Laws of the People's Republic of China

Zheng Jian Fa [2006] No. 65

Shanghai Stock Exchange and Shenzhen Stock Exchange, China Securities Depository & Clearing Corporation Limited and all clearing participants:

In accordance with the provisions of the Securities Law of the People's Republic of China, China Securities Regulatory Commission, in conjunction with the Ministry of Finance, jointly formulated the Measures for the Administration of the Securities Settlement Risk Fund and hereby issued for your implementation.

China Securities Regulatory Commission

June 16, 2006

Measures for the Administration of the Securities Settlement Risk Fund

Article 1

In order to prevent and solve the risks of the securities market, safeguard a sound operation of the securities depository & clearing system as well as manage and use the securities settlement risk fund in a proper manner, these Measures are formulated under the relevant provisions of the Securities Law of the People's Republic of China.

Article 2

Securities settlement risk fund (hereinafter referred to as this Fund) herein referred to in these Measures is a special fund that is established to be used in advance payment or cover of the losses of the securities depository & clearing institution as incurred from delivery under breach of contract, technical malfunction, wrong operations or force majeure.

Article 3

Sources of this Fund are:

(1)

Separate withdrawal with respect to 20% of the incomes and benefits of the securities depository & clearing institution;

(2)

Payment of the clearing participants with respect to 0.03бы of the business volume of Renminbi common stocks and funds, 0.01бы of the business volume of treasury bond spot, 0.0005бы of the business volume of 1-day treasury bond repurchase, 0.001бы of the business volume of 2-day treasury bond repurchase, 0.0015бы of the business volume of 3-day treasury bond repurchase, 0.002бы of the business volume of 4-day treasury bond repurchase, 0.005бы of the business volume of 7-day treasury bond repurchase, 0.01бы of the business volume of 14-day treasury bond repurchase, 0.02бы of the business volume of 28-day treasury bond repurchase, 0.06бы of the business volume of 91-day treasury bond repurchase, 0.12бы of the business volume of 182-day treasure bond repurchase on a daily basis.

Article 4

When the net asset of this Fund reaches or exceeds 3 billion yuan at the end of each fiscal year, the relevant fund shall not be drawn pursuant to the provisions of Subparagraph (1), Article 3 of the present Measures in the following year, the clearing participants may not make payment pursuant to the provisions of Subparagraph (2), Article 3 of these Measures, yet the term of the payment as made by each clearing participant pursuant to Subparagraph (2), Article 3 of these Measures after joining the settlement system shall be no less than 1 year.

Article 5

Where the net asset of this Fund is less than 3 billion yuan at the end of each fiscal year, this Fund shall be further drawn pursuant to the provisions of Subparagraph (1), Article 3 of these Measures and the relevant clearing participants shall continually make their payment pursuant to the provisions of Subparagraph (2), Article 3 of these Measures.

Article 6

The China Securities Regulatory Commission may, in conjunction with the Ministry of Finance may, adjust the scale, the method and proportion of withdrawal and payment of this Fund in light of the market risks

Article 7

The securities deposit & clearing institution shall appoint an organ to be responsible for the daily administration and use of this Fund.

Article 8

This Fund shall be entirely deposited into a special account of a state commercial bank and all of the deposit interests shall be transferred into the special fund account.

Article 9

The assets of this Fund and those of the securities deposit & clearing institution shall be separated into different accounts. Ledger accounts shall be established for this Fund so as to respectively record the assets, interest incomes of this Fund and the use of the principals as well as the interests of the corresponding assets as generated under the Subparagraphs of Article 3 of the present Measures.

Article 10

The minimum payment of this Fund is 20 million yuan. Where any securities deposit & clearing institution uses this Fund, it shall apply to the China Securities Regulatory Commission as well as the Ministry of Finance for approval.

Article 11

Where the breach of contract by the clearing participant causes any of the circumstances as prescribed in Article 2 , this Fund shall be employed in the sequence as follows:

(1)

Capital as paid by the delinquent clearing participant in accordance with Subparagraph (2), Article 3 of these Measures;

(2)

Capital as paid by any other clearing participant in accordance with Subparagraph (2), Article 3 of these Measures; and

(3)

Capital as drawn in accordance with Subparagraph (1), Article 3 of these Measures.

Article 12

The securities deposit & clearing institution shall, subject to the provisions of relevant laws and administrative regulations, establish and improve the operating rules, internal management system as well as clearing participant supervision system so as to avoid any risk or accident to the largest extent.

Article 13

After this Fund is employed, the securities deposit & clearing institution shall make a compensation claim from the relevant responsible parties and the recovered funds shall be transferred into this Fund. Meanwhile, the relevant operating rules, internal management system as well as clearing participant supervision system shall be timely revised and improved.

Article 14

Where this Fund is modified or settled accordingly, the China Securities Regulatory Commission shall, in conjunction with the Ministry of Finance, separately decide the proportion and amount of the remaining assets of this Fund that shall be refunded to relevant clearing participants.

Article 15

The Measures for the financial settlement and administration of this Fund shall be formulated by the Ministry of Finance.

Article 16

These Measures shall be subject to the interpretation of the China Securities Regulatory Commission in conjunction with the Ministry of Finance.

Article 17

These Measures shall come into force as of July 1, 2006. Upon approval of the State Council, the Interim Measures for the Administration of the Securities Settlement Risk Fund (approved by the State Council on January 31, 2000, and promulgated on April 4, 2000 by the China Securities Regulatory Commission and the Ministry of Finance) shall be repealed simultaneously.