Important Notice on the Rights and Interests of the Investors of Securities Investment Funds

Dear Fund Investor:

Investing in funds poses certain risks, even when gains are being made. In the interests of safeguarding your statutory rights, please read the information provided herein before deciding whether to invest in a fund or not.

I. Basic Information about Funds

1. What is a Fund?

Securities Investment Funds (often referred to as just “Funds”) refer to a collective investment method in which both the gains and risks resulting from investment are shared between a group of investors. Specifically, quota in a fund is sold to investors, and these investments are combined to form an indep endent property that is used to invest in a group of securities. The fund is under th e custodianship of a fund custodian and managed by a fund manager.

2. The differences between funds and other financing tools, such as shares, securities and deposits.

 

Funds

Shares

Bonds

Bank Deposits

Differences in the economic relationship reflected

A kind of b eneficiary certificate, f unds represent a trust relationship . Investors become the beneficiary of a fund after they have purchased a quota therein. The fund manager is only responsible for managing the capital that has been invested, and is not liable for any losses.

A kind of ownership certificate, shares represent an ownership relationship. An investor becomes an owner in the company in question once it has purchased shares.

A kind of creditor certificate, bonds reflect a debt creditor relationship. An investor becomes a creditor of the company in question after purchasing its bonds.

Represented as the liabilities of a bank. A form of credit certificate. The bank is held legally liable to maintain the principal of deposits and offer payment of interest.

Differences in the investment direction of funds raised

An indirect investment tool, funds mainly invest in negotiable securities such as shares and bonds.

A direct investment tool mainly oriented towards the industrial sector

A direct investment tool mainly oriented towards the industrial sector

An indirect investment tool. Banks are charged with the usage and investment direction of deposits.

Differences in the magnitude of risks and gains

Investments are made in a large range of negotiable securities, meaning that risks are effectively spread and gains are relatively stable

Share prices are highly subject to fluctuation. Risks are high but so are gains

Lower price fluctuation than shares. Low risks and low gains.

Interest rates for bank deposits are stable and there is little chance that deposits will incur losses. Therefore, this is a safe form of investment.

Source of Gains

Interest, dividends and capital gain

Dividends and capital gain

Interest and capital gain

Interest

Investment channels

Fund management companies and agencies such as banks and securities companies.

Securities companies

Bond issuing institutions and agencies such as banks and securities companies.

Banks, credit unions and postal savings banks.

3. Fund classification

(1) Funds can be divided into two types according to the way that they are operated: closed-end funds and open-end funds.

Closed-end funds are named after a means of fund operation in which fund quotas are fixed during the fund contract period, and can be traded at legal stock exchanges but not redeemed by the holder.

Open-end funds are named after a means of fund operation in which fund quotas are not fixed, and can be purchased or redeemed at times and places stipulated in the fund contract.

(2) Funds can also be categorized according to their investment targets, and include: equity funds, bond funds, money market funds and hybrid funds.

According to the standards for the classification of fund types prescribed in the Measures for the Administration of Operation of Securities Investment Funds, funds are classified as follows: Funds in which over 60% of the capital invested therein is invested in shares are classified as equity funds; funds in which over 80% of the capital invested therein is invested in bonds are classified as bond funds; Funds in which all of the capital therein is invested in the money market tool exclusively are classified as money market funds; funds in which the capital invested therein is invested in shares, bonds and the money market tool, but which the proportions of the total amount invested represented by shares and bonds respectively are not high enough to put the fund in the category of an equity or bond fund, are classified as hybrid funds. Put in sequence according to gain and risk, the order of these funds from high to low is as follows: equity funds, hybrid funds, bond funds and money market funds. The gains and risks of equity funds are the highest, whereas the gains and risks of money market funds are the lowest.

