Guidelines for the Zengcheng District Fund to Promote High-Quality Economic Development

 (Second Revised Edition)

By Investment Promotion Bureau of Zengcheng Economic&Technological Development Zone,Guangzhou

Town governments, street offices, district government departments, agencies and institutions, and departments of the development zone：

　　 The "Guangzhou Zengcheng District Promoting Economic High-Quality Development Guidance Fund Management Method (Revised Version for the Second Time)" has been reviewed and approved by the regular meeting of the District Government (3rd Session, 95th Meeting), and is now being issued to you. Please implement it seriously. If you encounter any problems during implementation, please report directly to the Development Zone Investment Promotion Bureau.

Investment Promotion Bureau of Zengcheng Economic&Technological Development Zone,Guangzhou

June 25, 2024

Guidelines for the Zengcheng District Fund to Promote High-Quality Economic Development 

(Second Revised Edition)

Chapter I General Provisions

　　Article 1: In order to further standardize the management of the Zengcheng District Promoting Economic High-Quality Development Guiding Fund (hereinafter referred to as the "guiding fund"), attract high-quality enterprises from both at home and abroad to gather in our district, play a supporting role for capital in promoting industrial transformation and upgrading, and drive the high-quality economic development of our district, based on relevant laws, regulations, and relevant policies, and in combination with our district's actual situation, this regulation is formulated.

　　Article 2: The guidelines herein refer to a policy-oriented fund established by the Zengcheng District government and operated in a market-oriented manner, one of the policy-oriented funds set up by the district government. The fund's purpose is to play the role of market resource allocation and fiscal fund guidance, adhering to the new development philosophy and meeting the requirements of high-quality development. It aims to accelerate the development of new economy and foster and nurture new growth drivers.

　　Article 3: The guiding fund invests in new economy and new driving force industry projects by taking equity stakes in sub-funds or by making direct equity investments.

　　Article 4: In this regulation, the term "participating fund" refers to the funds established or increased by the government's venture capital funds in cooperation with social capital for investment operations. All funds in which the government's venture capital funds participate are collectively referred to as "sub-funds" of the government's venture capital funds.

　　Article 5: This Measures refers to direct equity investment, where the Guiding Fund invests in projects that meet the industrial policies of Zengcheng District and have been approved by the Zengcheng District Investment Promotion Work Leadership Group, through direct equity investment. The maximum investment amount in direct equity investment shall not exceed 50% of the actual paid-in capital of the Guiding Fund in the current period.

　　Article 6: The guiding Fund shall be established in 2018 with an initial scale of 400 million yuan and a duration of 10 years, which may be extended after expiration according to the actual situation. The capital sources of the guidance fund mainly include:

　　（I）Special funds arranged by the district finance;

　　（II）The income generated from guiding the operation of the fund and the funds recovered from withdrawal (excluding the part used in accordance with the overall plan);

　　（III）Funds donated by individuals, enterprises, or social organizations without compensation;

　　（IV）Other sources of funding.

　　Article 7: The district finance bureau shall make the initial investment, and subsequent investments will be made according to the annual budget, project investment progress, or actual funding needs. If the external investment amount of the guidance fund does not reach 60% of the fund size in a given period, the district finance bureau will postpone the subsequent investment.

　　Article 8: The guidance fund operates under a management system that separates decision-making from management. It runs according to the principle of "government guidance, market operation, scientific decision-making, and risk prevention."

　　(I) Government guidance. The government plays a regulatory role in economic and social development and urban construction, innovates its support for economic development, guides social capital towards new economic and new driving force projects, and promotes the realization of policy orientation and objectives, but government departments do not participate in the fund's specific operations and do not specify specific projects.

　　(II) Market operation. The market should play the decisive role in resource allocation. The guidance fund guides social capital investment direction by investing in subsidiary funds. The daily management, project investment, and post-investment management of the subsidiary funds are carried out by professional fund management institutions according to market principles. Government departments and the guidance fund's trustee management institution do not interfere with the specific management and operation of the subsidiary funds.

