asia region funds passport - pwc australia establishment of the asia region funds passpor considered...

The future of the funds management industry in Asia

Asia Region Funds Passport

ForewordForeword

John BrogdenChief Executive OfficerFinancial Services Council

The Australian Financial Services Council commissioned this research to explore the benefits arising from the development of an Asia Region FundPassport as well as the regional attitudes towards thisPassport as well as the regional attitudes towards thisobjective.

We are very pleased that the research has identified overwhelmingly positive response to both of these questions.

This research confirms that the creation of an Asia Region Funds Passport presents a unique opportunitfacilitate cross border investment within the regionfacilitate cross-border investment within the region –bringing with it significant economic, industry and consumer benefits. Importantly, it is also clear from tresearch that there is widespread support for the creation of an Asia Region Funds Passport – with theregion clearly signalling it is ready to embrace this exciting concept.

Through this research we hope to advance policy andreg lator disc ssions in the region ith the aim thatregulatory discussions in the region with the aim that Governments and Regulators will begin working collaboratively with the industry to bring the Passportfruition. The Financial Services Council stands readycontribute to these discussions.

Robert GromeAsset Management Leader Asia Pacific - PwC

ds s

The establishment of an Asia Region Funds Passport is a challenging first, but necessary, step in positioning Asia as a significant player in the global funds management industrys

an

ty to

management industry.

In the coming decades Asia will need an efficient and effective funds management industry to support the pension challenges associated with a rapidly ageing population and increasing life expectancy.

The benefits for consumers, the industry and economies across the region are clear. An Asia Region Funds Passport will provide investors with access to new

the

e

d

Passport will provide investors with access to new markets and diversification in a more efficient manner and at a lower cost, while also supporting the growth and liquidity of regional capital markets.

Once an Asia Region Funds Passport is established, mutual recognition with jurisdictions outside the region could also be developed - one Asian market, one Middle East market, one European market, one American market ma e ent all combine to be one global market

to y to

market may eventually combine to be one global market.

Executive summaryExecutive summary

Andrew WilsonAsset Management Leader Australia- PwC

The Asia region is enthusiastic about the development of an Asia Region Funds Passport1 and appears ready to embrace the challenges involved in its establishment. Industry supportThis report incorporates the views of leading funds management industry bodies and participants across Asia region. More than eighty per cent of industry bodand market participants surveyed endorse the development of an Asia Region Funds Passport.

It is currently expensive and inefficient, and in some cases not possible, for fund managers to operate acrothe Asia region. An Asia Region Funds Passport wouprovide a uniform framework which would address soof these issues.

The economic and demographic g pfundamentals The establishment of the Asia Region Funds Passporconsidered to be important to the growth and prosperof the region’s funds management industry and in turnability to support growth across the region. The economic and demographic fundamentals of the Asiaregion support the view that it will be the “future growtengine” of the global funds management industry.

The GDP growth rate in the Asia region is forecast to double the rate of the rest of the world. Within the regthere are many developing economies with a need foinvestment capital to fund the expected significant growth in their GDP. There are also developed economies with established pension systems and/or high rates of saving that have funds available to inves

The population of the Asia region is over 4 billion, ti 60% f th ld’ l ti It irepresenting over 60% of the world’s population. It is

expected to grow by 25% by 20502 and ageing of the population will be at its most rapid between 2010 and2030.3

Increased levels of savings and investments will be required in order to fund the retirement of this ageing population while avoiding unsustainable pressure on government finances.

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1. A multilateral framework which would enable a complying fund or other Collective Investment Vehicle in a nation that signs up to the passport framework to offer that product in each of the other signatory nations

a

Many economies have established pension and sovereign wealth funds in order to help fund the costs of these growing and ageing populations throughout retirement.

the dies

The benefits are clearIn addition to funding growth and supporting the liquidity and diversity of the capital markets in the region, the key benefits to the region of an Asia Region Funds Passport include:

• Improved efficiency and cost reduction. Cross border capital flows will provide fund managers access to larger savings pools and allow for greater economies

oss ld

ome

of scale.

• Increased investor choice and ability to diversify, providing investors with access to otherwise inaccessible markets, investments and foreign expertise.

• Growth of funds management jobs and expertise in the region.

Similar regulatory frameworks

rt is rity n its

a th

Similar regulatory frameworksWhile there are diverse legislative and taxation requirements across the region, it was encouraging to note that most jurisdictions have similarities in their regulatory frameworks. For example, each jurisdiction requires the licensing of the promoter or issuer of the fund, the registration or approval of the fund itself and the registration or vetting of the offer documents.

This will provide a strong platform for establishing an be

gion, r

st.

p g p gAsia Region Funds Passport.

Europe may provide some answersThe increasing presence of UCITS compliant funds across Asia provides evidence that products which are established within an acceptable framework are very mobile.

The region can look to the UCITS framework as a starting point for establishing an Asia Region Funds

starting point for establishing an Asia Region Funds Passport. However, to be competitive the region will need to be innovative in both the design and ongoing operation of the Asia Region Funds Passport.

ConclusionThe region is ready to act. While there are definitely complex challenges that we will need to overcome as we move forward, they are not insurmountable and the benefits to the region could be substantial

2. Population Division of the Department of Economic and Social Affairs of the United Nations Secretariat, World Population Prospects: The 2008 Revision, http://esa.un.org/unpp, 07/10/2010

3. Pensions in Asia/Pacific: Ageing Asia must face its pension problems, OECD, www.oecd.org/els/social/ageing

benefits to the region could be substantial.

ContentsContents

The Asiindustr1

An Asia

UCITS: and wh

2

3and wh

1. Authopromo

2 Avera

Appendices

2. Averato obtadisclo

3. Restrijurisd

4 K t4. Key tajurisd

5. Key tajurisd

6. CurrenCIV iCIVs i

Glossar

ia region funds management ry

1

a Region Funds Passport 8

what it has meant for Europe hat the Asia region can learn

15hat the Asia region can learn

orisation/registration requirements for oters, CIVs and disclosure documents

21

age time and financial conditions required 22age time and financial conditions required ain a licence, authorise a CIV or register a sure document in each jurisdiction

22

ictions on how a fund operates in each diction

24

id ti f CIV i h 27ax considerations for CIVs in each diction

27

ax considerations for investors in each diction

30

nt arrangements for distribution of foreign th A i i

33n the Asia region

ry 34

1. 3Asia Region Funds

Passport

The Asia region funds man

A significant growth opportunity

Th i d d hi

The Asia region funds man

The economic and demographic fundamentals of the Asia region support the view that it will be the “future growth engine” of the global funds management industry.

The total funds under management (FUM) across Asimore than USD2 757 trillion representing just 13% ofmore than USD2.757 trillion representing just 13% of global FUM.4

Economic Growth

The Asia region produced USD16,652 billion5 in GDP2010. Of the top 5 economies in the world in terms of GDP, two economies (China and Japan) are in Asia. GDP is forecast to grow to USD24,591 billion by 2015a growth rate that is almost double the rest of the wora growth rate that is almost double the rest of the wor

This anticipated growth in the region makes it very attractive to investors and funds management organisations.

Within the Asia region, there are many developing economies with a need for investment to fund the expected significant growth in their GDP (for exampleChina and India) There are also economies that haveChina and India). There are also economies that haveestablished pension systems and/or high rates of savthat have funds available to invest (for example, Austrand Japan) and are keen to share in the huge growth opportunities presented by the developing economies

The Asia Region Funds Passport should be designedprovide an efficient mechanism for this investment to occur, and should support the development of regiona

it l k tcapital markets.

The amount of funds under management compared to population, highlighting the opportunity for growth in FUM in the Asia region

% of the world total Population FUM

EU

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4. National mutual fund associations, http://www.ici.org/research/stats/worldwide/ww_03_10

5. International Monetary Fund, World Economic Outlook Database, October 20106. World Economic Database, April 2009,

http://www.imf.org/external/pubs/ft/weo/20097. United Nations Department of Economic and Social Affairs/Population Division –

World Population to 2300

8.

9.

10

nagement industry

A large and ageing population:

The total population of Asia is over 4 billion representing over 60% of the world population and is expected to increase by 25% by 2050 7

nagement industry

a is

increase by 25% by 2050.7

The ageing of Asia’s population will be at its most rapid between 2010 and 2030. A recent report issued by the OECD8 concluded that “there is now a narrow window for many Asian economies to avoid future pension problems ... but it will soon be too late”. In many economies in the region, it is expected that there will be fundamental demographic change as the population ages, particularly

ith i t i h lth i ll i

P in

5 -rld 6

with improvements in health care in all economies coupled with a reduction in the birth rate in many economies.

While many Asian economies have established pension schemes and sovereign wealth funds to help fund the costs of these ageing populations throughout their retirement, the extremely low levels of participation will need to be addressed. For example, pension coverage in

rld.6

e, e

Europe is estimated to be 60% of the working-age population, compared with East Asia and the Pacific, where it is a little over 15% and South Asia, where it is less than 10%.9 An Asia Region Funds Passport will help provide greater investment choice at a lower cost, which will help improve retirement outcomes across the region.

Increasing middle class:

e ing ralia

s.

d to

al

Asia’s middle class has grown dramatically relative to other world regions in the last couple of decades, as outlined in the table below:

% Change in size of Middle Class (1990 – 2008)10

-10

5

8

28

OECD

Latin America and Caribbean

Developing Europe

Developing Asia

OECD

An increasing middle class will have many impacts within the region, including driving growth in GDP making the region attractive to investors. It will also lead to growth in savings pools within the region and in turn, demand for funds management services.

-10 0 10 20 30

OECD

Asia Region Funds Passport 1

Pensions in Asia/Pacific: Ageing Asia must face its pension problems, OECDPension Reform and the Development of Pension Systems: An Evaluation of World Bank Assistance, Independent Evaluation Group –World Bank

. Key Indicators of Asia and the Pacific 2010: The rise of the middle class, Asia Development Bank

The regulatory frameworkIndustry bodies and market participants consider thatregulators in their own jurisdiction have a strong trackg j grecord in enforcing the securities laws, albeit with somrespondents indicating that there had been recent significant improvements in the performance of the regulators in their market.

If the Asia Region Funds Passport is to be establisheregulators in the region will need to be satisfied that there are appropriate legal and systemic protections iparticipating markets, including the approach of theparticipating markets, including the approach of the regulator and the strength of enforcement systems.

What are the licensing requirements for the promoter?

While each jurisdiction in the region requires a promoto be licensed and each licensee must comply with minimum capital requirements, there is quite a wide variation in the detailed requirements for licensees.variation in the detailed requirements for licensees.

In all jurisdictions, a promoter or issuer of a fund or otCollective Investment Vehicle (CIV) requires a licencefrom the local regulator. Most jurisdictions require a nresident to obtain a licence by undertaking the full application and compliance process and satisfying alllocal requirements.

Typically, a licensee must maintain a minimum amouTypically, a licensee must maintain a minimum amouof liquid assets in the particular jurisdiction and the responsible employees of the licensee must comply wlocal requirements to demonstrate that they have expertise to undertake the activities covered by the licence.

There are ongoing licensing requirements in each jurisdiction and licence holders are typically subject toinspection by the local regulatorinspection by the local regulator.

These, together with other jurisdiction specific requirements, can act as an impediment to market enfor new market participants.

What are the authorisation/registration requirements for CIVs?

In each jurisdiction, a CIV must be authorised orIn each jurisdiction, a CIV must be authorised or registered with the local regulator before it can be offered to the public. The role of the regulator is varieIn some jurisdictions the regulator reviews and vets thparticular CIV for local requirements before authorisinfor distribution. For example, in many jurisdictions theCIVs must meet particular investment criteria or limitations (such as investment concentration limits orgearing prohibitions) before they can be authorised.

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On the other hand, in Australia, the regulator does not approve any particular CIVs or limit the types of assets

me

d,

in

pp y p ypin which CIVs can invest. Rather, the regulator concentrates on ensuring that the relevant disclosure documents disclose all the information relevant to an investment decision and the benefits and risks of the particular CIV product.

What are the authorisation/registration requirements for disclosure documents?

oter

.In each jurisdiction, a disclosure document must be approved by or registered with the local regulator before it can be released to the public.

In almost all jurisdictions, the disclosure document must be available in the local language.

Is there consistency in

ther e non

the

nt

regulatory frameworks across the region?Appendix 1 summarises the licensing and authorisation requirements in each jurisdiction for each of the promoter, CIV and disclosure document.

Appendix 2 summarises the average time and minimumnt

with

o

Appendix 2 summarises the average time and minimum financial requirements to obtain a licence.

While there is a variety of specific legislative requirements across the region it is encouraging to note the similarities in relation to the regulatory frameworks.

These similarities across the region will provide a strong platform to move towards establishing an Asia Fund Passport

ntry

Passport.

All countries have regulatoryframeworks in place that require:

Fund promoters to be licensed

d. he ng it e

r

Funds to be authorised/registered Disclosure documents to be registered

Separate custodian of fund assets


Key: Similar requirements across the region

Some differences across the region

2

The legislative requirementsAcross the region there are a variety of fund structurethat operate, although unit trusts are common in a gnumber of jurisdictions. There are a variety of rules inrelation to investments that are permitted, commonly (although not universally) prohibiting direct investmenin infrastructure and real estate and limiting the use oderivatives.

Appendix 3 summarises the restrictions on how fundsoperate in each jurisdiction.

There are no legislative minimum income distribution requirements in any jurisdiction in the region, other ththose set out in the individual fund’s documents.

Almost all jurisdictions require a separate custodian fothe fund’s assets. In all jurisdictions, except Singaporthe custodian has to be located in the same jurisdictiothough assets can be sub-custodied to foreign custodians in some locations. In Australia, the fundcustodians in some locations. In Australia, the fund manager may act as custodian if it has more than AUmillion of capital and custody systems in place.

In addition, in all jurisdictions, a foreign fund has to haa local agent to be authorised, registered or distribute(except for China where foreign funds may not be distributed).

There will be some challenges in establishing a passpThere will be some challenges in establishing a passpregime that satisfies the current legislative requiremein each jurisdiction.

