Shanghai Stock Exchange, Implementing Guidelines on Affiliated Transactions of Listed Companies

Where a listed company intends to purchase an asset of an affiliated party at a price exceeding 100% of its book value, the company shall, in addition to announcing the reasons for the premium price, also provide methods for shareholders to participate in the shareholders' general meeting such as network voting and other convenient methods for voting, as well as profit forecast reports on the target asset (Articles 48 and 49). If the listed companies appraise the asset to be purchased and have the pricing based thereon using appraisal methods that are based on projected earnings such as discounted cash flow method and hypothetical development method, it shall disclose the difference between the actual and projected profits of the relevant asset in the annual reports for three consecutive years following the completion of the affiliated transaction, and a special audit opinion shall be issued by an accounting firm. The company shall also conclude with the affiliated party a clear and feasible compensation agreement for the circumstance in which the actual profit falls short of the projected profit of the relevant asset (Article 50).