I OVERVIEW OF RECENT ACTIVITY

The most important development that the asset management industry has seen in recent times is the entry of foreign asset managers to the Argentine market as a result of the governmental policies aimed at integrating the domestic capital market into the global markets. This entry is still rather timid, but may be fostered in the near future if certain regulations, especially those related to mutual funds for qualified investors, are finally put in place.

Foreign asset managers can enter into the Argentine market in different ways, even when some of them are almost theoretical. We will expand on these channels later, but the road map would be as follows:2

  1. Public offering of foreign mutual funds: foreign mutual funds can be registered for public offering in Argentina but the requirements are so stringent that their registration is unattractive. For instance, such funds will have to invest at least 75 per cent of the funds in assets issued or located in Argentina, Mercosur countries or Chile.
  2. Private placement: the asset manager, or any third party, may sell unregistered mutual funds directly to investors under a private placement in Argentina. Traditionally this has been the largest distribution channel for foreign mutual funds, but the lack of private placement safe harbours is a constraint.
  3. Local mutual funds: an alternative would be that local mutual funds invest in foreign mutual funds. There are several restrictions that make it unfeasible for domestic mutual funds to invest in foreign mutual funds. The proposed regulations of mutual funds for qualified investors would lift these restrictions and boost investment in foreign mutual funds.
  4. Marketing to investment advisers: finally, asset managers may contact local licensed investment advisers to market their products. These licensed investment advisers may then recommend those products to their clients.

Recently, many foreign asset managers have been marketing their products to local licensed financial advisers (including local broker dealers who can provide such advice) and have also started to put in place structures that would allow them to sell their funds to local mutual funds for qualified investors.

II GENERAL INTRODUCTION TO THE REGULATORY FRAMEWORK

The regulatory framework for the asset management industry is based mainly on Law 24,083 (as amended, the Mutual Fund Law), which regulates mutual funds. The Mutual Fund Law defines mutual funds and its main characteristics. It also regulates the main requirements and obligations that the managing companies and depositary companies must comply with. Law 26,831 (as amended, the Capital Markets Law) is also relevant since it regulates the licences for asset managers.

The Capital Markets Law, which regulates public offering of securities and capital markets, creates certain agents who are licensed to carry out regulated activities related to the capital markets. Among these agent licences, there is a licence for a 'collective investment products administration agent',3 which includes managing companies of mutual funds, and for a 'custody agent for collective investment products',4 which includes depositary companies of mutual funds. Therefore, while most obligations, duties and responsibilities of the managing companies and depositary companies arise from the Mutual Fund Law, there are certain obligations that arise from the Capital Markets Law as these companies are licensed agents under such law.

In addition, the Capital Markets Law is also relevant regarding the public offering of quotas and foreign funds in Argentina.

The Comisión Nacional de Valores (CNV), the Argentine Securities and Exchange Commission, is the regulatory agency of both the Mutual Fund Law and the Capital Markets Law and it is also the supervisory agency of mutual funds activity.

i Mutual fund definition and characteristics

The Mutual Fund Law defines mutual funds as a separate estate owned by several persons who are co-owners of the estate and whose rights are represented by quotas.5 Mutual funds are not companies and do not have legal personality but, in no scenario will the investors in the fund be liable in excess of the assets of the fund.

The management of the mutual funds is carried out by the managing company, which must be a corporation authorised by the CNV or a financial institution authorised by the Argentine Central Bank. Custody of the assets of the mutual fund must be held by a different company, called a depositary company, which must be a financial institution.6 The managing company must be completely independent from any other company, especially the depositary company with whom it cannot share its offices. Neither can the directors, managers nor attorney-in-fact of the managing company have a position on the board or supervisory board of the depositary company.

