INDGFM2 - Isle of Man Professional Investor Fund

Isle of Man Profession Investor Fund (PIF)

The PIF is a category of unregulated fund, which has been designed exclusively for professional and institutional investors. It is not subject to approval by the Isle of Man Financial Supervision Commission as it is viewed by the Commission as a private arrangement. A PIF is exempt from the regulatory requirements that govern other Isle of Man funds, and is also unrestricted as to the number of investors that it may have. This degree of flexibility allows for a PIF to be established quickly and inexpensively.

An eligible professional investor may be an individual, company or trust with a net worth of US$1,000,000, or alternatively, can be an individual or company whose ordinary business is to acquire, hold, manage and dispose of investments.

The PIF is particularly suited to a number of collective investment schemes and arrangements. These include venture capital funds, management buy-out schemes, real property schemes and hedge funds. It also provides a framework for sponsors to create new types of designer funds intended for the professional and institutional market. A PIF may take the form of a unit trust, an open-ended investment company or a limited partnership.

The Administrator

The PIF is required to appoint an Administrator, who is responsible for the following:

• The processing of applications and redemptions in the PIF.
• Maintenance of the PIF share register and other books and records of the PIF.
• Calculation of the unit price of the PIF.
• Monitoring the PIF for compliance with its stated investment policy.
• The holding of an investment committee to consider the recommendations made by the appointed investment adviser.
• Preparation of material to be forwarded to the unit holder.
• The creation and cancellation of units in the PIF.

The Investment Adviser

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

Taxation Advantages

The chosen PIF vehicle can be tax exempt in the Island, provided that the PIF’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 levied 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 a PIF

• The PIF can be marketed and promoted anywhere in the world, provided that only eligible professional investors are accepted into the PIF. (Subject to local regulations).
• No requirement to produce a prospectus, although the operator of the PIF is obliged to produce an offering document containing all material information of relevance to a professional investor.
• No regulatory requirement to appoint a custodian.
• No regulatory fees are payable.
• A PIF can be established and incorporated in any jurisdiction, provided that it is administered in the Isle of Man.
• Minimum initial investment of US$100,000.

Costs

The costs quoted below are only an indication. 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 - £8,000
b) Legal - £8,000
i.e. £3,200 for 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 PIF (subject to a minimum fee of £15,000)
Investment Adviser - To be charged by adviser
Audit fee - From £3,000
Dealing costs - To be advised

Initial Charge on the Investor by the Fund/Dealing Fee

We would recommend that the fee be at least £500 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.