The CSRC issues the Measures for the Operation and Management of Publicly Offered Securities Investment Funds (Draft for Comment).

On October 9, the CSRC issued the Measures for the Operation and Management of Publicly Offered Securities Investment Funds (Draft for Comment) and publicly solicited opinions from society. In response to the "narrow-base drift" problem, where the definition of the investment scope of thematic funds is vague and too broad, and actual investment may deviate from the direction indicated by the product name, the draft Measures for Operation and Management proposes that fund contracts shall use identifiable and quantifiable methods to clearly define the investment direction indicated by the fund name, and the relevant defined scope shall conform to market consensus and be directly related to the investment direction indicated by the fund name. In response to the "broad-base narrow investment" problem, where all-market stock-selection funds are highly concentrated in a single industry or popular track during operation and essentially become industry thematic funds, the draft for comment requires that where the fund name does not indicate a specific industry or theme, the fund manager shall strengthen diversified investment management and shall not concentrate investment in a single industry or theme. This revision emphasizes that fund products cannot engage in "style drift," and even less should investors bear risks inconsistent with the product name and contract without their knowledge. The original text is as follows: The China Securities Regulatory Commission Publicly Solicits Opinions on the Measures for the Operation and Management of Publicly Offered Securities Investment Funds (Draft for Comment) and Supporting Rules In order to implement the Action Plan for Promoting the High-Quality Development of Publicly Offered Funds, regulate the investment operations of publicly offered funds, support the development of equity funds, and improve the operational flexibility of publicly offered funds, in accordance with the Securities Investment Fund Law of the People's Republic of China (hereinafter referred to as the Securities Investment Fund Law) and other relevant laws and regulations, the China Securities Regulatory Commission has revised the Measures for the Operation and Management of Publicly Offered Securities Investment Funds (CSRC Order No. 104) and supporting rules, forming the Measures for the Operation and Management of Publicly Offered Securities Investment Funds (Draft for Comment) (hereinafter referred to as the Measures for Operation and Management), the Provisions on Issues Concerning the Implementation of the <Measures for the Operation and Management of Publicly Offered Securities Investment Funds> (Draft for Comment), and the Content and Format Guidelines for Securities Investment Fund Information Disclosure No. 6 <Content and Format of Fund Contracts> (Draft for Comment), and is now publicly soliciting opinions from society. The Measures for Operation and Management are important supporting departmental rules of the Securities Investment Fund Law, clarifying investment operation matters such as product registration, subscription and redemption, investment restrictions, income distribution, and holders' meetings, and have played an important role in regulating fund investment operations, protecting investor rights and interests, and promoting industry development. The current Measures for Operation and Management have been in effect for more than 10 years since they were revised and issued in 2014. During this period, both the market environment and the public fund industry landscape have undergone major changes, necessitating revision and improvement of the rules. The main contents of this rule revision are: First, adhering to a problem-oriented approach, improving regulatory requirements for fund investment operations and tightening fund managers' responsibilities. Second, supporting the development of equity funds, improving investment operation arrangements for equity funds, providing space for product innovation, and helping introduce more medium- and long-term capital. Third, optimizing certain regulatory indicators and mechanisms to improve fund operational flexibility. We welcome valuable opinions from all sectors of society on the Measures for Operation and Management and supporting rules. The China Securities Regulatory Commission will further improve them based on the public consultation and promulgate and implement them after completing relevant procedures. Notice on Publicly Soliciting Opinions on the Measures for the Operation and Management of Publicly Offered Securities Investment Funds (Draft for Comment) and Supporting Rules In order to implement the work arrangements of the Action Plan for Promoting the High-Quality Development of Publicly Offered Funds, regulate the operations of publicly offered securities investment funds, and support the development of equity funds, in accordance with the Securities Investment Fund Law of the People's Republic of China and other relevant laws and regulations, the China Securities Regulatory Commission has revised the Measures for the Operation and Management of Publicly Offered Securities Investment Funds (CSRC Order No. 104) and supporting rules, and on the basis of the revision has drafted the Measures for the Operation and Management of Publicly Offered Securities Investment Funds (Draft for Comment), the Provisions on Issues Concerning the Implementation of <Measures for the Operation and Management of Publicly Offered Securities Investment Funds> (Draft for Comment), and the Content and Format Guidelines for Securities Investment Fund Information Disclosure No. 6 <Content and Format of Fund Contracts> (Draft for Comment), and is now publicly soliciting opinions from society. The public may submit feedback through the following channels and methods: 1. Fax: 010-88061446. 