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23 April 2001

The Stock Exchange of Hong Kong Limited (the Exchange) hereby publicly censures the Company and each of the Executive Directors of the Company as stated above for breaches of the Listing Agreement, Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the "Exchange Listing Rules"), and the Declaration and Undertaking with regard to Directors given by the Directors to the Exchange in the form set out in Appendix 5B of the Exchange Listing Rules (the "Undertaking").

At a disciplinary hearing held on 23 May 2000 and subsequently at a disciplinary (review) hearing held on 27 February 2001, the Listing Committee of the Exchange (the "Listing Committee") conducted disciplinary hearings into the conduct of, amongst other parties, the Company and each of Ms. Irene Wai Yin So, Mr. Evans Carrera Lowe, Mr. Danny Tak Tim Chan, Mr. Philip Tai Yip Poon and Mr. Eric Carrera Lowe (collectively, the "Executive Directors"), executive directors of the Company, in connection with certain connected transactions (the "Connected Transactions"), whereby Mansion House Capital Limited, a wholly owned subsidiary of the Company granted margin financing during 1996 and 1997 (the "Margin Account") to connected parties and subsequently substantial loans to cover shortfalls therein (the "Loans") to the same connected parties on 20 and 21 October 1998. The Loans were substantially unsecured and in the aggregate principal amount of approximately HK$100 million and repayable on demand. The amount of the Loans advanced represented approximately 71% of the net tangible assets of the Company as at December 1998. As a direct result of the making of the Loans, the Company's audited results for the year ended 31 December 1998 included a loss of HK$40 million relating to the Loans by way of an exceptional item. The aggregate amount of the Loans that remained outstanding as at 31 December 1999 were in excess of HK$100 million.

The Connected Transactions involved Mr. Jason So, Dynamic Assets Limited ("DAL"), a company beneficially owned by Mr. Jason So, PharmaTech Management Limited ("PML"), a company also beneficially owned by Mr. Jason So, and Noblesse Ventures Inc. ("NVI"), a company beneficially owned by Ms. Sheila So. Both Mr. Jason So and Ms. Sheila So are the brother and the sister of Ms Irene Wai Yin So respectively. Ms. Irene Wai Yin So is an Executive Director of the Company, and as such under the relevant connected transaction listing rules, any transaction involving a sibling of a director of a listed issuer or a company in which they hold an interest is deemed to be a connected transaction and the requisite connected transaction listing rules apply. Accordingly, each of Mr. Jason So, DAL, PML and NVI was hence a "connected party" for the purposes of the Exchange Listing Rules.

The Company and the directors of the Company have admitted the Company's breaches of the connected transaction rules under Chapter 14 of the Exchange Listing Rules in respect of the Connected Transactions.

The Listing Committee had concluded that the Company was in breach of the connected transactions provisions, in particular, Rule 14.26 (6) and Rule 14.29 of the Exchange Listing Rules and Paragraph 2 of the Listing Agreement.

The Listing Committee had also found that by virtue of the said breaches of the Exchange Listing Rules and Listing Agreement by the Company, the Executive Directors were each in breach of their respective Undertakings made in the form of a statutory declaration to the Exchange whereby they undertook to comply to the best of their abilities with the Exchange Listing Rules from time to time in force, and to use their best endeavours to procure that the Company of which they are executive directors would so comply.

The Listing Committee noted that the Connected Transactions constituting the Loans have caused significant provisions to be made in the audited accounts of the Company for the financial year ended 1998 which resulted in a loss being recorded in the same financial period. The Listing Committee was concerned with the apparent laxity of credit control and risk management in the Company and its subsidiaries during the period the relevant breaches of the Exchange Listing Rules occurred. The Listing Committee has been informed by the Company that it has since implemented improvement measures to its credit control and risk management systems. The Listing Committee was also dissatisfied with the concentration of large loans to a few connected clients in ratio to the overall margin loan portfolio and the concentration of the finance of the Company's shares against the overall clients' shares deposited with the Company. The Company has been put at risk by the Connected Transactions at the expense of the shareholders of the Company.

Accordingly, the Company and each of the Executive Directors are hereby publicly censured by the Listing Committee for:-

(i) the Company's breaches of Rule 14.26(6) and Rule 14.29 of the Exchange Listing Rules and Paragraph 2 of the Listing Agreement; and

(ii) the Executive Director's breach of his/her Undertaking to the Exchange in Form B to comply with the Exchange Listing Rules to the best of his/her ability and for causing or failing to prevent the Company from breaching the Exchange Listing Rules and the Listing Agreement.

For the avoidance of doubt, the Exchange confirms it is not publicly censuring any other directors of the Company, past or present, other than those named therein in relation to this matter.

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