Laws of the People's Republic of China

CHAPTER ONE GENERAL PROVISIONS CHAPTER TWO ISSUANCE CHAPTER THREE UNDERWRITERS AND MODES OF UNDERWRITING CHAPTER FOUR GUARANTIES CHAPTER FIVE REGISTRATION AND TRUST CHAPTER SIX BONDS TRANSFER AND CHANGE OF NAMES CHAPTER SEVEN REVELATION OF INFORMATION CHAPTER EIGHT PENALTIES CHAPTER NINE SUPPLEMENTARY PROVISIONS

   Article 1 This set of procedures has been formulated in accordance with laws and administrative decrees such as the Company Law, the Guarantee Law and Regulations on Administration of Enterprise Bonds with the aim of strengthening the administration and standardizing the issuance and transfer of enterprise bonds to guard against financial risks and protect the lawful rights and interests of creditors.

   Article 2 Enterprise bonds (hereinafter referred to as the bonds) as cited in this set of procedures shall be negotiable securities issued by enterprises in accordance with legal procedures and with the approval of PBOC with their principals and interests to be repaid within an agreed time limit.

   Article 3 In issuing bonds, enterprises should provide guarantees and warranties, except those that have been approved by PBOC to be exempted from such guarantees and warranties.

   Article 4 Bond subscribers should be responsible for the risks of cashing of the bonds by themselves, and are entitled to the following rights:

(1) The right to acquiring interests, recovering principals in accordance with the agreed time limit, or the exercise of related creditor's rights in case the bonds cannot be cashed on time;

(2) Transfer, hypothecation and inheritance of the bonds; and

(3) Requesting information on performance and financial standing of the bond issuers with the bonds' underwriters and issuers.

   Article 5 In issuing and transferring bonds, laws and administrative decrees and regulations should be abided by and the principles of openness, voluntarism and honesty should be observed, while related information should be fully disclosed and investment risks for the bonds revealed.

   Article 6 Enterprise legal persons within the boundaries of the People's Republic of China should abide by this set of procedures when engaging in the issuance and transfer of the bonds and related activities inside the People's Republic of China.

PBOC shall be in charge of issuance and transfer of the bonds, and responsible for the implementation of this set of procedures.

   Article 7 The meanings of the following terms are:

Issuer-An enterprise legal person that has been approved by PBOC to issue bonds.

Underwriter-A securities company, trust and investment company or enterprise legal person of financial company under an enterprise group recognized by PBOC as qualified to engage in underwriting of the bonds.

Guarantor-An enterprise legal person that provides guarantee and warranties to issuers in accordance with provisions of the Guarantee Law.

Trustee-A central national debt registration and settlement limited liability company (hereinafter referred to as the central registration company) that handles the overall registration and trust of bonds and their claims in books; and an underwriter that handles registration of such bonds and their claims and secondary trust.

Subscriber-A legal person, other organization or natural person with civil capacities that subscribes for the bonds.

   Article 8 For an issuance of bonds, an enterprise should first of all go to PBOC for an examination and approval which shall be made in accordance with the bond issuance plan approved by the State Council and handed down jointly by the State Planning Commission, PBOC, the Ministry of Finance and the Securities Committee under the State Council. For a central enterprise the examination and approval for bond issuance should be sought jointly from PBOC and the State Planning Commission and for a local enterprise in the related province, the corresponding examination and approval should be sought jointly from the corresponding PBOC branch, autonomous region, or municipality directly under the State Council and the planning commissions of the same administrative level.

Without approval, issuances of enterprise bond whether in a straight format or any disguised form are not allowed.

   Article 9 The principal underwriter of enterprise bonds should assist the issuer in submission of an issuance required under the Standard Format for Submission for Application by Enterprises to Issue Bonds including bond issuance charters, legal opinionaires to PBOC.

   Article 10 The bond issuance charter should comprise the following contents:

(1) The name, residence, scope of business, legal representative, telephone number for contact, and postal code of the issuer;

(2) The document number and date of the approval document issued by PBOC for the issuance of bonds;

(3) The name, time limit and interest rate of the bonds;

(4) The face value, issuance price and total volume of issuance of the bonds;

(5) The targeted subscribers, the time limit and ways of issuance;

(6) The starting and ending dates of interest payment, the time limit and ways of repayment of principal and interest;

(7) The objectives, uses and profit forecast of the bonds issued;

(8) Operational risks, cashing risks and preventative measures;

(9) Financial statement of the latest quarter;

(10) Major financial data and indicators of the recent three years;

(11) The enterprise's production and business operation and other basic information concerning business development in the recent three years;

(12) Basic information about the guarantors (approved by PBOC to be exempted from guarantee should be clearly indicated); and

(13) Other contents as required by PBOC.

