Implementing Rules for the Tentative Measures for the Administration of Overseas Utilization of Foreign Exchange Insurance Funds

Article 2: The overseas investment of Foreign Exchange Insurance Funds shall be determined by the board of directors of an insurance company (Entrusting Party), who may entrust a domestic insurance asset management company or an overseas professional investment management institution (Entrusted Party) to manage such investments. Provisions for other management methods shall be separately formulated by the China Insurance Regulatory Commission (CIRC).

Article 3: An Entrusting Party shall, in accordance with the Measures, entrust a commercial bank (Custodian) to take independent custody of foreign exchange insurance funds utilized overseas and foreign exchange assets generated from investments (hereinafter collectively called Foreign Exchange Insurance Funds).

Article 4: An Entrusting Party shall publicly, fairly and impartially select an Entrusted Party and a Custodian, and in accordance with the principles of security, liquidity and profitability, prudently formulate an asset strategic allocation plan.

Article 5: An Entrusted Party and a Custodian shall, in accordance with the principles of honesty, faithfulness, prudence, diligence and accountability, fairly manage the Foreign Exchange Insurance Funds and ensure the security of the Foreign Exchange Insurance Funds.

Article 6: The CIRC shall be responsible for formulating policies for the administration of the overseas investments of Foreign Exchange Insurance Funds. The CIRC and the State Administration of Foreign Exchange (SAFE) shall, according to their respective duties, regulate the overseas investment activities of Foreign Exchange Insurance Funds in accordance with the law.

PART TWO: APPLICATION ADMINISTRATION

Article 7: When filing an application with SAFE for foreign exchange payment for overseas investments with Foreign Exchange Insurance Funds, an Entrusting Party shall, at the same time, submit to the CIRC the following documents and materials:

(1) documents and materials specified in Article 7 of the Measures;

(2) the original of the board of directors' resolution regarding the overseas investment with Foreign Exchange Insurance Funds;

(3) an overseas investment management system and risk control system, which shall at least include the rules for the management of the entrusted matters, the essential elements for the formulation of the guidelines for overseas investments with Foreign Exchange Insurance Funds (Investment Guidelines) and the flow thereof, the criteria for the selection of the Entrusted Party and the domestic Custodian and the flow thereof, the criteria for the selection of counterparties, the information communication mechanism, the performance appraisal mechanism, the risk control mechanism, the supervision and inspection measures, the mechanism for handling significant unexpected matters, etc.;

(4) an overseas investment strategic allocation plan, which shall at least clarify the investment tenet, assets and liabilities, investment objectives, investment categories, investment ratios, investment markets, currency allocation, performance benchmarks, trading seat arrangement, etc.;

(5) an independent third party custody plan, which shall at least clarify the names and the domicile countries of the domestic Custodian, the overseas custody agent and the secondary Custodian, and their affiliated relationships with the Entrusting Party and the Entrusted Party;

(6) an investigative report regarding the compliance and prudent operations of the Entrusted Party and the Custodian in the most recent three years;

(7) a letter of undertaking guaranteeing the truthfulness of the materials provided and the performance of the duties stipulated in the Measures and these Rules; and

(8) other documents and materials as specified by the CIRC.

The CIRC shall, in accordance with the relevant provisions of the Measures and these Rules, conduct an assessment of the overseas investment management qualifications of the Entrusting Party.

Article 8: A domestic Entrusted Party that manages overseas investments with Foreign Exchange Insurance Funds shall submit to the CIRC the following documents and materials:

(1) an application letter signed by the legal representative or his/her authorized person;

(2) an overseas investment management system and risk control system, which shall at least include an investment authorization system, compliance management system, research and report system, category selection system, trading management system and information management system, as well as investment decision-making flow, criteria for the selection of counterparties, risk evaluation and performance assessment indices, risk control mechanism, professional ethics guidelines, audit and inspection measures, mechanism for handling significant unexpected matters, etc.;

(3) an overseas investment management plan, operational strategy, trading seat arrangement, etc.;

(4) the number and r¨¦sum¨¦s of the professional overseas investment personnel;

(5) an explanation regarding the information system, the trading system, the investment management system and other technology support systems for Foreign Exchange Insurance Funds investments;

(6) an explanation regarding the affiliated relationships with the Entrusting Party, the domestic Custodian and the overseas custody agent;

(7) a letter of undertaking guaranteeing the truthfulness of the materials provided and the performance of the duties stipulated in the Measures and these Rules; and

(8) other documents and materials as specified by the CIRC.

