Invitation to Tender for the Provision of

Investment Managers

COMMERCIAL IN CONFIDENCE ©2015 The Treasury (a Department of the Isle of Man Government) The copyright to these documents belongs to the Treasury (a Department of Isle of Man Government) and they may not be copied, reproduced, transmitted or stored on any electronic device or medium in any form in part or whole without the written permission of the Treasury

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Table of Contents It is the responsibility of the Tenderer to ensure that they are in receipt of all information detailed within this table of contents. Should a Tenderer find that this is not the case, they should contact the Treasury immediately, via the contact details given within the covering letter accompanying this ITT.

Documents Comprising This Tender Section 1 – General Instructions to Tenderers Section 2 – Specific Instructions to Tenderers Section 3 – Detail of the Requirement Section 4 – Tender Response: 

Document 1 – Form of Tender



Document 2 – Tender Evaluation Criteria



Document 3 – Certificate of Non-Collusion



Document 4 – Financial Regulations Declaration

Enclosures Enclosure 1 Enclosure 2a Enclosure 2b Enclosure 3 Enclosure 4 Enclosure 5

Notification of Intent Form of Agreement Absolute Return Fund Base +1 Form of Agreement Absolute Return Fund +3 Specification Standard Pre-Qualification Questionnaire Tender Specific Due Diligence Questionnaire

Reference: TRE/2015/004

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Section 1- General Instructions to Tenderers 1.1 Procurement Specification Conventions (Information) Within this ITT the following convention is used to differentiate between requirements which are mandatory, desirable and those for information. Mandatory items are indicated by (Mandatory)

These requirements must be met, any Tender Response not meeting these requirements will be penalised in the evaluation procedure.

Desirable items are indicated by (Desirable)

These requirements are considered important but are not essential in order to meet the needs of the Department. The ability of Tenderers to meet the desirable requirements will be considered during the tender evaluation.

Areas which are marked as 'Information' are provided to assist the Tenderer in the preparation of their Tender Response and will not form part of the evaluation. 1.2 Definitions (Information) This ITT has been prepared to define the Department’s requirements and the following phrases shall have the following meanings: 'the Agreement' Shall mean the contract that shall be entered into between the Department and the Contractor for the delivery of the Services which shall be in the form set out in Form of Agreement at Enclosure 2a and 2b. 'Alternative Tenders' Shall mean a Tender Response submitted in addition to a full Tender Response (where the full Tender Response is submitted in accordance with the requirements of this ITT) and which sets out proposals for the modification of the Specification (in whole or in part). 'Closing Date' Shall mean the date set out as the Due Date/time for submission of Tender Response in Section 2.7 of this ITT. 'Contractor' Shall mean the body who chosen by the Department as the successful Tenderer (if any) and who enters into the Agreement with the Department. ‘the Department’ Shall mean The Treasury (a Department of the Government). 'Form of Tender' Shall mean the document contained at Section 4 of this ITT. ‘the Government’ Shall mean all or any of the Departments and/or Statutory Boards and other bodies (whether the Departments and/or Statutory Boards and other bodies are acting jointly or separately) which collectively form the Isle of Man Government. ‘Intellectual Property Rights’ Shall mean patents, trademarks, service marks, design rights (whether registerable or otherwise), applications for any of the foregoing, copyright, know-how, trade or business names and other Reference: TRE/2015/004

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similar rights or obligations whether registerable or not in any country (including but not limited to the British Isles). ‘ITT’ Shall mean this Invitation to Tender document to include all sections and enclosures hereto. 'Notification of Intent' Shall mean the Notification of Intent which shall be in the form set out at Enclosure 1. ‘Procurement Officer’ Shall mean the person named in Section 2.3 of this ITT or such other person as is nominated in writing by the person named in Section 2.3 of this ITT. ‘Procurement Services’ Shall mean the Procurement Services section of the Treasury. 'Qualified Tenders' Shall mean a Tender Response whereby the Tenderer is seeking to modify the design, Specification or conditions of contract and which is not an Alternative Tender. ‘Requirement’ Shall mean the Department’s requirement for the Services as set out in Section 3 of this ITT. ‘Services’ Shall mean the provision of those goods and/or services as are set out in the Specification. 'Specification' Shall mean the specification as provided in Enclosure 3 ‘Tenderer’ Shall mean a body who submits a Tender Response or who could reasonably be expected to submit a Tender Response. 'Tender Period' Shall mean the period from the date of issue of this ITT until the Closing Date. 'Tender Price’ Shall mean the fixed price quoted by the Tenderer in their Tender Response for the fully inclusive provision by them of the Services and the defined hourly rate for additional services/goods (if any). 'Tender Response' Shall mean a tender submitted by a Tenderer in response to this ITT. ‘The Treasury’ Shall mean the Treasury, a Department of the Government. 'Working Days' Shall mean Monday to Friday in each week but excluding bank holidays recognised in the Isle of Man.

