Right place right time Ireland - the domicile of choice for regulated funds ppt

According to the Central Bank of Ireland, as of the end of November 2011, the assets of Irish domiciled investment funds were EUR 1 trillion, the industry entered 2012 as a trillion euro

Right place right time

Ireland - the domicile of choice for regulated fundswww.pwc.com/ie

1 Foreword 04

Foreword This achievement underlines the

experience, expertise and global reach of Ireland as a leading funds domicile and as

a leading centre for the administration of investment funds

The funds industry continues to be a source of high value employment in Ireland In the two year period from the start of 2010 to the end of 2011 the Irish funds industry will have created 1,143 new jobs in Ireland – bringing total

employment to 12,500

The Irish Funds Industry Association (IFIA) has opened representative offi ces in the US and the UK in a joint venture with IDA Ireland, the Irish Government’s inward investment agency The move means that the Irish funds industry will now have representatives on the ground in New York, Boston, Chicago, Atlanta and London for the fi rst time Offi ces have also been opened in Asia, Singapore and Tokyo.Ireland secured the accolade of Best Offshore Centre at the annual Global Investor Magazine awards 2010 and has recieved many other accolades based on its competitive infrastructure

I trust that you will fi nd this updated brochure on the Irish funds industry benefi cial to your business needs

The asset management world is in the middle of major regulatory change and it is

a testing time for the industry Ireland has been adapting quickly to this new landscape It is now UCITS IV ready with the Central Bank transposing this legislation by the 1 July 2011 deadline and the QIF product is also ‘AIFMD ready’

The Irish funds industry has proven itself

to be strong, diverse and resilient It has emerged relatively unscathed from the global fi nancial crisis According to the Central Bank of Ireland, as of the end of November 2011, the assets of Irish domiciled investment funds were EUR 1 trillion, the industry entered 2012 as a trillion euro industry, a remarkable achievement Ireland was the managers’

choice for both UCITS and alternatives investments in 2011 Recent fi gures from the Central Bank of Ireland show that the number of QIFs, the alternative fund vehicle, is at an all time high of 1,355 funds with assets also reaching a peak of EUR174 billion QIF assets grew some 18%

in 2011 On the UCITS side, EFAMA statistics showed that Ireland attracted the highest infl ow of UCITS net assets (EUR 41.5 billion) of any domicile for 2011 In fact, the statistics show that the gains made by Ireland were almost two and half times that of the next most successful domicile

Damian Neylin

Asset Management Leader Ireland

January 2012

The Irish

funds industry

The Irish funds industry with more than

20 years’ experience and expertise offers asset managers a ‘one stop shop’ for domiciliation Over 50 world class service providers provide an array of services to investment funds An abundance of the big players of the fund servicing world are situated in Ireland including

administrators, lawyers, custodians, auditors, transfer agents etc There is a wide range of specialist expertise in fund structuring, domiciling and administration available within a 12,500 strong

• The world’s leading centre for

the administrations of hedge

funds

• 40% of global hedge fund

assets are serviced in Ireland

• 7.4% of global hedge funds

are domiciled in Ireland

• Ireland is home to 63% of

all European hedge funds

• 18% growth in the Qualifying Investor Fund (“QIF”), the vehicle of choice for fund promoters wishing

to pursue alternative strategies such as hedge funds, in 2011

• 1,355 QIFS now authorised with AUM of EUR 174 bn

• The QIF is “AIFMD ready” as

it already complies with the majority of the requirements

Why Ireland for UCITS?

• Almost 80% of the assets

in all Irish domiciled funds are UCITS

• Approximately 3,000 Irish UCITS funds approved for cross border distribution

• Irish UCITS are distributed

in over 70 countries

• Ireland is the fastest growing major cross border UCITS domicile – over the past ten years the net assets of Irish UCITS have grown by 422%

• Ireland has signifi cant market share

in both Money Market Funds (30%

of European market) and ETF’s (38% of European market)

• Generous VAT exemptions for funds

• Extensive tax treaty network with over 60 countries

• Full compliance with international tax standards

Ireland - Your gateway

to the world

• More than 850 fund promoters from over 50 countries have chosen Ireland as their international hub

• The main countries of origin for fund promoters are the US, UK, Germany, Ireland and Italy The others originate from 45 countries

in Europe, Asia, the Middle East and the America

• Over $ 2.5 trillion investor assets are serviced by Irish service providers from 167 countries

• Ireland service providers support

23 currencies and 28 languages

• Irish funds distribute to over

70 countries in Europe, Asia, the Middle East and the Americas

Source - Irish Funds Industry Information

Promoters from countries all over the

world have set up funds in Ireland

Who is here already?

