Irish fund structures for international distributionUCITS & Qualifying Investor Funds (QIFs)

First for business. First for people.

Introduction to the Irish funds industry in Arabic 01Introduction to the Irish funds industry 07Establishing a fund in Ireland 13UCITS funds 19Distribution of Irish UCITS funds 25 Qualifying Investor Funds (QIFs) 31Taxation of Irish funds 35Services & contacts 37

Contents

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1

Introduction to the Irish funds industry in Arabic

23

32

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54

6

Introduction to the Irish funds industry

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Ireland is renowned globally as a premier location for establishing and servicing investment funds. Fund promoters can rely on Ireland as a ‘one-stop-shop’ for the domiciliation of funds and unparalleled experience in servicing all types of instruments. An abundance of the big players of the fund servicing world are situated in Ireland, with an extensive range of services available including fund administrators, lawyers, custodians etc. As a result, Ireland is the chosen location for many international fund players. Since its inception as a centre for investment funds, Ireland has positioned itself as a location for the establishment of “regulated” investment funds. As investors seek greater transparency and comfort from investment products and as greater regulatory oversight of investment funds becomes imminent, Ireland has a number of well established suitable products to fi t this growing need. The two most popular regulated products in Ireland are UCITS and the Qualifying Investor Fund (QIF).

Overview

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Scale of the Irish funds market• In excess of 10,700 funds with a

net asset value of over EUR 1.3 trillion serviced in Ireland as of September 2009 according to the Irish Fund Industry Association (IFIA).

• There are over 5,000 Irish domiciled funds with assets under management of EUR 703 billion as of September 2009 according to the IFIA.

• Fastest growing European and UCITS fund administration centre over the past fi ve years. (Irish domiciled net assets grew by 49% between 2004-2008; the European average for the same period was 15%, Source: Central Bank of Ireland & EFAMA)

• 80% of Irish domiciled funds are UCITS with a Net Asset Value of EUR 570 billion in over 3,000 funds including subfunds as of June 2009 according to the IFIA.

Irish domiciled funds - breakdown in assets between UCITS & Non - UCITS

Irish domiciled funds - breakdown by type

Did you know the following facts about the Irish funds market?

Source: Central Bank of Ireland, August 2009

Source: Central Bank of Ireland, June 2009

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Product Innovation in Ireland• A leading European domicile for

money market funds.

• The leading European domicile for Exchange Traded Funds (ETFs).

• The largest hedge fund administration centre in the world.

• A growing market for Shariah funds. All of the main parties in the Irish fi nancial services industry have some involvement in this growing industry. This can be refl ected in number of service providers − accountancy fi rms, law fi rms, etc. − which have established dedicated teams of experts in Islamic fi nance. Additionally a Shariah funds specialist unit has been established in the Financial Regulator. According to data compiled from the Eurekahedge Islamic Funds database, 20% of the Islamic funds market outside of the Middle East is located in Ireland, as of September 2009.

Total assets of Irish domiciled money market funds

Ireland as a domicile for European ETFs

Irish administered alternative investment funds

Source: Central Bank of Ireland

EU

R B

illio

n

Source: Barclays Global Investors & IFIA July 2009

Source: Hedge Fund Intelligence & IFIA July 2009

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Irish Regulatory Environment• Constructive regulatory

environment – robust and effi cient regulatory environment with a wide variety of investment fund vehicles available to suit individual investor needs. The Financial Regulator regulates on a ‘principles based’ approach rather than a rigid rules based system.

• Speed to market: 24 hour approval process available for Qualifying Investor Funds (QIFs) and an average 4-6 weeks for all other fund structures.

• Fast track promoter approval – within one week of application

• Promoter fi nancial resources requirement: Irish promoters must have minimum net shareholder’s funds of €635,000, or equivalent in another currency.

• Promoter liability – Irish Promoters not legally responsible for losses of funds, as long as due care has been provided.

• The Irish custodian model as required by the Financial Regulator provides signifi cant comfort to

investors. The custodian has a duty of care to the unit holders and is liable for any failure to meet the requisite standard of care. Such liability will also extend to the custodian’s appointment of any sub-custodians, which is of particular importance to investors where assets are likely to be held in various jurisdictions outside Ireland.

• Irish risk management process is based on guidance notes with built-in fl exibility. Risk monitoring for non-sophisticated funds in Ireland is on a daily basis. In Ireland the risk management process is not the responsibility of any designated individual.

Distribution of Irish Funds• Irish domiciled funds are

distributed in over 60 countries across Europe, the Americas, Asia and the Pacifi c, the Middle East and Africa.

• The main target market for Irish UCITS in the EU is the UK. Switzerland is the main market outside of the EU. A breakdown

of all the main markets for Irish UCITS funds is shown later in the document in the distribution section.

• Equity is the leading asset class for Irish UCITS funds in all the four main regions: Europe, Asia, the Middle East and South America. This is also discussed in more detail later in the document in the distribution section.

• 358 fund promoters from over 50 countries have set up Irish domiciled funds. If non -Irish domiciled funds are included, over 780 fund promoters use Ireland as a servicing centre for investment funds.

