The regular resources cash balance at the end of 2004 was 329 million, consisting of 318 million in convertible currencies and 11 million in non convertible currencies.

Table 5 Non convertible currencies held at 31 December 2004

The securities firm should sign entrustment contracts with securities brokers who accept such entrustment, issue securities broker certificate, define authorized scope of securities broker and supervise working behavior of securities broker.

Without securities business license, the securities firm and its domestic branch shall not run securities business.

The securities broker should have securities working qualification.

The equivalent of 1,491,424 ( 1,099,180) is held in currencies classified as non convertible, as follows

Securities brokers should work within authorized scope of the securities firm and show securities broker certificates to customer.

Article 56 Where a securities firm carries out securities lending and borrowing but does not have sufficient funds or securities, it can borrow from the securities financial companies.

3 Trade securities or maneuver securities market with insider information

(5) Securities service agencies provided services for a securities firm.

The financial plan for 2004 recommended a minimum regular resources convertible cash balance of 79 million.

Article 41 A securities firm engaged in securities business for its own account is limited to trading of legally issued stocks, bonds, warrants, securities investment funds or other securities recognized by the securities regulatory agency under the State Council.

Securities brokers shall not handle securities subscription or trading for customers.

Article 20 If a securities firm has two or more kinds of securities brokerage business, securities assets management business, financing with capital and securities, securities underwriting, securities sponsors, its board should set up remuneration and nomination committee, auditing committee and risk control committee to perform rights prescribed in company regulation.

1 Illegally buying securities issued by shareholder of the securities firm or other issuer with major relationship to securities firm against regulation

1 Customers purchase of securities, settlement of securities trading or customers withdrawal

Article 32 A securities firm should establish information inquiring system to ensure customers inquiring entrustment record, trading record, securities and balance during business hours of the securities firm, as well as other information such as name, practice license of the business operator and securities broker of the securities firm, certificate number of securities broker, etc.

Article 26 If a securities firm and its domestic branch are engaged in securities business prescribed in Article 125 of the Securities Law, they should follow the Securities Law and provisions of this Regulation.

Article 38 If a securities firm is engaged in securities brokerage business, it can entrust staff outside of the securities firm as securities broker, engaging in attracting and providing service for customers as agent.

Article 48 Securities lending and borrowing referred to in this article means that in the securities trading at the stock exchange or other securities trading places that have been approved by the State Council, securities firms lend capital or securities to customers for them to buy or sell securities based on the corresponding collaterals provided by the customers.

Securities account opened by the securities firm for securities assets management customer should be submitted to stock exchange for filing within 3 trading days.

That the exported goods are furnished against foreign currency convertible within three months of the date of shipment.

Article 44 If a securities firm is engaged in self run securities business, its risk controlling indicators such as ratio of total securities value and company net capital, ratio of value of one type of securities and net corporate capital, and ratio of quantity of one type of securities and total issuing quantity of this type of securities should comply with prescription of the securities regulatory agency under the State Council.

Article 50 A securities firm that carries out securities lending and borrowing business shall sign a securities lending and borrowing contract with the customer, and shall open a customer securities guarantee account with the securities registration and settlement organs, and a customer funds guarantee account with the designated commercial bank in the name of the securities firm in accordance with the provisions of the securities regulatory agency under the State Council.

Article 28 When the securities firm is entrusted by securities registration settlement agency to open securities account for customers, it should audit name and identity authenticity declared by customers according to management rule of securities account.

The securities firm shall not provide customer s capital account and securities account to others.

If the securities firm closes all securities business, disbands, goes bankruptcy or revokes domestic branch, it should publicize in newspaper appointed by the securities regulatory agency under the State Council and submit securities business license to the securities regulatory agency under the State Council for deregistration based on regulation.

(ii) Securities Act

Article 37 If a securities firm is engaged in securities brokerage business, it should audit whether capital and securities in customer s account are sufficient or not.

Table 5 shows details of the United States dollar equivalent of non convertible currencies held at 31 December 2004.

(3) Where a securities firm violates provisions to entrust others to buy and sell securities

Article 61 The securities firm shall not provide financing or warranty to other people using the assets of the securities brokerage customers or securities assets management customers.

After a securities firm acquiring business license for the securities or domestic branch issued or changed by the corporate registration agency, it should apply to the securities regulatory agency under the State Council for issuing or changing license for securities business.

Article 5 By obeying national regulations, securities firms can issue, trade and sell securities financial products.

Securities brokers can only accept entrustment of one securities firm for customer attracting and service activities.

The embedded derivative instruments and the principal contract jointly form into a mixed instrument, e.g., the convertible company bonds, etc.

China Securities Regulatory Commission

a transaction involving securities

Article 45 A securities firm can be engaged in securities assets management business by accepting customer s entrustment or using customer s assets according to the Securities Law and this Regulation.

Article 30 Before the securities firm signs securities dealing entrustment, securities assets management, capital and securities financing contracts with customers, it should appoint specialist to introduce business rule and contract content to customers and let customer sign and confirm on risk disclosure letter.

Article 46 A securities firm engaged in securities assets management business shall not have the following act

3 Having professionals, technical conditions, funds and securities required for carrying out securities lending and borrowing business

A securities firm mentioned in item 1 of this article refers to an unincorporated entity with business operation under the securities firm such as branch company and securities business outlet.

Article 29 The securities firm that is engaged in securities assets management business, capital and securities financing business, securities related finance product sales should get knowledge of identity, property, income status, securities investment experience and risk preference of customers according to prescribed procedure, and record as well as keep the information in written or electronic form.

The deposit given by the customer, all the securities that have been purchased through securities lending and borrowing, and all the funds from the sales of securities are collaterals to the securities firm, and shall be deposit to the customer securities guarantee account or the customer funds guarantee account and credited to the customer s credit granting account.