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MAURITIUS

as a Base for International

Mutual FundsUday K. Gujadhur

December 5, 2003

ssociation of Offshore Management Companies


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Mutual Fund IndustryMutual Fund Industry -- OriginOrigin

Established in 1989 with the enactment of : Stock Exchange Act 1989

Unit Trust Act 1989

Companies Act 1984

The National Mutual Fund was launched

In 1992 the MOBA Act 1992 was enactedwhich gave rise to offshore funds


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FUND INDUSTRY IN MAURITIUSFUND INDUSTRY IN MAURITIUS

Domestic Funds

Global Funds


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Definition : Investment EntityDefinition : Investment Entity

Investment entity means : An Investment Company

An authorised Mutual Fund

A Unit trust scheme Any other Collective investment arrangement established

with objective of allowing participants to spread their

investment risk and benefit from the management of asset.


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FUND INDUSTRY IN MAURITIUSFUND INDUSTRY IN MAURITIUS

Domestic Funds

Open and closed ended

Unit Trust Funds and Fund managers regulated by FSC

Minimum capital requirement for fund manager is MUR 5

million (approx. USD 175,000).

Up to 40% of the corpus can be invested overseas subject

to FSC approval.

10 open ended {out of which 8 Unit trusts (1 listed) and 2

companies} and 12 close ended funds (all listed)

Taxed as tax incentive companies at 15%


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Close and Open Ended Funds in Mauritius

0

10

20

30

4050

60

70

2000 2001 2002 2003

YEAR

NA

V

inMillionUSD

Open

closed

Domestic Fund Industry inDomestic Fund Industry in

MauritiusMauritius


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GlobalGlobal FundFunds in Mauritiuss in Mauritius

Over 263 funds representing NAV of USD 6.6 bn.

Primarily India related Funds

Also Asian Regional funds and Africa Fund

Hedge funds

Single- tier or two tier

Open or close ended

Listed Portfolio funds

Private Equity funds

Debt funds


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Legal FrameworkLegal Framework

The Companies Act 2001

The Financial Services Development Act 2001

The Protected Cell Company Act 1999

Unit Trust Act 1989The Financial Intelligence and Anti-Money Laundering Act 2002

The Prevention of Corruption Act 2002 and The Prevention of

Terrorism Act 2002

Income Tax Act 1995


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Protected Cell CompaniesProtected Cell Companies

Used for Funds or Insurance Companies

Single legal entitylegal segregation and protection of assets / liabilities

No minimum capital requirements

Creation of cellular and non cellular assets

Unlimited number of cells

Incorporated/continued/convertedFormal procedure for liquidation/receivership of any individual

cells


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Regulatory FrameworkRegulatory Framework

FSC Licensing and supervision of all non-banking financial

services

Non-banking financial services includes:

Global Business Activities

Insurance

Fund Management

Leasing

Capital Markets


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Licensing : ConsiderationsLicensing : ConsiderationsProven and demonstrable track record, credentials and particulars of

promoters/sponsors and all persons involved.

Structure, Investment Policy, restrictions and objectives of the CIS.

Mode of raising funds, borrowing policy and restrictions.

Basis of NAV calculation

Conditions for issuance and redemption of shares


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Licensing : ConsiderationsLicensing : Considerations

Risk profile and location of the investors and the markets(s) targeted

Licence/registration with the foreign regulator

Compliance with regulations in third countries

Ability to implement procedures / arrangement to be able to fulfill

continuous obligations


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FSC : Best PracticesFSC : Best PracticesChanges in objects of the company to be notified

Restriction on doing business with residents except with FSC approval

Scheme documents, investment plans and operational agreements to be

filed.

Licence/registration with the foreign regulator before carrying activities in

any jurisdiction

Disclosures for Due diligence

Registered office in Mauritius mandatory

Transaction to be routed through a local bank

Hold directors meetings in Mauritius

Maintain accounting records in Mauritius

Quarterly reporting / NAV calculation

Adherence to future enactments


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Number of Registered Global Funds

050

100

150200250300

19

95

19

96

19

97

19

98

19

99

20

00

20

01

20

02

20

03

Calendar year

NumberofFunds

Global Fund StatisticsGlobal Fund Statistics

Source: FSC


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Analysis of Funds by typeAnalysis of Funds by type

7%7%

23%

63%

Venture capitalschemes

PCCs

Close ended

Open ended

Source: FSC Annual Report 2002


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Funds : Geographical spreadFunds : Geographical spread


71%

5%

13%

5% 6%

0%

10%

20%

30%

40%

50%

60%

70%

80%India

Africa and Asia Pacific

South East and Far East

Asia

Europe and USA

Worldwide


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Global Funds ValuationGlobal Funds Valuation

Source: FSC

Note : The active NAV as at 30th June 2003 was USD 6.6 bn.

NAV

0

2

46

8

10

199

5

199

6

199

7

199

8

199

9

200

0

200

1

200

2

As at 31st December

US

$Billion



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Single Tier Two Tier Branch Listed

Two Tier Parent in:

Guernsey and Jersey

LuxembourgCayman Islands

Ireland

Singapore

UK

Switzerland

Listed:

Luxembourg

IrelandLondon

Zurich

New York

Mauritius

Structure of FundsStructure of Funds

Single Tier:

Mauritius Domicile

Pooling of InterestsListing

Manager domiciled in

various jurisdictions, incl.

