Australia Enacts Legislation Eliminating Tax Barrier

Washington, DC, August 2, 1999 - The Australian Parliament has enacted the "Taxation Laws Amendment Act (No. 2) 1999" which, among other things, removes a significant tax disincentive to Australian investment in U.S. funds that are treated for U.S. tax purposes as regulated investment companies (RICs). Under the act, an exemption from the Australian "foreign investment fund" or "FIF" rules is provided for interests held by Australian investors in RICs (and certain other U.S. entities), effective for taxable years ending on or after July 2, 1998. Prior to this change, an Australian investor in a RIC generally would be taxed each year on the RIC's realized income, as well as any unrealized gains in the securities held by the RIC, thereby accelerating the recognition of income to the investor. More specifically, the act provides an exemption from the FIF rules for interests held by Australian investors in (1) a company or trust that is treated as a RIC or a real estate investment trust for U.S. federal tax purposes or (2) a corporation subject to U.S. tax on its worldwide income.