Laws of the People's Republic of China

CONTENTS

CHAPTER 1. GENERAL PROVISIONS CHAPTER 2. ESTABLISHMENT PROCEDURE CHAPTER 3. TYPES OF COMPANIES CHAPTER 4. RESTRUCTURING OF STATE-OWNED ENTERPRISES AS JOINT STOCK LIMITED COMPANIES CHAPTER 5. CHINESE-FOREIGN JOINT STOCK LIMITED COMPANIES CHAPTER 6. SHARES CHAPTER 7. COMPANY DEBTS CHAPTER 8. SHAREHOLDERS AND SHAREHOLDERS' MEETINGS CHAPTER 9. BOARD OF DIRECTORS AND MANAGER CHAPTER 10. SUPERVISORY BOARD CHAPTER 11. FINANCIAL AFFAIRS AND ACCOUNTING CHAPTER 12. MERGER AND DIVISION CHAPTER 13. AMENDMENTS TO ARTICLES OF ASSOCIATION CHAPTER 14. TERMINATION AND LIQUIDATION CHAPTER 15. PENAL PROVISIONS CHAPTER 16. SUPPLEMENTARY PROVISIONS

CHAPTER 1. GENERAL PROVISIONS

   Article 1. These Regulations are formulated in order to establish the legal position of joint stock limited companies, to standardize their code of conduct, to protect the lawful rights and interests of joint stock limited companies and their shareholders and creditors, to ensure the leading position of the system of public ownership, to safeguard the socialist economic order and to promote economic development.

   Article 2. These Regulations shall be applicable to joint stock limited companies established in Shenzhen Municipality. Joint stock limited companies from outside Shenzhen Municipality that are listed on the Shenzhen Securities Exchange shall also comply with these Regulations.

   Article 3. The term "joint stock limited company" (a "Company") refers to an enterprise with the status of a legal person that is established in accordance with these Regulations, raises capital through the issue of shares and divides all of its registered capital into equal shares, and whose shareholders are liable toward it to the extent of the shares subscribed for by them, and that is liable for its debts to the extent of all of its assets.

   Article 4. Companies shall adhere to the principles of voluntary capital injection, equal share rights, joint enjoyment of gains and joint bearing of risks.

   Article 5. The production and business activities of Companies must comply with the laws and regulations of the state and safeguard the interests of the state and the public interest, and shall be subject to supervision by the relevant departments of the state.

   Article 6. The production and business activities and lawful rights and interests of Companies shall be protected by law and may not be infringed upon or unlawfully interfered with by any organization or individual.

   Article 7. Companies may not become shareholders with unlimited liability of other profit-seeking organizations.

Where a Company other than an investment Company approved by the state is a shareholder with limited liability of another profit-seeking organization, its shareholding in such other organization may not exceed 50 percent of the Company's registered capital.

   Article 8. The names of Companies shall comply with the laws and regulations concerning administration of the registration of names of enterprises with the status of a legal person, and shall contain the words "joint stock limited". The names of Companies that have not been established in accordance with these Regulations may not contain the words "joint stock limited" or "stock".

   Article 9. A company's domicile shall be the place where its main administrative establishment is located.

   Article 10. The scope of industries in which enterprises may restructure themselves as Companies or establish Companies is set forth below:

Ordinary industry, commerce, transportation, construction, tourism, services, cultivation, breeding, etc..

Production enterprises, high-technology enterprises, and enterprises generating foreign exchange through export, that comply with the industrial policies of the state and Shenzhen Municipality and that let the market regulate the production, sale and pricing of their main products may restructure themselves as Companies or establish Companies on a priority basis.

Enterprises that are run by the state on a monopoly basis and are extremely profitable, such as duty free companies, enterprises selling liquor and tobacco on a monopoly basis, gold and jewelry processing enterprises, etc., as well as enterprises engaged in industries in which the government has prohibited the establishment of Companies may not restructure themselves as Companies or establish Companies.

CHAPTER 2. ESTABLISHMENT PROCEDURE Article 11. Companies may be established by means of sponsorship or by means of share offer.

The term "establishment by means of sponsorship" refers to the form of establishment where all the issued shares of the Company are subscribed for by five or more sponsors themselves, and where no shares are offered to the Company's internal staff and workers or to the public. The term "establishment by means of share offer" refers to the form of establishment where the sponsors shall subscribe for more than 35 percent of the issued shares of the Company and where he balance is offered to the internal staff and workers of the Company, to other legal persons or to the public.

   Article 12. The sponsors of a Company must be legal persons, or departments that have been authorized by the state to make investments.

   Article 13. A Company's paid-up capital shall be its registered capital. The minimum registered capital of a Company shall be RMB 5 million yuan.

   Article 14. To establish a Company, its sponsors shall draft the following documents and submit the same to the Shenzhen Municipal Commission on the Restructuring of the Economic System (the "Municipal Restructuring Commission"), which shall review them in conjunction with the relevant departments and submit them to the Shenzhen Municipal People's Government (the "Municipal Government") for approval:

(1) an application for the establishment of a Company;

(2) a feasibility study;

(3) the articles of association of the Company;

(4) the share prospectus and share offer plan;

(5) the sponsors' documents certifying that they have the status of a legal person (the documents approving their establishment and the legal person business licenses), and their resident's identification documents or passports;

(6) the sponsors' certificates of creditworthiness; and

(7) the contract among the sponsors.

An existing enterprise that applies for permission to restructure itself as a Company shall also submit an asset valuation report and an investment verification report issued by an accounting firm qualified to perform asset valuation or by an asset valuation institution.

