In order to enrich China's national social security fund and cope with the pension shortfall issue caused by the aging of the Chinese population, on June 19, 2009, the State Council promulgated the “Measures on Enriching the Social Security Fund by Transferring Some State-Owned Shares in the Onshore Securities Market” (the “Measures”) requiring the transfer of certain state-owned shares of listed companies to the National Social Security Fund Council (the “NSSFC”). In the case of initial public offerings occurring after the promulgation of the Measures which include state-owned shares, 10%25 of the total shares to be listed (but not to exceed the shares actually owned by the state-owned shareholders) is required to be transferred to the NSSFC, subject to the same lock-up period as they are in the hands of the transferring state-owned shareholders. For initial public offerings occurring after the 2006 reform of the non-tradable shares (state-owned shares) and prior to the promulgation of the Measures, ten percent (10%25) of the shares actually publicly issued at that time should be transferred to the NSSFC retroactively, which shares shall be subject to three (3) more years of lock-up in addition to the transferring shareholders' lock-up period.
