alfi alfi

alfiLuxembourg Regulated Investment VehiclesAn overview of the regulatory requirements | Updated as at 1 March 2009alfiAssociation Luxembourgeoise des Fonds d'Investissement - Association of the Luxembourg Fund Industry

Luxembourg Regulated Investment VehiclesALFI thanks KPMG in Luxembourg, which produced thecontent of this brochure, for its authorization to reprint.KPMG in Luxembourg is a member of ALFI.2

Luxembourg Regulated Investment VehiclesThe Association of the Luxembourg Fund Industry (ALFI), the representative body for the Luxembourg investment fundcommunity, was founded in 1988. Today it represents over a thousand Luxembourg-domiciled investment funds, assetmanagement companies and a wide variety of service providers including depositary banks, fund administrators, transferagents, distributors, law firms, consultants, tax advisers, auditors and accountants, specialist IT providers and communicationsagencies.Luxembourg is the largest fund domicile in Europe and its investment fund industry is a worldwide leader in cross-border funddistribution. Luxembourg-domiciled investment structures are distributed in more than 50 countries around the globe, with aparticular focus on Europe, Asia, Latin America and the Middle East.ALFI defines its mission as to “Lead industry efforts to make Luxembourg the most attractive international centre”. Its mainobjectives are to:• Help members capitalise on industry trendsALFI’s many technical committees and working groups constantly review and analyse developments worldwide, as well as legaland regulatory changes in Luxembourg, the EU and beyond, to identify threats and opportunities for the Luxembourg fundindustry.• Shape regulationAn up-to-date, innovative legal and fiscal environment is critical to defend and improve Luxembourg’s competitive position as acentre for the domiciliation, administration and distribution of investment funds. Strong relationships with regulatory authorities,the government and the legislative body enable ALFI to make an effective contribution to decision-making through relevantinput for changes to the regulatory framework, implementation of European directives and regulation of new products orservices.• Foster dedication to professional standards, integrity and qualityInvestor trust is essential for success in collective investment services and ALFI thus does all it can to promote highprofessional standards, quality products and services, and integrity. Action in this area includes organizing training at all levels,defining codes of conduct, transparency and good corporate governance, and supporting initiatives to combat money laundering.• Promote the Luxembourg investment fund industryALFI actively promotes the Luxembourg investment fund industry, its products and its services. It represents the sector ineconomic missions organised by the Luxembourg government around the world and takes an active part in meetings of theglobal fund industry.For more information, visit our website at www.alfi.lu3

Luxembourg Regulated Investment VehiclesExecutivesummaryBenefiting from a flexible regulatory and tax environment, over the years,Luxembourg has built a strong reputation as a world-class centre for theinvestment fund industry and is the European leader with assets of more thane 1.6 trillion under management. On a worldwide basis, Luxembourg rankssecond after the United States of America.Retail fundsLuxembourg is viewed as the domicile of choice for UCITS funds (Undertakingsfor Collective Investment in Transferable Securities, commonly known inLuxembourg as Part I funds). These funds, with their European Passport, arenot only used for retail distribution in the European Union, but also in otherEuropean countries such as Switzerland and Norway, in Asia, in countriessuch as Singapore and Hong Kong and in the Middle East, in countries suchas Bahrain and Lebanon. At least 70% of all UCITS registered for distributionin 3 countries or more (including the home state) are Luxembourg funds.The leading cross-border asset management groups have funds domiciled inLuxembourg. The main promoters are from the United States, Switzerland andGermany. Overall, promoters from more than forty different countries havechosen Luxembourg to domicile their funds. These funds must comply withstrict investment policies and investment restrictions in accordance with theEuropean Directive 2001/108/EC (the “UCITS directive”) as transposed intothe Luxembourg law.Alternative investmentsAs a result of the greater demand for alternative investments from investorsthroughout the world in recent years, Luxembourg has taken steps to moderniseits laws and regulations and now offers a full range of investment products thatcater for alternative investment, particularly hedge funds, private equity and realestate investments.Hedge fundsBefore the latest developments in the law, opportunities for the set up of hedgefunds were rather limited, in spite of guidance provided through Circulars, issuedby the regulator, the Commission de Surveillance du Secteur Financier (CSSF).With the introduction of the Specialised Investment Fund (SIF) and its relativelylighter regulation Luxembourg now has a very attractive product that is expectedto boost the local hedge fund industry. The adoption of the UCITS directiveallowing investments in derivatives has also broadened investment possibilitiesin alternative strategies that were previously limited. The hedge fund industryin Luxembourg has also certainly benefited from the institutionalisation of theIndustry and the SIF is specially aimed at such investors.4

