Announcement of the Supreme People's Court of People's Republic of
China

January 9, 2003

For the purpose of trying civil compensation cases involving false
statements in relation to the securities market, regulating the
civil acts in the securities market, protecting the legitimate
rights and interests of investors, according to General Principles
of Civil Law of People's Republic of China, Securities Law of the
People's Republic of China, Company Law of People's Republic of
China and Civil Procedure Law of People's Republic of China as well
as other law regulations, according to the reality and practice of
judgment, this law is enacted.

Chapter I General Provisions

Article 1 The term "actions for civil compensation arising from
false statements in the securities market" (hereinafter referred to
as "civil compensation actions involving false statements in
securities market") in these provisions refers to cases involving
investors in the securities market commencing actions in the
People's Court with regards to losses suffered from the
dissemination of false statements.

Article 2 The term "investor" in these provisions refers to a
natural person, legal representative or other organization that is
engaged in the trading and subscription for securities in the
securities market.
The term "securities market" in these provisions refers to the
market in which an issuer can issue shares to the public, the market
in which trading of shares can take place through a brokerage
company and any other markets approved and established by the
government.
Article 3 These provisions are not applicable for the following
civil procedures in securities trading:
1. Securities trading in a securities market other than one approved
by the government;
2. Trading in securities through an agreement in a securities market
approved by the government.
Article 4 The People's Court in trying civil compensation actions
involving false statements in securities market shall mediate, and
shall strongly encourage parties to resolve their disputes through
mediation.
Article 5 The statute of limitations period decided in Article 135
of the General Principles of Civil Law shall be applied when
investor may institute a civil compensation action regarding false
statements in the securities market:
(1) The date on which China Securities Regulatory Commission of the
People's Republic of China (CSRC) or its representative organization
issues penalties for parties involved in the dissemination of false
statements.
(2) The date when the Ministry of Finance of the People's Republic
of China (MOF), other
administrative organizations and other organizations which have the
authority declare sentences upon parties involved in the
dissemination of false statements.
(3) Where the party disseminating false statements has yet to
receive its administrative punishment, but has been found guilty by
the People's Court, the date on which the civil judgment is made.
Where two or more administrative sentences are made in relation to
the dissemination of one false statement by different parties; or
where there are both administrative as well as criminal sentences,
the date of public declaration of the earliest administrative
sentence or the effective date of the criminal judgment shall be the
effective date for the commencement of civil action.
Chapter II Acceptance and Governance
Article 6 The People's Court should accept actions brought by
investors actions against the party disseminating false statements
for losses incurred as a result of receiving false statements, which
are in accordance with the administrative sentence of the relevant
authority or the criminal sentence issued by the People's Court and
in compliance with the Rule 108 of Civil Procedure Law.
Apart from submitting administrative sentences or public notices, or
the criminal sentence issued by the People's Court, investors
bringing actions for civil compensation involving the dissemination
of false statements must also provide the following pieces of
evidence:
(1) Identification documents of the natural person, legal
representative or other organizations. If these documents cannot be
provided, then notarized photocopies of the identification documents
must be provided;
(2) Evidence of the transaction conducted and the losses incurred.
Article 7 A defendant in a civil compensation action involving false
statements in the securities market should be the person
disseminating false statements, including:
(1) The actual controller of the initiator, shareholder or any other
entity;
(2) Issuer or publicly listed company;
(3) Broker;
(4) Underwriter;
(5) Accounting firm, law firm, valuation organization or any other
organizations providing agency services;
(6) Directors, supervisors, managers and other senior management
personnel of the entities listed in items (2), (3) and (4) above and
the person directly responsible for the entity listed in item (5);
(7) Other organizations or natural persons involved in the
dissemination of false statements.
Article 8 Actions involving false statements in the securities
market is under the jurisdiction of the Intermediate People's courts
of the city, where the government of province, municipality directly
under the Central Government, autonomous region lies in, and the
Intermediate People's courts of municipality with independent
planning status, and special economic zone.
Article 9 If there are multiple defendants in an action involving
false statements in the securities market, the jurisdiction of this
action can be determined according to the following principles:
(1) The Intermediate People's Courts of the city, where the issuer
or the publicly listed company lies in, shall have the jurisdiction,
with the exception of the situation as stipulated in section 2 of
Article 10.
(2) Actions against a party disseminating false statements (apart
from the issuer or publicly listed company) should be heard by the
Intermediate People's Courts of the defendant's domicile.
(3) If the defendant is a natural person, the Intermediate People's
Courts of the defendant's domicile shall have the jurisdiction.
Article 10 After the People's Court accepts the action involving
false statements in the securities market against the party
disseminating false statements (apart from an issuer or a publicly
listed company), on the application of the plaintiff or upon
