Administration of Securities Investment Fund Operations Procedures

Article 1: These Procedures have been formulated pursuant to the Securities Investment Funds Law and other relevant laws and administrative regulations, in order to regulate the operational activities of securities investment funds, protect the lawful rights and interests of investors and promote the healthy development of the securities investment fund market.

Article 2: These Procedures shall apply to the offering of securities investment funds (Funds), the purchase and redemption of Fund shares, the investment of Fund property, the distribution of Fund earnings, the convening of Fund shareholders' general meetings and other Fund operation activities.

Article 3: When engaging in Fund operation activities, laws, administrative regulations and the regulations of the China Securities Regulatory Commission (CSRC) as well as the principles of free will, fairness and good faith shall be observed and the interests of the state and the public interest may not be harmed.

Article 4: The CSRC and its agencies shall regulate Fund operation activities in accordance with laws, administrative regulations and these Procedures as well as the principle of prudent regulation.

Article 5: The Fund industry association shall be responsible for the self-regulation of Fund operation activities in accordance with laws, administrative regulations and the rules of self-regulation.

PART TWO: OFFERING OF FUNDS

Article 6: When applying to offer a Fund, the proposed Fund manager and Fund custodian shall satisfy the following conditions:

(1) the proposed Fund manager shall be a Fund management company established in accordance with the law and the proposed Fund custodian shall be a commercial bank with Fund custodianship qualifications;

(2) they have professional personnel such as Fund managers, etc. commensurate with the management and taking custody of the proposed Fund and who comply with the provisions of the CSRC;

(3) they have sound systems for each of such business stages as Fund investment management, sale, registration and appraisal, codes of conduct are in place and they are not characterized by any circumstances that could affect the normal operation of the Fund or that would or could prejudice the lawful rights and interests of the Fund shareholders;

(4) they have not been subjected to administrative or criminal punishment during the last year for violations of laws or regulations;

(5) they are not being investigated by regulatory authorities nor are they currently undergoing rectification due to a violation of laws or regulations;

(6) they are not characterized by a material change that is or could be detrimental to Fund operations, or involved in legal proceedings, arbitration proceedings or other such material matter;

(7) they are not exposed to any major operational risks, such as unsound corporate governance, operations and/or management that are in disarray, ineffective implementation of their internal control or risk control systems, deteriorating financial position, etc.;

(8) more than six months have elapsed since the date on which the proposed Fund manager returned all of the monies paid by the investors and the interest thereon for a previously approved Fund offering, the contract for which is valid or the offering period has expired, but the Fund failed to satisfy the conditions specified in Article 12 hereof; and

(9) other conditions imposed by the CSRC in accordance with the principle of prudent regulation.

Article 7: When applying for a Fund offering, such Fund shall meet the following conditions;

(1) it has a clear and lawful investment direction;

(2) it has a clear Fund operation method;

(3) it complies with the CSRC's provisions on Fund products;

(4) it does not duplicate another Fund already being managed by the proposed Fund manager;

(5) the drafts of such legal documents as the Fund contract, prospectus, etc. comply with laws, administrative regulations and the provisions of the CSRC;

(6) the Fund's name indicates the type of Fund and its investment characteristics and is free of content harmful to the interests of the state or the public interest, defrauds or misleads investors or other content that infringes upon the lawful rights and interests of third parties; and

(7) other conditions imposed by the CSRC in accordance with the principle of prudent regulation.

Article 8: When applying to offer a Fund, the Fund manager shall submit the application materials in accordance with the Securities Investment Funds Law and the provisions of the CSRC.

If a major change occurs in a matter referred to in the application materials during the application period, the Fund manager shall submit updated materials to the CSRC within five working days of the date the change occurred.

Article 9: The CSRC shall accept Fund offer applications, examine the same and render its decision in accordance with the Administrative Licensing Law and Article 39 of theSecurities Investment Funds Law.

Article 10: The CSRC may, in accordance with the principle of prudent regulation, arrange to have a panel of experts review a Fund offer application.

Article 11: The Fund offer period may not exceed three months counting from the date on which the Fund shares are offered for sale.

