Administrative Measures for Hubei Province Yangtze River Economic Belt Industry Fund Chapter I General Provisions

Transcription

1 Administrative Measures for Hubei Province Yangtze River Economic Belt Industry Fund Chapter I General Provisions Article 1 With a view to seizing the nationally significant strategic opportunities of One Belt and One Road, the development and opening of the Yangtze River Economic Belt, the construction of the city cluster in the middle reaches of the Yangtze River and so on, speeding up the development of strategic emerging industries in Hubei Province, fostering industrial core competitiveness and boosting industrial transformation and upgrading, the Hubei Province Yangtze River Economic Belt Industry Fund has hereby been established to impel fiscal and financial linkages by market means, guide the investment of social capital in the real economy, and propel the scientific development, transformation development and leapfrog development of the economy and society of Hubei Province. The Administrative Measures for the Hubei Province Yangtze River Economic Belt Industry Fund (hereinafter referred to as the Administrative Measures ) are hereby formulated in combination with the actual conditions of cultivation of strategic emerging industries by the Hubei Province Yangtze River Economic Belt Industry Fund and in combination with relevant state laws, regulations and the Interim Administrative Measures for the Government Investment Funds (Cai Yu [2015] No. 210) and the Guiding Opinions of the Ministry of Finance on Financial Capital Injection into Government Investment Funds (Cai Jian [2015] No. 1062). Article 2 Hubei Province Yangtze River Economic Belt Industry Fund follows the principles of government guidance, market operation, classified management and risk prevention, highlights features of specialization, marketization and internationalization, and takes marketization methods for operation as per the general ideas of overall design, raising fund by phases, surrender of profits by governments and rolling development. Article 3 Upon approval by the Hubei Provincial People s Government, the financial department of Hubei Province invested RMB 40 billion, initiating the establishment of Hubei Province Yangtze River Economic Belt industry guidance fund (hereinafter referred to as the guidance fund ). The guidance fund initiated the establishment of several investment funds of branch industries through cooperation with social capital (hereinafter referred to as the funds of funds ), jointly constituting Hubei Province Yangtze River Economic Belt Industry Fund (hereinafter referred to as the Yangtze River Industry Fund ) with a scale of RMB 200 billion. Through establishment of sub-funds or direct investment in major projects, the funds of funds strives to drive social investment of about RMB 1,000 billion, supporting the development of strategic emerging industries in Hubei. -1-

2 Chapter II Duties of Organizations Article 4 The Hubei Provincial People s Government has established the Hubei Province Yangtze River Economic Belt Industry Fund Management Committee (hereinafter referred to as the Fund Management Committee ), which shall be accountable to the Hubei Provincial People s Government and report work. The Fund Management Committee comprises the executive vice governor of Hubei Provincial People s Government as its director, the vice governor in charge of finance and industries as its vice director and major principals of relevant departments of Hubei Provincial People s Government as its members. Main duties of the Fund Management Committee include: (I) Formulating the development plan of the Yangtze River Industry Fund, coordinating and implementing policy guidance, supervision and management, performance assessment, etc. (II) Studying and formulating relevant policies supporting the development of the Yangtze River Industry Fund. (III) Selecting guidance fund management organizations and guidance fund custodian banks. (IV) Examining and approving the development plan, the scheme on income distribution, settlement scheme and so on of the guidance fund and the scheme on the surrender of profits by the government. (V) Examining and approving the establishment scheme of the fund of funds and the custodian bank of the fund of funds. (VI) Deliberating and approving other matters of the guidance fund that need to be approved. (VII) Completing other matters assigned by the Hubei Provincial Party Committee and the Hubei Provincial People s Government. Article 5 The Fund Management Committee has its office at the Financial Affairs Office of Hubei Provincial People s Government, with work expenses included into the financial budget of Hubei Province. Main duties of the Office of the Fund Management Committee include: (I) Doing routine work of the Fund Management Committee, and doing preliminary work to be deliberated and approved by the Fund Management Committee. (II) Establishing the work coordination system of member entities of the Fund Management Committee, and ensuring the effective and orderly operation of the Fund Management Committee. (III) Making the assessment of performance conditions of the Industry Fund Management Company, tracking the operations of the guidance fund and the fund of funds, and regularly entrusting a third-party professional agency to make performance evaluations of the implementation of policy objectives and investment operations of the guidance fund. (IV) Organizing the collection of the information on investment projects, establishing the library of projects with investment demands, and recommending them to the fund management organization. (V) Conducting external contacts on behalf of the Fund Management Committee, conducting contacts with and services for investors and management teams, and being responsible for news publicity, media communications and cooperation. (VI) Doing other work assigned by the Fund Management Committee. Article 6 The Fund Management Committee establishes the Expert Advisory Committee, which is composed of famous domestic and overseas experts and insiders in fields of industrial development, finance, investment, law, accounting, auditing, finance, management, etc. and is chaired by the director of the Office of the Fund Management Committee. The Office of the Fund Management Committee shall provide travel and labor expenses for the performance of members of the Expert Advisory Committee according to the relevant regulations. Main duties of the Expert Advisory Committee include: (I) Making the most of supporting effects for decisions, and conducting demonstration, consulting, guidance and review for major issues such as the establishment scheme, administrative measures and supporting policies of the Yangtze River Industry Fund, and ensuring the scientific nature of decision making. -2-

