Establishment of Fund Management Companies with Foreign Equity Participation Rules

Article 4: The form of organization of fund management companies with foreign equity participation shall be the limited liability company.

The names and registered capital of fund management companies with foreign equity participation, as well as the establishment and duties of the elements of their organizational structures, shall comply with the Company Law, the Tentative Procedures and the relevant provisions of the CSRC.

Article 5: Fund management companies with foreign equity participation shall meet the conditions specified in the Tentative Procedures and by the CSRC.

Article 6: An overseas shareholder of a fund management company with foreign equity participation shall meet the following conditions:

(1) it is a financial institution established and validly existing under the laws of the country in which it is located and has not been subjected to serious penalties from a securities regulator or judicial authority during the past three years;

(2) the country in which it is located has sound securities laws and regulatory systems, and such country's securities regulator has entered into a memorandum of understanding with the CSRC concerning cooperation in the regulation of the securities sector and maintains an effective regulatory cooperative relationship with the CSRC;

(3) it has paid up capital of not less than the equivalent of Rmb300 million in freely convertible currency; and

(4) other prudential conditions specified by the CSRC.

Article 7: The domestic shareholders of fund management companies with foreign equity participation shall satisfy the qualification conditions prescribed by the CSRC for shareholders of fund management companies.

Article 8: The foreign shareholdings in, or the interests held by the foreign investors in, a fund management company with foreign equity participation may not exceed 33% in the aggregate (including both direct and indirect holdings). Within three years after China's entry into the WTO, this limit shall be increased to 49%.

Overseas shareholders shall make their capital contributions in freely convertible currency.

Article 9: The chairman of the board, general manager and deputy general manager(s) of a fund management company with foreign equity participation shall possess the professional qualifications for senior management personnel of fund management companies specified by the CSRC.

Article 10: The domestic and overseas applicants for fund management companies with foreign equity participation shall submit the application materials to the CSRC according to the content and format prescribed by the CSRC.

Application materials submitted to the CSRC by domestic and overseas applicants must be written in Chinese. If documents or information issued by an overseas shareholder or the securities regulator of the country in which it is located are written in a foreign language, a Chinese translation consistent with the original shall be attached.

Article 11: Fund management companies with foreign equity participation jointly invested in and established by overseas shareholders and domestic shareholders shall undergo the two stages of preparation and commencement of business.

Article 12: The CSRC will make a decision to approve or not approve preparation within 60 working days from the date on which it formally accepts the preparation application from the domestic and overseas applicants. If it approves preparation, it will issue an approval document. If it does not approve preparation, it will notify the applicants in writing of the grounds therefor.

Article 13: If, in the case of fund management companies that have obtained a preparation approval document from the CSRC but have not yet formally commenced business, there is a major change in the basic circumstances of an overseas shareholder or an overseas shareholder violates the law and is punished or placed on a watchlist by the securities regulator of the relevant country or region, the overseas shareholder shall promptly request a meeting of the fund management company's sponsors and explain the relevant circumstances. If the overseas shareholder no longer conforms to the conditions of these Rules, the sponsors' meeting shall make a proposal as to how to deal with the situation. The company's preparatory committee shall, in a timely manner, report to the CSRC and handle the relevant matters.

Article 14: After the preparation of a fund management company has been completed, the domestic and overseas applicants shall submit to the CSRC the application materials for commencement of business by the fund management company.

The CSRC will make a decision to approve, to defer its decision on approval of, or not to approve, the commencement of business within 30 working days from the date on which it accepts the application to commence business. If it approves the commencement of business, it will issue an approval document. If it intends to defer its decision on approval of or not to approve the commencement of business, it shall inform the applicants in writing of the grounds therefor.

Article 15: If an overseas shareholder intends to be assigned or subscribe for equity in a domestic fund management company, such company shall submit the application materials to the CSRC.

The CSRC will make a decision to approve or not approve the application within 60 working days from the date on which it formally accepts the same. If it approves the application, it will issue an approval document. If it does not approve the application, it will notify the applicant in writing of the grounds therefor.

With respect to the examination of applications for the approval of new shareholders and applications for the approval of changes in shareholders that have contributed the largest proportion of capital and that nominate the largest number of directors, the CSRC will handle matters by reference to the examination procedures for the preparation of fund management companies.

Article 16: An overseas shareholder that holds equity in a fund management company and that is required by the competent authority of the place where it is registered or the place where its main business activities are conducted to place its overseas investments on record, shall, after it has obtained the approval certificate from the CSRC according to law, submit a copy of the relevant record filing information to the CSRC if and when it delivers such information to the competent authority of the place where it is registered or the place where its main business activities are conducted.

Article 17: The shareholders of fund management companies with foreign equity participation shall carry out procedures for registration of the change in or establishment of the company with the administration for industry and commerce within 30 working days after obtaining the approval documents from the CSRC.

Article 18: These Rules shall, mutatis mutandis, apply to equity participation in wholly mainland-owned fund management companies by investors from the Hong Kong and Macao Special Administrative Regions and from Taiwan.

Article 19: Where these Rules are silent on any matter relating to the establishment, change, termination, business activities and oversight of fund management companies with foreign equity participation, the other relevant CSRC provisions shall apply.

Article 20: These Rules shall be implemented as of July 1 2002.