2012
Minimum Capital Requirement Report – Guidance Note for Non UCITS Management Companies, Administration Companies and Trustee
Companies
2
Minimum Capital Requirement Report–
Guidance Note for UCITS Management
Companies
Minimum Capital Requirement Report – Guidance Note for UCITS Management Companies
Contents
Introduction
2
Reporting Financial Information
2
Detailed Information on Minimum Capital Requirement Report
3-7
Appendix I – Minimum Capital Requirement Template
8-9
Appendix II – Comparison Table between FINREP and MCR
10-13
1
Minimum Capital Requirement Report – Guidance Note for UCITS Management Companies
Introduction
The Minimum Capital Requirement (“MCR”) Report must be submitted to the
Central Bank of Ireland (“Central Bank”) by a UCITS management company
with the unaudited semi-annual financial statements and annual audited
financial statements at the reporting periods detailed in UCITS Notice 2
paragraph 20 and UCITS Notice 5 paragraph 19. The MCR must be signed by a
director or senior manager of the UCITS management company. The Directors
have ultimate responsibility for ensuring returns are completed correctly and on
time. The purpose of this Guidance Note is to provide an explanatory guide for
persons completing the MCR on the Central Banks Online Reporting System
(“ONR”). The Guidance Note may be updated periodically and the most up-todate version will be available on the Central Bank’s website1.
The unaudited semi-annual financial statements and annual audited financial
statements data should be submitted on the FINREP tables on the ONR. The
FINREP contains six core tables – (i) Table A Questionnaire, (ii) Table 1.1
Assets, (iii) Table 1.2 Liabilities, (iv) Table 1.3 Equity, (v) Table 2 Income
Statement and (vi) Table 34 Supplementary Financial Reporting Return. These
six core tables are mandatory for all FINREP submissions and data should be
taken directly from the UCITS management company’s unaudited semi-annual
financial statements or audited annual financial statements for each reporting
period.
Reporting Financial Information
Financial information reported in the FINREP tables and MCR should be
transposed directly from the financial statements at each reporting period.
Figures entered into the FINREP tables and MCR must be reconcilable to the
unaudited semi-annual financial statements or the audited annual financial
statements at the reporting date. All fields on the MCR must reconcile to the
fields on the FINREP tables which in turn must reconcile to the financial
statements. The Central Bank recommends that the FINREP tables are
completed prior to the MCR to aid the reconciliation between data sources.
1
http://www.centralbank.ie/regulation/industry-sectors/investment-firms/mifidfirms/documents/FINREP%20for%20irish%20investment%20firms%20-%20guidance%20note.pdf
2
Minimum Capital Requirement Report – Guidance Note for UCITS Management Companies
The below diagram illustrates the flow of information that the UCITS
management company should follow when filing the FINREP and MCR returns
on the Central Bank ONR system.
Annual Audited Financial Statements/ Unaudited Semi-Annual Financial
Statements
↓
FINREP Tables
↓
Minimum Capital Requirement Report
All figures in the FINREP and the MCR return must be presented in EURO
thousand’s (€000’s) e.g. three hundred thousand euro (€300,000) would be
input as 300.
UCITS management company’s should ensure that all the data provided in the
MCR report is accurate, complete and reconciles to the financial statements
and FINREP data. UCITS management companies that submit incorrect/late or
non-reconciling returns to the financial statements will be required to resubmit.
Persistent incorrect/late filings may result in enforcement action being taken by
the Central Bank against the UCITS management company and the Directors.
The below information details each section in the MCR return as presented.
See Appendix 1 for MCR table reference.
1. Initial Capital Requirement – As per UCITS Notice 2 paragraph 26 the initial
capital requirement is €125,000. Where the Net Asset Value of the Collective
Investment Schemes under management exceeds €250,000,000, a UCITS
management company must provide an additional amount of capital equal to
0.02% of the amount by which the net asset value exceeds €250,000,000. A
UCITS management company need not provide up to 50% of the additional
amount if it benefits from a guarantee of the same amount given by a credit
institution or insurance undertaking and the form of guarantee is approved by
the Central Bank.
