This English translation is for reference only. The Chinese version shall prevail in case of any inconsistencies.
Notice on Issuing the Measures for the Administration of Government Investment Funds in the Guangdong-Macao In-Depth Cooperation Zone in Hengqin (Revised)
All bureaus under the Executive Committee,
The Measures for the Administration of Government Investment Funds in the Guangdong-Macao In-Depth Cooperation Zone in Hengqin (Revised) has been approved upon deliberation at the session of the Executive Committee of the Cooperation Zone, and is hereby issued to you for your careful implementation. Should any issues arise during implementation, please promptly report the issues to the Finance Bureau of the Cooperation Zone.
Finance Bureau of the Guangdong-Macao In-Depth Cooperation Zone in Hengqin
August 6, 2024
Normative Document No. 1/2024 of the Finance Bureau
Measures for the Administration of Government Investment Funds in the Guangdong-Macao In-Depth Cooperation Zone in Hengqin (Revised)
Contents
Chapter I General Provisions
Chapter II Management Structure and Responsibilities of Government Investment Funds
Chapter III Operation and Management of Government Investment Funds
Chapter IV Establishment and Operation of Sub-funds
Chapter V Liquidation, Withdrawal, and Fund Management
Chapter VI Management Fees and Incentive Mechanism
Chapter VII Risk Control
Chapter VIII Performance Appraisal and Supervision and Administration
Chapter IX Supplementary Provisions
Chapter I
General Provisions
Article 1.
Purpose of the Measures
In order to standardize the establishment, management, and operation of government investment funds in the Guangdong-Macao In-Depth Cooperation Zone in Hengqin (hereinafter referred to as “government investment funds”), these Measures are hereby formulated in light of the actual circumstances of the Guangdong-Macao In-Depth Cooperation Zone in Hengqin (hereinafter referred to as the “Cooperation Zone”).
Article 2.
Definition
For the purposes of these Measures, the following definitions apply:
1. “Government investment funds” refer to policy-driven funds established with financial contributions from the Cooperation Zone and operated in a market-oriented manner. These funds, guided by budgetary resources, aim to enhance the role of the market in resource allocation and amplify the guiding impact of budgetary funds. They focus on promoting moderate diversification of Macao’s economy by directing social capital toward key sectors and weak areas in the Cooperation Zone’s economic and social development. Priority areas include industries specified in the Master Plan for the Construction of Guangdong-Macao In-Depth Cooperation Zone in Hengqin (hereinafter referred to as the “Master Plan”), such as scientific and technological R&D, high-end manufacturing, Macao-branded industries like traditional Chinese medicine, cultural tourism, convention and exhibition, commerce and trade, and modern finance. The funds also support talent development within the Cooperation Zone.
2. “Affiliated parties” refer to entities that are directly or indirectly controlled by a particular entity, entities that directly or indirectly control that entity, or entities that are directly or indirectly controlled by the same party that controls the entity;
3. “Affiliated funds” refer to various funds managed by sub-fund managers and management companies under the same actual control;
4. “Major projects” refer to projects with an investment exceeding RMB 500 million;
5. “Government investors” refer to investors whose funding sources consist of at least 50% from government funds.
Article 3.
Invested Entities
The entities receiving investment from government investment funds shall be projects aligned with the key industry directions specified in the Master Plan.
Government investment funds shall leverage the extensive project databases of market-oriented fund managers, selecting projects in alignment with the industrial layout of the Cooperation Zone to encourage invested enterprises to establish operations within the Cooperation Zone.
Government investment funds shall establish and invest in various market-oriented funds (hereinafter referred to as “sub-funds”) through direct or indirect investments.
With the approval of the Fund Management Committee authorized by the Executive Committee of the Guangdong-Macao In-Depth Cooperation Zone in Hengqin (hereinafter referred to as the “Executive Committee of the Cooperation Zone”), government investment funds may make direct investments in major projects and funds.
Article 4.
Operation Principles
Government investment funds shall adopt a governance structure that separates the ownership rights, management rights, and custody rights, and shall be established and operated under the principles of “guidance by the Executive Committee, market operation, comprehensive decision-making, and risk prevention”:
1. Guidance by the Executive Committee. The Executive Committee of the Cooperation Zone shall flexibly and efficiently exercise its regulatory functions in economic and social development, innovate fiscal support methods for economic growth, and guide social capital investments into fields aligned with the Master Plan, thereby advancing policy focus and objectives.
