Qualifying AIF Disclosures

Table of Contents

Prospectus

A QIAIF must publish a prospectus and keep its essential elements up to date. It must contain sufficient information for investors to make an informed judgment on the investment proposed. It must be offered free of charge to every prospective unit holder before the contract for the acquisition of units is entered.

The fund must ensure where the prospectus is translated into a language other than English, that it should contain only the same information and have the same meaning as the prospectus approved by the Central Bank.

The fund must comply with the terms of the prospectus. It may not change its investment objectives or make a material change to its policies as set out in the prospectus without the prior written approval of the unit holders on the basis of the majority of votes cast at a meeting. Dissenting members must have the opportunity to redeem their units prior to the implementation of the change.

Disclosures

The prospectus must, at a minimum, disclose.

the legal format of the fund
a statement where its constitutional documents and annual reports may be obtained.
brief details of the tax applicable,
accounting dates and distribution frequencies,
rules for applying income,
persons accepting responsibility for the prospectus
authorized share capital,
material contracts with third parties,
base currency
types and characteristics of the units,
denominations,
the unit holders’ rights.

Some Disclosure Requirements

The fund shall disclose the initial offer period, procedures for purchase and redemption of units set out circumstances in which redemptions may be suspended. Where it is open-ended with limited liquidity, it shall, in its prospectus, specify the limited nature of the redemption facilities. If redemption in specie is provided for, this must be fully disclosed and certain further information furnished.

A warehousing arrangement must be fully disclosed, including details of all applicable fees. It must be confirmed in the prospectus that the fund will pay no more than the current market value for the assets concerned.

A qualifying investor fund may only invest through one or more subsidiaries where the prospectus discloses the ability to establish wholly owned subsidiaries and discloses the names

Conflict Disclosures

Certain information must be disclosed regarding the management company or general partner. Their legal form, address and particulars must be furnished.

The names and positions in the management company or equivalent of the administrative management and supervisory function holders, their experience, current and past relevant to the investor and details of their main activities outside the management company where they are of significance in relation to their functions.

Details of service providers must be disclosed. Detailed provisions of contracts with management companies which may be relevant to unit holders must be disclosed, including those relating to remuneration. Other significant activities engaged in by the manager and any entity performing investment management functions are to be set out.

The fund is to set out in a prominent position in the prospectus, a clause to the effect that whether it has been authorized by the Central Bank, the Central Bank has not set any limits or other restrictions on the investment objectives, policies or the degree of leverage which may be employed by the qualifying investor AIF. It is to state that the authorization by the Central Bank is not the constitutional endorsement or guarantee of the fund by the Central Bank.

The fund must set out potential conflicts of interest between the fund management company and investment managers and set out how they are going to be resolved. The fund may only enter into a transaction as appropriate with its management company, depository, manager et cetera, where there has been full disclosure in the prospectus.

Fund of Fund

Where it invests in other funds, it must clearly set out the extent to which it is intended to do so and state that additional charges may arise from this investment policy. It must disclose the types of charges and costs relating to the underlying funds which may be borne by the fund.

Where a QIAIF is the fund of funds, it may only invest in other funds, which itself invest more than 50 per cent of net assets in other investment funds where the fund has made clear disclosure regarding increased cost and lack of transparency concerning ultimate exposure. Investments must not be for the purpose of duplicating management and investment management fees.

Special requirements apply to an umbrella qualifying investor fund. The prospectus must include confirmation that it is an umbrella fund with segregated liability between sub-funds. It must name other sub-funds where the units have been issued in new sub-funds. It shall disclose the extent to which one sub-fund can invest in another. It shall clearly state the charges applicable, if any, to the exchange of units between funds.

Operational requirements

A qualifying investor AIF must have sufficient financial resources at its disposal to enable it to conduct its business effectively and meet its liabilities. Where it does not employ the services of a management company or an authorised AIFM, it must have a minimum share capital of €125,000 and satisfy the Central Bank on a continuing basis that it has sufficient management resources to conduct its business and otherwise comply with the requirements of the rules.