Article 12: If the total quantity of Fund shares subscribed to comply with Article 44 of the Securities Investment Funds Law and satisfy the conditions set forth below at the expiration of the Fund offer period, the Fund manager shall carry out the capital verification and Fund record filing Procedures in accordance with provisions:

(1) the total quantity of Fund shares subscribed to are not less than 200 million and the total amount raised for the Fund is not less than Rmb200 million; and

(2) the number of Fund shareholders is not less than 200.

Article 13: The CSRC shall confirm in writing the receipt of the capital verification report and Fund record filing materials from the Fund manager within three working days of the date of receipt of the same. The Fund record filing procedures shall be deemed completed and the Fund contract shall enter into effect on the date of the CSRC's written confirmation.

The Fund manager shall publicly announce the receipt of the CSRC's confirmation document on the day following the receipt thereof.

Article 14: The information disclosure fees, accountants' fees, lawyers' fees and other expenses incurred during the Fund offer period may not be disbursed from the Fund property. If the Fund charges a subscription fee, the foregoing expenses may be disbursed from the subscription fees.

PART THREE: PURCHASE AND REDEMPTION OF FUND SHARES

Article 15: The Fund contract for an open-ended Fund shall specify, and its prospectus state, the dates (Open Dates) and times the Fund manager will process purchases and redemptions of Fund shares.

Article 16: The Fund contract for an open-ended Fund may specify that the Fund manager will not process redemptions for a fixed period commencing from the effective date of the Fund contract, provided that the specified period does not exceed three months. Such period shall be stated in the prospectus.

Article 17: The price for purchasing or redeeming the shares of an open-ended Fund shall be calculated by adding or subtracting the relevant fees to/from the net value of the Fund shares on the purchase or redemption date. The specific method of calculating the purchase and redemption prices of the shares of an open-ended Fund shall be stated in the Fund contract and prospectus.

The net value of the shares of an open-ended Fund shall be calculated by dividing the net value of the Fund assets by the number of outstanding shares of the Fund after closing of the market on each Open Date. The specific calculation method shall be stated in the Fund contract and prospectus.

Article 18: The Fund manager may not process the purchase, redemption or conversion of Fund shares on a date or at a time other than those specified in the Fund contract.

Where an investor submits an application to purchase, redeem or convert Fund shares on a date and time other than those specified in the Fund contract, the price for the purchase or redemption of his Fund shares shall be the price effective at the time the purchase or redemption of the Fund shares is processed on the next Open Date.

Article 19: When an investor purchases Fund shares, he must pay the entire purchase amount, except in the case of special Fund products specified by the CSRC. The purchase application shall enter into effect upon the investor paying the monies.

Article 20: The Fund manager shall confirm the validity of a purchase or redemption within three working days of the date of receipt of the investor's purchase or redemption application.

The Fund manager shall pay the redemption amount to the investor within seven working days of the date of receipt of the investor's valid redemption application, except in the case of special Fund products specified by the CSRC.

Article 21: The Fund contract for an open-ended Fund may specify that once the Fund reaches a certain size, the Fund manager will not accept any further subscription or purchase applications, provided that the same is stated in the prospectus.

During the Fund offer period, the Fund manager may not alter the size of the Fund as specified in the Fund contract. After the Fund contract has entered into effect, the Fund manager may alter the size of the Fund pursuant to the provisions of the Fund contract and in accordance with actual circumstances provided that it publicly announces the same three days in advance and updates the prospectus.

Article 22: The Fund contract for an open-ended Fund may impose a limit on the percentage or quantity of Fund shares that may be held by one Fund shareholder, provided that the same is stated in the prospectus.

Article 23: Net redemption applications exceeding 10% of the total number of shares of a Fund on any Open Date of an open-ended Fund are deemed a massive redemption.

If an open-ended Fund experiences a massive redemption, the redeemed shares processed by the Fund manager on the date in question may not be less than 10% of the total number of Fund shares, while the processing of the remaining redemption applications may be delayed.

