Measures for Pilot Projects for the Offering of Corporate Bonds

Article 2: This Law shall govern the offering of corporate bonds in the People's Republic of China.

For the purposes of this Law, the term “corporate bonds” means negotiable securities offered by a company in accordance with the statutory procedure and that specify that the principal will be repaid and interest thereon paid within a period of at least one year.

Article 3: To apply to offer corporate bonds, the conditions specified in the Securities Law, the Company Law and these Measures shall be satisfied and the check and approval of the China Securities Regulatory Commission (CSRC) shall be required.

Article 4: When applying to offer corporate bonds, information must be disclosed or provided in a truthful, accurate, complete, timely and fair manner, and such information may not contain false records, misleading statements or material omissions.

Article 5: A company shall act in good faith and safeguard the statutory rights and the rights specified in the prospectus that are enjoyed by the bondholders.

Article 6: The approval by the CSRC of an offering of corporate bonds does not indicate that it makes any substantive judgement or warranty as to the investment value of such bonds or on the returns to investors. The investment risks associated with corporate bonds shall be borne by the investors who subscribe for such bonds.

PART TWO: ISSUANCE CONDITIONS

Article 7: In order to offer corporate bonds, the following provisions shall be complied with:

(1) the company's production and operations comply with laws, administrative regulations, the company's articles of association and state industrial policy;

(2) the company's internal control systems are sound and the completeness, rationality and effectiveness thereof are free of any material defects;

(3) the credit grade of the bonds has been rated as good by a credit rating agency;

(4) the audited net assets of the company as at the end of the most recent period shall comply with laws, administrative regulations and relevant provisions of the CSRC;

(5) the average distributable profits realized during the most recent three financial years are not less than one year of coupon payment of the corporate bonds; and

(6) the aggregate balance of corporate bonds after the contemplated offering will not exceed 40% of net assets as at the end of the most recent period; the aggregate balance of corporate bonds of financial companies shall be calculated in accordance with the provisions on financial enterprises.

Article 8: Corporate bonds may not be offered if:

(1) the company's financial accounting documents contained false records or the company committed another major violation of the law during the most recent 36 months;

(2) the application documents for the contemplated offering contain false records, misleading statements or material omissions;

(3) the company is in default of previously issued corporate bonds or other debt obligation or is in arrears in repayment of the principal thereof or payment of interest thereon and such situation is persisting; or

(4) another circumstance that seriously harms the lawful rights and interests of investors or the public interest exists.

Article 9: The face value of each corporate bond shall be Rmb100. The offering price shall be determined by the offeror and sponsor through a market inquiry.

Article 10: A credit rating agency recognized by the CSRC and qualified to engage in the securities service business shall be engaged to rate the corporate bonds.

The company and the credit rating agency shall provide that the credit rating agency shall announce at least one follow-up rating report each year during the life of the bonds.

Article 11: Security provided for corporate bonds shall comply with the following provisions:

(1) the scope of the security shall include the principal and coupons of the bonds, liquidated damages, damages and expenses for realizing the claims;

(2) if the security is to be provided in the form of a guarantee, it shall be a joint and several guarantee and the quality of the guarantor's assets shall be good;

(3) if an encumbrance is to be created, title to the property to be used as security shall be clear, such property shall be free of encumbrances and not be subject to preservation measures and the value of such property shall have been assessed by a qualified asset appraisal institution as being no less than the secured amount; and

(4) it shall comply with the Property Law, Security Law and other relevant laws and regulations.

PART THREE: OFFERING PROCEDURE

Article 12: When an application to offer corporate bonds is to be made, a plan shall be formulated by the board of directors of the company and resolutions on the matters set forth below shall be adopted at a shareholders' meeting or shareholders' general meeting:

(1) the number of bonds to be offered;

(2) the arrangement for rights offering to the company's shareholders;

(3) the term of the bonds;

(4) the purpose of the proceeds;

(5) the term of validity of the resolutions;

(6) the matters that the board of directors has been authorized to handle; and

(7) other matters that require specifying.

Article 13: The proceeds derived from the offering of corporate bonds must comply with the purpose thereof approved by the shareholders' meeting or shareholders' general meeting, and comply with state industrial policy.

Article 14: The offering of corporate bonds shall require the sponsorship of a sponsor and a filing with the CSRC.

The sponsor shall prepare and submit the prospectus and the offering application documents in accordance with the relevant provisions of the CSRC.

Article 15: All of the company's directors, supervisors and senior management personnel shall sign the prospectus, vouching that it is free of false records, misleading statements or material omissions and stating that they will bear joint and several legal liability.

Article 16: The sponsor shall carry out a due diligence investigation of the contents of the prospectus, which shall be signed by the relevant person in charge in confirmation that it is free of false records, misleading statements or material omissions and shall state that the sponsor will bear joint and several legal liability.

Article 17: Certified public accountants, asset appraisers, credit rating personnel, lawyers and the firms in which they serve that issue documents in connection with bond offerings shall issue such documents in accordance with their lawfully formulated business rules, and the business standards and ethical standards accepted by the industry, and state that they bear liability for the truthfulness, accuracy and completeness of such documents.

Article 18: The audit reports, asset appraisal reports and credit rating reports cited in the prospectus shall have been issued by a qualified securities service firm and been signed by at least two qualified practitioners.

The legal opinions cited in the prospectus shall have been issued by a law firm and been signed by at least two handling lawyers.

