All relevant offices and bureaus of Zengcheng Economic and Technological Development Zone, town governments, street community offices, agencies concerned, GuangzhouZengcheng District Industry Investment Group Co., Ltd., and Guangzhou Nanyue Fund Mangement Group Co., Ltd.,
TheMeasures of Zengcheng District for the Administration of the High-quality Economic Development Guidance Fund (Amended) were deliberated and adopted at the 94thsession of the second district governmentexecuting meeting, and are hereby issued to you compliance and implementation. Problems encountered in the implementation shall be directly reported to theZengcheng District Bureau of Science, Industry, Commerce and Information Technology.
Zengcheng District Bureau of Science, Industry, Commerce and Information Technology of Guangzhou Municipality
April 14, 2021
Measures of Zengcheng Districtfor the Administration of the High-quality Economic DevelopmentGuidance Fund (Amended)
Chapter 1General Provisions
Article 1These Measures are formulated in accordance with the applicable laws, regulations and policies, in light of the realities of Zengcheng District,for the purposes of establishing and operatingthe high-quality economic developmentguidance fund of Zengcheng District (hereinafter referred to as the “Guidance Fund”) in a standardized manner, attracting high-quality domestic and overseas investment enterprises to the district, leveraging the supporting role of capital in promoting industry transformation and upgrading, and driving the high-quality district economic development.
Article 2The Guidance Fundherein refers toa policy fund established and operated in a market-based manner by the Zengcheng District People’s Government,aiming toexploit the resource allocation role of the market and the guiding role of fiscal funds, stick to the new developmentphilosophy, and step up efforts in developingnew economy and new growth drivers according to the high-quality development requirements.
Article 3The Guidance Fundshall be invested in new economy or new growth driver industry projects through equity participation in sub-funds or direct equity investment.
Article 4The “equity participation in sub-funds” herein refers to the initiation or capital increase of various investment funds for investment operations by the Guidance Fundand social capital jointly. Funds invested bythe Guidance Fundarecollectively known as sub-funds of the Guidance Fund (hereinafter referred to as “sub-funds”).
Article 5The “direct equity investment”herein means that the Guidance Fundsupports, by means of direct equity investment, any project that is recommended by the investment promotion departments of Zengcheng District Government and conforms to the district’s industry policies. The amount of direct equity investment shall not exceed 50% of the paid-up amount of the Guidance Fund in the current period.
Article 6The Guidance Fundshall have a stage-one size of 400 million yuan, and a duration of 10 years. The main funding sources of the Guidance Fundshall be:
(1)Special funds allocated by the district budget;
(2)Proceeds generated by the operation of the Guidance Fund (except the portion used under unified planning according to the procedure);
(3)Funds donated by individuals, enterprises or social organizations; and
(4)Other funding sources.
Article 7The district finance bureau shall provide the first period contribution, and subsequent contributions shall be provided based on the annual budget, project investment progress or actual fund demand. If the external investment amount of the Guidance Funddoes not reach 60% of the fund size of the current period, the district finance bureau shall postpone subsequent contributions.
Article 8The Guidance Fundshall be managedunder a system wheredecision-making is separated from management, and it shall be operatedunder the principle of “government guidance, market operation, science-based decision-making, and risk prevention”.
(1)Government guidance.Efforts shall be made to bring the government function inregulatingsocioeconomic development and urban construction into full play.Governments shalladoptinnovative forms of fiscal support for economic development,guide social capital to be invested in new economy or new growth driver projects, and promote the realization of the policy direction and objectives. However, government departments concerned shall not participate in specific fund operations and shall not designate specific projects.
(2)Market operation.The market shall play a decisive role of in resource allocation. The Guidance Fundshall guide investment directions of social capitalthrough equity participation in sub-funds. The routine management, project investment and post-investment management of sub-fundsshall be conducted by a professional fund management agency in a market-based manner. Government authorities concerned and the entrusted management agency of the Guidance Fundshall not interfere with the specific management and operation of sub-funds.
(3)Science-based decision-making.A science-based decision-making mechanism shall be established, decisions shall be made in a professional and meticulous manner, and the Guidance Fundand sub-fundsshall be managedand invested on a scientificand rational basis and through optimized procedures.
