Role of a Depositary of Qualified Investor Funds Eva Syková, Igor Murárik

2 Rules and regulations 1)Act No. 189/2004 Sb., the Collective Investment Act (the „Act“) Qualified Investor Fund (QIF)  Their establishment was allowed by the amendment in  They are not publicly offered, they are intended for a limited range of qualified investors  Their investment policy is not limited, reference to the statute.  Every collective investment fund must have its depositary. QIF Depositary  They especially perform the control function, the aim is to protect the investor  In 2009, an amendment came into being that mitigates control activity of a depositary with qualified investor funds  Pursuant to Section 21 (4) of the Act a qualified investor fund may negotiate a limitation or an exclusion of certain control activities of a depositary in a depositary contract provided that the details of such derogations are specified in the fund‘s statute. 2)Decree No. 115/2007 Sb., on the details of fulfilling the depositary‘s duties 3)Decree No. 270/2004 Sb., on a way of determining fair value of assets and liabilities of a collective investment fund and a way of determining the actual value of a share or participation certificate of a collective investment fund

3 Depositary‘s role(1) Control activity – prevails with funds for the public Monitoring activity – prevails with qualified investor funds In case of a QIF the exact specification in the fund‘s statute and a depositary contract is important. Activities of a depositary that cannot be excluded are:  Custody of the fund‘s assets or its other safe-keeping (if custody is excluded by the nature of the matter)  Records of the movements of all monetary means of the fund (the ex-ante control with payments over CZK 500,000.-)  Control whether the fund‘s shares or participation certificates are issued and repurchased under the Act and the fund‘s statute  Settling trades in the fund‘s assets The depositary‘s role is in particular: 1)Protective – to keep the fund‘s assets safe and to control their treatment 2)Registration – to keep records of assets and to process information on transactions in the fund‘s assets based on materials from the fund and independent sources

4 Depositary‘s role(2) The depositary's activities whose limitation or full exclusion can be negotiated in a depositary contract:  Control whether the actual value of a share or a participation certificate of the QIF is calculated in compliance with the Act and the fund‘s statute  Executing the fund‘s instructions that are not contrary to the Act or the fund‘s statute  Control whether the yield of the fund‘s assets is used in compliance with the Act and the fund‘s statute  Control whether the fund‘s assets are acquired and alienated under the Act and the fund‘s statute  Control a way of valuation of the fund‘s assets The depositary contract that limits a scope of the depositary‘s obligations will be effective if the fund‘s statute that contains details of deviations is effective. Rules for the depositary's conduct are subject to state supervision under the Act but to the extent of limitations of duties under Section 21 (4) of the Act the depositary is not obliged to submit notifications to the CNB or to interfere in the fund‘s activity. Only if the depositary believes there was a deviation in the funds activity, he will discuss this fact with the fund and may subsequently notify the CNB.

5 Depositary contract Exact specification pursuant to the Act and the statute (the statute is highly underlined) Specification of control activities (defining the limitation of the depositary's control), frequency of the calculation of the asset value (if required), etc. Fees for the performance of the depositary‘s activity – determined not under the volume of the fund‘s assets but under the scope of control activities (the depositary demands), i.e. always an individual approach to the client It is part of an application for granting the CNB‘s approval to the establishment of a fund (a pre- contract) A depositary contract is made for an indefinite period of time. A termination notice is 6 months.

6 Practical experience of UCB CZ as a depositary UCB CZ as a depositary performs this activity for: 15 qualified investor funds 10 of which focuss on investments in real estate (the QIF market is formed by totally 80 funds at present) 25 standard and special mutual funds intended for the public (under the volume of controlled assets UCB CZ takes the 3rd place on the market) 5 pension funds (under the volume of controlled assets UCB CZ takes the 1st place on the market) At , we totally controlled a volume of assets in the amount of CZK 143bn (the 1st on the market), of which assets of qualified investment funds amounted to CZK 4bn.

7 Organizational integration of the Funds Administration and Depository Services Section in UCB CZ Odbor GSS Depozitář Relationship mng. Custody Operations Custody Operations – Settlements and capital events FINI – the Treasury Sales Unit for financial institutions Real Estate Appraisal Section Market Risk Department

8 Contacts UniCredit Bank Czech Republic, a.s. Revoluční 7, Praha 1 Ing. Michal Stuchlík Director of the Global Securities Services Unit Tel.: Ing. Eva Syková Manager of the Funds Administration and Depository Services Section Tel.: Ing. Igor Murárik Specialist of the Funds Administration and Depository Services Section Tel.: