Measures for the Administration of the Pilot Project for Preference Shares

(Promulgated by the China Securities Regulatory Commission on, and effective as of, March 21 2014.)

Order of the CSRC No.97

Part One: General provisions

Article 1: These Measures have been formulated pursuant to the Company Law, the Securities Law, the State Council, Guiding Opinions on the Launch of the Pilot Project for Preference Shares and relevant laws and regulations in order to regulate the offering and trading of preference shares and protect the lawful rights and interests of investors.

Article 2: For the purposes of these Measures, the term “preference shares” means, in accordance with the Company Law, a specified type of shares other than generally specified common shares, the holders of which have preference over holders of common shares in the distribution of company profits and remaining property but whose rights to participate in the decision making and management of the company and other such rights are limited.

Article 3: Listed companies may offer preference shares. Unlisted public companies may make private placements of preference shares.

Article 4: The pilot project for preference shares shall comply with relevant provisions of the Company Law, the Securities Law, the State Council, Guiding Opinions on the Launch of the Pilot Project for Preference Shares and these Measures, observe the principles of transparency, fairness and impartiality, and fraud, insider trading and market manipulation are prohibited.

Article 5: A securities company or other securities service firm participating in the pilot project for preference shares shall comply with laws, regulations and relevant provisions of the China Securities Regulatory Commission (the CSRC), observe the business standards and codes of conduct generally accepted in the industry and act in good faith and with due diligence.

Article 6: During the pilot period, the offering of preference shares of varying seniority in terms of the distribution of dividends and the distribution of remaining property is not permitted, but the offering of preference shares with differences in other terms is permitted.

The offering by a company of both preference shares with mandatory dividends and preference shares without mandatory dividend terms shall not be deemed the offering of preference shares of varying seniority in terms of the distribution of dividends.

Article 7: Identical rights shall attach to preference shares with identical terms. When preference shares with the same terms are offered at the same time, the offer conditions, price and face dividend rate of each share shall be identical. For each share for which any entity or individual subscribes, it/he/she shall pay the same price.

Part Two: Exercise of the rights of holders of preference shares

Article 8: A company that offers preference shares shall, in addition to formulating relevant provisions of its articles of association in accordance with the State Council, Guiding Opinions on the Launch of the Pilot Project for Preference Shares, expressly specify in its articles of association the relevant rights and obligations of holders of preference shares in accordance herewith.

Article 9: If, after having been distributed dividends at the specified dividend rate, holders of preference shares have the right to participate in the distribution of the remaining profit together with the holders of common shares, the company's articles of association shall expressly specify matters such as the percentage and conditions for the participation in the distribution of the remaining profit by the holders of preference shares.

Article 10: If any of the circumstances set forth below arises and the company convenes a shareholders' general meeting, it shall notify the holders of preference shares thereof and follow the procedure for the notification of holders of common shares specified in the Company Law and its articles of association. Holders of preference shares shall have the right to attend the shareholders' general meeting, vote separately from the holders of common shares on the matters set forth below, with each preference share held giving them one vote; however, no votes shall attach to the preference shares held by the company itself:

(1) revision of provisions of the company's articles of association relating to preference shares;

(2) a one time reduction or aggregate reduction of the company's registered capital exceeding 10%;

(3) merger, division, dissolution or change in the corporate form of the company;

(4) offering of preference shares; or

(5) another circumstance as specified in the company's articles of association.

Resolutions on the aforementioned matters shall, in addition to requiring at least two-thirds of the votes held by the holders of common shares (including holders of preference shares with restored voting rights) present at the meeting for adoption, require at least two-thirds of the votes held by the holders of preference shares (excluding holders of preference shares with restored voting rights) present at the meeting for adoption.

Article 11: The shareholders' general meeting of the company may authorise the company's board of directors to pay dividends on preference shares in accordance with the company's articles of association. If the company fails to pay dividends on preference shares as agreed for an aggregate of three financial years or for two financial years in succession, holders of preference shares shall have the right, from the day immediately following the approval by the shareholders' general meeting of the plan for the year in question to distribute profits other than as agreed, to attend the shareholders' general meeting and vote thereon with the holders of common shares, with voting rights attaching to each preference share in the certain percentage specified in the company's articles of association.