   Article 11 The bonds should be issued through commissioned underwriters. The issuer is not allowed to make deals of the bonds.

   Article 12 With the approval of PBOC, enterprise bonds can either be issued as real-name book-entry bonds or as bearer bonds.

   Article 13 For those issued as real-name book-entry bonds, the issuance should be put under graduated trust by the trustees and the vouchers for registration and trust of bonds should be unifiedly printed by the central registration company. Prior to printing, the central registration company shall send the format for the vouchers for registration and trust of bonds to PBOC for reexamination.

   Article 14 For those issued as bearer bonds in kind, the bonds should carry the following contents:

(1) The name and residence of the issuer;

(2) The name, face value, time limit and interest rate of the bonds;

(3) The bonds' starting and ending dates of interest payment;

(4) The time limit and method of principal and interest repayment;

(5) The issuance date and serial number of the bond;

(6) The issuer's seal and the legal representative's seal and signature;

(7) The name and residence of the guarantor;

(8) The number and date of the approval documents issued by the examination and approval authorities; and

(9) The name of the printers of the bonds.

On the surface cover of the bearer bonds the following statement shall appear: "This bond is the only effective and legal proof attesting to the ownership of creditor's rights and no vouchers on commissioned storage of bonds are valid." Bearer bonds should be printed at printing units designated by PBOC.

The principal underwriter of the bonds should submit samples of the bonds to the PBOC prior to issuance for examination.

   Article 15 When PBOC approves the issuance of the bonds, the issuer should put the bonds into public within three months since the date of the approval. Otherwise the original approval documents will automatically be annulled; if the enterprise still needs to issue bonds, formalities should be started anew for examination and approval.

   Article 16 An issuer is not allowed to issue bonds for a second time under one of the following circumstances:

(1) The bonds for the previous issuance have not been fully subscribed;

(2) There have been and still are violations of contract or delayed payment of principals and interests for bonds previously issued or other debts.

CHAPTER THREE UNDERWRITERS AND MODES OF UNDERWRITING

   Article 17 Before actual underwriting of bonds issued, a securities institution should first of all be verified by PBOC its qualification for such underwriting and without such a verification by PBOC, or qualifications for underwriting having become invalid, except acting as a sub-underwriter or underwriting on a commissioned basis a securities institution is not allowed to engage in the work of underwriting.

   Article 18 An underwriter should be responsible for:

(1) Underwriting the bonds issued;

(2) Counciling upon guarantee of bonds;

(3) Registration, secondary trust and transfer of ownership of book- entry bonds;

(4) Bonds dealing for subscribers;

(5) Counciling upon information release for issuers; and

(6) Claiming payment for subscribers when the issuer or the guarantors fail to fulfill their obligations.

   Article 19 For a securities institution to apply for underwriting of bonds, the following conditions should be met:

(1) The net assets of the institution should be no less than RMB100 million;

(2) The proportion of circulating capital in net assets of the institution should not be lower than 50%;

(3) The ratio of net assets to total liabilities of the institution should not be lower than 10%;

(4) The senior managing staff of the institution should be available with necessary knowledge of securities, finance and legal matters and have not been involved in any major violations of law or regulations in the past two years. Two-thirds or more of them should have worked in securities-related business for over three years or in finance business for over five years;

(5) The institution has professional personnel who are familiar with related business codes and operating procedures;

(6) The institution is equipped with sound internal risk control and financial management systems;

(7) The institution has not committed any major violations of law or regulations in the past one year; and

(8) Other conditions as required by PBOC.

   Article 20 The securities institution that takes the lead in organizing an underwriting body, or acts as the sole underwriter of the bonds is in fact the principal underwriter.

A securities institution to become a principal underwriter for the issuance of enterprise bonds, should also meet the following conditions besides those listed under Article 19:

(1) Its net assets should not be less than RMB500 million;

(2) The number of full-time staff members engaged in bond business should not be less than five. It should also have professional personnel well equipped with accounting and legal knowledge;

(3) It should have participated in at least three issuances of bonds, or have been engaged in the underwriting of bonds for over three years; and

(4) There are no such record in the past one year that less than 30% of total bonds issued were sold when the institutions acted as the principal underwriter.

