Laws of the People's Republic of China

CONTENTS

CHAPTER 1. GENERAL PROVISIONS CHAPTER 2. PUBLIC STATEMENTS CHAPTER 3. REPORTS OF FINANCES AND RESULTS CHAPTER 4. IMPORTANT TRANSACTIONS CHAPTER 5. TAKE-OVER AND MERGER CHAPTER 6. MATERIAL CHANGES CHAPTER 7. INTERNAL CONTROL CHAPTER 8. SHARE MATTERS CHAPTER 9. PENALTIES CHAPTER 10. SUPPLEMENTARY PROVISIONS

CHAPTER 1. GENERAL PROVISIONS

   Article 1. These Measures are formulated on the basis of the Provisional Regulations of Shenzhen Municipality Concerning Joint Stock Limited Companies and the Provisional Measures of Shenzhen Municipality for Administration of the Issue and Trading of Shares (the "Provisional Measures"), in order to protect the lawful rights and interests of investors, to maintain the order of the securities market and to strengthen the supervision and control of listed companies.

   Article 2. All publication of information, and all important transactions and changes that affect share price fluctuations, on the part of companies publicly issuing shares in Shenzhen or whose shares are listed in Shenzhen must be carried out in compliance with these Measures.

   Article 3. The Shenzhen Special Economic Zone branch of the People's Bank of China (the "Authority in Charge"), under the direction of the People's Bank of China and the Shenzhen Municipal People's Government, shall be responsible for the supervision and control of listed companies in Shenzhen.

   Article 4. The Authority in Charge shall be responsible for the confirmation of the public statements mentioned in Chapter 2 and for supervision and control of the very substantial transactions, major transactions and share transactions mentioned in Chapter 4, the take-overs and mergers mentioned in Chapter 5, the material changes mentioned in Chapter 6, the internal control mentioned in Chapter 7 and part of the share matters mentioned in Chapter 8 hereof.

   Article 5. The Authority in Charge shall authorize the Shenzhen Securities Exchange (the "Exchange") to carry out routine supervision and control of listed companies in Shenzhen and to be responsible for examination of the listing announcements mentioned in these Measures and the reports of finances and results mentioned in Chapter 3 and for the supervision and control of the disclosable transactions and the transactions with connected persons mentioned in Chapter 4 and part of the share matters mentioned in Chapter 8 hereof.

CHAPTER 2. PUBLIC STATEMENTS

   Article 6. The term "public statements" refers to the special documents that joint stock companies disclose to the public when making public issues of shares, when listing and trading shares and when carrying out other very substantial matters. The term includes prospectuses for the issue of shares toward the public, listing announcements for the listing of shares, bonus prospectuses for the issue of bonus shares to existing shareholders, public statements concerning important matters and the relevant attached statements.

   Article 7. The standard for preparing public statements shall be that the company applying for issue or listing (the "Applicant Company") must make a publication sufficient to allow investors to gain a clear and comprehensive understanding and evaluation of such company's business development, financial situation, management situation, future prospects and the rights and interests associated with the shares involved. The contents must be, stated accurately, clearly, truthfully and comprehensively and there may not be any ambiguities, falsehoods or omissions therein, still less misleading or deceptive elements.

   Article 8. The contents of a prospectus shall, in addition to meeting the requirements of Article 18 of the Provisional Measures, also state in detail the company's process of capital formation, types of products, production process, sales situation, business results, property and equipment, rights and interested, main interested persons, the plan for application of the proceeds from share issue, analysis of benefits, and risk factors.

   Article 9. Simultaneously with the disclosure of the prospectus, an asset valuation report and written confirmation from an institution with professional qualifications, a financial report with its explanatory notes, major contracts and matters of litigation shall be published in newspapers and periodicals.

   Article 10. A listing announcement shall, in addition to meeting the requirements for share prospectuses, also clearly state the following particulars:

(1) the date of the company's listing and the number of the approval document granting the listing;

(2) details of the share issue and the composition of share rights;

(3) the main points of the resolution of the inaugural meeting or shareholders' general meeting concerning listing;

(4) resumes of the directors, supervisors and senior management personnel and details of their shareholding; (5) the equity of shareholders with holdings of more than 1 percent;

(6) details of application of funds and financial position following the share offer, financial situation and the forecast for the coming year;

(7) the contact person and contact address, telephone and facsimile numbers for members of the public wishing to inquire about company information at any time; and

(8) other items of importance.