　　(III) Scientific decision-making. A scientific decision-making mechanism is established, and the principle of professional and meticulous decision-making is followed. The management and investment decisions of the guidance fund and subsidiary funds are guided by the principle of scientific rationality and optimized procedures.

　　(IV) Risk prevention. The decision-making, governance of the fund management institution, and fund supervision of the guidance fund's investment in subsidiary funds are regulated to prevent financial risks.

Chapter II Management Model

  　　Article 9: The Zengcheng District Promoting Economic High-Quality Development Guidance Fund Management Group (hereinafter referred to as the "guidance fund management group") shall be established to exercise the decision-making and management functions of the guidance fund. The guidance fund management group shall be led by the district leader in charge of economic work, with the main leaders of the Finance Bureau (State-owned Assets Bureau) and the Investment Promotion Bureau serving as vice group leaders. One deputy leader each from the Bureau of Development and Reform, the Bureau of Industry and Commerce, the Science and Technology Bureau, the Zengcheng Industrial Investment Group, and the guidance fund trustee management institution shall serve as group members.

　　The guidance fund management group shall serve as the principal institution of the guidance fund, and shall, upon authorization by the district government, perform the following duties:

　　（I）Review and approve the development strategy and planning of the guidance fund, and determine the main investment directions of the guidance fund based on the economic and social development strategies and high-quality development policy orientation of Zengcheng District；

　　（II）Review and approve the relevant management regulations of the guidance fund；

　　（III）Review and approve the annual investment plan of the guidance fund；

　　（IV）Review and approve the selection results of the sub-fund management institutions；

　　（V）Adjust the scale of the guidance fund based on the investment operation situation；

　　（VI）Review and approve the market-oriented exit plan of the guidance fund for sub-funds；

　　（VII）Supervise the guidance fund trustee management institution in implementing the resolutions of the guidance fund management group；

　　（VIII）Review and approve the project plan and exit plan of the direct equity investment project of the guidance fund；

　　（IX）Other matters authorized by the district government.

　　Article 10: The guidance fund management group shall set up an office (hereinafter referred to as the "office") under its leadership, with the office located in the Investment Promotion Bureau. The office shall be responsible for daily affairs, and its main duties include:

  　　（I）Organize the meetings of the guidance fund management group；

  　　（II）Organize the meetings of the guidance fund evaluation committee；

  　　（III）undertake other tasks assigned by the Lead Fund Management Group;

  　　（IV）conduct performance evaluation of the Lead Fund's annual operation.

　　Article 11: The Lead Fund's trustee management institution shall, in addition to the following main responsibilities:

　　（I）Implement the resolutions of the Lead Fund Management Group;

　　（II）Select the sub-fund management institutions; publicize the annual Lead Fund application guidelines, accept the applications for sub-fund management institutions, conduct due diligence and investment analysis on the prospective sub-funds or cooperative parties, and submit the investment plan for establishing or participating in sub-funds to the appraisal committee for review and approval;

　　（III）Conduct due diligence and investment analysis on direct equity investment projects, and submit the investment analysis report on direct equity investment projects to the Lead Fund Management Group for review and approval;

　　（IV）Manage the Lead Fund's limited liability for investment with the investment amount as the limit, and represent the Lead Fund in exercising the rights of investors for the sub-funds invested;

　　（V）Submit the annual investment plan of the Lead Fund to the Lead Fund Management Group;

　　（VI）Monitor the operation of the sub-funds and direct equity investment projects, and report the operation status to the Lead Fund Management Group every six months; if the use of the sub-funds violates laws and regulations or deviates from policy guidelines, the trustee management institution of the Lead Fund can represent the Lead Fund to handle the relevant procedures for exiting the sub-funds according to the agreement;

　　（VII）Complete the non-market-oriented exit of the Lead Fund from the sub-funds;

　　（VIII）Conduct the professional operation of post-investment management and exit implementation for direct equity investment projects of the Lead Fund;

　　（IX）Coordinate the industrial departments of the district to provide project information query and project connection services for the sub-funds;

　　（X）evaluate the performance of the sub-funds' custodian banks in fulfilling the custodian agreement;

　　（XI）Undertake and guide other tasks assigned by the fund management team and office.

