AIMA QUESTIONNAIRE Due Diligence - BCBS - AIMA Questionnair (2014).pdf · AIMA QUESTIONNAIRE Due Diligence Incorporating the AIMA Questionnaire IDS is a member of AIMA January 2014

AIMA QUESTIONNAIRE

Due Diligence

Incorporating the AIMA Questionnaire

IDS is a member of AIMA

January 2014

The information given herein is correct as at: 31 December 2013

This questionnaire is based on AIMA’s Illustrative Questionnaire for the Due Diligence for Hedge Fund Administration for

Managers (2007)

1

ILLUSTRATIVE QUESTIONNAIRE FOR DUE DILIGENCE

OF

HEDGE FUND ADMINISTRATION FOR

MANAGERS

Illustrative Questionnaire for Due Diligence of HEDGE FUND ADMINISTRATION FOR MANAGERS The purpose of this document is to serve as a guide to managers in their relations with hedge fund administrators. Not all of the following questions are applicable to all administrators but we recommend that you ask as many questions as possible before making a decision.



Managers (2007)

2

Illustrative Questionnaire for Due Diligence of HEDGE FUND ADMINISTRATION FOR MANAGERS

CONTENTS Items Page No.

............................................................................................................................ 2 Contents

1 Details of Administrator ................................................................................................... 3 2 Ownership .................................................................................................................... 4 3 Documentation .............................................................................................................. 5 4 Size of Operation/Group .................................................................................................. 5 5 Client Relationship Management......................................................................................... 6 6 Auditors ...................................................................................................................... 7 7 Operations ................................................................................................................... 8

7.1 Shareholder Registration ............................................................................................ 8 7.2 Administation.......................................................................................................... 9 7.3 General ................................................................................................................. 9 7.4 Communication ...................................................................................................... 10 7.5 Other (please describe) ............................................................................................ 10

8 Equalisation ................................................................................................................. 10 9 Compliance Checks ........................................................................................................ 10 10 Anit-Money Laundering ................................................................................................... 11 11 Insurance.................................................................................................................... 12 12 Regulatory Body/Authorisation ......................................................................................... 12 13 Payment and Signatory Procedures .................................................................................... 13 14 NAV Calculation ............................................................................................................ 13

14.1 Transations ........................................................................................................... 13 14.2 Corporate Actions ................................................................................................... 16 14.3 Pricing/Valuations ................................................................................................... 16

15 Reconciliation .............................................................................................................. 18 16 Front or Middle Office Services ......................................................................................... 18 17 Fund Accounting System ................................................................................................. 19 18 Reporting .................................................................................................................... 20 19 Fund Systems Audits ...................................................................................................... 21 20 Legal and Tax .............................................................................................................. 21 21 Corporate Secretarial and Directors Services ........................................................................ 22 22 Fees .......................................................................................................................... 23 23 Operational Risk ........................................................................................................... 23 24 Business Continuity/Disaster Recovery ................................................................................ 24 25 General – Staff ............................................................................................................. 25



Managers (2007)

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NB: THE INFORMATION GIVEN HEREIN IS CORRECT AS AT TUESDAY, 04 FEBRUARY 2014

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1 DETAILS OF ADMINISTRATOR 1.1 Name:

Investment Data Services (Pty) Ltd (Reg No. 2002/030790/07) Trading as IDS

Fund Services

1.2 Address:

Physical Address:

IDS House , 8 St.George’s Mall, Cape Town 8001

Postal Address:

P O Box 24, Cape Town 8000

1.3 Telephone:

+ 27 21 402-1600

1.4 Fax:

+ 27 86 574-8893

1.5 Website:

www.idsfundservices.com

1.6 Contacts:

1.6.1 Relationship Manager:

o Name:

o Telephone:

o E-Mail:

Tony Christien

+27 21 402-1600

[email protected]

1.6.2 Valuations/Fund Accounting:

o Name:

o Telephone:

o E-Mail:

Kosie Feyt

+27 21 402-1600

[email protected]

1.6.3 Custody

o Name:

o Telephone:

o E-Mail:

Leeann Scott

+27 21 402-1600

[email protected]

1.6.4 Financial Reporting:

o Name:

o Telephone:

o E-Mail:

Brenda Doyle

+27 21 402-1600

[email protected]

1.6.5 Operations Management:

o Name:

o Telephone:

o E-Mail:

Tony Christien

+27 21 402-1600

[email protected]

1.6.6 Shareholder Services/Registrar &

Transfer Department:

o Name:

o Telephone:

o E-Mail:

Mandy-Lee Feyt

+27 21 402-1600

[email protected]

1.6.7

Middle Office Services

Graeme Rate

021-402-1600

[email protected]

http://www.idsfundservices.com/

mailto:[email protected]









Managers (2007)

4

1.6.8

I.T. Systems:

o Name:

o Telephone:

o E-Mail:

Andrew Frankish

+27 21 402-1600

[email protected]

1.6.9 Please provide Personnel Chart with total number of staff, CVs of all Principals, Directors, Officers and Senior

Managers, including:

Board of Directors

Chairman/President

Managing Director/CEO

Finance Director

Marketing Director

Non-Executive Director(s)

Operations Management

1. Relationship Manager

2. Administration / Accounting

3. Shareholder Services / Registrar and Transfer Department

4. Compliance / MLRO

5. I.T.

6. H.R.

7. Company Secretary if appropriate

Refer to the attached “Investment Data Services Information Brochure – September 2013” for details.

2 OWNERSHIP 2.1 Parent company (if any):

Name:

Address:

IDS Group (Pty) Ltd

IDS House , 8 St.George’s Mall, Cape Town 8001

2.2 If privately owned, details of beneficial

owners:

IDS Group is privately owned by Individuals and Staff.

2.3 Please describe corporate and capital

structure of parent company:

IDS Group is a SA registered proprietary limited company.

2.4 Please describe corporate and capital

structure of the administrator:

IDS is a SA registered proprietary limited company.