Luxembourg Regulated Investment VehiclesReal Estate and Private EquityReal estate and private equity companies in Luxembourg were mostlysubsidiaries of funds domiciled overseas. They have been set up mainly fortax reasons as Luxembourg has a very extensive network of double taxationtreaties. The introduction of the SICAR (investment company in risk capital)and SIF (specialised investment fund) laws with their lighter regulation and lowtaxation have enabled the expansion of real estate and private equity funds inLuxembourg over the last year, as promoters look to set up tax efficient andregulated structures to cater for investors wishing to diversify their portfolios.The determinant factor between the use of the SICAR and the SIF is often thetax situation of the potential investors.Promoters wishing to sell real estate and private equity funds to retail investors(who may not be able to invest in SICAR or SIF vehicles as they do not fulfil thewell-informed investor criteria), may set up their structures under Part II of thelaw of 20 December 2002. Unlike a Part I fund, these structures need to submita complete distribution application to the regulator of each country where theywish to distribute.The purpose of this brochure is to provide an overview of the various vehiclesthat may be set up in Luxembourg covering the complete spectrum of the Fundindustry. The overview covers the following areas:• Legal and regulatory requirements• Shareholding• Reporting requirements• Approval and supervision• Taxation5

Luxembourg Regulated Investment VehiclesLegal and regulatory requirementsPart I FundPart II FundApplicable legislationLaw of 20 December 2002(“Fund law”).Part ILaw of 20 December 2002(“Fund law”).Part IIEligible assetsRestricted to:Transferable securities, investment funds,financial derivative instruments, cash andmoney market instruments that are compliantwith Article 41 of the Fund law and theCommission Directive of 19 March 2007implementing Council Directive 85/611/EECas transposed in Luxembourg by the grandducaldecree of 8 February 2008.Uncovered short sales and borrowings arenot permitted.Unrestricted.Prior approval of the investment objectiveand strategy by the CSSF.Risk diversification requirementsDetailed risk diversification is required perArticles 42 to 52 of the Fund law.Risk diversification requirements aredetailed in CSSF Circular 91/75 and areless stringent than the ones in applicationfor Part I funds.In addition, specific restrictions arecontained in :- CSSF Circular 91/75 for funds investingin venture capital, futures, options and realestate;- CSSF Circular 02/80 for funds adopting analternative investment strategy.Entity typeSICAV (SA)SICAF (SA,SCA,Sàrl)FCPAll three must be open-ended.SICAV (SA)SICAF (SA,SCS, SCA,Sàrl)FCPStructures may be open or closed-ended.Segregated sub-fundsYesYes6

Luxembourg Regulated Investment VehiclesSIF SICAR Securitisation vehicle – regulatedLaw of 13 February 2007(“SIF law”).Law of 15 June 2004(“SICAR law”).Law of 22 March 2004(“Law on Securitisation”).Unrestricted.Restricted to direct and/or indirectinvestment in securities that represent riskcapital.CSSF Circular 06/241 defines the notionof risk capital and the way the CSSF willdecide if the investment objective of theSICAR complies with the requirement toinvest in risk capital.Risk capital consists mainly of high riskinvestments made in view of their launch,development or listing on stock exchange.Such investments may take varied formsand are normally done with a medium-termview.The SICAR may also marginally enterinto financial derivative instruments on anexceptional basis.Temporary investment in other assets isallowed pending investment in risk capital.Securitisation of risks linked to all kindsof assets, whether movable or immovable,tangible or intangible as well as risksrelating to obligations or liabilities assumedby third parties or relating to all or part ofthe activities of a third party. Such risks canbe taken on by the securitisation vehiclethrough the acquisition of assets, thesecuring or guaranteeing of liabilities, or theentering into any kind of obligation.Risk diversification requirements aredetailed in CSSF Circular 07/309 and areless stringent than the ones in applicationfor part I and Part II funds.No risk diversification requirements.No risk diversification requirements.SICAV / SICAF (SA,SCA,Sàrl, SCoSA)FCPStructures may be open or closed-ended.Corporate entity with fixed or variable sharecapital (SA,SCA,Sàrl, SCoSA, SCS)Securitisation company(SA, SCA, Sàrl, SCoSA)Public offering may only be conducted underthe structure of a SA or SCA.Securitisation fund(FCP, Fiduciary trust)YesYesYes7