(3) Special Kinds of Fund

a. Fund Family. Also known as an umbrella fund, a fund family refers to a kind of fund structure in which multiple funds share the same fund contract. Sub-funds operate separately and transfers can be made between them.

b. Guaranteed Fund. Through the use of investment portfolio insurance techniques, possible large gains are sought after whilst the risk from the investment target dropping in value is controlled.

c. Exchange Traded Open-end Funds (ETF) and Listed Open-end Funds (LOF). Exchange Traded Open-end Funds, or often just Exchange Traded Funds (ETF) are a kind of open-end fund that can be traded on the stock exchange and whose fund quota is not fixed. Listed Open-end Funds (LOF) are a kind of open-end fund whose quota can be purchased or redeemed both in and out of the stock exchange.

d. QDII Funds. QDII funds refer to a kind of securities investment fund in which most of the investments are made in overseas securities markets. Investors can make subscriptions or investment applications in RMB or foreign exchange such as US dollars. Gains can be made by the investor as they assume the risks of investing in foreign securities markets. The major difference between QDII funds and standard securities investment funds lies in the scope in which investments are made.

4. Fund Grading

Funds are analyzed and graded in terms of their quality based on a set grading standard. When investors are deciding whether to invest in a fund or not, this grading can serve as a reference. However, this grading should not be the sole basis on which the decision to buy a fund or not is made. The grading given to the fund is made according to the performance of the fund manager in the past, and is by no means an indication of how the fund will perform in the future.

The Bank, according to the principle of suitability for sale, conducts prudent investigations of fund managers, and also evaluates funds according to their risk level.

5. Fees for funds

Generally speaking, fund fees come in two types. The first type of fees are those that are incurred during the process of the fund's sale, such as subscription fee, purchase application fee, redemption fee and fund transfer fee. These fees are borne by the investor. Such fees are usually collected directly during the course of subscription, purchase application, redemption and fund transfer. Purchase application fees are collected either when the fund is purchased (front-end) or when it is sold (back-end). The fee rate usually decreases successively the longer the holding period is. The second kind of fees are those that are incurred in the fund management process, including fund management fee, fund custodian fee and information disclosure fee. These fees are taken from the fund. For money market funds and certain bond funds that don't levy purchase and redemption fees, a sale service fee might be withdrawn from the fund assets, but it can be no more than 2.5‰ of the total assets.

II. Rights of fund quota holders

According to the provisions given in article 70 of the Securities Investment Funds Law, fund quota holders enjoy the following rights:

1. Receive a share of gains from the fund;

2. Involv ement in the allotment of surplus fund property following liquidation;

3. Transfer or request redemption of the quota in the fund as stipulated by law;

4. Request the convening of a general fund quota holder's meeting in line with relevant stipulations;

5. Exercise voting rights on the matters deliberated during general fund quota holder's meeting;

6. Access and copy publicly disclosed fund information;

7. File litigation against fund managers, fund custodians and fund quota distributors that have infringed statutory rights;

8. Other rights and powers specified in the fund contract.

III. Prompting fund investment risks

1. Securities investment funds are long term investment tools. Their defining function is that they spread investment out so as to avoid the kind of risk incurred from investing in a single security. Funds are unlike bank deposits, bonds and other financing tools that offer fixed income projections. If a fund makes gains, the investors of the fund can share these gains out according the quotas that they hold therein. Likewise, if the fund incurs losses, these too must be shared out.

2. Funds face a number of potential risks as they are operated, such as market risks and the management risks, technological risks and legitimacy risks of the fund itself. Mass redemption risk is a kind of risk unique to open-end funds. Mass redemption is defined as the net total of redemption applications in a single day exceeding 10% of the total fund quota. In such circumstances, investors may not be able to redeem their entire quota in the fund immediately.

3. Fund investors should be clear about the differences between fixed-period fixed-sum investments in funds and bank deposit methods such as small savings for lump-sum withdrawal. Fixed-period fixed-sum investment refers to an easy form of making investments in which capital is invested into a fund over a long period at fixed intervals and amounts. However, this does not mean that the risks inherent to investing in funds can be avoided, and there is no guarantee that investments will make returns. Fixed-period fixed-sum investment should not be perceived as an equivalent to forms of financing such as making deposits in a bank.