Article 24: If an open-ended Fund experiences a massive redemption, the Fund manager shall determine the number of shares of a single Fund shareholder that it will process on the date in question in accordance with the percentage of the total shares, for which redemption was applied on that date, accounted for by the shares the redemption of which the Fund shareholder applied for.

A Fund shareholder may opt, at the time of application for redemption, to have redemption of those shares not redeemed on the day in question cancelled. If a Fund shareholder does not opt for cancellation, the Fund manager may delay the processing of the unprocessed shares to be redeemed until the next Open Date. The redemption price shall be that effective on the next Open Date.

Article 25: If an open-ended Fund experiences a massive redemption and the delayed processing of redemptions, the Fund manager shall notify the Fund shareholders by mail, facsimile or other method specified in the prospectus of the method by which it will handle the foregoing and publicly announce the same in the designated newspapers and other related media within three trading days.

Article 26: If an open-ended Fund experiences consecutive massive redemptions, the Fund manager may suspend acceptance of redemption applications in accordance with the provisions of the Fund contract and as specified in the prospectus. Payment of the redemption amounts for redemption applications that have been accepted may be delayed provided that such delay does not exceed 20 working days and that it is publicly announced in the designated newspapers and other related media.

Article 27: The Fund contract for an open-ended Fund may specify that if the number of shares the redemption of which a single Fund shareholder applies for on any Open Date exceeds a certain percentage of the total Fund shares, the Fund manager may suspend acceptance of redemption applications or delay payment in accordance with Article 26 hereof.

Article 28: Open-ended Funds shall keep on hand the equivalent of not less than 5% of the net value of the Fund assets in cash or in government bonds with a maturity date of less than one year for the purpose of paying redemption amounts to Fund shareholders, except in the case of special Fund products specified by the CSRC.

PART FOUR: FUND INVESTMENTS AND DISTRIBUTION OF EARNINGS

Article 29: The Fund contract and prospectus shall state the type of Fund in accordance with the following provisions:

(1) if more than 60% of the Fund assets are to be invested in stocks, it is deemed a stock Fund;

(2) if more than 80% of the Fund assets are to be invested in bonds, it is deemed a bond Fund;

(3) if investments are to be made only in money-market instruments, it is deemed a money-market Fund;

(4) if investments are to be made in stocks, bonds and money-market instruments and the percentages for stocks and bonds do not comply with the provisions of Items (1) and (2) hereof, it is deemed a mixed Fund; or

(5) other types specified by the CSRC.

Article 30: If a Fund's name indicates its investment direction, not less than 80% of non-cash Fund assets shall be in the form determined by the investment direction.

Article 31: When a Fund manager applies Fund property to invest in securities, the following is not allowed:

(1) the market value of the shares of one listed company held by a Fund exceeds 10% of the net value of the Fund assets;

(2) the issued securities of one company held by all the Funds managed by one Fund manager exceeds 10% of such securities;

(3) if Fund property is to be used for the purchase of shares offered in a share offering, the monetary amount applied for by a single Fund exceeds such Fund's total assets and the number of shares applied for by a single Fund exceeds the total number of shares that the share issuing company intends to offer through such offering;

(4) it violates the provisions of the Fund contract on the scope of investment, investment strategy or investment percentages; or

(5) it is characterized by other circumstances prohibited by the CSRC.

Fund products that invest in securities based entirely on the constituent percentages of the relevant index shall not be subject to the percentage limits specified in Items (1) and (2) of the preceding paragraph.

Article 32: A Fund manager shall cause a Fund's investment portfolio percentages to comply with the relevant provisions of the Fund contract within six months of the effective date of such contract.

Article 33: If a Fund's investments fail to comply with the percentage specified in item (1) or (2) of the first paragraph of Article 31 hereof or the investment percentages specified in the Fund contract due to factors not attributable to the Fund manager, such as stock market volatility, mergers of listed companies, changes in the size of the Fund, etc., the Fund manager shall make adjustments within 10 trading days.

