Laws of the People's Republic of China

the People's Bank of China, the China Banking Regulatory Commission and the China Securities Regulatory Commission

Announcement of the People's Bank of China, the China Banking Regulatory Commission and the China Securities Regulatory Commission

No.4

For the purpose of carrying out Some Opinions of the State Council on Promoting the Reform, Opening-up and Stable Development of the Capital Market (No. 3 [2004] of the State Council), promoting the harmonious development of the financial market, encouraging financial innovations and ensuring that the pilot work of establishing fund management companies by commercial banks goes on wheels, the People's Bank of China, the China Banking Regulatory Commission and the China Securities Regulatory Commission have jointly formulated the Measures for the Administration of Pilot Establishment of Fund Management Companies by Commercial Banks, which are hereby promulgated.

The People's Bank of China

The China Banking Regulatory Commission

The China Securities Regulatory Commission

February 20, 2005

Measures for the Administration of Pilot Establishment of Fund Management Companies by Commercial Banks

Chapter I General Provisions

Article 1

For the purpose of carrying out Some Opinions of the State Council on Promoting the Reform, Opening-up and Stable Development of the Capital Market (No. 3 [2004] of the State Council) and ensuring that the pilot work of establishing fund management companies by commercial banks goes on wheels, these Measures are formulated in accordance with the Company Law of the People's Republic of China, the Law of the People's Republic of China on Securities Investment Funds, the Law of the People's Republic of China on the People's Bank of China, the Banking Regulation and Supervision Law of the People's Republic of China and the Law of the People's Republic of China on Commercial Banks.

Article 2

Commercial banks hereof refer to those state-owned commercial banks and joint stock commercial banks that are established with the approval of the China Banking Regulatory Commission (hereinafter referred to as the CBRC)and within the territory of the People's Republic of China.

Article 3

Fund management companies hereof refer to those enterprises as a legal person that are established with direct investment of commercial banks as main shareholders, with the approval of the China Securities Regulatory Commission (hereinafter referred to as the CSRC) within the territory of the People's Republic of Chinaand that conduct fund management business.

Article 4

A fund management company established by a commercial bank shall raise and manage funds pursuant to the business scope as prescribed by the Law of the People's Republic of China on Securities Investment Funds. At the early pilot stage, it may raise and manage both a money market fund and a bond fund, may invest in securities with fixed returns, and may raise and manage any other type of fund.

Article 5

The People's Bank of China shall, together with the CBRC and the CSRC , be responsible for the comprehensive coordination of the establishment of fund management companies by commercial banks.

Chapter II Procedures for Examination and Approval of Applications

Article 6

A commercial bank that applies for investing in a fund management company shall submit materials in accordance with the relevant provisions as provided for by the CBRC, and send a copy of the said materials to the People's Bank of China during the pilot period. The CBRC shall examine the qualifications of the commercial bank for investing in a fund management company from the aspect of the overall risk control by the commercial bank, and issue regulatory opinions that the commercial bank may make external investment.

Article 7

Upon the regulatory opinions issued by the CBRC concerning the approval of the investment by a commercial bank in a fund management company, the commercial bank shall, in accordance with the Measures for the Administration of Securities Investment Fund Management Companies and other laws and regulations, submit to the CSRC the relevant materials as necessary for applying for the establishment of a fund management company for examination and approval.

The commercial bank shall simultaneously send a copy of the said materials to the People's Bank of China during the pilot period.

Article 8

Each commercial bank is encouraged to establish fund management companies in the form of equity diversification.

Article 9

The requirements and the shareholders' qualifications for a commercial bank to establish a fund management company shall be in accordance with the relevant provisions in the Measures for the Administration of Securities Investment Fund Management Companies, in addition to these Measures.

Chapter III Risk Control

Article 10

A fund management company established by a commercial bank shall establish a sound corporate governance. The commercial bank shall, in strict compliance with the principle of segregated operation of the banking, securities and insurance sectors that prohibits the same legal entity from directly engaging in more than one of these three types of business, build up an effective risk control system that insulates cross-sector transactions between itself and the fund management company established with its investment, and provide relevant documents to the CBRC for archival purposes.

Article 11

A commercial bank shall assume limited liabilities no greater than its initial financial contribution to the fund management company established by it, and exercise its rights through the general meeting of shareholders of the company, and may not intervene in the operation and management of the company by circumventing the meeting of shareholders and or board of directors.

Article 12

The commercial bank and the fund management company established by it may not provide clients' information to each other in violation of the state regulations, and the transactions between them may not impair the legitimate rights and interests of the clients.

Article 13

The staff of the fund management company established by a commercial bank must terminate their job contracts with the bank, and may not work for two institutions concurrently. The senior officers of the fund management company shall satisfy the relevant requirements as provided for in the Measures for the Administration of Senior Officers in Securities Investment Fund Management Companies.

Article 14

The fund assets managed by the fund management company established by a commercial bank may not be used to purchase securities issued or underwritten within the underwriting period by its shareholders.

Article 15

Where a commercial bank makes financial contribution to the funds managed by the fund management company, it shall conduct it pursuant to the relevant state provisions.

Article 16

No commercial bank may act as the trustee of the funds managed by the fund management company that is established by the bank.

Article 17

A commercial bank may sell, on a commission basis, fund products issued by the fund management company established by it, however, when it sell the fund on a commission basis, it may not offer trading terms more favorable than those on equivalent fund products offered by unconnected third parties with regard to the arrangement of selling period, the standards of service fees and the participation in the development of fund products. It may not take discriminated measures on other fund product sold on commission, and may not involve in unfair sales or competition.

Article 18

A commercial bank and a fund management company established by it may not conduct transactions on terms more favorable than those on equivalent transactions offered by unconnected third parties in the inter-bank bond market.

Article 19

The detailed rules for the implementation of connected transactions between a commercial bank and a fund management company established by the commercial bank shall be formulated by the CBRC and the CSRC jointly.

A fund management company established by a commercial bank and any commercial bank that establishes a fund management company shall disclose information according to the relevant provisions of the CSRC and the CBRC.

Chapter IV Supervision and Administration

Article 20

Types of fund raised by a fund management company established by a commercial bank shall subject to examination and approval of the CSRC.

Article 21

The CBRC shall define standards for the calculation of relevant risk control indicators for commercial banks that establish fund management companies, and conduct consolidated balance sheet supervision and administration on the commercial banks.

Article 22

The CSRC shall supervise fund management companies established by commercial banks, and the funds raised and managed by the fund management companies, in order to ensure the legitimate operation of fund assets and the legitimate rights and interests of fund holders.

Article 23

The People's Bank of China shall put on file and supervise the access of fund management companies established commercial banks to the nationwide inter-bank bond market.

Article 24

A fund management company established by a commercial bank and the commercial bank that establishes a fund management company shall submit materials according to the relevant provisions of the CSRC and the CBRC, and send a copy of said materials to the People's Bank of China at the pilot period.

Article 25

The People's Bank of China, the CBRC and the CSRC shall, in a timely manner, exchange the relevant information with each other and establish a supervision information sharing system when conducting supervision over fund management companies established by commercial banks.

Chapter V Supplementary Provisions

Article 26

These Measures shall also apply to the acquisition of fund management companies by commercial banks.

Article 27

The People's Bank of China, the CBRC and the CSRC shall jointly select pilot commercial banks and jointly make arrangements for the pilot program through consultations in light of the progress achieved in the pilot program and for the need of market development.

Article 28

The power to interpret these Measures shall be vested in the People's Bank of China, the CBRC and the CSRC.

Article 29

These Measures shall go into effect as of February 20, 2005.