AIF Disclosure

Table of Contents

Prospectus Requirements

A Retail AIF must publish a prospectus which must be dated. The essential elements must be kept up to date. It must contain sufficient information for investors to make an informed judgment of the investment proposal to them.

The statutory obligations in respect of disclosures to unitholders apply. See the separate sections on the AIFM regulations. The information set out in the regulations and in the handbook must be provided.

An AIF must comply with the terms of its prospectus. It shall not change its investment objectives or make a material change in investment policies without the approval of a majority of votes cast at the General Meeting. If a change is made, it shall provide reasonable notification to enable unitholders to redeem their units prior to implementation.

Retail Prospectus

The following must be disclosed as a minimum in the Retail AIF prospectus:

name;
form and law;
date of establishment;
place where the constitutional documents may be obtained;
brief indications relevant to the unitholders of the tax system applicable, including details of deductions made at source and capital gains treatment;
accounting dates and distribution frequencies;
description of rules for determining and applying income;
names and investments of directors of an investment company, experience, details of their main activities outside the company where they are of significance with respect to the company;
persons who accept responsibility for the information in the prospectus;
material provisions of contracts between the fund and key third parties, including the management company, general partner, and investment company;
authorised share capital;
base currency
the type and main characteristics of the units,
indication of stock exchanges where the units are listed, if any,
description of the AIMF remuneration policies and practices.

Umbrella Retail AIFs must include specific wording to confirm that they are in an umbrella fund with segregated liability between sub-funds. In the case of certain older funds, which do not have segregated liability, this must be clearly disclosed. It shall disclose the extent to which one fund can invest in another and the conditions which apply to such investments. It shall state the charges, if any, applicable to the exchange of units in one sub-fund for another.

Details of the investment policy must be disclosed. The quantitative parameters and extent of leverage to be engaged in must be stated.

A list of the stock exchanges and markets on which securities and financial derivatives of the Retail Investor AIF are traded must be disclosed. Only those meeting certain criteria may qualify.

The AIF shall make a full disclosure of the States, local authorities and public international bodies in the securities of which, it is intended to invest more than 20% of its net assets.

Investment Disclosures

The fund shall specify the techniques and instruments that it will utilise for efficient portfolio management. They must be in line with the best interests of the fund. It must disclose its policy regarding direct and indirect operational costs and fees arising from portfolio management techniques that may be deductible from the revenue delivered to the fund.

It must disclose its methodology for calculating the sale or issue price and the repurchase or redemption price of units. It must specify the method used to value assets, the method and frequency of calculation, and information concerning charges, means, places and frequencies of the publication of prices.

It must disclose the procedures and conditions for repurchase and redemption of units including the periods in which proceeds will normally be paid or discharged to unitholder. It must disclose the circumstances in which repurchase or redemption may be suspended. If it is an open-ended fund with limited liquidity, it must specify the limited nature of the redemption facilities.

In the case of a structured Retail Investor Fund, it must ensure that there is full disclosure regarding investment policy, underlying exposure and payoff formulas in clear languages that can be understood by a retail investor. It must include a prominent risk warning informing unitholders who redeem their investment prior to maturity that they do not benefit from a pre-defined payoff and may suffer significant losses.

A fund which only makes distributions out of capital must make disclosures including the rationale behind its policy. There must be a prominent risk warning which describes the effects of making distributions from capital, and highlights that distributions out of capital may have different tax implications to those in respect of income.

General hedging strategies must be described. Where relevant, individual currency share classes the subject of investment must be disclosed.

Fees

It must indicate the extent to which it is intended to invest in underlying investment funds and state what additional fees will arise. It must disclose and quantify to the extent possible, the types of charges and other costs relating to the underlying funds which will be borne by the fund. In addition to disclosure regarding fees at the level of the AIF, the prospectus must disclose fees arising at the underlying levels.

It must disclose the manner, amount and calculation of remuneration to the management company, directors of the investment company, general partners, depositary and third parties and reimbursement of costs to them. It must disclose the type of charges and other costs relating to investment in underlying investments which it will bear.

A retail fund shall only charge fees and expenses to capital where there has been specific disclosure and stated warnings are provided. Where the fund invests more than 20% in fixed-income instruments and the priority of the fund is the generation of income rather than capital growth, this priority shall be specified in the prospectus. It must include a statement that payment made during the life of the fund must be understood as a type of capital reimbursement.