Chapter III Operation and Management of Participation Funds

　　Article 12: The Guiding Fund shall operate on a mother fund basis, including investing in sub-funds established in Zengcheng District through the form of equity participation to guide social capital, or investing in new economy and new driving force industry investment funds that have already been established through the forms of capital increase, equity transfer or transfer of property rights (or partnership property rights) of the fund.

　　Article 13: The sub-fund shall operate on a market-oriented basis, and invest and manage its assets in accordance with the provisions of the charter or the relevant agreements. The Guiding Fund management agency shall supervise the investment and operation of the sub-fund, but shall not participate in its daily management.

　　Article 14: The main requirements for the Guiding Fund investment are as follows:

　　(I) Registered location. A newly established sub-fund shall be registered in Zengcheng District; if the Guiding Fund invests in an existing new economy and new driving force industry investment fund through the forms of capital increase, equity transfer or transfer of property rights (or partnership property rights), the sub-fund shall move its registered location to Zengcheng District.

　　(II) Fund size. The Guiding Fund's maximum investment in a single sub-fund shall not exceed 50 million RMB yuan, and shall not generally become the largest shareholder. If the limit is exceeded, it shall be submitted to the Zengcheng District government for further review.

　　(III) Fund investment direction. The Guiding Fund shall invest in new technologies, new industries, new business models and new forms of business, mainly including the following directions:

　　1. Strategic emerging industries. New energy vehicles, low-altitude economy, artificial intelligence, new display technologies, electronic and information communication, biomedicine and healthcare, new materials and high-end equipment manufacturing, new energy and energy conservation and environmental protection.

　　2. Modern services. Logistics, information services, e-commerce, business services, exhibition services, scientific and technological services, cultural industry, intellectual property services, tourism industry, sports industry and health industry.

　　3. Guangzhou Manufacturing 2025. Intelligent equipment and robots, next-generation information technology, new materials and fine chemicals, energy and environmental protection equipment, rail transit, high-end ships and marine engineering equipment, aerospace and satellite applications, and urban consumer industries.

　　4. Other sections, such as big data, digital creativity, smart home, quantum technology, blockchain, terahertz, natural gas hydrates, nanotechnology, industrial internet, rural revitalization, beautiful rural areas, and village-level industrial park renovation, as well as the strategic emerging industries identified by the state, province, and city.

　　（IV）Project investment period. The sub-fund must complete project investment within 3 years after the state guidance fund forms a sub-fund through equity investment or partnership property rights, and the project exit time must be earlier than the expiration date of the sub-fund.

　　（V）Duration. The duration of the sub-fund shall not be less than 3 years and shall not exceed the expiration date of the state guidance fund. Among them, during the duration of the sub-fund, the total amount of investment in enterprises within Zengcheng District shall not be less than the state guidance fund's equity investment amount.

　　（VI）Delegation of management. The governance structure of the sub-fund must comply with legal requirements and be entrusted to a professional management institution to manage the sub-fund's daily investment and management.

　　（VII）Establishment method. The sub-fund may be established in the form of a company or a partnership, and must strictly comply with the relevant laws and regulations of the People's Republic of China, such as the "Company Law of the People's Republic of China" and the "Partnership Enterprise Law of the People's Republic of China", to establish and operate.

　　（VIII）Contribution time. The state guidance fund and other investors should contribute to the sub-fund in phases and in proportion, and the state guidance fund and other investors should allocate the actual paid-in funds to the sub-fund account in phases and in proportion according to the investment agreement.

　　（IX）Flat structure. Each contributor to the sub-fund should agree on the allocation of profits and the sharing of risks according to the principle of "shared interests and shared risks". The guidance fund shall not promise the investors that their capital will not be lost, nor shall it promise a minimum return.

　　（X）Risk control. The single project investment amount of a sub-fund shall not exceed 20% of the total assets of the sub-fund.