Luxembourg Regulated Investment VehiclesLegal and regulatory requirementsPart I FundPart II FundSubstance requirements inLuxembourgHead office of SICAV/ SICAF or of themanagement company of the FCP must be inLuxembourg.No nationality or residency requirements forDirectors of funds which have appointed amanagement company.General requirement for one of the twoconducting officers of the managementcompany or self-managed SICAV to belocated in Luxembourg.Head office of SICAV/ SICAF or of themanagement company of the FCP must be inLuxembourg.No nationality or residency requirements forDirectors of funds or management company.Required service providers inLuxembourgDepositaryCentral administrationRéviseur d’entreprisesDepositaryCentral administrationRéviseur d’entreprisesMinimum capital requirement forfund/company1,250,000 to be reached within 6 months ofauthorisation.Self-managed SICAV/SICAF:300,000 at the date of authorisation and1,250,000 to be reached within 6 months ofauthorisation.1,250,000 to be reached within 6 months ofauthorisation.Management company requirementFCPYes (chapter 13 of the Fund law)FCPYes (chapter 14 of the Fund law)SICAV/SICAFMay appoint a management company or beset-up as a self-managed SICAV (chapter 13of the Fund law).SICAV/SICAFNoMinimum capital requirement formanagement companyInitial capital : 125,000Additional capital: 0.02% of the value of theportfolios managed by the managementcompany in excess of 250,000,000.Initial capital and additional capital arecapped to 10,000,000.Possibility to reduce capital need by 50% ifa guarantee is received from a bank or aninsurance company.125,000Risk managementThe risk management function is regulatedbased on CSSF Circular 07/308.The risk management function is notregulated.8

Luxembourg Regulated Investment VehiclesSIF SICAR Securitisation vehicle – regulatedHead office of SICAV/ SICAF or of themanagement company of the FCP must be inLuxembourg.No nationality or residency requirements forDirectors of funds or management company.Head office of the SICAR must be inLuxembourg.No nationality or residency requirements forDirectors.Head office of securitisation companyor of the management company of thesecuritisation fund must be in Luxembourg.No nationality or residency requirementsfor Directors of securitisation company ormanagement company.DepositaryCentral administrationRéviseur d’entreprisesDepositaryCentral administrationRéviseur d’entreprisesDepositaryAdministrative agentRéviseur d’entreprises1,250,000 to be reached within 12 monthsof authorisation.Total of subscribed share capital and sharepremium of 1,000,000 to be reached within12 months of authorisation.Securitisation fundNo minimum requirement.Securitisation companySA/SCA: 31.000Sàrl: 12.500SCoSA: no minimum requirement.FCPYes (Commercial Law)NoSecuritisation fundYes (Commercial Law)SICAV/SICAFNoSecuritisation companyNo125,000—Will depend on the legal form chosen.The minimum capital will range from12,500 for a Sàrl to 31,000 for a SA.The risk management function is notregulated.The risk management function is notregulated.The risk management function is notregulated.9

Luxembourg Regulated Investment VehiclesShareholdingPart I FundPart II FundEligible investorsAll typesAll typesListingPossiblePossibleCapital callsFCPCapital calls can be made either by way ofcapital commitments or through the issue ofpartly paid units. The law does not prescribethe minimum percentage of payment of theunit.FCPCapital calls can be made either by way ofcapital commitments or through the issue ofpartly paid units. The law does not prescribethe minimum percentage of payment of theunit.SICAVCapital calls may only be made by way ofcapital commitments as partly paid sharesare not allowed for a SICAV.SICAVCapital calls may only be made by way ofcapital commitments as partly paid sharesare not allowed for a SICAV.SICAFFor a Sàrl capital calls may only be madeby way of capital commitments as partlypaid shares are not allowed. If the SICAF isset up as a SA or SCA, capital calls can beorganised through capital commitment or byway of the issue of partly paid shares.At least 25% of each share must be paid-up.SICAFFor a Sàrl capital calls may only be made byway of capital commitments as partly paidshares are not allowed. If the SICAF is setup as a SA, SCA or SCS, capital calls can beorganised through capital commitment or byway of the issue of partly paid shares.At least 25% of each share must be paid-up.10

