Document No. 5 of the 2005 Annual General Meeting

Report on Amendments to the Company Charter

Dear Shareholders:
In accordance with the new Company Law of the People’s Republic of China, the Securities Law of the People’s Republic of China, and the Guidelines for the Articles of Association of Listed Companies (Revised in 2006), which have been in effect since January 1, 2006, as well as the Company’s actual circumstances, the Articles of Association are hereby amended. The principal amendments are as follows:
1. Article 1.7, “External Investment,” originally stipulated: “When a company makes investments in other limited liability companies or joint-stock companies, the aggregate amount of such investments shall not exceed 50 percent of the company’s net assets at the time; provided, however, that any increase in the investment resulting from capital contributions made by the investee company out of its retained earnings shall be excluded from this limit.”
It is hereby deleted.
2. Add the following provision to Article 1.8, “External Guarantees”: “Any guarantee provided by the Company or its controlled subsidiaries after the aggregate amount of such guarantees reaches or exceeds 50% of the most recent audited net assets shall be subject to approval by the Company’s Shareholders’ Meeting. Any guarantee provided by the Company after the aggregate amount of such guarantees reaches or exceeds 30% of the most recent audited total assets shall also be subject to approval by the Company’s Shareholders’ Meeting.”
3. In Article 3.3, “Types and Composition of Registered Capital,” the phrase “the company’s share structure” is amended to:
Share Class Number of Shares
Renminbi ordinary shares: 235,014,975 shares
“Domestic-listed foreign-invested shares: 115,000,000 shares”
4. Article 3.5, “Restrictions on Shareholding,” previously provided: “The provisions of the preceding paragraph shall apply to directors, supervisors, the general manager, and other senior management personnel who are corporate shareholders holding more than 5% of the company’s voting shares.”
It is now amended to read: “The provisions of the preceding paragraph shall apply to the company’s directors, supervisors, general manager, and other senior management personnel.”
5. Article 3.8, “Transfer and Trading of Shares,” previously stipulated:
“The company’s directors, supervisors, general manager, and other senior management personnel shall, during their tenure, periodically declare to the company the shares of the company they hold, and shall not transfer such shares during their tenure or within six months after leaving office.”
“The shares held by the company’s promoters shall not be transferred within three years from the date of the company’s establishment.”
It is now amended as follows: “Directors, supervisors, the general manager, and other senior management personnel of the company shall, during their tenure, periodically report to the company the shares they hold in the company and any changes thereto; during their tenure, the number of shares they may transfer each year shall not exceed 25% of the total number of shares they hold in the company; and the shares they hold in the company may not be transferred within one year from the date the company’s shares are listed and commence trading. Furthermore, such persons shall not transfer the shares they hold in the company within six months after leaving their positions.”
“The shares held by the company’s promoters may not be transferred within one year from the date of the company’s establishment.”
6. Article 3.11, “Methods of Capital Increase and Share Expansion,” originally stipulated:
“1. Allotment of new shares to existing shareholders; 2. Issuance of new shares to non-specific investors;”
It is now amended to read: “1. Public issuance of shares; 2. Non-public issuance of shares;”
7. Article 3.14, “Reduction of Registered Capital,” is amended to read as follows: “The Company shall, within ten days from the date on which the resolution to reduce the registered capital is adopted, notify its creditors and, within thirty days, publish a notice in the newspaper specified in Chapter XIV of these Articles of Association. Creditors who receive the notice shall, within thirty days from the date of receipt, or, if they have not received the notice, within forty-five days from the date of publication of the notice, have the right to demand that the Company repay their debts or provide appropriate security for such repayment.”
8. Article 3.15, “Share Repurchase,” previously provided: “3. In accordance with the provisions of Article 3.5; or 4. Other circumstances permitted by applicable laws and administrative regulations.”
Now amended to read: “3. To grant share awards to the Company’s employees; 4. Where a shareholder, dissenting from a resolution of the shareholders’ meeting on the merger or division of the Company, requests that the Company acquire its shares.”
9. Article 3.16, “Cancellation of Repurchased Shares,” previously stipulated:
“Upon the lawful repurchase of shares by the Company, such shares shall be cancelled within ten days from the date of repurchase, and the Company shall apply to the company registration authority for registration of the amendment to the registered capital and make a public announcement in accordance with the law and the provisions of these Articles of Association.”
Now amended to: “Article 3.16 Treatment of Repurchased Shares”
Upon the Company’s acquisition of its own shares in accordance with Article 3.15, if the acquisition falls under paragraph (1), such shares shall be cancelled within ten days from the date of acquisition; if the acquisition falls under paragraphs (2) or (4), such shares shall be transferred or cancelled within six months.