The CIRC shall, in accordance with the relevant provisions of the Tentative Provisions for the Administration of Insurance Asset Management Companies, the Measures and these Rules, and in respect of corporate governance, asset scale, management experience, investment performance, research capability, internal control, market position, etc., conduct a prudent evaluation of the qualifications of the domestic Entrusted Party to engage in the management of overseas investments with Foreign Exchange Insurance Funds and issue an assessment opinion thereof.

Article 9: An overseas Entrusted Party that manages overseas investments with Foreign Exchange Insurance Funds shall, in addition to meeting the conditions stipulated in Article 14 of the Measures, also meet the following conditions:

(1) have competence as an independent legal person;

(2) have five years or more of insurance investment management experience; and

(3) have purchased liability insurance policies commensurate with its asset management scale.

Article 10: An overseas Entrusted Party characterized by either of the following circumstances need not be restricted by the condition stipulated in Article 14(3) of the Measures, which stipulates that both the paid-up capital and the net assets shall not be less than US$60 million or the equivalent in a freely convertible currency:

(1) the Entrusted Party is a mutual or partnership organization, and the scale of assets entrusted to it for management is more than US$200 billion or the equivalent in a freely convertible currency; or

(2) the controlling shareholder complies with Article 14(3) of the Measures regarding paid-up capital and net assets, and is able to provide a full guarantee thereof.

Article 11: An overseas Entrusted Party that manages overseas investments with Foreign Exchange Insurance Funds shall submit to the CIRC the following documents and materials:

(1) an application letter signed by the legal representative or his/her authorized person;

(2) a written explanation regarding the compliance with the conditions stipulated in Article 14 of the Measures and Articles 9 and 10 of these Rules, and where the paid-up capital and the net assets of the Entrusted Party does not reach US$60 million or the equivalent in a freely convertible currency, a letter of full guarantee by the controlling shareholder;

(3) an overseas investment management system and risk control system, which shall at least include an investment authorization system, compliance management system, research and report system, category selection system, trading management system and information management system, as well as investment decision-making flow, criteria for the selection of counterparties, risk evaluation and performance assessment indices, risk control mechanism, professional ethics guidelines, audit and inspection measures, mechanism for handling significant unexpected matters, etc.;

(4) an overseas investment management plan, operational strategy, trading seat arrangement, etc.;

(5) the number and r¨¦sum¨¦s of the professional overseas investment personnel;

(6) an explanation regarding the information system, the trading system, the investment management system and other technology support systems for Foreign Exchange Insurance Funds investments;

(7) the business licence (duplicate) issued by the regulatory authority of the domicile country or region, or a valid photocopy of the business licence;

(8) a regulatory opinion issued by the regulatory authority of the domicile country or region, or a notarized declaration signed by the directors or partners of the company;

(9) the company financial statement of the most recent year audited by an accounting firm;

(10) an audit report on the company internal control system of the most recent year issued by an accounting firm;

(11) a valid photocopy of the liability insurance policy;

(12) an explanation regarding the affiliated relationships with the Entrusting Party, the domestic Custodian and the overseas custody agent;

(13) a letter of undertaking guaranteeing the truthfulness of the materials provided and the performance of the duties stipulated in the Measures and these Rules; and

(14) other documents and materials as specified by the CIRC.

The regulatory opinion and declaration referred to in Item (8) of the preceding paragraph shall include paid-up capital, net assets, scale of the assets managed, business management experience, and indication of no significant violation of laws or regulations in the most recent three years, etc.

The CIRC shall, in accordance with the relevant provisions of the Measures and these Rules and in respect of corporate governance, asset scale, management experience, research capability, investment performance, internal control, market position, etc., conduct a prudent evaluation of the qualifications of an overseas Entrusted Party in management of the Foreign Exchange Insurance Funds entrusted to it and issue an assessment opinion thereof.

Article 12: A domestic Custodian that takes custody of the Foreign Exchange Insurance Funds of an Entrusting Party for overseas investments shall submit to the CIRC the following documents and materials:

(1) an application letter signed by the legal representative or his/her authorized person;

(2) a written explanation regarding the compliance with the conditions stipulated in Article 18 of the Measures;

(3) documents supporting the qualifications to engage in the custody of Foreign Exchange Insurance Funds for overseas investments;

(4) an independent custody operational flow and management system, which shall at least include establishment of an account, asset keeping, funds increase and withdrawal, securities clearing and funds settlement, internal control and risk prevention, checking of information with the Entrusting Party and the Entrusted Party, selection of the overseas agent and the secondary Custodian, professional ethics guidelines, an audit and inspection mechanism, a mechanism for handling significant unexpected matters, etc.;

(5) the company financial statement of the most recent year audited by an accounting firm and a notarized declaration signed by the directors of the company;

(6) an audit report on the company internal control system of the most recent year issued by an accounting firm, which shall include details of the custody business;

(7) a list of the worldwide custody network, which shall specify the names and domicile countries of the overseas custody agent and the secondary Custodian relevant to the custody of the Foreign Exchange Insurance Funds, and an explanation regarding the compliance with the conditions stipulated in Article 26 of the Measures;

(8) an explanation regarding the affiliated relationships with the Entrusting Party and the Entrusted Party;

(9) a letter of undertaking guaranteeing the truthfulness of the materials provided and the performance of the duties stipulated in the Measures and these Rules; and

(10) other documents and materials as specified by the CIRC.