3 (II) Making the most of think tank effects, researching investment priorities of the Yangtze River Industry Fund and leading edge topics, providing services including fund talent cultivation and business consulting, and providing decision making suggestions for the Fund Management Committee. (III) Making the most of internal supervision effects, and conducting business supervision and performance assessment for fund managers and the operation of the Yangtze River Industy Fund according to the entrustment of the Fund Management Committee and the Office of the Fund Management Committee. Article 7 The Fund Management Committee establishes the Policy Review Committee, which is under the leadership of the Financial Affairs Office of Hubei Provincial People s Government and comprises principals and experts from the Hubei Provincial Development and Reform Commission, Hubei Economy and Information Technology Commission, Hubei Provincial Finance Department, the Science and Technology Department of Hubei Province, Hubei Province Changjiang Industry Investment Group Co., Ltd. (hereinafter referred to as Changjiang Industry Investment ) and other units. Main duties of the Policy Review Committee include: (I) Examining whether the establishment scheme of the fund of funds conforms to the Administrative Measures for Hubei Province Yangtze River Economic Belt Industry Fund (hereinafter referred to as the Administrative Measures ) as well as the Implementing Rules of Administrative Measures for Hubei Province Yangtze River Economic Belt Industry Fund (hereinafter referred to as the Implementing Rules ), the Development Plan of Hubei Province Yangtze River Economic Belt Industry Fund (hereinafter referred to as the Development Plan ), the Negative Investment List of Hubei Province Yangtze River Economic Belt Industry Fund (hereinafter referred to as the Negative Investment List ) and other documents formulated by the Fund Management Committee. (II) Examining selection conditions of fund management teams. Article 8 Hubei Provincial People s Government authorizes Hubei Provincial Finance Department to fulfill duties of Hubei Provincial People s Government as a contributor in the guidance fund. Hubei Provincial Finance Department entrusts Changjiang Industry Investment to fulfill the duties of contributor by proxy. An escrow account jointly managed by Hubei Provincial Finance Department and Changjiang Industry Investment may be set to manage government contributions. Article 9 Hubei Province Yangtze River Economic Belt Industry Fund Management Co., Ltd. (hereinafter referred to as the Industry Fund Management Company ) is established. The Industry Fund Management Company is established as per the model of mixed ownership, and its major shareholders are province-level investment and financing platform companies and social cooperators. Its main duties include: (I) Initiating the establishment of the guidance fund of limited partnership together with Changjiang Industry Investment, and managing the guidance fund upon entrustment. (II) Raising social capital, and initiating the establishment of all the funds of funds. (III) Selecting managers of the fund of funds, conducting due diligence of the fund of funds with the intention of making contributions and cooperative negotiations, and concluding the partnership agreement, articles of association and other necessary agreements of the fund of funds upon approval by the Fund Management Committee. (IV) Making performance assessment for the fund of funds, assessing managers of the fund of funds, and supervising the investment plan, investment schedule and capital custody and use of the fund of funds. (V) Guiding the withdrawal of the guidance fund from the fund of funds and settlement thereof. (VI) Regularly reporting the operations of the Yangtze River Industry Fund to the Fund Management Committee and the Office of Fund Management Committee. Article 10 The management organization of the fund of funds shall be established when necessary to take -3-

