Fund Establishment, Raising and Transactions

Article 5 Establishment of a fund shall be subject to the examination and approval of China Securities Supervisory and Control Commission (hereinafter referred to as CSSCC).

Article 6 A fund sponsor may apply for the establishment of an open fund or may apply for the establishment of a closed fund.

Article 7 The following terms shall be met for an application for the establishment of a fund:

1. (1) its main sponsors are securities firms, trust and investment companies and fund administering companies established in accordance with relevant state provisions;
2. the actual capital of each sponsor shall not be less than RMB 300 million Yuan, and the main sponsors shall have experiences in securities investment and a record of consecutive profits for over three years. However, the fund administering companies are excluded;
3. the sponsors, fund trustees and fund administrators shall have sound organizational institutions and management system with good financial status and standardized acts of operations;
4. the fund trustees and fund administrators shall have a site for business operations, facilities for security and precaution and other business-related facilities commensurate with requirements; and
5. other terms prescribed by CSSCC.

An applicant for the establishment of an open fund must also be able to ensure in qualified personnel and technical facilities the announcement at least once a week for the investors with respect to the net value of the fund assets and the bid price and the redemption price.

Article 8 A fund sponsor applying for the establishment of a fund shall present the following documents to CSSCC:

1. an application report;
2. a list of sponsors and the agreement;
3. the fund deed and the trusteeship agreement;
4. the prospectus;
5. in the case of a securities company or a trust and investment company serving as the sponsor, financial reports of the sponsor in the past three years audited by an accountant firm;
6. legal opinion letter issued by a law firm;
7. a fund-raising proposal; and
8. other documents the presentation of which is required by CSSCC.

The contents and formats of the fund deed, trusteeship agreement and prospectus of the preceding paragraph shall be prescribed by CSSCC.

Article 9 The percentage of the fund sponsors' subscription of fund units in the total amount of the fund and the percentage of holding fund units in the total amount of the fund during the fund's existence shall be determined by CSSCC.

Article 10 The existence of a closed fund shall not be less than five years and the minimum amount raised shall not be less than RMB 200 million Yuan.

Article 11 Expansion of fund-raising and extension of a closed fund shall have the following qualifications and be subject to the examination and approval of CSSCC:

1. annual rate of returns is higher than the average rate of returns nationwide;
2. the fund trustee and the fund administrator have committed no major acts in violation of laws and regulations in the past three years;
3. the fund holders' meeting and the fund trustee's agreement on the expansion of fund-raising or extension; and
4. other qualifications prescribed by CSSCC.

Relevant documents shall be presented in accordance with the requirements of CSSCC for application for expansion of fund-raising or extension.

Article 12 The fund sponsors shall, three days prior to the fund-raising, publish the prospectus in the newspaper designated by CSSCC.

Article 13 The duration of fund-raising of a closed fund shall be three months, which is to be calculated from the date of approval of the said fund. A closed fund can only be established when the fund raised within three months from the date of approval of the said fund exceeds 80% of the approved scale of the said fund. An open fund can only be established when the net sales within three months from the date of approval of the said fund exceed RMB 200 million Yuan.

A closed fund shall not be established when the fund raised is less than 80% of the approved scale of the said fund on expiry of the duration of fund-raising of the said fund. An open fund shall not be established when the net sales within three months from the date of approval of the said fund are less than RMB 200 million Yuan. The fund sponsors must bear expenses for the fund-raising and the fund raised with additional calculation of bank current deposit interest must be refunded to fund subscribers within 30 days.

Article 14 Bidding and redemption of an open fund can only be conducted in sites in conformity with the state provisions.

The fund administrator and the fund trustee may, upon establishment of a closed fund, apply to CSSCC and securities exchanges for listing of the fund. Rules for fund listing shall be formulated by securities exchanges and submitted to CSSCC for approval.