   Article 21 For a securities institution that meets the conditions as stated in Article 19 and Article 20 of this set of procedures to be qualified as a bond underwriter, the following documents should be presented to PBOC:

(1) Application for qualification for engagement in the business of bond underwriting;

(2) Duplicate of Permit for Operation in Financial Business;

(3) Duplicate of Business License of Legal Entities (carbon copy);

(4) Articles of association of the institution;

(5) Exposition on its internal risk and financial management system;

(6) Testimonials on the verified net assets at the end of the last quarter of the current fiscal year as presented by a certified public accounting firm with qualifications in securities-related business;

(7) Assets and liabilities statement, profit and loss statement, and statement on changes in financial standing at the end of the previous year as audited by a certified public accounting firm with qualifications in securities-related business;

(8) Statements, reports, and explanations on the volume of underwriting and cashing of bonds as organized in the past one year;

(9) Resumes and duplicates of professional certificates of the legal representative, key persons in charge and main professional personnel; and

(10) Other documents as required by PBOC.

   Article 22 PBOC shall examine the application document for qualification as bond underwriters. If qualified, the approved bond underwriters will be publicized by PBOC, and the list of the underwriters will be published through the media.

Qualifications for engagement in bond underwriting for securities institutions will be valid for one year as of the date of the publication of PBOC's notice and become invalid automatically after one year.

   Article 23 PBOC shall conduct reexamination of the underwriters' qualification once every year. Securities institutions already acquired underwriters' qualifications that need to keep the qualifications for the engagement in the business of enterprise bonds underwriting should, within one month before the expiration of their bond underwriting qualifications, submit items listed in sections 7, 8 and 9 of Article 21 and other documents required by PBOC to PBOC. Otherwise, their qualifications for bond underwriting shall be automatically annulled.

   Article 24 Underwriters should undertake the examinations and checkings of the authenticity, accuracy and integrity of the charters, notice and other related documents about the issuance issued by the issuers.

   Article 25 When a public issuance of bonds with the total face value of exceeding RMB50 million, the underwriters concerned should form an underwriting body, which is to compose of more than two underwriting institutions.

The principal underwriter should sign an underwriting agreement with other underwriters.

   Article 26 The principal underwriter should sign an agreement on underwriting with the issuer.

The agreement on underwriting should include the following contents:

(1) The names, residences and names of their legal representatives of the interested parties;

(2) Modes of underwriting;

(3) Categories of bond issuance (as bearer bonds or as book-entry bonds);

(4) The categories and value of bonds underwritten;

(5) The quotas of bond underwriting for each member of the underwriting body;

(6) The time limit of underwriting and the starting and ending dates;

(7) Dates and ways of money transfer for bond funds;

(8) Computation, methods and dates of payment of underwriting expenses;

(9) The responsibilities for cashing the bonds when due and the ways of cremation of the cashed bonds;

(10) Matters pertaining to guarantee of the bonds;

(11) Liabilities for breach of contract; and

(12) Other items as required by PBOC.

   Article 27 In underwriting issuance of enterprises bonds, can such forms as sales on a commission basis, exclusive sale of balance outstanding or fully exclusive sale can be taken.

For underwriting through sales on a commission basis, the underwriter has not to shoulder any issuance risks but only to transfer bond funds at agreed dates within the time limit of issuance to the issuer and return all bonds not sold to the issuer at the end of issuance.

For bonds underwriting through exclusive sales of balance outstanding, the underwriter has to shoulder part of the issuance risks and purchase all bonds not sold at the end of the time limit of issuance.

For bonds underwriting through fully exclusive sales, the underwriter has to shoulder all risks for the issuance and no matter the condition of the bond sales should purchase all bonds within an agreed period following the public issuance of the bonds and at the same time transfer all bond funds to the issuer.

   Article 28 For underwriting through fully exclusive sales, amount committed by an underwriter for an issuance should be limited in value as:

(1) For underwriters whose net assets was more than RMB100 million (including RMB100 million) and less than (but not including) RMB200 million at the end of the previous year, the sum of exclusive sales should not exceed RMB50 million;

(2) For underwriters whose net assets was more than RMB200 million (including RMB200 million) and less than (but not including) RMB50 billion at the end of the previous year, the sum of exclusive sales should not exceed RMB100 million;

(3) For underwriters whose net assets was more than RMB500 million (including RMB500 million) and less than (but not including) RMB1 billion at the end of the previous year, the sum of exclusive sales should not exceed RMB200 million;

(4) For underwriters whose net assets was more than RMB1 billion (including RMB1 billion) and less than (but not including) RMB1.5 billion at the end of the previous year, the sum of exclusive sales should not exceed RMB500 million; and

(5) For underwriters whose net assets was more than RMB1.5 billion (including RMB1.5 billion) at the end of the previous year, the sum of exclusive sales should not exceed RMB1 billion.