“Shares of the Company acquired in accordance with Article 3.15, Paragraph (3), shall not exceed five percent of the Company’s total issued shares; the funds used for such acquisitions shall be drawn from the Company’s after-tax profits; and the acquired shares shall be transferred to employees within one year.”
10. Add the following provision to Article 4.2, “Shareholders’ Rights”:
“If the procedures for convening shareholders’ meetings or board meetings, or the voting methods employed, violate laws, administrative regulations, or these Articles of Association, or if the content of any resolution violates these Articles of Association, shareholders shall have the right, within 60 days from the date the resolution is adopted, to petition the People’s Court for its annulment.”
If directors or senior management personnel, in the course of performing their corporate duties, violate laws, administrative regulations, or the provisions of these Articles of Association and thereby cause losses to the Company, any shareholder who, for a continuous period of more than 180 days, holds individually or collectively more than 1% of the Company’s shares shall have the right to submit a written request to the Supervisory Board to bring an action before the People’s Court. If the Supervisory Board, in the course of performing its corporate duties, violates laws, administrative regulations, or the provisions of these Articles of Association and thereby causes losses to the Company, shareholders may submit a written request to the Board of Directors to bring an action before the People’s Court.
If, upon receipt of the written request from a shareholder as provided in the preceding paragraph, the board of supervisors or the board of directors refuses to bring an action, fails to bring such action within 30 days from the date of receipt of the request, or if the circumstances are urgent and failure to bring the action immediately would result in irreparable harm to the company’s interests, the shareholder specified in the preceding paragraph shall have the right, in the company’s interest and in its own name, to file a lawsuit directly with the people’s court.
Where any other person infringes upon the lawful rights and interests of the company and causes it damage, a shareholder who, for a continuous period of more than 180 days, holds individually or jointly more than 1% of the company’s shares may bring an action in the People’s Court in accordance with the provisions of the preceding two paragraphs.
“If directors or senior management personnel violate laws, administrative regulations, or the provisions of these Articles of Association and thereby harm the interests of shareholders, shareholders may bring an action in the People’s Court.”
11. The following content is added to Article 5.2, “Annual and Extraordinary Meetings”:
“The shareholders’ meeting shall be held in person at a designated venue. If, in accordance with applicable regulations, an online voting or participation option is required, the Company shall promptly make such option available. Shareholders who participate in the shareholders’ meeting through any of the aforementioned methods shall be deemed to be present. The in-person session of the shareholders’ meeting shall not conclude before the online session. The shareholders’ meeting shall be held at the Company’s registered office.”
12. In Article 5.4, “Extraordinary General Meeting,” the procedures for the Supervisory Board and shareholders to request the convening of an extraordinary general meeting as originally stipulated are hereby amended to:
“In response to a proposal by an independent director to convene an extraordinary general meeting, the Board of Directors shall, in accordance with applicable laws, administrative regulations, and these Articles of Association, provide a written response—either approving or rejecting the convening of such meeting—within 10 days of receipt of the proposal. If the Board approves the convening of an extraordinary general meeting, it shall issue the notice of the meeting within 5 days after adopting the relevant board resolution; if the Board rejects the convening of such meeting, it shall state the reasons therefor and make a public announcement.”
With respect to a proposal by the Supervisory Board to convene an extraordinary general meeting of shareholders, the Board of Directors shall, in accordance with laws, administrative regulations, and these Articles of Association, provide written feedback within ten days of receipt of the proposal indicating whether it agrees or disagrees with convening such a meeting. If the Board of Directors agrees to convene the extraordinary general meeting, it shall issue a notice of the meeting within five days after adopting the relevant board resolution; any amendments to the original proposal contained in the notice must be approved by the Supervisory Board. If the Board of Directors does not agree to convene the extraordinary general meeting, or fails to provide feedback within ten days of receiving the proposal, such failure shall be deemed as the Board’s inability or refusal to perform its duty to convene the general meeting, in which case the Supervisory Board may convene and preside over the meeting on its own.
With respect to a proposal by a shareholder or shareholders who, individually or collectively, hold more than 10% of the Company’s shares to convene an extraordinary general meeting, the Board of Directors shall, in accordance with laws, administrative regulations, and these Articles of Association, provide a written response—either approving or rejecting the convening of such an extraordinary general meeting—within ten days of receipt of the request. If the Board approves the convening of an extraordinary general meeting, it shall issue a notice of the meeting within five days after adopting the relevant board resolution; any amendments to the original request contained in such notice shall be subject to the consent of the relevant shareholders. If the Board rejects the convening of an extraordinary general meeting, or fails to provide a response within ten days of receipt of the request, the shareholder or shareholders who, individually or collectively, hold more than 10% of the Company’s shares shall have the right to propose to the Supervisory Committee that an extraordinary general meeting be convened, and shall submit such a request in writing to the Supervisory Committee. If the Supervisory Committee approves the convening of an extraordinary general meeting, it shall issue a notice of the meeting within five days of receipt of the request; any amendments to the original proposal contained in such notice shall be subject to the consent of the relevant shareholders. If the Supervisory Committee fails to issue the notice of the general meeting within the prescribed time limit, it shall be deemed to have declined to convene and preside over the general meeting, in which case shareholders who, individually or collectively, hold more than 10% of the Company’s shares for a continuous period of at least ninety days may convene and preside over the meeting on their own.