Managers & Servuice Providers

The prospectus must disclose details of the management company and general partners. Their form in law, head office and any group of which they are member must be disclosed.

The names and positions in the management company of a general partner, the members of management and supervisory functions, their experience current and past relevant to the fund and details of their main activities outside the management company or general partner are of significance.

Details of service providers must be disclosed. The material provisions of contracts must be disclosed. Other significant activities engaged in by the manager and any entity providing management functions must be disclosed.

The fund must disclose its authorisation status. A prescribed statement is required to the effect that its authorisation does not involve an endorsement or guarantee of the fund by the Central Bank, nor is the Central Bank responsible for the contents of its prospectus.

Risk Status

The prospectus must disclose and describe, in a comprehensive manner, risks applicable to investing in a particular fund. It must make reference to

prices falling as well as rising,
desirability of consulting a financial advisor or stockbroker about the prospectus and
where relevant, the fact that the difference at one time between the sale and repurchase price means the investment must be viewed as medium to long-term.

It must contain a prominent risk warning, making specific reference to any potential for above-average risk and the suitability of the investment with the potential for above-average risk only for people who are in a position to take such a risk.

It must include a detailed description of the risks involved in

efficient management activities, including counterparty risk,
potential conflicts of interest, and
the impact they may have on the performance of the fund.

A fund which invests in emerging stock exchanges and markets shall include in its prospectus a recommendation that the unitholder should not invest a substantial proportion of his portfolio in the fund. This must be set out in bold at the beginning of the prospectus and must refer to a more detailed disclosure of risk factors. A special warning is required in respect of AIFs which invest in gold.

The prospectus must include a description of potential conflicts of interest which arise between the fund, fund manager, and investment managers and details of how these are going to be resolved. The fund shall only enter into a transaction with those parties or its delegates where there has been full disclosure in the prospectus.

Annual Reports

A fund shall publish a report annually and half annually. It must include the information specified in the regulations. Accounts must be audited.

The fund must submit accounts and reports to the Central Bank on an ongoing basis. The fund shall, on request, supply unitholders with copies of the annual and half-annual reports free of charge.

Certain minimum information must be provided in the annual report. Hedging transactions to provide protection against exchange risk must be specified. Where relevant, distributions out of capital must be disclosed. Certain transactions of sub-investment managers must be disclosed.

The annual report shall include all significant information which would enable unitholders to make an informed judgment on the development of the fund and its results. It must include

numbers of the units in circulation,
net asset value per unit,
full portfolio statement or condensed portfolio statement listing positions,
exposures greater than 5% of assets, distinguishing between different types of investments and each investment analysed in accordance with the most appropriate criteria in light of investment policy.

Misc. Disclosure Requirements

The report must set out changes in the composition of the portfolio during the relevant period. To allow unitholders to identify significant changes, only material changes are required to be included. Material changes are defined as aggregate purchases of a security exceeding 1% of the total value of purchases and aggregate disposals greater than 1%. At a minimum, the largest 20 sales and purchases must be set out.

Where the fund holds more than 10% of its net assets in deposits with credit institutions, details of the amounts and names of institutions must be provided. Details of investment by sub-funds in other sub-funds must be disclosed.

Information on the investment funds in which the fund has invested must be disclosed including disclosures of their regulatory status and fees. In the case of funds of unregulated funds, reports must list the names of the underlying funds, their management companies and domicile. It must include information on the impact of fees, including performance fees and returns.

There must be a description of soft commission arrangements affecting the fund during the period. There must be a description of how financial derivative instruments and securities lending have been utilised. There must be a description of how financial derivative instruments, securities lending and repurchase agreements have been used during the period must be included.

Half-Yearly Reports

There are, furthermore, specific requirements for the disclosure of these matters.

There are provisions in relation to information to be included in the half yearly report, including the following:

balance sheet and assets, number of units in circulation, net asset value, portfolio statement or condensed portfolio statement, changes in composition, details of deposits;
investments in sub-funds;
information on investment funds in which AIFs has invested; description of soft commission arrangements;
descriptions with specific requirements as to the use of the derivatives in the relevant period.