All countries have legislative requirements iplace that specify:

Types of Funds yp f

Outsourcing restrictions

Diversification requirements

Derivatives restricted

Local currency required Key: Some differences across the region

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es

n

nts of

s

The similarities in thehan

or re, on

existing regimes providea strong platform for establishing an AsiaFund Passport

D5

ave ed

port

Fund Passport

port nts

in


The tax environment

Whilst an Asia passport primarily id l t ttconsiders regulatory matters,

discriminatory tax outcomes can bbarrier to the cross border distributof funds in the Asia region.

Non-discriminatory tax regimes will allow participatingmarkets to maximise the benefits of an Asia Region FPassport. Accordingly, the tax regimes of participatingmarkets will need to move towards a “level playing fierelation to the tax treatment of funds in their home anforeign jurisdictions.

The process of tax reform is one that extends beyondregulatory change and regulators. Where changes in laws are needed, it will involve Government interventThere will need to be a broad ongoing commitment tog gunderlying principle of a level playing field. Each jurisdiction will need to consider and undertake tax reto enable and maintain this.

Tax regimes are complex. Appendix 4 summaries thetax considerations for CIVs. Appendix 5 summarises key tax considerations for investors in each jurisdictio

Tax reforms that may be required in various jurisdictioy q jrepresent a significant challenge to the establishmentefficient operation of an Asia Region Funds Passport

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The tax regimes in each jurisdiction have i h t diff k f t

be a tion

g Funds

inherent differences across key areas of tax

Tax treatment of domestic fund

Tax treatment of foreign fund

g eld” in nd

d tax ion. o the

Withholding tax

Double tax treaties

Individual resident

eform

e key the

on.

ons

Individual non-resident Key: Some differences across the region

Significant differences across the region

t and .

The tax regimes in each jurisdiction are complex

d t and represent a significant challenge to the success of an Asia Region Funds Passport


The Asia region’s experience ooffshore funds

Th l ti f thThe relative exposure of the investing public to offshore funds ineach jurisdiction varies significantly

Some jurisdictions, such as Hong Kong and Singaporare dominated by internationally domiciled funds, whereas others such as Australia, Japan and Korea hmore domestic managers. The proportion of all unlisteg p pfunds offered in the following economies that are domiciled outside of the region11 is:

• Hong Kong 91%

• Singapore 79%

• Taiwan 59%

Over the past three years approximately 40% of all nesales into UCITS12 funds have been sourced from Asi

A key impact of the quantum of funds domiciled outsidthe region is that the Asia region is outsourcing an increasing range of funds management services. As cbe seen in the table below there are already more tha

F

Belgium France Ger

The following table summarises the number of U

ribut

ed

Australia

Hong Kong 2

Japan

Korea

Fun

ds d

istr

Macau

Singapore 10

Taiwan 17 6

Total 17 18 3

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Total 17 18 3

11 PricewaterhouseCoopers, Global Fund Distribution, 201012 Undertakings for Collective Investments in Transferable Securities issued under a Europ13 PricewaterhouseCoopers, Global Fund Distribution, 2010

of …the Asia region is outsourcing an

n y.

re,

have ed

outsourcing an increasing range of funds management services.

5,000 UCITS products being sold into Asia, predominantly from Luxembourg.

The region may be missing out on opportunities to fullyet ia.

de

can an

The region may be missing out on opportunities to fully benefit from the growth in demand for funds management products across the region and associated development of skills and job opportunities in areas such as fund administration, custody, compliance, legal, tax and technology.

Fund domicile

rmany Ireland Luxembourg UK Other TOTAL

CITS funds distributed in the Asia region13 in 2009

7 42 6 55

207 953 24 23 1,209

4 3 50 10 67

248 2 250

96 433 5 45 579

19 399 1,599 48 185 2,260

10 161 616 10 27 847

33 873 3 941 89 296 5 26733 873 3,941 89 296 5,267

pean Union Directive Asia Region Funds Passport 5

Conclusion

Each jurisdiction in the Asia regionh d l d it l i l tihas developed its own legislative and tax requirements for funds, which presents both challenges and opportunities.

Although there are broad similarities, the various regulatory and tax regimes currently make it expensivand inefficient for fund managers to distribute their products in different markets across the region. The ARegion Funds Passport would seek to address muchthis inefficiency.

The similarities in the existing regulatory frameworks example, all jurisdictions require the funds, fund managers and offer documents to be registered and most require a separate custodian) provide a strong q p ) p gplatform for establishing an Asia Region Funds Passport.

.

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n The similarities in theexisting regulatory

ve

existing regulatory frameworks provide a strong platform forestablishing an AsiaFunds Passport

Asia h of

(for

Funds Passport


The industry generally consider the regulators in their own jurisdiction have a strong track record in enforcing the securities lawsenforcing the securities laws

An Asia RemechanismdistributioCollective Imanufactuadminister

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egion Funds Passport would be a m designed to facilitate the n across regional borders of gInvestment Vehicles

ured, distributed and red within the region

The industry identified numerous benefits arising from the introduction of an Asia Region Funds Passport

7Asia Region Funds

Passport

An Asia Region Funds PassAn Asia Region Funds Pass

What is an Asia Region FundsPassport?An Asia region Collective Investment Vehicle Passpo(“Asia Region Funds Passport”) would be a mechanisdesigned to facilitate the distribution across regional borders of funds manufactured, distributed and administered within the region. It would require the development of an agreed set of funds management regulations amongst a group of like-minded economiein the Asia region.14

This agreed set of regulations would not necessarily bidentical to the domestic regulations in any of the participating jurisdictions, but would be designed to provide a level of protection for investors that is acceptable to the regulator in each participating jurisdiction.

Funds that meet this agreed set of regulatory requirements would be certified to be “Asia Region q gFunds Passport compliant” by the regulatory authoritythe home jurisdiction, and could then be sold both domestically and also across borders amongst the Passport jurisdictions.

The common set of passport regulations would need cover a wide range of issues, including:

• the eligible investment asset classesg

• custody arrangements

• offer document conditions

• registration arrangements

• licensing arrangements

li it l• any limits on leverage

• liquidity requirements and

• investor protection and dispute resolution procedures.

This framework could be conceptually similar to the UCITS framework that has been established by the European UnionEuropean Union.

.

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.

14 Asia Region Funds Management Passport Proposal: Regional Benefits (unpublished manuscript) by the Financial Centre Task Force

sportsport

s

Gi h i d l f h UCITSrt sm

es

Given the penetration and apparent appeal of the UCITS regulatory framework within the region and elsewhere, the region could, initially at least, mould such an Asia Region Funds Passport regulatory framework reasonably closely on the current UCITS framework. However, if an Asia Region Funds Passport is going to provide an alternative for UCITS in the region we will need to innovate to ensure it is a competitive alternative (eg by providing access to different markets, more

be ( g y p g ,efficient registration process, etc).

Once in place, any changes to this framework would be determined by regulators and governments within the region on the basis of regional needs and developments to ensure the Asian Region Funds Passport remains competitive.

y in

to .

An Asia Region Funds Passport is a mechanism designed to facilitate the designed to facilitate the distribution across regional borders of funds manufactured, distributed and distributed and administered within the region


Is the region supportive of anAsia Region Funds Passport?

Based on survey responses received from 7 of the leading funds management industry bodies across theregion, it is evident that there is strong support for thedevelopment of an Asia Region Funds Passport. 86%industry body respondents indicated that it is of importance to the growth and prosperity of their fundsmanagement industry, as is illustrated in the graph below.

Industry bodies:

How important is the establishment of an Asia R i F d P t t th th dRegion Funds Passport to the growth and prosperity of your funds management industry?

29%14%

Very Important

Important or h t

Very Important

57%

somewhat important

Not Important

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e e % of

s

Similarly, there is strong support for an Asia Region Funds Passport from the surveyed market participants, with all respondents indicating that they consider the establishment of an Asia Region Funds Passport to be of importance to the growth and prosperity of their funds management industry, as can be seen in the following graph. We note that there may be some positive bias in the survey results, given that participants who consider the Asia Region Funds Passports to be important arethe Asia Region Funds Passports to be important are most likely to respond to the survey.

Market participants:

How important is the establishment of an Asia Region Funds Passport to the growth and

it f f d t i d t ?prosperity of your funds management industry?

t14%0% Very Important

Important or

Very Important

86%

somewhat important

Not Important


Is the region supportive of anAsia Region Funds Passport? (cont’d)(cont d)The surveyed market participants indicated that 66% wealth managers in their economy were either very supportive or supportive of an Asia Region Funds Pasthough 25% indicated that wealth managers in their cwere not yet thinking about it. Not surprisingly, a numthese were in China where it is currently not possible distribute foreign funds.

Also, there are a number of market participants that acurrently selling UCITS products across the region. Tparticipants have an established distribution channel may be satisfied with the use of these products as a mof accessing a number of markets across the region, reducing the importance of establishing an Asia RegioFunds Passport for them. This also highlights the neeinnovation in the creation of the Asia Region Funds Pgto allow it to compete with existing products in the regespecially UCITS (for example, access to different mamore efficient registration process, etc).

Market participants:

Are wealth managers in your jurisdiction supportive f th t bli h t f A i R i F d Pof the establishment of an Asia Region Funds Passpo

8%

25%

58%8%

Very Supportiv

Supportive

Not Supportive

They are not tabout it

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The surveyed market

of the

ssport, country

mber of to

participants indicated that 66% of the wealth managers in their economy were either very

are hese and means

on ed for Passport

supportive or supportive of an Asia Region Funds Passport

pgion, arkets,

t?ort?

ve

e

thinking


What are the benefits of an Asia Region Funds Passport? Th i d t b di d k t ti i t id tifi dThe industry bodies and market participants identifiednumerous benefits arising from the introduction of anAsia Region Funds Passport, including the following:

• Improved efficiency and therefore reduced fees/costs as a result of the following:

– Fund size would likely be much larger throughability to offer a single fund across multiple

k tmarkets

– Fund managers and distributors would gain efficiency through an increased number of funincreased funds under management and a larclient base i.e economies of scale

– Increased competition putting further downwapressure on fees to the benefit of investors. Fe

h i l f 0 4%across the region currently range from 0.4% to3% of net asset value per annum. As such, thopportunity for fee reductions especially in higfee regions may be significant

– Direct access to offshore funds rather than access via a local operator will likely result in telimination of an extra layer of fees and commissions.

The high concentration of domest

securities can be reduced by ‘‘securities can be reduced by

diversifying the portfolio

geographically

Market participant

‘‘

Investors would have

more choices‘‘

‘‘

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more choices

Market participant

‘‘ d I d i t h i hi h ld lt id

h the

• Increased investor choice which would result in the following benefits:

– There would be direct access to otherwise inaccessible markets, products and offshore expertise

– A broader range of products available to investors which would enable greater di ifi ti Thi i ti l l i t t

nds, rger

rd ees

diversification. This is particularly important as many investors have a high concentration of investments in their local securities which could be reduced by diversifying the portfolio geographically.

• Improved services:

– Higher competition in the funds management i d t h ld l d t i t i i tio

e gher

the

industry should lead to improvement in innovation and service delivery

tic


• Improved consumer protection as a result of tfollowing:

– For those investors in countries in the region wless developed funds management industries,less developed funds management industries,there will be easier access to more sophisticatindustries with strong corporate governance aregulatory frameworks

– Increased sophistication and expertise acrossregion through sharing of experiences and bespractices between markets.

Direct access to otherwise inaccessible markets ‘‘inaccessible markets and instruments

Market participant

‘‘

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the

with ,

• Significant benefits to the wider economy

– Across the region economies are at different stages of development, with emerging markets undergoing significant development and therefore,

ted and

s the st

undergoing significant development and therefore in need of capital, while some countries, particularly those with a well-developed pension/ superannuation system and sovereign wealth funds have assets to invest to meet this capital need. For example, in Australia, FUM is forecast to grow from AUD1.4 trillion to in excess ofAUD5 trillion over the next two decades. The Asia Region Funds Passport would facilitate the flow of capital across the regionof capital across the region

– Investors across the region can choose to more readily access growth opportunities within member countries

– Capital market liquidity and diversity across the region would be enhanced

– Increased visibility of and interest in the Asia– Increased visibility of and interest in the Asia region’s “locally-constituted” funds, resulting in greater global competitiveness of the Asia region funds management industry

– Increased support for the growth of the funds management industry across the region and retention of expertise and employment within the region.

Liquidity in the country is enhanced due to capital investments

‘‘ ‘‘

Market participant


What are the challenges to establishing an Asia Region Funds Passport?Funds Passport?

It was generally recognised that there are some significant challenges to introducing an Asia Region Funds Passport. Almost alof the market participants surveyei di t d th t t bli hi A iindicated that establishing an AsiaRegion Funds Passport would be challenging, citing the following kereasons:

• Differing legislative and tax requirements

• Variety of languages and culturesVariety of languages and cultures

• Range of sophistication and size of markets and investors

• A potential desire by local regulators and/or governments to protect their domestic fund industthrough the maintenance of barriers to entry

• Regulator resistance due to the inclusion ofRegulator resistance due to the inclusion of jurisdictions which may not appear to have a comparable level of regulatory supervision

• Local industry resistance should there not be a leplaying field (regulatory and tax) between passpojurisdictions.

In addition, it may be more challenging to establish thUCITS because there is no body or framework in theUCITS because there is no body or framework in the Asia region equivalent to the European Union with itsoverarching regulatory and governance framework.

While the challenges faced by the Asia region in establishing an Asia Region Funds Passport are significant and complex they are not insurmountable.Similar challenges have been overcome in the EU in order to establish UCITS, and the Asia region can leafrom the EU experience to expedite addressing thesefrom the EU experience to expedite addressing thesechallenges.

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What are the current arrangements for distribution of foreign funds in the Asia of foreign funds in the Asia region?

Foreign funds may be distributed to particular jurisdictions in the region either through specific mutual recognition agreements or through recognition of UCITS compliant products. There are currently very few mutual recognition arrangements in place between markets that

l d

permit the distribution of funds which have been authorised in one country to be distributed to the public in another country without complying with the full range of the other country’s approval requirements.

