Industry Briefing Seminar - IMAS...» Staffing resources » Capacity » Servicing considerations » Transfer agency » AML » Equalisation » NAV production » Pricing/valuation policy

Singapore,

Tuesday, 27th November 2007

Industry Briefing Seminar

hosted by the

Irish Funds Industry Association

Welcome Remarks

» H.E. Richard O’Brien, Ambassador of Ireland to Singapore

» Deirdre Power, Deloitte & Chair, IFIA

Ireland as an International Funds Centre

Seán Páircéir, Brown Brothers Harriman & Vice Chair, IFIA

Tara Doyle, Matheson Ormsby Prentice

Deirdre Power, Deloitte & Chair, IFIA

Gerry Brady, Northern Trust

Background to Ireland

as an International Funds Centre

Seán Páircéir, Brown Brothers Harriman & Vice Chair, IFIA

Ireland – An International Investment Funds Centre

» The fastest growing International Fund Domicile

» Extensive Product Range Available

» UCITS: Undertaking for Collective Investment in Transferable Securities. A European fund passport with a high level of acceptance by Regulators world-wide

» Equity, Bond, Money Market, Multi-Manager, Index Funds, Exchange Traded Funds, Fund of Funds, REITS, Securitised Vehicles

» Non-UCITS : A regulated investment product for Alternative Asset Classes including : » Property, Private Equity, Fund of Funds, Fund of Hedge Funds, Venture Capital Funds» Super QIF Regime – a significant new opportunity» Super QIF Regime – a significant new opportunity

» A “Centre of Excellence” for Fund Servicing» 23 Custodian Banks, 43 Administration Companies

» Supporting Investment Product sponsored by the world’s top Asset Managers and sold into the world’s most significant markets

» Maintaining Competitiveness is a key public policy objective

Dublin’s Quays from the City Centre

Ireland – A substantial and growing fund’s domicile

Funds Administered in Ireland Eur bn

856bn 2005

1,384bn 2007

Product Analysis

IrishDomiciled

UCITS

2006 919bn

Irish Product the Global Context

UCITS Market

6.5 trillionLuxembourg

28%

France

23%

Others

15%Germany 4%

Spain 4%

Italy 5%

Source: Lipper/IFSRA

2000 289bn

2002

2001 390bn

410bn

445bn 2003

564bn 2004

810bn810bn810bn810bn


Non-Irish

Domiciled



Non-UCITS


Alternative

Investment

Product

Dublin’s Spire on O’Connell Street

Source: EFAMA

23%UK

11%Ireland

10%

Rest

Of

World

70%

Ireland

30%

Source: HFM

Irish Administered Alternative Assets

» European Union and OECD Member State

» Strong Regulatory Environment

» Flexible and Skilled Workforce

» Positive Demographic in population» 40% under 25 years old

» Favourable employment laws

Ireland’s Competitive Advantage

International Financial Services Centre from the Liffey

» Collaborative Industry Environment

» Competitive between institutions» Cost » Product Innovation

» Collaborative for industry initiatives» New industry products» Agreement on legislative changes» The concept of Ireland inc.

» Growth in real demand from investors for flexible investment products

» Irish Tax system is not exported to host countries. Local rules can apply

by jurisdiction

The Irish Legal and Regulatory Environment for

Investment Funds

Tara Doyle, Matheson Ormsby Prentice

» IFSRA

» Types of Irish legal vehicle:

The Irish Legal and Regulatory Environment

» Unit trusts

» Common contractual funds.

» Investment companies

» Classification of Irish Funds

» UCITS» European passport» Global brand

» Non-UCITS


» Non-UCITS» Feeder funds

» Types of Non-UCITS Funds

» Retail – no minimum subscription» Professional investor - €125,000 minimum subscription» Qualifying investor - €250,000 minimum subscription

» Marketing of Singapore Funds in Ireland and Europe

» Inward marketing of Singapore funds to Irish investors» UCITS funds of funds – are Singapore funds eligible assets?» Non-UCITS funds of funds and feeder funds


» Non-UCITS funds of funds and feeder funds» Prospectus Directive passport» EU private placement regime?

