Laws of the People's Republic of China

No. 39

In order to promote the development of business-starting investment enterprises, regulate their investment operations and encourage them to make more investment into small and middle enterprises, especially the middle and small high and new technological enterprises, in accordance with the Company Law of the People's Republic of China, the Law of the People's Republic of China on the Promotion of Small and Middle Enterprises as well as in light of the functions of the relevant departments of the State Council, the Interim Measures for the Administration of Business-Starting Investment Enterprises have been constituted, deliberated and adopted by the National Development and Reform Commission, the Ministry of Science and Technology, the Ministry of Finance, Ministry of Commerce, the People's Bank of China, the State Administration of Taxation, the State Administration for Industry and Commerce, China Banking Regulatory Commission, China Securities Regulatory Commission, and the State Administration for Foreign Exchange. Upon the approval of the State Council, the present Measures are hereby promulgated and shall enter into force as of March 1, 2006. The National Development and Reform Commission

The Ministry of Science and Technology

The Ministry of Finance

The Ministry of Commerce

The People's Bank of China

The State Administration of Taxation

The State Administration for Industry and Commerce

China Banking Regulatory Commission

China Securities Regulatory Commission

The State Administration for Foreign Exchange

November 15, 2005

Interim Measures for the Administration of Business-Starting Investment Enterprises Chapter I General Provisions

Article 1

In order to promote the development of business-starting investment enterprises, regulate their investment operations and encourage them to invest in small and middle enterprises, especially the small and middle high and new technological enterprises, the present Measures are formulated according to the Company Law of the People's Republic of China, the Law of the People's Republic of China on the Promotion of Small and Middle Enterprises, and other laws and regulations.

Article 2

The term "business-starting investment enterprise" as mentioned in the present Measures refers to enterprise organizations which are registered and established within the territory of the People's Republic of China and mainly engage in business-starting investment activities.

The term "business-starting investment" as mentioned in the preceding paragraph refers to stock right investments that are injected into business-starting enterprises in expectation of capital gains mainly by way of stock right transfer after the invested business-starting enterprise becomes mature or relatively mature.

The term "business-starting enterprise" refers to growing enterprises, which are registered and established within the territory of the People's Republic of China, and are in the process of establishment or re-establishment, excluding those enterprises that have got listed in the open market.

Article 3

The state shall adopt archival filing management on business-starting investment enterprises. Any business-starting investment enterprise that has completed the archival filing procedures according to the present Measures shall be subject to the supervision of the administrative organ of business-starting investment enterprises, and those whose investment operations accord with the relevant provisions may enjoy the policy support. Any business-starting investment enterprise that fails to complete the archival filing procedures according to the present Measures shall not be subject to the supervision of the administrative organ of business-starting investment enterprises, nor does it enjoy the policy support.

Article 4

The archival filing administrative departments for the business-starting investment enterprises are classified into two levels: the administrative department of the State Council and the administrative departments of the provinces (including sub-provincial cities). The administrative department of the State Council shall be the National Development and Reform Commission; the administrative departments of provinces (sub-provincial cities)shall be determined by the people's government at the same level, and they shall perform the corresponding archival filing functions after having been archival filed at the administrative department of the State Council and shall be subject to the guidance of the administrative department of the State Council in the management business of archival filing of the business-starting investment enterprises.

Article 5

The Provisions on the Administration of Foreign-funded Business-Starting Investment Enterprises shall apply to foreign-funded business-starting investment enterprises. Any lawfully established foreign-funded business-starting investment enterprise, whose investment operations accords to the relevant conditions, may enjoy the relevant policy support granted to business-starting investment enterprises under the present Measures.

Chapter II The Establishment and Archival Filing of Business-Starting Investment Enterprises

Article 6

The business-starting investment enterprise may be established in the form of a limited liability company, joint stock limited company or any other enterprise organization as prescribed by law.

The business-starting investment enterprise established in the form of a company may consign another business-starting investment enterprise or business-starting investment management consulting enterprise as its management consulting institution, whom shall be responsible for its investment management business. The General Principles of the Civil Law of the People's Republic of China, the Contract Law of the People's Republic of China and other relevant laws and regulations shall apply to the legal relationship between the client and the agent.

Article 7

To apply for establishing a business-starting investment enterprise or business-starting investment management consulting enterprise, the applicant shall be directly registered at the administrative department for industry and commerce according to law.