   Article 29 PBOC, in reference to State's related laws and regulations and this set of procedures, may indicate objective to the underwriting of certain issuance of bonds by the underwriters that are involved in infringements of regulations.

   Article 30 A securities institution is not allowed to underwrite more than five (including five) issuances of bonds at the same time.

"At the same time" in the previous paragraph refers to coincidence or overlapping of the underwriting periods as stipulated under the underwriting agreements signed with different issuers.

   Article 31 Central bonds and local bonds of Grade A or higher creditability can be issued all around the country.

For local bonds issued across the provinces, autonomous regions and municipalities directly under the central government, the issuer should timely report the condition of bond underwriting to the branch offices of PBOC where the bonds are issued for the record.

No localities or units are eligible to restrict the issuance of bonds that originate from other places but conform to conditions set in this set of procedures. No localities or units are eligible to restrict the underwriting of local bonds by securities institutions of other places that are qualified for bond underwriting.

   Article 32 The underwriting commission for underwriters should be computed on the basis of the total face value of bonds issued and collected at the excess regressive rates. The specific standards are as follows:

Underwriting value Fee standards

Portions not exceeding 1.5%-3% 1.5%-2% RMB100 million Portions exceeding RMB100 1.5%-2% 1.2%-1.5% million but under RMB500 million Portions exceeding RMB500 1.2%-1.5% 0.8%-1.2% million but under RMB1 billion Portions exceeding RMB1 0.8%-1.5% 0.5%-1.2% billion

   Article 33 When necessary an issuer may sell bonds in instalments. When filing application for such sales, the issuer should clearly indicate the time of the instalment and volume of sales during each instalment. When changes in the mode and conditions of bond issuance occur, the issuer should submit the issuance plan to PBOC for approval before the undertaking of the sales of each instalment.

The time limit of underwriting for each instalment of bonds should be no less than 10 days and no more than 60 days.

   Article 34 The issuer should, within 10 work days of the end of each issuance, provide verification certifying the bond funds are really in place and final reports on underwriting expenses to the principal underwriter.

The principal underwriter should, within 15 work days of the end of each underwriting, submit to PBOC verification reports certifying the bond funds are really in place, and reports on the work of underwriting, which should explain in detail the implementation of the agreements on underwriting and on the underwriting body, as well as the final figures of underwriting expenses.

   Article 35 The branches of the PBOC at various levels should establish and perfect the statistical and reporting systems of enterprise bonds, do a good job in the statistical analysis of enterprise bonds and, in accordance with regulations, provide various statistical reports and analytical reports in time to reflect the problems existing in the enterprise bond market and conduct supervision and inspection on the enterprises' issuance of bonds and use of funds so raised.

   Article 36 Prior to the issuance of bonds, the issuer should provide guarantee and warranties, except that having been approved by PBOC for exemption. Only when the work concerning guarantees has been approved by PBOC can the bond issuance be started.

   Article 37 The guarantor concerned should, in accordance with the provisions of the Guarantee Law, provide written letter of guarantee to bond subscribers.

The guarantor may request the issuer to provide object of pledge or hypothecation for counter guarantee.

   Article 38 The principal underwriter should assist the issuer and the guarantor to handle matters pertaining to the guarantee and counter guarantee of bonds.

   Article 39 The guarantor should be a legal entity that conforms to the provisions of the Guarantee Law and meets the following conditions:

(1) Its net assets should be no less than the principal and interest of the bonds to be issued by the guaranteed party;

(2) It enjoys profits in the past three consecutive years and commands excellent prospects in business;

(3) It is not involved in such affairs as restructuring and dissolution or in major litigation cases; and

(4) Other conditions as required by PBOC.

Announcement should be made in time when a guarantor should lose its capacity to guarantee as a result of dissolution, bankruptcy or being canceled according to law.

   Article 40 The guarantor may charge guarantee fee on the guaranteed issuer under an amount agreed upon by both sides of the interested parties.

   Article 41 The letter of guarantee should include the following contents:

(1) The varieties and value of bonds being guaranteed;

(2) The time when the bonds mature;

(3) Way of guarantee;

(4) The scope of guarantee and warranties;

(5) The time limit of guarantee; and

(6) Other contents as required by PBOC.

