Rules of Procedure of the Board of Supervisors

Chapter 1 General Provisions

Art. 1 In order to protect the legal rights and interests of the company and the Company's shareholders, regulate the behavior of the directors, establish a standardized organizational structure and operation procedure of the board of directors, ensure the efficient and orderly conduct of the company's business decisions, these Rules are worked out in accordance with the Company Law of the People's Republic of China (hereinafter referred to as the Company Law), the Articles of Association) and relevant state laws and regulations.

Art. 2 From the date of its entry into force, the rules become legally binding documents that regulate the organization and conduct of the board of directors and regulate the powers, duties, rights and obligations of the chairman, directors and board of directors.

Chapter 2 Board director

Art. 3 A company director is a natural person. In any one of the following circumstances, he cannot become a company director:

(1)No civil capacity or limited civil capacity;

(2)Being sentenced to punishment due to corruption, taking bribes, embezzlement, misappropriation or disrupting the social order of the socialist market economy, and the execution period has not reached 5 years; or being deprived of political rights due to the commission of a crime, and the execution period has not reached 5 years;

(3)A person who is a director or factory manager, or manager of a company or enterprise being liquidated, and bearing personal responsibility to the liquidation of that company or enterprise, and three years has not elapsed since the completion of liquidation of that company or enterprise;

(4)Being the legal representative of a company or enterprise whose business license was cancelled because of breaking the law and being personally responsible, and three years has not elapsed since the cancellation of that business license;

(5)Bearing a personal debt of significant amount which is due and unpaid in full;

(6)Being prohibited to enter the securities market by the CSRC and the prohibition period has not yet expired;

(7)Other contents prescribed by the law, administrative regulations or departmental regulations. If an election or nomination of a director contravenes this Article, that election or nomination or appointment is void. If a situation under this Article appears during the period of service of a director, the company will terminate his duties.

Art. 4 When the board of directors is changed, the candidate of the new director is nominated by the former board of directors; When a board is vacant due to director's resignation, retirement, death, incapacity or removal from the general meeting of shareholders, a successor is nominated by the current board.

More than five percent of the shareholders who hold the total number of voting shares outside the company have the right to nominate new candidates to the company.

Art. 5 A director is elected and replaced by the general meeting of shareholders. The general election of directors is applicable to shareholders' meetings, which means that more than 1/2 of the voting rights of shareholders must attend the shareholders' meeting.

Art. 6 The term of office of the director for three years is calculated from the date of adoption of the resolution of the shareholders' meeting until the term of the board of directors expires. The term of office of the director expires and the election may be reelected. Prior to the expiration of a director's term, the general meeting of the shareholders shall not be relieved of his post without any reason.

Art. 7 Company directors enjoy the following rights:

(1)Attend board meetings;

(2)Timely obtain board meeting notice and meeting documents;

(3)To get the notice of the meeting of shareholders and attend the meeting of shareholders;

(4)Propose bills to the board alone or together.

(5)To exercise the right to vote independently at the board meeting, each director shall have one vote.

(6)On the board of directors, express views on each proposal to be discussed by the board of directors;

(7)To supervise the implementation of the resolutions of the board of directors;

(8)To sign a contract, agreement or other legal document on behalf of the company according to the authorization of the board of directors;

(9)According to the authorization of the board of directors, the company is involved in the research, planning, negotiation and signing of the company's foreign investment projects;

(10)According to the decision of the board of directors, on behalf of the company engaged in other activities;

(11)Other functions and powers conferred by the company's shareholders' meeting or the board of directors;

(12)Other powers prescribed by laws, regulations, articles of association or these rules.

Art. 8 The director shall not have the following actions:

(1)He cannot misappropriate company funds;

(2)He cannot use his personal name or other people’s names to open accounts to deposit company assets or funds;

(3)He cannot contravene these Articles and without having the consent of the shareholders’ meeting or the board of directors, lend company funds to other people or provide guarantee to other people using company assets;

(4)Cannot contravene these Articles or without the consent of the shareholders’ meeting, enter into contacts or trade with the company;

(5)Without the consent of the shareholders’ meeting, he cannot make use of his position to obtain business opportunities belonging to the company, for himself or other people. He cannot trade with himself or others in the same type of business of the company;

(6)He cannot accept commissions for himself when trading with other companies;

(7)He cannot unilaterally disclose company secrets;

(8)He cannot make use of his associated relationship to damage company interests.

He should be responsible for compensating any losses caused to the company.

Art. 9 Each director should take the best interests of the company and all shareholders as the code of conduct, abide by the laws, regulations and the provisions of the articles of association, and perform their duties faithfully.