2. Email: [email protected]. 3. Mailing address: Securities and Fund Institutions Supervision Department, China Securities Regulatory Commission, Fuhua Mansion, No. 19 Financial Street, Xicheng District, Beijing, Postal Code: 100033. The deadline for feedback is November 8, 2026. China Securities Regulatory Commission October 9, 2026 Measures for the Operation and Management of Publicly Offered Securities Investment Funds (Draft for Comment) Chapter I General Provisions Article 1 In order to regulate the operation activities of publicly offered securities investment funds (hereinafter referred to as funds), protect the lawful rights and interests of investors, and promote the healthy development of the securities investment fund market, these Measures are formulated in accordance with the Securities Investment Fund Law of the People's Republic of China (hereinafter referred to as the Securities Investment Fund Law) and other relevant laws and administrative regulations. Article 2 These Measures apply to the offering of funds, subscription, redemption and trading of fund shares, investment of fund assets, distribution of fund income, convening of fund share holders' meetings, and other fund operation activities. Article 3 Fund managers and fund custodians engaged in fund operation activities shall comply with laws, administrative regulations and the provisions of the China Securities Regulatory Commission (hereinafter referred to as the CSRC), follow the principles of voluntariness, fairness, honesty and creditworthiness, and diligence and responsibility, adhere to the priority of investors' interests, and faithfully perform fiduciary duties, and shall not harm national interests, public interests or the lawful rights and interests of investors, violate national policies, or violate public order and good customs. Fund managers using fund assets for securities investment shall comply with prudent operation rules, formulate scientific and reasonable investment strategies and risk management systems, and effectively prevent and control risks. Article 4 The CSRC and its dispatched offices shall supervise and manage fund operation activities in accordance with laws, administrative regulations, these Measures and the principles of prudential supervision. The CSRC may implement differentiated supervision based on factors such as fund managers' level of service to investors, corporate governance, compliance management and risk conditions. The CSRC's registration review of fund offerings shall be based on complete requirements and compliant content, centered on full information disclosure and investor suitability, and aimed at strengthening the protection of investors' interests and preventing systemic risks. The CSRC does not make substantive judgments or guarantees regarding the investment value and market prospects of funds. Investors shall carefully read information disclosure documents such as fund prospectuses, fund contracts, and fund product information summaries, independently judge the investment value of funds, independently make investment decisions, and bear investment risks themselves. Article 5 Stock exchanges, futures exchanges, and the Asset Management Association of China (hereinafter referred to as the Fund Industry Association) shall conduct self-regulatory management of fund operation activities in accordance with laws, administrative regulations, CSRC provisions and self-regulatory rules. Chapter II Basic Requirements Article 6 Funds are divided into the following categories according to different investment targets, which shall be stated in the fund contract and prospectus: (1) Funds with more than 80% of total fund assets invested in stocks, depositary receipts and other assets are stock funds; (2) Funds with more than 80% of total fund assets invested in bonds, asset-backed securities and other assets are bond funds; (3) Funds that invest only in money market instruments and for which fund share subscription and redemption can be processed on each trading day are money market funds; funds with more than 80% of total fund assets invested in negotiable certificates of deposit and with a minimum holding period for fund shares are negotiable certificate of deposit funds; (4) Funds with more than 80% of total fund assets invested in other fund shares are funds of funds; (5) Funds with more than 80% of total fund assets invested in futures and derivatives are futures and derivatives funds; (6) Funds that invest in the aforementioned investment targets but whose investment proportion in any category of investment targets does not comply with the provisions of items (1) to (5) are mixed funds; (7) Funds that invest in real estate asset-backed securities or other vehicles to obtain ownership or operating rights of real estate or other rights and interests, operate and manage real estate projects to obtain stable cash flows such as rents and fees, and distribute principal income to fund share holders are real estate investment trusts; (8) Other fund categories prescribed by the CSRC. The operation mode of funds may adopt open-end, fixed-term closed-end and perpetual closed-end. Article 7 Mixed funds shall have clear risk-return characteristics and clearly stipulate in the fund contract the proportion ranges of various types of assets. According to the investment proportion of equity assets stipulated in the fund contract, mixed funds are divided into: (1) Those with a minimum investment proportion of equity assets of 60% or more are