IIFA Country Reports 2010

ARGENTINA COUNTRY REPORT
January 2009 – June 2010
From January 1, 2009 to December 31, 2009
1. Economic and financial background
Introduction. A change was seen in Argentina’s macroeconomic conditions during 2009, as, added to
the country’s own challenges, was the downturn in international financial conditions seen in the last
months of 2008, which right away impacted on the global real economy. To the extent to which the
global context stabilized and slowly recovered, however, the local economic scene also showed clear
signs of recovery.
Economic Activity. Economic growth slowed down with respect to the increase seen in 2008, although
official GDP figures still show a roughly 0.9% increase in 2009. In quarterly terms, and setting aside
seasonal effects, activity trudged along weakly during the first two quarters of the year, with an average
quarterly decline of -0.2%, to finally begin to pick up in the second half of 2009. The gradual
improvement in international economic and financial conditions towards the end of the first quarter
brought relief to a number of export sectors that had been hard hit in late 2008. The first semester’s
fiscal boost also helped to maintain the local activity level, which stabilized in the second quarter of the
year and began to show destationalized growth in the second semester. For their part, different private
estimates note that local economic activity had seen a significant fall in GDP in 2009, although the
dynamic was similar to that exhibited by government statistics.
The slowdown in economic activity was observed in all sectors, but goods producers were especially
hard hit, having observed a joint decline of approximately 3.5%, according to official figures. Particularly
important, not only because of its direct impact but also for the indirect effects on other sectors, was the
setback in agricultural production secondary to an unusual drought that harmed production of
Argentina’s main agricultural products. As a result, the poor harvest caused a 35% drop in supplies for
the 2008-2009 harvest, whose effects were mainly felt in the first half of 2009. On the demand side, the
slowdown was also generalized, with almost all components showing considerable setbacks. Most
pronounced among these was the drop in exports, and secondly, in investment. On the other hand,
however, the one component of demand to have shown an increase versus 2008 was consumer
spending, spurred on by the government’s increased spending policy.
External Sector. The extraordinary crumbling of world trade did not pass by unnoticed in Argentina’s
domestic economy: demand for the country’s exports bottomed out, in particular industrial ones, as did
the evolution of prices on our country’s main export products. At the same time, an important drought
crippled local agricultural supply, leading to a decline of about 35% in farm production, further affecting
external sales. Import levels, nonetheless, dropped even more so, principally as a consequence of the
economy’s slowdown. Thanks to imports having shrunk more in relation to sales abroad, Argentina’s
economy was able to show a record trade surplus.
Exports in 2009 fell 21% with respect to 2008, as a result of a 12% drop in prices and a 9% decline in
quantities. For their part, imports fell 32% as compared to 2008’s levels, as evidenced by a 12% drop in
prices and a 23% decline in quantities. As a result, due to the larger fall in imports versus exports, a 35%
jump was observed in the trade surplus, totaling US$ 16.98 billion (5.4% of GDP). This large trade
surplus justified the Current Account’s having ended 2009 up US$11.3 billion (2.6% of GDP), higher than
that recorded in 2008. The Capital and Financial Account, however, showed a US$9.2 billion deficit,
explained by the prívate sector’s purchase of foreign assets, in particular during the first half of the year,
this, too, as a result of the international crisis.
Fiscal Policy. Within a recessionary context, fiscal policy sought to expand primary spending as a
strategy to sustain aggregate demand. Primary spending for the year showed a generalized and
considerable 30.2% increase, boosted by increases in salaries (37%), retirement/pension payments
(29%), transfers to provinces (73%) and real investment (46%).
The growth in public spending could not, however, be completely financed with current resources.
National tax revenues rose 13% above figures for 2008, showing a sharp deceleration with respect to the
two previous years, hand-in-hand with the economy’s slowdown. Social security revenues were shored
up by the flow of resources obtained from the nationalization of pension funds in late 2008: this
contributed approximately 1.2% of GDP, revenues which had before been destined to pension fund
administrators (AFJPs). Adjusting tax revenues by this factor, the nominal increase in said revenues was
only 9%.
The primary result at the national level added about 1.5% of GDP, but this was strongly influenced by
revenues of an extraordinary nature, such as revenue inflow from the AFJP take-over, Central Bank
earnings, the special allocation of IMF SDRs (Special Drawing Rights) and profits from the FGS (Fondo
de Garantía de Sustentabilidad, or Sustainability Guarantee Fund) of the pension system arising from
the State’s takeover of the AFJPs in late 2008. Without the above sources of revenue, there is, instead,
a primary deficit totaling 1.6% of GDP.
Monetary Policy. The monetary scenario in the first half of 2009 reflected the international crisis’s
impact and uncertainty regarding upcoming mid-term elections, slowly improving with the recovery
witnessed on the international scene and decreasing local uncertainty.
Seen in the exchange market was a considerable outflow of private capital in the first months of the year,
in part financed by the large trade surplus, despite international reserves’ having dropped off slightly. In
this context, the dollar rose 10% versus the peso, sitting at 3.77$/US$ near the end of the first semester.
The counterpart to this important outflow of capital in the first half of 2009 was the nominal stability seen
in the financial system’s private deposits. Despite this relatively stable behavior, time deposits were quite
volatile, with there being some months in which a contraction in time deposits was observed. Time
deposits in dollars, however, served as a hedge against the reigning uncertainty and consequently rose
18% in the first half of the year.
As external conditions improved, capital flight began to slow down, with the last quarter of the year
recording the first inflow of such capital since the first quarter of 2007. Also important in consolidating
this decrease in capital outflow was the Government’s announcement that it would go ahead with a new
debt swap proposal for public liabilities still in default. This improved the outlook for peso-denominated
assets and increased appetite for local risk. Less capital outflow, added to a continuing improvement in
the trade surplus, also allowed for a build up of international reserves, which totaled US$47.968 billion
(15% of GDP), nearly US$1.5 billion above late 2008’s levels. In this new context, the reference nominal
exchange rate showed greater stability, and after attaining its highest level, 3:85$/US$ in September, the
peso appreciated nominally, closing the year at 3.79$/US$.
In the second half of the year, as international financial conditions improved and there were higher
expectations at the local level, deposits in the financial system grew, with the increase in fixed term
deposits particularly standing out. During this unusually turbulent period, the financial system managed
to hold on to high liquidity levels, this being supported by Central Bank policies. As a result, interest rate
continued on the downward slope throughout the year, despite the volatility seen on the exchange
market.
Prices. A gradual deceleration in the rate of inflation was seen in the first months of 2009, mainly driven
by a slowdown in economic activity and a fall in international prices, among other factors. The anual
inflation rate as measured by the INDEC’s CPI showed a downwards trend, from 7.2% in December
2008 to 5.3% in June 2009. Nonetheless, during the second half of the year, and with improvements in
activity and recovery of some international prices becoming more evident, inflation once again began on
an upwards path. The year 2009 closed with a 7.7% increase in prices, slightly above that recorded in
December 2008, as per official government statistics. In any event, there are still differences in price
dynamics, according to prívate and official estimates. Furthermore, salary adjustments stayed above the
inflation rate, expected to hover around 20%.
Capital Markets. The pattern seen in the capital markets was similar to that observed in other economic
variables, with a setback noted in the first half of the year, followed by a recovery in the second half. In
general terms, this dynamic was also reflected in the international financial market. Bonds showed a
strong recovery towards the end of 2009, an improvement mainly seen from the month of May onwards.
The MERVAL index, in particular, saw an increase on the order of 110%, recording the highest nominal
value of the year (2320 points) on December 30th, although this figure was 1.3% below the record set in
October 2007.
2
Public bond prices also showed significant gains, with improvements in their yields as the international
context slowly began to normalize. Likewise, the prices of these assets bounced back following the
clearing up of certain doubts following June’s mid-term elections and in particular in October, once the
Government announced the reopening of the debt swap for holdouts who did not participate in the 2005
swap. The possibility of returning to the voluntary debt market, meanwhile, shored up local public bond
prices even more. Argentina’s country risk, therefore, as measured by JP Morgan’s EMBI+, closed out
2009 at 660 basis points (bps), having begun the year at 1681 bps.
2. Data on funds under management and portfolios
December 31st, 2008
3
December 31st, 2009
4
5
3. Key trends in flows and assets under management
Drop in AUMs due to elimination of Pension Funds was equaled by increasing inflows in money market
and short term debt Funds
4. Regulatory and self regulatory developments

No changes to be reported
5. Corporate governance - major developments

6. Fund governance
7. Product developments
None
8. Other major issues and developments

None
6
From January 1, 2010 to June 30, 2010
Introduction. The Argentine economy continued to recover from the recession that affected the country
in 2009, at a rate even better than expected some months ago. It was helped along by improved
industrial activity and, mainly, by increases in farm production, which favored recovery in the second half
of 2009. Other factors decisive in explaining this recovery are the improved international context, even
though today there is growing uncertainty as to future performance.
Economic Activity. Continuing with the improvement seen in the second half of 2009, Argentina’s
economy continued to expand in the first half of this year, with a 9.0% growth rate for this period. A large
part of this growth, however, is due solely to the return to levels existing prior to the 2008-2009 crisis.
Prroduction in the automotive industry, for example, for the first six months of 2010 was on the order of
that seen in the same period of 2008, although significant growth rates are still seen, of around 60%, due
to the important setback witnessed by this industry during the worst months of the international crisis.
Something similar was observed in farm production, although the harvest this year can be compared to
levels seen in 2007-2008, after the drought that greatly affected production in 2009.
On the demand side, exports showed the greatest activity, followed by private consumption, the latter of
these having demonstrated much vitality in the last few months. Investment, for its part, has also
continued on the upswing.
External Sector. External accounts continue to be relatively solid. The growth in exports is led by certain
key products, among which stand out sales abroad of soy and automobile exports. Exports rose 18% in
the first half of the year, boosted by a 14% improvement in quantities and a 4% one in prices. Imports,
for their part, were even more active, rising 43% for the period under study.
The strength of the trade surplus, which totaled $8.3 billion (2.7% of GDP) for the first half of the year,
has allowed for the financing of the outflow of capital that the economy continues to battle. However, the
dollarization of portfolios has been perceptibly lower as compared to a year ago, despite continuing
capital outflow. This slowdown in flight of capital, together with a still-considerable trade surplus, has
permitted the Central Bank to build up the level of international reserves, which at the end of June
totaled US$49.240 billion, or US$1.273 billion above December 2009’s levels.
Fiscal Policy. The fiscal situation of the National Government and of the provinces has continued its
expansive bias as in the last few years. Primary spending at the national level continues to grow at rates
on the order of 30% for the first half of the year, with overall increases in all areas of spending. Tax
revenues, however, have greatly accelerated their nominal growth, hand-in-hand with the local
economy’s recovery and the increases observed in prices and exports. Thus, between January and
Jume of this year, there was a 31.5% jump in tax revenues compared to that for the same period in
2009.
In any event, the Treasury has not yet acceded to voluntary financing on the debt market. In this sense,
towards the end of 2009 and the beginning of this year, the Government decided that international
reserves would be used for the payment of debt issued in foreign currency by means of several DNUs
(Decretos de Necesidad y Urgencia – Decrees of Necessity and Urgency). The Treasury continues to
satisfy its financiang needs by way of this instrument.
The National Treasury has thus been able to meet all its debt commitments, using the financing afforded
by different public sector agencies. Over the last year, the Central Bank has turned into one of the
Treasury’s main financing tools via the aforementioned possibility of directly employing international
reserves for the service on public debt, the use of Temporary Advances and transfers of earnings.
Monetary Policy. Growing public sector financing, together with the policy of accumulating international
reserves and the priority given to lowering local interest rates, has reined in the effectiveness of
monetary policy as an inflation-lowering tool. This scenario, which is sustainable because of the large
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trade surplus, and which allows for the financing of the large amounts of capital leaving the economy
without creating much disruption, is expected to continue in upcoming months, provided that the
purchase of dollars not increase or the trade balance fall substantially. Thus, the nominal exchange rate
was practically unchanged, with a nominal devaluation of just 3.1% in the first half of 2010. For their part,
private financial system deposits rose 9.3% in nominal terms, while interest rates continued on the
downward path seen since mid-2009.
Prices. Despite the stability in the nominal exchange rate - which in a highly-dollarized economy such as
Argentina’s helps to lessen inflationary pressures - these pressures have increased over the last year.
Since mid-2009, and hand-in-hand with the recovery in economic activity, inflation has been steadily
rising, from a 5.5% interannual rate in July 2009 to an 11.0% interannual rate in June of this year,
according to the INDEC’s CPI. The rise in inflation has been particularly generalized, despite the fact that
the prices of regulated goods and services have held steady. Price jumps are especially significant in
food, with an interannual increase of 15.7% in June. The food sector was also affected by some relative
price adjustments in one important component of Argentines’ food purchases: beef. The rise in this food
staple’s price also explains part of the acceleration seen in inflation in the last few months. Private
statistics, for their part, indicate a dynamic similar to that in official figures, however the price increases
they note are higher
Capital Markets. Within the framework of recovering international finances and beyond growing
uncertainties as to its future perspectives, the Government completed a new stage in national public debt
restructuring with holdout creditors. An acceptance rate of approximately 67% of eligible debt was
attained with this swap, and in all 92% of public liabilities were swapped. The recovery seen in the
international context and in local economic activity, together with positive effects of the debt swap,
helped to shore up local bond asset prices, with the MERVAL index having climbed 1.6% from
December 2009 to June of this year. Argentina’s country, however, as measured by means of national
public securities’ yields on the EMBI+, shot up 11.6% during the same period, as doubts remained as to
short- and medium-term fiscal dynamics.
Outlook. In synthesis, Argentina’s economy has shown a good recovery in 2010, exceeding its pre-crisis
level in the first half of this year and averaging an 8% growth rate in 2010. The economic expansion rate
is expected to drop off some in 2011, as those exceptional factors that drove the recovery as of mid-
2009 begin to fade; the international context, in addition, will be more uncertain than it was some months
ago. Growth in economic activity in 2011 is projected at about 4%, although with it being an election year
it is possible that tensions will arise.
December 31st, 2009
8
9
June 30th, 2010
10
11
Trend reported for previous report remains unchanged

Local capital market authority -CNV- issued (June 2010) a new regulation related to holding limits for
Funds portfolios

6. Fund governance
None

None
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INTERNATIONAL INVESTMENT FUNDS ASSOCIATION
XXIV ANNUAL MEETING
VIÑA DEL MAR, CHILE
AUSTRALIAN MEMBER REPORT
OCTOBER, 2010
1. Statistical Position
1.1. General Economic and Market Data
Table 1: Key Economic Indicators*
Population (millions) 22.5
Annual GDP ($ trillion) 1.223 (2009 - 10)

1.214 (US$)
Annual GDP growth rate 3.3%
Inflation rate (%) 3.1%
Unemployment rate (%) 5.1% (Oct 2010)
Stock market capitalisation ($ trillion at 7 Oct 2010) 1.65

1.64 (US$)
Official Interest Rate (14 Oct 2010) 4.5%
*All figures as at 30 June 2010 unless otherwise stated

All figures in A$ unless otherwise stated
US$ exchanges calculated at rate of A$1 = US$0.9930 as at 14 October 2010
1.2. Data on funds under management and portfolios

Table 2:
Net assets of the Australian Industry
Year Total assets under management Total assets under management

(as at end June) (US$ billions) (A$ billions)
2001 331 642

2002 372 661
2003 452 664
2004 558 782
2005 678 905
2006 774 1,063
2007 1,158 1,355
2008 1,254 1,301
2009 965 1,213
2010 1,139 1,351
Note: Exchange Rate taken at end of each financial year
2
Table 3: Australian Industry Size – 30 June 2010
Asset class A$ millions
Equity funds 495,370
Bond funds 87,477
Money market funds 278,064
Other 490,388
Total (excluding Fund of Funds) 1,351,249
Total in US$ 1,151,670 million

Note: Exchange Rate as used at time of reporting (30 June 2010) : A$1 = US$0.8523
2. Data relating to investors in Mutual Funds / Unit Trusts
2.1 Are any data available relating to the number of investors in the mutual fund
industry?
No such official data is available; however it is estimated at over 10 million. Significant exposure
is through superannuation (pension) investments.
2.2 If yes, please provide the data for the last two years and the source of this data.
N/A
2.3 Are there data available separately for retail investors and institutional investors?
No such data is available.
2.4 If yes, please provide data separately for retail and institutional investors for the
last two years.
N/A
2.5 Does the Association play any role in promoting retail investment in the mutual
fund industry? If so, please give details.
• FSC represents the industry to government, regulatory and media stakeholders to

ensure the industry is accurately portrayed and regulated in an appropriately balanced
fashion;
• Members' compliance with FSC’s Standards and Guidance Notes ensures the
promotion of industry best practice; and
• FSC is committed to helping all investors gain financial literacy and confidence. The
Consumer Information and Fact Sheet section of the FSC website provides information
on investment funds, fees, superannuation (pension), insurance and much more.
3
3. International Investment
3.1 Are funds of other countries sold?
Yes, Australians may invest directly into foreign funds. However, foreign funds cannot be sold
directly to Australian residents without first complying with Australian requirements. Australia also
has a network of Mutual Recognition Agreements, including with Hong Kong and New Zealand,
which allow foreign funds to be offered under their domestic licence.
3.2 Are your funds allowed to invest abroad?
Yes, there are no restrictions imposed.
4. Legal & Regulatory developments
Review into the governance, efficiency, structure and operation of the

superannuation system
The independent review was finalised in June 2010 and released by Government in July. It
contains over 170 recommendations covering a range of operational, regulatory and governance
matters as well as proposing a new simpler superannuation product for disengaged members.
The review does not alter the fundamentals of the superannuation system – the compulsory rate
of contributions or the concessional tax settings.
The final report can be viewed at: http://www.supersystemreview.gov.au/
Review of financial advice
The Government announced a package of reforms to financial advice in April 2010. The reforms
are designed to improve the quality of financial advice and encourage more Australians to seek
financial advice by addressing conflicts of interest created by certain remuneration practices.
Principally, the reforms seek to create a ‘product neutral’ adviser charging regime, by unbundling
advice and product payments and removing volume based payments between advisers,
licensees, platforms and product providers.
Key elements
• Statutory fiduciary duty, requiring advisers to place their clients’ interests before their
own, subject to a 'reasonable steps' qualification.
• Prospective ban on conflicted remuneration structures including commissions and volume
based payments between advisers, licensees, platforms and product providers.
• All advice fees to be agreed between the adviser and client and subject to annual
renewal.
• Percentage-based fees not permitted on geared products or investment amounts.
• Expansion of intra-fund advice regime to cover personal advice on new topics including:
transition to retirement; intra-pension advice; nomination of Beneficiaries; superannuation
and Centrelink payments; and retirement planning.
• Expert professional standards advisory panel to be established.
4
Financial Services Working Group
The Federal Government has established a combined government and industry Financial
Services Working Group with the primary focus of “Improving Product Disclosure” and finding a
way to shorten Product Disclosure Statements to improve consumer understanding and decision
making.
The Working Group has now finalised the implementation of a Shorter Product Disclosure
Statement (no longer than 8 pages) for margin lending, investment and superannuation products.
Product rationalisation
The FSC is continuing to work with Government on the development of a legislative proposal that
will enable the termination of old financial products that are often uneconomic, or are supported
on redundant technology platforms. The mechanism should enable investors in those old
products to be transferred without penalty (including taxation) to a more modern financial product
that offers similar benefits.
International Regulatory and Tax Developments
• Progressive reduction of withholding tax on certain distributions from Australian managed

funds, from 30% to a “flat and final” 7.5% from 1 July 2010.
• Foreign Investment Fund regime – 2009 Budget announced that the foreign investment fund
rules will be repealed, ensuring that Australian investors are no longer disadvantaged by
investing in offshore managed funds.
• Capital Account Taxation for Managed Investment Schemes – 2009 Budget announced that
managed funds will now be able to elect to be taxed on capital account, ensuring
international investors that they will not be taxed on capital gains arising out of most passive
investments made by Australian managed funds.
FSC self regulatory Industry Standards and Guidance Notes

FSC continues to build on its Industry Standards and Guidance Notes. These are designed to
assist members achieve industry best practice, and to enhance consumer confidence. By
adhering to the Standards, FSC’s full member companies have undertaken to develop processes
and products that provide investors with a quality assurance that goes beyond the base-line
legislative and regulatory framework. In recognition of this, FSC is committed to the promotion of
the Standards as a demonstration of integrity.
All FSC Standards and Guidance Notes can be found on the FSC website at: www.fsc.org.au.
5
Trustmark
From 2011, the FSC will introduce a Financial Services Trustmark to be used on member
websites and offer documents.
To qualify for the Trustmark, FSC Members are required to meet a rigorous process:
• Provide a Compliance Statement by 30 September each year setting out their

compliance with the Financial Services Council Standards;
• Adopt a resolution by their Board stating that they are satisfied that the company has
complied with the Financial Services Council’s Standards;
• The compliance statement is then signed by a Director or a representative of that

Board; and
• By using the Trustmark on a financial product or in relation to a financial service, the

company and its directors are making representations to their clients of compliance
with our standards. Directors are bound not to make false or misleading statements.
Their certification of the compliance statement is therefore bound by law.
In addition to these requirements, the Financial Services Council, through the Standards
Oversight and Disciplinary Committee, will have enhanced powers to monitor and enforce
compliance by members to our Standards. New powers will be provided to the Standards
Oversight and Disciplinary Committee to conduct risk and complaint based external audits of
members.
The Board has adopted this new power to ensure that use of the Trustmark is backed by external
audit where risk is identified or a complaint is made to the FSC about a member’s compliance.
Failure to comply with our Standards can and will result in members being disciplined, suspended
or expelled and the Trustmark being removed from their products.
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5. Distribution of Mutual Funds
5.1 Statistic Position
This data is not available.
6. Systems and Practices in Marketing of Funds
6.1 Do the Regulations specify any maximum rates for commission to

intermediaries/agents/brokers? If so, please indicate.
Commissions will be banned from 1 July 2012 under FSC Standard 19 and also under reforms to
be introduced by the Government. However, the level of fees paid to intermediaries, agents
and/or brokers are not capped.
6.2 What is the maximum load allowed under Regulation and for what purpose is it
used?
N/A
6.3 Are there any limits prescribed for sales and marketing expenses? If so, please
specify.
There is no limit for managed funds.
6.4 Is there a general or specific Regulation or Rule governing intermediaries selling

mutual fund schemes? If so, which agency administers the Regulations?
The selling of mutual fund schemes comes under the Corporations Act 2001, which is
administered by the Australian Securities and Investments Commission (ASIC). Financial
advisers are required to be licensed and are regulated under Part 7.6 of the Corporations Act
2001.
6.5 Is there a qualifying examination for intermediaries? If so, which agency conducts
the exam and what are the details such as passing marks, nature of conducting
the exam, etc.
Financial advisers are required to be licensed under the Corporations Act 2001 or be an
authorized representative of an Australian Financial Services Licensee. Section 912A of the
Corporations Act 2001 list the general obligations of a licensee. Paragraph 912A(1)(e) requires a
licensee to maintain competence to provide financial services for which it is licensed, and
paragraph 912A(1)(f) requires a licensee to ensure that its representatives are adequately trained
and are competent to provide those financial services.
The Australian Securities & Investments Commission (ASIC) in Policy Statement 146 (PS146),
sets out basic educational requirements that it considers are necessary to satisfy the competency
requirements of the law. ASIC PS 146 requires advisers in the financial services sector in
Australia to demonstrate the minimum educational levels of knowledge, skills and integrity that
are appropriate to the complexity of their activities and clients' needs.
ASIC maintains a register of approved courses for PS146 compliance. The register can be
accessed at http://www.asic.gov.au/etraining/etrain.nsf
7
6.6 Are there any regulations or industry rules relating to marketing practices? Can
mutual funds give gifts/prizes to distributors to encourage distribution of their
funds? Can such gifts/prizes be given directly to investors? Are these covered by
any regulation?
Mutual funds are permitted to provide ‘professional development’ services to distributors. These
might include attending a conference etc. FSC Standard 14, developed in concert with the
Financial Planners Association of Australia, provides a self-regulatory regime for the industry in
this regard to ensure standards of probity are maintained. The Standard sets an industry
benchmark on how some alternate forms of remuneration, paid by third parties, are managed and
disclosed by product providers and financial advisors. Any form of alternative remuneration that is
A$300 in value is considered “material” and is thereby subject to the Standard.
The Corporations Act 2001 requires licensed financial advisers to have in place adequate
arrangements for the management of conflicts of interest that may arise in relation to activities
undertaken in the provision of financial services (section 912A(1)(aa)). The Act also requires a
financial adviser to disclose any remuneration (including commission) or other benefits that they
may receive that could be reasonably expected to influence their advice (section 947B(1)(d) and
(e)).
Superannuation funds are prohibited from offering inducements to investors or employers.
7. Pricing Error
7.1 Are there specific rules for reporting pricing errors to the Regulator?
Both at general law and under statute, a superannuation fund trustee or the responsible entity of
a managed investment scheme is required to exercise their duties efficiently, honestly and fairly.
A material pricing error would be a breach of these requirements and breach reporting obligations
apply to both the Australian Securities and Investments Commission (ASIC) and the Australian
Prudential Regulatory Authority (APRA).
7.2 Are there specific rules for compensating investors, in the event of pricing error?
FSC produces Standards which deal with unit pricing requirements which all members must
comply with. ASIC and APRA have also issued a ‘Unit Pricing: Guide to Good Practice’, section
6.3 of which addresses this issue, which can be viewed at:
http://www.asic.gov.au/asic/pdflib.nsf/LookupByFileName/Unit_pricing_guide.pdf/$file/Unit_pricin
g_guide.pdf
7.3 Please describe how mutual fund management companies respond to pricing
errors, when they actually happen.
FSC has produced Standard No.17 to be used by members when correcting pricing errors.
This Standard applies to the treatment of errors in the pricing of interests in a Scheme. In forming
a policy for managing such errors, a Scheme Operator (the trustee or responsible entity) may
choose to use a level of materiality to assess whether an error requires compensation to be
considered for individuals in a Scheme, or the Scheme itself. For the purposes of this Standard,
the materiality used for such an assessment must be no more than 0.3% of the price of a unit.
Where the Scheme Operator has financially benefited from an error, the Scheme Operator must
pay compensation such that the Scheme Operator does not retain the financial benefit.
8
A Scheme Operator’s processes for the assessment and compensation of errors in the pricing of
scheme units must meet the following criteria:
• they must be documented and transparent;
• they must individually rectify past and present Investors that have been affected by a
materially incorrect unit price;
• they must consider the obligations of Scheme Operators under relevant legislation;
• they must not result in any residual benefit to Scheme Operators; and
• they must be regularly reviewed.
Errors must be reported to the appropriate level of management within the Scheme Operator. All
errors must be recorded and action taken to minimize the risk of recurrence.
When an error in unit pricing occurs and compensation is payable to past and/or present
Investors, the Scheme Operator must make reasonable efforts to communicate to affected
Investors and describe the nature of the error, how the error will be rectified, and how the affected
Investor will be compensated for the error.
Where a Compensatable Error has been identified, compensation to or from past and/or present
Investors or the Scheme will be required where the Investors or the Scheme have been
disadvantaged as a result of the Compensatable Error.
Where a Non-Compensatable Event has occurred, consideration must be given to whether any
further action is required to correct the pricing of the Scheme.
8. Risk Management Systems
8.1 Is there a risk management system prescribed by the Regulator? Yes/No
Yes
8.2 If yes, please give a brief description.
Managed investment schemes are required to have a Compliance Plan that sets out the
processes, systems and structures by which a Responsible Entity will continuously review how it
is complying with its obligations under the legislation and the scheme constitution (section 601EB
and Part 5C.4 of the Corporations Act 2001).
In certain circumstances, the Responsible Entity may also be required to establish a Compliance
Committee.
The following links has links to relevant regulatory documents/guidance:

http://www.asic.gov.au/asic/asic.nsf/byheadline/Managed+investment+schemes?openDocument#
2
8.3 If no, does the Industry Association formulate any systems? Yes/No
N/A
8.4 If yes, please give a brief description.
N/A
9
8.5 If no, what is the system followed in the industry?
Australia/New Zealand Standard 4360, a risk mitigation strategy produced by Standards

Australia, is a generic guide for risk management so that it applies to all forms of organizations.
While it is not compulsory, this would be the most common system followed by Australian firms as
a whole.
8.6 Does the industry follow any system of disaster recovery /business continuity
plan?
FSC’s Guidance Note 23 Major Disaster Plan establishes a mechanism to enable consistent
messages to be conveyed to member companies and consumers in times of crisis. The FSC
Major Disaster Plan complements, but does not replace, FSC members’ respective business
continuity planning.
8.7 If yes, please give brief details.
Main features and purpose of this Guidance Note are:

• to enhance industry preparedness and assist FSC members and industry to maintain
the confidence of consumers during the crucial early stages of a major
• disaster or an expected major disaster;
• to specify key actions for FSC, with the assistance of key decision makers in the FSC
community, in the event or the likelihood of a major disaster; and
• to complement and NOT to replace FSC members’ respective individual business
continuity plans.
9. Performance Evaluation and Role of Performance Evaluation Agencies
9.1 Are there regulatory provisions relating to making and/or publishing performance
evaluation? If so, give details.
There are no specific governmental guidelines, although any firm that produced data and / or
made claims that might be considered spurious would be at risk of prosecution by ASIC
(Australian Securities and Investments Commission).
FSC Standard No. 6 pertains to calculation of returns. The main features of this Standard are:
specification of the standards to be adopted by a member in the operation of its business;
guidance in the interpretation and application of those Standards; and a note to members of the
relevant regulation that is applicable in the operation of their businesses.
FSC Standard No. 10 “Presentation of Past Performance Information and Visual Promotions”
specifies standards to be adopted by FSC an member in the promotion of its Financial Products
and Services; as well as provide guidance in the interpretation and application of those
standards.
FSC’s Guidance Note No. 1.00 ‘Global Investment Performance Standards’ provides guidance on
how performance should be evaluated and reported. This Guidance Note is not compulsory within
the industry.
9.2 Are there third research parties or other agencies doing performance evaluation?
If so, give details.
10
A number of research houses conduct continual evaluation of the relative performance of firms in
the sector, some of which is publicly available.
9.3 Are there Regulatory provisions relating to benchmark indices against which the
performance of mutual fund is to be assessed?
No
9.4 Does the Industry Association undertake any performance evaluation activities?
No
10. Role of the Association
10.1 Does the association consist only of mutual funds or any other entities? If so,
please specify.
FSC represents the retail and wholesale funds management, superannuation (pension fund), life
insurance and financial advisory network industries.
10.2 Are there different categories of members? If so, please specify and indicate
their voting rights and other obligations/responsibilities/fee structure.
FSC has two categories of Members:

• ‘Full Members’, being organisations actively participating in the Industry (i.e. managing
collective investments) with full voting rights; and
• ‘Supporting Members’, being any organisations that provide professional services to the
Industry, or in other ways are related to these industries.
Supporting Members have the right to attend and be heard at any general meeting of the
Company, but are not:
• Entitled to vote at general meetings; nor
• Eligible for election to the Board.
The annual subscription payable by each class of members of the Company and the application
fee (if any) payable by members shall be such sum as the Board may from time to time prescribe.
10.3 Briefly describe the role and functions of the Association.
FSC is a national not-for-profit organisation which represents the retail and wholesale funds
management, superannuation and life insurance industries. FSC has over 135 members who are
responsible for investing over $A1 trillion on behalf of more than eleven million Australians.
FSC’s mission statement states the following objectives: "To play a significant role in the
development of the social, economic and regulatory framework in which our members operate,
thereby assisting members to serve their customers better."
10.4 What is the funding pattern, system of contribution?
FSC derives all of its revenue from membership fees. The formula for the calculation of each
member’s fees includes factors for the size of their funds under management and the industry
sector they are involved in. For further explanation, please see: http://www.FSC.org.au
11
10.5 Is there any financial support provided by the Regulator/Government? If yes,
please specify.
No financial support is provided by the Government or regulators.
10.6 Is the Association officially recognized as a self-regulatory organization (SRO) by

the Regulator? If yes, please specify the responsibilities, role and activities.
No. FSC Standards and Guidelines are not an approved code of conduct under section 1101A of
the Corporations Act 2001. However, FSC members are required, as a condition of FSC
membership, to comply with FSC Standards. The boards of FSC member companies must
complete and sign an annual statement of compliance with the Standards. Members may seek
exemption from the requirements of particular standards which are considered by the FSC
Standards Oversight and Disciplinary Committee (SODC).
The mandate of the SODC is to oversee member adherence with the principles set out in FSC
Standard No.1 – Code of Ethics. Its functions include to consider proposals for the development,
revision or amendment of FSC Standards; approve new Standards or revisions to existing
standards; hear and assess complaints against FSC member companies, expediting disciplinary
action is required; hear and assess issues of non-compliance with FSC Standards; and, oversee
the annual compliance process and provide a report for publication.
10.7 If not, what is your view on the association becoming an SRO? Is it necessary,
effective or not. Please give your observations/comments.
FSC has considered the approval of its Standards under the Corporations Act 2001 but
determined that such approval would not add to the effectiveness of FSC’s standards and may in
fact diminish the ability of FSC to respond to changes in the regulatory landscape by subjecting
any change to its Standards to ASIC approval as required under section 1101A(2) of the Act.
11. Taxation of Retail Investment Funds
11.1 How are retail investment funds taxed at fund level? Please describe how
dividend and interests received by funds are taxed? Please describe also how
capital gains realized by sale of portfolio securities are taxed?
In Australia, managed investments are flow through vehicles, so that fund managers pass onto
individual investors any dividends and tax credits accruing. Australia’s system of dividend
imputation allows Australian resident shareholders to receive a tax credit for any tax already paid
by the company. The shareholder’s income tax liability can then be reduced by the amount of the
tax credit. This also applies to managed funds. If a managed investment vehicle holds Australian
equities and receives franked dividends, the credit is passed onto the investor.
Where assets within the managed investment are sold by the manager, a capital gain is
distributed to investors following the sale of investments and investors must then pay capital
gains tax on their share of these amounts.
11.2 How are individual investors taxed on the distributions received from funds? How
are they taxed on the capital gains on sales of funds?
Distributions from funds form part of individuals’ assessable income and are thus taxed at the
investor’s normal marginal tax rates. Tax rates 2010–11:
12
Taxable income Tax on this income
0 – $6,000 Nil
$6,001 – $37,000 15c for each $1 over $6,000
$37,001 – $80,000 $4,650 plus 30c for each $1 over $37,000
$80,001 – $180,000 $17,550 plus 37c for each $1 over $80,000
$180,001 and over $54,550 plus 45c for each $1 over $180,000
Source: Australian Tax Office http://www.ato.gov.au
However, Australia’s system of dividend imputation, introduced in 1987 to eliminate the double
taxation of company profits, allows Australian resident shareholders to receive a tax credit for any
tax already paid by the company. The shareholder’s tax liability can then be reduced by the
amount of the tax credit. This also applies to managed funds. If a managed investment vehicle
holds Australian equities and receives franked dividends, the credit is passed onto the investor.
Similarly, with regards to capital gains tax, the net capital gain is taxed at the applicable marginal
tax rate. Where an asset has been held for more than one year, the capital gain receives
concessional treatment. For individuals and trusts this results in at least a 50% discount, for
superannuation (pension) funds the discount is 33.3% of the earnings tax payable.
11.3 Are there any tax incentives applied for financial products including investment
funds? If yes, please describe the tax incentives.
Contributions to pension (‘superannuation’) funds are taxed at a concessional rate of 15%

(compared to the marginal rates quoted above for individuals). Once the retirement age of 60 has
been reached, drawdown of the balance accumulated is tax free. Investment income is taxed at
15% while in the fund and capital gains earned by the fund are taxed at 10%.
11.4 Is there any tax incentive applied for investment funds only? If yes, please
describe the tax incentives.
There are no tax incentives specifically for investment funds.
13
Austria Country Report
1. Economic and Financial Background
Table 1: Key economic and financial indicators
2008 2009
Population (million) 8.342 8.375
GDP (EUR billion) 282.20 276.89
Real GDP growth (%) 1.8 -3.6
Inflation rate (%) 3.2 0.4
Unemployment rate (%) 5.8 7.2
Stock market capitalization (EUR billion) 53.09 77.98
Stock market capitalization (% of GDP) 18.81 28.16
Bond market capitalization (EUR billion) 267.39 315.15
Bond market capitalization (% of GDP) 94.75 113.82
Household gross savings ratio (%) 15.78 n/a (Oct.2010)
Household financial wealth (EUR billion) 415.90 439.94
Average per capita financial wealth (EUR) 49,856 52,530

3. Key Trends in flows and assets under management
As of June 30, 2010 the total volume of investment funds domiciled in Austria – representing all 25 Austrian
Investment Fund Management Companies (KAGs) – increased by around 10.95% during the last 12 months
to an amount of EUR 141.5 bn.
Assets under Management
Assets Assets Assets

30.06.2009 31.12.2009 30.06.2010
in mn € in % in mn € in % in mn € in %
Equity Funds 14,072.26 11.04 17,083.01 12.50 17,700.55 12.51
Bond Funds 60,138.39 47.16 63,124.93 46.19 65,871.91 46.56
Near Money Market Funds 5,981.15 4.69 5,940.78 4.35 5,421.84 3.83
Balanced Funds 44,990.57 35.28 48,292.76 35.34 50,415.98 35.64
Hedge Funds 1,246.17 0.98 1,150.07 0.83 1,066.94 0.75
Alternative Funds 1,082.46 0.85 1,068.67 0.78 991.27 0.70
Total 127,511.00 100.00 136,660.23 100.00 141,468.49 100.00
The figures above include so-called “Spezialfonds” (or special funds), which are investment funds mainly for
institutional investors as well as Funds of Funds.
Assets Assets Assets

“Spezialfonds” 30.06.2009 31.12.2009 30.06.2010
in mn € in mn € in mn €
Total 48,740.68 53,019.45 55,379.88
When i ncluding t he assets of r eal es tate f unds ( EUR 2. 19 bn), t he Austrian I nvestment F und I ndustry
reached a total volume of assets under management of EUR 143.66 bn.
Net Flows
Net Flows Net Flows Net Flows

07/08-06/09 01/09-12/09 01/10-06/10
in mn € in mn € in mn €
Equity Funds -496.62 1,508.85 4,28
Bond Funds -4,774.32 393.28 711,21
Near Money Market Funds -1,706.12 -1,881.66 -488.40
Balanced Funds -1,776.79 315.34 1,199.36
Hedge Funds -667.63 -522.57 -103.03
Alternative Funds -99.45 141.88 -38.40
Total -9,520.93 -44,87 1,285.02
4. Regulatory and self regulatory developments (including tax)
Amendment of the Austrian Investment Fund Act:
The l ast am endment of t he A ustrian I nvestment F und A ct ( InvFG) t ook pl ace i n 200 8. T his am endment
(BGBl 6 9/2008), t hat m ost not ably opened s o-called “ Spezialfonds” t o r etail investors w ith a m inimum
investment of Euro 250,000 is unfortunately the newest amendment of the InvFG because VÖIG efforts to
get a “ technical am endment” of t he I nvFG dr iven by the ex periences of t he financial turmoil has no t be en
realized yet du e t o p olitical r easons. I t i s unlikely t hat another s mall am endment of t he I nvFG will b e
implemented before the f orthcoming major due the n ational implementation of UCITS I V. In t erms of t he
UCITS I V implementation, Austria will m eet t he t imeframe and i t is l ikely t hat a c omplete o verhaul of t he
current InvFG will be made.
Pensions:
At the end of 20 09, major c hanges in connection with s tate-subsidised pension s avings pr oducts (pension
savings schemes) came into effect. VÖIG was very actively involved in the legislative process. The changes
essentially comprise of the following:
A general reduction of the minimum share quota for existing contracts (concluded prior to 1 January 2010)
from 40% to 30%. Since the introduction of state-subsidised pension savings schemes in 2003, the law had
stipulated that the investment must include at least 40% in shares first listed on a regulated market of a stock
exchange s ituated in a m ember s tate of t he E EA. Over a per iod of s everal years, t he proportion of t he
market capitalisation of shares first admitted in that state must not exceed 40% of the GDP of the respective
member state.
A c lear l egislative pr ovision t hat t he s hare qu ota of a pe nsion s avings s cheme has t o b e c alculated by
comparing the market price of the entire investment with the market price of the shares it contains. The share
quota has to be calculated on the basis of a yearly average.
The i ntroduction of a l ife c ycle m odel as of 1 J anuary 2 010 ( for c ontracts c oncluded af ter 3 1 D ecember
2009):
The new life c ycle model in the f ramework of state-subsidised pension savings s chemes provides that t he
minimum s hare quot a m ay be r educed i n ac cordance with t he increasing a ge of t he b eneficiary. F or
taxpayers w ho ha ve n ot r eached t he age of f orty-five b y 31 D ecember of t he previous year, t he m inimum
share quota is 30%; for those who have not reached the age of fifty-six by 31 December of the previous year,
the minimum share quota is 25%; and for those who have reached the age of fifty-five by 31 December of
the previous year, the minimum share quota is 15%.
The introduction of a guarantee-free version of the pension savings scheme, which was included in the draft
legislation s hortly before their adoption and which was strongly advocated by the Economic Chamber, the
banking sector and VÖIG, was ultimately not implemented.
Due t o t he legal r equirements of t he life c ycle m odel in c ombination with t he ex isting obligation of t he
provider to guarantee the contributions paid in, including premiums, the new life cycle model pension savings
contracts will, f or t he m ost par t, not be pr ovided b y t he investment f und i ndustry, but r ather by insurance
companies.
Tax rules:
No serious changes in the taxation of Austrian and foreign investment and real estate funds were made in
2009. H owever, on e s ignificant c hange oc curred in 2 009 as t he r esult of a decision b y t he C onstitutional
Court of A ustria o n 17 April 2 008 [ OGH 2008/15/0064]. I t ha d t o do with u nequal t ax t reatment of f oreign
portfolio d ividends as c ompared with dom estic por tfolio di vidends. Whereas A ustrian por tfolio d ividends
received by Austrian corporations have always been tax-exempt, foreign portfolio dividends were, until this
decision, liable t o t axation. T he C onstitutional C ourt of A ustria dec lared t hat t his v iolates t he pr inciple of
equality.
Within t he f ramework of t he Budget A ccompanying Act, t he F ederal Ministry of F inance i nstituted eq ual
treatment of domestic and foreign portfolios by providing that foreign dividends originating from corporations
based in EU member states and the EEA are tax-exempt for the receiving Austrian corporations as long as
the foreign corporation tax rate is not less than 15% (does not diverge from the Austrian corporation tax rate
by more than 10%). The tax exemption of dividends from companies in EEA states is additionally subject to
the r equirement that a c omprehensive a dministrative and enf orcement as sistance agr eement be i n p lace
between Austria and the state where the foreign company is based.
Portfolio d ividends dr awn from c ompanies bas ed i n third c ountries r emain liable t o t axation until further
notice, although objections are still being brought forward that this, too, represents unequal treatment.
For those cases in which, on the aforementioned grounds, no tax exemption can be assumed for dividends
from corporations based in the EU or the EEA, the Federal Ministry of Finance introduced tax liability with a
simultaneous s etoff o f foreign c orporate t ax as well as f oreign withholding t ax ( a s o-called “ saving
clause”/“Besteuerungsvorbehalt”). T his s aving c lause w as der ived di rectly f rom t he Constitutional C ourt
decision.
As things currently stand, the corporation tax rate in the EU countries Bulgaria and Cyprus is less than 15%.
There is currently no comprehensive administrative and enforcement assistance agreement in place with the
EEA s tates I celand an d Li echtenstein. F or por tfolio d ividends f rom corporations bas ed i n t hese c ountries,
therefore, the new saving clause applies. The implementation of the saving clause is proving to be difficult,
especially for the recipients of such dividends, due to the obligations to prove the accuracy of the tax returns.
Moreover, t he a dministration of t he c urrent c orporation t ax r ates r esults i n c onsiderable a dministrative
expenses.
The new provisions are also of significance for domestic and foreign investment funds, since a considerable
number of foreign portfolio dividends are drawn by retail clients through investment funds. Foreign portfolio
dividends drawn directly or through investment funds are, to a major extent, treated equally under Austrian
tax law.
5. Corporate governance – major developments

6. Fund governance
The s elf-regulatory f ramework o f t he A ustrian investment fund i ndustry, t he s o-called Quality Standards of
the Austrian Investment Fund Industry, last amended in 2008 had been unchanged in 2009 since they reflect
the interplay between the UCITS and the MiFID framework in an appropriate manner.
Moreover, the issuing of t he Quality Standards for the Austrian Real Estate Fund Industry proved t o b e
useful in particular during the financial turmoil and its aftermath.
Both, the amended Quality Standards of the Austrian Investment Fund Industry as well as the new Quality
Standards for the Austrian Real Estate Fund Industry can be found in German and English on the website of
VÖIG.
7. Product Development
The latest major product developments have to be seen in the light of the 2008 amendment of the
Investment Fund Act but of course the international product developments are also reflected in the Austrian
market.
8. Other Major Issues and Developments
Standards
The Austrian fund classification substantially amended in April 2008 has been fine-tuned on a regular basis,
e.g. in t he f ields of E TFs. T he c urrent d iscussions on m oney-market f unds i n E urope will l ikely lead t o
another amendment of the fund classification in the near future.
Regarding the F und Processing Passport, A ustria quickly implemented a sustainable and efficient solution
with OeKB (Oesterreichische Kontrollbank) which is linked to the recently introduced European EFAMA FPP
Portal.
Moreover, work is carried out in terms of reflecting some UCITS IV requirements in the existing FundsXML
scheme and to further increase the use of the Fondsdatenportal which so far increased the efficiency of the
industry in terms of processing a lot. It is also encouraging that major data vendors are already connected to
the Fondsdatenportal.
BRAZIL Member Report
1. Economic and Financial Figures
Key Indicator 2010 2009 2008 2007

Population (Milion) 193 192 190 189
GDP (US$ bilion) 2,012* 1,577 1,636 1,366
Real GDP growth 7.6%* -0,19% 5.14% 6.09%
Interest Rate 10.75% 8.75% 13.75% 11.25%
Inflation Rate 5.2%* 4.31% 5.90% 4.46%
Unemployment Rate 7.0%* 6.8% 6.8% 7.4%
Stock market capitalization (US$ bilion) 1,715** 1,740 1,088 1,764
Number of Companies 375** 385 392 404
353 319 270 235
Saving deposit (US$ bilion) ago/10
577 563 550 298
Time deposit (US$ bilion) ago/10
Trade Balance (US$ bilion) 14.5* 23.5 24,8 40
Total international reserves (US$ bilion) 273* 239.5 206.8 108.3
Exchange Rate (R$/US$) 1.750* 1.771 2.337 1.741
Net Public Sector Debt (as % of GDP) 40.3* 42.96 37.34 42.83
Notes: (*) ANBIMA's Macroeconomics Comission forecasts; Source: Central Bank, IBGE.
Source: (**) BMFBovespa - aug 2010
2. Assets Under Management

AUM (US$ Billion)
900
800
700
600
500
400
300
200
100
0
jun/03
jun/04
jun/05
jun/06
jun/07
jun/08
jun/09
jun/10
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
% Distribution per Type - Data on Annual AUM
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
jun/06
jun/07
jun/08
jun/09
jun/10
Fixed Income Money Market "Multimercado" Equity FIDC Private Equity Retirement Funds Others
Market Share of the Top 10 and Top 5 Portfolio Managers

90
80
70
60
50
40
30
20
10
0
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
jun/06
jun/07
jun/08
jun/09
jun/10
% AUM - Top 10 % AUM - Top 5
The funds industry reports total assets of US$ 841 billion – The total AUM in June 2010
amounted US$ 841 billion - a robust recovery compared to YE 2008. It is important to stress
that the reduction of total AUM during the second semester of 2008 also reflects the
devaluation of the Brazilian Real, depreciating by almost 50% during the crisis.
Brazilian Mutual Fund Industry – Brazilian Mutual Fund Industry is the 6th
largest industry around the world and in Brazilian currencies has almost
recovered the upside level of 2010.
4. Brazilian Capital Market Background
4.1 Self- Regulation, Best Practices and Supervision

New guidelines for Regulation and Best Practices Codes
Liquidity
In J uly,2010 t he A nbima R egulation and Best P ractice C ode f or I nvestment es tablished
guidelines regarding the minimum procedures t o control and m anage the investment F unds
portfolio liquidity to be followed by funds managers. The Li quidity Management policies and
procedures were registered at ANBIMA in order to attest the practices us ed by fund
managers regarding the liquidity of the portfolios of the Funds
Compliance
The code participant institutions should demonstrate the independence of Compliance area,
which i s r esponsible f or adopting preventive m easures ai med at complying with laws,
regulations an d c orporate principles ap ply, g uaranteeing t he bes t m arket pr actices and t he
care of principles established by the Code
CGA
Looking for technical capacity and compliance with standards of conduct in the performance
of management activities, the Funds Code requires the professional that perform the activity
of portfolio management having the power to make investment decision in name of the fund,
must be certified by Anbima’s Manager Certification
Advances
• “On site “supervision funds methodology - ANBIMA is c ontinuously upgrading i ts

regulation an d s upervision t o monitor t he m ovements of t he B razilian m arket. The w ork i s
being ex panded with t he development of ons ite s upervision of i nvestment f unds ar ea f or
participant i nstitutions, as al ready oc curs i n the c ustody and pr ivate s egment. U p t o
December this year, the Fund Supervision area will conducts a pilot project to implement this
new methodology. The goal is to achieve a set of principles and best practices for an effective
and ef ficient s upervision, b ased on r isk management and t he us e of m ethods f or pl anning,
analysis, documentation and f ormalization of pr ocedures A t t his f irst m oment, t he ac tivities
will focus on issues related to marking to market and fund prospectuses, as well as aspects of
organizational structure and control of institutions
• Indirect Supervision - The market supervision area also conducts monitoring based on
routine a nd thematic f ilters i n order t o verify the ad herence of t he p articipant i nstitutions t o
code rules. This supervision is undertaken by ANBIMA’s technical area.
• Methodology of fund supervision routine filters revised and improved as well as

the definition of new thematic filters. Following the improvement of the market, hence the
emergence of ne w as sets, per iodically c onducts ANBIMA s upervision i n l isted s ecurities i n
the por tfolios of i nvestment f unds. T he pur pose of t he r equest f or i nformation f or
administrators is t o as sess the rating of t he issuers o f these papers, the m arking to m arket
among other items, given the duty of the administrator arrange third-party resources that have
been entrusted
• Methodology of Application for Registration Fines Funds - The Investment Funds

Code established penalties application by the technical area for a noncompliance with its
standards, among them for the registration of new funds, sending and updating documents on
the funds, sending daily reports, among others. In order to reduce these fines, ANBIMA in
2010 is presenting to the participant institutions a report with a summary of its main
deficiencies that cause the penalty for taking corrective actions.
• Self-regulation statistics – The following statistical chart tabulates the penalties imposed
under i nvestment f unds s elf-regulation c riteria i n t he period – broken do wn b y t he pr inciple
topics covered by the Funds Self-Regulation Code;
Investigations Perform (Set/2010)

2010
Additional Explanations 71
Procedure for Verification of
5
Irregularities
Openning Processes 2
Penalties
2010
Orientation Letters 43
Fines 173
Recomendation Letter 2
Commitment Term 2
4.2 Private Banking
• Updating the Code - The Code of P rivate Banking, established in 2006,

has been changed, trying to adapt to the development and t he sophistication
of t his m arket. The c hanges ar e t he i nclusion o f t he requirement t hat t he
institutions m ust h ave 50% o f t heir P rivate Bankers w ith C FP ® certification,
the obl igation t o ha ve an ec onomist, a n i nvestment s trategist and a
compliance area dedicated only to the Private Banking.
• Private Banking Statistics - The ANBIMA i s dev eloping t he Private

Banking data t hat will be di sseminated on a c onsolidated bas is a nd ai ms to
present a overview of the Private Banking Industry in Brazil.
4.3 Qualified Services
• Review of Instruction 89 which regulates the activity of custody in

Brazil
During 2010 A NBIMA w orked on a proposal t o up date t he r egulation 89,
which talks about the activity of custody and other matters in Brazil that was
published i n 19 88. The pr oposal ai ms t o s plit t he r egulation into t hree
activities: Cu stody, B ookkeeping and c entral depos itory. T he do cument i s
under review by the CVM - Securities and Exchange Commission of Brazil.
• Update Methodology for Ranking of custody
The methodology of the ranking of qualified services is being updated to reflect the
current market practices. The amendments include changes in the methodology of
the rankings of custody and assets controlling.
4.4 Licensing
• CPA 10 (retail) and CPA 20 (qualified investors) licensing – From June

2009 t o J une 2 010, 42,695 c andidates s at t he C PA 10 ex aminations a nd
12,294, the CPA 20. Out of this total, 22,587 professionals obtained their CPA
10 a nd 7, 029, t he C PA 2 0. To d ate, 17 9,448 pr ofessionals h ave be en
awarded their certification in the CPA-10 and CPA-20 examinations, 29,616 of
them in the past 12 months.
• Certification of portfolio managers – ANBIMA hel d t he

first Certification for M anagers E xamination (CGA) di rected t o pr ofessionals
that per form r emunerated management o f t hird par ty r esources w ith pow ers
to t ake i nvestment d ecisions. To J une 2010, 8 0 pr ofessionals have bee n
awarded their certification CGA.
• Certification for investment specialists’ examination: In the s econd

half o f 2 009, t he first C ertification for I nvestment S pecialists Examination
(CEA) was held focused on professionals providing investment advice at bank
branches or through service platforms for customers, potential investors and
managers. T o J une 2010 , 69 professionals hav e be en aw arded t heir
certification CEA.
• ISO 9001: ANBIMA’s c ertification area beg ins i mplemented the I SO9001
certification w hich i s t he bas ic norm for c ontinual i mprovement a nd
standardization o f c ustomer pr ocesses and focus. The obj ective i s t o obt ain
the I SO 90 01 C ertification S eal an d t o g uarantee g reater q uality in se rvices
rendered by the Association and consequently to increase the satisfaction of
ANBIMA’s members.
• CFP Licensing – As a member of FPSB – Financial Planning Standards

Board, ANBIMA has been r esponsible for t he C FP – Certified F inancial
Planner certification in Brazil since 2006. It has organized examinations twice
a year and more than 1000 professionals have sat the last five examinations.
To June 2010, 427 certified professionals in Brazil.
5. Education
• ANBIMA Award: ANBIMA sponsors the annual ANBIMA Capital

Markets and Fixed Income Award the focus of both is encouraging the
production of studies and projects which contribute to the dissemination of
information on the sector. The ANBIMA Capital Markets prize is now in its
sixth edition, and ANBIMA Fixed Income prize in its fifth edition.
The best master’s and doctorate´s theses of ANBIMA Capital Markets prize
will be awarded with scholarships of R$15,000.00 and R$30,000.00,
respectively. Also, ANBIMA is published books with some of the prize-winning
theses from previous years and will continue to do it so.
The ANBIMA Fixed Income prize will award the winning papers with R$
12,000.00, R$ 8,000.00 and R$ 5,000.00 for first, second and third place,
respectively.
• The “How to Invest” website: The new version of the “How to Invest”
website – www.comoinvestir.com.br – with more than 40.000 users offers new
sections such as exclusive content for the female audience, challenges,
surveys and will have the fixed income section soon.
• Choose your Fund – This is a tool to locate and compare funds that have
today a total of 3,259 funds registered in the Brazilian market. This can be
freely accessed through the “How to Invest” website.
6. Industry Events
• 3rd ANBIMA Private Banking International Seminar - On N ovember

18th, 20 10, ANBIMA w ill be hol ding t he 3r d A NBIMA P rivate B anking
International S eminar i n S ão P aulo, B razil. This i s a bi annual event and t he
leading forum for discussing the transformation of the Private Banking market
in B razil, as well as e xamining pr ospects for t he i ndustry and t he c ountry’s
capital markets as a whole. The theme of the event will be t he opportunities
and the challenges of the Private Banking Market.
7. Statistical Summary
Table 1 – AUM
Period R$ Billion US$ Billion Number of Funds Exchange rate
2000 297 152 2,295 1.955

2001 344 148 2,524 2.320
2002 356 100 2,927 3.533
jun/03 419 146 2,773 2.872
2003 516 178 2,925 2.889
jun/04 566 182 2,906 3.108
2004 613 231 3,001 2.654
jun/05 660 281 2,823 2.350
2005 739 316 2,885 2.341
jun/06 853 394 2,906 2.164
2006 940 440 3,337 2.138
jun/07 1,072 557 3,348 1.926
2007 1,160 655 3,77 1.771
jun/08 1,219 766 4,037 1.592
2008 1,135 486 3,444 2.337
jun/09 1,244 638 3,424 1.952
2009 1,419 815 3,954 1.741
jun/10 1,515 841 4,369 1.802
Source: ANBIMA
Table 2 – Data on Annual AUM - % Distribution per Type
Period Fixed Income Money Market "Multimercado" Equity FIDC Private Equity Retirement Funds Others
2000 41 34 15 8 0 0 1 1
2001 37 29 22 7 0 0 1 2
2002 33 25 26 9 0 0 3 5
2003 33 22 28 8 0 0 4 5
2004 30 22 29 8 1 0 6 5
2005 40 23 17 8 2 0 7 3
jun/06 39 22 18 8 2 0 7 3
2006 34 20 23 10 2 0 8 3
jun/07 34 18 23 12 2 0 8 3
2007 30 17 24 16 2 0 8 3
jun/08 29 18 22 14 4 1 8 3
2008 29 19 23 10 4 2 10 2
jun/09 28 19 22 11 5 2 10 2
2009 26 17 24 12 4 3 10 4
jun/10 28 17 23 11 4 3 11 4
Source: ANBIMA
Table 3 – Portfolio Composition as % of the AUM
State and
Federal Public Other Fixed
Period Repo Municipal Public CD´s Debentures Equity Other Equity
Bonds Income
Bonds
2000 - 76.14 0.08 4.52 5.13 2.79 11.11 0.23
2001 - 75.16 0.04 7.65 4.74 2.52 9.52 0.37
2002 - 73.43 0.03 5.93 5.08 4.37 10.88 0.27
2003 - 75.86 0.03 6.77 3.89 2.89 10.33 0.24
2004 13.23 58.99 0.05 8.44 3.08 4.65 11.17 0.38
2005 9.43 60.53 0.04 10.66 3.93 3.98 11.16 0.24
jun/06 10.86 57.05 0.04 11.84 4.05 3.17 12.65 0.25
2006 11.35 54.8 0.05 10.18 4.62 3.38 15.25 0.28
jun/07 15.05 50.2 0.00 9.24 4.23 3.63 17.32 0.22
2007 13.6 47.04 0.00 8.96 4.17 4.28 21.71 0.24
jun/08 15.47 42.82 0.00 11.53 3.74 4.95 21.21 0.27
2008 19.1 41.5 0.00 13.7 4.4 6.4 14.4 0.5
jun/09 19.5 40.7 0.00 12.8 4.2 7.1 15.3 0.4
2009 19.92 40.66 0.02 11.38 3.71 6.05 17.65 0.3
jun/10 22.27 40.45 0.02 10.53 4.46 6.49 15.49 0.2
Source: ANBIMA
Table 4 – Portfolio Managers and Market Share
Number of Portfolio
Period Growth Rate % AUM - Top 10 % AUM - Top 5
Managers
1993 175 - 58.1 39.8
1994 188 7.4 57.2 38.9
1995 172 (8.5) 66.1 46.1
1996 171 (0.6) 66.6 47.8
1997 158 (7.6) 64.3 45.3
1998 149 (5.7) 65.7 48.8
1999 133 (10.7) 67.0 47.2
2000 131 (1.5) 69,1 49,4
2001 120 (8.4) 72,9 51,4
2002 110 (8.3) 74,2 53,3
June 2003 110 0.0 76.3 55.6
2003 111 0.9 75,8 55,7
June 2004 110 (9.0) 78.2 56.7
2004 102 (8.1) 77,7 56,6
June 2005 97 (4.9) 79.3 85.4
2005 92 (9.8) 77,6 57,4
June 2006 88 (4.4) 76,3 56,7
2006 87 (1.1) 77,6 56,9
June 2007 87 0.0 76,6 54,7
2007 87 0.0 75,8 53.04
June 2008 87 0.0 76,2 56,7
2008 85 (2.3) 79,6 58,2
June 2009 81 (4.7) 83,2 63,0
2009 87 7,4 83,5 61,4
June 2010 82 -5,7 83,8 61,1
Source: ANBIMA
BRAZIL Member Report
1. Economic and Financial Figures
Key Indicator 2010 2009 2008 2007

Population (Milion) 193 192 190 189
GDP (US$ bilion) 3,563* 1,577 1,636 1,366
Real GDP growth 7.6%* -0,19% 5.14% 6.09%
Interest Rate 10.75% 8.75% 13.75% 11.25%
Inflation Rate 5.2%* 4.31% 5.90% 4.46%
Unemployment Rate 7.0%* 6.8% 6.8% 7.4%
Stock market capitalization (US$ bilion) 1,715** 1,740 1,088 1,764
Number of Companies 375** 385 392 404
353 319 270 235
Saving deposit (US$ bilion) ago/10
577 563 550 298
Time deposit (US$ bilion) ago/10
Trade Balance (US$ bilion) 14.5* 23.5 24,8 40
Total international reserves (US$ bilion) 273* 239.5 206.8 108.3
Exchange Rate (R$/US$) 1.750* 1.771 2.337 1.741
Net Public Sector Debt (as % of GDP) 40.3* 42.96 37.34 42.83
Notes: (*) ANBIMA's Macroeconomics Comission forecasts; Source: Central Bank, IBGE.
Source: (**) BMFBovespa - aug 2010
2. Assets Under Management

AUM (US$ Billion)
900
800
700
600
500
400
300
200
100
0
jun/03
jun/04
jun/05
jun/06
jun/07
jun/08
jun/09
jun/10
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
% Distribution per Type - Data on Annual AUM
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
jun/06
jun/07
jun/08
jun/09
jun/10
Fixed Income Money Market "Multimercado" Equity FIDC Private Equity Retirement Funds Others
Market Share of the Top 10 and Top 5 Portfolio Managers

90
80
70
60
50
40
30
20
10
0
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
jun/06
jun/07
jun/08
jun/09
jun/10
% AUM - Top 10 % AUM - Top 5
The funds industry reports total assets of US$ 841 billion – The total AUM in June 2010
amounted US$ 841 billion - a robust recovery compared to YE 2008. It is important to stress
that the reduction of total AUM during the second semester of 2008 also reflects the
devaluation of the Brazilian Real, depreciating by almost 50% during the crisis.
Brazilian Mutual Fund Industry – Brazilian Mutual Fund Industry is the 6th
largest industry around the world and in Brazilian currencies has almost
recovered the upside level of 2010.
4. Brazilian Capital Market Background
4.1 Self- Regulation, Best Practices and Supervision

New guidelines for Regulation and Best Practices Codes
Liquidity
In J uly,2010 t he A nbima R egulation and Best P ractice C ode f or I nvestment es tablished
guidelines regarding the minimum procedures t o control and m anage the investment F unds
portfolio liquidity to be followed by funds managers. The Li quidity Management policies and
procedures were registered at ANBIMA in order to attest the practices us ed by fund
managers regarding the liquidity of the portfolios of the Funds
Compliance
The code participant institutions should demonstrate the independence of Compliance area,
which i s r esponsible f or adopting preventive m easures ai med at complying with laws,
regulations an d c orporate principles ap ply, g uaranteeing t he bes t m arket pr actices and t he
care of principles established by the Code
CGA
Looking for technical capacity and compliance with standards of conduct in the performance
of management activities, the Funds Code requires the professional that perform the activity
of portfolio management having the power to make investment decision in name of the fund,
must be certified by Anbima’s Manager Certification
Advances
• “On site “supervision funds methodology - ANBIMA is c ontinuously upgrading i ts

regulation an d s upervision t o monitor t he m ovements of t he B razilian m arket. The w ork i s
being ex panded with t he development of ons ite s upervision of i nvestment f unds ar ea f or
participant i nstitutions, as al ready oc curs i n the c ustody and pr ivate s egment. U p t o
December this year, the Fund Supervision area will conducts a pilot project to implement this
new methodology. The goal is to achieve a set of principles and best practices for an effective
and ef ficient s upervision, b ased on r isk management and t he us e of m ethods f or pl anning,
analysis, documentation and f ormalization of pr ocedures A t t his f irst m oment, t he ac tivities
will focus on issues related to marking to market and fund prospectuses, as well as aspects of
organizational structure and control of institutions
• Indirect Supervision - The market supervision area also conducts monitoring based on
routine a nd thematic f ilters i n order t o verify the ad herence of t he p articipant i nstitutions t o
code rules. This supervision is undertaken by ANBIMA’s technical area.
• Methodology of fund supervision routine filters revised and improved as well as

the definition of new thematic filters. Following the improvement of the market, hence the
emergence of ne w as sets, per iodically c onducts ANBIMA s upervision i n l isted s ecurities i n
the por tfolios of i nvestment f unds. T he pur pose of t he r equest f or i nformation f or
administrators is t o as sess the rating of t he issuers o f these papers, the m arking to m arket
among other items, given the duty of the administrator arrange third-party resources that have
been entrusted
• Methodology of Application for Registration Fines Funds - The Investment Funds

Code established penalties application by the technical area for a noncompliance with its
standards, among them for the registration of new funds, sending and updating documents on
the funds, sending daily reports, among others. In order to reduce these fines, ANBIMA in
2010 is presenting to the participant institutions a report with a summary of its main
deficiencies that cause the penalty for taking corrective actions.
• Self-regulation statistics – The following statistical chart tabulates the penalties imposed
under i nvestment f unds s elf-regulation c riteria i n t he period – broken do wn b y t he pr inciple
topics covered by the Funds Self-Regulation Code;
Investigations Perform (Set/2010)

2010
Additional Explanations 71
Procedure for Verification of
5
Irregularities
Openning Processes 2
Penalties
2010
Orientation Letters 43
Fines 173
Recomendation Letter 2
Commitment Term 2
4.2 Private Banking
• Updating the Code - The Code of P rivate Banking, established in 2006,

has been changed, trying to adapt to the development and t he sophistication
of t his m arket. The c hanges ar e t he i nclusion o f t he requirement t hat t he
institutions m ust h ave 50% o f t heir P rivate Bankers w ith C FP ® certification,
the obl igation t o ha ve an ec onomist, a n i nvestment s trategist and a
compliance area dedicated only to the Private Banking.
• Private Banking Statistics - The ANBIMA i s dev eloping t he Private

Banking data t hat will be di sseminated on a c onsolidated bas is a nd ai ms to
present a overview of the Private Banking Industry in Brazil.
4.3 Qualified Services
• Review of Instruction 89 which regulates the activity of custody in

Brazil
During 2010 A NBIMA w orked on a proposal t o up date t he r egulation 89,
which talks about the activity of custody and other matters in Brazil that was
published i n 19 88. The pr oposal ai ms t o s plit t he r egulation into t hree
activities: Cu stody, B ookkeeping and c entral depos itory. T he do cument i s
under review by the CVM - Securities and Exchange Commission of Brazil.
• Update Methodology for Ranking of custody
The methodology of the ranking of qualified services is being updated to reflect the
current market practices. The amendments include changes in the methodology of
the rankings of custody and assets controlling.
4.4 Licensing
• CPA 10 (retail) and CPA 20 (qualified investors) licensing – From June

2009 t o J une 2 010, 42,695 c andidates s at t he C PA 10 ex aminations a nd
12,294, the CPA 20. Out of this total, 22,587 professionals obtained their CPA
10 a nd 7, 029, t he C PA 2 0. To d ate, 17 9,448 pr ofessionals h ave be en
awarded their certification in the CPA-10 and CPA-20 examinations, 29,616 of
them in the past 12 months.
• Certification of portfolio managers – ANBIMA hel d t he

first Certification for M anagers E xamination (CGA) di rected t o pr ofessionals
that per form r emunerated management o f t hird par ty r esources w ith pow ers
to t ake i nvestment d ecisions. To J une 2010, 8 0 pr ofessionals have bee n
awarded their certification CGA.
• Certification for investment specialists’ examination: In the s econd

half o f 2 009, t he first C ertification for I nvestment S pecialists Examination
(CEA) was held focused on professionals providing investment advice at bank
branches or through service platforms for customers, potential investors and
managers. T o J une 2010 , 69 professionals hav e be en aw arded t heir
certification CEA.
• ISO 9001: ANBIMA’s c ertification area beg ins i mplemented the I SO9001
certification w hich i s t he bas ic norm for c ontinual i mprovement a nd
standardization o f c ustomer pr ocesses and focus. The obj ective i s t o obt ain
the I SO 90 01 C ertification S eal an d t o g uarantee g reater q uality in se rvices
rendered by the Association and consequently to increase the satisfaction of
ANBIMA’s members.
• CFP Licensing – As a member of FPSB – Financial Planning Standards

Board, ANBIMA has been r esponsible for t he C FP – Certified F inancial
Planner certification in Brazil since 2006. It has organized examinations twice
a year and more than 1000 professionals have sat the last five examinations.
To June 2010, 427 certified professionals in Brazil.
5. Education
• ANBIMA Award: ANBIMA sponsors the annual ANBIMA Capital

Markets and Fixed Income Award the focus of both is encouraging the
production of studies and projects which contribute to the dissemination of
information on the sector. The ANBIMA Capital Markets prize is now in its
sixth edition, and ANBIMA Fixed Income prize in its fifth edition.
The best master’s and doctorate´s theses of ANBIMA Capital Markets prize
will be awarded with scholarships of R$15,000.00 and R$30,000.00,
respectively. Also, ANBIMA is published books with some of the prize-winning
theses from previous years and will continue to do it so.
The ANBIMA Fixed Income prize will award the winning papers with R$
12,000.00, R$ 8,000.00 and R$ 5,000.00 for first, second and third place,
respectively.
• The “How to Invest” website: The new version of the “How to Invest”
website – www.comoinvestir.com.br – with more than 40.000 users offers new
sections such as exclusive content for the female audience, challenges,
surveys and will have the fixed income section soon.
• Choose your Fund – This is a tool to locate and compare funds that have
today a total of 3,259 funds registered in the Brazilian market. This can be
freely accessed through the “How to Invest” website.
6. Industry Events
• 3rd ANBIMA Private Banking International Seminar - On N ovember

18th, 20 10, ANBIMA w ill be hol ding t he 3r d A NBIMA P rivate B anking
International S eminar i n S ão P aulo, B razil. This i s a bi annual event and t he
leading forum for discussing the transformation of the Private Banking market
in B razil, as well as e xamining pr ospects for t he i ndustry and t he c ountry’s
capital markets as a whole. The theme of the event will be t he opportunities
and the challenges of the Private Banking Market.
7. Statistical Summary
Table 1 – AUM
Period R$ Billion US$ Billion Number of Funds Exchange rate
2000 297 152 2,295 1.955