20 largest promoters in Ireland

13 Royal Bank of Scotland

14 Ignis Asset Management

15 Legg Mason Group

16 Baring Asset Management

No of funds

No of funds

Origin of promoters of Irish domiciled and non domiciled funds

Funding industry in numbers

Service providers

Promoters of Irish administered funds

Promoters of Irish domiciled funds

Promoters of non-Irish domiciled funds

599

Funds Industry by %

Growth in domiciled funds (2009-2010)

Promoters originating from the US

Promoters originating from the UK

European cross border market

• At the end of 2011, assets of Irish domiciled investment funds had reached EUR 1 trillion.

• Ireland was the managers’ choice for both UCITS and alternatives investments in 2011

• Recent fi gures from the Central Bank of Ireland show that the number of QIFs, the alternative fund vehicle,  is at an all time high of 1,355 funds with assets also reaching a peak of EUR174 billion QIF assets have grown some 18% in the past

12 months

• On the UCITS side, EFAMA statistics showed that Ireland was also the domicile of choice for UCITS in 2011 attracting the highest infl ow of net assets of any domicile for the year.  In fact, the statistics show that the gains

made by Ireland were almost two and half times that of the next most successful domicile

• Ireland attracted EUR41.5 billion in net assets of UCITS in the year to date (Oct 2011) The largest infl ows experienced

by any other jurisdiction was only EUR17 billion.  In fact most jurisdictions saw signifi cant losses - some of more than EUR40 billion

• Funds assets fall globally by 27.5%

in 2008

• Net assets of Irish domiciled funds fall by 20% in 2008

• Irish GDP falls 7.6%

growth in Irish domiciled funds

serviced in Ireland reach EUR 1.8 trillion all time high

Management Agency set up to manage bad property loans

for Irish exports worth EUR 161bn

• All time high for Irish UCITS and QIFs UCITS = EUR 759bn (+27% on 2009)

QIFs = EUR 153bn (+35% on 2009)

• Irish GDP falls 1.25%

by 18%

• Irish UCITS receive largest infl ows in Europe

• Irish domiciled fund assets reach EUR 1 trillion

Irish funds industry fared well during challenging economic times

average at 0.7% for year

Source: Irish Funds Industry Association (IFIA), PwC Analysis

Regulation

Overview of the Irish funds industry environment

to non-resident or exempt Irish resident investors

• 69 treaties (55 of which in effect)

Memoranda of

Understanding

(MoU) with

non-EU countries

MoU’s signed with:

Bahrain, China, Dubai, Hong Kong, Isle

of Man, Jersey, Qatar, South Africa, Switzerland, Taiwan, UAE and USA

In addition to the above bilateral Memoranda of Understanding there are also a number of multilateral agreements

in place, having been signed into effect on various dates from March 1996 to date

Tax (continued)

Is stamp duty applicable in your domicile?

No stamp duty or capital duty is payable

on issue, transfer, repurchase or redemption of units in a fund

VAT treatment- What is the VAT treatment for funds?

reverse charge services received

based on proportions of investments (or investors) outside EU

Regulation

Name of regulatory body

Central Bank of Ireland

Available fund/

legal structures (Unit trust, investment company etc)

Average set

up time per structure (UCITS, QIF etc)

UCITS – 4-6 Weeks

Overall establishment including approval

of service providers – 3 months

Non - UCITS

Qualifying Investor Fund (QIF) – 24 hours.Overall establishment including approval

of service providers – 4-6 weeks

Professional Investor Fund (PIF) – 4 weeks.Overall establishment including approval

of service providers – 6-8 weeks

Retail Non –UCITS - 4 weeks

Overall establishment including approval

of service providers – 6-8 weeks

Overview of the Irish funds

industry environment

• Letter of application (All legal structures).

Information Document (KIID) (All legal structures)

structures)

(Investment Company)

• Trust Deed (Unit Trust)

Fund (CCF)

except the Unit Trust)

by fund?

Irish Promoters not legally responsible for losses of funds, as long as due care has been provided

What are the capital requirements for

a self managed company?

EUR 300,000

What are the requirements/

procedures for a fund redomiciling into your domicile?

Ability for a foreign incorporated fund to effectively be re-registered as an Irish Corporate is subject to meeting the Central Bank’s requirements

The process does not require transfer

of ownership of assets to the newly incorporated fund or cause any tax charge

to the fund or underlying investors for doing so

Outline the Risk Management Process for funds in your jurisdiction

on the Central Bank’s guidance notes with fl exibility

funds in Ireland is on a daily basis

the responsibility of any designated individual Collectively the responsibility

of the board of the management company

What is the level

of supervision required over

a custodian

in your jurisdiction?

Custodian has a duty of care to the unit holders and is liable for any failure to meet the requisite standard of care

Can fund be exempt from regulation?