2. Market operation. The decisive role of the market in resource allocation shall be fully utilized. Government investment funds shall steer the direction of social capital investment through their investments in sub-funds.
3. Comprehensive decision-making. The Executive Committee of the Cooperation Zone shall establish a Fund Management Committee to make decisions on major matters concerning government investment funds, including defining investment priorities and scales. The Fund Management Committee shall entrust professional government investment fund managers with managing the investments of government investment funds in sub-funds.
4. Risk prevention. A regulatory framework shall be developed to standardize the decision-making of government investment funds and sub-funds, the governance of fund managers, and fund supervision. In addition, a performance appraisal system for government investment funds shall be established to prevent operational risks.
Chapter II
Management Structure and Responsibilities of Government Investment Funds
Article 5.
Management Structure of the Fund Management Committee
The Fund Management Committee shall serve as the decision-making body for government investment funds, authorized by the Executive Committee of the Cooperation Zone and operating under the principle of democratic centralism.
The chief members of the Fund Management Committee shall be the Deputy Directors of the Executive Committee of the Cooperation Zone. Other members shall include one person in charge from each of the following: the Finance Bureau, Financial Development Bureau, Economic Development Bureau, Commercial Services Bureau, Statistics Bureau, Tax Service of the State Taxation Administration, and Guangdong-Macao In-Depth Cooperation Zone in Hengqin Investment Co.
The Office of the Fund Management Committee shall be based in the Finance Bureau of the Cooperation Zone, with its Director being the head of the Finance Bureau.
Resolutions of the Fund Management Committee shall require approval by at least two-thirds of its members, with each chief member holding veto power.
Article 6.
Responsibilities of the Fund Management Committee
The Fund Management Committee, authorized by the Executive Committee of the Cooperation Zone, shall fulfill the following responsibilities:
1. Examination and approval of development plans for government investment funds based on the Master Plan and industry development conditions, and determination of the primary investment directions for these funds;
2. Examination and approval of annual investment plans for government investment funds and their implementation;
3. Deliberation of annual reports of government investment funds;
4. Deliberation of annual work summaries and performance appraisal reports of government investment funds;
5. Decision-making on government investment funds’ investments in and withdrawals from major projects;
6. Decision-making on withdrawals from and concessions for investments made by government investment funds in projects of sub-funds and angel investment funds; and
7. Other major matters that require examination and approval.
Article 7.
Responsibilities of the Office of the Fund Management Committee
The Office of the Fund Management Committee shall fulfill the following responsibilities:
1. Submission for deliberation the measures for managing government investment funds and other related policies;
2. Submission for deliberation the annual investment plans for government investment funds and their implementation;
3. Submission for deliberation investment decisions on major projects of government investment funds;
4. Proposing to the Executive Committee of the Cooperation Zone the establishment of a regular deliberation mechanism and convening joint coordination meetings for investment attraction;
5. Regular supervision and appraisal of government investment funds;
6. Various administrative tasks for organizing meetings of the Fund Management Committee; and
7. Other matters authorized by the Fund Management Committee.
Article 8.
Responsibilities of Fund Managers
Government investment funds shall be managed by professional fund management institutions (hereinafter referred to as “government investment fund managers”). Government investment fund managers shall be entrusted with the day-to-day operations and investments of government investment funds, supporting industrial development in the Cooperation Zone and fulfilling the following responsibilities:
1. Draft annual investment plans for government investment funds and submit them for deliberation by the Fund Management Committee in accordance with these Measures;
2. Solicit and select sub-fund management institutions (hereinafter referred to as “sub-fund managers”), conduct preliminary reviews of application proposals from prospective institutions, and carry out due diligence and investment negotiations;
3. Undertake investment activities, including investments in or establishment of sub-funds, in accordance with the annual investment plans for government investment funds and these Measures;
4. Regularly report to the Office of the Fund Management Committee on the investment operations of government investment funds (including direct investment projects), providing semi-annual and annual reports, promptly report any significant matters arising during operations, and accept audits and inspections by the Office of the Fund Management Committee regarding daily management and operations of government investment funds;
5. Supervise and evaluate the performance of sub-funds, regularly report sub-fund operations to the Office of the Fund Management Committee, and promptly report any significant events that affect the interests of government investment funds. If sub-funds are found to be in violation of laws or regulations stipulated in these Measures, or are predicted to fall short of expected objectives by the end of their terms, government investment fund managers may terminate cooperation with sub-fund managers as per the agreements and withdraw through mechanisms such as equity or partnership share repurchases;
6. Coordinate with relevant departments to provide project information and project matching services for sub-funds or direct investment projects;
7. Conduct research on major matters, including management of investment returns, liquidation, and fund withdrawals, propose withdrawal plans for government investment funds from sub-funds or direct investment projects, and implement withdrawals upon approval;
8. Facilitate industrial development in the Cooperation Zone during regular operations and carry out necessary activities for industrial support, with prior reporting to the Office of the Fund Management Committee; and
