In the consideration of the problems occurred during the implementation of the “Share Listing Rules (2002)”, Shanghai and Shenzhen Stock Exchanges have amended their “Share Listing Rules” recently. The new “Shanghai Stock Exchange Share Listing Rules (2004)”, “Shenzhen Stock Exchange Share Listing Rules (2004)” were promulgated and effective as of December 10, 2004.

This amendment is a comprehensive amendment to the “Share Listing Rules (2002)” by addition of about 30% new provisions, which has embodied many contents from the relevant regulations of China Securities Regulatory Commission (the CSRC), e.g. the “Administration of the Takeover of Listed Companies Procedures”, “Administration of Disclosure of Information on the Change of Shareholdings in Listed Companies Procedures”, “Sponsor System for Issuing and Listing of Securities Tentative Procedures”, etc. Compared with the “Share Listing Rules (2002)”, the new rules were mainly amended in the following aspects:

•  Combining the Convertible Bond Listing Rules

The amended Share Listing Rules has smoothed its relationship with “Convertible Bond Listing Rules”. Convertible Bond, as a derivative product of Shares, has much information in common with shares in terms of disclosure requirement shares many common points with that of share. Therefore, this amendment has combined many specific regulations of “Convertible Bond Listing Rules” into the related sections of new “Share Listing Rules” (Section 5, Section 6, Section 11, and Section 12), and abolished the “Convertible Bond Listing Rules” at the same time.

•  Improvement on the Information Disclosure Requirement

•  A new concept of “Impartial Disclosure” was incorporated into the Section 2 of the newly “Share Listing Rules”. The “Impartial Disclosure” is intended to ensure all the investors to own an equal opportunity to obtain the information of the same quality, at the same time, prohibiting the listed company from disclosing the information selectively and infringing the equal right of investors to obtain the information, so as to make up the deficiency of the only equipment of “timely disclose” in the previous rules. This concept of impartial disclosure was embodied in Article 8.2.8, 2.11, 11.54 in the new “Share Listing Rules”.

•  “Major Event Initial Disclosure Obligation”, “Major Event Development Timely Disclosure Obligation”, and “Disclosure Obligation in the Preparation Status” were made.

The “Major Event Initial Disclosure Obligation” refers to the initial information disclosure of listed company with regard to the “any major event that would have critical influences to the transaction prices of the shares or derivative products of company”, which was stipulated in Section 7-AD HOC REPORTS. The new “Share Listing Rules” clearly set forth the time points of disclosure:

•  When board of directors or supervisory board make any resolution with regard to the major event;

•  When the related parties execute any Letter of Intention or Agreement with regard to the major event (no matter whether there is any condition or time limit is attached);

•  When any director, supervisor, or senior manager knows or should know the major event.

Listed company shall fulfill the “Major Event Initial Disclosure Obligation”, once any of the above situations occurs.

After performing the major event initial disclosure, it does not mean the listed company has completely fulfilled the obligation of timely disclosure. The new rules regulate that after the initial disclosure of major event, if the major event has any new development, the listed company shall continue disclosing the information with regard to the major event pursuant to the Article 7.5 of the new rules.

In addition, under this circumstance, even the major event is in a status of preparation, and has not reached the time point of “Major Event Initial Disclosure Obligation”, the listed company is still required to disclose the related preparation works and existing facts in time, when:

•  The major event can no longer be kept in secret;

•  The major event has been disclosed or there is hearsays in the market;

•  There is some abnormal fluctuation in the transaction of the shares or derivative products of the company.

•  Stressing the Warning Suspension

In the implementation of the “Share Listing Rules (2002)”, it was found that the percentage of routine suspension was very high, which failed the several warning suspensions that exist in a mass of routine suspensions to play the role of warning the market. The new Share Listing Rules has canceled, the routine suspension for quarterly report, and other suspension for interim reports, e.g. announcement of major legal action, announcement of related party transaction, etc.

Moreover, the new rules also endow the Exchange with more freedom on the suspension and resumption of listing. It is set forth in the new rules that the Exchange may decide the suspension and resumption of the shares and derivative products of the listed company, according to the real situation or under the requirement from CSRC, so as to avoid the high percentage of routine suspension of listing.

•  Improving the Regulations on Related Party Transactions

In the new rules, the Related Party Transactions is regulated as a section independently. It has enlarged the concept of “Related Persons”, i.e. all the persons, who used to be the related legal persons or individuals of the listed company within the past 12 months, shall be considered as the related persons of listed company.

This amendment has also adjusted the disclosure standard and voting procedure, clarified the concept of “Related Director” (see Article 10.2.1), clarified the concept of “Related Shareholders” (see Article 10.2.2), and also set forth a detailed regulation on implementation of the “Accumulative Calculation”.