Issues Relevant to Assignment of Enterprise State-owned Assets and Equity Circular

1. Issue of dovetailing the disposal of assets arising in the course of separations of core and secondary businesses and restructurings of the secondary businesses with the relevant provisions of the Procedures

The disposal of the assets of enterprises that the state-owned asset regulatory authorities and relevant departments have determined as falling within the scope of the separation of core and secondary businesses and of the restructuring of secondary businesses in the course of the separation of the core and secondary businesses, the restructuring of the secondary businesses and the reassignment and settlement of the surplus personnel of medium and large state-owned enterprises shall be handled in accordance with the Separation of the Main and Secondary Businesses, the Restructuring of the Secondary Businesses and the Reassignment and Settlement of the Surplus Personnel of Medium and Large State-owned Enterprises Implementing Procedures (ref. Guo Jing Mao Qi Gai [2002] No.859) and relevant ancillary documents. The sale to the staff and workers of a restructured enterprise or to an external investor of the net state-owned assets of such enterprise remaining after all payments have been made in accordance with provisions shall be handled in accordance with relevant state provisions. The specific transaction method may be decided by the capital receiving enterprises or the department (work unit) in charge of the restructured enterprise.

2. Issues of determining the matters relating to the assignment of the major state-owned assets and equity of important subsidiaries

For enterprises under the central government, such matters shall be handled in accordance with the relevant provisions of the Thorough Implementation of the «General Office of the State Council Trasmitting the State-owned Assets Supervision and Administration Commission of the State Council, Regulating the Restructuring of State-owned Enterprises Opinions Circular»Circular (ref. Guo Zi Fa Gai Ge [2004] No.4) issued by the State-owned Assets Supervision and Administration Commission of the State Council, and enterprises under the central government shall provisionally determine whether the assignment will be reported to the State-owned Assets Supervision and Administration Commission of the State Council for approval or whether they will decide themselves. For local enterprises, the relevant administration requirements shall be provisionally specified by the local state-owned assets regulatory authority in accordance with relevant regulations and in line with the realities of the places concerned. Once the procedures for the administration of the major matters of important subsidiaries have been issued by the State-owned Assets Supervision and Administration Commission of the State Council, such matters shall be handled in accordance with the new provisions.

3. Issues concerning the handling of assignments of enterprise state-owned assets and equity that involve changes in the nature of state-owned shares in listed companies

Assignments of enterprise state-owned assets and equity that involve changes in the nature of state-owned shares in listed companies shall be effected in accordance with the procedure specified in the Procedures. Information on such an assignment of assets and equity shall be publicly disclosed at the assets and equity exchange selected and determined by the State-owned Assets Supervision and Administration Commission of the State Council and potential assignees solicited widely. After an assignee has been determined and an assets and equity assignment contract initialled, the assignor shall report the matters relating to the change in the nature of the state-owned shares in the listed company to the State-owned Assets Supervision and Administration Commission of the State Council for examination and approval in accordance with state provisions on the administration of the assignment of state-owned shares in listed companies. Other matters shall be handled in accordance with the following provisions:

(1) after approval of the matters relating to the assignment of enterprise state-owned assets and equity that involve a change in the nature of the state-owned shares in the listed company, the assignor shall carry out the procedures for authenticating the assets and equity transaction with the assets and equity exchange on the strength of the approval document and the proof of payment of the entire amount in cash by the assignee;

(2) the assignor and assignee shall carry out the procedures for amendment of the registration of the state-owned shares of the listed company with the securities depository and clearing institution, in accordance with the specified procedure, on the strength of the approval document of the State-owned Assets Supervision and Administration Commission of the State Council for matters relating to the change in the nature of the state-owned shares in the listed company, the proof of payment of the entire amount in cash by the assignee, and the proof of the assets and equity transaction issued by the assets and equity exchange or the document of the state-owned assets regulatory authority at the provincial level or above approving the assignment of state-owned assets and equity directly by agreement, etc.;

(3) when an assignment of enterprise state-owned assets and equity involves a change in the nature of the state-owned shares in a listed company, the assignor shall additionally perform its information disclosure obligation in accordance with the relevant provisions of the securities regulatory department, the date of which disclosure may not be later than the date on which the information on the assets and equity assignment was disclosed at the assets and equity exchange.