2.5

Please give details of staff turnover for

the last 3 years showing levels of

seniority:

Cape Town

Since the 1st March 2008 to 31 December 2013 the IDS Group has had 146 new

appointments and 97 staff left the company.

Four of the staff leaving the company were senior staff members. One new

senior staff member joined the company.

Malta

Since 17 May 2010 to the 31 December 2013, 9 staff has been appointed and 2

staff members left the company.




Managers (2007)

5

3 DOCUMENTATION

3.1

IDS can provide these documents upon specific client requests and signing of a non-disclosure agreement:

1. Audited financial statements of

a. Parent company/group consolidated; and

b. Administrator

2. Copy of Memorandum and Articles of Association of Administrator

3. Certificate of Incorporation of Administrator; or

4. Other statutory incorporation/formation documentation of Administrator

References:

1. Bank references; and

2. Two client references

4 SIZE OF OPERATION/GROUP 4.1

Is your office the sole office/head

office?

If no, list other offices:

IDS Fund Services head office is in Cape Town

IDS Fund Services Malta Ltd (Reg No. 49663) the office is located in Birkirkara,

Malta

The information shown below is for both entities combined.

4.2

What are total funds* under

administration of group?

Dec 2013 Dec 2012 Dec 2011

Dec 2010

Dec 2009

ZAR 80

Billion

ZAR 54,2

billion

ZAR 39,40

Billion

ZAR 33,7

Billion

ZAR 33,7

Billion

4.3 What proportion of total funds under

administration relates to alternative

investments? 93% 96% 100% 100% 100%

4.4 What are total funds* under

administration of your office?

ZAR

80 Billion

ZAR 54,2

Billion

ZAR 39,40

Billion

ZAR 33,7

Billion

ZAR 33.5

Billion

4.5 How many funds* are administered by

the group? 211 205 203

171

167

4.6 How many alternative investment funds

are administered by the group? 197 205 203

171

167

4.7 How many funds* are administered by

your office? 197 205 203

171

167

Please identify the Fund Strategies that you

administer (Convertible Bond/Pan Euro L/S etc.)?

IDS is able to support all hedge fund strategies and has a broad client base with funds investing in a wide range of securities. We service high yield funds, distressed funds, arbitrage funds, and emerging market funds, funds with a high component of derivatives, fixed income funds, and long/short equity funds.

4.8 If the fund is a Fund of Funds (FOF), how

many FOFs are administered by the

group?

60 65

50

38

38

4.9 If the fund is a FOF, how many FOFs are

administered by your office?

60 65

50

38

38

4.10 Provide breakdown of total funds under

administration by alternative investment

strategy.



Managers (2007)

6

4.11 Provide breakdown of total fund

numbers by alternative investment

strategy.

4.12

Break down number of funds* for which

you provide daily, weekly, monthly,

quarterly and annual valuations.

DAILY WEEKLY MONTHLY QUARTERLY ANNUALLY

35

10

200

3

-

* Including sub-funds

4.13 How has the headcount grown during

the last 3 years?

2013-113

2012- 96

2011 - 91

2010 - 90

2009 - 91

2008 – 92

2007 - 65

2006 – 45

5 CLIENT RELATIONSHIP MANAGEMENT 5.1 Describe client relationship procedures:

For all clients, we appoint a Client Service Manager (CSM) who is responsible

for client interaction and is the “point” person for the relationship. The CSM is

responsible for all aspects of service delivery in the day-to day support of the

client.

This structure gives our clients a single contact point across all aspects of our

servicing teams.

5.2 Do you have a Client Relationship

Manager or equivalent?

Yes, see 5.1 above.

5.3 Who will be Client Relationship Manager

(or equivalent) allocated to our fund?

Why was this person chosen?

Yes, see 5.1 above.



Managers (2007)

7

5.4 Describe client relationship services that

would be expected:

1. During pre-launch and set-up of

fund:

2. During on-going operation of the

fund:

3. Availability on day-to-day basis – i.e.

how many other funds/clients will

the Client Relationship Manager be

responsible for?

4. What will be back-up during

illness/vacations?

During the pre-launch / set-up stage

Within IDS, the marketing phase of the engagement is handled by the Client

Services team. Once a prospective client has made contact, a project

identified and a fee schedule accepted, the Business Implementation team

coordinates the setup of the fund and completes the required due diligence on

the fund and related entities.

During transition

The Business Implementation team will assist the client during the

transition/launch period. Whilst the Client Services Manager (CSM) will

develop the new relationship and oversee the transition process, the BIM will

plan the transition and make sure that all Client Service Units are ready to

take on and service the new Fund. The CSM (in the case of an existing client

relationship) is specifically appointed to handle the launch of a complex

project (e.g. Hedge fund with pooling and equalisation procedures).

On a day-to-day basis

Whilst the CSM performs a continuous oversight of the relationship and

manages any changes in client requirements or new product needs, a Fund

Account Manager (FAM) and Officers and their operational teams handle day-

to-day servicing. Key Client Service functions such as Accounting & Valuation

and Custody/Settlement are organised by Product type. In each unit, Fund

Account Managers are appointed to focus on the day-today contacts with the

clients. We believe that this dual structure CSM/FAM is the most effective way

to acquire an in-depth knowledge of the business conducted by a client and to

satisfy requirements at different levels of seniority.

Availability CSMs work flexible hours, with core hours being 8.30 am to 5.00 pm. In case of

special circumstances or emergency, CSMs are contactable by phone or mobile

phone.

Back-up The CSM roles involve cross-information processes to ensure that day-to-day

activities can be covered at all times by the replacing manager. It is also

encouraged that holidays should be taken at moments of lesser client historical

activity. In these processes, we also place heavy emphasis on co-ordinated

team building and consequently, require a high level of pro-activity from the

individual teams in their responses to client needs.

