Article 1 The present Law is enacted with a view to regulating the activities concerning securities investment fund, to protect the legitimate rights and interests of the investors and other relevant parties, and to promote the healthy development of securities investment fund and securities market.

Article 2 The present Law shall apply to the securities investment activities conducted through the method of portfolio and through public offering of fund shares to raise securities investment fund (hereinafter referred to as fund), which is managed by fund managers and entrusted to fund trustees for the benefits of the fund share
holders; the matters not covered by the present Law shall be governed by the Trust Law of the People''s Republic of China, the Securities Law of the People's Republic of China, and other relevant laws and administrative regulations.

Article 3 The rights and obligations of the fund managers, fund
trustees and fund share holders shall be stipulated in the fund
contracts in accordance with the present Law.
The fund managers and fund trustees shall perform the duties of
trusteeship in accordance with the present Law and the fund
contract. A holder of fund shares shall enjoy the benefits and bear
the risks to the extent of the fund shares it holds.
Article 4 Those engaging in the activities involving securities
investment fund shall adhere to the principles of free will,
fairness and good faith, and may not impair the state and public
interests.
Article 5 A fund contract shall stipulate the operation method of
the fund. A fund can be operated in a closed, open, or any other
way.
A fund operated in a closed way (hereinafter referred to as closed
fund) refers to the fund of which the ratified total fund shares
remains fixed during the valid term of the fund contract and of
which the fund shares can be traded on the securities exchanges
established according to law, but can not be redeemed by the fund
share holders through application.
A fund operated in an open way (hereinafter referred to as open
fund) refers to the fund of which the total fund shares are unfixed
and of which the fund shares may be subscribed to or redeemed at the
time and place stipulated in the fund contract.
The methods of offering, trading, subscription and redemption of the
fund shares of other funds operated through other methods shall be
separately formulated by the State Council.
Article 6 Fund property shall be independent from the property owned
by the fund manager and fund trustee. The fund manager and fund
trustee may not attribute any of the fund property into their own
property.
The property and benefits obtained by the fund manager and fund
trustee as a result of the management, utilization or any other use
of the fund shall be included into the fund property.
Where the fund manager or fund trustee goes into liquidation as a
result of dissolution, cancellation, or declared bankruptcy
according to law, the fund property shall not be taken as their
liquidation property.
Article 7 The credit rights of fund property may not be set off
against the debts of the property owned by the fund manager and fund
trustee; and the credit rights and debts of different fund
properties may not be set off against each other.
Article 8 The debts not arising out of the fund property may not be
enforced against such fund property.
Article 9 The fund manager and fund trustee shall, in managing and
utilizing the fund property, devote themselves to their duties and
perform the obligations of good faith, prudence and diligence.
Fund practitioners shall have obtained the qualifications for
practice relating to funds, and shall abide by the laws,
administrative regulations, professional ethics, and code of
conduct.
Article 10 Fund managers, fund trustees and fund share offering
institutions may establish trade associations to strengthen
self-regulation, coordinate trade relationship, provide trade
services, and promote the development of the trade.
Article 11 The securities regulatory department under the State
Council shall supervise and regulate the activities concerning
securities investment fund according to law.
Chapter II Fund Managers
Article 12 Fund managers shall be assumed by the fund management
companies established according to law.
To be a fund manager, the ratification of the securities regulatory
department under the State Council is required.
Article 13 For establishment of a fund management company, the
following conditions shall be satisfied and the approval of the
securities regulatory department under the State Council is
required:
1) Having the articles of association which are in conformity with
the present Law and the Company Law of the People''s Republic of
China;
2) Having a registered capital of no less than 100 million RMB and
all of the capital being paid-in monetary capital;
3) Principal shareholders having good business performance and
public reputation in the securities business, securities investment
consultation, trust assets management or other financial assets
management, having no record of violation of law within the last 3
years, and having a registered capital of no less than 300 million
RMB;
4) The number of persons with fund practice qualification reaching
the statutory requirement;
5) Having business sites, security facilities and other facilities
relating to fund management business that comply with the
requirements;
6) Having sound internal auditing and monitoring system and risk
control system;
7) Other conditions provided for by laws and administrative
regulations and those provided for by the securities regulatory
department under the State Council and approved by the State
Council.
Article 14 The securities regulatory department under the State
Council shall, within 6 months from accepting the application for
establishment of a fund management company, make the examination
pursuant to the conditions specified in Article 13 hereof and the
principle of prudent regulation, make the decision whether to grant
the approval or not, and notify the applicant, and shall explain the
reasons if no approval is granted.
Where a fund management company is to establish any branch, modify
its articles of association, or alter any other major matters, it
shall apply to the securities regulatory department under the State
Council for approval. The securities regulatory department under the
State Council shall, within 60 days from the day of accepting the
application, make the decision whether to grant approval or not, and
notify the applicant, and shall explain the reasons if no approval
is granted.