equity-biased mixed funds; (2) Those with a maximum investment proportion of equity assets of 30% or less are bond-biased mixed funds; (3) Those whose equity asset investment proportion does not comply with the foregoing provisions are other mixed funds. The upper and lower limit range of the equity asset investment proportion of other mixed funds shall not exceed 40%, except in circumstances recognized by the CSRC. Article 8 Fund managers shall, based on factors such as market capacity, liquidity, valuation levels and the company's investment management capabilities, strengthen counter-cyclical layout management of fund products and prudently design the investment operation methods of fund products. Where a fund manager develops multiple fund products of the same type of investment style, it shall strengthen demonstration of rationality and necessity, equip sufficient human and material resources, and ensure that business development is compatible with management capabilities, risk control levels and actual market demand. Fund managers shall not induce investors to make short-term and frequent subscriptions and redemptions by arranging multiple fund products of the same type of investment style in the same fund sales channel. Article 9 Fund managers shall establish and improve a full-process management system covering research, investment and trading, strengthen the support of research for investment decisions, establish an investment authorization system, clearly define investment authority, strengthen fair trading management, reinforce supervision and checks and balances among all links, effectively manage fund managers' investment behavior, and improve the scientificity and objectivity of investment decisions. Fund managers shall adhere to value investment, long-term investment and rational investment, strictly comply with fund contract provisions, take effective measures to ensure investment style stability, and shall not switch investment styles, raise risk limits, harm market order, or conduct other non-compliant investment operations for short-term gains, scale rankings, etc. Fund managers shall strictly comply with the company's authorization management system and investment decision-making process, independently, objectively and prudently perform investment duties, and important investments shall be supported by detailed and continuous research reports and risk analysis. Article 10 Fund managers shall establish and improve a risk management system to accurately identify, prudently assess and promptly respond to various risks such as market risk, liquidity risk, credit risk and operational risk, promote the steady operation of funds and fair valuation of fund net asset value, ensure that the lawful rights and interests of investors are not harmed and are treated fairly, and comply with laws and regulations and relevant CSRC provisions. Fund managers shall adopt more prudent risk management measures for funds with relatively large scale or a relatively large number of investors, and comply with laws and regulations and relevant CSRC provisions. Article 11 In addition to the prohibited acts stipulated in Article 20 of the Securities Investment Fund Law, fund managers, fund custodians and their directors, supervisors, senior managers and other practitioners shall not engage in the following acts during fund operations: (1) Having other institutions or individuals issue investment instructions or illegally provide specific investment targets or other investment advice; (2) Providing convenience for other institutions or individuals to violate laws and regulations or evade regulation; (3) Engaging in unfair transactions, benefit transfer and other acts that harm the lawful rights and interests of investors; (4) Illegally returning management fees to investors; (5) Using fund assets to conduct unnecessary transactions for the purpose of seeking improper benefits; (6) Other acts prohibited by laws, administrative regulations and CSRC provisions. Chapter III Fund Offering Article 12 To apply for fund offering, the proposed fund manager and fund custodian shall meet the following conditions: (1) The proposed fund manager is a fund management company established according to law or another institution approved by the CSRC, and the proposed fund custodian is a commercial bank with fund custody qualifications or another financial institution approved by the CSRC; (2) Having fund managers and other business personnel that comply with CSRC provisions and are suitable for managing and custodying the proposed fund; (3) Within the most recent year, not having been subject to administrative or criminal penalties for major illegal or non-compliant acts or major dishonest acts in investment management business or custody business; (4) Not being under investigation by regulatory authorities or criminal investigation by judicial authorities for illegal or non-compliant acts or dishonest acts in fund management business or fund custody business, or not being in a rectification period; (5) Within the most recent year, the fund registration application materials submitted to the CSRC do not contain false records, misleading statements or major omissions; within the most recent six months, the fund registration application materials submitted to the CSRC do not contain information that is self-contradictory or materially inconsistent in prior and subsequent statements regarding the same fact; (6) There are no major changes that have caused or may cause adverse effects on fund operations, or other major matters such as litigation or arbitration involving fund assets, fund management business or fund custody business; (7) There are no major operational risks such as unsound governance