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INTERIM MEASURES FOR THE ADMINISTRATION OF SECURITIES INVESTMENT FUNDS

    Article 1  These Measures are formulated with a view to strengthening the
administration of securities investment funds, protecting the legitimate
rights and interests of the parties interested and promoting sound and
steady development of the securities market.

    Article 2  The securities investment funds (hereinafter referred to as
the funds) referred to in these Measures mean an interest-sharing,
risk-sharing collective securities investment mode, namely concentration of
investors' funds through fund issuing units under the trusteeship of the
fund trustees, funds administered and employed by fund administrators
for engaging in investment in such financial tools as stocks and bonds.

    Article 3  Fund assets shall be independent of the assets of the fund
trustees and fund administrators.

    Article 4  Whoever engages in fund operations and natural persons, legal
persons and other organizations related to such operations within the
territory of China shall abide by these Measures.
Chapter II  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) 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.
Chapter III  The Fund Trustee and the Fund Administrator

    Article 15  The fund established upon approval shall entrust a commercial
bank as the fund trustee for trusteeship of the fund assets and entrust a
fund administering company as the fund administrator for administration and
employment of the fund assets.

    Article 16  The fund trustee must be subject to the examination and
approval of CSSCC and the People's Bank of China.

    Article 17  The fund trustee and the fund administrator shall be
independent of each other administratively and financially, and their
high-ranking administrative staff shall not take up concurrent positions
of the other party.

    Article 18  The fund trustee shall have the following qualifications:

    (1) has a special fund trusteeship department;

    (2) has an actual capital not less than RMB 8 billion Yuan;

    (3) has adequate specialized staff conversant with trusteeship business;

    (4) has facilities for the safekeeping of the total assets of the fund; and

    (5) has capabilities of secure and high-efficiency settlement and
delivery.

    Article 19  The fund trustee shall fulfil the following functions and
responsibilities:

    (1) safekeeping of the total assets of the fund;

    (2) execution of the investment directives of the fund administrator and
responsibility for the handling of fund transactions under the name of the
fund;

    (3) supervision over the investment operations of the fund administrator,
non-execution of the investment directives in violation of laws and
regulations upon discovery and a report submitted to CSSCC;

    (4) reverification and examination of the net value of the fund assets
and the fund price calculated by the fund administrator;

    (5) safekeeping of the account books and records of the fund for more
than 15 years;

    (6) issuance of a report on the achievements of the fund, provision of
information on the fund trusteeship and a report submitted to CSSCC and the
People's Bank of China; and

    (7) other functions and responsibilities prescribed by the fund deed and
the trusteeship agreement.

    Article 20  The fund trustee must strictly separate the fund assets
under its trusteeship from the fund trustee's own assets, establish separate
accounts for different funds and conduct the administration according to
separate accounts.

    Article 21  The fund trustee having any of the following circumstances
must, upon approval of CSSCC and the People's Bank of China, retire from
office:

    (1) disbandment of the fund trustee, revocation and bankruptcy in
accordance with law or its assets taken over by the person taking over;

    (2) the fund administrator has ample reasons to hold that change of
the fund trustee is in the interests of the fund holders;

    (3) fund holders representing over 50% of the fund units demand the
retirement from office of the fund trustee; and

    (4) the People's Bank of China has ample reasons to hold that the fund
trustee is unable to continue to fulfil the functions and responsibilities
of fund trusteeship.

    Article 22  The new fund trustee shall be subject to the examination and
approval of CSSCC and the People's Bank of China; upon approval, the former
fund trustee may retire from office. The fund under the trusteeship of the
former fund trustee without being taken over by a new fund trustee shall
terminate.

    Article 23  An application for the establishment of a fund administering
company shall be subject to the examination and approval of CSSCC.

    Article 24  Establishment of a fund administering company shall have
the following qualifications:

    (1) the main sponsors shall be a securities company and a trust and
investment company established in accordance with relevant state provisions;

    (2) the operating status of the main sponsors has been good with
consecutive profits in the last three years;

    (3) the actual capital of each sponsor shall be no less than RMB 300
million Yuan;

    (4) the minimum actual capital of the fund administering company proposed
to be established shall be RMB 10 million Yuan;

    (5) has a clear-cut and feasible fund administration plan;

    (6) has qualified personnel for fund administration; and

    (7) other qualifications prescribed by CSSCC.

