ACCOUNTING REGULATIONS FOR JOINT VENTURES USING CHINESE AND FOREIGN INVESTMENT

LIABILITIES

   Article 1. The present Regulations are formulated to strengthen the accounting work of joint ventures using Chinese and foreign
investment, in accordance with the provisions laid down in the “Law of the People’s Republic of China on Joint
Ventures Using Chinese and Foreign Investment”, the “Income Tax Law of the People’s Republic of China Concerning Joint
Ventures Using Chinese and Foreign Investment” and other relevant laws and regulations.

   Article 2. These Regulations are applicable to all joint ventures using Chinese and foreign investment (hereinafter referred to
as “joint ventures”) established within the territory of the People’s Republic of China.

   Article 3. The public finance departments or bureaus of provinces, autonomous regions and municipalities directly under the Central
Government as well as the business regulatory departments of the State Council shall be permitted to make necessary supplements
to these regulations on the basis of complying with these regulations and in the light of specific circumstances,
and submit the supplements to the Ministry of Finance for the record.

   Article 4. Joint ventures shall work out their own enterprise accounting system in accordance with these Regulations
and the supplementary provisions made by the relevant public finance department or bureau of their provinces, autonomous
regions or municipalities, or by the relevant business regulatory departments of the State Council, and in the light
of their specific circumstances and submit their own system to their enterprise regulatory departments, local
public finance department and tax authority for the record.

   Article 5. A joint venture shall set up a separate accounting office with necessary accounting staff to handle its financial and
accounting work.

   Article 6. A joint venture of large or medium size shall have a controller to assist the president and to take the
responsibility in leading its financial and accounting work. A deputy controller may also be appointed when necessary.

A joint venture of relatively large size shall have an auditor responsible for review and examination of its financial
receipts and disbursements, accounting documents, accounting books, accounting statements and other relevant
data and those of its subordinate branches.

   Article 7. The accounting office and accounting staff of a joint venture shall fulfil their duties and responsibilities with due
care, make accurate calculation, reflect faithfully the actual conditions, and supervise strictly over all economic
transactions, protect the legitimate rights and interests of all the participants of the joint venture.

   Article 8. Accounting staff who are transferred or leaving their posts shall clear their responsibility transfer procedures with
those who are assuming their positions, and shall not interrupt the accounting work.

   Article 9. The accounting work of joint ventures must comply with the laws and regulations of the People’s Republic of China.

   Article 10. The fiscal year of a joint venture shall run from 1 January to 31 December under the Gregorian calendar.

   Article 11. Joint ventures shall adopt debit and credit double entry bookkeeping.

   Article 12. The accounting documents, accounting books, accounting statements and the other accounting records of a joint venture
shall be prepared accurately and promptly according to the transactions actually taken place, with all required routines
done and contents complete.

   Article 13. All the accounting documents, accounting books and accounting statements prepared by a joint venture must
be written in Chinese. A foreign language mutually agreed by the participants of the joint venture may be used concurrently.

   Article 14. In principle, a joint venture shall adopt Renminbi as its bookkeeping base currency. However, a foreign currency may be used
as the bookkeeping base currency upon mutual agreement of the participants of a joint venture.

If actual receipts or disbursements of cash, bank deposits, other cash holdings, claims debts, income and expenses,
etc. are made in currencies other than the bookkeeping base currency, a record shall also be made in the currencies
of actual receipts or disbursements.

   Article 15. Joint ventures shall adopt the accrual basis in their accounting. All revenues realised and expenses incurred during
the current period shall be recognised in the current period, regardless of whether receipts or disbursements
are made. The revenues or expenses not attributable to the current period shall not be recognised as current
revenue or expenses, even if they are currently received or disbursed.

   Article 16. The revenues and expenses of a joint venture must be matched in its accounting. All the revenues and relevant costs and
expenses of a period shall be recognised in the period and shall not be dislocated, advanced or deferred.

   Article 17. All the assets of a joint venture shall be stated at their original costs and the recorded amounts are generally not
adjusted whether there is any fluctuation in their market prices.

