Member Article

Under the Rules Governing Offshore Funds of August 2005, private placement of offshore funds may only be offered to: a) banks, bills companies, securities companies, trust companies, insurance companies, financial holding companies or other legal entities or organisation approved by the Taiwan Financial Supervisory Commission (FSC); b) not more than 35 “private investors”. Private Investors are individuals having: (i) net assets exceeding NT$10 million or aggregate net assets of an individual and his/her spouse exceeding NT$15 million; or (ii) in the past two years, income in excess of NT$1.5 million per annum or the aggregate annual income with his/her spouse exceeds NT$2 million. The number of “private investors” who invested, the total amount invested and any changes in investors or investment amounts must be reported to the FSC. From 17 February 2006, the FSC has further expanded the investment scope of private funds domiciled in Taiwan which are set up by Taiwanese managers (Private Funds). According to an order made pursuant to the Regulations Governing Securities Investment Trust Funds, Private Funds may invest in offshore funds which have not been approved or registered with the FSC. However, the underlying offshore funds must comply with the following requirements: • they must not invest in gold or commodities; • they may only have very restrictive investments in Mainland China securities; • their manager must have been established for more than one year and must not have been punished by the relevant regulatory authority for the recent two years; and • they must have regular valuation of fund price. It must be stated in the offering documents of the Private Funds that the fund may invest in offshore funds (including hedge funds) which have not been approved or authorised by the FSC. Thus, there maybe increased appetite for offshore funds from Taiwanese managers.