Ask the CSRC for the final report on the investigation of Kelon Electric's suspected securities violation case.

The CSRC issued the Final Report on the Investigation of Suspected Securities Violation Cases of Guangdong Kelon Electric Appliance Co., Ltd., which made a detailed record of the fact that Gu and Greencool were suspected of committing crimes.

The survey results show that Gu and others are suspected of eight types of criminal acts. They are: embezzlement and misappropriation of Kelon electrical property; Using related party transactions to defraud Kelon Electric Property totaling 227.8 million yuan; Defrauding state-owned land and/or encroaching on the relevant interests of Kelon Electric Appliances; False capital contribution or registered capital flight; Cover up the purpose of misappropriating and occupying Jiangxi Kelong funds, prepare false bank tickets and provide false financial reports; Using false documents to defraud company registration, forging company seals, engaging in fictitious income and other activities; Opening an off-balance-sheet secret account in Shenzhen, suspected of transferring Kelon funds; In the name of advertising fees, 80.33 million yuan of Kelon Electric Appliances was misappropriated for illegal purposes. According to the report, Gu and others and Greencool related companies are suspected of embezzling and misappropriating Kelon's electrical property, with a cumulative amount of 3.485 billion yuan.

The report also believes that Kelon Electric, as a listed company, began to implement a number of securities violations in 2002.

First of all, Kelon Electric adopted fictitious sales revenue, less provision for bad debts, less calculation of litigation compensation and other means. In 2002, the annual report inflated profits by 65.438+0.2 billion yuan, in 2003 it inflated profits by 65.438+0.48 billion yuan, and in 2004 it inflated profits by 65.438+0.49 billion yuan. After retrospective adjustment of the above-mentioned false financial and accounting reports fabricated for three consecutive years, Kelon Electric underreported its profit by 6.095 million yuan in 2003 and inflated its profit by 60.036 million yuan in 2004.

Secondly, the disclosure of cash flow statement in Kelon Electric's annual report in 2003 was seriously false. The cash received by borrowing was less than 3,025.5 million yuan, the cash paid for debt repayment was less than 2,654.38 yuan+36 million yuan, and the net cash flow generated by operating activities exceeded 889.7 million yuan.

From 2002 to 2005, Kelon Electric did not disclose many important matters such as changes in accounting policies, nor did it disclose related transactions such as joint investment and related purchases with Greencool.

Decision on prohibiting Gu and others from entering the market (Fa Zi [2006] No.4)

Party: Gu, male, born in 1959, then director and chairman of Guangdong Kelon Electric Appliance Co., Ltd. (hereinafter referred to as Kelon Electric Appliance), and his address is17th floor, Taifeng Zhonghui Building, No.20 zhushikou Street, Xuanwu District, Beijing.

Yan Yousong, male, born in 1965, was then the director and vice president of marketing of Kelon Electric Appliances, and then the chairman of Guangdong Kelon Air Conditioning Co., Ltd., and his address was/building kloc-0/5/door, Sihezhuang Village, Fengtai District, Beijing.

Zhang Hong, male, born in 1962, was then the director of kelon electric appliance, and later the chairman and president of Jiangxi kelon industrial development co., ltd, and his address was 40 12, Huanhu Beili, Hexi District, Tianjin.

Li Zhicheng, male, born in 1955, was then the financial controller and company secretary of Kelon Electric Appliances, and his address was 20th floor, 300 Des Voeux Road Central, Hong Kong.

Jiang Baojun, male, born in 1967, was then the chief financial officer, financial inspector and chairman of the board of supervisors of Kelon Electric Appliances, and his address was 40 1 Shanghongge, Kangfu Garden, Shunde District, Foshan City, Guangdong Province.

Yan, male, born in 1969, was then the deputy director of the finance department of Kelon Electric Appliances, and his address was 10A, Building 8, Jiaxin Garden, Shunde District, Foshan City, Guangdong Province.

Fang Zhiguo, male, born in 1962, was then a director of Kelon Electric Appliances, and his address was Unit 3, Building 24, Qianjin Building, Xiangyang Building, Hedong District, Tianjin.

According to the relevant provisions of the original Securities Law of People's Republic of China (PRC) (hereinafter referred to as the Securities Law), we initiated an investigation on Kelon Electric's alleged violation of securities laws and regulations, and informed the parties of the facts, reasons and basis of market prohibition according to law. At the request of the parties, we held a hearing and listened to the statements and arguments of the parties. Now the investigation and trial are over.