The declaration referred to in Item (5) of the preceding paragraph shall include paid-up capital, net assets, scale of the assets under custody, custodianship experience, and indication of no significant violation of laws or regulations in the most recent three years, etc.

The CIRC shall, in accordance with the relevant provisions of the Measures and these Rules and in respect of capital strength, corporate governance, custody scale, business experience, internal control, market position, service quality, etc., conduct a prudent evaluation of the qualifications of the domestic commercial bank to engage in the custody business for overseas investments with Foreign Exchange Insurance Funds and issue an audit opinion thereof.

PART THREE: ADMINISTRATION OF CATEGORIES

Article 13: The currency allocation of overseas investments with Foreign Exchange Insurance Funds of an Entrusting Party shall be limited to US dollar (USD), euro (EUR), Japanese yen (JPY), pound sterling (GBP), Canadian dollar (CAD), Swiss franc (CHF), Australian dollar (AUD), Singapore dollar (SGD), Hong Kong dollar (HKD) and other currencies approved by the CIRC.

The currency allocation strategy of overseas investments with Foreign Exchange Insurance Funds shall be approved by the investment decision-making committee, or its authorized department, of the Entrusting Party. The currency allocation shall comply with the provisions of the Measures and these Rules, and the terms of the agreement on the management of overseas investments with Foreign Exchange Insurance Funds (Investment Management Agreement) and the investment guidelines.

Article 14: The term 'bank deposits' referred to in Article 9(1) of the Measures means funds that are deposited in an overseas bank at the request of an Entrusted Party and for which the said bank undertakes to periodically pay the principal and interest, including a structured deposit issued by a bank that guarantees the return of the principal and a minimum amount of interest, and others.

The term 'foreign government bonds' referred to in Article 9(2) of the Measures means bonds that are issued by a sovereign country in the name of its central government and for which the government undertakes to periodically repay the principal and interest, including mortgage-backed securities (MBS) for which the government guarantees to periodically repay the principal and interest, etc.

The term 'international financial organization bonds' referred to in Article 9(2) of the Measures means bonds issued by a policy financial institution organized by various governments, etc.

The term 'money market products' referred to in Article 9(4) includes money market funds, etc.

Article 15: Investments in offshore stocks with Foreign Exchange Insurance Funds of an Entrusting Party shall be limited to the shares of Chinese enterprises listed on the New York, London, Frankfurt, Tokyo, Singapore and Hong Kong stock exchanges.

Article 16: Investments in offshore stocks with Foreign Exchange Insurance Funds of an Entrusting Party may be in the form of purchase in the primary market and trading in the secondary market. Purchase in the primary market includes rights issues, private placements, strategic investor subscriptions, etc.

Article 17: For financial products invested overseas with Foreign Exchange Insurance Funds of an Entrusting Party, their credit ratings by an international rating agency shall comply with Article 9 of the Measures, and:

(1) the rating of structured deposits shall be that of the issuing bank of the most recent three years and shall be A or above or the equivalent;

(2) the rating of a bond issued overseas by a Chinese enterprise shall be BBB or above or the equivalent;

(3) the rating of an MBS shall be AAA or the equivalent; and

(4) the rating of money market funds shall be A-1 or the equivalent.

Article 18: The overseas investment ratio of Foreign Exchange Insurance Funds of an Entrusting Party shall comply with Article 10 of the Measures, and:

(1) the balance of structured deposits, calculated at cost, shall not exceed 5% of the limit of foreign exchange investment payment approved by SAFE;

(2) the balance of MBS, calculated at cost, shall not exceed 20% of the limit of foreign exchange investment payment approved by SAFE;

(3) the total amount of Chinese enterprise stocks issued overseas, calculated at cost, shall not exceed 10% of the limit of foreign exchange investment payment approved by SAFE, and the amount invested in the stocks of a single enterprise shall not exceed 5% of the total amount of such stocks; and

(4) bank deposits in a single affiliated party shall not exceed 10% of the limit of foreign exchange investment payment approved by SAFE; bonds issued by a single affiliated party shall not exceed 3% of the limit of foreign exchange investment payment approved by SAFE and shall not exceed 10% of the total amount of bonds of that issue; and a stock issued by a single affiliated party shall not exceed 2% of the total amount of that stock.