   Article 18. A joint venture shall draw clear distinction between capital expenditures and revenue expenditures. All expenditures
incurred for the increase of fixed assets and intangible assets are capital expenditures. All expenditures
incurred to obtain current revenue are revenue expenditures.

   Article 19. Accounting methods adopted by a joint venture shall be consistent from one period to the other and shall not be
arbitrarily changed. Changes, if any, shall be approved by the board of directors and submitted to the local tax
authority for examination. Disclosure of the changes shall be made in the accounting report.

   Article 20. The participants of a joint venture shall contribute their share capital in the amount, ratio and mode of capital
contribution within the stipulated time limit as provided in the joint venture contract. The accounting for paid-in
capital by a joint venture shall be based on the actual amount contributed by each of its participants.

(1) For investment paid in cash, the amount and date as received or as deposited into the Bank of China or other banks
where the joint venture has opened its bank account shall be the basis for recording the capital contribution.

The foreign currency contributed by a foreign participant shall be converted into Renminbi or further converted
into a predetermined foreign currency at the exchange rates quoted on the day of the cash payment by the State Administration
of Foreign Exchange Control of the People’s Republic of China (hereinafter referred to as the “State Administration
of Foreign Exchange Control”). Should the cash Renminbi contributed by a Chinese participant be converted into
foreign currency, it shall be converted at the exchange rate quoted by the State Administration of Foreign Exchange
Control on the day of the cash payment.

(2) For investment in the form of buildings, machinery, equipment, materials and supplies, the amount
shown on the examined and verified itemisation list of the assets as agreed upon by each participant and the date
of the receipt of the assets shall be the basis of accounting according to the joint venture contract.

(3) For investment in the form of intangible assets, i.e. proprietory technology, patents, trade marks, copyright
and other franchises, etc. the amount and date as provided in the agreement or contract shall be the basis of accounting.

(4) For investment in the form of the right to use sites,the amount and date as provided in the agreement or
contract shall be the basis of accounting.

The capital contributed by each participant shall be recorded into the accounts of the joint venture as soon as they are
received.

   Article 21. The capital amount contributed by the participants of a joint venture shall be validated by Certified Public Accountants
registered with the government of the People’s Republic of China, who shall render a certificate on capital validation,
which shall then be taken by the joint venture as the basis to issue capital contribution certificates to the participants.

   Article 22. A joint venture shall open its deposit accounts in the Bank of China or the other banks within the territory of the People’s
Republic of China and approved by the State Administration of Foreign Exchange Control or by one
of its branches. All foreign exchange receipts must be deposited with the bank in the foreign currency deposit account
and all foreign exchange disbursements must be made from the accounts.

   Article 23. A joint venture shall set up journals to itemise cash and bank transactions in chronological order. A separate journal
shall be set up for each currency if there are several currencies.

   Article 24. The accounts receivable, accounts payable and other receivables and payables of a joint venture shall be recorded in
separate accounts set up for different currencies. Receivables shall be collected and payables shall be paid in
due time and shall be confirmed with the relevant parties periodically. The causes of uncollectible items shall
be investigated and the responsibilities thereof shall be determined. Any item proved to be definitely uncollectible
through strict management review shall be written off as a bad debt after approval is obtained through reporting
procedures specified by the board of directors. No “reserve for bad debts” shall be accrued.

   Article 25. For a joint venture using Renminbi as the bookkeeping base currency, its foreign currency deposits, foreign currency
loans and other accounts denominated in foreign currency shall be recorded not only in the original foreign currency
of the actual receipts and payments, but also in Renminbi converted from the foreign currency at an ascertained
exchange rate (using the exchange rate quoted by the State Administration of Foreign Exchange Control).

All additions of foreign currency deposits, foreign currency loans and other accounts denominated in foreign currencies
shall be recorded in Renminbi converted at their recording exchange rates, while deductions recorded in Renminbi
and converted at their book exchange rates shall be recognised as “foreign exchange gains or losses” (hereinafter referred
to as “exchange gains or losses”).