9. Address other matters authorized by the Fund Management Committee.
Chapter III
Operation and Management of Government Investment Funds
Article 9.
Adjustment of Investment Focus
With the approval of the Fund Management Committee, government investment fund managers may adjust the investment focus of government investment funds subject to the strategic plans of the Executive Committee of the Cooperation Zone.
Article 10.
Management Structure
Government investment funds shall operate under a two-tiered management structure consisting of a parent fund and sub-funds. As parent funds established through the Cooperation Zone’s financial resources, government investment funds shall invest in sub-funds or directly in projects.
With the approval of the Fund Management Committee, investment-related matters for government investment funds, including investment activities, post-investment management, and withdrawals, may be entrusted to government investment fund managers.
Article 11.
Modes of Operation
Government investment funds shall primarily collaborate with private capital to establish new sub-funds but may also invest in existing sub-funds through capital increases or equity transfers.
Sub-funds shall be established as limited partnerships or corporations and shall strictly comply with relevant laws, regulations, and industry self-regulatory rules.
Article 12.
Annual Investment Plan
Government investment fund managers shall draft an annual investment plan, covering, but not limited to, investment focuses, total annual investments, allocations for each investment field, amounts for each investment stage, and the plan for fund utilization for the year. This plan shall be submitted to the Fund Management Committee for review and approval within three months following the close of the previous calendar year.
Chapter IV
Establishment and Operation of Sub-funds
Article 13.
Management of Sub-funds
Sub-funds shall be operated under a market-oriented mechanism, with investments, management, and withdrawals conducted in accordance with partnership agreements, bylaws, or supplementary agreements.
Article 14.
Eligibility Conditions for Sub-funds
In principle, government investment funds shall invest in sub-funds registered within the Cooperation Zone. However, depending on actual investment needs, they may also invest in funds registered outside the Cooperation Zone, completing the required recordation procedures with the Asset Management Association of China or other relevant regulatory authorities in accordance with applicable regulations.
Article 15.
Procedures for the Establishment and Operation of Sub-funds
The procedures for the establishment and operation of sub-funds within an annual investment plan are as follows:
1. Public Collection or Rolling Approval: Government investment fund managers shall publicly issue application guidelines for government investment funds across various categories, based on the overall annual investment plans and focuses approved by the Fund Management Committee. Sub-fund managers may also independently apply in accordance with these guidelines;
2. Application: Applicants shall prepare sub-fund establishment proposals based on the guidelines and submit them to the government investment fund managers;
3. Preliminary Review: Government investment fund managers shall conduct a preliminary review of the submitted proposals according to these Measures;
4. Due Diligence: Government investment fund managers shall either entrust third-party institutions or independently conduct due diligence on pre-approved sub-fund manager candidates, compile due diligence reports, and provide investment recommendations;
5. Investment Decision: The Fund Management Committee shall make final investment decisions on sub-fund proposals based on the due diligence reports;
6. Public Announcement: Government investment fund managers shall publicly announce the proposed sub-funds or partners, based on the final decisions made by the Fund Management Committee, on their official website for a period of five working days. If objections arise during the publicity period, investigation procedures shall be initiated; if not, agreement negotiations and signing shall proceed;
7. Signing of Legal Documents and Fund Disbursement: Once the establishment of sub-funds or investment projects is approved, government investment fund managers shall promptly draft, negotiate, revise, and finalize all necessary legal documents. After finalizing, the documents shall be signed and sealed, and funds appropriated. Upon completion, government investment fund managers shall submit all necessary materials to the Fund Management Committee for recordation; and
8. Post-investment Management and Withdrawal: Government investment fund managers shall implement investment plans for government investment funds, perform post-investment management, and manage investment withdrawals.
