INDGFM3 - Isle of Man Exempt Restricted Funds

The Scheme

The scheme is a collective investment in the form of a Limited Company or a Unit Trust. 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. However the Commission do place certain restrictions on such schemes, and in particular:

1. The scheme must have less than 50 unit holders, although there is no maximum value for the scheme.

2. Persons resident in the Isle of Man are not permitted to acquire units, unless they are exempt from taxation in the Isle of Man.

3. No invitation may be made to the general public in any part of the world to subscribe for units.

4. As the scheme is seen as a private arrangement it does not form part of the statutory compensation scheme in the Isle of Man.

The Manager

The Manager would be responsible for the following:

• The processing of applications or redemptions in the fund.
• Issuing of certificates to unit holders.
• Maintenance of the books and records of the fund.
• Calculation of unit prices of the fund.
• Monitoring the fund for compliance with the scheme’s investment restrictions.
• The holding of an investment committee to consider the advisers recommendations.
• Preparation of material to be forwarded to the unit holders.
• Compliance with all local regulations.
• The creation and cancellation of units in the fund.

The manager recommended by Dixcart is Dixcart Global Fund Managers Limited, a company licensed to carry out this function in the Isle of Man. The manager is ultimately owned by the Dixcart Group.

Investment Adviser

The Investment Adviser is appointed to give advice concerning the investment and reinvestment of the assets of the scheme.

The Trustee

Under the Constitution documentation of the scheme, a Trustee will be appointed to ensure the manager is operating the fund in the best interest of the unit holders. The Trustee will be required to visit the manager, and ensure compliance is being met to the requirements of the unit holders, and to the local regulations of such schemes.

Custodian

The custodian is appointed to safeguard the investments and ensure all dividends/Interest income is collected. The Custodian may also value the investments in the fund on behalf of the manager.

Taxation

The scheme will incur no charge to Manx income tax, provided that the scheme’s income is derived from sources outside the Isle of Man or from approved sources in the Island, 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.

Costs

Initial Costs

1. Initial costs are payable on formation but charged to the fund over five years. The amount of the initial charge will vary, depending on the complexity of the formation documents. For a simple fund, the charge would be £10,000, increasing to £15,000 for a more complex fund.

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

Annual Costs

Trustee fee and Manager’s fee - From 0.5% (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

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

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.

Advantages of Setting up an Isle of Man Exempt Restricted Scheme

• Investors can benefit from the diversification of investments held.


• The setting up of a fund in this manner, gives a higher level of respectability to the sponsor, should they wish to encourage other professional investors.


• The appointment of a Trustee ensures that the fund is operated to the highest possible standard by the manager.


• Investors in the scheme will know who the investment advisers are, and are more likely to be aware of any changes to the investment advisory team, and their philosophy.


• This type of fund can be set up with different investment objectives, giving greater flexibility to the sponsors.


• If the fund is set up with a Limited Company structure, it is possible to add new types of funds in the future with different investment objectives.


• Investment into equities in this way would ensure that there is no requirement to disclose the beneficial owner of the investments to persons other than the manager of the scheme.


• Distributions from the fund are exempt from Isle of Man withholding tax.