Article 8

The business-starting investment enterprise, that has been registered in the administrative department for industry and commerce of the state, shall apply for the archival filing at the administrative department of the State Council.

The business-starting investment enterprise, which has been registered at the administrative department for industry and commerce at the province level or below, shall apply for the archival filing at the local administrative department of the province (sub-provincial city).

Article 9

To be archival filed at the administrative department, the business-starting investment enterprise shall possess the following conditions:

(1)

It has been registered at the administrative department for industry and commerce;

(2)

Its business scope accords with the provisions of Article 12 of the present Measures;

(3)

The amount of its actual capital contributions is not less than RMB 30 million Yuan or the amount of the initial payment of its capital contributions is not less than RMB 10 million Yuan, and all investors make a commitment to pay the balance of actual capital contributions in a sum of not less than RMB 30 million Yuan within 5 years after the registration;

(4)

The number of investors shall not exceed 200. As for a business-starting investment enterprise established in the form of a limited liability company, the number of investors shall not exceed 50. The amount of investment made by a single investor into a business-starting investment enterprise shall not be less than 1 million Yuan. All investors shall make investments in monetary form.

(5)

It shall have at least 3 senior managers who have two or more years of business-starting investment or relevant business experience to take charge of the investment management. If it consign another business-starting investment enterprise or business-starting investment management consulting enterprise as a management consulting institution to be responsible for its investment management business, this management consulting institution shall have at least 3 senior managers who have 2 or more years of business-starting investment or relevant business experience to take charge of the investment management.

The term "senior manager" as mentioned in the preceding paragraph refers to the managerial personnel who hold the position of vice manager or the higher or equivalent positions.

Article 10

When go through the archival filing formalities at the administrative department, the business-starting investment enterprise shall submit the following documents:

(1)

The legal documents that regulate the organizational procedures and acts of the business-starting investment enterprise such as the articles of association, and etc.

(2)

The photocopies of the industrial and commercial registration documents and business license;

(3)

The name list of the investors, and the certificates on commitment to capital contributions and on the already paid capital contributions; and

(4)

The name list and resumes of the senior managers.

If it consign a management consulting institution to take charge of the investment management business, it shall submit the following documents besides those as listed above:

(1)

The legal documents that regulate the organizational procedures and the acts of the management consulting institution such as its articles of association, and etc. ;

(2)

The photocopies of the industrial and commercial registration documents and the business license of the management consulting institution;

(3)

The name list and resume of the senior managers of the management consulting institution ; and

(4)

The agreement on the authorized management.

Article 11

After receiving an archival filing application of a business-starting investment enterprise, the administrative department shall, within 5 working days, examine whether or not the archival filing application documents are complete, and shall decide whether or not to accept the application. After accepting the application, it shall, within 20 working days, examine whether or not the applicant meets the archival filing requirements and issue to it a notice of "Archival Filing Completed" or "Archival Filing Rejected" in written. If the archival filing application is rejected, the reasons shall be stated in the written notice.

Chapter III The Investment Operations of Business-Starting Investment Enterprises

Article 12

The business scope of a business-starting investment enterprise is limited to:

(1)

business-starting investment operations;

(2)

acting as an agent in the business-starting investment business of other business-starting investment enterprises or individuals;

(3)

business-starting investment consulting services;

(4)

providing business-starting management services for business-starting enterprises; and

(5)

participating in the establishment of business-starting investment enterprises and business-starting investment management consulting institutions.

Article 13

No business-starting investment enterprise mustn't engage in any guarantee business or real estate business except for the purchase of real estate for its own use.

Article 14

The business-starting investment enterprise may make foreign investments with all its assets, of which the investments to enterprises shall be limited to the unlisted enterprises. However, after an unlisted enterprise has invested in gets listed, its non-transferred shares as well as the allocated shares shall not be subject to this restriction. It can only deposit its other funds in a bank, or use them to purchase government bonds or other securities with fixed proceeds.

Article 15

The business-starting investment enterprise may, by signing an investment agreement with the investment enterprise it invests in, make investments into the unlisted enterprise by way of quasi stock rights such as its stock rights, preferred stocks, convertible preferred stocks and etc..

