Chapter I General Provisions

Article 1 These Measures have been formulated in accordance with the "Company Law", "Securities Law" and the provisions of relevant laws
and administrative regulations for the purpose of regulating the conducts of securities companies on the issuance and transfer of
bonds, and protecting the legitimate rights and interests of the bondholders.

Article 2 "The bonds of a securities company" as used in the Measures refer to the negotiable instruments issued by a securities
company according to law, with the principals and interests to be repaid within an agreed time limit.
These Measures shall be applicable to the issuance of bonds by securities companies, excluding the issuance of the convertible
company bonds.

Article 3 The China Securities Regulatory Commission (hereinafter referred to as the "CSRC") shall be responsible for the supervision
over the issuance and transfer of the bonds by securities companies according to law.

Article 4 The issuance of the bonds of a securities company shall be in accordance with the conditions as prescribed in the Measures, and
shall be reported to the CSRC for approval. No bonds may be issued without authorization or in any disguised form without approval.

Article 5 The bonds of a securities company may be publicly issued, upon approval, to the general public or issued to targeted clients
to the qualified investors. The bonds for directional issuance shall not be issued publicly whether directly or in any disguised form.

Article 6 The securities companies that issue bonds (hereinafter refer to as "issuer") shall make effective measures for the
repayment of principals and interests due in order to protect the legitimate rights and interests of the bondholders.

Chapter II Issuance and Underwriting

Article 7 The public issuance of the bonds by the securities companies shall also be in line with the following requirements
besides meeting the conditions as prescribed in the "Company Law":
1. The issuer is a conglomerate securities company;
2. The net capital has been audited at the end of the recent period shall be no less than RMB 1 billion ;
3. It was profit-making in the past year;
4. All the indexes of risk supervision and control are in conformity with the relevant provisions of the CSRC;
5. It has no record of serious violation of the laws and regulations during the past two years;
6. It has a sound operational mechanism for the shareholders' meeting and the board of directors as well as effective internal
management rules, and has an appropriate technical system for business separation and internal control;
7. The capital is not taken up by the natural person, legal entity, or any other organization or any of the affiliates thereof in actual
control; or
8. Other conditions as prescribed by the CSRC.