Any director shall not engage in any activity in any way and / or means to harm or impair the interests of the company.

Any director may not engage in or operate a business of the same kind as the company for others.

No director shall be deprived of any business opportunity that belongs to or may belong to a company in any way and / or means.

Without the formal approval of the non - shareholders meeting, any director may not enter into a contract or conduct a transaction with the company (except for the appointment contract).

Any director violates the duty of loyalty: (1) The company will be able to bring the lawsuit in accordance with the maximum possible laws and regulations; (2) Any liability to which the director shall bear shall not be exempted or mitigated in any case.

Art 10 He should be careful, serious and diligent in exercising his authorities conferred by the company, in order to ensure that the business activities of the company comply with the nations’ law, administrative regulations and various economic policy requirements of the nation.

Art 11 Any director shall keep confidential company secrets, including, but not limited to, proprietary technology, design, procedures, management know-how, customer lists, production and marketing strategies, tender documents and tender contents; Not to disclose or to use for other purposes.

The obligation of confidentiality as stipulated in this article is still valid after the end of the appointment of any director until the following circumstances have occurred:

(1)When the mandatory provisions of national law are required;

(2)The entry into force of the court's referee;

(3)When the general meeting of shareholders is formally approved;

(4)The secrecy content has been properly entered into the public domain before the disclosure;

(5)Demand for public interest;

(6)The legal interests of the director itself are required.

In this article, "public interest requirement" means that certain or actions of a company directly or indirectly infringe upon the interests of the public, or involve certain or confidential information of the company, which directly affects the interests of the public.The situation in which the court or other government authorities require the director to perform the obligation to testify: "The director's own legitimate interests require" is that the legitimate interests of the director are violated illegally, except for the company or other government authorities. It is impossible for the director to get legal relief in other ways, and the court or other government authorities explicitly request the director to expose the company secrets to him. In the above two situations, a director should ask the court or other competent government authorities to take reasonable and proper measures to prevent disclosure and further spread of information.

Any director may not make use of insider information for the benefit of himself or others.

Any director who violates the obligation of confidentiality will be subject to the maximum possible action by the company in accordance with the laws and regulations.

Art 12 The director shall sign the board's resolution and take responsibility for the board's resolution. In violation of the laws, regulations, or articles of association of the board of directors, the company has suffered losses, and the directors who have participated in the resolution are liable to the company. However, the director may be exempt from the responsibility when it is proved to have dissent and recorded in the minutes of the vote.

Art 13 In the absence of a legal authorization by these articles or by the board of directors, no director can use his personal capacity to represent the company or the board of directors. When a director makes use of his personal capacity, but a third party reasonably thinks that the director is representing the company or the board of directors, that director should declare his position and capacity in advance.

Art 14 The director or his or her other business is directly or indirectly related to the company's existing or planned contracts, transactions and arrangements, the nature and extent of the relationship should be disclosed to the board of directors as soon as possible, regardless of the need for approval by the board of directors in general.

When a director has an associated relationship with an enterprise which is involved with a resolution to be decided at a board of director’s meeting, he cannot vote on that resolution, and cannot vote on behalf of other directors. That director’s meeting can be held if exceeding half of the unassociated directors attends. Resolutions made by the board of director’s meeting should be passed by exceeding half of the unassociated directors. If the less than three unassociated directors are attending the board meeting, the matter should be submitted to the shareholders’ meeting for discussion.

The affiliated director consists of the following directors with one of the following circumstances:

(1)Counterparty;

(2)Direct or indirect controller that deals with each other;

(3)Tenure in a legal person unit that deals with the other party or can directly or indirectly control the other party.

(4)A close family member, or a family member closely related to his or her direct control, including spouse, 18 year old child and their spouse, parents and spouse's parents, siblings and their spouses, siblings of their spouses, parents of their children's spouses.

(5)A family member who deals closely with a director, supervisor, or senior manager of a direct or indirect controller of a person or a direct or indirect controller. ( Including A. parents; B. the spouse; C. brothers and sisters; D. Children aged 18 or above; E. Spouses of parents, children, siblings of spouses )

(6)On the basis of other reasons, the company may be affected by its independent business judgment.

The director or his or her other business is directly or indirectly related to the company's existing or planned contracts, transactions and arrangements, the nature and extent of the relationship should be disclosed to the board of directors as soon as possible, regardless of the need for approval by the board of directors in general circumstances.

The procedure for deliberation of related transactions involving related directors shall be carried out in accordance with the specific provisions of the company. The company shall have the right to cancel relevant contracts, transactions or arrangements for the related transactions which are not considered according to the procedure, except when the other party is a bona fide third party.

