Chapter 8 Supplementary Provisions of the Trial Measures for the Administration of Overseas Securities Investment by Qualified Domestic Institutional Investors

Article 44 Domestic institutional investors investing in financial products or instruments of the Hong Kong Special Administrative Region and the Macao Special Administrative Region shall refer to the implementation of these Measures.

Article 45 If a fund management company that has obtained the qualification of domestic institutional investor raises funds from a specific target or accepts the entrustment of property from a specific target to invest in overseas securities market, it shall refer to the implementation of these Measures.

Article 46 The securities companies obtaining the qualification of domestic institutional investors to handle directed asset management, special asset management business, the use of funds under management to invest in overseas securities markets, with reference to the implementation of these Measures.

Article 47 These Measures shall come into force from July 5, 2007 onwards.

Qualified Domestic Institutional Investor Qualification Application Form (Omitted) Notice on Relevant Issues Concerning the Implementation of the Trial Measures for the Administration of Overseas Securities Investments by Qualified Domestic Institutional Investors CSRC Time: June 20, 2007 CSRC [2007] No. 81

Each fund management company, securities company and custodian bank:

For the implementation of the "Trial Measures on Administration of Overseas Securities Investments by Qualified Domestic Institutional Investors," the CSRC has adopted the following measures to implement the measures. In order to implement the Trial Measures for the Administration of Overseas Securities Investment by Qualified Domestic Institutional Investors (hereinafter referred to as the Trial Measures) and to do a good job of overseas securities investment by qualified domestic institutional investors (hereinafter referred to as domestic institutional investors), the relevant issues for the implementation of the Trial Measures are hereby notified as follows:

I. Documents proving the compliance with the provisions of Article 8 of the Trial Measures are as follows:

(1) Proofs of asset management scale and other certificates of asset management scale as of the end of the most recent quarter issued by domestic certified accountants (i) the latest quarter-end asset management scale issued by a domestic certified public accountant;

(ii) the basic information of the personnel with relevant experience in offshore investment management, such as their education, work experience, qualifications, professional titles, etc.

(iii) the main systems of risk control, compliance control and investment management, etc.

The pilot scheme will be implemented in accordance with Article 8 of the pilot scheme.

II. The supporting documents in compliance with the provisions of Article 14 of the Trial Measures are:

(1) business license and business permit certificates issued by the government or regulatory authorities of the country or region where the overseas investment adviser (hereinafter referred to as the investment adviser) is located (copy);

(2) documents certifying the asset management scale at the end of the previous year issued by the overseas certified public accountant;

(iii) the articles of incorporation or partnership of the investment adviser;

(iv) the main systems of risk control, compliance control and investment management of the investment adviser;

(v) whether the investment adviser has been subject to any significant penalties by the regulatory authorities in the last five years, and whether there are any significant matters that are being investigated by the judiciary or the regulatory authorities;

(vi) the audited financial statements of the investment adviser for the last year audited financial statements;

(vii) a description of the establishment and business activities of the investment adviser and its related parties in the territory.

The documents stipulated in the preceding paragraph shall be accompanied by a Chinese translation or a Chinese summary if they are written in a foreign language.

Third, the supporting documents in compliance with the provisions of Article 19 of the Trial Measures shall be:

(1) financial business license (copy);

(2) business license (copy);

(3) documents certifying the paid-in capital or documents certifying the scale of assets under custody as of the end of the previous year issued by an overseas certified public accountant;

(4) custodian department Staffing, description of the conditions for safe custody of assets;

(v) The main management system of the custodial business;

(vi) A statement that it has not been subjected to any major penalties by the regulatory authorities of the country or region where it is located in the last three years, and that no major matters are under investigation by the judicial department or regulatory authorities.

The documents stipulated in the preceding paragraph that are written in a foreign language shall be accompanied by a Chinese translation or a Chinese summary.

Four, fund-raising

(a) the collection of application materials

domestic institutional investors applying for fund-raising funds, pooled plans, in addition to submitting application materials in accordance with the "Securities Investment Funds Law", "Measures for the Operation and Management of Securities Investment Funds", "Trial Measures for the Client Asset Management Business of Securities Firms" and other relevant provisions, the following documents should also be submitted (a copy of the original, a copy). (one original and one copy):

1. Investor risk reminder letter;

2. Investor education materials, including but not limited to:

(1) basic introduction of the fund or pooled plan;

(2) introduction of the main risks faced by the investor in purchasing the fund or pooled plan for overseas investment;

(3) basic introduction of the investing country or regional market;

(4) introduction of the investing country or regional market;

(5) introduction of the investing country or region;

(6) introduction of the investing country or region; and Markets;

(4) Basic knowledge of the financial products or instruments to be invested in;

(5) Guidelines for compiling and selecting performance comparison benchmarks for the fund's investments.

