Circular on Administrative Issues Relevant to Asset Appraisal Firms that Engage in Securities and Futures-related Business

1. Conditions for the Application for Securities Business Appraisal Qualifications

(1) An asset appraisal firm wishing to engage in Securities Business shall obtain securities and futures-related business valuation qualifications (Securities Appraisal Qualifications) in accordance herewith.

(2) An asset appraisal firm that applies for Securities Appraisal Qualifications shall satisfy the following conditions:

(i) it has been lawfully established and has had its asset appraisal qualifications for at least three years and, if it has been involved in a merger by absorption, one year shall have elapsed from the date of completion of amendment of business registration;

(ii) its quality control system and other internal control systems are sound and have been effectively implemented, and its practice quality and professional ethics have been good;

(iii) it has at least 30 registered asset appraisers, of whom at least 20 have had their registered valuator certificates and been in practice continuously during the most recent three years;

(iv) it has net assets of not less than Rmb2 million;

(v) it has purchased professional liability insurance or makes allocations to a professional risk fund in accordance with provisions;

(vi) at least half of its partners or its shareholders holding not less than 50% of its equity have, most recently, been in practice with the firm continuously for at least three years; and

(vii) during the most recent three years, its valuation business revenue has totalled not less than Rmb20 million and each year has been not less than Rmb5 million.

(3) None of the following circumstances may apply to an asset appraisal firm that is applying for Securities Appraisal Qualifications:

(i) in the course of its practice activities it has had a criminal sentence or administrative penalty imposed on it and less than three years have elapsed between the date of completion of enforcement of the sentence/penalty decision and the application submission date;

(ii) it has had its Securities Appraisal Qualifications revoked for use of deception or other such illegitimate means to obtain such qualifications and less than three years have elapsed between the date of revocation and the application submission date; or

(iii) in the course of applying for Securities Appraisal Qualifications, its application was not accepted or was not approved due to concealment of relevant information or submission of false materials, and less than three years have elapsed between the date of issuance of the proof of non-acceptance or the decision withholding approval and the application submission date.

2. Application Materials for Securities Appraisal Qualifications

(1) An asset appraisal firm applying for Securities Appraisal Qualifications shall submit the following materials in triplicate:

(i) a Securities Appraisal Qualification Application Report (Annex 1) and a summary of its practice;

(ii) a Form for the Basic Particulars of an Asset Appraisal Firm (Annex 2);

(iii) a description of its quality control system and other internal control systems and the implementation thereof;

(iv) a Form on the Registration of Asset Appraisers (Annex 3) as at the end of the month preceding the submission of the application as verified by the China Appraisal Society;

(v) an audit report on its accounting statements for the most recent three years issued by an accounting firm with Securities Business qualifications, and such audit report shall contain a standalone statement disclosing the valuation revenue portion of its total revenues;

(vi) a Summary of Appraisal Business and Revenue Form (Annex 4) for the most recent three years;

(vii) a photocopy of its professional liability insurance policy, or documentation evidencing its aggregate professional risk fund; and

(viii) photocopies of the duplicates of its asset appraisal qualification certificate and business licence.

(2) An asset appraisal firm that has undergone a merger during the most recent three years shall, in addition to the materials specified above, also submit the following materials:

(i) a photocopy of the merger agreement;

(ii) audit reports on the accounting statements of the parties to the merger for the most recent three years issued by an accounting firm with Securities Business qualifications, and such audit reports shall contain standalone statements disclosing the valuation revenue portion of their total revenues;

(iii) a Form on the Registration of Asset Appraisers (Annex 3) of the parties to the merger as at the date of amendment of business registration as verified by the China Appraisal Society;

(iv) a description of changes in net assets and the professional risk funds during the period between the end of the year preceding the merger and the end of the month preceding the date of record for the merger;

(v) Summary of Appraisal Business and Revenue Forms (Annex 4) of the parties to the merger for the most recent three years; and

(vi) photocopies of the professional liability insurance policies of the parties or documentation evidencing each of their aggregate professional risk funds before the merger.

3. Establishment of Asset Appraisal Branches and Sub-branches

When an asset appraisal firm with Securities Appraisal Qualifications establishes a branch or sub-branch, it shall submit the following record filing materials in triplicate within five working days from the date of business registration of the branch or sub-branch:

(1) a Form for the Basic Particulars of an Asset Appraisal Firm (Annex 2);

(2) a Form on the Registration of Asset Appraisers (Annex 3) of the asset appraisal firm and all of its branches and sub-branches as at the date of the business registration of the branch or sub-branch as verified by the China Appraisal Society; and

(3) the written authorization and the management systems of the branch or sub-branch.

