China Securities Regulatory Commission, Pilot Project for Over-allotment Options Opinion

Issued: September 3 2001
Effective: as of date of issue
Applicability: For the purposes of the Opinion, "over-allotment option" means, in relation to a share issue, an option granted by the issuer to the lead distributor to sell at its discretion in light of market conditions up to 15% more of the shares it has underwritten at the original issue price (Item One). The Opinion also applies to initial public offerings (Item 17).

Main contents: The Opinion provides that if an issuer of shares intends to implement an over-allotment option in a new share offering, it shall obtain approval at a shareholders' meeting and disclose to the shareholders the intended use of the
proceeds derived from the exercise of the over-allotment option (Item Three). The lead distributor who intends to exercise the over-allotment option shall present sufficient evidence to the China Securities Regulatory Commission (CSRC) that it has effective internal control and that it will comply with the internal firewall principle in such exercise (Item Four). In addition, it shall open a special account for this purpose with the securities registration and settlement institution (Item Six). During the period for exercising the over-allotment option, if the market price of the issuer's shares is lower than the issue price, the lead distributor shall purchase the issuer's shares at a price no higher than the issue price at the centralized bidding venue using the funds obtained in exercising the over-allotment option and allocate the shares to the subscribers; if the market price of the issuer' shares is higher than the issue price, the lead distributor can ask the issuer to sell additional shares and allocate the shares to the subscribers (Item Eight). The lead distributor may at its discretion exercise the option on more than one occasion (Item Nine). The arrangements for exercising the option shall be disclosed in the prospectus for the new issue, and the actual exercise of the option and changes in shareholding after the exercise shall be announced (Items 5, 14 and 15).