2001 344 148 2,524 2.320
2002 356 100 2,927 3.533
jun/03 419 146 2,773 2.872
2003 516 178 2,925 2.889
jun/04 566 182 2,906 3.108
2004 613 231 3,001 2.654
jun/05 660 281 2,823 2.350
2005 739 316 2,885 2.341
jun/06 853 394 2,906 2.164
2006 940 440 3,337 2.138
jun/07 1,072 557 3,348 1.926
2007 1,160 655 3,77 1.771
jun/08 1,219 766 4,037 1.592
2008 1,135 486 3,444 2.337
jun/09 1,244 638 3,424 1.952
2009 1,419 815 3,954 1.741
jun/10 1,515 841 4,369 1.802
Source: ANBIMA
Table 2 – Data on Annual AUM - % Distribution per Type
Period Fixed Income Money Market "Multimercado" Equity FIDC Private Equity Retirement Funds Others
2000 41 34 15 8 0 0 1 1
2001 37 29 22 7 0 0 1 2
2002 33 25 26 9 0 0 3 5
2003 33 22 28 8 0 0 4 5
2004 30 22 29 8 1 0 6 5
2005 40 23 17 8 2 0 7 3
jun/06 39 22 18 8 2 0 7 3
2006 34 20 23 10 2 0 8 3
jun/07 34 18 23 12 2 0 8 3
2007 30 17 24 16 2 0 8 3
jun/08 29 18 22 14 4 1 8 3
2008 29 19 23 10 4 2 10 2
jun/09 28 19 22 11 5 2 10 2
2009 26 17 24 12 4 3 10 4
jun/10 28 17 23 11 4 3 11 4
Source: ANBIMA
Table 3 – Portfolio Composition as % of the AUM
State and
Federal Public Other Fixed
Period Repo Municipal Public CD´s Debentures Equity Other Equity
Bonds Income
Bonds
2000 - 76.14 0.08 4.52 5.13 2.79 11.11 0.23
2001 - 75.16 0.04 7.65 4.74 2.52 9.52 0.37
2002 - 73.43 0.03 5.93 5.08 4.37 10.88 0.27
2003 - 75.86 0.03 6.77 3.89 2.89 10.33 0.24
2004 13.23 58.99 0.05 8.44 3.08 4.65 11.17 0.38
2005 9.43 60.53 0.04 10.66 3.93 3.98 11.16 0.24
jun/06 10.86 57.05 0.04 11.84 4.05 3.17 12.65 0.25
2006 11.35 54.8 0.05 10.18 4.62 3.38 15.25 0.28
jun/07 15.05 50.2 0.00 9.24 4.23 3.63 17.32 0.22
2007 13.6 47.04 0.00 8.96 4.17 4.28 21.71 0.24
jun/08 15.47 42.82 0.00 11.53 3.74 4.95 21.21 0.27
2008 19.1 41.5 0.00 13.7 4.4 6.4 14.4 0.5
jun/09 19.5 40.7 0.00 12.8 4.2 7.1 15.3 0.4
2009 19.92 40.66 0.02 11.38 3.71 6.05 17.65 0.3
jun/10 22.27 40.45 0.02 10.53 4.46 6.49 15.49 0.2
Source: ANBIMA
Table 4 – Portfolio Managers and Market Share
Number of Portfolio
Period Growth Rate % AUM - Top 10 % AUM - Top 5
Managers
1993 175 - 58.1 39.8
1994 188 7.4 57.2 38.9
1995 172 (8.5) 66.1 46.1
1996 171 (0.6) 66.6 47.8
1997 158 (7.6) 64.3 45.3
1998 149 (5.7) 65.7 48.8
1999 133 (10.7) 67.0 47.2
2000 131 (1.5) 69,1 49,4
2001 120 (8.4) 72,9 51,4
2002 110 (8.3) 74,2 53,3
June 2003 110 0.0 76.3 55.6
2003 111 0.9 75,8 55,7
June 2004 110 (9.0) 78.2 56.7
2004 102 (8.1) 77,7 56,6
June 2005 97 (4.9) 79.3 85.4
2005 92 (9.8) 77,6 57,4
June 2006 88 (4.4) 76,3 56,7
2006 87 (1.1) 77,6 56,9
June 2007 87 0.0 76,6 54,7
2007 87 0.0 75,8 53.04
June 2008 87 0.0 76,2 56,7
2008 85 (2.3) 79,6 58,2
June 2009 81 (4.7) 83,2 63,0
2009 87 7,4 83,5 61,4
June 2010 82 -5,7 83,8 61,1
Source: ANBIMA
CANADA Member Report
Economic and Financial Background
Key Indicators (%)
2009 2010
Q1 Q2 Q3 Q4 Q1 Q2
Annual change Real GDP 1 -2.5 -3.2 -3.1 -1.1 2.2 3.4
2
Output Gap -2.2 -3.3 -3.6 -2.8 -1.8 -1.8
Unemployment rate2 7.8 8.4 8.5 8.4 8.2 8.0
Canadian dollar effective exchange rate (CERI)2 96.7 107.0 110.7 113.4 117.8 117.3
Annual change CPI1 1.2 -0.3 -0.9 1.3 1.4 1.0
Quarterly change Exports 1 -15.7 -6.9 1.8 5.0 4.4 1.2
Target Overnight Rate2 0.50 0.25 0.25 0.25 0.25 0.50
Personal Savings Rate1 5.2 5.1 4.4 3.5 3.0 5.9
S&P/TSX Composite TR3 -2.0 20.0 10.6 3.9 3.1 -5.5
Merrill Lynch Canada Broad Market TR (%)3 1.3 1.2 2.8 -0.8 1.3 3.0
1. Statistics Canada
2. Bank of Canada
3. Morningstar PALTrak
The outlook for Canada was much better at the end of 2009 than it was at the beginning of
2009. In the last two quarters of 2008, equity markets plummeted as the extent of the financial
crisis and the magnitude of deleveraging required to correct course become more widely
understood.
Equity market declines continued into 2010, with Canadian equity markets (like most equity
markets abroad) bottoming out towards the end of the first quarter. Unknown at the time, the
start of the second quarter of 2010 marked the beginning of the market recovery. The S&P/TSX
Composite increased by 20% over the second quarter and an additional 10.6% over the third
quarter of 2009. By the end of 2009, the S&P/TSX Composite had increased by over 35% for the
year, putting a significant dent in, though not fully accounting for, the previous year’s decline.
The real economy took longer to turnaround and continued to contract throughout 2009
before seeing modest growth in the first and second quarters of 2010. Real GDP declined on a
Page | 1
year-over-year basis over all four quarters of 2009 before increasing by 2.2% and 3.4%
respectively, in the first and second quarters of 2010.
Exports in particular, were adversely and expectedly, affected by the global drop in consumer
demand, falling by 15.7% in the first quarter and 6.9% in the second quarter of 2009. As the
global outlook improved towards the end of 2009, exports began to increase modestly.
Canada’s relatively strong position, from the government fiscal perspective, from the consumer
demand perspective and in terms of the resiliency of its financial framework, implied a
depreciation in foreign currencies was in order which has impacted the strength of the recovery
in export demand.
The Canadian dollar effective exchange rate (CERI), which measures the strength of the
Canadian dollar against a weighted average of the currencies of Canada’s biggest trading
partners, increased substantially throughout 2009, pushing through parity in the second
quarter of 2009 and closing in on 120 by the end of the first quarter of 2010. As always, the
price of commodities, particularly oil and gold, has had a significant impact on Canadian
exchange rates.
Like the Real GDP figures, the unemployment rate continued to creep up into 2009 reaching a
high point of 8.5% at the end of the third quarter. Since the third quarter, Canada has seen
modest declines in the unemployment rate. Canadian unemployment fell to 8.2% at the end of
the first quarter of 2010 and fell again slightly to 8% by the end of the second quarter.
The appreciation of the Canadian dollar against most other currencies, lower oil and gas prices
and the fall in economic activity generally has meant that previous easing by the Bank of
Canada has not led to inflation being a significant factor thus far. The year-over-year increase in
the consumer price index (CPI) was negative over the second and third quarters of 2009 before
rising by 1.3% in the fourth quarter. Year-over-year increases in the CPI (whether we are
looking at core or total CPI) in the first and second quarter of 2010 were in line with the
increase in the fourth quarter of 2009 at 1.4% and 1% respectively and have been well below
the 2% target used by the Bank of Canada.
The Bank of Canada had been worried about future inflationary pressures and speculative
pressure in the housing market which led to a slight tightening of monetary policy in the second
quarter of 2010. Subsequent deflationary fears in other jurisdictions have allayed some of these
inflationary concerns and have tempered the Bank’s tightening zeal.
Overall, Canada’s economic outlook is positive going into the latter half of 2010. The Bank of
Canada expects that the economy will return to full capacity by the end of 2011, a little later
Page | 2
than it first forecasted, but still well ahead of many other economies impacted by the financial
crisis.
While the outlook for the rest of 2010, going into 2011 looks promising, much of this promise
rests on the ability of foreign economies to meet their growth and consumer spending targets.
Export led growth and business investment are both particularly important to the Bank of
Canada’s forecast for 2011.
Should either of these factors not meet expectations, should the United States in particular see
a longer period of stagnation that leads to lower than expected export demand or leads
businesses at home to defer investment, we would expect some of the optimism for Canada to
dampen. Despite its strong economic fundamentals, Canada, as a small open economy, cannot
fully shield itself from the structural imbalances of its major trading partners.
Page | 3
Statistical Update and Commentary on Canadian Fund Activity
Complete statistical updates and commentary are provided by IFIC monthly at www.ific.ca. A
comprehensive year-in-review is also published for the previous calendar year at the end of
January.
Industry Update and Trends
Canadian Mutual Fund Industry ($CAD Millions)
Assets Net Sales (excl. dist) for the 12 months ending

Asset Class
Dec 2008 Jun 2009 Dec 2009 Jun 2010 Dec 2008 Jun 2009 Dec 2009 Jun 2010
Equity Funds 192,540 208,176 234,106 220,396 -12,001 -9,180 -5,888 -6,713
Domestic Equity 103,349 115,719 131,356 125,861 -6,680 -4,091 -2,173 -2,235
Global and International Equity 64,622 64,734 70,564 62,853 -5,392 -5,497 -4,258 -4,819
U.S. Equity 15,105 15,910 17,750 17,234 -244 169 319 284
Sector Equity 9,464 11,813 14,437 14,448 315 239 224 57
Balanced Funds 185,347 203,537 230,845 244,470 -1,182 -2,311 11,157 23,337
Domestic Balanced 114,563 125,102 138,053 142,374 -3,839 -2,976 5,451 11,669
Global Balanced 70,784 78,434 92,791 102,096 2,657 665 5,706 11,668
Bond Funds 54,155 61,177 72,055 79,216 -1,615 2,724 12,801 11,314
Domestic Fixed Income 47,504 51,597 60,239 66,016 -1,467 621 9,209 9,170
Global and High Yield Fixed Income 6,651 9,580 11,816 13,200 -147 2,103 3,592 2,144
Specialty Funds 4,094 3,602 3,674 3,756 537 -379 -550 -299
Long-Term Funds Total 436,137 476,492 540,679 547,838 -14,262 -9,146 17,521 27,639
Money Market Funds 70,922 70,612 54,542 44,002 14,413 365 -16,059 -26,464
All Funds 507,059 547,104 595,222 591,840 151 -8,781 1,462 1,175
Of which, Fund-of-Funds 87,264 95,342 108,664 119,381 3,223 1,496 8,801 16,527
In line with the recovery in equity markets towards the end of the first quarter of 2010, both
long-term fund asset growth and long-term fund sales were much improved in 2009.
Long-term fund assets totaled $436.1 billion at the end of 2008 and had increased by $40 billion
or 9.3% by the end of June 2009. Long-term fund asset growth over the second half of 2009
improved again, increasing by $64 billion or 13.5%.
Page | 4
Long-term fund asset growth in 2009 was well distributed across all the major fund asset
classes. Domestic Equity fund assets increased by $28.1 billion or 27% in 2009 and were
followed closely by the Domestic Balanced and Global Balanced fund asset classes which saw
increases of $23.5 billion (20.5%) and $22 billion (31.1%) respectively over the same period.
Long-term fund sales tracked the improvement in market performance and the reduction in
market volatility in 2009. Over the 12 months ending December 2008, long-term fund
redemptions totaled $14.3 billion and fell to $9.1 billion over the 12 month ends June 2009.
Long-term fund sales were back in positive territory by the end of 2009 ($17.5 billion) and were
in line with pre-downturn levels midway through 2010. Long-term fund sales totaled $27.6
billion for the 12 months ending June 2010.
While 2009 saw an increase in long-term fund assets, a related but opposite dynamic was at
work for Money Market assets. Money Market funds had seen dramatic inflows since
September 2007, the month after the non-bank sponsored asset backed commercial paper
(ABCP) market ceased to function due to these instrument’s exposure to sub-prime mortgage
markets in the United States.
However, as the Bank of Canada aggressively loosened monetary conditions to deal with the
credit crisis, Money Market yields plummeted which led to outflows of similar size to the
inflows that preceded them a year before. Over the second quarter of 2009, Money Market
fund redemptions totaled $4.1 billion. Money Market fund redemptions more than doubled in
the third quarter of 2009 to $8.3 billion and were followed by an additional $18.2 billion in
outflows over the next three quarters.
Page | 5
Quarterly Net Sales excluding re-invested distributions by IFIC asset class ($CAD Billions)
9.4
5.3
4.9
3.9 4.0
3.7 3.7
3.1 3.2
2.4
1.8
0.2
-0.2 -0.4
-0.6
-1.7 -1.9 -1.7
-2.8
-4.1 -4.1
-6.8
-7.3
-8.3
2009:Q1 2009:Q2 2009:Q3 2009:Q4 2010:Q1 2010:Q2
Balanced Equity Fixed Income Money Market
The outflows from Money Market funds were not unexpected by the industry. Much of the
money that had flowed into Money Market funds during the downturn came from investors
looking for more attractive short-term yields rather than from long-term investors moving to
the sidelines. Likewise, during the recovery and the subsequent yield declines on Money
Market securities, these same investors have moved to Money Market fund alternatives (often
offered through the same financial institution) such as high interest savings accounts.
For those long-term fund investors who were seeking shelter on the sidelines in Money Market
funds through the downturn and those making new fund investments throughout 2009, we saw
a focus on Fixed Income funds and Balanced funds rather than Equity funds as equity markets
have recovered and as fears have subsided.
Balanced fund sales moved into positive territory in the second quarter of 2009 hitting $2.4
billion. Balanced fund sales increased for the next three quarters, peaking in the first quarter of
2010 (the quarter that most Canadians contribute to their retirement savings plans) at $9.4
Page | 6
billion. Balanced funds garnered by far the largest share of new fund sales since the market
recovery began bringing in $23.3 billion in net sales over the 12 months ending June 2010.
Quarterly Balanced Fund Net Sales by Investment Product Type ($CAD Billions)
6.3
3.8 3.8
3.1
2.5
1.5 1.5
1.2 1.1
0.9
0.6
-0.7
2009:Q1 2009:Q2 2009:Q3 2009:Q4 2010:Q1 2010:Q2
Stand-Alone Funds Fund of Funds
Fixed Income funds moved into positive sales territory one quarter earlier than the Balanced
fund asset class. Fixed Income fund sales totaled $1.8 billion over the first quarter of 2009.
Fixed Income fund sales increased throughout 2009, peaking at $4 billion in the fourth quarter.
Fixed Income fund sales were $12.8 billion in total for 2009, $1.6 billion higher than total flows
into Balanced funds over the same period.
In contrast, Equity funds have largely been ignored by investors as markets have recovered.
This highlights two dynamics, the focus on Fixed Income funds for those investors that were
less than optimally diversified before the downturn and a continuation of the trend in investor
preferences that was apparent before the downturn, to invest indirectly in equity through
Balanced funds and Fund-of-Fund products rather than directly through Equity funds.
When we divide Balanced fund sales into flows to Fund-of-Fund products and flows to Stand-
Alone fund products (funds which invest directly into underlying securities rather than into
Page | 7
other mutual funds) we see how important the Fund-of-Fund product has been to investors
during the market recovery.
While overall Balanced fund sales were negative in the first quarter of 2009, Fund-of-Funds in
the Balanced fund asset class saw inflows of $600 million. Sales to Fund-of-Funds within the
Balanced fund asset class were positive and increasing throughout 2009 and into the first
quarter of 2010 when they reached $6.3 billion. Sales to Fund-of-Funds classified in Balanced
fund asset class, though they decreased to $3.8 billion in the second quarter of 2010, were still
over three times the size of inflows to Stand-Alone Balanced funds for the period.
In last year’s country report for Canada we expected that, as in the aftermath of previous
downturns, investors would slowly move back into equity markets, starting first through
investment into Balanced funds and Fund-of-Fund products and then through investment into
Equity funds directly. Clearly, we have seen the former trends but we are still awaiting the
latter trend.
We also posited last year, that the drastic shift in investor preferences was more likely a case of
temporary overshooting rather than a permanent shift in behavior. With respect to the
popularity of Money Market funds this has clearly been the case however the popularity of
Fixed Income funds has been more resilient than expected given the probable path of interest
rates going forward. As well, the overall lack of interest in Equity funds given the strength of
the recovery has been a surprise though, given the size of the shock felt by investors in the fall
of 2008, it is understandable that it may take a bit longer for investors to come around.
Regulatory and Self-Regulatory Developments
Value of Advice
IFIC established a Strategic Committee with a mandate “to reinforce the value of advice”, in
order to challenge positions being taken by stakeholders in the retirement savings debate,
which ignore or misrepresent the role that professional financial advice plays in contributing to
Canadians’ retirement savings. Claims have been put forward that public sector plans cost less,
and are therefore preferable as retirement vehicles to private sector-supplied retail
alternatives. The implication being that individualized service and advice, which is a strong
feature of retail solutions and largely absent in the public plans, is of little or no value. This
misperception was countered by showing how advice enables Canadians to save for retirement.
Page | 8
The Strategic Committee prepared a research report entitled The Value of Advice Report (the
Report), published in July 2010. The Report summarizes available published research showing
the critical role that advisors play in improving the financial well-being of their clients. It draws
from independent, publicly available research - primarily the Canadian Financial Monitor by
Ipsos Reid - widely used by government agencies and financial institutions to monitor trends in
Canadian consumers’ financial services behavior.
The Report provides a clear, unbiased view of the role played by financial advisors in helping
Canadians build their wealth and become more financially literate. As a large segment of the
advisor network is funded by fees and commissions paid by the mutual fund industry, the aim
of the Report is to contribute to a more constructive debate about the value of individual retail
products than has been present to date in the public discourse on retirement savings. IFIC
presented some of the key findings of the research, including the fact that advised households
were five times more likely to have RRSPs, to a Senate Committee, resulting in the positive role
of advice being reflected in the Senate Committee’s report.
Provincial Sales Tax Harmonization
In 2009, both the Ontario and British Columbia governments announced plans to harmonize
their retail sales tax with the federal goods and services tax (GST), creating a new form of value
added tax known as Harmonized Sales Tax (HST). It is expected that over time other provinces
will also harmonize their sales taxes with the federal GST.
Since its introduction in Canada in 1991 GST has taxed mutual funds at a much higher level than
other financial products. In simple terms, essentially everything that goes into providing mutual
funds is subject to sales tax, while the majority of costs of supplying other financial products,
such as salary expense, is exempt in the case of GICs, stocks and bonds. Harmonization further
disadvantages funds as the taxes applicable to funds will more than double under the HST.
IFIC has commissioned research by KPMG to show that Canada is an outlier in the way it taxes
funds, to attempt to convince the federal government that it should pursue a more equal sales
treatment of funds relative to other financial services and products.
Furthermore, the federal government decided to apply the HST to mutual funds by calculating
the HST in the hands of the unitholder and provided a very short implementation date.
Recognizing the implementation challenges for funds, IFIC worked with federal and provincial
officials to explain the implications and challenges of taxing services charged daily to mutual
funds with the objective of having them create rules that would not be unduly onerous and
Page | 9
costly to implement. While remaining concerned by the complex, still-changing and labour-
intensive nature of the HST rules, IFIC has been able to get some simplification of the rules.
The next challenge for the industry will be to convince the federal government to undertake a
policy review of the application of HST to financial services. IFIC is working with other financial
industry associations to assess the full spectrum of issues related to the current system, review
practices of other countries that use a value-added tax (particularly where the country does not
exempt financial services), and recommend areas that the industry can explore with
government to improve the fairness, economic neutrality, and compliance simplicity of the HST
and GST as applied to funds.
Retirement savings
Canada’s retirement income system has been the subject of intense national debate over the
last year and a half. Governments at the federal, provincial and territorial levels have been
engaged in research and public consultations to determine if, and how, the retirement systems
should be improved to provide for better and fuller coverage for Canadians. In these
discussions IFIC has helped to illuminate the role of the fund industry plays in helping Canadians
save for their retirement.
IFIC has been able to demonstrate the importance of savings outside of the traditional three
pillars of Canada’s retirement system; that is, outside of the Old Age Security and Guaranteed
Income Supplement (Pillar 1), the Canada Pension Plan (CPP) and Quebec Pension Plan (Pillar
2); and registered pension plans and registered retirement savings plans (Pillar 3). These
additional savings can be regarded as ‘Pillar 4’ and are held in a variety of forms in individual
savings and investment accounts. They are widely relied upon by Canadians as sources of
retirement income. Governments have acknowledged that when considering all 4 pillars of
Canada’s retirement system, Canada ranks among the most balanced and strongest in the
world.
IFIC has also worked hard to raise the level of understanding of the value of advice. Advice is an
important component of private sector solutions for improving retirement savings and
individuals use advisors to invest in mutual funds and other savings products. Not considering
the value advice plays in building individual wealth promoted the mistaken impression that
public sector plans cost less and are therefore universally preferable to private retail solutions
for retirement. IFIC’s release of the Value of Advice Report and representations made to
parliamentarians and government officials at all levels of government, sought to bring a more
balanced view to the debate.
Page | 10
Federal, provincial and territorial Ministers responsible for pensions subsequently agreed in
June 2010 to remove from the table the option of a government-sponsored new supplementary
pension plan. Ministers agreed instead to work on changes to tax rules and pension standards
to make available arrangements for multiple employer plans for employees and the self-
employed and to consider a modest, phased-in and fully-funded enhancement to defined
benefits under the CPP. IFIC continues to meet with governments to offer constructive ideas
for implementing these policies.
In addition, IFIC continues to correct misconceptions and inaccurate comparisons between the
costs of large defined benefit plans (such plans have steady cash flow, little reporting, few day-
to-day administrative costs) and private sector plans that provide multiple options, are held to
the highest standard of disclosure, round-the-clock access to holdings and – too often
overlooked – the benefits of advice.
Point of Sale
In June 2010, the Canadian Securities Administrators (CSA) released a report on the
Implementation of Point of Sale Disclosure for Mutual Funds (the Report), outlining the process
that the CSA will take to implement the new disclosure system for mutual funds. Similar rules
for segregated funds have already been approved by the Canadian Council of Insurance
Regulators.
We expect to see a Final Rule on the filing and posting of Fund Facts in late 2010. In 2011,
following a transition period, Fund Facts will be posted on fund company websites and available
to investors on request. Fund Facts is a two-page fund summary document intended to provide
a client with key information about a mutual fund investment at a time when the information is
most useful for the investment decision. Although the Simplified Prospectus still has to be
prepared, it does not have to be printed and sent.
IFIC supports the provision of simpler, more meaningful disclosure of key information about a
fund in a fund summary document. We always have taken the position that, by standardizing
disclosure in a short, easy-to-understand format, the proposed CSA rule is a significant step
forward.
We also support disclosing this information prior to the sale of a fund in a manner that is
consistent with the way that investors wish to receive information, and that does not disrupt
the investors’ ability to complete their transaction. We noted our concerns to the CSA that
onerous delivery requirements that only apply to mutual funds and segregated funds and not
to other investment products would be harmful to investors. It was gratifying to learn the CSA
Page | 11
decided to delay the implementation of required pre-sale delivery until similar requirements
can be developed and applied more generally to other competing retail investment products.
Annual Investor Survey
Since 2006, IFIC has engaged Pollara Strategic Insights to conduct the Canadian Investors’
Perceptions of Mutual Funds and the Mutual Fund Industry survey (the Survey). The Survey
was initiated to provide better data around the attitudes and opinions of Canadian mutual fund
holders; to identify their needs, expectations, behaviours, and opinions; and to track these over
time. The research provides helpful insights into a number of issues including:
• Confidence in mutual funds meeting financial goals,

• Methods of purchasing mutual funds and advisor’s role in decisions, and
• Staying informed about mutual fund investments.
This year the key findings are:
• For the first time since starting the survey, mutual funds now rival primary residences as
the investments in which investors have the greatest confidence ,
• Investors continue to rely on their advisors; with the advisory channel retaining a large
majority of customers when investors make subsequent purchases,
• Investors are confident in their knowledge of fees and prefer to pay them as part of
their mutual fund rather than as a separate annual payment , and
• The main purpose of mutual funds investments is to fund retirement and the majority of
investors are confident in their retirement finances.
For the current wave of research, 1,002 telephone interviews were conducted with mutual fund
holders eighteen years of age or older who make all, or some of the decisions regarding mutual
fund purchases in their household. All interviews were conducted between June 11, 2010 and
June 24, 2010.
National Securities Regulator
On May 25, 2010 the Canadian Securities Transition Office (CSTO), established by the federal
government in June 2009 to create a plan for the creation of a national securities regulator for
Canada, released a draft Canadian Securities Act which proposes to create the structure for the
Page | 12
Canadian Securities Regulatory Authority (CSRA). In June 2010, the CSTO released its blueprint
for the structure of the CSRA. The CSTO’s work dealt only with the creation of the structure
and not the constitutional authority of the federal government to proceed. This authority is
being challenged in the courts by Alberta and Quebec on the basis that the constitutional right
to regulate securities in Canada has been granted exclusively to the provinces. The federal
government is also seeking an opinion from the Supreme Court of Canada on whether it has
authority to regulate securities.
IFIC has traditionally taken a neutral position on a preference of national regulator versus the
current model, stating, in essence, that the structure is not as relevant as the outcome. IFIC’s
prior submissions have been limited to the regulatory environment for conventional mutual
funds, rather than the entire securities industry. Noting that the national regulator versus
passport debate is a political one, the submissions have been consistent that IFIC’s members
prefer to focus on the outcome of the regulatory system, regardless of the structure it takes:
The industry’s goal is a regulatory framework that allows funds to enhance value for investors
and that allows for a consistent consumer experience, and that this outcome may be achieved
through a variety of structural models.
As there is momentum currently towards the creation of a national regulator, and

notwithstanding its neutral position, IFIC submitted a comment letter to the federal Finance
Minister. The submission remained neutral on the relative merits of a national securities
structure while emphasizing the unique attributes and significant economic presence of the
mutual funds sector. The letter offers a number of suggestions for improvement, either to be
built into the new structure, or to be applied to the current structure. Specifically we suggested
improvement of the policy review and consultation process, the need for ongoing industry
advisory input, appropriate separation of regulatory and adjudicative functions, the need for
cost-benefit analyses on regulatory proposals, and appropriate and proportionate allocation of
fees. We also discuss the need to ensure that this new structure, if created, works as well or
better nationally than the current passport plus interface system.
The letter was intended to encourage policymakers to consult with IFIC on the structure and
function of any national regulatory structure should it proceed, or in any enhancements to the
current provincial structure should it remain, to ensure IFIC’s members’ goal as to the
regulatory environment for funds is met.
New Registration Requirements
The new nationally harmonized and streamlined registration rules came into effect on
September 28, 2009. The new regime requires, for the first time, registration for investment
fund managers effective September 28, 2010 (both mutual fund and hedge fund) and for
Page | 13
exempt market dealers. In addition, all registered firms must register a Chief Compliance
Officer and an Ultimate Designated Person to ensure the existence and management of and
adherence to a robust compliance program. Since the regime came into effect, market
participants have been busy implementing all necessary processes to ensure compliance with
the new rules by the implementation dates.
The emphasis on compliance systems and risk management articulates existing regulatory
concepts but emphasizes the importance of a firm-wide culture of compliance. IFIC issued
guidance to assist its members in meeting their compliance obligations under the new rule. The
guidance identifies a number of resources to assist members implement frameworks to
manage the risks associated with their business in accordance with prudent business practices.
The guidance also addresses the difference between monitoring and supervision and the need
for a clearly documented and articulated supervisory structure and compliance framework.
Accounting Standards
Under current IFRS standards, investment funds having a controlling interest in other
investment funds are required to consolidate. During 2009, IFIC made numerous submissions
to the International Accounting Standards Board (IASB) arguing that fair value accounting was a
more appropriate method of accounting than consolidation for investment funds. In February,
2010, based on the input received by IFIC as well as others, the IASB decided to exempt
investment companies from consolidating controlling interests held in other entities and,
instead, measure those interests at fair value. The IASB is expected to issue an exposure draft
before the end of 2010. The IASB and the United States Financial Accounting Standards Board
(FASB) are still considering what additional information investment companies should disclose
and are expected to issue exposure drafts in 2010.
In order to facilitate the IASB decision, at its May 5, 2010 meeting, the Canadian Accounting
Standards Board (AcSB) decided to propose that entities currently applying Accounting
Guideline AcG-18, Investment Companies, can continue to apply existing Canadian standards in
Part V of the Canadian Institute of Chartered Accountants (CICA) Handbook – Accounting until
fiscal years beginning on or after January 1, 2012. Earlier application would be permitted.
An investment company unaffected by the consolidation of controlled investees can adopt

IFRSs in Part I of CICA Handbook – Accounting for 2011 as originally planned. On June 30, 2010,
the AcSB published for comment an Exposure Draft proposing that investment companies can
defer the adoption of IFRSs by one year.
Page | 14
IFIC has engaged in discussions with the Canadian Securities Administrators (CSA) regarding the
impact of the above changes on the rules governing Investment Fund Continuous Disclosure,
and an announcement from the CSA is expected soon.
Client Relationship Model
After many years in development, the regulatory framework relating to the Client Relationship
Model is nearing implementation. The investment funds industry has been supportive of
regulatory measures designed to clearly define the nature of the client/advisor relationship and
the responsibilities that each party will assume when an account is opened. Amendments to
the Model being implemented by both dealer self-regulatory organizations, and suitability
guidelines are being finalized and are expected to be effective soon.
IFIC delivered a number of submission letters to both regulators stressing the need for a
harmonized framework developed in a coordinated and consistent approach for the benefit of
investors.
Do Not Email Legislation
The Canadian Government introduced legislation in 2010 aimed at curtailing the amount of
spam and fraudulent electronic communication consumers receive. Bill C-28, replacing last
year’s Bill C-27, was introduced before the House of Commons in a manner which would
effectively ban email communication to clients and prospects without obtaining some form of
consent to contact them.
IFIC and its members have been reviewing the proposed legislation, and while members were
supportive of a number of recommendations that are outlined in the Bill, a number of changes
are required. IFIC made a submission to the House of Commons Committee on Industry
Science and Technology and the Senate Committee on Transport and Communications. IFIC
appeared before the House of Commons to limit the scope of the legislation to those who
target individuals and entities through emails where there is no reasonable identifiable
relationship between the recipient and the sender.
Some changes in the legislation were adopted in response to the industry’s comments, such as
extending the definition of an “existing business relationship” to 24 months from the original 18
months, and new wording to allow for deemed consent in the instance where an email address
Page | 15
is conspicuously published. IFIC continues to seek an exemption for individual messages based
on referrals and for industries with regulatory responsibility to maintain client contact.
Fund Categorization
IFIC and the investment funds industry continue to work closely with the Canadian Investment
Fund Standards Committee (CIFSC), the voluntary body that establishes fund categories and
allocates funds to such categories. This year, IFIC recommended a number of fund category
revisions that were adopted by the CIFSC including the re-categorization of funds using
synthetic strategies, the re-categorization of infrastructure funds, the creation of sub-
categories in the Miscellaneous space and a change to the International Equity fund definition.
IFIC will be assisting the CIFSC as it looks to expand its activities to include the categorization of
fund series over the next year.
Understanding Mutual Fund Management Expense Ratios in Canada
Mutual fund pricing, as expressed by the fund Management Expense Ratio (MER), is more
standardized, more transparent and more widely disclosed than the pricing for any other
financial product in Canada. Canadian mutual fund MERs are competitive when compared to
the total cost of other financial products sold in Canada and to the cost of mutual funds sold in
other countries.
IFIC has been developing a comprehensive report on MERs that is expected to be released in
the fall, 2010. IFIC will utilize this research in discussions with government, media and other
stakeholders to ensure that the competitiveness, efficiency, and the value added by the fund
industry is well understood.
Value of Portfolio Management
IFIC has been reviewing the existing literature in the active versus passive management debate
and has developed a presentation which describes the importance of both active and passive
strategies for the support and development of healthy capital markets and for investors. The
presentation also highlights the most common errors made by analysts in the debate.
The goal is to help investors, governments and other stakeholders understand that the decision
as to which investment management strategy to choose will be time and state dependent with
respect to a particular market, and will also depend on individual circumstances including most
importantly the investor’s tolerance for risk.
Page | 16
For investors in particular, the relevant question is how to choose the investment that will
maximize the risk adjusted returns of the investor’s portfolio subject to their other unique
circumstances - both passive and active funds can be utilized to meet the investment objective.
Financial Literacy
The importance of increasing the financial and economic literacy of Canadians has become
particularly evident in the past several years as the impact of the financial crisis was felt by
individuals. Many initiatives to look at ways to improve literacy have been launched, including
a Task Force on Financial Literacy, by the Minister of Finance for Canada. The Task Force held
consultations across the country and is expected to issue a report in early 2011. IFIC’s
submission and presentation to this Task Force recommended several courses of action.
IFIC has always been a member of the Council for Investor Education and we continue to sit on
the Council, allowing for the sharing of ideas and programs among many financial services
organizations.
For the second year, IFIC will be hosting a Financial Literacy Forum which will bring together
experts from around the world to discuss the issue and potential solutions.
IFIC continues to sponsor the Investor Education Award at the Canadian Investment Awards.
IFIC established the IFIC Investor Education Award in 2006 to recognize the investment fund
manager, dealer or integrated firm that has produced an exceptional educational initiative
aimed at investors.
Page | 17
IIFA Country Report 2010
DENMARK
Denmark is among the countries which have been most severe hit by the crisis – one of the reasons is a
very large housing bobble in the years before the financial crisis.
Denmark has seen positive growth in the last three quarters. This should be viewed against the backdrop of
a preceding fall in output of just over 7 per cent in 2009.
Private consumption is also picking up, and the housing market seems to have stabilised following a strong
adjustment of house prices. However, there is considerable spare capacity in the economy, and output is not
likely to be back at the level seen at the eruption of the crisis until 2013.
Unemployment has been more or less flat in recent months. The relatively modest increase in unemployment
reflects factors such as a reduction of the labour force by around 100,000.
The crisis has had a considerable negative impact on public finances, and Denmark's 2010 budget deficit is
expected to be as high as USD 17 billion, corresponding to more than 5 per cent of the gross domestic
product, GDP. Consequently, political agreement has been reached to consolidate public finances in the
period from 2011 to 2013 inclusive. The tendency for private domestic demand and exports to pick up means
that gradual consolidation of public finances from 2011 onwards will not stifle the budding upswing.
The Danish bond market has been a safe haven for international investors during the European fiscal crisis
in 2010. This implies that the Danish short term interest rate is currently very low and that investors holding
Danish government bonds have achieved quite high returns, more than 13 % in the period Jan-Sep. 2010.
The Danish equities market has also increased in the first 8 months of 2010, namely 15 %.

The total net asset value increased by 19 % in 2009 and by 10% in 2010. The increase is mainly driven by
positive performance figures, but also positive net inflows.
The share of funds targeted institutional investors is 51% of the total net asset value end of June 2010. The
high share of institutional investors is caused by nationally regulated fund types (non-UCITS), primarily
targeted institutional and professional investors. Especially the Danish pension funds have invested large
amounts in Danish investment funds.
Table 1. Distribution of assets, investortypes
mio USD Dec 2008 Dec 2009 June 2010

Retail 59.211 73.564 80.255
Institutional 68.080 77.939 86.330
Foreign investors 1.194 1.598 1.753
Total 128.485 153.101 168.338
Both domestic and international funds are popular
Danish financial institutions issue a large amount of mortgage bonds, for which reason the investors have
always had a large share of bonds in the portfolios. In the recent decade, the investors have also invested
large amounts in funds with international bonds, primarily corporate and emerging markets bonds.
Money market funds have a negligible market share. Balanced funds are still not popular among retail
investors due to the tax legislation.
Table 2. Retail investors, distribution of assets

mio USD Dec 2008 Dec 2009 June 2010
Equities 20.166 29.198 30.992
Bonds domestic 22.155 23.741 25.162
Bonds foreign 14.196 17.911 20.855
Balanced+others 2.695 2.715 3.246
Total 59.212 73.565 80.255
The number of funds has increased slightly in recent years, most of the funds have been
non-UCITS targeted institutional investors.
Table 3. Number of funds, all investortypes

Dec 2008 Dec 2009 June 2010
Equities 438 428 426
Bonds domestic 130 140 144
Bonds foreign 150 164 168
Balanced+others 102 99 99
Total 820 831 837
The amount of net inflows was at a very low level in 2009 ($ 365 mio.), but has increased in 2010 to a total of
$5,870 mio.). The low level of net inflows in 2009 was caused by high outflows in institutional funds, and
especially the closing of a large second-pillar pension fund (SP-fund) has caused large outflows. However,
the amount of institutional inflows ex-SP funds was positive in 2009.
The inflow into retail funds for the first six months in 2010 ($3,434 mio) is a little higher than for 2009 as
($3,128 mio.). While the retail investors have mainly invested in equities funds in 2009, probably triggered by
the very high returns in equties, the retail investors have flocked to bond funds in 2010.
Figure 1: Net issues in fund categories
Figure 2: Net issues – investor types

• The national risk indicator classification scheme

The Danish FSA is planning to introduce a general risk/complexity indicator classification scheme for
all investment products, including UCITS and non-UCITS investments funds. The risk indicator will
have 3 levels, green, yellow and red. The risk indicator model is supposed to be used by all
investment advisors when doing financial advice – the individual investment products are not
supposed to show the risk/complexity indicator in prospects, advertising etc.
• Tax regulation
A tax reform which reduced income taxes from a maximum of 63% to 56% came into force 1.
January 2010. A liberalization of the rules regarding what assets an equity fund can invest in,
besides its portfolio of shares, has been introduced. The provision is part of the definition of which
fund shares are handled as ordinary shares in a tax context. The provision is implemented to oblige
the European Commission in connection with a treaty violation case. An initiated case at the
European Court of Justice is therefore now closed.
In Spring 2010 an act has been passed which reforms the taxation on bonds. The act harmonizes
taxation on gains on bonds in DKK and other currencies. Until now gains on low rate bonds in DKK
or EUR has been tax exempt. Bonds purchased before January 27 keep their status as exempt.
This act also introduces new rules in the tax classifications of dividend-paying funds. Investors,
realizing gain in equity funds will be taxed with the rate for realized gains from equities even though
the funds invest up to 50 % of assets in cash or in other securities than shares.
5. Corporate governance
No significant developments.
6. Fund Governance
• Guide to responsible investment and UN PRI principles

The Danish Commerce and Companies Agency has published a practical guide about responsible
investments. The guide explains the basic principles in responsible investments, and the guide also
has a description of UN PRI – Principles of Responsible Investment - and how the principles in UN
PRI can be used.
A number of Danish investment funds have contributed to the guide by submitting - for each of the
principles - examples of which steps fund managers can take to follow the principles.
• Best practice guide for Valuation

The Federation of Danish Investment Associations has worked on EFAMA’s Valuation Practice Note
and published a ‘best-practice-guide’ as to how investment management companies can implement
a strong valuation practice.
• The first Danish funds with share classes have been launched in Summer 2010 following new
legislation from 2009.
8. Other major developments and issues
• New national classification scheme based on EFC
The Danish fund classification has been redesigned in 2009 and will by the end of 2010 be based on
European Fund Classification (EFC).
The new classification structure implies that all public Danish funds are officially classified in the pan-
European Fund Classification (EFC) which automatically facilitates a transparent comparison of the
funds. This is a great advantage since Danish investors can be sure that funds that claim to invest in
e.g. European equities actually are invested in that asset type
The investors will also be able to see more characteristics of the funds in the statistics. For all bond
funds, information about currency exposure, interest rate exposure, and credit quality will be shown.
For all equity funds, information about country/region, sector and market capitalization will be shown.
• th
Celebration of 25 anniversary
In November 2009 the Federation of Danish Investment Associations celebrated its 25th
anniversary. In that occasion, the Federation of Danish Investment Associations published an
anniversary booklet in Danish about the fund association and the development of the fund industry in
the last 25 years.
1
2010 COUNTRY REPORT – FINLAND
Key Figures (end of 2009) 1
Population: 5,351,427
GDP 171.3 billion €, or 32,088 € per capita
GDP growth -7.8 %
Inflation rate 0.0 %
Unemployment 8.2 %
Investments in Finland and from Finland in billion €2

Direct investments 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 / Q1 2010 / Q2
Finnish investments abroad 59,3 61,0 60,2 62,4 69,4 73,1 79,2 83,3 88,0 89,8 91,6
Foreign investments in
Finland 27,3 32,4 39,8 42,1 46,5 53,6 62,3 60,1 58,7 59,7 59,4
Securities investments
Finnish investments in foreign
securities 63,4 72,5 84,7 107,4 130,8 162,4 173,9 129,2 166,9 179,5 182,3
Foreign investments in
Finnish securities 202,1 152,1 157,5 162,9 195,2 219,8 257,9 177,5 203,5 216,6 203,8
Main Features of Finnish Economy in 2009 - 2010 3
Finland’s GDP decreased by 7.8 percent during 2009 according to the figures by
Statistics Finland. A major part of the decline resulted from shrinking exports and
investments. Exports decreased 20% and investments nearly 15% in 2009. According to a
forecast by the Ministry of Finance domestic demand and exports will help the Finnish
economy to start growing in 2010. The estimated growth rate for 2010 is 1.5% and 2.5%
for the following two years.
Inflation was above 2% at the start of 2009 but after that it steadily decreased towards the
end of the year, being at its lowest (-1.5%) in October. The Ministry of Finance has
predicted that inflation will remain moderate over the next two years.
1
Source: Statistics Finland
2
Source: Statistics Finland
3
Source: Ministry of Finance
2
At the end of 2009 the unemployment rate was 8.2% which is 1.8% percentage points
higher than a year earlier. The outlook remains still rather gloomy as The Ministry of
Finance is expecting the unemployment rate to climb to 9.5% in 2010.
Breakdown of mutual funds domiciled in Finland 31.12.2009
Total net assets Number of Number of
Fund class (EUR million) investors funds
Equity funds 19 045,2 1 426 173 242
Assest allocation funds 6 750,9 567 816 98
Bond funds 15 339,4 220 015 77
Money market funds 11 733,3 240 518 32
Alternative funds 1 370,0 47 985 31
Total 54 238,7 2 502 507 480
Index funds 1 075,3 12 131 11
Fund of funds 8 423,4 604 524 97
Breakdown of mutual funds domiciled in Finland 30.6.2010

Total net assets Number of Number of
Fund class (EUR million) investors funds
Equity funds 20 164,8 1 500 234 241
Assest allocation funds 7 086,0 580 343 98
Bond funds 16 868,8 244 227 81
Money market funds 10 915,0 233 533 31
Alternative funds 991,4 40 794 30
Total 56 026,0 2 599 131 481
Index funds 510,2 13 294 11
Fund of funds 8 820,8 620 682 98
Overall market development
2009 was a year of recovery for the Finnish mutual fund industry. After total assets had
steadily fallen for 1.5 years the numbers started to show positive signs again. In the
beginning of the year the growth was somewhat non-existent but started to really pick up
on April. During 2009 the total assets have climbed from EUR 41.3 billion to EUR 54.2
billion. 29% of this growth is due to net in-flow of new money into mutual funds and
71% is due to increase in valuation of the underlying securities. February 2009 was the
first month since July 2007 that showed positive net subscriptions. According to these
statistics it is fair to say that during 2009 investors regained their confidence to the
market.
3
The growth in total net assets that started in 2009 continued also during the first four
months of 2010 peaking in April at EUR 59.2 billion. During this period the cumulative
net subscriptions totaled EUR 1.2 billion, representing 23% of the total growth in assets.
Thus, the main reason for total asset growth during this period was the increased
valuation of the underlying investments representing 77% of the total growth. However,
in May 2010 confidence to the markets disappeared again as the debt crisis that
originated from Greece made investors more cautious. Total net assets dropped over EUR
2.8 billion over one month. Net subscriptions were EUR 1.4 billion negative so
redemptions represented half of the fall in total assets.
Total Net Assets in Mutual Funds Domiciled in Finland

31.12.2008 - 31.12.2009
60
50
40
EUR
billion
30
20
10
0
4
Netsubscriptions to Mutual Funds Domiciled in Finland

31.12.2008 - 31.12.2009
1000
800
600
EUR 400
million
200
-200
-400
Total Net Assets in Mutual Funds Domiciled in Finland

31.12.2009 - 30.6.2010
60
59
58
57
EUR 56
billion 55
54
53
52
51
12/09 01/10 02/10 03/10 04/10 05/10 06/10
5
Netsubscriptions to Mutual Funds Domiciled in

Finland 31.12.2009 - 30.6.2010
1 000
500
EUR 0
million
-500
-1 000
-1 500
12/09 01/10 02/10 03/10 04/10 05/10 06/10
Equity funds
Market share of equity funds 31.12.2009 was at EUR 19.0 billion (35.1% of the total
market). Net subscriptions between 01/2009 and 12/2009 were 3.4 EUR billion. Picture 1
shows the asset development of different equity funds categories in 2009. During 2009
total assets of every equity fund category excluding Japan experienced notable growth.
Assets increased especially in equity funds investing in emerging markets. In this
category, total assets almost tripled during 2009 – reaching over EUR 5.5 billion at the
end of year and being asset-wise the biggest equity fund category. Cumulative net
subscriptions to emerging market equity funds during 2009 were over EUR 1.6 billion.
During the first half of 2010 market share of equity funds peaked in April at EUR 22.3
billion, but by the end of June it had declined back to EUR 20.2 billion. However, that is
still more than in the beginning of the year. Net subscriptions between 01/2010 and
06/2010 were EUR 169 million. Equity funds investing in emerging markets remained
attractive to investors as this equity fund category accumulated most of the new
investments during this period, EUR 404 million in total. In contrast, net subscriptions to
equity funds investing in Europe were EUR 459 million negative.
6
6
Emerging markets
Nordic
Europe
5
Finland
Global
Sector funds
4 North America
Pacific
EUR Japan
billion 3
Picture 1 Total net assets of equity funds domiciled in Finland by fund category 31.12.2008 –
31.12.2009
Emerging markets
Nordic
Europe
Finland
Global
Sector funds
North America
Pacific
Japan
Picture 2 Geographical breakdown of investments in equity funds (including sector funds) domiciled
in Finland as of 31.12.2009
7
8,00
7,00
Emerging
6,00 markets
Nordic
5,00 Europe
EUR Finland
billion 4,00
Global
3,00 Sector
funds
North
2,00 America
Pacific
1,00
0,00
12/09 01/10 02/10 03/10 04/10 05/10 06/10
Picture 3 Total net assets of equity funds domiciled in Finland by fund category 31.12.2009 –
30.6.2010
Bond funds
Total asset invested in bond funds were EUR 15.3 billion at 31.12.2009, or 28.3% of total
assets. Net subscriptions into bond funds between 01/2009 and 12/2009 were EUR 1.1
billion. Especially Euro-zone investment grade bonds attracted a lot of new investments.
In 2009 cumulative net subscriptions to this fund category totaled for EUR 1.4 billion. In
contrast, during the same period Euro-zone government bonds lost EUR 1.1 billion in net
subscriptions. Accordingly, Euro-zone government bonds was the fund class that suffered
the most in terms of redemptions during 2009.
Total asset invested in bond funds were EUR 16.9 billion at 30.6.2010, or 30.1% of total
assets. Net subscriptions into bond funds between 01/2010 and 06/2010 were EUR 0.8
billion. The only bond fund category that experienced negative net subscriptions was
Euro-zone government bonds (EUR -609 million). Investors favored bond funds
investing in emerging markets as net subscriptions to this fund category totaled EUR 534
million.
8
Money market funds
Total asset invested in money market funds were EUR 11.7 billion at 31.12.2009, or
21.6% of total assets. During 2009 redemptions hit especially this fund category –
cumulative net subscriptions being EUR -0.7 billion.
During the first half of 2010 money market funds took the biggest hit in terms of net
sales. Total redemptions money market funds during this period totaled over EUR 1.1
billion. In 30.6.2010 total assets invested in money market funds were EUR 10.9 billion,
or 19.5%.
Asset allocation funds
Asset allocation or balanced fund class has had a steady market share of about 12% for
the last years. 31.12.2009 asset allocation funds had EUR 6.8 billion total assets and a
market share of 12.4 %. Net subscriptions during 2009 totaled EUR 0.5 billion.
30.6.2010 asset allocation funds had EUR 7.1 billion total assets and a market share of
12.6 %. Net subscriptions between 01/2010 and 06/2010 totaled EUR 150 million.
Regulatory developments
The pension savings legislation was changed in the beginning of 2010. The new law
gives possibility for banks, investment firms and mutual fund companies to provide long-
term saving products which could invest in bank accounts, to listed securities and mutual
fund shares. It provides individuals a possibility to invest directly into mutual funds and
other investment products and allows them to deduct 28% of the savings in taxation.
When a person reaches the retirement age and withdraws his savings he will pay a tax
based on the capital income tax rate, which is 28%.
Taxation
The tax rules have long been favorable to investment funds as they are exempted from
paying taxes. However the Ministry of finance has set a committee to renew tax rules.
The capital income tax rate is 28 % and the corporate income tax rate is 26 %. Capital
gains tax is not collected if the value of the sold assets during the tax year does not
exceed EUR 1,000. On the other hand, capital losses are not deductible if the total
acquisition costs of the assets do not exceed EUR 1,000. The Net wealth tax has been
9
abolished. There are two ways you can calculate the deductible acquisition cost: either
use the actual acquisition cost or a so called deemed acquisition cost. If you have owned
the securities sold for at least 10 years you are entitled to use as deemed acquisition cost
40 % of the sale price. In case you have owned them for less than 10 years, the deemed
acquisition cost is 20 %.
Dividends received by private individuals and deceased persons' estates is taxed

differently depending on whether the dividends have been distributed by listed
companies, including companies listed on the so called ancillary lists, or by non-listed
companies. A tax amounting to 19.6 % is collected from dividends paid by listed
companies, as 70 % of the dividend income is taxable and 30 % non-taxable. Dividends
paid by non-listed companies are tax free provided the dividend does not exceed an
amount corresponding to 9 % of the mathematical value of the share and the total amount
of such dividends received by a tax payer do not exceed EUR 90,000.
Self regulatory developments
The Finnish fund classification was reformed in early 2009. New classification was
needed because the number and variety of mutual funds marketed in Finland has grown
considerably during the last few years. The new classification is based on EFAMA’s
classification principles which are applied to the fund selection available for the Finnish
mutual fund investors. Compared to the old classification the new classification is more
detailed which also means more fund classes.
According to legislation the right of the fund management companies to invest the assets
of investment funds is ten percent. If investment fund invests more than five percent into
a single company, it should announce the goals of corporate governance principles for the
company in question to the extent that they differ from goals given in prospectus.
The Finnish Association of Mutual Funds has issued a recommendation on fund

governance, which sets minimum guidelines for corporate governance principles that
fund manager should approve and disclose to their unit holders.
6. Fund governance
The Finnish investment fund legislation requires 1/3 of the board members of Finnish
fund management companies to be elected by the unit holders of the investment fund.
In the field of product development there are no recent major trends visible.

10
The Finnish Association of Mutual Funds has recommend its members to join the
Federation of Finnish Financial Services (FFFS), which is a trade body that represents
nearly all banks, insurers, finance houses, securities dealers and financial employers
operating in Finland and having 450 members who employ a total of 40,000 persons. As
a result the Finnish Association of Mutual Funds merged into FFFS in September 2009.
The board of the association continues as a mutual fund executive committee set up under
the FFFS and it is independent budget wise and has the power of decision over matters
directly pertaining to the mutual funds industry.
France Country Report
Table 1: Key Economic and Financial Indicators

2008 2009
GDP (EUR billion) 1,948 1921
Real GDP growth (% - annual average) 2.8 -1.4
Inflation rate (%) (IPCH – annual average) 2.8 0.1
Unemployment rate (%) (BIT) 7.8 9.5
Stock market capitalisation (EUR billion) 1,057 1,231
Stock market capitalisation (% of GDP) 54 64
Bond market capitalisation (EUR billion) 2,006 2,140
Bond market capitalisation (% of GDP) 103 111
Household gross savings ratio (%) 15.4 16.2
Household financial wealth (EUR billion) 3,455 3,490
Average per capita financial wealth (thousand 53.7 53.9
EUR)
Source: National accounts, INSEE
2. Data on Funds and Key Trends in Flows and Assets under Management
a- Key Trends in the Global Market
 From January 1, 2009 through to December 31, 2009
Total as sets un der m anagement in investment f unds and d iscretionary m andates r ose s ome 10.8% in
2009. This sharp increase compares with an 11% decline in 2008. From May onwards, a largely positive
“market ef fect” under scored a positive “net s ales effect” for equi ty, ba lanced a nd bond f unds. A n
improving product-mix and a double-digit asset growth are helping to maintain the industry's profitability –
the bas is f or i ts i ndependence an d i nnovative dr ive. P rofitability is also welcome t o s trengthen risk
management capability, competitiveness and, hence, client confidence.
Total assets under management (AUM) with asset management companies on the French market grew
by €255 billion, or 10.8%, in 2009. This growth stemmed almost equally from French funds and
discretionary mandates, including foreign funds managed in France.
Assets managed un der di scretionary m andates, c hiefly in f ixed-income pr oducts, gr ew 10. 9%, f rom
€1,115 billion to €1,237 billion. In addition to a broadly positive market effect, particularly in the second
half of the year, a rebound in net sales in the insurance sector was decisive. Financial management of
foreign funds represented almost €180 billion, up 9.1%.
French f unds’ net assets r ose € 126 b illion, c ontrasting pos itively with a € 223 billion dec rease in 2 008,
and totalled €1,421 billion at end-2009. This uptrend resulted mainly from a market effect (93%,
compared with 7% for net sales). Stripping out money market funds, the contribution of net sales to asset
growth was more significant, at about 16%, compared with 84% for the market effect.
 From January 1, 2010 through to June 30, 2010
During the first half of 2010, in a context of hard equity market conditions and deep tensions related to
the sovereign debt crisis, total AUM remained stable. An estimated 3% growth for mandates has been
counterbalanced by a decrease of investments funds assets close to 3%.
Table 2: Net Assets by the Fund Industry in France
(EUR billion)
June-
2006 2007 2008 2009
2010
Home-domiciled UCITS 1,343.40 1,351.60 1,143.30 1,253.30 1,211.50
Home-domiciled non- 146.00 166.00 151.60 168.0 172.0

UCITS
Funds domiciled abroad 151.50 160.20 115.50 175.00 185.00

and promoted by national
providers
Total AuM 1,640.90 1,677.80 1,410.40 1,596.30 1,568.50
Source: AMF
b- Key Trends in the UCITS Market
The different categories of UCITS can be analysed as follows, reflecting their varying trends:
In the first group equity and balanced funds were the most affected by market fluctuations for at least 15
months unt il t he en d of A pril 2 009 but, s ince t hen, assets i n eq uity an d ba lanced f unds ha ve b een
growing again. The rise in net assets, amounting to 34.6% and 17.3%, respectively, is mainly due to a
positive m arket ef fect ( 85% and 66%) b ut a lso t o substantial net s ales ( 15% and 34% of t he t otal
increase).
A second group composed of bond funds, where assets increased by a substantial €22.4 billion (14.5%),
from €154 bi llion at en d-2008 t o € 176.5 bi llion. T his ex pansion c an be t raced al most ent irely t o E uro
bond f unds, whose €9 .4 b illion i n net s ales i n 2 009 represented 5. 7% of al l bo nd f unds’ a verage net
assets.
Money market funds make up the third group, where assets were virtually unchanged in 2009 (down €6.4
billion, or 1.3% of AUM) partly because of €10.9 billion in net outflows, compared with net sales of €46
billion in 2008. A part f rom t he f act t hat t he Euro O vernight I ndex A verage ( Eonia) was v ery l ow, t his
result stemmed largely from a gradual and necessary rebalancing of the product mix in favour of equity-
and b ond-based pr oducts. N ote t hat m oney m arket f unds, which ac counted f or 30% of t otal net f und
assets in June 2007, climbed to almost 40% at the height of the crisis. That proportion was down to 35%
by end-2009.
In t he fourth gr oup, structured f unds experienced a further c ontraction i n AUM t hat slowed f rom 6% in
2008 t o 3. 5% i n 2009. T he c ontinuing f all i n net as sets i n t his c ategory r eflects t he f act t hat s everal
generations of f unds ( notably t hose f rom 2002 t o 20 06) r eached m aturity at a time w hen l ow interest
rates made them less attractive. This resulted in a simultaneous reduction in supply and in demand.
Up to June 2010, on six months, UCITS assets have experienced a decrease of 3.3%. Strong outflows
from money m arket f unds ( €52 b illion) c ontrasted with important t ransfers f rom t his c ategory m ainly
towards b ond f unds ( +€25 bi llion). R egarding eq uity funds, their net as sets slightly decreased b y € 11
billion resulting from both net outflows (42%) and market effect (58%).
2
Table 3: UCITS* Assets by Fund Type
(EUR billion)
June-
2006 2007 2008 2009
2010
Equity 401.8 408.3 260.4 322.7 311.3
Bond 190.6 174.8 154.1 176.5 200.1
Balanced 295.2 300.8 218.5 256.3 254.6
Money market 429.2 429.9 487.6 481.2 429.0
Fund-of-hedge funds 26.5 37.8 22.7 16.6 16.4
Total 1,155.1 1,343.4 1,351.6 1,143.3 1,211.5
of which
 Guaranteed 61.1 69.5 75.2 70.7 64.4
 ETFs 25.3 48.0 62.0 66.0 na
 SRI 10.0 12.5 20.3 20.2 na
* T he f ollowing s tatistics do not distinguish bet ween f unds compliant w ith t he U CITS di rective and ot her f unds such a s f eeder
funds, ARIA funds (including funds-of-hedge funds) and "contractual" funds
Source: AMF; Euronext (ETF); Novethic (SRI)
Table 4: Net Sales of UCITS* by Fund Type

(EUR million)
2006 2007 2008 2009 June-2010
Equity 37,900 -3,200 -10,700 3,600 -4,800
Bond 7,700 -18,600 -22,200 9,500 20,100
Balanced 22,600 200 -42,200 12,900 300
Money market 29,800 -15,900 41,700 -10.900 -52.800
Fund-of-hedge funds 7,500 8,700 -11,500 -6.900 -400
Total 105,500 -28,800 -44,900 8,200 -37,600
of which
 Guaranteed 5,100 4,000 -1,200 -6,400 -3,100
* Idem supra
Source: National accounts and AFG estimates
c- Key Trends in Other Nationally Regulated Funds
Alter-UCITS, mainly composed of, employee savings funds (FCPEs), private equity and venture capital
funds (FCPRs), r eal es tate i nvestment companies ( SCPI), s ecuritization f unds ( FCC) an d d erivative
funds (FCIMT) t otal EUR 168 bi llion. AUM of employee s avings f unds ( FCPEs) r ose by 18,8% for t he
year as a whole, to €84.8 billion, including EUR 3.0 billion located in the new corporate pension schemes
(PERCOs). Their growth reflects the combined effects of net inflows and a stock market rally. In private
equity, f or t he s econd year, adj ustments t o t he wealth t ax r egime i n f avour of s ubscription i n f unds
investing i n s mall and m id-sized businesses al lowed l ocal i nvestment f unds a nd i nnovation f unds t o
attract some €900 million in 2009. Globally, private equity funds (FCPR, FCPI, FIP) continued to grow at
a pace of 5,6% and reach AuM of EUR 36 billion.
Between t hese c ategories, as sets of em ployee s avings f unds ha ve r emained u nchanged up t o J une
2010.
3
Table 5: Assets of Other Nationally Regulated Funds
(EUR billion)
June-
2006 2007 2008 2009
2010
14.9 16.9 16.9 19.0 21.0
1
SCPI
23.0 31.0 28.5 28.0 30.0
2
FCC
0.7 0.5 0.4 0.3 0.3
3
FCIMT
25.0 30.0 32.0 34.3 35.0
4
FCPR, FCPI & FIP
82.4 87.6 71.4 84.8 84.9
5
FCPE
Total 146.0 166.0 149.2 166.4 171.2
1 Real estate investment companies (OPCI are not computed here; their assets are estimated up to Euro 10 billion at June 2010)
2 Securitisation funds
3 Specific hedge funds invested in derivatives
4 Private Equity and Venture capital funds
5 Employee savings funds
Source: AMF
d- Trends in the Number of Funds (From January 1, 2009 through to June 30, 2010)
In 200 9, ac celeration i n pr oduct r ationalisation has l ed t o a s harp r eduction i n t he num ber of f unds.
Ongoing M&A are likely to sustain this trend.
Table 6: Number of Funds

2006 2007 2008 2009 June-2010
Home-domiciled UCITS
 Fund units 8,092 8,243 8,301 7,982 7,903
 Classes 9,431 9,829 10,234 10,249 10,269
Home-domiciled non-UCITS 3,625 3,685 3,773 3,755 3,715
Foreign funds registered for 3,916 4,624 4,614 4,576 4,512

sales
Fund launches (UCITS) 960 831 785 613 na
Fund liquidations (UCITS) 883 645 218 286 na
Fund mergers (UCITS) 135 440 488 598 na

Average fund size* (EUR
million)
 Equity 159.8 154.5 86.2 122.4 119.2
 Bond 166.1 153.3 138.0 155.7 170.4
 Balanced 98.8 99.4 71.6 87.2 86.7
 Money market 940.7 962.7 1,006.2 1,072.6 1,037.2
 Guaranteed 88.8 95.9 91.7 88.9 84.8
 Fund-of-hedge funds 96.3 111.2 69.2 54.5 59.6
*Excluding feeders
Source: AMF and AFG estimates
At S eptember 2010, s ome 600 asset m anagement c ompanies and investment c ompanies – either
subsidiaries of bank ing, insurance or asset m anagement gr oups ( more than 200 companies) or
entrepreneurial " boutiques" ( in ex cess of 390 c ompanies) - represent m ore t han E UR 2,600 b illion of
AUM, both for collective and discretionary individual portfolio managements.
Two French firms now rank among the world's top ten asset management groups, and four are among
the t op 2 0. Together t hey manage c lose t o EUR 2.5 trillion, ar ound half of w hich t hrough t heir f oreign
subsidiaries, c hiefly i n t he U SA an d t he U K. T he pos ition of t he l argest F rench as set managers w as
strengthened by two major mergers in 2009.
4
If we consider not the funds but the companies that manage them, the French market boasts a vast array
of entrepreneurial asset management boutiques specialising, among other things, in active management,
private ba nking, alternative i nvestment, f unds of f unds, an d private e quity, t o name j ust a f ew f ields.
Some of these companies are becoming very active abroad in the European asset management market.
New asset management companies, most of them specialised, continue to be created at a steady pace.
About 2 5 c ompanies were es tablished in 20 09, and f orty new asset m anagement c ompanies were
created bet ween J anuary and S eptember 2010. R egulators ar e c urrently ex amining add itional l icence
applications.
Growing number of asset management companies

600
600 75
No. com panies (lhs) New com panies (gross, rhs) 571 567
62 538
61
59
502 52
500 486 50 50
474
42
36 40
42 432 427 35
413
29 26
400 25 25
375
353
334
300 0
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 sept.
Source : AMF and AFG estimates for september 2010 2010
3. French household savings, asset allocation and investment ownership

(From January 1, 2009 through to June 30, 2010)
a- Abundant Inflows of Savings and Financial Resources
Savings - the potential ‘raw material’ of the asset management industry – are readily available and have
been maintained at high levels during the last decades in France.
5
Gross savings and overall savings rate of French households
240 18%
Source: National accounts
16%
200
14%
160 12%
10%
120
8%
80 6%
4%
40
2%
0 0%
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Gross savings (in bn euros) Overall savings rate (in %)
The b reakdown of ov erall households’ s avings r ate showed a r elative dec line o f financial s avings r ate
between 20 02 and 2 007, but since then i t is s oaring a gain. Regarding non-financial s avings, i ts r ate
seem t o hav e r eached a top level i n 20 08, r eflecting pr obably t he negative t rend of t he r eal es tate
market.
Evolution of savings rates of French households

Source : National accounts
18%
16%
14%
12%
10%
8%
6%
4%
1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Overall savings rate Financial savings Non financial savings
Indeed, a r elatively ne w analysis t ool i ssued f rom a mixture of nat ional a nd f inancial ac counts, t he
households’ financial table, is now available at the European level to get a more in depth picture of the
households f inancing r esources and t heir us e. Inside a r ange going f rom 11. 5% t o 13. 5%, t he r ate of
financial i nflows, i ncluding not onl y gross s avings b ut al so t he i mpact of borrowing and ot her f actors
6
contributing to complete the resources of households, reflects more faithfully the acquisition of financial
assets.
As firms and households are now trying to reduce their level of debt, we can observe a reduced level of
net financial inflows alongside with a rising gross savings rate.
France: Households financing tables

In % of gross disposable income 2001 2002 2003 2004 2005 2006 2007 2008 2009
Ressources
Gross Saving 15,6 16,7 15,6 15,6 14,6 14,8 15,2 15,1 16,0
Net flows of loans 3,2 3,1 3,6 4,4 6,8 6,9 6,6 4,8 2,7
Transfers and Adjustments 1,4 1,7 -0,9 1,0 2,2 2,1 1,7 -0,1 2,1
Total ressources 20,2 21,5 18,3 21,0 23,7 23,7 23,6 19,9 20,8
Uses
Gross Capital Formation* 8,6 8,4 8,6 9,0 9,3 9,9 10,2 10,2 9,1
Flow of financial assets 11,6 13,1 9,7 12,0 14,4 13,9 13,4 9,7 11,7
Total uses 20,2 21,5 18,3 21,0 23,7 23,7 23,6 19,9 20,8
Gross disposable income (EUR bn) 993 1 039 1 066 1 113 1 150 1 204 1 267 1 309 1324
*Physical investments (i.e real estate…)
Source: OEE, National accounts
The relatively high level of financial assets ownership had become in the BC “before crisis” years even
more important as it has been combined with a steady securitization in the financing of retirement and
the economy, reflected by a trend of progressive re-allocation of assets in households’ portfolios towards
more l ong t erm and r isky as sets, s uch as s hare-oriented vehicles. T hus, household investment i n
banking deposits and cash products was declining slowly, down from 45% of total household wealth in
the beg inning of t he n ineties t o l ess t han o ne t hird. T his t rend has r eversed in 2008. We obs erve
however i n 2 009, due pr obably t o a r ebound of t he equi ty m arkets, t hat t he w eight of s ecurities an d
insurance has increased.
French households financial assets

Euro billion 1998 2000 2002 2004 2006 2008 2009
Currency and deposits 41% 36% 38% 35% 31% 34% 32%
- Currencies and deposits (of which current accounts) 11% 11% 11% 10% 9% 10% 10%
- Sight deposits 14% 12% 14% 14% 13% 15% 14%
- of which "Livret A" * 6% 4% 5% 4% 4% 4% 5%
- Term deposits 2% 2% 2% 1% 1% 3% 2%
- Contractual savings accounts: 14% 11% 11% 11% 8% 6% 6%
- of which mortgage accounts (PEL) 9% 8% 9% 9% 7% 5% 5%
Securities 31% 34% 29% 30% 32% 27% 28%
- Fixed income securities (bonds and similar paper) 3% 3% 3% 2% 2% 2% 2%
- Shares ans other equtiy 16% 20% 15% 18% 21% 16% 18%
- listed shares 5% 5% 3% 4% 5% 3% 4%
- unlisted shares 9% 12% 9% 11% 12% 9% 10%
- other equity 2% 3% 3% 3% 4% 5% 4%
- UCITS's shares 12% 12% 11% 10% 10% 9% 8%
- Short term UCITS 2% 1% 2% 1% 1% 1% 1%
- Long term UCITS 10% 10% 9% 9% 9% 7% 7%
Life insurance reserves 28% 30% 33% 35% 36% 39% 40%
Overall financial assets 100% 100% 100% 100% 100% 100% 100%
Overall financial assets (EUR billion) 1,936 2,303 2,290 2,631 3,140 3,151 3,384
Source: National accounts
Investment funds’ shares, directly and indirectly owned, represent near one-fifth of the financial assets of
households ( including unlisted s hares), whereas d irectly held listed s ecurities ( shares, bon ds, et c.)
accounted for less than 10%, confirming the trend observed in other developed markets.
7
Relative weight of investment funds and directly held securities in French households financial assets
1998 2000 2002 2004 2006 2008 2009

1. Investment funds shares 18% 21% 20% 19% 18% 18% 18%
- Short term UCITS 2% 1% 2% 1% 1% 1% 1%
- Long term UCITS 10% 10% 9% 9% 9% 7% 7%
- Investment funds via life insurance policies 7% 9% 9% 9% 8% 9% 10%
2. Directly held securities 19% 23% 18% 20% 22% 18% 20%
- Fixed income securities (bonds and similar paper) 3% 3% 3% 2% 2% 2% 2%
- Shares ans other equtiy 16% 20% 15% 18% 21% 16% 18%
3. Total securities (1+2) 38% 44% 38% 39% 40% 36% 38%
4. Other 62% 56% 62% 61% 60% 64% 62%
- Euro-denominated life insurance 22% 20% 24% 26% 28% 30% 30%
- Currency and all kinds of deposits 41% 36% 38% 35% 31% 34% 32%
Overall financial assets 100% 100% 100% 100% 100% 100% 100%
Overall financial assets (EUR billion) 1,936 2,303 2,290 2,631 3,140 3,151 3,384
Non financial assets (EUR billion) 2,527 3,074 3,788 5,087 6,576 6,940 6,733
Total net wealth (EUR billion) 4,027 4,878 5,556 7,099 8,927 9,184 9,150
Source: National accounts and AFG estimates.
b- “Instividuals” are the principal holders of investment funds on the French

market
French hous eholds o wn, e ither d irectly or indirectly, close t o t wo t hird of t he net as sets of i nvestment
funds (IF) in France. Ownership of shares in IF, irrespective of the type of owner, was relatively stable
the last ten years. “Instividuals” -- a term that encompasses households and a significant proportion of
assets hel d on their behalf b y institutional i nvestors – have become i ncreasingly important. A ctually,
institutional investors, which in France comprise for the most part insurance companies and investment
funds, hold assets that are ultimately owned by individuals, hence the neologism “instividuals”.
4. Regulatory and self regulatory developments (including tax) (From January 1,

2009 through to June 30, 2010)
a- Regulatory developments
The main r egulatory d evelopments t hat occurred in 2009-2010 r elate t o t he “ SICAF”, Money Mar ket
Funds and the distribution of collective investments.
SICAF (closed-end investment company)
The regulation of the SICAF (Société d’Investissement à Capital Fixe,) which are closed funds, has been
modernized in 2009 chiefly through new risk spreading rules and the enlargement of the scope of eligible
assets (financial instruments and derivatives). Decrees, published in 2010, specify the following points:
- The possibility for the closed-end investment companies to conclude financial contracts;
- The monthly periodicity of the publication of the net asset per share;
- The minimum capital required, from 8 million euros
- The obligation to set out the strategy of investment of the closed-end investment company in its
statutes;
- The no minal am ount of t he ac tion shares, set at 10 000 eur os, w hen t hey ar e of fered t o t he
general public.
The first of these new closed-end investment companies will probably be created in France in 2011.
8
Money Market Funds
The definition of the “money market funds” category is under revision, a final decision being expected at
the end of 2010. As in other countries of the European Union, it will follow the classification decided by
CESR (the European regulator). It is surprising that the European regulator gives a high importance to
the ratings which in the recent past have shown the limits of their relevance.
Distribution
A new law governs links between the producers and the distributors of OPCVM.
This text requires that distributors establish written agreements with management companies.
The management company provides the distributor with all necessary information for the appreciation of
the financial c haracteristics of t he i nstruments an d t he distributor ha s t o s ubmit to t he management
company, before their distribution, each advertising document to verify its compliance with the statutory
prospectus.
b- The UCITS IV Directive
The U CITS I V D irective, adopted o n 13 J uly 2009, w ill br ing m ajor r egulatory developments t o t he
European asset m anagement m arket. This t ext w ill have a s trong impact on t he as set m anagement
activity and the distribution of Ucits.
st
The Ucits IV “Level 2 measures” were adopted the 1 July of 2010. AFG collaborates closely with French
Authorities an d R egulator t o enc ourage a f ast i mplementation of t he di rective i nto nat ional law as t he
st
Directive will apply from 1 July 2011.
AFG c reated a ded icated w orking gr oup, or ganises t opical c onferences an d el aborated educ ational
notes a imed at i ts members t o hel p t hem t o adapt t heir op erations a nd s ystems i n or der t o m ake t he
most out of the opportunities offered by the Directive.
c- Pensions
No n ew development i n 2009 but t he 2 010 p ension r eform c ould have a positive impact on pension
savings. Perco assets were up to 3 billion euros in 2009 (+63%).
d- Tax rules, VAT and double tax treaties
In 2010 new tax rates and new rules impacting investors in funds were introduced.
Income
When FCP or SICAV distribute their income, shareholders are taxed on the assumption that they derived
their income directly from the fund.
Individuals:
No change: Interests deriving from bonds are taxable at progressive income tax rates which range up to
40% with no change, or, upon election of the holders, at a fixed rate of 18 % plus 12.1 % of social taxes
No change: Dividends on shares are taxable at progressive income tax rates with a reduction and a tax
credit, with no change or, upon election of the holders at a fixed rate of 18% plus 12.4 % social taxes.
Companies:
No change: application of a corporate tax of 33.33 % plus 3.3 % for additional and social levies.
9
Charities:
Charities, which were tax exempt on French source dividends, are now taxable at the rate of 15%.
Capital gains
Individuals:
st
Realised capital gains are taxable since 1 January 2009 at a fixed rate of 18% only if the total proceeds
from the sale of securities realised during the calendar year exceeds € 25,730. Realised capital gains are
now subject to social taxes at the rate of 12,1% regardless of the proceed from the sale (no threshold).
Companies:
No change. Corporate tax on realised capital gains and unrealised capital gains except for life insurance
companies. FCPR and UCITS invested in shares for 90% of their assets are not concerned.
Other rules need to be noticed:

st
- In t he individual i ncome ar ea, a gl obal c eiling of s ome t ax adv antages was instituted on 1
January. The amount of the tax reduction cannot be more than € 25,000 plus an amount of 10%
of the taxable income. Private equity funds (FCPI and FIP) are concerned by this disposition.
- The “carried interest” taxation is now set by law and is taxable at a specific rate of 30%;
- We hav e di fficulties with t he P rotocol t o t he F RANCE/US T reaty because t he French ‘ Fonds

Communs de P lacements’ ar e r egarded as par tnerships an d as s uch t hey c annot c laim b y
themselves the benefit of the reduced withholding tax on the dividends received from their US
shares.
5. Corporate governance – major developments (From January 1, 2009 through to

June 30, 2010)
AFG still strongly encourages its members to exercise their voting rights.
In order to help them to elaborate their voting policy on the exercise of voting rights as shareholders of
listed companies, AFG regularly updates its “Recommendations on Corporate Governance” (“Hellebuyck
Code”), first published in 1998. The latest version that was released in January 2010 is available on the
AFG website.
AFG also continues its monitoring program focused on SBF 120 companies by alerting AFG members to
resolutions that breach those recommendations (available on the AFG website).
6. Governance of management company / Fund governance issues (From January

1, 2009 through to June 30, 2010)
AFG, who plays a k ey r ole i n es tablishing bes t pr actice r ules f or t he asset m anagement industry, has
decided to revise its codes of Ethics.
In order to contribute to the self-regulation of the industry, AFG has updated its Code of Ethics. These
new r ules ha ve b ecome p rofessional s tandards app lying t o t he e ntire i ndustry as t he c ode has bee n
officially approved by French Authorities (AMF).
The Code of Ethics includes the following main innovations:
- Prevention and management of conflicts of interest, identification of the persons who may be
exposed to t hem, dev elopment of r isk mapping, s pecial c are t o be t aken f or i nter-portfolio
transactions, and provisions to prevent market timing
- Best-effort obligations, particularly when organising internal control and compliance systems,
and measures to prevent late trading
- Rules for implementing regulations on Know-Your-Customer and customer disclosure
- Oversight of personal transactions.
10
AFG i s c urrently e laborating s pecific c odes of c onduct: a code of c onduct f or v enture c apital f und
management c ompanies, a c ode of c onduct f or em ployees’ s avings f unds and a c ode of c onduct
concerning real-estate investment
a- Private Equity Funds
The 2010 Finance Act has introduced new requirements for some private equity funds:
So c alled “ Income t ax F CPI a nd F IP” and “wealth t ax r elief f unds ( FCPR, F CPI a nd F IP)” will h ave 8
months to reach 50% of their investment quota and 8 months to achieve the rest. This too strict deadline
period begins from the fund subscription closure date.
An exception is included for funds whose purpose is to invest more than 50% of their assets in the share
capital of JEIs (young innovative companies). These funds will continue to benefit from a period of two
financial years (i.e. up until 30 months) to reach their ratio.
The 2010 Finance Act also stipulates that investors in wealth tax vehicles (funds and holding companies)
must be i nformed annua lly of t he det ailed am ount of fees and c ommissions t hey pa y an d t hat a
framework for remuneration requirements for operators marketing these vehicles should be established.
The procedures for providing this information and establishing this framework will be set out by decree.
In add ition, AFG, in c ollaboration with t he F rench pr ivate e quity as sociation (A FIC), is elaborating a
specific code of conduct for private equity fund management companies.
b- Socially Responsible Investing (SRI) Funds (From January 1, 2009 through to

June 30, 2010)
In M arch 20 08, t he AFG’s S RI c ommittee, in c ollaboration with the F rench Social I nvestment F orum
(FIR), set up a working group to update its Transparency guidelines to support the development of SRI
and to improve information on actual fund practices.
A ne w v ersion of t he E uropean G uidelines was adopted b y t he E urosif B oard ( European Sustainable

Investment Forum) in October 2009.
The AFG Board decided to make the French Code mandatory for all public funds bearing the SRI brand
in December 2009.
Three enhancements to the new version of the French Code could be unveiled: definitions of SRI-related
terms; adaptations to accommodate the new asset classes and management techniques in the SRI fund
universe, and an accompanying handbook with practical advice for asset managers on how to apply the
Code.
The ne w version of t he Code has s ought t o s implify and r ecast c ertain i ssues i n order t o m ake S RI
clearer, both for savers and for the intermediaries that advise them.
11
8. Other major issues and developments (From January 1, 2009 through to June 30,
2010)
a- Main issues at the center of domestic lobbying activities
In 2009 , c ommunication w as f ocused on t he pr omotion of t he U CITS IV and t he s etting u p i n P aris of

hedge f unds and f oreign as set m anagement c ompanies. T hree an nual pr ess c onferences w ere
organised as compared to only one the previous years and press releases were systematically translated
in English.
Close contacts with Members of Parliament continued, in particular through the financial Observatory of
AFG.
b- Publications /studies
In a ddition t o t he a nnual report, asset m anagement c ompanies d irectory and ne wsletter which ar e
published on a regular basis, the AFG has developed brochures and professional guides on the following
issues: “Recommendations on conventions of distribution”, “Taxation of commissions”, “OPCI (real estate
funds)” and “Content of annual accounts of UCITS”.
AFG also contributed to a study on the entrepreneurial asset management companies in France in 2009.
c- Conferences & workshops
Following the AFG annual ge neral meeting, several conferences were organised for the attention of all
our members that were focused on three following topics: “The asset management company, a French
model?”, “ The E uropean r egulation of U CITS”, “ Role of l ong t erm i nvestment i n t he f inancing of t he
economy and pensions”.
AFG al so t ook par t t o ev ents i nvolving t he as set management i ndustry s uch as a conference on
pensions at the “Forum GI”, a symposium on financial regulation in partnership with Les Échos, an asset
management Forum organised by l’Agefi. The AFG also took part to the Patrimonia conference and the
Fund Forum.
Throughout the year, AFG organised several conferences on topical events:
- European Institutional Asset Mana gement S urvey 2009 : m anagement of of i nstitutional investors’
reserves
- Transposition of the third directive on anti money laundering.
-UCITS IV : state of play and negociations
-Professional certification and related tools offered by AFG
-The project of directive on Alternative Investment Fund Managers
-New Code of Ethics
-The latest evolutions on savings taxation
- The entrepreneurial asset management companies
d- Educational seminars & training courses
It has been a very busy year for training at AFG.