4. Merger and Division of Asset Appraisal Firms

(1) If an asset appraisal firm with Securities Appraisal Qualifications continues to exist after a merger or division and satisfies the conditions set forth in Items (ii) to (vii) of the second paragraph of Article 1 hereof, its Securities Appraisal Qualifications shall remain valid, and it shall submit the following record filing materials in triplicate within five working days from the date of amendment of its business registration:

(i) a Form for the Record Filing of Changes in the Particulars of an Asset Appraisal Firm (Annex 5);

(ii) a Form for the Basic Particulars of an Asset Appraisal Firm (Annex 2);

(iii) a photocopy of the merger or division agreement;

(iv) a photocopy of the duplicate of its post-merger or post-division business licence;

(v) a Form on the Registration of Asset Appraisers (Annex 3) as at the date of amendment of business registration after the merger or division as verified by the China Appraisal Society;

(vi) a photocopy of its professional liability insurance policy, or documentation evidencing its aggregate professional risk fund after the merger or division;

(vii) an audit report on its accounting statements as at the end of the month preceding the date of record for the merger or division issued by an accounting firm with Securities Business qualifications, and such audit report shall contain a standalone statement disclosing the valuation revenue portion of its total revenues; and

(viii) a description of its quality control system and other internal management systems and of the implementation thereof.

(2) If an asset appraisal firm newly established after the merger or division of an asset appraisal firm with Securities Appraisal Qualifications satisfies the provisions of the second and third paragraphs of Article 1 hereof, it may apply for Securities Appraisal Qualifications.

5. Record Filing of Material Matters of Asset Appraisal Firms

(1) If there is a change in the name, address, shareholders or partners, or legal representative or managing partner of an asset appraisal firm with Securities Appraisal Qualifications, the following record filing materials shall be submitted in triplicate within five working days of the date of amendment of business registration:

(i) a Form for the Record Filing of Changes in the Particulars of an Asset Appraisal Firm (Annex 5); and

(ii) photocopies of the duplicates of its asset appraisal qualification certificate and business licence.

(2) When there is a change in the name of an asset appraisal firm with Securities Appraisal Qualifications, the Ministry of Finance and the China Securities Regulatory Commission shall issue it a new Securities Appraisal Qualification certificate and announce the same after receipt of the materials and the Securities Appraisal Qualification certificate.

6. Annual Record Filing of Asset Appraisal Firms

An asset appraisal firm with Securities Appraisal Qualifications shall submit the following record filing materials in triplicate by March 31 of each year:

(1) a Form for the Basic Particulars of an Asset Appraisal Firm (Annex 2);

(2) a Form on the Registration of Asset Appraisers (Annex 3) as at the end of the previous year as verified by the China Appraisal Society;

(3) an audit report on its accounting statements for the previous year issued by an accounting firm with Securities Business qualifications, and such audit report shall contain a standalone statement disclosing the valuation revenue portion of its total revenues;

(4) a Summary of Appraisal Business and Revenue Form (Annex 4) for the previous year;

(5) a photocopy of its professional liability insurance policy, or documentation evidencing its aggregate professional risk fund; and

(6) a description of the implementation of and changes in its quality control system, management systems of branches and sub-branches and other internal management systems.

7. Routine Administration of Asset Appraisal Firms

(1) The Ministry of Finance and the China Securities Regulatory Commission will place an asset appraisal firm with Securities Appraisal Qualifications under special watch if:

(i) it has been reported;

(ii) it has been called into question by the public and the same is disclosed by the relevant media;

(iii) it is undertaking Securities Business for the first time;

(iv) turnover in its registered asset appraisers is overly frequent, or they have not engaged in Securities Business in the most recent year;

(v) there is a lack of harmony between its shareholders (partners) that could potentially affect its practice quality;

(vi) there has been a material change in its shareholders (partners);

(vii) there is an irregularity in its billing;

(viii) there is a discrepancy between the number and/or size of its customers and its practice capabilities and/or risk bearing capacity;

(ix) it has been involved in a merger or division;

(x) it has been subjected to criminal punishment, administrative penalties or industry self-regulatory sanctions;

(xi) it has failed to carry out a record filing in accordance herewith; or

(xii) another circumstance applies to it under which the Ministry of Finance and the China Securities Regulatory Commission deem it necessary to place it under special watch.

(2) When the Ministry of Finance and the China Securities Regulatory Commission conduct a monitoring inspection of the Securities Business of an asset appraisal firm in accordance with the law, the asset appraisal firm and its registered valuators shall give their cooperation.