If the time between public issue and listing is less than six mouths, the listing announcement need not publish the contents of the prospectus.

   Article 11. A bonus share prospectus shall be prepared by reference to the share prospectus. A public statement concerning an important matter shall be prepared in accordance with the appropriate provisions of Chapters 4 and 5 hereof.

   Article 12. A public statement must be confirmed by the Authority in Charge and may be published in designated newspapers and periodicals only after the Authority in Charge requires no further amendments. No major amendments may be made to the final version of a public statement without the permission of the Authority in Charge. When a public statement is published, it shall carry this important note: "The Authority in Charge does not guarantee the accuracy or completeness of the contents of this public statement and bears no responsibility for any losses caused thereby."

   Article 13. The sponsors and members of the board of directors of an Applicant Company must bear joint and several liability for the accuracy and completeness of the contents of public statements.

   Article 14. The distributor for a share issue must investigate the contents of the share prospectus during the distribution period and shall bear major responsibility for the accuracy and completeness of such contents.

   Article 15. Notarial institutions such as accounting firms and other parties that provide certifications for the issue of shares must handle matters in accordance with laws and regulations, perform their duties and bear joint and several liability for the contents of public statements.

   Article 16. All publicity materials of an Applicant Company during the period between its receiving approval for issue and the listing of its shares must be reviewed by the Authority in Charge. The contents thereof must comply with the relevant regulations and may not promote or advertise the products or business of such company.

   Article 17. Prospectuses, bonus share prospectuses and public statements concerning important matters must be submitted to the Authority in Charge for review and finalization. The Authority in Charge shall make a reply within three weeks after receiving the official draft; otherwise approval shall be deemed to have been given. Listing announcements must be submitted to the Exchange for review; final approval shall be given by the Authority in Charge. Finalized versions of public statements must be delivered in four copies each to the Authority in Charge and the Exchange for the record three days prior to their publication. Prospectuses and bonus share prospectuses shall be delivered in two copies each to the Administration for Industry and Commerce for the record.

   Article 18. Prior to the formal publication of a public statement, insiders of the Applicant Company and their advisers must maintain the confidentiality of the relevant materials. If it is discovered that contents of the relevant materials have been divulged, the Authority in Charge may refuse to consider the application.

   Article 19. A public statement shall be effective as from the date of its publication. A listed company must abide by the provisions and regulations thereof and perform its duties and may not alter such statement at will. If alteration is necessary, it must show cause therefor to the public. Major alterations must be approved at a shareholders' general meeting or by the relevant department in charge; otherwise, the company's parties concerned shall bear all liability arising from such alterations.

CHAPTER 3. REPORTS OF FINANCES AND RESULTS

   Article 20. A listed company must establish a system whereby its financial situation and business results are disclosed to the public at regular intervals. Such information shall be published twice in each fiscal year, namely in an interim report and an annual report. The interim report shall be published within 60 days following the end of the first six months of each fiscal year; the annual report shall be published within 90 days following the end of each fiscal year.

   Article 21. Ten days prior to publication, a listed company shall submit the materials to be published to the Exchange and shall publish them in designated newspapers and periodicals on the strength of a signed opinion from the Exchange. The Exchange shall make a reply within 10 days. The Exchange shall formulate the corresponding detailed rules on the basis of the Enterprise Accounting Principles of the Shenzhen Special Economic Zone (for Trial Implementation) and these Measures.

   Article 22. Company financial reports shall include balance sheets, profit and loss statements, statements of changes in shareholders' equity and statements of changes in financial position and their explanatory notes. An accounting firm shall be engaged to check over interim reports and to audit final reports. Accounting firms shall bear joint and several liability for the methods of examination of reports certified by them and for the truthfulness, reliability and completeness of their contents.

   Article 23. A financial report shall provide detailed statements of the following matters:

(1) where accounting treatments differ from fair and equitable accounting principles, the details thereof and the discrepancies produced by the different treatments shall be stated;

(2) where a choice exists between several fair and equitable accounting methods, the method chosen shall be indicated;

(3) where accounting treatments are changed for a special reason and such change affects the comparison of information from the periods preceding and following such change, the reason for the change and its specific effects on the contents of the report shall be stated; and

(4) details of the consolidation of statements of affiliated companies.