For cumulative preference shares, voting rights shall be restored until the company pays in full the dividends in arrears. For non-cumulative preference shares, voting rights shall be restored until the dividends for the year in question have been paid in full. Other circumstances under which voting rights for preference shares are restored may be specified in the company's articles of association.

Article 12: Holders of preference shares shall have the right to consult the company's articles of association, register of shareholders, corporate bond counterfoils, minutes of shareholders' general meetings, resolutions of the board of directors, resolutions of the supervisory board and financial accounting reports.

Article 13: The buyback of preference shares by an issuer includes a situation where it requests redemption of the preference shares or a situation where an investor requests sellback of the preference shares. In either case the specific conditions therefor shall be set forth in the company's articles of association and the prospectus documents. Where the issuer requests the redemption of preference shares, it must pay in full the outstanding dividends, unless it is a commercial bank that has issued preference shares to replenish its capital. Once the preference shares have been bought back, a corresponding write-down of the total number of outstanding preference shares shall be made.

Article 14: The directors, supervisors and senior officers of a company shall report to the company their holdings of preference shares of the company and changes therein. While in the service of the company, a director, supervisor or senior officer may not transfer more than 25% of his/her total holding of the company's preference shares per year. Other restrictions on the transfer of the company's preference shares by directors, supervisors and senior officers of the company may be specified in the company's articles of association.

Article 15: Except for the matters specified in the State Council, Guiding Opinions on the Launch of the Pilot Project for Preference Shares, when counting the number of shareholders and their shareholding percentages, common shares and preference shares shall be calculated separately.

Article 16: If the company's articles of association specify that a fixed dividend rate is to be used for preference shares, the same fixed dividend rate may be used throughout the life of the preference shares, or an annual fixed dividend rate specified, in which case the dividend rate may vary from year to year. If the company's articles of association specify that a floating dividend rate is to be used for preference shares, the method of calculating the face dividend rate during the life of the preference shares shall be specified.

Part Three: Offering of preference shares by listed companies

Section One: General provisions

Article 17: A listed company shall be separate from its controlling shareholder or de facto controller in terms of personnel, assets and finances and independent therefrom in terms of composing bodies and businesses.

Article 18: The listed company shall have sound internal controls that can effectively ensure its operating efficiency, lawfulness and compliance, and the reliability of its financial reports. The efficiency of its internal controls shall not have material defects.

Article 19: A listed company that wishes to offer preference shares shall have realised, during the most recent three years, annual average distributable profits of not less than one year's dividends on the preference shares.

Article 20: The cash dividends of the listed company during the most recent three years shall be in compliance with its articles of association and relevant CSRC regulatory provisions.

Article 21: The listed company shall not have had any major violations of accounting regulations during the reporting period. If it intends to make a public offering of preference shares, the audit reports issued by its certified public accountant in respect of its financial statements for the most recent three years shall be standard audit reports or unqualified audit reports with emphasis of matter paragraphs. If it intends to make a private placement of preference shares and the audit report issued by its chartered accountant in respect of its financial statements for the previous year is a modified audit report, the matters referred to therein shall not have a material adverse impact on the company or the material adverse impact shall have been extinguished before the offering.

Article 22: The proceeds from an offering of preference shares by a listed company shall have a clear purpose that is consistent with its scope of business and scale of operations, and such purpose shall comply with state industrial policy and laws and administrative regulations on environmental protection, land administration, etc.

Except in the case of financial enterprises, the project for which the proceeds from the offering are to be used may not be a finance type investment, such as for the purpose of holding tradable or saleable financial assets, or lending to others, or a direct or indirect investment in a company whose main business is the buying and selling of negotiable securities.

Article 23: The outstanding preference shares of a listed company may not exceed 50% of the total number of its common shares and the proceeds therefrom may not exceed 50% of its net assets before the offering. Those preference shares that have been bought back or converted shall not be included in the calculation.

Article 24: The terms of the preference shares offered by a listed company during one offering shall be identical. A new offering of preference shares may not be made until the previous offering is completed.