A guarantor should adopt the mode of joint liability for guarantee with the scope of the guarantee comprising principal and interest of the bonds, contractual fine, damage awards and expense for recovery of debts and time limit for the guarantee being two years since the date of the bonds' maturity.

   Article 42 Whereas a guarantor requests the issuer to provide objects as pledge (hypothecation) for counter guarantee, the guarantor and the pledger (hypothecation) should sign an agreement on assets pledge (hypothecation) and go through corresponding registration formalities in accordance with the Guarantee Law and other related regulations.

   Article 43 Change of guarantor(s) by an issuer should first of all acquire approval from PBOC.

After the change, the subscribers should accept the guarantee(s) provided by the new guarantor(s) as approved by PBOC.

CHAPTER FIVE REGISTRATION AND TRUST

   Article 44 A trustee shall be the registrant official of the creditor's rights of book-entry bonds to be responsible for the management of creditor's rights, the custody of legal rights and commissioned cashing of bonds after bond issuance and provision of related information services to subscribers.

   Article 45 Separated levels management shall be instituted for the registration and trust of book-entry bonds with the central registration companies to assume the general registration office and trustee to directly handle the registration and trust of bonds subscribed by financial securities institutions and funds; and the underwriters to assume branch registration offices and secondary trustees to handle the registration and trust of bonds subscribed by other institutions and individuals.

Trutees at various levels are responsible for the authenticity and accuracy of the creditor's rights for their own clients.

The central registration companies shall maintain supervision on the business operations of various secondary trustees.

   Article 46 A central registration company shall open self-operated bond accounts and secondary trustee general accounts for underwriters to respectively record the total bonds held by the underwriters themselves and those held by secondary trustee clients and also be responsible for the unified printing of the triplicate form of bond registration and trust vouchers (including primary and secondary vouchers) for use in issuance, registration and trust business.

   Article 47 When issuing bonds, the underwriters shall present bond registration and trust vouchers for the subscribers.

Whereas the subscribers are securities institutions or funds, the primary vouchers shall be presented together with the vouchers' registration slips and then handed over to the central registration company to register, verify and confirm creditor's rights for the subscribers and whereas the subscribers are other institutions or individuals, the underwriters should directly register creditor's rights, and present the secondary vouchers to them. Meanwhile, the vouchers's audit slips shall be gathered and handed over to the headquarters of the underwriter for an inspection by the latter of the standard of the distributed sales of the bonds. The central registration company has the right to exercise supervision over the process.

The underwriters should submit to the central registration company reports certifying total sum of the underwriter's bonds trusted for the registration of the total sum of the underwriters' bonds trusted under the various underwriters' secondary trust general accounts.

Excess or void vouchers should be handed over to the central registration company or the principal underwriter.

   Article 48 After an issuance of the bonds, only after certification by the central registration company and the issuer of the registered total sum of bonds, the sum of funds actually received, and their consistency, can the creditor's rights really come into force and then the central registration company shall present letter of confirmation of creditor's rights to the issuer.

   Article 49 The issuer should pay registration and trust fee, at the amount of 0.05% of total sum of bonds issued, to the trustee on a lump- sum basis; this fee shall be collected on a commission basis by the underwriters, and be distributed reasonably among the various trustees.

   Article 50 After an issuance of bonds, if the subscribers need to deal with the bonds at the stock exchanges, a transfer of trust should be made in accordance with the related regulations of the central registration company and the stock exchanges. Meanwhile, the central registration company should establish secondary trust general account for the securities registration companies of the stock exchanges.

   Article 51 For enterprise bonds issued publicly in the society, before the maturity and cashing of bonds, a notice on the methods of cashing should be announced by the issuer of commissioned cashing institutions through radio, TV, newspapers and other mass media to investors 15 days before the date of cashing with the following main contents:

(1) The names of the issuer and the bonds to be cashed;

(2) The name and residence of the commissioned cashing institution;

(3) The starting and ending dates of the bond cashing;

(4) Settlement of bonds cashed after the designated time;

(5) The publishing unit and its seal of the notice on methods of cashing; and

(6) Other items that need to be publicized.

   Article 52 Three days before the bond's due, an issuer of book-entry bonds should transfer funds for bond cashing to the accounts designated by the central registration company and an issuer of bearer bonds should transfer funds for bond cashing to the accounts of the principal underwriter. If the issuer fails to fulfil a debtor's obligations, the principal underwriter should notify the guarantor to fulfil the obligations as pledged in the letter of guarantee and pay the debts; if the guarantor also fails to fulfil corresponding obligation of paying the debts, the principal underwriter should act on behalf of the subscribers to seek compensations from the issuer or guarantor concerned.