The managing company and the depositary company will be, individually and separately, liable for the damages caused to investors due to failure to perform their obligations under the applicable regulations, the terms and conditions of the mutual fund, and the prospectus of the offering; but in no scenario shall one of the parties be liable for the breach of the other party.7

Investment purpose of the mutual fund

Mutual funds can have a broad or narrow investment purpose. Mutual funds that have one or more specific purposes must be denominated in a manner in which such specific purpose can be identified and must invest in those assets the minimum amount set forth by the CNV. Accordingly, the CNV rules provide that mutual funds that have a specialised purpose or whose name includes a reference to a certain class of assets must invest at least 75 per cent of the assets of the fund in such class.8 Additionally, the CNV has issued specific regulations for mutual funds whose purpose is to finance SMEs9 and those whose purpose is to finance productive and infrastructure projects in regional economies.10

Restrictions on investment by mutual funds

Mutual funds cannot invest in:

  1. securities issued by the managing company or the depositary company or in other mutual funds;11
  2. securities issued by the controlling company of the managing company, or any of its affiliates, in excess of 2 per cent of the capital or liabilities of such controlling party;
  3. a single bond issued by the Argentine government; or
  4. a class of assets in excess of the limits established by the CVN. The CNV can create exemptions to these limitations and the limitations on securities issued by the depositary company do not apply to financial trusts in which the trustee is the depositary company.

Classes of quotas

Mutual funds may have different classes of quotas with different rights and they may also have fixed-income quotas, in which a fixed return is paid on the notional value, subject to the return of the assets of the fund. Fixed-income quotas may be denominated in units adjusted by inflation12 or in units adjusted by the construction index,13 provided that the amortisation is longer than two years.14 The possibility to issue quotas indexed by inflation or the construction index is an exemption to the general public policy rule that forbids the indexation of obligations and debts.

ii Classes of mutual funds: regulations of open-end and closed-end mutual funds

There are two types of mutual funds: open-end mutual funds and closed-end mutual funds.

Open-end mutual funds

Open-end funds are those in which the number of quotas can be increased continuously by new subscriptions or be reduced by redemptions.

Open-end mutual funds can be formed by the following assets:

  1. publicly offered securities and sovereign and sub-sovereign public bonds traded in markets authorised by the CNV;
  2. precious metals;
  3. domestic or foreign currency;
  4. derivatives;
  5. instruments issued by financial institutions authorised by the Argentine Central Bank, including bank deposits;
  6. asset portfolios that replicate stock or financial indexes; and
  7. any other type of asset authorised by the regulations of the CNV.

The securities in which the mutual fund invests must be authorised for public offering either in Argentina or abroad. Also, the CNV has detailed regulations on the appraisal of the assets of the fund and the eligible assets for the liquidity reserve.15

Open-end mutual funds must invest at least 75 per cent of the funds in assets issued and negotiated in Argentina. For the purposes of this minimum investment requirement, due to outstanding international agreements, securities that have been authorised to be issued in states that are member of the Mercosur and in Chile have the same treatment as securities issued in Argentina,16 and the Argentine certificates of deposit – certificates representing foreign securities, similar to the American depositary receipt – are not considered securities issued and negotiated in Argentina, unless the underlying asset has been issued in Argentina or in a Member State of Mercosur or Chile.

Closed-end mutual funds

Closed-end mutual funds are those whose quotas cannot be redeemed, other than in those exceptional cases set forth by the regulations, and must be publicly offered.

The closed-end mutual fund must have, at all times, at least five investors and none of them can have, directly or indirectly, a participation exceeding 51 per cent of the votes of the quota holders.17

Closed-end mutual funds can be formed by the following assets:

  1. those assets that can be part of an open-end mutual fund;
  2. real estate and movable assets;
  3. securities without public offering;
  4. credit rights of any nature; and
  5. any other type of asset authorised by the regulations of the CNV.

Regarding those assets in which only those mutual funds that are closed-end can invest, such assets must be located, originated or issued in Argentina.18 However, in those closed-end funds that invest at least 75 per cent of the funds in assets in which an open-end fund can invest, this restriction will not be applicable to the investment in those assets.19 This restriction on investment abroad will not apply to closed-end mutual funds that are aimed at financing projects of technological innovation developed by companies organised in Argentina which have the potential to expand themselves regionally or internationally based on their activity.20

The name of the closed-end funds must specify that they are closed-end and identify their investment purpose.21 The rules of the mutual fund must establish a schedule and a strategy for the investment of the funds, which must provide for the investment of least 75 per cent of the funds in specific assets.22 The CNV rules also set out specific regulations for closed-end funds that invest in credits23 or in real estate.24

The subscription agreement may provide that the payment of the quotas will be made periodically, unless the quotas are paid in kind, in which case they have to be paid in at issuance.25 If a closed-ended fund issues additional quotas, investors must have a pre-emptive right and the managing company must set the price of the new quotas based on the appraisal opinion of two independent appraisers.26 The closed-end mutual fund can take debt but such indebtedness cannot exceed the net worth of the mutual fund.27

The CNV, considering the structure and characteristics of the closed-end mutual funds, can determine that their quotas may only be publicly offered to qualified investors.28

Mutual funds for qualified investors

The Mutual Fund Law provides that the CNV can create a class of mutual funds in which only qualified investors can invest.29 The definition of qualified investors must follow international standards on this matter and shall consider the investor's net worth and annual income.