Article 15 None of the following personnel may be a securities
practitioner of a fund manager:
1) Those being given criminal penalties for the crime of bribery and
embezzlement, malfeasance, or encroachment of property, or the crime
of undermining the socialist market economic order;
2) The directors, supervisors, factory directors, mangers and other
senior executives who are personally liable for the bankruptcy and
liquidation due to poor management or the revocation of business
license due to violation of law of the companies and enterprises in
which they hold office, provided that it has been less than 5 years
since the day of the end of the bankruptcy liquidation or of the
revocation of business license;
3) Those with large amount of outstanding personal debts;
4) The practitioners of fund managers, fund trustees, securities
exchanges, securities companies, securities registration and
settlement institutions, futures exchanges, futures brokerage
companies and other institutions, and the state functionaries that
have been dismissed due to violations of law;
5) The lawyers, certified accountants, practitioners of assets
evaluation institutions and assets verification institutions, and
practitioners of investment consultation institutions whose practice
licenses have been revoked or who have been disqualified due to
violations of law;
6) Other personnel that may not engage in the fund business as
provided for by any law or administrative regulation.
Article 16 The managers and other senior managerial personnel of a
fund manager shall be familiar with the laws and administrative
regulations concerning securities investment, have the qualification
for fund practice, and have worked in the field relevant to the
position they hold for more than 3 years.
Article 17 The selection or change of the managers and other senior
managerial personnel of a fund manager shall be submitted to the
securities regulatory department under the State Council for
examination in accordance with the conditions for holding such
office provided for by the present Law and other relevant laws and
administrative regulations.
Article 18 The directors, supervisors, managers and other
practitioners of a fund manager may not hold any position in the
fund trustee or other fund managers, and may not conduct any
securities transactions and other activities that impair the fund
property and the interests of the fund share holders.
Article 19 A fund manager shall perform the following duties:
1) Raising the fund according to law and handling or entrusting
other institutions recognized by the securities regulatory
department under the State Council to handle the offering,
subscription, redemption and registration of fund shares;
2) Making fund records;
3) Applying separate management and separate account books to
different fund properties it manages to make securities investment;
4) Determining the scheme on distribution of fund proceeds according
to the stipulations of the fund contract and distributing profits to
the holders of fund shares in good time;
5) Making fund accounting and preparing the fund financial
accounting report;
6) Preparing midterm and annual fund reports;
7) Calculating and publicizing the net value of the fund assets and
determining the prices for subscription and redemption of the fund
shares;
8) Handling the relevant information disclosures related to the
management of the fund property;
9) Convening the fund share holders'' meeting;
10) Keeping the records, account books, statements and other
relevant materials of the fund property management;
11) Exercising litigation rights or carrying out other legal action
in the name of the fund manager for the interests of the fund share
holders;
12) Other duties provided for by the securities regulatory
department under the State Council.
Article 20 A fund manager may not conduct any of the following acts:
1) Mixing its own property or the property of others with the fund
property to make securities investment;
2) Treating different fund properties it manages unfairly;
3) Seeking benefits for any third party other than the fund share
holders by using the fund property;
4) Unlawfully promising the fund share holders to make benefits or
bear losses;
5) Any other acts prohibited by the securities regulatory department
under the State Council in accordance with the relevant provisions
of the laws and administrative regulations.
Article 21 With respect to a fund manager under any of the following
circumstances, the securities regulatory department under the State
Council shall, according to its powers, order that fund manager to
make rectification or disqualify it as a fund manager:
1) Having committed any serious violations of laws or rules;
2) No longer meeting the conditions provided for in Article 13
hereof;
3) Other circumstances provided for by laws and administrative
regulations.
Article 22 Under any of the following circumstances, the duties of a
fund manager shall terminate:
1) Being disqualified for fund management;
2) Being dismissed by the fund share holders'' meeting;
3) Being dissolved, or cancelled, or declared bankruptcy according
to law;
4) Other circumstances stipulated in the fund contract.
Article 23 Where the duties of a fund manager terminate, the fund
share holders'' meeting shall appoint a new fund manager within 6
months; before the appointment of the new fund manager, the
securities regulatory department under the State Council shall
designate a temporary fund manager.
A fund manager shall, upon termination of its duties, keep in good
conditions the materials of fund management and process the
formalities for handover of the business in good time, the new fund
manger or temporary fund manager shall take over the business in
good time.
Article 24 A fund manager shall, upon termination of its duties,
retain an accounting firm to audit the fund property, publicize the
auditing results and put on record with the securities regulatory
department under the State Council.
Chapter III Fund Trustees
Article 25 Fund trustee shall be assumed by a commercial bank which
was established according to law and has obtained the qualification
for fund trust.
Article 26 To apply for the qualification for fund trust, a
commercial bank shall satisfy the following conditions and be
ratified by the securities regulatory department and the banking
regulatory department under the State Council:
1) Its net assets and capital adequacy complying with the relevant
provisions;
2) Having set up a specialized department of fund trust;
3) The number of the full-time personnel with fund practice
qualification reaching the statutory requirement;
4) Having the conditions for safe keeping of the fund property;
5) Having safe and high efficient clearing and settlement system;
6) Having business sites, security facilities and other facilities
relating to fund trust business that meet the requirement;
7) Having sound internal auditing and monitoring system and risk
control system;
8) Satisfying other conditions provided for by laws and
administrative regulations and the conditions provided for by the
securities and banking regulatory departments under the State
Council and approved by the State Council.
Article 27 Articles 15 and 18 shall apply to the practitioners of
the specialized fund trust department of a fund trustee.
