CONTENTS CHAIRMAN'S STATEMENT MANAGING DIRECTOR'S REPORT MANAGEMENT BOARD MPF SCHEMES ADVISORY COMMITTEE MPF INDUSTRY SCHEMES COMMITTEE

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2 CONTENTS Mandatory Provident Fund Schemes Authority Annual Report CHAIRMAN'S STATEMENT MANAGING DIRECTOR'S REPORT MANAGEMENT BOARD MPF SCHEMES ADVISORY COMMITTEE MPF INDUSTRY SCHEMES COMMITTEE THE MANDATORY PROVIDENT FUND SCHEMES AUTHORITY THE REGULATORY STRUCTURE AND LEGISLATIVE DEVELOPMENT SUPERVISION OF THE MPF INDUSTRY PROTECTION OF SCHEME MEMBERS REGULATION OF OCCUPATIONAL RETIREMENT SCHEMES PUBLIC EDUCATION AND PUBLICITY SUPPORTING SERVICES EXTERNAL RELATIONS FINANCIAL STATEMENTS STATISTICS APPENDICES

3 MISSION To ensure the provision of retirement protection for Hong Kong's workforce through an effective and efficient system of prudential regulation and supervision of privately managed provident fund schemes.

HIGHLIGHTS At the end of March 2001, about 82% of the employers, 92% of the relevant employees and 90% of the self-employed persons covered by the MPF System have joined MPF schemes.

4 HIGHLIGHTS At the end of March 2001, about 82% of the employers, 92% of the relevant employees and 90% of the self-employed persons covered by the MPF System have joined MPF schemes. By and large, the public appears to have accepted the MPF as a useful means of retirement protection and beneficial for the long term interests of the community. These results however have not been attained easily. In February 2000, enrolment by employers was only a worrying 0.5%. It caught up and reached 63% in December 2000 when the MPF System commenced. The enrolment rate subsequently exceeded 80% in February The compliance rates of relevant employees and self-employed persons follow a similar trend. Together with the employees who were already covered by existing occupational retirement schemes or statutory pension plans, 82% of the total workforce in Hong Kong was protected by retirement protection schemes at the end of March 2001.

Enrolment in the MPF System (1 February 2000 31 March 2001) 92% 90% 82% Employed Population by Type of

an employment-based system, some employers and members may be participating in more than one scheme.

5 Enrolment in the MPF System (1 February March 2001) 92% 90% 82% Employed Population by Type of Retirement Schemes (as at 31 March 2001) 12% 23% 6% 59% Compliance (as at 31 March 2001) (1) As the MPF is an employment-based system, some employers and members may be participating in more than one scheme. Adjustments have been made for employers and SEPs who are participating in more than one scheme in the same capacity.

6 CHAIRMAN S STATEMENT MPF is one of the biggest social programmes ever undertaken in Hong Kong and is completely new. The challenge is for the Government, the MPFA, the MPF industry and the community, all in the same boat, to navigate through the uncharted waters with flexibility, sensitivity and practical sense. A YEAR OF ACCOMPLISHMENTS Another year has gone by since the Mandatory Provident Fund Schemes Authority (MPFA) published its first annual report. I am now pleased to present the second report of the MPFA for the period 1 April 2000 to 31 March 2001, which, judged by any standard, was a year of accomplishments. SETTING THE STAGE The decision to go ahead with the full implementation of the Mandatory Provident Fund (MPF) System on 1 December 2000 as previously planned was confirmed in April 2000, after a thorough analysis of the readiness of the community, the industry and the MPFA. During that time, the Hong Kong economy was recovering steadily from the economic downturn caused by the Asian financial turmoil and was expected to have attained several consecutive quarters of positive growth by December It was 4

also anticipated that the businesses would be able to make suitable adjustments to their cost structures to absorb the increased operating cost due to MPF, which was estimated to be 0.

7 also anticipated that the businesses would be able to make suitable adjustments to their cost structures to absorb the increased operating cost due to MPF, which was estimated to be 0.7% on average for all business sectors. As far as the MPF industry was concerned, the MPFA had already completed the processing of the initial batches of licence applications, making available a great variety of choices in service providers and MPF products in the market. As at the beginning of the financial year, there were 21 trustees and 45 master trust schemes, most offering four or more choices of funds to scheme members. Furthermore, almost individuals were licensed and registered as intermediaries who would offer their services to MPF customers. 1 As the MPF market involves many different sectors of the financial services industry, cooperation amongst regulators, and harmonization of policies, standards and procedures across different regulatory areas are very important for effective and efficient supervision. In this respect, the MPFA had already established a good rapport with related financial regulators as well as relevant Government departments. 1 One of the approved trustees applied for withdrawal of approval during the year. As at the end of the financial year on 31 March 2001, there were 20 trustees, 47 master trust schemes, 299 constituent funds, 231 approved pooled investment funds and registered intermediaries. 5

8 At the beginning of the year, the MPFA was in full gear in preparing for the target implementation date of 1 December An 18-month intensive Public Education and Publicity Campaign had been launched to prepare the community for MPF. Plans for staff training and for bringing up the staffing to the approved establishment level, as well as the development of an Information Management System to facilitate the carrying out of MPFA s regulatory and supervisory functions were well underway. HIGHLIGHTS OF THE YEAR S WORK With the stage set, the most important challenge for the MPFA and its staff was to launch the MPF System on 1 December 2000 and ensure its smooth initial operation. This involved monitoring the readiness of the trustees and scheme administrators in operating their MPF businesses, the progress in processing enrolment applications and their preparedness for accepting contributions. At the same time, the processing of licence applications of MPF products and service providers was continuing. As regards the MPF interface with those schemes registered under the Occupational Retirement Schemes Ordinance, the MPFA had to ensure that the arrangements stipulated under the MPF Schemes (Exemption) Regulation were implemented smoothly. The large-scale territory-wide Public Education and Publicity Campaign launched since January 2000 penetrated all sectors and levels of the community. It successfully raised public awareness of the imminent implementation of the MPF System, addressed adverse comments, enhanced public acceptance and ultimately encouraged enrolment in MPF schemes. The Government also gave its staunch support by designating the promotion of MPF as one of its major publicity campaigns for Steps were also taken to prepare the MPFA in carrying out its enforcement duties, which involved formulation of the appropriate policies and strategies, and recruitment and training of staff to carry out the enforcement activities. All the functions of the Information Management System critical to the launch of the MPF System were developed and were fully supported by a set of backup systems. The strength of the Call Centre was scaled up significantly to cope with the rising workload of answering hotline enquiries prior to the launching of the System and for the initial months of its operation. The MPFA was also fully equipped with trained personnel and appropriate systems to handle the expected influx of complaint cases arising from the millions of accounts from the start of MPF contributions. Major strides were made in organizational development. The MPFA has settled in and bonded more closely, with the arrival of the Managing Director, Mr Rafael Hui, and two other executive directors early in the year. Major recruitment exercises were completed. Practices, procedures, policies in different areas of work were reviewed and further enhanced, including those in the areas of human resources management and financial control. The treasury functions were developed. It has even started preliminary rounds of review of the operational and administrative aspects of the relevant legislation based on the experience gained in the implementation processes. 6

9 CHAIRMAN S STATEMENT MPF IN OPERATION The figures speak for themselves. At the end of March 2001, four months after the start of the System, the enrolment rates in MPF schemes stood at 82% of employers, 92% of employees and 90% of self-employed persons. 2 Before there was MPF, only about one-third of the 3.25 million workforce had some form of retirement protection. As of March 2001, 82% of the workforce was covered by some form of retirement protection scheme. The MPFA s Enquiries and Complaints Handling Systems have been registering an average of calls a day and has handled over complaints since the launch of the MPF System. The Managing Director s report will give you more details of the MPFA s accomplishments, which will also be further elaborated in the following chapters. 2 The bases of these percentages are the relevant employers, employees and selfemployed persons as defined under the Mandatory Provident Fund Schemes Ordinance. THE MISSION HAS JUST BEGUN MPF is one of the biggest social programmes ever undertaken in Hong Kong and is completely new. Despite all the painstaking preparation and its initial smooth operation, the system has only had a few months operational experience. Given the dynamic complexity of our economy and the intricate diversity of the income structure of our workforce, no one can at this stage definitively predict all the outcomes, much less unintended consequences. The challenge is therefore for the Government, the MPFA, the MPF industry and the community, all in the same boat, to navigate through the uncharted waters with flexibility, sensitivity and practical sense. Having achieved the major milestone of launching the MPF System, the MPFA is now ready to embark on a series of new initiatives in consolidating its work, strengthening its regulatory and enforcement abilities and increasing its productivity, with a view to facing up to new challenges in perfecting the operation of the System. Far from being complacent, the MPFA understands that its mission of implementing a territorywide retirement protection system has only just begun. Before I close, I must not forget to place on record my deep appreciation for the valuable contributions and dedicated efforts of my fellow Management Board members, members of the MPF Schemes Advisory Committee and the MPF Industry Schemes Committee, and those of other committees of the MPFA such as the Guidelines Committee. Last but not the least, I would like to express my sincere gratitude to the management and staff for their commitment and drive as launching MPF by adopting the big-bang approach is no mean feat. Without their hard work, dedication and perseverance, the important chapter of the history of development of retirement protection schemes in Hong Kong could not have been written. Charles Lee Yeh-kwong Chairman 7

10 MANAGING DIRECTOR S REPORT By 31 March 2001, the Mandatory Provident Fund Schemes Authority (MPFA) has been in operation for two and a half years. During this period, the focus of its work was mainly on the setting up of the organization as well as the planning and preparation for the full implementation of the Mandatory Provident Fund (MPF) System. Following the decision to go ahead with the planned commencement of MPF System on 1 December 2000, the MPFA s work in the first three quarters of the financial year concentrated on the completion of all the regulatory and supervisory tasks essential for the launch. At the same time, it had to gear up for dealing with all the unavoidable teething problems of a new system, bearing in mind that this is one of the largest social programmes ever implemented in Hong Kong. Furthermore, it had to prepare and assist all parties concerned in playing their individual roles and in complying with the legislative requirements, including service providers, other regulatory bodies, Government departments, employers, employees and self-employed persons, to name but a few. Meanwhile, in order to ensure the smooth implementation of the MPF System, the MPFA continued to reach out to the whole community of Hong Kong and particularly the 3.25 million workforce in order to raise their awareness and rally their support for the System. MILESTONES The course of the year was marked by the following important accomplishments: April completed review of the overall readiness for the scheduled full implementation date of the MPF System of 1 December

11 Consolidating and refining the MPF System so that it can take deep and robust root within our community; so that it becomes part of our everyday life; and so that it can grow and reinforce our social fabric, underpinning stability and commitment for the future these are the real long term challenges. two industry schemes covering the catering and construction industries were registered to provide for the industries high labour mobility and large number of casual employees. the Call Centre providing a hotline enquiry service commenced operation, handling over calls a month. May the Commencement Notice for appointing 1 December 2000 as the commencement date for relevant provisions of the MPF legislation to bring the MPF System into full operation was passed by the Legislative Council on 31 May June all proposed amendments to the MPF legislation necessary for the implementation of the MPF System were passed by the Legislative Council. July processing of all applications of occupational retirement schemes (ORSO schemes) for MPF exemption was completed by 31 July As at 31 March 2001, there were MPF exempted ORSO schemes. the first batch of pooled investment funds applications were processed. Up to 31 March 2001, there were 231 approved pooled investment funds. August the computerized Hotline Enquiry Handling System went into service on 1 August and was recording over calls a month. the Industry Schemes Committee was established to monitor the effectiveness of Industry Schemes and to advise on ways to improve the administration and operation of the schemes. 9

12 September completed the third round of on-site inspection of the approved trustees to assess their readiness for the commencement of the MPF System. Recommendations on expediting recruitment of qualified personnel, development of computer systems and proper operational procedures were made to the trustees, all of whom were required to be ready by 1 October October the MPF universe of employers, relevant employees and self-employed persons was compiled on the basis of the data released by Government and was updated periodically thereafter. As at the end of the financial year, the numbers of employers, relevant employees and self-employed persons under the MPF System were estimated to be , and respectively. after having completed the fourth round of on-site inspection of trustees and intervened in certain cases involving problems in staffing and systems, the MPFA announced in late October 2000 that it was sufficiently satisfied with the competency of the 20 approved trustees in commencing the operation of their businesses from 1 December. November MPF SME* Resource Centres to provide SMEs with easy access to MPF information were set up in MPFA s premises and in the Trade and Industry Department s SME Information Centre. the number of hotline enquiries peaked at calls on one day. a computerized Complaints Handling System was set up to complement the Enquiries Handling System in an integrated network. At the end of the financial year, the two systems were handling an average of enquiries and registering 30 complaints a day. The Complaints Handling System has facilitated closer tracking and monitoring of the progress of complaint cases. It also has been linked up electronically with the trustees and the Labour Department. December commencement of MPF System on 1 December December / January the enforcement team started to carry out inspections at business establishments after the end of the permitted period for casual employees in the construction and catering industries. February in addition to investigation of complaint cases, general inspections were carried out by the enforcement team from February 2001 at the rate of about 100 business establishments per day. March started the consultation on the first set of proposed amendments to the MPF legislation after MPF implementation. Meanwhile, a total of 19 sets of new guidelines were issued to service providers to facilitate their compliance with the MPF legislation. In the course of licensing and supervision, the MPFA continued to work closely with other regulators. It liaised regularly with the Securities and Futures Commission (SFC) in processing applications and monitoring compliance of MPF products. With the MPFA playing a leading role, the MPF Intermediaries Regulation Coordinating Committee comprising representatives from the Insurance Authority, the SFC and the Hong Kong Monetary Authority agreed on the details of the intermediaries inspection programme. The large-scale territory-wide Public Education and Publicity Campaign was intensified with the objective to encourage enrolment in MPF schemes. In addition to the general public education and publicity *SME small and medium-sized enterprise. 10

13 MANAGING DIRECTOR S REPORT activities, some of the smaller scale special projects included special assistance rendered to SMEs, an enrolment drive for the Industry Schemes and a campaign for publicizing the MPF-ORSO interface arrangements. LOOKING AHEAD My colleagues and I would not have accomplished the launch of the MPF System without the guidance and trust on the part of the Chairman and all the Non-Executive Directors of our Management Board. We are proud and fortunate in having played a part in completing another chapter in the history of Hong Kong. It has been a very trying year, but, as the Chairman has pointed out in his Statement, in the development of retirement protection, this is only the beginning. Consolidating and refining the MPF System so that it can take deep and robust root within our community; so that it becomes part of our everyday life; and so that it can grow and reinforce our social fabric, underpinning stability and commitment for the future these are the real long term challenges. The MPF System is still very new. It is also unique in many ways among the principal models of retirement protection adopted in other places. It is customized for Hong Kong s own particular circumstances and it has to rest on a delicate set of balance of interests of employers, employees and service providers. At this stage, no one can claim that we have a perfect system. In the light of actual operating experience, changes and improvements are both desirable and unavoidable. However, in introducing any change, we always must be mindful of the need for balance and consensus. This is an evolving process and it will take at least a few more years before the system can settle into a more steady state. The focus of MPFA s work in the coming year will be on the following: (a) Consolidating the work and the organization of the MPFA; (b) Enhancing the MPFA s regulatory and enforcement abilities with emphasis on MPF investment products and investment education; and (c) Increasing productivity, thereby enhancing operational efficiency and containing costs. These objectives will be attained, in part, by several major projects in the coming year. Comprehensive reviews of the MPFA s organization will be conducted with a view to streamlining processes, rationalizing the distribution of workload, improving operational efficiency and ensuring that we are able to attract and retain quality staff. In consultation with the SFC and also seeking overseas expertise and advice, we will examine the need for, and ways and means to, further enhancing and developing our framework for the regulation of MPFrelated investment funds. Having attained very high enrolment rates in MPF schemes, our Public Education and Publicity Campaign will continue to focus on the fostering of public support and understanding, with emphasis on MPF investment products and investment education. With the objective of refining the MPF System, a comprehensive review of the operational aspects of the MPF and ORSO legislation will be carried out, with the former spanning the next few years. In ending this Report, I would like to take the opportunity to pay tribute, and to express my gratitude, to the vast majority of employers, employees and self-employed persons who are now members of the MPF family. The very high participation rate, even at the initial phase of the system, is all the more remarkable as our economy is still in the throes of restructuring and adjustment. Their response and support will be a constant source of inspiration and encouragement for all of us in the MPFA. Rafael Hui Si-yan Managing Director 11

MANAGEMENT BOARD (as at 31 March 2001) The MPFA is governed by the Management Board which consists of ten non-executive directors and six executive directors.

14 MANAGEMENT BOARD (as at 31 March 2001) The MPFA is governed by the Management Board which consists of ten non-executive directors and six executive directors. The Hon Charles Lee Ms Anna Wu CHAIRMAN The Hon Charles Lee Yeh-kwong, GBS, JP One of the founders of Woo, Kwan, Lee & Lo; Member, Executive Council; Chairman, Hong Kong Exchanges and Clearing Limited; Member, Equal Opportunities Commission; Chairman, Council of the Open University of Hong Kong; Member, Council of the Hong Kong University of Science and Technology; Member, Court of the Hong Kong Polytechnic University. NON-EXECUTIVE DIRECTORS Dr the Hon David Li Kwok-po, JP Chairman and Chief Executive Officer, The Bank of East Asia, Limited; Chairman, The Chinese Banks Association, Ltd; Chairman, Hong Kong Management Association; Member, Legislative Council; Member, Banking Advisory Committee; Member, Exchange Fund Advisory Committee; Member, Land Fund Advisory Committee; Director, Hong Kong Interbank Clearing Ltd; Director, Hong Kong Mortgage Corporation Ltd. Dr the Hon Lui Ming-wah, JP Managing Director, Keystone Electronics Co, Ltd; Managing Director, Nantin Enterprise Ltd; Hon Chairman, The Hong Kong Electronic Industries Association; Vice-President, The Chinese Manufacturers Association of Hong Kong; Member, Hong Kong Productivity Council; Member, 12

Mr Robert Tang Dr the Hon Lui Ming-wah Mr Lee Kai-ming Dr the Hon David Li Mr Eddy Fong Vocational Training Council; Advisory Board Member, Hong Kong International Arbitration Centre; Member,

15 Mr Robert Tang Dr the Hon Lui Ming-wah Mr Lee Kai-ming Dr the Hon David Li Mr Eddy Fong Vocational Training Council; Advisory Board Member, Hong Kong International Arbitration Centre; Member, Shandong Political Consultative Congress; Member, Legislative Council. Mr Eddy Fong Ching, SBS, JP Partner of PricewaterhouseCoopers; Member, Hong Kong Housing Authority; Non-Executive Director, Hong Kong Mortgage Corporation; Non-Executive Director, Exchange Fund Investment Limited; Director, Applied Research Council; Member, General Committee of the Federation of Hong Kong Industries. Mr Lee Kai-ming, SBS, JP Chairman, MPF Industry Schemes Committee; Chairman, Federation of Hong Kong and Kowloon Labour Unions; Member, Occupational Safety and Health Council; Adjudicator, Obscene Articles Tribunal; Member, Skills Upgrading Scheme Steering Committee; Member, Legislative Council ( ). Mr Robert Tang Ching, SC, JP Recorder of the High Court; Chairman, Independent Police Complaints Council; Member, ICAC Complaints Committee; Chairman, Town Planning Appeal Board ( ); Chairman, Securities and Futures Appeal Panel ( ); Chairman, Takeovers Appeal Committee ( ); Chairman, Criminal and Law Enforcement Injuries Compensation Boards ( ); Chairman, The Hong Kong Bar Association ( ). Ms Anna Wu Hung-yuk, SBS, JP Chairperson, Equal Opportunities Commission; Chairman, Operations Review Committee of Independent Commission Against Corruption; Member, Advisory Committee on Corruption of Independent Commission Against Corruption; Non-Executive Director, Securities and Futures Commission; Member, Council of Lingnan University; Member, Legislative Council ( ); Chairman, Consumer Council ( ). 13

16 Mr Stephen Ip Mr Joseph Yam Mr Alan Wong Mrs Fanny Law Mr Rafael Hui Mr Stephen Ip Shu-kwan, JP Secretary for Financial Services; has worked in a number of departments including Housing Department, Urban Services Department, Lands and Works Branch and Monetary Affairs Branch; recent postings include Secretary for Economic Services ( ); Commissioner for Labour ( ); Commissioner of Insurance and Registrar of Occupational Retirement Schemes ( ). Mrs Fanny Law, JP Secretary for Education and Manpower; has worked in various policy bureaux and departments, covering the areas of security, medical and health, economic services, housing and land supply, home affairs, social welfare, transport and civil service management; recent postings include Director of Education ( ); Director of the Chief Executive s Office of the Hong Kong Special Administrative Region ( ). Mr Joseph Yam Chi-kwong, JP Chief Executive, Hong Kong Monetary Authority; Director, Office of the Exchange Fund ( ); Deputy Secretary for Monetary Affairs ( ); Principal Assistant Secretary for Monetary Affairs ( ). EXECUTIVE DIRECTORS Mr Rafael Hui Si-yan, GBS, JP Deputy Chairman and Managing Director Secretary for Financial Services ( ); Commissioner for Transport ( ); Deputy Secretary for Works ( ); Deputy Secretary for Economic Services ( ); Deputy Secretary-General in the Office of the Unofficial Members of the Executive and Legislative Councils (UMELCO) ( ). Mr Alan Wong Chi-kong, JP Deputy Managing Director Directorate Administrative Officer seconded from the Government; Acting Managing Director, MPFA 14

MANAGEMENT BOARD Mr Ernest Lee Mr Raymond Tam Mrs Diana Chan Ms Hendena Yu (February 1999 to June 2000); also Commissioner of Insurance and Registrar of Occupational Retirement Schemes (February 1999

17 MANAGEMENT BOARD Mr Ernest Lee Mr Raymond Tam Mrs Diana Chan Ms Hendena Yu (February 1999 to June 2000); also Commissioner of Insurance and Registrar of Occupational Retirement Schemes (February 1999 to January 2000); previously worked in the Trade and Industry Branch, the Health and Welfare Branch and the University Grants Committee. Mrs Diana Chan Tong Chee-ching Executive Director (Corporate Services) Hospital Chief Executive, Wong Chuk Hang Hospital ( ); Deputy Director (Administration), Hospital Authority ( ); Administrative Officer, Hong Kong Government ( ). Mr Ernest Lee Shu-wing, BBS Executive Director (Member Protection) Registered Professional Planner; Assistant Commissioner for Transport ( ); Transport Officer rising to Principal Transport Officer ( ). Mr Raymond Tam Wai-man Executive Director (Services Supervision) Qualified Actuary; Fellow of the Society of Actuaries of USA; seconded from the Government to the MPFA ( ); Assistant Director, Regulatory Standards, Mandatory Provident Fund Office ( ); Assistant Commissioner of Insurance, Long Term Business, Office of the Commissioner of Insurance ( ); Council Member and Chairman of Investment Committee, Actuarial Society of Hong Kong ( ). Ms Hendena Yu Executive Director (ORSO Schemes) Fellow of the Society of Actuaries of USA; Fellow of the Canadian Institute of Actuaries; seconded from the Government to the MPFA ( ); Senior Manager (ORSO Interface), Mandatory Provident Fund Office ( ); Senior Insurance Officer, Office of the Registrar of Occupational Retirement Schemes (1995). 15

18 MANDATORY PROVIDENT FUND SCHEMES ADVISORY COMMITTEE The Mandatory Provident Fund Schemes Advisory Committee makes recommendations to the MPFA as to the operation of the Mandatory Provident Fund Schemes Ordinance and the effectiveness and efficiency of the MPFA. Prof Nelson Chow The Hon Ng Leung-sing The Hon Chan Yuen-han Mr Peter Wong The Mandatory Provident Fund Schemes Advisory Committee (MPFSAC) is a statutory body established under the Mandatory Provident Fund Schemes Ordinance (Cap. 485) (MPFSO) to make recommendations to the Mandatory Provident Fund Schemes Authority (MPFA) as to the operation of the MPFSO and the effectiveness and efficiency of the MPFA. The MPFSAC consists of an executive director designated by the MPFA and nine to Members of the MPFSAC (as at 31 March 2001) CHAIRMAN Professor Nelson Chow Wing-sun, SBS, JP Professor, Department of Social Work and Social Administration, University of Hong Kong DEPUTY CHAIRMAN Mr Rafael Hui Si-yan, GBS, JP Managing Director, MPFA eleven other members appointed by the Chief Executive. The chairman and deputy chairman of the MPFSAC are also appointed by the Chief Executive from amongst its members. 16

19 Mr Poon Siu-ping Mr Rafael Hui Mr Ho Sai-chu Mr Victor Lo The Hon Bernard Chan The Hon David Chu Mr Desmond Chan The Hon Sin Chung-kai OTHER MEMBERS The Hon Bernard Chan Member, Legislative Council The Hon Chan Yuen-han Member, Legislative Council The Hon David Chu Yu-lin Member, Legislative Council The Hon Ng Leung-sing Member, Legislative Council The Hon Sin Chung-kai Member, Legislative Council Mr Desmond Chan Kwok-kit Chairman, Hong Kong Investment Funds Association (1998) Mr Ho Sai-chu, SBS, JP Vice Chairman, The Chinese General Chamber of Commerce Mr Victor Lo Chung-wing, JP Deputy Chairman, Federation of Hong Kong Industries Mr Poon Siu-ping Vice-Chairman, Federation of Hong Kong and Kowloon Labour Unions The MPFSAC has given valuable advice to the MPFA on a wide range of issues. Over the year, it made recommendations on issues including the review of the commencement date of the Mandatory Provident Fund System, the enforcement principles related to MPF enrolment and participation and public education and publicity strategies. It also advised on proposed amendments to the MPF legislation. Mr Peter Wong Hong-yuen, GBS, JP Chairman, Hong Kong Retirement Scheme Association ( ) 17

20 MPF INDUSTRY SCHEMES COMMITTEE The MPF Industry Schemes Committee monitors the effectiveness of industry schemes and advises on ways to improve the administration and operation of the schemes in the interests of scheme members. Mr Ernest Lee Mr Ngan Chun-hung Mr Lee Kai-ming Mr Chan Chi-leung The MPF Industry Schemes Committee (ISC) was established in August 2000 pursuant to the MPFSO. The functions of the ISC are to monitor the effectiveness of industry schemes and to advise on ways to improve the administration and operation of the schemes in the interests of scheme members. The ISC consists of a chairperson, at least one but no more than two representatives of the approved trustee of each industry scheme nominated by that trustee, and not fewer than six other persons. Members of the ISC (as at 31 March 2001) CHAIRMAN Mr Lee Kai-ming, SBS, JP Chairman, Federation of Hong Kong and Kowloon Labour Unions OTHER MEMBERS Mr Chan Chi-leung Chairman, Construction Site Workers General Union Mr Chan Kay-cheung Director, Bank of East Asia (Trustees) Limited They are to be appointed by the Financial Secretary. There is also an executive director of the MPFA designated by the MPFA serving on the ISC. 18

21 Mr Valiant Cheung Mr Chan Kay-cheung Mr Mok Kwok-wo Mr Chan Wai-lun Mr Ho Sai-chu Mr Stephen Siu Mr So Kim-hung Mr Poon To-chuen Mr Chan Wai-lun Chairman, Food and Beverage Management and Professional Staff Association Mr Valiant Cheung Wai-lam Vice Chairman, Association of Restaurant Managers Mr Ho Sai-chu, SBS, JP Council Member, Hong Kong Construction Association Limited Mr Mok Kwok-wo Chairman, Society of Builders Hong Kong Mr Ngan Chun-hung Vice Chairman, Eating Establishment Employees General Union Mr Poon To-chuen, MH Consultant, Hong Kong Construction Industry Employees General Union Mr Stephen Siu Chi-fung Managing Director and Chief Executive Officer, Bank Consortium Trust Company Limited Mr So Kim-hung Representative of the Hong Kong Restaurants and Eating House Merchants General Association Mr Ernest Lee Shu-wing, BBS Executive Director (Member Protection), MPFA Since its establishment, the ISC has received reports of the MPFA and the approved trustees on the progress of preparation, enrolment status, publicity efforts and other matters on industry schemes, and given valuable advice on issues relating to the daily operation of industry schemes. Members were also consulted on issues that had implications on industry schemes, including the recommendations of the Construction Industry Review Committee and the proposed amendments to the MPFSO. 19

23 Judged by any standard, the year ending 31 March 2001 was a year of accomplishments. All the regulatory and supervisory tasks essential for the launch of the MPF System were completed. The MPFA also geared up for dealing with all the unavoidable teething problems of a new system, and prepared and assisted all relevant parties in playing their individual roles and in complying with the legislative requirements.