From 1st July 2010, a Certification programme concerning the financial and economic environment will
be r equired f or s everal c ategories of pr ofessionals working i n t he f inancial i ndustry in F rance ( Asset
managers, Analysts, people in charge of post market, sales, compliance officers etc.) AFG Asffi
Formation, the training subsidiary of AFG, has, in partnership with the banking training organisation been
awarded the agr eement f rom t he F rench F inancial R egulator ( AMF), t o m anage a nd or ganise this
examination. Together we have published a training manual, covering the entire syllabus required to take
the E xam and an onl ine training s ervice with a data-base of questions (regularly updated) is av ailable.
Recently at AFG we ha ve i ncluded t he c ertification exam s yllabus in our or iginal asset m anagement
programme (PRAM). AFG is al so of fering short specialised pr ogrammes on technical issues related to
private e quity, anti money l aundering, derivatives and c ertification. We also of fer t ailor m ade
programmes on both national and international level.
12
Germany Country Report

2008 2009 2010-06-30
Population (million) 82.0 82.0 82.0
GDP (EUR billion) 2,495.8 2,407.2 1,211.7*
Real GDP growth (%) 1.3 -1.7 -0.4*
Inflation rate (%) 2.6 0.4 0.3*
Unemployment rate (%) 7.4 7.5 7.5
Stock market capitalisation (EUR billion) 830.6 927.3 931.3
Stock market capitalisation (% of GDP) 33.3 38.5 -
Bond market capitalisation (EUR billion) 3,250.2 3,326.6 3,352.2
Bond market capitalisation (% of GDP) 130.2 138.2 -
Household gross savings ratio (%) 11.4 10.0 6,25**
Household financial wealth (EUR billion) 4,450 4,641 4.738,6
Average per capita financial wealth (EUR) 55,048.78 56,597.56 57,787.80
Sources: Deutsche Bundesbank, DESTATIS Statistisches Bundesamt
*half year **2nd quarter
Table 2: Net assets by the fund industry in Germany

(EUR billion)
2010-06-
2006 2007 2008 2009
30
Home-domiciled UCITS 271.552 266.064 184.920 220.934 228.193
Home-domiciled non-UCITS 741.881 775.810 719.978 798.806 834.754
Funds domiciled abroad and

promoted by national 268.552 322.566 259.233 322.184 331.470
providers
Total AuM 1,281.985 1,364.440 1,164.132 1,341.924 1,394.417
Table 3: Net sales of investment funds in Germany

(EUR million)
2010-06-
2006 2007 2008 2009
30
Home-domiciled UCITS -6,245.5 - -15,638.5 8,043.4 5,056.9
13,444.0
Home-domiciled non-UCITS 41,153.3 17,390.8 36,364.9 25,280.6
34,479.1
Foreign domiciled funds
promoted by national 30,193.5 -13,727.5 -12,049.9 2,261,7
providers 45,827.5
Total net sales 65,101.3 66,862.6 -11,975.4 32,358.4 32,599.2
Foreign-domiciled funds
promoted by foreign
3,037.0 -7,938.5 4,118.6 1,929.6 1,296.2
providers
In terms of total net assets, looking at 2009 and mid 2010 there is a strong rebound even leading to
all-time hi ghs of EUR bn 1,342 ( 31 D ec 2009) a nd 1,393 ( 30 J un 2010). I n d etail, however, t he
pattern is quite inhomogeneous as regards the r esults w ithin the d ifferent s egments of the market,
their development throughout 2009 and the first half of 2010, and the underlying driving factors of net
sales and performance.
The AuM of home-domiciled UCITS levelled off between the figures at the end of 2007 and the drop
down in l ate autumn of 2008. T he increase by EUR bn 43 is predominantly performance-driven as
there are net sales of EUR bn 13 o nly (EUR bn 8 in 20 09 and EUR bn 5 i n the r unning year). In
home-domiciled non-UCITS, on the contrary, well-balanced influences of both, net sales (attributing
to approx. 46 percent) and performance (approx. 54 percent) were visible in 2009. When looking at
the m id-2010 f igures, the influence of net s ales ( attributing t o a n ex tent of 70 percent) was m ore
important. Net s ales of EUR bn 25 .3 i n t he c urrent year s how t he s trong i nterest of es pecially
institutional investors in the home-domiciled non-UCITS segment.
Round-trip funds exhibited a completely different picture: Though they had suffered from heavy net
redemptions of EUR bn 12 in 2009 and experienced only a slight recovery in net sales in the first half
of 2010 (EUR bn 2.3), net assets rose by EUR bn 70 since the end of 2008, thus revealing a purely
performance-based recovery.
In a total market perspective, net sales in the first half of 2010 (EUR bn 32,6) are at the same level
as the net sales of the complete year 2009 (EUR bn 32,4).

3.1 Key Trends in the UCITS Market
Table 4: UCITS assets by fund type

(EUR billion)
2006 2007 2008 2009 2010-06-30
Equity 129.5 130.4 73.6 98.9 97,0
Bond 69.7 62.9 50.5 51.7 55,4
Balanced 22.3 27.5 29.2 30.6 35,2
Money Market 32.7 27.3 15.1 9.7 9,3
Fund-of-Funds 13.1 13.3 13.9 17.4 18,2
Other 4.2 4.7 2.5 12.6 13,1
Total 271.6 266.1 184,9 220.9 228,2
of which
 Guaranteed 0.0 0.0 0.1 0.1 0.1
 ETFs 17.6 19.9 16.8 23.8 24.5
 Absolute return 1.2 4.0 5.3 5.9 7.6
 SRI 1.9 2.4 3.0 2.3 3.2
Table 5: Net sales of UCITS by fund type

(EUR million)
2010-06-
2006 2007 2008 2009
30
Equity -7,061 -7,317 -2,948 5,798.9 -1,850.4
Bond -1,609 -5,701 -12,602 2,369.2 2,502.0
Balanced 587 3,562 7,577 3,110.6 3,783.7
Money Market 393 -4,752 -11,792 -5,854.3 -836.6
Fund-of-Funds 1,812 48 4,067 983.0 1,157.2
Other -368 716 59 1,636.0 300.8
Total -6,245 -13,444 -15,639 8,043.4 5,056.7
of which
 Guaranteed 0 0 0 2.6 6.0
 ETFs 3,218 1,333 3,709 2,480.2 145.4
 Absolute return -203 1,220 0.6 385.4 1,648.4
 SRI 671 334 -98.0 170.8 128.7
Tables 4 and 5 underpin in detail what has been said in commenting the main developments visible
in tables 2 and 3.
As regards equity funds, the constant net inflows of EUR bn 5.8 in 2009 came to a stop in 2010. Until
the end of June EUR bn 1 .9 outflows have been registered. S ome retail i nvestors may have taken
the advantage of go od equity p erformance to c hange t heir investments t o “ more s ecure” bo nd or
balanced assets. This results in a growth of assets by bond and balanced funds by 10 percent and
20 per cent respectively s ince 200 8. T he out flows out of money m arket f unds s eem t o dec line.
Whereas i n 20 09 t hey r eached nearly EUR bn 6, t he out flows unt il t he m idyear of 2010 remained
below EUR bn 1. In the first six months of 2010 investors showed strong interest in absolute return
products. Inflows of EUR bn 1.6 indicate that investors are interested in strategies which do not rely
on a single asset class.
In the ETF market which is dominated by products covering equity indices, the development in 2009
reflects the situation in equity funds in general with some more pronounced sales effects. The ETF
segment gr ew f rom EUR bn 16. 8 at t he end of 200 8 up t o EUR bn 23 .8 at year end 2009 w hich
means an increase by 41.5 percent. In the first half of 2010 net sales declined to EUR bn 0.1 after
EUR bn 2.5 in 2009. Nevertheless, it becomes clear that investors actively f ocused on ETFs more
than they did on equity funds in general.
3.2 Key Trends in Other National Regulated Funds
Table 6: Assets of other national regulated funds

(EUR billion)
2010-06-
2006 2007 2008 2009
30
Real estate 75.545 83.426 84.252 87.076 88.036
 Open-ended funds 75.545 83.426 84.252 87.076 88.036
Alternative management 1.090 0.763 0.506 0.406 0.429
 Hedge funds 0.718 0.434 0.244 0.148 n/a
 Fund-of-hedge funds 0.371 0.329 0.262 0.257 n/a
Special funds 665.246 691.621 635.220 711.323 746.289
Other n/a n/a n/a n/a n/a
Total 741.881 775.810 719.978 798.806 834.754
Table 7: Net Sales of other national regulated funds

(EUR million)
2010-06-
2006 2007 2008 2009
30
Real estate -7,395.5 6,607.8 627.0 3,214.6 2,120.4
 Open-ended funds -7,395.5 6,607.8 627.0 3,214.6 2,120.4
Alternative management 509.6 -340.9 -210.8 -102.8 12.9
 Hedge funds 476.9 -285.2 -172.7 -77.1 n/a
 Fund-of-hedge funds 32.7 -55.7 -38.1 -25.7 n/a
Special funds 48,039.2 28,212.2 16,974.6 33,253.1 23,147.3
Other n/a n/a n/a n/a n/a
Total 41,153.3 34,479.1 17,390.8 36,364.9 25,280.6
2009 and t he f irst hal f of 2010 once ag ain und erline the i mportance of S pecial f unds (investment
vehicles sold only to institutional in vestors) and open-ended r eal estate f unds for the G erman fund
sector. Against great odds, open-ended real estate funds have strengthened their position in terms of
net assets and net sales. Though 11 of them have still suspended redemptions and subscriptions of
fund units, AuM grew by about EUR bn 3.8 since the end of 2008 based on net inflows of EUR bn 3.2
in 2009 and EUR bn 2.1 from January to June 2010.
By m id-2010 h ome do miciled S pecial f unds r eached an al l-time hi gh i n t heir ne t as sets ( EUR bn
746.3) as a result of strong inflows (EUR bn 33.3 in 2009, EUR bn 23.1 in the first half of 2010) and
good per formance. T he net s ales f igures ar e c learly below the levels of 2005 and 200 6. In 2 009,
however, they are twice as high as in 2008. The recent trends in net sales are also positive and lead
to t he expectation of ex ceeding the 2 009 r esults u ntil t he e nd of 20 10. I nvestments b y insurance
companies, foundations and commercial banks are the main drivers of this development. Moreover,
one needs to bear in mind that the tremendous inflows registered by the mid of the decade did not
always stem from f resh money, but w ere al so gen erated b y reorganisation of institutional as sets.
When focusing on specialised administration services, some investment companies (“Master-KAG”)
convinced investors to shift assets managed within discretionary portfolios into the legal structure of
Special funds, thereby taking advantage from unified legal and tax reporting.
4. Regulatory and taxation issues
4.1 Regulatory developments
2009 has seen only few new developments directly influencing the German investment fund regime.
Due to the financial crisis the regulatory bodies in Germany have started close scrutiny on the legal
framework for bank ing and i nvestment bus inesses. F irst r egulatory m easures ( see 9. 2.) as
consequence of t he c risis hav e bee n t aken i n au tumn 2009 w ith r egard t o c redit a nd f inancial
institutions as well as investment companies which are now obliged to document investment advice
given to retail investors according to the German Securities Trading Act (Wertpapierhandelsgesetz).
Amidst of 2009, amendments to the Deposit Guarantee and Investor Compensation Act
(Einlagensicherungs- und Anlegerentschädigungsgesetz) have passed the German Parliament. With
this r evision a pr otracted and c ontroversial discussion r egarding the as signment of G erman
management c ompanies t o the C ompensatory Fund of S ecurities Trading Companies
(Entschädigungseinrichtung f ür Wertpapierhandelsunternehmen, “ EdW”) has c ome t o an en d.
Management companies will a lso be assigned t o the “ EdW” i f t hey provide c ollective portfolio
management under de legation f or an i nvestment f und a dministered b y a nother m anagement
company. G erman l aw s tates t hat the m ere l icense t o pr ovide t his s ervice i s s ufficient f or an
assignment to this institution, irrespective of the actual activities of the management company.
In late 2008, 12 open-ended real estate funds and one fund of funds had to temporarily suspend the
redemption of units due to massive outflows caused by the financial crisis. In order to prevent similar
situations in future crisis scenarios, BVI published a package of proposals for legislation to improve
the liquidity management of open-ended real estate investment funds at the beginning of 2009. A key
element was an o bligatory a nnouncement per iod f or r edemptions of i nstitutional investors.
Nevertheless, no legislative measures were taken in 2009.
Not u ntil May 2 010, t he German Mi nistry of F inance i ssued a b ill on r estructuring of t he legal
environment o f o pen-ended r eal es tate f unds. T he d raft f or a l aw to s trengthen investor pr otection
and improve the functionality of the capital markets (Gesetz zur Stärkung des Anlegerschutzes und
Verbesserung d er F unktionsfähigkeit d er K apitalmärkte) c ontains pr ovisions f or i mproving t he
liquidity m anagement of open -ended r eal es tate f unds b y way of c ertain m inimum hol ding p eriods
and r edemption p eriods f or i nvestors. I n t his d iscussion BVI ar gues f or a w ell-reasoned r eform i n
order to preserve this highly established investment product especially for retail investors.
With regard to investor protection, the proposal inter alia seeks to improve the service of investment
advice b y implementing s tandards f or adequ ate investor i nformation ab out f inancial pr oducts ( see
9.2.). F urthermore, i t ho lds r eporting a nd t ransparency r equirements i n or der t o pr event c reeping
acquisitions.
A new law against abusive securities and derivatives transactions came into force in August 2010. It
is supposed to extend the prohibition of naked short selling to all kinds of securities, as well as Euro-
currency derivates and c redit d efault s waps without a hedg ing p urpose. I n t his c ontext, B VI has
pleaded against such purely national regulation and fears negative impact on the German investment
industry.
4.2 Pensions
In 20 09 n et s ales of t he s o-called “ Riester” pens ion based o n i nvestment f und s aving p lans k ept
growing. By en d of 2 009, the t otal n umber of t hese plans r ose b y m ore t han 10 p ercent t o 2. 63
million contracts and another 3 percent to 2.71 by mid-2010. Against the background of a challenging
economic situation and a certain saturation of the market, the halving of the growth rate compared to
2008 was no t s urprising. N evertheless, t he gr owth of about 242, 000 c ontracts i n t he year of t he
biggest economical decrease in Germany since the end of World War II is a remarkable result and
shows the further potential of these plans. “Riester” pension is a third pillar pension product enjoying
state support through matching state contributions and tax benefits.
In 2009 a reform of marriage law was introduced which has influence on any provider of occupational
or private retirement saving plans. In case of divorce, providers are obligated to inform family courts
about p ensions r ights ac quired during t he p eriod of m arriage a nd – under certain c ircumstances –
have t o admit t he f ormer spouses of t heir c lients as new b eneficiaries to t heir r etirement pr ovision
systems. The r eform i ntends t o ac hieve f airer pens ion r ights adj ustments i n c ase of di vorce an d
leads to higher administration efforts on behalf of pension providers. BVI is actively supporting joint
initiatives with ot her product provider gr oups to establish uniform and pr actical c alculation methods
and procedures for the notification duties.
nd
The BVI concept of a purely investment fund based 2 pillar pension product has been finalised in
early 2009. The initiative was part of BVI’s political position with regard to the federal elections of fall
2009. To support BVIs’ lobbying activities towards extending second pillar occupational pensions to
investment fund products, a fact sheet has been produced which describes the advantages of pure
fund vehicles within occupational pensions. In 2010, the project gained momentum as a result of a
similar pr oposal tabled by t he m inistries of ec onomics of t he G erman f ederal s tates. T hey ar e
planning a legislative initiative in the Bundesrat (“upper house” of the German parliament) toward a
nd
new 2 pillar pension based on so called “AS funds”. These dedicated investment funds for old age
provision, introduced by the German legislator in 1998, lived in the shadows ever since because they
had not b een gr anted an y s tate al lowances. B VI welcomes t he i nitiative as t ailwind f or i ts ow n
agenda and contributes to the discussion.
4.3 Tax rules, VAT rules and double tax treaties
No new t ax r ates and new r ules i mpacting i nvestors i n i nvestment f unds have been i ntroduced i n
Germany in 2009-2010.
4.4 Regulation on Distribution
In a utumn 200 9 n ew regulation h as be en i mplemented i nto the G erman S ecurities T rading Act
(Wertpapierhandelsgesetz) in order to improve investment advice to retail investors. Since the
beginning of 2010 each advice has to be recorded in writing in terms of helping investors to optimise
their legal position in cases of wrongful advice. This obligation applies to credit and financial
institutions as well as i nvestment management c ompanies pr oviding i nvestment ad vice. B VI was
successfully lobbying for an exemption with regard to professional investors. Since only a handful of
BVI members ar e pr oviding i nvestment adv ice t o r etail c lients, the i mpact of t he ne w l egislation at
first s eemed to be manageable. Nevertheless, w henever i nvestment adv ice is gi ven with r egard t o
investment funds as w ell as ot her f inancial i nstruments, t he c omplex i mplementation of t he ne w
regulation had its negative influence on the distribution of financial products, e.g. the distribution of
investment funds.
In 20 09 t he G erman F ederal M inistry of C onsumer P rotection in a ddition launched an initiative t o

force di stributors t o i nform i nvestors abou t f inancial i nstruments v ia a s hort an d c lear information
sheet called “ Produktinformationsblatt” ( PIB) on voluntary basis. T his i nitiative was di scussed
controversially within t he f inancial industry. In t his c ontext BVI c alled attention t o t he European
developments concerning the Key Investor Information and “PRIPs”, the EU initiative for
comparability of savings products. Meanwhile, this initiative has been integrated into the recent draft
for a “Gesetz zur Stärkung des Anlegerschutzes und Verbesserung der Funktionsfähigkeit der
Kapitalmärkte“ published i n Ma y 2 010, w hich would make a P IB m andatory. As a begi nning t he
Ministry has met the BVI´s concerns stating that the Key Information Document according to UCITS
IV would replace the PIB for funds and could serve as a model for other financial products.
In 2009 BVI continued providing an evaluation service for its members with respect to shareholders’
meetings agendas of the 200 largest German as well as EuroSTOXX companies focusing on critical
issues (“Hauptversammlungsservice”). The service is custom-made for BVI by a specialised service
provider and assists BVI members in exercising voting rights on behalf of fund unit holders. Until the
end of 2009 the service was funded out of BVI budget; since then, BVI members are purchasing this
service directly from the service provider.
6. Fund governance
In 2009 BVI, i n c o-operation w ith t he F ederal F inancial S upervisory Authority (BaFin), f inished a
major r evision of i ts C ode of C onduct ( “BVI-Wohlverhaltensregeln”) i n or der t o adjust i t t o r ecents
changes of legislation, mainly in the area of conduct of business and organisational requirements for
fund managers. As a result, the BVI-Wohlverhaltensregeln provide for exhaustive guidance on how
to implement the new legislative requirements in practice.
BaFin has gr anted par ts of t he B VI-Wohlverhaltensregeln bi nding s tatus as i nterpretational

guidelines f or r egulations of t he G erman I nvestment A ct r eferring t o c onduct o f bus iness r ules. I n
turn, BaFin abstains from releasing administrative regulation in this area.
From 2009 to mid-2010, no new product lines were launched in Germany.
Domestic lobbying activities
In Germany, the year 2009 was marked by federal elections in autumn, bringing nearly all legislation
to a ha lt. The program of t he ne w g overnment i ncludes an o verhaul of t he G erman s upervisory
system. The supervisory authority BaFin is supposed to be focused on market supervision, whereas
the supervision of banks and insurance undertakings would be brought together under the roof of the
Bundesbank. This issue is still under discussion – and not a priority for BVI, as only minor changes in
daily business of the industry are to be expected.
The financial transaction tax is still heavily discussed in Germany. The Ministry of Finance is
considering implementation of such a t ax on national b asis. A lthough G ermany was very m uch i n
favour of a pan European strategy on transaction taxation, public opinion has taken over. In
Parliament, the issue is being discussed controversially. The proposals for a tax rate range from 0.1
to 5 basis points for regularly trades up to 1.5 % on specific, yet to be defined transactions (starting
from 1 ,000 € t rades), as proposed b y t he s ocial d emocratic p arty. BVI i s s trongly opposing these
ideas since the tax burden would lie with the ultimate investor.
Regarding the upcoming Single European Payment Area (SEPA), a European initiative for an
electronic financial infrastructure within the Euro zone, BVI supports a SEPA-migration end-date as
long as the following preconditions will be met:
1. legal s olution f or s imple and c ost-efficient r einterpretation of t he existing direct de bit/collection

authorisation procedure into a SEPA mandate,
2. national (= German) solution by the banking sector to ensure that the so-called "Sichtlastschrift"
(direct debit due at sight) is operational under SEPA and
3. availability of an enlarged "remittance i nformation" field of at least 400 c haracters ( SEPA Credit
Transfer, SCT as well as SEPA Direct Debit, SDD) instead of the envisioned 140 characters.
Presuming t he provision o f t hese f eatures, BVI es timates t hat appr oximately 30 - 36 m onths ar e
needed f or p lanning and implementation of t he m igration. T wo s eparate end-dates s hould h elp
minimizing the risk of unexpected problems by unbundling the processes of migration. At the same
time it would help users to allocate the manpower needed for the implementation; otherwise, demand
for ex perts might es calate. B VI c onsiders t he end of 201 3 as t he e arliest pos sible e nd-date. S CT
should be dealt with first, followed by SDD.
Standards
FundsXML, a s tandard f or dat a exchange on investment i nformation s upported b y t he f our

associations AFG (France), BVI (Germany), IFR (Denmark) and VÖIG (Austria), will be the standard
interface f or t he de livery of f und and c ompany information t o BVI. A ll G erman investment f und
companies as well as the foreign fund companies represented in BVI statistics should be able to use
this means for dat a c ommunication. T he G erman of ficial ga zette, e lektronischer B undesanzeiger,
plans t o us e F undsXML f or r eceiving t he data necessary f or t he l egal r eporting ( especially an nual
and half annual reports and tax information).
BVI ac tively s upports s everal m ajor pr ojects t o s tandardize k ey pr ocesses a long t he transaction
chain of c ross-border and dom estic securities t rading, t rade m atching and t rade s ettlement. With
these initiatives BVI is spearheading the straight-through-processing efforts within the German asset
management industry in order to enhance efficiency and operational safety.
In 2010 BVI p ushed f or m ore market penet ration of fund pr ocessing bas ed on t he I SO-20022
standard within t he G erman as set-management c ommunity. BVI s upports a nd assists the s ervice
provider “WM-Daten” to implement a website which contains the European Funds Processing
Passport (FPP).
BVI pr ovides as sistance t o t he w ork of t he I nternational S tandardization O rganisation I SO,

specifically as regards t he r eview of t he I SIN ( ISO6166) s tandard as well as t he r ange of I SO
identifiers for parties.
Seminars, workshops and business education
The s eries of s eminars and workshops or ganised by BVI p lay a vital par t of t he as sociation’s
membership services. In the first half of 2010 a total of 20 “members only”-events were attended by
1,000 participants.
In J anuary 2010 t he s econd gr oup of t he s o-called I nvestment-Fachwirt or B achelor of I nvestment

(CCI) passed its final examination. The Frankfurt Chamber of Commerce introduced the Investment-
Fachwirt in 2 006 as t he n ext s tage of pr ofessional t raining. T he f irst c ourses s tarted i n F rankfurt;
meanwhile ad ditional l ocations for preparatory courses have been established, including Trier. This
city attracts students from Luxemburg financial institutions who are looking for ways to improve their
career opportunities. The Investment-Fachwirt has been developed by BVI together with its members
and the trade union. Its main target groups are investment specialists or people with a professional
background in an investment company of at least five years. In a two year-course they will deepen
their k nowledge of ec onomics and l egal as pects of t he f und bus iness and will t hen c hoose t o
specialise e ither i n t he f ield of por tfolio m anagement, marketing and d istribution or f und c ontrolling
and risk management.
The oc cupational i mage “ investment s pecialist” ( “Investmentfondskaufmann”) i nitiated by B VI has

now a f irm pl ace i n t he human r esources depar tments of our m embers. I t i s b eing t aught bo th in
Frankfurt and Munich. Currently, some 150 young people a year pick up this career.
Publications
Since 2002 B VI issues a r egular b iweekly newsletter i nforming B VI m embers abou t l atest
developments r elevant t o the i nvestment i ndustry. T he B VI n ewsletter c omprises i nformation on
political issues at national and international level, legal, tax and pension news, media coverage and
changes to upper management and has developed over years to form a major information medium
for the German investment community.
BVI offers information materials about investment funds for different target groups. The publications
can be or dered by m ail, e -mail ( info@bvi.de) or do wnloaded f rom t he i nternet (www.bvi.de). T he
following items are currently in great demand:
• Occupational p ensions – directly with investment funds - four-page f lyer about t he B VIs
concept of t he “Direktfondsrente”, t he investment industry’s proposal for a pur ely f und-based
vehicle for occupational pensions.
• “Riester-Rente with investment funds” – publication addressing essential questions with regard
to state-funded third pillar retirement provisions called “Riester-Rente” and illustrating potential
returns of fund based Riester solutions.
• BVI f act book with d etailed i nformation about latest de velopments c oncerning t he G erman
investment industry for retail and institutional investors.
• Rulebook for investment companies „Handeln im Interesse der Anleger“ containing standards
for good and responsible conduct of business by the German fund managers.
• Brochure on S pecial O EREF providing general i ntroduction to G erman O pen-Ended R eal

Estate Funds (OEREF) for institutional investors.
• Tax brochure providing annual information on taxation of fund investment profits for retail and
institutional investors.
• CD-ROM: „Investmentfonds – einfach praktisch“ – an interactive presentation with basic

information a bout i nvestment f unds as well as c alculation pr ograms f or s avings pl ans and
withdrawal plans.
• BVI t eaching a ids „ Hoch i m K urs“, c onsisting of a pupi l m agazine, a t eacher br ochure with
more bac kground i nformation a nd s uggestions f or i nstruction as w ell as a c orresponding
webpage w ww.Hoch-im-Kurs.de. S ince 2 008 t his m edia package r eceived t hree C omenius
EDU Media Awards in the category of economic and commercial education. In 2010 the fourth
edition of “Hoch im Kurs” was released. The total circulation is 775,000 copies.
• “A l ittle hi story of i nvestment i ndustry“ - brochure p ublished on t he oc casion of t he 40t h

anniversary of BVI on March 25, 2010 with information on the development of the association
and an outline of milestones of the German investment fund industry.
Comprehensive information on investment funds in general, the current status and framework of the
German i nvestment i ndustry as well as on or ganisation an d ac tivities of B VI c an al so be f ound on
BVI’s webpage (www.bvi.de).
BVI membership structure
As of 30 June 2010, BVI represents 84 members (fund and asset management companies as well as
fund ho lding c ompanies). A s an additional c ategory, t he “ information m embership” h as pr oven t o
remain v ery at tractive t o n ew m embers. D espite he avy weather i n t he m arkets their num ber gr ew
again an d r eached 1 12 by mid-2010, gr owing t o 12 1 until 1 O ctober 2010. T he benefits comprise,
among others, access to selected areas of the BVI extranet (including statistical data), the fortnightly
BVI newsletter, the possibility to attend the BVI seminars and workshops. It also includes one page
for presentation of its services in the brochure “BVI Investment Services Directory”, serving as yellow
pages f or t he i nvestment i ndustry. “ Informationsmitglieder” c ome from di fferent c ompanies ranging
from software and IT service providers to lawyers, depository banks and accountants.
REPORT (HONG KONG) – July 2009 to June 2010

2009
The Hong Kong economy exhibited much resilience in countering the global financial tsunami and the
ensuing global recession. Although the economy contracted severely in the first quarter of 2009, it
quickly rebounded in the second quarter and continued to improve in the rest of the year. In the fourth
quarter, Gross Domestic Product (“GDP”) returned to positive year-on-year growth at 2.6%. For 2009 as
a whole, GDP decreased by 2.7%, the first annual recession since 1998.
On the trade front, Hong Kong’s merchandise exports were the most severely hit segment and the key
drag on the economy for most of the year. For the year as a whole, total exports of goods (comprising
re-exports and domestic exports) fell by 12.6% in real terms, following an increase of 1.9% in 2008.
Private consumption demand had strengthened notably since the second quarter, in contrast to the more
notable contraction in the first quarter. For 2009 as a whole, Private Consumption Expenditure (“PCE”)
fell modestly by 0.3% in real terms, after the 2.3% growth in 2008.
The labour market showed much resilience during the global crisis. After a marked rise in the early part
of 2009, the seasonally adjusted unemployment rate stabilized by around mid-year and came down
significantlyto 4.9% in the fourth quarter. The total number of job loss was 43,000 at the worst time of
the crisis. Towards the end of the year, there were signs that companies had turned more positive in
hiring workers. Likewise, the downward pressure on labour earnings abated in the latter part of the
year.
Consumer price inflation quickly subsided over the course of 2009 as the global recession led to spare
capacity around the world. Underlying consumer price inflation, in terms of the year-on-year rate of
change of the underlying Composite Consumer Price Index (“CPI”), came down steadily during the first
half, turning slightly negative from July to November. Yet, with economic recovery gathering pace,
inflation reverted back to a slight positive at 0.3% in December. For 2009 as a whole, CPI rose by an
average of 1.0%, down markedly from 5.6% in 2008.
st
1 half of 2010
The Hong Kong economy continued to show a broadly-based recovery in the second quarter of 2010,
benefited mainly from the robust growth momentum in the Mainland and other Asian economies. Real
GDP leaped distinctly further by 6.5% over a year earlier, after a growth of 8.0% in the first quarter. On
a seasonally adjusted quarter-to-quarter comparison, real GDP expanded by 1.4%.
Hong Kong’s total exports of goods surged by 20.1% in real terms in the second quarter over a year
earlier, further to the 21.6% growth in the first quarter. The Asian markets still outperformed the other
markets by a wide margin. Total exports to the Mainland continued to show a double-digit year-on-year
growth even against a higher base of comparison in the second quarter, and those to Taiwan, Japan,
Korea and Singapore all recorded double-digit growth in the region of 15-30%.
Labour market performance was somewhat mixed. Underemployment situation improved, while job
vacancies continued to rise along with a further pick-up in wages and earnings. Yet the seasonally
adjusted unemployment rate rose slightly to 4.6% in the second quarter, conceivably partly due to
frictional factors as more workers were in search of employment opportunities with better terms and
conditions.
The domestic sector held firm in the second quarter on the back of rising incomes and generally upbeat
economic sentiment. Private consumption expenditure grew solidly by 4.6% year-on-year in real terms
over a year earlier, further to the 7.1% growth in the first quarter. Despite the correction in the stock
market and concerns about the European sovereign debt problem, local consumer confidence remained
rather sanguine, as evidenced by sustained increase in spending on big-ticket items, including motor
vehicles and other consumer durables. Meanwhile, government consumption expenditure grew further
in the second quarter.
Headline consumer price inflation, as measured by the year-on-year rise in the headline Composite
Consumer Price Index (Composite CPI), notched up further from 1.9% in the first quarter to 2.6% in the
1
second quarter. Netting out the effects of the Government’s one-off relief measures to give a more
accurate indicator of the inflation trend, underlying consumer price inflation, as measured by the
year-on-year increase in the underlying Composite CPI, notched up from 0.8% in the first quarter to 1.5%
in the second quarter. The effect of the electricity charge subsidy, which faded out progressively, largely
accounted for the difference between the headline and underlying inflation rates. The higher inflationary
pressure in the second quarter took place under the backdrop of the increasingly entrenched recovery of
the local economy and a vibrant consumption market. Moreover, the robust performance of Asian
economies also contributed to somewhat stronger price pressure in the region.
2. Data on funds under management

Number and asset size of SFC-authorized funds
Details on unit trusts and mutual funds authorized by the Hong Kong Securities and Futures Commission
(“SFC”):
Number of funds Net Asset Value (“NAV”)

(US$ Million)
31-Mar-2010 31-Mar-2009 31-Dec-2009 31-Dec-2008
Bond 329 348 249,376 175,584
Equity 1,100 1,114 470,019 291,700
Diversified 89 113 40,846 32,695
Money Market 41 44 74,640 71,103
Fund of Funds 82 105 6,635 5,387
Index 84 59 74,279 42,969
Guaranteed 61 123 1,616 3,309
Hedge 11 14 676 770
Other Specialized* 7 11 8,789 4,785
Total 1,804 1,931 926,876 628,302
Umbrella Structure 164 162
Grand total 1,968 2,093
* Includes futures & options funds and leveraged funds.
Source: SFC (The data are published once a year)
The total number of SFC-authorized funds was 1,968 at the end of March 2010, down by 6.0% from end
of March 2009. Only index funds saw an increase in the number of funds (up by 42.4%). All other
categories saw a drop – guaranteed funds (down by 50.4%); other specialized funds (down by 36.4%);
fund of funds (down by 21.9%); hedge funds (down by 21.4%); diversified funds (down by 21.2%); money
market funds (down by 6.8%); bond funds (down by 5.5%) and equity funds (down by 1.3%).
In terms of NAV, at the end of December 2009, the industry saw an increase of 47.5% over December
2008. Most fund categories witnessed an increase in NAV, including other specialized funds (up by
83.7%); index funds (up by 72.9%); equity funds (up by 61.1%); bond funds (up by 42.0%); diversified
funds (up by 24.9%); fund of funds (up by 23.2%); money market funds (up by 5.0%). However, two
categories registered a drop in NAV – guaranteed funds (down by 51.2%) and hedge funds (down by
12.2%).
Origin of SFC-authorized funds
Offshore funds can be marketed in Hong Kong as long as they obtain SFC’s authorization. At the end of
March 2010, about 9% of SFC-authorized funds were domiciled in Hong Kong. They accounted for
3.5% of total NAV of all SFC-authorized funds at the end of December 2009.
2
Number of funds % NAV (US$ Million) %
31-March-2010 31-December-2009
Hong Kong 170 8.64 31,892 3.44
Luxembourg 1,195 60.72 597,705 64.49
Ireland 280 14.23 196,093 21.16
Guernsey 3 0.15 1 0.00
United Kingdom 56 2.85 40,041 4.32
Other Europe 15 0.76 682 0.07
Bermuda 23 1.17 4,951 0.53
British Virgin Island 6 0.30 25 0.00
Cayman Islands 213 10.82 9,371 1.01
Others 7 0.36 46,115 4.98
Total 1,968 100.00 926,876 100.00
Source: SFC
3. Key trends in flows

Gross and net sales by HK investors (Note 1)
(i) 2009 (Appendix 1)
In 2009, the fund industry registered gross and net sales of US$14,967.87 million and US$2,549.17
million respectively. Compared with 2008, gross sales were down by 16.7%, but the industry
managed to be back to net inflows.
Equity funds continued to account for the lion’s share of the industry sales in 2009. However,
compared with 2008, gross sales were down by 23.3% to US$8,883.01 million, accounting for 59.4%
of the industry gross total. On a net basis, equity funds witnessed an inflow of US$1,866.29 million,
compared with net outflows of US$2,722.28 million in 2008.
More than half of the equity funds sectors registered net inflows in 2009. Of which, Greater China
equity funds witnessed the highest net inflows, at US$954.77 million, compared with net outflows of
US$778.41 million in 2008. It was followed by emerging markets equity funds, with inflows at
US$483.77 million in 2009, compared with net outflows of US$443.57 million in 2008.
　
In percentage terms, European single market equity funds witnessed the largest increase in gross
sales, up by 81.7%, to US$118.76 million in 2009. In dollar terms, Greater China equity funds
recorded the largest increase: from US$2,319.51 million in 2008 to US$3,244.05 million – an
increase of US$924.54 million.
Gross sales of bond funds increased by 38.8% to US$4,067.05 million in 2009. Global bond funds
recorded gross sales of US$1,587.35 million, 24.1% up from 2008 and represented 39.0% of the
total gross inflows into bond funds. It was followed by Asia bond funds, with inflows at
US$1,052.79 million, compared with US$450.1 million in 2008. In aggregate terms, bond funds
attracted net inflows of US$2,020.83 million, compared with US$370.74 million in 2008 – an increase
of 4.5 times.
st
(ii) 1 half of 2010 (Appendix 2)
In the first half of 2010, the fund industry attracted robust inflows. Gross inflows reached
US$12,664.17 million, up by nearly 1.5 times over the corresponding period of last year. Net
inflows of US$4,468.45 million were registered, representing a turnaround from last year, when the
industry saw net outflows of US$7 million.
In the first half of the year, aggregate gross sales of equity funds totaled US$6,341.13 million,
accounting for 50.1% of the industry total – 96.6% over the same period of 2009. But the increase
paled when compared with bond funds. Gross sales of bond funds increased by nearly 4 times,
reaching US$5,152.83 million, and they took up 40.7% of the industry total. Furthermore, on a net
basis, it was the bond sectors that came first. Bond funds registered net inflows of US$2,926.55
Note1: Only retail transactions (including switches) are covered and sales attributed to institutional sources
are excluded. Data covered HKIFA members only.
3
million – 8.7 times more than the same period of 2009. Sales of equity funds only went up by 2.4
times, to US$1,681.72 million.
Out of the five bond categories, investors’ interest mainly focused on three, namely global, Asia and
emerging markets bond funds. In aggregate terms, they pulled in gross inflows of US$4,810.50
million and net inflows of US$2,824.87 million, accounting for 93.4% and 96.5% of the respective
total inflows into bond funds.
As for equity funds, Greater China region equity funds, emerging markets equity funds and sector
funds took the lead. Gross inflows into these 3 sectors totaled US$4,376.23 million, accounting for
69.0% of the aggregate inflows into equity funds. In terms of net inflows, their share was even
higher, at 83.9%.
4. Legal and regulatory developments

(a) Enhanced protection for the investing public
z In September 2009, the SFC issued a consultation paper on proposals to enhance protection
for the investing public. This included proposals to fine-tune existing regulations governing the
sale of unlisted securities and futures products to the public. Some of the key proposals are
listed below:
- Standardizing documentation in communicating key features and risks of the investment
product to investors;
- Including a product Key Facts Statement (“KFS”) in all offer documents;
- Disclosing the monetary and non-monetary benefits received by intermediaries;
- Providing a cooling off period for products where the investment is long-term, and where
there is no ready (and realistic) secondary market.
Also, the consultation paper introduced various proposals to revise the Code on Unit Trusts and
Mutual Funds (e.g. the introduction of new fund categories, KFS, etc.)
The SFC published the consultation conclusions in May 2010.
(b) SFC and Taiwan FSC signed MOU to facilitate cross listing of Exchange Traded Funds (“ETF”)
z In May 2009, the SFC and the Taiwan Financial Supervisory Commission (“FSC”) signed and
exchanged a Side Letter to a bilateral Memorandum of Understanding (“MOU”) which facilitates
crossing listing of ETF in the two markets. Under the terms of the Side Letter, ETFs listed on
the Hong Kong or Taiwan stock exchange and managed by asset managers licensed
respectively by the SFC or the FSC will be mutually recognized in each other’s jurisdiction for
the purpose of cross listings and offerings. The Side Letter strengthens regulatory
co-operation between the SFC and the FSC, in particular arrangements relating to information
sharing and confidentiality regarding management of ETFs.
z The industry in Hong Kong and Taiwan have capitalized on the cross-listing opportunities
facilitated by the Side Letter, e.g.
- The first Hong Kong ETF was cross-listed in Taiwan in August 2009. Another one was
listed in Taiwan by way of feeder fund in the same month.
- The SFC granted authorization to the first Taiwan ETF for offering in Hong Kong. And it
was listed in HK in August 2009.
(c) Enhanced Anti-Money Laundering regulatory regime

z In July 2009, the Financial Services and the Treasury Bureau (“FSTB”) launched a public
consultation to gauge views on the conceptual framework of the legislative proposal to enhance
the Anti-Money Laundering (“AML”) regulatory regime in respect of the financial sectors. The
proposal aims at addressing a number of following major deficiencies of the existing regime.
z In December 2009, the FSTB published a further round of consultation listing out detailed
legislative proposals for the New Legislation on the Customer Due Diligence and
Record-keeping Requirements for Financial Institutions and the Regulation of Remittance
Agents and Money Changers.
(d) Proposed establishment of an Investor Education Council and a Financial Dispute Resolution Centre
z In February 2010, the FSTB published a consultation paper entitled “Proposed Establishment of
an Investor Education Council (“IEC”) and a Financial Dispute Resolution Centre (“FDRC”)”.
The proposal aims at protecting and educating investors. Details are as follows:
- The proposed IEC will holistically oversee the needs of investor education and delivery of
related initiatives. It aims to improve the financial literacy and capability of the general
public by influencing their fundamental financial attitude and behavior, with a view to
4
assisting them to make better financial decisions.
- The proposed FDRC is to provide a one-stop, independent and affordable avenue for
consumers to resolve monetary disputes with the financial service providers. This offers an
alternative to litigation, which may be disproportionately costly and protracted for customers.
- Under the proposed scheme, financial institutions, such as banks or brokers, that are
licensees or regulatees of the SFC and the Hong Kong Monetary Authority (“HKMA”) should
join as members of the scheme. They would be required to follow an individual customer’s
wish and the scheme’s procedures to enter into mediation and arbitration if it had
established business connection with customer and fails to settle internally a dispute that
has come up.
- The maximum claimable amount was proposed to be set at HK$500,000, which would cover
more than 80% of the monetary disputes current handled by HKMA.
- Under the proposal, the mediation fees of the majority of the cases are within a few hundred
HK dollars. But for financial institutions, they have to pay a higher level of the case fees.
(e) Proposed disclosure of inside information

z In March 2010, the FSTB published a consultation paper entitled “Proposed Statutory
Codification of Certain Requirements to Disclose Price Sensitive Information by Listed
Corporations”. The proposal aims at enforcing listed corporations to make timely disclosure of
“price-sensitive information”. Key proposals are as follows:
- To include in the Securities and Futures Ordinance (“SFO”) a statutory requirement for a
listed corporation to disclose to the public as soon as practicable “price-sensitive
information” that has come to its knowledge.
- In defining “price-sensitive information,” the proposed definition will replicate the definition of
“relevant information” in section 245 of the SFO, which a person is prohibited from using
when dealing in the securities of a listed corporation. It is proposed that the SFO will use
the term “inside information” to refer to the “price-sensitive information” that a listed
corporation needs to disclose.
- The SFC in parallel proposed a drafted guidance on what constitutes “inside information".
(f) Proposed regulatory regime for credit rating agencies

z In July 2010, the SFC published a consultation paper concerning the “Regulatory Oversight of
Credit Rating Agencies”. The proposal aims to set up a regulatory regime to license and
supervise the activities of credit rating agencies (CRAs) in Hong Kong. Details are as follows:
- The proposal designates “providing credit rating services” as a new type of regulated activity
under the SFO, whereby both CRAs and their individual analysts will be subject to licensing
requirements and ongoing supervision in a similar manner to existing SFC licensees.
- It is intended that the new regime for the regulation of CRAs in Hong Kong will come into
effect by the end of January 2011 and that the process of licensing CRAs and their rating
analysts will commence almost immediately.
- For the purpose of facilitating the relatively short transition period from an unregulated
environment for CRAs in Hong Kong to a regulated one, the SFC proposed “grandfathering”
arrangements for existing rating analysts, subject to their being required to take a
post-licensing refresher course on local regulation instead of passing regulatory
examinations prior to being licensed.
The Hong Kong Investment Funds Association (“HKIFA”) had made submissions to all of the above
consultations.
(g) Latest survey on the fund management industry

z In July 2010, the SFC released the findings of its Fund Management Activities Survey (“FMAS”)
2009. The FMAS has been conducted on an annual basis since 1999 to collect information
and data on the general state of affairs of the fund management industry in Hong Kong. The
survey covers the fund management activities of three types of firms in Hong Kong, namely:
- corporations which are licensed by SFC and engage in asset management and fund
advisory businesses (collectively “licensed corporations”);
- banks which engage in asset management and other private banking activities (collectively
“registered institutions”), and are subject to the same regulatory regime (i.e. the SFO) as the
licensed corporations in respect of their fund management activities; and
- insurance companies registered under the Insurance Companies Ordinance (“ICO”) but not
licensed with the SFC, which provide services constituting classes of long term business as
defined in Part 2 of First Schedule of the ICO and have had gross operating income derived
from asset management.
5
z Key findings of this survey included:
- Combined fund management business (Note 2) of licensed corporations, registered institutions
and insurance companies amounted to HK$8,507 billion at the end of 2009, up from
HK$5,850 billion in 2008 (45.4% year-on-year increase in value);
- Of the total non-REIT fund management business (HK$8,433 billion), 63.9% of the assets, or
HK$5,389 billion, were sourced from non-Hong Kong investors; Of the total non-REIT
assets under management by licensed corporations, registered institutions and insurance
companies (HK$5,824 billion), 61.4% or HK$3,577 billion was managed in Hong Kong; and
- Of the total non-REIT assets managed in Hong Kong (HK$3,577 billion), 81.3% (HK$2,908
billion) was invested in Asia. Among this investment, HK$1,860 billion was invested in
Hong Kong and the Mainland.
5. Product development
y Launch of Renminbi (“RMB”) bond fund: In August 2010, the first SFC-approved RMB bond fund
was launched in Hong Kong.
6. Other major issues and development

Recent development of RMB related initiatives
y Expansion of the RMB trade settlement scheme: The People’s Bank of China (“PBoC”) and the
Hong Kong Monetary Authority (“HKMA”) signed a Supplementary Memorandum of Co-operation in
July 2010 on the expansion of the RMB trade settlement scheme. This relaxes a few policies on the
Rmb business in Hong Kong. Amongst others, financial institutions and corporations are now able to
open Rmb accounts and Rmb can be transferred between bank accounts under different names.
y Trading in the Mainland’s interbank bond market: PBoC promulgated a notice in August 2010
regarding a pilot scheme, which allows the Clearing Bank and participating banks of RMB business in
Hong Kong to conduct trading in the Mainland’s interbank bond market upon approval by the PBoC.
Furthermore, under the scheme, central banks and monetary authorities outside the Mainland can
also invest in the Mainland’s interbank bond market.
Recent development of Mandatory Provident Fund (“MPF”)
y Move to “employee choice” regime: The MPF Schemes (Amendment) Bill 2009, which seeks to
increase employees’ control over their MPF investments, was approved by the Legislative Council in
July 2009. The amendment allows employees to transfer accrued benefits derived from their
employees’ mandatory contributions from a contribution account under a registered scheme on a
lump-sum basis to another MPF scheme of their own choice at least once per calendar year. It will
be implemented upon completion of all necessary preparatory work (such as the enhancement of
computer and administrative systems) by the Mandatory Provident Fund Schemes Authority (“MPFA”)
and the trustees. It is expected that “employee choice” will be implemented in 2011.
y Data on MPF (Appendix 3): Aggregate NAV of all schemes increased from HK$259,709 million as
at Jun 2009, by 18.5% to HK$307,652 million as at Jun 2010.
Note2: “Combined fund management business” comprises fund management business and
SFC-authorized real estate investment trusts (“REITs”) management business. Due to the alternative
investment nature of REITs, they have been excluded from the detailed analysis in the report.
“Fund management business” comprises asset management, fund advisory business and other private
banking business.
“Asset management” refers to (i) the provision of services which constitute type 9 regulated activity as
defined in Schedule 5 of the SFO carried out by licensed corporations and registered institutions (excluding
assets from clients who are also licensed by or registered with the SFC); and (ii) the management of
financial assets arising from the provision of services which constitutes classes of long term business as
defined in Part 2 of the First Schedule of the Insurance Companies Ordinance (Chapter 41) (excluding
assets sub-contracted or delegated to other licensed corporations/registered institutions in Hong Kong for
management), but excludes REIT management, fund advisory business and other private banking business,
and “assets managed” shall be construed in the same manner.
6
Appendix 1 – Retail Sales & Redemptions by Hong Kong Investors 2009
TYPE OF FUND (US$ MILLION)

NET SALES/
SALES REDEMPTIONS (NET REDEMPTIONS)
A. Equity Funds
Asia Regional (excl. Japan) 680.17 786.29 -106.12
Asia Regional (incl. Japan) 81.14 121.98 -40.84
Greater China Region 3,244.05 2,289.28 954.77
Japan 42.70 79.88 -37.18
Hong Kong 238.90 170.03 68.87
Asian Single Market (non Japan/non HK) 996.36 860.93 135.43
International 262.24 291.90 -29.66
European Regional Market 98.42 162.20 -63.78
European Single Market 118.76 79.67 39.09
North American 58.07 44.82 13.25
Emerging Markets 1,529.71 1,045.94 483.77
Sector Funds 1,472.45 1,002.26 470.19
REITs-related Funds 60.04 81.54 -21.50
Sub-total 8,883.01 7,016.72 1,866.29
B. Balanced/Managed Funds 320.06 323.91 -3.85
C. Bond Funds
Global Bond 1,587.35 827.68 759.67
US 334.49 357.04 -22.55
Europe 102.37 51.87 50.50
Asia 1,052.79 373.92 678.87
Emerging Markets 990.05 435.71 554.34
Sub-total 4,067.05 2,046.22 2,020.83
D. Money Market Funds/liquidity Funds 913.77 1,146.28 -232.51
E. Guaranteed Funds 11.04 1,193.09 -1,182.05
F. Equity Index Funds 234.17 186.90 47.27
G. Fund of Funds (Traditional Long-only) 57.62 103.42 -45.80
H. Hedge Funds 22.07 8.38 13.69
I. Warrants, Futures and Options Funds 250.61 217.02 33.59
J. Other Funds 208.47 176.76 31.71
Grand total 14,967.87 12,418.70 2,549.17

Source: HKIFA (The sales and redemptions data only cover funds managed by HKIFA members.)
7
Appendix 2 - Retail Sales & Redemptions by Hong Kong Investors 2010 (from Jan to Jun)
TYPE OF FUND (US$ MILLION)
NET SALES/
SALES REDEMPTIONS NET REDEMPTIONS
A. Equity Funds
Asia Regional (excl. Japan) 665.94 527.96 137.98
Asia Regional (incl. Japan) 49.59 73.62 -24.03
Greater China Region 2,233.45 1,411.84 821.61
Japan 24.33 42.92 -18.59
Hong Kong 204.02 104.26 99.76
Asian Single Market (non Japan/ non HK) 674.81 564.90 109.91
International 120.82 140.33 -19.51
European Regional Market 37.78 89.64 -51.86
European Single Market 116.65 83.95 32.70
North American 52.24 30.81 21.43
Emerging Markets 1,248.66 804.67 443.99
Sector Funds 894.12 748.02 146.10
REITs-related Funds 18.72 36.49 -17.77
Sub-total 6,341.13 4,659.41 1,681.72
B. Balanced/Managed Funds 290.88 250.95 39.93
C. Bond Funds
Global Bond 2,884.15 994.47 1,889.68
US 243.23 187.87 55.36
Europe 99.10 52.78 46.32
Asia 1,037.09 423.07 614.02
Emerging Markets 889.26 568.09 321.17
Sub-total 5,152.83 2,226.28 2,926.55
D. Money Market Funds/liquidity Funds 365.08 501.72 -136.64
E. Guaranteed Funds 11.66 103.78 -92.12
F. Equity Index Funds 192.86 128.31 64.55
G. Fund of Funds (Traditional Long-only) 20.25 71.13 -50.88
H. Hedge Funds 40.81 15.27 25.54
I. Warrants, Futures and Options Funds 46.71 96.94 -50.23
J. Other Funds 201.96 141.93 60.03
Grand total 12,664.17 8,195.72 4,468.45

Source: HKIFA (The sales and redemptions data only cover funds managed by HKIFA members. At the end of June
2010, HKIFA members managed about 1,140 SFC-authorized funds with asset size of about US$682 billion.)
8
Appendix 3 - Data on MPF
30-Jun-2010 30-Jun-2009
MPF Schemes Number Number
Registered Schemes 39 38
Approved Constituent Funds 376 354
Approved Pooled Investment Funds 287 306
Approved Index-tracking Collective Investment Schemes 97 95
MPF Enrollment Rate*

Employers 98% 100%
Employees 99% 97%
Self-employed persons 74% 75%
Aggregate Net Asset Values of All Schemes HK$307,652 million HK$259,709 million
(including assets transferred from ORSO schemes Note3)
* Estimated figures.
Source: MPFA
***** End *****
(Prepared: September 2010)
Website: www.hkifa.org.hk
Email: hkifa@hkifa.org.hk
Note3 ORSO schemes are voluntary private occupational retirement schemes registered under the
Occupational Retirement Schemes Ordinance (“ORSO”), which has been in operation since 1993.
With the introduction of MPF, legislation has been introduced to set out arrangements for the
interface of the existing voluntary ORSO schemes with the new MPF System. The arrangement is
intended to minimize the interference with existing schemes and avoid upsetting the contractual
relationship between employers and employees. An ORSO registered scheme may be
MPF-exempted if it meets certain criteria.
9
2010 – IIFA Annual Conference
October 17 – October 21, 2010
Vina del Mar, Chile
COUNTRY REPORT - INDIA
ASSOCIATION OF MUTUAL FUNDS IN INDIA

COUNTRY REPORT – INDIA
January 1, 2009 to December 31, 2009 and

January 1, 2010 to June 30, 2010
1. Economic and financial Background

1.1 Real GDP Growth showed a turnaround from 6.7 percent in
2008-09 t o 7. 4 p ercent in 200 9-10. I n r elation t o t he pr e-
global c risis h igh growth phas e of 8.9 percent recorded
during 20 03-08, ho wever, it s uggests t he s cope f or further
acceleration.
1.2 The Indian mutual fund industry comprises 41 Asset

Management Companies managing assets of US$ 136 Bn.
(Rs.6,302 Bn.) und er 879 different mutual f und s chemes as
at t he end of J une 20 10. A t t he en d of A ugust 20 10, t he
Assets Under Management managed b y 43 Asset
Management Companies rose to US$ 151 Bn. (Rs.7,097
Bn.). T here ar e mutual f unds s ponsored b y p ublic s ector
banks, i nstitutions, pr ivate s ector ( including wholly foreign
owned) an d j oint s ector with f oreign participation. T he
regulatory f ramework i s v ery c omprehensive an d m atches
with t he bes t i n t erms of standards, pr actices and
procedures.
2. Data on Funds under Management and

portfolios
2.1 Assets Under Management as on December 31, 2009
As at end of December 2009, the mutual f und industry

managed as sets of U S $ 142.92 Bn. ( Rs. 6,651 B n.). T he
break-up of the Assets Under Management is given below:
US $ Million
Type of schemes Assets Under % to Total
Management
Income (Bond) 77,454 54
Growth ( Equity) i ncluding 42,518 30
special tax saving schemes
Balanced 3,782 3
Liquid/Money Market 17,211 12
Gilt 775 1
Gold ETFs 290 @
Other ETFs 222 @
Fund of Funds Investing 667 @
overseas
Total 142,919 100
@ Less than 1%
Exchange rate as on 31.12.2009 - 1US $ = 46.54 INR
Assets Under Management as on June 30, 2010
As a t en d of J une 2 010, t he m utual f und industry managed

assets of US $ 135.67 Bn. (Rs. 6,302 Bn.). The break-up of
the Assets Under Management is given below:
US $ Million
Type of schemes Assets Under % to Total
Management
Income (Bond) 70,679 52
Growth ( Equity) i ncluding 43,741 32
special tax saving schemes
Balanced 3,853 3
Liquid/Money Market 15,473 12
Gilt 695 1
Gold ETFs 417 @
Other ETFs 244 @
Fund of Funds Investing 568 @
overseas
Total 135,670 100
@ Less than 1%
3. Key trends in inflows

3.1 Trends in inflows
The net i nflow u nder d ifferent c ategories of f unds dur ing t he year
January 1, 2 009 t o D ecember 31, 20 09 i s indicated i n t he t able
below:
Net Inflows of Funds

Category US $ (Mn.)
Bonds (Income) 31,524
Growth ( Equity) including s pecial t ax 293
saving schemes
Balanced -189
Liquid / Money Market - 65
Gilt - 497
Gold ETFs 104
Other ETFs - 182
Fund of Funds Investing Overseas - 95
TOTAL 30,893
The net i nflow u nder d ifferent c ategories of f unds dur ing t he per iod
January 1, 2010 to June 30, 2010 is indicated in the table below:
Net Inflows of Funds

Category US $ (Mn.)
Bonds (Income) - 9,725
Growth ( Equity) including s pecial t ax 42
saving schemes
Balanced 43
Liquid / Money Market -2,108
Gilt - 97
Gold ETFs 82
Other ETFs 11
Fund of Funds Investing Overseas - 91
TOTAL -11,843

(including tax)
4.1 Securities and Exchange B oard of I ndia (SEBI) r egularly
reviews the Mutual Fund Regulations with a view to
upgrading s tandards, ensuring m ore t ransparency and
improving d isclosure. A ccordingly, S EBI has i ssued
regulatory gu idelines f or i nvestors’ protection and i nvestors’
servicing.
The important guidelines issued during the period of the

report are as under :
i. Mutual Funds ar e pr ohibited f rom offering an y indicative

portfolio and yield in their debt/ fixed income products.
ii. Portfolio of d ebt oriented c lose ended and i nterval s cheme/

plans t o be d isclosed b y t he AMCs on t heir r espective
Websites.
iii. Liquid F und Schemes and p lans ar e allowed to m ake

investment i n/ pur chase d ebt an d m oney m arket s ecurities
with maturity of upto 91 days only w.e.f. May 1, 2009.
iv. Mutual F unds ar e p ermitted t o invest i n Indian D epository

Receipts (IDRs).
v. No Mutual Fund schemes are allowed to invest more than 30

percent of its net assets in money market instruments of an
issuer.
vi. Investment i n Mi cro S chemes s uch as S ystematic

Investment Plans of Mutual Funds upto Rs.50,000/- per year
per investor is exempted from requirement of Permanent
Account Number (PAN).
vii. Entry Load abolished and upfront commission to the

distributors t o be p aid b y investors di rectly with ef fect f rom
August 1, 2009.
viii. In order to appropriately value debt securities, dual matrices
are introduced viz. Yield matrix covering securities issued by
NBFCs, R eal E state C ompanies and P TC and Yield matrix
applicable to all other sectors, w.e.f. August 12, 2009.
ix. To ens ure p arity among al l c lasses of uni t h olders, t here

would not be any distinction among unit holders based on the
amount of s ubscription w hile c harging ex it l oads w .e.f.
August 24, 2009.
x. The r evised C ode of C onduct f or I ntermediaries of Mutual

Funds has been introduced and the Mutual Funds have been
advised to report to AMFI and SEBI, if any intermediary does
not c omply with t he C ode of C onduct and t hat n o Mutual
Fund should deal with those intermediaries who do not follow
Code of Conduct.
xi. Mutual F unds s hall h ave a c omprehensive Systems A udit

encompassing au dit of s ystems and pr ocesses, c onducted
by an i ndependent auditor once i n two y ears and t he
Systems A udit Report a nd c ompliance s tatus s hould be
placed before the Trustees of the Mutual Fund. The Systems
Audit R eport/ f indings a longwith T rustee c omments s hould
be communicated to SEBI.
xii. Scheme Information Document to be uploaded on AMFI

Website two working days prior to the launch of the scheme.
xiii. For enh ancing t he r each of Mut ual F und s chemes t o m ore
towns an d c ities, t he u nits of Mutual Fund s chemes can be
transacted t hrough r egistered s tock br okers o f r ecognized
Stock Exchanges.
xiv. All t he AMCs t o ensure c ompliance with t he i nstruction of

investor informing his desire to change his distributor and/ or
go d irect without c ompelling t hat i nvestor t o o btain an N OC
from the existing distributor.
xv. Interest @ 1 5% p.a. t o be pa id t o u nit ho lders f or d elay in

dispatch of dividend warrants.
xvi. Modified s ystem of v aluation of debt s ecurities has been

introduced f rom D ecember 15, 2009 b y i ntroducing s econd
valuer. A n Aggregator S oftware s upplied t o A MCs, w ill
automatically provide the average after taking the data feeds
from both the valuers, which will be used for valuation of debt
securities.
xvii. The provisions regarding valuation of Money Market and

Debt securities effective from August 1, 2010, with a view to
ensure t hat t he value of t hese s ecurities i n the p ortfolio of
Mutual Fund schemes reflect the current market scenario.
xviii. In or der t o improve t he m anner i n which t he s tandard
warning in Advertisements b y Mutual F unds is c onveyed t o
the investors, the standard warning in audio-visual
advertisement shall be di splayed as “ Mutual F und
investments ar e s ubject t o market r isks, r ead al l s cheme
related doc uments c arefully” and n o ad dition or del etion of
words shall be made in the standard warning.
xix. The investors investing an amount of Rs.50,000/- and above

were r equired t o c omply with t he K now Your C lient ( KYC)
norms under P revention a nd Mon ey L aundering A ct, 2002
w.e.f. F ebruary 1, 2008. S EBI h as no w r emoved t his
threshold limit and accordingly, KYC has become mandatory,
irrespective of the amount of investment.
xx. In or der t o m ake N ew F und O ffer (NFO) pr ocess ef ficient,

NFO period, except for ELSS exhumes, has been reduced to
15 da ys, A MCs t o m ake i nvestments out of N FO pr oceeds
only on or after closure of NFO period, the units to be allotted
and s tate of ac count t o b e di spatched within f ive business
days from the closure of the NFO (except ELSS), the AMCs
to provide Applications Supported by Blocked Amount
(ASBA) f acility to t he investors f or al l N FOs l aunched on or
after October 1, 2010.
xxi. Non a vailability of U nit P remium R eserve f or di stribution of

dividend.
xxii. Mutual Funds to disclose on their websites and on the AMFI

Website, as well as i n t heir Annual R eports, details of
investor complaints received by them from all sources in the
prescribed format by classifying the complaints according to
the na ture of c omplaints. T he age -wise a nalysis of t he
complaints is also to be furnished as per the said format.
xxiii. All t he Mu tual Funds to de clare and disclose di vidends only

in t he f orm of R upee(s) per uni t i n a dvertisements and al l
other communications such as half yearly portfolio
disclosures, A nnual Reports, et c. t o the i nvestor, in o rder to
bring greater precision and clarity in dividend distribution.
xxiv. The uni t holders ha ve been pr ovided f acility t o convert their

Mutual Fund units represented by Statement of Account into
dematerialized f orm t hrough P articipants and also t o initiate
instructions for redemption of Mutual Fund units.
xxv. In order to ensure that investors have unrestricted access to

AMCs a nd t o enable A MCs t o p rovide pr ompt i nvestor
service al l A MCs have been di rected t o ope n ne w folios/
accounts o nly after ensuring t hat all investor related
documents i ncluding account op ening doc uments, P AN,
KYC, P oA ( if app licable), s pecimen s ignature are a vailable
with A MCs/ RTAs and not j ust w ith t he d istributor. A lso, f or
existing folios, AMCs shall be responsible for updation of the
investor r elated d ocuments i ncluding account opening
documents, PAN, KYC, PoA (if applicable), specimen
signature by November 15, 2010.
xxvi. In or der t o f acilitate t ransferability of uni ts of Mut ual F unds

held i n one demat ac count t o an other dem at ac count, a ll
AMCs t o c larify b y way o f an ad dendum t hat units of al l
Mutual F und S chemes, ex cept f or E LSS Schemes dur ing
their l ock-in-period as p er E LSS G uidelines, he ld i n dem at
form shall be freely transferable.
xxvii. The exposure limits of Mutual Funds in derivatives have

been m odified and t he f ormat f or t he purpose of uniform
disclosure of investment in derivative instruments in half
yearly p ortfolio d isclosure, A nnual R eport or i n an y ot her
disclosures has been specified.
xxviii. Exit load or any other amount charged to schemes shall not
be us ed f or pa ying an y upfront d istributors’/ agents’
commission.
4.2 Taxation:
In line with the taxation policy applicable to shares and stocks,
investment in equity oriented mutual fund schemes are exempt from
long t erm c apital g ain t ax and s hort t erm c apital ga ins ar e t axed at
the r educed r ate of f ifteen per cent. I n r espect of debt s chemes,
dividend paid out are subject to a Dividend Distribution tax.
Direct Tax Code (DTC)
Direct T ax C ode ( DTC) w ill r eplace t he ex isting I ncome Tax A ct,

1961 ef fective f rom A pril 1, 201 2. I ndividual I ncome t ax t hreshold
exemption l imits, i ncome t ax s labs will be r evised. H owever, t he
exemption available f or investments in Equity Linked Saving
Schemes (ELSS) of Mutual Funds under Section 80C of Income Tax
Act, 1961 would be withdrawn effective April 1, 2012.
5. Corporate Governance – major developments

5.1 AMFI Initiative
AMFI has t aken t he initiative t o pr omote B est Practices i n the

industry t o m atch with t he bes t i nternational pr actices. A MFI has
brought out a Code of Ethics known as AMFI Code of Ethics (ACE)
covering all areas of Mutual Fund operation. This is applicable to the
Asset Management Companies (AMCs). Recently, AMFI has issued
Best Practice Circular to all AMCs on ‘Risk mitigation process against
Third-Party Cheques in mutual fund subscriptions’, advising them not
to accept third party cheques except some exceptional situations.
For t he i ntermediaries, A MFI has br ought ou t A MFI Guidelines and
Norms for Intermediaries (AGNI) providing a set of broad guidelines
including c ode of c onduct f or t he agent d istributors. E ffective
September 1, 2010, AMFI has introduced Know Your Distributor
(KYD) pr ocess f or Mut ual F und di stributors, w hich i ncludes
submission of identity, address proof as well as bio-metrics.
5.2 Corporate Governance
In respect of governance of companies in which mutual funds invest,

a detailed corporate governance framework has been put in place by
the regulator.
6. Fund Governance
Board of T rustees i s t he f irst l evel R egulators. R ole a nd
responsibilities of Trustees are prescribed in the Regulations. 2/3rd of
Trustees and o ne h alf of t he D irectors of A sset Ma nagement
Companies are to be independent. The Compliance Officer is called
upon to report directly and independently to the Trustees.
Trustees to give bi-monthly compliance reports to SEBI. Trustees to

meet once in two months.
There i s un iform c ut-off ti me for appl ying N AVs, bo th f or

subscriptions and redemptions, across the Mutual Fund Industry.
Mutual Funds are required to update the Net Asset Value (NAV) by 9
P.M. on a daily basis on AMFI website. For Fund of Funds this time
limit is extended upto the 10 A.M. of the next business day. Average
Assets Under Management (AAUM) for the month, are required to be
uploaded on t he AMFI website on the next working day. H alf yearly
financial r esults and portfolio ar e r equired t o be p ublished in t he
newspaper an d d isplayed on website of m utual f unds and A MFI. A
separate category of “Securitised Debt Instruments” is to be provided
in the Half Yearly Portfolio Disclosure format under debt instruments.
7. Product development – major changes

The Indian Mutual Fund industry offers a variety of products including
Exchange Traded Funds (ETFs), Gold Exchange Traded Funds and
Capital Protection Oriented Schemes. There are schemes specifically
meant f or c hildren and f or educ ation pur poses. T here ar e s pecial
schemes w hich i nvest o nly in go vernment s ecurities c alled G ilt
Schemes and t here ar e s chemes w hich pr ovide r eturns on monthly
basis called Monthly Income Scheme.
There are specific sector funds viz. Auto, Pharma, Banking,

Petroleum, P ower, F MCG, T echnology, M edia an d Entertainment,
Infrastructure, S ervice S ector F unds et c. R egulator has r ecently
issued Guidelines in respect of Real Estate Mutual Fund Schemes.
Besides the products mentioned above Mutual Funds in India provide
facilities to the investors l ike Systematic Investment Plan (SIP).
Under this plan investors are encouraged to build up their savings in
Mutual F unds by investing a f ixed amount on a pr edetermined date
every month on a regular basis. Some Mutual Funds have also
introduced free insurance alongwith SIP. Similar facilities like
Systematic Withdrawal Plan (SWP), Systematic Transfer Plan (STP),
Dividend Transfer Plan (DTP) and Trigger Facility are also provided
to the investors.
The Government has introduced New Pension Scheme (NPS) for all
citizens of India from May 1, 2009. Since May 1, 2009, 9000 people
have enrolled into the scheme so far. Till then, the scheme was open
to Central and State Government employees only. The total number
of accounts under NPS are approximately 10 lacs. The Government
has appointed s ix F und M anagers t o m ange t he f unds under N PS,
out of which f our ar e t he s ubsidiary C ompanies/ J oint Venture
Companies floated by the Asset Management Companies. NPS has
given a return of 12% in the first year of operation.
‘Swavalamban Scheme’ has been introduced as part of NPS for the

workers i n t he unor ganized s ector. U nder t he s cheme, t he
Government will contribute Rs.1000/- annually per NPS account
during the current year and next three years, provided the subscriber
contributes an amount between Rs.1000-12000 a year.
There ar e t wo m utual f unds which h ad already l aunched s pecial

schemes relating to pension prior to introduction of NPS.