It is found that Kelon Electric's annual reports in 2002, 2003 and 2004 contain false records, major omissions and other illegal facts;

1.From 2002 to 2004, Kelon Electric fabricated false financial reports by means of fictitious main business income, less provision for bad debts and less compensation for litigation, resulting in inflated profits of 65,438+065,438+0,996,438+0,000 yuan in its 2002 annual report.

(1) From 2002 to 2004, Kelon Electric inflated the main business income and profit of the annual report by issuing invoices or sales outbound orders for the inventory that was not actually sold out of the warehouse and confirming it as income.

1.2002 annual report inflated income by 403,305,400 yuan, inflated profit by1.991.00 million yuan.

From June, 5438 to February, 2002, Kelon Electric issued invoices or sales outbound orders to 8 1 units such as Guangdong Dongguan Tailin Trading Co., Ltd. through its 17 sales branch, and confirmed the income of 403,305,400 yuan (excluding VAT, the same below). In fact, there is no real transaction for the above-mentioned goods with billing, billing and revenue confirmation, and the relevant inventory is sealed in Kelon Electric's warehouse and not sent to customers. At the same time, Kelon Electric falsely listed the sales expenses of 297.2453 million yuan and the installation and maintenance expenses of173.594 million yuan, and omitted the provision for inventory depreciation of 31262.4 million yuan. The above behavior led to a inflated profit of 65,438+065,438+0,996,38+0,000 yuan in Kelon's 2002 annual report.

In 2003, the annual report inflated income by 304,838,600 yuan and inflated profit by 89,350,600 yuan.

From June 2003 1 1 to February 65438, Kelon Electric issued an invoice or sales delivery order to Hefei Weixi Electric Co., Ltd. (hereinafter referred to as Hefei Weixi), and confirmed the income of 304,838,600 yuan. In fact, there is no real transaction for the above-mentioned goods with billing, billing and revenue confirmation, and the relevant inventory is sealed in Kelon Electric's warehouse and not sent to customers. At the same time, Kelon Electric inflated the carry-over sales expenses of 2032 1.36 million yuan and the installation and maintenance expenses of 1.79255 million yuan, and omitted the provision for inventory depreciation of 51.5438+0 million yuan. The above behavior led to a inflated profit of 89.3506 million yuan in Kelon's 2003 annual report.

3. In 2004, the annual report inflated the income by 565,438+0,270 and the profit by 65,438+0,204,205 yuan in 290 yuan.

In 2004, Kelon Electric Appliance and its 65,438+06 sales branch issued invoices or sales delivery orders to 66 customers including Hefu Weixi and Wuhan Chang Rong Electric Appliance Co., Ltd. (hereinafter referred to as Wuhan Chang Rong), confirming the income of 565,438+0,270, 290 yuan. In fact, there is no real transaction for the above-mentioned goods with billing, billing and revenue confirmation, and the relevant inventory is sealed in Kelon Electric's warehouse and not sent to customers. At the same time, Kelon Electric falsely listed the sales expenses of 36.331.49 million yuan and the installation and maintenance expenses of 3 1.4282 million yuan, and omitted the provision for inventory depreciation of 2.4607 million yuan. The above behavior led to a inflated profit of 65,438+0,204,205 yuan in Kelon's 2004 annual report.

(2) From 2003 to 2004, Kelon Electrical Appliances inflated the profit of the annual report by fictitious waste sales business with Zhuhai Defa Air Conditioning Accessories Co., Ltd. and Zhuhai Longjia Refrigeration Equipment Co., Ltd.

1.2003 annual report inflated profits by 20,025,200 yuan.

On June 24, 2003, Jiangxi Kelon Industrial Development Co., Ltd. (Kelon Electric Holding Company, hereinafter referred to as Jiangxi Kelon) transferred its shares to Zhuhai Hyde Power Air Conditioning Accessories Co., Ltd. (hereinafter referred to as Zhuhai Defa), and on February 26, 2003, Zhuhai Defa transferred its shares to Guangdong Kelon Electric Holding Company (Kelon Electric Holding Company) for 9 million yuan. On June 24, 2003, Jiangxi In the same month, Zhuhai Longjia transferred funds to Guangdong Kelon Refrigerator Co., Ltd. (Kelon Electric Holding Subsidiary, hereinafter referred to as Kelon Refrigerator) and Guangdong Kelon Air Conditioning Co., Ltd. (Kelon Electric Holding Subsidiary, hereinafter referred to as Kelon Electric Holding Subsidiary), and Kelon Electric forged warehouse receipts and other vouchers for waste materials, confirming that other business income of Kelon Refrigerator was 59,945,438+0,000 yuan, and other business income of Kelon Air Conditioning was 4,995,000 yuan.