structure, chaotic operation and management, ineffective implementation of internal control and risk management systems, or deteriorated financial conditions; (8) Other conditions prescribed by the CSRC in accordance with the principles of prudential supervision. Article 13 To apply for fund offering, the proposed fund shall meet the following conditions: (1) Having a clear and lawful investment direction, and not violating national policies or public order and good customs; (2) Having a clear fund operation method; (3) Complying with CSRC provisions on fund varieties; (4) The draft legal documents such as the fund contract and prospectus comply with laws, administrative regulations and CSRC provisions; (5) The fund name indicates the fund's category and investment characteristics; (6) There is no content that harms national interests, public interests or the lawful rights and interests of investors, defrauds or misleads investors, or otherwise infringes on the lawful rights and interests of others; (7) The prospectus truthfully, accurately and completely discloses important information required for investors to make investment decisions, does not contain false records, misleading statements or major omissions, and is concise, easy to understand and practical, and consistent with investors' comprehension ability; (8) Having an investor suitability management system consistent with fund characteristics, clear methods for investor positioning, identification and assessment to implement investor suitability arrangements, and clear risk warning content; (9) Systems for fund investment management, sales, registration and valuation and other business links are sound, conduct is standardized, and technical systems are fully prepared, and there are no circumstances that affect the normal operation of the fund, harm or may harm the lawful rights and interests of fund share holders, or may trigger systemic risks; (10) Other conditions prescribed by the CSRC in accordance with the principles of prudential supervision. Article 14 Where a fund manager applies for fund offering, it shall submit application materials in accordance with the Securities Investment Fund Law and CSRC provisions. From the time the application materials are administratively accepted, the fund manager, fund custodian and relevant fund service institutions shall bear corresponding legal responsibility for the truthfulness, accuracy and completeness of the application materials. Fund service institutions that issue legal opinions and other documents for fund application materials shall be diligent and responsible, and verify and validate the truthfulness, accuracy and completeness of the documents and materials on which they rely. After the application materials are accepted, the relevant content shall not be changed at will. If major changes occur in matters involved in the application materials during the application period, the fund manager shall submit updated materials to the CSRC within five working days from the date the change occurs. Article 15 The CSRC shall, in accordance with the Administrative Licensing Law and Article 54 of the Securities Investment Fund Law, accept fund offering registration applications, conduct review, make decisions on registration or non-registration, and notify the applicant; if not registered, it shall explain the reasons. Article 16 During the fund registration review process, the CSRC may entrust the Fund Industry Association to conduct preliminary review and provide opinions on the compliance of fund information disclosure documents, or organize expert review meetings to review innovative fund offering applications, and may also solicit opinions from dispatched offices, stock exchanges, futures exchanges, securities registration and settlement institutions, the Fund Industry Association, etc. regarding fund investment management, sales arrangements, trading settlement, registration and custody, and technical system preparation, and may conduct on-site inspections when necessary, for reference in registration review. Article 17 The fund offering period shall not exceed three months from the date of sale of fund shares. Article 18 When the fund offering period expires, if the total fund shares offered comply with Article 58 of the Securities Investment Fund Law and the following conditions are met, the fund manager shall handle capital verification and fund filing procedures in accordance with regulations: (1) For fixed-income funds such as bond funds, money market funds and negotiable certificate of deposit funds, the total offered fund shares shall be no less than 200 million shares and the fund offering amount shall be no less than RMB 200 million; for other types of funds, the total offered fund shares shall be no less than 50 million shares and the fund offering amount shall be no less than RMB 50 million, unless otherwise provided by laws, regulations or the CSRC; (2) The number of fund share holders shall be no less than 200. Sponsor-style funds are not subject to the above restrictions. Sponsor-style funds refer to funds in which, when offering the fund, the fund manager uses funds from company shareholders, the company's own funds, or funds from senior managers or fund managers and other personnel to subscribe for no less than RMB 10 million and holds them for no less than three years. Article 19 The CSRC shall provide written confirmation within three working days from the date of receiving the fund manager's capital verification report and fund filing materials; from the date of the CSRC's written confirmation, the fund filing procedures are completed and the fund contract takes effect. The fund manager shall make a public announcement on the next