Luxembourg Regulated Investment VehiclesSIF SICAR Securitisation vehicle – regulatedWell-informed investorsWell-informed investorsAll typesPossiblePossiblePossibleFCPCapital calls may be made by way of capitalcommitments or through the issue of partlypaid units. The law does not prescribe theminimum percentage to which each unit mustbe paid-up.Capital calls may be made by way of capitalcommitments or through the issue of partlypaid shares. At least 5% of each share mustbe paid-up.Securitisation fundCapital calls can be made either by way ofcapital commitments or through the issueof partly paid shares. The law does notprescribe the minimum percentage to whicheach share must be paid-up.SICAVCapital calls may be done by way of capitalcommitments or through the issue of partlypaid shares. At least 5% of each share mustbe paid-up.SICAFCapital calls may be done by way of capitalcommitments or through the issue of partlypaid shares. At least 5% of each share mustbe paid-upSecuritisation companyPartly paid shares are not allowed for theSàrl and SCoSA so capital calls must beorganised through capital commitment. Ifthe company is set up as a SA or SCA,capital calls can be organised through capitalcommitment or by way of the issue of partlypaid shares. At least 25% of each share mustbe paid-up.11

Luxembourg Regulated Investment VehiclesShareholdingPart I FundPart II FundIssue of shares / unitsFCPUnits must be issued at the NAV price.Such price may be increased by expensesand commissions.Existing unitholders do not havea pre-emption right when new units areissued, unless specifically provided for in theManagement Regulations.FCPUnits must be issued at the NAV price.Such price may be increased by expensesand commissions.Existing unitholders do not havea pre-emption right when new units areissued, unless specifically provided for in theManagement Regulations.SICAVThe issue of shares does not require anamendment of the Articles.Shares must be issued at the NAV price.Such price may be increased by expensesand commissions.Existing shareholders do not havea pre-emption right when new shares areissued, unless specifically provided for in theArticles.SICAVThe issue of shares does not require anamendment of the Articles.Shares must be issued at the NAV price.Such price may be increased by expensesand commissions.Existing shareholders do not havea pre-emption right when new shares areissued, unless specifically provided for in theArticles.SICAFThe issue of shares requires an amendmentof the Articles.The share price will be determined based onthe principles laid down in the Articles.When the SICAF is organised as a SAor SCA, existing shareholders have apre-emption right when new shares areissued, unless this right was waived by theShareholders’ Meeting.SICAFThe issue of shares requires an amendmentof the Articles.The share price will be determined based onthe principles laid down in the Articles.When the SICAF is organised as a SAor SCA, existing shareholders have apre-emption right when new shares areissued, unless this right was waived by theShareholders’ Meeting.Distribution of dividendsThe distribution of dividends must beforeseen in the prospectus of the fund.The distribution of dividends must beforeseen in the prospectus of the fund.For SICAV and FCP, distributions (interim orfinal) can be made irrespective of the realisedresults within the period, to the extent theminimum share capital is maintained.For SICAV and FCP, distributions (interim orfinal) can be made irrespective of the realisedresults within the period, to the extent theminimum share capital is maintained.For SICAF, final dividend distributions maynot result in a decrease in assets to anamount less than one-and-a- half timesthe fund’s total liabilities to its creditors.Interim dividend distributions are subject tostatutory requirements per Article 72-2 ofthe Commercial Law.For SICAF, final dividend distributions maynot result in a decrease in assets to anamount less than one-and-a- half times thefund’s total liabilities to its creditors.Interim dividend distributions are subject tostatutory requirements per Article 72-2 ofthe Commercial Law.12