Non EURO base currency UCITS management company’s should use the
reporting period end exchange rate, taken from the Central Bank of Ireland’s
website2, when translating both their unaudited semi-annual financial statements
or audited annual financial statements into EURO. UCITS management
company’s should use the reporting period end exchange rate when translating
both Balance Sheet and Income Statements (Company’s should not use average
rates when translating their Income statement into euro – company’s should use
reporting period end rates only).
2
http://www.centralbank.ie/polstats/stats/exrates/Pages/default.aspx
3
Minimum Capital Requirement Report – Guidance Note for UCITS Management Companies
It is the responsibility of UCITS management company to ensure that sufficient
capital is maintained in the company’s base currency at all times in order to satisfy
the applicable EURO capital requirement equivalent.
2. Expenditure Requirement – This is calculated as one quarter of a UCITS
management company’s total expenditure taken from the annual audited
financial statements. However, the Central Bank reserves the right to adjust
this amount should it be deemed not to reasonably reflect the current position
of the UCITS management company.
Note: When submitting semi-annual interim MCR returns, the figures in the
expenditure requirement should be that of the most recent annual audited
financial statements.
2.1.1.1 Total Expenditure – this figure is taken from the Income Statement and
includes all expenditure incurred by the UCITS management company at the
reporting date. The following items may be deducted from the total expenditure
figure to arrive at the Net Qualifying Expenditure figure:
-
2.1.1.2 Depreciation
-
2.1.1.3 Profit Shares, Bonuses etc.
-
2.1.1.4 Net losses on translation of foreign currency balances
Note: This field should only contain Net foreign currency losses; gains
on foreign currency should not be reported under this heading.
-
2.1.1.5 Shared Commissions paid. (Annex I UCITS Notices Note 4.2 (d))
Note: Shared Commissions are payments other than to officers and staff
of the UCITS management company.
Deductions in this line must be pre-approved by the Central Bank.
-
2.1.1.6 Exceptional and extraordinary items (Annex I UCITS Notices
Note 4.2 (e))
Note: General expenses or other expenses should not be input on this
line. Pre-approval must be sought by the Central Bank in order to
include expenditure under this line item.
-
2.1.1.7 Any other non-recurring expense items (Annex I UCITS Notices
Note 4.2 (e))
Note: This is an expense that should reflect the same categorisation of
expense as presented in the annual audited financial statements. No
other expenses should be included in this line item.
All deductions from the total expenditure figure should be clearly identified in
the most recent annual audited financial statements or supported with a letter
from the auditors confirming the figures. All figures input into the expenditure
requirement section of the MCR should be reconcilable to the FINREP figures.
4
Minimum Capital Requirement Report – Guidance Note for UCITS Management Companies
3. Minimum Capital Requirement – The UCITS management company’s Minimum
Capital Requirement is the higher of:


the Initial Capital Requirement plus the Additional Amount ( if required);
or
the Expenditure Requirement
4. Financial Resources – A UCITS management company is required to have
Financial Resources at least equal to its Minimum Capital Requirement.
Financial Resources for a UCITS management company will be based on the
data contained in the unaudited semi-annual financial statements or the audited
annual financial statements at the reporting date.
Financial resources are calculated as the aggregate of:
-
4.1.1.1 Equity Capital fully paid up
-
4.1.1.2 Perpetual Non-cumulative Preference Shares
-
4.1.1.3 Eligible Capital Contributions (Annex I UCITS Notices 6.4 (a
& b))
-
4.1.1.4 Qualifying Subordinated Loan Capital (Annex I UCITS
Notices 6.4 (a & b))
-
4.1.1.5 Share Premium Account
-
4.1.1.6 Disclosed Revenue and Capital Reserves
Note: These figures exclude the revaluation reserve and are to be
taken from the most recent unaudited semi-annual financial
statements or audited financial statements at the reporting date.