Tax Environment for Irish Investment Funds

Deirdre Power, Deloitte & Chair, IFIA

» Tax benefits of an Irish Fund

» No Irish Tax on Non-resident Investors

» Treaty Access to reduce Withholding Tax

Ireland – A Tax Efficient Location for your Fund

» Tax Transparency of the Common Contractual Fund – “CCF”

» No tax payable by the Irish Fund

» “Gross Roll Up” – legislation permits fund to buy/sell assets & no Irish tax.

» No annual tax on net asset values – e.g. no tax d’abonnement.

Tax Benefits of an Irish Fund

» No Capital taxes – e.g. no tax on issues of shares/units in the fund

» No VAT (sales tax) – recovery possible

» No Irish withholding on Irish source cash flows to a fund

» Reorganisation/Redomicile Reliefs available

- Omnibus declaration of non-resident investors- No Irish Stamp Duty on assets transferred

» Non-Resident declaration on initial subscription – gross payments as a result

» No Irish Income Tax or Capital Gains Tax

» No Irish Gift/Inheritance taxes

No Irish Tax on Non-Resident Investors

- where both parties are either domiciled or ordinarily resident outside of Ireland

In summary, no Irish tax on non-resident investors in Irish Funds.

Tax on investors decided by their home country, not Ireland

» 44 Double Taxation Agreements (and growing)

» Access depends on:

» Fund type

» Particular treaty

» Luxembourg – limited access like Ireland

Treaty Access to reduce Withholding Tax

» Luxembourg – limited access like Ireland

» US/Ireland Double Taxation Treaty

- Recognises Irish funds as treaty residents- Limitation of Benefits clause applies as normal

» Review each country individually

» Alternative Structures for Treaty Access

Irish Fund

(Non-UCITS)

Treaty Access to reduce Withholding Tax

Irish Company

Section 110

Profit participating note

Equity Investments – e.g. Singapore

Access to Irish Tax Treaties

• No Irish tax on CCF

• CCF transparent for Irish tax purposes

• All income and gains arise to investors.

•Investors can be pension funds or

UK Pension Fund

CCF

Dutch Institution

The Tax Transparency of the Common Contractual Fund “CCF”

•Investors can be pension funds or institutions (but no individuals).

• US confirmed transparent status– Very Important

• Transparency should allow investors access to tax treaty reliefs

• Confirmation needed from each jurisdiction on transparency of CCF from an investor and investment perspective

CCF

Investment Manager(s)

Investments

Treaty access

Treaty access

The Administration and Custody of Investment Funds

in Ireland

Gerry Brady, Northern Trust

The Administration and Custody of Investment Funds in Ireland

» Introduction

» ISEQ listing» Servicing centre» Domicile of choice

» Regulation

» Fund vehicle» Fund vehicle» Promoter/investment manager» Administration company» Trustee/custodian company» Management company» Non-Irish funds» ISEQ listing

The Administration and Custody of Investment Funds in Ireland» Fund Administration

» Transfer Agency» NAV production» Financial reporting

» Trustee/Custodial Services

» Fiduciary responsibility» Operational responsibility» Operational responsibility

» Safekeeping» Transaction settlement» Corporate actions

» Additional Services

» Corporate secretarial services» Directors» Tax reporting» Back/middle office» Credit» Securities lending


» Market Characteristics

» 46 licensed administrators» 22 licensed custodians» Mature industry» Staffing resources» Capacity

» Servicing considerations» Servicing considerations

» Transfer agency» AML» Equalisation

» NAV production» Pricing/valuation policy

» Financial reporting» Choice of GAAP

» Fiduciary services» Investment/borrowing constraints

» Custody operations» Contractual settlement


» Conclusion

» Robust servicing industry» Choice» Value» Reputation» Reputation

The Role of the Central Government in the Funds

Industry

George Shaw, Principal, Department of the Taoiseach (Irish Prime Minister)