Articles 16 and 17 shall apply to the managers and other senior
managerial personnel of the specialized fund trust department of a
fund trustee.
Article 28 A fund trustee and a fund manager may not be the same
party, and may not make capital contribution to or hold the shares
of each other.
Article 29 A fund trustee shall perform the following duties:
1) Keeping the fund property safely;
2) Opening capital accounts and securities accounts of the fund
property pursuant to the provisions;
3) Setting up separate accounts for different fund properties under
its trust and ensuring the completeness and independence of the fund
properties;
4) Keeping the records, account books, statements and other relevant
materials of the fund trust business;
5) Handling the clearing and settlement at the investment orders of
the fund manager pursuant to the stipulations of the fund contract;
6) Handling the information disclosures relating to the fund trust
business activities;
7) Presenting opinions on the fund financial accounting report and
the midterm and annual fund reports;
8) Checking and examining the net value of the fund assets and the
subscription and redemption prices of the fund shares calculated by
the fund manager;
9) Convening the fund share holders'' meeting pursuant to the
provisions;
10) Supervising the investment operations of the fund manager
pursuant to the provisions;
11) Other duties provided for by the securities regulatory
department under the State Council.
Article 30 Where a fund trustee finds out that any investment order
of a fund manager is in violation of any of the laws, administrative
regulations or other relevant provisions, or the stipulations of the
fund contract, it shall refuse to execute such order, notify the
fund manager immediately and report to the securities regulatory
department under the State Council in good time.
Where a fund trustee finds out that any investment order of a fund
manager which has taken effect according to the transaction
procedures is in violation of the laws, administrative regulations
or other relevant provisions, or the stipulations of the fund
contract, it shall notify the fund manager immediately and report to
the securities regulatory department under the State Council in good
time.
Article 31 The provisions of Article 20 hereof shall apply to fund
trustees.
Article 32 With respect to a fund trustee under any of the following
circumstances, the securities and banking regulatory departments
under the State Council shall, according to their powers, order it
to make rectification or disqualify it as a fund trustee:
1) Having committed any serious violation of laws and rules;
2) No longer meeting the conditions provided for in Article 26
hereof;
3) Other circumstances provided for by laws and administrative
regulations.
Article 33 The duties of a fund trustee shall be terminated under
any of the following circumstances:
1) Being disqualified as a fund trustee;
2) Being dismissed by the fund share holders'' meeting;
3) Being dissolved, cancelled, or declared bankruptcy according to
law; or
4) Other circumstances stipulated in the fund contract.
Article 34 Upon termination of the duties of a fund trustee, the
fund share holders'' meeting shall appoint a new fund trustee within
6 months; and before the appointment of the new fund trustee, the
securities regulatory department under the State Council shall
designate a temporary fund trustee.
A fund trustee shall, upon termination of its duties, keep in good
conditions the fund property and fund trust business materials and
process the formalities for handover of the property and business in
good time, the new fund trustee or temporary fund trustee shall take
over the property and business in good time.
Article 35 A fund trustee shall, upon termination of its duties,
retain an accounting firm to audit its fund property pursuant to the
provisions, publicize the auditing results, and report to the
securities regulatory department under the State Council for
archival purposes at the same time.
Chapter IV Raising of Fund
Article 36 A fund manager shall, when offering fund shares and
raising fund pursuant hereto, submit the following documents to and
get ratification from the securities regulatory department under the
State Council:
1) An application report;
2) A draft fund contract;
3) A draft fund trust agreement;
4) A draft prospectus;
5) Qualification certificates of the fund manager and fund trustee;
6) Financial accounting reports, which have been audited by
accounting firms, of the fund managers and fund trustees of the last
3 years or since their establishment;
7) Letters of legal opinion issued by law firms; and
8) Other documents to be submitted as provided for by the securities
regulatory department under the State Council.
Article 37 A fund contract shall include the following contents:
1) Purpose for raising the fund and the name of the fund;
2) Names and domiciles of the fund manager and fund trustee;
3) Method of fund operation;
4) Total fund shares and the valid term of the fund contract in the
case of a closed fund, or the minimum total shares to be raised in
the case of an open fund;
5) Principles for determining the date of offering of fund shares,
the prices and expenses;
6) Rights and obligations of the fund share holders, fund manager
and fund trustee;
7) Procedures and rules for the convening of, and deliberation and
voting on the fund share holders'' meeting;
8) The procedures, time and place of the offering, trading,
subscription and redemption of fund shares, the calculation method
of expenses, and the time and method of payment of redemption price;
9) Principles for the distribution of fund proceeds and the method
of execution of such principles;
10) Methods of drawing and paying and proportions of the
administrative fees and trust fees as the remuneration of the fund
manager and fund trustee;
11) Methods of drawing and paying other expenses relating to the
management and utilization of fund property;
12) Directions of and restrictions on investment of fund property;
13) Calculation method and publicizing method of the net value the
fund assets;
14) Methods of handling where the fund raised fails to meet the
statutory requirements;
15) Causes and procedures for avoidance and termination of the fund
contract, as well as the liquidation method of the fund property;
16) Dispute settlement methods;
17) Other matters agreed upon by the parties.
