Matters Relevant to Investments in Convertible Corporate Bonds by Insurance Companies Circular

(Issued by the China Insurance Regulatory Commission on July 23 2004.)

To all insurance companies and insurance asset management companies:

In order to carry through the spirit related to the State Council, Promoting the Reform, Opening Up and Stable Development of the Capital Markets Several Opinions, promote direct entry of insurance funds to the capital markets by various means in a stable and orderly manner, further broaden the channels for the use of insurance funds, enrich the variety of investment products for insurance funds and effectively disperse investment risks, the Commission, after discussion, has decided to allow insurance companies to invest in convertible corporate bonds (hereafter, Convertible Bonds). Relevant matters are notified hereby:

1. Convertible Bonds invested by insurance companies shall be corporate bonds that are convertible into shares, subject to the approval by the China Securities Regulatory Commission for issuance, and in compliance with the Administration of Convertible Corporate Bonds Tentative Procedures and the Issue of Convertible Corporate Bonds By Listed Companies Implementing Procedures (April 26 2001, China Securities Regulatory Commission Order No.2).

2. Investments in Convertible Bonds by insurance companies shall be put under enterprise bond investments and administered in accordance with the Administration of Investments in Enterprise Bonds by Insurance Companies Tentative Procedures (Bao Jian Fa [2003] No. 74).

The balance of an insurance company's investments in Convertible Bonds shall be included in the balance of enterprise bond investments, and the aggregate balance, calculated at cost, shall not exceed 20% of the company's total assets at the end of the preceding month.

An insurance company's holding of Convertible Bonds of the same type in the same issue shall not exceed 15% of the issued amount of that type of Convertible Bonds in that issue or 2% of the insurance company's total assets at the end of the preceding month, whichever is lower.

3. Insurance companies shall exercise prudence in Convertible Bond investments. Convertible bonds invested by insurance companies are temporarily not allowed to be converted into shares. The method of conversion shall be provided separately.

4. Investments in Convertible Bonds by insurance asset management companies with their own funds shall, mutatis mutandis, be implemented in accordance with the Circular.