4. Fund managers pledge to operate funds honestly, diligently and responsibly. However, they do not guarantee that the funds they operate will be profitable, and there is no guaranteed minimum gain. The past performance and net value of a fund are not indicators of how the fund will perform in the future. Fund managers warn investors that fund investments are carried out on an investor liability basis, i.e., after a fund has been invested in, the risks that arise from changes in the funds operation status and net value are borne by the investor alone.

5. The Industrial Bank will offer investors an appraisal of their risk tolerance capacity, and recommend suitable funds on this basis. However, it must be noted that the Bank's recommendations are for reference only. Clients must make fund investment decisions based on their own risk tolerance capacity and bear all risks that may arise from such investments.

IV. Service Details and Fees

The Industrial Bank provides the following services to fund investors:

1. Offering an appraisal of the risk tolerance capacity of investors.

2. Fund sales, including fund account opening, fund subscription and purchase, fund transfer, fixed-period fixed-sum investment and modification of the means of dividend division. The Bank collects subscription, purchase, redemption and transfer fees according to the issuing announcement of the fund in question and other announcements made by the fund management company.

3. Funds transaction e-channels such as the Internet Bank, Telephone Bank and the Mobile Phone Bank.

4. Information about funds in general and tips on how to combat risks.

V. Steps for fund transaction

Personal investors can purchase funds via the Industrial Bank in the following way:

1. Apply for a wealth management card or current passbook

You will be required to apply for a wealth management card or current passbook and deposit the necessary funds before open-end fund services can be accessed.

2. Open a fund account.

Fill-out and sign a Fund Services Application Form (The form is in duplicate). Provide original proof of identification and photocopies (ID card, Passport, Military Officer's ID, or Military Soldier's ID) as well as your wealth management card or current passbook. After your application has been processed by the system, the Bank will print out a Fund Services Application Receipt , which will be signed by bank staff. A copy of the receipt will be retained by the investor.

3. Appraisal of Investor Risk Tolerance

All new fund investors are required to fill-out a Client Risk Tolerance Appraisal Questionnaire before they will be granted access to fund services. The Bank, according to this risk tolerance appraisal, will recommend suitable funds to the client. However, it must be noted that the Bank's recommendations are for reference only. Clients must make fund investment decisions based on their own risk tolerance capacity and bear all risks that may arise from such investments.

4. Channels for Entrusting Transactions (over the counter, through Internet Banking or Telephone Banking etc.)

(1) Over the Counter

Investors who wish to entrust the Bank to subscribe, purchase or redeem funds on their behalf can do so by producing a wealth management card or current passbook at a Bank outlet and filling out a Fund Services Commission Sheet. After the Bank has been entrusted to make a transaction, counter staff will print out a Fund Services Receipt , which should be signed by the investor for confirmation.

(2) Through Internet Banking

Once the investor's fund account applied for via the Bank has been confirmed by the fund company, the investor can activate online fund transaction services for the wealth management card or current passbook in which the fund account has been opened by producing proof of identification, the wealth management card in question and filling-out an Application Form for Industrial Bank “Natural Life” Family Wealth Management Card Services and signing an Industrial Bank “Natural Life” Family Wealth Management Card Usage Contract at a Bank branch.

Once activated, open-end funds will be able to be subscribed, purchased and redeemed via the Bank's personal internet banking platform.

Investors can log-onto the Internet Bank and entrust the Bank to subscribe, purchase or redeem an open-end fund or withdraw an order on their behalf. After successfully entrusting the Bank, a Fund Services Application Receipt can be printed out by staff member and signed for confirmation at the counter of a Bank outlet.

