Issued: May 8 2006

Effective: as of date of issue

Applicability: The term 'inspectors' means senior management personnel who supervise and inspect the compliance of the operation of funds and companies, as well as the internal risk controls of companies.

Main contents: In the case of a conflict between the interests of the company and its shareholders, and those of fund shareholders, inspectors shall give priority to the protection of the interests of fund shareholders (Article 2). When performing duties, inspectors shall pay attention to matters such as: (1) whether fund investments comply with laws, regulations and the fund contract, and whether there exists illegal acts such as insider trading and market manipulation, and acts of improper affiliated transactions, transfer of benefits and unequal treatment to different investors; (2) whether fund operation is safe, and whether the operation of the information technology system is stable; and (3) whether company assets are safe and intact (Article 7). Inspectors shall, when the performance of duties requires, have the right to participate in, or attend as a non-voting party, the company's board of directors', meetings, and meetings relating to the company's business, investment decisions and risk management, etc. Inspectors shall have the right to investigate and review relevant company documents and files (Article 14). Where one of the following circumstances arises, inspectors shall report to the companies' board of directors, China Securities Regulatory Commission and its relevant local offices in a timely manner: (1) violations of laws or regulations attributable to the funds or the company; (2) the funds or the company is exposed to major business risks or latent threat; and (3) other circumstances that the inspector deem that reporting is necessary in accordance with the law (Article 16).