Three Asset Management Companies have been approved as Fund
Managers f or m anaging Employee P rovident F und O rganization
(EPFO) funds.
Public Sector U ndertakings hav e been p ermitted t o i nvest a c ertain

portion of their surplus funds in Public Sector Mutual Fund Schemes.
The R egulator h as f ormed a Mut ual F und A dvisory Committee t hat

will advise the Regulator on the reforms needed to propel the growth
of Mutual Funds.
In the last year, 5 new funds have been set up with a few more in the
pipeline.
In l ine with the i ndustry r equirements and t o m atch with t he bes t of

standards a nd pr actices av ailable e lsewhere i n the world, t he
regulatory framework and guidelines are constantly updated and
made s ensitive t o t he m arket r ealities. T he r egulator pl ays a very
active r ole in pr omoting and ens uring s trict c ompliance of t he
regulations as well as in developing the industry on healthy lines.
AMFI, which is a trade body, supports these developments and on its

own t akes s everal i nitiatives i n put ting i n p lace bes t s tandards and
practices. O ne of t he major i nitiatives i s t he certification and
registration of age nt d istributors who ar e qu alified and c ertified to
provide proper advice to the investors. An independent organization
is already working to promote Certified Financial Planners (CFP).
AMFI Investor Awareness Programs : AMFI conducts Investor

Awareness Programs through Member AMCs. In the current financial
year, 24 AMCs have conducted 1648 Investor Awareness Programs
covering 140 cities and 99604 participants, till August 2010.
SEBI, a lso c onducts I nvestor A wareness P rograms/ w orkshops

across t he c ountry. Stock Exchanges as w ell as ot her ent ities al so
conduct investor education programs.
Ireland Country Report

2008 2009
Real GDP growth (%) -2.3 -7.1
Inflation rate (%) 1.3 -2.6
Stock market capitalisation (EUR billion) 74.9 116.8
Stock market capitalisation (% of GDP) 40.8 68.3
Bond market capitalisation (EUR billion) 42.6* 71.8*
Bond market capitalisation (% of GDP) 23.2* 42.0*
Household financial wealth (EUR billion)
Average per capita financial wealth (EUR)
* Includes government bonds only
2. Key Trends in the Global Market
Table 2: Net Assets of the Fund Industry in Ireland

(EUR billion)
2005 2006 2007 2008 2009
Total AuM 587.302 730.171 808.367 647.055 748.629
In 2009 Ireland experienced an increase in total assets under management returning to the peaks of
2007. 2009 e nded with a strong r ecovery following a per iod of global t urbulence with total as sets
under a dministration i n I reland r eaching EUR 1. 4 t rillion by t he year end . I n t he year to D ecember
2009 t his r epresented a g rowth in Irish domiciled f unds of 16 per c ent - recovering m uch of t he
reduction in assets experienced during 2008.
Non-Irish domiciled funds administered in Ireland pretty much remained constant year on year – but
it was a year of two halves. Total assets in EUR billion declined by 31 per cent in the first half of 2009
but recovered sharply by 29 per cent in the second half of the year; this meant at year end non-Irish
domiciled funds were 11 per cent down on the previous year’s total net assets.
At year end 2009 the net assets of Irish domiciled funds amounted to EUR 749 billion, or just over
half of total assets under administration, while the net assets of non-Irish domiciled funds was EUR
693 billion.
Approximately 80 per cent of Irish domiciled assets were held in UCITS funds amounting to EUR 597
billion, 15 per cent or EUR 113 billion in Qualifying Investor Funds with the remaining 5 per cent held
in other non-UCITS structures.
3. Trends in the Number of Funds

2005 2006 2007 2008 2009
Home-domiciled UCITS - - - - -
 Funds 2,127 2,339 2,898 3, 097 2,721
Home-domiciled non-UCITS 1,671 1,748 1,882 1,928 1,906
Foreign funds registered for - - - - -

sales
Fund launches 121 107 138 94 108
Fund liquidations* 144 124 98 109 122

* This figure represents total annual fund revocations, which may include the closure of inactive funds as well as fund liquidations.
As o f December 200 9 t here were 961 f unds a nd 4,627 f unds, including s ub-funds, authorised i n
Ireland. The number of f unds remained relatively stable throughout 2009, recording a s light overall
decline of 1% (8% including sub-funds), which can be attributed partly to challenging market
conditions particularly in the first half of 2009 and partly due to the revocation of a number of inactive
sub-funds which were removed from the register in December 2009.
The number of fund authorisations saw a significant increase in the latter half of 2009 and while the
number of U CITS sub-funds dec lined du e to the r evocation of dormant funds the ac tual number of
UCITS funds increased by 6% to 398.
Ongoing v olatility i n t he alternative investments s ector i n 2009 was r eflected i n non-Irish d omiciled
funds administered in Ireland recording a slight decrease of 2% to 5,704 at year end 2009. At year
end t here were a t otal of 10,331 f unds i ncluding s ub f unds a dministered i n I reland, c omprising of
4,627 Irish domiciled schemes and 5,704 non-Irish domiciled schemes.

Earlier in the year the Financial Regulator introduced policy changes for Non-UCITS funds to
alleviate liquidity issues caused by financial market conditions. For Professional Investor Funds and
Qualifying Investor Funds these changes included:
• not limiting the amount of assets which might be allocated to a side pocket;
• partial suspension, or partial redemption arrangements;
• reduced gate pr ovisions, or an op tion t o d isapply the l imit on c ompulsory r edemptions i n

specie. In or der to include t hese p olicy c hanges e ach f und was r equired t o consider its
position with r egard t o the f air t reatment of all shareholders and t he boar d of di rectors and
the t rustee m ust pr ovide written c onfirmation t o t he F inancial R egulator t hat a ny pr oposed
action t akes i nto ac count the i nterests of a ll in vestors and is i n ac cordance w ith t he f und
rules.
• Additionally, Non-UCITS r etail funds c ould also establish side pockets, apply reduced
redemption gates, partial suspensions or partial repayment of proceeds as described above;
however, in specie redemptions must comply with existing policy for retail investment funds
No n ew tax r ules t hat ha ve a direct or indirect impact on f und m anagement were introduced i n
Ireland in 2009.
Ireland has signed comprehensive double taxation agreements with 58 companies. The agreements
cover direct taxes which in the case of Ireland are income tax, corporation tax and capital gains tax.
During 200 9 ne w a greements w ere s igned with A lbania, Bahrain, Belarus, B osnia & H erzegovina,
Hong Kong, Moldova and Serbia.
5. Corporate Governance
No additional r equirements affecting t he g overnance b y f unds of c ompanies i n which t hey invest

were effected during this time period.
6. Fund Governance
No additional regulatory requirements affecting the governance of funds were during this time period.
7. Product Developments
The Irish funds industry has remained at the forefront of product innovation and has actively
promoted t he S WIFT SHARP initiative t o aut omate f unds of hedge f unds t rade pr ocessing and is
currently preparing for the Phase I testing programme of this initiative.
Legislation t o pr ovide f or the efficient redomiciling of investment companies i nto Ireland was
contained in the Companies (Miscellaneous Provisions) Act 2009, and signed into law in December
2009.
During the period being reported there was significant other action to continue to develop the fiscal,
legal and regulatory environment for investment funds in Ireland.
Some examples include:
• a project to consolidate all Investment Funds Legislation;
• the formation of a specialised Shari’ah team in the Irish Financial Regulator;
• Memoranda of U nderstanding be tween C hina a nd I reland ( Regulatory a nd I ndustry

Associations);
• preparation of the r egulatory e nvironment f or UCITS IV , (particularly t he Mana gement

Company) and the anticipation of t he European C ommission’s pr oposed A lternative
Investment Fund Managers Directive and legislative;
• regulatory and legislative amendments to remove the requirement for half-yearly accounts for
Qualifying Investor Funds.
.
Ireland Country Report

2008 2009 Q2 2010
GDP (EUR billion) 184.0 170.9 78.119
†
Real GDP growth (%) -2.3 -7.1 -3.6
Inflation rate (%) 1.3 -2.6 -0.2
Stock market capitalisation (% of GDP) 40.8 68.3 -
Bond market capitalisation (EUR billion) 42.6* 71.8* 83.0
Bond market capitalisation (% of GDP) 23.2* 42.0* -
Household gross savings ratio (%) 5.5 7.6 -
Household financial wealth (EUR billion)
Average per capita financial wealth (EUR)
* Includes government bonds only
† as compared to same period in the previous year
Ireland has experienced and continues to experience a dramatic reduction in rents, consumer prices
and cost of labour.
DTZ research showed that prime rent locations fell by 39 per cent in 2009 and continues to fall.
Consumer prices in Ireland also fell during 2009 with deflation of 1.7 per cent while prices in the euro
area increased by 0.3 per cent.
Labour costs fell by 5 per cent during 2009, and forecasts from the European Commission indicate
that Irish unit labour costs will fall by 6.8 per cent by 2011, relative to 2008. In contrast, labour costs
in the EU area are forecast to increase by 3.3 per cent.
2. Key Trends in the Global Market
Table 2: Net Assets of the Fund Industry in Ireland

(EUR billion)
2006 2007 2008 2009 Q2 2010
Total AuM 730.171 808.367 647.055 748.629 861.363
Continuing t he gr owth t rend of l ate 2 009, I rish dom iciled AuM i ncreased by 13 per c ent i n t he s ix
months to June 2010. Combined with the substantial increase of 26 per cent in non-Irish domiciled
funds administered in Ireland, total assets under administration in Ireland reached an all time high of
EUR 1.8 trillion.
At year end 2009 the net assets of Irish domiciled funds amounted to EUR 861 billion or just under
half of total assets under administration while the net assets of non-Irish dom iciled funds was EUR
939 billion. Approximately 79 per cent of Irish domiciled assets were held in UCITS funds amounting
to E UR 682 billion, 16 p er c ent or E UR 135 billion w as i n Q ualifying I nvestor F unds with t he
remaining 5 per cent in other non-UCITS structures.

2006 2007 2008 2009 Q2 2010
Home-domiciled UCITS - - - - -
 Funds (including sub 2,339 2,898 3, 097 2,721 2,784
funds)
1,748 1,882 1,928 1,906 1,890
Home-domiciled non-UCITS
- - - - -
Foreign funds registered for
sales
Fund launches 107 138 94 94 65

* This figure represents total annual fund revocations, which may include the closure of inactive
funds as well as fund liquidations.
The i ncrease i n f und a uthorisations i n late 200 9 c ontinued i n t he f irst ha lf of 2 010 with a n ov erall
increase in f unds dom iciled i n I reland of 2% ( 1% including s ubfunds), bringing the t otal n umber of
funds authorised in Ireland to 4,674 funds including sub-funds. The number of fund authorisations for
th
UCITS increased during the first half of 2010 and as of 30 June 2010 there were a total of 10,752
funds including sub funds administered in Ireland, comprising of 4,674 Irish domiciled schemes and
6,078 non-Irish domiciled schemes.

rd
During t his p eriod t he 3 anti-money l aundering D irective w as t ransposed i nto Irish legislation.
Industry h as bee n ac tively engag ed, as par t of a m ulti-stakeholder s teering gr oup, i n dr afting c ore
and industry specific regulatory guidance to assist with the transition to the new requirements.
The Finance Bill 2010 included a number of welcome measures for regulated funds - and for UCITS
IV Management C ompanies i n particular. T he changes w ill provide c ertainty with r egard t o t he t ax
treatment of f oreign f unds t hat ar e m anaged f rom I reland un der t he ne w U CITS I V arrangements.
Specific provisions include:
• Legislation t o ensure t hat a f oreign f und m anaged b y an I rish U CITS I V Management

Company will not be regarded as having a taxable presence in Ireland and that no adverse
tax consequences arise.
• Confirmation that the rationalisation opportunities under UCITS IV can be availed of with tax
certainty without g iving r ise t o a ny c harge t o I rish t ax f or t he f oreign f unds c oncerned or
change in tax status for the underlying investors.
• Stamp dut y reliefs available under Irish legislation in relation to fund r eorganisations,
reconstructions and amalgamations have also been updated to allow stamp duty exemptions
where units are issued to the foreign fund as opposed to its unit holders. This is a significant
change that facilitates the master/feeder structures envisaged under UCITS IV and also the
re-domiciling of investment funds more generally.
• A further technical amendment has updated the definition of a management company and a
management c ompany t hat ho lds u nits in an I rish r egulated f und which it m anages c an
complete a declaration to ensure no exit tax is deducted on payments from that fund.
In addition:
• Ireland has signed comprehensive double taxation agreements with 58 countries. The
agreements cover direct taxes which in the case of Ireland are income tax, corporation tax
and c apital gains tax. During t he first 6 months of 2010 new a greements were signed with
Hong Kong, Morocco and the UAE.
5. Corporate Governance
No a dditional r equirements affecting t he g overnance b y f unds of c ompanies i n which t hey invest
occurred during this time period.
6. Fund Governance
In late April 2010 the Industry was invited by the Financial Regulator to prepare a Governance Code
for t he I nvestment F unds I ndustry which will c over i nvestment f unds, management c ompanies and
service pr oviders. It will b e o f a s imilar nature t o the r ecently pu blished proposed Codes f or t he
banking a nd i nsurance i ndustries i n I reland. D evelopment of t he I nvestment F unds G overnance
Code is ongoing.
During the period being reported there was significant action to continue to develop the fiscal, legal
and regulatory environment for investment funds in Ireland.
Some examples include:
• additional amendments t o the Q ualifying I nvestor F und pr oduct which w ill further f acilitate
efficient r edomiciling of i nvestment f unds into Ireland and account for other European level
movements in the area of non-UCITS funds;
• engagement to finalise Regulatory guidance in relation to funds using Prime Brokers;
• extension of the Initial Offering Period for Private Equity QIF products to 12 months;
• extension of permitted use of multiple share classes to use interest rate hedging and
financial derivative instruments at share class level under certain circumstances;
• the regulatory environment for UCITS IV - particularly the Management Company

Italy Country Report
1 Economic and Financial Background

2008 2009
Population (million) 60.0 60.3(e)
GDP (EUR billion) 1,568 1,520
Real GDP growth (%) -0.8 -4.0
Inflation rate (%) 2.2 1
Bond market capitalisation (EUR billion) 2,368 2,596
Bond market capitalisation (% of GDP) 151 171
Household gross savings ratio (%) 15.1 na
Household financial wealth (EUR billion) 3,361 3,480*
Average per capita financial wealth (EUR) 56,016 57,711*
*September
Table 2: Main Assets of Households

(EUR billion)
2005 2006 2007 2008 set-09
Currency &
875 944 986 1.053 1.064
Deposits
Debt securities 656 673 738 767 745
Quoted shares 980 1.032 983 672 761
Life & Pension
544 574 610 587 619
funds
Investment funds* 459 456 267 161 181
Other 96 137 116 121 110
Total 3.609 3.817 3.700 3.361 3.480
Italian households continue to be attracted by currency and deposits (31%) and debt securities (21%), even
if the latter lost market share by 2%.
The data show that the continuing positive trend of life & pension funds while investment funds market share
have stopped its decline at 5%.
2 Data and Key Trends in the Investment Fund Industry
Table 3: Net assets by the fund industry in Italy

(EUR billion)
2005 2006 2007 2008 2009 giu-10
Home-domiciled UCITS* 381,9 343,8 285,1 189,4 194,0 184,0
Home-domiciled non-UCITS 40,5 54,9 72,5 64,2 63,8 63,5
Funds domiciled abroad and promoted by national
182,8 212 200,9 139,7 156,5 165,7
providers
Foreign-domiciled funds promoted by foreign
55,8 74,1 95 48,9 64,3 71,2
providers
Total AuM 661,0 684,8 653,5 442,2 478,5 484,5
*Funds-of-funds included i n hom e-domiciled U CITS and
closed-ended funds in home-domiciled non-UCITS.
1
Table 4: Net Sales of Investment Funds in Italy
(EUR million)
2005 2006 2007 2008 2009 giu-10
Home-domiciled UCITS* -15.414 -47.745 -59.736 -73.343 -8.247 -10.161
Home-domiciled non-UCITS 8.411 8.130 10.127 -7.878 -3.360 317
Funds domiciled abroad and promoted by national
18.409 19.371 -2.888 -33.860 8.000 7.300
providers
Foreign-domiciled funds promoted by foreign
12.803 13.732 3.336 -26.890 4.174 9.752
providers
Total net sales 24.209 -6.512 -49.161 -141.972 567 7.208
*Funds-of-funds included in home-domiciled UCITS
and closed-ended funds in home-domiciled non-
UCITS.
During 2009 I talian as set management industry reverted its t rend of the pr evious three years. B y the third
quarter net sales had turned to positive and made up for the outflow of first half of the year. The trend was
confirmed during the first half of 2010. Italian Investment fund assets increased 8.2% to 478,5 billion at the
end of 2009 and to 484,5 billion at the end of June 2010. Only home domiciled non-UCITS fund assets still
decreased t o 63,8 b illion. T he c ategories t hat ha ve ac hieved i nflows were foreign domiciled pr oducts
promoted bot h b y I talian a nd f oreign pr oviders. T hese f unds hav e c ounterbalanced dom estic pr oduct and
they have increased their weight at 46.1% of total Italian asset. The reasons for this development is mainly
due to a taxation system that penalises Italian investment funds versus foreign domiciled products.
Table 5: Number of funds
2005 2006 2007 2008 2009 giu-10

Funds 1.034 989 924 742 675 662
Units - - - - - -
Home-domiciled non-UCITS 221 295 370 406 385 372
Foreign funds (Assogestioni

Members)
By national promoters 694 812 757 785 734 787
By foreign promoters 1.211 1.289 1.704 1.827 1.837 1.843
Fund launches 91 149 134 109 113 30
(only home-domiciled)
Average fund size (€ Mio.) (median)
Equity 29,2 32,2 24 7,7 12,2 12,3
Bond 63,5 58,7 42,7 19,5 24,6 37,2
Balanced 56,3 62,2 58,7 33,3 34,4 35,0
Money market 88,5 67,7 66,7 34,2 45,9 50,8
Real estate 201,5 204,2 196,3 145,6 114,6 110,7
A r eduction of nu mber of f unds for all k ind of pr oducts have marked 2009, du e t o t he m ergers of as set
managers and consolidation of their offerings. Owing to this, average fund size increased for all categories.
In the first half of 2010 however this trend partially changed and foreign funds increased their number.
3 Data and Key Trends in the UCITS Market
2
Table 6: UCITS Assets by Fund Type
(EUR billion)
2005 2006 2007 2008 2009 giu-10
Equity 78,6 73 54,1 22,6 26,9 25,0
Bond 146,1 110,1 80,3 63,0 67,3 68,5
Balanced 85,7 94,9 79,9 46,7 43,6 45,8
Money market 71,6 65,8 70,8 57,2 56,2 44,6
Fund-of-funds - - - - - -
Other - - - - - -
Total 381,9 343,8 285,1 189,4 194,0 184,0
of which
Guaranteed 0,1 4,7 6,3 5,0 4,3 4,6
Table 7: Net Sales of UCITS by Fund Type

(EUR million)
2005 2006 2007 2008 2009 giu-10
Equity -8.748 -11.956 -17.863 -12.955 -451 -993
Bond -5.854 -36.073 -30.368 -23.466 1.630 628
Balanced 11.063 6.780 -14.696 -26.017 -7.053 1.382
Money market -11.874 -6.496 3.191 -10.906 -2.373 -11.177
Fund-of-funds - - - - - -
Other - - - - - -
Total -15.414 -47.745 -59.736 -73.343 -8.247 -10.161
of which
Guaranteed 55 4.586 1.509 -1.205 -848 298
Home dom iciled U CITS f unds increased t heir as set during 2009, in s pite of r edemptions higher t han
subscriptions. T he r ise w as due mainly t o eq uity an d bond f unds. I n f act, c ompared to 20 08, e quity f unds
registered a r ise in as set under m anagement m ore t han 1 9% while bo nd f unds i ncreased almost 7% . B ut
only bond products receive new contributions for 1.6 million. Otherwise balanced and money market funds
decrease their assets by 6.6% and 1.7%.
The negat ive t rend i n f lows w as c onfirmed dur ing t he f irst s ix month of 2010 and as sets decreased as a
consequence.
4 Key Trends in Other Nationally Regulated Funds

(EUR million)
2005 2006 2007 2008 2009 giu-10
Real estate 18.272 25.287 31.287 34.626 38.317 38.243
Open-ended - - - - - -
Listed closed-ended 7.534 9.103 9.180 7.994 7.335 7.139
Unlisted closed-ended 10.738 16.184 22.107 26.632 30.982 31.104
REITS - - - - - -
Alternative management 16.059 22.488 29.316 16.499 11.482 10.832
Hedge funds 422 1.050 1.411 1.642 2.492 2.289
Funds-of-hedge funds 15.638 21.438 27.905 14.856 8.990 8.543
3
Special funds 3.539 2.235 2.198 1.605 1.261 1.184
Other 2.598 4.933 9.707 11.442 12.745 13.280
Total 40.468 54.942 72.508 64.173 63.805 63.539
Table 9: Net Sales of Other Nationally Regulated Funds

(EUR million)
2005 2006 2007 2008 2009 giu-10
Real estate 3.018 2.605 2.955 1.668 1.239 328
Open-ended - - - - - -
Listed closed-ended 466 261 0 0 0 0
Unlisted closed-ended 2.551 2.345 2.955 1.668 1.239 328
REITS - - - - - 0
Alternative management 4.347 5.250 5.179 -7.635 -5.131 -573
Hedge funds 86 579 297 429 474 -187
Funds-of-hedge funds 4.261 4.671 4.882 -8.064 -5.605 -386
Special funds 1.200 -1.488 -516 -473 -399 -46
Other -66 1.762 2.508 -1.439 931 607
Total 8.499 8.130 10.127 -7.878 -3.360 317
Non-UCITS f und have saw their assets reduced both i n 2009 and 2010. The l argest reduction was due t o
alternative m anagement and s pecial f und, i n par ticular f und of hedge f und r educed as sets b y 3 9%. R eal
estate fund market continued to grow, registering an increase in assets by 11%.
7.1 Regulatory developments:

In 2009 the industry continued its commitment to the implementation of the Mifid and Assogestioni supported
its effort with the preparation of validated guidelines.
In view of the principle based approach of the Directive, the Italian regulator has seen it fit to work with the
industry to pr ovide a pr actical s upport t o t he ac tual i mplementation of s aid pr inciples. B eside t he
rd
interpretation provided i n 3 level measures, CONSOB has hence developed a procedure - the validation
procedure – to d evelop g uidelines on a ll k ey aspects of t he di rective. A lthough t he a pplication of s uch
guidelines is not mandatory, management companies and intermediaries who chose to comply have access
to a safe harbour and can have certainty to be complaint with the MIFID. Assogestioni has worked
extensively with its associates and CONSOB between 2008 and 2009, obtaining validation on key aspects of
the legislation such as, amongst other, best execution, suitability and appropriateness and agreement for the
provision of the investment service of portfolio management.
In 20 09 Consob a pproved c hanges t o the R egulation no. 11 971 of 14 Ma y 1999 - Provisions o n i ssuers.
Changes concern mainly modification of the prospectus and the introduction of a new simplified prospectus
incorporating some of the indication of the KID being discussed at the European level as part of the UCITS
IV forthcoming regulation. The c hanges r esulted in a doc ument c ontaining o nly t he essential e lements f or
making and carrying out investment decisions, minimizing information serving only legal or regulatory
requirements.
Another ac t of C onsob which c ame af ter i ntense l obbying f rom t he i ndustry was t he c ommunication o n
illiquid financial products that details the rules of conduct for distributors of bank bonds, insurance policy e
OTC derivatives. The improved transparency marked a significant step toward level playing field and fairer
competition among retail investment products.
As f or r eal es tate f und, Assogestioni h as been working w ith t he aut horities t o s et t he f ramework f or t he
involvement of real estate fund in social housing projects as part of the government “Housing Plan”.
4
7.2 Pensions
COVIP, t he Italian authority for pens ion provisions, has i ssued ne w regulation regarding information to t he
subscribers of pens ion f unds w hile Assogestioni has w orked on s elf r egulation i nitiatives r egarding t he
offering of pension products and standard forms for transfer of accounts.
7.3 Tax rules, VAT rules and double tax treaties:

2009 saw the introduction of t he so called “tax shield” i.e. t he pos sibility, upon payment of a t ax, t o report
assets retained abroad in violation of legislation on fiscal monitoring. In view of the fact that the emersion of
the assets had to be channeled via authorized financial intermediaries such as asset management company,
Assogestioni worked to clarify procedures and requirements.
In I taly t here are n o d ouble t ax t reaties c ontaining r ules pertaining t o granting t reaty r elief t o i nvestment
funds.
8. Investment management governance

2010 saw the issuing by Assogestioni of a revised self regulatory document focusing on the identification and
management of conflict of interest within the asset management industry, the “Protocol for the independence
and the management of conflict of interest”. The revision stems not only from the need to adapt to changing
regulation but also to further strengthen the commitment of the industry to independence of asset managers
operating as par t of l arger gr oups. T he a doption of t he Protocol b y t he m ember of t he as sociation, not
mandatory, i s ex pected b y 2011 an d i t will be o n a c omply or ex plain b asis, w ith t he m ember hav ing t o
inform Assogestioni on their decision on whether to adopted the Protocol or not and the motivation thereof.
9. Fund Standards and Distribution

In 2009 a working group created by the Bank of Italy and Consob assessed alternative routes to increasing
the efficiency and open the distribution structure of funds. A first key step in this direction was indentified in
the s tandardization of s ystems, pr ocedures and l anguage of f und pr ocessing as a m ean t owards c ost
reduction and easier transferability of positions between operators.
Based o n t he out come of the s tudy, A ssogestioni ha s w orked w ith t he ot her a ssociations i nvolved i n t he
asset m anagement i ndustry – the ba nking as sociation an d t he associations o f i nvestment adv isors and
distributors – to set up a group that is currently working on best practice and standardization of procedures
and language for the fund processing, in line with the EFAMA and ISSA recommendation. Consob and the
Bank of Italy are observer in the proceedings. The final recommendation of the group are to be published in
October 2010 while the implementation of the best practice and standardized procedure is expected to start
in 2011.
10. Other activities of the association

In 2009 Assogestioni launched its asset management trade fair “Il Salone della Gestione del Risparmio”, a
new initiative that has expended the realm of previous events organized by Assogestioni from the traditional
half a day workshop focused on a strictly industry related topic for the asset management industry to a full
scale 3 day trade fair hosting seminars, workshops and even an art competition and embracing the industry
of “saving” investment at large. “Financial Education” was the main topic of this first year edition which took
place in April 2010 and attracted over 2000 visitors a day, mostly professionals.
In addition to the publication of its quarterly newsletter, Assogestioni published with Il Mulino a book on Mifid
with the purpose of supporting the industry in the adoption of the directive.
5
2010 IIFA
Country Report (Japan)
Real G DP Growth: -2.0 % in fisc al year 2009 ( April 2009 to Marc h 2010)
Unem plo ym ent Rate: 5.2 % in fiscal year 2009, 5.3 % in J une 2010
Basic Disc ount Rate: Rate cut from 0.5% to 0.3 % in Decem ber 2008
Consum er Pr ic e Index: - 1.7 % in fisc al year 2009, - 0.7 % in J une 2010
Stock Mark et ( Nik k ei 225) : 10,546 yen (Dec. 2009) , 9,382 yen (J une 2010)
For eign Exc hange Rate ( Yen per US dollar): 92.10 yen ( Dec. 2009) ,
88.48 yen (J une 2010)
2. Assets under Management and Net Flows of Publicly Offered Funds

A. January 1, 2009 to December 31, 2009
Type of Total Net Ass ets (in billon) Net Flows ( in billion)
Fund Jan.1, 2009 Dec . 31, 2009 (Jan.1, 2009 to
Dec . 31, 2009)
Yen US $ Yen US $ Yen US $
Stock 40,842 449 50,244 545 3,128 34
Funds
Bond 8,691 95 8,755 95 64 1
Funds
MMF 2,613 29 2,456 27 -156 -2
Total 52,146 573 61,455 667 3,036 33
B. January 1, 2010 to June 30, 2010

Type of Total Net Ass ets (in billon) Net Flows ( in billion)
Fund Jan. 1, 2010 June 30, 2010 (Jan. 1, 2010 to
June 30, 2010)
Yen US $ Yen US $ Yen US $
Stock 50,244 545 48,621 549 3,240 36
Funds
Bond 8,755 95 8,483 96 -274 -3
Funds
MMF 2,456 27 2,304 26 -151 -2
Total 61,455 667 59,408 671 2,815 31
1
2010 IIFA
(Notes) 1. Stock funds als o inc lude balanc ed funds.

2. In addition to the public l y offer ed funds listed above, there wer e als o pr ivatel y
plac ed funds of 28,965 billion yen (US$ 327 billion) at the end of J une 2010.
3. Exc hange Rate: 91.03 yen (J an 2009) , 92.10 yen ( Dec 2009),
88.48 yen (J une 2010)
T he total net ass ets of stock funds incr eased from 40.8 tr illion yen at the beginning of Jan.
2009 to 48.6 tr illion yen at the end of J une 2010. T his increas e of 7.8 tr illion yen was the
result of a net inflow of 6.4 trillion yen and portfolio apprec iation of 1.4 tr illion yen dur ing this
per iod.
T he total net ass ets of bond f unds decr eas ed from 8.７ tr illion yen at the beginning of J an.
2009 to 8.5 trillion yen at the end of June 2010. This decreas e of 0.2 tr illion yen was the
result of a net outflow of 0.2 tr illion yen during this per iod.
T he total net ass ets of MMF decr eased from 2.6 tr illion yen at the beginning of J an. 2009 to
2.3 tr illion yen at the end of June 2010. This decr ease of 0.3tr illion yen was the r es ult of a
net outflow of 0.3 tr illion yen dur ing this period.
As a res ult, the total net ass ets of public l y offered funds incr eased f rom 52.1 tr illion yen at
the beginning of Jan. 2009 to 59.4 tr illion yen at the end of June 2010.
3. Portfolio Compositions of Publicly Offered Investment Trusts
Jan. 1 2009 June 30, 2010

(59.4 Trillion Yen)
(52.1 Trillion Yen)
Ca l l
l oa ns &
Call loans Stocks
other Stocks & other
a s s ets 22%
22% assets
24% 30%
Other
Se c u ri ti e s
7% Other
Bonds Bonds
Securitie 44%
47% s 4%
4. Regulatory and Self-Regulatory Developments
A . R evie w o f P rosp ect us

In order to m ak e the pr ospec tus es for inves tm ent trusts m or e eas il y r eadable and
com prehens ible for investors, the Financ ial Ser vic es Agenc y (F SA) r evis ed the rules
gover ning the pr ospec tus doc um ents for inves tm ent tr usts in Dec em ber 2009.
2
2010 IIFA
A pr os pec tus cons ists of a “sum m ar y pr os pec tus” that m ust be delivered to all investors and
a “ detailed pros pectus” that m ust be deliver ed to inves tors on their r equest.
As a r esult of this rule revis ion, onl y the m ost im portant and r elevant inform ation for
inves tors suc h as the char acter istics, inves tm ent risk s, histor ic al perform ance, fees and
char ges of the fund s hould be included in the r evised s um m ar y pr ospectus. T he new r ule
applies to an y pros pec tus publis hed on and after J ul y 1, 2010.
B . T ax E xem pti on f or Sma ll I nve stm ents in Li sted St ock s an d O the rs
In order to encour age individual inves tors to par ticipate in the stock m ark ets, the
gover nm ent dec ided to intr oduc e the following tax ex em ption for small investm ents in listed
stock s, stock investm ent tr usts, and other ins trum ents .
a. Sc ope of tax exem ption: Dividends ( pr ofit distr ibutions) and c apital gains der ived
from listed s tock s, s toc k investm ent tr usts and others.
b. Annual investm ent lim it: 1 m illion yen per year
c. Total inves tm ent lim it: 3 m illion yen ( 1 m illion yen x 3 years)
d. Holding per iod: Maxim um of 10 years
e. Num ber of accounts: One acc ount per year
f. Pers ons qualified to open an account: r es idents and non-r es idents with Perm anent
Establis hm ent (20 year s old and above)
g. Propos ed tim ing of intr oduc tion: Januar y 2012
5. Corporate Governance & Fund Governance
T he Report on Internationalization of Japan’s Financ ial and Capital Mark et, publis hed b y the
Stud y Gr oup of the Financ ial S ystem Counc il in June 2009, r ecom m ended that in order to
im prove c orpor ate governance pr actic es thr ough the ex erc ise of voting r ights , institutional
inves tors s hould establish industr y- wide r ules for s umm arizing, tabulating and disc losing the
results of vote ex ec ution b y each ins titutional investor. As f ar as the fund indus tr y is
conc er ned, our ass oc iation alr ead y collected the res ults of vote ex ecution b y our m em ber s
and disc los ed them on an aggr egated bas is. Upon the Repor t’s recom m endation, our
assoc iation es tablis hed s elf-r egulator y r ules in March 2010 r equiring all m em bers to
disc los e their vote ex ecution res ults independentl y.
T here wer e no m ajor product developm ents .
3
International Investment Funds Association Annual Meeting
- Seoul 2010 -
MEMBER REPORT
(Korea)
1) General Economic Development
Backed by the government's expansionary policy, the Korean economy saw its real GDP grow 0.2% in 2009
– a huge dr op f rom the 2.3% i ncrease of the pr evious year. The s ignificant dec line i n growth can b e
attributed t o sluggish f acility investment a nd s tagnant pr ivate c onsumption an d ex ports. B y industry, t he
manufacturing sector witnessed a decline in growth, the service industry remained static and the construction
industry showed positive growth. Facility i nvestment, pr ivate consumption and exports all fell sharply year-
on-year, while government spending and construction investment rose. Per capita GNI stood at USD 17,175
in 2009, a decrease of 11% from 2008’s figure of USD 19,296. At the same time, spurred by a large surplus
in its product balance, Korea’s current account posted an overall surplus of USD 42.67 billion – a significant
turnaround from its previous USD 5.78 billion deficit.
At the end of 2009, the KRW/USD exchange rate stood at 1167.6 won, a 7.1% decline from 2008’s peak of
1257.5 w on. However, t he average won/dollar exchange r ate for 200 9 was 1276.4 won, a 15. 8% year-on-
year increase. This was due to fluctuations in won/dollar exchange rate caused by the global financial crisis,
which pushed t he KRW/USD ex change rate up to 1,570 won i n M arch before i t was stabilized by the
continuing current account surplus. The consumer price index (CPI) in 2009 was 2.8%, a sharp decline from
2008's 4.7%. At the same time, the gross savings ratio continued its downward slide reaching 30.0% in 2009,
a s light dr op f rom 2008’ s 30.5%. 2009 also saw Korea’s foreign r eserves i ncrease b y U SD 68. 8 billion
(34.1%) year-on-year, reaching USD 270 billion due to the surplus in the balance of payments, increases in
management pr ofits and t he r ecovery of f oreign c urrency l iquidity i njected i nto t he f inancial m arkets in
response to the global financial crisis.
2) Financial Environment
Short- and long-term interest rates in the first half of 2009 fell sharply due to cuts made by the Bank of Korea
(BOK) in six benchmark r ates (a combined c ut of 3. 25%) f rom O ctober 200 8 t o F ebruary 20 09, and t he
easing of g lobal f inancial crisis. However, i n t he s econd h alf of 20 09, interest rates r ose s teadily on t he
expectations of an economic r ecovery. 3-year t reasury b onds yields grew 100 bp year-on-year t o reach
4.41%. The yield on 91-day CDs declined 107 bp from the end of 2008 to reach 2.86%, while 91-day CPs
declined 340 bp year-on-year to 3.09%.
After the instability in t he global f inancial m arkets pus hed the K OPSI do wn to1018.81, it has s hown an
upward t rend d ue t o t he easing of gl obal f inancial c risis, t he ex pected gl obal economic r ecovery and t he
large v olume of pur chases b y f oreign investors. I n line with t his t rend, s tock m arket c apitalization also
jumped a whopping 65.8% year-on-year to reach USD 760.5 billion compared to 2008’s figure of USD 458.8
billion. This, however, still falls far short of the bullish 2007 level of USD 1014.6 billion.
2
<Major Economic Indicators>
Year (December 31) 2006 2007 2008 2009
ECONOMY
Real GDP Growth(%) 5.2 5.1 2.3 0.2
GDP (USD billion) 951.1 1049.3 930.9 832.9
Per Capita GNI (USD) 19,722 21,695 19,296 17,175
Gross Savings Ratio (%) 30.8 30.8 30.5 30.0
Finance
Yield on CP (91days, %) 4.65 5.40 6.22 3.16
Yield on Treasury Bonds (3yrs., %) 4.83 5.23 5.27 4.04
KOSPI(Point) 1434.46 1897.13 1117.86 1682.77
Stock market capitalization (USD billion) 681.1 1014.62 458.8 760.5
Trade and Foreign Exchange
Trade Balance (goods) (USD billion) 27.9 28.1 5.6 56.1
-Imports (FOB) (USD billion) 303.9 350.9 427.3 317.5
-Exports (FOB) (USD billion) 331.8 379 432.9 373.6
Current Account (USD billion) 5.4 5.9 -5.8 42.7
Exchange Rate (KRW/USD) 929.60 938.20 1,257.50 1,167.60
- Average basis 955.51 929.20 1,102.59 1,276.40
Foreign Currency Reserve (USD billion) 238.4 261.8 200.5 265.2
2. Key Trends in Investment Flow and Assets under Management
1) Total Asset
As of the end of June 2010, the total net assets of collective investment vehicles (CIV) was USD 260.2 billion,
a 5.1 billion (2%) decrease compared to the same period last year when total net assets were recorded at
USD 265.3 billion. In the same period, the total assets under management (AUM) amounted to USD 276.1
billion, a 15.1 billion (5.2%) drop from 2009’s 291.2 billion. This decline was due in part to the capital outflow
from funds overwhelming the inflow to stocks.
In the case of equity-type funds, total net assets in June 2010 increased slightly from 2009’s USD 80.7 billion
to reach USD 86.2 billion. However, categorized by AUM, 2010 saw a 10% decrease from the 2009’s figure
of USD 106.8 billion, dropping to USD 96.1 billion. In 2010, investment companies represent 4% of the total
net assets for the second consecutive year.
3
2) Percentage of CIV Holdings to Market Capitalization
The percentage of collective investment vehicles’ (CIV) holdings to stock market capitalization hit 9.05% in
June 200 9 bef ore s teadily declining to 7. 63% in 201 0. Mea nwhile, i n t he bo nd market, t he per centage of
CIVs rose from 9.34% in June 2009 to 9.72% in June 2010.
3) Trends concerning international investment funds
(a) Onshore Funds exclusively for Foreigners (OFFs)

As of J une 2010, onshore f unds ex clusively f or f oreigners (OFFs) edge d d own t o U SD 332.1 m illion f rom
USD 324.7 million a year earlier.
(b) Overseas Investment Funds (OITFs)

OITFs, established by domestic fund management companies to invest overseas, have come into favor as
investors seek to diversify their portfolios. OITFs experienced a steady increase because of tax exemptions
granted to capital gains on equities in 2007. Recently, however, OITFs have shown a downward trend due to
the s luggish g lobal ec onomy and t he above mentioned t ax be nefits ending in 200 9. O ITFs dec lined f rom
USD 45498.8 million in June 2009 to USD 44098.6 million the following year.
4
(c) Offshore Funds
Since the global financial turmoil, the

total net assets of offshore funds have
been steadily declining. As of June 2010,
offshore funds were valued at USD
1297.7 million, a 15% decrease from
2009’s figure of USD 1528.9 million.
.
3. Systems and Regulation of the Collective Investment Industry

With the enac tment of t he F inancial I nvestment S ervices an d C apital Mar kets A ct ( FSCMA), t he K orean
capital market has been given the legislative tools to further develop and advance its financial markets. The
focus i n 2009 was on instituting the various en hancements to t he financial system required b y FSCMA. In
2010, this f ocus has shifted to enhancing specific aspects of Korea's c apital m arket; i n particular in t hose
areas the collective investment industry is seeking improvement.
1) Create a Reasonable System of Collective Investment Vehicles
(a) Improve Sales Commissions and Fees

The 2009 revised FSCMA enforcement rules reduced the cap on commissions and sales fees from 5.0% to
2.0% and 5.0% to 1.0% respectively, a step forward in creating a reasonable system for commissions and
fees.
(b) Transfer System for Fund Distribution Companies

This system allows investors to easily transfer to fund distributors that offer better services. This encourages
fund distributors to diversify their services and attract customers by reducing their commissions, leading to
more benef its f or i nvestors and an ov erall qualitative improvement in the f und i ndustry. According t o t he
Korea Securities Depository (KSD), there were 7,042 transfers equaling 124.7 billion won (0.11% of the total
number of funds) from the first day of enforcement on January 25, 2010 to the end of February.
2) Provide Information for Investors
(a) Fund Manager Disclosure System

The high turnover of fund managers has a significant impact on investment returns. Against this backdrop,
KOFIA launched t he f und manager di sclosure s ystem so t hat i nvestors may access information on f und
managers before making i nvestment dec isions. Disclosure is c ategorized into t hree s ections: as set
managers, fund managers and funds. The asset manager section discloses the number of fund managers,
career histories, a verage working per iods, and the number of t ransfers ov er last three m onths. The f und
manager section contains information on career histories, working periods and performances, while the fund
section d iscloses t he number of f und manager t ransfers and por tfolio m anagers. I n add ition, it is n ow
5
mandatory f or an y c hanges i n f und m anager i nformation t o be included i n t he asset m anagement r eport,
increasing the awareness of investors.
(b) Improve Asset Management Reports

To offer better information to investors, efforts to improve asset management reports are being made in such
areas as updating information on sales fee/commissions, investment subjects and settlement.
4. Current Status of Products

1) Facilitating ETF
Capital i nflow to the ETF m arket i s r ising s teadily, leading to more listings of n ew t ypes of E TFs and t he
diversification of ETF products. One example is KODEX leverage ETF, the first of its kind in Asia, which was
only recently listed.
(Unit : USD Million)
Year
2006 2007 2008 2009 Jun, 2010
(End of Jun.)
Total Net Asset 1,625 2,618 3,258 2,950 3,914
No. of Types 12 21 37 50 58
6
Luxembourg Country Report 2010
2008 2009
(1) (1)
(2) (2)
GDP (EUR billions) 39.34 37.64
Real GDP growth (%) 0 -4.1
(4) (4)
(5) (5)
Stock market capitalisation (EUR billions) 47.81 73.22
(1)
As of 01/01/2008 respectively as of 01/01/2010
(2)
Market price / revised figure for 2008
(3)
Estimated
(4)
Average annual rate
(5)
in December
Number of Dec 31, 2008 Dec 31, 2009 June 30, 2010
Home-domiciled funds 3 371 3 463 3 550

of which
 Stand-alone funds 1 352 1 355 1 368
 Multiple compartment funds 2 019 2 108 2 182
Home-domiciled units 12 325 12 232 12 628
of which
 UCITS 9 351 9 017 9 198
 Non-UCITS 2 974 3 215 3 430
Foreign funds registered for sales 228 (2) 231 231 (3)
Fund Launches / registrations (1) 712 408 220

Fund Liquidations (1) 209 316 133
Unit Mergers (1) 485 482 n.a.
(1) since the 1st January
(2) as of 31 August 2008
(3) as of 31 December 2009
NB: UCITS is used in the sense of publicly offered open-end funds investing in transferable securities and money market funds.
Data shown to two decimal places
p. 2
Total Of which:
number of Fixed Money
End fund units Equity Balanced Others
of period income Market
Dec 2008 12 325 2 797 3 660 2 867 562 2 439
Dec 2009 12 232 2 773 3 448 3 032 543 2 436
June 2010 12 628 2 871 3 451 3 272 531 2 503
At the end of 2009, there were 3,463 legal entities domiciled in Luxembourg. During the year, 408 new funds
registered and 316 withdrawn, making a net rise of 92 over the 12 months. The total was thus up 2.73% after
17.45% in 2008.
While the total of 408 new fund entities launched equalled only 57.3% of the total launched in 2008, 2009
was nonetheless an excellent year with over 18% more launches than in 2006, considered a high point in the
history of the Luxembourg fund industry. In the ranking of years since 1998, 2009 comes in third.
During the year, the industry restructured in response to the financial crisis, leading to the withdrawal of no
fewer than 316 funds as promoters repositioned offerings to better meet market needs.
This r estructuring was a lso r eflected i n t he f irst ov erall d ecline in t he n umber of f und uni ts dom iciled i n
Luxembourg since 2003. Counting all conventional funds plus sub-funds in umbrella structures, the total was
down 0.75% over the year.
Continuing c onsolidation in t he f irst s even m onths set t he t otal n umber of uni ts at 1 2,164 in J uly, do wn
1.31% from January 1, but there were r enewed rises i n the f ollowing m onths, excepting December, which
saw an 0.16% decline. All told, funds and sub-funds totalled 12,232 at the end of the year.
In the first half year of 2010, the number of units headed up again, rising 3.2% to 12,628 at June 30. This
represented a ne t i ncrease of 396, am ply of fsetting a net dec line of 93 i n 2 009. To s um up, s uccessful
restructuring h as enab led t he i ndustry t o ada pt t o t he ne w f inancial environment and r ebound with m ore
effective responses to investor needs in the first half year of 2010.
In parallel over the same period, 220 new legal entities were set up, 7.8% more than in the first six months of
2009.
Of which:
Total assets UCITS nationally domiciled Non-UCITS nationally domiciled
under
management Net Number Average net Net Average net
(Eur bn) assets (fund assets by assets Number assets by
End (fund units)
(Eur bn) units) funds (Eur m) (Eur bn) funds (Eur m)
of period
Dec 2008 1 559,65 1 337,04 9 351 142,98 222,61 2 974 74,85
Dec 2009 1 840,99 1 592,37 9 017 176,60 248,62 3 215 77,33
June 2010 2 010,63 1 723,59 9 198 187,39 287,04 3 430 83,69

NB: UCITS is used in the sense of publicly offered open-end funds investing in transferable securities and money market funds.
Data shown to two decimal places
p. 3
In a context of globalisation and in the wake of the sub-prime crisis of 2007, the stock market slump of 2008
triggered a 24% plunge in the total net assets of UCITS based in Luxembourg from the end of the previous
year. A ctions t aken b y n ational go vernments t o c ontain t he c risis and t he d ecisions a dopted a t t he G 20
summit in April 2009 then put fresh life into financial markets around the world and, by the same token, the
Luxembourg fund industry.
Net assets under management rose by €281.34 billion or 18.04% over the year, reaching €1,840.993 billion
on D ecember 31. T hey thus r eturned t o m uch t he s ame l evel as at t he end of 200 6, when t hey s tood at
€1,844.850 billion.
A close look at developments shows the Luxembourg fund industry in step with international financial trends.
In a gl oomy f irst quar ter, net assets und er m anagement s aw a f urther d ecline of 2. 12% or €33.09 billion,
reflecting investor disquiet and a 22% plunge in stock markets from the beginning of the year.
Improvement only got under way in spring, with good news including a decline in short-term interest rates,
State guar antees t o bac k banks, a r eturn t o pr ofit for s ome bus inesses and s ome enc ouraging ec onomic
indicators, in particular an upturn in orders for durable goods in the US. Together these sharply reduced risk
aversion a nd markets w ere abl e t o s tage a r ecovery. T his c arried ov er t o net assets under m anagement,
which returned to growth with a rise of nearly 7% in the second quarter, setting the total at €1,526.563 billion.
The renewed upward trend continued in the third quarter, when net assets rose 8.74% to €1,773.834 billion.
The quarter thus accounted for 50% of total annual growth for Luxembourg funds in 2009. The year ended
on a highly encouraging note with the rise in net assets over the final quarter reaching €67.159 billion or 24%
of the total gain for the year.
Stock markets staged a generally vigorous recovery following the G20 summit in April 2009, with gains to the
end of 2009 reaching 20% in most cases. This accounted for 70% or €196.971 billion out of a total rise of
€281.340 billion in net assets during 2009.
The ot her 30% of t he r ise represented fresh inflows of c apital f rom private a nd i nstitutional i nvestors for a
total of €84.369 billion. This was attributable in particular to the activity of the Luxembourg fund industry, with
408 new funds launched in 2009 despite persistent uncertainties clouding the environment. It also reflected
renewed investor interest in funds following net outflows that made for 15% of the reduction of AuM in 2008.
Net s ubscriptions were positive t hroughout the year except in F ebruary a nd March, which s aw n et
disinvestment totalling €4.601 billion.
Net s ales r eached a p eak of €22 .448 bi llion i n J uly, t he hi ghest f igure s ince O ctober 2007 a nd t he t hird
quarter was thus the strongest in the year, with net investment inflows accounting for nearly 35% of growth
over the three months.
The momentum created by government plans plus prospects for an end to recession and renewed growth in
GDP in most countries have kept net assets on a steadily upward path since the beginning of 2010. Gains to
the end of June had a lready r eached a v ery healthy 9.21%, r aising t he t otal t o €2, 010.637 b illion, an d
reaching b ack t o t he hi storic t hreshold of €2 trillion set i n M arch 20 07 before the s ub-prime c risis h it in
August of the same year.
Renewed investor confidence is clearly illustrated by net inflows reaching a cumulative total of €71.7 billion
since January 2010, which represents 42% of the total rise in net assets under management during the first
six months of this year.
Of which:
Total Assets Fixed Money
under Equity Balanced Others
income Market
management
(Eur bn)
Net assets Net assets Net assets Net assets Net assets
End of period (Eur bn) (Eur bn) (Eur bn) (Eur bn) (Eur bn)
Dec 2008 1 559,65 403,07 372,04 244,39 342,92 197,23
Dec 2009 1 840,99 487,35 539,76 294,59 328,99 190,31
June 2010 2 010,63 578,26 578,13 329,08 320,43 204,73

p. 4
NB: Data shown to two decimal places
Of which:
Net sales
(1) UCITS
UCITS
+ NON-UCITS
End Eur billions Fixed Money

Equity Balanced Others
of period income Market
Dec 2008 -77,19 -86,19 -93,68 28,16 65,63 8,89
Dec 2009 84,37 35,23 48,48 20,16 -15,35 -4,14
June 2010 71,74 10,87 47,91 15,74 -28,66 25,88

(1) cumulated net sales since the 1st January of each year
NB: Data shown to two decimal places
Note1:All comments in relation with investment policy refers to the CSSF classification -the Supervisory of Control in Luxembourg- and
figures in the text may differ a little from the figures presented in the tables.
Following the re-classification of funds made by the CSSF(see not e 1 ) in 2004, in the wake of the UCITS III
Directive, certain money market instruments and other short-term securities were integrated into the “fixed-
income securities” category. At December 2009, total assets held in this investment class were 801.82 billion
euros, ac cording t o dat a published b y t he C SSF, r espectively 8 87.68 bi llion euros at J une 201 0. T his
explains why assets held in “pure” fixed-income funds in our table (above) are only 487.35 billion euros at
December 2009 (respectively 578.26 billions euros at June 2010).
The s ame pr ocedure was app lied t o equities, where U CIs i nvesting i n no n-listed s ecurities an d v enture
capital were integrated into CSSF statistics and show 544.11 billion euros instead of 539.76 billion euros in
the table above as of December 31, 2009 (583.90 billion euros instead of 578.13 billion euros as of June 30,
2010).
The f inancial c risis t riggered f ar-reaching c hanges i n t he investment s trategies pur sued b y Lux embourg
funds i n 2 008, r edefining t he weightings of different asset classes that had prevailed for years. During the
period un der r eview, i n 20 09, t he resulting ba lance was not f undamentally a ltered f rom 2008 t o 2009, bu t
market upturns and relaxation of investors' risk aversion clearly had an impact on policies.
Combined with political and economic developments including the G20 summit, demonstrations of business
resilience in t he f ace of the do wnturn, an d promising r esults in some s ectors, the rebound in stock-market
indices and dec lines i n interest r ates r evived investor i nterest in r iskier as sets. A gainst t his bac kdrop,
equities and other variable income securities were the main focus of increased allocations, with net assets in
this category rising 44.86% on a year to reach €544.113 billion at the end of 2009. Despite a 5.5-point rise in
market share, equity funds did not return to their 2007 level, but they accounted for 60% of overall growth in
Luxembourg funds, adding €168.489 billion to net assets in 2009.
Diversified s ecurity por tfolios, including certain of no n-listed s ecurities and venture c apital, posted a l ess
spectacular but still vigorous rise of 20.41% or €50.243 billion to €296.444 billion at year end, while the rise
for f ixed-income i nvestments, i ncluding m oney-market i nstruments and other s hort-term pl acements, wa s
10.78% or €78.048 billion. The latter thus remained the largest asset class, representing a total of €801.826
billion or 43.55% of the market at December 31, 2009.
While favourable market trends benefited all three categories above, which together represented 105.5% of
total annual growth, other asset classes lost investor favours as lower interest rates triggered large
repurchases. This was especially true for cash investment funds, which suffered a 34.67% fall in net assets
from 2008 to 2009.
Consolidation in t he num ber of uni ts during 2009 mainly concerned bon d funds, equity funds and funds of
funds, w ith of t he num ber of uni ts dec lining b y 1. 59%, 5. 61% an d 3. 66%, r espectively. R epositioning of
p. 5
offerings had the opposite effect for mixed funds, with the total number of units in this category rising 6.03%
for the year.
During the first six months of 2010, there are no significant changes. The breakdown between the different
investment s tyles s tayed s table. T he f ixed-income i nvestments r epresented always t he largest as set c lass
with a market share of 44.15% or a total of 887.684 billion euros at June 30, 2010.
4. Regulatory and self-regulatory developments
January 1, 2009 through to December 31, 2009
On 4 June 2009 the law approving the Oslo Convention which prohibits the use, stockpiling, production and
transfer of c luster munitions w as ado pted. I t m ust be not ed t hat t his l aw a lso b ans t he f inancing, with f ull
knowledge of the facts, of cluster munitions by any individual or body corporate.
Anti-money laundering: T he gr and-ducal decree of 2 9 J uly 2008 es tablishing an of ficial l ist of A ML/CFT
"equivalent" countries was abolished on 1 December 2009, resulting in the Luxembourg fund industry being
again able to apply a risk-based approach for the international distribution of funds.
January 1, 2010 through to June 30, 2010
Anti-money laundering: O n 1 F ebruary 2010, a n ew gr and-ducal d ecree was adop ted t o c larify c ertain
provisions of the anti-money laundering law of 18 July 2009, in particular as regards customer due diligence
rules. A further draft law modifying, among other, the abovementioned law of 2009 is currently in preparation
and should be voted in October 2010.
New circular on Islamic finance: On 12 January 2010, the Luxembourg tax authorities issued a new circular
which describes both the major principles of Islamic finance and their tax treatment. It clarifies in particular
the treatment of murabaha transactions (forward sales) – i.e. sales with deferred payment that is mostly used
for t he pur chase of go ods f or i mmediate de livery on def erred p ayment t erms – and sukuk (asset bac ked
securities), being the Islamic counterparts of conventional bonds.
The circular testifies that Islamic finance has the full support of the Luxembourg authorities and it contributes
to the development of Luxembourg as a centre of excellence for Shariah compliant investment funds.
st
Remuneration policies in the financial sector: On 1 February 2010, the CSSF issued guidelines concerning
remuneration policies in the financial sector (circular 10/437). The aim of this particular circular is to
implement European Commission recommendations in this field and to limit excessive risk-taking and foster
long-term v alue v iews. I n par ticular, i t s tresses t he i mportance of t he r espective r oles an d r esponsibilities
regarding governance and oversight in this area.
UCITS: A bill i mplementing D irective 2 009/65/EC ( the “ UCITS I V” di rective) i n national l aw was dr afted i n
spring 2010 and deposited recently by the Government with the Parliament. The draft law should be adopted
by the end of the year.
5. Tax
The capital duty which had already been reduced to 0.5 % in 2008 was abolished completely on 1 January
2009. This measure is supposed to enhance the attractiveness of Luxembourg’s financial centre for foreign
investments.
Luxembourg also signed 16 double tax treaties that are in compliance with the OECD model in the matter of
the exchange of information.
p. 6
Luxembourg signed several additional double tax treaties that are in compliance with the OECD model in the
matter of the exchange of information.
6. Corporate and fund governance

ALFI Code of conduct: T he ne w A LFI c ode of c onduct w as pu blished i n S eptember 2009. T his doc ument
aims at pr oviding b oards of di rectors with high-level principles and b est pr actice r ecommendations f or t he
governance of Lux embourg i nvestment funds. Principle-based rather t han r ule-based, t he Code
encapsulates ex isting bes t pr actice in t he l ight of i mplementation of E U Directive 2006/46/EC into
Luxembourg l aw, in par ticular the r equirement f or an ann ual c orporate go vernance s tatement as a c learly
identifiable section in annual financial reports.
7. Trends in product development

Socially Responsible Investing (SRI) Funds: T he Lux Flag M icrofinance La bel was c reated t o promote t he
microfinance s ector b y r eassuring i nvestors t hat t he f und t hey ar e interested i n ( known as a Mi crofinance
Investment V ehicle or “ MIV”) ac tually invests i n microfinance. Lab els ar e gr anted for one year and ar e
renewable. E ligible MIVs may be d omiciled i n an y jurisdiction where s upervision of t he MIV or its f und
manager i s equi valent t o that i n E U c ountries. A t otal of ni ne MI Vs, w ith es timated t otal as sets under
management of EUR 1.7 billion at March 31, 2010 now hold the LuxFlag label.
Board of Directors: At its General Membership Meeting held on 11 June 2009, the Association elected a new
Board of D irectors f or a p eriod of t wo years. T he ne w B oard of D irectors r e-elected C laude Kremer a s
Chairman.
UCITS: A LFI r esponded t o t he consultation o n t he m anagement c ompany p assport in September and t o

other CESR papers related to the implementation of the UCITS IV Directive on Level 2 in October.
MiFID: ALFI responded to the CESR consultations on complex v s. non-complex products, the definition of
advice under MiFID and inducements in 2009.
AIFMD: In t he l ast year, A LFI r eviewed an d c ommented on various versions of t he A IFM D irective being
worked on b y EU i nstitutions. A n i mportant o bjective was t o m aintain a f ull level pl aying f ield b etween
alternative i nvestment f unds located inside an d out side t he European U nion (the “ EU”), m anaged b y a n
EU/non EU AIMF, and distributed inside/outside the EU.
9. Topics of surveys conducted by your association
In 20 09 a nd 2 010 ALFI c onducted s tatistical s urveys am ong i ts m embers regarding he dge f unds and real
estate funds.
10. Publications
p. 7
Several Newsletters and News Digests were published, informing members of the association of regulatory
developments and important events.
An FAQ document relating to real estate funds of funds was published in January 2010.
In Mar ch 201 0 A LFI a lso published a U CITS I V br ochure s etting out t he ad vantages of Lux embourg f or
innovation in areas including the notification procedure, the key investor information document, mergers of
UCITS, master-feeder structures and the management company passport. A further flyer discussing the ten
reasons to opt for a Luxembourg management company was issued a few weeks later.
At a press conference on 22 March 2010, ALFI unveiled a study on the cross-border fund industry in Europe.
The study, “Symbiosis in the evolution of UCITS”, produced by Lipper FMI, looks at the growth of the market
from it as beginnings in 1988 and the future size of the industry.
11. Seminars and breakfast meetings
Various seminars and breakfast meetings were regularly organised throughout 2009, covering topics such as
alternative investments, market turmoil and t ax issues. The A LFI Real Estate s ub-committee al so set up a
dedicated real estate training programme in cooperation with IFBL (Institut de Formation Bancaire).
The annual ALFI spring Conference and the ALFI-NICSA forum proved a success in September 2009.
Together with the Association for Risk Management Professional (PriM), ALFI held a joint conference on 25
February 2010. With over 200 experts from a variety of fields, this event demonstrated the growing interest in
risk management issues.
The A LFI Spring C onference was aga in well-attended i n March 2010. Themes covered were among other
UCITS IV, AIFMD, and fund industry infrastructure.
Various seminars and breakfast meetings have been organized throughout the year, covering topics such as
fund accounting, UCITS, risk management, or corporate governance.
(previously known as Federation of Malaysian Unit Trust Managers “FMUTM”)
COUNTRY REPORT – MALAYSIA
XXIV INTERNATIONAL INVESTMENT FUNDS ASSOCIATION ANNUAL CONFERENCE 2010

After a sharp plunge at the beginning of 2009, Malaysia’s economy contracted at a smaller annual
rate of 1.2% in second half of last year before accelerated from 4.5% in Q4 2009 to 10.1% in Q1
this year, the f astest s ince t he ec onomy was em erging from the 1988 Asia c risis. The s tronger-
than-expected c yclical ups wing in t he ex ternal s ector, and t he b oost i t af fords export i ncomes,
should c omplement c onsumer spending an d ens ure t he dom estic economy c ontinues t o
strengthen, albeit at a slower pace.
In the light of the government’s budgetary intentions, talk of gradual removal of distortionary price
controls and weaker a gricultural output, upside r isk t o c onsumer pr ice i nflation has i ncreased.
However, as no ne of t hese r isks t o i nflation i s t he r esult of dem and f actors, n on-food i nflation
remains manageable. In March, the Bank Negara Malaysia (BNM) became the first central bank in
emerging Asia to begin normalising policy rates. It continued this trend, raising the policy rate by a
further 25 basis points for the third consecutive meeting in July to 2.75%.
During t he p eriod u nder r eview, t he F TSE Bursa M alaysia K LCI r ose 22%, o utperformed t he
regional markets in general. The relatively volatile markets that were seen towards the end of the
period ar e ex pected t o c ontinue amid c oncerns ov er E urope’s debt c risis and s lowing gl obal
recovery. H owever, c ompared t o t he r egion, Malaysia’s s trong domestic dem and, c urrency an d
low levels of foreign participation may help to make the local market a more defensive one.
Moving f orward, m uch of t he n ation’s gr owth will be c antered up on the success o f the T enth
Malaysia Plan. The Plan outlines key policies, strategies and targets for the nation over the next
five years (2011-2015). Among others, it focuses on right-sizing government and public spending,
driving private investment initiatives and strengthening human capital through educational-sector
reforms are deemed vital for Malaysia’s next phase of development.
2. Data on Funds Under Management and Portfolio

(a) Funds Under Management
Total Net Asset Value as at 30 June in RM (billion)

2010 (Jun)
2009 2009 2010
USD
(Jun) (Dec) (Jun) *
(billion)
**
Total Net Asset Value (NAV) 164.00 191.71 207.11 63.58
Bursa Malaysia Market Capitalisation 817.94 999.45 1,044.35 320.60
% of NAV to Bursa Market Capitalisation 20.05% 19.18% 19.83% --

Source : Securities Commission, Malaysia
*USD1 = RM3.2575
** Includes private and government-sponsored funds
Despite the volatile market, the size of the industry in terms of net asset value (NAV) grew 26.3%
to RM 207.11 billion (USD63.58 billion) as at end of June 2010, represents 19.83% of the market
capitalisation of Bursa Malaysia.
1
(b) Fund P ortfolio as at 30 J une (covers onl y f unds m anaged b y pr ivate c ompanies and excludes
government sponsored funds)
2009 (Jun) 2009 (Dec) 2010 (Jun)

Fund Type
No. RM (mil) No. RM (mil) No. RM (mil) USD (mil) *
Stock 181 19,534.80 186 24,664.66 202 23,556.31 7,231.41
Mixed-asset 75 5,992.39 66 6,225.86 69 5,774.16 1,772.57
Bonds 48 6,618.62 42 6,189.68 50 9,707.26 2,979.97
Money Market 40 13,813.53 30 12,587.04 41 17,310.25 5,313.97
Islamic 147 22,211.43 139 21,706.31 159 26,550.37 8,150.53
Guaranteed/ protected 37 5,824.86 37 4,925.67 27 3,903.94 1,198.45
Others** 23 671.69 22 1,099.13 30 2,174.40 667.51
Total 551 74,667.32 522 77,398.35 578 88,976.69 27,314.41
Source : Lipper Asia Ltd. Based on unit trust funds managed by companies that have provided fund
information to Lipper Asia Ltd, FIMM
* USD1 = RM3.2575
** Others include commodity, hedge/ fixed income arbitrage and target maturity funds.
3. Key Trends in Flows and Assets Under Management

After t he u nprecedented r ationalisation m oves l ast year whereby f unds t hat ar e s ub-scale a nd
inefficient to run were terminated, fund managers are launching funds in popular sectors. Equity or
stock funds focusing regional and global markets dominated the list of new funds launched during
the period as activity is expected to be relatively more vigorous in many emerging and developing
economies, driven by buoyant internal demand.
The period also saw one of continued growth for Islamic funds. Assets grew significantly at 19.5%
and touched R M26.6 billion f or t he f irst t ime. U ndoubtedly, innovation in I slamic i nvestment i s
happening at a f ast pace, and Malaysia’s I slamic f unds c ontinued t o open u p more i nvestment
options to i ndividuals w ho may ne ver have c onsidered investing i n d ifferent c lasses of as sets
either in local markets and abroad.
4. Regulatory and Self-Regulatory Developments (Including Tax)

(a) Malaysia Approved as I nvestment D estination un der Qualified D omestic I nstitutional I nvestors,
China
On 23 J une 2010, Malaysia has of ficially joined 10 ot her c ountries as appr oved i nvestment
destinations u nder C hina’s Q ualified D omestic I nstitutional Investors ( QDII) program. The Q DII
allows Chinese nationals to invest in overseas markets through approved institutions in a
prescribed m anner. A pproved institutions r egulated by CBRC an d C SRC m ay n ow i nvest f unds
pooled from their clients into Malaysian securities, including equities, fixed-income products, and
collective investment s chemes appr oved by the S C. T hese i nstitutions m ay a lso eng age t he
services of licensed Malaysian fund managers to assist with QDII investment matters.
(b) Revised Guidelines on Unit Trust Funds to Facilitate Unit Trust Funds with Multi-class Structure
The revised Guidelines, which took effect on 1 June 2010, allowed a single unit trust fund to offer
multiple c lasses of units over a single investment pool, with e ach class of un its having different
features such as the fees and charges imposed and the currency in which it is denominated.
As such, investors will be able to choose the class that best suit their investment objectives and
expected level of services offered. The amendments are also envisaged to facilitate the growth of
cross-border offerings of Malaysian unit trust funds that made possible under Mutual Recognition
Agreements.
2
(c) Issuance of the Issuer Eligibility Guidelines – Structured Warrants
In line with the increasing sophistication of equity derivatives products that have been introduced
to the market, such as bull equity-linked structures and warrants on indices and exchange-traded
funds, t he S C has i ssued t he I ssuer E ligibility G uidelines – Structured W arrants in December
2009 with an aim to maintain market confidence and enhance investor protection. The Guidelines,
among others, prescribes higher standards of business and risk management practices of issuers
and distributors of the products.
(d) Mutual Recognition of Islamic Funds between Malaysia and Hong Kong
A M utual Recognition Agreement ( MRA) was s igned i n November 200 9 between M alaysia and
Hong Kong to further develop the Islamic capital market in particular, Islamic collective investment
schemes ( CIS). T his marks a major milestone i n ac hieving gr eater r egulatory c o-operation as i t
will f oster c lose r egulation c o-operation an d help p ave t he way f or dee per an d br oader I slamic
investment markets in both jurisdictions. The mutual recognition has also cleared the way for the
development of a common platform for cross-border offering of Islamic CIS as Islamic product’s in
both countries can now be marketed and distributed with minimal regulatory intervention. This is
the s econd M RA signed af ter t he same ar rangement w as s ealed with Dubai F inancial S ervices
Authority in March 2007.
(e) Measures introduced to further liberalise and internationalise the Malaysian capital market
To increase Malaysia’s competitiveness as a fund-raising and investment destination, the recent