24 THE MANDATORY PROVIDENT FUND SCHEMES AUTHORITY The management team comprises six executive directors, two division heads* and two unit heads. Mr Alan Wong, Deputy Managing Director Mrs Diana Chan, Executive Director (Corporate Services) Mr Rafael Hui, Managing Director The MPFA was established pursuant to the MPFSO. It is governed by the Management Board which consists of ten non-executive directors and six executive directors, namely the Managing Director, the Deputy Managing Director, the Executive Director (Corporate Services), the Executive Director (Member Protection), the Executive Director (ORSO Schemes) and the Executive Director (Services Supervision). The MPFA is advised by the MPFSAC which makes recommendations and the effectiveness and efficiency of the MPFA. It is also advised by the ISC on matters relating to Industry Schemes. The Management Board has established a number of supporting committees to give advice and assistance to the MPFA on various aspects of its management and regulatory work. Membership lists of the Management Board and its supporting committees, the MPFSAC and the ISC are included in Appendix I. as to the operation of the MPFSO * The position of Head (Information Technology) was vacant as at 31 March

25 Mr Ernest Lee, Executive Director (Member Protection) Ms Hendena Yu, Executive Director (ORSO Schemes) Mr Raymond Tam, Executive Director (Services Supervision) Mrs Heidi Kwan, Head (External Affairs) Mr Gregory Willis, General Counsel Ms Estella Chan, Corporate Secretary Organization Structure (as at 31 March 2001) MANAGEMENT BOARD MPF SCHEMES ADVISORY COMMITTEE INDUSTRY SCHEMES COMMITTEE Administration Committee Finance Committee Guildelines Committee IMS Committee Tender Board Managing Director Deputy Managing Director ORSO Schemes Services Supervision Member Protection Corporate Services existing schemes exempted schemes schemes monitoring trustees & investment regulation enrolment & withdrawal industry schemes inspection & investigation default contribution Information Technology system development technical infrastructure & technical services quality assurance Information Management System Legal Unit legal services financial control treasury human resources general administration community relations External Affairs public education & publicity media relations Corporate Secretary Unit boards & committees corporate matters 23

26 THE REGULATORY STRUCTURE AND LEGISLATIVE DEVELOPMENT The MPFSO provides the framework for the establishment of a system of privately managed, employment- based MPF schemes to accrue financial benefits for members of the workforce when they retire. BACKGROUND The need for some form of comprehensive retirement protection in Hong Kong has been a subject of intense debate for over 30 years. Like many other developed countries, the increasing rate of aging of the Hong Kong population accentuates the importance of sufficient financial support to our future retirees, and the need for a comprehensive retirement protection system for the workforce has become particularly prominent. Some employers have been operating retirement schemes to provide retirement benefits for their employees with a view to enhancing the remuneration package and retaining staff. Until the early 1990s, retirement schemes had been allowed to operate freely. With the growing number of retirement schemes covering about 20% of the workforce and incidences of scheme mis-management (e.g. inadequate funding to support the benefits, no proper separation of assets, etc.), the Government decided to put the retirement schemes under a proper regulatory framework. The Occupational Retirement Schemes Ordinance (Cap. 426) (ORSO) was enacted in 1992 and brought into operation on 15 October It regulates private occupational retirement schemes operating in or from Hong Kong. The ORSO does not compel employers to establish occupational retirement schemes for their employees. It regulates all voluntarily established occupational retirement schemes through a registration system. The objective is to ensure that these schemes are properly administered and funded, and to provide greater certainty that retirement scheme benefits promised to employees will be paid when they fall due. Nevertheless, ORSO schemes only covered less than one-third of the workforce. The rapidly aging population and the fact that a substantial portion of the workforce was not covered by a retirement benefit system demanded urgent action. On this premise, Hong Kong took a major step in enacting the MPFSO in August 1995 to provide the backbone of a formal system of retirement protection. The MPFSO provides the framework for the establishment of a system of privately managed, employment-based Mandatory Provident Fund (MPF) schemes to accrue financial benefits 24

27 for members of the workforce when they retire. The MPFSO was amended and supplemented by relevant subsidiary legislation in 1998 and 1999 to fill in the operational details. KEY FEATURES OF THE MPF SYSTEM The key features of the MPF System are set out below: COVERAGE Unless exempted, all employees aged between 18 and 65 and self-employed persons under 65 are required to participate as members of registered MPF schemes. CONTRIBUTIONS Both the employer and the employee are each required to contribute 5% of the employee s relevant income. Self-employed persons are required to contribute 5% of their relevant income. Contributions are subject to the minimum and maximum levels of relevant income ($4,000 and $20,000 per month respectively) in the case of employees and self-employed persons, and to the maximum level of the employee s relevant income ($20,000 per month) in the case of employers. VESTING, PRESERVATION AND PORTABILITY The mandatory contributions made in respect of a scheme member are fully and immediately vested in him/her. The accrued benefits are required to be preserved until the attainment of retirement age of 65, though earlier benefit payment is allowed under certain prescribed circumstances. An employee is able to transfer his/her accrued benefits to another account in case of change of employment. ROLES OF PARTICIPANTS Employers As the MPF System is an employer-based system, employers are responsible for ensuring that their employees become members of a MPF scheme. They also need to deduct contributions from their employees salaries and remit them to the trustees together with the employers own contributions. Employees They select the investment options available in a MPF scheme for their accrued benefits. They also play a role in monitoring their MPF accounts. Self-employed Persons Self-employed persons (SEPs) are personally responsible for becoming members of registered schemes and for remitting their contributions and monitoring their MPF accounts. REGULATORY STRUCTURE The MPFSO provides for the regulation, supervision and monitoring of the operations of the MPF System by the MPFA. As provided under section 6E of the MPFSO, the functions of the MPFA are : (a) to be responsible for ensuring compliance with the MPFSO; (b) to register provident fund schemes as registered schemes; (c) to approve qualified persons to be approved trustees of registered schemes; (d) to regulate the affairs and activities of approved trustees and to ensure as far as reasonably practicable that those trustees administer the registered schemes for which they are responsible in a prudent manner; (e) to make rules or guidelines for the payment of mandatory contributions and for the administration of registered schemes with respect to those contributions; and 25

28 (f) to exercise such other functions as are conferred or imposed on the MPFA by or under the MPFSO or any other ordinance. smooth operation of retirement benefit schemes in Hong Kong, whether set up mandatorily or voluntarily. On 10 January 2000, the MPFA also formally took over the functions of the Registrar of Occupational Retirement Schemes. Hence, the MPFA is responsible for ensuring the MPF LEGISLATION The MPF legislation is composed of the MPFSO and several pieces of subsidiary legislation. A technical amendment was made to Schedule 1 to the MPFSO in June The MPFA prepared and assisted all relevant parties in playing their individual roles and in complying with the legislative requirements. 26

THE REGULATORY STRUCTURE AND LEGISLATIVE DEVELOPMENT The development of the subsidiary legislation in the year is summarized below: (1) The Mandatory Provident Fund Schemes (General) Regulation

29 THE REGULATORY STRUCTURE AND LEGISLATIVE DEVELOPMENT The development of the subsidiary legislation in the year is summarized below: (1) The Mandatory Provident Fund Schemes (General) Regulation (General Regulation) sets out detailed requirements on the operation of MPF schemes including requirements on trustees and other service providers, enrolment, contribution, portability and withdrawal of accrued benefits arrangement, and investment requirements. The General Regulation was amended in June 2000 to rectify certain technical anomalies identified in the course of applying legislative provisions that may inhibit the smooth operation of the MPF System. (2) The Mandatory Provident Fund Schemes (Exemption) Regulation sets out the detailed requirements with regard to applications for exemption from MPF requirements in respect of schemes registered under the ORSO (ORSO schemes) and the ongoing monitoring requirements. 27

30 Informative booklets explain legislative requirements in a user-friendly manner. (3) The Mandatory Provident Fund Schemes (Fees) Regulation prescribes the types and amounts of fees imposed by the MPFA, including fees payable on application for approval of trustees, registration of MPF schemes or approval of pooled investment funds, and annual registration fees to be paid by registered MPF schemes. (4) The Mandatory Provident Fund Schemes Rules were enacted in May The Rules set out the calculation of accrued benefits as well as the information and documents required to be submitted to the MPFA for applying for its consent to the merger and division of registered schemes. (5) The Mandatory Provident Fund Schemes (Compensation Claims) Rules were made in November The Rules make provisions in respect of applications by the MPFA to the Court of First Instance for determining matters relating to alleged losses of accrued benefits under registered schemes for the purposes of seeking compensation from the Compensation Fund. (6) The Mandatory Provident Fund Schemes (Winding Up) Rules were made in November The Rules make provisions in respect of applications by the MPFA to the Court of First Instance for the winding up of registered schemes. A list of the subsidiary legislation and legislative amendments made in respect of the MPFSO since its enactment is at Appendix II. ORSO LEGISLATION The ORSO is supported by subsidiary legislation in the form of rules made by the Registrar of Occupational Retirement Schemes. The Occupational Retirement Schemes (Recovery of Arrears) Rules, made for the recovery of contribution in arrears under a MPF exempted ORSO registered scheme, was passed by the Legislative Council in October 2000 and came into operation on 1 December The essence of the Rules is to empower the MPFA to closely monitor and rectify those unfavourable situations where the 28

THE REGULATORY STRUCTURE AND LEGISLATIVE DEVELOPMENT employer of a MPF exempted ORSO registered scheme fails to make the required contributions to the scheme when they fall due.

31 THE REGULATORY STRUCTURE AND LEGISLATIVE DEVELOPMENT employer of a MPF exempted ORSO registered scheme fails to make the required contributions to the scheme when they fall due. Failure to do so could render the employer liable to contribution surcharge and financial penalty imposed by the MPFA. Under certain situations, the MPFA may institute legal proceedings to recover as a debt due to the Authority any arrears and contribution surcharge and penalty. A list of the subsidiary legislation and legislative amendments made in respect of the ORSO since its enactment is at Appendix III. MPF GUIDELINES AND CODES To elaborate on the legislative requirements and to facilitate compliance of the MPF and ORSO legislation, the MPFA had issued in total 54 sets of Guidelines and two sets of Codes as of 31 March Among those guidelines, 19 sets of new guidelines were issued in the reporting year. During the same period, 8 sets of existing guidelines were revised. A complete list of all the guidelines and codes issued by the MPFA is set out in Appendix IV. CIRCULAR LETTERS AND BULLETINS Apart from the guidelines and codes, the MPFA has issued a number of circular letters to service providers to express the views of the MPFA on various issues and provide further assistance on compliance. Furthermore, several bulletins have been issued to employers of MPF exempted ORSO registered schemes to give guidance in relation to certain ORSO issues. The bulk of the letters and bulletins were issued in year 2000 to facilitate the preparation for MPF implementation. A list of the circular letters and bulletins issued during the year is set out in Appendix V. PROPOSED LEGISLATIVE AMENDMENTS In the course of preparing for the implementation of the MPF System, the MPFA has identified a number of areas which could be improved to Press conference on 1 December 2000 announcing the commencement of the MPF System. facilitate the operation of the System, to better protect the interests of scheme members, or to enhance the effectiveness of the regulation of MPF schemes by the MPFA. There are also some anomalies or ambiguities in the MPF legislation which need to be removed. Furthermore, the MPFA also has taken the opportunity to review its statutory functions with a view to ensuring that it fulfills more effectively its statutory responsibilities for overseeing and monitoring retirement protection systems in Hong Kong, including the retirement schemes industry. With this in mind, the MPFA has planned to propose the Mandatory Provident Fund Schemes (Amendment) Bill 2001 for introduction into the Legislative Council in the second quarter of The industry consultation for the amendment exercise commenced in March

32 The supervision of the MPF industry accounts for a major portion of the MPFA's regulatory activities. The MPFA assessed the readiness of the approved trustees for the commencement of MPF on 1 December 2000 and ensured their compliance with the MPF legislation. It reviewed and approved applications for approval of pooled investment funds and monitored the investment compliance of MPF products. It also monitored MPF intermediaries' compliance with the Code of Conduct for MPF Intermediaries and sought to improve their professional standard. Special efforts have also been devoted to the supervision of Industry Schemes.

34 SUPERVISION OF THE MPF INDUSTRY The MPF trustees, MPF intermediaries, MPF schemes and investment funds are closely monitored. The supervision of the MPF industry accounts for a major portion of the MPFA s regulatory activities. The MPF trustees, MPF intermediaries, MPF schemes and investment funds are closely monitored. Special efforts have also been devoted to the supervision of Industry Schemes. SUPERVISION OF TRUSTEES The trustee of a MPF scheme is the central party having an overall responsibility for the administration and management of the scheme. A trustee may delegate part of its functions to other service providers but the trustee has the duty to supervise and exercise proper control over these service providers. FOCUS OF WORK In year , the MPFA s work in respect of trustees supervision mainly focused on processing of applications for approval as trustees to ensure all the statutory approval requirements were satisfied. In the past year, the focus was shifted to assessing the readiness of the approved trustees for the commencement of MPF on 1 December 2000 and ensuring compliance with the MPF legislation by reviewing and analyzing various trustees statutory and non-statutory returns and carrying out on-site inspections to scrutinize the operations of the trustees. REVIEW OF TRUSTEES READINESS BEFORE 1 DECEMBER 2000 All approvals as trustees were granted by the MPFA in the year and the applicants met stringent criteria before being granted approval to become MPF trustees. During the year, one of the approved trustees applied for withdrawal of approval and the number of approved trustee was reduced to 20. A list of the approved trustees and their background is at Appendix VI. Most of the approved trustees were newly established companies specifically for the purposes of carrying on MPF business while some of them or their group companies were carrying on ORSO business on a much smaller scale and needed to be substantially geared up to prepare for the launch of MPF. As the MPF business is new in Hong Kong and affects over two million members of the workforce, the ability of the approved trustees to run the MPF business successfully is an important factor to be considered by the MPFA. In this respect, apart from the basic stringent approval criteria, the MPFA imposed additional 32

35 conditions on the approved trustees upon granting the approval status. Among the key ongoing conditions to be met by the approved trustees prior to 1 December 2000 are the establishment and documentation of appropriate and adequate compliance and operating procedures and controls; availability of data-processing facilities; appropriately-trained human resources and such other resources as are sufficient to enable the trustees to undertake their intended roles and to fulfill their obligations as approved trustees. To ensure that the approved trustees meet the above conditions prior to 1 December 2000 and that they are ready to process a massive volume of information and undertake other administrative tasks required by the MPF System, the MPFA carried out full-scale on-site inspections of the approved trustees during the third and fourth quarters of The scope of the inspections covered a wide range of areas including examination of scheme administration systems, review of compliance and operating procedures, and understanding the staff recruitment status and the training provided. Subsequent to the inspections, weaknesses on internal control measures and scheme administration systems were identified and the approved trustees were required to rectify them in a timely manner. After proper rectification, all approved trustees were able to satisfy the MPFA as to their readiness for the administration and operation of their MPF businesses, and their compliance with the MPF legislation as well as the approval conditions. MONITORING THE TRUSTEES AFTER 1 DECEMBER 2000 Close to the launch date of 1 December 2000 and during the initial 60-day permitted period ending on 29 January 2001 for scheme enrolment, approved trustees received an influx of membership applications. Shortly afterwards, this was followed by massive volumes of contribution data and payments which required prompt processing and demanded significant staff resources. To ensure that the approved trustees were able to process the information effectively and efficiently and to enable early detection of processing backlog and bottleneck, detailed progress reports on enrolment and contributions were obtained from the trustees since December 2000 on a regular basis. Where processing backlog, staffing issues or other issues were identified from the reports and after discussions were held with the approved trustees, the MPFA required immediate rectification actions to be taken by the approved trustees. Such actions included deployment of additional staff, hardware resources or other appropriate corrective measures. The MPF System was under considerable pressure and there were teething problems during the initial months of MPF contributions. As expected, a significant number of discrepancies and problems on contribution data and payments were encountered by the approved trustees. Such discrepancies and problems were mainly caused by the confusion and errors on contribution calculation, omissions of staff enrolment and termination notifications due to staff changes. These were mainly attributable to the fact that employers and self-employed persons were not yet sufficiently familiar with the MPF System during the initial period. 33

36 There were also other technical problems arising from different interpretations of the MPF legislation. In this respect, the MPFA issued various circular letters to the approved trustees to address the practical issues and to clarify the MPF legislation, with a view to eliminating confusion and facilitating smooth operation. The circular letters covered a range of issues including operational details of the MPF System such as enrolment and contribution requirements of self-employed persons and prorating of minimum and maximum levels of relevant income for mandatory contribution purposes. A list of all the circular letters issued in the year is at Appendix V. ONGOING MONITORING To ensure that the approved trustees comply with the statutory requirements and to enable early detection of deficiencies, trustees are required to submit returns, audited financial statements and reports, including the schemes under their trusteeship, on monthly, quarterly and annual bases. For the protection of scheme members interests, necessary follow-up actions and special investigations will be carried out if deficiencies or contravention of the MPF legislation are identified. So far no special investigation has been necessary. The MPFA is also responsible for processing changes of officers and other information of the approved trustees to ensure they comply with the MPF legislation and the conditions of approval. New appointment of directors or chief executive officers of approved trustees must have the prior consent of the MPFA based on the same approval requirements as for the initial approval process. During the current financial year, the MPFA gave consent to the appointment of 25 directors or chief executive officers. WORKSHOPS FOR TRUSTEES AND MPF INTERMEDIARIES At different stages of the launch, the MPFA conducted series of workshops to enhance the MPF knowledge of the MPF intermediaries 34

SUPERVISION OF THE MPF INDUSTRY The MPFA conducted series of workshops to enhance the MPF knowledge of the MPF intermediaries and the front-line staff of the approved trustees.

37 SUPERVISION OF THE MPF INDUSTRY The MPFA conducted series of workshops to enhance the MPF knowledge of the MPF intermediaries and the front-line staff of the approved trustees. and the front-line staff of the approved trustees, so that they could better serve scheme participants. COMPLAINTS AGAINST TRUSTEES About 360 complaints received by the MPFA in the year were lodged against trustees. Most of them were related to scheme administration. Compared with the total number of scheme members, the percentage of complaints was small. FOCUS OF COMING YEAR S WORK After several months of accepting contributions since December 2000 and with the substantial efforts put in by both the approved trustees and the MPFA, and the scheme participants becoming more familiarized with the system, the teething problems associated with MPF operations appeared to be transitory. In the coming year, apart from ensuring approved trustees 35

38 ongoing compliance with the MPF legislation, the MPFA will focus its efforts on securing improvements in the approved trustees standards and quality of services and scheme operations so as to better serve the scheme members and better protect their interests. SUPERVISION OF MPF SCHEMES AND INVESTMENT FUNDS FOCUS OF WORK MPF products include schemes, constituent funds and pooled investment funds. The work in respect of supervision of MPF products in was mainly focused on reviewing and approving applications for registration of schemes and approval of constituent funds. In the past year, focus was shifted to reviewing and approving applications for approval of pooled investment funds, approval of amendments to constitutive documents of the registered schemes, and monitoring the investment compliance of MPF products. REGISTRATION OF SCHEMES AND APPROVAL OF CONSTITUENT FUNDS Following the registration of 45 master trust schemes and the approval of 253 constituent funds in the year of , the MPFA registered eight additional schemes and approved 55 more constituent funds in the past year, including two industry schemes and two employer sponsored schemes comprising an aggregate of 17 corresponding constituent funds. Seven applications for registration of schemes were processed but not approved in the year because of voluntary withdrawal. Another application was still being processed as at the end of March During the year, because of commercial reasons, two master trust schemes with a total of nine underlying constituent funds were de-registered. The processing statistics are summarized in Table 1. A full list of the registered schemes and their underlying constituent funds is set out in Appendix VII. APPROVAL OF POOLED INVESTMENT FUNDS The constituent funds of MPF schemes may invest directly into investments permitted under the MPF legislation or indirectly through pooled investment funds, which operate either in the form of unit trusts or as insurance policies. By July 2000, the MPFA processed a total of 270 applications for approval as approved pooled investment funds. Thirty-seven of the applications were withdrawn before the completion of processing and 233 of them were finally approved. Two of the funds were subsequently deregistered voluntarily due to commercial reasons. As at 31 March 2001, there were 231 approved pooled investment funds of which 167 were in the form of unit trusts and 64 were in the form of insurance policies. Table 2 provides an analysis of the structures of the funds. Since many constituent funds have set up their investment arrangements by investing through approved pooled investment funds, the completion Table 1 Processing statistics at scheme level Number as at De-registration Registration Number as at 31 March 2000 during the year during the year 31 March 2001 Registered Schemes Master Trust Schemes Industry Schemes Employer Sponsored Schemes Approved Constituent Funds 36

39 SUPERVISION OF THE MPF INDUSTRY of the approval exercise for pooled investment funds marked a major stride in the development of the MPF System. With the MPF schemes, their constituent funds and the underlying approved pooled investment funds in place, the necessary investment management platform is ready for taking up MPF contributions and transfers from ORSO schemes upon commencement of the MPF System on 1 December APPROVAL OF VARIOUS SUBSIDIARY DOCUMENTS Ahead of the launch of the MPF System in December 2000, service providers finalized the management and administrative details of their schemes, including the execution of investment management contracts and custodial agreements. The requirements of the contents of these documents are stipulated in the MPF legislation, and these documents were reviewed by the MPFA to check if such requirements were fulfilled. A total of 80 investment management contracts and 48 custodial agreements for both registered schemes and approved pooled investment funds were reviewed by the MPFA during the year. Applications were also received in the year for approval of certain entities as approved overseas banks for the provision of custodial services under the MPF legislation. A total of 26 such applications were vetted and approved over the year. APPROVING AMENDMENTS TO THE APPROVED PRODUCTS AND THEIR DOCUMENTATION Various changes to the scheme structures were made by the service providers in the past year in response to keen market competition. The most salient ones were reduction in fees and charges and adjustments in the operational aspects of the schemes. The former has resulted in competitive rates charged by MPF schemes while the latter has led to improved services and simplified procedures for employers and scheme members. As these changes involved amendments to the principal brochures / explanatory memoranda or the trust deeds of the schemes, applications had to be made to the MPFA for approval before the changes took effect. For certain schemes, changes to such documents were required to ensure compliance with the legislative amendments enacted in June During the financial year ended 31 March 2001, the MPFA received 178 applications for approval of amendments. The processing of 161 applications was completed and that of 17 applications was in progress. Like the MPF schemes, the approved pooled investment funds also incorporated certain changes subsequent to approval by the MPFA, in response to market demand and changes in legislative requirements. Table 2 Analysis of approved pooled investment funds (as at 31 March 2001) UnitTrust Insurance Policy Total By fund valuation bases Unitized Non-unitized Total By fund structures Umbrella funds Internal portfolios Feeder funds Portfolio management funds Total