-
4.1.1.7 Audited interim net profits
Note: This figure is only allowable as a deduction if audited.
-
4.1.1.8 Other reserves less interim dividends
The following item should be deducted from the aggregated Financial
Resources figure:
-
5
4.1.2 Current year losses not included in disclosed revenue and
capital reserves above.
Note: If this figure is already included in the Disclosed Revenue and
Capital Reserves at line 4.1.1.6 then the loss figure should not be
included again on this line as this will be double counting.
Minimum Capital Requirement Report – Guidance Note for UCITS Management Companies
5. Eligible Assets – A UCITS management company is required to hold the higher
of the Expenditure Requirement or the Initial Capital Requirement in the form of
Eligible Assets. Eligible Assets must be easily accessible and free from any
liens or charges. In addition Eligible Assets must be maintained outside the
UCITS management company’s group.
Note: The Central Bank requires Eligible Assets to be held in an account that is
separate to the account(s) used by a UCITS management company for the dayday running of its business.
Eligible Assets are calculated as follows:
Total Assets – Non-current assets plus current assets. These figures should be
taken from the Balance Sheet or notes to the unaudited semi-annual financial
statements or annual audited financial statements at each reporting date. All
figures deducted as eligible assets in the MCR return should be reconcilable to
the FINREP tables.
The following items may be deducted from the Total Assets figure to arrive at
the Eligible Assets figure:
-
5.1.2.01 Fixed Assets
-
5.1.2.02 Intangible Assets
-
5.1.2.03 Cash or cash equivalents held with group companies
-
5.1.2.04 Debtors
-
5.1.2.05 Bad debt provisions
-
5.1.2.06 Prepayments
-
5.1.2.07 Intercompany amounts (gross)
-
5.1.2.08 Loans
-
5.1.2.09 Collective Investment Schemes which are not daily dealing
(Annex I UCITS Notices Note 7.4)
-
5.1.2.10 Any other assets which are not easily accessible.
6. Compliance Test – A UCITS management company must be in a position to
demonstrate its on-going compliance with the capital adequacy requirements
outlined in this document. Where a UCITS management company’s financial
position changes at any time between reporting intervals, which would impact
on its compliance with its regulatory capital requirements, it must notify the
Central Bank immediately and take any necessary steps to rectify its position.
6
Minimum Capital Requirement Report – Guidance Note for UCITS Management Companies
Note: Please ensure that the answers provided in the compliance test section
correspond correctly to the numerical data provided in the MCR return. If an
answer to any of these questions is “No”, the Central Bank must be notified
immediately.
7. Qualifying Subordinated Loan Capital
UCITS management companies must detail the qualifying Subordinated Loan
Capital at the reporting interval. The following must be disclosed:
7
-
7.2 Remaining term to maturity (months)
-
7.1.1 Gross amount
-
7.1.2 Less amortisation
-
7.1 Qualifying amount
Minimum Capital Requirement Report – Guidance Note for UCITS Management Companies
Appendix I - Minimum Capital Requirement Template Online Reporting System
for Report for UCITS Management Companies
Minimum Capital Requirement Report - UCITS Management Company
1. INITIAL CAPITAL REQUIREMENT PLUS ADDITIONAL AMOUNT
All monetary amounts are in €000's
1.1 What base currency was the below financial data prepared in?
(Note all data entered on this return must be in €000's)
1.2 Exchange Rate used in CCY/EUR format if functional currency
is not Euro (Note - Central Bank of Ireland rate must be used)
1.3 Initial Capital Requirement(A)
1.4 Assets under Management at Reporting Date
1.5 Excess over €250,000,000 (if applicable)
1.6 Additional Amount (if applicable) [0.02% of excess over
€250m](B)
1.7 Initial Capital Requirement(A) plus Additional Amount(B) (if
applicable). (The amount to be included(C) here is not required to
exceed €10,000,000.)