Examples of mutual recognition agreements in place between countries include Australia and Hong Kong and in Thailand the regulator may approve a fund operated from a country that is regulated by a member of IOSCO

ey

from a country that is regulated by a member of IOSCO, as can be seen in Appendix 6.

try

Th tl f

vel ort

han

There are currently very few arrangements for the mutual recognition between markets in the Asia region

h d bs

arn e

permitting the distribution of foreign funds

e


In practice, even where foreign funds can be distributthe impediments to their success are currently quite significant. For example, in Japan, foreign funds mayoffered for sale, however, there are language and taximpediments for investors which make off-shoreimpediments for investors which make off-shore products less attractive. In addition, other challenges exist such as whether the distributor’s system can handle such funds. As such the market share of foreifund sales relative to domestic products can be low.

Similarly, there has been very little use made of the Australia and Hong Kong mutual recognition agreemeprimarily because of some of the restrictions imposedthe funds (for example maximum foreign holdings) tthe funds (for example, maximum foreign holdings), timpediments and the timing of the agreement (July 2008, immediately before the global financial crisis).1

Where there is demand for offshore exposure, fund managers are commonly accessing foreign asset managers through other structures such as through tuse of a foreign sub-advisor in a fund-of-funds structuFor example a Japanese fund manager may offer an A t li b d f d t J i t ThAustralian bond fund to Japanese investors. The Japanese fund manager would then access the Australian bond fund manager’s expertise through investing in an Australian bond fund or entering into adirect fund management agreement (mandate) with aAustralian fund manager. The Asia Region Funds Passport would allow the Australian bond fund to be offered directly to Japanese investors, thereby eliminating a layer of costs.g y

The industry does not underestimate the complexity in overcoming the impediments but

d b appears ready to embrace the first steps

PwCPwC

15 Asia Region Funds Management Passport Proposal: Regional Benefits, Financial Centre Force (unpublished manuscript)

ted,

y be x

Conclusion

There is clearly significant and widespread support for the establishment of an Asia Region Funds Passport. The benefits to investors to the industry and to the

gn

ent, d on ax

The benefits to investors, to the industry and to the regional economies from reducing the barriers to funds flows across the region are significant, including increased investor choice, improved diversification opportunities and growth of the industry.

ax

5

he ure.

a an


Task

14

UCITS: what it has meant fUCITS: what it has meant fAsia region can learn

The UCITS16 framework was created over 25 years awith the objective of establishing a single market for funds management services across the European Un(“EU”).

Implemented in 1985, the UCITS directive aimed to develop a unified regulatory framework for mutual funacross Europe, to facilitate the distribution of funds domiciled in one member state across multiple EU member states and to offer investors in UCITS produa consistent level of protection and confidence. Manyforms of vehicles can be UCITS compliant.

Wh t th i iti l iWhat was the initial experienof UCITS in Europe?There was relatively slow growth in UCITS when the directive was initially introduced. The UCITS framewohas subsequently undergone further development anthe success of UCITS has grown significantly aroundworld.

On initial implementation the objectives of the directivand the reality were very different – largely due to a laof cohesion across the local laws, regulations and distribution policies of individual EU member countrie

The success of the UCITS directive was also limited the restrictions it placed on the permitted investmentsUCITS vehicles, which were limited to a narrowly def, ycategory of transferable securities and consisted maiof equities and bonds. UCITS I prohibited ‘higher riskinvestments such as derivatives and alternative asseclasses and structured products.

In the early 1990s, a second directive UCITS II was drafted with the objective of addressing these issues,the initiative was abandoned when member states didnot reach an agreement on the scope and form of thenot reach an agreement on the scope and form of thedirective.

16 Undertakings for Collective Investment in Transferable Securities (UCITS17 UCITS Directive 2001/107/EC and 2001/108/EC18 EFAMA – July 201019 Tax discrimination against foreign funds: Light at the end of the tunnel, PriPwC

for Europe and what the for Europe and what the

ago,

nion

What is the current experience of UCITS in Europe?UCITS III17 l h d i 2001 d i d f t

nds

cts y

UCITS III17 was launched in 2001 and comprised of two directives. Together, the new directives aimed to provide for the regulation of management companies and simplified fund prospectuses (the "management directive"), as well as a wider range of investment powers (the "product directive”).

In practical terms, once a fund has been certified as UCITS compliant in one EU member state, an

ce

ork d the

application may be made to market that fund to the public in any other EU country.

UCITS III substantially broadened the investment powers of investors by allowing UCITS to invest in other financial products (such as certain derivative instruments).

Whilst product sophistication brings with it concerns that

ve ack

es.

by s of ined

the existing UCITS brand may become tainted, it is recognized that a uniform set of rules governing the permitted investments by UCITS products has actually brought with it improved investor protection. Further, the differentiation between sophisticated and simple products may be addressed in a future UCITS V.

Since its introduction in 2001, UCITS III has achieved significant success, with rapid growth and penetration

nly k’ t

, but d e

g , p g pacross the European market and more recently, increasing distribution across the global market.

UCITS has been at the heart of the development of the European funds industry for the last two decades - with assets of €5 trillion, representing over 75%18 of the European investment funds market.

A significant number of the national tax and regulatory e g g ybarriers that had previously restricted the flow of funds across Europe have been successfully reduced, and whilst differences still remain (mainly in relation to withholding taxes, tax credits on dividends and the ability to access double tax treaties),19 the directive’s objective of developing a unified regulatory framework for mutual funds across Europe is largely achieved.

S) Directive 85/611/EEC

icewaterhouseCoopers, EFAMA, 2005


What is the experience of UCITS beyond Europe?B d E t t d h h lBeyond Europe, recent trends have shown a clear ansignificant growth in the distribution of UCITS productthe international market.

Asia, Latin America and the Middle East are predominant markets where UCITS have wide distribution. Within the Asia region, Singapore, Hong Kong and Taiwan are the main focuses of distributionwith nearly 2,300 cross-border registrations of UCITSproducts in Singapore at 31 December 2009.20 47 of top 5021 cross-border management groups are currendistributing in Singapore, Hong Kong, or Taiwan – or three.

Currently, approximately 50% of all net sales into UCproducts are originating from outside the EU, with Asrepresenting between 30% and 40% of total net salesinto UCITS. Assets from within Asia constitute approximately 20% of total FUM in UCITS.

There are significant funds currently flowing from Asiainto UCITS products. It is clear from this experience tthere is demand from Asian investors for foreign fundGiven the clear demand, and the head start that the Ethrough UCITS, has in the Asia region, the developmof an Asia Region Funds Passport is not only warrantit is neededit is needed.

20 PwC, Lipper and Thomson Reuters - Global Fund Distribution 201021 PwC, Lipper and Thomson Reuters - Global Fund Distribution 2010

PwC

d

What are the benefits that have arisen for Europe from UCITS? UCITS III h ll d th E f d i d t tnd

ts in

n –S

UCITS III has allowed the European funds industry to develop truly cross-border products, which offer investors greater choice, portability and investor protection. Using a mutual fund vehicle of their choice, it is now possible for investors to access markets and underlying assets which may otherwise have been inaccessible and do so through a globally recognised framework.

the ntly all

CITS ia s

UCITS products have proved attractive to investors who are increasingly looking for balanced portfolios consisting of transparent, well regulated products with greater liquidity and less risk.

From the fund promoter’s perspective, the strength of the UCITS brand amongst retail and institutional clients has greatly enhanced the marketability and distribution of product offerings across Europe and beyond. The

a that ds. EU, ent ted,

p g p ynumber of fund managers operating cross-border fund platforms has increased significantly, from 35 in 1999 to 230 in June 2010.22

Investment fund assets in Europe have more than doubled in size over the last decade to €6,833 billion23

and cross-border registrations of UCITS funds have increased from 11,338 at 31 December 1998 to 59,100 at 30 June 201024- firmly establishing the Europeanat 30 June 2010 firmly establishing the European funds management industry as a strong and vital component of the European financial system.

It is anticipated that the many benefits seen in Europe and the European funds management industry through the implementation of UCITS could be equally realised in Asia through an Asia Region Funds Passport.


22 Lipper Feri23 EFAMA, 31 December 201024 Lipper Feri

16

What does the future hold for UCITS?Th UCITS i ill ti t l t i iThe UCITS regime will continue to evolve to maximisthe benefits that flow to member states.

Whilst UCITS III has expanded the investment alternatives for UCITS, it has become evident over timthat there are still some continuing inefficiencies in thindustry under the Directive.

A report which considered the potential of a fully i t t d E f d k t25 di t d th tintegrated European funds market25 predicted that annual savings of up to 17 basis points could be attaiif average European equity fund sizes (average €148m)26 were to increase to that of the average US fund (average €886m).27 In addition a comparative stby Lipper found that the average Total Expenses Ratof a Luxembourg fund with assets under USD 5 milliomore than double that of a fund with over USD 250 million of assets.28

The Commission of the European Communities estimates that the potential annual savings to the European funds industry through improved efficienciecould be several billion Euros.29

The introduction of UCITS IV30 in July 2011 aims to address some of these inefficiencies and promote cosavings through modifications such as the managemeg g gcompany passport (which means that for the first timethe management company of the fund will not be required to be located in the same EU member state the fund’s domicile), fund mergers, master feeder structures and the simplification of investor informatio

It is hoped that the efficiency and consolidation measures under UCITS IV will bring greater flexibilitythe industry translating into new business opportunitthe industry, translating into new business opportunitfor fund managers, increased competitiveness and a more consolidated funds market.

.

25 Potential cost savings in a fully integrated European investment fund market, CRA, September 2006

26 Potential cost savings in a fully integrated European investment fund market, CRA International , September 2006

27 Potential cost savings in a fully integrated European investment fund market", CRA International , September 2006

28 Economies of scale and consolidation in collective funds, Lipper, March 2005

29

30PwC

What are some of the learningsfrom UCITS? UCITS h th l t t d d d d ise

me e

UCITS has, over the last two decades, succeeded in creating an EU passport for funds and now for fund managers.

Some empirical evidence of the significant benefits that have flowed from the introduction of UCITS include increased investor choice, improved diversification opportunities, ongoing reduction in fees and growth of the industry.

ined

tudy tio on is

The appetite for 'mobile' funds and products with 'passports' extends beyond investors in the EU. Hence the growth of UCITS funds around the world.

Industry players in the EU see this opportunity, and appear to be specifically targeting the Asia region as a growth area. UCITS funds are one of the fastest growing investment products in the Asian region.

es

st ent

It appears that the significant growth of UCITS occurred once the permitted classes of assets in which a UCITS product could invest was expanded, enabling a wider range of products to be offered. Ideally, the Asia Region Funds Passport would not need to start with such a restrictive regime as UCITS I, but rather adopt a regime more akin to UCITS III or even IV.

e

as

on.

y to ies

There has been and continues to be ongoing development of UCITS. Similarly, an Asia Region Funds Passport would require ongoing development to ensure that it remains competitive and relevant and the passport framework would need to embed such a function.

Perhaps the final learning is the need for patience – the success of UCITS that we see today was two decades in the making. While it is hoped that an Asia Region Funds ies g p gPassport could be achieved more quickly, as the industry embarks on this process it must be mindful of the time required to achieve success.

The UCITS framework may provide a good starting point but the region will need to make some key decisions to tailor it for the region. For example, should the Asia Region Funds Passport be fully competitive with UCITS IV (inclusive of a fund manager passport) or would thisIV (inclusive of a fund manager passport) or would this require too much change to be an attainable goal in the foreseeable future? Would the Asia Region Funds Passport seek to differentiate itself from UCITS, other than through the markets available? If so, how?

It is clearly time to start considering these and many other questions. In many ways, the success of the Asia Region Funds Passport will be determined by the answers to these questionsanswers to these questions.


Proposal for a directive of the European Parliament and of the Council on the coordination of laws, regulations and administrative provisions relating to undertakings for collective investment in transferable securities (UCITS), Commission of the European CommunitiesRecast UCITS Directive 2009/65/EC

17

Appendices

Ap

pen

dix

1:

Au

tho

risa

tio

n/r

egis

tra

tio

pp

end

ix

:u

tho

isa

tio

n/

egis

ta

tio

an

d d

iscl

osu

re d

ocu

men

ts

Cou

ntry

Reg

ulat

orF

und

pro

Au

stra

liaA

ustr

alia

n S

ecur

ities

and

Inv

estm

ents

Com

mis

sion

(A

SIC

)Y

esA

ust

ralia

(

)A

ustr

alia

n P

rude

ntia

l Reg

ulat

ory

Aut

hor

ity (

AP

RA

)Y

es

Chi

naC

hina

Sec

uriti

es R

egul

ator

y C

omm

issi

on (

CS

RC

)Y

es

Hon

g K

ong

Sec

uriti

es a

nd F

utur

es C

omm

issi

on (

SF

C)

Yes

Indi

aS

ecur

ities

and

Exc

hang

e B

oard

of

Indi

a (S

EB

I)Y

es

Indo

nes

iaC

apita

lMar

ket

Sup

ervi

sory

Boa

rdan

dF

inan

cial

Inst

itutio

n(B

AP

EP

AM

LK)

Yes

Indo

nes

ia

Cap

ital M

arke

t S

uper

viso

ry B

oard

and

Fin

anci

al I

nstit

utio

n (B

AP

EP

AM

–LK

)Y

es

Japa

nF

inan

cial

Ser

vice

s A

genc

y (F

SA

)

Sec

uriti

es a

nd E

xcha

nge

Sur

veill

ance

Com

mitt

ee (

SE

SC

)

Yes

Kor

eaF

inan

cial

Sup

ervi

sory

Com

mis

sion

(F

SC

)Y

es

Mal

aysi

aS

ecur

ities

Com

mis

sion

Yes

Sin

gapo

reM

onet

ary

Aut

horit

y of

Sin

gapo

re (

MA

S)

Yes

Tai

wan

Sec

uriti

es a

nd F

utur

es B

urea

u of

the

Fin

anci

al S

uper

viso

ry C

omm

issi

on

(FS

C)

Yes

Tha

iland

Sec

uriti

es a

nd E

xcha

nge

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mis

sion

(S

EC

)Y

es

Pw

C

on

req

uir

emen

ts f

or

pro

mo

ters

, fu

nd

s o

n

equ

iem

ents

fo

po

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tes,

fu

nd

s s om

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nce

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stm

ent

man

ager

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d au

thor

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ion/

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ure

docu

men

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e do

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lang

uage

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t

Yes

Yes

Yes

En

glis

hY

esY

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ng

lish

Yes

Yes

Yes

Chi

nese

Yes

Yes

Yes

Chi

nese

and

Eng

lish

Yes

Yes

Yes

Eng

lish

Yes

Yes

Yes

Bah

asa

Yes

Yes

Yes

Bah

asa

Yes

Yes

Yes

Japa

nese

Yes

Yes

Yes

Kor

ean

Yes

Yes

Yes

Eng

lish

or B

ahas

a M

alay

sia

Yes

Yes

Yes

Eng

lish

Yes

Yes

Yes

Chi

nese

Yes

Yes

Yes

Tha

i

21A

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CIV

Pas

spor

t

Ap

pen

dix

2:

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How

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(App

rox)

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Wha

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21

days

bef

ore

open

ing

the

ff

Min

imum

1

mon

th1 1 a l

the

disc

losu

re

docu

men

t?w

ithin

the

firs

t 10

bus

ines

s da

ys

offe

r

Doe

s th

e di

sclo

sure

do

cum

ent

have

an

exp

iry d

ate

?

