FAQs

Here are some frequently asked questions on Exchange Traded Funds (ETFs)

1. What is the ISEQ 20 ® ETF?
2. How does the ISEQ 20 ® ETF market Work?
3. How do I buy and sell the ISEQ 20 ® ETFs?
4. Where can I find pricing information on the ISEQ 20 ® ETF?
5. How does ISEQ 20 ® ETFs settle?
6. What are the benefits of the ISEQ 20 ® ETFs?
7. Is the ISEQ 20 ® ETF for professional or private investors?
8. What is the tax treatment of the ISEQ 20 ® ETF?
9. Will the ISEQ 20 ® ETFs distribute dividends?

1. What is the ISEQ 20 ® ETF?

The ISEQ 20 ® ETF is a fund that holds a portfolio of the equities that tracks the ISEQ 20 ® Index . The ETF can be bought and sold during normal trading hours through a stockbroker, in the same way as any other share. ETF’s typically incur far lower fees than actively managed funds or other index tracking products. In fact, ETFs have become some of the most cost effective instruments to track an index with far lower total expense ratios than other similar index tracking products. They also have the added benefits of fully transparent price formation and ease of dealing. The first ISEQ® tradeable ETF is structured as a UCITS and is a variable capital investment company. It is as such governed by the provisions of the European UCITS III Directive.

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2. How does the ISEQ 20 ® ETF market work?

Most investors will trade the ISEQ 20 ® ETF in the secondary market just like any other regular share. Transactions in the market for the ETF share are conducted on ISE Xetra, the ISE’s electronic trading platform. Liquidity in this market will be further enhanced by a dedicated market making facility for the ETF. This means that a market maker(s) commits to continuously quoting a price on the trading platform in accordance with the Rules of the ISE.

Liquidity in the ISEQ 20 ® ETF does not reflect merely the trading volume of the ETF but also reflects the liquidity of the underlying basket of shares. The majority of trading done by retail investors will be in the secondary market. It is possible for professional investors to create and redeem larger blocks of the ETF using the underlying equities. ETF shares are created (or redeemed) by the Exchange Traded Fund company (the issuer), who then acquires (returns) the basket of underlying stocks making up the ETF. The timing and frequency of the creation/redemption of the ETF will depend on investor demand.

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3. How do I buy and sell the ISEQ 20 ® ETF?

You can buy and sell the ISEQ 20 ® ETF in both Institutional and retail size through NCB Stockbrokers.

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4. Where can I find pricing Information on the ISEQ 20 ® ETF?

The ISE’s price dissemination infrastructure provides to all major securities information vendors, such as Bloomberg, Thomson Reuters, etc. Both the prices at which the transactions have been dealt and the market depth within the trading platform is published real time giving investors excellent visibility.

The ISEQ 20 ® ETF is traded on the same platform as other ISE equities. The same trading model used in the case of other equities applies to the ETF. This consists of an opening auction, continuous trading from 8am to 4.28pm and closing auction as well as pre and post trading phases.

The closing price will be primarily based on the closing auction which takes place between 4.28pm and 4.30pm daily.

The market will be order driven and further enhanced by the presence of a dedicated market making regime for the ETF. The same order types may be used as for trading in other ISE instruments. The tick size is €0.01.

In accordance with best market practice, the determination of the Net Asset Value of an ETF and the issue and redemption of shares may be temporarily suspended during a period when any of the underlying equities in the ETF are suspended or where trading is restricted or in other circumstances as outlined more fully in the Prospectus published for the relevant ETF.

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5. How does the ISEQ 20 ® ETF settle?

The Settlement is through CREST, the settlement system used by the Irish and UK equity markets, and will be in dematerialised form, meaning that paper certificates will not be generated for the ETF. Investors who wish to deal in ETFs will need to have a nominee account or hold a Personal Membership Account in CREST.

Standard settlement will be on a T+3 basis i.e. three days from the dealing date.

The ISEQ 20 ® ETF will have its register of holders maintained by a Computershare.

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6. What are the benefits of the ISEQ 20 ® ETF?

Diversification and Risk Management

Investing in the ISEQ 20® ETF provides investors with an exposure to a diversified portfolio of Irish quoted shares in one single transaction. Furthermore, by spreading the investment across a range of stocks through the ETF, investors are in a position to spread their risk and reduce their stock specific exposure. Investors can also use the ISEQ 20 ® ETF as part of a wider investment strategy to either enhance or hedge other investment holdings/instruments.

Ease of Trading in the ISEQ 20 ® ETF

The ISEQ 20 ® ETF is listed and traded on the Irish Stock Exchange and dealings in the shares are very transparent. The ETF will settle through CREST, the dedicated settlement system for Irish and UK securities.

The ISEQ 20® ETF has an approved market maker in place who will be responsible for providing liquidity by quoting a continuous bid/offer price for the ETF during normal trading hours, in accordance with the Rules of the ISE. The depth of both buy and sell orders for the ISEQ 20 ® ETF will be visible. The ISEQ 20 ® ETF differs from other tracker fund products in that it can be bought and sold on an intra-day basis, whereas other tracker-type funds are generally priced only on an end of day basis. Investors can use the full range of order types available on the ISE’s electronic trading platform, Xetra, to trade the ETF, including the use of ‘stop losses’ and ‘limit orders’.

Costs

The management fees charged on the ISEQ 20 ® ETF is significantly lower than the charges applied by other index tracking vehicles, including actively managed funds. As for any other purchase or sale of shares, stockbrokers’ commissions will apply on purchases and sales of shares in the ETF. For the ISEQ 20 ® ETF, which is structured as a UCITS, the Irish Takeover Panel levy will not be charged on ETF transactions on the ISE.

Transparency

The ISEQ 20 ® ETF is linked to the ISEQ 20 ® Index, which is independently calculated and widely published. It designed to track the performance and value of this specific Index. Therefore, the price of the ETF moves in line with the index, which makes tracking more visible. Dealings in the ETF are also more transparent. The price of each transaction is published including data on the volume and bid/offer spreads.

The indicative NAV (or iNAV) is published throughout each trading day on at least 15 second intervals. The daily net asset value of the ETF is published on the ISE website at www.ise.ie. Investors should note that the market price of a share in the ETF will not necessarily equal the Net Asset Value per share.

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7. Is the ISEQ 20 ® ETF for professional or private investors?

Both. All investors will find the ISEQ 20 ® ETF very useful as they trade just like any other share whilst providing diversified exposure to the market.

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8. What is the tax treatment of the ISEQ 20 ® ETF?

Stamp duty is not charged on the purchase of ETF shares by investors.

Distributions will be paid gross from the ETF to Shareholders. Distributions to Irish individual investors from the ISEQ 20 ® ETF are subject to tax. As the ETF is a UCITS structured Fund these dividend payments are subject to a tax rate of 27% as at May 2011.

Gains realised on the disposal, transfer, redemption or cancellation of shares in the ETF are subject to an exit tax, which is at a rate of 30% (the standard rate of tax plus 6%) as at May 2011.

It should be noted that this summary is not exhaustive and investors are advised to consult their own tax advisers about the rules that apply to their own individual circumstances. The information contained herein is based on current tax legislation and is subject to change without notice.

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9. Will the ISEQ 20 ® ETF distribute dividends?

It is intended that the ISEQ 20 ® ETF will pay dividends in the same way as other companies. The dividends paid will be based on the value of the dividends paid by the underlying stocks held by the ETF less its expenses. Investors will be notified of the timing of dividend payments.

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