Nanjing Panda Electronics Company Limited — Proxy Solicitation & Information Statement 2006

Nov 16, 2006

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南京熊 貓 電子股份有限公司 NANJING PANDA ELECTRONICS COMPANY LIMITED

(a joint stock limited company incorporated in the People’s Republic of China)

(Stock Code: 0553)

Proxy Form for Attendance to the 2nd Extraordinary General Meeting in 2006

No. of shares authorised by me[(1)] :

I/We[(2)] , of , being a member of Nanjing Panda Electronics Company Limited (the “Company”) and the holder(s) of A Shares / H Shares[(3)] , hereby appoint the Chairman of the meeting, or of (4) as my proxy to attend

and vote at the 2nd Extraordinary General Meeting for 2006 to be held at the Conference Room, Workers' Union, 301 Zhong Shan Road East, Nanjing, the People's Republic of China on 31st December 2006, Sunday, at 9:00 a.m. The proxy/proxies are authorized to vote on the resolutions according to the following instructions. In the absence of instructions, the proxy/proxies shall vote for or against the resolutions at their discretion.

their discretion.
Resolutions	For(5)	Against(5)	Abandonment(5)
1. To consider and approve by ordinary resolution the Agreement to use the Assets for discharge of the Debt (以資抵債協議) (the “Agreement”) entered into between the Company and Panda Electronic Group Limited (as defined and described in the announcement dated 15th November 2006 concerning transfer of Assets by Panda Electronic Group Limited to the Company for the Repayment of the Debt); and to authorize the directors of the Company to take all steps necessary or expedient in their opinion to implement and/or to give effect to the Agreement;
2. To consider and approve by special resolution the amendment of the Articles of Association
(1) That a new Article 6 be inserted immediately after the original Article 5 and shall be read as follows: “Article 6 The Company’s entire assets shall be divided into equal shares. Each shareholder’s liability shall be limited to the number of the Company’s share(s) he has subscribed. The Company’s liability shall be limited to the Company’s entire assets.”
(2) That a paragraph be inserted as the 3rd paragraph of the original Article 9 and shall be read as follows: “Other Senior Management Staff hereinafter referred to in the Articles of Associations means Deputy General Manager, Chief Accountant and Secretary to the Board of Directors of the Company.”
(3) That a new Article 25 be inserted immediately after the original Article 23 and shall be read as follows: “Article 25 The Share Segregation Reform Proposal of the Company was approved at the Relevant Shareholders’ Meeting on 28 July 2006 and was approved and endorsed by Ministry of Commerce of the State Council. The shareholding of the Company is as follows:

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There are a total of 655,015,000 ordinary shares, of which 334,715,000 circulating shares are held by Nanjing Panda Electronic Company Limited, representing 51.10% of the total share capital; 78,300,000 shares are held by public shareholders, representing 11.95% of the total share capital; 242,000,000 shares are held by overseas listed foreign shareholders, representing 36.95% of the total share capital.”
(4) The 2nd paragraph of the original Article 25 be altered and hence shall be read as follows: “(1) Issuing new shares to the public; (2) Offering new shares to designated investors; (3) Placement of new shares to existing shareholders; (4) Bonus issues of new shares to the existing shareholders; (5) Other manners as permitted by the laws and administrative regulations or that approved by China Securities Regulatory Commission.”
(5) Three (3) Articles be inserted after the original Article 26 as the new Article 29, Article 30 and Article 31 and shall be read as follows: “Article 29 The Company does not accept the shares of the Company as the subject matter (標的) of a pledge. Article 30 The Company’s shares held by the promoters shall not be transferred within one (1) year of the incorporation of the Company. The shares issued by the Company prior to the Company’s public offering of its shares shall not be transferred within one (1) year from the date the Company gets listed and its shares being traded in a stock exchange. The directors, supervisors and senior management staff of the Company shall declare to the Company the number of the Company’s shares held by them and changes, if any, of their respective shareholdings. During their terms of office, each of them shall not, within a year, transfer more than 25% of the total number of the Company’s shares each is holding; the Company’s shares held by them shall not be transferred within one (1) year from the date the Company gets listed and its shares being traded in a stock exchange. Within six (6) months of the abovementioned persons leaving office, he shall not transfer the Company’s shares held by him. Article 31 Where a director, supervisor, a member of the senior management staff of the Company or any shareholder, other than a overseas listed foreign shareholder, holding more than 5% of the Company’s shares sells his shares of the Company within 6 months after his purchase of such shares, or re-purchases the shares within 6 months after his selling such shares, the proceeds generated therefrom shall become that of the Company. The board of directors of the Company shall have the proceeds back. However, where a securities company holds more than 5% of the Company’s shares as a result of underwriting, the sale of the residue of the Company’s shares shall not be subject to this 6-month restriction.

