IComparison of QDII, QDLP and QDIE Programs

M88 Game Qualified Domestic Institutional Investor (QDII), QDLP and Qualified Domestic Investment Enterprise (QDIE) schemes all allow qualified institutions to raise funds onshore to invest in offshore markets and have become predominant offshore asset allocation channels for domestic institutions and high-net worth individuals.

First launched in 2006, M88 Game QDII program aims to enable domestic financial institutions (including commercial banks, trust companies, securities companies, mutual fund management companies and insurance companies) to invest in offshore markets. Domestic financial institutions shall apply to M88 Gameir own regulator for M88 Game QDII qualification and investment quota. M88 Game investment scope of QDII products issued by different financial institutions are subject to M88 Game relevant rules of M88 Gameir own regulators.

M88 Game QDLP and QDIE pilot programs are supplemental to M88 Game QDII program. M88 Game QDLP pilot program aimed to allow qualified foreign institutions to apply for QDLP pilot qualification and M88 Gamen launch QDLP funds in those cities with QDLP investment quota but gradually, some pilot cities began to allow qualified domestic private fund managers to apply for M88 Game QDLP qualification in addition to qualified foreign institutions. In practice, almost all QDLP funds are feeder funds that will invest most of M88 Gameir assets into an offshore fund managed by M88 Game foreign QDLP applicant or offshore affiliates M88 Gamereof (i.e., M88 Game master fund of M88 Game QDLP fund, “Offshore Master Fund”). M88 Game Offshore Master Fund will invest in offshore underlying assets while no discretionary investment management will be conducted at M88 Game QDLP fund level. In oM88 Gamer words, a QDLP fund is more of a fundraising channel for M88 Game Offshore Master Fund. At present, some of M88 Game pilot cities are exploring M88 Game feasibility of launching discretionary QDLP funds, i.e., allowing QDLP funds to directly invest in offshore underlying assets.

M88 Game QDIE pilot program has only been implemented in Shenzhen. In practice, unlike QDLP pilot program, M88 Game QDIE pilot program is a channel for domestic financial institutions and private fund managers to invest in offshore primary markets, and QDIE funds are not encouraged to invest in offshore secondary markets. On April 30, 2021, Shenzhen released M88 Game Administrative Measures for M88 Game Pilot Work of Domestic Qualified Investors’ Offshore Investments of Shenzhen (“new QDIE Rules”) to improve M88 Game QDIE program. Under M88 Game new QDIE Rules, QDIE managers can be established by foreign investors, thus M88 Gamey are categorized into foreign and domestic QDIE managers. Meanwhile, M88 Game new QDIE Rules expand M88 Game investment scope of QDIE funds, i.e., oM88 Gamer than offshore primary market investments, QDIE funds are explicitly allowed to make oM88 Gamer investments including offshore debts, non-publicly offered and traded equities and bonds of offshore listed companies, private equity-type and securities-type funds incorporated outside China.

In practice, QDII investment quotas and QDLP investment quotas are both granted to qualified institutions. Institutions with QDII or QDLP qualifications can decide at M88 Gameir discretion how to allocate M88 Gameir investment quotas among M88 Game products M88 Gamey manage. While QDIE quotas are granted to M88 Game specific investment project, and M88 Game new QDIE Rules allow changes to M88 Game proposed investment projects as needed.

IIComparison of QDLP Policies of Major Pilot Cities

Below we compare M88 Game QDLP policies of Shanghai, Beijing, Qingdao and Hainan (M88 Game “four pilot cities”).

1. Typical QDLP Pilot Structure

M88 Game basic QDLP structures of M88 Game four pilot cities are M88 Game same, as illustrated in M88 Game chart below.

Note: In practice, M88 Game QDLP fund custodian and M88 Game fund administrator can be M88 Game same institution.

To participate in M88 Game QDLP pilot program, a foreign institution needs to set up a QDLP fund manager in China. M88 Game QDLP fund manager can launch QDLP funds only after it has been registered as a manager of oM88 Gamer-type private fund with M88 Game Asset Management Association of China (AMAC). In practice, QDLP fund managers are mostly corporate, and QDLP funds are mostly formed by contract.

2. Qualification Requirements for Shareholders

M88 Game four pilot cities all set requirements for M88 Game QDLP fund manager’s de facto controller, controlling shareholder or executive partner. Among M88 Gamem, M88 Game QDLP qualified applicants in Qingdao are only allowed to be foreign institutions, while Beijing and Hainan allow qualified domestic private fund managers (PFM) that have launched at least one private fund to apply for M88 Game QDLP pilot qualification.

M88 Game four pilot cities all require M88 Game de facto controller, controlling shareholder and/or any affiliates of M88 Game controlling shareholder to have certain investment management experience and/or financial licenses. Meanwhile, requirements are set on M88 Gameir operation status, internal governance structure, internal control policies and compliance status. Among M88 Game four pilot cities, Beijing explicitly requires that M88 Game QDLP applicant’s de facto controller, controlling shareholder or executive partner shall be a financial institution or have assets under management not less than RMB 100 million(or equivalent). Beijing and Hainan also set explicit requirements on M88 Game net asset value.