4 charge of the operation management of the fund of funds (according to the intention of major contributors, the Industry Fund Management Company may be entrusted to manage the fund of funds, or major contributors and the Industry Fund Management Company may be entrusted to jointly manage the fund of funds). Its main duties include: (I) Planning the composition and investment directions of sub-funds, raising social capital, and initiating the establishment of sub-funds. (II) Selecting managers of sub-funds, conducting due diligence of the sub-fund intending to make contributions and cooperative negotiations, and concluding the sub-fund partnership agreement, articles of association and other necessary agreements. (III) Conducting due diligence for direct investment projects, and being responsible for relevant investment management. (IV) Being responsible for the withdrawal of the fund of funds from any sub-fund or direct investment project and settlement thereof. (V) Regularly reporting to contributors and the Industry Fund Management Company of operations of the fund of funds. -4-

5 Chapter III Investment Principles Article 11 The Yangtze River Industry Fund shall implement the development philosophies of innovation, coordination, environmentally friendly, opening and sharing, be deployed according to decisions of the Hubei Provincial Party Committee and Hubei Provincial People s Government, focus on strategic emerging industries, and implement the 2025 Outlines of Hubei Province for Manufacturing in China in a bid to promote industrial transformation and upgrading in Hubei Province. The Yangtze River Industry Fund primarily supports the entrepreneurial growth of industries and small-and medium-sized enterprises with strong externalities and apparent fundamentality, promotion and strategy, and in the way of M&A restructuring of enterprises, equity investment, venture investment and so on, creates industrial leaders, constructs industrial chains, fosters industrial ecology, enhances industrial core competitiveness, and forms a modern industrial system with Hubei characteristics. Article 12 The establishment of the Yangtze River Industry Fund and sub-funds thereof shall conform to the Development Plan, and they shall focus on the cultivation and development of strategic emerging industries in Hubei. Article 13 The Yangtze River Industry Fund and sub-funds thereof shall make investments in marketization forms such as equity investment, and provide value-added services. Investments shall conform to regulations in the Negative Investment List. Article 14 The guidance fund shall not directly invest in a specific project as a unique investor. The fund of funds generally makes investments in the way of establishment of sub-funds. In case of any material project, the fund of funds may make direct investments according to relevant agreement upon approval by the Industry Fund Management Company. Article 15 Structured arrangements may be made for the fund of funds, and the guidance fund participates in the fund of funds as an investor at a different level according to demands. However, the guidance fund may not promise any other investor that it will not incur any loss on its investment. Article 16 The Yangtze River Industry Fund establishes funds of multiple levels and several types according to demands in order to support the development of enterprises of different types. Special funds, overseas funds and so on are established to support enterprises in Hubei in respect of going out and introduction. Differentiated arrangements are made for the percentage of contribution of the guidance fund in the fund of funds according to fund position, fund raising difficulty and other factors. In principle, the guidance fund shall not be the largest contributor. Article 17 The fund of funds adopts a subscription system. All contributors make contributions according to the partnership agreement (articles of association), investment decision, the initiation conditions of the relevant sub-fund and the progress of the major project directly invested in. If a contributor fails to make a contribution according to the relevant agreement, the said contributor shall suspend the relevant rights thereof in the fund and fund management organization until the said contributor terminates such rights, and bear liability for default according to the relevant agreement. Article 18 The total investment amount of the Yangtze River Industry Fund and sub-funds thereof in Hubei (including investments supporting investment and M&A projects outside Hubei of enterprises in Hubei and the added investment projects in Hubei of enterprises outside Hubei which are invested in) shall not be lower than 5 times the grand total of the contribution scale of the guidance fund. The specific investment percentage of the fund of funds (including sub-funds thereof) in Hubei shall be negotiated by the Industry Fund Management Company with other contributors of the fund of funds, and clearly specified in relevant agreements. -5-