6 AUDITORS

6.1 Name of Company: Price Waterhouse Coopers

6.2 Contact Name: Zuhdi Abrahams

6.3 Telephone: +27 21 529 2342

6.4 E-mail: [email protected]

6.5 When appointed: March 2006

6.6 Have they always been your auditors?

If not, who were your previous

auditors?

When did you change and why?

No

Ernst & Young

March 2006, following a consolidation of auditors across the IDS Group



Managers (2007)

8

7 OPERATIONS What services do you provide? In particular, please comment on / describe the following:

7.1 SHAREHOLDER REGISTRATION:

Handling subscriptions and

redemptions (including

approval, issuing contract

notes and certificates, if

required):

Describe how your system

processes

shareholder/partner

activity

IDS places a great amount of importance on efficient and effective investor communications and

management reporting. When corresponding with the shareholders of a fund, IDS represents the

investment manager and promoter of the fund and it is essential that investors receive timely responses

to queries and statements that are easy to understand.

When the investor decides to make a subscription, the necessary completed documents will be sent

to the Investor Services department, where they are reviewed for completeness and accuracy, and to

ensure that the fund requirements (i.e. investor eligibility, minimum investment amounts, cut-off

times) have been met. A check will be done to determine whether the investor is an existing or new

customer. If new, the administrator will set up the new customer record on our share register system.

Systematic controls are in place to ensure that all instructions are issued to the respective fund within

the prescribed deadline. Standard procedure is as follows:

All subscriptions will be sent to us, initially by fax or email, prior to the cut off time stated in the fund’s

prospectus/partnership agreement. In the case of an initial subscription or any redemption we also

request that the original be sent to us by post. Once the fax/email is received, all details are checked

to ensure that they comply with the fund’s parameters. At this stage we can send an acknowledgment

to the shareholder/partner stating that the trade has been received and will be processed for the

relevant dealing day. If this is an initial subscription for a shareholder/partner, we will also review the

necessary anti-money laundering checks at this stage if requested to do so by the fund manager.

For subscriptions the cash availability is confirmed before it is processed (unless there is an allowable

exception).

The final stage of the process for subscriptions is the “completion” of trades. We will not perform this

until all relevant documents have been received, to ensure that our records show a complete and

correct audit trail. For redemptions a series of checks must be performed before a redemption can

be paid out (for example signatures are checked for authenticity and the current fund status checked to

ensure that redemption will not lead to the fund holding below the minimum level). We will also ensure

redemptions are in line with anti-money laundering (AML) procedures. Once the NAV has been received

and there are sufficient funds available in the funds account, payment will be made to the investor.

During the above process, detailed information can be sent to the investment manager, such as a trade

report detailing all trades received for a given dealing day at the cut off time for receipt of

subscriptions into the fund’s bank account). Pending trades are investigated to ensure that the

appropriate follow up process is adhered to.



Managers (2007)

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7.1.2 Processing receipts of

subscriptions and payment of

redemptions:

Any issues or outstanding documents are followed up with the either the investor or

fund manager.

All new investors are reviewed for compliance with AML regulations (Client is

responsible to obtain such evidence). For individual investors, we may require a copy of

their passport or identification card duly certified by a notary public, together with

evidence of their address such as utility bill or bank statement in the investor’s name.

In the case of corporate applicants we may require a certified copy of the certificate of

incorporation, memorandum and articles of association (or equivalent), the names,

occupations, dates of birth and residential and business addresses of all directors. (All

requirements in terms of FICA.)

7.2 ADMINISTRATION:

7.2.1 Can you act for:

1. Partnerships, LLPs?

2. Investment Companies?

3. Unit Trusts?

4. Master Feeder Fund

structures?

IDS can administer all of these structures.

7.3 GENERAL

Please provide information on your processes for:

7.3.1

Publishing Net Asset Value

and/or share prices, if there is

a bid/offer spread:

Not yet in South Africa

7.3.2 Preparation of financial

statements:

As part of the valuation process, IDS prepares unaudited financial statements (i.e.,

Balance Sheet, Income Statement, and Statement of Changes) for each valuation

period.

At year-end, IDS will produce a set of financial statements based on the required

reporting framework. These are then audit by the external auditors and any changes

requested by the auditors are effected where necessary.

7.3.3 Liaising with fund’s auditors:

IDS have extensive interaction with the auditors of each fund.

IDS Facilitate the audit by hosting the auditors at our offices and by providing all

necessary files and records to support them in their duties. IDS does all that is within

our power to ensure timely completion of audits. The majority of the audit work is

performed at the IDS offices as the client files are maintained onsite and is conducive

to a close working relationship.

7.3.4 Can you provide US tax

reporting (i.e. K1’s, etc.)?

Not required by existing client base.

7.3.5 Communication with

shareholders, regulators, data

services, stock exchange (if

applicable), etc.:

Not yet required by existing client base.


This questionnaire is based on AIMA’s Illustrative Questionnaire for the Due Diligence for Hedge Fund Administration

for Managers (2007)

10

7.4 COMMUNICATIONS

7.4.1

How do you report to investors

and investment managers?

FAX E-MAIL WEB PLATFORM

7.5 OTHER (PLEASE DESCRIBE)

a) Fund Fact Sheets: IDS produces monthly Fact Sheets, should these be requested by clients. These sheets contain all of the basic fund

information in a snapshot form, allowing the investor to obtain an understanding of the fund. The Fact Sheets are attached to the

Monthly Statements, which are sent to each investor in the fund.

b) IDS also administer private equity funds: more detail can be provided on application.

7.5.1

Please give details of

alternative investments and

hedge fund strategies that you

can support:

IDS are able to support all hedge fund strategies.

IDS have a broad client base with funds investing in a wide range of securities. IDS

can service high yield funds, distressed funds, arbitrage funds and emerging market

funds, funds with a high component of derivatives, fixed income funds, and long/short

equity funds

7.5.2 Do you administer funds

utilising the following strategy?

(to be completed by Manager):

Refer 7.5.1. IDS administer hedge funds, CIS and Private Equity Funds, including funds

of funds for all categories. Local and offshore funds are administered.

