INDGFM1 - Isle of Man Experienced Investor Fund

The Experienced Investor Fund (EIF)

The EIF is a category of unregulated fund, which has been designed exclusively for the needs of market professionals, global asset managers and other individuals who are sufficiently experienced to understand the risks associated with an investment in an EIF.

It is not subject to approval by the Isle of Man Financial Supervision Commission and as a result, is viewed by the Commission as a private arrangement. An EIF is exempt from the regulatory requirements that govern other Isle of Man funds. This degree of flexibility allows for an EIF to be established quickly and inexpensively, while also providing an adequate level of comfort to investors by ensuring proper disclosure and administration.

Management and Administration

The EIF is required to appoint a properly licensed administrator, who would be responsible for the following:

• The processing of applications and redemptions in the EIF.
• Maintenance of the EIF share register, and other books and records of the EIF.
• Calculation of unit price of the EIF.
• Monitoring the EIF for compliance with its stated investment policy.
• Ensuring that all investors in the EIF are sufficiently experienced to understand the risks associated with investing in the EIF.
• The holding of an investment committee to consider the recommendations made by the appointed investment adviser.
• Preparation of material to be forwarded to each of the unit holders.
• The creation and cancellation of units in the EIF.

There are no restrictions on the number of investors.

The Investment Adviser

The Investment Adviser is appointed to give advice concerning the investment and re-investment of the assets of the EIF.

The Custodian

The EIF must make proper arrangements for its assets to be held in safe custody with a custodian bank or a prime broker. The custodian need not be represented in the Isle of Man.

Taxation Advantages

The chosen EIF vehicle can be tax exempt in the Island, provided that the EIF’s income is derived from sources outside the Isle of Man or from approved sources in the Isle of Man, such as bank interest.

There are no capital gains, corporation, inheritance or capital transfer taxes levies in the Isle of Man, nor is there any stamp duty payable on the transfer of units or any exchange control.

Dividends and other payments to participants can be made without deduction of Isle of Man withholding tax

Other advantages of an EIF

• The EIF can be marketed and promoted anywhere in the world, provided that only eligible experienced investors are accepted into the EIF.
• The EIF can be established as an open-ended investment company, a unit trust or limited partnership.
• There is no requirement to produce a prospectus, although the operator of the EIF is obliged to produce an offering document containing all material information of relevance to a professional investor.
• No regulatory fees are payable.
• An EIF can be established and incorporated in any jurisdiction, provided that it is administered in the Isle of Man.
• No minimum initial investment amount.
• No net worth tests or declarations of wealth are imposed.
• No promotion restrictions are imposed, subject to the fund only admitting ‘Experienced Investors’ and the definition of such an investors is:
  “a person who, in relation to any EIF, is sufficiently experienced to understand the risk associated with an investment in that fund”

Costs

The costs below are for indication purposes only. A quote can be given for specific circumstances.

Initial Costs

1. Initial costs are payable on formation but charged to the fund over five years and are made up as follows:

a) Dixcart - £6,000
b) Legal - £6,000
ie. £2,400 in the first year

2. The minimum economic value of a fund would be £3 million.

Annual Costs

Administration fee - 0.5% of the Net Asset Value of the EIF (subject to a flat fee of £15,000)

Investment Adviser -To be charged by the adviser

Audit fee - From £3,000

Dealing costs - To be advised

Initial Charge on the Investor by the EIF

We would recommend that the fee be at least £300 to cover administration expenses.

Spread

The value of the fund is set by taking a mid price of the investments, plus other assets, less any liabilities, divided by the number of units.

A spread between bid and offer is achieved by adding 1%. It is necessary to provide for a spread to ensure that there would be sufficient funds to cover the cost of closure should a number of investors leave the fund, and to encourage investors to stay in the fund.