Finance Departments (Bureaus) of all provinces, autonomous regions, and municipalities directly under the central government; Securities Regulatory Commissions’ local regulatory bureaus in all provinces, autonomous regions, municipalities directly under the central government, and cities under separate planning:

To strengthen the dynamic management of asset valuation agencies qualified to conduct assessments related to securities and futures businesses (hereinafter referred to as “securities assessment agencies”), and in accordance with the relevant provisions of the “Notice from the Ministry of Finance and the China Securities Regulatory Commission on Management Issues Concerning Asset Valuation Agencies Engaged in Securities and Futures-Related Businesses” (Cai Qi [2008] No. 81), we hereby issue the following notice regarding the follow-up management of securities assessment agencies:

I. On the Annual Filing and Management of Securities Valuation Agencies

(1) Annual filing is an important component of the dynamic management of securities appraisal institutions. Each securities appraisal institution shall establish and improve a sound filing management system and assign dedicated personnel to be responsible for it.

(2) Securities valuation agencies shall entrust accounting firms that have no affiliation with the agency and are qualified to perform securities-related audits to audit their annual financial accounting reports. The audit report shall disclose the amount of revenue from valuation services, as well as the revenue amounts attributable to securities-related and non-securities-related businesses; the main components of various receivables and payables; the status of shareholder loans; and the details of the extraction and use of the professional risk fund.

(3) The summary table of assessment business and revenue for the previous year, submitted for annual filing, shall have its listed business and revenue statistically compiled in accordance with the provisions of Article 2 of this notice.

(4) Securities valuation agencies shall fulfill their industry and social responsibilities and accurately complete the Report on Fulfillment of Industry and Social Responsibilities (Attachment 1).

(5) Securities valuation agencies shall submit both written and electronic versions of their annual filing materials separately to the Ministry of Finance, the China Securities Regulatory Commission, and the China Association of Asset Appraisers. The Ministry of Finance, the China Securities Regulatory Commission, and the China Association of Asset Appraisers will publicly disclose the key contents in the annual filing materials of securities valuation agencies that pertain to the conditions stipulated in Document No. [2008]81 issued by the Ministry of Finance and State-owned Enterprises.

Securities appraisal institutions that fail to file reports within the prescribed time frame and according to the required content will be publicly criticized by the Ministry of Finance, the China Securities Regulatory Commission, and the China Association of Asset Appraisers.

II. Regarding the Calculation of Assessment Business Revenue

(1) The revenue from appraisal services of securities appraisal institutions is categorized into “revenue from appraisal services directly commissioned” and “revenue from appraisal services not directly commissioned.” In the management of securities appraisal qualifications, the “appraisal service revenue of no less than 5 million yuan per year for the past three years, totaling no less than 20 million yuan,” as stipulated in Article 1, Paragraph (2), Item 7 of Document Caiqi [2008] No. 81, refers exclusively to the “revenue from appraisal services directly commissioned,” which is calculated and verified through auditing without any change in accounting principles. The “revenue from appraisal services not directly commissioned” that has been generated shall continue to be accounted for and managed according to the original regulations, but will not be included in the calculation.

(2) When a securities valuation agency accepts a commission from the user of the valuation (consulting) report, signs a business engagement letter, fulfills the relevant procedures prescribed by the valuation standards, prepares working papers for the valuation, issues an invoice to the client, and obtains the right to collect payment, and simultaneously meets any one of the following conditions, the income shall be counted as “income from directly commissioned valuation services”:

1. An appraisal report was issued to the client regarding the value of individual assets or the overall assets of the enterprise.

2. Based on the valuation assessment of individual assets or the overall enterprise assets, we have provided the client with a written appraisal and advisory opinion.

3. If the assessment project is terminated due to reasons attributable to the client and no assessment report or assessment advisory opinion has been issued, the party shall provide either a termination agreement for the assessment project or supporting documentation proving the termination of the relevant economic activity associated with the assessment project.

4. If a securities valuation agency voluntarily terminates a valuation project without issuing a valuation report or valuation advisory opinion, it shall provide a reasonable explanation for the termination reason as required by securities valuation standards.

(3) In the event that a securities valuation agency merges with other valuation agencies, the revenue from valuation services earned by each party prior to the merger shall no longer be combined for calculation.

　III. On Internal Management Issues

(1) Securities valuation agencies shall establish and improve quality control systems, adopt effective protective measures, and reasonably ensure the independence of the agency and its personnel, thereby avoiding conflicts of interest.

(2) Securities valuation agencies shall, in accordance with the requirements of the “General Rules for Enterprise Financial Management” (Ministry of Finance Order No. 41), improve their internal financial systems, strengthen financial management, standardize financial practices, and prevent financial risks.

