10:10     SHANGHAI GROWTH<00770> - Announcement (5)                           

    INTERNAL CONTROLS AND CORPORATE GOVERNANCE                                
                                                                              
    Following is a general discussion of the internal controls and            
    corporate governance issues relating to the handling and holding of       
    the underlying assets of the Company:                                     
                                                                              
    1.      The Company's custody account maintained with the Custodian       
                                                                              
    The assets placed in the Company's custody account maintained with        
    the Custodian include cash and listed securities of the Company. This     
    account is controlled and operated by groups of authorised signatories    
    of the Company which are appointed by the Board, with each different      
    groups of authorised signatories assigned with different powers to        
    execute instructions to the Custodian for specific types of               
    transactions and limits of transactions. These various groups of          
    authorised signatories are reviewed and updated by the Company on         
    regular basis to ensure that only suitable persons are involved in        
    relation to the control and operation of the custody account. Daily       
    cash reports and listed securities portfolio reports are provided         
    by the Custodian to the Company to ensure that the Company keeps          
    abreast of its custodial arrangements with the Custodian.                 
                                                                              
    2.      The custody of the Unlisted Portfolio by the Company              
                                                                              
    In order to ensure the safe custody of the Unlisted Portfolio by the      
    Company, the investment agreements and certificates relating to the       
    Unlisted Portfolio are locked in the Company's safe kept on the           
    Company's premises, with access to the safe restricted to only            
    authorised personnel. Representatives of the Investment Manager are       
    also appointed to sit on the board of the PRC invested entities to        
    which the Unlisted Portfolio relates to. These representatives            
    represent the interest of the Company and so as to ensure the proper      
    management and control of the invested PRC entities.                      
                                                                              
    Management accounts of the invested entities to which the Unlisted        
    Portfolio relates to are provided to the Company on a regular basis       
    to ensure proper monitoring and supervision of the operations and         
    activities of the invested entities. These management accounts also       
    serve valuable tools for gaining up to date valuation of the investment   
    entities.                                                                 
                                                                              
    Other measures adopted by the Company to ensure the safe custody of       
    the Unlisted Portfolio by the Company include regular visits and          
    communications by the Investment Manager with the invested entities       
    to gain a clearer financial and operational understanding of the          
    invested entities. Also the Company ensures that all dividends or         
    interests received by the Company upon the Unlisted Portfolio, other      
    than in RMB, or the sale proceeds, in case of an exit of the investment,  
    are directly remitted to the custodian account with the Custodian.        
                                                                              
    The Company also conducts special review of the unlisted investments.     
    These special reviews are conducted by qualified international            
    accounting firms appointed by the Board on a half yearly basis to         
    enable the Board to assess the fair value of the unlisted investment.     
                                                                              
    3.      The custody of the Listed Taiwanese Investments                   
                                                                              
    Measures adopted by the Company to ensure the safe custody of Listed      
    Taiwanese Investments include a requirement by the Company that           
    securities deposit accounts to be opened directly with licensed           
    brokers, that are QFII, in Hong Kong to trade on Taiwanese stocks         
    must be approved by the Board. Specific Directors are also appointed      
    by the Board to control and operate the securities accounts, including    
    the giving of any instructions to trade the Listed Taiwanese              
    Investments and to receive dividends.                                     
                                                                              
    All sale proceeds and dividends distributed in relation to the Listed     
    Taiwanese Investments are directly remitted to the custodian account      
    held with the Custodian. Furthermore, in addition to the valuation        
    of the Listed Taiwanese Investments reported on the Custodian's daily     
    investment portfolio, the Company also receives monthly statements        
    from the licensed brokers showing month end values and stock holdings     
    of specific Taiwan stocks. Such monthly statements are used as a basis    
    for counter checking with the Custodian's valuations provided.