Risks of direct or indirect losses of incapable of cashing the bonds due in turn should be bore by the subscribers themselves.

CHAPTER SIX BONDS TRANSFER AND CHANGE OF NAMES

   Article 53 For bonds having been transferred to the trust of stock exchanges, their transfer and change of names should be handled in accordance with related business regulations of the stock exchanges; for those not yet do so or not be listed in the stock exchanges, their transfer and change of names should be handled in accordance with Article 54 and Article 55 of this set of procedures.

   Article 54 Bearer bonds are transferred at counters of the securities institutions designated by the local office of PBOC and institutions concerned should submit reports on a monthly basis on the transfer of bonds to the local office of PBOC, and timely make known the problems arising in the transfer of bonds.

The securities institutions which are to handle the transfer of bond should have sufficient means to distinguish the counterfeit bonds. They are not allowed to keep the bonds on a commission basis, nor to make or offer commissioned bond storage vouchers in any form by themselves.

In handling the business of bond transfers, securities institutions should deal with counterfeit bonds, if any, in the following ways according to different circumstances:

(1) Whereas securities institutions recognize counterfeit bonds in the process of purchase, the counterfeit bonds concerned should be confiscated and posted with cancellation marks;

(2) Whereas the securities institutions discover counterfeit bonds among the bonds already bought in, efforts should be made to check the authenticity of the bonds already bought and cancellation marks should be posted on the counterfeit ones and the party that has sold the bonds will be affixed with legal responsibilities.

Securities institutions, when discovered counterfeit bonds, should timely send them to the local office of PBOC and write a report on the matter. The local office of PBOC shall, upon receiving the securities institutions' reports related to counterfeit bonds, immediately notify the case to all the securities institutions in the regions where the bonds are issued attached with corresponding distinguishing means, and according to the cases concerned, report to higher authorities level by level. Meanwhile, the local office of PBOC shall make great effort to assist the local public security departments in tracking down the source of such counterfeit bonds.

   Article 55 Procedures on the transaction of book-entry bonds registered for trust with the central registration company and the underwriter are to be separately formulated.

   Article 56 With the approval of PBOC, bonds having been undergone official registration and trust and also in line with stipulated conditions can be used in buy-back transactions and procedures on such transactions will be separately formulated.

CHAPTER SEVEN REVELATION OF INFORMATION

   Article 57 The central registration company should help competent departments and the general public to get access to information about enterprise bonds and timely report any violations of regulations on revelation of information to competent departments.

   Article 58 Principal underwriters should provide proper assistence to bonds and supervise upon the whole process of information release by the issuers from the start of issuance until the complete cashing of the bonds, and is subject to joint responsibility for the occurrence of irregular practices and false information.

   Article 59 Principal underwriters should assist the bond issuers in compilation and announcement of notices on the bond issuance and examine whether the undertaking concerned conform to the stipulations.

After PBOC approves the application of bond issuance in an official reply in writing, the principal underwriter should publish the issuance notice in the newspaper designated by PBOC at least 10 days before the actual issuance. Before publication, the notice should be submitted to PBOC in advance, and there should be no difference between the contents actually released and those that have been examined and approved by PBOC.

During the period of issuance, an underwriter should place the issuance notice in places in sight at business sites, and has the obligation to remind subscribers to read the notice.

   Article 60 A bond issuance notice should fully reveal the bonds' related information and risks, carry statements as: "The issuer guarantees the authenticity, accuracy and integrity of the contents of the notice, and no decisions made by competent departments for this issuance represent any fundamental judgment on the bonds' risks" and the following contents as:

(1) The name, residence, basic facts, persons in charge and their resumes, contact telephone numbers and postal code of the issuer;

(2) The code number and date of the approval document issued by PBOC for the bond issuance;

(3) Categories, time limit, interest rate, face value, issuance price and total volume of bonds issued;

(4) The targeted subscribers, time, time limit and ways of issuance;

(5) The time limit and ways of repayment of principal and interest;

(6) The descriptions and volumes of bonds already issued but not yet due and of bonds not yet cashed after due;

(7) Uses for the funds raised;

(8) Risks of the enterprise bonds and countermeasures;

(9) Major financial data and indicators in the recent three years (including principal business revenues, net profits, total assets, net assets, capital/gains ratio, net capital/gains ratio and net assets ratio);