Promoter origin of Irish domiciled funds - Percentage of total Irish domiciled assets by promoter origin

Source: Lipper Ireland Fund Encyclopaedia, June 2009

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45 Administration Companies --------------- 19 Trustee/Custodian Banks

Other Key Facts• A recognised EU and OECD, open

and tax transparent jurisdiction with the lowest headline corporate tax rate in the OECD.

• Largest number of stock exchange listed investment funds.

• 12,000 skilled employees with availability of industry-wide training (over 9,500 employed directly by fund administrators and over 2,500 employed in associated services, e.g. legal, tax, audit, listing etc.)

• Ireland is a member of the EU, Euro zone, OECD and FATF and is continually ranked highly in international surveys of places to carry out business. Ireland is not included on any international list of tax havens (e.g. OECD/G20).

• Ireland is a modern, international, open economy where business can be conducted with Asia in the morning, the Americas in the afternoon and Europe throughout the day.

Irish stock exchange listings - Nos. of funds and sub-funds listed

The investment funds industry in Ireland

Investment Funds

In excess of 10,700 funds (Incl. sub funds)

570 billion in domiciled assets

153 billion in non-domiciled assets

1.3 trillion in assets being serviced

12,000 people employed

Lawyers

358 Fund Promoters (of Irish funds)

Listing Brokers

786 Fund Promoters

(including non Irish funds)

Accountants

Source: IFIA September 2009, Lipper Ireland Fund Encyclopaedia 2009

Source: Irish Stock Exchange

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Establishing a fund in Ireland

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The Irish Financial Services Regulatory Authority (the “Financial Regulator”) is the competent authority responsible for the authorisation and supervision of funds in Ireland. The Financial Regulator operates an “open door” policy with regard to fund managers and welcomes the opportunity to meet new managers to discuss potential projects. The Financial Regulator’s innovative and proactive approach to regulation, combined with its accessibility, has earned it a deserved reputation as a fi rst-class regulatory authority.

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Promoter ApprovalWhen deciding to establish a fund in Ireland, one of the fi rst things to be determined is the identity of the promoter. The Financial Regulator requires that a promoter be identifi ed to satisfy it that there is an entity of substance backing the project. There is no legal basis for the concept of promoter and the promoter has no fi nancial or contractual obligation to the fund.

The promoter, which may be the same entity as the investment manager, is responsible for the application to the Financial Regulator for authorisation of the fund and it (the promoter) must be approved by the Financial Regulator in advance of submission of the application for fund authorisation.

The approval process for the promoter normally takes approximately four weeks and, once obtained, this approval is valid for any further funds established in Ireland by that promoter.

The Financial Regulator will require information to be provided, outlining

relevant experience in promoting and managing funds, ownership details, latest audited accounts, confi rmation that the promoter is regulated in its home jurisdiction and confi rmation that it has at least €635,000 in shareholders’ funds.

If the proposed investment manager (being the entity with discretionary authority to manage and invest the fund’s assets) is a separate entity to the promoter, it must also submit an application for approval along the same lines.

UCITS and non-UCITSThere are two broad categories of investment funds in Ireland: UCITS and Non-UCITS.

The essential difference between the two regulatory frameworks is that UCITS funds are established pursuant to European legislation whereas non-UCITS are established pursuant to indigenous Irish legislation. UCITS funds must invest in accordance with the investment and borrowing restrictions imposed by UCITS legislation. UCITS can be marketed

cross-border throughout Europe and increasingly in areas such as the Far East, the Middle East and Latin America, without the need for full authorisation in the target countries. This makes them particularly suitable for managers seeking global distribution. While non-UCITS do not enjoy the same cross-border marketing benefi ts as UCITS, non-UCITS offer greater fl exibility in terms of investment strategy. They are more suited to managers wishing to target sophisticated investors and/or wishing to pursue more aggressive or alternative investment strategies. Non-UCITS generally tend to be sold on a private placement basis.

UCITSUCITS operate on the basis of their availability to retail investors, although many are institutional funds. Their investment and borrowing restrictions are generally not negotiable. The basic investment restriction for UCITS is that at least 90% of net assets must be invested in listed or soon to be listed (max 10%) transferable securities or securities

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issued by sovereign states or their local authorities, with no more than a 10% exposure to any one issuer. Borrowings are restricted to 10% of NAV and may only be made on a temporary basis.

Since 13 February 2002 (the implementation of amending UCITS Directives referred to as UCITS III), UCITS are no longer restricted to investing principally in transferable securities and the main objective of a harmonised UCITS may now consist of investing in other fi nancial assets such as:

• money market instruments;

• units in collective investment schemes;

• deposits with credit institutions;

• fi nancial derivative instruments; and

• index tracker funds.

More detail on UCITS and the fl exibility of the product is provided later in the document, in the UCITS funds section.

Non - UCITSNon-UCITS funds can generally be divided into three main categories. These are Retail Funds, Professional Investor Funds and Qualifying Investor Funds.

Retail Funds must comply in full with the Non-UCITS investment restrictions as contained in the Financial Regulator’s NU Series of Notices.