Article 34: The following Fund-related expenses may be disbursed from the Fund property:

(1) the Fund manager's management fee;

(2) the Fund custodian's custody fee;

(3) information disclosure expenses incurred after the Fund contract enters into effect;

(4) accountants' fees and lawyers' fees incurred after the Fund contract enters into effect;

(5) expenses of Fund shareholders' general meetings;

(6) the Fund's securities trading expenses; and

(7) other expenses that may be disbursed from the Fund property in accordance with relevant state provisions and the Fund contract.

Article 35: The earnings of a closed-end Fund may not be distributed less than once per year. The percentage of the annual earnings of a closed-end Fund that are to be distributed may not be less than 90% of the earnings realized by the Fund in the year in question.

The maximum number of times the earnings of an open-ended Fund are to be distributed each year and the minimum percentage of the earnings to be distributed shall be specified in the Fund contract.

Article 36: Fund earnings shall be distributed in cash.

Holders of shares in an open-ended Fund may opt in advance to have the cash earnings distributed to them converted into Fund shares in accordance with the provisions of the Fund contract on the purchase of Fund shares. If a Fund shareholder has not expressed an option in advance, the Fund manager shall pay him in cash.

PART FIVE: FUND SHAREHOLDERS' GENERAL MEETING

Article 37: In addition to the matters specified in Items (1) to (5) of Article 71 of the Securities Investment Funds Law, Fund contracts shall specify in accordance with the provisions of the CSRC other matters that require that a Fund shareholders' general meeting be convened, such as contract amendments that have a material impact on the rights and obligations of Fund shareholders, etc.

Article 38: If the Fund custodian is of the opinion that the convening of a Fund shareholders' general meeting is necessary, it shall submit a written proposal to that effect to the Fund manager. The Fund manager shall decide whether or not to convene such meeting and inform the Fund custodian in writing within 10 days of the date of receipt of the written proposal.

If the Fund manager decides to convene a meeting, it shall do so within 60 days of the date of issuance of its written decision. If the Fund manager decides against convening a meeting and the Fund custodian is still of the opinion that the convening of such a meeting is necessary, it shall proceed to convene the meeting itself.

Article 39: If Fund shareholders representing not less than 10% of the Fund shares are of the opinion that the convening of a Fund shareholders' general meeting is necessary, they shall submit a proposal to that effect to the Fund manager. The Fund manager shall decide whether or not to convene such meeting and inform the representative of the Fund shareholders who submitted the proposal and the Fund custodian in writing within 10 days of the date of receipt of the written proposal.

If the Fund manager decides to convene a meeting, it shall do so within 60 days of the date of issuance of its written decision. If the Fund manager decides against convening a meeting and the Fund shareholders representing not less than 10% of the Fund shares are still of the opinion that the convening of such a meeting is necessary, they shall submit a written proposal to the Fund custodian.

The Fund custodian shall decide whether or not to convene such a meeting and inform the representative of the Fund shareholders who submitted the proposal and the Fund manager in writing within 10 days of the date of receipt of the written proposal. If the Fund custodian decides to convene the meeting, it shall do so within 60 days of the date of issuance of its written decision.

Article 40: If both the Fund manager and Fund custodian decide against convening a Fund shareholders' general meeting, the Fund shareholders may convene such a meeting themselves in accordance with the second paragraph of Article 72 of the Securities Investment Funds Law.

If the Fund shareholders are to convene a Fund shareholders' general meeting themselves, they shall report the same to the CSRC for the record at least 30 days in advance.

Article 41: If the Fund shareholders are to convene a Fund shareholders' general meeting themselves in accordance with the law, the Fund manager and Fund custodian shall extend their cooperation and may not hinder the convening thereof or interfere.

Article 42: The convener shall submit matters put to a vote and adopted at a Fund shareholders' general meeting in accordance with Article 75 of the Securities Investment Funds Law to the CSRC for verification or for the record within five days of the date of adoption thereof.

Matters decided at the Fund shareholders' general meeting shall enter into effect on the date the CSRC verifies the same or issues its opinion expressing no objection, in accordance with the law.

Article 43: The Fund manager, Fund custodian and Fund shareholders shall implement effective decisions of the Fund shareholders' general meeting.