The recording exchange rates for the conversion of foreign currency to Renminbi may be the rate prevailing
on the day of recording the transaction or on the first day of the month, etc. The book exchange rate
may be calculated by the first-in-first-out method, or by the weighted average methods, etc. However, for the
decrease of accounts denominated in a foreign currency, the original recording rate may be used as the book rate. Whichever
rate is adopted, there shall be no arbitrary change once it is decided. If any change is necessary, it must be approved
by the board of directors and disclosed in the accounting report.

The difference in Renminbi resulting from the exchange of different currencies shall also be recognised as exchange
gains or losses.

The exchange gains or losses recognised in the account shall be the realised amount. In case of exchange rate
fluctuation, the Renminbi balances of the foreign currency accounts shall not be adjusted.

   Article 26. In a joint venture using a foreign currency as its bookkeeping base currency, its Renminbi deposits, Renminbi loans
and other accounts denominated in Renminbi shall be recorded not only in Renminbi but also in the foreign currency converted
from Renminbi at the exchange rate adopted by the enterprise. Differences in the foreign currency amount
resulting from the conversion at different Exchange rates shall also be recognised as exchange gains or losses as stipulated
in Article 25.

A joint venture using a foreign currency as its bookkeeping base currency shall compile not only annual accounting statements
in the foreign currency but also separate accounting statements in Renminbi translated from the foreign currency
at the end of a year. However, the joint venture’s Renminbi bank deposits, Renminbi bank loans and the
other accounts denominated in Renminbi shall still be accounted for in their original Renminbi amounts, and shall
be combined with the other items converted into Renminbi from foreign currency. The differences between the original
Renminbi amount of the Renminbi items and their Renminbi amount from currency translation shall not be recognised
as foreign exchange gains or losses, but shall be shown on the balance sheet with an additional caption as “currency translation
differences”.

   Article 27. The inventories of a joint venture refer to merchandise, materials and supplies, containers, low-value and perishable
articles, work in process, semi-finished goods, finished goods, etc. in stock, in processing or in transit.

   Article 28. All the inventories of a joint venture shall be recorded at the actual cost.

(1) The actual cost of materials and supplies, containers, low-value and perishable articles purchased from outside
shall include the purchase price, transportation expenses, loading and unloading charges, packaging expenses, insurance
premium, reasonable loss during transit, selecting and sorting expenses before taken into storage etc. The cost
of imported goods shall further include the custom duties and industrial and commercial consolidated tax, etc.

For merchandise purchased by a commercial or service-trade enterprise, the original purchase price shall be taken
as the actual cost for bookkeeping.

(2) The actual cost of self-manufactured materials and supplies, containers, low-value and perishable articles, semi-finished
goods and finished goods shall include the materials and supplies consumed, and wages and relevant expenses incurred during
the manufacture process.

(3) The actual cost of materials and supplies, containers, low-value and perishable articles, semi-finished
and finished goods completed through outside processing shall include the original cost of the materials and
supplies or semi-finished goods consumed, the processing expenses, inward and outward transportation expenses and sundry
charges.

The merchandise of the commercial or service-trade enterprises processed under contract with outside units shall be
recorded at the purchase price after processing, including the original purchase price of the merchandise before processing,
processing expenses and the industrial and commercial consolidated tax attributable.

   Article 29. The receipt, issuance, requisition and return of the inventories of a joint venture shall be processed on time
through accounting procedures according to the actual quantity and shall be itemsied in the subsidiary
ledger accounts with established columns for quantities and amounts, so as to strengthen inventory control. The
merchandise, materials, etc. in transit shall be accounted for through subsidiary ledgers and their condition of arrival
shall be inspected at all times. For those goods that have not arrived in due time, the relevant department shall
be urged to take action. As to those goods that have arrived but have not yet been checked or taken into
storage, their acceptance test and warehousing procedures shall be carried out in a timely manner.