Budget 20 10, un veiled on 23 O ctober 20 09, continued t o b uild on t he liberalisation m easures
announced earlier as follows:
i. 100% f oreign e quity participation in c orporate f inance a nd f inancial pl anning c ompanies

compared with the present requirement of at least 30 per cent local shareholding;
ii. Stamp duty exemption of 20% on Islamic financing instruments;
iii. Tax ex emption on profits r eceived f rom non -ringgit s ukuk (Islamic bonds ) originating f rom
Malaysia approved by the SC is extended to profits received from non-ringgit sukuk
originating from Malaysia approved by Labuan Off shore Financial Services Authority
(LOFSA);
iv. Deduction on ex penditure incurred o n t he issuance of I slamic securities ap proved by t he

SC. T he i ncentive is a lso ex tended t o ex penditure incurred on t he issuance of I slamic
securities approved by LOFSA;
v. Deduction on expenditure incurred to set-up Islamic stockbroking companies; and
vi. Liberalisation of the commission sharing arrangements between stockbrokers and remisiers
to e ncourage r etail participation i n t he s tock market. T he f irst s tage, which t akes ef fect
immediately, allows flexible brokerage sharing at a minimum rate of 40% for remisiers. The
commission sharing will be fully liberalised in the second stage, effective 1 January 2011.
(f) Securities Borrowing and Lending Model Enhanced for More Flexibility
An enh anced securities b orrowing a nd lending m odel i .e. Securities B orrowing and Len ding
Negotiated Transaction (SBLNT) was implemented in August 2009 that offers an option to borrow
and lend on an over-the-counter ( OTC) basis. Under t he SBLNT framework, eligible person are
now given the flexibility to enter into agreements, hence able to negotiate and agree on the terms
of bor rowing and lending directly. T hese securities bor rowing a nd l ending transactions m ust,
subsequently be r eported v ia on-shore bor rowing and lending r epresentatives and facilitated
through Bursa Malaysia Securities Clearing as the approved clearing house.
3
(g) Introducing Bursa Suq Al-Sila
Islamic finance an d i nvestments development i n Ma laysia t akes anot her s tep forward with t he
official launching of Bursa Suq Al-Sila or Commodities Market in August 2009. The platform will
serve t he gr owing demand f or S hariah-compliant f inancing ne eds an d close t he ga p c urrently
faced by international Islamic financial players.
As t he world’s f irst Shariah-compliant trading p latform for c ommodity M urabahah, t awarruq and
musawwamah transactions, Bursa Suq Al-Sila is well received among Islamic financial institutions
across several markets, including the UK and the Gulf Cooperation Council countries. Bursa Suq
Al-Sila is expected to further enhance the trading of commodities for liquidity purposes between
Islamic ﬁnancial institutions in Malaysia and to facilitate cross -border l iquidity transactions b y
providing a wider range of new instruments. It is also the first internet based platform in the world
with crude palm oil (CPO) as its underlying base commodity.
(h) Streamlining Registration of Shariah Advisers
The Registration of S hariah A dvisers G uidelines which t ook ef fect on 10 A ugust 200 9, a llowed
Shariah advisers, through a single registration, provide advice on all Shariah-based products and
services regulated b y the SC. Prior to t his, Shariah advisers had t o r egister separately f or each
product and services based on the respective guidelines. The guidelines, among others, stipulate
the c riteria and pr ocedures f or r egistration and r enewal, m atters pertaining to r egistration and
deregistration and continual professional development.
The guidelines supersede the various provisions on the eligibility and registration criteria outlined
in other SC’s guidelines covering various Islamic products and services.
(i) Investment Management Standard (IMS009) for Measuring and Disclosure of Fund Volatility
FIMM has introduced IMS009 in May 2009 as part of industry’s continuing efforts in educating the
investors on r isks per taining t o i nvesting i n u nit t rusts. T he I MS pr escribes a s tandard
measurement and disclosures of return volatility for unit trust funds and recognized funds in order
to provide investors with, at the first instance, information regarding return volatility characteristics
of the funds. Under the IMS, the annualized standard deviation, together with the relevant volatility
classification a nd d isclaimer ar e r equired t o be d isclosed i n a dvertisements and pr omotional
material of t he f unds, s ubject t o s pecific ex emptions t hat t ake i nto c onsiderations f unds’
availability status, target market and the focus of marketing messages that are return performance
driven or otherwise.
5. Major Development in Corporate Governance

During the period under reviewed, the SC continued to promote sound corporate governance and
risk management practices. Key initiatives include:
(a) Establishment of the Audit Oversight Board
In v iew of the need f or ex ternal auditors t o be s ubjected t o i ndependent o versight, t he S C has

established A udit O versight Board ( AOB) provided for u nder t he Securities C ommission
(Amendment) Act 201 0 w hich w as pas sed b y Parliament in D ecember 2 009. T he AO B
commenced operations on 1 April 2010.
The AOB is intended to promote further investor confidence in the quality and reliability of audited
financial statements of public-interest entities in Malaysia and to establish a framework to promote
and develop an independent, effective and robust audit oversight. Under this framework, public-
interest entity includes a public-listed company and institutions supervised by BNM and the SC.
An Implementation Steering Committee has already been established to formulate the registration
criteria f or au ditors of public-interest entities an d t his w ill b e f ollowed b y t he d evelopment of a
supervisory oversight programme for inspection, inquiry, enforcement and standards setting.
4
The responsibilities of AOB stipulated in the new provisions ar:
i. registration of individuals and firms that wish to audit public interest entities;
ii. directing Ma laysian Institute of Accountants ( MIA) t o es tablish or a dopt t he au diting a nd

ethical standards to be applied by auditors;
iii. inspecting audit firms to ensure compliance of standards required of registered auditors;
iv. conducting inquiries when there are suspicions raised during the inspection process;
v. imposition of proportionate sanctions; and
vi. providing education an d a wareness on domestic an d i nternational auditing and qua lity
standards.
(b) Working towards Corporate Governance (CG) Excellence among Listed Companies
Woking w ith other c apital market s takeholders s uch as B ursa M alaysia a nd Securities I ndustry
Development Corporation, the SC has organised public lectures on corporate governance as well
as hosted the annual Corporate Governance Week to further promote good corporate governance
practices among public listed companies and awareness among public.
Drawing many prominent corporate governance experts and speakers from Malaysia, Hong Kong
and Singapore, t he initiatives provided a major pl atform f or regulators and capital market
practitioners t o d eliberate on various k ey CG i ssues s uch as t he evolving roles of b oards,
effectiveness of independent directors, boardroom quality, board oversight over management and
risk management.
6. Fund Governance
Kindly refer to Sections 4 above.
7. Product Development
During the period, Islamic funds w ith innovative structures were introduced, including f unds that
invest in broader range of investment strategies or structured products that linked to commodities,
food staples, climate, inflation-hedged sectors with an aim to gain exposure to assets other than
the conventional equity and fixed-income, with minimal, if not zero downside risks.
8. Other Major Issues and Developments

Not applicable.
5
COUNTRY REPORT
From January 1, 2009 through to December 31, 2009
1. ECONOMIC AND FINANCIAL BACKGROUND

Economy
Nominal GDP (December 2009) $874.90 billion

Per capita GDP (2009) $8,411.11
Annual GDP growth (December 2009) -2.3%
Annual Per capita growth (2009) -20.37
Inflation rate (2009) 3.56%
Natural resources (9.49% of GDP) Petroleum, silver, copper, gol d, z inc, nat ural
gas, timber.
Agriculture (4.24% of GDP) Corn, beans, f ruit, c otton, coffee, s ugarcane,
winter vegetables.
Industry (24.84% of GDP) Manufacturing, e nergy, c onstruction,
processing, el ectronics, m ining, f eeding,
beverage, tobacco, etc.
Services (61.43% of GDP) Commerce and t ourism, f inancial s ervices,
transportation, educational, health and human
communications, etc.
Trade (Goods) Exports $230 billion
Trade (Goods) Imports $234 billion
Major markets USA, J apan, C anada, China, European
Union.
• Figures in dollars
• Source: Banxico, INEGI, IMF.
Financing
Central government external debt $93 billion

Central government domestic debt $171 billion
Domestic financing by commercial banks $190 billion
Domestic financing by non banks $685 billion
Mexican treasury short term rate CETES 28 4.51%
Mexican Bank short term rate TIIE 28 4.92%
Index of Mexican Market Exchange 32,120
Annual Index of Mexican Market Exchange 143.52%
growth
• Source: SHCP, Banxico, INEGI
2. DATA ON FUND UNDER MANAGEMENT AND PORTFOLIOS

During 2009, the Mexican mutual funds industry had an important recovery. Assets under management have
grown 27.33%, from 56,790 million dollar in 2008 to 72,310 million dollar in 2009.
Also, d uring t hat year t he variable i ncome f unds and f ixed i ncome funds increased 39.98% an d 25.19%
respectively.
In December the mutual funds industry register 477 funds and 32 fund managers operating. The number of
investors rose to 1,981,139 accounts.
In the following figure we show the evolution of net assets, total accounts and number of mutual funds.
Number of
Date Net Asset* Total Accounts
mutual funds
Jan-09 55,822 1,864,064 502

Feb-09 53,026 1,880,271 502
Mar-09 61,799 1,881,711 498
Abr-09 61,794 1,882,919 498
May-09 66,591 1,910,162 499
Jun-09 67,727 1,930,027 495
Jul-09 69,413 1,944,938 491
Agu-09 69,062 1,910,453 484
Sep-09 69,232 1,897,864 482
Oct-09 71,467 1,856,196 482
Nov-09 72,647 1,969,578 482
Dec-09 72,310 1,981,139 477
*Million dollars
Also as set a llocation i s pr imarily in government s ecurities, i t r epresents 64 .51% l ike C etes, B ondes an d
BPA’s stand out. Then we find Private debt with 9.69%, Equity 13.25% and Banking Debt 10.67%. Finally,
Derivative represents the .01% and Sight deposits 1.72%.
3. KEY TRENDS IN FLOWS AND ASSETS UNDER MANAGEMENT

Current market situation
Responding t o t he c risis t hat began t oward t he e nd of 200 8, t he Mutual F und Ma nagers pr oposed and
agreed upon measures to temper its impact on the mutual funds industry, which included the following:
• We w orked t ogether w ith N acional Financiera, S HCP and Mexican A ssociation of R etirement F und
Managers ( AMAFORE) t o dev elop a m echanism t hat w ould s upply l iquidity t hrough r etirement f und
managers (AFORES).
• Additionally, we explored the possibility of Specialized Retirement Mutual Funds (SIEFORES) invest in
mutual funds. This topic still being analyzed.
• In March, representatives of Barclays Global Investor (BGI) made a presentation on the first Trac to be
issued on corporate bonds in emerging companies, called “iShare Fixed-Income Tracs.”
• Various meetings of the Valuation work group were held, in which members agreed:
o To propose to the SHCP that restrictions be place on offerings of Savings Protection Bonds (BPA’s).
o To assume the minimum fee schedule, which recognized credit events, and to have valuation prices
based on trades rather than bids.
o On March the authority published an amendment to Article 12 of the Unified Mutual Funds Bulletin
(CUSI), in which the provisional (6-month) authorization given in October 2008 to ease application of
differentials to the valuation of mutual funds was made permanent and indefinite.
o Through a m odification t o A nnex 1, Mutual F und C lassification, Money Market F unds w ere
incorporated, a change published on September 17, 2009.
4. REGULATORY AND SELF REGULATORY DEVELOPMENTS

Mutual Funds Law
On November 27, 2009, the CNBV forward its preliminary draft of the reform, including, among other issues,
trust ac tivity, c ompartments, and c lient profiling. T his dr aft i s c urrently b eing reviewed b y t he SHCP and
Banco de México, and may therefore undergo substantial changes.
The reform does not include the change regarding offshore affiliates nor the change in using total assets to
calculate parameters.
Unified Mutual Funds Bulletin (CUSI)
In December, AMIB received the new version of CUSI that includes the following aspects:
• Recognizes the existence of unlimited capital stock, which will mean fewer requests for authorization for
an increase in authorized capital stock.
• Allows f or ge neric a nd s pecific pr ospectuses, without a llowing a ny exceptions t o t he c ontent of t he

shared prospectus, which applies to funds that are owned by a single fund manager and have
information that applies to each.
• Modifies the term for changes to the investment and repurchase regime, from one year to six months or
less, at the discretion of the Commission, and allows for a modification at any time when the fund has no
investors.
• Clarifies t he m inimum c apital applicable t o i ndependent f und managers ( 12 m illion pesos) a nd those
belonging to a financial group (1 million pesos)
• Eliminates the reference to 24-, 48-, or 72-hour settlement terms for funds’ trading in their own shares,
allowing them to set terms consistent with the assets that make up their portfolio (maximum T+5).
• Accepts asset deposits in global custodians or transfer agents which is already permitted in practice.
• Includes the use of the Securities Information Transfer System (STIV) for all procedures established in
the Mutual Funds Law and in applicable bulletins, in order to send and receive information in a manner
similar to what stock-market issuers’ use.
• Eliminates the obligation to publish mutual fund portfolios in nationally circulated newspapers, and now
obliges t hem only t o be i ) always available t o investors; and i i) pu blished in t he web p age of t he
distributor, with a clear and precise link.
• Classification of F unds as Short, Medium and Long Term, bas ed on t he weighted average duration of
the assets that make up the portfolio. The intent is to use the durations calculated by the price vendor so
the information is consistent.
• Incorporates definitions of equity trust certificates, asset-backed s ecurities and s tructured securities, in
order to di fferentiate between t he s tructures existing i n the m arket, w hile i mposing restrictions on t he
funds that may acquire them.
• Modifies t he c ontent of t he s implified prospectus and t hus r edesigns it in or der t o s how the bas ic
features of the fund and the results obtained for each share series. Also integrating a monthly document
entitled “Key Information Document.”
• Takes i nto ac count t he r isk a ffecting assets of similar nat ure i n i dentifying structured s ecurities whose
concentration in assets in a given industry group may be exposed to risk factors not currently analyzed
and which, in light of recent credit events, must be administered.
• Makes i t ob ligatory f or t hose r esponsible for i nvestment d ecision-making to have m inimum t echnical
capacity and experience for trading structured securities; also incorporates the principle of acting in the
best interest of the fund.
5. CORPORATE GOVERNANCE
The mutual funds shareholders can exercise their c orporate an d patrimonial rights from the shares drift of
the capital of the investment companies that they hold through a mandate granted to the Managers’ funds or
agent funds; although they can exercise directly.
The mutual funds shareholders have rights that are stipulated in Mexican laws, like:
1. vote on questions affecting the company as a whole

2. to have a say in the matter when it deems
3. being voted, they can participate in board of directors
4. receive dividends when declared by the board of directors
5. share in the proceeds in the corporate liquidation, if applicable
6. preemptive right
Also, there are some principles to consider like: there are rights of minorities to promote equal treatment and
active participation of minority shareholders, promotes integrity and ethical behavior of mutual funds
managers and disclosure and transparency in their financial information.
6. FUND GOVERNANCE
Structure of the board of directors
Based on the Mexican laws in force, all mutual funds must have:
• Shareholders’ m eeting is t he supreme or gan of m utual f unds. T he assemblies c an be general an d

special; the general one may be ordinary or extraordinary. The regular meetings are held at least once a
year within four months after the ending of fiscal year. The extraordinary and special meetings may meet
at any time.
• The management of the funds is in charge of the board of directors, which may be modified periodically
by a regular meeting. This must be i ntegrated by a minimum of five and a maximum of fifteen r egular
members, which whom at least thirty three percent must be independent. For each regular member, a
substitute on will be appointed.
• Independent c ounselors of m utual f unds s hall be p ersons s elected f or t heir experience, a bility and
prestige.
• The Commissioner monitors the performance of managers. They could be one, or several. The
commissioner is appointed by shareholders.
• The general director is the legal representative of the mutual funds whose function is to comply with the
guidelines s et by t he b oard of directors and c omptroller, s o t hat m utual f unds f ully c omply with t he
applicable provisions
7. PRODUCT DEVELOPMENTS
Media Relations
During the course of 2009, AMIB was presented in various media communications: magazines, newspapers,
radio an d t elevision pr ograms, c overing f inancial an d m arket-related topics. We f ocused a ttention o n t he
benefits of investing in the exchange (either directly or through mutual funds), new forms and instruments for
investment, the importance of an awareness of the market, the outlook for the industries, and adjustments in
the market resulting from the global crisis and the repercussions of current scenario on the financial markets
and on companies.
Print media
Throughout 2009, AMIB continued to publish the quarterly magazine “Valores por la Fortaleza de México”,
now in its 7th year of publication. The topics touched on areas of general interest, particularly relating to the
global crisis and its repercussions in the industry. We also continued with our goal of promoting stock-market
awareness, informing the general public of the nature, attributes and benefits the securities market offers to
both i nvestors and c ompanies t hat nee d f inancing i n or der t o gr ow. A lso we include ed ucational ar ticles
about the market, mutual funds as a savings alternative, and articles about finance.
8. OTHER MAYOR ISSUES AND DEVELOPMENTS
Selling Practices
A Working Group was created of members of the Legal Affairs and Compliance Committees met to review
selling practices and reach agreements on common policies.
The group decided on the following activities:
• Review of current Self-Regulatory Standards.

• Developing an objective procedure for profiling clients, an issue about which the CNBV has expressed
concern.
• Updating the script promoters must follow in selling products.
• Proposing the parameters for considering an investor to be considered “qualified.”
The Working Group analyzed the selling script, and suggested various adjustments. The group also
analyzed question by question the survey sent out by CNBV regarding selling practices in the industry, which
will serve as the basis for the industry proposal.
Members of t he gr oup d iscussed t he i ssue of t raffic-light r ating s ystems, w hich w ould help c reate s ecurity
mechanisms f or classifying t he product linked t o t he c lient pr ofile, based on which m ore i nformation or
documentation m ust be pr ovided or s igned by the c lient. T his would enhance t rading transparency and
reduce the risk for both clients and brokers.
COUNTRY REPORT
From January 1, 2010 through to June 30, 2010
1. ECONOMIC AND FINANCIAL BACKGROUND

Economy
Nominal GDP (June 2010) $999billion

Per capita GDP (2010) $8,135
Annual GDP growth (June 2010) 7.6%
Annual Per capita growth (2009) 12.70%
Inflation rate (June 2010) 3.69%
Natural resources (9.11%of GDP) Petroleum, silver, copper, gol d, z inc, nat ural
gas, timber.
Agriculture (4.65% of GDP) Corn, beans, f ruit, c otton, coffee, s ugarcane,
winter vegetables.
Industry (25.61% of GDP) Manufacturing, energy, c onstruction,
processing, el ectronics, m ining, f eeding,
beverage, tobacco, etc.
Services (60.64% of GDP) Commerce and t ourism, f inancial s ervices,
transportation, educational, health and human
communications, etc.
Trade (Goods) Exports (June 2010) $165 billion
Trade (Goods) Imports (June2010) $ 164 billion
Major markets USA, J apan, C anada, China, European
Union.
• Source: Banxico, INEGI, IMF.
Financing
Central government external debt $95 billion

Central government domestic debt $188 billion
Domestic financing by commercial banks $199 billion
Domestic financing by non banks $360 billion
Mexican treasury short term rate CETES 28 4.59%
Mexican Bank short term rate TIIE 28 4.96%
Index of Mexican Market Exchange 31,157
Annual Index of Mexican Market Exchange -3.00%
growth
• Source: SHCP, Banxico, INEGI
2. DATA ON FUND UNDER MANAGEMENT AND PORTFOLIOS

In J une 2 010, t he m utual fund i ndustry r eached a r ecord i n n et as sets of $86, 751 m illion dollars; which
represents an increase of 19.97% from the begging of the year.
In the same month the industry register 476 funds and 30 fund managers operating. The number of investors
rose to 1,876,958 accounts.
The decrease in funds that have been observed is mainly due to fund mergers.
In the following figure we show the evolution of net assets, total accounts and number of mutual funds.
Date Net Asset* Total Accounts Number of mutual funds

Jan-10 73,636 1,981,652 474
Feb-10 77,292 1,935,735 474
Mar-10 83,633 1,930,891 474
Abr-10 86,097 1,960,148 474
May-10 83,581 1,967,056 476
Jun-10 86,751 1,876,958 476
*Million dollars
Also as set a llocation i s pr imarily in government s ecurities, i t r epresents 64 .41% l ike C etes, B ondes an d
BPA’s stand out. Then we find Private debt with 8.76%, Equity 15.45% and Banking Debt 10.40%. Finally,
Derivative represents the 0.07% and Sight deposits 0.81%.
3. KEY TRENDS IN FLOWS AND ASSETS UNDER MANAGEMENT

Current market situation
The f und i ndustry has e njoyed s teady growth in assets and number of ac counts; t his i s t he r esult of t he
actions that have taken governmental institutions, fund managers and the AMIB.
Some topics that are still ongoing and we hope to implement during this year are:
• Mechanisms t o deal with l iquidity problems: The C NBV pr esented with various pr oposals being
developed b y I OSCO S C5 G roup an d t hey c ould be i mplementing in M exican i ndustry, like: s ide
pockets, redemption gates and repurchases in kind. These issues are analyzing by the Working Group.
4. REGULATORY AND SELF REGULATORY DEVELOPMENTS

Mutual Funds Law
The l ast N ovember C NBV forward i ts pr eliminary dr aft of t he reform of t his la w, including, am ong ot her
issues, trust activity, compartments, and client profiling. This draft is currently being reviewed by the SHCP
and Banco de México, and may therefore undergo substantial changes.
The reform does not include the change regarding offshore affiliates nor the change in using total assets to
calculate parameters.
Unified Mutual Funds Bulletin (CUSI)
We work on the modification of secondary regulation (CUSI) and during the first six months some changes
have been implemented and others are in the final stage of review, some of these changes are:
• Extends t he c lassification of funds f rom 17 t o more t han 80, i n or der t o al low b etter c omparability
between funds.
• The debt funds are classified by the average length as: short, medium and long term.
• Fund m anagers ar e r equired t o pub lish a m onthly document t hat c ontains k ey i nformation, which w ill
replace the simplified prospectus and the quarterly report.
• Allow the VaR is an upgraded section of the prospectus, to avoid unnecessary requests for amendment
to the prospectus, especially in those variations caused by movements in risk factors.
• Incorporate a unique methodology of calculation for the Value at Risk.
• Incorporate into the current classification retirement funds, known as Life Cycle.
5. CORPORATE GOVERNANCE
In the industry we consider a good corporate governance system, the one that contains the following basic
principles:
• Rights and equitable treatment of shareholders.

• Interests of other stakeholders.
• Role and responsibilities of the board.
• Integrity and ethical behavior.
• Disclosure and transparency.
• Identifying and controlling risks that the company is liable.
• Prevent illicit transactions and conflicts of interest.
• Regulatory compliance that the society is subject.
• Provide certainty an d c onfidence t o i nvestors and i nterested p arties on t he c onduct of hones t an d
responsible society.
6. FUND GOVERNANCE
In t he f und go vernance a re i nvolve: t he C hief E xecutive O fficer, t he boar d of di rectors, management,

shareholders and Auditors.
But the most important element is the board of directors which takes decision on behalf of investors.
The most important duties of the members of the board are:

• Approve by majority:
o Mutual Funds behavior manual.
o Enrollments of persons which distribute, valuate, qualify and provide the security prices.
o Rules to prevent and avoid interest conflicts.
• Establish investment and operative policies of mutual funds.
• Analyze and evaluate the results of the mutual funds manager.
• Every quarter, they must meet with at least the fifty one percent of assistance, with whom one percent
must be independent.
Media Relations
This year we have planed various forums to raise awareness investment vehicle to the public such as
investment funds. Some of the works being carried out are:
• The A MIB j ointly with t he Mex ican S tock E xchange i s or ganizing t he F inancial Literacy Week. T he
main topics to be discussed are saving, investment and mutual funds.
• Promotion P roject for t he Stock Mar ket t hrough a T V program coordinated b y BMV and A MIB and
includes t he f ollowing t opics: Analysis, C orporate F inance a nd / or I nvestment B anking, Promotion
and/or W ealth Management, Capital Market, Money M arket, Derivatives Market, Institutional
Advancement and Mutual Funds.
Print media
Continuing our ef forts t o d isseminate and promote i nformation on t he s ecurities market, w e c ontinued t o
publish our quarterly magazine called “Valores por la Fortaleza de México”. Among the various sections that
make up the bulletin, we included educational articles about the market, mutual funds as a s aving
alternative, a nd articles ab out f inance. All of t his is intended t o attract m ore i nvestors t o t he pr oducts o ur
market offers.
This magazine is published both electronically and printed, and sent to more than 10,000 subscribers. It is
distributed widely i n of fices of t he Mex ican pr esidency, in t he u pper a nd l ower hous es of C ongress, t he
judicial branch, in state and municipal governments, as well as among the directors and representatives of
various bus iness or ganizations t hat m ake up t he B usiness C oordinating C ouncil ( CCE), i n various
universities in Mexico, as well as directly to students and interested parties who subscribe to it.
8. OTHER MAYOR ISSUES AND DEVELOPMENTS
During the first half of the year, funds Managers discussed the possibility of conducting a study into the
profile of mutual fund investors in order to encourage a higher level of investment in these vehicles.
Due to the above, the study will be carried out by a working group that will define the approach to it. We
hope to have the results in the middle of next year.
Netherlands Country Report

2008 2009
Population (million) 16,4 16,6
GDP (EUR billion) 596 570
Stock market capitalisation (EUR billion) 456 583
Bond market capitalisation (EUR billion) 736 822
Bond market capitalisation (% of GDP) - -
Household gross savings ratio (%) - -
Household financial wealth (EUR billion) 729 865
Average per capita financial wealth (EUR) 44451 52108
Table 2: Main assets of households

(EUR billion)
2008 2009
Currency & Deposits 368 387
Debt securities 51 45
Quoted shares 127 149
Life & Pension funds 838 952
Investment funds n.a. n.a.
 Direct ownership - -
 Via life ins. policies - -
Other (money market + foreign funds) n.a. n.a.
Total financial assets n.a. n.a.
Total net wealth n.a. n.a.
Table 3: Net Acquisition by Households

(EUR million)
2008 2009
Currency & Deposits 9.952 12.359
Investment funds -3.913 1.977
Total financial assets n.a. n.a.
Table 4: Net assets by the fund industry in the Netherlands

(EUR billion)
2005 2006 2007 2008 2009
Real estate funds 15.77 19.36 13.68 10.5 12.69

Total AuM 95.76 101.85 90.96 67.50 79.01
Table 5: UCITS assets by fund type

(EUR billion)
2005 2006 2007 2008 2009
Equity 39.17 43.51 40.69 38.5 36.30
Bond 15.96 15.17 12.86 18.5 9.76
Balanced 10.85 11.07 11.69 n.a. 9.60
Money Market 2.01 1.82 1.18 n.a. n.a.
Fund-of-Funds - - - n.a. n.a.
Other 11.99 10.93 10.85 n.a. 10.66
Total 79.98 82.50 77.28 57.0 66.32
Table 6: Net sales of investment funds in the Netherlands

(EUR millions)
2005 2006 2007 2008 2009
Home-domiciled UCITS -5,759 142 -4,119 -2,594 -580
Real estate funds 99 231 -356 -193 83
Total net sales -5,660 373 -4,475 -2,787 -497
Table 7: Net sales of UCITS by fund type

(EUR million)
2005 2006 2007 2008 2009
Equity -3,087 537 -2,298 n.a. n.a.
Bond -3,619 -61 -1,815 n.a. n.a.
Balanced -300 17 636 n.a. n.a.
Money Market 438 451 -601 n.a. n.a.
Fund-of-Funds - - - n.a. n.a.
Other 809 -802 -41 n.a. n.a.
Total -5,759 142 -4,119 n.a. n.a.

The Dutch Parliament is currently discussing legislation to further de-materialize clearing and settlement of
financial instruments laws that have already existed for a long time. This is likely to lead to the abolishment of
the remainder of bearer instruments and connected expensive administrative measures. The legislation will
also improve the protection of the investors against a bankruptcy of a custodian.
The D utch r egime for collective investment schemes i s quite flexible. It is possible to have a Dutch based
UCITS or non-UCITS which is either a legal person (NV, BV, CV, etc) or a contractual type fund, an ‘FGR’.
The FGR is the vehicle that is often used by pension funds for asset pooling purposes. Also companies like
AEGON and SHELL use the popular FGR for their in-house pooling purposes, managing their international
assets in a fully tax transparent manner.
All of these types of funds can have the tax neutral status of a ‘Fiscale Beleggingsinstelling’ (‘FBI’) or a ‘Vrij-
gestelde Beleggingsinstelling’ (‘VBI’).
Also to alternatives, the Dutch financial regulation offers good access to a licence. Read more about the op-
portunities T he N etherlands offers on http://www.hollandfinancialcentre.nl/publications//HFC-GAIM-
pocketboekje5-versie%2015%20juni%202010.pdf
Obtaining a Dutch license for a UCITS or a NON-UCITS is not difficult. Fast track procedures exist for funds,
reducing time-to-market.
Building on this flexible framework, ahead of examples in Luxemburg and Ireland, a light supervisory regime
is available for investment vehicles which are only offered to professional investors. Under this light regime,
supervision is limited to prudential issues and fitness and properness of management.
Pensions
The i mplementation of t he I ORP D irective was finalized in J une 2010. T his introduces the pos sibility of a
‘general pe nsion i nstitution’ with a E uropean p assport f or def ined c ontribution pur poses t o f acilitate t he
cross-border pension business. In the near future also defined benefit regulation will follow. The Netherlands
have bu ilt up a gr eat ex pertise i n r etirement pr ovisions, s ince a lready right after t he S econd World War,
state, industry and c orporate p ension f unds were f irst i ntroduced in T he N etherlands. T he D utch pension
funds are among the largest pension funds in the world, investing worldwide and applying a wide range of
modern investment techniques. The Dutch skills in the area of retirement provisions include services on sol-
vency and fiduciary management, liability driven investments, asset liability matching, actuarial techniques,
pension fund management, administration and pension communication.
DUFAS Principles of fiduciary management

DUFAS has developed a set of Principles regarding fiduciary management. The main driver is to add profes-
sionalism to t he pension fund organisation. A n as set manager normally only looks at the asset side of the
equation. Because fiduciary management requires advising on both the asset and liability side of the pension
funds' balance sheet, specific expertise and tasks have to be implemented by the external manager. Fidu-
ciary management refers to the outsourcing of pension fund management to a single third party. This provid-
er t ypically t akes c ontrol of t he pens ion f und f rom t he s cheme's t rustees w ith r esponsibility f or adv ice and
implementation thereof, portfolio construction, asset manager selection, monitoring and reporting. Once the
trustees adopt an o verall i nvestment strategy, the fiduciary manager takes responsibility for the as set mix,
benchmark selection, risk budgeting and the hiring and firing of managers. Therefore, integrity and good go-
vernance of t he f iduciary manager pl ay also a n i mportant r ole i n t he D UFAS Fiduciary Management P rin-
ciples. DUFAS has also developed a template for a fiduciary management agreement, which can be found
together with the Principles at www.dufas.nl
Taxes
The Netherlands has a very favourable tax climate, which is attractive to both Dutch and foreign companies
and investment vehicles. The advantages are:
- An extensive network of bilateral tax treaties all over the world with all major countries
- Corporate tax rate of 25.5%
- Return or exemption of foreign withholding tax (interest, dividends, royalties)
- Tax ex emption f or an y holdings ov er 5% , m eaning t hat a ny profits, l osses, d ividends an d s tock pr ice
gains can be received without withholding tax.
- Tax neutral fund solutions: Fiscale beleggingsinstelling (FBI) and Vrijgestelde Beleggingsinstelling (VBI)
- Tax incentives for foreign employees (30% arrangement)
From a tax perspective, the VBI is an alternative for the FBI. The FBI has an effective 0% corporate tax rate,
which is tantamount to a tax exemption. There are certain conditions that have to be met by an ‘FBI’ in order
to qualify for the 0% corporate tax: a.o. the net profits of the fund have to be passed on to shareholders an-
nually. Most foreign shareholders are able to reclaim the dividend withholding tax. The FBI is protected by
the Dutch tax treaty network, which is especially important with respect to dividend withholding tax. All for-
eign withholding taxes, including dividend withholding taxes, are deducted from the Dutch dividend withhold-
ing tax.
There i s no capital t ax (“taxe d’ abonnement”), w ealth t ax or any ot her t ax on the as sets of a f und i n t he
Netherlands. This makes the FBI very appealing to – among others – institutional investors such as pension
funds.
The VBI tax regime is quite similar to the tax treatment of the Luxemburg SICAV. The VBI is exempt from
corporate tax, capital tax and dividend withholding tax. There are no shareholder requirements or leverage
limits, but the VBI must be an open-ended fund, investing in liquid assets (no real estate). The VBI is how-
ever not protected by the Dutch tax treaty network. This makes the VBI an interesting option for investments
on which little or no withholding tax is levied. The VBI is especially popular for tradable bonds and financial
derivatives, such as options, futures, forwards and swaps. An excellent neutral tax regime for alternatives.
Neither the VBI nor the FBI demand costly substance requirements, such as a fund manager based in the
Netherlands, nor an accountant, administrator or custodian based in the Netherlands.

In The Netherlands, all institutional investors, including asset managers, have the obligation to publish their
voting policy. Although this implies that ones policy can be not to vote, it is widely accepted to exercise voting
rights. A sset m anagers an d pens ion f unds i n T he N etherlands hav e incorporated a c orporate go vernance
network, c alled E umedion, i n which t hey d eliberate a bout al l k inds of gov ernance issues:
http://www.eumedion.nl/English
6. Fund governance
Early 2008, DUFAS introduced a set of Fund Governance Principles, which allows flexible solutions for inter-
nal fund governance, as inventoried by IOSCO in its governance report of June 2006. Execution of the fund
governance principles i s bas ed on p eriodic r eview a nd r eporting t o t he d aily m anagement, w hich ar e c us-
tomary structures within fund management organisations already. Thus, additional administrative burden i s
limited as much as possible.
In The Netherlands, fund governance can either be implemented at the level of the fund management com-
pany, in order to obtain a full overview of all kinds of governance issues within the organization and its funds,
or at the level of the individual funds.
Clear f und go vernance t opics ar e i dentified t o f ocus at tention of t he ov ersight ent ity. Among ot hers, t he
management of conflicts of interest, the segregation between investment decisions, settlement & administra-
tion an d c ontrol, s oft d ollar ar rangements and s ecurities l ending ar e t opics f or w hich a t ransparent po licy
needs to be developed by the fund manager. The implemented fund governance policy should be published
on the website of the fund manager. Oversight on compliance with these self binding rules needs to be exe-
cuted b y an oversight e ntity, which c an v ary from s upervisory d irectors, to non-executive b oard m embers,
depositary or external auditor. In terms of the application to day-to-day operations, the fund manager has the
freedom and flexibility to tailor the most appropriate model and oversight entity for his organization. The ap-
pointed oversight entity can effectively use the already existing periodic review and reporting lines within the
organization as an important source for its compliance assessment. The DUFAS Fund Governance Princi-
ples were approved by the Dutch government.
The Euronext Fund Service is the leading order platform for daily fund clearing and settlement in The Nether-
lands. The advantages of the Euronext Fund Service are the quick, low cost, fully STP clearing and settle-
ment procedures according to international T+3 securities standard for settlement, being traded on a regu-
lated market, free from administrative errors. All financial institutions do have internet access to the Euronext
Fund Service, thus enabling an open architecture model.
The Dutch market already had an open architecture market before MiFID. Nevertheless, third party distribu-
tion is still a minority distribution model in The Netherlands with only a few fund supermarkets present. The
large banks in T he Netherlands do offer third par ty f unds on the basis of guided ar chitecture. System and
personnel (proper advice) limitations do not allow for an offer of the vast majority of the European fund fami-
lies.

Globalisation and developments at financial institutions have led to a period of exciting and dramatic change
in the financial sector that was unimaginable only a few years ago, as financial centres around the globe at-
tempt t o g ain a n increased s hare of t he world's ec onomy. A lthough T he N etherlands has t raditionally en-
joyed a great deal of success in this area, there is a growing awareness that maintaining a high quality, com-
petitive financial sector that can also grow, requires new tools, methods and solutions.
The Holland Financial Centre foundation (‘HFC’) is a joint initiative set up by organizations from throughout
the Dutch financial sector. They include banks, insurers, trading firms, pension funds, asset managers, trade
bodies, audit firms, tax and law firms and the government. DUFAS, who’s mission statement is the improve-
ment of The Netherlands as a financial centre, also participates in this initiative. As a joint venture, the pur-
pose of the Holland Financial Centre is to strengthen the Dutch financial sector and the attractiveness of the
Netherlands as financial centre. To achieve this goal, Holland Financial Centre has chosen to focus on four
priority areas: r etirement m anagement, f inancial s ustainability s ervices, f inancial l ogistics an d A msterdam
Trading Venue. HFC has set up a counter function for foreign institutions who are interested in establishing
themselves i n T he N etherlands. T his c ounter of fers t hem di rect ac cess t o s pecialists f rom t he M inistry of
Finance, the Dutch financial supervisors and the Treasury for any questions companies might have in that
respect.
More information ab out the purpose an d pr ocedures of H FC c an be f ound at t he web p age:

www.hollandfinancialcentre.com.
The creation of the Duisenberg School of Finance in Amsterdam in collaboration with some of the best uni-
versities i n T he N etherlands i s anot her i mportant i nitiative i n t his r espect. Ma ny f oreign s tudents ar e a t-
tracted. Lectures are in English. Amongst others, the Duisenberg School of Finance specializes in risk man-
agement techniques.
The Netherlands is a location of choice for funds and fund management:

- Little substance requirements;
- Very mature institutional market place;
- The Netherlands has tax treaties with a large number of other jurisdictions worldwide, reducing withhold-
ing taxes to zero in most cases;
- Short time to market for new funds due to efficient licensing procedure;
- Service providers to the financial sector with great expertise and competitive rates;
- Wages in the financial sector are quite competitive on an international level
- The Dutch financial regulator, the ‘AFM’, is easily accessible;
- The AFM is held in high regard internationally;
- Good and large financial infrastructure with highly qualified specialists.
Portugal Country Report
Table 1: Key Economic Indicators
2008 2009 Jun-2010

GDP (EUR billion) 166.4 163.6 n.a.
Real GDP growth (%) 0.0 -2.7 1.5*
Inflation rate (%) 2.7 -0.9 -0.3
Stock market capitalisation (% of GDP) 68.2 105.4 n.a.
Bond market capitalisation (EUR billion) 41.1 31.4 45.5
Bond market capitalisation (% of GDP) 24.7 19.2 n.a.
Household gross savings ratio (%) 6.4 8.8 n.a.
Household financial wealth (EUR billion) 203.0 211.2 211.1
Average per capita financial wealth (EUR) 18,823.22 19,465.62 19,852.81
Sources: INE – Portugal; Euronext Lisbon; Banco de Portugal
* - Year-on-year rate of change
Portuguese ec onomy was s everely af fected b y t he g lobal f inancial c risis. G DP r educed b y 2. 7% i n 20 09,
following a zero growth in 2008 and unemployment rose to 10.1%. The efforts made by the Government to
support the Financial markets and the companies most affected by the crisis led to a deficit of more than 9%
in the State Budget.
The difficulties and uncertainty faced by Portuguese households led to an increase in households’ savings to
the highest rate of the past 5 years.
During t he f irst ha lf of t he c urrent year t he difficulties i ncreased as t he G overnment w as f orced t o t ake

restrictive measures to reduce the deficit of the State Budget, such as the increase of taxes, the reduction of
the public investment and the decrease of costs in several areas of the State Administration.
These measures hav e made G DP gr owth per spectives to dec line. During the first quar ter of 2010,
Portuguese G DP r ose b y 1.1% c ompared t o t he pr evious q uarter b ut t he growth i n the s econd q uarter
dropped to 0.3%, which means an year-on-year change of 1.5%.
Unemployment rate continued to increase in 2010, and have reached 10.6% in the second quarter.
Portuguese economy and Portuguese Government have been severely affected by the turmoil in the
sovereign de bt m arket, w ith t he interest r ates d emanded b y investors t o buy P ortuguese de bt i ncreasing
significantly, which worsens the conditions faced by the Government to reduce the State Budget deficit.
2. Data on Funds under management and portfolios
Table 2: Net Assets by the Fund Industry in Portugal

(EUR billion)
2006 2007 2008 2009 Jun-2010
Home-domiciled
UCITS 25.762 21.703 10.454 11.572 9.844
Home-domiciled 13.135 14.508 14.586 16.891 17.553

non-UCITS
Total AuM 38.897 36.212 25.040 28.463 27.397
Table 3: Net Assets by Fund Type
(EUR billion)
2006 2007 2008 2009 Jun-2010
UCITS: 25.762 21.703 10.454 11.572 9.844
Equity 2.971 3.307 1.110 1.569 1.503
Bond 9.783 7.574 3.357 2.606 2.446
Balanced 1.341 1.463 0.912 0.901 0.891
Money market 8.111 6.120 2.985 3.988 2.571
Fund-of-funds 2.061 1.507 0.703 0.599 0.576
Other 1.494 1.733 1.388 1.908 1.858
Non-UCITS: 13.135 14.508 14.586 16.891 17.553
Real Estate Funds 9.759 10.449 10.698 11.232 11.713
Other 3.375 4.060 3.888 5.659 5.840
Total 38.897 36.212 25.040 28.463 27.397

2006 2007 2008 2009 Jun-2010
Home-domiciled UCITS 208 212 207 192 192
Home-domiciled non-UCITS 236 283 317 346 346
Foreign funds registered for sales 1,179 1,576 1,726 1,729 1,744
Fund launches* 128 65 64 52 13
Fund mergers* 4 6 13 18 2
* I ncludes on ly H ome-domiciled I nvestment F unds. F or J une 201 0, i t r efers t o t he e vents oc curred
during the first half of 2010.
A. From January 1, 2009 through December 31, 2009
The reduction of the interest rates made bank deposits less attractive than in the recent past and forced
investors to look for alternatives.
There was, t herefore, a r eturn of the i nvestors to I nvestment Funds. T he good performances in global
financial markets also helped this trend and investment Funds registered an increase of 13.7% in Assets
under Management.
Mutual Funds (UCITS and Non-UCITS) were particularly favoured by investors, which led to an increase
of 20.1% in Assets under Management.
For the past few years, Portuguese investors have been preferring Non-UCITS Funds, which is reflected
in Assets under Management and in the number of available Funds. Non-UCITS Funds grew, in 2009,
almost 16% and t heir Assets under management r epresent almost 60% of t he Portuguese Investment
Fund Mar ket. T he nu mber of N on-UCITS F unds r ose t o 346 ( 29 F unds more than t he pr evious year),
while the number of UCITS Funds reduced to 192 (15 Funds less).
The reason behind this preference is due to the fact that most of these Funds have investment policies
aiming at securing the amounts invested and, at the same time, offering a minimum return, and others
have t otal r eturn investment p olicies, c haracteristics m ost appr eciated b y Portuguese i nvestors dur ing
this period of high volatility and uncertainty in financial markets.
B. From January 1, 2010 through June 30, 2010
The uncertainty and volatility returned to the financial markets and led Portuguese investors away from
Investment F unds. T otal Assets under Management reduced 3.7% dur ing the f irst ha lf of 2010, with
UCITS-Funds bei ng t he m ost af fected r egistering a decrease of al most 15% i n t he per iod. O f t hese,
Money Market Funds were particularly affected and fell by over 35%. The low rates of return provided by
these products and the increasing competition from bank deposits help to explain most of this trend.
All the categories of UCITS Funds were negative in the first half of 2010, penalized by the depreciation
of assets price or by investor divestment or both.
Non-UCITS F unds, on t he c ontrary, c ontinued t o per form w ell, r egistering an i ncrease of 3. 9%. R eal
Estate Funds remain the largest part of this segment and were also the ones with the highest increase,
with Assets under Management reaching 11.7 billion Euros, more 4.2% than at the end of 2009.
The economic and budgetary crisis that affects Portugal also contributed to the decrease in Assets under
Management. The increase of the unemployment rate and the difficulties and uncertainty ahead reduced
investors resources and /or willingness to invest in riskier, longer-term saving instruments.
Table 5: Net Sales by Fund Type

(EUR million)
st
2006 2007 2008 2009 1 half 2010
UCITS: -1,239.5 -4,594.6 -8,699.7 544.6 1,560.6
Equity 303.1 97.5 -923.3 104.1 53.5
Bond -1,533.5 -2,231.9 -3,731.2 -680.7 -159.9
Balanced 245.6 91.2 -377.8 -57.8 -5.1
Money market -732.4 -2,130.0 -3,112.7 969.3 -1,412.1
Fund-of-funds 222.3 -553.6 -585.7 -160.0 -35.3
Other 255.4 131.8 31.1 369.8 -1.8
Non-UCITS: 1,219.4 758.5 3.7 1,741.8 255.9
Real Estate n.a. n.a. n.a. n.a. n.a.
Other Funds 1,219.4 758.5 3.7 1,741.8 255.9
Total -20.1 - 3,836.4 -8,695.9 2,286.3 -1,304.7
A. From January 1, 2009 through December 31, 2009
As mentioned above, the reduction of the interest rates made bank deposits less attractive than in the
recent past and forced investors to look for alternatives.
Mutual Funds (UCITS and Non-UCITS) were particularly favoured by investors, receiving 2.3 billion Euro
of net sales, contributing for a major share of the growth observed in AuM.
As referred above, Non-UCITS Funds have been most favoured by investors, receiving more than ¾ of
the total annual net sales.
On t he U CITS s ide, i t i s worth no ting t he r eturn of i nvestors t o M oney M arket F unds t hat r egistered
almost one bi llion eur o i n net s ales t hroughout t he year. T his r eturn s eems, ho wever t emporary, i f w e
observe the trend in 2010.
B. From January 1, 2010 through June 30, 2010
Until now, 2010 has not been a good year for Portuguese Investment Funds. Throughout the first half of
the year, investors redeemed more than half of net sales registered in 2009.
Money Market Funds, in particularly, have been severely affected. During the first six months of 2010,
net redemptions have surpassed the total of net sales observed in 2009. The difficulties faced by local
banks to finance themselves in the international financial markets, forced them to look for other sources
of f inancing an d t o at tempt t o attract n ew deposits, competing, t herefore, with investment F unds with
similar risk profile, such as Money Market Funds and short-term bond Funds.

4.1. Introduction of Collective Investment Schemes of the corporate type (SICAV and SICAF)
th
Decree-Law nº 71/2010, p ublished on J une 18 introduced t o t he Portuguese l egal f ramework C ollective
Investment Schemes of the corporate type (similar to the SICAV’s).
This new legislation is aimed both at Mutual Funds (UCITS and Non-UCITS) and Real Estate Funds.
The Portuguese Government announced that this legislation intends to allow Portuguese Fund managers to
compete equally with t he foreign S ICAV’s that are a lready being sold i n P ortugal and t o provide t he same
tools that ex ist i n other countries of the European Union. At the s ame t ime, the new legal f ramework also
intends to allow greater investor participation given that are applied the same principles existing for
shareholders/companies.
The f irst analyses m ade t o t he doc ument s how t hat t here ar e no m ajor di fferences t o t he F unds of t he
contractual type, both in operational rules and in taxation.
4.2. Re-organization of the types of Financial / Investment companies
In J uly 2 009, t he G overnment a nd t he Supervisors anno unced t heir i ntention t o r e-organize t he r ange of
Financial Companies existing in the Portuguese market and the activities that they are authorized to perform.
The s everal ex isting t ypes of F inancial C ompanies would be c oncentrated in o nly t wo t ypes: “ Sociedades
Financeiras de Investimento” (Investment Companies) comprising the activities that are currently performed
by Discretionary Asset Management Companies, Broker - Dealer Companies, Brokerage Companies and the
Foreign-exchange o r m oney-market mediating c ompanies; a nd “ Sociedades G estoras de A ctivos” ( Asset
Management C ompanies), c omprising t he ac tivities t hat ar e c urrently p erformed b y Mut ual F und
Management Companies and Real Estate Fund Management Companies.
There were no further developments until now.
4.3. New Institutional Model of Financial Supervision
In S eptember 2009, t he M inistry of F inance an d P ublic A dministration s ubmitted a dr aft r eform t o publ ic
hearing, calling for the transformation from a present tripartite model to a "twin peaks" model based on two
autonomous, independent entities, both of them having transverse powers over every sector of the financial
system. The division of responsibilities would be assigned in the light of the prudential or conduct of business
nature of the supervision.
4.4. Changes in the rules for the valuation of the real estate properties held by Real Estate Funds
In M ay 2010, t he CMVM published a dr aft r egulation f or pub lic c onsultation t hat c hanges s ignificantly t he
rules f or v aluing t he r eal estate s ecurities h eld b y Portuguese R eal E state F unds. T he dr aft doc ument
foresees a half-annual or annual valuation for every property held (depending on the type of Fund) made by
two i ndependent appraisers, and t hat t he av erage of t he v alue at tributed by t hese appr aisers s hould b e
immediately reflected in the Fund’s NAV.
It also foresees several restrictions to the approval and appointment of appraisers in order to avoid conflicts
of interest and to ensure that the appraisers are technically capable and competent.
4.5. Taxation
A. The State Budget for 2010 eliminated the benefits that Closed-ended Real Estate Funds enjoyed in
relation with Mu nicipal P roperty T ransfer T ax (IMT) and Municipal Property T ax ( IMI). P reviously,
depending on the characteristics of the Fund, it enjoyed 100% or 50% exemption in the payment of
these taxes.
Nevertheless i t has be en very r ecently announced t hat t he G overnment's pr oposal f or t he S tate

Budget f or 20 11 f oresees the r eintroduction of t he e xemption f rom I MT and I MI f or C losed-ended
Real Estate Funds, but only for those subject to public placement.
B. The S tability P rogram(s) s ubmitted b y t he Portuguese G overnment t o t he E uropean C ommission
foresees an increase in the taxes paid by investors, both in income and in capital gains.
th
Decree-Law 15/2010, of J uly 26 , es tablishes t he new t ax r ules on c apital g ains. T hese ar e no w
subject to a 20% rate applying to all type of securities and all situations. Previously, gains obtained in
shares/equities held f or more than 12 months an d gains obtained in Debt securities were exempt.
However, this Decree-Law foresees a special regime for I nvestment F unds t hat maintain the rules
and exemptions existing previously.
th
Law 12 -A/2010, of J une 3 0 implements new r ules on t he t axation of s everal t ypes of i ncome,
including d ividends and interests. A ll t ax r ates were i ncreased b y 1. 5%, which m eans t hat bo th
dividends and interests are now subject to a tax rate of 21.5% (20% previously). Investment Funds
are al so s ubject t o t hese new rates and the income on f oreign F unds i s a lso subject t o t he ne w
21.5% tax rate.
5. Corporate Governance – Major Developments
CMVM disclosed its Regulation 3/2010 regarding “Conduct Duties and Professional Qualification of Financial
Analysts and Investment Consultants”.
This R egulation introduces s everal o bligations f or F inancial Analysts an d I nvestment C onsultants ac ting
individually or within other F inancial I ntermediaries nam ely r egarding t heir ac ademic / pr ofessional
qualifications and also regarding conduct duties they must bind themselves to.
6. Fund Governance
Nothing to report
See 4.1.

With t he r ecent m easures appr oved / a nnounced b y t he G overnment t o r educe t he S tate Budget deficit,
APFIPP has multiplied its contacts with the Government, the Political Parties and the Supervisors in order to
try t o m inimise t he i mpact of s uch m easures i n t he P ortuguese F inancial Markets, I nvestment F unds i n
particular.
Acknowledging t hat on e of t he major pr oblems of t he P ortuguese E conomy i s t he dec rease of t he s aving

rate, APFIPP is working on s everal i nitiatives to promote s avings, in g eneral and s avings for retirement in
particular, aimed at the companies and at individuals.
Continuing t he work s tarted i n 2 009, APFIPP has implemented an i ntense t raining pr ogram es pecially f or
workers of its Members but occasionally also opened to other participants on several matters were the need
for such courses was identified.
Demographical Data
Population (as at end June 2010)

Resident Population
Total Population (‘000) 5,076.7
Annual Growth (%) 1.8
Singapore Residents (‘000) 3,771.7
Singapore Citizens (‘000) 3,230.7
Singapore Permanent Residents (‘000) 541.0
Land Area (as at end 2009)

Population Density (Per Sq Km) 7,022
Land Area (Sq Km) 710.3
Economic Indicators (as at end 2009)
Gross Domestic Product (GDP)

At Current Market Prices (S$m) 265,057.9
Per Capita GDP 53,143.0
Productivity and Inflation (as at end 2009)
Annual Growth in Labour Productivity (%) -3.9

Annual Inflation Rate (%) 0.6
Manufacturing (as at end 2009)
Total Output (S$m) 213,699.8

Investment Commitments In Manufacturing And Services (Fixed Assets Investments) (S$m) 11,753.9
Foreign Investments (S$m) 8,385.6
Finance (as at end 2009)
Money Supply (M1) (S$m) 93,472.1

Official Foreign Reserves at End of Year (S$m) 263,955.4
External Trade at Current Prices (as at end 2009)
Total Trade (S$m) 747,417.3

Exports 391,118.1
Imports 356,299.3
Transport and Communications (as at end 2009)
Sea Cargo Handled (Million Freight Tonnes) 472.3

Air Cargo Handled (‘000 Tonnes) 1,636.6
Services and Tourism (as at end 2009)
Annual Growth In Retail Sales At Constant Prices (%) -9.4

Visitor Arrivals (‘000) (excluding Malaysian arrivals by land) 9,682.7
Hotel Occupancy Rate (%) 75.8
Source: Singapore Department of Statistics

Singapore has established a financial centre of international repute, serving not only its domestic economy,
but also the wider Asia Pacific region and in some instances, the world. Singapore's financial centre offers a
broad range of financial services including banking, insurance, investment banking and treasury services.
With a considerable range of both Singapore government securities and foreign corporate bonds available,
Singapore offers fixed income investors a wide spectrum of investment opportunities. Singapore has grown
to be one of the largest Real Estate Investment Trust (REITs) markets in Asia ex-Japan, and also provides a
good offering of investments in business trusts of shipping, aviation and infrastructure assets.
Singapore has a sound legal and judicial system, and a well-regulated international financial sector.
Singapore is the only Asian country with a "AAA" rating.
A key aspect of Singapore’s financial centre is its strong capital markets; the Singapore Exchange (SGX) is
the preferred listing location for more than 200 global companies. Besides being one of the top 5 most active
foreign exchange trading centres in the world, Singapore is also the second largest over-the-counter
derivatives trading centre in Asia, as well as a leading commodities derivatives trading hub.
Singapore has been r ecognised as o ne of t he b est c ities f or bus iness. I n t he S wiss-based i nternational
Institution f or Mana gement D evelopment's 2008 World C ompetitiveness Yearbook, S ingapore has be en
ranked as t he s econd-most c ompetitive c ountry i n t he world af ter t he U nited States. This i s due to t he
reasons t hat Singapore ha s about t he m ost bus iness-friendly r egulation in t he w orld, taking i nto account
other factors, including business licensing, taxes, credit legal rights and investor protection.
Singapore also has a high level of transparency and reliability in business, economic and regulatory affairs,
which are appreciated by investors. A stable political structure with parliamentary democracy, a well-
established judicial system, and the presence of strong domestic institutions with good corporate governance
practices, have increased the attractiveness of Singapore business environment to global investors.
Singapore c ontinues to be c ost c ompetitive c ompared with other m ajor c ities b y offering t he financial
institutions a competitive tax rate environment. Singapore's corporate tax rate is one of the lowest in Asia-
Pacific. Singapore also offers the advantage of having a comprehensive network of Double Tax Agreements
with more than 60 countries.
We also have a skilled workforce to meet industry demand. In addition to grooming the local workforce meet
the demand of t he industry, S ingapore also has an op en do or p olicy to i nternational talent an d
expertise. Washington-based risk consultancy agency, Business Environment Risk Intelligence (BERI), has
rated S ingapore's w orkforce as t he w orld's bes t workers s ince 1980. And a ccording t o t he I MD World
Competitiveness Yearbook 2007, Singapore has the most skilful and motivated labour force in Asia Pacific.
Singapore i s s trategically located i n a r egion of op portunities. Located at t he hear t of S outheast Asia,

Singapore is well placed to serve the fast-growing markets of the Asia-Pacific region. Financial institutions in
Singapore also trade around-the-clock with Asia-Pacific centres, as well as European and American centres,
making S ingapore a significant hub f or 24-hour t rading i n foreign exchange and securities, with i ts
sophisticated telecommunications network.
International travel is equally convenient with more than 84 international airlines operating scheduled
services through Singapore to more than 180 cities in 57 countries worldwide. Singapore has grown to be a
strategic link and important gateway for global investors.
Singapore seeks to ensure its relevance and connectivity to growth markets, not just in Asia but also beyond.
As par t of t his i nitiative, S ingapore has c oncluded F ree T rade Agreements ( FTAs) with m ajor ec onomies,
including the United States, Japan, Korea, Australia, New Zealand, India and Jordon. Singapore is also one
of the members of the ASEAN Free Trade Agreement (AFTA) which encourages the free flow of trade, and
reduces trade barriers.
Data on Funds under Management and Portfolios
AUM (in SGD billion), of Singapore Registered Unit Trust Funds for Sale
2009 2010 (as at end June 2010)
Bond 15.50 15.87
Equity 24.43 24.81
Mixed Assets 2.94 2.96
Money Market 1.07 1.37
Total 43.94 45.01
* AUM data is based on a sample size of 22 fund management companies in Singapore
Total number of licensed fund management (as at end June 2010): 113
Fund flows in Singapore

a. From January 1, 2009 through to December 31,2009
The Singapore unit trust market registered net inflows of S$2.33 billion for the year 2009, with net outflows of
S$122 m illion i n Q 1 2 009, net i nflows of S $513.3 m illion i n Q 2 20 09, net in flows of S $816.6 m illion i n Q 3
2009 and net inflows of S$1.12 billion in Q4 2009.
The return of enthusiasm to the markets after the global financial crisis which lasted till early 2009, translated
into more balanced inflow/outflow figures across all asset types for the quarter under review in Q1 2009 and
helped tip the balance of asset flow activity in favour of new inflows for the first time in several quarters, and
especially so in the case of equity products in Q2 2009.
In Q1 2009, the asset type showing the highest net outflows was bond unit trusts (-S$39.2 million) in contrast
with lower net r edemptions i n eq uity f unds ( -S$13.4 m illion), s ince t he l atter was s taunched b y rallying
equities and rising risk appetite toward quarter’s end. Bond products saw total inflows to the tune of S$545.7
million, with t otal i nflows into bo nd f unds exceeding t hose into equity f unds ( +S$508.2 m illion) f or t he f irst
time s ince t he en d of t hird quar ter 20 08. F urthermore, an other S $539.0 m illion f lowed into m oney m arket
products.
In Q2 2009, the asset type showing the highest net inflows was equity unit trusts (+S$505 million) in contrast
with l ower n et s ubscriptions i n mixed as set ( +S$49.7 million), m oney m arket ( +S$16.6 m illion) an d ot her
(+S$25.6 million) fund products. Bond funds were the only asset class with net redemptions at quarter’s end
(-S$83.7 million), as rallying equities and rising risk appetites drove money away from safe-haven assets into
riskier a sset cl asses. E ven t he r isk-averse am ong Q2 20 09’s m arket par ticipants s ought m ixed as set
products over bond or money market funds; flows into and out of mixed asset funds were largely limited to
balanced portfolios.
In Q3 2010, a rising investor appetite for risk, declining volatility, and delayed positive effects of previously
implemented s timulus m easures, a ll t ranslated into ec onomic indicators at more f avorable l evels t han
expected, especially in the emerging markets. These strong bullish trends even led to a brief correction in a
few em erging m arkets ( notably C hina) i n August. The as set t ypes s howing t he highest ne t i nflows were
equity ( +S$418.4 m illion) and b ond ( +S$284.9 m illion) uni t t rusts i n contrast w ith l ower net subscriptions
among mixed as set ( +S$11.2 m illion), m oney m arket ( +S$77.5 million) an d ot her ( +S$24.6 m illion) f und
products.
The market s entiment was up beat coming into t he f ourth quarter of 2 009, due t o t he prevailing pos itive
macro c onditions s uch as rising r isk appetites and p ortfolio i nflows, dec lining u nemployment rates and a
weakening dollar in Q3 2010, which added to the momentum. Some of these gains were shed in the latter
half of October, however, likely owing more to a reassessment of valuation levels than to that of risk levels.
The markets were also briefly shaken in November by Dubai’s decision to postpone the maturity of some of
its debt t o Ma y 2 010. B ut on t he whole, the m arkets r ode a long on t he s ame steady d iet of pos itive
macroeconomic data of recent months, ending the quarter with broad gains.
This sustained enthusiasm in the markets has helped extend the run of positive asset flow activity into Q4
2009. The asset types showing the highest net inflows were bond (+S$795.2 million) and equity (+S$450.2
million) unit t rusts in c ontrast with lower net s ubscriptions am ong m ixed as set ( +S$26.9 million), an d n et
outflows i n m oney m arket ( -S$103.9 m illion) an d ot her ( -S$44.3 m illion) f und products, a f urther s ign of
declining risk aversion. However flows into and out of mixed asset funds were largely limited to balanced and
flexible portfolios.
b. From January 1, 2010 through to June 30,2010
The Singapore unit trust market registered total net inflows of S$1.1039 billion as at 30 June 2010, with net
inflows of S$947 million in Q1 2010 and S$156.9 million in Q2 2010.
Market sentiment in the first quarter of 2010 was weighed down by regulatory and political headwinds (fiscal
woes in the Eurozone, termination of stimulus measures, rate hikes in Asia) during the initial months. But it
gathered momentum in the latter half, as Q4 2009 corporate earnings results turned out to be stronger than
expected and as several economies in Asia posted strong quarter-on-quarter GDP growth numbers, to finish
the quarter in positive territory.
Despite healthy and stronger-than-expected Q1 2010 corporate earnings announcements and positive
macro c ues c oming f rom s everal Asian/emerging ec onomies, m arket s entiment i n t he s econd qu arter of
2010 was weighed down by disappointing economic data emanating from the US and a deteriorating fiscal
environment in several of the Eurozone countries. While most of these themes were evident prior to the start
of t he quar ter, t hey grew more pr onounced as t he quarter a dvanced, precipitating a f light t o q uality as
evidenced by soaring treasuries and precious metals prices and by a strengthening Japanese yen, in May
and June of 2010.
Market ac tivity h as he lped ex tend t he r un of pos itive as set f low ac tivity into Q1 2010, benefiting r iskier
offerings among both equity and bond products. The asset types showing the highest net inflows were equity
(+S$464.2 m illion) and bond (+S$291.6 m illion) u nit trusts i n c ontrast with l ower net s ubscriptions am ong
residual as set c lasses ( +S$53.6 m illion), a nd n et o utflows f rom mixed as set of ferings ( -S$36.4 m illion).
Notably, money market pr oducts al so posted s olid net i nflows (+S$174.0 million), almost all of which went
into SGD-denominated offerings (+S$179.0 million).
Whereas in Q 2 2010, market ac tivity during the quarter has helped extend the r un of asset inflow activity,
marking a marginal 3.2% increase from the previous quarter’s gross inflows figure; the bulk of these inflows
went into bond and money market offerings or quality equity allocations. However, the quarter’s inflows were
almost entirely offset by a 32.6% rise in the volume of gross outflows quarter-on-quarter, with equity offerings
accounting for nearly half (or S$1.75 billion) of those outflows. Specifically, the asset classes attracting the
highest net inflows were money market (+S$131.7 million) and bond (+S$88.3 million) unit trusts in contrast
with net outflows among equity products (-S$92.9 million) and residual asset classes (-S$21.9 million).
Regulatory and Self Regulatory Developments
Regulator
In Singapore, the Monetary Authority of Singapore (MAS) is the regulatory body responsible for supervision
over m oney, banking, i nsurance, s ecurities, an d t he financial s ector in ge neral. I t is t he c entral bank of
Singapore. The MAS has been given powers to act as a banker to and financial agent of the Government. It
has also be en e ntrusted t o pr omote monetary s tability, an d credit a nd ex change policies c onducive t o t he
growth of the ec onomy w hich i s in line w ith i ts m ission “ to pr omote s ustained no n-inflationary ec onomic
growth, and a sound and progressive financial centre.”
Functions of the MAS

• To act as the central bank of Singapore, including the conduct of monetary policy, the issuance of
currency, t he o versight of pa yment s ystems and s erving as bank er to and f inancial ag ent of t he
Government
• To conduct integrated supervision of financial services and financial stability surveillance
• To manage the official foreign reserves of Singapore
• To develop Singapore as an international financial centre
The regulator also plays an important part in building investor confidence by maintaining the integrity of the
financial s ector i ncluding t he as set m anagement i ndustry. T he MA S a long with ot her r egulatory a gencies
does regular checks and monitors activities of the entire financial sector.
Rules and Regulations
The MA S adm inisters t he Financial A dvisers A ct ( FAA) and t he S ecurities and F utures A ct ( SFA) which
governs intermediaries selling mutual fund schemes in Singapore.
The FAA regulates all activities which advise others, directly or indirectly. through publication or writings, by
issuing or promulgating r esearch an alyses or r esearch r eports, whether in el ectronic, pr int or o ther f orm,
concerning any investment product, other than in the manner set out or advising on corporate finance within
the m eaning of t he S FA. I t includes the m arketing of collective i nvestment s chemes and arranging o f
contracts of insurances in respect of life polices, other than a contract of reinsurance.
Under the SFA, regulated activities include dealing in securities, trading in futures contract, leveraged foreign
exchange t rading, advising on c orporate f inance, f und m anagement, r eal es tate i nvestment t rust
management, s ecurities f inancing and pr oviding c ustodial s ervices for s ecurities. The A ct c overs licensing
criteria, forms and f ees, fit and proper c riteria, entry and examination r equirements, anti-money l aundering
and combating f inancing o f t errorism requirements, l ending of m oney, internet, out sourcing and b usiness
continuity, as well as cooling period for CIS constituted as unit trusts and procedures for retail and restricted
schemes.
In Singapore, fund assets are to be kept by a custodian, and the fund trustee must be independent of the
fund manager. In practice, m ost funds us e i ndependent c ustodians, but a few exceptions oc cur where the
custodian and t he f und m anager ar e s eparate bus iness ent ities t hat belong t o t he s ame par ent h olding
company.
Fund management companies in Singapore must also publish semiannual and annual reports. The annual
report m ust be audi ted by an independent auditor. The annual report m ust be made available within three
months after the fiscal year ends, and the semi-annual report is required to be published within two months
after the period ends.
The MA S’ C ode on C ollective I nvestment S cheme sets out bes t pr actices on t he m anagement, op eration,
and marketing of funds pursuant to the SFA. The code restricts the use and requires the disclosure of soft
dollars received f rom eac h br oker in t he semi-annual and annual reports. The Code also requires t hat the
annual report and semi-annual reports show the total expense ratio (TER) for the period under review and a
year ago.
Representatives wh o advise and sell mutual funds in Singapore must be licensed. In order to be licensed,
one must pass the examinations which are conducted regularly by the Institute of Banking and Finance. It is
mandated t hat t he a dvisor f ully d iscloses the d istribution f ee and ot her f ees t hat a c lient may incur. The
regulation r equires t hat t he s ale of f unds be accompanied by a prospectus pub lished by t he f und
management company.
There are advertising codes for unit trusts performance. Under the SFA and Codes of Advertising Practices,
advertisements must be fair, unambiguous and not misleading. It could be deemed an offence if this is not
followed.
Distribution/choice
Currently, u nit t rusts i n Singapore ar e d istributed a nd s old t hrough b anks, l icensed i ndependent f inancial
adviser f irms. I nsurance f irms, i nternet platforms, di rectly by the f und m anagement c ompanies an d ot her
licensed firm.
Singapore has a f airly open a rchitecture s ystem w here a majority of t he f unds ar e s old t hrough a n op en
platform. A n investor c an purchase m ultiple f und of ferings at m ost di stribution pl atforms. H owever, even
though funds from multiple fund families are offered at most platforms, in-house funds are highly represented
in the choices given.
All un it t rust f unds i n Singapore r equire minimum investment. T he t ypical minimum investment is S $1,000
(approximately US$667).
Fees and Expenses
• The majority of funds in Singapore charge a front-end load, and a few charge a back-end load.
• The official front-end load (FEL) is usually between 5.0% and 5.5%. Actual FEL is generally 1-3%.
• Annual management fees range between 1% and 2%.
Recent Developments
Enhancements to Tax Incentives for the Investment Management Industry in Singapore
The 2009 Budget proposed certain enhancements to the tax incentive regime applicable to the investment
management industry in Singapore:
 An enhanced t ier, ef fective f rom 1 A pril 20 09 t o 31 Mar ch 2014, was introduced, w hich ent itles fund
managers (FMs) and the funds they manage to certain benefits, including no restrictions imposed on the
residency status of the fund vehicle or its investors, and fund vehicles constituted as limited partnerships
can be entitled t o t ax exemption. With t his enh ancement, S ingapore-based F Ms w ere a llowed f urther
access to Singapore investors’ funds;
 As only ‘specified income’ derived from ‘designated investments’ enjoys tax exemption, the definitions of
these two terms had been expanded, to include qualifying Islamic investments, emission derivatives and
adjudicated and non-adjudicated liquidation claims;
 Remission of Goods and Services Tax (GST) for Singapore f unds. GST is chargeable on fund
management and other services provided by GST-registered suppliers to funds belonging in Singapore.
Based on G ST pr inciples, on ly GST-registered f unds m aking t axable s upplies c an c laim i nput t ax.
However, Singapore-based funds are generally making exempt financial supplies or receiving dividend
income and therefore, have difficulty registering for GST, as they do not make any taxable supplies. As
these funds were not GST-registered, the input tax incurred was irrecoverable, which formed part of the
business cost of operating in Singapore. This discouraged offshore fund managers to operate in
Singapore and use the services of GST-registered service providers.
To ensure Singapore c ontinuing c ompetitiveness as a global f inancial c entre, t he I nland R evenues

Authority of S ingapore ( IRAS) h as al lowed qualifying f unds t hat ar e m anaged b y a pr escribed f und
manager in Singapore to claim a substantial portion of the GST incurred on prescribed expenses at an
annual fixed recovery rate. The remission takes effect from 22 January 2009 to 31 March 2014.
Amendments to the Code on Collective Investment Scheme
The Monetary Authority of Singapore (MAS) released a consultation paper on proposed amendments to the
Code on Collective I nvestment S chemes ( Code) on 17 May 20 10. The proposed am endments ai med to
provide clarity and to increase the flexibility for managers in managing their funds, and enhance protection
for investors. They included:
i. Introducing a list of permissible investments and accompanying criteria to enhance clarity in the
application of the liquidity and diversification limits
ii. Strengthening safeguards on t he use of financial derivatives through prescription of counterparty limits
and acceptable forms of collateral used to mitigate counterparty risks
iii. Introducing additional gu idelines on the us e of t he commitment appr oach an d Value-at-Risk (V aR)
method for calculating exposures to financial derivatives
iv. Enhancing ex isting gu idelines o n f unds’ s ecurities l ending activities t hrough c omprehensive
requirements on the counterparty, custodian and the use of collateral. This is in the light of the
heightened attention on counterparty and liquidity risks as a result of the recent global financial crisis
v. Establishing new investment guidelines for funds seeking to track indices, introducing principles for the
naming of f unds and r equirements t o s tandardise t he m ethods us ed f or c alculating performance f ees
where the fund manager decides to impose such fees
vi. Modifying ex isting op erational r equirements, i ncluding a llowing t he s ending of ac counts and annual
reports to unitholders by electronic means with certain exceptions as long as unitholders are notified and
do not object to it
The proposed amendments will also apply to funds offered via an investment-linked life insurance policy.
Regulatory Regime for Listed and Unlisted Investment Products
The MA S Consultation Paper on the R egime for Listed a nd Unlisted Investment Products was r eleased in
January 2010 to enhance the safeguards for retail customers.
Proposed changes include:

• Current regulatory regime under FAA continues to apply.
• Introduction of excluded investment products such as shares, depository receipts, subscription rights,
subscription r ights pur suant t o r ights i ssues, c ompany warrants, b usiness trust un its, R EIT u nits,
plain vanilla bonds, money market instruments, life insurance policies (excluding investment-linked
policies), structured deposits (including dual currency investments)
• Sale of non-excluded investment products to be subject to revised package of proposals
• Formal policies and procedures on sale of investment products
Proposals for unlisted investment products include:

• Customer Knowledge Assessment for retail customer purchasing unlisted non-excluded investment
products
• Customer K nowledge Assessment t o be per formed or appr oved by a per son independent of the
financial advisory function
Proposals for listed investment products include:

• Enhanced safeguards f or r etail c ustomers, w hich i nclude i mposing an a ppropriate c eiling on the
customer’s trading of listed non-excluded investment products
• Customer A ccount R eview b y intermediaries f or r etail c ustomer t rading l isted non -excluded
investment products
Enhanced competency for representatives:

• New CMFAS Module.
• Intermediaries to ensure representatives undergo training on features and risk-reward characteristics
of a new non-excluded investment product before being allowed to sell the product.
Regulatory Regime for Fund Management Companies
On 27 A pril 20 10, t he M AS issued a c onsultation pa per t itled “ Review of t he R egulatory R egime f or F und
Management Companies and Exempt Financial Intermediaries”.
Currently, f und m anagers i n S ingapore ei ther o perate as ex empt f und managers under taking f und
management for not more than 30 qualified investors, or as holders of a capital markets services license in
respect of fund management. The Consultation Paper proposed to establish three distinct categories of fund
management companies (FMCs) instead:
 Notified FMCs – manage up t o S $250 m illion i n a ssets and s erve n ot m ore t han 3 0 qu alified
investors of whom up to 15 can be funds
 Licensed A/I FMCs – serve only accredited and/or institutional investors
 Licensed Retail FMCs – serve retail investors
Notable ar eas i nclude t he Notified F MCs which will c ontinue t o o perate u nder a n otification r egime. T his
category formalises the rules for exempt fund managers (EFMs), enabling fund managers who currently do
not ne ed t o s ecure a c apital m arkets services ( CMS) l icense t o oper ate, bu t a bas e c apital of at l east
S$250,000 at all times is imposed and there is no restrictions on the use of the base capital for investments
in assets.
However, once a n otified FMC’s as sets exceed S$250 m illion, i t will ha ve t o apply f or a C MS license t o
operate as a l icensed A /I FMC, an d t o s atisfy t he r elevant c riteria. G iven t he r isks of l everaged foreign
exchange trading, traders who are currently exempt are expected to be required to hold a CMS license as
well.
The MAS wants to raise the compliance functions of a licensed A/I FMC with additional resources. For FMCs
with m ore t han S$1 billion i n A UM, the f und m anagers w ill need t o h ave dedicated f ull-time compliance
personnel who are independent of the front office. MAS has proposed that professional indemnity insurance
must c ontinue to be r equired f or l icensed r etail F MCs and l icensed A /I F MCs, i t is no t m andated b ut is
‘strongly encouraged’.
In addition, a minimum of 2 individuals each with at least 5 years of relevant experience and at least two full-
time r esident r epresentatives ar e a lso r equired. T he nee d f or t wo experienced pr ofessionals was e arlier
‘strongly encouraged’ but not formally required.
MAS no ted in its pa per t hat i t understood the i ndustry’s c oncern over s tart-up costs. B ut it s aid that
maintaining a base capital requirement of S$250,000 for all FMCs would be consistent with sound business
practice and improve the viability of new FMCs by acting as a buffer for unexpected costs, especially during
adverse market conditions.
Corporate Governance
IMAS Guidelines on Corporate Governance
The I nvestment Mana gement A ssociation of S ingapore ( IMAS) believes t hat investment managers, as
stewards of t he m oney of ot hers, ne ed to have r egard t o t heir r ole as s hareholders. We r ecommend,
therefore, t hat investment m anagers s hould ha ve a policy r elating t o c orporate gov ernance ar rangements
and behaviours of the companies in which they invest; consider the process required to implement this policy;
and review the information that should be presented to their clients.
In or der t o as sist m embers, I MAS has developed a voluntary “ Guidelines f or C orporate G overnance” f or
investment managers, in their capacity as shareholders. This is intended to complement codes and guidance
already developed by other bodies such as Corporate Governance Committee and the Singapore Exchange.
IMAS r ecommends t hat investment m anagers s hould, whenever p ossible, m aintain c ommunication with
companies, vote ac tively a nd i nform t heir o wn i nvestors about their po licy on v oting an d ot her c orporate
governance m atters. V oluntary adoption of t he C ode i s l ikely to be pr acticable o nly f or t he r elationships
between investment m anagers and Singapore listed companies. I n the longer term, it may be desirable to
consider the practicalities of extending the Code to relationships with overseas companies.
Typical Corporate Governance Model
Singapore’s model on corporate governance is based on both legislation and non-legislative guidelines. The
primary legislation dealing with corporate governance is the Companies Act. Singapore also has a wealth of
case law dealing directly with c orporate go vernance, as well as t he s tringent listing r ules of the Singapore
Stock Exchange (SGX).
However, the local model is incomplete without the ‘Code of Corporate Governance 2005’. This code spells
out g uidelines pertaining t o matters s uch as t he c omposition a nd training of boar d of di rectors, d isclosure/
communication with s hareholders, and ac countability and aud it. A k ey f eature of t he C ode i s i ts v oluntary
nature: non-compliance does not attract penalties. This voluntary nature reflects the maturity of Singaporean
companies. An analysis of the Code shows that it is intended to allow companies a large degree of flexibility
in t heir a pproach t o c orporate g overnance. S ingapore has ac hieved s uccess i n t his r egard b y r ecognizing
that there is no ‘one-size-fits-all’ corporate governance model that can apply to all companies successfully.
The Code along with the Companies Act reflects Singapore’s balanced approach to corporate governance.
This was seen as the most appropriate model. This approach encourages commercial autonomy while also
mandating legislative accountability. It this differs from a prescriptive approach requiring companies to adopt
specific pr actices an d a non-prescriptive approach allowing c ompanies t o determine t heir o wn practices,
subject to appropriate disclosures of such practices adopted.
Major Developments
MAS has been closely monitoring developments to ensure that its Corporate Governance (“CG”) Framework
for f inancial institutions comprising t he R egulations and G uidelines Framework keeps pac e w ith global
industry a nd r egulatory developments. There has bee n i ncreased emphasis on ef fective c orporate
governance internationally. It is timely for MAS to enhance the existing CG Framework to take into account
these developments. Changes are proposed to the Corporate Governance Regulations and Guidelines as at
18 March 2010 on the following areas.
The ne w f ramework i s to ensure c ontinuous d evelopment with a n ef ficient b oard of di rectors, taking i nto
account t he c ompeting time commitment f aced when directors s erve on m ultiple B oards. The f inancial
institution s hould c onsider appointing a l ead i ndependent d irector and al so pr ovide additional guidance on
the role.
In regards to the c omposition of Board of Board C ommittees, th e f inancial i nstitution s hall not ap point a
person w ho i s a m ember of t he i mmediate f amily of t he CEO as t he B oard C hairman. Governance o ver
remuneration f ramework and pr actices, as well as g overnance o ver risk m anagement also ne eds t o b e
enhanced.
Product Developments
Exchange Traded Funds (ETFs)
The Singapore Exchange (SGX) has 73 ETFs listed, covering key Asian and emerging markets, as well as
other asset classes, such as commodities and money market. This provides a broad range of ETFs catering
to i nvestors’ different as set allocation and investment strategies. The annual m anagement fees of E TFs in
Singapore ar e g enerally less t han 1% , an d m ost E TFs l isted on t he S GX ha ve market makers t o pr ovide
competitive bid/ask prices. Investors are able to buy and sell ETFs anytime during market hours. No stamp
duty is levied for trading ETFs on the SGX. Buying and selling can also be executed through any broker.
The volume of ETFs-equities has consistently been the highest followed by that for commodities, then fixed
income and lastly money market, with an overall volume of 75,293,733 and a turnover of S$695,347,610 as
at July 2010, with an increase from S$472,736,991 in June 2010 with a total volume of 71,175,046.
Some f inancial institutions, l ike D eutsche Bank and BlackRock, ar e l ooking into put ting m ore E TFs i n t he
market. H owever, u nfamiliarity with E TFs among i nvestors and l ower pr ofit m argins f or f inancial f irms c an
dampen demand. Although less complicated ETFs have seen better buy-ins, ETFs are set to become more
sophisticated over the medium term.
ETFs Trading Fees
• Fund m anagers c harge management fees c alculated as a per centage of t otal as sets un der
management.
• Management fees of less than 1% per annum.
• No upfront sales charge.
• Buying and selling of ETF units on a stock exchange would incur the usual brokerage commissions
of approximately 0.25% to 0.5% and clearing fee of 0.04%.
ETFs Issuer Listing Fees
• SGX-ST will levy an initial listing fee of S$10,000 per ETF listed on its Board.
• For annual listing fee, SGX-ST will levy a charge of S$25 per US$1million of the net assets of the
ETF, subject to a minimum of S$400 and a maximum of S$2,000.
• SGX-ST r etains t he r ight t o r eview and c hange its ETF l isting f ees schedule as and when i t i s
deemed necessary.
American Depositary Receipts (ADR)
The SGX will offer trading in American Depositary Receipts (ADR) from 22 October 2010 in a bid to boost
trading volumes and liquidity.
Launching with the ADRs of 19 large Chinese firms that are listed in the United States, including Internet firm
Baidu, Aluminum Corporation of China, China Mobile, Petrochina, and software firm Netease, the SGX will
be the first Asian bourse to let investors trade in these shares in Asian hours.
Nine of the 19 firms are currently traded in the United States only, while the other 10 also have listings on
Hong Kong Exchanges and clearing.
Investors will be able to trade the ADRs on SGX which are fully fungible with the U.S.-listed ADRs during the
Asian trading day, in that investors can buy them in Singapore and sell in the United States and vice versa.
This w ill g ive investors new o pportunities t o ac t quickly o n information an d ne ws f low o n m ajor A sian
companies. Additionally, t he U .S.-listed c ompanies can a lso increase t heir ex posure am ongst t he investor
community in the Asia Pacific through greater accessibility during local trading hours.
Sources/references: ShookLin & Bok, Monetary Authority of Singapore, Asia Asset Management, Statistics
Singapore, Singapore Exchange
Demographical Data
Population (as at end June 2010)

Resident Population
Total Population (‘000) 5,076.7
Singapore Residents (‘000) 3,771.7
Singapore Citizens (‘000) 3,230.7
Singapore Permanent Residents (‘000) 541.0
Land Area (as at end 2009)

Population Density (Per Sq Km) 7,022
Land Area (Sq Km) 710.3
Economic Indicators (as at end 2009)
Gross Domestic Product (GDP)

At Current Market Prices (S$m) 265,057.9
Per Capita GDP 53,143.0
Productivity and Inflation (as at end 2009)
Annual Growth in Labour Productivity (%) -3.9

Annual Inflation Rate (%) 0.6
Manufacturing (as at end 2009)
Total Output (S$m) 213,699.8

Investment Commitments In Manufacturing And Services (Fixed Assets Investments) (S$m) 11,753.9
Foreign Investments (S$m) 8,385.6
Finance (as at end 2009)
Money Supply (M1) (S$m) 93,472.1

Official Foreign Reserves at End of Year (S$m) 263,955.4
External Trade at Current Prices (as at end 2009)
Total Trade (S$m) 747,417.3

Exports 391,118.1
Imports 356,299.3
Transport and Communications (as at end 2009)
Sea Cargo Handled (Million Freight Tonnes) 472.3

Air Cargo Handled (‘000 Tonnes) 1,636.6
Services and Tourism (as at end 2009)
Annual Growth In Retail Sales At Constant Prices (%) -9.4

Visitor Arrivals (‘000) (excluding Malaysian arrivals by land) 9,682.7
Hotel Occupancy Rate (%) 75.8
Source: Singapore Department of Statistics

Singapore has established a financial centre of international repute, serving not only its domestic economy,
but also the wider Asia Pacific region and in some instances, the world. Singapore's financial centre offers a
broad range of financial services including banking, insurance, investment banking and treasury services.
With a considerable range of both Singapore government securities and foreign corporate bonds available,
Singapore offers fixed income investors a wide spectrum of investment opportunities. Singapore has grown
to be one of the largest Real Estate Investment Trust (REITs) markets in Asia ex-Japan, and also provides a
good offering of investments in business trusts of shipping, aviation and infrastructure assets.
Singapore has a sound legal and judicial system, and a well-regulated international financial sector.
Singapore is the only Asian country with a "AAA" rating.
A key aspect of Singapore’s financial centre is its strong capital markets; the Singapore Exchange (SGX) is
the preferred listing location for more than 200 global companies. Besides being one of the top 5 most active
foreign exchange trading centres in the world, Singapore is also the second largest over-the-counter
derivatives trading centre in Asia, as well as a leading commodities derivatives trading hub.
Singapore has been r ecognised as o ne of t he b est c ities f or bus iness. I n t he S wiss-based i nternational
Institution f or Mana gement D evelopment's 2008 World C ompetitiveness Yearbook, S ingapore has be en
ranked as t he s econd-most c ompetitive c ountry i n t he world af ter t he U nited States. This i s due to t he
reasons t hat Singapore ha s about t he m ost bus iness-friendly r egulation in t he w orld, taking i nto account
other factors, including business licensing, taxes, credit legal rights and investor protection.
Singapore also has a high level of transparency and reliability in business, economic and regulatory affairs,
which are appreciated by investors. A stable political structure with parliamentary democracy, a well-
established judicial system, and the presence of strong domestic institutions with good corporate governance
practices, have increased the attractiveness of Singapore business environment to global investors.
Singapore c ontinues to be c ost c ompetitive c ompared with other m ajor c ities b y offering t he financial
institutions a competitive tax rate environment. Singapore's corporate tax rate is one of the lowest in Asia-
Pacific. Singapore also offers the advantage of having a comprehensive network of Double Tax Agreements
with more than 60 countries.
We also have a skilled workforce to meet industry demand. In addition to grooming the local workforce meet
the demand of t he industry, S ingapore also has an op en do or p olicy to i nternational talent an d
expertise. Washington-based risk consultancy agency, Business Environment Risk Intelligence (BERI), has
rated S ingapore's w orkforce as t he w orld's bes t workers s ince 1980. And a ccording t o t he I MD World
Competitiveness Yearbook 2007, Singapore has the most skilful and motivated labour force in Asia Pacific.
Singapore i s s trategically located i n a r egion of op portunities. Located at t he hear t of S outheast Asia,

Singapore is well placed to serve the fast-growing markets of the Asia-Pacific region. Financial institutions in
Singapore also trade around-the-clock with Asia-Pacific centres, as well as European and American centres,
making S ingapore a significant hub f or 24-hour t rading i n foreign exchange and securities, with i ts
sophisticated telecommunications network.
International travel is equally convenient with more than 84 international airlines operating scheduled
services through Singapore to more than 180 cities in 57 countries worldwide. Singapore has grown to be a
strategic link and important gateway for global investors.
Singapore seeks to ensure its relevance and connectivity to growth markets, not just in Asia but also beyond.
As par t of t his i nitiative, S ingapore has c oncluded F ree T rade Agreements ( FTAs) with m ajor ec onomies,
including the United States, Japan, Korea, Australia, New Zealand, India and Jordon. Singapore is also one
of the members of the ASEAN Free Trade Agreement (AFTA) which encourages the free flow of trade, and
reduces trade barriers.
Data on Funds under Management and Portfolios
AUM (in SGD billion), of Singapore Registered Unit Trust Funds for Sale
2009 2010 (as at end June 2010)
Bond 15.50 15.87
Equity 24.43 24.81
Mixed Assets 2.94 2.96
Money Market 1.07 1.37
Total 43.94 45.01
* AUM data is based on a sample size of 22 fund management companies in Singapore
Total number of licensed fund management (as at end June 2010): 113
Fund flows in Singapore

a. From January 1, 2009 through to December 31,2009
The Singapore unit trust market registered net inflows of S$2.33 billion for the year 2009, with net outflows of
S$122 m illion i n Q 1 2 009, net i nflows of S $513.3 m illion i n Q 2 20 09, net in flows of S $816.6 m illion i n Q 3
2009 and net inflows of S$1.12 billion in Q4 2009.
The return of enthusiasm to the markets after the global financial crisis which lasted till early 2009, translated
into more balanced inflow/outflow figures across all asset types for the quarter under review in Q1 2009 and
helped tip the balance of asset flow activity in favour of new inflows for the first time in several quarters, and
especially so in the case of equity products in Q2 2009.
In Q1 2009, the asset type showing the highest net outflows was bond unit trusts (-S$39.2 million) in contrast
with lower net r edemptions i n eq uity f unds ( -S$13.4 m illion), s ince t he l atter was s taunched b y rallying
equities and rising risk appetite toward quarter’s end. Bond products saw total inflows to the tune of S$545.7
million, with t otal i nflows into bo nd f unds exceeding t hose into equity f unds ( +S$508.2 m illion) f or t he f irst
time s ince t he en d of t hird quar ter 20 08. F urthermore, an other S $539.0 m illion f lowed into m oney m arket
products.
In Q2 2009, the asset type showing the highest net inflows was equity unit trusts (+S$505 million) in contrast
with l ower n et s ubscriptions i n mixed as set ( +S$49.7 million), m oney m arket ( +S$16.6 m illion) an d ot her
(+S$25.6 million) fund products. Bond funds were the only asset class with net redemptions at quarter’s end
(-S$83.7 million), as rallying equities and rising risk appetites drove money away from safe-haven assets into
riskier a sset cl asses. E ven t he r isk-averse am ong Q2 20 09’s m arket par ticipants s ought m ixed as set
products over bond or money market funds; flows into and out of mixed asset funds were largely limited to
balanced portfolios.
In Q3 2010, a rising investor appetite for risk, declining volatility, and delayed positive effects of previously
implemented s timulus m easures, a ll t ranslated into ec onomic indicators at more f avorable l evels t han
expected, especially in the emerging markets. These strong bullish trends even led to a brief correction in a
few em erging m arkets ( notably C hina) i n August. The as set t ypes s howing t he highest ne t i nflows were
equity ( +S$418.4 m illion) and b ond ( +S$284.9 m illion) uni t t rusts i n contrast w ith l ower net subscriptions
among mixed as set ( +S$11.2 m illion), m oney m arket ( +S$77.5 million) an d ot her ( +S$24.6 m illion) f und
products.
The market s entiment was up beat coming into t he f ourth quarter of 2 009, due t o t he prevailing pos itive
macro c onditions s uch as rising r isk appetites and p ortfolio i nflows, dec lining u nemployment rates and a
weakening dollar in Q3 2010, which added to the momentum. Some of these gains were shed in the latter
half of October, however, likely owing more to a reassessment of valuation levels than to that of risk levels.
The markets were also briefly shaken in November by Dubai’s decision to postpone the maturity of some of
its debt t o Ma y 2 010. B ut on t he whole, the m arkets r ode a long on t he s ame steady d iet of pos itive
macroeconomic data of recent months, ending the quarter with broad gains.
This sustained enthusiasm in the markets has helped extend the run of positive asset flow activity into Q4
2009. The asset types showing the highest net inflows were bond (+S$795.2 million) and equity (+S$450.2
million) unit t rusts in c ontrast with lower net s ubscriptions am ong m ixed as set ( +S$26.9 million), an d n et
outflows i n m oney m arket ( -S$103.9 m illion) an d ot her ( -S$44.3 m illion) f und products, a f urther s ign of
declining risk aversion. However flows into and out of mixed asset funds were largely limited to balanced and
flexible portfolios.
b. From January 1, 2010 through to June 30,2010
The Singapore unit trust market registered total net inflows of S$1.1039 billion as at 30 June 2010, with net
inflows of S$947 million in Q1 2010 and S$156.9 million in Q2 2010.
Market sentiment in the first quarter of 2010 was weighed down by regulatory and political headwinds (fiscal
woes in the Eurozone, termination of stimulus measures, rate hikes in Asia) during the initial months. But it
gathered momentum in the latter half, as Q4 2009 corporate earnings results turned out to be stronger than
expected and as several economies in Asia posted strong quarter-on-quarter GDP growth numbers, to finish
the quarter in positive territory.
Despite healthy and stronger-than-expected Q1 2010 corporate earnings announcements and positive
macro c ues c oming f rom s everal Asian/emerging ec onomies, m arket s entiment i n t he s econd qu arter of
2010 was weighed down by disappointing economic data emanating from the US and a deteriorating fiscal
environment in several of the Eurozone countries. While most of these themes were evident prior to the start
of t he quar ter, t hey grew more pr onounced as t he quarter a dvanced, precipitating a f light t o q uality as
evidenced by soaring treasuries and precious metals prices and by a strengthening Japanese yen, in May
and June of 2010.
Market ac tivity h as he lped ex tend t he r un of pos itive as set f low ac tivity into Q1 2010, benefiting r iskier
offerings among both equity and bond products. The asset types showing the highest net inflows were equity
(+S$464.2 m illion) and bond (+S$291.6 m illion) u nit trusts i n c ontrast with l ower net s ubscriptions am ong
residual as set c lasses ( +S$53.6 m illion), a nd n et o utflows f rom mixed as set of ferings ( -S$36.4 m illion).
Notably, money market pr oducts al so posted s olid net i nflows (+S$174.0 million), almost all of which went
into SGD-denominated offerings (+S$179.0 million).
Whereas in Q 2 2010, market ac tivity during the quarter has helped extend the r un of asset inflow activity,
marking a marginal 3.2% increase from the previous quarter’s gross inflows figure; the bulk of these inflows
went into bond and money market offerings or quality equity allocations. However, the quarter’s inflows were
almost entirely offset by a 32.6% rise in the volume of gross outflows quarter-on-quarter, with equity offerings
accounting for nearly half (or S$1.75 billion) of those outflows. Specifically, the asset classes attracting the
highest net inflows were money market (+S$131.7 million) and bond (+S$88.3 million) unit trusts in contrast
with net outflows among equity products (-S$92.9 million) and residual asset classes (-S$21.9 million).
Regulatory and Self Regulatory Developments
Regulator
In Singapore, the Monetary Authority of Singapore (MAS) is the regulatory body responsible for supervision
over m oney, banking, i nsurance, s ecurities, an d t he financial s ector in ge neral. I t is t he c entral bank of
Singapore. The MAS has been given powers to act as a banker to and financial agent of the Government. It
has also be en e ntrusted t o pr omote monetary s tability, an d credit a nd ex change policies c onducive t o t he
growth of the ec onomy w hich i s in line w ith i ts m ission “ to pr omote s ustained no n-inflationary ec onomic
growth, and a sound and progressive financial centre.”
Functions of the MAS

• To act as the central bank of Singapore, including the conduct of monetary policy, the issuance of
currency, t he o versight of pa yment s ystems and s erving as bank er to and f inancial ag ent of t he
Government
• To conduct integrated supervision of financial services and financial stability surveillance
• To manage the official foreign reserves of Singapore
• To develop Singapore as an international financial centre
The regulator also plays an important part in building investor confidence by maintaining the integrity of the
financial s ector i ncluding t he as set m anagement i ndustry. T he MA S a long with ot her r egulatory a gencies
does regular checks and monitors activities of the entire financial sector.
Rules and Regulations
The MA S adm inisters t he Financial A dvisers A ct ( FAA) and t he S ecurities and F utures A ct ( SFA) which
governs intermediaries selling mutual fund schemes in Singapore.
The FAA regulates all activities which advise others, directly or indirectly. through publication or writings, by
issuing or promulgating r esearch an alyses or r esearch r eports, whether in el ectronic, pr int or o ther f orm,
concerning any investment product, other than in the manner set out or advising on corporate finance within
the m eaning of t he S FA. I t includes the m arketing of collective i nvestment s chemes and arranging o f
contracts of insurances in respect of life polices, other than a contract of reinsurance.
Under the SFA, regulated activities include dealing in securities, trading in futures contract, leveraged foreign
exchange t rading, advising on c orporate f inance, f und m anagement, r eal es tate i nvestment t rust
management, s ecurities f inancing and pr oviding c ustodial s ervices for s ecurities. The A ct c overs licensing
criteria, forms and f ees, fit and proper c riteria, entry and examination r equirements, anti-money l aundering
and combating f inancing o f t errorism requirements, l ending of m oney, internet, out sourcing and b usiness
continuity, as well as cooling period for CIS constituted as unit trusts and procedures for retail and restricted
schemes.
In Singapore, fund assets are to be kept by a custodian, and the fund trustee must be independent of the
fund manager. In practice, m ost funds us e i ndependent c ustodians, but a few exceptions oc cur where the
custodian and t he f und m anager ar e s eparate bus iness ent ities t hat belong t o t he s ame par ent h olding
company.
Fund management companies in Singapore must also publish semiannual and annual reports. The annual
report m ust be audi ted by an independent auditor. The annual report m ust be made available within three
months after the fiscal year ends, and the semi-annual report is required to be published within two months
after the period ends.
The MA S’ C ode on C ollective I nvestment S cheme sets out bes t pr actices on t he m anagement, op eration,
and marketing of funds pursuant to the SFA. The code restricts the use and requires the disclosure of soft
dollars received f rom eac h br oker in t he semi-annual and annual reports. The Code also requires t hat the
annual report and semi-annual reports show the total expense ratio (TER) for the period under review and a
year ago.
Representatives wh o advise and sell mutual funds in Singapore must be licensed. In order to be licensed,
one must pass the examinations which are conducted regularly by the Institute of Banking and Finance. It is
mandated t hat t he a dvisor f ully d iscloses the d istribution f ee and ot her f ees t hat a c lient may incur. The
regulation r equires t hat t he s ale of f unds be accompanied by a prospectus pub lished by t he f und
management company.
There are advertising codes for unit trusts performance. Under the SFA and Codes of Advertising Practices,
advertisements must be fair, unambiguous and not misleading. It could be deemed an offence if this is not
followed.
Distribution/choice
Currently, u nit t rusts i n Singapore ar e d istributed a nd s old t hrough b anks, l icensed i ndependent f inancial
adviser f irms. I nsurance f irms, i nternet platforms, di rectly by the f und m anagement c ompanies an d ot her
licensed firm.
Singapore has a f airly open a rchitecture s ystem w here a majority of t he f unds ar e s old t hrough a n op en
platform. A n investor c an purchase m ultiple f und of ferings at m ost di stribution pl atforms. H owever, even
though funds from multiple fund families are offered at most platforms, in-house funds are highly represented
in the choices given.
All un it t rust f unds i n Singapore r equire minimum investment. T he t ypical minimum investment is S $1,000
(approximately US$667).
Fees and Expenses
• The majority of funds in Singapore charge a front-end load, and a few charge a back-end load.
• The official front-end load (FEL) is usually between 5.0% and 5.5%. Actual FEL is generally 1-3%.
• Annual management fees range between 1% and 2%.
Recent Developments
Enhancements to Tax Incentives for the Investment Management Industry in Singapore
The 2009 Budget proposed certain enhancements to the tax incentive regime applicable to the investment
management industry in Singapore:
 An enhanced t ier, ef fective f rom 1 A pril 20 09 t o 31 Mar ch 2014, was introduced, w hich ent itles fund
managers (FMs) and the funds they manage to certain benefits, including no restrictions imposed on the
residency status of the fund vehicle or its investors, and fund vehicles constituted as limited partnerships
can be entitled t o t ax exemption. With t his enh ancement, S ingapore-based F Ms w ere a llowed f urther
access to Singapore investors’ funds;
 As only ‘specified income’ derived from ‘designated investments’ enjoys tax exemption, the definitions of
these two terms had been expanded, to include qualifying Islamic investments, emission derivatives and
adjudicated and non-adjudicated liquidation claims;
 Remission of Goods and Services Tax (GST) for Singapore f unds. GST is chargeable on fund
management and other services provided by GST-registered suppliers to funds belonging in Singapore.
Based on G ST pr inciples, on ly GST-registered f unds m aking t axable s upplies c an c laim i nput t ax.
However, Singapore-based funds are generally making exempt financial supplies or receiving dividend
income and therefore, have difficulty registering for GST, as they do not make any taxable supplies. As
these funds were not GST-registered, the input tax incurred was irrecoverable, which formed part of the
business cost of operating in Singapore. This discouraged offshore fund managers to operate in
Singapore and use the services of GST-registered service providers.
To ensure Singapore c ontinuing c ompetitiveness as a global f inancial c entre, t he I nland R evenues

Authority of S ingapore ( IRAS) h as al lowed qualifying f unds t hat ar e m anaged b y a pr escribed f und
manager in Singapore to claim a substantial portion of the GST incurred on prescribed expenses at an
annual fixed recovery rate. The remission takes effect from 22 January 2009 to 31 March 2014.
Amendments to the Code on Collective Investment Scheme
The Monetary Authority of Singapore (MAS) released a consultation paper on proposed amendments to the
Code on Collective I nvestment S chemes ( Code) on 17 May 20 10. The proposed am endments ai med to
provide clarity and to increase the flexibility for managers in managing their funds, and enhance protection
for investors. They included:
i. Introducing a list of permissible investments and accompanying criteria to enhance clarity in the
application of the liquidity and diversification limits
ii. Strengthening safeguards on t he use of financial derivatives through prescription of counterparty limits
and acceptable forms of collateral used to mitigate counterparty risks
iii. Introducing additional gu idelines on the us e of t he commitment appr oach an d Value-at-Risk (V aR)
method for calculating exposures to financial derivatives
iv. Enhancing ex isting gu idelines o n f unds’ s ecurities l ending activities t hrough c omprehensive
requirements on the counterparty, custodian and the use of collateral. This is in the light of the
heightened attention on counterparty and liquidity risks as a result of the recent global financial crisis
v. Establishing new investment guidelines for funds seeking to track indices, introducing principles for the
naming of f unds and r equirements t o s tandardise t he m ethods us ed f or c alculating performance f ees
where the fund manager decides to impose such fees
vi. Modifying ex isting op erational r equirements, i ncluding a llowing t he s ending of ac counts and annual
reports to unitholders by electronic means with certain exceptions as long as unitholders are notified and
do not object to it
The proposed amendments will also apply to funds offered via an investment-linked life insurance policy.
Regulatory Regime for Listed and Unlisted Investment Products
The MA S Consultation Paper on the R egime for Listed a nd Unlisted Investment Products was r eleased in
January 2010 to enhance the safeguards for retail customers.
Proposed changes include:

• Current regulatory regime under FAA continues to apply.
• Introduction of excluded investment products such as shares, depository receipts, subscription rights,
subscription r ights pur suant t o r ights i ssues, c ompany warrants, b usiness trust un its, R EIT u nits,
plain vanilla bonds, money market instruments, life insurance policies (excluding investment-linked
policies), structured deposits (including dual currency investments)
• Sale of non-excluded investment products to be subject to revised package of proposals
• Formal policies and procedures on sale of investment products
Proposals for unlisted investment products include:

• Customer Knowledge Assessment for retail customer purchasing unlisted non-excluded investment
products
• Customer K nowledge Assessment t o be per formed or appr oved by a per son independent of the
financial advisory function
Proposals for listed investment products include:

• Enhanced safeguards f or r etail c ustomers, w hich i nclude i mposing an a ppropriate c eiling on the
customer’s trading of listed non-excluded investment products
• Customer A ccount R eview b y intermediaries f or r etail c ustomer t rading l isted non -excluded
investment products
Enhanced competency for representatives:

• New CMFAS Module.
• Intermediaries to ensure representatives undergo training on features and risk-reward characteristics
of a new non-excluded investment product before being allowed to sell the product.
Regulatory Regime for Fund Management Companies
On 27 A pril 20 10, t he M AS issued a c onsultation pa per t itled “ Review of t he R egulatory R egime f or F und
Management Companies and Exempt Financial Intermediaries”.
Currently, f und m anagers i n S ingapore ei ther o perate as ex empt f und managers under taking f und
management for not more than 30 qualified investors, or as holders of a capital markets services license in
respect of fund management. The Consultation Paper proposed to establish three distinct categories of fund
management companies (FMCs) instead:
 Notified FMCs – manage up t o S $250 m illion i n a ssets and s erve n ot m ore t han 3 0 qu alified
investors of whom up to 15 can be funds
 Licensed A/I FMCs – serve only accredited and/or institutional investors
 Licensed Retail FMCs – serve retail investors
Notable ar eas i nclude t he Notified F MCs which will c ontinue t o o perate u nder a n otification r egime. T his
category formalises the rules for exempt fund managers (EFMs), enabling fund managers who currently do
not ne ed t o s ecure a c apital m arkets services ( CMS) l icense t o oper ate, bu t a bas e c apital of at l east
S$250,000 at all times is imposed and there is no restrictions on the use of the base capital for investments
in assets.
However, once a n otified FMC’s as sets exceed S$250 m illion, i t will ha ve t o apply f or a C MS license t o
operate as a l icensed A /I FMC, an d t o s atisfy t he r elevant c riteria. G iven t he r isks of l everaged foreign
exchange trading, traders who are currently exempt are expected to be required to hold a CMS license as
well.
The MAS wants to raise the compliance functions of a licensed A/I FMC with additional resources. For FMCs
with m ore t han S$1 billion i n A UM, the f und m anagers w ill need t o h ave dedicated f ull-time compliance
personnel who are independent of the front office. MAS has proposed that professional indemnity insurance
must c ontinue to be r equired f or l icensed r etail F MCs and l icensed A /I F MCs, i t is no t m andated b ut is
‘strongly encouraged’.
In addition, a minimum of 2 individuals each with at least 5 years of relevant experience and at least two full-
time r esident r epresentatives ar e a lso r equired. T he nee d f or t wo experienced pr ofessionals was e arlier
‘strongly encouraged’ but not formally required.
MAS no ted in its pa per t hat i t understood the i ndustry’s c oncern over s tart-up costs. B ut it s aid that
maintaining a base capital requirement of S$250,000 for all FMCs would be consistent with sound business
practice and improve the viability of new FMCs by acting as a buffer for unexpected costs, especially during
adverse market conditions.
IMAS Guidelines on Corporate Governance
The I nvestment Mana gement A ssociation of S ingapore ( IMAS) believes t hat investment managers, as
stewards of t he m oney of ot hers, ne ed to have r egard t o t heir r ole as s hareholders. We r ecommend,
therefore, t hat investment m anagers s hould ha ve a policy r elating t o c orporate gov ernance ar rangements
and behaviours of the companies in which they invest; consider the process required to implement this policy;
and review the information that should be presented to their clients.
In or der t o as sist m embers, I MAS has developed a voluntary “ Guidelines f or C orporate G overnance” f or
investment managers, in their capacity as shareholders. This is intended to complement codes and guidance
already developed by other bodies such as Corporate Governance Committee and the Singapore Exchange.
IMAS r ecommends t hat investment m anagers s hould, whenever p ossible, m aintain c ommunication with
companies, vote ac tively a nd i nform t heir o wn i nvestors about their po licy on v oting an d ot her c orporate
governance m atters. V oluntary adoption of t he C ode i s l ikely to be pr acticable o nly f or t he r elationships
between investment m anagers and Singapore listed companies. I n the longer term, it may be desirable to
consider the practicalities of extending the Code to relationships with overseas companies.
Typical Corporate Governance Model
Singapore’s model on corporate governance is based on both legislation and non-legislative guidelines. The
primary legislation dealing with corporate governance is the Companies Act. Singapore also has a wealth of
case law dealing directly with c orporate go vernance, as well as t he s tringent listing r ules of the Singapore
Stock Exchange (SGX).
However, the local model is incomplete without the ‘Code of Corporate Governance 2005’. This code spells
out g uidelines pertaining t o matters s uch as t he c omposition a nd training of boar d of di rectors, d isclosure/
communication with s hareholders, and ac countability and aud it. A k ey f eature of t he C ode i s i ts v oluntary
nature: non-compliance does not attract penalties. This voluntary nature reflects the maturity of Singaporean
companies. An analysis of the Code shows that it is intended to allow companies a large degree of flexibility
in t heir a pproach t o c orporate g overnance. S ingapore has ac hieved s uccess i n t his r egard b y r ecognizing
that there is no ‘one-size-fits-all’ corporate governance model that can apply to all companies successfully.
The Code along with the Companies Act reflects Singapore’s balanced approach to corporate governance.
This was seen as the most appropriate model. This approach encourages commercial autonomy while also
mandating legislative accountability. It this differs from a prescriptive approach requiring companies to adopt
specific pr actices an d a non-prescriptive approach allowing c ompanies t o determine t heir o wn practices,
subject to appropriate disclosures of such practices adopted.
Major Developments
MAS has been closely monitoring developments to ensure that its Corporate Governance (“CG”) Framework
for f inancial institutions comprising t he R egulations and G uidelines Framework keeps pac e w ith global
industry a nd r egulatory developments. There has bee n i ncreased emphasis on ef fective c orporate
governance internationally. It is timely for MAS to enhance the existing CG Framework to take into account
these developments. Changes are proposed to the Corporate Governance Regulations and Guidelines as at
18 March 2010 on the following areas.
The ne w f ramework i s to ensure c ontinuous d evelopment with a n ef ficient b oard of di rectors, taking i nto
account t he c ompeting time commitment f aced when directors s erve on m ultiple B oards. The f inancial
institution s hould c onsider appointing a l ead i ndependent d irector and al so pr ovide additional guidance on
the role.
In regards to the c omposition of Board of Board C ommittees, th e f inancial i nstitution s hall not ap point a
person w ho i s a m ember of t he i mmediate f amily of t he CEO as t he B oard C hairman. Governance o ver
remuneration f ramework and pr actices, as well as g overnance o ver risk m anagement also ne eds t o b e
enhanced.
Product Developments
Exchange Traded Funds (ETFs)
The Singapore Exchange (SGX) has 73 ETFs listed, covering key Asian and emerging markets, as well as
other asset classes, such as commodities and money market. This provides a broad range of ETFs catering
to i nvestors’ different as set allocation and investment strategies. The annual m anagement fees of E TFs in
Singapore ar e g enerally less t han 1% , an d m ost E TFs l isted on t he S GX ha ve market makers t o pr ovide
competitive bid/ask prices. Investors are able to buy and sell ETFs anytime during market hours. No stamp
duty is levied for trading ETFs on the SGX. Buying and selling can also be executed through any broker.
The volume of ETFs-equities has consistently been the highest followed by that for commodities, then fixed
income and lastly money market, with an overall volume of 75,293,733 and a turnover of S$695,347,610 as
at July 2010, with an increase from S$472,736,991 in June 2010 with a total volume of 71,175,046.
Some f inancial institutions, l ike D eutsche Bank and BlackRock, ar e l ooking into put ting m ore E TFs i n t he
market. H owever, u nfamiliarity with E TFs among i nvestors and l ower pr ofit m argins f or f inancial f irms c an
dampen demand. Although less complicated ETFs have seen better buy-ins, ETFs are set to become more
sophisticated over the medium term.
ETFs Trading Fees
• Fund m anagers c harge management fees c alculated as a per centage of t otal as sets un der
management.
• Management fees of less than 1% per annum.
• No upfront sales charge.
• Buying and selling of ETF units on a stock exchange would incur the usual brokerage commissions
of approximately 0.25% to 0.5% and clearing fee of 0.04%.
ETFs Issuer Listing Fees
• SGX-ST will levy an initial listing fee of S$10,000 per ETF listed on its Board.
• For annual listing fee, SGX-ST will levy a charge of S$25 per US$1million of the net assets of the
ETF, subject to a minimum of S$400 and a maximum of S$2,000.
• SGX-ST r etains t he r ight t o r eview and c hange its ETF l isting f ees schedule as and when i t i s
deemed necessary.
American Depositary Receipts (ADR)
The SGX will offer trading in American Depositary Receipts (ADR) from 22 October 2010 in a bid to boost
trading volumes and liquidity.
Launching with the ADRs of 19 large Chinese firms that are listed in the United States, including Internet firm
Baidu, Aluminum Corporation of China, China Mobile, Petrochina, and software firm Netease, the SGX will
be the first Asian bourse to let investors trade in these shares in Asian hours.
Nine of the 19 firms are currently traded in the United States only, while the other 10 also have listings on
Hong Kong Exchanges and clearing.
Investors will be able to trade the ADRs on SGX which are fully fungible with the U.S.-listed ADRs during the
Asian trading day, in that investors can buy them in Singapore and sell in the United States and vice versa.
This w ill g ive investors new o pportunities t o ac t quickly o n information an d ne ws f low o n m ajor A sian
companies. Additionally, t he U .S.-listed c ompanies can a lso increase t heir ex posure am ongst t he investor
community in the Asia Pacific through greater accessibility during local trading hours.
Sources/references: ShookLin & Bok, Monetary Authority of Singapore, Asia Asset Management, Statistics
Singapore, Singapore Exchange
Slovakia Country Report

2008 2009
GDP (EUR billion)* 67.22 63.33
Real GDP growth (%)** 6.2 -4.7
Bond market capitalisation (EUR billion) 16.72 20.24
Bond market capitalisation (% of GDP) 24.87 31.96
Household financial wealth (EUR billion) - -
Average per capital financial wealth (EUR) - -
* at current prices
**at chain-linked volumes with reference year 2000
2. Data on Funds under Management and Portfolios

2005 2006 2007 2008 2009
 Funds 50 61 72 78 70
Foreign funds registered for - - - - -

sales
 By national promoters 278 319 440 379** 424**
Average fund size (median) *
 Equity - 3.4 4.4 4.9 11.2
 Bond - 18.5 14.1 8.1 14.3
 Balanced - 10.6 14.4 7.4 8.3
 Money market - 49.6 43.8 28.1 106.5
 Real estate - 0.1 23.8 27.3 31.1
 Special - 15.73 22.7 23.0 23.8
* million EUR home-domiciled UCITS
** Only investment funds reported by SASS
The number of UCITS funds has changed slightly. There are 70 domestic and nearly 424 open-ended funds
domiciled abroad registered by foreign promoters and reported by Slovak Association of Asset Management
Companies.
On the market home-domiciled UCITS funds existed on 6 Equity funds, 8 Bond funds, 19 Balanced Funds,
13 Money market funds, 16 Funds of Funds and 8 Others (Guaranteed) funds by the end of 2009.
3. Key Trends in Flows and Assets under Management
3.1. Key Trends in the Global Market
Table 3: Net Assets by the Fund Industry in Slovakia

(EUR billion)
2005 2006 2007 2008 2009

providers
Total AuM 3.844 3.844 4.771 3.787 4.118
Table 4: Net Sales of Investment Funds in Slovakia

(EUR million)
2005 2006 2007 2008 2009
Home-domiciled UCITS 1,043.9 32.6 590.7 -869.0 -24.5
Home-domiciled non-UCITS n.a. 14.6 104.2 1.8 21.4

promoted by national 228.3 57.1 67.0 -46.3 115.5
providers
Total net sales 1,272.2 104.3 761.9 -975.7 112.4
The year 2009 was also for the Slovak Republic the year of turnover after a descending trend of Net Assets
by the Fund Industry, which was expressed by the increase of Net Assets by about 8.7%. The largest
increase (after a significant drop last year) was realized by Funds domiciled abroad and promoted by
national providers (52.8%). This increase was caused by sound net sales, as well as the increase in value
mainly of equity assets in portfolios from March 2009. Drop by -26.2% was experienced by Home-domiciled
non-UCITS funds due to termination of 41 closed non-UCITS funds and the transfer of their assets under
open-end UCITS funds.
At the end of 2009 Slovak Association of Asset Management Companies reported data on 75 open-ended
domestic funds and 426 funds domiciled abroad. However domestic funds still managing up to 83% of asset
invested into open-ended funds. Individual investors trust more nationally domiciled companies, which are
owned by traditional banks operating in Slovakia. The top three domestic fund management companies
share more than 74% of NAV of the whole market of investment funds.
In 2009 the net sales in the open-ended funds market in Slovakia amounted to 112.4 million EUR, which
forms 2.7% of the net assets at the end of 2009. Nonetheless, Home domiciled UCITS funds brought in
negative net sales (-24.5 million EUR), which were affected by high redemptions in the first quarter of 2009.
This development was affected by the global financial and economic crisis, which influence continued during
the first quarter of 2009 in the sector of collective investment. In the following period the increase of net sales
only moderately topped the high of redemptions at the beginning of the year. Greater dynamics of increase
Net Assets by the Fund Industry was caused especially by substantial increase of the price of equity and
partially bond assets in portfolio funds.
3.2. Key Trends in the UCITS Market

(EUR billion)
2005 2006 2007 2008 2009
Equity 0.240 0.172 0.183 0.090 0.127
Bond 1.190 0.623 0.529 0.400 0.410
Balanced 0.211 0.224 0.404 0.307 0.387
Money market 1.392 1.380 1.888 1.622 1.765
Fund-of-funds 0.148 0.564 0.557 0.347 0.324
Other 0.083 0.039 0.258 0.341 0.242
Total 3.264 3.002 3.819 3.107 3.255
of which
 Guaranteed 0.083 0.039 0.258 0.341 0.242

(EUR million)
2005 2006 2007 2008 2009
Equity 116.8 113.0 21.2 -5.0 21.4
Bond 554.1 -561,1 -119.9 -142.9 7.2
Balanced 97.3 88.7 -15.6 -93.0 28.0
Money market 365.1 -126.6 412.9 -504.6 85.7
Fund-of-funds 138.9 482.1 85.3 -181.6 -59.9
Other - 36.5 206.8 58.2 -106.9
Total 1,272.2 32.6 590.7 -869.0 -24.5
of which
Guaranteed 0 36.5 206.8 58.2 -106.9
In 2009 we registered increase of net assets in all categories except the Fund of Funds and Other funds, in
which there are Guaranteed funds. The greatest percentage increase of net assets was in Equity funds
(41%).
The ratio between Equity funds and Fund-of-funds on one s ide and Bond funds and Money market funds on
the ot her, r an even d eeper due to f inancial and ec onomic c risis w ith di sadvantage f or m ore r isky
investments, which indicates persisting conservative profile of the Slovak investor if compared to the
European average.
Similarly in n et s ales were not iced p ositive n et s ales l ast year, i n a ll c ategories of funds ex cept F und of
Funds an d Other Funds. T he gr eatest a bsolute inflow of f inancial r esources was not iced in M oney m arket
funds.
3.3. Key Trends in Other Nationally Regulated Funds

(EUR billion)
2005 2006 2007 2008 2009
Real estate - 0.0001 0.100 0.170 0.139
 Open-ended - 0.0001 0.100 0.170 0.139
Alternative management - - - - -
Special funds - 0.016 0.023 0.023 0.024
Other * 0.030 0.044 0.027 0.028 -
Total 0.030 0.060 0.150 0.221 0.163
* Closed-ended investment funds
Table 8: Net Sales of other nationally regulated funds
(EUR million)
2005 2006 2007 2008 2009
Real estate - 0.1 98.2 1.85 21.4
 Open-ended funds - 0.1 98.2 1.85 21.4
 Closed-ended funds - 0 0 0 0
Special funds - 14.5 6 0 0
Other* - - - - -
Total - 14.6 104.2 1.85 21.4
At the end of the year, the Slovak market of non-UCITS funds consisted of four special Real estate funds
and one Special fund for institutional investors. 41 retail closed-ended mutual funds were transformed into 4
Balanced Open-end UCITS funds at the end of the year. For these reasons the market share of non-UCITS
funds dropped to 5% of the total home domiciled assets under management.
Special Real estate funds make up 85% of the Net assets of non-UCITS funds. In Real estate funds dropped
Net Asset on 18.2% of total positive Net sales. The decrease was caused by re-evaluation of real estate
assets in portfolios during economic crisis.
4.1. Regulatory developments
During 200 9 t hese l egal m easures w ith di rect or i ndirect i mpact on f und an d as set management w ere
passed:
- Financial m ediation and financial c onsulting A ct and r esulting am endment of C ollective

Investment Act.
- Amendment of the Securities and Investment Services Act
- Decrees for reducing influences of global financial crisis on bank sector Act
- Determination the way of property value in mutual fund National Bank of Slovakia (NBS) Decree
- Regulation required elements of an application for prior approval NBS Decree
- Submission of s tatements b y e ntities providing f or di stribution of s ecurities a nd depos itories of
mutual funds for purposes on supervision under above financial market NBS Decree
4.2 Tax rules VAT and double tax treaties:
During 2009 we did not register any new tax rules or tax rates that could have a direct or indirect impact on
investors in investment funds or on fund management.
During 2009 w e di d not r egister an y ne w r egulation or v oluntary initiatives r elating t o t he g overnance of

management companies.
The gov ernance of management c ompanies i n f und management c ompanies i s c arried out b y t he l ocal
authority – National B ank of S lovakia, according t o C ollective I nvestment A ct. Mem bers o f S lovak
Association of Asset Management Companies are providing very comprehensive information on daily,
weekly basis. All information is available for everybody via newspapers and web pages.
Slovak As sociation of A sset Man agement C ompanies and s ome o f i ts members acceded to a c orporate
governance Codex in the past, which was issued by Central European Corporate Governance Association
6. Fund Governance
6.1. Standards (fund classification, fund processing, risk disclosure, etc.)
In order to respect the investment tools valuation rules (self-regulation) there was a process of comparing the
Bond securities pricing, as well as the structured products of bond type in portfolios of Home-domiciled funds
carried out on a regular basis in 2009.
This activity was affected by the application of new Determination of wealth value method in mutual fund in
practice NBS Decree.
Keeping advertising and promotion rules by members of the Association were continuously controlled by the
Ethic Committee of SASS.
6.2. Distribution (distribution of foreign funds, financial advice, disclosure of fees, etc.)
Asset management companies as well as banks and distribution companies customized their processes in
accordance with new Financial mediation and Financial consulting Act. The Act caused substantial changes
in structuralizing financial consulting and mediation, in duties of individual subjects, in registration and in
doing examinations and further education. NBS Decrees tied on to the Act were as follows:
- on register of financial agents, financial advisers, financial mediators from the other member state in
insurance or reinsurance sector and bound investment agents and on charges for the operation of NBS.
- on method of proving the fulfilling of conditions for obtaining permission to run activity of independent
financial agent and for obtaining permission to run activity of financial advisor
- on content, division and way of producing running financial mediation report and running financial
consulting report.
Adapting some of new distribution processes relating to the new Act will gradually continue in 2010 and
2011.
7. Product developments.
The year 2009 saw the launch of one Balanced Fund and one Other (Guaranteed) fund.
Three Equity funds, one Bond fund and six Funds of Funds were merged into other funds in 2009. The
increase in mergers was caused by rationalization of portfolios and investment strategies after a sharp drop
of Net Assets in funds, continuing until the end of first quarter of 2009.
Rationalization of portfolios and mergers caused important increasing of Average fund size (median) at the
end of 2009.
The Association’s lobbying activities in 2009 focused mainly on acts and decrees mentioned in article 7.1.
The Association also issues regular daily, weekly and monthly reports on national investment funds industry.
The Association organized big open conference Asset management in Slovakia 2009 for professionals from
asset management and brokerage companies and several press conferences covering latest trends in the
market of collective investment.
In January 2010 Slovak Association of Asset Management Companies in cooperation with the publisher of
the biggest economic daily organized evaluation and awarding esteems for domestic and foreign mutual
funds - Top Fund Slovakia 2009 in several categories. Slovak Association of Asset Management Companies
undertook expert guarantee for creation of propositions and for mutual funds information database.
Slovakia Country Report

End IIQ
2008 2009
2010
GDP (EUR billion)* 67.22 63.33 31.43
Real GDP growth (%)** 6.2 -4.7 4.7
Inflation rate (%) 3.5 0.0 0.7
Stock market capitalisation (% of GDP) 5.77 5.61 n.a.
Bond market capitalisation (EUR billion) 16.72 20.24 22.35
Bond market capitalisation (% of GDP) 24.87 31.96 n.a.
Household gross savings ratio (%) 7.45 7.67 n.a.
Household financial wealth (EUR billion) - - -
Average per capital financial wealth (EUR) - - -
* at current prices
**at chain-linked volumes with reference year 2000
2. Data on Funds under Management and Portfolios

2006 2007 2008 2009 End II.Q 2010
 Funds 61 72 78 70 72
Foreign funds registered for

sales
 By national promoters 319 440 379** 424** 426**
Average fund size (median) *
 Equity 3.4 4.4 4.9 11.2 10.8
 Bond 18.5 14.1 8.1 14.3 14.5
 Balanced 10.6 14.4 7.4 8.3 6.8
 Money market 49.6 43.8 28.1 106.5 87.8
 Real estate 0.1 23.8 27.3 31.1 41.0
 Special 15.73 22.7 23.0 23.8 24.1
* million EUR home-domiciled UCITS
** Only investment funds reported by SASS
The number of UCITS funds has changed slightly at the end of the first half-year 2010. There are 72
domestic and nearly 426 open-ended funds domiciled abroad registered by foreign promoters and reported
by SASS.
On the market home-domiciled UCITS funds to the end of the first half-year 2010 exists 7 Equity funds, 8
Bond funds, 20 Balanced Funds, 13 Money market funds, 16 Funds of Funds and 8 Others (Guaranteed)
funds.
3.1. Key Trends in the Global Market
Table 3: Net Assets by the Fund Industry in Slovakia

(EUR billion)
2006 2007 2008 2009 End IIQ 2010

providers
Total AuM 3.844 4.771 3.787 4.118 4.373
Table 4: Net Sales of Investment Funds in Slovakia

(EUR million)
2006 2007 2008 2009 I.-II.Q 2010
Home-domiciled UCITS 32.6 590.7 -869.0 -24.5 162.3

promoted by national 57.1 67.0 -46.3 115.5 88.7
providers
Total net sales 104.3 761.9 -975.7 112.4 269.5
The first half-year 2010 was in Slovakia in indication of continuing overall trend of increasing Net Assets by
the Fund Industry, which started in March 2009 and is expressed by half-year increase Net Assets about
6,2%. The largest increase (after previous drop last year) noticed Home- domiciled non UCITS Funds
(15.3%). In this group are mainly special Real-Estate Funds.
At the end of the first half-year 2010 Slovak Association of Asset Management Companies reported data on
77 open-ended domestic funds and 426 funds domiciled abroad. However domestic funds still managing up
to 82% of asset invested into open-ended funds. Individual investors trust more nationally domiciled
companies, which are owned by traditional banks operating in Slovakia. The top 3 domestic fund
management companies share up to 72% of NAV of the whole market of investment funds.
In the first half-year 2010 there were noticed Net sales in the open-ended funds market in Slovakia of 269.5
millions EUR, which forms 6.2% of the Net assets at the end of 2009. The highest relative increase of Net
Sales in compare with total Net Assets noticed Funds domiciled abroad and promoted by national providers
(11.2%).
Initiate development was affected by dying recovery phase away on financial markets after global financial
and economic crisis, ongoing increase of confidence during the whole first half-year 2010 in the sector of
collective investment. In the first half-year 2010 the dynamics of increase Net Assets by the Fund Industry
was practically created in full attitude by Net Sales and benefit from the increase of assets value in funds
portfolios was zero in effect.
3.2. Key Trends in the UCITS Market

(EUR billion)
End II.Q
2006 2007 2008 2009
2010
Equity 0.172 0.183 0.090 0.127 0.150
Bond 0.623 0.529 0.400 0.410 0.463
Balanced 0.224 0.404 0.307 0.387 0.439
Money market 1.380 1.888 1.622 1.765 1.834
Fund-of-funds 0.564 0.557 0.347 0.324 0.309
Other 0.039 0.258 0.341 0.242 0.197
Total 3.002 3.819 3.107 3.255 3.392
of which
 Guaranteed 0.039 0.258 0.341 0.242 0.197

(EUR million)
2006 2007 2008 2009 I.-II.Q 2010
Equity 113.0 21.2 -5.0 21.4 27.7
Bond -561,1 -119.9 -142.9 7.2 45.2
Balanced 88.7 -15.6 -93.0 28.0 78.7
Money market -126.6 412.9 -504.6 85.7 58.6
Fund-of-funds 482.1 85.3 -181.6 -59.9 -2.3
Other 36.5 206.8 58.2 -106.9 -45.6
Total 32.6 590.7 -869.0 -24.5 162.3
of which
Guaranteed 36.5 206.8 58.2 -106.9 -45.6
In the first half-year 2010 we registered increase of Net Assets in all fund categories except the Fund of
Funds and Other funds, in which there are Guaranteed Funds. The biggest percentage increase of Net
Assets was in Equity funds (18%).
The ratio between Equity funds and Fund-of-funds on one s ide and Bond funds and Money market funds on
the other s ide i s de epened und er i nfluence s hareholder ex periences f rom f inancial an d economic c risis in
accounted period continuously as well, with disadvantage for more risky investments, what indicates about
persisting conservative profile of the Slovak investor if compared to the European average.
Similarly in Net Sales were noticed positive Net Sales last year, in all fund categories except Fund of Funds
and Other Funds. The greatest absolute tide of financial resources was in Balanced Funds.
3.3. Key Trends in Other Nationally Regulated Funds

(EUR billion)
End II.Q
2006 2007 2008 2009
2010
Real estate 0.0001 0.100 0.170 0.139 0.164
 Open-ended 0.0001 0.100 0.170 0.139 0.164
Special funds 0.016 0.023 0.023 0.024 0.024
Other * 0.044 0.027 0.028 - -
Total 0.060 0.150 0.221 0.163 0.188
Table 8: Net Sales of other nationally regulated funds

(EUR million)
2006 2007 2008 2009 I.-II.Q 2010
Real estate 0.1 98.2 1.85 21.4 18.5
 Open-ended funds 0.1 98.2 1.85 21.4 18.5
Special funds 14.5 6 0 0 0
Other* - - - - -
Total 14.6 104.2 1.85 21.4 18.5
At the end of the first half-year Slovak market of non-UCITS funds consisted of four special retail funds and
one s pecial f und f or i nstitutional i nvestors. I n t his f unds c ategory was no ticed abo ve s tandard d ynamics
increase of Net Assets 15.3%. F rom these r easons the market share of non-UCITS funds slightly rose up
5.3% of the total home domiciled assets under management.
Special real estate funds make more than 87% of total Net Assets of non-UCITS funds. In Real estate funds
rose up Net Asset on 18%. This increase was principally caused by the tide of new investments but the
overestimation of retail assets in portfolios after recovery phase in retail sector as well.
4.1 Regulatory developments:
During the first half-year 2010 these legal measures were issued with direct or indirect impact on fund and
asset management:
- Decree of National Bank of Slovakia (NBS) for the way to prove fulfillment conditions to license
for running activities of individual financial agent and to license for running activities of financial
consultant
- Decree of N BS of pr ofessional ex amination a nd professional examination with certification f or
purposes Financial Mediation and Financial Consulting Act
4.2 Tax rules VAT and double tax treaties:
During the first half-year 2010 we did not register any new tax rules or tax rates that could have a direct or
indirect impact on investors in investment funds or on fund management.

During the first half-year 2010 we did not register any new regulation or voluntary initiatives relating to the
governance of Management Company.
The gov ernance of Mana gement C ompany i n fund management c ompanies is c arried o ut b y t he l ocal
authority – National b ank of S lovakia, according t o t he Act o n c ollective investment. Mem bers of S lovak
Association of Asset Management Companies are providing very comprehensive information on daily,
weekly basis. All information is open for everybody via newspapers and web pages.
Slovak A ssociation of A sset M anagement C ompanies and s ome of i ts m embers acceded to a C orporate
Governance Codex in the past, which was issued by Central European Corporate Governance Association.
6. Fund Governance
6.1. Standards (fund classification, fund processing, risk disclosure, etc.)

In order to respect the investment tools valuation rules (self-regulation) there was a process of comparing the
debt securities pricing, as well as the structured products of bond type in portfolios of home-domiciled funds
carried out on a regular basis over the first half-year 2010.
This activity was affected by the application of new decree of NBS about the way to determine property value
in mutual fund in practice.
Keeping advertising and promotion rules by members of the Association was continuously controlled by the
Ethic Committee of the Association
6.2 Distribution (distribution of foreign funds, financial advice, disclosure of fees, etc.)
In t he f irst ha lf-year 2 010 A sset m anagement c ompanies as well as bank s and d istribution c ompanies
customized their processes in accordance with new Act on financial mediation and financial consulting. The
Act c aused s ubstantial c hanges i n structuralizing f inancial c onsulting and m ediation, i n d uties of i ndividual
subjects, in registration and in doing examinations and another education.
7. Product developments.
Over the first half-year 2010 was launch, 1 Equity fund and 1 Balanced Fund.
The association’s lobbying activities in the first half-year 2010 focused mainly on participation of amendment
of decrees and acts mentioned in paragraph 4.1.
The Association also issues regular daily, weekly and monthly reports on national investment funds industry.
The Association organized in co-operation with Czech Association AKAT, big open conference Next Steps in
Asset management 2010 for professionals from asset management and brokerage companies and several
press conferences covering latest trends in the market of collective investment.
In January 2010 Slovak Association of Asset Management Companies in co-operation with the editor of the
biggest economical journal organized selecting and awarding esteems for domestic and foreign mutual funds
- Top Fund Slovakia 2009 in some categories. Slovak Association of Asset Management Companies
undertook skilled guarantee for creation propositions and for information database with data about mutual
funds.
IIFA CONFERENCE – CHILE OCTOBER 2010
COUNTRY REPORT – SOUTH AFRICA
SUBMITTED BY ASISA
CONTENT
A. Domestic Economic Developments
B. Monetary Developments, Interest Rates and Financial Markets
C. The Financial Services Industry
1. Regulatory Framework and Industry Structure

2. ASISA and ASISA Members and Regulated Savings Pools
3. Industry Statistics
D. Policy and Regulatory Initiatives
1. Prudential
2. Market Conduct
P L Campher P Dempsey
CEO Deputy CEO
1
IIFA CONFERENCE – CHILE OCTOBER 2010
Country Report – South Africa
A. Domestic Economic Developments
Domestic Output
Growth in the South African economy gained further momentum in the opening months of 2010
as dom estic ac tivity became more c losely al igned with improving gl obal economic conditions.
Real gross domestic product increased at an annualized rate of 4,6 per cent in the first quarter of
2010 following an increase of 3,2 per cent attained in the fourth quarter of 2009. The enhanced
performance in the first quarter could be attributed to firmer increases observed in real output of
the primary and tertiary sectors, alongside a further solid albeit somewhat slower rate of increase
in t he r eal v alue ad ded b y t he s econdary s ector. G rowth i n t he r eal v alue add ed b y t he no n-
agricultural s ectors ac celerated f rom an ann ualized r ate of 3, 7 p er c ent in t he f ourth quarter of
2009 to 4,4 per cent in the first quarter of 2010.
Measured over four quarters, real economic activity posted positive growth in the first quarter of
2010 following f our c onsecutive quarters of c ontraction. T his improved economic per formance
was supported by higher consumer and business confidence levels during the period.
Having increased at an annualized rate of only 0,9 per cent in the fourth quarter of 2009, the real
value added by the primary sector advanced at a rate of 11,8 per cent in the first quarter of 2010.
The growth in the first quarter could be attributed to increases in the real value added by both the
agricultural and the mining sectors.
Real gross domestic expenditure
Growth i n a ggregate r eal gross dom estic ex penditure ou tpaced gr owth in r eal gr oss dom estic
production b y a s ubstantial m argin i n t he f irst quar ter of 2010 – growth i n r eal gr oss do mestic
expenditure accelerated from an annualized rate of 4,9 per cent in the fourth quarter of 2009 to
12,1 per cent in the first quarter of 2010, as all major expenditure components registered
improvements.
2
Following an increase of 1,6 per cent in the fourth quarter of 2009, growth in real final
consumption ex penditure by households ac celerated markedly t o an annualized r ate of 5, 7 per
cent in the first quarter of 2010. The brisk expansion in real outlays by households was evident in
all the spending categories, except for spending on services. Household expenditure appears to
have been positively influenced by several factors, including an acceleration in growth rate of real
disposable i ncome, t he r educed c ost of c redit as a result of l ower i nterest r ates, r elatively low
inflation, rising confidence levels, and an improvement in households’ net wealth as the prices of
real estate and other assets continued to rise.
Gross saving
After i ncreasing s teadily f rom 14, 9 per c ent i n t he f irst quar ter of 2009 to 16,3 per c ent in t he
fourth quar ter, the r atio of gr oss s aving t o gr oss dom estic pr oduct d eclined s lightly t o 1 6,0 p er
cent in the first quar ter of 2010. This deterioration was due to a decline in the savings r atio of
both t he c orporate a nd h ousehold s ectors, while t he s aving r atio of t he general g overnment
remained broadly unchanged.
Whereas the national saving ratio declined marginally, the utilization of foreign capital increased
markedly from a low of 2,9 per cent of gross domestic product in the final quarter of 2009 to 4,6
per cent in the first quarter of 2010. The turnaround of fixed investment to positive growth and
the m uch s lower depletion of i nventories i n t he f irst quar ter of 2010 nec essitated a greater
reliance on foreign saving, given the inertia in domestic saving.
3
Prices
Low g lobal i nflation, t he a ppreciation i n t he ex ternal v alue of t he r and and progress made i n
containing production costs helped to restrain inflationary pressures in the domestic economy in
the first qu arter of 201 0. Quarterly producer prices for domestic output increased at an
annualized rate of 4,0 per cent in the first quarter of 2010 compared with an increase of 0,4 per
cent in the fourth quarter of 2009. Headline consumer price inflation, however, decelerated from
an annualized rate of 5,0 per cent to 3,3 per cent over the same period.
Foreign-owned assets in South Africa
Foreign di rect investment i nto S outh A frica s hrank further i n t he f irst quar ter of 2010 when t he
inward movement of direct investment capital amounted to R3,7 billion compared with an inflow of
R4,0 billion in the fourth quarter of 2009. Non-resident investors continued to expand their direct
equity holdings i n S outh African i nvestment ent erprises. F oreign par ent c ompanies i ncreased
their loan exposure to South African subsidiaries over the same period.
Foreign portfolio investors continued to increase their holdings of both South African equity and
debt s ecurities d uring t he f irst quar ter of 2010. O n a net basis, i nward portfolio i nvestment
amounted to R44,1 billion in the first quarter of 2010 compared with an inflow of R41,2 billion in
the fourth quarter of 2009. Net purchases of South African debt securities constituted about 73
per cent of the increase in portfolio investment liabilities over the period. Apart from transactions
through the Bond Exchange of South Africa, the increase in portfolio liabilities also reflected the
issuance of a US$2,0 billion bond in the international capital markets by the National Treasury.
4
5
B. Monetary developments, interest rates and financial markets
Money supply
The progressive economic recovery which gained momentum in the two quarters to March 2010
is yet t o be m irrored i n t he m onetary s tatistics. T he r ecent r ecession c urtailed t he gr owth of
banking-sector as sets b y elevating i mpaired ad vances, r einforcing t he us e of m ore s tringent
lending criteria and bringing about a cautious stance by the public towards the use of credit. The
current s ubdued behaviour of t he m onetary and c redit a ggregates s uggests t hat t he observed
economic recovery may have relied on greater synchronization of income and expenditure, and
funding mechanisms outside the banking sector.
The declining trend in the growth rate of the M3 levelled out in eary 2010. Twelve-month growth
in M3 r eached a record low of 0,5 per cent i n February 2010 before r ecovering t o 1,5 per c ent
and 1,7 per cent in March and April, respectively. However, on a quarter-to-quarter basis growth
in M3 d ecelerated f rom 4, 1 per c ent i n t he t hird quarter of 200 9 t o 1, 7 per c ent in t he f ourth
quarter of 2010. The growth in M3 continued to be constrained by subdued confidence levels of
the household and corporate sectors, associated with lingering doubt about the health of
household, corporate and sovereign balance sheets and finances.
Interest rates and yields
At its March 2010 meeting, the MPC decided to reduce the repurchase rate by 50 basis points to
6,5 per c ent. A t t hat p oint t he i nflation out look and r isks per ceived b y t he M PC had i mproved
significantly c ompared w ith t he s ituation a t t he pr evious f our m eetings, pr oviding s cope f or a
moderate reduction in the repurchase rate to reinforce the sustainability of the domestic economic
upswing. A large out put gap, f airly m odest pac e of gr owth in d omestic ex penditure, r educed
uncertainty associated w ith el ectricity t ariff i ncreases, t ogether w ith an a ppreciation in the
exchange value of the rand and relatively stable international oil prices were some of the factors
contributing t o the improved i nflation o utlook. S ince t he f irst r eduction i n the po licy r ate in
December 2008, the repurchase rate has been lowered by a cumulative total of 550 basis points.
Subsequently a t t he May 2010 MPC m eeting it was dec ided t o k eep t he p olicy r ate at 6, 5 per
cent, since the inflation outlook had remained broadly unchanged.
6
Share market
The historical dividend yield on all classes of shares on the JSE trended downwards from 4,8 per
cent i n N ovember 2008 t o a low of 1, 9 per c ent in April 2 010 – its l owest level i n a decade –
before increasing somewhat to 2,1 per cent in May. The earnings yield on all classes of shares
also reached a record low of 4,8 per cent in February 2010, before increasing to 5,6 per cent in
May. All t he ab ove ex treme out comes w ere r elated t o t he h igh l evels of s hare pr ices as t his
market r ecovered f rom t he i nternational f inancial c risis, w hile t he r ecovery i n r eal ec onomic
activity was still lagging as reflected by low earnings and dividend payments.
7
C. The Financial Services Industry
1. Regulatory Framework and Industry Structure
SA FINANCIAL MARKETS
Governor of Reserve Bank Minister of Finance
Reserve Bank National Treasury
Registrar of Banks Financial Services Board
Short Term
Local & International Banks JSE Financial Retirement
Insurers
Banking Association South Africa SRO Institutions Funds
ASISA SAIA
IRF
members members
International Local Banks
Banks
CSD
CSDP’s Strate
SRO
JSE: JSE Securities Exchange

SRO: Self Regulatory Organisation
ASISA: Association for Savings and Investment SA
SAIA: SA Insurance Association
IRF: Institute of Retirement Funds
CSD: Central Securities Depository
CSDP’s: Central Securities Depository Participants
8
2. ASISA and ASISA Members & Regulated Savings Pools
ASISA has 151 m embers r epresenting Lo ng T erm Insurers, I nvestment Man agers, M ulti
Managers, C ollective I nvestment S cheme Man agers and Fund S upermarkets. A SISA
members manage a very large percentage of the regulated savings pools of South Africa –
R3,0 trillion out of R3,8 trillion.
Member institutions represented on the Board of ASISA can only do so by way of their most
senior executive.
The leaders of the industry thus drive the activities of ASISA at a strategic level.
Technical i ssues are dealt w ith v ia the s even Board C ommittees w hich are c onstituted b y
subject matter experts from within the membership. Each Board Committee is chaired by a
director and t he ac tivities of t he Board C ommittee are c o-ordinated a nd driven b y Senior
Policy Adviser who is a subject matter expert employed by ASISA.
ASISA has a staff compliment of 26 most of whom have many years of industry experience.
9
Main contractual savings flows, 2009
Long-term insurers, official and private pension funds
R bn
Premiums and retirement fund
Contributions received: 320
+
PLUS
Investment income 160
-
MINUS
Benefits paid out 330
- Stock of assets:
MINUS
Administrative expenses Retirement
Tax and dividends paid 40 Funds and long-
Term insurers
=
EQUALS R3 000 bn
Domestic current income surplus 110
10
3. Industry Statistics
3.1 CIS Statistics
12 months ended 31/12/2009
Assets under management in the South African Collective Investment Schemes

Industry had grown to R786 billion by the end of 2009. As at the end of 2009 the
industry offered 904 funds.
In 2009 the CIS industry attracted record net inflows of R96 billion.
The vast majority of the net inflows went into:
• Asset Allocation Funds: 31%

• Equity Funds: 30%
• Money Market Funds: 26%
• Fixed Interest Funds: 23%
6 months ended 30 June 2010.
Assets under management in CIS industry as at 30 June 2010 amounted R824

billion. As at this date the industry offered 919 funds.
Net inflows for the six month period to 30 June 2010 amounted to R44 billion.
The bulk of the inflows went into:
• Money Market Funds: 43%

• Asset Allocation Funds: 42%
• Equity Funds: 3%
• Fixed Interest Funds: 3%
Asset Allocation 31 December 2008 – 30 June 2010
As c an be s een f rom t he di agrams on page 1 3 the asset al location i n t he C IS

industry i s pr edominately exposed t o interest r ate i nvestments – 52% as at 30
June 2010.
The exposure to asset allocation funds (flexible and prudential) was 24% as at 30
June 2010.
Direct exposure to shares listed on the JSE Securities Exchange was 24% as at
30 June 2010. (Equity and Real Estate).
11
12
13
3.2 Long Term Insurance: Industry Statistics
Inflows 6 months June 2010 Year to 31/12/2009