40 A total of 208 applications for approval to changes to the documentation of the funds were received by 31 March 2001 with the processing of 190 cases completed and 18 cases in progress. The statistics of processing amendments are summarized in Table 3. INVESTMENT MONITORING Investment operations of the registered schemes started with the commencement of MPF contributions and transfers from ORSO schemes in December Monitoring work was initially conducted through review of the regular returns and reports from the service providers. Full-scale regular on-site inspection will commence in the next financial year. Review work performed during the year is summarized in Table 4. The approved trustees have the statutory duties to report promptly to the MPFA upon the occurrence of significant events, which include breaches of the MPF legislation. Up to 31 March 2001, reports of breaches received were primarily technical breaches, such as violation of diversification limits, that were attributable mainly to the small amount of money collected at the initial stage of the MPF System. These breaches were rectified promptly and the number of breaches rapidly declined as the size of MPF funds accumulated to more sizable amounts. Scheme members were compensated for any losses incurred in the process of rectification of the breaches. The MPFA does not expect these problems to recur in the longer term as the fund size of the registered schemes grows. FOCUS OF COMING YEAR S WORK On-site inspection of investment activities commenced at the close of the past year. In the year to come, the MPFA has planned and scheduled various visits to all trustees, and investment managers in certain cases. The objectives of these inspections are to review the investment compliance of the MPF schemes, to identify any inadequacy in the internal controls of trustees and service providers in respect of investment operations, and to demand remedial actions if necessary. Where rectifications are undertaken by the trustees or investment managers, such actions will also be examined in the on-site inspection process to ensure that the interests of scheme members are well-protected. Table 3 Statistics of processing amendments to approved products (as at 31 March 2001) Completed In Progress Total Registered Schemes Approved Pooled Investment Funds Total Table 4 Statistics of reports and returns from service providers processed (as at 31 March 2001) Approved Pooled Schemes Investment Funds Total Monthly returns Quarterly returns Not applicable Consolidated reports/ Auditors' reports Total

41 SUPERVISION OF THE MPF INDUSTRY STATISTICS Statistics on MPF schemes and funds are included in Part B of the Statistics section. SUPERVISION OF INTERMEDIARIES The MPFA works closely with the Hong Kong Monetary Authority (HKMA), the Insurance Authority (IA) and the Securities and Futures Commission (SFC) in regulating MPF intermediaries. FOCUS OF WORK In year , the work in respect of supervision of intermediaries mainly focused on registering MPF intermediaries, formulating policies and developing procedures relating to the regulation of MPF intermediaries. In the past year, the focus was shifted to monitoring MPF intermediaries compliance with the Code of Conduct for MPF Intermediaries, fine-tuning the regulatory framework and improving the professional standard of MPF intermediaries. REGISTRATION OF MPF INTERMEDIARIES During the year, the MPFA processed a total of new applications for registration as MPF intermediaries. As at 31 March 2001, there was a total of registered MPF intermediaries, comprising 479 corporations and individuals respectively. ONGOING MONITORING Under the existing regulatory framework, the MPFA acts as the lead regulator, coordinating the regulatory efforts of the other three regulators with a view to ensuring regulatory consistency and minimizing regulatory overlap. Whilst the MPFA is mainly responsible for daily monitoring and handling of complaints, the HKMA, the IA and the SFC are responsible for supervising those MPF intermediaries falling under their regulatory regimes, including conducting inspections and taking enforcement / disciplinary actions where necessary on MPF intermediaries under their respective supervision. The year was marked with considerable resources devoted to processing of changes of information relating to MPF intermediaries. During the year, the MPFA processed a total number of changes. Table 5 Number of registered MPF intermediaries (as at 31 March 2001) Total number of registered MPF intermediaries Corporate intermediaries 479 Individual intermediaries Permitted to advise on insurance policies Permitted to advise on securities Permitted to advise on securities & insurance policies Figure 1 MPF intermediaries by industry* (as at 31 March 2001) Securities Banking 3% 41% Insurance 56% * classified by principal's major line of business 39

42 Most of the changes were related to change of employment of individual intermediaries and change of name of their sponsoring corporation as a result of corporate mergers and restructuring. Over the past year, the HKMA, IA and SFC conducted a number of inspections on corporate intermediaries falling under their respective regulatory regimes. So far, no major irregularities or serious breaches of the Code of Conduct for MPF Intermediaries were noted. All corporate intermediaries were required to complete an Information Summary Questionnaire issued by the MPFA. The information so obtained was used to facilitate the three regulators in conducting inspections. Earlier in the year, the four regulators agreed on a set of procedures for dealing with alleged misconduct of MPF intermediaries. All complaints against MPF intermediaries are normally dealt with by the MPFA. If further investigation and/or disciplinary actions are required, the complaint would then be referred to the relevant regulator. During the year, there were 45 complaints against MPF intermediaries. This accounted for about 2% of the total complaints received by the MPFA. Only two complaint cases were referred to the other regulators for follow-up. FINE-TUNING OF THE REGULATORY FRAMEWORK Considerable efforts were devoted to fine-tuning the regulatory framework. The fit and proper criteria was introduced in the past year to assess whether or not applicants/ registrants are fit and proper to be registered or to remain registered as MPF intermediaries. The Code of Conduct for MPF Intermediaries was revised during the year to incorporate the fit and proper criteria and the requirement on disclosure of past investment performance during the marketing process. The requirement of filing annual returns by corporate intermediaries was also introduced during the year. This was to ensure that the MPFA maintained an up-to-date database of MPF intermediaries. IMPROVING QUALITY OF MPF INTERMEDIARIES A simple and user-friendly leaflet known as MPF Intermediary & You was published during the year to educate the public concerning the role of MPF intermediaries as well as an individual s role as a scheme participant. Efforts were devoted to improving the standard of MPF intermediaries through expanding the coverage of the MPF Intermediaries Examination Study Notes and enhancing the quality of the MPF intermediaries examination. The series of workshops conducted by the MPFA for MPF intermediaries had helped them to get familiarized with the operational details and better serve their clients. FOCUS OF COMING YEAR S WORK In the coming year, the focus in respect of supervision of intermediaries will be on further refining the regulatory framework and improving the professional standard of MPF intermediaries. SUPERVISION OF THE INDUSTRY SCHEMES Industry Schemes are MPF schemes designed for industries with high worker mobility. Currently, they cover the catering and construction industries. REGISTRATION AND ENROLMENT On 13 April 2000, the MPFA registered two trustees for the Industry Schemes. They were selected by the Industry Schemes Selection Board after a competitive tendering exercise. The two trustees 40

SUPERVISION OF THE MPF INDUSTRY Executive Councillor Hon Henry Tang and Legislative Councillor Hon Lee Cheuk-yan helped promoting Industry Schemes.

43 SUPERVISION OF THE MPF INDUSTRY Executive Councillor Hon Henry Tang and Legislative Councillor Hon Lee Cheuk-yan helped promoting Industry Schemes. are the Bank Consortium Trust Company Limited and the Bank of East Asia (Trustees) Limited. As at the end of March 2001, about employers, employees and SEPs have joined the Industry Schemes. Enrolment was still growing. MONITORING COMPLIANCE The MPFA monitored the trustees compliance with the MPFSO by analyzing their reports, holding regular progress meetings and carrying out on-site inspections to scrutinize the operation of trustees with the aim of protecting the interests of scheme members. The trustees of the two Industry Schemes took proactive measures in attracting enrolment, and in overcoming teething problems in scheme administration caused by work volume, and employers and casual employees being unfamiliar with the procedures. With these efforts, the making of mandatory contributions by scheme members under the Industry Schemes was in reasonable order in the early months of operation. Participation in the Industry Schemes was influenced by the changing operational characteristics of the catering and construction industries in recent years. In the catering sector, more employees were employed on monthly terms, hence they had participated in the master trust schemes instead. In the construction industry, the multiple layers of sub-contracting, the transitory work places and the changing status of the workforce, either as employer, employee or SEP, were materially affecting the rate of participation. In September 2000, the MPFA made a submission to the Works Bureau s Construction Industry Review Committee expressing concern over some trade practices which may obstruct MPF implementation. Some of the Construction Industry Review Committee s recommendations made in January 2001, including worker registration and reduction in layers of sub-contracting, should have a positive effect on strengthening enrolment in the Industry Schemes, if implemented. THE INDUSTRY SCHEMES COMMITTEE The operation of Industry Schemes has been closely monitored by the statutory Industry Schemes Committee. It met three times during the year and made positive recommendations on enforcement and education which were necessary in enhancing compliance by employers and employees alike. Please refer to pages 18 and 19 for the membership and other information on the Committee. 41

45 The MPFA is now ready to embark on new initiatives in consolidating its work, strengthening its regulatory and enforcement abilities and increasing its productivity. The MPFA will tackle the non-compliant employers, relevant employees and self-employed persons by education and law enforcement. It will strive to boost the compliance rates and impress on the public that at the end of the day, it is the entire community of Hong Kong, not merely employees, that will benefit from the success of the MPF System.

46 PROTECTION OF SCHEME MEMBERS In this crucial initial year, the MPFA had to carefully chart its course in order to meet its objectives of smoothening the transition, ensuring public acceptance, enforcing the law, and protecting scheme members interests. From 1 December 2000, Hong Kong has become the first place in Asia with the World Bank s three pillars of old age protection* in place for its industrious workforce. Given time, the MPF System will become an integral and indispensable part of the working life of the people of Hong Kong, providing a reliable source of funding support for their retirement needs. On the other hand, in its inaugural year of operation, when employers and employees found themselves having to align with the legal requirements of enrolling in MPF schemes and making periodic contributions, the implementation of the MPF System inevitably had its fair share of teething problems. In this crucial initial year, the MPFA had to carefully chart its course in order to meet its objectives of smoothening the transition, ensuring public acceptance, enforcing the law, and protecting scheme members interests. SMOOTHENING THE TRANSITION The advent of the MPF era poses many challenges. As a social programme, the scale of transformation brought about by the MPF System has been unprecedented. The universe of the MPF System involves employers, covers relevant employees and SEPs. The socio-economic background, employment status and remuneration packages, saving habits and knowledge on investment, as well as plans for retirement of these people are widely different. The implementation of the MPF System has introduced new dynamics into the culture and behaviour in the world of human resources and their employment: it requires the employment status and remuneration packages of individuals to be individually and formally identified. It brings to light people of the informal sector, who have no fixed jobs and who might never have paid tax, and requires them to enrol in a MPF scheme. It also requires enrolled employees to make choices on their long term investment strategies. It was against such a background that the MPFA had been devising implementation strategies and action * In 1994, the World Bank published its Research Report Averting the Old Age Crisis. It advocates the need for a multi-pillar arrangement for old age security. The three pillars are a mandatory, privately funded and managed retirement fund scheme, publicly funded social security, and personal savings plus insurance. 44

plans. These required close coordination amongst employers, employees and the MPFA. They involved trade associations, labour unions and professional bodies.

47 plans. These required close coordination amongst employers, employees and the MPFA. They involved trade associations, labour unions and professional bodies. Since the MPFSO does not and indeed cannot prescribe specific conditions covering each and every individual or employment establishment, comprehensive answers to frequently asked questions had to be prepared and promulgated in all practicable ways. Over 400 briefing seminars were held for employer s representatives and trade associations. Over letters and pamphlets on the key features of the MPF System were sent to employers in September 2000, urging them to enrol early. The MPFA has issued guidelines to facilitate service providers in complying with the operational requirements of MPF, among them 13 sets were on scheme operations. These 13 sets of THE PARTICIPATION CERTIFICATES The participation certificate, issued by the MPFA, is legally required to be displayed by employers as the proof of having joined a MPF scheme. Despite the fact that the MPFA s major publicity started long before the implementation date, most employers only signed up between November 2000 and February As a result, the bulk of the applications for participation certificates was only received by the MPFA and processed within these months. The bunching of applications and their high volume presented an onerous task for the MPFA. Nevertheless, efforts on the vetting of applications, in printing and validation of the certificates produced, proved to be well spent. As at 31 March 2001, a total of participation certificates have been processed and issued by the MPFA to employers, of which were guidelines were supplemented by 11 circular letters to clarify specific and technical issues for trustees and corporate MPF intermediaries. Participation certificate The full list of guidelines and codes issued by the MPFA so far is included in Appendix IV. Appendix V lists all the circular letters and bulletins issued within the year. 45

48 printed and delivered during the 3 months from December 2000 to February ENSURING ACCEPTANCE OF THE MPF SYSTEM ENROLMENT At the end of March 2001, about 82% of the employers, 92% of the relevant employees and 90% of the SEPs covered by the MPF System have joined an MPF scheme. By and large, the public appears to have accepted the MPF as a useful means of retirement protection and beneficial for the long term interests of the community. These results however have not been attained easily. In February 2000, enrolment by employers was only a worrying 0.5%. It caught up and reached 63% in December 2000 when the MPF System commenced. The enrolment rate subsequently exceeded 80% in February Detailed statistics on enrolment are included in Part A of the Statistics section of this report. While most employers were compliant, many took action only at the last minute. The last-minute rush created a tremendous challenge for the service providers in having to clear the volume of work within a short period of time. The growth in enrolment rates during rhe period from February 2000 to March 2001 is shown on page 3. Together with the employees who were already covered by existing occupational retirement schemes or statutory pension plans, 82% of the total workforce in Hong Kong was protected by retirement protection schemes at the end of March The remaining 18% included 12% who were exempt from MPF (people aged below 18, people aged 65 or above, or domestic employees and self-employed hawkers who are not required by law to join any local retirement scheme) and 6% who should have joined but had not yet joined any MPF scheme. The coverage of Hong Kong s employed population by different types of retirement schemes as at 31 March 2001 is shown on page 3. While the MPFA will sustain its efforts on the remaining 18% of the employers, 8% of the relevant employees and 10% of the SEPs, it will take time to achieve full compliance, if it can be achieved at all. In this connection, continual efforts on public education should go hand in hand with appropriate enforcement actions. Figure 2 Number of proactive inspections conducted since 1 December Dec-00 Jan-01 Feb-01 Mar-01 Figure 3 Number of complaint-driven investigations conducted since 1 December Dec-00 Jan-01 Feb-01 Mar

49 PROTECTION OF SCHEME MEMBERS ENFORCING THE LAW INSPECTION AND INVESTIGATION The MPFA established its enforcement team in December 2000, with the passing out of 60 MPF Inspectorate officers after training. The team is tasked with the responsibilities of inspecting employment premises and investigating complaints received. Inspections are proactive with surprise checks on employers randomly but systematically selected. Up to the end of March 2001, a total of inspections have been conducted. Figures 2 and 3 show the number of inspections and investigations conducted since 1 December Investigations are detailed examinations of complaint cases received. Up to 31 March 2001, complaints had been received by the MPFA, of which about 68% concerned member protection. Table 6 shows a breakdown of the nature of complaints received. Member protection has been enhanced by the effective processing of complaints received. Technical breaches by employers, committed due to oversight or ignorance, were usually rectified speedily after warnings were served by the MPFA. Furthermore, not all the complaints were genuinely MPF-related. In the initial months, false alarms with no infringement on scheme members right were not uncommon. Such complaints were usually withdrawn after it was found that the problems were caused by misunderstanding or inadequate communications between employers and employees. Some complaints on deduction of wages were in fact industrial disputes. In this respect, an effective mechanism of referral of such complaints through an electronic link had been established between the MPFA and the Labour Department. Anonymous cases accounted for about 19% of the complaints received. Some complainants were unwilling to reveal their identities to employers, or to serve as witnesses in court. In such cases, investigation had to be curtailed and the cases closed. PROSECUTION Prosecution is the last resort in ensuring compliance. For blatant contraventions of the MPFSO, the MPFA would have no hesitation in bringing offenders to court. The MPFA is not empowered by law to prosecute MPF-related offences. Assistance from the Department of Justice and the Police is therefore required. The MPFA has established an effective rapport with these two Government departments. Up to the Table 6 The nature of complaints received by the MPFA up to 31 March 2001 Nature % (A) Complaint cases related to member protection: * 68 Deduction of wages 16 Involuntary change from employee to SEP 6 Non-enrolment in MPF Schemes 22 Default contribution 21 Others (e.g. dismissal by employer) 7 (B) Complaint cases against trustees, intermediaries, ORSO etc 32 Total 100 * Multiple selection of complaint category is allowed. As such, the sum of the percentages of individual categories is larger than the total percentage. 47

end of March 2001, 12 cases involving 16 summonses have been referred to the Police for prosecution. Most cases were about nonenrolment and were taken up mainly in response to complaints received.

50 end of March 2001, 12 cases involving 16 summonses have been referred to the Police for prosecution. Most cases were about nonenrolment and were taken up mainly in response to complaints received. Statistics on enforcement are contained in Part E of the Statistics section of this report. ENHANCING THE TRANSPARENCY OF THE MPF SYSTEM With a view to keeping the public better informed about the MPF System and better protecting scheme members, the MPF Statistical Digest, a quarterly publication, was published in March A cyber version is also available on the MPFA website. The Digest contains such 48

PROTECTION OF SCHEME MEMBERS key statistical information as enrolment rates, the universe of the MPF System, the consolidated net asset values of the MPF schemes, and similar data on the ORSO schemes.

51 PROTECTION OF SCHEME MEMBERS key statistical information as enrolment rates, the universe of the MPF System, the consolidated net asset values of the MPF schemes, and similar data on the ORSO schemes. The contents will be enhanced when further information is available from trustees. THE WAY FORWARD For the year , the key activities in respect of member protection will be to tackle the noncompliance of the remaining hard core of 18% of employers, 8% of relevant employees and 10% of SEPs, by education and law enforcement. The MPFA hopes to be able to achieve the target enrolment rate of at least 88% to 90% of the employers by the end of We will strive to boost the compliance rates and impress on the public that at the end of the day, it is the entire community of Hong Kong, not merely employees, that will benefit from the success of the MPF System. Public enquiries related to the MPF System are promptly answered. 49

52 REGULATION OF OCCUPATIONAL RETIREMENT SCHEMES One of the MPFA s key tasks before the launch of the MPF System was the processing of applications for MPF exemption of ORSO Schemes. EXEMPTION OF ORSO SCHEMES FROM MPF REQUIREMENTS PROCESSING OF MPF EXEMPTION APPLICATIONS During the year, one of the MPFA s key tasks before the launch of the MPF System was the processing of applications for MPF exemption of ORSO schemes. The closing date for lodging such applications was 3 May In order to urge the employers to submit their exemption applications by 3 May 2000, the MPFA had taken various measures to raise their awareness. These measures involved enhanced publicity efforts as well as direct communication with the parties concerned. An intensive publicity campaign was conducted prior to the closing date for making MPF exemption applications. The campaign engaged a variety of promotional measures, including advertisements and announcements in the mass media, distribution of information pamphlets, dissemination of messages through outdoor signboards, TV screens and giving talks to groups at the district level. Concurrently, the MPFA issued letters reminding employers operating ORSO schemes of the exemption application deadline and urged them to communicate with their employees on the issue. In addition, the MPFA contacted ORSO scheme administrators, inviting them to assist the employers to make the relevant interface arrangements and prepare the necessary documents for communicating with the employees on the decision. At the close of the deadline for MPF exemption applications on 3 May 2000, the MPFA received a total of MPF exemption applications, of which schemes were registered schemes and 569 were exempted schemes. The MPFA had completed the processing of all MPF exemption applications by 31 July Out of the applications, exemption applications covering about scheme members were approved by the MPFA. The results of MPF exemption applications are shown in Figure 4. APPEALS Four appeals were lodged with the Mandatory Provident Fund Schemes Appeal Board (the Appeal Board) against the MPFA s decision to refuse applications for MPF exemption certificate. Three of the appeals were 50

53 subsequently withdrawn. The hearing of the remaining appeal case was held on 31 October The decision of the MPFA to refuse the application was upheld by the Appeal Board. MPF/ORSO OPTION Under the Mandatory Provident Fund Schemes (Exemption) Regulation, the employers of MPF exempted ORSO schemes are required to offer an option to the members of the ORSO schemes to choose between MPF schemes and the ORSO schemes. Each relevant employer of a MPF Exempted ORSO Registered Scheme is required to report the membership information to the MPFA on or before 28 February The results compiled on the basis of the membership statements received are set out in Figure 5. WITHDRAWAL OF EXEMPTION CERTIFICATE Owing to the additional costs of running two schemes (MPF and ORSO schemes) simultaneously and other reasons, employers of MPF exempted ORSO schemes may withdraw the MPF exemption certificates. Up to 31 March 2001, 650 MPF exempted ORSO schemes had relinquished their exemption status covering about members who would be required to be enrolled in MPF Applications Figure 4 approved Results of 1% MPF exemption Applications applications 1% rejected 77 Applications withdrawn 91 98% Total No. of Applications : Note: Figure in boldface denotes the respective no. of applications Figure 5 Results of membership statements % of existing members who have opted for and become members of a registered MPF scheme % of existing members who have decided to remain in the ORSO schemes 12% 88% 51

54 schemes. The number of MPF exempted ORSO schemes as at 31 March 2001 was covering about employers and scheme members (after excluding members who have opted to join MPF schemes). A breakdown of the number of schemes is shown in Figure 6. WINDING UP OF ORSO SCHEMES For those ORSO schemes which have not obtained MPF exemption status, the relevant employers may choose an interface arrangement to retain them as top-up schemes, freeze the schemes or terminate the schemes. A majority of the employers are expected to terminate the ORSO schemes upon the MPF launch. To ensure a smooth interface for these ORSO schemes, the MPFA issued a letter to all the relevant employers on 19 September 2000 to remind them of the interface options as well as the issues in respect of termination of ORSO schemes. In October 2000, the MPFA also issued a circular letter to all ORSO scheme administrators to draw their attention to various matters relating to termination of an ORSO scheme upon which an employer would have to enrol his employees into a MPF scheme. During the year, ORSO schemes (comprising registered schemes and 80 exempted schemes) were wound up. As at 31 March 2001, the number of ORSO schemes stood at , of which were registered schemes (covering about scheme members after excluding members who have opted to join MPF schemes) and were exempted schemes. In addition, the MPFA had received a further termination notices in respect of ORSO schemes (including registered schemes and 34 exempted schemes). These schemes were undergoing termination processes as at 31 March Based on the termination notices submitted and the latest annual returns of the respective ORSO registered schemes, the asset Figure 6 Number of MPF exempted ORSO schemes (as at 31 March 2001) ORSO Expempted Schemes ORSO Registered Schemes Total No. of MPF Exempted ORSO Schemes : Table 7 Asset arrangements for terminated ORSO registered schemes No of Asset Size ORSO Asset Arrangement Schemes % ($M) % Transferred to MPF Scheme , Transferred to another ORSO Scheme , Paid out to scheme members , Total ,

55 REGULATION OF OCCUPATIONAL RETIREMENT SCHEMES arrangements for the terminated ORSO registered schemes (including those schemes undergoing termination process) are set out in Table 7. ENHANCEMENT OF ADMINISTRATION OF MPF EXEMPTED ORSO SCHEMES The MPFA issued four guidelines during the year in order to ensure effective administration of the MPF exempted ORSO schemes. Four bulletins were also issued to employers who operate MPF exempted ORSO registered schemes to promulgate the major requirements they need to fulfill in order to comply with the relevant legislation and to safeguard the interests of scheme members. The guidelines issued by the MPFA so far and all the circular letters issued in the year are listed in Appendices IV and V respectively. WORK OF THE REGISTRAR OF OCCUPATIONAL RETIREMENT SCHEMES As the Registrar of Occupational Retirement Schemes (RORS), the MPFA is also responsible for the effective administration of occupational retirement schemes. The work of the RORS in this aspect includes monitoring of ORSO registered/exempted schemes and processing of changes to the schemes. Details of the work of the RORS are summarized in Figure 7. A list of the corporate administrators who administer pooling agreements for ORSO schemes is in Appendix VIII. STATISTICS Statistics on ORSO schemes are set out in Part C of the Statistics section. Figure 7 Work of Registrar of Occuptional Retirement Schemes Note: Figures denote workload for the year Monitoring of compliance with ORSO Exemption Requirements 20 overseas compliance certificates and membership statements regarding members who are HKID card holders Examination of Annual Returns and Audited Financial Statements annual returns processed Registrar of Occupational Retirement Schemes Granting Consent for Changes of Pooling Agreements Consent granted to 649 schemes Processing of Notifications of Changes notifications of changes processed Processing of Applications for Registation 893 schemes registered and 146 schemes exempted 53

56 The launch of the MPF System would not have been successful unless there was adequate communication with the public, with members sufficiently informed and rendering their support. The large-scale territory-wide Public Education and Publicity Campaign launched since January 2000 penetrated all sectors and levels of the community. It successfully raised public awareness of the imminent implementation of the MPF System, addressed adverse comments, enhanced public acceptance and ultimately encouraged enrolment in MPF schemes.