Investor education materials should be written in concise, easy-to-understand Chinese language, and should not contain any promotion of a particular fund product or pooled plan, domestic institutional investors or the products or services they provide, but may make references to the products or services as examples and such references will not have any effect of promoting the company, products or services.

3. If a domestic institutional investor commissions an investment advisor, it shall also produce the following documents:

(1) the basic information form of the investment advisor (Attachment 1);

(2) the draft agreement signed between the domestic institutional investor and the investment advisor;

(3) the supporting documents as stipulated in the second article of this Circular.

4. If the custodian entrusts a foreign custodian, it shall also produce the following documents:

(1) draft agreement signed between the custodian and the foreign custodian;

(2) supporting documents stipulated in Article 3 of this Circular.

Where the documents specified in the preceding paragraph are written in a foreign language, they shall be accompanied by a Chinese translation or a Chinese summary.

(2) The name of the fund or pooled plan shall comply with the following requirements:

1. The language shall be simple, clear and easy to understand;

2. It shall be in line with the investment strategy, investment scope, and investment country or region of the fund or pooled plan.

(3) The fund's investment performance comparison benchmark and its selection shall comply with the following conditions:

1. The performance comparison benchmark shall be specified at the beginning of the performance evaluation period;

2. The performance comparison benchmark is consistent with the fund's investment style and methodology;

3. The data of the performance comparison benchmark can be obtained at a reasonable frequency;

4. The components and weights that make up the performance comparison benchmark can be clearly identified;

5. Knowledge of the current conditions of the securities that make up the performance comparison benchmark and research expertise;

6. Acceptance of the applicability of the performance comparison benchmark and the ability to reasonably account for active management deviations from the performance comparison benchmark;

7. Reproducibility of the performance comparison benchmark.

(d) The first offering of a fund or a pooled plan shall comply with the following requirements:

1. It may be offered in RMB, US dollars or other major foreign exchange currencies as the denomination currency;

2. The fund's offering amount shall be not less than RMB 200 million or the equivalent currency; the pooled plan's offering amount shall be not less than RMB 100 million or the equivalent currency;

3. Open-end Fund share holders of not less than 200 people, closed-end fund share holders of not less than 1,000 people, pooled plan holders of not less than 2 people;

4. Raised at par, domestic institutional investors can determine the size of the par amount according to the characteristics of the product.

V. Investment Operation

(1) Except as otherwise provided by the CSRC, the fund and the pooled plan may invest in the following financial products or instruments:

1. Money market instruments such as bank deposits, negotiable certificates of deposit, bankers' acceptances, bank notes, commercial paper, repurchase agreements, short-term government bonds;

2. Government bonds, corporate bonds Government bonds, corporate bonds, convertible bonds, home mortgage-backed securities, asset-backed securities, etc. and securities issued by international financial organizations recognized by the CSRC (Annex 2);

3. Ordinary shares, preferred shares, global depository receipts and American depository receipts, and real estate trust certificates listed and traded in the securities markets of the countries or regions that have signed a Memorandum of Understanding (MOU) on Bilateral Supervisory Cooperation with the CSRC (Annex 3);

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4. Public funds registered with the securities regulators of countries or regions that have signed a memorandum of understanding on bilateral regulatory cooperation with the CSRC;

5. Structured investment products linked to fixed-income, equity, credit, commodity indices, funds, and other underlying;

6. Forward contracts, swaps, and warrants, options and warrants recognized by the CSRC for trading on overseas exchanges (Annex 4) Financial derivative products such as warrants, options and futures listed for trading.

The banks referred to in item 1 of the preceding paragraph shall be branches of Chinese-funded commercial banks established overseas or offshore banks that have attained the ratings of the credit rating agencies recognized by the CSRC (Annex 5) in the most recent fiscal year.

(2) Except as otherwise provided by the CSRC, funds and pooled plans shall not engage in the following acts:

1. Purchase of real estate.

2. Purchase of real estate mortgage.

3. Purchase of precious metals or certificates representing precious metals.

4. Purchase of physical goods.

5. Borrowing cash except for temporary purposes such as redemption payable and transaction liquidation. The proportion of cash borrowed for such temporary purposes shall not exceed 10% of the net asset value of the fund or pooled plan.