Reference: TRE/2015/004

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1.3 Procurement Process (Mandatory) The procurement process is to be run by Procurement Services for and on behalf of the Department. Procurement Services and the Department will be involved in the selection of the Contractor and the Department will ultimately enter into the Agreement with the Contractor (should a Contractor be chosen). 1.4 Confidentiality (Mandatory) Tenderers are reminded that the ITT and the procurement process are confidential. The information, details and documents provided by Tenderers responding to this ITT will not be published or disclosed by Procurement Services to any other party, other than to the Department and the professional advisors of both the Treasury and the Department. Tenderers are, however, asked to note the ‘Announcements’ clause within the Agreement and the circumstances in which the Department may disclose part or all of the contents of the Agreement. The Department requires a fair and open competition for the investment manager tender process. If the Treasury has reasonable grounds for suspecting that collusion has occurred between Tenderers, then those Tenderers shall be excluded from the remainder of the procurement process and possibly future tenders. Tenderers must complete and return with their Tender Response the Certificate of Non-Collusion (included as Document 3 of Section 4 of this ITT). 1.5 Authority (Mandatory) The Department is seeking bona fide and competitive bids for the Services. The supply, of the required Services should be undertaken in full compliance with the standards laid down within this ITT. 1.6 Tender Documents and Confirmation of Receipt (Mandatory) Tenderers will receive the complete ITT as listed in the table of contents on page 2 of this ITT. Each Tenderer shall promptly acknowledge receipt of this ITT by completing and returning the Notification of Intent. Should a Tenderer decide that he is unable to submit a Tender Response he shall immediately notify the Procurement Officer. The Tenderer must then return the complete ITT to the Treasury, including any copies. The Tenderer shall state in writing the reasons for withdrawal. 1.7 Formal Tender Procedure (Mandatory) The Form of Tender must be fully completed in all respects, otherwise the Tender Response may not be considered. Section 4 of this ITT, titled Tender Response, must be returned on these pages leaving this entire Section intact as the Tender Response. Any alterations shall be evidenced by striking through incorrect details and inserting new ones immediately above the original details and must be initialled. Entries must be in ink, correction fluid must not be used. The envelope containing the Tender Response should be stamped at the Post Office if delivered by post or if delivered by hand to the Treasury at the address detailed in Section 2.3, ensuring that a member of staff notes the time and date of receipt, as Tender Responses delivered otherwise may not arrive on time. The Tenderer must submit a Tender Response that complies with the ITT.

Reference: TRE/2015/004

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1.8 Incomplete Tender Responses (Mandatory) Tender Responses must be complete at the time of submission. It may not be possible to consider a Tender Response if any particulars and/or data requested in the ITT are not provided in full. 1.9 Qualified Tenders (Mandatory) Tenderers should submit unqualified Tender Responses. Under no circumstances must any amendment be made to the ITT as printed, except when so instructed by Procurement Services. Tenderers wishing to submit a non-compliant Tender Response, by way of qualification of ITT, must do so separately using the format of this ITT as far as is practicable. Only in very exceptional circumstances will Tender Responses qualified in any way be considered. 1.10 Alternative Tender (Mandatory) The Tenderer may submit an Alternative Tender(s). If the Tenderer wishes to offer an Alternative Tender, this must be in addition to a conforming Tender Response. If a conforming Tender Response is not submitted the Alternative Tender will not be considered. The requirements for an Alternative Tender are as follows: Proposals involving modifications to the Specification in whole or in part should be notified, in confidence, to the Procurement Officer as early as possible during the Tender Period. An Alternative Tender will not be considered unless this prior notification has been given not less than a full five (5) Working Days (Monday-Friday 9.00am-5.00pm) before the Closing Date. Following receipt of this notification the Procurement Officer may, after such consultation with the Department as they may consider necessary, give a preliminary opinion as to the acceptability of the modifications proposed but this opinion will not be binding on the Department. In their own interests Tenderers are advised to provide as much information as possible about the modifications at this stage. If the Tenderer does decide to submit an Alternative Tender it must be accompanied by supporting information in sufficient detail to enable its technical acceptability, price and delivery time to be fully assessed. Any Alternative Tender involving modifications to the Specification will be assessed on its merits and if considered valid may be accepted without recourse to re-tendering. An accepted alternative Specification would become the Specification for the purpose of the Agreement. A decision to adopt a technically acceptable modified Specification will be governed by the amount of overall benefit (financial and non-financial) which it can reliably be expected to achieve. Matters to be considered in arriving at the overall benefit of the Alternative Tender will include the effect of any deferment in starting date arising from the extra time needed for the preparation of an amended Agreement for signature. If the Tenderer wishes to submit an Alternative tender they must:     

Submit together with the conforming Tender Response. Photocopy or reprint the Form of Tender, Pricing Schedule and Notification of Intent for each Alternative Tender Response submitted. Clearly reference and include full and detailed particulars of the benefits to the Department of the alternative goods or service. Submit a full technical specification. State any qualifications or alternatives to the requirements of the ITT.

Reference: TRE/2015/004

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Note: If the Tenderer offers an alternative, this must be in addition to a conforming Tender Response. If a conforming Tender Response is not submitted the Alternative Response will not be considered. 1.11 Fees (Mandatory) All fees quoted must be in sterling and are to be fixed for the duration of the contact. Any base fee quoted must be transparent. Treasury wish the fee calculation to be based on period end market values which should be verifiable against the manager’s printed valuation reports. Treasury’s requirement is to account for fees on receipt of a quarterly VAT invoice. Tenderers should note that it is their sole responsibility to ensure the arithmetical accuracy of their Tender Response. Once submitted, the Department will not accept any increase to the Tender Price. General directions and descriptions of the goods or service given in the Specification are not necessarily repeated in the Form of Tender and Schedule of Prices. Reference should be made to the Specification for this information and unless otherwise specified, the fees entered into the Schedule of Prices shall relate to the Specification. The Schedule of Prices is to enable Tender Responses to be evaluated on an equal basis. No quantity is guaranteed to the successful Tenderer and this should be taken into account when completing the Schedule of Prices. Unless expressly stated to the contrary, any quantities given in the Pricing Schedule are for information only. Tender Responses will be evaluated on an equal basis. Each item in the Schedule of Prices must be fully priced, with insertions for each item. If any item is unpriced (whether by leaving the rate or amount space blank or by entering "included" or otherwise), that item shall be deemed to be priced at "nil”. 1.12 Representations (Mandatory) Any attempt to involve the Government's staff or representatives in presentations, demonstrations or similar approaches prior to acceptance and without official request may prejudice the final selection. No representation, explanation or statement, made to a Tenderer or anyone else by or on behalf of the Government, as to the meaning of the ITT or otherwise in explanation shall bind the Department in the exercise of its powers and duties under the Agreement. 1.13 Requests for Information/ITT Amendments (Mandatory) Should any amendments to the ITT as issued to the Tenderers be deemed to be necessary prior to the Closing Date these will be issued by the Treasury to Tenderers in the form of instructions and will, upon issue, form part of the ITT. Tenderers can only raise questions, requests for additional information, explanation or clarification with Procurement Services via email. Any responses made by Procurement Services to queries by telephone cannot be relied upon. All queries should be addressed to the Procurement Officer at the email address set out at Section 2.3 of this ITT. All questions/requests for clarification must be submitted in accordance with the conditions set out in Section 2.5 of this ITT. Procurement Services will attempt to respond to raised queries within five (5) Working Days. Please be advised that all questions and answers raised in respect of the ITT will be circulated to all Tenderers.

