Announcement by the State Administration of Foreign Exchange of the Provisions on the Administration of Foreign Exchange in Domestic Securities Investments of Qualified Foreign Institutional Investors

Chapter V Statistics and Supervision

Article 21 A QFII should go through the formalities of the foreign exchange registration alteration and submit a written report in and to the SAFE within 5 working days in the following situations:

(1) The alteration of such basic condition as title, responsible person, major shareholder or actual controller of a QFII;

(2) A QFII or its major shareholder and actual controller is severely punished by other supervision authorities (including overseas ones), which may cause significant impacts on investment operation of the QFII or its relevant business qualification is suspended or revoked;

(3) Alteration of the custodian or domestic entrusted investment agency (agent) or alteration of its relevant material information;

(4) Alteration of account title and information of opening bank;

(5) Alteration of open-ended Chinese fund prospectus; and

(6) Other conditions required by the SAFE.

Where a QFII changes a custodian, the new one should also provide the newly-signed custody agreement draft, the basic condition of the new custodian and relevant content of assets custody, and the new notarized and authorized letter, and submit the official custody agreement within 5 working days as of the date when a foreign exchange account and a special RMB account are opened.

Article 22 The custodian shall timely and accurately submit the relevant report forms of a QFII fund remittance and domestic securities investment in accordance with the following provisions:

(1)    Fill in the Detailed Form for QFII Funds Remittance (see Appendix II for sample form) within 2 working days after funds remittance or settlement and purchase of foreign exchange by a QFII;

(2)    Report and submit the Monthly Reform Form 1 and 2 of Domestic Securities Investment of QFIIs (see Appendix III for sample form) within 8 working days monthly; and

(3)    Report and submit the last year’s Annual Finance Reform Form 1 and 2 of Domestic Securities Investment of QFIIs (see Appendix IV for sample form) audited by the Chinese Certified Public Accountant within 3 months after a accounting year is over.

Article 23 A QFII shall be punished by the SAFE in accordance with the Regulations on Foreign Exchange Administration of the People’s Republic of China and may be adjusted to reduce the investment quota until the quota is revoked in the following situations:

(1)    Illegally utilize foreign exchange by transferring or reselling investment quota;

(2)    Provide false information or materials for a custodian or the SAFE;

(3)    Handle settlement of payment or purchase of foreign exchange not according to the provisions herein;

(4)    Provide the relevant information or materials of fund remittance and domestic securities investment not according to the requirements of the SAFE; and

(5)    Other acts in violation of the administration of foreign exchange.

Article 24 The custodian shall be published by the SAFE according to the Regulations on Foreign Exchange Administration of the People’s Republic of China; if the situation is serious, the SAFE will revoke the qualification of a QFII with CSRC in the following conditions:

(1)    Investment quota exceeding that approved by the SAFE or handling deposit inward of remittance for a QFII beyond the time limit;

(2)    Handling the formalities of deposit and profit outward of remittance for a QFII not according to the Provisions herein;

(3)    Opening or closing a foreign exchange account and a special RMB account for a QFII not according to the Provisions herein or handling the formalities of funds remittance and transfer not according to the prescribed scale of account balance;

(4)    Submitting the report form and relevant documents to the SAFE or reporting relevant situations to the SAFE not according to the Provisions herein;

(5)    Conducting statistics declaration of the international payment not according to the Provisions herein; and

(6)    Other acts in violation of the Provisions on Administration of Foreign Exchange.