Dear Friends,

Further to our alert sheet dated April 15 and September 22, 2015, the Financial Supervisory Commission ("FSC") issued a ruling dated October 13 to officially announce the amendment to the Regulation Governing Offshore Funds ("Amendment") (see Attachment 1 in Chinese).  The main difference against the version in April 2015 is the new qualifications for offshore fund management institutions to register funds in Taiwan (which has been updated in our September 22 email).  Please also refer to Item 3 below.

We recap the Amendment below:

1.The Amendment specifically requires a prior approval for any addition, suspension or revocation of share class from the Securities Investment Trust and Consulting Association ("SITCA") although such approval had been required by a SITCA letter.  The SITCA will then report the same to the FSC on a monthly basis.  In addition, the master agent is no longer required to file with the Central Bank of the R.O.C. ("CBC") by itself for any change of sales agents or securities firms.  The SITCA will report the same to the FSC and CBC on a monthly basis after the approval is given to the master agent by the SITCA. (Articles 12 and 29)

2.The master agent shall file the general monthly report for the applicable month by the tenth (10th) business day of the next month, while the investment percentage can be filed by the end of the next month.  (Article 13)

3.In addition to the US$2 billion AUM, two (2)-year track record and no sanction record, the offshore fund management institution or its business group must make concrete contributions required by the FSC to enhance the asset management business in Taiwan, subject to the FSC’s recognition, provided that the qualification can be exempted if the fund or fund management institution domicile falls under the recognition list of the FSC. (Article 24)

While the specific threshold of the concrete contributions will be further stipulated by the FSC, according to the previous press release issued by the FSC dated September 15, it will likely provide the alternatives listed in Attachment 2 for each institution to select, which include the scenarios, such as establishment of a securities investment trust enterprise ("SITE") in Taiwan with the assets under management (''AUM'') reaching NT$5 billion (around US$167 million), mandate of assets to Taiwanese DM operators with AUM reaching US$3.5 billion (around US$117 million), investment of the funds so managed into SITE funds.

4.The FSC may set the limitation of the AUM for each fund duly registered or to be registered.  The FSC may also set the limitation on the AUM on the basis of the fund management institution.  (Articles 26-1 and 28)

5.The FSC may suspend, revoke or cancel the registration if it does not accept the application for change of the fund under paragraph 6 of Article 12 but the change still be made, or the AUM sold in Taiwan breaches the limitation set by the FSC and such breach is substantial. (Article 31)

6.The Amendment will take effect upon announcement, except that it provides six-(6)-months grace period for the monthly report set in item 2 above (i.e. take effect on April 15, 2016) and one (1)-year grace period for the qualification set in item 3 above (i.e. take effect on October 15, 2016).  Where the offshore fund management institution or its business group has proposed a concrete plan to meet the qualification and approved by the FSC, the FSC might grant another grace period for implementation.  (Articles 24 and 59)

Echo Yeh / Mike Lu & Jeffery Liu / Judy Tai