Reference: TRE/2015/004

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1.14 Proposal Costs (Information) Neither the Treasury, Procurement Services, the Department nor any other part of Government or any other organisation assisting the Department with the procurement process, will accept any charges for expenses or losses incurred by the Tenderer as a result of responding to this ITT. 1.15 Validity of Proposal (Mandatory) It is a mandatory requirement that the Tenderer's Tender Response must be left open for acceptance or non-acceptance, for a period of one hundred and eighty (180) days from the Closing Date. 1.16 Health & Safety (Mandatory) Tenderers shall make due allowance in their Tender Response for the safety, health and welfare of their staff, and those of their sub-contractors (where sub-contracting is permitted), and members of the Government and any visitors to Government premises. The Contractor will be required to fully comply with all health and safety requirements to include the Health and Safety at Work Act (1974), the Management of Health and Safety at Work Regulations (1992) and the Control of Substances Hazardous to Health Regulations 2002, Industry Best Practice and all/any other policies and/or regulations notified by the Department from time to time. 1.17 Insurances (Mandatory) The Agreement must provide for insurance cover against damage to the Government's property or that of any other person lawfully on the Government's premises and personal injury/death to any person. The minimum level of insurance required is set out in Section 3.2 of this ITT. 1.18 Working within the Government (Mandatory) The Government operates a no smoking policy. The Contractor must make their staff and their sub-contractors (where sub-contracting is permitted) aware of this policy and are responsible for their compliance. 1.19 IOM Based Staff (Mandatory) It should be noted that each person working on the Island must either be an "Isle of Man worker" or will require a work permit. The granting of a work permit cannot be guaranteed by the Government (see http://www.gov.im/categories/working-in-the-isle-of-man/work-permits/ for further information on the legislation). 1.20 Income Tax and National Insurance (Mandatory) In accordance with Manx law any person, including a company, not resident in the Isle of Man is liable to income tax on Manx source income. Examples of how this liability is dealt with can include the deduction of tax at source from the Manx income, requiring employing contractors to set up a local payroll and requiring the person to complete non-resident tax returns. The liability to tax on Manx source income may be disregarded in certain circumstances: particularly in cases where the Isle of Man has a double taxation agreement with the country of residence of the person receiving the income. Tenderers to which this paragraph may apply should familiarise themselves with the requirements of Manx tax law, and may wish to contact the Income Tax Division of Treasury for further guidance and to obtain certainty regarding their situation. Where a UK-resident individual is sent by their UK employer to work temporarily in the Isle of Man, National Insurance contributions (NIC) should continue to be deducted at UK rates from their Manx source income and remitted to HM Revenue & Customs in the normal way. Where a person resident in the UK is temporarily employed by an Isle of Man employer, including the Isle of Man Reference: TRE/2015/004

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Government, their income will be liable to NIC at Manx rates. The liability to NIC may be disregarded in certain circumstances where the Isle of Man has a reciprocal agreement with the country of residence of the individual concerned. Tenderers to which this paragraph may apply should familiarise themselves with the requirements of Manx National Insurance law, and may wish to contact the Income Tax Division of Treasury for further guidance and to obtain certainty regarding their situation. 1.21 Notification of Results (Information) There will be an initial evaluation based on the response to tender documentation. A shortlist of bidders will then be asked to present to the Department. The notification of outcome is not anticipated until at least 6 weeks after presentations have concluded and therefore no useful purpose is served by contacting Procurement Services, Treasury, the Department or any of its representatives, prior to the notification of the result. Following the notification of results there will be a ten (10) day standstill period prior to the Department entering into the Agreement with the Contractor. Should any Tenderer have any issues concerning the tender result or any aspect of the procurement process they should make representation to the Procurement Officer during the standstill period. At the end of the standstill period, and provided that no valid representation objecting to the tender result or the conduct of this procurement process has been received, the Department will be free to enter into the Agreement with the Contractor. If a representation is received from a Tenderer during the standstill period but the Treasury has not concluded its investigation of the representation by the end of the standstill period, the Department may delay entering into the Agreement until the investigation is concluded (however, the Treasury will not accept any representation made after the end of the Standstill Period). 1.22 Reservations (Information) The Department does not bind itself to accept the lowest or any Tender Response, and reserves the right to accept any Tender Response in whole or in part. The Department reserves the right to use other contractors or vendors in provision of the Services or similar services and the Agreement is not exclusive. 1.23 Disclaimer (Information) Tenderers are required to inform the Procurement Officer of any apparent ambiguities, errors or omissions in this ITT. The Department and/or Procurement Services (on behalf of Treasury) will accept no responsibility for the accuracy of information supplied. The Tenderer shall satisfy himself that any information supplied by the Department or Procurement Services (on behalf of the Department) is accurate and correct. 1.24 Law/Formation of the Agreement (Mandatory) The terms and conditions of the Agreements associated with this tender exercise will be consistent for all successful tenderers. Should a Tenderer wish to amend any of the Clauses, they should submit full details (including draft wording) of any proposed amendment with their Tender Response. The Department will however reserve the right to reject any amendment/inclusion. In the event that a Tenderer is selected as a result of this procurement process, the permitted amendments to the Agreement shall be limited to those set out in their Tender Response.

