Cover note for Ireland Apple Escrow Fund 2020 Financial Statements

The Ireland Apple Escrow Fund (the “Fund”) is governed by the Escrow Framework Deed, which was signed by the Minister for Finance, Apple Sales International Limited (ASI), and Apple Operations Europe Limited (AOE) on 24 April 2018. The Escrow Framework Deed sets out the detailed legal agreement regarding the recovery of the alleged State aid, following the European Commission Decision of 30 August 2016 (Decision C(2016)5605), and the framework for oversight, safekeeping and management of the Fund.

The Minister for Finance delegated certain of his functions in relation to the Fund to the National Treasury Management Agency (NTMA) by way of orders issued pursuant to Section 28 of the NTMA (Amendment) Act 2000. These functions include inter alia:

• conduct, in conjunction with Apple, of the procurement processes for escrow agent and custodian services, and for investment management services;
• the negotiation and execution of, and performance of obligations under the escrow agent and custodian agreement;
• the negotiation and execution of, and performance of obligations under investment management agreements;
• the approval of amendments to the investment policy from time to time;
• the appointment of the Ireland members of the investment committee and other rights and obligations in relation to that committee;
• the oversight of the investment and management of the Fund;
• the preparation and issuing of certain release instructions; and
• the approval of Fund operational procedures.

The financial statements of the Fund are prepared pursuant to Section 28(5) of the National Treasury Management Agency (Amendment) Act 2000. The Minister has directed that the NTMA prepares and keeps accounts for the Fund on the basis of the International Financial Reporting Standards (IFRS) accounting standard. The accompanying financial statements are the fulfilment of this direction.

The investment policy for the Fund was agreed by the Minister for Finance and Apple. The Fund is managed by three investment managers, with management and investment oversight jointly through the Investment Committee for the Fund, comprising an equal number of members from the NTMA and Apple.

The investment policy establishes the investment principles and parameters for investment of the Fund, which inform the mandates that the investment managers are required to adhere to. The investment objective is to preserve capital to the greatest extent possible in light of the prevailing market conditions. In addition, the Fund is managed in a manner designed to ensure adequate liquidity is maintained to meet liabilities in respect of the payment of fees and expenses, and in relation to all releases to be made from the Fund.

For these reasons, the risk appetite in respect of the Fund as specified in the investment policy is "low", with investment permitted only in highly rated euro-denominated fixed income securities. The Fund is predominately invested in short to medium-term sovereign and quasi-sovereign bonds. The Investment Committee monitors the performance of the investment managers and the ongoing appropriateness of the investment policy.

The decision by the European Commission in relation to the State aid noted that profits subjected to tax in Ireland (for the period covered by the decision) could be reduced if Apple was required to pay taxes in another jurisdiction in respect of the same profits for this period. These adjustments are referred to as “third country adjustments” and are not dependent on the outcome of the legal proceedings in the European courts.

The financial statements for 2020 set out that the net assets of the Fund as at 31 December 2020 totalled €13,984m. All income, expenses, gains and losses accrue to the Fund, including the Investment Manager and Escrow Agent/Custodian fees and taxes. The €36m decline for the year primarily reflects the current negative interest rate environment and negative yields on highly rated euro-sovereign, quasi-sovereign bonds and fund operating expenses. There were no third country adjustments during 2020.

On 15 July 2020, the General Court of the European Union (GCEU) issued its judgement annulling the Commission decision, finding in favour of Ireland and Apple. On 25 September 2020, the European Commission announced its decision to lodge an appeal with the Court of Justice of the European Union (CJEU) challenging the judgement of the GCEU.

The timeline for the Fund is aligned to the ongoing legal proceedings and the Fund will remain in place until a final determination is made by the European Courts, at which time the funds held in escrow will be released.