The limitation of the offshore funds' derivatives position under Article 23 of the Regulations Governing the Offshore Funds （"Regulations"） has been a concern of the offshore funds companies and the master agents for a long time.  We would like to inform you that recently the Financial Supervisory Commission ("FSC") amended Article 23 of the Regulations and issued a ruling to ease such limitation.  

Under the original contents of Article 23 of the Regulations, for an offshore fund to be offered and sold to the public in Taiwan, the total value of the fund's open long positions in derivatives shall not exceed fifteen percent (15%) of the fund's net asset value and the total value of the fund's open short positions in derivatives shall not exceed the total market value of the corresponding securities held by the fund.  

On February 5, 2008 the FSC amended Article 23 of the Regulations to eliminate the specification of such limitation in the Regulations but have it subject to the FSC's ruling. Furthermore, on February 12, 2008, the FSC issued a ruling to change the abovementioned 15% derivative limitation to 40%.  According to such FSC ruling, the total value of the offshore fund's open long positions in derivatives for the purpose of increasing the investment efficiency shall not exceed forty percent (40%) of the fund's net asset value, and the total value of the offshore fund's open short positions in derivatives for hedging purpose shall not exceed the total market value of the corresponding securities held by the offshore fund.  

We hope the above will be helpful.  Should you have any questions, please feel free to contact us.  

Best Regards,  

Lee and Li, Attorneys-at-Law
7F , 201 Tun Hua N. Road
Taipei, Taiwan 10508, R. O. C.
Tel: 886-2-2715-3300
Fax: 886-2-2514-9841