(3) Through Telephone Banking

Fund services are available via the Bank's customer service hotline 95561. The investor can activate telephone fund transaction services by producing proof of identification, the wealth management card in question (the card housing the fund account) or the current passbook and filling-out an Application Form for Industrial Bank “Natural Life” Family Wealth Management Card Services and signing an Industrial Bank “Natural Life” Family Wealth Management Card Usage Contract at a Bank branch . Once activated, open-end funds will be able to be bought and sold via the Bank's customer service hotline 95561.

Investors can call the customer service hotline on 95561 and entrust the Bank to subscribe, purchase or redeem an open-end fund or withdraw an order on their behalf. After successfully entrusting the Bank, a Fund Services Application Receipt can be printed out and signed for confirmation at the counter of a Bank outlet.

(4) Through Mobile Phone Banking

Fund services are available via the Bank's Mobile Phone Banking. The investor can activate mobile phone fund transaction services by producing proof of identification, the wealth management card in question (the card housing the fund account) and filling-out an Application Form for Industrial Bank “Natural Life” Family Wealth Management Card Services and signing an Industrial Bank “Natural Life” Family Wealth Management Card Usage Contract at a Bank branch. Once activated, open-end funds will be able to be bought and sold via the fund transaction section of the Bank's WAP mobile phone banking (https://wap.cib.com.cn).

Investors can log-onto the mobile phone bank and entrust the Bank to subscribe, purchase or redeem open-end funds commissioned by the Bank on an instant payment transaction basis or withdraw an order on their behalf. After successfully entrusting the Bank, a Fund Services Application Receipt can be printed out and signed for confirmation at the counter of a Bank outlet.

5. Transaction Confirmation

All entrustments made to the Bank are subject to confirmation by the fund company. Therefore, investors can check whether or not the transaction has been successful via a bank outlet or e-service at least two working days after entrusting the Bank to conduct a transaction. Investors can check the confirmation status of their transaction at a Bank outlet with the second sheet of the Fund Services Transaction Receipt . Internet bankers can check the status of their transaction via the internet bank or at a Bank outlet with the Fund Services Transaction Receipt. Telephone bankers can check the status of their transaction via the customer services hotline 95561 or at a Bank outlet with the Fund Services Transaction Receipt.

6. Making Enquiries

Investors can access fund information, fund account information and transaction entrustment information by producing their wealth management card or current passbook at a Bank outlet. Internet bankers can access fund information, fund account information and transaction entrustment information via the personal internet banking service. Telephone bankers can access fund information, fund account information and transaction entrustment information via the customer service hotline 95561.

VI. Complaints handling and contact information

Fund investors can make suggestions or complaints about the services offered at Bank outlets by calling the Bank's customer service hotline 95561 or by mail, fax or e-mail. In principle, complaints received on a working day will be responded to on the same day. If not, a response will be given within three working days. Complaints received on a non-working day will be responded to on the first working day after having been received. If not, a response will be given within three working days.

Investors can also file complaints with the China Securities Regulatory Commission or the Securities Association of China by mail, fax or e-mail. Contact details are given below:

Securities Association of China

Website: www.sac.net.cn

e-mail: huizhang@sac.net.cn

Address: Floor 2, Block B, Fukai Building, Financial Street, Beijing.

Post Code: 100140

Fax: 010-66575896

Tel: 010-58352888 (Call center for China securities investors)

www.sipf.com (site for the protection of China securities investors)

Investors are advised to read the Fund Contract and Fund Prospectus carefully before investing in a fund. Investments should be made in accordance with risk tolerance capacity. The industrial Bank and the fund management companies guarantee that the interests of investors come first, and that services will be offered honestly, diligently and responsibly. However, we cannot guarantee that funds will be profitable, and there is no guaranteed minimum gain. Investors can log-on to the websites of the China Securities Regulatory Commission (www.csrc.gov.cn) or the Securities Association of China (www.sac.net.cn) for the official list of fund selling organizations and to confirm the Industrial Bank's credentials in this regard.

 

 

Industrial Bank Co., Ltd.

Website: www.cib.com.cn

Customer Service Hotline: 95561