlarged group for a VSA; and
       (iii)       on the remaining group for a VSD.

       There are also new requirements for the inclusion of pro-forma financial information
       where the subject of the transaction is a revenue-generating asset (other than a
       business or company) with an identifiable net income stream or assets valuation.

16.    Despatch of Circulars

16.1   Listed issuers must despatch circulars to shareholders at the same time as, or before,
       giving notice of the relevant general meeting (Rule 13.73).


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16.2   Any material information coming to the directors’ attention after the issue of the
       circular must be given to shareholders either in a supplementary circular or by way of
       a newspaper announcement not less than 14 days before the relevant general meeting.
       The meeting must be adjourned to comply with the 14-day requirement.

B.     CONNECTED TRANSACTIONS

1.     Definition of Connected Person

1.1    Non Wholly-owned Subsidiaries

       A non wholly-owned subsidiary will be treated as a ‘connected person’ only if any
       connected person(s) of the listed issuer (other than at the level of its subsidiaries)
       is/are, individually or together, a substantial shareholder (ie. controls the exercise of
       10% or more of the voting rights) in the non wholly-owned subsidiary (Rule
       14A.11(5)). A subsidiary of such a non wholly-owned subsidiary is also a connected
       person.

1.2    Wholly-owned Subsidiaries

       Wholly-owned subsidiaries are not connected persons (Rule 14A.12).

2.     Definition of Associate

       The main definition of associate which applies throughout the Rules has been
       amended to include, in summary:

       (i)     a company controlled by trustees of a trust of which a relevant individual or
               his family interests or a relevant company is a beneficiary or discretionary
               object; and

       (ii)    a subsidiary or holding company of a trustee-controlled company and fellow
               subsidiaries of such a holding company.

3.     Relatives of a connected person as deemed associates

       In summary, the following are included within the definition:

       (i)     Close Relatives

               These include any person co-habiting as a spouse, children, step-children,
               parents, step-parents, siblings and step-siblings.

       (ii)    Other Close Relatives
               These include in-laws, grandparents, grandchildren, uncles and aunts, cousins,
               nephews and nieces whose association with the person is such that, in the
               opinion of the Exchange, the proposed transaction should be subject to the
               connected transaction requirements.

4.     New Definitions of ‘transaction’, ‘listed issuer’ and ‘controller’




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5.     Classification of Connected Transactions
5.1    Connected transactions will be subject to the same size tests (except for the profits
       test) as notifiable transactions. The relevant tests are:
                   Total assets test
                   Consideration test
                   Revenue test
                   Equity capital test

5.2    Connected and continuing connected transactions (other than those involving options)
       fall into 3 main categories:

       (i)         those which are exempt from the reporting, announcement and independent
                   shareholders’ approval requirements (fully exempt transactions);

       (ii)        those exempt from the independent shareholders’ approval requirement; and

       (iii)       transactions subject to the reporting, announcement and independent
                   shareholders’ approval requirements*.
       *
           These transactions will also require:

       (a)         the establishment of an independent board committee with INEDs only; and

       (b)         the appointment of an independent financial adviser to advise the independent board
                   committee and shareholders on the transaction (see I.4 below).

5.3    The categories of transactions which are fully exempt are set out at Rule 14A.31.

5.4    Revised de Minimis Exemption Thresholds (Rules 14A.31 and 14A.32)

       A connected transaction must be on normal commercial terms for these exemptions to
       be relied upon.

        De minimis threshold for exemption Each of the size tests (except profits) is
        from reporting, announcement and less than 0.1%; or
        independent shareholders’ approval
        requirements (‘de minimis threshold 1’) Each size test (except profits) is equal to or
                                                more than 0.1% but less than 2.5% and the
                                                consideration is less than HK$1 million.

        De minimis threshold for exemption Each size test (except profits) is less than
        from      independent  shareholders’ 2.5%; or
        approval requirement (‘de minimis
        threshold 2’)                        Each size test (except profits) is equal to or
                                             more than 2.5% but less than 25% and the
                                             consideration is less than HK$10 million.