   Article 24. An interim report shall contain at least the following contents: (1) financial situation:

(a) balance sheet;

(b) profit and loss statement, which must state:

(i) turnover, sales of main products;

(ii) profits (or losses) before taxes from ordinary items;

(iii) revenue and expenditure relating to extraordinary items (major items shall be noted); and

(iv) tax base and profit after taxes;

(c) changes in shareholders' equity;

(d) comparisons of the figures for all items with those for the same period during the preceding year; and

(e) obligatory comments from an accounting firm;

(2) business review, providing a concise summary of the progress and profitability all the business activities of the company, mainly consisting of an analysis by region and by industry;

(3) statements of important matters, and publication of abstracts of the contents of major contracts;

(4) forecast of prospects (comments from an accounting firm);

(5) details of the securities holdings in the company and changes in the equity of directors, supervisors, the manager and large shareholders with holdings of more than 1 percent; and

(6) relevant resolutions of the board of directors.

   Article 25. An annual report shall include at least the following items:

(1) a basic overview of the company: capital structure, organizational system (major business departments and branches and administrative structure), the rights and interests appertaining to it (subsidiaries, types and quantities of securities holdings, real property owned), working personnel (number, educational composition, average age, average length of service);

(2) business situation: details of production and sales of main products, development of new products and details of important matters;

(3) financial information: balance sheet, profit and loss statement, statement of changes in shareholders' equity, statement of changes in financial position and profit distribution statement, certified by an accounting firm; comparisons of the figures for all items with those for the same period during the preceding year;

(4) statement of the company's indebtedness: details of bank loans, guarantees and itemizations of company debts, and the relevant parties, main contents and initial and final dates, etc. thereof;

(5) business outlook: reasonable expectations of long-term and short-term developments in all types of company business and investment targets, and reliable forecasts of foreseeable major factors affecting company prospects;

(6) details of bonus and dividend distribution;

(7) an audit report from an accounting firm; if there are reservations attached to such report, the factors contributing thereto must be stated; and

(8) the intention to extend or terminate the appointment of the accounting firm.

   Article 26. Interim reports must be approved by the board of directors of the company and signed by the supervisory board in acknowledgment of perusal Annual reports must be approved at a shareholders' general meeting. Both types of report shall be submitted in four copies each to the Authority in Charge and the Exchange for reference three days prior to their publication.

   Article 27. All reports involving the business situation or financial data of a listed company must be reviewed by the Exchange and simultaneously submitted to the Authority in Charge for reference prior to publication; otherwise, they shall be deemed to have been published with the intent to manipulate the prices of the shares concerned.

   Article 28. A listed company may not disclose or supply at will information that will affect prices. The disclosure of important information that will affect prices must be reported to the Exchange and the Authority in Charge 48 hours beforehand, and the authorization of the Exchange thereto must be obtained. If the Exchange has made no reply within 24 hours, it shall be deemed to have given its authorization. These time limits shall be extended accordingly in the case of official holidays or legal holidays.

CHAPTER 4. IMPORTANT TRANSACTIONS Article 29. The following shall be important transactions:

(1) very substantial transactions;

(2) major transactions;

(3) disclosable transactions;

(4) share transactions; and

(5) transactions with connected persons.

   Article 30. "The term very substantial transaction" refers to an act whereby a listed company or a subsidiary thereof takes over another enterprise, acquires assets or realizes its own assets so as to reach any of the proportions set forth below:

(1) an acquisition or realization of assets in an amount of more than 50 percent of the company's total assets;

(2) an acquisition or realization of assets from which the forecast net profit will constitute more than 50 percent of the company's net profit for that category;

(3) an acquisition in consideration of which shares constituting more than 50 percent of the total share capital will be issued;

(4) relevant acquisitions capable of causing changes in share controllership.

The relevant acts of acquisition or asset realization in each of the above items shall include the entry into or early termination of financing, operation or lease agreements which will affect the assets, liabilities and profits of the company.

   Article 31. Very substantial acquisitions must be authorized by the Authority in Charge and approved at a shareholders' general meeting.

   Article 32. Shareholders having a major interest in a very substantial transaction shall not have the right to vote at such shareholders' general meeting.

   Article 33. Trading of the shares of a company must be suspended as from the date on which formal negotiations concerning a very substantial transaction commence and may not be resumed until the publication of an agreement. Resumption of quotation shall be regarded as a new application for listing and shall be handled in accordance with the procedures for new listings.

   Article 34. Within three days following the reaching of an agreement over the provisions of a very substantial transaction, the issuer shall deliver the agreement to the Authority in Charge and shall publish the same in newspapers and periodicals following review by the Authority in Charge.