Article 16.
Eligibility Conditions for the Structure of Sub-funds
Sub-funds applying for investments from government investment funds shall meet the following conditions for their structures:
1. Investment Proportion: In principle, the commitment of government investment funds in any single sub-fund shall not exceed 40% of the total committed capital of that sub-fund (angel investment funds are exempt from this limit);
2. Term: In principle, the term of sub-funds shall not exceed fifteen years;
3. Investment Focus: Sub-funds shall primarily invest in projects within key industries in the Cooperation Zone as specified in the Master Plan;
4. Investment Proportion Restrictions: In principle, sub-fund investments shall not exceed 30% of the total equity of the invested enterprise, except for special or buyout sub-funds. The total investment in a single enterprise shall not exceed 20% of the total committed capital of the sub-fund. Special and buyout sub-funds shall be determined by government investment fund managers;
5. Round-tripping Investment Requirement: Sub-funds investing in the Macao SAR or the Cooperation Zone (collectively, “implementation regions”) shall ensure that the investment amount is at least equal to the paid-in capital from government investment funds. After formal submission of application materials of sub-funds, and no earlier than one year before signing the investment agreement, the following cases qualify as fulfilling round-tripping requirements:
(1) Investments by the sub-fund or affiliated funds in enterprises in the implementation regions;
(2) If the sub-fund or affiliated funds bring the headquarters of an invested enterprise into the implementation regions, the investment amount shall be calculated as the greater of the enterprises’ paid-in registered capital and capital reserve, net assets, or fixed asset investments in the regions;
(3) If enterprises invested by the sub-fund or affiliated funds establish or relocate subsidiaries in the implementation regions, the investment amount shall be calculated as the greater of the subsidiaries’ paid-in registered capital and and capital reserve, net assets, or fixed asset investments in the regions;
(4) If industrial groups with direct or indirect equity ties to the sub-fund or its managers, and approved by government investment fund managers, newly establish subsidiaries or relocate their headquarters or subsidiaries into the implementation regions, the investment amount shall be calculated as the greater of the subsidiaries’ paid-in registered capital and capital reserve, net assets, or fixed asset investments in the regions;
(5) For the introduction of companies, research institutions, or projects of significant importance and influence, the round-tripping investment amount may be verified by government investment fund managers and approved by the Office of the Fund Management Committee; and
(6) Additional requirements: a. Companies within the Cooperation Zone qualifying for round-tripping investments shall conduct substantive operations as required; b. If these companies relocate outside of the implementation regions within five years of implementation, they shall not be qualified for round-tripping investments; c. Certification shall be provided by the implementing entity to verify contributions to round-tripping investments of sub-funds, subject to review and final determination by government investment fund managers; and d. For new subsidiaries using net assets or fixed assets for calculating round-tripping amounts, investments in unused properties such as land or buildings for regular operations such as production and office work shall be excluded.
6. Management Fees: Following market practices, the payment standards for the management fees of sub-funds shall be governed by the partnership agreements, bylaws, or additional agreements. In principle, unless otherwise approved by the Fund Management Committee, the net annual management fees borne by government investment funds during the term of a sub-fund (after agreed deductions) shall not exceed 2.5% per year of the government investment fund’s final paid-in capital to the sub-fund. Furthermore, the management fee rate charged to government investment funds shall not be higher than the rate charged to any other investor (excluding sub-fund managers, general partners, or affiliated parties approved by government investment fund managers).
Article 17.