6.     Shareholders’ Approval Requirements

6.1    For connected and continuing connected transactions, ‘independent shareholders’ are
       those shareholders who are not required to abstain from voting on the relevant
       transaction. Rules 14A.18 and 14A.54 require the following to abstain from voting:

       (i)         any connected person with a material interest in the transaction;



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       (ii)    any person falling within Rule 14A.13(1)(b) that has a material interest in the
               transaction and its associates; and
       (iii)   any shareholder with a material interest in the transaction and its associates.

       The circular must include a statement that these parties will not vote. In addition, any
       vote of shareholders at a general meeting on a connected transaction must be taken on
       a poll (irrespective of whether any person has a material interest in the transaction)
       (Rule 13.39(4)). The issuer must comply with the new requirements for poll votes
       (see further at paragraph H.1 below).

6.2    Waiver of Requirement to hold General Meetings

       Connected transactions may be approved by written resolutions of independent
       shareholders in lieu of an EGM in the same circumstances as for major transactions
       (see A.12.3 above):

7.     Continuing Connected Transactions

7.1    The Rules include a new category of ‘continuing connected transaction’.

7.2    Exemptions from the Reporting, Announcement and Independent Shareholders’
       Approval Requirements (Rule 14A.33)

       The following continuing connected transactions are fully exempt:

       (i)     the provision of consumer goods or services as set out in Rule
               14A.31(7)(note that this exemption has been tightened);
       (ii)    the sharing of administrative services on a cost basis as set out in Rule
               14A.31(8); and
       (iii)   continuing connected transactions on normal commercial terms where the
               percentage ratios (except profits) and consideration on an annual basis are
               within de minimis exemption 1 (see 5.4 above).

7.3    Exemption from the Independent Shareholders’ Approval Requirement (Rule 14A.34)

       Continuing connected transactions on normal commercial terms will be subject only
       to the reporting and announcement requirements if the percentage ratios (except
       profits) and consideration on an annual basis are within de minimis exemption 2 (see
       5.4 above).

7.4    Non-exempt Transactions (Rule 14A.35)

       Issuers proposing to enter a continuing connected transaction which is not exempt
       from the reporting, announcement and independent shareholders’ approval
       requirements must:

       (i)     enter a written agreement with the connected person for a fixed period not
               exceeding 3 years on normal commercial terms;
       (ii)    set a maximum aggregate annual value (cap), the basis of which must be
               disclosed;
       (iii)   comply with the relevant reporting and announcement requirements; and
       (iv)    obtain independent shareholders’ approval for the transaction and cap, unless
               exempt from the independent shareholders’ approval requirement.

7.5    A listed issuer must re-comply with the reporting and announcement requirements


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       and obtain independent shareholders’ approval (unless exempt) when the agreement is
       renewed or there is a material change to the terms of the agreement and when the cap
       is exceeded (Rule 14A.36).

7.6    Continuing transactions become continuing connected transactions

       If a continuing transaction becomes a continuing connected transaction, the issuer
       must comply with all applicable reporting and disclosure requirements. Any
       variation or renewal of the agreement requires compliance with applicable reporting,
       disclosure and independent shareholders’ approval requirements (Rule 14A.41).

7.7    As regards existing waivers:

       (i)     Where a listed issuer has been granted a waiver for a fixed period, the waiver
               continues to apply until the earlier of:

               (a)      the expiry of the waiver; and

               (b)      the listed issuer failing to comply with any waiver condition(s), the
                        agreement being renewed or there being a material change to the
                        terms of the agreement.

       (ii)    Where a waiver has been granted indefinitely, the listed issuer should ensure
               compliance with the new requirements as soon as practicable after March 31,
               2004.

8.     Financial Assistance as a Connected Transaction

8.1    The Rules contain a new section on Financial Assistance. The provision of financial
       assistance by or to a listed issuer will only be regarded as a connected transaction if it
       is made:

       (i)     to or by a connected person; or
       (ii)    to or by a company in which both the listed issuer and connected person(s) (at
               the listed issuer’s level) are shareholders and the connected person(s) of the
               listed issuer (at the level of the listed issuer) is/are, individually or together, a
               substantial shareholder of the company.

8.2    Exemptions from the Reporting, Announcement and Independent Shareholders’
       Approval Requirements for Listed Issuers (other than Banking Companies)

       Where financial assistance is provided by a listed issuer for the benefit of a connected
       person, it will be fully exempt if it is on normal commercial terms (or better to the
       listed issuer) and the percentage ratios and total value of the assistance plus any
       preferential benefit are within de minimis threshold 1 (see paragraph 5.4 above)
       (Rule 14A.65(2)).