Article 25: A listed company may not offer preference shares if:

(1) its application documents for the contemplated offering contain false records, misleading statements or material omissions;

(2) it has been imposed administrative penalties by the CSRC during the previous 12 months;

(3) it is suspected of having committed a criminal offence and the judicial authority has opened a case and commenced investigation or it is suspected of having committed a violation of laws or regulations and the CSRC has opened a case and commenced investigation;

(4) its rights and interests have been materially prejudiced by its controlling shareholder or de facto controller and the same has not been extinguished;

(5) it or an affiliate has provided security for a third party in a manner that violates provisions and the same has not been released;

(6) security that has been provided, a legal action, arbitration proceedings, major market wariness or other material matter that could have a material impact on the company as a going concern exists;

(7) its directors and/or senior management personnel do not satisfy the qualifications for their positions as specified in laws, administrative regulations, rules or regulations; or

(8) another circumstance that materially prejudices the lawful rights and interests of investors or the public interest applies.

Section Two: Special provisions on public offerings

Article 26: For a listed company to make a public offering of preference shares, one of the following circumstances shall apply to it:

(1) its common shares are a component of the SSE 50 Index;

(2) it wishes to use the public offering of preference shares as the means to pay for the acquisition or the merger by absorption of another listed company; or

(3) if it wishes to buy back common shares with the objective of reducing its registered capital, it may make a public offering of preference shares as the means of payment, or, once implementation of the buyback plan is completed, it may publicly offer preference shares not exceeding the total amount of the buyback and capital reduction.

If the circumstance set forth in Item (1) of this Article ceases to be satisfied after the CSRC approves the public offering of preference shares, the listed company may nevertheless proceed with the contemplated offering.

Article 27: The listed company shall have been profitable during the most recent three consecutive financial years. Whichever is the lower of net profit before and after subtraction of non-recurring profit and loss shall serve as the basis for calculation.

Article 28: A listed company that publicly offers preference shares shall specify the following matters in its articles of association:

(1) adoption of a fixed dividend rate;

(2) where it has after-tax distributable profit, it must distribute dividends to the holders of preference shares;

(3) the shortfall, when it is unable to pay dividends in full to the holders of preference shares, is to be cumulated to the following financial year; and

(4) once holders of preference shares have been distributed dividends at the specified dividend rate, they are not entitled to participate in the distribution of the remaining profit together with the holders of common shares.

Where a commercial bank offers preference shares to replenish its capital, it may provide otherwise in respect of Items (2) and (3).

Article 29: When a listed company makes a public offering of preference shares, it may make a rights issue to existing shareholders on a preferential basis.

Article 30: In addition to the provisions of Article 25 hereof, if a listed company has been imposed administrative penalties for a violation of industry and commerce, tax, land, environmental protection or customs laws, administrative regulations, or rules during the most recent 36 months and the circumstances thereof are serious, it may not make a public offering of preference shares.

Article 31: When a listed company is to make a public offering of preference shares, it and its controlling shareholder or de facto controller shall not, during the previous 12 months, have breached a public undertaking given to investors.

Section Three: Miscellaneous provisions

Article 32: The face value of each preference share shall be Rmb100.

The offer price and face dividend rate of preference shares shall be fair and reasonable, and may not prejudice the lawful interests of shareholders or other stakeholders. The offer price may not be lower than the face value of the preference shares.

The price or face dividend rate of publicly offered preference shares shall be determined by a market price inquiry or other public method recognised by the CSRC. The face dividend rate of privately placed preference shares may not be greater than the average annual weighted average rate of return on equity during the most recent two financial years.

Article 33: A listed company may not offer convertible preference shares. However, a commercial bank may, in accordance with regulatory provisions on commercial bank capital, make a private placement of preference shares that are mandatorily converted into common shares upon the occurrence of a triggering event, and shall comply with relevant provisions.

Article 34: When making a private placement of preference shares, a listed company may make such placement only to qualified investors as specified herein and the targets of each placement may not exceed 200 persons. Furthermore, the targets of placements of preference shares with identical terms may not exceed 200 persons in the aggregate.

If the targets of a placement are foreign strategic investors, the provisions of relevant State Council departments shall additionally be complied with.