day after receiving the CSRC confirmation document. Article 20 Information disclosure fees, accountant fees, lawyer fees and other expenses during the fund offering period shall not be paid from fund assets; if the fund charges subscription fees, they may be paid from subscription fees. Chapter IV Subscription, Redemption and Trading of Fund Shares Article 21 The fund contract of an open-end fund shall stipulate, and the prospectus shall state, the date (hereinafter referred to as open day) and time on which the fund manager handles fund share subscription and redemption business. Fund managers shall strengthen the management of the holder structure of open-end fund shares. When handling fund share offering, subscription and redemption business, they shall follow the principles of giving priority to the interests of fund share holders and treating different investors fairly, establish monitoring, identification and control mechanisms for large-amount fund subscriptions and redemptions, and when subscription, purchase or redemption harms investor interests, promptly take measures such as controlling the offering scale, suspending subscription and redemption business, limiting the scale or proportion of subscription and redemption, limiting the holding proportion of a single fund share holder, and rejecting large subscriptions and redemptions. Fund sales institutions shall cooperate with fund managers in investor structure management, process fund share offering, subscription and redemption in an orderly manner, and strengthen investor education and services. Article 22 The fund contract of an open-end fund may stipulate that the fund manager will not handle redemption within a certain period from the effective date of the fund contract; however, the stipulated period shall not exceed three months and shall be stated in the prospectus. Except in circumstances recognized by the CSRC. Article 23 The subscription and redemption prices of open-end fund shares shall be calculated based on the fund share net asset value on the subscription or redemption date plus or minus relevant fees. The specific calculation method for the subscription and redemption prices of open-end fund shares shall be stated in the fund contract and prospectus. The net asset value of open-end fund shares shall be calculated by dividing the net asset value of the fund by the balance of fund shares on that day. The specific calculation method shall be stated in the fund contract and prospectus. Article 24 Fund managers shall not handle subscription, redemption or conversion of fund shares on dates or at times other than those stipulated in the fund contract, except in circumstances recognized by the CSRC. If an investor submits a subscription, redemption or conversion application on a date or at a time other than those stipulated in the fund contract, the subscription or redemption price of the fund shares shall be the price on the open day on which the next fund share subscription or redemption time falls; if the date and time on which the investor submits the subscription application are relatively far from the next open day, the fund manager may reject the application and shall state this in the fund contract or prospectus. Article 25 When an investor subscribes for fund shares, the subscription amount must be paid in full; when the investor pays the subscription amount, the subscription is established; when the fund share registration institution confirms the fund shares, the subscription becomes effective. When a fund share holder submits a redemption application, the redemption is established; when the fund share registration institution confirms the redemption, the redemption becomes effective. Except as otherwise provided by the CSRC. For open-end funds that invest in portfolio securities corresponding to a specific index or other investment targets stipulated in the fund contract, their fund shares may be subscribed and redeemed with portfolio securities, cash or other consideration stipulated in the fund contract. The subscription and redemption consideration of fund shares shall be determined based on the fund's asset portfolio and the fund share net asset value on the subscription or redemption date, and the specific calculation method shall be stated in the fund contract and prospectus. The listing and trading, subscription and redemption, and fund settlement of fund shares shall comply with relevant provisions of stock exchanges and securities registration and settlement institutions. Article 26 Fund managers shall, within three working days from the date of receiving investor subscription or redemption applications, confirm the validity of the subscription or redemption, unless otherwise provided by the CSRC. Fund managers shall pay redemption proceeds within seven working days from the date of accepting valid investor redemption applications, unless otherwise provided by the CSRC. Fund managers shall not set differentiated redemption proceeds payment times for the same fund. Article 27 An open-end fund may stipulate that after the fund reaches a certain scale, the fund manager will no longer accept subscription or purchase applications, but this shall be stated in the prospectus or relevant announcements. Fund managers shall not exceed the fund scale upper limit determined in information disclosure documents such as the fund share offering announcement during the fund offering period. After the fund contract takes effect, the fund manager may adjust the fund scale according to actual circumstances, but shall announce it three days in advance. Article 28 The fund contract of an open-end fund may set limits on the proportion or number of fund shares held by a single fund share