No,

but

the

in

form

atio

n m

ust b

e up

-to-

date

A fu

nd m

ust

be

laun

ched

in 6

m

onth

s af

ter

CS

RC

’s

No,

but

the

in

form

atio

n m

ust b

e up

-to-

date

Ann

ual.

The

ad

ditio

nal

info

rmat

ion

has

to b

e u p

-to-

Ann

ual

Y a

py

appr

oval

pda

te

Pw

C

al

con

dit

ion

s re

qu

ired

to

ob

tain

a

al

con

dit

ion

s eq

ui

ed t

o o

bta

in a

o

r re

gis

ter

a d

iscl

osu

re d

ocu

men

t in

) Ja

pan

Kor

eaM

alay

sia

Sin

gapo

reT

aiw

anT

haila

nd

1to

6 m

onth

s20

day

s fr

om

appl

icat

ion

date

Not

kno

wn

2 to

3 m

onth

sA

t le

ast

2-3

mon

ths

but

curr

ently

the

With

in 6

0 da

ys

and

pass

ed t

o M

inis

ter

for

proc

ess

may

ta

ke m

uch

long

er

appr

oval

with

in

30 d

ays

15 d

ays

to

1

mon

th a

fter

appl

icat

ion

is

lodg

ed

15 d

ays

Nor

mal

ly 1

to

2 m

onth

s3

to 4

mon

ths

At

leas

t 2-

3 m

onth

s bu

t cu

rren

tly t

he

proc

ess

may

ta

ke m

uch

l

90 d

ays

long

er

Ye

s –

Se

mi-

annu

ally

No

No

Yes

No,

but

the

in

form

atio

n m

ust b

e up

-to-

date

No

23A

sia

CIV

Pas

spor

t

Ap

pen

dix

3:

Res

tric

tio

ns

on

ho

w a

fu

np

pen

dix

3:

est

icti

on

s o

n h

ow

a f

un

Cou

ntry

Typ

es o

f C

IVs

offe

red

Inve

stm

ent

type

s no

t pe

rmitt

edR

estr

ictio

ns o

n ou

tsou

rcin

g D

iver

sific

atio

n re

q

Aus

tral

iaU

nit t

rust

s an

d su

pe

ran

nu

atio

n fu

nds

Non

e id

entif

ied

No,

but

the

lice

nsee

m

ust c

ompl

y w

ith

ti

No

outs

ourc

ing

guid

elin

es

Chi

naO

pen-

en

de

d a

nd c

lose

-en

ded

fund

s, m

ulti-

clie

nt

segr

egat

ed

acco

unts

Rea

l est

ate,

in

fras

truc

ture

No,

if th

e se

rvic

e pr

ovid

er h

as t

he

appr

opria

te li

cens

e

Yes

–th

e f

air

val

inve

stm

ent

in t

heby

one

com

pany

10

% o

f th

e fu

nd’s

inve

stm

ent

held

bm

anag

ed b

y th

e m

anag

er in

the

sby

one

com

pany

10

% o

f th

e se

cur

The

re m

ay b

e ot

hdi

vers

ifica

tion

req

fund

con

trac

ts

Hon

g K

ong

Uni

t tru

sts,

eg

equi

ty

fund

, he

dge

fund

, in

dex

fund

, w

arra

nts

fund

, R

EIT

etc

.

Infr

astr

uctu

reN

oY

es –

exte

nsiv

e.

sche

me

may

not

10

% o

f its

net

as

issu

ed b

y a

sing

lno

t ho

ld m

ore

tha

ass

ets

in u

nlis

ted

secu

ritie

s. T

here

“s

peci

alis

ed f

und

Tru

sts

Cod

e, s

ucm

anag

eme

nt f

unan

d st

ruct

ured

fu

spe

cific

div

ers

ific

requ

irem

ents

Indi

aM

utua

l fun

ds.

Oth

er

fund

s su

ch a

s D

omes

tic

Ven

ture

Cap

ital F

unds

, C

olle

ctiv

e in

vest

men

t sc

hem

es c

an h

ave

priv

ate

plac

emen

t

Res

tric

tions

on

deriv

ativ

es.

Inve

stm

ent

in

ph

ysic

al a

sse

ts

(eg

gold

, re

al

esta

te)

is s

ubje

ct t

o

Out

sour

cing

of

core

fu

nctio

ns c

ould

re

quire

app

rova

l

Yes

Pw

C

rest

rictio

ns

nd

op

era

tes

in e

ach

ju

risd

icti

on

nd

op

ea

tes

in e

ach

ju

isd

icti

on

quire

men

ts

Leve

rage

res

tric

ted

Der

ivat

ives

res

tric

ted

Loca

l cur

renc

y de

nom

inat

ion

requ

ired

No,

exc

ept

for

supe

rann

ua

tion

fu

nd

s hi

ht

t

No

The

re is

no

spec

ific

requ

irem

ent

whi

ch m

ay n

ot g

rant

se

curit

y ov

er t

heir

asse

ts

ue o

f th

e fu

nd’s

e

sto

cks

issu

ed

ca

nnot

exc

eed

s ne

t as

sets

, th

e by

all

fund

s

Yes

–on

ly t

hrou

gh

repo

s.

Mon

etar

y m

arke

t fu

nds

coul

d ha

ve r

epos

of

no

mor

e th

an 2

0% o

f its

net

as

set

valu

e, o

ther

fun

ds

Yes

–es

peci

ally

war

rant

s an

d st

ock

inde

x fu

ture

Yes

sam

e fu

nd

secu

ritie

s is

sued

ca

nnot

exc

eed

ritie

s on

issu

e.

her

quire

men

ts in

no m

ore

than

40%

A s

ecur

ities

ho

ld m

ore

than

se

ts in

se

curit

ies

e is

suer

. It

may

an

15%

of

its n

et

d or

unq

uot

ed

are

a ra

nge

of

Yes

–de

pen

ds o

n th

e as

set

clas

s, b

ut g

ener

ally

be

twee

n 10

% a

nd 2

5% o

f gr

oss

asse

ts

Yes

for

gen

eral

sec

uriti

es

fund

s w

hich

may

inve

st in

op

tions

and

war

rant

s fo

r he

dgin

g pu

rpos

es,

but

subj

ect

to a

15%

di

vers

ifica

tion

rest

rictio

n.

A s

chem

e m

ay in

vest

in

The

re is

no

spec

ific

requ

irem

ent

s” u

nder

the

Uni

t ch

as

cash

nd

s, h

edg

e fu

nds

unds

, w

hich

hav

e ca

tion

futu

res

cont

ract

s fo

r he

dgin

g pu

rpos

es,

but

subj

ect

to d

iver

sific

atio

n re

stric

tions

. It

is p

ossi

ble

to e

stab

lish

spec

ific

fund

s to

inve

st in

der

ivat

ives

w

ith in

crea

sed

leve

ls o

f di

sclo

sure

disc

losu

re

A M

utua

l Fun

d ca

nno

t bo

rrow

exc

ept

to m

eet

tem

pora

ry li

quid

ity n

eeds

fo

r th

e pu

rpos

e of

re

purc

hase

, re

dem

ptio

n of

un

its o

r pa

yme

nt

of

Yes

(on

ly s

ecu

ritie

s fu

ture

s an

d op

tions

pe

rmitt

ed)

Yes

24A

sia

CIV

Pas

spor

t

inte

rest

or

divi

dend

to

the

unit

hold

ers

Ap

pen

dix

3:

Res

tric

tio

ns

on

ho

w a

fu

np

pen

dix

3:

est

icti

on

s o

n h

ow

a f

un

Cou

ntry

Typ

es o

f C

IVs

offe

red

Inve

stm

ent

type

s no

t pe

rmitt

edR

estr

ictio

ns o

n ou

tsou

rcin

g D

iver

sific

atio

n re

Indo

nes

ia

Pro

tect

ed f

und

(RD

PT

)

Dis

cret

iona

ryfu

nd

Rea

l est

ate,

in

fras

truc

ture

No

No

Dis

cret

iona

ry f

und

Japa

nIn

vest

men

t T

rust

s (I

TM

F

unds

). F

or a

ltern

ativ

e in

vest

men

ts,

othe

r ty

pes

of C

IVs

are

used

(eg

in

vest

men

t co

rpor

atio

n,

TK

,TM

K)

ITM

Fun

ds m

ay

inve

st in

va

riou

s pr

oduc

ts

Yes

–m

ust

have

in

tern

al p

ortfo

lio

man

agem

ent

fun

ctio

n bu

t ca

n ou

tsou

rce

som

e a

sset

m

anag

eme

nt

Yes

.

Kor

ea

Inve

stm

ent

trus

t, In

vest

men

t co

mpa

ny,

Inve

stm

ent

limite

d lia

bilit

y co

mpa

ny,

Inve

stm

ent

limite

d t

hi

Priv

ate

equi

ty a

nd

hedg

e fu

nds

cann

ot b

e of

fere

d to

the

pub

lic

Yes

. A

sset

m

anag

eme

nt

com

plia

nce,

inte

rnal

au

dit,

ris

k m

anag

eme

nt a

re

ti

td

t

Yes

. D

iver

sific

ati

depe

nd

on t

ypes

inve

sted

by

fund

part

ners

hip

com

pan

y,

Inve

stm

ent

limite

d pa

rtne

rshi

p, I

nves

tmen

t un

disc

lose

d as

soci

atio

n

res t

ricte

d to

ou

tsou

rce.

How

ever

, fo

reig

n in

vest

men

t m

anag

eme

nt f

unct

ion

can

be d

eleg

ate

d to

ot

her

asse

t m

anag

ers

Ma

lays

ia

Uni

t tru

sts

are

mos

t S

ome

rest

rictio

ns

Gen

eral

ly n

o,

Onl

y fo

r sp

eci

fic

yco

mm

onon

cer

tain

ass

ets,

su

ch a

s de

rivat

ives

y,

espe

cial

ly f

or

over

seas

inve

stm

ents

yp

exam

ple,

RE

ITs

cert

ain

perc

enta

gco

mpl

eted

pro

pe

Sin

gapo

reU

nit T

rust

Li

mite

d P

artn

ersh

ips

Gen

eral

ly n

one

No,

but

gui

delin

es o

n ou

tsou

rcin

g ne

ed t

o be

com

plie

d w

ith

Yes

. D

epen

ds o

n

ie E

quity

/bo

nd

/ba

rest

rictio

ns,

but

ff

dd

fund

s do

Pw

C

nd

op

era

tes

in e

ach

ju

risd

icti

on

(co

nt’

d)

nd

op

ea

tes

in e

ach

ju

isd

icti

on

(co

nt

d)

equi

rem

ents

Le

vera

ge r

estr

icte

dD

eriv

ativ

es r

estr

icte

d Lo

cal c

urre

ncy

deno

min

atio

n re

quire

d

Yes

No

No

Yes

–T

he u

se o

f le

vera

ge

shou

ld b

e w

ithin

net

ass

et

valu

e of

the

fun

d, a

nd t

he

borr

owin

gs a

re a

llow

ed

only

for

the

pur

pose

of

payi

ng r

edem

ptio

n an

d/or

di

strib

utio

nto

inve

stor

s

Yes

–fo

r he

dgin

g pu

rpos

es s

uch

inve

stm

ents

sho

uld

not

go o

ver

the

scop

e of

he

dgin

g,

or s

houl

d be

de

fined

in it

s co

ntra

ct

docu

men

t

Whi

le th

ere

are

no la

ws

proh

ibiti

ng a

n IT

M F

und

from

bei

ng d

enom

ina

ted

in

fore

ign

curr

enci

es,

from

an

oper

atio

nal

per

spec

tive

it is

ex

trem

ely

diffi

cult

to d

o so

. N

osu

chlim

itatio

nsex

ist

for

dist

ribut

ion

to in

vest

ors

docu

men

tN

o su

ch li

mita

tions

exi

st f

or

fore

ign

fund

s

ion

requ

irem

ents

s

of a

sset

s s

(eg

10%

rul

e)

Yes

. G

ener

ally

, fu

nd

port

folio

s ar

e pr

ohib

ited

from

usi

ng le

vera

ge.

How

ever

, in

the

cas

e of

pr

ivat

e pl

acem

ent

fund

s fo

r lif

ii

tt

tl

Yes

. B

asic

ally

, th

e to

tal

risk

expo

sure

to

deriv

ativ

es s

houl

d no

t ex

ceed

net

ass

et o

f th

e fu

nd

Yes

. H

owev

er,

fore

ign

fund

s ca

n be

den

omin

ate

d in

fo

reig

n cu

rren

cies

and

may

is

sue

diff

eren

t cl

asse

s of

un

its in

diff

eren

t cu

rren

cies

qu

alify

ing

inve

stor

s, t

otal

bo

rrow

ing

is li

mite

d

fund

typ

es,

for

Yes

Onl

y pe

rmitt

ed f

or

Yes

yp,

mus

t ha

ve a

g

e in

vest

ed in

er

ty

yp

hedg

ing

purp

oses

n ty

pe o

f fu

nds,

ala

nce

d ha

ve n

o fu

nd o

f he

dge

Yes

No

No.