6. Using financing to purchase securities, except for investment in financial derivatives.

7. Participate in short selling transactions where the underlying assets are not held.

8. Engaging in the business of underwriting securities.

9. Other acts prohibited by the CSRC.

(3) Domestic institutional investors and investment advisers shall not engage in the following behaviors:

1. Unfairly treating different clients or different portfolios.

2. Disclosing client information to any third party except as provided by laws and regulations.

3. Other behaviors prohibited by the CSRC.

(D) Limitations on Investment Ratio

1. A single fund or pooled plan shall not hold more than 20% of the net value of deposits in the same bank as the fund or pooled plan. Deposits in the custodian account of the fund or pooled plan are exempted from the above restriction.

2. The market value of securities issued by the same institution (except governments and international financial organizations) held by a single fund or pooled plan shall not exceed 10% of the net value of the fund or pooled plan. Index funds are exempted from the above restriction.

3. The assets of a single fund or pooled plan holding securities listed and traded in the securities markets of countries or regions other than the countries or regions that have signed the Memorandum of Understanding on Bilateral Supervisory Cooperation with the CSRC shall not exceed 10% of the net asset value of the fund or pooled plan, of which the assets of the securities held in the markets of any one of these countries or regions shall not exceed 3% of the net asset value of the fund or pooled plan.

4. Funds and pooled plans shall not purchase securities for the purpose of controlling or influencing the organization issuing the securities or its management. All funds and pooled plans managed by the same domestic institutional investor shall not hold more than 10% of the total securities issued by the same organization with voting rights. Index funds are exempt from the above restrictions.

The former investment ratio restriction shall be calculated together for the total domestic and overseas listed equity of the same institution, and shall also be calculated together for the underlying securities represented by GDRs and ADSs, assuming that conversions are exercised on the equity warrants held.

5. The market value of illiquid assets held by a single fund or pooled scheme shall not exceed 10% of the net value of the fund or pooled scheme.

The former non-liquid assets refer to the liquidity-restricted securities stipulated in the law or the fund contract or the contract of the pooled plan, as well as other assets recognized by the China Securities Regulatory Commission (CSRC).

6. The aggregate market value of overseas funds held by a single fund or pooled plan shall not exceed 10% of the net value of the fund or pooled plan. The holding of money market funds is exempted from the above restriction.

7. All the funds and pooled plans managed by the same domestic institutional investor shall not hold more than 20% of the total shares of any one offshore fund.

If the fund or pooled plan exceeds the above investment ratio limit, it shall adopt reasonable commercial measures to reduce its position within 30 working days after exceeding the ratio in order to comply with the investment ratio limit.

CSC may adjust the above investment ratio in accordance with the development of the securities market or specific cases of the fund or pooled plan.

(V) Fund of Funds

1. The investment ratio of each offshore fund shall not exceed 20% of the net asset value of the fund of funds. Where a fund of funds invests in an offshore umbrella fund, the umbrella fund shall be deemed to be one fund.

2. The fund-of-funds shall not invest in the following funds:

(1) other fund-of-funds;

(2) Feeder Fund;

(3) sub-funds of the umbrella fund that invests in the previous two funds.

3. Pooled schemes investing mainly in funds shall refer to the above provisions.

(F) Investment in Financial Derivatives

Funds and pooled plans investing in derivatives shall be limited to portfolio hedging or effective management, and shall not be used for speculation or amplification of transactions, and at the same time, shall strictly comply with the following provisions:

1. The entire exposure to financial derivatives of a single fund or pooled plan shall not be higher than 100% of the net assets of the fund or pooled plan.

2. The total amount of initial margin paid by a single fund or pooled scheme for investment in futures, option premium paid or collected for investment in options, and initial fee paid for investment in over-the-counter derivatives shall not be higher than 10% of the net asset value of the fund or pooled scheme.

3. Funds and pooled plans investing in over-the-counter financial derivatives such as forward contracts and swaps shall meet the following requirements:

(1) All counterparties involved in the transaction (except for Chinese-funded commercial banks) shall have a rating of not less than that of a credit rating agency recognized by the China Securities Regulatory Commission.

(2) The counterparties shall value the transaction at least every business day, and the fund or pooled plan may terminate the transaction at fair value at any time.

(3) The market value denominated exposure of any one counterparty shall not exceed 20% of the net asset value of the fund or pooled scheme.

4. Funds, pooled plans to invest in derivatives, domestic institutional investors in the product offering application should be submitted to the China Securities Regulatory Commission to invest in derivatives funds, pooled plans risk management process, to be adopted by the portfolio hedging, effective management strategy.

5. Domestic institutional investors shall submit to the CSRC, within 60 working days after the end of the accounting year of each fund or pooled plan, an annual report including the position and risk analysis of derivatives.

