Product opportunities in the Asia Pacific

region Examining current developments for

product issuers in the region

Harvey KalmanHead of EQT Corporate Fiduciary & Financial Services

Current Global Framework

USA

EUROPE

No 2 in domestic Funds globally Has domestic unitized companies with an indpt fiduciary (UCIT) and 10m euro capitalization required for the fiduciary Approx. 5-6tn in FUM Domestically and internationally focused especially ASIA Able to do mutli-currency and mutli-fee classes per fund Outcome – Europe has produced product that certain Asian countries allow direct or indirect investments

No 1 in domestic Funds globally Has domestic Mutual Funds, unitized companies with a Board and no capitalization required for the Board Approx. 10tn in FUM Domestically focused but with global reach Recent US Government changes make investments from US citizens into non US funds very difficult ie FATCA and Dodd-Frank Outcome – US domestic funds for domestic users and will get bigger and bigger and might enter Asia

AUSTRALIA

No 4 in domestic Funds globally Has domestic unit trusts where majority have internal non independent “Board” and uncapped capitalization required for the Board Approx. 1.5tn in FUM Only domestically focused Outcome – FUM driven by superannuation system but at risk to other players who offer A$ classes in their funds ie Europe - UCITS

No X in domestic Funds globally, unsure of FUM Has recently signaled that Chinese domestic investors will be able to invest into Hong Kong domiciled funds, who will need a “Bank” to be Trustee of that fund FUM unsure? Domestically focused but … Outcome – Has a history of watching and seeing and learning and then using “politics” to get a Chinese centric solution.

CHINA

Current Global Framework

USA

No 1 in domestic Funds globally Has domestic Mutual Funds, unitized companies with a Board and no capitalization required for the Board Approx. 10tn in FUM Domestically focused but with global reach Recent US Government changes make investments from US citizens into non US funds very difficult ie FATCA and Dodd-Frank Outcome – US domestic funds for domestic users and will get bigger and bigger and might enter Asia

EUROPE

AUSTRALIA

CHINA

No 4 in domestic Funds globally Has domestic unit trusts where majority have internal non independent “Board” and uncapped capitalization required for the Board Approx. 1.5tn in FUM Only domestically focused Outcome – FUM driven by superannuation system but at risk to other players who offer A$ classes in their funds ie Europe - UCITS

No X in domestic Funds globally, unsure of FUM Has recently signaled that Chinese domestic investors will be able to invest into Hong Kong domiciled funds, who will need a “Bank” to be Trustee of that fund FUM unsure? Domestically focused but … Outcome – Has a history of watching and seeing and learning and then using “politics” to get a Chinese centric solution.

No 2 in domestic Funds globally Has domestic unitized companies with an indpt fiduciary (UCIT) and 10m euro capitalization required for the fiduciary Approx. 5-6tn in FUM Domestically and internationally focused especially ASIA Able to do mutli-currency and mutli-fee classes per fund Outcome – Europe has produced product that certain Asian countries allow direct or indirect investments

IssueConcern about outsourcing Tax base, Regulatory control and Jobs to Europe and potentially China or USA, so:

Need a common structure, language and framework and Need a common Structure like a unitized company structure Possible solutions One registered Fund with one set of accounts Multi currency base classes with multi tax returns vs one Tax returns lodged in multi locations, and Multi offer documents in those location

= the Asian Unitised Collective Investments Trust or

AUCIT

Opportunities in Asia

An Australian domiciled Fund global equity fund, registered in Australia with Asset managed out of Hong Kong and Sydney

Custodian and Administration of registered AUCIT in Australia with some services outsourced to China

Registries – one in each of the countries using their own currency class◦ Eg. A$ class registry in OZ with offer doc (principal offer doc) in OZ

◦ $US class or $won class in Korea with wrapper offer doc in Korea leveraging off the principal offer doc and;

◦ $NZ class in NZ again with its own offer doc wrapper

One set of Financial accounts lodged in Australia (where fund registered) 3 tax returns associated with their own classes in OZ, Korea and NZ If specific reporting required ie AIIR report in OZ this is done for OZ class

only, or FATCA reporting again done per class

= AUCIT, and jobs

AUCIT Example

Pathway – initially Governments accept the pilot Local Oz tax laws to change to allow multiple tax

returns per classes with a fund Local ASIC rules re offer documents and capital for

REs will need to be changed Pathway - ongoing New Collective Investment Vehicle (CIV) structures

created with corresponding acts in pilot counties New CIV tax act for CIV Harmonisation of offer rules and tax requirements

across the pilot countries

AUCIT Pathway

Solves the common structure approach Solves the erosion of the tax vases in the ASEAN countries Solves the outsourcing of regulatory control as each

jurisdiction will get control of its classes of investors and disclosure via the wrapper offer doc

Solves the exporting of jobs to Europe as each jurisdiction gets employment in their country associated with activity and tasks

Gives us a proper funds management operational and regulatory structure.

◦ A Five Tick Outcome 

But beware: If we do not do, others will watch, learn and

then take over thus crowding us all out.

AUCIT Outcome