No

memorandum and articles of association;

• The standard notifi cation letter;

the protection of unit holders which provides a similar level of investor protection to that provided in Ireland

enclosing the information and documentation as outlined

by the Central Bank

Advertising Standards for Ireland

The Central Bank is the competent authority for the authorisation of regulated funds in Ireland Their duties include:

• Approval of the fund promoter, investment manager and Management Company

• Approval for the marketing of non-Irish investment funds into Ireland

• Specifi cation and approval of the fund administrator and custodian

• Specifi cation and approval of the prime broker in the case of hedge funds

• Authorisation and ongoing supervision

of Irish funds

The regulatory authority in Ireland has continuously adopted an “open door” policy in their willingness to meet with project promoters and discuss issues directly with them The Central Bank of Ireland is seen to be innovative and proactive to the needs of the Irish Funds Industry whilst maintaining a reputation

as a fi rst-rate regulatory authority

Obtaining approval

Investment funds seeking authorisation to

be domiciled in Ireland must obtain authorisation from the Central Bank and undergo a two stage process in which the promoter and the fund itself, including details of the service providers, is approved The Central Bank will only consider approval of the fund once the promoter approval has been granted, which must be taken into consideration in terms of timing However, if a promoter is authorised in another jurisdiction and meets the principal criteria required by the Central Bank, the Central Bank may run the fund approval process in parallel with the promoter approval

Setting up a fund

in Ireland

Stage 1: Promoter Approval

The promoter is the party responsible

for lodging the application of the fund

authorisation with the Central Bank and

will appoint a legal/regulatory counsel

to draw up the agreements establishing

the fund liaising with the Central

Bank throughout the course of the

authorisation process

To obtain promoter approval, a promoter

must submit a standard application

providing details of:

(whether directly or indirectly) of the

capital or voting rights of the promoter

applicant

and the number of clients

country

funds only

as investment manager/advisor to the proposed fund

The Central Bank must be satisfi ed as

to the promoter’s expertise, integrity and adequacy of fi nancial resources

The promoter must have minimum shareholders’ funds of EUR 635,000

Fast track approval of one week is available for fund promoters

If the proposed investment manager is a separate entity to the promoter, it must also submit an application for approval along the same lines The investment manager must provide suffi cient information to enable the Central Bank to

be satisfi ed as to the expertise, integrity and adequacy of fi nancial resources

The Central Bank provides standard application forms for the approval of the fund and the promoter and the fund’s investment advisor/manager on its website – www.centralbank.ie

Stage 2: Fund Approval

Once the promoter and investment

manager have been approved, the

next step in obtaining approval is

approval for the fund documentation

An application for authorisation of an

investment fund is made by lodging

fund documentation, in draft form, with

the Central Bank The Central Bank will

usually respond with its initial comments

within three to four weeks of receipt of

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 process

To obtain approval an investment fund must submit a standard application to the Central Bank comprising of the following information:

Management Company (if applicable) and administration company (if applicable)

the fund (if an investment company, including their curriculum vitae)

advisor, distributor or placing agent of the fund

by the fund, including investment management/advisory agreements, management agreement, administration and distribution agreements

secretary (if a company)

Approval of service providers

For all Irish investment funds the principal service providers to the fund must be approved in advance This applies to the promoter (as discussed above), the Management Company (if any), the directors, the investment manager (as discussed above) and the Irish administrator and custodian

Management Company

All Unit Trusts and Common Contractual Funds (CCFs) must appoint a Management Company Although an investment company does not require a Management Company, one can be established if necessary

UCITS IV introduces the “full management company passport”, (“MCP”) This MCP will allow a UCITS fund in one domicile to

be managed by a Management Company located in another jurisdiction

Irish UCITS Management Companies and Self-Managed UCITS must comply with the Central Bank’s UCITS notices and guidance note in relation to the Management Company, see below:

• UCITS 2, 10 & 16 of the UCITS notices

• Guidance note - organisation

of Management Companies

• Non UCITS Management Companies are subject to the Central Bank’s non-UCITS notices

These documents are available on the Central Bank website

The directors and managers of the fund

are required to meet certain standards of

competence and probity which requires

them to submit a detailed questionnaire to

the Central Bank seeking approval for that

appointment The Central Bank must

satisfy itself as to the reputation and

experience of all directors by applying its

Fitness and Probity test This is to ensure

that the Directors and Managers have the

proper skills to manage a fi rm “Fitness”