Professional Investor Funds (“PIFs”) have a minimum initial subscription requirement per investor of €125,000 or the equivalent. PIFs enjoy considerably more relaxed borrowing and investment restrictions compared to UCITS and retail non-UCITS funds and are therefore suitable for funds aimed at more sophisticated investors.

Qualifying Investor Funds (“QIFs”) are designed for high net-worth individuals or institutional investors. No borrowing or investment restrictions apply. The basis for QIFs is that investors in these funds have a high degree of knowledge and experience of relevant markets and a detailed understanding of the

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investment risks involved. Investment in these funds are confi ned to Qualifying Investors, namely:-

• an individual who has a minimum net worth (excluding main residence and household goods) in excess of €1,250,000;

or

• an institution, which owns or invests on a discretionary basis at least the equivalent of €25 million or where its benefi cial owners are Qualifying Investors in their own right.

The minimum initial subscription per investor in a QIF is €250,000. The minimum amount of subsequent subscriptions is not limited.

More detail is provided on the QIF later in the document in the Qualifying Investor Funds (QIFs) section.

Fund VehiclesThere are several legal forms through which an investment fund can be established including variable capital investment company, unit trust, common contractual fund

and investment limited partnership. Consideration should be given to investment strategy, target investor market, distribution plans and tax consequences in choosing the optimum vehicle and structure.

Fund Authorisation Once the promoter and investment manager have been approved, the next step is obtaining approval for the fund documentation. An application for authorisation of an investment fund is made by lodging fund documentation, in draft form, with the Financial Regulator.

The Financial Regulator will usually respond with its initial comments within three to four weeks of receipt of an application. Depending on its nature and complexity, a typical fund should be capable of authorisation within a four to six week period upon submission of all documentation.

The exception to this is the QIF which avails of a one day fast-track authorisation procedure.

The Irish Stock ExchangeShould a fund wish to list its units/shares on the Irish Stock Exchange (“ISE”), it will need to appoint Irish listing agent/stockbroker. A stock exchange quote on the ISE is available to Irish and foreign funds.

Due to the close working relationship between the ISE and the Financial Regulator, the ISE automatically accepts the suitability of the investment manager and custodian of funds authorised by the Financial Regulator.

TaxationIrish investment funds are exempt from any Irish tax on income and gains derived from their investment portfolios irrespective of where their investors are resident.

As the Irish vehicle is tax neutral, generally the tax consequences for investors of acquiring, holding, converting, redeeming or disposing of units/shares in an Irish fund will depend on the relevant laws of the jurisdiction to which the investor is subject.

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There is a detailed table on Irish tax later in the document in the taxation of Irish funds section.

DirectorsAll Irish domiciled investment companies and Irish domiciled management companies of Irish funds must have at least two Irish resident directors. The Financial Regulator must satisfy itself as to the reputation and experience of all directors by applying its Fitness and Probity test.

Service ProvidersIn an Irish domiciled fund, certain minimum activities must be carried out in Ireland, including the following:-

• safekeeping and custody function;

• net asset value calculations;

• fund accounting;

• maintenance of members register;

• preparation of fi nancial reports; and

• retention of all investor correspondence and original documentation received.

This, effectively, means that the fund appoints an Irish-based fund administrator.

The fund is specifi cally required to have an Irish-based custodian, which cannot be the same entity as the administrator. The fund must also have auditors, who will also be Irish-based. Certain fund vehicles require a management company to be appointed.

A substantial amount of the world’s leading fi nancial institutions operating in the fund administration industry are based in Dublin and thus the sourcing of appropriate service providers for Irish domiciled funds presents no diffi culty.

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UCITS funds

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UCITS are Undertakings for Collective Investment in Transferable Securities. Having their origin in European legislation, UCITS benefi t from an EU-wide “passport” which means that once they are authorised in one EU member state, they can be sold in any other EU member state without the need for additional authorisation. Because of the necessity to comply with a common European standard, UCITS are now regarded globally as very well regulated funds, with robust risk management procedures, a strong emphasis on investor protection and coming from a stable environment. As a result, the UCITS brand is recognised beyond the EU and UCITS products are accepted for sale in Asia, the Middle East and Latin America.

What are UCITS?

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UCITS are now distributed in over 140 countries, so the UCITS product is ideal for asset managers seeking access to multiple markets. The distribution of Irish UCITS funds is discussed in detail later in the document in the distribution section.

What can UCITS invest in? While UCITS funds must invest in accordance with the investment and borrowing restrictions imposed by UCITS legislation, advances in the UCITS product have broadened the range of assets into which UCITS can invest. In summary, UCITS are permitted, subject to certain criteria, to invest in: -

• transferable securities;• money market instruments;• other open ended funds;• closed ended funds;• cash deposits with credit

institutions;• structured fi nancial instruments;• fi nancial derivative instruments;

– swaps – options – futures – forwards – OTC derivatives – CFDs – derivatives on commodities

indices – derivatives on hedge fund

indices

– repos

Total assets of Irish domiciled UCITS funds - EUR billion

Total number of Irish domiciled UCITS funds - Funds including sub-funds

Source: Central Bank of Ireland

Source: Financial Regulator

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What are the principal investment restrictions? • a UCITS may invest no more

than 10% of its net assets in one issuer, with the aggregate of all investments in excess of 5% not to exceed 40% of the net assets. The 10% limit is raised to 25% for bonds issued by EU credit institutions that are subject to laws protecting bondholders. The aggregate of any such investments in excess of 5% may comprise up to 80% of the UCITS net assets.