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Where the board of directors of the Company fails to act in accordance with the provisions set out in the preceding paragraph, the shareholders have the right to request the board of directors to act within 30 days in accordance with that as set out in the preceding paragraph. Where the board of directors of the Company fails to act in accordance with such provisions within the aforesaid period of time, the shareholders have the right to, in the interests of the Company, directly file a lawsuit with the People’s Court in their own names. Where the board of directors of the Company fails to act according to the provisions set out in the preceding paragraph, the directors in charge shall bear several and joint liabilities in accordance with the law.”
(6) The original Article 29 be altered and hence shall be read as follows: “Article 34 In the following circumstances, the Company may repurchase its issued shares in accordance with the laws, administrative regulations, departmental codes and procedures provided by the Articles of Association after such repurchase is approved by the relevant principal authorities of the State: (1) Cancellation of shares for the purpose of reduction of capital of the Company; (2) Merger with other companies which hold shares of the Company; (3) Award of shares of the Company to employees; (4) Shareholders raising objection to a resolution passed in the General Meeting on merger with other companies or division of the Company and hence requesting the Company to repurchase their shares; or (5) Other circumstances permitted by the laws and administrative regulations.”
(7) The following be inserted at the end of the original Article 30 and hence shall be read as follows: “(4) in other manners as recognized by China Securities Regulatory Commission.”
(8) The original Article 32 shall become Article 37 and be altered and hence shall be read as follows: “Article 37 If the Company repurchases its shares pursuant to Article 34 (1) - (3), a resolution thereof shall be passed in the General Meeting. Where the Company repurchases its shares pursuant to Article 34 (1), the repurchased shares shall be cancelled within 10 days from the date of repurchase; where shares are repurchased pursuant to Article 34 (2) and/or (4), the repurchased shares shall be transferred or cancelled within 6 months from the date of repurchase. Shares repurchased by the Company pursuant to Article 34 (3) shall not exceed 5% of the total issued shares of the Company. The fund used for the repurchase of shares shall be paid from the after-tax profits of the Company. The shares purchased by the Company shall be transferred to the employees within 1year.”

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(9) Clauses (2), (4), (5)(v) and (7) of the original Article 51 shall be altered and hence read as follows: “(2) To request, convene, preside, attend or appoint a proxy to attend shareholders’ meetings and to exercise his right to vote in accordance with the laws; (4) To transfer, give or pledge shares in accordance with the laws, administrative regulations and the Articles of Association; (5)(v) Minutes of shareholders’ meetings, resolutions of Board Meetings, Supervisory Committee Meetings, financial and auditors’ reports and stud of debentures of the Company. (7) For a shareholder who raises objection to a resolution passed in the General Meeting on merger with other companies or division of the Company, the right to request the Company to repurchase the shares held by him;”
(10) Four articles be inserted after the original Article 51 as the new Article 57, Article 58, Article 59 and Article 60 and shall be read as follows: “Article 57 A shareholder who proposes to inspect relevant information mentioned in the previous Article 55 or to get materials shall produce written supporting documents to prove to the Company the nature and number of the Company’s shares held by him. The Company shall provide the information as requested by the shareholder upon verifying his capacity as a shareholder. Article 58 In the event the content of a resolution passes in a General Meeting or a board meeting is in violation of any law or administrative regulation, a shareholder shall have the right to request the People’s Court to invalidate such resolution. In the event the procedures for calling for a General Meeting or a board meeting or the way of voting is in violation of any law, or administrative regulation or the resolution itself is in violation of the Articles of Association, or the content of a resolution passed is in violation of the Articles of Association, a shareholder may, within 60 days from the date the resolution being passed, request the People’s Court to revoke the resolution.” Article 59 Where any director or member of the senior management staff violates any law, administrative regulation, or the Articles of Association in the course of performing his duties and thereby causing any loss to the Company, a shareholder who individually or jointly holds 1% or more of the Company’s shares for a period of consecutive 180 days or more may request the supervisory committee in writing to initiate a lawsuit in the People’s Court. Where the supervisory committee violates any law, administrative regulation, or the Articles of Association in the course of performing its duties thereby causing any loss to the Company, a shareholder may request the board of directors in writing to initiate a lawsuit in the People’s Court.