requires that a person appointed as a

Director or Manager has the necessary

qualifi cations, skills and experience to

perform the duties of that position

“Probity” requires that a person is honest,

fair and ethical

The Central Bank of Ireland recently

published its Regulations and Standards of

Fitness and Probity under Part 3 of the

Central Bank Reform Act 2010

From December 1, 2011 existing and new

staff in Pre-Approval Controlled Functions

(“PCFs”) will be subject to the Regulations

and Standards Firms are required to

notify the Central Bank of each individual

in the organisation in a PCF by 31

December 2011

From March 1, 2012 new appointments to

less senior positions Controlled Functions

(“CFs”) will be subject to the Regulations

and Standards From 1 December 2012

the Regulations and Standards will apply

to all staff in existing CFs

The Central Bank also published Draft

Guidance for industry which, among other

things, indicates the type of due diligence

that regulated fi nancial service providers

should carry out in relation to persons

proposed for or holding PCFs or CFs

Details on the new fi tness and probity

regime are available on the Central Bank’s

website

Corporate Governance Code

The IFIA recently release the “Corporate Governance Code; Collective Investment Schemes and Management Companies”

and a questions and answers paper (FAQ’s)

to compliment the Code and support its introduction While the Code is a voluntary industry code its adoption is strongly recommended and it will be effective from the 1 January 2012 with a transitional period of 12 months till the 1st January 2013

The preparation of the Code followed an invitation from the Central Bank to the industry, through the IFIA, to develop a voluntary Corporate Governance Code for the funds industry in Ireland Following considerable engagement with and input from the Central Bank a draft code was prepared and earlier in the year circulated for consultation During the consultation process a signifi cant amount of feedback was received, this feedback was discussed with the Central Bank following which the now fi nalised Code was agreed The Code and the FAQ’s are available from:

www.irishfunds.ie

Administrator / Trustee / Custodian

All Irish investment funds must have an Irish based administrator and an Irish based custodian / trustee The administrator is responsible for the calculation of the NAV, the maintenance of the accounting books and records, the maintenance of the share register etc The custodian / trustee are responsible for safekeeping of the assets and for certain

fi duciary / trustee type functions The custodian cannot be the same entity as the administrator From a prudential and supervision prospective and to demonstrate substance the Central Bank requires the following administrative activities are performed in Ireland:

1 Finalisation of the NAV

2 Access to the accounting books and records

3 Maintenance of the share registerFor further details please see annex II in the UCITS notices

An Irish fund can be established

as one of the following legal

structures:

• Investment Company

• Unit Trust

• Common Contractual Fund

• Investment Limited Partnership

Irish funds are most commonly established

as either investment companies or unit

trusts

The main service providers to an Irish fund

are its administrator, custodian and

investment manager The investment

manager can be based outside of Ireland

but it is a requirement from the Central

Bank that the administrator and the

custodian must be based in Ireland

The Irish custodian model as required by

the Central Bank provides signifi cant

comfort to investors as they specifi cally

require the custodian to act in the interests

of the unit holders in the funds The

custodian will be directly liable to the unit

holders for any unjustifi able failure to

perform its obligations or improper

performance of them Such duties 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

There are two main fund regimes in

Ireland; UCITS and non-UCITS There are

a number of factors to take into

consideration when deciding whether to

structure an investment fund under either

the UCITS or the non-UCITS regime such

as; location of target investors, investment

policy of the fund etc

The non-UCITS regime is more suitable to fund managers who wish to target sophisticated investors namely institutional and high net worth individuals Additionally, certain funds which employ more complex investment strategies posing greater risk in return for potentially greater reward may not be permissible under the UCITS regime but can be set up as non-UCITS funds The most popular fund structure under the non-UCITS regime is the Qualifying Investor Fund (QIF) The QIF is seen as a

fl exible fund structure and has no investment restrictions

On the other hand, the UCITS product is suited to managers who would like to distribute their funds to shareholders on a worldwide basis The aim of the EU’s UCITS Directive was to create a pan-European funds market as part of the EU’s

fi nancial services action plan, the objective

of which, to allow for open-ended funds investing in transferable securities to be subject to the same regulation in every Member State It was hoped that once such legislative uniformity was established throughout Europe, funds authorised in one Member State could be sold to the public in each Member State without the requirement for further authorisation, thereby furthering the EU’s goal of a single market for fi nancial services in Europe This is commonly referred to as a

“European Passport” and is available only

to funds under the UCITS regime Once a UCITS fund is approved in one EU country, application may be made to have the fund registered for marketing to the public in any other EU country

Furthermore the success of the UCITS brand has now transcended beyond the borders of the EU and the UCITS regime is now recognised globally as a well

regulated investment product 358 fund promoters from over 50 countries have set

up Irish domiciled funds which are distributed to over 70 countries across Europe, Asia, the Americas, the Middle East and Africa

UCITS QIF

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 Due to 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

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

• Unit Trust

• Unit Trust

fund Originally created as a true retail product, UCITS funds are sold to the public but also to corporate and institutions As UCITS funds may be easily marketed across the EU and beyond, investors originate from many parts of the world