2. In 2004, the annual report inflated profits by 28.3386 million yuan.

On June 5438+February 65438+May 2004, Jiangxi Kelon transferred RMB17.6 million to Zhuhai Longjia and RMB12.4 million to Zhuhai Defa. In that month, Zhuhai Longjia remitted 9.45 million yuan, 2.6 million yuan and 5.55 million yuan to Kelon Refrigerator, Guangdong Kelon Refrigerator Co., Ltd. (Kelon Electric Holding Company, hereinafter referred to as Kelon Refrigerator) and Kelon Air Conditioning respectively. Kelon Electric forged warehouse receipts and other documents for waste materials, and confirmed that the income from other business of Kelon refrigerator was 9,453,200 yuan, Kelon freezer was 2,628,500 yuan, and Kelon air conditioner was 5,560,700 yuan. In the same month, Zhuhai Defa remitted 5.03 million yuan to Kelon Accessories, and Kelon Electric forged documents such as waste warehouse receipts, confirmed that other business income of Kelon Accessories was 4,898,400 yuan, and made provision for bad debts of 654,380 yuan +0.5722 million yuan; Zhuhai Defafa remitted 7.37 million yuan to Kelon Electric Appliances to purchase scrapped air conditioning prototypes, and Kelon Electric Appliances directly reduced the prototype cost by 7.37 million yuan in 2004. The above behavior led to a inflated profit of 28.3386 million yuan in Kelon's annual report in 2004.

(3) In 2003, Kelon Electric inflated the profit of the annual report by underestimating the provision for bad debts.

Kelon Electric combines the balance of accounts receivable of Guangzhou Haizhu Tengyao Electric Appliance Co., Ltd. at the end of 2003 with the balance of accounts receivable of Dongguan Humen Supply and Marketing Cooperative Yuehua Household Appliances Co., Ltd. -472. 1.4 million, and makes an aging analysis, and omits the provision for bad debts of 65.438+0.22. 1.4 million of accounts receivable of Guangzhou Haizhu Tengyao Electric Appliance Co., Ltd. Kelon Electric combines the balance of accounts receivable of Shenzhen Xinchuyuan Electric Appliance Co., Ltd. with the balance of -5 1. 1.9 million at the end of 2003 in Dianbai County for aging analysis. Some of the aging divisions are wrong, and the provision for bad debts of accounts receivable of Shenzhen Xinchuyuan Electric Appliance Co., Ltd. is underestimated by 70 1. Kelon Electric divided all the accounts receivable of Shunde Longyong Hardware & Electric Material Co., Ltd. with an age of more than one year into accounts receivable with an age of less than three months, and made a provision for bad debts of 2,629,700 yuan less. Kelon Electric treats all the balance of accounts receivable of Daqing Hailang Materials Trading Company at the end of 2003 as accounts within three months, with less provision for bad debts of 603,000 yuan. The above behavior led to a inflated profit of 5 155500 yuan in Kelon's 2003 annual report.

(D) In 2003, Kelon Electric inflated the profit of the annual report by underestimating the litigation damages.

From June 65438+February 10 to June 16, 2003, Foshan Intermediate People's Court made a series of final judgments on the contract dispute between Kelon Electric and some employees, and ordered Kelon Electric to pay 227 employees living allowance and case acceptance fees, totaling 3,939,200 yuan, which was not included in the profit and loss of 2003. The above behavior led to a inflated profit of 3,939,200 yuan in Kelon's 2003 annual report.

2. There are significant false records in the cash flow statement of Kelon Electric's 2003 annual report.

In 2003, Kelon Electric bought and sold products between Kelon Electric and its subsidiaries, and based on this trade background, it issued bank acceptance bills and commercial acceptance bills to banks for discount, and obtained a lot of cash. Kelon Electric's cash flow summary table does not truly reflect the above cash flow. According to statistics, Kelon Electric Company's consolidated cash flow statement in 2003 understated the cash received by borrowing 3,025.5 million yuan, understated the cash paid for debt repayment 2,654.38+0,357.3 million yuan, and overstated the net cash flow generated by operating activities by 889.76 million yuan.