Department of the Prime Minister (Taoiseach)

» Clearing House Group (CHG)

» Main strategic group located in the Office of the Prime Minister

» Senior Representatives of both the public service and industry

» Chaired by the Secretary General to the Irish Government

» Sets strategic direction for the funds industry following consultation with all relevant stakeholders

Funds Working Group

» Membership includes representatives of Government Departments, State agencies, the Financial Regulator and the industry

» Its role is to ensure that the legal, regulatory and fiscal environment is conducive to the development of the funds industry

» Through close co -operation between the various Government » Through close co -operation between the various Government agencies and the industry, it adds to the breadth of experience available to the funds industry

» Maintains Ireland as a competitive location for the domicile, administration and management of investment funds

Regulatory-Fiscal

» The Funds Working Group acts as a facilitator between industry and the various Government Departments and State Agencies

» Provides the industry direct contact with the Department of Enterprise, Trade and Employment on legislation , the Department of Finance and the Revenue Commissioners on fiscal matters ,and the Financial Regulator on regulatory fiscal matters ,and the Financial Regulator on regulatory matters.

» The Group also has an input through the Tax Strategy Group into the annual Finance Bill.

Education

» Identification of importance of additional education, training and research and upskilling for the further development of the funds industry

» A commitment in the strategy document “Building on Success ” to identify existing and future skills needs and to provide a framework to support the delivery of the associated Success ” to identify existing and future skills needs and to provide a framework to support the delivery of the associated education provision to meet these needs.

» Government study being concluded to identify the current and future skills needs requirement to develop a successful international financial services industry. Action will be taken as a result of its findings.

Coffee Break


hosted by the


Singapore,


Introduction to Irish Investment Fund Products

Dan Morrisey, William Fry

» Introduction

» Sophisticated Investor Products

» Retail Products including UCITS


» Retail Products including UCITS

» Pooling Products

» Questions and Answers

» Authorisation depends on Investor Classification

– Retail

UCITS

Non UCITS


– Sophisticated Investor

» Common Thread – Ireland is a Regulated Domicile→ all Funds benefit from Investor Protection Regime

Professional

Qualifying

Categories of Irish Domiciled Funds by Investment

Strategy

Most Conservative Most Flexible

UCITS Non UCITS ProfessionalInvestor

QualifyingInvestorUCITS Non UCITS Investor Investor

Min. SubEquiv. €125,000

Min. Sub Equiv. €250,000for Investor + Min Net Worth Requirement for Investor

Categories of Irish Domiciled Funds – Growth Trend: Numbers

0

100

200

300

400

500

600

700

800

900

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

-07

Non-UCITS

0

300

600

900

1200

1500

1800

2100

2400

2700

3000

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

Jun-07

UCITS

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

Jun-

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

Jun

0

50

100

150

200

250

300

350

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

Jun-07

Professional Investor

0

100

200

300

400

500

600

700

800

900

1000

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

Jun-07

Qualifying Investor

June 2007 Based on Irish Financial Services Regulatory Authority Figures

Categories of Irish Domiciled Funds – Growth Trend

100

200

300

400

500

600

700

800

900

1000

200400600800

10001200140016001800200022002400260028003000

UCITS Non-UCITS Retail

0

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

Jun-

07

0200

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

Jun-

0

100

200

300

400

500

600

700

800

9001000

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

Jun-

07

0

100

200

300

400

500

600

700

800

900

1000

1991

1992

1993

1994- Ni

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

Jun-

Professional Investor Qualifying Investor


Funds Domiciled in Ireland – Breakdown of Assets

under Management – All Categories80.5%

3.9%

2.8%

12.7%

0.2%

UCITS €654 Bn

€ 31.6 Bn Retail Funds

€22.7 Bn Professional Investor Funds

€103.3 Bn Qualifying Investor Funds

€1.3 Bn Non-Designated Funds

Non UCITS: €159 Bn


» “Barbell Development”

yet


» Blurring of Distinction in Product Design

- Sophisticated Product Design Opportunities in UCITS III

Introduction to Irish UCITS Funds

Michael Barr, A&L Goodbody

UCITS - Introduction

» European wide regulated retail fund

» Regulated by home regulators with right to passport into other European jurisdictions