The term 'affiliated party' referred to in Item (4) of the preceding paragraph means an enterprise:

(1) in which the Entrusting Party directly or indirectly holds more than 10% of the shares;

(2) that directly or indirectly holds more than 10% of the shares in the Entrusting Party;

(3) where it and the Entrusting Party separately have more than 10% of their shares directly or indirectly held by another enterprise; or

(4) is recognized by the CIRC as having a material interest in the Entrusting Party.

PART FOUR: ADMINISTRATION OF AGREEMENTS

Article 19: When signing an Investment Management Agreement, the Entrusting Party shall require the Entrusted Party to provide an examination opinion issued by the CIRC. The Investment Management Agreement shall, in addition to complying with all the provisions of the Measures and these Rules and general entrustment practices, also comply with the following:

(1) clearly specify the responsibilities and obligations of the Entrusting Party and the Entrusted Party;

(2) clearly specify the limits on investment categories, investment ratios and investment markets set by the Entrusting Party, and determine the measures for handling circumstances where the investment limits are exceeded due to market fluctuations, credit rating adjustments, etc.;

(3) clearly specify the supervisory responsibilities of the Entrusting Party and the CIRC on the Entrusted Party. The Entrusted Party shall, in accordance with the terms and requirements of the Investment Management Agreement, provide to the Entrusting Party and the CIRC all and related information on the management of the Foreign Exchange Insurance Funds in a timely manner;

(4) clearly specify that the Entrusted Party shall comply with the principle of avoiding its own self-interest;

(5) clearly specify that each year, the Entrusted Party shall appoint an accounting firm to conduct an audit on the implementation of internal controls, and the audit report shall cover the Foreign Exchange Insurance Funds under its management. Clearly specify that the Entrusting Party shall have the right to appoint an accounting firm to conduct an audit of the Foreign Exchange Insurance Funds managed by the Entrusted Party, and the Entrusted Party shall provide cooperation thereto;

(6) clearly specify that the Entrusted Party shall cooperate with the domestic Custodian to conduct compliance inspections, check the updates on the Foreign Exchange Insurance Funds in a timely manner, provide the relevant information, and ensure the truthfulness and accuracy of the information;

(7) clearly specify that the Entrusted Party shall manage the overseas investments with Foreign Exchange Insurance Funds in accordance with the principles of prudence and accountability. Where losses are incurred from various negligent acts or operational errors, inadequacy in the balances of securities and funds, flaws in the clauses of an agreement with a third party, system failure, personnel fraud, etc., the Entrusted Party shall compensate for the direct losses incurred therefrom and bear the civil liability thereof. The Entrusted Party shall bear the burden of proof for its prudence and accountability;

(8) clearly specify that where the Entrusted Party violates the provisions of relevant laws or regulations, the Measures or these Rules, or the terms of the Investment Management Agreement or the investment guidelines, and a loss to the Foreign Exchange Insurance Funds is incurred, it shall bear the compensation and civil liability thereof. The compensation and civil liability borne by the Entrusted Party before its retirement will not be released due to retirement;

(9) clearly specify that where the Entrusted Party violates the provisions of relevant laws or regulations, the Measures or these Rules, or the terms of the Investment Management Agreement or the investment guidelines, and makes use of the Foreign Exchange Insurance Funds entrusted to it for management to seek improper benefits for itself or another party, the benefits sought shall belong to the Foreign Exchange Insurance Funds. Where a loss to the Foreign Exchange Insurance Funds is incurred, the Entrusted Party shall bear the compensation and civil liability thereof. The compensation and civil liability borne by the Entrusted Party before its retirement will not be released due to retirement;

(10) clearly specify the provisioning and payment method for investment management fees;

(11) clearly specify the arbitration clauses of the Investment Management Agreement, and that a dispute shall be filed with an arbitration tribunal in China or the Hong Kong Special Administrative Region of China;

(12) clearly specify matters relevant to the dissolution and termination of the Investment Management Agreement;

(13) clearly specify that the Chinese version of the Investment Management Agreement shall prevail over other language versions. Where a foreign language version prevails over the Chinese version due to the requirements of the agreement, market practice or other requirements, a Chinese translation shall be attached; and

(14) clearly specify other matters that need to be defined.

Before signing the Investment Management Agreement with the Entrusted Party, the Entrusting Party shall appoint a professional lawyer with at least five years of practice experience to review the Investment Management Agreement and issue a legal opinion thereof.