58 PUBLIC EDUCATION AND PUBLICITY The MPFA continued to reach out to the whole community of Hong Kong in order to raise their awareness and rally their support for the MPF System. OBJECTIVES With the implementation of the MPF System on 1 December 2000, about two million Hong Kong people have enrolled in MPF schemes. For many, this is the first time that they have ever joined a retirement protection plan. The launch of the MPF System would not have been successful unless there was adequate communication with the public, with members sufficiently informed and rendering their support. The key public education and publicity objectives were therefore to raise public awareness and rally general support for the System. CAMPAIGN STRATEGY Publicity activities were conducted on two levels, aiming at the mass public on the one hand and targeted groups on the other. The messages and activities, nevertheless, supplemented The mass public was informed, through extensive media campaigns, of the benefits the MPF System would bring to individuals and the community at large. They were also reminded of the key dates and milestones, so as to get prepared for the implementation. To ensure a smooth launch, participating parties needed a good grasp of the technical and operational aspects of the System. This included questions on how to select a scheme, and complemented each other. 56

(Left) Acting Financial Secretary Mr Stephen Ip, MPFA Chairman Hon Charles Lee and (right) DJs at the MPFA Super Expo.

prepare and submit information to the trustees, as well as how to calculate and make contributions.

information needs. These messages were disseminated through trade associations, employer groups, labour unions and groups at the district level to their members and constituents.

The MPF Campaign Coordinating Committee, chaired by the Secretary for Financial Services, comprised representatives from the Labour Department, Information Services Department, Housing

59 (Left) Acting Financial Secretary Mr Stephen Ip, MPFA Chairman Hon Charles Lee and (right) DJs at the MPFA Super Expo. Legislative Councillor Hon Tommy Cheung visited restaurants in Shamshuipo to pass on the MPF message. Commissioner for Labour Mrs Pamela Tan officiated at a Construction Site Show. prepare and submit information to the trustees, as well as how to calculate and make contributions. As employers, employees and self-employed persons were required to attend to different aspects of scheme operation, messages were specifically tailored to cater to their specific information needs. These messages were disseminated through trade associations, employer groups, labour unions and groups at the district level to their members and constituents. MPF CAMPAIGN COORDINATING COMMITTEE The promotion of the MPF System was a major Government publicity programme for the year The MPF Campaign Coordinating Committee, chaired by the Secretary for Financial Services, comprised representatives from the Labour Department, Information Services Department, Housing Department, Home Affairs Department and Radio Television Hong Kong. Committee members provided valuable input and assistance to facilitate the implementation of various publicity campaigns. UNDERSTANDING PUBLIC NEEDS Understanding the public s need for information in order to promptly address their MPF concerns was a major success factor for a smooth launch. Through close liaison and interaction with various local bodies, 57

trade associations and worker groups, the MPFA had been able to obtain timely feedback and keep itself abreast

MAJOR ACTIVITIES OF THE PUBLIC EDUCATION AND PUBLICITY CAMPAIGN MAJOR CAMPAIGNS Awareness Campaign to promote

territory-wide campaign in the summer. Promotional materials on MPF were distributed to employers and employees.

proclaim System and to educate the public on their MPF rights.

60 trade associations and worker groups, the MPFA had been able to obtain timely feedback and keep itself abreast of the information needs of the public. MAJOR ACTIVITIES OF THE PUBLIC EDUCATION AND PUBLICITY CAMPAIGN MAJOR CAMPAIGNS Awareness Campaign to promote the awareness of the MPF Operation-All-Shops over shops were visited by MPFA ambassadors in this territory-wide campaign in the summer. Promotional materials on MPF were distributed to employers and employees. Celebrities Endorsement Campaign prominent leaders and well-known figures of the community were invited to proclaim System and to educate the public on their MPF rights. Over shops were visited by MPFA ambassadors in the Operation-All- Shops Campaign. DJs helped to promote MPF. Mr Choi Chun-wa, Vice-chairman of Hong Kong Construction Industry Employees General Union, distributed MPF information to workers. 58

PUBLIC EDUCATION AND PUBLICITY their support for the MPF System. This served to increase public awareness and muster general support for the System.

They also visited eateries and construction sites to encourage employers and employees in the two industries to join the Industry Schemes.

ADVERTISING The public s attention was drawn to the milestones along the implementation process, the key dates to observe and important things to note.

Apart from engaging TV, radio airtime and printed advertisement, other tools for raising public awareness included large outdoor banners such as the mega display sign put up at Jordan facing the

61 PUBLIC EDUCATION AND PUBLICITY their support for the MPF System. This served to increase public awareness and muster general support for the System. Industry Scheme Campaigns prominent employers and union leaders in the catering and construction industries were invited to help organize activities in promoting the schemes. They also visited eateries and construction sites to encourage employers and employees in the two industries to join the Industry Schemes. MPF Exemption Campaign to encourage employers who operate ORSO schemes to seek MPF-exemption status. ADVERTISING The public s attention was drawn to the milestones along the implementation process, the key dates to observe and important things to note. TV commercials featuring animated cartoon characters were used to urge employers and self-employed persons to join the schemes early to avoid a last-minute rush. Apart from engaging TV, radio airtime and printed advertisement, other tools for raising public awareness included large outdoor banners such as the mega display sign put up at Jordan facing the harbour. Its huge Chinese characters!" (MPF for the Future) stand out MPF show on television. Video wall advertisment at Times Square. Mega size billboard at Jordan waterfront (right) and its launch ceremony* (left) * (Left to right) Mr Tse Lai-leung, President of Hong Kong Construction Association Ltd; Mr Chan Kay-cheung, ISC Member; Hon Lau Chin-sek, Legislative Councillor; Mr Donald Tsang, Financial Secretary; Mr Lee Kai-ming, MPFA Director; Mr Poon Siu-ping, MPFSAC Member; Mr Chan Wai-lun, ISC Member; Mr Wu Chor-nam, Chairman of Central & Western District Council; and Mr Rafael Hui, Managing Director. 59

sharply against the waterfront, especially when lit in the evenings. Similarly, large billboards and banners carrying the theme The Fruit is Yours (!

MEDIA RELATIONS During the year, 67 media interviews were arranged. A total of 82 press releases were issued.

There was a total of 11 booklets published (nine in Chinese and two in English) on topics Mr Lee Wing-sang, Chairman of Motor Transport Workers General Union, helped

62 sharply against the waterfront, especially when lit in the evenings. Similarly, large billboards and banners carrying the theme The Fruit is Yours (!"#$) were placed throughout Hong Kong, projecting the image of the benefits that can be reaped on retirement. The theme was also carried on MTR posters. MEDIA RELATIONS During the year, 67 media interviews were arranged. A total of 82 press releases were issued. PUBLICITY LITERATURE Following the highly popular All-in-one guidebook, a series of pocket-size booklets were published during the year. There was a total of 11 booklets published (nine in Chinese and two in English) on topics Mr Lee Wing-sang, Chairman of Motor Transport Workers General Union, helped distributing MPF information to mini-bus drivers. such as the main features of the MPF System, Relevant Income, Contribution Period, Choosing MPF Investment Funds, and features of the different types of funds. These handy, informative booklets were widely distributed through District Offices, trade unions and chambers of commerce. 60

MPF intermediaries are the main interface between trustees and scheme members.

63 PUBLIC EDUCATION AND PUBLICITY The interactive and user-friendly MPFA website is a popular source for MPF information seekers. SEMINARS AND WORKSHOPS FOR INTERMEDIARIES The MPFA was fully aware of the pivotal role that MPF intermediaries played towards the smooth implementation of the System. MPF intermediaries are the main interface between trustees and scheme members. Their knowledge of the MPF System and the quality of their after-sale services would have a direct impact on the smooth operation of MPF schemes. It was important that intermediaries were equipped with MPF-related knowledge and expertise. Scores of seminars and workshops were organized at different stages of the publicity campaign to update them with the latest information and to answer their queries. COMMUNITY OUTREACH Reaching out to the community was an important part of the MPFA s public education initiative. The aim of the outreach activities was to establish face-to-face contact, to provide answers to questions and to collect feedback. A designated team travelled throughout the entire SAR to brief area committees, talk to workers and attend seminars organized by various local and workers bodies. 61

The MPFA also joined hands with employer groups, labour unions and district bodies to further promulgate MPF information to employers, employees, district representatives and human resources

In a direct-mailing campaign in August 2000, information-rich, user-friendly booklets and leaflets on MPF-related issues were distributed to SMEs throughout Hong Kong.

64 The MPFA also joined hands with employer groups, labour unions and district bodies to further promulgate MPF information to employers, employees, district representatives and human resources professionals in discussions, forums and seminars. help them prepare for the full implementation in December In a direct-mailing campaign in August 2000, information-rich, user-friendly booklets and leaflets on MPF-related issues were distributed to SMEs throughout Hong Kong. In the coming year, the MPFA will seek to further propagate user-friendly MPF-related knowledge, with an emphasis on investment education, to the public at large and MPF scheme members in particular. There was a total of 986 of these outreach activities during the year, attracting about attendees. WORKING TOGETHER WITH SMALL AND MEDIUM ENTERPRISES For the convenience of small and medium enterprises (SMEs), MPF SME Resource Centres have been set up at the MPFA's premises and the Trade and Industry Department's SME Information Centre in Mong Kok to provide one-stop MPF information service. The two centres are connected to the MPFA through direct phone lines so that SME enquiries can be answered instantly. In addition, the MPFA held 12 seminars for SMEs in conjunction with the Hong Kong Productivity Council's SME Centre, various media and SME organizations. Roadshows held at MTR stations throughout the year also provided handy information for SMEs to MPFA WEBSITE The MPFA website continued to be a popular source for information seekers. It underwent an enhancement and facelift to become more interactive and user-friendly. Over visitors had frequented the site. The lists of major publicity activities, campaign media used and booklets distributed are set out at Appendices IX to XI. THE WAY FORWARD For the year under report, the thrust of the communication campaign was to address the questions and concerns of what, why and when. The launch of the MPF System had brought the public education and publicity campaign into another stage, which was to address the question of how the MPF System and the MPFA would operate to the benefit of members and the community. Celebrities proclaimed their support for MPF in a series of television commercials. Hon Charles Lee Hon Chan Yuen-han 62

65 PUBLIC EDUCATION AND PUBLICITY Hon Henry Tang Dr Lee Ka-yan Mr Albert Cheng Ms Dodo Cheng Hon Christine Loh Hon Lau Chin-sek Mr Wong Tsz-wah Mr Chan Wing-luk Mr Yeung Kwun-yat 63

66 SUPPORTING SERVICES The supporting departments of the MPFA provide the essential supporting services for ensuring and enhancing the effective management and operational processes of the MPFA. The Corporate Services Division, the Information Technology Division, the Legal Unit and the Corporate Secretary Unit provide the essential supporting services for ensuring and enhancing the effective management and operational processes of the MPFA. CORPORATE SERVICES DIVISION The Corporate Services Division is responsible for providing administration and other support services. Its main scope of work includes human resources management, financial control, treasury functions, translation service and general administrative support. HUMAN RESOURCES MANAGEMENT In , the Human Resources Department continued to be heavily engaged in recruitment of staff. Up to 31 March 2001, we had recruited 115 staff out of an approved establishment of 315, giving a total strength of 272. In addition, we have employed 109 temporary staff to help with peak workloads. The 2 largest recruitment exercises were for the Inspectorate staff and Community Relations Assistants. During the year, individual reviews were conducted on the structure of various divisions and departments, enabling them to be more efficient and effective in meeting the changing requirements of the MPFA. The Corporate Services Division, the Information Technology Division, the External Affairs Division and the Enforcement Department of the Member Protection Division have all undergone restructuring to some extent, gearing them up for the challenges of the launch of the MPF System in December The Human Resources Department also developed, designed and formulated all the human resources related policies and the Human Resources Policy and Administration Manual was completed. To ensure an effective reward-forperformance strategy, a rigorous review of the performance appraisal system, and the performance-related bonus payment and salary adjustment mechanism was conducted and implemented. 64

67 By 1 December 2000, we had enrolled all our staff in MPF schemes. We have appointed three trustees to provide a wider selection of scheme choices to our staff. Arrangements were also made to transfer staff's ORSO scheme assets to the MPF schemes. Comprehensive communication sessions were arranged to facilitate understanding of the interface arrangements. With the establishment of the training section in July 2000, training policies had been formulated. Structured training programmes and core training modules for understanding the MPF System and the MPFA were developed; 28 classes of these core programmes covering 378 participants were conducted; training for the Community Relation Assistants and the Inspectorate grades were also carried out. During the year, 48 classes covering eight skills training workshops, including Staff Appraisal Review, Stress Management, Complaints Handling, Interpersonal and Communication Skills, Effective Team Management, Telephone Manners and First Aid had been organized with an attendance of over An Editorial Board for the Staff Newsletter was formed in December 2000 with the first issue published in February To keep our staff informed of up-to-date corporate issues, other staff communication tools such as the Staff Express and Staff Bulletin were also launched. To cultivate and maintain a culture with emphasis on teamwork, a Staff Welfare Committee was formed to plan and organize staff social activities. With a kind donation by the Chairman of the MPFA, the Hon Charles Lee Yeh-kwong, a "gym room" was set up and equipped with an exercise bicycle, a stepper, OSIM chairs, TV and mini-hi Fi for staff to relax and keep fit. Other social activities organized included a fun day at the International Golf & Yacht Club, an outing to the Po Leung Kuk Holiday Camp, movie evenings and a Staff Christmas Party. GENERAL ADMINISTRATION The General Administration Department provides a wide range of administrative support services to the MPFA to ensure the smooth functioning of the office. These services included the timely provision of suitable equipment, facilities and amenities, and ensuring a safe and comfortable working environment for staff members. Furthermore, it also ensured that assets and records of the MPFA were kept in a safe and easily retrievable manner. To cope with staff expansion and the need for ancillary space, additional offices were leased at the 5/F International Finance Centre to accommodate the Call Centre, and four floors at the Asia Standard Tower to house the Enforcement Department. Storage space at Sunley Centre at Kwai Chung was also leased for off-site storage of materials which were not of immediate use. FINANCIAL CONTROL During the year, the budget structure was reviewed and revised to cope with operational needs. In addition, the budgetary process was also reviewed and a more systematic approach was used in the preparation of the budget. 65

The existing financial management system was improved through process re-engineering and automation by applying information technology, in particular the addition of a module to capture commitment of

68 MPFA directors, committee members and staff participated in a MPF Telegame Show jointly organized by the MPFA and Community Chest. A financial and accounting policy manual listing all fundamental financial policies of the MPFA was compiled. The existing financial management system was improved through process re-engineering and automation by applying information technology, in particular the addition of a module to capture commitment of funds. TREASURY During this year, the Treasury Department was established. One of its first tasks was to map out interim investment strategies for the Capital Grant and the Compensation Fund. As from 30 March 2001, two external bond fund managers were appointed keep safe custody of MPFA's assets. Treasury policies and procedures were laid down and a manual produced. COMMUNITY RELATIONS The Community Relations Department (CRD) was set up in April 2000 to provide a centralized avenue for the public to make enquiries about the MPF System. As at 31 March 2001, there were 27 permanent and 52 temporary staff members at the CRD, who were the frontline personnel at the receiving end of all public enquiries and complaints made through , by phone, by fax, in writing or in person. to manage two portfolios, and a master custodian was appointed to 66

69 SUPPORTING SERVICES Enquiries In anticipation of surging public enquiries in the run-up to the MPF launch, a Call Centre has been set up since April 2000 to answer questions related to the MPF System, such as MPF scheme features, roles and obligations of different parties, members' rights and relevant services. The services and operating hours of the Call Centre were progressively enhanced and extended at various stages of MPF implementation. At the peak of the demand of its service between November and December 2000, the Call Centre operated a hotline enquiry service from 8:30 am to 10:00 pm and a round-the-clock voic service. In March 2001, the hotline enquiry service ran from 8:30 am to 7:00 pm. A computerized Enquiries Handling System, which enabled the logging of all incoming calls and other useful information, was installed in August The Interactive Voice Response System (IVRS) installed in December 1999 was further enhanced in January With these improvement measures, calls can be answered within thirty seconds and the number of abandoned calls dropped drastically to less than two per day on average. During the year, the CRD received enquiries. The number of enquiries peaked in November 2000 with the record of calls in a single day. Complaints The CRD provides a central depository of all complaints referred to the MPFA since 1 December At the end of November 2000, a computerized Complaints Handling System was installed to facilitate the recording, processing, and monitoring of all complaint cases. The system has been linked up with the MPF trustees and the Labour Department through electronic means to facilitate quick referral of complaints. From 1 December 2000 to 31 March 2001, the CRD received a total of complaints. Statistics Statistics of enquiries and complaints are included in Part D of the Statistics section. INFORMATION TECHNOLOGY DIVISION The Information Technology (IT) Division has played a significant role in ensuring that all the required computer and IT systems are ready and operate smoothly so as to facilitate the launch of the MPF System on 1 December 2000, and the discharge of the MPFA s various statutory and corporate management functions effectively. INFORMATION MANAGEMENT SYSTEM (IMS) The most important accomplishment made in the year was the successful completion of the IMS core systems, which went live in November 2000 despite the earlier project slippage. The core systems do not only provide public access to relevant MPF information, they also facilitate the efficient processing of applications submitted by service providers for registration of MPF trustees, schemes, intermediaries and investment funds, and assist in the management and monitoring of enrolment and compliance. Moreover, with the disaster recovery drill successfully conducted in 67

70 November 2000, there was added assurance that in case of a disaster, the IMS services could be restored at a backup site and business operations could be resumed speedily. The Default Contribution system went live on 26 February The launch of these systems was the result of the hard work and collaboration between the IT Division, the user representatives and the project contractor staff in all stages of system development. The close monitoring and management by the IMS Committee was also indispensable to the successful and timely implementation of the core systems. This Committee is headed personally by the Chairman and consists of experts of very high standing in the IT field, namely Dr David Cheung, Associate Professor of the Department of Computer Science at the University of Hong Kong; Mr Daniel Lai, President of the Hong Kong Computer Society and Head of Information Technology of the MTR Corporation; and Mr Stephen Lau, Privacy Commissioner for Personal Data. In parallel with the development of the IMS, several interim systems had been built to meet the immediate and critical business needs of the MPFA and to ensure that the MPFA's operations were not adversely affected by the slippage of the IMS project. These interim systems have served as back-up systems once the IMS core systems went live. COMPLAINTS HANDLING SYSTEM The Complaints Handling System installed before the launch of the MPF System was developed by the IT Division in order for the MPFA to effectively and speedily respond to complaints lodged by the public. The system was built around an information database, which is accessible through a shared network among the trustees, the Labour Department, and the MPFA. TRUSTEE SUPERVISION To ensure the readiness of the IT systems of the Trustees and Administrators, the IT Division visited their data centres to ascertain their IT competence and the soundness of their systems and procedures. Observations and recommendations were communicated to their management staff. OTHER IT SERVICES During the year, the IT Division provided technical support to the infrastructure on which the application systems were run, ensuring a stable and secure system environment for over 300 users. It assisted in the testing and acquisition of software for other supporting departments of the MPFA and also has developed peripheral systems to facilitate the rendering of various supporting services, such as the various bulletin board systems to facilitate efficient dissemination and sharing of information within the MPFA. LEGAL UNIT The work of the MPFA generates many legal issues. The MPF and ORSO systems derive from legislation, common law and equity and are complex from a lawyer's perspective insofar as they interact with the laws of contract, trusts, 68

71 SUPPORTING SERVICES insurance, financial services and employment. The administrative functions of the MPFA are governed by administrative law and affected by privacy and anti-discrimination legislation. As a statutory corporation the MPFA has internal governance issues. As an enterprise the MPFA faces employment law issues and commercial issues relating to the supply of requisite facilities (e.g. leased premises, computer systems), materials and services. The Legal Unit advises on all legal issues affecting the MPFA in its various roles. Before the commencement of the MPF System on 1 December 2000, the primary focus of the Unit was advising on the interpretation and implementation of the MPF and ORSO legislation. The MPFA is not empowered to definitively interpret the law. Nevertheless, it has been essential to the success of the MPF and ORSO systems that the MPFA forms accurate and accepted views on the law affecting MPF and ORSO schemes and expresses those views for the guidance of employers, trustees and service providers. The Unit has played an important role in formulating those views, particularly in the form of draft guidelines for clearance by the Guidelines Committee. Since the launch of the MPF System in late 2000, the Unit has been active in supporting the MPFA's enforcement actions. The Unit liaises closely with the MPFA inspectors, the Police and the Department of Justice and advises on each investigation report before it is dispatched to the Department of Justice for further action with a view to prosecuting offenders. The MPF legislation needs to be refined and amended in the light of operational experience. The Unit has played an important part in advising on the legal aspects of proposed legislative amendments affecting retirement schemes. At the same time, it has also been involved in the provision of legal education to MPFA staff, particularly inspectors. CORPORATE SECRETARY UNIT The Unit has been responsible for providing secretariat services to the Management Board and the MPF Schemes Advisory Committee and co-ordinating matters relating to other boards and committees of the MPFA. It collated and drafted the annual Corporate Plan, reported on progress reviews of the Corporate Plan and managed the production of the Annual Report. The Unit has assisted in receiving and arranging meetings with visitors to the MPFA, including those from the Mainland and overseas. 69

72 EXTERNAL RELATIONS The MPFA received visitors from overseas and the Mainland, exchanging views as well as sharing experiences with them. The decision to implement a privately managed, employment-based MPF System in Hong Kong has attracted a lot of interests and attention from financial regulators, social agencies, government and non-government organizations, and academics, both locally and overseas. During the year under report, the MPFA received a number of visitors from overseas and the Mainland, exchanging views as well as sharing experiences with them. Our representatives were also invited to participate in a number of seminars and talks. Highlights of these activities are given below: LIST OF ACTIVITIES Apr Mar Apr Jun-00 The Acting Managing Director gave a briefing to a delegation led by the President and Chief Executive Officer from Caisse des Depots et Consignations of France. Executive Director (ORSO Schemes) addressed the 2000 Asia Pacific Human Resources Conference held in Hong Kong. 19-Jul-00 Executive Director (Member Protection) addressed a MPF seminar organized by the CFO Asia. 25-Jul-00 Executive Director (Services Supervision) gave a briefing to the delegation of China Securities Regulatory Commission. 29-Aug Sep-00 The Chairman addressed the Business Week CFO Forum. The Deputy Managing Director was invited by Hong Kong Trade Development Council to address the "Conference on Hong Kong's Financial Services" held in London. 70

Mr Gao Qiang, Vice Minister of Finance, with Mr Alan Wong, Deputy Managing Director.

