The Listing Committee of the Exchange has recently concluded a disciplinary hearing into the conduct of, among other things, the Company and the Relevant Parties (directors of the Company except for Mr. Lin Yan who was a former director), in connection with certain connected transactions, being those as publicly announced by the Company in its announcement dated April 22, 1999, whereby the Company and its subsidiaries (collectively the "Group") were involved in a series of transactions with Shijiazhuang Pharmaceutical Group Company Limited ("SPG") and its affiliated companies, other than members of the Group (collectively the "SPG Group"), during the period from January 1, 1998 to April 7, 1999.

SPG was the holding company of the Company then holding 57% of its issued share capital and was a connected person of the Company under the Listing Rules. Details of the Connected Transactions are as follows:

(i) During the period from February 20, 1998 to April 7, 1999, the Group made non-trade interest bearing advances on a current account basis to the SPG Group on numerous occasions. The maximum balance of such advances amounted to HK$194,262,000 on April 6, 1999, representing 27% of the Group's net tangible asset value as at December 31, 1998. Repayment of all outstanding balances of such advances including interest accrued thereon at a rate of 9% per annum was made on April 9, 1999; and

(ii) Throughout 1998, sales and purchases of raw materials and sales of finished products were carried out between the Group and the SPG Group, which aggregate amount exceeded the de minimis exception set out in Rule 14.24(5) of the Exchange Listing Rules.

The Relevant Parties have admitted breaches of the connected transaction rules under Chapter 14 of the Exchange Listing Rules.

The Listing Committee has concluded that there were breaches of Rules 14.23(2), 14.25(1), 14.26(6) and 14.29 of the Exchange Listing Rules.

The Listing Committee has also found that each of the Relevant Parties failed to comply with Rule 3.08(f) of the Exchange Listing Rules in failing to apply such degree of skill, care and diligence as may reasonably be expected of a person of his knowledge and experience and holding his office within the issuer; and further by virtue of the said breaches of the Exchange Listing Rules, the Relevant Parties breached their respective Director's Undertaking, whereby each of them undertook to comply to the best of his ability with the Exchange Listing Rules from time to time in force, and to use his best endeavours to procure that the Company of which he was/is a director would so comply.

Accordingly, each of the Relevant Parties is hereby publicly criticised by the Listing Committee for breaches of Rule 3.08(f) of the Exchange Listing Rules and the Director's Undertakings to comply to the best of his ability with the Exchange Listing Rules from time to time in force and to use his best endeavours to procure that the Company complied with the Exchange Listing Rules.

For the avoidance of doubt, the Listing Committee confirms that in relation to this matter it is not publicly criticising the Company, or any present or former member of the Board of Directors of the Company, save for the Relevant Parties.