Issues Relevant to Regulating Offshore Listing of Subsidiaries of Domestic Listed Companies Circular

1. The term "offshore listing of a subsidiary of a Listed Company" shall mean the act of publicly offering shares and listing on an offshore securities market by a subsidiary in which a listed company has the controlling power (hereafter, "Subsidiary").

2. A Listed Company shall comply with the following criteria if its Subsidiary is to apply for offshore listing:

(1) the Listed Company has been profitable in the most recent three consecutive years;

(2) the business or assets in which proceeds from share issues or fund raising by the Listed Company in the most recent three fiscal years are put shall not be used as capital contribution to the Subsidiary to apply for offshore listing;

(3) the net profit of the Subsidiary that the Listed Company is entitled to on the basis of its equity interest in the consolidated statement of the most recent fiscal year shall not exceed 50% of the net profit in the consolidated statement of the Listed Company;

(4) the net assets of the Subsidiary that the Listed Company is entitled to on the basis of its equity interest in the consolidated statement of the most recent fiscal year shall not exceed 30% of the net assets in the consolidated statement of the Listed Company.

(5) the Listed Company and its Subsidiary shall not compete within the same industry, shall enjoy independence from each other in terms of assets and finance, and have no overlapping appointment of managers between them;

(6) shares of the Subsidiary held by the directors, senior management personnel and affiliated parties of the Listed Company and its Subsidiary shall not exceed 10% of the total share capital of the Subsidiary before its offshore listing;

(7) there is no appropriation of funds or assets by individuals, legal persons or other organizations having actual controlling power, or affiliated parties, nor any other major affiliated transactions that undermine the company's interest, in the Listed Company; and

(8) no major violation of laws or regulations by the Listed Company in the most recent three years.

3. A Listed Company shall, in accordance with the requirements set out in this Circular and the law, pass resolutions on the following matters regarding offshore listing of its Subsidiary:

(1) the board of directors shall pass resolutions on whether or not the offshore listing of the Subsidiary complies with this Circular, the proposal of the offshore listing of the Subsidiary, and the commitment to maintain its independent listing status, and the explanation and prospect as to its capacity of ongoing profitability, by the Listed Company, and the same shall be proposed to the shareholders' general meeting for approval;

(2) the shareholders' general meeting shall deliberate and vote on, item by item, the proposal of the offshore listing of the Subsidiary, and maintenance of the independent listing status, and the explanation and prospect as to its ongoing profitability, of the Listed Company, as included in the proposal by the board of directors; and

(3) if the directors and senior management personnel of the Listed Company are to arrange a shareholding scheme in the Subsidiary, independent directors shall collect voting rights from shareholders of tradable shares (public shares) regarding, and pass an independent resolution on, such matter, and the same shall be passed with at least half of the voting rights held by shareholders of tradable shares (public shares) attending the shareholders' general meeting.

4. Listed Companies shall engage a securities business institution registered with the China Securities Regulatory Commission and included in the list of sponsor institutions as its financial advisor for the purpose of maintaining its on-going listing status (hereafter, Financial Advisor). A Financial Advisor shall assume the following duties:

(1) A Financial Advisor shall, in accordance with this Circular, conduct due diligence on the application documents for the offshore listing of the Subsidiary of the Listed Company; and issue a Financial Advisor's report undertaking that it has full reasons to believe that there is no false record, misleading statement or material omission in the application documents of the Listed Company, and believe that the Listed Company will still maintain its independent on-going listing status and the retained core assets and business will possess the capacity for on-going operation after the offshore listing of the Subsidiary.

(2) In the remaining period of the year of offshore listing of the Subsidiary and the following full fiscal year, the Financial Advisor shall continue to supervise and guide the Listed Company to maintain its independent listing status, and assume the following duties:

a. continue to monitor the independent operation, capacity for on-going operation and other matters regarding the condition of the core assets and business of the Listed Company;

b. supervise and guide the Listed Company to perform its information disclosure obligations in accordance with the law under the law aiming at changes in the assets or financial condition of the Subsidiary that have a significant impact on the equity interest of the Listed Company, and other important information that may influence the price of shares of the Listed Company; and

c. submit to the China Securities Regulatory Commission and the stock exchange a Summary Report on On-going Listing Status within 10 days of the end of such supervision and guidance work.

5. In case of offshore listing of its Subsidiary, a Listed Company shall perform its information disclosure obligations on the following day of the occurrence of any of the following events:

(1) a resolution passed by the board of directors, or the shareholders' general meeting, on the offshore listing of the Subsidiary;

(2) obtaining the consent to handle the application for offshore listing submitted by the Subsidiary to the China Securities Regulatory Commission;

(3) approval of the offshore listing of the Subsidiary; or

(4) any major events disclosed by the Subsidiary to offshore investors that may cause any abnormal share price fluctuation that the Listed Company shall disclose in a timely manner to domestic investors. The Listed Company shall include an explanation on the business development of the Subsidiary under the major matters in the annual report.

6. A Financial Advisor shall be honest and trustworthy, diligently fulfil its duties, faithfully discharge its duty to issues relevant to financial advisor's reports, and supervise and guide, on an on-going basis, the Listed Company to maintain its independent listing status, with reference to the Sponsorship System for Offering and Listing of Securities Tentative Procedures and in compliance with laws, administrative regulations, provisions of the China Securities Regulatory Commission and industry guidelines. The China Securities Regulatory Commission shall, mutatis mutandis, carry out regulation over the practice of Financial Advisors in accordance with the Sponsorship System for Offering and Listing of Securities Tentative Procedures.

7. To apply for offshore listing, the Subsidiary of a Listed Company shall prepare and submit the application documents and relevant materials in accordance with the requirements of the China Securities Regulatory Commission. The China Securities Regulatory Commission shall implement administrative approval in respect of applications for offshore listing by Subsidiaries of Listed Companies.

8. This Circular shall not apply to Listed Companies that have issued both domestically invested shares listed in China and foreign-invested shares listed in China.