holder, but this shall be stated in the prospectus. Article 29 If the net redemption applications of an open-end fund on a single open day exceed 10% of the total fund shares, it is a huge redemption, except in circumstances recognized by the CSRC. If a huge redemption occurs in an open-end fund, the redemption shares processed by the fund manager on that day shall not be less than 10% of the total fund shares, and the remaining redemption applications may be postponed. Article 30 If a huge redemption occurs in an open-end fund, the fund manager shall, for the redemption application of a single fund share holder, determine the redemption shares processed for that single fund share holder on that day according to the proportion of the redemption shares applied for to the total redemption shares applied for on that day. Fund share holders may choose to cancel the portion not processed on that day when applying for redemption. If the fund share holder does not choose to cancel, the fund manager may postpone the unprocessed redemption shares to the next open day, and the redemption price shall be the price on the next open day. Article 31 If a huge redemption occurs in an open-end fund and processing is postponed, the fund manager shall notify fund share holders within three trading days through the method stipulated in the prospectus, explain the relevant handling method, and simultaneously make a public announcement in the prescribed media. Article 32 If huge redemptions occur continuously in an open-end fund, the fund manager may, in accordance with the fund contract and prospectus, suspend acceptance of redemption applications; redemption applications already accepted may have payment postponed, but the postponement period shall not exceed 20 working days, and a public announcement shall be made in the prescribed media. Article 33 The fund contract of an open-end fund may stipulate that if a single fund share holder applies to redeem fund shares exceeding a certain proportion of the total fund shares on a single open day, the fund manager may suspend acceptance of redemption applications or postpone payment in accordance with Article 32 of these Measures. Article 34 An open-end fund shall maintain no less than 5% of the fund's net asset value in cash or government bonds, policy financial bonds and central bank bills maturing within one year, to prepare for payment of redemption proceeds to fund share holders, except for exchange-traded open-end funds and other circumstances recognized by the CSRC. If the above proportion is not met due to changes in fund scale, the fund manager shall complete adjustment by the next trading day. Article 35 Fund shares may be listed and traded on stock exchanges in accordance with law, or transferred in trading venues recognized by the CSRC or through other methods in accordance with laws and regulations and fund contract provisions. Stock exchanges and trading venues recognized by the CSRC shall, in accordance with laws, administrative regulations, CSRC provisions and prudential principles, formulate rules for fund share listing and trading and other acts, strengthen review management and monitoring, and promptly handle and report to the CSRC and relevant dispatched offices if major risks or violations are found in relevant funds. Chapter V Fund Investment and Income Distribution Article 36 Fund managers shall set a performance benchmark for funds, except in circumstances recognized by the CSRC. Fund managers shall establish and improve a full-process management mechanism for performance benchmarks to ensure that performance benchmarks effectively represent investment style, measure investment performance and constrain investment behavior, and comply with laws and regulations and relevant CSRC provisions. Article 37 Where a fund name indicates an investment direction, the fund contract and prospectus shall use identifiable or quantifiable methods to clearly define the investment direction indicated by the fund name, and the defined scope shall conform to basic market common sense and general cognition, be directly related to the investment direction, and no less than 80% of total fund assets shall belong to the content determined by the investment direction. The aforementioned investment direction includes specific market capitalization, industry, theme, market segment, region, strategy, asset class, etc. Fund managers shall establish and maintain a style library of investment objects in accordance with regulations, ensuring that securities in the style library of investment objects comply with the fund contract and prospectus provisions on investment direction. Where the fund name does not indicate a specific industry or theme, the fund manager shall strengthen diversified investment management and shall not concentrate investment in a single industry or theme. Article 38 Fund managers using fund assets for securities investment shall not engage in the following circumstances, unless otherwise provided by the CSRC: (1) A fund holds securities issued by one company with a market value exceeding 10% of the fund's net asset value; (2) All funds managed by the same fund manager hold securities issued by one company exceeding 10% of such securities; (3) Fund assets participate in stock issuance subscription, and the amount declared by a single fund exceeds the total assets of the fund, or the number of shares declared by a single fund exceeds the total number of shares issued by the company in this issuance; (4) Except for funds of funds, a fund holds other funds with a market value exceeding 30% of the fund's net asset value; (5) A fund of funds holds another single fund with a market value exceeding 20% of the fund's net asset