3. From 2002 to 2004, Kelon Electric did not disclose major matters such as changes in accounting policies, nor did it disclose related transactions such as investment and purchase of goods with related parties.

(a) Kelon Electric's 2002 annual report did not disclose the changes in the accounting policy of maintenance deposit.

In September 2002, Kelon Electric changed the accounting policy of maintenance deposit. Kelon Electric did not disclose the contents, reasons and effects of changes in accounting policies in its 2002 annual report.

(II) Kelon Electric did not fulfill the interim report and announcement obligations on the major matters related to Kelon Electric held by Guangdong Greencool Enterprise Development Co., Ltd. (formerly Shunde Greencool Enterprise Development Co., Ltd., hereinafter referred to as Guangdong Greencool), and it was not disclosed in the 2004 annual report.

On June 5438+1October1day, 2004, Guangdong Greencool, Gu and Greencool Purchasing Center (Shenzhen) Co., Ltd. (hereinafter referred to as Shenzhen Greencool) and China Agricultural Bank Shenzhen Luohu Sub-branch (hereinafter referred to as Luohu Agricultural Bank) signed the maximum guarantee contract and supplementary agreement, stipulating that Guangdong Greencool would take this action in Shenzhen Greencool. During the warranty period stipulated in this contract, Guangdong Greencool guarantees that its 26.43% shares in Kelon Electric Appliance shall not be pledged, transferred or otherwise disposed of to a third party; In case of violation of this agreement, Shenzhen Greencool shall increase the deposit of outstanding bank acceptance bills and outstanding letters of credit to 100%. According to the above guarantee, the deposit ratio charged by Luohu Agricultural Bank for issuing invoices and letters of credit is 20%. Kelon Electric did not fulfill its interim report and announcement obligations on the above major issues, and it was not disclosed in the 2004 annual report.

(III) The annual reports of Kelon Electric in 2002 and 2003 did not disclose the investment matters of Jiangxi Kelon and its related party Jiangxi Greencool Capital Co., Ltd. (hereinafter referred to as Jiangxi Greencool), and the annual reports of 2003 and 2004 did not disclose the use of huge assets of related parties.

In May, 2002, Jiangxi Greencool signed a settlement agreement with Nanchang Economic and Technological Development Zone Management Committee, stipulating that the development zone "fully supports Greencool Capital Company to set up Greencool-Kelon household appliances industry project". In June 2002, 5438+ 10, Jiangxi Greencool built a factory building, and Jiangxi Kelon invested heavily in building 12 air-conditioning production lines in the above-mentioned factory building, and put into trial production in June 2003, with an output of more than 4,000 units in that year, in 2004. Kelon Electric did not disclose the above investment matters in its annual reports in 2002 and 2003, nor did it disclose the use of related party assets in its annual reports in 2003 and 2004.

(IV) The 2004 annual report of Kelon Electric Appliance Co., Ltd. did not disclose the investment matters between Zhuhai Kelon Electric Appliance Co., Ltd. (hereinafter referred to as Zhuhai Kelon) and its related party Zhuhai Greencool (Industrial Park) Co., Ltd. (hereinafter referred to as Zhuhai Greencool).

On May 18, 2003, Shunde Greencool Enterprise Development Co., Ltd. signed the Greencool Industrial Park Project Agreement with the Jinwan District People's Government of Zhuhai City. According to this agreement, on September 24th, 2003, Zhuhai Greencool was established, and in February, 2004, Zhuhai Kelon was established. Since then, Zhuhai Greencool has set up a factory in Wanqing Industrial Zone, Sanzao Town, Jinwan District, Zhuhai City, and Zhuhai Kelon has invested in building a refrigerator production line and related equipment in this factory. Kelon Electric did not disclose the above matters in its 2004 annual report.

(V) The related party transaction in which Kelon Electric purchased refrigerators and other products from Hefei Meiling Co., Ltd. (hereinafter referred to as Meiling Electric) at a price of 7,965,438+0.39 million yuan failed to fulfill the obligations of interim report and announcement, and was not disclosed in the 2003 annual report.

