XN000022-1997-01-15 — Page 35

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The specific action taken by the SFC and the SEHK to improve corporate governance since January 1995 include:

In 1995, the SEHK's Listing Rules were amended to require all listed companies to include in their annual and interim reports a compliance statement with respect to their code of best practice.

In 1995 and 1996, the SFC and the SEHK jointly hosted conferences on the duties of directors of listed companies under the SEHK's Listing Rules.

In 1996, SEHK's Listing Rules were amended to set out the procedures for director's declarations and undertakings that must be completed by all directors.

In 1996, the SEHK set up a Working Party on Corporate Governance in which the SFC also participated. Amongst other matters, the Working Party is considering the Hong Kong Society of Accountants' report on corporate governance,

In 1995 and 1996, the SFC and the SEHK assisted the Administration in the drafting of legislation which seeks to provide statutory protection for auditors of listed companies who report in good faith suspected fraud, unlawful conduct, misfeasance or other misconduct discovered in the course of audit to the SFC and the SEHK.

The answers to the three sub-questions are as follows:

(a)

(b)

Budgetary provision

Neither the SFC, nor the SEHK has prepared the budget for the last two years in a format which could clearly delineate the budgetary provision for investigation work on listed companies or for the prevention of corporate fraud and mismanagement.

Evaluation on preventive measures

Neither the SFC nor the SEHK has carried out specific evaluation on the impact of the preventive action they have taken. Nevertheless, the SFC believes that the enforcement action taken under section 29A of the Securities and Futures Commission Ordinance would be an effective deterrent and should help prevent corporate fraud and mismanagement.