8 EQUALISATION 8.1

Do you provide equalisation

accounting services (including

the series of shares and

consolidation method)?

We can provide equalisation accounting services.

8.2 If so, please describe all

methods covered:

To be discussed with client during the set-up phase.

8.3 When carrying out equalisation

is this done on a separate

spread sheet system or is it

automated within your

mainstream administration or a

separate system?

This is automated within PFS-Paxus.

9 COMPLIANCE CHECKS 9.1 Do you carry out compliance

checks with regard to the

investment restrictions and

other restrictions of funds that

you administer, including,

inter alia:

1. Restrictions on minimum

investment by subscriber?

2. Leverage restrictions?

3. Investment restrictions:

a. Limits on size of

It is not IDS policy to carry out fund compliance checks at all.

No

No

No



for Managers (2007)

11

individual

holdings?

b. Limits on exposure to

individual market or

individual

investment/issuer of

securities?

4. How frequently and how

promptly do you monitor

investment restrictions?

5. Valuation procedures, as

stated in the OM (Offering

Memorandum)?

6. Compliance with stock

exchange “Continuing

Obligations”?

7. Others?

No

n/a

n/a

n/a

n/a

Are compliance checks

manually or system driven? If

system driven, please describe

the process and controls for

setting-up the appropriate

compliance checks and the

periodic review of any

restrictions:

n/a

10 ANTI-MONEY LAUNDERING 10.1

Do you take responsibility for

carrying out anti-money

laundering checks on Investors?

Depending on the terms specified in the Administration Agreement, the IDS Investor

Services and Compliance teams are involved in monitoring developments in anti-

money laundering (AML) regulations. The IDS office is in full compliance with the

AML requirements of SA (FICA). IDS partners with its clients to assist them in

developing an AML program that both suits their individual risk level and complies

with all applicable AML regulations.

Some of the AML compliance services which IDS can assist with are:

1. Obtaining or checking identifying and due diligence documentation on potential

investors when necessary

2. Checking potential and current investors against the OFAC watch lists and other

relevant data bases

3. Monitoring investor activity and generating Suspicious Activity Reports when

necessary

4. Generally complying with all the requirements of FICA in South Africa.

Note: The client remains responsible for AML.

10.2 Please provide a summary of

your AML procedures.

Please see answer noted above.



for Managers (2007)

12

10.3 Please also supply details of

the guidelines or regulations

with which you are required to

comply.


10.4 Have your procedures been

subjected to external review

i.e. by the auditors and if so

when?


10.5

Who is your AML Officer?

Liza Fourie (Cape Town)

11 INSURANCE 11.1 Do you currently hold

insurance for the following:

Director & Officers

Liability?

Professional Indemnity?

Crime (Employee

fidelity/third party fraud)?

Key Person Insurance?

Other?

N.B.: if you are not restricted

from disclosing such

information under your

policy(ies)

IDS maintain insurance coverage for its own protection at levels that it believes is

appropriate and sufficient for the types of business conducted. These covers are placed

with excellent security within recognised markets providing insurance to financial

institutions. As would be expected for IDS, the policies include: (1) Errors & Omissions

insurance which is professional indemnity cover for mistakes, errors, omissions and

negligence etc.; and (2) Comprehensive Crime, which is a combination of Blanket Bond

and Computer Crime Policies for infidelity, fraud, theft, damage to and loss of property

and related risks. Key person insurance is also in place for senior executives.

12 REGULATORY BODY/AUTHORISATION 12.1

Who is your regulator?

IDS (Pty) Ltd is a category I FSP under the FAIS and as such is regulated by the FSB.

IDS Fund Services Malta Ltd is a recognised Fund Administrator by the Malta Financial

Services Authority.

12.2 Contact name: Financial Services Board (www.fsb.co.za)

12.3 Authorisation status: Active

12.4 Authorisation number: FSP number 16802

12.5 If a group, is this your main

regulator or are you subject to

regulation by a regulator in

another jurisdiction?

The FSB is the main regulator, but IDS Malta is subject to regulation by the MFSA

12.6 When was the last regulator

visit/audit and were any

material issues identified? If

yes, what was the nature of

the issues(s) and how long did

they take to be resolved?

The most recent FSB visit took place from the 11th to 14th July 2011.

12.7 Has the administrator been

subject to any regulatory

disciplinary actions?

No



for Managers (2007)

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12.8 If so, please describe

circumstances, what was done

to remedy the situation and

current regulatory status of

administrator:

N/a

12.9 Is your company a member of

AIMA or any other relevant

trade association?

Yes, AIMA, SAVCA (South African Venture Capital Association), ASISA, and ACCA.

13 PAYMENT AND SIGNATORY PROCEDURES 13.1 Third party payment

procedures:

1. Do you have signing powers

with regard to third party

payments on funds for

which you act as

administrator?

2. Do you have sole signing

powers or is it jointly with

the investment manager?

3. Does the investment

manager have sole

signatory powers?

Yes

Sole – but on instructions from the Investment Manager. (No discretion)

The Investment Manager issues instructions to IDS, but has no signatory powers over

the custody bank account.

13.2 Are you involved in authorising

the fund to open new

brokerage or bank accounts or

is this the sole responsibility of

the investment manager?

Custodian Bank Accounts are opened on instructions of the manager.

Brokerage accounts are opened by the Manager.

13.3 If you give third party payment

instructions on behalf of the

fund, what controls do you

have to ensure that only

authorised payments are made

(call

back/confirmation/other)?

Written or electronic instructions from the Fund Manager (no discretion).

Strict internal controls and division of duties together with dual sign-off procedures,

using EFT.

13.4 Can you provide a director for

the fund, with signatory

powers?

No

14 NAV CALCULATION

14.1 TRANSACTIONS

14.1.1

How often can you value the

portfolio(s)?