　　（XI）Credit incentives. When applying for the guiding fund to participate in the sub-fund, the applicants and institutions with good credit will be given priority and consideration in the process of acceptance, investigation and evaluation, including the subjects who are included in the national trustworthy incentive list such as A-level taxpayers, and the subjects who perform well in the comprehensive credit evaluation of enterprises in Guangzhou.

　　Article 15: The criteria for the sub-fund's investment in enterprises registered in Zengcheng District are as follows:

　　（I）Investment entity recognition.

　　1. The sub-fund;

　　2. Other equity investment funds managed by the sub-fund management institution, provided that the same investment has been made jointly with the sub-fund within the investment period of the sub-fund.

　　（II）Recognition of enterprises registered in Zengcheng District. The following situations can be recognized as investment in enterprises registered in Zengcheng District:

　　1. The registered office of the invested enterprise is located in Zengcheng District;

　　2. The invested enterprise, after obtaining the investment, moves its registered office into Zengcheng District within the investment period, or establishes or moves its research and development center, production base, or sales company, which can generate tax revenue for Zengcheng District, within the investment period;

　　3. Introduces and has substantial business operations for the registered enterprises in Zengcheng District;

　　4. The investment in enterprises outside Zengcheng District made by the sub-fund or the sub-fund management institution's other funds through equity investment;

　　5. The sub-fund management institution's other funds or the sub-fund itself invest in the main production and research base of the enterprise located in Zengcheng District (the assets of the subsidiary company shall not be less than the corresponding investment amount of the sub-fund to the enterprise);

　　6. The sub-fund management institution's other funds newly invest (or invest with their own funds) in enterprises located in Zengcheng District or introduce enterprises to settle in Zengcheng；

　　7. Other investments in enterprises within the jurisdiction of Zengcheng District.

　　Article 16: The sub-fund shall not engage in any of the following businesses directly or indirectly:

　　（I）Investing in shares of listed companies, except for the shares held by the participating fund after investing in unlisted companies and the allotment and subscription part thereof;

　　（II）Engaging in guarantee, mortgage, entrustment loan, real estate (including purchasing self-use real estate) business;

　　（III）Investing in stocks, futures, enterprise bonds, trust products, non-guaranteed wealth management products, insurance plans and other financial derivatives;

　　（IV）Investing in other investment funds;

　　（V）Providing sponsorship or donations to any third party;

　　（VI）Absorbing or indirectly absorbing deposits, or providing loans and fund lending to any third party;

　　（VII）Making outbound investments with unlimited joint and several liability;

　　（VIII）Raising funds through the issuance of trust or collective investment products;

　　（IX）Other businesses prohibited by other national laws and regulations.

　　Article 17: The management institution of the sub-fund shall meet the following requirements:

　　（I）Established in accordance with the law, with a registered capital of no less than 10 million yuan and fully paid in cash;

　　（II）With a sound and effective corporate governance, internal control mechanism, and management system, has rich investment management experience, excellent historical performance, and provides a dedicated and stable management team for the investment fund;

　　（III）With a sound incentive and constraint mechanism, follow-up investment mechanism, asset custody mechanism, and risk isolation mechanism;

　　（IV）No negative information and has not been listed on the abnormal institution list of the China Securities Investment Fund Association;

　　（V）Accepts the inquiry of the guidance fund trust management institution on investment operations and reports relevant situations to the guidance fund trust management institution as needed.

　　Article 18: The guidance fund shall stipulate in the company's articles of association or partnership agreement with other investors of the sub-fund that the sub-fund management institution shall report the sub-fund's major matters to the guidance fund in writing (the specific reporting work shall be submitted to the guidance fund trust management institution). The sub-fund management institution shall report the project filing to the guidance fund trust management institution within one month after completing the project investment. The guidance fund trust management institution shall submit the statistical report to the guidance fund management team for filing every six months.

　　Article 19: The sub-fund management institution shall submit the half-yearly and annual operation reports of the sub-fund's business to the guidance fund trust management institution in July of each year and January of the following year; submit the audited financial report and bank custody report of the sub-fund for the previous year before April each year. The guidance fund trust management institution may entrust professional institutions to audit the sub-fund as needed.

