Hong Kong Regulations

SECURITIES AND FUTURES (FINANCIAL RESOURCES) RULES - SCHEDULE 2

HAIRCUT PERCENTAGES

(Past version on 01/04/2003).

[sections 2 & 43]

TABLE 1

HAIRCUT PERCENTAGES FOR SHARES LISTED IN HONG KONG FOR THE PURPOSES OF THESE
RULES (EXCEPT FOR THE PURPOSE OF CALCULATING THE HAIRCUT AMOUNT UNDER SECTION
22(1)(b)(i)) (L.N. 117 of 2006)

Item Description Haircut Percentage
%

1. Shares which are listed on a recognized stock market-

   (a)  being a constituent of the Hang Seng Index or the Hang Seng Hong Kong
        LargeCap Index
15

   (b)  to the extent not already covered in paragraph (a), being a
        constituent of the Hang Seng Hong Kong MidCap Index 20

   (c)  being any share not referred to in paragraph (a) or (b) 30

2. Shares which are listed on a recognized stock market but are not stratified
according to stock indices 30 (L.N. 117 of 2006)

TABLE 1A

HAIRCUT PERCENTAGES FOR SHARES LISTED IN HONG KONG FOR THE PURPOSE OF
CALCULATING THE HAIRCUT AMOUNT UNDER SECTION 22(1)(b)(i)

Item

Description
Haircut
Percentage
%

1. Shares which are listed on a recognized stock market-

   (a)  being a constituent of the Hang Seng Index or the Hang Seng Hong Kong
        LargeCap Index 15

   (b)  being a constituent of the Hang Seng Hong Kong MidCap Index 20

   (c)  being a constituent of the Morgan Stanley Capital International Inc.
        Hong Kong Index or the Morgan Stanley Capital International Inc. China
        Index 30

   (d)  being a constituent of the Hang Seng Composite Index 30

   (e)  being any share not referred to in paragraph (a), (b), (c) or (d)-

   (i)  for a licensed corporation which does not repledge securities
        collateral 30

   (ii) for a licensed corporation which repledges securities collateral 60

2. Shares which are listed on a recognized stock market but are not stratified
according to stock indices-

   (a)  for a licensed corporation which does not repledge securities
        collateral 30

   (b)  for a licensed corporation which repledges securities collateral 60
        (L.N. 117 of 2006)

TABLE 2

HAIRCUT PERCENTAGES FOR SHARES LISTED IN THE UNITED KINGDOM, THE UNITED STATES
OF AMERICA AND JAPAN (L.N. 117 of 2006)

Item Description Haircut Percentage
%

1. Shares which are listed on a specified exchange in the United Kingdom

(other than the London Stock Exchange plc—SEAQ International), the United
States of America (other than the Nasdaq Stock Market, Inc.—Nasdaq National
Market) or Japan (other than the Japanese Association of Securities Dealers
Automated Quotations)-

   (a)  being a constituent of the FTSE-100 Index, Nikkei 500 Index or
        Standard & Poor's 500 Index; or 15

   (b)  being any share not referred to in paragraph (a)
20 2. Shares which are listed on a specified exchange in the United Kingdom

(other than the London Stock Exchange plc—SEAQ International), the United
States of America (other than the Nasdaq Stock Market, Inc.—Nasdaq National
Market) or Japan (other than the Japanese Association of Securities Dealers
Automated Quotations), but are not stratified according to stock indices 20
(L.N. 117 of 2006)

TABLE 3

HAIRCUT PERCENTAGES FOR OTHER SHARES

Item Description Haircut Percentage
%

1. Shares listed on a specified exchange specified in Part 1 of Schedule 3

(other than the London Stock Exchange plc—SEAQ International, the Nasdaq
Stock Market, Inc.—Nasdaq National Market or the Japanese Association of
Securities Dealers Automated Quotations)
20 2. Shares listed on a specified exchange specified in Part 2 of Schedule 3
30 3. Shares listed on the London Stock Exchange plc—SEAQ International, the
Nasdaq Stock Market, Inc.—Nasdaq National Market or the Japanese Association
of Securities Dealers Automated Quotations
30 4. Shares listed on any other stock exchange which is a member of the World
Federation of Exchanges
50 5. Listed shares not referred to in item 1, 2, 3 or 4 or Table 1, 1A or 2
75 (L.N. 117 of 2006)

TABLE 4

HAIRCUT PERCENTAGES FOR QUALIFYING DEBT SECURITIES, BY ISSUER OR GUARANTOR,
ETC.

