Investment Operations, Supervision and Administration

Article 32 Prior to the establishment of a fund, the amount subscribed by the investorsshall only be deposited in a commercial bank and shall not be used.

Article 33 The investment combination of a fund shall conform to the following provisions:

1. the percentage of investment in stocks and bonds of a fund shall not be less than 80% of the total value of the assets of the said fund;
2. the stocks of a listed company held by a fund shall not exceed 10% of the net value of the assets of the said fund;
3. the securities distributed by a company held by the entire fund under the administration of the same fund administrator shall not exceed 10% of the said securities;
4. the percentage of investment in state bonds by a fund shall not be less than 20% of the net value of the assets of the said fund; and
5. other restrictions on percentage provided for by CSSCC.

Article 34 Engagement in the following acts shall be prohibited:

1. mutual investment among funds;
2. engagement by fund trustees and commercial banks in fund investment;
3. buying and selling of securities by fund administrators in the name of funds by using funds not under the name of the funds;
4. engagement by fund administrators in any form in underwriting securities or engagement in other independently operated business of securities in addition to state bonds;
5. engagement by fund administrators in call loan business;
6. engagement in fund investment by using bank credit funds;
7. fund scalping by state-owned enterprises in violation of relevant state provisions;
8. fund assets used for mortgage, guarantee, call loans or loans;
9. engagement in securities credit transactions;
10. engagement in real estate investment with fund assets;
11. engagement in investment which might cause the fund assets to bear unlimited liabilities;
12. investment of fund assets in securities distributed by companies having relations of interests with the fund trustees or fund administrators; and
13. other acts prohibited by the provisions of CSSCC.

Article 35 An open fund must keep adequate cash or state bonds to pay for the redemption.

Article 36 The trusteeship fee of fund trustees, the remuneration for fund administrators and other expenses which may be deducted from the fund assets shall be handled pursuant to the relevant state provisions and made clear in the fund deeds and trusteeship agreements.

Article 37 Fund trustees and fund administrators shall implement the financial accounting rules of the State and pay taxes in accordance with law.

Article 38 Distribution of fund benefits shall take the form of cash at least once a year. The percentage of distribution of fund benefits shall not be less than 90% of the net returns of the fund.

Article 39 CSSCC and the People's Bank of China shall, pursuant to their respective functions and powers, carry out inspection and audit from time to time over fund-raising, transactions, investment operations and related business activities and financial and accounting material. Fund trustees, fund administrators and relatedagencies and personnel shall provide the relevant information and material in time and shall not refuse and obstruct.

Article 40 A fund shall terminate in the event of any of the following circumstances:

1. expiry of the duration of closure of a fund and extension has not been approved;
2. approval has been granted for the termination of a fund ahead of time; and
3. a fund which has been ordered by CSSCC to terminate due to major acts in violation of laws and regulations.

Article 41 A settlement team must be formed to carry out settlement of the fund assets at the time of termination of a fund; the settlement results shall be submitted to CSSCC for approval and announced.

CSSCC shall oversee the settlement process of a fund.

Article 42 All surplus assets after settlement of a fund shall be distributed to fund holders according to the percentage of the fund units held by the fund holders in the fund assets.