Eligibility Conditions for Sub-fund Application and Management Institutions
Sub-fund application and management institutions seeking investments from government investment funds shall meet all of the following conditions:
1. Application Institutions: Institutions that are legally established, registered with relevant regulatory authorities or industry self-regulatory organizations, and possess fixed business premises and hardware and software facilities suitable for their operations. They shall have no major violations of laws or regulations in the past three years;
2. Management Institutions: Sub-fund managers may be the application institutions or their affiliated parties and shall be registered with relevant regulatory authorities or industry self-regulatory organizations (for newly established institutions, the necessary qualifications for private equity investment fund registration shall be obtained before government investment funds provide paid-in capital);
3. Sub-funds shall have a dedicated and stable management team, including at least three senior management personnel with over three years of relevant equity investment experience. Key members of the management team shall not be on the List of Dishonest Judgment Debtors and shall not have been penalized by administrative authorities or industry self-regulatory organizations in the past three years;
4. The major shareholders (for corporate structures) or general partners (for partnership structures) of sub-fund managers, or at least three core management team members, shall collectively have managed venture capital funds totaling at least RMB 200 million, with a minimum of three successful investment projects in relevant industries that meet any of the following criteria:
(1) The equity withdrawal rate for investment projects exceeds 80%, with a return rate of no less than 50% on the withdrawn equity;
(2) The equity withdrawal rate for investment projects is 80% or less, with the withdrawn principal and corresponding returns totaling at least 120% of the total investment principal;
(3) Investment projects have been successfully listed on major stock exchanges, such as the main boards of the Shanghai or Shenzhen Stock Exchanges, SME Board, STAR Market, ChiNext, Stock Exchange of Hong Kong, New York Stock Exchange, or NASDAQ, with a return rate of at least 80% based on the market value as of the trading day prior to the Fund Management Committee meeting;
5. During the investment period, the average investment progress of funds managed by sub-fund managers shall exceed 50% (excluding the first sub-fund managed by sub-fund managers invested in by government investment funds);
6. Sub-funds shall follow standardized management and investment operations, including comprehensive investment decision-making procedures, risk control mechanisms, and sound financial management systems; and
7. Other management institutions approved by the Fund Management Committee.
Chapter V
Liquidation, Withdrawal, and Fund Management
Article 18.
Liquidation
The liquidation of government investment funds requires approval from the Executive Committee of the Cooperation Zone.
Upon liquidation, the principal, investment returns, and interest due to the Executive Committee of the Cooperation Zone shall be fully remitted to the state treasury on time, in accordance with the relevant state treasury management regulations.
Article 19.
Withdrawal of Sub-funds
Government investment funds shall complete the liquidation and withdrawal of their investments from sub-funds at the end of the sub-fund’s term, on an equal share basis with other investors, as stipulated in the relevant partnership agreements, bylaws, or supplementary agreements.
If the partnership agreements, bylaws, or supplementary agreements lack specific provisions for withdrawal, a qualified asset appraisal institution shall be engaged to assess the invested equity, which will serve as the basis for determining the withdrawal price of government investment funds.
Article 20.
Withdrawal of Direct Investment Projects
Projects directly invested in by government investment funds shall specify the withdrawal conditions and methods in the investment agreements and relevant contracts.
Upon reaching the investment period or meeting the agreed withdrawal conditions, withdrawals shall be executed in a timely manner through legally compliant methods, including but not limited to equity transfers, shareholding reductions, shareholder repurchases, capital reductions by the project company, or liquidation.
Article 21.
Compulsory Withdrawal Conditions
In any of the following circumstances, government investment funds shall have the right to demand withdrawal. Other investors of the sub-funds shall sign all necessary documents or follow all necessary procedures to ensure the withdrawal of government investment funds. The risks and losses arising from the withdrawal shall be borne by the sub-fund managers (if the sub-fund managers are not the same as the sub-fund application institutions, both the application institutions and the sub-fund managers shall bear joint and several liabilities):
1. Sub-funds fail to make investments as stipulated in partnership agreements, bylaws, or additional agreements and do not make effective rectifications;
2. After government investment fund managers sign investment or partnership agreements with sub-fund managers, the sub-funds fail to complete commercial registration or fail to make their initial investment for a period exceeding one year;
3. After government investment funds contribute capital to the sub-fund accounts, the sub-funds have not engaged in any investment activities for more than one year;
4. The investment projects of sub-funds do not align with the policy focus of these Measures;
5. Sub-funds operate in violation of laws and regulations and have been subject to investigation and punishment;
6. Sub-fund managers undergo substantial changes without the approval of relevant authorities of the sub-funds. Substantial changes include, but are not limited to: major shareholders (in the form of corporations) or general partners (in the form of limited partnerships) of sub-fund managers undergoing substantial changes; at least half of the locked-in members of the Investment Decision-making Committee or core members of management teams undergoing changes; and
7. Where more than one year has passed since the end of the publicity period without objection to the submitted proposals for the establishment of sub-funds, and the sub-fund managers or their affiliated parties have not signed partnership agreements or bylaws with government investment funds, the relevant investment decision documents of the government investment funds shall become invalid.