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If the supervisory committee or the board of directors refuses to lodge a lawsuit after it receives an aforementioned written request in the preceding paragraph, or if it fails to initiate a lawsuit within 30 days after it receives the request, or if, it is in an emergency that the failure to lodge a lawsuit immediately may cause irretrievable damage to the interests of the Company, the aforementioned shareholder in the preceding paragraph may, in the interest of the Company, directly lodge a lawsuit in the People’s Court in his own name. If the legitimate rights and interests of the Company are impaired and any losses are caused to the Company, the aforementioned shareholder in the first paragraph of this Article may initiate a lawsuit in the People’s Court in accordance with the provisions of the 1st and 2nd paragraphs of this Article 58. Article 60 If any director or member of the senior manager staff does any act jeopardizing the shareholders’ interests by violating any law, administrative regulation, or the Articles of Association, a shareholder may lodge a lawsuit in the People’s Court.”
(11) That Clauses (3) and (4) be inserted after Clause (2) of the original Article 52 and shall be read as follows: “(3) Save as stipulated by the laws or regulations, no share refund is allowed; (4) There shall be no abuse of a shareholder’s rights to jeopardize the Company’s or other shareholder’s interests; there shall be no abuse of the Company’s status as an independent legal person or any abuse of the limited liability of a shareholder to jeopardize the interests of the Company’s creditors.”
(12) One (1) article be inserted after the original Article 52 as the new Article 62 and shall be read as follows: “Article 62 Where a shareholder holding shares of 5% or more carrying voting rights pledges his shares, he shall report to the Company in writing on the date on which the shares are pledged.”
(13) One paragraph be inserted to the original Article 53 and shall be read as the 1st paragraph as follows: “The controlling shareholders and the de facto ultimate controller of the Company shall not jeopardize the interest of the Company by way of their connected relationship with the Company. Anyone in breach of this provision thereby causing loss to the Company shall compensate the Company.”
(14) Clauses (14), (15), (16) and (17) be inserted after Clause (13) of the original Article 58 and shall be read as follows: “(14) Review and approve the guarantee as that required by Article 68; (15) Review matters in respect of acquisitions and/or disposals of substantial assets the value of which in a year is in excess of 30% of the latest audited gross assets of the Company; (16) Review and approve the change of use of the capital fund raised; (17) Review the share equity incentive plan;”