On May 2, 2003, Kelon Electric signed an OEM product production contract with Meiling Electric, stipulating that Kelon Electric would purchase refrigerators and other products from Meiling Electric during August and February, 2003, with an amount of 79 1.39 million yuan (including 17% VAT). On May 29, 2003, Shunde Greencool Enterprise Development Co., Ltd. signed an agreement with Hefei Meiling Group Holding Co., Ltd. to acquire 20.03% of the shares held by the company and become the largest shareholder of Meiling Electric. On July 5, Gu became the legal representative and chairman of Meiling Electric. According to the above contract, Kelon Electric actually paid 700,000 yuan1.1.4 thousand yuan. As of June 65438+February 3, 2004, there was still 902,500 yuan unpaid. Kelon Electric did not fulfill the obligations of interim report and announcement on the above related party transactions, nor did it disclose it in the 2003 annual report.

(VI) Kelon Electric did not fulfill the obligation of interim report and announcement on the related transaction of Kelon Air Conditioning purchasing Greencool R4 1 1C refrigerant from Jiangxi Kesheng Industry and Trade Co., Ltd. (hereinafter referred to as Kesheng Industry and Trade Co., Ltd.), and it was not disclosed in the 2004 annual report.

On June 25th, 2004, Kelon Air Conditioning signed an agreement with related party Kesheng Industry and Trade to purchase 95 tons of refrigerant. 11c1On October 22nd, Kelon Industry and Trade delivered 95 tons of Greencool r4 1 1C refrigerant to Kelon Air Conditioning Warehouse. On April 6, 2005, Kelon Electric paid 65438. Kelon Electric did not fulfill the obligation of interim report and announcement on the above matters, nor did it disclose it in the 2004 annual report.

Gu, Yan Yousong, Fang Zhiguo signed the resolution of the board of directors to consider and approve the text and abstract of the annual reports of Kelon in 2002, 2003 and 2004, and Jiang Baojun signed the resolution of the board of supervisors to consider and approve the text and abstract of the annual reports of Kelon in 2002 and 2003. Gu, Yan signed the annual reports of Kelon Electric in 2002, 2003 and 2004 as the person in charge of the enterprise, the person in charge of the accounting work and the person in charge of the accounting institution respectively. Gu Chu Jun was the chairman of Kelon Electric at that time; Yan Yousong was then the director and vice president of marketing of Kelon Electric Appliances and the chairman of Guangdong Kelon Air Conditioning Co., Ltd.; Zhang Hong was then the director of Kelon Electric Appliances and the chairman and president of Jiangxi Kelon Industrial Development Co., Ltd.; Li Zhi became the chief financial officer and company secretary of Kelon Electric Appliances; Jiang Baojun used to be the chief financial officer, chief financial officer and chairman of the board of supervisors of Kelon Electric Appliances. Yan used to be the deputy director of the finance department of Kelon Electric Appliances; Fang Zhiguo was a director of Kelon Electric at that time. Gu organized, led, planned and directed all the above-mentioned illegal acts of Kelon Electric Appliances, and was the directly responsible person in charge. Yan Yousong, Zhang Hong, Li Zhicheng, Jiang Baojun, Yan and Fang Zhiguo are respectively responsible for the illegal acts they participated in and understood or the relevant annual reports reviewed and adopted, and are other directly responsible personnel.