Luxembourg Regulated Investment VehiclesSIF SICAR Securitisation vehicle – regulatedFCPThe unit price will be determined based onthe principles laid down in the ManagementRegulations.Existing unitholders do not havea pre-emption right when new units areissued, unless specifically provided for in theManagement Regulations.SICAVThe issue of shares does not require anamendment of the Articles.The share price will be determined based onthe principles laid down in the Articles.Existing shareholders do not havea pre-emption right when new shares areissued, unless specifically provided for in theArticles.The issue of new shares requires anamendment of the Articles unless theSICAR is set-up with variable share capital.The share price will be determined based onthe principles laid down in the Articles.The issue of new shares will be conductedas provided for in the Articles. The existingshareholders will have a pre-emption right ifspecifically provided for in the Articles.Securitisation fundThe unit price will be determined based onthe principles laid down in the ManagementRegulations.Existing unitholders do not havea pre-emption right when new units areissued, unless specifically provided for in theManagement Regulations.Securitisation companyThe issue of new shares requires anamendment of the Articles.The share price will be determined based onthe principles laid down in the Articles.When the securitisation company isorganised as a SA or SCA, existingshareholders have a pre-emption right whennew shares are issued, unless this right waswaived by the Shareholders’ Meeting.SICAFThe issue of shares requires an amendmentof the Articles.The share price will be determined based onthe principles laid down in the Articles.When the SICAF is organised as a SAor SCA, existing shareholders have apre-emption right when new shares areissued, unless this right was waived by theShareholders’ Meeting.The distribution of dividends must beforeseen in the prospectus of the fund.For SICAV and FCP, distributions (interim orfinal) can be made irrespective of the realisedresults within the period, to the extent theminimum share capital is maintained.For SICAF, final dividend distributions maynot result in a decrease in assets to anamount less than one-and-a- half times thefund’s total liabilities to its creditors.Interim dividend distributions are subject tostatutory requirements per Article 72-2 ofthe Commercial Law.The distribution of dividends must beforeseen in the prospectus of the SICAR.Dividend distributions, interim and final,are not subject to specific regulatoryrequirements, except for compliance withminimum capital requirements.Securitisation fundThere are no restrictions on distributions(interim or final).Securitisation companyFinal dividend distribution may not result ina decrease in assets to an amount less thanthe subscribed capital plus non-distributablereserves.Interim dividend distributions are subject tostatutory requirements per Article 72-2 ofthe Commercial Law.13

Luxembourg Regulated Investment VehiclesReporting requirementsPart I FundPart II FundProspectus directive as transposedinto the Luxembourg lawClosed-endedPart I funds may not be closed ended.Closed-endedA prospectus prepared in compliance withthe requirements of the Prospectus Directivemust be prepared when an “offer to thepublic” within the meaning of the ProspectusDirective is made except if the offer fallsunder any exemption of the ProspectusDirective.Open-endedPart I funds may make a public offer onthe basis of their prospectus prepared inaccordance with the requirements of theFund law.Open-endedPart II funds may make a public offer onthe basis of their prospectus prepared inaccordance with the requirements of theFund law.This prospectus must be updated on anongoing basis.This prospectus must be updated on anongoing basis.Simplified prospectusRequiredNot requiredNAV computation frequencyNAV must be computed on each day thereare subscriptions or redemptions with aminimum of twice a month.NAV must be computed on each day thereare subscriptions or redemptions with aminimum of once a month.Valuation principlesValuation of assets is made on the basis ofthe realisable value estimated in good faith,unless provided for differently in the Articlesor Management Regulations.Valuation of assets is made on the basis ofthe realisable value estimated in good faithunless provided for differently in the Articlesor Management Regulations.14