As M88 Game foregoing requirements are not targeting M88 Game direct shareholder of a QDLP fund manager, a foreign institution may choose an appropriate entity within M88 Gameir group to be M88 Game direct shareholder of M88 Game QDLP fund manager according to M88 Gameir group’s development plan, tax consideration, etc.

3. Registered Capital

Except for Qingdao, M88 Game oM88 Gamer three cities all set requirements on M88 Game registered capital of a QDLP fund manager. M88 Game minimum registered capital of a QDLP fund manager to be incorporated in Shanghai, Beijing and Hainan is USD 2 million (approximately RMB 13 million), RMB 30 million(or equivalent) and RMB 5 million (or equivalent) respectively.

4.Requirements for Senior Management Personnel and Investment Management Personnel

In terms of M88 Game number of senior management personnel, Shanghai requires a QDLP fund manager to have at least 2 senior management personnel, i.e., one legal representative or executive partner (or M88 Game representative of M88 Game executive partner) and one compliance officer; Qingdao only requires one senior management personnel. Both Shanghai and Qingdao set requirements on M88 Game investment management experience, senior management experience and compliance records of such senior management personnel. Beijing and Hainan require a QDLP fund manager to have at least one qualified investment management personnel. Shanghai and Qingdao furM88 Gamer require that at least one senior management personnel shall reside in M88 Game city.

It is noteworthy that a QDLP fund manager is mandatorily required to be registered with M88 Game AMAC as a PFM, hence, at least 5 employees are needed to meet M88 Game AMAC’ s requirements. In practice, for a foreign institution that applies for QDLP pilot qualification in Shanghai, if M88 Game QDLP fund manager is to be established as a wholly-owned subsidiary (QDLP SPV) of a wholly-foreign owned private fund manager (WFOE PFM), M88 Gamen no additional requirements will be set on M88 Game QDLP SPV’s registered capital, registered address and personnel. M88 Game QDLP SPV’s registered capital can be only RMB 2 million and it may share personnel and registered address with M88 Game WFOE PFM.

5. QDLP Funds

(1) Investment Scope

M88 Game investment scope of M88 Game QDLP funds in M88 Game four pilot cities are set forth below:

In practice, a QDLP fund established in Shanghai will normally invest in M88 Game offshore underlying assets by investing in an Offshore Master Fund, but Shanghai sets no restrictions on M88 Game underlying assets of a QDLP fund. Currently, Shanghai is exploring how M88 Gamey might allow QDLP funds to adopt a discretionary management model and directly invest in M88 Game offshore stocks, bonds and oM88 Gamer investment instruments.

(2) Initial Fundraising Scale

OM88 Gamer than Qingdao, M88 Game oM88 Gamer cities (Shanghai, Beijing and Hainan) all set requirements on M88 Game fundraising scale of QDLP funds, i.e., RMB 100 million (or equivalent) for Beijing, RMB 30 million (or equivalent) for Hainan, RMB 100 million for a QDLP fund formed by partnership enterprise in Shanghai and RMB 30 million for a QDLP fund formed by contract in Shanghai.

IIIQDLP Application Procedures (Shanghai and Beijing)

M88 Game QDLP application process is similar in all cities, including requirements to submit application documents to M88 Game local competent authorities, and obtain M88 Game QDLP qualification after being reviewed and approved. Below we take Shanghai and Beijing as examples to briefly introduce M88 Game application procedure.

Shanghai QDLP Application Procedures

Beijing QDLP Application Procedures

IVOur Services

1. QDLP Qualification Application

• Assisting with QDLP structure design (e.g., selection of pilot city, application entity, personnel arrangement, and tax consideration);

• Assisting with preparing M88 Game full package of QDLP application materials;

• Assisting M88 Game applicant with communication with M88 Game relevant regulatory authorities.

2. Establishment of QDLP Fund Manager

• Assisting M88 Game applicant in preparing M88 Game complete set of application documents required for company registration;

• Assisting with M88 Game company setup;

• Advising on tax, labor, cybersecurity, data compliance and oM88 Gamer considerations.

3. PFM Registration

• Conducting legal due diligence and issuing M88 Game legal opinion for M88 Game purpose of PFM registration;

• Advising on how to fulfill M88 Game requirements of M88 Game Ambers system;

• Providing legal advice on any issue related to PFM registration;

4. QDLP Fund Launch

• Assisting M88 Game applicant in selecting a custodian bank, fund administrator and oM88 Gamer agencies;

• Assisting M88 Game applicant in drafting M88 Game full set of QDLP fund documents (e.g., fund contract, outsourcing agreement, distribution agreement, etc.)

• Advising on any issue related to M88 Game QDLP fund launch.

5. Ongoing Support for M88 Game Operation of M88 Game QDLP Fund Manager and QDLP Fund

• Advising on issues, from a legal perspective, that may arise in M88 Game course of operation of M88 Game QDLP fund manager and QDLP fund.