I will identify the main evidences of the above facts as follows: 1, industrial and commercial registration materials of Kelon Electric Appliances and its related subsidiaries, announcement documents of Kelon Electric Appliances from 2002 to 2004, resolutions of the board of directors and the board of supervisors, various financial management systems of Kelon Electric Appliances, and employment documents of Kelon Electric Appliances to the parties concerned. 2. Electronic accounts CD-ROM, financial reports, general ledger, subsidiary ledger, accounting statements, accounting vouchers and special explanations on financial issues of Kelon Electric and its subsidiaries from 2002 to 2004. 3. Notice of Kelon Electric Finance Department, meeting minutes, statistics, false outbound orders, false financial vouchers, logistics inventory tables and descriptions, audit reconciliation data of Deloitte Certified Public Accountants, description of company's goods pressing, statistics and descriptions of branch's goods pressing, industrial and commercial registration data, capital verification reports and accounting data of Hefei Vichy and Wuhan Chang Rong, and notice of marketing department on invoicing and delivery of C/W company. 4. Industrial and commercial registration materials, capital verification reports and accounting materials of Zhuhai Defa and Zhuhai Longjia, vouchers of Jiangxi Kelon funds flowing to Kelon refrigerators, Kelon air conditioners and Kelon accessories, Kelon Electric's explanation on waste sales, false outbound orders and financial reconciliation entries. 5. Kelon Electric's 2003 accounts receivable aging analysis table, accounts receivable subsidiary ledger, three accrual guidelines, Kelon Electric and related personnel's explanations on aging issues. 6. Labor dispute judgment, compensation payment voucher, and Kelon Electric's explanation on the disclosure and disbursement of labor litigation. 7. The resolutions of the board of directors of Kelon Electric Appliances and its subsidiaries on the loan in 2003, the financing agreement with the bank, the tripartite credit agreement, the bills and discount vouchers of Kelon Electric Appliances and its subsidiaries, the accounting entries and detailed accounts of Kelon Electric Appliances, and the statement of cash flow of Kelon Electric Appliances. 8. Description of Kelon Electric's 2000-200 1 year warranty preparation, and accounting information of Kelon Electric's 2000-2003 maintenance deposit. 9. Maximum guarantee contract and its supplementary agreement, loan approval notice of Luohu Agricultural Bank, debt and creditor's rights contract signed by Guangdong Greencool and Luohu Agricultural Bank, relevant bills and billing information. 10, industrial and commercial registration materials of Jiangxi Kelon and Jiangxi Greencool, resolutions of Kelon's board of directors on investing in Jiangxi Kelon, settlement agreement, relevant land transfer agreement, land use certificate, land leasing payment certificate, Jiangxi Kelon project description and construction payment certificate, Jiangxi Greencool capital description and construction payment certificate. 1 1, industrial and commercial registration data of Zhuhai Kelon and Zhuhai Greencool, accounting data of Zhuhai Greencool in 2004, evidence of budget and construction of Zhuhai Kelon project, land transfer agreement, land use certificate and payment voucher of land transfer fee. 12, OEM product production contract, payment voucher for Kelon Electric Appliance's purchase of refrigerator, VAT invoice, equity acquisition document of Meiling Electric Appliance, and relevant documents of Gu's employment in Meiling Electric Appliance. 13, industrial and commercial registration materials of Kesheng Industry and Trade, capital verification report, purchase contract, bill of lading, laboratory test sheet, receipt documents, payment vouchers, invoices, accounting entries of Kelon Electric, and list of refrigerants purchased by Kelon Electric (R41/kloc). 14. Transcripts of conversations between investigators and the parties and relevant personnel, explanations of the parties and relevant personnel and other evidence. 15, relevant evidence provided by Kelon Electric and other relevant units and individuals.

I will think that the above-mentioned behavior of Kelon Electric violates the relevant provisions of Articles 59, 61 and 62 of the original Securities Law, and constitutes the behavior of "failing to disclose information in accordance with the relevant provisions, or disclosing information with false records, misleading statements or major omissions" as mentioned in Article 177 of the original Securities Law. According to the provisions of Article 177 of the original Securities Law, the association made administrative punishment decisions on the parties respectively. At the same time, we have transferred Gu and others to the public security organs to investigate and deal with their alleged corruption, misappropriation of Kelon Electric's huge property and other criminal acts.

At the same time, according to Article 4 of the Interim Provisions on Prohibition of Securities Market, "If directors, supervisors, managers and other senior managers of listed companies commit one of the following acts or are directly responsible or directly responsible for such acts, the China Securities Regulatory Commission will regard them as market bans according to the circumstances, except administrative sanctions according to law: ……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………… Serious damage to the interests of investors ",Article 5" Directors, supervisors, managers of listed companies and other senior managers who are identified as prohibited from entering the market shall not serve as senior managers of any listed company or securities operating institution for three to 10 years from the date of announcement of the decision of the China Securities Regulatory Commission; If the circumstances are particularly serious, they may not serve as senior managers of listed companies or securities institutions. " According to the facts, nature, circumstances and social harmfulness of the illegal behavior of the parties concerned, I will decide:

1. Gu is regarded as banned from entering the market, and shall not serve as the senior manager of any listed company or securities operation institution from the date when the decision is announced by the FSC;

2. Yan Yousong and Zhang Hong are regarded as prohibited from entering the market, and shall not serve as senior managers of any listed company or securities institution for 10 years from the date of the announcement of the decision of this Association;

3.,,, Yan, and Fang Zhiguo are regarded as prohibited from entering the market, and shall not serve as senior managers of any listed company or securities operating institution for five years from the date of the announcement of the decision of this Association.

China Securities Regulatory Commission (CSRC)

June 2006 15