(4)Risk prevention.The equity participation of the Guidance Fund in sub-fund decision-making, the governance of the fund management agency, and capital regulation shall be regulated to prevent fund operation risks.
Chapter 2Management Pattern
Article 9ASupervision and Management Group of theHigh-quality Economic Development Guidance Fundof Zengcheng District (hereinafter referred to as the “Guidance Fund Management Group”) shall be established to perform decision-making and management duties for the Guidance Fund. The Management Group directorshall be the deputyhead of Zengcheng District;the vice directors shall bethe main leaders of theBureau of Science, Industry, Commerce and Information Technology and the Bureau ofFinance bureauof the district;group memebers shall include theleaders of theinvestmentpromotionsection ofthe District Bureau of Science, Industry, Commerce and Information Technology, and theBureau of Economy,Science and Information Technology of Zengcheng Economic and Technological Development Zone, theDistrict Bureau ofDevelopment and Reform, Zengcheng District Investment Promotion and Enterprise Preparation Service Center, Nanyue Fund, Zengcheng District Industry Investment Group Co., Ltd., etc.
As the competent authority for theGuidance Fund, the Management Group isauthorized by the district government to perform the following duties:
(1)Approving the development strategy and plan of the Guidance Fund, and determining its main investment directions based on the economic and social development strategy, and high-quality development policy direction of Zengcheng District;
(2)Approving relevant management systems of the Guidance Fund;
(3)Approving annual investment plans of the Guidance Fund;
(4)Approving selection results of sub-fund management agencies;
(5)Adjusting the size of the Guidance Fund based on investment operations;
(6)Approving the market-based withdrawal plan of the Guidance Fundfor sub-funds;
(7)Supervising the entrusted management agency of the Guidance Fundto perform resolutions of the Management Group;
(8)Approving the direct equity investmentproject proposal and withdrawal plan of the Guidance Fund; and
(9)Performing other tasks authorized by the district government.
Article 10The General Office of the Management Group (hereinafter referred to as the “General Office”)will be established at the District Bureau of Science, Industry, Commerce And Information Technology, responsible for day-to-day affairs, including:
(1)Organizing working meetings of the Management Group;
(2)Organizing meetings ofthe Guidance Fund Review Committee; and
(3)Performing other tasks assigned by the Guidance Fund Management Group.
Article 11Guangzhou Nanyue Fund Group Co., Ltd. is appointed as the entrusted management agency of the Guidance Fund (referred to as “Nanyue Fund” or the “Guidance Fund Manager”). Its main responsibilities shall be as follows:
(1)Executing resolutions of the Management Group;
(2)Selecting sub-fund management agencies:publicizingannual application guide of the Guidance Fund, and acceptingapplicationsfrom sub-fund management agencies. After conducting due diligence and investment analysis on any proposed sub-fund or partner, the Review Committee shall review the investment plan of establishment of or equity participation in the sub-fund, and submit the selection result to the Management Group for approval;
(3)Conducting due diligence and investment analysis on direct equity investment projects, and submitting such reports to the Management Group for approval;
(4)Assuming limited liability for any sub-fund of the Guidance Fund to the extent of the contribution, and exercising the investor rights for such sub-fund on behalf of the Guidance Fund;
(5)Submitting annual investment plans of the Guidance Fund to the Management Group;
(6)Supervising sub-fundsand direct equity investment projects, and reporting operation to the Management Group semiannually;handing the sub-fund withdrawal procedure on behalf of the Guidance Fund according to the agreement when any sub-fund is used in violation of laws and regulations, or in departure from the policy direction;
(7)Completing the non-market-based withdrawal of the Guidance Fundfrom any sub-fund;
(8)Providing project information inquiry and project matchmaking services for sub-funds on behalf of the district industry authority;
(9)Evaluating of the performance of the custody agreement by the custodian bank of any sub-fund; and
(10)Performing other tasks assigned bythe Management Group, the General Office.
