Measures for the Administration of the Takeover of Listed Companies (Revised)

Revised on February 14 2012. Latest revision can be found at:
http://www.chinalawandpractice.com/Article/3002670/Measures-for-the-Administration-of-the-Takeover-of-Listed-Companies-2nd-Revision.html

(Promulgated by the China Securities Regulatory Commission on, and effective as of, August 27 2008.)

Order of the CSRC No.56

PART ONE: GENERAL PROVISIONS

Article 1: These Measures have been formulated pursuant to the Securities Law, the Company Law and other related laws and administrative regulations in order to regulate takeovers of listed companies and related share interest changes, protect the lawful rights and interests of listed companies and investors, maintain the order of the securities market, safeguard the public interest and promote the optimal allocation of securities market resources.

Article 2: Takeovers of listed companies and related share interest changes must comply with laws and administrative regulations, and the provisions of the China Securities Regulatory Commission (the CSRC). Concerned parties shall act in good faith, abide by social and commercial ethics, consciously maintain the order of the securities market and accept supervision by the government and public.

Article 3: Takeovers of listed companies and related share interest changes must comply with the principles of transparency, fairness and impartiality.

A party with a disclosure obligation in a takeover of a listed company and related share interest changes shall fully disclose its interests in the listed company and changes in such interests and strictly perform its reporting, announcement and other statutory obligations in accordance with the law. Until relevant information is disclosed, such party shall bear an obligation of confidentiality in respect thereof.

The information reported and announced by a party with a disclosure obligation must be true, accurate and complete, and may not contain any false or misleading statements or material omissions.

Article 4: Takeovers of listed companies and related share interest changes may not jeopardize state security or the public interest.

If a takeover of a listed company and related share interest changes involve such matters as state industrial policy, industry access, transfer of state-owned shares, etc., the approval of the relevant state departments shall be required before the same can be effected.

If a foreign investor wishes to take over a listed company and carry out related share interest changes, it shall obtain the approval of the relevant state departments, and such takeover shall be governed by the laws of China and be subject to Chinese judicial and arbitral jurisdiction.

Article 5: An acquirer may become the controlling shareholder of a listed company by acquiring shares thereof, become the de facto controller of a listed company through an investment relationship, agreement or other arrangement or may obtain control of a listed company through a combination of the foregoing methods.

An acquirer includes the investor and other persons acting in concert.

Article 6: No one may use the takeover of a listed company to harm the lawful rights and interests of the target company or its shareholders.

A listed company may not be taken over if:

(1) the acquirer is encumbered by a relatively large debt that it failed to discharge upon the due date and such circumstance persists;

(2) the acquirer has committed or is suspected of having committed a major violation of the law during the most recent three years;

(3) the acquirer has committed a serious breach of trust in the securities market during the most recent three years;

(4) the acquirer is a natural person characterized by any of the circumstances specified in Article 147 of the Company Law; or

(5) other circumstances where the takeover of a listed company is prohibited as specified in laws or administrative regulations or by the CSRC.

Article 7: The controlling shareholder or de facto controller of a target company may not abuse its rights as a shareholder to harm the lawful rights and interests of the target company or its other shareholders.

If a target company's controlling shareholder or de facto controller and its affiliated parties harm the lawful rights and interests of the target company or its other shareholders, the said controlling shareholder or de facto controller shall, prior to transferring its control over the target company, actively eliminate such harm. If it fails to eliminate such harm, it shall make arrangements to use the proceeds from the sale of the relevant shares to eliminate all of the harm and for any portion of the harm that the proceeds are insufficient to eliminate, it shall provide a sufficient and valid security bond or arrangement and, pursuant to the company's articles of association, seek the approval therefor of the shareholders' general meeting of the target company.

Article 8: The directors, supervisors and senior management personnel of a target company bear obligations of loyalty and due diligence to the company and shall treat equitably all of the potential acquirers seeking to take over the company.

The decisions and measures taken by the board of directors of the target company with respect to the takeover shall be conducive to safeguarding the interests of the company and its shareholders. The board of directors may not abuse its powers to erect inappropriate barriers to the takeover, use company resources to provide financial assistance in any form to the acquirer or harm the lawful rights and interests of the company or its shareholders.

Article 9: When an acquirer intends to take over a listed company, it shall engage a professional firm registered in China that is qualified to engage in the financial consulting business as a financial consultant. If the acquirer fails to engage a financial consultant in accordance with the Measures, it may not proceed with the takeover of the listed company.

Financial consultants shall act with due diligence, comply with industry standards and professional ethics, maintain their independence and ensure the truthfulness, accuracy and completeness of the documents that they prepare and issue.

If a financial consultant deems that the acquirer intends to use the takeover of the listed company to harm the lawful rights and interests of the target company and its shareholders, it shall refuse to provide financial consultancy services to the acquirer.

Article 10: The CSRC oversees the takeover of listed companies and related share interest changes in accordance with the law.

The CSRC will establish a special committee composed of professionals and relevant experts. The special committee may, at the request of the functional departments of the CSRC, provide advisory opinions on whether the takeover of a listed company will be constituted, whether circumstances prohibiting the takeover of a listed company exist and other relevant matters. The CSRC will render its decisions in accordance with the law.

Article 11: Stock exchanges shall formulate operational rules in accordance with the law, organize the transactions and provide services for the takeover of listed companies and the related share interest changes, carry out real time monitoring of related securities trading activities and monitor whether the parties with disclosure obligations in takeovers of listed companies and related share interest changes duly perform their disclosure obligations.

Securities depository and clearing institutions shall formulate operational rules in accordance with the law and provide services relating to such matters as securities registration, deposit, clearing, etc. for takeovers of listed companies and related share interest changes.

PART TWO: DISCLOSURE OF INTERESTS

Article 12: The interests of an investor in a listed company include the shares registered under its name, and shares the voting rights attaching to which it actually controls but that are not registered under its name. The interests in a listed company of an investor and its persons acting in concert shall be calculated together.

Article 13: An investor and its persons acting in concert shall, within three days from the date on which, through securities transactions on a stock exchange, the shares of a listed company in which they have an interest reach 5% of the outstanding shares of such listed company, prepare a report on change in interests, submit the written report to the CSRC and the stock exchange, forward a copy thereof to the agency of the CSRC of the place where the listed company is located (the Agency), notify the listed company and announce the same. During the aforementioned period of time, they may not further buy or sell the listed company's shares.

Once the shares in which the aforementioned investor and its persons acting in concert have an interest reach 5% of the outstanding shares of the listed company, whenever the percentage of shares in which they have an interest increase or decrease through transactions on the stock exchange by a quantity equivalent to 5% of the outstanding shares of the listed company, they shall report and announce the same in accordance with the provisions of the preceding paragraph. They may not further buy or sell the listed company's shares during the reporting period or for two days after making the report and announcement.

Article 14: If an investor and its persons acting in concert intend to have their holding of the shares in a listed company in which they have an interest reach or exceed 5% of such company's outstanding shares through a transfer by agreement, they shall, within three days of the occurrence thereof, prepare a report on change in interests, submit the written report to the CSRC and the stock exchange, forward a copy thereof to the Agency, notify the listed company and announce the same.

Once the shares in which the aforementioned investor and its persons acting in concert have an interest reach 5% of the outstanding shares of the listed company, whenever the percentage of shares in which they have an interest increases or decreases by a quantity equal to or exceeding 5% of the outstanding shares of the listed company, they shall perform their reporting and announcement obligations in accordance with the provisions of the preceding paragraph.

The investors and their persons acting in concert mentioned in the two preceding paragraphs may not further buy or sell the listed company's shares before making the report and announcement. The relevant share transfer and registration of change of ownership procedures shall be carried out in accordance with Part Four hereof and the provisions of the stock exchange and the securities depository and clearing institution.