   Article 15. Where an existing enterprise wishes to restructure itself as a Company, the responsible persons of the enterprise and representatives of the owners of the property rights in the enterprise shall jointly form a Committee for the Preparation of a Joint Stock Limited Company, which shall be responsible for the following matters:

(1) to apply to the Municipal Government for approval to restructure the enterprise as a Company and to submit to the Municipal Government the relevant documents specified in Article 14 hereof;

(2) to thoroughly examine the claims and debts of the enterprise, and to entrust an accounting firm qualified to perform asset valuation or an asset valuation institution with performing asset valuation and verification, to determine what portion of shares will cover the enterprise's remaining net assets, to draw up a plan for the share rights and types of shares to be created, to work out the number of shares to be issued, etc.; where the said activities involve state assets, matters shall be handled in accordance with the relevant regulations of the state;

(3) to be in charge of the drafting of necessary documents such as the restructuring plan, the Company's articles of association, the prospectus, etc.;

(4) to offer the shares; and

(5) to convene the inaugural meeting of the Company.

   Article 16. The Preparation Committee shall be automatically dissolved on the date of establishment of the Company's board of directors.

   Article 17. An application for approval to establish a Company shall specify the following:

(1) the names and domiciles of the sponsors (in the case of an existing enterprise intending to restructure itself as a Company, the name and domicile of the existing enterprise shall be specified as well);

(2) the grounds for establishment of the Company;

(3) the name of the Company to be established;

(4) the share rights intended to be created; and

(5) the basic applications of the capital to be raised by the Company.

   Article 18. The feasibility study shall specify the following:

(1) the names and domiciles of the sponsors (in the case of an existing enterprise intending to restructure itself as a Company, the name and domicile of the existing enterprise shall be specified as well);

(2) an outline of the production and business activities of the sponsors, their creditworthiness, their investment abilities, etc.;

(3) the state of affairs and distribution of the assets, liabilities, net assets and profit of the enterprise to be restructured during the past three years;

(4) the scope and scale of business, including the names of the products, the domestic and foreign demand for the products, production details, the scale of production, the regions where the products are sold, the sales channels and the ratio of domestic sales to exports;

(5) the estimated investment, i.e. the sum of the fixed assets and the working capital to be invested in the project;

(6) the source of funds, i.e. the amount of shares that the sponsors intend to subscribe for (including the method of subscription) and the amount of shares intended to be offered, the proportion of such shares to the total amount of shares of the Company, the amount of funds to be borrowed, and the proportion of net assets to the total value of assets; and

(7) the profit forecast, profit rate on funds, profit rate on share capital and surplus per share.

   Article 19. The articles of association of a Company shall be drafted by its sponsors or by legal counsel instructed by its sponsors. After the articles of association have been unanimously agreed upon by all sponsors, they shall be submitted to the Municipal Restructuring Commission for approval and be made public by an appropriate method, in accordance with the type of Company. The articles of association of a Company must specify the following:

(1) the name and domicile of the Company;

(2) the purpose and scope of business of the Company;

(3) the method of establishment and type of the Company;

(4) the names and domiciles of the sponsors and the names and positions of their legal representatives;

(5) the total amount of the Company's registered capital, the types of shares to be issued, the rights attaching to and the total amount of each type of share, and the amount of each share;

(6) the methods and amount of capital injection by each type of shareholder, and the proportion of each type of shareholder's shareholding to the total amount of shares;

(7) the method of transfer of shares in the Company;

(8) the types of convertible securities of the Company and the method of conversion;

(9) the establishment, official powers and rules of procedure of the Company's shareholders' meeting and board of directors, and the appointment and official powers of the Company's manager;

(10) the Company's legal representative, the procedure for his appointment and his official powers;

(11) the financial and accounting systems of the Company;

(12) the distribution of the Company's after tax profit;

(13) the termination and liquidation of the Company;

(14) the method by which the Company is to make public announcements;

(15) the procedure for amendment of the Company's articles of association;

(16) the date of formulation of the articles of association and the signatures of the sponsors; and

(17) other matters that the sponsors deem necessary to be specified.

The contents of the articles of association of a Company may not be in conflict with these Regulations.

The articles of association of a Company shall be valid only when the Special Seal of Shenzhen Municipality for Approval of the Articles of Association of Joint Stock Limited Companies is affixed thereto.

   Article 20. Within 30 days after the approval by the Municipal Government of an application for approval to establish a Company, the sponsors shall apply to the Shenzhen Municipal Administration for Industry and Commerce (the "AIC") for registration of preparation and construction.

   Article 21. Where a Company is established by means of issuing shares to its internal staff and workers and other legal persons or by means of offering shares to the public, its sponsors shall submit a share offer application to the Shenzhen Special Economic Zone branch of the People's Bank of China (the "PBOC"). Shares may be issued only after such application has been approved in accordance with the relevant regulations of the People's Bank of China.

Where a Company is to be established by means of sponsorship, its sponsors shall apply to the PBOC for the handling of matters concerning the issue of shares. The procedures for the printing of share certificates may be carried out only after such application has been approved.

   Article 22. Sponsors shall publicly issue a prospectus by an appropriate method, in accordance with the type of Company. A prospectus shall specify the following:

(1) the name and domicile of the Company;

(2) the scope of business;

(3) basic information on the sponsors;

(4) the grounds for the issue of shares;

(5) the total amount of shares to be issued, the class(es) and number of shares to be issued, and the face value, book value and selling price of each share to be issued;

(6) the target (s) of the share issue;

(7) the opening and closing dates of the share issue;

(8) conditions attached to the issue of shares;

(9) relevant information on the Company's business: the state of affairs of the main business operations, profit forecast and forecast of dividends and bonuses;

(10) the number of shares subscribed for by the sponsors and the verification certificates for such subscriptions;

(11) the name(s) and domicile(s) of the securities distributors(s), the amount of shares to be distributed and the method of distribution; and

(12) the method of share subscription.