Luxembourg Regulated Investment VehiclesSIF SICAR Securitisation vehicle – regulatedClosed-endedA prospectus prepared in compliance withthe requirements of the Prospectus Directivemust be prepared when an “offer to thepublic” within the meaning of the ProspectusDirective is made except if the offer fallsunder any exemption of the ProspectusDirective.A prospectus prepared in compliance withthe requirements of the Prospectus Directivemust be prepared when an “offer to thepublic” within the meaning of the ProspectusDirective is made except if the offer fallsunder any exemption of the ProspectusDirective.Open-endedSIF may make a public offer on the basis oftheir prospectus prepared in accordance withthe requirements of the SIF law.There are no specific requirements whenan offer falls under an exemption of theprospectus Directive.This prospectus must be up-to-date whennew securities are issued to new investors.Not requiredNot requiredNAV is computed on the frequency set in theArticles or Management Regulations.Securitisation fundNot requiredSecuritisation companyNot requiredAssets are to be valued at fair value to bedetermined in compliance with the rulesdetailed in the Articles or ManagementRegulations.Securitisation fundValuation of assets is made on the basis ofthe realisable value estimated in good faithunless provided for differently in the Articlesor Management Regulations.Securitisation companyValuation of assets is made at the lowerof acquisition cost or market value orat acquisition cost less any permanentimpairment considered by the Board ofDirectors.15

Luxembourg Regulated Investment VehiclesReporting requirementsPart I FundPart II FundFinancial reportsAudited annual report is required within4 months of the year-end.Audited annual report is required within4 months of the year-end.Semi-annual report due within 2 months ofthe 6 month period-end.Semi-annual report due within 2 months ofthe 6 month period-end.Generally accepted accountingprinciplesAnnual reportLux GAAP only, i.e. provisions of the law of19 December 2002 except for :• The content and layout of the annual report,• The valuation of assets which is ruled byarticles 9§3, 28§4, 40, 71, 75§5 of the Fundlaw.Annual reportLux GAAP only, i.e. provisions of the law of19 December 2002 except for :• The content and layout of the annual report,• The valuation of assets which is ruled byarticles 9§3, 28§4, 40, 71, 75§5 of the Fundlaw.Semi-annual reportLux GAAP only, i.e. provisions of the law of19 December 2002 except for :• The content and layout of the annual report,• The valuation of assets which is ruled byarticles 9§3, 28§4, 40, 71, 75§5 of the Fundlaw.Semi-annual reportLux GAAP only, i.e. provisions of the law of19 December 2002 except for :• The content and layout of the annual report,• The valuation of assets which is ruled byarticles 9§3, 28§4, 40, 71, 75§5 of the Fundlaw.Other reportsLong-form report to be issued by the auditorwith the annual report in accordance withCSSF Circular 02/81.Long-form report to be issued by the auditorwith the annual report in accordance withCSSF Circular 02/81.ConsolidationNo exemption granted – normally notrequired due to diversification requirements.No exemption granted.IFRSAnnual accountsIFRS allowed upon request to the“Commission des Normes Comptables”.Annual accountsIFRS allowed upon request to the“Commission des Normes Comptables”.Consolidated accountsConsolidated accounts16IFRS is mandatory if the company is listedin accordance with the EU regulation1606/2002.IFRS is mandatory if the company is listedin accordance with the EU regulation1606/2002.

Luxembourg Regulated Investment VehiclesSIF SICAR Securitisation vehicle – regulatedAudited annual report is required within6 months of the year-end.Audited annual report is required within6 months of the year-end.Securitisation fundSame requirements as for the FCP.No semi-annual report is required.No semi-annual report is required.Securitisation companyAudited annual report is required at yearend.It must be available 15 days before theAnnual General meeting of shareholders andfiled with the Registrar within 7 months ofthe year-end.No semi-annual report is required.If a closed-ended SIF is listed on an EUregulated market the deadlines may be shorter.If the entity has securities listed on an EUregulated market the deadlines may be shorter.If the entity has securities listed on an EUregulated market the deadlines may be shorter.Annual reportLux GAAP only, i.e. provisions of the law of19 December 2002 except for :• The content and layout of the annual report,• The valuation of assets which is ruled byarticles 9, 28§4, 40§1 of the SIF law.Semi-annual reportNot requiredAnnual reportLux GAAP only, i.e. provisions of the law of19 December 2002 except for the valuationof assets which is ruled by article 5§3 of theSICAR law.Semi-annual reportNot requiredAnnual reportSecuritisation fundLux GAAP only, i.e. provisions of the law of19 December 2002 except for :• The content and layout of the annual report,• The valuation of assets which is ruled byarticles 9§3, 28§4, 40, 71, 75§5 of the Fundlaw.Securitisation companyLux GAAP only, i.e. provisions of the law of19 December 2002.NoneNoneNoneThe law contains an exemption to prepareconsolidated accounts for the SIF and itssubsidiaries.The law contains an exemption for theSICAR to prepare consolidated accounts.No exemption granted.Annual accountsIFRS allowed upon request to the“Commission des Normes Comptables”.Annual accountsIFRS allowed upon request to the“Commission des Normes Comptables”.Annual accountsIFRS allowed upon request to the“Commission des Normes Comptables”.Consolidated accountsIFRS is mandatory if the company is listedin accordance with the EU regulation1606/2002.Consolidated accountsIFRS is mandatory if the company is listedin accordance with the EU regulation1606/2002.Consolidated accountsIFRS is mandatory if the company is listedin accordance with the EU regulation1606/2002.17