23-Sep-00 15-Dec-00 Executive Director (ORSO Schemes) attended the "Seminar on Pension and Provident Fund Reform" in Thailand and spoke on the Hong Kong experience of establishing the three-pillar

5-Jan-01 12-Jan-01 16-Jan-01 The Deputy Managing Director, Executive Director (Corporate Services), Executive Director (Member Protection) and Executive Director (Services Supervision) received a

73 Mr Gao Qiang, Vice Minister of Finance, with Mr Alan Wong, Deputy Managing Director. A delegation led by Mr Liu Zhongli, Director of Economic Restructuring Office of the State Council, visited the MPFA. Briefing to the IMF International Capital Markets Mission. 23-Sep Dec-00 Executive Director (ORSO Schemes) attended the "Seminar on Pension and Provident Fund Reform" in Thailand and spoke on the Hong Kong experience of establishing the three-pillar system of retirement protection. The Chairman and Senior Management gave a briefing on MPF to a delegation led by Mr Liu Zhongli, Director of Economic Restructuring Office, the State Council. 5-Jan Jan Jan-01 The Deputy Managing Director, Executive Director (Corporate Services), Executive Director (Member Protection) and Executive Director (Services Supervision) received a delegation led by Mr Gao Qiang, Vice Minister of Finance and gave a briefing to them on MPF. The Deputy Managing Director, Executive Director (Services Supervision) and Executive Director (Member Protection) gave a briefing to Ms Barbara Ellington, Deputy British Consul-General, on the MPF System. The Managing Director, Deputy Managing Director and Executive Director (Services Supervision) exchanged views with the IMF International Capital Markets Mission during their visit to Hong Kong. 2-Mar-01 Executive Director (Services Supervision) attended the "International Workshop on Korean Pension Reform in Transition" held in Hong Kong as a panel discussant. 71

74 FINANCIAL AND OTHER INFORMATION FINANCIAL STATEMENTS Mandatory Provident Fund Schemes Authority Mandatory Provident Fund Schemes Compensation Fund STATISTICS Part A MPF Scheme Members The MPF Universe Enrolment in the MPF System (1/2/ /3/2001) Employed Population by Type of Retirement Schemes Enrolled (as at 31/3/2001) Compliance Rates (as at 31/3/2001) Part B MPF Schemes and Funds Number and Net Asset Values of MPF Schemes by Type (as at 31/3/2001) Number and Net Asset Values of Approved Constituent Funds by Type (as at 31/3/2001) Asset Allocation of Approved Constituent Funds by Asset Class (as at 31/3/2001) Asset Allocation of Approved Constituent Funds by Geographical Region (as at 31/3/2001) Prescribed Savings Rates Part C ORSO Schemes ORSO Schemes Number of ORSO Schemes (2 Year Comparison) by Benefit Type Number of ORSO Schemes (as at 31/3/2001) by Benefit Type MPF Exempted ORSO Schemes Number of MPF Exempted ORSO Schemes (as at 31/3/2001) ORSO Registered Schemes Number of Members Covered by ORSO Registered Schemes (2 Year Comparison) by Benefit Type Number of Members Covered by ORSO Registered Schemes (as at 31/3/2001) by Benefit Type Contribution Amount to ORSO Registered Schemes by Employers and Employees Contribution Amount to ORSO Registered Schemes by Benefit Type Asset Size of ORSO Registered Schemes by Benefit Type Part D Enquiries and Complaints Enquiries Received by Month (1/4/ /3/2001) Complaints Received by Week (1/12/ /3/2001) Complaints Received by Industry of the Complaint Target (1/12/ /3/2001) Complaints Received by Target and Nature (1/12/ /3/2001) Part E Enforcement Proactive Inspection Carried Out by District (1/12/ /3/2001) Proactive Inspection Carried Out by Business Nature (1/12/ /3/2001) Number of Investigation Cases, by Type of Alleged Offences by Month (1/12/ /3/2001) Number of summons applications referred to the Police by Nature of Offences Committed (1/12/ /3/2001) APPENDICES I Membership Lists of Boards and Committees II Mandatory Provident Fund Schemes Ordinance and Subsidiary Legislation III Occupational Retirement Schemes Ordinance and Subsidiary Legislation IV List of MPF Guidelines and Codes V List of Circular Letters / Bulletins VI List of Approved MPF Trustees and Their Background VII List of Registered MPF Schemes and Constituent Funds VIII List of Corporate Administrators who Administer Pooling Agreements for ORSO Schemes IX List of Public Education and Publicity Activities X List of Campaign Media XI List of Booklets Distributed XII Definition of terms

75 FINANCIAL STATEMENTS Auditors report to the Mandatory Provident Fund Schemes Authority ( the MPFA ) (Established in Hong Kong under the Mandatory Provident Fund Schemes Ordinance) We have audited the financial statements on pages 74 to 81 which have been prepared in accordance with accounting principles generally accepted in Hong Kong. RESPECTIVE RESPONSIBILITIES OF THE MPFA AND THE AUDITORS The Hong Kong Mandatory Provident Fund Schemes Ordinance ( the Ordinance ) requires the MPFA to prepare financial statements which give a true and fair view. In preparing financial statements which give a true and fair view it is fundamental that appropriate accounting policies are selected and applied consistently, that judgements and estimates are made which are prudent and reasonable and that the reasons for any significant departure from applicable accounting standards are stated. It is our responsibility to form an independent opinion, based on our audit, on those financial statements and to repor t our opinion to you. BASIS OF OPINION We conducted our audit in accordance with Statements of Auditing Standards issued by the Hong Kong Society of Accountants. An audit includes examination, on a test basis, of evidence relevant to the amounts and disclosures in the financial statements. It also includes an assessment of the significant estimates and judgements made by the MPFA in the preparation of the financial statements, and of whether the accounting policies are appropriate to the MPFA s circumstances, consistently applied and adequately disclosed. We planned and performed our audit so as to obtain all the information and explanations which we considered necessary in order to provide us with sufficient evidence to give reasonable assurance as to whether the financial statements are free from material misstatement. In forming our opinion we also evaluated the overall adequacy of the presentation of information in the financial statements. We believe that our audit provides a reasonable basis for our opinion. OPINION In our opinion, the financial statements give a true and fair view of the state of the MPFA s affairs as at 31 March 2001 and of its deficit and cash flows for the year then ended, and have been properly prepared in accordance with accounting principles generally accepted in Hong Kong. KPMG Certified Public Accountants Hong Kong, 14 June

76 Income and Expenditure Account (for the year ended 31 March 2001) Note (HK$) (HK$) Income Fee income 3(e) 23,452,210 11,916,070 Interest income 3(e) 291,364, ,030,336 Dividend income 3(e) 5,949,500 Unrealised (losses)/gains on investments (78,012,508) 75,476, ,753, ,422,720 Other income 166, , ,920, ,720,839 Expenditure Staff and related expenses 165,508,867 70,774,597 Public education and publicity expenses 53,937,066 7,844,724 Depreciation 7 12,715,467 4,722,924 Premises expenses 23,804,226 14,584,632 Other operating expenses 26,049,921 11,362, ,015, ,289,630 (Deficit)/surplus for the year 6, 11 (39,095,066) 271,431,209 Surplus brought forward 284,772,395 13,341,186 Surplus carried forward 245,677, ,772,395 No separate statement of recognised gains and losses has been prepared as the deficit for the year would be the only component of this statement. The notes on pages 77 to 81 form part of these financial statements. 74

77 FINANCIAL STATEMENTS MPFA Balance Sheet (at 31 March 2001) Note (HK$) (HK$) Non-current assets Fixed assets 7 53,424,266 24,369,995 Projects in progress 8 403,198 3,193,942 Investments 9 1,218,637, ,650,000 1,272,464, ,213,937 Current assets Debtors 1,012, ,400 Deposits and prepayments 9,133,868 6,414,965 Interest receivables 20,475,580 68,351,834 Deposit with banks maturing more than three months after the balance sheet date 1,357,000,000 Cash and cash equivalents 10 2,618,553,162 4,900,458,292 4,006,174,810 4,976,085,491 Current liabilities Creditors and accrued charges 27,588,387 15,167,033 Fees received in advance 5,374, ,000 32,962,437 15,527,033 Net current assets 3,973,212,373 4,960,558,458 Net assets 5,245,677,329 5,284,772,395 Representing: Capital grant 2 5,000,000,000 5,000,000,000 Income and expenditure account 245,677, ,772,395 5,245,677,329 5,284,772,395 Approved by the Mandatory Provident Fund Schemes Authority on 14 June 2001 and signed on its behalf by Rafael Hui Managing Director The notes on pages 77 to 81 form part of these financial statements. 75

78 Cash flow statement (for the year ended 31 March 2001) Note (HK$) (HK$) Net cash outflow from operating activities 11 (231,963,531) (80,485,693) Returns on investments and servicing of finance Dividend income 5,949,500 Interest received 339,240, ,068,665 Net cash inflow from returns on investments and servicing of finance 345,190, ,068,665 Investing activities Increase in deposits with banks maturing more than three months after the balance sheet date (1,357,000,000) Payments for purchases of fixed assets (38,131,723) (30,621,892) Payments for purchases of investments (1,000,000,000) (221,173,686) Net cash outflow from investing activities (2,395,131,723) (251,795,578) Net cash outflow before and after financing/ decrease in cash and cash equivalents (2,281,905,130) (92,212,606) Cash and cash equivalents at beginning of the year 4,900,458,292 4,992,670,898 Cash and cash equivalents at 31 March 10 2,618,553,162 4,900,458,292 The notes on pages 77 to 81 form part of these financial statements. 76

79 FINANCIAL STATEMENTS MPFA Notes to the financial statements 1 BACKGROUND AND FUNCTIONS OF THE MANDATORY PROVIDENT FUND SCHEMES AUTHORITY ( THE MPFA ) The MPFA was established under section 6 of the Hong Kong Mandatory Provident Fund Schemes Ordinance ( the Ordinance ) which came into effect on 24 July The functions of the MPFA are stated under section 6E of the Ordinance. 2 CAPITAL GRANT On 3 April 1998 the Finance Committee of the Legislative Council of the Hong Kong Special Administrative Region approved a capital grant of HK$5 billion as initial funding to cover the establishment and operating costs of the MPFA. 3 SIGNIFICANT ACCOUNTING POLICIES These financial statements have been prepared in accordance with all applicable Statements of Standard Accounting Practice and Interpretations issued by the Hong Kong Society of Accountants, accounting principles generally accepted in Hong Kong and the requirements of the Ordinance. A summary of the significant accounting policies adopted by the MPFA is set out below: (a) BASIS OF PREPARATION OF THE ACCOUNTS The measurement basis used in the preparation of the accounts is historical cost, modified by marking to market of certain investment in securities as explained in the accounting policies set out below. (b) FIXED ASSETS Fixed assets are stated in the balance sheet at cost less accumulated depreciation. Gains or losses arising from the retirement or disposal of a fixed asset are determined as the difference between the estimated net disposal proceeds and the net book value of the asset and are recognised in the income and expenditure account on the date of retirement or disposal. (c) DEPRECIATION Depreciation is calculated to write off the cost of fixed assets over their estimated useful lives on a straight line basis as follows: Leasehold improvements Computer equipment and software Office equipment and furniture Motor vehicles over the remaining terms of the leases or four years whichever is shorter 3 4 years 4 years 4 years (d) INVESTMENTS IN SECURITIES The MPFA s policies for investments in securities are as follows: (i) (ii) Investments in securities are stated in the balance sheet at fair value. Changes in fair value are recognised in the income and expenditure account as they arise. Profits or losses on disposal of investments in securities are determined as the difference between the estimated net disposal proceeds and the carrying amount of the investments and are accounted for in the income and expenditure account as they arise. 77

80 3 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (e) RECOGNITION OF REVENUE (i) Fee income Fee income consists of application fees and annual fees arising from the Occupational Retirement Schemes Ordinance ( ORSO ) Schemes and Mandatory Provident Fund schemes and is accounted for on an accrual basis. (ii) (iii) Interest income Interest income from time deposits with the Hong Kong Monetary Authority and banks is accrued on a timeapportioned basis on the principal outstanding and at the rate applicable. Dividend Dividend income from listed investments is recognised when the share price of the investment goes ex-dividend. (f) OPERATING LEASE Rental payable under operating leases is accounted for on a straight line basis over the periods of the respective leases. (g) RELATED PARTIES For the purposes of these financial statements, parties are considered to be related to the MPFA if the MPFA has the ability, directly or indirectly, to control the party or exercise significant influence over the party in making financial and operating decisions, or vice versa, or where the MPFA and the party are subject to common control or common significant influence. Related parties may be individuals or other entities. (h) CASH AND CASH EQUIVALENTS Cash and cash equivalents are cash at bank and in hand and also include short-term, highly liquid investments which are readily convertible into known amounts of cash without notice and which were either within three months of maturity when acquired or maturing within three months of the balance sheet date. 4 TAXATION The MPFA is exempt from taxation pursuant to section 88 of the Hong Kong Inland Revenue Ordinance and accordingly no provision has been made for taxation in these financial statements. 5 DIRECTORS EMOLUMENTS Directors emoluments are as follows: (HK$) (HK$) Fees Other emoluments 15,608,238 10,426,314 78

81 FINANCIAL STATEMENTS MPFA 6 (DEFICIT)/SURPLUS FOR THE YEAR (Deficit)/surplus for the year is arrived at after charging: (HK$) (HK$) Operating lease charges property rental 16,375,005 10,530,909 Auditors remuneration 125,600 83,500 Depreciation 12,715,467 4,722,924 Staff costs (including retirement benefit costs of $10,667,777; 2000: $2,804,657) 142,017,906 65,207,042 7 FIXED ASSETS Computer Office Leasehold equipment equipment Motor improvements and software and furniture vehicles Total (HK$) (HK$) (HK$) (HK$) (HK$) Cost At 1 April ,812,020 12,576,972 3,341,026 1,362,901 29,092,919 Additions 11,440,079 25,939,560 4,414,591 41,794,230 Disposals (32,393) (32,393) At 31 March ,252,099 38,516,532 7,723,224 1,362,901 70,854,756 Accumulated depreciation At 1 April ,015,545 2,109, ,764 58,439 4,722,924 Charge for the year 5,048,226 5,965,976 1,360, ,725 12,715,467 Disposals (7,901) (7,901) At 31 March ,063,771 8,075,152 1,892, ,164 17,430,490 Net book value At 31 March ,188,328 30,441,380 5,830, ,737 53,424,266 At 31 March ,796,475 10,467,796 2,801,262 1,304,462 24,369,995 8 PROJECTS IN PROGRESS Projects in progress consist of capital project expenditures not yet substantially completed at 31 March 2001 as follows: (HK$) (HK$) IT systems 403, ,305 Office fitting out projects 2,233, ,198 3,193,942 79

82 9 INVESTMENTS (HK$) (HK$) Equity securities Market value of listed investments in Hong Kong 219,300, ,650,000 Bonds portfolio Market value of investments in Hong Kong Listed investments 302,942,327 Unlisted investments 696,395,165 1,218,637, ,650, CASH AND CASH EQUIVALENTS (HK$) (HK$) Deposit with the Hong Kong Monetary Authority 4,490,383,502 Deposits with banks maturing within three months of the balance sheet date 2,613,000, ,500,000 Cash at bank and in hand 5,553,162 6,574,790 2,618,553,162 4,900,458, RECONCILIATION OF (DEFICIT)/SURPLUS FOR THE YEAR FROM OPERATING ACTIVITIES Reconciliation of (deficit)/surplus of income over expenditure to net cash outflow from operating activities: (HK$) (HK$) (Deficit)/surplus for the year (39,095,066) 271,431,209 Depreciation 12,715,467 4,722,924 Loss on disposal of fixed assets 24,492 Interest income (291,364,370) (293,030,336) Dividend income (5,949,500) Unrealised losses/(gains) on investments 78,012,508 (75,476,314) Increase in deposits and prepayments (2,718,903) (553,528) Increase in debtors (151,800) (860,400) Increase in creditors and accrued charges 11,549,591 12,920,752 Increase in fees received in advance 5,014, ,000 Net cash outflow from operating activities (231,963,531) (80,485,693) 12 LOANS TO DIRECTORS AND EXECUTIVES There were no loans to directors or executives during the year and no loans outstanding at the balance sheet date. 80

83 FINANCIAL STATEMENTS MPFA 13 CAPITAL COMMITMENTS Capital commitments outstanding at 31 March 2001 not provided for in the financial statements were as follows: (HK$) (HK$) Contracted for 16,260,281 35,783,578 Authorised but not contracted for 3,278,474 2,754,069 19,538,755 38,537, OPERATING LEASE COMMITMENTS At 31 March 2001 the MPFA had commitments under operating leases in respect of its premises to make payments in the next year as follows: (HK$) (HK$) Lease expiring after 1 year but within 5 years 17,929,112 13,738, MANDATORY PROVIDENT FUND SCHEMES COMPENSATION FUND Section 17 of the Ordinance requires the MPFA to establish a compensation fund and the MPFA may appoint an administrator for the compensation fund or where there is no such administrator, the MPFA must administer the compensation fund. During the year, the MPFA administered the compensation fund. The Mandatory Provident Fund Schemes (General) Regulation requires the compensation fund to be maintained in separate bank accounts and separate financial statements are to be prepared in respect of the fund. 16 COMPARATIVE FIGURES Comparative figures have been reclassified to conform with the current year s presentation. 81

84 Auditors report to the Administrator of the Mandatory Provident Fund Schemes Compensation Fund We have audited the financial statements of the Mandatory Provident Fund Schemes Compensation Fund ( the Fund ) established under section 17 of the Hong Kong Mandatory Provident Fund Schemes Ordinance ( the Ordinance ) on pages 83 to 87 which have been prepared in accordance with accounting principles generally accepted in Hong Kong. RESPECTIVE RESPONSIBILITIES OF THE ADMINISTRATOR AND AUDITORS The Ordinance requires the administrator to keep proper accounting records of the Fund and to prepare an income and expenditure account and a balance sheet ( the financial statements ) of the Fund in respect of each financial year. The administrator prepares the financial statements in order to give a true and fair view. In preparing financial statements which give a true and fair view it is fundamental that appropriate accounting policies are selected and applied consistently, that judgements and estimates are made which are prudent and reasonable and that the reasons for any significant departure from applicable accounting standards are stated. It is our responsibility to form an independent opinion, based on our audit, on those financial statements and to repor t our opinion to the administrator. BASIS OF OPINION We conducted our audit in accordance with Statements of Auditing Standards issued by the Hong Kong Society of Accountants. An audit includes examination, on a test basis, of evidence relevant to the amounts and disclosures in the financial statements. It also includes an assessment of the significant estimates and judgments made by the administrator in the preparation of the financial statements and of whether the accounting policies are appropriate to the Fund s circumstances, consistently applied and adequately disclosed. We planned and performed our audit so as to obtain all the information and explanations which we considered necessary in order to provide us with sufficient evidence to give reasonable assurance as to whether the financial statements are free from material misstatement. In forming our opinion we also evaluated the overall adequacy of the presentation of information in the financial statements. We believe that our audit provides a reasonable basis for our opinion. OPINION In our opinion the financial statements give a true and fair view of the state of affairs of the Fund as at 31 March 2001 and of its surplus and cash flows for the year then ended and have been properly prepared in accordance with accounting principles generally accepted in Hong Kong. KPMG Certified Public Accountants Hong Kong, 14 June

85 FINANCIAL STATEMENTS MPF SCHEMES COMPENSATION FUND Income and Expenditure Account (for the year ended 31 March 2001) Note (HK$) (HK$) Income Interest income 2(b) 39,672,385 36,026,894 Levy fee 2(b) 3,690,656 43,363,041 36,026,894 Expenditure Auditors remuneration 7 37,000 Bank charges 7 6,750 43,750 Surplus for the year 6 43,319,291 36,026,894 Surplus brought forward 37,872,757 1,845,863 Surplus carried forward 81,192,048 37,872,757 No separate statement of recognised gains and losses has been prepared as the surplus for the year would be the only component of this statement. The notes on pages 86 and 87 form part of these financial statements. 83

86 Balance Sheet (at 31 March 2001) Note (HK$) (HK$) Current assets Levy fee receivable 3,690,656 Interest receivable 11,770,024 9,407,606 Deposit with banks maturing more than three months after the balance sheet date 160,760,000 Cash and cash equivalents 4 505,015, ,465, ,235, ,872,757 Current liabilities Creditors and accrued charges 43,750 Net assets 681,192, ,872,757 Representing: Compensation fund Compensation Fund Seed Money 5 600,000, ,000,000 Income and expenditure account 81,192,048 37,872, ,192, ,872,757 Approved by the Mandatory Provident Fund Schemes Authority on 14 June 2001 and signed on its behalf by Rafael Hui Managing Director The notes on pages 86 and 87 form part of these financial statements. 84

87 FINANCIAL STATEMENTS MPF SCHEMES COMPENSATION FUND Cash flow statement (for the year ended 31 March 2001) Note (HK$) (HK$) Net cash position 6 Returns on investments and servicing of finance Interest received 37,309,967 28,465,151 Investing activities Increase in deposit with banks maturing more than three months after the balance sheet date (160,760,000) Net cash outflow from investing activities (160,760,000) Net cash (outflow)/inflow before and after financing (123,450,033) 28,465,151 (Decrease)/increase in cash and cash equivalents (123,450,033) 28,465,151 Cash and cash equivalents at beginning of the year 628,465, ,000,000 Cash and cash equivalents at 31 March 4 505,015, ,465,151 The notes on pages 86 and 87 form part of these financial statements. 85

88 Notes to the financial statements 1 PURPOSE AND CLAIM FOR PAYMENT The Mandatory Provident Fund Schemes Compensation Fund ( the Fund ) is established for the purpose of compensating members of registered Mandatory Provident Fund schemes and other persons who have beneficial interests in those schemes for losses of accrued benefits that are attributable to misfeasance or illegal conduct committed by the approved trustees of those schemes or by other persons concerned with the administration of those schemes. Application for compensation from the Fund has to be made to a court of law in accordance with Hong Kong Mandatory Provident Fund Schemes Ordinance ( the Ordinance ). The administrator shall then make the compensation fund payment pursuant to the decisions of the court. During the year, the Mandatory Provident Fund Schemes Authority ( the MPFA ) was the administrator of the Fund. 2 SIGNIFICANT ACCOUNTING POLICIES These financial statements have been prepared in accordance with all applicable Statements of Standard Accounting Practice and Interpretations issued by the Hong Kong Society of Accountants, accounting principles generally accepted in Hong Kong and the requirements of the Ordinance. A summary of the significant accounting policies is set out below: (a) BASIS OF PREPARATION OF THE ACCOUNTS The measurement basis used in the preparation of the accounts is historical cost. (b) RECOGNITION OF INCOME (i) Levy fee Levy fee consists of fees charged to the approved trustees of registered Mandatory Provident Fund Schemes. Levy fee is accounted for on an accrual basis. (ii) Interest income Interest income from time deposits with Hong Kong Monetary Authority and banks is accrued on a timeapportioned basis on the principal outstanding and at the rate applicable. (c) RELATED PARTIES For the purposes of these financial statements, parties are considered to be related to the Fund if the Fund has the ability, directly or indirectly, to control the party or exercise significant influence over the party in making financial and operating decisions, or vice versa, or where the Fund and the party are subject to common control or common significant influence. Related parties may be individuals or other entities. (d) CASH AND CASH EQUIVALENTS Cash and cash equivalents are cash at bank and in hand and also include short-term, highly liquid investments which are readily convertible into known amounts of cash without notice and which are either within three months of maturity when acquired or maturing within three months of the balance sheet date. 3 TAXATION The MPFA is exempt from taxation pursuant to section 88 of the Hong Kong Inland Revenue Ordinance and accordingly no provision has been made for taxation in these financial statements. The MPFA obtained confirmation from the Inland Revenue Department that the tax exemption also applied to the Fund. 86

89 FINANCIAL STATEMENTS MPF SCHEMES COMPENSATION FUND 4 CASH AND CASH EQUIVALENTS (HK$) (HK$) Deposit with the Hong Kong Monetary Authority 628,465,151 Deposits with banks maturing within three months of the balance sheet date 505,000,000 Cash at bank and in hand 15, ,015, ,465,151 5 MONEY CONSTITUTING THE FUND On 12 March 1999, an amount of HK$600 million was injected from the Government of the Hong Kong Special Administrative Region, as the seed money of the Fund. 6 RECONCILIATION OF SURPLUS FOR THE YEAR FROM OPERATING ACTIVITIES Reconciliation of surplus of income over expenditure to net cash position from operating activities: (HK$) (HK$) Surplus for the year 43,319,291 36,026,894 Interest income (39,672,385) (36,026,894) Increase in levy fee receivable (3,690,656) Increase in creditors and accrued charges 43,750 Net cash position 7 EXPENDITURE OF THE FUND Auditors remuneration and bank charges incurred during the year was borne by the Fund, and MPFA has not charged any administration fee to the Fund during the year. All expenditure incurred including audit fee of HK$15,000 for the year ended 31 March 2000 was borne by the MPFA. 87

90 STATISTICS Part A MPF Scheme Members 1. THE MPF UNIVERSE (a) EMPLOYERS UNDER THE MPF SYSTEM ( 000) Number of main businesses extracted from the Central Register of Establishments (CRE) (1) 322 Add Number of owners' corporations with employee(s) which are not covered in the CRE (2) 3 Number of employers engaged in other industries which are not covered in CRE 4 Less Number of business establishments with no employee (3) 82 Number of business establishments engaging exempt persons only 7 Employers under the MPF System* 240 * Figures may not sum up to the total due to rounding. Sources: (1) CRE kept by Census and Statistics Department (2) Estimation based on figures provided by the Land Registry (3) Census and Statistics Department (b) RELEVANT EMPLOYEES COVERED UNDER THE MPF SYSTEM ( 000) Number of employees (excluding employees aged below 18 or above 65) (1) Less Civil servants who are covered by the Civil Service Pension System (2) 183 Teachers who are covered by the Grant Schools or Subsidized Schools Provident Fund (3) 39 Foreign (4) and local domestic employees 230 Expatriates who do not have the right of abode in Hong Kong and are covered by overseas retirement schemes or who work in Hong Kong for not more than 1 year (5) 45 Employees who choose to remain as members of MPF Exempted ORSO schemes (6) 524 Employees who are employed for less than 60 days, excluding employees participating in Construction and Catering (7) 30 Relevant Employees covered under the MPF System* * Figures may not sum up to the total due to rounding. Sources : (1) General Household Survey, Census and Statistics Department. As employees who had attained the age of 64 on or before 1 December 2000 are also exempted from requirements under the Mandatory Provident Fund Schemes Ordinance, they have also been excluded from the base figure here. (2) Civil Service Bureau (3) Education Department (4) & (5) Estimation based on figures provided by the Immigration Department (6) Figures reported by Employers of MPF Exempted ORSO Schemes (7) Estimation based on figures provided by a special topic enquiry conducted via the General Household Survey in Q by Census and Statistics Department 88