Mauritius


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Taxation of Global Funds inTaxation of Global Funds inMauritiusMauritius

Tax incentive company: liable to income tax atthe rate of 15%.

Entitled to a tax credit equivalent to the higher of :

actual foreign tax suffered and

80% of the Mauritian tax on its foreign source ofincome.

Gains on disposal of securities is exempt in

Mauritius No withholding tax in Mauritius


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Typical Fund StakeholdersTypical Fund Stakeholders

Investors

FundInv. Manager

Inv. Advisor

Administrator,

Registrar &Secretary

Custodian

Sub-CustodianCash

Custodian

Auditors

Sub-Administrator


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Administrator

Mauritius

Fund Investment

Manager

InvestmentsIndian Custodian

Mauritian Cash Custodian

InvestorsInvestors Investors

Parent Holding

Worldwide

Mauritius

India

Fund Structure : IndiaFund Structure : India

STRUCTURE A

Analysts

Global Custodian


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Administrator

Mauritius Fund

Investments

Investment Manager

AnalystsIndian Custodian

Mauritian Cash Custodian

Global Custodian

Fund Structure : IndiaFund Structure : India

InvestorsInvestors InvestorsWorldwide

Mauritius

India

STRUCTURE B


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FundInvestment

Manager

Investment

AdviserClass A Class B Class C

Administrator

Custodian

Debt Equities Debt & Equity Regional Investments

Fund Structure:Fund Structure: MulticlassMulticlass

Investors

Worldwide

Mauritius

Investee Countries

Class D

Global Custodian

Sub-Custodian


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Administrator

Cell A

Equity

Investment Manager

Cash Custodian

Fund Structure : PCCFund Structure : PCC

InvestorsInvestors Investors

Cell B Cell C Cell D

Investors

Debt Mixed

Portfolio

Regional

Worldwide

Mauritius

Investee CountriesSub-Custodian

Global Custodian


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Supervision by FSCSupervision by FSC

Onsite visits

Offsite supervisionThrough audited accounts prepared in accordance with

International Financial Reporting Standards

Through contacts with other supervisory bodies for purpose

of exchange of information on cross border supervision


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Listing Requirements on Stock Exchange of MauritiusListing Requirements on Stock Exchange of Mauritius

for investment entitiesfor investment entities Demonstrate an adequate trading and financial record for three

preceding years. For investment company this condition may bedispensed with.

Board of directors must be able to demonstrate that it will actindependently of any investment manager

Distributable income must be principally derived from investments

Company must not take legal or management control of

investments in its portfolio Must invest in 10 or more securities each of which has been issued

by non related parties

Dividends must not be paid unless they are covered by income

received from the underlying investments Within one year of the first marketing of the securities to the

public, the company must have a minimum paid up capital of 20million rupees


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Listing Requirements on Stock Exchange of MauritiusListing Requirements on Stock Exchange of Mauritius

for investment entitiesfor investment entities

Issue at least 25% of the shares to the public(minimum of

200 shareholders) (may be waived in appropriatecircumstances)

Not more than 20% of the gross assets of the company

may be lent to or invested of any one company or group

The listing particulars must contain information to enable

investors to be reasonably well informed about the

securities quoted and the issuer


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Functions of AdministratorFunctions of Administrator Set up and launch

Full administration: Portfolio pricing and NAV calculation at

required frequency

Performing Registrar functions

Acting as Company Secretary

Ensuring compliance with legislation and licensing conditions

Maintenance of all books and records

Liaison with external parties for settlement of trades

Monitoring investment parameters


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Functions (contd.)Functions (contd.)

Comparing portfolio performance with benchmarks

Processing subscriptions/ redemptions

Maintaining share register

Organising board meetings

Preparing semi-annual and annual reports

Advising on dividend distributions

Co-ordinating audits

Liaision with tax advisers and ensuring that relevant tax

returns are filed within deadline


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Future DevelopmentFuture Development

Proposed Securities legislation

CIS Legislation

Insolvency legislation


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Mauritius as a Mutual Fund JurisdictionMauritius as a Mutual Fund Jurisdiction

Common jurisdiction for pooling of investors

Proven fund administration facilities

Cost efficiency

Well regulated and recognised financial services sector

Availability of banking and legal expertiseIdeally located between the Far East / Australia / Europe/USA

DTAs with 28 countries and IPPAs with several countries


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Treaty CountriesTreaty Countries

EuropeBelgium Sweden

France LuxembourgU.K. Belgium

Italy Cyrus

Croatia

AsiaIndia Singapore

China MalaysiaSri Lanka Indonesia

Thailand NepalPakistan

AfricaZimbabwe Namibia

Swaziland South AfricaMadagasca Mozambique

Botswana Rwanda

Middle EastOman

Kuwait


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Opportunities in MauritiusOpportunities in Mauritius

Marketing of overseas products

Fund Management Pension Funds

Gateway to Africa


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Thank YouThank You

AOMC Secretariat Tel: + 230 211 2153C/o Suite 608 Email: [email protected]

St. James Court

St. Denis Street Website : www.aomc.mu

Port Louis (operational as from January 2004)

Mauritius


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Uday K. Gujadhur10, Frere Felix de Valois Street

Port Louis-Mauritius

(230) 202 3000 Telephone

(230) 212 5265 Facsimile

[email protected]

uday gujadhur_2003

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