Article 15: If a change arises in the shares in which an investor and its persons acting in concert have an interest through an administrative allocation or change, the enforcement of a court ruling, succession, bestowal or other such method, thereby reaching the threshold specified in the preceding Article, they shall perform their reporting and announcement obligations in accordance with the preceding Article and carry out the procedures for registration of the change of the shares' ownership with reference to the provisions of the preceding Article.

Article 16: If an investor and its persons acting in concert are not the largest shareholder or de facto controller of the listed company and the shares in which they have an interest reach or exceed 5% of the outstanding shares of the company but have not reached 20% thereof, they shall prepare a simplified report on change in interests containing the following information:

(1) the names and domiciles of the investor and his/her persons acting in concert; if the investor and its persons acting in concert are legal persons, their names, places of registration and their legal representatives;

(2) the objective of the shareholding and whether they intend to continue increasing their interest in the listed company during the following 12 months;

(3) the name of the listed company, and the class, quantity and percentage of shares;

(4) the date on which the shares of the listed company in which they have an interest reached or exceeded 5% of the outstanding shares of such company or the date on which the increase or decrease in the shares in which they have an interest reached 5%, and the means by which this was accomplished;

(5) a brief description of their buying and selling of the company's shares through securities transactions on the stock exchange during the six months prior to the change in their interest; and

(6) other information that the CSRC or stock exchange requires to be disclosed.

If the aforementioned investor and its persons acting in concert are the largest shareholder or de facto controller of the listed company and the shares in which they have an interest reach or exceed 5% of the outstanding shares of such listed company but have not reached 20% thereof, they shall additionally disclose the information specified in the first paragraph of Article 17 hereof.

Article 17: If the shares in which an investor and the persons acting in concert have an interest reach or exceed 20% of the outstanding shares of the listed company, but do not exceed 30% thereof, they shall prepare a detailed report on change in interests in which they shall disclose the following information, in addition to the information that they are required to disclose under the preceding Article:

(1) the controlling shareholders or de facto controllers of the investor and its persons acting in concert and charts of their equity control relationships;

(2) the price for acquiring the relevant shares, the amount required therefor and the source of the funds or other payment arrangement;

(3) whether the business in which the investor, its persons acting in concert and their controlling shareholders or de facto controllers engage in is in intra-industry competition or potentially in intra-industry competition with that of the listed company and whether continuing affiliated transactions exist between them; if there is intra-industry competition or continuing affiliated transactions between them, whether relevant arrangements have been made to ensure that the investor, its persons acting in concert and their affiliated parties are not in intra-industry competition with the listed company and that they preserve its independence;

(4) the follow-up plan to make adjustments to the listed company's assets, business, personnel, organizational structure, articles of association, etc. during the following 12 months;

(5) the material transactions between the listed company and the investor and its persons acting in concert during the preceding 24 months;

(6) the absence of the circumstances specified in Article 6 hereof; and

(7) the capacity to provide relevant documents in accordance with Article 50 hereof.

If the aforementioned investor and its persons acting in concert are the largest shareholder or de facto controller of the listed company, they shall additionally engage a financial consultant to issue a review opinion on the information disclosed in the aforementioned report on change in interests, except in the case of an administrative allocation of, or change in, state-owned shares, a share transfer between different entities under the control of the same de facto controller or shares obtained in a succession. If the investor and its persons acting in concert undertake not to exercise the voting rights attaching to the relevant shares for at least three years, they may be exempted from engaging a financial consultant and providing the documents specified in Item (7) of the preceding paragraph.

Article 18: If an investor and its persons acting in concert have disclosed a report on change in interests and, within six months from the date of the disclosure of such report, are required to submit and announce another report on change in interests due to a change in the shares in which they have an interest, they may limit their report and announcement to that information that is different from that in the previous report. If more than six months have elapsed since the previous disclosure, the investor and its persons acting in concert shall prepare a report on change in interests and perform their reporting and announcement obligations in accordance with this Part.

Article 19: If the shares in which an investor and its persons acting in concert have an interest change due to a reduction in the listed company's share capital in such a way that the circumstance specified in Article 14 hereof arises, the investor and its persons acting in concert shall be exempted from performing their reporting and announcement obligations. The listed company shall announce the changes in the shares in which its shareholders have an interest that resulted from such reduction within two working days of completing the amendment of registration for the reduction in its share capital. If a reduction in the share capital of a company could result in an investor and its persons acting in concert becoming the largest shareholder or de facto controller of the company, the investor and its persons acting in concert shall perform their reporting and announcement obligations in accordance with the first paragraph of Article 17 hereof within three working days from the date of the announcement of the resolution of the company's board of directors concerning the reduction of the company's share capital.

Article 20: If relevant information is published in the media or if abnormal trading in the company's stock occurs prior to the disclosure in accordance with the law by the parties with a disclosure obligation in the takeover of a listed company and related share interest changes, the listed company shall immediately make inquiries with concerned parties. Such concerned parties shall give their replies in writing in a timely manner and the listed company shall issue an announcement in a timely manner.

Article 21: The parties with a disclosure obligation in the takeover of a listed company and related share interest changes shall make their information disclosures in accordance with the law in at least one medium designated by the CSRC. If a disclosure is made in other media, the information disclosed shall be identical to, and the time of such disclosure may not be earlier than, that of the disclosure in the designated medium.

Article 22: If the parties with a disclosure obligation in the takeover of a listed company and related share interest changes act in concert, they may agree in writing that one among them will act as their designated representative in preparing unified information disclosure documents and agree to authorize the designated representative to sign and stamp the information disclosure documents.

Each party with a disclosure obligation shall be liable for the information relating to it appearing in the information disclosure documents. Where relevant information in the information disclosure documents relates to multiple parties with a disclosure obligation, each party with a disclosure obligation shall be jointly and severally liable for the relevant information.

PART THREE: TAKEOVER BY OFFER

Article 23: If an investor wishes to acquire shares of a listed company by way of an offer of its own accord, it may issue an offer to all of the target company's shareholders to acquire all of the shares held by them (a General Offer) or issue an offer to all of the target company's shareholders to acquire part of the shares held by them (a Partial Offer).

Article 24: If, through securities transactions on a stock exchange, the shares of a listed company held by an acquirer reach 30% of the outstanding shares of such company, and such acquirer wishes to continue to increase its holding of such company's shares, it shall do so by way of an offer and issue either a General Offer or a Partial Offer.

Article 25: If an acquirer intends to acquire shares of a listed company by way of an offer in accordance with Articles 23, 24, 47 and 56 hereof, the shares it acquires may not account for less than 5% of the listed company's outstanding shares.

Article 26: If a listed company is to be taken over by way of an offer, the acquirer shall treat all of the target company's shareholders equitably. Shareholders holding the same class of shares shall be accorded equal treatment.

Article 27: If an acquirer issues a General Offer with the objective of delisting the listed company, or after having its application for an exemption rejected by the CSRC, it shall pay the takeover price in cash. If the takeover price is to be paid in legally transferable securities (Securities), the shareholders of the target company shall additionally be offered the option to take payment in cash.

Article 28: If shares of a listed company are to be acquired by way of an offer, the acquirer shall prepare a report on takeover by offer, engage a financial consultant to submit a written report to the CSRC and stock exchange, forward a copy to the Agency, notify the target company and issue an alert with respect to the abstract of the report on takeover by offer.

The acquirer shall announce its report on takeover by offer, the professional opinion of its financial consultant and the legal opinion issued by a lawyer within 15 days from submitting, in accordance with the preceding paragraph, the report on takeover by offer complying with CSRC provisions and the related documents specified in Article 50 hereof. If the CSRC does not express a reservation with respect to the information disclosed in the report on takeover by offer within 15 days, the acquirer may make an announcement. If the CSRC discovers that the report on takeover by offer fails to comply with laws, administrative regulations or relevant provisions, it will notify the acquirer in a timely manner and the acquirer may not announce its takeover offer.

