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INVESTMENT RESTRICTIONS APPLICABLE TO PENSION FUNDS

WORLD PENSION ASSOCIATION (WPA)

INVESTMENT RESTRICTIONS TO PENSION FUNDS
APRIL 2002
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INVESTMENT RESTRICTIONS APPLICABLE TO PENSION FUNDS

EUROPE

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Worls Pension Association, april 2002

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INVESTMENT RESTRICTIONS APPLICABLE TO PENSION FUNDS

Minimum % Country
Austria (Only assets held in Pensionskassen)

Characteristics
Equities, options & convertible bonds foreign equities 1 foreign assets real estate loans to sponsoring company in EMU fixed interest securities3 bonds issued by states or firms not belonging to zone A mutual investment funds not subject to legislation of an EU Member State (Directive 85/611/EEC) non-quoted values real estate certificates options, futures and other derivatives not used for hedging non-guaranteed loans direct real estate in one value equities, bonds from one issuer and/or loans to one borrower equities, bonds, loans issued by sponsoring employer (self-investment) so-called “High Risk assets” (see annex 1) unlisted certificates (shares etc.) and other securities which are listed in countries not belonging to Zone A (included in the 50% above) total technical reserves which can be invested in one single issuer/debtor remains in place, excl. mortgage credit institutes currency matching rule (of which 50% can be in EURO or in an EU currency) No restrictions

Total

Maximum % same total issuer
50 30 50 20 10

35 10 10 10 5 1 10 5 15 5 5

Belgium

2

Denmark

4

50 10 2 40 80

1 2

Non-Euro currencies and bearer bonds, foreign currency deposits in Austrian banks and cash held in foreign currencies min. technical reserves = minimum reserves + solvency ratio + 60% of difference between plan reduction and actuarial reduction in case of early retirement 3 According to directive 89/647/EEC, the following countries are included in zone A: the countries of the EU, Hungary, Iceland, Norway, Switzerland, Turkey, Czech, the U.S., Canada, Mexico, Japan, Australia, New-Zealand and Saudi-Arabia 4 changed end 1994 i.e. application of Third Life Insurance Directive in Danish Regulation
a70ae3be-7604-4386-83df-9c7205a0af26.doc Worls Pension Association, april 2002

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INVESTMENT RESTRICTIONS APPLICABLE TO PENSION FUNDS
Minimum % Country
Finland: Main restrictions of the Decree on the coverage of the pension liabilities of pension foundations issued on 23/12/1998

Maximum % Same issuer Total
50 50 25 40 70 25 15 No limit

Characteristics Total
quoted shares and bonds of companies domiciled in an EEA state units in investment funds that invest their assets in shares and bonds Bonds traded on a regulated market in an EEA state or issued by credit institutions (excl. deposit banks) or corporations licensed or domiciled in an EEA state units in an individual investment fund Real property and shares in real estate corporations in an EEA state real property and shares and holdings in real estate corporations, mortgages on real estate in EEA property one single investment target Units in an interest funds Currency matching Fall under the restrictions of Life insurance Directive Since 1994 the legal restrictions on investments have been abolished. However there is a set of internal rules, which apply to all of the member pension schemes. EU equities (including Germany) non EU equities stock of any company EU bonds non-EU bonds real estate (EU-wide) deposits

80

France: Insured schemes France: AGIRC & ARRCO Germany: Pensionskasse

30 6 10 6 5 25 10

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Worls Pension Association, april 2002

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INVESTMENT RESTRICTIONS APPLICABLE TO PENSION FUNDS

Minimum % Country
Greece Iceland

Maximum % Same issuer Total
50 50 10 10 15 25

Characteristics Total
NO INFORMATION available – will be updated foreign investments Foreign and domestic equities unlisted securities one single investment target Stock of a single firm Shares in any mutual or equity fund NO RESTRICTIONS ( see annex 2) NO INFORMATION – will be updated NO RESTRICTIONS (see annex 3) self-invested in the employing company – (no self-investment possible for industry pension funds) self-invested in the employing company (additional max.) total assets of the pension fund that can be invested in the sponsoring company The restrictions relating to self-investment can be waived, if the Insurance Chamber agrees, in situations where the employer has taken on new financial obligations due to an increase in pension benefits relating to years of past service. Equities Shares in a single company property

