Fund Management

Article 23 Upon the approval of SAFE, a QFII should open a RMB special account with its custodian. Within five working days after the opening of the RMB special account, the custodian should report to CSRC and SAFE for filing.

Article 24 Revenue articles in the RMB special account shall include, settlement of funds (foreign exchange funds from overseas, and accumulated settlement of foreign exchange should not exceed the approved investment quota), proceeds from the disposal of securities, cash dividends, interests from current deposits and bonds. Expense articles in the RMB special account shall include: cost of purchasing securities (including stamp tax and commission charges), domestic custodian fee and management fee, and payment for purchasing foreign exchange (to be used to repatriate principals and proceeds).

The capital of special RMB account shall not be used for money lending or guarantee.

If QFII has not fully remitted the principals within three months after receiving Foreign Exchange Registration Certificate, the actual amount remitted will be deemed as the approved quota, thereafter the difference between approved quota and the actual amount shall not be remitted inward prior to the obtaining of a newly approved investment quota.

Article 26 In the case that a QFII is a closed-end Chinese fund management company, it can mandate its custodian, with the submission of required documents to SAFE to apply for purchase of foreign exchange for the repatriation of principals by stages and by batches three years after its remittance of the principals. The amount of each batch of principal repatriation should not exceed 20% of the total principals, and the interval between two repatriations should not be shorter than one month.

Other types of QFII can mandate their custodians, with the submission of required documents, to apply to SAFE to repatriate the principals by stages and by batches one years after their remittance of the principals. The amount of each batch of principal repatriation should not exceed 20% of the total principals, and the interval between two repatriations should not be shorter than three months.

The overseas receivers of the above-mentioned repatriation should be the QFII themselves.

Article 27 QFII whose principal of approved investment quota is remitted to China for less than one year but over three months, after the submission of transfer application form transfer contract and upon approval of CSRC and SAFE, may transfer the approved investment quota to other QFII or other applicants who have fulfilled the requirements of Article 6 After getting Securities Investment Licence from CSRC and investment quota from SAFE, the transferee can remit the difference as its principals if the value of the transferred assets is lower than the investment quota approved by SAFE.

Article 28 If QFII intends to remit principals inwards again after it partially or fully repatriates its principals, it should re-apply for investment quota.

Article 29 If QFII needs to purchase foreign exchange to repatriate their post-tax profits of the previous accounting year which have been audited by Chinese CPA, the QFII should mandate its custodian to apply to SAFE fifteen days prior to repatriation, together with the following documents:

1. Repatriation Application Form;
2. Financial reports of the accounting year in which the profits are generated;
3. Auditor's report issued by Chinese CPA;
4. Profits distribution resolutions or other effective legal documents;
5. Tax payment certificates;
6. Other documents as required by SAFE.

The overseas receivers of the above-mentioned repatriation should be the QFII themselves.

Article 30 SAFE may adjust the timeframe required for QFII to repatriate its principal and proceeds, subject to the needs of China's foreign exchange balance.