Section Four: Offering procedure

Article 35: When a listed company applies to offer preference shares, the board of directors shall publicly disclose the preliminary plan for the contemplated offering of preference shares in accordance with CSRC provisions on information disclosure, adopt resolutions on the following matters in accordance with the law and refer them to the shareholders' general meeting for approval:

(1) the plan for the contemplated offering of preference shares;

(2) if it is to be a private placement of preference shares and the targets thereof have been determined, the preference share subscription contracts, the effectiveness of which is subject to the attached conditions, executed by the listed company and the corresponding targets of the placement; a subscription contract shall specify the number of preference shares the target of the placement proposes to subscribe for, the subscription price or pricing principles, the face dividend rate or the principles for the determination thereof and other necessary terms; a subscription contract shall specify that the target of the placement may not participate in the subscription by a price competition method and that the contract shall enter into effect once the proposed placement has been approved by the board of directors and shareholders' general meeting of the listed company and by the CSRC;

(3) if it is to be a private placement of preference shares and the targets thereof have not been determined, the resolution shall include the scope and qualifications of the targets of the placement, the pricing principles, and the number or number range of preference shares to be placed.

If the listed company's controlling shareholder(s), de facto controller(s) or an affiliated party controlled thereby is to participate in the subscription for the privately placed preference shares, matters shall be handled in accordance with Item (2) of the preceding paragraph.

Article 36: The independent directors of the listed company shall issue a dedicated opinion on the impact of the listed company's contemplated offering on the rights and interests of the listed company's shareholders of different classes, and the same shall be disclosed with the board resolutions.

Article 37: When the shareholders' general meeting of the listed company deliberates on the offering of preference shares, it shall conduct a vote on each of the following matters:

(1) the type and quantity of preference shares to be offered;

(2) the offer method, offer targets and the arrangement for the rights issue to existing shareholders;

(3) the face value, and the offer price or the principles for determining the same;

(4) the method by which the holders of preference shares will participate in the distribution of profits, including the face dividend rate or the principles for determining the same, the conditions for the distribution of dividends, the dividend payment method, whether the dividends are cumulative, whether the holders of preference shares may participate in the distribution of the remaining profit, etc.;

(5) the buyback terms, including the buyback conditions, period, price and the principles for determining the same, and the subjects entitled to exercise the buyback option (if any);

(6) the use to which the proceeds will be put;

(7) the preference share subscription contracts, the effectiveness of which is subject to the attached conditions, executed by the listed company and the corresponding targets of the placement (if any);

(8) the term of validity of the resolutions;

(9) the proposal for amending the relevant policy terms of the company's articles of association concerning the distribution of profits and remaining property to holders of preference shares and common shares, restoration of voting rights in connection with preference shares, etc.;

(10) the authorisation of the board of directors to handle specific matters relating to the contemplated offering; and

(11) other matters.

The foregoing resolutions shall require at least two-thirds of the votes held by the holders of common shares (including holders of preference shares with restored voting rights) present at the meeting for adoption. If preference shares were previously offered, the foregoing resolutions shall additionally require at least two-thirds of the votes held by the holders of preference shares (excluding holders of preference shares with restored voting rights) present at the meeting for adoption. If the listed company is to offer preference shares to specific company shareholders and their affiliated parties, the affiliated shareholders shall recuse themselves when the shareholders' general meeting votes on the offer plan.

Article 38: When a listed company convenes a shareholders' general meeting in respect of matters relating to an offering of preference shares, it shall offer online voting, and it may additionally make the participation of shareholders in the shareholders' general meeting more convenient by other means approved by the CSRC.

Article 39: When a listed company applies to offer preference shares, the same shall be sponsored by a sponsor and the same shall be reported to the CSRC. The relevant application, review, approval, offering and other such procedures shall be handled with reference to the Measures for the Administration of Securities Offerings by Listed Companies and the Measures for the Administration of the Offering and Underwriting of Securities. The meeting of the Public Offering Review Committee shall conduct its review of the offering application in line with the special procedure specified in the China Securities Regulatory Commission, Measures on the Public Offering Review Committee.