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(15) One (1) article be inserted after the original Article 58 and become the new Article 69 and shall be read as follows: “Article 69 The following external guarantees shall be subject to review and approval in the General Meetings: (1) Any guarantee provided after the total amount of external guarantees provided by the Company and its controlling subsidiaries reaching or exceeding 50% of the latest audited net assets; (2) Any guarantee provided after the total amount of external guarantee provided by the Company reaching or exceeding 30% of the latest audited gross assets; (3) Guarantees provided to an institute with gearing ratio exceeding 70%; (4) A single guarantee to an amount exceeding 10% of the latest audited net assets; (5) A guarantee provided to shareholders, de facto ultimate controller and its connected parties.”
(16) Six (6) Articles be inserted after the original Article 60 and become the new Article 72, Article 73, Article 74, Article 75, Article 76 and Article 77 and shall be read as follows: “Article 72 An independent director has the right to propose to the Board of Directors to convene an Extraordinary General Meeting. The Board of Directors shall, in accordance with the laws, administrative rules and provisions of the Articles of Association, give its reply in writing stating whether it agrees or disagrees to convene the Extraordinary General Meeting within 10 days after receipt from the independent director of the said proposal. In the event that the Board of Directors gives its consent to convene the Extraordinary General Meeting, a notice of Extraordinary General Meeting shall be issued within 5 days after the Board of Directors passed the relevant resolution. In the event that the Board of Directors does not give its consent to convene the Extraordinary General Meeting, it shall issue an announcement to state the reasons. Article 73 The Supervisory Committee has the right to propose to the Board of Directors to convene an Extraordinary General Meeting and shall propose the same to the Board of Directors in writing. The Board of Directors shall give its reply in writing stating whether it agrees or disagrees to convene the Extraordinary General Meeting within 10 days after receipt of the said proposal in accordance with the laws, administrative rules and provisions in the Articles of Association. In the event that the Board of Directors gives its consent to convene the Extraordinary General Meeting, a notice of General Meeting shall be issued within 5 days after the Board of Directors passed the relevant proposal. Prior approval from the Supervisory Committee is required for any change to the original proposal.

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In the event that the Board of Directors does not give its consent to convene the Extraordinary General Meeting, or fails to give any reply within 10 days after the receipt of the said proposal, the Board of Directors shall be deemed to be unable to perform or failing to perform its function of convening a General Meeting. The Supervisory Committee itself may convene and preside over the General Meeting. Article 74 Any shareholder holding shares of 10% or more severally or jointly has the right to propose to the Board of Directors in writing to convene an Extraordinary General Meeting. The Board of Directors shall give its reply in writing stating whether it agrees or disagrees to convene the Extraordinary General Meeting within 10 days after receipt of the said proposal in accordance with the laws, administrative rules and provisions in the Articles of Association. In the event that the Board of Directors gives its consent to convene the Extraordinary General Meeting, a notice of General Meeting shall be issued within 5 days after the Board of Directors passed the relevant resolution. Prior consent from the relevant shareholder is required for any change to the original request. In the event that the Board of Directors does not give its consent to convene the Extraordinary General Meeting, or fails to give any feedback within 10 days after the receipt of the said proposal, a shareholder who severally or jointly holding the Company’s shares of 10% or more has the right to propose to the Supervisory Committee in writing of convening an Extraordinary General Meeting. In the event that the Supervisory Committee gives its consent to convene the Extraordinary General Meeting, a notice of Extraordinary General Meeting shall be issued within 5 days after the receipt of said proposal. Prior consent from the relevant shareholder is required for any change, as appeared in the notice, to the original proposal. In the event that the Supervisory Committee fails to issue the notice of Extraordinary General Meeting within the prescribed period, the Supervisory Committee shall be deemed not to convene or preside over the General Meeting. A shareholder who severally or jointly holds the Company’s shares of 10% or more in a period of consecutive 90 days may convene and preside over the meeting on his own. Article 75 In the event that the Supervisory Committee or the aforesaid shareholder decides to convene the General Meeting on its/ his own, the Supervisory Committee or the aforesaid shareholder shall notify the Board of Directors in writing and file with relevant authorities of China Securities Regulatory Commission and the stock exchange where the Company is located. The shareholding in the Company of a shareholder who convenes the General Meeting shall not be less than 10% prior to the announcement of resolutions of the General Meeting.