91 (c) SELF-EMPLOYED PERSONS UNDER THE MPF SYSTEM ( 000) Number of SEPs extracted from General Household Survey (excluding SEPs aged below 18 or above 65) (1) 332 Less SEPs who are licensed hawkers (excluding licensed hawkers aged below 18 or above 65) (2) 6 SEPs who are covered under the MPF System* 326 * Figures may not sum up to the total due to rounding. Sources : (1) SEPs under the MPF System include both self-employed persons and employers as defined in the Quarterly Report on General Household Survey, Census and Statistics Department. As SEPs who had attained the age of 64 on or before 1 December 2000 are also exempted from requirements under the Mandatory Provident Fund Schemes Ordinance, they have also been excluded from the base figure here. (2) Food and Environmental Hygiene Department 2. ENROLMENT IN THE MPF SYSTEM (1/2/ /3/2001) Relevant Self-employed Month/Year Employers Employees Persons 2/2000 0% 1% 0% 3/2000 3% 4% 1% 4/2000 6% 8% 3% 5/ % 16% 7% 6/ % 23% 10% 7/ % 28% 12% 8/ % 34% 15% 9/ % 41% 18% 10/ % 49% 20% 11/ % 78% 45% 12/ % 82% 75% 1/ % 86% 81% 2/ % 90% 90% 3/ % 92% 90% 89

92 3. EMPLOYED POPULATION BY TYPE OF RETIREMENT SCHEMES ENROLLED (as at 31/3/2001) Joined MPF Schemes 59% Joined other retirement schemes 23% Exempted from joining any local retirement scheme 12% Should have joined but had not yet joined any MPF scheme 6% 4. COMPLIANCE RATES (as at 31/3/2001) Universe ( 000) Participating Members (1) ( 000) Compliance Rate* Employers % Relevant Employees % SEPs % * Compliance rate may not equal the number of participating members divided by the universe due to rounding. (1) As the MPF is an employment-based system, some employers and members may be participating in more than one scheme. Adjustments have been made for employers and SEPs who are participating in more than one scheme in the same capacity. 90

93 STATISTICS Part B MPF Schemes and Funds 1. NUMBER AND NET ASSET VALUES (1) OF MPF SCHEMES BY TYPE (as at 31/3/2001) Net Asset Values (1) Type of Schemes Number (in HK$ million) Master Trust Schemes 47 15,534 Industry Schemes Employer Sponsored Schemes 2 54 Total 51 15,694 (1) As reported by trustees. Note that the figures have included assets transferred from the ORSO schemes. 2. NUMBER AND NET ASSET VALUES OF APPROVED CONSTITUENT FUNDS BY TYPE (as at 31/3/2001) Net Asset Values (1) Type of Constituent Funds Number (in HK$ million) Capital Preservation Fund 51 2,201 Money Market Fund Guaranteed Fund 40 3,536 Bond Fund Balanced Fund 136 7,155 Equity Fund 54 2,382 Total ,694 (1) As reported by trustees. Note that the figures have included assets transferred from the ORSO schemes. 3. ASSET ALLOCATION OF APPROVED CONSTITUENT FUNDS BY ASSET CLASS (as at 31/3/2001) Deposits & Cash Debt Securities* Equities Capital Preservation Fund 71% 29% Money Market Fund 53% 47% Guaranteed Fund 15% 55% 30% Bond Fund 12% 88% Balanced Fund 12% 30% 58% Equity Fund 7% 2% 90% Overall 21% 32% 47% 0% * Include convertible debt securities 20% 40% 60% 80% 100% 91

94 4. ASSET ALLOCATION OF APPROVED CONSTITUENT FUNDS BY GEOGRAPHICAL REGION* (as at 31/3/2001) Hong Kong Asia (excl. HK) North America Europe Others Capital Preservation Fund 89% 1% 5% 3% 1% Money Market Fund 99% 1% Guaranteed Fund 87% 1% 11% 1% Bond Fund 44% 4% 38% 10% 3% Balanced Fund 37% 15% 23% 21% 4% Equity Fund 58% 13% 14% 15% Overall 60% 9% 16% 13% 2% 0% * Geographical Region basically reflects the country of origin of the issuer of the investment. 20% 40% 60% 80% 100% 5. PRESCRIBED SAVINGS RATES (1) Date of the Month Number of Day (s) Prescribed Savings Rate (1) (%) December January February March (1) Prescribed Savings Rates are prescribed by the MPFA pursuant to section 37(8) of the Mandatory Provident Fund Schemes (General) Regulation for the operation of Capital Preservation Funds. 92

95 STATISTICS Part C ORSO Schemes ORSO SCHEMES 1. NUMBER OF ORSO SCHEMES (2 YEAR COMPARISON) BY BENEFIT TYPE Defined Contribution (92%) (8%) Total: Defined Benefit (93%) (7%) Total: NUMBER OF ORSO SCHEMES (as at 31 March 2001) BY BENEFIT TYPE Benefit Type Scheme Type Defined Contribution Defined Benefit Total No. of Schemes % No. of Schemes % No. of Schemes % Registered Scheme MPF exempted Non-MPF exempted Exempted Scheme MPF exempted Non-MPF exempted Total

96 MPF EXEMPTED ORSO SCHEMES 1. NUMBER OF MPF EXEMPTED ORSO SCHEMES (as at 31 March 2001) ORSO ORSO Registered Exempted Schemes Schemes Total (a) Number of MPF Exempted ORSO Schemes approved as at 1 August (b) Number of new applications approved during the period from 1 August 2000 to 31 March 2001(Note) (c) Number of withdrawals of MPF Exemption Certificates during the period from 1 August 2000 to 31 March (d) Number of MPF Exempted ORSO Schemes as at 31 March [i.e. (d) = (a) + (b) (c)] Note: This refers to the application for MPF exemption in respect of newly established ORSO registered schemes whereby all or a substantial portion of the members and assets of the schemes were transferred from 1 or more MPF exempted ORSO schemes as a result of scheme restructuring or bona fide business transactions. ORSO REGISTERED SCHEMES 1. NUMBER OF MEMBERS COVERED BY ORSO REGISTERED SCHEMES (2 YEAR COMPARISON) BY BENEFIT TYPE ('000) Defined Contribution 2001* 584 (75%) 192 (25%) Total: 776 Defined Benefit (70%) 272 (30%) Total: * After excluding members of MPF exempted ORSO registered schemes who have opted to join MPF schemes. 94

97 STATISTICS 2. NUMBER OF MEMBERS COVERED BY ORSO REGISTERED SCHEMES (as at 31 March 2001) BY BENEFIT TYPE Benefit Type Scheme Type Defined Contribution Defined Benefit Total ( 000) % ( 000) % ( 000) % MPF exempted (Note) Non-MPF exempted Total Note: After excluding members of MPF exempted ORSO registered schemes who have opted to join MPF schemes. CONTRIBUTION AMOUNT 3. CONTRIBUTION AMOUNT TO ORSO REGISTERED SCHEMES BY EMPLOYERS AND EMPLOYEES MPF Exempted Non-MPF Exempted Total (in million HK$) (in million HK$) (in million HK$) Employer s Contributions Ordinary 12,688 2,782 15,470 (75%) (61%) (72%) Initial/Special (2%) (2%) (2%) 13,067 2,902 15,969 (77%) (63%) (74%) Employee s 3,885 1,684 5,569 Contributions (23%) (37%) (26%) Total Contributions 16,952 4,586 21,538 (100%) (100%) (100%) Source: The latest annual returns in respect of ORSO registered schemes 95

98 4. CONTRIBUTION AMOUNT TO ORSO REGISTERED SCHEMES BY BENEFIT TYPE Non-MPF Exempted ($4,586M) Defined Benefit ($445M) 2% Defined Contribution ($4,141M) 19% MPF Exempted ($16,952M) Defined Benefit ($5,832M) 27% Defined Contribution ($11,120M) 52% Contribution Amount : HK$21,538 million Source: The latest annual returns in respect of ORSO registered schemes ASSET SIZE 5. ASSET SIZE OF ORSO REGISTERED SCHEMES BY BENEFIT TYPE Non-MPF Exempted ($24,043M) Defined Benefit ($4,814M) 3% Defined Contribution ($19,229M) 11% MPF Exempted ($154,135M) Defined Benefit ($80,642M) 45% Defined Contribution ($73,493M) 41% Asset size: HK$178,178 million Source: The latest annual returns in respect of ORSO registered schemes 96

99 STATISTICS Part D Enquiries and Complaints 1. ENQUIRIES RECEIVED BY MONTH (1/4/ /3/2001) Apr-00 May-00 Jun-00 Jul-00 Aug-00 Sep-00 Oct-00 Nov-00 Dec-00 Jan-01 Feb-01 Mar-01 Mode of Enquiries Apr 00 May 00 Jun 00 Jul 00 Aug 00 Sep 00 Oct 00 Nov 00 Dec 00 Jan 01 Feb 01 Mar 01 Phone Written Walk-in Total

100 2. COMPLAINTS RECEIVED BY WEEK (1/12/ /3/2001) Dec 09 Dec 16 Dec 23 Dec 30 Dec 06 Jan 13 Jan 20 Jan 27 Jan 03 Feb 10 Feb 17 Feb 24 Feb 03 Mar 10 Mar 17 Mar 24 Mar 31 Mar Status of the complaints received (as at 31/3/2001) Completed Being handled by MPFA Being handled by Trustees Total no. of complaints received

101 STATISTICS 3. COMPLAINTS RECEIVED BY INDUSTRY OF THE COMPLAINT TARGET (1/12/ /3/2001) MPF Services Provider 28% Catering 20% Construction 13% Finance, Insurance, Real Estate & Business Services 13% Community, Social & Personal Services 7% Wholesale, Retail, Import/Export Trades 5% Manufacturing 4% Transportation 6% Others 4% 4. COMPLAINTS RECEIVED BY TARGET AND NATURE (1/12/ /3/2001) Employers 68% Alleged Offences:* Non-enrolment (22%) Default Contribution (21%) Deduction of Wages (16%) Forced Change to SEP (6%) Others (7%) ORSO Administrators 3% Others 1% Trustees and Service Providers 28% * Multiple selection of complaint category is allowed. As such, the sum of the percentages of individual categories is larger than the percentage of complaint cases related to employers. 99

102 Part E Enforcement 1. PROACTIVE INSPECTION CARRIED OUT BY DISTRICT (1/12/ /3/2001) District Number Central 99 Eastern 261 Islands 53 Kowloon City 296 Kwai Tsing 82 Kwun Tong 267 Mongkok 271 North 233 Sai Kung 85 Sham Shui Po 277 Shatin 242 Southern 147 Tai Po 181 Tsuen Wan 229 Tuen Mun 236 Wan Chai 326 Western 142 Wong Tai Sin 223 Yau Tsim 176 Yuen Long 214 Total

103 STATISTICS 2. PROACTIVE INSPECTION CARRIED OUT BY BUSINESS NATURE (1/12/ /3/2001) Business Nature Number Business Services 41 Catering Industry 969 Communication 3 Community, Social and Personal Services 543 Construction 437 Entertainment Services 19 Financing 24 Hotel 1 Import/Export Trades 53 Manufacturing 55 Mining and Quarrying 1 Real Estate 53 Retail Shelf company 77 Storage 1 Transport 12 Wholesales 134 Others 66 Total NUMBER OF INVESTIGATION CASES, BY TYPE OF ALLEGED OFFENCES BY MONTH (1/12/ /3/2001) Month Alleged Offences Dec 2000 Jan 2001 Feb 2001 Mar 2001 Total Deduction of Wages Forced Change to Self-employed Person Non-enrolment Default Contribution Others Number of investigations conducted* * Figures may not add up to the total as multiple selection of complaint category is allowed. 4. NUMBER OF SUMMONS APPLICATIONS REFERRED TO THE POLICE BY NATURE OF OFFENCES COMMITTED (1/12/ /3/2001) Nature of Offence Number of Summons Applications Non-enrolment 13 Employer failing to contribute from his own funds 3 Total

104 APPENDIX Appendix I Membership Lists of Boards and Committees (as at 31 March 2001) MANAGEMENT BOARD CHAIRMAN The Hon Charles Lee Yeh-kwong, GBS, JP DEPUTY CHAIRMAN Mr Rafael Hui Si-yan, GBS, JP (from 7 June 2000) MEMBERS Dr the Hon David Li Kwok-po, JP Dr the Hon Lui Ming-wah, JP Mr Eddy Fong Ching, SBS, JP Mr Lee Kai-ming, SBS, JP Mr Robert Tang Ching, SC, JP Ms Anna Wu Hung-yuk, SBS, JP Mr Stephen S K IP, JP (from 13 June 2000) Mrs Fanny Law, JP (from 17 September 2000) Mr Joseph Yam Chi-kwong, JP Mr Alan Wong Chi-kong, JP Mrs Diana Chan Tong Chee-ching Mr Ernest Lee Shu-wing, BBS (from 13 June 2000) Mr Raymond Tam Wai-man Ms Hendena Yu MANDATORY PROVIDENT FUND SCHEMES ADVISORY COMMITTEE CHAIRMAN Prof Nelson Chow Wing-sun, SBS, JP DEPUTY CHAIRMAN Mr Rafael Hui Si-yan, GBS, JP (from 7 June 2000) MEMBERS The Hon Bernard Chan The Hon Chan Yuen-han The Hon David Chu Yu-lin The Hon Ng Leung-sing The Hon Sin Chung-kai Mr Desmond Chan Kwok-kit Mr Ho Sai-chu, SBS, JP Mr Victor Lo Chung-wing, JP Mr Poon Siu-ping Mr Peter Wong Hong-yuen, GBS, JP MPF INDUSTRY SCHEMES COMMITTEE (established since 25 August 2000) CHAIRMAN Mr Lee Kai-ming, SBS, JP MEMBERS Mr Chan Chi-leung Mr Chan Kay-cheung Mr Chan Wai-lun Mr Valiant Cheung Wai-lam Mr Ho Sai-chu, SBS, JP Mr Mok Kwok-wo Mr Ngan Chun-hung Mr Poon To-chuen, MH Mr Stephen Siu Chi-fung Mr So Kim-hung Mr Ernest Lee Shu-wing, BBS ADMINISTRATION COMMITTEE CHAIRMAN Dr the Hon Lui Ming-wah, JP MEMBERS The Hon Charles Lee Yeh-kwong, GBS, JP Mr Lee Kai-ming, SBS, JP Mr Rafael Hui Si-yan, GBS, JP (from 7 June 2000) Mr Alan Wong Chi-kong, JP Mrs Diana Chan Tong Chee-ching Mr Eric Lam Cheong-yee (until 6 April 2000) TENDER BOARD CHAIRMAN Ms Anna Wu Hung-yuk, SBS, JP MEMBERS Dr the Hon Lui Ming-wah, JP Mr Lee Kai-ming, SBS, JP Mrs Diana Chan Tong Chee-ching 102

105 FINANCE COMMITTEE CHAIRMAN Dr the Hon David Li Kwok-po, JP MEMBERS The Hon Charles Lee Yeh-kwong, GBS, JP Mr Eddy Fong Ching, SBS, JP Mr Joseph Yam Chi-kwong, JP Mr Rafael Hui Si-yan, GBS, JP (from 7 June 2000) Mr Alan Wong Chi-kong, JP Mrs Diana Chan Tong Chee-ching Mr Eric Lam Cheong-yee (until 6 April 2000) GUIDELINES COMMITTEE CHAIRMAN Mr Robert Tang Ching, SC, JP MEMBERS Ms Anna Wu Hung-yuk, SBS, JP Mr Duncan Abate Mr Paul A Moore (from 8 September 2000) Mr Jeremy Gadbury (until February 2001) Mr Jonathan Hubbard Mrs Christine Koo (until 7 September 2000) Mr Edward Lau Wan-kong Mr Albert Li Kwok-ki Mr Raymond Tam Wai-man IMS COMMITTEE CHAIRMAN The Hon Charles Lee Yeh-kwong, GBS, JP MEMBERS Dr David Cheung Wai-lok Mr Daniel Lai Mr Stephen Lau Mr Alan Wong Chi-kong, JP Ms Hendena Yu Mrs Agnes Mak Tang Pik-yee (until 28 March 2001) MANDATORY PROVIDENT FUND SCHEMES APPEAL BOARD CHAIRMAN Mr Patrick Fung Pak-tung, SC DEPUTY CHAIRMAN Mrs Angelina Lee Wong Pui-ling, JP PANEL MEMBERS Mr Edward Cheng Wai-sun Prof Fan Yiu-kwan Mr Joseph P Fok, SC Mr Philip Hilliard Dr Francis Lui Ting-ming Mr So Wai-keung Mr Anthony Tyen Kan-hee Mr Roderick Woo Bun, JP OCCUPATIONAL RETIREMENT SCHEMES APPEAL BOARD CHAIRMAN Mr Patrick Fung Pak-tung, SC (from 1 October 2000) Mr Robert Kotewall, SC (until 30 September 2000) DEPUTY CHAIRMAN Mrs Angelina Lee Wong Pui-ling, JP PANEL MEMBERS Mr Desmond Chan Kwok-kit Mr Philip Hilliard Mr Shiu Wai-kwok Mr So Wai-keung Mr Anthony Grahame Stott (until 30 September 2000) Mr Paul Tan Chuen-yan Mr Anthony Tyen Kan-hee 103

106 Appendix II Mandatory Provident Fund Schemes Ordinance and Subsidiary Legislation (as at 31 March 2001) Legislation Reference Ordinance Mandatory Provident Fund Schemes Ordinance Chapter 485 Provident Fund Schemes Legislation (Amendment) Ordinance 1998 Ordinance No.4 of 1998 Consequential Amendments to the MPFSO under: Adaptation of Laws (No.12) Ordinance 1999 Ordinance No. 31 of 1999 Statute Law (Miscellaneous Provisions) Ordinance Ordinance No. 32 of 2000 Companies (Amendment) Ordinance Ordinance No. 46 of 2000 Subsidiary Legislation Mandatory Provident Fund Schemes (General) Regulation L.N. 201 of 1998 Mandatory Provident Fund Schemes (Exemption) Regulation L.N. 203 of 1998 Mandatory Provident Fund Schemes (Fees) Regulation L.N. 120 of 1999 Mandatory Provident Fund Schemes (General) (Amendment) Regulation 2000 L.N. 222 & 223 of 2000 Mandatory Provident Fund Schemes Rules L.N. 226 & 227 of 2000 Mandatory Provident Fund Schemes (Compensation Claims) Rules L.N. 342 of 2000 Mandatory Provident Fund Schemes (Winding Up) Rules L.N. 343 of 2000 Related Notice / Order Declaration of Change of Titles (General Adaptation) Notice 1997 L.N. 362 of 1997 Mandatory Provident Fund Schemes (Amendment of Schedule 6) Notice 1998 L.N. 205 of 1998 Mandatory Provident Fund Ordinance (Cap. 485) (Commencement) Notice 1998 L.N. 292 of 1998 Provident Fund Schemes Legislation (Amendment) Ordinance 1998 (4 of 1998) L.N. 293 of 1998 (Commencement) Notice 1998 Mandatory Provident Fund Schemes (General) Regulation (L.N. 201 of 1998) L.N. 294 of 1998 (Commencement) Notice 1998 Mandatory Provident Fund Schemes Ordinance (80 of 1995) (Commencement) L.N. 68 of 1999 Notice 1999 Mandatory Provident Fund Schemes (General) Regulation (Cap.485 sub. leg.) L.N. 69 of 1999 (Commencement) Notice 1999 Provident Fund Schemes Legislation (Amendment) Ordinance 1998 (4 of 1998) L.N. 70 of 1999 (Commencement) Notice 1999 Rectification of Errors Order 1999 L.N. 95 of 1999 Provident Fund Schemes Legislation (Amendment) Ordinance 1998 (4 of 1998) L.N. 296 of 1999 (Commencement) (No.2) Notice

107 APPENDIX Legislation Reference Mandatory Provident Fund Schemes (Exemption) Regulation (Specification of Date L.N. 53 of 2000 Under Sections 5 and 16) Notice Mandatory Provident Fund Schemes Ordinance (80 of 1995) (Commencement) L.N. 119 of 2000 Notice 2000 Provident Fund Schemes Legislation (Amendment) Ordinance 1998 (4 of 1998) L.N. 120 of 2000 (Commencement) Notice 2000 Mandatory Provident Fund Schemes (General) Regulation (Cap. 485 sub. leg.) L.N. 121 of 2000 (Commencement) Notice 2000 Mandatory Provident Fund Schemes (Contributions for Casual Employees) Order L.N. 179 of 2000 Mandatory Provident Fund Schemes (Specification of Permitted Periods) Notice L.N. 180 of 2000 Mandatory Provident Fund Schemes Ordinance (Amendment of Schedule 1) L.N. 224 & 225 of 2000 Notice

108 Appendix III Occupational Retirement Schemes Ordinance and Subsidiary Legislation (as at 31 March 2001) Legislation Reference Ordinance Occupational Retirement Schemes Ordinance Chapter 426 Occupational Retirement Schemes (Amendment) Ordinance 1995 Ordinance No. 53 of 1995 Occupational Retirement Schemes (Amendment) Ordinance 1999 Ordinance No. 52 of 1999 Consequential Amendments to the ORSO under: Insurance Companies (Amendment) Ordinance 1993 Ordinance No. 59 of 1993 Inland Revenue (Amendment) (No.5) Ordinance 1993 Ordinance No. 76 of 1993 Provident Fund Schemes Legislation (Amendment) Ordinance 1998 Ordinance No. 4 of 1998 Subsidiary Legislation Occupational Retirement Schemes (Authentication and Certification of L.N. 400 of 1993 Documents) Rules Occupational Retirement Schemes (Consultative Committees) Rules L.N. 401 of 1993 Occupational Retirement Schemes (Exemption from Audit) Rules L.N. 402 of 1993 Occupational Retirement Schemes (Fees) Rules L.N. 403 of 1993 Occupational Retirement Schemes (Insurance Arrangement) Rules L.N. 404 of 1993 Occupational Retirement Schemes (Member s Request for Information on L.N. 405 of 1993 Scheme Assets) Rules Occupational Retirement Schemes (Payment of Benefits) Rules L.N. 406 of 1993 Occupational Retirement Schemes (Fees) (Amendment) Rules 1995 L.N. 55 of 1995 Occupational Retirement Schemes (Preparation of Actuarial Certificates) Rules L.N. 41 of 1997 Occupational Retirement Schemes (Periodic Certification of Registered Defined L.N. 42 of 1997 Benefit Schemes) Rules Occupational Retirement Schemes (Notices of Changes) Rules L.N. 360 of 1998 Occupational Retirement Schemes (Authentication and Certification of Documents) L.N. 361 of 1998 (Amendment) Rules 1998 Occupational Retirement Schemes (Fees) (Amendment) Rules 1998 L.N. 362 of 1998 Occupational Retirement Schemes (Member's Request for Information on L.N. 238 of 1999 Scheme Assets) (Amendment) Rules 1999 Occupational Retirement Schemes (Recovery of Arrears) Rules L.N. 285 of

109 APPENDIX Appendix IV List of MPF Guidelines and Codes Guideline No. Name of Guidelines Version Date Part I Guidelines on Licensing I.1 Guidelines on Application for Approval as Trustees 12/98 I.2 Guidelines on Application for Registration of Provident Fund Schemes 12/98 I.3 Guidelines on Custodians 1/01 I.4 Guidelines on Eligible Insurers 12/98 I.5 Guidelines on Application for Approval of Constituent Funds 12/98 I.6 Guidelines on Application for Approval of Pooled Investment Funds 12/98 I.7 Guidelines on Central Securities Depositories 5/99 I.8 Guidelines on Custodial / Subcustodial Agreement 10/00 Part II Guidelines on Reporting Requirements II.1 Guidelines on Monthly Returns of Registered Schemes 2/99 II.2 Guidelines on Monthly Returns of Approved Pooled Investment Funds being Capital 2/99 Preservation Funds II.3 Guidelines on Quarterly Returns of Constituent Funds 2/99 II.4 Guidelines on Annual Statements of Registered Schemes 1/01 II.5 Guidelines on Annual Statements of Approved Pooled Investment Funds 5/99 II.6 Guidelines on Internal Control Report for each Registered Scheme 5/99 Part III Guidelines on Investment III.1 Guidelines on Debt Securities 1/01 III.2 Guidelines on Other Securities 1/01 III.3 Guidelines on Eligible Overseas Banks 1/01 III.4 Guidelines on Recognized Exchanges 3/99 III.5 Guidelines on Investment Managers 6/99 III.6 Guidelines on Capital Preservation Funds 12/99 III.7 Guidelines on Security Lending 3/99 III.8 Guidelines on Repurchase Agreements 3/99 III.9 Guidelines on Reserving Standards for Investment Guarantees 2/01 Part IV Guidelines on Scheme Operations IV.1 Guidelines on Disclosure of Annual Fees 3/00 IV.2 Guidelines on Reports Relating to Payment of Mandatory Contributions 3/99 IV.3 Guidelines on Election Forms for Transfer of Accrued Benefits 4/99 IV.4 Guidelines on Payment of Accrued Benefits Documents to be Submitted to 1/01 Approved Trustees IV.5 Guidelines on Payment of Accrued Benefits Permanent Departure from Hong Kong 4/99 IV.6 Guidelines on Notice for Unclaimed Benefits 4/99 IV.7 Guidelines on Fees for Portability 5/99 IV.8 Guidelines on Enrolment and Contribution Arrangements for Relevant Employees 10/00 other than Casual Employees IV.9 Guidelines on Enrolment and Contribution Arrangements for Casual Employees 10/00 IV.10 Guidelines on Enrolment and Contribution Arrangements for Self-employed Persons 10/00 107