value, or invests in another fund of funds; (6) Total fund assets exceed 140% of the fund's net assets; (7) Violating fund contract provisions on investment scope, investment strategy and investment proportion; (8) Other circumstances prohibited by CSRC provisions. Fund assets investing in real estate investment trusts shall be implemented in accordance with items (1) to (3) of the preceding paragraph, and items (4) and (5) of the preceding paragraph and the relevant provisions on funds of funds shall not apply. The specific proportion of fund assets invested by fund managers in securities derivatives shall comply with relevant CSRC provisions. Article 39 Fund managers shall establish and improve internal approval and evaluation mechanisms for related-party transactions, clarify lists of related parties and related-party transactions, and effectively identify major related-party transactions. Where fund managers use fund assets to conduct related-party transactions, they shall comply with the fund's investment objectives and investment strategies, follow the principle of giving priority to the interests of fund share holders, effectively prevent conflicts of interest, and execute at fair and reasonable market prices. Major related-party transactions shall be submitted to the fund manager's board of directors or an institution authorized by the board for review, obtain the prior consent of the fund custodian, and be disclosed in accordance with laws and regulations. The fund manager's board of directors shall review fund related-party transaction matters at least every six months. Article 40 Fund managers shall, within three months from the effective date of the fund contract, make the fund's investment portfolio proportions comply with the relevant provisions of the fund contract. If the fund contract provisions are not met, fund share redemption and listing and trading shall not be handled, except in circumstances recognized by the CSRC. During this period, the fund's investment scope, investment strategy and risk-return characteristics shall comply with the fund contract provisions. Article 41 If, due to factors outside the fund manager such as securities market fluctuations, mergers of securities issuers, or changes in fund scale, fund investment does not comply with the proportions stipulated in Articles 6, 7, 37 and 38 of these Measures or the investment proportions stipulated in the fund contract, the fund manager shall complete adjustment within ten trading days, except in circumstances prescribed by the CSRC. If the liquidity of relevant assets is restricted, adjustment shall be completed within ten trading days after the liquidity-restricted assets can be sold, transferred or resume trading. If the fund manager realizes fund assets on the day of a huge redemption application, the lower limit requirements for relevant asset investment proportions stipulated by laws and regulations and the fund contract may be exempted. Article 42 The following fund-related expenses may be paid from fund assets: (1) Management fees of the fund manager; (2) Custody fees of the fund custodian; (3) Audit fees and lawyer fees after the fund contract takes effect; (4) Fund share holders' meeting expenses; (5) Securities trading expenses of the fund; (6) Other expenses that may be paid from fund assets in accordance with relevant national provisions and the fund contract. Fund managers may, based on the principle of consistency with the interests of fund share holders and in light of product characteristics and investor needs, set the structure and level of fund management fee rates. If a non-fixed fee model is adopted, the fund manager shall design a fair fee collection mechanism compatible with investor interests, take effective measures to avoid incentivizing fund managers to pursue improper risks when managing investment portfolios, and raise the requirements for fair trading management among fund products with different fee models. Fund managers may establish separate share classes for personal pension, fund investment advisory and other businesses prescribed by the CSRC, and implement fee preferences for management fees and custody fees in accordance with regulations. Article 43 Fund income distribution shall be stipulated in the fund contract. Fund income distribution shall be in cash, except in circumstances recognized by the CSRC. Fund share holders of open-end funds may choose in advance to convert the cash income distributed into fund shares in accordance with the fund contract provisions on fund share subscription; if the fund share holder has not made a choice in advance, the fund manager shall pay cash. Fund managers shall prudently handle large-amount subscription and redemption applications during sensitive periods for open-end fund income distribution in accordance with regulations, and effectively protect the lawful rights and interests of existing fund share holders. Article 44 Fund managers shall establish and improve management mechanisms for participating in the governance of listed companies, play the role of active shareholders, and actively, effectively and prudently participate in the governance of listed companies by exercising voting rights, inquiry rights, proposal rights and other relevant shareholder rights in accordance with law. A fund's holding of shares already issued by a listed company shall be calculated on a single-product basis. If a fund that invests in securities entirely according to the constituent proportions of a relevant index holds 5% or more but less than 20% of the voting shares already issued by a listed company, the relevant provisions of Article 63, paragraphs 1 and 2 of the Securities Law shall not apply. If a fund that