    Relevant documents shall be presented in accordance with the requirements
of CSSCC for an application for the establishment of a fund administering
company.

    Article 25  A fund administering company may, upon approval, engage in
the following businesses:

    (1) business of fund administration; and

    (2) sponsorship for the establishment of funds.

    Article 26  A fund administrator shall fulfil the following functions
and responsibilities:

    (1) employment of the fund assets in investment and administration of the
fund assets in accordance with the fund deed;

    (2) payment of fund benefits to the fund holders in time and in full
amount;

    (3) safekeeping of the account books and records of the fund for more
than 15 years;

    (4) compilation of the financial report of the fund, making an
announcement in time and submitting a report to CSSCC;

    (5) calculation and announcement of the net value of the fund and the
net value of each fund unit asset; and

    (6) other functions and responsibilities prescribed by the fund deed.

    The administrator of an open fund shall also, in accordance with the
relevant state provisions and the provisions of the fund deed, handle
timely and accurately the bidding and redemption of the fund.

    Article 27  The fund administrator having any of the following
circumstances must retire from office upon approval of CSSCC:

    (1) disbandment of the fund administrator, revocation and bankruptcy in
accordance with law or its assets being taken over by the person taking over;

    (2) the fund trustee has ample reasons to hold that change of the fund
administrator is in the interests of the fund holders;

    (3) the fund holders representing more than 50% of the fund units demand
the retirement from office of the fund administrator; and

    (4) CSSCC has ample reasons to believe that the fund administrator is
unable to continue to fulfil the functions and responsibilities of fund
administration.

    Article 28  The new fund administrator shall be subject to the examination
and approval of CSSCC; upon approval, the former fund administrator may
retire from office. The fund under the administration of the former fund
administrator without being taken over by a new fund administrator shall
terminate.
Chapter IV  Fund Holders' Rights and Obligations

    Article 29  Fund holders have the following rights:

    (1) to attend or to entrust a representative to attend the fund holders'
meeting;

    (2) to obtain fund benefits;

    (3) to oversee the fund management and obtain information on the status
of the fund business and finances;

    (4) to bid, redeem or transfer fund units;

    (5) to obtain the surplus assets of the fund after settlements; and

    (6) other rights provided for in the fund deed.

    Article 30  A fund holders' meeting shall be convened in the event of
any of the following circumstances:

    (1) revision of the fund deed;

    (2) termination of the fund ahead of time;

    (3) change of the fund trustee;

    (4) change of the fund administrator; and

    (5) other circumstances prescribed by CSSCC.

    Matters of the preceding paragraph shall, upon resolutions being adopted
by the fund holders' meeting, be subject to the approval of CSSCC.

    Article 31  Fund holders shall fulfil the following obligations:

    (1) to abide by the fund deed;

    (2) to pay the amount subscribed to the fund and the prescribed fees;

    (3) to bear limited liabilities for the losses or termination of the fund;
and

    (4) not to engage in any activity detrimental to the interests of the
fund and other fund holders.
Chapter V  Investment Operations, Supervision and Administration

    Article 32  Prior to the establishment of a fund, the amount subscribed by
the investors shall 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 related agencies 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.
Chapter VI  Penalty Provisions

    Article 43  Whoever establishes, raises or raises in disguised form a fund
on one's own without approval shall be banned by CSSCC and ordered to refund
the funds raised as well as their interests; where there are illegal gains,
they shall be confiscated, and a fine more than 100% less than ten times
of the amount of the illegal gains concurrently imposed; where there are no
illegal gains, a fine under RMB 1 million Yuan shall be imposed.

    Article 44  Whoever lists for trading of a fund on one's own without
approval shall be ordered by CSSCC to stop the trading and imposed a fine
under RMB 1 million Yuan.

    Article 45  Whoever establishes a fund administering company on one's own
or engages in business of fund administration on one's own without
approval shall be banned by CSSCC; where there are illegal gains, they
shall be confiscated and a fine more than 100% less than ten
times of the amount of the illegal gains concurrently imposed; where there are
no illegal gains, a fine under RMB 1 million Yuan shall be imposed.

    Article 46  Whoever engages in fund trusteeship business on one's own
without approval shall be ordered to stop the fund trusteeship business,
the illegal gains shall be confiscated and a fine under RMB 500,000 Yuan
concurrently imposed.