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The shareholder who convenes the General Meeting shall submit relevant supporting documents to relevant authorities of CSRC and the stock exchange where the Company is located upon the issuing of notice of the General Meeting and announcement of resolutions of the General Meeting. Article 76 The Board of Directors and the Secretary to the Board of Directors will co-operate with the Supervisory Committee or the shareholder who convene the General Meeting on its/his own. The Board of Directors shall provide the register of members as at the date of the share equity registration. Article 77 Any expenses necessary for and incurred from the General Meeting convened by the Supervisory Committee or the aforesaid shareholder shall be borne by the Company.”
(17) The original Article 63 be altered and hence shall be read as follows: “Article 80 When the Company convenes a General Meeting, the board of directors, the Supervisory Committee and shareholders who severally or jointly hold 3% or more of the shares of the Company have the right to make new proposals to the Company in writing. Where such proposals containing matters within the functions to be performed in a General Meeting, the Company shall put such matters in the agenda of the General Meeting.”
(18) One (1) Article be inserted after the original Article 63 and become the new Article 81 and shall be read as follows: “Article 81 After the notice of General Meeting is issued, the General Meeting shall not be postponed or cancelled without a proper reason and the proposals stated in the notice of General Meeting shall not be cancelled. In the event of any postponement or cancellation, the convener shall issue an announcement and state the reasons therein at least 2 working days before the original date of the General Meeting.”
(19) The original Article 68 be altered and become the new Article 86 and shall be read as follows: “Article 86 On the basis of an assurance that the General Meeting will be convened in a legal and valid way, the Company may conduct the General Meeting by various means and channels, inter alia, the provision of online voting platform with up-to-date information technique to facilitate the shareholders participating in the General Meeting. Where the General Meeting is to be conducted online or by way of other means, the time and procedure of such online voting or other voting methods shall be clearly stated in the notice of General Meeting. The online voting or other voting methods of the General Meeting shall commence no earlier than 3:00 p.m. of a day prior to the date of the General Meeting but no later than 9:30 a.m. on the date of the General Meeting and it shall terminate no earlier than 3:00 p.m. on the date of conclusion of the General Meeting.”
(20) The original Article 69 be deleted.

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(21) Two (2) paragraphs be inserted to the original Article 77 and shall become the 2nd and 3rd paragraphs and shall be read as follows: “The Company’s shares held by the Company do not carry any voting rights. Such shares shall not be included in the total number of shares vested with voting rights that represent the shareholders attending of the General Meeting. The Board of Directors, independent directors and shareholders satisfying conditions of relevant stipulations may gather Shareholders’ voting rights.
(22) One (1) article be inserted to the original Article 77 and become a new Article 95 and shall be read as follows: “Article 95 All directors, supervisors and Secretary to the Board of Directors shall attend all General Meetings. The general manager and other senior management staff shall observe the meeting.”
(23) The original Article 83 be deleted.
(24) Three (3) Articles be inserted after the original Article 83 and become the new Article 101, Article 102 and Article 103 and shall be read as follows: “Article 101 The list of candidates of directors and supervisors shall be submitted to the General Meeting for voting in the form of proposal. In the election of directors and supervisors in the General Meeting, accumulative polling system may be adopted in accordance with the provisions in the Articles of Association or resolutions passed in the General Meeting. The accumulative polling system as mentioned in the preceding paragraph means that in the election of directors and supervisors in the General Meeting, each share bears a voting right equivalent to the number of directors or supervisors to be elected The voting rights held by the shareholders may be accumulated for casting votes. The Board of Directors shall announce to the shareholders the biographies and basic information of each candidate of directors or supervisors. Article 102 In the event a proposal is not passed or any change is made in the current General Meeting to a resolution passed in the previous general meeting, special reminders shall be made in the announcement of resolutions of the General Meeting. Article 103 In the event proposal regarding cash distribution, bonus share or capital reserve share transfer is passed in the General Meeting, the Company shall implement the specific plans within 2 months after conclusion of the General Meeting”
(25) The original Article 84(4) be altered and hence shall be read as follows: “(4) the annual budgets and statements of final accounts of the Company and the annual report of the Company;”

