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Securities Investment Trust & Consulting Association of R.O.C.
2016 Taiwan Country Report
1
Economic and financial background
Table 1: Key Economic Indicators
2015
Total Population
June-2016
23,462,914
23,502,588
523,009
(Estimated) 253,376
Average GDP per capita (USD)
22,294
(Estimated) 10,783
Rate of real GDP growth (%)
0.65%
(Estimated) 1.22%*
CPI rate (%)
0.14%
0.90%
Unemployment rate (%)
3.78%
3.89%
Stock market capitalization (USD Billion)
767.90
786.94
Bond market capitalization (USD Billion)
277.64
271.59
31.91
32.44
GDP (USD Million)
Foreign exchange rate (USD:TWD)
(Data Source: National Statistics, R.O.C. (Taiwan)
* For the whole year of 2016, estimated by Directorate-General of Budget, Accounting and Statistics,
Executive Yuan, R.O.C.
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Data on funds under management and portfolios
Please find the second column of the below table.
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Key trends in flows and assets under management
3.1
Total AUM
2015.12.31
Table 2: Statistics of Assets under Management and Net Flow (USD Million)
Mutual Fund Assets
Net Flows
Types of Fund
December 2015
Market Share
Jan. 2015 ~ Dec. 2015
Equity Fund
15,507
23.10%
(880)
Balance Fund
2,784
4.15%
713
Bond Fund
6,475
9.64%
(1,538)
Money Market Fund
30,746
45.80%
7,081
Fund of Funds
3,915
5.83%
(272)
458
0.68%
47
587
0.87%
12
6,157
9.17%
1,453
Principal Guaranteed
Fund
REITs Fund
ETF
1
506
0.75%
155
67,134
100.00%
6,771
Index Fund
Total
2016.6.30
Table 3: Statistics of Assets under Management and Net Flow (USD Million)
Mutual Fund Assets
Net Flows
Types of Fund
Jun. 2016
Market Share
Jan. 2016 ~ Jun. 2016
Equity Fund
15,478
22.48%
(49)
Balance Fund
2,776
4.03%
(122)
Bond Fund
6,548
9.51%
(189)
Money Market Fund
29,635
43.05%
(1,693)
4,211
6.12%
204
491
0.71%
(12)
858
1.25%
241
8,384
12.18%
2,244
464
0.67%
(32)
68,844
100.00%
591
Fund of Funds
Principal Guaranteed
Fund
REITs Fund
Exchange Traded Fund
Index Fund
Total
(Data Source: SITCA)
US$: local currency exchange rate on June 30, 2016: 32.28
US$: local currency exchange rate on December 31, 2015: 32.83
3.2
Shares of Mutual Fund Market by Category
2015.12.31
2
(Data Source: SITCA)
2016.6.30
(Data Source: SITCA)
3.3
Trends Concerning International Investment Funds
(a)
Key investment area of onshore international investment funds:
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(Data Source: SITCA)
(b)
Trends in overseas investment of onshore funds:
(Data Source: SITCA)
(c)
From December 2014 to June 2016, the AUM of domestic funds investing overseas
decreased slightly from USD24.89 billion to USD24.22 billion.
During the same period, the
AUM of offshore decreased from USD104.94 billion to USD94.13 billion, whereas the AUM of
onshore funds increased from USD62.39 billion to USD68.83 billion.
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Product development
4.1
The total market value reached NTD2.22 trillion as of 30 June 2016, up 13% from NTD1.97 trillion
by the end of 2014, boosted primarily by substantial net cash flow into ETFs and domestic money
market funds.
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4.2
Investors have been choosing passively managed products (including ETFs and index funds) for a
while. This trend continued over the period of 2015 to June 2016. The total market value reached
NTD286 billion as of 30 June 2016, up 65% from NTD173 billion by the end of 2014. Among them,
the leveraged ETFs by far top the list and gained a total of around NTD110 billion in assets during
this period.
4.3
Due to the widened movement of the market and banks’ refusals to large deposits, large capital
inflow from Institutional Investors into domestic money market funds gained a total of NTD198
billion in assets during this period.
4.4
High-yield bond funds were one of the worst investments in 2015. The total market value saw a
decrease of 24%, from NTD194 billion by the end of 2014 to NTD148 billion as of 30 June 2016.
However, investors began returning to high-yield bond funds during the second quarter in 2016.
AUM hit the low point in March 2016, but enjoyed a moderate return from that point forward
through the end of the second quarter.