   Article 35. The term "major transactions" refers to the transactions set forth in each item of Article 30 where the corresponding figure is more than 25 percent.

   Article 36. Major transactions shall be handled in accordance with the procedure for very substantial transactions, with the exception that resumption of quotation shall not be treated as a new listing.

   Article 37. The term "disclosable transactions" refers to the transactions set forth in items (1), (2) and (4) of Article 30, where the corresponding figure is more than 10 percent.

   Article 38. Within three days following the reaching of an agreement over the provisions of a disclosable transaction, the issuer shall deliver such agreement to the Exchange for review and simultaneously to the Authority in Charge for the record, and shall publish the same in newspapers and periodicals following its review by the Exchange.

   Article 39. Within 15 days following the publication of a written agreement concerning any important transaction, the issuer must prepare and publish a public statement concerning such transaction, which shall include at least the following contents:

(1) the purpose of the transaction;

(2) the date of the transaction and an overview of the parties to the transaction;

(3) the general nature of the transaction; (4) the asset situation and business circumstances relating to the transaction;

(5) the amount of the transaction and the method of payment;

(6) the transaction price and the method by which the amount was determined;

(7) the benefits to be obtained through the transaction. If it is a take-over or acquisition, a forecast of the profits derivable from the transaction must be attached; if it is a realization of assets, the earnings from their sale and the application thereof must be stated; and

(8) other information publication of which is required by the Authority in Charge or the Exchange.

   Article 40. The term "share transaction" refers to the act whereby assets are acquired by means of share issue.

   Article 41. Share transactions shall be handled in accordance with the procedures for major transactions.

   Article 42. The public statement for a share transaction must include, in addition to each of the items set forth in Article 39, the following contents:

(1) the number of shares to be issued;

(2) the document number and main points of the document by which the Authority in Charge granted approval for share issue;

(3) changes in the shareholdings of major shareholders (those with holdings of more than 1 percent of the total); and

(4) other information required by the Authority in Charge.

   Article 43. The term "transactions with connected persons" refers to transactions concluded between the issuer and its subsidiaries on the one hand and the directors, supervisors and senior executive personne l of the company and their relatives on the other hand (including transactions with companies whose shares are controlled by the above-mentioned persons).

   Article 44. Transactions with connected persons must be handled in accordance with the procedures for disclosable transactions.

   Article 45. The following transactions with connected persons need not be handled in accordance with the procedure prescribed above:

(1) the acquisition or selling off of consumer goods or service facilities by a company from or to connected persons in the course of routine business and in accordance with general commercial principles;

(2) transactions between an issuer and its wholly-owned subsidiary;

(3) transactions between an issuer and a non-wholly-owned subsidiary, provided that the connected persons do not control the shares (hold more than 25 percent of the shares) of such subsidiary; and

(4) transactions in the amount of less than 100,000 yuan.

   Article 46. All persons involved in a transaction with connected persons that must be passed at a shareholders' general meeting and persons with a material interest in such transaction must relinquish their voting rights at such shareholders' general meeting.

CHAPTER 5. TAKE-OVER AND MERGER

   Article 47. The term "take-over and merger" refers to the act whereby a legal or natural person or his or its agent acquires a controlling interest in a listed company (or public company) by means of acquisition of the shares of such company.

The term "controlling interest" means the ownership of more than 25 percent of the shares or voting rights in a listed company.

   Article 48. All parties to a take-over and merger shall observe the following general principles:

(1) when changes occur in the controlling interests in a company, any shareholder acquiring a controlling interest shall promptly notify all the shareholders; (2) a shareholder acquiring a controlling interest in a company must undertake to present a take-over proposal to the holders of the same type of shares on the same conditions, and carry out such proposal;

(3) the board of directors of each of the parties to a take-over and merger must take the interests of the mass of medium-sized and small shareholders as a prerequisite and must ultimately ensure the overall interests of its own party's shareholders;

(4) the directors and senior executive personnel of the company to be taken-over may not take any action that would affect the implementation of the take-over prior to adoption of a pertinent resolution at a shareholders' general meeting of the company that is taking over; and

(5) all parties involved in a take-over and merger shall make best efforts to prevent the occurrence of a false market.

   Article 49. Any act whereby a cumulative total of more than 25 percent of the shares or voting rights in a listed company is acquired shall be an act of take-over and merger.

