Provisions on Several Issues Concerning the Regulation of Material Asset Reorganizations by Listed Companies

(Issued by the China Securities Regulatory Commission on April 16 2008.)

Announcement of the CSRC [2008] No.14

Article 1: If a listed company intends to carry out a material asset reorganization, all of its directors shall strictly perform their obligation of good faith and duly carry out the work involved in maintaining the confidentiality of information and in suspending and resuming the trading of the company's shares.

After the first resolution of the board of directors on the material asset reorganization has been voted on and adopted, the listed company shall apply to the stock exchange outside trading hours on the day of the resolution or the following working day to make an announcement. The board of directors shall prepare a preliminary material asset reorganization plan or material asset reorganization report in accordance with the Measures for the Administration of Material Asset Reorganizations by Listed Companies (Order of the CSRC No.53) and relevant guidelines for information disclosure and announce such preliminary plan or report, as an appendix to the board resolution, together with such resolution.

The transaction counterparty to the material asset reorganization shall give an undertaking warranting that the information that it provides is true, accurate and complete and that such information does not contain any false records, misleading statements or material omissions, and give a statement that it will bear joint and several legal liability. Such undertaking and statement shall be announced together with the resolution of the board of directors of the listed company.

Article 2: When the listed company is to hold the first meeting of the board of directors to consider matters relating to the material asset reorganization, it shall execute a conditional transaction contract with the pertinent transaction counterparty on the day of, or the day prior to, the meeting of the board of directors. The transaction contract shall state that the transaction contract shall enter into effect immediately upon the contemplated material asset reorganization being approved by the board of directors and the shareholders' general meeting of the listed company and by the CSRC.

If the material asset reorganization involves an issuance of shares to purchase assets, the transaction contract shall specify the quantity or quantity range of shares that the specified party is subscribing for, the subscription price or pricing principles and the lock-up period as well as the basic details of the target assets, the transaction price or pricing principles, the schedule for the change in ownership or delivery of the assets, liability for breach of contract, etc.

Article 3: If the board of directors has not issued a notice convening a shareholders' general meeting within six months after the announcement of the first board resolution on the issuance of shares to purchase assets, the listed company shall convene another meeting of the board of directors to consider the issuance of shares to purchase assets and treat the date of the announcement of the board resolution as the reference date for the pricing of the shares to be issued.

If an issuance of shares to purchase assets submitted to the shareholders' general meeting for consideration fails to gain approval and if the board of directors of the listed company again passes a resolution for such issuance of shares to purchase assets, the date of announcement of such board resolution shall be the reference date for the pricing of the shares to be issued.

Article 4: If a listed company intends to carry out a material asset reorganization, the board of directors shall make a prudent judgement on whether the contemplated transaction complies with the following provisions and record the same in the minutes of the board resolutions:

(1) if the subject assets of the transaction involve matters requiring approval, such as a project proposal, environmental protection, industry entry, land, planning and construction, the appropriate permit or the official reply from the relevant competent authority shall be obtained before the first resolution of the board of directors on the contemplated transaction is announced; if the contemplated transaction involves matters requiring approval, the progress in the applications for approvals filed with the relevant competent authorities and the remaining approval procedures to be carried out shall be disclosed in detail in the preliminary plan for or the report on the material asset reorganization and a special warning shall be given on the possible risk of not obtaining the approval;

(2) if the listed company intends to purchase assets, the seller of the assets must lawfully have unqualified rights in the subject assets before the first resolution of the board of directors on the contemplated transaction is announced, and there must not be any restrictions or bar on its transfer of the assets;

if the asset that the listed company intends to purchase is equity in an enterprise, the enterprise may not be characterized by fraudulent capital contributions or other circumstance that could affect its lawful existence; if the listed company will become a stockholding company after the completion of the transaction, the enterprise equity that is the principal subject asset shall be a controlling interest;

if the assets to be purchased by the listed company are resource-type rights, such as leaseholds and mining rights, it shall have already obtained the relevant title certificate and satisfy the relevant development or exploitation conditions;

(3) the assets purchased by the listed company are conducive to improving the integrity of its assets (including obtaining the trademark rights, patent rights, non-patented technology, exploitation rights, franchise rights and other such intangible assets required for its production and operations) and conducive to the listed company maintaining its independence in terms of personnel, procurement, production, sales, intellectual property, etc.; and

(4) the contemplated transaction shall be conducive to improving the financial position of the listed company, strengthening its continuous profitability, highlighting its core business, enhancing its risk resistance capacity, bolstering its independence, reducing affiliated transactions and avoiding intra-industry competition.

Article 5: If a listed company intends to carry out a material asset reorganization, its board of directors, the transaction counterparty, securities service institutions and relevant persons shall strictly comply with the relevant provisions of the Circular on Regulating Information Disclosure of Listed Companies and Acts of Relevant Parties (Zheng Jian Gong Si Zi [2007] No.128) and duly perform their information disclosure and other such obligations and procedures.

If the board of directors of a listed company or the transaction counterparty cancels or suspends a reorganization plan or makes a substantive change to such plan (including but not limited to changing the principal transaction counterparty, changing the principal subject assets, etc.) without sufficient and legitimate reason after the first resolution of the board of directors on the material asset reorganization has been announced, the CSRC shall take regulatory measures against and pursue the legal liability of the listed company, the transaction counterparty, the securities service institutions and other such entities and relevant persons in accordance with relevant provisions.