Article 40: When offering preference shares, a listed company may apply for one-time approval for an offering in tranches. Except for the face dividend rate, the terms of preference shares offered in different tranches shall be identical. The company shall offer the first tranche within six months from the date of approval of the offering by the CSRC, and offering of the remaining number of shares shall be completed within 24 months. If the time limit of the approval document is exceeded, the approval of the CSRC must be applied for anew. The number of shares offered in the first tranche shall not be less than 50% of the total offer quantity, and the number to be offered in each remaining tranche shall be determined by the company at its own discretion. Record filing shall be carried out with the CSRC within five working days after completion of the offering of each tranche.

Part Four: Private placements of preference shares by unlisted public companies

Article 41: An unlisted public company wishing to make a private placement of preference shares shall satisfy the following conditions:

(1) its operations being lawful and compliant;

(2) having a sound corporate governance structure; and

(3) performing its information disclosure obligations in accordance with the law.

Article 42: For a private placement of preference shares by an unlisted public company, Articles 23, 24, 25, 32 and 33 hereof shall be complied with.

Article 43: When making a private placement of preference shares, an unlisted public company may make such offering only to qualified investors as specified herein and the targets of each placement may not exceed 200 persons. Furthermore, the targets of placements of preference shares with identical terms may not exceed 200 persons in the aggregate.

Article 44: When an unlisted public company intends to make an offering of preference shares, its board of directors shall, in accordance with the law, adopt resolutions in respect of the specific plan therefor, the impact of the contemplated offering on the rights and interests of the company's shareholders of different classes, the objective of the offering of preference shares, the use to which the proceeds are to be put and other matters that require stipulation, and refer the same to the shareholders' general meeting for approval.

If the board resolution has determined the specific targets of the placement, the board resolution shall determine the names of the specific targets of the placement and subscription price or the pricing principles, the number or the number range subscribed for, etc. Additionally, before the convening of the board meeting, share subscription contracts, the effectiveness of which is subject to the attached conditions, shall be executed with the corresponding targets of the placement. If the board resolution has not determined the specific targets of the placement, it shall expressly specify the scope and qualifications of the targets of the placement, the pricing principles, etc.

Article 45: When the shareholders' general meeting of the unlisted public company deliberates on the offering of preference shares, the matters to be voted on shall be handled with reference to Article 37 hereof. The resolutions on the offering of preference shares shall require at least two-thirds of the votes held by the holders of common shares (including holders of preference shares with restored voting rights) present at the meeting for adoption. If preference shares were previously offered, the foregoing resolutions shall additionally require at least two-thirds of the votes held by the holders of preference shares (excluding holders of preference shares with restored voting rights) present at the meeting for adoption. If the unlisted public company is to place preference shares with specific company shareholders and their affiliated parties, the affiliated shareholders shall recuse themselves when the shareholders' general meeting votes on the offer plan, unless the holders of the company's common shares (excluding holders of preference shares with restored voting rights) number less than 200.

Article 46: The relevant application, review (exemption), offering and other such procedures for an offering of preference shares by an unlisted public company shall be handled in accordance with the relevant provisions of the Measures for the Regulation of Unlisted Public Companies.

Part Five: Trading, transfer, registration and settlement

Article 47: After an offering of preference shares, an application may be made for the listing and trading or transfer thereof. No lockup period shall be imposed.

Preference shares that were publicly offered may be listed and traded on a stock exchange. Preference shares privately placed by a listed company may be transferred on a stock exchange, and preference shares privately placed by an unlisted public company may be transferred on National Equities Exchange and Quotations, with the scope of such transfers limited to qualified investors. The specific measures for the trading or transfer of preference shares shall be formulated separately by the stock exchange or National Equities Exchange and Quotations.

Article 48: The suitability criteria for investors at the preference share trading or transfer stage shall be consistent with those at the offering stage. The number of investors after the trading or transfer of privately placed preference shares with identical terms may not exceed 200.

Article 49: The China Securities Depository and Clearing Corporation shall provide services such as registration, deposit, clearing and delivery for preference shares.