» Well regarded worldwide (not just in Europe)

» Has been developed and up-dated

» Proactive dynamic regulation

» Rules to ensure effective and uniform investor protection covering:

» Supervision of the Fund» Safe-keeping of assets by a third party» Investment limits» Information right for investors» Meaningful diversification

Attractions of a UCITS

» Retail Product

» Also of interest to institutional investors

» Insurance companies;

» Pension funds» Pension funds

» Ability to passport

» International brand recognition

UCITS – Eligible Assets

» Transferable securities

» Money market instruments

» Collective investment schemes

» Derivatives» Derivatives

» Deposits

» Warrants

Each category subject to various classification rules in each case as regards eligibility.

Development of UCITS Eligible Assets

» UCITS III Rules

» Derivatives (ability to use them for investment purposes)

» Fund of funds

» Index funds

» Money market funds

» Latest Irish development – ability to short sell provided it is covered by way of securities lending arrangement

Resulting Developments

» Much increased use of derivatives

» Structured products housed within a UCITS

» 130/30 Funds

» Using a UCITS as an effective institutional product offering

UCITS as a Global Product

» Well respected as a high quality brand

» Footprint in over 50 countries

» Particularly strong in Asia and South America

» 90% of cross border UCITS domiciled in Ireland and Luxembourg

UCITS – the Next Stage

» 2006 White Paper

» Legislative proposal plan for end January 08 – Implementation by end 2008

» Address issue of management company passport

» Framework for cross border fund mergers

» Deal with pooling mechanisms (for example master – feeder structures and virtual pooling)

» Key investor disclosure document (replacement of simplified prospectus)

Sophisticated Investor Products

Kevin O’Connor, Arthur Cox

Qualifying Investor Funds

» Minimum Subscription €250,000 per investor.

» Individual Investor – minimum net worth €1.25m.

» Institutional Investor – owns or invests €25m.

» Qualifying Investor must certify they meet the minimum criteria.

» Exceptions to minimum investment criteria permitted for management/investment management/investment advisory company or a director or senior investment employee of such company.

» All investment and leverage restrictions disapplied.

» Disclose in prospectus investment objectives and policies; borrowing policies; quantitative parameters on extent of leverage.


» Prospectus must include prominent risk warning as to potential for above average risk.

» Investment companies must still comply with risk spreading principle in accordance with Companies Act 1990.

» From 14 February 2007 QIF fund documents no longer submitted to Financial Regulator for review.

» Application Form submitted with final documents and if application is in order authorisation letter issues next day.


next day.

» Promoter and service providers must still be approved.

» Still need Irish administrator and custodian/trustee.

» Possible to appoint a prime broker.

» Very popular vehicle.

» Speed to market critical feature.

» Ideal for hedge funds or other sophisticated products.


Professional Investor Funds

» Minimum subscription €125,000 per investor.

» Exceptions to minimum investment criteria same as for QIFs.

» Derogations from general investment restrictions granted by Financial Regulator on a case by case basis.

» Typically general retail investment restrictions doubled, i.e. PIF may invest up to 20% of NAV in the securities of any one issuer.

» Typically borrowings up to 100% of NAV allowed.

» May appoint a prime broker.

Limited Liquidity Funds

» Hybrid between closed-ended funds and open-ended funds.

» Right to redeem can be deferred/ delayed at the discretion of the Trustees/Directors.