Luxembourg Regulated Investment VehiclesApproval and supervisionPart I FundPart II FundPromoter requirementYesYesSupervision by CSSFYesYesRegular reporting to CSSFYesMonthly with due date the 20th of the nextmonth.Annually with due date four months afteryear-end.Details on reporting contained in CSSFCircular 97/136.YesMonthly with due date the 20th of the nextmonth.Annually with due date four months afteryear-end.Details on reporting contained in CSSFCircular 97/136.Approval processCreation of a fund is subject to prior approvalby the CSSF of:• Articles or Management Regulations,full and simplified prospectus and mainagreements with service providers;• Directors of the fund or managers of themanagement company;• Choice of Depositary and Auditor;• Promoter’s experience and financialsoundness.Creation of a fund is subject to prior approvalby the CSSF of:• Articles, or Management Regulations,prospectus and main agreements withservice providers;• Directors of the fund or managers of themanagement company;• Choice of Depositary and Auditor;• Promoter’s experience and financialsoundness.18

Luxembourg Regulated Investment VehiclesTaxationPart I FundPart II FundIncome taxTax exemptTax exemptWithholding tax on dividends andcapital gainsNot subject to withholding tax except ifEU savings directive applies.Not subject to withholding tax except ifEU savings directive applies.Subscription tax• 0.05% of NAV for equity fund.• 0.01%of NAV for money market cash fundsand institutional fund.• Exemption for special institutional moneymarket cash funds, pension funds andfunds investing in other funds alreadysubject to the subsciption tax.• 0.05% of NAV for equity fund.• 0.01%of NAV for money market cash fundsand institutional fund.• Exemption for special institutional moneymarket cash funds, pension funds andfunds investing in other funds alreadysubject to the subscription tax.Net wealth taxTax exemptTax exemptCapital dutyNo capital dutyNo capital dutyValue Added tax (VAT)Tax exemption on management services.Tax exemption on management services.Double Taxation Treaties (DTT)FCPNo access to DTT signed by Luxembourg;exception Ireland.FCPNo access to DTT signed by Luxembourg;exception Ireland.SICAV/SICAFLimited to some DTTs.Applicability of DTTs is determined by adecision taken by the Luxembourg fiscalauthorities, but without practical experienceon the exact classification that may beadopted by the other countries.SICAV/SICAFLimited to some DTTs.Applicability of DTTs is determined by adecision taken by the Luxembourg fiscalauthorities, but without practical experienceon the exact classification that may beadopted by the other countries.20

Luxembourg Regulated Investment VehiclesSIF SICAR Securitisation vehicle – regulatedTax exemptTax exemption for income derived fromtransferable securities.Tax exemption for one year for incomeon cash held for the purpose of a futureinvestment.The remaining income is subject to theordinary income tax of 28,59 %(Municipal Business Tax + CorporateIncome Tax - Luxembourg city 2009).Securitisation companyFully taxable at a rate of 28,59% (MunicipalBusiness Tax + Corporate Income Tax -Luxembourg city 2009). A reduction of thetaxable income to close to 0 is possible(engagements made to investors and othercreditors are fully deductible).Securitisation fundTax exemptNot subject to withholding tax except ifEU savings directive applies.Not subject to withholding tax except ifEU savings directive applies.Not subject to withholding tax except ifEU savings directive applies.• Annually 0.01% of NAV.• Tax exemption possible for certain moneymarket and pension funds or SIFs investingin other funds already subjectto subscription tax.No subscription tax.Securitisation companyNo subscription tax.Securitisation fundTax exemption.Tax exemptTax exemptTax exemptNo capital dutyNo capital dutyNo capital dutyTax exemption on management services.Tax exemption on management services.Tax exemption on management services.FCPNo access to DTT signed by Luxembourg;exception Ireland.SICAV/SICAFLimited to some DTTs.Applicability of DTTs is determined by adecision taken by the Luxembourg fiscalauthorities, but without practical experienceon the exact classification that may beadopted by the other countries.SICAR in the form of a corporate entity (alltypes except the SCS) should benefit fromthe Luxembourg double tax treaty network.Securitisation companyYes (all types except the SCS).Securitisation fundNo access to DTT.21