Tier Description Haircut Percentage
%

1. Where the issuer or guarantor of the qualifying debt securities-

   (a)  is the Central People's Government of the People's Republic of China
        or the People's Bank of China;

   (b)  is the Government;

   (c)  is the Hong Kong Exchange Fund; or

   (d)  has an issue or issues currently rated by-

   (i)  Moody's Investors Service at Aaa or Prime-1; or

   (ii) Standard & Poor's Corporation at AAA or A-1
0 2. Where the qualifying debt securities are any certificate of deposit, the
issuer of which is an authorized financial institution or an approved bank 
incorporated outside Hong Kong
0 3. To the extent not already covered in Tier 1 or Tier 2-

   (a)  where the issuer or guarantor of the qualifying debt securities has an
        issue or issues currently rated by-

   (i)  Moody's Investors Service at Aa, A or Prime-2; or

   (ii) Standard & Poor's Corporation at AA, A or A-2;

   (b)  where the issuer of the qualifying debt securities is the Hong Kong
        Mortgage Corporation; or

   (c)  where the qualifying debt securities are listed on a recognized stock
        market
2 4. To the extent not already covered in Tier 1, Tier 2 or Tier 3, where the
issuer of the qualifying debt securities has an issue or issues currently
rated by-

   (a)  Moody's Investors Service at Baa or Prime-3; or

   (b)  Standard & Poor's Corporation at BBB or A-3 5

TABLE 5

HAIRCUT PERCENTAGES FOR QUALIFYING DEBT SECURITIES, BY REMAINING TERM TO
MATURITY

Remaining term to maturity (I)

Qualifying debt securities
with a fixed coupon or with
a floating rate coupon

Haircut Percentage
% (II)

Qualifying debt securities
other than those with a
fixed coupon or with a
floating rate coupon

Haircut Percentage
%

   (a)  Less than 6 months
1 1

   (b)  6 months to less than 3 years
3 3

   (c)  3 years to less than 5 years
4 5

   (d)  5 years to less than 10 years
7 10

   (e)  10 years or more 10 22

TABLE 6

HAIRCUT PERCENTAGES FOR SPECIAL DEBT SECURITIES

Item Description Haircut Percentage

1. Special debt securities being indexed bonds same as that applicable to the
underlying assets

2. Special debt securities being-

   (a)  convertible debt securities; or

   (b)  bonds with non-detachable warrants,
where-

   (c)  their market value is more than their par value or nominal value; or
        same as that applicable to the assets underlying the securities or
        bonds concerned

   (d)  their market value is equal to, or less than, their par value or
        nominal value same as that applicable to the
        qualifying debt securities referred to in column 2 in relation to Tier
        1, Tier 3 or Tier 4 in Table 4 and with the same remaining term to
        maturity

3. Special debt securities being non-interest bearing debt securities 105% of
the haircut percentage applicable to the qualifying debt securities referred
to in column 2 in relation to Tier 1, Tier 3 or Tier 4 in Table 4 and with the
same remaining term to maturity

TABLE 7

HAIRCUT PERCENTAGES FOR SPECIFIED SECURITIES

Item Description Haircut Percentage

1. Specified securities being warrants listed on a specified exchange
100%

2. Specified securities being equity linked instruments same as that
applicable to the underlying securities

3. Specified securities being units in any unit trust or shares in any
mutual fund-

   (a)  which is authorized under section 104 of the Ordinance; or

   (b)  under a Recognized Jurisdiction Scheme specified in an Appendix to the
        Code on Unit Trusts and Mutual Funds published by the Commission,
where their nature is-

   (c)  the same as that of a warrant fund, futures and options fund,
        leveraged fund or hedge fund referred to in that Code; or 40%

   (d)  not the same as any of the funds mentioned in paragraph (c) 20% (L.N.
        117 of 2006)

TABLE 8

HAIRCUT PERCENTAGES FOR SPECIFIED INVESTMENTS

Item Description Haircut Percentage
%

1. Specified investments being-

   (a)  gold coin or gold bullion; or

   (b)  investments in gold which are prescribed in the Schedule to the
        Securities and Futures (Collective Investment Schemes) Notice (Cap 571
        sub. leg. M) and authorized by the Commission under section 104 of the
        Ordinance 10 2. Specified investments being physical commodities of a
        quantity, quality and condition suitable for delivery under a
        futures contract or options  contract traded on a specified exchange
        40