110 Guideline No. Name of Guidelines Version Date IV.11 Guidelines on Contribution Period in respect of a Relevant Employee 7/00 IV.12 Guidelines on Relevant Income in respect of a Relevant Employee 7/00 IV.13 Guidelines on Compensation Fund 1/01 IV.14 Guidelines on Remittance Statement 9/00 IV.15 Guidelines on Person Exempt under section 4(3) of the Mandatory Provident Fund 9/00 Schemes Ordinance IV.16 Guidelines on MPF Coverage on Employees Working Outside Hong Kong 9/00 IV.17 Guidelines on Contribution Arrangement of a Self-employed Person 10/00 IV.18 Guidelines on Contribution Arrangement of a Self-employed Person who Sustains 10/00 a Loss IV.19 Guidelines on Minimum and Maximum Levels of Relevant Income of a Self-employed 10/00 Person IV.20 Guidelines on Prepayment of Contributions 10/00 Part V Guidelines on ORSO Interface V.1 Guidelines on MPF Exempted ORSO Schemes Application for Exemption of ORSO 12/99 Exempted Schemes V.2 Guidelines on MPF Exempted ORSO Schemes Application for Exemption of ORSO 12/99 Registered Schemes V.3 Guidelines on MPF Exempted ORSO Schemes Treatment of Accrued Rights of 4/99 Existing Members who join MPF Schemes V.4 Guidelines on MPF Exempted ORSO Schemes Preservation of Benefits 4/99 V.5 Guidelines on MPF Exempted ORSO Schemes Illustrative Examples 5/99 V.6 Guidelines on MPF Exempted ORSO Schemes Application for Approval of 6/99 Appointment of Trustees V.7 Guidelines on MPF Exempted ORSO Schemes Application for Approval of 6/99 Appointment of Directors of Trustees V.8 Guidelines on MPF Exempted ORSO Schemes Application for Withdrawal of 5/00 Exemption Certificate of an ORSO Exempted Scheme V.9 Guidelines on MPF Exempted ORSO Schemes Application for Withdrawal of 5/00 Exemption Certificate of an ORSO Registered Scheme V.10 Guidelines on MPF Exempted ORSO Schemes Filing of Annual Report 12/00 V.11 Guidelines on MPF Exempted ORSO Schemes Withdrawal of Minimum MPF Benefits 12/00 Others Code of Conduct for MPF Intermediaries 10/00 Code on MPF Investment Funds 12/99 Erratum to the Code on MPF Investment Funds 5/00 108

111 APPENDIX Appendix V List of Circular Letters/Bulletins (1 April 2000 to 31 March 2001) CIRCULAR LETTERS Date of letter Addressee Subject 3 Apr 2000 Trustees and Sponsors Marketing / Advertising of MPF Business of Schemes 19 Apr 2000 Trustees Submission of Enrolment Information 19 Apr 2000 Trustees Monthly Returns Common Errors and Recommendations 4 Jul 2000 Trustees MPF Legislation 4 Jul 2000 Trustees Transfer of Benefits to MPF Schemes 5 Jul 2000 Trustees and MPF Prorating of Minimum and Maximum Levels of Relevant Income for Corporate Intermediaries Mandatory Contribution Purposes 17 Jul 2000 Trustees Approval of trustee under section 20 of the MPFSO 17 Jul 2000 Applicants of PIFs Application for Approval of PIFs 29 Jul 2000 Trustees and MPF Prorating of Minimum and Maximum Levels of Relevant Income for Corporate Intermediaries Mandatory Contribution Purposes 10 Aug 2000 Trustees and MPF Mandatory Contributions by a Self-employed Person Corporate Intermediaries 21 Aug 2000 Trustees and Sponsors of Establishment Costs and Marketing Expenses of Schemes Schemes 30 Aug 2000 Trustees and Sponsors of Marketing Expenses and Establishment Costs Schemes 12 Sep 2000 Trustees Non-refusal of Scheme Applicants 27 Sep 2000 Trustees Refusal of Application for Membership by a Self-employed Person ( SEP ) 30 Sep 2000 Trustees Withdrawal of Accrued Benefits 10 Oct 2000 Trustees and MPF Industry Schemes Corporate Intermediaries 10 Oct 2000 Trustees Industry Schemes 10 Oct 2000 Professional Associations, MPF Circular Letter No. 3 (of IRD) Worker Unions and Consultants 13 Oct 2000 Trustees Delegates of Custodians and Custodial Agreement 20 Oct 2000 MPF Corporate MPF Guidelines Intermediaries 24 Oct 2000 ORSO Scheme MPF/ORSO Interface Arrangement Termination of ORSO Scheme Administrators 28 Oct 2000 Trustees Transfer of Benefits to MPF Schemes 30 Oct 2000 Trustees Monthly Returns of Registered Schemes 31 Oct 2000 Trustees Non-refusal of Scheme Applicants in relation to Employee Enrolment and Data Collection 109

112 Date of letter Addressee Subject 8 Nov 2000 Trustees Electronic Interface for Default Contribution and Persistent Late Payment Report and Contribution Surcharge 9 Nov 2000 Trustees and MPF Mis-selling of Master Trust Schemes to Employers of Casual Employees Corporate Intermediaries 15 Nov 2000 Trustees Return of Registered Scheme Information relating to Participating Employers and Members 16 Nov 2000 Trustees and MPF Misleading Information on Enrolment and Contribution Requirements and Corporate Intermediaries Non-refusal of Self-employed Persons 24 Nov 2000 Trustees and Sponsors of Adequate Insurance under Section 29 of the General Regulation APIFs 27 Nov 2000 Trustees, Sponsors of Delegates of Custodians and Custodial Agreements Schemes and APIFs, and Custodians 2 Dec 2000 ORSO Scheme MPF/ORSO Interface Arrangement Transfer of ORSO Scheme Assets Administrators and Trustees 8 Dec 2000 Trustees and MPF Corporate Enrolment and Contribution Arrangement of Self-employed Persons Intermediaries 9 Jan 2001 Trustees Prorating of Minimum and Maximum Levels of Relevant Income for Mandatory Contribution Purposes 10 Jan 2001 Trustees Provision of Documents/Information to Scheme Participants 17 Jan 2001 Trustees Enrolment of Employees in MPF Schemes 1 Feb 2001 Trustees Enrolment of Employees in MPF Schemes 8 Feb 2001 Trustees Retirement Schemes with Different Retirement Ages for Different Sexes 15 Feb 2001 Trustees Change of Ownership of Business and Transfer of Employees between Associated Companies 2 Mar 2001 Trustees Returns of MPF Schemes 20 Mar 2001 Trustees Trustee Notification on Late Payment of MPF Contributions 110

113 APPENDIX BULLETINS Date of Bulletin Addressee Subject 1 Dec 2000 Employers who operate a Recovery of Contribution in Arrears MPF exempted ORSO Scheme 1 Dec 2000 Employers who operate a Appoint and/or Retirement of Trustees or the Directors of Corporate Trustees MPF exempted ORSO and Investment Managers Scheme 1 Dec 2000 Employers who operate a Reporting of Membership MPF exempted ORSO Scheme 1 Dec 2000 Employers who operate a Periodic Fee MPF exempted ORSO Scheme 111

114 Appendix VI List of Approved MPF Trustees and Their Background (as at 31 March 2001) AMERICAN INTERNATIONAL ASSURANCE COMPANY (TRUSTEE) LIMITED American International Assurance Company (Trustee) Limited is a member of the American International Group, Inc. The American International Group is an international insurance organization of which its member companies write property, casualty, marine, life and financial services insurance worldwide and engage in a range of financial services businesses. The sponsor of the schemes, American International Assurance Company Limited ( AIA ), also a member of AIG, markets a full range of insurance and pension products. Jardine Fleming, the partner of AIA on providing MPF services in Hong Kong, is a member of the Chase Manhattan Corporation, which provides commercial, investment and private banking and asset management services worldwide. AXA CHINA REGION TRUSTEES LIMITED AXA China Region Trustees Limited is a member of the AXA Group which is a provider in the fields of provident funds, life and non-life insurance, re-insurance, and other related financial services. BANK CONSORTIUM TRUST COMPANY LIMITED Bank Consortium Trust Company Limited is a wholly owned subsidiary of Bank Consortium Holding Limited, a company formed by a consortium of a group of licensed banks in Hong Kong: namely Asia Commercial Bank Limited; Chekiang First Bank Limited; Dah Sing Bank, Limited; Liu Chong Hing Bank Limited; Shanghai Commercial Bank Limited; Wing Hang Bank, Limited; Wing Lung Bank Limited; International Bank of Asia Limited and Industrial and Commercial Bank of China (Asia) Limited. All the shareholder banks' principal businesses focus on retail banking and other financial services. BANK OF COMMUNICATIONS TRUSTEE LIMITED Bank of Communications Trustee Limited is a wholly owned subsidiary of the Bank of Communications which is engaged in a full range of retail banking business and corporate banking business focusing on exploring the international settlement business. BANK OF EAST ASIA (TRUSTEES) LIMITED Bank of East Asia (Trustees) Limited is a wholly owned subsidiary of the Bank of East Asia, Limited which is one of the major commercial banks in Hong Kong. The bank operates branches and representative offices worldwide and engages in a wide range of retail as well as wholesale banking services. BERMUDA TRUST (FAR EAST) LIMITED Bermuda Trust (Far East) Limited ( BTFE ) is a wholly owned subsidiary of the Bank of Bermuda Limited. Bank of Bermuda is one of the leading offshore financial services groups with a worldwide network of key financial and offshore centres. The Bank provides corporations and private clients with a range of trust, fund administration, custody, asset management and banking services. BTFE is currently the trustee of a number of schemes sponsored by various global asset management companies including, Fidelity Investments Management (Hong Kong) Limited, INVESCO Asia Limited and Dresdner RCM Global Investors Asia Limited. 112

115 APPENDIX BOCI-PRUDENTIAL TRUSTEE LIMITED BOCI-Prudential Trustee Limited is a joint-venture company set up by the Bank of China Group and the Prudential Group. The Bank of China Group engages in investment banking services, retail banking services, direct investment and fund management. The Prudential Group provides a broad range of financial and insurance products and fund management business. BUTTERFIELD TRUST (HONG KONG) LIMITED Butterfield Trust (Hong Kong) Limited is a member of the Bank of Butterfield which provides trusts, fund administration and assets management services to individuals and financial institutions in addition to retail and corporate banking services. CHINA LIFE TRUSTEES LIMITED China Life Trustees Limited is a subsidiary of the China Life Insurance Company, Limited which is a member of China Insurance Company, Limited. The business activities of China Insurance Company, Limited are principally general insurance operation, life insurance, provident fund, retirement scheme, reinsurance, and other related financial operations. CITITRUST LIMITED Cititrust Limited is a member of the Citigroup, Inc. Citigroup, Inc engages in a broad range of financial services, which includes retail banking, insurance services, corporate and investment banking, and asset management and private banking. CMG ASIA TRUSTEE COMPANY LIMITED CMG Asia Trustee Company Limited is owned by CMG Asia Limited, which is a member of the Commonwealth Bank Group. The Commonwealth Bank Group provides integrated financial services including retail, business, institutional, funds management, insurance, investment banking, broking services and finance company activities. HSBC PROVIDENT FUND TRUSTEE (HONG KONG) LIMITED HSBC Provident Fund Trustee (Hong Kong) Limited is a wholly owned subsidiary of the Hongkong and Shanghai Banking Corporation Limited, which is one of the leading commercial banks in Hong Kong. The HSBC Group is also an administrator of pooled ORSO schemes. ING PENSION TRUST LIMITED ING Pension Trust Limited is a member of ING Group which is an integrated financial service provider active in the fields of banking, insurance and assets management. MANULIFE PROVIDENT FUNDS TRUST COMPANY LIMITED Manulife Provident Funds Trust Company Limited is a member of Manulife Financial Group. The Manulife Financial Group provides financial protection products and investment management services to individuals, families, businesses and groups in selected international markets. MASSMUTUAL TRUSTEES LIMITED MassMutual Trustees Limited is a member of the MassMutual Financial Group which is a provider in the fields of life and disability insurance, asset accumulation products, retirement and investment management services. 113

116 MLC TRUSTEES (HONG KONG) LIMITED MLC Trustees (Hong Kong) Limited is a subsidiary of the MLC Limited which is a member of the National Australia Bank Group. MLC Limited is engaged in the management of superannuation, investment management and trusts business and provision of life insurance products. PACIFIC CENTURY TRUSTEES LIMITED Pacific Century Trustees Limited is a member of the Pacific Century Insurance Group which provides a range of whole life, endowment, and term life insurance products, re-insurance, provident funds and other related financial services. PRINCIPAL TRUST COMPANY (ASIA) LIMITED Principal Trust Company (Asia) Limited is a member of the Principal Financial Group. The Principal Financial Group provides integrated financial services including life, disability and health insurance, mutual funds, residential mortgages, investment management and pension plans. ROYAL BANK OF CANADA TRUST COMPANY (ASIA) LIMITED Royal Bank of Canada Trust Company (Asia) Limited is a member of the Royal Bank of Canada Group which provides banking, stock broking, insurance and wealth management services to individual and business customers worldwide. THE TAI PING TRUSTEES (H.K.) LIMITED The Tai Ping Trustees (H.K.) Limited is wholly owned by The Tai Ping Life Insurance Company Limited, which is a member of China Insurance Company, Limited. The Tai Ping Life Insurance Company Limited provides a wide range of individual insurance, employee benefits and retirement plans. 114

117 APPENDIX Appendix VII List of Registered MPF Schemes and Constituent Funds (as at 31 March 2001) MPF schemes AIA-JF Comprehensive Retirement Benefit MPF Scheme AIA-JF Mandatory Provident Fund Scheme AIA-JF Premium MPF Scheme Bank Consortium Industry Plan Bank Consortium MPF Plan BCOM Joyful Retirement MPF Scheme BCOM Prosperous Retirement MPF Scheme BEA (MPF) Industry Scheme BEA (MPF) Master Trust Scheme Underlying constituent funds Capital Preservation Portfolio Guaranteed Portfolio Balanced Portfolio Capital Preservation Portfolio Conservative Portfolio Growth Portfolio Guaranteed Portfolio Balanced Portfolio Capital Preservation Portfolio Conservative Portfolio Growth Portfolio Guaranteed Portfolio BCT Balanced Fund BCT Capital Preservation Fund BCT Growth Fund BCT Stable Fund Bank Consortium Balanced Fund Bank Consortium Capital Preservation Fund Bank Consortium Growth Fund Bank Consortium Stable Fund BCOM Guaranteed (CF) Fund BCOM Joyful Capital Preservation (CF) Fund BCOM Balanced (CF) Fund BCOM Prosperous Capital Preservation (CF) Fund BCOM Stable Growth (CF) Fund BEA (Industry Scheme) Balanced Fund BEA (Industry Scheme) Capital Preservation Fund BEA (Industry Scheme) Growth Fund BEA (Industry Scheme) Stable Fund BEA (MPF) Balanced Fund BEA (MPF) Capital Preservation Fund BEA (MPF) Growth Fund BEA (MPF) Long Term Guaranteed Fund BEA (MPF) Stable Fund 115

118 MPF schemes BOC-Prudential Easy-Choice Mandatory Provident Fund Scheme BOC-Prudential Flexible Mandatory Provident Fund Scheme CEF MPF Master Trust Scheme Chamber CMG Choice China Life MPF Master Trust Scheme CMG Rainbow 65 Dao Heng MPF Master Trust Plan DBS Kwong On Bank MPF Master Trust Scheme Underlying constituent funds BOC-Prudential Balanced Fund BOC-Prudential Capital Preservation Fund BOC-Prudential Growth Fund BOC-Prudential Stable Fund BOC-Prudential Bond Fund BOC-Prudential Capital Preservation Fund BOC-Prudential Global Equity Fund BOC-Prudential Hong Kong Equity Fund CEF MPF Balanced Fund CEF MPF Capital Preservation Fund CEF MPF Growth Fund CEF Templeton Global Equity Fund CMG Balanced Portfolio Fund CMG Capital Preservation Fund CMG Fixed Income Fund with Guarantee CMG Hong Kong Equity Fund CMG Progressive Growth Fund CMG Stable Income Fund China Life Balanced Fund China Life Capital Preservation Fund China Life Growth Fund China Life Guaranteed Return Fund CMG Balanced Portfolio Fund CMG Capital Preservation Fund CMG Fixed Income Fund with Guarantee CMG Hong Kong Equity Fund CMG Progressive Growth Fund CMG Stable Income Fund Aggressive Growth Fund Balanced Growth Fund Capital Preservation Fund Guaranteed Fund Stable Growth Fund DBS-KOB Balanced Fund DBS-KOB Capital Preservation Fund DBS-KOB Conservative Fund DBS-KOB Growth Fund DBS-KOB Guaranteed Fund 116

119 APPENDIX MPF schemes Double Easy Mandatory Provident Fund Dresdner RCM MPF Master Trust Dresdner RCM MPF Plan Eagle Star MPF Scheme Advance Planner Eagle Star MPF Scheme Security Planner Fidelity Retirement Master Trust Hang Seng Mandatory Provident Fund SuperTrust Underlying constituent funds Double Easy Balanced Fund Double Easy Capital Preservation Fund Double Easy Cash Fund Double Easy Growth Fund Double Easy Guaranteed Fund Double Easy Stable Fund Double Easy Top Select Fund Balanced Fund Capital Preservation Fund Capital Stable Fund Growth Fund Stable Growth Fund Balanced Fund Capital Preservation Fund Capital Stable Fund Growth Fund Stable Growth Fund Eagle Star Accumulation Fund Eagle Star Capital Preservation Fund Eagle Star Global Growth Fund Eagle Star Guarantee Fund Eagle Star HK Dollar Savings Fund Eagle Star Capital Preservation Fund Eagle Star Guarantee Fund Eagle Star HK Dollar Savings Fund Balanced Fund Capital Preservation Fund Capital Stable Fund Growth Fund Hong Kong Equity Fund Stable Growth Fund Balanced Fund Capital Preservation Fund Growth Fund Guaranteed Fund Hang Seng Index Tracking Fund 117

120 MPF schemes Hang Seng Mandatory Provident Fund SuperTrust Plus HSBC Mandatory Provident Fund SuperTrust HSBC Mandatory Provident Fund SuperTrust Plus ING MPF Master Trust Basic Scheme ING MPF Master Trust Comprehensive Scheme Underlying constituent funds Asian Equity Fund Balanced Fund Capital Preservation Fund European Equity Fund Growth Fund Guaranteed Fund Hang Seng Index Tracking Fund Hong Kong Equity Fund North American Equity Fund Stable Growth Fund Balanced Fund Capital Preservation Fund Growth Fund Guaranteed Fund Hang Seng Index Tracking Fund Asian Equity Fund Balanced Fund Capital Preservation Fund European Equity Fund Growth Fund Guaranteed Fund Hang Seng Index Tracking Fund Hong Kong Equity Fund North American Equity Fund Stable Growth Fund ING MPF Basic Scheme Balanced Growth Portfolio ING MPF Basic Scheme Capital Guaranteed Portfolio ING MPF Basic Scheme Capital Preservation Portfolio ING MPF Basic Scheme Hong Kong Equity Portfolio ING MPF Basic Scheme International Equity Portfolio ING MPF Basic Scheme Stable Growth Portfolio ING MPF Comprehensive Scheme Asian Equity Portfolio ING MPF Comprehensive Scheme Balanced Growth Portfolio ING MPF Comprehensive Scheme Capital Guaranteed Portfolio ING MPF Comprehensive Scheme Capital Preservation Portfolio ING MPF Comprehensive Scheme Growth Portfolio ING MPF Comprehensive Scheme Hong Kong Equity Portfolio ING MPF Comprehensive Scheme International Equity Portfolio ING MPF Comprehensive Scheme Stable Growth Portfolio ING MPF Comprehensive Scheme Stable Portfolio 118

121 APPENDIX MPF schemes INVESCO Strategic MPF Scheme Jones Lang LaSalle Property Management Division Mandatory Provident Fund Scheme Manager Elite Master Trust Manulife Global Select (MPF) Scheme Manu-Lifestyle (MPF) Scheme Mass Mandatory Provident Fund Scheme Underlying constituent funds Balanced Fund Capital Preservation Fund Capital Stable Fund Growth Fund Guaranteed Fund Jones Lang LaSalle Capital Preservation Fund Jones Lang LaSalle Guarantee Fund AXA Balanced Fund BNP Capital Preservation Fund Dresdner RCM Balanced Fund Fidelity Balanced Fund INVESCO Balanced Fund Managed Capital Stable Fund Managed Growth Fund Managed Stable Growth Fund Schroder Balanced Fund Manulife MPF Aggressive Fund Manulife MPF Capital Preservation Fund Manulife MPF European Equity Fund Manulife MPF Growth Fund Manulife MPF Hong Kong Bond Fund Manulife MPF Hong Kong Equity Fund Manulife MPF Interest Fund Manulife MPF International Bond Fund Manulife MPF International Equity Fund Manulife MPF Japan Equity Fund Manulife MPF North American Equity Fund Manulife MPF Pacific Asia Equity Fund Manulife MPF Stable Fund Manulife MPF Aggressive Fund Manulife MPF Capital Preservation Fund Manulife MPF Growth Fund Manulife MPF Interest Fund Manulife MPF Stable Fund Capital Preservation Fund Global Growth Fund Global Stable Fund Guaranteed Growth Fund 119

122 MPF schemes New-Alliance Mandatory Provident Fund Scheme PCI Master Trust MPF Scheme Polaris MPF Master Trust Principal MPF Scheme Series 100 Principal MPF Scheme Series 200 Principal MPF Scheme Series 600 Principal MPF Scheme Series 800 Underlying constituent funds Capital Growth Fund Capital Preservation Fund Global Balanced Fund Income Fund PCI Capital Preservation Fund PCI Fixed Income Fund PCI Global Balanced Fund PCI Hong Kong Fund Polaris Asia Pacific (excluding HK) Fund Polaris Capital Preservation Fund Polaris Global Diversification Fund Polaris Hong Kong SAR Fund Polaris Korea Fund Principal Capital Preservation Fund Principal Capital Preservation Fund Principal HK Dollar Savings Fund Principal Long Term Guaranteed Fund Principal Capital Preservation Fund Principal Global Growth Fund Principal HK Dollar Savings Fund Principal Long Term Accumulation Fund Principal Long Term Guaranteed Fund Principal Asian Equity Fund Principal Capital Guaranteed Fund Principal Capital Preservation Fund Principal Global Growth Fund Principal HK Dollar Savings Fund Principal International Bond Fund Principal International Equity Fund Principal Long Term Accumulation Fund Principal Long Term Guaranteed Fund Principal Stable Yield Fund Principal US Dollar Savings Fund Principal US Equity Fund 120

123 APPENDIX MPF schemes RBC MPF Master Trust Schroder MPF Master Trust SHKP MPF Employer Sponsored Scheme Standard Chartered MPF Plan Advanced Underlying constituent funds RBC Balanced Portfolio Fund RBC Capital Preservation Fund RBC Fixed Income Fund with Guarantee RBC Hong Kong Equity Fund RBC Progressive Growth Fund RBC Stable Income Fund Schroder MPF Asian Portfolio Schroder MPF Balanced Investment Portfolio Schroder MPF Capital Guaranteed Portfolio Schroder MPF Capital Preservation Portfolio Schroder MPF Capital Stable Portfolio Schroder MPF Growth Portfolio Schroder MPF HK Dollar Fixed Income Portfolio Schroder MPF Hong Kong Portfolio Schroder MPF International Portfolio Schroder MPF Stable Growth Portfolio Dresdner Stable Growth Fund Fidelity Balanced Fund Fidelity Stable Growth Fund HSBC Capital Stable Fund New-Alliance Global Balanced Fund Standard Chartered Capital Preservation Fund SHKP Standard Chartered Career Average Guaranteed Fund SHKP Citi Balanced Fund Citi Conservative Fund Citi Hong Kong Equities Fund Dresdner RCM Balanced Fund Dresdner RCM Capital Stable Fund Dresdner RCM Growth Fund Fidelity Global Investment Fund Balanced Fund Fidelity Global Investment Fund Capital Stable Fund Fidelity Global Investment Fund Growth Fund HSBC MPF A Balanced Fund HSBC MPF A Hong Kong Equity Fund HSBC MPF A Stable Fund INVESCO Global Balanced Fund INVESCO Global Equities Fund INVESCO MPF Bond Fund Mercury Hong Kong Strategy Trust Flexible BalancedPlus Fund Mercury Hong Kong Strategy Trust Flexible BondPlus Fund 121