In 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 EUR 100,000 into the fund Investors will need to be either MiFID professional investors or certify that they have the knowledge and experience necessary to understand the investment in the fund

• Other open ended funds;

futures, forwards, OTC derivatives, CFDs, derivatives on commodities indices, derivatives on hedge fund indices and repos)

As a result the range of assets eligible for the QIF is very

fl exible, making it is an ideal product for structuring many different types of funds including the following:

to laws protecting bondholders The aggregate of any such investments in excess of 5% may comprise up

to 80% of the UCITS net assets

securities or instruments are issued or guaranteed

by a government or its local authorities or by a public international body

unlisted transferable securities and money market instruments

any one CIS Investment in non-UCITS CIS may not,

in aggregate, exceed 30% of net assets

deposits made with the same credit institution This limit is raised to 20% for deposits made with the fund’s custodian

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

issued by, or made or undertaken with, the same body may not exceed 20% of the net asset value of

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

All investment and borrowing restrictions which apply

to retail funds are automatically disapplied in the case

of the 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 and venture capital funds

another scheme the QIF is regarded as a feeder type investment

100% in unregulated schemes subject to a maximum

of 50% in any one unregulated scheme

requirements It is the responsibility of the directors

of the investment company to ensure that the QIF complies with the legislative requirement

public through the issue of debt securities However, the Central Bank does not object to the issue of notes by authorised collective investment schemes,

on a private basis, to a lending institution to facilitate

fi nancing arrangements Details of the note issue should be clearly provided in the prospectus

UCITS QIF

Overall establishment including approval of service providers - 3 months

All the below parties must be approved /cleared by the Central Bank;

• promoter;

(in the case of a Unit Trust and CCF);

(fund administrator, investment manager, directors)

QIFs are authorised to launch within one day of fi ling the prescribed documentation with the Central Bank An application for authorisation as a QIF can be made where the:

• promoter;

(in the case of a Unit Trust and CCF);

(fund administrator, investment manager, directors)

have been approved/cleared by the Central Bank 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 Central Bank 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 Central Bank by 3pm, the QIF will be authorised the following day

Required

service

providers

for the central administration - responsible for accounting, NAV calculation, keeping register of shareholders

as a Unit Trust or CCF

be responsible for the central administration - responsible for accounting, NAV calculation, keeping register of shareholders

UCITS QIF

(Investment Company)

• Trust Deed (Unit Trust)

the Unit Trust)

(Investment LimitedPartnership)

(Optional for Investment Company)

• Fund profi le

structures except the Unit Trust)

(Investment Limited Partnership)

(Optional for Investment Company)

(If applicable)

Ongoing obligations for Funds

The reporting requirements for each

authorised collective investment scheme

are set out in the letter of authorisation

issued to each scheme The following

reports must be submitted to the Central

Bank:

• Monthly, half-yearly and annual reports

of the authorised scheme

• Annual audited accounts of the related

fund management company

The quarterly OFII return must be

submitted to the Statistics Department of

the Central Bank of Ireland within ten

working days of the end-quarter to which

it refers This data should be consistent

with what is reported on the equivalent

monthly NAV return For more

information, please visit the Central Bank

website

The monthly return should be submitted

to: The Funds Team, Statistics

Department, Central Bank of Ireland,

within ten working days of each month

end from authorisation date

A reporting code is assigned to each

scheme on authorisation

The UCITS/ Non UCITS notices set out

further details of the reporting

requirements applicable to each scheme

• UCITS Part 7.1 sets out information to be

included in monthly returns to the

Central Bank on the UCITS

• UCITS Part 8.2 and Appendices A and B

sets out information on the publication

of annual and half-yearly reports

• NU 10 sets out information to be

included in monthly returns to the

Central Bank

• NU 11 and Appendices A and B sets out

information on the publication of annual

and half-yearly reports

Ongoing obligations for Management Companies

Half Yearly Returns

Half-yearly fi nancial accounts must be submitted within two months of the relevant reporting period and must be accompanied by the Minimum Capital Requirement Report, which forms part of the UCITS/ non UCITS Notices

Online Submission of Financial Returns

From the 1 September 2011 UCITS/non UCITS Management Companies must submit a number of returns in an electronic format

These fi nancial returns are submitted through a web-based electronic reporting system

The following will assist you in completing your returns:

• Online Reporting System User Manual - Fund Service Providers

• FINREP for Fund Service Providers - Guidance Note

• FINREP for Fund Service Providers - Guidance Note - Appendix 1

Internal Audit Reports

Copies of reports from Internal Audits carried out on UCITS/non UCITS Management Companies are required to

be submitted to the Central Bank

Management Company

In relation to the Management Company aspect, all Management Companies must ensure that they are now compliant with the Markets in Financial Investment Directive (MiFID) provisions with have been added to UCITS IV The Markets in Financial Investment Directive (MiFID) is

a European Union Law that provides harmonised regulation for investment services across the Member States of the European Economic Area (EEA) This also applies to self managed UCITS