Article 29: The report on takeover by offer specified in the preceding Article shall specify the following matters:

(1) the name and domicile of the acquirer; if the acquirer is a legal person, its name, place of registration and legal representative, and a chart of the equity control relationship with its controlling shareholder or de facto controller;

(2) the acquirer's decision on the takeover, the objective thereof and whether, during the forthcoming 12 months, it intends to continue increasing its shareholding;

(3) the name of the listed company and the class of shares to be acquired;

(4) the quantity and percentage of shares it intends to acquire;

(5) the takeover price;

(6) the amount required for the takeover, the source of funds and a fund guarantee, or other payment arrangement;

(7) the terms of the takeover offer;

(8) the takeover period;

(9) the quantity and percentage of the shares of the target company held at the time of the submission of the takeover report;

(10) an analysis of the impact on the listed company of the contemplated takeover, including whether the business in which the acquirer and its affiliated parties are engaged is in intra-industry competition or potentially in intra-industry competition with that of the listed company and whether continuing affiliated transactions exist between them; if there is intra-industry competition or continuing affiliated transactions between them, whether the acquirer has made appropriate arrangements to ensure that it and its affiliated parties are not in intra-industry competition with the listed company and that the independence of the listed company is maintained;

(11) the follow-up plan to make adjustments to the listed company's assets, business, personnel, organizational structure, articles of association, etc. during the forthcoming 12 months;

(12) the material transactions between the listed company and the acquirer and its affiliated parties during the preceding 24 months;

(13) details of the buying and selling of the target company's shares through securities transactions on the stock exchange during the preceding six months; and

(14) other information that the CSRC requires to be disclosed.

If the acquirer issues a General Offer, it shall fully disclose in the report on takeover by offer the risks of delisting, the time of completion of the takeover after the delisting and follow-up arrangements for the sale of their shares by the remaining shareholders who still hold shares of the listed company. An acquirer that issues a General Offer with the objective of delisting the company shall not be required to disclose the information specified in Item (10) of the preceding paragraph.

Article 30: If an acquirer that intended to acquire more than 30% of the shares of a listed company in accordance with Article 47 hereof instead needs to effect such takeover by way of an offer, it shall issue an alert with respect to the abstract of its report on takeover by offer within three days after reaching the takeover agreement or making a similar arrangement, perform its reporting and announcement obligations in accordance with Articles 28 and 29 hereof and shall be exempt from preparing, submitting and publishing a listed company takeover report. If approvals are required by law, it shall put a special notice in the announcement stating that relevant approvals must be obtained before the contemplated offer can be made.

If the acquirer fails to obtain approval, it shall submit a report on cancelling the takeover plan to the CSRC within two working days from receiving the notice, and forward copies thereof to the Agency and stock exchange, notify the target company and announce the same.

Article 31: If, during the period between the submission of the report on takeover by offer to the CSRC and announcement of the same, an acquirer intends of its own accord to cancel the takeover plan, it shall submit an application for cancellation of the takeover plan and an explanation of the reasons therefor to the CSRC and announce the same. The acquirer may not attempt to take over the same listed company within 12 months from the announcement date.

Article 32: The board of directors of the target company shall conduct an investigation of the entity qualifications of the acquirer, its credit standing and takeover intent, analyze the offer conditions, issue a recommendation as to whether the shareholders should accept the offer and engage an independent financial consultant to issue a professional opinion. The board of directors of the target company shall submit its report and the professional opinion of the independent financial consultant to the CSRC within 20 days after the announcement of the report on takeover by offer by the acquirer, forward copies thereof to the Agency and stock exchange and announce the same.

If the acquirer materially alters the conditions of the takeover offer, the board of directors of the target company shall, within three working days, submit the supplementary opinions issued by the board of directors and the financial consultant on the alteration of the offer conditions and report and announce the same.

Article 33: During the period between the issuance of the alert by the acquirer and completion of the takeover offer, other than the target company continuing to carry out its normal business activities or implementing the resolutions that have been adopted by the shareholders' general meeting, the board of directors of the target company may not, without the approval of the shareholders' general meeting, materially affect the company's assets, liabilities, interests or business results through the disposal of company assets, investment in third parties, adjusting the company's core business, providing security, taking out loans, etc.

Article 34: Directors of the target company may not resign during the takeover offer period.

Article 35: When an acquirer effects a takeover by offer in accordance herewith, the offer price for a class of shares may not be less than the highest price paid by the acquirer to acquire the same class of shares during the six months prior to the date of the alert for the takeover offer.

If the offer price is less than the arithmetical average of the daily weighted average price for that class of shares during the 30 trading days prior to the date of the alert, the financial consultant engaged by the acquirer shall analyze the trading in that class of shares during the preceding six months and state whether the stock price is being manipulated, whether there are persons acting in concert with the acquirer that have not been disclosed, whether the acquirer made other payment arrangements when acquiring the company's shares during the preceding six months, the reasonableness of the offer price, etc.

Article 36: The acquirer may pay the price for taking over the listed company in cash, Securities, a combination of cash and Securities or other such lawful means. The financial consultant engaged by the acquirer shall state that the acquirer has the capacity to effect the takeover by offer.

If the takeover price is to be paid in cash, a sum of not less than 20% of the total takeover price shall be deposited as a security bond with the bank designated by the securities depository and clearing institution at the time the alert for the takeover offer is issued.

If the acquirer is to pay the takeover price in Securities, it shall provide the audited financial accounting reports of the issuer of the Securities for the most recent three years, a Securities valuation report, and cooperate in the due diligence investigation conducted by the independent financial consultant engaged by the target company.

If the acquirer is to pay the takeover price in Securities that are listed and traded on a stock exchange, it shall deliver all of the Securities to be used as payment into the custody of the securities depository and clearing institution at the time the alert for the takeover offer is issued, unless the listed company is offering new shares. If the acquirer is to pay the takeover price in bonds listed on a stock exchange, the period of time such bonds are listed and tradable may not be less than one month. If the acquirer is to pay the takeover price in Securities that are not listed and traded on a stock exchange, it must give the shareholders of the target company the option of taking payment in cash and disclose in detail the method and procedures for the custody of such Securities and their delivery to the shareholders of the target company.

Article 37: The takeover period specified in the takeover offer may not be less than 30 days or greater than 60 days, unless a competing offer is made.

The acquirer may not revoke its takeover offer during the term of the undertaking specified in the takeover offer.

Article 38: If a takeover offer is made, during the period between the issuance of the announcement and the expiration of the takeover period, the acquirer may neither sell shares of the target company nor purchase shares of the target company in a manner other than that specified in the offer or on terms that surpass those of the offer.

Article 39: The takeover terms specified in the takeover offer shall apply to all of the shareholders of the target company.

If the acquirer wishes to amend the takeover offer, it must first submit a written report to the CSRC, forward copies to the Agency, stock exchange and securities depository and clearing institution, and notify the target company. It shall announce such amendments after approval by the CSRC.

Article 40: The acquirer may not amend the takeover offer during the 15 days prior to the expiration of the takeover period, unless a competing offer is made.

If a competing offer is made and the acquirer that issued the initial offer amends its takeover offer less than 15 days prior to the expiration of the initial takeover offer period, the takeover period shall be extended. The extended offer period shall not be less than 15 days nor run beyond the date of expiration of the last competing offer. Additionally, the security bond shall be increased by the specified percentage. If the takeover price is to be paid in Securities, the corresponding quantity of Securities shall be added and delivered into the custody of the securities depository and clearing institution.

The acquirer that issued the competing offer may not issue the alert for the takeover offer any later than 15 days prior to the expiration of the initial takeover offer period, and shall perform its reporting and announcement obligations in accordance with Articles 28 and 29 hereof.

Article 41: If a material change in the basic facts disclosed in the report on takeover by offer occurs, the acquirer shall, within two working days from the date of the occurrence of such material change, submit a written report to the CSRC and forward copies to the Agency and stock exchange, notify the target company and announce the same.