       Where the listed issuer provides financial assistance to a company within 8.1(ii)
       above, the financial assistance will be fully exempt if it is on normal commercial
       terms; and

       (i)     it is in proportion to the listed issuer’s equity interest in the company; and
       (ii)    any guarantees given by the listed issuer are on a several (not joint and
               several) basis.



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       Otherwise, the financial assistance will be subject to the reporting, announcement and,
       if applicable, independent shareholders’ approval requirements unless exempt under
       the de minimis exception rules.

       Financial assistance provided to a listed issuer by a connected person or a company
       within 8.1(ii) above is exempt from the reporting, announcement and independent
       shareholders’ approval requirements if:

       (i)     it is on normal commercial terms (or better to the listed issuer); and
       (ii)    no security over the assets of the listed issuer is given.

C.     APPLICATION OF THE SIZE TESTS IN OTHER PARTS OF THE RULES

1.     Disclosure of Advances to Entities and Financial Assistance to Affiliated
       Companies (Rules 13.13 to 13.16)

       The general disclosure obligation will arise where:

       (i)     any of the percentage ratios of an advance to an entity exceeds 8%;

       (ii)    the percentage ratios for the amount of an increase in an advance to an entity
               since the previous disclosure is 3% or more; and

       (iii)   any of the percentage ratios of the financial assistance given to affiliated
               companies of an issuer, and guarantees given for facilities to such affiliated
               companies, together in aggregate exceeds 8%.

       Although all the size tests apply in theory, only the consideration and total assets test
       will be relevant in practice.

       Listed issuers should ensure compliance with the disclosure requirements for
       advances to entities and financial assistance to affiliated companies based on the
       revised percentage ratios as soon as possible after March 31, 2004.

2.     Application of the Percentage Ratios to other parts of the Rules

       Please see our detailed note at paragraph II C.3.

D.     DILUTION OF SHAREHOLDERS’ INTERESTS

1.     Refreshment of general mandate (Rule 13.36)

       The upper limit on the number of shares which may be issued under a general
       mandate (ie. 20% of existing issued share capital) is retained.

       Amendments:

       (i)     allow companies to refresh their general mandate once a year subject to
               shareholders’ approval (normally at the AGM); and

       (iii)   require independent shareholders’ approval for subsequent refreshments
               (subject to an exemption for a top-up of the unused portion of a previous
               general mandate after a pre-emptive issue of shares to existing shareholders.
               Such top-ups only require shareholders’ approval).



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2.     New Price Restriction on the Issue of Shares under the General Mandate (Rule
       13.36(5))

       The placing price or subscription price under top-up arrangements must not represent
       a discount of 20% or more to the bench-marked price of the securities, unless the
       issuer is in severe financial difficulties or there are other exceptional circumstances.
       There are new announcement requirements for issues at discounts of 20% or more.

3.     Placing and Top-up Subscription (Rule 14A.31(3)(d))

       On a placing and top-up by a connected person to an independent third party, the
       exemption from the reporting, announcement and independent shareholders’ approval
       requirements applies only if the number of new shares subscribed by the connected
       person does not exceed the number of shares placed by him and the new shares are
       issued within 14 days of the connected person signing an agreement to reduce his
       shareholding.

4.     New Requirements for Offers of Securities Excluding Overseas Shareholders

       Exclusion of overseas shareholders is only permitted if, after relevant enquiries, the
       issuer is satisfied that it is necessary or expedient due to legal, regulatory or stock
       exchange requirements in any relevant place and the reasons are set out in the
       relevant circular or document.

5.     Rights issues and open offers

       The requirement for independent shareholders’ approval for any rights issue or open
       offer which would increase either the issued share capital or market capitalization of
       the issuer by more than 50% is retained. Amendments clarify determination of the
       50% threshold. The latest rights issue or open offer is aggregated with:

       (i)     any other rights issues or open offers announced by the issuer (a) within the
               12 month period immediately preceding the announcement of the proposed
               rights issue or offer or (b) prior to such 12 month period where dealing in the
               shares issued under the rights issue or open offer started within such 12
               month period; and

       (ii)    any bonus securities, warrants or other convertible securities (assuming full
               conversion) granted to shareholders as part of such rights issues or open
               offers.