receiving the approval of all plaintiffs, the Court can add the
issuer or the publicly listed company as a joint defendant, and
transfer the case to the Intermediate People's courts where the
issuer or the listed company lies in.
If the plaintiff does not apply or the plaintiffs do not agree to
add the defendant, but the Court is of the opinion that it is
necessary to add the defendant, the Court should inform the issuer
or the publicly listed company that it has been added as a joint
defendant in the action, but it should not transfer the action.
Article 11 After the People's Court accepts the action involving
false statements in the securities market, if the party against whom
the administrative sentence is made refuses to accept the sentence,
and applies for administrative review, or brings an administrative
action, the court can suspend the proceedings.
After the People's Court accepts the action, if the administrative
sentence is revoked, the court should terminate the proceedings.
Chapter III Methods of litigation
Article 12 A plaintiff stipulated in these provisions can choose to
bring actions individually or jointly.
Article 13 If there are multiple plaintiffs bringing separate
actions against the same defendant for the same disseminated false
statement, including both individual litigants and joint litigants,
the People's Court can inform the individual plaintiffs to join
together in one action.
Where there are multiple plaintiffs bringing actions against the
same defendant for the same disseminated false statement, the
People's Court can combine them into one action.
Article 14 The number of the joint plaintiffs should be ascertained
before trial. If there are numerous joint plaintiffs, each joint
plaintiff may elect two to five legal representatives, and each
legal representative may elect up to two agents.
Article 15 Legal representatives should ensure that they have
obtained the plaintiffs' specific authorization to represent the
plaintiffs in court hearings, to change or abandon the application,
and also to conduct negotiations and enter into a conciliation
agreement with the defendant.
Article 16 The People's Court, when finding the defendant as being
liable for the losses of multiple plaintiffs, may include the total
amount of compensation payable in the main part of the judgment, and
list the name and compensation amount applicable to each plaintiff
in the appendix attached to the judgment.
Chapter IV. Definition of false statements
Article 17 The term "false statements in the securities market"
refers to the person, who has the obligation to disclose the
information, violates the regulation of Securities Law, during the
process of issuing and trading of securities, makes any falsehood,
misleading statement or major omission of important issue, or any
other illegal disclosure of information.
The term "important issue" should be defined according to Article
57, Article 60, Article 61, Article 62, and Article 72 of Securities
Law and according to other related regulations.
The "false record" occurs when the person, who has the obligation to
disclose the information, adds the inexistent fact in the
information disclosure report.
The "misleading statement" is defined as: the statement made by the
person who discloses the information or through the media, misleads
the investors to make incorrect judgment, and seriously influential.
The "major omission" occurs when the person, who has the obligation
to disclose the information, does not totally record, or only
partially record the issue, which should be listed in the report.
The "illegal disclosure" occurs when the person, who has the
obligation to disclose the information, does not disclose the
information, which should be disclosed within an appropriate period
or fails to disclose it in a legal way.
Article 18 When the investor satisfies any of the following
conditions, the People's court should make a judgment that there is
causality between the false statement and the losses of investor.
(1) The securities, in which the investor invested, have a direct
relationship with the false statement
(2) The investor purchased the securities on or after the date the
false statement was disseminated and before the disclosure or
correction date.
(3) The investor suffered losses because of selling or holding the
securities after the disclosure or correction date.
Article 19 If the defendant can present the evidence to prove that
the plaintiff satisfy any of the following conditions, the People's
Court should make a judgment that there is no causality between the
false statement and the losses of investor.
(1) The investor sold the securities before the disclosure or
correction date.
(2) The investor purchased the securities after the disclosure or
correction date
(3) The investor purchased the securities knowing about the false
statement.
(4) The losses or partial losses were caused by systematic risks
related to the stock market.
(5)The investor acted in bad faith or intended to manipulate the
prices of securities.
Article 20 The date of the false statement dissemination is defined
in these Provisions as the date when the false statement was made,
or the date when the false statement occurred.
The disclosure date refers to the first day when the truth about
false statement becomes publicly known or is broadcasted in the
media such as newspapers, radio and television.
The correction date refers to the day when the person who
disseminated the false statement n his own initiative in accordance
with relevant procedure corrects the false information in the media
assigned by China Securities Regulatory Commission
Chapter 5 -Matters relating to liability and waiver of liability
Article 21 The initiator, issuer or publicly listed company is
liable for losses of the investors caused as a result of
dissemination of false statements.
The directors, supervisors, managers and other persons of senior
level management are liable for civil compensation for the
above-mentioned loss, except when there is evidence proving that no
fault on the part of the respective senior level management
personnel occurred.
Article 22 Where the issuer or publicly listed company disseminating
false statements acted under the control of a third party
("substantial controller") and caused a loss to the investors, the
issuer or publicly listed company still remains liable for civil