Article 42: Those shareholders that agree to accept the takeover offer (the Preliminary Accepters) shall appoint a securities company to carry out the relevant procedures for preliminary acceptance of the offer. The acquirer shall appoint a securities company to carry out with the securities depository and clearing institution the procedures for the temporary custody of the tendered shares. The tendered shares in the temporary custody of the securities depository and clearing institution may not be transferred during the takeover offer period.

For the purposes of the preceding paragraph, the term “preliminary acceptance” means the initial intent of the shareholders of the target company indicating that they agree to accept the offer but which, during the takeover offer period until the acceptance becomes irrevocable, does not constitute an undertaking. A Preliminary Accepter may appoint a securities company to carry out the procedures for the withdrawal of its preliminary acceptance of the offer up until three trading days prior to the expiration of the takeover offer period. In such circumstances, the securities depository and clearing institution shall, pursuant to the Preliminary Accepter's withdrawal application, lift its temporary custody over the tendered shares. During the three trading days prior to the expiration of the takeover offer period, the Preliminary Accepters may not withdraw their acceptance of the offer. During the takeover offer period, the acquirer shall publish on a daily basis on the stock exchange's website the quantity of shares that have been tendered.

If a competing offer is made, a Preliminary Accepter of the initial offer that wishes to recover, in whole or in part, its tendered shares and sell the same to the competing acquirer shall appoint a securities company to carry out the procedures for the withdrawal of the preliminary acceptance of the initial offer and the relevant procedures for the preliminary acceptance of the competing offer.

Article 43: Upon expiration of the offer period, the acquirer shall, if it issued a Partial Offer, acquire the shares tendered by the company's shareholders on the terms specified in the takeover offer. If the quantity of tendered shares exceeds the target acquisition quantity, the acquirer shall acquire the tendered shares pro rata. If the objective of the takeover is to delist the target company's listing, the acquirer shall purchase all of the shares tendered by the target company's shareholders on the terms specified in the takeover offer. If the acquirer failed to obtain an exemption from the CSRC and issued a General Offer, it shall purchase all of the shares tendered by the target company's shareholders.

Within three trading days after the expiration of the takeover period, the appointed securities company shall carry out the procedures for the registration of the transfer, clearing and change of ownership of the shares with the securities depository and clearing institution and lift the temporary custody of those shares exceeding the target acquisition percentage. The acquirer shall announce the results of its takeover by offer.

Article 44: If the spread of the share equity of the target company no longer satisfies the conditions for listing after the expiration of the takeover period, the listing and trading of such listed company's shares shall be terminated by the stock exchange. Those remaining shareholders that still hold shares of the target company prior to the completion of the takeover shall have the right to sell their shares to the acquirer on the same terms as those of the takeover offer within the reasonable period of time specified in the takeover report and the acquirer shall acquire the same.

Article 45: Within 15 days after the expiration of the takeover period, the acquirer shall submit a written report on the takeover to the CSRC, forward copies to the Agency and stock exchange and notify the target company.

Article 46: With the exception of an offer, investors may not publicly seek to acquire the shares of listed companies outside of a stock exchange.

PART FOUR: TAKEOVER BY AGREEMENT

Article 47: If the shares of a listed company in which an acquirer has an interest and acquired by it by way of an agreement account for more than 5% but less than 30% of the company's outstanding shares, matters shall be handled in accordance with Part Two hereof.

If the shares in which the acquirer has an interest reach 30% of the outstanding shares of the company and it intends to continue acquiring the same, it shall, in accordance with the law, make a General Offer or Partial Offer to the shareholders of such listed company. If the circumstances specified in Part Six hereof are met, the acquirer may apply to the CSRC for an offer exemption.

If the shares of a listed company that an acquirer intends to acquire by agreement exceed 30%, the acquisition of the portion above 30% shall be conducted by way of an offer, unless the circumstances specified in Part Six hereof are met, in which case the acquirer may apply to the CSRC for an offer exemption. The acquirer shall perform its takeover agreement after it has obtained the exemption from the CSRC. If it fails to obtain the exemption from the CSRC but intends to continue performing its takeover agreement, or if it did not apply for an exemption, it shall issue a General Offer before performing its takeover agreement.

Article 48: If an acquirer intends to acquire by way of an agreement more than 30% of the shares of a listed company and intends to apply for an exemption based on Part Six hereof, it shall, within three days from the date of reaching the takeover agreement with the listed company's shareholders, prepare a listed company takeover report, submit its exemption application and the relevant documents specified in Article 50 hereof, appoint a financial consultant to submit a written report to the CSRC and stock exchange, forward copies to the Agency, notify the target company and announce the abstract of the listed company takeover report. Once the Agency receives the written report, it shall inform the people's government at the provincial level of the place where the listed company is located.

Within three days from the date of receipt of the exemption from the CSRC, the acquirer shall announce its takeover report, the professional opinion of its financial consultant and the legal opinion issued by a lawyer. If the acquirer fails to obtain an exemption, it shall announce the same within three days from the date of receipt of the decision of the CSRC and handle matters in accordance with the second paragraph of Article 61 hereof.

If the CSRC discovers that the takeover report does not comply with laws, administrative regulations or relevant provisions, it shall inform the acquirer thereof in a timely manner. If the acquirer fails to correct the same, it may not announce its takeover report and it may not perform the takeover agreement until it has made the announcement.

Article 49: The listed company takeover report prepared based on the preceding Article must disclose the information specified in Items (1) to (6) and (9) to (14) of Article 29 hereof and the conditions for the entry into effect of the takeover agreement and the payment arrangement.

If an acquirer that has disclosed a takeover report needs to submit a further report and make an announcement within six months from the date of disclosure of the previous report due to a change in interests, it may submit a report on and announce only such information that is different from that in the preceding report. If more than six months have elapsed, it shall perform its reporting and announcement obligations in accordance with Part Two hereof.

Article 50: When an acquirer intends to take over a listed company, it shall submit the following documents to the CSRC:

(1) proof of identity of a Chinese citizen, or proof of registration in China as a legal person or other organization;

(2) an explanation of the feasibility of the future development plan for the listed company based on the acquirer's capabilities and experience in the industry; if the acquirer intends to revise the company's articles of association, elect a new board of directors of the company, change or adjust the core business of the company, it shall additionally supplement its explanation of possessing the management capabilities to operate the listed company in a compliant manner;

(3) if the acquirer and its affiliated parties are in intra-industry competition with or have affiliated transactions with the target company, an explanation of how they intend to avoid competing with the target company and other such conflicts of interest, and maintain the independence of the operations of the target company;

(4) if the acquirer is a legal person or another organization, a statement that its controlling shareholder or de facto controller has not changed during the most recent two years;

(5) an explanation of the core enterprises and core business of the acquirer and its controlling shareholder or de facto controller, and the acquirer's affiliates and their core business; if the acquirer or its de facto controller is the controlling shareholder or de facto controller of two or more listed companies, an explanation of the listed companies as well as of the banks, trust companies, securities companies, insurance companies and other such financial institutions in which it has a 5% or greater shareholding; and

(6) the review opinion of the financial consultant on the integrity record of the acquirer during the most recent three years, the lawfulness of the source of the funds for the takeover, whether the acquirer has the capacity to perform the relevant undertakings and the truthfulness, accuracy and completeness of the relevant disclosed information; if the acquirer has been established for less than three years, the financial consultant shall additionally provide a review opinion on the integrity record of the acquirer's controlling shareholder or de facto controller for the most recent three years.

If an offshore legal person or other offshore organization intends to take over a listed company, it shall, in addition to submitting the documents specified in Items (2) to (6) of the first paragraph, submit the following documents:

(1) a review opinion of the financial consultant on whether the acquirer satisfies the conditions for making a strategic investment in a listed company and whether it has the capacity to take over the listed company; and

(2) a declaration that the acquirer accepts Chinese judicial and arbitral jurisdiction.