6. Funds and pooled plans shall not directly invest in derivatives related to physical commodities.

(7) Funds and pooled plans managed by domestic institutional investors may participate in securities lending and borrowing transactions and shall comply with the following provisions:

1. All counterparties involved in the transactions (except Chinese commercial banks) shall have ratings from credit rating agencies recognized by the CSRC.

2. Adjustments should be made using a market value system to ensure that the market value of the collateral is not less than 102% of the market value of the securities lent.

3. The borrower should pay all dividends, interest and distributions generated from the lent securities to the fund and the pooled program in a timely manner during the trading period. In the event of default by the borrower, the Fund and the Pooled Plan shall have the right to retain and dispose of the collateral to satisfy the claim in accordance with the Agreement and relevant laws.

4. Unless otherwise stipulated by the CSRC, the collateral can be the following financial instruments or varieties:

(1) cash;

(2) certificates of deposits;

(3) commercial paper;

(4) government bonds;

(5) Chinese commercial banks or foreign financial institutions (as a counterparty to the transaction) that are rated no lower than by credit rating agencies recognized by the CSRC. (5) Irrevocable letter of credit issued by a Chinese commercial bank or an overseas financial institution rated by a credit rating agency not lower than that recognized by the China Securities Regulatory Commission (except for those acting as a counterparty to the transaction or its related party).

5. The Fund and the Pooled Plan shall have the right to terminate the securities lending transaction at any time and demand the return of any or all of the lent securities within a reasonable period of time in accordance with normal market practice.

6. Domestic institutional investors shall be liable for any losses incurred by the fund or pooled scheme in connection with its participation in securities lending and borrowing transactions.

(h) The funds and pooled plans managed by domestic institutional investors may participate in positive repurchase transactions and reverse repurchase transactions in accordance with normal market practice and shall comply with the following provisions:

1. All counterparties participating in the positive repurchase transactions (except for the Chinese-funded commercial banks) shall have the credit ratings of the credit rating agencies recognized by the China Securities Regulatory Commission (CSRC).

2. Participating in positive repurchase transactions shall adopt a market value pricing system to adjust the selling proceeds to ensure that the cash is not less than 102% of the market value of the sold securities. In the event of default by the buyer, the fund and the pooled program have the right to retain or dispose of the selling proceeds to satisfy the claim in accordance with the agreement and relevant laws.

3. The buyer should pay all dividends, interest and distributions generated from the sold securities to the fund and the pooled program in a timely manner during the period of the positive repurchase transaction.

4. Participation in reverse repurchase transactions shall be adjusted to ensure that the market value of the purchased securities is not less than 102% of the cash paid by adopting the market value valuation system for the purchased securities. In the event of default by the seller, the Fund and the Pooled Plan have the right to retain or dispose of the purchased securities to satisfy the claim in accordance with the agreement and relevant laws.

5. Domestic institutional investors shall be liable for any losses incurred by the funds and pooled plans in participating in positive repurchase transactions and reverse repurchase transactions of securities.

(ix) The total market value of all securities that have been lent but not returned or the total market value of all securities that have been sold but not repurchased by a fund or a pooled plan participating in securities lending and borrowing transactions and positive repurchase transactions shall not exceed 50% of the total assets of the fund or pooled plan.

The collateral and cash held by a fund or a pooled plan as a result of its participation in securities lending and borrowing transactions or forward repurchase transactions shall not be counted as part of the total assets of the fund or pooled plan for the purpose of calculating the preceding percentage limit.

(j) If a fund or a pooled plan participates in securities lending and borrowing transactions, positive repurchase transactions, or reverse repurchase transactions, the domestic institutional investor shall, in accordance with the provisions of the regulations, set up an appropriate internal control system, operating procedures, and carry out file management.

VI. Fees and Net Worth Calculation

(1) The fund of funds shall have a reasonable management fee rate and sales expense arrangement. If an investment adviser is commissioned, the investment adviser's fee may be charged to the fund's assets.

(ii) The net value of the shares of the fund and the pooled plan shall be calculated and disclosed at least once a week, and if the fund or the pooled plan invests in derivatives, it shall be calculated and disclosed on each business day.

(iii) The net value of the shares of the funds and pooled schemes shall be disclosed within 2 business days after the valuation date.

(d) The net value of the shares of a fund or a pooled plan shall be calculated and disclosed separately or simultaneously in major foreign exchange currencies such as Renminbi or US Dollar.

(v) Each buying and selling transaction of the fund or pooled scheme assets shall be reflected in the latest net share value calculation.

(vi) Valuation of liquidity restricted securities may be done with reference to international accounting standards.

(vii) Valuation of derivatives can be done with reference to international accounting standards.

