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In order to protect the legitimate rights and interests of investors, strengthening restrictions on the market and improving the mechanism for forming the issuing price of shares, the notice on several issues concerning the trial implementation of price inquiry system for initial public offerings is hereby given as follows: I. A company of IPO (hereinafter referred to "issuer") and its recommendation institutions shall determine the issuing price of shares by inquiring of the investors about the price. The inquired investors as mentioned in this Circular refer to the securities investment fund management companies, securities companies, trust and investment companies, finance corporations, insurance institutional investors and QFIIs that meet the conditions as provided for by the China Securities Regulatory Commission (hereinafter referred to "CSRC"), and other institutional investors authorized by the CSRC. II. When the issuer and its recommendation institutions announce the issuing price and price/earning ratio, the earnings per share shall be calculated by basing on the comparatively low net profits divided by the total stocks after the issuing, and the former shall be audited by an accounting firm in the year prior to the issuing and with the deduction of non-routine profits/losses. The issuer that offers anticipation on profits shall still complement the disclosure of the issuing price/earning ratio based thereon. The earnings per share shall be calculated by basing on the comparatively low net profits divided by the total stocks after the issuing, and the former shall be audited by an accounting firm in the present issuing year and with the deduction of non-routine profits/losses. The issuer may also disclose such issuing price index as the price/book ratio, which can reflect the features of the industry where the issuer belongs. III. After the application for issuing is approved by the CSRC, the issuer shall make public its letter of intent and initiate its recommendation, introduction and inquiry. The inquiry shall be divided into such two phases as the initial inquiry and the accumulated bidding inquiry. The issuer and its recommendation institutions shall determine the issue price range through the initial inquiry, and the issuing price through the accumulated bidding inquiry. The said letter of intent shall have the same contents, form and legal effect with the prospectus except the issuing price and the capital amount to be raised. The issuer and its recommendation institutions shall undertake corresponding legal liabilities for the authenticity, veracity and integrity of the letter of intent. The recommendation institutions shall provide a research report regarding investment values for the inquired investors at the time of initial inquiry, and the said research report shall be worked out according to this Circular. IV. The issuer and its recommendation institutions shall conduct their initial inquiries to at least 20 investors, and determine the issue price range and corresponding price/earning ratio range on the strength of the quotation results. An inquired investor shall separately make his quotation on the basis of a comprehensive study of the issuer's inherent investment values and market status, and simultaneously submit the basis for and results of the quotation to the recommendation institutions. Both the initial inquiry and quotation shall be carried out in written form. If 400 million or more shares are offered publicly, the number of inquired investors taking part in the initial inquiry shall not be less than 50. V. The issuer and its recommendation institutions shall, after setting the issue price range, carry out the accumulated bidding inquiry to the investors within the said range, and determine the issuing price according to the results of accumulated bidding inquiry. All investors in line with this Circular can participate in the accumulated bidding inquiry. The issuer and its recommendation institutions shall report the issuing price range, issuing price and corresponding price/earning ratio to the CSRC for archival filing after they are determined; and the basis for setting the issuing price shall be filed for archival purposes and made public at the same time. VI. The issuer and its recommendation institutions shall ration shares to the inquired investors participating in the accumulated bidding inquiry, and in case less than 400 million shares are offered publicly, the quantity for rationing shall not exceed 20% of the total amount of this issuance; if 400 million or more shares are offered publicly, the quantity for rationing shall not exceed 50% of the total amount of this issuance. The issuer and its recommendation institutions may adjust the said ratio on the strength of the market status upon the approval of the CSRC. VII. After accomplishing the accumulated bidding inquiry, if the valid subscription amount beyond the issuing price is larger than the shares to be rationed to the inquired investors, the issuer and its recommendation institutions shall ration the said valid subscription amount at the same ratio, which shall be the shares to be rationed to the inquired investors divided by the valid subscription amount beyond the issuing price. The standards for valid subscription shall be specified in the issuing announcement. The recommendation institutions shall examine and confirm the qualifications of inquired investors, and the shares shall not be rationed to any investor not in conformity with the present Circular and other relevant provisions. VIII. The issuer and its recommendation institutions shall, after the conclusion of accumulated bidding inquiry and rationing, publish an announcement on the rationing results, which shall include, but not limited to, the following items: (1) information about the accumulated bidding inquiry, which includes the valid subscription amount at different prices of all inquired investors, valid accumulated subscription amount above the different prices and corresponding multiples of oversubscription, total subscription amount and total frozen capitals; (2) the proportion of the rationed subscription to the valid subscription amount beyond the issuing price, and the multiples of oversubscriptions; and (3) the list of inquired investors that have obtained the rationing, the amount of rationing and the amount of refund. IX. The issuer and its recommendation institutions shall, after the conclusion of accumulated bidding