Article 51: If a listed company's directors, supervisors, senior management personnel, employees or a legal person or other organization controlled or entrusted by them intend to buy out the company or obtain control thereof by the method specified in Part Five hereof (a Management Buyout), such listed company shall have a sound organizational structure that operates well, effective internal control system and the percentage of independent directors among the members of the board of directors shall account for one-half or more. The company shall engage an asset appraisal institution with securities and futures business qualifications to provide an appraisal report on the company's assets. Such buyout shall require the adoption of a resolution by the non-affiliated directors on the board of directors and, after obtaining the consent of at least two-thirds of the independent directors, shall be submitted to the shareholders' general meeting for deliberation and require a majority of the votes of the non-affiliated shareholders present at a shareholders' general meeting for adoption. Before the independent directors express their opinion, they shall engage an independent financial consultant to issue a professional opinion on the buyout. The opinions of the independent directors and the independent financial consultant shall be announced together.

If the directors, supervisors or senior management personnel of the listed company are characterized by any of the circumstances specified in Article 149 of the Company Law or have a negative integrity record in the securities market during the most recent three years, they may not take over the company.

Article 52: When a listed company is to be taken over by agreement, the period between the execution of the takeover agreement and completion of the change of the relevant shares' ownership is the takeover transition period for the listed company (Transition Period). During the Transition Period, the acquirer may not put forward a motion through the controlling shareholder to elect a new board of directors of the listed company. If there is genuinely sufficient reason to elect a new board of directors, the directors from the acquirer may not exceed one-third of the members of the board of directors. The target company may not provide security for the acquirer and its affiliated parties, issue shares to raise funds, carry out a material purchase or sale of assets, make a material investment or carry out affiliated transactions with the acquirer or its affiliated parties, except in circumstances where the acquirer does so for the purpose of rescuing a listed company that is in crisis or facing serious financial difficulties.

Article 53: If the controlling shareholder of a listed company is to transfer to the acquirer by agreement shares that it holds in the listed company, it shall investigate the acquirer's entity qualifications, integrity and its takeover intent, and shall disclose the results of its investigation in its report on change in interests.

If the controlling shareholder and its affiliated parties have not discharged their debts to the company or lifted the security provided by the company for their debts or another circumstance exists that is prejudicial to the interests of the company, the board of directors of the target company shall disclose the same in a timely manner and take effective measures to safeguard the interests of the company.

Article 54: The relevant parties involved in a takeover by agreement shall carry out with the securities depository and clearing institution the procedures for the temporary custody of the shares to be transferred and may deposit the cash to be used for payment with the bank designated by the securities depository and clearing institution.

Article 55: After the announcement of the takeover report, and once the stock exchange has confirmed the contemplated share transfer, the relevant parties shall, in accordance with the operating rules of the stock exchange and securities depository and clearing institution, apply to the securities depository and clearing institution to lift the temporary custody of the shares that are to be transferred by agreement on the strength of proof that the entire transfer amount has been deposited into the bank account approved by the parties, and carry out the procedures for registration of the change of ownership.

If the acquirer fails to carry out its reporting and announcement obligations, or fails to submit an application in accordance with provisions, the stock exchange and securities depository and clearing institution shall not carry out the procedures for the share transfer or registration of the change of ownership.

If the acquirer fails to carry out the procedures for the change of the relevant shares' ownership within 30 days after the announcement of the takeover report, it shall promptly issue an announcement explaining the reason therefor. Until it has completed the change of the relevant shares' ownership, it shall issue an announcement every 30 days reporting on its progress in carrying out the procedures for the change of the relevant shares' ownership.

PART FIVE: INDIRECT TAKEOVER

Article 56: If an acquirer is not a shareholder in a listed company but, by way of an investment relationship, agreement or other arrangement, the shares in which it has an interest reach 5% or more but less than 30% of the outstanding shares of the listed company, matters shall be handled in accordance with Part Two hereof.

If the shares in which the acquirer has an interest account for more than 30% of the outstanding shares of the company, it shall make a General Offer to all of the company's shareholders. If the acquirer anticipates that it will not be able to make a General Offer within 30 days of the fact occurring, it shall cause the shareholders that it controls to reduce their shareholding in the listed company to 30% or less during those 30 days and announce the same within two working days from the date of the reduction. Thereafter, if the acquirer or a shareholder that it controls intends to continue increasing its shareholding, it shall do so by way of an offer. If the acquirer intends to apply for an exemption based on Part Six hereof, it shall handle the matters in accordance with Article 48 hereof.

Article 57: If an investor is not a shareholder of a listed company but, by way of an investment relationship, obtains control of a shareholder of the listed company, and the shareholding of such shareholder reaches the percentage specified in the preceding Article and the investor has a material impact on the assets and profits of such shareholder, it shall perform reporting and announcement obligations in accordance with the preceding Article.

Article 58: A listed company's de facto controller and the shareholders controlled by it bear an obligation of cooperating with the listed company in truthfully, accurately and completely disclosing information on changes affecting the de facto controller. If the de facto controller and the shareholders controlled by it refuse to perform the aforementioned obligation of cooperation, resulting in the listed company being unable to perform its statutory information disclosure obligations and bearing civil and administrative liability as a result thereof, the listed company shall have the right to institute a legal action against them. If the de facto controller or controlling shareholder direct the listed company and its relevant personnel not to perform their information disclosure obligations in accordance with the law, the CSRC will investigate and handle the matter in accordance with the law.

Article 59: If a listed company's de facto controller and the shareholders controlled by it fail to perform their reporting and announcement obligations, the listed company shall submit a report and make an announcement promptly after the date on which it learned of the same. If the de facto controller still fails to make a disclosure after the listed company has announced the change affecting the de facto controller, the board of directors of the listed company shall make inquiries to the de facto controller and the shareholders controlled by it, and, if necessary, may engage a financial consultant to make such inquiries, and report the results of such inquiries to the CSRC, the Agency and the stock exchange. The CSRC will, in accordance with the law, investigate and deal with the de facto controller that refused to perform its reporting and announcement obligations.

If the listed company learns of a relatively major change affecting its de facto controller and fails to report and announce the same in a timely manner, the CSRC shall order it to rectify the matter. If the circumstances are serious, it shall declare the liable directors of the listed company persona non grata.

Article 60: If a listed company's de facto controller and the shareholders controlled by it fail to perform their reporting and announcement obligations, refuse to perform their obligation of cooperation specified in Article 58 or if the de facto controller is characterized by circumstances that make it ineligible to take over a listed company, the board of directors of the listed company shall refuse to accept motions or extempore motions put before the board by the shareholders controlled by the de facto controller and submit a report to the CSRC, the Agency and the stock exchange. The CSRC will order the de facto controller to rectify the matter and may declare the directors nominated by the de facto controller through the shareholders controlled by it persona non grata. The shareholders controlled by the de facto controller may not exercise the voting rights attaching to the shares that they hold until rectification has been carried out. If the board of directors of the listed company fails to refuse to accept the motions brought before the board by the de facto controller and the shareholders controlled by it, the CSRC may declare the liable directors persona non grata.

PART SIX: EXEMPTION APPLICATION

Article 61: Subject to the circumstances specified in Article 62 or 63, an investor and its persons acting in concert may apply to the CSRC for the following exemptions:

(1) exemption from increasing their shareholding by way of a takeover offer; or

(2) exemption from making a takeover offer to all of the shareholders of the target company if there are restrictions on their entity qualifications or the class of shares or there are special circumstances as specified in laws or administrative regulations or by the CSRC.

If they fail to obtain an exemption, the investor and its persons acting in concert shall reduce their shareholding in the target company or that of the shareholders controlled by them to 30% or less within 30 days from the date of receipt of the notice from the CSRC. If they intended to continue increasing their shareholding by a method other than an offer, they shall make a General Offer.