Article 20: When signing a custodian agreement for overseas investments with Foreign Exchange Insurance Funds (Custodian Agreement), the Entrusting Party shall require the domestic Custodian to provide an examination opinion issued by the CIRC. The Custodian Agreement shall, in addition to complying with all the provisions of the Measures and these Rules and general custody practices, also comply with the following:

(1) clearly specify the responsibilities and obligations of the Entrusting Party and the domestic Custodian;

(2) clearly specify that the Entrusting Party shall cooperate with the domestic Custodian to conduct compliance inspections. The domestic Custodian shall cooperate with the CIRC to conduct compliance inspections, check the updates on the Foreign Exchange Insurance Funds in a timely manner, provide the relevant information, and ensure the truthfulness and accuracy of the information;

(3) clearly specify the supervisory responsibilities of the Entrusting Party and the CIRC on the domestic Custodian. The Custodian shall, in accordance with the terms and requirements of the Custodian Agreement, provide to the Entrusting Party and the CIRC all and related information on the custody of the Foreign Exchange Insurance Funds in a timely manner;

(4) clearly specify that when the domestic Custodian needs to appoint an overseas custody agent or a secondary Custodian, the domestic Custodian shall explain to the Entrusting Party regarding the criteria for the selection of the overseas custody agent or the secondary Custodian, the management flow and supervisory measures, and shall obtain the approval of the Entrusting Party. The domestic Custodian shall submit to the CIRC the result of the selection of the overseas custody agent or the secondary Custodian;

(5) clearly specify that each year, the domestic Custodian shall appoint an accounting firm to conduct an audit on the implementation of internal controls, and the audit report shall cover the Foreign Exchange Insurance Funds under its custody. Clearly specify that the Entrusting Party shall have the right to appoint an accounting firm to conduct an audit of the Foreign Exchange Insurance Funds under the custody of the Custodian, and the domestic Custodian shall provide cooperation thereto;

(6) clearly specify that the domestic Custodian shall supervise the overseas custody agent or its secondary Custodian on the business activities of the custody of the Foreign Exchange Insurance Funds in accordance with the principles of prudence and accountability. Where losses are incurred from various negligent acts or operational errors, inadequacy in positions, flaws in the clauses of an agreement with a third party, system failure, personnel fraud, etc., the domestic Custodian shall compensate for the direct losses incurred therefrom and bear the civil liability thereof. The domestic Custodian shall bear the burden of proof for its prudence and accountability;

(7) clearly specify that where the domestic Custodian violates the provisions of relevant laws or regulations, the Measures or these Rules, or the terms of the Custodian Agreement or the investment guidelines, and a loss to the Foreign Exchange Insurance Funds is incurred, it shall bear the compensation and civil liability thereof. The compensation and civil liability borne by the domestic Custodian before retirement will not be released due to retirement;

(8) clearly specify that where the domestic Custodian violates the provisions of relevant laws or regulations, the Measures or these Rules, or the terms of the Custodian Agreement or the investment guidelines, and makes use of the Foreign Exchange Insurance Funds under its custody to seek improper benefits for itself or another party, the benefits sought shall belong to the Foreign Exchange Insurance Funds. Where a loss to the Foreign Exchange Insurance Funds is incurred, the domestic Custodian shall bear the compensation and civil liability thereof. The compensation and civil liability borne by the domestic Custodian before retirement will not be released due to retirement;

(9) clearly specify the provisioning and payment method for investment management fees;

(10) clearly specify that relevant laws and regulations of the People's Republic of China shall apply to the conclusion, interpretation and dispute resolution of the Custodian Agreement, and relevant arbitration clauses shall specify that disputes be submitted to an arbitration tribunal in China or the Hong Kong Special Administration Region of China;

(11) clearly specify matters relevant to the dissolution and termination of the Custodian Agreement;

(12) clearly specify that the Chinese version of the Custodian Agreement shall prevail over other language versions. Where a foreign language version of an agreement signed between the domestic Custodian and the overseas custody agent or the secondary Custodian prevails over the Chinese version due to the requirements of the agreement, market practice or other requirements, a Chinese translation shall be attached; and

(13) clearly specify other matters that need to be defined.

Before signing the Custodian Agreement with the domestic Custodian, the Entrusting Party shall appoint a professional lawyer with at least five years of practice experience to review the Custodian Agreement and issue a legal opinion thereof.

PART FIVE: ADMINISTRATION OF INVESTMENTS

Article 21: An Entrusting Party shall, in accordance with the Risk Control Guidelines for Utilization of Insurance Funds, establish a management system and a risk control system for overseas investments with Foreign Exchange Insurance Funds, and formulate a scientific, precise and effective overseas investment management flow.

Article 22: An Entrusting Party shall give full consideration to the attributes of Foreign Exchange Insurance Funds, and strengthen and improve the asset strategic allocation in accordance with the asset-liability matching management requirements.