6 Article 19 The duration of the guidance fund is 10 years. If the duration needs to be extended upon expiration, procedures set out in the relevant partnership agreement shall be gone through after a report by the Fund Management Committee to the Hubei Provincial People s Government for approval. Generally, the duration of the fund of funds and sub-funds shall not exceed the duration of the guidance fund. Article 20 Generally, the guidance fund shall be withdrawn according to relevant laws, regulations and conditions set out in the relevant articles of association. If the guidance fund has achieved the expected goals before expiration of the duration thereof, the guidance fund shall be encouraged to be withdrawn in the way of asset securitization, repurchase by any other contributor, transfer of shares of the fund and so on to accelerate turnover, further enhance investment efficiency and motivate more social capital to invest in industries in Hubei Province. Article 21 The guidance fund shall not engage in the following business services: (I) Guarantees, mortgages, entrusted loans and other business services other than financing guarantees. (II) Investment in shares on the secondary market, futures, real estate, securities investment funds, corporate bonds with a rating below AAA, trust products, non-guaranteed wealth management products, insurance plans and other financial derivatives. (III) Provision of sponsorship and donations for any third party. (IV) Attraction of loans or attraction of loans in a disguised way, or provision of loans and capital borrowing and lending for any third party. (V) External investment with unlimited joint and several liability. (VI) Issue of trust products or collective financial products to raise capital. (VII) Other business services prohibited by state laws and regulations. Article 22 No sub-fund shall invest in any other investment fund or investment enterprise. Article 23 The fund of funds, sub-funds (excluding overseas sub-funds) and managment organizations thereof shall be registered in Hubei Province. In principle, names of the fund of funds and sub-funds shall include words of Hubei and Yangtze River. -6-

7 Chapter IV Investment Decisions Article 24 The fund of funds shall be applied by the initiator to the Industry Fund Management Company. The Industry Fund Management Company shall conduct due diligence for an establishment scheme, and the Investment Decision Committee of the Industry Fund Management Company shall research decisions. Upon approval by the Fund Management Committee, the establishment scheme will be implemented. Article 25 Before being submitted to the Investment Decision Committee of the Industry Fund Management Company for voting, the investment matters of the guidance fund shall be submitted to the Policy Review Committee for policy objective review. All the matters voted down by the Policy Review Committee shall not be submitted to the Investment Decision Committee of the Industry Fund Management Company for voting, and the Policy Review Committee shall not review matters beyond the scope of its duties. Article 26 After the establishment scheme of the fund of funds is approved by the Fund Management Committee, the Industry Fund Management Company shall conclude relevant agreement with other contributors to the fund of funds, under which all the parties thereto shall fulfill contribution obligations. Article 27 The fund of funds shall specify the compliance with the Administrative Measures, the Implementing Rules and Negative Investment List in the partnership agreement (articles of association), and establish sub-funds or make investments in material projects according to the industry fields and fund types set out in the agreement. Article 28 Sub-funds shall specify the compliance with the Administrative Measures, Implementing Rules and Negative Investment List in the partnership agreement (articles of association), and make project investments according to the industry fields and fund types set out in the agreement. Article 29 If the scheme on cooperation between Yangtze River Industry Fund and any state-level industry fund or world famous investment institution is beyond the range of the Administrative Measures, the Fund Management Committee shall approve it in a case by case fashion. -7-