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(26) Clauses (5) and (6) be inserted after the original Article 85(4) and hence shall be read as follows: “(5) Substantial assets acquired or disposed of or guarantee granted for an amount exceeding 30% of the latest audited total assets of the Company within 1 year; (6) share equity incentive plan;”
(27) One (1) article be inserted after the original Article 85 and become the new Article 106 and hence shall be read as follows: “Article 106 Where matters relating to connected transactions are reviewed in the General Meeting, connected shareholders shall not cast their votes. Their shares which carry voting rights shall not be included in the total number of effective votes. Announcements on resolutions of General Meeting shall adequately disclose the votes cast by unconnected shareholders.”
(28) Three paragraphs be inserted after the first paragraph of original Article 89 and become the new 2nd, 3rd and 4th paragraphs and hence shall be read as follows: “Where a General Meeting is convened by the Supervisory Committee itself, the General Meeting shall be presided by the Chairman of the Supervisory Committee. If the Chairman of the Supervisory Committee fails to or does not perform his duty, the General Meeting shall be presided by the Deputy Chairman of the Supervisory Committee. If the Deputy Chairman of the Supervisory Committee fails to or does not perform his duty, the General Meeting shall be presided by a supervisor collectively elected by the majority of the supervisors. Where a General Meeting is convened by a shareholder, the General Meeting shall be presided by a representative elected by the convener. In the General Meeting, where the Chairman of the General Meeting breaches the rules of procedure of the General Meeting which makes it unable to carry on the General Meeting, a person may be elected as the Chairman of the General Meeting by the majority of the attending shareholders with voting rights so as to carry on the General Meeting.”
(29) One (1) Article be inserted after the original Article 92 and become the new Article 114 and hence shall be read as follows: “Article 114 The Company shall appoint a lawyer to provide legal advice in the General Meeting of the Company to the following issues and make announcement accordingly: (1) Whether the convening and procedure of holding the General Meeting are in compliance with the laws, administrative regulations and the Articles of Association; (2) Whether the qualifications of members attending the General Meeting and the convener of the General Meeting are lawful and valid; (3) Whether the voting procedure and voting results of the General Meeting are lawful and effective; (4) Provision of legal advice to other relevant issues as requested by the Company.”

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(30) One (1) paragraph be inserted after the 2nd paragraph and become the new 3rd paragraph of the original Article 103; one (1) paragraph be inserted after the 4th paragraph and become the new 6th paragraph and the original 5th paragraph be altered and hence shall be read as follows respectively: “The term of office of a director shall take effect from the date of assumption until expiry of term of office of the current board of directors. In the event no re-election takes place before the expiry of the term of office of the director, the original director shall continue to perform his duties of directorship in accordance with the laws, administrative regulations, departmental codes and provisions of the Articles of Association before a new director is elected and assumes office.” “Save as in the circumstance provided in the preceding paragraph, resignation of a director shall become effective when the resignation report is served to the Board of Directors.” “Chairman and Vice Chairman shall be elected and removed by a majority of votes of all directors. The terms of office of a Chairman and a Vice Chairman shall be one of 3 years and are eligible for re-election. A director may also take up other senior management positions, but the total number of directors who simultaneously taking up positions of general manager or other senior management position shall not exceed 1/2 of the total number of directors of the Company.”
(31) The original Article 104 (12) be altered and hence shall be read as follows: “To determine issues including external investments, acquisition and disposal of assets, pledge of assets, external guarantee, fund management on trust and connected transactions other than those having been decided in the General Meeting;”
(32) Two (2) articles be inserted after the original Article 104 and become the new Article 127 and Article 128 and hence shall be read as follows: “Article 127 The Board of Directors shall give explanations at the General Meeting on the qualified auditing opinions issued by the certified public accountants to the Company’s financial reports. Article 128 The Board of Directors shall formulate rules of procedure of its meetings to ensure that the Board of Directors have put into action the resolutions passed at the General Meeting so as to promote work efficiency and make scientific decisions.”
(33) The original Article 109 be deleted.
(34) The 2nd paragraph of the original Article 111 be altered and hence shall be read as follows: “The Vice Chairman shall assist the Chairman with his work. If the Chairman fails to or does not perform his duties, such duties shall be performed by the Vice Chairman. If the Vice Chairman fails to or does not perform his duties, the duties shall be performed by a director collectively elected by a majority of directors.”