Requirements in relation to Irish Management Companies are outlined in the following documents available on the Central Bank website

• UCITS 2, 10 and 16 of the UCITS notices

• Guidance Note – Organisation of Management Company

Key Investor Information Document

The Key Investor Information Document, (“KIID”) replaces the current Simplifi ed Prospectus and is another mandatory requirement of UCITS IV for clients The KID is a short two page, clear, concise information document

From 1 July 2011, all newly authorised UCITS must publish a KIID per UCITS/sub-fund Following 30 June 2012 all UCITS/sub-funds must publish a KIID There is a grandfathering provision available between 30 June 2011 and 30 June 2012 where all existing funds can still use a Simplifi ed Prospectus

Requirements in relation to the KIID are outlined in the following documents on the Central Bank website:

• UCITS 19 of the UCITS notices

• Policy Document – Transition from Simplifi ed Prospectus to KIID

• Guidance Note – Publication

The application of UCITS IV in Ireland

UCITS IV introduces changes in the following areas: Notifi cation procedure, Management companies, Key Investor Document, Mergers and Master Feeder structures

Not all of the above are mandatory, the changes in relation to mergers & master feeder structures will only impact clients who chose to use them

On the 29 June 2011, the Minister for Finance signed legislation that transposes UCITS IV into Irish law The Statutory Instrument 352 of 2011 consolidates all previous UCITS legislation and includes the provisions of the UCITS IV Directive including: the management company passport, the Key Investor Information Document, simplifi ed notifi cation procedures for cross-border marketing, as well as provisions for cross-border mergers and master-feeder structures

The Central Bank of Ireland has issued revised Notices and Guidance Notes to refl ect the UCITS IV legislation The Central Bank has also revised and updated its NU Notices The updated UCITS and non-UCITS Notices and Guidance Notes are available on the Central Bank’s website

sectors/funds.

www.centralbank.ie/regulation/industry-Requirements in relation to the new notifi cation procedure are outlined in the following documents on the Central Bank website:

• UCITS I5 of the UCITS notices

• Policy Note: UCITS authorised in another Member State intending

to market in Ireland

Master Feeder Structure/ Mergers

These are the two non-mandatory aspects

of UCITS IV, the Central Bank requirements for these provisions are outlined in the below documents

• Master Feeder – UCITS 18 of UCITS notices

• Mergers - Amalgamation of Irish authorised collective investment schemes with other collective investment schemes

The above documents are available on the Central Bank website

Re-domiciling a fund to Ireland

Irish company law enacted in September

2010 introduced new provisions enhancing the effi ciency and simplifying the process of offshore corporate investment fund re-domiciliation to Ireland

Pursuant to the legislation, existing offshore funds in the following approved jurisdictions can redomicile to Ireland: the Cayman Islands, the British Virgin Islands, Jersey, Guernesy and the Isle of Man

Other jurisdictions may be added by order

of the Irish Minister for Enterprise Trade and Innovation

Notifi cation Procedure- Inward

marketing

The new notifi cation procedure for the

cross border marketing UCITS funds in the

European Union will be

regulator-to-regulator The UCITS home Member State

regulator will have only a maximum of 10

working days to review a notifi cation fi le

(standardised in form and content) and to

transmit it to the host Member State

regulator, thereby triggering the

immediate right to start marketing

activities in that country Upon sending of

the notifi cation email including the UCITS

documentation, the home Member State

regulator shall inform the UCITS of its

right to access the host country market

immediately The host Member State

regulators shall confi rm receipt /

completeness of the notifi cation request

within 5 working days The home Member

State regulator must ensure that the

transmission of the complete

documentation to the host Member State

regulators has taken place before it notifi es

the UCITS about its transmission Member

States regulators shall accept transmission

and fi ling of notifi cation documents by

e-mail The Irish email address is

UCITSinwardmarketing@centralbank.ie

UCITS wishing to market in a foreign EU

country must submit the following

documents to their home regulator who

will in turn send onto the host regulator

using the above mentioned procedure;

• The trust deed, the deed of constitution

or the memorandum and articles of

association;

• The latest prospectus;

• The standard notifi cation letter;