Article 8 Where a securities company issues directional bonds, the
requirements as prescribed in items 4, 5, 6, 7, and 8 of the
preceding Article shall also be met, besides the conditions as
prescribed in the "Company Law", and the net capital audited at the
end of the late period shall be no less than RMB 500 million.
Article 9 The directional bonds issued shall only be issued to the
qualified investors, which refer to those investors that meet the
following conditions, and can judge by themselves, with the ability
of independently analyzing and bearing the risk of the invested
bonds:
1. The legal entities or investment organizations established
according to law;
2. Able to engage in bond investment according to the provisions and
articles of incorporation; and
3. A registered capital of RMB10 million or more or the net capital
audited being RMB20 million or more.
Article 10 The capital collected through the issuance of bonds shall
be used for specified purposes and for which there shall be
corresponding spending plan and the management rules. The collected
capital shall be used in line with the relevant provisions of laws
and regulations or those of the CSRC, and may not be used in the
businesses and conducts prohibited.
Article 11 The issuer shall retain securities rating organizations
to make credit rating for the current bonds and make arrangements
for the follow-up rating.
The securities rating organizations shall be responsible for the
impersonality, impartiality and punctuality of the rating result.
The contents and the format of the credit rating report shall be in
conformity with relevant provisions.
Article 12 The issuer shall provide guaranty for bonds issuance.
Where the guaranty is provided for the issuance of bonds, the
guarantor shall have the capability to pay off the debts for
debtors, and the guaranty shall be that with joint and several
liabilities; In case the mortgage or the pledge is provided for the
issuance of bonds, the property under the mortgage or pledge shall
be assessed by the qualified property assessment institutions.
The amount of money secured for the public issuance of the bonds
shall be no less than the total amount of the principals and the
interests of the bonds, and for the directional bonds issued, the
amount shall be no less than 50% of the total amount of the
principals and the interests of the bonds.
Article 13 An issuer shall retain credit agents for bondholders. The
credit agency agreement shall be made when retaining the credit
agent, and the rights and obligations, as well as the liabilities
for breach of contract among the issuer, bondholder and the credit
agent shall be specified.
An issuer shall stipulate expressly in the prospectus that the
investors subscribing the current bonds shall be deemed as accepting
the credit agency agreement.
An issuer may retain trust and investment corporations, fund
management corporations, securities companies, law firms, and
securities investment consultation institutions as credit agents.
Article 14 The issuer shall retain law firms to provide the legal
advisory papers and the lawyer's working report by consulting the
relevant provisions of the CSRC on securities issuance.
Lawyers shall air their legal opinions expressly, the focus of which
is on the issuance conditions of bonds, plans of issuance, terms of
issuance, guaranty, credit rating, the special repayment accounts,
and the credit agent, as well as the bondholder's meetings, etc,
according to the characteristics of the bonds.
Article 15 An issuer shall retain a securities company that has the
main underwriter's qualifications to organize the underwriting of
bonds. For the directional bonds issued, the selling of which may
also be organized by the issuer itself with the approval of the
CSRC.
Article 16 The board of directors of a securities company shall
formulate the schedule for bond issuance, and the shareholders'
meeting shall make special decisions on the following matters
concerned:
1. The scale of issuance, the time limit and the interest rate;
2. Guaranty;
3. The use of the funds collected;
4. Ways of issuance;
5. The valid term of the decisions made; and
6. Other important items in relation to the current bonds.
Article 17 The following documents shall be filed to the CSRC by a
securities company when applying for bond issuance:
1. The application report of the issuer;
2. The resolutions of the board of directors and the shareholders'
meeting;
3. The recommendations of the main underwriters (with the attachment
of the investigation report on the fulfillment of duties);
4. The prospectus (with the attachment of the plan of issuance);
5. The legal advisory papers (with the attachment of the lawyer's
working report);
6. The financial statements over the past three years and in the
current term, which have been audited;
7. The credit rating report and the follow-up statements on the
arrangement of the rating;
8. The special report on the repayment plan and the safeguards;
9. The report on the analysis of the cash flow concerning the
payment of the principals and the interests of the current bonds;
10. The security agreement and the related documents;
11. The credit agency agreement;
12. The photocopies of the articles of incorporation and the
business license of the issuer;
13. Other important contracts in relation to the issuance of the
bonds; and
14. Other documents ought to be reported to the CSRC as required.
Article 18 For the issuance of directional bonds, if the potential
subscriber promises in written form to subscribe all the bonds and
not transfer them in the bond transfer markets, the issuer may be
exempt from credit rating, providing guaranty or retaining the
credit agency, after obtaining the written consent of the potential
subscriber.
The bonds as cited in the preceding paragraph can be transferred
only by agreement. The two parties making the transfer shall make
definite written indications and recognition on the limitations of
the transfer and the risk of the bonds.
Article 19 Bonds shall be underwritten on a sole agency basis or on
a commission basis.
The maximum period for underwriting bonds or the self-organized sale
shall be 90 days.
Article 20 For the bonds publicly issued, if the total amount of the
par value of the bonds which are sold out within the sales term
accounts for less than 50% of the total amount of the bonds to be
issued, or the requirements for listing of the bonds are not met
with, the issuance shall be deemed as a failure. And the issuer
shall return the subscribers the amount of money according to the
issuance price together with the interests of the bank deposit at
the corresponding period of time.
The issuer cannot put to use the capital collected before the end of
the issuance of the bonds, and the main underwriter and the credit
agent shall have the responsibility to supervise them.
Article 21 The bonds publicly issued shall be issued openly to the
general public, with RMB100 par value for each share. The
directional bonds issued shall be issued to the qualified investors
by way of keeping accounts, with RMB 500 thousand par value for each
share, and the bonds subscribed by each qualified investor shall be
no less than RMB one million par value.
Bonds may be issued according to the par value, or by other means,
of which the specific way of issuance shall be determined through
negotiation between the issuer and the main underwriter.
Article 22 The interest rate of the bonds shall be determined
through negotiation between the issuer and the main underwriter in
light of such factors as the credit grade, degree of risk, the
demands and supply of the markets, etc, but must be in line with the
relevant provisions on the management of the interest rate of the
bonds.
Article 23 The minimum period of the bonds shall be one year, and
the maximum period shall be five years.