124 MPF schemes Underlying constituent funds Mercury Hong Kong Strategy Trust Flexible EquityPlus Fund Schroder MPF Asian Fund Schroder MPF Balanced Investment Fund Schroder MPF HK Dollar Fixed Income Fund Standard Chartered Capital Preservation Fund Advanced Standard Chartered Career Average Guaranteed Fund Advanced Templeton MPF Asian Balanced Fund Templeton MPF Global Bond Fund Templeton MPF Global Equity Fund Standard Chartered MPF Plan Basic Tai Ping Retire-Easy MPF Master Trust Scheme The Smart MPF Master Trust Scheme Zurich-Chinese Bank MPF Scheme Premier Zurich-Chinese Bank MPF Scheme PremierDELUXE Standard Chartered Balanced Fund Basic Standard Chartered Capital Preservation Fund Basic Standard Chartered Career Average Guaranteed Fund Basic Standard Chartered Growth Fund Basic Standard Chartered Stable Fund Basic Tai Ping Retire-Easy Balanced Fund Tai Ping Retire-Easy Capital Preservation Fund Tai Ping Retire-Easy Capital Stable Fund Tai Ping Retire-Easy Growth Fund Tai Ping Retire-Easy Guarantee Fund Balanced Portfolio Capital Preservation Portfolio Conservative Portfolio Growth Portfolio Guaranteed Portfolio Zurich-Chinese Bank Capital Preservation Fund Zurich-Chinese Bank Guarantee Fund Zurich-Chinese Bank HK Dollar Savings Fund Zurich-Chinese Bank Accumulation Fund Zurich-Chinese Bank Asian Equity Fund Zurich-Chinese Bank Capital Guarantee Fund Zurich-Chinese Bank Capital Preservation Fund Zurich-Chinese Bank Global Growth Fund Zurich-Chinese Bank Guarantee Fund Zurich-Chinese Bank HK Dollar Savings Fund Zurich-Chinese Bank International Bond Fund Zurich-Chinese Bank International Equity Fund Zurich-Chinese Bank Stable Yield Fund Zurich-Chinese Bank US Dollar Savings Fund Zurich-Chinese Bank US Equity Fund 122

125 APPENDIX Appendix VIII List of Corporate Administrators who Administer Pooling Agreements for ORSO Schemes (as at 31 March 2001) Authorized Insurers Corporate Trust Companies American International Assurance Company (Bermuda) Limited American International Assurance Company, Limited Assicurazioni Generali Societa per Azioni China Life Insurance Company, Limited CIGNA Worldwide Insurance Company CMG Asia Limited Hang Seng Life Limited HSBC Life (International) Limited ING Life Insurance Company (Bermuda) Limited Manufacturers Life Insurance Company The Manulife (International) Limited Pacific Century Insurance Company Limited Principal Insurance Company (Hong Kong) Limited Prudential Assurance Company Limited The Winterthur Life AIA Pension And Trustee Co. Ltd. Asia Commercial Bank (Trustee) Limited AXA China Region (Bermuda) Limited AXA China Region Trustees Limited Bank of Communications Trustee Limited Bermuda Trust (Far East) Limited BOC Group Trustee Company Limited BTM Trustee (HK) Limited Butterfield Trust (Hong Kong) Limited China Life Trustees Limited CMG Asia Trustee Company Limited HSBC International Trustee Limited HSBC Trustee (Hong Kong) Limited ING Pension Trust Limited Manulife Provident Funds Trust Company Limited MassMutual Trustees Limited MLC Trustees (Hong Kong) Limited Principal Trust Company (Asia) Limited Royal Bank of Canada Trust Company (Cayman) Limited Shanghai Commercial Bank Trustee Limited Tai Ping Trustees (H.K.) Limited The 123

126 Appendix IX List of Public Education and Publicity Activities (April 2000 to March 2001) Apr May 2000 MPF exemption campaign to promote the deadline for application for MPF exemption of ORSO schemes. 10 Apr 3 May 2000 Video wall advertisement at Times Square and Harbour City. 13 Apr 2000 Press conference to announce the trustees for Industry Schemes. 14 Apr 2000 Executive Director (Services Supervision) gave an interview to the Asian Wall Street Journal. 17 Apr 2000 The Acting Managing Director gave an interview to Commercial Radio. 20 Apr 2000 Media workshop on MPF exemption application. 15 Apr 14 May 2000 Outdoor displays at Tsimshatsui and Central. 29 Mar 3 May 2000 Advertisement on TV and newspapers. 4 May 2000 Media briefing on MPF exemption application response. 15 Jun 2000 Executive Director (ORSO Schemes) gave an interview to Next Magazine. 31 Jul 2000 Media briefing to announce MPF exemption result. Apr Aug 2000 Awareness Campaign to increase public awareness and educate the public on their MPF rights. 13 Apr 5 May 2000 Advertisement on MPF investment education guide on radio and newspapers. 17 Apr 12 May 2000 MPF Quiz Game programme on Commercial Radio. 21 Apr 19 May 2000 The MPFA and the Commercial Radio jointly organized an episode of radio drama Flat C, 18/F on MPF main features. 25 Apr 30 May 2000 The MPFA and TVB jointly produced the I-files programme on MPF main features May 2000 MPF Quiz Game segment on Commercial Radio. 5 May 4 Jun 2000 TV advertisement of 5+5, the contribution level of both employers and employees. Also shown on the video walls at Times Square and Harbour City. 20 May 2000 The MPFA and the Community Chest jointly organized an MPF Telegame Show for broadcast on TVB May 2000 The MPFA participated in the MoneyWorld Asia Hong Kong 2000 to promote MPF main features. 30 May 2000 The MPFA participated in Cable TV s programme on Industry Scheme. 7 Jun 2000 Executive Director (Services Supervision) gave an interview to Channel News Asia. 7 Jun 2000 The Deputy Managing Director gave an interview to Hong Kong Business Magazine. 9 Jun 2000 The Managing Director gave an interview to Financial Times. 124

127 APPENDIX 17 Jun 24 Sep 2000 A series of roving exhibitions in 45 public housing estates to disseminate the MPF messages to the general public. 17 Jun 11 Aug 2000 MTR poster advertisement with the message of Know your MPF right in 76 locations at all stations. 17 Jun 17 Sep 2000 Green van advertisement on MPF main features on 50 routes. 29 Jun 2000 Legislative Councillors, District Council Chairmen, MPFA board members, business leaders and celebrities helped launch a territory-wide shop visit Operation-All-Shops to raise public awareness of the MPF System. 180 Ambassadors visited over shops in the 9-day operation. 30 Jun 2000 Executive Director (Member Protection) gave an interview to Ming Pao Daily News. 4 Jul 26 Sep 2000 The MPFA and Radio Television Hong Kong jointly produced a 13-episdoe radio drama on MPF main features. 19 Jul 2000 Media briefing to announce the introduction of guidelines on relevant income. 7 Aug 27 Sep 2000 First round of MTR roving exhibitions on MPF main features held at eight busy stations. Correspondingly, an MTR street level promotion was organized for ambassadors to distribute MPF brochures to the commuters Aug 2000 The MPFA and the Trade Development Council jointly organized the MPFA Super Expo 2000 to promote MPF to the general public. All the 20 trustees participated in the Expo. 29 Aug 30 Sep 2000 TV advertisement on My MPF, My Rights. Aug Sep 2000 Celebrities Endorsement Campaign Celebrities, including public and business leaders, helped promote the message MPF is your retirement protection. (Celebrities included: the MPFA Chairman Hon Charles Lee; Executive Councillor Hon Henry Tang; Legislative Councillors Hon Chan Yuen-han, Hon Lau Chin-sek and Hon Christine Loh; Famous radio broadcaster Mr Albert Cheng; Investment expert Mr Chan Wing-luk; Top chef Mr Yeung Kwun-yat; Dr Lee Ka-yan; Top artistes Ms Dodo Cheng and Mr Wong Tze-wah.) 16 Sep 1 Dec 2000 Advertisement on TV, newspapers and MTR (136 locations at all stations). Sep 2000 Jan 2001 Industry Scheme Campaign to promote the specially designed Industry Scheme to the catering and construction industries. 1 Sep Feb Advertisement on radio, newspapers, horse-racing magazines, bus shelters and MTR (in 3 selected 2001 stations). 25 Sep 19 Oct 2000 Print advertisement on regional investment seminars on newspapers and magazines Oct 2000 The MPFA and Commercial Radio jointly produced an 8-episode 2-minute game segment. 25 Oct 2000 Press conference to announce the results of the inspection of trustees. 28 Oct 2000 A Construction Site Show was set up to promote the Industry Scheme to the construction industry. Executive Director (Member Protection) and the Commissioner for Labour officiated at the ceremony. 125

128 3 Nov 29 Dec 2000 The MPFA participated in a weekly, 10-minute phone-in session in a radio programme on Radio Television Hong Kong Nov 2000 The MPFA and ATV jointly produced a series of Hong Kong Today on MPF main features. 18 Nov 2000 The MPFA organized a promotional event to promote the Industry Scheme in Tsuen Wan. Executive Director (Member Protection), Executive Councillor Hon Henry Tang and Legislative Councillor Hon Lee Cheuk-yan officiated at the ceremony. Oct Nov 2000 Push Campaign to promote the commencement date of MPF. 2 Sep Apr Green van advertisement with the message of Hurry up to catch the MPF bus before 1 Dec on routes; bus advertisement on MPF commencement date and MPFA hotline on 150 bus panels; outdoor displays on MPF commencement date at various Government Offices and busy business districts. 4 Oct 29 Nov 2000 MPFA produced an 8-episode TV programme One minute MPF for broadcast on TVB. 4 Oct 2000 The MPFA and TVB jointly produced a 9-episode 5-minute TV programme on MPF main features. 5 Oct 2000 Financial Secretary Mr Donald Tsang officiated at the launch ceremony of the Mega Size Billboard showing the MPF commencement date. 5 Oct 2000 Website advertorial on MPF commencement on JobsDB.com 6 Oct Jan Advertisement with the message of It s MPF time. Sign up now! on newspapers and MTR (in locations of selected MTR stations); Advertisement with the message of Hurry! Sign up now! on TV and MTR (in 66 locations at all stations); MTR poster advertisement with the message of Time's up in 66 locations at all stations. 7 Oct 2000 The MPFA and TVB jointly produced an MPF Game Show. 14 Oct 25 Nov 2000 Executive Director (Services Supervision) attended the investment programme on Commercial Radio hosted by Mr Chan Wing-luk. 15 Oct 3 Dec 2000 Executive Director (Services Supervision) attended the investment programme on Metro Radio hosted by Mr Ricky Tam. 16 Oct 2 Dec 2000 The MPFA produced a 1-minute promotional segment MPF Diary on MPF main features on the Metro Radio. 25 Oct 2000 Press conference to announce the results of the inspection of trustees. 2 Nov 2000 Deputy Managing Director gave an interview to South China Morning Post. 2 Nov 2000 Executive Director (Services Supervision) gave an interview to Dow Jones. 8 Nov 2000 Deputy Managing Director gave an interview to Euromoney Magazine Nov 2000 Print and radio advertisement on self-employed persons by famous artiste Mr Cho Tat-wah Nov 2000 The MPFA participated in ATV s investment programme hosted by Mr Ricky Tam. 126

129 APPENDIX Nov 2000 KMB Multi-media on board (Roadshow) showing the TV advertisement of celebrities endorsement and enforcement on 100 buses. 27 Nov Feb Website advertorial on Ask 100.com and 36.com on MPF main features Nov 27 Dec 2000 The MPFA and the Radio Television Hong Kong jointly produced a series of TV drama on MPF main features for broadcast on TVB. Dec 2000 Mar 2001 Sustained Campaign to extend the public awareness of MPF s implementation. 1 Dec 2000 Press conference to announce the implementation of the MPF System. 1 Dec 2000 Executive Director (ORSO Schemes) gave an interview to Cable TV. 2 Dec 2000 Deputy Managing Director gave an interview to Commercial Radio. 2 Dec 2000 Executive Director (Member Protection) gave an interview to Metro Radio. 2 Dec Feb MTR poster advertisement with the message of Hurry! It s MPF's time in 42 locations at all stations Dec 2000 Media briefing on enforcement and a mock-up inspection. 9 Dec 2000 Executive Director (Services Supervision) gave an interview to Radio Television Hong Kong. 11 Dec 2000 Executive Director (Services Supervision) gave an interview to ATV. 12 Dec Jan Second round of MTR roving exhibitions on MPF contributions and guidelines for employees and 2001 employers held at 7 stations. 30 Dec Feb MTR poster advertisement with the message of Time s up in 57 locations at all stations Jan 2001 The MPFA produced an 8-episode TV programme One-Minute MPF for broadcast on TVB, hosted by radio broadcasters Mr Albert Cheng and Mr Geoff Wong Jan 2001 Print advertisement on MPF key dates on newspapers Jan 2001 TV advertisement on MPF key dates. 18 Jan 2001 The MPFA and Commercial Radio jointly organized an episode of radio drama Flat C, 18/F on employers obligation. 22 Jan 2001 The MPFA organized a promotional event to promote the Industry Scheme to the catering industry. Legislative Councillor Hon Tommy Cheung visited restaurants in Shamshuipo to disseminate the message. 29 Jan 2 Mar 2001 Radio advertisement on MPF enrolment endorsed by an SME employer, a taxi driver and a construction sub-contractor. 127

130 1 Feb 2001 Media briefing on MPFA hotline service and a tour to the Call Centre. 5 Feb 2001 Print advertisement with the message of MPF-The fruit is yours on Hong Kong Business magazine. 6 Feb 6 Mar 2001 The MPFA and the Metro Radio jointly produced a series of MPF programmes on MPF member protection and investment Feb 2001 The MPFA participated in the Careers & Education Expo 2001 to promote investment education and main features of MPF Mar 2001 MTR poster advertisement with the message of MPF-The fruit is yours in 57 locations at all stations. 5 Mar 2001 Print advertisement with the message of MPF-The fruit is yours on HK Federation of Trade Unions Bulletin. 12 Mar 12 Apr 2001 TV advertisement on employers MPF obligation. 15 Mar 2001 Print advertisement with the message of MPF-The fruit is yours on The Bulletin. Mar 2001 onwards Investment Education Campaign to educate the public on MPF investment. 15 Mar 2001 Media workshop on investment education and the workflow of MPF contribution. 30 Mar 2001 Investment seminar for The Federation of Hong Kong and Kowloon Labour Unions. 128

131 APPENDIX Appendix X List of Campaign Media (April 2000 to March 2001) Campaign Period Campaign Campaign Media Campaign Media Activities Apr Jul 2000 Awareness Campaign Advertising TV, Radio, MTR (all stations), Green Van (50 routes), Video Wall (Harbour City, Times Square and Leighton Road) and Paper Posters TV and Radio Program Article Contribution 3 TV Programs and 4 Radio Programs Choice Magazine and St. James Settlement Bi-monthly Magazine Aug Sep 2000 Celebrities Advertising TV, MTR Posters (all stations) and Newspapers Endorsement Campaign Sep Oct 2000 Industry Scheme Advertising Radio, Bus Shelters, Newspapers, Horse Racing Campaign Magazines and Paper Posters Radio Program Phone-in Game Programs Oct Nov 2000 Push Campaign Advertising TV, Radio, MTR Posters (all stations), Bus (150 panels), Green Van (70 routes), KMB Multi-Media on Board (Roadshow) on 100 buses, Newspapers, Magazines and Paper Posters TV and Radio Program Outdoor Banner Website advertorial 6 TV Programs and 3 Radio Programs Mega Size Billboard at City Golf Club, Government Offices (Kwun Tong, Queensway, San Po Kong, Kowloon, North Point, Cheung Sha Wan, Kwai Hing, Yuen Long), Trade and Industry Department Tower, Tamar Site, Jockey Club, International Finance Centre, Auxiliary Medical Service Headquarters and the Site next to Sogo Department Store JobsDB, Ask100.com and 36.com 129

132 Campaign Period Campaign Campaign Media Campaign Media Activities Dec 2000 Mar 2001 Sustained Campaign Advertising TV, Radio, MTR (all stations), KMB Multi-Media on Board (Roadshow) on 700 buses, Newspapers and Magazines; Radio Program and Paper Posters TV & Radio Program Outdoor Banner Article Contribution 2 TV Programs and 2 Radio Programs Mega Size Billboard at City Golf Club, Government Offices (San Po Kong, Kowloon, North Point, Kwai Hing and Yuen Long), International Finance Centre, Auxiliary Medical Service Headquarters and the Site next to Sogo Department Store MPF Infostation in Apple Daily, MPF Column for SMEs in Hong Kong Economic Journal Mar 2001 onwards Investment Education Investment Seminars Investment Seminars for Labour Unions (e.g. The Campaign Federation of HK and Kowloon Labour Unions, HK Confederation of Trade Unions, HK Federation of Trade Unions and HK and Kowloon Trades Union Council) TV Program 1 TV Program 130

133 APPENDIX Appendix XI List of Booklets Distributed (April 2000 to March 2001) Issue Date Publications Distribution 1 2 Apr 2000 Your choice before 3 May Apr Apr May 2000 Investment guide for MPF scheme members May 2000 MPF Intermediary & You May Jun 2000 MPF Industry scheme Jun Jun Jun Aug Aug Aug Aug Sep Oct Oct Oct Oct Nov 2000 Choosing MPF Investment Funds Nov 2000 Main Features of MPF system Nov Dec Jan 2001 Leaflet (MPF Guide for employers and employees) Jan Feb 2001 MPF guide for employees and employers Feb Mar 2001 MPF guide for self employed Mar Total:

134 Appendix XII Definition of Terms (a) OCCUPATIONAL RETIREMENT SCHEMES Defined benefit scheme Defined contribution scheme Insurance arrangement Member MPF exempted ORSO scheme Occupational retirement scheme ORSO exempted scheme ORSO registered scheme Means an occupational retirement scheme which is not a defined contribution scheme. Means an occupational retirement scheme which provides that the amount of a benefit under the scheme is to be an amount determined solely by reference to: a) the contributions to the scheme s funds by or in respect of the member concerned and any declared return in respect of such contributions (where such return may be subject to a minimum guaranteed rate but is otherwise unascertainable before it is declared); and b) where appropriate, the qualifying service and age of the employee. Means an agreement or arrangement: a) made in respect of an occupational retirement scheme with an authorized insurer under which the insurer is responsible for managing the scheme; and b) which is of a class or description specified in rules made by the Registrar of Occupational Retirement Schemes. Includes, in relation to an occupational retirement scheme, an individual who is entitled or prospectively entitled to benefits under the scheme by virtue of: a) his employment by the relevant employer (whether past or present) of the scheme; or b) an agreement made between the relevant employer of the first-mentioned scheme and the relevant employer of another occupational retirement scheme of which such individual was formerly a member, whether or not such individual is a party to the agreement, and where appropriate, member also includes the estate of a deceased member. Means an occupational retirement scheme in respect of which an exemption has been granted under section 5 of MPFSO. Members of this ORSO scheme are exempted from the MPFSO. Means subject to subsection (6) of section 2 of the ORSO any scheme, not being a contract of insurance under which benefits are payable only upon the death or disability of the insured, which: a) is comprised in one or more instruments or agreements; and b) has or is capable of having effect in relation to one or more descriptions or categories of employment so as to provide benefits, in the form of pensions, allowances, gratuities or other payments, payable on termination of service, death or retirement, to or in respect of persons gainfully employed (whether in Hong Kong or elsewhere) under a contract of service in any employment, and includes, where the context admits, a proposed such scheme. Means an occupational retirement scheme for which the Registrar has issued an exemption certificate under section 7 of ORSO. Means an occupational retirement scheme which has been registered under section 18 of ORSO. 132

135 APPENDIX ORSO scheme Means: administrator a) in the case of a scheme or pooling agreement governed by a trust, the trustee concerned; b) in the case of a scheme or pooling agreement which is the subject of or regulated by an insurance arrangement, the insurer concerned; c) in any other case, the person who is principally responsible for the management of the scheme and its assets otherwise than as a person who is solely concerned with the investment or custody of the assets. Pooling agreement Relevant employer Top-up scheme Means an agreement or arrangement: a) which is: i) governed by a single trust; or ii) the subject of or regulated by an insurance arrangement including a series of insurance arrangements which are of the same class or description; b) which applies to 2 or more individual occupational retirement schemes each of which is: i) governed by such trust; or ii) (where appropriate) the subject of or regulated by such insurance arrangement, by virtue of such application; c) under which, in the case of an agreement or arrangement governed by such trust, the assets of its participating schemes are vested with the administrator of the agreement or arrangement, as the case may be; d) which is managed, in the case of an agreement or arrangement governed by such trust, by a registered trust company; e) in relation to which, and its participating schemes, proper accounts and records are kept; and f) under which the value of the assets attributable to, and the liabilities of, each of its participating schemes are readily determinable from such accounts and records. Means, in relation to an occupational retirement scheme, the employer who provides the employment which entitles or enables the employee to be a member of the scheme. Means an occupational retirement scheme restructured to supplement the minimum benefits provided under an MPF scheme. (b) MPF SCHEMES Accrued benefits In relation to a registered scheme, means the amount of each scheme member's beneficial interest in the registered scheme at any time, derived from the contributions made by or in respect of that scheme member, together with the income or profits arising from any investments thereof, but taking into account any losses in respect thereof. 133

136 Approved pooled investment fund Approved trustee Casual employee Constituent fund An investment fund which is an insurance policy, authorized unit trust or authorized mutual fund that a) complies with the requirements set out in section 17(2) of Schedule 1 to the General Regulation; and b) is approved by the MPFA. Means a company or a natural person approved by the MPFA as a trustee in accordance with section 20 of the MPFSO. Means a relevant employee who is declared by an order made under section 2(2) of the MPFSO to be a casual employee for the purposes of the MPFSO. Section 2(2) of the MPFSO provides that if relevant employees: a) are engaged in an industry for which a provident fund scheme is registered as an industry scheme; and b) employed in that industry by an employer on a day to day basis or for a fixed period of less than 60 days, the MPFA may, by order published in the Gazette, declare those employees to be casual employees for the purposes of the MPFSO. In relation to a registered scheme, means the fund that constitutes a registered scheme, or a fund that forms part of the scheme, and complies with the requirements set out in section 36 of the General Regulation. Employer-sponsored Means a registered scheme membership of which is: scheme a) in the case of an employer who is not a company, open only to the relevant employees of that employer; or b) in the case of an employer that is a company, open only to the relevant employees of that company or an associated company. Industry scheme Mandatory contribution Master trust scheme Means a provident fund scheme registered under section 21A of the MPFSO as an industry scheme. Such a scheme may be for the persons engaged (whether as employees or as self-employed persons) in a particular industry or a particular class of industries or in two or more industries or classes of industries. Means an amount that is required to be paid as a contribution to a registered scheme under section 7A or 7C of the MPFSO. Means a registered scheme membership of which is open to: a) the relevant employees of more than one employer; and b) self-employed persons; and c) persons who, having accrued benefits in another registered scheme, wish to have those benefits transferred to the first-mentioned scheme, but does not include an industry scheme. 134

137 APPENDIX Provident fund scheme Registered scheme Relevant employee Relevant income Scheme member Self-employed person Service provider Voluntary contribution Means a scheme governed by a trust: a) the terms of which are set out in one or more documents; and b) that: i) provides for the payment of pecuniary benefits to the members of the scheme when they reach the retirement age, or any other prescribed event occurs in relation to them; or ii) in the case of members who die before reaching that age or before the occurrence of such an event, provides for the payment of those benefits to the personal representatives or beneficiaries of the estates of those members, and includes a proposed provident fund scheme. Means a provident fund scheme registered under section 21 of the MPFSO as an employer sponsored scheme or a master trust scheme or registered under section 21A of the MPFSO as an industry scheme. Means an employee of 18 years of age or over and below retirement age. Means: a) in the case of a relevant employee, any wages, salary, leave pay, fee, commission, bonus, gratuity, perquisite or allowance (other than a housing allowance or other housing benefit), expressed in monetary terms, paid or payable by an employer (directly or indirectly) to that relevant employee in consideration of his employment under that contract, but does not include severance payments or long service payments under the Employment Ordinance (Cap. 57); b) in the case of a self-employed person, income of that person as ascertained in accordance with the regulations made under section 46 of the MPFSO. In relation to a registered scheme, means a person who has a beneficial interest in the registered scheme. Means a person whose relevant income (otherwise than in the capacity as an employee) derives from his production (in whole or in part) of goods or services in Hong Kong, or his trade in goods or services in or from Hong Kong. In relation to a provident fund scheme, means an investment manager, custodian of scheme assets or other person appointed or engaged by the trustee of the scheme to provide services for the purposes of the scheme, and includes a person to whom the provision of those services is delegated by such a manager, custodian or other person, but does not include a person appointed or so engaged as an auditor, solicitor or actuary. Means a contribution paid to a registered scheme in accordance with section 11 of the MPFSO. 135

138 (c) ABBREVIATIONS stands for General Regulation HKMA IA IMS ISC IT MPF MPFA MPFSAC MPFSO ORSO ORORS RORS SEP SFC Mandatory Provident Fund Schemes (General) Regulation Hong Kong Monetary Authority Insurance Authority Information Management System Industry Schemes Committee Information technology Mandatory Provident Fund Mandatory Provident Fund Schemes Authority Mandatory Provident Fund Schemes Advisory Committee Mandatory Provident Fund Schemes Ordinance Occupational Retirement Schemes Ordinance Office of the Registrar of Occupational Retirement Schemes Registrar of Occupational Retirement Schemes Self-employed person Securities and Futures Commission 136

139

140

Supervision of the MPF Industry Professional

Professional [ 22 ] Mandatory Provident Fund y Schemes Authority Supervision of the MPF Industry The MPFA is responsible for overseeing the operations of the approved trustees and the registered MPF products