Article 16

The investments made by a business-starting investment enterprise into a single enterprise shall not exceed 20% of the total assets of the business-starting investment enterprise.

Article 17

The business-starting investment enterprise shall, in the articles of association, the agreement on authorized management and other legal documents, specify the methods for the computation of management and operation fees, or the management consulting expenses of the management consulting institution, and establish a management cost control mechanism.

Article 18

The business-starting investment enterprise may draw a certain proportion from the actual investment proceeds as the performance-based remuneration to the managers or to the management consulting institution, and establish a performance incentive mechanism.

Article 19

The business-starting investment enterprise may determine a limited period of existence in advance, which shall not be less than 7 years.

Article 20

The business-starting investment enterprise may enhance its investment capacity by way of financing of creditor's rights within the prescribed scope of law.

Article 21

The business-starting investment enterprise shall, according to the relevant provisions of the state on enterprise financial and accounting, establish and improve internal financial management system and accounting measures.

Chapter IV Policy Support to Business-Starting Investment Enterprises

Article 22

The state and local governments may establish business-starting investment guidance funds to support the establishment and development of business-starting investment enterprises by way of holding their shares, providing financing guaranties and etc.. The concrete management measures shall be formulated separately.

Article 23

The state shall adopt tax preferential policies to support the development of business-starting investment enterprises and induce them to increase investments to small and middle enterprises, especially the small and middle high and new technological enterprises. The concrete measures shall be separately formulated by the finance and taxation department of the State Council jointly with other relevant departments.

Article 24

The business-starting investment enterprise may withdraw its investments by transfer of listed equities, transfer of equities by agreement, buybacks of the invested enterprises or by other means. The relevant departments of the state shall actively advance the construction of the multi-level system of capital market and improve the investment dropout mechanism for business-starting investment enterprises.

Chapter V Supervision and Administration on Business-Starting Investment Enterprises

Article 25

The business-starting investment enterprise and its management consulting institution that have been archival filed at the administrative department shall, according to the provisions of all the articles in Chapters II and III of the present Measures, conduct the investment operations and shall be subject to the supervision and administration by the administrative department.

Article 26

The business-starting investment enterprise and its management consulting institution that have been archival filed at the administrative department shall, within 4 months as of the end of each fiscal year, submit their annual financial statements and business reports audited by certified public accountants to the administrative department, and shall report the significant events occurred during the process of its investment operation.

The "significant event" as mentioned in the preceding paragraph refers to:

(1)

revisions to the articles of association and other important legal documents;

(2)

increase or decrease of the capital;

(3)

split-up or merger,

(4)

change of senior managers or management consulting institutions; or

(5)

liquidation and termination of business.

Article 27

The administrative department shall, within 5 months as of the end of each fiscal year, conduct an annual inspection on the business-starting investment enterprise and its management consulting institution to determine whether or not it observes the provisions of all the articles in Chapters II and III. Where necessary, it may, within the prescribed scope of the relevant articles of Chapters II and III, irregularly conduct inspections on its investment operations.

To those who fails to conduct investment operations according to the provisions of all the articles in Chapters II and III of the present Measures, the administrative department shall order it to make corrections within 30 working days. If it fails to make corrections, its archival filing shall be canceled and from this day on, its new application made for archival filling during the next 3 years shall be rejected.

Article 28

The administrative departments of all provinces (including sub-provincial cities)shall timely report the situation on the archival filing of business-starting investment enterprises within their respective jurisdictions to the administrative department of the State Council, and shall, within 6 months as of the end of each fiscal year, report the situation on the investment operations of the business-starting investment enterprises that have been listed within the scope of archival filing administration.

Article 29

The administrative department of the State Council shall intensify the guidance to the administrative departments of all provinces (including sub-provincial cities). To those who fails to implement the administrative responsibilities or fails to manage properly, it shall propose it to make corrections. If bad consequences are caused, it shall propose it to investigate the relevant managers liable for their negligence of duties.

Article 30

The business-starting investment industry associations shall, according to the present Measures, relevant laws, rules and regulations, conduct self-disciplinary management on the business-starting investment enterprises and maintain the rights and interests of this industry.

Chapter VI Supplementary Provisions

Article 31

The present Measures shall be interpreted by the National Development and Reform Commission jointly with other relevant departments.

Article 32

The present Measures shall enter into force as of March 1, 2006.