Mutual funds for qualified investors will not be subject to the requirements on minimum investment in Argentine assets and other investment restrictions provided by the Mutual Fund Law.

The CNV, through its General Resolution No. 765, in October 2018 called for comments from the general public regarding a proposed regulation on mutual funds for qualified investors. However, the regulations have not been issued yet. The main framework of the proposed regulations is described below.

Investment by qualified investors

Only qualified investors, as defined by the CNV, would be able to invest in mutual funds for qualified investors.30

Exemption to limits on investment in foreign assets

Mutual funds for qualified investors will not need to comply with the limit set by the Mutual Fund Law, by which open-end funds have to invest at least 75 per cent of their assets in Argentina. Nonetheless, investments by these funds abroad must be made in securities that have authorisation for public offering by the Securities and Exchange Commission in their jurisdiction, which must be a jurisdiction that (1) is considered as cooperative for tax purposes by Argentine authorities, and (2) is not considered as a non-cooperative or high-risk jurisdiction by the Financial Action Task Force.

Investment guidelines and limits

Mutual funds for qualified investors must also comply with the following investment guidelines and limits:

  1. they will not be allowed to invest in securities issued by the managing company or the depositary company;
  2. investments in securities issued by one or several issuers that belong to the same economic group cannot exceed 40 per cent of the fund's assets;
  3. investments in securities issued by the managing company's parent company, or its affiliates, cannot exceed 2 per cent of the parent company's capital or outstanding bonds;
  4. investment in assets that represent corporate capital of an issuer cannot represent more than 20 per cent of said issuer's corporate capital, and investment in its corporate bonds of said issuer's total liabilities; in both cases, according to the last published annual or trimestral financial statements;
  5. investments in public debt issued under the same issuing conditions (i.e., different series of a same asset where only the issuance date changes) issued by the national government, provincial government or municipal government may not exceed 40 per cent of the fund's net worth; and
  6. up to 100 per cent of the net worth of the mutual fund for qualified investors can be deposited in a financial institution outside Argentina that complies with certain conditions.
Investment in other mutual funds

Mutual funds for qualified investors are allowed to invest in quotas of other local or foreign open-end mutual funds, as long as investment, liquidity, diversification, debt and redemption policies are consistent with those for that mutual fund, and the following investment guidelines are followed:

  1. up to 40 per cent of the fund's assets can be invested in quotas issued by the same local open-end mutual fund;
  2. the mutual fund for qualified investors can invest in open-end mutual funds registered outside Argentina if they comply with certain requirements;
  3. if the mutual fund for qualified investors invests exclusively in foreign funds, this must be provided in the rules of the fund, together with its fees, commissions and expenses; and
  4. investment in closed-end mutual funds, either local or foreign, is limited to up to 25 per cent of the fund's net worth.

In all cases, the managing company must disclose to investors the fees, commissions and expenses related to the mutual funds in which the mutual fund for qualified investors invests.

Indebtedness

The rules of the fund for qualified investors have to provide the indebtedness limit, which cannot exceed the net worth of fund.

Other regulations

General regulations for open-end funds will be applicable.

iii Regulations for managing companies, depositary companies and distribution and placement agents

The Mutual Fund Law, the Capital Markets Law and the regulations of the CNV regulate the activities of managing companies, depositary companies and distribution and placement agents.

Managing companies

A managing company must:

  1. manage the fund in a professional manner as a good business person and prioritise the interest of the co-owners of the fund;
  2. represent the collective interest of the co-owners of the fun; and
  3. have the minimum net worth requirements set forth by the regulations.