Article 19: A prospectus shall be valid for six months from the last signing date.

Asset appraisal reports and credit rating reports that have exceeded their terms of validity may not be used in a prospectus.

Article 20: The CSRC shall review applications for the offering of corporate bonds in accordance with the following procedure:

(1) it shall decide on whether or not to accept an application within five working days after receipt of the application documents;

(2) after accepting the application, it shall conduct a preliminary examination of the application documents;

(3) the public offering review committee shall review the application documents in accordance with the special procedure set out in the China Securities Regulatory Commission, Measures on the Public Offering Review Committee; and

(4) the CSRC shall render its decision on whether or not to grant its approval.

Article 21: When offering corporate bonds, an application may be made for a single approval for an offering to be made in instalments. The company shall make its initial offering within six months from the date of the approval of the offering by the CSRC and the offering of the remaining bonds shall be completed within 24 months. Bonds that have not been offered within the period specified in the approval document may only be offered if approved again by the CSRC.

The number of bonds initially offered may not be less than 50% of the total number to be offered. The number offered during each subsequent instalment shall be determined by the company itself and each such instalment offering shall be reported to the CSRC for the record within five working days after the completion thereof.

Article 22: A company shall publish a CSRC-approved abstract of its prospectus in at least one publication designated by the CSRC and the full text of the prospectus on an Internet website designated by the CSRC two to five working days prior to the offering of its corporate bonds.

PART FOUR: PROTECTION OF THE RIGHTS AND INTERESTS OF BONDHOLDERS

Article 23: The company shall engage a bond trustee for the bondholders and enter into a bond trust agreement. The bond trustee shall safeguard the interests of the bondholders in accordance with the provisions of the agreement during the life of the bonds.

The company shall specify in the prospectus that by subscribing for the bonds, investors are deemed to have consented to the bond trust agreement.

Article 24: The sponsor for the offering or another organization approved by the CSRC shall serve as the bond trustee. An organization that has provided security for the offering may not serve as the trustee for the offering.

The bond trustee shall act in the best interests of the bondholders and may not have a conflict of interests with the bondholders.

Article 25: The bond trustee shall perform the following duties:

(1) monitoring on a continuing basis the creditworthiness of the company and the guarantor and if an event that could affect the material rights and interests of the bondholders arises, convening a bondholders' meeting;

(2) if the company creates a security for the bonds, the bond trust agreement shall specify that the secured property is trust property and the bond trustee shall obtain the certificate or other relevant document for the secured rights prior to the offering of the bonds and duly hold the same in its custody during the security period;

(3) diligently handling discussions or litigations between the bondholders and the company during the life of the bonds;

(4) where it believes the company will be unable to discharge its debt obligations, requiring the company to provide additional security or, in accordance with the law, applying to the statutory authority to take property preservation measures;

(5) if the company becomes insolvent, participating in the restructuring, settlement, reorganization or bankruptcy legal proceedings; and

(6) other material obligations specified in the bond trust agreement.

Article 26: The company shall, together with the bond trustee, formulate the bondholders' meeting rules and specify the scope of the rights exercisable by the bondholders through bondholders' meetings, the procedure for exercising such rights and other important matters.

The company shall specify in the prospectus that by subscribing for the bonds, investors are deemed to have consented to the bondholders' meeting rules.

Article 27: A bondholders' meeting shall be held if:

(1) amendments to the prospectus are to be made;

(2) the bond trustee is to be replaced;

(3) the company is unable to repay principal or pay coupons on schedule;

(4) the company is to reduce its capital, merge, divide, be dissolved or file for bankruptcy;

(5) a material change to the guarantor or the thing provided as security occurs; or

(6) an event that has a material effect on the rights and interests of the bondholders occurs.

PART FIVE: REGULATION

Article 28: If a company violates these Measures by failing to perform its information disclosure obligation, failing to convene a bondholders' meeting as stipulated, thereby harming the rights and interests of the bondholders or committing other such act, the CSRC may order it to rectify the matter; and may take administrative regulatory measures against the supervisors directly in charge and other directly responsible persons such as giving them a regulatory discussion, declaring them persona non grata, etc., and recording the same in their integrity files and publicly announcing the same.

Article 29: If the offering sponsorship document issued by a sponsor contains false records, misleading statements or material omissions, or the sponsor or its relevant personnel forge or alter a signature or seal, or fail to perform another statutory duty, matters shall be handled in accordance with the relevant provisions of the Securities Law and the sponsorship system.

Article 30: If a document issued by a securities service firm that issues audit reports, legal opinions, asset appraisal reports, credit rating reports or other such documents in connection with the offering of corporate bonds, or by a member of its personnel, contains false records, misleading statements or material omissions, matters shall be handled in accordance with the Securities Law and relevant provisions of the CSRC.

Article 31: If a bond trustee violates these Measures by failing to perform its duties specified in the bond trust agreement, thereby harming the rights and interests of the bondholders, the CSRC may order it to rectify the matter; and may take administrative regulatory measures against the supervisors directly in charge and other directly responsible persons such as giving them a regulatory discussion, declaring them persona non grata, etc., and recording the same in their integrity files and publicly announcing the same.

PART SIX: SUPPLEMENTARY PROVISIONS

Article 32: The listing, trading, registration, clearance and other such matters relating to corporate bonds shall comply with the relevant provisions of the stock exchange where they are listed and of the pertinent securities depository and clearing institution.