• the limit of 10 per cent above is further raised to 35 per cent if the securities or instruments are issued or guaranteed by a government or its local authorities or by a public international body.

• a UCITS can invest up to 10% of its net assets in unlisted transferable securities and money market instruments.

• a UCITS can invest up to 20% of its net assets in any one CIS. Investment in non-UCITS CIS may not, in aggregate, exceed 30% of net assets.

• a UCITS can invest up to 20 per cent of its net assets in deposits made with the same credit institution. This limit is raised to 20% for deposits made with the fund’s custodian.

• the risk exposure of a UCITS to a counterparty to an OTC derivative may not exceed 5% of net asset value. This limit is raised to 10% in the case of credit institutions in the EEA or other specifi ed countries.

• a combination of two or more of the following issued by, or made or undertaken with, the same body may not exceed 20% of the net asset value of a UCITS:

– investments in transferable securities or money market instruments;

– deposits; and/or

– counterparty risk exposures arising from OTC derivatives transactions.

• the Financial Regulator may authorise a UCITS to invest up to 100% of its net assets in different transferable securities and money market instruments issued or guaranteed by any government, local authority or public international body subject to certain conditions.

What strategies can be pursued? Recent market diffi culties have led to dramatic changes in investors’ appetite for risk. This revision of asset allocation strategies has resulted in an increased demand by investors for regulated products. More and more, this has led hedge fund managers to move into the regulated fund arena, either as a result of their investor base wishing to move away from unregulated hedge funds or as those managers seek to attract new money.

UCITS funds, in particular, are seen as the product of choice, due to their liquidity, transparency, high level of investor protection and distribution opportunities. Also, fl exibility: the UCITS product enables hedge fund managers to mirror many of their

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hedge fund strategies through the use of an appropriate mix of leverage, shorting and derivatives.

UCITS III signifi cantly widened the range of investment possibilities for UCITS funds. Of major signifi cance is the ability of managers to use fi nancial derivative instruments (“FDI”) to access strategies which were previously the preserve of hedge fund managers. The opportunity to structure alternative investment strategies within the robust regulatory framework of a UCITS has been critical to the growth of the product. Examples of strategies that are being pursued by UCITS include:

• absolute return

• long/short equity (e.g. 130/30)

• statistical arbitrage

• convertible arbitrage

• global macro

• market neutral

• fi xed income arbitrage

• convertible bond

• credit funds

• hedge fund index funds

• commodities index funds

• synthetic ETFs

• fund of funds

• enhanced fi xed income

• structured products

• managed futures

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Distribution of Irish UCITS funds

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UCITS funds are the ideal vehicle for promoters who wish to distribute their funds throughout the EU without having to obtain authorisation from each Member State. Although, the success of the UCITS structure has extended beyond the borders of the EU and the UCITS brand is now recognised globally as a well regulated investment product. Distribution is paramount to the success of the UCITS product. Ireland is renowned as a centre of excellence for UCITS products. Irish UCITS funds are distributed heavily in Asia, the Middle East and South America as well as in Europe.

Overview

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Many different types of strategies and products have been set up as UCITS funds. The UCITS framework has become increasingly diverse over the last few years. Most investment strategies are now allowed under the UCITS regime. As we have mentioned, even alternative strategies may now be achieved within the UCITS regime. An increasing number of hedge fund managers are looking to set up their funds under the UCITS regime. Additionally, many Exchange Traded Funds and Money Market Funds in Ireland have been set up under the UCITS regime, benefi tting from the principle of mutual recognition within the EU and a high level of acceptance by regulators worldwide as well as the advantage of a global distribution network.

Breakdown of the main markets for Irish UCITS fundsOur research on the distribution of Irish UCITS funds focused on fund groups in Ireland where the number of countries which they distribute to is greater than 5. (58 fund groups match this criteria). All fund groups sell to one or more EU countries i.e. 100%. As shown in the chart opposite, top markets for Irish UCITS funds include countries in all main regions including Europe, the Americas (Peru and Chile), Asia (Singapore and Hong Kong) and the Middle East (Bahrain).

Top markets for Irish UCITS funds

Source: Lipper Hindsight, PwC analysis, July 2009

Other countries includes: Australia, Bahamas, Cyprus, Gibraltar, Isle of Man, Japan, Macau, Mauritius, Mexico, Panama, South Africa & the United Arab Emirates.

0 20 40 60 80 100% of fund groups

Cou

ntrie

s

EU

Switzerland

Singapore

Chile

Hong Kong

Other

ChannelIslands

Peru

Bahrain

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The chart opposite highlights the main markets by region. Europe is the most popular region for Irish UCITS funds with the greatest number of the 58 fund groups selling Irish UCITS funds into this region as might be expected. Asia is the next largest market for Irish UCITS funds, followed by South America and then the Middle East.