   Article 50. Take-over shall include partial take-over and total takeover:

(1) the term "partial take-over" refers to the act whereby a cumulative total of more than 25 percent but less than 100 percent of the shares or voting rights in a listed company is acquired;

(2) partial take-over is divided into three grades of control, namely a cumulative controlling interest of more than 25 percent, more than 50 percent and more than 75 percent. The reaching or surpassing of each of these ratios must be handled as an act of take-over and merger;

(3) the term "total take-over" refers to the act whereby 100 percent of the shares or voting rights in a listed company are acquired.

   Article 51. All take-over agreements must be delivered to the Authority in Charge three days prior to their official publication and published in newspapers and periodicals following review. Such agreements shall become effective following their approval at shareholders' general meetings of all parties. The same provisions shall apply to amendments to such agreements.

   Article 52. Following the finalization of the intention of a company to carry out a take-over and merger, it must be presented to the board of directors of the company taking over. The directors of the company to be taken over shall have the right to require the company taking over to provide a guarantee, in order to ensure the full performance of such agreement.

All parties to an agreement and all insiders shall maintain strict confidentiality prior to the official publication of such agreement.

   Article 53. From the date of the conclusion of a take-over and merger agreement through the date of its performance in full, the company being taken over may not issue any securities or sign any contracts relating to matters outside the normal scope of business of such company.

   Article 54. A partial take-over must comply with the following provisions:

(1) the company taking over may not purchase shares in the company to be taken-over during the period between the signing of the agreement and its entry into effect;

(2) where the number of shares that the shareholders of the company to be taken over are willing be acquired is greater than the number to be acquired, the company taking over must make acquisitions on a pro-rata basis; and

(3) the take-over agreement shall be effective only after its adoption by more than 50 percent of the shareholders with independent voting rights.

The term "shareholder with independent voting rights" means a shareholder unrelated to the relevant take-over.

   Article 55. A take-over and merger of a holding company or subsidiary of a listed company that involves a substantial transfer of shares or voting rights as set forth in Article 49 shall be a chain take-over. Chain take-overs shall be handled in accordance with the provisions concerning take-over and merger contained in these Measures.

   Article 56. A company taking over another company shall prepare and publish a public statement within 20 days following the publication of the agreement. The contents of such public statement shall include:

(1) the name, place of registration and take-over agent of the company;

(2) the number of shares in the company taking over and in the company to be taken over held by holding companies, subsidiaries and directors and senior executive personnel;

(3) the take-over price and method of payment, and explanations thereof;

(4) schedule arrangement;

(5) the obligations of the company taking over and the rights of shareholders in the company to be acquired;

(6) the equity-debt, profit-loss and shareholding situations for the preceding three years;

(7) details of the liabilities of the company and its subsidiaries, such as loans taken out and loans granted, mortgages, debt guarantees, etc.; (8) major contracts and explanations thereof;

(9) the company's articles of association and relevant internal rules;

(10) plans for continued operation of the company to be taken over;

(11) plans for reorganization of the assets of the company to be taken over;

(12) plans for disposition of the staff of the company to be taken over;

(13) a revaluation of assets and explanation thereof; and

(14) other information required by the Authority in Charge.

   Article 57. A company to be taken over shall prepare and publish a public statement within 20 days following the publication of the agreement. The contents of such public statement shall include:

(1) the state of affairs of the company;

(2) comments from the company's board of directors on the takeover;

(3) detailed statements of the shares in the company taking over held by the directors and senior executive personnel of the company;

(4) the state of affairs of holding companies and their subsidiaries;

(5) the equity-debt and profit-loss situations of the company for the preceding three years;

(6) detail of loans taken out and loans granted, mortgages, debt guarantees and details of other debts of the company and its subsidiaries;

(7) material contracts and explanations thereof;

(8) detailed statements shall be made concerning directors and senior executive personnel who have a material interest in the acquiring company; and

(9) other information required by the Authority in Charge.

   Article 58. No amendments may be made to an agreement after the twentieth day following its signing, with the exception of amendments permitted by the Authority in Charge. An agreement shall automatically become void if not approved at a shareholders' general meeting within 45 days.

   Article 59. All persons participating in the negotiation of an agreement and all relevant insiders must maintain an agreement and all relevant insiders maintain confidentiality throughout the process of negotiation of or consultation concerning the entry into such agreement, up through the date of publication of such agreement. Such individuals may not purchase shares in the company taking over during the same period.