Chapter III Trust and Transfer
Article 24 The bonds of the securities companies shall be subject to
the registration, trust and settlement of the China Securities
Registration and Settlement Limited Company.
The Central National Debts Registration and Settlement Limited
Company may also be responsible for the registration, trust and
settlement of the company bonds after approval.
Article 25 The bonds publicly issued shall be applied for
centralized competitive transaction by listing in the stock
exchange, and may also be transferred by other means upon approval
of the SCRC.
The securities company that applies for listing of the bonds shall,
makes listing agreement with the stock exchange, observes the
listing regulations of the stock exchange and accepts the
supervision of the stock exchange as well.
Article 26 The following conditions ought to be met in the
application for the listing of bonds:
1. The application for the issuance of bonds has been approved and
the bonds issuance has been completed;
2. The total amount of the par value of the bonds actually issued is
no less than RMB 200 million
3. The requirements for the public issuance are still met with when
applying for listing of the bonds; and
4. Other conditions as prescribed by the CSRC.
Article 27 In case the termination of the bonds listed for
transaction is one month before the expiration of the listed bonds,
the cashing of the bonds shall be handled by the issuer.
In case the securities company whose bonds are listed for
transaction is in any of the situations as prescribed in Articles 55
and 56 of the "Securities Law", the stock exchange shall make
decisions on the suspension of the transaction or termination of the
listing.
Article 28 The directional bonds issued shall be transferred by
agreement, or by other means with the approval of the SCRC, of which
the minimum transfer unit shall be no less than RMB 500 thousand par
value. The bonds transfer shall be made between the qualified
investors, and shall be made in line with the business rules of the
place of transfer.
The issuer, the main underwriter, the securities company providing
the transfer service and the transferor shall all make examination
and confirmation on the identity of the qualified investors, those
investors who are not qualified shall not participate in the
activities of subscription and assignment of the directional bonds
issued.
Article 29 The issuer, the main underwriter, and the securities
company providing the transfer service shall make declaration to the
registration and settlement company on the relevant data of the
qualified investor who has been examined and confirmed, and handle
the formalities for the opening and registration of the securities
account. The qualified investors shall only carry out such
investment activities as the application and purchase and the
assignment of the bonds by using the securities account that has
been registered in the registration and settlement company, and
shall fill in the subscription list or the assignment list of the
bonds.

Chapter IV Information Disclosure
Article 30 The securities company shall make prospectus and other
information disclosure documents in light of the relevant provisions
of the CSRC when issuing bonds, and make sure that all the
information that have the material influences on the investors shall
be disclosed in authenticity, accuracy, integrity, and in time. But
the prospectus for the issuance of directional bonds and the
relevant data are refrained from being published in the media
whether directly or in any disguised form.
The issuer and the relevant parties shall not mislead the investors
by any means to buy the bonds.
Article 31 The issuers shall indicate the investors in the obvious
place of the prospectus: "The investors shall, when purchasing the
current bonds, carefully read the prospectus and the relevant
information disclosure documents, and make independent investment
judgment. The approval of the CSRC on the issuance of the current
bonds does not mean that the CSRC has made any evaluation on the
investment value of the current bonds, nor does it mean the CSRC has
made any judgment on the investment risk of the current bonds."
Article 32 The prospectus, the listing announcement, the periodical
report and the announcement on the major events, shall be made in
accordance with the relevant provisions of the CSRC and the
operational rules of the stock exchange.
Article 33 The issuance terms disclosed in the prospectus shall be
specific and definite, stipulating in detail the terms in relation
to the rights and obligations of the parties of the bonds.
At least the following contents shall be included in the prospectus:

1. The scale of the bonds, time limit and the interest rate;
2. The start and termination time of the issuance;
3. The time, the procedures and the ways of the repayment of the
principals and the interests;
4. The special repayment account and other repayment measures;
5. The relevant arrangements for the bondholder's meeting;
6. The credit agent and the credit agency agreement;
7. The guaranty issues;
8. The rating report and the arrangements for the follow-up rating;
9. The liabilities of the issuer in breach of the contract; and
10. The underwriting institutions and their liabilities.
Article 34 The issuers shall, within the existing period of the
bonds, disclose to the bondholders the annual financial report that
has been audited by the accountant firm which has the qualification
of practicing securities business.
Article 35 The issuer that issues bonds publicly shall make public
announcements for three times on the relevant matters concerned in
the designated press of the CSRC within 10 days before the date of
paying the principals and interests.
Article 36 During the listing of bonds, the issuer shall submit an
annual report to the SCRC and the stock exchange within four months
after the end of each financial year, and submit a mid-term report
to the SCRC and the stock exchange within two months after the end
of the first half year of each financial year, as well as make
disclosure on the designated press and the internet website of the
CSRC.
Article 37 The important matters in relation to the interests of the
bondholders within the time limit of the report shall be disclosed
in detail in the periodical report, and at least the following
contents shall be included in the report:
1. The payment of principals and interests of the bonds;
2. The relevant conditions of the special repayment accounts;
3. The material alteration of the guarantor and the guarantee;
4. The alteration of the liabilities of the issuer;
5. The summarization of the status of cash flow;
6. The conditions of follow-up ratings;
7. The main contents of the report on the agency matters of the
credit agent;
8. The main conditions of the public announcements of the major
events;
9. The convening of the bondholder's meetings; and
10. Other information that has great influences on the bondholders.
Article 38 In case an issuer is in any of the following
circumstances, it shall be publicized in time or informed to the
bondholders in an effective way:
1. Anticipation of being unable to repay the interests or the
principals;
2. Abnormity in the special repayment account;
3. Making such contracts as the security contract and other
important contracts that may have great influence on the repayment
of the principals and the interests;
4. Occurring serious loss or suffering such serious loss that
exceeds 10% of the net capital;
5. Occurring major arbitration or litigation;
6. Reducing the capital, merger, split, dissolution and application
for going bankrupt;
7. Great re-composition of liabilities to be carried out;
8. Failure to implement the stipulations of the prospectus;
9. The major alteration of the guarantor or guarantee;
10. The suspension of the transaction of the bonds and the
termination of the listing of the bonds by the stock exchange; and
11. Other circumstances as prescribed by the CSRC.
Article 39 Where the bonds are issued to targeted clients, the
contents and ways of continuous disclosure of the information shall
be stipulated in the prospectus, but shall be in conformity with the
relevant provisions of the CSRC on the information disclosure of the
directional bonds issued.

Chapter V Repayment Measures
Article 40 A bondholder shall implement its rights according to the
provisions of the laws and regulations, and the stipulations of the
prospectus, and supervise the relevant conducts of the issuer and
the credit agent.
Article 41 A issuer shall open a special repayment account for the
payment of the principals and the interests of the bonds, and make
clear the sources of the capital in the account, the way of
withdrawal and other relevant matters concerning the supervision and
management of accounts. The capital in the account may be used for
the investment of such products as treasury bonds that are of low
risk and high fluidity, or repay the bonds ahead of schedule as
agreed.
Article 42 The issuers shall make resolutions through the
shareholder's meeting, and improve the proportion of the optional
surplus accumulation fund and that of the ordinary risk reserve
within the existing period of the bonds, so as to reduce repayment
risks.
Article 43 The issuers shall make resolutions through the
shareholder's meeting to take the following measures within the
period when the capital in the special repayment account could not
be withdrawn as stipulated or repay the principals and interests of
the bonds:
1. Not distributing profits to the shareholders;
2. Deferring the implementation of such items of capital outlay as
the major foreign investment, purchase, and merger or incorporation;

3. Adjusting to reduce or ceasing to pay the salary and bonus to the
directors or the executives; and
4. The person directly liable is forbidden to shift from his
position.
Article 44 Where an issuer agrees to repurchase the bonds before the
expiration date of the bonds or repay the debts ahead of the
schedule as stipulated, he shall not impair the interests of the
bondholders, and shall treat all the bondholders fairly.
Article 45 Issuers are forbidden to alter the stipulations of the
prospectus unilaterally within the existing period of the bonds.
Where it is necessary to make any alteration under special
circumstances, the issuer shall notify the credit agent in time and
win the consent of the bondholder.
Article 46 A bondholder may implement his rights alone, or through
the bondholder's meeting. The rights, procedures of convening, and
the effective conditions of the bondholder's meeting shall be
stipulated in the prospectus.
Article 47 In case any of the following circumstances arises, the
bondholder's meeting shall be convened:
1. The issuer suggests that the stipulations of the prospectus be
altered;
2. The issuer is unable to pay the principals and the interests on
schedule;
3. The issuer reduces the capital, merges or incorporates, dissolves
and applies for bankruptcy;
4. The material alteration of the guarantor or guarantee; or
5. The bondholders owning over 10% of the par value of the bonds
suggest changing the credit agent.
Article 48 The issuer, the guarantor, the shareholders who hold the
current bonds and over 10% stock rights of the issuer, and other
important affiliates, may take part in the bondholder's meeting and
bring forward proposals, but may not take a vote.
Article 49 A credit agent shall fulfill his duty, implement his
obligation of management with honesty, credit, caution and
efficiency, and observe the stipulations of the agency agreement
strictly, as well as implement the following obligations:
1. In case such circumstances as failure to repay the principals and
interests in time or any other circumstance that may affect the
material interests of the bondholders arise, the credit agent shall
urge and remind the issuer, and notify the bondholders as well;
2. Supervising the use of the special repayment account and the
money collected, as well as the guaranty matters concerned in light
of the stipulations;
3. Acting as the agent of the bondholder and the issuer for the
negotiation and litigation affairs between them, in light of the
stipulations of the prospectus; and
4. Other matters concerned as authorized by the bondholder's
meeting.
Article 50 The credit agents shall make operational rules for the
agency business, and take effective measures to protect the
legitimate rights and interests of the bondholders, and make reports
on the credit agency matters periodically.
Article 51 Issuers shall assign persons specially handling the bond
affairs, and make up the repayment working party to take charge of
such matters as the repayment of the interests and the principals
and other relative matters.