Article 38 The prospectus of a fund shall include the following
contents:
1) Name of the ratification document for the application for fund
raising and the date of ratification;
2) Basic information of the fund manager and fund trustee;
3) Summary of the fund contract and fund trust agreement;
4) Date of offering, prices, expenses, and period of offering of the
fund shares;
5) Method of offering the fund shares and the names of the offering
institution and registration institution;
6) Names and domiciles of the law firms issuing letters of legal
opinion and the accounting firms auditing the fund property;
7) Methods of drawing and paying and proportions of the remuneration
of the fund manager and fund trustee and other relevant expenses;
8) Contents of risk warning; and
9) Other contents provided for by the securities regulatory
department under the State Council.
Article 39 The securities regulatory department under the State
Council shall, within 6 months from the day of accepting an
application for fund raising, make the examination pursuant to the
laws and administrative regulations, the provisions of the
securities regulatory department under the State Council, and the
principle of prudence, make the decision to grant ratification or
not and notify the applicant; and shall explain the reasons if
ratification is not granted.
Article 40 Fund shares may be offered only after the application for
fund raising has been ratified.
Article 41 The offering of fund shares shall be the responsibility
of the fund manager; and the fund manager may entrust another agency
recognized by the securities regulatory department under the State
Council to handle the offering on its behalf.
Article 42 A fund manager shall publicize the prospectus, fund
contract and other relevant documents 3 days prior to the offering
of the fund shares.
The documents specified in the preceding paragraph shall be true,
accurate and complete.
Publicity and promotion of the fund raising shall be in conformity
with the relevant laws and administrative regulations and shall not
involve any acts specified in Article 64 hereof.
Article 43 A fund manager shall start raising fund within 6 months
from the day of receiving the ratification document. If the fund
raising starts after that 6 months and no substantial alterations
have happened to the ratified matters, the fund manager shall report
to the securities regulatory department under the State Council for
archival purposes; and if there is any substantial alteration, it
shall file a new application with the securities regulatory
department under the State Council.
The fund raising shall be finished within the fund raising period
ratified by the securities regulatory department under the State
Council. The fund raising period shall be calculated starting from
the day of offering the fund shares.
Article 44 Upon expiration of the fund raising period, in the case
of a closed fund, if the total amount of fund shares raised reaches
80% or more of the ratified scale, or in the case of an open fund,
if the total amount of fund shares raised reaches the minimum amount
ratified, and if the number of the fund share holders meets the
provisions of the securities regulatory department under the State
Council, the fund manager shall, within 10 days from the expiration
of the fund raising period, retain a statutory capital verification
agency to make capital verification, and shall, within 10 days from
receiving the capital verification report, submit the report to the
securities regulatory department under the State Council, put on
record the fund and make a public announcement.
Article 45 The capital raised during the fund raising period shall
be deposited in a special account, and nobody may use such capital
before the end of the fund raising.
Article 46 The fund contract is concluded when an investor pays for
the fund shares it subscribes to; and the fund contract takes effect
after the fund manager put on record the fund with the securities
regulatory department under the State Council pursuant to Article 44
hereof.
Upon the expiration of the fund raising period, if the conditions
specified in Article 44 are not satisfied, the fund manager shall
assume the following liabilities:
1) Covering with its own property the debts and expenses incurred as
a result of the fund raising;
2) Returning the money that the investors have paid, plus the
interest accruing thereon at the current deposit rate, within 30
days after the expiration of the fund raising period.
Chapter V Trading of Fund Shares
Article 47 Fund shares of a closed fund may be traded on the
securities exchange upon application of the fund manager and
ratification of the securities regulatory department under the State
Council.
The securities regulatory department under the State Council may
authorize the securities exchange to ratify the trading of fund
shares on the market pursuant to the statutory conditions and
procedures.
Article 48 The following conditions shall be satisfied for the
listing and trading of fund shares:
1) The raising of fund complies with the provisions hereof;
2) The valid term of the fund contract is 5 years or more;
3) The capital raised is no less than 200 million RMB;
4) There are no less than 1,000 fund share holders;
5) Other conditions set forth in the listing rules of fund shares.
Article 49 The listing and trading rules of fund shares shall be
formulated by the securities exchange and be submitted to the
securities regulatory department under the State Council for
ratification.
Article 50 After the listing of fund shares, if any of the following
circumstances occurs, the securities exchange shall terminate its
listing and report to the securities regulatory department under the
State Council for archival purposes:
1) The conditions for listing prescribed in Article 48 hereof are
not long met;
2) The fund contract expires;
3) The fund share holders'' meeting decides to terminate the listing
prior to the due date;
4) Other circumstances under which the listing shall be terminated
as stipulated in the fund contract or provided for in the listing
rules of fund shares.
Chapter VI Subscription and Redemption of Fund Shares
Article 51 The subscription, redemption and registration of an open
fund shall be handled by the fund manager; and the fund manager may
entrust another agency recognized by the securities regulatory
department under the State Council to handle the matters on its
behalf.
Article 52 A fund manager shall handle the subscription and
redemption of fund shares every workday; if there are otherwise
stipulations in the fund contract, such stipulations shall be
observed.
Article 53 A fund manager shall pay for the redemption on time,
except under any of the following circumstances:
1) The fund manager is unable to pay for the redemption due to force
majeure;
2) The securities exchange decides to close the market according to
law and as a consequence, the fund manager is unable to calculate
the net value of the fund assets of that day;
3) Other special circumstances stipulated in the fund contract.