Where the board of supervisors or the shareholders decide to convene a general meeting of shareholders on their own, they shall notify the board of directors in writing and simultaneously file a record with the local branch of the China Securities Regulatory Commission and the stock exchange at the company’s place of registration. Prior to the announcement of the resolution of the general meeting, the aggregate shareholding percentage of the convening shareholders shall not be less than 10%. Upon issuing the notice of the general meeting and the announcement of its resolution, the convening shareholders shall submit the relevant supporting documents to the local branch of the China Securities Regulatory Commission and the stock exchange at the company’s place of registration.
“The Board of Directors and the Company Secretary shall cooperate with any general meeting convened by the Supervisory Board or by shareholders on their own initiative. The Board of Directors shall provide the register of shareholders as of the record date. The expenses necessary for such a general meeting convened by the Supervisory Board or by shareholders on their own initiative shall be borne by the Company.”
13. Article 5.5, “Powers of the General Meeting of Shareholders,” previously provided: “14. To deliberate proposals submitted by shareholders representing more than five percent of the total number of outstanding voting shares of the Company;”
“14. To deliberate proposals submitted by shareholders holding more than three percent of the company’s outstanding voting shares;”
“In addition, the following items are added: ‘15. To review and approve matters relating to guarantees as stipulated in Article 1.8 of these Articles of Association; 16. To review matters concerning the Company’s acquisition or disposal of material assets within one year that exceed 30% of the Company’s total audited assets as of the most recent period; 17. To review and approve any changes in the intended use of funds raised; 18. To review and approve the equity incentive plan.’”
14. Article 5.6, “Convening of the General Meeting of Shareholders,” originally provided: “The General Meeting of Shareholders shall be convened by the Board of Directors. The Board of Directors shall notify the company’s shareholders at least thirty days prior to the holding of the meeting.”
     If, for special reasons, the company must postpone the convening of the shareholders’ meeting, it shall issue a notice of postponement at least five business days prior to the originally scheduled date of the meeting.  
It is now amended to read: “When convening an annual general meeting of shareholders, the convener shall notify each shareholder twenty days prior to the meeting; when convening an extraordinary general meeting of shareholders, the convener shall notify each shareholder fifteen days prior to the meeting.”
     If, for special reasons, the company must postpone the convening of the shareholders’ meeting, it shall issue a notice of postponement at least two business days prior to the originally scheduled date of the meeting.  
15. Article 5.7, “Presiding over the Shareholders’ Meeting,” is amended to read as follows: “The shareholders’ meeting shall be presided over by the Chairman of the Board. If the Chairman is unable or unwilling to perform his duties, the Vice Chairman shall preside; if the Vice Chairman is unable or unwilling to perform his duties, a director nominated by a majority of the directors shall preside. For shareholders’ meetings convened by the Supervisory Committee, the meeting shall be presided over by the Chairperson of the Supervisory Committee. If the Chairperson of the Supervisory Committee is unable or unwilling to perform his duties, a supervisor nominated by a majority of the supervisors shall preside. For shareholders’ meetings convened by the shareholders themselves, a representative nominated by the convener shall preside. During the holding of a shareholders’ meeting, if the chairperson violates the rules of procedure in such a way that the meeting cannot continue, the meeting may, with the consent of a majority of the voting shareholders present at the meeting, elect a person to serve as the chairperson and resume the meeting.”
16. Add the following provision to Article 5.12, “Voting Procedures”:
“The shares of the Company held by the Company shall carry no voting rights and shall not be entitled to profit distributions.”
“The same voting right may be exercised only by one of the on-site or online voting methods. In the event of duplicate votes cast for the same voting right, the result of the first vote shall prevail.”
17. Article 5.13, “Election of Directors and Supervisors,” previously provided: “Shareholders holding more than ten percent of the company’s total voting shares shall have the right to submit a list of candidates for directors and supervisors.”
It is now amended to read: “Shareholders holding more than three percent of the company’s total voting shares shall have the right to propose a list of candidates for directors and supervisors.”
18. Add the following provisions to Article 5.15, “Voting on Special Resolutions”: “6. Where the Company purchases or sells material assets, or provides guarantees, within a single year in an amount exceeding 30% of the Company’s total audited assets as of the most recent period; 7. Equity incentive plans.”
19. Article 5.17, “Motions Proposed by Shareholders,” previously provided: “Shareholders who, individually or collectively, hold more than five percent of the company’s total voting shares may submit motions for consideration by the General Meeting of Shareholders.”