Article 23: An Entrusting Party shall, in accordance with the standards and stipulated procedures, select the Entrusted Party and the domestic Custodian through invitation for bids. In principle, one Entrusting Party may select only one domestic Custodian.

Article 24: An Entrusting Party shall authorize the domestic Custodian to establish separate custody accounts and maintain the independence of different types of funds according to different Entrusted Parties, different insurance products and foreign exchange funds of different nature. The domestic Custodian shall provide cooperation thereto.

Article 25: Where an Entrusting Party is listed overseas, it shall remit the Foreign Exchange Insurance Funds raised from listing into China within six months. Where state laws and regulations provide otherwise, such laws and regulations shall prevail. An Entrusting Party that has obtained qualification to invest overseas shall, within 30 days from the date of approval, transfer the Foreign Exchange Insurance Funds raised from listing directly into a domestic or overseas custody account.

Article 26: The investment guidelines formulated by an Entrusting Party shall at least include the investment tenet, investment objectives, investment categories, investment ratios, investment markets, investment period, performance benchmark, criteria for selecting counterparties and the list thereof, and requirements of liquidity and risk control. The investment guidelines shall be forwarded to the Entrusted Party and the domestic Custodian at the same time.

Article 27: Where an Entrusting Party has a deposit in a commercial bank other than the domestic Custodian or the overseas custody agent, the Entrusting Party shall request the said bank to provide to the domestic Custodian the original of the ownership document or the original of the document evidencing total ownership, and periodically provide to the domestic Custodian information regarding such deposit. Where the deposit is terminated early or has matured, it shall be transferred into the account designated by the domestic Custodian.

Article 28: An Entrusting Party shall periodically review the investment guidelines, and in accordance with the policy environment, market tendency and investment circumstances, timely make changes and inform the Entrusted Party and the domestic Custodian. The frequency of the review of the investment guidelines shall be at least once a year.

Article 29: An Entrusting Party shall, in accordance with the relevant clauses of the Investment Management Agreement, periodically evaluate the investment management capability and actual investment performance of the Entrusted Party, and make the corresponding adjustment to the scale of the entrusted management. Where the Entrusting Party finds that the Entrusted Party has violated laws or regulations, the Entrusting Party may rescind the Investment Management Agreement. The frequency of the evaluation of the Entrusted Party shall be at least once a year.

Article 30: An Entrusting Party shall, in accordance with the relevant clauses of the Custodian Agreement, periodically evaluate the custody capability and actual service quality of the domestic Custodian, the overseas custody agent and the secondary Custodian. Where the requirements of the Custodian Agreement are not met or where violation of laws or regulations is found, the Entrusting Party may request that the overseas custody agent or the secondary Custodian be changed, or terminate the Custodian Agreement. The frequency of the evaluation of the domestic Custodian shall be at least once a year.

Article 31: An Entrusting Party and an Entrusted Party shall carry out follow-up assessment of the exchange rate risk, interest rate risk, credit risk, market risk, liquidity risk and operational risk of overseas investments with Foreign Exchange Insurance Funds to control the overseas investment risk.

Article 32: Before an Entrusted Party starts investment operations, the Entrusting Party, the Entrusted Party and the domestic Custodian shall reach a consensus regarding the preparation of documentation, trading operations, and the issue, confirmation and implementation of trading and settlement instructions, etc. The Entrusting Party and the Entrusted Party shall inform the domestic Custodian regarding the instruction issuing personnel, the authorization letter and the authorized limit.

Article 33: An Entrusted Party shall strictly follow the provisions of relevant laws and regulations, the Measures and these Rules, and the terms of the Investment Management Agreement and the investment guidelines, and establish a special instruction and examination system to ensure that the trading instructions do not violate relevant restrictive provisions.

Article 34: An Entrusted Party shall not use the Foreign Exchange Insurance Funds to engage in speculative foreign exchange trading, mortgage financing or other liability-incurring investments.

Article 35: An Entrusted Party shall prepare a written research report before making the following significant decisions:

(1) a decision involving 10% or more of the Foreign Exchange Insurance Funds entrusted to it for management;

(2) a decision requiring significant adjustment to the investment portfolio;

(3) a decision requiring significant adjustment to the performance benchmark;

(4) a decision requiring significant adjustment to the investment risk tolerance; or

(5) a decision requiring significant adjustment to the criteria for selecting counterparties.

Article 36: An Entrusted Party shall, within the provisions of the Measures and these Rules, and the terms of the Investment Management Agreement and the investment guidelines, give full consideration to credit circumstances, risk attributes, earnings capacity, information transparency, liquidity and other indices, to determine the range of categories that may be invested in.

Article 37: An Entrusted Party shall use value at risk and other risk measurement indices to indicate the risk circumstances of different investment categories and the overall risk of the Foreign Exchange Insurance Funds entrusted to it for management.