   Article 60. Relevant persons as described in the preceding Article who, following the publication of the agreement provided for in the preceding Article, participate in the sale or purchase of shares of a party to the agreement must report the details of such transactions to the Authority in Charge for reference.

   Article 61. If there is no proposal of total take-over in the provisions of an initial agreement, such agreement must be reported to the Authority in Charge for approval of exemption.

   Article 62. In the case of take-over by means of the issue of new shares, the Authority in Charge may consider exempting the company taking over from proposing a total take-over, provided that the following conditions are met:

(1) the independent shareholders have voted to approve it;

(2) no insider trading is carried on;

(3) three are no major changes in the directors and senior management personnel of the company taking over; and

(4) there is a balanced distribution of large shareholders within the company.

   Article 63. The Authority in Charge shall not consider exemption for total take-over under the following circumstances: (1) there are insufficient funds;

(2) the company taking over has made large acquisitions of shares in the company to be taken over in the year preceding its proposal of the take-over plan.

   Article 64. The company to be taken over and the company taking over shall notify the Authority in Charge and the Exchange immediately upon commencement of formal negotiations; furthermore, quotation for trading of their shares must be suspended from the date of commencement of formal negotiations through the date on which the agreement is published.

   Article 65. The acquisition of convertible securities, share subscription warrants and other securities not associated with voting rights shall not be an act of take-over for the purposes of this Chapter; the subscription for or conversion of such securities, however, shall be an act of take-over for the purposes of this Chapter.

CHAPTER 6. MATERIAL CHANGES

   Article 66. Each of the following shall be a material change:

(1) a change in the articles of association of a company;

(2) personnel changes among such senior management personnel as directors and supervisors;

(3) a change in the scope of business;

(4) a change in registered capital or registered address;

(5) a change in accounting firm or legal counsel;

(6) consolidation of organizational framework, or establishment, consolidation or bankruptcy of subsidiaries; and

(7) the entry into and alteration of other material contracts that will affect company operations.

   Article 67. All material changes must be proposed in a motion by the board of directors and discussed and adopted by vote at a shareholders' general meeting.

   Article 68. Motions on personnel changes among such senior management personnel as directors and supervisors, and personal information on the candidates, shall be submitted to the Authority in Charge for review one month prior to the shareholders' general meeting. A change of general manager shall also be reported to the Authority in Charge one month before it takes place. The Authority in Charge shall conduct an investigation into the business abilities and reputation of the candidate (s) within 15 days from its receipt of the materials and shall have a veto over his/their qualifications to hold the positions (s).

   Article 69. All material changes must be approved by the relevant government departments. Such changes shall be reported to the relevant departments for examination and approval within five days following their adoption at a shareholders' general meeting and shall be disclosed to the public within 10 days after taking place. They shall also be reported to the Authority in Charge and the Exchange for the record.

CHAPTER 7. INTERNAL CONTROL

   Article 70. A listed company shall establish an internal control mechanism that shall carry out effective supervision and control of such links in the routine processes of living and operations as the selection and purchase of raw materials, the production and sale of products, the application of funds and the repayment of loans, etc. For each link there shall be a specific person to be responsible for the organization of business records and materials in order to facilitate verification and checking by notarial organizations and the department in charge when necessary. The personnel and wage relations of persons engaged in this type of work must have a certain degree of detachment and independence; the general manager shall be directly responsible for their transfer and regular training and assessment. In addition, specific detailed implementing rules shall also be formulated and reported to the Authority in Charge for reference.

   Article 71. A listed company shall establish an internal auditing system and auditing organization and shall engage professional personnel of relatively high quality to take on the work of auditing. The name, educational record, professional title, resumes and contact telephone numbers of the auditing personnel shall be submitted to the Authority in Charge and the Exchange. The qualifications of the person in Charge of the auditing organization to hold such position shall be submitted to the Authority in Charge for review and shall be approved at a shareholders' general meeting.

   Article 72. The auditing organization shall be directly accountable to the chairman of the board of directors. Article 73. The supervisory board of a company may require the general manager or the board of directors to make reports at any time and may entrust such notarial organizations as law firms, accounting firms, etc. to verify such reports.

   Article 74. If a director suspects that company profits have sustained major harm, he shall immediately make a report to the supervisory board. The supervisory board shall organize an investigation immediately upon its receipt of such report and shall report the results of such investigation at a shareholders' general meeting or to the Authority in Charge.

