About the National Council for Social Security Fund

On 1^st August 2000, the Central Committee of CPC and the State Council decided to establish National Social Security Fund (NSSF), and set up the National Council for Social Security Fund (SSF) for managing and operating the NSSF’s assets.

NSSF aims to be a solution to the problem of aging and serves as a strategic reserve fund accumulated by the central government to support future social security expenditures and other social security needs.

In accordance with the Interim Measures On the Administration of the Investment of National Social Security Fund promulgated on 13^th Dec 2001, the funding sources of NSSF are as follows: fiscal allocation of the central government; allocation from the lottery public welfare fund, capital derived from reduction or transfer of state-owned shares; capital raised in other manners with approval of the State Council; investment proceeds and equity assets.

Organization Chart of the National Council For Social Security Fund

 Composition of the Board 

The Board is composed of Chairman, Vice Chairmen (nominated by the State Council) and Directors (appointed by the State Council). The directors include current and former state leaders, public figures, current vice ministers of relevant government departments and vice governor of some provinces. The first Chairman is the former Finance Minister LIU Zhongli and the second Chairman is another former Finance Minister XIANG Huaicheng.

Members of the Board

Chairman: DAI Xianglong

Vice Chairman: SUN Xiaoxi, WANG Zhongmin, LI Keping

Directors: HUA Jianmin, CHENG Siwei, LI Guixian, CHEN Jinhua, YUAN Baohua, YANG Jike, LIU Zhongli, XIANG Huaicheng, WANG Mengkui, LUO Pingfei, LI Yong, HU Xiaoyi, WANG Jiong, XU Weiguo, ZHANG Zuoha, WU Dengchang

Responsibilities

SSF, a government agency on the ministerial level directly under the State Council of the People’s Republic of China, is responsible for the management and operation of NSSF and has the following responsibilities:

1. To operate the fund allocated by the central government, capital and equity assets derived from reduction of state-owned shares and capital raised in other manners;

2. To formulate the operation schemes for investments of SSF and to organize the operation;

3. To select investment managers and custodians of the NSSF, to mandate them with and to monitor the investment operation and custody of the NSSF assets, invest directly in prescriptive markets in accordance with the related laws and regulations;

4. To be responsible for the financial management and accounting of the NSSF, and to prepare periodical financial accounting statements and financial accounting reports;

5. Regularly to publish the financial condition such as NSSF's assets, proceeds and cash flow to the public.

6. To earmark fund for social security purposes in a way instructed and designated jointly by the Ministry of Finance and Ministry of Labor and Social Security.

7. To perform other duties as assigned by the State Council

Organization Structure-Board

According to the rules of the State Council, the Board is the governing body with the highest authority of SSF which is composed of Chairman, Vice Chairmen and Directors. The Board meets once every year to examine and adopt SSF work report of the previous year and work plan of the current year submitted by the secretariat and vote on other major issues. The Board also holds a workshop in the middle of the year. The board is responsible for the following functions:

1. Examine and adopt major policies and strategies concerning the management and operation of NSSF.

2. Examine and adopt NSSF annual operation plan and mid-and-long-term development plan submitted by the secretariat.

3. Examine the implementation of NSSF annual operation plan and approve NSSF annual operation report.

4. Approve NSSF’s major management rules concerning investment management, risk management and information disclosure.

5. Report to the State Council and authorized government departments concerning issues and problems in the management and operation of NSSF.

6. Formulate and revise the charter of SSF.

Organization Structure-Permanent Departments

The SSF has ten permanent departments.

Organization Structure-Non-Permanent Committees

The SSF has three non-permanent committees, i.e. the Expert Appraisal Committee, the Investment Committee and the Risk Management Committee.

SSF Logo

The logo of SSF is composed of an ancient and auspicious Chinese symbol “Fangsheng” and the abbreviation “SSF”. The symbol is an expression of solidarity, excellence and good luck, which represents good wishes for SSF as a fund that bears in heart people’s livelihood, keeps the principal and pursues growth and remains safe and liquid.

Legal Framework

The management of NSSF have been carried out in strict compliance with relevant laws. A sound legal system has been building up. So far, the related legal framework includes an administrative regulation and two divisional regulations, namely the Provisional Measures on Raising Social Security Fund through Reducing State-owned Shares, which was promulgated by the State Council on Jun. 12, 2001 and its prescribed A-share reduction was suspended on Oct. 23 of the same year; the Interim Measures On the Administration of the Investment of National Social Security Fund which was jointly promulgated by the Ministry of Finance and the Ministry of Labor and Social Security on Dec. 31, 2001, and the Provisional Regulations on Overseas Investment and Management of National Social Security Fund which was jointly promulgated by the Ministry of Finance，the Ministry of Labor and Social Security and the People’s Bank of China on May 1, 2006.