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Regulatory and self-regulatory developments (including tax)
5.1
Amendments of Some Articles of Standards Governing the Establishment of Securities
Investment Consulting Enterprises and Regulations Governing Securities Investment
Consulting Enterprises
In order to facilitate healthy development of securities investment consulting enterprises and
supervision work, the FSC introduced amendments of Standards Governing the Establishment of
Securities Investment Consulting Enterprises and Regulations Governing Securities Investment
Consulting Enterprises on May 19, 2016. The key points of the amendments include: (1) If a
securities broker operating only equity crowdfunding applies for concurrent operation of securities
investment consulting business, the scope of such concurrent consulting business will be confined
to the stock of companies that conduct equity crowdfunding on the broker’s crowdfunding platform.
(2) The amendment also adds that a securities investment consultation enterprise that is of a
certain scale, and that possesses equipment for real-time access to foreign securities investment
research information, and sufficient and competent personnel, is qualified to apply operating
foreign securities investment consulting business.
5.2
Amendments of Directions Regarding Securities Investment Trust Enterprise Exercising
the Voting Rights Associated with Shares It Holds in a Securities Investment Trust Fund
Electronic voting has gradually become a common practice in shareholders' meetings of public
companies. In order to increase participation of investment trust enterprises in corporate
governance, the FSC issued an order on May 18, 2016 to amend directions regarding a securities
investment trust enterprise exercising the voting rights associated with shares it holds in a
securities investment trust fund based on authorization in Article 23 of Regulations Governing
Securities Investment Trust Enterprises. According to the new direction, funds have to meet two
conditions in order to waive the requirement of sending designated person to attend the
shareholders’ meeting of a public company using electronic voting. The first and also an existing
condition is that the number of shares held by an individual fund has to be less than 300,000 and
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the total number of shares held by all funds collectively has to be less than 1 million. Second and
also a new condition is that the number of shares held by an individual fund has to be less than
1/10000 of shares issued by the invested company and the total number of shares held by all
funds collectively has to be less than 3/10000.
5.3
Deregulation allowing centralized securities depository enterprises to pay and collect
money for domestic funds
On April 26, 2016, the FSC introduced a deregulation measure that allows securities brokers to
subscribe domestic funds for investors in their own name and the payments can be made and
collected with the accounts designated by centralized securities depository enterprises for such
transactions. At the same time, centralized securities depository enterprises are allowed to pay
and collect money for domestic funds, with the aim of promoting consistency of operating
procedures between overseas and domestic funds and making payment and collection simpler
and more convenient for investors and sub-distributors.
5.4
Deregulation measure regarding the reporting requirements for business plan about public
offering and follow-on offering of securities investment trust funds submitted by securities
investment trust enterprises to their board of directors and lifting restrictions for
applications submitted by new securities investment trust enterprise for the public offering
of its first fund product
In order to help securities investment trust enterprises to promptly satisfy market needs by offering
or follow-on offering of securities investment trust funds and in order to lift restrictions for
applications submitted by a new securities investment trust enterprises for public offering of its first
fund product, the FSC issued the amendment to Regulations Governing the Public Offering of
Securities Investment Trust Funds by Securities Investment Trust Enterprises on January 4 2016,
the key points including changing operating requirements fort fund raising plans submitted by
securities investment trust enterprises to their board of directors, waiving of the requirement of
approval from board of directors of securities investment trust enterprises for follow-up offering of
funds, lowering the minimum amount for establishment of the first open-ended fund by a new
securities investment trust enterprise, shortening the period in which the beneficiary can redeem
the fund and extending the deadline for offering commencement after approval by the FSC.
5.5
Broadening the scope of re-investments by Securities investment Trust Enterprises and
Securities Investment Consulting Enterprises
On December 9, 2015, the FSC broadened the scope of reinvestments made by Securities
Investment Trust Enterprises (SITEs) and Securities Investment Consulting Enterprises (SICEs).
Such liberalization measures aim to help SITEs and SICEs to (1) work with financial technology
industry for business development and operating efficiency enhancement and (2) exploit available
sales human resources and research experience and professional analysis ability regarding
securities and financial market to expand the business scope. The FSC allows SITEs to invest in
financial technology companies, Fund Online Sales Platform established by Taiwan Depository
and Clearing Corporation and the Taipei Exchange, local insurance agents and insurance brokers,
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local venture capital investment enterprises and venture capital investment consulting companies
and foreign asset management institutions. SICEs are also allowed to invest in local insurance
brokers, insurance agents and financial technology companies and SICEs acting as master
agents of offshore funds are allowed to invest in the Fund Online Sales Platform.
The SITEs and SICEs shall obtain the FSC’s approval for the abovementioned reinvestments and
the total about of such reinvestments shall not exceed 40% of net worth of the SITE or SICE. In
addition, the SITEs and SICEs shall establish a management and risk assessment mechanism for
investee enterprises and introduce related preventive measures in the internal control system to
avoid conflict of interest.