R bn R bn
Total Individual Premium 62,8 115,9

Income
Total Group Premiums 32,3 67,7
(Group Schemes Retirement
Funds)
Investment Income 27,7 64,1
Total Inflows 122,8 247,7
Outgo – Benefits 6 months to 30/6/2010 Year to 31/12/2009

R bn R bn
Individual 49,8 95,0

Group 40,8 80,5
Total Outgo 90,6 175,5
Individual (Net Inflows) 6 months to 30/6/2010 12 months 31/12/2009

R bn R bn
Inflow 62,8 115,9

Outgo 49,8 95,0
Net 13,0 20,9
Outgo% of Inflow 79% 82%
Group (Net Flows) 6 months to 30/6/2010 12 months 31/12/2009

R bn R bn
Inflow 32,3 67,7

Outgo 40,8 80,5
Net (8,5) (12,8)
Outgo % of Inflow 126% 119%
Assets At 30/6/2010 31/12/2009

R bn R bn
Assets 1 140 1 129

Liabilities 1 037 1 026
Surplus 103 103
Capital Adequacy 33 31
Requirement (CAR)
Excess Assets 70 72
14
Asset Split % %
Equity 46 45
Listed 38 38
Unlisted 8 7
Bonds 13 13
Corporate Bonds 9 9
Property 6 5
Foreign 9 10
Call/Cash 12 12
Other 5 6
Although flows over the periods measured have been substantial, there have also been major outflows.
Individual Business: As a r esult of t he f inancial c rises and t he r esultant r ecession, lapses and s urrenders
increased during 2008 and 2009. This trend has now improved with lapses and surrenders decreasing in the
first the six months of 2010.
Group Business: Outflows have consistently been higher than inflows over the periods measured. This has
been as a r esult of j ob l osses and t he pa yment of retrenchment benef its and di scontinuances due t o the
recession. During the first six months of 2010 this trend seems to be continuing, but we are hopeful with the
increase in economic activity that this trend will reverse in 2011.
Assets: The Long Term Insurance industry is in good shape. The excess assets are greater than two times
the required capital adequacy ratios.
D. Policy and Regulatory Initiative
South Africa is a member of the G20 and is also represented on the Financial Stability Board.
All regulatory and policy initiatives in South Africa must be seen in the light of recommendations for financial
sector reform emanating from the G20.
1. Prudential
1.1 Solvency Adequacy Management (SAM)
In t he c ontext of t he gl obal f ramework ( Solvency I I) t he R egulator t ogether with i ndustry is

working to implement Solvency II adapted for South African circumstances (SAM) by 2014.
1.2 Regulation 28 (Pensions Fund Act)
Regulation 28 outlines the investment parameters for retirement funds. Industry together with the
Policy Maker (National Treasury) and the Regulator are redrafting these investment parameters.
This should be completed by the end of 2010.
1.3 Collective Investment Schemes Control Act (CISCA)
• Review and rewrite of the Act. This process has already started.
• Rewrite of Notice 1503 (UCITS III alignment). Should be completed by mid 2011.
• Third P arty F unds. Industry i s w orking w ith the R egulator t o r eset t he par ameters and
rules within which Third Party Funds will be allowed.
15
1.4 Over the Counter Derivative Contracts (OTC’s)
The Regulator has convened a task force to look at regulation with regard to OTC’s. Industry is
represented on this task group.
Currently e quity over t he counter d erivatives ha ve been accommodated w ithin t he “ Can D o

Option” structure on the JSE Securities Exchange (JSE).
These options are valued, margined, market-to-market and traded on the JSE – approximately 10
million contracts.
The task group is also looking at accommodating the vast majority of interest rate contracts within
the “Can Do Option” framework on the JSE.
For those contracts that cannot be accommodated, the concept of a centralized OTC register is
being explored.
1.5. Hedge Fund Regulation (Product Level)
Hedge Fund managers are licensed and regulated in terms of the Financial Advisors and
Intermediaries Services Act (FAIS).
Currently t he Policy M aker, Regulator a nd ASISA ar e ex ploring a r egulated pr oduct within t he

Collective Investment Schemes Control Act (CISCA) utilising UCITS III aligned portfolios.
1.6 Rating Agencies
In line with international initiatives the process of regulating Rating Agencies is underway.
2. Market Conduct
2.1 Treat the Customer Fairly (TCF)
16
The R egulator together with I ndustry are working t ogether t o ensure t hat the life c ycle of al l
products is managed in a way that places the interests of the customer first. A road map is to be
published by the end of 2010.
The Regulatory Framework to be implemented by 2012.
2.2 Conflicts of Interest
• Increased Disclosure Requirements – 19/07/2010

• Prohibitions (General) – 19/10/2010
• Conflict of Interest Policy – 19/04/2011
2.3 FAIS Fit and Proper
In terms of the Financial Advisory and Intermediary Services Act (FAIS) additional examinations
for intermediaries, key individuals and representatives will be introduced to determine whether fit
and pr oper r equirements ar e met. These ex aminations will t est k nowledge of t he app licable
regulation and the products and will be a pre-requisite for licencing. Examinations to be
concluded by end of 2012.
17
Spanish Association of Investment Funds and Companies
XXI st IIFA CONFERENCE

17th October – 21 st October, 2010.CHILE
Member Report: SPAIN
1. ECONOMIC AND FINANCIAL BACKGROUND.
2009 was pr edicted t o c ontinue as a v ery t urbulence year i n S panish dom estic ec onomy. I t was not unt il
September 2008 , when the eur opean policy m easures were implemented t o a s mall number of c ountries
(Spain and Italy). In both countries, the measures were dedicated to households (tax rebates) reform of the
taxation system to support specific sectors such as housing. From September, as the financial crisis began
to af fect s eriously the ec onomy, m any c ountries a nnounced s pecific m easures: G ermany, S pain, I taly,
Netherlands, U nited K ingdom, S weden. T he E uropean C ommission pr oposed a 200 bi llion e uros s timulus
plan to be implemented at the European level by the countries. At the beginning of 2009, the UK and Spain
completed their initial plans, while Germany announced a new plan.
With the exception of United States, in the rest of the world the GDP began contracting in the third quarter of
2008, and by early 2009 was falling at an annualised pace not seen since the 1950s. Also capital
investment, which w as in dec line y ear-on-year s ince t he f inal qu arter of 2006, matched t he 1957 –58 p ost
war record in the first quarter of 2009. The pace of collapse in residential investment picked up speed in the
first quarter of 2009, dropping 23.2% year-on-year, nearly four percentage points faster than in the previous
quarter.
In Spain, unemployment rate reached 18.7% (37% for youths) in May 2009 — the highest in the Euro zone
and the housing sales a nd construction declined dramatically. T he S panish economy gr ew by 0.1% in the
first quar ter of 201 0, t he f irst pos itive growth i n 2 years. T his i s mostly at tributed t o an increase of pub lic
demand, while private demand dropped. The GDP growth for all of 2010 is predicted to be slightly negative.
The budget d eficit has be en gr owing r apidly s ince t he S panish go vernment i ntroduced h igh s pending on
public works and unemployment benefits to combat the recession, though the debt-to-GDP ratio is low due
to a surplus maintained several years before 2008. Market uncertainty and pressure from the EU, and IMF,
led the government to introduce austerity reforms in May 2010 that reduced government employees'
salaries, froze pension funds, and suspended public works. This legislation is designed to reduce the deficit
to 6% of G DP i n 201 1, and Spain h as pl edged t o r educe i t t o b elow 3% by 2 013. In m id-June, t he
government i ssued a decree i mplementing labour market reform t o r educe rigidity i n h iring and f iring
workers.
Due largely to outstanding bad loans to the construction sector, Spanish regional saving banks (cajas) have
been undergoing a series of mergers to increase liquidity and put the sector on a sound footing.
- Page 1 of 8 -
PRÍNCIPE DE VERGARA, 43, 2º ♦ 28001 MADRID ♦ TEL.: 00 34 914314735 ♦ FAX: 00 34 915781469

E-MAIL: inverco@inverco.es ♦ WEBSITE: www.inverco.es
2. DATA.
EVOLUTION BY CATEGORIES
ASSETS % ASSETS VARIATION NET SALES

Assets and net sales
2010 Jan- 2010 Jan-
(Billion Euros) Dic-07 Dic-08 Dic-09 Jun-10 2009 2009
Jun Jun
MONEY MARKET FUNDS 37,3 34,9 13,5 9,6 -61% -29% -4,7 -2,7
BOND FUNDS 79,5 70,7 86,0 76,2 22% -11% -4,0 -10,2
Domestic 60,9 48,7 62,8 50,8 29% -19% -3,5 -12,6
International 1,0 0,7 1,3 2,1 90% 57% 0,6 0,6
Guaranteed 17,6 21,3 21,8 23,3 2% 7% -1,1 1,8
BALANCED 52,7 36,3 42,7 37,9 18% -11% 2,3 -0,2
Domestic 14,1 6,6 8,4 8,4 27% 0% 1,4 -0,4
International 38,6 29,7 34,3 29,5 16% -14% 0,9 0,2
EQUITY FUNDS 99,9 61,5 51,5 50,6 -16% -2% -5,2 0,6
Domestic 6,4 2,7 3,0 2,0 11% -34% -0,1 -0,2
International 51,3 28,7 24,5 25,1 -15% 3% 0,9 1,3
Guaranteed 42,2 30,2 24,0 23,5 -20% -2% -6,1 -0,5
TOTAL 269,4 203,4 193,7 174,4 -5% -14% -11,6 -12,5
3. KEY TRENDS IN FLOWS AND ASSETS UNDER MANAGEMENT.
For the last 18 months, the Spanish UCITS industry’s assets suffered a decrease of 14% ending with
total assets EUR 174,4 billions, due to the fact that there have been net redemptions (almost a decrease of
a 25% in t he l ast year a nd a h alf) c ontrary t o t he market appr eciation t hat result i nto p ositive m arket
performances. Throughout 2009 t ill j une 2 010 I bex-35 i ndex r egistered a n 30 % i ncrease which al most
compensated previous year dec rease. T his i s a r esult of i nvestor c onfidence r ecovering, n evertheless t he
credit crunch crisis, the world financial situation and most of all the tighter credit conditions continue affecting
the industry as a global.
Net r edemptions increased f rom –57,6 B illion Euros i n 2 008 t o –12,5 i n J une 2010. E venthough in a 1 8
months per iod i t c an be en s een as an improvement m ainly d ue t o the f act t hat investors were getting
confidence with financial markets, it is also true that in this period, the total amount of net sales was –24,1
billion euros. T his i s d ue t o t he f act t hat o ther f inancial products, s uch as dep osits, were obtaining m uch
higher performances in the short and medium term. And as last year occurred, investors preference radically
changed from global funds which, as a result of their flexible strategy could obtain higher returns while taking
on greater risk, and focused on guaranteed bond funds.
a) EQUITY FUNDS:
- Assets amounted Euro 50,6 Billion, compared with Euro 61,5 Billion at the end of 2008. This
decrease was basically based on outflows in domestic Equity Funds (-4,6 billions), due to an
uncertain and u nstable e quity m arket. P erformances w ere pos itive i n m ost of equi ty
categories.
b) MONEY MARKET FUNDS:

- For t he last 18 m onths assets highly decreased to almost 72%, d ue to 7,5 billion outflows
because performances remained very low. In 2009 assets decreased from Euro 34,9 Billion
to Euro 13,5 billion, mainly based on transfers from Money Market Funds to Bond Funds due
to a r eclassification in s tatistics introduced b y Spanish S tock E xchange Commission
(CNMV) and the rest was due to outflows as already explained.
- Page 2 of 8 -

c) BOND FUNDS:
- In J une 201 0 as sets a mounted E uro 76, 2 B illion, c ompared w ith E uro 70, 7 B illion du e t o
positive performances and the continue exchange effect produced by the new regulation and
classification of t hese pr oducts w ith h igher i nvestment r estrictions i ntroduced f or Mone y
Market Funds. Outflows registered in these funds totalled 14 billion euros.
d) BALANCED FUNDS:
- From D ecember 2008 t ill June 2 010, t he as sets i ncreased f rom E uro 36, 3 B illion t o E uro
37,9 Billion, that is to say an increase of 4%, mainly due to better market performances, and
net subscriptions of 2,1 billion euros in the last 18 months.
4. REGULATORY AND SELF REGULATORY DEVELOPMENTS (INCLUDING TAX)
Regulatory developments, with direct or indirect impact on fund and/or asset management, are:
► Amendment on CIS Regulations.
It has been a pproved t he Royal Decree 749/2010 of 7 J une 2 010 t o am end C IS r egulations t hat
include or reform, among others, the following matters:
- “Side pockets” (development of requirements related to creation of a new CIS or compartment

of C IS, t hat will g ather i lliquid instruments of t he or iginal C IS, a nd a pplication of more f lexible
rules on illiquid assets management to the new CIS or compartment of CIS).,
- Investment of CIS (increase of el igible assets, r elaxation of c ertain d iversification a nd
investment limits and hardening of other diversification limits)
- Reinforcement of obligations in case of delegation of functions by CIS management
companies and self-managed CIS.
- Liquidation procedure of Real Estate Investment Funds (maximum management fees, public
periodical information and CIS depositary obligations).
- Marketing of Hedge Funds (it is not required an initial minimum investment of 50.000 € in case
of subscription of Hedge Funds by professional clients,)
- Marketing of CIS units and shares by asset management companies (asset m anagement
companies ha ve t o c omply with r ules r eferred t o s uitability and a ppropriateness as sessment
when they market CIS shares and units).
- Admission of certain practices related to fees (provided that it was disclosed in CIS
prospectuses, as set m anagement c ompanies ar e allowed t o r efund m anagement fees t o
investors and to charge intermediation fees that include services of financial analysis).
► Significant holdings in management companies.
Law 5/2009 of 29 June 2009 amended certain financial legislation so as to reform the legal regime
governing significant holdings in financial institutions. It was enacted to transpose to Spanish
law D irective 20 07/44/EC of t he E uropean Parliament and of t he C ouncil of 5 S eptember 2007
amending certain EU directives as regards procedural rules and evaluation criteria for the prudential
assessment of acquisitions and increase of holdings in the financial sector.
This Law am ended Law 35/2003 of 4 November 2003 on Collective Investment Schemes (CIS) to
apply the s ame ne w r egime for s ignificant h oldings i n credit i nstitutions, i nvestment f irms and
insurance companies and for significant holdings in management companies.
The implementing regulation, regarding significant holdings in management companies, is included

in Royal Decree 1818/2009 of 27 November 2009 that amended the Regulations of CIS approved by
Royal Decree 1309/2005 of 4 November 2005.
- Page 3 of 8 -

Finally, t here is a dr aft C ircular o n i nformation t hat pot ential acquirer s hould s end t o Spanish
Securities Market Commission (CNMV) in order to asses acquisitions of significant holdings in CIS
asset management companies and increases of holdings in CIS asset management companies.
► Content of the half-yearly reports on performance of the monitoring and supervisory function of
CIS depositaries
Circular 3/ 2009 o f 2 5 M arch 20 09, approved by CNMV, s ets o ut t he content of the half-yearly
reports that CIS depositaries shall prepare on the results of their monitoring and supervisory
functions.
CIS depositaries s hall r eport an y incidents i n t he valuation of as sets, any c onciliation differences
between s ecurities and b alances, an y o ther i ncidents r egarding net as set value and a ny n on-
compliance with legal limits and ratios, ether settled or pending settlement as at the last day of the
corresponding half-year period.
The hal f-yearly reports m ust be s ubmitted t o C NMV, pr ior to the l ast c alendar day of t he s econd
month following the period to which the reports relate.
► Yearly audit report on customer asset protection.
Circular 5/2009 of 25 November 2009, approved by CNMV, sets out the content of the yearly audit
report on customer asset protection and the criteria to be followed by external auditors in
preparing their report.
This report must be prepared by external auditors of entities included within the scope of the Circular
(among others, CIS management companies that provide services of safekeeping and administration
of C IS s hares and uni ts and s ervices of di scretionary and i ndividualize por tfolio m anagement
according t o a c lient order t hat c onfers di sposal po wer o f t hat c lient’s f inancial instruments and
resources).
The ex ternal au ditor has t o s end t he au dit r eport t o CNMV i n t he f irst f ive m onths of t he f inancial
year.
► Internal control of CIS management companies and self-managed CIS.
Circular 6/2009 of 9 D ecember 2009, ap proved by CNMV, s ets out i n det ail t he organizational
requirements and internal control obligations that have to be applied by CIS management
companies and by self-managed CIS.
The C ircular addresses the responsibility of t he board of directors of the companies in the
implementation an d m aintenance of i nternal c ontrol pr ocedures a nd policies and of an i nternal
structure and organisation which ensure the proper working of risk management functions. Also, the
content of the internal control policies and procedures manuals of the companies is specified.
The C ircular r equires t he creation and m aintenance of t hree i nternal c ontrol u nits which f unction
independently of each other: one devoted to risk management, another to regulatory compliance and
a third to internal audit. The Circular sets out exhaustively the internal organization requirements, the
functions to be performed by each of the aforementioned units and the requirements which may be
applicable to the delegation of their respective functions.
The C ircular pr ovides t hat C NMV m ay r equire t he c ompanies t o r emedy deficiencies i n

administrative and accounting organization and in internal control procedures, and to provide
appropriate resources for the exercise of their activities.
A final r ule es tablishes a deadline of 31 D ecember 2010 f or t he c ompanies to ad apt t heir c ontrol
systems to the requirements set by the Circular.
- Page 4 of 8 -

► Categories.
Circular 1/2009 of 4 February 2003, approved by CNMV, established various financial CIS
categories based on investment policy. For further information, please see section 7.
► Tax rules
Law 26/2009 of 23 December 2009 on the State Budget for 2010 and Royal Decree 2004/2009 of 23
December 2009 raised taxes regarding saving incomes that apply in c ase of t ransmission or
redemption of CIS shares and units and in case of distribution of CIS dividends, and their
respective withholding.
Law 11 /2009 of 26 O ctober 2009 amends different tax Laws applying Real Estate Collective
Investment Schemes. Owing to this reform, Real Estate CIS can benefit from a special tax regime
without fulfilling a minimum investment in certain kind of properties, as it was required previously.
► Advertising of financial products and services
Order E HA/1717/2010 of 11 J une 2010 r egulates a nd c ontrols ad vertising on f inancial pr oducts

(including, among others, CIS units and shares) and on financial services (including, among others,
investment an ancillary services on financial products and CIS management).
It es tablishes r ules, principles and g eneral c riteria on advertising an d r equires t hat ent ities t hat
provides i nvestments s ervices must hav e c ommercial c ommunication’s pol icies i n r elation t o s uch
services. Additionally, it includes a regimen of advertising control.
Specifically related to CIS, it provides that:
- Certain communications, regulated by that Order, are considered advertising, although, due to
any circumstance, in that moment it would not be possible immediate subscription or
acquisition of CIS units and shares.
- It will b e c onsidered advertising ac tivities, s ubject t o t hat O rder, t hose c ommunications

addressed t o at tract t he public with r espect t o C IS m anagement or marketing ac tivities,
although such communication would not be referred, individually, to a concrete CIS.
- Promotional ac tivities or a dvertising c ampaigns of s ubscription or acquisition of C IS un its or

shares cannot be begun before such CIS are registered in CNMV official registers.
► Standardized internal code of conduct.
In or der t o obt ain an d k eep t heir aut horization, C IS management c ompanies and s elf-managed
investment CIS must have an internal code on conduct.
INVERCO suggested and worked on a standardized internal code on conduct that has been
approved by CNMV, last 14 May 2010. This standardized i nternal code on conduct is inspired in
the c onduct r ules s et o ut i n t he S ecurities M arket L aw implementing M IFID. I t includes a
development of obligations on personal transactions, market abuse, conflicts of interest, connected
transactions, i nvestment i n non -traded s ecurities, s eparation f rom C IS d epositary, preparation of
investment and f inancial analysis r eports an d c reation of a uni t t hat m onitors i nternal c ode o n
conduct.
1
5. CORPORATE GOVERNANCE - MAJOR DEVELOPMENTS
The term "corporate governance" refers to the governance by funds of companies in which the funds invest, such as
1
the exercise of a fund's voting rights in a company whose shares are held by the funds.
- Page 5 of 8 -

Obligation to exercise fund's voting rights in a portfolio company was established by article 46.1.d)
Law 35/2003 of 4 November 2003 and article 81.1.i) Royal Decree 1309/2005 of 4 November 2005.
According t o t hese ar ticles, t his obl igation m ust be c omplied b y C IS as set management c ompanies i n
relation to securities integrated in funds that are managed by them, providing that some specific conditions
are met.
Rules on market abuse must be complied by CIS according to article 80 Law 24/1988 of 28 July 1988 on the
securities m arket. Standardized internal code on conduct, approved by CNMV at the proposal of
INVERCO, includes a development of obligations on, among others, market abuse (please, see section
4).
2
6. FUND GOVERNANCE
Internal c ontrol of C IS m anagement c ompanies and self-administered C IS i s r egulated b y ar ticles 43 a nd

11.2 Law 35/2003 of 4 November 2003 and articles 73 and 12.1 R oyal D ecree 1309/ 2005 of 4 November
2005 an d t heir de velopments i n c ertain aspects. Circular 6/2009 of 9 December 2009, approved by
CNMV, sets out in detail the organizational requirements and internal control obligations that have to
be applied by CIS management companies and by self-managed CIS (please, see section 4).
Prevention of conflicts of interest, requirement for connected transactions or separation from CIS depositary
are m atters r egulated b y Law 35 /2003 of 4 N ovember 200 3 an d 12. 1 R oyal D ecree 130 9/2005 of 4
November 2005. Additionally, standardized internal code on conduct, approved by CNMV at the
proposal of INVERCO, includes a development of obligations on, among others, personal
transactions, conflicts of interest, connected transactions, investment in non-traded securities,
separation from CIS depositary, preparation of investment and financial analysis reports and
creation of an unit that monitors internal code on conduct (please, see section 4).
Circular 1/ 2009 of 4 F ebruary 2003, ap proved b y C NMV, es tablished various financial CIS categories
based on investment policy. The Circular reduced the number of existing investment policies, qualified the
definitions of t he r emaining ones t o adapt t hem t o t he c urrent s ituation of t he sector and c ontains di verse
provisions designed to provide investors with clear, concise information on CIS’ investment policies.
The Circular includes a number of criteria for deciding to which investment policy category each CIS belongs
and provides that, when a CIS can be classified in two investment policy categories, it shall be deemed to
belong to that entailing the higher risk. If a CIS does not have a category in the new classification, CNMV
will, ex officio, assign it to a new investment policy category.
The new CIS categories are summed up in the following table:
Category Definition
Money market Absence of exposure to equity, forex or subordinated debt
Subscription and redemptions on a daily basis
[1]
Average maturity of the portfolio of less than six months.
Minimum 90% of t he t otal as sets invested in assets w ith a m aturity or r esidual
maturity less than 2 years
Absence of exposure t o a ssets w ith a maturity or r esidual m aturity gr eater t han 5
years
Absence of exposure to assets with a short-term rating under A2 or equivalent or to
non-rated assets issued by an issuer whose short-term rating is under A2.
(1)
Duration of FRN is calculated taking into account the period until the next adjustment.
Euro bond Absence of ex posure t o equity s ecurities an d t he C IS h as no t b een c lassified as
Money Market.
Maximum 10% exposure to foreign exchange risk.
The term "fund governance" refers to developments in the governance of funds, such as a change in the requirements
2
for independence of a fund's board.

- Page 6 of 8 -

Category Definition
International Absence of exposure to equity securities.
bond The exposure to foreign exchange risk may be higher than 10%.
Euro mixed Lower than 30% exposure to equity securities.
bond The s um of i nvestments i n equ ity s ecurities i ssued by ent ities l ocated out side t he
euro area and the exposure to foreign exchange risk shall not exceed 30%.
International Lower than 30% exposure to equity securities.
mixed bond The s um of i nvestments i n eq uity s ecurities issued by entities l ocated outside t he
euro area and the exposure to foreign exchange risk may exceed 30%.
Euro mixed Between 30% and 75% equity exposure.
equity The s um of i nvestments i n eq uity s ecurities issued by entities l ocated outside t he
euro area and the exposure to foreign exchange risk shall not exceed 30%.
International Between 30% and 75% equity exposure.
mixed equity The s um of i nvestments i n eq uity s ecurities issued by entities l ocated outside t he
euro area and the exposure to foreign exchange risk may exceed 30%.
Euro equity More than 75% equity exposure.
At least 60% exposure to equity securities issued by entities located in the euro area.
Maximum 30% exposure to foreign exchange risk.
International More than 75% equity exposure and the CIS has not been classified as euro equity.
equity
Passive CIS which r eplicate or reproduce an i ndex, including E TFs, and CIS w ith a specific
management CIS non-guaranteed return target.
Guaranteed CIS bac ked b y t he gu arantee of a t hird par ty a nd which guar antee t he i nvestment
fixed return plus a fixed return.
Guaranteed CIS backed by the guarantee of a third party and which guarantee the recovery of the
variable return initial investment plus a possible amount fully or partly linked to the performance of
equity instruments, foreign currency or other asset.
Additionally, it includes CIS backed by the guarantee of a third party which guarantee
the recovery of the initial investment and include an active management of a part of
their assets.
Partially CIS with a specific held-to-maturity return target linked to the performance of equity
guaranteed instruments, foreign currency or other asset, for which there is a guarantee of a third
party and which guarantee the recovery of a percentage less than 100% of the initial
investment.
Additionally, it includes CIS backed by the guarantee of a third party which guarantee
the recovery of a percentage less than 100% of the initial investment and include an
active management of a part of their assets.
Absolute return CIS which are m anaged with the objective ( not guaranteed) of ac hieving a c ertain
periodic return/exposure.
In or der t o reach this purpose, CIS use techniques s uch as absolute value, r elative
value, dynamic…
Global CIS whose i nvestment pol icy do es not f it i nto an y o f t he abov e i nvestment po licy
categories.
8. OTHER MAJOR ISSUES AND DEVELOPMENTS
► Draft Law to amend CIS Law.
It has bee n pu blished a draft Law to amend CIS Law that would reform rules for sanction. If th is
draft w as ap proved, i t would be ex tended pe ople and e ntities s ubject t o t he system of s upervision,
inspection and discipline and conducts that constitute violations of CIS Law. Additionally, it would admit
some new criteria to establish sanctions. Additionally, this draft Law would allow management
companies to market 3rd pillar pension plans.
► Draft Circular on derivative financial instruments.
- Page 7 of 8 -

CNMV p ublished a draft Circular on derivative f inancial i nstruments t hat w ould r egulate c alculation of
diversification limits, clarify requirements that certain derivative financial instruments must fulfill in order
to be considered eligible assets, increase eligible underlying assets and provide criteria for valuation of
derivative financial instruments.
► INVERCO activities.
Aside from its participation in every regulatory initiative undertaken during the public period and in many
conferences, INVERCO h as l aunched a ne w publication, r egarding t he t ax t reatment of s avings i n
Europe, and has collaborated closely with I IMV (Iberoamerican I nstitute for the Stocks Mar kets) i n t he
publication of a comparative survey of the Collective Investment Schemes in Latin America.
Additionally, I NVERCO has c reated a por tal c alled “ INVERCO obs ervatory”
(http://www.observatorioinverco.es/) with t he pur pose of s preading and ex plaining a dvantages t hat
Investment Funds and Pension Plans offer to investors.
- Page 8 of 8 -

24TH ANNUAL ASSEMBLY OF THE INTERNATIONAL INVESTMENT FUNDS ASSOCIATION
OCTOBER 2010, CHILE
MEMBER REPORT - SWEDEN
2009
Population (million) 9.3
GDP (USD billion) 424
Real GDP growth (%) -4.9
Inflation rate (%) 0.9
Unemployment rate (%) 8.5
Stock market capitalisation (USD billion) 473
Stock market capitalisation (% of GDP) 112
Bond market capitalisation (USD billion) 314
Bond market capitalisation (% of GDP) 74
Household gross savings ratio (%) 13.9
Household financial wealth (USD billion) 798
Average per capita financial wealth (USD) 85,403
The Swedish economy saw a (negative) GDP growth of minus 5 percent in 2009 due to the severe economic
downturn. The Swedish GDP figure (in USD) is h igher i n 2009 t han in 2 008 on ly as a r esult of t he
appreciation of the Swedish krona against the USD. For 2010 the economic growth in Sweden is predicted to
4.3 percent.
The total stock market value in Sweden increased in 2009 from USD 289 to USD 473 billion, corresponding
to 64 percent growth, (52 % when calculated in SEK). The stock market upturn has also continued in 2010.
At the end of June, the Swedish stock market had risen by another 10 percent.
Table 2: Total assets by fund type, US$ Billion
2009-12-31 2010-06-30 As a % of total

Equity funds 134,2 128,2 58
Balanced funds 37,6 37,3 17
Bond funds 22,9 23,1 10
Money Market funds 28,6 27,5 12
Other funds 6,8 5,9 3
TOTAL 230,0 222,1 100
The total fund assets in Sweden increased in 2009 from USD 160 to USD 230, mainly due to the sharp stock
market r ecovery bu t al so as a r esult of l arge net inflows i nto investment f unds dur ing t he year. The A UM
figure at the end of 2009 constitutes the highest year-end AUM ever recorded for Sweden.
Also i n 201 0 the t otal f und as sets ha ve increased. T his f act i s, ho wever, n ot apparent i n t he a bove t able
since the Swedish krona has weakened against the US Dollar in 2010 (January-June).
Worth noting is that equity funds constitute nearly 60 percent of the total fund assets in Sweden.
Table 3: Total net sales by fund type, USD Million

2009 2010 (Q1-Q2)
Equity funds 13 535 998
Balanced funds 3 082 2 400
Bond funds 2 567 2 147
Money Market funds -2 991 409
Other funds -29 -579
TOTAL 16 163 5 375
Total net sales of investment funds amounted to more than USD 16 billion in 2009, which represents the
largest net inflow ever recorded for a single year.
USD 13.5 billion, over 80 percent of the total net inflow, was invested in equity funds during 2009. Money
market fund recorded at the same time a net outflow of USD 3 billion. This reveals that fund investors in
2009, in contrast to 2008, largely increased their willingness to invest and especially towards investments in
riskier assets. Equity funds as well as balanced funds recorded net inflows during all months in 2009.
The large net inflow into investment funds has continued in 2010. At the end of June total net sales of funds
amounted to USD 5.4 billion, mainly due to large inflows into balanced funds and bond funds.

The third Anti Money Laundering Directive was implemented in 2009 and guidelines from the FSA came into
force on May 15 2009.
Pensions:
The Premium Pension system, launched in 2000, introduced compulsory investments of funds in one part of
the 1st pillar pension. During 2009 legislative proposals were presented regarding the system entering into
force in the beginning of 2010. This was the result of the Swedish state committee from 2005 looking over
the Swedish pension system. The existing authority administering the payments and fund selections (PPM)
has been merged with the Swedish Social Insurance Authority into one new authority, the Swedish Pensions
Agency (Pensionsmyndigheten).
Most of the changes relate, however, to the state default option and these changes came into force in May
2010. The default alternative, Premiesparfonden, has been replaced by a new alternative – AP7Såfa. Three
additional state fund portfolios have also been created with differing risk profiles. All new investment
alternatives are based on different proportions of two new funds managed by the Seventh AP fund, namely a
global equity fund and a Swedish fixed income fund. These funds are also available separately.
The new AP7Såfa is an age-adapted mutual fund portfolio. The equity exposure – and hence the risk level –
are initially higher than in an average global equity fund, (the equity exposure will initially be 150 percent).
The risk level is adapted to the saver’s age, such that the equity exposure will start to successively decline
once the saver has reached the age of 55. The equity exposure and risk level decline annually until the saver
reaches the age of 75.
The open fund market with private managers’ funds is still available. As per 2009-12-31 there were about
750 private funds available for selection for the premium pension.
The Swedish Investment Fund Association has launched a website, www.fondkollen.se, in order to guide the
investors how to choose and evaluate private funds in the state pension system.
Tax:
A pr oposal f or a c hange i n t he t axation of t he f unds w as i ntroduced i n January 20 10. According t o t he
proposal the current tax on the funds should be abolished but the tax burden should be shifted to the unit
holders, irrespectively if they are holding Sweden or foreign registered funds. The proposal has been heavily
criticized by the industry and the future of the proposal is not yet determined.
The S wedish F inancial S upervisory Authority ( Finansinspektionen) h as i ssued Regulations and gu idelines
regarding r emuneration po licies i n c redit i nstitutions, i nvestment f irms and f und management c ompanies
(FFFS 2009 :6), t hat c ame into f orce 1 J anuary 2010. F irms s hall ha ve a r emuneration p olicy th at i s
consistent with good risk management and does not encourage short-term profits and excessive risk-taking.
For e mployees w hose ac tions c an hav e a m aterial i mpact on t he r isk ex posure of t he f irm, at least 60
percent of the variable remuneration should be deferred for at least three years.
The regulation is based on the EU Commission's recommendation governing remuneration policy within the
financial services sector. In these efforts, Finansinspektionen has also implemented the global principles for
sound remuneration systems which were adopted at the G20 meeting in September 2009.
6. Fund governance
The Swedish Investment Fund Association has conducted surveys among our members regarding the extent
to which they have introduced SRI considerations in their management. They were also asked to elaborate
on an y c orporate go vernance pol icies an d t heir adh erence t o t he as sociation’s C ode of C onduct, which i s
construed as a “comply or explain”-document.
According t o t he s urveys approximately half of t he m embers o f t he S wedish I nvestment F und A ssociation

are s ignatories of t he U NPRI. T he Swedish I nvestment F und A ssociation already has a workgroup o n
corporate governance and due to a mandate by the board the group has focused on SRI issues during 2010.
The main topic has been the ongoing development towards mainstreaming responsible investments, where
SRI issues are becoming increasingly important for all funds.
In 200 9 and especially i n 2010 the n umber of Exchange t raded funds (ETF) has i ncreased dr amatically in
Sweden. Also the AUM figure for these products has increased.

Among t he m ost pr ioritized i ssues f or T he S wedish I nvestment F und A ssociation are fund t axation, the
implementation of the EU directive UCITS IV, the AIFM-Directive and pensions issues. Communication also
plays an important role.
The association has arranged seminars on taxation and marketing standards and rules.
Securities Investment Trust & Consulting Association of R.O.C.
2009 Taiwan Country Report
2009 Jun-2010
Total Population 23,119,772 23,138,381
GDP (USD Million) 378,952 (Estimated) 204,045
Average GDP per capita (USD) 16,423 (Estimated) 8,822
Rate of real GDP growth (%) -1.91% (Estimated) 12.53%
CPI rate (%) -0.87% 1.19%
Unemployment rate (%) 5.85% 5.16%
Stock market capitalization (USD Billion) 716.45 640.68
Bond market capitalization (USD Billion) 186.05 191.20

Foreign exchange rate (2009.12.31) 32. 03 (2010.6.30) 32.278
(Data S ource: N ational S tatistics, R .O.C. ( Taiwan))
Please find the second column of the below table.
Table 2: Statistics of Assets under Management and Net Flow (USD Million)
Mutual Fund Assets Net Flows

Types of Fund
December 2009 Market Share Jan. 2009 ~ Dec. 2009
Equity Fund 22,948 37.22% 925.9
Balance Fund 1,919 3.11% -209.56
Bond Fund 30,143 48.88% 195.24
Money Market
Fund 92 0.15% -149.56
Fund of Funds 3,447 5.59% 1020.33
REITs Fund 628 1.02% 46.99
1
Exchange
Traded Fund 2,340 3.79% -249.73
Index Fund 145 0.23% -82.91
Total 61,662 100% 1,496.7
Table 2: Statistics of Assets under Management and Net Flow (USD Million)
Mutual Fund Assets Net Flows
Types of Fund
Jun. 2010 Market Share Jan. 2010 ~ Jun. 2010
Equity Fund 20,270.18 36.04% -328.71
Balance Fund 1,554.31 2.76% -230.05
Bond Fund 27,281.78 48.5% -2,566.73
Money Market
Fund 50.91 0.09% -39.05
Fund of Funds 4,046.56 7.19% 435.84
REITs Fund 497.57 0.88% -84.64
Exchange
Traded Fund 2,411.79 4.29% 383.27
Index Fund 137.68 0.24% 7.5
Total 56,250.78 100% -2,422.55

(Data Source: SITCA)
3.1 Total Mutual Fund AUM
2
Fund Size（US$ Billion）
600 90,000
77,484 80,000
500 74,243
70,000
63,085 62,907
56,251
400 61,029 60,330
60,000 Number
52,592 61,662 of Fund
50,000
300 35,123
47,820
40,000 AUM
32,822
(USD
200 30,000 million)
22,294
19,432 20,000
100 9,511
2,925 10,000
2,705 2,019
243 642
0 0
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
Jun-
10
(Data Source: SITCA)
3.2 Shares of Mutual Fund Market by Category
2009.12.31
Exchange
REITs Fund
Traded Fund
1.02% Index Fund
3.79%
Fund of Funds
0.23%
5.59%
Equity Fund
Money Market
37.22%
Fund
0.15%
Bond Fund Balance Fund

48.88% 3.11%
2010.6.30
3
REITs Fund Exchange
Fund of Funds 0.88% Traded Fund
7.19% 4.29% Index Fund
0.24%
Money Market Equity Fund
Fund 36.04%
0.09%
Bond Fund Balance Fund

48.50% 2.76%
3.3 Trends Concerning International Investment Funds
1. Key investment area of onshore international investment funds:
40.00%
35.00%
30.00%
25.00%
June 2010
20.00% January 2010
January 2009
15.00%
10.00%
5.00%
0.00%
No Ja De Au As Em La Ot
rth pa ve str ia erg tin he
Am n lop alia ex ing A me rs
er i ed & Ja Eu ric
ca Eu Ne pa a
rop w n r op
e Ze e
ala
nd
2. Trends in overseas investment of onshore funds:
4
100%
90%
19.2%
27.7% 31.5%
80%
70% Fund AUM:Foreign-
investment Funds
60%
Fund AUM: Domestic-
50%
80.8% investment Funds
40% 72.3% 68.5%
30%
20%
10%
0%
January 2009 January 2010 June 2010
3. During the period of January 2009 to June 2010, the AUM of international funds domiciled in Taiwan
increased from USD 8.93 billion to 17.72 billion, taking the market share from 19.2% to 31.5%, and 71
new onshore funds launched including 6 domestic-investment funds and 65 foreign-investment funds.
In the same period, the AUM of offshore funds doubled from USD 30.46 billion in Jan. 2009 to USD
67.89 billion in Jun. 2010, whereas the AUM of onshore funds increased by 13% from USD 49.8
billion in Jan. 2009 to USD 56.25 billion in Jun. 2010.
4.1 FSC allows submission of investment documents in electronic form

To help improve efficiency and lower costs in securities investment trust and consulting enterprises, the
FSC recently ruled that when securities investment trust enterprises (SITEs) use a securities investment
trust fund for the purpose of investment or trading, or when SITEs or securities investment consulting
enterprises (SICEs) use discretionary investment assets for the purpose of investment or trading, they will
be allowed to submit the analysis reports, decisions, execution records, and review reports referred to in
Articles 17 and 58 of the Securities Investment Trust and Consulting Act, in the form of electronic
documents as defined in Articles 4 and 6 of the Electronic Signatures Act.
4.2 FSC amends securities trust fund regulations
In order to afford securities investment trust enterprises (SITEs) greater flexibility in timing the launch of
new securities investment trust funds, the FSC recently amended Article 7, paragraph 3 of the
"Regulations Governing the Public Offering of Securities Investment Trust Funds by Securities
Investment Trust Enterprises." Prior to the amendment, the Regulations required a SITE to begin an
public offering within three months after successfully applying (or registering) to do an offering, and
allowed a SITE to apply once for a three-month extension of the deadline. The amendment changes each
5
of these three-month periods to six months.
4.3 FSC eases restriction on delegation of fund management
According to authorization granted in Article 5, paragraph 1 of the "Regulations Governing Securities
Investment Trust Funds," the FSC as of 21 December 2009 now allows a securities investment trust
enterprise (SITE) to delegate a third party to determine how to invest fund assets overseas in markets
except Asia and Oceania.
4.4 FSC adopts reporting rules for SITEs applying for QFII status in mainland China
Once the recently signed cross-strait Memorandum of Understanding (MOU) on supervisory cooperation
in the securities and futures industry takes effect, securities investment trust enterprises (SITEs) from
Taiwan will be allowed to apply to the authorities in mainland China for recognition as a Qualified Foreign
Institutional Investor (QFII), which enables them to invest in A shares listed on mainland securities
exchanges. The FSC, in order to prepare for this eventuality, recently adopted a set of reporting rules
designed to enable the FSC to keep track of the progress of QFII applications submitted by such SITEs to
the mainland authorities, and of their mainland investment positions once they obtain QFII status. SITEs
will be required submit monthly reports in which they: (1) identify which RMB-denominated listed
securities ("A shares") in which they have invested the assets of their trust investment funds and
discretionary investment accounts; and (2) specify the amounts of each such investment position.
4.5 Securities Investment Trust Enterprises are allowed to invest high-yield bond fund assets in
investment-grade bonds
In order to bolster the international competitiveness of Taiwan's securities investment trust enterprises
(SITEs), and to afford them greater flexibility in the operation of high-yield bond fund assets, the FSC
recently amended the regulation to allow SITEs to invest high-yield bond fund assets in investment-grade
bonds. Prior to this change, the foresaid funds were only allowed to invest such assets in high-yield bonds
and money market instruments.
5. Major development in corporate governance
5-1 From January 1, 2009 to December 31, 2009
1. Since the financial crisis, the regulators have been researching the subject of disclosure of remuneration
or other bonuses paid to directors, supervisors and executive managements. The regulators aim to
strengthen the correlation between company risk management and remuneration packaging policy
through regulation, internal control system or corporate governance practice. Thus, we have revised the
regulation of the Guideline of Cooperate Governance based on the above issues.
2. According to Article 12 of the Guideline of Cooperate Governance, while making investment decision the
fund company needs to consider the corporate governance practice of the issued company.
3. According to Article 23 of the Regulations Governing Securities Investment Trust Enterprises, the fund
company exercising the voting rights shall do so in the best interest of beneficial interest certificate
holders, and may not directly or indirectly participate in the management of the company issuing the
6
shares it holds or in other inappropriate arrangements.
5-2 From January 1, 2010 to June 30, 2010

Since the financial crisis, the regulators have been researching the subject of disclosure of remuneration
or other bonuses paid to fund managers. The regulators aim to strengthen the correlation between
company risk management and remuneration packaging policy through regulation, internal control system
or corporate governance practice. Thus, we have enacted the regulation of the Guideline of
Remuneration of Fund Company based on the above issues.
6. Fund Governance
None.
7. Product development
7-1 A most striking trend starting from 2009 was the overwhelming popularity of overseas investment
products. 74 out of 80 new raised onshore funds from 2009 to June 2010 were overseas investment.
The ratio of overseas assets in onshore fund portfolios increased from 19% at year-end 2008 to 28% at
year-end 2009, and further increased to 31% as of June 2010. Onshore funds are getting
internationalized.
7-2 The composition of onshore funds has changed substantially over the period of 2009 to June 2010. At
year-end 2008, money market funds accounted for 60% of onshore fund assets; stock funds held 32% of
the assets; bond funds accounted for another 2%. As of June 2010, the ratio of money market funds
dropped to 45%, in contrast to the increase of 42% of stock funds and 7% of bond funds. Onshore funds
are getting diversified and moving into a healthier composition.
7-3 In terms of product types, due to the market recovery in 2009 and ease of cross-strait relationship, shares
of Great China funds and funds that invest in emerging countries and certain fixed income products, such
as high-yield bond, investment-grade bond, and high-dividend funds rose sharply since 2009. Investor
also flocked to ETFs in response to economic uncertainty and instability.
7-4 In the past 6 years, the market share of fund assets at larger SITEs has increased. Strong inflows to
certain types of funds, such as ETFs and fixed income products, which are fewer in number and have
fewer SITEs provided than other funds, helped push several SITEs, including Polaris and Fuh Hwa, that
specialize in those funds into the large groups.
8-1 The Polaris Taiwan Top 50 Tracker Fund (H.K.) became the first Taiwan ETF to list on the Hong Kong
Exchanges on August 19, 2009. The fund is structured as a Feeder Fund, and tracks the Polaris Taiwan
Top 50 Tracker Fund (Ticker Coder: 0050).
7
8-2 The memorandum of understanding (MOU) on cooperation in financial supervision across the Taiwan
Strait was officially signed on November 16, 2009. The move is likely to enhance the development and
cooperation between the financial sectors in Taiwan and China. The terms and measures in the MOU
cover cooperation on monitoring operations involving banking, securities, futures, and insurance services.
8-3 To increase the breadth and depth of Taiwan’s futures market and to provide the futures traders a more
various trading and hedging vehicles, the Taiwan Futures Exchange (TAIFEX) introduced 34 Single-Stock
Futures Contracts and 13 Equity Options on January 25, 2010.
8-4 The FSC announced on March 15, 2010 that securities investment trust funds were henceforth allowed to
invest in domestic Futures Trust Fund Beneficial Certificates. In addition, securities investment trust funds
were also newly allowed to invest in Inverse ETFs, Commodity ETFs, Call and Put Warrants, and Stock
Warrants with specific limitations on the investing ratios.
8
Turkish Institutional Investment Managers’ Association
Turkey Country Report - IIFA (January 1, 2010 – June 30, 2010)
The normalization process in the financial markets started as of the second half of 2009 with the help of
measures taken worldwide, and the global economic activity started to recover since then. However, the high
budget deficit problem which manifested itself in some countries in the form of a debt crisis in the first half of
2010, fueled concerns over the sustainability of economic recovery in the global markets.
Rising concerns regarding the debt sustainability of several Southern European countries have caused risk
appetites to follow a volatile market. While risk premium indicators have increased, particularly across some
European countries during this period, the increases in emerging market risk premiums -especially in Turkey-
were limited.
Turkey survived the global crisis without bailing out any banks, and this year it ended loan talks with the
International Monetary Fund. It enjoyed an influx of positive economic data in the first half of the year,
suggesting that the economy is on track to full recovery from the worst financial crisis since the Great
Depression.
Turkey’s economy grew an annual 10.3 percent in the second quarter as record-low interest rates helped push
output above the level it reached before the 2008 collapse in the world economies. Turkish consumers showed
a recovery from 2009’s 4.7 percent slumpin the first half of 2010 and bank loands for cars, homes and other
purchases have risen since January.
Though inflation continued to rise during the first quarter of 2010, later developments during the second quarter
of 2010 have shown that the increase in inflation since the last quarter of 2009 was temporary. The inflation rate
for PPI was 8.4 % annually in June 2010, from 8.2% in December 2009.
The Turkish lira depreciated 6.2% against the US Dollar in the second half of 2010, while appreciating 9.2 %
against the Euro in the same period. The Euro’s weakness against the world parities also caused Turkish lira’s
appreciation.
Turkish investment funds asset value jumped 15.2 % to EUR 15.9 billion in the first half of 2010, due to better
economic conditions in the global economy and Turkey.
Together with the dropping interest rates, lower crowding-out effect of the Treasury and investors getting
matured; investment funds industry and new investment instruments are expected to get more attention in the
forthcoming period.
The private pension fund sector also rose by 12% to EUR 4.7 billion in the first half of 2010, compared with EUR
4.2 billion at end-2009. 6.5 years old private pension system is showing a very successful growth since 2003
and carries a great importance for the future of investment funds. Their shares in total managed assets reached
20% in 2009, up from 10% in 2006.
1

End of 2009 2010/Q2
Real GDP growth (%) -4.7 10.3
Inflation rate (%) *Jan 2010 8.2 8.4
Trends in the Mutual Fund Sector in Turkey
The net asset value of the Turkish investment funds rose roughly 15% to EUR 15.9 billion in the first half of 2010
The pension fund sector continued its growth and showed 12% rise to EUR 4.7 billion in the first half of 2010.
Turkish fund industry maintained positive developments in January-June 2010 period and when we look at the
categories, equity funds recorded the strongest increase with 52.4% to EUR 337 million, mostly reflecting stock
market gains. While money market funds, balanced funds and bond funds also showed increases of 12%, 7.1%
and 4.2%, respectively.
Net asset value of Other funds (Gold Funds and Guaranteed&Protected Funds) jumped 127 percent in the first
half of 2010, compared with end-2009. However, Funds of funds decreased by 10.2% to EUR 7 million in the
first half of 2010, compared with EUR 8 million at end of December 2009.
Net asset value of Investment Trusts increased 11.1% to EUR 2.7 billion during January-June 2010 period.
In Turkey, there are 3 different categories of Investment Trusts which are Real Estate Investment Trusts,
Securities Investment Trusts and Venture Capital Investment Trusts, with a net asset value of EUR 2.3 billion,
EUR 369 million and EUR 80 million, respectively.
2
Net Asset Value of Turkish Investment Funds
Kind of Funds Net Asset Value ( EUR million)

End of 2009 2010/Q2
MUTUAL FUNDS 13.866 15.931

EQUITY FUNDS 221 337
BOND FUNDS 1.274 1.328
BALANCED FUNDS 1.271 1.361
MONEY MARKET FUNDS 10.683 11.969
OTHERS
(Guaranteed&Protected Funds, Gold
Funds) 408 929
FUNDS OF FUNDS 8 7
PENSION MUTUAL FUNDS 4.246 4.716
INVESTMENT TRUSTS 2.433 2.702

Real Estate Investment Trusts 2.028 2.253
Securities Investment Trusts 332 369
Venture Capital Investment Trusts 72 80
Mutual Funds System

In Turkey, there are two different types of Mutual Funds, classified as Type A and Type B funds. Type A Mutual
Funds are required to invest at least 25% of their assets in equities that are issued by Turkish companies, while
Type B Mutual Funds have no such obligations. Though A Type and B Type terminology is used in the local
market, the fund classifications on the tables below are made accordingly with the European classifications.
As of June 2010, the total net asset value of Mutual Funds is EUR 15.9 billion in Turkey. The breakdown of the
different categories of Mutual Funds are as follows; Equity funds: 2.1%, Bond funds: 8.3%, Balanced funds:
8.5%, Money Market funds: 75.1%, Funds of Funds: 0.05% and Others: 5.8%.
When we compare the end 2009 figures with the end of June 2010, the number of Mutual funds increased to
381 from 321. The number of Other funds increased to 84 from 39, due to rising numbers of guaranteed &
protected funds. Number of equity funds, bond funds, balanced funds and money market funds slightly rose in
the same period.
3
Number of Turkish Investment Funds
Kind of Funds Number Of Funds

End of 2009 2010/Q2
MUTUAL FUNDS 321 381

EQUITY FUNDS 47 50
BOND FUNDS 54 57
BALANCED FUNDS 126 134
MONEY MARKET FUNDS 52 53
OTHERS
(Guaranteed&Protected Funds, Gold
Funds) 39 84
FUNDS OF FUNDS 3 3
Pension Fund System
The pension system continued its growth in the first half of 2010, and rose 12% to EUR 4.7 billion at end of
June 2010, compared with EUR 4.2 billion in 2009. The participation in the system has grown increasingly,
although it is a voluntary system and the number of investors reached 5.8 million as of June 2010.
The most important aspect of the Turkish pension system is that it is fund based and pension funds are
managed by the asset management companies in Turkey. The system is complementary to the state social
security system on the basis of voluntary participation and the defined contribution principle, with a view to direct
individual pension savings to investment to improve the welfare level by providing a supplementary income
during retirement to contribute to economic development by creating long term resources for the economy and
thereby increase employment, came into force.
Although there are many different types pension funds for different investment strategies, the majority of assets
in Turkish funds are government bonds. Withholding for income tax is applied when a participant leaves the
system but at different rates depending on when he left the system. If an investor retires from the system at the
age of 56 with 10 years loyalty, the investor must pay a 3.5 percent tax.
As the improvement of the legal framework, certain actions have been taken to provide a more effective
functioning of the pension system in 2009. Within this framework, the Individual Pension Intermediaries
Regulation was revised to enhance the standards applicable to the activities of individual pensions
intermediaries. Furthermore, regulations were made regarding the e-plan system that allows for pension plans to
be stored in electronic media and probable accumulation charts presented to participants.
4
Regulatory and Taxation Issues
Mutual funds are established in the form of open-end investment companies in Turkey and they are not a
separate legal entity. The mutual funds are operated in terms of the rules stated in the prospectus, which
includes general terms about the management of the fund, custody of assets, valuation principles and conditions
of investing in the fund. The Capital Markets Board (CMB) is working on the implementation of EU Commission’s
recommendations on UCITS directives.
Currently, funds in Turkey do not comply with the UCITS Directive, but as they are open-ended, they are
marketed to the public and can be broken into equity, bond, balanced and money market funds and are included
in UCITS data in the EFAMA statistics.
The finance ministry worked in 2009 to impose equal withholding tax on foreigners and Turkish nationals for
bonds and investment funds. Under the new tax regime, zero withholding tax will be imposed on profits from
government debt securities for both foreign and Turkish corporations, including mutual funds, while a 10 % tax
will be collected from both local and foreign individuals. The current taxation system allowing both foreign and
domestic investors to pay zero withholding tax on shares remains unchanged.
The current law allows Turkish funds to pay withholding tax on the interest, capital and dividend gains; instead
an investor is taxed at the rate of 10% when they realize their profits. Investors are not taxed until they redeem
their funds.
Turkey’s Constitutional Court ruled in 2009 in favor of making the tax on bonds, shares and mutual funds equal
for domestic and foreign investors after the government removed the tax for foreigners in 2006 in a bid to attract
foreign capital to Turkey.
Corporate Governance Principles in Turkey were issued by CMB in June 2003. Therefore, the CMB has defined
corporate governance principles, which can be used primarily by listed companies as well as by joint stock
companies both in the private and public sector.
The Turkish Institutional Investment Managers’ Association (TKYD) accepted EFAMA, the code of conduct for
investment and asset management firms and therefore issued these principles as a guide to its members.
Istanbul Stock Exchange works on several international projects as part of EU accession process.
Fund Standards and Distribution
There were many initiatives taken by Turkish Institutional Investment Managers’ Association (TKYD) towards
transparency in the fund industry.
CMB is regulating fund performance presentation standards based on a global standard. CMB has also new
initiatives for disclosure of fees and commissions. Investors are encouraged to review all disclosed information.
Founders of open end investment funds are restricted to banks, insurance companies, charities, non-bank
intermediaries (brokerage houses). For a foreign fund to be distributed in Turkey, it should not be less than
three-years old and in principle, foreign fund should not invest in Turkey.
Notice periods for mutual funds are;

One business day for subscription and two business days for redemption in Equity funds;
One business day for both subscription and redemption in Fixed Income funds except Money Market funds.
5
Trends in product development and level playing field issues
There are no real estate investment funds in Turkey. There are only real estate investment trusts which are all
closed-ended instruments.
Guaranteed and Protected Funds, Hedge Funds are new to the market and especially shares of the guaranteed
and protected funds rise since 2008. Free Investment Funds (FIF)s are able to set any minimum investment
amount (including no investment amount) and to determine the number of investors. FIF units can only be sold
to qualified
According to the hedge funds communiqué published in late 2006, the hedge funds in Turkey (free investment
funds) are being regulated by the CMB. Together with the several funds compatible with the UCITS III
directives, the applications of hedge funds are made since the first quarter of the 2009.
Qualified investors are defined in the CMB law as; local and foreign investment funds, pension funds, securities
investment trusts, venture capital investment trusts, real estate investment trusts, intermediary institutions,
banks, insurance companies, portfolio management companies, pension and relief funds, foundations, real and
legal persons that have total asset amount equal to at least 1 million Turkish Lira in terms of cash in Turkish
and/or foreign currencies and in terms of capital market instruments.
After extensive studies between the industry and the Turkish Capital markets Board (CMB), the most proper
groundwork for the system was prepared. In Turkey, hedge funds will be under the regulation of the CMB. Still
these funds will have freedom to some extend in establishing the outlines.
Activities of the Association

Turkish Capital Markets Board (CMB) is working together with TKYD to resolve many issues related with
investment funds, as well as discussing certain proposals and offering solutions to some critical issues including
the fund classifications, new law and tax regulations facing the investment fund industry in Turkey.
TKYD’s eight working committees are; Fund Classification and Ranking, Tax and Legislation, Communications,
Training and Human Resources, Index, Open Architecture, Strategy, and they study extensively in many aspects
regarding the Turkish fund industry. The projects cover the new classification of Turkish fund industry, the new
code of collective investment corporation and asset management, tax incentives to support the system, creation
of the new indices which are used as benchmark by the asset management companies, organization of some
seminars and conferences by TKYD.
CMB is also in close contact with TKYD committees in working towards taking the necessary steps to move the
Turkish investment fund sector towards EU accession.
TKYD’s first half 2010 activities can be summarized as; Annual Meeting of Turkish Collective Instruments
Industry in Antalya, participation to the committee meetings of the government’s Istanbul Financial Center
project. Lobbying activities by the TKYD management to Turkish public authorities on tax and legislative issues,
chairman of the Capital Markets Board and IMKB chairman.
TKYD publishes a magazine “Institutional Investor” since April 2008 in quarterly basis. It is being distributed
among TKYD members, institutional investors, universities, and the regulating body officials. The magazine
covers all up-date developments in the Turkish Investment fund industry as well as some analysis, researches,
introductions of the new funds in the market, new trends in the sector and developments in the world fund
industry together with some financial statistics.
KYD indices are widely used for benchmarking in the sector which date back to October 2001. Indices are; KYD
A Type (equity) Funds and KYD B Type (fixed income) Funds.KYD O/N REPOS, KYD Eurobond, KYD Domestic
Government Bond Indices and KYD Gold Price Indices and KYD One Month Deposit Indices.
6
Turkish Institutional Investment Managers’ Association
Turkey Country Report - IIFA (January 1, 2009 – December 31, 2009)

Turkish economy slowed 4.7% pct in 2009 after experiencing 1.1 fall in 2008 as the global crisis continued to
affect the world economies and Turkey as well. The affect of the crisis was less forcefully after the second
quarter of 2009. The country’s economy contracted by an unprecedented 14% in the first quarter of 2009, but
incentives granted in various durable goods and the automotive industry helped ease of contraction at the end of
the year.
The inflation rate fell to 6.5% in 2009 after surging 10.1% in 2008. The rate was in line with the Turkish Central
Bank targets for 2010. Although there were some price fluctuations in 2009 such as rising food and oil prices,
withdrawal of tax cuts within the fiscal stimulus package, they had little impact on the final inflation rates as of
December 2009. Targeted inflation rate for 2009 was 6.5%.
The Turkish lira appreciated 2.3% against the US Dollar in 2009, while it remained unchanged against the
European currency in the same period.
Turkish investment funds market which gets the smaller market share of GDP rose by 24% and reached to EUR
13.9 billion in 2009, from EUR 11.2 billion at the end of 2008.
Together with the dropping interest rates, lower crowding-out effect of the Treasury and investors getting
matured; investment funds industry and new investment instruments are expected to get more attention in the
forthcoming period.
The private pension fund sector continued uptrend and rose 40% to EUR 4.2 billion in 2009, from EUR 3.0 billion
at end of 2008. Six-year old private pension system is showing a very successful growth since 2003 and carries
a great importance for the future of investment funds. Their shares in total managed assets reached 20% in
2009, up from 10% in 2006.

End of 2008 2009
Household gross savings ratio (%) -5.1 10.8
1
Trends in the Mutual Fund Sector in Turkey
When we compare the end-2008 figures with 2009, the net asset value of the Turkish investment funds rose by
24% to EUR 13.9 billion, from EUR 11.2 billion. Furthermore, the pension fund sector continued its growth,
showing 40% rise to EUR 4.2 billion at end-2009, when compared with EUR 3.0 billion at end 2008. Turkish fund
industry was positively affected when the global recovery started in the second half of 2009.
Net asset value of the mutual funds bond funds increased 70.2% to EUR 1.3 billion in 2009, compared with EUR
749 million at end 2008. Equity funds also increased 60% to EUR 221 million in the same period. Money market
funds slightly rose 11.5% to EUR 10.7 billion, from EUR 9.6 billion. Net asset value of Funds of funds increased
67.6% to EUR 8 million at end of 2009.
Other funds consist of Gold Funds and Guaranteed&Protected Funds and these funds were the most attractive
ones in 2009. They experienced the strongest rise (%243). Balanced funds almost doubled in the same period.
In 2009, net asset value of Investment Trusts increased 4.6% to EUR 2.4 billion. In Turkey, there are 3 different
categories of Investment Trusts which are Real Estate Investment Trusts, Securities Investment Trusts and
Venture Capital Investment Trusts, with a net asset value of EUR 2.0 billion, EUR 332 million and EUR 72 million
respectively at end of December 2009.
Net Asset Value of Turkish Investment Funds
Kind of Funds Net Asset Value ( EUR million)

End of 2008 2009
MUTUAL FUNDS 11.238 13.866

EQUITY FUNDS 138 221
BOND FUNDS 749 1.274
BALANCED FUNDS 642 1.271
MONEY MARKET FUNDS 9.585 10.683
OTHERS
(Guaranteed&Protected Funds, Gold Funds) 119 408
FUNDS OF FUNDS 5 8
PENSION MUTUAL FUNDS 2.987 4.246
INVESTMENT TRUSTS 2.327 2.433

Real Estate Investment Trusts 2.001 2.028
Securities Investment Trusts 259 332
Venture Capital Investment Trusts 66 72
2
Mutual Funds System
In Turkey, there are two different types of Mutual Funds, classified as Type A and Type B funds. Type A Mutual
Funds are required to invest at least 25% of their assets in equities that are issued by Turkish companies, while
Type B Mutual Funds have no such obligations. Though A Type and B Type terminology is used in the local
market, the fund classifications on the tables below are made accordingly in line with the European
classifications.
As of December 2009, the total net asset value of Mutual Funds is EUR 13.7 billion in Turkey. The breakdown of
the different categories of Mutual Funds are as follows; Equity funds: 1.6%, Bond funds: 9.2%, Balanced funds:
9.2%, Money Market funds: 77.0%, Funds of Funds: 0.1% and Others: 2.9%.
When we compare the end December 2008 figures with December 2009, the number of Mutual funds decreased
321, from 328 in Turkey. In 2009, the biggest declined seem at balanced funds thus the new classification.
Number of equity funds and bond funds also slightly declined in the same period. The reasons of the rise at
other funds were increasing the number of guaranteed & protected funds in 2009.
Kind of Funds Number Of Funds

End of 2008 2009
MUTUAL FUNDS 328 321

EQUITY FUNDS 50 47
BOND FUNDS 56 54
BALANCED FUNDS 136 126
MONEY MARKET FUNDS 50 52
OTHERS
(Guaranteed&Protected Funds, Gold Funds) 33 39
FUNDS OF FUNDS 3 3
Pension Fund System
Completing its sixth year in 2009, the pension system has been in a rapid growth trend despite the financial
crisis. During this period, the savings have gained with the professional management and the high growth rate
was achieved in individual pension system. The total fund amount rose 40% to EUR 4.2 billion at end 2009,
compared with EUR 3.0 billion at end of December 2008.
In 2003, the net asset value of the pension funds was only EUR 24 million. The participation in the system has
grown increasingly, although it is a voluntary system and the number of investors reached 5.4 million in 2009.
The number of the active pension companies reached 13.
The most important aspect of the Turkish pension system is that it is fund based and pension funds are
managed by the asset management companies in Turkey. The system is complementary to the state social
security system on the basis of voluntary participation and the defined contribution principle, with a view to direct
individual pension savings to investment to improve the welfare level by providing a supplementary income
during retirement to contribute to economic development by creating long term resources for the economy and
thereby increase employment, came into force.
Although there are many different types pension funds for different investment strategies, the majority of assets
in Turkish funds are government bonds. Withholding for income tax is applied when a participant leaves the
system but at different rates depending on when he left the system. If an investor retires from the system at the
age of 56 with 10 years loyalty, the investor must pay a 3.5 percent tax.
3
As the improvement of the legal framework, certain actions have been taken to provide a more effective
functioning of the pension system in 2009. Within this framework, the Individual Pension Intermediaries
Regulation was revised to enhance the standards applicable to the activities of individual pensions
intermediaries. Furthermore, regulations were made regarding the e-plan system that allows for pension plans to
be stored in electronic media and probable accumulation charts presented to participants.
Regulatory and Taxation Issues
Mutual funds are established in the form of open-end investment companies in Turkey and they are not a
separate legal entity. The mutual funds are operated in terms of the rules stated in the prospectus, which
includes general terms about the management of the fund, custody of assets, valuation principles and conditions
of investing in the fund. The Capital Markets Board (CMB) is working on the implementation of EU Commission’s
recommendations on UCITS directives.
Currently, funds in Turkey do not comply with the UCITS Directive, but as they are open-ended, they are
marketed to the public and can be broken into equity, bond, balanced and money market funds and are included
in UCITS data in the EFAMA statistics.
The finance ministry worked in 2009 to impose equal withholding tax on foreigners and Turkish nationals for
bonds and investment funds. Under the new tax regime, zero withholding tax will be imposed on profits from
government debt securities for both foreign and Turkish corporations, including mutual funds, while a 10 % tax
will be collected from both local and foreign individuals. The current taxation system allowing both foreign and
domestic investors to pay zero withholding tax on shares remains unchanged.
The current law allows Turkish funds to pay withholding tax on the interest, capital and dividend gains; instead
an investor is taxed at the rate of 10% when they realize their profits. Investors are not taxed until they redeem
their funds.
Turkey’s Constitutional Court ruled in 2009 in favor of making the tax on bonds, shares and mutual funds equal
for domestic and foreign investors after the government removed the tax for foreigners in 2006 in a bid to attract
foreign capital to Turkey.
Corporate Governance Principles in Turkey were issued by CMB in June 2003. Therefore, the CMB has defined
corporate governance principles, which can be used primarily by listed companies as well as by joint stock
companies both in the private and public sector.
The Turkish Institutional Investment Managers’ Association (TKYD) accepted EFAMA, the code of conduct for
investment and asset management firms and therefore issued these principles as a guide to its members.
Istanbul Stock Exchange works on several international projects as part of EU accession process.
Fund Standards and Distribution
There were many initiatives taken by Turkish Institutional Investment Managers’ Association (TKYD) towards
transparency in the fund industry.
CMB (Capital Markets Board) is regulating fund performance presentation standards based on a global
standard. CMB has also new initiatives for disclosure of fees and commissions. Investors are encouraged to
review all disclosed information.
Founders of open end investment funds are restricted to banks, insurance companies, charities, non-bank
intermediaries (brokerage houses).
For a foreign fund to be distributed in Turkey, it should not be less than three-years old and in principle, foreign
fund should not invest in Turkey.
4
Notice periods for mutual funds are;
One business day for subscription and two business days for redemption in Equity funds;
One business day for both subscription and redemption in Fixed Income funds except Money Market funds.
Trends in product development and level playing field issues
There are no real estate investment funds in Turkey. There are only real estate investment trusts which are all
closed-ended instruments.
Guaranteed and Protected Funds, Hedge Funds are new to the market and especially shares of the guaranteed
and protected funds rise since 2008.Free Investment Funds (FIF)s are able to set any minimum investment
amount (including no investment amount) and to determine the number of investors. FIF units can only be sold
to qualified investors.
According to the hedge funds communiqué published in late 2006, the hedge funds(free investment funds) in
Turkey are being regulated by the CMB. Together with the several funds compatible with the UCITS III
directives, the applications of hedge funds are made since the first quarter of the 2009.
Qualified investors are defined in the CMB law as; local and foreign investment funds, pension funds, securities
investment trusts, venture capital investment trusts, real estate investment trusts, intermediary institutions,
banks, insurance companies, portfolio management companies, pension and relief funds, foundations, real and
legal persons that have total asset amount equal to at least 1 million Turkish Lira in terms of cash in Turkish
and/or foreign currencies and in terms of capital market instruments.
After extensive studies between the industry and the Turkish Capital markets Board (CMB), the most proper
groundwork for the system was prepared. In Turkey, hedge funds will be under the regulation of the CMB. Still
these funds will have freedom to some extend in establishing the outlines.
Activities of the Association

Turkish Capital Markets Board (CMB) is working together with TKYD to resolve many issues related with
investment funds, as well as discussing certain proposals and offering solutions to some critical issues including
the fund classifications, new law and tax regulations facing the investment fund industry in Turkey.
TKYD’s eight working committees are; Fund Classification and Ranking, Tax and Legislation, Communications,
Training and Human Resources, Index, Open Architecture, Strategy, and they study extensively in many aspects
regarding the Turkish fund industry. The projects cover the new classification of Turkish fund industry, the new
code of collective investment corporation and asset management, tax incentives to support the system, creation
of the new indices which are used as benchmark by the asset management companies, organization of some
seminars and conferences by TKYD.
CMB is also in close contact with TKYD committees in working towards taking the necessary steps to move the
Turkish investment fund sector towards EU accession.
TKYD has 27 institutional (asset management companies, insurance companies and brokerages) and 40
individual members.
TKYD’s 2009 activities can be summarized as; Annual Meeting of Turkish Collective Instruments Industry,
th
participation to the preparations of the government’s Istanbul Financial Center project, celebration of TKYD’s 10
foundation day, preparation and presentation of the draft Collective Investment Instruments law to the Capital
Markets Board, lobbying activities by the TKYD management to Turkish public authorities on tax and legislative
issues.
5
TKYD publishes a magazine “Institutional Investor” since April 2008 in quarterly basis. It is being distributed
among TKYD members, institutional investors, universities, and the regulating body officials. The magazine
covers all up-date developments in the Turkish Investment fund industry as well as some analysis, researches,
introductions of the new funds in the market, new trends in the sector and developments in the world fund
industry together with some financial statistics.
KYD indices are widely used for benchmarking in the sector which date back to October 2001. Indices are; KYD
A Type (equity) Funds and KYD B Type (fixed income) Funds.KYD O/N REPOS, KYD Eurobond, KYD Domestic
Government Bond Indices and KYD Gold Price Indices and KYD One Month Deposit Indices.
6
United Kingdom Country Report