In the case of a Company creating new shares to increase its capital or an existing enterprise being restructured as a Company, basic information on the Company's directors and manager shall be added under item (3) hereof, the book value of each existing share shall be added under item (5) hereof, and information on the profitability and equity-debt situation shall be specified under item (9) hereof.

In the case of an existing enterprise being restructured as a Company, an evaluation of and a verification report on the enterprise's remaining assets shall be included.

   Article 23. The sponsors of a Company shall prepare subscription forms to be filled out by subscribers. Such subscription forms shall set forth the relevant items of the prospectus and the number and date of the PBOC's approval document for the share offer.

   Article 24. Subscribers shall pay their subscription moneys in accordance with the amount of shares entered on the subscription form and the time limit for payment. If a subscriber fails to pay his subscription moneys within the time limit therefor, he shall automatically be deemed to have relinquished the shares subscribed for, which shall then be offered to others. If such failure to pay causes damage to the Company, the subscriber shall be liable for compensation therefor.

   Article 25. A Company may not sell shares beyond the time limit for sale or beyond the maximum amount of shares to be issued.

   Article 26. The sponsors of a Company shall convene the inaugural meeting within 40 days after the subscription moneys have been paid in full.

An inaugural meeting shall be attended by more than two-thirds of the subscribers for the Company's shares. Resolutions voted on at such meeting shall be passed by a two-thirds majority of the affirmative votes of the subscribers present.

   Article 27. The following official powers may be exercised at an inaugural meeting:

(1) to hear the sponsors' report concerning the preparation and construction of the Company;

(2) to adopt or amend the Company's articles of association;

(3) to elect the members of the board of directors and of the supervisory board; and

(4) to decide other matters concerning the establishment of the Company.

   Article 28. Within 30 days after its establishment, a board of directors shall apply to the AIC for registration and submit to it the following documents:

(1) an application for registration;

(2) the document from the Municipal Government approving the establishment of the Company;

(3) the document from the PBOC approving the share offer;

(4) the Company's articles of association;

(5) the register of shareholders;

(6) the minutes of the inaugural meeting;

(7) the share capital verification certificates of the shareholders; and

(8) other documents required by the AIC.

A Company shall be established and obtain the status of a legal person upon verification and approval of registration and issue of a Business License of an Enterprise with the Status of a Legal Person by the AIC.

   Article 29. The sponsors of a Company shall assume the following responsibilities:

(1) to be jointly and severally liable for subscription for any issued shares of the Company that are not taken up;

(2) if the Company cannot be established, to be jointly and severally liable for the expenses and debts arising from the establishment activities; and

(3) if the Company publicly issued shares but cannot be established, to be jointly and severally liable for repayment of the subscription moneys already paid up by the subscribers, together with the statutory interest thereon.

CHAPTER 3. TYPES OF COMPANIES

   Article 30. Companies can be divided into the following two major categories, depending on the scope and method of the share offer, subscription and transfer:

(1) Internal Companies, being Companies whose shares are subscribed for by its sponsors alone or simultaneously issued to the Company's internal staff and workers and other legal persons. Internal Companies are divided into the following two kinds:

(a) Companies that are established by means of sponsorship and whose shares are subscribed for by their sponsors, are not issued to any persons other than their sponsors and are transferred between legal persons;

(b) Companies that are established by means of share offer and (i) whose shares are subscribed for by their sponsors and internal staff and workers or other legal persons, (ii) the shareholding of whose internal staff and workers may not exceed 30 percent of their total amount of shares and (iii) whose shares are transferred between their internal staff and workers and legal persons and are strictly forbidden to be issued and transferred to any persons other than their staff and workers.

The term "internal staff and workers of a Company" refers to a Company's directors, manager, staff and workers, and such persons as aforesaid of subsidiaries in which such Company owns more than 50 percent of the total shares.

(2) Public Companies, being Companies whose shares are publicly issued to the public. Public Companies are divided into the following two kinds:

(a) Companies whose shares are issued to the public and, upon approval by the PBOC, are traded over the counters of securities dealers;

(b) Companies whose shares are issued to the public and, upon approval by the PBOC, are listed and traded on the Securities Exchange.

   Article 31. A Company that issues its shares to the public shall meet each of the following conditions:

(1) its business conforms to the industrial policies of the state and Shenzhen Municipality;

(2) the total amount of shares of a newly organized Company, or the net assets of an existing enterprise prior to being restructured as a Company, are not less than RMB 10 million yuan;

(3) the proportion of its net tangible assets to its tangible assets for the year preceding its being restructured as a Company is not lower than 25 percent;

(4) the sponsor's share subscriptions are not less than 35 percent of the Company's total amount of shares;

(5) the shares taken up by the public constitute not less than 25 percent of the Company's total amount of shares;

(6) the portion of shares subscribed for by the Company's staff and workers does not exceed 10 percent of the portion of shares issued by the Company to the public or, in the case of an internal Company being changed to a public Company that exceeds this limit, no shares are placed with its internal staff and workers;

(7) the number of shareholders is not less than 800;

(8) the financial affairs are public; and

(9) the political and professional quality of the main responsible persons of the enterprise is comparatively good, they observe discipline and abide by the law, and they have no record of bad business operations.

   Article 32. In order for shares to be listed, the Company requesting their listing shall submit an application to the Securities Exchange, which shall review the same and subsequently submit it to the PBOC for approval.

   Article 33. A listed Company shall meet each of the following conditions:

(1) the Company's business conforms to the industrial policies of the state and Shenzhen Municipality;

(2) the Company has a record of profitability for more than three consecutive years and has provided financial information covering the past three years;

(3) the proportion of its net tangible assets to its tangible asset is not lower than 38 percent; however, in the case of a public company that has been in existence for more than one year, such requirement shall have been satisfied one year prior to the application for listing;

(4) the Company's profit rate for the past two years is higher than the average profit rate of the same industry;

(5) the Company's net assets prior to listing and issue are not less than RMB 15 million yuan;

(6) it meets the other conditions for public Companies; and

(7) other conditions imposed by the Securities Exchange.

   Article 34. A Company established by means of sponsorship that requests approval for being changed to an internal Company whose shares are held by its own staff and workers, and an internal Company that requests approval for being changed to a public Company, shall submit an application to the Municipal Restructuring Commission, which shall review the same and subsequently submit it to the Municipal Government for approval. Upon Approval by the Municipal Government of such application, an application for approval of share offer and listed trading shall be submitted to the PBOC. The Company may be changed only after the PBOC has approved the application in accordance with the relevant regulations of the People's Bank of China.

CHAPTER 4. RESTRUCTURING OF STATE-OWNED ENTERPRISES AS JOINT STOCK LIMITED COMPANIES

   Article 35. The term "restructuring of a state-owned enterprise as a joint stock limited company" means the restructuring of an existing state-owned enterprise as a Company by dividing the enterprise's net assets (assets less liabilities) into state-owned shares and subsequently (i) selling a portion of such shares to other legal persons and individuals or (ii) issuing a portion of new shares to departments authorized by the state to make investments, other legal persons and individuals.

The rights, interests and debts of the original enterprise shall be vested in and borne by the Company formed through the restructuring. Collective enterprises, and enterprises established jointly by investors from both inside and outside special zones, may be restructured as Companies by reference to this Chapter.

   Article 36. The following shares may be created in the course of restructuring state-owned enterprises as joint stock limited companies:

(1) state-owned shares, being shares that are held directly, or that others have been authorized to hold, by government departments for state asset administration;

(2) legal person shares, being shares formed by legal persons in the People's Republic of China through investments in legally disposable assets;

(3) individual shares, being (i) individual shares of staff and workers of the enterprise, that is, internally issued shares held by the staff and workers of the issuing Company or (ii) public individual shares, that is, publicly issued shares of a Company that are purchased by members of the public with their lawful individual property;

(4) foreign capital shares, being shares formed by foreign legal persons and individuals and by legal persons and individuals from Hong Kong, Macao and Taiwan through foreign currency investments.

   Article 37. Proportion of state-owned shares:

(1) in Companies of key importance for the national economy and the people's livelihood, the controlling interest of state-owned shares shall be maintained;

(2) in other Companies, there shall be no limitations on the proportion of state-owned shares.

The assignment of state-owned shares in a Company of key importance for the national economy and the people's livelihood by a Company that has been authorized to hold such shares shall be examined by the department for state asset administration, which shall submit the assignment to the Municipal Government for approval. The assignment of state-owned shares by an enterprise under the Municipal Government that has been authorized to hold such shares shall be reported to the municipal department for state asset administration for approval. The assignment of state-owned shares by a second-or third-tier enterprise that is subordinate to an enterprise under the Municipal Government and that has been authorized to hold such shares shall be reported to the enterprise in charge of it for approval.

   Article 38. Where a state-owned enterprise wishes to restructure it self as a Company, a preparation committee shall be formed by representatives of all sides, such as the representative of the owner of the state assets, the department in charge of the enterprise, the responsible persons of the enterprise, etc.. Such preparation committee shall be responsible for the restructuring of the enterprise as a Company, etc..

The state asset representatives of group companies (head offices of companies) and of enterprises under the Municipal Government shall be appointed by the government department for state asset administration. The state asset representatives of second-tier enterprises shall be appointed by the enterprises in charge that have direct title to the assets.

   Article 39. The examination and approval procedure for the restructuring of enterprises as Companies shall be as set forth below:

(1) the restructuring of a group company, the head office of a company of an enterprise under the Municipal Government as a Company shall be reported to the Municipal Government for approval;

(2) the restructuring of an enterprise subordinate to a group company, to a head office of a company or to an enterprise under the Municipal Government as a Company shall be agreed to by the Company in charge and subsequently be reported to the Municipal Government for approval;

(3) where an enterprise established by investors from both inside and outside special zones wishes to apply for approval to be restructured as a Company, the investors in such enterprise shall adopt a resolution in favor of such restructuring and subsequently submit an application to the Municipal Government for approval; Where a Chinese enterprise outside the People's Republic of China wishes to apply for approval to be restructured as a Company, such restructuring shall be agreed to by the unit in charge and subsequently be reported to the Municipal Government for approval;

(4) the restructuring of an enterprise under a district or county as a Company shall be agreed to by the district or county government and subsequently be reported to the Municipal Government for approval.

CHAPTER 5. CHINESE-FOREIGN JOINT STOCK LIMITED COMPANIES

   Article 40. The term "Chinese-foreign joint stock limited companies" means Companies established pursuant to these Regulations by Chinese and foreign investors. With respect to Chinese-foreign joint stock limited companies, relevant laws and regulations concerning foreign investment enterprises shall be referred to in addition to implementing these Regulations.

   Article 41. The establishment of Chinese-foreign joint stock limited companies shall comply with the state's policies concerning industries invested in by foreign business entities.

Newly organized Chinese-foreign joint stock limited companies shall generally be established by means of sponsorship.

The minimum registered capital of Chinese-foreign joint stock limited companies shall be RMB 30 million yuan.

To invest abroad or in Hong Kong, Macao or Taiwan, Chinese-foreign joint stock limited companies shall apply to the municipal examination and approval authority for foreign investment in accordance with the examination and approval procedure, and may only carry out procedures for the outward remittance of funds, etc. after approval by the municipal examination and approval authority for foreign investment or the Ministry of Foreign Economic Relations and Trade.

   Article 42. To establish a Chinese-foreign joint stock limited company, an existing enterprise may be restructured as a Chinese-foreign joint stock limited company, or a Chinese-foreign joint stock limited company may be newly organized.

Where a foreign investment enterprise wishes to apply for approval to restructure itself as a Chinese-foreign joint stock limited company, the original investors shall adopt a resolution in favor of such restructuring and submit an application to the Municipal Restructuring Commission, in conjunction with the municipal examination and approval authority for foreign investment, shall review such application in accordance with the relevant regulations, making reference to the current procedure and limits of authority for the examination and approval of Chinese-foreign equity joint ventures, and subsequently submit the same to the Municipal Government for approval. The rights, interest and debts of the original foreign investment enterprise shall be vested in and borne by the Chinese-foreign joint stock limited company formed through the restructuring.

The restructuring of a state-owned or other enterprise as a Chinese-foreign joint stock limited company shall be handled by reference to the preceding paragraph.

Where a foreign investment enterprise is restructured as a Chinese-foreign joint stock limited company, the Company's articles of association shall set forth the rights and obligations of the original parties to the joint venture, and specify whether there are any restrictions on shareholding assignments to third parties by the original parties to the joint venture during the original joint venture term.

To newly organize a Chinese-foreign joint stock limited company, the sponsors shall submit an application to the municipal examination and approval authority for foreign investment. Such authority, in conjunction with the Municipal Restructuring Commission, shall review such application in accordance with the relevant regulations, making reference to the current procedures and limits of authority for the examination and approval of Chinese-foreign equity joint ventures, and subsequently submit the same to the Municipal Government for approval. The articles of association of Chinese-foreign joint stock limited companies, and any amendments thereto, shall be examined and approved by the Municipal Restructuring Commission in conjunction with the municipal examination and approval authority for foreign investment.

   Article 43. Chinese-foreign joint stock limited companies that wish to issue Renminbi-denominated shares ("A Shares") and special Renminbi-denominated shares ("B Shares"), and other Companies that wish to issue B Shares when receiving foreign investment, shall submit an application in accordance with the relevant regulations of the People's Bank of China, and may issue such shares only after such application has been approved.

The term "B Shares" means shares the face values of which are denominated in Renminbi, that are subscribed for and traded in foreign currency, and that are offered exclusively to foreign investors and investors from Hong Kong, Macao and Taiwan for sale and purchase. Foreign investors and investors from Hong Kong, Macao and Taiwan may not buy or sell A Shares. Investors that are neither foreign investors nor investors from Hong Kong, Macao or Taiwan may not buy or sell B Shares.

   Article 44. The holders of B shares in a Company shall have the same rights and obligations as the holders of A shares in that Company.

   Article 45. The foreign share capital of Chinese-foreign joint stock limited companies shall not be less than 25 percent of the Company's registered capital.

   Article 46. Chinese-foreign joint stock limited companies shall be granted the treatment accorded to Chinese-foreign equity joint ventures. The term of preferential treatment such as tax exemption and reduction granted to any foreign investment enterprise shall not be recalculated if such enterprise is restructured as a Company.

   Article 47. In all buying and selling of B Shares, prices shall be calculated in Renminbi and paid in foreign currency (convertible currency), that is, payment shall be made in accordance with the foreign exchange adjustment price of the Shenzhen Special Economic Zone Foreign Exchange Adjustment Center on the business day immediately preceding the date of payment.

Dividends and bonuses on B Shares shall be paid in foreign currency in accordance with the foreign exchange adjustment price of the Shenzhen Special Economic Zone Foreign Exchange Adjustment Center for the week immediately preceding the date of distribution of the dividends and bonuses.

   Article 48. Dividends and bonuses paid on B shares, capital for B shares, and capital gains derived on the secondary market shall be remitted out of the People's Republic of China in accordance with the procedures prescribed by the People's Bank of China and the exchange control departments.

CHAPTER 6. SHARES

   Article 49. All the capital of a Company shall be divided into equal shares represented by share certificates.

   Article 50. The shares of a Company may be subscribed for with currency or be obtained by injecting as capital, at a certain value, physical objects, industrial property, proprietary technology or land use rights needed by the Company for production and business purposes. Such obtaining of shares shall require the issue of an asset valuation report, an investment verification report and relevant information by an approved asset valuation institution, technology evaluation institution or accounting firm.

The amount of shares constituted by industrial property and proprietary technology may not exceed 20 percent of the Company's total registered capital.

   Article 51. Companies may issue ordinary shares and preferred shares.