8 Chapter V Income Distribution Article 30 The capital from the premature allocation and withdrawal for settlement of the guidance fund from the fund of funds shall be deposited into the escrow account of the guidance fund for rolling development. When there is a lot of accumulated profit in the guidance fund, the profits may be distributed at irregular intervals pursuant to the corresponding partnership agreement. Article 31 The income allocated for government contribution in the guidance fund shall be turned over to the state treasury by the contributor. Capital shall be withdrawn from the dividends allocated for the government contribution by a certain percentage, primarily to make proper risk and profit compensations for the governent-dominated funds with strong spillover, a long investment period, high risks and low yield, as well as reward excellent fund managers upon assessment and so on. Relevant expenditures shall be included into budget management. Article 32 Each time income is distributed, the fund of funds may, according to subsequent project risks, retain risk reserves of a certain percentage in accordance with the relevant agreement. Article 33 The guidance fund shall bear limited liability for the fund of funds to the extent of the contribution amount. Where the fund of funds records losses during settlement, the manager of the fund of funds shall bear losses to the extent of the contribution thereof to the fund of funds, and the deficiency, if any, shall be shared in accordance with the relevant agreement. Article 34 The government contribution to the guidance fund may, in an appropriate method of profit surrender, guide the Yangtze River Industry Fund to intensify the investment in strategic emerging industries in Hubei. The definite scheme on the surrender of profits shall be worked out by the Industry Fund Management Company together with Changjiang Industry Investment, and be submitted to the Fund Management Committee for examination and approval. -8-

9 Chapter VI Risk Control Article 35 The Yangtze River Industry Fund and sub-funds thereof shall raise capital from specific objects in a non-public way, and shall not attract or attract in a disguised way any public deposits, issue trusts or collective financial products to raise funds, or engage in any business prohibited by laws and regulations. Article 36 The guidance fund, the fund of funds and sub-funds shall be trusted to banks with qualifications. The custodian banks shall conduct dynamic supervision over fund accounts to ensure the expenditure of the capital in the directions agreed upon. The custodian bank of the guidance fund shall regularly report the custody conditions of the guidance fund to the Office of the Fund Management Committee and the Hubei Provincial Finance Department, and promptly report major events of operation of the guidance fund. The Industry Fund Management Company shall regularly collect the custody conditions of the fund of funds and sub-funds and report them to the Office of the Fund Management Committee and the Hubei Provincial Finance Department, and promptly report major events of operation of the fund of funds and sub-funds. Article 37 A custodian bank shall meet the following conditions: (I) Be a national state-owned bank, joint-stock commercial bank or a local legal person bank in Hubei Province. (II) Have facilities and equipment and information technology systems for safe custody and conducting custody business operations. (III) Have perfect custody business processes and sound work systems of internal auditing and monitoring, risk control, business isolation, information confidentiality and so on, and effectively implementing relevant systems. (IV) Have had no gross negligence or bad record on punishment by any competent industrial administrative department or judiciary authority within last 3 years. Article 38 The Industry Fund Management Company shall reinforce management by information means, and grasp operation situations of the fund of funds, sub-funds and projects invested in. Article 39 The Industry Fund Management Company shall intensify regulation over projects directly invested in by the fund of funds, and the manager of the fund of funds shall reinforce the regulation over sub-funds, closely track project operations and financial position, and practically prevent risks. Article 40 Managers of the guidance fund, the fund of funds and sub-funds shall make contributions to the funds managed by them in cash. The business management teams of the fund management organizations shall follow investments in specific investment projects led by them. Article 41 Managers of the fund of funds shall report the operations of the fund of funds and sub-funds of the Industry Fund Management Company on a quarterly basis, and promptly report major events such as the alteration of legal documents of the fund of funds and sub-funds, capital increase and decrease, changes in management organizations, settlement and dissolution. The Industry Fund Management Company shall report the operation conditions of the Yangtze River Industry Fund to the Office of Fund Management Committee and the Hubei Provincial Finance Department on a quarterly basis, and submit the report on general operation conditions of the Yangtze River Industry Fund and the annual accounting report of the guidance fund audited by a certified public accountant on an annual basis. Article 42 Where the fund of funds or any sub-fund violates laws or regulations or relevant agreements etc., the Industry Fund Management Company shall promptly report to the Office of the Fund Management Committee, and require the corresponding fund manager to make corrections. If the fund -9-