Article 62: An acquirer may apply to the CSRC for an exemption from making an offer to increase its shareholding if:

(1) the acquirer and the seller can demonstrate that the contemplated transfer will not result in a change in the de facto controller of the listed company;

(2) the listed company is facing serious financial difficulties, the restructuring plan to rescue the listed company proposed by the acquirer has been approved by the shareholders' general meeting of the company and the acquirer undertakes not to transfer its interests in the company for a period of three years;

(3) as approved by the non-affiliated shareholders in the shareholders' general meeting of the listed company, the acquirer has obtained new shares placed with it by the listed company, resulting in the shares of the company in which it has an interest accounting for more than 30% of the company's outstanding shares, the acquirer undertakes not to transfer the shares in which it has an interest for a period of three years and the shareholders' general meeting of the company has agreed to exempt the acquirer from making an offer; or

(4) other circumstances recognized by the CSRC for the purpose of meeting the needs of the development and change of the securities market and protection of the lawful rights and interests of investors.

If the exemption application documents submitted by the acquirer comply with provisions and it is has performed its reporting and announcement obligations in accordance herewith, the CSRC will accept its application. If the documents do not comply with the provisions, or if the acquirer has failed to perform its reporting and announcement obligations, the CSRC will not accept its application. The CSRC will render its decision on whether or not to grant exemption in respect of the specific item that the acquirer applied for within 20 working days of accepting the exemption application. If the acquirer obtains an exemption, it may continue to increase its shareholding.

Article 63: A concerned party may apply to the CSRC using the simplified procedure for an offer exemption if:

(1) the shares of the listed company in which the investor has an interest account for more than 30% of the outstanding shares of such company and the same is due to an allocation without compensation, change or merger of state-owned assets approved by the government or the state-owned assets administration department;

(2) the shares of the listed company in which the investor has an interest account for 30% or more of the outstanding shares of such company and, commencing one year from the occurrence of the foregoing fact, the increase in each 12-month period in its holding of the shares of such company in which it has an interest will not account for more than 2% of the company's outstanding shares;

(3) the shares of the listed company in which the investor has an interest account for 50% or more of the outstanding shares of such company and the continuous increase of its interests in the company will not affect such company's listed status;

(4) the concerned party's holding of shares in the company in which it has an interest accounts for more than 30% of the outstanding shares of such company and the same is due to the company buying back shares from specific shareholders at the fixed price approved by the shareholders' general meeting for the purpose of reducing the company's share capital;

(5) a securities company, bank or other such financial institution, by virtue of engaging in underwriting, lending or other such business within its scope of business in accordance with the law comes to hold more than 30% of the outstanding shares of a listed company, but does not actually control or intend to control such company and it submits a plan to transfer relevant shares to a non-affiliated party within a reasonable period of time;

(6) the concerned party's holding of shares of a company in which it has an interest accounts for more than 30% of the outstanding shares of such company and the same is due to a succession; or

(7) other circumstances recognized by the CSRC for the purpose of meeting the needs of the development and change of the securities market and protection of the lawful rights and interests of investors.

If an application for an exemption is submitted pursuant to Item (1) or any of Items (3) to (7) of the preceding paragraph, and the CSRC has not raised any objections within 10 working days from the date of receipt of the application documents that comply with provisions, the relevant investor may apply to carry out the share transfer and registration of change of ownership procedures with the stock exchange and the securities depository and clearing institution. If, pursuant to Item (2) of the preceding paragraph, the relevant investor makes an announcement of its increased shareholding and applies to the CSRC for an exemption within three days after the completion of such increase, the CSRC shall render its decision on whether or not to grant an exemption within 10 working days from the date of receipt of the application documents that comply with provisions. If the CSRC withholds approval of the use of the simplified procedure to make the application, the relevant investor shall make its application in accordance with Article 62 hereof.

Article 64: If an acquirer is to apply for an exemption, it shall engage a law firm or other such professional organization to issue a professional opinion.

PART SEVEN: FINANCIAL CONSULTANTS

Article 65: The financial consultant engaged by an acquirer shall perform the following duties and responsibilities:

(1) conducting a due diligence investigation of the relevant circumstances of the acquirer;

(2) at the request of the acquirer, providing it professional services, comprehensively evaluating the financial and business position of the target company, assisting the acquirer in analyzing the legal, financial and business risks involved in the takeover, providing recommendations with respect to the takeover price, takeover method, payment arrangement and other such matters involved in the takeover proposal and guiding the acquirer in preparing the submission documents in the specified format and with the specified contents;

(3) guiding the acquirer on compliant operation in the securities market, causing the acquirer's directors, supervisors and senior management personnel to become familiar with relevant laws, administrative regulations and CSRC provisions and to fully understand the obligations and responsibilities that they are required to bear, and procuring the performance by them of their reporting, announcement and other statutory obligations in accordance with the law;

(4) fully examining and verifying whether the acquirer complies with the provisions hereof and the truthfulness, accuracy and completeness of the submission documents and issuing objective and impartial opinions on matters relating to the takeover;

(5) as appointed by the acquirer, submitting the submission materials to the CSRC and, depending on the comments of the CSRC following examination of the same, organizing and coordinating the acquirer and other professional organizations in responding thereto; and

(6) executing an agreement with the acquirer and, within the 12 months following the completion of the takeover, continuing to guide the acquirer in complying with laws, administrative regulations, CSRC provisions, stock exchange rules and the listed company's articles of association, exercising its shareholder rights in accordance with the law and duly performing its undertakings and related provisions.

Article 66: The financial consultant's report on the contemplated takeover issued by the financial consultant engaged by the acquirer shall address and analyze the following matters and contain clear opinions on each item:

(1) whether the information disclosed in the listed company takeover report or report on takeover by offer prepared by the acquirer is true, accurate and complete;

(2) the objective of the contemplated takeover;

(3) whether the acquirer has provided all the necessary supporting documents; based on a review of the strengths of the acquirer and its controlling shareholder or de facto controller, the core business in which they are engaged, their status as going concerns, their financial positions and their integrity, explaining whether the acquirer has the entity qualifications, whether it has the financial capacity for the takeover, whether it has the management capabilities to operate the listed company in a compliant manner, whether it is required to bear additional responsibilities, whether it has the capacity to perform the relevant obligations and whether it has a negative integrity record;

(4) the financial consultant's guidance of the acquirer in compliant operation in the securities market, whether the acquirer's directors, supervisors and senior management personnel are familiar with the relevant laws, administrative regulations and CSRC provisions and whether they fully understand the obligations and responsibilities they are required to bear, and the financial consultant's procurement of their performance of their reporting, announcement and other statutory obligations in accordance with the law;

(5) the acquirer's equity control structure and the manner in which the acquirer's controlling shareholder or de facto shareholder controls it;

(6) the source of the funds for the takeover by the acquirer and the lawfulness thereof and whether the acquirer is to use the shares acquired in the contemplated takeover as a pledge to a bank or other financial institution to obtain financing;

(7) if the acquirer is to pay the takeover price using Securities, an explanation shall be given of whether the information disclosure by the issuer of the relevant Securities is true, accurate and complete, the convenience of the securities transaction, etc.;

(8) whether the acquirer has carried out the necessary authorization and approval procedures;

(9) whether arrangements have been made to ensure the stable operation of the listed company during the takeover Transition Period and whether such arrangement complies with relevant provisions;

(10) an analysis of the follow-up plans of the acquirer; if the business engaged in by the acquirer is in intra-industry competition with that of the listed company or if there are affiliated transactions between them, an analysis of the plan of the acquirer to resolve the issue of intra-industry competition with the listed company and other such conflicts of interest and to maintain the independence of the operations of the listed company; and an explanation of the possible impact of the contemplated takeover on the independence of the operations and the continuous development of the listed company;

(11) whether the subject matter of the acquisition is encumbered by other rights and whether compensation arrangements other than the takeover price have been made;

(12) whether business dealings exist between the target company and the acquirer and its affiliated parties, and whether the acquirer has reached a certain agreement or tacit understanding with the directors, supervisors and senior management personnel of the target company concerning future employment arrangements;

(13) whether the listed company's existing controlling shareholder or de facto controller and its affiliated parties have debts to the company that have not been discharged or security for their debts provided by the company that has not been lifted or whether other circumstances that are prejudicial to the interests of the company exist; if such circumstances exist, whether a feasible solution has been proposed; and

(14) if the acquirer intends to apply for an exemption, an explanation shall be given as to whether the contemplated takeover falls into the category eligible for an exemption, whether the acquirer has given an undertaking and whether it has the capabilities to perform the relevant undertaking.