• The latest annual report and any

subsequent half-yearly report; and

• The Key Investor Information

Document(KIID)/Simplifi ed Prospectus

The new re-domiciliation regime provides

a clear framework ensuring minimal

disruption to day-to-day management and

distribution of the funds whilst preserving

their legal identity The legal (registering

with the Companies Registration Offi ce

(CRO)) and regulatory (approval by the

Central Bank), processes involved in

re-domiciliation are relatively

straightforward minimising the

administrative burden of migration The

Central Bank of Ireland issued a “Guidance

Letter” outlining the practical steps

involved for both corporate funds and unit

trusts Where a fund is a unit trust there is

no need to fi le with the CRO, however

additional documentation will be required

for submission to the Central Bank

Post migration, there is an obligation on

the migrating company to submit, within 3

days of registration in Ireland,

confi rmation of de- registration from its

original domicile to the Central Bank and

to comply with applicable Irish corporate

and regulatory requirements on an

ongoing basis

Re-domiciliation allows offshore corporate

funds to maintain its legal entity whilst

existing shareholders’ shares remain

unaffected However some changes will be

required including change of registered

offi ce address and addition of plc (or Public

Limited Company) to the name and

amendment of fund documentation to

refl ect migration and applicable Irish law

Further to recent lobbying by the funds industry, there is a current review underway concerning fund re-domiciliation which is looking at extending the scope of the Investment Limited Partnership Act 1994, to enable limited partnerships to migrate to Ireland Additionally, the Irish Funds Industry Association has been devoting resources to having legislation put in place (the OEIC proposal) to enable funds to be set up outside the remit of company law which would result in the fund not having a ‘plc’ designation (as it would not consist as a

‘per se corporation’ for US tax purposes) and as such could be in a position to ‘check the box’ This proposal would undoubtedly

be a welcome development, signifi cantly enhancing the attractiveness of Irish funds

to investment managers seeking to market

in the U.S

Distribution of

Irish funds

Ireland is one of the main gateways for UCITS funds Irish UCITS are distributed

to a large number of countries across Europe, the Americas, Asia and the Pacifi c,

the Middle East and Africa The chart below outlines the distribution of Irish UCITS over the last fi ve years

Total number of registrations for Irish

UCITS funds in each of the

Europe is consistently the most popular

market for Irish UCITS funds, it has the

highest number of Irish fund registrations

annually and this has steadily increased

since 2006 Asia Pacifi c has the second

highest number of Irish UCITS fund

registrations which peaked in 2008 with

934 registrations The number of Irish

UCITS registrations for the Middle East

has been reducing year on year The

number of Irish UCITS registrations for the

Americas had been increasing every year

but has dropped for the fi rst time in 2010

Africa has the lowest number of Irish

UCITS registrations out of the fi ve regions

Total number of registrations per year of

Irish UCITS funds into Europe

2006 2007 2008 2009 2010

050100150200250300

Total number of registrations per year of Irish UCITS funds into the Americas

2006 2007 2008 2009 2010

01836547290108126144162180

Total number of registrations per year of Irish UCITS funds into the Middle East

2006 2007 2008 2009 2010

0102030405060

Total number of registrations per year of Irish UCITS funds into Africa

Total number of registrations per year of

Irish UCITS funds into the Asia Pacifi c

Top ten distribution countries for Irish UCITS funds

Top fi ve European countries for Irish UCITS

Top fi ve Asian Pacifi c countries for Irish UCITS

-Top Middle Eastern countries for Irish UCITS

Top Americas countries for Irish UCITS

-Top African countries for Irish UCITS

The UK consistently has the highest

number of cross-border fund

registrations in the past fi ve years

Germany has the second highest

registrations every year for the past fi ve

years The subsequent rankings from

3rd to 9th place have included the same

seven countries over the last 5 years

These include; Austria, France, Italy,

Luxembourg, Netherlands, Spain and

Switzerland, whose rankings have

varied from year to year The last place

in the top ten changed annually

between 2006 and 2010 (Hong Kong,

Sweden, Luxembourg and Singapore)

Distribution Channels for the

top 10 Distribution countries

for UCITS

As seen in the table, Retail Banks continue

to be the dominant distribution channel

for UCITS funds It is the main distribution

channel for all countries with the

exception of Switzerland and the UK

In Switzerland, not surprisingly, private

banks are the main channel In the UK,

the main channel is independent fi nancial

advisors France is one of the only

countries which has a broad mix of

channels, with a spread between

retail banks, insurance companies

and private banks

Source: PwC Research

Distribution Channels for the top 10 Distribution countries for UCITS

Ranking Country Traditional Fund

Distribution Channels

Main channel

& players

funds, insurance, fund supermarkets, institutions, pensions, independent

fi nancial advisors (IFAs)

Retail banks (over 40%)

funds, insurance, pension funds, fund platforms, online brokers, independent fi nancial advisors (IFAs)

Retail Banks

funds, insurance, fund supermarkets, institutions, pensions, independent

fi nancial advisors (IFAs)

Private banks (over 40%)

funds, wrappers, fund supermarkets, online brokers, independent fi nancial advisors (IFAs)