* - tends to be the norm

DAILY WEEKLY BI-WEEKLY MONTHLY QTR

LY

ANNUALLY

Yes,

mostly

portfolio

valuation

s, not

prices

Yes* Yes Yes* Yes Yes



for Managers (2007)

14

14.1.2

Please describe how you

receive information with

regard to posting

security/investment

transactions:

IDS are able to receive daily information files from our clients and various

counterparties.

We receive our primary information from the Prime brokers via email and FTP. Since

we service funds that use more than one Prime Broker, multiple Prime Broker

interfaces is not an issue.

IDS utilises a middleware application (Medius) which allows us extreme flexibility over

incoming files. All incoming files (Client file, prime broker file, etc.) are translated

into a format which can be seamlessly uploaded into the administration system.

Broker and client files are received daily, weekly, and monthly. Outbound data is

equally as flexible.

14.1.3

Please describe your procedure

for establishing security

masters:

During the Market Data trade upload process, new securities are identified during the

actual trade upload process. Once any new security is identified, all listed info for

that security will be gathered, a security master is created and upload process is

continued.

14.1.4 What security identifiers are

used for exchange-traded and

non-exchange traded

securities?

Exchange-Traded securities identifiers include: ISIN, Ticker, SEDOL, CUSIP, RIC code

Non Exchange-Traded securities generally don’t utilize security identifiers.

14.1.5 If you receive the information

from the investment manager

or the prime broker or

custodian, do you:

1. receive the information by

fax or e-mail?

2. get hard copies direct from

the prime broker and/or

custodian?

Please see the response to the above question. Our preference is to receive

information from Investment Managers and Prime Brokers electronically. If this is not

possible, then we can receive the information by fax.

14.1.6 If the valuations are provided

by the manager or by one

issuer without independent

verification, is or will the

valuation procedure be

adequately described in the

OM and has it been or will it be

approved by the auditor?

IDS will not accept non-independent valuations. Where the manager has been

involved in making an estimate, independent verification is always obtained where

possible.

14.1.7 Do you book all trades on your

systems or rely on broker

statements?

IDS rely on Broker Statements and Trade files, which are used to upload into our

Accounting System. (IDS doesn’t book trades)

14.1.8

List security types which can

upload automatically into your

accounting system:

1. Equities

2. CFD’s (Contract for Difference)

3.Options

4. Commercial Papers

5. Bonds

6. Futures

7. Mutual Funds

8. Partnerships Interest



for Managers (2007)

15

14.1.9 List security types which are

either input manually or input

as other security types:

To be discussed with client to determine needs.

14.1.10 Do you give any trading

instructions on behalf of the

investment manager? If so,

how do you receive those

instructions and from which

party?

IDS do not give any trading instructions on behalf of the Investment Manager. On

occasion, IDS may request a prime broker to create liquidity for redemptions, on

instructions from the Manager.

14.1.11 How do you confirm that they

are correct?

Written instructions, where relevant, are received from Managers. IDS has no

discretion, it only executes instructions. See above reply for scope.

14.1.12 Describe your procedures for

accounting for realised and

unrealised gains/(losses) on

forward currency contracts

entered into to hedge non-base

currency classes:

Hedge transactions are captured as FX transactions on the administration system. The

administration system automatically calculates realised and unrealised gains and

losses by marking the deals against the NAV date closing rates in the system. Exchange

rates and forward rates are via automated pricing feed into the administration

system.

14.1.13 What information will you

provide the manager in respect

of hedging non-base currency

classes?

N/A

14.1.14

How do you receive

information on cash

movements, including

payments and settlements of

transactions in the fund’s

accounts?

For information on the cash and securities transactions taking place through the fund’s

prime brokerage account, please see the response in 14.1.2.

All other cash movements and payments into/out of the fund’s account with

Investment Data Nominees Trust (IDNT) will be processed through our system and

automatically captured.

14.1.15 Please describe, in general

terms, the allocation of fund’s

expenses:

All income & expenses are allocated in accordance with the capital base of each

investor.

14.1.16 What percentage of your NAVs

are sent to managers within:

1 to 3 days?

4 to 5 days?

6 to 8 days:?

Timeframe Single Funds Fund of Funds

1 to 3 days 45% N/A

4 to 5 days 45% N/A

6 to 8 days 10% 100%

14.1.17 What percentage of NAVs are

agreed within:

1 to 3 days?

4 to 5 days?

6 to 8 days?

Timeframe Single Funds Fund of Funds

1 to 3 days 20% N/A

4 to 5 days 60% N/A

6 to 8 days 20% 100%



for Managers (2007)

16

14.2 CORPORATE ACTIONS

14.2.1

Do you have a centralised

corporate actions department?

It forms part of the Market Data function.

14.2.2

Describe your procedures for

processing corporate action

activity.

On a weekly basis, dividends are automatically uploaded into Paxus, utilising an

automated feed from Bloomberg. Corporate Events such as Stock Splits and Capital

Reductions are manually inputted using local market sources.

Other than Bloomberg, the most comprehensive listing of Corporate Actions/Dividends

is the ABSA Corporate Diary. Other than the ABSA Corporate Diary (which is updated

weekly), the JSE and Sharedata are updated daily. ABSA, JSE and Sharedata are

continuously monitored. Once a new Corporate Action has been identified, and all

information has been gathered and confirmed, the Corporate Action is entered into

the Accounting System.

14.2.3

What corporate action

information sources do you

use?

1. Bloomberg

2. JSE

3. Sharedata

4. ABSA Corporate Diary

14.3 PRICING/VALUATIONS

14.3.1

Is the pricing of investments in

the fund independent?

Yes, we use independent sources for pricing investments in funds where possible.

14.3.2

Please describe pricing

source(s):

The accounting system, PFS-Paxus, takes an automatic price feed from Bloomberg. The

Investment Price Variance Report will detail all price sources as well as price variances

to the previous valuation or acquisition price, if more recently brought onto the

portfolio. To verify pricing where discrepancies exist, IDS consults additional sources

such as Telekeurs(foreign) and Sharedata(Local) or pricing vendors.