(10) Audited balance sheets, profit and loss statements, and statements on changes in financial standing in the past three years and notes;

(11) Main contents of letter of guarantee;

(12) Name, residence, basic facts and telephone number of guarantor (if there is no guarantee, such fact shall be stated);

(13) Audited assets and liabilities statements, profit and loss statements, and statements on changes in financial status in the past three years and notes of the guarantor;

(14) Name, residence or address and telephone number of the underwriter or the underwriting outlets of the underwriting body;

(15) Name, residence, telephone number and postal code of the trustee;

(16) The party that would handle and shoulder the risks when failure of fulfilling the obligations by the debtors of the guarantors;

(17) Pledge by the subscriber to accept the change of guarantor through legal procedures;

(18) Credit grade of the enterprise bond;

(19) Sample of bearer bonds or sample voucher for registration and trust of book-entry bonds (including primary voucher and secondary voucher); and

(20) Other information as required by PBOC for disclosure.

   Article 61 Legal representative of the issuers and the principal underwriters should sign on the issuance notices to ensure no false, or seriously misleading statements or major omissions in the issuance notices and pledge to shoulder joint responsibilities.

   Article 62 A valid period for the issuance notice is 60 days as of the date of the signing of the issuance notice. A bond issuance should cease immediately when the issuance notice becomes invalid.

   Article 63 Principal underwriters should, before April 30 of each year, submit annual reports audited by certified public accountans of the issuers for the previous year to PBOC. The statements, after being examined by PBOC, should be released to the investors by means designated by PBOC. The costs of information release shall be shouldered by the issuers.

   Article 64 The contents and format of the report of an issuer should be:

(1) Basic facts about the companies;

(2) Retrospects and prospects of the company's business;

(3) Basic facts of the industry that the company belongs to;

(4) Basic facts on major plants, mines and real estate and other assets owned by the company;

(5) Basic facts about the senior managerial staff of the companies;

(6) Summaries of the company's financial statements in the past three years or since its establishment;

(7) Analysis by the company's managerial departments of its financial situation and business results;

(8) Uses and profit projection of the funds raised through issuance of the enterprise bonds;

(9) Major litigation involving the company;

(10) Financial audit report and balance sheet, profit and loss statement, and statement on change of financial standing of the company; and

(11) Statements on other major items.

The contents and format of a mid-term report of a company can take the annual reports as reference, but mid-term financial statements may not go through the auditing procedures. The principal underwriter shall, before August 30 of each year, submit the mid-term report of the issuer in the current year to PBOC. After examination by PBOC, the report shall be released to the investors by means designated by PBOC. The cost of information release shall be bore by the issuer.

   Article 65 Major reminders should be carried in the annual and mid-term reports, with following remarks: It is to the great faith of this company that no major omissions, false statements and serious misleads in the data carried by this report, and the company shall bear individual or joint responsibilities for the authenticity, accuracy and integrity of the contents of the report."

   Article 66 Annual and mid-term report should be signed by the legal representatives and executives in charge of finance of the issuers and have their seals affixed.

   Article 67 The bond credit rating institution that provides bond credit rating reports to an issuer should be approved by PBOC beforehand.

The public accounting firm and law firm that provide financial audit reports and legal opinionaires should be approved by PBOC as qualified for engagement in securities business, and rates charged for their services should also be approved by PBOC beforehand.

   Article 68 Whereas there are major events that have major impacts on the market price of enterprise bonds or on the cashing of principal and interest, and at the same time are out of the knowledge of the investors, the issuer should immediately submit reports on the major events to the principal underwriter, who should immediately release the information by means designated by PBOC to the investors to clearly include the full significance of the events concerned. The expense for such information release should be bore by the issuer.

The major events cited in the previous paragraph include:

(1) The company signs major contracts that could have notable effects on the assets, liabilities, rights and interests or production performance singly or severally;

(2) There are major changes in the company's business policies or business projects;

(3) There are major investments made by the company;

(4) There are major debts owed by the company;

(5) The circumstances on breach of contract by the company in its failure to pay major debts that are due;

(6) There are major operational or non-operational losses incurred by the company;

(7) There is major damage to the company's assets;

(8) There are major changes in terms of the company's production and operational environment;

(9) Newly promulgated laws, regulations, rules and policies that would impose significant influence on the company's business operations;

(10) There are changes in the post of chairman, or over 30 percent of members of the board of directors, or in the post of the general manager;

(11) There are changes in the residence of the issuer or guarantor;

(12) Major litigation items involving the company; and

(13) Such circumstances as the company would be merged, divided, liquidated or bankrupt.