Fun

ds m

ay is

sue

diff

eren

t cl

asse

s of

se

curit

ies

deno

min

ate

d in

di

ffere

ntcu

rren

cies

diffe

rent

cur

renc

ies

25A

sia

CIV

Pas

spor

t

Ap

pen

dix

3:

Res

tric

tio

ns

on

ho

w a

fu

np

pen

dix

3:

est

icti

on

s o

n h

ow

a f

un

Cou

ntry

Typ

es o

f C

IVs

offe

red

Inve

stm

ent

type

s no

t pe

rmitt

edR

estr

ictio

ns o

n ou

tsou

rcin

g D

iver

sific

atio

n re

Tai

wan

Con

trac

tual

-typ

e ve

hicl

es

oper

ate

d by

a T

aiw

an

itii

tt

Gov

ernm

ent

Bon

ds.

Sec

uriti

es

tbli

td

Yes

, as

set

man

agem

ent

f

tit

b

Yes

–ex

tens

ive.

in

div

idu

al i

nve

stm

10%

fth

fd

secu

ritie

s in

vest

men

t tr

ust

com

pan

y (“

SIT

E”)

. T

he S

ITE

is th

e se

ttlor

an

d a

cust

odia

n ac

ts a

s th

e tr

uste

e of

fun

d as

sets

mus

t be

liste

d,

trad

ed o

n th

e ov

er-

the-

coun

ter

mar

ket

or a

ppro

ved

by

FS

C.

Fun

ds m

ay

not

inve

st d

irect

ly

in c

omm

oditi

es,

gold

orre

ales

tate

func

tions

may

not

be

outs

ourc

ed.

Onl

y re

gist

rar/

tran

sfer

ag

ent

func

tions

may

be

out

sour

ced

10%

of

the

fund

vin

vest

men

t m

ay n

mor

e th

an 1

0% o

com

pany

and

th

ein

vest

ed b

y al

l fu

com

mon

man

age

may

not

exc

eed

issu

edsh

ares

ofgo

ld,

or r

eal e

stat

e bu

t m

ay in

vest

di

rect

ly

issu

ed s

hare

s of

Tha

iland

Mut

ual F

und,

Pro

pert

y F

und,

Priv

ate

Fun

d, T

hai

Pro

vide

nt F

und

and

Ven

ture

Cap

ital F

und

Infr

astr

uctu

re.

Suc

h as

set

man

ager

ha

s to

be

mem

ber

of

IOS

CO

but

sub

ject

to

appr

oval

by

SE

C

Dep

ends

on f

und

been

not

ified

in t

Inv

estm

ent

typ

es:

The

tabl

e ab

ove

cons

ider

s th

e ty

pes

of a

sset

s in

whi

ch p

ublic

ly a

vaila

ble

fund

s m

ay in

vest

and

list

ed o

ur u

nder

stan

ding

of t

he m

ost c

omm

on a

sset

cl

asse

s,be

ing

fixed

inte

rest

,sh

ares

,go

vern

men

tbo

nds,

com

pany

bond

san

dcl

asse

s, b

eing

fix

ed in

tere

st,

shar

es,

gove

rnm

ent

bond

s, c

ompa

ny b

onds

and

ot

her

debt

sec

uriti

es, d

eriv

ativ

es (

optio

ns, w

arra

nts,

for

eign

exc

hang

e co

ntra

cts,

sw

aps)

, re

al e

stat

e an

d in

fras

truc

ture

. In

the

tabl

e ab

ove,

we

have

in

dica

ted

that

ther

e ar

e no

res

tric

tions

on

inve

stm

ent

type

s w

ith a

res

pons

e of

“n

one

iden

tifie

d”,

as w

e w

ere

info

rmed

tha

t all

thos

e as

set c

lass

es w

ere

perm

itted

inve

stm

ents

. How

ever

, th

ey m

ay b

e su

bjec

t to

oth

er r

estr

ictio

ns o

r lim

its o

n th

e t y

pes

or s

ize

of in

vest

men

ts in

a p

artic

ular

ass

et c

lass

set

out

in

ypp

the

rele

vant

reg

ulat

ors

guid

elin

es.

Pw

C

nd

op

era

tes

in e

ach

ju

risd

icti

on

(co

nt’

d)

nd

op

ea

tes

in e

ach

ju

isd

icti

on

(co

nt

d)

quire

men

ts

Leve

rage

res

tric

ted

Der

ivat

ives

res

tric

ted

Loca

l cur

renc

y de

nom

inat

ion

requ

ired

For

exa

mpl

e, n

o m

ent

may

exc

eed

lth

Yes

and

fun

ds c

anno

t le

nd

to o

r pr

ovid

e gu

ara

nte

e fo

r th

tit

Yes

, on

ly a

llow

ed f

or

hedg

ing

purp

ose

, to

i

it

t

Yes

, lo

cal f

unds

are

de

nom

inat

ed

in N

ew T

aiw

an

Dll

Off

hf

dva

lue,

the

no

t co

nstit

ute

of t

he in

vest

ee

e to

tal a

mou

nt

unds

und

er t

he

eme

nt o

f a

SIT

E

10%

of

the

tota

l th

atco

mpa

ny

any

othe

r en

tity

impr

ove

inve

stm

ent

effic

ienc

y, o

r as

ot

herw

ise

appr

ove

d by

th

e F

SC

. T

here

are

va

rious

ris

k ex

posu

re

limits

Dol

lars

. Offs

hore

fun

ds

mar

kete

d in

Tai

wan

may

be

deno

min

ate

d in

oth

er

curr

enci

es

that

com

pan

y

d ty

pe.

All

have

he

Pro

spec

tus

No

Yes

Yes

26A

sia

CIV

Pas

spor

t

Ap

pen

dix

4:

Key

ta

x c

on

sid

era

tio

ns

fop

pen

dix

4:

ey t

ax

co

nsi

de

ati

on

s fo

Tax

atio

n o

f th

e fu

nd

How

wou

ld e

ach

of t

he f

und

vehi

cles

in y

our

juris

dict

ion

be

rega

rde

d fo

r ta

x pu

rpos

es?

Wha

t ar

e th

e ta

x im

plic

atio

ns f

or a

do

mes

tic f

und

dom

icile

d in

you

r ju

risdi

ctio

n, in

clud

ing

annu

al

tii

t?

Wha

t ar

e th

e on

gofo

reig

n fu

nd b

eing

ju

risdi

ctio

n?re

port

ing

requ

irem

ents

?

Aus

tral

iaF

unds

are

not

tax

ed a

t th

e fu

nd

leve

l, bu

t ar

e in

stea

d re

gard

ed

for

tax

as f

low

thr

oug

h en

titie

s (p

rovi

ded

inve

stor

s ar

e en

title

d to

all

the

inco

me

of t

he f

und)

The

re is

no

tax

at t

he f

und

leve

l. A

ustr

alia

n fu

nds

are

requ

ired

to

lodg

e an

ann

ual

tax

ret

urn

and

also

m

ust r

epor

t in

form

atio

n to

the

ir in

vest

ors

annu

ally

so

that

the

y ca

n co

mpl

ete

thei

r pe

rson

al t

ax r

etur

ns

Usu

ally

non

e

pp

Chi

naF

unds

are

fre

e of

cap

ital

inco

me

tax

Not

app

licab

leU

ncle

ar

Hon

g K

ong

All

auth

oris

ed

fund

s ar

e ex

empt

fo

r ta

x pu

rpos

esN

one

Non

e if

the

fore

ign

Hon

g K

ong

and

the

esta

blis

hmen

t of

th

Indi

aA

vie

w c

an b

e ta

ken

that

a

Mut

ual f

und

regi

ster

edw

ith

SE

BI

is e

xem

pt f

rom

tax

.

Dom

estic

ent

ities

ar

e ge

nera

lly

requ

ired

to f

ile a

n an

nual

inco

me

tax

retu

rn/w

eal

th t

ax r

etur

n. O

ther

re

port

ing

requ

irem

ents

incl

ude

For

eign

fun

ds c

ann

Indi

a

repo

rtin

g re

quire

men

ts in

clud

e

with

hold

ing

tax

retu

rn,

adva

nce

tax

paym

ents

etc

Pw

C

or

CIV

s in

ea

ch j

uri

sdic

tio

no

CV

s in

ea

ch j

uis

dic

tio

n

Wit

hh

old

ing

tax

Do

ub

leta

x ag

reem

en

ts

ing

tax

impl

icat

ions

for

a di

strib

uted

into

you

r W

hat

inco

me

with

hold

ing

tax

or c

apita

l ga

ins

with

hold

ing

tax

expo

sure

s ar

ise

on in

vest

men

ts h

eld

in y

our

ji

diti

?

To

wha

t ex

tent

can

dom

estic

fu

nds

bene

fit f

rom

dou

ble

tax

trea

ties?

juris

dict

ion?

Aus

tral

ian

fund

s ar

e re

spon

sibl

e fo

r w

ithho

ldin

g ta

x on

dis

trib

utio

ns t

o no

n-re

side

nts

Tax

tre

atie

s ex

ist

but

limita

tions

may

aris

e if

the

trea

ty r

equi

res

bene

ficia

l ow

ners

hip

(due

to

the

trus

t le

gal f

orm

)

Min

imal

–as

indi

vidu

al r

esid

ents

are

fr

ee o

f ca

pita

l gai

n ta

x, u

ncle

ar f

or

fore

ign

inve

stor

s

It is

unc

lear

whe

ther

fun

ds

wou

ld b

e ab

le t

o ac

cess

do

uble

tax

agr

eem

ent

s as

fu

nds

do n

ot p

ay d

omes

tic t

ax

for

thei

r in

com

e ar

isin

g fr

om

over

seas

inve

stm

ents

fund

is a

n au

thor

ised

fun

d in

er

e is

no

perm

ane

nt

he f

und

in H

ong

Kon

g

Gen

eral

ly n

one

Hon

g K

ong

has

a gr

owin

g nu

mbe

r of

Dou

ble

Tax

T

reat

ies

not

be d

irect

ly d

istr

ibut

ed in

N

o w

ithho

ldin

g ta

x on

cap

ital g

ains

for

re

side

nt a

nd c

erta

in c

ateg

orie

sof

fo

reig

n in

vest

ors.

A d

omes

tic M

utua

l Fun

d co

uld

bene

fit f

rom

the

tre

aty

if it

is

rega

rde

d as

res

iden

t un

der

the

rele

vant

Dou

ble

Tax

atio

nth

e re

leva

nt D

oubl

e T

axat

ion

Avo

idan

ce A

gree

men

t

27A

sia

CIV

Pas

spor

t

Ap

pen

dix

4:

Key

ta

x c

on

sid

era

tio

ns

fop

pen

dix

4:

ey t

ax

co

nsi

de

ati

on

s fo

Tax

atio

n o

f th

e fu

nd

How

wou

ld e

ach

of t

he f

und

vehi

cles

in y

our

juris

dict

ion

be

rega

rde

d fo

r ta

x pu

rpos

es?

Wha

t ar

e th

e ta

x im

plic

atio

ns f

or a

do

mes

tic f

und

dom

icile

d in

you

r ju

risdi

ctio

n, in

clud

ing

annu

al

tii

t?

Wha

t ar

e th

e on

gofo

reig

n fu

nd b

eing

ju

risdi

ctio

n?re

port

ing

requ

irem

ents

?

Indo

nes

iaC

olle

ctiv

e in

vest

men

t fu

nd

rega

rde

d as

a c

orpo

ratio

n fo

r ta

x pu

rpos

es.

The

se f

unds

are

su

bjec

t to

tax

The

re a

re m

onth

ly a

nd a

nnu

al t

ax

repo

rtin

g re

quire

men

tsN

o In

don

esia

n ta

x In

don

esia

n ta

x re

si

Japa

nIn

vest

men

t tr

usts

are

not

su

bjec

t to

Jap

anes

e co

rpor

ate

tax

if ce

rtai

n cr

iteria

are

met

Inve

stm

ent

trus

ts a

re t

reat

ed a

s op

aqu

e un

der

Japa

nese

tax

la

w.

Inco

me

is r

ecog

nize

d by

No

tax

repo

rtin

g re

quire

men

t fo

r th

e in

vest

men

t tr

ust

itsel

f if

cert

ain

crite

ria a

re m

et.

The

re a

re

info

rmat

ion

shar

ing

requ

irem

ents

for

th

e w

ithho

ldin

g ta

x ag

ents

whi

ch

requ

ire r

epor

ting

of c

erta

in

info

rmat

ion

tota

xau

thor

ities

Gen

eral

ly f

orei

gn in

subj

ect

to J

apan

es

corp

orat

e fu

nds

are

Japa

nese

cor

pora

tso

urce

inco

me)

pro

perm

anen

t es

tabl

is

the

bene

ficia

ry a

t th

e tim

e w

hen

a pr

ofit

dist

ribut

ion

form

the

tr

ust

is m

ade

info

rmat

ion

to t

ax a

utho

ritie

s an

nual

lyT

here

are

no

tax

r efo

reig

n fu

nd it

self;

hin

form

atio

n sh

arin

gw

ithho

ldin

g ta

x ag

e

Kor

eaA

qua

lifie

d tr

ust

type

fun

d is

not

a

taxa

ble

entit

y an

d no

t su

bjec

t to

inco

me

tax

(it is

how

ever

A q

ualif

ied

trus

t ty

pe f

und

is n

ot

subj

ect

to t

ax f

iling

obl

igat

ions

. A

co

rpor

ate

type

fun

d is

in p

rinci

ple

Unl

ess

a fo

reig

n f u

esta

blis

hmen

t (“

PE

any

tax

filin

g/re

port

(su

bjec

t to

ann

ual

"lic

ense

tax

" of

KR

W 4

5,00

0 (a

ppro

x. U

SD

40

))

A c

orpo

rate

typ

e fu

nd is

sub

ject

to

the

nor

mal

cor

pora

te in

com

e ta

x. H

owev

er,

a qu

alifi

ed f

und

is

entit

led

toa

divi

dend

pyp

pp

subj

ect

to t

he n

orm

al c

orpo

rate

in

com

e t

ax

filin

g

yg

plo

cal d

istr

ibut

or o

f t

with

hold

ing

tax

at t

from

the

fore

ign

fun

inve

stor

s an

d su

bje

requ

irem

ent

entit

led

to a

div

iden

d

decl

arat

ion

dedu

ctio

n

Pw

C

or

CIV

s in

ea

ch j

uri

sdic

tio

n (

con

t’d

)o

CV

s in

ea

ch j

uis

dic

tio

n (

con

td

)

Wit

hh

old

ing

tax

Do

ub

leta

x ag

reem

en

ts

ing

tax

impl

icat

ions

for

a di

strib

uted

into

you

r W

hat

inco

me

with

hold

ing

tax

or c

apita

l ga

ins

with

hold

ing

tax

expo

sure

s ar

ise

on in

vest

men

ts h

eld

in y

our

juris

dict

ion?