Under any of the abovementioned circumstances, the fund manager
shall report to the securities regulatory department under the State
Council for archival purposes on that exact day.
After the circumstances provided for in the first paragraph of this
article are eliminated, the fund manager shall pay for the
redemption in good time.
Article 54 Sufficient cash or government bonds shall be kept in the
case of an open fund as the provision for payment for the redemption
by the fund share holders. The specific proportion of the cash or
government bonds in the fund property shall be provided for by the
securities regulatory department under the State Council.
Article 55 The prices of subscription and redemption of fund shares
shall be calculated on the basis of the net value of the of the fund
shares subscribed to and redeemed plus or minor the relevant
expenses.
Article 56 If any error occurs in the calculation of price on the
basis of the net value of the fund shares, the fund manager shall
correct such error and take reasonable steps to prevent further
losses. Where the wrongly calculated price reaches 0.5% of the net
value of the fund shares, the fund manager shall make a pubic
announcement and report to the securities regulatory department
under the State Council for archival purposes.
Where the error in the calculation of price on the basis of the net
value of the fund shares causes any loss to a fund share holder,
that fund share holder shall have the right to require the fund
manager and fund trustee to make compensation.
Chapter VII Fund Operations and Information Disclosure
Article 57 A fund manager shall employ the method of portfolio when
using the fund property to make securities investment.
The specific mode of portfolio and the investment proportions shall
be stipulated in the fund contract pursuant to the provisions hereof
and those provided for by the securities regulatory department under
the State Council.
Article 58 Fund property shall be used for the investment of:
1) Listed stocks and bonds; and
2) Other securities types provided for by the securities regulatory
department under the State Council.
Article 59 Fund property may not be used in the following
investments or activities:
1) Underwriting of securities;
2) Providing loans or guarantees to others;
3) Engaging in investment with unlimited liability;
4) Trading other fund shares, unless the State Council has otherwise
provisions;
5) Making capital contribution to the fund manager and fund trustee
of the property or trading the stocks or bonds issued by the said
fund manager and fund trustee;
6) Trading the securities issued by or the securities underwritten
within the underwriting period by the shareholders holding
controlling position in the fund manager and fund trustee of the
property or by the companies with other significant interest
relationships with the said fund manager and fund trustee;
7) Insider dealing, manipulating the securities price or other
wrongful securities dealings;
8) Other activities prohibited by the securities regulatory
department under the State Council pursuant to the laws and
administrative regulations.
Article 60 The fund manager and fund trustee and other personnel
with the obligation of information disclosure shall disclose the
fund information according to law and shall ensure the truthfulness,
correctness and completeness of the information disclosed.
Article 61 The parties obliged to disclose fund information shall
ensure the information that should be disclosed is disclosed within
the period of time prescribed by the securities regulatory
department under the State Council, and ensure that the investors
may consult or copy the disclosed information pursuant to the time
and method stipulated in the fund contract.
Article 62 The fund information that should be disclosed to the
public includes:
1) Prospectuses, fund contracts, and fund trusteeship agreements;
2) Fund raising information;
3) Public announcements of listing of the fund shares;
4) Net value of the fund assets and fund shares;
5) Prices for subscription and redemption of fund shares;
6) Portfolio quarterly reports of fund property, financial
accounting reports and the midterm and annual fund reports;
7) Interim reports;
8) Resolutions of the fund share holders'' meeting;
9) Significant personnel movements in the specialized fund trust
department of the fund manager and fund trustee;
10) Litigations involving the fund manager, fund property and fund
trust business; and
11) Other information that should be disclosed as provided for the
securities regulatory department under the State Council pursuant to
the relevant provisions of the laws and administrative regulations.
Article 63 The accounting firms and legal firms issuing auditing
reports or letters of legal opinions with respect to the fund
information disclosed to the public shall guarantee the
truthfulness, correctness and completeness of the documents they
issued.
Article 64 The following acts are not allowed in the public
disclosure of fund information:
1) Making falsified records, misleading statements or significant
omissions;
2) Making prediction of the securities investment performance;
3) Promising gaining of benefits or assuming of losses in violation
of rules;
4) Defaming other fund managers, fund trustees or institutions
offering fund shares; or
5) Other acts prohibited as provided for by the securities
regulatory department under the State Council pursuant to the
relevant provisions of the laws and administrative regulations.
Chapter VIII Alteration and Termination of the Fund Contract and
Liquidation of Fund Property
Article 65 The method of fund operation may be changed on the basis
of stipulations of the fund contract or the resolution of the fund
share holders'' meeting and upon the ratification of the securities
regulatory department under the State Council.
Article 66 The following conditions shall be satisfied if the a
closed fund is to raise more capital or the valid term of the fund
contract thereof is to be extended, and the ratification of the
securities regulatory department under the State Council is
required:
1) Having good fund performance;
2) The fund manager having no record of administrative or criminal
punishment for violations of laws or rules within the last 2 years;
3) The plan being adopted by the fund share holders'' meeting
through resolution;
4) Other conditions provided for herein.
