BVI
REGULATED PROFESSIONAL INVESTMENT FUND

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Proposal for the formation and licensing of a
British Virgin Islands regulated professional investment fund
and ongoing annual administration and valuation.

This investment fund structure proposal is for investing in real estate and trading foreign exchange and global commodity markets.
 

TRADER FUND CONCEPT

OffshoreSimple through it's partners is launching a new fund concept and which is specifically designed for new starter investment funds. The product is called the Trader Fund Concept, (TFC). TFC is a new and innovative regulated investment fund product, which has been designed specifically for the fledgling investment managers who are seeking to enter the international investment fund arena for the first time and for new investment funds with ‘seed-capital’ of between $ 1 million and $ 3 million. The underlying feature of TFC is a highly regulated and licensed British Virgin Islands professional investment fund structure, which provides new ‘start-up’ managers the opportunity to establish their own fully regulated investment fund at a fraction of the usual costs. TFC recognizes that the formation and annual operating costs associated with regulated and licensed investment fund structures are a major discouragement to new ‘start-up’ managers, as the initial seed-investment capital can be relatively small, i.e. between US$ 1m – US$ 3m. The TFC product is designed to overcome this initial cost hurdle by providing a competitive and efficient solution.

The key feature of the TFC product is that it provides the new manager with an initial establishment and annual operating cost structure, which is attuned to the initial seed-investment capital in order to provide the new manager with the best possible opportunity to perform during the crucial months following the launch of the investment fund.  With regard to the establishment costs, a typically charge is minimum  $30,000.  However, for TFC we will establish the fund structure for an initial $17,500. (This is subject to an associate holding the voting shares in the fund; however you are provided with an open-ended call option to acquire the voting shares at any time for an additional $12,500). The initial set-up cost of $17,500 is then amortized within the fund over a period of 36 months and therefore, following the launch of the fund the initial setup cost is reimbursed to you.  With regard to the annual operating costs, these are only gradually increased as assets under management increase, therefore reducing the impact on performance, which is essential during the early trading period of the new investment fund. This schedule illustrates the gradual increase in operating expenses, which are attuned to the increase in assets under management and detailing the scaled operating costs structure.

Offshore named Directors can be provided at a ‘low-start’ fee and KPMG have agreed to exclusively act as auditors for TFC investment funds. It is proposed either Barclays International or Bank of Bermuda (now a subsidiary of HSBC) as the principal bankers for all TFC investment funds. This provides the TFC fund vehicle with internationally recognized services providers, adding to the creditability of the fund.

We propose this structure for the following reasons:

1. The structure is an ‘open-ended’ investment fund, which enables the fund to receive subscriptions on a regular basis. We are proposing month-end valuations, thus enabling the fund to receive subscriptions monthly;
    

2. The structure is highly regulated and therefore provides investors with a high degree of protection. An independent administrator carries out the valuations and a leading firm of accounts audit the fund. We propose in this instance KPMG.
    

3. The British Virgin Islands is a tax-free jurisdiction for ‘non-resident’ investment funds. Although the profits of the fund are not taxable in the BVI, individual investors may be taxable on their investment in the fund. Certainly in Europe, we believe that persons are taxable on their worldwide income and are therefore obligated to declare all of their income sources. However, this will vary from one jurisdiction to another.

There are many legal solutions to reducing tax liabilities and this will depend on the jurisdiction of the investor, however one solution is for the investors to invest in the fund via an ‘insurance’ type product. This has the possibilities of reducing the tax liability and certainly we have knowledge that this type of investment vehicle can provide EU nationals with a legal solution to reduce their tax liability.

We can assist in providing such solutions on a case-by-case basis, as it will depend on the status and jurisdiction of the individual investors.

4. With regard to confidentiality, the BVI adopts very strict confidentiality laws and therefore investor details are not open to public scrutiny.

With regard to the trading strategies of the proposed investment fund, i.e. Real Estate and trading Foreign Exchange and Commodity Markets, we would suggest that you consider separating these strategies into separate investment fund vehicles. The reason is that trading foreign exchange and commodities, (we assume via the global futures markets), are via exchange traded markets and therefore valuations can be conducted using published market close prices. Real Estate investments are obviously more difficult to value, as the nature of the investment dictate that the frequency of ‘official’ valuations is less for exchange traded securities.

Please note that the annual administration fee of a minimum of $ 25,000 relates to providing month-end valuations for a fund, which is trading exchange-traded securities. With regard to the Real Estate investments, the administration fee will depend on the frequency of the valuations and also the methodology of the valuations as agreed between the client, auditor and administrator.

The fees for the establishment of a ‘recognised’ professional investment fund is detailed as follows:

 Establishment Costs:

 The fee proposal includes the provision of the following:

Plus out of pocket expenses, such as courier, telephone, fax, etc.

Provision of  2 ‘Named’ Director, per annum, (if required)                          US$  4,000 *

* This is for a TFC low cost start structure

It should be noted that in normal circumstances the costs associated with establishing a licensed fund are reimbursed to the ‘sponsor’ immediately the investment fund receives investor subscriptions and the fund is activated. It is normal practice that the establishment costs are presented as an asset in the accounts of the fund and amortized over a period of 24 to 36 months.

The above fees include the Offering Memorandum being legally reviewed by a BVI lawyer. Please note that should the proposed fund be open to United States of America investors a U.S. Attorney must also review the offering document. A fee quote can be provided on request.

The establishment fee is payable in instalments as follows:
Payable in Advance                            -           US$ 17,500

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