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(35) The original Article 112 be altered and hence shall be read as follows: “Article 134 The Board of Directors shall convene at least 2 meetings each year. The meetings shall be convened by the Chairman. All directors shall be notified of the board meeting 10 days in advance. Shareholders representing voting rights of one-tenth or more, one-third or more of directors or the Supervisory Committee may propose to convene an extraordinary board meeting. The Chairman shall convene and preside the meeting within 10 days upon receipt of the proposal.”
(36) One article be inserted after the original Article 118 and become the new Article 142 and hence shall be read as follows: “Article 142 Where a director has connected relationship with an enterprise involved in an issue to be resolved in the board meeting, such director shall not exercise his voting rights on such issue nor can he exercise the voting rights as a proxy of other directors. Such board meeting may be held with attendance of a majority of the directors with no connected relationship. Resolutions resolved at such board meeting shall be passed by a majority of directors with no connected relation. Where the board meeting is attended by less than 3 directors with no connected relation, the issue shall be submitted to the General Meeting for consideration.”
(37) One article be inserted after the original Article 119 and become the new Article 144 and hence shall be read as follows: “Article 144 Any director who fails to neither attend the board meeting in person nor appoint other directors to attend the meeting as his proxy for 2 consecutive meetings, such director shall be deemed to have failed to perform his duties and the Board of Directors shall propose in the General Meeting to replace such director.”
(38) The 2nd paragraph of the original Article 133 be altered and hence shall be read as follows: “In the event the re-election of a supervisor does not take place on a timely basis upon expiry of the terms of office or a supervisor resigns during his term of office which results in the number of members of the supervisory committee falling below the statutory number, the original supervisor shall continue to perform his duty as a supervisor in accordance with the laws, administrative rules and the Articles of Association before a new supervisor is elected and assumes office.”
(39) The original Article 134 be altered and hence shall be read as follows: “Original Article 134 There shall be a Supervisory Committee comprising of at least two representatives of the employees, two independent persons and the rest being representatives of the shareholders. Employees’ representatives shall be elected and removed by the employees through election while independent persons and shareholders’ representatives shall be elected and removed in the General Meeting.”
(40) The original Article 136 be altered and hence shall be read as follows: “A Supervisory Committee meeting shall be held at least once every six months, to be convened by the Chairman of the Supervisory Committee. If the Chairman of the Supervisory Committee fails to or does not perform his duties, a supervisor collectively elected by a majority of supervisors shall convene and preside at the meeting of Supervisory Committee.”

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(41) Two (2) articles be inserted after the original Article 138 and become the new Article 164 and Article 165 and hence shall be read as follows: “Article 164 The Supervisory Committee shall prepare a minute to record decisions made on the issues discussed at the meeting. Such minute shall be signed by supervisors attending the meeting. Supervisors shall have the right to request to make certain remarks in the minutes on what he said in the meeting. Article 165 Supervisors shall ensure that any information disclosed by the Company is true, accurate and complete.”
(42) The original Article 145 be altered and hence shall be read as follows: “Article 172 Directors, supervisors, general manager and other senior management staff of the Company, in the course of exercising their rights and performing their duties, shall act carefully, diligently and skillfully with reference to a reasonable and prudent man who would have behaved under similar circumstances, including but not limited to the following acts: (1) To carefully, prudently and diligently exercise the rights given by the Company so as to ensure that the Company’s commercial acts are in compliance with the laws, administrative regulations and requirements of various economic policies of the PRC and do not go beyond the scope of business as stated in the business licence; (2) To understand the operation and management of the Company’s business on a timely basis; (3) To sign the written confirmed opinions for regular reports of the Company and to ensure that information disclosed by the Company is true, accurate and complete; (4) To provide the status reports and information to the Supervisory Committee honestly and shall not hinder the Supervisory Committee or supervisors from exercising their powers; (5) Other duties and obligations on a diligent basis as prescribed by the laws, administrative regulations, department codes and the Articles of Association.”
(43) The original Article 167 be altered and hence shall be read as follows: “Article 194 The Company shall announce four financial reports for each financial year, that is, an interim financial report to be published within 60 days at the end of the first 6 months of the financial year, an annual financial report to be published within 120 days at the end of the financial year, and 2 quarterly financial reports to be published within 30 days from the end of the first 3 months and first 9 months of the financial year respectively.”