Art 15 A director can resign before the expiry of his term of service. When a director resigns, he should submit a written resignation report to the board of directors.

If the members of the board of directors fall below the minimum legal requirement due to a director’s resignation, before a newly elected director commences the appointment, the original director(s) should still carry out the director’s duties according to the law, administrative regulations, departmental regulations and these Articles. In addition, the board of directors has the right to approve the resignation of any director, but after the resignation of the director, the board of directors shall propose a new motion to elect a new director. The board of directors or the shareholders holding or amalgamating the total number of voting shares issued outside the company has the right to nominate the candidate for the new director.

Art 16 One of the following cases of the director may be removed from the position of the director at any time by the resolution of the general meeting of the shareholders:

(1)A person who is in a serious violation of the articles of association or the obligations of the directors of this rule;

(2)A big economic loss to the company due to major faults;

(3)After a people's court trial, a person is investigated for criminal responsibility;

(4)The Rights of Those Being Educated through Labor;

(5)It is not present for two consecutive times, nor does it entrust other directors to attend the meeting of the board of directors;

(6)The director no longer has the qualifications specified in this rule.

Art 17 According to the provisions of the articles of association, a director who serves as general manager, deputy general manager or other senior managerial personnel shall not exceed 1/2 of the total number of directors.

Art 18 Each of the remuneration of the directors (including but not limited to wages, allowances, subsidies, bonuses, fees, pension and retirement compensation board) will be decided solely by the general meeting of shareholders.

When approving the remuneration of every director, the shareholders' conference should give full consideration to the company's management, the industry status of the company, the director's personal capability and his contribution to the company.

Any remuneration of each director shall be disclosed in detail in the company's annual report.

Art 19 The company does not pay taxes for the director in any form.

Chapter 3 The composition and authority of the board of directors

Art 20 The board of directors is composed of 5 directors. The board of directors is responsible for the shareholders' meeting and is the company's management and decision-making body, exercising the following functions and powers:

(1)Summon the meeting of the shareholders' meeting and report the work to the shareholders' meeting;

(2)Implement the resolutions of the board of shareholders;

(3)Determine the company's business plan and investment plan;

(4)To formulate the company's annual financial budget plan and final settlement plan;

(5)Formulate the company's profit distribution plan and make up the loss plan;

(6)A plan for a company to increase or reduce the registered capital and the issuance of corporate bonds;

(7)A plan for the establishment of a company to merge, separate, dissolve, or change the form of a company;

(8)Determine the establishment of an internal management organization in a company;

(9)Decide to appoint or dismiss the company manager and its remuneration matters; and in accordance with the nomination of the manager to appoint or dismiss the deputy manager of the company, the person in charge of the finance and the matters of remuneration;

(10)Making the basic management system of the company;

(11)Other functions and powers stipulated in the articles of association of the company.

Art 21 During the session of the board of directors, the board of directors authorizes the chairman to enjoy the following rights:

The sole term of investment or asset disposal made by the chairman of the company's assets shall not exceed 5% (5%) of the net assets of the latest phase of the company's audit.

Under the premise that the company's asset liability ratio is no more than 65%, it has the right to decide the amount of a single sum that accounts for the mortgage or pledge of assets or owners' interests under the audit assets less than 5% (including 5%) in the latest period.

The above mentioned matters shall not apply to the provisions of this article.

The chairman should submit a written report to the board at the last session of the board meeting, which has been approved during the last board meeting to this board meeting.

Chapter 4 Meeting Procedure

Art 22 The board meets twice a year, one of which should be held in the first half of the year to review the company's annual work report and profit distribution plan.

Art 23 The chairman may convene a temporary meeting of the board at any time when the chairman thinks it is necessary. In one of the following cases, the chairman of the board of directors shall convene a meeting of the provisional board of directors within five working days:

(1)A shareholder who represents more than one-third of the voting rights;

(2)More than one third of the directors proposed;

(3)When the board of supervisors proposed;

If the chairman does not issue a notice of the interim meeting of the board of directors within five days upon receipt of the written request, the directors who require an interim meeting of the board of directors shall have the right to convene an interim meeting of the board of directors.

Art 24 The meeting of the board of directors shall be notified to each of the directors by the way of service, delivery or fax of the meeting by the date of the meeting.

An interim meeting of the board of directors shall be notified to the directors in writing by 5 days prior to the date of the meeting. But if by all the directors unanimously approved before, during or after the meeting, you can take other way send meeting notice or without meeting notice to convene an interim meeting based on directly.