10 manager fails to make corrections as required, fund operations shall be terminated, and the contribution of the guidance fund shall be withdrawn without the consent of other contributors. Article 43 Where the fund of funds or any sub-fund is involved in any of the following circumstances during operation, the operation shall be terminated and settlement shall be conducted: (I) The shareholder or partner representing more than two thirds of fund shares requires termination, which is resolved and adopted at the general meeting or partner meeting. (II) The fund of funds or the sub-fund records serious losses and is unable to continue its operation. (III) Owing to serious violation of laws and regulations, the fund of funds or the sub-fund will be ordered to be terminated by the relevant management authority. Article 44 In any of the following circumstances, the manager of the fund of funds or a sub-fund shall leave: (I) The manager is dismissed or bankrupt or has the assets taken over by a receiver. (II) The manager loses management capability or seriously damages the interests of any fund investor. (III) In accordance with the fund partnership agreement, the investor holding more than two thirds of interests of the fund requires the manager to leave. (IV) Any other circumstance occurs whereby the manager should leave in accordance with the fund partnership agreement. Article 45 The Industry Fund Management Company shall agree in the agreement of the fund of funds that in any of the following circumstances, the guidance fund may be withdrawn from the fund of funds without the consent of other contributors: (I) Establishment formalities have not been finished as per stipulated procedures more than six months after the confirmation of the scheme on the fund of funds (subject to the date of approval by the Fund Management Committee). (II) The fund of funds fails to establish any sub-fund or makes any investment more than six months after the guidance fund appropriates capital to the account of the fund of funds. (III) The fund of funds fails to make an investment in accordance with the relevant agreement. (IV) The management organization of the fund of funds changes substantially. (V) Any circumstance that does not conform to the relevant agreement or violates the Administrative Measures or the Implementing Rules as identified by the Office of the Fund Management Committee occurs. At the time of withdrawal of the guidance fund, the Industry Fund Management Company shall engage a qualified intermediary to conduct special auditing and asset assessment for fund shares or equities held by it, which will be taken as the basis for withdrawal price. -10-

11 Chapter VII Assessment and Supervision Article 46 The Fund Management Committee shall formulate and revise the Implementing Rules, the Development Plan and the Negative Investment List to guide the investment direction of the Yangtze River Industry Fund, take them as bases of the assessment and supervision for funds and fund managers, and ensure the realization of strategic intentions of the Hubei Provincial Party Committee and the Hubei Provincial People s Government. Article 47 The Fund Management Committee shall formulate the performance assessment methods of the Yangtze River Industry Fund and fund managers. The Office of the Fund Management Committee together with the Hubei Provincial Finance Department and other departments shall be responsible for the assessment and evaluation of the guidance fund and the Industry Fund Management Company, while the Industry Fund Management Company shall be responsible for the assessment and evaluation of the fund of funds, sub-funds and managers thereof. Article 48 The assessment, evaluation and so on shall be made comprehensively from the overall efficiency of funds and in the principle of marketization, and no definite evaluation shall be made for profits and losses of a single fund or single project. Article 49 The auditing and financial departments shall audit and examine the overall operations of the guidance fund. Article 50 The Industry Fund Management Company shall receive the audit and examination of the auditing and financial departments. Illegalities and irregularities such as use for any other purpose not stipulated, retention, appropriation or squandering of the guidance fund during fund operations shall be dealt with according to relevant state laws and regulations. -11-

12 Chapter VIII Supplementary Provisions Article 51 The joint establishment of a fund by the guidance fund and the financial fund under the Central Government shall be subject to relevant state regulations. Article 52 The Fund Management Committee shall formulate specific implementing rules in accordance with the Administrative Measures. Article 53 The Administrative Measures shall be subject to the interpretation of the Office of the Fund Management Committee as authorized by the Fund Management Committee. -12-