(3) Except for working capital required to carry out business operations, securities appraisal institutions generally shall not provide long-term loans to shareholders or other individuals. If a securities appraisal institution extends a loan to a shareholder, such loan must not result in the net assets falling below 2 million yuan after deducting the shareholder’s loan. For personal loans required due to force majeure, the reasons, amount, and repayment commitment must be clearly stated and approved by a resolution of the shareholders’ meeting.

(4) Securities valuation agencies engaging in asset operation and management shall provide financial support for their valuation services and the sustainable development of the agency, and shall not engage in equity investments.

(5) Securities valuation agencies shall strictly comply with the state’s regulations concerning cash management, bank settlements, invoice management, and other related matters. Large-scale cash receipts and payments, as well as fund transfers between institutions, shall be conducted via bank transfers and supported by legally valid vouchers.

(6) The principles for recognizing revenue from appraisal services provided by securities appraisal institutions shall comply with the provisions of the "Enterprise Accounting Standards" and maintain consistency. For cases where an appraisal report has been issued but the appraisal revenue has not yet been recognized, or where an appraisal report has not been issued due to termination of the appraisal project but the appraisal revenue has already been recognized, such situations shall be disclosed during annual filing.

IV. On the issue of supervision and inspection

(1) The Ministry of Finance and the China Securities Regulatory Commission shall, in accordance with the law, supervise securities appraisal institutions. For the following matters involving the management of securities appraisal qualifications, securities appraisal institutions shall be subject to on-site inspections conducted by a joint inspection team composed of the Ministry of Finance, the China Securities Regulatory Commission, and the China Association of Asset Appraisers:

1. Situations that meet the conditions stipulated in Article 1, Paragraph (2), Items 2 through 5 of Document Cai Qi [2008] No. 81;

2. Situations specified in Article 7, Paragraph (1) of Document Caiqi [2008] No. 81 that warrant special attention;

3. The filed materials do not match the actual situation.

(2) The joint inspection team shall conduct on-site inspections and notify the securities valuation agency five working days in advance, following the rules governing the approval of securities valuation qualifications. The securities valuation agency and its registered asset appraisers shall cooperate fully with the on-site inspections.

After conducting on-site inspections, the Joint Inspection Team shall prepare an inspection report and put forward recommendations for handling the matter.

(3) In accordance with Paragraph (3) of Article 7 of Document Cai Qi [2008] No. 81, the Ministry of Finance and the China Securities Regulatory Commission have taken measures such as issuing warning letters (Attachment 2) and ordering rectifications (Attachment 3). These measures specify the circumstances in which securities valuation agencies fail to comply with the requirements set forth in Document Cai Qi [2008] No. 81, as well as the specific requirements for regulatory actions, and the measures have been publicly announced.

(4) If a securities appraisal agency, after making rectifications, still fails to meet the conditions stipulated in Article 1, Paragraph (2) of Document No. [2008]81 issued by the Ministry of Finance and the CSRC, the Ministry of Finance and the CSRC will, in accordance with the law, revoke its securities appraisal qualification.

V. On Establishing Integrity Records

(1) The Ministry of Finance, the China Securities Regulatory Commission, and the China Association of Asset Appraisers will gradually establish a unified integrity archive for securities appraisal institutions.

(2) The following circumstances occurring at securities valuation agencies will be recorded in the integrity file:

1. Failing to file the required report as prescribed;

2. The submitted materials do not conform to the facts;

3. Failing to cooperate with the Ministry of Finance and the China Securities Regulatory Commission in their supervisory and regulatory efforts;

4. Engaging in securities valuation business during the period when ordered to make rectifications for failing to meet the conditions stipulated in Document No. [2008]81 of the Ministry of Finance and Enterprise;

5. Those who have been subject to criminal penalties, administrative penalties, or industry self-regulatory sanctions for conducting securities business;

6. Other circumstances that affect the integrity record of securities valuation agencies.

(3) The Ministry of Finance, the China Securities Regulatory Commission, and the China Association of Asset Appraisers shall periodically publish the integrity records of securities appraisal institutions to the public.

VI. Other Matters

(1) The China Association of Asset Appraisers shall strengthen self-regulatory management within the industry, guide and supervise securities appraisal institutions to conduct their practice in compliance with the provisions of asset appraisal standards, assist the Ministry of Finance and the China Securities Regulatory Commission in carrying out regulatory work, and continuously improve the securities appraisal regulatory information system.

(2) This notice shall take effect from the date of its issuance.

Ministry of Finance, China Securities Regulatory Commission
November 6, 2009

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