The fund shall make the issue and redemption price of units available to unit holders promptly on request. It shall not issue units unless the net issue price is paid into the assets of the fund within a reasonable time.

Bonus units may be allowed. It may only retain 10 per cent or less of redemption proceeds where which reflects the redemption policy of the underlying fund, and only until such time as the full redemption proceeds from the underlying investment are received.

Annual and half-annual reports

The fund must publish an annual report for each financial year. It must be audited by a qualified auditor. The auditor’s report must be reproduced in full in the annual report to the unit holders. The fund shall include information specified in the regulations in its annual report. Half-yearly reports must also be produced.

Accounts must be returned to the Central Bank within a certain period of the year-end. The annual report must be filed within six months of the year’s end. Unit holder must be supplied with a copy of the annual report and half yearly report, if any, free of charge.

If it is an umbrella fund, separate reports may be produced for individual sub-funds. They must name the other sub-funds and state in the reports that such sub-funds are available free of charge on request from the management company. An investment company established as an umbrella fund must include accounts of all sub-funds in the relevant period.

A fund, which is an investment company, must confirm whether it has maintained its aim of spreading risks. Significant information to enable the unit holders to make an informed judgment on the development of the fund must be included in the report. The following information must be included.

Number of units in circulation,
net asset price per unit
full portfolio statement distinguishing different types of investment, each analyzed in accordance with the most appropriate criteria in light of the investment policy.
A condensed portfolio statement may be allowed subject to conditions
Investments in sub-funds within an umbrella structure.
Information on investment funds in which the fund is invested, including disclosure, regulatory status and fees paid
Description of soft commission arrangements
Description of how derivatives and other leveraged lending have been used in the period

Open financial derivative positions at the reporting date must be marked to market and specifically identified in the portfolio statement.

Accounts Notes

Funds which are engaged in securities lending must disclose this in notes to the accounts including certain particulars of the amount of the loans and collateral held.

The report must also set out

a list of the exchange rates used in the report
comparative tables for the last three years showing the net asset value per unit
depository’s report

The annual report must state whether the fund is satisfied that there are arrangements in place to ensure that the obligations in relation to dealings by management companies and equivalent groups are applied to all transactions with connected parties and that the fund is satisfied that the transactions with connected parties during the period complied with the requisite obligations.

There must be a report on commissions received by the management company by virtue of investment in units in another form, where these commissions are not paid to the fund. They must explain how the receipt of such commissions is consistent with its inducements and best execution obligations.

Equivalent but lesser information is required in half of annual reports.

Various

It must notify the Central Bank of any proposed amendment to its prospectus. It must not alter its constitutional documents or change its names without the prior approval of the Central Bank.

A retail AIF must ensure that the offer period does not commence prior to authorisation where they are established as private equity or real estate retail investor AIFs. This may be extended upwards of a year provided the terms of the offer ensure the early unit holders are not prejudiced.

Central Bank must be informed that the calculation of net asset value is suspended.

Directors

Where the AIF is an investment company, departures from the office of directors must be notified to the Central Bank. The investor must form a view as to the impact of the resignation, which view may need to be communicated to the Central Bank.

A retail AIF which is an investment company must not have directors in common with its depository. It must have a minimum of two Irish resident directors. Where the retail AIF is an investment company, it shall ensure that each of its Directors is required to disclose concurrent directorships.

There are procedures regarding replacement of a depository. Particulars must be notified to the Central Bank. There are limitations on termination of depository’s appointment. There are provisions applicable to replacing the management company, general partner or equivalent.

Returns

The fund must make monthly and quarterly returns to the Statistics Division of the Central Bank using an online reporting system. This is to include relevant codes for the fund and sub-funds, base currency, fund type, closed asset value, net asset value, number of units, net asset value at month end, payments received and made by the issue and repurchase of units in the month, net amount from issues and repurchases profit and loss, investment fees and other expenses.

There is a requirement for a quarterly survey of collective investment undertakings to be returned to the Statistics Division of the Central Bank.