Managing companies are authorised not only to manage mutual funds, but also other types of portfolios and to distribute and place quotas of mutual funds, whether managed by them or by other managing companies. In addition, they can render advisory services on capital market investments and place transaction orders.31

Managing companies of mutual funds must be registered with the CNV as a a 'collective investment products administration agent'.32 The managing company must have a net worth of at least 150,000 UVA, which must be increased by 20,000 UVA with each additional mutual fund that it manages. At least 50 per cent of such minimum net worth must be held in certain eligible assets listed by the CNV.33

Depositary companies

The depositary company must, inter alia:

  1. collect and make payments to the investor resulting from the subscription and redemption of the quotas of the mutual fund;
  2. supervise the compliance by the managing company of the procedures related to the acquisition and negotiation of the assets of the mutual fund;
  3. carry out the custody and deposit of the securities and the instruments related to the investments, the collection of accrued benefits and the payment and collection of the purchase prices related to the transactions of the mutual; and
  4. keep a register of the investors in the mutual fund.34

Depositary companies, which must be financial institutions, must be registered with the CNV as a 'custody agent for collective investment products'.35 The depository company can be registered with the CNV under other categories of agents that are compatible with its activity as a depositary company.36

Mutual fund placement agents

The managing company and the depositary company can directly place the quotas of the mutual fund. In addition, these parties may, at their own cost, enter into placement agreements with mutual fund distribution and placement agents registered with the CNV. The appointment of a mutual fund placement agent does not discharge any of the responsibilities and duties of the managing company and the depositary company.37

Mutual fund placement and distribution agents can be a financial institution or any other entity that meets the requirements of the CNV.

Any employee of the managing company, the depositary company or the mutual fund distribution and placement agent who is in contact with the public must pass an exam and be registered as a qualified adviser with the CNV.38

iv Public offering of offshore mutual funds in Argentina

A foreign mutual fund can be publicly offered in Argentina if it is registered with the CNV. The registration procedure requires that the mutual fund meets not only the general requirements for the registration of foreign issuers but also the specific requirements applicable to foreign mutual funds. As further described below, the current regulations are so stringent that it is not a practical possibility to register a foreign mutual fund and there has seldom been any security publicly offered by a foreign issuer in recent years.

Registration of a foreign entity as issuer

The Rules of the CNV provide that all foreign issuers have to fulfil certain requirements in order to be registered as a foreign issuer. For instance, the foreign issuer must not be affected by legal restrictions or prohibitions that restrain the performance of the corporate purpose and activities set forth in the by-laws or articles of incorporation in its jurisdiction of incorporation, must have a permanent representation or branch in Argentina, and must provide evidence that it has certain eligible assets outside Argentina.

The CNV regulations applicable to local issuers will apply to the foreign issuer.

Restriction on investment in foreign assets

The Rules of the CNV have limitations on the assets in which these foreign issuers may invest that put these entities in the same situation as local mutual funds regarding the ability to invest in non-Argentine assets. The main investment restriction is that the securities in the portfolio shall be publicly traded in Argentina or abroad, and that 75 per cent of the investments must be made in assets issued and traded in Argentina, in Chile or in a Mercosur country.

In addition, the foreign entity may not:

  1. hold more than 5 per cent of the voting rights of an entity;
  2. invest in securities issued by an entity of a similar nature (e.g., other mutual funds);
  3. purchase securities issued by its parent company representing more than 2 per cent of the capital or debt of such parent company, as resulting from its last financial statements (the shares in excess of such limit will have no voting rights);
  4. have in its portfolio securities that represent more than 10 per cent of the total liabilities of an issuing company;
  5. invest in a single Argentine government bond worth more than 30 per cent of its assets; and
  6. invest more than 20 per cent of the assets in securities issued by a single issuer or by issuers belonging to the same group.

Reporting obligations

Foreign issuers have to comply with all the information obligations applicable to Argentine issuers, and with certain specific reporting obligations for foreign mutual funds (e.g., the redemption value of the securities as of the redemption date, and details of the funds collected in Argentina).