   Article 69 If the issuer changes the guarantor, the change should be announced in newspapers designated by PBOC to the public with the announcement to be submitted to PBOC in advance.

   Article 70 Whereas committing any of the following activities, an enterprise or securities institution shall be ordered to return the funds and interest raised, have the illicit earnings confiscated, to pay a fine of less than RMB30,000 by the party directly responsible in accordance with the seriousness of the circumstances and be moved to be handled by the judiciary authorities if a criminal offense is constituted:

(1) Issuing bonds without authorization;

(2) Issuing bonds in amounts that exceed the approved scope; and

(3) Raising funds for parties other than the issuer under the guise of selling bonds, using such tricks as cross trading.

   Article 71 Whereas committing any of the following activities, an underwriter or other securities institutions shall be meted out with one or several of the following penalties: a warning, confiscation of illegal earnings, imposition of a fine less than RMB30,000 on the party directly responsible, suspension from bond underwriting business, being barred for one year for application for qualifications in bond underwriting or complete revocation of the qualifications. If a criminal offense is constituted, the case shall be moved to be handled by judiciary authorities:

(1) Engaging in underwritings or covert underwritings without acquiring qualifications for bond underwriting, or after the qualifications become invalid;

(2) Acquiring qualifications for bond underwriting through fraud or other illicit means;

(3) Failure to charge commissions in accordance with this set of procedures;

(4) Failure to submit verification reports that bond funds are in place, and reports on the work of underwriting;

(5) Releasing false underwriting notices;

(6) Leaking classified information;

(7) Soliciting underwriting business through inappropriate promises, slandering counterparts and other unfair practices in competition;

(8) When underwriting bonds through exclusive sale, trying to result in a surplus of bonds at the end of the issue by such means as intentional hoarding or interception, shortening the time of underwriting, or cutting the number of underwriting outlets;

(9) Luring others to subscribe for bonds through investment, kickbacks or other illicit means;

(10) Falsifying bond registration and trust vouchers or making trust vouchers by oneself;

(11) Failure to fulfil the obligation of acting as a councilor or supervising the work of bond information release; or the commission of major omissions;

(12) Continuing to issue bonds when the issuance period expires;

(13) Failure to acting on behalf of the subscribers to recover debts when the issuer or guarantor does not fulfil their obligations; and

(14) Other acts in bond underwriting business that violate this set of procedures.

   Article 72 Covert raising of interest rates for bond issuance will be punished in accordance with related regulations of PBOC on interest rate administration.

   Article 73 Whereas a securities institution is suspected of involvement in serious violation of the law and regulations, or suffers great losses, its qualifications for engagement in bond underwriting business will be suspended during the time when it is under investigation by related State organs; it will be handled in accordance with the conclusion of investigations by related departments.

   Article 74 Whereas a guarantor proves its guarantee capacity with false data or statements, or fails to timely state the fact that it is no longer capable of acting as a guarantor as a result of dissolution, bankruptcy or being canceled according to law, and thereby causing losses to the subscribers, the guarantor should, in accordance with provisions of related laws and regulations, compensate the subscribers for the losses; if a crime is constituted, the guarantor shall be handed over to judiciary authorities for further actions.

   Article 75 For mistakes occurred for various reasons in the creditor's rights registered by the trustee for the subscribers that cause losses to the subscribers, aside from compensations to the subscribers, a warning or a fine of less than RMB10,000 shall be meted out to the party directly responsible. If a trustee abuses its work to embezzle or lend the bonds of subscribers without authorization, a fine of less than RMB30,000 will be meted out to the party directly responsible, and illicit earnings be confiscated; if the circumstance is serious, the trustee's qualifications will be revoked; if a crime is constituted, the trustee shall be handed over to judiciary authorities for further actions. However, the trustee shall continue to fulfil its obligations before transferring trust formalities in accordance with regulations.

   Article 76 For bond credit rating institutions, public accounting firms, asset evaluation institutions and law firms that fail to conduct credit rating, auditing, asset verification, evaluation and examination objectively and justly, if discovered, they will be barred from engagement in finance-related business, and handed over to related competent departments for further actions; if a crime is constituted, they shall be handed over to judiciary authorities for further actions.

CHAPTER NINE SUPPLEMENTARY PROVISIONS

   Article 77 PBOC will be responsible for the interpretation of this set of procedures.

   Article 78 This set of procedures comes into force as of the date of its promulgation.