Breakdown of leading markets for Irish UCITS

Breakdown of EU countries for Irish UCITS

0

20

40

60

80

100

% o

f fun

d g

roup

s

EU Asia/ME South America

UK

Ger

man

y

Fran

ce

Net

herla

nds

Sp

ain

Sw

eden

Italy

Sin

gap

ore

Taiw

an

Hon

g K

ong

Bah

rain

Chi

le

Per

u

Aus

tria

Source: Lipper Hindsight, PwC analysis, July 2009

Source: Lipper Hindsight, PwC analysis, July 2009

Note: Other EU countries that Irish UCITS distribute to include: Czech Republic, Greece, Poland, Portugal, Slovakia & Slovenia.

0 20 40 60 80 100% of fund groups

Cou

ntrie

s

UK

Germany

France

Netherlands

Austria

Spain

Sweden

Luxembourg

Italy

Norway

Belguim

Finland

Denmark

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What are the main asset classes for Irish UCITS per region?Our research here is focused on fund groups in Ireland where the number of countries to which they distribute is greater than 5. According to the Lipper Hindsight database, 58 fund groups match this criteria as of July 2009. The main asset classes focused on include: equity, bond, money market funds, mixed assets and other.

• Equity is the leading asset class for all the four main regions: Europe, Asia, the Middle East and South America. In the Middle East, 50% of Irish UCITS funds sold into this region are equities. The percentage breakdown for the equity asset class in the other regions is as follows: South America (48%), Europe (43%) and then Asia (37%).

• Bonds are the next most popular asset class in all the regions. 31% of Irish UCITS funds sold into Asia

are bond funds. This is followed by 29% in South America and 25% for both Europe and the Middle East.

• The breakdown for the money market asset class is as follows. In both the Middle East and South America 19% of Irish UCITS funds sold into these regions are money market funds. This is followed closely by 17% in Asia and 15% in Europe.

• The mixed assets class breakdown for each region is as follows: Europe (12%) and Asia (10%). This asset class only accounts for 4% in South America and no Irish UCITS that sell into the Middle East are classifi ed under the mixed assets class.

• All other asset classes fall under the other category with the following breakdown: the Middle East (6%), Europe (5%), Asia (5%) and South America (0%).

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Key domiciles where Irish UCITS are distributed

Top 5 countries in the EU where each Irish UCITS asset class/product offering is distributed

Rank Equities Bonds Money market funds Exchange traded funds

1 UK UK UK UK

2 Germany Germany Germany Germany

3 France/Netherlands France France Italy

4 Austria Austria/Spain Spain Netherlands

5 Italy Italy Austria/Italy Luxembourg

Top 5 countries outside the EU where each Irish UCITS asset class/product offering is distributed

Rank Equities Bonds Money market funds Exchange traded funds

1 Switzerland Switzerland Singapore Switzerland

2 Singapore Singapore Hong Kong Singapore

3 Chile Taiwan Chile Chile

4 Hong Kong Hong Kong Bahrain/Switzerland Peru

5 Taiwan Chile Macau/Taiwan N/A

Source: Lipper hindsignt, PwC analysis, July 2009

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Qualifying Investor Funds (QIFs)

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The Qualifying Investor Fund (“QIF”), the most successful non-UCITS fund in Ireland, is the vehicle of choice for fund promoters wishing to pursue alternative strategies such as hedge funds, private equity/venture capital funds and real estate funds. The signifi cant investment fl exibility which the Irish regulatory regime offers to QIFs together with the fact that they can be authorised within 24 hours of fi ling documentation with the Financial Regulator, has made them one of the most successful Irish fund products . The QIF now competes in terms of fl exibility and speed-to-market with products in offshore centres such as Cayman and BVI but with the added advantage of being located within a robust regulatory framework.

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Total assets of Irish Qualifying Investor Funds (QIFs) - Total assets (Eur billion)

Total number of Irish domiciled Qualifying Investor Funds (QIFs) - Funds including sub-funds

Flexibility The general investment and borrowing restrictions imposed by the Financial Regulator on investment funds are automatically avoided by structuring the fund as a QIF.

QIFs can pursue investment strategies which include short selling, signifi cant borrowings and leverage, derivatives and investments in other funds, without restriction. Similarly, the limits on the level of investment in any given market or securities which apply to all other types of funds in Ireland do not apply to QIFs.

Accordingly, QIFs are particularly suitable for sale to sophisticated investors such as high net-worth individuals and institutions. More aggressive investment strategies can be pursued, such as:

• hedge funds

• real estate funds

• infrastructure funds

• private equity funds

• venture capital funds

Qualifying as a QIFIn order to qualify as a QIF, the fund may only accept investors who satisfy certain eligibility criteria (“Qualifying Investors”) and who subscribe a minimum of €250,000 into the fund.

A Qualifying Investor is,

• in the case of a natural person, an individual with a minimum net worth (excluding his/her main residence and household goods) of €1,250,000; or

• in the case of an institution,

– one which owns or invests on a discretionary basis at least €25,000,000 or its equivalent in other currencies; or

– where its benefi cial owners are Qualifying Investors in their own right.