Chapter 3Operation Management of Equity Participation in Sub-funds
Article 12The Guidance Fundshall operate as a fund of funds, including guiding social capital to initiatesub-funds jointly in Zengcheng District by equity participation, or investing in any established new economy or new growth driver industry investment fund by capital increase, equity (or partnership property shares) transfer, etc.
Article 13Sub-fundsshall operate based on a market mechanism, and their investment, management and withdrawal shall be conducted according to articles of association, partnership agreements or other agreements. Nanyue Fund shall supervise sub-fund investment operations, but shall not participate in the routine managementof sub-funds.
Article 14The main investment requirements of the Guidance Fundshall be as follows:
(1)Place of registration.Any newly established sub-fund shall be registered in Zengcheng District; if any sub-fund is to participate in any established new economy or new growth driver industry investment fund by capital increase, equity (or partnership property shares) transfer, etc., the place of registration shall be moved to Zengcheng District.
(2)Fund size.The maximum contribution of the Guidance Fundto any singlesub-fund shall not exceed 50 million yuan, and the Guidance Fund shall not become the largest shareholder in principle; if such limit is exceeded, such investment shall be submitted separately to the district government for approval.
(3)Investment direction.The Guidance Fundshall be invested in new economy projects such as new technologies, new industries, new business formats and new modes, high-tech industries, strategic emerging industries and other new growth driver projects, mainly including the following directions:
(a)Strategic emerging industries:new-generation IT, AI, biology and health industries, new materials and advanced equipment manufacturing, new energy, energy conservation and environmentalprotection, fashion andcreativity, and new energy vehicles
(b)Modern service industries:finance, logistics, information service, e-commerce, commercial service, MICE, technological service, culture, intellectual property service, tourism, sports, and health industries
(c)Made in Guangzhou 2025:intelligent equipment and robots, new-generation IT, energy-saving and new energy vehicles, new materials and fine chemicals, biomedicine and healthcare, energy and environmental protection equipment, rail traffic, high-end ship and marine engineering equipment, aviation and satellite application, and urban consumption industries
(d)Others:digital economy, big data; super-vision new display projects, and related semiconductor, electronic and information communication, fine chemicals and functional materials, precision machinery, optical instruments, and other upstream industries, as well as downstream industries like smart home, medical care, and industrial Internet
(4)Duration.The duration of any sub-fund shall not be less than three years, and not exceed the duration of the Guidance Fund. The total capital invested in enterprises registered in Zengcheng District by any sub-fund during its duration shall not be less than the contribution of the Guidance Fund.
(5)Investment period.Any sub-fund shall complete project investment within three years after the Guidance Fund forms equity in the sub-fund by equity participation, and the time of project withdrawal shall be earlier than the maturity of the sub-fund.
(6)Entrusted management.The governance structure of any sub-fund must meet the legal requirements, and any professional management agency shall be appointed to be responsible for the routine investment and management of the sub-fund.
(7)Mode of establishment.Any sub-fund may be established under the corporate or partnership system, anditmust be established and operated in strict conformity with the Company Law of the People’s Republic of China, the PartnershipLaw of the People’s Republic of China, and other applicable laws and regulations.
(8)Time of contribution.The contributions of the Guidance Fundand any other investor in any sub-fund shall be in place at the same pace and proportion in stages. The Guidance Fundand such other investor shall appropriate the paid-up capital to the account of the sub-fund at the same pace and proportion in stages according to the investment agreement.
(9)Planar structure.All investors of any sub-fund shall define the mode of return disposal and loss sharing on the principle of “benefit and risk sharing”. The Guidance Fundshall not promise to any other investor that the investment principal will not suffer any loss, and not promise any minimum return.
Article 15Any sub-fund shall not deal with the following types of operations directly or indirectly:
(1)Being invested in the stock of any listed enterprise, except for the untransferredpart or the allotted partafter any non-listed enterprise in which it is invested is listed;
(2)Dealing with such operations as guarantee, mortgage, entrusted loans, and real estate (including real estate purchased for self-use);
(3)Being invested in stocks, futures, corporate bonds, trust products, non-principal-guaranteed wealth management products, insurance plans, and other financial derivatives;
(4)Being invested in any other investment fund;
(5)Providing any sponsorship, donation, etc. to any third party;
(6)Absorbing deposits directly or in a disguised form, or providing any loan or interbank lending to any third party;
(7)Being used for any external investment bearing unlimited joint and several liability;
(8)Raising funds by issuing any trust or collective wealth management product; and
(9)Conducting any other operation prohibited by the state laws and regulations.
