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	CIRCULAR OF THE CHINA SECURITIES REGULATORY COMMISSION ON RELEVANT ISSUES CONCERNING THE INVESTMENT OF SECURITIES INVESTMENT FUNDS IN EQUITY SHARES IN THE STATE-OWNED SHARE-TRADING REFORM

	(No. 138 [2005] of China Securities Regulatory Commission, August 15, 2005)


SUBJECT : SECURITIES INVESTMENT FUNDS; INVESTMENT; EQUITY SHARES
ISSUING DEPARTMENT : CHINA SECURITIES REGULATORY COMMISSION
ISSUE DATE : 08/15/2005
IMPLEMENT DATE : 08/15/2005
LENGTH : 687 words
TEXT :

Since the piloting state-owned shares reform of listed companies was initiated, some listed companies have worked out their equity shares distribution plans. As a variety of securities, the equity shares have their own operating features. For the issue concerning the investment equity shares of securities investment funds (hereinafter referred to as the funds), we should carry out the relevant work on the base of the piloting reform step by step and make further provisions thereabout according to the market development. So far, in order to regulate the operations of fund investment, protect the legitimate interests and rights of fund shareholders, according to the Law on the Securities Investment Funds, the Measures for the Management of Securities Investment Fund Operations, and other relevant provisions, we hereby notify the relevant issues regarding the piloting application of fund investment equity shares by fund managers in the reform of state-owned shares as follows:

I. A fund may hold the equity shares passively obtained in the share-trading reform, and may sell some of the equity shares or exercise their rights to such shares according to the relevant provisions of the Stock Exchange.

II. A fund may actively invest in the equity shares issued in the share-trading reform.

III. A fund manager, who plans to use the property under the fund to make any equity shares investment according to the provisions of Article II of the this Circular, shall observe the relevant laws and regulations, comply with the relevant stipulations of the fund contract, and report the equity shares investment plan to the China Securities Regulatory Commission for publicity. Items including proportional restriction, investment strategy, information disclosure method and risk control measures shall be clearly indicated in the equity shares investment plan and the relevant investment risks shall be fully revealed as well.

IV. Where a fund manager makes any equity shares investment with the fund's property, there shall not be any of the following circumstances:

(1) Where the total amount of equity shares as purchased by a fund on any trading day exceeds 0.1% of the net value of the fund asset in the previous trading day;

(2) Where the market value of all the equity shares as held by a fund exceeds 3% of the net value of the fund asset; or

(3) Where the value of an equity share as held by all the funds under the management of a same fund manager exceeds 10% of the total value of the equity shares.

Any provision as separately provided for by the China Securities Regulatory Commission shall not be restricted by the proportional restriction as prescribed in item (1), (2) or (3) in the preceding paragraph.

V. A fund manager shall, according to the fund investment strategy and the risk-return feature, formulate an effective and feasible equity shares investment plan, and may stipulate the specific proportion of the relevant fund investment equity shares within the proportional scope as empowered in Article IV of this Circular.

VI. Where any fund investment fails to comply with items (2) and (3) of Article IV of this Circular as well as the fund contact or the investment proportion as stipulated in the fund equity shares investment plan due to factors such as the fluctuation of the securities market, the alteration of fund scale and the payment consideration in the share-trading reform that go beyond the control of the relevant fund manager, the fund manager shall make relevant adjustment within 10 trading days.

VII. Where a fund manager makes equity shares investment by using the property under the fund, he shall not obtain any foul interests by means of any insider story, or manipulate the equity shares price or the price of subject securities, or make use of the equity shares investment to conduct any interest transfer.

VIII. A fund manager or a fund custodian shall earnestly perform the duties of honesty and credit, and prudence and diligence, establish and improve a management system of equity shares investment, and formulate effective risk control measures for the equity shares investment so as to effectively protect the legitimate rights and interests of fund shareholders.