24 Hour Authorisation QIFs are authorised to launch within one day of fi ling the prescribed documentation with the Financial Regulator. An application for authorisation as a QIF can be made where the:

Source: Central Bank of Ireland

Source: Central Bank of Ireland

33

• promoter;

• management company (if applicable);

• directors in the case of an investment company;

• trustee / custodian; and

• other service providers (fund administrator, investment manager)

have been approved/cleared by the Financial Regulator in advance of the application and where the fund refl ects the agreed parameters.

The relevant application form for a QIF, which must be completed and submitted to the Financial Regulator, is designed to establish the parameters within which a QIF can operate. A certifi cation must accompany the application form confi rming that the application form is correct, complete and accurately refl ects the material documentation of the QIF and that the prospectus etc. complies with the relevant regulations. Once all necessary documents are completed and submitted to the Financial Regulator by 3pm, the QIF will be authorised the following day.

Fund VehiclesA QIF can be established as a variable capital investment company, unit trust, common contractual fund or investment limited partnership. Consideration should be given to investment strategy, target investor market, distribution plans and tax consequences in choosing the optimum vehicle and structure.

Use of SPVs QIFs can invest in underlying assets through wholly owned special purpose vehicles (“SPVs”). This is of particular interest, for example, for real estate funds where each real estate investment can be made through an SPV in order to ringfence liability relating to each project. The SPV structure can also be used for tax effi ciency purposes, by holding underlying assets through an Irish SPV. Although the SPV will be subject to Irish corporation tax at a rate of 25% on its taxable profi ts, its transactions are generally structured so that the level of taxable profi t is negligible or zero. This is done by ensuring that the SPV’s income is matched by tax deductible

expenditure. As a tax exempt vehicle, the QIF will not suffer any Irish tax on interest income and dividends received from the SPV.

Other Key Features of QIFs• audited annual accounts must be

sent to the Financial Regulator and shareholders within four months of the year end;

• semi annual accounts are not required;

• any amendments to the QIF’s prospectus or material contracts need to be fi led with the Financial Regulator one business day prior to coming into effect;

• QIFs can issue a separate prospectus for a share class within a QIF or within a sub-fund of an umbrella QIF, provided the existence of other share classes is disclosed to investors; and

• a QIF may issue notes, on a private basis, to lending institutions to facilitate fi nancing arrangements, provided that details of the note issue is clearly disclosed in the prospectus.

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Taxation of Irish funds

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Tax treatment Irish management company Irish fundCorporation Tax Rate 12.5% on trading income

25% on non trading income

One of the lowest headline corporation tax rates in the OECD

Tax exempt on income and capital gains

No net assets tax

Treatment of Losses Trading losses can be carried back one year against trading income, offset against income and gains of the current year (and set against non trading income on value basis in current year), and carried forward indefi nitely against income of the same trade

Capital losses cannot be offset against capital gains

Filing Requirements Corporation Tax Return fi led nine months after accounting year end. Preliminary tax obligations payable in two instalments

Investment Undertaking Returns fi led semi annually- nil returns fi led when no taxable event arises.

Double Taxation Treaties 46 countries and 9 under negotiation 46 countries and 9 under negotiation. Ireland recently signed an agreement with Bahrain and treaties with Saudi Arabia, the United Arab Emirates (UAE) and Kuwait are expected to be signed shortly. (Treaty access is dependent on fund structure and relevant jurisdiction).

Withholding Taxes on Distributions

Non Applicable No withholding taxes apply, under domestic legislation, on income distributions or redemption payments made by a fund to non Irish resident investors once an appropriate non resident declaration is in place.

Transaction Taxes No capital duty on issue of shares in Irish Man Co. 1% stamp duty applies to transfer of shares although relief from charge may apply

No capital and stamp duty on issue or acquisition of fund units

VAT treatment Investment Management activities VAT exempt. Fourth schedule services (professional services from abroad) require Man Co of Fund to self account for VAT on reverse charge basis.

Possibility of Man Co recouping VAT based on proportions of investments outside EU of funds under management. Possible to recover VAT even if not required to register for VAT (through VAT60E procedure).

Fund activities VAT exempt. Fourth Schedule services (professional services from abroad) require Funds to self account for VAT on reverse charge basis.

Possibility of Fund recouping VAT based on proportions of investments outside EU. Possible to recover VAT even if not required to register for VAT (through VAT60E procedure).

Controlled Foreign Company (CFC) Legislation

No No

Banking Secrecy No banking secrecy or exchange of information blockages

No banking secrecy or exchange of information blockages

Thin Capitalisation Legislation No No

Transfer Pricing Legislation No No

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Services & contacts

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Audit ServicesOur audit approach is tailored to suit the size and nature of your organisation and draws upon our extensive industry knowledge. In addition to the independent audit we offer advisory services in the areas of fi nancial reporting, corporate governance, regulatory compliance, independent controls and risk assessment.

Tax & Legal ServicesOur Tax and Legal Services formulates effective strategies for optimising taxes, implementing innovative tax planning and effectively maintaining compliance.