5.6
Regulations Governing Overseas Bonds and High Yield Bonds Relaxed for Securities
Investment Trust Funds
In order to boost competitiveness of domestic investment trust business and flexibility of
investment trust operations, on November 10, 2015. FSC allowing the long-term debt rating of the
issuer to apply to priority bonds without credit rating; allowing long-term bonds with a credit rating
of BBB to be classed as investment grade bonds; removing limitations for investments in Rule
144A bonds; allowing real estate securitized funds to invest in high yield bonds.
5.7
Partial amendments of Regulations Governing Offshore Funds
In order to facilitate balanced development of onshore and offshore funds business and better
protect interests of domestic investors regarding offshore funds, the FSC amended the above
Regulations on October 13, 2015. The amendments are highlighted as follows:
A.
To strengthen supervision over offshore funds and increase the contribution of offshore fund
institutions to domestic asset management business, offshore institutional fund managers or
their group affiliates are allowed to offer and sell offshore funds and are granted one-year
“grace period” only when such entities have made specific contribution to domestic asset
management business and such contribution has met specific criteria set by the FSC.
B.
To increase flexibility in supervision, the FSC may set the total amount of domestic offering
and sale by offshore funds depending on market conditions.
C.
The monthly reports of offshore funds now may be submitted in a two-stage manner; monthly
report information shall be submitted by the tenth business day of the following month, while
information regarding investment ratios may be provided by the end of the following month.
D.
To protect interests of domestic investors and meet business practices, some amendments
have been made. Including modification of the procedure and type of events a master agent
shall publicly announce, deletion of the paragraph that offshore funds meeting specific
criteria may apply to the Regulations Governing Public Offering of Securities Investment
Trust Funds by Securities Investment Trust Enterprises, revision of conditions that the FSC
may suspend the offering and sale of offshore funds or void or revoke its approval or effective
registration, and amendment of the type of events that a master agent who has filed the
application to the FSC for approval of the offering and sale of offshore funds shall report
before the approval is granted.
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5.8
Eased regulations on holding of concurrent positions by associated persons of SITEs and
SICEs working for overseas institutions relaxed
To assist foreign financial institutions to execute their Plan of Stronger Business Ties in Taiwan,
encourage foreign SITEs and SICEs to cultivate domestic asset management professionals, and
bring Taiwan into line with international norms, on September 16, 2015 the FSC eased regulations,
allowing associated persons of SITEs and SICEs to hold concurrent positions at foreign
institutions that have an investment relationship with the SITE or SICE, or that are members of the
same business conglomerate and under the control of the same parent company as the SITE or
SICE.
5.9
A FOFs managers now allowed to manage other FOFs
Quite a few fund of funds (FOFs) issued by SITEs are based on the mixed asset allocation
concept and there exists difficulty differentiating equity-based funds and credit-based funds, and,
at present, a balanced fund manager can manage other balanced funds simultaneously. With the
above considerations, the FSC relaxed previous restrictions on September 23, 2015, and now
allows a fund of funds managers to manage other FOFs at the same time.
5.10 FSC relaxed Directions for Offshore Banking Branches Conducting Trust Businesses
September 1st, 2015, the FSC relaxed Directions for Offshore Banking Branches Conducting
Trust Businesses. Regarding offshore Funds of the investment targets of the business, the FSC
eased the ratio of each target’s investment in Taiwan securities markets to its net asset value shall
not exceed from 30% to 50%. However, the investment in foreign currency denominated
international bonds (including RMB denominated Formosa bond) may be excluded from the
calculation of investment in Taiwan securities markets.
5.11 SFB Launched the Advanced Excellence Program for SITEs guiding securities investment
trust enterprises (SITEs) to upgrade their management skills and enter into international
market
The FSC has launched incentive measures for SITEs to raise the level of asset management
talent and skills, increase asset management scale and develop in the direction of
internationalization, announcing the Advanced Excellence Program for SITEs on June 1st 2015.
With regards to SITEs that meet the basic necessary requirements, they have committed no major
regulations breaches, have sound finances and no major shortcomings with respect to internal
controls, if such a SITE performs well with respect to two of the three aspects on investment
research capability or international presence and talent training, the FSC will provide incentive
measures for related business. The main measures include: (1) Relaxing the limit on the number
of new securities investment trust funds per application or shortening the effective registration
period; (2) Simplifying the application process for special types of securities investment trust fund;
(3) Easing restriction on some investment ratios; (4) Simplifying the operating procedure
regulations for investment transactions.
SITEs can now apply for the aforementioned program.
This program is intended to encourage and is not restrictive or mandatory; therefore, SITEs can
still, according to the current regulations, apply for or filing for public/private funds and engage in
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discretionary and other asset management business.