Reference: TRE/2015/004

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The Agreement will be formed when the Contractor and the Department both sign the Agreement and the Department has dated the Agreement. The Department reserves the right to claim costs and damages from the selected Tenderer in the event that: 

such Tender Response is withdrawn on the basis of the Tenderer subsequently seeking to introduce any amendments which go beyond ‘permitted’ amendments.



the Tenderer, having been notified of acceptance of the Tender Response, fails to sign the Agreement by the time and date stated in the acceptance notice (being no less than seven days after such notice).

Such costs and damages claim may include the costs of the Department being required to repeat any parts of the procurement process. Without prejudice to any other rights and remedies of the Department, the Department reserves the right (and shall not be restricted or fettered in any way by the Agreement (if any)) to use any other firm if necessary in respect of the Services or any other matter in connection with the Department's activities.

Reference: TRE/2015/004

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Section 2- Specific Instructions to Tenderers 2.1 Nature of the Agreement (Information) The Isle of Man Government Treasury (“Treasury”) seeks to appoint by competitive tender discretionary investment managers for the management of six investment funds with a total market value spread across all of the funds of £1.4 billion as at 31st March 2015. There are currently 6 appointed investment managers. The Contractor will enter into the Agreement with the Department for a 5 year term. 2.2 Commencement (Mandatory) st st The Agreement will take effect on 1 April 2016 and will determine on 31 March 2021 subject to earlier termination in accordance with the Terms of the Agreement (“the Term”). 2.3 Procurement Officer Contact details of the Treasury, Procurement Officer dealing with this ITT: Will McCann Procurement Services Government Office Bucks Road Douglas Isle of Man IM1 3PU

(Information)

Telephone: 01624 686544 Email: [email protected]

2.4 Split Award (Information) The Department will award the Contract to a number of tenderers. There are currently six Investment Managers. 2.5 Clarification (Mandatory) If you have any questions relating to this ITT they are to be submitted by return e-mail to the Procurement Officer set out at Section 2.3 above no later than noon on Friday 26th June 2015. Following the deadline all questions will be anonymised and then distributed together with the written answer to all Tenderers. 2.6 Tender Response (Mandatory) Tenderers must ensure that they fully complete and return all the documents contained within Section 4 of this ITT that includes: 

Document 1 - Form of Tender



Document 2 - Tender Evaluation Criteria



Document 3 - Certificate of Non-Collusion



Document 4 - Financial Regulations Declaration

2.7 Closing Date and Time for Tenders (Mandatory) Tender Responses must be delivered by hand in formats stipulated above to the person at the address set out in Section 2.3 of this ITT, to be received not later than noon on Tuesday 7th July 2015. Tender Responses should be delivered in a plain envelope marked “Tender – TRE/2015/004”.

Reference: TRE/2015/004

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If Tender Responses are delivered by hand to the Government Office, please use the post box marked “Treasury (excluding Income Tax)”. If you require a receipt, please call Procurement Services using the phone on the Ground Floor. Email submissions will not be considered. Proof of despatch will not be accepted as proof of receipt. Tender Responses received after the Closing Date and time will be considered late and will not be evaluated, they will only be opened for the purpose of identifying the Tenderer in order to facilitate the return of the Tender Response document. 2.8 Format of Tender Response The Tender Response should be printed in duplex format, bound in such a way as to prevent the removal or addition of pages. Page numbers should be displayed and numbered consecutively. Tenderers should check the numbers of the pages to satisfy themselves that no pages are missing or have been duplicated. The Tenderer must submit seven (7) printed copies within their response. An electronic version must also be included in pdf format on a memory stick. 2.9 Presentations In accordance with the Proposed Tender Programme at 2.10, Tender responses will be evaluated to enable a shortlist of tenderers to make a presentation to the Investment Committee of the Treasury. Presentations will be no more than an hour in length, to include a question and answer session with the lead Investment Manager. Treasury value good communication with their appointed investment managers and would expect to meet their future relationship manager (if any) during the presentation. Presentations for short-listed tenderers will take place week commencing 5th October 2015, at King Orry Room, Treasury, Government Office, Bucks Road, Douglas, Isle of Man, IM1 3PU Allocated Tender Presentation times will be confirmed, in writing once notification to tenderers of short listing has been advised. 2.10

Proposed Tender Programme Description of Activity

Scheduled Date

Issue of Invitation to Tender to eligible institutions

15th June 2015 12 noon Tuesday 7th July 2015

Tender Closing Date Acknowledgement letters confirming receipt of tender to be issued by Treasury

10th July 2015

Notification to Tenderers of short-listing status

By Start of September

Presentations by short-listed Tenderers

w/c 5th October 2015

Notification to Tenderers of outcome of tender

Reference: TRE/2015/004

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Section 3 - Detail of the Requirement 3.1

Specification

(Mandatory)

As provided as Enclosure 3 (See end of document) 3.2 Insurance Levels (Mandatory) The Contractor shall at all times during the Term of the Agreement, and while the Contractor is liable or potentially liable to the Department under this Agreement, hold as a minimum: (a) professional indemnity insurance of no less an amount than the sum of ten million pounds sterling (£10,000,000); and (b) employers liability insurance of no less an amount than the sum of ten million pounds sterling (£10,000,000); and (c) public liability insurance of no less an amount that the sum of five million pounds sterling (£5,000,000).