compensation. The issuer or publicly listed company may, after
accepting liability for compensation, seek compensation from the
substantial controller.
In the event that the substantial controller violates Articles 4, 5
and 188 of Securities Law by the provision of false statements, and
as a result causes a loss to the investor, the substantial
controller should bear the liability for the loss in question.
Article 23 The underwriter and broker are liable for losses of the
investor caused as a result of the dissemination of false
statements, except where there is evidence proving no fault on the
part of the underwriter and broker.
Those directors, supervisors, managers and other senior management
personnel already liable may seek compensation from the underwriter
and broker, subject to the exception as mentioned above.
Article 24 Public intermediaries and other persons directly
responsible for violating Articles 161 to 202 of the Securities Law
and thereby causing investors to suffer loss shall be liable for
compensation for that part of the loss caused by the violation,
except where evidence exists showing no fault on the part of the
public intermediaries and persons.
Article 25 Clause (7) of Article 7 of these rules provides that
organizations and natural persons violating Articles 5, 72, 188 and
189 of Securities Law, thereby causing investors to suffer loss,
shall be liable for compensation.
Chapter 6 - Joint liability for Infringement of Rights
Article 26 Where the initiator provides a guarantee to the issuer
for the information disclosed, the initiator and the issuer shall be
jointly liable for the loss suffered by the investors.
Article 27 Where underwriters, brokerage companies and other public
intermediaries, who know or should know about false statements of
issuer or publicly listed company, do not correct or provide
comment, they shall be jointly liable for the infringement of
investor's rights, and the loss resulting thereof.
Article 28 The involvement of directors, supervisors, managers and
senior management personnel of issuers, listed companies,
underwriters and brokerage companies in any of the following
activities shall be jointly liable for giving of false statements:
(1) Providing false statements.
(2) Failing to object to the dissemination of statements known or
should be known to be false.
(3) Other circumstances where liability should occur.
Chapter 7-Losses Calculation
Article 29 Investors have the right to demand compensation from
persons disseminating false statements in the securities market and
thereby causing investors to suffer loss in accordance with Article
30 of these rules; where securities have ceased to be issued,
investors have the right to demand for the refund and compensation
of funds already deposited into the Savings account and interest
earned on those funds.
Article 30 The scope of liability of a person disseminating false
statements in the securities market is determined by the actual loss
suffered by the investors from relying on the false statements.
Actual losses that can be suffered by investors include:
(1) Loss from caused by the difference in investment capital.
(2) Commission and duties caused by the difference in investment
capital.
The interest referred to above shall be calculated from the date of
purchase to the date of sale of the securities in accordance with
the bank's savings account interest rate for the respective period
in question.
Article 31 The loss from the difference in investment capital
suffered by investors as a result of selling shares on or before the
base date shall be calculated by multiplying the difference between
the share purchase price and sale price by the number of shares held
by the investors.
Article 32 The loss from the difference in investment capital
suffered by investors as a result of selling shares or holding share
certificates after the base date shall be calculated by multiplying
the difference in the average closing share prices of each day
either for the period from the share purchase date to the date the
false statement was given, or for the period from the correction
date to the base date by the number of shares held by the investors.
Article 33 The term "base date" for the purpose of calculating the
difference in capital refers to the deadline set down within a
reasonable period of time after the false statement is disclosed or
corrected, so as to calculate the scope of losses suffered by
investors as a result of the false statements. The base date shall
be determined according to the following:
(1) From the disclosure or correction date to the date when the
volume of the shares affected by the false statement achieve 100%.
However, the volume of shares transferred through major deals shall
not be included in this calculation.
(2) If it is not possible to determine a base date in accordance
with Clause (1) prior to the court hearing, then the base date shall
be 30 transaction days after the disclosure or correction date.
(3) For shares already withdrawn from the securities market, the
base date shall be one transaction day prior to the date the shares
are withdrawn from the securities market.
(4) For shares which have already ceased trading in the securities
market, the base date shall be one transaction day prior to the date
the shares have ceased being traded in the securities market; where
trading has resumed, the base date shall be determined in accordance
with Clause (1).
Article 34 Any benefits obtained by investors during the period they
hold the shares, including cash dividends, bonus shares, shares
obtained from the transfer of accumulation funds, any rights to
purchase rationed shares, increase in or transfer allotted shares
obtained by investors with their own funds during the period they
hold the shares, cannot be credited against the compensation payable
by the person giving the false statement.

Article 35 The calculation of reduction loss of invalidated
securities should be done using the price and volume of the
securities when they were still valid.

Chapter 8 - Annexure

Article 36 These rules take effect from 1 February 2002.

Article 37 These rules will prevail where there are inconsistencies
between the Notice regarding false statements in the securities
market causing civil disputes promulgated on 15 January 2002 and
these rules.

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