Part Six: Information disclosure

Article 50: A company shall prepare its preference share prospectus or other information disclosure documents in accordance with CSRC information disclosure rules and perform its information disclosure obligations in accordance with the law. The relevant information disclosure procedure and requirements for a listed company shall be handled with reference to the Measures for the Administration of Securities Offerings by Listed Companies, the Implementing Rules for Private Placement of Shares by Listed Companies and relevant regulatory guidelines. The information disclosure procedure and requirements for a private placement of preference shares by an unlisted public company shall be handled with reference to the Measures for the Regulation of Unlisted Public Companies and relevant regulatory guidelines.

Article 51: When disclosing its regular reports, a company that has issued preference shares shall disclose in a dedicated section details of the preference shares that have been issued, a list of the names of the top 10 largest holders of its preference shares and the number of shares held by them, details on the distribution of profits to the holders of preference shares, details of the buyback of preference shares, details on the restoration of voting rights and the exercise thereof by holders of preference shares, details of the accounting treatment of preference shares and other information relating to preference shares. The specific contents and format thereof will be specified by the CSRC.

Article 52: If a restoration of voting rights, buyback of common shares or other such matter, or another matter that could have a relatively major impact on the trading or transfer price of its common shares or preference shares occurs in respect of a listed company that has issued preference shares, it shall perform its ad hoc report, announcement or other such information disclosure obligation in accordance with Article 67 of the Securities Law and relevant CSRC provisions.

Article 53: An unlisted public company that has issued preference shares shall perform its routine information disclosure obligations in accordance with the Measures for the Regulation of Unlisted Public Companies and relevant regulatory guidelines.

Part Seven: Buyback, merger and restructuring

Article 54: A listed company may use a private placement of preference shares as a means of payment for the buyback of common shares from specific shareholders of the company. The price for the buyback of common shares by the listed company shall be fair and reasonable, and may not prejudice the lawful interests of shareholders or other stakeholders.

Article 55: If a listed company makes a public offering of preference shares to buy back common shares in order to reduce its registered capital, or uses a private placement of preference shares as a means of payment for the buyback of common shares from specific shareholders of the company, it shall, in addition to complying with the conditions and procedure for the offering of preference shares, comply with the following provisions:

(1) if the listed company is to buy back common shares, the board of directors shall adopt a resolution thereon in accordance with the law and submit it to the shareholders' general meeting for approval;

(2) the resolution on the buyback of common shares adopted by the shareholders' general meeting shall include the following matters: the price range for the buyback of common shares, the number and percentage of common shares to be bought back, the time limit for the buyback of common shares, the term of validity of the resolution, the specific authorisation of the board of directors for the handling of matters relating to the contemplated share buyback and other relevant matters; if the placement of preference shares is to be used as a means of payment, the resolution shall include the total amount of preference shares that is to be used for payment and the payment percentage; if a public offering of preference shares is to be made within one year from the date of completion of the buyback plan, the resolution shall include the total amount of funds for the buyback and the source of such funds;

(3) the resolution of the shareholders' general meeting of the listed company on the buyback of common shares shall require at least two-thirds of the votes held by the holders of common shares (including holders of preference shares with restored voting rights) present at the meeting for adoption;

(4) the listed company shall announce the resolution on the buyback of common shares on the day following the adoption thereof by the shareholders' general meeting; and

(5) notification of creditors in accordance with the law.

Where these Measures are silent, other CSRC provisions on buybacks by listed companies shall be complied with.

Article 56: A takeover offer for a listed company shall apply to all of the shareholders of the target company, but different takeover conditions may be proposed to holders of preference shares and holders of common shares.

Article 57: A listed company may offer preference shares to purchase assets in accordance with the conditions set forth in the Measures for the Administration of Material Asset Restructurings by Listed Companies and shall additionally comply with Articles 33 and 35 to 38 hereof in disclosing relevant information and carrying out the pertinent procedures in accordance with the law.

Article 58: A listed company that offers preference shares as a means of payment for the purchase of assets may additionally raise ancillary funds.

Article 59: If the plan of an unlisted public company to offer preference shares involves a material asset restructuring, CSRC provisions on material asset restructurings shall be complied with.