    The fund trustee who fails to separate the fund assets under its
trusteeship from the trustee's own assets in accordance with provisions,
or fails to conduct separate-account administration of the fund assets
shall be ordered to make a rectification, his/her illegal gains shall be
confiscated and concurrently imposed a fine more than 100% less than
five times of the amount of the illegal gains.

    Article 47  Any fund administrator who violates the provisions of Article
32 of these Measures shall be ordered to make a rectification; where there
are illegal gains, they shall be confiscated and a fine more than 100% less
than five times the amount of the illegal gains shall be concurrently imposed;
where there are no illegal gains, a fine of less than RMB 500,000 Yuan shall
be imposed.

    Article 48  Any fund administrator who violates the provisions of Article
33 of these Measures shall be ordered by CSSCC to make a rectification;
where there are illegal gains, they shall be confiscated and a fine more
than 100% less than three times of the amount of the illegal gains shall be
concurrently imposed; where there are no illegal gains, a fine of under RMB
300,000 Yuan shall be imposed.

    Article 49  Whoever has committed any of the acts listed in Article
34 of these Measures shall be ordered to make a rectification; where there are
illegal gains, they shall be confiscated and a fine more than 100% less than
five times of the amount of the illegal gains shall be concurrently imposed;
where there are no illegal gains, a fine of under RMB 500,000 Yuan shall be
imposed.

    Article 50  Any fund administrator or fund trustee who indulges in
self-seeking misconduct, operates in violation of regulations and fails to
perform its functions and responsibilities in fund administration or fund
trusteeship, or seriously neglects its duties resulting in bad fund
management or major losses, shall be suspended and revoked of its fund
administration business qualifications or fund trusteeship business
qualifications in addition to penalty according to law.

    Article 51  Any fund administrator or fund trustee who, in violation of
the provisions of Article 39 of these Measures, fails to provide or delays
in providing relevant information and material, or refuses and hinders
inspection and audit conducted according to law shall be ordered
to make a rectification, administered a warning and concurrently imposed
a fine of under RMB 50,000 Yuan.

    Article 52  Decisions on penalties prescribed in Articles 46, 47, 49, 50
and 51 of these Measures shall be made by CSSCC and the People's Bank of
China pursuant to their respective functions and powers; however, no more
than two penalties shall be imposed with respect to the same illegal act.

    Article 53  Whoever commits the securities fraudulent acts of
manipulating the market price, inside trading or false statement shall be
imposed penalties by CSSCC in accordance with law.

    Article 54  The person-in-charge held directly responsible and other
persons directly responsible in violation of the provisions of these Measures,
shall be temporarily suspended and revoked of its qualifications for
operations in addition to imposing administrative sanctions according to law.

    Whoever causes losses to others in violation of the provisions of these
Measures shall bear civil liability for compensation.

    Whoever constitutes a crime in violation of the provisions of these
Measures shall be investigated of the criminal liability.
Chapter VII  Supplementary Provisions

    Article 55  The implications of the following terms in these Measures
are:

    (1) "Fund unit" means the voucher the fund sponsor issues to unspecified
investors indicating that the holder has asset ownership and right of
distribution of benefits of the fund and other related rights and assumes
corresponding obligations.

    (2) "An open fund" means a fund that the total amount of its fund issuance
is not fixed, that the total number of fund units increases or decreases from
time to time, that investors may bid or redeem the fund unit in accordance
with the offering of the fund at business sites prescribed by the State.

    (3) "A closed fund" means a fund the total amount of its issuance is
predetermined, the total number of fund units during closure remains
unchanged and investors may transfer or buy and sell its fund units through
securities markets after the fund is listed.

    (4) "Total value of fund assets" includes the aggregate of the value of
all types of securities purchased by the fund, the principal and interests of
bank deposits as well as the value formed by other investments.

    (5) "Net value of fund assets" means the value of the total value of fund
assets minus the expenses which may be deducted from the fund assets pursuant
to relevant state provisions.

    (6) "Net value of fund assets per unit" means the value of the net value
of fund assets on the date of calculation divided by the total number of
fund units on the date of calculation.

    (7) "Returns on the fund" include dividends, share interests,
bond interests acquired through fund investment, difference in the buying
and selling price of securities, interests from deposits as well as other
revenues.

    (8) "Net returns on the fund" mean the balance of returns on the fund
minus the expenses which may be deducted from the returns on the fund
pursuant to relevant state provisions.

    Article 56  CSSCC shall organize the implementation of these Measures.

    Article 57  These Measures shall enter into force as of the date of
promulgation.