Article 67 The fund contract shall terminate under any of the
following circumstances:
1) The valid term of the fund contract has not been extended upon
expiration;
2) The fund share holders'' meeting decides to terminate the
contract;
3) The duties of the fund manager and fund trustee terminate and
there are no new fund manager and fund trustee to take over the
duties within 6 months; or
4) Other circumstances stipulated in the fund contract.
Article 68 Upon termination of the fund contract, the fund manager
shall organize a liquidation group to make liquidation of the fund
property.
The liquidation group shall consist of the fund manager, fund
trustee and the relevant intermediary agencies.
The liquidation report made by the liquidation group shall be
audited by the accounting firm, and shall, after the law firm issues
the letter of legal opinions, being submitted to the securities
regulatory department under the State Council for archival purposes
and a public announcement shall be made.
Article 69 The residual fund property after the liquidation shall be
distributed according to the proportions of the shares held by the
fund share holders.
Chapter IX Rights of the Fund Share Holders and the Exercise thereof
Article 70 A fund share holder enjoys the following rights:
1) Sharing the proceeds of the fund property;
2) Being entitled to distribution of the residual fund property
after liquidation;
3) Transferring or applying for redemption of the fund shares he
holds according to law;
4) Requiring the convening of the fund share holders'' meeting
pursuant to the provisions;
5) Exercising the right of voting with respect to the matters
deliberated at the fund share holders'' meeting;
6) Consulting or duplicating the fund information and materials
disclosed to the public;
7) Bringing lawsuits against the fund manager, fund trustee or fund
share offering agency whose acts have impaired his legitimate rights
and interests; and
8) Other rights stipulated in the fund contract.
Article 71 The following matters shall be deliberated and decided by
the fund share holders'' meeting:
1) Terminating the fund contract prior to the due date;
2) Raising more capital for the fund or extending the valid term of
the fund contract;
3) Changing the method of fund operation;
4) Raising the remuneration standards of the fund manager and fund
trustee;
5) Changing the fund manager or fund trustee;
6) Other matters stipulated in the fund contract.
Article 72 The fund share holders'' meeting shall be convened by the
fund manager; where the fund manager fails or is unable to convene
the meeting pursuant to the provisions, the fund trustee shall
convene the meeting.
Where the fund share holders that represent more than 10% of the
fund shares require the convening of the fund share holders''
meeting with respect to an identical matter, but neither the fund
manager nor the fund trustee is able to convene the meeting, the
fund share holders that represent more than 10% of the fund shares
shall have the right to convene the meeting by themselves and report
to the securities regulatory department under the State Council for
archival purposes.
Article 73 To convene the fund share holders'' meeting, the convener
shall make a public announcement in respect of the time and form of
the meeting, the matters to be deliberated, the rules of procedures,
and the voting method, etc., at least 30 days prior to the convening
of the meeting.
The fund share holders'' meeting may not hold a voting on any
matters that have not been publicly announced.
Article 74 The fund share holders'' meeting may be held with the
presence of the fund shareholders in person or by held through
communication, etc.
One voting right is attached to each fund share, and a fund share
holder may entrust an agent to attend the fund share holders''
meeting and exercise the voting right.
Article 75 The fund share holders'' meeting may be held only when it
is constituted by a quorum of the fund share holders representing
more than 50% of the fund shares; any decision to be made on a
deliberated matter shall be subject to more than 50% of the voting
rights held by fund share holders attending the meeting; however,
the decision to alter the fund operation method, to change the fund
manager or fund trustee, or to terminate the fund contract prior to
the due date shall be subject to more than two thirds of the voting
rights held by the fund share holders attending the meeting.
The matters decided by the fund share holders'' meeting shall be
reported to the securities regulatory department under the State
Council for ratification or for archival purposes, and a public
announcement shall be made.
Chapter X Supervision and Administration
Article 76 The securities regulatory department under the State
Council shall perform the following duties according to law:
1) Formulating the regulation and rules on the supervision and
administration of the activities concerning securities investment
fund according to law and exercising the power of examination and
approval and ratification according to law;
2) Making records of the fund;
3) Supervising and administering the activities concerning
securities investment fund undertaken by the fund manager, fund
trustee and other institutions, and investigating and punishing the
illegal acts and making public announcements;
4) Formulating the qualification standards and code of conduct of
the fund practitioners and supervising the implementation thereof;
5) Supervising and inspecting the disclosure of fund information;
6) Directing and supervising the activities of the fund
associations; and
7) Other duties provided for by laws and administrative regulations.

Article 77 The securities regulatory department under the State
Council shall have the right to take the following measures when
performing its duties according to law:
1) Entering the scene where an illegal act occurred to make
investigation and obtain evidence;
2) Enquiring the parties concerned and the entities and individuals
relating to the event under investigation and requiring them to make
explanations with respect to the matters relating to the event under
investigation;
3) Consulting and duplicating the securities transaction records,
transfer registration records, financial accounting materials and
other relevant documents and materials of the parties concerned and
the entities and individuals relating to the event under
investigation, and sealing the documents and materials that might be
transferred or hidden;
4) Enquiring about the capital accounts, securities accounts or fund
accounts of the parties concerned and the entities and individuals
relating to the event under investigation, and applying to judicial
organs for freezing the illegal capital or securities which may be
transferred or hided as showed by evidence;
5) Other measures provided for by laws and administrative
regulations.