Part Eight: Regulatory measures and legal liability

Article 60: If a company, its controlling shareholder or de facto controller, or a director, supervisor, senior officer or other directly responsible person thereof, or a relevant market intermediary firm or a responsible person thereof, or another market participant involved in the pilot project for preference shares violates these Measures, the matter shall be dealt with in accordance with the Company Law, the Securities Law and relevant CSRC provisions. If a criminal offence is suspected, the case shall be transferred to the judicial authorities for criminal prosecution.

Article 61: If a listed company or unlisted public company violates these Measures by failing to formulate the relevant articles of association clauses in accordance with provisions, failing to convene a shareholders' general meeting to restore the voting rights of the holders of preference shares as stipulated or otherwise prejudicing the rights and interests of holders of preference shares and small and medium-sized shareholders, the CSRC shall order it to rectify the matter and may take the appropriate administrative regulatory measures against the listed company or unlisted public company and its manager directly in charge and other directly responsible persons and impose administrative penalties such as giving them a warning and fining them up to Rmb30,000.

Article 62: If a listed company violates the second paragraph of Article 22 hereof, the CSRC may order it to rectify the matter and refuse to accept applications from it for the public offering of securities for 36 months.

Article 63: If a listed company or unlisted public company makes a private placement of preference shares with an investor other than a qualified investor as specified herein, the CSRC shall order it to rectify the matter and may refuse to accept applications from it for the offering of preference shares for 36 months from the date of confirmation.

Article 64: If an underwriter, when underwriting a private placement of preference shares, makes a rights issue of preference shares to a target other than a qualified investor as specified herein, the CSRC may order it to rectify the matter and refuse its participation in the underwriting of securities for 36 months.

Part Nine: Supplementary provisions

Article 65: For the purposes of these Measures, the term “qualified investor” includes:

(1) financial institutions the establishment of which was approved by the relevant financial regulator, including commercial banks, securities companies, fund management companies, trust companies and insurance companies;

(2) the wealth management products offered by the aforementioned financial institutions to investors, including but not limited to bank wealth management products, trust products, investment-linked insurance products, fund products and securities companies' asset management products;

(3) enterprises with legal personality with paid-in capital or total paid-in share capital of not less than Rmb5 million;

(4) partnerships with total paid-in capital contributions of not less than Rmb5 million;

(5) qualified foreign institutional investors, renminbi qualified foreign institutional investors and foreign strategic investors that satisfy the provisions of the relevant State Council departments;

(6) individual investors, other than the directors and senior management personnel of the issuer and their spouses, whose assets in various types of securities accounts, fund accounts and asset management accounts total not less than Rmb5 million; and

(7) other qualified investors as recognised by the CSRC.

Article 66: When an unlisted public company makes an initial public offering of common shares and makes a simultaneous private placement of preference shares, its placement of preference shares and information disclosure thereof shall comply with the provisions herein concerning private placements of preference shares by listed companies.

Article 67: When a domestically registered company listed offshore makes an offering of preference shares abroad, it shall comply with provisions on the offering of shares and listing abroad.

When a domestically registered company listed offshore makes a domestic offering of preference shares, matters shall be handled with reference to the provisions hereof on the offering of preference shares by unlisted public companies and relevant provisions such as the Measures for the Regulation of Unlisted Public Companies, and its preference shares may be transferred on the National Equities Exchange and Quotations.

Article 68: The following terms herein shall have the meanings ascribed to them below:

(1) “mandatory dividends” means that a company must distribute dividends to holders of preference shares when it has after-tax distributable profits;

(2) “after-tax distributable profits” means the undistributed profits to which the issuer's shareholders are entitled in accordance with the law;

(3) “weighted average rate of return on equity” means the weighted average rate of return on equity calculated in accordance with the Rules for the Preparation and Submission of Information Disclosures by Companies That Offer Shares to the Public No.9: Calculation and Disclosure of Rate of Return on Equity and Earnings Per Share;

(4) “SSE 50 Index” means the SSE 50 Index published by China Securities Index Co., Ltd.

Article 69: When calculating the number of qualified investors for the purposes of these Measures, where an asset management firm subscribes for or acquires preference shares by way of two or more products under its management, they shall be deemed as one person.

Article 70: These Measures shall be effective as of date of promulgation.