Chapter IV Application for Guidance Fund and Selection of Sub-fund Management Institutions

　　Article 20: Procedure for Applying for Guidance Fund Participation in Sub-funds:

　　（I）Public Invitation. The Guidance Fund Management Group-approved annual allocation plan for the Guidance Fund shall be publicly announced by the Guidance Fund trustee management institution. Applicants shall apply to the Guidance Fund trustee management institution according to the requirements of the annual guidance fund application guidelines.

　　（II）Due Diligence. The Guidance Fund trustee management institution shall conduct due diligence and investment analysis on the applicant's materials and application plans.

　　（III）Evaluation by the Evaluation Committee. The Guidance Fund shall implement the evaluation committee system for evaluation. The evaluation committee shall evaluate the sub-fund management institution application plan based on the due diligence and investment analysis results. The application plan shall be approved by at least six-sevenths (including) of the full committee members for submission to the Guidance Fund Management Group for decision. The evaluation committee shall consist of seven members, jointly composed by the Investment Promotion Bureau of the Development Zone, the Finance Bureau (the State-owned Assets Supervision and Administration Bureau), the Development and Reform Bureau, the Science, Technology and Industrialization Bureau, the Development Zone Science and Technology Innovation Bureau, the Development Zone Industrial Investment Group, and the Guidance Fund trustee management institution. Each unit shall appoint a relevant responsible person or designate an external expert to participate in the evaluation.

　　（IV）Decision by the Guidance Fund Management Group. The Guidance Fund Management Group shall decide on the selection of sub-fund management institutions evaluated by the evaluation committee. The sub-fund management institution shall be approved by at least two-thirds (including) of the full group members for final selection.

　　（V）Public Announcement. The Guidance Fund trustee management institution shall publicly announce the sub-fund management institutions approved by the Guidance Fund Management Group for a period of 3 days.

　　Article 21: A newly established sub-fund shall meet the following conditions if it applies for Guidance Fund investment:

　　（I）The principal sponsor (partner), sub-fund management institution, and custodian bank have been basically determined, and other investors (partners) have been preliminarily confirmed, with a guarantee that the funds will be deposited in accordance with the agreed schedule and in full.

　　（II）All investors in the sub-fund shall make legitimate contributions to the fund by legal means, with the individual institutional investor other than the sub-fund management institution contributing no less than 3 million RMB and the individual natural person investor no less than 1 million RMB. The number of sub-fund investors shall comply with relevant laws and regulations. All investors shall contribute with monetary funds, and all contributions shall be fully funded within three years.

　　（III）The sub-fund management institution, serving as the sub-fund manager, shall make an actual contribution to the sub-fund, with the specific contribution ratio stipulated in the sub-fund articles of association or partnership agreement.

　　（IV）The sub-fund management institution, serving as the sub-fund manager, already has a certain number of project reserves and has formulated the first-stage investment plan.

　　Article 22: Applications for the guidance fund to increase its investment in existing new economy, new driving force industry investment funds or acquire equity (or partnership property rights) shall meet the following conditions in addition to complying with the requirements for newly established sub-funds:

　　（I）The investment fund has been established in accordance with relevant laws and regulations and completed product registration with the China Securities Investment Fund Association, and has begun investment operations;

　　（II）All investors have made their initial contributions, which account for no less than 20% of the registered capital or the committed contribution amount.

　　Article 23: If the external investment amount of the sub-fund that has applied for the guidance fund investment has not reached 60% of the sub-fund size, the sub-fund management agency shall not be allowed to continue applying for the guidance fund's equity investment.

Chapter V Subscription Fund Investment Exit and Termination

　　Article 24: The equity (or partnership interest) invested by the Guidance Fund in a subscription fund can be exited at any time when there is a buyer, through means such as expiration liquidation, repurchase by social shareholders, and transfer of equity (or partnership interest) (through listing or non-listing).

　　Article 25: The Guidance Fund's trustee management institution is responsible for examining the exit timing of the subscription fund, and operates the exit when the timing is ripe.

　　Article 26: Before the Guidance Fund exits, if the subscription fund has already achieved profits, the Guidance Fund should obtain corresponding dividends according to its proportion of investment before exiting.