2. EXPENDITURE REQUIREMENT
2.1.1.1 Total Expenditure (taken from Profit and Loss account)
LESS
2.1.1.2 (Depreciation)
2.1.1.3 (Profit Shares, Bonuses, etc)
2.1.1.4 (Net losses on translation of foreign currency balances)
2.1.1.5 (Shared Commissions paid) - Note 4.2(d)
2.1.1.6 (Exceptional and Extraordinary Items) - Note 4.2(e)
2.1.1.7 (Any other non-recurring expense) - Note 4.2(e)
2.1.1 Net Qualifying Expenditure
2.1 EXPENDITURE REQUIREMENT [One quarter of Net Qualifiying
Expenditure](D)
3. MINIMUM CAPITAL REQUIREMENT
UCITS MANAGEMENT COMPANY
Higher of Initial Capital Requirement plus Additional Amount (if applicable) and Expenditure Requirement
3.1 MINIMUM CAPITAL REQUIREMENT [Higher of (C) and (D)](E)
4. FINANCIAL RESOURCES
4.1.1.1 Equity Capital fully paid up
4.1.1.2 Perpetual Non-cumulative Preference Shares
4.1.1.3 Eligible Capital Contributions
4.1.1.4 Qualifying Subordinated Loan Capital (See 'Note on
Qualifying Subordinated Loan Capital' below)
4.1.1.5 Share Premium Account
4.1.1.6 Disclosed Revenue and Capital Reserves (excluding
Revaluation Reserves)(from most recent audited figures)
4.1.1.7 Audited Interim Net Profits - Note 6.3
4.1.1.8 Other Reserves
4.1.1 Total
4.1.2 LESS: Current Year Losses not included in Disclosed
Reserves and Capital Reserves above
4.1 FINANCIAL RESOURCES(F)
8
Minimum Capital Requirement Report – Guidance Note for UCITS Management Companies
5. ELIGIBLE ASSETS (must be held outside the Group)
5.1.1.1 Total Non-current Assets (taken from Balance Sheet)
5.1.1.2 Current Assets (taken from Balance Sheet)
5.1.1 TOTAL ASSETS
Less: Ineligible Assets
5.1.2.01 (Fixed Assets)
5.1.2.02 (Intangible Assets)
5.1.2.03 (Cash held with group companies)
5.1.2.04 (Debtors)
5.1.2.05 Bad Debt Provisions
5.1.2.06 (Prepayments)
5.1.2.07 (Intercompany Amounts (gross))
5.1.2.08 (Loans)
5.1.2.09 (Collective investment schemes which are not daily
dealing) - Note 7.4
5.1.2.10 (Any other assets which are not easily accessible)
5.1.2 Total Ineligible Assets
5.1 ELIGIBLE ASSETS(G)
6. COMPLIANCE TEST
6.1 Are Financial Resources(F) at least equal to Minimum Capital
Requirement(E)?
6.2 Are Eligible Assets(G) at least equal to Minimum Capital
Requirement(E)?
6.3 Where are Eligible Assets held? - Note: Upload relevant bank
statements through the Online Reporting System
6.4 Was the firm in compliance with the capital adequacy
requirements throughout the period under review?