» Limited liquidity funds are not required to list on Irish Stock Exchange as is case for closed-ended funds.

» Useful structure for fund of funds where underlying investments are illiquid due to lock-ups.

Fund of Funds

» Rule for retail funds is that the target funds must be authorised in Ireland or in a jurisdiction with equivalent investor protection.

» PIF (which is a Fund of Funds) may invest up to 20% of its NAV in a target fund but 100% of its assets may of its NAV in a target fund but 100% of its assets may be invested in unregulated funds.

» QIF may invest up to 40% of its NAV in a target fund but 100% of its assets may be invested in unregulated funds.

Pooling Products

Dan Morrisey, William Fry

Feargal O’Reilly, KPMG

What is Pooling?

Entity PoolingPooling which aggregates the assets of participating funds through a separate vehicle (e.g. the CCF)

Virtual PoolingPooling using information technology to aggregate amounts as if they were an underlying pool without actually constituting the pool as a separate vehicle.

What is Asset Pooling?

Existing Investment Structure Asset Pooling Structure

UK Pension Fund

Irish Company

Dutch BV

Swiss Pension Fund

UK Pension Fund

Irish Company

Dutch BV

Swiss Pension Fund

Investments Investments Investments Investments

becomes…Common Contractual Fund

Investments

equals…Economies

of

Scale

What is Virtual Pooling?

Existing Investment Structure Virtual Pooling Structure

UK Pension Fund

Irish Company

Dutch BV

Swiss Pension Fund

UK Pension Fund

Irish Company

Dutch BV

Swiss Pension Fund

Investments Investments Investments Investments

becomes…

Investment Pool

Key Benefits

» Greater access to Investment Managers for what would have been smaller portfolios

» Greater structuring/blending opportunities

» Reduced number of portfolios → Proportionate reduction in volumes of transactionsvolumes of transactions

» Larger Pools → Larger transactions → Lower costs

» Larger Pools → Scale → Lower investment management fees and custody/ administration costs

» Larger Pools → Greater Access to Securities Lending

Common Contractual Fund

» Established under the law of contract by Deed of Constitution (Custodian + Manager)

» Has no separate legal personality of itself – relationship between CCF and investors is a contractual oneand investors is a contractual one

» Investors hold co-ownership rights in assets as tenants in common

» Investor liability limited to amount contributed for units

» Segregated liability between Sub-Funds

Common Contractual Fund – Legal Features

» Established under the law of contract by Deed of Constitution (Custodian + Manager)

» Has no separate legal personality of itself – relationship between CCF and investors is a contractual oneand investors is a contractual one

» Investors hold co-ownership rights in assets as tenants in common

» Investor liability limited to amount contributed for units

» Segregated liability between Sub-Funds

Common Contractual Fund – Regulatory Options

» As a UCITS – UCITS III investment and borrowing restrictions apply

» As a Non-UCITS:» As a Non-UCITS:

» QIF: No investment restrictions imposed

» PIF: Derogations available from standard non-UCITS investment restrictions on a case by case basis

» CCF – available to institutions – not individuals

Asset Pooling

- Why Should You Be Considering It?

Feargal O’Reilly, KPMG Ireland

1. Initial challenges have been met

» A number of asset pooling structures currently exist

» Irish administrators / custodians have invested heavily in and many have developed their systems to facilitate asset pooling

» Legal council have been through the authorisation process» Legal council have been through the authorisation process

» Tax professionals have clarity on transparency

» The Regulator has authorised pooling structures

IN SHORT ASSET POOLING WORKS

Recent CCF examples

» Multinational Pension Funds Nestle, IBM

» Investment Managers Vanguard, Legal & General, Deutsche Bank

2. Withholding Tax Efficiencies

Potential benefits of transparent fund

» Can remove withholding tax drag

» Direct impact on performance

Pooling Vehicles

�

�

1. Cheaper service provider costs

2. Better investment performance

�

�

Potential benefit Opaque Transparent

Withholding tax can be a real cost!