Article 67: The independent financial consultant engaged by the board of directors of the listed company or the independent directors may not concurrently serve as, or have an affiliated relationship with, the financial consultant of the acquirer. The independent financial consultant shall, as appointed, conduct a due diligence investigation and issue a professional opinion on the equitability and lawfulness of the contemplated takeover. The independent financial consultant's report shall address and analyze the following issues and give a clear opinion on the same:

(1) whether the acquirer has the entity qualifications;

(2) an analysis of the capabilities of the acquirer and the impact that the contemplated takeover could have on the independence of the operations and the continuous development of the target company;

(3) whether the acquirer intends to exploit the assets of the target company or whether the target company is to provide financial assistance for the contemplated takeover;

(4) if a takeover offer is involved, an analysis of the target company's financial position and an explanation of whether the takeover price fully reflects the value of the target company, whether the takeover offer is equitable and reasonable and the recommendations made to the public shareholders with respect to the acceptance of the offer;

(5) if the acquirer is to pay the takeover price using Securities, an analysis of the value of the relevant Securities based on the assets, business and profitability projections of the issuer of such Securities, and professional opinions on whether the takeover terms are equitable and reasonable to the public shareholders of the target company and whether they accept the takeover terms proposed by the acquirer; and

(6) if a Management Buyout is involved, an analysis of the value of the listed company and a comprehensive examination of, and clear opinions on, the pricing basis of the contemplated takeover, the method of payment, the source of the takeover funds, financing arrangements, repayment plan and the feasibility thereof, the status of the implementation and the effectiveness of the listed company's internal control system, the business dealings between the listed company and the aforementioned persons and their immediate family members during the most recent 24 months and other information disclosed in the takeover report.

Article 68: In its report, the financial consultant shall give the undertakings set forth below with respect to the submission documents that it was appointed to submit to the CSRC:

(1) it has performed its due diligence investigation obligations in accordance with provisions and has sufficient reason to be confident that there are no material discrepancies between the professional opinion that it issued and the acquirer's submission documents;

(2) it has examined the acquirer's submission documents and is confident that such documents are compliant with provisions both in terms of contents and format;

(3) it has sufficient reason to be confident that the contemplated takeover complies with laws, administrative regulations and CSRC provisions and sufficient reason to be confident that the information disclosed by the acquirer is true, accurate and complete, and is free of false or misleading statements and material omissions;

(4) it submitted to its internal review department for review the professional opinions on the contemplated takeover that it issued, and the same were approved thereby;

(5) during its tenure as financial consultant, it took strict measures to ensure confidentiality, and strictly implemented its internal firewall system; and

(6) it has executed a continuing guidance agreement with the acquirer.

Article 69: During the takeover and the continuing guidance period, the financial consultant shall pay close attention as to whether the target company provides security for or loans to the acquirer or its affiliated parties or whether other such circumstances prejudicial to the interests of the listed company arise. If it becomes aware of any violations of the law or inappropriate acts, it shall promptly report the same to the CSRC, Agency and stock exchange.

Article 70: A financial consultant may, for the purpose of performing its duties and responsibilities, engage other professional organizations to assist it in its examination of the acquirer, but shall exercise its independent judgement with respect to the materials provided and the information disclosed by the acquirer.

Article 71: From the announcement of the acquirer's listed company takeover report until the lapse of 12 months following the completion of the takeover, the financial consultant shall pay close attention to the listed company's business position by way of day-to-day communication, regular return visits, etc. and, while taking into consideration events disclosed in the target company's regular reports and ad hoc announcements, perform its duties and responsibilities of continuing guidance of the acquirer and the target company by:

(1) procuring the execution of the procedures for the change in ownership of the equity by the acquirer in a timely manner and the performance of its reporting and announcement procedures in accordance with the law;

(2) procuring compliant operation by the acquirer and the target company in accordance with the law and inspecting such performance;

(3) procuring the performance by the acquirer of its public undertakings and inspecting the performance thereof;

(4) while taking into consideration the target company's regular reports, examining the implementation of the follow-up plan by the acquirer and whether the anticipated objectives are being achieved, whether a relatively large discrepancy exists between the implementation results thereof and previously disclosed information and whether the relevant profitability projections are being achieved or whether the objectives anticipated by management are being attained;

(5) if a Management Buyout is involved, examining whether the implementation of the relevant repayment plan disclosed in the target company's regular reports is consistent with the reality; and

(6) procuring and inspecting the performance of other obligations agreed to during the takeover.

During the continuing guidance period, the financial consultant shall, while taking into consideration the quarterly reports, interim report and annual report disclosed by the listed company, issue continuing guidance opinions and submit the same to the Agency within 15 days after the aforementioned regular reports have been disclosed.

If the financial consultant discovers during such period that the information disclosed by the acquirer in the listed company takeover report is inconsistent with the facts, it shall procure the truthful disclosure of relevant information by the acquirer and report to the CSRC, Agency and stock exchange in a timely manner. If the financial consultant terminates the entrustment contract, it shall, in a timely manner, submit a written report to the CSRC, Agency and stock exchange explaining the reasons why it cannot continue performing its continuing guidance duties and responsibilities and announce the same.

PART EIGHT: CONTINUING OVERSIGHT

Article 72: During the 12 months following completion of the takeover of a listed company, the financial consultant engaged by the acquirer shall, within three days prior to each quarter, report to the Agency on the investments, purchases or sales of assets, affiliated transactions and adjustments to the core business that had a relatively major impact on the listed company during the quarter, as well as changes in the directors, supervisors and senior management personnel, arrangements made for staff and workers, performance by the acquirer of its undertakings, etc.

If the places of registration of the acquirer and of the listed company are different, it shall additionally forward a copy of such report to the Agency of the place where the acquirer is located.

Article 73: Based on the principle of prudential regulation, the Agency shall conduct oversight and inspections of the acquirer and the listed company after the completion of the takeover by such means as holding discussions with the accounting firm responsible for the auditing of the listed company, inspecting the performance by the financial advisor of its continuing guidance responsibilities, regular and ad hoc onsite inspections, etc.

If the Agency discovers a material discrepancy between reality and the information disclosed by the acquirer, it shall pay close attention to the acquirer and the listed company, may order the acquirer to extend the financial consultant's continuing guidance period and shall investigate and deal with the matter in accordance with the law.

If the financial consultant terminates its contract with the acquirer during the continuing guidance period, the acquirer shall engage another financial consulting firm to perform the continuing guidance duties and responsibilities.

Article 74: The shares of the target company acquired by the acquirer during the takeover of the listed company may not be transferred during the 12 months following completion of the takeover.

Transfers of the shares of the target company in which the acquirer has an interest carried out between different entities controlled by the same de facto controller shall not be subject to the aforementioned 12-month restriction, however, the provisions of Part Six hereof shall be complied with.

PART NINE: REGULATORY MEASURES AND LEGAL LIABILITY

Article 75: If a party with information disclosure obligations in the takeover of a listed company and the related share interest changes fails to perform its reporting, announcement and other related obligations in accordance herewith, the CSRC will order it to rectify the matter and take such regulatory measures against it as a regulatory discussion, issuance of a letter of warning, ordering it to suspend or halt the takeover, etc. Until it has carried out the rectification, the relevant party with the information disclosure obligation may not exercise the voting rights attaching to the shares that it holds or actually controls.