2008 2009
Population (mid year, million) 61.407 61.834
GDP (GBP billion) 1,446 1,393
Stock market capitalisation (end year, GBP billion) 1,326 1,788
Stock market capitalisation (% of GDP) 92 128
Bond market capitalisation (EUR billion) - -
Bond market capitalisation (% of GDP) - -
1
Household financial wealth (end year, GBP billion, net) 2,128 2,622
Average per capita financial wealth (GBP) 34,700 43,500
1
Includes non profit institutions serving households
1.1 Economic and financial developments
Early 2009 s aw t he U K e conomy suffering i ts w orst r ecession s ince t he 193 0s. The U K had moved i nto
recession in the second quarter of 2008, the first of six quarters of negative economic growth. The sharpest
rate of contraction was in the first quarter of 2009 when GDP was 2.4% lower than in the fourth quarter of
2008. There were further modest reductions in the next two quarters before GDP started rising in the fourth
quarter. This rise continued into the first half of 2010 and, by the second quarter, GDP was 1.6% higher than
a year earlier. Nevertheless, GDP was still 4.7% below its first quarter 2008 peak and lower than four years
earlier.
The biggest determinant of the course of the economy was the credit crunch that had developed in 2008 and
the G overnment’s r esponse t o it. In late 20 08, t he Government ac quired s takes i n two of t he biggest f our
retail ba nks i n ex change f or f unds and r educed interest r ates t o 0. 5%. Early i n 200 9, t here was f urther
support to help the banks in most difficulty and the Bank of England announced a programme of quantitative
easing. With banks anxious to restore their capital ratios and with complaints about their lack of lending, the
Government negotiated lending targets for the banks in which it had acquired big stakes.
The Government has also provided a fiscal stimulus, with a reduction in the rate of VAT its centrepiece. All
these ac tions m et w ith s ome s uccess as sharp falls i n as set pr ices w ere s tabilised. B y t he s econd hal f of
2009, both house and commercial property prices were rising again, though still at levels well below 2007.
The same was true for share prices. As noted above, GDP started to rise in the fourth quarter of 2009. These
trends c ontinued i nto t he f irst hal f of 2010, t hough t he i ncreases i n as set pr ices and out put w ere m odest
compared with the sizes of the previous falls.
Fears of def lation were c onsiderable i n e arly 2009 but t his di d no t hap pen. Despite t he V AT r eduction,
consumer pr ices c ontinued t o r ise on an an nual ba sis, al beit at a s lower r ate t han i n r ecent years. T he
annual i ncrease r eached a l ow po int of 1. 1% i n S eptember 2009. T he r eturn of V AT t o its pr evious r ate
pushed up the inflation rate to 3.3% in the first half of 2010 and, with VAT to rise again, the Bank of England
expect the rate to continue above the Government’s 2% inflation target till late 2011. Nevertheless, some still
see deflation as a threat and the interest rates on long term government bonds remain at low levels.
A weak labour market kept pay settlements low throughout this period: the growth in average earnings was
1.6% over the year t o t he second quarter of 20 10. T his m ay h ave h elped k eep t he r ise in un employment
lower than many expected on the basis of previous recessions – nevertheless, the unemployment rate was
7.8% in June 2010. Low pay increases, together with increased unemployment, led to a marginal decline in
household i ncome f rom w ages a nd s alaries i n c ash t erms i n 20 09 c ompared with t he previous year.
However, r educed d irect t axes and i ncreased social benef its c ontributed t o a n i ncrease i n ho useholds’
disposable income (3.2% in cash terms and 1. 8% in r eal t erms). Consumers c hose t o save this increased
income rather than spend it – consumers’ expenditure dropped 2.1% between 2008 and 2009 and the saving
ratio increased from 2.0% to 7.0%.The saving ratio stayed at this level in the first quarter of 2010 – the latest
information available.
1.2 Impact on fund investors
Whilst retail investors’ a ppetite f or f unds w as m uted dur ing 200 8 as t he f inancial c risis de veloped, t hey
began to return to investment in funds in November 2008 with most of the money going into bond funds. This
may have reflected both the high yields on these funds and the paucity of interest on cash accounts after the
bank r ate f ell t o 0. 5%. T he f irst quar ter of 2009 s aw ne t r etail s ales at £4 .1billion and , i n t he n ext t hree
quarters, t he inflow averaged £ 7.2 billion. B y t he s econd half of t he year, with equity m arkets r ecovering,
equity funds were out-selling bonds, but there were also significant flows into “absolute return” funds, which
seek to deliver whether markets are rising or falling.
Overall, net retail sales in 2009 were the highest ever. Sales have continued at a high level in the first half of
2010, a veraging £ 5.5 billion per quarter. T hese net sales were widely s pread across t he d ifferent as set
classes – equity f unds, bo nd f unds, ba lanced f unds and pr operty f unds as well as abs olute r eturn f unds.
Nevertheless, des pite t he unc ertainties abo ut t he f uture c ourse of t he ec onomy, i nvestors’ ov erall f und
portfolios c ontinue t o be c oncentrated in equity f unds – these accounted f or 59% of f unds und er
management at the end of June 2010.
1.3 Asset Management
Most of the figures in this report, like those in the previous paragraph, relate to authorised investment funds,
i.e. funds authorised by the UK Financial Services Authority (FSA) and domiciled in the UK. Some data is
also provided for overseas domiciled funds authorised for sale to UK investors (eg UCITS).
However, these funds represent only a small proportion (14%) of the total value of the assets managed by
IMA m embers i n t he U K, w hich am ounted to £ 3.4 trillion at t he en d of 200 9. IM A’s eighth Annual A sset
Management Survey found that:
• IMA members run a full range of products out of the UK, including property and alternatives. Around
40% of survey respondents run hedge funds;
• institutional clients account for 77% of total assets under management, retail and private clients for
23%;
• overseas clients ( both institutional an d r etail) ac count f or s ome 31% of t otal as sets under
management;
• internationally, IMA member firms or groups of which they are a part managed a total of £1.3 trillion;
• UK-headquartered I MA f irms managed £1. 4 trillion in t he UK as at December 200 9, with a f urther

£1.2 trillion managed internationally by these firms or groups of which they are a part;
• in asset management terms, the UK remains the largest centre in the EU (30% of total assets under
management);
• of the £3. 4 t rillion under management b y I MA f irms, 46% was i nvested i n e quities, 3 5% i n f ixed
income, 9% in cash/money market instruments and 5% in property. The remaining 5% was
accounted for by a variety of alternative asset classes, currency overlay and structured products;
• headline figures s how t hat U K eq uities accounted f or 47% of t otal eq uity exposure. W hile little
changed f rom 2008, t his r epresented a f all t o 40 % as a pr oportion of t otal U K dom estic market
capitalisation.
Table 2: Net assets of the funds industry in the United Kingdom

(GBP billion)
1 End June
End year 2006 2007 2008 2009
2010

2
promoted by national providers 12.3 18.0 16.0 24.9 22.4
Total AuM 421.9 485.2 377.7 505.3 510.4

1
From January 2007 IMA has included additional institutional funds which partly account for the increase in FUM. This also affects sales
figures. The number of funds domiciled abroad providing statistics to IMA also increased in 2007.
2
Overseas funds comprise open-ended funds which are domiciled outside the UK, FSA-recognised and sold into the UK with
“distributor status”. Collection of information commenced in July 2006 and number of investment funds providing information increased
during 2007.
Table 3: Net Sales of Investment Funds in the United Kingdom

(GBP million)
1
2006 2007 2008 2009 2010 H1
Home-domiciled UCITS 16,584 588 -1,799 27,528 16,429
Home-domiciled non-UCITS 4,053 3,301 -444 2,094 3,451

2
promoted by national providers 545 1,648 -1,743 1,679 597
Total Net Sales 21,182 5,537 -3,985 31,301 20,477

1
From January 2007 IMA has included additional institutional funds which partly account for the increase in FUM. This also affects sales
figures. The number of funds domiciled abroad providing statistics to IMA also increased in 2007.
2
Overseas funds comprise open-ended funds which are domiciled outside the UK, FSA-recognised and sold into the UK with
“distributor status”. Collection of information commenced in July 2006 and number of investment funds providing information increased
during 2007.
3. Key Trends in the UCITS Market

(GBP billion)
End June
End year 2006 2007 2008 2009
2010
Equity 290.6 309.9 220.7 287.6 277.7
Bond 58.6 78.4 74.3 94.8 98.0
Balanced 30.4 34.7 28.5 37.9 43.6
Money market 3.7 5.0 2.9 3.3 3.2
1
Fund-of-funds 21.9 25.2 21.3 30.8 32.8
Other 8.3 18.5 19.7 28.5 35.2
Total 391.6 446.5 346.1 452.1 457.7
of which
 Guaranteed 0.6 1.0 1.4 3.0 3.4
2
 ETFs - - - - -
1
Funds of funds are not included in the total in order to avoid double counting.
2
IMA does not collect information on ETFs. None are currently domiciled in the UK.
(GBP million)
2006 2007 2008 2009 2010 H1
Equity 4,930 -5,203 -4,423 8,762 3,353
Bond 5,955 160 1,803 10,699 432
Balanced 2,760 2,840 968 2,472 6,937
Money market 1,012 1,189 -2,320 -393 -34
1
Fund-of-funds 2,820 2,216 1,304 3,514 2,214
Other 1,927 1,602 2,174 5,988 5,741
Total 16,584 587 -1,799 27,528 16,429
of which
 Guaranteed 750 350 414 1,518 542
2
 ETFs - - - - -
1
Funds of funds are not included in the total in order to avoid double counting.
2
IMA does not collect information on ETFs. None are currently domiciled in the UK.
4. Key Trends in Other Nationally Regulated Funds

1
(GBP billion)
End June
End year 2006 2007 2008 2009
2010
2
Real estate (Open-ended) 11.3 10.9 6.9 8.6 10.1
3
Special funds 6.6 9.9 8.5 19.6 20.1
Other - - - - -
Total 17.8 20.8 15.4 28.3 30.3
1
Excludes listed, closed end investment companies, which are not represented by IMA.
2
Figures relate to open-ended real estate funds. Real Estate Investment Trusts (which are listed companies) are not included.
3
Figures cover all non-UCITS that are not property funds.
1
Table 7: Net Sales of Other Nationally Regulated Funds
(GBP million)
2006 2007 2008 2009 2010 H1
2
Real estate (Open-ended) 3,009 1,389 -1,235 1,487 1,383
3
Special funds 1,060 1,912 791 607 2,069
Other - - - - -
Total 4,069 3,301 -444 2,094 3,451
1
Excludes listed, closed end investment companies, which are not represented by IMA.
2
Figures relate to open-ended real estate funds. Real Estate Investment Trusts (which are listed companies) are not included.
3
Figures cover all non-UCITS that are not property funds.
1
End June
End year 2006 2007 2008 2009
2010
 Funds 1,919 1,753 2,230 2,271 2,242
 Units - - - - -
 Classes - - - - -
Foreign funds registered for sales 2 505 615 578 578 601
Fund launches 195 232 260 161 81
Fund liquidations (defined as

closed funds) 143 139 158 223 42
Fund mergers (defined as closed - - - - -

funds)
Average fund size (GBP million,
median)
 Equity 91.5 91.5 58.9 76.6 79.9
 Bond 94.0 100.5 86.4 123.9 122.1
 Balanced 53.1 54.0 33.3 39.5 43.4
 Money market 18.3 39.0 50.1 53.6 56.1
 Real estate 309.8 78.5 66.4 104.3 135.5
 Special 64.9 59.2 48.5 54.9 34.2
1
Table excludes listed, closed end investment companies, which are not represented by IMA.
2
Overseas funds comprise open-ended investment funds which are domiciled outside the UK, FSA recognised and sold into the UK
with distributor status. Figures represent investment funds reporting statistics to IMA.
6.1 Home Domiciled Funds
Total f unds under m anagement ( FUM) o f ho me dom iciled U CITS and n on-UCITS f unds at end D ecember
2009 were at an all time high of £480bn – an increase of 35% when compared to the end of 2008 when FUM
stood at nearly £378bn. This figure rose further to £488bn at the end of June 2010. Over half (61%) of the
increase d uring t he 18 m onth p eriod to J une 20 10 was due t o m arket movements, w ith t he r emainder a
result of net fund sales.
Gross sales of f unds ( both U CITS and no n-UCITS) w ere £ 123.1bn i n 2 009, up b y 19 % on t he 2008
(£103.6bn). The first six months of 2010 experienced gross sales of £84.7bn. To put this in context, gross
sales during the first half of 2010 have already surpassed that of the full year 2005.
Total net sales were p ositive i n 20 09 to the amount of £29. 5bn, t he highest ever annual f igure. This trend
continued into 2010 with a further £19.9bn in net sales recorded in the first half of the year. Net retail sales
were par ticularly s trong d uring t he 18 m onths t o J une 201 0, am ounting t o £36.8bn, with net r etail s ales
above £2.0bn in 12 of the 18 months. The strong net retail sales in 2009 were due to both a annual increase
in gr oss s ales of 24% t o £78bn a nd a dec rease i n repurchases of 12% t o £52bn. N et I SA s ales were
positive, at £3.4bn, during 2009 for the first year since 2003, and the best since 2001. Net ISA sales in the
first six months of 2010 were £3.2bn.
Institutional sales saw a net inflow of £3.6bn in 2009, the first positive yearly inflow since 2006. The first six
months ov er 20 10 s aw £8 .9bn in institutional net s ales, with a s ubstantial c ontribution f rom s ome f irms
choosing authorised investment fund vehicles to hold funds in preference to previous arrangements.
The large rise in overall industry net sales in 2009 and the first half of 2010 did not extend to ethical funds.
Net retail sales of ethical funds in 2009 were down 16% on 2008 to £167m. Ethical FUM stood at £5.6bn at
the end of 2009, up 26% on 2008. No new ethical funds were launched during 2009 but there were four fund
closures. Ethical FUM have remained remain static in the first half of 2010, with net sales of £135m in the
first 6 months.
Tracker funds had a very strong 2009 with net sales increasing from £435m in 2008 to £2.4bn in 2009 and
there was a further £742m net inflow in the first half of this year. These figures were driven largely by net
institutional sales of £2.0bn. Institutions have been net buyers of tracker funds for 13 years. Helped by rising
stock markets, tracker FUM stood at £27.1bn at the end of June 2010, up 35% from end of 2008.
In t erms o f net r etail s ales, t he £C orporate B ond s ector was ag ain t he m ost popu lar s ector d uring 2 009
taking in more t han £6. 0bn of retail m oney. This c ame against t he backdrop of low interest rates, w ith the
official bank rate falling to 0.5% in March 2009. The UK Absolute Return sector was the second best selling
sector, with net retail sales of £2.6bn during 2009. Similarly, the Europe ex UK sector was again the worst
net r etail s elling s ector d uring t he year, al though t he net o utflow of £0. 4bn was significantly l ess t han t he
£2.0bn net outflow of 2008.
In t he f irst hal f of 2010, t he £S trategic B ond s ector saw l arge r etail i nflows, t aking i n £1. 7bn i n n et r etail
sales. In stark contrast to 2008, when the £Corporate Bond sector was the best selling sector, this sector fell
to the third worst selling sector, experiencing retail outflows of £152m.
6.2 Non-UK Domiciled Funds
Defined as open-ended investment funds which are domiciled outside the UK, and are FSA recognised and
sold into the UK with distributor status, the IMA has collected data on these funds since July 2006.
At December 2009, FUM of these funds was £24.9bn representing data from 32 fund companies consisting
of 579 funds. This figure was up 56% compared to December 2008. This figure dropped slightly to £22.4bn
by the end of the first half of 2010.
Total net sales of non-UK domiciled funds were £1.7bn in 2010, almost entirely offsetting the net outflow in
2008. T his w as al most ent irely dr iven b y r etail i nvestment ( £1.6bn). N et s ales of of fshore funds w ithin t he
IMA Absolute Return sector were positive at £710m, though the majority of these sales were to institutional
investors (£500m). Overall, the first half of 2010 saw further steady net inflows of £597m, again driven mainly
by retail investment (£492m).
6.3 UCITS Funds
UK domiciled UCITS funds accounted for just under 96% of total FUM at end June 2010, the same as the
last few years. UCITS funds recorded total net inflows during 2009 of £27.4bn, and £16.5bn during the first
half of 2010. This is in contrast to 2008 when UCITS funds experienced net outflows £1.8bn, the first time
that such outflows had happened.
Equity f unds, as a n as set c lass, c ontinue t o dom inate U CITS f unds, and ac counted f or 61% of al l U CITS
assets at the end of June 2010. This is a figure which fluctuates with market movements but which has been
in decline in recent years, as investors have diversified their holdings over a wider range of asset classes.
Equity funds experienced net inflows of £8.8bn in 2009, the first time net inflows of these funds have been
positive since 2006 and the highest net inflow since the dot-com highs 2000. This trend continued into 2010,
with equity funds seeing further net inflows of £3.3bn.
Bond funds were the main driving force behind the all time high for total net sales of UCITS funds in 2009.
Bond funds recorded a net inflow of £10.7bn in 2009, almost six times the figure for 2008. The £Corporate
Bond sector was the best selling retail sector for the first eight months of 2009. In the first half of 2010 bond
funds s aw a m arked dec line i n n et inflows, o nly £432m i n t he f irst s ix m onths. A t t he end of J une 2 010,
bonds funds accounted for 21% of total FUM in UCITS funds – the same as 18 months earlier.
Balanced funds saw continued net inflows in 2009, well up on the previous year and approaching the levels
seen in 2006 and 2007. The very large increase in these inflows seen in the first half of 2010 was due to the
adoption of a U CITS s tructure f or f unds pr eviously r un ou tside t he i nvestment f unds i ndustry. A l ot of
balanced f unds are f unds of funds. UCITS fund of funds hav e per formed well i n comparison to t he overall
UCITS m arket in r ecent years. F UM i n f unds of funds at end D ecember 2009 w ere u p 45% f rom a y ear
earlier at £30.8bn while UCITS FUM in total rose by 31%. This relative growth of funds of funds continued
into the first six months of 2010. At the close of June 2010, funds of funds accounted for 7.2% of total FUM
in UCITS funds – up from 6.2% at the beginning of 2009.
Funds in the “other” category fared very well in 2009 and the first half of 2010, largely due to the Absolute
Return sector, which saw net retail sales of £4.0bn in 2009 and £3.4bn in the first half of 2010. This sector
has been one of the best selling sectors since it was launched in April 2008.
6.4 Other nationally regulated funds
At t he en d of J une 2 010, FUM i n NURS pr operty f unds were £ 10.2bn, up f rom £6.9bn at e nd 2 008, an
increase of almost a half. Net sales of these funds were almost £1.5bn in 2009, more than reversing the net
outflow experienced during 2008 (£1.2bn) against the backdrop of a steep correction of the UK commercial
property market. Investor interest in the property market seemed to have been restored by 2009, with the
Property sector being the best selling retail sector in October 2009, November 2009 and January 2010. In
the first half of 2010, net sales of NURS property funds of £1.3bn continued the trend of 2009.

7.1 Regulatory developments
In the light of the financial crisis, the FSA has introduced more intrusive and prescriptive oversight of firms.
Whilst ban ks ar e pr imarily t he f ocus, several of t hese i nitiatives ha ve b een a pplied t o as set m anagers,
though commonly on a more proportionate basis than for banks:
• stress testing: larger asset managers will be required to conduct reverse stress tests to identify the
level of risk which could result in the firm being no longer able to trade;
• liquidity: asset managers now need to implement additional systems and controls to identify, monitor
and control liquidity risk within the management firm;
• remuneration (compensation) r ules dr awn from the G 20 w ork. H owever, asset m anagers ar e not
required to follow the prescriptive requirements imposed upon banks.
Work has c ommenced at the IMA up on Principles f or O perational R isk Mana gement w hich will result in a
publication in 2 010. T his i s des igned t o c omplement t he I MA’s I ndividual C apital A dequacy Assessment
Process (ICAAP) Guidance, which was published at the end of 2008 and is well-used.
In July 2010, the Government announced a new regulatory structure for the UK. Under this structure, banks
and insurance c ompanies will b e pr udentially r egulated b y t he new Prudential Regulation A uthority ( PRA)
and all firms will be regulated on conduct of business by the new Consumer Protection and Markets Authority
(CPMA), including investment managers. Clearing and settlement systems will be supervised by the Bank of
England, a longside i ts ex isting r esponsibilities f or pa yment s ystems. A nd t he G overnment i s t o c onsult
separately on whether t he U K Li sting A uthority s hould b e m erged w ith t he F inancial R eporting C ouncil
(FRC), under the Department for Business, Innovation and Skills (BIS).
7.2 Pensions
With the change of Government, there will be some potentially significant alterations to pensions regulation.
While a review of the 2012 automatic enrolment reforms is not expected to result in a fundamental rethink,
the G overnment has s ignalled a m ajor c hange of d irection with r espect to annuitisation. I t is c urrently
consulting on proposals to end the effective requirement to annuitise by 75 and has signalled its intention to
introduce a far more flexible regime for future retirees.
In ot her areas, t he work of t he P ension R egulator’s I nvestment G overnance G roup (IGG) c ontinues. The
IGG is charged with working further on the Myners Principles, introduced as a voluntary code in 2001. The
IMA c hairs a Subgroup on D C pe nsions, which c onsulted on i nvestment go vernance pr inciples and best
practice guidelines for trust-based and c ontract-based DC work-based schemes. The principles are
expected to be finalised before the end of the year.
7.3 Tax rules, VAT rules and double tax treaties
A number of improvements to fund tax rules were made in 2009/2010, making UK funds tax-efficient:
• there is now legislative certainty that authorised funds will not be taxed as traders, thus preserving
the benefit of the UK exemption from tax on chargeable gains;
• there is now a tax-efficient regime for securities funds (which complements the tax-efficient regime
for r eal estate f unds i ntroduced i n 20 08). R egulations on " tax e lected f unds" came i nto f orce i n
September 2009. Distributions from TEFs are streamed into dividends and non-dividends. As
dividends are generally exempt in the fund from tax, and a corporation tax deduction can be claimed
against the non-dividend stream, no tax sticks in the fund itself;
• from 1 July 2009 authorised funds are no longer subject to tax on foreign dividends;
• there is n ow p arity of t reatment i n t he t axation of U K an d of fshore, equi ty and b ond f unds. U K

investors in offshore bond funds are now taxed on an interest return, akin to distributions from UK
bond f unds. Also, U K i nvestors r eceiving d ividends from of fshore equi ty f unds c an no w c laim t he
dividend tax credit which is available to investors receiving dividends from UK equity funds;
• there is now a “Genuine Diversity of O wnership” ( GDO) c ondition ( in ef fect a “ n ot intentionally

closely held” requirement), which applies in a number of circumstances but importantly has replaced
the ( in p ractice unworkable) s ubstantial o wnership t est f or Q ualified I nvestor Schemes, which c an
now be sold to sophisticated investors without being impeded by complex tax rules.
The new Government has announced that it will introduce authorised tax-transparent vehicles, remove the
double fund-specific Stamp Duty Reserve Tax charge on funds investing in other funds, and address other
issues in the tax code that might prevent the UK from capitalising fully on UCITS IV and the AIFMD.
As regards offshore funds, the reformed reporting fund tax regime came into force from 1 December 2009.
This s implifies t he r ules a nd g ives as m uch c ertainty as pos sible f or no n-UK funds, t heir m anagers an d
investors. Finalised HMRC guidance on the reformed reporting fund regime for offshore funds was issued in
May 2010.
All ECJ decisions regarding the VAT treatment of fund administration and intermediation have been
transposed into nat ional l aw. There i s a dom estic c ase pend ing on t he VAT t reatment of i nvestment
management services supplies to occupational “defined benefit” pension schemes, which is not expected to
be heard until February 2011.
The U K, with o ver 100 c omprehensive D ouble T axation Agreements, has t he most ex tensive n etwork of
double tax agreements in the world.
All authorised funds are subject to tax, irrespective of which regime they are taxed under (equity, bond, tax
elected f und or pr operty authorised i nvestment f und), and t herefore c an s ecure t he ben efits of doubl e t ax
agreements. All UK tax regimes are conditional, including:
• all income must be distributed at each accounting date at the minimum;
• income must be either taxed in the fund under corporation tax or withheld on distribution (at 20%) to
non-exempt investors;
• investment returns must be split between income and capital; and
• the TEF and PAIF regimes require a “GDO” condition (see above) to be met.
8. Investment management governance

IMA m embers ar e major i nvestors f or t heir c lients i n c ompanies, hol ding ar ound 4 0% of t he U K equity
market, and take an active r ole i n representing our members' interests as institutional investors on
stewardship, and corporate governance and reporting issues. 2009 was a busy year.
Sir D avid Walker i ssued hi s f inal r ecommendations in t he s ummer on c orporate go vernance i n financial
institutions. The IMA met with Sir David before, during and after his review and provided frequent input, as
well responding to the formal consultations.
The IMA welcomed many of his recommendations in respect of both the governance of banks and the role of
institutional s hareholders. He ad dressed a number o f our c oncerns and the IMA welcomed hi s f ocus on
enhancing t he be havioural as pects of t he c onduct of a boar d’s bus iness, r ather t han imposing m ore r ules
and regulations.
The Financial Reporting Council also consulted on reforms to the Combined Code, now to be termed the UK
Corporate G overnance C ode. I MA welcomed many of t he pr oposals, particularly t he c onclusion t hat t he
Code r emains f it f or pur pose an d t he f ocus o n conduct r ather t han prescription. T he m ost c ontroversial
aspect of the paper, however, is whether Boards should be made more accountable by annual re-election.
As a m ember of the Institutional S hareholders' C ommittee ( ISC), the IMA w ere a co-author of t he
Stewardship Code which was based on the ISC Statement of Principles. This was issued in November and
has been gen erally w ell-received. The G overnment as ked t he F inancial R eporting C ouncil ( FRC) t o t ake
responsibility for the Code. Following the FRC’s consultation, it published the Stewardship Code with limited
amendments to reflect some of the points in Section E of the former Combined Code at the start of July. The
FSA is c urrently c onsulting on a regulatory requirement that as set m anagers d isclose their c ommitment to
the Code or their alternative business model on a web site.
One of the issues the FRC is looking at is how adherence to the Code should be monitored. The IMA has
monitored adherence to the ISC Statement of Principles for a number of years through a regular survey. The
most recent survey, which covered 32 managers that manage 66% of all UK equities managed, showed that
managers’ adherence to the ISC Statement of Principles has increased over the previous six years. The IMA
is developing this survey under an independent steering group and will be surveying institutional investors’
adherence to the Stewardship Code as at 30 September 2010, aiming to publish a report by March 2011.
9. Fund Standards and Distribution

9.1. Standards
The I MA launched its F und P rocessing P assport ( FPPs) r epository on S eptember 2009. The l aunch was
with six member firms contributing FPPs initially for both their UK and offshore European fund ranges. Since
then, one of the UK's largest fund management groups has added FPPs for its offshore funds and is in the
process of compiling the data for its UK range, and another major group is working actively towards loading
the FPPs for its funds. The repository now contains more than 800 FPPs.
The I MA has updated its Fund Processing P rinciples i n or der t o r ealign t hem w ith E FAMA's ex panded
recommendations for fund processing efficiency in Europe. The IMA continues to work closely with EFAMA
on the further development of its recommendations.
We are seeing increasing attention being given to the ISO 20022 standard for financial messaging, which is
the cornerstone of the Fund Processing Principles and the EFAMA recommendations, as a result of a wider
industry initiative to increase the availability of asset re-registration between fund platforms. This initiative is
leading t owards a c ommitment b y t he i ndustry t o a dopt I SO 200 22 m essaging as par t of t he ef fort t o
automate and improve the process.
9.2. Distribution
There hav e be en no new i nitiatives in t he ar ea of distribution in 2009/10. However, t he U K r egulator

continues to consult on aspects of distribution through its Retail Distribution Review. Rules have now been
published which effectively ban advisers from soliciting or receiving commission and providers from offering
to pay commission. These rules will come into force at the end of 2012.
Work is also taking place regarding the increase in qualification and competence requirements which will, at
the same time, be imposed upon advisers (whether independent or working for product provider firms, such
as banks and insurance companies.
Discussions are taking place regarding the role and funding of platform propositions in the distribution chain.
Proposals put forward by the regulator include a ban on payments from the provider to the platform, so that
platforms are funded by the adviser and client, together with a ban on rebates of AMC altogether. The FSA
expects to publish a Consultation Paper on both of these issues later in 2010.

The year 2009 was dominated by recovery in the markets and, once again, by the actions of regulators and
legislators around the world in response to the credit c risis, many of which impact the as set management
industry. T he IMA c ontinues t o contribute its views, b oth on t hose initiatives which c ould i mpact t he asset
management i ndustry directly an d on t hose which af fect t he market i n w hich o ur members oper ate. Into
2010, a new Government in the UK has resulted in substantial proposed changes to the regulatory
architecture as well an I ndependent Commission o n B anking Reform. A ction i s also be ing t aken at
European level on remuneration which will have an impact on UK asset management businesses.
Research i s an i mportant element in t he IMA’s work for t wo main r easons. First, it enables us t o c omment
authoritatively on the activities of the as set management industry in the United Kingdom. Second, it h elps
us to have a clearer understanding of the wider environment in which the industry operates and to be able
to contribute credibly to policy debates.
Our annual Asset Management Survey, published in the summer of 2010, showed the scale of the industry
as w ell as h ighlighting k ey i ssues. The l atest o ne f ocused on a n umber of ar eas, including t he ong oing
response to the credit crisis, the future of the UK as an asset management centre and the role of investment
managers in providing more tailored solutions for clients.
The IMA has also been very active in a number of policy areas, publishing a jointly commissioned research
report on fund risk classification as well as continuing its detailed input into ongoing long-term savings and
pensions reform initiatives. In particular, there are now moves substantially to change the rules effectively
requiring annuitisation b y a ge 75. This will create in the longer term a much more flexible an d innovative
retirement income environment, in which asset managers will be able to play a greater role.
From January 2010, the IMA started to collect more granular data from fund companies about the sales and
re-purchases of their funds in order to better understand the distribution of funds through different channels.
The first information on the new basis was published in June 2010. This included fund companies’
transactions with platforms as a separate channel. At the same time, the IMA made available for the first time
information collected from some of the biggest fund platforms showing further detail, in particular about the
products within which funds were bought.
The IMA opened its sectors to offshore submissions from 1 April 2010. The funds are fully integrated in to the
existing sector classification system, allowing comparisons between funds to be made on a like for like basis.
The IMA issues good practice documents to provide members with help and guidance on a variety of issues.
During 20 09 and t he f irst ha lf of 2010, the IMA pr ovided g uidance on the pr esentation of reports
and accounts, fund suspensions, change events, liquidity management and pricing methodologies for
authorised f unds. The IMA upd ated t he guidance o n t he c alculation a nd distribution of b ond i ncome and
provided updated guidance on issues to be considered by firms prior to launching a hedged currency class.
In September 2009, the IMA published Guidance for A sset Managers on Internal Capital Adequacy
Assessment ( ICAAP). T his i s t he f irst of t wo gu ides on pr udential a nd operational r isk. The IMA pl ans to
publish the second guide, Principles of Operational Risk, later this year.
The IMA takes seriously its role in helping to train and educate staff in member organisations. In 2009, the
IMA ran a number of workshops on Risk Management, covering Operational Risk, People Risk, Regulatory
Risk and Senior Management, and Governance and Risk. The results from the workshops were discussed
at a members’ seminar in November and were published on the members’ website. During the first half of
2010 further good practice workshops were held on preparing for and managing an FSA ARROW visit, the
ICAAP and Valuation and Pricing.
The I MA held a number of s uccessful s eminars f or F SA policymakers and s upervisors t o improve t heir
business awareness, attended by around 400 delegates, including some from the Treasury and HMRC. The
IMA also ran a well-attended seminar especially for HMRC on the role of investment management.
COUNTRY REPORT - UNITED STATES

The United States entered 2009 on the heels of the worst financial crisis since the Great Depression.
Conditions i n f inancial m arkets began t o s tabilize and i mprove t hroughout 2009, r eflecting, i n l arge part,
government efforts to provide liquidity and strengthen financial institutions. Specifically, the Federal Reserve
maintained special credit and liquidity programs that had been instituted in 2008 and kept the federal funds
rate in a t arget r ange of 0 t o 0. 25 percent t hroughout 2 009 a nd the f irst ha lf of 2010 . U .S. s tock pr ices
bottomed o ut i n e arly March 20 09 f rom t heir r apid and s teep des cent over t he pr ior year an d a half and
rallied during the remaining 10 months of 2009 to become the strongest post-World War II bull market, with a
gain of 6 5 p ercent in t he S&P 500 I ndex. I n t he f irst s ix m onths of 20 10, ho wever, t he S&P 500 I ndex
declined 7. 5 per cent. C redit s preads o n c orporate bonds—the difference i n yields bet ween n on-triple-A
rated c orporate bo nds a nd T reasury s ecurities—narrowed s ignificantly during 2 009. Prices o n t hese
corporate bonds r ose as i nvestors per ceived a lower r isk o f def ault b y c orporate issuers. I n t he f irst s ix
months of 2010, credit spreads on corporate bonds widened slightly, but were still well below the levels seen
in 2008. Additionally, prices on Treasury s ecurities a nd triple-A r ated c orporate bonds declined in 20 09 as
investors largely unwound the flight to quality that characterized the financial crisis of 2008. This pattern was
reversed somewhat in the first six months of 2010 as concerns mounted over European sovereign debt and
investors increasingly turned to relatively less risky U.S. Treasuries, leading to falling yields and rising prices
on these securities.
Economic activity started to expand in the second half of 2009, with GDP growing at a 1.6% annual
rate i n t he t hird quarter, a nd 5% i n t he f ourth quarter. H owever, t hat gr owth has s lowed c onsiderably in
2010, with GDP growth rates of 3.7% and 1.6% in the first and second quarter of 2010, respectively. Among
the reasons for the tepid recovery are continued weakness in the labor market, modest income growth, lower
housing wealth, and tight credit conditions for households and small businesses. For example, the national
unemployment rate, which stood at 7.7% in January 2009, peaked at 10.1% in October 2009, and remained
at an elevated level of 9.5% as of June 2010.
Despite the sizable gains in the U.S. equity market in 2009, investors continued to withdraw cash from
1
domestic equity mutual funds. Investors pulled $40 billion, on net, out of mutual funds investing in primarily
U.S. stocks in 2009. Flows into equity funds that invest primarily in non-U.S. equities fared somewhat better
in 2009, garnering $31 billion i n net new cash. Nevertheless, these inflows were still quite modest
considering the strong performance of foreign stock markets during 2009. These trends in equity mutual fund
flows continued in the first half of 2010, with investors pulling $18 billion from domestic equity funds, while
adding $27 billion into international and global equity funds.
Investors’ dem and f or bon d f unds was v ery s trong during 20 09 as i nvestors added a r ecord $3 76
billion t o their b ond fund holdings, compared to an i nflow of $ 28 billion the pr evious year. So far i n 20 10,
inflows into bond funds has remained at about the same pace as in 2009, with investors adding $169 billion
into these funds in the first half of the year.
Money m arket f unds, pa rticularly t hose i nvested i n U .S. go vernment securities, experienced
substantial outflows in 2009 and the first half of 2010. This development likely reflects the search for higher
yields in an environment of low short-term interest rates accompanied by a steep yield curve and unwinding
of the flight to safety by investors in response to the financial crisis of 2007 and 2008. Investors withdrew
$539 billion in 2009 and an additional $509 billion in the first six months of 2010 from money market funds.
1
Net new cash flow equals new sales less redemptions plus net exchanges.
Statistical Update on U.S. Fund Activity
Complete U.S. fund industry statistical trends, updated monthly, are available on the ICI website at
www.ici.org/stats/latest/index.html. Comprehensive year-end information is available at www.icifactbook.org.
Open-Ended Mutual Funds
At t he end of D ecember 2009, total U .S. m utual f und as sets were $1 1.12 t rillion, with 44% ( $4.958
trillion) in equity funds, 30% ($3.316 trillion) in money market funds, 20% ($2.206 trillion) in bond funds and
6% ($641 billion) in hybrid funds.
The $11.12 trillion in total assets represents an increase of $1.519 trillion or 15.8% above the level of
December 2008. This change reflects a 34% ($1.253 billion) increase in equity funds, a 13% ($516 billion)
decrease in m oney m arket f unds, a 41% ( $639 b illion) i ncrease in bond f unds and a 2 8% ( $141 bi llion)
increase in hybrid funds.
At t he e nd of J une 2 010, total U .S. m utual f und as sets dec lined t o $ 10.5 t rillion, with 44% ( $4.600
trillion) in equity funds, 27% ($2.813 trillion) in money market funds, 23% ($2.456 trillion) in bond funds, and
6% ($635 billion) in hybrid funds.
The number of funds as of December 2009 was 7,691, down from 8,022 the year before. There were
7,618 funds as of June 2010.
From January 2009 to December 2009, net new cash flow to long-term funds was $390 billion, up from
a negative $225 billion the previous year. New sales and exchange sales totaled $2.378 trillion, or 41% of
total assets at the beginning of the period. Redemptions and exchange redemptions of long-term funds were
$1.989 trillion, or 34% of assets.
For t he s ix-month per iod ending J une 2 010, net ne w c ash f low t o long-term f unds was $ 178 billion.
Over t he s ame per iod, n ew s ales an d ex change s ales of t hese funds t otaled $1. 379 t rillion, while
redemptions and exchange redemptions were $1.201 trillion.
ETFs
Total U.S. ETF assets as of December 2009 were $777 billion, with 86% ($669 billion) in equity funds,
and 14% ($107 billion) in bond and hybrid funds. This represents an increase of $246 billion or 46% over the
$531 billion of ETF assets in December 2008. Net issuance of ETF shares in 2009 was $116 billion, about
35% less than the previous year. The number of ETFs as of December 2009 was 797, up from 728 the year
before.
As of June 2010, total U.S. ETF assets were $772 billion, with 83% ($642 billion) in equity funds, and
17% ( $110 billion) i n bo nd and h ybrid f unds. N et i ssuance of E TF s hares f or t he s ix-month per iod en ding
June 2010 was $38 billion. At the end of June 2010, there were 872 ETFs.
Closed-End Funds
Total U.S. closed-end fund assets as of December 2009 were $228 billion, with 41% ($93 billion) in
equity funds and 59% ($136 billion) in bond funds. This represents a decrease of $40 billion or 21% from the
$188 billion of closed-end fund assets in December 2008. The number of closed-end funds as of December
2009 was 627, down slightly from 642 the year before.
At the end of June 2010, total U.S. closed-end fund assets were $227 billion, with 39% ($87 billion) in
equity f unds an d 61 % ( $140 billion) i n b ond f unds. There w ere 62 4 c losed-end f unds at t he e nd of J une
2010.
Trends in International Investments
As of D ecember 200 9, assets of i nternational an d g lobal e quity and bond m utual f unds were $ 1.40
trillion, up 47% from $954 billion in December 2008. These funds represented 18% of total long-term fund
assets as of December 2009. There was a $53 billion net inflow to these funds in the twelve-month period
ending December 2009, up from the previous year’s outflow of $77 billion.
As of June 2010, total net assets of international and global equity and bond mutual funds were $1.33
trillion, representing 17% of total long-term fund assets. There was a $51 billion net inflow to these funds in
the six-month period ending June 2010.
Assets o f international an d gl obal e quity ETFs w ere $209 b illion in December 2009 , u p a bout 83 %
from $114 billion in December 2008. These funds represented 31% of total equity ETF assets in December
2009. As of June 2010, total assets of these funds were $197 billion, representing 30% of total equity ETF
assets.
Assets of i nternational and gl obal e quity and bond c losed-end f unds w ere $6 8 bi llion i n D ecember
2009, u p 7 0% from $40 billion in December 2008. T hese f unds r epresented 30% of t otal equity and bond
closed-end fund assets as of December 2009.
As of June 2010, assets of international and global equity and bond closed-end funds were $50 billion,
representing 22% of total equity and bond closed-end fund assets.
Regulatory and Self-Regulatory Developments
The f ollowing are s ome of t he s ignificant legal developments i mpacting m utual f unds during 200 9
and the first half of 2010. The financial crisis during the autumn of 2008 has had a significant influence on
the legislative and regulatory agenda of policymakers in the United States for the past two years. Legislative
efforts on bot h t he Senate and H ouse levels per sisted t hrough the s ummer o f 2010, c ulminating in t he
passage of Dodd-Frank Wall Street Reform and Consumer Protection Act in July 2010.
Money Market Funds. In response t o the turmoil in the money market i n late 2008, th e Institute
formed a Mone y M arket W orking G roup t o d evelop r ecommendations t o improve the f unctioning of t he
money m arket and, i n p articular, t he op eration a nd r egulation of m oney m arket f unds. The ef forts of t his
group r esulted in t he i ssuance of a r eport i n March 2009 with o ver t wenty r ecommendations, addr essing
areas such as liquidity, maturity, credit quality, client concentration, and disclosure as well as the authority of
a f und’s b oard t o as sure fair t reatment of a ll m oney m arket f und s hareholders i n t he event of ex treme
redemption requests.
In June 2009, the U.S. Securities and Exchange Commission (SEC) proposed amendments to the
regulation of m oney m arket f unds, i ncluding c hanges t hat would i mprove t he standards f or c redit quality,
liquidity a nd m aturity f or h oldings of money m arket f unds. In J anuary 2010, t he S EC adopted ne w r ules
designed t o s ignificantly s trengthen the r egulatory r equirements go verning m oney m arket funds and better
protect investors. For instance, the new rules require money market funds to have a minimum percentage of
their assets in highly liquid securities while limiting their ability to acquire lower quality securities. The rules
are also designed to enhance disclosure of portfolio securities and improve the operational aspects of money
market f unds. Upon ap proval of t hose amendments, S EC C hairman Mar y Schapiro c alled f or a s econd
round of rulemaking to address further issues, including the question of whether money market funds should
be f orced t o ab andon t heir s table p er-share v alue ( typically $1.00) an d t o l et t heir n et asset value “ float”
instead. The Institute firmly believes that “floating the NAV” would destroy money market funds as they exist
now, risking severe harm to investors and to issuers of short-term securities, including businesses, state and
local governments, banks, and the U.S. Treasury. The Institute continues to educate policymakers and the
public on the need to preserve the viability of money market funds with a stable $1.00 NAV.
Information on t hese de velopments, i ncluding t he R eport of t he Mone y M arket Working G roup as

well as the SEC’s money m arket fund proposal, i s available at http://www.ici.org/mmfs. A c hronology and
brief summary of the various government interventions i s available
at http://www.ici.org/fcr/resources/08_market_interventions.
Summary Prospectus and Prospectus Revisions. In January 2009, the SEC adopted revisions to
the form of a mutual fund’s prospectus. The revisions require key information to appear in plain English, in a
standardized order, at the front of every mutual fund’s statutory prospectus, in place of the current risk/return
summary. Additionally, t he S EC adopted am endments t hat permit a f und t o s atisfy i ts pr ospectus d elivery
obligations by providing investors with a summary prospectus, which includes the key information at the front
of the statutory prospectus, and making additional information, including the statutory prospectus, available
on the Internet and in paper upon request. The changes became effective March 31, 2009, with compliance
required for all new fund registrations and annual updates that are filed on or after January 1, 2010.
Mutual Funds and Retirement Savings. Sharply declining balances in 401(k) plan accounts led
some in ear ly 2 009 to c all f or s craping t he 4 01(k) system or replacing i t with a go vernment-sponsored
account, including in hearings before the House of Representatives’ Education and Labor Committee. The
Institute argued strongly in testimony on February 24, 2009, that the 401(k) plan is a success of public policy,
generating trillions of dollars in savings, and that while there is need to continue to improve 401(k) plans, the
market downturn should not be used as an excuse to give up on employment-based retirement savings. A
copy of t he I nstitute’s t estimony, which i ncludes r ecommendations t o s trengthen t he 4 01(k) s ystem, i s
available her e: http://www.ici.org/policy/ici_testimony/09_house_401k_tmny. N o policymaker has a dopted
the radical suggestions. George Miller (D-Ca), chairman of the House Education and Labor Committee and
a strong critic of 401(k) plans, has said he intends to “preserve and strengthen” 401(k) plans. The Obama
Administration has proposed t o expand r etirement p lan c overage u nder t he e xisting s ystem b y r equiring
employers that do not offer a 401(k) plan to offer payroll deductions to an Individual Retirement Account, and
automatically enroll employees into the payroll deduction (unless the employee opts out).
401(k) Retirement Saving Plans - Fee Disclosure. As a r esult of t he economic do wnturn,

proposals t o improve f ee d isclosure in 401(k) pl ans t o em ployees who participate i n p lans and employers
who s elect t he p lan’s s ervice pr oviders an d i nvestment m enu hav e gained m omentum. In J uly 2010, the
Obama Administration’s L abor D epartment released an i nterim f inal r ule r equiring r etirement pl an s ervice
providers to provide information on their fees to employers. The rule requires plan recordkeepers to serve as
conduits of information about the investments used in 401(k) plans and requires recordkeepers to disclose
an estimate of the cost to the plan of recordkeeping services. The Institute filed a comment letter supporting
the r ule an d r equesting t echnical c larifications, available at http://www.ici.org/pdf/24520.pdf. T he La bor
Department ex pects t o r elease s oon t he f inal pi ece of i ts l ong-term w ork on di sclosure—rules f or t he
information em ployees r eceive about t he pl an’s i nvestments and f ees. In May of 2 010, the H ouse of
Representatives passed, a s part of a larger bill, legislation t o require detailed disclosure t o employers an d
employees and effectively require that every 401(k) plan offer an index fund that is either a total U.S. stock
market fund, a total U.S. bond market fund, or a combination. The Institute and many others opposed the
index f und r equirement o n gr ounds t he g overnment s hould no t s ubstitute its j udgment f or t hat of pl an
fiduciaries who select plan menus. The full Congress ultimately enacted the larger bi ll without the 401(k)
provisions and the continuing work by the Labor Department to complete its disclosure agenda may make
legislation unlikely.
Target Date Funds. Because the financial downturn hit a wide range of asset classes, target date
funds c ame under s crutiny. I n F ebruary 2 009, t he Chairman of t he S enate Aging C ommittee ( Sen. H erb
Kohl ( D-WI)) as ked t he Department of L abor an d SEC to look i nto t arget dat e f unds. I n J une 20 09, t he
regulators held a joint hearing to consider whether to make any changes in their regulations. The Institute’s
testimony bef ore t he ag encies em phasized t he i mportance of t arget d ate f unds as an as set allocation
innovation, s tressed t hat t he differences am ong t arget date f unds r eflect d ifferent assumptions i n t heir
designs and that the agencies should not seek to regulate the target date fund designs as there is no one
”right” asset allocation glide path for these funds. Our testimony acknowledged that while target date fund
disclosure i s good, ga ps in understanding appear t o ex ist am ong investors and we pr esented i n t he
testimony Disclosure Principles to Enhance Understanding of Target Date Funds, developed by an Institute
working gr oup, r ecommending pr ominent display of f ive k ey p ieces of i nformation b y all target d ate funds,
whether organized as mutual funds, collective trusts or customized products. The Institute filed a statement
for the record in October 2009 in connection with a hearing of the Senate Committee on Aging in which the
Institute again argued against government intervention to redesign target date funds and in favor of
increased efforts to inform and educate retirement savers.
In 2 010, r egulators f ocused o n disclosure and e ducation in c onnection w ith target dat e funds. In
May 2010, the Department of Labor and SEC issued an Investor Bulletin to provide guidance on investing in
a t arget date f und. T he D epartment al so p lans t o i ssue gui dance t o p lan s ponsors f or s electing and
monitoring target date funds. In June 2010, the SEC proposed significant amendments to its anti-fraud and
advertising rules to detail information that must appear in target date fund marketing materials and ads. The
SEC d id not pr opose c hanges t o f und n ames, t he pr ospectus, or s ummary pr ospectus. T he I nstitute
comment l etter s upported t he s pirit of t he S EC pr oposal t hat f ocused on c ommunicating k ey pi eces of
information ab out t arget d ate f unds t o i nvestors an d us ed a gr aphic glide path i llustration t o c onvey t he
information ( but t he I nstitute m ade r ecommendations des igned to a void having t he SEC begin t o o verly
prescribe specific content of materials and to make the r ule more workable). T he Institute c omment l etter
also emphasized that any new rules for target date mutual funds should apply equally to target date funds
that are not mutual funds.
Institute materials on target date funds can be found at the ICI Target Retirement Date Funds
Resource Center at http://www.ici.org/trdf.
Lifetime Income. With the gr adual shift from defined benefit pension plans to defined contribution
plans as the primary retirement plan offered by private-sector employers, policymakers are focused on how
to assist workers in spending down their retirement assets over their lifetimes. Data showing the prevalence
of l ump s um di stributions f rom de fined c ontribution p lan ac counts has c aused c oncern am ong s ome t hat
participants ar e no t m aking opt imal us e of t heir s avings. Since m ost def ined contribution p lans ar e no t
required t o of fer annu ities or ot her l ifetime income op tions, pr oposals have c entered o n r equiring p lans to
offer these types of distribution forms or how to otherwise encourage employers to make them available, and
how t o enc ourage greater ut ilization of ann uities b y par ticipants. T he O bama Administration, t hrough t he
Departments of Labor and Treasury, in early 2010 asked for public comments on the use of lifetime income
options and, in September 2010, convened a hearing to further explore certain issues raised in submissions.
The Institute submitted a letter in response to the request for comments and testified at the hearing; copies
of our c omments an d testimony are available a t http://www.ici.org/pdf/24278.pdf
and http://www.ici.org/policy/ici_testimony/10_lifetime_income_state respectively. The Institute’s statements
describe the tradeoffs in various distribution options currently available to plan participants and IRA owners.
The I nstitute explained that i ndividual r etirees h ave di fferent circumstances and ne eds (although m any
already hold a significant portion of assets in annuity-equivalent form, including Social Security), and there is
no on e-size-fits-all ap proach t o m anaging as sets d uring retirement. T he I nstitute emphasized that th e
government s hould r ecognize t he validity of bo th annuity and no n-annuity approaches a nd that e ducation
and advice for the distribution phase is critically important. The Senate Aging Committee held a hearing in
June 201 0 f ocused on many of t he s ame i ssues as Labor a nd T reasury. T he I nstitute s ubmitted a written
statement for the hearing record similar to our submissions to Labor and Treasury. The Institute expects that
as a result of this process, DOL and Treasury will make modest changes to encourage greater availability
and use of lifetime income options.
Market Structure. In January 2010, the SEC issued a concept release examining the current structure
of the U.S. equity markets and whether the rules governing the markets have kept pace with the significant
changes in technology a nd t rading pr actices, a vailable at http://www.sec.gov/rules/concept/2010/34-
61358.pdf. In the release, the SEC asked for input from market participants, investors and policymakers on
a wide range of ideas for improving the U.S. market structure, and an array of specific regulatory proposals.
The Institute submitted a comprehensive l etter addressing a number of significant market issues, available
at http://www.ici.org/pdf/24266.pdf. Among other things, the Institute closely examined high frequency and
high speed trading – ultra-fast, computerized trading of stocks through complex algorithms – and its impact
on investors. The Institute also advocated greater market transparency to address concerns about
undisplayed liquidity, or hidden trading interest, as well as in order routing and execution practices.
nd
The SEC subsequently held a market structure roundtable on June 2 , to which the Institute offered its
views in two submissions. Each submission called for better coordination across the equity, options and
th
futures markets, particularly in light of regulatory gaps that affected the markets on May 6 . One submission
advocated updated market-wide and stock-by-stock circuit breakers, as well as better procedures for
resolving clearly erroneous trades. Further, the Institute urged the examination of both the use of market
orders and the inconsistent practices of exchanges addressing major price movements. In the second
th
submission, the Institute presented evidence and analysis of the impact of the May 6 market events on
ETFs, based on an Institute study of the issue. The Institute’s letters are available
at http://www.ici.org/pdf/24384.pdf and http://www.ici.org/pdf/24361.pdf.
The SEC issued numerous proposals for regulatory action in this area.
Flash Orders. In October 2009, the SEC proposed to amend Rule 602 of Regulation NMS to eliminate
an ex ception f or t he us e of “ flash or ders” b y e quity a nd opt ions ex changes. Flash or ders ar e or ders
communicated by a trading venue to certain market participants (and not initially to the market as a whole)
and either ex ecuted immediately or withdrawn i mmediately af ter c ommunication. T he I nstitute s ubmitted a
letter i n N ovember 2009 s upporting t he pr oposal a nd s hared t he SEC’s concerns r elating t o f lash or ders,
most significantly, the potential impact on the public display of trading interests in general and on the specific
order that are flashed, as well as the possibility of the creation of a “two-tiered” market. The Institute’s letter
is available at http://www.ici.org/pdf/23973.pdf.
Clearly Erroneous Trade Rules. On M ay 6, 2 010, m any t rades were c ancelled ac cording to t he
securities markets’ “clearly erroneous rules,” which provide the various securities exchanges with the ability
to cancel trades effected at prices sharply divergent from prevailing market prices. On July 19, 2010, the ICI
filed a c omment l etter with t he S EC supporting proposed SRO r ules t o i mprove t he pr ocess f or br eaking
erroneous t rades, av ailable
at http://stellent75.ici.org/intradoc/groups/attachments/documents/attachment/24437.pdf. Our letter raised
concerns, ho wever, t hat t he pr oposals o nly ad dress t he pr ocedural c omponent of t he r ules and not how
market participants are utilizing the rules themselves. Our letter, therefore, encouraged the SEC to ensure
that ex changes ar e vigilant i n ascertaining t hat t he r ules ar e not ab used a nd t hat t rades ar e broken on ly
when truly erroneous.
Dark Pools. On January 14, 2010, the SEC proposed measures intended to increase transparency of
dark pools (i.e., private trading systems in which participants transact their trades without displaying
quotations to the public). Among other things, the SEC’s proposals would require that a dark pool publicly
identify in real-time that is executed a trade (currently, public trade reports do not identify whether an over-
the-counter t rade was r eported b y a dark poo l a nd, if s o, its identity). The I nstitute submitted a l etter on
nd
February 22 supporting the goals of the SEC’s proposals – to encourage the greater display of quotations
to t he pu blic and t o avoid the creation of a two-tiered market t hat depr ives t he public of i nformation a bout
stock prices and liquidity. The letter, however, opposed the real-time display of the identity of the dark pool
where a trade is executed, as such disclosure may leave a “footprint” about orders executed by funds and, in
turn, lead t o t he f rontrunning of f und portfolio pos itions. T he I nstitute’s le tter is available
at http://stellent75.ici.org/intradoc/groups/attachments/documents/attachment/24137.pdf.
Risk Management Controls. In April 2010, the SEC proposed new Rule 15c3-5 under the Securities
Exchange Act of 1934 that would require brokers-dealers with access to trading directly on an exchange or
alternative t rading s ystem to i mplement r isk management c ontrols and s upervisory procedures r easonably
designed t o m anage t he f inancial, r egulatory, an d other r isks a ssociated with su ch access. While t he
Institute supported the goals of the proposal, it asserted in a comment letter, dated April 1, 2010, that funds
use market ac cess ar rangements s o as not t o i mpart t rading information t o t he t rading des ks o f br oker-
dealers and seek anonymity of their trading interest and that such anonymity would be damaged by the pre-
trade and post-trade controls and procedures that would be mandated by the rule.
High Frequency Traders. In April 2010, the SEC proposed a rule that would require (1) certain large-
volume, high-frequency traders to self-identify to the SEC; and (2) broker-dealers that effect transactions for
large trader customers to maintain and produce records of these customers’ trades to the SEC. The Institute
largely s upported t he c oncept of t he pr oposed r eporting s ystem, but r aised c oncerns a bout t he lack o f
confidentiality provisions for the reported information and the administratively cumbersome and costly
aggregation process, especially for entities that are part of a larger financial complex. The Institute’s June
nd
22 comment letter is available at http://www.ici.org/pdf/24381.pdf.
Consolidated Audit Trail. On May 26, 2010, the S EC pr oposed to require Financial I ndustry
Regulatory Authority (“FINRA”) and the national securities exchanges to jointly file a national market system
plan t o develop, implement, an d m aintain a c onsolidated au dit trail with r espect t o t he t rading of l isted
equities and options. According to the SEC, a consolidated audit trail would significantly aid it its and the self-
regulatory or ganizations’ e fforts t o det ect a nd d eter f raudulent an d m anipulative ac ts and practices in t he
marketplace as well as efforts to investigate and prepare market reconstructions and understand causes of
th
unusual m arket ac tivity. T he I nstitute submitted a letter on A ugust 9 , available
at http://www.ici.org/pdf/24477.pdf, s upporting t he pr oposal, but r ecommending t he har monization of t he
regulatory reporting requirements under the two proposals where possible to eliminate unwarranted costs.
Credit Rating Agencies. In ear ly 2 009 the SEC pr oposed a s eries of r eforms to br ing i ncreased
transparency t o t he c redit ratings pr ocess an d c urb practices t hat c ontributed t o t he t urmoil in t he c redit
markets. The SEC’s three-step reform proposal included measures designed to minimize conflicts of interest
and to improve investor understanding of credit ratings through enhanced disclosure of methods and
performance data. The third part of the SEC’s proposal focused on how the SEC’s own rules refer to and
rely upon c redit r atings. T he I nstitute generally s upported t he SEC’s e fforts r egarding i mproving
transparency as part of credit rating agency reform. The Institute’s comment letter on the SEC’s proposal to
impose addi tional d isclosure, r eporting an d r ecordkeeping r equirements on r ating agencies is a vailable
at http://www.ici.org/pdf/23359.pdf.
In O ctober, N ovember and December 2009, t he S EC proposed additional amendments that would
impose a series of new requirements on registered rating agencies to improve disclosure about credit ratings
and the ratings process and address conflicts of interest between rated issuers and the rating agencies. The
SEC also s olicited c omments r egarding measures t o enha nce l iability f or r ating agenc ies. O ur comment
letters are available at http://stellent75.ici.org/intradoc/groups/attachments/documents/attachment/24005.pdf
and http://stellent75.ici.org/intradoc/groups/attachments/documents/attachment/24122.pdf.
With the Dodd-Frank Wall Street Reform and Consumer Protection Act, Congress decided to codify
many of t he m easures t hat were a part of t he SEC credit r ating agency proposals as w ell as r equire
additional o versight r equirements t hat were not a p art of t he SEC pr oposals. A dditional and up dated
information on credit rating agency reforms can be found at www.ici.org/cra.
Short Sale Proposals. Beginning in September 2008, the SEC, like many regulators around the
world, i nitiated em ergency and other r egulatory actions r elating t o s hort s ales as a r esult of t he f inancial
turmoil. S pecifically, the SEC imposed a s eries of em ergency orders t o r ein in s hort s elling in s tocks o f
financial c ompanies and a lso adopt ed on an em ergency basis a t emporary i nterim final r ule, R ule 20 4T,
designed to address abusive “naked” short selling, as well as another rule, Rule 10a-3T, designed to provide
the SEC with information regarding the short positions of major market participants.
“Naked” Short Selling. In July 2009, t he S EC a nnounced t hat R ule 204T , w hich was, i n par t,
designed to reduce abusive “naked” short selling, would be permanent (now Rule 204). The now permanent
rule requires broker-dealers to promptly purchase or borrow securities to deliver on a short sale. The SEC
also announced that it would work with several self-regulatory organizations to make short sale volume and
transaction dat a a vailable through t he organizations’ W eb s ites. This action was t aken i n l ieu of m aking
permanent the interim rule, Rule 10a-3T, that had required institutional investment managers to report to the
SEC their short sales and short positions in certain securities. In addition, the SEC announced that it would
hold a public roundtable to discuss securities lending and pre-borrowing as well as other possible short sale
disclosure requirements.
Alternative Uptick Rule. On F ebruary 2 4, 2 010, the S EC a dopted t he “ alternative uptick r ule,”
placing additional restrictions on short sales. Under the new rule, if a particular stock’s price declines from
the previous day’s closing price by 10 percent, short sales for the remainder of that day and the following day
in that s tock w ill on ly be permitted at a pr ice a bove the c urrent national b est b id. A ll br oker-dealers a nd
trading centers will be required to adopt policies and procedures to assure compliance by market participants
with the rule. The Institute, in its comment letter, did not support any new restrictions on short sales. The
Institute’s position was based on the fact that there is no empirical evidence that new restrictions would have
alleviated any of t he m arkets’ v olatility or t hat ne w r estrictions would increase investor c onfidence in t he
markets. W e were al so c oncerned t hat t he ne w restrictions c ould c reate un intended consequences f or
investors. T he In stitute’s c omment l etter is available
Circuit Breakers. In May 2010, the national securities exchanges and F INRA proposed s ingle s tock
circuit breakers in response to the market events of May 6. The flash crash of May 6 highlighted the need to
implement a trading pause for individual securities in times of market stress to mitigate instances of sudden
market volatility. Under the proposed rules, trading in a stock would pause across U.S. equity markets for a
five-minute period in the event that a stock experiences a 10 percent change in price over the preceding five
minutes. T he c ircuit br eakers w ould f irst be i mplemented v ia a p ilot pr ogram c onsisting of t he s tocks
comprising the S&P index. The Institute strongly supported the proposed rules, yet urged the SEC to include
in t he p ilot pr ogram, as soon as p ossible, E TFs t hat t rack t he S &P 500 or i ndices with substantially
overlapping s ecurities. The I nstitute’s letter i sa vailable
Accounting. In J une 2010, the FASB issued a proposed Accounting Standards Update t hat sets
forth a c omprehensive ap proach t o f inancial instrument c lassification and m easurement, i mpairment, and
revisions to head accounting. Under the proposal, most financial instruments, including loans held by banks
and hel d-to-maturity s ecurities, would b e m easured at f air v alue with c hanges i n value r ecognized in net
income, unless an instrument qualifies and the reporting entity elects to recognize the changes in value in
other comprehensive i ncome. The proposal represents the F ASB’s move from amortized cost-based
reporting to fair value-based reporting. The proposal would affect investment company financial reporting. In
particular, the proposal would require: (1) transaction costs on portfolio trades to be expenses and included
in the expense ratio, (2) money market funds to report their holdings at fair value (in lieu of amortized cost) in
their financial statements, and (3) liabilities to be measured at fair value, with changes in value reflected in
the net increase/decrease in net assets in the fund’s statement of operations.
Tax Developments
Regulated Investment Company Modernization Act. Tax legislation to modernize the tax rules
that apply to funds registered for sale in the U.S. advanced this year with strong support from the Institute.
The bill addresses a few important structure and products issues as well as numerous technical ones. The
tax benefits of investing in a fund of funds would be enhanced; the foreign taxes paid by the lower-tier fund –
which are creditable against U.S. tax by investors in the lower-tier fund – would become creditable as well by
investors in the upper-tier fund. Another change would permit funds to invest more efficiently in
commodities; the income generated by commodities would become “qualifying” income under the bill. A
small increase in the portion of a fund’s capital gains that must be distributed to investors each calendar year
was added in September before the U.S. House of Representatives approved the bill; this change was
needed so that the overall bill would gain (rather than lose) tax revenues. This revenue-raising provision
increases the likelihood that the U.S. Senate will consider the bill this year.
Flow-Through of Interest and Short-Term Capital Gains to Non-U.S. Investors in U.S. Funds.
Congress has not yet acted on legislation to extend for another year the “flow-through” provisions (enacted
first in 2005) that permit foreign investors in U.S. funds to receive distributions attributable to interest and
short-term capital gains without incurring U.S. withholding tax.
2011 Tax Rates and Other Important Issues. Congress likewise has not acted on tax provisions of
broader effect that expire at the end of 2010. These provisions, which were enacted in 2001 and 2003,
include lower maximum rates on dividends and long-term capital gains and more favorable tax treatment of
decedents’ estates. Another important proposal that has not been considered this year would permit fund
shareholders to defer tax on automatically reinvested capital gain dividends.
Foreign Account Tax Compliance Act (“FATCA”). Legislation enacted in March that becomes
effective on January 1, 2013, will impose substantial recordkeeping and reporting obligations on U.S. funds
with foreign financial institution (“FFI”) shareholders and on FFIs that invest in U.S. securities. The Institute
and many others, including both U.S. and non-U.S. firms and associations, are engaged in detailed
discussions with the U.S. Treasury Department and the Internal Revenue Service (“IRS”) regarding the need
for administrable FATCA guidance.
Cost Basis Reporting. Final regulations issued by the IRS in October 2010 adopt many of the
Institute’s suggestions for implementing mandatory cost basis reporting legislation enacted in 2008. These
new reporting rules will require funds and brokers to report to fund shareholders, who redeem or sell shares
purchased on or after January 1, 2012, both the cost basis of the shares redeemed/sold and whether any
gain or loss is long-term or short-term. These rules apply to other equity securities purchased on or after
January 1, 2011.
Corporate Governance Developments
Proxy Access. In J une 2009, t he SEC proposed changes t o t he f ederal proxy r ules t o m ake i t
easier for a shareholder to nominate directors of companies, including mutual funds. The proposal included
a ne w r ule that would r equire c ompanies, in c ertain c ircumstances, t o i nclude s hareholder nominees f or
director in t he c ompanies’ pr oxy m aterials. A s hareholder or gr oup of s hareholders would ha ve t o m eet
certain ownership thresholds that would be tiered based on the size of the company. In addition, companies
would b e pr ecluded f rom ex cluding f rom t heir pr oxy m aterials s hareholder pr oposals b y qualifying
shareholders t hat am end, or r equest an am endment t o, a c ompany’s governing d ocuments r egarding
nomination procedures or disclosures related to shareholder nominations, provided the shareholder proposal
does not conflict with the new proposed rule. The SEC’s proposal is available
at http://www.sec.gov/rules/proposed/2009/33-9046.pdf.
The Institute supported the SEC’s proposal to allow qualifying shareholders to submit bylaw
amendments c oncerning director nomination pr ocedures on a p ublic operating company’s proxy statement
but op posed t he pr oposal to per mit s hareholders t o nom inate di rectors on a p ublic oper ating c ompany’s
proxy s tatement. In t he c ase of mutual f unds, t he I nstitute qu estioned whether t here had been s ufficient
consideration of the need for proxy access requirements and, if so, how they should work. As a result, the
Institute recommended that mutual funds be excluded from the proposal and instead that the SEC consider
whether a proxy access proposal should apply to mutual funds at all, and if so, how such a proposal should
be dr afted t o be tter s uit t he un ique attributes of m utual f unds. T he I nstitute’s comment l etter i s available
at http://www.ici.org/pdf/23725.pdf.
On August 25, 2009, the SEC adopted the proposed changes to the federal proxy and other rules.
The Adopting R elease i s available at http://www.sec.gov/rules/final/2010/33-9136.pdf. T he adopted rule is
being c hallenged i n c ourt b y US bus iness gr oups such as t he C hamber of C ommerce and B usiness
Roundtable.
Fund Governance Developments
U.S. Supreme Court - Mutual Fund Fee Case. The S upreme C ourt of t he United S tates heard
arguments i n t he c ase of Jones v. Harris Associates in N ovember 2009 . A t i ssue i n t he c ase was t he
standard a f ederal c ourt would us e t o r eview a c laim b y a f und s hareholder al leging t hat a f und a dviser
received excessive fees under Section 36(b) of the 1940 Act. The Seventh Circuit’s decision departed from
the standard established in 1982 by the U.S. Court of Appeals for the Second Circuit in Gartenberg v. Merrill
Lynch Asset Management Inc. In September 2009, ICI filed a brief in support of Harris Associates, available
at http://www.ici.org/pdf/09_scotus_jvh_ici_brief.pdf. On Mar ch 30, 2010, the S upreme C ourt una nimously
affirmed t he l ong-standing Gartenberg standard, which was a h istoric and c rucial ou tcome f or t he m utual
fund industry. Specifically, the Court held that, in order to be found liable in a shareholder suit brought under
Section 36(b) of the 1940 Act, an investment adviser must charge a fee that is “so disproportionately large
that i t b ears n o r easonable r elationship t o t he s ervices r endered an d c ould not ha ve b een t he product of
arm’s length bargaining.”
Other Developments
U.S. Financial Regulatory Reform Efforts. Throughout 200 9 and 2010 there w ere a number of
Congressional he arings an d a v ariety of pr oposals put f orth on t he t opic of f inancial s ervices r egulatory
reform. In June 2009, the Obama Administration issued a white paper outlining its plan for financial services
regulatory reform. The paper included recommendations designed to meet five key objectives: (1) promote
robust s upervision and r egulation of f inancial f irms; ( 2) es tablish c omprehensive s upervision of f inancial
markets; (3) protect consumers and investors from financial abuse; (4) provide the government with the tools
it needs to manage financial crises; and (5) raise international regulatory standards and improve international
cooperation. I n s upport of t he Administration’s go als, t he I nstitute of fered r ecommendations f or
strengthening t he SEC, c losing r egulatory gaps, and f ashioning an effective approach t o s ystemic r isk
regulation t o be tter pr otect i nvestors a nd t he f inancial s ystem gener ally. With r espect t o t he SEC, t he
Institute ur ged l awmakers to pr eserve t he S EC’s r ole as t he r egulatory s tandard s etter f or funds and t heir
service providers. The Institute also recommended that the SEC have clear authority to oversee hedge fund
advisers, t o increase t ransparency and r educe c ounterparty r isk of ov er-the-counter derivatives, a nd t o
ensure t hat i nvestors ha ve t imely ac cess t o r elevant and r eliable information abou t m unicipal s ecurities
offerings. On addr essing s ystemic r isks t o t he f inancial s ystem, t he I nstitute has ad vocated t he
establishment of a “Systemic Risk Council,” chaired by the Secretary of the Treasury, the Federal Reserve
Chairman, and the heads of other banking and capital market regulators as members. Paul Schott Stevens’
testimony before t he C ommittee on Banking, H ousing a nd U rban A ffairs, is av ailable
at http://www.ici.org/pressroom/speeches/09_reg_ref1_jul_tmny.
The Dodd-Frank Wall Street Reform and Consumer Protection Act was signed into law by President
Obama on J uly 21, 20 10. The A ct c onsists of s ixteen d istinct T itles o n a wide variety of t opics t hat, once
implemented b y t he r equired r egulations, w ill s ignificantly a lter t he U .S. f inancial r egulatory s ystem. The
covered topics include the creation of Financial Stability Oversight Board designed to mitigate systemic risk
and maintain system-wide financial stability, the orderly liquidation of failing non-depository institution
financial c ompanies, t he e stablishment of an i ndependent bur eau within the F ederal R eserve Board t o
protect c onsumers of c ertain f inancial pr oducts, the r egulation of ov er-the-counter der ivatives, an d t he
Volcker r ule that pr ohibits i nsured d epositary institutions and t heir af filiates f rom c onducting proprietary
trading a nd i nvesting in he dge f unds a nd pr ivate equity f unds, et c. The A ct requires ex tensive r egulations
and studies t hat will be conducted ov er t he nex t year or t wo i n or der t o be implemented. A ccordingly, t he
ultimate impact of the Act, particularly on registered investment companies, is not yet known.
Investment Adviser Custody. In May 2009, the SEC proposed amendments to the rule governing
custody arrangements for registered investment advisers. The amendments are designed to provide
additional s afeguards and were pr oposed i n r esponse t o r ecent enf orcement ac tions al leging f raudulent
conduct, i ncluding m isappropriation or ot her m isuse of i nvestor assets. The a dditional s afeguards would
require registered investment advisers that have custody of client funds or securities to undergo an annual
surprise examination by an independent public accountant to verify client funds and securities. In addition,
when an adviser or an affiliate maintains client assets (rather than an independent qualified custodian), the
adviser or affiliate will need to obtain, at least yearly, a written report from an independent public accountant
that includes an opinion regarding the qualified custodian’s controls relating to custody of client assets. On
December 30 , 2009, t he S EC a dopted t he pr oposed am endments t o i nvestment ad viser c ustody r ules,
available at http://www.sec.gov/rules/final/2009/ia-2968.pdf.

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ARGENTINA COUNTRY REPORT

January 2009 – June 2010

From January 1, 2009 to December 31, 2009

1. Economic and financial background

2. Data on funds under management and portfolios

December 31st, 2008

4. Regulatory and self regulatory developments

5. Corporate governance - major developments

8. Other major issues and developments

1. Economic and financial background

2. Data on funds under management and portfolios

December 31st, 2009

4. Regulatory and self regulatory developments

5. Corporate governance - major developments

8. Other major issues and developments

XXIV ANNUAL MEETING

VIÑA DEL MAR, CHILE

AUSTRALIAN MEMBER REPORT

1.1. General Economic and Market Data

Table 1: Key Economic Indicators*

Population (millions) 22.5

Annual GDP ($ trillion) 1.223 (2009 - 10)

Annual GDP growth rate 3.3%

Inflation rate (%) 3.1%

Unemployment rate (%) 5.1% (Oct 2010)

Stock market capitalisation ($ trillion at 7 Oct 2010) 1.65

Official Interest Rate (14 Oct 2010) 4.5%

*All figures as at 30 June 2010 unless otherwise stated

1.2. Data on funds under management and portfolios

Year Total assets under management Total assets under management

2001 331 642

Note: Exchange Rate taken at end of each financial year

Asset class A$ millions

Equity funds 495,370

Bond funds 87,477

Money market funds 278,064

Total (excluding Fund of Funds) 1,351,249

Total in US$ 1,151,670 million

2. Data relating to investors in Mutual Funds / Unit Trusts

No such data is available.

• FSC represents the industry to government, regulatory and media stakeholders to

3.1 Are funds of other countries sold?

3.2 Are your funds allowed to invest abroad?

Yes, there are no restrictions imposed.

4. Legal & Regulatory developments

Review into the governance, efficiency, structure and operation of the

The final report can be viewed at: http://www.supersystemreview.gov.au/

Review of financial advice

International Regulatory and Tax Developments

• Progressive reduction of withholding tax on certain distributions from Australian managed

FSC self regulatory Industry Standards and Guidance Notes

• Provide a Compliance Statement by 30 September each year setting out their

• The compliance statement is then signed by a Director or a representative of that

• By using the Trustmark on a financial product or in relation to a financial service, the

5.1 Statistic Position

This data is not available.

6. Systems and Practices in Marketing of Funds

6.1 Do the Regulations specify any maximum rates for commission to

There is no limit for managed funds.

6.4 Is there a general or specific Regulation or Rule governing intermediaries selling

Superannuation funds are prohibited from offering inducements to investors or employers.

8. Risk Management Systems

8.1 Is there a risk management system prescribed by the Regulator? Yes/No