Article 22.
Division of Liabilities
In the event of a loss upon liquidation of sub-funds, the sub-fund managers and investors shall bear the losses in accordance with the proportions specified in the partnership agreements, bylaws, or additional agreements. Government investment funds shall assume limited liability up to the amount of their capital contribution to the sub-funds.
Chapter VI
Management Fees and Incentive Mechanism
Article 23.
Management Fees
In principle, management fees for government investment funds shall be charged by government investment fund managers as a proportion of actual investments to cover wages, salaries, and other operating expenses.
The Fund Management Committee may adjust the management fee rates for government investment funds based on factors such as fund size, prevailing market rates, performance evaluations, and other relevant indicators.
If sub-funds are also managed by government investment fund managers, then corresponding management fees shall not be paid to the managers twice; only the management fees for either the government investment funds or the sub-funds shall be paid.
Article 24.
Concession Principle
To better leverage the guiding role of the Cooperation Zone’s financial resources, encourage sub-funds to invest in enterprises within the Cooperation Zone, and support the establishment of industries in the zone, government investment funds may offer concessions—up to the limit of their returns—to sub-fund managers, other investors, implementation projects, and related enterprises that meet the requirements of these Measures. However, they shall not commit to safeguarding the investment principal of other investors from loss or guarantee minimum returns, except as otherwise stipulated by the state. Specific measures shall be formulated in detail and submitted for deliberation by the Fund Management Committee.
Chapter VII
Risk Control
Article 25.
Investment Restrictions
The submission of investment plans for government investment funds shall be the responsibility of the sub-fund application institutions.
For new sub-fund establishments, application institutions shall have raised at least 50% of the total committed capital for the proposed sub-fund (excluding contributions from government investment funds) at the time of submitting the application and provide commitment letters and other documentation from prospective investors.
Sub-funds applying for capital increases shall provide relevant legal documents confirming their agreement to apply for contributions from government investment funds at fair value, waive any compensation for capital occupancy costs of government investment funds (if applicable), and agree that government investment funds shall share in the returns from projects already invested in by the sub-fund (if applicable).
Article 26.
Investment Proportion of Sub-fund Managers
The total investment proportion of sub-fund managers and their affiliated parties in sub-funds supported by government investment funds shall be no less than 1%.
Article 27.
Eligibility Conditions for Sub-fund Managers
Sub-fund managers applying for investments from government investment funds shall raise capital from qualified investors in accordance with the Regulation on the Supervision and Administration of Private Investment Funds, the Interim Measures for the Supervision and Administration of Privately Offered Investment Funds, and other applicable regulations.
Where sub-funds are invested directly or indirectly by a majority of investors through unincorporated entities such as limited partnerships, sub-fund managers shall conduct look-through verification to confirm the qualified investor status of final investors and consolidate the number of investors.
Sub-fund managers shall exercise due diligence to ensure that each investor meets the qualified investor requirements as specified by relevant national policies and regulations.
Article 28.
Key Personnel Lock-in
Sub-fund partnership agreements, bylaws, or additional agreements shall lock in the members of the Investment Decision-making Committee and core members of management teams. Any personnel changes among the locked-in individuals shall be approved by a vote of the relevant authorities of the sub-fund, such as the partners’ meeting or board of shareholders.
Before a sub-fund achieves 70% of its investment progress, locked-in core members of the management team may not participate in or assume key roles in other funds within the same investment field that could affect their management of the sub-fund. Additionally, sub-fund managers may not raise or manage other funds within the same investment field.
Article 29.
Fund Custody
Government investment funds shall be entrusted to commercial banks with qualified fund custody credentials. The selection of custodian banks shall be determined by the Fund Management Committee. Custodian banks shall have branches in the Cooperation Zone and a solid foundation of cooperation with the Zone. Custody accounts shall be opened at these local branches.
Government investment fund managers shall be responsible for drafting custody agreements. Custodian banks for government investment funds shall handle account management, fund settlement, asset custody, and other relevant duties as outlined in the custody agreements. They shall also monitor investment activities dynamically and submit custody reports to both government investment fund managers and the Fund Management Committee every six months.
Article 30.
