Opinion on the Application of Securities and Futures Laws No.3: Opinion on the Application of the Provision “No Major Change Shall Have Occurred in the Issuer's Core Business During the Most Recent Three Years” of Article 12 of the «Measures for the Administration of Initial Public Offerings of Shares and the Listing Thereof»

(Issued by the China Securities Regulatory Commission on May 19 2008.)

Announcement of the CSRC [2008] No.22

Article 12 of the Measures for the Administration of Initial Public Offerings of Shares and the Listing Thereof (Order of the CSRC No.32; the “IPO Measures”) requires that no major change shall have occurred in an issuer's core business during the most recent three years. Recently, there have been circumstances where, during the most recent three years (the Reporting Period), certain companies that have applied for an initial public offering of shares and the listing thereof (Issuers) have reorganized identical, similar or related businesses under the same corporate controller, and numerous Issuers have asked whether such circumstances are in compliance with the aforementioned requirement of the IPO Measures. After consideration, we are of the opinion that:

1. Many reorganizations of identical, similar or related businesses under the same corporate controller by an Issuer are market acts effected by an enterprise group for the purpose of realizing an overall offering and listing of the core business, reducing management costs, leveraging the advantages of business synergies and enhancing the enterprise's economies of scale. From a capital market perspective, the reorganization and integration by an Issuer of businesses under the same corporate controller that are identical, similar or related to its own prior to an offering and listing is helpful in avoiding intra-industry competition, reducing affiliated transactions, optimizing corporate governance, ensuring compliant operation and has a positive role in enhancing the quality of listed companies, optimizing the resource allocation function of capital markets, protecting the lawful rights and interests of investors, particularly small and medium investors, and promoting the healthy and stable development of capital markets.

2. If an Issuer has reorganized identical, similar or related businesses under the same corporate controller during the Reporting Period and it additionally satisfies the following conditions, its core business shall be deemed not to have undergone a major change:

(1) the reorganized party shall have been under the control of the same corporate controller as the Issuer from the beginning of the Reporting Period or, if the reorganized party was newly established during the Reporting Period, it shall have been under the control of the same corporate controller as the Issuer from the date of its establishment; and

(2) the business of the reorganized party injected into the Issuer shall be related (identical or similar industry or the upstream or downstream segment of the same production chain) to the business of the Issuer prior to the reorganization.

The reorganization method shall comply with market principles, and include but not be limited to the following:

(1) the Issuer acquiring the equity of the reorganized party;

(2) the Issuer acquiring the business assets of the reorganized party;

(3) the corporate controller using the equity or business assets of the reorganized party to increase the capital of the Issuer; or

(4) the Issuer absorbing the reorganized party by way of a merger by absorption.

3. When an Issuer restructures identical, similar or related businesses under the same corporate controller during the Reporting Period, it shall pay close attention to the effect of the reorganization on its total assets, or its operating revenue or gross profit. The Issuer shall, depending on the effect, handle matters in accordance with the following requirements:

(1) if the total assets of the reorganized party at the end of the financial year preceding the reorganization or its operating revenue or gross profit for the financial year preceding the reorganization equal(s) or exceed(s) 100% of those/that of the corresponding project of the Issuer prior to the reorganization, the Issuer may apply for an offering only after it has operated for one financial year after the reorganization so as to permit investors to understand its overall operations after the reorganization;

(2) if the total assets of the reorganized party at the end of the financial year preceding the reorganization or its operating revenue or gross profit for the financial year preceding the reorganization equal(s) or exceed(s) 50% but are/is less than 100% of those/that of the corresponding project of the Issuer prior to the reorganization, the sponsor and the Issuer's legal counsel shall, in accordance with requirements of relevant laws and regulations in respect of an entity making an initial public offering, include the reorganized party in their due diligence investigations and issue the relevant opinion; additionally, the documents issued by the accountant concerning the reorganized party and other documents relating to financial accounting information shall be submitted in accordance with the requirements of Parts Four and Eight of the schedule to the Guidelines for the Contents and Formats for Information Disclosures by Companies that Offer Securities to the Public (No.9): Application Documents for Initial Public Offerings of Shares and the Listing Thereof (Zheng Jian Fa Xing Zi [2006] No.6) together with the other offering application documents;

(3) if the total assets of the reorganized party at the end of the financial year preceding the reorganization or its operating revenue or gross profit for the financial year preceding the reorganization equal(s) or exceed(s) 20% of those/that of the corresponding project of the Issuer prior to the reorganization, the submitted financial statements must, at least, include the balance sheet for the most recent period following the completion of the reorganization.

4. If there were affiliated transactions during the financial year preceding the reorganization between the reorganized party and the Issuer prior to the reorganization, the total assets, operating revenue or gross profit shall be calculated after subtracting such transactions.

5. If more than one reorganization occurred in the financial year or period preceding the submission of the IPO application documents by the Issuer, the effects of the reorganizations on the Issuer's total assets, operating revenue or gross profit shall be calculated cumulatively.

6. If a reorganization involves a merger of an enterprise subject to the same control as specified in the Enterprise Accounting Guidelines No.20 - Business Combinations, the net losses or gains of the reorganized party shall be counted as non-recurring losses or gains, and shall be indicated separately in the submitted financial statements.

If a reorganization does not involve a merger of an enterprise under the same corporate controller, but the total assets of the reorganized party at the end of the financial year preceding the reorganization or its operating revenue or gross profit for the financial year preceding the reorganization equal(s) or exceed(s) 20% of those/that of the corresponding project of the Issuer prior to the reorganization, in preparing the Issuer's pro forma income statements for the most recent three years and most recent period, such statements shall be prepared as if the post-reorganization corporate structure had already existed at the beginning of the period of the submitted statements and the accountant making the submission shall issue an opinion thereon.