Article 16A sub-fund management agencyshall meet the following requirements:
(1)It is established according to law, with a registered capital of not less than 10 million yuan;
(2)It has sound and effective, corporate governance, internal control and managementsystems, rich investment management experience, excellent historical performance, and an exclusive and stable management team for the sub-fund;
(3)It has sound incentive and restraint, follow-up investment, asset custody and risk isolation mechanisms;
(4)It has no negative information, and is not included in the list of abnormal agencies by the Asset Management Association of China; and
(5)It accepts inquiries on investment operations from Nanyue Fund, and reports relevantinformation to Nanyue Fund as necessary.
Article 17The Guidance Fundshall agree with any other investor of any sub-fund in the articles of association or partnership agreement that the sub-fund management agencyshall report major matters on the sub-fund to the Guidance Fundin writing (filed with the entrusted management agency of the Guidance Fund –Nanyue Fund). The sub-fund management agencyshall conduct project filing with Nanyue Fund within one month after the completion of project investment of the sub-fund, and Nanyue Fund shall submit a statistical report to the Management Group for record semiannually.
Article 18The sub-fund management agencyshall submit the operation reports of the sub-fund in the first half year and previous year to Nanyue Fund in each July and next January, and the audited financial report and bank custody report of the sub-fund in the previous year in each April. Nanyue Fund may appoint a professional agency to audit the sub-fund as necessary.
Chapter 4Application for the Guidance Fundand Selection of Sub-fund Management Agencies
Article 19Procedure of applying for equity participation in sub-funds under the Guidance Fund:
(1)Public solicitation.According to the annual funding plan of the Guidance Fund approved by the Guidance Fund Management Group, the entrusted management agency of the Guidance Fundshall publicize the annual application guide of the Guidance Fund to the public.Applicantsmay file an application with the entrusted management agency of the Guidance Fund according to the application guide.
(2)Due diligence.The entrusted management agency of the Guidance Fundshall perform due diligence and investment analysis on any applicant’s information and proposal.
(3)Review by the Review Committee:The Guidance Fundshall practice a review committee review system, where the Review Committee review the proposal of a sub-fund management agency based on the due diligence and investment analysis, and the proposal shall be adopted by at least four fifths of all reviewers of the Review Committee before being submitted to the Management Group for decision-making. The Review Committee shall have five seats in total, and be composed of the District Bureau of Science, Industry, Commerce and Information Technology, District Finance Bureau, Bureau of Economy,Science, and Information Technology of Zengcheng Economic and Technological Development Zone, Nanyue Fund, and Zengcheng District Industry Investment Group Co., Ltd.jointly, where each agency shall assign one person responsible or appoint an external expert for review.
(4)Decision making by the Management Group.The Management Group shall decide on the sub-fund management agenciesselected by the Review Committee;only when the agencyearns the approval of at least two thirds of all members of the Management Group can be finally selected.
(5)Publication.The entrusted management agency of the Guidance Fundshall keep the list ofsub-fund management agencies approved by the Management Grouppublicizedfor three days.
Article 20Any newly established sub-fund that applies for a contribution from the Guidance Fundshall meet the following conditions:
(1)Its main sponsor (partner, similarly hereinafter), sub-fund management agency, and custodian bank have been largely determined, and other investors (partners, similarly hereinafter) have been preliminarily ascertained, and warrant that funds will be made available timely and fully.
(2)All investors of the sub-fund make contributions with lawful funds, the contribution of any single institutional investor except the sub-fund management agency is not less than 3 million yuan, and the contribution of any single natural person investor is not less than 1 million yuan, and the number of investors complies with the applicable law. All investors make contributionsmonetarily, and all contributions will be in place in the next three years.
(3)As the sub-fund manager, the sub-fund management agencymakes a paid-up contribution to the sub-fund, and the contribution proportion is specified in the articles of association or partnership agreement of the sub-fund.