Chapter VI Direct Equity Investment Project Investment Process

　　Article 27: The investment decision process for direct equity investment projects:

　　（I）Project source. Direct equity investment projects are projects approved by the investment promotion work leading group of the district and are consistent with the industrial policies of Zengcheng District.

　　（II）Preliminary screening. The trustee management institution of the guidance fund shall, in accordance with the relevant requirements of this regulation, conduct initial screening, due diligence, and investment analysis on the materials submitted by the applicant institution, formulate a direct equity investment plan, and report the eligible investment projects to the guidance fund management team.

　　（III）Decision-making by the guidance fund management team. The guidance fund management team shall decide on the investment plan that has passed the initial screening, and the direct equity investment plan shall be approved by two-thirds (including) or more of the members of the guidance fund management team.

　　Article 28: The investment implementation process for direct equity investment projects:

　　（I）Signing of agreements. The trustee management institution of the guidance fund shall be responsible for implementing the signing of investment agreements and other legal documents with the approved investee enterprises.

　　（II）Fund disbursement. The trustee management institution of the guidance fund shall be responsible for the disbursement of the guidance fund to the investee enterprises.

　　（III）Post-investment management. The trustee management institution of the guidance fund shall comply with the relevant provisions on government investment fund management and this regulation, and do a good job of subsequent tracking management and exit of the investees.

　　（IV）Implementation of exit. The exit of direct equity investment projects shall be implemented by the trustee management institution of the guidance fund in accordance with the specific project agreement on exit approved by the guidance fund management team.

Chapter VII Incentive and Constraint Mechanisms

　　Article 29: Management Fee Payment:

　　（I）The annual management fee for the trustee of the guiding fund shall be determined based on the total scale of the guiding fund under its management, paid annually and drawn from the guiding fund each year. The management fee for the trustee of the guiding fund shall be determined based on the performance evaluation results, and the guiding fund management working group office shall conduct a performance evaluation of the guiding fund operations annually. The management fee for the trustee of the guiding fund shall be linked to the performance evaluation results, specifically as follows:

　　1. If the performance evaluation score is below 60 points, the annual management fee for the trustee of the guiding fund shall be determined at 0.5% of the total scale of the guiding fund;

　　2. If the performance evaluation score is above 60 points (inclusive) but below 90 points, the annual management fee for the trustee of the guiding fund shall be determined at 0.8% of the total scale of the guiding fund;

　　3. If the performance evaluation score is above 90 points (inclusive), the annual management fee for the trustee of the guiding fund shall be determined at 1% of the total scale of the guiding fund.

　　(II) The guiding fund management working group shall continue to study and improve the performance evaluation management mechanism, establish a sound system for the performance evaluation of the guiding fund and its supporting measures, and conduct a comprehensive performance evaluation of the policy objectives and policy effects of the guiding fund.

　　(III) The management fee for the sub-fund management institution shall be determined according to the provisions set forth in the sub-fund company's articles of association or partnership agreement. The annual management fee shall generally be determined based on 1%-2% of the actual paid-in capital of the sub-fund, and shall be paid by the sub-fund. 

　　Article 30: The guiding fund shall exit from the sub-fund by transferring its equity stake in the form of equity investment, and the other investors in the sub-fund shall have the priority to acquire the guiding fund's equity stake. The pricing for the guiding fund's exit shall be as follows:

　　（I）If the guiding fund's investment does not exceed 3 years, the transfer price shall be determined by adding the guiding fund's original investment amount to the yield calculated based on the interest rate of the same period deposit. The calculation formula is: transfer price = guiding fund investment amount + guiding fund investment amount x interest rate of the same period deposit x term.

　　（II）If the guiding fund's investment exceeds 3 years but not exceeding 5 years, the transfer price shall be determined by adding the guiding fund's original investment amount to the yield calculated based on the LPR of the same period loan market quotation. The calculation formula is: transfer price = guiding fund investment amount + guiding fund investment amount x LPR of the same period loan market quotation x term.