   Article 30. The actual cost or original purchase price of inventories issued or requisitioned from the store of a joint venture may
be accounted for by it under one of the following methods; first-in-first-out, shifting average, weighted average,
batch actual, etc. Once the accounting method is adopted, no arbitrary change shall be allowed. In case a
change of accounting method is necessary, it shall be submitted to the local tax authority for approval and disclosed
in the accounting report.

   Article 31. In the joint ventures using planned cost in daily accounting for materials and supplies, finished goods, etc. the
planned cost of those issued from stock, shall be adjusted into actual cost at the end of each month.

For commercial and service-trade enterprises using a selling price in daily accounting for merchandise, the cost of goods
sold shall be adjusted from the selling price to the original purchase price at the end of a month.

   Article 32. A joint venture shall take physical inventory of its stock periodically, at least once a year. If any overage,
shortage, damage, deterioration, etc. is found, the relevant department shall investigate the cause and write
out a report. Accounting treatment shall be made as soon as the report is approved through strict management review
and the reporting procedures specified by the board of directors. The treatment shall generally be completed
before the annual closing of final accounts.

(1) The inventory shortage (minus inventory overage) and damage (minus salvage) of materials and supplies, work
in process, semi-finished goods, finished goods, and merchandise, etc. shall be charged to the current expenses,
except the amount, if any, that should be indemnified by the persons in fault.

(2) The net loss resulting from natural disasters shall be charged to non-operating expenses after deducting the
salvage value recoverable and insurance indemnity.

   Article 33. If there is any inventory in a joint venture to be disposed of at a reduced price due to obsolescence, it shall be
reported for approval according to the procedures specified by the board of directors, and the net loss on disposal
shall be recognised as loss on sales. If the disposal is not yet done at the end of a year, disclosure shall be made
in the annual accounting report for the actual cost per book, the net realisable value and the probable loss thereof.

   Article 34. Disclosure shall be made in the annual accounting report of a joint venture on the actual cost per book, net realisable
value and probable loss of its inventories of which the net realisable value is lower than the actual cost per book due
to the decline of the market price.

CHAPTER VII ACCOUNTING FOR LONG TERM INVESTMENT AND LONG TERM LIABILITIES

   Article 35. The investment of a joint venture in other units shall be accounted for at the amount paid or agreed upon at the
time of the investment, and shall be shown in the balance sheet with a separate caption as “long term investment.”

Income and loss derived from long term investment shall be recognised as non-operating income or non-operating expense.

   Article 36. The bank loans borrowed by a joint venture for capital construction during its preparation period or for increasing fixed
assets, expanding its business, or making renovation and reform of its equipment after its operation has started,
shall be accounted for at the amount and on the date of the loan and shall be presented in the balance sheet with a separate
caption as “long term bank loans”.

The interest expenses on long term bank loans incurred during the construction period shall be charged
to construction cost and capitalised as a part of the original cost of the fixed assets; but interest expense incurred
after the completion of the construction and the transfer of fixed assets for operation purposes shall be charged to current
expenses.

   Article 37. A joint venture shall prepare a fixed assets catalogue as the basis of accounting according to the criteria of fixed
assets laid down in the “Income Tax Law of the People’s Republic of China Concerning Joint Ventures Using Chinese
and Foreign Investment” and in consideration of its specific circumstances.

   Article 38. The fixed assets of a joint venture shall be grouped into five broad categories as follows: building and structures;
machinery and equipment; electronic equipment; transport facilities (trains or ships, if any, shall be grouped separately);
and other equipment. The joint venture may further group them into sub-categories according to the need of its management.

   Article 39. The fixed assets of a joint venture shall be recorded at their original cost.

For fixed assets contributed as investment, the original cost shall be the price of the assets agreed upon by all
the participants of the joint venture at the time of investment.

For fixed assets purchased, the original cost shall be the total of the purchase price plus freight, loading
and unloading charges, packaging expenses and insurance premium, etc. The original cost of the fixed assets that
need installation work, shall include installation expenses. The original cost of imported equipment shall
further include the customs duties, consolidated industrial and commercial tax, etc. paid as required.

For fixed assets manufactured or constructed by the joint venture itself, the original cost shall be the actual expenditure
incurred in the course of manufacture or construction.