7. Note on Qualifying Subordinated Loan Capital
The qualifying amount of redeemable subordinated debt is
calculated as follows:
7.1 Remaining term to maturity (Months)
7.1.1 Gross Amount
7.1.2 (Less Amortisations)
7.1 = Qualifying Amount
9
Minimum Capital Requirement Report – Guidance Note for UCITS Management Companies
Appendix II – Comparison table between MCR and FINREP
MCR
2 Expenditure
Requirement
2.1.1 Total
Expenditure
FINREP
Audited Accounts
2.1.1.02 Interest Expense
+ 2.1.1.03 Expenses On Share Capital Repayable On Demand
+ 2.1.1.06 Fee And Commission Expenses
+ 2.1.1.07 Realised Gains-Losses On Financial Assets And
Liabilities Not Measured At FV Through PL Net (loss only)
+ 2.1.1.08 Gains - Losses On Financial Assets And Liabilities
Held For Trading Net (loss only)
+ 2.1.1.09 Gains-Losses On Financial Assets And Liabilities
Designated At FV Through PL Net (loss only)
+ 2.1.1.10 Gains - Losses From Hedge Accounting Net (loss
only)
+ 2.1.1.11 Exchange Differences Gain Loss Net (loss only)
+ 2.1.1.12 Gains - Losses On De-recognition Of Assets Other
Than Held For Sale Net (loss only)
+ 2.1.1.14 Other Income Expenses From Insurance And
Reinsurance Contracts Net (loss only)
+ 2.1.1.16 Other Operating Expenses
+ 2.1.1.17 Administration Costs
+ 2.1.1.18 Depreciation
+ 2.1.1.20 Impairment On Financial Assets Not Measured At
FV Through PL
+ 2.1.1.21 Impairment On Non-Financial Assets
2.1.2
Depreciation
2.1.3 Profit
Shares,
Bonuses, etc.
2.1.4 Net losses
on translation
of foreign
currency
balances
2.1.5 Shared
Commissions
paid
2.1.6
Exceptional and
Extraordinary
Items
2.1.7 Any other
non-recurring
expense
2.1 Net
Qualifying
Expenditure
2.2 Expenditure
Requirement
3 Minimum
Capital
10
2.1.1.18 Depreciation
34.A.1.2 Bonuses Profit Shares Benefit In Kind
2.1.1.11 Exchange Differences Gain Loss Net (loss only)
No FINREP comparison
34.A.2.19 Exceptional And Extraordinary Items
34.A.2.20 Any Other Non Recurring Expense
Shared Commissions paid is taken from MCR as there is no
FINREP equivalent
Net Qualifying Expenditure * 25%
Audited Accounts
Minimum Capital Requirement Report – Guidance Note for UCITS Management Companies
Requirement
3.1 Minimum
Capital
Requirement
4 Financial
Resources
4.1.1.1 Equity
Capital fully
paid up
4.1.1.2
Perpetual Noncumulative
Preference
Shares
4.1.1.3 Eligible
Capital
Contributions
4.1.1.4
Qualifying
Subordinated
Loan Capital
4.1.1.5 Share
Premium
Account
4.1.1.6
Disclosed
Revenue and
Capital
Reserves
Higher of the (i) initial capital requirement (ii) expenditure
requirement (iii) initial capital requirement plus additional
amount
Accounts received with MCR
1.3.1.1 Paid In Capital
No FINREP comparison
34.D.1.2 Capital Contribution
No FINREP comparison
1.3.2 Share Premium
34.D.1.1 Retained Earnings
+ 1.3.7 Profit - Loss Attributable To Equity Holders Of The
Parent
4.1.1.7 Audited
Interim Net
Profits
4.1.1.8 Other
Reserves (less
Interim
Dividends)
1.3.7 Profit (loss) attributable to equity holders of the parent
(interim profits should be audited)
1.3.5.1 Reserves Accumulated Losses of Investments In
Entities Accounted For Using The Equity Method
+ 34.D.1.3 Other Unrecognised Reserves
+ 1.3.3 Other Equity
+ 1.3.4 Revaluation Reserves And Other Valuation Differences
- 1.3.8 Interim Dividends
4.1.1 Total