Article 38: If, due to market fluctuations, credit rating adjustment and other factors, the investment management of an Entrusted Party does not comply with the provisions of the Measures or these Rules, or the terms of the Investment Management Agreement or the investment guidelines, the Entrusted Party shall inform the Entrusting Party and the domestic Custodian in a timely manner and make adjustment within a reasonable time period.

Article 39: An Entrusted Party shall fairly and impartially manage the different funds entrusted to it, and periodically provide to the Entrusting Party investment performance and risk evaluation reports, etc. on the Foreign Exchange Insurance Funds entrusted to it for management.

Article 40: A domestic Custodian shall conduct compliance inspections of the investments of the Entrusted Party. If a violation of the provisions of relevant laws and regulations, the Measures or these Rules, or the terms of the Investment Management Agreement or the investment guidelines is found, the domestic Custodian shall inform the Entrusting Party and the Entrusted Party in a timely manner. The Entrusting Party and the Entrusted Party shall jointly determine a solution and handle the matter accordingly.

Article 41: The domestic Custodian, overseas custody agent and secondary Custodian shall, in accordance with the relevant provisions of the Custodian Agreement, be jointly responsible for the clearing, delivery and custody of the Foreign Exchange Insurance Funds in their custody, and accurately check the updates on the assets in a timely manner. The original of the ownership document or the original of the document evidencing total ownership of the assets in custody shall be kept by the domestic Custodian, but if laws or regulations of the place of investment provide otherwise, such laws or regulations shall prevail.

Article 42: If, due to market fluctuations, credit rating adjustment and other factors, the investment management of an Entrusted Party does not comply with the provisions of the Measures or these Rules, or the terms of the Investment Management Agreement or the investment guidelines, the domestic Custodian shall inform the Entrusting Party and the Entrusted Party in a timely manner, supervise the Entrusted Party to make adjustment within a reasonable time period and report the adjustment results to the CIRC.

PART SIX: REGULATION

Article 43: Where an Entrusting Party entrusts a number of Entrusted Parties to manage its overseas investments with Foreign Exchange Insurance Funds, the aggregate investment balance shall not exceed the investment ratios stipulated by the CIRC.

Article 44: An Entrusting Party shall, in addition to reporting to the CIRC relevant matters in accordance with Articles 33 and 34 of the Measures, also report to the CIRC the following:

(1) within 10 days after the end of each quarter, report the balance of the overseas special foreign exchange account and the details of all the receipts and payments of such account;

(2) within 10 days after the end of each quarter, report the details of the structured deposits, and the report shall at least include the principal clauses of the agreement, the interest rate fluctuation range, the deposit term, a summary of the inherent risks and other important issues that may affect the potential losses in the product;

(3) within 10 days after the end of each quarter, report the details of the deposits in affiliated parties and of the purchase of bonds and stocks of affiliated parties, and the report shall at least include the affiliated relationships with the various trading parties, the nature of the transactions, the transaction amount, the corresponding ratios and the pricing policy;

(4) before the end of June each year, submit the evaluation reports regarding the Foreign Exchange Insurance Funds management of the Entrusted Party and the Custodian in the preceding year;

(5) the increase or reduction in the scale of the Foreign Exchange Insurance Funds managed by an Entrusted Party, including the basis for making the decision and the investment management performance of the Entrusted Party, which shall be reported within 15 days from the day the decision is made;

(6) the formulation or amendment of the investment guidelines, which shall be reported within 15 days;

(7) the signing of the Investment Management Agreement, the Custodian Agreement and the legal opinion, which shall be reported within five days;

(8) a significant unexpected event in the investment market, or a significant unexpected event that affects the security and investment performance of the Foreign Exchange Insurance Funds, which shall be reported within two days; and

(9) a significant unexpected event happened to the Entrusted Party or the domestic Custodian, which shall be reported within two days.

When reporting the matter stipulated in Item (8) of the preceding paragraph, the Entrusting Party shall also include measures for asset preservation and risk prevention.

Article 45: A commercial bank having a relationship with an Entrusting Party as follows shall not act as a domestic Custodian or an overseas custody agent of such Entrusting Party:

(1) the Entrusting Party directly or indirectly holds more than 10% of the shares of the commercial bank;

(2) the commercial bank directly or indirectly holds more than 10% of the shares of the Entrusting Party;

(3) the Entrusting Party and the commercial bank separately have more than 10% of their shares directly or indirectly held by the same enterprise; or

(4) other relationships that the CIRC deems may affect the independence of the domestic Custodian and the overseas Custodian.