(4)As the sub-fund manager, the sub-fund management agency has reserved a certain number of projects, and developed a Stage 1 investment plan.
Article 21In case of application for the capital increase or equity (or partnership property shares) transfer of any existing new economy or new growth driver industry investment fund by the Guidance Fund, in addition to the conditions for a newly establishedsub-fund, the following conditions shall also be met:
(1)The investment fund has been establishedaccording to the applicable laws and regulations, has been registered as a product with the Asset Management Association of China, and has started investmentoperations;
(2)The Stage 1 contributions of all investors of the investment fund are in place, and not less than 20% of the registered capital or promised contributions.
Article 22If the amount of external investment of any sub-fund that has applied for a contribution from the Guidance Fundis less than 60% of its size, the sub-fund management agency shall not continue to apply for equity participation or investment by the Guidance Fund.
Chapter 5Withdrawal from and Termination of Equity Participation in Sub-funds
Article 23The equity (or partnership property shares) formed by the equity participation of the Guidance Fundin any sub-fund can be withdrawn by means of liquidation at maturity, repurchase by social shareholders, equity (or partnership property shares)transfer (listed or not), etc. at any time if there is a transferee.
Article 24The entrusted management agency of the Guidance Fundshall review the withdrawal timing of any sub-fund, and withdraw from it when the time comes.
Article25If any sub-fund has made a profit before with withdrawal of the Guidance Fund, the Guidance Fundshall withdraw after receiving profits according to its contribution proportion.
Chapter 6Process of Investment in Direct Equity Investment Projects
Article 26Investment decision-making process of direct equity investment projects:
(1)Project source.Direct equity investment projectsshall be projects recommended by the investment promotion department of the Zengcheng District Government, and complying with the industry policy of Zengcheng District.
(2)Preliminary screening. Nanyue Fund conducts preliminary compliance review, due diligence and investment analysis on the application materials submitted by the applicant according to the relevant requirements hereof, prepare a direct equity investment proposal, and submit conforming investment projects to the Management Group.
(3)Decision making by the Management Group.The Management Group makes a decision on the investment proposalsthat have passed preliminary screening;only those earnsthe approval of at least two thirds of all members of the Management Groupshall be adopted.
Article 27Investment implementation process of direct equity investment projects:
(1)Agreement singing: Nanyue Fund shall secure the signing of the investment agreement and other legal documents between the Guidance Fundand the approved investee enterprise.
(2)Fund disbursement. Nanyue Fund shall secure the contribution of the Guidance Fundto the investee enterprise.
(3)Post-investment management. Nanyue Fund shall conduct the subsequent management, withdrawal, etc. of the investee enterprise according to the government provisions on investment fund management and these Measures.
(4)Withdrawal.For the withdrawal of any direct equity investment project, the Guidance Fund Manager shall conduct withdrawal according to the withdrawal plan of such project approved by the Management Group.
Chapter 7Incentive and Punishment Mechanism
Article 28Management fee payment:
(1)Nanyue Fund’s annual management fee shall be assessed at 1% of the gross size of the Guidance Fundmanaged by it, and paid annually from the Guidance Fund.
(2)Any sub-fund management agency shall charge a management fee according to the articles of association of the sub-fund. The annual management fee shall be usually 1-2% of the paid-up contribution of the sub-fund, and paid by the sub-fund.
Article 29When theGuidance Fund withdraws after forming equity in any sub-fund by equity participation, other investors of the sub-fund shall enjoy priority in being transferred the shares held by the Guidance Fund. Upon withdrawal of the Guidance Fund, it shall be priced as follows:
(1)If the Guidance Fundis invested for not more than three years, the transfer price shall be the sum of the original contribution of the Guidance Fundand the return calculated at the concurrent time deposit rate based on the following formula: transfer price = contribution of the Guidance Fund +contribution of the Guidance Fund ×concurrent time deposit rate × term.