In recognition of the international tax issues to be considered in structuring funds, our specialised tax team works extensively with our global investment management teams on an ongoing basis.

Regulatory Advisory ServicesPwC has a dedicated regulatory and compliance service team to assist you with all aspects of fi nancial

How PwC Ireland can help...

services regulation. The regulatory and compliance services team provides support and advice to help you identify, manage and control any existing and future regulatory risks. Our services can be broadly categorised under three main headings:

• Market entry; feasibility studies, authorisation services, governance arrangements, compliance frameworks, capital adequacy arrangements & notifi cation assistance

• Regulatory risk management

• New regulatory obligations

Advisory ServicesPwC also provides a full range of business advisory services for both large organisations and independent advisors entering the investment fund business. Our business advisory services team can assist clients in making strategic assessments of the investment business, preparing business plans and economic analyses as well as advising on the structure of both the investment

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Contacts:Ken OwensPartnerPricewaterhouseCoopers1 Spencer DockNorth Wall Quay, Dublin 1, IrelandTel: +353 1 792 8542Email: ken.owens@ie.pwc.com

Pat CandonPartnerPricewaterhouseCoopers1 Spencer DockNorth Wall Quay, Dublin 1, IrelandTel: +353 1 792 8538Email: pat.candon@ie.pwc.com

Omer KhanManagerPricewaterhouseCoopers1 Spencer DockNorth Wall Quay, Dublin 1, IrelandTel: +353 1 792 8171Email: omer.khan@ie.pwc.com

advisor and the underlying fund. The team can also offer advice on systems and operational needs, identifying and selecting outside vendors and preparation of full documentation of policies and procedures.

Global Fund Distribution ServicesPwC has an integrated global network of local experts coordinated by a dedicated central team supporting all aspects of your cross-border fund distribution strategy.

Designing, implementing and maintaining a multi-jurisdictional distribution strategy involves a unique set of challenges. PwC can help with these challenges. We understand the interconnected processes and specifi c local and international resources required for a cross-border strategy to be sustainable. More than 10 years ago, PwC pioneered a revolutionary and unique service supporting fund promoters to develop, implement and

Combined market share by subfund assets

maintain cross-border distribution strategies. Today, through our unique Global Fund Distribution (GFD) service, PwC remains the market leader of solutions for cross-border fund distribution. Our service includes:

• Market Strategy• Market Entry• Market Reporting• ETF Listing• Market Publication• Market Intelligence Monitor• Distributor Analysis• Distribution Model Optimisation

Our Market Share

Source: Ireland Funds Encyclopaedia June 2009

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Mason Hayes+Curran is a full service business law fi rm with offi ces in Dublin, New York and London.

Mason Hayes+Curran’s Investment Funds and Regulatory Unit advises on all aspects of investment fund law and regulation in Ireland. In particular, we advise fund promoters on structuring, establishing and listing investment funds in Ireland and we advise and assist fund service providers in establishing operations in Ireland and provide ongoing legal advice as their business develops.

Our lawyers in the Investment Funds and Regulatory Unit have a wealth experience in the investment funds industry and have been involved in the development of policy and regulation on behalf of the industry. Our lawyers have advised a wide variety of clients on structuring and promoting funds authorised by the Irish Financial Services Regulatory Authority including funds targeted at the retail sector and at a more sophisticated investor level. We advise on the legal structure of funds (investment companies, unit trusts, limited partnerships and common contractual

funds), their regulatory classifi cation (UCITS or non-UCITS) and specialist vehicles such as professional investor funds, qualifying investor funds, hedge funds, funds of funds, feeder funds etc. We are currently advising one of the fi rst Abu Dhabi-based fund promoters to establish an Irish UCITS fund.

We have expertise not only in the regulation of investment fund products but also in the transactions entered into by such funds and the increasingly sophisticated fi nancial instruments and techniques being utilized by asset managers. We have particular expertise in the area of alternative investments and are committed to seeing Ireland’s continued development as a domicile for regulated hedge funds, to complement its now fi rmly established reputation as a jurisdiction of choice for the servicing of hedge funds.

At Mason Hayes+Curran we recognise the need for responsive, innovative and strategic legal advice in this dynamic industry and our success in growing our practice in this area is representative of this.

Contacts:Fionán Breathnach Partner South Bank House, Barrow Street, Dublin 4, Ireland.Tel +353 1 614 5000 Fax +353 1 614 5001DDI +353 1 614 5080Email: fbreathnach@mhc.ie

John Kettle Partner 60 Lombard Street, London EC3V 9EATel : 0044 20 3178 3368 (direct)Tel: 0044 20 3178 3366Fax: 0044 20 3178 3367Email: jkettle@mhc.ie

David O’Donnell Partner South Bank House, Barrow Street, Dublin 4, Ireland.Tel +353 1 614 5000 Fax +353 1 614 5001DDI +353 1 614 5065Email: dodonnell@mhc.ie

Mason Hayes+Curran - Irish law fi rm for investment funds

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Our Ethics and business modelWhen Apex Fund Services launched in 2003 we set-out to address the service issues that existed within the industry and held at our core a dedication to ensure that our offering was client focused. The standards we laid down were designed to ensure a swift response consistently and with the highest levels of service protected by SAS 70 Type II independent audits.