Ireland Italy Luxembourg The Netherlands

5 5 10

Norway Results still need updating

35 15 60

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Worls Pension Association, april 2002

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INVESTMENT RESTRICTIONS APPLICABLE TO PENSION FUNDS

Minimum % Country
Portugal in force since January 31, 1998

Characteristics
equity or loans issued by the same company equity or loans (including bank deposits) issued by the same group of companies property investments being used by the Fund Sponsor or an associate Any one property investment (meaning limit to a group of real estate investment, that by its location or functional dependency, can be considered as only one investment) 6 Stocks denominated in foreign currencies Direct equity holdings Unquoted direct equity holdings Land and buildings Land, property, property investment funds, mortgage loans, securities bonds issued by companies whose incomes are derived from property Bank term deposits and deposit certificates Bonds and commercial paper, other than those issued by the Portuguese State Open or close ended unitised/pooled equity, bonds and mixed funds (excluding property related) quoted in or outside Portugal Mortgage loans Sum of equities, bonds, properties, credits with mortgages, banking deposits listed or negotiated in organised markets Banking deposits Securities issued or guaranteed by the same entity Sum of securities issued or guaranteed by the same entity and credits granted or guaranteed by it. Sum of securities issued or guaranteed by entities belonging to the same group and credits granted or guaranteed by it. Cash No restrictions in equities or foreign investments

Total

Maximum % Same Total issuer
5 20 25 10
5

20 50 3 45 50 30 60 30 25 90 15 5 10 10 1

Spain

5 6

in some circumstances the limit may be increased to 10% EURO denominated assets, whether or not quoted on the Lisbon Stock Exchange or issued by foreign companies are NOT treated as foreign assets.
Worls Pension Association, april 2002

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INVESTMENT RESTRICTIONS APPLICABLE TO PENSION FUNDS

Minimum % Country
Sweden “bigger friendly societies” (“understödsfören7 ingar”) Sweden: “small friendly societies” (“understödsföreningar”) Switzerland U.K.

Characteristics
Equities Property Fixed income Currency matching Equties Property Fixed income Currency matching NO RESTRICTIONS (see annex 4) Self-investment Any one unit trust Unit trusts run by any one manager

Total

Maximum % Same Total issuer
25 25 100

80 0 100 100 100 5 10 25

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Same restrictions as for life assurance companies (Third life directive)
Worls Pension Association, april 2002

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INVESTMENT RESTRICTIONS APPLICABLE TO PENSION FUNDS

Annex 1
A. The so-called “high risk assets” are the following: 1) 2) UCITS (EU Directive 85/611). Other bonds and loans listed of public stock exchanges of Zone A (= OECD); (other than those considered “low-risk” and also belonging to Zone A such as government bonds; listed bonds issued by international organisations: mortgage-credit bonds as well as other bonds issued in Denmark or similar bonds issued in Zone A; land and buildings and/or loans secured by registered mortgages thereon; loans secured on the company’s own life insurance policies up to their surrender value). Shares and other certificates of capital participations listed on the public stock exchange in Zone A. Land and buildings not considered “low-risk” (see 2).

3) 4)

B. Previously a minimum of 60% had to be invested in “low-risk assets”; this has now been replaced by a maximum of 50% in so-called “high-risk assets” as defined in the table.

Annex 2
Theoretically, pension funds invested through an insurance company are subject to the Third Life Directive. However, these restrictions apply to the total business of the Insurance Companies and they are able to organise their affairs in such a way that in practice the restrictions do not apply to the pension fund portfolios.

Annex 3
In the current Luxembourg pensions law, there are no quantitative investment restrictions, but a “Prudent Person” approach is requested. The investment policy has to be accepted and is supervised by the CSF (Commission de Surveillance du Secteur Financier).

