Cover note for Ireland Apple Escrow Fund 2023 Financial Statements

Background

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 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 National Treasury Management Agency (Amendment) Act 2000 (NTMA 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 NTMA 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.

Performance of the Fund

The investment policy for the Fund was agreed by the Minister for Finance and Apple. The Fund is managed by three investment managers, with the Investment Committee for the Fund responsible for monitoring performance and investment oversight. The Investment Committee for the Fund comprises 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 financial statements for 2023 set out that the net assets of the Fund as at 31st December 2023 totalled €13,774m, which represented a €400m increase in value for the year. All income, expenses, gains and losses accrue to the Fund, including the investment managers’ and escrow agent/custodian’s fees and taxes. The €400m is made up of €406m resulting from changes in the fair value of the assets reduced by €6m in operating expenses for investment management and custodian fees.

Timeline on the Fund

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.

On 23 May 2023 the CJEU held the oral hearing of the European Commission’s appeal of the GCEU judgement.

The Advocate General’s opinion, which was published on 9 November 2023, proposed that the CJEU set aside that judgment and refer the case back to the GCEU for a new decision on the merits. The Advocate General’s opinion is not binding on the CJEU but is considered by the Court when arriving at its final judgment.

The next step is the issuing of the CJEU judgement. The CJEU has informed the parties of the date of the judgement. 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.

• On 2 April 2023, AOE merged with its Irish incorporated parent company, Apple Operations International Limited (AOI). Pursuant to the merger, all of AOE’s assets transferred to AOI, and AOI assumed all of AOE’s rights, obligations and liabilities, by operation of law with effect from 2 April 2023, and AOE was thereby dissolved without going into liquidation. The Escrow Framework Deed was amended and supplemented on 3 March 2023 to facilitate the merger and the continuation of the agreed Fund arrangements following the merger.