Reference: TRE/2015/004

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Section 4 - Tender Response The four documents that comprise Section 4 are to be completed and returned for the purposes of the tender evaluation and award in accordance with the instructions set out in Section 2 of the ITT. No other sections or enclosures are to be returned unless expressly stipulated in Section 2. Tenderers must ensure that they fully complete and return all the documents contained within Section 4 of this ITT as follows: 

Document 1 - Form of Tender



Document 2 - Tender Evaluation Criteria



Document 3 - Certificate of Non-Collusion



Document 4 - Financial Regulations Declaration

Reference: TRE/2015/004

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Document 1 – Form of Tender To: The Head of Procurement, Procurement Services, The Treasury, Central Government Office, Bucks Road, Douglas, Isle of Man, IM1 3PU. I/We the undersigned of:

agree to be bound by the terms of this ITT and having fully understood all parts thereof (to include the Instructions to Tenderers, Specification and the Agreements), do hereby offer to supply the Services for the fees outlined in the pricing section outlined in Document 2 Tender Evaluation Criteria. This Tender Response remains open for acceptance for 180 days from the Closing Date. Dated this

day of

2015

Signature: Name: Position in the Company: Address:

Telephone No: Email address:

Note: The Department does not bind itself to accept the lowest or any Tender Response and reserves the right to accept part, only of any one or more Tender Response. Tender Responses are to be forwarded in a package so as to reach the Treasury at the Delivery Address no later than the date and time specified.

Reference: TRE/2015/004

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(Intentionally Blank)

Reference: TRE/2015/004

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Document 2 - Tender Evaluation Criteria Whilst the evaluation of Tender responses will incorporate both Price and Quality factors through an approach commonly referred as “the Most Economically Advantageous Tender”, the Quality of the potential Investment Manager is paramount. The emphasis on quality is supported through the following weighting split that will be used to evaluate Tender Responses:  

Price Quality

30% 70%

Price The pricing element of this evaluation will relate to fee calculation. Any base fee quoted must be transparent. Treasury wish the fee calculation to be based on period end market values which should be verifiable against the manager’s printed valuation reports. All fee proposals must be in sterling. Fees (including those on a tiered basis) must be quoted on the basis of the following: Item

Description A portfolio of up to £100 million

Fee

1 A portfolio of up to £200 million 2 A portfolio of up to £350 million 3

Should you wish to detail your fee structure as a separate Appendix please title the response as “Appendix 1 – Fee Structure” Should the Department identify any additional services throughout the agreement term, Fees will be agreed between the Department and Contractor. Quality The quality element of this evaluation will take into consideration the following requirements: 1. 2. 3.

Covering and Introductory Submission Due Diligence Submission Full Written Submission

Please Note: Only elements 2 and 3 will be evaluated as part of your quality mark. Submissions will be evaluated to enable a shortlist of organisations that will be invited to the Presentation stage of this exercise. The Presentation stage will be evaluated in conjunction with Full written submission.

Reference: TRE/2015/004

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1.

Covering and Introductory Submission

All Tenders should be submitted in English with the following documentation:Covering letter which should provide:i)

Contact details (name, address, telephone, e-mail address) for the person within the Tenderer’s organisation who has overall responsibility for the submission of the tender.

ii) Confirmation that the contract supplied with the invitation to tender letter is acceptable. If there are any minor terms and conditions deemed unacceptable and your organisation wishes to alter then details should be supplied in the tender covering letter with the proposed alternative wording supplied for consideration by the Department and its legal advisors. It is essential that any alterations are raised within your ITT submission to ensure sufficient time for advice can be sought. Clarification or requests for change after this deadline will not be considered. Furthermore, other than clarification of specific particulars that may be added to the agreement following a successful tender response, no further review of the agreement will be offered. iii) Confirmation that Institutions that are eligible to tender must satisfy one of the following criteria:Hold an Isle of Man Financial Supervision Commission Class 2 Sub-Class 4 licence to conduct investment business and currently provide discretionary investment manager services; or Hold an Isle of Man Financial Supervision Commission Deposit Taking licence and have a major Investment Division as part of their group. Consideration will be given to institutions that are prepared to obtain the appropriate Isle of Man Financial Supervision Commission investment business licence but any appointment would be subject to the institution being successful in obtaining that investment business licence. If a company is successful but needs to apply for an appropriate license, this may delay the allocation of funds for investment beyond 1st April 2016. 2.

Due Diligence Submission Please complete/provide the following Due Diligence documentation that supports your tender response: i)

Enclosure 4 Isle of Man Government Standard Pre-Qualification Document

ii) Enclosure 5 Tender Specific - Due Diligence Questionnaire iii) Your organisations latest two years audited accounts iv) Copies of your Insurance cover

Reference: TRE/2015/004

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3.

Written Response

In order to ensure the evaluation of quality is applied consistently, requirements are marked using a scoring system of zero (0) to five (5). All headings that comprise the written submission are based upon a “minimum score” application. Tender responses that fail to meet a score of 3 in the “Criteria for awarding score” below will automatically not be considered for shortlist. Criteria for awarding score Completely fails to meet required standard or does not provide a proposal.

Score 0

Proposal significantly fails to meet the standards required, contains significant shortcomings and/or is inconsistent with other proposals. Proposal falls short of achieving expected standard in a number of identifiable respects. Proposal meets the required standard in most material respects, but is lacking or inconsistent in others. Proposal meets the required standard in all material respects. Proposal meets the required standard in all material respects and exceeds some or all of the major requirements.

