Investing In Ireland

Regulated industries, activities and regulatory authorities

A number of business activities in Ireland are regulated or supervised with the principal ones being set
out in the Appendix. We have focused in this section on one of Ireland's greatest success stories over
the past 25 years, the International Financial Services Centre.

International Financial Services

The International Financial Services Centre (the "IFSC") in Dublin has developed into a significant
worldwide centre for a wide range of financial services activities. Driven initially by a package of
substantial tax incentives, the IFSC has grown to an extent that the 250 global financial institutions
that operate in this area now employ around 25,000 people. Many of the world's leading financial
institutions have now established in the IFSC, providing a broad range of financial services in the
following areas:

• investment funds;
• banking and asset finance;
• treasury management;
• finance leasing;
• captive insurance;
• asset management;
• fund administration and custody;
• securities trading; and
• securitisation.

The Central Bank of Ireland is the regulator of financial services activities in Ireland. The appeal ofestablishing an international financial services operation in Ireland is based on a unique combination of the Irish legal and regulatory system, the specialists skills and expertise of its workforce, the country's pro-business approach, low taxation, infrastructure and government support.

Over half of the world's top 50 banks have operations in the IFSC. Typical banking activities in the IFSC include asset financing, aircraft leasing, international lending and loan syndications, bond and commercial paper issuance, global treasury, investment and corporate banking, structured finance, back office activities, credit card operations, management of client treasury functions and securitisation.

Some of the global treasury activities carried out at the IFSC include: inter-group lending/financing, cash pooling, netting, cash management, market pricing, exchange and interest rate risk management and cross-border leasing.

Over a quarter of the IFSC companies are involved in insurance-related operations, particularly captive insurance and reinsurance.

Investment funds

One of the main sub-sectors of international financial services operating in the IFSC is investment funds. Ireland presents the international investment funds community with an unparalleled set of attractions both as a domicile for investment funds and as a centre from which to administer, market and service funds domiciled in other international locations.

The corporate and non-corporate vehicles which can be used for regulated collective investment schemes, or funds, are as follows:

• unit trusts;
• investment companies with variable capital;
• investment limited partnerships; and
• common contractual funds.

Certain investment restrictions will apply to regulated investment funds, to the nature and spread of
their investments and on the use of derivative instruments unless they market solely to sophisticated
investors. Each fund must have an Irish custodian, certain minimum administrative activities must be
performed in Ireland and each director, promoter, investment manager, manager and general partner
must be approved by the Central Bank, including the approval of any replacement. Each fund
must also publish a prospectus or placing memorandum and must submit periodic and annual
accounts to the Central Bank.

The two regulated fund regimes in Ireland are:

• Undertakings for Collective Investment in Transferable Securities ("UCITS"),
• Collective investment schemes other than UCITS ("non-UCITS").

UCITS

A UCITS fund must be an open-ended fund and can avail of a "single passport" throughout the EU
for the sale of its units/shares. This means that UCITS, once authorised and regulated in Ireland, can
be sold to the public in all of the EU Member States, and increasingly in areas such as the Far East,
Latin America and the Middle East, once the appropriate notifications have been made to the local
authorities.

Because of the necessity to comply with a common European standard, UCITS are regarded as
the most highly-regulated funds. UCITS have evolved and built on earlier success by extending
the range of permitted investments to include money market instruments, bank deposits, other
collective investment schemes and financial derivative instruments. Legislative developments over
the past three years have enabled UCITS to avail of new product opportunities, including strategies
combining leverage and derivatives. UCITS can now viably compete with structured notes, unit-linked
life products and unregulated funds but in a framework with enhanced governance, compliance and
transparency. This has not been lost on hedge fund managers who are increasingly seeing UCITS as
an opportunity to bring a product to investors who need a more regulated product.

Non-UCITS

The non-UCITS regime is attractive to fund managers who wish to target sophisticated investors,
namely institutional and high net worth individuals. Certain funds, which employ more complex
investment strategies posing greater risk, may not be permissible under the UCITS regime but can
be set up as a non-UCITS fund. The investor profile will dictate the regulatory parameters of the non-
UCITS fund and can be broken down into three categories according to the relevant target investor
market:

1.the retail investor,

2. the professional investor; or

3.the qualifying investor (institutional/high net worth).

Qualifying Investor Funds ("QIFs") are one of Ireland's most popular types of non-UCITS, as QIFs offer
flexibility to employ alternative investment strategies e.g. hedge funds, fund of hedge funds, private
equity funds, real estate investment funds. QIFs are only open to certain investors i.e. the minimum
subscription per investor in a QIF is €100,000 and investment in a QIF is limited to:

• An Investor who is a professional client within the meaning of the MiFID; or
• An appropriately accredited knowledgeable investor; or
• An investor who appropriately certifies that they are an informed investor.

In order to meet the requirements of existing fund providers and become a more attractive location
for alternative investments, the Central Bank can now authorise QIFs, on a filing basis only, within 24 hours of submission of the relevant
documentation.

Recent Developments

Ireland recently introduced new fund re-domiciling laws under the Companies (Miscellaneous
Provisions) Act 2009 which provides a streamlined process for a non-Irish corporate fund redomiciling
to Ireland. These provisions were introduced to facilitate existing fund managers to
relocate non-Irish funds to Ireland. The process involves the filing of registration documentation with
the Irish Companies Registration Office and simultaneously applying for authorisation as a regulated
fund with the Central Bank.

In June 2009, the European Council of Ministers approved the UCITS IV Directive (Directive 2009/65/
EC) (the "Directive") which was published on 17 November 2009 in the Official Journal of the European
Union. The Directive contains a number of enhancements to the existing UCITS regime. Some of the
main features of the UCITS IV Directive include:

• the introduction of a management company passport scheme whereby a management company authorised by its home Member State is allowed to manage UCITS established in another EU Member State;
• subject to certain investor protection constraints, the cross-border merger of all types of UCITS is now allowed and will be recognised by each Member State. This should enable the consolidation of domestic and international funds which would provide pooling opportunities to take advantage of economies of scale, thereby offering cost savings and enhanced returns;
• the Directive will enable feeder funds to pool assets into a single master fund under the master-feeder provisions;
• a new 'Regulator to Regulator' notification procedure is being introduced to remove administrative obstacles and delays relating to the cross-border distribution process;
• a new standard summary information document known as the "key investor information document" is being introduced to replace the simplified prospectus. The key investor information document isintended to be a briefing document, written in a non-technical format, giving investors meaningful information prior to them making a subscription. The aim of the new briefing document is to enable the investor to reach their investment decision on a more informed and timely basis; and
• specific measures are being introduced which are designed to improve communication and exchange of information between regulatory authorities in the Member States.

Having enhanced the product itself by virtue of previous directives, the intention of the Directive is
to improve the environment in which that product operates. Facilitating fund mergers, improving the
framework for cross-border distribution and introducing the management company passport are all
intended to reduce cost, improve economies of scale and facilitate easier distribution. This will only
enhance the strength of the UCITS product and confirm its position as the global brand of choice
for regulated collective investment. The implementation deadline for the Directive across all Member
States is July 2011.

Next Chapter