Sub-fund Custody
The assets of sub-funds invested by government investment funds shall be entrusted to commercial banks with fund custody qualifications. Sub-fund managers shall draft custody agreements, allocate funds to custodian banks according to the overall investment plans of the sub-funds, and implement dedicated account management. In principle, custody accounts for newly established sub-funds shall be opened at branches of custodian banks in the Cooperation Zone.
Custodian banks, upon accepting the entrustment of sub-funds and signing custody agreements, shall perform routine duties such as asset custody, fund appropriation, and settlement in accordance with the custody agreements. They shall also conduct dynamic supervision of investment activities to ensure that sub-funds invest in the agreed fields.
Article 31.
Investment Conditions
When sub-funds implement staged capital contributions, government investment funds shall disburse their corresponding proportion of capital to the sub-fund accounts only after at least 80% of the total contributions from other investors (excluding other government investors approved by government investment fund managers) for the respective stage have been fully contributed, in accordance with the established procedures.
Article 32.
Observer Appointment
Where government investment fund managers entrusted by government investment funds participate in the decision-making of the Investment Decision-making Committee, they shall have the right to appoint a representative as a member of the committee. Alternatively, they may choose not to participate in the decision-making but shall retain the right to appoint a representative as an external observer. The observer shall have the right to attend and listen in on the meetings of the Investment Decision-making Committee.
Members of the Investment Decision-making Committee or external observers appointed by government investment fund managers shall have the right to perform compliance reviews on whether the proposed investment projects of sub-funds comply with these Measures, partnership agreements, bylaws, or additional agreements.
Upon deliberation and decision by government investment fund managers, a de facto veto power shall be exercised over projects that violate these Measures, partnership agreements, bylaws, or additional agreements. If, due to special circumstances, a de facto veto power cannot be stipulated in partnership agreements, bylaws, or additional agreements, alternative supervisory provisions may be adopted.
Article 33.
Distribution of Investment Returns for Sub-funds
In principle, the distribution of investment returns for sub-funds shall follow a “return of principal first, distribute profits later” approach. Investment returns attributable to government investment funds shall first be distributed based on the proportion of their paid-in capital in the sub-funds until the full recovery of their paid-in capital. Any remaining investment returns shall then be distributed in accordance with partnership agreements, bylaws, or additional agreements, as applicable. Where investment returns for sub-funds are distributed based on specific projects, a corresponding clawback mechanism shall be established for the profit shares received by the sub-fund managers.
For the purposes of the preceding paragraph, a “clawback mechanism” refers to a system where, in cases of project-specific return distribution, sub-fund managers shall retain a certain proportion (no less than 50%) of their profit shares within the sub-funds until all other investors have fully recovered their capital. If other investors fail to recover their full capital upon the liquidation of sub-funds, sub-fund managers shall return their previously received profit shares to other investors to compensate for their investment losses.
Article 34.
Sub-fund Reporting System
Sub-fund managers shall establish a disclosure system for major matters related to the sub-funds.
Sub-funds shall submit quarterly operation reports to government investment fund managers within one month after the end of each quarter. Within four months after the end of each fiscal year, sub-funds shall also submit an annual operation report, an audited financial report, and a bank custody report to the government investment fund managers. Government investment fund managers may entrust professional institutions to conduct audits of sub-funds as needed.
Article 35.
Investment Restrictions
Government investment funds and sub-funds shall not engage in the following activities:
1. Engaging in financing guarantees, mortgages, entrusted loans, or similar activities;
2. Investing in stocks on the secondary market, except for transactions aimed at supporting industrial development in the Cooperation Zone, such as private placements, negotiated transfers, bulk trades, and mergers and acquisitions;
3. Investing in futures, real estate, securities investment funds, enterprise bonds rated below AAA, trust products, insurance plans, and other financial derivatives;
4. Providing sponsorship or donations to any third parties (excluding approved public welfare donations);
5. Accepting deposits or engaging in disguised deposit-taking, providing loans, or engaging in interbank lending to third parties;
6. Making foreign investments that involve unlimited joint and several liabilities;
7. Issuing trust or collective wealth management products to raise funds; or
8. Engaging in other activities prohibited by national laws and regulations.
Chapter VIII
Performance Appraisal and Supervision and Administration
Article 36.