To

wha

t ex

tent

can

dom

estic

fu

nds

bene

fit f

rom

dou

ble

tax

trea

ties?

impl

icat

ion

if th

e fu

nd is

not

id

ent

For

inve

stm

ent

in a

Mut

ual F

und

irres

pect

ive

of t

he r

esid

ency

, th

ere

shou

ld b

e no

tax

. O

ther

typ

es o

f in

vest

men

t m

ay b

e su

bjec

t to

w

ithho

ldin

g ta

x, e

glis

ted

shar

e, b

onds

an

d sa

vin

gs

Dom

estic

mut

ualf

unds

can

be

nefit

fro

m d

oubl

e ta

x tr

eatie

s

g

nves

tmen

t tr

usts

are

not

se

cor

pora

te t

ax.

For

eign

e

gene

rally

not

sub

ject

to

te t

ax (

exce

pt c

erta

in J

apan

ov

ided

tha

t th

ere

is n

o sh

men

t in

Jap

an

For

eign

fun

ds m

ay b

e su

bjec

t to

w

ithho

ldin

g ta

x on

inte

rest

or

divi

dend

,

earn

ed in

Jap

an

CIV

s sh

ould

be

elig

ible

(a

lthou

gh s

ome

tech

nica

l un

cert

aint

y re

mai

ns)

epor

ting

requ

irem

ents

for

the

ho

wev

er,

ther

e ar

e g

requ

irem

ents

for

the

en

t in

Jap

an

und

has

a pe

rman

en

t E

”) in

Kor

ea,

it is

not

sub

ject

to

ting

requ

irem

ent.

How

ever

, a

With

hold

ing

tax

appl

ies

A r

educ

ed

trea

ty r

ate

on

divi

dend

s/in

tere

st a

nd

exem

ptio

n on

cap

ital g

ains

g

q,

the

fund

is li

able

to

dedu

ct

the

time

of r

emitt

ing

the

prof

its

nd t

o th

e K

orea

n in

divi

dual

ec

t to

the

with

hold

ing

tax

filin

g

pp

gm

ay b

e av

aila

ble

28A

sia

CIV

Pas

spor

t

Ap

pen

dix

4:

Key

ta

x c

on

sid

era

tio

ns

fop

pen

dix

4:

ey t

ax

co

nsi

de

ati

on

s fo

Tax

atio

n o

f th

e fu

nd

How

wou

ld e

ach

of t

he f

und

vehi

cles

in y

our

juris

dict

ion

be

rega

rde

d fo

r ta

x pu

rpos

es?

Wha

t ar

e th

e ta

x im

plic

atio

ns f

or a

do

mes

tic f

und

dom

icile

d in

you

r ju

risdi

ctio

n, in

clud

ing

annu

al

tii

t?

Wha

t ar

e th

e on

gofo

reig

n fu

nd b

eing

ju

risdi

ctio

n?re

port

ing

requ

irem

ents

?

Mal

aysi

aG

ener

ally

tax

ed

as a

com

pan

y ho

wev

er t

ax e

xem

ptio

ns a

pply

fo

r m

ost

of t

he in

vest

men

ts

mad

e by

a u

nit

trus

t

RE

ITs

can

achi

eve

tax

tran

spar

enc

ypr

ovid

ed90

%of

Fili

ng o

f ta

x re

turn

s an

d pa

ying

tax

(if

any)

as

a no

rmal

com

pan

yF

orei

gn f

unds

can

nM

alay

sia

unle

ssa

pfr

om th

e S

ecur

ities

thro

ugh

dom

estic

li

tran

spar

enc

y pr

ovid

ed 9

0% o

f its

cur

rent

yea

r ch

arge

abl

e in

com

e is

dis

trib

uted

Sin

gapo

reF

und

vehi

cles

are

gen

eral

ly

exem

pt f

rom

tax

pro

vide

d th

ey

appl

y fo

r th

e va

rious

tax

in

cent

ives

offe

red

for

cert

ain

Ann

ual t

ax f

iling

is r

equi

red

desp

ite

the

fund

bei

ng e

xem

pt f

rom

tax

Non

e

type

s of

inve

stm

ent

inco

me

Tai

wan

The

fun

d its

elf i

s no

t a

tax

asse

ssab

le e

ntity

No

tax

or r

epor

ting

requ

irem

ents

for

th

e fu

ndN

one

for

the

fund

iw

ithho

ldin

g ta

x.

The

Fun

d is

liab

le t

dist

ribu

tes

asse

ssa

inve

stor

s (d

omes

ticin

com

eto

unde

rlyin

inco

me

to u

nder

lyin

Tha

iland

T

hai m

utua

l fun

d es

tabl

ishe

d T

hai m

utua

l fun

d is

not

req

uire

d to

F

orei

gn f

unds

are

nun

der

the

Sec

uriti

es la

w is

not

su

bjec

t to

tax

file

tax

retu

rns

No

annu

al t

ax r

epo

Pw

C

or

CIV

s in

ea

ch j

uri

sdic

tio

n (

con

t’d

)o

CV

s in

ea

ch j

uis

dic

tio

n (

con

td

)

Wit

hh

old

ing

tax

Do

ub

leta

x ag

reem

en

ts

ing

tax

impl

icat

ions

for

a di

strib

uted

into

you

r W

hat

inco

me

with

hold

ing

tax

or c

apita

l ga

ins

with

hold

ing

tax

expo

sure

s ar

ise

on in

vest

men

ts h

eld

in y

our

ji

diti

?

To

wha

t ex

tent

can

dom

estic

fu

nds

bene

fit f

rom

dou

ble

tax

trea

ties?

juris

dict

ion?

not

be d

istr

ibut

ed d

irect

ly in

to

ppro

val h

as b

een

obta

ine

d s

Com

mis

sion

and

are

mad

e ic

ense

d fu

nd m

anag

ers

A w

ithho

ldin

g ta

x m

echa

nism

ope

rate

s fo

r pa

yme

nts

to in

vest

ors

depe

ndi

ng

on t

he c

lass

(ie

indi

vidu

als

or f

orei

gn

inve

stor

s)

Tax

tre

atie

s sh

ould

be

appl

icab

le

With

hold

ing

tax

will

onl

y ap

ply

in

cert

ain

case

s fo

r no

n-ex

empt

div

iden

d in

com

e

Pot

entia

l ben

efit

s, b

ut n

ot

clea

r as

of

yet

tsel

f, ex

cept

with

reg

ards

to

to w

ithho

ldin

g ta

x w

hen

it ab

le in

com

e to

und

erly

ing

c fu

nds

rare

ly d

istr

ibut

e n

gin

vest

ors

)

Gen

eral

ly,

inte

rest

inco

me

from

do

mes

tic b

ond

inve

stm

ents

is s

ubje

ct

to w

ithho

ldin

g ta

x. W

ithho

ldin

g ta

x ra

te

for

inte

rest

inco

me

is h

ighe

r fo

r of

fsho

re in

vest

ors,

and

div

iden

d in

com

e de

rived

by

offs

hore

inve

stor

s

Tai

wan

ado

pts

a lo

ok-t

hrou

gh

appr

oach

for

fun

ds t

hat

seek

to

acc

ess

tax

trea

ty b

enef

its.

If th

e un

derl

yin

g in

vest

ors

are

tax

resi

dent

and

ben

efic

ial

owne

rs o

f th

e un

derl

yin

g n

g in

vest

ors)

yw

ould

be

subj

ect

to in

com

e ta

x

If of

fsho

re in

vest

orha

s a

perm

ane

nt

esta

blis

hmen

t in

Tai

wan

, ca

pita

l gai

ns

from

sec

uriti

es t

radi

ng w

ould

be

subj

ect

to A

ltern

ativ

e M

inim

um T

ax

yg

inco

me,

tax

tre

aty

bene

fit m

ay

appl

y

not

subj

ect

to t

ax in

Tha

iland

. T

he f

orei

gn in

vest

or is

sub

ject

to

15%

T

he d

omes

tic f

unds

or

ting

is r

equi

red

with

hold

ing

tax

on c

apita

l gai

n.

How

ever

the

rat

e m

ay b

e re

duce

d or

ex

empt

by

the

virt

ue o

f ce

rtai

n do

uble

ta

x tr

eaty

agr

eem

ent

esta

blis

hed

unde

r th

e S

ecur

ities

Law

is n

ot t

ax e

ntity

so

they

will

not

be

entit

led

to

bene

fit f

rom

dou

ble

tax

trea

ties

29A

sia

CIV

Pas

spor

t

Ap

pen

dix

5:

Key

ta

x c

on

sid

era

tio

ns

fop

pen

dix

5:

ey t

ax

co

nsi

de

ati

on

s fo T

axa

Wha

t ar

e th

e ta

x im

plic

atio

ns fo

r an

indi

vidu

al r

esid

ent

in y

our

terr

itory

inve

stin

g in

a d

omes

tic f

und

?W

hat

are

the

tax

impl

ica

your

ter

ritor

y in

vest

ing

in

Aus

tral

iaA

ustr

alia

n re

side

nt in

divi

dual

s in

vest

ing

in A

ustr

alia

n fu

nds

are

taxe

d on

the

ir sh

are

of t

he t

ax n

et in

com

e (in

clud

ing

capi

tal

gain

s) o

f th

e fu

nd in

the

yea

r in

whi

ch t

heir

pres

ent

entit

lem

ent

aris

es. T

his

appl

ies

irres

pect

ive

of w

heth

er t

he a

ctua

l di

strib

utio

n fr

om t

he f

und

is p

aid

in a

su

bse

qu

en

t ye

ar

The

For

eign

Inv

estm

ent

repe

aled

and

rep

lace

d b

Acc

umul

atio

n F

und

(FA

F

Unl

ike

the

FIF

rul

es,

For

eas

FA

Fs

if th

ey m

eet

the

The

dis

posa

l of

units

in th

e fu

nd w

ill h

ave

capi

tal g

ains

tax

im

plic

atio

ns.

Aus

tral

ian

indi

vidu

al in

vest

ors

are

taxe

d on

inco

me

at t

heir

mar

gina

l tax

rat

e (u

p to

45%

plu

s M

edic

are

levy

). C

apita

l gai

ns

(on

asse

ts h

eld

for

mor

e th

an a

yea

r) m

ay b

e ta

xed

at

conc

essi

onal

rat

es

the

FA

F r

egim

e is

dire

cte

inve

stor

whe

re t

hey

acq

uso

le o

r do

min

ant

purp

osbe

nefit

' and

tax

may

be

aC

omm

issi

oner

mak

es a

w

Mor

e su

bsta

ntia

l inv

estm

Con

trol

led

For

eign

Com

pg

pth

e in

vest

or m

ay b

e ta

xesh

are

of t

he in

com

e of

th

dist

ribut

ed b

y th

e fo

reig

ncu

rren

tly u

nder

ref

orm

Chi

naIn

divi

dual

res

iden

t is

free

of

inco

me

tax

Unc

lear

Hon

g K

ong

Pro

vide

d an

indi

vidu

al is

mak

ing

a pe

rson

alin

vest

men

t, th

ey

are

not

subj

ect

to t

ax in

Hon

g K

ong

on t

heir

inve

stm

ent

inco

me

and

gain

s

If h

owev

er,

the

indi

vidu

al is

inve

stin

g in

the

cour

se o

f ru

nnin

g a

busi

ness

, an

y in

vest

men

t ga

ins

and

loss

es w

ould

be

rega

rde

d as

bus

ines

s re

venu

e an

d tr

eate

d fo

r ta

x ac

cord

ingl

y

Tax

impl

icat

ions

are

as

f

Indi

aA

n in

divi

dual

inve

stor

wou

ld b

e lia

ble

to c

apita

l gai

ns t

ax in

ca

ses

whe

re u

nits

of

Mut

ual F

unds

are

sol

d. T

he t

ax r

ate

may

va

ryfr

om 0

-30%

dep

en

din

g on

the

nat

ure

of t

he in

com

e, t

ype

of s

chem

e in

vest

ed in

and

the

per

iod

of h

oldi

ng t

he u

nit.

Indi

vidu

als

are

taxe

d at

a p

rogr

essi

ve r

ate

Res

iden

ts a

nd o

rdin

ary

rw

orld

wid

e in

com

e. T

he t

depe

ndi

ng

on t

he n

atur

ein

vest

ed in

and

per

iod

of

a pr

ogre

ssiv

e ra

te

Pw

C

or

inv

esto

rs i

n e

ach

ju

risd

icti

on

o i

nv

esto

s in

ea

ch j

uis

dic

tio

n

atio

n o

f in

vest

ors

tions

for

an in

divi

dual

res

iden

t in

n

a fo

reig

n fu

nd?