In 6 years we have grown to a group of 12 separate offi ces around the world and have held our principles true maintaining our service standards and ensuring a global reputation of excellence.

Strategy The funds industry through 2003 to 2006 was going through explosive growth and it was clear that the Asian, Indian and Middle East would emerge as powerful centres in the emergence of new funds and investment management centres.

Given this we were quick to ensure that we began to develop strong presences in these regions. We were the fi rst fund administration company

to be granted a license in the DIFC in July 2006 and have steadily built up our business and relationships in that region opening in Bahrain in 2007, with offi ces opening in Saudi Arabia and Abu Dhabi in the early part of 2010.

Our ServicesCore Services:

Fund Accounting Services Apex Fund Services administers over 250 funds globally ranging from Irish UCITS and non-UCITS funds to offshore products and private equity funds. We prepare daily, weekly, monthly NAV’s and provide same day reporting where required which can also be accessed by the investment manager through our web-portal www.apexfundsnet.com

Transfer AgencyWe manage the subscription/redemption process for all of our funds and ensure anti-money laundering checks are carried out in full and maintained on our systems.

Within the Middle East we have the added benefi t that for Irish funds with investment managers or

Apex Fund Services Limited - A truly global offering.

investors from the Middle East we can maintain the Anti-Money Laundering documentation in our offi ces in that region. This gives additional comfort to investors that their personal information does not travel outside of the gulf states.

Ancillary services:

• Pre launch advice and assistance with fund structuring and establishment, including recommendation and liaison with key service providers.

• Reviewing and commenting upon the relevant client offering documents, agreements and subscription forms.

• Setting up bank and custody accounts.

• Liaising with key service providers throughout the process.

• Preparing clients and funds for regulatory approval.

• Establishing Service Level Agreements and Key Performance Indicators to monitor performance.

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Specialist Services of Individual Offi ces:

• Bermuda – Stock Exchange Listing Sponsor.

• Dubai and Bahrain – Acceptance of Arabic subscription and redemption documents.

• Dubai and Bahrain – Expertise with Shari’ah products.

• Ireland and Malta – Meeting of SICAV and UCITS reporting requirements.

• Mauritius – Formation of Special Purpose Vehicles for Private Equity Funds as well as tax reporting and advice.

• China – Consulting on the structuring and valuation of private equity transactions.

Systems and technology Apex Fund Services continues to focus on technology and delivering on our clients ongoing needs.

Our technology allows us to fully automate every distinct fund type from Private equity capital calls and commitments, to master feeder structures for offshore funds, to Irish UCITS and non-UCITS.

There are over 170 reports available on our core system from fi nancial, portfolio, transfer agency and performance reporting. In addition, we have worked closely with our client base in providing an online web-reporting access to view a large selection of these reports that our clients felt would be most benefi cial to them.

www.apexfundsnet.com • A secure global operations

network, including 24/7 support operations ensuring a web-based platform is available and reliable. It is supported with extensive disaster recovery and encrypted systems security features.

• Fund Reporting Solutions consolidate data from our Paxus system into a user-friendly format for our fund managers to use and automates the delivery of accounting and portfolio information to our fund managers.

• Investor Reporting Solutions provides continuous on-line access to investor statements, historical transaction activity, fund documents and performance reporting that are continuously available to investors via a secure web platform.

Contacts:John Bohan Managing DirectorApex Fund Services (Ireland) Ltd. Enterprise House, Watersedge, Midleton, Co.CorkTel: 353 21 46 333 66Mobile: 353 87 656 0096Fax: 353 21 46 333 77Email: john@apexfunds.ie Website: www.apexfundservices.com

Craig Roberts Managing Director Apex Fund Services (Dubai) LtdDubai International Financial CentreDubai, United Arab EmiratesTel: +971 (0)4 352 5659Mobile: 971 (0)50 535 0692Fax : +971 (0)4 352 5662www.apexfundservices.com

Nicolas Angio Head of Operations Apex Fund Services Bahrain WLL Offi ce #55,Building #44, Road #1701Diplomatic Area, Bahrain Tourism Company Building, Manama 317, Bahrain Tel: (973) 17 530217Mobile: (973) 39 690427Fax: (973) 17 531817www.apexfundservices.com

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© 2009 PricewaterhouseCoopers/Mason Hayes+Curran/Apex. All rights reserved.“PricewaterhouseCoopers” refers to the network of member fi rms of PricewaterhouseCoopers International Limited, each of which is a sepa-rate and independent legal entity PricewaterhouseCoopers, One Spencer Dock, North Wall Quay, Dublin 1 is authorised by the Institute of Chartered Accountants in Ireland to carry on investment business.

Disclaimer While every care has been taken in the production of this publication, PricewaterhouseCoopers, Mason Hayes+Curran and Apex do not accept any responsibility in respect of anyone or any organisation acting or refraining to act as a result of this publication. In all cases, appropriate professional advice should be sought (02210).

First for business. First for people.