4.1.2 LESS:
Current Year
Losses not
inlcuded in
Disclosed
Reserves and
Capital
Reserves above
4 Financial
Resources
11
Perpetual Non-cumulative Preference Shares, Qualifying
Subordinated Loan Capital and Audited Interim Net Profits are
taken from MCR as there are no FINREP equivalents
2 Total Profit - Loss (loss only) (if not already included in
Disclosed Revenue and Capital Reserves calculation) (if difference
between 4.1.1.6 MCR and FINREP calculations equals 2 Total
Profit - Loss in FINREP, this field will show zero)(profit included in
this line at interim reporting must be audited)
Total minus Current Year Losses and unaudited
profits(previous 2 cells)
Minimum Capital Requirement Report – Guidance Note for UCITS Management Companies
5 Eligible
Assets
5.1.1.1 Total
Non-current
Assets
5.1.1.2 Current
Assets
5.1.1 TOTAL
ASSETS
5.1.2.01 Fixed
Assets
5.1.2.02
Intangible
Assets
5.1.2.03 Cash
held with group
companies
5.1.2.04
Debtors
Accounts received with MCR
1.1 Total Assets NonCurrent
1.1 Total Assets Current
1.1 Total Assets Total
1.1.09 Tangible Assets
1.1.10 Intangible Assets
No FINREP comparison, should be included from MCR if
difference in Total Eligible Assets matches this field
34.B.1.1.1 Trading Book Debtors Gross
+ 34.B.1.2.1 Non Trading Book Debtors Gross
5.1.2.05 Bad
Debt Provisions
34.B.1.1.2 Trading Book Debtors Provision
+ 34.B.1.2.2 Non Trading Book Debtors Provision
5.1.2.06
Prepayments
5.1.2.07
Intercompany
Amounts
(gross)
5.1.2.08 Loans
5.1.2.09
Collective
investment
schemes which
are not daily
dealing
5.1.2.10 Any
other assets
which are not
easily
accessible
34.B.1.3 Prepayments
34.B.1.4 Inter Company Debtors
1.1.02.4 Loans And Advances
+ 1.1.03.3 Loans And Advances
+ 1.1.04.3 Loans And Advances
+ 1.1.05.2 Loans And Advances
+ 1.1.06.2 Loans And Advances
No specific FINREP comparison, should be included at most
appropriate field in the FINREP
1.1.02.1 Derivatives Held For Trading
+ 1.1.02.2 Equity Instruments
+ 1.1.02.3 Debt Securities
+ 1.1.03.1 Equity Instruments
+ 1.1.03.2 Debt Securities
+ 1.1.04.1 Equity Instruments
+ 1.1.04.2 Debt Securities
+ 1.1.05.1 Debt Securities
12
Minimum Capital Requirement Report – Guidance Note for UCITS Management Companies
+ 1.1.06.1 Debt Securities
+ 1.1.07 Derivatives - Hedge Accounting
+ 1.1.11 Investments In Entities Accounted For Using The
Equity Method
+ 1.1.12 Tax Assets
+ 1.1.13 Assets Under Insurance And Reinsurance Contracts
+ 1.1.15 Non-Current Assets And Disposal Groups Classified As
Held For Sale
+ 34.B.1.5 Paye Prsi Vat
+ 34.B.1.6 Investments At Cost
+ 34.B.1.7 Other Unrecognised Assets
5.1.2 Total
Ineligible Assets
5.1 Eligible
Assets
6 Compliance
Test
6.1 Are
Financial
Resources at
least equal to
Minimum
Capital
Requirement?
6.2 Are Eligible
Assets at least
equal to
Minimum
Capital
Requirement?
6.3 Where are
Eligible Assets
held?
6.4 Was the
firm in
compliance
with the capital
adequacy
requirements
throughout the
period?
13
Addition of Ineligible Assets fields from FINREP
Total Assets minus Total Ineligible Assets
Accounts received with MCR
Calculated from FINREP figures
Calculated from FINREP figures
No FINREP comparison
No FINREP comparison
Bosca PO 559, Sráid an Dáma, Baile Átha Cliath 2, Éire
PO. Box No 559, Dame Street, Dublin 2, Ireland