It is now amended to read: “Shareholders who, individually or collectively, hold more than three percent of the company’s total voting shares may submit proposals for consideration by the shareholders’ meeting.”
20. In Article 6.7, “Special Meetings,” the following has been added: “6. When proposed by shareholders representing more than one-tenth of the voting rights.”
21. Article 6.12, “Board Voting,” is amended to read: “Board meetings shall adopt a one-person-one-vote voting system. Resolutions of the Board must be approved by a majority of all directors.”
“Directors who have a related-party relationship with the company concerned in connection with matters resolved at a board meeting shall not exercise voting rights on such resolutions, nor may they act as proxies for other directors to exercise voting rights. Such a board meeting may be held provided that a majority of the directors who are not related parties are present, and any resolution passed at the meeting must be approved by a majority of the independent directors. If fewer than three independent directors are present at the board meeting, the matter shall be submitted to the shareholders’ meeting for consideration.”
22. Article 7.4, “Powers and Functions of the Supervisory Board,” is amended to read:
“1. Shall review the company’s periodic reports prepared by the Board of Directors and submit written review opinions; 2. Conduct audits of the company’s financial affairs; 3. Supervise the performance of duties by directors and senior management, and propose the removal of any director or senior manager who violates laws, administrative regulations, these Articles of Association, or resolutions of the Shareholders’ Meeting; 4. When the conduct of directors or senior managers harms the interests of the company, require such persons to rectify the situation; 5. Propose the convening of an extraordinary general meeting and, in the event that the Board of Directors fails to perform its statutory duties under the Company Law to convene and preside over the general meeting, convene and preside over the meeting itself; 6. Submit proposals to the Shareholders’ Meeting; 7. Bring lawsuits against directors and senior managers in accordance with Article 152 of the Company Law; 8. If abnormal conditions in the company’s operations are detected, may conduct investigations; 9. Such other powers as are prescribed by laws, regulations, these Articles of Association, or delegated by the Shareholders’ Meeting.”
23. Article 7.8, “Resolutions of the Supervisory Board,” previously stipulated: “A resolution of the Supervisory Board shall be adopted only if it is approved by a majority of more than two-thirds of the supervisors present and voting.”
It is now amended to read: “Resolutions of the Supervisory Board shall be adopted only upon the approval of more than half of the supervisors voting.”
24. Add the following provision to Article 8.2, “Appointment”: “Individuals who hold positions other than directorship in the entity that is the company’s controlling shareholder or actual controller shall not serve as senior management personnel of the company.”
25. Article 10.12, “Appointment of the Accounting Firm,” previously provided: “If a vacancy arises in the position of the accounting firm, the Board of Directors may, prior to the convening of the General Meeting of Shareholders, appoint an accounting firm to fill such vacancy; however, such appointment must be subsequently ratified at the General Meeting of Shareholders.”
It is now amended to read: “The Board of Directors shall not appoint an accounting firm prior to a decision by the Shareholders’ Meeting.”
26. Article 11.2, “Distribution of After-Tax Profits,” previously provided: “3. Appropriation of 5% to 10% for the statutory public welfare fund;”
It is hereby deleted.
27. Article 12.2, “Corporate Mergers,” is amended to read as follows: “The Company shall, within ten days from the date on which the resolution for merger is adopted, notify its creditors and, within thirty days, publish a public announcement in the newspaper specified in Chapter XIV of these Articles of Association. Creditors who receive the notice shall, within thirty days from the date of receipt, or, if they have not received the notice, within forty-five days from the date of the public announcement, be entitled to demand that the Company repay their debts or provide appropriate security.”
28. Article 12.3, “Corporate Split,” is amended to read as follows: “The Company shall, within ten days from the date on which the resolution for the corporate split is adopted, notify its creditors and, within thirty days, publish a public announcement in the newspaper specified in Chapter 14 of these Articles of Association. Creditors who receive the notice shall, within thirty days from the date of receipt, or, if they have not received the notice, within forty-five days from the date of the public announcement, be entitled to demand that the Company repay their debts or provide appropriate security.”
29. Article 13.4, “Notice of Liquidation and Filing of Claims,” is amended to read as follows: “Upon the establishment of the company’s liquidation committee, it shall notify creditors within ten days and, in accordance with the provisions of Chapter 14 of these Articles of Association, publish a public notice within sixty days. Creditors shall file their claims with the liquidation committee within thirty days from the date of receipt of the notice; for those who have not received the notice, the deadline shall be forty-five days from the date of publication of the notice.”
30. As the share structure reform of the Company has been completed, the relevant provisions in the Articles of Association regarding separate voting by public shareholders are no longer applicable and are hereby deleted.
     Please review the above report.
 

May 30, 2006