1 2 3 4 5

Tenderers should respond to each heading in a clear, detailed and decisive manner, to ensure that there is no likelihood for misinterpretation. Tenderers must submit their written response in the alphabetical order prescribed below, clearly cross referencing the heading title. The Written Submission a. Company Information – Provide a summary of the history of your company and details of the discretionary investment management services it provides. b. Investment information – Provide an overall investment philosophy of your company including but not limited to how investment decisions, portfolio asset allocation decisions and security selection decisions are taken for discretionary investment management contracts. A professional skills and experience profile should be supplied for the investment managers who would have responsibility for performance and decision making on Treasury’s portfolio. c. Investment Performance – Provide demonstration of your company’s ability to achieve a strong track record of performance against benchmarks, including how investment performance is achieved and risk controlled in volatile markets. d. Recommended Investment Strategy – Please provide a comprehensive recommendation of investment strategy with reference to the investment mandate restrictions and benchmarks detailed in Appendices 1 – 3. If your organisation only intends to tender for some of these investment funds your written submission should explicitly state to which funds the recommended investment strategy applies. e. Information on the Individual Manager(s) – Provide written details of any relevant educational and professional qualifications and the experience and track record of the lead Investment Manager or any employee of the appointed Discretionary Investment Manager who would be directly engaged in providing the services to Treasury. If appropriate enclose CV’s. f. Socially Responsible Investment – Treasury’s statement on Socially Responsible Investment is detailed in Section 1.5. Provide details of your organisation’s procedures to comply with Treasury’s Socially Responsible Investment statement.

Reference: TRE/2015/004

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g. Reporting – Treasury reporting deadlines and requirements are detailed in Section 2. Advise whether your company is able to meet the required deadlines and provide an explanation and samples of typical reports that will be available to Treasury. h. Customer Services – Treasury’s customer service requirements are detailed in Section 2. Demonstrate that your company is able to meet these requirements and enclose details of any other customer services or benefits which you would provide to Treasury if your tender is successful. i. Referees – Please provide the names and addresses of two external clients who the Isle of Man Treasury could approach for references. Please note referees will only be approached in the event of short-listing. j. Any other information/innovation which you consider is relevant and which will support your tender submission.

Reference: TRE/2015/004

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Document 3 - Certificate of Non-Collusion To:

The Treasury, a Department of the Isle of Man Government

Sirs, Certificate of Non-Collusion The essence of tendering is that the Department shall receive bona fide competitive Tender Responses from all Tenderers. In recognition of this principle, I/We certify that this is a bona fide Tender Response intended to be competitive, and that I/We have not fixed or adjusted the amount of this Tender Response by or under or in accordance with any agreement or arrangement with any other person. In this certificate the word "person” includes any person, any body or association corporate or unincorporate and "any agreement or arrangement" includes any such transaction, formal or informal and whether legally binding or not.

Signature: Name: For and on behalf of: Address:

Date:

Reference: TRE/2015/004

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(Intentionally Blank)

Reference: TRE/2015/004

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Document 4 - Financial Regulations Declaration To:

The Treasury, a Department of the Isle of Man Government

Sirs, Financial Regulations Declaration I/We confirm that all appropriate Returns have been made to Treasury by the due date, that there are no outstanding statutory payments, such as I.T.I.P., Company Tax, National Insurance Contributions or V.A.T., currently due to the Government and that I/we are in no other way indebted to the Government. I/We fully understand that it is my/our responsibility to ensure that my/our obligations in respect of the submission of returns and/or payments are in order. I/We hereby authorise the Treasury to seek and obtain any necessary information required to verify that all appropriate Returns have been made and that there are no outstanding statutory payments or other debts currently due by me/us to the Government.

Signature: Name: For and on behalf of: Address:

Date: Isle of Man Company Registration No: Isle of Man Income Tax Company Ref: Isle of Man N.I. Employer's Registration No: V.A.T. Registration No:

Reference: TRE/2015/004

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Enclosure 3 1.1.

Specification

Introduction The Treasury currently has six investment funds; four of these funds have an absolute return benchmark to outperform the UK Bank of England Base Rate + 3% and the other two funds have an absolute return benchmark to outperform the UK Bank of England Base Rate + 1%. The written submission should include a recommendation of the investment strategy with reference to the investment mandate definitions and benchmarks detailed in the Appendices. If the organisation only intends to tender for some of the investment funds the written submission should explicitly state to which funds the recommended investment strategy applies.

1.2.

Absolute Return Funds (Base +3%) The Absolute Return Funds are named below with their respective market values as at 31st March 2015. The intention is that these funds will achieve a reasonable rate of return with reduced volatility. Definitions of each are set out in Appendix 1. The benchmark and investment restrictions are the same across each Absolute Return Fund and are set out in Appendix 2. Market Value at 31.03.15 (£m)

Name of Fund Appendix Appendix Appendix Appendix 1.3.

2 2 2 2

National Insurance Investment Account Reserve Fund Public Service Employees Pension Reserve MUA Bond Repayment Fund

Absolute Return Funds (Base +1%) The Fixed Income Funds are named below with their respective market values as at 31st March 2015. Within these funds there is a need for capital preservation which is reflected in the restrictions within the investment mandate. Definitions of each are set out in Appendix 1. The benchmark and investment restrictions are the same across both Fixed Income Funds and are set out in Appendix 3. Name of Fund Appendix 3 Appendix 3

1.4.

774.5 342.0 225.6 35.1

Hospital Estate Development Fund Notes Issued Fund

Market Value at 31.03.15 (£m) 43.5 33.8

Custodial Arrangements For all contracts commencing from 1st April 2016 custodial services will be provided by Treasury’s master custodian, BNY Mellon.

1.5.

