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SECURITIES INVESTMENT TRUST FUNDS MAY BE OF-FERED AS UMBRELLA FUNDS
Carol Wu
In a letter dated 30 June 2004, the Securities and Futures Bureau (SFB) permitted securities in-vestment trust enterprises to offer and issue se-curities investment trust funds in the form of umbrella funds, which apply the concept of asset allocation. The main points are as follows:
An umbrella fund may have no more than three sub-funds. They must be made the subject of a single application, and must be offered at the same time. If any of the sub-funds does not achieve the conditions for its establishment, the entire umbrella fund should not be established.
A fund under an umbrella fund may be an equity fund, a balanced fund, a fund of fund, a principal guaranteed fund, or an index fund.
A separate securities investment trust agree-ment should be concluded for each sub-fund, stipulating the following:
1.If any sub-fund does not achieve the con-ditions for its establishment, the umbrella fund should not be established.
2.No automatic conversion mechanism is allowed between sub-funds. Conversion between sub-funds may only be made on application by an investor. The conversion fee may be set by the manager.
The issuer must produce a prospectus stating for each sub-fund the scope of its investments, its segmentation, and an analysis of its simi-larities and differences with the other sub-funds. If the content of any matter stated in the prospectus applies to all sub-funds, this may be indicated, and the content concerned need not be repeated.
