Hong Kong Regulations

MANDATORY PROVIDENT FUND SCHEMES (GENERAL) REGULATION - SECT 37

Provisions relating to capital preservation fund

Caution: This is a past version. See the current version here.



"authorized financial institution" (認可財務機構)

"Hong Kong dollar savings account" (港元儲蓄帳戶)

"prescribed savings rate" (訂明儲蓄利率)

(1) At least one of the constituent funds of a registered scheme must be a
capital preservation fund.

(2) A capital preservation fund-

   (a)  may be invested only-

        (i)    by placing it on deposit in accordance with section 11 of
               Schedule 1, but only for a term not exceeding 12 months; or

        (ii)   in debt securities with a remaining maturity period of 2 years
               or less and of a kind referred to in section 7(2)(a) or (b) of
               Schedule 1; or

        (iii)  in debt securities with a remaining maturity period of 1 year
               or less and that satisfy the minimum short term credit rating
               set by the Authority, based on the credit rating of the
               securities as determined by an approved credit rating agency;
               and

   (b)  must have an average portfolio remaining maturity period of not more
        than 90 days; and

   (c)  must have a total value of Hong Kong dollar currency investments equal
        to the total market value of the fund, as measured by the effective
        currency exposure, in accordance with section 16 of Schedule 1; and

   (d)  must operate as a unit trust, or as a unitized insurance policy issued
        by an authorized insurer.

(3) After taking into account any losses arising from the investment of the
funds comprising a capital preservation fund, all income and profits derived
from the investment of those funds must be credited to the scheme members
concerned at least once each month.

(4) Amounts may be deducted from the account of a scheme member whose accrued
benefits form part of a capital preservation fund only as provided by
subsections (5) to (7).

(5) If the approved trustee of a registered scheme some or all of the funds of
which comprise a capital preservation fund is required to pay a levy under
section 17(3) of the Ordinance, such amount as may be necessary to enable the
trustee to pay the levy may be deducted from the account of each scheme member
whose accrued benefits form part of that fund. The amount is to be calculated
as follows-

MAB

A＝L× CPA

where- A represents the amount to be calculated; L represents the amount of
the levy; MAB represents the member's accrued benefits that form part of the
capital preservation fund; CPA represents the total funds comprising the
capital preservation fund.

(6) If-

   (a)  funds attributable to a scheme member form part of a capital
        preservation fund; and

   (b)  the amount of the income and profits derived from the investment of
        those funds for a particular month exceeds the amount of interest that
        would be earned if those funds had been placed on deposit in a
        Hong Kong  dollar savings account at the prescribed savings rate, an
        amount not exceeding the excess may be deducted from the member's
        accrued benefits as scheme administrative expenses for that month.

(7) However, if for a particular month no amount is deducted as administrative
expenses under subsection (6), or the amount of administrative expenses that
is deducted under that subsection is less than the amount of administrative
expenses for the month, the deficiency may be deducted from the amount of any
excess that may remain in respect of any of the following 12 months after
deducting the administrative expenses applicable to that following month.

(8) In this section-

"authorized financial institution" (認可財務機構) means an
authorized financial  institution belonging to a class specified by the
Authority from time to time for the purposes of this subsection by notice
published in the Gazette; (L.N. 223 of 2000)

"Hong Kong dollar savings account" (港元儲蓄帳戶) means a
Hong Kong dollar  savings account established by an
authorized financial institution;

"prescribed savings rate" (訂明儲蓄利率) means the rate prescribed by
the Authority for the purposes of this subsection by notice published in a
Chinese language newspaper and an English language newspaper circulating in
Hong Kong as-

   (a)  the rate at which interest is for the time being payable in respect of
        a Hong Kong dollar savings account; or

   (b)  if different authorized financial institutions pay interest on Hong 
        Kong dollar savings accounts at different rates, the rate determined
        by the Authority as the average of those rates.