Article 78 There shall be no less than 2 functionaries of the
securities regulatory department under the State Council when
performing their duties and making the investigation or inspection
according to law, and they shall show their legal certificates. They
are obliged to keep confidential the business secrets they get to
know through the investigation or inspection.
Article 79 The functionaries of the securities regulatory department
under the State Council shall devote themselves to their duties,
execute their duties according to law, act honestly and impartially,
subject themselves to supervision, and may not seek private benefits
by taking advantages of their positions.
Article 80 When the securities regulatory department under the State
Council performs its duties according to law, the entity and
individual under investigation and inspection shall render
cooperation and faithfully provide the relevant documents and
materials, and may not refuse or hinder the investigation and
inspection or hide the documents and materials.
Article 81 The securities regulatory department under the State
Council shall, if finding out any illegal acts suspect of crimes
when performing its duties according to law, transfer the case to
the judicial organ for handling.
Article 82 The functionaries of the securities regulatory department
under the State Council may not assume concurrent positions in the
regulated institutions.
Chapter XI Legal Liabilities
Article 83 If the fund manager and fund trustee violate any of the
provisions hereof or the stipulations of the fund contract in the
performance of their respective duties and cause damages to the fund
property or the fund share holders, they shall be liable for
compensation for their respective acts. Where they cause damages to
the fund property or fund share holders through joint acts, they
shall be jointly and severally liable for compensation.
Article 84 If any party uses the raised capital in violation of
Article 45 hereof, it shall be ordered to return the money and the
illegal gains shall be confiscated; if the illegal gains exceed
500,000 Yuan, a fine of 1 time up to 5 times the illegal gains shall
be imposed concurrently; if there is no illegal gains or the illegal
gains are less than 500,000 Yuan, a fine of 50,000 Yuan up to
500,000 Yuan shall be imposed concurrently; a warning shall be given
to the directly responsible personnel in charge and other directly
liable personnel and a fine of 30,000 Yuan up to 300,000 Yuan shall
be imposed; if any damages are caused to the investors, the
offenders shall be liable for compensation according to law; and if
any crime has been constituted, the offenders shall be subject to
criminal liabilities.
Article 85 If any party raises capital for a fund without
ratification of the securities regulatory department under the State
Council, it shall be ordered to stop the act and return the fund
raised plus the interest thereon at the current rate of bank
deposit, the illegal gains shall be confiscated and a fine of 1% up
to 5% of the sum raised shall be imposed; and if any crime has been
constituted, the offender shall be subject to criminal liabilities.
Article 86 If any party, in violation of the provisions hereof,
establishes any fund management company without authorization, the
company shall be banned by the securities regulatory department, and
a fine of 50,000 Yuan up to 500,000 Yuan shall be imposed
concurrently; and if any crime has been constituted, the offender
shall be subject to criminal liabilities.
Article 87 If any party engages in fund management or fund trust
business without ratification of the securities regulatory
department under the State Council, it shall be ordered to stop the
act and the illegal gains shall be confiscated; if the illegal gains
exceed 1 million Yuan, a fine of 1 time up to 5 times the illegal
gains shall be imposed concurrently; if there is no illegal gain or
the illegal gains are less than 1 million Yuan, a fine of 100,000
Yuan up to 1 million Yuan shall be imposed concurrently; if any
damages are caused to the fund property or the fund share holders,
the offender shall be liable for compensation; a warning shall be
given to the directly responsible personnel in charge and other
directly liable personnel, and a fine of 30,000 Yuan up to 300,000
Yuan shall be imposed concurrently; and if any crime has been
constituted, the offenders shall be subject to criminal liabilities.
Article 88 If the fund manager or fund trustee, in violation of the
provisions hereof, fails to apply separate management or separate
account books to the fund property or appropriate the fund property
for other unauthorized purposes, they shall be ordered to correct
the act and be imposed on a fine of 50,000 Yuan up to 500,000 Yuan;
if any damages are caused to the fund property or fund share
holders, they shall be liable for compensation according to law; a
warning shall be given to the directly responsible personnel in
charge and other directly liable personnel, and their qualification
for fund practice shall be suspended or cancelled, and a fine of
30,000 Yuan up to 300,000 Yuan shall be imposed concurrently; if any
crime has been constituted, the offenders shall be subject to
criminal liabilities.
The property and proceeds obtained by the fund manager and fund
trustee through appropriation of the fund property for other
unauthorized purposes shall be included into the fund property.
However, if there are otherwise provisions in the laws and
administrative regulations, such provisions shall be observed.
Article 89 If the fund manager and fund trustee have committed any
of the acts specified in Article 20 hereof, they shall be ordered to
correct the act and the illegal gains shall be confiscated; if the
illegal gains exceed 1 million Yuan, a fine of 1 time up to 5 times
the illegal gains shall be imposed concurrently; if there is no
illegal gains or the illegal gains are less than 1 million Yuan, a
fine of 100,000 Yuan up to 1 million Yuan shall be imposed
concurrently; if any damages are caused to the fund property or fund
share holders, they shall be liable for compensation according to
law; a warning shall be given to the directly responsible personnel
in charge and other directly liable personnel, their qualification
for fund practice shall be suspended or cancelled, and a fine of
30,000 Yuan up to 300,000 Yuan shall be imposed concurrently; and if
any crime has been constituted, the offenders shall be subject to
criminal liabilities.