Publicity

Foreign entities must inform the CNV of any publicity made by them within three business days of the date of publication. Also, the foreign issuer must describe its legal nature, in all the information, in a manner such that the public cannot confuse them with an Argentine mutual fund regulated by the Mutual Fund Law.

v Private placement

The public offering of securities is regulated by the Capital Markets Law. The Capital Markets Law defines public offering of securities as an invitation, made by an issuer or by individuals or companies engaged fully or partially in the purchase and sale of securities, to the general public, or certain sectors or groups, made through personal offers, newspaper advertisements, radio or television broadcasts, telephone, electronic means, films, billboards, signs, programmes, electronic means (including email and social networks), circulars, printed notices or by any other means, to enter into any transaction involving securities.39

The Capital Markets Law does not provide a 'private placement' definition or specific 'safe harbours' from securities registration requirements.40 The lack of an express definition does not mean that private placements do not exist but that exempted transactions are defined by default as any offer of securities that does not fall within the definition of public offering. Therefore, 'private placement' is any offering that does not qualify as a public offering. There are certain guidelines based on a reasonable interpretation of the regulations and precedents that can be followed by parties willing to carry out a private placement in Argentina.

Therefore, offshore mutual funds can also be offered in Argentina without being registered with the CNV to the extent such offer is carried out by means of a private placement.

III COMMON ASSET MANAGEMENT STRUCTURES

Open-end mutual funds continue to dominate the mutual fund structures, with the number of closed-end mutual funds still almost negligible. Regarding the type of investment of open-end mutual funds, those open-end funds dedicated to fixed income represent approximately 60 per cent of the funds, money market around 20 per cent and equity 10 per cent.41

IV MAIN SOURCES OF INVESTMENT

The current breakdown, as of May 2019, of investors in mutual funds is approximately 85 per cent legal entities and 15 per cent individuals. Individual investors have participations totalling approximately 120 billion Argentine pesos and legal entities around 660 billion Argentine pesos. The participation of individuals has decreased since May 2018 when it peaked, representing 25 per cent of the invested funds.

V KEY TRENDS

The arrival to the market of large foreign asset managers is the most relevant trend in the market. These foreign asset managers are starting to market their products to those local agents who have licences (mainly, broker dealer licences) that allow them to render investment advisory services to their clients, manage portfolios on a discretionary basis and place orders outside Argentina. These licensed investment advisers would then recommend these products to their clients or place orders on their behalf if they manage portfolios on a discretionary basis.

Also, these foreign asset managers are putting in place structures that will allow them to render advisory services, or sell products, to local managing companies once the regulation on mutual funds for qualified investors – which will have fewer restrictions on investing outside Argentina – becomes effective. Therefore, the issuance by the CNV of the final regulation on mutual funds for qualified investors may have a large impact on the market. In the meantime, certain management companies have launched open-end mutual funds that invest outside Argentina in Latin American countries, concentrating their investments in Chile and Brazil, which have the same treatment as Argentinian assets for the purpose of the minimum investment in local assets.

Finally, regarding the distribution of local mutual funds, certain managing companies are using electronic payment platforms and apps to offer to their users the possibility to subscribe money market funds with the cash they have available in those systems.

VI SECTORAL REGULATION

Sectoral regulations are not particukarly relevant to the Argentine market as regulated companies have limited importance in the market, mainly since there are very few pension funds. Insurance companies, the largest regulated sector that invests in capital markets, can invest part of their mandatory reserves in mutual funds.

VII TAX LAW

Investors who are non-Argentine residents are exempted from income tax on the income resulting from their redemption of quotas of open-end funds that have at least 75 per cent of their assets in shares issued by Argentine companies that are traded in markets authorised by the CNV. Also, capital gains and interest arising from debt quotas of open-end funds placed though a public offering are exempted from income tax. Non-Argentine residents will benefit from the exemption to the extent they are not a resident of a non-cooperative jurisdiction for tax purposes, and the funds were not delivered from any of those jurisdictions.42

In other cases, the income arising from the redemption of quotas of open-end mutual funds will be subject to a 5 per cent or a 15 per cent income tax rate depending on the currency in which the quotas are denominated. A rate of 5 per cent applies to quotas denominated in Argentine pesos (or mutual funds whose underlying assets are issued in Argentine pesos) and a rate of 15 per cent applies if the quotas were issued in a foreign currency (or the underlying assets are issued in a foreign currency).

VIII OUTLOOK

The issuance of the regulations on mutual funds for qualified investors will change the landscape of the mutual fund industry since it will allow local managing companies to partner with foreign asset managers to offer a more diverse portfolio of mutual funds with global assets.


Footnotes

1 Pablo Gayol is a partner at Marval, O'Farrell & Mairal. The author would like to thank Fernando Vaquero, partner at the firm, for his contribution on tax aspects.