(3) The Ministry of Finance and the China Securities Regulatory Commission shall open integrity files for asset appraisal firms that engage in Securities Business. If an asset appraisal firm with Securities Appraisal Qualifications commits a violation of provisions when engaging in Securities Business, the Ministry of Finance and the China Securities Regulatory Commission may take measures against it such as issuing a letter of warning and at the same time ordering it to rectify the matter. With respect to the asset appraisal firm's person in charge, supervisors directly responsible and other directly responsible persons, they may take measures such as having a regulatory discussion with them and issuing them a letter of warning. If the circumstances are serious, the Ministry of Finance and the China Securities Regulatory Commission may ban them from engaging in Securities Business for a specific period of time, record the same in their integrity files and publicly announce the same.

8. Revocation of Securities Appraisal Qualifications

(1) An asset appraisal firm with Securities Appraisal Qualifications shall satisfy the conditions set forth in Items (ii) to (vii) of the second paragraph of Article 1 hereof on an ongoing basis.

(2) If a circumstance arises that causes an asset appraisal firm with Securities Appraisal Qualifications to no longer satisfy any one of the conditions set forth in Items (ii) to (v) of the second paragraph of Article 1 hereof, it shall report the same to the Ministry of Finance and the China Securities Regulatory Commission within five working days and carry out rectification within 90 days from the date on which the aforementioned circumstance arose. During the rectification period, it may not undertake Securities Business. Within five workings days after completion of the rectification, it shall submit a description of the outcome of the rectification.

(3) The Ministry of Finance and the China Securities Regulatory Commission shall revoke the Securities Appraisal Qualifications of an asset appraisal firm with Securities Appraisal Qualifications if:

(i) a circumstance as specified in the second paragraph of this Article arises and it fails to report the same on time, or it fails to carry out rectification or, after rectification, it still fails to satisfy the conditions specified in Items (ii) to (v) of the second paragraph of Article 1 hereof; or

(ii) a change in circumstances results in it no longer satisfying the conditions set forth in item (vi) or (vii) of paragraph (2) of Article 1 hereof.

(4) If the business of an asset appraisal firm with Securities Appraisal Qualifications is terminated, its Securities Appraisal Qualifications shall become null and void and its Securities Appraisal Qualification certificate shall be returned before the cancellation of business registration.

(5) If an asset appraisal firm with Securities Appraisal Qualifications ceases to engage in Securities Business due to a reason other than being closed down, or having its Securities Appraisal Qualifications revoked, in accordance with the law, it shall return its Securities Appraisal Qualification certificate and submit in triplicate an Explanation of Why an Asset Appraisal Firm Has Terminated Its Securities Business (Annex 6).

(6) If an asset appraisal firm is closed down, or has its Securities Appraisal Qualifications revoked, in accordance with the law, or returns its Securities Appraisal Qualification certificate, the Ministry of Finance and the China Securities Regulatory Commission shall announce the same.

9. Miscellaneous Matters

(1) The China Appraisal Society shall assist the Ministry of Finance and the China Securities Regulatory Commission in their administration of asset appraisal firms with Securities Appraisal Qualifications.

(2) For the purposes of this Circular, the term “Securities Business” means various types of asset appraisal businesses involving various enterprises that have issued or intend to issue securities, as well as asset appraisal businesses involving securities and futures business firms, stock and futures exchanges, securities investment funds and their management companies, securities depository and clearing firms, etc.

(3) The expression “at least” as used in this Circular includes the number itself.

(4) Asset Appraisal Firms, when submitting relevant Annexes and audit reports in accordance herewith, shall additionally submit electronic versions thereof. If a photocopy of a relevant document is submitted, it shall bear the official stamp of the entity.

(5) This Circular shall be effective as of July 1 2008. If a lawful asset appraisal firm holding a Securities Business asset appraisal permit jointly issued by the former State Administration for State-owned Assets and the China Securities Regulatory Commission submits a Form for the Basic Particulars of an Asset Appraisal Firm (Annex 2) and a description of the historical changes in its Securities Business asset appraisal permit within 60 days from the effective date hereof, its Securities Appraisal Qualifications shall remain valid until December 31 2008.

Annexes:

1. Securities Appraisal Qualification Application Report

2. Form for the Basic Particulars of an Asset Appraisal Firm

3. Form on the Registration of Asset Appraisers

4. Summary of Appraisal Business and Revenue Form

5. Form for the Record Filing of Changes in the Particulars of an Asset Appraisal Firm

6. Explanation of Why an Asset Appraisal Firm Has Terminated Its Securities Business