　　（III）If the guiding fund's investment exceeds 5 years, it shall exit through marketization.

　　Article 31: According to the principle of "priority to recover capital before sharing profits", the guiding fund shall reward the guiding fund management institution with 20% of the increased value of the investment project (The recycled funds shall be deducted from the investment made by the guidance fund to the project, as well as the taxes and other expenses incurred in the exit of the fund and the normal rewards of the sub-fund management institution (excluding the reward stipulated in Article 29 of this regulation), etc.) or direct equity investment project when it exits through marketization from the sub-fund project or direct equity investment project, based on the guiding fund's investment in the project.

　　Article 32: When the guiding fund exits through marketization from the sub-fund project or direct equity investment project, it shall reward the guiding fund management institution and the other investors in the sub-fund with a certain proportion of the remaining profit (hereinafter referred to as "remaining profit") based on the investment proportion of the guiding fund in the sub-fund (hereinafter referred to as "investment proportion").In addition, the fund management institution and other investors in the sub-fund will be rewarded with a certain proportion of the profits, as follows:

　　（I）Investment ratio is 100%-120% (including) will reward 20% of the remaining profits to the sub-fund management institution and other investors of the sub-fund at the time;

　　（II）Investment ratio is 120%-150% (including) will reward 30% of the remaining profits to the sub-fund management institution and other investors of the sub-fund at the time;

　　（III）Investment ratio is 150%-200% (including) will reward 50% of the remaining profits to the sub-fund management institution and other investors of the sub-fund at the time;

　　（IV）Investment ratio exceeds 200% will reward all remaining profits to the sub-fund management institution and other investors of the sub-fund at the time.

　　Article 33: The proportion of investment in sub-funds in the Zengcheng district cannot be less than 100% of the contribution of the guidance fund. If the proportion of investment in sub-funds in the Zengcheng district within 3 years after the guidance fund forms a sub-fund by participating in investment is less than 100% of the contribution of the guidance fund, the guidance fund may choose to withdraw without the consent of other investors, and the guidance fund management agency may take the following measures:

　　（I）Require the return of the entire investment amount;

　　（II）Require the sub-fund management institution or (and) other investors of the sub-fund to pay a penalty of twice the interest rate of the current fixed-term deposit for the same period, the calculation formula of the penalty is: penalty = guidance fund investment amount × interest rate of the current fixed-term deposit × 2 × period;

　　（III）Have the right to cancel the qualification of the sub-fund management institution for applying for the industrial guidance fund of Zengcheng district;

　　（IV）Have the right to apply to the Guangzhou Municipal Financial Supervision and Administration Bureau for legally identifying and punishing the dishonest behavior of the sub-fund management institution according to the contract.

Chapter VIII Risk Control

　　Article 34: The government-led fund shall, in the articles of incorporation (or partnership agreement) of the sub-fund, stipulate that the government-led fund shall conduct compliance review on the investment projects of the equity-stake sub-fund, and the government-led fund shall have the right to withdraw without the consent of other investors if any of the following situations occur:

　　(I) More than one year has elapsed since the approval of the sub-fund plan, and the sub-fund has not completed the establishment procedures in accordance with the prescribed procedures and time limits;

　　(II) More than one year has elapsed since the government-led fund funds have been transferred to the sub-fund account, and the sub-fund has not conducted investment business;

　　(III) The investment field and stage of the sub-fund do not conform to the policy objectives;

　　(IV) The sub-fund has not invested in accordance with the provisions of the articles of incorporation (or partnership agreement);

　　(V) There has been a substantial change in the management institution of the sub-fund.

　　Article 35: The government-led fund shall, in the articles of incorporation (or partnership agreement) of the equity-stake sub-fund, stipulate that the main initiator of the sub-fund shall not withdraw from the sub-fund before the government-led fund.