2 In this chapter we exclude from our analysis foreign exchange-traded funds, which may have different regulations.

3 'Agente de Administración de Productos de Inversión Colectiva', Section 1 of the the Chapter I, Title V of the CNV Rules.

4 'Agente de Custodia de Productos de Inversión Colectiva', Section 1 of the the Chapter I, Title V of the CNV Rules.

5 Section 1 of the Mutual Fund Law.

6 Section 3 of the Mutual Fund Law.

7 Section 4 of the Mutual Fund Law.

8 Section 27 of the Chapter I, Title V of the CNV Rules.

9 Section 21 of the Chapter II, Title V of the CNV Rules.

10 Section 22 of the Chapter II, Title V of the CNV Rules.

11 Section 7 of the Mutual Funds Law.

12 i.e., Unidad de Valor Adquisitivo (units of acquisitive value, UVA).

13 i.e., Unidad de Vivienda (UVI).

14 Section 51 and 52 of the Chapter II, Title V of the CNV Rules.

15 Chapter II, Title V of the CNV Rules.

16 Section 11 of Chapter II, Title V of the CNV Rules.

17 Section 36 of the Chapter II, Title V of the CNV Rules.

18 Section 6 of the Mutual Fund Law; and Section 31 of the Chapter II, Title V of the CNV Rules.

19 Section 31 of the Chapter II, Title V of the CNV Rules.

20 Section 31 of the Chapter II, Title V of the CNV Rules.

21 Section 31 of the Chapter II, Title V of the CNV Rules.

22 Section 41 of the Chapter II, Title V of the CNV Rules.

23 Section 47 of the Chapter II, Title V of the CNV Rules.

24 Section 50 of the Chapter II, Title V of the CNV Rules.

25 Section 39 of the Chapter II, Title V of the CNV Rules.

26 Section 37 of the Chapter II, Title V of the CNV Rules.

27 Section 41 bis of the Chapter II, Title V of the CNV Rules.

28 Section 31 of the Chapter II, Title V of the CNV Rules.

29 Section 7 bis of the Mutual Fund Law.

30 According to the CNV's regulations, the following persons will be considered as 'qualified investors': (1) the Argentine government, the provinces and municipalities, autarchic agencies, state-owned companies and state enterprises; (2) international organisations and public law persons; (3) public trust funds; (3) the Argentine Social Security Administration (ANSES) and the Sustainability Guaranty Fund (FGS); (4) pension funds; (5) banks and public or private financial entities; (6) mutual investment funds; (7) financial trusts with public offering; (8) insurance companies; (9) mutual guarantee companies; (10) legal entities registered before the CNV as agents, when acting on their own behalf; (11) individuals who are registered as experts with the CNV; (12) individuals or legal entities, other than those listed in the preceding paragraphs, that at the time of making the investment have investments in securities or deposits in financial institutions for an amount equal to 350,000 UVA (a unit whose value is adjusted by inflation and represents approximately US$0.87, as at 31 July 2019); and (13) legal entities established abroad and individuals with real domicile abroad.

31 Section 2 of the the Chapter I, Title V of the CNV Rules.

32 'Agente de Administración de Productos de Inversión Colectiva', Section 1 of the the Chapter I, Title V of the CNV Rules.

33 Section 2 of the the Chapter I, Title V of the CNV Rules.

34 Section 14 of the Mutual Fund Law.

35 'Agente de Custodia de Productos de Inversión Colectiva', Section 1 of the the Chapter I, Title V of the CNV Rules.

36 Section 11 of the the Chapter I, Title V of the CNV Rules.

37 Section 23 of the the Chapter II, Title V of the CNV Rules.

38 Section 3, Chapter II, Title V of the CNV Rules.

39 Section 2 of the Capital Markets Law.

40 The Capital Markets Law authorises the CNV to regulate private placement exemptions (Section 82 of the Capital Markets Law). However, the CNV has not regulated private placements yet.

41 Statistics are for the year 2017, as published by the Chamber of Mutual Funds.

42 The list of non-cooperative jurisdictions shall be published by the executive branch of government. Decree No. 279/2018 provides that until the executive branch issues the list of non-cooperative jurisdictions, taxpayers should use the list of 'cooperative jurisdictions' published by the tax authorities.