Wha

t ar

e th

e ta

x im

plic

atio

ns f

or n

on-r

esid

ent

indi

vidu

als

or e

ntiti

es

inve

stin

g in

dom

estic

fun

ds in

you

r ju

risdi

ctio

n? F

or e

xam

ple,

how

ar

e no

n-re

sid

ent

indi

vidu

als

or e

ntiti

es t

axed

in y

our

juris

dict

ions

on

yj

inco

me

and

gain

s ar

isin

g in

the

fun

d?

Fun

d (F

IF)

regi

me

has

now

bee

n by

the

pro

pose

d F

orei

gn

F)

rule

s (a

nti-r

oll u

p pr

ovis

ions

)

eign

fun

ds w

ill o

nly

be r

egar

de

d e

legi

slat

ive

defin

ition

. B

road

ly,

For

eign

inve

stor

s ar

e as

sess

able

on

thei

r A

ustr

alia

n so

urce

d in

com

e

Dis

trib

utio

ns o

f in

tere

st o

r un

fra

nke

d di

vide

nds

to n

on-r

esid

en

ts m

ay

be s

ubje

ct t

o A

ustr

alia

n w

ithho

ldin

g t

ax a

t th

e ge

nera

l rat

e of

10%

an

d 30

%,

resp

ectiv

ely.

The

rat

e on

unf

rank

ed

divi

dend

s is

gen

eral

ly

ed a

t sc

hem

es e

nter

ed

into

by

an

uire

an

inte

rest

in a

FA

F w

ith t

he

e of

obt

aini

ng

a 'ta

x de

ferr

al

asse

ssed

on

the

fund

whe

n th

e w

ritte

n de

term

inat

ion

men

ts m

ay b

e ta

xed

unde

r th

e pa

ny

(CF

C)

rule

s. I

n th

is c

ase,

redu

ced

to 1

5% (

or p

ote

ntia

lly le

ss)

unde

r a

doub

le t

ax a

gree

me

nt

(whe

re a

pplic

able

). F

rank

ed d

ivid

ends

are

fre

e of

with

hold

ing

tax

Whe

re t

he f

und

is a

man

age

d in

vest

men

t tr

ust,

cert

ain

dist

ribut

ions

of

Aus

tral

ian

sour

ced

inco

me

or c

apita

l gai

ns f

rom

tax

abl

e A

ustr

alia

n pr

oper

ty m

ade

to f

orei

gn in

vest

ors

will

be

subj

ect

to a

30

% r

ate

of w

ithho

ldin

g. T

his

rate

is r

educ

ed w

here

the

rec

ipie

nt is

a

resi

dent

of

a fo

reig

n ju

risdi

ctio

n w

ith w

hich

Aus

tral

ia h

as e

ffec

tive

py

()

ed

on a

n ac

crua

ls b

asis

on

a he

for

eign

fun

d ev

en if

not

n

fund

. T

he C

FC

rul

es a

re

gj

exch

ang

e of

info

rmat

ion

on t

ax

mat

ters

. T

he c

ount

ries

and

terr

itorie

s th

at q

ualif

y as

an

“info

rmat

ion

exch

ang

e co

untr

y” f

or t

hese

pu

rpos

es a

re p

resc

ribed

in A

ustr

alia

n ta

xatio

n re

gula

tions

. T

he

redu

ced

rate

of

with

hold

ing

is 1

5% f

or t

he 2

009

/10

inco

me

year

and

7.

5% f

or la

ter

inco

me

year

s

Unc

lear

for

a do

mes

tic f

und

For

aut

horis

ed

fund

s th

ere

is n

o w

ithho

ldin

g ta

x an

d th

ere

are

no

repo

rtin

g re

quire

men

ts

resi

dent

s ar

e ta

xed

on t

heir

tax

rate

may

var

y fr

om 2

0-30

%

e of

the

inco

me,

typ

e of

ent

ity

f ho

ldin

g. I

ndiv

idua

ls a

re t

axed

at

A fo

reig

n in

vest

or u

nder

the

dom

estic

law

sw

ould

be

liabl

e to

cap

ital

gain

s ta

x in

cas

es w

here

uni

ts o

f M

utua

l Fun

ds a

re s

old.

The

tax

ra

te m

ay v

ary

from

0-4

0% d

epe

ndi

ng

on t

he n

atur

e of

the

inco

me,

ty

pe o

f en

tity,

typ

e of

sch

eme

inve

sted

in a

nd p

erio

d of

hol

ding

the

un

it

30A

sia

CIV

Pas

spor

t

Ap

pen

dix

5:

Key

ta

x c

on

sid

era

tio

ns

fop

pen

dix

5:

ey t

ax

co

nsi

de

ati

on

s fo

(co

nt’

d)

Tax

a

Wha

t ar

e th

e ta

x im

plic

atio

ns fo

r an

indi

vidu

al r

esid

ent

in y

our

terr

itory

inve

stin

g in

a d

omes

tic f

und

?W

hat

are

the

tax

impl

ica

your

ter

ritor

y in

vest

ing

in

Indo

nes

iaIn

com

e re

ceiv

ed b

y in

divi

dual

res

iden

t (u

nit

hold

er)

from

M

utua

l Fun

d is

not

sub

ject

to

tax

Sub

ject

to

Indi

vidu

al I

nco

max

. 30

%

Japa

nD

istr

ibut

ions

fro

m d

omes

tic f

unds

(ie

Jap

anes

e in

vest

men

t tr

usts

) ar

e su

bjec

t to

with

hold

ing

tax

at t

he r

ate

of 2

0%

(red

uced

to10

%un

til31

Dec

embe

r20

11pr

ovid

edth

efu

ndis

The

tax

impl

icat

ions

for

ain

vest

ing

in a

for

eign

inv

sam

eas

thos

ere

latin

gto

(red

uced

to

10%

unt

il 31

Dec

embe

r 20

11,

prov

ided

the

fun

d is

a

publ

icly

off

ere

d st

ock

inve

stm

ent

trus

t)

If t

he

dom

estic

sto

ck f

und

is n

ot p

ublic

ly t

rade

d, t

he

dist

ribut

ion

is s

ubje

ct t

o in

com

e t

ax a

t pr

ogre

ssiv

e in

divi

dual

in

com

e ra

tes

(up

to 5

0%),

rep

orta

ble

upon

fili

ng a

Jap

anes

e in

divi

dual

tax

ret

urn.

The

with

hold

ing

tax

shou

ld g

ener

ally

be

cred

itabl

e ag

ains

t th

e Ja

pane

se in

divi

dual

inve

stor

’s f

inal

tax

lia

bili

ty

sam

e as

tho

se r

elat

ing

tofu

nd w

here

the

dis

trib

utio

hand

ling

agen

t in

Jap

an

How

ever

, w

here

the

dis

tth

roug

h a

paym

en

t ha

ndta

x is

not

impo

sed,

how

ein

com

e ta

x at

pro

gres

siv

50%

)re

port

abl

eup

onfi

liab

ility

Cap

ital g

ains

rea

lised

by

Japa

nes

e in

divi

dual

inve

stor

s fr

om

the

sale

of

units

in a

dom

estic

sto

ck f

und

is s

ubje

ct t

o in

com

e ta

x at

the

rat

e of

20%

(ho

wev

er,

a tr

ansi

tiona

l ra

te o

f 10

%

appl

ies

to

capi

tal g

ains

on

publ

icly

off

ered

sto

ck in

vest

men

t tr

ust

until

31

Dec

embe

r 20

11 w

here

the

sal

e is

mad

e to

, or

th

roug

h,

a br

oker

-de

aler

act

ing

in J

apan

)

50%

), r

epor

tabl

e up

on f

ire

turn

Japa

nese

CF

C r

ule

ma

yfu

nd u

nder

cer

tain

con

di

Cap

ital g

ains

rea

lised

by

Japa

nes

e in

divi

dual

inve

stor

s fr

om

the

sale

of

uni

ts in

a d

omes

tic b

ond

fund

is n

ot s

ubje

ct t

o in

com

e ta

x

Kor

eaP

rofit

dis

trib

utio

ns f

rom

a q

ualif

ied

trus

t ty

pe f

und

are

taxe

d as

di

vide

nds

in t

he h

ands

of

the

inve

stor

s an

d su

bjec

t to

w

ithho

ldin

g ta

x at

15.

4%.

Whe

re t

he s

um o

f di

vide

nd a

nd

inte

rest

inco

me

deriv

edby

aK

orea

nin

divi

dual

durin

ga

year

Pro

fit d

istr

ibut

ions

fro

m a

char

acte

rized

as

divi

den

inve

stor

s re

gard

less

of

thA

Kor

ean

payi

ng

agen

t(

inte

rest

inco

me

deriv

ed b

y a

Kor

ean

indi

vidu

al d

urin

g a

year

ex

ceed

s K

RW

40

mill

ion

(app

rox.

US

D 3

5,0

00)

, th

e ex

cess

is

subj

ect

to g

loba

l tax

atio

n at

the

indi

vidu

al's

pro

gres

sive

m

argi

nal t

ax r

ate

of u

p to

38.

5% w

ith a

cre

dit

for

an in

terim

w

ithho

ldin

g ta

x

A K

orea

n pa

yin

g ag

ent

(fo

reig

n fu

nd)

is r

equi

red

15.4

% a

t th

e tim

e of

dis

tto

the

indi

vidu

al in

vest

or

Pw

C

or

inv

esto

rs i

n e

ach

ju

risd

icti

on

o

in

ves

tos

in e

ach

ju

isd

icti

on

atio

n o

f in

vest

ors

tions

for

an in

divi

dual

res

iden

t in

n

a fo

reig

n fu

nd?

Wha

t ar

e th

e ta

x im

plic

atio

ns f

or n

on-r

esid

ent

indi

vidu

als

or e

ntiti

es

inve

stin

g in

dom

estic

fun

ds in

you

r ju

risdi

ctio

n? F

or e

xam

ple,

how

ar

e no

n-re

sid

ent

indi

vidu

als

or e

ntiti

es t

axed

in y

our

juris

dict

ions

on

yj

inco

me

and

gain

s ar

isin

g in

the

fun

d?

ome

Tax

at

prog

ress

ive

rate

, In

com

e an

d ga

ins

rece

ived

by

non-

resi

den

t in

divi

dual

s or

ent

ities

in

vest

ing

in d

omes

tic M

utua

l Fun

ds is

not

sub

ject

to

Indo

nes

ian

tax

a Ja

pan

ese

indi

vidu

al in

vest

or

estm

ent

trus

t ar

e ge

nera

lly t

he

oan

inve

stm

ent

ina

dom

estic

Div

iden

ds p

aid

by a

dom

estic

fun

d to

non

res

iden

t in

divi

dual

s or

en

titie

s w

ithou

t a

perm

ane

nt e

stab

lishm

ent

in J

apan

are

sub

ject

to

Japa

nese

with

hold

ing

tax

atth

era

teof

20%

(red

uced

to7%

until

31o

an in

vest

men

t in

a d

omes

tic

on is

mad

e th

roug

h a

paym

en

t

ribut

ion

is m

ade

dire

ctly

(no

t dl

ing

agen

t in

Jap

an),

with

hold

ing

ever

, th

e in

com

e is

sub

ject

to

ve

indi

vidu

al in

com

e ra

tes

(up

to

ling

aJa

pane

sein

divi

dual

tax

Japa

nese

with

hold

ing

tax

at

the

rate

of

20%

(re

duce

d to

7%

unt

il 31

D

ecem

ber

2011

and

15%

the

reaf

ter,

pro

vide

d th

e do

mes

tic f

und

is

publ

icly

off

ere

d st

ock

inve

stm

ent

trus

t) f

or s

tock

inve

stm

ent

trus

t an

d 1

5% f

or b

ond

inve

stm

ent

trus

t, su

bjec

t to

the

ava

ilabi

lity

of a

ny

trea

ty r

elie

f

Und

er

Japa

nese

tax

law

, no

n re

side

nt in

divi

dual

s or

ent

ities

with

out

a pe

rman

ent

est

ablis

hmen

t in

Jap

an a

re n

ot s

ubje

ct t

o ca

pita

l gai

ns

tax

onth

edi

spos

alof

units

inJa

pan

ese

inve

stm

ent

trus

tlin

g a

Japa

nese

indi

vidu

al t

ax

y ap

ply

to t

he f

orei

gn c

orpo

rate

tio

ns

tax

on

the

disp

osal

of

units

in J

apan

ese

inve

stm

ent

trus

t

a fo

reig

n fu

nd a

re g

ener

ally

ds

in t

he h

ands

of

the

Kor

ean

he le

gal f

orm

of

the

fore

ign

fund

. (in

clud

ing

alo

cald

istr

ibut

orof

a

The

for

eign

inve

stor

may

be

entit

led

to a

red

uce

d w

ithho

ldin

g ra

te

on d

ivid

ends

(eg

10~

15%

) an

d an

exe

mpt

ion

on c

apita

l gai

ns is

av

aila

ble.

With

out

trea

ty p

rote

ctio

n,

the

dom

estic

with

hold

ing

tax

(22%

for

divi

dend

sth

elo

wer

of11

%of

sale

proc

eeds

and

22%

of(in

clud

ing

a lo

cal d

istr

ibut

or o

f a

to d

educ

t w

ithho

ldin

g ta

x at

rib

utin

g th

e pr

ofits

fro

m t

he f

und

(22%

for

div

iden

ds,

the

low

er o

f 11

% o

f sa

le p

roce

eds

and

22%

of

gain

for

cap

ital g

ain)

wou

ld a

pply

31A

sia

CIV

Pas

spor

t

Ap

pen

dix

5:

Key

ta

x c

on

sid

era

tio

ns

fop

pen

dix

5:

ey t

ax

co

nsi

de

ati

on

s fo

(co

nt’

d)

Tax

a

Wha

t ar

e th

e ta

x im

plic

atio

ns fo

r an

indi

vidu

al r

esid

ent

in y

our

terr

itory

inve

stin

g in

a d

omes

tic f

und

?W

hat

are

the

tax

impl

ica

your

ter

ritor

y in

vest

ing

in

Mal

aysi

aIn

divi

dual

s ar

e ge

nera

lly e

xem

pt f

rom

tax

on

unit

trus

t di

strib

utio

ns r

ecei

ved.