Annex 4
Since April 2000 the new Swiss pensions law does no longer incorporate any quantitative investment restrictions, but a “Prudent Person” approach is requested.

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Worls Pension Association, april 2002

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INVESTMENT RESTRICTIONS APPLICABLE TO PENSION FUNDS

SOUTH & CENTRAL AMERICA

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Worls Pension Association, april 2002

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INVESTMENT RESTRICTIONS APPLICABLE TO PENSION FUNDS

Minimum % Country
Argentina

Characteristics
Equities Public bonds Corporate bonds Real estate certificates Mutual funds Options and futures Fixed term deposits in financial institutions 8 Securities issued by foreign entities Public bonds Term deposits and securites issued or guaranteed by financial institutions 9 Bonds issued by public or private companies real estate certificates Equities Mutual funds 10 Securities issued by foreign entities Public bonds and other securities issued by public entities Term deposits and securites issued or guaranteed by financial 11 institutions Real estate certificates Corporate Bonds Mutual funds 12 International investments 13 Equity

Total

Maximum % same total issuer
70 80 40 40 30 10 30 20 50 50 45 50 40 25 16 80 42 40 30 5 10 30

Chile

5

Colombia

8 9

10% in securities issued by foreign states or international public bodies and 10% in securities issued by foreign companies. Of which, up to 10% may be invested in convertible bonds issued by public or private companies 10 The maximum permitted in international equity is 10%, while investments in international bonds may reach 16%. 11 10% in securities issued by the Investments Guaranteed Fund + 30% in fixed income securities issued or guaranteed by financial institutions + 2% in oversight deposits. 12 Includes bonds issued or guarantedd by foreign goverments, central banks and comercial or investment banks, mutual funds that invest in bonds and index funds. 13 Equity with a high or medium liquidity. The maximum permitted in not very liquid or illiquid equity is 5%.
a70ae3be-7604-4386-83df-9c7205a0af26.doc Worls Pension Association, april 2002

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INVESTMENT RESTRICTIONS APPLICABLE TO PENSION FUNDS

Minimum % Country
El Salvador

Maximum % Same issuer Total
100 40 20 20 40 40 10 40 55 40 40 35 12 7,5 5 65 30 25 30

Characteristics Total
Securities issued by public entitites Corporate bonds issued by domestic companies units of domestic investment funds Equity and convertible bonds issued by domestic companies Securities backed by real property guarante Certificates of deposits and securities issued by domestic financial institutions Securities issued by public entities Deposits and bonds issued or guaranteed by financial institutions. Mortage certificates or securities Corporate bonds Equity Investment funds International investments Operations of hedging of financial risks. National Government Bonds Term deposits Securities issued by public and private companies Real Estate certificates

Perú

15 12

Uruguay

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Worls Pension Association, april 2002

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INVESTMENT RESTRICTIONS APPLICABLE TO PENSION FUNDS

OTHERS OECD COUNTRIES

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Worls Pension Association, april 2002

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INVESTMENT RESTRICTIONS APPLICABLE TO PENSION FUNDS

Minimum % Country
Canada

Characteristics
Foreign investments Securities issued by a non Government issuer Voting securities PRUDENT MAN RULE PRUDENT MAN RULE SPECIFIC INVESTMENT RULES for: Employee Stock Ownership Plan (ESOP): - Stock of the sponsoring company 16 DC plan (including 401K): DB plan: - Stock of the sponsoring company - Real Estate Stock of the sponsoring company No restrictions regarding the investment in different asset classes

Total

Maximum % Same Total issuer
30 10 30 30
15 14

USA

50

17

10 10 5

Australia

18

14 15

30% of book value of portfolio. 30% of book value of portfolio. 16 These plans may allow the participants to invest directly their account balances. In this case, the plan must provide at least three investment options that represents different levels of risk. 17 Except, for participants who are age 50 or older and for those who have more than 15 years of service. 18 It does not exist rules which direct or restrict investment into asset classes.
a70ae3be-7604-4386-83df-9c7205a0af26.doc Worls Pension Association, april 2002


								
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