�

�

�

��

2. Better investment performance

3. Lower regulatory costs

4. Better risk management

5. Tax efficient

�

�

�

�

Pooling Vehicles - Opaque

Irish Corporate FundU.K. Pension

Scheme

U.S. Dividends

U.K. Dividends Irish Dividends

Net IncomePaid as Dividend

Only has recourseTo Ireland – U.K. DTA

SchemeDutch Dividends

Withholding tax suffered based on Irish corporate fund and

its ability to obtain reduced WHT

Pooling Vehicles - Transparent

Irish CCF U.K. Pension

U.S. Dividends

U.K. Dividends

Income maintainsCharacter

U.S. Dividends

U.K. Dividends

Withholding tax suffered based on U.K. Pension Scheme and

its ability to obtain reduced WHT

Irish CCF U.K. PensionScheme

U.K. Dividends

Dutch Dividends

Can use U.K. DTANetwork to reduce

or recover withholdingTax suffered

U.K. Dividends

Dutch Dividends

Tax Comfort

» It may not make sense to have every jurisdiction within a Common Contractual Fund (CCF)

» Approx. 90 percent of a typical global index is covered by ten countries

» A large amount of ground work has been completed

Typical Global Equity Index

Germany, 3%

Switzerland, 3%

France, 4%

Australia, 2%Canada, 2%Italy, 2%

The Netherlands, 2%

Japan, 9%

Other, 10%

U.S., 52%

U.K., 11%

Summary of Key Positions

CountryLikely to be Transparent

Likely to be Non Transparent More Work Needed

Australia �

Austria �

Belgium �

Canada �

France �

Germany �Germany �

Italy �

Japan �

Norway �

Spain �

Switzerland �

The Netherlands �

U.K. �

U.S. �

Source: KPMG International, 2007

3. VAT Efficiencies

» VAT normally charged on investment management, administration and other services provided for direct investment

VAT Savings Possible

investment

» Provision of investment management, administration and custody to an “Investment Undertaking” VAT EXEMPT in Ireland

3. VAT Efficiencies (contd.)

» Where services provided from EU jurisdiction to Irish CCF, normally outside scope of VAT in country where service

VAT Savings Possible

in country where service provider established

» Where service received in Ireland by an “Investment Undertaking” VAT EXEMPT

4. Improve Tax Credits

» CCF is not just for limiting withholding tax

» Individuals are the only category of investor prohibited in the CCFprohibited in the CCF

» Potential to provide benefits of pooling and also pass on withholding tax credits to taxable investors

5. Improve Tax Credits (contd.)

U.S. CorporateGerman Corporate Singapore Corporate

Investment

Irish CCFCustodian

InvestmentManager

Administrator




Income Net of WHT

Irish CCFCustodian

InvestmentManager

Administrator




WHT Credit

Irish CCFCustodian

InvestmentManager

Administrator


6. Asset Pooling Summary

» Reduced operating costs due to economies of scale

» No Irish tax on CCF

» Tax benefits will depend on investors and investments

» CCF transparent for Irish tax purposes and mirrors US regulations » CCF transparent for Irish tax purposes and mirrors US regulations on transparency

» Transparency should allow investors access to tax treaty reliefs

» Investors can be pension funds or institutions

» Ireland offers significant flexibility to manage tax exposures

International Financial Reporting Standards –

Recent Developments & Opportunities

Jonathan O’Connell, PricewaterhouseCoopers

Agenda:

1. Overview of changing IFRS

2. Implications

3. IFRS Convergence

4. How the Irish Industry has dealt with the changes

1. Overview of changing IFRS - Scope

» IFRS continually evolving

» Preparation of dealing NAV unaffected!