14.3.3 How do you handle valuations

of complex derivative

instruments when only the

manager and/or the

issuer/dealer claim ability to

value the assets?

We obtain a third party valuation from a source independent of the fund manager,

usually either the counterpart or the prime broker.

14.3.4

Do you ever outsource

valuations or pricing of

complex investment products

to independent specialists?

Only as above

For OTC instruments such as SWAPS, options etc., IDS has contracted a third party

vendor to confirm the prices on request.

14.3.5

What time can the manager

expect to receive net asset

value calculations?

DAILY WEEKLY MONTHLY

By 16h00

next day

From as early as the

Wednesday, with all net

asset value calculations

concluded by COB on the

Friday.

Single Funds 5th working day of

month

Fund of

Funds

7th – 8th working

day of the month



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14.3.6

How do you resolve pricing

variances/disputes?

Pricing variances/disputes are to be referred to the internal Risk and Valuations

committee. Significance of the variance is assessed in terms of the fund size and a

decision is made to verify/source a price independently. Pricing needs to be

consistent across all funds for the same securities.

Consultation with the fund manager as well as pricing vendor will take place.

14.3.7 Please describe verification

process:

All inputs of the pricing process are verified to independent third party information.

14.3.8 Please describe the range of

investment strategies you can

value and the process you

follow for each strategy:

We value all investment strategies and follow the same process for each. Trades are

uploaded in the fund valuation system from trade files received and market prices are

uploaded from Bloomberg. Cash, positions, prices, market values & net gains or losses

for a specific period are reconciled to Prime Broker information.

14.3.9 Do you have the ability to price

securities at a particular time,

e.g. ADRs at European market

close, if this is dictated by the

prospectus?

We are able to run at specific times, and at those times pull either Last, Close, Bid,

Offer, Mid or Bid/Offer prices. We will not be able to pull a price at a specific time if

it is not one of the above. Note that this would be manual. We are not in a position to

pull time specific pricing for funds. This is why A&V have to get all Polar Start pricing

manually.

14.3.10 Do you highlight to the fund

board significant holdings in

illiquid stocks?

No

14.3.11

If the fund is a FOHF, please

describe:

1. The process for updating

portfolio valuations,

including the methods for

obtaining prices of

underlying funds,

monitoring receipt of fund

prices on a timely basis,

and the timeliness of the

availability of data to the

FOHF manager:

2. The control processes to

ensure the accuracy of

fund valuations, including

reconciliation and

compliance checks and

verification of estimated

prices against final prices

and audited prices:

1. Underlying fund prices are distributed directly to Market Data who captures same.

Investment certificates & month end statement are collated by the Custody

Department. Copies are made available to the Fund Accounting Department for

completion of the valuations. The Fund Accountants agree the positions in the

accounting system to the custody positions report & also agree month end values to

statements received from the underlying funds administrators. Market Data follows up

on prices (on day 5) & Custody follows up on statements (on day 6) if not received

within agreed timeframes. The Client Relationship Manager continually monitors the

progress & reports to FOHF Managers if there are delays which will impact on agreed

deadlines.

2. The IDS review process involves a Supervisor reviewing each valuation before it is

approved for distribution to the FOHF Manager. IDS will only use estimates if there is a

delay in receiving a final price.



for Managers (2007)

18

15 RECONCILIATION 15.1 Please describe the process

for, and frequency of,

reconciling security positions

and cash balances for the fund

with:

1. The Manager:

2. The Prime Broker:

3. The Payment Bank:

4. The Custodian (if any):

IDS reconcile positions and cash on a daily, weekly or at least a monthly basis,

dependent on the frequency of NAVs delivered to the client. IDS reconcile the

positions and cash per the administration system (Paxus) to the reporting from the

Prime Broker. IDS do not currently perform three way reconciliations between the

client, Prime Broker, and administrator.

Exception based results are investigated and escalated to the Prime Broker and / or

the client.

Cash balances are reconciled and confirmed to the bank statements/ Prime Broker on

a daily, weekly or at least a bi-monthly basis and reconciling items are investigated

for validity and followed up for resolution immediately.

15.2 Please describe the procedures

for resolving any variances or

differences in such

reconciliations, including

procedures for documenting

such variances and specify who

is responsible for such

documentation:

When a reconciliation results in a variance with the prime broker, the fund

administrator (FA) would fully document it, ensure that all information received is

entered in the accounting system and then elevate the matter to the broker. Where

differences persist the FA will check the client’s trade instructions to the broker’s

trade and settle date activity. All differences will be reported to the broker and IM to

clarify if all details are correct. If changes are required all hard copy will be

requested.

16 FRONT OR MIDDLE OFFICE SERVICES 16.1 Do you provide front and/or

middle office servicing to

managers?

Yes

16.2 If so, please attach detailed

description of such services on

a separate sheet.

Please see attached annexure A



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19

17 FUND ACCOUNTING SYSTEM 17.1

Please provide Operating

Procedures Manual (describing

how the system(s) work):

This is encapsulated in the “help” facility of the application.

17.2 Please give details of the

accounting/portfolio system(s)

used by the administrator,

including whether system is

proprietary or commercial:

The main accounting system is PFS-Paxus, a fully integrated solution for fund

administration, integrating into one system all the processes that often are performed

on multiple, disparate systems.

The securities module supports various types of trades. The system generates and

posts accounting entries to the general ledger for realised gain/loss, commission

and other charges. Booking of CFDs, futures and options are supported.

Data upload formats are supported from a range of sources.

Complex multi-tiered and pooling structures are catered for.

Supports multiple accounting methodologies (e.g multi- currency, FIFO)

The flexibility of the system allows for a wide range of different and complex fee

structures to be defined and applied. This includes the functionality of defining

multiple fee structures within a fund and for individual classes.

