SEC Division of Investment Management staff letter: R.O.C. Taiwan Fund

RESPONSE OF THE OFFICE OF CHIEF COUNSEL
DIVISION OF INVESTMENT MANAGEMENT
February 11,2000
Our Ref. No. 00-74
The RO.C. Taiwan Fund
File No. 811-4893
Your letter dated Fenruary 9, 2000 requests our assurance that we would not recommend enforcement action to the Commission under Section 15(a) ofthe Investment Company Act of 1940 (the "Investment Company Act") against International Investment Trust Company Limited (the "Adviser"), the investment adviser to The RO.C. Taiwan Fund (the "Trust"), ifthe Adviser acts as investment adviser ofthe Trust under an investment contract among the Adviser, the. Trust, and Central Trust ofChina (the "Custodian"), the Trust's custodian, after the implementation of a permanent reduction in the amount of compensation paid under the contract to the Adviser, the Custodian, or both ofthem, without seeking and obtaining shareholder approval. Facts The Trust is a diversified, closed-end investment company that is registered under the Investment Company Act, and its shares are listed on the New York Stock Exchange (the "NYSE"). The Adviser is a securities investment trust enterprise incorporated under the laws of the Republic ofChina (the "RO.C.") and registered under the Investment Advisers Act of i940. The Custodian is a bank organized under R.O.C.law. You state that the Trust compensates the Adviser and the Custodian pursuant to an investment contract (the "Investment Contract") among the Trust, the Adviser, and the Custodian. You state that the Adviser manages the assets ofthe Trust that are held in the RO.C. pursuant to the Investment Contract. I You state that, unlike the practice in the United States, the Custodian is a party to the Investment Contract because ofRO.C.legal requirements concerning investment advisory and management arrangements in the RO.C. You state that the fees payable by the Trust to the Adviser and the Custodian pursuant to the Investment Contract have been reduced twice, in 1991 and 1996, in each case after the Trust The Adviser has the authority to manage the small portion ofthe Trust's assets that may be held periodically by the Trust in the United States pursuant to a separate investment contract between the Trust and the Adviser, to which the Custodian is not a party (the "U.S. Investment Contract"). The Trust pays no additional compensation to the Adviser, and incurs no additional expenses, as a result ofthe services provided by the Adviser under the U.S. Investment Contract.