Qualifications Criteria and Approval Procedures

Article 6 A QFII applicant should fall within the following criteria:

1. The applicant should be in sound financial and credit status, should meet the requirements set by CSRC on assets size and other factors, and its risk control indicators should meet the requirements set by laws and securities authorities under its home jurisdiction;
2. Employees of the applicant should meet the requirements on professional qualifications set by its home country/region;
3. The applicant should have sound management structure and internal control system, should conduct business in accordance with the relevant regulations and should not have received any substantial penalties by regulators in its home country/region over the last three years prior to application;
4. The home country/region of the applicant should have sound legal and regulatory system, and its securities regulator has signed Memorandum of Understanding with CSRC and has maintained an efficient regulatory and co-operative relationship;
5. Other criteria as stipulated by CSRC based on prudent regulatory principles.

Article 7 The criteria of assets scale and other factors as referred to in the aforesaid article are:

For fund management institutions, Having operated fund business for over 5 years with the most recent accounting year managing assets of not less than US$10 billion;

For insurance companies, Having operated insurance business for over 30 years with paid-in capital of not less than US$1 billion and managing securities assets of not less than US$10 billion in the most recent accounting year;

For securities companies, Having operated securities business for over 30 years with paid-in capital of not less than US$1 billion and managing securities assets of not less than US$10 billion in the most recent accounting year;

For commercial banks, Ranking among the top 100 of the world in the total assets for the most recent accounting year and managing securities assets of not less than US$10 billion.

CSRC may adjust the aforesaid requirements subject to the developments of securities market.

Article 8 To apply for QFII qualification and investment quota, an applicant should submit the following documents to CSRC and SAFE respectively through its custodian:

1. Application Forms (including basic information on the applicant, investment quota applied for and investment plan, etc.);
2. Documents to verify that the applicant meets requirements set in Article 6;
3. Draft Custody Agreement signed with its expected custodian;
4. Audited financial reports for the most recent 3 years;
5. Statement on sources of the funds, and Letter of Undertaking promising not to withdraw funds during the approved period;
6. Letter of authorization by the applicant;
7. Other documents as required by CSRC and SAFE.

All the aforesaid documents, if written in languages other than Chinese, must be accompanied by their Chinese translations or Chinese extracts.

Article 9 The CSRC shall, within 15 working days from the date the full set of application documents are received, determine whether to grant approval or not. Securities Investment Licenses will be issued to those applicants whose applications have been approved whereas written notices will be given to those applicants whose applications have been rejected.

Article 10 Applicants shall apply to the SAFE through their custodians for investment quotas after obtaining the Securities Investment Licenses.

SAFE shall, within 15 working days from the date full set of application documents are received, determine whether to grant approval or not. Applicants whose applications have been approved will be notified in writing their permitted investment quotas and Foreign Exchange Registration Certificates will be issued. Written notices will be given to those applicants whose applications have been rejected.

The Securities Investment Licence will automaticallybecome void if an applicant is unable to obtain the Foreign Exchange Registration Certificate within one year after the Securities Investment Licence is granted.

Article 11 In order to encourage medium and long-term investments, preference will be given to the institutions managing closed-end Chinese funds subject to the requirements of Article 6 or pension funds, insurance funds and mutual funds with good investment records in other markets.