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The Interim Provisions on the Administration of Foreign Exchange in Domestic Securities Investments of Qualified Foreign Institutional Investors have been promulgated and put into effect by the State Administration of Foreign Exchange (hereinafter refer to the SAFE) as of November 28, 2002. And during their implementation, the SAFE has received in succession inquiries from some institutional investors after the administration of foreign exchange of the domestic securities investment by qualified foreign institutional investors (hereinafter refer to the QFII). We hereby give the following notice concerning the relevant issues for the convenience of operation: I. The domestic trustee of the QFII (hereinafter refer to the trustee) may open a special RMB account for each QFII in virtue of the following documents: 1. The photocopy of the official reply of the SAFE on approving the amount of investment by the QFII; 2. The official reply of the SAFE on approving the QFII's opening of the special RMB account; and 3. Other documents required by the trustee. II. A trustee may not open a sub-account of the special RMB account for a QFII; and a trustee may, upon the request of a QFII, establish a detailed ledger for the capital collection and payment of his special RMB account, in which the use of each sum of money collected and paid shall be recorded specifically. No other account except the special RMB account may be opened in the bank of the trustee by a QFII for carrying out its investment business. III. The deposit interest rates of the special RMB account shall be implemented by referring to the standard of current deposit interest rates of unit announced by the People's Bank of China. IV. All kinds of expenses of the QFII, including the trust fees, administrative cost, auditing fees, and other fees, which occur when the investment business is carried out in China, shall be paid from the special RMB account; and the expenses of the QFII that occur outside China may not be paid from the special RMB account. V. When the amount of investment of the QFII is from 50 million dollars to 1 hundred million dollars (including 1 hundred million dollars), the initial principals to be paid shall be no less than 20% of the amount of investment (including 20%); when the amount of investment is from 1 hundred million dollars to 2 hundred million dollars (including 2 hundred million dollars), the initial principals to be paid shall be no less than 15% of the amount of investment (including 15%); when the amount of investment is from 2 hundred million dollars to 4 hundred million dollars (including 4 hundred million), the initial principals to be paid shall be no less than 10% of the amount of investment (including 10%); when the amount of investment is from 4 hundred million dollars to 8 hundred million dollars (including 8 hundred million dollars), the initial principals to be paid shall be no less than 5% of the amount of investment (including 5%). VI. In case the principals paid by the QFII are less than 50 million dollars, the QFII may only be permitted to have the inward remittance of principals left in the trustee's care by means of deposit after the settlement of exchange, and no securities investment is permitted. If the amount of investment paid by the QFII fails to reach 50 million dollars within the period of validity, the inward remittance of principals shall be remitted by installment after the expiration of the closing period prescribed in the Interim Provisions on the Administration of Foreign Exchange in Domestic Securities Investments of Qualified Foreign Institutional Investors. VII. The QFII may remit the profits on a yearly basis, and the profits permitted to remit by the QFII shall be those accumulated each year and realized. VIII. In case a QFII transfers its amount of investment, the transferee shall make the inward remittance of principals from abroad within the amount of investment authorized, and complete the payment of the relevant capitals with the transferor within China. The trustee shall remit the capitals of the transferor outside China in virtue of the documents of approval for the transfer issued by the State Administration of Foreign Exchange within 5 working days after the transferred capitals have been received by the transferor. IX. A foreign fund management company may choose only one type of funds, either the close funds or the open funds, for each application. In case a foreign fund management company applies for the amount of investment in the type of close funds (open funds), which has been approved, and applies again for the amount of investment in the type of open funds (close funds), that shall be deemed as a separate application, while not as an increase of the amount of investment. The fund management company shall apply for another QFII foreign exchange registration certificate and another special RMB account. The two kinds of funds shall be independently accounted and be managed by separate accounts. X. In case a QFII changes a trustee, the former trustee shall, when handing over all the relevant records to the new trustee, keep one photocopy of all the relevant records on file for future reference, the term for keeping in the archives shall be 15 years. XI. The trustee shall submit the relevant QFII report forms to the State Administration of Foreign Exchange in time prescribed. The format of the QFII report forms to be submitted to the State Administration of Foreign Exchange (see Attachment) has been publicized by the State Administration of Foreign Exchange on its internet website (www. safe.gov. cn). The trustee shall send the QFII report forms by fax or email separately to the SAFE. Fax: (010) 68402349 Email Address: security@mail.safe.gov.cn XII. The QFII report forms sent to SAFE by a trustee shall be made according to such accounting rules as the accrual basis. XIII. Should the trustee have any problems during the handling of the QFII trusteeship business, he should feed them back to the Capital Items Administration Department of the SAFE in time. Person to contact: Zhou Yongkun Tel: (010) 68402347 Attachments: 1. Monthly Report Forms of the Qualified Foreign Institutional Investors on Domestic Securities Investments (I), (II) (Omitted) 2. Annual Financial Statements of the Qualified Foreign Institutional Investors on Domestic Securities Investments (I), (II) (Omitted) 3. List of the QFII Capital Remitted Inward and Outward (Omitted) |
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