Socially Responsible Investment In furtherance of the Treasury’s investment objectives the Treasury’s investment managers are required to ensure that decisions on whether to buy, sell or retain investments take into account the reputation and standing of each company in the marketplace including their social, environmental and ethical conduct as matters which are relevant to both the current and anticipated future financial performance of the investment.

Reference: TRE/2015/004

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PURPOSE AND DEFINITION OF THE INVESTMENT FUNDS

APPENDIX 1

NATIONAL INSURANCE INVESTMENT ACCOUNT The purpose of the National Insurance Investment Account is to provide sufficient funding to meet present and future National Insurance related expenditure. RESERVE FUND The current budget strategy is that 100% of income generated by the Reserve Fund investments is required to be remitted regularly to the Treasury to support Isle of Man Government’s General Revenue Account. PUBLIC SERVICE EMPLOYEES PENSION RESERVE The purpose of the fund is to accumulate, within a reserve, the receipt of pension transfer values in respect of incoming employees and to provide a long term reserve to stabilise the annual finance of: - transfer values payable for outgoing employees; lump sums payable to retiring employees; and future pension liability. MUA BOND REPAYMENT FUND The purpose of this fund is to repay the bonds raised by capital program funds in the early 2000’s from the sale of Bonds backed by the Isle of Man Treasury. The bond repayment schedule is £75 million in March 2030 and £185 million in August 2034 repayment date. The value of the fund as at 31st March 2015 is circa £35.1 million. It is intended that the Fund will receive additional contributions on an annual basis. HOSPITAL ESTATE DEVELOPMENT FUND The Hospital Estate Development Fund was established by Tynwald in 1994. The purpose of this fund is to meet the loan charges arising from the capital expenditure in respect of the new Noble’s Hospital. A review of the remaining expected life of the fund is performed annually. It is anticipated that the fund will be exhausted in 2024-25. The loan charges for the next few years are estimated to be in the region of £3 million per annum. The repayment requirement will result in the balance of the fund declining. The annual withdrawal from the fund is usually scheduled for the month of March. The investment manager should take into account the requirement for capital preservation. NOTES ISSUED FUND The purpose of the Notes Issued Fund is to ensure that there is a minimum of 100% asset backing for the Isle of Man Government Notes in issue. 100% of investment income is required to be remitted quarterly to Treasury to support the Isle of Man Government’s General Revenue Account. The investment manager should take into account the requirement for capital preservation.

Reference: TRE/2015/004

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Absolute Return Funds Investment Mandate (base +3%)

APPENDIX 2

The investment objective is to achieve moderate capital appreciation over the medium term without excessive volatility. The time horizon is 3 – 5 years. The portfolio has a moderate tolerance for risk commensurate with the investment objective. The following restrictions will apply: a) Equities may comprise up to 80% of the market value of the total assets of the portfolio. No more than 15% of the market value of the total assets of the portfolio to be invested in any one equity sector, no more than 6% of the market value of the total assets of the portfolio to be invested in any one share. b) Bonds and cash may comprise up to 100% of the market value of the total assets of the portfolio. No more than 10% of the total portfolio may be exposed to bonds rated below Investment Grade. c) No more than 40% of the market value of the total assets of the portfolio to be held in nonsterling assets. d) Derivatives can only be used to provide downside protection to assets held by the portfolio. Prior written permission is required for the use of any derivatives other than Index Futures, Stock Futures, Call Options and Put Options. Use of derivatives is subject to the following limits:    

To provide a protection limit of up to 50% of the market value of the total assets of the portfolio. Covered call options may be written on assets that form up to 20% of the market value of the portfolio. Put options may be purchased on assets that form up to 20% of the market value of the portfolio. The writing of put options is prohibited.

All investments in derivatives must comply with the principles of the UCITS regulations and particular attention is drawn to the risk management requirements and counterparty exposure limits. e) No dealing in shares of companies registered in the Isle of Man without prior Treasury consent. f) No dealing in unquoted securities without prior Treasury consent. g) No more than 5% of the market value of the total assets of the portfolio to be held in cash with any bank forming part of the investment manager’s group. Cash assets above 5% of the total market value of the portfolio should be deposited with other institutions. No more than £15 million or 15% of the market value of the portfolio, whichever is the greater, may be held with institutions within any one banking group. h) No investment in any collective investment schemes or other in-house products operated by the investment manager or the investment manager’s group without prior Treasury consent. Where approval is given to the use of an in-house fund, the Manager shall make investments in an in-house fund whose investment restrictions, subject to (i) below, accord with the restrictions of the Investment Mandate. i)

Treasury accepts that funds do routinely use a variety of instruments, including derivatives however at least 98% of the value of the underlying investments of the portfolio must consist of investments which if held directly would be compliant with a-f above. Reference: TRE/2015/004

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j) No investment should be made which is not realisable within a reasonable period, maximum 3 months, without prior Treasury consent. The benchmark for the Absolute Return Fund portfolios is to outperform the Bank of England Base Rate +3% over rolling three year periods. Absolute Return Investment Mandate (Base +1%)

APPENDIX 3

The investment objective is capital preservation over the medium term with reduced volatility. The time horizon is 3 – 5 years. The portfolio has a low tolerance for risk commensurate with the investment objective. The following restrictions will apply: a)

Equities to comprise no more than 20% of total assets of the market value of the total assets of the portfolio.

b)

Bonds and cash may comprise up to 100% of the market value of the total assets of the portfolio. No more that 10% of the total portfolio may be exposed to bonds rated below Investment Grade

c)

No more than 10% of the assets of the portfolio to be held in non-sterling assets.

d)

No dealing in shares of companies registered in the Isle of Man without prior Treasury consent.

e)

No dealing in unquoted securities without prior Treasury consent.

f)

No more than 10% of the market value of the total assets of the portfolio to be held in cash with any bank forming part of the investment manager’s group. Cash assets above 10% of the total market value of the portfolio should be deposited with other institutions. No more than £8 million or 15% of the market value of the portfolio, whichever is the greater, may be held with institutions within any one banking group.

g)

No dealing in derivatives without prior Treasury consent.

h)

No investment in any collective investment schemes or other in-house products operated by the investment manager or the investment manager’s group without prior Treasury consent.

i)

No investment should be made which is not realisable within a reasonable period, maximum 3 months, without prior Treasury consent.