The system contains a powerful multi-currency general ledger module, which is

used as the source for financial statements and fee calculations. The fund’s

balance sheet is thus tied to its assets and performance based fees.

In excess of 30 standard reports are provided, which can be saved in various formats.

Custom reports and statements can be developed as required.

Refer to http://www.pacificfundsystems.com/ for further information.

17.3 Is the administration fully

integrated or are there

separate modules/systems for:

1. Shareholder Services?

2. Securities transactions?

3. General fee calculation?

4. Incentive fee calculation?

5. Others?

1. PFS-Paxus caters for a fully integrated relationship between valuations and investor

servicing.

2. Securities transactions are processed within PFS-Paxus.

3. Fee calculations are automated in most cases, although complex methodologies are

manually captured.

17.4 By who are the systems

maintained?

Systems are maintained by both external suppliers and internal IDS IT and system

specialists.

17.5 Do you have any in-house

capability or do you rely totally

on suppliers?

We have in-house IT support and business support as well as external supplier support for enhanced product capability

17.6 Do the system(s) have

electronic interfaces with

prime brokers and banks?

Yes. We have interfaces with the main Prime Brokers and Banks and can establish links with any new provider.

17.7 If yes, please name the prime

brokers and banks with whom

you currently have direct

electronic access:

Deutsche Bank, Peregrine, Investec, Cadiz, RMB, etc.



for Managers (2007)

20

17.8 Please name prime brokers

and/or banks with whom you

anticipate having direct

electronic access within 6

months:

We can establish direct electronic access to any Prime Broker or Bank within a few

days.

17.9 How often and when were last

upgrades made to the

hardware used by the

administrator?

Infrastructure upgrades are made as and when needed. Refer to section 24.9

17.10 What procedures are in place

to limit access to fund data to

authorised persons, on a need-

to-know basis?

Each employee at IDS is assigned an individual logon and password. This logon is then

linked to areas on the server which the user will require access to. No user may access

any area of the server/system which they are not authorised to.

17.11 What anti-viral/firewall

procedures do you maintain?

Refer to section 24.11.

17.12 How often are your anti-viral

systems updated?

Refer to section 24.12

17.13 Have you suffered any delays

or disruptions as a result of a

virus getting into your system?

Refer to section 24.13

17.14 If so, please describe when and

in what circumstances:

N/a.

17.15 What is the total annual

budget (as a percentage of

total operating budget) for IT

systems?

Not disclosed.

18 REPORTING 18.1

Please describe reporting

processes available to

managers and investors:

Investor receives a monthly investment statement in PDF format that is emailed

directly from the administration system.

Managers receive batch reports in various formats (Xcel, PDF etc.)

18.2 Can you provide internet/web

accessed reports or full

accounting process to

managers?

Yes, web access is planned for 2011

18.3 Can you provide restricted

internet/web accessed reports

to investors?

Not at this stage. Planned for the future.



for Managers (2007)

21

18.4 If “yes” to the previous two

questions, describe password

protection and other

protection procedures used to

ensure confidentiality:

N/a

18.5 Are you able to provide

customised reports to

managers?

Yes

18.6 Describe risk management

reports/analysis tools available

to managers/investors and

method and regularity of

provision of such reports:

N/a

19 FUND SYSTEMS AUDITS 19.1

Have your system(s) been

reviewed by an independent

audit in accordance with ISAE

3402 or another internationally

recognised standard?

Yes, our external auditors signed off an ISAE 3402 type I report in December 2012

19.2

If ISAE 3402 is it level 1 or 2?

Currently IDS holds a ISAE 3402, Type I.

19.3 Was the report qualified or

unqualified?

Unqualified

19.4 Who was the audit firm?

PWC

19.5 Have you changed audit firm?

If so, why?

No, but see 6.6 above.

19.6 Have the auditors of any funds

that you administer ever

required a NAV to be changed

during the administrator’s

term of contract? Please

explain.

No

19.7 Have any of the audits of the

funds that you administer ever

been qualified or reserved due

to an action by your firm?

Please describe the

circumstances:

No

19.8 What comments, if any, have

any fund’s auditors made with

respect to the administrator’s

internal controls?

We have thorough and effective internal controls

20 LEGAL AND TAX 20.1

Please explain your procedures

for tracking:

a) The number of investors

who are US Persons, and;

b) The number of investors

which are of ERISA plans

N/a

N/a



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22

and US tax-exempt

investors as well as their

non-US equivalents:

20.2 Please confirm that you are

able:

a) To perform PFIC reporting,

and;

b) To provide K1s to US

taxable investors:

N/a

N/a

20.3 What procedures do you follow

with regard to compliance with

the US QI rules?

N/a

20.4 What procedures do you follow

with regard to compliance with

the EU Savings Directive? Are

you the final payment agent?

i) Do you maintain separate

data on EU individual

investors?

ii) Do you monitor the

portfolio of the fund to

determine if it is exempt

from reporting?

N/a

20.5 Are you performing client

identification procedures as

required?

N/a

20.6 Has this impacted on any

existing reporting under

section 17 or 18?

N/a

20.7 Please confirm that your

standard administration

agreement does not provide

for your liability to be capped:

N/a

20.8 Please provide a sample of

your standard agreement:

To be provided on request.

21 CORPORATE SECRETARIAL AND DIRECTORS SERVICES 21.1

Do you provide corporate

secretarial services?

Yes- Separately charged at tariffs set by SAICA

21.2 If so, please describe:

We offer comprehensive secretarial services and should the fund require, we can

attend to those as and when required.

21.3 Do you provide directors? No

21.4 If so, corporate or individual

directors?

N/a

21.5 Do you impose any restrictions

on directors’ involvement in

management of the fund?

N/a

21.6 If so, please describe: N/a



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23

21.7 Are you prepared to take

responsibility for informing the

board in good time of all

regulatory filings that are due

and if so in which jurisdictions?

N/a

22 FEES 22.1 On what basis do you charge

your fees for:

Administration?

Registrar & Transfer

Agency?