Holders of ordinary shares may participate in the management of the Company through exercise of their voting rights at shareholders' meetings. Each ordinary share shall give equal voting rights. Holders of ordinary shares shall have the right to participate in the distribution of the Company's surplus after the Company has made allocations to the common reserve and the provident fund and paid the dividends on preferred shares. The bonuses on ordinary shares shall vary in accordance with the Company's profits. When the Company is liquidated upon bankruptcy or termination, holders of shares shall rank behind creditors and holders of ordinary shares shall rank behind creditors and holders of preferred shares of the Company in the distribution of the Company's residual assets. Holders of preferred shares shall generally have no voting rights. However, if the Company does not pay dividends on preferred shares for three consecutive years, holders of preferred shares may also obtain one vote per share. Dividends on preferred shares shall be paid in accordance with the rate or amount specified in the articles of association. When the Company is liquidated upon bankruptcy or termination, holders of preferred shares shall rank behind creditors but before holders of ordinary shares in the distribution of the Company's residual assets. When issuing preferred shares, a Company shall provide for the following matters in its articles of association:

(1) the sequence of distribution of dividends on preferred shares, and the amount or rate of such dividends;

(2) whether dividends are cumulative or noncumulative;

(3) the sequence of distribution by the Company of its residual property to the holders of preferred shares;

(4) whether or not preferred shares are convertible into ordinary shares and, if convertible, the conditions of conversion; and

(5) other matters concerning the rights and obligations attaching to preferred shares.

Holders of preferred shares shall not be entitled to the Company's common reserve.

A company shall have the right to redeem preferred shares at the price specified in its articles of association.

   Article 52. The shares of a Company shall be registered shares.

All registered shares shall be registered in the holder's own name. Shares that are owned by a department authorized by the state to make investments or by a legal person shall be registered in the name of such department or legal person and not under a separate account name or in the name of a representative.

Individuals who wish to subscribe for or transfer shares must carry their resident's identification certificates or passports. Departments or legal persons that wish to subscribe for or transfer shares must present valid certificates.

   Article 53. Companies may not issue no-par share certificates. Companies may not issue shares below par.

   Article 54. The shares held in a Company by a single natural person may not exceed 0.5 percent of the total amount of that Company's shares.

Each Company shall make specific provisions in its articles of association on the basis of the scale of its capital and the nature of its industry, up to the limit set forth in the preceding paragraph.

   Article 55. Shares are valuable securities issued by Companies, certifying that the shareholders have rights and interests in such Companies. The following particulars shall be clearly stated on a share certificate:

(1) the name and domicile of the Company;

(2) the number and date of the document of registration of the Company's establishment or of the amendment of the Company's registration following a new share issue;

(3) the number and date of the PBOC's document of approval of the share offer;

(4) the class of shares;

(5) the total number of shares of the Company, the amount of each share and the face value of the share;

(6) the number of shares in the present issue;

(7) the name of the shareholder;

(8) the number of the share certificate; and

(9) the date of issue.

Shares shall become valid after they have been signed by the Company's legal representative and sealed by the Company.

   Article 56. Shares may be transferred through a securities trading house in accordance with the relevant laws and regulations of the state and the Company's articles of association, and may also be bestowed, inherited and charged, except that none of the said acts may be performed as from the date of liquidation of the Company.

Legal persons such as enterprises and Companies may neither transfer public shares, subscription warrants and preferential subscription rights held by them to their own staff and workers, nor gratuitously distribute to their staff and workers shares purchased with collective welfare funds, reward funds and funds from the common reserve. Preferential subscription rights that are relinquished by shareholders shall be publicly auctioned on the securities market. Shareholders may not redeem their shares.

   Article 57. When an enterprise acquires more than 10 percent of the total amount of shares of a Company, it must notify such Company within 10 days.

   Article 58. Sponsors may not transfer their shares until two years after registration of the Company's establishment.

Share assignments by the sponsors of public Companies shall be submitted to the PBOC for approval.

   Article 59. The shares of internal staff and workers of public Companies may not be transferred for one year following subscription. During any half year after such one-year period, such a staff member or worker may not transfer in excess of 10 percent of his shareholding.

   Article 60. The proceeds from a share offer by an existing enterprise that restructured itself as a Company may not exceed twice the amount of the net assets of the former enterprise.

   Article 61. When a Company wishes to increase its capital and issue shares, its board of directors shall draw up a plan, and a resolution to increase its capital and amend its articles of association shall be adopted at a shareholders' meeting. Thereupon, a feasibility study on the increase of capital and a report on the amendment of the articles of association shall be submitted to the department authorized by the Municipal Government, and an application for the issue of shares shall be submitted to the PBOC. The capital may be increased and shares may be issued only after approval has been granted.

A Company that pays dividends or bonuses in the form of a bonus share issue shall observe the preceding paragraph.

   Article 62. To apply for approval to increase its capital and issue new shares, a Company must meet the following conditions:

(1) its business circumstances are good and it has a stable record of profitability;

(2) the ratio of net tangible assets to tangible assets for the immediately preceding year is not lower than 38 percent;

(3) the investment objects for the proceeds have been determined, and the gains are expected to exceed the average profit rate in the same industry; and

(4) the investment project conforms to the industrial policies of the state and Shenzhen Municipality.

   Article 63. A Company may not increase its capital and issue new shares within one year after its most recent share issue.

   Article 64. When a Company increases its capital, the value of its new shares, calculated on the issue price, may not exceed twice the book value of its existing shares.

   Article 65. When a Company issues new shares upon an increase of capital, its existing shareholders shall have a pre-emptive right, provided that Article 31 hereof is not violated.

   Article 66. A Company must issue a prospectus before each increase of capital and issue of new shares.

   Article 67. If a Company's profits are insufficient to pay dividends on its preferred shares for two consecutive years, it may no longer issue preferred shares.

   Article 68. After a Company has increased its capital, it shall amend the registration of its registered capital with the AIC.