The nature, funding, payment, management and regulation of NSSF have been stipulated in the draft of Social Security Law. The Rules on National Social Security Fund is in the process of drafting as it is already in the legislative work plan of the State Council.

Investment Policy and Scope

Under relevant provisions of the Interim Management Measures on the Investments of the National Social Security Fund, the Interim Management Measures on the Overseas Investments of the National Social Security Fund, the NSSF are permitted to invest in the following products:

1. Domestic investments: bank deposits, treasury bonds, financial bonds, corporate bonds, securitized products, securities investment funds, stocks, industrial investments, industrial investment funds and trust investments.

2. Overseas investments: bank deposits, foreign treasury bonds, bonds of international financial organizations, bonds of foreign entities, foreign corporate bonds, overseas bonds issued by the Chinese government or Chinese enterprises, money market products such as banking drafts and large CDs, stocks, funds, derivative instruments such as swaps and futures, and such other investment products or instruments jointly approved by the Ministry of Treasury and the Ministry of Labor and Social Security.

Risk Policy and Investment Objective

In line with its nature as a national social security reserve fund, NSSF has formulated its risk policy and investment objective based on both short and mid-and-long-term perspectives. Its short-term (annual) risk policy is: given the probability of 90%, the maximum annual loss of the current year should not exceed 10%. The mid-and-long-term (5 year ) risk policy is: given the probability of 90%, the minimum annual rate of return should not be lower than 3.5%. The short-term investment objective is: To beat the composite benchmark of NSSF. The mid-and-long-term investment objective is: to beat inflation (CPI+2%) of the same period of time and strive for higher returns.

Size of the Fund and Asset Allocation

As of Dec. 31, 2009, the total asset under management of the National Council for Social Security Fund (SSF) stood at RMB 776.5bn, among which RMB692.7bn are NSSF equity capital. Among different asset categories, fixed income took up 40.67%, domestic stocks 25.91%, global stocks 6.54%, equity assets 20.54%, cash equivalents 6.34%.

Asset Size of National Social Security Fund

 Investment Proceeds

In 2009, NSSF has an investment return of RMB 84.9bn with a rate of return at 16.1%. Among them, RMB42.6bn was realized and RMB 42.3bn was trading assets fair value movement. By the end of 2009, the Fund has achieved accumulated proceeds of RMB 244.8bn, with a yield of 9.75% annually.

Overview of the Fund’s Annual Return 

Data Source: National Council for Social Security Fund　　　　 Unit: 100 million in RMB

Data Year	Asset Size	Annual Return (%)	Inflation Rate (%)
2000	0.17	-	-
2001	7.42	1.73	0.70
2002	19.76	2.59	-0.80
2003	44.71	3.56	1.20
2004	36.72	2.61	3.90
2005	71.22	4.16	1.80
2006	619.79	29.01	1.50
2007	1,453.50	43.19	4.80
Adjustment due to the Accounting Standards Conversion 1	-261.45	-	-
2008	-393.72	-6.75	5.90
Accumulative Return	1,598.11	(Annualized) 2 8.98	(Annu2alized) 3 2.34

Note: 1. Due to the change of calculation methods in the New Accounting Standards, profit and loss from fair value change of some assets is no longer calculated in investment return, the one time adjustment was made at the beginning of year 2008 to the amount of fair value change which has been calculated into investment return (formerly called operational return) in previous years.

　　 2. Annualized return is the geometric mean value of the annual return of the fund since inception.

　　 3. Annualized inflation is the geometric mean value of the annual inflation since the year when the fund was founded.

Entrusted Fund

1. Industrial Pooling Fund

According to Measures on the Management of Original Industrial Pooling Fund Generated from Enterprise Basic Pension Fundsjointlypromulgated by the Ministry of Finance and the Ministry of Labor and Social Security, the SSF has been entrusted to manage industrial pooling fund since April, 2004. As of Dec. 31, 2009, the balance of industrial pooling funds entrusted stood at RMB 6.283bn.

2. Individual Account Fund

According to Provisional Measures on the Implementation of Central Subsidy Investment and Management of Enterprise Employee Basic Pension Individual Account jointly promulgated by the Ministry of Finance and the Ministry of Labor and Social Security as well as investment and management contracts signed with various pilot provinces (cities and autonomous regions), the SSF has been entrusted to manage the individual account fund of pilot provinces since December, 2006. As of Dec. 31, 2009, the balance of individual account funds entrusted stood at RMB 43.953bn.