Article 46: A commercial bank or an overseas Entrusted Party having a relationship as follows shall not concurrently act as a domestic Custodian, an overseas custody agent and an Entrusted Party of the same Entrusting Party:

(1) the commercial bank directly or indirectly holds more than 10% of the shares of the overseas Entrusted Party;

(2) the overseas Entrusted Party directly or indirectly holds more than 10% of the shares of the commercial bank;

(3) the commercial bank and the overseas Entrusted Party separately have more than 10% of their shares directly or indirectly held by the same enterprise; or

(4) other relationships that the CIRC deems may affect the independence of the Entrusted Party and the domestic Custodian.

Article 47: An Entrusted Party shall report to the CIRC the following:

(1) before the end of June each year, submit the company internal control audit report and financial statements of the preceding year issued by an accounting firm, including the investment performance and the details of the Foreign Exchange Insurance Funds entrusted to it for management;

(2) within 15 days after the end of each quarter, submit the investment performance and risk evaluation reports of the Foreign Exchange Insurance Funds entrusted to it for management;

(3) a significant unexpected event in the investment market, or a significant unexpected event that affects the security and investment performance of the insurance funds, which shall be reported within two days;

(4) a significant change to the registered capital, shareholder structure or partners, which shall be reported within five days;

(5) a matter that involves a significant litigation or the imposition of a significant penalty, which shall be reported within five days; and

(6) other matters as stipulated by the CIRC.

When reporting the matter stipulated in Item (3) of the preceding paragraph, the Entrusted Party shall also include measures for asset preservation and risk prevention.

Article 48: A domestic Custodian shall, in addition to reporting to the CIRC relevant matters in accordance with Article 20 of the Measures, also report to the CIRC the following:

(1) before the end of June each year, submit the company internal control audit report and financial statements of the preceding year issued by an accounting firm, including details of the Foreign Exchange Insurance Funds in custody;

(2) a significant change to the registered capital or shareholder structure, which shall be reported within five days;

(3) a matter that involves a significant litigation or the imposition of a significant penalty, which shall be reported within five days;

(4) determination or change of an overseas custody agent or the secondary Custodian, which shall be reported within five days; and

(5) other matters as stipulated by the CIRC.

Article 49: The CIRC may, in accordance with Articles 9 and 10 of the Measures and relevant provisions, take the following measures:

(1) in accordance with the updates on the overseas investments with Foreign Exchange Insurance Funds and the international financial markets, adjust the various investment ratios; or

(2) in accordance with the management capacity of the Entrusting Party, gradually modify the investment categories, investment currencies and investment markets.

Article 50: The CIRC shall periodically and non-periodically conduct inspections regarding the compliance and risk control of the overseas investments of the Entrusting Party and domestic Entrusted Party, or may appoint an accounting firm or other intermediary organizations to conduct inspections regarding the overseas investments of the Entrusting Party and domestic Entrusted Party.

Article 51: The CIRC shall, in accordance with the relevant provisions of the Measures and these Rules, conduct an annual examination of the overseas investments with Foreign Exchange Insurance Funds conducted by the Entrusted Party and the domestic Custodian.

The Entrusted Party and domestic Custodian shall separately provide the documents and materials in accordance with Articles 8, 9, 10, 11 and 12 of these Rules.

Where the CIRC finds that the Entrusted Party or the domestic Custodian does not meet the conditions stipulated in the Measures or these Rules, the CIRC may request in writing the Entrusted Party or the domestic Custodian to explain the reasons therefor.

Article 52: Where an Entrusting Party or a domestic Entrusted Party violates the Measures, these Rules or relevant provisions, the CIRC shall hold a regulatory discussion or conduct an inquiry with the relevant senior management personnel and the principal operation personnel, and may, in serious circumstances, impose administrative penalties in accordance with the law.

Article 53: Where a domestic Custodian or an overseas Entrusted Party violates the Measures, these Rules or relevant provisions, the CIRC shall record its bad business practices, and may, in serious circumstances, terminate its engagement in overseas investments with Foreign Exchange Insurance Funds.

PART SEVEN: SUPPLEMENTARY PROVISIONS

Article 54: For the purposes of these Rules, the term "Foreign Exchange Insurance Funds in the custody of the Custodian" includes the domestic and overseas Foreign Exchange Insurance Funds managed by the insurance institution.

Article 55: For the purposes of these Rules, the term 'accounting firm' means an accounting firm with audit experience in the relevant overseas industry and has a reputation and is widely recognized worldwide.

For the purposes of these Rules, the term 'international rating agency' means Moody's Investors Service, Standard & Poor's, Fitch Ratings and other rating agencies recognized by the CIRC.

Article 56: These Rules shall be effective as of the date of promulgation.

* Translation provided by Boss & Young, Attorneys at Law, Shanghai. All rights reserved.