   Article 69. A Company may reduce its capital pursuant to statutory procedure if it has excess capital or suffers serious losses. Capital may be reduced by the following methods:

(1) reduction of the number of shares, to be achieved by cancellation or consolidation of shares, as needed;

(2) reduction of the amount of shares, to be achieved by return of subscription moneys in the case of excess capital,and by cancellation of the amount of each share in the case of serious losses; or

(3) reduction of both the number and the amount of shares.

   Article 70. To reduce its capital, a Company must follow each of the following procedures:

(1) convene a shareholders' meeting, at which a resolution to reduce the capital shall be adopted, and make corresponding amendments to the articles of association of the Company;

(2) request approval from the department authorized by the Municipal Government and submit an application to the PBOC for carrying out share changes;

(3) prepare a balance sheet and list of property, publicly notify creditors, and designate a period of not less than 90 days in which creditors may raise objections. If a creditor raises an objection within the designated period, the Company shall repay the debt to it in full or provide it with a debt repayment guarantee prior to reducing its capital. The Company may not oppose its creditors by reducing its capital; and

(4) apply to the AIC for registration of the reduction of capital. Article 71. The total amount of a Company's shares after reduction of its capital may not be less than the limit for a Company's registered capital set forth in Article 13 and the standard, if any, for the minimum amount of registered capital for its specific industry.

   Article 72. If a Company needs to replace share certificates due to a reduction of its capital, it shall, after the registration of such reduction, publicly notify its shareholders to replace their share certificates within a period of not less than 90 days.

A shareholder who fails to replace his share certificates within the time limit shall be deemed to have relinquished his shareholding rights. The Company shall auction off such shares and return the proceeds to the shareholder.

   Article 73. A shareholder who has lost his share certificate shall make a public announcement declaring such share certificate to be void. If the Company does not receive and objection within 45 days, the shareholder may apply for a replacement to the Company or Shenzhen Securities Registrars Co.

   Article 74. Unless due to special circumstances such as reduction of capital, a Company may not repurchase its own shares or keep its own issued shares as treasury shares. If special circumstances require a Company to repurchase to keep its own issued shares as treasury shares, it may do so only after requesting and obtaining approval from the PBOC.

   Article 75. If a Company owns more than 10 percent of another enterprise's shares, such enterprise may not purchase shares of such Company.

If a Company owns more than 50 percent of the shares of another enterprise or Company, the former shall be the parent Company and the latter its subsidiary enterprise or subsidiary Company. Subsidiary enterprises and subsidiary Companies shall be strictly forbidden to subscribe for shares of their parent Companies.

CHAPTER 7. COMPANY DEBTS

   Article 76. The main forms of Company debts are loans and bonds. Companies shall have the right to take out loans and issue bonds as business may require, provided that they are permitted to do so under state laws, regulations and policies.

   Article 77. If a Company wishes to issue bonds, a proposal thereto shall be put forward by its board of directors and a resolution to that effect shall be adopted at a shareholders' meeting.

If a Company wishes to issue general bonds, the resolution to that effect adopted at a shareholders' meeting shall be valid only if adopted with the number of votes specified in Article 103.

If a Company wishes to issue convertible bonds, the resolution to that effect adopted at a shareholders' meeting shall be valid only if adopted with the number of votes specified in Article 104.

   Article 78. A Company may issue bonds only after having requested and obtained approval from the PBOC in accordance with the relevant regulations of the state.

   Article 79. The issue and assignment of Company bonds shall be performed on an agency basis by a financial institution approved by the People's Bank of China.

   Article 80. Bonds issued by a Company shall be guaranteed or secured. The amount of secured bonds issued may not exceed the Company's net assets. The amount of guaranteed bonds issued shall not be subject to such restriction.

   Article 81. A company may issue bearer bonds or registered bonds. The face value of bearer bonds may not be less than RMB 20 yuan per certificate. The face value of registered bonds may not be less than RMB 1, 000 yuan per certificate. The face values of each issued Company bond certificate of the same kind shall be equal.

   Article 82. A Company may not issue bonds in any of the following circumstances:

(1) the Company bonds that it previously issued have not been fully subscribed for;

(2) it is a fact that it has defaulted on, or deferred repayment of the principal together with interest of, its debts or previously issued Company bonds, and such default or deferment persists; or

(3) the average net pre-tax earnings of the Company during the past two years are less than three times the average debt and/or bond interest payable by the Company during the same period.

   Article 83. Company bonds shall be printed in the uniform format specified by the PBOC. Company bonds shall be valid only after they have been signed by the Chairman of the Board and sealed by the Company.

   Article 84. When issuing bonds, a Company must make a written public announcement, which shall specify the following particulars:

(1) the name and domicile of the Company;

(2) the scope of business;

(3) the total amounts of assets and capital;

(4) the total amount and composition of liabilities;

(5) the reason for the bond issue;

(6) the kind, total amount, face value and issue price of the bonds issued; (7) the rate of interest of the Company bonds, the method of interest payment and the time limits for interest payments;

(8) the method of and time limit for repayment of the Company bonds;

(9) the targets of the issue of Company bonds;

(10) the distributor and the place of issue of the Company bonds; and

(11) the opening and closing dates of the bond issue.

   Article 85. A Company shall prepare Company bond subscription forms to be filled out by subscribers for its bonds. Such subscription forms shall set forth the relevant particulars of the public notice of the Company bond issue and the number and date of the PBOC's document of approval of the bond issue. Subscribers shall enter the number of Company bonds subscribed for and their domiciles on the subscription forms, and sign and seal the same.