       The Rules on open offers have been amended in line with the Rules on rights issues in
       providing for issuers to make arrangements to dispose of securities not validly applied
       for by shareholders provided the securities are made available for subscription by all
       shareholders and allocated on a fair basis.

       The new Rules clarify that an issue of new securities to a connected person under an
       open offer which is underwritten or sub-underwritten by the connected person is
       exempt from the reporting announcement and shareholders’ approval requirements
       provided arrangements are made as above.

       Where an open offer which is wholly or partly underwritten or sub-underwritten by a
       director, chief executive or substantial shareholder fails to make such arrangements or
       makes other arrangements, shareholders’ approval is required.



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E.     SHARE REPURCHASES

1.     The 25% monthly share repurchase restriction has been removed.
2.     Repurchases are not allowed at more than 5% of the average closing market price for
       the previous 5 days on which the shares are traded on the Exchange (Rule
       10.06(2)(a)).
3.     The dealing restriction period will commence one month prior to the earlier of:

       (i)     the date of the board meeting notified to the Exchange for approval of the
               issuer’s results; and
       (ii)    the deadline for publication of the results,

       and end on the date of the results announcement.

F.     WITHDRAWAL OF PRIMARY LISTING ON THE EXCHANGE

       In line with proposed changes to the Takeovers Code, any withdrawal of primary
       listing will be subject to:

       (i)    the approval of at least 75% of the votes of independent shareholders;
       (ii)   the number of votes cast against the resolution must not be more than 10% of
              the votes attaching to shares held by independent shareholders; and
       (iii)  shareholders being offered a reasonable cash or other alternative.
       Withdrawal of Secondary Listing Status

       Secondary listing status may be withdrawn if all relevant laws, regulations and listing
       requirements of the jurisdictions of an issuer’s primary listing and incorporation have
       been complied with and shareholders have been given at least 3 months’ prior notice
       by newspaper announcement.

G.     DISPOSAL OF CONTROLLING SHAREHOLDERS’ INTERESTS

1.     Commencement of Lock-up Period (Rule 10.07(1))

       The lock-up periods for the disposal of interests by controlling shareholders will
       commence on the date by reference to which disclosure of the shareholding is
       made in the listing document. The new requirements will apply to all initial listing
       applicants in process on or after March 31, 2004, including those new applicants
       whose applications have been approved but not listed.

       Any offer for sale disclosed in a listing document is not subject to the lock-up.

2.     Agreement for Disposal of Shares

       The new Rules expressly prohibit controlling shareholders from entering into any
       agreement to dispose of their shares or creating any options, rights, interests or
       encumbrances in respect of their shares during the restriction periods.

3.     Deemed Disposal of Controlling Shareholders’ Interests (Rule 10.08)

       Issuers are prohibited, subject to limited exceptions, from issuing (or agreeing to issue)
       shares or securities convertible into equity securities for 6 months after their shares
       commence dealing on the Exchange.




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H.     VOTING BY SHAREHOLDERS

1.     Poll Vote Mandatory (Rule 13.39(4))

       Voting by poll is mandatory for:

              connected transactions;
              all resolutions requiring independent shareholders’ approval;
              granting options to a substantial shareholder, an INED or their associates; and
              transactions in which a shareholder has a ‘material interest’ and is therefore
               required to abstain from voting.

       An issuer must publish the results of a poll in the newspaper on the business day
       following the meeting.

       New explanation of ‘material interest’ – see paragraph A.12.2 above.

2.     Voting by Controlling Shareholders

       Controlling shareholders are required to abstain from voting on:

       (a)     rights issues and open offers when either the issued share capital or market
               capitalization of the issuer will increase by more than 50%;
       (b)     withdrawal of a primary listing on the Exchange (subject to revised voting
               thresholds);
       (c)     on a fundamental change in principal business activities within 12 months of
               commencement of dealing on the Exchange; and
       (d)     on the second and subsequent refreshments of the general mandate (new).