The benchmark is to outperform the Bank of England Base Rate +1% over rolling three year periods.

Reference: TRE/2015/004

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2.

Treasury Reporting and Administrative Requirements

2.1

Meetings Institutions who are appointed as Investment Managers will be required to attend a minimum of two meetings per year to discuss the performance of the portfolio under their management with the Treasury Investment Committee at Government Offices.

2.2

Treasury Reporting Requirements Treasury reporting requirements and deadlines are as follows:a) Quarter end fund market values and Total Expense Ratios to be reported via e-mail by the 5th working day following each quarter end. Quarter ends are 31st March, 30th June, 30th September and 31st December. b) Monthly portfolio valuation reports to be received by the 10th working day following the month end, by email. These reports must contain schedules of all transactions, including purchases; sales, showing details of any realised profits or losses; corporate actions; income received; dividends with details of any tax deductions; derivative contracts; any other movements or transactions. The reports must also include book cost and cash reconciliations. Tenderers must note that Government’s accounting currency is sterling and that the manager’s reconciliations and reports must enable accounting to be carried out in sterling. c) Quarterly Performance packs to be received by the 10th working day, by email. In addition to the information contained in the monthly portfolio valuations, quarterly information should detail performance against benchmark for the quarter, the year, previous three years and previous five years (where statistics are available dependent on length of appointment). Quarterly performance reports should also contain an Attribution Analysis. As the quarterly reports are distributed to Members of the Investment Committee, they must contain schedules of the transactions for the quarter. d) Contract notes/details should be promptly available for all trades if requested. e) Managers will be required to assist in the reconciliation of their portfolio valuation reports to custodian records and to demonstrate on a regular basis that the investments and bank accounts held are reconciled. f) Please note, it is Treasury’s intention to publish at, some stage, performance information. Such information would be published by manager/portfolio and net of fees. Agreed Fee levels and Total Expense Ratios will remain confidential between Treasury and the appointed investment manager.

2.3

General Customer Service Requirements Managers will be expected to respond promptly (within 24 hours) to any queries or requests for information from Treasury officials in respect of the Treasury investments under their management. These ad hoc queries may include, but are not limited to:    

Urgent requests for information required for the preparation of responses to questions raised by Members of Tynwald; Routine administration queries in connection with individual transactions; Assistance with reconciliation issues; Any questions raised by the Investment Committee as part of their regular review of managers’ performance and investment strategy.

Reference: TRE/2015/004

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Enclosure 5 Tender Specific - Due Diligence Questionnaire ISLE OF MAN GOVERNMENT TENDER SPECIFIC - DUE DILIGENCE QUESTIONNAIRE

Strictly Private and Confidential General Information 1.

Please provide the following information:-

The full name of your company; Its registered Office; Its ownership structure; It’s Board of Directors / Partners; Its main offices; and Details of any affiliated companies, subsidiaries and joint ventures.

2.

Please provide a brief corporate history.

3.

Is your company publicly quoted?

4.

If your company is not publicly quoted, please provide details of shareholders.

Reference: TRE/2015/004

If so, where?

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5. Please describe your company’s principal activities.

6. Please provide details of your company or group credit rating.

Compliance 7. Please provide details of your current regulatory arrangements.

8. Is your company currently facing any regulatory issues? If so, please provide full details.

9. Please provide details of regulators of other group entities.

10. Has your company (or any of its affiliates or subsidiaries), or have any of your officers, been involved in any litigation or any other legal proceedings related in any way to its fund management activities over the last five years? If so, please provide full details.

11. Has your company (or any of its affiliates or subsidiaries), been involved in any out of court settlements related in any way to its fund management activities over the last five years? If so, please provide full details.

12. Who is your company’s compliance officer? within your company.

Reference: TRE/2015/004

Please provide a clear statement of their role

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13. Please provide details of your company’s Professional Indemnity Insurance cover.

Audit and Financial Control 14. Who is in overall charge of the audit and control function within your company?

15. Does your company have an internal audit department?

16. Who are your company’s external auditors and for how long have they served in this capacity?

17. Does your company have any major outsourcing arrangements?

18. Please provide a copy of your company’s latest financial accounts.

Referees 19. Please provide the name and addresses of two external clients who the Isle of Man Government could approach for references.

Reference: TRE/2015/004

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Investment Background 20. Please provide a brief statement of your company’s investment performance. Please include details on the depth of experience of the investment team, historic performance against benchmarks and investment philosophy of your company.

21. Please provide the total amount of funds under management by your company.

22. Please indicate the current market value of the portfolios managed for each of your three largest external clients. To protect client confidentiality you are not required to provide the clients’ names.

23. Please provide any other relevant information which you feel the Isle of Man Government should be aware of prior to an appointment decision.

Declaration I declare that to the best of my knowledge the answers submitted in this Pre-Qualification Questionnaire (and any supporting documentation) are correct. I understand that the information will be used in the evaluation process to assess my organisation’s suitability to be invited to tender for the Government’s requirement. Signature: Name: Position (Job Title): Name of the Organisation: Date:

Reference: TRE/2015/004

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