Performance Appraisal
The Office of the Fund Management Committee shall evaluate the performance of government investment fund managers in accordance with the performance appraisal measures. The appraisal shall focus on the operation of government investment funds, their effectiveness in leveraging social capital, and their impact on promoting industrial development. Specific appraisal measures shall be formulated separately by the Fund Management Committee.
Article 37.
Sub-fund Constraint Mechanisms
Government investment fund managers shall ensure that sub-fund partnership agreements, bylaws, or additional agreements explicitly incorporate the requirements outlined in these Measures and the annual investment plans of government investment funds, specifying the investment focuses, investment regions, and leverage ratios for the sub-funds. For sub-fund managers who violate relevant agreements, government investment fund managers shall implement constraint mechanisms, including deductions from profit sharing, early withdrawal of investments, and legal accountability.
Article 38.
Government Investment Fund Manager Reporting System
Government investment fund managers shall regularly report the investment operations of government investment funds to the Fund Management Committee in accordance with Article 8, Paragraph 1, Item 4 of these Measures and shall comply with audits and inspections.
Article 39.
Supervision and Administration of Government Investment Funds
Where government investment fund managers or their staff fail to fulfill their responsibilities or improperly perform their duties in the use and management of government investment funds, they shall bear corresponding legal responsibility. Where criminal conduct is suspected, the matter shall be referred to the competent authorities in accordance with the law.
Article 40.
Supervision and Administration of Sub-funds
Where sub-fund managers commit violations of laws, regulations, or agreements during the operation of sub-funds, the Fund Management Committee and government investment fund managers may, depending on the severity of the situation, take measures such as public exposure, industry censure, and compulsory withdrawal to hold them accountable in accordance with the law.
Article 41.
Supervision and Administration of Sub-fund Application and Management Institutions
If sub-fund application or management institutions, or their affiliated parties, engage in activities specified in Article 45 of these Measures, or in other circumstances identified by the Fund Management Committee and government investment fund managers as serious violations of laws and regulations, they shall be prohibited from applying to government investment fund managers to establish new sub-funds or invest in existing sub-funds for five years from the date such activities or circumstances occur.
Article 42.
Audit Supervision
Relevant departments within the Cooperation Zone shall provide business guidance to and conduct audit supervision of government investment fund managers in accordance with their respective responsibilities.
Article 43.
Supervision and Administration by Observers
Government investment fund managers may strengthen the supervision and administration of sub-funds by appointing observers or adopting other methods, focusing on investment directions, decision-making processes, and compliance with national laws, regulations, industry self-regulatory rules, and key legal documents related to sub-funds.
Article 44.
Supervision and Administration by Sub-fund Agreements
The provisions in these Measures governing sub-funds and their operations shall be incorporated into sub-fund partnership agreements, bylaws, additional agreements, and other relevant agreements.
If government investment fund managers fail to comply with the preceding provisions, relevant entities shall hold them accountable in accordance with entrusted management agreements.
Article 45.
Supervision of Funds
Violations of laws and regulations, including fraudulent practices to obtain investments from government investment funds, misuse, retention, diversion, or squandering of such funds, shall be handled in accordance with relevant national laws and regulations.
Article 46.
Fault Tolerance Mechanism
Provided that government investment fund managers conduct thorough due diligence, follow compliant decision-making procedures, do not seek personal gain, and commit no gross negligence, fault tolerance shall apply in cases where a single project (whether a direct investment project or sub-fund) or the government investment funds as a whole fails to achieve the expected investment outcomes or incurs losses due to force majeure, policy changes, market fluctuations, or similar factors. Such circumstances shall be handled in accordance with relevant regulations, disciplines, and laws, and no negative evaluations shall be made.
Chapter IX
Supplementary Provisions
Article 47.
Other Provisions
In these Mesures, the terms "at least," "no more than," "not exceed," and "no less than" include the specified number; while "exceed" and "more than" exclude the specified number.
Article 48.
Interpretative Authority
These Measures shall be subject to interpretation by the Finance Bureau of the Cooperation Zone.
Article 49.
Effective Date and Validity Period
These Measures shall come into effect on August 6, 2024 and remain valid for a period of five years. The Measures for the Administration of Government Investment Funds in the Guangdong-Macao In-Depth Cooperation Zone in Hengqin (Normative Document No. 1/2023 of the Finance Bureau) is hereby repealed.