Administration of Pilot Projects for the Establishment of Fund Management Companies by Commercial Banks Procedures

Article 2: For the purposes of these Procedures, the term "commercial bank" refers to state-owned commercial banks and share system commercial banks whose establishment in the People's Republic of China has been approved by the China Banking Regulatory Commission (the CBRC).

Article 3: For the purposes of these Procedures, the term "fund management company" means an enterprise legal person in the People's Republic of China to which a commercial bank has made a direct capital contribution and of which it is the main shareholder, whose establishment has been approved by the China Securities Regulatory Commission (the CSRC) and that engages in fund management business.

Article 4: A fund management company established by a commercial bank shall offer and manage funds within the scope of business specified in the PRC Securities Investment Fund Law. During the initial period of the pilot projects, it may offer and manage money market funds and bond funds, invest in fixed return securities and may offer and manage other types of funds.

Article 5: The People's Bank of China, in conjunction with the CBRC and the CSRC, is responsible for the overall coordination of the establishment of fund management companies by commercial banks.

PART TWO: APPLICATION AND APPROVAL PROCEDURES

Article 6: A commercial bank that wishes to apply to invest in a fund management company shall submit its materials in accordance with the relevant provisions of the CBRC and, during the period of the pilot projects, shall also send copies thereof to the People's Bank of China. The CBRC shall examine the commercial bank's qualifications to invest in a fund management company from the perspective of the comprehensive oversight of commercial bank risks and issue, in accordance with the law, an oversight opinion on whether the commercial bank can invest in a third party.

Article 7: Once the CBRC has issued it an oversight opinion consenting to its investing in a fund management company, the commercial bank shall submit to the CBRC the relevant application materials for the establishment of a fund management company in accordance with such relevant laws and regulations as the Administration of Securities Investment Fund Management Companies Procedures, etc. The CBRC shall examine the same in accordance with the law.

During the period of the pilot projects, the commercial bank shall also send copies of its application materials to the People's Bank of China.

Article 8: Commercial banks are encouraged to establish fund management companies with diversified equity.

Article 9: In addition to the provisions specified herein, the terms and conditions for the establishment of fund management companies and the qualifications of shareholders shall be handled in accordance with the relevant provisions of the Administration of Securities Investment Fund Management Companies Procedures.

PART THREE: RISK CONTROL

Article 10: A fund management company established by a commercial bank shall establish a sound corporate governance structure. A commercial bank shall establish, in strict accordance with the principle of "separation of business between legal persons", an effective system of isolating the risks between itself and the fund management company it has invested in and established and shall report such system to the CBRC for the record.

Article 11: A commercial bank shall bear limited liability toward the fund management company established by it only to the extent of its capital contribution thereto and shall legally exercise its shareholder rights through the shareholders' meeting of the fund management company. It may not bypass the shareholders' meeting or board of directors to interfere in the fund management company's operations and management.

Article 12: A commercial bank and the fund management company established by it may not violate state provisions by mutually sharing customer information and their business dealings may not harm the legitimate and lawful rights and interests of customers.

Article 13: The working personnel of a fund management company established by a commercial bank must have a wage and employment contract relationship that is separate from the commercial bank and may not serve concurrently with both the fund management company and the commercial bank. The senior management personnel of the fund management company shall comply with the relevant provisions of the Administration of Appointment of Senior Management Personnel of the Securities Investment Fund Industry Procedures.

Article 14: The fund assets managed by a fund management company established by a commercial bank may not be used to purchase the negotiable securities offered or, during the distribution period, distributed by its shareholders.

Article 15: If a commercial bank offers financing support for the funds managed by the fund management company, it shall do so in accordance with relevant state provisions.

Article 16: A commercial bank may not act as the custodian of the funds managed by the fund management company established by it.

Article 17: A commercial bank may act as an agent in selling the funds offered by the fund management company established by it, provided that, when doing so, it does not offer conditions in terms of sales period arrangements, service fee rates, participation in fund product development, etc. that are more favourable than those offered to unaffiliated third parties for the same type of transaction. Furthermore, it may not discriminate against other funds for which it is acting as an agent in the sale of, and may not engage in improper sales activities or acts of unfair competition.

Article 18: A commercial bank may not effect transactions on the interbank bond market with the fund management company established by it on terms more favourable than those offered to unaffiliated third parties for the same type of transaction.

Article 19: The implementing rules on affiliated transactions between commercial banks and fund management companies established by them will be jointly formulated by the CBRC and the CSRC.

Fund management companies established by commercial banks and commercial banks that have established fund management companies shall effect information disclosure in accordance with the relevant provisions of the CSRC and the CBRC respectively.

PART FOUR: OVERSIGHT

Article 20: The types of funds offered by fund management companies established by commercial banks shall be subject to the verification of the CSRC.

Article 21: The CBRC shall formulate the relevant criteria for calculating risk oversight indexes for commercial banks that have established fund management companies and implement consolidated supervision thereof.

Article 22: The CSRC shall oversee in accordance with the law the fund management companies established by commercial banks and the funds offered and managed by them, and ensure the lawful application of fund property and that the lawful rights and interests of fund shareholders are not infringed.

Article 23: The People's Bank of China shall file for the record and oversee the access to the nationwide interbank bond market by fund management companies established by commercial banks.

Article 24: Fund management companies established by commercial banks and commercial banks that have established fund management companies shall submit their materials respectively in accordance with the relevant provisions of the CSRC and CBRC and, during the period of the pilot projects, shall also send copies thereof to the People's Bank of China.

Article 25: The People's Bank of China, CBRC and CSRC shall mutually keep each other apprised of relevant information in a timely manner in the course of lawfully overseeing fund management companies established by commercial banks and establish a system for the sharing of oversight information.

PART FIVE: SUPPLEMENTARY PROVISIONS

Article 26: The acquisition of fund management companies by commercial banks shall be handled with reference to these Procedures.

Article 27: The People's Bank of China, CBRC and CSRC will jointly select the pilot banks and will jointly determine pilot project work arrangements based on the circumstances of the pilot projects and market development needs.

Article 28: The People's Bank of China, CBRC and CSRC are jointly in charge of interpreting these Procedures.

Article 29: These Procedures shall be effective as of February 20 2005.