(2)If the Guidance Fundhas been invested for more than three years but not more than five years, the transfer price shall be the sum of the original contribution of the Guidance Fundand the return calculated at the concurrent benchmark bank loan rate based on the following formula: transfer price =contribution of the Guidance Fund +contribution of the Guidance Fund ×concurrent benchmark bank loan rate × term.
(3)If the Guidance Fund has been invested for more than five years, it shall withdraw in a market-based manner.
Article 30When the Guidance Fund withdraws from any sub-fund in a market-based manner on the basis of “payback before profit sharing”, 20% of the incremental profit of the Guidance Fund invested in the sub-fund (recovered amount less the contribution to the sub-fund, withdrawal tax, normal reward for the sub-fund management agency(excluding Article 28), and other expenses, similarlyhereinafter) shall be granted to the entrusted management agency of the Guidance Fund as a reward.
Article 31According to the Interim Measures for the Administration of Government Investment Funds, in order to give better play of the guiding role of government contributions, the government may surrender part of profits. When the Guidance Fundwithdraws from any sub-fund in a market-based manner, based on the ratio of the total amount of the sub-fund invested in enterprises registered in Zengcheng District to the amount of equity participation of the Guidance Fund (hereinafter referred to as the “investment proportion”), the Guidance Fundmay grant a certain proportion of the incremental profit of equity participation in the sub-fund after granting a reward to the entrusted management agency of the Guidance Fund (hereinafter referred to as the “remaining profit”) to the sub-fund management agency and other investors of the sub-fund, as follows:
(1)If the investment proportion is more than 100% but not more than 120%, 20% of the remaining profit shall be rewarded to the sub-fund management agency and any other investor of the sub-fund then;
(2)If the investment proportion is more than 120% but not more than 150%, 30% of the remaining profit shall be rewarded to the sub-fund management agency and any other investor of the sub-fund then;
(3)If the investment proportion is more than 150% but not more than 200%, 50% of the remaining profit shall be rewarded to the sub-fund management agency and any other investor of the sub-fund then;
(4)If the investment proportion is more than 200%, 100% of the remaining profit shall be rewarded to the sub-fund management agency and any other investor of the sub-fund then.
Article32Theproportion of any sub-fund invested in enterprises registered in Zengcheng District shall not be less than 100% of the contribution of the Guidance Fund. If the proportion of the sub-fund invested in enterprises registered in Zengcheng Districtis lower than 100%within three years after the Guidance Fundforms equity in it by equity participation, the Guidance Fund may choose to withdraw without the consent of any other investor, and the entrusted management agency of the Guidance Fundmay take the following measures:
(1)Requesting to refund the full contribution;
(2)Asking the sub-fund management agency and/or the other investors of the sub-fund to pay a penalty calculated at twice the concurrent time deposit rate to the Guidance Fundbased on the following formula: penalty =contribution of the Guidance Fund×concurrent time deposit rate ×2× term;
(3)Having the right to disqualify the sub-fund management agency from applying for the Guidance Fundpermanently; and
(4)Having the right to apply with the Guangzhou Municipal Financial Work Bureau for including the sub-fund management agency in the list of discredited debtors of the Guangzhou Municipal Financial Work Bureau.
Chapter 8Risk Control
Article 33The Guidance Fundshall specify in the articles of association (or partnership agreement) of any sub-fund with the other investors that the Guidance Fund shall conduct compliance review on any project in which the sub-fund is invested by equity participation, and in any of the following cases, the Guidance Fundshall have the right to withdraw without the consent of the other investors:
(1)The sub-fund has not completed the establishment procedure according to the specified procedure and time beyond one year after the sub-fund proposal is confirmed;
(2)The sub-fund has not conducted any investment operationone yearafter the contribution of the Guidance Fundis disbursed to the sub-fund account;
(3)The investment field and stage of the sub-fund does not conform to the policy objectives;
(4)The sub-fund is not invested according to its articles of association; or
(5)The sub-fund management agency undergoes any substantial change.
Article 34If the Guidance Fundis invested by equity participation, it shall be specified in the articles of association (or partnership agreement) of the sub-fund that the main sponsor shall not withdraw from the sub-fund earlier than the Guidance Fund.