Corporate Secretarial?

Directors?

Others?

for a fund with the following

characteristics (to be

completed by manager):

Estimated size at launch:

No. of valuations p.a.:

No. of Dealing Days p.a.:

No. of Shareholders:

Volume of Security

Transactions:

Any special features or

esoteric investments:

Listed OTC instruments.

This section is subject to a separate and valid Non-Disclosure Agreement

N/a

N/a

N/a

N/a

N/a

N/a

N/a

23 OPERATIONAL RISK 23.1

How does the company define

operational risk?

The risk of loss arising from human error, management failure and fraud, or from

shortcomings in systems or controls.

23.2 Does the company have an

operational risk management

framework? Does the

framework consider how the

company identifies, assesses,

monitors and controls

operational risks?

Yes

Yes

23.3 Are the employees responsible

for the operational risk

framework adequately

independent from the business

and appropriately trained?

(For example, does the

company have a risk or internal

audit function that is

responsible for the

framework?)

Yes



for Managers (2007)

24

23.4 Does the board of directors

approve and regularly review

the operational risk

management framework?

Yes, via the Audit Committee

23.5 Who is responsible for

implementing the operational

risk framework? Are there

clear lines of responsibility

across senior management?

Risk and Compliance Manager, Liza Fourie (Cape Town)

Yes, in terms of functional responsibilities.

23.6 How does the company ensure

that employees understand

their responsibilities for

implementing the operational

risk framework?

Through line management training and review.

23.7 What on-going assurance does

the firm provide to clients over

the effectiveness of its

operational risk framework? If

a SAS70 or FRAG 21 (being

replaced by AAF 01/06) has

been completed? Please list

the key weaknesses identified

in the last 5 years.

Please see 19.1 & 19.2

24 BUSINESS CONTINUITY/DISASTER RECOVERY 24.1

Please describe your disaster

recovery (business continuity

management- BCM) plan:

The current BCM plan is based on a program of regular backups and an alternate work recovery site on a different electricity grid. The plan is reviewed by-annual in order to keep it current and up to date

24.2 Do you have a dedicated BCM

Manager overseeing your plan?

Riana Hoefer

021-4021600

[email protected]

24.3

Do you have a back-up

recovery site? If yes, where is

it located and is it a dedicated

or shared facility?

TCM premises in Canal Walk. TCM is a shared facility and has subsidiary

offices in Johannesburg and Durban, which are also available to us should

there be a need. Refer to www.tcm.co.za for further information.

24.4

How long should it take to be

operational, if existing

premises were out of action?

Should we have the need we could be up and fully operations at our

proposed site within 24-48 hours.

24.5

Has the recovery site been

tested? If so, when was the

last test? Please provide a

copy of the latest report.

Yes, the last test was conducted in November 2013


http://www.tcm.co.za/



for Managers (2007)

25

24.6

Do you back-up data on

systems regularly? If so, how

often? Is this back-up a

manual or automated process?

All backups are automated, and all system state data are backed-up daily.

Separate backups are also made twice daily to a separate backup server

onsite, which is mirrored to an offsite backup server every evening.

24.7 Are back-ups stored onsite or

offsite? If offsite, where?

Backups are stored onsite, and we have a mirrored backup server housed in

the secure facility at Internet Solutions in Cape Town.

24.8 Do you create back-up copies

of physical documents?

No.

24.9

How often and when were last

upgrades made to the

hardware used by the

administrator?

Upgrades are made as and when needed. All servers were virtualised and

upgraded in 2013.

24.10

What procedures are in place

to limit access to fund data to

authorised persons on a need-

to-know basis?

Each employee at IDS is assigned an individual Logon and Password. This

logon is then linked to areas on the server which the user will require access

to. No user may access any area which they are not authorised to.

24.11

What anti-viral/firewall

procedures do you maintain?

All Computers connected to our network run Sophos AntiVirus software. This

software is updated every hour from the internet with updated Virus

definitions and protection. All computers run on-access scanning, which

means that anytime a file is accessed it is scanned for threats first. All

computers also run a full HDD scan once a day. We use Sophos Proxy and

Fortinet firewalls on our Internet Lines. No user is able to connect any kind of

disk (CD, Flash drive) to their computers as it is blocked.

24.12 How often are your anti-viral

systems updated?

The Virus Definitions are downloaded and updated every hour. The

Application version is updated whenever a new release becomes available

24.13

Have you suffered any delays

or disruptions as a result of a

virus getting into your system?

Not in past 36 months.

24.14 If so, please describe when and

circumstances:

n/a

24.15

Have procedures been subject

to an external review and if so

by whom?

All of this has been thoroughly revised as part of ISAE 3402 – See 19.1&19.2

25 GENERAL – STAFF



for Managers (2007)

26

25.1

What procedures are in place

to maintain staff

confidentiality of investor

information?

All staff is aware that they are obliged to maintain investor information

confidentiality as a condition of employment with the IDS Group and breach

of this condition may result in dismissal. In addition to the IDS employment

conditions, all staff are trained in aspects of hedge fund administration and

procedures and are aware of the consequences of breach.

25.2 Do you provide written job

descriptions to staff,

particularly with regard to

specifying responsibilities and

duties of fund administration

and shareholder services

functions?

All job functions have written job descriptions which include details of

minimum levels of education and experience

25.3 Do you impose minimum

experience and educational

standards for each position?

As noted above, all job functions require minimum levels of education and

experience

25.4 Do you offer any training to

maintain and improve

education levels for staff?

Training is available to all members of staff. This may take the form of in-house or external training.

This Due Diligence Questionnaire has been prepared by:

Signature:

Name: Tony Christien

Position: Director, IDS Group

Date: 30 January 2014

Documents

AIMA QUESTIONNAIRE Due Diligence - BCBS - AIMA Questionnair (2014).pdf · AIMA QUESTIONNAIRE Due Diligence Incorporating the AIMA Questionnaire IDS is a member of AIMA January 2014