Article 76: If the documents, such as reports, announcements, etc., of a party with information disclosure obligations in the takeover of a listed company and the related share interest changes contain false or misleading statements or material omissions, the CSRC will order it to rectify the matter and take such regulatory measures against it as a regulatory discussion, issuance of a letter of warning, ordering it to suspend or halt the takeover, etc. Until rectification has been carried out, the acquirer may not exercise the voting rights attaching to the shares that it holds or actually controls.

Article 77: If an investor and its persons acting in concert obtain control of a listed company but fail to engage a financial advisor in accordance herewith, circumvent the statutory procedures and obligations or conduct the takeover of the listed company in a disguised manner, or if a foreign investor circumvents jurisdiction, the CSRC will order them/it to rectify the matter and take such regulatory measures against them/it as issuance of a letter of warning, or ordering them/it to suspend or halt the takeover. Until rectification has been carried out, the acquirer may not exercise the voting rights attaching to the shares that it holds or actually controls.

Article 78: If an acquirer that has made a takeover offer fails, before the expiration of the takeover offer period, to pay the takeover price or purchase the tendered shares in accordance with the agreed upon provisions, it may not take over a listed company for a period of three years from the date of the occurrence of such fact and the CSRC will refuse to accept submission documents submitted by it and its affiliated parties. If the disclosure of false information or manipulation of the securities market is suspected, the CSRC will open a case, investigate the acquirer and pursue its legal liability in accordance with the law.

If the financial consultant engaged by the acquirer mentioned in the preceding paragraph lacks sufficient evidence indicating that it acted with due diligence, the CSRC will pursue its legal liability in accordance with the law.

Article 79: If the controlling shareholder or de facto controller of a listed company, when transferring its control of such company, fails to discharge its debts to the company, lift the security provided for it by the company or otherwise rectify another circumstance attributable to it that is prejudicial to the interests of the company, the CSRC will order it to rectify the matter and order it to suspend or halt the takeover.

If the board of directors of the target company fails to take effective measures to cause the controlling shareholder or de facto controller of the company to rectify the matter, or if, after completion of the takeover, it fails to cause the acquirer to perform its undertakings, arrangements or warranties, the CSRC may declare the relevant directors persona non grata.

Article 80: If a director of a listed company fails to perform his or her obligations of loyalty and due diligence or uses the takeover to seek improper gains, the CSRC will take regulatory measures against him or her such as a regulatory discussion, issuance of a letter of warning, etc. and may declare him or her persona non grata.

If the provisions of the articles of association of a listed company on the control of the company violate laws, administrative regulations or these Measures, the CSRC will order rectification.

Article 81: If a securities service firm or a securities company or its professional staff that issues asset appraisal reports, audit reports, legal opinions or financial consultant's reports for takeovers of listed companies fails to perform its duties and responsibilities in accordance with the law, the CSRC will order it to rectify the matter and take such regulatory measures against it as a regulatory discussion, issuance of a letter of warning, etc.

Article 82: The CSRC will record in an integrity file violations of the law by concerned parties involved in the takeover of a listed company and the related share interest changes and the rectification thereof.

Legal liability will be pursued in accordance with the law for violations of these Measures that constitute violations of securities laws.

PART TEN: SUPPLEMENTARY PROVISIONS

Article 83: For the purposes of these Measures, the phrase “acting in concert” means the act by an investor together with other investors to increase, by way of an agreement or other arrangement, the quantity of voting shares of a listed company that they control, or the fact thereof.

Each of the investors that acts in concert in the takeover of a listed company and the related share interest changes is a person acting in concert. In the absence of evidence to the contrary, investors are persons acting in concert if:

(1) there is an equity control relationship among the investors;

(2) the investors are under the control of the same entity;

(3) key members among the directors, supervisors or senior management personnel of an investor concurrently serve as directors, supervisors or senior management personnel of another investor;

(4) an investor has an equity interest in another investor and has a material impact on the major decisions of the other investor;

(5) a natural person, a legal person or another organization other than a bank provides a financial arrangement enabling an investor to acquire relevant shares;

(6) a partnership, cooperation arrangement, joint operation or other economic interest relationship exists between or among the investors;

(7) a natural person who holds 30% or more of the shares in an investor holds shares in the same listed company as the investor;

(8) a director, supervisor or member of the senior management personnel of an investor holds shares in the same listed company as the investor;

(9) the parents, spouse, children and their spouses, spouse's parents, siblings and their spouses, spouse's siblings and their spouses and other such family members of a natural person who holds 30% or more of the shares in an investor or of a director, supervisor or member of the senior management personnel of an investor holds shares in the same listed company as the investor;

(10) a director, supervisor or member of the senior management personnel of a listed company holds shares in the company with any his or her aforementioned family members, or holds shares in the company together with an enterprise that he or she or an aforementioned family member directly or indirectly controls;

(11) a director, supervisor, member of the senior management personnel or employee of a listed company holds shares in the company together with a legal person or other organization that he or she controls or has engaged; or

(12) investors have other affiliated relationships between or among them.

Persons acting in concert shall calculate their shares together. When an investor calculates the shares that it holds, it shall calculate both the shares registered in its name and those registered in the names of its persons acting in concert.

If an investor is of the opinion that it should not be deemed to be a person acting in concert, it may submit evidence to the contrary to the CSRC.

Article 84: An investor shall be deemed to control a listed company if:

(1) it is the controlling shareholder of the listed company by virtue of its holding 50% or more of the company's shares;

(2) it actually controls more than 30% of the voting shares of the listed company;

(3) through its actual control of voting shares of the listed company, it can determine one half or more of the members of the board of directors of the company;

(4) based on its actual control of voting shares of the listed company, it has a material impact on the resolutions taken by the shareholders' general meeting of the company; or

(5) other circumstances recognized by the CSRC.

Article 85: When calculating the percentage of shares that it holds, a party with an information disclosure obligation shall calculate the portion of the outstanding convertible securities of the listed company that it holds and has the right to convert together with the shares of the listed company that it holds and compare its shareholding percentage with the percentage derived from the addition thereto of non-equity securities translated into shares. The larger of the two shall prevail. If the exercise period has expired and it has not exercised its option or if the exercise conditions are no longer satisfied, it shall not be required to calculate such securities.

The larger of the two as mentioned in the preceding paragraph shall be calculated in accordance with the following formulas:

(1) number of shares held by the investor ÷ total outstanding shares of the listed company

(2) (total number of shares held by the investor + number of shares into which the convertible non-equity securities held by the investor may be converted) ÷ (total outstanding shares of the listed company + total number of shares into which the convertible non-equity securities issued by the listed company may be converted)

Article 86: If an investor obtains control of a listed company through an administrative allocation, enforcement of a court judgement, succession, bestowal or other such method, it shall carry out its reporting and announcement obligations in accordance with Part Four hereof.

Article 87: The contents and format of reports on change in interests, takeover reports, reports on takeover by offer, board of directors' reports of target companies, application documents for takeover offer exemptions, etc. will be formulated separately by the CSRC.

Article 88: If a target company is listed both domestically and overseas, the acquirer shall, in addition to complying with these Measures and relevant CSRC provisions, comply with the relevant provisions of the place of the overseas listing.

Article 89: If a foreign investor takes over a listed company or its interest in the listed company changes, it shall, in addition to complying with these Measures, comply with relevant provisions on investment in listed companies by
foreign investors.

Article 90: These Measures shall be effective as of September 1 2006. The Measures for the Administration of the Takeover of Listed Companies (Order of the CSRC No.10), the Measures for the Administration of Disclosure of Information on the Change of Shareholdings in Listed Companies (Order of the CSRC No.11), the Circular on Issues Relevant to Share Listing and Trading Conditions of Target Companies Involved in Takeovers by Offer (Zheng Jian Gong Si Zi [2003] No.16) and the Issues Relevant to Regulating the Acts of Transferring the De Facto Control over Listed Companies (Zheng Jian Gong Si Zi [2004] No.1) issued by the CSRC shall be repealed simultaneously.