Measures for the Administration of Securities Investments in China by Qualified Foreign Institutional Investors

(Promulgated by the China Securities Regulatory Commission, People's Bank of China and State Administration of Foreign Exchange on August 24 2006 and effective as of September 1 2006.)

Order of the CSRC, PBOC and SAFE No.36

PART ONE: GENERAL PROVISIONS

Article 1: These Measures are formulated in accordance with relevant laws and administrative regulations in order to regulate acts of investment in the Chinese securities market by qualified foreign institutional investors and to promote the development of the Chinese securities market.

Article 2: For the purposes of these Measures, "qualified foreign institutional investor" (QFII) means a foreign fund management institution, insurance company, securities company or other asset management institution that complies with these Measures, has been approved by the China Securities Regulatory Commission (CSRC) to invest in the Chinese securities market and has obtained a quota approved by the State Administration of Foreign Exchange (SAFE).

Article 3: A QFII shall appoint a domestic commercial bank to act as the custodian of its assets and appoint a domestic securities company to handle its domestic securities trading activities.

Article 4: QFIIs must abide by Chinese laws, regulations and other relevant provisions.

Article 5: The CSRC shall regulate securities investments in China by QFIIs in accordance with the law. SAFE shall, in accordance with the law, impose foreign exchange control on investment quotas, inward and outward remittances of funds and other matters relevant to securities investments in China by QFIIs.

PART TWO: CONDITIONS FOR QUALIFICATIONS AND PROCEDURES FOR EXAMINATION AND APPROVAL

Article 6: To apply for QFII status, the applicant shall meet the following conditions:

(1) to have a stable, healthy financial position and a good credit rating, to meet conditions such as those for asset scales prescribed by the CSRC;

(2) to have business personnel who meet the relevant business qualification requirements of the country or region in which the applicant is located;

(3) to have a sound corporate governance structure and a comprehensive internal control mechanism, to carry on business in compliance with law, and not to have received any major punishment during the preceding three years from the regulator;

(4) to be located in a country or region that has sound legal and regulatory systems, and the securities regulator of which has entered into a memorandum of understanding with the CSRC concerning regulatory cooperation and maintains an effective regulatory cooperation relationship with the CSRC; and

(5) to meet other conditions prescribed by the CSRC in accordance with the principle of prudent regulation.

Article 7: When applying for QFII status and an investment quota, the applicant may submit the documents through the custodian to, the CSRC and SAFE respectively.

Article 8: The CSRC will examine the application materials, seek the opinion of SAFE and render its decision on whether or not to grant its approval within 20 working days from the date of receipt of the complete set of application documents. If the CSRC decides to grant approval, it will issue a securities investment business permit. If the CSRC decides to withhold approval, it will notify the applicant in writing.

Article 9: Within one year from the date of receipt of the securities investment business permit, the applicant shall apply through the custodian to SAFE for an investment quota.

SAFE shall examine the application materials, seek the opinion of the CSRC and render its decision on whether or not to grant its approval within 20 working days from the date of receipt of the complete set of application documents. If SAFE decides to grant approval, it will render a written official reply and issue a foreign exchange registration certificate. If SAFE decides to withhold approval, it will notify the applicant in writing.

Article 10: With a view to encouraging medium and long-term investments, primary consideration shall be given to institutions that comply herewith and manage long-term funds, such as retirement funds, insurance funds, mutual funds, charity funds, etc.

PART THREE: CUSTODY, REGISTRATION AND SETTLEMENT

Article 11: A custodian shall meet the following conditions:

(1) to have a dedicated asset custody department;

(2) to have paid-up capital of not less than Rmb8 billion;

(3) to have an adequate number of full-time personnel familiar with custody business;

(4) to be able to keep safe custody of the assets of the QFII;

(5) to have the ability to carry out secure, highly efficient clearing and settlement;

(6) to be qualified as a designated foreign exchange bank and qualified to operate renminbi business; and

(7) to have no record of any major violation of exchange control regulations during the most recent three years.

Those China branches of foreign-invested commercial banks that have continuously operated in China for not less than three years may apply to become custodians. The calculations to determine whether they meet the requirement on the amount of paid-up capital shall be performed on the amount of paid-up capital of their foreign head offices.

Article 12: The examination and approval of the CSRC and SAFE shall be required to obtain qualifications as a custodian. Within 30 working days after receipt of the complete set of application documents, the CSRC shall countersign and issue a custody qualification permit together with SAFE.

Article 13: A custodian shall perform the following duties:

(1) to keep safe all of the assets placed in its custody by the QFII;

(2) to handle the relevant foreign exchange settlement, sale, receipt and payment business and renminbi fund settlement business of the QFII;

(3) to supervise the QFII's investment operations, and to report to the CSRC and SAFE if the QFII's investment instructions violate laws or regulations in a timely manner;

(4) within two working days of remittance of principal into China or remittance of principal or earnings out of China by the QFII, to inform SAFE of the particulars of the funds so remitted and the settlement or sale of foreign exchange by the QFII;

(5) within eight working days after the end of each month, to report to SAFE the details of payments made into and out of, as well as the asset allocation of, the QFII's foreign exchange accounts and special renminbi accounts, and to report to the CSRC the details of the investments and transactions of the securities accounts;

(6) within three months after the conclusion of each fiscal year, to prepare an annual financial report on the particulars of the QFII's securities investment activities in China during the previous year and to submit the same to the CSRC and SAFE;

(7) to keep for a period of not less than 20 years relevant information such as records of remittances into and out of China, the conversion of funds, the receipt and payment of foreign exchange, and the receipt and payment of funds by the QFII;

(8) to submit balance of payments statistics in accordance with state foreign exchange control provisions; and

(9) other duties specified by the CSRC and SAFE in accordance with the principle of prudential regulation.