PART SIX: REGULATION AND LEGAL LIABILITY

Article 44: If the number of Fund shareholders falls below 200 or if the net value of the Fund assets falls below Rmb50 million after the Fund contract for an open-ended Fund enters into effect, the Fund manager shall promptly report the same to the CSRC. If such a circumstance persists for 20 consecutive working days, the Fund manager shall explain the reason therefor and submit a solution to the CSRC.

Article 45: The CSRC and its agencies shall conduct regular or ad hoc inspections of the Fund operation activities engaged in by Fund managers and Fund custodians and the Fund managers and Fund custodians shall extend their cooperation therein.

Article 46: If a Fund manager or Fund custodian violates laws, administrative regulations or these Procedures, the CSRC or its agency may order it to rectify the matter and suspend the handling of related matters. It may take administrative regulatory measures against the persons directly in charge and other persons directly responsible, such as holding regulatory discussions with them, issuing them a letter of warning, placing a record in the good faith file, suspending them from the performance of their duties, determining that they are not suited to serving in their positions, etc.

Article 47: If a Fund manager, Fund custodian, one of their persons directly in charge or another member of their personnel directly responsible engages in Fund operation activities in violation of these Procedures, the CSRC shall impose administrative punishment in accordance with laws and administrative regulations. If laws or administrative regulations do not provide therefor, the CSRC shall impose administrative punishment in accordance with these Procedures. If it/he is suspected of having committed a criminal offence, its/his case shall be transferred to the judicial authorities and its/his criminal liability shall be pursued.

Article 48: If a Fund manager violates Article 18 hereof by processing the purchase, redemption or conversion of Fund shares on a date or at a time other than one specified in the Fund contract, it shall be punished in accordance with Article 89 of the Securities Investment Funds Law.

Article 49: If a Fund manager violates Article 31 hereof when applying Fund property to invest in securities, it shall be punished in accordance with Article 90 of the Securities Investment Funds Law.

Article 50: If a Fund manager or Fund custodian fails to convene a Fund shareholders' general meeting in accordance with Article 38 or 39 hereof, it shall be punished in accordance with Article 95 of the Securities Investment Funds Law.

Article 51: If a Fund manager conceals information or provides fraudulent materials when applying to offer a Fund, the CSRC will not accept its application. If it has already accepted the application, it will not grant its approval and punish the Fund manager by issuing it a warning.

Article 52: If a Fund manager is characterized by any of the circumstances set forth below while engaging in Fund management activities, it shall be ordered to rectify the matter and punished by being given a warning, being fined or both; the persons directly in charge and other directly responsible persons shall be punished by being given a warning, being fined or both:

(1) it failed to calculate the price for purchasing or redeeming Fund shares in accordance with Article 17 hereof;

(2) it failed to confirm the validity of a purchase or redemption or failed to pay the redemption amount in accordance with Article 20 hereof;

(3) it failed to process a redemption application in accordance with the second paragraph of Article 23 hereof;

(4) it failed to keep on hand cash or government bonds in accordance with Article 28 hereof;

(5) it failed to adjust the investment percentages in accordance with Article 33 hereof;

(6) it failed to distribute Fund earnings in accordance with Article 35 or 36 hereof; or

(7) it failed to report or explain relevant circumstances or submit a solution in accordance with Article 44 hereof.

Article 53: If a Fund manager or Fund custodian is characterized by any of the circumstances set forth below, it shall be ordered to rectify the matter and punished by being given a warning, being fined or both; the persons directly in charge and other directly responsible persons shall be punished by being given a warning, being fined or both:

(1) it failed to extend its cooperation to Fund shareholders in convening a Fund shareholders' general meeting in accordance with Article 41 hereof;

(2) it failed to apply for verification of or file for the record matters decided at a Fund shareholders' general meeting in accordance with Article 42 hereof;

(3) it failed to implement the effective decisions of the Fund shareholders' general meeting in accordance with Article 43 hereof; or

(4) it failed to extend its cooperation, in accordance with Article 41 hereof, to the CSRC and/or its agency when they/it were/was carrying out an inspection.

PART SEVEN: SUPPLEMENTARY PROVISIONS

Article 54: These Procedures shall be implemented from July 1 2004.