(viii) Domestic institutional investors shall reasonably determine the time for selecting the asset prices of open-ended funds and set them out in the prospectus and fund contract.

(ix) The specific calculation method of the net value of the open-ended funds and pooled plans and the subscription and redemption prices shall be set forth in the fund and pooled plan contracts and prospectuses, and the number of decimal places shall be specified.

(j) Domestic institutional investors shall pay the redemption amount within 10 working days from the date of acceptance of the holder's valid redemption application, unless otherwise provided by the CSRC.

(xi) The fund contract may agree on the proportion of cash or government bonds to be held by the fund, and special varieties approved by the China Securities Regulatory Commission may be exempted from the proportion restriction stipulated in Article 28 of the Measures for the Operation and Management of Securities Investment Funds.

(xii) The fund contracts of open-end and closed-end funds shall agree on the number of times a fund's earnings are to be distributed each year and the proportion of the fund's earnings to be distributed. The distribution of fund income may be exempted from the restrictions set forth in Article 35 of the Measures for the Administration of the Operation of Securities Investment Funds, unless otherwise provided by the China Securities Regulatory Commission.

VII. Disclosure of Information

Disclosure of information of the fund shall strictly comply with the relevant provisions and meet the following requirements:

(1) Both Chinese and English may be used, and Chinese shall prevail.

(2) The net value and related information can be calculated and disclosed in major foreign exchange currencies such as RMB and USD. Where conversion between currencies is involved, the source of exchange rate data should be disclosed and consistency should be maintained. If there is a change, it should be disclosed and the reasons for the change. The exchange rate of RMB against major foreign currencies shall be based on the median RMB exchange rate announced by the People's Bank of China or its authorized institutions on the last valuation date at the end of the reporting period.

(C) domestic institutional investors who commissioned the investment adviser should be disclosed in the prospectus, which should include, but is not limited to: the name of the investment adviser, registered address, office address, legal representative, the establishment of the time, the size of the asset management in the most recent fiscal year, the main contact person and his contact telephone, fax, e-mail, the main responsible personnel educational background, experience, Qualifications and professional titles obtained, etc.

(d) In the event of changes in the domestic institutional investors and the main personnel in charge of the investment adviser during the operation of the fund, and if the domestic institutional investors believe that the event is likely to have a significant impact on the investment of the fund, they shall make a timely announcement and explain it in the updated prospectus.

(E) If the custodian entrusts an overseas custodian, it shall announce the relevant information of the overseas custodian in the prospectus, which shall at least include the name, registered address, office address, legal representative, time of establishment, paid-in capital of the most recent fiscal year, the scale of custodian's assets, and credit rating.

(6) If the fund invests in financial derivatives, it shall explain in detail in the fund contract and prospectus the derivative products to be invested and their basic characteristics, the portfolio hedging to be adopted, the effective management strategy and the manner and frequency to be adopted.

(vii) If the fund invests in overseas funds, it shall disclose the rate arrangement between the fund and the overseas funds.

(viii) If the fund participates in securities lending and borrowing, positive repurchase transactions and reverse repurchase transactions, it shall disclose the same in the fund contract and prospectus in accordance with the relevant provisions.

(ix) The fund shall disclose in the prospectus the following risks that may arise from investing in overseas markets: overseas market risk, government regulation risk, political risk, liquidity risk, exchange rate risk, derivatives risk, operational risk, accounting risk, tax risk, transaction settlement risk, legal risk, financial modeling risk, securities borrowing and lending/positive repurchase/reverse repurchase risk, small market capitalization/emerging market/high tech company stock risk, credit risk, interest rate risk, primary product risk, block trade risk, etc. The disclosure should include the definition, characteristics, and possible consequences of the above risks.

(j) The fund shall disclose the policy, procedures, and document custody of proxy voting in accordance with the relevant regulations.

(xi) The fund shall calculate and express investment performance in accordance with the Global Investment Performance Standards (GIPS).

(xii) The disclosure of information of the Pooled Scheme shall be made with reference to the above provisions.

VIII. Investment advisers engaging in relevant business activities in the territory shall comply with the relevant laws, regulations and provisions of the territory.

IX. The sub-funds of the umbrella fund shall comply with the provisions of the Pilot Measures and this Circular.

X. This Circular shall come into force on July 5, 2007, and shall be effective from then on.

Attachments: 1. Basic Information Sheet of Overseas Investment Advisors of Qualified Domestic Institutional Investors

2. International Financial Organizations Recognized by CSRC

3. Countries or Regions that have Signed Memorandums of Understanding on Bilateral Supervisory Cooperation with CSRC

4. Overseas Exchanges Recognized by CSRC

5. Credit rating agencies recognized by the CSRC