Member Article

NewLegislation Enables the Public Offering of Foreign Fund Units in Israel for theFirst Time

On February 10, 2016, the IsraeliParliamentary Finance Committee approved regulations ("Regulations")which will enable the public offering of foreign mutual fund units inIsrael. The Regulations will take effectwithin six months from the date of publication.

Prior to the enactment of theRegulations, the Israeli Joint Investment Trust Law permitted the offering offoreign funds in Israel. However, theconditions set out in the Joint Investment Trust Law, particularly therequirement that the Israeli Securities Authority ("ISA") beconvinced about the adequacy of the foreign regulatory regime applicable to theforeign fund, meant that in practice, units of foreign funds have not been, upuntil now, publically offered in Israel.

The Regulations prescribe conditionswhich a foreign fund must meet in order to obtain approval from the ISA topublically offer its units in Israel, while enjoying an exemption from mostprovisions of the Israeli mutual funds regulatory regime. The main criteria set out in the Regulationsare:

• Minimum value of assets under management. The total value ofassets managed by the foreign fund manager is at least $20 billion.

• Volume and minimal trading period of the managed funds. The foreign fundmanager manages at least five foreign funds whose units have been publicallytraded for at least five years, and the total value of assets held in each ofthese funds was not less than $500 million for the two years preceding theapplication (for a permit to offer units in Israel).

• Minimum fund value, period of trading, and place of theoffer.The value of the fund's assets is at least $50 million, and its unitshave been offered for sale in Europe or the United States for at least sixmonths.

• Appointment of a representative in Israel. The foreign fundmanager has appointed a representative in Israel to liaise with the ISA andwith the public unitholders in Israel.The representative can be a local fund manager, a corporation with anIsraeli investment advisor or portfolio manager license, or a foreign fundmanager or its affiliate - if it has a branch in Israel.

• Collateral. The foreign fund manager is required toprovide a bank guarantee from an Israeli bank in the amount of at least NIS 1million, and deposit a cash or securities deposit in an Israeli bank, in theamount or value as prescribed by the Regulations (between NIS 250,000 - 12million, depending on the value of the units held through Israeli distributors).

• If the foreign fund is traded in Israel it must be listed abroad. If the fund islisted on the Tel Aviv Stock Exchange, the units must also be listed on aforeign exchange.

• Ongoing publication of unit prices. Foreign fund pricesare published regularly on the internet and are available to the public withoutcharge at any time.

• Equal rights for local unitholders. The rights of aforeign fund unitholder which are purchased in Israel, are identical to therights of every other unitholder.

• The foreign fund does not specialize in investments inIsrael.

After receiving a permit from the ISAfor the public offering of units in Israel, the offering will be made using theforeign fund's prospectus which was published abroad (in English). The prospectus must attach an appendixcontaining a Hebrew summary which includes information about its compliancewith the terms set forth in the Regulations for the public offer of the fund inIsrael, a description of the fund's investment policies, details about fees,information about its performance and information regarding how to purchase andredeem units.

FBC has been advising the IsraeliAssociation of Exchange Traded Funds for several years in connection with thelegislative process relating to the regulatory reform allowing the publicoffering of foreign funds in Israel.

We would be delighted to provide youwith further advice in this area.

Sincerely,

Capital Markets Department

Fischer Behar Chen Well Orion& Co.