Article 14: A custodian must keep its own assets and those it manages as custodian strictly apart, and keep separate accounts for those assets it manages as custodian.

Article 15: Each QFII may appoint only one custodian but the custodian may be changed.

Article 16: A QFII may apply to open a securities account with the securities depository and clearing institution. Such securities account may be a real name account or a nominal holder account.

A nominal holder shall report the name, place of registration, asset allocation mix and details of the securities investments of the actual investor or fund that it represents to the CSRC and stock exchange within eight working days after the end of each quarter.

Article 17: A QFII shall appoint an institution that has obtained clearing participant qualifications from the securities depository and clearing institution to carry out fund clearance. Within five working days of opening a renminbi clearing account, the aforementioned institution shall report on the opening of the account to SAFE for the record.

PART FOUR: INVESTMENT OPERATIONS

Article 18: Within the approved investment quota, a QFII may invest in renminbi-denominated financial instruments approved by the CSRC.

Article 19: A QFII may appoint a securities company or other investment management institution established in China to carry out securities investment management in China.

Article 20: Share investments in China by a QFII shall comply with the limitations on shareholding percentages specified by the CSRC and other relevant state provisions.

Article 21: When performing its information disclosure obligation, an offshore investor shall calculate together the domestically listed shares and offshore listed shares of the same listed company that it holds and comply with relevant laws and regulations on information disclosure.

Article 22: Securities companies and other such institutions shall keep information such as the instruction records and transaction records of QFIIs for a period of not less than 20 years.

Article 23: Securities investment activities carried out in China by QFIIs shall comply with relevant provisions of the stock exchange and securities depository and clearing institution.

PART FIVE: FUND MANAGEMENT

Article 24: Upon approval by SAFE, a QFII shall open foreign exchange accounts and special renminbi accounts with the custodian.

Article 25: The scope of receipts and expenditures of a QFII's foreign exchange accounts and special renminbi accounts shall comply with relevant provisions of SAFE.

Article 26: A QFII shall carry out inward remittance of the principal by the time specified by SAFE. The remitted principal shall be in a convertible currency approved by SAFE and the amount thereof may not exceed the approved limit.

If a QFII fails to remit in full the principal by the time specified by SAFE, it shall give a written explanation to the CSRC and SAFE and the amount actually remitted by it shall be its approved limit. The difference between its approved limit and the actual amount remitted by it may not be remitted inward without the approval of SAFE.

Article 27: A QFII may apply for outward remittance of funds from the date of expiration of the period of time specified by SAFE, unless otherwise specified by SAFE.

Article 28: SAFE may, based on China's economic and financial circumstances, supply and demand in the foreign exchange market and the balance of payments, make revisions to the times for the inward and outward remittance of principal by QFIIs, the amounts thereof and the time limit for making outward remittances of funds in line with the arrangements of the People's Bank of China.

PART SIX: REGULATION

Article 29: The CSRC and SAFE may, in accordance with the law, require a QFII, custodian, securities company or other such institution to provide relevant information on the QFII, and make the necessary inquiries and carry out the necessary inspections.

Article 30: A QFII shall report to the CSRC and SAFE for the record within five working days after the occurrence of:

(1) a change of custodian;

(2) a change of legal representative;

(3) a change of controlling shareholder;

(4) an adjustment in its registered capital;

(5) major litigation or other major matters;

(6) a major punishment imposed outside China; or

(7) other circumstances specified by the CSRC or SAFE.

Article 31: A QFII shall apply for a new securities investment business permit if:

(1) it changes its name;

(2) it is merged by absorption with another institution; or

(3) in other circumstances specified by the CSRC or SAFE.

While applying for a new securities investment business permit, the QFII may continue to engage in securities trading, unless, in line with prudential regulatory principles, the CSRC deems it necessary to suspend its trading.

Article 32: A QFII shall return its securities investment business permit and foreign exchange registration certificate to, respectively, the CSRC and SAFE if:

(1) the applicant fails to apply to SAFE for an investment quota within one year after obtaining its securities investment business permit;

(2) the institution is dissolved, commences bankruptcy procedures or is taken over by a receiver;

(3) the QFII applies for a new permit; or

(4) the QFII has committed a major violation of the law or is characterized by another circumstance determined by the CSRC and SAFE.

Article 33: If a major violation of laws or regulations is perpetrated through a securities account managed by a QFII, the CSRC may, in accordance with the law, take such measures as limiting the transactions that can be carried out through such account, etc. and SAFE may take such measures as placing a limit on funds that may be remitted inward thereto or outward therefrom, etc.

Article 34: If a custodian commits a serious violation of laws or regulations, the CSRC and SAFE will, in accordance with the law, jointly render a decision to revoke its custodian qualifications.

Article 35: If a QFII, custodian, securities company, etc. violates these Measures, the CSRC and/or SAFE will impose appropriate administrative penalties in accordance with the law.

PART SEVEN: SUPPLEMENTARY PROVISIONS

Article 36: These Measures shall apply to the engagement in securities investment carried out in the mainland by institutional investors established in the Hong Kong Special Administrative Region, the Macao Special Administrative Region and Taiwan.

Article 37: These Measures shall be effective as of September 1 2006. The Tentative Measures for the Administration of Securities Investments in China by Qualified Foreign Institutional Investors jointly promulgated by the CSRC and People's Bank of China on November 5 2002 shall be repealed simultaneously.