Retail banks

funds, fund supermarkets, online brokers, pensions, independent

fi nancial advisors (IFAs)

Retail banks (over 60%)

of funds, wrappers, insurance, fund supermarkets, online brokers, institutions, independent fi nancial advisors (IFAs), pensions

IFAs (over 50%)

of funds, insurance, institutions, pensions, independent fi nancial advisors (IFAs)

Retail banks, insurance companies and private banks cover 60% Banks (over 20%), Insurance (over 20%), Private Banks (over 10%)

funds, insurance, fund supermarkets, institutions, pensions, independent

fi nancial advisors (IFAs), promoters

Retail banks (over 50%)

insurance, funds supermarkets, pensions, independent fi nancial advisors (IFAs)

Retail banks

management companies, small private market operators

Retail banks

Top 20 Investor Markets

Based on the combined assets of domiciled and non-domiciled funds serviced in Ireland

Million

Channels*

Main Channels

Hedge Fund Distribution Channels

**

Kingdom

banks, fund of funds, wrappers, insurances, fund supermarkets, online brokers, institutions, independent fi nancial advisors (IFAs), Pensions

IFAs (over 50% of the market)

Banks, wrappers, private placement, investment manages

supermarkets, fi nancial advisers, independent representatives

Financial advisers are the main channel

Private placement

securities, direct sales

Securities (over 50%

of the market)

Private placement

fund of funds, insurance, fund supermarkets, institutions, pensions, independent fi nancial advisors (IFAs)

Private banks (over 40% of the market)

Banks, fund distribution companies, wrappers, private placement, other regulated fi nancial services institutions, non-regulated fi nancial services intermediaries, investment manages

fund of funds, wrappers, fund supermarkets, online brokers, independent

fi nancial advisors (IFAs)

Retail banks are the main channel

Banks, fund distribution companies, wrappers, private placement, other regulated fi nancial services institutions, non-regulated fi nancial services intermediaries, investment managers

fund of funds, wrappers, fund supermarkets, online brokers, independent

fi nancial advisors (IFAs)

Retail banks are the main channel

Banks, wrappers, private placement

direct sales, others

Banks and insurance companies (over 70%

of the market)

Banks, fund distribution companies, wrap platforms, other regulated

fi nancial services institutions

fund of funds, insurance, fund supermarkets, institutions, pensions, independent fi nancial advisors (IFAs)

Retail banks (over 50% of the market)

Private placement

Top 20 Investor Markets

Hedge Fund Distribution Channels **

fund of funds, insurance, fund supermarkets, institutions, pensions, independent fi nancial advisors (IFAs)

Retail banks (over 40% of the market)

Banks, fund distribution companies, wrappers, private placement, other regulated

fi nancial services institution, non-regulated fi nancial services intermediaries, investment managers

fund of funds, insurance, institutions, pensions, independent fi nancial advisors (IFAs)

Retail banks (over 20%) insurance companies (over 20%) and private banks (over 10%)

Banks, fund distribution companies, wrappers, other regulated fi nancial services institutions, investment managers

wrappers, insurance, fund supermarkets, pensions, independent fi nancial advisors (IFAs)

Retail banks are the main channel

Banks, fund distribution companies, wrappers, private placement, other regulated

fi nancial services institutions, investment managers

asset management companies, small private market operators

Retail banks are the main channels

Banks, fund distribution companies, other regulated

fi nancial services institutions, non-regulated fi nancial services intermediaries, investment managers

securities, others

Banks and insurance companies (over 80%)

Banks, private placement, other regulated fi nancial services institutions, non-regulated

fi nancial services intermediaries, investment manager

banks, fund of funds, fund supermarkets, online brokers, pensions, independent fi nancial advisors (IFAs)

Retail banks (over 60%)

Banks, fund distribution companies, wrappers, other regulated fi nancial services institutions, investment managers

fi nancial services institutions, investment managers

securities, direct sales

Banks and insurance companies (50%)

Banks, fund distribution companies, private placement, investment managers, other regulated fi nancial services institutions

Top 20 Investor Markets

Hedge Fund Distribution Channels **

agents and IFAs, platform sales through management companies, life companies, linked investments, pension funds and multi-mangers

Ties agents, life companies, linked investments

Banks, wrappers, private placements, investment managers

securities, direct sales, others

Banks and insurance companies (80% of market)

Banks, private placement, investment managers, other regulated fi nancial services institutions

securities, direct sales, others

Banks and insurance companies (over 70% of market)

N/A

Emirates

intermediaries, direct sales

Banks are the main channel

Investment managers

* Includes mutual funds, money market funds, ETFs, multi-manager and other traditional asset allocation strategies

**Includes hedge funds, private equity, property, fi nd of hedge funds, and other alternative assets allocation strategies

Source: Irish Funds Industry Information