Expenditures of a joint venture on technical innovation and reform that result in the increase of the fixed
assets value shall be recorded as increments of the original cost of the fixed assets.

   Article 40. Depreciation on the fixed assets of a joint venture shall generally be accounted for on an average basis under the
straight line method.

(1) Depreciation on fixed assets shall be accounted for on the basis of the original cost and the group depreciation rate
of the fixed assets.

The depreciation rate of fixed assets shall be calculated and determined on the basis of the original cost, estimated
residual value and useful life of the fixed assets.

A joint venture shall determine the specific useful lives and depreciation rates for different groups of
fixed assets according to the minimum depreciation period and the estimated residual value of the fixed assets
as provided in the “Income Tax Law Concerning Joint Ventures Using Chinese and Foreign Investment”.

(2) In a case where a joint venture needs accelerated depreciation or a change of depreciation method
for special reasons, application shall be submitted by the joint venture to the tax authority for examination and
approval.

(3) Generally, depreciation of the fixed assets of a joint venture shall be accounted for monthly according to the monthly
depreciation rates and the monthly beginning balances of the original cost per book of the fixed assets in use.
For fixed assets put in use during a month, depreciation shall not be calculated for the month but shall be started
from the next month. For fixed assets to be used during the month which are reduced or stopped depreciation shall still
be calculated for the month and be stopped from the next month.

(4) For fixed assets fully depreciated but still useful, depreciation shall no longer be calculated. For fixed assets
discarded in advance,no retroactive depreciation shall be made either.

For fixed assets declared scrap in advance or transferred out, the difference between the net proceeds
obtained from disposal (less liquidation expenses) and the net value of the fixed assets (original cost less accumulated
depreciation) shall be recognised as non-operating income or non-operating expenses of a joint venture.

   Article 41. For the purchase, sales, disposal, discarding and internal transfer, etc. of the fixed assets, a joint venture must execute
accounting routines and set up a fixed assets subsidiary ledger for the relevant accounting so as to strengthen the control
of fixed assets.

   Article 42. A physical inventory must be taken on the fixed assets of a joint venture at least once a year. If any average, shortage
or damage of the fixed assets is found, the cause shall be investigated and a report written out by the relevant department.
Accounting treatment shall be made as soon as the report is approved through strict management review and the reporting
procedures specified by the board of directors. Generally, this work shall be finished before the annual closing of final
accounts.

(1) For fixed assets average,the replacement cost shall be taken as the original cost, the accumulated depreciation shall
be estimated and recorded according to the existing usability and wear and tear of the assets, and the difference between
the original cost and the accumulated depreciation shall be credited to non-operating income.

(2) For fixed assets shortage,the original cost and accumulated depreciation shall be written off and
the excess of original cost over accumulated depreciation shall be charged as non-operating expenses.

(3) For damaged fixed assets, the net loss after the original cost deducted by the accumulated depreciation, recoverable
salvage value and the indemnity receivable from the person in fault or from the insurance company, shall be charged as non-operating
expenses.

   Article 43. The intangible assets and other assets of a joint venture include proprietary technology, patents, trade marks, copyrights,
right to use sites, other franchises and organisation expenses, etc.

For intangible assets contributed as investment by the participants of a joint venture, the original cost
shall be the value provided in the agreement or contract. The original cost of purchased intangible assets shall
be the amount actually paid. Monthly amortisation of the intangible assets shall be made over their useful life
from the year when they come into use. Those without specified useful life may be amortised over a period of ten
years. The amortisation period shall not be longer than the duration of a joint venture.

   Article 44. The expenses incurred by a joint venture during its preparation period (not including expenditure for acquiring
fixed assets and intangible assets and the interest incurred during the construction period to be included
in the construction cost may be accounted for as organisation expenses according to the provisions of the agreement
and with the consent of all participants, and shall be amortised after the production or operation starts. The
annual amortisation shall not exceed 20 per cent of the expenses.

   Article 45. The expenditure incurred by a joint venture on major repair and improvement of the leased-in fixed assets shall

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