» Applies twice per year – half-year and full-year financial statements for investors

1. Overview of changing IFRS - Scope

» Convergence of Irish GAAP with IFRS

» Good progress on acceptance of IFRS in the US

» Two standard setters, but the effect is the same» Two standard setters, but the effect is the same

» Timing of convergence

Financial Reporting Changes - Implications

IFRS FRS

a) Pricing of investments 39 26

b) Treatment of transaction costs 39 26

c) Recognition basis for interest income 39 26c) Recognition basis for interest income 39 26

d) Classification of investors’ capital and of distributions to investors

32 25

e) Determination of functional currency 21 23

f) Risk Disclosures in financial statements 7 29

Financial Reporting Changes – Implications

a) Pricing of investments

» Fair value» Bid prices for long positions» Ask prices for short positions» Valuation techniques where no active market» Valuation techniques where no active market» May impact NAV – difference between trading NAV and

financial statement NAV

(remember- only for financial statements)


b) Treatment of transaction costs

» At present, include in cost, deduct from proceeds

» New – for investments held at fair value expensed immediately

» No impact on NAV – reclassification between captions in income statement if disclosed separately


c) Recognition basis for interest income

» Fixed income funds / money market funds

» Premiums and discounts on purchase of securities

» Most currently amortize on straight line basis» Most currently amortize on straight line basis

» New requirement for effective yield basis

» New requirement consistent with US GAAP

» No impact on NAV – reclassification between captions in

income statement if interest is disclosed separately


d) Classification of investors’ capital and of

distributions to investors

» Conventional treatment – investors’ capital is equity and

distributions to investors are distributions

» IFRS treatment – investors’ capital is debt and distributions

to investors are interest expense

» Both changes are reclassifications – no effect on NAV

» IFIA participated in IASB Discussion on this topic recently


e) Determination of functional currency

» Stricter rules for determining functional currency – which is

currency of measurement

» E.G. raise SGD capital and invest in USD securities – What

is the appropriate functional currency?

» No impact on NAV – reclassification

» Not likely to have a major impact


f) Risk Disclosures in financial statements – IFRS 7

»Disclosures required by the Standard include:

» information on the significance of financial instruments for an entity's financial position and performance.

» information about exposures to risks arising from financial instruments instruments

e.g. Qualitative disclosures in relation to Credit Risk, Liquidity Risk and Market Risks etc.

» and Quantitative disclosures regarding the extent of exposures based on information provided to key management

» Disclosures based on risk management and internal key management information is an important part of the revised Standard

Risk Disclosures in financial statements – IFRS 7

(contd.) Disclosures Include:

» Credit risk

» Liquidity risk

» Market risk

» Market price risk» Interest rate risk» Currency risk

» All of the above disclosures may be a mixture of qualitative and quantitative disclosures and should specify how the specific risks are managed.

»IFIA issued a detailed Guidance Paper on FRS 29 in June 2007

Financial Reporting Changes – Implications Summary

» Most changes are to presentation and disclosure only

» Only change which may affect calculation of NAV is pricing of investments

» Only affects financial statements twice per year – no impact on regular NAV calculation

3 . IFRS Convergence with US GAAP

SFAS No. 157: Fair Value Measurements

»IASB issued Discussion Paper in Nov 2006.

»Starting point for discussion is SFAS 157.

»Exposure Draft expected 2008

4. Financial Reporting Changes

Dealing with the changes

» Perceived difficulties in implementation

» Irish Industry has dealt extremely well with IFRS changes which have impacted in Ireland ahead of the rest of the EU

» Significant IFRS expertise located now in Ireland

Financial Reporting Changes

Dealing with the changes

» IFIA taking a leading and proactive role in dealing with all issues and co-ordinating industry efforts

» Detailed Guidance Paper issued in respect of the practical implications of adopting new Standards – December 2005implications of adopting new Standards – December 2005

» Very positive feedback received from other jurisdictions

» IFIA Technical Committee has worked closely with various Fund Industry Associations in writing to the IASB