4. Issues concerning the formulation and implementation of the plan for assigning enterprise state-owned assets and equity

The plan for the assignment of enterprise state-owned assets and equity is an important basis for examination and approval of the assignment by the relevant approval authority and for the implementation of the relevant matters by the assignor after conclusion of the assets and equity assignment. The assignor shall duly study and implement the following key points:

(1) the assignor shall fully evaluate and extensively analyze the assignment of the enterprise state-owned assets and equity; if necessary, it may engage a relevant professional consulting institution to provide advice on, and an evaluation of, the assignment of the enterprise state-owned assets and equity;

(2) the plan for the settlement of the staff and workers of the enterprise that is the subject matter of the assignment shall, in accordance with relevant state policies, expressly state the method by which the employment relationships of the staff and workers of the enterprise will be classified and handled and the relevant compensation rates and shall be subject to deliberation and adoption by the staff and workers congress of the enterprise and the examination and approval of the labour and social security administrative department of the place where the enterprise is located;

(3) after completion of the assignment of enterprise state-owned assets and equity, the assignor shall duly implement the provisions of the assignment plan in accordance with the relevant provisions of the General Office of the State Council Transmitting the «State-owned Assets Supervision and Administration Commission of the State Council, Regulating the Restructuring of State-owned Enterprises Opinions» Circular (ref. Guo Ban Fa [2003] No.96) and the Procedures. Unless otherwise specified by the state, the assignment of enterprise state-owned assets and equity may not be effected by deducting the relevant expenses from the net assets prior to the assignment.

5. Issues concerning public disclosure of information on the assignment of enterprise state-owned assets and equity

In order to ensure that the disclosure of information relating to the assignment of the enterprise state-owned assets and equity is complete and extensive, the relevant approval authorities for such assignments must strengthen their examination of the contents of the assignment announcements, and assets and equity exchanges shall strengthen their administration of the disclosure of information relating to such assignments.

(1) Assets and equity assignment announcements shall be disclosed to the public by the assets and equity exchange through the prescribed channels and at the prescribed times. For major assignments of assets and equity or for assets and equity assignments concerning which the relevant approval authority has imposed special requirements, the assignor and assets and equity exchange may specify a different announcement period through an entrustment agreement, provided that such period is not less than 20 working days. The assignment announcement period shall commence to count from the date on which the newspaper(s) and/or periodical(s) published the information.

(2) After publication of an assets and equity assignment announcement, the assignor may not indiscriminately change the published information or, without reason, ask that it be retracted. If, due to a special reason, the published information truly needs to be changed or retracted, the consent or supporting document of the relevant assets and equity assignment approval authority shall be presented and the assets and equity exchange shall publish an announcement by way of the original information publication channel. The date of the announcement shall be the date from which counting will commence.

(3) The assignment conditions specified in the assets and equity assignment announcement may not have content that is expressly directed at certain parties or that violates the principle of fair competition. After information relating to the assignment of enterprise state-owned assets and equity is disclosed to the public, the relevant authorities shall select the assignee in accordance with the same assignment conditions.

6. Issues concerning registration and administration of the interested assignees

In order to ensure that the relevant authorities can participate in the transaction involving enterprise state-owned assets and equity and in line with the principles of transparency, impartiality and fairness, after the announcement for the assignment of enterprise state-owned assets and equity has been published, the interested assignees that responded shall be administered in accordance with the following provisions:

(1) The assets and equity exchange shall be in charge of the registration and administration of the interested assignees that responded and may not entrust the assignor or another party with the registration and administration of the interested assignees. The assets and equity exchange and the assignor shall jointly examine the qualifications of the registered interested assignees in accordance with the relevant standards and requirements and determine the number of qualified interested assignees.

(2) The assets and equity exchange shall keep a record of the examination of the qualifications of the relevant interested assignees and place information on the registration of the assignees, the examination of their qualifications, etc. and other basic information on the assets and equity transaction into the assets and equity transaction file and duly preserve the same.

(3) In the course of registering the interested assignees, the assets and equity trading institution may not predetermine the number of assignees to be registered, or refuse to register or exclude from registering any assignee on any pretext.