　　Article 36: The government-led fund shall, in the articles of incorporation (or partnership agreement) of the sub-fund, stipulate that:

　　(I) The government-led fund shall bear liability for the debts of the sub-fund to the extent of its investment, except as otherwise stipulated in the articles of incorporation (or partnership agreement) of the equity-stake sub-fund; the government-led fund shall not require preferential terms superior to those of other investors;

　　(II) When the sub-fund undergoes liquidation (including dissolution and bankruptcy), it shall fulfill the debts of creditors in accordance with legal procedures, and the remaining assets shall be distributed proportionally to the guidance fund and other investors of the sub-fund. When the sub-fund liquidation results in a loss, the sub-fund management institution shall bear the loss with its investment amount first, and the remaining loss shall be borne by the guidance fund and other investors of the sub-fund in proportion to their investment.

　　Article 37: The government-led fund shall clearly stipulate in the charter (or partnership agreement) of the sub-fund that it serves as an investor and has the right to appoint a representative as an observer to attend the investment decision-making committee meetings of the sub-fund, enjoy the rights of accessing the files of the sub-fund and supervising the sub-fund in accordance with the relevant agreements and this regulation, and have the right to raise objections to matters that violate the investment areas stipulated in this regulation or the prohibited business, or violate the charter (or partnership agreement) of the sub-fund.

　　Article 38: The government-led fund management agency shall strengthen the supervision over the use of the government-led fund's equity investment in the sub-fund, closely track its business and financial status, and prevent financial risks.

　　Article 39: Legal and contractual liabilities shall be pursued for various irregularities in the operation of the government-led fund and the major sponsors of the sub-fund who cheat the government-led fund or use the fund in violation of the designated use, misappropriate, misuse, or waste the fund.

　　Article 40: The government-led fund management agency shall entrust a commercial bank with relevant experience to undertake custody, specifically responsible for the disbursement, settlement, and daily monitoring of the government-led fund. The custodian bank shall report the situation of the government-led fund on a regular basis.

　　Article 41: Direct equity investment funds are primarily intended to serve the development of Guangzhou ZengCheng district's industries. In line with the characteristics of equity investment risks, the total loss from direct equity investment projects shall not exceed 15% of the cumulative scale of the government's investment. 

Chapter IX  Guidance Fund Supervision

　　Article 42: The guidance fund management team shall supervise the operation of the guidance fund and, if necessary, entrust professional institutions to conduct audits. The team shall regularly evaluate the policy objectives, policy effects, and investment operation of the guidance fund.

　　Article 43: The guidance fund management team shall be responsible for evaluating the performance and assessing the inspection of the guidance fund's entrusted management institution. The guidance fund's entrusted management institution shall submit a written report on the operation of the guidance fund and the guidance fund custody before June 30th of each year to the guidance fund management team. The report shall include the following:

　　(I) the investment operation of the guidance fund;

　　(II) the disbursement, exit, income, and loss of the guidance fund;

　　(III) the audited financial reports of the sub-funds and direct equity investment projects;

　　(IV) the operating situation and the audit report of the guidance fund's entrusted management institution by the accounting firm in the past year.

　　Article 44: If the guidance fund management team finds that the guidance fund's entrusted management institution has or may have dereliction of duty or failure to fulfill its duties during the supervision, it shall issue written rectification opinions or inquiries to the guidance fund's entrusted management institution. The guidance fund's entrusted management institution shall carry out rectification or provide a reasonable explanation as required. If it fails to rectify and improve or fails to provide a reasonable explanation twice in a row, the guidance fund management team has the right to replace the guidance fund's entrusted management institution.

　　Article 45: The guidance fund's entrusted management institution shall report to the District Development and Reform Commission within the first week of every half year the investment and operation of the guidance fund and its sub-funds. It shall report in a timely manner if any major events or changes occur. 

Chapter X Supplementary Provisions

　　Article 46: In the event of any discrepancies between this regulation and other relevant provisions of the Guangzhou government investment fund management system, the latter shall apply.　

　　Article 47: This regulation shall come into force on the date of its issuance and shall remain in effect for five years. At the same time, the Guangzhou Economic Development and High-Quality Growth Leading Fund Management Measures (Revised Edition) (Zengkexinzhi No. 1, 2021) shall be revoked. Sub-funds that have signed partnership agreements or company bylaws prior to the revision of this regulation may opt to follow this regulation.