invests in securities entirely according to the constituent proportions of a relevant index holds 5% of the shares of a listed company, the relevant provisions of Article 44 of the Securities Law shall not apply; selling the listed company shares it holds that are not within the restricted transfer period stipulated by laws, administrative regulations or the CSRC shall not apply the relevant provisions of the Interim Measures for the Management of Share Reduction by Shareholders of Listed Companies, unless otherwise provided by the CSRC. Chapter VI Fund Conversion of Operation Mode, Merger and Change of Registration Article 45 The conversion of a fund's operation mode or merger with another fund shall be carried out in accordance with the procedures stipulated by laws and regulations and the fund contract. If the implementation plan is not explicitly stipulated in the fund contract, it shall be reviewed and approved by the fund share holders' meeting. The fund manager shall issue a notice in advance, clarify the relevant implementation arrangements, explain the impact on existing fund share holders and the options available to fund share holders (such as redemption, transfer out or sale), and reserve at least 20 open days or trading days before implementation for fund share holders to make choices. Article 46 After fund registration, if substantive adjustments to the original registered matters are required, relevant procedures shall be performed in accordance with laws and regulations and the fund contract; if continuing to publicly raise funds, an application to change registered matters shall be submitted to the CSRC in accordance with the Administrative Licensing Law before public offering. Without registration, funds shall not be publicly or disguisedly publicly offered. Substantive adjustment matters referred to in the preceding paragraph include major adjustments to fund investment objectives, scope, strategy, performance benchmarks and risk-return characteristics; major adjustments to subscription and redemption, valuation and accounting, and fee structure rules; and other matters that may cause non-compliance with the registration conditions stipulated in Articles 12 and 13 of these Measures. Article 47 For open-end funds established in accordance with Article 18, paragraph 1 of these Measures, after the fund contract takes effect, if the fund's net asset value or the number of fund share holders fails to meet the circumstances stipulated in Article 18, paragraph 1 of these Measures for 20 consecutive working days, the fund manager shall disclose this in periodic reports; if the aforementioned circumstances occur for 60 consecutive working days, the fund manager shall report to the CSRC dispatched office within ten working days and propose a solution, except in circumstances recognized by the CSRC. If continued operation is intended, the fund manager shall bear the fixed expenses of fund operation. If it intends to convert the operation mode, merge with another fund or terminate the fund contract early, the fund manager shall convene a fund share holders' meeting for voting in accordance with regulations. For sponsor-style funds established in accordance with Article 18, paragraph 2 of these Measures, if they continue to exist three years after the fund contract takes effect, the preceding provisions shall apply. Fund managers shall clearly stipulate in the fund contract that the fund contract terminates if the fund's net asset value remains below a certain scale for consecutive periods, except in circumstances recognized by the CSRC. Fund managers may also stipulate circumstances for termination of the fund contract based on the number of fund share holders, concentration of fund share holders, etc. Chapter VII Fund Share Holders' Meeting Article 48 In addition to the matters stipulated in Article 47, items (1) to (4) of the Securities Investment Fund Law, the fund contract shall also stipulate, in accordance with CSRC provisions, other matters that have a major impact on the rights and obligations of the parties to the fund contract and require convening a fund share holders' meeting. The fund contract shall stipulate matters for which the fund contract may be amended upon consensus between the fund manager and the fund custodian, announcement 30 days in advance during the open period, and without convening a fund share holders' meeting. The fund manager shall fully demonstrate and prudently assess to ensure that relevant matters have no material adverse impact on the interests of fund share holders, do not involve major changes in investment objectives, scope, strategy, operation mode, etc., and file with the relevant CSRC dispatched office within five days after the announcement. If the open period is less than 30 days, announcement shall be made before the open period. The fund custodian shall strengthen review and assessment. Fund managers, fund sales institutions and other institutions shall promptly inform fund share holders of relevant matters in accordance with regulations. Article 49 If a fund share holders' meeting has not established a standing body, and the fund custodian considers it necessary to convene a fund share holders' meeting, it shall submit a written proposal to the fund manager. The fund manager shall decide whether to convene within ten days from the date of receiving the written proposal and shall notify the fund custodian in writing. If the fund manager decides to convene, it shall convene within 60 days from the date of issuing the written decision; if the fund manager decides not to convene and the fund custodian still considers it necessary to convene, it shall convene on its own and shall convene within 60 days from the