5.12 Restrictions eased on the acquisition and post-acquisition selling of stocks for securities
investment trust and consulting professionals
On May 25th, 2015, the FSC loosened the restrictions on employee and their spouses involved in
securities investment trust companies or discretionary investment business in securities
investment trust and investment consulting companies, allowing them to acquire and sell the
stocks acquired from new share issuance, participation in employee benefit savings trust or
employee stock ownership trust within their managed mutual funds or discretionary investment
assets. These persons should then report their stock transaction to their company in compliance
with their companies’ internal control regulations.
6
Major development in corporate government
The Organization for Economic Cooperation and Development (OECD) published revised Principles of
Corporate Governance in September 2015, to conform to international development trends and enhance
corporate governance of the Taiwan Stock Exchange Corporation (TWSE)/GreTai Securities Market
(GTSM) Listed Companies, the Financial Supervisory Commission (FSC) amended relevant corporate
best practice principles for TWSE/GTSM Listed Companies, requiring those companies to put more
emphasis on communicating with institutional investors, protecting the shareholders’ right and
strengthening the powers of the board of directors. In addition, FSC amended Corporate Social
Responsibility Best Practice Principles for TWSE/GTSM Listed Companies in order to give full
consideration to the interests of stakeholders (e.g. customers or consumers).
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Fund governance
7.1
Taiwan Stock Exchange Corporation (TWSE) issued Stewardship Principle on June 30th, 2016.
Institutional investors (SITEs and SICEs with Discretionary investment business) can voluntarily
sign this Stewardship Principle. In compliance with the Principle, Signatories are encouraged to
pay attention on operating condition of investment object, attend the shareholders meeting,
exercise the right to vote, and communicate with management of investment object in order to
strengthen corporate governance n of investment object.
7.2
Amendments of Directions Regarding Securities Investment Trust Enterprise Exercising
the Voting Rights Associated with Shares It Holds in a Securities Investment Trust Fund
Electronic voting has gradually become a common practice in shareholders' meetings of public
companies. In order to increase participation of investment trust enterprises in corporate
governance, the FSC issued an order on May 18, 2016 to amend directions regarding securities
investment trust enterprise exercising the voting rights associated with shares it holds in a
securities investment trust fund based on authorization in Article 23 of Regulations Governing
Securities Investment Trust Enterprises. According to the new direction, funds have to meet two
conditions in order to waive the requirement of sending designated person to attend the
shareholders’ meeting of a public company using electronic voting. The first and also an existing
condition is that the number of shares held by an individual fund has to be less than 300,000 and
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the total number of shares held by all funds collectively has to be less than 1 million. Second and
also a new condition is that the number of shares held by an individual fund has to be less than
1/10000 of shares issued by the invested company and the total number of shares held by all
funds collectively has to be less than 3/10000.
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Other major issues and developments
8.1
Securities Investment Trust Enterprises and Securities Investment Consulting Enterprises
On December 9, 2015, the FSC broadened the scope of reinvestments made by Securities
Investment Trust Enterprises (SITEs) and Securities Investment Consulting Enterprises (SICEs).
Such liberalization measures aim to help SITEs and SICEs to (1) work with financial technology
industry for business development and operating efficiency enhancement and (2) exploit available
sales human resources and research experience and professional analysis ability regarding
securities and financial market to expand the business scope. The FSC allows SITEs to invest in
financial technology companies, Fund Online Sales Platform established by Taiwan Depository
and Clearing Corporation and the Taipei Exchange, local insurance agents and insurance brokers,
local venture capital investment enterprises and venture capital investment consulting companies
and foreign asset management institutions. SICEs are also allowed to invest in local insurance
brokers, insurance agents and financial technology companies and SICEs acting as master
agents of offshore funds are allowed to invest in the Fund Online Sales Platform.
The SITEs and SICEs shall obtain the FSC’s approval for the abovementioned reinvestments and
the total about of such reinvestments shall not exceed 40% of net worth of the SITE or SICE.
In addition, the SITEs and SICEs shall establish a management and risk assessment mechanism
for investee enterprises and introduce related preventive measures in the internal control system
to avoid conflict of interest.
8.2
FSC requires Securities firm , Securities investment trust enterprise , and Futures
Commission Merchant to set aside a special reserve to pay for transformation of
employees affected by financial technology
To spur Securities firm , Securities investment trust enterprise , and Futures Commission Merchant
to attach importance to the interests of their employees in the digitization process, on
Aug 5,
2016 the FSC issued an order requiring that Securities firm , Securities investment trust enterprise ,
and Futures Commission Merchant set aside a special reserve of 0.5% to 1% of after-tax earnings
when allocating earnings for 2016 to 2018 to cover the cost of transformation of employees
affected by Fintech.
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