If

it is

RE

IT d

istr

ibut

ions

, th

ere

wou

ld

alre

ady

be a

10%

with

hold

ing

tax

dedu

cte

d. N

o ca

pita

l gai

ns

tax

regi

me

in M

alay

sia

for

inve

stm

ents

in s

ecur

ities

or

fund

s

Nor

mal

ly t

ax e

xem

pt u

nle

part

of

the

busi

ness

of

dein

divi

dual

Sin

gapo

reN

ota

xim

plic

atio

nT

here

isno

capi

talg

ains

tax

inS

inga

por

eN

one

Sin

gapo

reN

o ta

x im

plic

atio

n. T

here

is n

o ca

pita

l gai

ns t

ax in

Sin

gap

ore

, an

d in

com

e fr

om in

vest

men

t is

tax-

free

Non

e

Tai

wan

Gen

eral

ly,

if a

dom

estic

fun

d di

strib

utes

ass

essa

ble

inco

me

to

indi

vidu

al r

esid

ents

, in

com

e ta

x m

ay a

pply

dep

en

din

g on

the

na

ture

of

dist

ribut

ed in

com

e (a

lthou

gh

this

is r

arel

y se

en in

pr

actic

e).

Div

iden

d in

com

e is

inco

me

tax

exem

pt if

the

inve

stor

is

dom

estic

tax

res

iden

t. C

apita

l gai

ns f

rom

tra

ding

Tai

wan

ese

itill

tf

it

Inco

me

deriv

ed f

rom

inve

rega

rde

d as

for

eign

sou

rA

ltern

ativ

e M

inim

um T

ax

exem

ptio

n th

resh

old

of N

secu

ritie

s ar

e ge

nera

lly e

xem

pt f

rom

inco

me

tax

Tha

iland

P

rofit

sha

ring

is s

ubje

ct t

o 10

% w

ithho

ldin

g ta

x

Red

empt

ion

gain

is s

ubje

ct t

o p

erso

nal i

ncom

e ta

x at

pr

ogre

ssiv

e ra

te (

incl

udin

g w

ith o

ther

inco

me)

Gai

n on

sal

es o

f un

it tr

ust

is e

xem

pt

Inco

me

from

inve

stin

g in

pers

onal

inco

me

tax

at p

othe

r in

com

e) if

suc

h in

cw

ithin

the

sam

e ca

lend

a

Pw

C

or

inv

esto

rs i

n e

ach

ju

risd

icti

on

o

in

ves

tos

in e

ach

ju

isd

icti

on

atio

n o

f in

vest

ors

tions

for

an in

divi

dual

res

iden

t in

n

a fo

reig

n fu

nd?

Wha

t ar

e th

e ta

x im

plic

atio

ns f

or n

on-r

esid

ent

indi

vidu

als

or e

ntiti

es

inve

stin

g in

dom

estic

fun

ds in

you

r ju

risdi

ctio

n? F

or e

xam

ple,

how

ar

e no

n-re

sid

ent

indi

vidu

als

or e

ntiti

es t

axed

in y

our

juris

dict

ions

on

yj

inco

me

and

gain

s ar

isin

g in

the

fun

d?

ess

such

gai

ns a

re r

egar

ded

as

ealin

g in

inve

stm

ents

by

the

Gen

eral

ly n

o ta

x un

less

a p

erm

ane

nt

esta

blis

hmen

t is

in M

alay

sia.

C

erta

in in

vest

men

ts s

uch

as R

EIT

s w

ould

hav

e a

with

hold

ing

tax

whi

ch w

ill b

e de

duct

ed

(eg

RE

IT w

ithho

ldin

g ta

x at

25%

for

for

eign

co

rpor

atio

ns a

nd 1

0% f

or f

orei

gn in

stitu

tiona

l inv

esto

rs)

Non

eN

one

estm

ents

in o

ffsh

ore

fund

s is

rc

e in

com

e, w

hich

is s

ubje

ct t

o x

at t

he r

ate

of 2

0% (

with

an

NT

D 6

mill

ion)

Inte

rest

and

div

iden

d in

com

e di

strib

uted

by

dom

estic

fun

ds t

o no

n-re

side

nt in

divi

dual

s or

ent

ities

are

sub

ject

to

with

hold

ing

tax.

W

ithho

ldin

g ta

xes

may

diff

er a

nd t

he r

educ

ed

tax

rate

on

trea

ty

depe

nds

on

resi

denc

y of

ben

efic

ial o

wne

rs o

f su

ch in

vest

men

t.

Cap

ital g

ains

fro

m r

edem

ptio

n of

uni

ts o

f a

Tai

wan

ese

fund

are

ll

td

fi

tge

nera

lly e

xem

pte

d fr

om in

com

e ta

x

n a

fore

ign

fund

is s

ubje

ct t

o T

hai

prog

ress

ive

rate

(in

clud

ing

with

co

me

is b

roug

ht

into

Tha

iland

r

year

as

rece

ivin

g su

ch in

com

e

Non

-res

iden

t en

titie

s ar

e no

t ta

xed

on t

he g

ains

and

inco

me

from

in

vest

men

t in

dom

estic

fun

ds.

Non

-res

iden

t in

divi

dual

s ar

e su

bjec

t to

tax

on

gain

s an

d in

com

e fr

om in

vest

men

t in

dom

estic

fun

ds o

n pr

ogre

ssiv

e ra

te.

The

pay

er is

not

req

uire

d to

ded

uct

the

tax

whe

n m

akin

g th

e pa

yme

nt o

f su

ch in

com

e to

non

-res

ide

nt in

divi

dual

s.

The

refo

re,

itis

the

duty

ofno

n-r

esid

ent

indi

vidu

als

topa

yta

xin

The

refo

re,

it is

the

duty

of

non

resi

de

nt in

divi

dual

s to

pay

tax

in

Tha

iland

32A

sia

CIV

Pas

spor

t

Ap

pen

dix

6:

Cu

rren

t a

rra

ng

emen

ts f

or

pp

end

ix6

:C

uen

t a

an

gem

ents

fo

Asi

a r

egio

n

At

liC

hiH

KI

diI

Aus

tral

iaC

hina

Hon

g K

ong

Indi

aIn

Doe

s th

e ju

risdi

ctio

n ha

ve a

sys

tem

of

rec

ogni

tion

of f

orei

gn f

unds

Yes

, bu

t cu

rren

tly

limite

d to

tho

se in

re

cogn

ised

juris

dict

ions

No

Yes

. T

he S

FC

may

acc

ept

that

so

me

sche

mes

alre

ady

com

ply

in s

ubst

ance

with

cer

tain

pr

ovis

ions

of

the

Uni

t T

rust

and

M

utua

l Fun

ds C

ode

by v

irtue

of

No

N

gfo

r di

strib

utio

n to

the

pub

lic?

ypr

ior

auth

oriz

atio

n in

a

regu

late

d ju

risdi

ctio

n

If s

o, w

hich

co

untr

ies

have

ac

hiev

ed

reco

gniti

on?

Hon

g K

ong,

New

Z

eala

nd,

UK

, G

uern

sey,

Jer

sey,

Isl

e of

Man

, S

inga

por

e,

US

A a

nd G

erm

any

Not

ap

plic

able

Aus

tral

ia,

Fra

nce,

Ger

man

y,

Gue

rnse

y, I

rela

nd,

Isle

of

Man

, Je

rsey

, Lu

xem

bo

urg,

Mal

aysi

a T

aiw

an,

UK

, U

SA

Not

ap

plic

able

N a

Pw

C

r d

istr

ibu

tio

n o

f fo

reig

n C

IVs

in t

he

dis

tib

uti

on

of

foei

gn

CV

s in

th

e

di

JK

Ml

iS

iT

iT

hil

dnd

ones

iaJa

pan

Kor

eaM

alay

sia

Sin

gapo

reT

aiw

anT

haila

nd

No

Yes

, bu

t cu

rren

tly

limite

d to

tho

se in

re

cogn

ised

ju

risdi

ctio

ns

No

No

Yes

, bu

t cu

rren

tly li

mite

d to

tho

se in

re

cogn

ised

ju

risdi

ctio

ns

No

Cur

rent

ly,

SE

C a

llow

s on

ly f

orei

gn

issu

er w

ho

has

liste

d j

secu

ritie

s in

th

eir

hom

e co

untr

ies

to

be li

sted

in

Sto

ck

Exc

hang

e of

T

h aila

nda

ad

Not

pp

licab

leLu

xem

burg

, Ir

elan

d an

d C

aym

an

Not

ap

plic

able

Not

ap

plic

able

Luxe

mbo

urg

and

Irel

and

Not

ap

plic

able

Not

ap

plic

able

33A

sia

CIV

Pas

spor

t

GlossaryGlossary


A multilateral framework which would enable a complying fund in a nation that signs up to the Passpframework to offer that product in each of the otherframework to offer that product in each of the other signatory nations.

Asian region or the region

The jurisdictions covered by the survey being AustralChina, Hong Kong, India, Indonesia, Japan, Korea, Malaysia, Singapore, Taiwan and Thailand.

CIV or Collective Investment VehicleCIV or Collective Investment Vehicle

Collective investment vehicle referring to all of the different structures used for funds management, commonly taking the form of unit trusts. We have usethe terms ‘CIV’ and ‘funds’ interchangeably.

Disclosure document

The document for each fund that sets out the keyThe document for each fund that sets out the key considerations for that fund. It typically includes suchinformation as the investment strategy, fees and risks

EU

European Union

FUM

Funds under management.

Funds management

The collective or mutual pooling of financial assets totake advantage of investment management services.

Promoter

The promoter, or issuer of securities is the entity responsible for creating the CIV.

UCITS

Undertakings for Collective Investment in TransferabSecurities issued under a series of European Union directives.

PwC

port

lia,

ed

s.

o

le

34Asia Region Funds

Passport

About the reportAbout the report

PwC partnered with the Financial Services Council in

This report in relation to the Asia Region Funds PassSeptember and October 2010, together with other resindustry bodies, a wide range of organisations operatindustry bodies, a wide range of organisations operatthroughout the Asia region.

The survey questions covered the opinions and attituto collect factual information about the regulatory and

Survey responses were received from Australia, ChinSingapore, Taiwan and Thailand.

This report provides an overview of the survey findingp p y g

We thank the respondents for their time and insight.

Important Notice

This report is based on data collected from industry bodies, PwC neand information published by other third parties. PwC Australia has nand makes no representation or warranty in relation to the accuracysurveys, no member firm in the PwC network performed detailed revhandled by legal firms. Rather the information is based on the exper

Any expressions of opinion (direct or implied) that are distillations orviews of PwC Australia or any other PwC network firm.

Commentary, information or material contained in this publication is analysis of any kind. In particular, this publication does not constitutenot a substitute for specific professional advice. No person should upublication without seeking advice from an appropriately qualified prcaused as a result of use of or reliance on this publication.

“PwC” is the brand under which member firms of PricewaterhouseCTogether, these firms form the PwC network. Each firm in the netwoother member firm. PwCIL does not provide any services to clients. member firms nor can it control the exercise of their professional jud

n the preparation of this report.

sport proposal is based on a survey conducted in search and analysis. Respondents to the survey were from ting in the industry and member firms of the PwC networkting in the industry and member firms of the PwC network

ude of market participants and industry bodies and sought d operating environment in each country.

na, Hong Kong, India, Indonesia, Japan, Korea, Malaysia,

gs, together with analysis and interpretation of the results. g , g y p

twork firms in the Asia Pacific region and a range of other organisations, not independently verified the information provided by survey respondents

y or completeness of the data collected. In addition, in completing the views of the legislative requirements, the interpretation of which is normally rience and observations of practice in the relevant jurisdictions.

r interpretations of the responses from the surveys do not represent the

of a general nature only. This publication is not intended to be advice or e the provision of legal, accounting or professional advisory services and is ndertake or refrain from any action based on the information in this rofessional. PwC Australia accepts no responsibility for any loss or damage

oopers International Limited (PwCIL) operate and provide services. ork is a separate legal entity and does not act as agent of PwCIL or any PwCIL is not responsible or liable for the acts or omissions of any of its

dgment or bind them in any way.

ContactContact

Andrew Wilson Ken Woo

For further information about the survey, ple

Andrew WilsonPartner+61 2 8266 [email protected]

Ken WooPartner+61 2 8266 [email protected]

Gennesee RockDirector+61 2 8266 [email protected]

Tim ManefieldDirector+61 2 8266 293tim.manefield@

James HuangTaiwan+886 2 2729 52james.huang@t

Mohammad Faiz (Fiaz) AzmiMalaysia+60 3 2173 0867mohammad.faiz.azmi@my pwc commy.pwc.com

Anothai LeekitThailand+66 2 344 1100

Cliff ReesIndonesia

Takeshi ShimiJapan

Marie-Anne KongHong Kong+852 2289 [email protected]

Michelle Oliver+61 2 8266 1133

To request additional copies please contact

+62 21 527 [email protected]

+81 90 6515 17takeshi.shimizu@


To find out more about the Financial Servicesfollowing

John BrogdenChief Executive Officer+61 2 9299 3022

Martin CodinDirector of Pol+61 2 8235 25

© 2010 PricewaterhouseCoopers. All rights reserved. "PricewaterhouseCoopers" refers to PricPricewaterhouseCoopers global network or other member firms of the network, each of which

pwc.com.au

ase contact

Robert Grome

8wc.com

Robert GromeSingapore Partner+852 2289 [email protected]

9au.pwc.com

Suzanne HodgesSenior Consultant+61 2 8266 [email protected]

Jae-Hyeong JooKorea+82 2 709 [email protected]

08tw.pwc.com

Alex WongChina

Gautam MehraIndia+91 22 6689 [email protected]

twattana

zu

TJ Yen+61 2 8266 4642

Media enquiries


[email protected]


s Council, please visit ww.fsc.org.au or contact one of the

aicy

523

Stephen WoodhillDirector of Communication+61 2 8235 2527

cewaterhouseCoopers, a partnership formed in Australia or, as the context requires, the is a separate and independent legal entity..

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