       Amendments to the Rules provide that:

             controlling shareholders are only required to abstain from voting in favour (ie.
               they can vote against);
              if there are no controlling shareholders, the issuer’s chief executive and
               directors (excluding INEDs) and their associates must abstain from voting in
               favour; and
              the Exchange reserves the right to require the following to abstain from
               voting in favour:

               (a)     parties who were controlling shareholders when the decision for the
                       transaction was made or approved by the board (and who are still
                       shareholders, but not controlling shareholders, at the time of the
                       general meeting), and their associates; and
               (b)     if there were no controlling shareholders, directors (other than INEDs)
                       and the chief executive of the issuer when the decision for the
                       transaction was made or approved by the board, and their associates.

I.     DIRECTORS AND BOARD PRACTICES

       INDEPENDENT NON EXECUTIVE DIRECTORS

1.     Further Guidance Regarding Independence (Rule 3.13)

1.1    Further guidelines for the determination of the independence of INEDs have been
       included in the Rules.


CHARLTONS                                    17                                          36109.2
1.2    Further amendments require:
              an INED to provide the Exchange with written confirmation of the new
               factors concerning his independence and that there are no other factors
               affecting his independence;
              INEDs to inform the Exchange of any change of circumstances affecting
               independence;
              each INED to provide annual confirmation of his independence to the listed
               issuer;
              the listed issuer to confirm in its annual report whether it has received such
               confirmation and whether it considers the INED to be independent; and
              where a proposed INED fails to meet any independence guideline(s), the
               listed issuer must satisfy the Exchange that the person is independent.

       Existing INEDs must submit confirmation of their independence according to the new
       guidelines before September 30, 2004.

2.     Qualification of INEDs (Rule 3.10(2))*

       The Rules require the appointment of at least one INED with appropriate professional
       qualifications or accounting or related financial management expertise.

3.     Minimum Number of INEDs*

       The Rules require the appointment of a minimum of 3 INEDs. The listed issuer
       must inform the Exchange and publish an announcement immediately if the number
       of its INEDs falls below the minimum or it does not have one qualified INED. The
       draft Code on Corporate Governance Practices includes as a recommended best
       practice that a listed issuer should appoint INEDs representing at least one third of the
       board.
       *
           Existing listed issuers have until September 30, 2004 to comply with these requirements.

4.     Independent Board Committees (Rule 13.39(6))

       For connected transactions, transactions requiring independent shareholders’ approval
       and spin-offs requiring shareholders’ approval under Practice Note 15, issuers are
       required by the Rules to:

       (i)         establish an independent board committee (consisting only of INEDs) to
                   advise shareholders on the transaction or arrangement and on how to vote,
                   taking into account the recommendations of the independent financial adviser
                   (see (ii) below); and
       (ii)        appoint an independent financial adviser acceptable to the Exchange to
                   recommend to the independent board committee and the shareholders as to
                   whether the terms of the relevant transaction or arrangement are fair and
                   reasonable and whether the transaction or arrangement is in the interests of
                   the issuer and its shareholders as a whole and to advise shareholders on how
                   to vote.




CHARLTONS                                              18                                             36109.2
5.     Board Practices

5.1    Code on Corporate Governance Practices

       The draft revised Code of Best Practice (renamed the Code on Corporate Governance
       Practices (the ‘Code’)) is currently subject to consultation.

       The Exchange proposes to publish the final Code in the first half of 2004. The Code
       will be effective for accounting periods commencing on or after 1 January 2005.

       The draft Code contains 2 tiers of recommended board practices:

              1st tier - minimum standards of board practices. Compliance is not
               mandatory. A ‘comply or explain’ approach has been adopted (ie. issuers
               must disclose and explain any deviation from the minimum standards in their
               corporate governance report in their annual report);

              2nd tier - comprises recommended best practices that issuers are encouraged
               to adopt. Disclosure of any deviation is not required, but issuers are
               encouraged to disclose any deviation as for the lst tier provisions.

5.2    Report on Corporate Governance

       Listed issuers will be required to include a Corporate Governance Report in their
       annual report. The draft Corporate Governance Report is currently subject to
       consultation.