inquiry, publicly offer remaining shares to individual investors at the same price according to the principles and procedures as provided for in the issuing announcement. X. The inquired investors shall separately and independently take part in the accumulated bidding inquiry and the rationing with the designated self-run account or the account for investment products under the management, and comply with the rules relating to the account management. The upper limit for accumulated subscription of the single designated securities account shall not exceed the total amount of shares to be rationed to the inquired investors. The inquired investors shall pay the full amount of subscription fees for their participation in the accumulated bidding inquiry and the rationing, and the interests incurred during the frozen period of subscription fees shall be attributed to the inquired investors. XI. The inquired investors shall promise to lock up the stocks rationed from participating in the accumulated bidding inquiry for more than 3 months, and the locking period shall be computed from the date when the stocks are publicly offered to individual investors. The stock exchange where the issuer listed its shares and the securities depository and clearing institution shall make corresponding arrangements on locking the rationed shares. XII. The recommendation institutions shall be responsible for the recommendation, introduction, inquiry and ration. The recommendation institutions shall employ an accounting firm with professional securities qualifications to assess the frozen subscription fees and issue an assessment report; also it shall employ a law firm to bear witness to the inquiry and ration, including, but not limited to, whether or not the investors to be rationed and the rationing methods are in accordance with laws, regulations and the present Circular, and provide written legal opinions on special items. XIII. The recommendation institutions, accounting firms, law firms and relevant functionaries shall abide by laws, regulations and the present Circular, be honest and keep faith, be diligent and fulfill duties. The quotations and subscriptions of inquired investors shall comply with the principle of good faith, with the provisions of laws, regulations and fund contracts or articles of corporation, etc. XIV. The underwriting agreements and underwriting group agreements may be concluded after the issuing price is determined, and be submitted to the CSRC for archival filing. Upon the conclusion of stock issuance, the issuer and its recommendation institutions shall report such issuing particulars as the recommendation, introduction, inquiry and rationing and the opinions of other intermediary institutions to the CSRC for archival filing. XV. The research report on investment values as made by the recommendation institutions shall fully and objectively analyze the factors influencing the issuing price, and the quoted materials in the said report shall be authentic and precise and their resources shall be indicated. The said research report shall include, but not limited to, the following items: (1) the classification of the issuer's industry, the issuer's status in the said industry and its impacts on the pricing; (2) the performance of listed firms' stocks of the issuer's industry in the secondary market and the market macrocosmic tendency's impacts on the pricing; (3) the impacts of the issuer's management situation and potential for development on the pricing; (4) the impacts of the issuer's profit-making abilities and financial status on the pricing; (5) the impacts of the issuer's projects invested by the raised capitals on the stock pricing; (6) the issuer's anticipation of the trading price range in the secondary market after the listing of its stocks; and (7) any other factor that has important impacts on the issuer's stock pricing. XVI. The CSRC shall exercise supervision over and administration of the acts of the recommendation institutions, other intermediary institutions and inquired investors. If any of the recommendation institutions, other intermediary institutions and inquired investors and of the relevant responsible persons violates the relevant laws, regulations and rules, the CSRC shall take supervisory measures and impose administrative sanctions. If any of them is suspected of committing a crime, the offender shall be transferred to a judicial organ and be investigated for criminal liabilities: (1) any recommendation institution which underwrites stocks that are issued without permission, or discloses in advance information on stock issuing shall be punished pursuant to Articles 176 and 183 of the Securities Law; (2) if any issuer discloses the expected profits but its actual profits are less than 80 % of the expected profits, any project as sponsored by the relevant recommendation representatives shall not be accepted within 3 months pursuant to Article 67 of the Interim Measures for the Stock Issuance and Listing Recommendation System (No.18 of the China Securities Regulatory Commission, hereinafter referred to as the Measures for the Recommendation); (3) a recommendation institution and its representatives with bad acts in the inquiry and rationing shall be given such supervisory measures as making a hint in talks, paying important attention, ordering it or him to get right or determining one as improper to take corresponding position; (4) any accounting firm or law firm that has unlawful or irregular acts in the inquiry and rationing shall be punished or given corresponding supervisory measures pursuant to Article 202 of the Securities Law and Article 72 of the Measures for the Recommendation; (5) any inquired investor that doesn't follow the principle of good faith in the quotation, subscription and rationing or doesn't comply with the relevant conditions any more shall be delisted from the inquired investors. XVII. The present Circular shall be implemented as of January 1, 2005. The Guidelines on the Analysis Report about the Stock Issue Pricing (for Trial Implementation) (No.94 [1999] of the China Securities Regulatory Commission), the Notice on Amending Relevant Provisions in the Notice about the Further Improvement of Stock Issuing Methods (No.32 [2000] of the China Securities Regulatory Commission) and the Guidelines on the Issuing Methods of Rationing of Legal Persons (No.111 [2000] of the China Securities Regulatory Commission) shall be repealed simultaneously. |
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