   Article 75. If more than 10 percent of the shareholders or share holders holding more than 10 percent of the shares file a complaint to the effect that there have been any acts of fraud, deceit, favoritism or corrupt practices in the management echelon of the company, the Authority in Charge shall organize and carry out an investigation.

   Article 76. When a company carries out such activities as asset valuation, checking of financial figures, etc., it must provide truthful and complete information. If an entrusted organization discovers falsehoods in or omissions of portions of such information, it shall have the right to require the company to make an explanation and to continue to provide information. If necessary, such organization may refuse to carry out certification, and the expenses it has already incurred shall be borne by the listed company.

CHAPTER 8. SHARE MATTERS

   Article 77. A listed company shall strictly abide by its articles of association, strengthen all of its operational mechanisms and give full play to its shareholders' general meetings, board of directors and supervisory board.

   Article 78. A listed company shall entrust two authorized representatives exclusively to be in charge of share matters, to be responsible for liaison with the Authority in Charge, the Exchange and Shenzhen Securities Registrars Company and to deal with inquiries from the public.

   Article 79. An authorized representative shall notify the Authority in Charge, the Exchange and Securities Registrars Co. in writing of the means for contacting him, including his office and residence telephone numbers, pager number and facsimile number. When he is traveling on business or on holiday, he shall entrust a suitable person known to the Authority in Charge to liaise in matters on his behalf and shall provide notification in writing of temporary means of liaison.

   Article 80. Except under special circumstances, a listed company may not terminate the employment of its authorized representative prior to appointing another authorized representive. When it decides to terminate the employment of an authorized representative and appoint a new authorized representative, it shall immediately notify the Authority in Charge and state its reasons for terminating the appointment.

   Article 81. If the Authority in Charge considers that an authorized representative is incapable of performing his duties adequately, it shall have the authority to require the listed company to replace such representative. The listed company shall appoint a successor with all due haste.

   Article 82. A listed company must establish a register for the registration of shareholders, in order to keep abreast at all times of changes among shareholders. A listed company shall obtain information on changes among shareholders from Securities Registrars Co. on the fifth day of each month. Senior management personnel of the company such as directors, supervisors, the manager, etc. shall turn over the shares they hold in such company to the company for central custody. A shareholder holding more than 1 percent of the shares must give notice of increases and decreases in his shareholding within five days following such changes. The company shall report details of share changes and changes among shareholders to the Authority in Charge for reference on the 10th day of each month.

   Article 83. Twenty-five days prior to holding a shareholders' general meeting, a public company shall submit the relevant agenda to the Authority in Charge for review. The Authority in Charge shall make a reply within 10 days following its receipt of the same. The prepared information for the shareholders' general meeting shall be made available 15 days prior to the meeting for inspection by shareholders at any time. Resolutions adopted at the shareholders' general meeting and the relevant materials shall be submitted to the Authority in Charge and the Exchange for reference within five days following the conclusion of the meeting.

   Article 84. A shareholder who for any reason is unable to attend a shareholders' general meeting may appoint a proxy attending the meeting or an authorized representative of the company to exercise his voting rights. Such shareholder must conscientiously fill out the instrument of proxy printed by the company and submit information on himself when making such entrustment. The instrument of proxy shall be in accordance with the provisions of Article 87.

   Article 85. A shareholder who attends a shareholders' general meeting may employ an instrument of canvassed entrustment in his own name in order to canvass the opinion of a shareholder who is unable to attend the meeting. Prior to employing canvassed entrustment, the canvasser shall fill out the canvasser's reference information and submit the same to the supervisory board of the company for the record and shall select a fixed site to be the place of canvassed entrustment.

   Article 86. The company shall issue canvassed entrustment attendance cards to canvassers, which they shall wear in a conspicuous fashion. Canvassed entrustment may not be carried out in another's name or be transferred to another to use.

   Article 87. An instrument of canvassed entrustment must clearly state the following particulars:

(1) a clear indication of endorsement or non-endorsement of each motion on the agenda of the shareholders' general meeting;

(2) the grounds for opposition to the contents of any motion on the agenda of the shareholders' general meeting to which opposition is indicated;

(3) regarding matters of election of personnel at the shareholders' general meeting, the name, career resume and shareholder's account number of and the number of shares held in the company by each candidate the entrustor intends to nominate and support shall be indicated. The number of persons to be supported by the entrustor may not exceed the number of persons to be elected;

(4) the date of submission to the supervisory board; and

(5) the name, identification document number address and shareholder's number of and the number and type of shares held by the canvasser. If the canvasser is a legal person, its name, address, legal person business license number and shareholder's number, and the name, identification document number and address of and the number and type of shares held by its responsible person.

