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.