Article 35The Guidance Fundand the other investors shall specify in the articles of association (or partnership agreement) of any sub-fund:
(1)The Guidance Fundshall be liable for the sub-fund’s debts to the extent of its contribution, and except it is otherwise specified in the articles of association (or partnership agreement) of the sub-fund, no additional benefit clause for superiority over the other investors shall be required;
(2)When the sub-fund is liquidated (including dissolution and bankruptcy), after its financial claims are discharged according to the legal proceedings, the remaining properties shall be used for repayment to the Guidance Fundand the other investors of the sub-fundproportionally; when any loss arises in the liquidation of the sub-fund, the sub-fund management agency shall first bear such loss with its contribution to thesub-fund, and the balance shall be borne by the Guidance Fundand the other investors of the sub-fund in proportion to their contributions.
Article 36The Guidance Fundshall specify in the articles of association (or partnership agreement) of any sub-fund that as an investor, the Guidance Fund shall have the right to assign a delegate to attend meetings of the sub-fund’s Investment Decision-making Committee as an observer, have access to the sub-fund’s files and documents, supervise the sub-fund’s investment operations in accordance with the relevant agreement andthese Measures; for any industry investment in violation of such agreement, any prohibited operation, or any matter in breach of the articles of association (or partnership agreement) of the sub-fund, the observer shall have the right to give a rejection opinion to the sub-fund’s general meeting (or partner meeting), Board of Directors or Investment Decision-making Committee.
Article 37The entrusted management agency of the Guidance Fundshall strengthen the regulation of the use of any sub-fund in which the Guidance Fundis invested by equity participation, and track its management and financial status closely to prevent financial risks.
Article38For violations in the operation of the Guidance Fund, and acts of the main sponsor of any sub-fund of gaining access to the Guidance Fund by cheating, failing to use the Guidance Fund for the specified purpose, embezzling and wasting the Guidance Fund, an accountability system shall be established.
Article39The entrusted management agency of the Guidance Fundshall appoint a commercial bank with relevant experience for custody, which shall be responsible for the Guidance Fund’s disbursement, liquidation and routine monitoring. The custodian bank shall report the status of the Guidance Fund regularly.
Article40Direct equity investment funds shall serve Zengcheng District’s industry development mainly. Based on the characteristics of equityinvestment risks, if the contribution to any direct equity investment project suffers any loss, the gross loss shall not exceed 15% of the cumulative contribution of the Guidance Fund.
Chapter 9Supervision of the Guidance Fund
Article 41The Guidance Fund Management Group shall supervise the operation of the Guidance Fund, appoint a professional agency for auditing as necessary, and conduct performanceevaluation on the Guidance Fund’s policy goal, policy effectiveness and investment operations.
Article 42The Guidance Fund Management Group shall be responsible for the performanceevaluation and inspection of the entrusted management agency of the Guidance Fund. The entrusted management agency of the Guidance Fundshall report the operation and custody of the Guidance Fund in the previous year to the Guidance Fund Management Group in writing before each June 30, mainly including:
(1)The Guidance Fund’s investment operations;
(2)The Guidance Fund’s disbursement, withdrawal, return and losses;
(3)The financial report of the audited sub-fund and direct equity investment project; and
(4)The operating status of the entrusted management agency of the Guidance Fund, and the audit report of the entrusted management agency of the Guidance Fundin the past year issued by an accounting firm.
Article 43If the entrusted management agency of the Guidance Fund is found to have or potentially have a neglect of duty or any other problem or risk during regulation, the Guidance Fund Management Group shall give a written correction opinion or inquiry to the entrusted management agency of the Guidance Fund. The entrusted management agency of the Guidance Fundshall conduct correction or make a reasonable explanation as required. If the entrusted management agency of the Guidance Fundfails to conduct correction or make a reasonable explanation for two consecutive times, the Guidance Fund Management Group shall have the right to replace the entrusted management agency of the Guidance Fund.
Chapter 10Supplementary Provisions
Article 44These Measures shall come into effect from the date of issue, and shallremain effective for five years. The original Measures of Zengcheng District for the Administration of the High-quality Economic Development Guidance Fund (ZDSICIB  No.123) shall be abolished thereupon.