ENG-2017 — Page 105

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Financial and Monetary Affairs

Open-ended Fund Company Structure

The government, together with the SFC, has been working to implement the legal framework for the introduction of an open-ended fund company (OFC) structure as an alternative fund vehicle to the unit trust structure. The OFC structure will allow funds to be set up in the form of companies but with the flexibility, not enjoyed by conventional companies, to create and cancel shares for investors' subscription and redemption in the funds. This additional choice would help attract more funds to domicile in Hong Kong and further develop Hong Kong as a full-service international asset management centre. The OFC regime is expected to start operation in the second half of 2018.

Mutual Recognition of Funds

In July, the SFC and Autorité des Marchés Financiers of France signed a Memorandum of Understanding on Mutual Recognition of Funds (MRF) to allow the distribution of eligible public funds in each other's market through a streamlined vetting process. The Mainland-Hong Kong MRF arrangement, launched in 2015, continued to operate smoothly during the year. As at end- 2017, the regulators of the two places had authorised 60 funds, with aggregate net sales of more than RMB12.8 billion. As for the Switzerland-Hong Kong MRF scheme, launched in 2016, the Swiss Financial Market Supervisory Authority had authorised four Hong Kong funds by end-2017.

Corporate Treasury Centres

Hong Kong is Asia's premier location for multinational corporations to manage their global or regional treasury functions. Its favourable tax and regulatory environment helps attract Mainland and overseas companies to establish Corporate Treasury Centres (CTCs) in the city. The Inland Revenue Ordinance allows interest deduction in calculating profits tax for the intra- group financing business of corporations operating in Hong Kong under specified conditions, and profits tax reduction by 50 per cent for qualifying CTCs.

Asian Infrastructure Investment Bank

The Asian Infrastructure Investment Bank (AIIB) is a multilateral development bank. It plays an important role in supporting infrastructure development in Asia and promoting regional connectivity. Hong Kong became a member of the AIIB in June.

HKMA Infrastructure Financing Facilitation Office

The HKMA established the Infrastructure Financing Facilitation Office in 2016 to facilitate infrastructure investments and their financing by working with key stakeholders. Since its launch, the office has formed an effective collaborative network of key stakeholders in infrastructure investment and financing and raised the international profile of Hong Kong as an infrastructure financing centre. By end-2017, it had welcomed 78 organisations from Hong Kong, the Mainland and overseas as partners.

In March, the office held the inaugural Debt Financing and Investors' Roundtables. An equity reference term sheet was developed to devise a common language that can be understood and accepted by investors and project owners, thereby narrowing the gap in their expectations and bringing them closer to doing deals. During the year, the office also facilitated the HKMA's

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