Note to subscribers for the amendments to the rules governing the listing of securities on the Growth Enterprise Market (the "GEM Listing Rules")

Update No. 20

8 December 2004

Dear Sirs,

Amendments to the GEM Listing Rules relating to the Code on Corporate Governance Practices and Rules on the Corporate Governance Report

We enclose reprinted pages of the GEM Listing Rules incorporating amendments to the GEM Listing Rules in relation to the Code on Corporate Governance Practices (the "Code") and the rules on the Corporate Governance Report, together with the filing instructions.

The Code is inserted as a new Appendix 15 replacing existing GEM Listing Rules 5.35 to 5.45. The Rules on the Corporate Governance Report are inserted as a new Appendix 16.

Various other consequential amendments to the GEM Listing Rules have been made on the introduction of the Code and Rules on the Corporate Governance Report.

Revised Code on Corporate Governance

The Code sets out the Exchange's views on the principles of good corporate governance and two levels of recommendations, namely Code Provisions and Recommended Best Practices. Issuers are expected to comply with, but may choose to deviate from, the Code Provisions. Issuers are encouraged to comply with the Recommended Best Practices which are provided for guidance only. Issuers may devise their own code on corporate governance practices on such terms as they may consider appropriate.

The Code has five sections dealing with directors, remuneration of directors and senior management, accountability and audit, delegation by the Board and communication with shareholders. In each section, the Code sets out the Code Provisions and/or Recommended Best Practices, together with the underlying principles of the relevant provisions to assist listed issuers in developing their own code of board practices.

Corporate Governance Disclosure

Issuers must state whether they have complied with the Code Provisions set out in the Code for the relevant accounting period in their half-year reports and annual reports.

Issuers are required to include a Corporate Governance Report in their annual reports containing prescribed information on their corporate governance practices.

Where the issuer deviates from the Code Provisions set out in the Code, the issuer must give considered reasons, in the case of annual reports, in the Corporate Governance Report and, in the case of half-year reports, either by giving considered reasons for each deviation or, to the extent that it is reasonable and appropriate, by referring to the Corporate Governance Report in the immediately preceding annual report, and providing details of any changes together with considered reasons for any deviation not reported in that annual report.

In the case of the Recommended Best Practices, issuers are encouraged, but are not required, to state whether they have complied with them and give considered reasons for any deviation.

Coming into Effect

Subject to the implementation and transitional arrangements set out in Appendix 2 to the Exposure Conclusions Report (which is available on the Exchange's website at www.hkex.com.hk/consul/conclusion/expocon.pdf), the rule amendments will come into effect on 1 January 2005.

Please click HERE to see the amendments to the respective sections. The revised version of the entire GEM Board Listing Rules are located in the section headed "Listing Rules (GEM)".

Yours faithfully

For and on behalf of

The Stock Exchange of Hong Kong Limited

Richard Williams
Head of Listing