How to Establish a Fund in Ireland

Brian Dillon, Dillon Eustace

Various Fund Products in Ireland

UCITS Non-UCITS

Equity Funds Alternative Investment Funds

Bond Funds Property Funds

Money Market Funds Private Equity Funds

Multi-Manager Funds Fund of FundsMulti-Manager Funds Fund of Funds

Common Contractual Funds Fund of Hedge Funds

Index Funds Feeder Funds

Exchange Traded Funds Venture Capital Funds

Fund of Funds

Real Estate Investment Trusts

Securitised Assets

www.financialregulator.ieEntities applying for promoter/investment manager approval need to be regulated by the Monetary Authority of Singapore and to have received a license to provide capital market services under the Securities and

Futures Act.

Non-UCITS

(I) Retail Fund

(II) Professional Investor Fund

(III) Qualifying Investor Fund

UCITS

(i) Retail

» calculation of each fund’s net asset value and dealing price, including the updating/confirmation of the prices of the underlying securities.

» calculation of income and expense accruals.

» all accounting records, i.e. income, expenses, assets and liabilities

Minimum administrative activities in Ireland to be

carried out in Ireland:

(A)

» all accounting records, i.e. income, expenses, assets and liabilities must be maintained in and updated in Ireland. Semi-annual and annual accounts must be prepared in Ireland.

» all detailed reconciliation i.e. stock, custody, register must be performed in Ireland;

» these are important elements of the books and records of a scheme.

» dividends must be issued from Ireland. In addition, the reconciliation of all bank accounts relating to schemes including those relating to dividends must be carried out in Ireland.

» maintenance and servicing of the unitholders’ register including input, alteration and deletion of records. Unitholders’ certificates or their equivalent must be issued in Ireland.

» correspondence to unitholders of the scheme, including completed application forms from investors, any other instructions from investors

Minimum administrative activities in Ireland to be

carried out in Ireland:

(B)

application forms from investors, any other instructions from investors and all dividend/income distributions, must originate from and be retained within Ireland. Unit certificates or their equivalent must be issued in Ireland, as must the processing and issue of redemption requests.

» all the back-up documents underlying the books and records of a scheme must be held in Ireland where they can be audited and, in addition, be subject to inspection by the Financial Regulator. The staff who maintain and prepare these books and records must be located in Ireland.

Fund Documentation

» Prospectus

» Trust Deed/Memorandum and Articles of Association

» Administration Agreement

» Custodian Agreement» Custodian Agreement

» Investment Management Agreement

» Investment Advisory Agreement

» Placing Agreement

» Distribution Agreement; and Prime Brokerage

» A listing increases a funds distribution capacity by accessing a wider investor base. It allows promoters to market the fund (i) to institutional investors who may require a listing on a recognised stock exchange in order to invest and (ii) in countries where the relevant authorities require or provide exemptions for investment

Reasons to list on the ISE

(A)

in listed securities.

» The ISE permits the listing of a wide range of products and structures, and regularly reviews its requirements to encompass new industry developments. The ISE does not prescribe which investment objective or policies a fund may adopt, but instead imposes a framework based on risk spreading and disclosure based on the chosen objectives.

» an ISE listing provides a “stamp of regulation” for funds which may be domiciled in unregulated jurisdictions. The level of scrutiny imposed by the ISE on an initial and ongoing basis provides the market with a significant level of transparency and investor protection. The ISE listing is well recognised as a “meaningful” regime.

Reasons to list on the ISE

(B)

“meaningful” regime.

» an ISE listing carries with it a significant element of prestige and visibility, particularly as Ireland is a member of both the OECD and the EU.

» an ISE listing enables the security to be marked to market, ie. to allow investors to refer to a quoted market price for their securities.

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Industry Briefing Seminar - IMAS...» Staffing resources » Capacity » Servicing considerations » Transfer agency » AML » Equalisation » NAV production » Pricing/valuation policy