Article 90 If the fund manager and fund trustee have committed any
of the acts specified in Items 1) through 6) and in Item 8) of
Article 59 hereof, they shall be ordered to correct the act and be
imposed on a fine of 100,000 Yuan up to 1 million Yuan; if any
damages are caused to the fund property or fund share holders, they
shall be liable for compensation according to law; a warning shall
be given to the directly responsible personnel in charge and other
directly liable personnel, their qualification for fund practice
shall be suspended or cancelled, and a fine of 30,000 Yuan up to
300,000 Yuan shall be imposed concurrently; and if any crime has
been constituted, the offenders shall be subject to criminal
liabilities.
Where the fund manager and fund trustee have committed any of the
acts prescribed in the preceding paragraph, the property and
proceeds obtained through utilization of the fund property shall be
included into the fund property. However, if there are otherwise
provisions in the laws and administrative regulations, such
provisions shall be observed.
Article 91 If the fund manager and fund trustee have committed the
act specified in Item 7) of Article 59 hereof, they shall be
punished pursuant to the relevant provisions of the Securities Law
of the People''s Republic of China, and apart from that, a warning
shall be given to the directly responsible personnel in charge and
other directly liable personnel, their qualification for fund
practice shall be suspended or cancelled, and a fine of 30,000 Yuan
up to 300,000 Yuan shall be imposed concurrently; if any damages are
caused to the fund property or fund share holders, the offenders
shall be liable for compensation according to law.
Article 92 If the fund manager and fund trustee, in violation of the
provisions hereof, make capital contribution to or hold the shares
of each other, they shall be ordered to correct the act and be
imposed on a fine of less than 100,000 Yuan.
Article 93 If any party obliged to disclose fund information fails
to make the disclosure according to law or the disclosed information
contain falsified indications, misleading statements or significant
omissions, that party shall be ordered to correct the act, with the
illegal gains being confiscated, and be imposed on a fine of 100,000
Yuan up to 1 million Yuan; if any damages are caused to the fund
property or fund share holders, the offender shall be liable for
compensation according to law; a warning shall be given to the
directly responsible personnel in charge and other directly liable
personnel, their qualification for fund practice shall be suspended
or cancelled, and a fine of 30,000 Yuan up to 300,000 Yuan shall be
imposed concurrently; and if any crime has been constituted, the
offenders shall be subject to criminal liabilities.
Article 94 If any professional agency which issues the auditing
report or letter of legal opinions in respect of the fund
information disclosed to the public by the parties obliged to
disclose such information falsifies the contents for which it is
responsible, that agency shall be ordered to correct the act, with
the illegal gains being confiscated, and be imposed on a fine of 1
time up to 5 times the illegal gains concurrently; if the
circumstances are serious, the agency shall be ordered to stop its
business, and the relevant qualification of the directly liable
personnel shall be suspended or cancelled; if any damages are caused
to the fund property or fund share holders, the offender shall be
liable for compensation according to law; and if any crime has been
constituted, the offenders shall be subject to criminal liabilities.

Article 95 If the fund manager or fund trustee fails to convene the
fund share holders'' meeting pursuant to the provisions, it shall be
ordered to correct the act and may be imposed on a fine of less than
50,000 Yuan; a warning shall be given to the directly responsible
personnel in charge and other directly liable personnel, and their
qualification for fund practice shall be suspended or cancelled.
Article 96 If the fund manager or fund trustee violates the
provisions hereof and the circumstances are serious, the offender
shall be disqualified for fund management or fund trust.
Article 97 If any practitioner in the specialized fund trust
department of a fund manager or fund trustee, in violation of
Article 18 hereof, causes any damages to the fund property or fund
share holders, that person shall be liable for compensation
according to law; if the circumstances are serious, he/she shall be
disqualified from fund practice; and if any crime has been
constituted, he/she shall be subject to criminal liabilities.
Article 98 If any functionary of the securities regulatory
department neglects the duties, abuses the powers, seeks private
benefits through wrongful means, or exerts or accepts money or
property from others by taking advantages of his/her position, that
person shall be given administrative sanctions according to law; and
if any crime has been constituted, the offender shall be subject to
criminal liabilities.
Article 99 If any party is liable for both civil compensation and
fines or monetary penalty for violations of the provisions hereof
and the property of that party is not sufficient to cover all the
payments, priority shall be given to civil compensation.
Article 100 With respect to the civil compensation and fines the
fund manager and fund trustee should bear pursuant to the provisions
hereof, the fund manager and fund trustee shall make the payment
with their own property.
The fines and monetary penalties paid and the illegal gains confiscated according to law shall all be turned in to the treasury.

Chapter XII Supplementary Provisions

Article 101 The State Council shall, pursuant to the principles hereof, enact separate specific measures for the administration of the securities investment activities undertaken by fund management companies or other institutions approved by the State Council to raise capital from specified objects or to accept the property trust
from certain objects.

Article 102 The State Council shall enact separate measures for the administration of the securities investment activities of raising capital through public offering of stocks and establishing securities investment companies.

Article 103 The present Law shall take effect as of June 1, 2004.

Bright Jon  Attorney-at-law   Fax: +86-512-53516040
email@colaw.cn