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Pursuant to Paragraph I of Article 23 of the Regulations Governing the Offshore Funds, offshore funds meeting the conditions set forth in said Paragraph may be offered and sold in Taiwan subject to approval by or effective registration with the Financial Supervisory Commission (FSC). Among those conditions, Sub-paragraphs IV and V provide that: (i) the percentage of the investment in any single offshore fund that is contributed by Taiwan investors may not exceed the limit set by the FSC; and (ii) the investment portfolio of the offshore fund may not make Taiwan securities markets its primary investment area and the percentage of investment in Taiwan's securities shall not exceed the limit set by the FSC.
In respect to such percentage limit, the FSC issued a ruling in 2010. Such ruling provides that (i) the percentage of the investment in any single offshore fund that is contributed by Taiwan investors may not exceed 70% of the net asset value of such offshore fund, and (ii) the investment portfolio of the offshore fund in the Taiwan securities shall not exceed70% of the net asset value of such offshore fund.
Now, considering that when the percentage of the investment in any single offshore fund contributed by Taiwan investors reaches 50%, it shows that such offshore fund treats Taiwan as its major market, and in order to carry out differentiated management and encourage offshore fund institutions to cultivate deep-rooted local relationships to grow their locally based asset management business in Taiwan, the FSC plans to lower the percentage of the investment in any single offshore fund contributed by Taiwan investors to 50% from 70%. However, such change does not apply to offshore funds the registration jurisdiction of which is recognized and published by Taiwan financial regulator, or offshore fund institutions which have obtained the FSC's special-case recognition for their proven track records in terms of contributions to enhance and develop the asset management industry in Taiwan. For such offshore funds, the percentage remains to be 70%. The FSC may further lower the percentage to 40% if warranted for securities market regulation.
Further, when the percentage of the investment in a single country by an offshore fund reaches 50%, such country shall be deemed as the primary investment area of such offshore fund. Hence, the FSC also lowered the investment portfolio of offshore funds in Taiwan securities to 50% from 70%.