   Article 86. Subscribers shall pay their subscription moneys in accordance with the amount of bonds entered on the subscription form. If a subscriber fails to pay his subscription moneys within the time limit therefor, he shall automatically be deemed to have relinquished the bonds subscribed for, which shall then be offered to others.

   Article 87. A Company shall prepare a counterfoil book of Company bonds for future reference, in which the following particulars shall be recorded:

(1) the names and the places of residence or domiciles of the holders of the Company bonds;

(2) the total amount, face value, interest rate, repayment method, time limit for repayment, etc. of the Company bonds;

(3) the date of issue of the Company bonds; and

(4) the dates of subscription for the bonds by their holders.

   Article 88. Public Companies may issue convertible bonds. Holders of convertible bonds may convert the same into ordinary shares in accordance with the articles of association of the issuing Companies.

   Article 89. To issue convertible bonds, a Company shall apply to the department authorized by the Municipal Government for approval to increase its capital and to the PBOC for approval to issue ordinary shares. Convertible bonds may be issued only after such approvals have been granted.

   Article 90. The amount of convertible bonds issued by a Company may not exceed 50 percent of its ordinary share capital.

   Article 91. Bondholders may, through the bondholders' meeting, entrust the securities dealer that issued the bonds as agent for the issuing Company to safeguard their interests.

   Article 92. Bondholders' meetings shall be convened by the Company that issued the bonds or by the securities dealer that issued the bonds as agent for such Company.

Bondholders representing 10 percent of the bonds issued in a single issue may request the Company mentioned in the preceding paragraph to convene a bondholder's meeting.

   Article 93. The provisions of Chapter 8 hereof concerning the procedure for convening shareholders' meetings shall apply to the procedure for convening Company bondholders' meetings. Article 103 shall apply to the adoption of resolutions at Company bondholders' meetings. At bondholders' meetings, each bond shall give the right to one vote.

CHAPTER 8. SHAREHOLDERS AND SHAREHOLDERS' MEETINGS

   Article 94. Departments that have been permitted by the state to make investments, legal persons and natural persons (other than those subject to restrictions) may subscribe for shares of Companies and become shareholders of such Companies.

   Article 95. The shareholders shall be the owners of the Company and shall have rights and bear obligations in accordance with the classes and amounts of the shares they hold.

   Article 96. Shareholders shall have the following main rights:

(1) to attend or appoint a proxy to attend shareholders' meetings of the Company and to exercise their voting rights;

(2) to transfer shares in accordance with these Regulations and the Company's articles of association; (3) to peruse the Company's articles of association, the minutes of its shareholders' meetings and its accounts, to supervise the operation and financial management of the Company and to make suggestions or inquiries;

(4) to receive dividends or Company bonuses in accordance with their shareholdings;

(5) to have a pre-emptive right to purchase new shares in proportion to their original shareholdings in the Company;

(6) to be distributed residual property according to law when the Company is terminated; and

(7) other rights provided for in the Company's articles of association.

   Article 97. Shareholders shall have the following main obligations:

(1) to abide by the Company's articles of association;

(2) to pay subscription moneys in respect of the shares that they have subscribed for, in accordance with the method of capital injection;

(3) to bear the losses and debts of the Company in accordance with their shareholdings; and

(4) other obligations set forth in the Company's articles of association.

   Article 98. The shareholders' meeting shall be the highest organ of authority of the Company.

   Article 99. Shareholders' meetings shall be divided into ordinary meetings and extraordinary meetings.

Ordinary meetings shall be held once annually. Not more than 15 months may elapse between two ordinary meetings.

The board of directors shall convene an extraordinary shareholders' meeting:

(1) if the board of directors considers it necessary;

(2) if one-third of the seats on the board of directors are vacant;

(3) if the Company's losses reach one-third of its paid-up share capital; or

(4) if shareholders representing at least 10 percent of the Company's shares submit a request to that effect.

   Article 100. Shareholders' meetings shall be convened by the board of directors. Shareholders shall be notified by the board of directors of the date, place and agenda of the meeting 15 days before such meeting is to be held. Such notice shall be given in the form of a public announcement as provided for in the Company's articles of association. Public Companies shall publicly announce the particulars specified in the preceding paragraph in the Shenzhen Special Zone Daily or the Shenzhen Commercial News.

   Article 101. If a shareholder is unable to attend a shareholders' meeting, he may appoint a proxy to attend the meeting. Such proxy shall produce the instrument appointing him as proxy signed by the appointing shareholder.

   Article 102. The following powers may be exercised at shareholders' meetings:

(1) to hear and review the work reports of the board of directors and the supervisory board;

(2) to decide upon the Company's dividend and bonus distribution plans;

(3) to approve the Company's annual reports, balance sheets, profit and loss statements and other accounting statements;

(4) to decide upon plans for increasing or reducing the Company's capital;

(5) to decide upon plans for the issue of shares by a Company established by means of sponsorship to its internal staff and workers and other legal persons, or for the transformation of an internal Company into a public Company, or for the over-the-counter or exchange trading of the Company's shares;

(6) to decide upon plans for issue of Company bonds;

(7) to elect and remove the members of the board of directors and the supervisory board, and to decide upon the remuneration of such persons and the methods of payment thereof;

(8) to adopt resolutions on the division, merger, termination, liquidation, etc. of the Company;

(9) to amend the Company's articles of association;

(10) to discuss and adopt draft resolutions proposed by shareholders representing at least 5 percent of the shares; and

(11) to adopt resolutions on other important matters of the Company.

   Article 103. A quorum for purposes of taking votes on ordinary resolutions at a shareholders' meeting shall be constituted by the presence of shareholders representing between them one half of the total number of shares