       There are 3 levels of disclosure requirements:

       (i)     1st level - mandatory disclosure requirements. Failure to comply will be
               regarded as a breach of the Listing Rules;
       (ii)    2nd level - summarises the Code provisions for disclosure of corporate
               governance practices. Listed issuers will be required to explain any
               non-disclosure;
       (iii)   3rd level - recommended disclosures that listed issuers are encouraged to
               include.

K.     ESTABLISHMENT OF GOVERNANCE COMMITTEES

1.     Audit Committee (Rule 3.21)

       Establishment of an audit committee is compulsory under the Rules. Existing
       issuers have until September 30, 2004 to comply. The committee must be made up
       only of non-executive directors, the majority of which must be INEDs of the issuer.
       The minimum requirement is for 3 members, one of whom must be an INED with
       appropriate professional qualifications or accounting or related financial management
       expertise.

       If an issuer fails to establish an audit committee or does not meet the requirements for
       its constitution, it must immediately inform the Exchange and publish an
       announcement. It has 3 months to rectify the situation.




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2.     Qualified Accountant (Rule 3.24)

       The Rules require listed issuers to employ a qualified accountant on a full-time basis.
       This must be met by March 31, 2004.

3.     Remuneration Committee

       Establishment comprising a majority of INEDs is a minimum standard in the draft
       Code.

4.     Nomination Committee

       The establishment of a nomination committee comprising a majority of INEDs is a
       recommended best practice in the draft Code.

L.     DIRECTORS’        DUTIES       AND       RESPONSIBILITIES          AND     INTERNAL
       CONTROLS

       The relevant requirements have been set out in the draft Code.

M.     ARTICLES OF ASSOCIATION

       New requirements for issuers’ articles of association are:

       (i)     Voting By Interested Directors

               The prohibition on a director voting on any board resolution approving a
               contract or arrangement in which he has a material interest, is extended to
               cover contracts or arrangements in which any of his associates has a material
               interest.

       (ii)    Nomination of Directors (Appendix 3 paragraph 4(4)-(5))

               The minimum length of the period for shareholders to lodge notice of their
               nomination of a director is at least 7 days. Amendments provide that such
               period should commence no earlier than the day after despatch of notice of
               the meeting appointed for such election and should end no later than 7 days
               prior to the date of the meeting.

               Rule 13.70 further requires that a listed issuer publishes a newspaper
               announcement or issues a supplementary circular upon receipt of notice from
               a shareholder of its intention to nominate a director, if received after issue of
               notice of the relevant meeting.

       (iii)   Voting at General Meetings (Appendix 3 paragraph 14)

               Where any shareholder is required under the Rules to abstain from voting or
               restricted to voting only for or against any resolution, any votes cast by or on
               behalf of such shareholder in contravention of such requirement or restriction
               will not be counted.

       Listed issuers must amend their Articles of Association to comply with the amended
       provisions of Appendix 3 at the earliest opportunity and, in any event, no later than
       the conclusion of their next AGM. Where an issuer has despatched notice of an
       AGM before March 31, 2004 and the meeting will be convened after that date, it must


CHARLTONS                                     20                                           36109.2
       amend its articles at the earliest opportunity after the implementation of the new
       Rules.

N.     SECURITIES TRANSACTIONS BY DIRECTORS

1.     Disclosure of breaches

       Any breach of the minimum standard of conduct for securities transactions by
       directors set out in the Model Code for Securities Transactions by Directors of Listed
       Issuers (the ‘Model Code’) at Appendix 10 of the Rules will constitute a breach of the
       Rules. Listed issuers may adopt their own code on terms no less exacting than those
       in the Model Code. Where a listed issuer sets a higher standard in its own code,
       breach of such code will not be a breach of the Rules provided that the standard
       required by the Rules is met.

2.     Definition of dealing

       A non-exhaustive definition of ‘dealing’ has been included at Rule 7(a).

3.     ‘Black-Out’ period of Directors’ Securities Transactions (Rule A.3)

       Unless the circumstances are exceptional, directors are prohibited from dealing in a
       listed issuer’s securities during the period commencing one month immediately
       preceding the earlier of:

       (i)     the date of the board meeting (as notified to the Exchange) for approval of the
               listed issuer’s results; and

       (ii)    the deadline for the listed issuer to publish an announcement of its results,

       and ending on the date of the results announcement.