Luxembourg Regulated Investment VehiclesGlossary of termsArticlesArticles of incorporation of a Company / Fund.Closed-ended fundA fund which is not open to redemptions.Commercial LawThe Law dated 10 August 1915 on commercial companies, as amended.CSSFCommission de Surveillance du Secteur Financier, the Luxembourg financialsupervisory authority.FCPFonds Commun de Placement, an unincorporated co-ownership of assets managedby a management company.IFRSInternational Financial Reporting Standards.Lux GAAPLuxembourg Generally Accepted Accounting Principles.NAVNet Asset Value.Offer to the public“Offer to the public” within the meaning of the Prospectus Directive :a communication that is addressed in any form or by any means to individualsand containing sufficient information on the conditions of the offer and on theshares offered, so that the investor is in a position to decide on the purchase orsubscription of those shares. This definition also applies to the placement of sharesby financial intermediaries.Open-ended fundA fund that is open to redemptions.Part I fundA fund that complies with Part I of the law of 20 December 2002, also referred to asUCITS (Undertakings for Collective Investment in Transferable Securities).Part II fundA fund that complies with Part II of the law of 20 December 2002.Prospectus DirectiveDirective 2003/71/EC (amending Directive 2001/34/EC) on the prospectus to bepublished when securities are offered to the public or admitted to trading,as transposed into Luxembourg law.22

Luxembourg Regulated Investment VehiclesWell-informed investorA well-informed investor must be either :• An institutional investor:Undertakings and organizations that manage an important amount of funds andassets. This concept covers inter alia credit institutions and other financial sectorprofessionals, insurance and re-insurance undertakings, welfare institutions andpension funds, industrial and financial groups and structures put in place by theseentities to manage an important amount of funds and assets.• Or a professional investorAny professional investor within the meaning of Annex II to the Directive 2004/39on markets in financial instruments.• Or an investor who has adhered in writing to the status of well-informed investorand complies with one of the following conditions:- he invests at least 125,000 in the fund /company,- his expertise is confirmed by a banking institution as defined in Directive2006/48/EC, by an investment firm as defined in Directive 2004/39/EC or bya management company as defined in Directive 2001/107/EC.SASociété Anonyme (public limited company).SàrlSociété à Responsabilité Limitée (private limited company).SCASociété en Commandite par Actions (partnership limited by shares).SCoSASociété Coopérative organisée comme une Société Anonyme(cooperative company organised as a public limited company).SCSSociété en Commandite Simple (limited partnership).SICAFSociété d’Investissement à Capital Fixe (investment company with fixed capital).SICARSociété d’Investissement en Capital à Risque (investment company in risk capital).SICAVSociété d’Investissement à Capital Variable (investment company with variable capital).SIFSpecialised investment fund, compliant with the law of 13 February 2007.UCITSUndertakings for Collective Investments in Transferable Securities.23

The information contained herein is of a general nature and is not intended to address thecircumstances of any particular individual or entity. Although we endeavor to provide accurate andtimely information there can be no guarantee that such information is accurate as of the date it isreceived or that it will continue to be accurate in the future. No one should act on such informationwithout appropriate professional advice after a thorough examination of the particular situation.© 2009 KPMG S.à r.l., a Luxembourg privatelimited company and a member firm of theKPMG network of independent member firmsaffiliated with KPMG International, a Swisscooperative. All rights reserved.

ALFI a.s.b.l.Association of the LuxembourgFund Industry59, boulevard RoyalL-2449 LuxembourgT + 352 22 30 26 -1F + 352 22 30 93info@alfi.luwww.alfi.lu