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• (44) A paragraph be inserted after the 2nd paragraph of the original Article 170 and become the 3rd paragraph and hence shall be read as follows: “ Continued withdrawal is not necessary where the amount of the statutory reserves of the Company has accumulated to over 50% of the registered capital of the Company.”

• (45) A paragraph be inserted after the 1st paragraph of the original Article 172 and shall become the 2nd paragraph and hence shall be read as follows: “Capital reserve shall not be used to cover the loss of the Company.”

• (46) A paragraph be inserted after the 1st paragraph of the original Article 172 and shall become the 2nd paragraph and hence the said 2nd paragraph shall be read as follows: “Company shares held by the Company shall not be included for profits appropriation.”

• (47) Save for the abovementioned amendments, other articles in the original Articles of Association and other clauses in the articles shall be sequentially renumbered.

Date:

, 2006 Signature:

Notes:

1. All shareholders of the Company whose names appear in the Company’s register of members at the close of business on Friday, 1st December 2006 are entitled to attend the 2nd Extraordinary General Meeting in 2006 (the “EGM”) of the Company. Holders of A Shares of the Company whose names appear in register of member in the Shanghai branch of China Securities Depository and Clearing Corporation Limited at the close of business on 1st December 2006 can bring along with their identity cards or shareholder account cards to attend the EGM. Holders of A Shares or their proxies (if any) shall bring their identity cards, shareholder account cards and the proxy forms (if any) to complete the procedures for attending the EGM at the secretarial office of the Board of the Company at 301 Zhong Shan Road East, Nanjing at 9:00 a.m. to 4:00 p.m. from 1st December 2006 to 10th December 2006. Overseas shareholders can register by post or by fax.

2. All holders of H Shares of the Company should pay attention that the register of members of the Company will be closed from 1st December 2006 to 30th December 2006 (both days inclusive), during which period no transfer of H Shares can be registered. Holders of H Shares whose names appear in the Company’s register of member at the close of business on 1st December 2006, or their representatives or proxies are entitled to attend the EGM with their identity certificates or passports. If a shareholder appoints a proxy to attend the EGM on his behalf, his proxy must bring along with the proxy form.

3. Shareholder who has the right to attend and vote at the EGM is entitled to appoint one proxy or several proxies, whether a member of the Company or not, to attend and vote at the EGM.

4. If more than one proxy are appointed, the rights of voting may only be exercised when a poll is taken.

5. The instrument appointing a proxy must be in writing under the hand of the appointer or his attorney duly authorized in writing. In the case of a corporation, the proxy form must be under its common seal or under the hand of its director or duly authorized attorney. If the proxy form is signed by an agent on behalf of an appointer, the proxy form or other authority must be notarially certified. The proxy form together with the notarially certified power of attorney or other authority must be delivered to the office of the Company 24 hours before the time appointed for the holding of the EGM.

6. Shareholders who intend to attend the EGM should send a reply in writing to the office of the Company in person or by post or by fax before 11st December 2006. The written reply shall not preclude the shareholders to attend the EGM.

7. The EGM is expected to last for a half day. Shareholders and their proxies attending the EGM are responsible for their own transportation and accommodation expenses.

8. As for details of the Agreement (《以資抵債協議書》), please refer to the announcements published in China Securities Journal, Shanghai Securities News, Ta Kung Pao and The Standard in Hong Kong on 16th November 2006.

9. The Company’s office and correspondence address:

Postal code: 210002 Telephone: 8625-8480 1144 Fax: 8625-8482 0729

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