Art 25 The following persons shall have the right to present motions to the board of directors on any matters within the terms of the board of directors:

(1)President;

(2)Any director;

The following persons have the right to submit a bill to the board at any time in respect of any affairs involved in their duties.

(1)General manager;

(2)Chief financial officer.

Art 26 Important information and data relating to the consideration of the item should be distributed to the directors in written form before the beginning of the meeting. The drafters and/or providers of the documents shall make the meeting documents provide all information in an accurate and complete manner and be as concise as possible.

Art 27 If any director is unable to attend the board meeting, he may entrust other directors to attend and vote in writing. An agent may represent one or more directors. Each power of attorney shall specify the name of the agent and the agent's authority on behalf of the director. Except as otherwise provided for in the power of attorney, the agent shall have the same rights as the director. The agent's right is automatically invalidated when the meeting is closed.

Art 28 The meeting of the board of directors shall be held by half of the directors in person or by proxy.

Art 29 If the chairman attends the meeting in person, the chairman will chair the meeting. If the chairman does not attend the meeting but formally authorizes other directors to act as chairman, the director will chair the meeting when the director attends the meeting in person. If the chairman has not attended the meeting in person, he has not authorized other directors to exercise the authority of the chairman, or if the director has not attended the meeting in person, or if the director refuses to chair a meeting, more than half of the directors shall jointly elect a director to chair the meeting.

Art 30 Each supervisor shall have the right to attend each board meeting. Unless the board decides otherwise, the general manager and the chief financial officer shall have the right to attend each board meeting. Upon the proposal of any director, the deputy general manager and other senior managers shall have the right to attend the board meeting. Upon the invitation of the board of directors, any other person may attend the board meeting.

In accordance with article 18 of the company law, the board of directors shall listen to the opinions of the company's trade union when deciding on major issues in operation and making important rules and regulations and listen to the staff's opinions and Suggestions through the workers' congress or other forms.

Art 31 The directors present at the meeting shall register at the meeting, and the directors present at the meeting shall, in addition to the names of the agents, sign and indicate the name of the agent.

Other personnel attending the meeting shall also register at the meeting.

Art 32 The board of directors shall vote in writing; Each director has one vote. No member of the board of directors has the right to vote for a decisive vote.

Art 33 The board of directors shall arrange at least one director to make statistics on the results of the vote. At the same time, a supervisor shall be invited to supervise the process of counting the votes and the results of the vote.

By way of communication to the meeting of the board of directors, the tellers and scrutineers arranged by the leader of the meeting, but should ensure that there is at least one director and the board of supervisors and the scrutineers in counting.

The tellers and scrutineers shall honestly perform their duties, and the statistical results of the authenticity and accuracy of legal liability.

Art 34 The board of directors shall be held in a field manner, and the board of directors shall arrange the appropriate time for the directors at the meeting to ask questions. The general manager and other senior managers of the meeting shall give a reply or explanation to the questions of the director.

The supervisors, the general manager and the members of the table related to the deliberations of the board of directors have the right to speak at the meeting. With the consent of the chairman of the conference, the other members also have the right to speak at the meeting.

Art 35 Each board meeting shall write the record of the meeting, and shall be signed by all the directors and the secretaries attending the meeting in person or delegate to the meeting. The signed record of the meeting shall be kept as a company's file for a period of ten years.

Chapter 5 President

Art 36 The board of directors shall have a chairman and shall be elected by more than half of all the directors.

The term of the chairman is up to the expiration of the term of the board.

Art 37 The chairman exercises the following functions and powers:

(1)Convene and host the meeting of the board of directors of the general meeting of the shareholders;

(2)Supervise and inspect the implementation of board resolutions;

(3)Sign company stocks, corporate bonds and other securities;

(4)To sign the major documents of the board of directors and other documents which shall be signed by the chairman of the company;

(5)To exercise the functions and powers of the legal representative;

(6) In the event of an emergency, such as a major natural disaster, the company's affairs shall be exercised in accordance with the provisions of the law and the special disposition of the articles of association and report to the company's board of directors and shareholders afterwards.

(7) Other functions and powers conferred by the board of directors.

Art 38 In any of the following circumstances, the chairman shall bear the due responsibilities:

(1)Slack in the exercise of power and cause great losses to the company;

(2)Overtake power and cause great losses to the company;

(3)There are other acts that violate the laws, regulations, articles of association, or the obligations under this rule.

Chapter 6 Supplementary Articles

Art 45 This rule is explained by the company's board of directors.

Art 46 The rules shall be formulated by the board of directors and shall be implemented after the approval of the general meeting of shareholders.

Zhejiang Huaguang Capsule Stock Co.,Ltd

August 2014