Chapter VI Legal Liabilities
Article 52 The issuance, underwriting, transfer and the information
disclosure of a securities company shall be made in accordance with
the relevant provisions of the Company Law and the Securities Law.
Those acts in violation of the provisions shall be subject to
administrative punishment by the CSRC according to law.
Article 53 In the case of bonds issued to targeted clients, if the
issuer publishes, directly or in any disguised form, the prospectus,
or releases relevant information in any mass media, which is in
violation of the provisions, he shall be ordered by the SCRC for
correction, and be meted out with one or more of the following
penalties as warning, confiscation of the illegal proceeds; in case
the circumstance is serious, the approval for the issuance of
directional bonds shall be revoked by the SCRC, and the bonds having
been issued shall be returned by the issuer according to the issuing
price plus the bank deposit interest at the corresponding period, as
well as being barred for three years for application for the
qualifications on bond issuance. The executives directly responsible
and other personnel directly liable shall be meted out with one or
more of the following penalties: warning, confiscation of illegal
proceeds, suspension from or complete revocation of the practicing
qualifications of the securities business.
Article 54 The issuer or underwriter of directional bonds issued,
who, in violation of the provisions, sells the bonds to unqualified
investors shall initiatively make corrections; those who refuse to
make corrections shall be ordered by the CSRC to make corrections,
and be meted out with one or more penalties such as warning and
confiscation of illegal proceeds. The approval for the issuance of
directional bonds may be revoked by the issuer, and the bonds having
been issued shall be returned by the issuer according to the issuing
price plus bank deposit interests for the corresponding period, and
the issuer shall be barred for three years from applying for the
qualifications for bond issuance, and the underwriter shall be
suspended from or disqualified in bond underwriting. The executives
directly responsible and other personnel directly liable shall be
meted out with one or more penalties, including warning,
confiscation of illegal proceeds, suspension from or
disqualification from practicing the securities business.
Article 55 The intermediary institutions that provide services in
the issuance of directional bonds, shall correct the false records,
misrepresentations or major omissions that may exist in the advice
it proposed; those institutions who refuse to make corrections,
shall be ordered by the SCRC to make corrections, and may also be
meted out with one or more penalties according to the particular
circumstances including warning, confiscation of illegal proceeds,
suspension from or being disqualified from practicing the securities
business. The executives directly responsible and other personnel
directly liable shall be meted out with one or more penalties
including warning, confiscation of illegal proceeds, suspension from
or being disqualified from practicing the securities business.
Article 56 In case a credit agent fails to perform his duty as
stipulated, the relevant personnel liable shall be imposed an
administrative punishment by the SCRC according to law; and shall
take civil liabilities according to law for the losses caused to the
bondholders.

Article 57 If an issuer fails to repay the principals and the interests due, the bondholders can lodge a complaint to him. For those who have the ability to repay but refuse to implement the repayment duty, and have other violation acts, the SCRC may take the following measures according to the particular circumstances:
1. Ordering the implementation of relevant obligations;
2. Imposing one or more penalties on the entity including a warning, confiscation of illegal proceeds, suspension of part of the
securities business; or
3. Imposing one or more penalties on the executives directly responsible and other personnel directly liable, including warning,
confiscation of illegal proceeds, suspension from or being disqualified from practicing the securities business.

Chapter VII Supplementary Provisions
Article 58 The regulatory measures on the issuance of lower bonds by securities companies shall be formulated separately.
Article 59 The Measures shall enter into force as of October 8, 2003.
 

Bright Jon  Attorney-at-law   Fax: +86-512-53516040
email@colaw.cn