Our Ref: No.7 [2003] CSRC

April 21, 2003

Parties involved:

Luoyang Chundu Foodstuffs Company Limited, domiciled at No.126, Chundu Road, Luoyang City, Henan Province. Its legal representative is Liu Haifeng.

Mr. Zhao Haijun, 44 years old, the former board chairman of Luoyang Chundu Foodstuffs Company Limited, whose domicile is No.31, Kaixuan West Road, Xigong District, Luoyang City, Henan Province;

Mr. Feng Wanping, 49 years old, the former vice board chairman of Luoyang Chundu Foodstuffs Company Limited, whose domicile is Room 10, Block No.2, Courtyard No.2, Dongming Road, Zhengzhou City, Henan Province;

Mr. Lei Zhiqin, 51 years old, the former director of Luoyang Chundu Foodstuffs Company Limited, whose domicile is Chundu Shibailou Building, Kaixuan West Road, Luoyang City, Henan Province;

Mr. Zhou Xinbang, 55 years old, the former director of Luoyang Chundu Foodstuffs Company Limited, whose domicile is unknown;

Mr. Wang Heping, 46 years old, the former director of Luoyang Chundu Foodstuffs Company Limited, whose domicile is No.188, Dugang Street, Zhengzhou City, Henan Province;

Ms. Wang Aifen, 34 years old, the former secretary to board of directors of Luoyang Chundu Foodstuffs Company Limited, whose domicile is unknown. 

The investigation on the case regarding the illegal actions of Luoyang Chundu Foodstuffs Company Limited (hereinafter referred to as Luoyang Chundu) in securities business has been completed. A hearing was held on January 17, 2003 to listen to the statement and defense of the relevant parties and their agents.

The illegal actions of the relevant parties are as follows:  Between March 28, 1999 and August 22, 1999, Luoyang Chundu consecutively signed 10 major assets purchase and sales agreements with the affiliated enterprises with a total value of CNY 431.66 million. Luoyang Chundu failed to promptly disclose the signing of the above important affiliated transaction agreements and failed to disclose the relevant matters in the interim report for 1999. The above facts are proved by the relevant agreements signed between Luoyang Chundu and the affiliated enterprises, the resolutions of board of directors on approving the signing of the agreements, the resolution of board of directors on reviewing the interim report for 1999 and the meeting minutes.

There were big-ticket payouts from the account of Louyang Chundu in CITIC Industrial Bank Zhengzhou Branch in December 1998 and the first half of 1999, but the company failed to record these in time. As a result, the monetary assets as of December 31, 1998 disclosed in the public announcement for listing, the monetary assets as of December 31, 1998 disclosed in the interim report and annual report for 1999 were CNY 73.39 million more than the actual amount. The monetary assets as of June 30, 1999 disclosed in the interim report for 1999 was CNY 306.78 million more than the actual amount. The above facts are proved by the fund transfer certificate issued by CITIC Industrial Bank Zhengzhou Branch, the meeting minutes and resolutions of the board of directors for reviewing the interim report and annual report for 1999.

The CSRC decides that the fact that Luoyang Chundu failed to promptly disclose the important affiliated transactions and failed to disclose the matter in the interim report for 1999 has breached the provisions of item 3 of Article 62.2 and item 5 of Article 60 of the Securities Law of the People’s Republic of China (hereinafter referred to as the Securities Law) and constitutes the illegal acts as prescribed in item 1 of Article 177 of the Securities Law “having major omission in the information disclosure”; the fact that Luoyang Chundu disclosed false information in the public announcement for listing and the interim report and annual report for 1999 constitutes the illegal acts as prescribed in item 2 of Article 174.1 in Provisional Regulations on Administration of Share Issuance and Trading “making false statement during the issuance and trading of shares” and the illegal acts as prescribed in item 1 of Article 177.1 in the Securities Law “having false statement in the information disclosure”.

Therefore, according to the above provisions, the CSRC decides to impose a fine of CNY 300 thousand on Luoyang Chundu, impose a warning and a fine of CNY 50 thousand on the persons in charge who are directly responsible, the former board chairman Zhao Haijun, the former vice board chairman Feng Wanping respectively, impose a warning and a fine of CNY 30 thousand on other persons with direct responsibilities, the directors Lei Zhixin, Zhou Xinbang and Wang Heping respectively, and impose a warning on the former secretary to board of directors Wang Aifen. Since the former board chairman of the company Gao Fenglai passed away on May 23, 1999, no legal liabilities will be investigated against him.

The relevant parties shall pay the fine to the CSRC (Opening Bank: CITIC Industrial Bank Head Office, Account No.: 7111010189800000162. The fine will be submitted to the treasure house directly by the bank) within 15 days as of the date of the issuance of this Letter of Disciplinary Penalty, and file the copy of payment voucher with the Department of Legal Affairs of the CSRC. If the relevant parties disagree with the penalties, they can raise administrative reconsideration to the CSRC within 60 days as of the date of the receipt of this Letter of Disciplinary Penalty, and can also directly raise litigations to the people’s court with jurisdictions within 3 months as of the date of the receipt of this Letter of Disciplinary Penalty. Yet the above decisions shall continue to be executed during the period of reconsideration and litigation.

The China Securities Regulatory Commission

(This English version by Shenzhen Securities Information Co., Ltd. is for your reference only. In case any discrepancy exists between the Chinese and English context, the Chinese version shall prevail.)