   Article 88. Under any of the following circumstances, the voting rights represented by a person employing entrustment shall be void:

(1) the instrument of proxy or instrument of canvassed entrustment is not the original form printed by the company;

(2) the instrument of proxy or instrument of canvassed entrustment was obtained by means of transfer, or was not signed and sealed by the canvasser in accordance with regulations;

(3) the instrument of canvassed entrustment has been prohibited by the supervisory board;

(4) the instrument of proxy or instrument of canvassed entrustment contains falsehoods; or

(5) the number of shares held by the entrustor exceeds that held by the canvasser. Article 89. A listed company must carry out distribution of bonuses and dividends in accordance with Articles 34 and 35 of the Provisional Measures and the relevant provisions of its own articles of association.

   Article 90. When a listed company decides to issue bonus shares, it shall submit to the Authority in Charge a working plan for the application of profits converted into increased funds and a detailed report, independently audited by an accounting firm, of the sources and composition of the profits.

   Article 91. The funds raised by a public company through share issue or bonus share issue must be deposited in a special account with a bank approved by the Authority in Charge. The bank of deposit shall strictly supervise the application of such funds in accordance with the predetermined application. Such funds may not be diverted to other uses unless such diversion has been approved at a shareholders' general meeting or permitted by the Authority in Charge. The issuing company shall report the results of the issue and the name of the bank of deposit and the number of the deposit account to the Authority in Charge within one month following conclusion of the issue. The bank of deposit shall report to the Authority in Charge monthly on the application of the funds. If the bank fails to make reports on schedule, it may not thereafter accept the deposit of funds raised through securities.

   Article 92. Neither a listed company nor its holding institution may buy or sell shares of that company unless such purchase or sale is approved by the Authority in Charge.

   Article 93. Neither the senior management personnel of a company, such as directors, supervisors, the manager, etc., nor internal connected persons may divulge any information that will affect share prices; still less may they employ insider information to buy or sell shares of the company either directly or indirectly. Internal connected persons may buy and sell company shares only after publication of the information.

CHAPTER 9. PENALTIES

   Article 94. The Exchange shall impose penalties on those who violate relevant provisions of these Measures that concern matters to be handled by the Exchange. Those who disagree with the penalties imposed upon them may apply to the Authority in Charge for reconsideration. Decisions on reconsideration made by the Authority in Charge must be carried out by the parties concerned.

   Article 95. The Authority in Charge shall impose the following penalties, in consideration of the seriousness of the circumstances, for violations of Article 12, 16 or 18 hereof:

(1) a warning;

(2) an order to correct the situation;

(3) a postponement of issue or of listing;

(4) cancellation of the plan for issue or listing;

(5) instructions to recall the documents pertaining to issue or listing.

   Article 96. Violations of Article 7 or 19 shall be punished in accordance with Article 87 of the Provisional Measures.

   Article 97. The following penalties shall be imposed for violations of Article 20, 21, 24, 25, 26, 27, 28, 39 or 69:

(1) a warning;

(2) a fine, not to exceed 10,000 yuan;

(3) an order to correct the situation.

   Article 98. The Authority in Charge shall impose penalties on the parties involved in violations of Article 28 or 59, in accordance with Article 93 of the Provisional Measures.

   Article 99. The following penalties shall be imposed for violations of Article 32, 34, 38 or 42:

(1) a warning;

(2) a fine, not to exceed 5,000 yuan.

   Article 100. The Authority in Charge shall compel violators of Article 48, 50, 51, 52, 53, 57 or 58 to suspend the take-over and merger and to take sole responsibility for the consequences.

   Article 101. Violators of Article 67, 68, 69, 70, 80, 82 or 83 shall be ordered to correct the situation within a specified period of time; alternatively, quotation of their shares shall be suspended for one week.

   Article 102. For violations of Article 90, 91, or 92, the Authority in Charge shall confiscate the illegal income and cancel the qualification to issue shares for the following three years.

   Article 103. The Exchange shall impose the following penalties on the parties involved in violations of Article 93:

(1) return of the income to the issuing company; (2) prohibition from buying or selling shares for the following three years.

CHAPTER 10. SUPPLEMENTARY PROVISIONS

   Article 104. The Authority in Charge shall be responsible for the interpretation of these Measures.

   Article 105. These Measures shall be implemented as from the date of promulgation.