Changing the Shareholdings of Fund Management Companies

On December 26 2002 the China Securities Regulatory Commission (CSRC) promulgated the Issues Relevant to Standardization of the Transfer of Contributed Capital by Fund Management Companies' Shareholders Circular (Share Transfer Circular). The Share Transfer Circular is based on the Issues Relevant to Material Changes of Fund Management Companies Circular (Material Changes Circular) promulgated in March 2002, and lays down more specific stipulations with respect to one of the most important changes affecting a fund management company: a shareholder's transfer of its contributed capital.

Requirements for the Transferee

The guiding policy for regulating such transfer deals is to protect the fund holders' interests and promote the fund management company's (FMC) long-term development. Therefore, just as in examining the sponsors of a proposed FMC, the CSRC imposes strict requirements on the transferee's qualifications. The transferee shall have actually contributed registered capital of at least Rmb300 million, and a sound operational status, as well as meeting other requirements formulated by the CSRC in accordance with prudential principles. If the transferee is proposed to become the biggest shareholder, it must also be a duly established securities company or trust and investment company that has been profitable over the past three consecutive years.