4.     Dealings by directors in exceptional circumstances (Rule C)

       The Model Code has been amended so that directors are allowed to dispose of, but
       not acquire, securities of a listed issuer under exceptional circumstances (for example,
       to meet a pressing financial commitment) during the ‘black-out’ period.

5.     Directors as Trustees or Beneficiaries

       The Model Code contains new provisions for directors acting as trustees.

6.     Disclosure in Annual and Interim Reports (Rule D15)

       Issuers will be required to confirm their adoption of a code of conduct meeting the
       required standard and to disclose any non-compliance.

O.     DIRECTORS’ CONTRACTS, REMUNERATION AND APPOINTMENTS

1.     Directors’ Service Contracts

       Prior approval of shareholders is required for a service contract which:

       (i)     may exceed 3 years; or



CHARLTONS                                     21                                           36109.2
       (ii)    requires the issuer to give more than one year’s notice or pay compensation
               of more than one year’s remuneration, to terminate the contract.

       The issuer’s remuneration committee or an independent board committee should
       advise shareholders on any such contract and as to how to vote.

       The new requirements apply to:

       (i)     new service contracts entered into after March 31, 2004; and
       (ii)    variations as to the duration or payment on termination or any other material
               terms of existing service contracts and renewal of such contracts.

       Directors’ service contracts entered into on or before January 31, 2004 are exempt
       from the new requirements. Issuers are however required to include the particulars
       of any exempt service contracts in their annual reports for the term of such contracts
       (Appendix 16 paragraph 14A).

2.     Disclosure of Directors’ Remuneration

       The Rules require listed issuers to disclose individual directors’ and past directors’
       emoluments on a named basis in its financial statements.

P.     DISCLOSURE OF INFORMATION

1.     New Announcement Requirements

       There is a new requirement for issuers to publish a formal announcement as soon as
       practicable (in addition to immediately notifying the Exchange) of:

       (i)     any proposed alteration of the issuer’s memorandum or articles of
               association;
       (ii)    any appointment, resignation or re-designation of its directors or supervisors
               including the reasons for any resignation and biographical details of newly
               appointed directors and supervisors;
       (iii)   any change in the rights attaching to (1) any class of listed securities or (2)
               any shares into which any listed debt securities are convertible or
               exchangeable;
       (iv)    any change in the auditors or financial year end; and
       (v)     any change in the secretary or registered address.

2.     Despatch of Notice of General Meetings and Circulars (Rule 13.73)

2.1    The Rules require issuers to despatch circulars to shareholders at the same time as, or
       before giving notice of the general meeting to approve the transaction.

2.2    Any material information coming to the directors’ attention after issue of the circular
       must be given to shareholders in a supplementary circular or newspaper
       announcement at least 14 days before the general meeting. General meetings must
       be postponed to comply with the 14 day requirement.

2.3    Notice of general meetings and meetings of creditors must be published by way of
       announcement.




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Q.     FINANCIAL REPORTING

       The two-phased publication arrangements for annual and half-year results
       announcements are to be abolished with effect from the accounting period
       commencing on or after July 1, 2004. The disclosure requirements for annual and
       half-year results announcements have been brought into line with those for summary
       financial reports and will be effective for accounting periods commencing after July 1,
       2004.

       The financial information in the preliminary announcement of annual results is
       required to ‘have been agreed with the auditors’ rather than actually audited. The
       amended Rules also allow issuers to send out a summary interim report instead of an
       interim report (Rule 13.48).

       Early adoption of the new disclosure requirements is encouraged by the Exchange.
       Where results announcements are published in accordance with the new disclosure
       requirements on or after March 31, 2004, they will not be required to comply with the
       existing two-phased publication arrangements.

R.     MEANING OF SUBSIDIARY

       The definition of ‘subsidiary’ is expanded to include:

       (a)     any entity which is accounted for and consolidated in the audited
               consolidated accounts of an issuer as a subsidiary under the applicable
               HKFRS or IFRS; and

       (b)     any entity which will, as a result of acquisition of its equity interest by the
               issuer, be accounted for and consolidated in the next audited consolidated
               accounts of the issuer under the applicable HKFRS or IFRS.




This memorandum is intended as a summary only of the amendments to the Main Board
Listing Rules. Specific advice should be sought in relation to any particular situation.



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