On December 8, 2011, the General Office of the PRC National Development and Reform Commission (the “NDRC”) issued the Circular on Promoting the Compliant Development of Equity Investment Enterprises (the “New Circular”), which is the first nationwide rule that comprehensively regulates Equity Investment Enterprises (“EIEs”) established in the PRC. According to the announcement published on the NDRC website regarding the promulgation of the New Circular, the regulation targets illegal fundraising activities and non-compliant operations of equity investment funds in the PRC. In addition, the New Circular aims to regulate the operations and record filings of onshore-established EIEs (including fund-of-funds that use EIEs as invested objects), which are in the business of investing in equities of non-publicly traded enterprises. Because the New Circular aims to regulate onshore established EIEs, we are of the view that the New Circular does not apply to purely offshore funds that are formed outside of the PRC.

The New Circular is a further development in the regulation of EIEs, following the Circular on Further Regulating the Development and Record Filing Administration of EIEs in Pilot Areas (the “Pilot Circular”), which was issued by the NDRC on January 31, 2011. The New Circular regulates the same scope of activities as the Pilot Circular: (1) the establishment, fundraising and investment of EIEs; (2) risk-control mechanisms of EIEs; (3) responsibilities of Equity Investment Management Entities (the “EIMEs”, as entrusted management entities of EIEs); (4) information disclosure systems of EIEs; and (5) record filings and industry self-disciplinary measures of EIEs.